BECG PROJECT REPORT

CORPORATE COVERNANCE OF AXIS BANK

Alekhya Rangi
ENROLLMENT NO:12BSPHH010084 BECG SECTION : D

About the company

Name: Axis Bank Limited Year of operation: 1994 Industry type: Private sector bank Headquarters: Mumbai, Maharashtra Chairman: Dr Sanjiv Misra MD & CEO: Shikha Sharma Operating revenue of INR16,217 crores Net profit of INR5,179 crores. Products: Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management Axis Bank Limited is the third largest private sector bank in India. It offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The Bank was promoted jointly by the Administrator of the Unit Trust of India (UTI-I), Life Insurance Corporation of India (LIC), General Insurance Corporation Ltd., National Insurance Company Ltd., The New India Assurance Company, The Oriental Insurance Corporation and United India Insurance Company. The Unit Trust of India holds a special position in the Indian capital markets and has promoted many leading financial institutions in the country. The Bank has seven international offices with branches at Singapore, Hong Kong, Dubai and Colombo and representative offices at Shanghai, Dubai and Abu Dhabi, which focus on corporate lending, trade finance, syndication, investment banking and liability businesses. In addition to the above, the Bank has a presence in UK with its wholly owned subsidiary Axis Bank UK Limited Awards and recognitions Bank of the Year Money Today FPCIL Awards 201213 Best Bank CNBC-TV18 Indias Best Bank and Financial Institution Awards 2012 Best Bank Runner Up Outlook Money Awards 2012 Consistent Performer Indias Best Banks 2012 Survey by Business Today & KPMG Fastest Growing Large Bank Dun & Bradstreet Polaris Financial Technology Banking Awards 2012 Fastest Growing Large Bank Business world Best Banks Survey 2012 Best Domestic Bond House The Asset Triple A Country Awards 2012 Deal Maker of the Year in Rupee Bonds Business world Magna Awards India's Best Deal Makers 2012 The Best Emerging Bullion Dealing Bank 9th India International Gold Convention-201112

Best Acquiring Institution in South Asia Visa LEADER Award at Visas 2012 APCEMEA Security Summit Bali Gold Shield for Excellence in Financial Reporting in the Private Banks category 201112 ICAI (Institute of Chartered Accountants of India)

Corporate Governance:
Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others. Principles of corporate governance: Accountability Integrity and ethical behavior Transparency Responsibility Fairness Rights and equitable treatment of shareholders Interests of other stakeholders Corporate governance in banks: Banks form a crucial link in a countrys financial system and their well-being is imperative for the economy. The significant transformation of the banking industry in India is clearly evident from the changes that have occurred in the financial markets, institutions and products. While deregulation has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. Cross-border flows and the entry of new products have significantly influenced the domestic banking sector, forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operations in order to remain competitive in the globalized environment. These developments have facilitated greater choices for consumers who have become more discerning and demanding compelling banks to offer a broader range of products through diverse distribution channels. In such scenario, implementation of good corporate governance practices in banks can ensure them to cope with the changing environment. Todays corporate governance means to do everything better and provides for risk assessment, risk cover, early warning systems against failure as well as prompt corrective action.

Corporate Governance of Axis Bank

Code of Conduct for Directors:
The Board of Directors of Axis Bank has adopted the same at its meeting held on 18th February, 2005 Do's Attend the Board Meetings regularly and effectively. Study the Board papers thoroughly and use the good offices of the Chief Executive for eliciting any information at the Board meeting. Ask the Chairman to furnish you with the Board papers and follow-up reports on a definite time schedule. Involve yourself as Director on the Board thoroughly in the matter of formulation of general policy and also ensure that performance of the bank is monitored adequately at Board levels. Be familiar with the broad objective of the bank and the policy laid down by the Government and the Reserve Bank. All constructive ideas for the better management of the bank and for making valuable contribution would be welcome. You must work as a team and not sponsor or be prejudiced against individual proposals. The management on its part is supposed to furnish full facts and complete papers in advance. Try to give as much of your wisdom, guidance and knowledge as possible to the management. Try to analyze the trends of economy, assist in the discharge of management's responsibility to public and formulation of measures to improve customer service and be generally of constructive assistance to the bank management

