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Year End :2024-03

Your Directors take great pleasure in presenting the 30^th Annual Report on the business and financial operations of your Bank, together with the audited accounts for the year ended March 31, 2024.

The Financial Year 2023-24 was a historic one as the merger of parent HDFC Limited with and into HDFC Bank was completed. This merger strengthened our position as a leading financial conglomerate with marquee financial services institutions like HDFC Life Insurance Company Limited, HDFC Asset Management Company Limited and HDFC ERGO General Insurance Company Limited becoming subsidiaries in addition to the existing ones, HDFC Securities Limited and HDB Financial Services Limited.

Coming to the macroeconomic environment, India is expected to be one of the fastest growing major economies in the world in the Financial Year 2024-25 with the RBI expecting GDP growth at 7.2 per cent.

Over the past three years, the Indian economy grew on an average by 8.3 per cent and at 8.2 per cent in FY24. GDP growth has been supported by an increase in capital expenditure with the Government doing the heavy lifting. Inflationary pressures have moderated over the last fiscal year with retail inflation averaging at 5.4 per cent in FY24 from 6.7 per cent in FY23.

On the global front, geopolitical tensions could act as a headwind for India's growth and inflation outlook. However, while these challenges may pose some risks the resilience and momentum shown by the domestic economy in recent years suggests that it is well-equipped to navigate any potential headwinds.

For more details, please refer to the Macroeconomic and Industry section on page no. 220.

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

I Financial Parameters

The Bank's key financial parameters continued to be healthy, primarily attributable to its robust credit evaluation of targeted customers and a well-diversified loan book across sectors, customer segments and products. Its performance is an outcome of its disciplined approach to managing risk and return.

The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01, 2023 and hence the comparisons with the previous periods have to be looked at in light of the same.

Based on Standalone Financial Statements

The income statement reflected a growth in revenue comprising Net Interest Income and Non Interest Income. While the former grew by 25.0 per cent, the latter grew by 57.7 per cent year-on-year. On an overall basis, Total Net Revenue for the year ended March 31, 2024, reached ' 1,57,773.5 crore, reflecting an increase of 33.6 per cent over the previous year.

Net Profit increased by 37.9 per cent to ' 60,812.3 crore from ' 44,108.7 crore. Return on Average Net Worth was 16.09 per cent while Basic Earnings Per Share was ' 85.83 up from ' 79.25.

Total Advances grew by 55.2 per cent and Total Deposits grew by 26.4 per cent year-on-year. Core Net Interest Margin (NIM) was at 3.53 per cent.

Gross Non-Performing Assets (GNPAs) stood at 1.24 per cent as against 1.12 per cent. This is amongst the lowest in the industry.

I Stepping into a new Era

The merger strengthens our position as a leading financial conglomerate with an unwavering commitment to enhancing customer service. The fusion of erstwhile HDFC Limited's strong position in the mortgage business and HDFC Bank's operational efficiencies and wider reach, brings significant benefits for customers, employees and shareholders, amplifying scale and product offerings.

The Integration Committee, formed in October 2022, played a vital role in overseeing the seamless post-merger integration of HDFC Bank and erstwhile HDFC Limited. Strategically

planning and coordinating 32 key workstreams, the committee ensured effective implementation and synergy, prioritising the minimisation of customer grievances and regulatory compliance. Looking ahead, the Bank's focus remains on profitable growth. By leveraging HDFC Limited's extensive home loan customer base, the Bank will strategically implement cross selling initiatives, offering need-based products through digital journeys without incurring additional acquisition costs. We aim to transform our branches into experiential hubs, integrating digital innovation with personalised service to elevate customer engagement.

I Summary

The Indian economy registered an average growth rate of 8.3 per cent over the last three years, with growth standing at 8.2 per cent in the Financial Year 2023-24. Going forward, India is expected to remain one of the fastest growing major economies in the world in FY25, with the RBI projecting GDP growth at 7.2 per cent.

This is expected to be aided by some recovery in consumer spending particularly in rural areas. The other positive factors that support demand are a normal monsoon, stable inflation and expected reduction in interest rates. Your Bank is well-positioned to make the most of these opportunities by leveraging the strength of its balance sheet and the trust enjoyed by its brand.

It is also committed to supporting nation building particularly furthering rural prosperity through both its business and social initiatives. We will continue to be a responsible corporate citizen contributing to the development of society and promoting sustainability. This journey will of course not be possible without the continuing support of our ever-growing family of over 2.13 lakh employees.

We are committed to hiring and retaining the best talent and being among the industry's leading employers.

I Mission and Strategic Focus

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

During the year under review, HDFC Bank did not lose the human touch and continued building a sound customer franchise across distinct businesses to achieve healthy growth in profitability consistent with its risk appetite.

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

•    Deliver superior experience and greater convenience to customers

•    Increase market share in India's growing banking and financial services industry

•    Expand geographical reach

•    Cross-sell the broad financial product portfolio

•    Sustain strong asset quality through disciplined credit risk management

• Maintain low cost of funds

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

I Summary of Financial Performance		C crore)
Particulars	For the year ended / As on March 31, 2024	For the year ended / As on March 31,2023
Deposits and Borrowings	3,041,939.4	2,090,160.2
Advances	2,484,861.5	1,600,585.9
Total Income	307,581.6	192,800.4
Profit Before Depreciation and Tax	73,705.4	60,727.8
Profit After Tax	60,812.3	44,108.7
Profit Brought Forward	112,960.0	93,185.7
Additions on Amalgamation (net)	3,570.1	-
Total Profit Available for Appropriation	177,342.4	137,294.4
Appropriations
Transfer to Statutory Reserve	15,203.1	11,027.2
Transfer to General Reserve	6,081.2	4,410.9
Transfer to Capital Reserve	4,166.4	4.6
Transfer to / (from) Investment Reserve	529.4	(294.8)
Transfer to / (from) Investment Fluctuation Reserve	378.0	82.0
Transfer to Special Reserve	3,000.0	500.0
Dividend pertaining to previous year paid during the year	8,404.4	8,604.5
Balance carried over to Balance Sheet	139,579.9	112,960.0

I Dividend

The Board of Directors of the Bank, at its meeting held on April 20, 2024, has recommended a dividend of ' 19.50 (Nineteen Rupees Fifty Paisa only) per equity share of ' 1/- (Rupee One only) each, for the Financial Year ended March 31, 2024. This translates to a Dividend Payout Ratio of 24.38 per cent of the profits for the Financial Year ended March 31, 2024.

In general, your Bank's dividend policy, among other things, balances the objectives of rewarding shareholders and retaining capital to fund future growth. It has a consistent track

record of dividend distribution, with the Dividend Payout Ratio ranging between 20 per cent and 25 per cent, which the Board endeavours to maintain. The dividend policy of your Bank is available on the Bank's website.

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

As on March 31, 2024, the issued, subscribed and paid-up capital of your Bank stood at ' 7,59,69,10,662.00/- comprising 7,59,69,10,662 equity shares of ' 1/- each. Further, 4,66,21,586 equity shares of face value of ' 1/- each were issued by your Bank pursuant to the exercise of Employee Stock Options (ESOPs). (For information pertaining to ESOPs, please refer Annexure 1 of the Directors' Report).

Pursuant to the merger of erstwhile HDFC Limited (e-HDFC) with and into the Bank, the Allotment and Transfer Committee of HDFC Bank at its meeting held on July 14, 2023, approved the continuation of warrants in the name of HDFC Bank for the Warrants of e-HDFC held as on the record date in the same ratio i.e. one (1) HDFC Bank Warrant for one (1) HDFC Limited Warrant. Consequently, as of July 14, 2023, the 1,47,57,600 warrants previously issued by e-HDFC Limited were retained in the name of HDFC Bank.

Furthermore, the Bank has subsequently allocated 2,47,75,632 equity shares following the exercise of 1,47,47,400 warrants by

warrant holders until the last conversion date of warrants which was August 10, 2023. Additionally, 10,200 warrants lapsed due to non-exercise.

Capital Adequacy Ratio (CAR)

As on March 31, 2024, your Bank's total CAR, calculated as per Basel III Regulations, stood at 18.8 per cent, well above the regulatory minimum requirement of 11.7 per cent, including a Capital Conservation Buffer of 2.5 per cent and an additional requirement of 0.2 per cent on account of the Bank being identified as a Domestic Systemically Important Bank. Tier I Capital was at 16.79 per cent as of March 31,2024.

Management Discussion and AnalysisMacroeconomic and Industry Development

Over the past three years, the Indian economy registered an average growth rate of 8.3 per cent. India's real GDP growth has been pegged at 8.2 per cent for FY24 as per the provisional estimates released by the National Statistical Office (NSO). The GDP growth has been supported by a boost in capital expenditure particularly in infrastructure development including roads, highways, railways and housing with the Government doing the heavy lifting. Additionally, private sector investment also showed some signs of resurgence in sectors such as cement, steel, oil and gas.

On the other hand, private consumption growth slowed to 4.0 per cent in FY24 from 6.8 per cent in FY23 and 11.7 per cent in FY22. To recall, post the pandemic, consumption had been driven by services along with high demand for premium products. However, as this pent-up demand effect waned and interest rates started rising consumer demand slowed down in FY24. Moreover, high food inflation and an uneven monsoon weighed on rural demand recovery.

As for the supply side, rise in manufacturing and construction activity has largely aided growth. The manufacturing sector has benefitted from improved profit margins due to lower input costs, while Government support schemes such as the ECLGS aided MSMEs. Further, favourable infrastructure and policy measures like Production Linked Incentive (PLI) and FAME 2 Schemes finally paid off for some critical sectors like automobiles, electronics (largely mobile handsets) and metals. Moreover, the construction sector has maintained an average growth rate of 13.1 per cent over the past three years supported by Government infrastructure investments and an increased housing market demand.

On the external front, slowdown in global growth significantly impacted India's exports of goods and services in FY24. However, expansion of professional and business services exports combined with diversification to new markets such as Central Asia and Latin America helped cushion the impact of the slowdown elsewhere in the global economy.

Going forward, India is expected to remain one of the fastest growing economies in the World in FY25 with the RBI forecasting a GDP growth rate of 7.2 per cent. Economic activity is expected to be supported by a further surge in private capital expenditure and continued Government capital spending. Moreover, a higher allocation for Production Linked Incentive (PLI) sectors in the Budget for FY25 is likely to bolster manufacturing activity and attract FDI flows. In addition, a continued diversification

of supply chains out of China and to other emerging markets is likely to channel investment flows into India. Furthermore, the International Monetary Fund upgraded its global growth forecast by 10 bps to 3.2 per cent for FY24 which bodes well for India's economic growth. In addition, domestic consumer spending is expected to see some recovery particularly in rural areas as a normal monsoon, stable inflation and a reduction in interest rates support demand.

Inflationary pressures have moderated over the last fiscal year, with retail inflation averaging at 5.4 per cent in FY24 from 6.7 per cent in FY23. Although, retail headline inflation rose to a high of 7.4 per cent in July 2023 it has since moderated reaching 4.83 per cent in April 2024. Encouragingly, core inflation (retail inflation excluding food and fuel) has also dipped below 4 per cent signalling a disinflationary trend. Going forward, we expect retail inflation to average at 4.6 per cent in FY25 assuming normal monsoon. Additionally, a favourable economic base and controlled core inflation is expected to offer support. That said, weather related disturbances such as heatwaves, uneven distribution of monsoons along with a resurgence in global commodity prices remain a risk to the inflation trajectory.

Emerging risks on the global front could pose challenges to India's growth trajectory and inflation outlook. Higher crude oil prices as a result of any escalation in Middle East tensions and tighter global oil supply pose a risk for domestic growth and inflation. Moreover, the impact of geopolitical tensions on global supply chains could hurt India's exports to major trading partners and escalate costs. However, while global challenges may pose some risks, the resilience and momentum shown by the domestic economy in recent years suggests it is well-equipped to navigate any potential headwinds.

Financial Performance

The financial performance of your Bank during the year ended March 31, 2024 remained healthy with Total Net Revenue (Net Interest Income plus Other Income) rising 33.6 per cent to ' 1,57,773.5 crore from ' 1,18,057.1 crore in the previous year. Revenue growth was driven by an increase in both Net Interest Income and Other Income. Net Interest Income grew by 25.0 per cent to ' 1,08,532.5 crore. Core Net Interest Margin was at 3.53 per cent.

Other Income grew by 57.7 per cent to ' 49,241.0 crore. The largest component was Fees and Commissions at ' 28,160.7 crore. Profit on Revaluation and Sale of Investments was ' 11,526.1 crore. Foreign Exchange and Derivatives Revenue was ' 4,001.1 crore and recoveries from written-off accounts were ' 3,441.3 crore.

Operating (Non-Interest) Expenses rose to ' 63,386.0 crore from ' 47,652.1 crore. During the year, your Bank set up 925 new branches and 1,211 ATMs / Cash Recycler Machines (CRMs). The addition in expenses includes erstwhile HDFC Limited operating cost post-merger. This, along with higher spend on IT resulted in higher infrastructure and staffing expenses. Staff expenses also went up due to employee additions and annual wage revisions. Further, Deposit Insurance and Credit Guarantee Corporation (DICGC) premium cost increased due to deposit growth. Despite higher Staff and Infrastructure Expenses, the Cost to Income Ratio was 40.2 per cent as compared to 40.4 per cent during the previous year.

