Governance Guidelines

Guidelines for LIC Housing Finance Limited on

Board Effectiveness

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Index / Table of Contents Page Nos.

Preamble 5

1. Composition and Role of Board of Directors 6

1.1. Size and Composition 6
1.1.1. Role of the Board 6
1.1.2. Responsibilities of the Board 7
1.1.3. Additional Responsibilities of the Board 9
1.2. Role of the Chairman 10
1.3. Role of the Directors 12
1.3.1. Additional Guidelines 13
1.4. Managing Director (Executive) 13
1.5. Non-Executive Promoter Directors 14
1.6. Independent Director 14
I. Guidelines for Professional Conduct 16
II. Role and Function of Independent Director 17
III. Duties of Independent Director 17
IV. Manner of appointment of Independent director 18
V. Re-appointment 19
VI. Resignation or Removal 19
VII. Separate Meetings 20
VIII. Evaluation Mechanism 20
1.7. Term / Tenure of Office of Director 20
2. Committees of the Board 21
2.1. Mandate of Audit Committee 22
2.1.1. Power of Audit Committee 25
2.1.2. Audit Committee mandatorily reviews 25
2.2. Mandate of Nomination and Remuneration Committee 25
2.3. Mandate of Corporate Social Responsibility Committee 26
2.4. Mandate of Stakeholders Relationship Committee 26
2.5. Mandate of Risk Management Committee 26
2.6. Mandate of Debenture Allotment Committee 27
2.7. Mandate of Executive Committee 27
2.8. Mandate of Banking Licence Committee 28
2.9. Mandate of QIP Issue Committee 29
2.10. Mandate of HR Committee 30
2.11. Strategic Investment Committee 30
2.12. Article Evaluation Committee 30
3. Board Appointment, Induction and Development 30
3.1. Procedure for Nomination and Appointment of Director 30
3.1.1. General Director Qualification Criteria 31
3.1.2. ‘Fit and Proper’ Criteria for Director of Housing Finance Companies’ 31
3.1.3. Information and Declaration 32
3.1.4. Form of Deed of Covenants with a Director 36
3.1.5. General Criteria for Positive Attributes 41
3.2. Director’s Induction and Development 42
3.3. Director Remuneration 42
3.4. Insurance 43
3.5. Subsidiary Oversight 43
4. Board Effectiveness Review 44
4.1. Board Evaluation 45
4.1.1. Board Questionnaire 45

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 4.1.2. Annual Independent directors meeting and Evaluation of Non-Executive &
Executive Promoter Directors 45
4.1.3. Independent Directors Evaluation 46
4.1.4. Suggestive / Advisory in nature 46

Preamble

This Governance Guidelines document is based on the current practice followed by the
Company. These guidelines have been prepared keeping in view the provisions of the
Companies Act, 2013, (‘the Act’) Corporate Governance requirements as prescribed by
Securities and Exchange Board of India (SEBI) in terms of Notification dated 2 nd
September, 2015 and 22nd December, 2015 of SEBI (Listing Obligations and Disclosure
Requirements) (Amendment) Regulations, 2015, known as (Listing Regulations) and
also in terms of Notification No.NHB.HFC.CG-DIR.1/MD&CEO/2016. In case there is
any change in the law or the requirements of the Listing Regulations as prescribed by
SEBI, the Company will have to comply with the applicable provisions of the Act and
provisions of Listing Regulations as amended from time to time. These guidelines should
be read in conjunction with the Act, Listing Regulations, SEBI (Prohibition of Insider
Trading) Regulations, 2015 alongwith the Code of Internal Procedures and Conduct for
Regulating, Monitoring and Reporting of Trading by Insiders pursuant to Regulation 9 (1)
and Schedule b of the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the
amended Articles of Association of the Company.

This document aims to bring in one place all previous board / committee related
guidelines, policies, code etc. and it shall be put up before the Board of the Company for
its consideration and adoption. These guidelines shall take effect from the date on which
they are adopted by the Board of the LIC Housing Finance Limited.

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1. Composition and Role of Board of Directors

1.1. Size and Composition:

The Board believes that Board consisting of 8 to 12 members is an appropriate size

based on the Company’s present nature and size of business. The Board periodically
evaluates whether a larger or smaller slate of directors would be preferable.

At present, the Board of Directors is comprised of 11 members — ten Non-Executive

and one Executive Director. Shri Siddhartha Mohanty, Managing Director & CEO is an
Executive Director. The Executive and Non-Executive Directors are competent and
knowledgeable personalities in their respective fields. In view of Listing Regulations and
requirement of the Companies Act, 2013, the existing Directors have been classified as
follows:

1. Shri M. R. Kumar : Chairman, - non executive promoter director

2. Shri Vipin Anand
3. Shri Jagdish Capoor
4. Ms. Savita Singh
5. Dr. Dharmendra Bhandari
6. Shri V. K. Kukreja
7. Shri Ameet N. Patel
8. Shri P Koteswara Rao
9. Shri Kashi Prasad Khandelwal
10. Shri Sanjay Kumar Khemani
11. Shri Siddhartha Mohanty
: Director – non independent promoter director
: Director – independent
: Director – independent
: Director – independent
: Director – independent
: Director – independent
: Director – non independent and non-executive
: Director – independent
: Director – non independent and non-executive
: Managing Director & CEO–Whole Time Executive
non independent promoter director.

1.1.1. Role of the Board:

The Board is collectively responsible for the success of the Company and shall exercise
superintendence, control and direction of the Company’s affairs towards long term value
creation for all stakeholders. The Board alongwith its committees provides supervision
and direction to and oversees the performance of the management. The Board of
Directors shall meet atleast four times a year, with a maximum time gap of one hundred
and twenty days between any two meetings.

The Board of Directors shall periodically review compliance reports pertaining to all laws
applicable to the Company, prepared by the Company as well as steps taken by the
Company to rectify instances of non-compliances. The Board of Directors of the

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Company shall satisfy itself that plans are in place for orderly succession for appointment
to the Board of directors and senior management.

The Board of Directors shall lay down a code of conduct for all members of Board of
Directors and senior management of the Company. The code of conduct shall suitably
incorporate the duties of independent directors as laid down in the Companies Act, 2013.

The Board of Directors shall be responsible for framing, implementing and monitoring
the risk management plan of the Company.

The performance evaluation of independent directors shall be done by the entire Board of
Directors, provided that in the said evaluation, the directors who are subject to evaluation shall

not participate. [This is elaborated hereunder (VIII Evaluation Mechanism)]

1.1.2. Responsibilities of the Board (as per Regulation 4(2)(f) of Listing Regulations)

 Disclosure of Information
a. Members of the Board and key executives should be required to disclose
to the Board whether they, directly, indirectly or on behalf of third parties,
have a material interest in any transaction or matter directly affecting the
company.
b. The Board and senior management should conduct themselves so as to
meet the expectations of operational transparency to stakeholders while
at the same time maintaining confidentiality of information in order to
foster a culture for good decision-making.
 Key Functions of the Board
a. Reviewing and guiding corporate strategy, major plans of action, risk
policy, annual budgets and business plans; setting performance
objectives; monitoring implementation and corporate performance; and
overseeing major capital expenditures, acquisitions and divestments.
b. Monitoring the effectiveness of the Company’s governance practices and
making changes as needed.
c. Selecting, compensating, monitoring and, when necessary, replacing key
executives and overseeing succession planning.
d. Aligning key managerial personnel and board remuneration with the long
term interest of the company and its shareholders.
e. Ensuring a transparent board nomination process with the diversity of
thought, experience, knowledge, perspective and gender in the Board.

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 f. Monitoring and managing potential conflicts of interest of management,
board members and shareholders, including misuse of corporate assets
and abuse in related party transactions.
g. Ensuring the integrity of the Company’s accounting and financial
reporting systems, including the independent audit, and that appropriate
systems of control are in place, in particular, systems for risk
management, financial and operational control, and compliance with the
law and relevant standards.
h. Overseeing the process of disclosure and communications.
i. Monitoring and reviewing Board Evaluation framework.

