Saaketa Consultants LTD (2024)

Your Directors take great pleasure in presenting the 29^thAnnual Report on the business and financial operations of your Bank,together with the audited accounts for the year ended March31, 2023.

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

On the economic front, India's GDP grew by 7.2 per cent in Financial Year 2022-23 compared to 9.1 per cent in the precedingyear as per the Central Statistical Organisation. The highergrowth last year in Financial Year 2021-2022 was largely due tothe negative impact of the pandemic in Financial Year 2020-21.

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

Overall systemic liquidity remained in surplus for much of the last financial year. However, RBI started raising rates from May2022 onwards, cumulatively increasing by 250 basis points.Global headwinds resulted in slowing export momentum in thesecond half of financial year 2022-23 and 2023-24 GDP growthforecast being revised by 200 basis points. Although, Indianbanks remain relatively immune to the effects of US regionalbanking turmoil, ripple effects of the global turmoil are likely tobe felt on domestic markets due to high inflation, geopoliticaltensions and persistent but continuing localised disruptions ofthe COVID-19 pandemic.

In the long run however, we see resilience in the domestic market against future headwinds as India remains one of thefastest growing economies globally. External stability indicatorscontinue to remain healthy. Internal consumption demand isbeing supported by the rationalisation of income tax slabs aswell as 37.4 per cent increase in capital expenditure to ' 10 lakhcrore in the Union Budget for 2023-24.

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

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

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

the strength of its franchise. With its Future Ready Strategy consisting of 10 strategic pillars supported by key enablers, theBank is prepared for the future and aims to catalyze, create, andcapture the next wave of growth.For more details, pleaserefer to page 38.

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

The future of your Bank, of course, will be driven by the efforts of the ever growing family of 1.73 lakh employees across India.We are committed to hiring and retaining the best talent andbeing among the industry's leading employers. For this, wefocus on promoting a collaborative, transparent and participativeorganization culture, and rewarding merit and sustainedhigh performance.

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: CustomerFocus, Operational Excellence, Product Leadership, Peopleand Sustainability. Sustainability should be viewed in unison withEnvironmental, Social and Governance performance. As a partof this, your Bank, through its umbrella CSR brand Parivartan,seeks to bring about change in the lives of communities mainlyin rural India.

During the year under review, the Bank did not lose its human touch but continued building sound customer franchises acrossdistinct businesses to achieve healthy growth in profitabilityconsistent with your Bank's risk appetite.

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

• Deliver superior experience and greater convenience tocustomers

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

• Expand geographical reach

• Cross-sell the broad financial product portfolio

• Sustain strong asset quality through disciplined credit riskmanagement

• Maintain low cost of funds

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

Dividend

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

In general, your Bank's dividend policy, among other things, balances the objectives of rewarding shareholders andretaining 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 Boardendeavours to maintain. The dividend policy of your Bank isavailable on the Bank's website.

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

As on March 31, 2023, the issued, subscribed and paid-up capital of your Bank stood at ' 5,579,742,786/- comprising5,579,742,786 equity shares of ' 1/- each. Further, 34,201,810equity shares of face value of ' 1/- each were issued by your Bankpursuant to the exercise of Employee Stock Options (ESOPs).(For information pertaining to ESOPs, please referAnnexure 1of the Directors' Report).

Capital Adequacy Ratio (CAR)

As on March 31, 2023, your Bank's total CAR, calculated as per Basel III Regulations, stood at 19.3 per cent, well abovethe regulatory minimum requirement of 11.7 per cent, includinga Capital Conservation Buffer of 2.5 per cent and an additionalrequirement of 0.2 per cent on account of the Bank beingidentified as a Domestic Systemically Important Bank. Tier ICapital was at 17.1 per cent as of March 31, 2023

TOTAL CAR

19.3 per cent

WELL ABOVE REGULATORY MINIMUM REQUIREMENT OF 11.70 PER CENT

Management Discussion and Analysis

Macroeconomic and Industry Developments

India's GDP registered a growth of 7.2 per cent in Financial Year 2022-23 as per latest estimates by the Central StatisticalOrganisation. This is a moderation from 9.1 per cent growthin Financial Year 2021-22, largely due to the base effect forFinancial Year 2021-22 owing to the negative economic impactof pandemic in Financial Year 2020-21. Growth was supportedby pent up consumption demand and easing of supply - sideconstraints as the economy looked to shake off pandemicinduced disruptions.

Private consumption continued to improve, registering a healthy growth of 7.5 per cent on strong discretionary spending. Urbandemand showed resilience while rural demand began to showearly signs of recovery. Investment momentum remained strongas private capex recovery began supported by rising Governmentcapital expenditure. Exports expanded at a healthy rate of 13.6per cent in Financial Year 2022-23 crossing the $400 billion markfor the second year in a row. However, exports seemed to havelost some momentum towards the latter half of 2022-23 as globalgrowth headwinds rose.

On the positive side, there are supports for domestic growth as well. The Union Budget 2023-24 increased Government'sallocation on capital expenditure by 37.4 per cent to over 10lakh crore. Further, the rationalisation of income tax slabsannounced in the Budget is likely to aid consumption demandby putting more money in the hands of people in the lowerincome brackets. Manufacturing and private capital expendituremay see improvement as inflation moderates supported by thepause in RBI's rate hike cycle. Finally, the normal monsoonforecast by IMD augurs well for the agriculture sector. However,risk of El-Nino negatively affecting temporal and spatial rainfalldistribution remains.

On balance, we expect India's GDP growth at 6.0 per cent in 2023-24. Headline inflation has moderated from its peak of 7.8per cent year-on-year in April 2022, with a cool off in commodityprices and food inflation as well as an improvement in supplychains. Headline inflation stood at 4.8 per cent year-on-year inJune 2023. However, there are several risks on horizon. Unevennature of monsoons, El-Nino risk and weak progress in Kharifsowing are some of major risks to inflation outlook. In 2023-2024,we estimate headline inflation to average at 5.1 per cent year-on-year. We expect the RBI to keep the policy rate unchanged at6.5 per cent throughout 2023-2024 and see possibility of ratecuts only in early 2024-2025.

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

Financial Performance

The financial performance of your Bank during the year ended March 31, 2023, remained healthy with Total Net Revenue(Net Interest Income plus Other Income) rising 16.3 per centto ' 118,057.1 crore from '101,519.5 crore in the previous year.Revenue growth was driven by an increase in both Net InterestIncome and Other Income. Net Interest Income grew by 20.6per cent to ' 86,842.2 crore. Net Interest Margin (NIM) stood at4.1 per cent. Gross Advances grew by 16.9 per cent andDeposits grew by 20.8 per cent.

TOTAL NET REVENUE

16.3 per cent growth

Other Income grew by 5.8 per cent to ' 31,214.8 crore. The largest component was Fees and Commissions at ' 23,844.1crore. Within fees approximately 94 per cent pertains to Retail.The increase in fees is largely explained by increase in the Retailexposures. Loss on Revaluation and Sale of Investments was

' 1,131.2 crore. Foreign Exchange and Derivatives Revenue was ' 4,081.9 crore, and recoveries from written-off accounts were' 3,382.4 crore.

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

NEW BRANCHES

1,479

IN FY 2022-23

Total Provisions and Contingencies were ' 11,919.7 crore as compared to ' 15,061.8 crore in the preceding year. YourBank's provisioning policies remain more stringent thanregulatory requirements.

The Coverage Ratio based on specific provisions alone excluding write-offs was 75.8 per cent and including general,floating and contingent provisions was 176.3 per cent. Your Bankmade General Provisions of ' 422.7 crore during the year. GrossNon-Performing Assets (GNPAs) were at 1.12 per cent of GrossAdvances, as against 1.17 per cent in the previous year. NetNPA ratio stood at 0.27 per cent as against 0.32 per cent in theprevious year.