Total Provisions and Contingencies were ' 23,492.2 crore as compared to ' 11,919.7 crore in the preceding year. The increase is mainly on account of floating provision created during the year of ' 10,900.0 crore. Your Bank's provisioning policies remain more stringent than regulatory requirements.

The Coverage Ratio based on specific provisions alone excluding write-offs was 74.0 per cent and including general, floating and contingent provisions was 195.3 per cent. Your Bank made General Provisions of ' 1,146.1 crore during the year. Gross Non-Performing Assets (GNPAs) were at 1.24 per cent of Gross Advances, as against 1.12 per cent in the previous year. Net NPA ratio stood at 0.33 per cent as against 0.27 per cent in the previous year.

Profit Before Tax grew by 21.2 per cent to ' 70,895.3 crore. After providing for Income Tax of ' 10,083.0 crore, Net Profit increased by 37.9 per cent to ' 60,812.3 crore from ' 44,108.7 crore. Return on Average Net Worth was 16.09 per cent while Basic Earnings Per Share (EPS) was ' 85.83 up from ' 79.25.

As on March 31, 2024, your Bank's Total Balance Sheet stood at ' 36,17,623 crore, an increase of 46.7 per cent over ' 24,66,081 crore on March 31, 2023. Total Deposits rose by 26.4 per cent to ' 23,79,786 crore from ' 18,83,395 crore. Savings Account Deposits grew by 6.4 per cent to ' 5,98,747 crore while Current Account Deposits rose by 13.4 per cent to ' 3,10,016 crore. Time Deposits stood at ' 14,71,023 crore, representing an increase of 40.4 per cent. CASA Deposits accounted for 38.2 per cent of Total Deposits. Advances stood at ' 24,84,862 crore, representing an increase of 55.2 per cent.

The Domestic Loan Portfolio at ' 24,46,212 crore grew by 56.9 per cent over March 31, 2023.

The Bank's Debt Equity Ratio for the year ended March 31, 2024 stood at 1.21 as compared to 0.39 in the previous year.

Erstwhile HDFC Limited Borrowing Maturity Schedule

Of the erstwhile HDFC Ltd's borrowings of ' 4,01,140 crore as at March 31, 2024, approximately 15 per cent is due for repayment in each of the three years up to FY27 and the balance 55 per cent is due thereafter.

Business Review

Your Bank's operations are split into Domestic and International.

A. Domestic Business comprises the following:

Retail Banking

Your Bank's Retail Assets are built on three key principles: Strong Digital Offering, Optimal Risk Pricing and Maintaining Pristine Portfolio Quality. Adherence to these principles combined with the strength of merger boosted your Bank's Retail Advances which witnessed a 104.33 per cent year-on-year growth.

Brief on segment performance:

The Bank's increased focus on top corporates and good credit score customers contributed to the overall pristine portfolio quality. Personal Loans segment has experienced strong growth with the overall portfolio touching '1,84,581 crore towards the end of the year. An overwhelming majority of applications (99 per cent) of this segment are originated digitally and 86 per cent of these applications are disbursed digitally. The Xpress car loans, offering seamless end-to-end digital disbursement, has increased the digital origination to 30 per cent of the total New Car Loan business. Two-Wheeler Advances has grown by 15 per cent to '11,776 crore of Advances and has 98 per cent of digital acquisition.

Your Bank has exhibited significant year-on-year growth of 27.78 per cent in Gold Loans capitalising on an expanded branch network.

With the incoming Home Loan portfolio from erstwhile HDFC Limited. post-merger, your Bank's Home Loan portfolio has increased by 332.11 per cent, surpassing industry growth rates. The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01,2023 and hence comparisons with the previous periods have to be looked at in light of the same.

The payments business is one of the stated strategic growth pillars for the Bank.

With over 7 crore cards issued (credit, debit and pre-paid) and a widely spread acceptance network across the online and offline merchant ecosystem, HDFC Bank continues to maintain a leadership position across multiple product offerings in the payments landscape.

In the Financial Year 2023-24, HDFC Bank introduced many new products across the Payments Business.

The Credit Cards Business continued to enhance its product offerings and launched a slew of co-branded, business and consumer credit cards. For the year ended March 31,2024, 63 lakh new credit cards were issued covering retail and business segments. Of total cards in force in market, HDFC Bank also crossed a milestone of 2 crore cards in force which is an industry first amongst all issuers.

Further, the Bank launched PayZapp 2.0 a comprehensive mobile payment commerce app in March 2023. PayZapp supports a complete range of payments from credit cards, debit cards to UPI with customers getting the choice of form factor to make payments. The app has reached the milestone of 75 lakh registrations in FY24.

To enhance and strengthen offerings to merchants, SmartHub Vyapar- an integrated payment, banking and business solution that caters to the daily needs of merchants and helps them drive business growth was formally launched in October 2022. The platform has witnessed widespread adoption ever since and has onboarded over 16 lakh users across the country as on March 31, 2024.

SmartHub Payment Gateway, a unified payment platform for online merchants was launched in February 2024 in line with the Bank's endeavour to provide merchants a comprehensive

platform to cater to their payments and banking needs and help drive their growth. This platform enables merchants to collect payments through 150 plus methods and assists them in maximising sales with best-in-class success rate. SmartHub Payment Gateway provides an insightful dashboard powered by smart analytics and empowers merchants to provide a frictionless check out experience for their customers.

Lastly, in tune with the evolving payments landscape the business continues to transform itself with significant investments across Cloud Computing, Analytics, Artificial Intelligence and Machine Learning, Open APIs and Cyber Security. The objective is to manage large scale and continuously grow volumes while processing transactions in a safe and secure manner.

Digital Initiatives in the Retail Segment in FY24:

With the newly launched digital platform HDFC Bank XpressWay the Bank offers over 30+ banking products, including loans, credit cards, account opening and investments along with value-added services such as form filling and details modification as well as pre-approved banking products. This comprehensive Do-It-Yourself (DIY) platform provides a wider range of offerings reducing the need for human assistance during the application process and increasing speed for customers.

The Bank has been a pioneer in digitalisation with initiatives like Personal Loan in 10 Seconds, Digital Loan Against Shares, Digital Loan Against Mutual Funds and Xpress Car Loans. Continued emphasis is placed on digitalising processes and enhancing customer touchpoints to expand the Bank's reach.

Our Distribution Channel:

The virtual channels of the Bank were set up to enhance coverage across customer segments and to ensure a holistic service experience to all customers. This is one of the key engagement channels in the Bank.

Virtual Relationship Banking is an integrated customer centric approach covering three pillars - Virtual Relationship, Virtual Sales and Virtual Care serving as a crucial component of the Bank's sales and customer engagement strategy. This approach harnesses technology to connect with customers, build relationships and promote banking products and services. This helps the Bank to expand the managed customer base, generate leads and drive revenue growth.

Recognising employees and customers as the capitals for this business, your Bank has invested heavily in training and development of its relationship managers. Training covers

product knowledge, sales techniques, communication skills, compliance and regulatory requirements and customer relationship management skills.

As we transition into the digital age, a banking experience characterised by digital ease and personalised conversations remains at the core of our Virtual Relationship Management (VRM) strategy.

As a part of this strategy, Relationship Managers reach out to customers through remote and digital platforms resulting in deeper and cost-effective engagement. As digital literacy and exposure increases exponentially, VRMs are gaining wider acceptance through deeper engagement and relationships backed by a strong product offering thereby constituting an important component of the Bank's customer engagement strategy.

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

As of March 31, 2024, the Bank's distribution network was at 8,738 branches and 20,938 ATMs / CRMs across 4,065 cities / towns as against 7,821 branches and 19,727 ATMs across 3,811 cities / towns as of March 31, 2023. 52 per cent of our branches are in semi-urban and rural areas. In addition, we have 15,182 business correspondents, which are primarily manned by Common Service Centres (CSC). The total number of customers your Bank catered to as on March 31, 2024 was over 9.32 crore, up from over 8.28 crore in the previous year.

Retail Banking - Home Loan Business

Post-merger integration of the erstwhile HDFC Limited's home loan portfolio with the Bank has resulted in scale in terms of customer base and book size. This also brings together erstwhile HDFC Limited's segment expertise and in person customer connect with HDFC Bank's extensive branch network, ability to leverage technology platforms and a wide bouquet of banking products. The Gross Retail Mortgage Advances stood at ' 7,72,786 crore compared to the previous year's ' 1,78,840 crore. The figures for the period ended March 31, 2024 include the operations of erstwhile HDFC Limited which amalgamated with and into HDFC Bank on July 01,2023 and hence comparisons with the previous periods have to be looked at in light of the same.

As you are aware prior to the merger, your Bank operated in the Home Loan Business in conjunction with HDFC Limited. As

per this arrangement, your Bank sourced HDFC home loans while HDFC Limited approved and disbursed them. HDFC Bank received a sourcing fee for these loans and as per the arrangement had the option to purchase loans for a value up to 70 per cent of the loans sourced by the Bank either through the issuance of mortgage-backed Pass-Through Certificates (PTCs) or a direct assignment of loans. The balance was retained by HDFC Limited.

The Bank is gradually converting erstwhile HDFC Limited's service centres to branches and has a well-defined approach for this. Cross-selling remains a primary focus for both existing and new customers, leveraging the Bank's digital channels to minimise acquisition costs effectively. Post the merger, approximately 85 per cent of the newly acquired home loan customers hold a liability account with your bank. Your Bank's market share growth on incremental disbursals is in double digits post - merger.

Third Party Products

Your Bank distributes Life, General and Health Insurance as well as Mutual Funds (Third Party Products) to its customers. In the Financial Year 2023-24, the income from this business accounted for 22 per cent of Bank's Total Fee Income.

Life Insurance

Your Bank has adopted an open architecture model fo distributing insurance products from our three trusted partners with a focus on offering customers a diverse array of options. Foi the year ended March 31, 2024, the Bank mobilised premium of ' 8,940 crore representing a year-on-year growth of three per cent. Our extensive distribution network includes branches virtual channels, NRI services and wealth management. The key focus would continue to be on staff training, robust quality and control processes uniformly implemented across al partners as well as offering integrated and seamless digital on-boarding journeys. Currently, the Bank's NetBanking platform offers 57 insurance products across all partners accounting fo over 46 per cent of the total policies.

 

Non-Life Insurance

Your Bank, in collaboration with its three General Insurance and two Standalone Health and Insurance partners, has introduced innovative non-life insurance products to expand the range of offerings and provide a comprehensive coverage to customers. These products are accessible through both digital and physical platforms. Employees across channels have been trained in the new products and processes. To meet customer demands, additional manpower has been deployed across non-life insurers. As on March 31, 2024, premium mobilisation in General and Health Insurance reached a total of ' 4,208.4 crore representing a growth of 75 per cent over the previous year.

Mutual Funds

Your Bank follows an open architecture approach in distribution of Mutual Funds and is currently associated with 35 Asset Management Companies (AMCs).

The Bank's Asset Under Management (AUM) grew by 35 per cent to reach ' 1,37,343 crore for the year ended March 31, 2024. The Bank offers digital on-boarding platform to the customers for Mutual Fund investments through Investment Services Account (ISA) and SmartWealth (app based).

During the same period, HDFC Bank and HSL (InvestNow) witnessed a significant growth of 44 per cent in Systematic

The Bank's focus is to develop wealth management across the country by focusing on super affluent and mass affluent clients. It has focused on growth of market share through 150+ client events in FY24.

A Service First culture, enables us to deliver best-in-class experience to clients. Wealth Business has achieved higher growth through better product selection and enhanced service experience with engaged and trusted wealth bankers. A strong brand as well as experience of over two and a half decades resonates well with customers and creates trust. This trust has been strengthened through robust processes, diligent research methodology and bespoke recommendation model for Portfolio Management Services (PMS) and Alternate Investment Funds (AIF). This is in addition to the Fama model for selection of mutual funds.

Your Bank has provided wealth bankers with a state-of-the-art investment platform that uses advanced analytics to provide consolidated portfolio overview. It continues to invest in training talent by providing best in class programmes from IIMs and other leading institutions to enhance the knowledge levels and skills of our wealth bankers. This helps them to engage better with clients in a dynamic market environment.

Wealth Business has developed an advanced unassisted digital investment platform, SmartWealth, that provides -

0 Model portfolio basket recommendations 0 Consolidated portfolio view 0 Account aggregation across banks 0 Portfolio analytics on-the-go 0 Nudges to rebalance portfolio 0 SIP calendar and ability to pause and restart SIPs

This new state-of-the-art mobile application provides a highly personalized experience and will democratise wealth management across customer segments. It has more than 1.1 lakh downloads and 70 per cent active users.

In an endeavour to align with the client's long term interest, your Bank has focused on growing recurring revenue which has yielded positive results. In Financial Year 2023-24, the wealth teams' recurring (trail) income has grown by 25 per cent and ranges between 40-50 per cent. This growth reflects a commitment to provide sustainable value to clients while ensuring the long-term profitability of your Bank.

