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Governance Guidelines

Guidelines for LIC Housing Finance Limited on Board Effectiveness

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Index / Table of Contents Page Nos.

Preamble 5

1. Composition and Role of Board of Directors 6 1.1. Size and Composition 6

1.1.1. Role of the Board 6 1.1.2. Responsibilities of the Board 7 1.1.3. Additional Responsibilities of the Board 9

1.2. Role of the Chairman 10 1.3. Role of the Directors 12

1.3.1. Additional Guidelines 13

1.4. Managing Director (Executive) 13 1.5. Non-Executive Promoter Directors 14 1.6. Independent Director 14

I. Guidelines for Professional Conduct 16 II. Role and Function of Independent Director 17 III. Duties of Independent Director 17 IV. Manner of appointment of Independent director 18 V. Re-appointment 19 VI. Resignation or Removal 19 VII. Separate Meetings 20 VIII. Evaluation Mechanism 20

1.7. Term / Tenure of Office of Director 20 2. Committees of the Board 21

2.1. Mandate of Audit Committee 22 2.1.1. Power of Audit Committee 25 2.1.2. Audit Committee mandatorily reviews 25

2.2. Mandate of Nomination and Remuneration Committee 25 2.3. Mandate of Corporate Social Responsibility Committee 26 2.4. Mandate of Stakeholders Relationship Committee 26 2.5. Mandate of Risk Management Committee 26

2.6. Mandate of Debenture Allotment Committee 27 2.7. Mandate of Executive Committee 27 2.8. Mandate of Banking Licence Committee 28 2.9. Mandate of QIP Issue Committee 29 2.10. Mandate of HR Committee 30 2.11. Strategic Investment Committee 30 2.12. Article Evaluation Committee 30

3. Board Appointment, Induction and Development 30 3.1. Procedure for Nomination and Appointment of Director 30

3.1.1. General Director Qualification Criteria 31 3.1.2. ‘Fit and Proper’ Criteria for Director of Housing Finance Companies’ 31 3.1.3. Information and Declaration 32 3.1.4. Form of Deed of Covenants with a Director 36 3.1.5. General Criteria for Positive Attributes 41

3.2. Director’s Induction and Development 42 3.3. Director Remuneration 42 3.4. Insurance 43 3.5. Subsidiary Oversight 43

4. Board Effectiveness Review 44 4.1. Board Evaluation 45

4.1.1. Board Questionnaire 45

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4.1.2. Annual Independent directors meeting and Evaluation of Non-Executive & Executive Promoter Directors 45

4.1.3. Independent Directors Evaluation 46 4.1.4. Suggestive / Advisory in nature 46

Preamble

This Governance Guidelines document is based on the current practice followed by the

Company. These guidelines have been prepared keeping in view the provisions of the

Companies Act, 2013, (‘the Act’) Corporate Governance requirements as prescribed by

Securities and Exchange Board of India (SEBI) in terms of Notification dated 2nd

September, 2015 and 22nd December, 2015 of SEBI (Listing Obligations and Disclosure

Requirements) (Amendment) Regulations, 2015, known as (Listing Regulations) and

also in terms of Notification No.NHB.HFC.CG-DIR.1/MD&CEO/2016. In case there is

any change in the law or the requirements of the Listing Regulations as prescribed by

SEBI, the Company will have to comply with the applicable provisions of the Act and

provisions of Listing Regulations as amended from time to time. These guidelines should

be read in conjunction with the Act, Listing Regulations, SEBI (Prohibition of Insider

Trading) Regulations, 2015 alongwith the Code of Internal Procedures and Conduct for

Regulating, Monitoring and Reporting of Trading by Insiders pursuant to Regulation 9 (1)

and Schedule b of the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the

amended Articles of Association of the Company.

This document aims to bring in one place all previous board / committee related

guidelines, policies, code etc. and it shall be put up before the Board of the Company for

its consideration and adoption. These guidelines shall take effect from the date on which

they are adopted by the Board of the LIC Housing Finance Limited.

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Chairman, - non executive promoter director : 1. Shri M. R. Kumar

Director – independent : 3. Shri Jagdish Capoor

Director – independent : 5. Dr. Dharmendra Bhandari

Director – independent : 7. Shri Ameet N. Patel

Director – non independent and non-executive : 10. Shri Sanjay Kumar Khemani

non independent promoter director.

1. Composition and Role of Board of Directors

1.1. Size and Composition:

The Board believes that Board consisting of 8 to 12 members is an appropriate size

based on the Company’s present nature and size of business. The Board periodically

evaluates whether a larger or smaller slate of directors would be preferable.

At present, the Board of Directors is comprised of 11 members — ten Non-Executive

and one Executive Director. Shri Siddhartha Mohanty, Managing Director & CEO is an

Executive Director. The Executive and Non-Executive Directors are competent and

knowledgeable personalities in their respective fields. In view of Listing Regulations and

requirement of the Companies Act, 2013, the existing Directors have been classified as

follows:

1.1.1. Role of the Board:

The Board is collectively responsible for the success of the Company and shall exercise

superintendence, control and direction of the Company’s affairs towards long term value

creation for all stakeholders. The Board alongwith its committees provides supervision

and direction to and oversees the performance of the management. The Board of

Directors shall meet atleast four times a year, with a maximum time gap of one hundred

and twenty days between any two meetings.

The Board of Directors shall periodically review compliance reports pertaining to all laws

applicable to the Company, prepared by the Company as well as steps taken by the

Company to rectify instances of non-compliances. The Board of Directors of the

Managing Director & CEO–Whole Time Executive : 11. Shri Siddhartha Mohanty

Director – independent : 9. Shri Kashi Prasad Khandelwal

Director – non independent and non-executive : 8. Shri P Koteswara Rao

Director – independent : 6. Shri V. K. Kukreja

Director – independent : 4. Ms. Savita Singh

Director – non independent promoter director : 2. Shri Vipin Anand

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Company shall satisfy itself that plans are in place for orderly succession for appointment

to the Board of directors and senior management.

The Board of Directors shall lay down a code of conduct for all members of Board of

Directors and senior management of the Company. The code of conduct shall suitably

incorporate the duties of independent directors as laid down in the Companies Act, 2013.

The Board of Directors shall be responsible for framing, implementing and monitoring

the risk management plan of the Company.

The performance evaluation of independent directors shall be done by the entire Board of

Directors, provided that in the said evaluation, the directors who are subject to evaluation shall

not participate. [This is elaborated hereunder (VIII Evaluation Mechanism)]

1.1.2. Responsibilities of the Board (as per Regulation 4(2)(f) of Listing Regulations)

Disclosure of Information

a. Members of the Board and key executives should be required to disclose

to the Board whether they, directly, indirectly or on behalf of third parties,

have a material interest in any transaction or matter directly affecting the

company.

b. The Board and senior management should conduct themselves so as to

meet the expectations of operational transparency to stakeholders while

at the same time maintaining confidentiality of information in order to

foster a culture for good decision-making.

Key Functions of the Board

a. Reviewing and guiding corporate strategy, major plans of action, risk

policy, annual budgets and business plans; setting performance

objectives; monitoring implementation and corporate performance; and

overseeing major capital expenditures, acquisitions and divestments.

b. Monitoring the effectiveness of the Company’s governance practices and

making changes as needed.

c. Selecting, compensating, monitoring and, when necessary, replacing key

executives and overseeing succession planning.

d. Aligning key managerial personnel and board remuneration with the long

term interest of the company and its shareholders.

e. Ensuring a transparent board nomination process with the diversity of

thought, experience, knowledge, perspective and gender in the Board.

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f. Monitoring and managing potential conflicts of interest of management,

board members and shareholders, including misuse of corporate assets

and abuse in related party transactions.

g. Ensuring the integrity of the Company’s accounting and financial

reporting systems, including the independent audit, and that appropriate

systems of control are in place, in particular, systems for risk

management, financial and operational control, and compliance with the

law and relevant standards.

h. Overseeing the process of disclosure and communications.

i. Monitoring and reviewing Board Evaluation framework.

