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Management Discussion  
Yes Bank Ltd.
 
BSE Code 532648
ISIN Demat INE528G01027
Book Value(Rs.) 113.51
NSE Code YESBANK
Dividend Yield % 2.92
Market Cap(Rs. in millions) 174951.26
P/E 30.50
EPS 2.25
Face Value(Rs.) 2  
Year End: March 2016
 

MANAGEMENT DISCUSSION  AND ANALYSIS

EXECUTIVE OVERVIEW

Macro-Economic and Industry Overview

As per estimates provided by the International Monetary  Fund (April 2016), World GDP growth decelerated to 3.1% in 2015 from 3.4% in 2014. Global economic activity weakened amid increasing financial market volatility, especially in the second half of 2015. Moderation in economic growth was driven by softer activity in advanced economies. The scenario for emerging markets (EMs) was diverse, with high growth rates in most of emerging Asia, but severe macroeconomic conditions in commodity exporting countries.

Global commodity prices weakened due to a combination of subdued growth conditions, supply glut in certain cases, and a stronger dollar resulted in the benchmark CRB Commodity Index falling by 23.4% in 2015. The decline was broad based with prices of crude oil (Brent), industrial metals, gold, and agricultural commodities falling by approximately 36%, 24%, 10% and 12% respectively.

While softness in commodity prices lowered external trade realizations, global trade also suffered with volume growth in 2015 estimated (by IMF) to have fallen below the World GDP growth to 2.8%. The ongoing slowdown and rebalancing in China (with more than 10% share in global trade), declining investments in commodity exporters like Brazil, Russia, etc., and significant exchange rate debrciation in many EMs (primarily triggered by dollar strength and exchange rate adjustment in China) resulted in weakening of global trade activity.

Subdued economic activity amid disinflationary conditions prompted many key central banks to further ease monetary policy through a combination of conventional and unconventional tools. While few major central banks extended their quantitative and credit easing measures, some of them like the European Central Bank and the Bank of Japan also pushed their monetary policy rate into negative territory.

In contrast, the US Federal Reserve remained an important outlier. After concluding its quantitative easing program in 2014, the Fed continued with its monetary policy normalization process by hiking interest rate by 25 bps to 0.25-0.50% in 2015. Nevertheless, global economic and financial conditions prompted it to moderate its projected interest rate trajectory for 2016 to a 50 bps hike from 100 bps hike earlier.

The Indian economy consolidated the gains achieved in restoring macroeconomic stability, a process that began in FY 2014-15.

As per Central Statistical Organization’s advance estimates, India’s GDP growth for FY 2015-16 is expected to increase to 7.6% from 7.2% in FY 2014-15. This is expected to be led by private consumption demand (primarily urban) and gross fixed capital formation (primarily through public capex). On the sectoral front, growth is projected to be led by manufacturing and agriculture allied activities.

Inflation continued to moderate. Average CPI inflation in FY 2015-16 decelerated to 4.9% from 6.0% in FY 2014- 15. Despite monsoon deficiency for second consecutive year, food inflation declined, aided by a limited increase in minimum support prices for food grains, subdued rural wage growth and the government’s timely offloading of surplus food stocks. Sharp drop in crude oil prices helped moderate fuel inflation. The central bank’s anti-inflationary stance and quality fiscal consolidation bode well for core inflation, which remained below 5% through the course of the year.

The disinflationary momentum was more pronounced in case of WPI inflation, which remained in the negative territory throughout, averaging at -2.6% during Apr-Feb FY 2015-16 vis-à-vis 2.5% during Apr-Feb FY 2014-15.

India’s external position strengthened further in FY 2015-16. As per the Economic Survey brsented by the Finance Minister in February 2016, the current account deficit is expected to remain in the well within comfort at 1.0-1.5% of GDP. Foreign exchange reserves of USD 356 Billion (end March 2016) and robust net FDI inflows (USD 34 Billion between Apr-Feb FY 2015-16) were noteworthy developments against the background of global uncertainties.

FOREIGN EXCHANGE RESERVES OF USD 356 BILLION (END MARCH 2016) AND ROBUST NET FDI INFLOWS (USD 34 BILLION BETWEEN APR-FEB FY 2015-16) WERE NOTEWORTHY DEVELOPMENTS AGAINST THE BACKGROUND OF GLOBAL UNCERTAINTIES.

On the fiscal front, the government is expected to meet its FY 2015-16 fiscal deficit target of 3.9% of GDP accompanied by a healthy quality of adjustment. While the capital expenditure is slated for a 20.9% growth in FY 2015-16, the subsidy bill is expected to contract marginally by 0.2%.

On the monetary policy front, the RBI reduced repo rate by a cumulative of 75 bps to 6.75% during the course of FY 2015-16, after reducing it by 50 bps in Q4 FY 2014-15. With CPI inflation for January 2016 turning out to be 31 bps lower than RBI’s target of 6.0% and government maintaining fiscal discipline, the central bank opted for another cut of 25 bps in the repo rate to 6.50% in April 2016.

Money market liquidity conditions improved in the first half of FY 2015-16 (with average liquidity being in surplus between Jul-Sep) largely on the back of front loading of government expenditure and dollar purchases by the RBI. Thereafter, liquidity conditions started deteriorating sequentially and closed FY 2015-16 with a deficit of Rs. 2,145 Billion. Buildup of government cash balances with the RBI, above trend increase in currency in circulation and dollar sale by RBI contributed towards tightening of liquidity conditions in the second half of FY 2015-16.

Over the course of FY 2015-16, the Indian Rupee traded in a band of 62.19-68.71. Rupee was trading brdominantly between 62-64 range during Apr-Jul. This was breached after the surprise Chinese Yuan devaluation in August 2015. Thereafter, a stronger Dollar on the back of expectations regarding interest rate hikes in the US resulted in weakness in EM currencies including Rupee. While the currency lost 6.0% to the US Dollar in FY 2015-16, it remained one of the outperformers in EM.

Despite global financial markets imparting volatility, the 10-year g-sec yield fell by 27 bps to 7.47% as of end March 2016 on account of monetary easing from the RBI during the course of the year and quality fiscal consolidation from the government.

BUSINESS SEGMENT OVERVIEW

Corporate Banking

Your Bank’s Corporate Banking (CB) group provided combrhensive financial and risk management solutions to large corporate clients with a turnover greater than Rs. 1,500 Crores. Your Bank’s professional relationship experts forged value-based long-term relationships with the top management and promoters of almost all large corporate houses in India.

Your Bank’s CB group offered combrhensive client focused Services comprising Working Capital Finance, Term Loans, Specialized Corporate Finance Products, Trade & Transaction Banking Products, Cash Management Services, Debt Capital Markets, Treasury Services, Investment Banking Solutions and Liquidity Management Solutions, among others. Your Bank prioritized credit quality and all offerings were made following a rigorous analysis of the client’s risk profile as well as proactive monitoring of credit, market and operational risks.

Your Bank offered industry-specific products by understanding customer businesses, market conditions and industry developments. This distinctive approach translated into mutually-beneficial relationships with clients in knowledge-driven sectors like life sciences and healthcare, information technology, food and agribusiness, manufacturing, infrastructure, media and entertainment, hospitality and education, among others.

Your Bank remained committed to continuous improvement in terms of service, risk management and product portfolio through original research, benchmarking and client orientation.

Emerging Corporates Banking

To enhance the focus and coverage on emerging companies, your Bank has formed a new group to cater exclusively to the requirements of Emerging Corporates, with a turnover between Rs. 500 Crores to Rs. 1500 Crores, through customized, sector specific products and services combined with a knowledge banking approach for helping them manage financial, market and growth risks. This Group offers best in class banking services and works closely with growth companies to enable them to transition to become large, world class enterprises of the future. This Group has a special emphasis on the Sunrise sectors of the Indian economy including Auto Components, Food and Agri-processing, Media & Entertainment, Pharmaceuticals, IT/ITes, E-Commerce, Gems & Jewellery among others. This Group is a key part of the wholesale banking portfolio and is expected to grow significantly both in terms of revenue and exposure, while maintaining a sharp focus on asset quality and credit control.

Commercial Business Banking

India is in the midst of a rapid economic transformation and has fast emerged as a global manufacturing hub and service provider, underpinned by skilled manpower. Correspondingly, this reflected in the growth of your Bank’s Commercial Business Banking business, focused on servicing high-growth corporate clients with a turnover in the range of Rs. 100 – 500 Crores.

COMMERCIAL BUSINESS BANKING GROUP ADOPTED A ‘LIFECYCLE BANKING’ PHILOSOPHY TO FULFILL THE BANKING NEEDS OF THE CLIENTS ACROSS THE GROWTH CYCLE

Considering the high-growth nature and continuous expansion of your Bank’s clients, the Commercial Business Banking group adopted a ‘Lifecycle Banking’ philosophy to fulfil the banking needs of the clients across the growth cycle.  The impetus continued to be on servicing the clients through a ‘Money Doctor’ approach, balancing the client expectations and the Bank’s risk strategies.

Your Bank’s unique positioning provided an opportunity to offer the entire product suite with customized solution. Your Bank helped forge a number of success stories across industries, such as FMCG, life sciences, healthcare, gems and jewellery, food, agribusiness, auto ancillaries, IT, e-commerce, education and hospitality. With regional brsence in 26 locations across India, Commercial Business Banking division catered to the financing needs of the clients with quick and efficient service.

Further, the Commercial Business Banking group addressed the banking requirements for linked and ancillary businesses of the clients, ensuring continuous deepening and retention of client relationships. The division concentrated on achieving capital efficiency by focusing on cross-sell and referral-led business origination techniques. The division also focused on increasing granularity in the business by offering customized solutions and leveraging its knowledge banking expertise to evolve into a trusted advisor to the clients.

Government Banking

At YES BANK, the Government Banking (GB) group addresses the financial and banking needs of Central and State Government undertakings and affiliates.

Over the years, your Bank has provided financial and advisory services to Ministries under the Union Government, State Governments, Central and State Public Sector Undertakings (PSUs), Boards and other affiliates. Your Bank remained committed to delivering innovative, structured and combrhensive solutions, accomplishing several landmark transactions with Maharatnas, Navratnas, Mini-Ratnas and other apex institutions and developed meaningful relationships with over 700 entities across India. The GB group remained committed to the core values of client origination, innovation and superior service and has over 90 experienced and seasoned Bankers in 45 locations across the country.

Your Bank made concerted efforts to support educational, religious and sporting institutions across India through unique transaction banking offerings aimed at streamlining the working capital management of these apex and nationally important institutions.

Your Bank made inroads into the welfare trusts management of leading Central and State Public Sector Undertakings through its differentiated and competitive SA offering, complementing your Bank’s efforts to build a sustainable CASA book.

