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Notes to Accounts of City Union Bank Ltd.

Mar 31, 2023

Qualitative Disclosures:

A. A summary discussion of the Bank''s approach to assessing the adequacy of its capital to support current and future activities.

In order to strengthen the capital base of banks in India, the Reserve Bank of India in April 1992 introduced capital adequacy measures in banks, based on the capital adequacy framework (Basel I) issued by Basel Committee on Banking Supervision (BCBS). Initially, the framework addressed capital for credit risk, which was subsequently amended to include capital for market risk as well and the Bank was compliant with regard to maintenance of minimum capital for credit and market risks.

Subsequently, the BCBS released the "International Convergence of Capital Measurement and Capital Standards: A Revised Framework" (popularly known as Basel II document) on 26.06.2004. Reserve Bank of India issued final guidelines on 27.04.2007 for implementation of the New Capital Adequacy (Basel II) Framework, which includes capital for Operational Risk. In line with the RBI guidelines, the Bank successfully migrated to the revised framework (Basel-II) from 31.03.2009.

Reserve Bank of India issued guidelines based on the Basel III reforms on capital regulation during May 2012, to the extent applicable to banks operating in India. The Basel III capital regulation has been implemented from 01.04.2013 in India in phases and it was decided originally to implement ''Capital Conservation Buffer Framework'' fully from 31.03.2018. RBI issued detailed Guidelines on Composition of Capital Disclosure Requirements on 28.05.2013.

RBI had issued circulars on various dates extending the transitional period for full implementation of Basel III Capital Regulations due to the unfavorable economic situation and also due to the continuing stress on account of COVID-19 crisis. Now the minimum regulatory requirement under Basel III with Capital Conservation Buffer (CCB) is 11.50% (9.00% 2.50%) with effect from 01.10.2021.

RBI has issued circular on "Prudential Guidelines on Capital Adequacy and Liquidity Standards -Amendments" on 31.03.2015. The Basel III Capital Regulations have been consolidated in Master Circular -Basel III Capital Regulations vide circular No. DOR.CAP.REC 3/21.06.201/2022-23 dated April 01, 2022, which includes the introduction of capital buffers.

Under the Basel II framework, the total regulatory capital comprises Tier I (core capital) and Tier 2 capital (supplementary capital). In order to improve the quality of regulatory capital, the capital will predominantly consist of Common Equity Tier1 (CET1) under Basel III. Non-equity Tier 1 and Tier 2 capital would continue to form part of regulatory capital subject to eligibility criteria as laid down in Basel III. The Basel III capital regulations continue to be based on three-mutually reinforcing Pillars, viz. Minimum Capital Requirements (Pillar 1), Supervisory Review of Capital Adequacy (Pillar 2) and Market Discipline (Pillar 3) of the Basel II Capital Adequacy framework.

The Basel-III norms mainly seek to:

â¢ Raise the quality of capital to ensure that the banks are capable of absorbing losses, both as going concern and as gone concern basis.

â¢ Increase the risk coverage of the capital framework.

â¢ Introduce leverage ratio to serve as a backstop to the risk-based capital measure.

â¢ Raise the standards for the supervisory review process and public disclosures.

The macro prudential aspects of Basel III are largely enshrined in the capital buffers. Both the buffers i.e. the Capital Conservation Buffer and the Counter Cyclical Capital Buffer are intended to protect the banking sector from stressed situations and business cycles.

Minimum capital requirements under Basel-III:

Under the Basel III Capital Regulations, banks are required to maintain a minimum Pillar 1 Capital (Tier-I Tier-II) to Risk-weighted Assets Ratio (CRAR) of 9% on an

on-going basis. Besides these minimum capital requirements, Basel III also provides for creation of Capital Conservation Buffer (CCB) and Counter Cyclical Capital Buffer (CCCB).

B. The Bank''s approach in assessment of Capital Adequacy

The Bank is following Standardised Approach, Standardised Duration Approach and Basic Indicator Approach for measurement of capital charge in respect of credit risk, market risk and operational risk respectively. Besides computing CRAR under the Pillar I requirement, the Bank also undertakes stress testing periodically in various risk

areas to assess the impact of stressed scenario or plausible events on asset quality, liquidity, profitability and capital adequacy. The Bank conducts Internal Capital Adequacy Assessment Process (ICAAP) on an annual basis to assess the sufficiency of its capital funds to cover the risks specified under Pillar-I and Pillar-II of Basel guidelines. The adequacy of Bank''s capital funds to meet the future business growth is being assessed in the ICAAP document.

D. RiskExposureandAssessment

Risk is an integral part of banking business in an ever dynamic environment, which is undergoing radical changes both on the technology front and product offerings. The main risks faced by the bank are credit risk, market risk and operational risk. The bank aims to achieve an optimum balance between risk and return to maximize shareholder value. The relevant information on the various categories of risks faced by the bank is given in the ensuing sections. This information is intended to give market participants a better idea on the risk profile and risk management practices of the bank.

The Bank has a comprehensive risk management system to address various risks and has set up an Integrated Risk Management Department (RMD), which is an independent operational department. Bank has a Risk Management Committee of Board

functioning at apex level for formulating, implementing and reviewing bank''s risk management measures pertaining to credit, market and operational risks. Apart from the Risk Management Committee of the Board at apex level, the Bank has a strong bankwide risk management structure comprising of Risk Management Committee of Executives (RMCE) assisted by Asset Liability Management Committee (ALCO), Credit Risk Management Committee (CRMC) and Operational Risk Management Committee (ORMC) at senior management level. Credit Risk Management Committee deals with credit policies and procedures, Asset Liability Management Committee deals with Asset Liability Management (ALM) and Integrated Treasury Policy of the Bank and Operational Risk Management Committee formulates policies and procedures for managing operational risks.

Credit Risk

Credit Risk is a possibility of losses associated with diminution in the credit quality of borrowers or counterparties. In a bank''s portfolio, Credit Risk arises mostly from lending activities of the bank, when a borrower is unable to meet its financial obligations emanating from potential changes in the credit quality / worthiness of the borrowers or counterparties.

