Balance Sheet

As at March 31, 2014

` in ‘000
As at As at
Schedule 31-Mar-14 31-Mar-13
CAPITAL AND LIABILITIES

Capital 1 4,798,101 4,758,838

Reserves and surplus 2 429,988,169 357,382,646

Deposits 3 3,673,374,777 2,962,469,846

Borrowings 4 394,389,918 330,065,972

Other liabilities and provisions 5 413,444,042 348,641,671

Total 4,915,995,007 4,003,318,973

ASSETS

Cash and balances with Reserve Bank of India 6 253,456,277 146,273,990

Balances with banks and money at call and short notice 7 142,380,101 126,527,699

Investments 8 1,209,510,703 1,116,135,953

Advances 9 3,030,002,712 2,397,206,432

Fixed assets 10 29,399,180 27,030,813

Other assets 11 251,246,034 190,144,086

Total 4,915,995,007 4,003,318,973

Contingent liabilities 12 7,231,549,138 7,201,224,293

Bills for collection 209,430,623 261,039,630

Significant accounting policies and notes to the

17 & 18
financial statements

The schedules referred to above form an integral part of

the Balance Sheet.

As per our report of even date. For and on behalf of the Board
For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Renu Karnad
Sanjay Dongre Sashidhar Jagdishan
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 32

Statement of Profit and Loss
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
Schedule 31-Mar-14 31-Mar-13
I INCOME
Interest earned 13 411,355,336 350,648,736
Other income 14 79,196,415 68,526,226
Total 490,551,751 419,174,962
II EXPENDITURE
Interest expended 15 226,528,999 192,537,521
Operating expenses 16 120,421,981 112,361,165
Provisions and contingencies 58,817,010 47,013,428
Total 405,767,990 351,912,114
III PROFIT
Net profit for the year 84,783,761 67,262,848
Balance in Profit and Loss account brought forward 111,321,846 83,996,470
Total 196,105,607 151,259,318
IV APPROPRIATIONS
Transfer to Statutory Reserve 21,195,941 16,815,712
Proposed dividend 16,433,495 13,090,810
Tax (including cess) on dividend 2,792,873 2,224,783
Dividend (including tax / cess thereon) pertaining to previous
year paid during the year 48,462 44,748
Transfer to General Reserve 8,478,376 6,726,285
Transfer to Capital Reserve 582,710 858,498
Transfer to / (from) Investment Reserve Account 32,218 176,636
Balance carried over to Balance Sheet 146,541,532 111,321,846
Total 196,105,607 151,259,318
V EARNINGS PER EQUITY SHARE (Face value ` 2 per share) ` `
Basic 35.47 28.49
Diluted 35.21 28.18
Significant accounting policies and notes to the financial statements 17 & 18
The schedules referred to above form an integral part of the
Statement of Profit and Loss.

As per our report of even date. For and on behalf of the Board
For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Renu Karnad
Sanjay Dongre Sashidhar Jagdishan
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 33

Cash Flow Statement
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
Particulars
31-Mar-14 31-Mar-13

Cash flows from operating activities

Net profit before income tax 127,720,506 97,506,268

Adjustments for :

Depreciation on fixed assets 6,716,076 6,516,663

(Profit) / loss on revaluation of investments (65,078) (348,627)

Amortisation of premia on held to maturity investments 806,470 582,183

(Profit) / loss on sale of fixed assets (33,019) 10,566

Provision / charge for non performing assets 17,526,727 13,131,395

Provision / charge for diminution in value of investment (41,196) 522,145

Floating provisions 300,000 4,000,000

Provision for standard assets 2,212,886 1,237,140

Provision for wealth tax 7,500 6,000

Contingency provisions (2,924,758) (1,337,374)

152,226,114 121,826,359

Adjustments for :

(Increase) / decrease in investments (86,209,196) (142,070,919)

(Increase) / decrease in advances (650,494,318) (455,574,678)

Increase / (decrease) in deposits 710,904,931 495,405,387

(Increase) / decrease in other assets (63,728,736) 33,698,441

Increase / (decrease) in other liabilities and provisions 61,447,568 (34,603,665)

124,146,363 18,680,925

Direct taxes paid (net of refunds) (40,510,341) (37,368,738)

Net cash flow from operating activities 83,636,022 (18,687,813)

Cash flows used in investing activities

Purchase of fixed assets (8,174,144) (8,631,976)

Proceeds from sale of fixed assets 127,266 43,136

Investment in subsidiaries and / or joint ventures (7,865,750) -

Net cash used in investing activities (15,912,628) (8,588,840)

HDFC Bank Limited Annual Report 2013-14 34

Cash Flow Statement
For the year ended March 31, 2014
` in ‘000

Year Ended Year Ended

Particulars
31-Mar-14 31-Mar-13
Cash flows from financing activities

Money received on exercise of stock options by employees 7,232,947 11,171,000

Increase / (decrease) in borrowings (excluding subordinate debt,

63,760,946 36,789,886
perpetual debt and upper tier II instruments)

Proceeds from issue of upper & lower Tier II capital instruments - 54,470,000

Dividend paid during the year (13,134,876) (10,130,544)

Tax on dividend (2,229,179) (1,641,937)

Net cash generated from financing activities 55,629,838 90,658,405

Effect of exchange fluctuation on translation reserve (318,543) 42,673

Net increase / (decrease) in cash and cash equivalents 123,034,689 63,424,426

Cash and cash equivalents as at April 1st 272,801,689 209,377,263

Cash and cash equivalents as at March 31st 395,836,378 272,801,689

As per our report of even date. For and on behalf of the Board
For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner Keki Mistry
Membership No.: 046768
Renu Karnad
Sanjay Dongre Sashidhar Jagdishan
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 35

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 1 - CAPITAL
Authorised capital
2,75,00,00,000 (31 March, 2013 : 2,75,00,00,000) Equity Shares of ` 2/- each 5,500,000 5,500,000
Issued, subscribed and paid-up capital
2,39,90,50,435 (31 March, 2013 : 2,37,94,19,030) Equity Shares of ` 2/- each 4,798,101 4,758,838
Total 4,798,101 4,758,838
SCHEDULE 2 - RESERVES AND SURPLUS
I Statutory reserve
Opening balance 69,908,483 53,092,771
Additions during the year 21,195,941 16,815,712
Total 91,104,424 69,908,483
II General reserve
Opening balance 26,129,001 19,402,716
Additions during the year 8,478,376 6,726,285
Total 34,607,377 26,129,001
III Balance in profit and loss account 146,541,532 111,321,846
IV Share premium account
Opening balance 135,148,961 124,261,852
Additions during the year 7,415,134 10,887,109
Total 142,564,095 135,148,961
V Amalgamation reserve
Opening balance 10,635,564 10,635,564
Additions during the year - -
Total 10,635,564 10,635,564
VI Capital reserve
Opening balance 3,813,175 2,954,677
Additions during the year 582,710 858,498
Total 4,395,885 3,813,175
VII Investment reserve account
Opening balance 176,636 -
Additions during the year 342,831 231,802
Deductions during the year (310,612) (55,166)
Total 208,855 176,636
VIII Foreign currency translation account
Opening balance 248,980 206,308
Additions / (deductions) during the year (318,543) 42,672
Total (69,563) 248,980
Total 429,988,169 357,382,646

HDFC Bank Limited Annual Report 2013-14 36

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 3 - DEPOSITS
A I Demand deposits
(i) From banks 12,169,991 10,385,135
(ii) From others 602,710,457 512,717,671
Total 614,880,448 523,102,806
II Savings bank deposits 1,031,333,207 882,112,454
III Term deposits
(i) From banks 15,422,987 14,278,854
(ii) From others 2,011,738,135 1,542,975,732
Total 2,027,161,122 1,557,254,586
Total 3,673,374,777 2,962,469,846

B I Deposits of branches in India 3,612,313,174 2,946,407,245

II Deposits of branches outside India 61,061,603 16,062,601
Total 3,673,374,777 2,962,469,846

SCHEDULE 4 - BORROWINGS
I Borrowings in India
(i) Reserve Bank of India - 2,750,000
(ii) Other banks 14,937,256 7,246,758
(iii) Other institutions and agencies - 24,390,200
(iv) Upper and lower Tier II capital and innovative perpetual debts 160,439,000 160,439,000
Total 175,376,256 194,825,958
II Borrowings outside India* 219,013,662 135,240,014
Total 394,389,918 330,065,972
* Includes Upper Tier II debt of ` 599.15 crore (previous year : ` 542.85 crore)
Secured borrowings included in I & II above : Nil (previous year : Nil)

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

I Bills payable 56,112,013 54,787,708
II Interest accrued 25,918,488 62,714,315
III Others (including provisions) 299,581,788 205,466,652
IV Contingent provisions against standard assets 12,605,385 10,357,403
V Proposed dividend (including tax on dividend) 19,226,368 15,315,593
Total 413,444,042 348,641,671

HDFC Bank Limited Annual Report 2013-14 37

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
I Cash in hand (including foreign currency notes) 38,505,015 50,077,236
II Balances with Reserve Bank of India :
(a) In current accounts 212,951,262 94,196,754
(b) In other accounts 2,000,000 2,000,000
Total 214,951,262 96,196,754
Total 253,456,277 146,273,990
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I In India
(i) Balances with banks :
(a) In current accounts 1,746,554 3,238,144
(b) In other deposit accounts 21,201,113 46,635,317
Total 22,947,667 49,873,461
(ii) Money at call and short notice :
(a) With banks 1,000,000 17,850,000
(b) With other institutions 15,366,745 -
Total 16,366,745 17,850,000
Total 39,314,412 67,723,461
II Outside India
(i) In current accounts 40,154,939 5,876,363
(ii) In deposit accounts 2,995,750 8,142,750
(iii) Money at call and short notice 59,915,000 44,785,125
Total 103,065,689 58,804,238
Total 142,380,101 126,527,699
SCHEDULE 8 - INVESTMENTS
A Investments in India in
(i) Government securities 946,400,171 849,023,184
(ii) Other approved securities - -
(iii) Shares 1,347,904 1,244,692
(iv) Debentures and bonds 27,143,837 17,260,637
(v) Subsidiaries / joint ventures 15,413,909 7,548,159
(vi) Others (units, CDs / CPs, PTCs, security receipts and NABARD deposits) 209,989,161 236,028,115
Total 1,200,294,982 1,111,104,787
B Investments outside India in
Other investments
(a) Shares 9,396 9,396
(b) Debentures and bonds 9,206,325 5,021,770
Total 9,215,721 5,031,166
Total 1,209,510,703 1,116,135,953

HDFC Bank Limited Annual Report 2013-14 38

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
C Investments
(i) Gross value of investments
(a) In India 1,202,029,358 1,113,472,422
(b) Outside India 9,215,721 5,031,166
Total 1,211,245,079 1,118,503,588
(ii) Provision for depreciation
(a) In India 1,734,376 2,367,635
(b) Outside India - -
Total 1,734,376 2,367,635
(iii) Net value of investments
(a) In India 1,200,294,982 1,111,104,787
(b) Outside India 9,215,721 5,031,166
Total 1,209,510,703 1,116,135,953
SCHEDULE 9 - ADVANCES
A (i) Bills purchased and discounted 146,469,089 123,219,205
(ii) Cash credits, overdrafts and loans repayable on demand 1,232,781,559 945,869,566
(iii) Term loans 1,650,752,064 1,328,117,661
Total 3,030,002,712 2,397,206,432
Loans with tenor of less than one year are classified under A (ii) above

B (i) Secured by tangible assets* 2,308,167,862 1,766,063,990

(ii) Covered by bank / government guarantees 41,688,328 61,551,311
(iii) Unsecured 680,146,522 569,591,131
Total 3,030,002,712 2,397,206,432
* Including advances against book debts

C I Advances in India
(i) Priority sector 896,128,736 767,430,252
(ii) Public sector 124,180,757 84,217,368
(iii) Banks 1,177,248 917,007
(iv) Others 1,775,580,461 1,448,683,315
Total 2,797,067,202 2,301,247,942
II Advances outside India
(i) Due from banks 7,469,539 18,469,102
(ii) Due from others
(a) Bills purchased and discounted 177,402 409,362
(b) Syndicated loans 21,134,880 13,623,839
(c) Others 204,153,689 63,456,187
Total 232,935,510 95,958,490
Total 3,030,002,712 2,397,206,432
Advances are net of provisions

HDFC Bank Limited Annual Report 2013-14 39

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000

As at As at

31-Mar-14 31-Mar-13

SCHEDULE 10 - FIXED ASSETS

A Premises (including land)

Gross block

At cost on 31 March of the preceding year 11,642,619 10,519,897

Additions during the year 2,637,812 1,140,440

Deductions during the year (110,771) (17,718)

Total 14,169,660 11,642,619

Depreciation

As at 31 March of the preceding year 2,916,893 2,488,876

Charge for the year 501,047 443,998

On deductions during the year (80,762) (15,981)

Total 3,337,178 2,916,893

Net block 10,832,482 8,725,726

B Other fixed assets (including furniture and fixtures)

Gross block

At cost on 31 March of the preceding year 52,464,978 44,235,581

Additions during the year 6,544,363 8,990,318

Deductions during the year (667,757) (760,921)

Total 58,341,584 52,464,978

Depreciation

As at 31 March of the preceding year 34,159,891 28,794,662

Charge for the year 6,218,514 6,074,183

On deductions during the year (603,519) (708,954)

Total 39,774,886 34,159,891

Net block 18,566,698 18,305,087

C Assets on lease (plant and machinery)

Gross block

At cost on 31 March of the preceding year 4,546,923 4,546,923

Additions during the year - -

Total 4,546,923 4,546,923

HDFC Bank Limited Annual Report 2013-14 40

Schedules to the Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
Depreciation
As at 31 March of the preceding year 4,104,467 4,104,467
Charge for the year - -
Total 4,104,467 4,104,467
Lease adjustment account
As at 31 March of the preceding year 442,456 442,456
Charge for the year - -
Total 442,456 442,456
Unamortised cost of assets on lease - -
Total 29,399,180 27,030,813
SCHEDULE 11 - OTHER ASSETS
I Interest accrued 45,949,256 39,209,326
II Advance tax / tax deducted at source (net of provisions) 12,687,606 15,789,085
III Stationery and stamps 202,985 165,999
IV Non banking assets acquired in satisfaction of claims - -
V Bond and share application money pending allotments 9,029 29,333
VI Security deposit for commercial and residential property 3,728,696 4,062,868
VII Others* 188,668,462 130,887,475
Total 251,246,034 190,144,086
*Includes deferred tax asset (net) of ` 1,859.51 crore (previous year: ` 1,904.85 crore)

SCHEDULE 12 - CONTINGENT LIABILITIES

I Claims against the bank not acknowledged as debts - taxation 8,309,000 9,349,100
II Claims against the bank not acknowledged as debts - others 825,707 3,975,400
III Liability on account of outstanding forward exchange contracts 4,753,861,196 4,467,860,687
IV Liability on account of outstanding derivative contracts 2,009,620,394 2,292,213,027
V Guarantees given on behalf of constituents :
- In India 210,323,779 162,354,571
- Outside India 35,915,763 3,993,576
VI Acceptances, endorsements and other obligations 192,095,251 220,595,426
VII Other items for which the bank is contingently liable 20,598,048 40,882,506
Total 7,231,549,138 7,201,224,293

HDFC Bank Limited Annual Report 2013-14 41

Schedules to the Financial Statements
For the year ended March 31, 2014
` in ‘000
Year ended Year ended
31-Mar-14 31-Mar-13
SCHEDULE 13 - INTEREST EARNED
I Interest / discount on advances / bills 316,869,165 268,223,935
II Income from investments 90,368,457 78,202,586
III Interest on balance with RBI and other inter-bank funds 3,559,920 2,816,311
IV Others 557,794 1,405,904
Total 411,355,336 350,648,736

SCHEDULE 14 - OTHER INCOME

I Commission, exchange and brokerage 57,349,490 51,669,046
II Profit / (loss) on sale of investments (net) 1,039,436 1,264,352
III Profit / (loss) on revaluation of investments (net) 65,078 348,627
IV Profit / (loss) on sale of building and other assets (net) 33,019 (10,566)
V Profit / (loss) on exchange / derivative transactions (net) 14,010,614 10,101,338
VI Income earned by way of dividends from subsidiaries /
9,600 7,693
companies and / or joint ventures abroad / in India
VII Miscellaneous income 6,689,178 5,145,736
Total 79,196,415 68,526,226

SCHEDULE 15 - INTEREST EXPENDED

I Interest on deposits 190,481,554 163,206,243
II Interest on RBI / inter-bank borrowings 35,362,147 28,889,728
III Other interest 685,298 441,550
Total 226,528,999 192,537,521

SCHEDULE 16 - OPERATING EXPENSES

I Payments to and provisions for employees 41,789,795 39,653,843
II Rent, taxes and lighting 9,233,001 8,406,573
III Printing and stationery 2,731,744 3,108,216
IV Advertisement and publicity 1,435,610 1,841,294
V Depreciation on bank’s property 6,716,076 6,516,663
VI Directors’ fees, allowances and expenses 8,226 7,111
VII Auditors’ fees and expenses 13,368 14,612
VIII Law charges 793,102 509,569
IX Postage, telegram, telephone etc. 4,172,410 4,023,604
X Repairs and maintenance 7,882,522 7,665,309
XI Insurance 3,414,706 2,877,862
XII Other expenditure* 42,231,421 37,736,509
Total 120,421,981 112,361,165
* Includes marketing expenses, professional fees, commission to sales agents, travel and
hotel charges, entertainment, registrar and transfer agency fees and system management fees.

HDFC Bank Limited Annual Report 2013-14 42

Schedules to the Financial Statements
For the year ended March 31, 2014
Schedule 17 - Significant accounting policies appended to and forming part of the financial statements for the year
ended March 31, 2014.
A BACKGROUND
HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company engaged
in providing a range of banking and financial services including commercial banking and treasury operations. The Bank is
governed by the Banking Regulation Act, 1949. The Bank has overseas branch operations in Bahrain and Hong Kong.
B BASIS OF PREPARATION
The financial statements have been prepared and presented under the historical cost convention and accrual basis of
accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (‘GAAP’),
statutory requirements prescribed under the Banking Regulation Act 1949, circulars and guidelines issued by the Reserve
Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) notified under the Companies (Accounting Standard)
Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India.
Use of estimates :
The preparation of financial statements in conformity with GAAP requires the management to make estimates and
assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of
the financial statements and the reported income and expenses for the reporting period. Management believes that the
estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from
these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods.
C PRINCIPAL ACCOUNTING POLICIES
1 Investments
Classification :
In accordance with the RBI guidelines on investment classification and valuation, Investments are classified on the date of
purchase into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter
called “categories”). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under
each of these categories, investments are further classified under six groups (hereinafter called “groups”) - Government
Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint ventures and
Other Investments.
Recording purchase and sale transactions in securities is done following ‘Settlement Date’ accounting, except in the case of
equity shares where ‘Trade Date’ accounting is followed.
Basis of classification :
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.
Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of
subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not
classified in the above categories are classified under AFS category.
Acquisition cost :
In determining acquisition cost of an investment :
 ™ 7gd`ZgV\Z!Xdbb^hh^dc!ZiX#eV^YVii]Zi^bZd[VXfj^h^i^dc!VgZgZXd\c^hZY^ci]ZHiViZbZcid[EgdÃiVcYAdhh#
 ™ 7gd`ZceZg^dY^ciZgZhidcYZWi^chigjbZcih^hgZXd\c^hZY^ci]ZHiViZbZcid[EgdÃiVcYAdhh#
 ™ 8dhid[^ckZhibZcih^hWVhZYdci]ZlZ^\]iZYVkZgV\ZXdhibZi]dY#
Disposal of investments :
Profit / Loss on sale of investments under the aforesaid three categories is recognised in the Statement of Profit and Loss.
The profit from sale of investment under HTM category, net of taxes and transfer to statutory reserve is appropriated from
Statement of Profit and Loss to “Capital Reserve” in accordance with the RBI guidelines.
Short sale :
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines.
The short position is reflected as the amount received on sale and is classified under ‘Other Liabilities’. The short position is
marked to market and loss, if any, is charged to the Statement of Profit and Loss while gain, if any, is ignored. Profit / Loss
on settlement of the short position is recognised in the Statement of Profit and Loss.

HDFC Bank Limited Annual Report 2013-14 43

Schedules to the Financial Statements
For the year ended March 31, 2014
Valuation :
Investments classified under AFS and HFT categories are marked to market as per the RBI guidelines.
Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices
declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives Association
(‘FIMMDA’), periodically.
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’)
included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State Government securities, Other approved securities, Bonds
and Debentures) and preference shares, wherever linked to the YTM rates, is done with a mark-up (reflecting associated
credit and liquidity risk) over the YTM rates for government securities published by FIMMDA.
Special Bonds such as Oil Bonds, Fertilizer Bonds etc. which are directly issued by Government of India (‘GOI’) that do not
qualify for SLR are also valued by applying the mark up above the corresponding yield on GOI securities.
Unquoted equity shares are valued at the break-up value, if the latest balance sheet is available or at ` 1 as per the RBI
guidelines.
Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.
Treasury Bills, Commercial Papers and Certificate of Deposits being discounted instruments, are valued at carrying cost.
Security receipts are valued as per the Net Asset Value provided by the issuing Asset Reconstruction Company from time
to time.
Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the Statement
of Profit and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent of depreciation
already provided. The valuation of investments includes securities under repo transactions. The book value of individual
securities is not changed after the valuation of investments.
Investments classified under HTM category are carried at their acquisition cost and not marked to market. Any premium
on acquisition is amortised over the remaining maturity period of the security on a constant yield to maturity basis. Such
amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI
guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for.
Non-performing investments are identified and depreciation / provision is made thereon based on the RBI guidelines. The
depreciation / provision is not set off against the appreciation in respect of other performing securities. Interest on non-
performing investments is not recognised in the Statement of Profit and Loss until received.
Repo and reverse repo transactions :
In accordance with the RBI guidelines Repo and Reverse Repo transactions in government securities and corporate debt
securities (excluding transactions conducted under Liquidity Adjustment Facility (‘LAF’) and Marginal Standby Facility
(‘MSF’) with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is
accounted for as interest expense and revenue on reverse repo transactions is accounted for as interest income.
In respect of repo transactions under LAF and MSF with RBI, amount borrowed from RBI is credited to investment account
and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense. In respect of reverse repo
transactions under LAF, amount lent to RBI is debited to investment account and reversed on maturity of the transaction.
Revenues thereon are accounted for as interest income.
2 Advances
Classification :
Advances are classified as performing and non-performing based on the RBI guidelines and are stated net of bills
rediscounted, specific provisions, interest in suspense for non-performing advances, claims received from Export Credit
Guarantee Corporation, provisions for funded interest term loan classified as non-performing advances and provisions in
lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is transferred to an interest
suspense account and not recognised in the Statement of Profit and Loss until received.
Provisioning :
Specific loan loss provisions in respect of non-performing advances are made based on management’s assessment of the
degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI.

HDFC Bank Limited Annual Report 2013-14 44

Schedules to the Financial Statements
For the year ended March 31, 2014
The specific provision levels for retail non-performing assets are also based on the nature of product and delinquency levels.
Specific loan loss provisions in respect of non-performing advances are charged to the Statement of Profit and Loss and
included under Provisions and Contingencies.
Recoveries from bad debts written-off are recognised in the Statement of Profit and Loss and included under Other Income.
In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire
amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts.
The Bank maintains general provision for standard assets including credit exposures computed as per the current
marked to market values of interest rate and foreign exchange derivative contracts, and gold at levels stipulated by RBI
from time to time. In the case of overseas branches, general provision on standard advances is maintained at the higher
of the levels stipulated by the respective overseas regulator or RBI. Provision for standard assets is included under Other
Liabilities.
Provisions made in excess of these regulatory requirements or provisions which are not made with respect to specific
non-performing assets are categorised as floating provisions. Creation of floating provisions is considered by the Bank
up to a level approved by the Board of Directors. In accordance with the RBI guidelines and as per policy approved by
the Board, floating provisions are not reversed by credit to Statement of Profit and Loss. Floating provisions are used only
for contingencies under extraordinary circumstances wherein these are used for making specific provisions for impaired
accounts. Floating provisions have been included under Other Liabilities.
Further to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposures (other than for home country exposure). Countries are categorised into risk categories as per Export
Credit Guarantee Corporation of India Ltd. (‘ECGC’) guidelines and provisioning is done in respect of that country where the
net funded exposure is one percent or more of the Bank’s total assets.
In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs,
but has reasons to believe on the basis of the extant environment or specific information, the possible slippage of a specific
advance or a group of advances or exposures or potential exposures. These are classified as contingent provisions and
included under Other Liabilities.
The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s
financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would
normally involve modification of terms of the advance / securities, which would generally include, among others, alteration
of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive
reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the
restructuring package. Necessary provision for diminution in the fair value of a restructured account is made. Restructuring
of an account is done at a borrower level.
3 Securitisation and transfer of assets
The Bank securitises out its receivables, subject to the minimum holding period (‘MHP’) criteria and the minimum retention
requirements (‘MRR’) of RBI, to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such securitised-out
receivables are de-recognised in the balance sheet when they are sold (true sale criteria being fully met with) and consideration
is received by the Bank. Sales / transfers that do not meet these criteria for surrender of control are accounted for as secured
borrowings. In respect of receivable pools securitised-out, the Bank provides liquidity and credit enhancements, as specified
by the rating agencies, in the form of cash collaterals / guarantees and / or by subordination of cash flows, not exceeding
20% of the total securitised instruments, in line with RBI guidelines. The Bank also acts as a servicing agent for receivable
pools securitised-out.
The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash flows, which
are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables
are assigned directly to the purchaser and are not represented by Pass through Certificates (‘PTCs’), subject to the RBI
prescribed MHP criteria and the MRR. The RBI issued addendum guidelines on securitisation of standard assets vide its
circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct assignment
transactions undertaken subsequent to these guidelines.
Pursuant to these guidelines, the Bank amortises any profit received in cash for every individual securitisation or direct
assignment transaction at the end of every financial year. This amortisation is calculated as the maximum of either of the
three parameters stated below :

HDFC Bank Limited Annual Report 2013-14 45

Schedules to the Financial Statements
For the year ended March 31, 2014
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provisions, if any, and direct write-offs made on the MRR and any other exposures to the securitisation transaction
(other than credit enhancing interest only strip); or
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during the year as a proportion to the amount of unamortised principal at the beginning of the year; or
 ™ i]ZVbdjcid[jcVbdgi^hZYXVh]egdÃiVii]ZWZ\^cc^c\d[i]ZnZVgY^k^YZYWngZh^YjVabVijg^ind[i]ZhZXjg^i^hVi^dcdg
the direct assignment transaction.
In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken
through the direct assignment route, the Bank continues to amortise the profit / premium that arose on account of sale of
receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets
issued vide its circular dated February 1, 2006.
Any loss arising on account of sale of receivables is recognised in the Statement of Profit and Loss for the period in which
the sale occurs in accordance with the said RBI guidelines.
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines,
in the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances
and where the Bank is participating, the aggregate amount of the participation is classified under advances. In the case of
participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and where
the Bank is participating, the aggregate amount of participation is shown as due from banks under advances.
In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value
(i.e., book value less provisions held), the shortfall is charged to the Statement of Profit and Loss. If the sale is for a value
higher than the net book value, the excess provision is not reversed but is utilised to meet the shortfall / loss on account of
sale of other non-performing advances. The RBI issued new guidelines on sale of non-performing advances on February 26,
2014. In accordance with these guidelines, if the sale of non-performing advances is at a price below the net book value, the
shortfall is charged to the Statement of Profit and Loss spread over a period of two years. If the sale is for a value higher than
the net book value, the excess provision is credited to the Statement of Profit and Loss in the year the amounts are received.
The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classified as investments.
The Bank also buys loans through the direct assignment route which are classified as advances. These are carried at
acquisition cost unless it is more than the face value, in which case the premium is amortised based on effective interest
rate (EIR) method.
4 Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of
purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is
ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit /
functioning capability from / of such assets.
Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The rates of depreciation
are not lower than the rates prescribed in Schedule XIV of the Companies Act, 1956. Depreciation rates for certain key fixed
assets are given below :

Depreciation rate
Asset
per annum
Owned Premises 1.63%
Very Small Aperture Terminals (‘VSATs’) 10.00%
Automated Teller Machines (‘ATMs’) 10.00%
Office equipment 16.21%
Computers 33.33%
Motor cars 25.00%
Software and System development expenditure 20.00%
Assets at residences of executives of the Bank 25.00%

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 ™ >iZbhZmXajY^c\hiV[[VhhZihXdhi^c\aZhhi]Vc` 5,000 and point of sale terminals are fully depreciated in the year of
purchase.

HDFC Bank Limited Annual Report 2013-14 46

Schedules to the Financial Statements
For the year ended March 31, 2014
 ™ 6aadi]ZgVhhZihVgZYZegZX^ViZYVheZgi]ZgViZhheZX^ÃZY^cHX]ZYjaZM>Kd[i]Z8dbeVc^Zh6Xi!&.*+#
 ™ ;dgVhhZihejgX]VhZYVcYhdaYYjg^c\i]ZnZVg!YZegZX^Vi^dc^hegdk^YZYdcegdgViVWVh^hWni]Z7Vc`#
 ™ I]Z7Vc`jcYZgiV`ZhVhhZhhbZcid[i]ZjhZ[jaa^[Zd[VcVhhZiVieZg^dY^X^ciZgkVahiV`^c\^cidVXXdjciX]Vc\Zh^c
environment, changes in technology, the utility and efficacy of the asset in use, etc. Whenever there is a revision of the
estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life
of the said asset.
5 Impairment of assets
The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairment
loss, if any, is provided in the Statement of Profit and Loss to the extent the carrying amount of assets exceeds their
estimated recoverable amount.
6 Transactions involving foreign exchange
Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing
on the date of the transaction. Income and expenditure items of integral foreign operations (representative offices) are
translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly
average closing rates.
Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates
notified by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the balance sheet date and the resulting net valuation
profit or loss arising due to a net open position in any foreign currency is recognised in the Statement of Profit and Loss.
Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated
at closing exchange rates notified by FEDAI at the balance sheet date and the resulting profit / loss arising from exchange
differences are accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net investment
in the non-integral foreign operations in accordance with AS-11.
Foreign exchange spot and forward contracts outstanding as at the balance sheet date and held for trading, are revalued
at the closing spot and forward rates respectively as notified by FEDAI and at interpolated rates for contracts of interim
maturities. The contracts for longer maturities i.e. greater than one year are revalued using MIFOR (Mumbai Interbank
Forward Offer Rate) and contracts with USD-INR currency pair are valued using USD LIBOR (London Interbank Offered
Rate) rates. For other currency pairs, the forward points (as published by FEDAI) are extrapolated. The resulting profit or loss
on valuation is recognised in the Statement of Profit and Loss.
Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting
currency required or available at the settlement date of a transaction, and are outstanding at the balance sheet date, are
effectively valued at the closing spot rate. The premia or discount arising at the inception of such forward exchange contract
is amortised as expense or income over the life of the contract.
Currency futures contracts are marked to market daily using settlement price on a trading day, which is the closing price of
the respective futures contracts on that day. While the daily settlement price is computed on the basis of the last half an hour
weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day
of the futures contract or as may be specified by the relevant authority from time to time. All open positions are marked to
market based on the settlement price and the resultant marked to market profit / loss is daily settled with the exchange.
Contingent Liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit,
acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.
7 Derivative contracts
The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which the
derivative contracts are entered into and are re-measured at fair value as at the balance sheet or reporting dates. Derivatives
are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair value is
negative (negative marked to market value). Changes in the fair value of derivatives other than those designated as hedges
are recognised in the Statement of Profit and Loss.
Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market.
In respect of derivative contracts that are marked to market, changes in the market value are recognised in the Statement
of Profit and Loss in the relevant period. The Bank identifies the hedged item (asset or liability) at the inception of the

HDFC Bank Limited Annual Report 2013-14 47

Schedules to the Financial Statements
For the year ended March 31, 2014
transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter.
Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Profit and Loss.
Contingent Liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of
exchange notified by FEDAI as at the Balance Sheet date.
8 Revenue recognition
Interest income is recognised in the Statement of Profit and Loss on an accrual basis, except in the case of non-performing
assets where it is recognised upon realisation as per RBI norms.
Interest income on investments in PTCs and loans bought out through the direct assignment route is recognised at their
effective interest rate.
Income on non-coupon bearing discounted instruments is recognised over the tenor of the instrument on a constant effective
yield basis.
Loan processing fee is recognised as income when due. Syndication / arranger fee is recognised as income when a
significant act / milestone is completed.
Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines.
Dividend on equity shares, preference shares and on mutual fund units is recognised as income when the right to receive
the dividend is established.
Guarantee commission, commission on Letter of Credit, annual locker rent fees and annual fees for credit cards are
recognised on a straight line basis over the period of contract. Other fees and commission income are recognised when due,
except in cases where the Bank is uncertain of ultimate collection.
9 Employee benefits
Employee Stock Option Scheme (‘ESOS’)
The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank
to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees
within a specified period.
The Bank follows the intrinsic value method to account for its stock-based employee compensation plans. Compensation
cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined
under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume on
the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period.
Gratuity
The Bank provides for gratuity to all employees. The benefit is in the form of lump sum payment to vested employees on
resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15 days
basic salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The Bank
makes contributions to funds administered by trustees and managed by insurance companies for amounts notified by the
said insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes contribution to a
fund set up by eLKB and administered by the board of trustees.
The defined gratuity benefit plans are valued by an independent actuary as at the balance sheet date using the projected
unit credit method as per the requirement of AS-15 (Revised 2005), Employee Benefits, to determine the present value
of the defined benefit obligation and the related service costs. Under this method, the determination is based on actuarial
calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial
gain or loss is recognised in the Statement of Profit and Loss.
Superannuation
Employees of the Bank, above a prescribed grade, are entitled to receive retirement benefits under the Bank’s Superannuation
Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15% for the Managing
Director, Executive Directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff) to insurance
companies, which administer the fund. The Bank has no liability for future superannuation fund benefits other than its
contribution, and recognises such contributions as an expense in the year incurred, as such contribution is in the nature of
defined contribution.

HDFC Bank Limited Annual Report 2013-14 48

Schedules to the Financial Statements
For the year ended March 31, 2014
Provident fund
In accordance with law, all employees of the Bank are entitled to receive benefits under the provident fund. The Bank
contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary). Of this, the
Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of ` 6,500/- per
month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’). The balance amount
is contributed to a fund set up by the Bank and administered by a board of trustees. In respect of eCBoP employees,
employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered by RPFC and from
April 2009 onwards, the same is transferred to the fund set up by the Bank and administered by the board of trustees. In
respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a board of trustees. The
Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to the members of
the trust shall not be lower than the statutory rate of interest declared by the Central Government under the Employees
Provident Funds and Miscellaneous Provisions Act 1952 and shortfall, if any, shall be made good by the Bank.
The guidance note on implementing AS-15 (revised 2005), Employee Benefits, states that benefits involving employer
established provident funds, which require interest shortfalls to be provided, are to be considered as defined benefit plans.
Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by the
Actuary Society of India and provision towards this liability is made.
The overseas branches of the Bank make contributions to the respective relevant government scheme calculated as a
percentage of the employees’ salaries. The Bank’s obligations are limited to these contributions, which are expensed when
due, as such contribution is in the nature of defined contribution.
Leave encashment / Compensated absences
The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees
under Indian Banks’ Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based
on an independent actuarial valuation at the balance sheet date, which includes assumptions about demographics, early
retirement, salary increases, interest rates and leave utilisation.
Pension
In respect of pension payable to certain eLKB employees under IBA structure, which is a defined benefit scheme, the Bank
contributes 10% of basic salary to a pension fund set up by the Bank and administered by the board of trustees and the
balance amount is provided based on actuarial valuation as at the balance sheet date conducted by an independent actuary.
In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and
have completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will
be converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands
frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for.
In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years,
pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision
thereto is made based on actuarial valuation as at the balance sheet date conducted by an independent actuary.
10 Debit and credit cards reward points
The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial
method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends.
Provisions for the said reward points are made based on the actuarial valuation report as furnished by the said independent
actuary.
11 Bullion
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail
customers. The imports are typically on a back-to-back basis and are priced to the customer based on an estimated price
quoted by the supplier. The Bank earns a fee on such wholesale bullion transactions. The fee is classified under commission
income.
The Bank also sells bullion to its retail customers. The difference between the sale price to customers and actual price
quoted by supplier is recorded under commission income.
The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classified as
interest expense / income respectively.

HDFC Bank Limited Annual Report 2013-14 49

Schedules to the Financial Statements
For the year ended March 31, 2014
12 Lease accounting
Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Profit and
Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases.
13 Income tax
Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the
Income Tax Act, 1961 and the rules framed there under) and the net change in the deferred tax asset or liability during the
year. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the
carrying values of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred
tax assets and liabilities are measured using the enacted or substantively enacted tax rates as at the balance sheet date.
Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied by
the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net basis.
Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realized in future.
In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only
if there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each balance sheet date and
appropriately adjusted to reflect the amount that is reasonably / virtually certain to be realized.
14 Earnings per share
The Bank reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic earnings
per equity share has been computed by dividing net profit for the year attributable to equity shareholders by the weighted
average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential dilution that
could occur if securities or other contracts to issue equity shares were exercised or converted to equity during the year.
Diluted earnings per equity share are computed using the weighted average number of equity shares and the dilutive
potential equity shares outstanding during the period except where the results are anti-dilutive.
15 Segment Information
The disclosure relating to segment information is in accordance with the guidelines issued by RBI.
16 Accounting for provisions, contingent liabilities and contingent assets
In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Bank recognises provisions when it
has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits
will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.
Provisions are determined based on management estimate required to settle the obligation at the balance sheet date,
supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect
the current management estimates.
A disclosure of contingent liability is made when there is :
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occurrence of one or more uncertain future events not within the control of the Bank; or
™ VegZhZcidWa^\Vi^dcVg^h^c\[gdbVeVhiZkZcil]^X]^hcdigZXd\c^hZYVh^i^hcdiegdWVWaZi]ViVcdjiÄdld[gZhdjgXZh
will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote,
no provision or disclosure is made.
Contingent Assets, if any, are not recognised in the financial statements since this may result in the recognition of income
that may never be realized.
17 Cash and cash equivalents
Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short
notice.

HDFC Bank Limited Annual Report 2013-14 50

Schedules to the Financial Statements
For the year ended March 31, 2014
Schedule 18 - Notes forming part of the Financial Statements for the year ended March 31, 2014
Amounts in Notes forming part of the Financial Statements for the year ended March 31, 2014 are denominated in Rupees crore
to conform to extant RBI guidelines.
1 Capital adequacy
The Bank’s Capital to Risk-weighted Asset Ratio (‘Capital Adequacy Ratio’) as on March 31, 2014 is calculated in accordance
with the RBI’s guidelines on Basel III capital regulations (‘Basel III’) which were effective April 1, 2013. The minimum capital
requirement under Basel III will be phased-in as follows :

Minimum ratio of capital As on As on March 31

to risk-weighted assets April 1, 2013 2014 2015 2016 2017 2018 2019
Common equity tier I ratio 4.5% 5.0% 5.5% 5.5% 5.5% 5.5% 5.5%
Capital conservation buffer - - - 0.625% 1.25% 1.875% 2.5%
Tier I capital ratio 6.0% 6.5% 7.0% 7.0% 7.0% 7.0% 7.0%
Total capital adequacy ratio 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

The Bank’s capital adequacy ratio as on March 31, 2014 computed under Basel III is given below :
(Amounts in ` crore)
Particulars March 31, 2014
Tier I capital 40,654.52
Of which common equity tier I capital 40,654.52
Tier II capital 14,855.55
Total capital 55,510.07
Total Risk weighted assets 345,300.85
Capital adequacy ratios under Basel lII
Tier I 11.77%
Of which common equity tier I 11.77%
Tier II 4.30%
Total 16.07%

The Bank’s capital adequacy ratio, calculated in accordance with the RBI guidelines under Basel II framework, as on
March 31, 2013 is as follows :
(Amounts in ` crore)

Particulars March 31, 2013

Tier I capital 33,881.13
Tier II capital 17,519.23
Total capital 51,400.36
Total Risk weighted assets 305,878.89
Capital adequacy ratios
Tier I 11.08%
Tier II 5.72%
Total 16.80%

HDFC Bank Limited Annual Report 2013-14 51

Schedules to the Financial Statements
For the year ended March 31, 2014
During the year ended March 31, 2014, the Bank allotted 19,631,405 equity shares (previous year : 32,730,760 equity
shares) aggregating to face value ` 3.93 crore (previous year : ` 6.55 crore) in respect of stock options exercised.
Details of Basel III eligible additional tier I and tier II capital raised during the year are given below : (` crore)

Particulars March 31, 2014

Additional tier I capital raised during the year -
Of which :
Perpetual non-cumulative preference shares issued during the year -
Perpetual debt instruments issued during the year -
Tier II capital raised during the year -
Of which :
Debt capital instruments issued during the year -
Preference share capital instruments issued during the year -

Details of Basel II eligible innovative perpetual debt instruments and upper and lower tier II instruments issued during the
year are given below. These instruments are eligible capital instruments under Basel III as per the prescribed transitional
phase-out arrangements : (` crore)

Particulars March 31, 2014 March 31, 2013

Amount raised by issue of Innovative Perpetual Debt Instruments (IPDI) - -
during the year
Amount raised by issue of upper Tier II instruments during the year - -
Amount raised by issue of lower Tier II instruments during the year - 5,447.00

Subordinated debt (lower Tier II capital), upper Tier II capital and innovative perpetual debt instruments outstanding as at
March 31, 2014 are ` 12,428.00 crore (previous year : ` 12,428.00 crore), ` 4,015.05 crore (previous year : ` 3,958.75 crore)
and ` 200.00 crore (previous year : ` 200.00 crore) respectively.
The details of the bonds issued during the year ended March 31, 2013 are given below :

Particulars Date of allotment Coupon rate (%) Tenure Amount (` crore)

Lower Tier II bonds August 13, 2012 9.45% 15 years1 3,477.00
Lower Tier II bonds October 31, 2012 8.95% 10 years2 565.00
3
Lower Tier II bonds December 28, 2012 9.10% 10 years 1,405.00
1
Call option exercisable on August 13, 2022 at par with the prior approval of RBI.
2
Call option exercisable on October 31, 2017 at par with the prior approval of RBI.
3
Call option exercisable on December 28, 2017 at par with the prior approval of RBI.
Based on the balance term to maturity and the applicable transitional phase-out arrangements under Basel III, as at March
31, 2014, 80% of the book value of perpetual debt instruments is considered as Additional Tier I capital and 74% of the book
value of subordinated debt (lower Tier II capital) and upper Tier II capital is considered as Tier II capital for the purpose of
capital adequacy computation.
Based on the balance term to maturity as at March 31, 2013, 100% of the book value of perpetual debt instruments is
considered as Tier I capital and 93% of the book value of subordinated debt (lower Tier II capital) and upper Tier II capital is
considered as Tier II capital for the purpose of capital adequacy computation.
In accordance with RBI guidelines, banks are required to make Pillar 3 disclosures under Basel III capital regulations. The
Bank has made these disclosures which are available on its website at the following link : http:// [Link]/aboutus/
basel_disclosures/[Link]. These Pillar 3 disclosures have not been subjected to audit.

