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Management Discussion and Analysis

Value Creation and Capital Formation

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This Integrated Report demonstrates both the value created by the Bank in the past for the benefit of its stakeholders, which is reflected in various forms of capitals as explained below, and, more importantly, the Bank’s continued ability to create value in the short, medium, and long term on the strength of those capitals.

One of the foundational principles of Integrated Reporting is conceptualizing an organisation’s value creation process through a multi-capital model. By reflecting on value creation beyond financial value, the Bank is better able to capture and disclose a wide array of information about the duality of the process of value creation, viz. delivering value to and deriving value from stakeholders. Both these aspects are closely inter-related as the ability of the Bank to create value for itself is inextricably linked to the value it creates for its stakeholders. The more value the Bank delivers to its stakeholders, the more value it can derive in return. Delivering value essentially involves creating financial and non-financial value for the benefit of the stakeholders such as investors, customers, employees, business partners, Government institutions & regulators, and the society and environment, which will in turn drive the Bank’s future earnings, enabling it to create value for itself. This process leads to capital formation in the form of Financial Capital, Manufactured Capital, Intellectual Capital, Human Capital, Social and Relationship Capital, and Natural Capital. It is these capitals that drive the Bank to sustainably create value into the future. 

This duality of the process of value creation is depicted in Figure 06 above.

A snapshot of the value the Bank has been able to create over its existence of 100 plus years as reflected in the six capitals is given in the Statement of Capital Position on pages 36 and 37. It is these strong and robust capitals, unparalleled among the private sector banks, that will fuel the Bank’s growth and ability to create value in the future.

Nevertheless, the reader will note that this Management Discussion & Analysis is structured along the lines of four Strategic Imperatives viz. Prudent Growth, Customer Centricity, Leading Through Innovation and Operational Excellence ( Refer Figure 07 on page 39). In order to create value and grow its stocks of capitals, the Bank executes numerous strategic actions (broadly referred to as value driver activities in the Business Model on pages 34 and 35) to address its strategic imperatives. It is these strategic actions and the resultant interactions, relationships and interconnectivities that drive the capital growth reflected in the Statement of Capital Position. As such, we believe that this structure based on strategic imperatives is a perfect complement to the multi-capital model by reporting on how the Bank created value during the year under review, along with its plans to create value in the short, medium, and long term.