HDFC Bank remains focused on providing an asset allocation-based wealth management offering that is designed to Protect, Manage and Grow its clients' wealth.

Wholesale Banking

The Wholesale Banking business was an important growth engine for your Bank in the year under review. This business focuses on institutional customers such as the Government, PSUs, Large and Emerging Corporates and SMEs. Your Bank offers a range of products and services encompassing working capital and term loans, trade credit, cash management, supply chain financing, foreign exchange and investment banking services.

The Wholesale Banking business recorded healthy growth, ending Financial Year 2023-24 with a domestic loan book size of ' 10,87,084 crore, recording a growth of 32 per cent over the earlier year. This constituted about 44 per cent of your Bank's domestic loans as per Basel II classification. Your Bank was able to expand its share of the customer wallet primarily using sharper customization, cross-selling and expanding into more geographies.

Based on its superior product delivery, service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading corporates. Corporate Banking, focusing on large, well-rated companies continued to be the biggest contributor to Wholesale Banking in terms of asset size.

This business continued its attention towards engaging with Multi-National Corporations (MNCs) and capitalised on the increasing trend among large companies to consolidate their banking relationships. Your Bank strengthened its existing relationships and expanded its market share by leveraging its extensive array of product offerings. This business provided support to customer requirements under the Production Linked Incentive (PLI) Scheme. The Emerging Corporates Group which focuses on the mid- market segment too witnessed significant growth. Your Bank leveraged its vast geographical reach, technology backbone, automated processes, suite of financial products and quick turnaround times to offer a differentiated service. The business continues to have a diversified portfolio in terms of both industry and geography.

In the year under review, the Bank continued its focus on the MSME sector. There has already been increased formalistion and digitalisation of the MSME sector owing to the implementation of the Goods and Service Tax (GST). Through MyBusiness, which offers comprehensive financial solutions

like Business Banking, Easy Loans, Trade Services and Digital Solutions, MSMEs can conveniently access a suite of product / services tailored to meet the business requirements.

Post the merger of HDFC Limited with HDFC Bank, the Bank inherited the realty finance business. This business largely covers the rental discounting business as well as construction finance. The size of the book was at ' 80,736 crore as on March 31, 2024.

The Investment Banking business further cemented its prominent position in the Debt Capital Markets, Equity Capital Markets and INR Loan Syndication. Your Bank improved its position to 2^nd in the Bloomberg rankings of Rupee Bond Book Runners for the Financial Year 2023-24 with a market share of 14.95 per cent. Your Bank maintained its position amongst the top 3 in the Bloomberg rankings of Syndicated INR term loans for Financial Year 2023-24, with a market share of 13.47 per cent. The Bank has provided advisory services and actively assisted clients in equity fund raising through 3 Initial Public Offerings amounting to ' 4,245 crore and 3 Qualified Institutional Placements amounting to ' 4,750 crore, aggregating to ' 8,995 crore for the Financial Year 2023-24.

In the Government business, your Bank sustained its focus on tax collections, collecting direct tax (CBDT) of ' 5,25,157.51 crore and Indirect tax (CBIC+ GST) of over ' 3,77,112.41 crore during Financial Year 2023-24. It continues to enjoy a pre-eminent position among the country's major stock and commodity exchanges in both Cash Management Services and Cash Settlement Services.

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

It also leverages analytics to delve deeper into corporate ecosystems resulting in better product structuring, cross sell opportunities, improved yields thus improving the Bank's share of Revenue Pools from Corporates.

HDFC Bank provides a comprehensive suite of cutting-edge platforms tailored to meet the diverse needs of corporate clients. Among these, our Corporate Net Banking platform stands out, offering both the reliable e-Net service and the more recently upgraded CBX platform. These platforms provide intuitive interfaces and robust functionalities empowering businesses with seamless control over their financial operations. Additionally, our Trade Platform - Trade on Net (TON) serves as a cornerstone for facilitating efficient trade transactions. Also, our Supply Chain Finance (SCF) transaction

platform enables digital contract bookings and automated disbursements streamlining end-to-end SCF transactions for the corporates. Your Bank has also integrated with all the three TReDS platforms. We are also collaborating with Fintechs to integrate with Corporate ERP and offer Embedded Banking in Corporate Ecosystems journeys.

Treasury

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

Revenue accrues from spreads on customer transactions based on trade and remittance flows and demonstrated hedging needs. Your Bank recorded a revenue of ' 4,001.10 crore from foreign exchange and derivative transactions in the year under review.

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

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

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

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

B. International Business

During the year, your Bank stayed on course to cater to NRI clients and deepen its product and service proposition. Your Bank has global footprints by way of representative offices and branches in countries like Bahrain, Hong Kong, the UAE and Kenya. It also has a presence in International Financial Service Centre (IFSC) at GIFT City in Gandhinagar, Gujarat. In addition, two existing representative offices of erstwhile HDFC Limited in London and Singapore have become representative offices of the Bank as per the composite scheme of amalgamation between HDFC Bank Limited and HDFC Limited. These offices are for providing loans-related services for availing housing loans in India and for the purchase of properties in India.

The Bank's product strategy in International Markets is customer centric and it has products to cater to client needs across asset classes. GIFT City branch offers products such as trade credits, foreign currency term loans (including external commercial borrowings). It has gradually widening the product offerings to cater to the needs of Resident and Non-Resident clients and capitalise on the growth in the financial centre.

As on March 31, 2024, the Balance Sheet size of International Business was US $ 9.06 billion. Advances constituted 1.55% of the Bank's advances. The Total Income contributed by Overseas Branches constituted 1.51% of the Bank's Total Income for the year.

C. Government, Institutional Business and StartUps

It has been another year of steady progress for Government, Institutional Business and Start-Ups within your Bank. Some of the key highlights include:

1.    Increased focus on the retail Government deposits resulted in your Bank acquiring over 15 per cent of the market share in 159 districts.

2.    Your Bank continues to lead in generating Agency Business, ranking among the top three leading Government Agency Banks for collecting Central Government taxes. Substantial market shares were acquired in collections of Direct Tax, GST and Custom Duty as per tax collection data reported through PIB & CGA, GoI.

HDFC Bank's Market Share (approx):

Custom Duty Collections	8%
Goods and Services Tax Collections	16%
Direct Tax Collections	24%

3.    Your Bank facilitated the transfer of funds flowing from the Central Government to various beneficiaries under the aegis of the Centrally Sponsored Schemes, Central Sector Schemes, and the 15^th Finance Commission. The total flows processed grew by 39 per cent YoY.

4.    Your Bank has intensified its efforts to engage with pensioners implementing the following measures:

a.    Enhancing our pension product by introducing new features such as health and cyber insurance coverage for pensioners up to 75 years of age along with providing discounted rates from HDFC ERGO.

b.    In the Financial Year 2023-24, we ensured that 99 per cent of pensioners (our customers) successfully submitted their digital life certificates in the Pension Processing System of the Bank through a hassle-free experience.

5.    This fiscal year, your Bank has expanded its presence in the education sector by successfully onboarding approximately 40 per cent of universities nationwide. Some of the marquee additions include IIM Indore, IIM Nagpur, IIM Amritsar, NIT Mizoram and Assam University. Additionally, we have onboarded notable religious organisations, including Shrinathji Temple -Nathdwara, Shri Badrinath Kedarnath Mandir Samiti, Catholic Mission of Western Bengal, Ramakrishna Mission, Sree Ayyappan Temple Trust, S D B J

Masjid A/C Burhani Qardan Hasana, Punjab Wakf Board and the chain of ISKCON.

6.    Your Bank has received positive customer feedback for its recently launched digital products:

a.    HDFC Bank CollectNow: This omnichannel collection solution seamlessly integrates online and offline payments, setting a new industry standard.

b. FARSight Dashboard: A visualisation tool that provides customers an easy understanding of balances and fund movements across accounts in a multi-level parent child set-up.

7.    Start-Ups: Your Bank has revamped its offering for start-ups under its flagship program StartUp|BuildUp. New offerings introduced in the current financial year include:

a.    A Credit Guarantee Scheme for Start-Ups providing lending opportunities upon meeting specific criteria.

b.    Specialised group health insurance coverage plans designed for Start-Ups with a minimum of 7 employees.

c.    Commercial cards for both personal and professional expenses of founders backed by fixed deposits.

d.    To help Start-Ups be compliant with regulations, your Bank renders value-added services such as provision of legal handbooks and compliance calendars for its customers.

8.    Your Bank signed MoUs with prominent Start-Up ecosystem partners. Most of them are incubators located at educational institutions. Some of the partners are:

a.    Indian Institute of Management, Kozhikode Laboratory for Venturing, Innovation and Entrepreneurship

b.    AIC Jawaharlal Nehru University Foundation for Innovation

c.    AIC Anna University, Chennai

d.    Indian Institute of Technology, Guwahati Technology Incubation Centre

e.    AIC Guru Gobind Singh, Indraprastha University

f.    iNEST Dr. Moopen Medical College

9. Parivartan Startup grants

Your Bank supported 41 incubators associated with reputed academic institutions and 170 StartUps through the 7^th edition of the Parivartan StartUp Grants.

In addition to this, your Bank ran a new track this year of high-touch programmes with five Nodal Government Partnerships, contributing to specific thematic areas:

a.    Reserve Bank Innovation Hub: Identifying/ Developing a Product/Process/Policy to make banking inclusive for People with Disabilities (PWD)

b.    National Skill Development Corporation:

Enhancing the Skill India Digital platform by engaging StartUps in skilling and livelihood sector

c.    Ministry of Food Processing Industries:

Promoting food innovations with specific focus on Millets

d.    Goa Startup Mission: Identifying StartUps that can contribute to sustainability goals of the State of Goa

e.    Niti Aayog (Atal Innovation Mission):

Strategic partnership for access to incubator network

D. Semi-Urban and Rural

The Semi-Urban and Rural (SURU) markets have always been a focus of your Bank's strategy. In the last few years, your Bank has made a renewed push into these markets as rising income levels and aspirations of rural customers are leading to demand for better quality financial products and services. The Bank has been increasing its presence in Semi-Urban and Rural markets to cater to these demands.

 

 

Products such as post-harvest cash credit and warehouse receipt financing facilitate faster cash flows to farmers, while credit is also extended for Allied Agricultural Activities such as Dairy, Pisciculture, and Sericulture. Moreover, HDFC Bank's Commercial and Rural Banking Group (CRB) plays a pivotal role in product development, planning, and monitoring strategies for growth. The Bank's targeted branch expansion in SURU regions coupled with digital interventions aims to create a superior customer experience and position HDFC Bank as a future-ready institution.

Participation in Government Schemes

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

Agriculture Infrastructure Fund (AIF) Scheme: Through this scheme, the Bank is offering medium to long-term debt for investment in viable projects pertaining to post-harvest management and infrastructure development like construction of warehouses/silos. As of March 31, 2024, under the AIF scheme, your Bank has sanctioned ' 4,368 crore covering 5,330 projects and disbursed ' 2,800 crore covering 4,130 projects. During the year under review, your Bank has sanctioned ' 2,200 crore for 3,125 projects and disbursed '1,664 crore for 2,685 projects.

•    The Project Monitoring Unit, AIF, Ministry of Agriculture and Farmer Welfare has set specific targets through various campaigns. Your Bank secured second position by approving ' 442 crore for 744 projects in AIF BHARAT Campaign conducted between 15^th July and 31^st August 2023.

•    In the AIF Backlog Blasters Campaign conducted between 1^st November to 18^th November 2023 with a focus on clearing pending applications, your Bank has secured top position amongst all Scheduled Commercial Banks (SCBs) by clearing 806 applications.

•    HDFC Bank has secured third position by approving ' 757 crore for 863 projects during AIF RAPID Campaign conducted between 15^th January and 29^th February 2024.

HDFC Bank has financed and supported 35 lakh Small and Marginal Farmers. This was achieved through a strategy to engage closely with small and marginal farmers through customised agriculture loans. Leveraging the Government schemes, it has launched various secured / unsecured loan products including Loan Against Gold as security targeting small and marginal farmers in Agri and Allied segments.

Farmer Producer Organisations (FPOs):

For agriculture productivity and incomes to grow, aggregation of farm holdings in the form of FPOs is the key strategy in doubling farmers' income. Leveraging the Government scheme for formation and promotion of 10,000 new FPOs (Credit guarantee is available from NABARD/CGTMSE), your Bank has funded eligible FPOs for working capital and term loan requirements. As of March 31, 2024, your Bank was able to reach 206 FPOs covering about one lakh small and marginal farmers.

Dairy:

Dairy is the largest segment in the agriculture economy, and keeping this in mind, your Bank has created a separate team of agriculture specialists to cater to this segment. India, boasts of a substantial cattle population of over 30 crore, that offers a promising landscape for Cattle Finance as well as securing liabilities. The country's agriculture sector, particularly the Small and Marginal Farmers (SMF) segment, stands to benefit significantly in this scenario, with over 90 per cent of them falling within this category. Recognizing the potential for growth and financial inclusion, your Bank has initiated a strategic programme named 'Dairy Ki Pheri'. This initiative is designed to empower milkmen by facilitating their evolution from mere milk vendors to dairy entrepreneurs - transforming them from Doodh Walas to Doodh Lalas.