Credit Risk Management encompasses a host of management techniques, which help the banks in mitigating the adverse impacts of credit risk. The objective of the Credit Risk Management is to identify measure, monitor and control credit risk by adopting suitable methodology.

The Bank has formulated Loan Policy which stipulates various prudential norms, benchmarks, guidelines for sanctioning of credits and recovery of the same. The Bank has also formulated a separate Credit Risk Management Policy, besides a Policy on Credit Risk Mitigation and Collateral Management.

Credit Risk is assessed by a robust internal credit risk rating system. Credit Risk Rating is the process wherein the merits and demerits of a borrower are captured and scorings assigned, which enables the Bank to take a view on the acceptability or otherwise of any credit proposal.

Credit Risk Management Policy

The Bank has put in place a well-structured Credit Risk Management Policy duly approved by the Board. The Policy document defines organization structure, roles & responsibilities and the processes whereby the Credit Risk can be identified, quantified and managed. Credit Risk is monitored on a bank wide basis and the compliance with regard to the risk limits approved by the Credit Risk Management Committee (CRMC)/ Board is ensured.

The Bank adopts the definition of ''past due'' and ''impaired credits'' (for reporting purposes) as defined by Reserve Bank of India under Income Recognition, Asset Classification and provisioning (IRAC) norms (vide RBI Master Circular dated October 01, 2021).

The Bank is accepting the ratings of the External Credit Rating Agencies approved by Reserve Bank of India, namely a) CRISIL, b) ICRA, c) CARE, d) India ratings & research Pvt Ltd, e) Acuite ratings & research Ltd and f) Infomerics Valuation and Rating Pvt. Ltd. to facilitate the corporate borrowers who enjoy credit facilities to get themselves rated. The corporates which are yet to get the approved ratings from these rating agencies are treated as ''unrated''.

The Bank computes risk weight on the basis of external rating assigned, both long-term and short-term, for the facilities availed by the borrowers. The external ratings assigned are generally facility specific. The Bank follows

the below mentioned procedures as laid down in the Basel III guidelines for usage of external ratings:

Rating assigned by one rating agency is used for all the

types of claims on the borrowing entity.

Long-term ratings are used for facilities with

contractual maturity of one year & above.

Short-term ratings are generally applied for facilities with contractual maturity of less than one year.

The Bank has put in place Credit Risk Mitigation and Collateral Management Policy with the primary objective of

Mitigation of Credit Risks and enhancing awareness on identification of appropriate collateral taking into account the spirit of Basel III / RBI guidelines

Optimizing the benefit of Credit Risk Mitigation in

computation of capital charge as per the approaches laid down in Basel III / RBI guidelines.

Valuation and methodologies are detailed in Credit Risk Management Policy, Valuation Policy and Loan Policy of the Bank.

The Bank recognizes the following Financial Collateral (FC) for Credit Risk Mitigation.

a) Cash or Cash equivalent (Bank Deposits/Certificate of Deposits issued by the Bank, etc.)

b) Gold Jewels

c) Indira Vikas Patras

d) Kisan Vikas Patras

e) National Savings Certificates

f) Life Insurance Policies with a declared surrender value

g) Securities issued by the Central and State Governments

h) Debt securities rated by a recognized Credit Rating Agency where these are either:

at least BBB(-] when issued by public sector entities; or

â¢ at least A when issued by other entities

(including banks and Primary Dealers); or

at least PR3/P3/F3/A3 for short term debt

instruments

i) Debt securities not rated by Credit Rating Agency but

issued by a bank and

listed on a recognized stock exchange; and Classified as senior debt.

The Bank accepts guarantees from individuals with considerable net worth and the Corporates, besides guarantee issued by Government, other Commercial banks, ECGC and CGTSI.

Concentration Risk in Credit Risk Mitigation: All types of securities eligible for mitigation are easily realizable financial securities. As such, presently no limit/ceiling has been prescribed to address the concentration risk in credit risk mitigants recognized by the Bank. The portion of advances subjected to CRM including non-funded advances amounted to 27.59% of outstanding total of funded and non-funded credit. The Bank has ensured legal certainty in the matter of credit risk mitigation as per RBI guidelines.

Market Risk in trading book is assessed as per the Standardised Duration Approach. The capital charge for both investments and foreign exchange exposure is computed as per Reserve Bank of India prudential guidelines.

a. Definition of market risk:

Market risk refers to the potential losses arising from volatility in interest rates, foreign exchange rates, equity prices and commodity prices. Market risk arises with respect to all market risk sensitive financial instruments, including securities, foreign exchange contracts, equity and derivative instruments as well as from balance sheet or structural positions.

b. Portfolios covered under Standardised approach:

The Bank''s portfolio comprises of Government securities, equity shares and forex portfolio.

c. Strategies and processes :

1. The Bank has put in place a comprehensive Market risk management Framework to address the Market risks (bank wide) including that of the Trading Book.

2. Within the above framework, various policies of the Bank prescribes Limits like Value at Risk

(VaR), Duration, Minimum holding level for liquid assets, Exposure limits, Forex open position limits (day light/overnight), Stop-loss limits etc .

3. Risk profiles are analyzed and the effectiveness of risk mitigants is regularly monitored through Mid Office.

4. Adherence to limits are being monitored by dedicated mid office, reporting exceptions to the head of Risk Management Department, independent of Treasury /IBD operational units.

d. Risk Measurement :

1. Value at Risk (VaR) numbers is arrived for Equity Portfolio and Foreign Exchange Position.

2. The positions are marked to market at stipulated intervals. The Duration/Modified Duration for trading book is computed and its adherence to the prescribed duration limits is ensured.

3. The Bank is computing capital charge for both investments and foreign exchange exposure categories using Standardised Duration Approach as required under RBI guidelines.

4. Stress testing analysis is done by applying rate shocks on investment portfolio and also on foreign exchange open position.

Operational Risk is the risk of loss resulting from inadequate or failed processes, people and systems or from external events. Operational risk includes legal risk but excludes strategic and reputation risks.

The Bank has put in place Operational Risk Management Policy duly approved by the Board. This policy outlines the Organisation Structure and covers the process of identification, assessment/measurement and control of various operational risks.