GROSS NPA

1.12 per cent

AS ON MARCH 31, 2023

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

NET PROFIT

19.3 per cent increase

IN FY 2022-23

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

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

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: Industry First Digital Offering, Optimal Pricing for Risk, andPristine Portfolio Quality. By adhering to these principles, yourBank has achieved an impressive 22 per cent year-on-yeargrowth in Domestic Retail Advances.

The Personal Loans segment has experienced strong growth, with the overall portfolio touching ' 171,676 crore by the endof the year. The Bank's increased focus on the Governmentsegment and top corporates has contributed to improvedportfolio quality.

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

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

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

Continued emphasis is placed on digitising processes and enhancing customer touchpoints to expand the Bank's reach.Building on the success of initiatives like Personal Loan in 10Seconds, Digital Loan Against Shares, and Digital Loan AgainstMutual Funds, your Bank introduced in the year under review anindustry-first, completely digital, contactless, and paperless carloan process. New customers can receive disbursem*nt within30 minutes, including the Video KYC process, while existingpre-approved customers can obtain loan disbursem*nt in just 10seconds. These loans are credited to the account of the dealer.

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

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

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

Smart Hub Vyapar, an integrated holistic banking and business solution that caters to daily needs of merchants and helpsdrive business growth, was formally launched in October 2022.The platform has witnessed widespread adoption and hasonboarded one million users across the country as of March31, 2023.

The Credit Cards business continued to enhance its product offerings and launched a slew of co-branded credit cardscovering Retail and Wholesale business segments. Overall, thecards business (credit, debit and pre-paid) continued to seerobust volume growth, with customer spends crossing ' 5 lakhcrore in Financial Year 2022-23.

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

Lastly, in tune with the evolving payments landscape, the business continues to transform itself with significant investmentsacross cloud computing, analytics, Artificial Intelligence andMachine Learning, open APIs and cyber security. The objectiveis to manage large scale and continuously grow volumes whileprocessing transactions in a safe and secure manner.

Virtual Relationship Banking is an integrated customer centric approach covering three pillars - Virtual Relationship, VirtualSales and Virtual Care. This channel is a crucial component ofits sales and customer engagement strategy. It involves the useof technology to reach out to customers, build relationships, andpromote banking products and services. This is an effective wayfor the Bank to expand the managed customer base, generateleads, and drive revenue growth.

Employees and customers are the capital for this business, and the Bank has invested heavily in training and development of itsrelationship managers. Training covers product knowledge, salestechniques, communication skills, compliance and regulatoryrequirements, and customer relationship management skills.

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

This programme gained further traction in the year under review. Under VRM, relationship managers reach out to customersthrough remote and digital platforms resulting in deeper andcost-effective engagement. As digital literacy and exposureincreases exponentially, VRMs are gaining wider acceptancethrough deeper engagement and relationships backed by astrong product offering and are an important component of theBank's customer engagement strategy.

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

Meanwhile, your Bank also added 1,479 branches during the year, taking the total to 7,821. As of March 31, 2023, the Bank'sdistribution network was at 7,821 branches and 19,727 ATMs /Cash Deposit and Withdrawal Machines (CDMs) across 3,811cities/ towns as against 6,342 branches and 18,130 ATMs /CDMs across 3,188 cities / towns as of March 31,2022. Fifty-twoper cent of our branches are in semi-urban and rural areas. Inaddition, the Bank has 15,921 business correspondents, whichare primarily manned by Common Service Centres (CSCs). Thetotal number of customers your Bank catered to as on March31, 2023 was over 8.28 crore, up from over 7.10 crore in theprevious year.

Retail Banking - Home Loan Business

As you are aware, your Bank operates in the Home Loan Business in conjunction with HDFC Limited. As per this arrangement, yourBank sources HDFC home loans while HDFC Limited approvesand disburses them. Your Bank receives sourcing fee for theseloans and as per the arrangement, has the option to purchaseloans for a value up to 70 per cent of the loans sourced by theBank either through the issuance of mortgage-backed PassThrough Certificates (PTCs) or a direct assignment of loans. Thebalance is retained by HDFC Limited. Your Bank originated, onan average ' 4,501 crore of home loans every month in theyear under review and purchased ' 36,910 crore as directassignment of loans.

Third Party Products

Your Bank distributes Life, General and Health Insurance, as well as Mutual Funds (Third Party Products) to its customers. InFinancial Year 2022-23, the income from this business increasedby 23 per cent to ' 5,455 crore from ' 4,422 crore and accountedfor 23 per cent of Bank's total fee income.

Life Insurance

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

the Bank mobilised premium of ' 8,689 crore representing a year-on-year growth of 28 per cent. The extensive distributionnetwork, includes branches, virtual channels, NRI services, andwealth management. The key focus would continue to be onstaff training, robust quality and control processes uniformlyimplemented across all partners as well as offering integratedand seamless digital on-boarding journeys. Currently, the Bank'sNetBanking platform offers more than 60 insurance productsacross all partners, accounting for over 53 per cent of thetotal policies.

Non-Life Insurance

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

Mutual Funds

Your Bank follows an open architecture approach in distribution of Mutual Funds and is currently associated with 34 AssetManagement Companies (AMCs). The Bank's Assets underManagement (AUM) increased by 10 per cent to reach ' 1,01,655crore for the year ended March 31, 2023. During the sameperiod, the Bank witnessed a significant growth of 40 per centin Systematic Investment Plans (SIPs) mobilisation. Through itsunique Investment Services Account (ISA) offering, the Bankoffers a digital on-boarding platform to the customers for MutualFunds' investments - 74 per cent of ISAs were opened throughdigital mediums in Financial Year 2022-23.

Wealth Management

In financial year 2022-23, your Bank has focused on expansion and has reached 923 locations through the hub and spokemodel. We now cater to over 62,000 households with a 51 percent growth in customer base. Market share in mutual funddistribution now stands at 5 per cent. Your Bank's endeavour isto continue this expansion into new geographies through a moregranular approach.

Your Bank places a strong emphasis on a customer-centric approach. Our commitment to an open architecture andnon-proprietary framework remains unwavering. The team ofrelationship managers, service relationship managers, andinvestment analysts work together to provide best-in-classservice. They conduct in-depth research, follow asset allocationprinciples, and regularly review portfolios to add value to client

investments. The objective is to be the go-to resource for all the financial needs of customers.

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

We are also excited to introduce our advanced unassisted digital investment platform. This state-of-the-art mobileapplication brings in a new level of convenience and accessibilityto our customers. It offers milestone-based investmentrecommendations, consolidated portfolio views, investmentaggregation, and portfolio analytics on the go. The aim is todemocratise wealth management across all retail customersegments and provide a highly personalised experienceto everyone.

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

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

Wholesale Banking

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

The Wholesale Banking business recorded healthy growth, ending Financial Year 2022-23 with a domestic loan book size of' 823,254 crore, recording a growth of 11.6 per cent over theearlier year. This constituted about 52 per cent of your Bank'sdomestic loans as per Basel II classification. Your Bank wasable to expand its share of the customer wallet, primarilyusing sharper customization, cross-selling and expanding intomore geographies.

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

This business refocused on its engagement with MNCs. This business also continued to capitalise on the trend of large

companies preferring to deal with fewer banks. Your Bank deepened its existing relationships as well as gained marketshare by leveraging its wide product offering. This businesssupported customer requirements under the Production LinkedIncentive Scheme. The Emerging Corporates Group, whichfocuses on the mid- market segment, too witnessed significantgrowth. Your Bank leveraged its vast geographical reach,technology backbone, automated processes, suite of financialproducts and quick turnaround times to offer a differentiatedservice. The business continues to have a diversified portfolioin terms of both industry and geography.