 Other Responsibilities
a. The Board should provide the strategic guidance to the company, ensure
effective monitoring of the management and should be accountable to the
company and the shareholders.
b. The Board should set a corporate culture and the values by which
executives throughout a group will behave.
c. Board members shall act on a fully informed basis, in good faith, with due
diligence and care, and in the best interest of the company and the
shareholders.
d. The Board shall encourage continuing directors’ training to ensure that
the Board members are updated about happening / non-happening of
events.
e. Where Board decisions may affect different shareholder groups
differently, the Board should treat all shareholders fairly.
f. The Board shall maintain high ethical standards and shall take into
account the interests of stakeholders.
g. The Board shall exercise objective independent judgement on corporate
affairs.
h. Board shall consider assigning a sufficient number of non-executive
Board members capable of exercising independent judgement to tasks
where there is a potential for conflict of interest.
i. The Board shall ensure that, while rightly encouraging positive thinking,
these do not result in over-optimism that either leads to significant risks
not being recognised or exposes the company to excessive risk.
j. The Board shall have ability to ‘step back’ to assist executive
management by challenging the assumptions underlying: strategy,

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 strategic initiatives (such as acquisitions), risk appetite, exposures and
the key areas of the company’s focus.
k. When committees of the Board are established, their mandate,
composition and working procedures shall be well defined and disclosed
by the Board.
l. Board members shall be able to commit themselves effectively to their
responsibilities.
m. In order to fulfill their responsibilities, board members shall have access
to accurate, relevant and timely information.
n. The Board and senior management shall facilitate the independent
Directors to perform their role effectively as a Board member and also a
member of a committee.

1.1.3. Additional Responsibilities for the Board of LIC Housing Finance

Limited

In addition to the above responsibilities prescribed by the Act, and Listing

Regulations, the main objectives of the Board of LIC Housing Finance Limited
shall include:

 Approval / review of business plan, budgets (sanction & disbursement)

and updates;
 Approval of revenue and capital budgets and updates / reviews thereof;
 Status of NPA and updates / reviews thereof;
 Approval of fund raising programme of the Company;
 Approval / review of status of swap trades / transactions;
 Review outstanding term loan / borrowings;
 Risk management review;
 Asset liability management updates / reviews thereof;
 Approval of the unaudited quarterly and the audited financial annual
accounts of the Company on both stand alone and consolidated basis;
 Internal control systems, compliance of all laws applicable to the
Company including the requirement of the Equity Listing Agreement with
the Stock Exchanges;
 Delegation of financial powers to the management;
 Approval / review of productivity linked incentive, recruitment etc;
 Future plans and other decisions / changes of significant importance of price
sensitive nature;

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  Status report on the implementation of decisions taken at the Board
meetings;
 Report on investor grievances, shareholding pattern and secretarial audit
reports;
 Review of subsidiary companies performance.
 Significant changes in policies and internal controls.

1.2. Role of the Chairman:

The Chairman is responsible for Board leadership and creating conditions for effectiveness
of the overall Board which include inter-alia:

 Setting the strategic agenda of the Board (in conjunction with the Company’s
management) with focus on long term value creation for all stakeholders.
 Encouraging active engagement by all the members of the Board and promoting
effective relationship and open communication.
 Communicating effectively with all stakeholders and enabling meaningful
relationships, as may be required.
 Providing guidance to the Managing Director & CEO.

 A person who is a chairman of the board of directors has additional rights and
duties, and additional opportunities. It is usually the function of a chairman to
determine, or at least to exercise a significant influence upon, the agenda of
the meetings of the board. He or she is in a position to ensure that proposals
are brought forward for consideration by the directors at their meetings.
 The chairman has a general responsibility to oversee the functioning of the board
and to ensure that all matters to be considered by the board are in fact brought
before it. The chairman should have extensive involvement with the chief
executive in order to be appropriately familiar with what is happening in the
company.
 The Chairman shall discharge functions as per the provisions of Memorandum
and Articles of Association of the Company, Companies Act, 2013 and
Secretarial Standards. Care shall be taken in respect of matters like quorum of
the meetings, orderly conduct of meetings, adjournment of convened meetings
(The Chairman may, unless dissented to or objected by the majority of
Directors present at a Meeting at which a Quorum is present, adjourn the
Meeting for any reason, at any stage of the Meeting), declaration of results of
voting, recording of minutes of meetings etc.

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  Directors shall not participate through Electronic Mode in the discussion on
certain restricted items, unless expressly permitted by the Chairman. Such
restricted items of business include approval of the annual financial statement,
Board’s report, prospectus and matters relating to amalgamation, merger,
demerger, acquisition and takeover. Similarly, participation in the discussion
through Electronic Mode shall not be allowed in Meetings of the Audit Committee
for consideration of annual financial statement including consolidated financial
statement, if any, to be approved by the Board, unless expressly permitted by
the Chairman.
 Supplementary Notes on any of the Agenda Items may be circulated at or prior
to the Meeting but shall be taken up with the permission of the Chairman and
with the consent of a majority of the Directors present in the Meeting, which shall
include at least one Independent Director, if any.
 Any item not included in the Agenda may be taken up for consideration with the
permission of the Chairman and with the consent of a majority of the Directors
present in the Meeting, which shall include at least one Independent Director, if
any.
 In case of Director/s participating through Electronic Mode, the Chairman shall
confirm the attendance of such Directors. For this purpose, at the
commencement of the Meeting, the Chairman shall take a roll call. The Chairman
or Company Secretary shall request the Director participating through Electronic
Mode to state his full name and location from where he is participating and shall
record the same in the Minutes.
 The Chairman shall guide the Board in accordance with well settled practices on
Corporate governance, particularly on matters such as categorisation of
directors, composition of Board, constitution of Audit, Nomination &
Remuneration, Stakeholders’ Relationship and Corporate Social Responsibility
Committees or such other statutory committees as may be required to be
constituted inter alia changing the nomenclature and / or terms of reference, from
time to time, Board / Committee / General meeting procedures, disclosure by
directors etc.
 The Chairman shall convene meetings of Board and take the chair at all such
meetings.
 The Chairman must be ready, willing and able to intervene decisively as and
when necessary. The chairman should further ensure that the views of all
directors are heard and not subdued by the conduct of others during deliberations
and that board meetings achieve the purposes for which they are intended, and

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 should take a lead in reviewing the composition, effectiveness and
performance of the board.
 The Chairman shall ensure that the constitution of the Board is appropriate to the
needs of the business and that it meets the Governance Guidelines set out by
the Companies Act, 2013, SEBI (LODR) Regulations, 2015, Secretarial
Standards or any other regulatory body or advisory as may be required for
Company’s business; provided however, that adhering to the recommendations
of advisory/professional bodies that are non-statutory in nature, shall be at the
sole discretion of the Board.
 The Chairman shall ensure that the individual members of the Board have
necessary freedom and opportunity to express their views.
 The Chairman shall ensure that the Board makes clear what powers it reserves
for itself and what it has delegated to the Executive Director.
 The Chairman shall ensure that the proceedings of the Meeting are correctly
recorded.
 The Chairman has absolute discretion to exclude from the Minutes, matters
which in his opinion are or could reasonably be regarded as defamatory of any
person, irrelevant or immaterial to the proceedings or which are detrimental to
the interests of the company.
 Minutes of the previous Meeting may be signed either by the Chairman of such
Meeting at any time before the next Meeting is held or by the Chairman of the
next Meeting at the next Meeting.

1.3. Role of the Directors: [as per new provision (166) of the Companies Act, 2013]

Directors of LIC Housing Finance Limited are expected to comply with the duties which
are fiduciary in nature and major ones are as under:

i) To act in accordance with the Company’s Articles of Association in force

from time to time.
ii) To act in good faith in order to promote the objects of the Company for
the benefits of its members as a whole, and in the best interest of the
Company.
iii) To discharge their duties with due and reasonable care, skill and
diligence.
iv) Not to involve themselves in a situation in which they may have a direct
or indirect interest that conflicts, or possibly may conflict, with the interest
of the Company.

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 v) Not to secure or attempt to secure any undue gain or advantage either to
yourself or to your relatives, partners or associates.
vi) Not to assign their office as Director.

In addition to the above Directors are also expected to:

i) Constructively challenge and help develop proposals on strategy for

growth of the Company.
ii) Evaluate the performance of management in meeting agreed goals and
objectives.
iii) Satisfy oneself on the integrity of financial information and that financial
controls and systems or risk management are effective and defensible.
iv) Take responsibility for the processes for accurately reporting on
performance and financial position of the Company.
v) Keep governance and compliance with the applicable legislation and
regulations under review and the conformity of Company’s practices to
accepted norms.
Further, the directors are expected to demonstrate high standards of ethical
behaviour, strong interpersonal and communication skills and soundness of
judgement.

1.3.1. Additional Guidelines for LIC Housing Finance Limited

 Board will ensure that a transparent board nomination process is in place that
encourages diversity of thought, experience, knowledge, perspective, age and
gender.
 It is expected that Board to have an appropriate blend of functional and industry
expertise.

1.4. Managing Director (who is Executive Director)

 Managing Director provides leadership through his / her board position, as well
as for the business area or function for which he / she is directly responsible.
 Managing Director is expected to exercise individual judgement on every issue
in the overall interests of the Company. He or she is expected to demonstrate
role model behaviour on all aspects including living by the Company’s Code of
Conduct for Directors and Senior Management.
 Managing Director is member of the Board by virtue of employment with LIC of
India who is on deputation to the Company on the terms and conditions as
decided by LIC of India and Board of LIC Housing Finance Limited. The

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 membership of the Board would cease in the event of superannuation,
resignation or cessation of service or on being transferred / repatriated back to
LIC of India.