Other Responsibilities

a. The Board should provide the strategic guidance to the company, ensure

effective monitoring of the management and should be accountable to the

company and the shareholders.

b. The Board should set a corporate culture and the values by which

executives throughout a group will behave.

c. Board members shall act on a fully informed basis, in good faith, with due

diligence and care, and in the best interest of the company and the

shareholders.

d. The Board shall encourage continuing directors’ training to ensure that

the Board members are updated about happening / non-happening of

events.

e. Where Board decisions may affect different shareholder groups

differently, the Board should treat all shareholders fairly.

f. The Board shall maintain high ethical standards and shall take into

account the interests of stakeholders.

g. The Board shall exercise objective independent judgement on corporate

affairs.

h. Board shall consider assigning a sufficient number of non-executive

Board members capable of exercising independent judgement to tasks

where there is a potential for conflict of interest.

i. The Board shall ensure that, while rightly encouraging positive thinking,

these do not result in over-optimism that either leads to significant risks

not being recognised or exposes the company to excessive risk.

j. The Board shall have ability to ‘step back’ to assist executive

management by challenging the assumptions underlying: strategy,

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strategic initiatives (such as acquisitions), risk appetite, exposures and

the key areas of the company’s focus.

k. When committees of the Board are established, their mandate,

composition and working procedures shall be well defined and disclosed

by the Board.

l. Board members shall be able to commit themselves effectively to their

responsibilities.

m. In order to fulfill their responsibilities, board members shall have access

to accurate, relevant and timely information.

n. The Board and senior management shall facilitate the independent

Directors to perform their role effectively as a Board member and also a

member of a committee.

1.1.3. Additional Responsibilities for the Board of LIC Housing Finance

Limited

In addition to the above responsibilities prescribed by the Act, and Listing

Regulations, the main objectives of the Board of LIC Housing Finance Limited

shall include:

Approval / review of business plan, budgets (sanction & disbursement)

and updates;

Approval of revenue and capital budgets and updates / reviews thereof;

Status of NPA and updates / reviews thereof;

Approval of fund raising programme of the Company;

Approval / review of status of swap trades / transactions;

Review outstanding term loan / borrowings;

Risk management review;

Asset liability management updates / reviews thereof;

Approval of the unaudited quarterly and the audited financial annual

accounts of the Company on both stand alone and consolidated basis;

Internal control systems, compliance of all laws applicable to the

Company including the requirement of the Equity Listing Agreement with

the Stock Exchanges;

Delegation of financial powers to the management;

Approval / review of productivity linked incentive, recruitment etc;

Future plans and other decisions / changes of significant importance of price

sensitive nature;

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Status report on the implementation of decisions taken at the Board

meetings;

Report on investor grievances, shareholding pattern and secretarial audit

reports;

Review of subsidiary companies performance.

Significant changes in policies and internal controls.

1.2. Role of the Chairman:

The Chairman is responsible for Board leadership and creating conditions for effectiveness

of the overall Board which include inter-alia:

Setting the strategic agenda of the Board (in conjunction with the Company’s

management) with focus on long term value creation for all stakeholders.

Encouraging active engagement by all the members of the Board and promoting

effective relationship and open communication.

Communicating effectively with all stakeholders and enabling meaningful

relationships, as may be required.

Providing guidance to the Managing Director & CEO.

A person who is a chairman of the board of directors has additional rights and

duties, and additional opportunities. It is usually the function of a chairman to

determine, or at least to exercise a significant influence upon, the agenda of

the meetings of the board. He or she is in a position to ensure that proposals

are brought forward for consideration by the directors at their meetings.

The chairman has a general responsibility to oversee the functioning of the board

and to ensure that all matters to be considered by the board are in fact brought

before it. The chairman should have extensive involvement with the chief

executive in order to be appropriately familiar with what is happening in the

company.

The Chairman shall discharge functions as per the provisions of Memorandum

and Articles of Association of the Company, Companies Act, 2013 and

Secretarial Standards. Care shall be taken in respect of matters like quorum of

the meetings, orderly conduct of meetings, adjournment of convened meetings

(The Chairman may, unless dissented to or objected by the majority of

Directors present at a Meeting at which a Quorum is present, adjourn the

Meeting for any reason, at any stage of the Meeting), declaration of results of

voting, recording of minutes of meetings etc.

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Directors shall not participate through Electronic Mode in the discussion on

certain restricted items, unless expressly permitted by the Chairman. Such

restricted items of business include approval of the annual financial statement,

Board’s report, prospectus and matters relating to amalgamation, merger,

demerger, acquisition and takeover. Similarly, participation in the discussion

through Electronic Mode shall not be allowed in Meetings of the Audit Committee

for consideration of annual financial statement including consolidated financial

statement, if any, to be approved by the Board, unless expressly permitted by

the Chairman.

Supplementary Notes on any of the Agenda Items may be circulated at or prior

to the Meeting but shall be taken up with the permission of the Chairman and

with the consent of a majority of the Directors present in the Meeting, which shall

include at least one Independent Director, if any.

Any item not included in the Agenda may be taken up for consideration with the

permission of the Chairman and with the consent of a majority of the Directors

present in the Meeting, which shall include at least one Independent Director, if

any.

In case of Director/s participating through Electronic Mode, the Chairman shall

confirm the attendance of such Directors. For this purpose, at the

commencement of the Meeting, the Chairman shall take a roll call. The Chairman

or Company Secretary shall request the Director participating through Electronic

Mode to state his full name and location from where he is participating and shall

record the same in the Minutes.

The Chairman shall guide the Board in accordance with well settled practices on

Corporate governance, particularly on matters such as categorisation of

directors, composition of Board, constitution of Audit, Nomination &

Remuneration, Stakeholders’ Relationship and Corporate Social Responsibility

Committees or such other statutory committees as may be required to be

constituted inter alia changing the nomenclature and / or terms of reference, from

time to time, Board / Committee / General meeting procedures, disclosure by

directors etc.

The Chairman shall convene meetings of Board and take the chair at all such

meetings.

The Chairman must be ready, willing and able to intervene decisively as and

when necessary. The chairman should further ensure that the views of all

directors are heard and not subdued by the conduct of others during deliberations

and that board meetings achieve the purposes for which they are intended, and

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should take a lead in reviewing the composition, effectiveness and

performance of the board.

The Chairman shall ensure that the constitution of the Board is appropriate to the

needs of the business and that it meets the Governance Guidelines set out by

the Companies Act, 2013, SEBI (LODR) Regulations, 2015, Secretarial

Standards or any other regulatory body or advisory as may be required for

Company’s business; provided however, that adhering to the recommendations

of advisory/professional bodies that are non-statutory in nature, shall be at the

sole discretion of the Board.

The Chairman shall ensure that the individual members of the Board have

necessary freedom and opportunity to express their views.

The Chairman shall ensure that the Board makes clear what powers it reserves

for itself and what it has delegated to the Executive Director.

The Chairman shall ensure that the proceedings of the Meeting are correctly

recorded.

The Chairman has absolute discretion to exclude from the Minutes, matters

which in his opinion are or could reasonably be regarded as defamatory of any

person, irrelevant or immaterial to the proceedings or which are detrimental to

the interests of the company.

Minutes of the previous Meeting may be signed either by the Chairman of such

Meeting at any time before the next Meeting is held or by the Chairman of the

next Meeting at the next Meeting.

1.3. Role of the Directors: [as per new provision (166) of the Companies Act, 2013]

Directors of LIC Housing Finance Limited are expected to comply with the duties which

are fiduciary in nature and major ones are as under:

i) To act in accordance with the Company’s Articles of Association in force

from time to time.

ii) To act in good faith in order to promote the objects of the Company for

the benefits of its members as a whole, and in the best interest of the

Company.

iii) To discharge their duties with due and reasonable care, skill and

diligence.

iv) Not to involve themselves in a situation in which they may have a direct

or indirect interest that conflicts, or possibly may conflict, with the interest

of the Company.

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v) Not to secure or attempt to secure any undue gain or advantage either to

yourself or to your relatives, partners or associates.

vi) Not to assign their office as Director.

In addition to the above Directors are also expected to:

i) Constructively challenge and help develop proposals on strategy for

growth of the Company.

ii) Evaluate the performance of management in meeting agreed goals and

objectives.

iii) Satisfy oneself on the integrity of financial information and that financial

controls and systems or risk management are effective and defensible.

iv) Take responsibility for the processes for accurately reporting on

performance and financial position of the Company.

v) Keep governance and compliance with the applicable legislation and

regulations under review and the conformity of Company’s practices to

accepted norms.

Further, the directors are expected to demonstrate high standards of ethical

behaviour, strong interpersonal and communication skills and soundness of

judgement.

1.3.1. Additional Guidelines for LIC Housing Finance Limited

Board will ensure that a transparent board nomination process is in place that

encourages diversity of thought, experience, knowledge, perspective, age and

gender.

It is expected that Board to have an appropriate blend of functional and industry

expertise.

1.4. Managing Director (who is Executive Director)

Managing Director provides leadership through his / her board position, as well

as for the business area or function for which he / she is directly responsible.

Managing Director is expected to exercise individual judgement on every issue

in the overall interests of the Company. He or she is expected to demonstrate

role model behaviour on all aspects including living by the Company’s Code of

Conduct for Directors and Senior Management.

