Commitments and contingencies

12 Months Ended

Mar. 31, 2022

26. Commitments and contingencies

Commitments and contingent liabilities other than for off balance sheet financial instruments (see note 23) are as follows:

Capital commitments

The Bank has entered into committed capital contracts, principally for branch expansion and technology upgrades. The estimated amounts of contracts remaining to be executed on the capital account as of March 31, 2021 and March 31, 2022 aggregated Rs. 12,895.7 million and Rs. 21,115.5 million, respectively.

Contingencies

The Bank is party to various legal proceedings in the normal course of business. The Bank estimates the provision for contingencies which primarily include indirect taxes since no precedents exist which could be used as points of reference. The amount of claims against the Bank towards indirect taxes and other claims which are not acknowledged as debts as at March 31, 2022 amounted to Rs. 9,226.0 million (previous year Rs. 10,203.1 million). The Bank does not expect the outcome of these proceedings to have a material adverse effect on the Bank’s results of operations, financial condition or cash flows. The Bank intends to vigorously defend these claims. Although the results of other legal actions cannot be predicted with certainty, it is the opinion of management, after taking appropriate legal advice, that the likelihood of these claims becoming obligations of the Bank is remote and hence the resolution of these actions will not have a material adverse effect, if any, on the Bank’s business, financial condition or results of operations.

Lease commitments

The Bank is party to operating leases for certain of its office premises and employee residences, with a renewal at the option of the Bank. Operating lease

right-of-use

assets and lease liabilities were as follows:


	As of March 31,
	2021		2022		2022

			(In millions)
Right-of-use assets		Rs. 64,548.8		Rs.71,572.2	US$	943.4
Lease liabilities		70,422.0		78,138.0		1,029.9

The total lease expenses were as follows:


	As of March 31,
	2020		2021		2022		2022

	(In millions)
The total minimum lease expense during the year recognized in the consolidated statement of income		Rs. 13,698.7		Rs. 14,244.4		Rs.13,866.6	US$	182.8

The total operating cash flow for operating lease expenses during the year ended March 31, 2021 and March 31, 2022 was Rs. 12,820.3 million and Rs. 14,295.7 million (US$ 188.4 million), respectively.

The future minimum lease payments as of March 31, 2022 were as follows:


Due in fiscal year ending March 31:	Operating leases
	(In millions, except for weighted averages)
2023	Rs.	12,894.8		US$	170.0
2024		11,818.6			155.8
2025		11,351.1			149.6
2026		11,029.9			145.4
2027		10,485.0			138.2
Thereafter		54,653.2			720.4

Total lease payments	Rs.	112,232.6		US$	1,479.4
Less: imputed interest		34,094.6			449.5

Total operating lease liabilities	Rs.	78,138.0		US$	1,029.9

Weighted average remaining lease term (in years)		9.7			9.7
Weighted average discount rate		7.0	%		7.0	%

The Bank enters into lease agreements to obtain the

right-of-use

assets for its business operations, substantially all of which are premises Lease liabilities and

right-of-use

assets are recognized when the Bank enters into operating leases and represent obligations and rights to use these assets over the period of the leases and are

re-measured

for modifications. Operating lease liabilities include fixed payments for the contractual duration of the lease, adjusted for renewals or terminations. The lease agreements entered into by the Bank do not include any material residual value guarantees and material restrictive covenants. The lease payments are discounted using a rate determined when the lease is recognized. In general, the Bank does not know the discount rate implicit in the lease, and so the Bank estimates a discount rate that the Bank believes approximates a collateralized borrowing rate for the estimated duration of the lease term. At lease commencement, lease liabilities are recognized based on the present value of the remaining lease payments and discounted using the incremental borrowing rate.

Right-of-use

assets are reported in other assets on the consolidated balance sheet and related lease liabilities are reported in accrued expenses and other liabilities. The amortization of operating lease

right-of-use

assets and the accretion of operating lease liabilities are reported together as fixed lease expenses and are included in

non-interest

expense- premises and equipment. The lease expense is recognized on a straight-line basis over the life of the lease. The lease agreements entered into by the Bank generally have renewal and escalation clauses. These agreements also in general permit the Bank to terminate the lease arrangement within a certain period of notice of termination. The Bank does not include renewal or termination options in the establishment of the lease term when it is not reasonably certain that it will exercise them. The Bank has elected to exclude leases with terms of less than one year from the operating lease

right-of-use

assets and lease liabilities. The related short-term lease expense is included in

non-interest

expense- premises and equipment. The Bank accounted for lease-related concessions obtained as a result of the

COVID-19

pandemic in accordance with guidance in Topic 842. As of March 31, 2022, the Bank had additional undiscounted operating lease commitments of Rs. 1,731.9 million, predominantly for premises, with leases which have not yet commenced. These leases will commence by April 2022 and have lease terms ranging from 9 to 15 years.

Reward points

The movement in provision for credit card and debit card reward points as of March 31, 2021 and March 31, 2022 is as follows:


	As of March 31,
	2021			2022			2022

	(In millions)
Opening provision of reward points		Rs. 7,341.5		Rs.	6,387.9		US$	84.2
Provision made during the year		3,752.1			4,651.3			61.3
Utilization/write back of provision		(4,026.7	)		(4,137.7	)		(54.5	)
Effect of change in rate of accrual of reward points		(679.0	)		(542.4	)		(7.1	)

Closing provision of reward points		Rs. 6,387.9		Rs.	6,359.1		US$	83.9