1.5. Non-Executive Promoter Directors (who is Chairman and other one Promoter
Director)

 Non-executive director bring an external view and judgement on the issues of

strategy, risk, performance, capital and other resources, key appointments and
business conduct. They should therefore be provided with the freedom to
constructively challenge strategies and policies proposed by management. They
should also be at the liberty to use all channels of communication, formal as well
as informal, to put across their point of view to the management.

 Non-executive director shall retire by rotation as required by the law but shall be
entitled to be re-appointed if qualified under law. They should be selected
through a formal process of recommendation by Nomination and Remuneration
Committee of the Company and confirmed by the Board.

1.6. Independent Director [as mandated by Regulation 16 of the Listing Regulations]

An independent director in relation to a company, means a non-executive director other

than a managing director or a whole-time director or a nominee director -

a. Who, in the opinion of the Board, is a person of integrity and possesses relevant
expertise and experience;
b. i) who is or was not a promoter of the company or its holding, subsidiary or
associate company;
ii) who is not related to promoters or directors in the company, its holding,
subsidiary or associate company;

c. who has no or had no pecuniary relationship with the company, its holding,
subsidiary or associate company;
d. none of whose relatives has or had pecuniary relationship or transaction with
the company, its holding, subsidiary or associate company, or their promoters,
or directors, amounting to two per cent or more of its gross turnover or total
income of fifty lakh rupees or such higher amount as may be prescribed,
whichever is lower, during the two immediately preceding financial years or
during the current financial year;
e. who, neither himself nor any of his relatives-
i) holds or has held the position of a key managerial personnel or is or has
been employee of the company or its holding, subsidiary or associate

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 company in any of three financial years immediately preceding the
financial year in which he is proposed to be appointed;
ii) is or has been an employee or proprietor or a partner, in any of the three
financial years immediately preceding the financial year in which he is
proposed to be appointed, of-
A) a firm of auditors or company secretaries in practice or cost auditors of
the company or its holding, subsidiary or associate company; or
B) any legal or a consulting firm that has or had any transaction with the
company, its holding, subsidiary or associate company amounting to ten
per cent or more of the gross turnover of such firm;
iii) holds together with his relatives two per cent or more of the total voting
power of the company; or
iv) is a Chief Executive or director, by whatever name called, of any non-
profit organisation that receives twenty-five per cent or more of its
receipts from the company, any of its promoters, directors or its holding,
subsidiary or associate company or that holds two per cent or more of
the total voting power of the company; or
f. Who possesses such other qualification as may be prescribed as per Rule 5 of
the Companies (Appointment and Qualification of Directors) Rules, 2014.

An independent director shall possess appropriate skills, experience and knowledge in

one or more fields of finance, law management, sales, marketing, administration,
research, corporate governance, technical operations or other disciplines related to the
company’s business.

An independent director as per Regulation 16 of the Listing Regulations shall mean non-
executive director of the company who-

a) Apart from receiving director’s remuneration, has or had no material pecuniary

relationship with the company, its holding, subsidiary or associate company, or
their promoters, or directors, during the two immediately preceding financial
years or during the current financial year.
b) Is not related to promoters or persons occupying management positions at the
board level or at one level below the board;
c) Has not been an executive of the company in the immediately preceding three
financial years;
d) Is not a partner or an executive or was not partner or an executive during the
preceding three years, of any of the following;

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 i) The statutory audit firm or the internal audit firm that is associated
with the company, and
ii) The legal firm(s) and consulting firm(s) that have a material
association with the company.
e) Is not a material supplier, service provider or customer or a lessor or lessee of
the company, which may affect independence of the director;
f) is not a substantial shareholder of the company i.e. owning two percent or more
of the block of voting shares.
g) who is not less than 21 years of age.

The Nomination and Remuneration Committee annually reviews with the Board the
applicable skills and characteristics required of Board nominees in the context of the
size, composition and needs of the Board and Company, apart from Fit and Proper
Criteria for Directors of Housing Finance Companies as per Housing Finance
Companies – Corporate Governance (National Housing Bank) Directions, 2016 (as
appended as Annex-1) vide notification No.NHB.HFC.CG-DIR.1/MD&CEO/2016 dated
09.02.2017. As per the aforesaid notification, the Company as directed by NHB would
obtain necessary information and declaration from the proposed / existing Directors for
the purpose in the format as appended as Annex-2. Further, the proposed / existing
Directors would execute the Deeds of Covenants in the format as appended as Annex-
3. Upon the recommendation of the Nomination and Remuneration Committee, the
Board may appoint a director on the Board during the course of the year to fill vacancies
in the Board and newly appointed director to serve until the succeeding annual meeting
of shareholders. Independent directors ideally should be thought / practice leaders in
their respective functions / domains.

Independent directors are expected to abide by the ‘Code for Independent Directors’ as
outlined in the Act. The code specifies the guidelines of professional conduct, role and
function and duties of independent directors. These are as follows:

I. Guidelines of professional conduct: (schedule IV – section 149(8))

An independent director shall:

1. Uphold ethical standards of integrity and probity;

2. Act objectively and constructively while exercising his duties;
3. Exercise his responsibilities in a bona fide manner in the interest of the company;
4. Devote sufficient time and attention to his professional obligations for informed
and balanced decision making;
5. Not allow any extraneous considerations that will vitiate his exercise of objective
independent judgement in the paramount interest of the company as a whole,
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 while concurring in or dissenting from the collective judgement of the Board in its
decision making;
6. Not abuse his position to the detriment of the company or its shareholders or for
the purpose of gaining direct or indirect personal advantage or advantage for any
associated person;
7. Refrain from any action that would lead to loss of his independence;
8. Where circumstances arise which make an independent director lose his
independence, the independent director must immediately inform the Board
accordingly;
9. Assist the company in implementing the best corporate governance practices.

II. Role and Functions of Independent Director:

The independent directors shall:
1. Help in bringing an independent judgement to bear on the Board’s deliberations
especially on issues of strategy, performance, risk management, resources, key
appointments and standards of conduct;
2. Bring an objective view in the evaluation of the performance of board and
management;
3. Scrutinize the performance of management in meeting agreed goals and
objectives and monitor the reporting of performance;
4. Satisfy themselves on the integrity of financial information and that financial
controls and the systems of risk management are robust and defensible;
5. Safeguard the interests of all stakeholders, particularly the minority shareholders;
6. Balance the conflicting interest of the stakeholders;
7. Determine appropriate levels of remuneration of executive directors, key
managerial personnel and senior management and have a prime role in
appointing and where necessary recommend removal of executive directors, key
managerial personnel and senior management;
8. Moderate and arbitrate in the interest of the company as a whole, in situations of
conflict between management and shareholder’s interest.

III. Duties of Independent Director:

The independent directors shall –
1. Undertake appropriate induction and regularly update and refresh their skills,
knowledge and familiarity with the company;
2. Seek appropriate clarification or amplification of information and, where
necessary, take and follow appropriate professional advice and opinion of
outside experts at the expense of the company;
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 3. Strive to attend all meetings of the Board of Directors and of the Board
committees of which he or she is a member;
4. Participate constructively and actively in the committees of the Board in which
they are chairpersons or members;
5. Strive to attend the general meetings of the company;
6. Where they have concerns about the running of the company or a proposed
action, ensure that these are addressed by the Board and, to the extent that they
are not resolved, insist that their concerns are recorded in the minutes of the
Board meeting;
7. Keep themselves well informed about the company and the external environment
in which it operates;
8. Not to unfairly obstruct the functioning of an otherwise proper Board or committee
of the Board;
9. Pay sufficient attention and ensure that adequate deliberations are held before
approving related party transactions and assure themselves that the same are in
the interest of the company;
10. Ascertain and ensure that the company has an adequate and functional vigil
mechanism and to ensure that the interests of a person who uses such
mechanism are not prejudicially affected on account of such use;
11. Report concerns about unethical behaviour, actual or suspected fraud or violation
of the company’s code of conduct or ethics policy;
12. Acting within his / her authority, assist in protecting the legitimate interests of the
company, shareholders and its employees;
13. Not disclose confidential information, including commercial secrets,
technologies, advertising and sales promotion plans, unpublished price sensitive
information, unless such disclosure is expressly approve by the Board or required
by law.