Managing Director is member of the Board by virtue of employment with LIC of

India who is on deputation to the Company on the terms and conditions as

decided by LIC of India and Board of LIC Housing Finance Limited. The

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membership of the Board would cease in the event of superannuation,

resignation or cessation of service or on being transferred / repatriated back to

LIC of India.

1.5. Non-Executive Promoter Directors (who is Chairman and other one Promoter Director)

Non-executive director bring an external view and judgement on the issues of

strategy, risk, performance, capital and other resources, key appointments and

business conduct. They should therefore be provided with the freedom to

constructively challenge strategies and policies proposed by management. They

should also be at the liberty to use all channels of communication, formal as well

as informal, to put across their point of view to the management.

Non-executive director shall retire by rotation as required by the law but shall be

entitled to be re-appointed if qualified under law. They should be selected

through a formal process of recommendation by Nomination and Remuneration

Committee of the Company and confirmed by the Board.

1.6. Independent Director [as mandated by Regulation 16 of the Listing Regulations]

An independent director in relation to a company, means a non-executive director other

than a managing director or a whole-time director or a nominee director -

a. Who, in the opinion of the Board, is a person of integrity and possesses relevant

expertise and experience;

b. i) who is or was not a promoter of the company or its holding, subsidiary or

associate company;

ii) who is not related to promoters or directors in the company, its holding,

subsidiary or associate company;

c. who has no or had no pecuniary relationship with the company, its holding,

subsidiary or associate company;

d. none of whose relatives has or had pecuniary relationship or transaction with

the company, its holding, subsidiary or associate company, or their promoters,

or directors, amounting to two per cent or more of its gross turnover or total

income of fifty lakh rupees or such higher amount as may be prescribed,

whichever is lower, during the two immediately preceding financial years or

during the current financial year;

e. who, neither himself nor any of his relatives- i) holds or has held the position of a key managerial personnel or is or has

been employee of the company or its holding, subsidiary or associate

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company in any of three financial years immediately preceding the

financial year in which he is proposed to be appointed;

ii) is or has been an employee or proprietor or a partner, in any of the three

financial years immediately preceding the financial year in which he is

proposed to be appointed, of-

A) a firm of auditors or company secretaries in practice or cost auditors of

the company or its holding, subsidiary or associate company; or

B) any legal or a consulting firm that has or had any transaction with the

company, its holding, subsidiary or associate company amounting to ten

per cent or more of the gross turnover of such firm;

iii) holds together with his relatives two per cent or more of the total voting

power of the company; or

iv) is a Chief Executive or director, by whatever name called, of any non-

profit organisation that receives twenty-five per cent or more of its

receipts from the company, any of its promoters, directors or its holding,

subsidiary or associate company or that holds two per cent or more of

the total voting power of the company; or

f. Who possesses such other qualification as may be prescribed as per Rule 5 of

the Companies (Appointment and Qualification of Directors) Rules, 2014.

An independent director shall possess appropriate skills, experience and knowledge in

one or more fields of finance, law management, sales, marketing, administration,

research, corporate governance, technical operations or other disciplines related to the

company’s business.

An independent director as per Regulation 16 of the Listing Regulations shall mean non-

executive director of the company who-

a) Apart from receiving director’s remuneration, has or had no material pecuniary

relationship with the company, its holding, subsidiary or associate company, or

their promoters, or directors, during the two immediately preceding financial

years or during the current financial year.

b) Is not related to promoters or persons occupying management positions at the

board level or at one level below the board;

c) Has not been an executive of the company in the immediately preceding three

financial years;

d) Is not a partner or an executive or was not partner or an executive during the

preceding three years, of any of the following;

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i) The statutory audit firm or the internal audit firm that is associated

with the company, and

ii) The legal firm(s) and consulting firm(s) that have a material

association with the company.

e) Is not a material supplier, service provider or customer or a lessor or lessee of

the company, which may affect independence of the director;

f) is not a substantial shareholder of the company i.e. owning two percent or more

of the block of voting shares.

g) who is not less than 21 years of age.

The Nomination and Remuneration Committee annually reviews with the Board the

applicable skills and characteristics required of Board nominees in the context of the

size, composition and needs of the Board and Company, apart from Fit and Proper

Criteria for Directors of Housing Finance Companies as per Housing Finance

Companies – Corporate Governance (National Housing Bank) Directions, 2016 (as

appended as Annex-1) vide notification No.NHB.HFC.CG-DIR.1/MD&CEO/2016 dated

09.02.2017. As per the aforesaid notification, the Company as directed by NHB would

obtain necessary information and declaration from the proposed / existing Directors for

the purpose in the format as appended as Annex-2. Further, the proposed / existing

Directors would execute the Deeds of Covenants in the format as appended as Annex-

3. Upon the recommendation of the Nomination and Remuneration Committee, the

Board may appoint a director on the Board during the course of the year to fill vacancies

in the Board and newly appointed director to serve until the succeeding annual meeting

of shareholders. Independent directors ideally should be thought / practice leaders in

their respective functions / domains.

Independent directors are expected to abide by the ‘Code for Independent Directors’ as

outlined in the Act. The code specifies the guidelines of professional conduct, role and

function and duties of independent directors. These are as follows:

I. Guidelines of professional conduct: (schedule IV – section 149(8))

An independent director shall:

1. Uphold ethical standards of integrity and probity;

2. Act objectively and constructively while exercising his duties;

3. Exercise his responsibilities in a bona fide manner in the interest of the company;

4. Devote sufficient time and attention to his professional obligations for informed

and balanced decision making;

5. Not allow any extraneous considerations that will vitiate his exercise of objective

independent judgement in the paramount interest of the company as a whole,

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while concurring in or dissenting from the collective judgement of the Board in its

decision making;

6. Not abuse his position to the detriment of the company or its shareholders or for

the purpose of gaining direct or indirect personal advantage or advantage for any

associated person;

7. Refrain from any action that would lead to loss of his independence;

8. Where circumstances arise which make an independent director lose his

independence, the independent director must immediately inform the Board

accordingly;

9. Assist the company in implementing the best corporate governance practices.

II. Role and Functions of Independent Director:

The independent directors shall:

1. Help in bringing an independent judgement to bear on the Board’s deliberations

especially on issues of strategy, performance, risk management, resources, key

appointments and standards of conduct;

2. Bring an objective view in the evaluation of the performance of board and

management;

3. Scrutinize the performance of management in meeting agreed goals and

objectives and monitor the reporting of performance;

4. Satisfy themselves on the integrity of financial information and that financial

controls and the systems of risk management are robust and defensible;

5. Safeguard the interests of all stakeholders, particularly the minority shareholders;

6. Balance the conflicting interest of the stakeholders;

7. Determine appropriate levels of remuneration of executive directors, key

managerial personnel and senior management and have a prime role in

appointing and where necessary recommend removal of executive directors, key

managerial personnel and senior management;

8. Moderate and arbitrate in the interest of the company as a whole, in situations of

conflict between management and shareholder’s interest.

III. Duties of Independent Director:

The independent directors shall –

1. Undertake appropriate induction and regularly update and refresh their skills,

knowledge and familiarity with the company;

2. Seek appropriate clarification or amplification of information and, where

necessary, take and follow appropriate professional advice and opinion of

outside experts at the expense of the company;

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3. Strive to attend all meetings of the Board of Directors and of the Board

committees of which he or she is a member;

4. Participate constructively and actively in the committees of the Board in which

they are chairpersons or members;

5. Strive to attend the general meetings of the company;

6. Where they have concerns about the running of the company or a proposed

action, ensure that these are addressed by the Board and, to the extent that they

are not resolved, insist that their concerns are recorded in the minutes of the

Board meeting;

7. Keep themselves well informed about the company and the external environment

in which it operates;

8. Not to unfairly obstruct the functioning of an otherwise proper Board or committee

of the Board;

9. Pay sufficient attention and ensure that adequate deliberations are held before

approving related party transactions and assure themselves that the same are in

the interest of the company;

10. Ascertain and ensure that the company has an adequate and functional vigil

mechanism and to ensure that the interests of a person who uses such

mechanism are not prejudicially affected on account of such use;

11. Report concerns about unethical behaviour, actual or suspected fraud or violation

of the company’s code of conduct or ethics policy;

12. Acting within his / her authority, assist in protecting the legitimate interests of the

company, shareholders and its employees;

13. Not disclose confidential information, including commercial secrets,

technologies, advertising and sales promotion plans, unpublished price sensitive

information, unless such disclosure is expressly approve by the Board or required

by law.

IV. Manner of appointment of Independent Director:

1. Appointment process of independent directors shall be independent of the

Company management; while selecting independent directors, the Board shall

ensure that there is appropriate balance of skills, experience and knowledge in

the Board so as to enable the Board to discharge its functions and duties

effectively.