HDFC Bank Limited Annual Report 2013-14 52

Schedules to the Financial Statements
For the year ended March 31, 2014
Reconciliation of accounting capital and regulatory capital, as on March 31, 2014 : (` crore)

Particulars Under Basel III Under Basel II

March 31, 2014 March 31, 2013
(a) Subscribed capital 479.81 475.88
(b) Reserves and surplus 42,998.82 35,738.26
(c) Accounting capital (a+b) 43,478.63 36,214.14
(d) Innovative perpetual debt 160.00 200.00
(e) Adjustments :
- Deferred tax asset (1,859.51) (1,904.85)
- Securitisation exposures (risk weighted under Basel III whilst - (176.74)
deducted @ 50% from Tier I under Basel II)
- Investment in subsidiaries (deducted @ 70% from Tier I under Basel (1,057.14) (361.81)
III and 50% from Tier I under Basel II)
- Valuation adjustment for illiquid positions (45.17) (47.07)
- Others (22.29) (42.54)
Total adjustments (2,984.11) (2,533.01)
(f) Total Tier I capital (c+d+e) 40,654.52 33,881.13
(g) Total Tier II capital 14,855.55 17,519.23
Total regulatory capital (f+g) 55,510.07 51,400.36

2 Earnings per equity share

Basic and diluted earnings per equity share have been calculated based on the net profit after taxation of ` 8,478.38
crore (previous year : ` 6,726.28 crore) and the weighted average number of equity shares outstanding during the year of
2,390,289,717 (previous year : 2,360,960,867).
Following is the reconciliation between basic and diluted earnings per equity share : (`)

For the years ended

Particulars
March 31, 2014 March 31, 2013
Nominal value per share 2.00 2.00
Basic earnings per share 35.47 28.49
Effect of potential equity shares (per share) (0.26) (0.31)
Diluted earnings per share 35.21 28.18

Basic earnings per equity share have been computed by dividing net profit for the year attributable to the equity shareholders
by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share have been
computed by dividing the net profit for the year attributable to the equity shareholders by the weighted average number of
equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive. The
dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of dilution on the profits
in the current year and previous year.
Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted
earnings per share :

For the years ended

Particulars
March 31, 2014 March 31, 2013
Weighted average number of equity shares used in computing basic 2,390,289,717 2,360,960,867
earnings per equity share
Effect of potential equity shares outstanding 17,849,608 26,076,830
Weighted average number of equity shares used in computing diluted 2,408,139,325 2,387,037,697
earnings per equity share

HDFC Bank Limited Annual Report 2013-14 53

Schedules to the Financial Statements
For the year ended March 31, 2014
3 Reserves and surplus
Draw down from reserves
There has been no draw down from reserves during the year ended March 31, 2014 (previous year : Nil).
Statutory reserve
The Bank has made an appropriation of ` 2,119.59 crore (previous year : ` 1,681.57 crore) out of profits for the year ended
March 31, 2014 to Statutory Reserve pursuant to the requirements of section 17 of the Banking Regulation Act, 1949 and
RBI guidelines dated September 23, 2000.
Capital reserve
During the year ended March 31, 2014, the Bank appropriated ` 58.27 crore (previous year : ` 85.85 crore), being the profit
from sale of investments under HTM category, net of taxes and transfer to statutory reserve, from Profit and Loss Account
to Capital Reserve account.
General reserve
The Bank has made an appropriation of ` 847.84 crore (previous year : ` 672.63 crore) out of profits for the year ended
March 31, 2014 to General Reserve pursuant to Companies (Transfer of Profits to Reserves) Rules, 1975.
Investment reserve account
During the year ended March 31, 2014, the Bank has appropriated ` 3.22 crore (net) (previous year : ` 17.66 crore (net))
from Profit and Loss Account to Investment Reserve account.
4 Dividend on shares allotted pursuant to exercise of stock options
The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise
of any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2014, if
approved at the ensuing Annual General Meeting.
5 Accounting for employee share based payments
The shareholders of the Bank approved grant of equity share options under Plan “B” in June 2003, Plan “C” in June 2005,
Plan “D” in June 2007, Plan “E” in June 2010 and Plan “F” in June 2013. Under the terms of each of these Plans, the Bank
may issue Equity Stock Options (‘ESOPs’) to employees and whole time directors of the Bank, each of which is convertible
into one equity share. All the plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee
Stock Purchase Scheme) Guidelines, 1999 as amended from time to time.
Plans B, C, D, E and F provide for the issuance of options at the recommendation of the Compensation Committee at the
closing price on the working day immediately preceding the date when options are granted. For Plan B the price is that
quoted on an Indian stock exchange with the highest trading volume during the preceding two weeks, while for Plans C, D,
E and F the price is the closing price of the share on an Indian stock exchange with the highest trading volume as of the
working day preceding the date of grant.
Vesting conditions applicable to the options are at the discretion of the Compensation Committee. These options are
exercisable on vesting, for a period as set forth by the Compensation Committee at the time of grant. The period in which
options may be exercised cannot exceed five years. Modifications, if any, made to the terms and conditions of ESOPs as
approved by the Compensation Committee are disclosed separately.
The erstwhile Centurion Bank of Punjab (‘eCBoP’) had granted stock options to its employees prior to its amalgamation with
the Bank. The options were granted under the General ESOP Scheme framed in accordance with the SEBI (Employee Stock
Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time. The outstanding
options granted by eCBoP and the grant price thereof were converted into equivalent HDFC Bank options and prices in the
swap ratio of 1:29 i.e. 1 stock option of HDFC Bank for every 29 stock options granted and outstanding of eCBoP as on
May 23, 2008, the effective date of the amalgamation, in accordance with Clause 9.9 of the scheme of amalgamation of
eCBoP with the Bank. The vesting dates for the said stock options granted in various tranches were revised as per Clause
9.9 of the Scheme. The aforesaid stock options are exercisable within a period of 5 years from the date of vesting. Options
granted under the General ESOP scheme were granted at the market price. The market price was the latest available closing
price, prior to the date of meeting of the Board of Directors / Compensation Committee in which options were granted or
shares were issued, on the stock exchange on which the shares of the Bank were listed. If the shares were listed on more
than one stock exchange, then the stock exchange where there was highest trading volume on the said date was considered.

HDFC Bank Limited Annual Report 2013-14 54

Schedules to the Financial Statements
For the year ended March 31, 2014
Method used for accounting for shared based payment plan
The Bank has elected to use intrinsic value method to account for the compensation cost of stock options to employees
and whole time directors of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share
exceeds the exercise price of the option.
Activity in the options outstanding under the Employee Stock Option Plans
 ™ 6Xi^k^in^ci]Zdei^dchdjihiVcY^c\jcYZgi]ZkVg^djhZbeadnZZhidX`dei^dceaVchVhViBVgX](&!'%&)/

Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 65,443,045 417.32
Granted during the year 47,060,000 679.99
Exercised during the year 18,903,115 382.63
Forfeited / lapsed during the year 1,123,330 583.43
Options outstanding, end of year 92,476,600 556.06
Options exercisable 46,137,600 431.59

 ™ 6Xi^k^in^ci]Zdei^dchdjihiVcY^c\jcYZgi]ZkVg^djhZbeadnZZhidX`dei^dceaVchVhViBVgX](&!'%&(/

Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 99,872,740 389.52
Granted during the year - -
Exercised during the year* 33,459,050 333.87
Forfeited / lapsed during the year 970,645 433.59
Options outstanding, end of year 65,443,045 417.32
Options exercisable 56,752,845 409.46

*includes 728,290 options exercised, pending allotment of equity shares as of March 31, 2013.
™ ;daadl^c\iVWaZhjbbVg^hZhi]Z^c[dgbVi^dcVWdjihidX`dei^dchdjihiVcY^c\VhViBVgX](&!'%&)/
Number of shares Weighted average Weighted average
Range of exercise price
Plan arising life of options exercise price
(`)
out of options (in years) (`)
Plan B - - - -
Plan C 680.00 6,952,000 5.21 680.00
Plan D 225.29 to 680.00 13,643,900 2.94 490.62
Plan E 440.16 to 680.00 71,494,300 3.82 558.33
General ESOP 118.61 to 251.72 386,400 0.40 217.13

No options have been granted under Plan F during the year ended March 31, 2014
™ ;daadl^c\iVWaZhjbbVg^hZhi]Z^c[dgbVi^dcVWdjihidX`dei^dchdjihiVcY^c\VhViBVgX](&!'%&(/

Number of shares Weighted average Weighted average

Range of exercise price
Plan arising life of options exercise price
(`)
out of options (in years) (`)
Plan B 198.97 to 219.74 614,500 0.53 203.50
Plan C 198.97 to 219.74 705,400 0.44 208.12
Plan D 219.74 to 340.96 12,058,100 1.39 285.60
Plan E 440.16 to 508.23 51,175,300 3.65 457.40
General ESOP 107.30 to 251.72 889,745 1.09 210.75

HDFC Bank Limited Annual Report 2013-14 55

Schedules to the Financial Statements
For the year ended March 31, 2014
Fair value methodology
The fair value of options used to compute proforma net income and earnings per equity share have been estimated on
the dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical
share prices. 47,060,000 options were granted during the year ended March 31, 2014 (previous year : Nil). The various
assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2014 were :

Particulars March 31, 2014

Dividend yield 0.81% to 0.83%
Expected volatility 28.57% to 41.52%
Risk-free interest rate 8.21% to 9.08%
Expected life of the options 1 to 7 years
Impact of fair value method on net profit and earnings per share
Had the compensation cost for the Bank’s stock option plans been determined based on the fair value approach, the Bank’s
net profit and earnings per share would have been as per the proforma amounts indicated below :
(` crore)
Particulars March 31, 2014 March 31, 2013
Net profit (as reported) 8,478.38 6,726.28
Add : Stock-based employee compensation expense included in net income - -
Less : Stock-based compensation expense determined under fair value 561.32 431.62
based method (proforma)
Net profit (proforma) 7,917.06 6,294.66
(`) (`)
Basic earnings per share (as reported) 35.47 28.49
Basic earnings per share (proforma) 33.12 26.66
Diluted earnings per share (as reported) 35.21 28.18
Diluted earnings per share (proforma) 32.88 26.37

6 Other liabilities
™ I]Z7Vc`]ZaYXdci^c\Zciegdk^h^dchidlVgYhhiVcYVgYVhhZihVbdjci^c\id` 1,260.54 crore as on March 31, 2014
(previous year : ` 1,035.74 crore). These are included under Other Liabilities.
™ >c a^cZ l^i] G7> \j^YZa^cZh! egdk^h^dc [dg hiVcYVgY VhhZih ^h bVYZ 5 %#'* [dg Y^gZXi VYkVcXZh id V\g^XjaijgZ VcY
small and micro enterprises (SMEs) sectors, @ 1%for advances to commercial real estate sector and @ 0.75% for
advances to commercial real estate - residential housing sector. For all types of restructured standard advances
(effective June 1, 2013) provision for standard assets is made@ 5% for a prescribed number of years from the date of
restructuring or upgradation as the case may be and for the stock of restructured standard advances outstanding as
on May 31, 2013 provision for standard assets is made @ 3.50% (which will be increased to 5% in a phased manner
by March 31, 2016). For housing loans offered at a comparatively lower rate of interest in the first few years after which
rates are reset at higher rates (teaser rate loans), provision for standard assets is made @ 2% until after one year from
the date on which the rates are reset at higher rates. For all other loans and advances provision for standard assets is
made @ 0.40%. Provision for standard assets of overseas branches has been made at higher of rates prescribed by
the overseas regulator or RBI.
™ I]Z7Vc`]VhegZhZciZY\gdhhjcgZVa^hZY\V^cdc[dgZ^\cZmX]Vc\ZVcYYZg^kVi^kZXdcigVXihjcYZgdi]ZgVhhZihVcY
gross unrealised loss on foreign exchange and derivative contracts under other liabilities. Accordingly, other liabilities
as on March 31, 2014 include unrealised loss on foreign exchange and derivative contracts of ` 12,609.15 crore
(previous year : ` 7,036.66 crore).
™ Cdh]VgZVeea^XVi^dcbdc^ZhlZgZdjihiVcY^c\VhdcBVgX](&!'%&)#6hd[BVgX](&!'%&(ºDi]Zga^VW^a^i^Zh»^cXajYZ
share application monies of ` 22.15 crore, received on exercise of employee stock options pending allotment of equity
shares, which were subsequently allotted on April 4, 2013.

HDFC Bank Limited Annual Report 2013-14 56

Schedules to the Financial Statements
For the year ended March 31, 2014
7 Investments
s 6ALUE OF INVESTMENTS ` crore)
Particulars March 31, 2014 March 31, 2013
Gross value of investments
- In India 120,202.94 111,347.24
- Outside India 921.57 503.12
Provisions for depreciation on investments
- In India 173.44 236.76
- Outside India - -
Net value of investments
- In India 120,029.50 111,110.48
- Outside India 921.57 503.12

s -OVEMENT IN PROVISIONS HELD TOWARDS DEPRECIATION ON INVESTMENTS (` crore)

Particulars March 31, 2014 March 31, 2013
Opening balance 236.76 226.93
Add : Provision made during the year 62.75 103.96
Less : Write-off, write back of excess provision during the year 126.07 94.13
Closing balance 173.44 236.76

Movement in provisions held towards depreciation on investments have been reckoned on a yearly basis
s 2EPO TRANSACTIONS
In accordance with RBI’s guidelines, accounting of repo / reverse repo transactions excludes those done with the RBI.
Following are the details of the repo / reverse repo transactions deals done during the years ended March 31, 2014 and
March 31, 2013 :
 Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2014 : (` crore)
Minimum Maximum Daily average Outstanding
Particulars Outstanding outstanding outstanding as at
during the year during the year during the year March 31, 2014
Securities sold under repo
1. Corporate debt securities - - - -
2. Government securities - 10,744.77 669.79 -
Securities purchased under reverse repo
1. Corporate debt securities - 311.20 19.23 311.20
2. Government securities - 5,584.48 125.38 -
 Details of repo / reverse repo deals (in face value terms) done during the year ended March 31, 2013 : (` crore)
Minimum Maximum Daily average Outstanding
Particulars Outstanding outstanding outstanding as at
during the year during the year during the year March 31, 2013
Securities sold under repo
1. Corporate debt securities - - - -
2. Government securities - 182.25 2.51 -
Securities purchased under reverse repo
1. Corporate debt securities - 110.80 20.47 -
2. Government securities - 790.00 161.66 -
There were no outstanding repo deals with RBI under liquidity adjustment facility / marginal standing facility as of March
31, 2014 (previous year : ` 20,995.41 crore). Outstanding reverse repo deals with RBI under liquidity adjustment facility
/ marginal standing facility as of March 31, 2014 were ` 5,720.00 crore (previous year : ` 7,035.00 crore).

HDFC Bank Limited Annual Report 2013-14 57

Schedules to the Financial Statements
For the year ended March 31, 2014
s .ON 3,2 INVESTMENT PORTFOLIO
 Issuer-wise composition of non-SLR investments as at March 31, 2014 (` crore)

Extent of
Extent of “below Extent of Extent of
Sr.
Issuer Amount private investment “unrated” “unlisted”
No.
placement# grade” securities#* securities#**
securities#
1 Public sector undertakings 75.00 75.00 - - -
2 Financial institutions 15,615.17 15,524.42 - - -
3 Banks 564.99 1.00 - - -
4 Private corporate 7,048.34 6,510.57 - 153.55 159.15
5 Subsidiaries / Joint ventures 1,541.39 1,541.39 - - -
6 Others 1,639.60 1,636.60 - - -
7 Provision held towards depreciation (173.44)
Total 26,311.05 25,288.98 - 153.55 159.15
# Amounts reported under these columns above are not mutually exclusive.
* Excludes investments in equity shares, units of equity oriented mutual funds and deposits with NABARD,
SIDBI and NHB under the priority / weaker sector lending schemes in line with extant RBI guidelines.
** Excludes investments in equity shares, units of equity oriented mutual funds, pass through certificates,
security receipts, commercial paper, certificate of deposits and deposits with NABARD, SIDBI and NHB
under the priority / weaker sector lending schemes in line with extant RBI guidelines.
 Issuer-wise composition of non-SLR investments as at March 31, 2013 (` crore)

Extent of
Extent of “below Extent of Extent of
Sr.
Issuer Amount private investment “unrated” “unlisted”
No.
placement# grade” securities# * securities# **
securities#
1 Public sector undertakings 151.63 100.00 - - -
2 Financial institutions 14,930.57 14,580.80 - - -
3 Banks 1,958.06 1,721.20 - - -
4 Private corporate 5,676.24 5,153.87 - 194.52 212.80
5 Subsidiaries / Joint ventures 754.82 754.82 - - -
6 Others 3,472.24 775.16 - - -
7 Provision held towards depreciation (232.28)
Total 26,711.28 23,085.85 - 194.52 212.80
# Amounts reported under these columns above are not mutually exclusive.
* Excludes investments in equity shares, units of equity oriented mutual funds and deposits in NABARD,
SIDBI and NHB under the priority / weaker sector lending schemes in line with extant RBI guidelines.
** Excludes investments in equity shares, units of equity oriented mutual funds, pass through certificates,
security receipts, commercial paper, certificate of deposits and deposits with NABARD, SIDBI and NHB
under the priority / weaker sector lending schemes in line with extant RBI guidelines.
 Non-performing non-SLR investments (` crore)

Particulars March 31, 2014 March 31, 2013

Opening balance 161.96 112.39
Additions during the year 0.50 97.95
Reductions during the year 55.08 48.38
Closing balance 107.38 161.96
Total provisions held 99.96 156.78

HDFC Bank Limited Annual Report 2013-14 58

Schedules to the Financial Statements
For the year ended March 31, 2014
s $ETAILS OF INVESTMENTS CATEGORY WISE
The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and
Held to Maturity (HTM) is as under : (` crore)
As at March 31, 2014 As at March 31, 2013
Particulars
HFT AFS HTM Total HFT AFS HTM Total
Government securities 7,018.48 17,199.86 70,421.68 94,640.02 12,905.84 18,277.50 53,718.98 84,902.32

Other approved securities - - - - - - - -

Shares 2.53 133.20 - 135.73 - 125.41 - 125.41

Debentures and bonds 384.00 3,251.02 - 3,635.02 1,206.73 1,021.51 - 2,228.24

Subsidiary / Joint ventures - - 1,541.39 1,541.39 - - 754.82 754.82

Others 62.36 5,817.36 15,119.19 20,998.91 1,175.29 8,156.72 14,270.80 23,602.81

Total 7,467.37 26,401.44 87,082.26 120,951.07 15,287.86 27,581.14 68,744.60 111,613.60

s $ETAILS OF hOTHER INVESTMENTSv AS AT THE "ALANCE 3HEET DATE IS GIVEN BELOW  ` crore)

Particulars March 31, 2014 March 31, 2013

Certificate of deposits 91.30 1,862.02
Commercial paper 4,177.62 4,095.66
Debt oriented mutual fund units 3.02 2,613.96
Pass through certificates 1,535.45 711.20
Security receipts issued by reconstruction companies 72.33 49.17
Deposits with NABARD 12,180.41 10,677.19
Deposits with SIDBI and National Housing Bank under the priority /
2,938.78 3,593.61
weaker sector lending schemes
Total other investments 20,998.91 23,602.81
™ >ckZhibZcih^cXajYZhZXjg^i^Zhd[;VXZKVajZ;KV\\gZ\Vi^c\` 1,845.00 crore (previous year : FV ` 1,745.00 crore)
which are kept as margin for clearing of securities, of FV ` 5,693.30 crore (previous year : FV ` 12,100.00 crore)
which are kept as margin for Collateralised Borrowing and Lending Obligation (CBLO) and of FV aggregating ` 120.35
crore (previous year : FV ` 40.00 crore) which are kept as margin for Forex Forward segment – Default Fund with the
Clearing Corporation of India Ltd.
™ >ckZhibZcih ^cXajYZ hZXjg^i^Zh d[ ;K V\\gZ\Vi^c\ ` 16.00 crore (previous year : FV ` 6.00 crore) which are kept
as margin with National Securities Clearing Corporation of India Ltd. ('NSCCIL'), of FV aggregating ` 13.00 crore
(previous year : FV ` 5.00 crore) which are kept as margin with MCX - SX Clearing Corporation Ltd., of FV aggregating
` 0.30 crore (previous year : FV ` 0.30 crore) which are kept as margin with United Stock Exchange for transacting in
the currency derivative segment and of FV aggregating ` 2.00 crore (previous year : Nil) which are kept as margin with
Indian Clearing Corporation Limited in the BSE currency derivatives segment.
™ >ckZhibZcih ]Vk^c\ ;K V\\gZ\Vi^c\ ` 35,013.64 crore (previous year : FV ` 29,376.69 crore) are kept as margin
towards Real Time Gross Settlement (RTGS) and those having FV aggregating ` 26,139.39 crore (previous year :
` 38,188.32 crore) are kept as margin towards liquidity adjustment facility with the RBI.
™ I]Z7Vc`]VhbVYZ^ckZhibZcih^cXZgiV^cXdbeVc^Zhl]ZgZ^c^i]daYhbdgZi]Vc'*d[i]ZZfj^inh]VgZhd[i]dhZ
companies. Such investments do not fall within the definition of a joint venture as per AS-27, Financial Reporting of
Interest in Joint Ventures and the said accounting standard is thus not applicable. However, pursuant to RBI guidelines,
the Bank has classified and disclosed these investments as joint ventures.
™ 9jg^c\i]ZnZVgZcYZYBVgX](&!'%&)!i]ZgZ]VhWZZccdhVaZ[gdb!VcYigVch[Zgid$[gdb!=IBXViZ\dgn^cZmXZhh
of 5% of the book value of investments held in HTM category at the beginning of the year. In accordance with the RBI
guidelines, this excludes :
9 one-time transfer of securities permitted to be undertaken by banks at the beginning of the accounting year with
approval of the Board of Directors; and

HDFC Bank Limited Annual Report 2013-14 59

Schedules to the Financial Statements
For the year ended March 31, 2014
9 sales to the RBI under pre-announced open market operation auctions.
™ >c 6j\jhi '%&(! i]Z G7>! Vh V dcZ"i^bZ bZVhjgZ! eZgb^iiZY WVc`h id igVch[Zg HAG hZXjg^i^Zh [gdb i]Z 6;H $ =;I
category to the HTM category. Accordingly, during the year ended March 31, 2014, the Bank transferred SLR securities
having face value aggregating ` 1,932.49 crore from the AFS category to the HTM category. In accordance with RBI
guidelines, this transfer is excluded from the 5% cap prescribed for value of sales and transfer of securities to / from
the HTM category.
8. Derivatives
s &ORWARD RATE AGREEMENTS &2!S  )NTEREST RATE SWAPS )23 !MOUNTS IN ` crore)

[Link]. Particulars March 31, 2014 March 31, 2013

i) The total notional principal of swap agreements 176,666.72 207,507.18
ii) Total losses which would be incurred if counter parties failed to fulfill
1,078.83 599.87
their obligations under the agreements
iii) Concentration of credit risk arising from swaps* 83.76% 79.90%
iv) Collateral required by the Bank upon entering into Swaps - -
v) The fair value of the swap book (141.96) (183.28)
* Concentration of credit risk arising from swaps is with banks as on March 31, 2014 and March 31, 2013.
The nature and terms of Rupee IRS as on March 31, 2014 are set out below :

Notional principal
Nature Nos. Benchmark Terms
(` crore)
Trading 19 618.00 INBMK Fixed Receivable v/s Floating Payable
Trading 19 818.00 INBMK Floating Receivable v/s Fixed Payable
Trading 4 1,250.00 INCMT Floating Receivable v/s Fixed Payable
Trading 1 35.00 FIX TO FIX Fixed Receivable v/s Fixed Payable
Trading 709 60,701.82 OIS Fixed Receivable v/s Floating Payable
Trading 730 62,634.57 OIS Floating Receivable v/s Fixed Payable
Trading 279 15,645.00 MIFOR Fixed Receivable v/s Floating Payable
Trading 181 10,502.00 MIFOR Floating Receivable v/s Fixed Payable
Trading 13 600.00 MIOIS Floating Receivable v/s Fixed Payable
152,804.39
The nature and terms of foreign currency IRS as on March 31, 2014 are set out below :

Notional principal
Nature Nos. Benchmark Terms
(` crore)
Trading 1 9.86 JPY Libor Fixed Receivable v/s Floating Payable
Trading 1 9.86 JPY Libor Floating Receivable v/s Fixed Payable
Trading 1 43.90 GBP Libor Fixed Receivable v/s Floating Payable
Trading 1 43.90 GBP Libor Floating Receivable v/s Fixed Payable
Trading 2 826.85 EURIBOR Fixed Receivable v/s Floating Payable
Trading 2 826.85 EURIBOR Floating Receivable v/s Fixed Payable
Trading 46 3,917.59 USD Libor Fixed Receivable v/s Floating Payable
Trading 139 11,116.55 USD Libor Floating Receivable v/s Fixed Payable
Hedging 3 2,995.75 USD Libor Fixed Receivable v/s Floating Payable
Hedging 9 4,071.22 USD Libor Floating Receivable v/s Fixed Payable
23,862.33

HDFC Bank Limited Annual Report 2013-14 60

Schedules to the Financial Statements
For the year ended March 31, 2014
The nature and terms of Rupee IRS as on March 31, 2013 are set out below :

Notional principal
Nature Nos. Benchmark Terms
(` crore)
Trading 21 702.00 INBMK Fixed receivable v/s Floating payable
Trading 20 877.00 INBMK Floating receivable v/s Fixed payable
Trading 4 1,250.00 INCMT Floating receivable v/s Fixed payable
Trading 1 50.00 FIX TO FIX Fixed receivable v/s Fixed payable
Trading 1,093 89,761.10 OIS Fixed receivable v/s Floating payable
Trading 1,063 80,409.40 OIS Floating receivable v/s Fixed payable
Trading 255 13,454.00 MIFOR Fixed receivable v/s Floating payable
Trading 164 8,063.00 MIFOR Floating receivable v/s Fixed payable
Trading 16 400.00 MIOIS Floating receivable v/s Fixed payable
194,966.50
The nature and terms of foreign currency IRS as on March 31, 2013 are set out below :

Notional principal
Nature Nos. Benchmark Terms
(` crore)
Trading 1 14.29 JPY Libor Fixed receivable v/s Floating payable
Trading 1 14.29 JPY Libor Floating receivable v/s Fixed payable
Trading 40 1,806.76 USD Libor Fixed receivable v/s Floating payable
Trading 124 7,991.09 USD Libor Floating receivable v/s Fixed payable
Hedging 3 2,714.25 USD Libor Fixed receivable v/s Floating payable
12,540.68
s %XCHANGE TRADED INTEREST RATE DERIVATIVES ` crore)

S. No. Particulars 2014 2013

i) The total notional principal amount of exchange traded interest
rate derivatives undertaken during the year ended March 31,
(instrument-wise) :
(a) 10 year Government Security Notional Bond 185.60 Nil
ii) The total notional principal amount of exchange traded interest rate Nil Nil
derivatives outstanding as of March 31,
iii) The notional principal amount of exchange traded interest rate N.A. N.A.
derivatives outstanding and not ‘highly effective’, as of March 31,
iv) Mark-to-market value of exchange traded interest rate derivatives N.A. N.A.
outstanding and not ‘highly effective’, as of March 31,
s 1UALITATIVE DISCLOSURES ON RISK EXPOSURE IN DERIVATIVES
Overview of business and processes
Derivatives are financial instruments whose characteristics are derived from underlying assets, or from interest and
exchange rates or indices. These include forwards, swaps, futures and options. The notional amounts of financial
instruments such as foreign exchange contracts and derivatives provide a basis for comparison with instruments
recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash flows involved or the
current fair value of the instruments and, therefore, do not indicate the Bank’s exposure to credit or price risks. The
following sections outline the nature and terms of the derivative transactions generally undertaken by the Bank.
Interest rate contracts
Forward rate agreements give the buyer the ability to determine the underlying rate of interest for a specified period
commencing on a specified future date (the settlement date). There is no exchange of principal and settlement is
effected on the settlement date. The settlement amount is the difference between the contracted rate and the market
rate prevailing on the settlement date.

HDFC Bank Limited Annual Report 2013-14 61

Schedules to the Financial Statements
For the year ended March 31, 2014
Interest rate swaps involve the exchange of interest obligations with the counterparty for a specified period without
exchanging the underlying (or notional) principal.
Interest rate caps and floors give the buyer the ability to fix the maximum or minimum rate of interest. The writer of
the contract pays the amount by which the market rate exceeds or is less than the cap rate or the floor rate respectively.
A combination of interest rate caps and floors is known as an interest rate collar.
Interest rate futures are standardised interest rate derivative contracts traded on a recognised stock exchange to buy
or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a
specified future date, at a price determined at the time of the contract.
Exchange rate contracts
Forward foreign exchange contracts are agreements to buy or sell fixed amounts of currency at agreed rates of
exchange on future date. All such instruments are carried at fair value, determined based on either FEDAI rates or on
market quotations.
Cross currency swaps are agreements to exchange principal amounts denominated in different currencies. Cross
currency swaps may also involve the exchange of interest payments on one specified currency for interest payments
in another specified currency for a specified period.
Currency options give the buyer, on payment of a premium, the right but not an obligation, to buy or sell specified
amounts of currency at agreed rates of exchange on or before a specified future date. Option premia paid or received
is recorded in Statement of Profit and Loss for rupee options at the expiry of the option and for foreign currency options
on premium settlement date.
Currency futures contract is a standardised contract traded on an exchange, to buy or sell a certain underlying asset
or an instrument at a certain date in the future, at a specified price. The underlying instrument of a currency future
contract is the rate of exchange between one unit of foreign currency and the INR.
Most of the Bank’s derivative transactions relate to sales and trading activities. Sale activities include the structuring
and marketing of derivatives to customers to enable them to hedge their market risks (both interest rate and exchange
risks), within the framework of regulations as may apply from time to time. The Bank deals in derivatives on its own
account (trading activity) principally for the purpose of generating a profit from short term fluctuations in price or yields.
The Bank also deals in derivatives to hedge the risk embedded in some of its Balance Sheet assets and liabilities.
Constituents involved in derivative business
The Treasury front office enters into derivative transactions with customers and inter-bank counterparties. The Bank
has an independent back-office and mid-office as per regulatory guidelines. The Bank has a credit and market risk
department that assesses various counterparty risk and market risk limits, within the risk architecture and processes
of the Bank.
Derivative policy
The Bank has in place a policy which covers various aspects that apply to the functioning of the derivative business.
The derivative business is administered by various market risk limits such as position limits, tenor limits, sensitivity
limits and value-at-risk limits that are approved by the Board and the Risk Policy and Monitoring Committee (‘RPMC’).
All methodologies used to assess credit and market risks for derivative transactions are specified by the market risk
unit. Limits are monitored on a daily basis by the mid-office.
The Bank has implemented a Board approved policy on Customer Suitability & Appropriateness to ensure that
derivative transactions entered into are appropriate and suitable to the customer’s nature of business / operations.
Before entering into a derivative deal with a customer, the Bank scores the customer on various risk parameters and
based on the overall score level it determines the kind of product that best suits its risk appetite and the customer’s
requirements.
Classification of derivatives book
The derivative book is classified into trading and hedging book. Classification of the derivative book is made on the
basis of the definitions of the trading and hedging books specified in the RBI guidelines. The trading book is managed
within the trading limits approved by the RPMC.

HDFC Bank Limited Annual Report 2013-14 62

Schedules to the Financial Statements
For the year ended March 31, 2014
Hedging policy
For derivative contracts designated as hedge the Bank documents, at inception, the relationship between the hedging
instrument and the hedged item, the risk management objective for undertaking the hedge and the methods used
to assess the hedge effectiveness. Hedge effectiveness is ascertained at the time of inception of the hedge and
periodically thereafter. Hedge effectiveness is measured by the degree to which changes in the fair value or cash flows
of the hedged item that are attributable to a hedged risk are offset by changes in the fair value or cash flows of the
hedging instrument.
The hedging book consists of transactions to hedge Balance Sheet assets or liabilities. The tenor of hedging instrument
may be less than or equal to the tenor of underlying hedged asset or liability. Derivative contracts designated as hedges
are not marked to market unless their underlying asset or liability is marked to market. In respect of derivative contracts
that are marked to market, changes in the market value are recognised in the Statement of Profit and Loss in the
relevant period. Gain or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Profit and
Loss.
s 0ROVISIONING COLLATERAL AND CREDIT RISK MITIGATION
The Bank enters into derivative transactions with counter parties based on their business ranking and financial position.
The Bank sets up appropriate limits upon evaluating the ability of the counterparty to honour its obligations in the event
of crystallisation of the exposure. Appropriate credit covenants are stipulated where required as trigger events to call
for collaterals or terminate a transaction and contain the risk.
The Bank, at the minimum, conforms to the RBI guidelines with regard to provisioning requirements. Overdue receivables
representing crystallized positive mark-to-market value of a derivative contract are transferred to the account of the
borrower and treated as non-performing assets, if these remain unpaid for 90 days or more. Full provision is made
for the entire amount of overdue and future receivables relating to positive marked to market value of non-performing
derivative contracts.
s 1UANTITATIVE DISCLOSURE ON RISK EXPOSURE IN DERIVATIVES (` crore)

S. Currency derivatives Interest rate derivatives

Particulars
No. March 31, 2014 March 31, 2013 March 31, 2014 March 31, 2013

1 Derivatives (notional principal amount)

a) Hedging 872.55 905.51 7,066.97 2,714.25
b) Trading 22,823.62 20,265.76 170,198.90 205,335.78
2 Marked to Market Positions
a) Asset (+) 630.57 322.87 1,085.18 591.13
b) Liability (-) (484.52) (256.21) (1,190.63) (788.17)
3 Credit Exposure 1,474.83 1,126.74 2,368.73 2,110.09
4 Likely Impact of one percentage
change in interest rate (100*PV01)
a) On hedging derivatives 5.93 5.85 3.31 121.07
b) On trading derivatives 10.10 11.32 130.65 118.57
5 Maximum of 100*PV01 observed
during the year
a) On Hedging 6.98 5.96 142.60 135.11
b) On Trading 11.37 16.89 163.81 159.58
6 Minimum of 100*PV01 observed
during the year
a) On Hedging 5.93 0.09 3.31 -
b) On Trading 4.31 6.44 97.02 91.16
9 The notional principal amount of foreign exchange contracts classified as Hedging and Trading outstanding as on
March 31, 2014 amounted to ` 26,147.11 crore (previous year : ` 787.13 crore) and ` 449,239.01 crore (previous
year : ` 445,998.94 crore) respectively.
9 The notional principal amounts of derivatives reflect the volume of transactions outstanding as at the Balance
Sheet date and do not represent the amounts at risk.

HDFC Bank Limited Annual Report 2013-14 63

Schedules to the Financial Statements
For the year ended March 31, 2014
9 For the purpose of this disclosure, currency derivatives include currency options purchased and sold and cross
currency interest rate swaps.
9 Interest rate derivatives include interest rate swaps, forward rate agreements and interest rate caps.
9 The Bank has computed the maximum and minimum of PV01 for the year based on the balances as at the end
of every month.
9 In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI
guidelines. Credit exposure has been computed using the current exposure method which is the sum of :
(a) the current replacement cost (marked to market value including accruals) of the contract or zero whichever
is higher; and
(b) the Potential Future Exposure (PFE). PFE is a product of the notional principal amount of the contract and
a factor that is based on the grid of credit conversion factors prescribed in RBI guidelines, which is applied
on the basis of the residual maturity and the type of contract.
9. Asset quality
s -OVEMENTS IN .0!S FUNDED !MOUNTS IN ` crore)

Particulars March 31, 2014 March 31, 2013

(i) Net NPAs to Net Advances 0.27% 0.20%

(ii) Movement of NPAs (Gross)
(a) Opening balance 2,334.64 1,999.39
(b) Additions (fresh NPAs) during the year 4,621.79 3,137.81
(c) Reductions during the year : 3,967.15 2,802.56
- Upgradation 1,443.32 932.27
- Recoveries (excluding recoveries made from upgraded accounts) 1,042.12 718.34
- Write-offs 1,481.71 1,151.95
(d) Closing balance 2,989.28 2,334.64
(iii) Movement of Net NPAs
(a) Opening balance 468.95 352.33
(b) Additions during the year 1,658.65 940.67
(c) Reductions during the year 1,307.57 824.05
(d) Closing balance 820.03 468.95
(iv) Movement of provisions for NPAs (excluding provisions on standard assets)
(a) Opening balance 1,865.69 1,647.06
(b) Additions during the year 2,963.14 2,197.14
(c) Write-off 1,481.71 1,151.95
(d) Write-back of excess provisions 1,177.87 826.56
(e) Closing balance 2,169.25 1,865.69
NPAs include all assets that are classified as non-performing by the Bank.
The Bank had hitherto computed additions and reductions by comparing NPAs outstanding at the beginning and at the
end of the reporting period. Based on a clarification from RBI that additions and reductions should include slippages

HDFC Bank Limited Annual Report 2013-14 64

Schedules to the Financial Statements
For the year ended March 31, 2014
and the related upgradation / recoveries even if these are within the same reporting period, the Bank has accordingly
reflected these additions / reductions and the related provisions in the above table. Further, slippages and the related
upgradation / recoveries that may occur on more than one occasion for the same customer in the reporting period
are aggregated and accordingly counted more than once under additions and reductions respectively, in the above
table. As a result, the additions to NPAs and reductions in NPAs on account of upgradation / recoveries increased by
the same amount and the amounts of opening NPAs, closing NPAs, write offs and the related provisions remained
unchanged. Previous year’s figures have accordingly been re-classified.

s 4ECHNICAL OR PRUDENTIAL WRITE OFFS

Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of
the branches, but have been written-off (fully or partially) at the Head Office level. Movement in the stock of technically
or prudentially written-off accounts given below :
(` crore)

Particulars March 31, 2014 March 31, 2013

Opening balance of technical / prudential write-offs - -

Technical / prudential write-offs during the year - -

Recoveries made from previously technically / prudentially written-off
- -
accounts during the year
Closing Balance of technical / prudential write-offs - -

s 3ECTOR WISE .0!S

Percentage of NPAs to
Particulars Total Advances in that sector (%)

March 31, 2014 March 31, 2013

Agriculture and allied activities 1.18 0.90

Industry (Micro & small, Medium and Large) 0.99 1.04

Services 0.75 0.60

Personal Loans 0.80 0.62

s &LOATING PROVISIONS
Floating provisions of ` 1,835.03 crore (previous year : ` 1,835.03 crore) have been included under “Other Liabilities”.
Movement in floating provision is given below :
(` crore)

Particulars March 31, 2014 March 31, 2013

Opening Balance 1,835.03 1,435.03

Provisions made during the year 30.00 400.00

Draw down made during the year (30.00) -

Closing Balance 1,835.03 1,835.03

Floating provisions have been utilized in accordance with the RBI guidelines dated February 7, 2014.

HDFC Bank Limited Annual Report 2013-14 65

 s $ISCLOSURE ON ACCOUNTS SUBJECTED TO RESTRUCTURING FOR THE YEAR ENDED -ARCH  
(` crore, except numbers)

Under Corporate Debt Restructuring (CDR) Under Small & Medium Enterprises (SME)
Type of Restructuring Others Total
Mechanism Debt Restructuring Mechanism
S.
No. Asset Classification Sub Sub Sub Sub
Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total
Standard Standard Standard Standard
Details

1 Restructured accounts
as on April 1, 2013* No. of borrowers 4 1 10 1 16 - - - - - 3 - 3 1 7 7 1 13 2 23

Amount outstanding 73.48 47.62 356.97 13.92 491.99 - - - - - 7.63 - 25.70 2.80 36.13 81.11 47.62 382.67 16.72 528.12

Provision thereon 1.00 1.00 15.31 0.96 18.27 - - - - - 0.13 - 0.23 0.06 0.42 1.13 1.00 15.54 1.02 18.69

2 Fresh restructuring
during the year No. of borrowers - - - - - - - - - - 3 1 - - 4 3 1 - - 4

Amount outstanding - - - - - - - - - - 8.39 16.70 - - 25.09 8.39 16.70 - - 25.09

HDFC Bank Limited Annual Report 2013-14

Provision thereon - - - - - - - - - - 0.02 - - - 0.02 0.02 - - - 0.02

3 Upgradations to
No. of borrowers - - - - - - - - - - - - - - - - - - - -
restructured standard
category during the
year
For the year ended March 31, 2014

Amount outstanding - - - - - - - - - - - - - - - - - - - -

Provision thereon - - - - - - - - - - - - - - - - - - - -
Schedules to the Financial Statements

66
4 Advances not shown
as restructured No. of borrowers - - - - - - - -
standard advances at
the beginning of the
next year^ Amount outstanding - - - - - - - -

Provision thereon - - - - - - - -

5 Down gradation of
restructured accounts No. of borrowers - -1 +1 - - - - - - - -1 +1 - - - -1 -1+1 +1 - -
during the year
Amount outstanding - -51.63 +51.63 - - - - - - - -2.10 +2.10 - - - -2.10 -49.53 +51.63 - -

Provision thereon - -4.00 +4.00 - - - - - - - - - - - - - -4.00 +4.00 - -

6 Write-offs of
restructured accounts No. of borrowers - - 1 - 1 - - - - - - - 1 - 1 - - 2 - 2
during the year
Amount outstanding - - 3.29 - 3.29 - - - - - - - 8.61 - 8.61 - - 11.90 - 11.90

7 Restructured accounts
as on March 31, 2014* No. of borrowers 2 - 10 - 12 - - - - - 4 2 1 - 7 6 2 11 - 19

Amount outstanding 67.08 - 385.08 - 452.16 - - - - - 12.64 18.80 7.87 - 39.31 79.72 18.80 392.95 - 491.47

Provision thereon - - 17.83 - 17.83 - - - - - 0.19 - 0.03 - 0.22 0.19 - 17.86 - 18.05

* Excludes the figures of standard restructured advances which do not attract higher provisioning or risk weight

^ These are restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the year and hence need not be shown as restructured standard advances at the beginning of the
next year.
 s $ISCLOSURE ON ACCOUNTS SUBJECTED TO RESTRUCTURING FOR THE YEAR ENDED -ARCH  
(` crore, except numbers)

Under Corporate Debt Restructuring (CDR) Under Small & Medium Enterprises (SME)
Type of Restructuring Others Total
Mechanism Debt Restructuring Mechanism
S.
No. Asset Classification Sub Sub Sub Sub
Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total Standard Doubtful Loss Total
Standard Standard Standard Standard
Details

1 Restructured accounts No. of borrowers# 5 6 6 1 17 - - - - - 4 1 3 - 8 9 7 9 1 25

as on April 1, 2012*

Amount outstanding 145.14 302.55 120.52 10.04 578.25 - - - - - 11.33 13.92 33.80 - 59.05 156.47 316.47 154.32 10.04 637.30

Provision thereon 7.40 15.11 15.27 1.80 39.58 - - - - - 0.17 0.57 0.45 - 1.19 7.57 15.68 15.72 1.80 40.77

2 Fresh restructuring No. of borrowers - - 1 - 1 - - - - - 1 - 2 - 3 1 - 3 - 4

during the year

Amount outstanding - - 34.67 - 34.67 - - - - - 2.20 - 17.84 - 20.04 2.20 - 52.51 - 54.71

HDFC Bank Limited Annual Report 2013-14

Provision thereon - - 0.23 - 0.23 - - - - - - - 0.05 - 0.05 - - 0.28 - 0.28

3 Upgradations to No. of borrowers 1 -1 - - - - - - - - - - - - - 1 -1 - - -

restructured standard
category during the
year
Amount outstanding +30.88 -30.88 - - - - - - - - - - - - - +30.88 -30.88 - - -
For the year ended March 31, 2014

Provision thereon - - - - - - - - - - - - - - - - - - - -

4 Advances not shown

Schedules to the Financial Statements

67
No. of borrowers - - - - - - - -
as restructured
standard advances at
the beginning of the
next year^ Amount outstanding - - - - - - - -

Provision thereon - - - - - - - -

5 Down gradation of No. of borrowers -1 +1-5 +5 - - - - - - - - - -1 +1 - -1 -4 +4 +1 -

restructured accounts
during the year
+47.62
Amount outstanding -47.62 +237.11 - - - - - - - - - -2.80 +2.80 - -47.62 -189.49 +234.31 +2.80 -
-237.11
+1.00
Provision thereon -1.00 +5.29 - - - - - - - - - -0.06 +0.06 - -1.00 -4.29 +5.23 +0.06 -
-5.29
6 Write-offs of No. of borrowers - - 1 - 1 - - - - - - 1 - - 1 - 1 1 - 2
restructured accounts
during the year
Amount outstanding - - 19.38 - 19.38 - - - - - - 12.13 - - 12.13 - 12.13 19.38 - 31.51

7 Restructured accounts No. of borrowers 4 1 10 1 16 - - - - - 3 - 3 1 7 7 1 13 2 23

as on March 31, 2013*

Amount outstanding 73.48 47.62 356.97 13.92 491.99 - - - - - 7.63 - 25.70 2.80 36.13 81.11 47.62 382.67 16.72 528.12

Provision thereon 1.00 1.00 15.31 0.96 18.27 - - - - - 0.13 - 0.23 0.06 0.42 1.13 1.00 15.54 1.02 18.69

* Excludes the figures of standard restructured advances which do not attract higher provisioning or risk weight

^ These are restructured standard advances which cease to attract higher provisioning and / or additional risk weight at the end of the year and hence need not be shown as restructured standard advances at the beginning of the
next year.