IV. Manner of appointment of Independent Director:

1. Appointment process of independent directors shall be independent of the
Company management; while selecting independent directors, the Board shall
ensure that there is appropriate balance of skills, experience and knowledge in
the Board so as to enable the Board to discharge its functions and duties
effectively.
2. The appointment of independent director(s) of the company shall be approved at
the meeting of the shareholders.
3. The explanatory statement attached to the notice of the meeting for approving
the appointment of independent director shall include a statement that in the
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 opinion of the Board, the independent director proposed to be appointed fulfills
the conditions specified in the Act and the rules made thereunder and that the
proposed director is independent of the management.
4. The appointment of independent directors shall be formalized through a letter of
appointment, which shall set out:
a. The term of appointment;
b. The expectation of the Board from the appointed director; the Board level
committee(s) in which the director is expected to serve and its tasks;
c. The fiduciary duties that come with such an appointment alongwith
accompanying liabilities;
d. Provision for Directors and Officers (D and O) insurance, if any;
e. The Code of Business Ethics that the company expects its directors and
employees to follow;
f. The list of actions that a director should not do while functioning as such in
the company; and
g. The remuneration, mentioning periodic fees, reimbursement of expenses for
participation in the Board’s and other meetings and profit related commission,
if any.
5. The terms and conditions of appointment of independent directors shall be open
for inspection at the registered office of the company by any member during
normal business hours.
6. The terms and conditions of appointment of independent directors shall also be
posted on the company’s website.

V. Re-appointment:
The re-appointment of independent director shall be on the basis of report of
performance evaluation.

VI. Resignation or removal:

1. The resignation or removal of an independent director shall be in the same
manner as is provided in sections 168 and 169 of the Act.
2. An independent director who resigns or is removed from the Board of the
company shall be replaced by a new independent director within a period of not
more than one hundred and eighty days from the date of such resignation or
removal, as the case may be.
3. Where the company fulfils the requirement of independent directors in its Board
even without fulfilling the vacancy created by such resignation or removal, as the

17 | P a g e
 case may be, the requirement of replacement by a new independent director
shall not apply.

VII. Separate Meetings:

1. The independent directors of the company shall hold atleast one meeting in a
year, without the attendance of non-independent directors and members of
management;
2. All the independent directors of the company shall strive to be present at such
meeting;
3. The meeting shall:
a. Review the performance of non-independent directors and the Board as a
whole;
b. Review the performance of the Chairperson of the company, taking into
account the views of executive directors and non-executive directors;
c. Assess the quality, quantity and timeliness of flow of information between the
company management and the Board that is necessary for the Board to
effectively and reasonably perform their duties.

VIII. Evaluation Mechanism:

1. The performance evaluation of independent directors shall be done by the
entire Board of Directors, excluding the director being evaluated.
2. On the basis of the report of performance evaluation, it shall be determined
whether to extend or continue the term of appointment of the independent
director.

Independent directors should be provided with the freedom to constructively challenge

strategies and policies proposed by management. They should also be at the liberty to
use all channels of communication, formal as well as informal, to put across their point
of view to the management.

Independent directors shall not be liable for retirement by rotation.

1.7. Term / Tenure of Office of Director

 Not less than two thirds of the total number of Directors (excluding Non-
Executive Independent Directors) shall be liable to retire by rotation. One
third of the number of directors liable to retire by rotation will retire by rotation
every year and shall be appointed by the Company in General Meeting.

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  Term of office of Non-Executive Independent Director: Person shall be
eligible for the office of Non-Executive Director for a term upto five
consecutive years on the Board of the Company. However, the Board
may take informed decision to consider such person, who has
completed term of office of five consecutive years to be eligible for re-
appointment on passing of a special resolution by the Company and
disclosure of such appointment in the Board’s report. Notwithstanding
the above, no Non-Executive Director shall hold office for more than
two consecutive terms of five years each.
 Term of office of Non-Executive Promoter Director (i.e. Chairman & other LIC
of India - Managing Director) shall be upto attainment of superannuation in
the services of LIC of India.

 Term of office of Executive Promoter Director (i.e. Managing Director of LIC

Housing Finance Limited) shall be as decided by LIC of India and Board of
LIC Housing Finance Limited from time to time which will be within the limit
as per the Companies Act, 2013.

2. Committees of the Board

The Board has set up following committees in addition to those which are mandatory or
optional under SEBI and other applicable regulations:
 Audit Committee;
 Nomination and Remuneration Committee;
 Corporate Social Responsibility Committee;
 Stakeholders Relationship Committee;
 Risk Management Committee;
 Debenture Allotment Committee;
 Executive Committee;
 Banking Licence Committee;
 QIP Issue Committee;
 HR Committee.
 Strategic Investment Committee.
 Article Evaluation Committee.
The mandates of the above committees shall cover the matters specified by law / regulator, but
should ideally include the following which are outlined below under Mandates of Board Committees.

Mandates of Board Committees:

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2.1. Mandate of Audit Committee
The Audit Committee comprises three Non-Executive, Independent Directors
with expertise in finance, accounts, treasury and law. All the members of Audit
Committee are financially literate. The Company Secretary shall act as the
secretary to the Audit Committee.

The Audit Committee shall meet atleast four times in a year and not more than
one hundred and twenty days shall elapse between two meetings. The quorum
for Audit Committee meeting shall either be two members or one third of the
members of the audit committee, whichever is greater, with atleast two
independent directors.

Role of Audit Committee

As per the Act, the role of the Audit Committee (section 177) shall include the
following:
a. The recommendation for appointment, remuneration and terms of
appointment of auditors of the company. Section 139(1) provides that
all appointments of auditors including filing of casual vacancy shall be
made after taking into account the recommendation of audit committee;

b. Review and monitor the auditor’s independence and performance, and

effectiveness of audit process;

c. Examination of the financial statement and the auditors’ report thereon;

d. Approval of any subsequent modification of transactions of the

company with related parties;

e. Scrutiny of inter-corporate loans and investments;

f. Valuation of undertakings or assets of the company, wherever it is

necessary;

g. Evaluation of internal financial controls and risk management systems;

h. Monitoring the end use of funds raised through public offers and related
matters.

The Audit Committee may call for the comments of the auditors about
internal control systems, the scope of audit, including the observations of
the auditors and review of financial statement before their submission to
the Board and may also discuss any related issues with the internal and
statutory auditors and the management of the company.

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 Establish a vigil mechanism for directors and employees to report genuine
concerns in such manner as may be prescribed.

The role of the Audit Committee as per Regulation 18(3) of the Listing
Regulations shall include the following:

i. Oversight of the company’s financial reporting process and the

disclosure of its financial information to ensure that the financial
statement is correct, sufficient and credible;
ii. Recommendation for appointment, remuneration, and terms of
appointment of auditors of the company;
iii. Approval of payment to statutory auditors for any other services
rendered by the statutory auditors;
iv. Reviewing, with the management, the annual financial statements
and auditor’s report thereon before submission to the board for
approval, with particular reference to:
a. Matters required to be included in the Director’s Responsibility
Statement to be included in the Board’s report in terms of
clause(c) of sub-section 3 of section 134 of the Companies Act,
2013;
b. Changes, if any, in accounting policies and practices and reasons
for the same;
c. Major accounting entries involving estimates based on the
exercise of judgement by management;
d. Significant adjustments made in the financial statements arising
out of audit findings;
e. Compliance with listing and other legal requirements relating to
financial statements;
f. Disclosure of any related party transactions;
g. Qualifications in the draft audit report.
v. Reviewing, with the management, the quarterly financial statements
before submission to the board for approval;
vi. Reviewing, with the management, the statement of uses / application
of funds raised through an issue (public issue, rights issue,
preferential issue, etc), the statement of funds utilized for purposes
other than those stated in the offer document / prospectus / notice
and the report submitted by the monitoring agency on utilization of
proceeds of a public or rights issue, and making appropriate
recommendations to the Board to take up steps in this matter;

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 vii. Review and monitor the auditor’s independence and performance and
effectiveness of audit process;
viii. Approval or any subsequent modification of transactions of the
company with related parties.
ix. Scrutiny of inter-corporate loans and investments.
x. Valuations of undertakings or assets of the company wherever it is
necessary.
xi. Evaluation of internal financial controls and risk management
systems.
xii. Reviewing, with the management, performance of statutory and
internal auditors, adequacy of the internal control systems;
xiii. Reviewing the adequacy of internal audit function, if any, including the
structure of the internal audit department, staffing and seniority of the
official heading the department, reporting structure coverage and
frequency of internal audit;
xiv. Discussion with the internal auditors of any significant findings and
follow up thereon;
xv. Reviewing the findings of any internal investigations by the internal
auditors into matters where there is suspected fraud or irregularity or
a failure of internal control systems of a material nature and reporting
the matter to the board;
xvi. Discussion with statutory auditors before the audit commences, about
the nature and scope of audit as well as post-audit discussion to
ascertain any area of concern;
xvii. To look into the reasons for substantial defaults in the payment to the
depositors, debenture holders, shareholders (in case of non-payment
of declared dividends) and creditors;
xviii. To review the functioning of the Whistle Blower Mechanism;
xix. Approval of appointment of CFO (i.e., the whole-time Finance Director
or any other person heading the finance function or discharging that
function) after assessing the qualifications, experience and
background, etc of the candidate;
xx. Carrying out any other function as is mentioned in the terms of
reference of the Audit Committee.
(The term related party transactions shall have the same meaning as provided
in Regulation 23 of the Listing Regulations).
2.1.1. Powers of Audit Committee
 To investigate any activity within its terms of reference.