The other policies adopted by the Bank which deal with the management of operational risks are Inspection Policy, Information Security Audit Policy and Policy on Modified code of conduct for Know Your Customer & AntiMoney Laundering Standards.

Operational Risks in the Bank are managed through comprehensive and well-articulated internal control framework. Operational risk is mitigated by effecting suitable insurance coverage wherever necessary. The Bank has also put in place a compliance cell to supervise KYC & AML guidelines and off site monitoring of high value transactions. For accounting operations in the computerized environment, suitable internal control system is maintained and a separate policy on I.T. Security is in place specifying the internal guidelines on access, control, communications, operations, personal security, business continuity management etc.

Quantitative Disclosures:

Capital charge for Operational Risk is computed as per the Basic Indicator Approach based on 15% of the average of the gross income for the previous three years i.e. 2019-20, 2020-21 & 2021-22 as defined in the Master Circular on Basel III Capital Regulations of RBI dated 01.04.2022. The capital charge for operational risk is arrived at ''358.27 crore.

Qualitative Disclosures:

Interest rate risk is the risk where changes in the market interest rates might affect a bank''s financial condition. Changes in interest rates affect both the current earnings (earnings perspective) as also the net-worth of the Bank (economic value perspective). The risk from earnings perspective can be measured as impact in the Net Interest Income (NII) or Net Interest Margin (NIM). Similarly, the risk from economic value perspective can be measured as drop in the Economic value of Equity (EVE).

The impact on income (earning perspective) is measured through use of Gap Analysis by applying notional rate shock up to 200 bps as prescribed.

For the calculation of impact on earnings, the Traditional Gap is taken from the Rate Sensitivity statement and based on the remaining period from the mid-point of a particular bucket, the impact for change in interest rates up to 200 bps is arrived at for one year time horizon.

The Bank has adopted Duration Gap Analysis for assessing the impact (as a percentage) on the Economic

Value of Equity (Economic Value Perspective) by applying a notional interest rate shock of 200 bps. RBI has issued draft guidelines vide DBOD.No. BP. 7/21.04.098/ 2005-06 dated April 17, 2006 on improvements to banks'' Asset Liability Management framework, covering interest rate risk and liquidity risk measurement / reporting frameworks and prudential limits. Subsequently, on November 04, 2010, RBI issued a circular on Interest Rate Risk using Duration Gap Analysis and these guidelines have been taken into account while calculating IRRBB As per the RBI guideline circular DOR.MRG.REC.102/00-00-009/2022-23 dated 17.02.2023 on "Governance, Measurement and Management of Interest Rate Risk in Banking Book (IRRBB)", the bank is taking steps in measuring, monitoring & disclosing the exposure to Interest Rate Risk in Banking Book (IRRBB). The revised

measurement and implementation of IRRBB will be calculated from August 2023 (using the position as of 30.06.2023) and would be submitted to RBI as per extant guidelines. The Bank calculates Modified Duration Gap on Assets & Liabilities and arrives at the impact on Economic Value of Equity. The Bank is calculating IRRBB on a monthly basis.

Quantitative Disclosures:

a. The impact of change in Interest Rate i.e. Earnings at Risk for 200 bps interest rate shock as on 31^st March, 2023 is '' 162.67 crore.

b. The impact of change in market value of Equity for an interest rate shock of 200 bps as on 31^st March, 2023 is 5.17%.

Counterparty Credit Risk (CCR) is the risk that a counter party to a transaction could default before the final settlement of the transaction cash flows. Unlike a firm''s exposure to credit risk through a loan, where the exposure to credit risk is unilateral and only the lending bank faces the risk of loss, CCR creates a bilateral risk of loss to either party.

Counterparty credit risk in case of derivative contracts arises from the forward contracts. The subsequent credit risk exposures depend on the value of underlying market factors (e.g., interest rates and foreign exchange rates),

which can be volatile and uncertain in nature. The Bank does not enter into derivative transactions other than forward contracts.

Credit exposures on forward contracts

The Bank enters into the forward contracts in the normal course of business for proprietary trading and arbitrage purposes, as well as for our own risk management needs, including mitigation of interest rate and foreign currency risk. Derivative exposures are calculated according to the current exposures method.

The capital requirement for Bank''s exposure to Qualified Central Counter Party (QCCP) has been computed for the exposure to Clearing Corporation of India (CCIL) as on 31^stMarch, 2023 amounting to ''3674.73 crore with risk weighted assets of ''734.95 crore, which is forming part of credit risk total. In terms of RBI circular dated 28^th March, 2013, the Credit Valuation Adjustment (CVA) risk capital charge has been computed, which amounted to ''2.35 crore (the corresponding risk weighted value of ''29.32 crore has also been added to credit risk weighted assets).

Mar 31, 2022

Qualitative Disclosures:

A. A summary discussion of the Bank''s approach to assessing the adequacy of its capital to support current and future activities.

RBI has issued circular on "Prudential Guidelines on Capital Adequacy and Liquidity Standards -Amendments" on 31.03.2015. The Basel III Capital Regulations have been consolidated in Master Circular -Basel III Capital Regulations vide circular No. DBOD.No. BP.BC.1 / 21.06.201 / 2015-16 dated July 1, 2015, which includes the introduction of capital buffers.

The Basel-III norms mainly seek to:

Raise the quality of capital to ensure that the banks are capable of absorbing losses, both as going concern and as gone concern basis.

Increase the risk coverage of the capital framework.

Introduce leverage ratio to serve as a backstop to the risk-based capital measure.

Raise the standards for the supervisory review process and public disclosures.

The macro prudential aspects of Basel III are largely enshrined in the capital buffers. Both the buffers i.e. the capital conservation buffer and the countercyclical buffer are intended to protect the banking sector from stressed situations and business cycles.

Minimum capital requirements under Basel-III:

Under the Basel III Capital Regulations, banks are required to maintain a minimum Pillar 1 Capital (Tier-I Tier-II) to Risk-weighted Assets Ratio (CRAR) of 9% on an

on-going basis. Besides these minimum capital requirements, Basel III also provides for creation of capital conservation buffer (CCB) and countercyclical capital buffer (CCCB).