# Particulars of accounts restructured include a borrower whose investment in preference shares is classified as substandard and other performing credit facilities granted to the said borrower are not treated as NPA in accordance
with RBI guidelines.
Schedules to the Financial Statements
For the year ended March 31, 2014
s $ETAILS OF lNANCIAL ASSETS SOLD TO SECURITISATION  RECONSTRUCTION COMPANIES 3#  2# FOR ASSET RECONSTRUCTION
ARE AS UNDER 
(Amounts in ` crore)

Particulars March 31, 2014 March 31, 2013

Number of accounts 4 Nil

Aggregate value (net of provisions) of accounts sold to SC / RC 4.82 Nil

Aggregate considerations 6.13 Nil

Additional consideration realized on full redemption of accounts
3.30 Nil
transferred in earlier years
Aggregate gain over net book value 1.31 Nil

Additional consideration realized on full redemption of accounts transferred during the year ` 6.36 crore (previous year
: Nil).

™ 9jg^c\i]ZnZVghZcYZYBVgX](&!'%&)VcYBVgX](&!'%&(!cdcdc"eZg[dgb^c\ÃcVcX^VaVhhZihlZgZhdaY!ZmXajY^c\
those sold to SC / RC.

™ 9jg^c\i]ZnZVghZcYZYBVgX](&!'%&)VcYBVgX](&!'%&(!cdcdc"eZg[dgb^c\ÃcVcX^VaVhhZihlZgZejgX]VhZYWn
the Bank.

 $ETAILS OF EXPOSURES TO REAL ESTATE AND CAPITAL MARKET SECTORS RISK CATEGORY WISE COUNTRY EXPOSURES SINGLE  GROUP
borrower exposures, unsecured advances and concentration of deposits, advances, exposures and NPAs

s $ETAILS OF EXPOSURE TO REAL ESTATE SECTOR

Exposure is higher of limits sanctioned or the amounts outstanding as at the year end.
(` crore)

Category March 31, 2014 March 31, 2013

(a) Direct exposure* 29,749.41 25,241.74

(i) Residential mortgages** 19,683.42 16,890.83
(ii) Commercial real estate 9,891.67 8,115.58
(iii) Investments in mortgage backed securities (‘MBS’) and other
securitised exposures :
(a) Residential 174.32 235.33

(b) Commercial real estate - -

(b) )NDIRECT EXPOSURE  7,227.71 4,879.73

Fund based and non-fund based exposures on National Housing Bank

7,227.71 4,879.73
(NHB) and housing finance companies (HFCs)
Total exposure to real estate sector 36,977.12 30,121.47

* Direct exposure includes housing loans eligible for inclusion in priority sector lending ` 18,541.59 crore (previous
year : ` 15,831.70 crore).

** includes loans purchased under the direct loan assignment route

Of the above, exposure to real estate developers is 0.4% (previous year : 0.4%) of total advances.

HDFC Bank Limited Annual Report 2013-14 68

Schedules to the Financial Statements
For the year ended March 31, 2014
s $ETAILS OF CAPITAL MARKET EXPOSURE
Exposure is higher of limits sanctioned or the amount outstanding as at the year end. (` crore)

S. No. Particulars March 31, 2014 March 31, 2013

(i) Direct investments made in equity shares, convertible bonds, convertible
debentures and units of equity oriented mutual funds the corpus of which is not 76.14 66.31
exclusively invested in corporate debt
(ii) Advances against shares, bonds, debentures or other securities or on clean basis
to individuals for investment in shares (including IPO’s / ESOP’s), convertible 105.96 145.34
bonds, convertible debentures and units of equity oriented mutual funds
(iii) Advances for any other purposes where shares or convertible bonds or
convertible debentures or units of equity oriented mutual funds are taken as 1,305.60 1,481.43
primary security
(iv) Advances for any other purposes to the extent secured by collateral security of
shares or convertible bonds or convertible debentures or units of equity oriented
mutual funds i.e. where the primary security other than shares / convertible 17.90 36.09
bonds / convertible debentures / units of equity oriented mutual funds does not
fully cover the advances
(v) Secured and unsecured advances to stock brokers and guarantees issued on
4,994.17 4,655.73
behalf of stock brokers and market makers
(vi) Loans sanctioned to corporates against the security of shares / bonds /
debentures or other securities or on clean basis for meeting promoter’s 2,514.09 1,122.80
contribution to the equity of new companies in anticipation of raising resources
(vii) Bridge loans to companies against expected equity flows / issues - -
(viii) Underwriting commitments taken up in respect of primary issue of shares or
convertible bonds or convertible debentures or units of equity oriented mutual funds - -
(ix) Financing to stock brokers for margin trading - -
(x) All exposures to venture capital funds (both registered and unregistered) 1.70 2.10
Total exposure to capital market 9,015.56 7,509.80

s $ETAILS OF RISK CATEGORY WISE COUNTRY EXPOSURE ` crore)

March 31, 2014 March 31, 2013

Risk Category
Exposure (net) Provision held Exposure (net) Provision held
Insignificant 12,346.98 3.97 8,300.90 -
Low 3,316.35 - 4,141.05 -
Moderately low 4,726.96 - 2,131.08 -
Moderate 19.82 - 611.68 -
Moderately high 28.48 - 42.48 -
High - - - -
Very High - - 0.04 -
Total 20,438.59 3.97 15,227.23 -
™ $ETAILS OF 3INGLE "ORROWER ,IMIT 3', 'ROUP "ORROWER ,IMIT '", EXCEEDED BY THE "ANK
During the years ended March 31, 2014 and March 31, 2013, the Bank’s credit exposure to single borrowers and group
borrowers were within the limits prescribed by RBI.
s 5NSECURED ADVANCES
Advances for which intangible collaterals such as rights, licenses, authority, etc. are charged in favour of the Bank in
respect of projects financed by the Bank, are reckoned as unsecured advances under Schedule 9 of the Balance Sheet
in line with extant RBI guidelines. There are no such advances outstanding as on March 31, 2014 (previous year : Nil).
s )NTER BANK 0ARTICIPATION WITH RISK SHARING
The aggregate amount of participation issued by the Bank, reduced from advances as per regulatory guidelines,
outstanding as of March 31, 2014 was ` 4,450.00 crore (previous year : ` 2,330.00 crore).

HDFC Bank Limited Annual Report 2013-14 69

Schedules to the Financial Statements
For the year ended March 31, 2014
s #ONCENTRATION OF DEPOSITS ADVANCES EXPOSURES AND .0!S
a) Concentration of deposits (Amounts in ` crore)

Particulars March 31, 2014 March 31, 2013

Total deposits of twenty largest depositors 28,211.29 23,061.07
Percentage of deposits of twenty largest depositors to total
7.7% 7.8%
deposits of the Bank
b) Concentration of advances (Amounts in ` crore)

Particulars March 31, 2014 March 31, 2013

Total advances to twenty largest borrowers 63,659.46 52,662.79
Percentage of advances of twenty largest borrowers to total
advances of the Bank 13.4% 12.8%

Advances comprise credit exposure (funded and non-funded credit limits) including derivative transactions
computed as per Current Exposure Method in accordance with RBI guidelines.
c) Concentration of exposure (Amounts in ` crore)

Particulars March 31, 2014 March 31, 2013

Total exposure to twenty largest borrowers / customers 76,011.79 64,001.84
Percentage of exposure of twenty largest borrowers / customers
15.2% 14.7%
to total exposure of the Bank on borrowers / customers

Exposures comprise credit exposure (funded and non-funded credit limits) including derivative transactions and
investment exposure in accordance with RBI guidelines.
d) Concentration of NPAs (` crore)

Particulars March 31, 2014 March 31, 2013

Total gross exposure to top four NPA accounts 354.73 288.30

 /THER lXED ASSETS INCLUDING FURNITURE AND lXTURES

Other fixed assets includes amount capitalised relating to software having useful life of five years. Details regarding the same
are tabulated below : (` crore)

Particulars March 31, 2014 March 31, 2013

Cost
As at March 31 of the previous year 1,093.49 830.10
Additions during the year 188.59 263.40
Deductions during the year - (0.01)
Total (a) 1,282.08 1,093.49
Depreciation
As at March 31 of the previous year 711.17 563.74
Charge for the year 146.32 147.44
On deductions during the year - (0.01)
Total (b) 857.49 711.17
Net value as at March 31 (a-b) 424.59 382.32

HDFC Bank Limited Annual Report 2013-14 70

Schedules to the Financial Statements
For the year ended March 31, 2014
12. Other assets
™ Di]ZgVhhZih^cXajYZYZ[ZggZYiVmVhhZicZid[` 1,859.51 crore (previous year : ` 1,904.85 crore). The break-up of the
same is as follows : (` crore)

Particulars March 31, 2014 March 31, 2013

$EFERRED TAX ASSET ARISING OUT OF 
Loan loss provisions 1,496.42 1,453.10
Employee benefits 121.60 118.80
Others 300.06 390.90
Total (a) 1,918.08 1,962.80
$EFERRED TAX LIABILITY ARISING OUT OF 
Depreciation (58.57) (57.95)
Total (b) (58.57) (57.95)
Deferred tax asset (net) (a-b) 1,859.51 1,904.85

™ @Zn^iZbhjcYZgDi]Zgh^cDi]ZgVhhZihVgZVhjcYZg/    (` crore)

Particulars March 31, 2014 March 31, 2013

Unrealised gain on foreign exchange and derivative contracts* 13,965.15 7,463.93
Deferred tax assets 1,859.51 1,904.85
Deposits & amounts paid in advance 900.74 1,398.32
Accounts receivable 2,128.93 1,257.02
Margin for LAF with RBI - 1,025.00
Residuary items 12.52 39.63
Total 18,866.85 13,088.75

*The Bank has presented gross unrealised gain on foreign exchange and derivative contracts under other assets and gross
unrealised loss on foreign exchange and derivative contracts under other liabilities.
13. Maturity pattern of key assets and liabilities
Assets and liabilities are classified in the maturity buckets as per the guidelines issued by the RBI. (` crore)
Over 3 Over 6 Over Over
1 2 to 7 8 to 14 15 to 28 29 days to Over 5
As at March 31, 2014 months to 6 months to 1 year to 3 years to Total
day days days days 3 months years
months 12 months 3 years 5 years

Loans & advances 6,022.49 6,943.89 4,308.40 8,278.80 34,841.80 24,585.12 29,450.83 143,717.35 22,597.09 22,254.50 303,000.27

Investments 19,500.79 3,025.34 2,639.62 2,872.83 5,527.87 9,535.79 7,278.14 35,235.61 6,342.03 28,993.05 120,951.07

Deposits 6,774.10 11,853.43 9,403.92 10,527.24 18,492.97 26,127.75 18,568.22 167,127.92 9,377.39 89,084.54 367,337.48

Borrowings 1,473.91 745.92 119.81 458.95 4,478.22 1,210.06 2,525.06 11,053.00 8,442.91 8,931.15 39,438.99

Foreign currency assets 5,840.51 5,617.07 1,049.39 1,858.85 6,223.78 4,304.94 601.83 16,204.19 1,484.80 169.10 43,354.46

Foreign currency liabilities 613.10 1,048.49 224.77 1,184.84 4,883.09 2,729.69 4,846.39 34,270.24 8,523.87 636.90 58,961.38

(` crore)
Over 3 Over 6 Over Over
1 2 to 7 8 to 14 15 to 28 29 days to Over 5
As at March 31, 2013 months to 6 months to 1 year to 3 years to Total
day days days days 3 months years
months 12 months 3 years 5 years

Loans & advances 5,160.79 4,770.92 4,617.22 6,939.38 22,673.07 22,676.59 25,700.78 110,569.48 18,146.42 18,465.99 239,720.64

Investments 4,397.94 13,865.75 2,429.28 2,692.10 7,566.13 7,183.02 7,752.56 34,347.67 5,051.12 26,328.03 111,613.60

Deposits 4,667.75 10,306.01 7,730.10 7,288.12 18,957.09 20,887.03 17,959.52 126,568.53 5,224.33 76,658.50 296,246.98

Borrowings 239.53 1,435.14 504.35 565.12 2,980.61 4,029.55 999.08 4,028.92 6,474.45 11,749.85 33,006.60

Foreign currency assets 1,360.66 5,030.23 1,360.79 1,288.74 5,855.24 5,119.54 1,117.90 2,588.78 1,404.62 106.48 25,232.98

Foreign currency liabilities 293.96 1,074.45 549.93 777.62 3,683.12 4,636.29 2,224.74 3,005.35 4,623.94 576.69 21,446.09

HDFC Bank Limited Annual Report 2013-14 71

Schedules to the Financial Statements
For the year ended March 31, 2014
14. Provisions, contingent liabilities and contingent assets
Given below is the movement in provisions and a brief description of the nature of contingent liabilities recognised by the
Bank.
a) Provision for credit card and debit card reward points (` crore)

Particulars March 31, 2014 March 31, 2013

Opening provision for reward points 130.07 85.80
Provision for reward points made during the year 100.89 109.35
Utilisation / write back of provision for reward points (57.72) (62.65)
Effect of change in rate for accrual of reward points (22.33) 14.11
Effect of change in cost of reward points - (16.54)
Closing provision for reward points 150.91 130.07

b) Provision for legal and other contingencies (` crore)

Particulars March 31, 2014 March 31, 2013

Opening provision 312.66 286.03
Movement during the year (net) 39.95 26.63
Closing provision 352.61 312.66

c) Description of contingent liabilities

S. No. Contingent liability* Brief description

1 Claims against the Bank not The Bank is a party to various taxation matters in respect of which appeals are pending.
acknowledged as debts - The Bank expects the outcome of the appeals to be favorable based on decisions on
taxation similar issues in the previous years by the appellate authorities, based on the facts of the
case and the provisions of Income Tax Act, 1961.
2 Claims against the Bank not The Bank is a party to various legal proceedings in the normal course of business. The
acknowledged as debts - Bank does not expect the outcome of these proceedings to have a material adverse effect
others on the Bank’s financial conditions, results of operations or cash flows.
3 Liability on account of The Bank enters into foreign exchange contracts, currency options, forward rate
forward exchange and agreements, currency swaps and interest rate swaps with inter-bank participants on
derivative contracts its own account and for customers. Forward exchange contracts are commitments to
buy or sell foreign currency at a future date at the contracted rate. Currency swaps are
commitments to exchange cash flows by way of interest / principal in one currency against
another, based on predetermined rates. Interest rate swaps are commitments to exchange
fixed and floating interest rate cash flows. The notional amounts of financial instruments
such as foreign exchange contracts and derivatives provide a basis for comparison with
instruments recognised on the Balance Sheet but do not necessarily indicate the amounts
of future cash flows involved or the current fair value of the instruments and, therefore,
do not indicate the Bank’s exposure to credit or price risks. The derivative instruments
become favorable (assets) or unfavorable (liabilities) as a result of fluctuations in market
rates or prices relative to their terms.
4 Guarantees given on As a part of its commercial banking activities, the Bank issues documentary credit and
behalf of constituents, guarantees on behalf of its customers. Documentary credits such as letters of credit
acceptances, endorsements enhance the credit standing of the Bank’s customers. Guarantees generally represent
and other obligations irrevocable assurances that the Bank will make payments in the event of the customer
failing to fulfill its financial or performance obligations.
5 Other items for which the These include : a) Credit enhancements in respect of securitized-out loans; b) Bills
Bank is contingently liable rediscounted by the Bank; c) Capital commitments; d) Underwriting commitments

*Also refer Schedule 12 - Contingent liabilities

HDFC Bank Limited Annual Report 2013-14 72

Schedules to the Financial Statements
For the year ended March 31, 2014
 "USINESS RATIOS  INFORMATION

Particulars March 31, 2014 March 31, 2013

Interest income as a percentage to working funds1 9.72% 9.91%

Net interest income as a percentage to working funds 4.37% 4.47%

Non-interest income as a percentage to working funds 1.87% 1.94%

Operating profit2 as a percentage to working funds 3.39% 3.23%

Return on assets (average) 2.00% 1.90%

Business per employee (` in crore)

3
8.90 7.50

Profit per employee4 (` in crore) 0.12 0.10

Gross non-performing assets to gross advances5 0.98% 0.97%

Gross non-performing advances to gross advances 0.91% 0.85%

6 7
Percentage of net non-performing assets to net advances 0.27% 0.20%

Provision coverage ratio8 72.57% 79.91%

Definitions of certain items in Business Ratios / Information :

1. Working funds is the daily average of total assets during the year.
2. Operating profit is net profit for the year before provisions and contingencies.
3. “Business” is the total of net advances and deposits (net of inter-bank deposits).
4. Productivity ratios are based on average employee numbers.
5. Gross advances are net of bills rediscounted and interest in suspense.
6. Net NPAs are non-performing assets net of interest in suspense, specific provisions, ECGC claims received, provisions
for funded interest term loans classified as NPAs and provisions in lieu of diminution in the fair value of restructured
assets classified as NPAs.
7. Net advances are equivalent to gross advances net of specific loan loss provisions, ECGC claims received, provision
for funded interest term loans classified as NPA and provisions in lieu of diminution in the fair value of restructured
assets.
8. Provision coverage ratio does not include assets written off.
16. Interest income
Interest income under the sub-head Income from Investments includes dividend received during the year ended March 31,
2014 on units of mutual funds, equity and preference shares amounting to ` 89.86 crore (previous year : ` 180.35 crore).
17. Earnings from standard assets securitised-out
There are no Special Purpose Vehicles (‘SPV’s) sponsored by the Bank for securitisation transactions. During the years
ended March 31, 2014 and March 31, 2013, there were no standard assets securitised-out by the Bank.
Form and quantum of services and liquidity provided by way of credit enhancement
The Bank has provided credit and liquidity enhancements in the form of cash collaterals / guarantees / subordination of
cash flows etc., to the senior pass through certificates (‘PTC’s) as well as on loan assignment transactions. The RBI issued
addendum guidelines on securitisation of standard assets vide its circular dated May 7, 2012. Accordingly, the Bank does not
provide liquidity or credit enhancements on the direct assignment transactions undertaken subsequent to these guidelines.
The total value of credit enhancement outstanding in the books as at March 31, 2014 was ` 348.28 crore (previous year :
` 353.47 crore), and liquidity enhancement was ` 8.10 crore (previous year : ` 8.10 crore). Outstanding servicing liability was
` 0.19 crore (previous year : ` 0.27 crore).

HDFC Bank Limited Annual Report 2013-14 73

Schedules to the Financial Statements
For the year ended March 31, 2014
18. Other income
s #OMMISSION EXCHANGE AND BROKERAGE INCOME
9 Commission, exchange and brokerage income is net of correspondent bank charges.
9 Commission income for the year ended March 31, 2014 includes fees (net of service tax) of ` 337.56 crore
(previous year : ` 469.21 crore) in respect of life insurance business and ` 116.69 crore (previous year : ` 125.47
crore) in respect of general insurance business.
s -ISCELLANEOUS INCOME
Miscellaneous income includes recoveries from written-off accounts amounting to ` 622.61 crore (previous year :
` 496.54 crore).
19. Other expenditure
Other expenditure includes outsourcing fees amounting to ` 590.31 crore (previous year : ` 530.26 crore) and commission
paid to sales agents amounting to ` 1,003.26 crore (previous year : ` 963.30 crore), exceeding 1% of the total income of the
Bank.
20. Provisions and contingencies
The break-up of provisions and contingencies included in the Statement of Profit and Loss is given below : (` crore)

Particulars March 31, 2014 March 31, 2013

Provision for income tax
- Current 4,269.41 3,275.76
- Deferred 24.27 (251.42)
Provision for wealth tax 0.75 0.60
Provision for NPAs 1,632.58 1,234.21
Provision for diminution in value of non-performing investments (4.12) 52.21
Provision for standard assets 221.29 123.71
Other provisions and contingencies* (262.48) 266.27
Total 5,881.70 4,701.34
*Includes (write-back) / provisions for tax, legal and other contingencies ` (265.33) crore (previous year : ` (133.21) crore),
floating provisions ` 30.00 crore (previous year : ` 400.00 crore), provisions for securitised-out assets ` (26.21) crore
(previous year : ` 5.92 crore) and standard restructured assets ` (0.94) crore (previous year : ` (6.44) crore).
 %MPLOYEE BENElTS
Gratuity (` crore)

Particulars March 31, 2014 March 31, 2013

Reconciliation of opening and closing balance of the present value of the
DElNED BENElT OBLIGATION
Present value of obligation as at April 1 206.28 166.30
Interest cost 17.87 13.06
Current service cost 38.88 38.73
Benefits paid (15.42) (11.76)
Actuarial (gain) / loss on obligation :
Experience adjustment 5.87 2.72
Assumption change (16.05) (2.77)
Present value of obligation as at March 31 237.43 206.28
Reconciliation of opening and closing balance of the fair value of the plan assets
Fair value of plan assets as at April 1 130.22 91.86
Expected return on plan assets 12.11 8.88
Contributions 43.82 39.24
Benefits paid (15.42) (11.76)
Actuarial gain / (loss) on plan assets :

HDFC Bank Limited Annual Report 2013-14 74

Schedules to the Financial Statements
For the year ended March 31, 2014
Particulars March 31, 2014 March 31, 2013
Experience adjustment 1.87 2.00
Assumption change - -
Fair value of plan assets as at March 31 172.60 130.22
Amount recognised in Balance Sheet
Fair value of plan assets as at March 31 172.60 130.22
Present value of obligation as at March 31 (237.43) (206.28)
!SSET  LIABILITY AS AT -ARCH  (64.83) (76.06)
%XPENSES RECOGNISED IN 3TATEMENT OF 0ROlT AND ,OSS
Interest cost 17.87 13.06
Current service cost 38.88 38.73
Expected return on plan assets (12.11) (8.88)
Net actuarial (gain) / loss recognised in the year (12.04) (2.04)
Net cost 32.60 40.87
Actual return on plan assets 13.97 10.88
Estimated contribution for the next year 48.30 30.96
Assumptions
Discount rate 9.0% per annum 8.1% per annum
Expected return on plan assets 8.0% per annum 8.0% per annum
Salary escalation rate 8.5% per annum 8.5% per annum
Experience adjustment (` crore)
Years ended March 31
Particulars
2014 2013 2012 2011 2010
Plan assets 172.60 130.22 91.86 66.00 51.74
Defined benefit obligation 237.43 206.28 166.30 136.08 99.20
Surplus / (deficit) (64.83) (76.06) (74.44) (70.08) (47.46)
Experience adjustment gain / (loss) on plan assets 1.87 2.00 (0.93) 0.01 7.40
Experience adjustment (gain) / loss on plan liabilities 5.87 2.72 1.25 9.56 (5.02)
Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the year with regard
to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2014 are given below :
% of fair value to
Category of Plan assets
total plan assets
Government securities 26.0%
Debenture and bonds 32.9%
Equity shares 32.3%
Others 8.8%
Total 100.0%

Pension (` crore)
Particulars March 31, 2014 March 31, 2013
Reconciliation of opening and closing balance of the present value of the
DElNED BENElT OBLIGATION
Present value of obligation as at April 1 58.19 56.85
Interest cost 4.84 4.18
Current service cost 0.77 1.32
Benefits paid (8.88) (11.09)
Actuarial (gain) / loss on obligation :
Experience adjustment 3.62 6.12
Assumption change 0.35 0.81
Present value of obligation as at March 31 58.89 58.19
Reconciliation of opening and closing balance of the fair value of the plan assets
Fair value of plan assets as at April 1 48.88 51.14
Expected return on plan assets 3.87 4.00
Contributions 0.67 6.41
Benefits paid (8.88) (11.09)

HDFC Bank Limited Annual Report 2013-14 75

Schedules to the Financial Statements
For the year ended March 31, 2014
(` crore)
Particulars March 31, 2014 March 31, 2013
Actuarial gain / (loss) on plan assets :
Experience adjustment 3.45 (1.58)
Assumption change - -
Fair value of plan assets as at March 31 47.99 48.88
Amount recognised in Balance Sheet
Fair value of plan assets as at March 31 47.99 48.88
Present value of obligation as at March 31 (58.89) (58.19)
!SSET  LIABILITY AS AT -ARCH  (10.90) (9.31)
%XPENSES RECOGNISED IN 3TATEMENT OF 0ROlT AND ,OSS
Interest cost 4.84 4.18
Current service cost 0.77 1.32
Expected return on plan assets (3.87) (4.00)
Net actuarial (gain) / loss recognised in the year 0.51 8.51
Net cost 2.25 10.01
Actual return on plan assets 7.33 2.42
Estimated contribution for the next year 9.30 9.48
Assumptions
Discount rate 9.0% per annum 8.1% per annum
Expected return on plan assets 8.0% per annum 8.0% per annum
Salary escalation rate 8.5% per annum 8.5% per annum

Experience adjustment (` crore)

Years ended March 31

Particulars
2014 2013 2012 2011 2010
Plan assets 47.99 48.88 51.14 43.35 38.78
Defined benefit obligation 58.89 58.19 56.85 57.38 40.70
Surplus / (deficit) (10.90) (9.31) (5.71) (14.03) (1.92)
Experience adjustment gain / (loss) on plan assets 3.45 (1.58) (1.29) 2.85 2.78
Experience adjustment (gain) / loss on plan liabilities 3.62 6.12 1.36 18.50 2.12
Expected rate of return on investments is determined based on the assessment made by the Bank at the beginning of the year with regard
to its existing portfolio. Major categories of plan assets as a percentage of fair value of total plan assets as of March 31, 2014 are given below :

% of fair value to
Category of Plan assets
total plan assets
Government securities 6.3%
Debenture and bonds 67.4%
Others 26.3%
Total 100.0%

Provident fund
The guidance note on AS-15, Employee Benefits, states that employer established provident funds, where interest
is guaranteed are to be considered as defined benefit plans and the liability has to be valued. The Actuary Society of
India (ASI) has issued a guidance note on valuation of interest rate guarantees on exempt provident funds. The actuary
has accordingly valued the same and the Bank holds a provision of ` 0.52 crore as on March 31, 2014 (previous year :
` 9.57 crore) towards the present value of the guaranteed interest benefit obligation. The actuary has followed Deterministic
approach as prescribed by the guidance note.
!SSUMPTIONS 

Particulars March 31, 2014 March 31, 2013

Discount rate (GOI security yield) 8.9% per annum 8.0% per annum
Expected guaranteed interest rate 9.0% per annum 8.6% per annum

HDFC Bank Limited Annual Report 2013-14 76

Schedules to the Financial Statements
For the year ended March 31, 2014
The Bank does not have any unfunded defined benefit plan. The Bank contributed ` 143.34 crore (previous year : ` 129.54
crore) to the provident fund and ` 43.22 crore (previous year : ` 37.33 crore) to the superannuation plan.
Compensated absences
The actuarial liability of compensated absences of accumulated privileged and sick leaves of the employees of the Bank is
given below :
(` crore)

Particulars March 31, 2014 March 31, 2013

Privileged leave 213.13 211.25

Sick leave 45.29 40.50
Total actuarial liability 258.42 251.75
Assumptions
Discount rate 9.0% per annum 8.1% per annum
Salary escalation rate 8.5% per annum 8.5% per annum

22. Disclosures on remuneration

1UALITATIVE $ISCLOSURES
A. Information relating to the composition and mandate of the Remuneration Committee
Composition of the Remuneration Committee
The Board of Directors of the Bank has constituted the Remuneration Committee (hereinafter, the ‘Remuneration
Committee’) for overseeing and governing the compensation policies of the Bank. The Remuneration Committee
is comprised of four independent directors and is chaired by the Chairman of the Board of Directors of the Bank.
Further, two members of the Remuneration Committee are also members of the Risk Policy and Monitoring Committee
(‘RPMC’) of the Board.
The Remuneration Committee is comprised of the Chairman, Mr. C. M. Vasudev, Dr. Pandit Palande, Mr. Partho Datta
and Mr. Bobby Parikh. Further, Mr. C.M. Vasudev and Mr. Partho Dutta are also members of the RPMC.
Mandate of the Remuneration Committee
The primary mandate of the Remuneration Committee is to oversee the implementation of compensation policies of
the Bank.
The Remuneration Committee periodically reviews the overall compensation policy of the Bank with a view to
attract, retain and motivate employees. In this capacity it is required to review and approve the design of the total
compensation framework, including compensation strategy programs and plans, on behalf of the Board of Directors. The
compensation structure and pay revision for Whole Time Directors is also approved by the Remuneration Committee.
The Remuneration Committee co-ordinates with the RPMC to ensure that compensation is aligned with prudent risk
taking.
B. Information relating to the design and structure of remuneration processes and the key features and objectives
of remuneration policy
I. Key Features and Objectives of Remuneration Policy
The Bank’s Compensation Policy (hereinafter, the ‘Policy’) is aligned to business strategy, market dynamics,
internal characteristics and complexities within the Bank. The ultimate objective of the Policy is to provide a
fair and transparent structure that helps in retaining and acquiring the talent pool critical to build competitive
advantage and brand equity. The Policy has been designed basis the principles for sound compensation practices
in accordance with regulatory requirements and provides a framework to create, modify and maintain appropriate
compensation programs and processes with adequate supervision and control.
The Bank’s performance management system provides a sound basis for assessing employee performance
holistically. The Bank’s compensation framework is aligned with the performance management system and

HDFC Bank Limited Annual Report 2013-14 77

Schedules to the Financial Statements
For the year ended March 31, 2014
differentiates pay appropriately amongst its employees based on degree of contribution, skill and availability
of talent owing to competitive market forces by taking into account factors such as role, skills, competencies,
experience and grade / seniority.

The compensation structure for both the categories of employees is determined by the Remuneration Committee
and ensures that :

(a) the compensation is adjusted for all types of prudent risk taking;

(b) compensation outcomes are symmetric with risk outcomes;

(c) compensation payouts are sensitive to the time horizon of risk; and

(d) the mix of cash, equity and other forms of compensation are aligned with risk.

II. Design and Structure of Remuneration

a) Fixed Pay

The Remuneration Committee ensures that the fixed component of the compensation is reasonable, taking
into account all relevant factors including industry practice.

Elements of Fixed Pay

The fixed pay component of the Bank’s compensation structure typically consists of elements such as
base salary, allowances, perquisites, retirement and other employee benefits. Perquisites extended are in
the nature of company car, hard furnishing, company leased accommodation, club membership and such
other benefits or allowances in lieu of such perquisites / benefits. Retirement benefits are comprised of
contributions to provident fund, superannuation fund (for certain job bands) and gratuity. The Bank also
provides pension to certain employees of the erstwhile Lord Krishna Bank (eLKB) under the Indian Banks’
Association (‘IBA’) structure.

Determinants of Fixed Pay

The fixed pay is primarily determined by taking into account factors such as the job size, performance,
experience, location, market competitiveness of pay and is designed to meet the following key objectives of :

(a) fair compensation given the role complexity and size;

(b) fair compensation given the individual’s skill, competence, experience and market pay position;

(c) sufficient contribution to post retirement benefits; and

(d) compliance with all statutory obligations.

For Whole Time Directors additional dimensions such as prominence of leadership among industry leaders,
consistency of the Bank’s performance over the years on key parameters such as profitability, growth and
asset quality in relation to its own past performance and that of its peer banks would be considered. The
quantum of fixed pay for Whole Time Directors is approved by the Remuneration Committee as well as the
Board and is subject to the approval of the RBI.

B 6ARIABLE 0AY

The performance management system forms the basis for variable pay allocation of the Bank. The Bank
ensures that the performance management system is comprehensive and considers both, quantitative and
qualitative performance measures.

HDFC Bank Limited Annual Report 2013-14 78

Schedules to the Financial Statements
For the year ended March 31, 2014
Whole Time Directors
The bonus for Whole Time Directors will not exceed 70% of the fixed pay in a year, thereby ensuring
that there is a balance between the fixed and variable pays. The variable pay for Whole Time Directors is
approved by the Remuneration Committee as well as the Board and is subject to the approval of the RBI.
The variable pay component is paid out subject to the following conditions :
™ L]ZgZi]ZkVg^VWaZeVnXdchi^ijiZh*%dgbdgZd[i]ZÃmZYeVn!Vedgi^dcd[i]ZhVbZldjaYWZ
deferred as per the schedule mentioned in the table below :

0ORTION OF 6ARIABLE 0AY Timelines

60% Payable effective April 1 of the financial year immediately following the
performance year, subject to RBI approval.
13.33% As on the start date of the subsequent financial year immediately
following the reference performance year.
13.33% As on the start date of the second financial year immediately following
the reference performance year.
13.33% As on the start date of the third financial year immediately following the
reference performance year.
™ I]Z7Vc`]VhYZk^hZYVeegdeg^ViZbVajhVcYXaVl back clauses as a risk mitigant for any negative
contributions of the Bank and / or relevant line of business in any year. Under the malus clause the
incumbent foregoes the vesting of the deferred variable pay in full or in part. Under the claw back
clause the incumbent is obligated to return all the tranches of payout received of bonus amounts
pertaining to the relevant performance year.
Employees Other Than Whole Time Directors
The Bank has formulated the following variable pay plans :
™ 6ccjVa7dcjhEaVc
The quantum of variable payout is a function of the performance of the Bank, performance of
the individual employee, job band of the employee and the functional category. Basis these key
determinants and due adjustment for risk alignment, a payout matrix for variable pay is developed.
Market trends for specific businesses / functions along with inputs from compensation surveys may
also be used in finalising the payout.
Bonus pools are designed to meet specific business needs therefore resulting in differentiation in
both the quantum and the method of payout across functions. Typically higher levels of responsibility
receive a higher proportion of variable pay vis-à-vis fixed pay. The Bank ensures that the time horizon
for risk is assessed and the deferment period, if any, for bonus is set accordingly. Employees on
the annual bonus plan are not part of the incentive plans. The following is taken into account while
administering the annual bonus :
9 In the event the proportion of variable pay to fixed pay is substantially high (typically variable
pay exceeding 50% of fixed pay), the Bank may devise an appropriate deferment schedule after
taking into consideration the nature of risk, time horizon of risk, and the materiality of risk.
9 In cases of deferment of variable pay the Bank makes an assessment prior to the due date
for payment of the deferred portion for any negative contribution. The criteria for negative
contribution are decided basis pre-defined financial benchmarks. The Bank has in place
appropriate methods for prevention of vesting of deferred variable pay or any part thereof, on
account of negative contribution. The Bank also has in place claw back arrangements in relation
to amounts already paid in the eventuality of a negative contribution.
™ >cXZci^kZEaVch
Incentive Plans are formulated for sales personnel who are given origination / sales targets but have
limited impact on risk since credit decisions are exercised independent of the sales function. Most

HDFC Bank Limited Annual Report 2013-14 79

Schedules to the Financial Statements
For the year ended March 31, 2014
incentive plans have quarterly payouts and are based on the framework of a balanced scorecard.
In alignment with the principles of prudent risk management, a portion of the incentive payouts are
deferred till the end of the year and are linked to attainment of targets for the full year.
Risk, Control and Compliance Staff
The Bank has separated the Risk, Control and Compliance functions from the Business functions
in order to create a strong culture of checks and balances thereby ensuring good asset quality and
to eliminate any possible conflict of interest between revenue generation and risk management and
control. Accordingly, the overall variable pay as well as the annual salary increment of the employees
in the Risk, Control and Compliance functions is based on their performance, functional objectives
and goals. The Bank ensures that the mix of fixed to variable compensation for these functions is
weighted in favour of fixed compensation.
c) Guaranteed Bonus
Guaranteed Bonuses may not be consistent with sound risk management or pay for performance principles
of the Bank and therefore do not form an integral part of the general compensation practice.
For critical hiring for some select strategic roles, the Bank may consider granting of a sign-on bonus as
a prudent way to avoid loading the entire cost of attraction into the fixed component of the compensation
which could have a long term cost implication for the Bank. For such hiring, the sign-on bonus is generally
decided by taking into account appropriate risk factors and market conditions.
For hiring at levels of Whole Time Directors / Managing Director a sign-on bonus, if any, is limited to the first
year only and is in the form of Employee Stock Options.
d) Employee Stock Option Plan (‘ESOPs’)
The Bank considers ESOPs as a vehicle to create a balance between short term rewards and long term
sustainable value creation. ESOPs play a key role in the attraction and retention of key talent. The Bank
grants equity share options to its Whole time Directors and other employees above a certain grade. All
plans for grant of options are framed in accordance with the SEBI guidelines, 1999 as amended from time
to time and are approved by the shareholders of the Bank. These plans provide for the grant of options post
approval by the Remuneration Committee.
The grant of options is reviewed and approved by the Remuneration Committee. The number of options
granted varies at the discretion of the Remuneration Committee after considering parameters such as the
incumbent’s grade and performance rating, and such other appropriate relevant factors as may be deemed
appropriate by the Remuneration Committee. Equity share options granted to the Whole Time Directors are
subject to the approval of the Remuneration Committee, the Board and the RBI.
e) Severance Pay
The Bank does not grant severance pay other than accrued benefits (such as gratuity, pension) except in
cases where it is mandated by any statute.
f) Hedging
The Bank does not provide any facility or fund or permit its Whole Time Directors and employees to insure
or hedge their compensation structure to offset the risk alignment effects embedded in their compensation
arrangement.
III. Remuneration Processes
Fitment at the time of Hire
Pay ranges of the Bank are set basis the job size, experience, location and the academic and professional
credentials of the incumbent.
The compensation of new hires is in line with the existing pay ranges and consistent with the compensation levels
of the existing employees of the Bank at similar profiles. The pay ranges are subject to change basis market
trends and the Bank’s talent management priorities. While the Bank believes in the internal equity and parity as a
key determinant of pay it does acknowledge the external competitive pressures of the talent market. Accordingly,

HDFC Bank Limited Annual Report 2013-14 80

Schedules to the Financial Statements
For the year ended March 31, 2014
there could be certain key profiles with critical competencies which may be hired at a premium and treated as an
exception to the overall pay philosophy. Any deviation from the defined pay ranges is treated as a hiring exception
requiring approval with appropriate justification.
)NCREMENT  0AY 2EVISION
It is the endeavor of the Bank to ensure external competitiveness as well as internal equity without diluting
the overall focus on optimizing cost. In order to enhance our external competitiveness the Bank participates
in an annual salary survey of the banking sector to understand key market trends as well as get insights on
relative market pay position compared to peers. The Bank endeavors to ensure that most employees progress
to the median of the market in terms of fixed pay over time. This coupled with key internal data indicators like
performance score, job family, experience, job grade and salary budget form the basis of decision making on
revisions in fixed pay.
Increments in fixed pay for majority of the employee population are generally undertaken effective April 1 every
year. However promotions, confirmations and change in job dimensions could also lead to a change in the fixed
pay during other times of the year.
The Bank also makes salary corrections and adjustments during the year for those employees whose
compensation is found to be below the market pay and who have a good performance track record. However
such pay revisions are done on an exception basis.
C. Description of the ways in which current and future risks are taken into account in the remuneration processes.
It should include the nature and type of the key measures used to take account of these risks
The Bank takes into account all types of risks in its remuneration processes. The Bank takes into consideration the
fact that a portion of the Bank’s profits are directly attributable to various types of risks the Bank is exposed to, such as
credit risk, market risk, operational risk and other quantifiable risks. Based on the surplus available post adjustment of
the cost of capital to cover all such risks and factoring the impact of bonus payout on operating costs an appropriate
bonus pool is arrived at.
The Bank also provides for deferment of bonus in the event the proportion of variable pay as compared to fixed pay
is substantially high. The Bank has also devised appropriate malus and claw back clauses as a risk mitigant for any
negative contributions of the Bank and / or relevant line of business in any year. Under the malus clause, the incumbent
foregoes the vesting of the deferred variable pay in full or in part. Under the claw back clause, the incumbent is
obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant performance year.
D. Description of the ways in which the Bank seeks to link performance during a performance measurement
period with levels of remuneration
Levels of remuneration in the Bank are linked to the performance of the individual employees and the respective
business functions. The performance driven pay culture is briefly described below :
Fixed Pay
At the conclusion of every financial year the Bank reviews the fixed pay portion of the compensation structure basis
merit-based increments and market corrections. These are based on a combination of performance rating, job band
and the functional category of the individual employee. For a given job band, the merit increment is directly related to
the performance rating. The Bank strives to ensure that most employees progress to the median of the market in terms
of fixed pay over time. All other things remaining equal, the correction percentage is directly related to the performance
rating of the individual.
Variable Pay
Basis the individual performance, role, and function, the Bank has formulated the following variable pay plans :
s !NNUAL "ONUS 0LAN
The Bank’s annual bonus is computed as a multiple of the standardised gross salary for every job band. The
bonus multiple is based on performance rating, job band and the functional category of the individual employee.
All other things remaining equal, for a given job band, the bonus multiple is directly related to the performance
rating. The proportion of variable pay to fixed pay increases with job band. Employees on the annual bonus plan
are not part of the incentive plans.