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  To seek information from any employee.
 To obtain outside legal or other professional advice.
 To secure attendance of outsiders with relevant expertise, if it considers
necessary.

2.1.2. The Audit Committee mandatorily reviews the following:

1. Management discussion and analysis of financial condition and results of

operations;
2. Statement of significant related party transactions submitted by
management;
3. Management letters / letters of internal control weakness issued by the
statutory auditors;
4. Internal audit reports relating to internal control weakness;
5. The appointment, removal and terms of remuneration of the Chief Internal
auditor shall be subject to review by the Audit committee.

2.2. Mandate of Nomination And Remuneration Committee: [as mandated by Act

(section 178) and Regulation 19 of the Listing Regulations]

 Formulation of the criteria for determining qualifications, positive

attributes and independence of a director.
 Identifying persons who are qualified to become directors and who may
be appointed in senior management in accordance with the criteria laid
down.
 Recommend to the Board, the appointment or re-appointment of
directors.
 Devise a policy on Board diversity.
 Recommend to the Board appointment of key managerial personnel
(KMP as defined by the Act).
 Support the Board and Independent Directors in evaluation of the
performance of the Board and individual directors. This shall include
“Formulation of criteria for evaluation of performance of Independent
Directors and the Board of directors. Whether to extend or continue the
term of appointment of the independent director, on the basis of the report
of performance evaluation of independent directors.
 Recommend to the Board the remuneration policy for directors, KMP and
other employees.

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  The Nomination and Remuneration Committee shall, while
formulating the policy shall ensure that
 (a) the level and composition of remuneration is reasonable and
sufficient to
 attract, retain and motivate directors of the quality required to run the
company
 successfully;
 (b) relationship of remuneration to performance is clear and meets
appropriate
 performance benchmarks; and
 (c) remuneration to directors, key managerial personnel and senior
management
 involves a balance between fixed and incentive pay reflecting short
and long-term
 performance objectives appropriate to the working of the company
and its goals:
 Provided that such policy shall be disclosed in the Board's report
 On an annual basis, recommend to the Board the remuneration payable
to directors, KMP and senior management as well as other employees.
 Oversee familiarization and training programmes for directors.

2.3. Mandate of Corporate Social Responsibility Committee:[as mandated by section

135 of the Act]

 The Committee shall formulate and recommend a CSR policy to the

Board which shall indicate the activities to be undertaken by the
Company as specified in Schedule VII.
 Recommend the amount of expenditure to be incurred on the CSR
activities.
 Monitor the CSR policy from time to time.

2.4. Mandate of Stakeholders Relationship Committee:

 Consider and resolve the grievances of security holders of the
company including complaints related to transfer of securities, non
receipt of annual report / declared dividends.
 Oversee compliances in respect of dividend payments and transfer of
unclaimed amounts to the Investor Education and Protection Fund.
 Review statutory compliance relating to all security holders.

24 | P a g e
  Oversee and review all matters related to the transfer of securities of
the company.
 Approve issue of duplicate certificates of the company.
 Recommend measures for overall improvement of the quality of
investor services.

2.5. Mandate of Risk Management Committee: [applicable to top 100 listed entities,
determined on the basis of market capitalization, as at the end of the immediate previous financial year]

 To review risk management policy.

 Review of the current status on the outer limits prescribed in the Risk
Management policy and report to the Board.
 Review the matters on risk management.
 Review and monitor types of risks the company is exposed to.
 Lay down procedures to inform Board about risk assessment and
minimization procedures
 Frame, implement and monitor the risk management plan of the
company.

2.6. Mandate of Debenture Allotment Committee:

 Allot Non-Convertible Debentures / Bonds (Tier I/II Bonds) to the
successful applicant from time to time in different tranches.

2.7. Mandate of Executive Committee

 To frame the norms, policies, guidelines, conditions, parameters for
all housing loan schemes including Project Finance schemes.
 To relax / waive / alter the norms/ guidelines/ condition of the housing
loan schemes including Project Finance schemes on case to case
basis.
 To sanction loan to Builders and Developers under Project Loans
beyond the limits delegated to Managing Director & CEO as per
Financial Power Standing Order, 1990 (as amended upto 25th April,
2012) (FPSO) on recommendation of the Project Finance / HOD
Committee. The Project Finance Committee would be constituted by
the Managing Director & CEO from time to time.
 To sanction loan under Rental Securitization of beyond the loan
amount delegated to Managing Director & CEO as per FPSO.

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  To sanction loan under Individual loan schemes beyond the loan
amount delegated to Managing Director & CEO as per FPSO.
 To approve any new loan scheme that Company may launch.
 To revise the interest rate in the existing schemes & new schemes of
Individual/ Project loans.
 To modify/ restructure existing & new schemes for Individual / Project
loans.
 To revise terms and conditions of the existing & new Individual/
Project loans.
 To take over the portfolio of the Housing Loans subject to the limits
as specified by the Board from time to time.
 To waive Interest, Additional Interest, and other charges beyond the
limits delegated to Managing Director & CEO in respect of the One
Time Settlement under FPSO.
 To waive principal amount irrespective of the waiver amount involved
in respect of One Time Settlement beyond the limits delegated to
Managing Director & CEO under FPSO.
 To approve the Reserve price under SARFAESI Act, 2002 beyond the
limits delegated to Managing Director & CEO under FPSO.
 To approve LICHFL- PLR and to review & revise the same from time
to time.
 To approve the purchase / construction of the property for office
building / staff quarters beyond the limits delegated to Managing
Director & CEO generally on such terms and conditions as they may
think fit and in any such purchase or other acquisition to accept such
title as they may believe or may be advised to be reasonably
satisfactory.
 To borrow money for the purpose of the business of the Company
subject to the limit specified by the Board from time to time.
 To approve the payment for arrangers for fund mobilization.
 To approve the payment of processing or any other fees payable to
Banks/FIs.
 To approve the availing of re-finance from National Housing Bank.
 To delegate its powers to Managing Director & CEO any or all of the
powers listed above for a specific period.

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  Approve / ratify relaxation/ waiver/ refund of processing fees,
administrative fee, prepayment charges in respect of project finance
(including at the time of revalidation).
 Approve / ratify restructuring / re-schedulement of project loan.
 Approve revision of rate of interest in respect of project loans on case
to case basis.
 Approve/ ratify issue of NOC, release of charge in respect of project
loan.
 Approve the cases under Consortium/ Joint financing.
 Approve takeover of existing project loan/ term loan of other
institution/s.

2.8. Mandate of Banking Licence Committee:

 Exploring the possibility of applying for Banking License pursuant to
the guidelines to be framed by the RBI
 appraise and select the Consultant / Retainer for preparation of
documentation, presentation, business plan and liaison with RBI in
the matter and also to assist in giving feedback / suggestions to RBI.
 Approve the remuneration of the consultant/s.

2.9. Mandate of QIP Issue Committee:

 To decide on type of securities to be issued;
 The aggregate amount to be raised through the QIP;
 Decide the price (including premium) at which the securities would be
issued,
 Such price being not less than price arrived as per SEBI (Issue of
Capital and Disclosure Requirements) Regulations, 2009 at the time
of issue;
 The number of securities to be issued in tranche;
 The terms and conditions thereof, as may be deemed appropriate at
the time of such issue or allotment considering the prevailing market
conditions and relevant factors;
 To negotiate and finalize all such arrangements, if any, with any
Merchant Banker, Depositories, Custodians and all such agencies as
may be involved or concerned in such offerings of securities and the
fees payable to them by way of commission, brokerage, or the like;

27 | P a g e
  to finalize, approve, adopt and execute the draft offering circular /
information memorandum / such other documents / writings, if any,
forward the same to appropriate authorities if necessary and issue the
same to the prospective investors after incorporating any correction
or alteration therein;
 Seek the listing of such securities on the Stock Exchanges where the
Company's existing shares are listed;
 and to accept such conditions as may be prescribed by any of them
in granting any such approval consent, permission or sanction;
 To issue and allot the securities and to do all such acts, deeds,
matters and things necessary or desirable in connection with or
incidental to the issue of the securities;
 To take effective steps for crediting the securities to the demat
account of the proposed allottees and enter the names of the allottees
in the Register of Members of the Company;
 To finalize, sign and execute all the papers, deeds and documents
related to the said QIP as may be deemed fit and necessary;
 To resolve and settle all questions and difficulties that may arise in
the proposed issue, offer and allotment of any of the said shares,
utilization of the issue proceeds;
 To file necessary returns, make declarations / announcements,
furnish information etc, to the concerned authorities in connection with
the QIP; and to do all acts, deeds and things in connection therewith
and incidental thereto and;
 To delegate such powers as it may in its absolute discretion, deem
appropriate, to any person.