B. The Bank''s approach in assessment of Capital Adequacy

2. Risk Exposure and Assessment

Credit Risk

Credit Risk is assessed by a robust internal credit risk

rating system. Credit Risk Rating is the process wherein the merits and demerits of a borrower are captured and scorings assigned, which enables the Bank to take a view on the acceptability or otherwise of any credit proposal.

Credit Risk Management Policy

The Bank is accepting the ratings of the External Credit Rating Agencies approved by Reserve Bank of India, namely a) CRISIL, b) ICRA, c) CARE, d) India ratings & research Pvt Ltd, e) Brickwork, f) Acuite ratings& research Ltd and g) Infomerics Valuation and Rating Pvt. Ltd. to facilitate the corporate borrowers who enjoy credit facilities above Rs.7.50 crore to get themselves rated. The corporates which are yet to get the approved ratings from these rating agencies are treated as ''unrated''.

the below mentioned procedures as laid down in the Basel III guidelines for usage of external ratings:

â¢ Rating assigned by one rating agency is used for all the types of claims on the borrowing entity.

â¢ Long-term ratings are used for facilities with contractual maturity of one year & above.

â¢ Short-term ratings are generally applied for facilities with contractual maturity of less than one year.

Quantitative Disclosures

The exposures after risk mitigation as per Standardised Approach, (rated and unrated) in the following three major risk buckets, as well as, those that are deducted as per risk mitigation are given below.

The Bank has put in place Credit Risk Mitigation and Collateral Management Policy with the primary objective of

â¢ Mitigation of Credit Risks and enhancing awareness on identification of appropriate collateral taking into account the spirit of Basel III / RBI guidelines

â¢ Optimizing the benefit of Credit Risk Mitigation in computation of capital charge as per the approaches laid down in Basel III / RBI guidelines.

Valuation and methodologies are detailed in Credit Risk Management Policy, Valuation Policy and Loan Policy of the Bank.

The Bank recognizes the following Financial Collateral (FC) for Credit Risk Mitigation.

a) Cash or Cash equivalent (Bank Deposits/Certificate of Deposits issued by the Bank, etc.)

b) Gold Jewels

c) Indira Vikas Patras

d) Kisan Vikas Patras

e) National Savings Certificates

f) Life Insurance Policies with a declared surrender value

g) Securities issued by the Central and State Governments

h) Debt securities rated by a recognized Credit Rating Agency where these are either:

â¢ at least BBB(-) when issued by public sector entities; or

â¢ at least A when issued by other entities (including banks and Primary Dealers); or

â¢ at least PR3/P3/F3/A3 for short term debt instruments

i) Debt securities not rated by Credit Rating Agency but

â¢ issued by a bank and

â¢ listed on a recognized stock exchange; and

â¢ Classified as senior debt.

The Bank accepts guarantees from individuals with considerable net worth and the Corporates, besides guarantee issued by Government, other Commercial banks, ECGC and CGTSI.

Concentration Risk in Credit Risk Mitigation: All types of securities eligible for mitigation are easily realizable financial securities. As such, presently no limit/ceiling has been prescribed to address the concentration risk in credit risk mitigants recognized by the Bank. The portion of advances subjected to CRM including non-funded advances amounted to 24.81% of outstanding total of funded and non-funded credit. The Bank has ensured legal certainty in the matter of credit risk mitigation as per RBI guidelines.

a. Definition of market risk:

b. Portfolios covered under Standardised approach:

The Bank''s portfolio comprises of Government securities, equity shares and forex portfolio.

c. Strategies and processes :

1. The Bank has put in place a comprehensive Market risk management Framework to address the Market risks (bank wide) including that of the Trading Book.

2. Within the above framework, various policies of the Bank prescribes Limits like Value at Risk

(VaR), Duration, Minimum holding level for liquid assets, Exposure limits, Forex open position limits (day light/overnight), Stop-loss limits etc .

3. Risk profiles are analyzed and the effectiveness of risk mitigants is regularly monitored through Mid Office.

4. Adherence to limits are being monitored by dedicated mid office, reporting exceptions to the head of Risk Management Department, independent of Treasury /IBD operational units.

d. Risk Measurement

1. Value at Risk (VaR) numbers is arrived for Trading book Central Government securities and Foreign Exchange Position.

2. The positions are marked to market at stipulated intervals. The Duration/Modified Duration for trading book is computed and its adherence to the prescribed duration limits is ensured.

3. The Bank is computing capital charge for both investments and foreign exchange exposure categories using Standardised Duration Approach as required under RBI guidelines.

4. Stress testing analysis is done by applying rate shocks on investment portfolio and also on foreign exchange open position.

Operational Risks in the Bank are managed through comprehensive and well-articulated internal control

framework. Operational risk is mitigated by effecting suitable insurance coverage wherever necessary. The Bank has also put in place a compliance cell to supervise KYC & AML guidelines and off site monitoring of high value transactions. For accounting operations in the computerized environment, suitable internal control system is maintained and a separate policy on I.T. Security is in place specifying the internal guidelines on access, control, communications, operations, personal security, business continuity management etc.

Quantitative Disclosures

Capital charge for Operational Risk is computed as per the Basic Indicator Approach based on the average of the gross income for the previous three years i.e. 2018-19, 2019-20 & 2020-21 as defined in the Master Circular -Basel III Capital Regulations & New Capital Adequacy Framework guidelines. The required capital is '' 331.14 crore.

Qualitative Disclosures

The impact on income (earning perspective) is measured through use of Gap Analysis by applying notional rate shock up to 200 bps as prescribed.

The Bank has adopted Duration Gap Analysis for assessing the impact (as a percentage) on the Economic

Value of Equity (Economic Value Perspective) by applying a notional interest rate shock of 200 bps. RBI has issued draft guidelines vide DBOD.No. BP. 7/21.04.098/ 2005-06 dated April 17, 2006 on improvements to banks'' Asset Liability Management framework, covering interest rate risk and liquidity risk measurement / reporting frameworks and prudential limits. Subsequently, on November 04, 2010, RBI issued a circular on Interest Rate Risk using Duration Gap Analysis and these guidelines have been taken into account while calculating IRRBB. The Bank calculates Modified Duration Gap on Assets &

Liabilities and arrives at the impact on Economic Value of Equity. The Bank is calculating IRRBB on a monthly basis.