HDFC Bank Limited Annual Report 2013-14 81

Schedules to the Financial Statements
For the year ended March 31, 2014
s )NCENTIVE 0LANS
The Bank has formulated incentive plans for its sales personnel who are given origination / sales targets. All
incentive payouts are subject to the achievement of individual targets enumerated in the respective scorecards of
the employees. A portion of the incentive payouts are deferred till the end of the year and are linked to attainment
of targets for the full year.

E. A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the
Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting

Whole Time Directors

The bonus for Whole Time Directors will not exceed 70% of the fixed pay in a year, thereby ensuring that there is a
balance between the fixed and variable pay. The variable pay for Whole Time Directors is approved by the Remuneration
Committee as well as the Board and is subject to the approval of the RBI. The variable pay component is paid out
subject to the following conditions :

™ L]ZgZi]ZkVg^VWaZeVnXdchi^ijiZh*%dgbdgZd[i]ZÃmZYeVn!VcVeegdeg^ViZedgi^dci]ZgZd[^hYZ[ZggZYVcY
vests as per the schedule mentioned in the table below :

0ORTION OF 6ARIABLE 0AY Timelines

60% Payable effective April 1 of the financial year immediately following the performance
year, subject to RBI approval.
13.33% As on the start date of the subsequent financial year immediately following the
reference performance year.
13.33% As on the start date of the second financial year immediately following the reference
performance year.
13.33% As on the start date of the third financial year immediately following the reference
performance year.

™ I]Z 7Vc` ]Vh YZk^hZY Veegdeg^ViZ bVajh VcY XaVl WVX` XaVjhZh Vh V g^h` b^i^\Vci [dg Vcn cZ\Vi^kZ
contributions of the Bank and / or relevant line of business in any year.

9 Malus Clause

Under the malus clause the incumbent foregoes the vesting of the deferred variable pay in full or in part.
In the event there is a deterioration in specific performance criteria (such as criteria relating to profit or
asset quality) that are laid down by the Remuneration Committee, then the Remuneration Committee
would review the deterioration in the performance taking into consideration the macroeconomic
environment as well as internal performance indicators and accordingly decide whether any part of
the deferred tranche pertaining to that financial year merits a withdrawal.

9 Claw back Clause

Under the claw back clause the incumbent is obligated to return all the tranches of payout received of
bonus amounts pertaining to the relevant performance year. In the event there is any act attributable
to the concerned Whole Time Director / Managing Director resulting in an incident of willful and
deliberate misinterpretation / misreporting of financial performance (inflating the financials) of the
Bank, for a financial year, which comes to light in the subsequent three years, the incumbent is
obligated to return all the tranches of payout received of bonus amounts pertaining to the relevant
performance year.

The specific criteria on the applicability of malus and claw back arrangements are reviewed by the Remuneration
Committee annually.

HDFC Bank Limited Annual Report 2013-14 82

Schedules to the Financial Statements
For the year ended March 31, 2014
Employees Other Than Whole Time Directors

The Bank has formulated the following variable pay plans :

™ Annual Bonus Plan

The quantum of variable payout is a function of the performance of the Bank, performance of the individual
employee, job band of the employee and the functional category. Basis these key determinants and due
adjustment for risk alignment, a payout matrix for variable pay is developed. Market trends for specific businesses
/ functions along with inputs from compensation surveys may also be used in finalising the payout.

Bonus pools are designed to meet specific business needs therefore resulting in differentiation in both the
quantum and the method of payout across functions. Typically higher levels of responsibility receive a higher
proportion of variable pay vis-à-vis fixed pay. The Bank ensures that the time horizon for risk is assessed and the
deferment period, if any, for bonus is set accordingly. Employees on the annual bonus plan are not part of the
incentive plans. The following is taken into account while administering the annual bonus :

9 In the event the proportion of variable pay to fixed pay is substantially high (typically variable pay exceeding
50% of fixed pay), the Bank may devise an appropriate deferment schedule after taking into consideration
the nature of risk, time horizon of risk, and the materiality of risk.

9 In cases of deferment of variable pay the Bank makes an assessment prior to the due date for payment of
the deferred portion for any negative contribution. The criteria for negative contribution are decided basis
pre-defined financial benchmarks. The Bank has in place appropriate methods for prevention of vesting of
deferred variable pay or any part thereof, on account of negative contribution. The Bank also has in place
claw back arrangements in relation to amounts already paid in the eventuality of a negative contribution.

™ Incentive Plans

Incentive Plans are formulated for sales personnel who are given origination / sales targets but have limited
impact on risk since credit decisions are exercised independent of the sales function. Most incentive plans have
quarterly payouts. In alignment with the principles of prudent risk management, a portion of the incentive payouts
are deferred till the end of the year and are linked to attainment of targets for the full year.

F. Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the
Bank utilizes and the rationale for using these different forms.

The Bank recognises the importance of variable pay in reinforcing a pay for performance culture. Variable pay stimulates
employees to stretch their abilities to exceed expectations.

s !NNUAL "ONUS 0LAN

These are paid to reward performance for a given financial year. This covers all employees and excludes
employees receiving incentives. This is based on performance rating, job band and functional category of the
individual.

s )NCENTIVE 0LANS

These are paid to frontline sales staff for the achievement of specific sales targets but limited impact on risk
as credit decisions are exercised independent of the sales function. Further, it has been the endeavor of the
Bank to ensure that the objectives set are based on the principles of a balanced scorecard rather than just the
achievement of financial numbers. Incentives are generally paid every quarter. A portion of the incentive payouts
are deferred till the end of the year and are linked to attainment of targets for the full year.

s %MPLOYEE 3TOCK /PTION 0LAN

This is to reward for contribution of employees in creating a long term, sustainable earnings and enhancing
shareholder value. Only employees in a certain job band and with a specific performance rating are eligible for
Stock Options. Performance is the key criteria for granting stock options.

HDFC Bank Limited Annual Report 2013-14 83

Schedules to the Financial Statements
For the year ended March 31, 2014
1UANTITATIVE $ISCLOSURES

The quantitative disclosures cover the Bank’s Whole Time Directors and Key Risk Takers. Key Risk Takers are individuals
who can materially set, commit or control significant amounts of the Bank’s resources, and / or exert significant influence over
its risk profile. The Bank’s Key Risk Takers include Whole Time Directors, Group Heads, Business Heads directly reporting
to the Managing Director and select roles in the Bank’s Treasury and Investment Banking functions.

S. No. Subject March 31, 2014 March 31, 2013

(a) Number of meetings held by the Number of meetings : 7 Number of meetings : 5
Remuneration Committee during the
financial year and remuneration paid to Remuneration paid : ` 0.05 crore Remuneration paid : ` 0.04 crore
its members
(b) (i) Number of employees having received a 21 employees 22 employees
variable remuneration award during the
financial year
(b) (ii) Number and total amount of sign-on None None
awards made during the financial year
(b) (iii) Details of guaranteed bonus, if any, paid None None
as joining / sign on bonus
(b) (iv) Details of severance pay, in addition to None None
accrued benefits, if any
(c) (i) Total amount of outstanding deferred Total amount of outstanding deferred Total amount of outstanding deferred
remuneration, split into cash, shares and remuneration (cash bonus) was ` 3.02 remuneration (cash bonus) was ` 1.81
share-linked instruments and other forms crore crore
(c) (ii) Total amount of deferred remuneration ` 0.60 crore Nil
paid out in the financial year
(d) Breakdown of amount of remuneration ` 32.83 crore (Fixed*) ` 31.81 crore (Fixed*)
awards for the financial year to show fixed ` 9.92 crore (Variable pay pertaining to ` 9.82 crore (Variable pay pertaining to
and variable, deferred and non-deferred financial year ended March 31, 2013, in financial year ended March 31, 2012, in
relation to employees where there was no relation to employees where there was no
deferment of pay) deferment of pay)
` 4.53 crore** (Variable pay pertaining to ` 4.53 crore (Variable pay pertaining to
financial year ended March 31, 2013, in financial year ended March 31, 2012, in
relation to employees where there was relation to employees where there was
deferment of pay), of which ` 1.81 crore deferment of pay), of which ` 1.81 crore
was deferred and ` 2.72 crore was non- was deferred and ` 2.72 crore was non-
deferred. deferred.
(e) (i) Total amount of outstanding deferred Total amount of outstanding deferred Total amount of outstanding deferred
remuneration and retained remuneration remuneration (cash bonus) was ` 3.02 remuneration (cash bonus) was ` 1.81
exposed to ex post explicit and / or crore crore
implicit adjustments.
(e) (ii) Total amount of reductions during the Nil Nil
financial year due to ex-post explicit
adjustments.
(e) (iii) Total amount of reductions during the Nil Nil
financial year due to ex-post implicit
adjustments

* Excludes gratuity benefits, since the same is computed at Bank level.

** Includes deferred variable pay of ` 0.98 crore and non-deferred variable pay of ` 1.48 crore approved by the RBI
subsequent to March 31, 2014 vide letter dated April 2, 2014
Note : 4,241,000 stock options were granted to the Bank’s Key Risk Takers during the year ended March 31, 2014
(previous year : Nil).

HDFC Bank Limited Annual Report 2013-14 84

Schedules to the Financial Statements
For the year ended March 31, 2014
23. Segment reporting
Business Segments
Business segments have been identified and reported taking into account, the target customer profile, the nature of products
and services, the differing risks and returns, the organisation structure, the internal business reporting system and the
guidelines prescribed by RBI. The Bank operates in the following segments :
a) Treasury
The treasury segment primarily consists of net interest earnings from the Bank’s investment portfolio, money market
borrowing and lending, gains or losses on investment operations and on account of trading in foreign exchange and
derivative contracts.
b) Retail Banking
The retail banking segment serves retail customers through a branch network and other delivery channels. This
segment raises deposits from customers and provides loans and other services to customers with the help of specialist
product groups. Exposures are classified under retail banking taking into account the status of the borrower (orientation
criterion), the nature of product, granularity of the exposure and the quantum thereof.
Revenues of the retail banking segment are derived from interest earned on retail loans, interest earned from other
segments for surplus funds placed with those segments, subvention received from dealers and manufacturers, fees
from services rendered, foreign exchange earnings on retail products etc. Expenses of this segment primarily comprise
interest expense on deposits, commission paid to retail assets sales agents, infrastructure and premises expenses
for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated
expenses of specialist product groups, processing units and support groups.
c) Wholesale banking
The wholesale banking segment provides loans, non-fund facilities and transaction services to large corporates,
emerging corporates, public sector units, government bodies, financial institutions and medium scale enterprises.
Revenues of the wholesale banking segment consist of interest earned on loans made to customers, interest / fees
earned on the cash float arising from transaction services, earnings from trade services and other non-fund facilities
and also earnings from foreign exchange and derivative transactions on behalf of customers. The principal expenses
of the segment consist of interest expense on funds borrowed from external sources and other internal segments,
premises expenses, personnel costs, other direct overheads and allocated expenses of delivery channels, specialist
product groups, processing units and support groups.
d) Other banking business
This segment includes income from para banking activities such as credit cards, debit cards, third party product
distribution, primary dealership business and the associated costs.
e) Unallocated
All items which are reckoned at an enterprise level are classified under this segment. This includes capital and reserves,
debt classified as Tier I or Tier II capital and other unallocable assets and liabilities such as deferred tax, prepaid
expenses, etc.
Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments.
Segment result includes revenue less interest expense less operating expense and provisions, if any, for that segment.
Segment-wise income and expenses include certain allocations. Interest income is charged by a segment that provides
funding to another segment, based on yields bench marked to an internally approved yield curve or at a certain agreed
transfer price rate. Transaction charges are levied by the retail-banking segment to the wholesale banking segment for
the use by its customers of the retail banking segment’s branch network or other delivery channels. Such transaction
costs are determined on a cost plus basis. Segment capital employed represents the net assets in that segment.
Geographic segments
The geographic segments of the Bank are categorized as Domestic Operations and Foreign Operations. Domestic Operations
comprise branches in India and Foreign Operations comprise branches outside India.

HDFC Bank Limited Annual Report 2013-14 85

Schedules to the Financial Statements
For the year ended March 31, 2014
Segment reporting for the year ended March 31, 2014 is given below :
"USINESS SEGMENTS  ` crore)
Other
S. Retail Wholesale
Particulars Treasury banking Total
No. banking banking
operations
1 Segment revenue 11,786.70 40,804.86 19,645.34 5,033.55 77,270.45
2 Unallocated revenue 2.58
3 Less : Inter-segment revenue 28,217.85
4 Income from operations (1) + (2) - (3) 49,055.18
5 Segment results 412.30 5,685.41 5,940.11 1,920.46 13,958.28
6 Unallocated expenses 1,186.21
7 Income tax expense (including deferred tax) 4,293.67
8 Net profit (5) - (6) - (7) 8,478.40
9 Segment assets 160,537.01 169,135.07 143,652.82 14,333.65 487,658.55
10 Unallocated assets 3,940.97
11 Total assets (9) + (10) 491,599.52
12 Segment liabilities 38,125.60 298,225.26 90,597.43 1,737.86 428,686.15
13 Unallocated liabilities 19,434.72
14 Total liabilities (12) + (13) 448,120.87
15 Capital employed (9) - (12) 122,411.41 (129,090.19) 53,055.39 12,595.79 58,972.40
16 Unallocated (10) - (13) (15,493.75)
17 Total (15) + (16) 43,478.65
18 Capital expenditure 3.16 860.96 21.75 32.35 918.22
19 Depreciation 6.7 531.85 90.93 42.13 671.61

'EOGRAPHIC SEGMENTS  ` crore)

Particulars Domestic International
Revenue 48,304.19 750.99
Assets 461,809.17 29,790.35
Capital expenditure 917.53 0.69
Segment reporting for the year ended March 31, 2013 is given below :
"USINESS SEGMENTS  ` crore)
Other
S. Retail Wholesale
Particulars Treasury banking Total
No. banking banking
operations
1 Segment revenue 9,711.02 34,919.65 17,633.82 3,902.56 66,167.05
2 Unallocated revenue 112.77
3 Less : Inter-segment revenue 24,362.33
4 Income from operations (1) + (2) - (3) 41,917.49
5 Segment results 225.00 4,424.15 4,751.96 1,564.12 10,965.23
6 Unallocated expenses 1,214.61
7 Income tax expense (including deferred tax) 3,024.34
8 Net profit (5) - (6) - (7) 6,726.28
9 Segment assets 139,459.18 138,001.73 107,109.05 11,331.21 395,901.17
10 Unallocated assets 4,430.73
11 Total assets (9) + (10) 400,331.90
12 Segment liabilities 24,652.79 234,968.21 82,810.62 1,016.26 343,447.88
13 Unallocated liabilities 20,669.88
14 Total liabilities (12) + (13) 364,117.76
15 Capital employed (9) - (12) 114,806.39 (96,966.48) 24,298.43 10,314.95 52,453.29
16 Unallocated (10) - (13) (16,239.15)
17 Total (15) + (16) 36,214.14
18 Capital expenditure 100.80 629.46 165.92 116.90 1,013.08
19 Depreciation 52.20 426.34 94.44 78.69 651.67

HDFC Bank Limited Annual Report 2013-14 86

Schedules to the Financial Statements
For the year ended March 31, 2014
'EOGRAPHIC SEGMENTS  ` crore)

Particulars Domestic International

Revenue 41,529.43 388.06
Assets 386,064.61 14,267.29
Capital expenditure 1,012.67 0.41
24. Related party disclosures
As per AS-18, Related Party Disclosure, the Bank’s related parties are disclosed below :
Promoter
Housing Development Finance Corporation Limited
Enterprises under common control of the promoter
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 ™ <GJ=;^cVcXZA^b^iZY ™ =9;8GZVainA^b^iZY
 ™ =9;8:G<D<ZcZgVa>chjgVcXZ8dbeVcnA^b^iZY ™ =9;8KZcijgZ8Ve^iVaA^b^iZY
 ™ =9;8KZcijgZhIgjhiZZ8dbeVcnA^b^iZY ™ =9;8HVaZhEg^kViZA^b^iZY
 ™ <g^]V>ckZhibZcih ™ 8gZY^aV;^cVcX^VaHZgk^XZhEg^kViZA^b^iZY
 ™ =9;8:YjXVi^dcVcY9ZkZadebZciHZgk^XZhEg^kViZA^b^iZY ™ =9;8>ckZhibZcihIgjhi
 ™ =9;8EgdeZginKZcijgZhA^b^iZY ™ <g^]VEiZA^b^iZY
 ™ =9;8A^[ZEZch^dc;jcYBVcV\ZbZci8dbeVcnA^b^iZY ™ =IEVgZ`];djcYVi^dc
 ™ <gVcYZjgEgdeZgi^ZhEg^kViZA^b^iZY ™ L^cYZgbZgZEgdeZgi^ZhEg^kViZA^b^iZY
 ™ EZciV\gVbEgdeZgi^ZhEg^kViZA^b^iZY ™ L^cX]ZhiZgEgdeZgi^ZhEg^kViZA^b^iZY
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Subsidiaries
HDFC Securities Limited
HDB Financial Services Limited
Associates
Atlas Documentary Facilitators Company Private Limited
HBL Global Private Limited
International Asset Reconstruction Company Private Limited
Welfare trust of the Bank
HDB Employees Welfare Trust
Key management personnel
Aditya Puri, Managing Director
Paresh Sukthankar, Deputy Managing Director
Harish Engineer, Executive Director (retired from the services of the Bank effective September 30, 2013)
Kaizad Bharucha, Executive Director (appointed with effect from December 24, 2013)
Related parties to key management personnel
Salisbury Investments Private Limited, Anita Puri, Amit Puri, Amrita Puri, Adishwar Puri, Aarti Sood, Sangeeta Sukthankar,
Dattatraya Sukthankar, Shubhada Sukthankar, Akshay Sukthankar, Ankita Sukthankar, Madhavi Lad, Sudha Engineer,
Shreematiben Engineer, Nikhil Engineer, Uma Engineer, Mahesh Engineer, Havovi Bharucha, Huzaan Bharucha, Danesh
Bharucha, Daraius Bharucha.

HDFC Bank Limited Annual Report 2013-14 87

Schedules to the Financial Statements
For the year ended March 31, 2014
In accordance with paragraph 5 of AS-18, the Bank has not disclosed certain transactions with relatives of Key Management
Personnel as they are in the nature of banker-customer relationship.
The significant transactions between the Bank and related parties for year ended March 31, 2014 are given below. A specific
related party transaction is disclosed as a significant related party transaction wherever it exceeds 10% of all related party
transactions in that category :
™ >ciZgZhi eV^Y / =djh^c\ 9ZkZadebZci ;^cVcXZ 8dgedgVi^dc A^b^iZY ` 8.83 crore (previous year : ` 9.79 crore);
HDFC Standard Life Insurance Company Limited ` 8.23 crore (previous year : ` 1.10 crore); Atlas Documentary
Facilitators Company Private Limited ` 4.15 crore (previous year : ` 4.08 crore).
™ >ciZgZhigZXZ^kZY/=97;^cVcX^VaHZgk^XZhA^b^iZY` 89.32 crore (previous year : ` 55.43 crore).
™ GZcYZg^c\d[hZgk^XZh/=9;8HiVcYVgYA^[Z>chjgVcXZ8dbeVcnA^b^iZY` 340.90 crore (previous year : ` 472.33
crore); Housing Development Finance Corporation Limited ` 130.81 crore (previous year : ` 139.59 crore);
HDFC ERGO General Insurance Company Limited ` 117.40 crore (previous year : ` 126.31 crore); HDFC Asset
Management Company Limited ` 75.19 crore (previous year : ` 68.41 crore).
™ GZXZ^k^c\d[hZgk^XZh/=7A<adWVaEg^kViZA^b^iZY` 492.75 crore (previous year : ` 464.56 crore); Atlas Documentary
Facilitators Company Private Limited ` 430.00 crore (previous year : ` 393.48 crore).
™ 9^k^YZcYeV^Y/=djh^c\9ZkZadebZci;^cVcXZ8dgedgVi^dcA^b^iZY` 216.27 crore (previous year : ` 169.08 crore);
HDFC Investments Limited ` 82.50 crore (previous year : ` 64.50 crore).
The Bank’s related party balances and transactions for the year ended March 31, 2014 are summarized as follows : (` crore)
Enterprises
Key
under common
)TEMS  RELATED PARTY Promoter Subsidiaries Associates management Total
control of
personnel
the promoter
5,494.84 676.99 215.67 85.12 10.25 6,482.87
Deposits taken
(5,494.84) (720.78) (215.67) (85.21) (14.13) (6,530.63)
0.15 3.86 10.52 33.45 2.30 50.28
Deposits placed
(0.15) (3.86) (10.52) (38.45) (2.30) (55.28)
- 0.05 917.27 44.40 0.94 962.66
Advances given
- (0.08) (1,002.36) (44.70) (0.94) (1,048.08)
Fixed assets purchased from - - - 0.01 - 0.01
Fixed assets sold to - - - - 0.01 0.01
Interest paid to 8.83 19.18 1.32 4.25 0.73 34.31
Interest received from - 8.24 89.32 0.86 0.02 98.44
Income from services rendered to 130.81 534.97 16.71 25.89 - 708.38
Expenses for receiving services from 85.71 168.00 79.03 922.75 0.50 1,255.99
- - 1,510.20 31.19 - 1,541.39
Equity investments
- - (1,510.20) (31.19) - (1,541.39)
- 189.14 - 39.72 - 228.86
Other investments
- (189.14) - (39.72) - (228.86)
Dividend paid to 216.27 91.69 - - 1.71 309.67
Dividend received from - - 0.95 0.01 - 0.96
12.49 63.99 0.89 - - 77.37
Receivable from
(12.49) (87.34) (2.02) - - (101.85)
14.32 - 17.22 23.05 - 54.59
Payable to
(14.32) - (17.22) (90.67) - (122.21)
0.11 0.04 0.05 - - 0.20
Guarantees given
(0.11) (0.04) (0.05) - - (0.20)
Remuneration paid - - - - 11.08 11.08
Loans purchased from 5,556.07 - - - - 5,556.07
NPAs sold to - - - 6.42 - 6.42

HDFC Bank Limited Annual Report 2013-14 88

Schedules to the Financial Statements
For the year ended March 31, 2014
Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances
at each quarter-end.
Remuneration paid excludes value of employee stock options exercised during the year.
The Bank being an authorised dealer, deals in foreign exchange and derivative transactions with certain parties which includes
the promoter and related group companies. The foreign exchange and derivative transactions are undertaken in line with the RBI
guidelines. The notional principal amount of foreign exchange and derivative contracts transacted with the promoter that were
outstanding as on March 31, 2014 is ` 250.00 crore (previous year : ` 250.00 crore). The contingent credit exposure pertaining to
these contracts computed in line with the extant RBI guidelines on exposure norms is ` 8.82 crore (previous year : ` 7.42 crore).
During the year ended March 31, 2014, the Bank purchased securities from Credila Financial Services Private Limited ` 236.56
crore (previous year : Nil) and from HDB Financial Services Limited ` 65.00 crore (previous year : ` 180.00 crore). During the year
ended March 31, 2013, the Bank had also purchased securities from HDFC Standard Life Insurance Company Limited ` 294.24
crore. During the year ended March 31, 2014, the Bank sold securities to HDFC Standard Life Insurance Company Limited with
book values aggregating ` 336.88 crore (previous year : ` 650.02 crore), to HDFC ERGO General Insurance Company Limited
` 24.86 crore (previous year : ` 217.16 crore). During the year ended March 31, 2014, the Bank redeemed securities of Credila
Financial Services Private Limited ` 50.00 crore (previous year : Nil). During the year ended March 31, 2013 the Bank had also
sold securities to Key Management Personnel ` 5.26 crore.
As of March 31, 2014, investment of HDFC Standard Life Insurance Company Limited in the Bank’s tier II bonds amounted to
` 85.00 crore (previous year : ` 61.00 crore) and that of HDFC ERGO General Insurance Company Limited amounted to ` 5.00
crore (previous year : ` 5.00 crore).
During the year ended March 31, 2014, the Bank paid rent of ` 0.66 crore (previous year : ` 0.66 crore) to parties related to
the Bank’s key management personnel in relation to residential accommodation. As at March 31, 2014, the security deposit
outstanding was ` 3.50 crore (previous year : ` 4.28 crore).
The deposit outstanding from HDB Employees Welfare Trust as of March 31, 2014 was ` 45.12 crore (previous year : ` 49.66
crore). The Bank also paid interest on deposit from HDB Employees Welfare Trust aggregating to ` 4.41 crore (previous year :
` 4.55 crore).
The Bank’s related party balances and transactions for the year ended March 31, 2013 are summarized as follows :
(` crore)
Enterprises
Key
under common
)TEMS  RELATED PARTY Promoter Subsidiaries Associates management Total
control of
personnel
the promoter

1,985.17 566.11 281.82 44.13 5.67 2,882.90

Deposits taken
(3,193.25) (729.10) (369.08) (48.97) (6.61) (4,347.01)
0.15 - 9.76 38.45 2.22 50.58
Deposits placed
(0.15) - (9.76) (38.45) (2.22) (50.58)
- - 643.71 7.98 0.73 652.42
Advances given
- - (643.71) (17.93) (0.73) (662.37)
Fixed assets purchased from - - - - - -
Fixed assets sold to - - - - - -
Interest paid to 9.79 12.77 2.88 4.12 0.41 29.97
Interest received from - - 55.46 1.87 0.04 57.37
Income from services rendered to 139.59 668.68 18.15 20.95 - 847.37
Expenses for receiving services from 47.94 111.07 67.62 858.04 0.60 1,085.27
- - 723.62 31.19 - 754.81
Equity Investments
- - (748.62) (31.19) - (779.81)

HDFC Bank Limited Annual Report 2013-14 89

Schedules to the Financial Statements
For the year ended March 31, 2014
(` crore)
Enterprises
Key
under common
)TEMS  RELATED PARTY Promoter Subsidiaries Associates management Total
control of
personnel
the promoter

- - - 15.67 - 15.67
Other investments
- - - (21.31) - (21.31)
Dividend paid to 169.08 68.83 - - 1.15 239.06
Dividend received from - - 0.76 0.01 - 0.77
13.97 101.74 0.32 2.42 - 118.45
Receivable from
(13.97) (101.74) (1.59) (2.42) - (119.72)
- - 12.71 66.87 - 79.58
Payable to
(8.12) - (12.95) (107.23) - (128.30)
0.10 0.13 0.05 - - 0.28
Guarantees given
(0.10) (0.13) (0.05) - - (0.28)
Remuneration paid - - - - 11.95 11.95
Loans purchased from 5,164.40 - 27.72 - - 5,192.12

Figures in bracket indicate maximum balance outstanding during the year based on comparison of the total outstanding balances
at each quarter-end.

Remuneration paid excludes value of employee stock options exercised during the year.
 ,EASES
Operating leases primarily comprise office premises, staff residences and Automated Teller Machines (‘ATMs’), which are
renewable at the option of the Bank. The details of maturity profile of future operating lease payments are given below :
(` crore)

Period March 31, 2014 March 31, 2013

Not later than one year 679.84 611.59

Later than one year and not later than five years 2,286.63 2,076.89
Later than five years 1,239.62 1,021.66
Total 4,206.09 3,710.14
The total of minimum lease payments recognised in the Statement of Profit and
765.57 700.61
Loss for the year
Total of future minimum sub-lease payments expected to be received under non-
74.78 64.30
cancellable sub-leases
Sub-lease amounts recognised in the Statement of Profit and Loss for the year 29.70 24.22
Contingent (usage based) lease payments recognized in the Statement of Profit and
133.29 105.55
Loss for the year

The Bank has sub-leased certain of its properties taken on lease.

The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue
restrictions or onerous clauses in the agreements.
26. Penalties levied by the RBI
During the year ended March 31, 2014, the RBI imposed a penalty of ` 4.50 crore on the Bank for certain irregularities and
violations discovered by the RBI, viz., non-observance of certain safeguards in respect of arrangement of “at par” payment

HDFC Bank Limited Annual Report 2013-14 90

Schedules to the Financial Statements
For the year ended March 31, 2014
of cheques drawn by cooperative banks, exceptions in periodic review of risk profiling of account holders, non-adherence
to KYC rules for walk-in customers (non-customers) including for sale of third party products, sale of gold coins for cash in
excess of ` 50,000 in certain cases and non-submission of proper information required by the RBI.
 $ISCLOSURE FOR CUSTOMER COMPLAINTS  UNIMPLEMENTED AWARDS OF "ANKING /MBUDSMAN
s #USTOMER COMPLAINTS
(A) Customer complaints other than ATM transaction disputes

Particulars March 31, 2014 March 31, 2013

(a) No. of complaints pending at the beginning of the year 2,293 1,417
(b) No. of complaints received during the year 123,860 132,619
(c) No. of complaints redressed during the year 125,698 131,743
(d) No. of complaints pending at the end of the year 455 2,293

(B) ATM transaction disputes relating to the Bank’s customers on the Bank’s ATMs

Particulars March 31, 2014 March 31, 2013

(a) No. of complaints pending at the beginning of the year 183 234
(b) No. of complaints received during the year 12,586 24,461
(c) No. of complaints redressed during the year 12,610 24,512
(d) No. of complaints pending at the end of the year 159 183
(e) Complaints per ten thousand transactions 0.45 0.86

(C) ATM transaction disputes relating to the Bank’s customers on other banks’ ATMs

Particulars March 31, 2014 March 31, 2013

(a) No. of complaints pending at the beginning of the year 1,570 3,643
(b) No. of complaints received during the year 127,955 155,918
(c) No. of complaints redressed during the year 127,924 157,991
(d) No. of complaints pending at the end of the year 1,601 1,570
(e) Complaints per ten thousand transactions 6.44 8.63

(D) Total customer complaints and ATM transaction disputes [total of tables (A), (B) and (C) above]

Particulars March 31, 2014 March 31, 2013

(a) No. of complaints pending at the beginning of the year 4,046 5,294
(b) No. of complaints received during the year 264,401 312,998
(c) No. of complaints redressed during the year 266,232 314,246
(d) No. of complaints pending at the end of the year 2,215 4,046

Note : ATM transaction disputes reported in the above tables are in accordance with RBI guidelines on disclosure
of customer complaints.
s 5NIMPLEMENTED AWARDS OF "ANKING /MBUDSMEN "/

Particulars March 31, 2014 March 31, 2013

(a) No. of unimplemented awards at the beginning of the year Nil Nil
(b) No. of awards passed by the BO during the year 1 2
(c) No. of awards implemented during the year 1 2
(d) No. of unimplemented awards at the end of the year Nil Nil

HDFC Bank Limited Annual Report 2013-14 91

Schedules to the Financial Statements
For the year ended March 31, 2014
s 4OP AREAS OF CUSTOMER COMPLAINTS
The average number of customer complaints per branch, including ATM transaction disputes, was 6.2 per month
during the year ended March 31, 2014 (previous year : 8.0 per month). For the year ended March 31, 2014, retail
branch banking segment accounted for 74.19% of the total complaints (an increase from 74.12% for the previous year)
followed by credit cards at 17.22% of the total complaints (an increase from 12.99% for the previous year), retail assets
at 4.04% of the total complaints (a reduction from 6.90% for the previous year), while other segments accounted for
4.55% of total complaints (as against 5.99% in the previous year). The top 10 areas of customer complaints for the
year ended March 31, 2014, including ATM transaction disputes, accounted for 67.05% of total complaints as against
66.83% for the year ended March 31, 2013. The top 5 areas of customer complaints on which the Bank is working
towards root cause remediation are - ‘cash not dispensed or less cash dispensed in the Bank’s ATMs’, ‘statement
related - credit cards’, ‘address change request given at branch not done’, 'instant account not activated - personal
details not updated’ and ‘Sales related - credit cards’.
™ Position of BO complaints as per RBI annual report
As per a report published by the RBI for the year ended June 30, 2013, the number of BO complaints per branch for the
Bank was 1.67 (previous year : 2.28). The number of BO complaints other than credit cards per 1,000 accounts was at
0.11 (previous year : 0.15). The number of BO complaints (credit card related) per 1,000 cards was at 0.08 (previous
year : 0.06) for the Bank.
 $ISCLOSURE OF ,ETTER OF #OMFORTS ,O#S ISSUED BY THE "ANK
The Bank has not issued any Letter of Comfort during the years ended March 31, 2014 and March 31, 2013.
29. Small and micro industries
Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain
disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases
of delays in payments to micro and small enterprises or of interest payments due to delays in such payments.
30. Overseas assets, NPAs and revenue (` crore)

Particulars March 31, 2014 March 31, 2013

Total Assets 29,790.35 14,267.29
Total NPAs 37.45 Nil
Total Revenue 750.99 388.06
 /FF "ALANCE SHEET 306S
There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.
32. Credit Default Swaps
The Bank has not transacted in credit default swaps during the year ended March 31, 2014 (previous year : Nil).
 #OMPARATIVE lGURES
Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year’s
presentation
As per our report of even date. For and on behalf of the Board
For B S R & Co. LLP # - 6ASUDEV Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master 6IJAY -ERCHANT
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 92

Basel III - Pillar 3 Disclosures

1 Scope of Application :
Top bank in the group
The Basel III Capital Regulation (‘Basel III’) is applicable to HDFC Bank Limited (hereinafter referred to as the ‘Bank’)
and its two subsidiaries (HDFC Securities Limited and HDB Financial Services Limited) which together constitute the
Group in line with the Reserve Bank of India (‘RBI’) guidelines on the preparation of consolidated prudential reports. The
Basel III capital regulations were effective April 1, 2013 as per RBI guidelines. Accordingly, previous year figures of capital
computation and risk weighted assets are not comparable.
Accounting and regulatory consolidation
For the purpose of financial reporting, the Bank consolidates its subsidiaries in accordance with Accounting Standard (‘AS’)
-21, Consolidated Financial Statements, on a line-by-line basis by adding together like items of assets, liabilities, income
and expenditure. Investments in associates are accounted for by the equity method in accordance with AS-23, Accounting
for Investments in Associates in Consolidated Financial Statements.
For the purpose of consolidated prudential regulatory reporting, the consolidated Bank includes all group entities under
its control, except group companies which are engaged in insurance business and businesses not pertaining to financial
services. Details of subsidiaries and associates of the Bank along with the consolidation status for accounting and
regulatory purposes are given below :

Included under Included under Reasons for

Name of entity Method of Method of Reasons for consolidation
accounting regulatory difference in
[Country of accounting regulatory under one of the scope of
scope of scope of the method of
incorporation] consolidation consolidation consolidation
consolidation consolidation consolidation
Consolidated
HDFC Securities
Consolidated in in accordance
Limited (‘HSL’)
accordance with with AS-21,
Yes Yes Not applicable Not applicable
AS-21, Consolidated Consolidated
[India]
Financial Statements. Financial
Statements.
HDB Financial Consolidated
Services Limited Consolidated in in accordance
(‘HDBFS’) accordance with with AS-21,
Yes Yes Not applicable Not applicable
AS-21, Consolidated Consolidated
[India] Financial Statements. Financial
Statements.

HDB Employee HDBEWT provides relief

Welfare Trust Consolidated in to employees and / or
(‘HDBEWT’) accordance with their dependents such as
Yes No Not applicable Not applicable
AS-21, Consolidated medical relief, educational
[India] Financial Statements. relief. The Bank has no
investment in this entity.

Accounted for by
Atlas Documentary
the equity method
Facilitators ADFC is a non-financial
in accordance with
Company Private entity. Bank’s investment
AS-23, Accounting
Limited (‘ADFC’) Yes No Not applicable Not applicable in ADFC has been risk
for Investments
weighted for capital
in Associates in
[India] adequacy purposes.
Consolidated Financial
Statements.
Accounted for by
the equity method
HBL Global Private HBL is a non-financial
in accordance with
Limited (‘HBL’) entity. HBL is a
AS-23, Accounting
Yes No Not applicable Not applicable subsidiary of [Link]
for Investments
[India] Bank has no investment
in Associates in
in this entity.
Consolidated Financial
Statements.
Accounted for by
International Asset the equity method
Reconstruction in accordance with Bank’s investment has
Company Private AS-23, Accounting been risk weighted
Yes No Not applicable Not applicable
Limited (‘IARCL’) for Investments for capital adequacy
in Associates in purposes.
[India] Consolidated Financial
Statements.

HDFC Bank Limited Annual Report 2013-14 93

Basel III - Pillar 3 Disclosures

Group entities not considered for consolidation under both accounting scope and regulatory scope
There are no group entities that are not considered for consolidation under both the accounting scope of consolidation and
regulatory scope of consolidation.
Group entities considered for regulatory scope of consolidation
Regulatory scope of consolidation refers to consolidation in such a way as to result in the assets of the underlying group
entities being included in the calculation of consolidated risk-weighted assets of the group. Following is the list of group
entities considered under regulatory scope of consolidation.

Total balance sheet Total balance sheet

equity*as of assets as of
Name of entity Principal activity of the
March 31, 2014 March 31, 2014
[Country of incorporation] entity
(per accounting (per accounting
balance sheet) balance sheet)

HDFC Securities Limited (‘HSL’) ` 4,421.7 million ` 8,587.5 million

Stock broking
[India] (` 3,712.7 million) (` 5,441.2 million)
HDB Financial Services Limited (‘HDBFS’) ` 16,285.0 million ` 136,894.0 million
Retail assets financing
[India] (` 8,735.3 million) (` 83,033.1 million)
*comprised of equity share capital and reserves & surplus
Figures in brackets denote numbers for the previous year
Capital deficiency in subsidiaries
There is no capital deficiency in the subsidiaries of the Bank as of March 31, 2014 (previous year : Nil).
Investment in insurance entities
As of March 31, 2014, the Bank does not have investment in any insurance entity (previous year : Nil).
Restrictions on transfer of funds within the Group
There are no restrictions or impediments on transfer of funds or regulatory capital within the Group as of March 31, 2014
(previous year : Nil).
2 Capital Adequacy
Assessment of capital adequacy
The Bank has a process for assessing its overall capital adequacy in relation to the Bank's risk profile and a strategy for
maintaining its capital levels. The process provides an assurance that the Bank has adequate capital to support all risks
inherent to its business and an appropriate capital buffer based on its business profile. The Bank identifies, assesses
and manages comprehensively all risks that it is exposed to through sound governance and control practices, robust risk
management framework and an elaborate process for capital calculation and planning.
The Bank has a comprehensive Internal Capital Adequacy Assessment Process (‘ICAAP’). The Bank’s ICAAP covers the
capital management policy of the Bank, sets the process for assessment of the adequacy of capital to support current and
future activities / risks and a report on the capital projections for a period of 2 to 3 years.
The Bank has a structured management framework in the internal capital adequacy assessment process for the
identification and evaluation of the significance of all risks that the Bank faces, which may have a material adverse impact
on its business and financial position. The Bank considers the following as material risks it is exposed to in the normal
course of its business and therefore, factors these while assessing / planning capital :
z Credit Risk, including residual risks z Credit Concentration Risk
z Market Risk z Business Risk
z Operational Risk z Strategic Risk
z Interest Rate Risk in the Banking Book z Compliance Risk
z Liquidity Risk z Reputation Risk
z Intraday risk z Technology Risk
z Model Risk z Counterparty Credit Risk

HDFC Bank Limited Annual Report 2013-14 94

Basel III - Pillar 3 Disclosures

The Bank has implemented a Board approved Stress Testing Framework which forms an integral part of the Bank's
ICAAP. Stress Testing involves the use of various techniques to assess the Bank’s potential vulnerability to extreme but
plausible stressed business conditions. The changes in the levels of Credit Risk, Market Risk, Liquidity Risk and Interest
Rate Risk in the Banking Book (‘IRRBB’) and the changes in the on and off balance sheet positions of the Bank are
assessed under assumed “stress” scenarios. Typically, these relate, inter alia, to the impact on the Bank’s profitability and
capital adequacy. Stress tests are conducted on a quarterly basis and the stress test results are put up to the Risk Policy
& Monitoring Committee of the Board on a half yearly basis and to the Board annually, for their review and guidance. The
Bank periodically assesses and refines its stress tests in an effort to ensure that the stress scenarios capture material
risks as well as reflect possible extreme market moves that could arise as a result of business environment conditions. The
stress tests are used in conjunction with the Bank’s business plans for the purpose of capital planning in the ICAAP.
Capital requirements for credit risk (Amounts in ` million)
Particulars March 31, 2014 March 31, 2013*
Portfolios subject to standardised approach 272,864.8 236,550.8
Securitisation exposures 12,477.3 10,267.4
Total 285,342.1 246,818.2
* computed as per Basel II - New Capital Adequacy Framework
Capital requirements for market risk (Amounts in ` million)

Standardised duration approach March 31, 2014 March 31, 2013*

Interest rate risk 8,377.7 7,552.5
Equity risk 765.5 5,910.4
Foreign exchange risk (including gold) 1,260.0 270.0
Total 10,403.2 13,732.9
* computed as per Basel II - New Capital Adequacy Framework

Capital requirements for operational risk (Amounts in ` million)

Particulars March 31, 2014 March 31, 2013
Basic indicator approach 28,100.9 22,564.6

Common Equity Tier 1 (‘CET1’), Tier 1 and Total capital ratios (computed as per Basel III capital regulations)
The minimum capital requirements under Basel III will be phased-in as per the guidelines prescribed by RBI. Accordingly,
the Bank is required to maintain a minimum CET1 capital ratio of 5.0%, a minimum Tier I capital ratio of 6.5% and a
minimum total capital ratio of 9.0% as of March 31, 2014. The Bank’s position in this regard is as follows :

Particulars Standalone Consolidated

March 31, 2014 March 31, 2014
CET1 capital ratio 11.77% 11.72%
Tier I capital ratio 11.77% 11.72%
Total capital ratio 16.07% 16.00%
Note : Subordinated debt instruments issued by HDBFS have not been considered as eligible capital instruments under the Basel III
transitional arrangements.
Disclosures pertaining to composition of capital, including the capital disclosure templates, have been disclosed separately on the Bank’s
website under the ‘Regulatory Disclosures Section’.