Indian Financial Institutions Banking

Your Bank’s Indian Financial Institutions Banking (IFIB) group interfaces with domestic financial institutions. The team primarily engages in offering banking solutions to domestic banks, non-banking finance companies, housing finance companies, insurance brokers and companies, small finance banks, payment banks, mutual funds, financial institutions, cooperative banks, regional rural banks and capital market participants (stock exchanges, stock brokers, commodity brokers and exchanges, foreign portfolio investors), primary dealers, depositories, AD II licence holders and payment aggregators. Your Bank customizes specific solutions for domestic financial institutions that enhances transactional efficiencies leading to enduring relationships.

As a strategy to offer greater benefits to the customers through reduced cost of funds, your Bank actively engages with institutions like SIDBI, NABARD, EXIM Bank and NHB to avail refinance, and with overseas branches of domestic banks to avail foreign currency long-term borrowings. The group also leverages its relationship for distribution of G-Sec, T-bills and SDLs thereby helping the bank’s Primary dealer business.

Some of the new products that the group has offered during the year using the Bank’s pioneering technological platform were:

Application Programming Interface (API) Banking to offer real time/instant banking facility to NBFCs, Brokers, and other Financial Institutions, which is emerging as a key product to integrate and streamline the transaction processing cycle

Nodal Bank offering for payment aggregators, Escrow arrangement for e-wallet players, and AD-II related transactions for money changers and foreign-exchange related players

Bunch Note Acceptor (BNA) offering to large financial institutions to transform the cash transaction process with real-time credit, timely reporting and reconciliation, and detection of fake currency, which was widely acknowledged by Co-operative Banks, NBFs, among others

Online RTGS/NEFT collections (e-collections) and National Automated Clearing House (NACH) offering with real time MIS which found favor among NBFCs, mutual funds, brokers and insurance companies

Correspondent Banking with cooperative banks by offering of sub-membership of RTGS and NEFT services, improved and automated solutions for cheque clearing under CTS, integrated ATM transaction solutions, collection of subsidy and grants under DBTL scheme, and integrated investment solutions viz. CSGL account services to benefit them and their customers

International Banking

In order to address the global aspirations of clients, YES - International Banking has created a widesbrad partner network of over 950 international banks, financial institutions, exchange houses and official bodies. Your Bank executed marquee transactions across products and geographies through its global banking partner network.

YES - International Banking offers a complete suite of products (Debt, Trade Finance, Treasury Services, Investment Banking Solutions, Remittance Solutions, Financial Advisory and Global Indian Banking) to international customers. Your Bank was rated among brferred partners by international institutions to meet their clients’ banking requirements in India. The International Banking Division, in coordination with MNC Corporate Banking, helped position your Bank as the brferred ‘Host Country Bank’ by leveraging its rich relationship capital.

In addition to active tie-ups with exchange houses in GCC and the ASEAN, the International Banking team made inroads into key Western economies like the US and the UK. These alliances increased remittance flow through your Bank. Leveraging on its YES Money platform which was setup to cater to Domestic remittances for migrant workers,

YES BANK has launched an Indo-Nepal Remittance service for Nepalese Citizens residing in India. YES - International Banking has partnered with 2 leading banks in Nepal – Global IME Bank and Mega Bank – to offer a seamless remittance solution for outward remittances to Nepal. YES-International Banking continues to raise large-ticket offshore borrowings for your Bank and negotiate overseas trade transactions for your Bank’s clientele.

Your Bank raised USD 50 Million (Rs. 315 Crores) through the issue of Green Infrastructure Bonds to International Finance Corporation, Washington which is the first investment by IFC in an Emerging Markets GREEN BOND issue in the World. Your Bank also signed the loan agreement with Overseas Private Investment Corporation (OPIC), the U.S. Government’s Development Finance Institution for supporting small business growth in India. The loan facility with OPIC was increased from the original amount of USD 200 Million at the time of signing the memorandum of understanding to USD 245 Million now.

YES Bank signed a Technical Assistance agreement with Asian Development Bank, Manila, Philippines for a grant of USD 1 Million to finance capacity building activities related to the Rural Financial Inclusion and Farmer Access to Markets Project of YES BANK and to which YES BANK will contribute USD 2 Million.

YES-International Banking focused on emerging as a brferred host country banker and payments bank to global counterparts. As a result, more institutions utilized your Bank’s network for their India-linked businesses.

International Footprint

Your Bank established its international footprint by inaugurating its maiden overseas office in the form of a Rebrsentative Office at Abu Dhabi, UAE. The Rep Office was officially inaugurated in April 2015 by H. E. Sheikh Nahyan Bin Mubarak Al Nahyan, Minister of Culture, Youth and Social Development, accompanied by Mr. T. P. Seetharaman, Ambassador of India to the UAE. The Rebrsentative Office has provided great convenience to NRI customers by facilitating host of Banking, Financial and Investment

YOUR BANK RAISED USD 50 MILLION (Rs. 315 CRORES) THROUGH THE ISSUE OF GREEN INFRASTRUCTURE BONDS TO INTERNATIONAL FINANCE CORPORATION, WASHINGTON

consultation services of your Bank in UAE and has played an important role in promoting your Bank services to the larger NRI Diaspora in the country. Additionally, it has provided a significant Brand Value and visibility of your Bank in UAE. Pursuant to receipt of the Reserve Bank of India’s approval, in October 2015, Your Bank was the first bank in India to commence the operations at International Financial Services Centre(IFSC) at GIFT City, Gujarat. Setting up of an IFSC in India has been the vision of Hon’ble Prime Minister of India, as this would be a major game changer for the financial services  

YOUR BANK WAS THE FIRST BANK IN INDIA TO COMMENCE THE OPERATIONS AT INTERNATIONAL FINANCIAL SERVICES CENTRE (IFSC) AT GIFT CITY, GUJARAT

sector in India. A banking unit at GIFT IFSC (IBU) is equivalent to a foreign branch and is a significant development in overall augmentation of Your Bank’s business model whereby Bank will be in a position to provide combrhensive solutions for its client’s foreign currency banking requirements. The opening of an IBU has boosted YES BANK’s Cross Border Trade offerings, External Commercial Borrowings, Foreign Currency loans/syndications and offshore M&A funding business among others. Additionally, the IBU will also allows YES BANK to raise Foreign Currency funding through Bonds/ bilateral loans and other routes. Your Bank is pleased to report that business momentum at IBU has been building up well with and given the positive feedback from clients, we expect significant ramp-up of business volumes at our IBU in the time to come.

Branch Banking

Your Bank’s specialized relationship management architecture & superior customer service, augmented by its cutting-edge technology, were the key driving factors behind enhanced customer experience in the Branch Banking segment. The focus was not merely on facilitating transactions, but also in engaging, informing and involving customers in a personalized manner through specialized relationship channels. Your Bank continued to expand its footprints to facilitate financially-efficient inclusive banking.

Your Bank has institutionalized a dedicated framework to increase penetration in the Metro/Urban geographies in All States Capitals, Top 30 and Top 200 Deposit Centres and Semi-urban/Rural geographies covering DMIC, Special Economic Zones, Economic Promotion Zones, Food Parks, Agri Parks, Ports etc. Your Bank’s customers were served through more than 860 branches across 600 locations and over 1,609 ATMs and BNAs at the close of 2015-16 Your Bank undertook numerous initiatives in 2015-16 to reinforce its commitment on Branch Banking.

SME Branches

Your Bank has launched 26 specialized branches in Highdensity commercial centers, exclusively designed for offering banking products and services to the SME segment.

These branches cater as ‘One-stop shop’ for all the business and financial needs of SMEs offering Assets, Trade/Fx & Remittances, Bulk Payments, Bulk Cheque Printing, etc. Transactional requests are provided high priority and completed within faster turn around times, thereby eliminating customer queues. These branches are better equipped to serve the needs of MSMEs , thereby providing impetus to the Government’s Make-in-India program as well.

ATMs /Recyclers

Your Bank has 1,250 ATMs and 359 Bunch Note Acceptors/ Recyclers (BNA) as of March 31, 2016. Bunch Note Acceptors have been apbrciated by many Corporate Clients as they offer multiple advantages while fulfilling Corporate cash collection needs. The innovation has automated the cash handling processes in various sectors which largely relied on traditional methods of cash management. Your Bank has won the brstigious ‘Bank in a Box’ award from Banking Frontier. Your Bank’s ATM network is recognized as the Second Best in the mid-sized banks by NPCI.

Currency Chest

Your Bank has launched its first Currency Chest and Small Coin Depot in Mumbai on March 3, 2016. Opening of Currency Chest reflects YES BANK’s support to Reserve Bank of India’s endeavor to increase the efficiency of currency management in the banking system. The currency chest will supply and distribute adequate quantity of currency in YES BANK branches, thereby ensuring the quality of bank notes in circulation through continuous supply of clean notes and timely withdrawal of soiled notes.

Digitized Banking

In order to achieve significant strides in the digital banking segment, your Bank has created a dedicated ‘Digital Banking’ vertical with the objective of creating the ‘Best-in-Class’ Digital Channels, Innovative Payment Instruments and Acquiring Platforms. Your Bank has empowered the YES Mobile and Retail Internet Banking Channels with advanced and user friendly navigation features. Your Bank has also activated the National Unified USSD Platform (NUUP) based services to offer banking services on USSD channel. It has also forayed into offering banking solutions on Social Media and Chat Messengers. As part of introducing new payment instruments, Your Bank has launched its Virtual Prepaid Card in partnership with Freecharge Wallet and the product has been widely accepted with over 1.5 million signups within 12 weeks of its launch. During the year, your Bank also launched YES PAY – a mobile wallet offering for retail consumers. Your Bank continues to build innovative channels and interfaces in merchant transaction, brpaid partnerships, wallets and e-commerce segments. Your Bank has also partnered the National Payments Corporation of India for the launch of UPI – Unified Payments Interface.

Internet Payment Gateway and POS

Your Bank implemented various initiatives to strengthen its Internet Payment Gateway and POS offerings with an objective of becoming a Primary Banker in the merchant acquiring space. Your Bank now has close to 10,000 merchants sbrad across 90 cities covering various sectors and segments offering GPRS, MPOS and NFC enabled terminals. Choice of terminal options have substantially provided ease of collection benefits to merchants offering ‘Cash on Delivery’ facilities.

Contact Centre

Your Bank has dedicated Contact Centres for both inbound and outbound calling services catering to domestic as well as NRI customers. While the inbound Contact Centre resolves queries, complaints and service requests initiated by customers, the Outbound Contact Centre triggers service calls to a select set of clients to facilitate their service and product requirements. The Outbound Contact Centre has set-up dedicated teams for different client segments covering Saving Accounts, Current Accounts, Salaried, NRIs,  Retail loans and Business Banking clients.