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

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

In the Government business, your Bank sustained its focus on tax collections, collecting direct tax (CBDT) of ' 4,99,099.29 croreand Indirect tax (CBIC+ GST) of over ' 3,45,008.23 crore duringFinancial Year 2022-23. It continues to enjoy a pre-eminent positionamong the country's major stock and commodity exchanges inboth Cash Management Services and Cash Settlement Services.

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

The Bank is leveraging analytics for deeper insights on Corporate ecosystems leading to better product structuring, cross sellopportunities, improved yields, thus improving Bank's share ofRevenue Pools from Corporates.

In addition to the Corporate Net Banking platform (e-Net and the new upgraded platform CBX) and Trade Platform - Tradeon Net (TON), the Bank has also launched the new SCFtransaction platform which allows digital contract bookings anddisbursem*nts automating the SCF transactions end to end for

the Corporates. Multiple Corporates have already migrated to the platform. The Bank is also integrated with all the three TReDSplatforms. We are also partnering with Fintechs to integratewith Corporate ERP and offer Embedded Banking in CorporateEcosystems journeys.

Treasury

The Treasury is the custodian of your Bank's cash/liquid assets and handles its investments in securities, foreign exchangeand cash instruments. It manages the liquidity and interest raterisks on the balance sheet and is also responsible for meetingreserve requirements. The vertical also helps manage thetreasury needs of customers and earns a fee income generatedfrom transactions customers undertake with your Bank whilemanaging their foreign exchange and interest rate risks.

Revenue accrues from spreads on customer transactions based on trade and remittance flows and demonstrated hedgingneeds. Your Bank recorded revenue of 4,081.9 crore from foreignexchange and derivative transactions in the year under review.While plain vanilla forex products were in demand across allcustomer segments, demand for derivatives products increasedwith the RBI liberalizing regulations and allowing Indian banks toparticipate in Non-Deliverable Offshore markets.

As part of its prudent risk management, your Bank enters into foreign exchange and derivatives deals with counterparties afterit has set up appropriate credit limits based on its evaluation ofthe ability of the counterparty to meet its obligations. Whereyour Bank enters into foreign currency derivatives contractsnot involving the Indian Rupee with its customers, it typicallylays them off in the inter-bank market on a matched basis. Forsuch foreign currency derivatives, your Bank primarily carriesthe counterparty credit risk (where the customer has crystallisedpayables or mark-to-market losses) and may carry only residualmarket risk, if any. Your Bank also deals in derivatives on its ownaccount, including for the purpose of its own Balance Sheetrisk management.

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

Your Bank maintains a portfolio of Government Securities in line with the regulatory norms governing the Statutory LiquidityRatio (SLR). A significant portion of these SLR securities are in‘Held-to- Maturity' (HTM) category, while some are ‘Available forSale' (AFS). Your Bank is also a primary dealer for GovernmentSecurities. As a part of this business, your Bank holds fixedincome 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. Italso capitalised on falling bond yields to book profits and is now

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

a. Integrating with the Railway CRIS system to enabledigital onboarding of retiring Railway officials fordisbursem*nt of their pension.

b. Signing a Memorandum of Understanding (MoU)with the Ministry of Defence for enabling its branchnetwork as a Pension Service Network for DefencePensioners through SPARSH (System for PensionAdministration) portal implemented by the Ministryfor Pensioner Services.

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

6. Empanelled with Government of India, e-NationalAgriculture Marketplace Platform of Platforms (PoP) to offerbanking services to entities on e-NAM Portal other thantraders and farmers.

7. The Virtual Institutional Relationship Manager (VIRM) grewexponentially as a sourcing channel for the Institutionalbusiness. Around 50 VIRMs contributed ' ~757 crore worthof liability growth to the business.

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

9. Launched two new digital products, CollectNow, anomnichannel collections solution, the first of its kind inthe industry bringing offline and online payment modestogether, and FarSight a digital dashboard to slice and dicetransaction data and monitor account limits.

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 Bankhas made a renewed push into these markets as rising incomelevels and aspirations of rural customers are leading to demandfor better quality financial products and services. The ruralgroups in every department of your Bank work together to tapthese opportunities.

Apart from meeting its statutory obligations under PSL (Agri and Allied activities, Small and Marginal Farmers and weaker sectionsetc.), your Bank has been offering a wide range of products onthe asset side, such as Auto, Two-Wheeler, Personal, Gold, LightCommercial Vehicle (LCV), and small shopkeeper loans in these

of warehouses/silos. As on March 31, 2023, your Bank has sanctioned ' 1,881 crore covering 2,205 projects and disbursed' 1,136 crore covering 1,445 projects.

Your Bank has managed to secure the second position among scheduled commercial banks under the AIF scheme by activelyparticipating in campaigns conducted by Project MonitoringUnit (PMU). Your Bank achieved 172 per cent of the assignedtarget under the NOBOL campaign (15^thJuly to 18^thSeptember2022) with ' 431 crore worth of sanctions against a target of' 250 crore. Your Bank secured the first position in terms ofpercentage achievement.

Under the Bankers Enabling Sustainable Transformation (BEST) campaign (1^stJanuary to 15^thMarch 2023), HDFC Bank securedthe second position (among all participating banks) in terms ofvalue i.e., ' 649 crore worth of sanctions against a target of' 700 crore. Your Bank has been honoured by the Ministry ofa*griculture for this.

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

Funding Small and Marginal Farmers (SMFs)

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

In the last financial year, your Bank serviced customers in

165.000 villages. The rural banking teams have reached out tothese villages with various suite of agriculture products. YourBank is looking at growing the numbers in the coming year to

200.000 plus villages with a plethora of interventions.

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

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

Dairy

Dairy is the largest segment in the agriculture economy and keeping this in mind, your Bank has created a separateteam of agriculture specialists to cater to this segment. InFinancial Year 2022-23 the Bank has disbursed an amount of' 895.89 crore to 66,000 small and marginal farmers for Cattlefinance.

Digital Interventions

Digitising Milk Procurement: This initiative brings transparency in the milk procurement and payment process,which benefits both farmers and dairy societies. Multi-functionTerminals (MFTs), popularly known as Milk-to- Money ATMs, aredeployed in dairy societies. The MFTs link the milk procurementsystem of the dairy society to the farmer's account to enablefaster payments. MFTs have cash dispensers that function asstandard 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. Apartfrom dairy and cattle loans, customers gain access to all theBank's products including digital offerings such as 10 SecondPersonal Loans, Kisan Credit Card, Bill Pay, and Missed CallMobile Recharge. So far, your Bank has digitised payments atover 1,700 milk cooperatives across 21 states, benefiting morethan 5.9 lakh dairy farmers. The Dairy business witnessed 86per cent year-on-year growth in disbursem*nts and 78 per centin the book.

Substituting Moneylenders:

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

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

Social initiatives in Farm Sector

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

Over the last few years, several parts of the country have been severely impacted by natural calamities such as drought,unseasonal rains, hailstorms, floods and the pandemic. Withinregulatory guidelines, your Bank has been providing relief to theimpacted farmers. It also has put in place systems designed toenable 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 lendingrequirements. The Bank has leveraged its extensive knowledgeof rural customers to create as well as deliver products andservices at affordable price points and with quick turnaroundtime. This has enabled the Bank to establish a strong footprintin the rural geographies, which it has now leveraged to increaseits penetration of liability products. Further, your Bank is buildinga 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 risksand 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. Ason March 31, 2023, your Bank's assets in the MSME segmentstood at ' 363,618 crore. The Micro Enterprises assets alonestood at ' 139,115 crore.

