Banking Industry

Protecting its Group 7

Reputation
Gautam Kaul H20020
Mahimn Bhatt BJ0027
Mainak Roy H20031
Rubak Bhatachharya H20182
Vachica Gupta H20058
 AU Small Finance Bank Corporate Governance Philosophy
Good Governance is the cornerstone to build trust with investors, customers, & employees.
Strong belief that Good Governance is the only way to grow in lending business

4 Defence Layers of CG=> 158 member CG Team

Converted to a small finance bank in 2017

MD & CEO - Mr. Sanjay Agarwal
Chairman – Raj Vikash Verma
Services

Payment Products
Loans Deposits
& Services
Corporate Governance Overview
Target Segment
Company Statistics • 9 Board of Directors – Tenure of 3 years, Narendra Ostawal resigned
• Number of Board meetings held in the financial Year – 11
• Fortune India: 355/500 • List of committee apart from aforementioned-
• No. Of employees: 23K o Stakeholder Relationship Committee – 4 members
Low & Middle Micro & Small • Annual Revenue: 3.8K Cr o CSR Committee – 5 Members
Income Indv. Businesses • Net Income: 1.71K Cr o Review of Classification of Wilful Defaulters Committee – 4 members
• Credit Rating – AA o Special Committee on Fraud monitoring – 5 members
• Operates in 15 states & 2UT o Disciplinary Committee – 4 members
• Provides Secured Loans o Committee on financial inclusion – 4 members
Category 1 : Rights & Equitable treatment of Shareholders (CG Score -20/36)
Pros
• Entire board attended the
last AGM
• AGM was held within 4
months after closing the
financial year
• There is policy pertaining
to conflict of interest
• No prejudice against
minority shareholders
Category 2 : Role of Stakeholders (CG Score – 17/18)
Pros
• SRC Committee in place
• Huge focus on welfare &
Safety of employees
• High Credit Rating,
improving on YoY basis
• Strong emphasis on ethical
& anti-bribery policy
• Detailed report on CSR
• Grievance Redressal &
Whistle-blower Policy
Category 3 : Disclosure & Transparency (CG Score – 38/46)
Areas Of Improvements
• No information of
Royalty pay-outs is
provided in the report
• The latest charter of
documents highlighting
the voting rights of board
or disproportionate
power is not available
Areas Of Improvements
• In-case of the banking
Industry the suppliers are
the depositors,
management policies of
the company get
extended to the suppliers,
but nothing has been
mentioned for selection
of suppliers
Pros
• Financial performance
was disclosed on a
quarterly basis
• Strong emphasis on Non-
financial information
• The risks and mitigation
steps have been stated
• Notice of board meetings
is shared in advance
• Transcripts of meetings
are shared
Category 4 : Responsibilities of the Board (CG Score – 35/38)
Pros
• Attendance has been
almost 100% cumulatively
• 11 Board meetings last yr
• The Chairman’s term is 3
years and was changed
recently (Independent)
• 5/9 are independent dir.
• The Board has skills and
exp pertaining to banking
Areas Of Improvements
• Reasons can be
mentioned along with %
of people who voted
against a resolution
• No clear information of
external auditor
• Responsibilities of Senior
leaders to be mentioned
• Experience and tenure of
the board should be
mentioned
Areas Of Improvements
• 1/8 in the board is
women
• The succession Planning
metrics have not been
clearly defined
Corporate Governance
Audit Committee