During the reporting period, HDFC Bank disbursed a total equivalent to ' 1,531 crore to 43,243 cases. Additionally, 19,000 cases were under active processing. This surge in disbursement is noteworthy as it marks a significant increase from the average of 1,500 cases per month over the past 8 months, nearly tripling the previous rate. The disbursement primarily focused on small and marginal farmer loans.

In Financial Year 2023-24, the Bank has disbursed an amount of ' 8,786 crore to 2,47,533 farmers as Cattle finance.

Digital Interventions

Some of the digital interventions made by your bank include: Digitising Milk Procurement:

This initiative brings transparency in the milk procurement and payment process, which benefits both farmers and dairy societies. Multi-function Terminals (MFTs), popularly known as Milk-to-Money ATMs, are deployed in dairy societies. The MFTs link the milk procurement system of the dairy society to the farmer's account to enable faster payments. MFTs have cash dispensers that function as standard ATMs. Payments are credited without the hassles of cash distribution. Further, this process creates a credit history which can then be used for accessing bank credit. Apart from dairy and cattle loans, customers gain access to the Bank's products including digital offerings such as 10 Second Personal Loan, Kisan Credit Card and Bill Pay. So far, the Bank has digitised payments at over 357 milk cooperatives across two states, benefiting more than 2.6 lakh dairy farmers. The Dairy business witnessed 142 per cent year-on-year growth in disbursements and 121 per cent in the book.

Gold Loans:

Your Bank is making inroads into a market dominated by the unorganized sector, moneylenders and pawn brokers. The Bank is keen on making the gold loan facility available across the length and breadth of the country. As on March 31, 2024, the Bank is offering gold loans through 4,604 branches, with 45 per cent of these branches in Semi-Urban and Rural locations.

Your Bank is implementing its blueprint of making gold loans available in most of its branches and thereby taking this product within the reach of otherwise untapped customer segments.

Social Initiatives in Farm Sector

The farm sector faces threats arising out of climate change as evident from the growing number of extreme weather events. In addition, factors like soil health, input quality (seeds and fertilizers), water availability, and Government policy have significant impact, along with price realisations and storage facilities. All this has an impact on farm yield and income.

Given the vulnerabilities, it is critical to strengthen climate resilience and adaptability of the agri-food sector. In this context, your Bank has launched a variety of initiatives such as Holistic Rural Development Programme (HRDP), Crop Residue

Management Project and many others. Within regulatory guidelines, your Bank has also been providing relief to the impacted farmers. It also has put in place systems designed to enable Direct Benefit Transfers in a time-bound manner.

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

Micro, Small and Medium Enterprises (MSME)

The MSME sector serves as an important engine for economic growth and is one of the largest employers in the economy. As on March 31, 2024, your Bank's assets in the MSME segment stood at ' 5,03,598.23 crore. The Micro Enterprises assets alone stood at ' 1,69,448 crore.

The Union Government and the Reserve Bank of India (RBI) have been providing support for lending to MSME segment on an ongoing basis. They had provided special support to the MSME sector during the pandemic through various schemes, such as Interest Moratorium, ECLGS, ECLGS extension and COVID support loans. The Government has also launched a revamped CGTMSE scheme with increased limit threshold for guarantee cover and reduction of guarantee fee. Many other schemes like Credit Guarantee to Start Ups (CGSS) and Extension of interest subvention have been rolled out.

Your bank emerged as the largest contributor to CGTMSE in FY24, supporting the MSME sector with guarantee-covered credit facilities. This has further supported the growth of MSME loans which have shown a year-on-year growth of 21.4 per cent.

 

 

in an ever-evolving landscape. Our supervisory behaviour framework-Nurture, Care, Collaborate (NCC) -empowers our workforce with the knowledge and guidance needed to lead transformation. We focus on acquiring diverse talent and prioritise their well-being, safety, and development, fostering an inclusive environment where they can succeed and grow.

For details please refer to pages: 138 to 157.

2. Transforming Banking for the Future and Technology Absorption

In the ever-evolving landscape of banking, HDFC Bank remains steadfast in its commitment to take forward its customer-centric approach. Given below are the five pillars.

1.    Journeys: Our quest for excellence begins with prioritising seamless and intuitive interactions. By harmonising digital and physical channels, we craft journeys that go beyond mere transactions, fostering lasting relationships with customers.

2.    Channels: Recognizing the unique preferences and needs of our diverse clientele, we are offering a spectrum of banking channels, ensuring accessibility and convenience for all.

3.    Core: Our core banking infrastructure has undergone a major transformation, instilling it with the agility and scalability necessary to navigate the winds of change.

4.    Data: We are leveraging advanced analytics to cater to the intricate needs of our diverse customers. This is allowing us to anticipate and fulfill their needs with bespoke solutions.

5.    Security: Upholding the highest standards of security, we fortify our defences to safeguard the sanctity of customer trust, brick by digital brick.

These strategic pillars serve as beacons, guiding our journey towards sustainable growth and value creation for our esteemed shareholders. With continued focus towards providing tailored digital banking solutions, HDFC Bank has reinforced its technology and innovative prowess by undertaking key initiatives such as:

PayZapp 2.0: Building upon the success of its impactful launch, PayZapp 2.0 has continued its growth to become one of the fastest growing payments app providing customers with a seamless and intuitive user experience while ensuring enhanced security features. Other highlights include:

1.    It has reached the milestone of 75 lakh registrations

in FY24

2.    65 per cent monthly active users

3.    Average daily volume of 4.5 lakh transactions

SmartHub Vyapar: This is a vital part of our offering, designed to empower merchants. It offers seamless digital solutions for their everyday needs, including instant onboarding for customers, interoperable payments, and remote transactions. Additionally, its marketing tool helps merchants amplify their offers on social media reaching both existing and potential

customers. As on March 31, 2024, SmartHub Vyapar is a 16 lakh merchant community with over 70,000 new merchants being added every month. It has processed transaction volumes totaling ' 2.28 lakh crore in FY24.

HDFC Bank One (Customer Experience Hub): Our AI /

ML driven platform and conversational bot, has transformed our contact centre operations by centralising and streamlining customer interactions. Its expansion across India covers various services like PhoneBanking, IVR self-service, virtual relationship management teams, and tele-sales. With an omnichannel approach, including WhatsApp chat banking, SMS banking, IVR, and agent assisted service, it ensures a seamless customer experience. HDFC Bank One has powered over 3.2 crore customer engagements with monthly interactions touching 1.9 crore unique customers. Notably, it has reduced resolution time for email channels by 50 per cent.

Xpress Car Loan (XCL): Xpress Car Loan continues to excel in seamless digital loan disbursals processing over 32 per cent of car loans. Offering zero paper, zero-touch processing in just 30 minutes, it leads as India's largest digital car loan platform. In the fourth quarter of the Financial Year 2023-24, over 40 per cent of all car loans were digital, averaging monthly disbursements of over ' 1,020 crore.

SmartWealth: Introduced in January 2024, SmartWealth is a user-centric Do-It-Yourself (DIY) investment mobile application, targeting the Emerging Affluent and Affluent segments, with a strategic focus on Tier 2 & 3 markets. It offers users the capability to aggregate and view their external and HDFC Bank account balances, along with a spend analyzer feature via the Account Aggregator platform. The SmartWealth App has been downloaded 1,14,921 times, with 68,249 registered customers and 27,530 active SIPs. As on March 31, 2024, it manages Mutual Funds Assets Under Management (AUM) worth ' 26.92 crore and has enabled customers to upload held-away mutual funds with AUM totalling ' 3,561 crore via the Consolidated Account Statement (CAS) feature.

Acquisition & Servicing Journeys: In our ongoing digitalising efforts, we have advanced significantly by introducing new customer journeys covering diverse offerings like joint accounts, pension accounts and hybrid salary accounts for corporates. We have also expanded our digital service offerings with 10 new service journeys now covering nearly 87 per cent of services. Looking ahead we plan to roll out unified acquisitions, embedded insurance, Gold Loan journeys, and bundled Personal Loan and Insurance with the Home Loan journey.

Tradeflow: TradeFlow, a cloud-based centralised platform continues to provide enhanced reliability and usability for end-users. The application integrates with a multitude of applications and employs various automations, including a dynamic MIS, an informative dashboard, a single view of all dependencies, and peripheral application integration. Between March 2023 and March 2024, the platform expanded to 280+ locations, processing 9,000+ transactions daily and saving 25 per cent time per transaction. It offers a single integrated platform for trade users, ensuring consistency and efficiency.

Corporate Banking exchange (CBX): CBX, our unified corporate banking portal, offers seamless NetBanking for corporates via mobile and web. It improves efficiency and user satisfaction with features like customised narration and enhanced authorisation levels. CBX serves a growing customer base processing over 1.15 crore transactions per month.

BizXpress: Rolled out to select customers, BizXpress stands as our digital portal platform designed for MSME / SME customers. It is a digital native integrated solution, offering a comprehensive suite of banking and value-added services for the SME segment, providing a seamless one-stop banking solution.

Dukandar Dhamaka: Dukandar Dhamaka offers affordable credit solutions for small businesses, helping them seize growth opportunities and manage cash flow challenges. The tailored overdraft (OD) facility allows shopkeepers to access up to ' 10 lakh without GST and up to ' 25 lakh with GST. This initiative sourced over ' 500 crore in business in the fourth quarter of FY24, empowering shopkeepers across India.

Commercial Loan Origination: HDFC Bank enabled digital sourcing for all working capital segments of Emerging Enterprises Group (EEG) and Business Banking Group (BBG) customers. Integrated with the state-of-the-art business rule engine, this initiative facilitates in-principle approvals for customers within just 30 minutes, streamlining the lending process and empowering businesses to seize opportunities swiftly and efficiently.

Smart Saathi: This is our digital distribution platform to connect Business Correspondents (BCs) and Business Facilitators (BFs) with the Bank. This initiative marks a significant milestone in the journey towards providing innovative solutions tailored to the evolving needs of customers. By leveraging this network of Business Correspondents and Facilitators, the Bank aims to enhance financial inclusion by extending banking products and services to the last mile.

New Branch Rollout and Other Initiatives: Technology played a crucial role in the successful rollout of over 900 branches in the Financial Year 2023-24 ensuring each site had the necessary infrastructure and systems through meticulous planning and execution. Internet breakout has been implemented for these branches, enhancing branch users' access to internet applications using SWAN and Zscaler Internet Access (ZIA).

Zero Trust Architecture: We leveraged a Secure Access Service Edge partner's advanced zero trust technology to seamlessly navigate through the merger, ensuring network harmony and eliminating conflicts. Leveraging their advanced technologies, we've reduced dependency on Multiprotocol Label Switching (MPLS) across branches, enhancing operational efficiency and agility. This has strengthened our security measures and boosted performance.

Safeguarding Data: The Bank is fully committed to enhancing its cyber security measures as part of its technological advancement strategy. Key endeavours include establishing a cutting-edge Cyber Security Operations Center (CSOC) to anticipate security threats and manage incidents proactively. Additionally, the implementation of Security Orchestration, Automation and Response (SOAR) aims to streamline incident response processes. Network micro-segmentation is being introduced to bolster protection against ransomware while next-generation Security Incident Event Management (SIEM) systems with AI and ML capabilities are being deployed for heightened security monitoring. The Bank also conducts round-the-clock defacement monitoring, vulnerability management, and Anti-DDoS measures. Furthermore, anti-Advanced Persistence Threat (Anti-APT) systems are being employed on all endpoints, alongside the adoption of a zero-trust architecture approach and the implementation of Data Loss Prevention (DLP) solutions. Lastly, data encryption on all laptops and the integration of Domain-based Message Authentication is being enforced to ensure robust email security.

Innovating for Tomorrow

Digital Rupee: Central Bank Digital Currency (CBDC), or Digital Rupee, is the secure, faster, and more inclusive version of the Indian Rupee, ensuring privacy in payments. It fosters financial inclusion, reduces operational costs, and enhances resilience and efficiency in payment systems. With upcoming programmability and offline features, CBDC could revolutionise the payments industry. Currently, HDFC Bank has over 5 lakh customers registered on the app and transacting ' 169 crore annually through Digital Rupee.

UPI Autopay: UPI Autopay enables users to automate recurring payments covering various needs like bill payments, school fees, OTT subscriptions, insurance premium, EMIs, and mutual funds. It results in timely and reliable payments, helping users avoid late fees and disruptions. This plays a crucial role in customer retention, benefiting merchants. HDFC Bank has onboarded top merchants across industries, collecting ' 2,100 crore in monthly recurring payments through this feature.

UPI Secondary ASBA: UPI Secondary ASBA, also known as Single Block Multiple Debit, enables investors to block funds in their bank accounts for a specific purchase of financial instruments. The amount is debited only upon successful settlement by the clearing corporation (both NCL and ICCL). This mechanism, operating on the UPI platform ensures simple, secure and convenient transactions for users. HDFC Bank is a pioneer in offering the UPI Secondary ASBA feature.