Quantitative Disclosures

a. The impact of change in Interest Rate i.e. Earnings at Risk for 200 bps interest rate shock as on 31^st March, 2022 is '' 172.63 crore.

b. The impact of change in market value of Equity for an interest rate shock of 200 bps as on 31^st March, 2022 is 7.07%.

which can be volatile and uncertain in nature. The Bank does not enter into derivative transactions other than forward contracts.

Credit exposures on forward contracts

28^th March, 2013, the Credit Valuation Adjustment (CVA) risk capital charge has been computed, which amounted to '' 1.20 crore (the corresponding risk weighted value of '' 15.02 crore has also been added to credit risk weighted assets).

Mar 31, 2018

1.1 Sale and Transfer to / from HTM category

During the year ended 31^st March, 2018, the Bank has sold Government Securities from Held to Maturity category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The profit booked out of sale of HTM securities has been transferred to Capital Reserve.

1.2 The Reserve Bank of India vide its circular RBI / 2017-18 / 147 DBR No.BP.BC.102 / 21.04.048 / 2017-18 dated 02^nd April, 2018, permitted Banks to spread provisioning for Mark to Market (MTM) losses on investments held in AFS and HFT category for the quarters ended 31^st December, 2017 and 31^st March, 2018 equally over four quarters respectively (commencing with the quarter in which the loss is incurred). The Bank has not availed the said dispensation and has recognised the entire Mark to Market loss on investments in the respective quarters.

2.1 Disclosures on risk exposure in derivatives

2.1.1 Qualitative Disclosure :

A. Structure and Organisation for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla Forward Contracts only to backup / cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury Policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the Open Position Limits, Deal Size Limits and Stop Loss Limits for trading.

The Mid Office is handled by Risk Management Department. Daily report is generated by Risk Management Department for appraisal of the risk profile to the Senior Management for Asset and Liability Management.

B. Scope and nature of Risk Measurement, Risk Reporting and Risk Monitoring Systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (Counterparty, Stop Loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants

The Bankâs policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc., are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals / margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding Forward Contracts are done as per FEDAI guidelines in force. Mark to Market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure Method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks. The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other Banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower.

The Bank also deals with other Banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Mark to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under Current Exposure Method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

@ Out of the total credit exposure of Rs.125.92 cr (P.Y. Rs.297.72 cr), exposure to the tune of Rs.75.42 cr (P.Y. Rs.266.09 cr) is accepted for guaranteed settlement by Clearing Corporation of India (CCIL) and exposure to the tune of Rs. 35.02 cr (P.Y. Rs. 24.05 cr) are other Inter-Bank deals not guaranteed by CCIL. Balance of Rs. 15.48 cr (P.Y. Rs. 7.58 cr) is out of forward contracts outstanding with customers.

3.1. Divergence in Asset Classification and Provisioning for NPAs :

In terms of RBI circular DBR.BP.BC.No.63 / 21.04.018 / 2016-17 dated 18^th April, 2017, Banks are required to disclose the divergences in asset classification and provisioning consequent to RBIâs annual supervisory process in their notes to accounts wherever either a) the additional provisioning requirements assessed by RBI exceed 15% of the published net profits after tax for the reference period or, b) the additional Gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the reference period, or both. Accordingly, RBI inspection has been concluded with position relating to 31^st March, 2017 and we do not have requirement of reporting divergence as per RBI / SEBI guidelines for the said period and the same was informed to stock exchanges through our filing dated 30^th January, 2018.

3.1.1 Particulars of Accounts Restructured

As per Annexure I.

3.1.2 Disclosures on the scheme for sustainable Structuring of Stressed Assets (S4A), as at 31^st March, 2018.

There were no accounts during the year where S4A has been applied.

3.1.3 Disclosures on Flexible Structuring of Existing Loans.

There were no borrowers taken up for flexibility structuring during the year.

3.1.4 Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period)

There were no accounts during the year where SDR has been invoked.

3.1.5 Disclosures on change in Ownership outside SDR scheme (accounts which are currently under the stand-still period)

There were no accounts during the year where Bank has decided to effect change in ownership.

3.1.6 Disclosures on change in Ownership of Projects under Implementation (accounts which are currently under the stand-still period)

There were no project loan accounts during the year where Bank has decided to effect change in ownership.

3.2 Details of Non - Performing financial assets purchased / sold

3.2.1 Details of non performing financial assets purchase d from other Banks :

3.2.2 Details of non performing financial assets sold to other Banks :

3.3 Provisions on Standard Assets

The above classification has been made on the basis of the guidelines of RBI and certain assumptions made by management and have been relied upon by auditors.

4.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

4.2 Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - Nil

5. PENALTIES IMPOSED BY RBI

During the year, RBI has imposed penalty of Rs.12,000/- on discrepancies detected during Soiled Note Remittances.

6. DISCLOSURES AS PER ACCOUNTING STANDARDS

The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBIâs guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of Income / Expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (3) of Income / Expenditure of certain items recognised on cash basis.

iii) Effects of changes in Foreign Exchange Rates -AS 11

The Bank is revaluing foreign currency transactions consistently at the weekly average rate of the last week, prescribed by FEDAI, instead of the rate at the date of the transaction as per AS 11. The management is of the view that there is no material impact on the accounts for the year.

iv) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under - Leave Encashment :

vi) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - Nil

Key Management Personnel - Dr. N. Kamakodi

vii) Leases - AS 19

a) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss Account in the year to which it relates.

b) Future lease rents and escalation in the rent are determined on the basis of agreed terms.

c) At the expiry of initial lease term, generally the Bank has an option to extend the lease for a further pre-determined period.

d) The Bank does not have any financial lease.

ix) Consolidated Financial Statements (CFS) - AS 21

The bank has no Subsidiaries / Joint Venture / Associates. Hence reporting under CFS is not applicable.