Total and Tier I capital ratios (computed as per Basel II - New Capital Adequacy Framework)

Particulars Standalone Consolidated

March 31, 2013 March 31, 2013
Tier I capital ratio 11.08% 11.01%
Total capital ratio 16.80% 16.90%

HDFC Bank Limited Annual Report 2013-14 95

Basel III - Pillar 3 Disclosures

3 Credit Risk
Credit Risk Management
Credit risk is defined as the possibility of losses associated with diminution in the credit quality of borrowers or
counterparties. In a bank’s portfolio, losses stem from outright default due to inability or unwillingness of a customer or
counterparty to meet commitments in relation to lending, trading, settlement and other financial transactions.
Architecture
The Bank has a comprehensive credit risk management architecture. The Board of Directors of the Bank endorses the
credit risk strategy and approves the credit risk policies of the Bank. This is done taking into consideration the Bank’s risk
appetite, derived from perceived risks in the business, balanced by the targeted profitability level for the risks taken up.
The Board oversees the credit risk management functions of the Bank. The Risk Policy & Monitoring Committee (‘RPMC’),
which is a committee of the Board, guides the development of policies, procedures and systems for managing credit risk,
towards implementing the credit risk strategy of the Bank. The RPMC ensures that these are adequate and appropriate to
changing business conditions, the structure and needs of the Bank and the risk appetite of the Bank. The RPMC periodically
reviews the Bank’s portfolio composition and the status of impaired assets.
The Bank’s Credit & Market Risk Group drives credit risk management centrally in the Bank. It is primarily responsible for
implementing the risk strategy approved by the Board, developing procedures and systems for managing risk, carrying
out an independent assessment of credit and market risk, approving individual credit exposures and monitoring portfolio
composition and quality. Within the Credit & Market Risk group and independent of the credit approval process, there is
a framework for review and approval of credit ratings. With regard to the Wholesale Banking business, the Bank’s risk
management functions are centralised. In respect of the Bank’s Retail Assets business, while the various functions relating
to policy, portfolio management and analytics are centralised, the underwriting function is distributed across various
geographies within the country. The risk management function in the Bank is clearly demarcated and independent from
the operations and business units of the Bank. The risk management function is not assigned any business targets.
Credit Process
The Bank expects to achieve its earnings objectives and to satisfy its customers’ needs while maintaining a sound
portfolio. Credit exposures are managed through target market identification, appropriate credit approval processes, post-
disbursement monitoring and remedial management procedures.
There are two different credit management models within which the credit process operates - the Retail Credit Model and
the Wholesale Credit Model. The Retail Credit Model is geared towards high volume, small transaction sized businesses
wherein credit appraisals of fresh exposures are guided by statistical models and are managed on the basis of aggregate
product portfolios. The Wholesale Credit Model on the other hand, is relevant to lower volume, larger transaction size,
customised products and relies on a judgmental process for the origination, approval and maintenance of credit exposures.
The credit models have two alternatives for managing the credit process - Product Programs and Credit Transactions. In
Product Programs, the Bank approves maximum levels of credit exposure to a set of customers with similar characteristics,
profiles and / or product needs, under clearly defined standard terms and conditions. This is a cost-effective approach to
managing credit where credit risks and expected returns lend themselves to a template-based approach or predictable
portfolio behavior in terms of yield, delinquency and write-off. Given the high volume environment, automated tracking and
reporting mechanisms are important to identify trends in portfolio behavior early and to initiate timely adjustments. In the
case of credit transactions, the risk process focuses on individual customers or borrower relationships. The approval process
in such cases is based on detailed analysis and the individual judgment of credit officials, often involving complex products
or risks, multiple facilities / structures and types of securities.
The Bank’s Credit Policies & Procedures Manual and Credit Programs, where applicable, form the core to controlling credit
risk in various activities and products. These articulate the credit risk strategy of the Bank and thereby the approach for
credit origination, approval and maintenance. These policies define the Bank’s overall credit granting criteria, including
the general terms and conditions. The policies / programs generally address areas such as target markets / customer
segmentation, qualitative and quantitative assessment parameters, portfolio mix, prudential exposure ceilings, concentration
limits, price and non-price terms, structure of limits, approval authorities, exception reporting system, prudential accounting
and provisioning norms, etc. They take cognizance of prudent and prevalent banking practices, relevant regulatory
requirements, nature and complexity of the Bank’s activities, market dynamics etc.

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Basel III - Pillar 3 Disclosures

Credit concentration risk arises mainly on account of concentration of exposures under various categories including industry,
products, geography, underlying collateral nature and single / group borrower exposures. To ensure adequate diversification
of risk, concentration ceilings have been set up by the Bank on different risk dimensions, in terms of borrower / business
group, industry and risk grading.
The RPMC sets concentration ceilings and the Credit & Market Risk Group monitors exposure level under each dimension
and ensures that the portfolio profile meets the approved concentration limits. These concentration ceilings and exposure
levels are periodically reported to the Board. The regulatory prudential norms with respect to ceilings on credit exposure
to individual borrowers or group of borrowers also ensure that the Bank avoids concentration of exposure.
As an integral part of the credit process, the Bank has a fairly sophisticated credit rating model appropriate to each market
segment in Wholesale Credit. The models follow principles similar to those of international rating agencies. In Retail Credit,
score cards have been introduced in the smaller ticket, higher volume products like credit cards, two wheeler loans and
auto loans. For the other retail products which are typically less granular or have higher ticket sizes, loans are underwritten
based on the credit policies, which are in turn governed by the respective Board approved product programs. All retail
portfolios are monitored regularly at a highly segmented level.
Management monitors overall portfolio quality and high-risk exposures periodically, including the weighted risk grade of
the portfolio and industry diversification. Additional to, and independent of, the internal grading system and the RBI norms
on asset classification, the Bank has a labeling system, where individual credits are labeled based on the degree of risk
perceived in them by the Bank. Remedial strategies are developed once a loan is identified as an adversely labeled credit.
Definition of Non-Performing Assets
The Bank follows extant guidelines of the RBI on income recognition, asset classification and provisioning. A Non-Performing
Asset (‘NPA’) is a loan or an advance where :
a) Interest and / or installment of principal remain overdue for a period of more than 90 days in respect of a term loan.
b) The account remains ‘out of order’, in respect of an overdraft / cash credit (‘OD’ / ‘CC’). An account is treated as ‘out
of order’ if the outstanding balance remains continuously in excess of the sanctioned limit / drawing power or where
there are no credits continuously for 90 days as on the date of balance sheet or credits are not enough to cover the
interest debited during the same period.
c) The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted.
d) The installment of principal or interest thereon remains overdue for two crop seasons for short duration crops.
e) The installment of principal or interest thereon remains overdue for one crop season for long duration crops.
f) Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.
g) The amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction
undertaken in terms of RBI’s guidelines on securitisation dated February 1, 2006.
h) In respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative
contract, if these remain unpaid for a period of 90 days from the specified due date for payment.
Any amount due to the Bank under any credit facility is 'overdue' if it is not paid on the due date fixed by the Bank.
The Bank will classify an account as NPA if the interest due and charged during any quarter is not serviced fully within 90
days from the end of the quarter. When a particular facility of a borrower has become non-performing, the facilities granted
by the Bank to that borrower (whether a wholesale or retail borrower) will be classified as NPA and not the particular facility
alone which triggered the NPA classification for that borrower.
Advances against term deposits, National Savings Certificates eligible for surrender, Indira Vikas Patras, Kisan Vikas Patras
and Life Insurance policies need not be treated as NPAs, provided adequate margin is available in the accounts. Credit
facilities backed by the Central Government though overdue may be treated as NPA only when the Government repudiates
its guarantee when invoked. State Government guaranteed advances and investments in State Government guaranteed
securities would attract asset classification and provisioning norms if interest and / or principal or any other amount due to
the Bank remains overdue for more than 90 days.
A loan for an infrastructure project will be classified as NPA during any time before commencement of commercial
operations as per record of recovery (90 days overdue), unless it is restructured and becomes eligible for classification as

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Basel III - Pillar 3 Disclosures

'standard asset' in terms of conditions laid down in the related RBI guidelines. A loan for an infrastructure project will be
classified as NPA if it fails to commence commercial operations within two years from the original Date of Commencement
of Commercial Operations (‘DCCO’), even if it is regular as per record of recovery, unless it is restructured and becomes
eligible for classification as 'standard asset' in terms of conditions laid down in the related RBI guidelines.
A loan for a non-infrastructure project (other than commercial real estate exposures) will be classified as NPA during any
time before commencement of commercial operations as per record of recovery (90 days overdue), unless it is restructured
and becomes eligible for classification as 'standard asset' in terms of conditions laid down in the related RBI guidelines.
A loan for a non-infrastructure project (other than commercial real estate exposures) will be classified as NPA if it fails to
commence commercial operations within one year from the original DCCO, even if is regular as per record of recovery,
unless it is restructured and becomes eligible for classification as 'standard asset' in terms of conditions laid down in the
related RBI guidelines.
A loan for commercial real estate project will be classified as NPA during any time before commencement of commercial
operations as per record of recovery (90 days overdue), or if the project fails to commence commercial operations within
one year from the original DCCO or if the loan is restructured.
Non-performing assets are classified into the following three categories :
s 3UB STANDARD !SSETS
A sub-standard asset is one, which has remained NPA for a period less than or equal to 12 months. In such cases,
the current net worth of the borrower / guarantor or the current market value of the security charged is not enough
to ensure recovery of the dues to the banks in full. In other words, such an asset will have well defined credit
weaknesses that jeopardize the liquidation of the debt and are characterised by the distinct possibility that banks will
sustain some loss, if deficiencies are not corrected.
s $OUBTFUL !SSETS
A doubtful asset is one, which remained NPA for a period exceeding 12 months. A loan classified as doubtful has
all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the
weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly
questionable and improbable.
s ,OSS !SSETS
A loss asset is one where loss has been identified by the Bank or internal or external auditors or the RBI inspection
but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such
little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery
value.
Interest on non-performing assets is not recognised in the profit / loss account until received. Specific provision for non-
performing assets is made based on Management’s assessment of their degree of impairment subject to the minimum
provisioning level prescribed by RBI.
Geographic distribution of gross credit risk exposures (Amounts in ` million)

March 31, 2014 March 31, 2013

Exposure distribution
Fund Based* .ON &UND "ASED Total Fund Based* .ON &UND "ASED Total

Domestic 3,183,539.5 402,418.6 3,585,958.1 2,624,090.8 382,949.5 3,007,040.3

Overseas 242,329.0 35,915.8 278,244.8 100,980.3 3,993.6 104,973.9
Total 3,425,868.5 438,334.4 3,864,202.9 2,725,071.1 386,943.1 3,112,014.2

 * Fund based exposures comprise loans & advances including bills re-discounted and investments in debenture & bonds, commercial
papers, security receipts, on-balance sheet securitisation exposures purchased or retained and deposits with NABARD, SIDBI & NHB
under the priority / weaker section lending schemes.

**Non-fund based exposures comprise guarantees, acceptances, endorsements and letters of credit.

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Basel III - Pillar 3 Disclosures

Industry-wise distribution of exposures : (Amounts in ` million)

As on March 31, 2014
Industry
Fund based .ON FUND BASED
Agriculture and Allied Activities 155,559.1 544.5
Automobile and Auto Ancillary 150,948.5 13,226.9
Banks and Financial Institutions 179,642.2 3,150.7
Capital Market Intermediaries 14,943.8 21,198.0
Cement and Products 22,720.0 5,990.9
Chemical and Products 34,344.6 7,361.8
Coal and Petroleum Products 69,725.4 59,704.1
Construction and Developers (Infrastructure) 49,081.7 22,146.6
Consumer Durables 11,828.7 4,553.4
Drugs and Pharmaceuticals 26,478.5 3,612.3
Engineering 57,349.9 38,551.4
Fertilizers and Pesticides 28,671.9 8,273.4
FMCG & Personal Care 8,784.8 1,643.3
Food and Beverage 100,588.0 5,701.1
Gems and Jewelry 28,995.5 3,604.9
Housing Finance Companies 40,867.8 455.4
Information Technology 12,654.4 7,278.1
Iron and Steel 85,224.9 19,958.0
Mining and Minerals 18,206.7 4,686.0
NBFC / Financial Intermediaries 84,099.2 395.4
Non-ferrous Metals 23,913.4 35,499.8
Paper, Printing and Stationery 19,034.4 1,875.7
Plastic and products 13,876.4 2,526.8
Power 76,904.4 14,388.0
Real Estate and Property Services* 58,851.1 9,916.3
Retail Assets** 1,332,220.9 62,057.0
Retail Trade 99,209.6 3,121.6
Road Transportation*** 149,869.3 2,398.4
Services 96,574.6 14,778.2
Telecom 33,853.6 13,372.2
Textiles and Garments 47,665.0 10,324.7
Wholesale Trade 227,766.3 26,849.8
Other Industries**** 65,413.9 9,189.7
Total 3,425,868.5 438,334.4
* ‘Details of exposure to real estate sector’ as disclosed in the Notes forming part of the Financial Statements is as
per RBI guidelines, which includes exposure to borrowers in the real estate industry, investment in home finance
institutions, securitization, etc.
** Comprises auto loans, consumer loans, credit cards, home loans, personal loans, two wheeler loans, business loans
not elsewhere classified.
*** Includes retail commercial vehicle financing.
**** Covers industries such as airlines, fishing, glass & products, leather & products, media & entertainment, other non-
metallic mineral products, railways, rubber & products, shipping, tobacco & products, wood & products, each of which
is less than 0.25% of the total exposure.

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Basel III - Pillar 3 Disclosures

 (Amounts in ` million)

As on March 31, 2013

Industry
Fund based .ON FUND BASED
Agriculture and Allied Activities 51,213.7 1,166.4
Automobile and Auto Ancillary 109,555.8 12,472.7
Banks and Financial Institutions 179,430.0 3,705.2
Capital Market Intermediaries 15,792.2 19,631.9
Cement and Cement Products 15,597.7 3,970.2
Chemical and Chemical Products 27,342.0 4,540.6
Coal and Petroleum Products 48,885.1 70,147.5
Construction and Developers (Infrastructure) 27,537.9 15,276.2
Consumer Durables 9,479.8 4,168.4
Drugs and Pharmaceuticals 16,596.8 3,995.2
Engineering 43,676.6 32,362.9
Fertilizers and Pesticides 19,672.3 12,311.7
Food and Beverage 70,361.8 4,939.8
Gems and Jewelry 41,639.8 1,355.5
Housing Finance Companies 15,026.0 7.5
Information Technology 10,684.6 5,559.8
Iron and Steel 53,220.7 22,326.7
Mining and Minerals 11,619.3 3,557.8
NBFC / Financial Intermediaries 63,547.3 1,126.1
Non-ferrous Metals 24,311.1 40,595.9
Paper, Printing and Stationery 12,541.7 2,671.0
Plastic and products 9,367.6 2,413.9
Power 53,645.5 11,222.0
Real Estate and Property Services* 38,411.5 8,554.5
Retail Assets** 1,150,572.3 15,299.0
Retail Trade 71,033.2 2,655.5
Road Transport*** 157,579.2 1,929.0
Services 73,247.1 14,376.8
Telecom 17,239.0 6,509.3
Textiles and Garments 31,060.0 9,512.4
Wholesale Trade 178,460.9 36,930.1
Other Industries**** 76,722.6 11,651.6
Total 2,725,071.1 386,943.1
* ‘Details of exposure to real estate sector’ as disclosed in the Notes forming part of the Financial Statements is as
per RBI guidelines, which includes exposure to borrowers in the real estate industry, investment in home finance
institutions, securitization, etc.
** Comprises auto loans, consumer loans, credit cards, home loans, personal loans, two wheeler loans, business loans
except where otherwise classified.
*** Includes retail commercial vehicle financing.
**** Covers other industries such as glass and products, leather and products, media and entertainment, other non-metallic
mineral products, railways, rubber and products, shipping, tobacco and products, wood and products, airlines, fishing
and FMCG and personal care each of which is less than 0.25% of the total exposure.

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Basel III - Pillar 3 Disclosures

Exposures to industries (other than retail assets) in excess of 5% of total exposure

(Amounts in ` million)

As on March 31, 2014

Industry
Fund based .ON FUND BASED
Wholesale Trade 227,766.3 26,849.8

 (Amounts in ` million)
As on March 31, 2013
Industry
Fund based .ON FUND BASED
Road Transport 157,579.2 1,929.0
Banks and Financial Institutions 179,430.0 3,705.2
Wholesale Trade 178,460.9 36,930.1

Residual contractual maturity breakdown of assets

z  As on March 31, 2014 (Amounts in ` million)
Balances
Cash and with banks
Maturity buckets balances and money Investments Advances* Fixed assets Other assets Grand total
with RBI at call and
short notice
1 to 14 days 119,457.9 115,735.1 252,315.9 174,993.1 - 20,841.3 683,343.3
15 to 28 days 3,935.1 1,029.0 28,728.3 82,972.7 - 31,540.7 148,205.8
29 days to 3 months 7,334.5 8,157.3 55,278.7 352,798.8 - 14,374.2 437,943.5
3 to 6 months 12,133.1 872.5 95,433.9 252,613.6 - 7,194.6 368,247.7
6 months to 1 year 6,961.5 11,287.8 72,981.4 307,673.6 - 384.4 399,288.7
1 to 3 years 60,605.5 2,295.5 352,356.1 1,480,040.2 - 182,530.1 2,077,827.4
3 to 5 years 2,093.3 6,058.6 63,423.8 251,150.4 - 38.0 322,764.1
Above 5 years 41,051.3 126.3 275,192.5 251,946.2 30,262.8 - 598,579.1
Total 253,572.2 145,562.1 1,195,710.6 3,154,188.6 30,262.8 256,903.3 5,036,199.6
* Excludes bills re-discounted.

z  As on March 31, 2013 (Amounts in ` million)

Balances
Cash and with banks
Maturity buckets balances and money Investments Advances* Fixed assets Other assets Grand total
with RBI at call and
short notice
1 to 14 days 23,937.0 72,542.5 207,108.1 146,837.2 - 27,146.7 477,571.5
15 to 28 days 2,975.6 1,227.2 26,921.0 69,502.6 - 26,527.5 127,153.9
29 days to 3 months 5,709.4 8,219.6 75,661.3 229,209.8 - 14,504.7 333,304.8
3 to 6 months 10,860.6 19,074.8 71,830.2 231,635.4 - 6,673.5 340,074.5
6 months to 1 year 7,279.0 21,309.5 77,675.6 265,219.0 - 955.2 372,438.3
1 to 3 years 56,964.8 984.2 343,476.6 1,132,929.1 - 116,297.0 1,650,651.7
3 to 5 years 1,838.5 5,526.1 50,516.9 195,594.0 - 25.2 253,500.7
Above 5 years 36,743.9 119.0 256,414.4 201,524.1 27,733.2 - 522,534.6
Total 146,308.8 129,002.9 1,109,604.1 2,472,451.2 27,733.2 192,129.8 4,077,230.0
* Excludes bills re-discounted.

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Basel III - Pillar 3 Disclosures

Asset quality (Amounts in ` million)

Particulars March 31, 2014 March 31, 2013
NPA ratios
a) Gross NPAs to gross advances 0.98% 0.95%
b) Net NPAs to net advances 0.28% 0.20%
Amount of Net NPAs
Gross NPAs 31,007.5 23,739.2
Less: Provisions 22,223.8 18,829.1
Net NPAs 8,783.7 4,910.1
Classification of Gross NPAs
Sub-standard 15,345.0 9,508.5
Doubtful*
zDoubtful 1 4,035.2 4,953.4
zDoubtful 2 5,809.9 3,309.5
zDoubtful 3 1,297.1 946.6
Loss 4,520.3 5,021.2
Total Gross NPAs 31,007.5 23,739.2

* Doubtful 1, 2 and 3 categories correspond to the period for which asset has been doubtful viz., up to one year (‘Doubtful 1’), one to three
years (‘Doubtful 2’) and more than three years (‘Doubtful 3’).
Note: NPAs include all assets that are classified as non-performing.
(Amounts in ` million)
Particulars March 31, 2014 March 31, 2013
Movement of Gross NPAs
Opening balance 23,739.2 20,031.7
Additions during the year 48,756.3 32,118.3
Reductions (41,487.9) (28,410.8 )
Closing balance 31,007.6 23,739.2
Movement of provisions for NPAs
Opening balance 18,829.1 16,489.8
Provisions made during the year 30,936.3 22,294.0
Write-off (15,437.8) (11,653.3)
Write-back of excess provisions (12,103.7) (8,301.4)
Closing balance 22,223.9 18,829.1

The Bank had hitherto computed additions and reductions by comparing NPAs outstanding at the beginning and at the
end of the reporting period. Based on a clarification from RBI that additions and reductions should include slippages and
the related upgradation / recoveries even if these are within the same reporting period, the Bank has accordingly reflected
these additions / reductions and the related provisions in the above table. Further, slippages and the related upgradation /
recoveries that may occur on more than one occasion for the same customer in the reporting period are aggregated and
accordingly counted more than once under additions and under reductions respectively, in the above table. As a result, the
additions to NPAs and reduction in NPAs on account of upgradation / recoveries have both increased by the same amount
and the amounts of opening NPAs, closing NPAs, write offs and the related provisions remained unchanged. Previous year’s
figures have accordingly been re-classified.

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Non-performing investments (Amounts in ` million)

Particulars March 31, 2014 March 31, 2013
Gross non-performing investments 1,108.8 1,654.6
Less: Provisions 1,014.7 1,582.9
.ET NON PERFORMING INVESTMENTS 94.1 71.7

Provision for depreciation on investments (Amounts in ` million)

Particulars March 31, 2014 March 31, 2013
Opening balance 2,382.7 2,269.3
Provisions made during the year 627.5 1,054.7
Write-off (532.0) (161.6)
Write-back of excess provisions (728.7) (779.7)
Closing balance 1,749.5 2,382.7
Movement in provisions held towards depreciation on investments have been reckoned on a yearly basis.
4. Credit Risk : Portfolios subject to the Standardised Approach
Standardised approach
The Bank has used the Standardised Approach for the entire credit portfolio.
For exposure amounts after risk mitigation subject to the standardised approach (including exposures under bills re-
discounting transactions, if any), the Bank’s outstanding (rated and unrated) in three major risk buckets as well as those
that are deducted, are as follows :
(Amounts in ` million)
Gross credit exposure March 31, 2014 March 31, 2013
Below 100% risk weight 1,549,738.2 1,262,143.2
100% risk weight 1,370,459.4 984,786.9
More than 100% risk weight 943,986.9 865,084.1
Deducted 18.4 -
Total 3,864,202.9 3,112,014.2
Note: Gross credit exposure is comprised of loans & advances, bills re-discounted aggregating ` 4,000.0 million (previous year : ` 21,000.0
million), investments in debenture & bonds, commercial papers, security receipts, on-balance sheet securitisation exposures
purchased or retained and deposits with NABARD, SIDBI & NHB under the priority / weaker section lending schemes, guarantees,
acceptances, endorsements and letters of credit.
Treatment of undrawn exposures
As required by the regulatory norms, the Bank holds capital even for the undrawn portion of credit facilities which are not
unconditionally cancellable by the Bank, by converting such exposures into a credit exposure equivalent based on the
applicable Credit Conversion Factor (‘CCF’). For unconditionally cancellable credit facilities the Bank applies a CCF of zero
percent.
Credit rating agencies
The Bank is using the ratings assigned by the following domestic external credit rating agencies, approved by the RBI, for
risk weighting claims on domestic entities :
z Credit Analysis and Research Limited (‘CARE’)
z Credit Rating Information Services of India Limited (‘CRISIL’)
z ICRA Limited (‘ICRA’)
z India Ratings and Research Private Limited (earlier known as Fitch India)
The Bank is using the ratings assigned by the following international credit rating agencies, approved by the RBI, for risk
weighting claims on overseas entities :
z Fitch Ratings
z Moody’s
z Standard & Poor’s

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Types of exposures for which each agency is used

The Bank has used the solicited ratings assigned by the above approved credit rating agencies for all eligible exposures,
both on balance sheet and off balance sheet, whether short term or long term, in the manner permitted in the RBI
guidelines on Basel III capital regulations. The Bank has not made any discrimination among ratings assigned by these
agencies nor has restricted their usage to any particular type of exposure.
Public issue ratings transferred onto comparable assets
The Bank has, in accordance with RBI guidelines on Basel III capital regulations, transferred public ratings on to comparable
assets in the banking books in the following manner :
Issue Specific Ratings
z All long term and short term ratings assigned by the credit rating agencies specifically to the Bank’s long term and
short term exposures respectively are considered by the Bank as issue specific ratings.
z For assets in the Bank’s portfolio that have contractual maturity less than or equal to one year, short term ratings
accorded by the chosen credit rating agencies are considered relevant. For other assets, which have a contractual
maturity of more than one year, long term ratings accorded by the chosen credit rating agencies are considered
relevant.
z Long term ratings issued by the chosen domestic credit rating agencies have been mapped to the appropriate risk
weights applicable as per the standardised approach under Basel III capital regulations. The rating to risk weight
mapping furnished below was adopted for domestic corporate exposures, as per RBI guidelines :

Long term rating AAA AA A BBB BB & Below Unrated

Risk weight 20% 30% 50% 100% 150% 100%
z In respect of the issue specific short term ratings the following risk weight mapping has been adopted by the Bank, as
provided in the RBI guidelines :

Short term rating equivalent A1+ A1 A2 A3 A4 & D Unrated

Risk Weight 20% 30% 50% 100% 150% 100%
z Where
 multiple issue specific ratings are assigned to the Bank’s exposure by the various credit rating agencies, the
risk weight is determined as follows :
(i) If there is only one rating by a chosen credit rating agency for a particular claim, then that rating is used to
determine the risk weight of the claim.
(ii) If there are two ratings accorded by chosen credit rating agencies, which map into different risk weights, the
higher risk weight is applied.
(iii) If there are three or more ratings accorded by chosen credit rating agencies with different risk weights, the
ratings corresponding to the two lowest risk weights are referred to and the higher of those two risk weights is
applied, i.e., the second lowest risk weight.
Inferred Ratings
z The specific rating assigned by a credit rating agency to a debt or issuance of a borrower or a counterparty (to which
the Bank may or may not have an exposure), which the Bank applies to an un-assessed claim of the Bank on such
borrower or counterparty is considered by the Bank as inferred ratings.
z In terms of guidelines on Basel III capital regulations, the Bank uses a long term rating as an inferred rating for an
un-assessed long term claim on the borrower, where the following conditions are met :
(i) The Bank’s claim ranks pari passu or senior to the specific rated debt in all respects.
(ii) The maturity of the Bank’s claim is not later than the maturity of the rated claim.
z The un-assessed long term claim is assigned the risk weight corresponding to an inferred long term rating as given
in the table under Issue Specific Ratings.
z For an un-assessed short term claim, the Bank uses a long term or short term rating as an inferred rating, where the
Bank’s claim ranks pari passu to the specified rated debt.
z Where a long term rating is used as an inferred rating for a short term un-assessed claim, the risk weight
corresponding to an inferred long term rating as given in the table under Issue Specific Rating is considered by the
Bank.

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Basel III - Pillar 3 Disclosures

z Where a short term rating is used as an inferred rating for a short term un-assessed claim, the risk weight
corresponding to an inferred short term rating as given in the table under Issue Specific Rating is considered, however
with notch up of the risk weight. Notwithstanding the restriction on using an issue specific short term rating for other
short term exposures, an unrated short term claim on a counterparty is given a risk weight of at least one level higher
than the risk weight applicable to the rated short term claim on that counterparty. If a short term rated facility to a
counterparty attracts a 20% or a 50% risk weight, the unrated short term claims to the same counterparty will get a
risk weight not lower than 30% or 100% respectively.
z If long term ratings corresponding to different risk weights are applicable for a long term exposure, the highest of
the risk weight is considered by the Bank. Similarly, if short term ratings corresponding to different risk weights are
applicable for a short term exposure, the highest of the risk weight is considered. However, where both long term
and short term corresponding to different risk weights are applicable to a short term exposure, the highest of the risk
weight is considered by the Bank for determination of capital charge.
z If a counterparty has a long term exposure with an external long term rating that warrants a risk weight of 150%,
all unrated claims on the same counterparty, whether short term or long term, receives a 150% risk weight, unless
recognised credit risk mitigation techniques have been used for such claims. Similarly, if the counterparty has a short
term exposure with an external short term rating that warrants a risk weight of 150%, all unrated claims on the same
counterparty, whether long term or short term, receive a 150% risk weight.
Issuer Ratings
z Ratings assigned by the credit rating agencies to an entity conveying an opinion on the general creditworthiness of
the rated entity are considered as issuer ratings.
z Where multiple issuer ratings are assigned to an entity by various credit rating agencies, the risk weight for the Bank’s
claims are as follows :
(i) If there is only one rating by a chosen credit rating agency for a particular claim, then that rating is used to
determine the risk weight of the claim.
(ii) If there are two ratings accorded by chosen credit rating agencies, which map into different risk weights, the
higher risk weight is applied.
(iii) If there are three or more ratings accorded by chosen credit rating agencies with different risk weights, the
ratings corresponding to the two lowest risk weights are referred to and the higher of those two risk weights is
applied, i.e., the second lowest risk weight.
z The risk weight assigned to claims on counterparty based on issuer ratings are as those mentioned under Issue
Specific Ratings.
 #REDIT 2ISK -ITIGATION  $ISCLOSURES FOR 3TANDARDISED !PPROACH
Policies and process
The Bank’s Credit Policies & Procedures Manual and Product Programs include the risk mitigation and collateral
management policy of the Bank. The policy covers aspects on the nature of risk mitigants / collaterals acceptable to the
Bank, the documentation and custodial arrangement of the collateral, the valuation approach and periodicity etc.
For purposes of computation of capital requirement for Credit Risk, the Bank recognizes only those collaterals that are
considered as eligible for risk mitigation in the RBI guidelines, which are as follows :
z Cash deposit with the Bank
z Gold, including bullion and jewelry
z Securities issued by Central and State Governments
z Kisan Vikas Patra and National Savings Certificates (Kisan Vikas Patra is a safe and long term investment option
backed by the Government of India and provides interest income similar to bonds; National Savings Certificates are
certificates issued by the Department of Post, Government of India - it is a long term safe savings option for the
investor and combines growth in money with reductions in tax liability as per the provisions of the Indian Income Tax
Act, 1961)
z Life insurance policies with a declared surrender value of an insurance company which is regulated by the insurance
sector regulator
z Debt securities rated at least BBB(-)/PR3/P3/F3/A3
z Units of Mutual Funds, where the investment is in instruments mentioned above
The Bank uses the comprehensive approach in capital assessment. In the comprehensive approach, when taking collateral,
the Bank calculates the adjusted exposure to a counterparty for capital adequacy purposes by netting off the effects of that
collateral. The Bank adjusts the value of any collateral by a haircut to take into account possible future fluctuations in the
value of the security occasioned by market movements.

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For purposes of capital calculation, the Bank recognises the credit protection given by the following entities, considered
eligible as per RBI guidelines :
 z Sovereigns, sovereign entities (including Bank for International Settlements (‘BIS’), the International Monetary Fund
(‘IMF’), European Central Bank and European Community as well as Multi-lateral Development Banks like World
Bank Group, IBRD, IFC, Asian Development Bank, African Development Bank, European Bank for Reconstruction
& Development, Inter-American Development Bank, European Investment Bank, European Investment Fund, Nordic
Investment Bank, Caribbean Development Bank, Islamic Development Bank & Council of Europe Development
Bank, Export Credit Guarantee Corporation and Credit Guarantee Fund Trust for Small Industries (‘CGTSI’), Credit
Guarantee Fund Trust for Low Income Housing (‘CRGFTLIH’)), banks and primary dealers with a lower risk weight
than the counterparty.
z Other entities that are externally rated. This would include credit protection provided by parent, subsidiary and affiliate
companies when they have a lower risk weight than the obligor.
The credit risk mitigation taken is largely in the form of cash deposit with the Bank and thus the risk (credit and market)
concentration of the mitigants is low.
Exposure covered by financial collateral post haircuts
Total exposure that is covered by eligible financial collateral after the application of haircuts is given below :
(Amounts in ` million)
Particulars March 31, 2014 March 31, 2013
Total exposure covered by eligible financial collateral 371,832.3 146,855.3
Exposure covered by guarantees / credit derivatives
The total exposure for each separately disclosed credit risk portfolio that is covered by guarantees / credit derivatives is given
below :
(Amounts in ` million)
Particulars March 31, 2014 March 31, 2013
Total exposure covered by guarantees 10,027.8 18,742.4
6. Securitisation Exposures
Objectives, Policies, Monitoring
The Bank undertakes securitization / loan assignment transactions with the objective of maximizing return on capital
employed, managing liquidity, meeting priority sector lending requirements and maximizing yield on asset opportunities.
The RBI issued ‘Revised Securitisation Guidelines’ on May 7, 2012 (hereinafter, the ‘revised securitisation guidelines’)
covering both Securitisation and Loan Assignment transactions separately. The said guidelines define minimum holding
period, minimum retention requirements, due diligence, credit monitoring, stress testing requirements etc. For loan
assignment transactions, credit enhancement has been disallowed under the revised guidelines.
The Bank undertakes both ‘purchase’ and ‘sale’, transactions through both securitization and loan assignment routes and
has Board approved policies for both.
The Bank participates in Securitisation and Loan Assignment transactions in the following roles :
z Originator / Seller
The Bank originates assets in its book and subsequently down-sells them through the securitisation or assignment
route.
z Servicing and Collection agent
For assets sold, the Bank undertakes the activity of collections and other servicing activities including preparation of
monthly payout reports.
z Investor
The Bank invests in Pass Through Certificates (‘PTCs’) backed by financial assets originated by third parties for the
purposes of holding / trading / maximizing yield opportunities and meeting priority sector lending requirements.
z Assignee
The Bank purchases loans through the direct assignment route for purposes of book building and yield optimisation.

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z ,IQUIDITY FACILITY PROVIDER

In case of sale transactions undertaken through the securitisation route, the Bank may also provide liquidity facility.
This is a type of credit support used to meet temporary collection mismatches on account of timing differences
between the receipt of cash flows from the underlying performing assets and the fulfillment of obligations to the
beneficiaries. The Bank may also undertake to be a third party liquidity facility provider for other securitisation
transactions.
z Credit enhancement provider
Under the revised securitisation guidelines, the Bank may provide credit enhancement on Securitization ‘sale’
transactions undertaken by the Bank / a third party for meeting shortfalls arising on account of delinquencies and
prepayment losses in the underlying pool sold. The Bank may also undertake to be a credit enhancement provider
for securitization transactions originated by third parties.
z Underwriter
The Bank may underwrite in whole or part of an issuance of securitised debt instruments, with the intent of selling
them at a later stage subject to stipulations under the extant RBI guidelines.
The major risks inherent in Securitisation / Loan Assignment transactions are given below :
z Credit Risk
In case of Securitisation transactions, where credit enhancement is provided by the originator or any third party as
permitted under the revised guidelines, the investor bears the loss in case the shortfalls in collections exceed the
credit enhancement provided. Where credit enhancement is provided in the form of a corporate guarantee, the investor
bears the loss that could arise from default by the guarantor which is also reflected in a downgrade in the rating of
the corporate guarantor. In case of Loan Assignment transactions, the assignee bears the loss arising from defaults
/ delinquencies by the underlying obligors.
z Market Risk :
3 ,IQUIDITY 2ISK
This is the risk arising on account of absence of a secondary market, which provides exit options to the investor
/ participant. This risk would be applicable only in case of securitisation transactions.
3 Interest Rate Risk
This is the mark-to-market risk arising on account of interest rate fluctuations.
z Prepayment Risk
Prepayments in the securitised / assigned pool result in early amortisation and loss of future interest (re-investment
risk) to the investor on the amounts.
z #O MINGLING 2ISK
This is the risk arising from co-mingling of funds belong to the investor(s) with those of the originator and / or servicer.
This risk occurs when there is a time lag between collection of amounts due from the obligors and payouts made to
the investors / assignee.
z Servicer Risk
Servicer risk is the risk arising on account of the inability of a collection and processing agent to collect monies from
the underlying obligors and operational difficulties in processing the payments. In long tenor pools, the investor is
exposed to the risk of servicer defaulting or discontinuing its operations in totality.
z 2EGULATORY AND ,EGAL 2ISK
These are risks arising on account of non-compliance of transaction structures with the extant regulatory guidelines
which may result in higher risk weight and hence higher capital charge being applied on the transaction or the Bank
not being able to classify the transactions as priority sector lending. These risks also arise when transactions are
not compliant with applicable laws which may result in the transaction being rendered invalid. Conflict between the
provisions of the transaction documents and those of the underlying financial facility agreement or non-enforceability
of security / claims due to imperfection in execution of the underlying facility agreements with the borrowers could also
lead to an increase in legal risk. Risk could also arise due to issues on interpretation of tax laws leading to changes
in scheduled transaction cash flows.

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The overall framework for both securitisation and loan assignment transactions is specified in the respective Board approved
policies. The said policies define the covenants for evaluation and the key requirements that need to be adhered to for all
such transactions such as the Minimum Holding Period (‘MHP’) and Minimum Retention Requirement (‘MRR’) stipulations,
credit enhancement (for securitisation transactions), structure, rating and accounting treatment. Additionally, for purchase
transactions, the Bank examines parameters such as the profile and track record of the originator, the type and nature
of underlying assets, pool characteristics, findings of due diligence audits and rating (if applicable), credit enhancement
provided and listing status (in case of securitisation).
The Bank also has a process for monitoring the performance of all pools purchased under securitisation or the loan
assignment route (both prior to as well as post the issuance of the revised securitisation guidelines) basis information
received from the servicing agent / trustee. The performance of pools is measured by analysing parameters such as
collection ratios, delinquencies, credit enhancement utilisation and level of available credit enhancement (where applicable).
The Bank undertakes regular escalation to the Management on performance of pools which show concerning trends. In
case of sold pools, a memorandum on transactions undertaken is put up to the Audit & Compliance Committee of the Board
on a quarterly basis.
Accounting Policy for securitisation transactions
The Bank securitises out its receivables, subject to the MHP criteria and the MRR of RBI, to Special Purpose Vehicles
(‘SPVs’) in securitisation transactions. Such securitised-out receivables are de-recognised in the balance sheet when they
are sold (true sale criteria being fully met with) and consideration is received by the Bank. Sales / transfers that do not meet
these criteria for surrender of control are accounted for as secured borrowings. In respect of receivable pools securitised-
out, the Bank provides liquidity and credit enhancements, as specified by the rating agencies, in the form of cash collaterals
/ guarantees and / or by subordination of cash flows, not exceeding 20% of the total securitised instruments, in line with
RBI guidelines. The Bank also acts as a servicing agent for receivable pools securitised-out.
The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash flows, which
are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables
are assigned directly to the purchaser and are not represented by Pass through Certificates (‘PTCs’), subject to the RBI
prescribed MHP criteria and the MRR. The RBI issued revised securitisation guidelines on securitisation of standard assets
vide its circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct
assignment transactions undertaken subsequent to these guidelines.
Pursuant to the revised securitisation guidelines, the Bank amortises any profit received in cash for every individual
securitisation or direct assignment transaction at the end of every financial year. This amortisation is calculated as the
maximum of either of the three parameters stated below :
z the losses incurred on the portfolio, including marked-to-market losses in case of securitisation transactions, specific
provisions, if any, and direct write-offs made on the MRR and any other exposures to the securitisation transaction
(other than credit enhancing interest only strip); or
z the amount of unamortised cash profit at the beginning of the year multiplied by the amount of principal amortised
during the year as a proportion to the amount of unamortised principal at the beginning of the year; or
z the amount of unamortised cash profit at the beginning of the year divided by residual maturity of the securitisation
or the direct assignment transaction.
In relation to securitisation transactions undertaken prior to the said revised securitisation guidelines, including those
undertaken through the direct assignment route, the Bank continues to amortise the profit / premium that arose on account
of sale of receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard
assets issued vide its circular dated February 1, 2006.
Any loss arising on account of sale of receivables is recognised in the Statement of Profit and Loss for the period in which
the sale occurs in accordance with the said RBI guidelines.
The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classified as
investments. The Bank also buys loans through the direct assignment route which are classified as advances. These are
carried at acquisition cost unless it is more than the face value, in which case the premium is amortised based on Effective
Interest Rate (‘EIR’) method.

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External credit rating agencies

In the banking book, following were the external credit rating agencies involved with the Bank’s Securitisation and Loan
Assignment transactions :
z Credit Analysis and Research Limited (‘CARE’)
z Credit Rating Information Services of India Limited (‘CRISlL’)
z India Ratings and Research Private Limited (‘India Ratings’)
z ICRA Limited (‘ICRA’)
z Brickwork Ratings India Private Limited (‘Brickwork’)
The ratings declared / issued by the above agencies were used to cover the following securitisation and loan assignment
exposures :
z Securitised Debt Instruments / PTCs / Purchased assets
z Second loss credit enhancement facilities
z Liquidity facilities

Securitisation exposures in banking book

z Details of securitisation exposures in banking book (Amounts in ` million)
Particulars March 31, 2014 March 31, 2013
Amount securitised out outstanding 2,452.7 3,787.2
Amount securitised during the year* - -
Losses recognised during the current period for loans against property and
loans against rent receivables exposures securitised earlier - 0.3
Amount of assets intended to be securitised within a year** - -
Of which amount of assets originated within a year before securitisation  
 * The Bank has not securitised out any component of its standard asset portfolio.
** The Bank has made no projection of the assets it intends to securitise-out during the fiscal year beginning April 1, 2014. Securitisation
transactions are undertaken on a need basis to meet the objectives articulated under ‘Objectives, Policy, Monitoring’.

z The total amount of exposures securitised and unrecognised gain or losses on sale (Amounts in ` million)
March 31, 2014 March 31, 2013
Outstanding Outstanding Outstanding Outstanding
Exposure Type amount of unrecognised amount of unrecognised
exposures gain or loss exposures gain or loss
securitised on sale securitised on sale
Auto loans 4.2 - 19.4 -
Commercial vehicle loans - - 1.4 -
Loans against property and rent receivables 476.1 - 1,136.5 -
Housing loans 1,972.4 - 2,629.9 -
Total 2,452.7 3,787.2
z Aggregate amount of on-balance sheet securitisation exposures retained or purchased (Amounts in ` million)
Exposure Type March 31, 2014 March 31, 2013
Commercial vehicle loans 224.5 2,469.4
Housing loans 190,865.5 165,162.4
Personal loans 2.6 108.9
Two wheeler loans - 16.3
Mixed assets* 749.0 3,055.4
Tractor loans 984.8 3,071.1
Total 192,826.4 173,883.5
* includes commercial vehicle / equipment loans, two wheeler loans and tractor loans

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z Aggregate amount of off-balance sheet securitisation exposures (Amounts in ` million)

Exposure type March 31, 2014* March 31, 2013

Housing loans 1,709.5 1,731.2
Mixed assets** 1,854.3 1,884.6
Total 3,563.8 3,615.8
  *risk weighted for capital adequacy purposes as per Basel III capital regulations.
**includes auto loans, commercial vehicle loans, two wheeler loans, loans against property and loans against rent receivables.

z Aggregate amount of securitisation exposures retained or purchased and the associated capital charges, broken down
between exposures and further broken down into different risk weight bands for each regulatory capital approach :
(Amounts in ` million)
March 31, 2014 March 31, 2013
Risk weight bands Exposure type
Exposure Capital charge Exposure Capital charge*
Less than 100% Housing loans 188,583.7 8,490.6 117,177.4 5,343.4
Commercial
vehicle loans 221.5 15.0 2,452.5 165.5
Mixed assets** 749.0 46.5 3,026.6 204.3
Tractor loans 984.8 66.5 3,071.1 207.3
At 100% Housing loans 2,281.8 205.4 47,651.9 4,288.7
More than 100% Housing loans - - 333.1 37.5
Commercial
vehicle loans 3.0 0.3 16.9 1.9
Mixed assets** - - 28.8 3.2
Personal loans 2.6 0.3 108.9 12.3
Two wheeler loans - - 16.3 1.8
Total 192,826.4 8,824.6 173,883.5 10,265.9
*computed as per Basel II - New Capital Adequacy Framework
**includes commercial vehicle / equipment loans, two wheeler loans and tractor loans
z Securitisation exposures deducted from capital as on March 31, 2014: Not applicable.
z Exposures that have been deducted entirely from Tier I capital, credit enhancing Interest Only Strips (‘I/Os’) deducted
from total capital and other exposures deducted from total capital as on March 31, 2013
(Amounts in ` million)
Exposure Credit enhancing Other exposure
Exposure type deducted entirely I/Os deducted deducted from
from Tier I capital from total capital total capital
Mixed assets* - - 1,803.6
Housing loans - - 1,731.2
Total 3,534.8
* includes auto loans, commercial vehicle loans, two wheeler loans, loans against property and loans against rent receivables.
Securitisation exposures in trading book
z Aggregate amount of exposure securitised-out for which some exposure has been retained and which is subject to
market risk approach as of March 31, 2014 was ` 3.5 million (previous year : ` 5.7 million). The exposure type was
commercial vehicle loans.