Generative AI: In our pursuit of innovation, HDFC Bank is leveraging Generative AI to enhance operations and deliver ground breaking solutions. Highlights include:

•    Internal BETA FAQ Bot: Provides efficient response to customer queries.

•    CAMs Covenant Extraction POC: Successfully extracts critical information from financial documents.

•    Branch Executive Co-Pilot Prototype: Empowers branch executives to provide better customer service by addressing queries and reducing dependencies on central units for improved efficiency.

Lastly in our digital transformation journey we have prioritised seamless experiences through our Factory approach, cocreating Tech IP with Agile principles and cloudification. Our API Factory is building scalable architectures for rapid integrations, enabling embedded banking for richer customer experiences.

In the current financial year, the Bank is gearing up for an array of ground-breaking initiatives set to redefine the banking landscape. From the establishment of a robust data lake to fuel data-driven insights, to the expansion of embedded banking solutions for seamless financial experiences, we are committed to pushing the boundaries of innovation. This is being done through launches like credit cards crafted to meet the needs of the dynamic young demographic plus initiatives such as modernised platforms and architectures for Gold Loan, Consumer Durable Loan, and Sustainable Livelihood Initiative. Our next-gen NetBanking and MobileBanking experiences, aim to reimagine enhanced digital experiences backed by cutting-edge technology and security solutions.

Cybersecurity

Cybersecurity is at the heart of the technology transformation journey and the Bank is deeply committed to ensuring robust cyber security with substantial advancements being made to further fortify its infrastructure and applications. Key initiatives in this regard include:

•    Significant advancements to consolidate cyber security through initiatives such as the foundation of a next-generation Cybersecurity Operations Center (CSOC) for predictive security and incident management, introduction of Security Orchestration, Automation and Response (SOAR) to reduce incident response times and network micro-segmentation for better control, visibility and preparedness against ransomware.

•    The initiative and approach to leverage AI and ML as an entire suite to proactively detect and respond to threats is managed through the deployment of next generation Security Incident Event Management (SIEM) solution augmented by Artificial Intelligence (AI) and Machine Learning (ML) capabilities along with strong User Entity Behavioral Analysis (UEBA) functionalities and built-in threat modelling.

•    24/7 defacement monitoring and vulnerability management of the bank's internet properties, antivirus / malware program, patch management, penetration testing, etc. for minimising the surface area for cyber security attacks and fortifying the Bank's assets like infrastructure and applications.

•    Dedicated program for Attack Surface Management (ASM) that includes continuous attack surface discovery and probing for weaknesses on the discovered assets. There has been a continuous effort to ensure that all significant weaknesses are remediated within a reasonable timeframe.

•    Adopting a zero-trust architecture approach to ensure protection against cyber-attacks.

•    Implementation of Anti-Advanced Persistence Threat (Anti-APT) system agent on all endpoints in the Bank to protect from zero-day malware attacks. All network elements such as email, web as well as endpoint computers are protected by the anti-APT system.

•    Enterprise solutions such as Data Loss Prevention (DLP) to monitor sensitive data stored, transmitted and shared by users, and to prevent and detect data breaches. All endpoints have proxy agent configured to ensure that only authorised websites are accessed. All outgoing e-mails are monitored through DLP solution.

•    Laptop Encryption: Data encryption ensures that business-critical and sensitive data is not misplaced, thereby preventing any reputational damage and curtailing monetary losses. Hard disk encryption is implemented on all laptops.

•    Implementation of Domain-based Message Authentication, Reporting and Conformance (DMARC) system for protecting the Bank's domain from unauthorized use, commonly known as ‘email spoofing'.

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

Service Quality Initiatives and Grievance Redressal

Customer Focus is one of the five core values of the Bank. Given a highly competitive business environment, especially with diverse lines of businesses, we continuously strive to enhance customer experience. Delivering exceptional product quality and customer service delivery is a prerequisite for sustained growth. The Bank strives to achieve this by seeking customer feedback, benchmarking with best-in-class business entities and implementing customer-centric improvements. We have adopted a three-step strategy regarding Customer Service -Define, Measure and Improve.

HDFC Bank has adopted a multi-pronged approach to provide an omnichannel experience to its customers. On the one hand, it has traditional touchpoints like Branches, Email Care and PhoneBanking. On the other hand, it has state-of-the-art platforms like NetBanking, MobileBanking, WhatsaApp Banking, the chatbot Eva and the bank's exclusive social care handles. The Bank also has a Virtual Relationship Manager (VRM) programme to cater to various financial needs in a personalised manner.

Customer service performance and grievance redressal are regularly assessed at various levels, including Branch Level Customer Service Committees, Standing Committee on Customer Service and Customer Service Committee of the Board. HDFC Bank has implemented robust processes to monitor and measure service quality levels across touchpoints, including at product and process level, through the efforts of the Quality Initiatives Group.

The Service Quality team conducts regular reviews across various products, processes and channels, focusing on improving the customer experience. A unique Service Quality Index (SQI) has been developed to measure the performance of key customer facing channels based on critical customer service parameters. This SQI enables continuous improvement of initiatives to raise service standards.

One of the basic building blocks of providing acceptable level of customer service is to have an effective Internal Grievance Redressal Mechanism / Framework. HDFC Bank has developed a comprehensive Grievance Redressal Policy, Customer Rights Policy, Customer Compensation Policy, duly approved by the Board, which outline a framework for resolving customer grievances. These policies are accessible to customers through the Bank's website and branch network.

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

This Bank is compliant with the RBI Internal Ombudsman Guidelines. At the apex level, as a part of the Internal Grievance Redressal mechanism, the Bank has appointed seasoned-retired bankers as Internal Ombudsmen to independently review any customer grievance which is partly/wholly rejected by the Bank before the final decision is communicated to the customer.

HDFC Bank is on a journey to measure customer loyalty through a high velocity, closed loop customer feedback system. This customer experience transformation programme helps employees to empathise better with customers and improve turnaround times. Branded as ‘Infinite Smiles', the programme helps establish behaviours and practices that result in customer-centric actions through continuous improvement in products, services, processes and policies.

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

Risk Management and Portfolio Quality

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

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

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

•    Credit Risk including Residual Risks

•    Market Risk

•    Operational Risk

•    Interest Rate Risk in the Banking Book

•    Liquidity Risk

•    Intraday Liquidity Risk

•    Intraday Credit Risk

•    Credit Concentration Risk

•    Counterparty Credit Risk

•    Model Risk

•    People Risk

•    Business Risk

 

Digital and Credit Risk

Driven by rapid technological advancements, the banking sector is witnessing the increasing importance of digitalisation as a critical differentiator for customer retention and service delivery. Digital lending has emerged as a convenient and quick method for customers to secure loans with just a few clicks often in minutes, if not seconds. However, addressing the risks associated with digital lending is crucial and your Bank has implemented appropriate measures to manage these risks effectively. Digital loans are sanctioned primarily to your Bank's existing customers. Often, they are customers across multiple products, thus enabling the Bank ready access to their credit history and risk profile. This accessibility facilitates the evaluation of their loan eligibility. Moreover, the credit checks and scores used by your Bank in process-based underwriting are replicated for digital loans. This ensures consistency in the evaluation process.

Market Risk

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

Liquidity Risk

Liquidity risk is the risk that the Bank may not be able to meet its financial obligations as they fall due without incurring unacceptable losses. Your Bank's liquidity and interest rate risk management framework is spelt out through a well-defined Board approved Asset Liability Management Policy. As part of this process, your Bank has established various Board-approved limits for liquidity and interest rate risks in

the banking book. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity and interest rate risk management strategy of the Bank in line with its risk management objectives and ensures adherence to the risk tolerance / limits set by the Board. ALCO reviews the policy's implementation and monitoring of limits. While the maturity gap, Basel III ratios and stock ratio limits help manage liquidity risk, Net Interest Income impact and market value of equity (MVE) impact help mitigate interest rate risk in the banking book. This is reinforced by a comprehensive Board-approved stress testing programme covering both liquidity and interest rate risk.

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

The Liquidity Coverage Ratio (LCR) is one of the Basel Committee's key reforms to develop a more resilient banking sector. The LCR, a global standard, is also used to measure your Bank's liquidity position. LCR seeks to ensure that the Bank has an adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs under a 30-day calendar liquidity stress scenario. The LCR helps in improving the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spill over from the financial sector to the real economy. Based on Basel III norms, your Bank's average LCR stood at 117.35 per cent on a consolidated basis for financial year 2023-24 as against the regulatory threshold at 100 per cent.

The Net Stable Funding Ratio (NSFR), a key liquidity risk measure under BCBS liquidity standards, is also used to measure your Bank's liquidity position. The NSFR seeks to ensure that your Bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities. The NSFR promotes resilience over a longer-term time horizon by requiring banks to fund their activities with

more stable sources of funding on an ongoing basis. The RBI guidelines stipulated a minimum NSFR requirement of 100 per cent at a consolidated level and your Bank has maintained the NSFR well above 100 per cent since its implementation. Based on guidelines issued by RBI, your Bank's NSFR stood at 120.81 per cent on a consolidated basis March 31,2024.

Operational Risk

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

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

A. Framework and Process

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

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

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

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

•    Measurement of Operational Risk based on the actual loss data

•    Monitoring of risk through Key Risk Indicators (KRI)

•    Management and reporting through KRI, RCSA and operational risk losses of the Bank

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

B.    Internal Control

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

C.    Information Technology and Information Security Practices

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

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

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

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

For details on Business Continuity, Information and Cybersecurity Practices and Data Privacy Measures, please refer to pages 82 -87, 235 and 241.

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

D. Fraud Monitoring and Control

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

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

Compliance Risk

Compliance Risk is defined as the risk of impairment of your Bank's integrity, leading to damage to its reputation,

legal or regulatory sanctions, or financial loss, as a result of a failure (or perceived failure) to comply with applicable laws, regulations, and standards. Your Bank has a Compliance Policy to ensure the highest standards of compliance. A dedicated team of subject matter experts in the Compliance Department works with business, support and operations teams to ensure active Compliance Risk management and monitoring. The team also provides advisory services on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and also putting in place robust internal policies. Products that adhere to regulatory norms are tested after rollout and shortcomings, if any, are fully addressed till the product stabilises. Internal policies are reviewed and updated periodically as per agreed frequency or based on market actions or regulatory guidelines/ actions. The compliance team also seeks regular feedback on regulatory compliance from product, business and operation teams through self-certifications and monitoring.

ICAAP

Your Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) for the identification and evaluation of the significance of the risks that the Bank faces, which may have a material adverse impact on its business and financial position. The ICAAP framework is guided by the Board approved ICAAP Policy.

Group Risk

Post merger, the subsidiaries of your Bank have increased manifold from existing two subsidiaries. In order to manage the risk arising from subsidiaries with regards to potential uncertainties or adverse events that can impact the operations, financial stability, reputation of the Group, your Bank has established Group Risk Management function within the Risk Management Group. Your Bank shall have a reasonable oversight on the Risk Management Framework of the group entities on an ongoing basis through Group Risk Management Committee and Council. The Board / Risk Management committees of respective subsidiary shall be driving the day to day risk management in accordance with the requirements of the respective regulator. Stress testing for the group is carried out by integrating the stress tests of the subsidiaries. Similarly, capital adequacy projections

are formulated for the group after incorporating the business / capital plans of the subsidiaries. The Group Risk Management Committee shall report to the Bank's Risk Policy & Monitoring Committee (RPMC).

Model Risk

The use of models invariably presents model risk, which is the potential for adverse consequences from decisions based on incorrect or misused model outputs and reports. The Model Validation Unit (MVU) under Risk Management Group shall be responsible for testing and verifying the accuracy and reliability of models used within the Bank. By establishing a dedicated MVU, your Bank ensures that its models are independently evaluated before implementation and on an ongoing basis. There is an established Enterprise Model Validation Policy (EMVP) which is a centralized, overarching policy whose objective is to provide comprehensive guidance on model risk management across the Bank. The policy defines the roles and responsibilities across stakeholders i.e., Model Owners, Model Users, Model Developers, and the Model Validation Unit (MVU). There is Model Risk Management Committee (MRMC) which is an executive committee to govern the Model Risk Management Framework as defined in the EMV policy. It shall also oversee the development and implementation of EMV policy, governance structure, necessary processes and system are put in place and review the results of the model validation/monitoring on a periodic basis. The MRMC shall report to the Bank's Risk Policy & Monitoring Committee (RPMC).

Climate Risk

The risks from climate change are divided into (i) Physical risk which captures economic losses from acute impacts on account of extreme weather events or long-term chronic impact on environment; and (ii) Transition risks which captures financial asset level losses due to the possible process of adjustment to a low carbon economy.

Your Bank has partnered with an independent reputed global agency for developing a framework to assess climate transition risk at a borrower level for select industries. Additionally, your Bank has taken initiatives to engage in capacity building programs to familiarize the Board and its staff members on the key developments in climate risk assessment, considering this risk is continuously evolving.