New Customizable Current Account proposition

Your Bank launched a fully-revamped, first-of-its-kind Customizable Current Account proposition aimed at placing the power of choice in the hands of the consumers. Based on extensive market research and customer feedback

Your Bank has launched a dynamic and integrated current account program, which offers three tiers – Edge Business, Prime Business and Exclusive Business. A business owner can choose to start at any of the three tiers according to his business requirements. The Bank will periodically review the customer’s usage of the account and automatically upgrade to a higher tier if applicable.

Interactive Statements

Your Bank launched first in the industry interactive statements for select YES First customers. Capitalizing on the ecofriendly e-statements platform, interactive statements offer unmatched convenience based on customer brferences.

Features such as unified view of the entire relationship with the Bank, dynamic search & sort and personalized information graphics provide a differentiated user experience compared to the regular bank statements. Your Bank will over time extend this service to other customers as well.

Government Initiatives

Your Bank partnered with Insurance Companies and other agencies to support and assist the Government in their financial and social security mission. Your Bank has actively participated in Government initiatives like Pradhan Mantri Jan-Dhan Yojana (PMJDY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Atal Pension Yojana (APY). Your Bank is fully committed to support all efforts and programs/schemes initiated by the Government from time to time.

E-KYC

As an important step towards its digital transformation journey, Your Bank has launched its E-KYC module with the objective of relieving the customers from the hassles of documentation. Additionally, E-KYC also facilitates the Bank with verifying customer credentials through a reliable digital source. Aadhaar Card holders can give their consent to the Bank to access their data from UIDAI’s Central Data Repository. This facility is successfully launched in all Cluster Hub Branches of your Bank.

Global Indian Banking

Your Bank has recently launched ‘Global Relationship Managers’ Channel for providing superior relationship management and investment advisory expertise to select overseas NRI clients. Your Bank launched new corridors for NRI remittances from Singapore and Switzerland through its state of the art remittance platform. Your Bank now provides NRI remittance facility for NRIs based out of United Kingdom, Europe, United Arab Emirates, Australia, Singapore and Switzerland. To facilitate quicker remittances your Bank has launched ‘YES Smart Remit Kits’ for NRIs based out of UAE through the YES BANK Abu Dhabi Rebrsentative Office. To maximize channel penetration and customer base, your Bank has also started offline registrations for ‘YES Remit’ through Branch Banking Channels. Additionally, GIB customers can now book online appointments with their Branch Leaders before their visit to India through the YES BANK website.

Retail Banking

In line with its objectives of building quality, granularity and profitability in the loans portfolio, Your Bank has launched a number of Retail Banking Asset products in 2015-16. Your Bank’s customers can select from a wide range of Retail Loan products like Secured Business Loans, Car Loans, Super Bike Loans, Commercial Vehicle Loans, Construction Equipment Loans, Loans Against Securities, Gold Loans, Personal Loan and Home Loans. Your Bank is aggressively focusing in designing superior products for tapping the affordable housing segment.

Your Banks has designed a ‘Hub-Spoke’ model for aggressive market penetration which covers 130 key locations across the country. Your Bank’s objective in 2016-17 would be to harness Priority Sector Lending (PSL) opportunities, Digitization and seamless lending process, building a granular portfolio and obtain better yields.

Business Banking

Your Bank has adopted a highly focused approach for serving MSMEs, where dedicated verticals with requisite expertise have been created to provide segment specific and need based financial solutions during the entire life cycle of the MSMEs. Your Bank has been consistently following the knowledge banking approach, which clearly distinguishes it from its peers in the MSME space. Your Bank’s offerings are also providing impetus to the Government’s vision of the Make in India program by catering to MSMEs in the relevant sectors. Your Bank fostered growth, competitiveness and employment creation through financing the MSMEs. For making the banking experience much more convenient and to reduce overall process turn-around time your Bank has adopted large scale digitization of its processes which has helped in automation of various activities and paperless movement of CAMs (Credit Appraisal Memos).

A greater focus in lending to MSMEs and agri-linked businesses helped the Bank fulfil its priority sector lending requirements. Your Bank also partnered with the NSIC, SIDBI, CRISIL, FIEO, Brickwork and other key institutions in the MSME space to ensure that the best schemes and benefits were passed on to customers.

PRODUCT CAPITAL

Transaction Banking

Your Bank’s Transaction Banking Group (TBG) won several international awards and accolades in FY 2015-16 including Best Trade Finance Bank in India and Best Cash Management Bank in India for conceptualization and seamless delivery of quality products and services. The Group specialized in core banking offerings like Corporate Current Accounts, Cash Management Services, Capital Markets & Escrow Services and Trade Finance & Services and Bullion (Gold & Silver) trading, provided under the aegis of the YES Transact brand.

The TBG team comprised competent domain specialists from diverse backgrounds, personally interacting with customers to understand, address and service their strategic, financial and operating needs in the following areas:

Working capital and liquidity management

Treasury integration

Exposure and risk management

Inbound and outbound remittances

State of the art Integrations with client end ERP’s to provide seamless Receivables and Payables Solutions

Innovative technological solutions for process automation and for integration of customers’ and inter-bank systems

Regulatory and International Trade Advisory

Bullion (Gold & Silver) purchase, and fulfilling working capital requirement in form of Gold on Loan

 Rel-ID(Relative Identity) and EIPP (Electronic Invoice Presentment and Payment) services have also been launched

The core group developed and implemented unique and customized product propositions across industry verticals. Your Bank exceeded customer expectations by offering an efficient transaction banking desk, continuously expanding its product suite through its Knowledge Banking-led strategy and strengthening its delivery channels to ensure superior services. The Unit has embarked on a focused Digital strategy to build synergy among different verticals and enabling unique opportunities for clients, thus differentiating

YES BANK’s product and service propositions

In FY 2015-16, Your Bank was privileged to get the very First License from Reserve Bank of India(RBI) to establish its IFSC Banking Unit (IBU) at International Finance Tec-City (GIFT City), Gandhi Nagar in Gujarat. GIFT CITY IBU has broad base product offerings such as External Commercial Borrowings (ECBs), Trade Loans to Correspondent Banks, Direct Lending to JV/WOS of Indian Corporate & Foreign Currency Current Account (FCCA) which are handled by TBG across various customer segments with more products in pipeline to be launched in FY 2016-17.

In the same year, the TBG also started offering API Banking service which enables instant banking facility for the corporate clients. Corporates and Institutions welcomed this initiative and it created new benchmarks including India’s first instant refund facility in e-commerce.

Financial Markets

Backed by experienced professionals, the Financial Markets Group at your Bank offers a competitive and combrhensive line of financial market products and services to its clients.

Your Bank’s Financial Markets (FM) business model provides effective risk management solutions relating to foreign currency and interest rate exposures faced by its corporate clients. The FM group proactively assists clients by making them aware about the risks they face with respect to capital raising, investments, exports, imports and other market risks.

Your Bank has created a buoyant Debt Capital Markets (DCM) franchise with a deep-rooted knowledge of the underlying market dynamics, coupled with strong distribution and structuring capabilities. Since its inception, the DCM group has originated and efficiently executed numerous transactions, across the product suite, for clients including corporates, PSUs, Central and State Government entities and many NBFCs.

Your Bank was ranked No. 4 by Prime Database in the ‘Private Issuers Category’ of the Arrangers tables and was ranked No. 6 in the ‘All issuers category’ League table by Prime Database for 2014-15. Further, your Bank was ranked No. 7 by Bloomberg in the India Domestic Bonds league table for CY 2015.

Your Bank now has the Primary Dealership License for underwriting and bidding for Government of India. As a part of this mandate, Your Bank underwrites and bids for these securities in the auction of Government Bonds held by Reserve

YOUR BANK WAS RANKED NO. 4 BY PRIME DATABASE IN THE ‘PRIVATE ISSUERS CATEGORY’ OF THE ARRANGERS TABLES AND WAS RANKED NO. 6 IN THE ‘ALL ISSUERS CATEGORY’ LEAGUE TABLE BY PRIME DATABASE

Bank of India. The PD desk actively trades and distributes dated securities, T-bills and State Government Bonds, thus covering the complete sovereign debt product needs of clients including Mutual Funds, Insurance Companies, FPIs, Cooperative Banks, Provident Funds and Retail Customers.

The PD desk also trades in interest rate swaps. Financial Markets also conducts proprietary trading to maximize earnings by optimal risk taking across key fixed income, equities and global foreign exchange markets. Additionally, it is responsible for Balance Sheet Management, Liquidity Monitoring, Maintenance of Cash and Statutory Reserve requirements and day-to-day Fund Management of the Bank. Subordinated and hybrid debt capital for your Bank is also raised by the FM Group. Your Bank continues to excel as ICRA (Moody’s affiliate in India) has reaffirmed your Bank’s A1+ rating for its 10,000 Crores Certificate of Deposit program. A1+ rating indicates the highest level of safety in the short-term.

Loan Syndications

The Loan Syndication (LS) team has sold down long term bulk exposures to banks & financial institutions to improve the overall yields on the loan book of your Bank thereby creating a strong brand equity across stakeholders like Banks, NBFCs and other financial institutions. Over the years, the team has demonstrated strong credit appraisal & structuring skills, sectoral knowledge and relationship management which has been apbrciated across the stakeholders spectrum and is reflected in the results below.

The LS team has successfully placed approximately Rs. 21,400 Crores (~USD 3.3 Billion) across 63 transactions in FY 2015-16 as against ~ Rs. 14,000 Crores (USD 2.3 Billion) across 49 transactions in FY 2014-15 to its partner Banks,

NBFCs and financial institutions within India as well as internationally. The clientele involved pedigreed players across the renewable energy, manufacturing and real estate sectors

The team’s consistent performance has placed your Bank as 9th (maiden entry into top 10) in Indian Borrower Loans Bookrunner (both Domestic and Foreign Currency) by Bloomberg for CY 2015 up from 26th rank in CY 2014.

Structured Credits Group

An ongoing challenge faced by the Indian banking industry is a increasing stress and asset quality concerns in the banking sector. Preservation of capital as well as resolution of nonperforming and restructured assets have been focused priority for your Bank. Towards this, Structured Credits Group (SCG) was created as an in-house team of specialists for the early resolution, effective management of distressed and non-performing assets. With in depth analysis and taking advantages of the supportive guidelines in recent times, SCG provides effective solutions for resolving stressed assets by way of early identification of performance detoriation, close monitoring, and thereafter implementing pragmatic solutions by leveraging deeply embedded business, regulatory and legal understanding.