x) Accounting for Taxes on Income - AS 22

The major components of the Deferred Tax Asset and Liabilities as at 31^st March, 2018 are as follows:

xi) Accounting for Investments in Associates in CFS - AS 23

The Bank has no Associates. Hence reporting under CFS - AS 23 is not applicable.

xii) Discontinuing Operations - AS 24

The Bank has not discontinued any of its operations. Hence reporting under CFS - AS 24 is not applicable.

xiii) Interim Financial Reporting - AS 25

Quarterly review have been carried out with reference to RBI and SEBI circulars & prescribed formats.

xiv) Intangible Assets - AS 26

The Bank has followed AS 26 - âIntangible Assetâ issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xv) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 -âImpairment of Assetsâ applies.

xvi) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPAâs and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

7.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

As informed to the Stock Exchanges on 8^th December, 2017, during the third quarter, there were certain improper transactions amounting to Rs.31.55 cr through VISA, MASTER & NPCI networks through ATM switch which were approved outside the Bankâs network. The Bank has a cyber insurance cover for Rs.25 cr and insurance claim has been lodged. The Bank has provided a sum of Rs.7 cr during the third quarter.

As informed to the Stock Exchanges on 17^th February, 2018, during Q4 FY 18, three fraudulent remittances amounting to Rs.12.13 cr had gone through our SWIFT system which were not initiated by us. Out of this, the Bank received back Rs.3.25 cr. An amount of Rs.2.22 cr have been blocked and for getting back the remaining amount the Bank is taking efforts. During the fourth quarter, the Bank has made a provision of Rs.6.66 cr.

7.1.1 Letters of Comfort

The Bank has not issued any letters of comfort to other banks / branches during the year.

7.1.2 Letter of Undertaking

Letter of Undertaking (LOU) issued by the Bank towards Trade Credit for import of goods into India and outstanding as on 31^st March, 2018 was Rs.114.17 cr (translated at exchange rate published by FEDAI as at the last working day). The Bank has not issued any LOU after 13^th March, 2018 in compliance with RBI notification A.P. (DIR Series) Circular No. 20 dated 13^th March, 2018. The LOUs issued and outstanding are as per extant RBI guidelines at the time of issue of LOUs and the Bank will not rollover LOUs on expiry. The Bank has not issued any LOUs based on bullion agreement. In the Bankâs assessment, no financial impact is likely to arise.

7.2 Provisioning Coverage Ratio (PCR)

The Provisioning Coverage Ratio (PCR) of the Bank as on 31^st March, 2018 is 64%. (pY. 61%)

7.3 Bancassurance Business

Income from Bancassurance Business for the financial year 2017-18 is Rs.6.95 cr (PY. Rs.6.24 cr)

7.4 Concentration of Deposits, Advances, Exposures and NPAs

7.5 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

7.6 Unamortized Pension and Gratuity Liabilities - Nil.

7.7 Disclosures relating to Securitization

The outstanding amount of securitized assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31^st March, 2018 - Nil.

7.8 Credit Default Swaps

The Bank has not entered into Credit Default Swaps during the Current Financial Year.

7.9 Unhedged Foreign Currency Exposure

a) In terms of RBI circular No. DBOD. NO. BP. BC. 85/21.06.200/2013-14 dated 15^th January, 2014 with regard to Capital and Provisioning Requirements for exposures to entities with Unhedged Foreign Currency Exposure, the Bank has a policy approved by the Board of Directors.

b) The provision required for UFC exposure as on 31^st March, 2018 is Rs.1.95 crore only against which a provision of Rs.1.96 crore has already been made.

c) The incremental capital requirement for the unhedged forex exposure as on 31^st March, 2018 has been determined based on the additional risk weight value of Rs.2.09 crore for the UFC exposure.

8. LIQUIDITY COVERAGE RATIO

8.1 Disclosure Format

As per Annexure II.

8.2 Quality Disclosure around LCR

Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS.The LCR promotes short term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.

LCR is defined as:

Stock of High Quality Liquid Assets(HQLA) > 100 % Total net cash outflows over the next 30 calendar days

The LCR standard aims to ensure that a Bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for the next 30 days period under a significantly severe liquidity stress scenario specified by RBI.

The main driver of the LCR is HQLA which consists of Cash in hand, Excess CRR balance as on that particular day, Government Securities in excess of minimum SLR requirement, Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF), Facility to avail liquidity for liquidity coverage ratio at 9% of NDTL, Marketable securities representing claims on or claims guaranteed by sovereigns, PSEs or multilateral development banks that are assigned a 20% risk weight under the Basel II standaridized approach for credit risk and provided that they are not issued by a Bank / Financial Institution / NBFC or any of its affiliated entities, Marketable securities representing claims on or claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%, Common equity shares not issued by a Bank / Financial Institution / NBFC or any of its affiliated entities and included in NSE CNX Nifty and / or S & P BSE Sensex indices. As the LCR is well within the norms, there is no requirement for intra period changes as well as changes over time.

The Bank has a well-diversified funding portfolio. Retail deposits, considered as stable is the major funding source of the Bank, indicating lower dependence of the Bank on wholesale funds.

The impact of derivative exposures and currency mismatch in the LCR is very minimal. There is no such inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers to be relevant for its liquidity profile.

The Liquidity Risk Management in the Bank is guided by the ALM Policy. The Bankâs Liquidity management is centralized at Treasury department as per the directions of ALCO.

9.1 Income Tax

Provision for Income Tax in the current year is made as per Income Computation Disclosures Standards (ICDS) after considering various judicial decisions on certain disputed issues.

In the opinion of the management, no provision is considered necessary for earlier years towards disputed tax liability since for the Income Tax claim of Rs.646 cr (under Appeal) (previous year Rs.525 cr) and Rs.18.94 cr for Service Tax, the Bank has to its support, appellate orders decided in its favour on similar issues..