Don'ts Do not send any instruction to any individual officer of the Bank or give direction to individual officer in any matter. Do not involve yourself in any matter relating to personnel administration - whether it is appointment, transfer, posting or a promotion or a redressal of individual grievances of any employee. Do not interfere in the day-to-day functioning of the Bank. Do not approach or influence for sanction of any kind of facility from an individual branch manager or any other officer. Do not involve yourself in the routine or everyday business and in the management functions.

Do not participate in the Board discussion, if a proposal in which you are directly or indirectly interested comes up for discussion. Disclose your interest will in advance to the Chief Executive. Do not reveal any information relating to any constituent of the Bank to anyone as you are under oath of secrecy and fidelity. Directors should not send for individual officers of the Bank or give directions to such officers on any matter. You should discourage the individual employee or unions approaching you in any matter. You may indicate your directorship of the Bank on your visiting card/letter head, but the logos or distinctive design of the bank should not, however, be displayed on the visiting card/ letterhead. Directors should not directly call for papers/files/notes recorded by various departments for scrutiny etc. In respect of agenda items to be discussed in the meetings, all information/ clarification that they may require for taking a decision will be made available by the executive. Directors are expected to ensure confidentiality of the Bank's agenda papers/notes. Ordinarily, it is suggested that by way of abundant precaution, the Board papers may be returned to the Bank after the meeting. Do not sponsor any loan proposal, building and sites for Bank's premises, enlistment or empanelment of contractors, architects, doctors, lawyers etc. Do not do anything, which will interfere with and/or be subversive of maintenance of discipline, good conduct and integrity of the staff.

Code of Conduct for Employees:

The Board of Directors of Axis Bank has adopted the same at its meeting held on 18th February, 2005 Code of Conduct Every officer shall undertake and perform his duties in such capacity and at such places as he may be directed by the Bank. Every officer shall maintain good conduct, discipline, punctuality and show courtesy and attention to all persons in their transactions or dealings with the Bank. Every officer shall discharge his duties with utmost integrity, honesty, devotion and diligence and do nothing which is unbecoming of him or which is likely to tarnish the image of the Bank. Cases of fraud and dishonesty will attract penalty of dismissal. An officer shall maintain secrecy about the affairs of the Bank and its customers and will sign a declaration of fidelity and secrecy in the prescribed form. No officer shall engage in any trade or business or accept employment or fee for any work done by him outside the Bank. No officer shall take an active part in politics and stand for election anywhere outside the Bank. No officer shall indulge in gambling or speculative activities in any shares, stocks, securities, commodities or valuables. He can, however, make bonafide investment of his own funds in such securities as he may wish to buy.10.8. An officer shall not enter into any personal dealings with customers or service providers (including contractors, consultants and vendors) of the Bank which may result in undue pecuniary advantages to the officer.

