National Insurance Academy, Pune

CORPORATE GOVERANANCE:

A Comparative study of Axis and HDFC bank

(Individual Assignment)

Submitted by:

Date: 2nd March 2017 Yash Tiwari

(Roll No. 151741)

Corporate governance is the application of best management practices, compliance of law

in true letter and spirit and adherence to ethical standards for effective management and
distribution of wealth and discharge of social responsibility for sustainable development of all
stakeholders. -
Institute of Companies Secretaries of India

Analysis and Interpretation:

Board Structure and Size

According to the Birla Committee (1999) the board of the company has an optimum combination of
executive and non-executive directors with not less than fifty percent of the board comprising the non-
executive directors. The number of independent directors would depend on the nature of the chairman
of the board. In case a company has a non-executive chairman at least one third of board should
comprise of independent directors and in case a company has an executive chairman of least half of
board should be independent. Following table below will show the board structure strength and size of
the Axis & HDFC bank. This evaluation will help in observing at what extent these banks complying
with prescribed rules and regulation

S.No. Categories Axis Hdfc

1. Total Number of Director 13 11
A No. of Executive Directors 2 3
Promoters - -
Others - -
B No. of Non-Executive 11 6
Directors
Independent 8 5
Nominee 3 -
Others - 1
2. No. of Directors in
Percentage
Executive Directors 15.38% 27.27%
Non-Executive Directors 84.61% 54.54%
Independent Directors 61.54% 45.45%

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OBSERVATION FROM TABLE :

Both banks have an optimum combination of executive and non-executive directors.

There is no information about independent director in Axis bank but information provided by
HDFC.

Directors Attendance in the Board Meeting

The Birla Committee recommends that board meeting should be held at least four times in a year with
a maximum time gap of four months between any two meetings maximum attendance at board
meetings ensures good accountability and commitment of the board members.

Hdfc bank- During the year under review, seven (7) Board Meetings were held. All the directors of
the Bank who were on the Board of the Bank as on the date of previous Annual General Meeting held
on July 21, 2015 attended the meeting.

Axis bank- During the year 2015-16, Five (5) meetings were held. The date of previous Annual
General Meeting held on July 24, 2015.

Observations:

Both banks are fulfilling the minimum criteria of at least four boards meeting in a financial
year.
All the directors of HDFC were present during the last AGM held, but in case of Axis bank, 3
were absent.

Audit Committee:

It is required as per clause 49(II) of the listing agreement that a qualified and independent audit
committee should be set up by the board of a company which, will enhance transparent practices.

Both banks are filling up all requirement of audit committee.

The objectives of Audit in Axis bank is described in detail where is in case case of HDFC it is
in much broader terms.
Chairman of meeting was Non-executive Director in Axis as well as HDFC.
Both banks have not published committee report.

Nomination and Remuneration Committee:

The Nomination and Remuneration Committee includes scrutinizing the nominations of the directors
with reference to their qualifications and experience, for identifying Fit and Proper persons,
assessing competency of the persons and reviewing compensation levels of the Banks employees
vis--vis other banks and the banking industry in general. A company must have a credible and
transparent policy in determining and accounting for the remuneration of the directors. The policy

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should avoid potential conflicts of interest between the shareholders, the directors the management.
The over-riding principle in respect of directors remuneration is that of openness and shareholders
are entitled to a full and clear statement of benefits available to the directors.

There is detailed information about non-executive director and independent director in

transparency in composition of the committee by Axis bank but not in HDFC.
Both the banks have disclosed the remuneration of Directors in the report in detail.
Seven (7) meeting held by Axis bank in a year but HDFC met nine (9) meetings.
Both the banks have not published its committee reports in corporate governance reports.

Risk Management Committee

The Risk Management Committee is an independent committee of the Board of Directors that has, as
its sole and exclusive function, responsibility for the risk management policies of the Corporations
global operations and oversight of the operation of the Corporations global risk management
framework.