2. The appointment of independent director(s) of the company shall be approved at

the meeting of the shareholders.

3. The explanatory statement attached to the notice of the meeting for approving

the appointment of independent director shall include a statement that in the

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opinion of the Board, the independent director proposed to be appointed fulfills

the conditions specified in the Act and the rules made thereunder and that the

proposed director is independent of the management.

4. The appointment of independent directors shall be formalized through a letter of

appointment, which shall set out:

a. The term of appointment;

b. The expectation of the Board from the appointed director; the Board level

committee(s) in which the director is expected to serve and its tasks;

c. The fiduciary duties that come with such an appointment alongwith

accompanying liabilities;

d. Provision for Directors and Officers (D and O) insurance, if any;

e. The Code of Business Ethics that the company expects its directors and

employees to follow;

f. The list of actions that a director should not do while functioning as such in

the company; and

g. The remuneration, mentioning periodic fees, reimbursement of expenses for

participation in the Board’s and other meetings and profit related commission,

if any.

5. The terms and conditions of appointment of independent directors shall be open

for inspection at the registered office of the company by any member during

normal business hours.

6. The terms and conditions of appointment of independent directors shall also be

posted on the company’s website.

V. Re-appointment:

The re-appointment of independent director shall be on the basis of report of

performance evaluation.

VI. Resignation or removal:

1. The resignation or removal of an independent director shall be in the same

manner as is provided in sections 168 and 169 of the Act.

2. An independent director who resigns or is removed from the Board of the

company shall be replaced by a new independent director within a period of not

more than one hundred and eighty days from the date of such resignation or

removal, as the case may be.

3. Where the company fulfils the requirement of independent directors in its Board

even without fulfilling the vacancy created by such resignation or removal, as the

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case may be, the requirement of replacement by a new independent director

shall not apply.

VII. Separate Meetings:

1. The independent directors of the company shall hold atleast one meeting in a

year, without the attendance of non-independent directors and members of

management;

2. All the independent directors of the company shall strive to be present at such

meeting;

3. The meeting shall:

a. Review the performance of non-independent directors and the Board as a

whole;

b. Review the performance of the Chairperson of the company, taking into

account the views of executive directors and non-executive directors;

c. Assess the quality, quantity and timeliness of flow of information between the

company management and the Board that is necessary for the Board to

effectively and reasonably perform their duties.

VIII. Evaluation Mechanism:

1. The performance evaluation of independent directors shall be done by the

entire Board of Directors, excluding the director being evaluated.

2. On the basis of the report of performance evaluation, it shall be determined

whether to extend or continue the term of appointment of the independent

director.

Independent directors should be provided with the freedom to constructively challenge

strategies and policies proposed by management. They should also be at the liberty to

use all channels of communication, formal as well as informal, to put across their point

of view to the management.

Independent directors shall not be liable for retirement by rotation.

1.7. Term / Tenure of Office of Director

Not less than two thirds of the total number of Directors (excluding Non-

Executive Independent Directors) shall be liable to retire by rotation. One

third of the number of directors liable to retire by rotation will retire by rotation

every year and shall be appointed by the Company in General Meeting.

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Term of office of Non-Executive Independent Director: Person shall be

eligible for the office of Non-Executive Director for a term upto five

consecutive years on the Board of the Company. However, the Board

may take informed decision to consider such person, who has

completed term of office of five consecutive years to be eligible for re-

appointment on passing of a special resolution by the Company and

disclosure of such appointment in the Board’s report. Notwithstanding

the above, no Non-Executive Director shall hold office for more than

two consecutive terms of five years each.

Term of office of Non-Executive Promoter Director (i.e. Chairman & other LIC

of India - Managing Director) shall be upto attainment of superannuation in

the services of LIC of India.

Term of office of Executive Promoter Director (i.e. Managing Director of LIC

Housing Finance Limited) shall be as decided by LIC of India and Board of

LIC Housing Finance Limited from time to time which will be within the limit

as per the Companies Act, 2013.

2. Committees of the Board

The Board has set up following committees in addition to those which are mandatory or

optional under SEBI and other applicable regulations:

Audit Committee;

Nomination and Remuneration Committee;

Corporate Social Responsibility Committee;

Stakeholders Relationship Committee;

Risk Management Committee;

Debenture Allotment Committee;

Executive Committee;

Banking Licence Committee;

QIP Issue Committee;

HR Committee.

Strategic Investment Committee.

Article Evaluation Committee.

The mandates of the above committees shall cover the matters specified by law / regulator, but

should ideally include the following which are outlined below under Mandates of Board Committees.

Mandates of Board Committees:

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2.1. Mandate of Audit Committee

The Audit Committee comprises three Non-Executive, Independent Directors

with expertise in finance, accounts, treasury and law. All the members of Audit

Committee are financially literate. The Company Secretary shall act as the

secretary to the Audit Committee.

The Audit Committee shall meet atleast four times in a year and not more than

one hundred and twenty days shall elapse between two meetings. The quorum

for Audit Committee meeting shall either be two members or one third of the

members of the audit committee, whichever is greater, with atleast two

independent directors.

Role of Audit Committee

As per the Act, the role of the Audit Committee (section 177) shall include the

following:

a. The recommendation for appointment, remuneration and terms of

appointment of auditors of the company. Section 139(1) provides that

all appointments of auditors including filing of casual vacancy shall be

made after taking into account the recommendation of audit committee;

b. Review and monitor the auditor’s independence and performance, and

effectiveness of audit process;

c. Examination of the financial statement and the auditors’ report thereon;

d. Approval of any subsequent modification of transactions of the

company with related parties;

e. Scrutiny of inter-corporate loans and investments;

f. Valuation of undertakings or assets of the company, wherever it is

necessary;

g. Evaluation of internal financial controls and risk management systems;

h. Monitoring the end use of funds raised through public offers and related

matters.

The Audit Committee may call for the comments of the auditors about

internal control systems, the scope of audit, including the observations of

the auditors and review of financial statement before their submission to

the Board and may also discuss any related issues with the internal and

statutory auditors and the management of the company.

21 | P a g e

Establish a vigil mechanism for directors and employees to report genuine

concerns in such manner as may be prescribed.

The role of the Audit Committee as per Regulation 18(3) of the Listing

Regulations shall include the following:

i. Oversight of the company’s financial reporting process and the

disclosure of its financial information to ensure that the financial

statement is correct, sufficient and credible;

ii. Recommendation for appointment, remuneration, and terms of

appointment of auditors of the company;

iii. Approval of payment to statutory auditors for any other services

rendered by the statutory auditors;

iv. Reviewing, with the management, the annual financial statements

and auditor’s report thereon before submission to the board for

approval, with particular reference to:

a. Matters required to be included in the Director’s Responsibility

Statement to be included in the Board’s report in terms of

clause(c) of sub-section 3 of section 134 of the Companies Act,

2013;

b. Changes, if any, in accounting policies and practices and reasons

for the same;

c. Major accounting entries involving estimates based on the

exercise of judgement by management;

d. Significant adjustments made in the financial statements arising

out of audit findings;

e. Compliance with listing and other legal requirements relating to

financial statements;

f. Disclosure of any related party transactions;

g. Qualifications in the draft audit report.

v. Reviewing, with the management, the quarterly financial statements

before submission to the board for approval;

vi. Reviewing, with the management, the statement of uses / application

of funds raised through an issue (public issue, rights issue,

preferential issue, etc), the statement of funds utilized for purposes

other than those stated in the offer document / prospectus / notice

and the report submitted by the monitoring agency on utilization of

proceeds of a public or rights issue, and making appropriate

recommendations to the Board to take up steps in this matter;

22 | P a g e

vii. Review and monitor the auditor’s independence and performance and

effectiveness of audit process;

viii. Approval or any subsequent modification of transactions of the

company with related parties.

ix. Scrutiny of inter-corporate loans and investments.

x. Valuations of undertakings or assets of the company wherever it is

necessary.

xi. Evaluation of internal financial controls and risk management

systems.

xii. Reviewing, with the management, performance of statutory and

internal auditors, adequacy of the internal control systems;

xiii. Reviewing the adequacy of internal audit function, if any, including the

structure of the internal audit department, staffing and seniority of the

official heading the department, reporting structure coverage and

frequency of internal audit;

xiv. Discussion with the internal auditors of any significant findings and

follow up thereon;

xv. Reviewing the findings of any internal investigations by the internal

auditors into matters where there is suspected fraud or irregularity or

a failure of internal control systems of a material nature and reporting

the matter to the board;

xvi. Discussion with statutory auditors before the audit commences, about

the nature and scope of audit as well as post-audit discussion to

ascertain any area of concern;

xvii. To look into the reasons for substantial defaults in the payment to the

depositors, debenture holders, shareholders (in case of non-payment

of declared dividends) and creditors;

xviii. To review the functioning of the Whistle Blower Mechanism;

xix. Approval of appointment of CFO (i.e., the whole-time Finance Director

or any other person heading the finance function or discharging that

function) after assessing the qualifications, experience and

background, etc of the candidate;

xx. Carrying out any other function as is mentioned in the terms of

reference of the Audit Committee.