The Union Government and the Reserve Bank of India (RBI) provided special support to the MSME sector duringthe pandemic through various schemes, such as InterestMoratorium, ECLGS, ECLGS extension, and COVID supportloans. The Government has also launched a revamped CGTMSEscheme with increased limit threshold for guarantee cover andreduction of guarantee fee.

Your bank emerged as the largest contributor to CGTMSE this year, supporting the MSME sector with guarantee-coveredcredit facilities. This has further supported the growth of MSMEloans, which have shown a year-on-year growth of 22.5 per cent.The Bank also supported its customers through the ECLGSand ECLGS extension schemes this year and provided ad hocenhancements as needed. HDFC Bank continued to be a starperformer under the ECLGS 1.0, 2.0, 3.0, and ECLGS extensionschemes. It disbursed loans amounting to ' 44,823 crore toover 1.25 lakh customers under these schemes. The Bankcontinued to provide swift support to existing customers after theGovernment announced the extension of the ECLGS scheme.

The pace of digitalisation among MSMEs has accelerated, which has helped to speed up the pace of disbursem*nt and increasetransparency in the sector. Customers can now apply online andsubmit required documents digitally, and they can also executepost-sanction agreements digitally to avail of facilities quickly withstraight-through disbursem*nt. The Government's digitalisationpush, the adoption of GST, and reforms in return filings, suchas income tax, have made it easier to access customer cashflow and financial data, which can be used to support decisionmaking and portfolio monitoring.

The SME portal continues to offer ad hoc approvals and preapproved Temporary Overdrafts (TODs) on a Straight Through Processing (STP) basis to existing customers. They can requesta top-up of loans and submit the required documents online. TheSME portal also allows customers to access your Bank's servicesrelated to sanctioned credit facilities 24/7 from anywhere. Wehave also enabled customers to download various certificatesand statements as needed on an ongoing basis.

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

2) Information Technology Summary

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

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

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

Technology Absorption

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

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

With progressive modernisation of our Core Banking Applications and Technology Infrastructure, HDFC Bank has reinforced itstechnology and innovative prowess by undertaking key initiativessuch as:

• PayZapp 2.0: We have launched the modernised PayZapp

2.0, a payments app with a seamless and intuitive user interface and enhanced security to provide a superiorcustomer experience. PayZapp 2.0 also brings aboutseveral quality-of-life improvements over the previousapp and provides new-age functionalities such as Limitmanagement, Auto-linkage of HDFC Bank cards, enhancedonboarding experience and rich statements. PayZapp 2.0was re-built from grounds up and launched in March, 2023.

The app has been well received by the customers growing to a user base of over 1.1 million in just 45 days of itslaunch. It is the first app enabled with Rupay credit cardfor UPI payments. Till date PayZapp has facilitated over

65 lakh transactions and has seen 1.5X increase in the average spend.

• SmartHub Vyapar: The one-stop business and bankingsolution designed and developed to serve the businessneeds of Micro and Small Enterprises (MSMEs) is beingcontinuously enhanced with new use cases bundledas part of various rollouts. The latest rollout includedon-boarding for select segments of Savings Accountcustomers, a General Purpose Reloadable (GPR) prepaid card wherein, the merchant as a customer can applyand load money and other app linked enhancements. Thecontinuous enhancements over time have aided in scalingup to reach 1.5 million merchants. The app handles over18 lakh transactions daily and has earned a 4.9 averagerating on Play Store and 4.6 on App Store. Besides,SmartHub has facilitated the disbursem*nt of over' 10,000 crore worth of loans.

• Onboarding and Servicing Journeys:We haveaccelerated our digitisation agenda after carrying aheadthe momentum from the previous years in truly digitisingour customer journeys. TheOnboarding Journeysenable smoother and consistent customer experienceby expanding the offerings on the Bank's platforms.A few of the onboarding journeys added are New to BankCredit Cards, Existing to Bank Credit Cards without offer, GoldLoan and SmartHub lead form and Sovereign Gold Bond.In addition to the above ourServicing Journeyssuchas Debit Card hot listing and re-issue, Nomination/Emailupdation, etc have also been rolled out. Journeys suchas Individual Current Account, Business Loan for Existingand New to Bank customers without offer are in their finalstages before launch.

• HDFC Bank One (Customer Experience Hub), the

AI/ML driven conversational bot which transformed our on-premises contact centre into a singular centralisedplatform is further being expanded. It has been rolled outpan-India covering contact centres including InboundPhone Banking, Interactive Voice Response (IVR) selfservice, virtual relationship management teams andtelesales. Over the past quarter we have made telesalesavailable in five more locations, Inbound Phone Banking(IPBK) live in one more location, IVR live in two morelocations. With the launch of HDFC Bank One, we havewitnessed significant improvements in our customerengagements owing to the omni-channel experiencebeing provided across WhatsApp chat banking, SMSbanking, IVR and Agent assisted. HDFC Bank One hascontributed to a 44 per cent reduction in case resolutiontime, 64 per cent reduction in turnaround time both for

email as well as an average reduction of 324 seconds in handling time for voice care.

• Xpress Car Loans: XCL, the first of its kind end-to-enddigital lending journey platform facilitating instant andhassle-free car loan disbursals to existing as well as new-to-bank customers has been witnessing a tremendousresponse. The average monthly disbursem*nt hasexceeded ' 550 crore over the past 3 months. Theplatform will be further enhanced by engaging with leadingcar dealerships and manufacturers to offer seamless loandisbursals and purchase experiences across the country.

Some key highlights of this initiative:

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

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

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

4. Disbursal takes less than 30 minutes.

• OurDigital Distribution Platformwas launched inApril, 2023. With this platform, we have digitally enabledour network of Corporate Business Correspondents andBusiness Facilitators by providing them an omnichannelexperience for the digital journeys of products suchas Gold Loan, Home Loans, Kisan Gold Card, SalesAccounts, Recurring Deposits, Fixed Deposits, etc. whichare focusing specifically on rural locations. This portal hasbeen made available for agents as well as partners.

• Cattle Finance: Dairy Cattle Finance app, our one-touch solution is developed to facilitate dairy farmers byproviding them with a single platform for an end-to-enddigital processing of their applications. Beginning withonboarding, the platform encompasses everything tilldisbursem*nt leading to a significant reduction in theturnaround-time thus enhancing customer experience.Since its public launch in December, 2022, Cattle Financehas processed over 2,700 applications. This journey wasconceptualised, documented, designed, developed, andlaunched all within a mere 30 days showcasing our Bank'sagility in new product development. The app was initiallylaunched in eight districts of Gujarat with plans to rolloutin Uttar Pradesh, Rajasthan and Punjab in place.

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

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

• Data Centre Migration: We have successfullymigrated our primary data centre to state-of-the-art facilities in Mumbai and Bengaluru. Ourcomprehensive planning program spanning over12 months helped achieve a seamless migration ofall production and User Acceptance Testing (UAT)applications.

• Cloud Strategy: We have progressed on our Hybrid-Cloud strategy with the successful implementation ofa common landing zone with leading cloud serviceproviders. This enables the creation of a secure andstreamlined environment for all cloud deployments inthe future and furthers the bank's agenda of imbibingagility and modern software development practicesin our transformation journey.

• TradeFlow: TradeFlow has entirely transformedour Trade Finance solution by building a centralisedstate-of-the-art platform, providing improvement inreliability and usability for end-users. This applicationis entirely built on the cloud and employs variousautomations that abet its' integration with over 15applications. With revolutionary features such as adynamic MIS, informative dashboard, single view ofall dependencies as well as its ability to integratewith various trade finance peripheral applications,TradeFlow proves to be the one-stop applicationfor all our Trade users. Currently the platform is liveacross all Trade processing branches, processing anaverage of over 6,000 transactions per day.