No officer shall guarantee in his private capacity the pecuniary obligations of another person or agree to indemnify in such capacity another person from loss except with the prior approval of the Bank. An officer shall so manage his private affairs as to avoid insolvency or habitual or excessive indebtedness. Issue of cheques by officers on their personal accounts without keeping sufficient balance therein is an act of serious misconduct and will attract stringent disciplinary action. No officer shall indulge in sexual harassment which includes such unwelcome sexually determined behavior (whether directly or by implication) as physical contact and advances a demand or request for sexual favors; sexually colored remarks; showing pornography, and any other unwelcome physical, verbal or non-verbal conduct of sexual nature. Every officer on first appointment and as on 31st March each year (beginning with 31st March, 2003), shall submit a return of assets and liabilities giving full details of: the immovable property owned or acquired or held by the officer in his/her name or in the name of any member of his / her family* or in the name of any other person; all financial securities and bank deposits including cash balances owned or acquired or held by the officer; debts and other liabilities incurred by the officer directly or indirectly, including loans from the Bank. An officer, as a general rule, shall not accept gifts or other benefits other than of nominal value from any individual or concern having official dealings with the Bank or from any officer junior to him/her so as to avoid any possibility of such gifts or benefits even appearing to compromise business or official relationships. Officers must use their discretion in being satisfied that the gifts are indeed of nominal value. No officer shall take or give or attempt to take or give any undue assistance or use or attempt to use any unfair methods or means in respect of any examination or test conducted or held by the Bank or any other authority or institution. An officer shall comply with all the terms and conditions in respect of any loan, advance or other facility granted by the Bank. No officer shall use his position or influence directly or indirectly, to secure employment for his son, daughter or any other member of his family in any private undertaking having official dealings with the Bank (this will include the Bank's borrowers, contractors, consultants and vendors). No officer shall grant on behalf of the Bank any loan or advance to himself or his spouse, a Joint Hindu Family of which he or his spouse is a member or a partnership with which he or his spouse is connected in any manner or a trust in which he or his spouse is a trustee, or a private or public limited company, in which he or his spouse hold substantial interest. ("Substantial interest" as defined in clause (ne) of Section 5 of the Banking Regulation Act 1949). No officer shall grant on behalf of the Bank any loan or advance to (a) a family member; (b) an individual who is the guarantor of a family member or an individual who is a partner in business of a family member; (c) a Joint Hindu Family in which a family member is a member; (d) a firm in which a family member is a partner, manager or guarantor; and (e) a company in which a family member holds substantial interest or is interested as director manager or guarantor, without prior permission of the Bank.

Officers may not contribute the Bank's funds or assets to any political candidate, party, charity, or similar organization, unless such contribution is expressly permitted by law/ regulation / directive and has been preapproved by the appropriate authorized representative of the Bank. An officer shall comply with all lawful and reasonable directions which may from time to time be given to him by an officer under whose control he may be placed. Officers who suspect violations of the letter or spirit of the Bank's laid down systems, procedures or staff rules have an obligation to report their concerns to the Bank's designated Vigilance Officer.

Philosophy on Code of Governance The Banks policy on Corporate Governance has been: I. To enhance the long term interest of its shareholders, provide good management, adopt prudent risk management techniques and comply with the required standards of capital adequacy, thereby safeguarding the interest of its other stakeholders such as depositors, creditors, customers, suppliers and employees. II. To identify and recognise the Board of Directors and the Management of the Bank as the principal instruments through which good corporate governance principles are articulated and implemented. To also identify and recognise accountability, transparency and equality of treatment for all stakeholders, as central tenets of good corporate governance Board of Directors The composition of the Board of Directors of the Bank is governed by the Companies Act, 1956 the Banking Regulation Act, 1949 and Clause 49 of the Listing Agreement. The Banks board comprises of executive and non-executive Directors .The Board presently consists of 14 Directors and its mix provides a combination of professionalism, knowledge and experience required in the banking business. There are 7 independent Directors constituting one-half of the Boards membership with Shri S. B. Mathur designated as the Lead Independent Director. The functions, responsibilities, role and accountability of the Board are well dened. In addition to monitoring corporate performance, the Board also carries out functions such as taking care of all the statutory agenda, approving the Business Plan and all major policies, reviewing and approving the annual budgets and borrowing limits and xing exposure limits .It ensures that the Bank keeps shareholders informed about plans, strategies and performance. The detailed reports of the Banks performance are periodically placed before the Board. The business of the Board is also conducted through the following Committees constituted by the Board to deal with specic matters and delegated powers for different functional areas: a) Committee of Directors The Committee of Directors exercises powers delegated to it by the Board relating to loans, credit policy, credit portfolio, monitoring of exposures (both credit and investment), expenditures, investment, branch expansion, compliance with the statutory and regulatory framework, proposals relating to the Banks operations covering all departments and business

segments and important issues relating to day to day affairs/problems and to take such steps as may be deemed necessary for the smooth functioning of the Bank.