Nomination, Remuneration, Ethics and Compensation Committee

Stakeholders Relationship Committee

Credit Committee

Investment and Raising Capital Committee

Risk Management Committee

Customer Service, Marketing Strategy & Digital Banking Committee

Special Committee of the Board for Monitoring and Follow up of Cases of Frauds

Committee for Human Resources Policy

Information Technology & Operations Committee

Review Committee of the Board on Non Co- Operative Borrowers

Corporate Social Responsibility Committee

Review Committee of the Board for Willful Defaulters

Category 1 : Rights & Equitable treatment of Shareholders (CG Score -)
Pros
• Clear & defined RPT
policy.
• Policy to facilitate
disclosure of conflicts of
interest by stakeholders
• AGMs held 2 months
within end of Fiscal Year
• External auditors
participate in AGM
• Provides e-voting option
Category 2 : Role of Stakeholders (CG Score – 17/18)
Pros
• SRC Committee in place
• Policies publicly available
for supplier selection
• High Credit Rating,
improving on YoY basis
• Strong emphasis on ethical
& anti-bribery policy
• Detailed report on CSR
• Grievance Redressal &
Whistle-blower Policy
Category 3 : Disclosure & Transparency (CG Score)
Areas Of Improvements
• Stakeholder rights needs
more clarity
• Issues are often clubbed
in resolutions
• Needs easier access
methods for shareholder
documents & rights
• Optionally can include
transcripts of
shareholder questions in
meetings.
Areas Of Improvements
• The policies are publicly
disclosed but the
company has not
provided information on
the number of employee
accidents and sexual
harassment incidents
Pros
• Policy for determining
and disclosing material
information
• Company has made
timely disclosures in the
past three years
• Disclosed quarterly
financial performance for
each of the past 4
quarters
Category 4 : Responsibilities of the Board (CG Score - )
Pros
• Attendance has been
almost 98% cumulatively
• 8 Board meetings last yr
• 8/11 are independent dir.
• The Board has skills and
exp pertaining to banking
• Non- exec director has
prior working experience
in the major industry the
company operates in
Areas Of Improvements
• Needs better disclosures
on foreseeable risk
• The entire transcript/
webcast of the meeting is
publicly not available
• A detailed framework is
not disclosed for training
and development, &
orientation program for
directors
Areas Of Improvements
• 2/11 in the board is
women
• Attendance for some
directors lagging
• Variable Pay information
is not clearly stated
• Succession plan lacing for
senior leadership
MD&CEO – Sashidhar Jagdishan
Chairman – Atanu Chakraborty

Growth Engines
• Wholesale Banking
• Retail Banking
• Treasury

Corporate • Adopting the best governance practices

Company Statistics
• Headquarters - Mumbai
• Operations - PAN India
• Number of employees – 120093
• Revenue – 90084 Crores
• Profit After Tax – 31116 Crores
• Market Share – 23%
Governance • Transparent disclosures
• Shareholder empowerment
Philosophy
Composition of Board of Directors
• Executive directors - 2
• Non- executive directors - 2
• Independent directors - 6
 Cons
Pros
• The report doesn’t mention how the issues are resolved
whether they are clubbed or not
• The external auditors do not attend or participate in the
• Maintains transparency (High score for Disclosure & Transparency)
AGM
• dividend policy
• No policy in place to disclose reasons behind pledging
• AGM webcast
of shares
• Shareholder meeting details
• The roles and responsibilities of senior executives was
• Segmental information
not very clear in the report.
• Number of board meetings – 17
• There were 2 controversies
• CSR Committee for the CSR Initiative - Parivartan (Rs 694 Crores,
2.03% of average profits)
• In Dec 2020, RBI ordered temporary halt the issuance of
• Committees for different verticals new credit cards
• Audit Committee – 4 members (All Independent Directors) • In Jan 2020, RBI imposed a monetary penalty of 1 crore
• Stakeholders’ Relationship Committee - 4 members (All
for non-compliance with Master Direction on KYC
Independent Directors) • The company report doesn't say much about protection
• Nomination & Remuneration Committee – 4 members of minority shareholders
• Risk Policy and Monitoring Committee - 5 members
• Board performance evaluation
Comparison of CG Scores in Banking Industry
Analysis of the Industry
AU Small Federal
Max Score Finance HDFC Bank • Banking industry as a whole lays high
Bank Bank
emphasis on Corporate Governance
Rights and (In Top 3 after IT and Telecom)
Equitable
treatment of 36 20 26 27
shareholders
• All the companies have high scores in
roles of stakeholders and disclosure and
transparency
Role of
Stakeholders 18 17 17 14
• Overall improvements could be-
o Role of the Senior Management
Disclosure & should be clearly defined
Transparency 46 38 40 41
o Risks and mitigation should be
clearly defined
Responsibilities o Audit committee should be
on Board 38 35 29 30
comprised of independent directors
o Succession planning pipeline and
nomination guidelines should be
Weighted Score 100 78.52 78.95 79.51 clearly defined
o Protection policies should be
established for minority
shareholders