SCG employed multi-pronged resolution strategies, which included operational and financial restructuring, identifying strategic investors for the takeover of stressed assets, arranging last mile financing for business turnarounds, recoveries/resolution within regulatory and legal framework and working closely with ARCs with customized resolution for each case..

SCG’s focus resulted in your Bank emerging with one of the lowest non-performing asset ratios in the Indian banking industry.

YES Securities

YES Securities (India) Limited (YSIL), your Bank’s Broking and Investment Banking subsidiary, completed two years of operations in FY 2015-16. During the year, YSIL expanded its coverage beyond Mumbai and NCR to offer its best-in-class 3-in-1 proposition to customers in 8 additional cities – Bangalore, Chennai, Hyderabad, Kolkata, Chandigarh, Pune, Ahmedabad and Jaipur. YSIL now offers customers a best-in-class investment experience on the web and across mobile devices (app available for iOS and Android) and continues to strengthen its research and execution capabilities. The company also built robust Institutional Broking capabilities and has been empanelled as a Broker by several leading institutional and corporate clients.

YES Securities is a well-integrated financial services firm offering a gamut of services, such as Investment Banking (including Equity Capital Markets and Sustainable Investment Banking), Institutional Sales & Trading and Equity Research to its clients. The firm is a registered securities broker with SEBI and is also a member of NSE and BSE

Investment Banking: The Investment Banking team provides M&A and capital advisory services to large and midmarket corporate and financial sponsor clients through key products such as Mergers & Acquisition Advisory, Private Equity fund-raising and Equity Capital Markets. The team offers expertise across a variety of sectors including Food & Agribusiness, Media & Entertainment, Internet & E-Commerce, Consumer Markets, Infrastructure & EPC, BFSI, Industrials and Logistics. The firm was rated by a leading international publication as the ‘Investment Bank of the Year’ in India in 2015. Some of the rebrsentative transactions consummated by the team during the year under review include:

Book Running Lead Manager to the Rs. 11.5 Billion IPO of Coffee Day Enterprises Limited Exclusive advisor to GTPL Hathway for raising structured finance from an Indian NBFC Exclusive strategic and financial advisor to Jain Irrigation Systems Limited for raising private equity funds from Mandala Capital amounting to approx. USD 120 Million Book Running Lead Manager to the Rs. 6.5 Billion IPO of Healthcare Global Enterprises Limited

Sustainable Investment Banking (SIB): The SIB practice focuses on providing advisory services exclusively in the areas of Clean Technology, Renewable Energy, Environmental Services and Education. Key transactions by the team during the year under review are as follows: Exclusive strategic and financial advisor to Jaiprakash Associates Limited for the divestment of 49 MW wind assets Exclusive strategic and financial advisor for sale of majority stake in Test Funda to ThinkCell Learning Solutions Exclusive strategic advisor to Environmental Clean Technologies (ECT) for commercialization of ECT’s clean coal technology in India Exclusive strategic and financial advisor to Indorama Renewable for sale of 30 MW wind assets to Tata Power [Pending Closing]

Institutional Sales & Trading: The Institutional Equities team caters to Domestic Institutional Investors and Foreign Institutional Investors across geographies. The client focused sales team follows a thorough research based and customized service oriented approach. With a keen focus on understanding client-specific objectives, the sales team works closely with the research team to provide market insight, actionable ideas and opportunities relevant to the firm’s clients. The trading team provides trading strategies across the spectrum and ensures seamless execution of every transaction.

Equity Research: YES Securities provides Equity Research services to clients, to enhance portfolio performance and minimize risk, through an experienced fundamental and technical research team covering 25+ companies across diverse sectors.

Responsible Banking

In line with its Responsible Banking ethos, your Bank has a created a positive impact for its stakeholders spectrum through, its positive impact financing such as climate finance & inclusive banking, nurturing talent, social outcome based initiatives, contribution to national goals of inclusivity, skill development, digitalization & natural environment and participating in the global public discourse on sustainable development.

Strengthening its ties with global and national thought leaders, Responsible Banking produced key knowledge reports at significant platforms to drive policy advocacy on pertinent issues of the day, including: Imperatives of Scaling up Off-Grid Renewable Energy in India

Climate Finance: Innovating for India Accomplishing Energy Efficiency in MSME: A cluster based study

Water: The next sustainability frontier Your Bank has been actively involved with protocols established by national and international bodies including UN Global Compact, Natural Capital Declaration, CDP, India GHG Program and TERI Council for Business Sustainability. In the reporting period, your Bank became the first Indian Bank to join the World Business Council for Sustainable Development (WBCSD) and the <IR> Lab India, a collaborative effort between CII–ITC Centre of Excellence for Sustainable Development (CESD) and the International Integrated Reporting Council (IIRC) to further the adoption of <IR> by Indian companies.

Your Bank had underlined its commitment to natural capital by becoming the first Indian signatory to the Natural Capital laration (NCD) in 2013. As the Chair of the Steering Committee of NCD (effective from January 1, 2016), your Bank will oversee NCD’s strategy and provide direction/ oversight for the working groups and the Secretariat. During the year, your Bank strengthened its relationship with the UNEP Finance Initiative, the global partnership between UNEP and the financial sector, with the Bank’s Chief Sustainability Officer continuing as Asia Pacific Chair. Your Bank is also elected to its Global Steering Committee and sits on the Board of its Banking Commission. Your Bank was also the only bank in the world to be featured in the UN Secretary General’s Climate Finance report which was launched at the Climate Finance Ministerial Meeting held in October 2015, ahead of the COP21.

Your Bank continued to be a benchmark institution for triple bottom line accounting and reporting, becoming the first Indian Bank to release a GRI G4 ‘Combrhensive’ Sustainability Report for FY 2014-15. As the first banking sector signatory to the UN Global Compact, your Bank’s Communication On Progress (COP) continues to be at GC Advanced level, the highest level of disclosures.

As the first Indian banking signatory to the CDP, your Bank is now the only financial institution to be on its Carbon Disclosure Leadership Index for India for five consecutive years, 2011 to 2015, and scored 98 on the Index.

During the year, your Bank completed the third phase of its ISO 14001:2004 certification for Environmental Management System, certifying 105 additional locations across India, and re-certifying 79 locations from Phase I and II, thus covering all its cluster hub branches and corporate offices.

YES COMMUNITY, your Bank’s unique engagement program scaled up its impact during the year, utilizing its branches as knowledge-sharing centres on pertinent social and environmental issues. Your Bank hosted 8,767 community events during the year, touching over 807,500 lives.

During the year, your Bank was recognized nationally and internationally for its sustainability performance, and has become the first Indian bank to be included in the brstigious Dow Jones Sustainability Indices, Emerging Markets Index 2015. Your Bank’s climate finance efforts were recognized by the Karlsruhe Sustainable Finance Awards, Germany for ‘Outstanding Business Sustainability Achievement’, while its positive social impact initiatives recognized with Golden Peacock awards for Sustainability, Environment Management and CSR categories in 2015.

YES FOUNDATION, your Bank’s social development arm was launched in 2012 with a vision of building an ‘Empowered and Equitable India’. The Foundation’s initiative, ‘YES! i am the CHANGE’ social film making challenge has emerged as the largest social film movement in the world. In its third edition, 140,132 teams from all over India submitted 2,755 short films, which were judged by a highly eminent jury.

Inclusive & Social Banking

In line with the Responsible Banking vision to mainstream sustainability within its core business and address needs of the ‘next billion’ customers, YES BANK created a special division called Inclusive & Social Banking (ISB). ISB is responsible for the design and implementation of various financial inclusion initiatives. For YES BANK, financial inclusion is not just a social and regulatory obligation but a viable business opportunity.

The mandate of the ISB was to reach the un-banked and under-banked population (urban, semi-urban and rural areas) by leveraging your Bank’s branch network, technology edge and relationship capital in the public, private and social sectors. In line with the guiding principle of Frugal Innovations for Financial Inclusion (FI4FI), the ISB team developed innovative business models and forged partnerships leading to their seamless implementation. The ISB team aimed to create viable business models while providing ‘access to finance’ to the bottom-of-the-pyramid customers.

ISB offered various financial services comprising microcredit, micro-saving, micro-insurance and remittance services across geographical and socioeconomic contexts and partners.

Through the flagship, YES Livelihood Enhancement Action Program (YES LEAP), YES BANK provided combrhensive financial services (credit, saving and insurance) to Self-Help groups/ Joint Liability Groups through partner organizations acting as Business Correspondents. Through YES LEAP, YES BANK touched over 1.8 million households across 19 states and 260 districts.

While being committed to Financial Inclusion, ISB’s recent focus has been on enhancing technology solutions to efficiently scale YES BANK’s outreach to cater to more unbanked and under banked population of India. ISB introduced a dedicated first of its kind loan origination & management system for booking SHG loans. It offers the flexibility of microfinance institutions along with regulations and risk controls required for banks at the same time. All field transactions were recorded in YES Sahaj mobile transaction device and monitored centrally. Furthermore, for improved monitoring over field operations, increased efficiency and transparency, tablet solution is being launched. This will help bridge the inability of banks to have brick and mortar branches for serving the remote rural population. There will be seamless integration between field operations and loan booking with this initiative.

FIRST INDIAN BANK TO BE INCLUDED IN THE brSTIGIOUS DOW JONES SUSTAINABILITY INDICES, EMERGING MARKETS INDEX 2015

The ISB team is also mandated with the implementation of your Bank’s Financial Inclusion Plan (FIP) as approved by the Board and the RBI. Your Bank performed well across almost all financial inclusion parameters. Your Bank’s radical FI4FI approach received several national and international accolades.

Microfinance Institutions Group

YES BANK remains committed to creating equal financial opportunities for all. YES BANK promoted microfinance as a new asset class, widening access to capital through a twopronged strategy involving the Microfinance Institutions Group (MFIG), and mainstreaming bottom-of-the-pyramid clients through the Inclusive and Social Banking team. Via product suite of MFIG that comprises of Term Loan Facilities, loan syndications, rated capital market loan products like pool securitization, bonds, commercial paper, pass through certificates (PTCs), YES BANK catalyzes growth of the Indian microfinance industry.

YES BANK aims to access more investors and reduce fund costs, thereby making it possible to deliver affordable, fairlypriced and customized financial solutions. The MFIG engaged in advocacy at various levels, emerging as the primary channel to engage with stakeholders (MFIs, investors, rating agencies, policymakers, governmental agencies and regulatory bodies) and making it possible for the Group’s activities to touch the lives of millions of people.