• Revamping Corporate Net Banking: CorporateBanking eXchange (CBX) is our unified corporatebanking portal specifically designed to cater tothe net-banking needs of corporates. Having thecapability to transact and process via both mobileand the internet portal, this system now handles over

87,000 active domains. We have already migratedabout 99 per cent of our customers to CBX and theremaining are planned to be inducted in the quarterstarting Financial Year 2023-24. Further, this newportal offers superior customer convenience andexperience with its' added modern features such ascustomised narration, enhanced authorisation leveland, a contextual Help dashboard.

• Loan Origination and Management

Transformation: Our next generation loan origination and management system designed forCommercial and Rural Banking is built on the cloud.Equipped with a future ready technology architectureand design, the platform consolidates a multitude ofinternal applications incorporating the robustness

of our processes and workflows within it. With features such as proposal initiation, credit evaluation,operational checks, disbursem*nt and postdisbursem*nt monitoring, the proposed solution willeventually span across the digital frontend, backendand surround systems.

• Branches: The IT team worked extensively inonboarding and making IT ready over 1500 branchesreaching this record number within the span of ayear.

• UPI: HDFC Bank's UPI has continued to move fromstrength to strength with a substantial year-on-yeargrowth both in value as well as volumes. Now, withthe successful implementation of the Active-Activearchitecture of UPI we can process records fromNational Payments Corporation of India (NPCI)DR and its' PR site simultaneously. This will playa significant role in laying the foundation for ourHDFC Bank UPI Active-Active design. Efforts on UPImandates at the launch time of the LIC IPO provedfruitful as HDFC Bank was selected for the main IPOamong the top 5 banks. UPI will be enhanced furtherwith the introduction of UPI Lite with its first issuerscheduled to go-live across the country.

• FynDNA Governor Solution: Governor Solutionis our recently developed adaptive rate limiterdeployed between the source and destinationsystem (whether Cloud or On-premises), which playsthe key role of intelligently managing and controllingthe exchange of transactions basis the health ofthe destination system. This monitoring mechanismallows for detailed analysis of the performance ofthe destination system, enabling detection of anyirregularities and avoiding performance deterioration.

• ATM Hard Disk Encryption: With theimplementation of Full Hard Disk Encryption, theBank has further fortified the security structuresat our ATMs, mitigating the risk of an attack on themachine posed by system booting through a USB/CD or DVD. Currently, over 12,000 ATMs' have beenencrypted with additional encryption plans for theremaining already in place.

• SDWAN: Software-Defined Wide Area Network hasbeen rolled out across over 2,000 locations enablingthe management of network devices throughsoftware as opposed to the traditional usage ofhardware switches, routers, etc. It assists in creationof a centralised control centre thereby improvingperformance and reliability for users.

Bank continuously strives to enhance customer experience, recognising the significance of this in a highly competitivebusiness environment, especially with diverse lines ofbusinesses. Ensuring exceptional product quality and servicedelivery becomes paramount for sustained growth. Your Bankdesires to achieve this by seeking customer feedback as well asbenchmarking with best-in-class business entities and facilitatingthe implementation of customer-centric improvements. YourBank has adopted a three-step strategy with regards toCustomer Service - Define, Measure, and Improve.

Your Bank has adopted a multi-pronged approach to provide an omnichannel experience to its customers. On one side, yourBank has traditional touch points like Branch, Email Managementteam and PhoneBanking, and on the other side, it has state- of-the-art platforms like NetBanking, MobileBanking, the chatbotEva and the bank's exclusive social care handles which offer awide range of channel choice to its customers. Your Bank hasalso improvised on the relationship-based banking programmesby introducing a Virtual Relationship Manager (VRM) programmeto cater to various financial needs in a personalised manner.Customer service performance and grievance redressal areregularly assessed at different levels, including Branch LevelCustomer Service Committees (BLCSCs), Standing Committeeon Customer Service (SCCS) and Customer Service Committeeof the Board (CSCB). Your Bank has implemented robustprocesses to monitor and measure service quality levels acrosstouchpoints, including at product and process level, throughdiligent work of the Quality Initiatives Group.

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

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

Your Bank actively participated in RBI's Nationwide Intensive Customer Awareness campaign, aiming to enhance customerawareness on their rights and responsibilities in context of thecustomer service standards and the Internal Grievance Redress(IGR) provided by the Regulated Entities and Alternate GrievanceRedress (AGR) mechanism of RBI. The initiative emphasised to

customers about the self-protection measures for safeguarding against the growing incidents of digital and electronic financialfrauds, reaching even the farthest and remotest areas ofthe country.

Your Bank has created multiple channels for customers to provide feedback and register grievances, facilitating a transparent andaccessible system. As a pioneer in innovative financial solutionsand digital platforms, your Bank has witnessed an increasedutilisation of its digital channels, resulting in improved customerloyalty. Keeping customer interest in focus, your Bank hasformulated a Board approved Protection Policy, which limitsthe liability of customers in case of unauthorised electronicbanking transactions.

Your Bank is on a journey to measure customer loyalty through a high velocity, closed loop customer feedback system. Thiscustomer experience transformation programme will helpemployees empathise better with customers and improveturnaround times. Branded as ‘Infinite Smiles', the programmewould help establish behaviours and practices that result incustomer-centric actions through continuous improvements inproduct, services, process, and policies.

Your Bank remains committed to placing the customer at the centre of its operations. By consistently improving customerexperience, adopting an omnichannel approach, andimplementing robust service quality and grievance redressalmechanisms, your Bank aims to exceed customer expectationsand 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 expandedin response to the evolving banking landscape. Liquidity Risk,Information Technology Risk, and Information Security Riskhave also emerged as critical considerations. These risks notonly impact your Bank's financial strength and operations butalso its reputation. To address these concerns, your Bankhas established Board-approved risk strategy and policiesoverseen by the Risk Policy and Monitoring Committee (RPMC).The Committee ensures that frameworks are established forassessing and managing various risks faced by your Bank,systems are developed to relate risk to the Bank's capital leveland methods are in place for monitoring compliance with internalrisk management policies and processes. The Committeeguides the development of policies, procedures and systemsfor managing risks. It ensures that these are adequate andappropriate to changing business conditions, the structure andneeds 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 convergenceonly at the CEO level.

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

• Credit Risk, including Residual Risks

• Market Risk

• Operational Risk

• Interest Rate Risk in the Banking Book

• Liquidity Risk

• Intraday Liquidity Risk

• Intraday Credit Risk

• Credit Concentration Risk

• Counterparty Credit Risk

• Model Risk

• Outsourcing Risk

• People Risk

• Business Risk

• Strategic Risk

• Compliance Risk

• Reputation Risk

• Technology Risk

• Group RiskCredit Risk

Credit Risk is the possibility of losses associated with diminution in the credit quality of borrowers or counterparties. Lossesstem from outright default or reduction in portfolio value. YourBank has a comprehensive credit risk architecture, policies,procedures, and systems for managing credit risk in its retailand wholesale businesses. Wholesale lending is managed onan individual as well as portfolio basis. In contrast, given thegranularity of individual exposures, retail lending is managedlargely on a portfolio basis across various products and customersegments. Robust front-end and back-end systems are inplace to ensure credit quality and minimise default losses. Thefactors considered while sanctioning retail loans include income,demographics, credit history, loan tenure, and banking behavior.In addition, multiple credit risk models are developed and usedto assess different segments of customers based on portfoliobehavior. In wholesale loans, credit risk is managed by cappingexposures based on borrower group, industry, credit rating

grades, and country, among others. This is backed by portfolio diversification, stringent credit approval processes, periodicpost-disbursem*nt monitoring, and remedial measures. YourBank has ensured strong asset quality through volatile timesin the lending environment by stringently adhering to prudentnorms and institutionalised processes. Your Bank also has arobust framework for assessing Counterparty Banks, which arereviewed periodically to ensure interbank exposures are withinapproved appetite.