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z Aggregate amount of on-balance sheet securitisation exposures retained or purchased

(Amounts in ` million)

Exposure type March 31, 2014 March 31, 2013

Hire purchase receivables 6.7 27.8
Housing loans 1,743.2 2,353.3
Mixed assets* 7,217.0 3,060.6
Commercial vehicle loans 1,905.5 781.3
Tractor loans 3,510.8 763.9
Micro finance 1,286.9 149.1
Total 15,670.1 7,136.0
* includes auto loans, commercial vehicle loans, two wheeler loans, loans against property and loans against rent receivables.
z Off-balance sheet securitisation exposures as of March 31, 2014 was ` 172.1million (previous year : ` 22.6 million),
which is risk weighted for capital adequacy purposes. The exposure type was commercial vehicle loans.
z Aggregate amount of securitisation exposures retained or purchased, subject to the securitisation framework for
specific risk broken down into different risk weight bands :
3 Securitisation exposures broken down into different risk weight bands at book value
(Amounts in ` million)
Risk weight band March 31, 2014 March 31, 2013
Less than 100% 15,400.6 6,986.9
At 100% 266.0 149.1
More than 100% 3.5 -
Total 15,670.1 7,136.0
3 Aggregate amount of capital requirements for securitisation exposures (capital charge)
(Amounts in ` million)
Risk weight band March 31, 2014 March 31, 2013
Less than 100% 517.9 304.6
At 100% 24.0 14.3
More than 100% 0.5 -
Total 542.4 318.9
z Securitisation exposures deducted from capital as on March 31, 2014 : Not applicable (previous year : ` 22.6 million
with exposure type commercial vehicle loans).
7. Market Risk in Trading Book
Market Risk Management Strategies and Processes
The Market Risk management process at the Bank consists of identification and measurement of risks, control measures
and reporting systems. It ensures that the risk taking of the Bank’s treasury desks and the investment banking department
is within the risk appetite encapsulated within the treasury limits package, equity limits package and specific limits approved
by the Board from time to time. The Board approved risk appetite is handed down as limits to the various treasury desks
and the investment banking department. The prescribed limits are monitored by the treasury mid office and reported as per
the guidelines laid down from time to time. The market risk objective, framework and architecture along with the functions
of market risk are detailed in the Board approved Market Risk Policy.
Market Risk Architecture
The market risk process includes the following key participants :
z The Risk Policy & Monitoring Committee (‘RPMC’) of the Board reviews and recommends for approval to the Board,
the Bank’s market risk policies, procedures and limit packages. The Committee supports the Board by supervising
the implementation of the risk strategy. The Committee guides the development of policies, procedures and systems

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for managing risk. It ensures that these are adequate and appropriate to changing business conditions, the structure
and needs of the Bank and the risk appetite of the Bank. In addition, it monitors the compliance of the Board approved
risk appetite.
z The Market Risk Function covers the assessment of the market risk for treasury portfolio, evaluate / validate methods
for monitoring market risk and prescribes control processes. The Market Risk Function also reviews the valuation
models and the mnemonics definition proposed by the Treasury Analytics department. Market risk is managed under
the guidance of the RPMC of the Board.
z The Treasury Mid-Office is responsible for the day to day monitoring and reporting of market risk controls, valuations
etc. Mid-Office reports any limit breaches to the Senior Management. Mid Office also monitors the counterparty risk
exposures and maintains the market data as per the Operations Manual of Market Data Cell. The Mid-Office functions
for all locations (including overseas branches), is centrally located.
z The Investment Committee oversees and reviews any direct investments in Shares, Convertible Bonds, Convertible
Debentures and any other Equity linked instruments.
z Treasury Desks among others include Foreign Exchange, Money Market, Interest Rate Trading, Trading Derivatives,
Equities and Precious Metal desks which carry out the basic day to day management of the various portfolios and
the underlying market risk within the stipulated market risk limits and other applicable limits, policies and procedures.
z Treasury Analytics unit is responsible for model validation and maintenance of the policy laid down for model valuation
and validation including prescription for market data sources and mnemonics definitions / conventions, which are
further reviewed by Market Risk.
Market Risk Limits Reporting
Types of limits could include position limits, gap limits, tenor and duration limits, PV01 limits, basic risk limits, stop loss
trigger level, value-at-risk limits and option Greek limits. These limits may or may not apply to all portfolios and are
appropriately selected as market risk controls in the various limits packages. The market risk limits are measured and
monitored by the Mid-Office, and subsequently reported to the concerned departments / senior management. Any major
variations in the utilisations of the limit are analysed and reviewed with Market Risk prior to circulation of reports. Any breach
in the limits is acted upon by Treasury Front Office as per the Board approved processes.
The Bank enters into derivative deals with counterparties based on their financial strength and understanding of derivative
products and its risks. In this regard, the Bank has a Customer Suitability and Appropriateness Policy in place. The
Bank sets up appropriate limits having regard to the ability of the counterparty to honor its obligations in the event of
crystallization of the exposure. Appropriate credit covenants are stipulated where required as trigger events to call for
collaterals or terminate a transaction and contain the risk. The Bank also books derivative deals to hedge the interest rate
/ currency risks in borrowings or investments within the ambit of Bank’s hedging processes and policies.
Market risk capital requirement (Amounts in ` million)
Standardised duration approach March 31, 2014 March 31, 2013*
Interest rate risk 8,377.7 7,552.5
Equity risk 765.5 5,910.4
Foreign exchange risk (including gold) 1,260.0 270.0
Total 10,403.2 13,732.9
*computed as per Basel II - New Capital Adequacy Framework
8. Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events. The way operational risk is managed has the potential to positively or negatively impact a bank’s customers,
its financial performance and reputation. The Bank has put in place Board approved governance and organizational structure
with clearly defined roles and responsibilities to mitigate operational risk arising out of the Bank’s business and operations.
Organisational Structure for Managing Operational Risk
The RPMC of the Board reviews and recommends to the Board of Directors the overall operational risk management
framework for the Bank. A committee comprised of senior management personnel viz., Operational Risk Management
Committee (‘ORMC’) oversees the implementation of operational risk management framework approved by the Board. The
ORMC is headed by the Deputy Managing Director, the Chief Risk Officer, Head - Audit, Head - Operations and senior

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representatives from relevant business functions. An independent operational risk management department is responsible
for the implementation of the framework across the Bank. Board approved operational risk management policy stipulates
the roles and responsibilities of employees, business units, operations and support function in managing operational risk.
Risk Measurement and Monitoring
While the day-to-day operational risk management lies with business lines, operations and support functions, the ORMD
is responsible for designing tools and techniques for identification and monitoring of operational risk across the Bank
consistent with the framework approved by the Board. The ORMD also ensures operational risk exposures are captured
and reported to the relevant levels of the management for initiating suitable risk mitigations in order to contain operational
risk exposures within acceptable levels. The Internal audit department provides an independent assurance on the
effectiveness of governance, risk management and internal controls to achieve risk management and control objectives.
The Bank applies a number of risk management techniques to effectively manage operational risks :
z A systematic risk assessment process is followed before rolling out new products and processes. New products are
rolled out after putting in place the required mitigants based on risk assessment and on ensuring required skill sets
and technological resources are in place.
z A bottomup risk assessment process, Risk Control Self-Assessment identifies high risk areas so that the Bank can
initiate timely remedial measures. This assessment is conducted at quarterly rests to update senior management, of
the risk levels across the Bank.
z Key Risk Indicators are employed to alert the Bank on impending problems in a timely manner. These allow monitoring
of the control environment as well as operational risk exposures and trigger risk mitigation actions.
z Material operational risk losses are subjected to detailed risk analysis to identify areas of risk exposures and gaps in
controls basis which appropriate risk mitigating actions are initiated.
z Bank conducts annual scenario analysis to derive information on hypothetical severe loss situations and use the
information for risk management actions, apart from analyzing the plausible financial impact.
z Periodic reporting on risk assessment and monitoring is made to the line as well as to senior management to ensure
timely actions are initiated at all levels.
Capital Requirement
The Bank has devised an operational risk measurement system compliant with Advanced Measurement Approach for
estimating operational risk capital estimate for the Bank. The Bank is in the process of fine tuning the approach and
will subsequently submit the same for regulatory approval. Currently, the Bank follows the Basic Indicator Approach for
estimating operational risk capital.
 !SSET ,IABILITY -ANAGEMENT @!,- 2ISK -ANAGEMENT
ALM risk management process consists of management of liquidity risk and Interest Rate Risk in the Banking Book
(‘IRRBB’). Liquidity risk is the risk that the Bank may not be able to fund increases in assets or meet obligations as they
fall due without incurring unacceptable losses. IRRBB refers to the potential adverse financial impact on the Bank’s banking
book from changes in interest rates. The banking book is comprised of assets and liabilities that are contracted on account
of relationship or for steady income and statutory obligations and are generally held till maturity. The Bank carries various
assets, liabilities and off-balance sheet items across markets, maturities and benchmarks exposing it to risks from changing
interest rates. The Bank’s objective is to maintain liquidity risk IRRBB within tolerable limits.
Structure and Organization
The ALM risk management process of the Bank operates in the following hierarchical manner :
z "OARD OF $IRECTORS
The Board has the overall responsibility for management of liquidity and interest rate risks. The Board decides
the strategy, policies and procedures of the Bank to manage liquidity and interest rate risk including setting of risk
tolerance / limits and reviewing of stress test results.
z 2ISK 0OLICY  -ONITORING #OMMITTEE @20-# OF THE "OARD
The RPMC is responsible for evaluating the overall risks faced by the Bank including liquidity and interest rate risks.
The RPMC also addresses the potential interaction of liquidity risk and interest rate risk with the other risks faced by
the Bank.

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z !SSET ,IABILITY #OMMITTEE @!,#/

ALCO is a decision-making unit responsible for ensuring adherence to the risk tolerance / limits set by the Board as
well as implementing the liquidity and interest rate risk management strategy of the Bank in line with the Bank’s risk
management objectives and risk tolerance. The ALCO is also responsible for balance sheet planning from risk-return
perspective including strategic management of liquidity and interest rate risks. The role of the ALCO includes the
following :
i. Product pricing for deposits and advances
ii. Deciding the desired maturity profile and mix of incremental assets and liabilities
iii. Articulating interest rate view of the Bank and deciding on the future business strategy
iv. Reviewing and articulating funding policy
v. Ensuring the adherence to the limits set by the Board of Directors
vi. Determining the structure, responsibilities and controls for managing liquidity and interest rate risk
vii. Ensuring operational independence of risk management function
viii. Reviewing stress test results
ix. Deciding on the transfer pricing policy of the Bank
z !,- /PERATIONAL 'ROUPS
Internal ALM operational groups support the ALM organisation.
Risk Measurement Systems and reporting :
Liquidity Risk is measured using flow approach and stock approach. Flow approach involves comprehensive tracking of
cash flow mismatches. Stock approach involves measurement of critical ratios in respect of liquidity risk. Analysis of liquidity
risk also involves examining how funding requirements are likely to be affected under crisis scenarios. The Bank has a
Board approved liquidity stress framework guided by regulatory instructions. The Bank has an extensive intraday liquidity
risk management framework for monitoring intraday positions during the day.
IRRBB is measured and controlled using both Earnings Perspective (Traditional Gap Analysis) and Economic Value
Perspective (Duration Gap Analysis). Earnings Perspective (Traditional Gap Analysis) measures the sensitivity of net interest
income to changes in interest rate over the next 12 months. It involves bucketing of rate sensitive assets, liabilities and
off-balance sheet items as per residual maturity / re-pricing date in various time bands and computing change of income
under 200 basis points upward and downward rate shocks over a one year horizon. Economic Value Perspective (Duration
Gap Analysis) calculates the change in the present value of the Bank’s expected cash flows for a 200 basis point upward
and downward rate shock. The Bank also undertakes periodic stress testing for its banking book. This provides a measure
to assess the Bank’s financial standing from extreme but plausible interest rate fluctuations. The stress testing framework is
approved by the Board. Periodic risk reports are sent to senior management for review. A risk summary is also presented
at ALCO meetings.
Quantification of IRRBB
The increase / decline in earnings and economic value for an upward / downward rate shock of 200 basis points (‘bps’),
broken down by currency, are as follows :

z Earnings Perspective (impact on net interest income)

(Amounts in ` million)

March 31, 2014 March 31, 2013

Currency If interest rateIf interest rate If interest rate If interest rate
were to go down were to go up were to go down were to go up
by 200 bps by 200 bps by 200 bps by 200 bps
INR (17,513.5) 17,513.5 (12,753.8) 12,753.8
USD (1,962.7) 1,962.7 (1,866.0) 1,866.0
Others 89.3 (89.3) (2.5) 2.5
Total (19,386.9) 19,386.9 (14,622.3) 14,622.3

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 z Economic Value Perspective (impact on market value of equity)

(Amounts in ` million)

March 31, 2014 March 31, 2013

Currency If interest rate If interest rate If interest rate If interest rate
were to go down were to go up were to go down were to go up
by 200 bps by 200 bps by 200 bps by 200 bps
INR (9,638.4) 9,638.4 (6,384.6) 6,384.6
USD (1,645.4) 1,645.4 (2,809.9) 2,809.9
Others (1,706.2) 1,706.2 (836.8) 836.8
Total (12,990.0) 12,990.0 (10,031.3) 10,031.3

 'ENERAL $ISCLOSURES FOR %XPOSURES 2ELATED TO #OUNTERPARTY #REDIT 2ISK

Counterparty Credit Risk (‘CCR’) limits for the banking counterparties are assessed based on an internal model
that considers the parameters viz. credit rating and net worth of counterparties, net worth of the Bank and business
requirements. In all other cases, CCR limit is approved based on credit assessment process followed by the Bank as per
the Credit Policies and Procedures Manual. CCR limits are set on the amount and tenor while fixing the limits to respective
counterparties with distinct limits for each type of exposure. Capital for CCR exposure is assessed based on Standardised
Approach.
The Bank has entered into Credit Support Annex (‘CSA’) agreements with some of the major international counterparty
banks. CSA defines the terms or rules under which collateral is posted or transferred between derivative counterparties to
mitigate the credit risk arising from "in the money" derivative positions on OTC derivative contracts.
The Bank does not recognize bilateral netting. The derivative exposure is calculated using Current Exposure Method
(‘CEM’). The balance outstanding as on March 31, 2014 is given below.
(Amounts in ` million)

March 31, 2014 March 31, 2013

Particulars Current Current
Notional Amounts Notional Amounts
Exposure* Exposure
Foreign exchange contracts 4,753,861.2 207,658.6 4,467,860.7 103,202.2
Interest rate derivative contracts 1,772,658.7 23,687.3 2,080,500.3 21,101.0
Currency swaps 71,041.3 12,732.3 59,328.6 9,446.9
Currency options 165,920.4 2,016.0 152,384.2 1,820.5
Total 6,763,481.6 246,094.2 6,760,073.8 135,570.6
 *In accordance with RBI guidelines, exposures to central counterparties arising from OTC derivative transactions are subject to counterparty
credit risk treatment effective January 1, 2014. Accordingly, previous year numbers are not comparable.

11. Composition of Capital

Disclosures pertaining to composition of capital, including the capital disclosure templates and main features of equity and
debt capital instruments are given below. The detailed terms and conditions of equity and debt capital instruments have
been disclosed separately on the Bank’s website under the ‘Regulatory Disclosures Section’. The link to this section is
[Link]

HDFC Bank Limited Annual Report 2013-14 115

Basel III - Pillar 3 Disclosures

` million
Composition of Capital as at March 31, 2014 Amounts Ref No.
Subject to
0RE "ASEL )))
Treatment
Common Equity Tier 1 capital: instruments and reserves
1 Directly issued qualifying common share capital plus related stock surplus (share premium) 147,850.0 a = a1 + a2
2 Retained earnings 151,764.7 b
3 Accumulated other comprehensive income (and other reserves) 141,532.8 c = c1 + c2 +
c3 + c4 + c5
4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock -
companies)
Public sector capital injections grandfathered until 1 January 2018 NA
5 Common share capital issued by subsidiaries and held by third parties (amount allowed in - - d
group CET1)
6 Common Equity Tier 1 capital before regulatory adjustments 441,147.5
Common Equity Tier 1 capital : regulatory adjustments
7 Prudential valuation adjustments 180.7 271.0
8 Goodwill (net of related tax liability) 622.2 933.3 e = e1 + e2
9 Intangibles other than mortgage-servicing rights (net of related tax liability) -
10 Deferred tax assets 7,674.2 11,511.4 f
11 Cash-flow hedge reserve -
12 Shortfall of provisions to expected losses -
13 Securitisation gain on sale -
14 Gains and losses due to changes in own credit risk on fair valued liabilities -
15 Defined-benefit pension fund net assets - -
16 Investments in own shares (if not already netted off paid-in capital on reported balance -
sheet)
17 Reciprocal cross-holdings in common equity 14.1 -
18 Investments in the capital of banking, financial and insurance entities that are outside the - -
scope of regulatory consolidation, net of eligible short positions, where the bank does not
own more than 10% of the issued share capital (amount above 10% threshold)
19 Significant investments in the common stock of banking, financial and insurance entities -
that are outside the scope of regulatory consolidation, net of eligible short positions
(amount above 10% threshold)
20 Mortgage servicing rights (amount above 10% threshold) -
21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net -
of related tax liability)
22 Amount exceeding the 15% threshold -
23 of which : significant investments in the common stock of financial entities -
24 of which : mortgage servicing rights -
25 of which : deferred tax assets arising from temporary differences -
26 National specific regulatory adjustments -
26a Investments in the equity capital of unconsolidated insurance subsidiaries -
26b Investments in the equity capital of unconsolidated non-financial subsidiaries -
26c Shortfall in the equity capital of majority owned financial entities which have not been -
consolidated with the bank
26d Unamortised pension funds expenditures -

HDFC Bank Limited Annual Report 2013-14 116

Basel III - Pillar 3 Disclosures

` million
Composition of Capital as at March 31, 2014 Amounts Ref No.
Subject to
0RE "ASEL )))
Treatment
27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 11,115.7
1 and Tier 2 to cover deductions
28 Total regulatory adjustments to Common Equity Tier 1 19,606.9
29 Common Equity Tier 1 capital (CET1) 421,540.6
Additional Tier 1 capital : instruments
30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus (31+32) -
31 of which : classified as equity under applicable accounting standards (Perpetual Non- -
Cumulative Preference Shares)
32 of which : classified as liabilities under applicable accounting standards (Perpetual debt -
Instruments)
33 Directly issued capital instruments subject to phase out from Additional Tier 1 1,600.0 g
34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by -
subsidiaries and held by third parties (amount allowed in group AT1)
35 of which : instruments issued by subsidiaries subject to phase out -
36 Additional Tier 1 capital before regulatory adjustments 1,600.0
Additional Tier 1 capital : regulatory adjustments
37 Investments in own Additional Tier 1 instruments -
38 Reciprocal cross-holdings in Additional Tier 1 instruments -
39 Investments in the capital of banking, financial and insurance entities that are outside the -
scope of regulatory consolidation, net of eligible short positions, where the bank does not
own more than 10% of the issued common share capital of the entity (amount above 10%
threshold)
40 Significant investments in the capital of banking, financial and insurance entities that are -
outside the scope of regulatory consolidation (net of eligible short positions)
41 National specific regulatory adjustments -
41a Investments in the Additional Tier 1 capital of unconsolidated insurance subsidiaries -
41b Shortfall in the Additional Tier 1 capital of majority owned financial entities which have not -
been consolidated with the bank
Regulatory adjustments applied to Additional Tier 1 in respect of Amounts Subject to Pre-
Basel III Treatment
of which : capital charge for illiquid positions 271.0
of which : goodwill on consolidation 933.3
of which : deferred tax assets arising from temporary differences 11,511.4
42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover -
deductions
43 Total regulatory adjustments to Additional Tier 1 capital 12,715.7
44 Additional Tier 1 capital (AT1) (11,115.7)
44a Additional Tier 1 capital reckoned for capital adequacy
45 Tier 1 capital (T1 = CET1 + AT1) (row 29 + row 44a) 421,540.6
Tier 2 capital : instruments and provisions
46 Directly issued qualifying Tier 2 instruments plus related stock surplus -
47 Directly issued capital instruments subject to phase out from Tier 2 121,891.6 h
48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by -
subsidiaries and held by third parties

HDFC Bank Limited Annual Report 2013-14 117

Basel III - Pillar 3 Disclosures

` million
Composition of Capital as at March 31, 2014 Amounts Ref No.
Subject to
0RE "ASEL )))
Treatment
49 of which : instruments issued by subsidiaries subject to phase out - i
50 Provisions 32,349.6 j=
j1 + j2 + j3 + j4
51 Tier 2 capital before regulatory adjustments 154,241.2

Tier 2 capital: regulatory adjustments

52 Investments in own Tier 2 instruments -
53 Reciprocal cross-holdings in Tier 2 instruments 18.1
54 Investments in the capital of banking, financial and insurance entities that are outside the -
scope of regulatory consolidation, net of eligible short positions, where the bank does not
own more than 10% of the issued common share capital of the entity (amount above the
10% threshold)
55 Significant investments in the capital banking, financial and insurance entities that are -
outside the scope of regulatory consolidation (net of eligible short positions)
56 National specific regulatory adjustments (56a+56b) -
56a of which : investments in the Tier 2 capital of unconsolidated subsidiaries -
56b of which : shortfall in the Tier 2 capital of majority owned financial entities which have not -
been consolidated with the bank
57 Total regulatory adjustments to Tier 2 capital 18.1
58 Tier 2 capital (T2) 154,223.1
58a Tier 2 capital reckoned for capital adequacy 154,223.1
58b Excess Additional Tier 1 capital reckoned as Tier 2 capital
58c Total Tier 2 capital admissible for capital adequacy (row 58a + row 58b) 154,223.1
59 Total capital (TC = T1 + T2) (row 45+row 58c) 575,763.7
Risk Weighted Assets in Respect of Amounts Subject to Pre-Basel III Treatment
60 Total risk weighted assets (row 60a +row 60b +row 60c) 3,598,291.1
60a of which : total credit risk weighted assets 3,170,467.9
60b of which : total market risk weighted assets 115,590.9
60c of which : total operational risk weighted assets 312,232.3
Capital ratios
61 Common Equity Tier 1 (as a percentage of risk weighted assets) 11.72%
62 Tier 1 (as a percentage of risk weighted assets) 11.72%
63 Total capital (as a percentage of risk weighted assets) 16.00%
64 Institution specific buffer requirement (minimum CET1 requirement plus capital 5.00%
conservation and countercyclical buffer requirements, expressed as a percentage of risk
weighted assets)
65 of which : capital conservation buffer requirement 0.00%
66 of which : bank specific countercyclical buffer requirement -
67 of which : G-SIB buffer requirement -
68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted assets) -
National minima (if different from Basel III)
69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 5.50%

HDFC Bank Limited Annual Report 2013-14 118

Basel III - Pillar 3 Disclosures

` million
Composition of Capital as at March 31, 2014 Amounts Ref No.
Subject to
0RE "ASEL )))
Treatment
70 National Tier 1 minimum ratio (if different from Basel III minimum) 7.00%
71 National total capital minimum ratio (if different from Basel III minimum) 9.00%
Amounts below the thresholds for deduction (before risk weighting)
72 Non-significant investments in the capital of other financial entities 544.2
73 Significant investments in the common stock of financial entities 311.7
74 Mortgage servicing rights (net of related tax liability) NA
75 Deferred tax assets arising from temporary differences (net of related tax liability) NA
Applicable caps on the inclusion of provisions in Tier 2
76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardised 32,349.6 j = j1 + j2 + j3
approach (prior to application of cap) + j4
77 Cap on inclusion of provisions in Tier 2 under standardised approach 39,630.8
78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings- NA
based approach (prior to application of cap)
79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach NA
#APITAL INSTRUMENTS SUBJECT TO PHASE OUT ARRANGEMENTS ONLY APPLICABLE BETWEEN !PRIL   AND
March 31, 2022)
80 Current cap on CET1 instruments subject to phase out arrangements NA
81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities) NA
82 Current cap on AT1 instruments subject to phase out arrangements 1,600.0 g
83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities) 400.0
84 Current cap on T2 instruments subject to phase out arrangements 121,891.6 h
85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities) 23,702.9

Notes to the Template

Row # of template Particular ` million
10 Deferred tax associated with accumulated losses -
Deferred tax assets (excluding those associated with accumulated losses) net of deferred tax liability 19,185.6
19 If investments in insurance subsidiaries are not deducted fully from capital and instead considered under NA
10% threshold for deduction, the resultant increase in the capital of bank
of which : Increase in Common Equity Tier 1 capital NA
of which : Increase in Additional Tier 1 capital NA
of which : Increase in Tier 2 capital NA
26b If investments in the equity capital of unconsolidated non-financial subsidiaries are not deducted and NA
hence, risk weighted then :
(i) Increase in Common Equity Tier 1 capital NA
(ii) Increase in risk weighted assets NA
44a Excess Additional Tier 1 capital not reckoned for capital adequacy (difference between Additional Tier 1 -
capital as reported in row 44 and admissible Additional Tier 1 capital as reported in 44a)
of which : Excess Additional Tier 1 capital which is considered as Tier 2 capital under row 58b -
50 Eligible provisions included in Tier 2 capital 32,349.6
Eligible revaluation reserves included in Tier 2 capital -
Total of row 50 32,349.6
58a Excess Tier 2 capital not reckoned for capital adequacy (difference between Tier 2 capital as reported in -
row 58 and T2 as reported in 58a)

HDFC Bank Limited Annual Report 2013-14 119

Basel III - Pillar 3 Disclosures

` million
#OMPOSITION OF #APITAL 2ECONCILIATION 2EQUIREMENTS Balance sheet as in Balance sheet under
consolidated financial regulatory scope of
statements consolidation
Step 1 AS ON  -ARCH  AS ON  -ARCH 
A #APITAL AND ,IABILITIES
i Paid-up capital 4,798.1 4,798.1
Reserves & surplus 436,868.3 436,558.3
Minority interest 1,517.3 917.0
Total capital 443,183.7 442,273.4
ii $EPOSITS 3,670,803.3 3,671,254.5
of which : Deposits from banks 27,593.0 27,593.0
of which : Customer deposits 3,643,210.3 3,643,661.5
of which : Other deposits - -
iii Borrowings 495,967.2 495,967.2
of which : From RBI - -
of which : From banks 214,315.4 214,315.4
of which : From other institutions & agencies 37,520.0 37,520.0
of which : Others 69,401.3 69,401.3
of which : Capital instruments 174,730.5 174,730.5
iv Other liabilities & provisions 426,245.4 426,255.5
4OTAL #APITAL AND ,IABILITIES 5,036,199.6 5,035,750.6
B Assets
i Cash and balances with RBI 253,572.2 253,572.2
Balance with banks and money at call and short notice 145,562.1 145,562.1
Total 399,134.3 399,134.3
ii Investments 1,195,710.6 1,195,290.3
of which : Government securities 946,400.2 946,400.2
of which : Other approved securities - -
of which : shares 1,488.8 1,377.2
of which : Debentures & Bonds 36,358.6 36,358.6
of which : Subsidiaries, Joint Ventures, Associates 544.5 311.8
of which : Others (including Commercial Papers, Mutual Funds etc.) 210,918.5 210,842.5
iii ,OANS AND ADVANCES 3,154,188.6 3,154,188.6
of which : to banks 8,646.8 8,646.8
of which : to customers 3,145,541.8 3,145,541.8
iv Fixed assets 30,262.8 30,262.8
v Other assets 255,354.8 255,326.1
of which :
(a) goodwill and intangible assets - -
(b) deferred tax assets 19,185.6 19,185.6
vi Goodwill on consolidation 1,548.5 1,548.5
vii $EBIT BALANCE IN 0ROlT  ,OSS ACCOUNT
Total Assets 5,036,199.6 5,035,750.6

HDFC Bank Limited Annual Report 2013-14 120

Basel III - Pillar 3 Disclosures

` million
#OMPOSITION OF #APITAL 2ECONCILIATION 2EQUIREMENTS Balance sheet as Balance sheet under Ref.
in consolidated regulatory scope of No.
Step 2 financial statements consolidation
AS ON  -ARCH  AS ON  -ARCH 
A #APITAL AND ,IABILITIES
i 0AID UP CAPITAL 4,798.1 4,798.1 a1
Reserves & surplus 436,868.3 436,558.3
of which :
Share premium 143,051.9 143,051.9 a2
Balance in Profit / Loss A/c 152,074.7 151,764.7 b
of which :
(a) balance in profit / loss account (relating to associates) not considered under
310.0 -
regulatory scope of consolidation
Statutory Reserves 91,883.5 91,883.5 c1
General Reserve 34,687.4 34,687.4 c2
Amalgamation Reserve 10,635.6 10,635.6 c3
Capital Reserve 4,395.9 4,395.9 c4
Investment Reserve Account 208.9 208.9 j1
Foreign Currency Translation Reserve (69.6) (69.6) c5
Minority interest 1,517.3 917.0
of which considered under capital funds - - d
Total capital 443,183.7 442,273.4
ii $EPOSITS 3,670,803.3 3,671,254.5
of which : Deposits from banks 27,593.0 27,593.0
of which : Customer deposits 3,643,210.3 3,643,661.5
of which : Other deposits - -
iii Borrowings 495,967.2 495,967.2
of which : From RBI - -
of which : From banks 214,315.4 214,315.4
of which : From other institutions & agencies 37,520.0 37,520.0
of which : Others 69,401.3 69,401.3
of which : Capital instruments 174,730.5 174,730.5
of which :
(a) Eligible AT1 capital - 1,600.0 g
(b) EligibleT2 capital issued by Bank - 121,891.6 h
(c) Eligible T2 capital issued by subsidiaries - - i
iv Other liabilities & provisions 426,245.4 426,255.5
of which :
Provisions against standard assets 12,938.7 12,929.8 j2
Country risk provisions 39.7 39.7 j3
Floating provisions 19,193.8 19,171.2 j4
4OTAL #APITAL AND ,IABILITIES 5,036,199.6 5,035,750.6
B Assets
i Cash and balances with RBI 253,572.2 253,572.2
Balance with banks and money at call and short notice 145,562.1 145,562.1
Total 399,134.3 399,134.3
ii Investments 1,195,710.6 1,195,290.3
of which : Government securities 946,400.2 946,400.2
of which : Other approved securities - -
of which : shares 1,488.8 1,377.2
of which : Debentures & Bonds 36,358.6 36,358.6
of which : Subsidiaries, Joint Ventures, Associates 544.5 311.8
of which goodwill on acquisition of IARC included as part of carrying amount as per AS 23 7.0 7.0 e1
of which : Others (including Commercial Papers, Mutual Funds etc.) 210,918.5 210,842.5
iii ,OANS AND ADVANCES 3,154,188.6 3,154,188.6
of which : to banks 8,646.8 8,646.8
of which : to customers 3,145,541.8 3,145,541.8
iv Fixed assets 30,262.8 30,262.8
v Other assets 255,354.8 255,326.1
of which :
(a) goodwill and intangible assets - -
Out of which :
Goodwill - -
Other intangibles (excluding MSRs) - -
(b) deferred tax assets 19,185.6 19,185.6 f
vi Goodwill on consolidation 1,548.5 1,548.5 e2
vii $EBIT BALANCE IN 0ROlT  ,OSS ACCOUNT
Total Assets 50,36,199.6 50,35,750.6

HDFC Bank Limited Annual Report 2013-14 121

Basel III - Pillar 3 Disclosures

Main Features of Regulatory Capital Instruments

Item Equity Lower Lower Series Series Series Series Series Series Series Series Series Series Series Series
Particulars
# Shares Tier II Tier II 1&2 3 4 5 6 7 8 1/06 2/06 1/06/UT 2/06/UT 3/06/UT

1 Issuer HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank

2 Unique INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040
identifier A01026 A08112 A08120 A08138 A08146 A08146 A08161 A08179 A08179 A08187 A08153 A08203 A08195 A08211 A08237
3 Governing
laws of the Applicable Indian statutes and regulatory requirements
instrument
4 Transitional Common Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2
Basel III rules Equity Tier 1
5 Post- Common Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible
transitional Equity Tier 1
Basel III rules
6 Eligible at Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and
solo / group / Group Group Group Group Group Group Group Group Group Group Group Group Group Group Group
group & solo
7 Instrument Common Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Upper Tier Upper Tier Upper Tier
type Shares Instruments Instruments Instruments Instruments Instruments Instruments Instruments Instruments Instruments Instruments Instruments 2 Capital 2 Capital 2 Capital
Instruments Instruments Instruments
8 Amount 4,798.1 - 25.1 423.6 117.2 152.4 386.8 149.0 281.3 502.3 565.9 807.1 2,511.6 2,511.6 300.6
recognised in
the regulatory
capital
(` in million
as of March
31, 2014)
9 Par value of Not 3,950.0 50.0 2,530.0 700.0 910.0 2,310.0 890.0 1,680.0 3,000.0 1,690.0 2,410.0 3,000.0 3,000.0 359.0
instrument applicable
(` in million)
10 Accounting Shareholders’ Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability
classification equity
11 Original date Various* 04-Feb-04 04-Feb-04 27-Oct-05 28-Nov-05 05-Dec-05 20-Jan-06 24-Feb-06 24-Feb-06 28-Mar-06 19-May-06 05-Sep-06 05-Jun-06 05-Sep-06 20-Oct-06
of issuance
12 Perpetual or Perpetual Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated
dated
13 Original No Maturity 04-May-14 04-May-17 27-Apr-15 28-Jun-15 28-Jun-15 20-Apr-15 24-Oct-15 24-Oct-15 04-Feb-16 19-May-16 05-Sep-16 05-Jun-21 05-Sep-21 20-Oct-21
maturity date

14 Issuer call No No No No No No No No No No No No Yes Yes Yes

subject
to prior
supervisory
approval
15 Optional Not Not Not Not Not Not Not Not Not Not Not Not Date of call : Date of call : Date of call :
call date, applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable 05-Jun-16 05-Sep-16 20-Oct-16
contingent Tax event : Tax event : Tax event :
call dates and None None None
redemption Regulatory Regulatory Regulatory
amount event : None event : event :
Redemption None None
price : At Redemption Redemption
par price : At price : At
par par
16 Subsequent Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
call dates, if applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
applicable
Coupons / Dividend Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon
dividends
17 Fixed or Not Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed
floating applicable
dividend /
coupon
18 Coupon rate Not 5.90% 6.00% 7.50% 7.50% 7.50% 7.75% 8.25% 8.25% 8.60% 8.45% 9.10% Before call : Before call : Before call :
and any applicable 8.8% 9.2% 8.95%
related index If call not If call not If call not
exercised : exercised : exercised :
9.55% 9.95% 9.7%

19 Existence of Not Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
a dividend applicable
stopper
*Note : Dates of allotment of equity shares are available in section titled 'History of share issues' on the Bank's website at the following link: [Link]

HDFC Bank Limited Annual Report 2013-14 122

Basel III - Pillar 3 Disclosures

Series Series Series Series Series Series Series Series Series Series Series FCY Series Series Upper
1/06/IPDI 1/08-09/UT 1/08-09/LT 2/08-09/UT 2/08-09/LT 3/08-09/UT 1/10-11 1/11-12/LT 1/12-13/LT 2/12-13/LT 3/12-13/LT Debt B E Tier II

HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank HDFC Bank

INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 INE040 Not INE484 INE484 INE040
A08229 A08252 A08245 A08260 A08278 A08286 A08294 A08302 A08310 A08328 A08336 applicable A09029 A08047 A09011

Applicable Indian statutes and regulatory requirements

Additional Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2 Tier 2
Tier 1
Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible Ineligible

Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and Solo and
Group Group Group Group Group Group Group Group Group Group Group Group Group Group Group

Perpetual Upper Tier Tier 2 Debt Upper Tier Tier 2 Debt Upper Tier Upper Tier Tier 2 Debt Tier 2 Debt Tier 2 Debt Tier 2 Debt Upper Tier Tier 2 Debt Tier 2 Debt Upper Tier
Debt 2 Capital Instruments 2 Capital Instruments 2 Capital 2 Capital Instruments Instruments Instruments Instruments 2 Capital Instruments Instruments 2 Capital
Instruments Instruments Instruments Instruments Instruments Instruments Instruments
1,600.0 4,839.0 7,702.2 1,674.4 1,004.6 6,672.5 9,251.1 30,557.8 29,109.4 4,730.2 11,762.6 5,016.1 - - 837.2

2,000.0 5,780.0 11,500.0 2,000.0 1,500.0 7,970.0 11,050.0 36,500.0 34,770.0 5,650.0 14,050.0 5,991.5 150.0 40.0 1,000.0

Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability Liability

08-Sep-06 26-Dec-08 26-Dec-08 19-Feb-09 19-Feb-09 17-Mar-09 07-Jul-10 12-May-11 13-Aug-12 31-Oct-12 28-Dec-12 21-Nov-06 16-Jun-04 25-Jan-05 24-May-07

Perpetual Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated Dated

No Maturity 26-Dec-23 26-Dec-18 19-Feb-24 19-Feb-19 17-Mar-24 07-Jul-25 12-May-26 13-Aug-27 31-Oct-22 28-Dec-22 15-Dec-21 16-May-14 25-May-14 23-May-22

Yes Yes No Yes No Yes Yes Yes Yes Yes Yes Yes No No Yes

Date of call : Date of call : Not Date of call : Not Date of call : Date of call : Date of call : Date of call : Date of call : Date of call : Date of call : Not Not Date of call :
08-Sep-16 26-Dec-18 applicable 19-Feb-19 applicable 17-Mar-19 07-Jul-20 12-May-21 13-Aug-22 31-Oct-17 28-Dec-17 15-Dec-16 applicable applicable 24-May-17
Tax event : Tax event : Tax event : Tax event : Tax event : Tax event : Tax event : Tax event : Tax event : Tax event : Tax event :
None None None None None None None None None None None
Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory Regulatory
event: None event: None event: None event: None event: None event: None event: None event: None event: None event: None event: None
Redemption Redemption Redemption Redemption Redemption Redemption Redemption Redemption Redemption Redemption Redemption
price : At par price : At par price : At par price : At par price : At par price : At par price : At par price : At par price : At par price : At par price : At par

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon Coupon

Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Floating Fixed Fixed Fixed to
floating

Before call : Before call : 10.70% Before call : 9.75% Before call : Before call : 9.48% 9.45% 8.95% 9.10% Before call : 7.05% 8.75% Before call :
9.92% 10.85% 9.95% 9.85% 8.7% LIBOR+1.2% 10.84%
If call not If call not If call not If call not If call not If call not If call not
exercised : exercised : exercised : exercised : exercised : exercised : exercised : 5
10.92% 11.35% 10.45% 10.35% 9.2% Libor+2.2% Year G Sec
Yield +3.5%
Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

HDFC Bank Limited Annual Report 2013-14 123

Basel III - Pillar 3 Disclosures

Item Equity Lower Lower Series Series Series Series Series Series Series Series Series Series Series Series
Particulars
# Shares Tier II Tier II 1&2 3 4 5 6 7 8 1/06 2/06 1/06/UT 2/06/UT 3/06/UT
20 Fully Fully Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Mandatory Partially Partially Partially
discretionary, discretionary discretionary discretionary discretionary
partially
discretionary
or mandatory
21 Existence No No No No No No No No No No No No Yes Yes Yes
of step-up
or other
incentive to
redeem
22 Non- Non- Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative
cumulative or cumulative
cumulative
23 Convertible Not Non Non Non Non Non Non Non Non Non Non Non Non Non Non
or non- applicable convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible
convertible
24 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
conversion applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
trigger(s)
25 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
fully or applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
partially
26 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
conversion applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
rate
27 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
mandatory applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
or optional
conversion
28 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
specify applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
instrument
type
convertible
into
29 If convertible, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
specify issuer applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
of instrument
it converts
into
30 Write-down No No No No No No No No No No No No No No No
feature
31 If write-down, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
write-down applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
trigger(s)
32 If write-down, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
full or partial applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
33 If write-down, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
permanent or applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
temporary
34 If write-down, Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
description applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
of write-up
mechanism
35 Position in Perpetual All other All other All other All other All other All other All other All other All other All other All other All other All other All other
subordination Debt creditors creditors creditors creditors creditors creditors creditors creditors creditors creditors creditors creditors creditors creditors
hierarchy in Instruments and and and and and and and and and and and and and and
liquidation Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors Depositors
(specify of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank of the Bank
instrument
type
immediately
senior to
instrument)
36 Non- No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
compliant
transitioned
features
37 If yes, Not No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss
specify non- applicable absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption
compliant features features features features features features features features features features features features features features
features

HDFC Bank Limited Annual Report 2013-14 124

Basel III - Pillar 3 Disclosures

Series Series Series Series Series Series Series Series Series Series Series FCY Series Series Upper
1/06/IPDI 1/08-09/UT 1/08-09/LT 2/08-09/UT 2/08-09/LT 3/08-09/UT 1/10-11 1/11-12/LT 1/12-13/LT 2/12-13/LT 3/12-13/LT Debt B E Tier II
Partially Partially Mandatory Partially Mandatory Partially Partially Mandatory Mandatory Mandatory Mandatory Partially Mandatory Mandatory Partially
discretionary discretionary discretionary discretionary discretionary discretionary discretionary

Yes Yes No Yes No Yes Yes No No No No Yes No No Yes

Non- Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative Cumulative
cumulative

Non Non Non Non Non Non Non Non Non Non Non Non Non Non Non
convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible convertible

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

No No No No No No No No No No No No No No No

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable
Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

Not Not Not Not Not Not Not Not Not Not Not Not Not Not Not
applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable applicable

All other All other All other All other All other All other All other All other All other All other All other All other All other All other All other
creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and creditors and
Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of Depositors of
the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank the Bank

Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes

No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss No loss
absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption absorption
features features features features features features features features features features features features features features features

HDFC Bank Limited Annual Report 2013-14 125

Independent Auditor’s Report

To the Board of Directors of HDFC Bank Limited

Report on the Consolidated Financial Statements 5. The financial statements also include ` 91 lacs
being the Group’s proportionate share in the profit of
1. We have audited the accompanying consolidated associates which has been recognised on the basis of
financial statements of HDFC Bank Limited (‘the Bank’) the unaudited financial statements available with the
and its subsidiaries and associates (collectively known Bank.
as ‘the Group’), which comprise the consolidated
Balance Sheet as at 31 March 2014 and the 6. Our responsibility is to express an opinion on these
consolidated Statement of Profit and Loss and the consolidated financial statements based on our audit.
consolidated Cash Flow Statement for the year then We conducted our audit in accordance with standards
ended, a summary of significant accounting policies on auditing issued by the Institute of Chartered
and other explanatory information. Accountants of India. Those Standards require that
we comply with ethical requirements and plan and
Management’s Responsibility for the Consolidated
perform the audit to obtain reasonable assurance about
Financial Statements
whether the consolidated financial statements are free
2. Management is responsible for preparation of of material misstatements.
these consolidated financial statements that give
7. An audit involves performing procedures to obtain
a true and fair view of the consolidated financial
evidence about the amounts and disclosures in the
position, consolidated financial performance and
consolidated financial statements. The procedures
consolidated cash flows of the Group in accordance
selected depend on the auditor's judgment, including
with accounting principles generally accepted in India.
the assessment of the risks of material misstatement
This responsibility includes the design, implementation
of the consolidated financial statements, whether due
and maintenance of internal control relevant to the
to fraud or error. In making those risk assessments,
preparation and presentation of the consolidated
the auditor considers internal control relevant to
financial statements that give a true and fair view and
the Group’s preparation and presentation of the
are free from material misstatement, whether due to
fraud or error. consolidated financial statements that give a true
and fair view in order to design audit procedures that
Auditor’s Responsibility are appropriate in the circumstances. An audit also
includes evaluating the appropriateness of accounting
3. We did not audit the financial statements and other policies used and the reasonableness of accounting
financial information of the subsidiaries of the Group estimates made by the management, as well as
whose financial statements reflect total assets of evaluating the overall presentation of the consolidated
` 92,402 lacs as at 31 March 2014, total revenues of financial statements.
` 26,847 lacs and cash flows of ` 3,392 lacs for the
year then ended. These financial statements have 8. We believe that the audit evidence we have obtained
been audited by other auditors, whose reports have is sufficient and appropriate to provide a basis for our
been furnished to us and were relied upon by us for audit opinion.
our opinion on the consolidated financial statements
of the Group. Opinion

4. The financial statements also include ` 272 lacs 9. We report that the Consolidated Financial Statements
being the Group’s proportionate share in the profit of have been prepared by the Bank in accordance
associates which has been recognised on the basis with the requirements of Accounting Standards (AS)
of the audited financial statements available with the 21, ‘Consolidated financial statements’, Accounting
Bank. These financial statements have been audited Standards (AS) 23, ‘Accounting for Investments in
by other auditors, whose reports have been furnished Associates in Consolidated Financial Statements’
to us and were relied upon by us for our opinion on notified pursuant to the Companies (Accounting
consolidated financial statements of the Group. Standards) Rules, 2006.