2.10 Mandate of HR Committee: (Subsumed into Nomination & Remuneration Committee)

 Deliberate on all HR related matters of the employees of the Company
other than those under the purview of Nomination & Remuneration
Committee and recommend to the Board for final approval.

2.11 Strategic Investment Committee:

 The scope of the Strategic Investment Committee is to review the
valuation of any proposal of strategic investment that may be received
by the Company and recommend it to the Board.

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2.12 Article Evaluation Committee:
 The scope of the Articles Evaluation Committee is to review
amendments to Articles of Association of the Company and to get
legal vetting conducted of the draft Articles of Association by Law firm.

3. Board Appointment, Induction and Development

3.1. Procedure for Nomination and Appointment of Directors

A director’s qualification to serve on the Board shall be determined by the Board,

upon the recommendation of the Nomination and Remuneration Committee,
prior to nominating said director for election at the Company’s annual general
meeting. In addition, with respect to each director candidate considered for
election to the Board between annual general meetings, prior to such election,
the Nomination and Remuneration Committee shall evaluate each director
candidate and recommend to the Board duly qualified director as candidate for
election to the Board.

The Nomination and Remuneration Committee shall evaluate each director and
candidate under the Director Qualification Criteria and ‘Fit and Proper’ Criteria
for Directors of Housing Finance Companies set forth herein.

3.1.1. General Director Qualification Criteria

The Board has not established specific minimum age, education, and years of
business experience or specific types of skills for Board members, but, in
general, expects qualified directors to have ample experience and proven record
of professional success, leadership and the highest level of personal and
professional ethics, integrity and values. The Board would take into account
many factors such as general understanding of marketing, finance, research,
corporate governance, legal including compliance of laws, human resources,
labour welfare and other disciplines relevant to the success of a housing finance
company in today’s competitive environment, understanding of the company’s
business, educational and professional background, personal accomplishment
and other factors that the Board may consider relevant.[as mandated by Act]

3.1.2. ‘Fit and Proper’ Criteria for Directors of Housing Finance Companies’

The importance of due diligence of Directors to ascertain suitability for the post
by way of qualifications, technical expertise, track record, integrity, etc. needs
no emphasis for any financial institution. It is proposed to follow the same
guidelines mutatis muntandis in case of Housing Finance Companies also.

29 | P a g e
 While the National Housing Bank carries out due diligence on Directors before
issuing Certificate of Registration to HFC, it is necessary that HFCs put in place
an internal supervisory process on a continuing basis. Further, in order to
streamline and bring in uniformity in the process of due diligence, while
appointing Directors, HFCs are advised to ensure that the procedures
mentioned below are followed and minimum criteria fulfilled by the persons
before they are appointed on the Boards:
a) HFCs should undertake a process of due diligence to determine the
suitability of the person for appointment / continuing to hold appointment
as a Director on the Board, based upon qualification, expertise, track
record, integrity and other ‘fit and proper’ criteria. HFCs should obtain
necessary information and declaration from the proposed / existing
Directors for the purpose in the format given at Annex-2.
b) The process of due diligence should be undertaken by the HFCs at the
time of appointment / renewal of appointment.
c) The Boards of the HFCs should constitute Nomination Committees to
scrutinize the declarations.
d) Based on the information provided in the signed declaration,
Nomination Committees should decide on the acceptance or otherwise
of the Directors, where considered necessary.
e) HFCs should obtain annually as on 31st March a simple declaration
from the Directors that the information already provided has not
undergone change and where there is any change, requisite details are
furnished by them forthwith.
f) The Board of HFCs must ensure in public interest that the nominated/
elected Directors execute the deeds of covenants in the format given in
Annex-3.

Annex-2
3.1.3. Information and Declaration
Name of HFC:

Declaration and Undertaking by Director (with enclosures as appropriate as

on )
I. Personal details of Director
a. Full Name
b. Date of Birth
c. Education Qualifications
d. Relevant Background and

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 Experience e. Permanent Address
f. Present Address
g. E-mail Address / Telephone
Number h. Director Identification
Number
i. Permanent Account Number under the
Income Tax Act and name and
address of Income Tax Circle
j. Relevant knowledge and experience
k. Any other information relevant to
Directorship of the
HFC
II. Relevant Relationship of Director
a. List of Relatives if any who are
connected with the HFC (Refer
Section
6 and Schedule 1A of the Companies
Act, 1956 and corresponding
provisions of New Companies Act,
2013)
b. List of entities if any in which he/she is
considered as being interested
(Refer Section 299(3)(a) and
Section 300 of the Companies Act,
1956 and corresponding provisions of
New Companies Act, 2013)
c. List of entities in which he/she is
considered as holding substantial
interest within the meaning of HFC
(NHB) Directions, 2010
d. Name of HFC in which he/she is or
has been a member of the board
(giving details of period during
which such office was held)
e. Fund and non-fund facilities, if any,
presently availed of by him/her
and/or by entities listed in II (b) and
(c) above

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 from the HFC
f. Cases, if any, where the director or
entities listed in II (b) and (c) above are
in default or have been in default in the
past in respect of credit facilities
obtained from the HFC or any other HFC
/ bank.
III. Records of professional achievements
a. Relevant professional achievements
IV. Proceedings, if any, against the Director
a. If the director is a member of a
professional association/body, details of
disciplinary action, if any, pending or
commenced or resulting in conviction in
the past against him/her or whether
he/she has been banned from entry into
any profession/ occupation at any time.
b. Details of prosecution, if any, pending or
commenced or resulting in conviction in
the past against the director and/or
against any of the entities listed in II (b)
and (c) above for violation of economic
laws and regulations.
c. Details of criminal prosecution, if any,
pending or commenced or resulting in
conviction in the last five years against
the director
d. Whether the director attracts any of the
disqualifications envisaged under
Section 274 of the Companies Act 1956
and corresponding provisions of New
Companies Act, 2013?
e. Has the director or any of the entities at
II (b) and (c) above been subject to any
investigation at the instance of
Government department or agency?
f. Has the director at any time been found
guilty of violation of rules/regulations/
legislative requirements by customs/
excise /income tax/foreign exchange
/other revenue authorities, if so give
particulars
g. Whether the director has at any time
come to the adverse notice of a
regulator such as SEBI, IRDA, MCA,
RBI, etc.
(Though it shall not be necessary for a

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 candidate to mention in the column
about orders and findings made by the
regulators which have been later on
reversed/set aside in toto, it would be
necessary to make a mention of the
same, in case the reversal / setting aside
is on technical reasons like limitation or
lack of jurisdiction, etc. and not on merit,
If the order of the regulator is
temporarily stayed and the appellate /
court proceedings are pending, the
same also should be mentioned.)
V. Any other explanation / information in
regard to items I to III and other
information considered relevant for
judging fit and proper

Undertaking
I confirm that the above information is to the best of my knowledge and
belief true and complete. I undertake to keep the HFC fully informed, as
soon as possible, of all events which take place subsequent to my
appointment which are relevant to the information provided above.

I also undertake to execute the deed of covenant required to be executed

by all Directors of the HFC.

Place : Signature

Date :

VI. Remarks of Chairman of Nomination Committee / Board of Directors

of HFC

Place : Signature

Date :

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 Annex-3
3.1.4. Form of Deed of Covenants with a Director
Form of Deed of Covenants with a Director

THIS DEED OF COVENANTS is made this ………. day of ………………….

Two Thousand……………………..BETWEEN ……………………………………
having its registered office at ……………………………………………………..
(hereinafter called the “HFC”) of the one part and Mr/Ms
………………………….. of ................................................................ (hereinafter
called the “Director”) of the other part.

WHEREAS

A. The director has been appointed as a director on the Board of Directors of

the HFC (hereinafter called "the Board") and is required as a term of his / her
appointment to enter into a Deed of Covenants with the HFC.

B. The director has agreed to enter into this Deed of Covenants, which has
been approved by the Board, pursuant to his said terms of appointment.

NOW IT IS HEREBY AGREED AND THIS DEED OF COVENANTS

WITNESSETH AS FOLLOWS:

1. The director acknowledges that his / her appointment as director on the Board
of the HFC is subject to applicable laws and regulations including the
Memorandum and Articles of Association of the HFC and the provisions of
this Deed of Covenants.