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

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

Digital and Credit Risk

Driven by rapid technological advancements, the banking sector is witnessing the increasing importance of digitalisationas a critical differentiator for customer retention and servicedelivery. Digital lending has emerged as a convenient and quickmethod for customers to secure loans with just a few clicks,often in minutes, if not seconds. However, addressing the risksassociated with digital lending is crucial, and your Bank hasimplemented appropriate measures to manage these riskseffectively. Digital loans are sanctioned primarily to your Bank'sexisting customers. Often, they are customers across multipleproducts, thus enabling the Bank ready access to their credithistory and risk profile. This accessibility facilitates the evaluationof their loan eligibility. Moreover, the credit checks and scoresused by your Bank in process based underwriting are replicatedfor digital loans. This ensures consistency in the evaluationprocess. To further enhance risk management, your Bank hasestablished an independent model validation unit responsible forassessing the credit scoring models utilised in generating creditscores for digital loans. These models are subject to ongoingmonitoring, periodic reviews, back-testing, and correctiveactions are implemented whenever necessary.

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

Market Risk

Market Risk arises primarily from your Bank's statutory reserve management and trading activity in interest rates, equity, andcurrency market. These risks are managed through a well-definedBoard approved Market Risk Policy, Investment Policy, ForeignExchange Trading Policy, and Derivatives Policy that caps risk indifferent trading desks or various securities through trading risk

a consolidated basis for financial year 2022-23 as against the regulatory threshold at 100 per cent.

AVERAGE LIQUIDITY COVERAGE RATIO

115.51 per cent

ON A CONSOLIDATED BASIS FOR FY 2022-23

The Net Stable Funding Ratio (NSFR), a key liquidity risk measure under BCBS liquidity standards, is also used to measure yourBank's liquidity position. The NSFR seeks to ensure thatyour Bank maintains a stable funding profile in relation to thecomposition of its assets and off-balance sheet activities. TheNSFR promotes resilience over a longer-term time horizon byrequiring banks to fund their activities with more stable sourcesof funding on an ongoing basis. The RBI guidelines stipulated aminimum NSFR requirement of 100 per cent at a consolidatedlevel and your Bank has maintained the NSFR well above 100per cent since its implementation. Based on guidelines issuedby RBI, your Bank's NSFR stood at 119.13 per cent on aconsolidated basis at March 31, 2023.

Operational Risk

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

Given below is a detailed explanation under four different heads: Framework and Process, Internal Control, InformationTechnology and Information Security Practices and FraudMonitoring 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 RiskManagement Committee (ORMC) and reviewed by the RPMCof the Board. An independent Operational Risk ManagementDepartment (ORMD) implements the framework. Under theframework, the Bank has three lines of defence. The first line ofdefence 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 frameworkacross the Bank. It designs and develops tools required forimplementing the framework including policies and processes,guidelines towards implementation and maintenance of theframework. In order to achieve the aforesaid objective pertainingto operational risk management framework, the ORMC guides

and oversees the functioning, implementation, and maintenance of operational risk management activities of Bank, with specialfocus on:

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

• Measurement of Operational Risk based on the actualloss data

• Monitoring of risk through Key Risk Indicators (KRI)

• Management and reporting through KRI, RCSA and lossdata of the Bank

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

B. Internal Control

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

C. Information Technology and Information SecurityPractices

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

The three lines of defence approach is adopted for enterprisewide Technology Risk management. The first line of defence

holds primary responsibility of managing the risk and ensuring proper controls are in place.

The second line of defence defines policies, frameworks and controls. Information Technology Risk function and InformationSecurity Group addresses technology and information securityrelated risks. A well-documented Board-approved informationsecurity 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 canmeet any operational contingencies. Further, there is a well-documented crisis management plan in place to address thestrategic issues of a crisis impacting the Bank and to direct andcommunicate the corporate response to the crisis including cybercrisis. In addition, employees periodically undergo mandatorybusiness continuity awareness training and sensitisationexercises on a periodic basis.

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

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

An independent assurance team within Internal Audit acts as a third line of defence that provides assurance on the managementof 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 implementationof fraud prevention measures. Frauds are investigated to identifythe root cause and relevant corrective steps are recommendedto prevent recurrence.

Fraud Monitoring committees at the senior management and Board level also deliberate on high value fraud events and advisepreventive actions. Periodic reports are submitted to the Boardand 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 orregulatory sanctions, or financial loss, as a result of a failure (orperceived failure) to comply with applicable laws, regulations,and standards. Your Bank has a Compliance Policy to ensurethe highest standards of compliance. A dedicated team ofsubject matter experts in the Compliance Department workswith business, support and operations teams to ensure activeCompliance Risk management and monitoring. The team alsoprovides advisory services on regulatory matters. The focus is onidentifying and reducing risk by rigorously testing products andalso putting in place robust internal policies. Products that adhereto 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 agreedfrequency or based on market actions or regulatory guidelines/actions. The compliance team also seeks regular feedback onregulatory compliance from product, business and operationteams through self-certifications and monitoring.

ICAAP

Your Bank has a structured management framework in the Internal Capital Adequacy Assessment Process (ICAAP) toidentify, assess and manage all risks that may have a materialadverse impact on its business/financial position/capitaladequacy. The ICAAP framework is guided by the Boardapproved ICAAP Policy.

Stress Testing Framework

Your Bank has implemented a Board approved Stress Testing Policy and Framework which forms an integral part of the Bank'sICAAP. Stress testing involves the use of various techniquesto assess your Bank's potential vulnerability to extreme butplausible stressed business conditions. The changes in thelevels of Pillar I risks and select Pillar II risks, along with thechanges in the on and off-Balance Sheet positions of your Bankare assessed under assumed ‘stress' scenarios and sensitivityfactors. The suite of stress scenarios include topical themesas well as historically observed geopolitical / macroeconomic/ sectoral and other trends. The stress testing outcome maybe analysed through capital impact and/or identification ofvulnerable borrowers depending on the scenario.

Group Risk

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

Business Continuity Planning (BCP)

Your Bank has a robust BCP program in place that enabled it to continue to operate and deliver quality services duringCOVID and beyond. Our ISO22301:2019 certified BusinessContinuity Program enables us to minimize service disruptions

and potential impact on our employees, customers and business during any unforeseen adverse events or circ*mstances. Thisprogram is designed in accordance with the guidelines issued byregulatory bodies and is subject to regular internal, external, andregulatory reviews. The central Business Continuity Office workstowards strengthening the Bank's continuity preparedness. Theimplementation of the program is overseen by the BusinessContinuity Steering Committee which is chaired by the ChiefRisk Officer. The Business Continuity Procedure has welldefined roles and responsibilities for teams involved in CrisisManagement, Business Recovery, Emergency Response, andIT Disaster Recovery.