Both the banks have risk management committee, defined separately along with the number
of directors.
Committee has majority of independent directors in both the banks.
Five (5) meetings were held in both Axis and Hdfc bank in year 2015-16.
Axis bank has defined the objectives of the committee in a detailed form but Hdfc did not.
Attendance chart of director for committee is given by Axis bank but not in Hdfc.

Stakeholders Relationship Committee:

The Stakeholders Relationship Committee approves and monitors transfer, transmission, splitting and
consolidation of shares and considers requests for dematerialization of shares. It also monitors
redressal of complaints from shareholders relating to transfer of shares, non-receipt of Annual Report,
dividends etc.
Both Companies have Stakeholders Relationship Committee.
Hdfc report shows the number of complaints received solved and pending.it also shows the
other letters received regarding shareholders issues. Axis bank does show any such details or
figures.
Hdfc bank has held 4 meetings while 3 in case of Axis bank. Details of attendance are given
in Axis banks report but not in Hdfc.

Other committees like customer service, IT strategy, CSR, Acquisitions and mergers, review etc have
almost similar structure and functions in both the banks

Statutory Disclosures: Mandatory

S.no. Items of Statutory Disclosures Axis Bank Hdfc Bank

1 Significant related party transactions The Bank has not The Bank has not

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 having potential conflict with the entered into any entered into any
interest of the company materially significant materially significant
related party related party
transaction that may transaction that may
have potential conflict have potential conflict
with the interest of the with the interest of the
Bank. Bank.

2 Non-compliance related to capital No penalties or No penalties or

market matters during the last 3 strictures have been strictures have been
years. imposed imposed

3 Accounting treatment Applicable accounting Applicable accounting

standards are followed standards are followed

4 Board Disclosure Risk-Management Laid down procedure Laid down procedure to

to inform board inform board member
member about risk about risk assessment
assessment and and minimization for
minimization for boards boards review reports
review reports

5 Management discussion and MD & A report formed MD & A report formed

analysis (MD & A) part of annual report part of annual report

6 Shareholder information on : Disclosed Compliance Disclosed Compliance

Appointment of new
directors
reappointment of retiring
directors
Quarterly result &
presentation
Share-transfers
Directors responsibility
Statement

Observations:
Both banks have not entered into any materially significant related party transaction that may
have potential conflict with the interest of the bank.
Non-Compliance related to capital market matters during the financial year. There were no
penalties or strictures have been imposed.

Accounting standards are followed by both the banks for accounting treatment.

Management discussion and analysis & shareholders information also disclosed in Annual
report.

Non-Mandatory Disclosures

S.No. Items of Statutory Disclosures Axis Bank Hdfc Bank

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1 Shareholder right (e.g. information & Disclosed on a website Disclosed on a website
half yearly declaration of financial & report. & report.
performance sent to shareholders)

2 Audit Qualification Disclosed in corporate Disclosed in corporate

governance report governance report

3 Training of Board member No-information No-information

provided in corporate provided in corporate
governance report governance report

4 Evaluation of Non-Executive Information provided in Information provided in

directors corporate governance corporate governance
report report

5 Whistle Blower Policy Information provided in Information provided in

corporate governance corporate governance
report. report.

Postal Ballot:
During the year, no resolutions were passed by means of postal ballot in HDFC bank, where as in
case of Axis Bank, it is disclosed in the report in detailed form.

Corporate Social Responsibility (CSR):

Axis Bank-
CSR activities are persued through the initiatives taken by Bank of Axis bank Foundation
(ABF) or other trust or agency.
It has partnered with around 100 NGOs all over India and impacted 8.14 lacs beneficiaries till
31/03/2016.
Contributing to the Prime Ministers National Relief Fund or any other fund set up by the
Government for socio-economic development.
Special education for the differently-abled
Consumer education and awareness
Support vocational education, life skill coaching and career counselling
Natural resource management, soil and water conservation
The Bank has been working on providing medical relief and trauma care for victims of
accidents through its Foundation.
The Bank is sensitive towards its role in ensuring environmental sustainability, ecological
balance and conservation of natural resources and will pursue projects that conserve
resources and enhance environment such as renewable energy and energy efficiency.