9.2 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31^st March, 2018. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

9.3 Employees Stock Option

The Bank has allotted 35,57,840 (PY. 28,73,602) equity shares during the year to its eligible employees who have exercised their options granted under ESOP of the Bank

9.4 In accordance with the RBI circular DBOD. No. BPBC.2 / 21.06.201 / 2013-14 dated 01^stJuly, 2013, banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30^th September, 2013. The disclosures have been made available on the Bankâs website.

9.6 There are no dues to Micro and Small Enterprises calling for disclosure as at 31^st March, 2018 as per the records available.

9.7 Implementation of Ind AS:

The Ministry of Company Affairs (MCA) has notified Accounting Standard (Ind AS) as issued by The Institute of Chartered Accountants of India (ICAI) for implementation beginning from 1^st April, 2019 with comparative figures of 2018.

Accordingly, the Ind AS quarterly financials of FY 2019-20 should be published with comparison from June 2019.

As advised by RBI, the Bank has submitted proforma Ind AS financial statements to RBI for the half year ended 30^th September, 2016 and for the quarter ended 30^th June, 2017 in prescribed format.

9.8 Priority Sector Lending Certificates (PSLC)

During the year, PSLC purchased (SF / MF) Rs.500 cr and PSLC sold Rs.3,117 cr (Micro Enterprises Rs.1,917 cr and General Rs.1,200 cr).

9.9 In accordance with RBI instruction, the Bank has made a provision of 5% a m o u n t i n g t o Rs.3.62 cr against exposure in the long term food credit advance to Punjab State Government and 15% amounting to Rs.1.34 cr towards Telangana State.

9.10 RBI Circular DBR No. BP.BC.100/ 21.04.048 / 2017-18 dated 7^th February, 2018 permitted Banks to continue the exposures to MSME borrowers registered under Goods & Service Tax (GST) to be classified as Standard Assets where the dues between 1^st September, 2017 and 31^st January, 2018 are paid not later than 180 days from their respective original due dates. In accordance with the provisions of the circular, the Bank had not recognised interest Income of Rs.17 lakhs and created a standard assets provision of Rs.81 lakhs in respect of such accounts.

9.11 The Board of Directors recommend a dividend of 30% (30 paise) per equity share of Rs.1/- each for the year 2017-18, subject to the approval of the members at the ensuing Annual General Meeting. In accordance with AS 4, Contingencies and Events occuring after the Balance Sheet date notified by the MCA on 30^th March, 2016, the proposed dividend has not been shown as appropriation from the Profit and Loss appropriation account as of 31^st March, 2018 and correspondingly not reported under Other Liabilities and Provisions as at 31^st March, 2018. For computation of capital adequacy ratio as at 31^st March, 2018, Bank has adjusted the proposed dividend and tax thereon for determining capital funds.

9.12 The Board of Directors at its meeting held on 24^th May, 2018 approved issue of Bonus shares, in the proportion of 1 : 10, i.e. 1 (one) bonus equity share of Rs.1/- each for every 10 (ten) fully paid-up equity shares held as on the record date, subject to approval by the members of the Bank.

9.13 RBI has advised Banks to make higher provisions for those accounts referred under the provisions of Insolvency and Bankruptcy Code, 2016 (IBC). The Bank had exposure to two such accounts which were declared as NPA and fully provided in earlier years.

9.14 In terms of RBI circular no.DBR.No.BP.BC.64 / 21.04.048 / 2016-17 dated 18^th April, 2017. No provision is required to be made since we do not have any exposure in telecom sector.

9.15 Previous yearâs figures have been regrouped wherever necessary to confirm to the current year classification.

Mar 31, 2017

1. Sale and Transfer to / from HTM category

During the year ended 31^st March, 2017, the Bank has sold Government Securities from Held to Maturity category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The profit booked out of sale of HTM securities has been transferred to Capital Reserve. The market value of investments under HTM category as on 31^st March, 2017 was Rs.6,006.45 crore and as the market value was higher than the book value, the provision thereof is not required to be made.

2. Disclosures on risk exposure in derivatives

2.1 Qualitative Disclosure :

A. Structure and Organization for Management of risk in derivatives trading

The Integrated Treasury Policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the Open Position Limits, Deal Size Limits and Stop Loss Limits for trading.

B. Scope and nature of Risk Measurement, Risk Reporting and Risk Monitoring Systems

C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc., are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

Valuation of outstanding Forward Contracts are done as per FEDAI guidelines in force. Marked to Market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure Method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other Banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower. The Bank also deals with other Banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under Current Exposure Method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

3. Particulars of Accounts Restructured As per Annexure I.

Disclosures on the scheme for sustainable Structuring of Stressed Assets (S4A), as at 31^st March, 2017

There were no accounts during the year where S4A has been applied.

Disclosures on Flexible Structuring of Existing Loans

There were no borrowers taken up for flexibility structuring during the year.

Disclosures on Strategic Debt Restructuring Sheme (accounts which are currently under the stand-still period)

There were no accounts during the year where SDR has been invoked.

Disclosures on change in Ownership outside SDR scheme (accounts which are currently under the stand-still period)

There were no accounts during the year where Bank has decided to effect change in ownership.

Disclosures on change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

There were no project loan accounts during the year where Bank has decided to effect change in ownership.

4. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

5. Unsecured Advances - Advances secured by intangible securities such as Rights, licenses, authorizations, etc. - Nil

6. Penalties imposed by RBI

During the year, RBI has imposed penalty of Rs.69,000/- on discrepancies detected during Soiled Notes Remittance.

7. Disclosures as per Accounting Standards

The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of Income / Expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognized on cash basis.

iii) Employee Benefits-AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

vi). Leases âAS 19

a) Lease rent paid for operating leases are recognized as an expense in the Profit & Loss Account in the year to which it relates.

b) Future lease rents and escalation in the rent are determined on the basis of agreed terms.

c) At the expiry of initial lease term, generally the Bank has an option to extend the lease for a further pre-determined period.

d) The Bank does not have any financial lease.

viii) Consolidated Financial Statements (CFS)-AS 21

The Bank has no subsidiaries.

x) Accounting for Investments in Associates in CFS - AS 23

The Bank has no Associates.

xi) Discontinuing Operations - AS 24

The Bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 -"Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

8. Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

9. Letters of Comfort

The Bank has not issued any letters of comfort to other Banks / Branches during the year. However, letter of undertaking aggregating to Rs.163.45 crore was outstanding as on 31^st March, 2017. In the Bank''s assessment, no financial impact is likely to arise.