(The term related party transactions shall have the same meaning as provided in Regulation 23 of the Listing Regulations).

2.1.1. Powers of Audit Committee

To investigate any activity within its terms of reference.

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To seek information from any employee.

To obtain outside legal or other professional advice.

To secure attendance of outsiders with relevant expertise, if it considers

necessary.

2.1.2. The Audit Committee mandatorily reviews the following:

1. Management discussion and analysis of financial condition and results of

operations;

2. Statement of significant related party transactions submitted by

management;

3. Management letters / letters of internal control weakness issued by the

statutory auditors;

4. Internal audit reports relating to internal control weakness;

5. The appointment, removal and terms of remuneration of the Chief Internal

auditor shall be subject to review by the Audit committee.

2.2. Mandate of Nomination And Remuneration Committee: [as mandated by Act

(section 178) and Regulation 19 of the Listing Regulations]

Formulation of the criteria for determining qualifications, positive

attributes and independence of a director.

Identifying persons who are qualified to become directors and who may

be appointed in senior management in accordance with the criteria laid

down.

Recommend to the Board, the appointment or re-appointment of

directors.

Devise a policy on Board diversity.

Recommend to the Board appointment of key managerial personnel

(KMP as defined by the Act).

Support the Board and Independent Directors in evaluation of the

performance of the Board and individual directors. This shall include

“Formulation of criteria for evaluation of performance of Independent

Directors and the Board of directors. Whether to extend or continue the

term of appointment of the independent director, on the basis of the report

of performance evaluation of independent directors.

Recommend to the Board the remuneration policy for directors, KMP and

other employees.

24 | P a g e

and long-ter

(a) the level and composition of remuneration is reasonable and

attract, retain and motivate directors of the quality required to run the

involves a balance between fixed and incentive pay reflecting short

successfully;

performance benchmarks; and

m

Provided that such policy shall be disclosed in the Board's report

On an annual basis, recommend to the Board the remuneration payable

to directors, KMP and senior management as well as other employees.

Oversee familiarization and training programmes for directors.

2.3. Mandate of Corporate Social Responsibility Committee:[as mandated by section

135 of the Act]

The Committee shall formulate and recommend a CSR policy to the

Board which shall indicate the activities to be undertaken by the

Company as specified in Schedule VII.

Recommend the amount of expenditure to be incurred on the CSR

activities.

Monitor the CSR policy from time to time.

2.4. Mandate of Stakeholders Relationship Committee:

Consider and resolve the grievances of security holders of the

company including complaints related to transfer of securities, non

receipt of annual report / declared dividends.

unclaimed amounts to the Investor Education and Protection Fund.

Review statutory compliance relating to all security holders.

Oversee compliances in respect of dividend payments and transfer of

performance objectives appropriate to the working of the company

(c) remuneration to directors, key managerial personnel and senior

(b) relationship of remuneration to performance is clear and meets

The Nomination and Remuneration Committee shall, while

and its goals:

management

appropriate

company

sufficient to

formulating the policy shall ensure that

25 | P a g e

Oversee and review all matters related to the transfer of securities of

the company.

Approve issue of duplicate certificates of the company.

Recommend measures for overall improvement of the quality of

investor services.

2.5. Mandate of Risk Management Committee: [applicable to top 100 listed entities,

determined on the basis of market capitalization, as at the end of the immediate previous financial year]

To review risk management policy.

Review of the current status on the outer limits prescribed in the Risk

Management policy and report to the Board.

Review the matters on risk management.

Review and monitor types of risks the company is exposed to.

Lay down procedures to inform Board about risk assessment and

minimization procedures

Frame, implement and monitor the risk management plan of the

company.

2.6. Mandate of Debenture Allotment Committee:

Allot Non-Convertible Debentures / Bonds (Tier I/II Bonds) to the

successful applicant from time to time in different tranches.

2.7. Mandate of Executive Committee

To frame the norms, policies, guidelines, conditions, parameters for

all housing loan schemes including Project Finance schemes.

To relax / waive / alter the norms/ guidelines/ condition of the housing

loan schemes including Project Finance schemes on case to case

basis.

To sanction loan to Builders and Developers under Project Loans

beyond the limits delegated to Managing Director & CEO as per

Financial Power Standing Order, 1990 (as amended upto 25th April,

2012) (FPSO) on recommendation of the Project Finance / HOD

Committee. The Project Finance Committee would be constituted by

the Managing Director & CEO from time to time.

To sanction loan under Rental Securitization of beyond the loan

amount delegated to Managing Director & CEO as per FPSO.

26 | P a g e

To sanction loan under Individual loan schemes beyond the loan

amount delegated to Managing Director & CEO as per FPSO.

To approve any new loan scheme that Company may launch.

To revise the interest rate in the existing schemes & new schemes of

Individual/ Project loans.

To modify/ restructure existing & new schemes for Individual / Project

loans.

To revise terms and conditions of the existing & new Individual/

Project loans.

To take over the portfolio of the Housing Loans subject to the limits

as specified by the Board from time to time.

To waive Interest, Additional Interest, and other charges beyond the

limits delegated to Managing Director & CEO in respect of the One

Time Settlement under FPSO.

To waive principal amount irrespective of the waiver amount involved

in respect of One Time Settlement beyond the limits delegated to

Managing Director & CEO under FPSO.

To approve the Reserve price under SARFAESI Act, 2002 beyond the

limits delegated to Managing Director & CEO under FPSO.

To approve LICHFL- PLR and to review & revise the same from time

to time.

To approve the purchase / construction of the property for office

building / staff quarters beyond the limits delegated to Managing

Director & CEO generally on such terms and conditions as they may

think fit and in any such purchase or other acquisition to accept such

title as they may believe or may be advised to be reasonably

satisfactory.

To borrow money for the purpose of the business of the Company

subject to the limit specified by the Board from time to time.

To approve the payment for arrangers for fund mobilization.

To approve the payment of processing or any other fees payable to

Banks/FIs.

To approve the availing of re-finance from National Housing Bank.

To delegate its powers to Managing Director & CEO any or all of the

powers listed above for a specific period.

27 | P a g e

Approve / ratify relaxation/ waiver/ refund of processing fees,

administrative fee, prepayment charges in respect of project finance

(including at the time of revalidation).

Approve / ratify restructuring / re-schedulement of project loan.

Approve revision of rate of interest in respect of project loans on case

to case basis.

Approve/ ratify issue of NOC, release of charge in respect of project

loan.

Approve the cases under Consortium/ Joint financing.

Approve takeover of existing project loan/ term loan of other

institution/s.

2.8. Mandate of Banking Licence Committee:

Exploring the possibility of applying for Banking License pursuant to

the guidelines to be framed by the RBI

appraise and select the Consultant / Retainer for preparation of

documentation, presentation, business plan and liaison with RBI in

the matter and also to assist in giving feedback / suggestions to RBI.

Approve the remuneration of the consultant/s.

2.9. Mandate of QIP Issue Committee:

To decide on type of securities to be issued;

The aggregate amount to be raised through the QIP;

Decide the price (including premium) at which the securities would be

issued,

Such price being not less than price arrived as per SEBI (Issue of

Capital and Disclosure Requirements) Regulations, 2009 at the time

of issue;

The number of securities to be issued in tranche;

The terms and conditions thereof, as may be deemed appropriate at

the time of such issue or allotment considering the prevailing market

conditions and relevant factors;

To negotiate and finalize all such arrangements, if any, with any

Merchant Banker, Depositories, Custodians and all such agencies as

may be involved or concerned in such offerings of securities and the

fees payable to them by way of commission, brokerage, or the like;

28 | P a g e

to finalize, approve, adopt and execute the draft offering circular /

information memorandum / such other documents / writings, if any,

forward the same to appropriate authorities if necessary and issue the

same to the prospective investors after incorporating any correction

or alteration therein;

Seek the listing of such securities on the Stock Exchanges where the

Company's existing shares are listed;

and to accept such conditions as may be prescribed by any of them

in granting any such approval consent, permission or sanction;

To issue and allot the securities and to do all such acts, deeds,

matters and things necessary or desirable in connection with or

incidental to the issue of the securities;

To take effective steps for crediting the securities to the demat

account of the proposed allottees and enter the names of the allottees

in the Register of Members of the Company;

To finalize, sign and execute all the papers, deeds and documents

related to the said QIP as may be deemed fit and necessary;

To resolve and settle all questions and difficulties that may arise in

the proposed issue, offer and allotment of any of the said shares,

utilization of the issue proceeds;

To file necessary returns, make declarations / announcements,

furnish information etc, to the concerned authorities in connection with

the QIP; and to do all acts, deeds and things in connection therewith

and incidental thereto and;

To delegate such powers as it may in its absolute discretion, deem

appropriate, to any person.