HDFC Bank Limited Annual Report 2013-14 126

10. The Balance Sheet and the Statement of Profit and (a) in the case of the consolidated Balance Sheet, of the
Loss and the Cash Flow Statement have been drawn state of affairs of the Group as at 31 March 2014;
up in accordance with the provisions of Section 29 of
the Banking Regulation Act, 1949 read with Section (b) in the case of the consolidated Statement of Profit and
211 of the Companies Act, 1956. Loss, of the profit for the year ended on that date; and

11. Based on our audit and to the best of our information (c) in the case of the consolidated Cash Flow Statement,
and according to the explanations given to us and of the cash flows for the year ended on that date.
on the consideration of reports of other auditors on
For B S R & Co. LLP
separate financial statements and on the consideration
Chartered Accountants
of the unaudited financial statements and on other
Firm’s Registration No.: 101248W
relevant financial information of the components,
we are of the opinion that the consolidated financial Akeel Master
statements give a true and fair view in conformity Partner
with the accounting principles generally accepted in Membership No.: 046768
India and guidelines issued by Reserve Bank of India
in relation to preparation of consolidated financial Mumbai
statements: April 22, 2014

HDFC Bank Limited Annual Report 2013-14 127

Consolidated Balance Sheet
As at March 31, 2014
` in ‘000
As at As at
Schedule 31-Mar-14 31-Mar-13
CAPITAL AND LIABILITIES

Capital 1 4,798,101 4,758,838

Reserves and surplus 2 436,868,201 361,668,439

Minority interest 2A 1,517,355 2,213,370

Deposits 3 3,670,803,323 2,960,917,699

Borrowings 4 495,967,176 394,966,127

Other liabilities and provisions 5 426,245,464 352,705,377

Total 5,036,199,620 4,077,229,850

ASSETS

Cash and balances with Reserve Bank of India 6 253,572,162 146,308,790

Balances with banks and money at call and short notice 7 145,562,120 129,002,845

Investments 8 1,195,710,628 1,109,604,124

Advances 9 3,154,188,602 2,472,451,151

Fixed assets 10 30,262,787 27,733,162

Other assets 11 256,903,321 192,129,778

Total 5,036,199,620 4,077,229,850

Contingent liabilities 12 7,231,729,138 7,201,238,793

Bills for collection 209,430,623 261,039,630

Significant accounting policies and notes to the Consolidated

17 & 18
financial statements
The schedules referred to above form an integral part of the
Consolidated Balance Sheet
As per our report of even date. )RUDQGRQEHKDOIRIWKH%RDUG
For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 128

Consolidated Statement of Profit and Loss Account
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
Schedule 31-Mar-14 31-Mar-13
I INCOME
Interest earned 13 425,550,196 358,610,213
Other income 14 82,975,016 71,329,645
Total 508,525,212 429,939,858
II EXPENDITURE
Interest expended 15 234,454,516 196,954,474
Operating expenses 16 124,696,542 115,518,963
Provisions and contingencies 61,729,097 48,463,621
Total 420,880,155 360,937,058
III PROFIT
Net profit for the year 87,645,057 69,002,800
Less : Minority interest 246,523 335,233
Add : Share in profits of associates 36,316 28,818
Consolidated profit for the year attributable to the Group 87,434,850 68,696,385
Balance in Profit and Loss account brought forward 114,759,351 86,213,878
Total 202,194,201 154,910,263
IV APPROPRIATIONS
Transfer to Statutory Reserve 21,614,541 17,020,712
Proposed dividend 16,433,495 13,096,639
Tax (including cess) on dividend 2,849,723 2,227,394
Dividend (including tax/cess thereon) pertaining to previous year 48,462 44,748
paid during the year
Transfer to General Reserve 8,558,376 6,726,285
Transfer to Capital Reserve 582,710 858,498
Transfer to Investment Reserve Account 32,218 176,636
Balance carried over to Balance Sheet 152,074,676 114,759,351
Total 202,194,201 154,910,263
V EARNINGS PER EQUITY SHARE (Face value ` 2 per hare) ` `
Basic 36.58 29.10
Diluted 36.31 28.78
Significant accounting policies and notes to the
Consolidated financial statements 17 & 18
The schedules referred to above form an integral part of the
Consolidated statement of Profit and Loss
As per our report of even date. )RUDQGRQEHKDOIRIWKH%RDUG
For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 129

Consolidated Cash Flow Statement
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
Particulars
31-Mar-14 31-Mar-13

Cash flows from operating activities

Net profit before income tax 131,896,428 99,733,715
Adjustments for :
Depreciation on fixed assets 6,886,804 6,632,647
(Profit) / Loss on revaluation of investments (65,078) (348,627)
Amortisation of premia on Held to Maturity investments 806,470 5,82,183
Provision/Charge for Non Performing Assets 18,506,221 13,403,040
Floating Provisions 576,750 4,266,730
Provision for standard assets 2,343,469 1,339,890
Provision for wealth tax 7,656 6,108
Contingency provision (2,933,919) (1,337,473)
(Profit)/Loss on sale of fixed assets (33,736) 10,385
Share in current year's profits of associates (36,316) (28,817)
Provision/Charge for Dimunition in value of Investment (41,196) 537,294
157,913,553 124,797,075
Adjustments for :
(Increase) / Decrease in Investments (86,770,385) (142,403,428)
(Increase) / Decrease in Advances (700,414,983) (497,182,761)
Increase / (Decrease) in Deposits 709,885,624 495,521,931
(Increase) / Decrease in Other assets (66,178,707) 33,359,910
Increase / (Decrease) in Other liabilities and provisions 69,761,569 (34,229,915)
84,196,671 (20,137,188)
Direct taxes paid (net of refunds) (42,090,327) (38,336,069)
Net cash flow from operating activities 42,106,344 (58,473,257)
Cash flows from investing activities
Purchase of fixed assets (8,530,884) (9,107,375)
Proceeds from sale of fixed assets 130,019 45,519
Investment in subsidiaries (2,265,750) -
Net cash used in investing activities (10,666,615) (9,061,856)

HDFC Bank Limited Annual Report 2013-14 130

Consolidated Cash Flow Statement
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
Particulars
31-Mar-14 31-Mar-13

Cash flows from financing activities

Increase in Minority Interest 402,962 376,784

Money received on exercise of stock options by employees 7,232,947 11,171,001

Proceeds from issue of Upper and Lower Tier II capital instruments 2,300,000 60,470,000

Increase / (Decrease) in Borrowings (excluding Subordinate debt, Perpetual

98,138,049 70,813,587
debt and Upper Tier II instruments)

Dividend paid during the year (13,140,705) (10,135,020)

Tax on Dividend (2,231,791) (1,643,901)

Net cash generated from financing activities 92,701,462 131,052,451

Effect of Exchange Fluctuation on Translation reserve (318,543) 42,672

Net Increase/(Decrease) in cash and cash equivalents 123,822,648 63,560,010

Cash and cash equivalents as at April 1st 275,311,634 211,751,624

Cash and cash equivalents as at Mar 31st 399,134,282 275,311,634

As per our report of even date. )RUDQGRQEHKDOIRIWKH%RDUG

For B S R & Co. LLP C. M. Vasudev Aditya Puri Bobby Parikh
Chartered Accountants Chairman Managing Director Partho Datta
Firm’s Registration No.: 101248W
Pandit Palande
Paresh Sukthankar Kaizad Bharucha
Akeel Master Vijay Merchant
Deputy Managing Director Executive Director
Partner
Keki Mistry
Membership No.: 046768
Sanjay Dongre Sashidhar Jagdishan Renu Karnad
Executive Vice President Chief Financial Officer Directors
Mumbai, April 22, 2014 (Legal) & Company Secretary

HDFC Bank Limited Annual Report 2013-14 131

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 1 - CAPITAL
Authorised Capital
2,75,00,00,000 (31 March, 2013 : 2,75,00,00,000) Equity Shares of ` 2/- each 5,500,000 5,500,000
Issued, subscribed and paid-up capital
2,39,90,50,435 (31 March, 2013 : 2,37,94,19,030) Equity Shares of ` 2/- each 4,798,101 4,758,838
Total 4,798,101 4,758,838
SCHEDULE 2 - RESERVES AND SURPLUS
I Statutory reserve
Opening balance 70,268,983 53,248,271
Additions during the year 21,614,541 17,020,712
Total 91,883,524 70,268,983
II General reserve
Opening balance 26,129,001 19,402,716
Additions during the year 8,558,376 6,726,285
Total 34,687,377 26,129,001
III Balance in profit and loss account 152,074,676 114,759,351

IV Share premium account

Opening balance 135,636,749 124,749,640
Additions during the year 7,415,134 10,887,109
Total 143,051,883 135,636,749
V Amalgamation reserve
Opening balance 10,635,564 10,635,564
Additions during the year - -
Total 10,635,564 10,635,564
VI Capital reserve
Opening balance 3,813,175 2,954,677
Additions during the year 582,710 858,498
Total 4,395,885 3,813,175
VII Investment reserve account
Opening balance 176,636 -
Additions during the year 342,831 231,802
Deductions during the year (310,612) (55,166)
Total 208,855 176,636
VIII Foreign currency translation account
Opening balance 248,980 206,308
Additions / (deductions) during the year (318,543) 42,672
Total (69,563) 248,980
Total 436,868,201 361,668,439

HDFC Bank Limited Annual Report 2013-14 132

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 2 A - MINORITY INTEREST
Minority interest at the date on which parent subsidiary
276,029 276,029
relationship came into existence
Subsequent increase 1,241,326 1,937,341
Total 1,517,355 2,213,370
Includes reserves of Employee Welfare Trust of ` 60.03 crore (previous year : ` 56.98 crore)

SCHEDULE 3 - DEPOSITS
A I Demand deposits
(i) From banks 12,169,991 10,385,135
(ii) From others 600,804,871 511,964,115
Total 612,974,862 522,349,250
II Savings bank deposits 1,031,326,133 882,099,711
III Term deposits
(i) From banks 15,422,987 14,278,854
(ii) From others 2,011,079,341 1,542,189,884
Total 2,026,502,328 1,556,468,738
Total 3,670,803,323 2,960,917,699
B I Deposits of branches in India 3,609,741,720 2,944,855,098
II Deposits of branches outside India 61,061,603 16,062,601
Total 3,670,803,323 2,960,917,699

SCHEDULE 4 - BORROWINGS
I Borrowings in India
(i) Reserve Bank of India - 2,750,000
(ii) Other banks 70,694,514 46,706,913
(iii) Other institutions and agencies 37,520,000 43,830,200
(iv) Upper and lower Tier II capital and innovative perpetual debts 168,739,000 166,439,000
Total 276,953,514 259,726,113
II Borrowings outside India* 219,013,662 135,240,014
Total 495,967,176 394,966,127
*Includes Upper Tier II debt of ` 599.15 crore (previous year : ` 542.85 crore)
Secured borrowings included in I & II above : ` 8,922.73 crore (previous year : ` 5,759.80 crore)

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

I Bills payable 56,112,013 54,787,708
II Interest accrued 28,261,198 63,733,348
III Others (including provisions) 309,650,317 208,300,224
IV Contingent provisions against standard assets 12,938,718 10,560,063
V Proposed dividend (including tax on dividend) 19,283,218 15,324,034
Total 426,245,464 352,705,377

HDFC Bank Limited Annual Report 2013-14 133

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 6 - CASH AND BALANCES WITH RESERVE BANK OF INDIA
I Cash in hand (including foreign currency notes) 38,620,900 50,112,036
II Balances with Reserve Bank of India :
(a) In current accounts 212,951,262 94,196,754
(b) In other accounts 2,000,000 2,000,000
Total 214,951,262 96,196,754
Total 253,572,162 146,308,790
SCHEDULE 7 - BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I In India
(i) Balances with banks :
(a) In current accounts 2,102,898 3,346,215
(b) In other deposit accounts 24,026,788 49,002,392
Total 26,129,686 52,348,607
(ii) Money at call and short notice :
(a) With banks 1,000,000 17,850,000
(b) With other institutions 15,366,745 -
Total 16,366,745 17,850,000
Total 42,496,431 70,198,607
II Outside India
(i) In current accounts 40,154,939 5,876,363
(ii) In other deposit accounts 2,995,750 8,142,750
(iii) Money at call and short notice 59,915,000 44,785,125
Total 103,065,689 58,804,238
Total 145,562,120 129,002,845
SCHEDULE 8 - INVESTMENTS
A. Investments in India in
(i) Government securities 946,400,171 849,023,184
(ii) Other approved securities - -
(iii) Shares 1,479,364 1,418,665
(iv) Debentures and bonds 27,152,237 17,269,037
(v) Joint ventures * 544,510 508,300
(vi) Others (Units, CDs / CPs, PTCs, security receipts and NABARD deposits) 210,918,625 236,353,772
Total 1,186,494,907 1,104,572,958
*Includes Goodwill of ` 0.70 crore (previous year : ` 0.70 crore) and Capital Reserve of
` 0.43 crore on account of investment in associates (previous year : ` 0.43 crore)
B Investments outside India in
Other investments
(a) Shares 9,396 9,396
(b) Debentures and bonds 9,206,325 5,021,770
Total 9,215,721 5,031,166
Total 1,195,710,628 1,109,604,124

HDFC Bank Limited Annual Report 2013-14 134

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
C Investments
(i) Gross value of investments
(a) In India 1,188,244,432 1,106,955,742
(b) Outside India 9,215,721 5,031,166
Total 1,197,460,153 1,111,986,908
(ii) Provision for depreciation
(a) In India 1,749,525 2,382,784
(b) Outside India - -
Total 1,749,525 2,382,784
(iii) Net value of investments
(a) In India 1,186,494,907 1,104,572,958
(b) Outside India 9,215,721 5,031,166
Total 1,195,710,628 1,109,604,124
SCHEDULE 9 - ADVANCES
A (i) Bills purchased and discounted 146,469,089 123,219,205
(ii) Cash credits, overdrafts and loans repayable on demand 1,232,781,559 945,869,566
(iii) Term loans 1,774,937,954 1,403,362,380
Total 3,154,188,602 2,472,451,151
Loans with tenor of less than one year are classified under A (ii) above
B (i) Secured by tangible assets* 2,419,011,548 1,832,585,009
(ii) Covered by bank / government guarantees 41,688,328 61,551,311
(iii) Unsecured 693,488,726 578,314,831
Total 3,154,188,602 2,472,451,151
* Including advances against book debts
C I Advances in India
(i) Priority sector 898,226,797 770,444,752
(ii) Public sector 124,180,757 84,217,368
(iii) Banks 1,177,248 917,007
(iv) Others 1,897,668,290 1,520,913,534
Total 2,921,253,092 2,376,492,661
II Advances outside India
(i) Due from banks 7,469,539 18,469,102
(ii) Due from others
a) Bills purchased and discounted 177,402 409,362
b) Syndicated loans 21,134,880 13,623,839
c) Others 204,153,689 63,456,187
Total 232,935,510 95,958,490
Advances are net of provisions Total 3,154,188,602 2,472,451,151

HDFC Bank Limited Annual Report 2013-14 135

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
SCHEDULE 10 - FIXED ASSETS

A Premises (including land)

Gross block

At cost on 31 March of the preceding year 11,642,394 10,519,672

Additions during the year 2,637,812 1,140,440

Deductions during the year (110,771) (17,718)

Total 14,169,435 11,642,394

Depreciation

As at 31 March of the preceding year 2,916,893 2,488,876

Charge for the year 501,047 443,998

On deductions during the year (80,762) (15,981)

Total 3,337,178 2,916,893

Net block 10,832,257 8,725,501

B Other fixed assets (including furniture and fixtures)

Gross block

At cost on 31 March of the preceding year 53,913,943 45,181,384

Additions during the year 6,878,474 9,504,932

Deductions during the year (693,167) (772,373)

Total 60,099,250 53,913,943

Depreciation

As at 31 March of the preceding year 34,906,282 29,434,114

Charge for the year 6,389,332 6,190,167

On deductions during the year (626,894) (717,999)

Total 40,668,720 34,906,282

Net block 19,430,530 19,007,661

C Assets on lease (plant and machinery)

Gross block

At cost on 31 March of the preceding year 4,546,923 4,546,923

Additions during the year - -

Total 4,546,923 4,546,923

HDFC Bank Limited Annual Report 2013-14 136

Schedules to the Consolidated Financial Statements
As at March 31, 2014
` in ‘000
As at As at
31-Mar-14 31-Mar-13
Depreciation
As at 31 March of the preceding year 4,104,467 4,104,467
Charge for the year - -
Total 4,104,467 4,104,467
Lease adjustment account
As at 31 March of the preceding year 442,456 442,456
Charge for the year - -
Total 442,456 442,456
Unamortised cost of assets on lease - -
Total 30,262,787 27,733,162
SCHEDULE 11 - OTHER ASSETS
I Interest accrued 45,961,534 39,225,430
II Advance tax / tax deducted at source (net of provisions) 12,807,051 15,915,695
III Stationery and stamps 202,985 165,999
IV Non banking assets acquired in satisfaction of claims - -
V Bond and share application money pending allotment 9,029 29,333
VI Security deposit for commercial and residential property 3,807,941 4,125,210
VII Others * 194,114,781 132,668,111
Total 256,903,321 192,129,778
* Includes deferred tax asset (net) of ` 1,918.56 crore (previous year : ` 1,913.06 crore)
and Goodwill of ` 154.85 crore (previous year : ` 38.17 crore)

SCHEDULE 12 - CONTINGENT LIABILITIES

I Claims against the bank not acknowledged as debts - taxation 8,311,600 9,351,700

II Claims against the bank not acknowledged as debts - others 831,507 3,987,800

III Liability on account of outstanding forward exchange contracts 4,753,861,196 4,467,860,687

IV Liability on account of outstanding derivative contracts 2,009,620,394 2,292,213,027

V Guarantees given on behalf of constituents

- in India 210,495,379 162,354,071

- outside India 35,915,763 3,993,576

VI Acceptances, endorsements and other obligations 192,095,251 220,595,426

VII Other items for which the Bank is contingently liable 20,598,048 40,882,506

Total 7,231,729,138 7,201,238,793

HDFC Bank Limited Annual Report 2013-14 137

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
` in ‘000
Year Ended Year Ended
31-Mar-14 31-Mar-13
SCHEDULE 13 - INTEREST EARNED
I Interest / discount on advances / bills 330,775,141 275,912,115
II Income from investments 90,392,028 78,242,820
III Interest on balance with RBI and other inter-bank funds 3,786,035 3,019,141
IV Others 596,992 1,436,137
Total 425,550,196 358,610,213
SCHEDULE 14 - OTHER INCOME
I Commission, exchange and brokerage 60,968,819 54,426,310
II Profit / (loss) on sale of investments (net) 1,002,141 1,278,691
III Profit / (loss) on revaluation of investments (net) 65,078 348,627
IV Profit / (loss) on sale of building and other assets (net) 33,736 (10,385)
V Profit / (loss) on exchange / derivative transactions (net) 14,008,092 10,101,338
VI Income earned by way of dividends etc. from subsidiaries / companies
and / or joint ventures abroad / in India - 7,693

VII Miscellaneous income 6,897,150 5,177,371

Total 82,975,016 71,329,645
SCHEDULE 15 - INTEREST EXPENDED
I Interest on deposits 190,425,563 163,132,026
II Interest on RBI / inter-bank borrowings 34,468,911 28,335,378
III Other interest 9,560,042 5,487,070
Total 234,454,516 196,954,474
SCHEDULE 16 - OPERATING EXPENSES
I Payments to and provisions for employees 44,944,724 42,017,887
II Rent, taxes and lighting 9,471,478 8,615,335
III Printing and stationery 2,740,915 3,117,920
IV Advertisement and publicity 1,451,665 1,870,160
V Depreciation on bank's property 6,886,804 6,632,647
VI Directors' fees, allowances and expenses 8,766 7,701
VII Auditors' fees and expenses 13,368 14,612
VIII Law charges 793,102 509,569
IX Postage, telegram, telephone etc. 4,305,680 4,147,333
X Repairs and maintenance 7,987,391 7,753,007
XI Insurance 3,420,379 2,882,090
XII Other expenditure* 42,672,270 37,950,702
Total 124,696,542 115,518,963
* Includes marketing expenses, professional fees, commission to sales agents, travel and hotel
charges, entertainment, registrar and transfer agency fees and system management fees

HDFC Bank Limited Annual Report 2013-14 138

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Schedule 17 - Significant accounting policies appended to and forming part of the consolidated financial statements
for the year ended March 31, 2014.
A BACKGROUND
HDFC Bank Limited (‘HDFC Bank’ or ‘the Bank’), incorporated in Mumbai, India is a publicly held banking company engaged
in providing a range of banking and financial services including commercial banking and treasury operations. The Bank is
governed by the Banking Regulation Act, 1949. The Bank has overseas branch operations in Bahrain and Hong Kong.
B PRINCIPLES OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Bank, its subsidiaries and associates, which
together constitute the ‘Group’.
The Bank consolidates its subsidiaries in accordance with Accounting Standard (‘AS’) 21, Consolidated Financial
Statements, notified by the Companies Accounting Standard Rules, 2006 on a line-by-line basis by adding together the
like items of assets, liabilities, income and expenditure. Capital reserve / Goodwill on consolidation represent the difference
between the Bank’s share in the net worth of the subsidiary and the cost of acquisition at the time of making the investment
in the subsidiary. Further, the Bank accounts for investments in associates under equity method of accounting in accordance
with AS-23, Accounting for Investments in Associates in Consolidated Financial Statements, notified by the Companies
Accounting Standard Rules, 2006.
C BASIS OF PREPARATION
The consolidated financial statements have been prepared and presented under the historical cost convention and accrual
basis of accounting, unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India
(‘GAAP’), statutory requirements prescribed under the Banking Regulation Act 1949, circulars and guidelines issued by the
Reserve Bank of India (‘RBI’) from time to time, Accounting Standards (‘AS’) notified under the Companies (Accounting
Standard) Rules, 2006 to the extent applicable and current practices prevailing within the banking industry in India. Suitable
adjustments are made to align with the format prescribed under the Banking Regulation Act, 1949.
Use of estimates
The preparation of consolidated financial statements in conformity with GAAP requires the management to make estimates
and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date
of the financial statements and the reported income and expense for the reporting period. Management believes that the
estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from
these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods.
HDB Financial Services Limited is a non-banking financial company and a subsidiary of the Bank. HDFC Securities Limited
is a financial services provider along with broking as core product and a subsidiary of the Bank.
The consolidated financial statements present the accounts of HDFC Bank Limited with its following subsidiaries and
associates :

Name Relation Country of Ownership

incorporation interest**
HDFC Securities Limited Subsidiary India 89.2%
HDB Financial Services Limited Subsidiary India 97.3%
Atlas Documentary Facilitators Company Private Limited Associate India 29.0%
International Asset Reconstruction Company Private Limited Associate India 29.4%
HBL Global Private Limited Associate India Nil
HDB Employee Welfare Trust * India

* The accounts of HDB Employee Welfare Trust, a trust established for providing general welfare measures such as
medical relief and educational assistance to the employees of the Bank and their dependants has been entirely
consolidated.
** Denotes HDFC Bank’s direct interest.

HDFC Bank Limited Annual Report 2013-14 139

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
During the year ended March 31, 2014, the Bank purchased 4,275,000 shares of HDFC Securities Limited and thereby
increased its stake-holding in HDFC Securities Limited from 62.1% to 89.9%. Further, the shareholding decreased from
89.9% to 89.2% on account of 111,150 stock options exercised by Minority Stakeholders.
During the year ended March 31, 2014 the shareholding in HDB Financial Services Limited decreased from 97.4% to 97.3%
on account of 293,000 stock options exercised by Minority Stakeholders.
The audited financial statements of the subsidiary companies, entity controlled by the Bank, associates and the un-audited
financial statements of an associate have been drawn up to the same reporting date as that of the Bank, i.e. March 31,
2014.
D PRINCIPAL ACCOUNTING POLICIES
1 Investments
HDFC Bank Limited
Classification :
In accordance with the RBI guidelines on investment classification and valuation, Investments are classified on the date of
purchase into “Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM’) categories (hereinafter
called “categories”). Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under
each of these categories, investments are further classified under six groups (hereinafter called “groups”) - Government
Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint ventures and
Other Investments.
Recording purchase and sale transactions in securities is done following ‘Settlement Date’ accounting, except in the case
of equity shares where ‘Trade Date’ accounting is followed.
Basis of classification :
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.
Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of
subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines.
Investments which are not classified in the above categories, are classified under AFS category.
Acquisition cost :
In determining acquisition cost of an investment :
™ 7gd`ZgV\Z!Xdbb^hh^dc!ZiX#eV^YVii]Zi^bZd[VXfj^h^i^dc!VgZgZXd\c^hZY^ci]ZHiViZbZcid[EgdÃiVcYAdhh#
™ 7gd`ZceZg^dY^ciZgZhidcYZWi^chigjbZcih^hgZXd\c^hZY^ci]ZHiViZbZcid[EgdÃiVcYAdhh#
™ 8dhid[^ckZhibZcih^hWVhZYdci]ZlZ^\]iZYVkZgV\ZXdhibZi]dY#
Disposal of investments :
Profit / Loss on sale of investments under the aforesaid three categories is recognised in the Statement of Profit and Loss.
The profit from sale of investment under HTM category, net of taxes and transfer to statutory reserve is appropriated from
Statement of Profit and Loss to “Capital Reserve” in accordance with the RBI Guidelines.
Short sale :
The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines.
The short position is reflected as the amount received on sale and is classified under ‘Other Liabilities’. The short position
is marked to market, and loss, if any, is charged to the Statement of Profit and Loss while gain, if any, is ignored. Profit /
Loss on settlement of the short position is recognised in the Statement of Profit and Loss.
Valuation :
Investments classified under AFS and HFT categories, are marked to market as per the RBI guidelines.
Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or
prices declared by Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives
Association (‘FIMMDA’), periodically.

HDFC Bank Limited Annual Report 2013-14 140

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’)
included in the AFS and HFT categories is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA.
The valuation of other unquoted fixed income securities (viz. State Government securities, Other approved securities, Bonds
and Debentures) and preference shares, wherever linked to the YTM rates, is done with a mark-up (reflecting associated
credit and liquidity risk) over the YTM rates for government securities published by FIMMDA.
Special Bonds such as Oil Bonds, Fertilizer Bonds etc. which are directly issued by Government of India (‘GOI’) that do
not qualify for SLR are also valued by applying the mark up above the corresponding yield on GOI securities.
Unquoted equity shares are valued at the break-up value, if the latest Balance Sheet is available or at ` 1 as per the RBI
guidelines.
Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.
Treasury Bills, Commercial Papers and Certificate of Deposits being discounted instruments, are valued at carrying cost.
Security receipts are valued as per the Net Asset Value provided by the issuing Asset Reconstruction Company from time
to time.
Net depreciation in the value, if any, compared to the acquisition cost, in any of the six groups, is charged to the
Statement of Profit and Loss. The net appreciation, if any, in any of the six groups is not recognised except to the extent
of depreciation already provided. The valuation of investments includes securities under repo transactions. The book value
of individual securities is not changed after the valuation of investments.
Investments classified under HTM category are carried at their acquisition cost and not marked to market. Any premium
on acquisition is amortised over the remaining maturity period of the security on a constant yield to maturity basis. Such
amortisation of premium is adjusted against interest income under the head “Income from investments” as per the RBI
guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures is provided for.
Non-performing investments are identified and depreciation / provision is made thereon based on the RBI guidelines. The
depreciation / provision is not set off against the appreciation in respect of other performing securities. Interest on non-
performing investments is not recognised in the Statement of Profit and Loss until received.
Repo and reverse repo transactions :
In accordance with the RBI guidelines Repo and Reverse Repo transactions in government securities and corporate debt
securities (excluding transactions conducted under Liquidity Adjustment Facility (‘LAF’) and Marginal Standby Facility
(‘MSF’) with RBI) are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is
accounted for as interest expense and revenue on reverse repo transactions is accounted for as interest income.
In respect of repo transactions under LAF and MSF with RBI, amount borrowed from RBI is credited to investment account
and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense. In respect of reverse repo
transactions under LAF, amount lent to RBI is debited to investment account and reversed on maturity of the transaction.
Revenues thereon are accounted for as interest income.
HDFC Securities Limited
Investments that are readily realisable and are intended to be held for not more than one year from the date, on which such
investments are made, are classified as current investments. All other investments are classified as long term investments.
Current investments are carried at cost or fair value, whichever is lower. Long-term investments are carried at cost. However,
provision for diminution is made to recognise a decline, other than temporary, in the value of the investments, such reduction
being determined and made for each investment individually.
HDB Financial Services Limited
Investments expected to mature after twelve months are taken as non current / long term investment and stated at cost.
Provision is recognised only in case of diminution, which is other than temporary in nature. Investments maturing within
three months from the date of acquisition are classified as cash equivalents if they are readily convertible into cash. All other
investment are recognised as current investments / short term and are valued at lower of cost and net realizable value.
Interest on borrowings is recognized in Statement of Profit and Loss on an accrual basis. Costs associated with borrowings
are grouped under financial charges along with the interest costs.

HDFC Bank Limited Annual Report 2013-14 141

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
HDB Employees Welfare Trust

Long-term investments are stated at cost of acquisition. Provision for diminution is made if such diminution is considered
as being other than temporary in nature.

2 Advances

HDFC Bank Limited

Classification :

Advances are classified as performing and non-performing based on the RBI guidelines and are stated net of bills
rediscounted, specific provisions, interest in suspense for non-performing advances, claims received from Export Credit
Guarantee Corporation, provisions for funded interest term loan classified as non-performing advances and provisions in
lieu of diminution in the fair value of restructured assets. Interest on non-performing advances is transferred to an interest
suspense account and not recognised in the Statement of Profit and Loss until received.

Provisioning :

Specific loan loss provisions in respect of non-performing advances are made based on management’s assessment of the
degree of impairment of wholesale and retail advances, subject to the minimum provisioning level prescribed by the RBI.

The specific provision levels for retail non-performing assets are also based on the nature of product and delinquency
levels. Specific loan loss provisions in respect of non-performing advances are charged to the Statement of Profit and Loss
and included under Provisions and Contingencies.

Recoveries from bad debts written-off are recognised in the Statement of Profit and Loss and included under Other Income.

In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire
amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts.

The Bank maintains general provision for standard assets including credit exposures computed as per the current marked
to market values of interest rate and foreign exchange derivative contracts and gold at levels stipulated by RBI from time
to time. In the case of overseas branches, general provision on standard advances is maintained at the higher of the levels
stipulated by the respective overseas regulator or RBI. Provision for standard assets is included under Other Liabilities.

Provisions made in excess of these regulatory requirements or provisions which are not made with respect to specific
non-performing assets are categorised as floating provisions. Creation of floating provisions is considered by the Bank up
to a level approved by the Board of Directors. In accordance with the RBI guidelines and as per policy approved by the
Board, floating provisions are not reversed by credit to Statement of Profit and Loss. Floating provisions are used only
for contingencies under extraordinary circumstances wherein these are used for making specific provisions for impaired
accounts. Floating provisions have been included under Other Liabilities.

Further to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposures (other than for home country exposure). Countries are categorised into risk categories as per Export
Credit Guarantee Corporation of India Limited (‘ECGC’) guidelines and provisioning is done in respect of that country where
the net funded exposure is one percent or more of the Bank’s total assets.

In addition to the above, the Bank on a prudential basis makes provisions on advances or exposures which are not NPAs,
but has reasons to believe on the basis of the extant environment or specific information, the possible slippage of a specific
advance or a group of advances or exposures or potential exposures. These are classified as contingent provisions and
included under Other Liabilities.

The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s
financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would
normally involve modification of terms of the advance / securities, which would generally include, among others, alteration of
repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive
reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the
restructuring package. Necessary provision for diminution in the fair value of a restructured account is made. Restructuring
of an account is done at a borrower level.

HDFC Bank Limited Annual Report 2013-14 142

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
HDB Financial Services Limited
Classification :
Advances are classified as standard, substandard and doubtful assets as per the Company policy approved by the
Board which is more conservative than the relevant RBI guidelines. Interest on non-performing advances is transferred
to an interest suspense account and not recognised in the Statement of Profit and Loss until received. Loan assets are
recognised on disbursement of loan and in case of new asset financing on the transfer of ownership.
Provisioning :
The Company assesses all receivables for their recoverability and accordingly recognises provision for non performing and
doubtful assets as per approved Company policies and guidelines. The Company ensures provisions made are not lower
than as stipulated by RBI guidelines.
The Company provides 0.25% on standard assets as stipulated by Circular No. [Link].207/03.02.002/2010-11
dated January 17, 2011 issued by RBI under the head "Contingent Provision against Standard Assets". The Company has
also made additional provision on standard assets under the head "General provisions". The rate of general provision is
based on the management estimate of future expected losses in loan portfolio. The rate of general provision is calculated
using "probability of default" (PD) and "Loss given default" (LGD)
Loan origination costs :
Brokerage, commission, incentive to employee, etc. paid at the time of acquisition of loans are charged to revenue.
3 Securitisation and transfer of assets
HDFC Bank Limited
The Bank securitises out its receivables subject to the minimum holding period (‘MHP’) criteria and the minimum retention
requirements (‘MRR’) of RBI, to Special Purpose Vehicles (‘SPVs’) in securitisation transactions. Such securitised-out
receivables are de-recognised in the Balance Sheet when they are sold (true sale criteria being fully met with) and
consideration is received by the Bank. Sales / transfers that do not meet these criteria for surrender of control are accounted
for as secured borrowings.
In respect of receivable pools securitised-out, the Bank provides liquidity and credit enhancements, as specified by the
rating agencies, in the form of cash collaterals / guarantees and / or by subordination of cash flows, not exceeding 20% of
the total securitised instruments, in line with RBI guidelines. The Bank also acts as a servicing agent for receivable pools
securitised-out.
The Bank also enters into transactions for transfer of standard assets through the direct assignment of cash flows, which
are similar to asset-backed securitisation transactions through the SPV route, except that such portfolios of receivables
are assigned directly to the purchaser and are not represented by Pass through Certificates (‘PTCs'), subject to the RBI
prescribed MHP criteria and the MRR. The RBI issued addendum guidelines on securitisation of standard assets vide
its circular dated May 7, 2012. Accordingly, the Bank does not provide liquidity or credit enhancements on the direct
assignment transactions undertaken subsequent to these guidelines.
Pursuant to these guidelines, the Bank amortises any profit received in cash for every individual securitisation or direct
assignment transaction at the end of every financial year. This amortisation is calculated as the maximum of either of the
three parameters stated below :
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provisions, if any, and direct write-offs made on the MRR and any other exposures to the securitisation transaction
(other than credit enhancing interest only strip); or
™ i]ZVbdjcid[jcVbdgi^hZYXVh]egdÃiVii]ZWZ\^cc^c\d[i]ZnZVgbjai^ea^ZYWni]ZVbdjcid[eg^cX^eVaVbdgi^hZY
during the year as a proportion to the amount of unamortised principal at the beginning of the year; or
™ i]ZVbdjcid[jcVbdgi^hZYXVh]egdÃiVii]ZWZ\^cc^c\d[i]ZnZVgY^k^YZYWngZh^YjVabVijg^ind[i]ZhZXjg^i^hVi^dc
or the direct assignment transaction.
In relation to securitisation transactions undertaken prior to the aforementioned RBI guidelines, including those undertaken
through the direct assignment route, the Bank continues to amortise the profit / premium that arose on account of sale of
receivables over the life of the securities sold, in accordance with the RBI guidelines on securitisation of standard assets
issued vide its circular dated February 1, 2006.

HDFC Bank Limited Annual Report 2013-14 143

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Any loss arising on account of sale of receivables is recognised in the Statement of Profit and Loss for the period in which
the sale occurs in accordance with the said RBI guidelines.
The Bank transfers advances through inter-bank participation with and without risk. In accordance with the RBI guidelines, in
the case of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances
and where the Bank is participating, the aggregate amount of the participation is classified under advances. In the case
of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and
where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances.
In accordance with RBI guidelines on sale of non-performing advances, if the sale is at a price below the net book value
(i.e., book value less provisions held), the shortfall is charged to the Statement of Profit and Loss. If the sale is for a value
higher than the net book value, the excess provision is not reversed but is utilised to meet the shortfall / loss on account of
sale of other non-performing advances. The RBI issued new guidelines on sale of non-performing advances on February
26, 2014. In accordance with these guidelines, if the sale of non-performing advances is at a price below the net book
value, the shortfall is charged to the Statement of Profit and Loss spread over a period of two years. If the sale is for a
value higher than the net book value, the excess provision is credited to the Statement of Profit and Loss in the year the
amounts are received.
The Bank invests in PTCs issued by other SPVs. These are accounted for at the deal value and are classified as
investments. The Bank also buys loans through the direct assignment route which are classified as advances. These are
carried at acquisition cost unless it is more than the face value, in which case the premium is amortised based on effective
interest rate (EIR) method.
HDB Financial Services Limited
Gains arising on assignment of receivables will be recognised at the end of the tenure of assignment contract as per the
RBI guidelines, while loss, if any is recognised upfront.
4 Fixed assets and depreciation
HDFC Bank Limited
Fixed assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of
purchase and all expenditure like site preparation, installation costs and professional fees incurred on the asset before it is
ready to use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit
/ functioning capability from / of such assets.
Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The rates of depreciation
are not lower than the rates prescribed in Schedule XIV of the Companies Act, 1956. Depreciation rates for certain key
fixed assets are given below :

Asset Depreciation
rate per annum
Owned Premises 1.63%
Very Small Aperture Terminals (‘VSATs’) 10.00%
Automated Teller Machines (‘ATMs’) 10.00%
Office equipment 16.21%
Computers 33.33%
Motor cars 25.00%
Software and system development expenditure 20.00%
Assets at residences of executives of the Bank 25.00%
™ >begdkZbZcihidaZVhZ]daYegZb^hZhVgZX]Vg\ZYd[[dkZgi]ZgZbV^c^c\eg^bVgneZg^dYd[aZVhZ#
™ >iZbhZmXajY^c\hiV[[VhhZihXdhi^c\aZhhi]Vc` 5,000 and point of sale terminals are fully depreciated in the year
of purchase.
™ 6aadi]ZgVhhZihVgZYZegZX^ViZYVheZgi]ZgViZhheZX^ÃZY^cHX]ZYjaZM>Kd[i]Z8dbeVc^Zh6Xi!&.*+#

™ ;dgVhhZihejgX]VhZYVcYhdaYYjg^c\i]ZnZVg!YZegZX^Vi^dc^hegdk^YZYdcegdgViVWVh^hWni]Z7Vc`#

HDFC Bank Limited Annual Report 2013-14 144

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
™ I]Z7Vck undertakes assessment of the useful life of an asset at periodic intervals taking into account changes in
environment, changes in technology, the utility and efficacy of the asset in use etc. Whenever there is a revision
of the estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining
useful life of the said asset.

HDFC Securities Limited

Tangible assets are stated at acquisition cost, net of accumulated depreciation and accumulated impairment losses, if
any. Cost comprises purchase price and expenses directly attributable to bringing the asset to its working condition for the
intended use. Subsequent expenditure related to an item of fixed asset are added to its book value only if it increases the
future benefits from the existing asset beyond its previously assessed standard of performance.