This consists of: Committee of Directors K. N. Prithviraj Chairman Shikha Sharma S. B. Mathur Prasad R. Menon R. N. Bhattacharyya Somnath Sengupta V. Srinivasan

b) Audit Committee The Audit Committee of the Board of Directors functions with the following main objectives: i. To provide direction and to oversee the operation of the audit function. ii. To review the internal audit system with special emphasis on its quality and effectiveness. iii. To review internal and concurrent audit reports of large branches with a focus on all major areas of housekeeping, particularly inter branch adjustment accounts, arrears in the balancing of the books and un-reconciled entries in inter-bank and Nostro accounts and frauds. iv. To discuss matters related to frauds. v. To discuss and follow up for audit issues related to Long Form Audit Report. vi. To discuss and follow up for issues related to RBI Inspection Report(s). vii. To review the system of appointment and remuneration of concurrent auditors and external auditors. viii.To oversee the Banks nancial reporting process and the disclosure of its nancial information to ensure that the nancial statements are correct, sufcient and credible. ix.To recommend to the Board, the appointment, re-appointment, and if required, the replacement or removal of the Statutory Auditor and the xation of their audit fees. x. To approve payments to Statutory Auditors for any other services rendered by them. Committee: S. B. Mathur Chairman K. N. Prithviraj V. R. Kaundinya Samir K. Barua c) Risk Management Committee

Committee: Sanjiv Misra Shikha Sharma K. N. Prithviraj Samir K. Barua Ireena Vitt The Risk Management Committee of the Board of Directors functions with the following main objectives: i. To perform the role of Risk Management in pursuance of the Risk Management Guidelines issued periodically by RBI and Board. ii. To oversee and advise to the Board on: a. Dening risk appetite, tolerance thereof and review the same, as appropriate. b. Systems of risk management framework, internal control and compliance to identify, measure, aggregate, control and report key risks. c. Alignment of business strategy with the Boards risk appetite; and d. Maintenance and development of a supportive culture, in relation to the management of risk, appropriately embedded through procedures, training and leadership actions so that all employees are alert to the wider impact on the whole organisation of their actions and decisions. iii. To advise the Board on all high level risk matters. d) Shareholders/Investors Grievance Committee The primary objective of the Shareholders/Investors Grievance Committee is to look into redressal of shareholders and investors grievances relating to non-receipt of dividend, refund orders, shares sent for transfer, non-receipt of Annual Report and other similar grievances. e) HR and Remuneration Committee The HR and Remuneration Committee of the Board of Directors functions with the following main objectives: i. To review and recommend to the Board for approval the overall remuneration philosophy and policy of the Bank, including the level and structure of xed pay, variable pay, perquisites, bonus pool, stock-based compensation to employees of the Bank, and any other form of compensation as may be included from time to time. This was to be undertaken keeping in mind the strategic objectives, market environment and the regulatory framework as may exist from time to time. ii. To review and recommend to the Board for approval, the total increase in manpower cost budget of the Bank as a whole, at an aggregate level, for the next year. iii. To review and recommend to the Board for approval the talent management and succession policy and process in the Bank for ensuring business continuity, especially at the level of Managing Director and Chief Executive Ofcer (MD & CEO), the other Whole-time Directors, senior managers one level below the Board position and other key roles.