Agribusiness Product Management

Agriculture is a prominent sector of our economy (17% of GDP) and Government of India’s focus on this sector was evident in the Union Budget 2016-17 which has created tremendous opportunities for food processing, agri infrastructure and irrigation. Your Bank’s continued focus on agri supply chain has enabled us to be well poised to take advantage of these emerging opportunities. Agribusiness Product Management (ABPM) team has experienced Banking and Industry professionals with in-depth knowledge of Priority Sector so that the Bank can deliver efficient and customized banking solutions to the core sectors, such as agriculture, dairy, sugar, agri MSMEs among others, thereby playing a significant part in driving the economic growth of rural India. Given the critical need for additional agri-infrastructure assets, your Bank took the lead in providing long-term structured term funding for related projects. Further, to ensure a seamless and cost-efficient delivery to valued Food and Agri (F&A) customers, your Bank forged strategic alliances with several leading warehouse-related service providers, steadily building a strong commodity funding portfolio with a stress on customized offerings. Your Bank will continue to add more reputed partners for strategic advantage to increase coverage of geographies and commodities. There is also a focus on various intermediaries in the F&A supply chain, ensuring an access to structured and financially appropriate banking products under agro processing domain. Your Bank is committed to timely credit delivery to farmer community, including small and marginal farmers, for providing loans for raising crops, br & post harvest activities, developmental activities and plantation & horticulture activities that are a part of identified supply chain, for off-take of produce.

For developing the evolving segment of Farmer Producer Companies (FPC), your Bank engaged with regulatory agencies such as NABARD and SFAC (Small Farmers’ Agribusiness Consortium) to identify FPCs with sustainable business model and create a robust profitable portfolio.

PROCESS, SERVICE & TECHNOLOGY  OVERVIEW

Service and Technology Capital

To enhance customer delight, your Bank leveraged state-o fthe- art technology and innovative practices in Digital banking and Digitization of end to end processes. Your Bank invested in upgrading the role of technology in various mission-critical back-end functions, including Quality Assurance, Technology Solutions Group, Risk Management, Internal Audit and Human Capital.

Business Processes - Creating a Quality  Organization

In our pursuit to Build a Quality Organization, your Bank seamlessly extended its professional approach to business processes resulting in continuous improvement.

Some key initiatives comprised

Centralized back office functions (NOC-National Operating Centres) of various businesses in Mumbai and Gurgaon, including ‘Yes Touch Contact Centre’ located in Gurgaon & Mumbai provide superior customer service and efficient business continuity planning.

Your Bank is setting up its largest Operations Management and Services Delivery facility in Ambattur, Chennai which will be sbrad over 7 lakh sq. ft. to employ 9,000 employees at full capacity and expanded to 12,000 by 2020. Business Excellence frameworks and quality practices, such as Five S, Quality Circle, Lean, Six Sigma and ISO 9001 standards were established. Back-office operations at NOCs, 101 key branches and your Bank’s Internal Audit Function have been certified under ISO 9001 (Quality Management System).

Your Bank’s complaints management processes have been certified under ISO 10002 (Customer Service - Complaints Management system). Your Bank used the Complaints and Query Management System as a singular touch point to log, handle, escalate and resolve customer grievances. Your Bank strengthened its Business Continuity Management Framework (ISO 22301-certified) and Information Security Management Framework (ISO 27001-certified). There was an on-going evaluation of all critical parameters, including an end-to-end (e2e) review of critical business processes.

Your Bank implemented a framework for the measurement of Customer Experience (internal and external) to ensure that customer feedback across each touch point (including customer complaint registers, customer satisfaction surveys, telephonic surveys and employee feedback) was collected, analyzed and acted upon.

Your Bank has Digitised transaction processing in critical functions for straight through processing and enabling paper less transactions.

Your Bank leveraged social media as a new channel for superior customer service to address queries/ complaints, receive feedback, garner inputs on service (VOC),

Your Bank adhered to Banking Codes and Standards Board of India (BCSBI), Goiporia Committee recommendations, Damodaran Committee recommendations and the Committee on Procedures and Performance Audit of Public Services (CPPAPS) guidelines, thereby ensuring compliance across its critical functions.

Embedding a Continuous Improvement Approach Your Bank’s Quality Assurance and Service Delivery Units provided a framework that facilitated continuous improvement. The Quality Policy at your Bank states, ‘YES BANK ‘will strive to ensure a consistent superior service experience through operational excellence, innovation, cutting-edge technology and best-in-class systems, and processes in its mission to become the Finest Quality Bank of the World in India’ by 2020.

The Service Quality Strategy

Your Bank’s three-pronged structure to bolster customer service comprised customer experience, innovation and quality assurance. The Customer Experience unit captured the Voice of the Customer (VOC), and assessed performance across key service drivers. These initiatives were managed through the Innovation Centre, which acted as a clearing house for ideas, that helped your Bank implement ‘next practices’ across products, services and channels.

Specific quality goals were classified across the categories of Process Management and External and Internal Service Delivery in line with your Bank’s Quality Policy and Objectives. Quality improvement drives, like workforce suggestion schemes, Lean Six Sigma, Quality Circles, Five S, ISO 9001 and ISO 10002 were implemented across business units and branches.

At your Bank, external and internal service delivery (customer satisfaction) was measured using dashboards, Voice of the Customer (VOC), Branch Service Committee Meetings, Sigma Scorecards and External/Internal Customer Satisfaction Surveys. These initiatives not only helped build mutuallybeneficial customer relationships, but also ensured stringent Service Level Agreements (SLAs) across the Bank.

The YES Service Program, an internal service proposition, disseminated through a defined and on-going service marketing program, and measured through mystery shopping, on-job monitoring and Branch Executive Leadership Team (BELT) programs, were held periodically across key branches.

Your Bank created a knowledge pool of Six Sigma/Lean change agents to reinforce a culture of improvement. Your Bank undertook several improvement projects (strategic and tactical) during the fiscal year. The former were targeted towards projects that impacted strategic business objectives, while the latter were tactical improvements carried out by the shop-floor teams.

The leadership of each business unit reviewed existing processes, initiated improvements and instilled procedural orientation. Within a short period, your Bank reported the following achievements: Your Bank has been recognized as ‘World Class’ in the Service Category by Asia Pacific Quality Organization. Your Bank is also the only Indian Bank to win this brstigious global award based on Malcolm Baldrige Business Excellence Framework (USA).

Information Technology

Information Technology (IT) is a critical enabler of business transformation and growth needs to play a fundamentally distinctive role as it partners with the business. IT-enabled businesses, advances products and innovation and foster customer-led growth. As a new generation Bank, Your Bank has deployed ‘Technology’ as a Strategic Business enabler

- to build a distinct competitive advantage and to achieve superior standards of Customer Service.

Your Bank has recognize this and has committed to investing in Technology adopting an A-R-T (Alliances, Relationships, and Technology) approach where-in we have identified the need of the current times and pain points of the customers concluding on these as a set of opportunities without compromising on security to ensure the customers carry out their banking needs and services with ease and comfort frame of mind.

The vision of the Technology & Solutions Group (TSG) at Your Bank is ‘To become the most efficient unit of Bank by enabling state-of-the-art technology services & solutions to deliver superior stakeholder experience’ Technology has its strategy broken into 2 parts i.e. ‘Run the Bank’ to continue work on Initiatives which are needed to keep the banks operations running effectively and ‘Build The Bank’ keeping laser-sharp focus on transformation initiatives to meet the Vision of the Group and Your Bank. Many critical initiatives which were bank-wide were successfully completed in time during the year. Starting with rolling out of API Banking, which provides a secure abstraction layer with reliable access to launching its first own Digital Wallet called YES PAY which is an simple user friendly mobile applications available for all users in the country to pay for a wide range of services. Technology also led to launch an in-house developed Deliverable Management Solution (DMS) that helped automation of managing the tracking and reporting of various physical deliverables across multiple units within the Bank. In 2015, Your Bank has also made Remote Computing a reality with Any Time Anywhere (ATAM) workstations thru End User Computing. This not only saves costs but also ensures optimum utilization of resources In addition, Your Bank has launched its biggest initiative of upgrading the Bank’s Core Banking Systems to best in class applications globally in order to meet the growing demands of Your Bank. Initiatives on Mobility Platform Revamp incorporating the latest state of art technology apps in digital banking and fresh look for its Corporate Website are already in full fledge execution mode. Technology Team is also working with the business to launch Your Bank’s first own Credit Cards, a new Customer Relationship Management (CRM) tool, and upgrading the current Business Intelligence framework to enhance the Customers Behavioural Analytics.

HUMAN CAPITAL MANAGEMENT

Your Bank pursued a strong employee value proposition of ‘Creating & Sharing Value’ driven by the ethos of Professional Entrebrneurship and a talent philosophy of Owner-Partner- Manager model with all YES BANKers engaging, directing, managing and accelerating development.

The Human Capital engagement practices at your Bank were targeted at developing the Bank’s brand as a ‘Preferred Employer of Choice’. Your Bank continued to attract and retain the best talent from within India and abroad. Besides, your Bank hired a number of experienced professionals from other private sector banks that strengthened our retail banking leadership. Your Bank continued to balance the recruitment of top and senior management professionals at one end, with middle, junior and general management professionals at the other. Within a short time, your Bank’s management talent was regarded as one of the best in the Indian banking sector, demonstrated by the several recognitions and awards received over the last eleven years.

Your Bank made significant people investments in 2015- 16, institutionalizing initiatives in the areas of executive engagement, improving workplace health and wellness, learning and development. The result of this investment in people was that, your Bank created a robust workforce of over 15,000 employees in just 12 years.

Some of the key highlights of your Bank’s Human Capital practices are illustrated below:

Executive engagement

Making YES BANK a ‘Great Place to Work’ Your Bank has been participating in the ‘India’s Best Companies to Work for’ study since 2013. The study is conducted by Great Place to Work® Institute, a leading management research and consulting firm. During this study, confidential and anonymous feedback is sourced by the Institute from randomly-identified YES BANKers, to measure the Bank’s ’Trust Index‘ across such parameters, as organizational credibility, respect, fairness, pride and camaraderie. The results are analyzed and relevant interventions launched, including leadership workshops, re-articulated integrated vision and values framework, YES to GRACE (Gender Respect and Commitment to Equality), Internal Complaints Committee (ICC) to investigate and inquire into complaints of sexual harassment, Hi-Potential Development Programs and Revitalized 5C’s Employee Engagement Program, among others. Your Bank also participated in the 2016 study. The Trust index score has consistently gone up from 70 in 2013 to 72 in 2014 and subsequently to 74 in 2015. The scores increased across all parameters. Your Bank was declared the 2nd Best Place to Work For in the Banking Sector in 2015.