Further your bank has formulated its ESG policy and ESG & Climate Change Assessment Framework which is integrated into bank's credit appraisal process.

Stress Testing Framework

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

Business Continuity Planning (BCP)

Your Bank has a strong BCP programme in place that enables operational resilience and continuity in delivering quality services across various business cycles. With our ISO 22301:2019 certified Business Continuity Programme, we prioritise minimising service disruptions and safeguarding our employees, customers and business during any unforeseen adverse events or circumstances. The Programme is designed in accordance with the guidelines issued by regulatory bodies. Further our programme undergoes regular internal, external and regulatory reviews.

The central Business Continuity Office focuses on strengthening the Bank's preparedness for continuity. Oversight over programme is provided by the Business Continuity Steering Committee, chaired by the Chief Risk Officer. The Business Continuity Procedure outlines clear roles and responsibilities for teams involved in Crisis Management, Business Recovery, Emergency Response, and IT Disaster Recovery, ensuring a coordinated approach.

As a responsible Bank, these steadfast practices have enabled us to continue seamless service delivery to our customers through disruptive events and beyond.

Internal Controls, Audit and Compliance

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

Your Bank has set up various executive-level committees with participation from various business and control functions that are designed to review and oversee matters pertaining to capital, assets and liabilities, business practices and customer service, operational risk, information security, business continuity planning and internal risk-based supervision among others. The second line of defence functions set standards and lay down policies and procedures by which the business functions manage risks, including compliance with applicable laws, compliance with regulatory guidelines, adherence to operational controls and relevant standards of conduct. At the ground level, your Bank has a mix of

preventive and detective controls implemented through systems and processes, ensuring a robust framework in your Bank to enable correct and complete accounting, identification of outliers (if any) by the management on a timely basis for corrective action and mitigating operational risks.

Your Bank has put in place various preventive controls, including:

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

b)    Dual custody over cash and near-cash items

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

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

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

f)    Stringent password policy

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

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

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

j)    Audit logs directly extracted from systems

k)    Empowerment grid

Your Bank also has detective controls in place:

a)    Periodic review of user IDs and its usage logs

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

 

party transactions and extent of adherence to the licensing conditions of the RBI.

Any new product/process introduced in your Bank is reviewed by Compliance function in order to ensure adherence to regulatory guidelines. The Audit function may, if deemed necessary also proactively recommend improvements in operational processes and service quality for such new products / processes.

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

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

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

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

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

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

 

Performance of Subsidiary Companies

Your Bank has five key subsidiaries, HDB Financial Services Limited (HDBFSL), HDFC Life Insurance Company Limited (HDFC Life), HDFC Asset Management Company Limited (HDFC AMC), HDFC ERGO General Insurance Company Limited (HDFC ERGO) and HDFC Securities Limited (HSL). HDBFSL is a leading NBFC that caters primarily to segments not covered by the Bank while HSL is among India's leading retail broking firms. HDFC Life is a leading, listed, long-term life insurance solutions provider in India. HDFC ERGO offers a complete range of general insurance products. HDFC AMC is Investment Manager to HDFC Mutual Fund, one of the largest mutual funds in the country.

Amongst the Bank's key subsidiaries, HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited prepare their financial results in accordance with Indian GAAP and other subsidiaries do so in accordance with the notified Indian Accounting Standards (‘Ind-AS').

The detailed financial performance of the companies is given below.

HDFC Securities Limited (HSL)

journeys which led to more than 90 per cent of customers being onboarded digitally.

In the case of Margin Trade Funding (MTF), the Average Book Size during the year was ' 4,855 crore, against the average book size of ' 3,190 crore in the last financial year. The Book Size for the year ended March 31,2024 stands at ' 6,033 crore.

HSL launched its flat price broking app, HDFC SKY in September 2023. HDFC SKY has a one-price slab of ' 20 for both intraday and delivery across segments, MTF at 12 per cent and zero account opening and maintenance charges for the first year.

HDFC SKY is designed to support investors and traders across experience levels to participate seamlessly in the financial markets and achieve their financial goals. The app provides access to various investment and trading offerings, including Indian stocks, ETFs, Mutual Funds, Futures and Options, Currencies, Commodities, IPOs and global equities on a single Fintech platform. Its users are spread across Tier-1, 2 and 3 cities.

The platform is best placed to help its customers with investment and stock recommendations and proprietary research to enable better and informed decision-making.

The Indian stock market witnessed an exceptional rally in the Financial Year 2023-24 marking multiple record highs. It was one of the best performing major markets after Japan's Nikkei. In Financial Year 2023-24, Nifty50 rose 28.6 per cent, while the BSE Sensex was up 24.8 per cent. This remarkable performance can be attributed to robust retail participation and strong Foreign Portfolio Investor (FPI) inflows triggered by buoyant economic growth and healthy corporate earnings. An increase in foreign investments in the Indian stock market provided additional liquidity and drove up stock prices. Indian equities garnered ' 2.08 lakh crore from FIIs in the Financial Year 2023-24. Demat accounts surged to 15.1 crore in March 2024 as compared to 11.4 crore in March 2023.

Realty (up 133 per cent) and Power (up 86 per cent) indices gained the most during the Financial Year 2023-24 followed by Capital Goods and Auto, Energy Indices. FMCG and BANKEX Indices while ending with gains during the year, significantly underperformed compared to other indices. Broader markets outperformed in the Financial Year 2023-24 with the Nifty Midcap 50 up by 59.8 per cent and Nifty Smallcap 50 gaining 71.6 per cent.

As on March 31, 2024, your Bank held 95.1 per cent stake in HSL.

HDB Financial Services Limited (HDBFSL)

HDB Financial Services Limited (HDBFSL) is a subsidiary of HDFC Bank and is a Non-Banking Finance Company (NBFC). HDBFSL has a comprehensive bouquet of products and service offerings that are tailor-made to suit its customers' requirements including first-time borrowers and the underserved segments.

HDBFSL is engaged in the business of lending, fee-based products and BPO services.

The company's Profit After Tax rose by 25.59 percent to ' 2,461 crore as on March 31,2024 compared to ' 1,959 crore as on March 31, 2023. The Total Loan Book stood at ' 90,218 crore as on March 31, 2024 compared to ' 70,031 crore as on March 31, 2023, a growth of 28.8 per cent. The asset quality remained robust, with Gross Non Performing Asset (GNPA) ratio at 1.90 per cent and Net Non Performing Asset (NNPA) ratio at 0.63 per cent as on March 31, 2024. GNPA stood at 2.73 per cent and NNPA at 0.95 per cent for the year ended March 31, 2023. Capital Adequacy Ratio stood at 19.25 per cent as on March 31, 2024.

HDBFSL has continued to focus on diversifying its products and expanding its distribution while augmenting its digital infrastructure and offerings to effectively deliver credit solutions. The company has a strong network of over 1,680 branches spread across 1,144 cities. As on March 31, 2024, your Bank held 94.6 per cent stake in HDBFSL.

HDBFSL has a diverse range of product offerings (secured and unsecured) to various customer segments. Given below are the key product as well as service offerings to various customer segments.

Consumer Loans

Consumer Loans are provided to individuals for personal or household purposes to meet their short to medium term requirements. It comprises loans for consumer durables, lifestyle products and digital products, personal loans, auto loans for new and used cars, two-wheeler loans and gold loans.

Enterprise Loans

HDBFSL offers loans to businesses for their growth and working capital requirements. Various loans offered to enterprises include: Unsecured Business Loan, Enterprise Business

Loan, Loan Against Property, Loan Against Securities and Loan Against Lease Rental. These loans cater to the financial requirements of enterprises for the purchase of new machinery, inventory or revamping the business.

Asset Finance

HDBFSL provides loans for the purchase of new and used commercial vehicles and provides refinance against existing vehicles for business working capital. It extends these offerings to fleet owners, first-time users, first-time buyers and captive use buyers. Construction equipment loans are offered for the procurement of new and used construction equipment. The company also facilitates refinancing on existing equipment. HDBFSL also offers customised tractor loans for the purchase of tractors or tractor-related implements to meet both agricultural and commercial needs.

Micro Lending

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

These loans were initiated in 2019 and are currently available in seven states including Maharashtra, Bihar, Rajasthan, Gujarat, Madhya Pradesh, Uttar Pradesh and Odisha covering 114 districts with more than 200 operational branches.

Fee-Based Products / Insurance Services

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

BPO Services

The BPO services offerings include running collection call centres, sales support services, back office operations and processing support services. Under collection services, HDBFSL has a contract to run collection call centres for HDFC Bank. These centres provide collection services for the entire range of HDFC Bank's retail lending products offering comprehensive end-to-end collection services. Under back office and sales support, HDBFSL offers sales support

and back-office services like forms processing, document verification, finance and accounting operations and processing support for HDFC Bank.

Digital Presence

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

HDFC Asset Management Company Limited (HDFC AMC)

Incorporated in 1999, HDFC AMC offers a comprehensive suite of mutual fund and alternative investments across asset classes, including equity, fixed income, hybrid and multi-asset solutions both on active as well as passive platforms. It caters to the needs of a large and diverse customer base. HDFC Bank became the holding company and promoter of HDFC AMC, in place of erstwhile HDFC Limited, with effect from July 1,2023. As on March 31,2024, HDFC Bank held a 52.55 per cent stake in HDFC AMC.

HDFC AMC is Investment Manager to HDFC Mutual Fund, one of the largest mutual funds in the country with closing AUM of over ' 6 lakh crore and market share of 11.4 per cent as on March 31, 2024. It serves a mutual fund customer base of 96 lakh unique investors, with a total of 1.66 crore live accounts. The company has a vast network of 254 branches, over 85,000 distribution partners and modern digital platforms, enabling it to serve clients across India.

HDCF AMC offers Portfolio Management and Segregated Account Services as well as Alternative Investment Funds to High Networth Individuals, family offices, domestic corporates, trusts, provident funds and domestic cum global institutions.

The company also has a wholly owned subsidiary company -HDFC AMC International (IFSC) Limited in Gujarat International Finance Tec-City (Gift City) for providing investment management, advisory and related services.

Total Income for the Financial Year 2023-24 recorded a year-on-year growth of 27 per cent to ' 3,162.5 crore. Profit After Tax grew by 37 per cent to ' 1,945.8 crore.

 

SME & Corporate Customers to Crop and Cattle Insurance for Rural Customers.

HDFC ERGO has a track record of consistent profitable growth. Over the past 16 years, it has grown faster than the industry - with a 31 per cent CAGR vis-a-vis 15 per cent CAGR for the General Insurance industry. As a result, HDFC ERGO has improved its market share from 0.8 per cent in the Financial Year 2007-08 to 6.4 per cent in the Financial Year 2023-24.

Profit After Tax for the year ended March 31,2024 was ' 437.67 crore compared to ' 652.66 crore for the year ended March 31, 2023.

Distribution Network

In order to provide its customers complete flexibility to avail its products and services, HDFC ERGO has a pan-India presence and a multi-channel distribution network. As of March 31,2024, the company has a strong network of 266 branches and 497 Digital Offices spread across 509 districts of the country.

Besides its own sales force, website and call centre, HDFC ERGO distributes its products via individual agents, corporate agents, bancassurance partners, brokers, motor insurance service providers, web aggregator and common service centre channels. As of March 31, 2024, HDFC ERGO has a large network of 1,09,279 individual agents including Point of Sales Personnel (POSPs) and has partnered with 149 Banks / Corporate Agents for distributing its products.

Product Segments

Accident & Health Insurance: HDFC ERGO offers various products under Accident & Health Insurance - retail health insurance to first-time health insurance buyers, group health insurance to insured groups, top-up health insurance to those who seek to protect themselves from high medical expenses, mass health insurance to those interested in participating in Government schemes as well as personal accident insurance and travel insurance. The company is the second largest retail health insurer in the industry as of March 31, 2024.

Motor Insurance: HDFC ERGO offers motor insurance for various segments - private cars, two wheelers, passenger vehicles, commercial vehicles, electronic vehicles as well as new and old vehicles. It is the fifth largest insurer in the private sector in the Motor Insurance segment in the Financial Year 2023-24.

Commercial Business: HDFC ERGO has a track record of providing customised insurance solutions to its corporate clients. Be it property, engineering insurance, marine insurance or liability insurance, the company follows an advisory approach to its clients based on a thorough understanding of their requirement. It is the fourth largest insurer in the private sector in the Commercial segment in the Financial Year 2023-24.

Rural and Agri Business: HDFC ERGO's rural market development activities are spearheaded by crop insurance covering a large agrarian population which is frequently affected by crop losses attributable to an irregular climatic pattern. It is the second largest insurer in the private sector in the crop insurance segment in FY24. HDFC ERGO also supports deepening insurance penetration in rural India via its Common Service Center (CSC) channel.

Servicing

The company has a robust digital service architecture supported by Artificial Intelligence. It reviews and re-engineers processes on a continuous basis to drive efficiencies and enhancing customer / channel experience. It has ISO certified processes of Claims, Operations, Customer Services, Business Continuity Management System and Information Security Management System.