iv. To review organisation health through feedback from employee surveys conducted on a regular basis. v. To review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any fundamental changes in organisation structure which could have wide ranging or high risk implications. vi. To review and recommend to the Board for approval the creation of new positions at the level of Executive Director and above. e) HR and Remuneration Committee The HR and Remuneration Committee of the Board of Directors functions with the following main objectives: i. To review and recommend to the Board for approval the overall remuneration philosophy and policy of the Bank, including the level and structure of xed pay, variable pay, perquisites, bonus pool, stock-based compensation to employees of the Bank, and any other form of compensation as may be included from time to time. This was to be undertaken keeping in mind the strategic objectives, market environment and the regulatory framework as may exist from time to time. ii. To review and recommend to the Board for approval, the total increase in manpower cost budget of the Bank as a whole, at an aggregate level, for the next year. iii. To review and recommend to the Board for approval the talent management and succession policy and process in the Bank for ensuring business continuity, especially at the level of Managing Director and Chief Executive Officer (MD & CEO), the other Whole-time Directors, senior managers one level below the Board position and other key roles. iv. To review organisation health through feedback from employee surveys conducted on a regular basis. v. To review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any fundamental changes in organisation structure which could have wide ranging or high risk implications. vi. To review and recommend to the Board for approval the creation of new positions at the level of Executive Director and above. f) Nomination Committee The Nomination Committee of the Board of Directors functions with the following main objectives: i. To undertake a process of due diligence to determine the suitability of any person for appointment/continuing to hold appointment as a director on the Board, based upon qualication, expertise, track record, integrity and other t and proper criteria.

ii. To examine the vacancies that will come up at the Board on account of retirement or otherwise. iii. To evaluate the skills that exist, and those that are absent but needed at the Board level, and search for appropriate candidates who have the pro le to provide such skill sets. iv. To create a recommendatory list of Directors for deliberation and decision-making at the Board-level. v. To review the composition of Committees of the Board, and identify and recommend to the Board, the Directors who can best serve as members of each Board Committee. Meetings and Attendance during the year: 5 meetings of Nomination Committee were held during the year on 20th April 2012, 29th August 2012, 3rd November 2012, 29th November 2012 and 15th January 2013. Shri S. B. Mathur and Smt. Rama Bijapurkar attended all the ve meetings. Shri V. R. Kaundinya attended four meetings. g) Special Committee of the Board of Directors for Monitoring of Large Value Frauds The major functions of the Special Committee are to monitor and review all the frauds of `1 crore and above, so as to: i. Identify the systemic lacunae, if any, which facilitated perpetration of the fraud and put in place measures to plug the same. ii. Identify the reasons for delay, if any, in detection and reporting to top management of the Bank and RBI. iii. Monitor progress of CBI/Police investigation and recovery position. iv. Ensure that staff accountability is examined at all levels in all the cases of frauds and staff related action, if required, is completed quickly without loss of time. v. Review the efcacy of the remedial action taken to prevent recurrence of frauds, such as, strengthening of internal controls. vi. Put in place other measures as may be considered relevant to strengthen preventive measures against frauds. h) Customer Service Committee The Customer Service Committee of the Board of Directors functions with the following main objectives: i. Overseeing the functioning of the Banks internal committee set-up for customer service. ii. To review the level of customer service in the Bank including customer complaints and the nature of their resolution. iii. Provide guidance in improving the customer service level.

iv. Review any award by the Banking Ombudsman to any customer on a complaint led with the Ombudsman. v. To ensure that the Bank provides and continues to provide, best-in-class service across all its category of customers which will help the Bank in protecting and growing its brand equity. vi. The Committee could address the formulation of a Comprehensive Deposit Policy, incorporating the issues such as the treatment of death of a depositor for operations of his/her account, the product approval process, the annual survey of depositor satisfaction and the triennial audit of such services. vii. To examine any other issues having a bearing on the quality of customer service rendered. viii. To ensure implementation of directives received from RBI with respect to rendering services to customers of the Bank. Meetings and Attendance during the year: 4 meetings of the Customer Service Committee were held during the year on 22nd June 2012, 26th September 2012, 7th December 2012 and 8th February 2013. Dr. Adarsh Kishore, Smt. Shikha Sharma and Prof. Samir K. Barua attended all the four meetings. Smt. Ireena Vittal attended one meeting for which she was eligible. i) Committee of Whole-Time Directors The Committee of Whole-time Directors exercises powers delegated to it by the Board, for managing the affairs of the Bank, for review and efcient control of various operational areas such as treasury, branch banking etc., and for ensuring speedy disposal of matters requiring immediate approval. The Committee consists of all Whole-time Directors of the Bank. Meetings during the year:6 meetings of the Committee of Whole-time Directors were held during the year on 29th October 2012, 22nd November 2012, 17th December 2012, 14th January 2013, 25th February 2013 and 25th March 2013 ) Committee of Whole-Time Directors The Committee of Whole-time Directors exercises powers delegated to it by the Board, for managing the affairs of the Bank, for review and ef cient control of various operational areas such as treasury, branch banking etc., and for ensuring speedy disposal of matters requiring immediate approval. The Committee consists of all Whole-time Directors of the Bank. Meetings during the year: 6 meetings of the Committee of Whole-time Directors were held during the year on 29th October 2012, 22nd November 2012, 17th December 2012, 14th January 2013, 25th February 2013 and 25th March 2013. j) Acquisitions, Divestments and Mergers Committee