While the detailed report is awaited, as per the brliminary report the Trust Index score continues to be at 74 for 2016 as well. Given the increase in headcount in the Bank over the last one year, sustaining the score is significant.

5 C’s Employee Engagement Model

To engage the growing workforce, your Bank follows the 5 C’s Engagement Model viz. Culture, Communication, Career, Connect, and Care. Your Bank ENGAGEs and DEVELOPs Human Capital by disseminating/re-connecting YES BANKers with YES BANK’s core VALUES, by creating an intentional CULTURE, encouraging open and honest COMMUNICATION, strengthening CONNECT with employees and community, supporting CAREER development and showing their CARE as an organization.

YES CLUB FIT – A Wellness Initiative

YES BANK launched an innovative pedometer-based WELLNESS initiative called ‘YES CLUB FIT’ to help further augment the health quotient of YES BANK executives. YES CLUB FIT was designed to help YES BANKers become more active, within the time and space constraints of modern life, via a format that is fun, team oriented and relevant to them. This was complemented with regular sessions on ergonomincs, meditation, zumba and lifestyle management.

This initiative attracted participation from all executives irrespective of age, gender, physical ability and fitness levels. This was launched pan Bank and 1500 YES BANKers participated in this exciting journey to improved health and happiness.

University & Schools Relationship Management (USRM)

The University & Schools Relationship Management (USRM) initiative plays a pivotal role in building your Bank’s brand as a ‘Preferred Employer of Choice’ among the Best Educational Institutions in India and abroad. This program is designed to equip an encompassing knowledge sharing solution that will help propagate information about key developments in the Banking arena. Through this program, several outreaching engagement activities are planned, and executed with select B-Schools, Engineering colleges and Agricultural Institutes across the country and abroad.

The USRM Team launched 4th edition of YES BANK Transformation Series, a case study competition themed on innovation and digitization in the Banking sector saw participation from over 16,000 students from reputed Indian and international institutes. Also, 3 editions of YES BANK USRM Newsletter were launched to ensure effective and concise transmission of relevant information pertaining to YES BANK with the faculty & student community across 800+ campuses in India and select foreign universities abroad.

YES Professional Entrebrneurship Program (Y-PEP)

Your Bank launched this innovative and institutionalized Talent Acquisition program in 2006, to foster young leadership, by putting the participants in challenging roles and projects and driving high performance through structured Induction, learning programs, and mentorship by senior management, inculcating prudent risk taking attitude and developing leadership qualities. This program’s notable feature is that, the Young professionals are selected for specific positions against the choices given by candidates. YES BANK has hired 100 Y-PEPs for 2016 batch. Over the last 10 years, this program has inducted over 1000 Y-PEPs from brmier institutions. This highly qualified talent pool has contributed to consistently augment and support your Bank’s knowledge based, state-of-the-art technology driven services across key banking relationships, products, knowledge advisory groups, and critical support functions

YES SCHOOL OF BANKING (YSB)

Your Bank has always strongly believed that ‘Knowledge’ is a key differentiator, and continues to invest in developing its Human Capital for creating differentiated Capacity, Capability, Culture & Confidence. In line with the same, YES School of Banking was institutionalized in 2007, with a vision to create a Centre of Excellence for learning solutions in Banking and related areas and drive alignment of Business Goals at every stage of the Organization’s growth. All learning & development initiatives at YES BANK are domiciled under the aegis of this dedicated knowledge function.

The key focus areas for YSB are:

1. Building enablers for achieving SCALE in line with Vision 2020

2. Supporting YES BANK’s priorities viz. Leadership Development, Productivity, Service Culture, Cross sell, Design Thinking & Innovation

3. Creating a Compliance Culture (system, controls & processes)

4. Building Hire & Train models to build a scalable Talent supply chain

YES UDAAN

Your Bank associated with Project Udaan, an ambitious project undertaken in partnership with the Ministry of Home Affairs and the National Skill Development Corporation (NSDC), to provide training and employment opportunities to Jammu & Kashmir’s youth. Your Bank launched the 3rd edition of YES UDAAN in February 2016, offering Certification in Banking Fundamentals program. The program received over 280 applications, out of which 23 youths were screened and selected through an online aptitude test, followed by a selection interview. The shortlist saw equal participation in terms of Gender, with 12 male and 11 female applicants selected for the training. These youths will undergo 3 months Classroom and on the job training.

Women Centric initiatives:

Safety for Women

In view of the current increase in incidents pertaining to women’s safety in India, awareness/training workshops were organized for female executives on basic brparedness and response measures. The workshops were designed to sensitize, empower and support them in untoward situations. These guidelines were aimed at increasing safety awareness, and providing practical tips and tools that would help female executives avoid potentially hostile situations in the most practical manner. Another key initiative that was implemented was the 24*7 Helpline Number for SOS situations for all YBL executives. A List of Next of Kin, along with phone numbers is made available with the 24X7 call center, to inform them about the emergency situations.

Say YES to G.R.A.C.E.

Your Bank has revised the Policy for Prevention of Sexual Harassment in line with the ‘The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)’ Act & Rules, 2013.

With a view to create a robust framework for dissemination, awareness creation and periodic reiteration of Prevention of Sexual Harassment policy amongst all executives, the Bank launched  ‘Say YES to G.R.A.C.E’ (Gender Respect And Commitment to Equality). This initiative is applicable to all YES BANKers irrespective of gender. Though keeping in mind the focus on women safety in India, this initiative has played a key role in gender sensitization.

Rewards and Recognition

Your Bank was recognised as:

No.1 ‘Dream Company to Work For’, Best Employer of the Year’, ‘Best Employer Brand of the Year (Banking Sector) by the World HRD Congress 2016

Award for Excellence in HR Through Technology by the World HRD Congress 2015

Most Inspiring Workplace of the Year 2015 – Private Sector Banks awarded by Banking Frontiers No. 2 in Banking under India’s Best Companies to Work For 2015 (GPTW Institute)

Runners up of BML Munjal Awards 2015 for Business Excellence through Learning & Development (Private Sector – Services category)

Top Learning & Development Organization conferred under the ‘Special Category’ of CII HR Excellence Awards (in Dec 2014)

RISK MANAGEMENT

The long-term financial security and success of your Bank is built on a robust risk management system. Through proactive and improved risk management practices, your Bank’s risk management function continuously works towards achieving financial stability and enhancing stakeholder value. The Risk Management Architecture of your Bank is overseen by the Risk Monitoring Committee (RMC), an independent Board level sub-committee that strives to put in place specific policies, frameworks and systems for effectively managing the various risks.

The day-to-day functioning is managed by the Risk Management Department (RMD). The RMD is headed by the Chief Risk Officer (CRO), who leads the Credit Risk Unit and Risk Control Units. Credit Risk Unit is responsible for evaluating, rating and underwriting credit under respective Risk Heads. The Risk Control Units, such as Market Risk, Operational Risk, Enterprise Risk Management Unit, Information Security Unit, Portfolio Analytics Unit, Credit Risk Control Unit, Credit Mid Office and Risk Containment Unit are responsible for independent review, monitoring and reporting of all risk control parameters, and recommending appropriate corrective actions where necessary. These units are also responsible for ensuring compliance to internal policies and regulatory guidelines.

Enterprise Risk Management

Your Bank has an Enterprise Risk Management Unit (ERM) that is responsible for implementation of ERM framework, Risk Aggregation, Risk based pricing, Pillar II Risk assessment of – Reputational Risk, Compliance Risk, Concentration risk etc., BASEL II / III compliance, Internal Capital Adequacy Assessment Process (ICAAP) review, migration to advanced approaches for capital charge computation and Bank wide Stress testing. Your Bank has further constituted two Committees - Enterprise Risk and Capital Management Committee (ERCC) and Reputation Risk Management Committee (RRMC). ERCC is responsible for overseeing Enterprise Risk Management, Capital Management, and ensuring that all material risks are identified, measured, monitored and controlled in accordance with Bank’s Risk Appetite, as well as, within Regulatory guidelines. The RRMC oversees Reputation Risk Profile, designs proactive steps for enhancement of Reputation of the Bank and management of Reputation Risk events for the Bank

Your Bank has successfully migrated to BASEL-II capital adequacy norms since March 31, 2009. Under this, it has adopted the ‘Standardized Approach’ for measurement of Credit Risk, ‘Basic Indicator Approach’ for Operational Risk and ‘The Standardized Duration Approach’ for Market Risk.

Your Bank has also implemented the Basel-III norms, and has laid down a roadmap for migration to advanced approaches for capital charge computation, across Credit Risk, Market Risk and Operational Risk. Your Bank has also formulated an extensive policy on ICAAP, commensurate with the Bank’s size, level of complexity, risk profile and scope of operations.

Your Bank has thus evolved a robust enterprise-wide risk management framework which is geared to support the business plans of the Bank.

Credit Risk

Your Bank’s Credit Risk management is governed by a combrhensive and well-defined Credit Policy, which is approved by the Board. It encompasses credit approval processes for all business segments, along with the guidelines for monitoring and mitigating the risks associated with them. All corporate credit proposals are approved either through a Committee approach or through Joint Delegation, depending on rating and exposure thresholds outlined in the Credit Policy. Your Bank currently has three committees for approving credits, viz. Board Credit Committee (BCC), Management Credit Committee (MCC) and Executive Credit committee (ECC). Of these, the BCC is a Board level subcommittee, while MCC and ECC comprise Top and Senior management personnel. Joint Delegation involves two or three approvers jointly approving the proposal, which primarily addresses large volume of small ticket proposals.

While exercising their sanctioning powers, these designated committees/functionaries exercise the highest level of due diligence, and ensure adherence to the Bank’s Credit policy and other regulatory guidelines.

The appraisal process encompasses a detailed risk assessment and rating of all obligors, using your Bank’s rating models. These models have been developed in conjunction with a reputed external credit rating agency, and cover all corporate business segments of your Bank. The ratings of customers are assessed based on their financial performance, industry characteristics, business positioning, project risks, operating performance and other non-financial parameters, such as quality of management and conduct of account. Your Bank additionally has in place, scorecards for specific schematic programs, in case of Retail and SME borrowers.

This function works in close coordination with various business segments to periodically review the individual borrower relationships, identify early warning signals and assess the overall health of borrowers. Your Bank has taken proactive measures to ensure that delinquencies are maintained at a minimum level, through robust postsanction monitoring processes. There is a dedicated team, which works towards ensuring compliance to the sanctioned terms and conditions, through an internal tracking system.