HDFC ERGO has a fair and robust claims management practice. Following its core values, the company provides prompt response and quick claim settlement and equity of treatment to all its stakeholders, through its wide network of motor workshops and empanelled hospitals across the country. Customers are able to view and track claims status and provide feedback through HDFC ERGO's website and mobile application thus bringing in transparency. Over 80 per cent of motor insurance claim surveys were conducted digitally in FY 2023-24. About 90 per cent of motor insurance claims and about 65 per cent of health insurance claims were settled in cashless mode in FY24.

HDFC ERGO issued more than 1.1 crore policies in FY 202324, of which ~90 per cent were issued digitally. HDFC ERGO has enabled multilingual support across digital platforms to service the customers in their preferred language. For example, the AI-enabled WhatsApp bot ‘MyRA' currently offers services in 12 languages. AI-enabled processes have led to prompt assessment and detection of external damages to vehicles with the estimation of repair/replace of parts. It has also launched AI-enabled inspection for break-in insurance, enabling customers to receive the decision in about 5 minutes. In line with its customer centric philosophy, the company's grievance resolution TAT is lower than industry average by about 3 days.

In FY24, HDFC ERGO introduced “here” app. The app is a one-of-a-kind ecosystem which helps customers and noncustomers of the Company to take informed decisions about their everyday needs such as mobility, healthcare, travelamoungst others. It was launched in May 2023 and has been well received by the users, with over 50 lakh downloads.

Recently, HDFC ERGO has also partnered with Google Cloud to establish a Center of Excellence for Generative AI, aiming to offer hyper-personalised customer experiences and innovative insurance solutions.

HDFC ERGO continues to be future-ready by innovating and focusing on new-age technologies like AI, VR, Robotics to continue to provide superior customer experience.

ESG

HDFC ERGO believes in building a sustainable ecosystem to ensure it can continue providing value to its customers and society at large. It has developed an ESG policy and framework, and has been undertaking a number of initiatives across Environmental and Social aspects and further strengthening its Governance related processes.

As an example, diversity, equity and inclusion (DEI) is a key part of the company's culture and embedded in various processes. The share of women in overall workforce has improved from 19 per cent in FY22 to 25 per cent in FY24

Other Statutory DisclosuresNumber of Meetings of the Board, attendance, meetings and constitution of various Committees

Fourteen (14) meetings of the Board were held during the FY 2023-24. The details of Board meetings held during the year, attendance of Directors at the meetings and constitution of various Committees of the Board are included separately in the Corporate Governance Report.

Annual Return

In accordance with the provisions of Companies Act, 2013 (the “Act”), the Annual Return of HDFC Bank Limited (“Bank” or “HDFC Bank”) in the prescribed Form MGT-7 for FY 2023-24 is available on the website of the Bank at https:// www.hdfcbank.com/personal/about-us/investor-relations/ annual-report.

Requirement for maintenance of cost records

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

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

Pursuant to Section 143(12) of the Act and circular issued by National Financial Reporting Authority circular dated June 23, 2023, there were 3 instances of fraud committed during FY 2023-24, by the officers or employees of the Bank and reported by the Statutory Auditors to the Audit Committee of the Board. Details of the frauds are as under:

Sr. No.	Nature of the fraud with description	Approximate amount involved	Remedial actions taken
1	Misappropriation & Criminal	' 616.32	1) Bank had investigated the case which had revealed that the Bank's process of
	Breach of Trust CDM was operated singly, and cash removed from machine was not deposited at branch; instead, pilfered by teller authoriser.	Lakhs	dual custody was not followed by the staff and the Cash Deposit Machine (“CDM”) was operated under single custody by Branch Staff and cash evacuated from machine was not deposited at branch, instead, pilfered by Branch Staff. However, with adherence of Bank process by the branch / other staff the fraud could have been averted / detected at an early stage. 2) Bank had taken necessary disciplinary action against the involved staff by terminating his services as well as other staff towards the identified lapses. Further, the said branch staff was arrested by the police authorities and is in judicial custody. Post completion of the internal investigation, to avoid such incident following were the enhancements:- a)    Tracking institutionalised to review Cash Recycler Machines (CRM) with high cash balances. Terminals with system balances beyond a threshold are being reviewed. b)    Branches without system entry for cash evacuation from CRM are identified centrally & highlighted along with ageing since the last entry posting. c)    Branch Managers periodic checks includes whether CDM is held and managed in Dual Custody, and Branch staff is aware of the process with regards to End of Day (“EOD”) of the CDM machine. d)    Cash extracted from CDM in dual custody and CDM general ledger (“GL”) is nullified by depositing the Cash extracted from the machine. e)    Cash is tallied with counter slips generated from the machine (including retraction slips) and necessary shortage / excess booked in case of any physical discrepancy on advice of the Automated Teller Machine (“ATM”) monitoring team.
2	Misappropriation & Criminal	' 305.05	Update on recommendations / remedial action made in the inquiry report.
	Breach of Trust Staff had misappropriated funds of multiple customers and had used these for online gaming/ betting and lost	Lakhs	a)    Disciplinary action specific to HDFC Bank & insurance partner staffs stands executed. b)    Matter was reported to RBI on November 8, 2023. Insurance claim has been initiated. Insurance company has appointed surveyor for the case. Surveyor had asked for certain details/documents which were provided by the bank. Bank is currently following up with insurance company for status. c)    Amount in question was refunded to customers. d)    Towards the breach of service level agreement identified for courier agency - M/s Agarwal Enterprises (Trackon Couriers Pvt. Ltd), show cause notice was issued to the courier company in consultation with legal. Response received against specified show cause notice was reviewed & Service Level Agreement / services of courier company were discontinued. e)    Customer is in ‘no debit' status. Since matter is Sub Judice, said account cannot be weeded out till final court order is received. f)    BOTC asserted that Loan Against Trust Receipt alerts are raised based on the threshold limits for a single transaction (' 20 Lakhs & above) & risk profile of the customer. In highlighted account, customer was flagged as low risk & there was only one transaction of ' 20 Lakhs for which alert was triggered to branch for further review / enhanced due diligence. g)    The Customer has changed his online banking credentials. Aside, branch has advised all highlighted customers to change their login credentials as a precautionary measure. h)    Further, the Customer was guided and advised to get all remaining cheques stopped. However, customer has confirmed custody of remaining cheques & had utilized few cheques post this incident. Customer has reportedly issued cheque/s to some third party to clear some of his obligations & will apply for a new cheque book once he is back from abroad. Customer has been suitably informed by the branch on this aspect. i)    Further, 16 specified transactions has been confirmed to be bonafied by respective branches. No anomalies noted.

Sr.	Nature of the fraud with	Approximate	Remedial actions taken
No.	description	amount involved
3	Cheating & Forgery	' 2971.86	Corrective Measures :
	Syndicate Fraud perpetrated	Lakhs	1)	Any change in the loan amount beyond ' 1 Lakh mandatorily requires Regional
	by borrowers in connivance			Credit manager (“RCM”) approval.
	with others by creating fake employment		2)	' 10 Lakhs cap has been placed for personal loans being extended to any employee of manpower companies.
			3)	Customer Profile Validation (“CPV”) agents have now been mandated to meet the borrower at residence or office for cases where loan amount applied is more than ' 25 Lakhs.
			4)	Quarterly bureau checks of all employees in underwriting unit is being conducted by Risk team to derive their financial discipline.
			5)	Credit control unit (within underwriting) is being setup to identify the outliers and analyse the trends. The first set of observations has been received and being worked upon.

Directors’ Responsibility Statement

Pursuant to Section 134 of the Act, the Board of Directors

hereby confirm that:

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

•    We have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2024 and of the profit of the Bank for the year ended on that date.

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

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

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

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

Compliance with Secretarial Standards

The Bank has complied with Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India.

Statutory Auditors

The Members of the Bank at the 27^th Annual General Meeting (“AGM”) had approved the appointment of M/s. M.M. Nissim & Co. LLP, Chartered Accountants (ICAI Firm Registration No. 107122W/W100672) [“MMN”] as the joint statutory auditor(s) of the Bank from FY 2021-22 till (and including) FY 2023-24. Further, the Members of the Bank at the 28^th AGM held on July 16, 2022 had approved the appointment of M/s. Price Waterhouse LLP, Chartered Accountants (ICAI Firm Registration No. 301112E/E300264) [“PW”], as the joint statutory auditor(s) of the Bank for a period of 3 (three) years from FY 2022-23 till (and including) FY 2024-25.

In view of the completion of term of MMN, the Board of Directors based on the recommendation of the Audit Committee has recommended the appointment of M/s. Batliboi & Purohit, Chartered Accountants (ICAI Firm Registration No. 101048W) [“B&P”] to act as Joint Statutory Auditors of the Bank in relation to the FY 2024-25, 2025-26 and 2026-27, subject to approval of the shareholders at the ensuing AGM and Reserve Bank of India (“RBI”) each year.

Further, RBI vide its letter dated May 30, 2024 has approved the appointment of B&P to act as Joint Statutory Auditors of the Bank along with PW for FY 2024-25.

The resolution in this regard is being proposed at the ensuing AGM for the approval of the Shareholders.

During the year ended March 31, 2024, the fees paid to the Joint Statutory Auditor(s) and their respective network firms on aggregated basis are as follows:

(' In crores)
Fees (excluding taxes)*	HDFC Bank to joint statutory auditor(s)	Subsidiaries of HDFC Bank to joint statutory auditor(s) and its network firms
Statutory Audit	9.00	1.05
Certification & other audit / attestation services	6.82	0.05
Non-audit services	-	-
Outlays	0.40	0.05
Total	16.22	1.15
*No fees were paid to network firms of joint statutory auditor(s) by HDFC Bank.

Corporate Social Responsibility

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

The Bank's Environmental Social & Governance (ESG) Policy Framework is available at https://www.hdfcbank.com/ content/api/contentstream-id/723fb80a-2dde-42a3-9793-7ae1be57c87f/f0ac1d94-7b3f-4b7a-ad10-d84cd154eaed

Particulars of Contracts or Arrangements with Related Parties

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

Particulars of Loans, Guarantees or Investments

Pursuant to applicable provisions of Section 186 of the Act, the particulars of investments made by the Bank are disclosed in note no. 8 of Schedule 18 of the Financial Statements as per the applicable provisions of the Banking Regulation Act, 1949.

Material Development

Scheme of Amalgamation

The Board of Directors of the Bank at its meeting held on April 04, 2022, had approved a composite scheme of amalgamation (the “Scheme”) for the amalgamation of: (i) erstwhile HDFC

Investments Limited and erstwhile HDFC Holdings Limited, each a subsidiary of erstwhile Housing Development Finance Corporation Limited (“e-HDFC Limited”), with and into e-HDFC Limited, and (ii) e-HDFC Limited with and into HDFC Bank (the “Amalgamation”). Pursuant to the receipt of requisite approvals from Stock Exchanges, Securities and Exchange Board of India, Competition Commission of India, Reserve Bank of India, National Company Law Tribunal and all other regulatory / statutory authorities, the Amalgamation became effective from July 1, 2023 upon filing INC 28 with the Registrar of Companies, Mumbai.

Consequently, on July 14, 2023, the Bank allotted 3,11,03,96,492 equity shares of Re. 1 each to the shareholders of e-HDFC Limited in the ratio of 42:25 i.e. 42 equity shares of HDFC Bank (each having a face value of Re. 1) credited as fully paid for every 25 equity shares of e-HDFC Limited (each having a face value of Rs. 2). Also, non-convertible debentures and commercial papers issued and allotted by e-HDFC Limited were transferred in the name of the Bank. The Bank has done necessary corporate actions to give effect to above allotment / transfer of securities. Further, the warrants issued and allotted by e-HDFC Limited were matured on August 10, 2023 and out of total 1,47,57,600 warrants of e-HDFC Limited, 147,47,400 warrants were converted into 2,47,75,632 equity shares of Re. 1 each of the Bank, which were allotted and listed on the Stock Exchanges. Whereas the balance 10,200 warrants representing 17,136 equity shares were cancelled / lapsed.

In case of shareholders / warrant holder who were eligible for fractional entitlement, the securities were consolidated by a trust managed by Axis Trustee Services Limited, which was nominated by Board of Directors of the Bank. On October 9, 2023, the trust sold the consolidated securities in the market and the proceeds were distributed after deducting applicable cost and taxes to the eligible holders of such securities in the proportion of their entitlement ratio.

There were no material developments / changes / commitments affecting the financial position of the Bank which have occurred after March 31, 2024 till the date of this report.

Financial Statements of Subsidiaries and Associates

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

The Board of Directors of the Bank at its meeting held on April 04, 2022, had approved a composite scheme of amalgamation sold 90.01% equity stake of HDFC Credila to the Acquirers and consequently HDFC Credila ceased to be the subsidiary of the Bank. As on March 31, 2024, HDFC Bank holds aggregating to 9.99% of total issued and paid-up share capital of HDFC Credila, which is in compliance with the conditions as stipulated by the RBI vide its letter dated April 20, 2023 read with the letter dated June 27, 2023.

