MANAGING RISKS IMPACTING OUR BUSINESS

KEY RISKS IN FISCAL 2022

The continuing Covid-19 pandemic and economic developments made credit risk a key focus for the Bank during the year.

OUR RESPONSE

The Bank ensured effective risk management across business segments, strengthened by ongoing reviews for early identification and stress testing. The Bank’s net non-performing assets decreased from 1.14% at March 31, 2021 to 0.76% at March 31, 2022. Credit cost as a percentage of average advances reduced from 1.75% in fiscal 2021 to 1.12% in fiscal 2022.

The Bank maintained strong capital and liquidity positions, which were significantly above regulatory requirements

KEY RISKS IN FISCAL 2022

Movements in interest rates, foreign exchange rates, credit spreads and equity prices remained largely stable during fiscal 2022. However, tightening monetary policy and exchange rate movements are expected to pose challenges going forward and could impact our net interest margin, the value of the trading portfolio, income from treasury operations and the quality of the loan portfolio. Further, deposits are an important source of funding, which are primarily short-term in nature, and banks face the risk of asset-liability mismatches if not rolled over by depositors.

OUR RESPONSE

The Investment Policy, Asset Liability Management Policy and Derivatives Policy, approved by the Board of Directors, govern the treasury activities and the associated risks and contain the limits structure. The Asset Liability Management Committee which includes the MD & CEO, Wholetime Directors and senior executives periodically reviews the Bank’s business profile and its impact on asset liability management. Periodic monitoring is done by the Market Risk Management Group which recommends changes in policies, processes and methodologies. Building a strong liability franchise is a core strategic focus for the Bank.

KEY RISKS IN FISCAL 2022

There has been an increase in ransomware risk globally in recent years. In a digital economy, the Bank also leverages partnerships with third parties and these could also be sources of information security risk.

OUR RESPONSE

The Bank has been investing on building resilience and responding effectively to cyberattacks. The Bank has laid significant focus on data privacy and data loss prevention mechanisms and continued to make progress in fiscal 2022. There were no material incidents of security breaches or data loss during fiscal 2022.

KEY RISKS IN FISCAL 2022

The growing customer dependence on digital transactions and increasing volumes of such transactions requires banks, including us, to focus on the availability and scalability of our systems. Misalignment between business and IT strategies is also a formidable risk.

OUR RESPONSE

The Bank’s focus on technology and the transformation journey of Bank to Bank ^Tech has enabled it to respond to the changing technological dynamics in an agile and responsive manner. The Information Technology Strategy Committee, which is a Board-level Committee, ensures that information technology strategy is aligned with the business strategy and with appropriate policies and control frameworks. The Bank’s IT systems remained stable and service delivery was largely uninterrupted during fiscal 2022.

KEY RISKS IN FISCAL 2022

The ability to attract, motivate and retain talented professionals and the availability of skilled management is critical for the successful implementation of the Bank’s strategy and competing effectively. Employee well-being remained a key focus during fiscal 2022.

OUR RESPONSE

The Bank’s human capital strategy is based on key value propositions of fair compensation policy, learning and growth, empowerment and care. Skilling and awareness efforts continued during fiscal 2022 with particular focus on digital upskilling and data analytics. The Bank conducted vaccination drives for employees and their immediate family during the year.

KEY RISKS IN FISCAL 2022

The Bank’s compliance with regulatory requirements and changes is a key priority for the Bank. Failure to comply with applicable regulations could lead to inquiries or investigations by regulatory and enforcement authorities either against the Bank, or employees, its representatives, agents and third-party service providers.

OUR RESPONSE

The Bank is committed to ensuring compliance with regulations and laws, and proactively monitors these developments. The Bank has put in place well-articulated policies and controls to ensure compliance. The Bank seeks to have a strong compliance culture driven by the organisation’s leadership. This would help in building stakeholder confidence and trust, and also ensure timely action to mitigate associated reputational risks.