2.10 Mandate of HR Committee: (Subsumed into Nomination & Remuneration Committee)

Deliberate on all HR related matters of the employees of the Company

other than those under the purview of Nomination & Remuneration

Committee and recommend to the Board for final approval.

2.11 Strategic Investment Committee:

The scope of the Strategic Investment Committee is to review the

valuation of any proposal of strategic investment that may be received

by the Company and recommend it to the Board.

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2.12 Article Evaluation Committee:

The scope of the Articles Evaluation Committee is to review

amendments to Articles of Association of the Company and to get

legal vetting conducted of the draft Articles of Association by Law firm.

3. Board Appointment, Induction and Development

3.1. Procedure for Nomination and Appointment of Directors

A director’s qualification to serve on the Board shall be determined by the Board,

upon the recommendation of the Nomination and Remuneration Committee,

prior to nominating said director for election at the Company’s annual general

meeting. In addition, with respect to each director candidate considered for

election to the Board between annual general meetings, prior to such election,

the Nomination and Remuneration Committee shall evaluate each director

candidate and recommend to the Board duly qualified director as candidate for

election to the Board.

The Nomination and Remuneration Committee shall evaluate each director and

candidate under the Director Qualification Criteria and ‘Fit and Proper’ Criteria

for Directors of Housing Finance Companies set forth herein.

3.1.1. General Director Qualification Criteria

The Board has not established specific minimum age, education, and years of

business experience or specific types of skills for Board members, but, in

general, expects qualified directors to have ample experience and proven record

of professional success, leadership and the highest level of personal and

professional ethics, integrity and values. The Board would take into account

many factors such as general understanding of marketing, finance, research,

corporate governance, legal including compliance of laws, human resources,

labour welfare and other disciplines relevant to the success of a housing finance

company in today’s competitive environment, understanding of the company’s

business, educational and professional background, personal accomplishment

and other factors that the Board may consider relevant.[as mandated by Act]

3.1.2. ‘Fit and Proper’ Criteria for Directors of Housing Finance Companies’

The importance of due diligence of Directors to ascertain suitability for the post

by way of qualifications, technical expertise, track record, integrity, etc. needs

no emphasis for any financial institution. It is proposed to follow the same

guidelines mutatis muntandis in case of Housing Finance Companies also.

30 | P a g e

While the National Housing Bank carries out due diligence on Directors before

issuing Certificate of Registration to HFC, it is necessary that HFCs put in place

an internal supervisory process on a continuing basis. Further, in order to

streamline and bring in uniformity in the process of due diligence, while

appointing Directors, HFCs are advised to ensure that the procedures

mentioned below are followed and minimum criteria fulfilled by the persons

before they are appointed on the Boards:

a) HFCs should undertake a process of due diligence to determine the

suitability of the person for appointment / continuing to hold appointment

as a Director on the Board, based upon qualification, expertise, track

record, integrity and other ‘fit and proper’ criteria. HFCs should obtain

necessary information and declaration from the proposed / existing

Directors for the purpose in the format given at Annex-2.

b) The process of due diligence should be undertaken by the HFCs at the

time of appointment / renewal of appointment.

c) The Boards of the HFCs should constitute Nomination Committees to

scrutinize the declarations.

d) Based on the information provided in the signed declaration,

Nomination Committees should decide on the acceptance or otherwise

of the Directors, where considered necessary.

e) HFCs should obtain annually as on 31st March a simple declaration

from the Directors that the information already provided has not

undergone change and where there is any change, requisite details are

furnished by them forthwith.

f) The Board of HFCs must ensure in public interest that the nominated/

elected Directors execute the deeds of covenants in the format given in

Annex-3.

Annex-2

3.1.3. Information and Declaration

Name of HFC:

Declaration and Undertaking by Director (with enclosures as appropriate as

on )

I. Personal details of Director

a. Full Name

b. Date of Birth

c. Education Qualifications

d. Relevant Background and

31 | P a g e

Experience e. Permanent Address

f. Present Address

g. E-mail Address / Telephone

Number h. Director Identification

Number

i. Permanent Account Number under the

Income Tax Act and name and

address of Income Tax Circle

j. Relevant knowledge and experience

k. Any other information relevant to

Directorship of the HFC

II. Relevant Relationship of Director

a. List of Relatives if any who are

connected with the HFC (Refer Section 6 and Schedule 1A of the Companies

Act, 1956 and corresponding

provisions of New Companies Act,

2013)

b. List of entities if any in which he/she is

considered as being interested

(Refer Section 299(3)(a) and

Section 300 of the Companies Act,

1956 and corresponding provisions of

New Companies Act, 2013)

c. List of entities in which he/she is

considered as holding substantial

interest within the meaning of HFC

(NHB) Directions, 2010

d. Name of HFC in which he/she is or

has been a member of the board

(giving details of period during

which such office was held)

e. Fund and non-fund facilities, if any,

presently availed of by him/her and/or by entities listed in II (b) and (c) above

35 | P a g e

from the HFC

f. Cases, if any, where the director or

entities listed in II (b) and (c) above are

in default or have been in default in the

past in respect of credit facilities

obtained from the HFC or any other HFC / bank.

III. Records of professional achievements

a. Relevant professional achievements

IV. Proceedings, if any, against the Director

a. If the director is a member of a

professional association/body, details of

disciplinary action, if any, pending or

commenced or resulting in conviction in

the past against him/her or whether

he/she has been banned from entry into

any profession/ occupation at any time.

b. Details of prosecution, if any, pending or commenced or resulting in conviction in the past against the director and/or

against any of the entities listed in II (b) and (c) above for violation of economic laws and regulations.

c. Details of criminal prosecution, if any,

pending or commenced or resulting in

conviction in the last five years against

the director

d. Whether the director attracts any of the

disqualifications envisaged under

Section 274 of the Companies Act 1956

and corresponding provisions of New

Companies Act, 2013?

e. Has the director or any of the entities at

II (b) and (c) above been subject to any investigation at the instance of Government department or agency?

f. Has the director at any time been found guilty of violation of rules/regulations/ legislative requirements by customs/

excise /income tax/foreign exchange /other revenue authorities, if so give

particulars

g. Whether the director has at any time

come to the adverse notice of a

regulator such as SEBI, IRDA, MCA,

RBI, etc.

(Though it shall not be necessary for a

36 | P a g e

candidate to mention in the column about orders and findings made by the regulators which have been later on reversed/set aside in toto, it would be

necessary to make a mention of the same, in case the reversal / setting aside is on technical reasons like limitation or lack of jurisdiction, etc. and not on merit, If the order of the regulator is temporarily stayed and the appellate /

court proceedings are pending, the same also should be mentioned.)

V. Any other explanation / information in regard to items I to III and other information considered relevant for judging fit and proper

Undertaking

I confirm that the above information is to the best of my knowledge and belief true and complete. I undertake to keep the HFC fully informed, as soon as possible, of all events which take place subsequent to my

appointment which are relevant to the information provided above.

I also undertake to execute the deed of covenant required to be executed by all Directors of the HFC.

Place : Signature

Date :

VI. Remarks of Chairman of Nomination Committee / Board of Directors

of HFC

Place : Signature

Date :

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3.1.4. Form of Deed of Covenants with a Director

Form of Deed of Covenants with a Director

Annex-3

THIS DEED OF COVENANTS is made this ………. day of …………………. Two Thousand……………………..BETWEEN ……………………………………

having its registered office at ……………………………………………………..

(hereinafter called the “HFC”) of the one part and Mr/Ms

………………………….. of ................................................................ (hereinafter

called the “Director”) of the other part.

WHEREAS

A. The director has been appointed as a director on the Board of Directors of

the HFC (hereinafter called "the Board") and is required as a term of his / her

appointment to enter into a Deed of Covenants with the HFC.

B. The director has agreed to enter into this Deed of Covenants, which has

been approved by the Board, pursuant to his said terms of appointment.

NOW IT IS HEREBY AGREED AND THIS DEED OF COVENANTS

WITNESSETH AS FOLLOWS:

1. The director acknowledges that his / her appointment as director on the Board

of the HFC is subject to applicable laws and regulations including the

Memorandum and Articles of Association of the HFC and the provisions of

this Deed of Covenants.