²In furtherance of the RBI direction, the Bank has decided to undertake the sale of its 100% stake held in HDFC Education and Development Services Private Limited (the “Proposed Transaction”) using the Swiss challenge method. The Bank had on March 30, 2024, entered into a binding term sheet with an interested party and the offer contained in such term sheet shall serve as the anchor / base bid to seek counter offers from other parties interested in participating in the aforesaid Swiss challenge process. The Bank shall finalise the purchaser on the basis of the completion of the Swiss challenge process, subsequent to which such purchaser and the Bank will enter into definitive agreement for the purposes of the Proposed Transaction.

Apart from abovementioned companies, no other entities became or ceased to be the Bank's subsidiaries, associates or joint ventures during the year 2023-24.

Disclosure under Foreign Exchange Management Act, 1999 (“FEMA”)

Pursuant to the Amalgamation of e-HDFC Limited with and into the Bank effective July 1,2023, subsidiaries of e-HDFC Limited has became subsidiaries of the Bank. During the period under review, the Bank has complied with the applicable provisions of FEMA and has obtained a certificate from M/s. M. M. Nissim & Co. LLP, Chartered Accountants, Statutory Auditor of the Bank, to this effect.

Whistle Blower Policy / Vigil Mechanism

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

This Policy has also been put in place to provide a mechanism through which adequate safeguards can be provided against victimization of employees who avail of this mechanism. The Policy would cover and will be applicable to the Protected

Disclosures related to violation/ suspected violation of the Code of Conduct including (a) breach of applicable law; (b) fraud/criminal offence or corruption/misuse of office to obtain personal benefit / pecuniary advantage for self or any other person; (c) leakage/suspected leakage of unpublished price sensitive information which are in violation to SEBI (Prohibition of Insider Trading) Regulations, 2015 and related internal policy of the Bank, i.e. Share Dealing Code of the Bank, (d) wilful data breach and / or unauthorized disclosure of Bank's proprietary data including customer data.

The Policy will not cover the following types of complaints which if made, will not be considered Protected Disclosure under this Policy:

(a)    Matters relating to personal grievances on issues such as appraisals, compensation, promotions, rating, behavioral issues / concerns of the manager(s) / supervisor(s) / other colleague(s), complaint of sexual harassment at workplace etc. for which alternate internal redressal mechanisms in the Bank are in place.

(b)    Matters which are pending before a court of law, tribunal, other quasi- judicial bodies or any governmental authority.

(c)    Anonymous / pseudonymous complaints will not be considered as Protected Disclosures under this Policy.

All Protected Disclosures made under the Policy shall be made to the Whistle Blower Committee through the following modes;

(a)    By letter in a closed / sealed envelope addressed to the Whistle Blower Committee, or

(b)    by submission of the same on the information portal of the Bank, or

(c)    by way of an email addressed to whistleblower@hdfcbank. com. In exceptional circumstances, the Whistle Blower may make such Protected Disclosures directly to the Chairperson of the Audit Committee of the Board.

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

Details of Whistle blower complaints received and subsequent action taken and the functioning of the Whistle Blower mechanism are reviewed periodically by the Audit Committee of the Board. During the FY 2023-24, a total of 156 such complaints were received and taken up for investigation which has resulted in certain staff actions in 55 cases post investigation. The broad categories of whistle blower complaints were in the areas of misappropriation of bank /

customer funds, forgery related cases, improper business practices, behavioural issues and corruption.

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

Statement on Declaration by Independent Directors

Mr. Atanu Chakraborty, Mr. M. D. Ranganath, Mr. Sandeep Parekh, Dr. (Mrs.) Sunita Maheshwari, Mrs. Lily Vadera and Dr. (Mr.) Harsh Kumar Bhanwala are the Independent Directors on the Board of the Bank as on March 31,2024.

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

Evaluation of Board of Directors

The performance evaluation of the Board, Committees of the Board and the individual members of the Board (including the Chairman) for Financial Year 2023-24, was carried out internally pursuant to the framework laid down by the Nomination and Remuneration Committee (“NRC”). A questionnaire for the evaluation of the Board, its Committees and the individual members of the Board (including the Chairman), covering various aspects of the performance of the Board and its Committees, including composition, roles and responsibilities, Board processes, Boardroom culture, adherence to Code of Conduct and Ethics, quality and flow of information, as well as measurement of performance in the areas of strength as identified in the previous board evaluation, was sent out to the Directors. The Committees were evaluated inter-alia on parameters such as composition, terms of reference, quality of discussions, contribution to Board decisions and balance of agenda between the Committee and the Board. The responses received to the questionnaires on evaluation of the Board and, its Committees and Non-Independent Directors were then placed before the meeting of the Independent Directors for consideration. The assessment of performance of NonIndependent Directors on personal and professional attributes was also carried out at the meeting of Independent Directors. The assessment of performance of the Independent Directors on the Board (including Chairman) was subsequently discussed

by the Board. In addition to the above parameters, the Board evaluated and was satisfied that the Independent Directors of the Bank fulfill the independence criteria as specified in LODR and was independent from the management.

The evaluation brought out the cohesiveness of the Board, a Boardroom culture of trust and cooperation, and Boardroom discussions which are open, transparent and encourage diverse viewpoints. Other areas of strength included effective discharge of Board's roles and responsibilities. The Board would continue to adhere to best corporate governance practices and would dedicate more time in strategy planning, competitive positioning, benchmark and talent management. Considering the addition of subsidiaries post the merger, the Board has taken steps in right direction to have effective oversight on the subsidiaries. The Board also noted that while there has been positive development in the areas of focus identified in the previous evaluation, efforts need to continue in that direction. The appropriate feedback was conveyed to the respective Board members.

Policy on Appointment and Remuneration of Directors and Key Managerial Personnel

Your Bank has in place a Policy for appointment and fit and proper criteria for Directors of the of the Bank (the “Policy”). The Policy lays down the criteria for identification of persons who are qualified as ‘fit and proper' to become Directors on the Board- such as academic qualifications, competence, track record, integrity, etc. which shall be considered by the NRC while recommending the appointment of Directors. The Policy also deals with the process for appointment/re-appointment of directors, annual affirmations, familiarization programme for Non-Executive Directors of the Bank etc. The Policy is available on the website of the Bank at https://www.hdfcbank.com/ personal/about-us/corporate-governance/codes-and-policies.

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

Your Bank's Compensation Policy is aimed to attract, retain, reward and motivate talented individuals critical for achieving strategic goals and long-term success. The Compensation Policy is aligned to business strategy, market dynamics, internal characteristics and complexities within the Bank. The ultimate objective is to provide a fair and transparent

 

 

Succession Planning

The NRC and the Board reviews succession planning and transitions at the Board and Senior Management level. The Board composition and the desired skill sets / areas of expertise at the Board level are continuously reviewed and

vacancies, if any, are reviewed in advance through a systematic due diligence process.

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

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

Significant and Material orders Passed by Regulators

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Bank's operations in future.

Further, details pertaining to penalties / strictures / prohibitions / restrictions on the Bank are included in the Corporate Governance Report.

Directors and Key Managerial Personnel

In compliance with Section 152 of the Act and the Articles of Association of the Bank, Mr. Bhavesh Zaveri and Mr. Keki Mistry will retire by rotation at the ensuing Annual General Meeting and are eligible for re-appointment. A resolution seeking shareholders' approval for their re-appointment forms part of the Notice of this AGM. A brief profile of both the retiring directors is furnished in the report on Corporate Governance for the information of shareholders.

Following were the changes in composition of the Board of Directors:

1.    Appointment of Mr. Kaizad Bharucha (DIN: 02490648) and Mr. Bhavesh Zaveri (DIN: 01550468) as Deputy Managing Director and Executive Director respectively, for a period of 3 (three) years with effect from April 19, 2023 upto April 18, 2026 (both days inclusive), liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on June 11, 2023.

2.    Appointment of Mr. Keki Mistry (DIN: 00008886) and Mrs. Renu Karnad (DIN: 00008064) as Non-Executive (Non-Independent) Directors of the Bank, with effect from June 30, 2023 to November 6, 2029 (both days inclusive) and July 1, 2023 to September 2, 2027 (both days inclusive), respectively, liable to retire by rotation,

 

as approved by shareholders at the 29^th Annual General Meeting of the Bank held on August 11, 2023.

3.    Re-appointment of Mr. Sashidhar Jagdishan (DIN: 08614396) as Managing Director and Chief Executive Officer of the Bank for a period of 3 (three) years with effect from October 27, 2023 to October 26, 2026 (both days inclusive) and not liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on January 9, 2024.

4.    Re-appointment of Mr. Sandeep Parekh (DIN: 03268043) and Mr. M. D. Ranganath (DIN: 07565125) as Independent Directors of the Bank for a period of 3 (three) years with effect from January 19, 2024 to January 18, 2027 (both days inclusive) and January 31,2024 to January 30, 2027 (both days inclusive), respectively and not liable to retire by rotation, as approved by the shareholders through Postal Ballot on January 9, 2024.

5.    Appointment of Mr. V. Srinivasa Rangan (DIN: 00030248) as an Executive Director of the Bank for a period of 3 (three) years with effect from November 23, 2023 to November 22, 2026 (both days inclusive) and liable to retire by rotation as approved by RBI and the shareholders through Postal Ballot on January 9, 2024.

6.    Appointment of Dr. (Mr.) Harsh Kumar Bhanwala (DIN: 06417704) as an Independent Director of the Bank for a period of 3 (three) years with effect from January 25, 2024 to January 24, 2027 (both days inclusive) and not liable to retire by rotation, as approved by the shareholders of the Bank through Postal Ballot on March 29, 2024.

7.    Re-appointment of Mr. Atanu Chakraborty (DIN: 01469375) as the Part Time Chairman and Independent Director of the Bank for a period of 3 (three) years with effect from May 5, 2024 to May 4, 2027 (both days inclusive) and not liable to retire by rotation, as approved by RBI and the shareholders through Postal Ballot on May 3, 2024.

8.    Mr. Sanjiv Sachar (DIN: 02013812) and Mr. Umesh Chandra Sarangi (DIN:02040436) ceased to be Independent Directors with effect from the close of business hours on July 20, 2023 and February 29, 2024 respectively, upon completion of their respective terms. Your Board places on record its sincere appreciation for the contribution made by them during their tenure with the Bank and wishes them well in future endeavors.

Corporate Governance

In compliance with Regulation 34 and other applicable provisions of LODR, a separate report on Corporate Governance along with a certificate of compliance from the Secretarial Auditors, forms an integral part of this report.

Business Responsibility and Sustainability Report

The Bank's Business Responsibility and Sustainability Report in the format adopted by companies in India as per the guidelines of SEBI in this regard forms an integral part of this report.

Prevention, Prohibition and Redressal of Sexual Harassment of Women at the Workplace

The relevant information is included in the Corporate Governance Report.

Customer complaints and grievance redressal

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

Unclaimed Deposits of e-HDFC Limited

The Bank is a private sector bank registered with RBI and in terms of applicable RBI norms, deposits remaining unclaimed / unpaid for a period of 10 years, need to be transferred by the Bank to Depositor Education and Awareness (DEA) Fund maintained by RBI.

In accordance with applicable provisions of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, as amended, (the Rules) erstwhile Housing Development Finance Corporation Limited (e-HDFC) till the effective date of the amalgamation i.e. July 1, 2023, has transferred deposits remaining unclaimed for a period of seven years from the date they became due for payment to the Investor Education and Protection Fund (IEPF) established by the Central Government. The deposit holders of e-HDFC can claim their respective unclaimed deposit from IEPF. The process of claiming the deposit from IEPF is uploaded on the website of the Bank. Henceforth, the Bank would be transferring all the unclaimed deposits of e-HDFC (remaining unclaimed for more than 10 years) to the said DEA Fund.

I Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the Reserve Bank of India and other Government and Regulatory Agencies. Your Directors would also like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank's employees and look forward to their continued contribution.

I Conclusion

The year under review witnessed the amalgamation of erstwhile HDFC Limited with and into HDFC Bank. This has opened up immense opportunities through the fusion of e-HDFC Limited's home loan expertise with HDFC Bank's operational efficiencies and wider reach. The amalgamation also offers huge prospects for cross sell. All in all, it is going to be a key driver for future growth. The under penetration of banking services in India is an opportunity by itself. HDFC Bank is well placed to capitalise on this given its inherent balance sheet and brand strengths. While chasing growth, the Bank will not lose sight of adhering to corporate governance standards, serving customers in a transparent way and treating employees fairly.

 

 

1

Pursuant to the abovementioned Amalgamation and conditions as stipulated by the RBI, e-HDFC Limited (since amalgamated with and into HDFC Bank) and HDFC Bank

2

(being the successor entity of e-HDFC Limited) had executed definitive documents for sale of approximately 90% of total issued and paid-up share capital of HDFC Credila Financial Services Limited's (“HDFC Credila”) to (a) Kopvoorn B.V., (b) Moss Investments Limited, (c) Defati Investments Holding B.V., and (d) Infinity Partners ((a),(b),(c) and (d) are hereinafter collectively referred as “Acquirers”). Subsequently, HDFC Bank