Items of fixed assets that have been retired from active use and are held for disposal are stated at the lower of their net
book value and net realisable value and are shown separately in the financial statements.

Gains or losses arising from disposal or retirement of tangible fixed assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset and are recognised net, within “Other Income” or “Other Expenses”,
as the case maybe, in the Statement of Profit and Loss in the year of disposal or retirement.

Depreciation is provided on a pro-rata basis using the straight-line method over the estimated useful lives of the assets or
at the rates prescribed under Schedule XIV of the Companies Act, 1956, whichever is higher, as follows :

Asset Estimated useful life

Computers 3 years
Computers peripherals 4 years
Office equipment 6 years
Furniture and fixtures 15 years
Leasehold Improvements over the primary period of the lease
Electricals 21 years
Vehicles 4 years
Office premises 61 years

™ 6aaiVc\^WaZVcY^ciVc\^WaZVhhZihXdhi^c\aZhhi]Vc` 5,000 individually are fully depreciated in the year of purchase.

™ JhZ[jaa^kZhVgZgZk^ZlZYViZVX]ÃcVcX^VanZVgZcYVcYVY_jhiZY^[Veegdeg^ViZ#

™ >ciVc\^WaZVhhZihVgZhiViZYViVXfj^h^i^dcXdhi!cZid[VXXjbjaViZYVbdgi^hVi^dcVcYVXXjbjaViZY^beV^gbZciadhhZh!
if any.

™ 8dhi d[ Vc ^ciVc\^WaZ VhhZi ^cXajYZh ejgX]VhZ eg^XZ! cdc"gZ[jcYVWaZ iVmZh VcY Yji^Zh VcY Vcn di]Zg Y^gZXian
attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates.
Subsequent expenditure on an intangible asset is charged to the Statement of Profit and Loss as an expense unless
it is probable that such expenditure will enable the intangible asset increase the future benefits from the existing asset
beyond its previously assessed standard of performance and such expenditure can be measured and attributed to
the intangible asset reliably, in which case, such expenditure is capitalised.

™ >ciVc\^WaZ VhhZih VgZ Vbdgi^hZY dc V higV^\]i"a^cZ WVh^h dkZg i]Z^g Zhi^bViZY jhZ[ja a^kZh# 6 gZWjiiVWaZ egZhjbei^dc
that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use is
considered by the management. The amortisation period and the amortisation method are reviewed at least at each
reporting date. If the expected useful life of the asset is significantly different from previous estimates, the amortisation
period is changed accordingly.

™ <V^ch dg adhhZh Vg^h^c\ [gdb i]Z gZi^gZbZci dg Y^hedhVa d[ Vc ^ciVc\^WaZ VhhZi VgZ YZiZgb^cZY Vh i]Z Y^[[ZgZcXZ
between the net disposal proceeds and the carrying amount of the asset and recognised as income or expense in
the Statement of Profit and Loss in the year of disposal.

HDFC Bank Limited Annual Report 2013-14 145

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
The estimated useful lives of intangible assets used for amortisation are :

Asset Estimated useful life

Computer software licenses 5 years
Electronic trading platform 5 years
Bombay stock exchange card 10 years

HDB Financial Services Limited

Fixed assets are stated at cost less accumulated depreciation and impairment, if any. The cost of fixed assets comprise
purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Subsequent
expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability
from / of such assets.
Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The rates of depreciation
for certain key fixed assets used in arriving at the charge for the year are as under :

Asset Depreciation
rate per annum
Office equipment 16.21%
Computer 33.33%
Motor cars 20.00%
Immovable property 1.63%
Furniture & fixtures 9.50%
Software and system development 33.33%
™ >begdkZbZcihidaZVhZ]daYegZb^hZhVgZX]Vg\ZYd[[dkZgi]Zeg^bVgneZg^dYd[aZVhZdg^ihjhZ[jaa^[Z!l]^X]ZkZg^h
lower.
™ >iZbhXdhi^c\aZhhi]Vc` 5,000/- are fully depreciated in the year of purchase.
™ 6aadi]ZgVhhZihVgZYZegZX^ViZYVheZgi]ZgViZhheZX^ÃZY^cHX]ZYjaZM>Kd[i]Z8dbeVc^Zh6Xi!&.*+#
™ ;dgVhhZihejgX]VhZYVcYhdaYYjg^c\i]ZnZVg!YZegZX^Vi^dc^hWZ^c\egdk^YZYdcegdgViVWVh^hWni]Z8dbeVcn#
5 Impairment of assets
Group
The Group assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment
loss, if any, is provided in the Statement of Profit and Loss to the extent the carrying amount of assets exceeds their
estimated recoverable amount.
6 Transactions involving foreign exchange
HDFC Bank Limited
Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing
on the date of the transaction. Income and expenditure items of integral foreign operations (representative offices) are
translated at the weekly average closing rates and of non-integral foreign operations (foreign branches) at the monthly
average closing rates.
Foreign currency monetary items of domestic and integral foreign operations are translated at the closing exchange rates
notified by Foreign Exchange Dealers’ Association of India (‘FEDAI’) as at the Balance Sheet date and the resulting net
valuation profit or loss arising due to a net open position in any foreign currency is recognised in the Statement of Profit
and Loss.
Both monetary and non-monetary foreign currency assets and liabilities of non integral foreign operations are translated at
closing exchange rates notified by FEDAI at the Balance Sheet date and the resulting profit / loss arising from exchange
differences are accumulated in the Foreign Currency Translation Account until remittance or the disposal of the net
investment in the non-integral foreign operations in accordance with AS-11.

HDFC Bank Limited Annual Report 2013-14 146

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Foreign exchange spot and forward contracts outstanding as at the Balance Sheet date and held for trading, are revalued
at the closing spot and forward rates respectively as notified by FEDAI and at interpolated rates for contracts of interim
maturities. The contracts for longer maturities i.e. greater than one year are revalued using MIFOR (Mumbai Interbank
Forward Offer Rate) and contracts with USD-INR currency pair are valued using USD LIBOR (London Interbank Offered
Rate) rates. For other currency pairs, the forward points (as published by FEDAI) are extrapolated. The resulting profit or
loss on valuation is recognised in the Statement of Profit and Loss.
Foreign exchange forward contracts not intended for trading, that are entered into to establish the amount of reporting
currency required or available at the settlement date of transaction and are outstanding at the Balance Sheet date, are
effectively valued at the closing spot rate. The premia or discount arising at the inception of such a forward exchange
contract is amortised as expense or income over the life of the contract.
Currency futures contracts are marked to market daily using settlement price on a trading day, which is the closing price
of the respective futures contracts on that day. While the daily settlement price is computed on the basis of the last half
an hour weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last
trading day of the futures contract or as may be specified by the relevant authority from time to time. All open positions are
marked to market based on the settlement price and the resultant marked to market profit / loss is daily settled with the
exchange.
Contingent Liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit,
acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.
7 Derivative contracts
HDFC Bank Limited
The Bank recognises all derivative contracts (other than those designated as hedges) at fair value, on the date on which
the derivative contracts are entered into and are re-measured at fair value as at the Balance Sheet or reporting dates.
Derivatives are classified as assets when the fair value is positive (positive marked to market value) or as liabilities when
the fair value is negative (negative marked to market value). Changes in the fair value of derivatives other than those
designated as hedges are recognised in the Statement of the Profit and Loss.
Derivative contracts designated as hedges are not marked to market unless their underlying transaction is marked to market.
In respect of derivative contracts that are marked to market, changes in the market value are recognised in Statement
of Profit and Loss in the relevant period. The Bank identifies the hedged item (asset or liability) at the inception of the
transaction itself. Hedge effectiveness is ascertained at the time of the inception of the hedge and periodically thereafter.
Gains or losses arising from hedge ineffectiveness, if any, are recognised in the Statement of Profit and Loss.
Contingent Liabilities on account of derivative contracts denominated in foreign currencies are reported at closing rates of
exchange notified by FEDAI at the Balance Sheet date.
8 Revenue recognition
HDFC Bank Limited
™ >ciZgZhi ^cXdbZ ^h gZXd\c^hZY ^c i]Z HiViZbZci d[ EgdÃi VcY Adhh dc Vc VXXgjVa WVh^h! ZmXZei ^c i]Z XVhZ d[ cdc"
performing assets where it is recognised upon realisation as per RBI norms.
™ >ciZgZhi^cXdbZdc^ckZhibZcih^cEI8hVcYadVchWdj\]idjii]gdj\]i]ZY^gZXiVhh^\cbZcigdjiZ^hgZXd\c^hZYVi
their effective interest rate.
™ >cXdbZdccdc"XdjedcWZVg^c\Y^hXdjciZY^chigjbZcih^hgZXd\c^hZYdkZgi]ZiZcdgd[i]Z^chigjbZcidcVXdchiVci
effective yield basis.
™ AdVcEgdXZhh^c\;ZZ^hgZXd\c^hZYVh^cXdbZl]ZcYjZ#HncY^XVi^dc$VggVc\Zg[ZZ^hgZXd\c^hZYVh^cXdbZl]Zc
a significant act / milestone is completed.
™ <V^c$adhhdchZaaYdlcd[adVch^hgZXd\c^hZY^ca^cZl^i]i]ZZmiVciG7>\j^YZa^cZh#
™ 9^k^YZcYdcZfj^inh]VgZh!egZ[ZgZcXZh]VgZhVcYdcbjijVa[jcYjc^ih^hgZXd\c^hZYVh^cXdbZl]Zci]Zg^\]iid
receive the dividend is established.
™ <jVgVciZZXdbb^hh^dc!Xdbb^hh^dcdcAZiiZgd[8gZY^i!VccjVaadX`ZggZci[ZZhVcYVccjVa[ZZh[dgXgZY^iXVgYhVgZ
recognised on a straight line basis over the period of contract. Other fees and commission income is recognised when
due, except in cases where the Bank is uncertain of ultimate collection.

HDFC Bank Limited Annual Report 2013-14 147

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
HDFC Securities Limited
™ >cXdbZ[gdbhZgk^XZhgZcYZgZYVhVWgd`ZgV\Z^hgZXd\c^hZYjedcgZcYZg^c\d[i]ZhZgk^XZh#
™ 8dbb^hh^dchVgZgZXdgYZYdcVigVYZYViZWVh^hVhi]ZhZXjg^i^ZhigVchVXi^dcdXXjgh#
™ ;ZZh[dghjWhXg^ei^dcWVhZYhZgk^XZhVgZgZXZ^kZYeZg^dY^XVaanWjiVgZgZXd\c^hZYVhZVgcZYdcVegd"gViVWVh^hdkZg
the term of the contract.
™ 8dbb^hh^dch[gdbY^hig^Wji^dcd[ÃcVcX^VaegdYjXihVgZgZXd\c^hZYjedcVaadibZcid[i]ZhZXjg^i^Zhidi]ZVeea^XVci
or as the case may be, issue of the insurance policy to the applicant.
™ 8dbb^hh^dchVcY[ZZhgZXd\c^hZYVhV[dgZhV^YVgZZmXajh^kZd[hZgk^XZiVm!hZXjg^i^ZhigVchVXi^dciVm!hiVbeYji^Zh
and other levies by SEBI and stock exchanges.
™ >ciZgZhi^hZVgcZYdcYZaVnZYeVnbZcih[gdbXa^ZcihVcYVbdjcih[jcYZYidi]ZbVhlZaaVhiZgbYZedh^ihl^i]WVc`h#
™ >ciZgZhi^cXdbZ^hgZXd\c^hZYdcVi^bZegdedgi^dcWVh^hiV`^c\^cidVXXdjcii]ZVbdjcidjihiVcY^c\[gdbXjhidbZgh
or on the financial instrument and the rate applicable.
™ 9^k^YZcY^cXdbZ^hgZXd\c^hZYl]Zci]Zg^\]iidgZXZ^kZi]ZY^k^YZcY^hZhiVWa^h]ZY#
HDB Financial Services Limited
™ >ciZgZhi ^cXdbZ ^h gZXd\c^hZY ^c i]Z HiViZbZci d[ EgdÃi VcY Adhh dc Vc VXXgjVa WVh^h# >c XVhZ d[ Cdc EZg[dgb^c\
Assets (NPA) interest income is recognised upon realisation as per the RBI Guidelines. Interest accrued and not
realised before the classification of the asset as an NPA is reversed and credited to the interest suspense account.
™ >cXdbZ[gdb7EDhZgk^XZhVcYdi]ZgÃcVcX^VaX]Vg\ZhVgZgZXd\c^hZYdcVcVXXgjVaWVh^h!ZmXZei^cXVhZd[X]ZfjZ
bouncing charges, late payment charges, foreclosure charges and application money, which are accounted as and
when received.
™ Je[gdci$egdXZhh^c\[ZZhVgZgZXdkZgZYVcYgZXd\c^hZYVii]Zi^bZd[Y^hWjghZbZcid[adVc#
™ >cXdbZ[gdbY^k^YZcY^hgZXd\c^hZY^ci]ZHiViZbZcid[EgdÃiVcYAdhhl]Zci]Zg^\]iidgZXZ^kZ^hZhiVWa^h]ZY#
HDB Employees Welfare Trust
™ >cXdbZ^hgZXd\c^hZYdcVXXgjVaWVh^h#
9 Employee benefits
HDFC Bank Limited
Employee stock option scheme (‘ESOS’)
The Employee Stock Option Scheme (‘the Scheme’) provides for the grant of options to acquire equity shares of the Bank
to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees
within a specified period.
The Bank follows the intrinsic value method to account for its stock-based employee’s compensation plans. Compensation
cost is measured by the excess, if any, of the market price of the underlying stock over the exercise price as determined
under the option plan. The market price is the closing price on the stock exchange where there is highest trading volume
on the working day immediately preceding the date of grant. Compensation cost, if any is amortised over the vesting period.
Gratuity
The Bank provides for gratuity to all employees. The benefit is in the form of lump sum payment to vested employees
on resignation, retirement, death while in employment or on termination of employment of an amount equivalent to 15
days basic salary payable for each completed year of service. Vesting occurs upon completion of five years of service.
The Bank makes contributions to funds administered by trustees and managed by insurance companies for amounts
notified by the said insurance companies. In respect of erstwhile Lord Krishna Bank (‘eLKB’) employees, the Bank makes
contribution to a fund set up by eLKB and administered by the board of trustees. The defined gratuity benefit plans are
valued by an independent actuary as at the Balance Sheet date using the projected unit credit method as per the requirement of
AS-15 (Revised 2005), Employee Benefits to determine the present value of the defined benefit obligation and the related
service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about

HDFC Bank Limited Annual Report 2013-14 148

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Statement
of Profit and Loss.

Superannuation

Employees of the Bank, above a prescribed grade, are entitled to receive retirement benefits under the Bank’s
Superannuation Fund. The Bank contributes a sum equivalent to 13% of the employee’s eligible annual basic salary (15%
for the Managing Director, Executive Directors and for certain eligible erstwhile Centurion Bank of Punjab (‘eCBoP’) staff)
to insurance companies, which administer the fund. The Bank has no liability for future superannuation fund benefits other
than its contribution, and recognises such contributions as an expense in the year incurred, as such contribution is in the
nature of defined contribution.

Provident fund

In accordance with law, all employees of the Bank are entitled to receive benefits under the provident fund.

The Bank contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary).
Of this, the Bank contributes an amount equal to 8.33% of employee’s basic salary up to a maximum salary level of
` 6,500/- per month, to the Pension Scheme administered by the Regional Provident Fund Commissioner (‘RPFC’).
The balance amount is contributed to a fund set up by the Bank and administered by a board of trustees. In respect of
eCBoP employees, employer’s and employee’s share of contribution to Provident Fund till March 2009, was administered
by RPFC and from April 2009 onwards, the same is transferred to fund set up by the Bank and administered by the board
of trustees. In respect of eLKB employees, the Bank contributes to a fund set up by eLKB and administered by a board
of trustees. The Bank recognises such contributions as an expense in the year in which it is incurred. Interest payable to
the members of the trust shall not be lower than the statutory rate of interest declared by the Central government under
the Employees Provident Funds and Miscellaneous Provisions Act 1952 and shortfall, if any, shall be made good by the
Bank. The guidance note on implementing AS-15 (revised 2005), Employee Benefits, states that benefits involving employer
established provident funds, which require interest shortfalls to be provided, are to be considered as defined benefit plans.
Actuarial valuation of this Provident Fund interest shortfall is done as per the guidance note issued in this respect by the
Actuarial Society of India and provision towards this liability is made.

The overseas branches of the bank makes contributions to the respective relevant government scheme calculated as a
percentage of the employees’ salaries. The Bank's obligations are limited to these contributions, which are expensed when
due, as such contribution is in the nature of defined contribution.

Leave encashment / Compensated absences

The Bank does not have a policy of encashing unavailed leave for its employees, except for certain eLKB employees under
Indian Banks Association (‘IBA’) structure. The Bank provides for leave encashment / compensated absences based on
an independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early
retirement, salary increases, interest rates and leave utilisation.

Pension

In respect of pension payable to certain eLKB employees under IBA structure, which is a defined benefit scheme, the
Bank contributes 10% of basic salary to a pension fund set up by the Bank and administered by the board of trustees and
the balance amount is provided based on actuarial valuation as at the Balance Sheet date conducted by an independent
actuary.

In respect of certain eLKB employees who had moved to a Cost to Company (‘CTC’) driven compensation structure and
have completed less than 15 years of service, the contribution which was made until then, is maintained as a fund and will
be converted into annuity on separation after a lock-in-period of two years. For this category of employees, liability stands
frozen and no additional provision is required except for interest as applicable to Provident Fund, which is provided for.

In respect of certain eLKB employees who moved to a CTC structure and had completed service of more than 15 years,
pension would be paid on separation based on salary applicable as on the date of movement to CTC structure. Provision
thereto is made based on actuarial valuation as at the Balance Sheet date conducted by an independent actuary.

HDFC Bank Limited Annual Report 2013-14 149

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
HDFC Securities Limited
Short term
Short term employee benefits include salaries and performance incentives. A liability is recognised for the amount expected
to be paid under short-term cash bonus or profit sharing plans if the Company has a present legal or informal obligation to
pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably. These
costs are recognised as an expense in the Statement of Profit and Loss at the undiscounted amount expected to be paid
over the period of services rendered by the employees to the Company.
Long term
The Company offers its employees long term benefits by way of defined-contribution and defined-benefit plans, of which
some have assets in special funds or securities. The plans are financed by the Company and in the case of some defined
contribution plans by the Company along with its employees.
Defined-contribution plans
These are plans in which the Company pays pre-defined amounts to separate funds and does not have any legal or informal
obligation to pay additional sums. These comprise of contributions to the employees’ provident fund, family pension fund
and superannuation fund. The Company’s payments to the defined-contribution plans are reported as expenses during the
period in which the employees perform the services that the payment covers.
Defined-benefit plans
Expenses for defined-benefit gratuity plan are calculated as at the balance sheet date by an independent actuary in a
manner that distributes expenses over the employee’s working life. These commitments are valued at the present value of
the expected future payments, with consideration for calculated future salary increases, using a discount rate corresponding
to the interest rate estimated by the actuary having regard to the interest rate on government bonds with a remaining
term that is almost equivalent to the average balance working period of employees. The fair values of the plan assets
are deducted in determining the net liability. When the fair value of plan assets exceeds the commitments computed as
aforesaid, the recognised asset is limited to the net total of any cumulative past service costs and the present value of any
economic benefits available in the form of reductions in future contributions to the plan.
Actuarial losses or gains are recognised in the Statement of Profit and Loss in the year in which they arise.
Other employee benefits
Compensated absences which accrue to employees and which can be carried to future periods but are expected to be
availed in twelve months immediately following the year in which the employee has rendered service are reported as
expenses during the year in which the employees perform the services that the benefit covers and the liabilities are reported
at the undiscounted amount of the benefits.
Where there are restrictions on availment of such accrued benefit or where the availment is otherwise not expected to
wholly occur in the next twelve months, the liability on account of the benefit is actuarially determined using the projected
unit credit method.
Share-based payment transactions
Equity settled stock options granted under the Company’s Employee Stock Option Schemes are accounted for as per
the accounting treatment prescribed by the Guidance Note on Employee Share-based Payments issued by the Institute
of Chartered Accountants of India. The intrinsic value of the option being excess of fair value of the underlying share
immediately prior to date of grant over its exercise price is recognised as deferred employee compensation with a credit
to employee stock option outstanding account. The deferred employee compensation is charged to Statement of Profit
and Loss on straight line basis over the vesting period of the option. The options that lapse are reversed by a credit to
employee compensation expense, equal to the amortised portion of value of lapsed portion and credit to deferred employee
compensation expense equal to the unamortised portion.
HDB Financial Services Limited
Long term employee benefits
Gratuity
The Company provides for gratuity to all employees. The benefit is in the form of lump sum payments to vested employees

HDFC Bank Limited Annual Report 2013-14 150

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
on resignation, retirement, or death while in employment or on termination of employment of an amount equivalent to 15
days basic salary payable for each completed year of service. Vesting occurs upon completion of five years of service. The
Company makes annual contributions to fund administered by trustees and managed by insurance companies for amounts
notified by the said insurance companies. The defined benefit plan are valued by an independent external actuary as at
the balance sheet date using the projected unit credit method to determine the present value of defined benefit obligation
and the related service costs. Under this method, the determination is based on actuarial calculations, which include
assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised
in the statement of profit and loss.
Provident fund
In accordance with the applicable law, all employees of the Company are entitled to receive benefits under the Provident
Fund Act, 1952. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of
employee’s basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC)
and the Company has no liability for future provident fund benefits other than its annual contribution. Since it is a defined
contribution plan, the contributions are accounted for on an accrual basis and recognised in the Statement of Profit and
Loss.
Compensated absences
The Company does not have a policy of encashment of unavailed leaves for its employees but are permitted to carry
forward subject to a prescribed maximum days. The Company provides for compensated absences in accordance with
AS-15 (revised 2005) Employee Benefits issued by ICAI. The provision is based on an independent external actuarial
valuation at the balance sheet date.
10 Debit and credit cards reward points
HDFC Bank Limited
The Bank estimates the probable redemption of debit and credit card reward points and cost per point using an actuarial
method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends.
Provisions for the said reward points are made based on the actuarial valuation report as furnished by the said independent
actuary.
11 Bullion
HDFC Bank Limited
The Bank imports bullion including precious metal bars on a consignment basis for selling to its wholesale and retail
customers. The imports are typically on a back-to-back basis and are priced to the customer based on an estimated price
quoted by the supplier. The Bank earns a fee on such wholesale bullion transactions. The fee is classified under commission
income.
The Bank also sells bullion to its retail customers. The difference between the sale price to customers and actual price
quoted by supplier is recorded under commission income.
The Bank also deals in bullion on a borrowing and lending basis and the interest paid / received thereon is classified as
interest expense / income respectively.
12 Lease accounting
Group
Lease payments including cost escalation for assets taken on operating lease are recognised in the Statement of Profit
and Loss over the lease term on a straight-line basis in accordance with the AS-19, Leases.
13 Income tax
Group

Income tax expense comprises current tax provision (i.e. the amount of tax for the period determined in accordance with the
Income Tax Act, 1961 and the rules framed there under) and the net change in the deferred tax asset or liability during the

HDFC Bank Limited Annual Report 2013-14 151

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
year. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the
carrying values of assets and liabilities and their respective tax bases, and operating loss carried forward, if any. Deferred
tax assets and liabilities are measured using the enacted or substantively enacted tax rates as at the Balance Sheet date.

Current tax assets and liabilities and deferred tax assets and liabilities are off-set when they relate to income taxes levied
by the same taxation authority, when the Bank has a legal right to off-set and when the Bank intends to settle on a net
basis.

Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future.
In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if
there is virtual certainty of realisation of such assets. Deferred tax assets are reviewed at each Balance Sheet date and
appropriately adjusted to reflect the amount that is reasonably / virtually certain to be realised.

14 Earnings per share

Group

The Group reports basic and diluted earnings per equity share in accordance with AS-20, Earnings per Share. Basic
earnings per equity share has been computed by dividing net profit for the year attributable to equity shareholders by
the weighted average number of equity shares outstanding for the period. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue equity shares were exercised or converted to equity during
the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and the
dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

15 Segment information

Group

The segmental classification to the respective segments is in accordance with the guidelines issued by RBI.

16 Accounting for provisions, contingent liabilities and contingent assets

Group

In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Group recognises provisions when
it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions are determined based on management estimate required to settle the obligation at the Balance Sheet date,
supplemented by experience of similar transactions. These are reviewed at each Balance Sheet date and adjusted to reflect
the current management estimates.

A disclosure of contingent liability is made when there is :

™ a possible obligation arising from a past event, the existence of which will be confirmed by the occurrence or non-
occurrence of one or more uncertain future events not within the control of the Bank; or

™ a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources
will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.

Contingent Assets, if any, are not recognised in the financial statements since this may result in the recognition of income
that may never be realised.

17 Cash and cash equivalents

Group

Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and
short notice.

HDFC Bank Limited Annual Report 2013-14 152

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Schedule 18 - Notes forming part of the consolidated financial statements for the year ended March 31, 2014
Amounts in Notes forming part of the Financial Statements for the year ended March 31, 2014 are denominated in Rupee crore
to conform to extant RBI guidelines.
1 Earnings per equity share
Basic and Diluted earnings per equity share have been calculated based on the net profit after taxation of ` 8,743.49
crore (previous year : ` 6,869.64 crore) and the weighted average number of equity shares outstanding during the year of
2,390,289,717 (previous year : 2,360,960,867)
Following is the reconciliation between basic and diluted earnings per equity share : (`)

For the year ended

Particulars
March 31, 2014 March 31, 2013

Nominal value per share 2.00 2.00

Basic earnings per share 36.58 29.10
Effect of potential equity shares (per share) (0.27) (0.32)
Diluted earnings per share 36.31 28.78
Basic earnings per equity share have been computed by dividing net profit for the year attributable to the equity
shareholders by the weighted average number of equity shares outstanding for the year. Diluted earnings per equity share
have been computed by dividing the net profit for the year attributable to the equity shareholders by the weighted average
number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are
anti-dilutive. The dilutive impact is on account of stock options granted to employees by the Bank. There is no impact of
dilution on the profits in the current year and previous year.
Following is the reconciliation of weighted average number of equity shares used in the computation of basic and diluted
earnings per share :

For the year ended

Particulars
March 31, 2014 March 31, 2013

Weighted average number of equity shares used in computing basic earnings 2,390,289,717 2,360,960,867
per equity share
Effect of potential equity shares outstanding 17,849,608 26,076,830
Weighted average number of equity shares used in computing diluted 2,408,139,325 2,387,037,697
earnings per equity share

2 Reserves and surplus

Draw down from reserves
There has been no draw down from reserves during the year ended March 31, 2014 (previous year : Nil).
Statutory reserve
The Bank has made an appropriation of ` 2,161.45 crore (previous year : ` 1,702.07 crore) out of profits for the year ended
March 31, 2014 to Statutory Reserve pursuant to the requirements of section 17 of the Banking Regulation Act, 1949 and
RBI guidelines dated September 23, 2000.
Capital reserve
During the year ended March 31, 2014, the Bank appropriated ` 58.27 crore (previous year : ` 85.85 crore), being the profit
from sale of investments under HTM category, net of taxes and transfer to statutory reserve, from Profit and Loss Account
to Capital Reserve account.
General reserve
The Bank has made an appropriation of ` 855.84 crore (previous year : ` 672.63 crore) out of profits for the year ended
March 31, 2014 to General Reserve pursuant to Companies (Transfer of Profits to Reserves) Rules, 1975.

HDFC Bank Limited Annual Report 2013-14 153

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Investment reserve account
During the year ended March 31, 2014, the Bank has appropriated ` 3.22 crore (net) (previous year : ` 17.66 crore (net))
from Profit and Loss Account to Investment Reserve Account.
3 Dividend on shares allotted pursuant to exercise of stock options
The Bank may allot equity shares after the Balance Sheet date but before the book closure date pursuant to the exercise
of any employee stock options. These equity shares will be eligible for full dividend for the year ended March 31, 2014, if
approved at the ensuing Annual General Meeting.
4 Accounting for employee share based payments
HDFC Bank Limited
The shareholders of the Bank approved grant of equity share options under Plan "B" in June 2003, Plan "C" in June 2005,
Plan "D" in June 2007, Plan "E" in June 2010 and Plan “F” in June 2013. Under the terms of each of these Plans, the Bank
may issue Equity Stock Options ('ESOPs') to employees and whole time directors of the Bank, each of which is convertible
into one equity share. All the plans were framed in accordance with the SEBI (Employee Stock Option Scheme & Employee
Stock Purchase Scheme) Guidelines, 1999 as amended from time to time.
Plans B, C, D, E and F provide for the issuance of options at the recommendation of the Compensation Committee at the
closing price on the working day immediately preceding the date when options are granted. For Plan B the price is that
quoted on an Indian stock exchange with the highest trading volume during the preceding two weeks, while for Plans C,
D, E and F the price is the closing price of the share on an Indian stock exchange with the highest trading volume as of
the working day preceding the date of grant.
Vesting conditions applicable to the options are at the discretion of the Compensation Committee. These options are
exercisable on vesting, for a period as set forth by the Compensation Committee at the time of grant. The period in which
options may be exercised cannot exceed five years. Modifications, if any, made to the terms and conditions of ESOPs as
approved by the Compensation Committee are disclosed separately.
The erstwhile Centurion Bank of Punjab (‘eCBoP’) had granted stock options to its employees prior to its amalgamation
with the Bank. The options were granted under the General ESOP Scheme framed in accordance with the SEBI (Employee
Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time. The
outstanding options granted by eCBoP and the grant price thereof were converted into equivalent HDFC Bank options
and prices in the swap ratio of 1:29 i.e. 1 stock option of HDFC Bank for every 29 stock options granted and outstanding
of eCBoP as on May 23, 2008, the effective date of the amalgamation, in accordance with Clause 9.9 of the scheme of
amalgamation of eCBoP with the Bank. The vesting dates for the said stock options granted in various tranches were
revised as per Clause 9.9 of the Scheme. The aforesaid stock options are exercisable within a period of 5 years from the
date of vesting. Options granted under the General ESOP scheme were granted at the market price. The market price was
the latest available closing price, prior to the date of meeting of the Board of Directors / Compensation Committee in which
options were granted or shares were issued, on the stock exchange on which the shares of the Bank were listed. If the
shares were listed on more than one stock exchange, then the stock exchange where there was highest trading volume
on the said date was considered.
Method used for accounting for shared based payment plan
The Bank has elected to use intrinsic value method to account for the co mpensation cost of stock options to employees
and whole time directors of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying
share exceeds the exercise price of the option.
Activity in the options outstanding under the Employee Stock Option Plans
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Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 65,443,045 417.32
Granted during the year 47,060,000 679.99
Exercised during the year 18,903,115 382.63
Forfeited / lapsed during the year 1,123,330 583.43
Options outstanding, end of year 92,476,600 556.06
Options exercisable 46,137,600 431.59

HDFC Bank Limited Annual Report 2013-14 154

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
 ™ 6Xi^k^in^ci]Zdei^dchdjihiVcY^c\jcYZgi]ZkVg^djhZbeadnZZhidX`dei^dceaVchVhViBVgX](&!'%&(/

Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 99,872,740 389.52
Granted during the year - -
Exercised during the year* 33,459,050 333.87
Forfeited / lapsed during the year 970,645 433.59
Options outstanding, end of year 65,443,045 417.32
Options exercisable 56,752,845 409.46

*includes 728,290 options exercised, pending allotment of equity shares as of March 31, 2013.

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Number of Weighted average Weighted average

Plan Range of exercise price (`) shares arising life of options exercise price
out of options (in years) (`)
Plan B - - - -
Plan C 680.00 6,952,000 5.21 680.00
Plan D 225.29 to 680.00 13,643,900 2.94 490.62
Plan E 440.16 to 680.00 71,494,300 3.82 558.33
General ESOP 118.61 to 251.72 386,400 0.40 217.13

No options have been granted under Plan F during the year ended March 31, 2014

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Number of Weighted average Weighted average

Plan Range of exercise price (`) shares arising life of options exercise price
out of options (in years) (`)
Plan B 198.97 to 219.74 614,500 0.53 203.50
Plan C 198.97 to 219.74 705,400 0.44 208.12
Plan D 219.74 to 340.96 12,058,100 1.39 285.60
Plan E 440.16 to 508.23 51,175,300 3.65 457.40
General ESOP 107.30 to 251.72 889,745 1.09 210.75

Fair Value methodology

The fair value of options used to compute proforma net income and earnings per equity share have been estimated on
the dates of each grant using the binomial option-pricing model. The Bank estimates the volatility based on the historical
share prices. 47,060,000 options were granted during the year ended March 31, 2014 (previous year : Nil). The various
assumptions considered in the pricing model for the ESOPs granted during the year ended March 31, 2014 were :

Particulars March 31, 2014

Dividend yield 0.81% to 0.83%

Expected volatility 28.57% to 41.52%
Risk-free interest rate 8.21% to 9.08%
Expected life of the option 1 to 7 years

HDFC Bank Limited Annual Report 2013-14 155

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
Impact of fair value method on net profit and earnings per share (‘EPS’)

Had the compensation cost for the Bank's stock option plans been determined based on the fair value approach, the Bank's
net profit and earnings per share would have been as per the proforma amounts indicated below :
(` crore)

Particulars March 31, 2014 March 31, 2013

Net Profit (as reported) 8,478.38 6,726.28

Add : Stock-based employee compensation expense included in net income - -
Less : Stock based compensation expense determined under fair value based
561.32 431.62
method (proforma)
Net Profit (proforma) 7,917.06 6,294.66
(`) (`)
Basic earnings per share (as reported) 35.47 28.49
Basic earnings per share (proforma) 33.12 26.66
Diluted earnings per share (as reported) 35.21 28.18
Diluted earnings per share (proforma) 32.88 26.37

HDFC Securities Limited

The Shareholders of the Company approved a stock option scheme (viz. ESOS–001) in February 2010 (“Company
Options”). Under the terms of the scheme, the Company issues stock options to employees, whole time director, managing
director and directors of the Company, each of which is convertible into one equity share.

Scheme ESOS-001 provides for the issuance of options at the recommendation of the Compensation Committee of the
Board of Directors (the “Compensation Committee”) at a price of ` 135/- per share, being the fair market value of the share
arrived by a category 1 merchant banker.

Such options vest at definitive dates, save for specific incidents, prescribed in the scheme as framed / approved by
the Compensation Committee. Such options are exercisable for a period following the vesting at the discretion of the
Compensation Committee, subject to a maximum of two years from the date of vesting.

Method used for accounting for shared based payment plan

The Company uses the Intrinsic Value method to account for the compensation cost of stock options to employees of the
Company.

Activity in the options outstanding under the Employee Stock Option Plan

 ™ 6Xi^k^in^ci]Z options outstanding under the Employees Stock Option Plan as at March 31, 2014 :

Weighted average
Particulars Company options
exercise price (`)

Options outstanding, beginning of year 122,900 135.00

Granted during the year - -
Exercised during the year 111,150 135.00
Forfeited during the year 600 -
Lapsed during the year 2,450 135.00
Options outstanding, end of year 8,700 135.00
Options Exercisable 8,700 135.00

HDFC Bank Limited Annual Report 2013-14 156

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
 ™ 6Xtivity in the options outstanding under the Employees Stock Option Plan as at March 31, 2013 :

Weighted average
Particulars Company options
exercise price (`)
Options outstanding, beginning of year 371,400 135.00
Granted during the year - -
Exercised during the year 234,225 135.00
Forfeited during the year 12,000 135.00
Lapsed during the year 2,275 135.00
Options outstanding, end of year 122,900 135.00
Options Exercisable 122,900 135.00

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Number of Weighted average Weighted average
Range of exercise price
Plan shares arising life of options exercise price
(`)
out of options (in years) (`)
Company Options 135.00 8,700 0.89 135.00
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Number of Weighted average Weighted average

Range of exercise price
Plan shares arising life of options exercise price
(`)
out of options (in years) (`)
Company Options 135.00 122,900 1.61 135.00
Fair Value methodology
The fair value of options used to compute pro forma net income and earnings per equity share have been estimated on the
dates of each grant using the Black and Scholes model. The shares of the Company are not listed on any stock exchange.
Accordingly, the Company has considered the volatility of the Company’s stock price as an average of the historical volatility
of similar listed enterprises for the purpose of calculating the fair value to reduce any company specific variations. The
various assumptions considered in the pricing model for the stock options granted by the Company during the year ended
31 March, 2010 are :

Particulars EWT options Company options

Dividend yield Nil Nil

Expected volatility 73.56% to 79.04% 71.53% to 72.67%
Risk-free interest rate 6.53% to 8.19% 6.22% to 7.18%
Expected life of the option 0 - 2 years 0 - 5 years
Impact of fair value method on net profit and EPS
Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the
Company’s net profit and earnings per share would have been as per the pro forma amounts indicated below :
(` crore)

Particulars March 31, 2014 March 31, 2013

Net Profit (as reported) 78.44 66.82

Add : Stock-based employee compensation expense included in net income - -
(Less) / Add : Stock-based compensation expense determined under fair value
0.02 (0.25)
based method (proforma)
Net Profit (proforma) 78.46 66.57
(`) (`)
Basic and diluted earnings per share (as reported) 51.00 44.09
Basic and diluted earnings per share (proforma) 51.02 43.92

HDFC Bank Limited Annual Report 2013-14 157

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
HDB Financial Services Limited

™ >c VXcordance with resolution approved by the shareholders, the company has reserved shares, for issue to
employees through ESOP scheme. On the approval of compensation committee, each ESOP scheme is issued. The
compensation committee has approved stock option schemes ESOS-4 in October, 2010 and ESOS-5 in July 27, 2011
and ESOS-6 in June 11, 2012 and ESOS-7 in July 19, 2013. Under the term of the schemes, the Company may issue
stock options to employees and directors of the Company, each of which is convertible into one equity share.

™ 9jg^c\ i]Z nZVg! :HDH", lVh VeegdkZY VcY \gVciZY [dg i]Z ^hhjVcXZ d[ dei^dch Vi i]Z gZXdbbZcYVi^dc d[ i]Z
Compensation Committee of the Board at a price of ` 56 per share.

™ HjX] dei^dch kZhi Vi V YZÃc^i^kZ YViZ! hVkZ [dg heZX^ÃX ^cX^YZcih! egZhXg^WZY ^c i]Z hX]ZbZ Vh [gVbZY $ VeegdkZY
by the Compensation Committee. Such options are exercisable for a period following vesting at the discretion of the
Compensation Committee, subject to a maximum of two years from the date of vesting.

Method used for accounting for shared based payment plan

The Company uses intrinsic value to account for the compensation cost of stock options to employees of the Company.

Activity in the options outstanding under the Employee Stock Option Plans

™ 6Xi^k^in^ci]Zdei^dchdjihiVcY^c\jcYZgi]Z:beadnZZHidX`Dei^dcEaVchVhViBVgX](&!'%&)/

Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 903,750 28.23
Granted during the year 1,645,000 56.00
Exercised during the year 293,000 24.66
Forfeited / lapsed during the year 104,050 44.36
Options outstanding, end of year 2,151,700 49.17

™ 6Xi^k^in^ci]Zdei^dchdjihiVcY^c\jcYZgi]Z:beadnZZHidX`Dei^dcEaVchVhViBVgX](&!'%&(/

Weighted average
Particulars Options
exercise price (`)
Options outstanding, beginning of year 422,900 19.89
Granted during the year 691,000 31.00
Exercised during the year 160,150 18.59
Forfeited / lapsed during the year 50,000 26.85
Options outstanding, end of year 903,750 28.23

™ ;daadl^c\iVWaZhjbbVg^hZhi]Z^c[dgbVi^dcVWdjihidX`dei^dchdjihiVcY^c\VhViBVgX](&!'%&)/

Weighted average Weighted

Number of
Range of exercise price remaining average Vesting
Plan shares arising
(`) contractual life of exercise Conditions
out of options options (in years) price (`)
ESOS - 4 17.50 22,800 1.42 17.50 3 years service
ESOS - 5 25.00 50,800 2.44 25.00 3 years service
ESOS - 6 31.00 490,100 2.91 31.00 3 years service
ESOS - 7 56.00 1,588,000 3.10 56.00 2 years service

HDFC Bank Limited Annual Report 2013-14 158

Schedules to the Consolidated Financial Statements
For the year ended March 31, 2014
™ ;daaowing table summarises the information about stock options outstanding as at March 31, 2013 :

Weighted average Weighted

Number of
Range of exercise price remaining average Vesting
Plan shares arising
(`) contractual life of exercise Conditions
out of options options (in years) price (`)
ESOS - 4 17.50 147,100 2.34 17.50 3 years service
ESOS - 5 25.00 86,650 3.02 25.00 3 years service
ESOS - 6 31.00 670,000 3.60 31.00 3 years service
Fair Value methodology
The fair value of options used to compute pro forma net income and earnings per equity share have been estimated on
the dates of each grant using the Black-Scholes model. The shares of Company are not listed on any stock exchange.
Accordingly, the Company has considered the volatility of the Company’s stock price as zero, since historical volatility of
similar listed enterprise was not available. The various assumptions considered in the pricing model for the stock options
granted by the Company during the year ended 31 March 2014 are :

Particulars March 31, 2014 March 31, 2013

Dividend yield Nil Nil
Expected volatility 35-60% 35-60%
Risk-free interest rate 7-8% 8-9%
Expected life of the option 2-4 years 3-5 years

Impact of fair value method on net profit and EPS

Had compensation cost for the Company’s stock option plans been determined based on the fair value approach, the
Company’s net profit and earnings per share would have been as per the proforma amounts indicated below :
(` crore)
Particulars March 31, 2014 March 31, 2013
Net Profit (as reported) 209.26 102.45
Add : Stock-based employee compensation expense included in net income - -
Less : Stock-based compensation expense determined under fair value based
1.26 0.42
method (proforma)
Net Profit (proforma) 208.00 102.03
Basic earnings per share (as reported) 4.32 2.49
Basic earnings per share (proforma) 4.29 2.48
Diluted earnings per share (as reported) 4.32 2.49
Diluted earnings per share (proforma) 4.29 2.48

Impact of fair value method on net profit and EPS of the Group
Had compensation cost for the stock option plans outstanding been determined based on the fair value approach, the
Group’s net profit and earnings per share would have been as per the proforma amounts indicated below :
(` crore)
Particulars March 31, 2014 March 31, 2013
Net Profit (as reported) 8,743.49 6,869.64
Less : Stock-based compensation expense determined under fair value based
562.56 432.29
method (proforma)
Net Profit (proforma) 8,180.93 6,437.35
(`) (`)
Basic earnings per share (as reported) 36.58 29.10
Basic earnings per share (proforma) 34.23 27.27
Diluted earnings per share (as reported) 36.31 28.78
Diluted earnings per share (proforma) 33.97 26.97

HDFC Bank Limited Annual Report 2013-14 159