2. The director covenants with the HFC that:

(i) The director shall disclose to the Board the nature of his / her interest,

direct or indirect, if he / she has any interest in or is concerned with a

contract or arrangement or any proposed contract or arrangement

entered into or to be entered into between the HFC and any other

person, immediately upon becoming aware of the same or at meeting

of the Board at which the question of entering into such contract or

arrangement is taken into consideration or if the director was not at the

date of that meeting concerned or interested in such proposed contract

or arrangement, then at the first meeting of the Board held after he /

she becomes so concerned or interested and in case of any other

contract or arrangement, the required disclosure shall be made at the

first meeting of the Board held after the director becomes concerned

or interested in the contract or arrangement.

(ii) The director shall disclose by general notice to the Board his / her other

directorships, his / her memberships of bodies corporate, his / her

interest in other entities and his / her interest as a partner or proprietor

of firms and shall keep the Board apprised of all changes therein.

(iii) The director shall provide to the HFC a list of his / her relatives as

38 | P a g e

defined in the Companies Act, 1956 or 2013 and to the extent the

director is aware of directorships and interests of such relatives in

other bodies’ corporate, firms and other entities.

(iv) The director shall in carrying on his / her duties as director of the HFC:

a) use such degree of skill as may be reasonable to expect from a

person with his / her knowledge or experience;

b) in the performance of his / her duties take such care as he / she

might be reasonably expected to take on his / her own behalf and

exercise any power vested in him / her in good faith and in the

interests of the HFC;

c) shall keep himself / herself informed about the business, activities

and financial status of the HFC to the extent disclosed to him / her;

d) attend meetings of the Board and Committees thereof (collectively

for the sake of brevity hereinafter referred to as "Board") with fair

regularity and conscientiously fulfil his / her obligations as director

of the HFC;

e) shall not seek to influence any decision of the Board for any

consideration other than in the interests of the HFC;

f) shall bring independent judgment to bear on all matters affecting

the HFC brought before the Board including but not limited to

statutory compliances, performance reviews, compliances with

internal control systems and procedures, key executive

appointments and standards of conduct;

g) shall in exercise of his / her judgement in matters brought before

the Board or entrusted to him / her by the Board be free from any

business or other relationship which could materially interfere with

the exercise of his / her independent judgement; and

h) shall express his / her views and opinions at Board meetings

without any fear or favour and without any influence on exercise of

his / her independent judgement;

(v) The director shall have:

a) fiduciary duty to act in good faith and in the interests of the HFC

and not for any collateral purpose;

b) duty to act only within the powers as laid down by the HFC’s

Memorandum and Articles of Association and by applicable laws

and regulations; and

c) duty to acquire proper understanding of the business of the HFC.

(vi) The director shall:

a) not evade responsibility in regard to matters entrusted to him / her

by the Board;

b) not interfere in the performance of their duties by the whole-time

Directors and other officers of the HFC and wherever the director

39 | P a g e

has reasons to believe otherwise, he / she shall forthwith disclose

his / her concerns to the Board; and

c) not make improper use of information disclosed to him / her as a

member of the Board for his / her or someone else’s advantage or

benefit and shall use the information disclosed to him / her by the

HFC in his / her capacity as director of the HFC only for the

purposes of performance of his / her duties as a director and not

for any other purpose.

d) make declaration to the effect that:

(i) he/she has not been associated with any unincorporated body

that is accepting deposits;

(ii) he/she has not been associated with any company, the

application for Certificate of Registration (CoR) of which has

been rejected by the National Housing Bank;

(iii) there is no criminal case, including for offence under section

138 of the Negotiable Instruments Act, against him/her.

3. The HFC covenants with the director that:

(i) the HFC shall apprise the director about:

a) Board procedures including identification of legal and other duties

of Director and required compliances with statutory obligations;

b) control systems and procedures;

c) voting rights at Board meetings including matters in which Director

should not participate because of his / her interest, direct or

indirect therein;

d) qualification requirements and provide copies of Memorandum

and Articles of Association;

e) corporate policies and procedures;

f) insider dealing restrictions;

g) constitution of, delegation of authority to and terms of reference of

various committees constituted by the Board;

h) appointments of Senior Executives and their authority;

i) remuneration policy;

j) deliberations of committees of the Board, and

k) communicate any changes in policies, procedures, control

systems, applicable regulations including Memorandum and

Articles of Association of the HFC, delegation of authority, Senior

Executives, etc. and appoint the compliance officer who shall be

responsible for all statutory and legal compliance.

(ii) the HFC shall disclose and provide to the Board including the director

all information which is reasonably required for them to carry out their

functions and duties as a director of the HFC and to take informed

decisions in respect of matters brought before the Board for its

consideration or entrusted to the director by the Board or any

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committee thereof;

(iii) the disclosures to be made by the HFC to the Directors shall include

but not be limited to the following:

a) all relevant information for taking informed decisions in respect of

matters brought before the Board;

b) HFC’s strategic and business plans and forecasts;

c) organisational structure of the HFC and delegation of authority;

d) corporate and management controls and systems including

procedures;

e) economic features and marketing environment;

f) information and updates as appropriate on HFC’s products;

g) information and updates on major expenditure;

h) periodic reviews of performance of the HFC; and

i) report periodically about implementation of strategic initiatives and plans.

(iv) the HFC shall communicate outcome of Board deliberations to

Directors and concerned personnel and prepare and circulate minutes

of the meeting of Board to Directors in a timely manner and to the extent

possible within two business days of the date of conclusion of the Board

meeting; and

(v) advise the director about the levels of authority delegated in matters

placed before the Board.

4. The HFC shall provide to the director periodic reports on the functioning of

internal control system including effectiveness thereof.

5. The HFC shall appoint a compliance officer who shall be a senior executive

reporting to the Board and be responsible for setting forth policies and

procedures and shall monitor adherence to the applicable laws and

regulations and policies and procedures including but not limited to

directions of National Housing Bank and other concerned statutory and

governmental authorities.

6. The director shall not assign, transfer, sublet or encumber his / her office

and his / her rights and obligations as director of the HFC to any third party

provided that nothing herein contained shall be construed to prohibit

delegation of any authority, power, function or delegation by the Board or

any committee thereof subject to applicable laws and regulations including

Memorandum and Articles of Association of the HFC.

7. The failure on the part of either party hereto to perform, discharge, observe

or comply with any obligation or duty shall not be deemed to be a waiver

thereof nor shall it operate as a bar to the performance, observance,

discharge or compliance thereof at any time or times thereafter.

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8. Any and all amendments and / or supplements and / or alterations to this Deed

of Covenants shall be valid and effectual only if in writing and signed by the

director and the duly authorised representative of the HFC.

9. This Deed of Covenants has been executed in duplicate and both the copies

shall be deemed to be originals.

IN WITNESS WHEREOF THE PARTIES HAVE DULY EXECUTED THIS

AGREEMENT ON THE DAY, MONTH AND YEAR FIRST ABOVE WRITTEN.

For the HFC Director

By …………………..

Name: Name:

Title:

In the presence of:

1……………………………….. 2. ………………………….

3.1.5. General Criteria for Positive Attributes. [as mandated by Part D Schedule II of Listing Regulations]

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The Nomination and Remuneration Committee shall also consider whether each

candidate for directorship and each director possess the following:

The highest level of personal and professional ethics, reputation, integrity and

values;

An appreciation of the Company’s mission and purpose, and loyalty to the

interests of the Company and its shareholders;

The ability to exercise objectivity and independence in making informed business

decisions;

The willingness and commitment to devote the extensive time necessary to fulfill

his / her duties;

The ability to communicate effectively and collaborate with other board members

to contribute effectively to the diversity of perspectives that enhances Board and

Committee deliberations, including willingness to listen and respect the views of

the others;

The skills, knowledge and expertise relevant to the Company’s business.

In its evaluation, the Nomination and Remuneration Committee shall consider the

Board size and composition of the Board according to the following guidelines:

With respect to Board composition as a whole, the Board would compose of

executive, non-executive directors from promoter category and directors who

qualify as ‘independent’ pursuant to section 149(6) of the Companies Act, 2013

read with Rule 5 of Companies (Appointment And Qualification of Directors)

Rules, 2014.

With respect to Audit Committee, 1) all the members must be ‘independent’

pursuant to section 149(6) of the Companies Act, 2013 read with Rule 5 with

Companies (Appointment And Qualification of Directors) Rules, 2014; 2) all

members of audit committee shall be financially literate and atleast one

member shall have accounting or related financial management expertise.

With respect to Executive Committee it would compose of executive director

and independent directors pursuant to Rule 5 of Companies (Appointment And

Qualification of Directors) Rules, 2014.