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

• Steering Committee for centralized monitoring of yourBank's Business Continuity program implementation

• Crisis Management teams for effective management ofrecovery operations during disruptive events

• Dedicated DR site for recovery of critical core and customerfacing applications

• Functional recovery plans for structured and speedyrecovery of operations

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

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

Internal Controls, Audit and Compliance

Your Bank has put in place extensive internal controls and processes to mitigate Operational Risks, including centralisedoperations and ‘segregation of duty' between the front officeand back office. The front-office units usually act as customertouchpoints and sales and service outlets while the back-officecarries out the entire processing, accounting and settlementof transactions in the Bank's core banking system. The policyframework, definition and monitoring of limits is carried out byvarious mid-office and risk management functions. The creditsanctioning and debt management units are also segregatedand 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, thatare designed to review and oversee matters pertaining to capital,assets and liabilities, business practices and customer service,operational risk, information security, business continuity planningand internal risk-based supervision among others. The secondline of defence functions set standards and lay down policiesand procedures by which the business functions manage risks,

including compliance with applicable laws, compliance with regulatory guidelines, adherence to operationalcontrols and relevant standards of conduct. At theground level, your Bank has a mix of preventive anddetective controls implemented through systems andprocesses, ensuring a robust framework in your Bank toenable correct and complete accounting, identificationof outliers (if any) by the Management on a timely basisfor corrective action and mitigating operational risks.

Your Bank has put in place various preventive controls:

a. Limited and need-based access to systemsby users

b. Dual custody over cash and near-cash items

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

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

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

f. Stringent password policy

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

h. STP processes between core banking systemand payment interface systems for transmissionof messages

i. Additional authorisation leg in payment interfacesystems in applicable cases

j. Audit logs directly extracted from systems

k. Empowerment grid

Your Bank also has detective controls in place:

(a) Periodic review of user IDs

(b) Post-transaction monitoring at the back-endby way of call back process (through dailylog reports) by an independent person, i.e.,to ascertain that entries in the core bankingsystem/messages in payment interfacesystems are based on valid/authorisedtransactions and customer requests

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

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

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

(d) Independent and surprise checks periodicallyby supervisors.

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

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

The Internal Audit Department also independently reviews your Bank's implementation of Internal Rating Based (I RB)-approach for calculation of capital charge for Credit Risk, theappropriateness of your Bank's ICAAP, as well as evaluates thequality and comprehensiveness of your Bank's disaster recoveryand business continuity plans and also carries out managementself-assessment of adequacy of the Bank's internal financialcontrols and operating effectiveness of such controls in terms ofSarbanes Oxley (SOX) Act and Companies Act, 2013. The InternalAudit Department plays an important role in strengthening of theControl functions by periodically reviewing their practices andprocesses as well as recommending enhancements thereof.Additionally, oversight is also kept on the functioning of thesubsidiaries, related party transactions and extent of adherenceto 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 regulatoryguidelines and also by Internal Audit from the perspective ofexistence of internal controls. The Audit function also proactively

recommends improvements in operational processes and service quality, wherever deemed fit.

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

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

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

Your Bank besides having robust controls in place to ensure adherence to the KYC guidelines at the time of account openingalso has monitoring process at various stages of the customerlifecycle including a continuous review process in the form oftransaction monitoring carried out by a dedicated AML CFTmonitoring team, which carries out transaction reviews foridentification of suspicious patterns/trends that enables yourBank to further carry out enhanced due diligence (whereverrequired) and appropriate actions thereafter.

The Audit team and the Compliance team undergo regular training both in-house and external to equip them with thenecessary 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 theperformance of the Audit and Compliance functions in your Bankand provides direction, wherever deemed fit. Your Bank hasalways adhered to the highest standards of compliance andhas put in place appropriate controls and risk measurementand risk management tools to ensure a robust compliance andgovernance structure.

Performance of Subsidiary Companies

Your Bank has two subsidiaries, HDB Financial Services Limited (HDBFSL) and HDFC Securities Limited (HSL). HDBFSL is aleading NBFC that caters primarily to segments not coveredby the Bank while HSL is among India's leading retail brokingfirm. The financial results of the subsidiaries are prepared inaccordance with notified Indian Accounting Standards (‘Ind-AS').

The detailed financial performance of the companies is given below.

TRANSACTING CUSTOMERS OF HSL

11.93 lakh

HDFC Securities Limited (HSL)

HSL's Total Income under Indian Accounting Standards was ' 1,891.6 crore as against ' 1,990.3 crore in the previous yearand Net Profit was ' 777.2 crore as against ' 984.3 crore inthe previous year. The company has a customer base of 44.87lakh to whom it offers an exhaustive range of investmentand protection products. In the year under review, HSL had

11.93 lakh transacting customers. The focus on digitalisationcontinued. Notably, 92 per cent of its customers accessed itsservices digitally, against 91 per cent in the previous year.

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

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

Nifty started Financial Year 2023 on a weak note and touched a low in June 2022 as the US Fed stepped up monetary tighteningfollowing a surprise inflation number in the US. Nifty rose lateras crude prices began to fall and softer economic data from theUS raised hopes that the US Fed may not opt for aggressive ratehikes. Nifty touched a new high in December 2022. This wasdriven by improving economic numbers in India and persistentbuying by FPIs and locals. A bout of correction followed and thefiscal year ended with Nifty closing marginally in the negative.In Financial Year 2023, Nifty outperformed the US markets butended being behind the European and Japanese markets. NiftyMidcap 100 index ended 1.1 per cent higher while the NiftySmallcap 100 index ended 13.8 per cent lower. Within sectors,Capital Goods, Banks, FMCG and Auto indices rose smartly,while IT, Metals, Realty and Healthcare indices ended in thenegative. As on March 31, 2023, your Bank held 95.6 per centstake in HSL.

HDB Financial Services Limited (HDBFSL)

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

HDBFSL has continued to focus on diversifying its products and expanding its distribution while augmenting its digitalinfrastructure and offerings to effectively deliver credit solutions.It has a strong network of over 1,492 branches spread across1,054 cities. As on March 31, 2023, your Bank held 94.8 percent stake in HDBFSL.

Synopsis of its performance across key parameters is as below:

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

LOANS

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

Consumer Loans

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

Enterprise Loans

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

The Enablers

HDBFSL’s presence across digital channels enables it to offer a wide variety of financial solutions to its customers. They canaccess and manage their loan account 24/7 through its new,upgraded version of Mobile Banking Application with enhancedfeatures - ‘HDB-On-the-Go', Customer Service Portal to managethe loan account, Missed Call Service, WhatsApp AccountManagement and the Chatbot #AskPriya.

Other Statutory disclosures

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

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

Annual Return

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

Requirement for maintenance of cost records:

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

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

During the year under review, no instances of fraud committed against the Bank by its officers or employees were reported bythe Statutory Auditors and Secretarial Auditors under Section143(12) of the Companies Act, 2013 to the Audit Committee orthe Board of Directors of the Bank.

Directors’ Responsibility Statement

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

• In the preparation of the annual accounts, the applicableaccounting standards have been followed along withproper explanation relating to material departures.

• We have selected such accounting policies and appliedthem consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fairview of the state of affairs of the Bank as on March 31,2023and of the profit of the Bank for the year ended on that date.

• We have taken proper and sufficient care for the maintenanceof adequate accounting records in accordance with theprovisions of the Companies Act, 2013, for safeguardingthe assets of the Bank and for preventing and detectingfraud and other irregularities.

• We have prepared the annual accounts on a goingconcern basis.

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

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

Compliance with Secretarial Standards

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

Statutory Auditors

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

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

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

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

Disclosure under Foreign Exchange Management Act, 1999

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

Corporate Social Responsibility

The composition of Corporate Social Responsibility & ESG Committee, brief outline of the CSR policy of the Bank andthe initiatives undertaken by the Bank on CSR activities duringthe year are set out inAnnexure 2of this report in the formatprescribed in the Companies (Corporate Social ResponsibilityPolicy) Rules, 2014. This Policy is available on the Bank's websiteathttps://v.hdfcbank.com/csr/our-commitment.html.