2. The director covenants with the HFC that:

(i) The director shall disclose to the Board the nature of his / her interest,
direct or indirect, if he / she has any interest in or is concerned with a
contract or arrangement or any proposed contract or arrangement
entered into or to be entered into between the HFC and any other
person, immediately upon becoming aware of the same or at meeting
of the Board at which the question of entering into such contract or
arrangement is taken into consideration or if the director was not at the
date of that meeting concerned or interested in such proposed contract
or arrangement, then at the first meeting of the Board held after he /
she becomes so concerned or interested and in case of any other
contract or arrangement, the required disclosure shall be made at the
first meeting of the Board held after the director becomes concerned
or interested in the contract or arrangement.

(ii) The director shall disclose by general notice to the Board his / her other
directorships, his / her memberships of bodies corporate, his / her
interest in other entities and his / her interest as a partner or proprietor
of firms and shall keep the Board apprised of all changes therein.

(iii) The director shall provide to the HFC a list of his / her relatives as
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 defined in the Companies Act, 1956 or 2013 and to the extent the
director is aware of directorships and interests of such relatives in
other bodies’ corporate, firms and other entities.

(iv) The director shall in carrying on his / her duties as director of the HFC:

a) use such degree of skill as may be reasonable to expect from a

person with his / her knowledge or experience;
b) in the performance of his / her duties take such care as he / she
might be reasonably expected to take on his / her own behalf and
exercise any power vested in him / her in good faith and in the
interests of the HFC;
c) shall keep himself / herself informed about the business, activities
and financial status of the HFC to the extent disclosed to him / her;
d) attend meetings of the Board and Committees thereof (collectively
for the sake of brevity hereinafter referred to as "Board") with fair
regularity and conscientiously fulfil his / her obligations as director
of the HFC;
e) shall not seek to influence any decision of the Board for any
consideration other than in the interests of the HFC;
f) shall bring independent judgment to bear on all matters affecting
the HFC brought before the Board including but not limited to
statutory compliances, performance reviews, compliances with
internal control systems and procedures, key executive
appointments and standards of conduct;
g) shall in exercise of his / her judgement in matters brought before
the Board or entrusted to him / her by the Board be free from any
business or other relationship which could materially interfere with
the exercise of his / her independent judgement; and
h) shall express his / her views and opinions at Board meetings
without any fear or favour and without any influence on exercise of
his / her independent judgement;

(v) The director shall have:

a) fiduciary duty to act in good faith and in the interests of the HFC
and not for any collateral purpose;
b) duty to act only within the powers as laid down by the HFC’s
Memorandum and Articles of Association and by applicable laws
and regulations; and
c) duty to acquire proper understanding of the business of the HFC.

(vi) The director shall:

a) not evade responsibility in regard to matters entrusted to him / her

by the Board;
b) not interfere in the performance of their duties by the whole-time
Directors and other officers of the HFC and wherever the director
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 has reasons to believe otherwise, he / she shall forthwith disclose
his / her concerns to the Board; and
c) not make improper use of information disclosed to him / her as a
member of the Board for his / her or someone else’s advantage or
benefit and shall use the information disclosed to him / her by the
HFC in his / her capacity as director of the HFC only for the
purposes of performance of his / her duties as a director and not
for any other purpose.
d) make declaration to the effect that:
(i) he/she has not been associated with any unincorporated body
that is accepting deposits;
(ii) he/she has not been associated with any company, the
application for Certificate of Registration (CoR) of which has
been rejected by the National Housing Bank;
(iii) there is no criminal case, including for offence under section
138 of the Negotiable Instruments Act, against him/her.

3. The HFC covenants with the director that:

(i) the HFC shall apprise the director about:

a) Board procedures including identification of legal and other duties
of Director and required compliances with statutory obligations;
b) control systems and procedures;
c) voting rights at Board meetings including matters in which Director
should not participate because of his / her interest, direct or
indirect therein;
d) qualification requirements and provide copies of Memorandum
and Articles of Association;
e) corporate policies and procedures;
f) insider dealing restrictions;
g) constitution of, delegation of authority to and terms of reference of
various committees constituted by the Board;
h) appointments of Senior Executives and their authority;
i) remuneration policy;
j) deliberations of committees of the Board, and
k) communicate any changes in policies, procedures, control
systems, applicable regulations including Memorandum and
Articles of Association of the HFC, delegation of authority, Senior
Executives, etc. and appoint the compliance officer who shall be
responsible for all statutory and legal compliance.
(ii) the HFC shall disclose and provide to the Board including the director
all information which is reasonably required for them to carry out their
functions and duties as a director of the HFC and to take informed
decisions in respect of matters brought before the Board for its
consideration or entrusted to the director by the Board or any

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 committee thereof;

(iii) the disclosures to be made by the HFC to the Directors shall include
but not be limited to the following:

a) all relevant information for taking informed decisions in respect of

matters brought before the Board;
b) HFC’s strategic and business plans and forecasts;
c) organisational structure of the HFC and delegation of authority;
d) corporate and management controls and systems including
procedures;
e) economic features and marketing environment;
f) information and updates as appropriate on HFC’s products;
g) information and updates on major expenditure;
h) periodic reviews of performance of the HFC; and
i) report periodically about implementation of strategic initiatives and
plans.

(iv) the HFC shall communicate outcome of Board deliberations to

Directors and concerned personnel and prepare and circulate minutes
of the meeting of Board to Directors in a timely manner and to the extent
possible within two business days of the date of conclusion of the Board
meeting; and

(v) advise the director about the levels of authority delegated in matters
placed before the Board.

4. The HFC shall provide to the director periodic reports on the functioning of
internal control system including effectiveness thereof.

5. The HFC shall appoint a compliance officer who shall be a senior executive
reporting to the Board and be responsible for setting forth policies and
procedures and shall monitor adherence to the applicable laws and
regulations and policies and procedures including but not limited to
directions of National Housing Bank and other concerned statutory and
governmental authorities.

6. The director shall not assign, transfer, sublet or encumber his / her office
and his / her rights and obligations as director of the HFC to any third party
provided that nothing herein contained shall be construed to prohibit
delegation of any authority, power, function or delegation by the Board or
any committee thereof subject to applicable laws and regulations including
Memorandum and Articles of Association of the HFC.

7. The failure on the part of either party hereto to perform, discharge, observe
or comply with any obligation or duty shall not be deemed to be a waiver
thereof nor shall it operate as a bar to the performance, observance,
discharge or compliance thereof at any time or times thereafter.

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 8. Any and all amendments and / or supplements and / or alterations to this Deed
of Covenants shall be valid and effectual only if in writing and signed by the
director and the duly authorised representative of the HFC.

9. This Deed of Covenants has been executed in duplicate and both the copies
shall be deemed to be originals.

IN WITNESS WHEREOF THE PARTIES HAVE DULY EXECUTED THIS

AGREEMENT ON THE DAY, MONTH AND YEAR FIRST ABOVE WRITTEN.

For the HFC Director

By …………………..

Name: Name:

Title:

In the presence of:

1……………………………….. 2. ………………………….

3.1.5. General Criteria for Positive Attributes. [as mandated by Part D Schedule II of Listing Regulations]

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 The Nomination and Remuneration Committee shall also consider whether each
candidate for directorship and each director possess the following:

 The highest level of personal and professional ethics, reputation, integrity and
values;
 An appreciation of the Company’s mission and purpose, and loyalty to the
interests of the Company and its shareholders;
 The ability to exercise objectivity and independence in making informed business
decisions;
 The willingness and commitment to devote the extensive time necessary to fulfill
his / her duties;
 The ability to communicate effectively and collaborate with other board members
to contribute effectively to the diversity of perspectives that enhances Board and
Committee deliberations, including willingness to listen and respect the views of
the others;
 The skills, knowledge and expertise relevant to the Company’s business.

In its evaluation, the Nomination and Remuneration Committee shall consider the
Board size and composition of the Board according to the following guidelines:

 With respect to Board composition as a whole, the Board would compose of

executive, non-executive directors from promoter category and directors who
qualify as ‘independent’ pursuant to section 149(6) of the Companies Act, 2013
read with Rule 5 of Companies (Appointment And Qualification of Directors)
Rules, 2014.

 With respect to Audit Committee, 1) all the members must be ‘independent’

pursuant to section 149(6) of the Companies Act, 2013 read with Rule 5 with
Companies (Appointment And Qualification of Directors) Rules, 2014; 2) all
members of audit committee shall be financially literate and atleast one
member shall have accounting or related financial management expertise.

 With respect to Executive Committee it would compose of executive director

and independent directors pursuant to Rule 5 of Companies (Appointment And
Qualification of Directors) Rules, 2014.