The main function of the Committee is to discuss and consider any idea or proposal for merger and acquisition. This Committee will consider and give its in-principle approval in the matter and the proposal will then be placed before the Board of Directors for its nal decision. Meetings and Attendance during the year: 4 meetings of Acquisitions, Divestments and Mergers Committee were held during the year on 24th April 2012, 27th April 2012, 26th September 2012 and 29th November 2012. Smt. Shikha Sharma, Shri K. N. Prithviraj and Shri Prasad R. Menon attended all the four meetings. Shri V. R. Kaundinya attended two meetings. Shri S. B. Mathur attended one meeting. Smt. Rama Bijapurkar could not attend any meeting. Shri V. R. Kaundinya also attended one meeting through tele-conference.

k) IT Strategy Committee The IT Strategy Committee functions with the following main objectives: i. Approving IT strategy and policies. ii. Ensuring that management has an effective strategic planning process in place. iii. Ensuring that the business strategy is aligned with the IT strategy. iv. Ensuring that the IT organizational structure serves business requirements and direction. v. Oversight over implementation of processes and practices that ensures IT delivers value to businesses. vi. Monitoring the method that management uses to determine the IT resources needed to achieve strategic goals and provide high-level direction for sourcing and use of IT resources. vii. Ensuring proper balance of IT investments for sustaining the Banks growth. viii. Assess exposure to IT risks and its controls and evaluating effectiveness of managements monitoring of IT risks. ix. Assessing managements performance in implementing IT strategies. x. Assessing if IT architecture has been designed to derive maximum business value. xi. Reviewing IT performance measurement and contribution to businesses. xii. Approving capital and revenue expenditure in respect of IT procurements.

Corporate Governance Rating

ICRA

ICRAs Corporate Governance Rating (CGR) is meant to indicate the relative level to which an organisation accepts and follows the codes and guidelines of corporate governance practices.

Conclusion:
In the coming years Indian financial system will grow not only in size but also in complexity as the forces of completion gain for the momentum and financial market acquire greater depth. We can assure that the policy environment will remain supportive of healthy growth and development with accent on more operational flexibility as well as greater prudential regulation and supervision. The really success of our financial sector will however depend primarily on the organization effectiveness of the banks, including corporative banks, for which initiatives will have to come from the banks themselves. It is for these corporative banks themselves to build on this synergy inherent in the corporative structure and stand up for their unique qualities. With elements good corporate governance, sound investment policies, appropriate internal control system, better credit risk management, focus on newly emerging business, commitment to better customer service. Axis bank will definitely be able to grapple with these challenges and convert them into opportunities

REFERENCESS http://crisil.com/ratings/ratings-rationales.jsp http://www.icra.in/rating.aspx?ck=Al1zZU0jCxnnNzwL5uegv1Fy wzqWlG7XXo1LFd139RXYzgMYK9S57yAVElNeyt/XaTZKAv xm5n3QFNK78Qi6AxxtsNfhtNkvqsN02qKn1Jns2J8e/K/etZMxY h5901190113wgX http://www.axisbank.com/investor-corner/annual-reports.aspx http://www.cidb.org.za/default.aspx http://en.wikipedia.org/wiki/Axis_Bank