There is also an independent ‘Portfolio Analytics Unit’, which is responsible for monitoring the entire credit portfolio across all segments, including monitoring of early warning signals, identifying portfolio trends, and generating portfolio level MIS, covering various credit quality indicators, conducting industry studies and determining industry outlook. Further, ‘Credit Risk Control Unit’ is responsible for independently reviewing your Bank’s credit policies and programs, including rating models, scorecard development /implementation/ testing for retail / program based lending. The unit is also responsible for migration to Internal Ratings Based (IRB) approach for Credit Risk, under Basel II. Your Bank also has an active legal department that helps in assessment and management of material legal risks. The department has developed a combrhensive set of standard documents for various types of credit products.

Market Risk

Your Bank’s Market Risk management is governed by combrhensive Board approved Market Risk Policy, ALM Policy, Liquidity Policy, Investment Policy, Hedging Policy, Stress Testing Policy, Derivative Policy and a Derivative Appropriateness Policy to ensure that risks underwritten across business activities are within the stipulated risk appetite of the Bank, and also to ensure that similar risks are aggregated. These policies have been benchmarked with industry-best practices and RBI regulations.

Your Bank has an integrated, straight-through processing and state-of-the-art treasury system for enabling better risk management. Your Bank measures liquidity, currency, and interest rate risks through various metrics, viz. Liquidity Gap Analysis, Dynamic Cash Flow Analysis, Intraday Liquidity Monitoring, Liquidity Coverage Ratio, along with other Liquidity Ratios, Value at Risk (VaR), Earnings at Risk (EaR) and Market Value of Equity, Sensitivity Analysis, among others using robust internal risk models. Your Bank regularly conducts stress testing to monitor the Bank’s vulnerability towards extreme, but plausible unfavourable shocks.

Your Bank monitors and controls its risk, using various internal and regulatory risk limits for trading book and banking book, which are set according to a number of criteria, including economic scenario, business strategy, management experience, peer analysis and the Bank’s risk appetite. The risk reporting mechanism in the Bank comprises disclosures, and reporting to the various management committees, viz. Investment Committee, Asset Liability Committee, among others.

Operational Risk

Your Bank, in accordance with the regulatory guidelines, has implemented a combrhensive operational risk management policy and put in place a framework to identify, assess and monitor risks, strengthen controls, improve customer service, and minimize operating losses. Your Bank has constituted the Operational Risk Management Committee (ORMC), which is the primary driver for implementing the best industry practices in Operational Risk Management.

Your Bank has further implemented a combrhensive Business Continuity Management (BCM) Policy, to safeguard the interests of the employees and customers, in the event of a disaster or significant disruption that may affect its operations and brmises. The plan is designed to facilitate the safety and well being of employees, and continuity of the critical business processes in the event of various disaster scenarios.

Your Bank has also put in place a Product and Process Approval Policy, which covers the approval and risk evaluation process, of all the new products/modifications to existing processes. Additionally, your Bank has also constituted Outsourcing Management Committee (OMC) to ensure effective due diligence and monitoring of your bank’s outsourced activities on continuous basis.

INTERNAL AUDIT

Your Bank’s Internal Audit department performs independent and objective assessment to monitor adequacy, effectiveness and adherence to the internal controls, processes and procedures instituted by the management and extant regulations. function supports your Bank’s role in safeguarding its assets. The function has adopted a Risk-based approach of Internal Audit (RBIA). The primary focus of the audit is on key risk areas, which are of substantial importance to the Bank. The RBIA approach has been thoughtfully structured taking into account the RBI guidelines and internationally established practices. The Internal Audit department reports to the Managing Director & CEO for day-to-day activities and to the Audit Committee for Audit Planning & Reporting. Additionally, your Bank also subjects its operations to Concurrent Audit by reputed audit firms to complement its Internal Audit function. The Concurrent Audit covers core activities such as the Credit Portfolio, Financial Markets, Operations, and Branches. All audit reports are circulated to the relevant management teams and the Audit and Compliance Committee of the Board. Your Bank’s Internal Audit department is ISO 9001:2008 certified (Quality Management System).

Compliance

Your Bank has institutionalized a strong compliance culture across the organization, pursuant to its strategic goals of transparency and trust, among all its stakeholders. Your Bank has a dedicated Compliance Department for ensuring regulatory compliance, across all its businesses and operations.

The key functions of this department includes, dissemination of key regulatory updates affecting the various businesses of your Bank, review of new products and processes from a regulatory compliance perspective, provide guidance on compliance-related matters, impart training to employees on compliance aspects, among others. Your Bank has also put in place a ‘Know Your Customer’ and ‘Anti-Money Laundering Policy, ’approved by the Board of Directors, and transaction monitoring procedures, as per the RBI guidelines.

FINANCIAL AND OPERATING PERFORMANCE

Your Bank has delivered a steady financial and operating performance for FY 2015-16. Your Bank, in the back drop of challenging economic environment, has once again delivered superior Return on Equity (RoE) of 19.9% and Return on Assets (RoA) of 1.7% for the year ended March 31, 2016 along with a advance growth of 30.0% and asset growth of 21.4%.

Your Bank has continued to deliver on all key parameters with robust growth in net income, improving net interest margins, stable asset quality and improving liability franchise with a CASA ratio of 28.1% an improvement of 5% over March 31, 2015. This helped your Bank generate strong shareholder returns with basic and diluted EPS increasing to Rs. 60.6 and Rs. 59.3 respectively, taking the book value up to Rs. 327.8 after considering a dividend of Rs. 10 per share

Your Bank’s total Balance Sheet size increased by 21.4% from Rs. 136,170.4 Crores as of March 31, 2015 to Rs. 165,263.4 Crores as of March 31, 2016 primarily driven by growth in advances.

Advances

During this fiscal, your Bank recorded a growth of 30.0% in its loan book with advances increasing to Rs. 98,209.9 Crores, on the back of growth in lending in Corporate Banking (large corporations, government-owned corporations and institutions, multinational corporations and Indian financial institutions) & Commercial Banking (mid-market corporations, operating across various industries), Branch Banking (SMEs, MSMEs and Retail) and priority sector lending.

The Yield on Advances for the year was 11.5%. As a result of growth in advances, CD ratio of the Bank has increased from 82.9% to 87.9%. During FY 2015-16, your Bank has raised Basel III compliant Tier II instruments amounting to Rs. 3,899.2 Crores with tenor of 10 years. Further, your Bank had commenced its operation, pursuant to RBI approval, in International Finance Service Centre (IFSC) Banking Unit in Gujarat International Finance Tec City (GIFT) and in period of less than half year of operations, the IFSC has an outstanding loan book amounting to Rs. 1,498.9 Crores.

Investments

Total investments as at March 31, 2016 increased by 13% to Rs. 48,838.5 Crores from Rs. 43,228.5 Crores as at March 31, 2015. This can be mainly attributed to the increase in Government Securities of Rs. 5,185.0 Crores and increase in Non-SLR investments of Rs. 424.9 Crores.

Deposits

Your Bank’s deposits increased by 22.5% to Rs. 111,719.5 Crores as at March 31, 2016 which comprised of Rs. 10,925.1 Crores of demand deposits, Rs. 20,417.7 Crores of savings deposits and Rs. 80,376.8 Crores of term deposits. Term Deposits increased by 14.7% as at March 31, 2016 over March 31, 2015 while savings deposits increased by 62.3% and current deposits increased by 28.5% as at March 31, 2016 over March 31, 2015. The Bank has seen an increase in the composition of granular deposits on account of an increasing branch franchise and customer base of the Bank. Current and Savings Account (CASA) deposits grew by 48.7% to Rs. 31,342.8 Crores taking the CASA ratio to 28.1% as at March 31, 2016 up from 23.1% as of March 31, 2015. The Bank continues to witness increased traction in CASA on the back of growing branch network, improving productivity, improved brand franchise and enhanced Savings Rate offering.

Borrowings

Total borrowings of your Bank increased from Rs. 26,220.4 Crores as at March 31, 2015 to Rs. 31,659.0 Crores as at March 31, 2016. The foreign currency borrowing, including IFSC, increased from Rs. 9,903.7 Crores as on March 31, 2015 to Rs. 10,613.0 Crores as on March 31, 2016.

Interest Income

Your Bank’s total interest income increased by 16.9%, from Rs. 11,572.0 Crores for the year ended March 31, 2015 to Rs. 13,533.4 Crores for the year ended March 31, 2016. Interest income on advances and discounts on bills increased by 21.1%, primarily due to an increase in gross advances. The average yield on your Bank’s advances portfolio was 11.5% for the year ended March 31, 2016. Interest income on investments increased by 4.5%, due to higher average investment portfolio during the year. These investments were mainly in government securities (including investments held to meet SLR requirements), corporate debentures and bonds, passthrough certificates of mortgage-backed and asset-backed securities, commercial paper and certificate of deposits.

Interest Expense

Your Bank’s total interest expense increased by 10.9%, from Rs. 8,084.2 Crores for the year ended March 31, 2015 to Rs. 8,966.7 Crores for the year ended March 31, 2016. Interest expense on deposits increased by 9.8%, due to an significant increase in average deposit held during the year. Average deposit cost was 7.4% for the year ended March 31, 2016. Interest expense on RBI / inter-bank borrowings increased by 11.8% due to significant higher average borrowing during the year.

Net Interest Income

Your Bank’s net interest income increased at a rate of 30.9% from Rs. 3,487.8 Crores for the year ended March 31, 2015 to Rs. 4,566.7 Crores for the year ended March 31, 2016. Overall yield on advances has reduced to 11.5% for the year ended March 31, 2016 from 12.2% for the year ended March 31, 2015. This was accompanied by a decrease in cost of deposits from 8.4% for the year ended March 31, 2015 to 7.5% for the year ended March 31, 2016 driven by increase in percentage of low cost deposits in the form of CASA. Both the above factors resulted in net interest margins improving from 3.2% for the year ended March 31, 2015 to 3.4% for the year ended March 31, 2016.

Other Income

Your Bank also displayed robust growth in non-interest income by 32.5% from Rs. 2,046.5 Crores for the year ended March 31, 2015 to Rs. 2,712.1 Crores for the year ended March 31, 2016, primarily due to increases in commission, exchange and brokerage income. Commission, exchange and brokerage income comprised of mainly income from opening and negotiating letters of credit, commission charged on financial guarantee and performance guarantee, cash management services, financial advisory services and fees for loan syndication. Income from these increased by 24.4% from Rs. 1,976.5 Crores for the year ended March 31, 2015 to Rs. 2,459.2 Crores for the year ended March 31, 2016. Net profit from the sale of investments increased from Rs. 142.1 Crores for the year ended March 31, 2015 to Rs. 260.6 Crores for the year ended March 31, 2016. Profit from exchange transactions and miscellaneous income had a loss of Rs. 7.8 Crores for the year ended March 2016 due to movement in currency and interest rates.  