 With respect to other Committees such as Debenture Allotment Committee,

Nomination and Remuneration Committee, CSR Committee, Risk

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 Management Committee etc. the composition would compose of executive
director and independent directors pursuant to Rule 5 of Companies
(Appointment And Qualification of Directors) Rules, 2014.

3.2. Director’s Induction and Development

 The Nomination and Remuneration committee shall ensure familiarization
programme for new directors.
 The familiarization programme may include:
 Roles, rights and responsibilities of directors.
 Mechanisms to build working relationship among the Board members.
 General understanding of marketing, finance, research, corporate
governance, legal including compliance of laws, human resources, labour
welfare and other disciplines relevant to the success of a housing finance
company in today’s competitive environment, understanding of the
company’s business.
 Industry / sectoral overview, company’s vision, strategy etc.
 Directors to update knowledge on general environment in which the Company
functions.
 The Nomination and Remuneration committee will support the directors, as may
be required, to continually update their skills and knowledge and their familiarity
with the company and its business.
 The Company will fund / arrange for training on all matters which are common to
the Board.

3.3. Director Remuneration

 Non-executive Independent Directors are not paid any fees or compensation /
commission other than Directors’ Sitting fee of Rs.35,000/- per meeting for
attending Board, Rs.25,000/- per meeting for attending Executive Committee
meeting, Rs.25000/- per meeting for attending Debenture Allotment Committee
meeting / Audit Committee meeting/ IT Strategy Committee meeting,
Rs.15,000/- per meeting for attending Risk Management Committee /
Nomination & Remuneration Committee / Stakeholder Relationship Committee
/ Investment Committee Meetings.
 No fees paid to the Chairman, Non-Executive (Promoter) Director and
Managing Director & CEO. However, remuneration is being paid to Managing
Director & CEO as applicable to an officer in the cadre of Executive Director of
LIC of India.

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3.4. Insurance

 Directors’ and Officers’ liability insurance should be taken covering all directors and
senior officials for such amount, as is determined to be reasonable by the Board.

3.5. Subsidiary Oversight

 The Nomination and Remuneration committee of the holding / parent company will
provide guidelines for remuneration of directors on material subsidiaries*. Holding
company whose equity is listed, need to follow the provisions of Regulation
24 which are as follows:
 The minutes of the Board meetings of the unlisted subsidiary company shall
be placed at the Board meeting of the listed holding company. The
management of the unlisted subsidiary shall periodically bring to the notice
of the Board of Directors of the listed holding company, a statement of all
significant transactions and arrangements entered into by the unlisted
subsidiary company.
Explanation: For the purpose of this regulation, the term ‘significant
transaction or arrangement shall mean any individual transaction or
arrangement that exceeds or is likely to exceed ten percent of the total
revenue or total expenses or total assets or total liabilities, as the case may
be, of the unlisted material subsidiary for the immediately preceding
accounting year.
 The Audit Committee of the listed holding company shall also review the
financial statements, in particular, the investments made by the unlisted
subsidiary company.
 Audit Committee of the material subsidiary* (as required by law or for business
reasons) may consider and adopt the policies, procedures and processes laid
down by the Audit Committee of the holding company. Further, critical issues may
be referred by the Audit Committee of the material subsidiary* to the Audit
committee of the holding company.
 The chief internal auditor of the holding company shall oversee the internal audit
and risk management function of all material* / non-material subsidiaries and will
carry out periodic assessments either directly or through an outsourced / internal
arrangement.
[* in our case there is no material subsidiary. The term material non listed Indian
subsidiary shall mean an unlisted subsidiary, incorporated in India, whose income
or net worth (i.e. paid up capital and free reserves) exceeds 20% of the

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 consolidated income or net worth respectively, of the listed holding company and
its subsidiaries in the immediately preceding accounting year. For this reason one
of the provision of Regulation 24 i.e. Atleast one independent director on the Board
of Directors of the listed entity shall be a director on the board of directors of an
unlisted material subsidiary, incorporated in India is not applicable in our case].

4. Board Effectiveness Review

The performance evaluation of independent directors shall be done by the entire Board
of Directors, excluding the director being evaluated.
On the basis of the report of performance evaluation, it shall be determined whether to
extend or continue the term of appointment of the independent director.
 It is the responsibility of the Nomination and Remuneration Committee to formulate
criteria determining Director Qualification, positive attributes, criteria for evaluation
of Independent Director and Board.
 An annual meeting of Independent Directors would be convened by Chairman of
the Nomination and Remuneration Committee to
 Review the performance of the Non-Independent Directors (executive /
non-executive promoter directors and one non-executive and non-
independent director);
 Review the performance of the Board as a whole;
 Review the performance of the Chairman of the company, taking into
account the views of executive directors and non-executive directors.
 Assess the quality, quantity and timeliness of flow of information between
the management of the company and the board of directors that is
necessary for the board of directors to effectively and reasonably perform
their duties.

4.1. Board Evaluation

4.1.1. Board Questionnaire
 On an annual basis, each independent director in the independent directors’
meeting would evaluate the Board as a whole on a defined questionnaire template
confidentially (Annexure Q attached provides the indicative questionnaire
template).
 Some indicative areas for Board evaluation include:
 Degree of fulfillment of key responsibilities;
 Board size and composition;
 Effectiveness of Board process and functioning;

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  Access to relevant and timely information
 Establishment of corporate strategy, risk policy, annual budgets and
business plans.
4.1.2. Annual Independent Directors meeting and Evaluation of Non-
Executive and Executive Promoter Directors [as mandated by Act and Regulation 25
of the Listing Regulations]

 The Chairman of the Nomination and Remuneration Committee would convene an

Annual Independent Directors’ meeting to review performance of the Board as a
whole. In the same meeting, the Independent Directors will also review the
performance of the non-Independent and non-executive director, non-executive
(Promoter) director, executive (promoter) director, review the performance of the
Chairman of the company, taking into account the views of executive directors and
non-executive directors.
 The process for evaluation of the Board, Chairman, Non-Executive promoter
director, is as follows:
 In the beginning, the Board Evaluation Questionnaire would be distributed amongst
all the Independent Directors for their feedback and comments if any.
 After evaluation of Board, Chairman could be evaluated. Questionnaire for
evaluation of Chairman would be distributed to all the Independent Directors for
feedback and comments if any. Likewise evaluation of Non-Executive promoter
director would be initiated by following the above i.e. questionnaire for evaluation
of Non-Executive Promoter Director would be distributed to all the Independent
Directors for feedback and comments if any. Similarly evaluation of non- executive
and non-independent director would be initiated by following the above i.e.
questionnaire for evaluation of non-executive and non-independent director would
be distributed to all the Independent Directors for feedback and comments if any.

Managing Director (executive) would be evaluated by following the above i.e.

questionnaire for evaluation of Executive Promoter Director would be distributed to
all the Independent Directors for feedback and comments if any. Further, the
Managing Director (executive) would also be evaluated based on the parameters
set at the beginning of the year by the Nomination and Remuneration Committee.

4.1.3. Independent Directors Evaluation

 The performance evaluation of Independent Directors shall be done by the entire
of Board of Directors (excluding the director being evaluated). The Non- Executive
Independent Director Evaluation Questionnaire would be distributed amongst all
the Directors, excluding the director being evaluated. That is to say if Mr. X is to be

46 | P a g e
 evaluated, then evaluation questionnaire assessing Mr. X will be distributed to all
the Board members, except Mr. X. Once feedback of all the board members
(excluding Mr. X) is obtained then another director say Mr. Y would be evaluated
by distributing evaluation questionnaire evaluating Mr. Y would be distributed to all
the Board members (except Mr. Y) for obtaining feedback and comments of the
Board members (other than Mr. Y) if any. Likewise to follow similar steps for
evaluation of rest of other independent directors.

4.1.4. Following are suggestive / advisory in nature

 The minutes of the Annual Independent Directors meeting will record the process.
Post the Annual Independent Directors meeting, the collective feedback of the
Independent Directors will be discussed by the Chairman of the Nomination and
Remuneration Committee with the Chairman of the Board covering:
o Performance evaluation of the Board as a whole;
o Performance evaluation of the Non-Executive and Executive Promoter
Directors;
o Performance evaluation of the Chairman of the company;
o Performance evaluation of Independent Directors.
o On the basis of the report of performance evaluation, it shall be determined whether
to extend or continue the term of appointment of the Independent Director.
 It is critical that any agreed actions that come out of an evaluation are implemented
and monitored if the board is to move to the next stage of maturity. Therefore, the
Board if it desires could include a review of actions steps as an agenda item to be
tracked at each meeting. Milestones could be established for the achievement of
the action plans and progress reviewed until all agreed changes have been
implemented. These activities could be documented in a ‘board road map’.

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