Hdfc bank:

Financial Literacy and Empowerment: Sustainable Livelihood Initiative (SLI) is a model that
has helped empower thousands of people, particularly women in the rural parts of the country.

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 Promoting Education: initiated a multitude of projects, reaching out to about 27,000
students.
Skills Training and Livelihood Enhancement: Our livelihood and skill development
initiatives are focused on training and capacity building of youth and women from
economically weaker sections of the society. As part of our project on sustainable livelihoods,
we have worked towards capacity building of close to 3.07 lakh women.
Blood Donation Camps
Rural Development: undertake several initiatives to address the developmental needs of
rural communities, from providing infrastructural support to running community-based
campaigns. We also support a primary healthcare and Diagnostic Centre in Kedarghati,
Uttarakhand which reaches out to close to 50 surrounding villages
Milk-To-Money: Under Milk-To-Money (MTM) initiative, it work closely with dairy co-operative
societies and farmer producer organisations to reduce risks of quality dilution by middlemen
and help dairy farmers increase their productivity.
Environmental Responsibility: energy efficient equipment, multi-channel digital delivery
through Net Banking, Phone Banking and Mobile Banking (Payzapp, Chillr etc).

Category Axis Bank Hdfc Bank

Amount Spent by the bank for CSR
1. 133.77cr 1. 119.02cr
1. 2014-15
2. 163.03cr 2. 197.10cr
2. 2015-16

Business Responsibility Report:

In Business Responsibility Report framework, most of the Sections A, B, C, D 1 & 3 and E covers
qualitative and descriptive data. Only Section D 2 covers quantitative data, based on 10 Questions
spreaded across 9 principles. All the figures are almost same expect few which are given below.
Major differences include:
Principle P-2 has very less applicability in HDFC bank where as applicable in majority of
categories in Axis Bank.
In category Indicate the link for the policy to be viewed Online HDFC does not disclose it to
public, whereas Axis bank has disclosed in its report.
In case of grievance redressal mechanism related to the policy to address stakeholders
grievances related to the policy, HDFC bank does not follow majority principles but Axis bank
Do.
In Axis bank, Head of department is responsible for effective implementation related to
independent audit/evaluation of working of this policy.

In a Broader sense, Axis bank has a higher score in complying with the principles related to different
categories specifies, over HDFC bank.

Conclusion and Suggestions:

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 Banking sector plays an important role in India to transform economy towards self-sufficiency
hence the corporate governance of the banking sector is significant.
In HDFC bank no resolutions were passed by means of postal ballot. Therefore disclosure
related to Postal ballot needs to be enhanced.
Board committees are useful for better performance of the banks activities.
Axis bank can add more committees like- Premises Committee, Fraud monitoring, credit
approval Committee.& HDFC bank can add committees like- Acquisitions, divestment and
mergers community, committee for whole-time directors.
Banks are engaging themselves in various CSR activities which is indirectly contributing to
their increased market performance.
Rural development is taken as major initiatives by the banks, apart from education,
employment and women empowerment.
Banks should initiate more seminars and workshops in order to highlight the relevance of
corporate governance
Banks annual general meetings with specific venue and timings make it expensive and
inconvenient for many shareholders to attend. It should not be just a formality of holding the
meetings but should be of productive purpose. Hence the shareholders who are not able to
attend the AGM should avail of the postal ballot to cast their vote. However since the
procedure is not properly highlighted it is required that banks provide details of the postal
ballot in their annual report.
It is necessary for the regulator to see that shareholders rights to be informed on decisions
concerning fundamental corporate changes is taken care of by the banks and Shareholders
are provided with adequate information on the agenda items of the shareholders meeting.

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