Operating Expenses

Your Bank continued to make substantial investments in human capital, information technology and branch expansion to meet its growth targets. As a result, operating expenses increased by 30.3% from Rs. 2,284.7 Crores for the year ended March 31, 2015 to Rs. 2,976.4 Crores for the year ended March 31, 2016. Employee costs increased by 32.4% from Rs. 979.7 Crores for the year ended March 31, 2015 to Rs. 1,296.8 Crores for the year ended March 31, 2016, primarily due to the expansion of the branch network resulting in head count increasing from 10,810 to 15,000. Employee costs accounted for 43.6% of our operating expenses for the year ended March 31, 2016 compared to 42.9% for the year ended March 31, 2015. Rent, taxes and lighting also increased by 14.4% to Rs. 304.7 Crores on account of the branch expansion to 860 from 630. Other significant reasons for an increase in operating expense comprised an increase in information technology and asset outsourcing charges, electricity, debrciation, maintenance charges, and deposit insurance charges paid to Deposit Insurance and Credit Guarantee Corporation. Despite increasing investments in people and branches, your Bank maintained a very healthy cost to income ratio of 40.9% for the year ended March 31, 2016.

Provisions and Contingencies

Provisions and contingencies increased by 41.7% from Rs. 1,244.2 Crores for the year ended March 31, 2015 to Rs. 1,763.1 Crores for the year ended March 31, 2016. The key components of provisions are provision for taxation of Rs. 1,226.8 Crores (FY 2014-15: Rs. 904.7 Crores), Provision on account of mark to market of investments of Rs. 2.5 Crores (FY 2014-15: release of Rs. 58.4 Crores), Provisions for NPAs of Rs. 497.9 Crores (FY 2014-15: Rs. 130.0 Crores) and Provision for Standard Assets Rs. 38.2 Crores (FY 2014-15: Rs. 244.0 Crores).

Net profit

As a result of the above, your Bank’s net profit increased by 26.6% from Rs. 2,005.4 Crores for the year ended March 31, 2015 to Rs. 2,539.4 Crores for the year ended March 31, 2016.

Shareholders’ Funds and Capital Management

Your Bank’s shareholder funds were Rs. 13,786.6 Crores as at March 31, 2016 as compared to Rs. 11,680.0 Crores as at March 31, 2015. The increase is majorly on account of profit after tax net of proposed dividend of Rs. 2,033.3 Crores. The Book Value per share increased to Rs. 327.8 as at March 31, 2016 from Rs. 279.6 as at March 31, 2015 on the back of steady growth and earnings retention of approximately 80%. Total capital funds stood at Rs. 21,874.4 Crores as at March 31, 2016 as per Basel III.

Tier-I Capital

Tier I Capital of your Bank has increased from Rs. 11,875.5 Crores to Rs. 14,269.3 Crores which is 20.2% increase in FY 2015-16 over FY 2014-15. The increase is on account of retained profit after tax earned during FY 2015-16 amounting to Rs. 2,033.3 Crores.

Tier-II Capital

During 2015-16 your Bank mobilised Tier II capital amounting to Rs. 3,899.2 Crores . As per Basel III norms, Your Bank had a capital adequacy ratio of 16.5% as at the end of FY 2015-16. As per Basel-III, Tier-I capital ratio was 10.7% and the Tier-II capital ratio was 5.8% as at March 31, 2016

In line with the RBI circular on Basel III Capital Regulations, currently for computing capital requirement, your Bank has adopted the standardized approach for credit risk, standardized duration approach for market risk and Basic indicator approach for operational risk. Your Bank has also put in place a Board approved policy on Internal Capital Adequacy Assessment Process (ICAAP) which defines and sets processes to review and improve the techniques used for identification, measurement and assessment of all material risks and resultant capital requirements.

SWOT ANALYSIS

Strengths

Your Bank has displayed strong financial health across macroeconomic cycles withstanding domestic and global adversaries, coming out even stronger and confident of its execution skills and competency. Within a span of 12 years, your Bank has witnessed the challenges of Global Financial crisis of 2008-09, Liquidity tightening measures by RBI in July 2013 and macro economic slowdown in past few years coupled with Asset Quality overhang marring the Indian Banking industry. However, your Bank has continued to deliver strong profitability while maintaining healthy Asset Quality. Your Bank had delivered RoA (annualized) at or above 1.5% and RoE (annualized) around 20%, over last eight years, with the best-in-class Net NPA and Gross NPA ratios. Your Bank’s well maintained asset quality, even through tough macroeconomic challenges exemplifies well defined controls, checks and processes and is the testimony of strong risk ethos and culture that the Bank has developed since inception. Your Bank has a superior Credit Appraisal process with highest level of due diligence and adequate controls and supervision resulting in reduction of Adverse Selection. Apart from the aforementioned diligent Credit selection and maintaining process, your Bank has good Structural capabilities which have helped your Bank to contain Asset Quality challenges brsent in the current economic environment. These robust risk management practices have resulted in top quartile performance in asset quality delivery by your Bank over the last 5 years. Going forward, your Bank is committed to replicate the success of Corporate business into Retail/SME businesses as well. Our perseverance in Liabilities is reflected in Retail liability contribution (including CASA) of over 55% of total deposits of the Bank today.

Your Bank is also committed to provide outstanding service delivery and quality experience to its customers through our new age technology channels and continuously evolving digital channels. These alternative digital channels are tantamount to increasing efficiency, improving service, enhancing customer experience as well as reducing operative costs in the long run. Your Bank has had a proven track record to raise capital and long term funding, necessary to sustain growth and expansion in network. It has raised capital (both equity and other forms of capital) at appropriate times. This ability to augment capital funds will help to capture growth opportunities with the improving macroeconomic environment. Last but not the least, your Bank’s performance is attributable to the finest human capital and talented management cadre. Your Bank has always emphasized on ‘Knowledge’ as a key differentiator and over the years has developed finest human and intellectual capital by equipping executives with skills and knowledge through initiatives of Yes School of Banking.

Weakness

Although your Bank has made significant strides over the last few years, it is still a relatively small player in the Indian banking space with over 1.2% market share in Advances and 1.1% market share in Deposits. However your Bank is capturing market share at rapid pace through significant investment in human capital, infrastructure and technology.

Your Bank’s gradual growth and development across the cycles has equipped your Bank with strong standing in the market, mainly due to its differentiated Knowledge Banking approach. Your Bank’s network of branches is also relatively lesser compared to other larger players with lower brsence in remote locations. Being a relatively newer bank, brand awareness among retail customers, although fast catching up, is lower than its peers, who have been in the business for a significantly longer time. Your Bank has made significant investments in enhancing its brand through appropriate media campaigns, expanding its branch network and ATM base, and thereby augmenting its customer base at a rapid pace. Your Bank also has minimal international brsence which has limited your Bank’s ability to raise low-cost foreign currency funding, and pursue international trade finance opportunities. However, it has recently made its maiden international foray, in the form of a Rebrsentative office at Abu Dhabi and commencing operations at International Banking Unit at GIFT city, Gujrat. This will significantly enhance your Bank’s International Banking product offerings for corporate clientele while enabling long term Foreign Currency Fund raising at competitive rates.

Opportunities

India is the oasis in a desert: Where most economies are facing headwinds to growth, concerted efforts by the government and RBI have enabled a right mix of growth and inflation to emerge. The government’s efforts at reviving capex amid its focus on infrastructure sectors like roads, railways, ports, and power are creating new avenues for growth. IMD’s forecast for above normal monsoon after 2 consecutive years of below par performance is likely to give a boost to consumption. While China’s weak growth outlook will continue to weigh on global growth dynamics, relative stability in currency and financial markets after a brief period of volatility during early part of the current calendar year is comforting. The government’s measure to reduce small savings rate in line with the brvailing market conditions is likely to be beneficial for the domestic banking industry. Also, government’s continued focus on DBT, digitization, mobile banking and financial inclusion is opening up avenues for new age banking in India. Monetization of gold, conscious effort to maintain positive real interest rate along with financial inclusion are likely to incentivize financial savings and encourage the shift from physical savings in the medium term.

The Indian banking sector continues to experience demographic tailwinds. The large middle class with increasing incomes and banking needs, along with a huge unbanked population below the age of 25, offers an enormous retail opportunity for banks in India. Smaller towns and rural India still provide a huge untapped potential for expansion, and there are significant opportunities, especially in the small and medium enterprise space. Further, the ability to use technology, to profitably deliver banking solutions to masses, is an exciting opportunity. Additionally, the goal of financial inclusion would benefit immensely from key government initiatives, like, the PMJDY, use of Aadhar, mobile-based payments, mobile-based card transaction facilities, and thereby would help develop the knowledge infrastructure for enhancing reach of the banking sector. Mobile technology, with its extensive reach, rapid adoption rate amongst youth, coupled with the capacity to reduce transaction costs, is key to redefining financial services. With over 1 billion mobile phones in India, mobile banking has a huge opportunity.

India has only about 50 million mobile banking customers currently; as compared to the global figure of 1 billion mobile banking users – these numbers rebrsent the scale of the untapped opportunity. Rapid digitization can be the single largest enabler of a massive ‘financial revolution’ and transform India and the world into a cashless economy – which is the future of money.

Threats

Private investment continues to remain tepid amid excess capacities, stressed balance sheets and excessive leverage especially in infrastructure companies is a major threat.

Despite government’s efforts at faster clearances of projects, non conducive market conditions and lack of promoter interest are holding back a sustained recovery in investment demand. Sharp fall in commodity prices especially of metals has led to massive dumping in turn affecting the prospects of some industries such as steel. Moreover, continued softness in prices of commodities like oil is impacting fortunes of countries dependent on oil exports in turn contributing to weak growth outlook.

Muted Credit demand from banks due to the weakness in economic activity together with heavily leveraged corporate balance sheets resulting in increase in stressed assets is one of the significant threats to the industry and your Bank. As India further integrates with the global economy, the rupee will get internationalized, the bond, currency and derivatives markets will further develop and deepen which are all positives for the economy. However, as global markets become more competitive and volatile, managing risk will become increasingly important. Technology and analytics will become the cornerstones of improved risk management in the country.

Changes in the RBI regulations, requiring banks to set up a higher number of rural branches could also result in lower profitability for banks. Also, the RBI awarding additional licenses could potentially result in increasing competition in the banking industry, over the medium to long-term. There may be some erosion in projected growth due to market captured by new entrants, and also due to the competition among banks in retaining quality staff. Your Bank could also face intense competition from allied firms in financial services (e.g. broking/investment banking, among others), who compete for human capital. Further, recent regulatory changes including revised priority sector norms, adoption of BASEL-III norms could result in lower profitability for the banking system in general, thereby also impacting your Bank.

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