Related Party Transactions

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

Particulars of Loans, Guarantees or Investments

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

Financial Statements of Subsidiaries and Associates

In terms of Section 134 of the Companies Act, 2013 and read with Rule 8 (1) of the Companies (Accounts) Rules, 2014 theperformance and financial position of the Bank's subsidiariesand associates are enclosed asAnnexure 4to this report.

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

Whistle Blower Policy / Vigil Mechanism

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

This Policy has also been put in place to provide a mechanism through which adequate safeguards can be provided againstvictimization of employees who avail of this mechanism. Thepolicy would cover and will be applicable to the ProtectedDisclosures related to violation/ suspected violation of the Codeof Conduct including (a) breach of applicable law; (b) fraud orcorruption; (c) leakage/suspected leakage of unpublished pricesensitive information which are in violation to SEBI (Prohibitionof Insider Trading) Regulations, 2015 and related internal policyof the Bank, i.e. Share Dealing Code of the Bank, (d) wilful databreach and/ or unauthorized disclosure of Bank's proprietarydata including customer data.

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

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

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

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

Securities Class Action Suit

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

The Court vide its Order dated May 1, 2023 granted the Bank's motion to dismiss the securities class action complaintfiled against HDFC Bank, Mr. Aditya Puri and Mr. SashidharJagdishan. The Court had provided 30 days time to the Plaintiffto seek leave to file further amended complaint. The Plaintiff hasnot filed amended complaint within the stipulated time frame andthus the Court vide its further order dated 8^thJune has dismissedthe Plaintiff's claim and closed the case.

Material Developments: Scheme of Amalgamation

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

The parties to the Scheme inter alia filed a Joint Company Scheme Application with the National Company Law Tribunal,Mumbai Bench (“NCLT”). Pursuant to the order dated October14, 2022 passed by NCLT, shareholders' meetings of HDFCBank and HDFC Limited, respectively, were convened andheld to approve the Scheme. The Scheme was approved bythe requisite majority of shareholders on November 25, 2022.Post receipt of the said shareholders' approval, the parties tothe Scheme filed a Joint Company Scheme Petition before theNCLT seeking sanction of the Scheme. The NCLT, after hearingthe parties to the Scheme, sanctioned the Scheme vide its orderdated March 17, 2023.

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

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

Statement on Declaration by Independent Directors

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

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

Pursuant to the provisions of Section 149 of the Act, the Independent Directors have submitted declarations that each ofthem meets the criteria of independence as provided in Section149(6) of the Act along with Rules framed thereunder andRegulation 16(1)(b) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations,2015. There has been no change in the circ*mstances affectingtheir status as Independent Directors of the Bank. In the opinionof the Board, the Independent Directors possess the requisiteintegrity, experience, expertise and proficiency required underall applicable laws and the policies of the Bank.

Board Performance Evaluation

The performance evaluation of the Board, Committees of the Board and the individual members of the Board (including theChairman) for Financial Year 2022-23, was carried out internallypursuant to the framework laid down by the Nomination andRemuneration Committee ('NRC'). A questionnaire for theevaluation of the Board, its Committees and the individualmembers of the Board (including the Chairman), designedin accordance with the said framework and covering various

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 theCompensation Policy of the Bank. The same is available atthe web-linkhttps://www.hdfcbank.com/personal/about-us/corporate-governance/codes-and-policies. The CompensationPolicy of the Bank, duly reviewed and recommended by theNRC has been articulated in line with the relevant Reserve Bankof India guidelines.

Your Bank's Compensation Policy is aimed to attract, retain, reward and motivate talented individuals critical for achievingstrategic goals and long term success. The CompensationPolicy is aligned to business strategy, market dynamics, internalcharacteristics and complexities within the Bank. The ultimateobjective is to provide a fair and transparent structure that helpsthe Bank to retain and acquire the talent pool critical to buildingcompetitive advantage and brand equity.

Your Bank's approach is to have a “pay for performance” culture based on the belief that the Performance ManagementSystem provides a sound basis for assessing performanceholistically. The compensation system should also take intoaccount factors such as roles, skills / competencies, experienceand grade / seniority to differentiate pay appropriately on thebasis of contribution, skill and availability of talent on accountof competitive market forces. The details of the CompensationPolicy are also included in Note No. 24 of Schedule 18 formingpart of the Accounts.

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

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

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

Mr. Malay Patel ceased to be Independent Director on the Board of the Bank with effect from the close of business hours onMarch 30, 2023, upon completion of a continuous period ofeight years from the date of his initial appointment as Directorof the Bank. Mr. Malay Patel is also an Independent Director onthe Board of HDFC Securities Limited, subsidiary of the Bank.Mr. Patel receives sitting fees and reimbursem*nt of expenses

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

• Appointed Mr. Keki M. Mistry (DIN: 00008886) as anAdditional and Non-Executive (Non-Independent) Directorof the Bank, with effect from June 30, 2023, liable to retireby rotation. His appointment shall be subject to the approvalof the shareholders of the Bank in the ensuing AnnualGeneral Meeting.

• Appointed Mrs. Renu Karnad (DIN: 00008064) as anAdditional and Non-Executive (Non-Independent) Directorof the Bank, liable to retire by rotation, with effect from July1, 2023 i.e. the effective date of the composite scheme ofamalgamation inter alia of Housing Development FinanceCorporation Limited into and with the Bank. Her appointmentshall be subject to the approval of the shareholders of theBank in the ensuing Annual General Meeting.

• Recommended to the Reserve Bank of India (“RBI”), thecandidature of Mr. V. Srinivasa Rangan (DIN: 00030248)for appointment as an Executive Director (i.e., Whole-timeDirector) of the Bank for a period of three (3) years from suchdate or such other period as may be approved by RBI andsubsequently by the shareholders of the Bank.

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

Particulars of Employees

The information in terms of Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules, 2014 is given inAnnexure 5.Further, the statement containing particulars of employees asrequired under Section 197(12) of the Companies Act, 2013read with Rule 5(2) and 5(3) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules, 2014 is givenin an Annexure and forms part of this report. In terms of Section136(1) of the Companies Act, 2013, the annual report and thefinancial statements are being sent to the Members excludingthe aforesaid Annexure. The Annexure is available for inspectionand any Member interested in obtaining a copy of the Annexuremay write to the Company Secretary of the Bank.

Customer complaints and grievance redressal

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

Acknowledgement

Your Directors would like to place on record their gratitude for all the guidance and co-operation received from the ReserveBank of India, Securities Exchange Board of India, CompetitionCommission of India, National Company Law Tribunal, StockExchanges, Insurance Regulatory Development Authority,Pension Fund Regulatory and Development Authority and othergovernment and regulatory agencies. Your Directors would alsolike to take this opportunity to express their appreciation for thehard work and dedicated efforts put in by the Bank's employeesand look forward to their continued contribution in building a‘World Class Indian Bank.'

Conclusion

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

Your Bank has a huge opportunity thanks to the under penetration of banking services in India. It has a strong balancesheet in terms of both size and asset quality. Its consistentperformance and customer focus has helped it build a franchisethat can capitalise on the opportunity. The merger with HDFCLimited is a positive for its long term growth story with theaddition of the home loan product to its portfolio opening upa significant runway. It will continue focusing on its five corevalues: Customer Focus, Operational Excellence, ProductLeadership, People and Sustainability and adhering to highlevels of corporate governance.

On behalf of the Board of Directors

Atanu Chakraborty Sashidhar Jagdishan

Part-time Chairman Managing Director and

and Independent Director Chief Executive Officer

Mumbai, June 30, 2023