With respect to other Committees such as Debenture Allotment Committee,

Nomination and Remuneration Committee, CSR Committee, Risk

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Director & CEO as applicable to an officer in the cadre of Executive Director of

Management Committee etc. the composition would compose of executive

director and independent directors pursuant to Rule 5 of Companies

(Appointment And Qualification of Directors) Rules, 2014.

3.2. Director’s Induction and Development

The Nomination and Remuneration committee shall ensure familiarization

programme for new directors.

The familiarization programme may include:

Roles, rights and responsibilities of directors.

Mechanisms to build working relationship among the Board members.

General understanding of marketing, finance, research, corporate

governance, legal including compliance of laws, human resources, labour

welfare and other disciplines relevant to the success of a housing finance

company in today’s competitive environment, understanding of the

company’s business.

Industry / sectoral overview, company’s vision, strategy etc.

Directors to update knowledge on general environment in which the Company

functions.

The Nomination and Remuneration committee will support the directors, as may

be required, to continually update their skills and knowledge and their familiarity

with the company and its business.

The Company will fund / arrange for training on all matters which are common to

the Board.

3.3. Director Remuneration

Non-executive Independent Directors are not paid any fees or compensation /

commission other than Directors’ Sitting fee of Rs.35,000/- per meeting for

attending Board, Rs.25,000/- per meeting for attending Executive Committee

meeting, Rs.25000/- per meeting for attending Debenture Allotment Committee

meeting / Audit Committee meeting/ IT Strategy Committee meeting,

Rs.15,000/- per meeting for attending Risk Management Committee /

Nomination & Remuneration Committee / Stakeholder Relationship Committee

/ Investment Committee Meetings.

Managing Director & CEO. However, remuneration is being paid to Managing

LIC of India.

No fees paid to the Chairman, Non-Executive (Promoter) Director and

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3.4. Insurance

Directors’ and Officers’ liability insurance should be taken covering all directors and

senior officials for such amount, as is determined to be reasonable by the Board.

3.5. Subsidiary Oversight

The Nomination and Remuneration committee of the holding / parent company will

provide guidelines for remuneration of directors on material subsidiaries*. Holding

company whose equity is listed, need to follow the provisions of Regulation

24 which are as follows:

The minutes of the Board meetings of the unlisted subsidiary company shall

be placed at the Board meeting of the listed holding company. The

management of the unlisted subsidiary shall periodically bring to the notice

of the Board of Directors of the listed holding company, a statement of all

significant transactions and arrangements entered into by the unlisted

subsidiary company.

Explanation: For the purpose of this regulation, the term ‘significant

transaction or arrangement shall mean any individual transaction or

arrangement that exceeds or is likely to exceed ten percent of the total

revenue or total expenses or total assets or total liabilities, as the case may

be, of the unlisted material subsidiary for the immediately preceding

accounting year.

The Audit Committee of the listed holding company shall also review the

financial statements, in particular, the investments made by the unlisted

subsidiary company.

Audit Committee of the material subsidiary* (as required by law or for business

reasons) may consider and adopt the policies, procedures and processes laid

down by the Audit Committee of the holding company. Further, critical issues may

be referred by the Audit Committee of the material subsidiary* to the Audit

committee of the holding company.

The chief internal auditor of the holding company shall oversee the internal audit

and risk management function of all material* / non-material subsidiaries and will

carry out periodic assessments either directly or through an outsourced / internal

arrangement.

[* in our case there is no material subsidiary. The term material non listed Indian

subsidiary shall mean an unlisted subsidiary, incorporated in India, whose income

or net worth (i.e. paid up capital and free reserves) exceeds 20% of the

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consolidated income or net worth respectively, of the listed holding company and

its subsidiaries in the immediately preceding accounting year. For this reason one

of the provision of Regulation 24 i.e. Atleast one independent director on the Board

of Directors of the listed entity shall be a director on the board of directors of an

unlisted material subsidiary, incorporated in India is not applicable in our case].

4. Board Effectiveness Review

The performance evaluation of independent directors shall be done by the entire Board

of Directors, excluding the director being evaluated.

On the basis of the report of performance evaluation, it shall be determined whether to

extend or continue the term of appointment of the independent director.

It is the responsibility of the Nomination and Remuneration Committee to formulate

criteria determining Director Qualification, positive attributes, criteria for evaluation

of Independent Director and Board.

An annual meeting of Independent Directors would be convened by Chairman of

the Nomination and Remuneration Committee to

Review the performance of the Non-Independent Directors (executive /

non-executive promoter directors and one non-executive and non-

independent director);

Review the performance of the Board as a whole;

Review the performance of the Chairman of the company, taking into

account the views of executive directors and non-executive directors.

Assess the quality, quantity and timeliness of flow of information between

the management of the company and the board of directors that is

necessary for the board of directors to effectively and reasonably perform

their duties.

4.1. Board Evaluation

4.1.1. Board Questionnaire

On an annual basis, each independent director in the independent directors’

meeting would evaluate the Board as a whole on a defined questionnaire template

confidentially (Annexure Q attached provides the indicative questionnaire

template).

Some indicative areas for Board evaluation include:

Degree of fulfillment of key responsibilities;

Board size and composition;

Effectiveness of Board process and functioning;

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Access to relevant and timely information

Establishment of corporate strategy, risk policy, annual budgets and

business plans.

4.1.2. Annual Independent Directors meeting and Evaluation of Non-

Executive and Executive Promoter Directors [as mandated by Act and Regulation 25

of the Listing Regulations]

The Chairman of the Nomination and Remuneration Committee would convene an

Annual Independent Directors’ meeting to review performance of the Board as a

whole. In the same meeting, the Independent Directors will also review the

performance of the non-Independent and non-executive director, non-executive

(Promoter) director, executive (promoter) director, review the performance of the

Chairman of the company, taking into account the views of executive directors and

non-executive directors.

The process for evaluation of the Board, Chairman, Non-Executive promoter

director, is as follows:

In the beginning, the Board Evaluation Questionnaire would be distributed amongst

all the Independent Directors for their feedback and comments if any.

After evaluation of Board, Chairman could be evaluated. Questionnaire for

evaluation of Chairman would be distributed to all the Independent Directors for

feedback and comments if any. Likewise evaluation of Non-Executive promoter

director would be initiated by following the above i.e. questionnaire for evaluation

of Non-Executive Promoter Director would be distributed to all the Independent

Directors for feedback and comments if any. Similarly evaluation of non- executive

and non-independent director would be initiated by following the above i.e.

questionnaire for evaluation of non-executive and non-independent director would

be distributed to all the Independent Directors for feedback and comments if any.

Managing Director (executive) would be evaluated by following the above i.e.

questionnaire for evaluation of Executive Promoter Director would be distributed to

all the Independent Directors for feedback and comments if any. Further, the

Managing Director (executive) would also be evaluated based on the parameters

set at the beginning of the year by the Nomination and Remuneration Committee.

4.1.3. Independent Directors Evaluation

The performance evaluation of Independent Directors shall be done by the entire

of Board of Directors (excluding the director being evaluated). The Non- Executive

Independent Director Evaluation Questionnaire would be distributed amongst all

the Directors, excluding the director being evaluated. That is to say if Mr. X is to be

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evaluated, then evaluation questionnaire assessing Mr. X will be distributed to all

the Board members, except Mr. X. Once feedback of all the board members

(excluding Mr. X) is obtained then another director say Mr. Y would be evaluated

by distributing evaluation questionnaire evaluating Mr. Y would be distributed to all

the Board members (except Mr. Y) for obtaining feedback and comments of the

Board members (other than Mr. Y) if any. Likewise to follow similar steps for

evaluation of rest of other independent directors.

4.1.4. Following are suggestive / advisory in nature

The minutes of the Annual Independent Directors meeting will record the process.

Post the Annual Independent Directors meeting, the collective feedback of the

Independent Directors will be discussed by the Chairman of the Nomination and

Remuneration Committee with the Chairman of the Board covering:

o Performance evaluation of the Board as a whole;

o Performance evaluation of the Non-Executive and Executive Promoter

Directors;

o Performance evaluation of the Chairman of the company;

o Performance evaluation of Independent Directors.

o On the basis of the report of performance evaluation, it shall be determined whether

to extend or continue the term of appointment of the Independent Director.

It is critical that any agreed actions that come out of an evaluation are implemented

and monitored if the board is to move to the next stage of maturity. Therefore, the

Board if it desires could include a review of actions steps as an agenda item to be

tracked at each meeting. Milestones could be established for the achievement of

the action plans and progress reviewed until all agreed changes have been

implemented. These activities could be documented in a ‘board road map’.