10. Provisioning Coverage Ratio (PCR)

The Provisioning Coverage Ratio (PCR) of the Bank as on 31^st March, 2017 is 61%. (PY. 60%)

11. Bancassurance Business

Income from Bancassurance Business for the financial year 2016-17 is Rs. 6.24 cr. (PY. Rs.4.42 cr)

12. Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

13. Unamortized Pension and Gratuity Liabilities - Nil.

14. Disclosures relating to Securitization

The outstanding amount of securitized assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31^stMarch, 2017 - Nil.

15. Unhedged Foreign Currency Exposure

b) The provision required for UFC exposure as on 31^st March, 2017 is Rs.0.94 crore only against which a provision of Rs.1.96 crore has already been made.

c) The incremental capital requirement for the unhedged forex exposure as on 31^st March, 2017 has been determined based on the additional risk weight value of Rs.0.37 crore for the UFC exposure.

16. Liquidity Coverage Ratio

17. Credit Default Swaps

The Bank has not entered into Credit Default Swaps during the Current Financial Year.

18. Intra-Group Exposures

Nil

19. Quality Disclosure around LCR

Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS. The LCR promotes short term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.

LCR is defined as

Stock of High Quality Liquid Assets(HQLA) > 100 % Total net cash outflows over the next 30 calendar days

While the BCBS specifies a ratio of minimum 100% for all Banks, RBI has made a graduated increase from 60% to attain 100% by 2019 as given in the schedule below:

Composition of High Quality Liquid Assets (HQLA) :

- Cash in hand.

- Excess CRR balance as on that particular day.

- Excess Government Securities in excess of minimum SLR requirement.

- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF).

- Facility to avail liquidity for liquidity coverage ratio at 5% of NDTL.

- Repo Borrowings should be deducted.

- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%.

- Common equity shares not issued by the Bank and included in NSE CNX Nifty and / or S & P BSE Sensex indices.

As regards the concentration of funding sources, the term deposits from public is the major source for the Bank.

The currency mismatch in respect of Foreign Currency Assets and Liabilities is very minimal.

20. Income Tax

Provision for Income Tax in the current year is made as per Income Computation Disclosures Standards (ICDS) after considering various judicial decisions on certain disputed issues.

In the opinion of the management, no provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs.525 cr (under Appeal) (previous year Rs.409 crore), the bank has to its support, appellate orders decided in its favour on similar issues.

21. Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31^st March, 2017. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

22. Employees Stock Option

The Bank has allotted 28,73,602 (PY. 16,23,479) equity shares during the year to its eligible employees who have exercised their options granted under ESOP of the Bank.

23. In accordance with the RBI circular DBOD. No. BPBC.2/21.06.201/2013-14 dated 1^st July, 2013, Banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30^thSeptember, 2013. The disclosures have been made available on the Bank''s web site.

24. There are no dues to Micro and Small Enterprises calling for disclosure as at 31^st March, 2017 as per the records available.

25. Implementation of Ind AS:

The Ministry of Corporate Affairs (MCA) has notified Accounting Standard (Ind AS) as issued by The Institute of Chartered Accountants of India (ICAI) for implementation beginning from 1^st April, 2018 onwards with comparative figures of 2017.

Accordingly, the Ind AS quarterly financials of FY.2017-18 should be published with comparison from June 2018 onwards.

As advised by RBI, the Bank has submitted proforma Ind AS financial statements to RBI for the half year ended 30^th September, 2016 in prescribed format.

26. Priority Sector Lending Certificates (PSLC)

During the year, PSLC purchased (SF / MF) Rs.650 cr and PSLC sold Rs.3,845 cr (Micro Enterprises Rs.1,000 cr and General Rs.2,845 cr).

27. Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2015

1 CONTINGENT LIABILITIES

I. Claims against Bank not acknowledged as debts 3,58,95 2,97,92

II. Liability for partly paid Investments Nil Nil

III. Liability on account of outstanding Forward Exchange Contracts 5892,14,70 3661,48,27

IV. Guarantees given on behalf of Constituents

- In India 1196,55,24 968,53,55

- Outside India 29,73,96 8,77,92

V. Acceptances,endorsements and other obligations 407,75,32 470,93,36

VI. Other items for which the Bank is contingently liable 6,73,79 42,40

Total 7536,51,96 5113,13,42

2. Sale and Transfer to / from HTM category

The value of sales and transfer of securities from HTM category after considering the exemptions allowed by RBI, doesn''t exceed 5 percent of the book value of investments held in HTM category at the beginning of the year. Hence no disclosure is required.

3. Disclosures on risk exposure in derivatives

Qualitative Disclosure:

A. Structure and Organisation for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla forward contracts only to backup / cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the open position limits, deal size limits and stop loss limits for trading.

The Mid-Office is handled by Risk Management Department. Daily report is generated by Risk Management department for appraisal of the risk profile to the senior management for Asset and Liability Management.

B. Scope and nature of risk measurement, risk reporting and risk monitoring systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (Counterparty, Stop loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges / mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc. are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals / margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding forward contracts are done as per FEDAI guidelines in force. Marked to market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure method are taken into account while sanctioning forward contract limits to customers and collaterals / cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer / borrower. The Bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid-office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

4. Particulars of Accounts Restructured

As per Annexure I.

5. Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

6. Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - Nil

7. PENALTIES IMPOSED BY RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

8. DISCLOSURES AS PER ACCOUNTING STANDARDS

The Bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

For the preparation of these financial results, the Bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended 31stMarch, 2015, except for accounting of depreciation on fixed assets.

Disclosure regarding Depreciation Policy: In the current year, effective from 1st April, 2014 the Bank has changed the accounting policy of charging depreciation having regard to change in the estimated useful life of the assets, from Written down value method (WDV), to Straight line method (SLM) in respect of all fixed assets .The management believes that the aforesaid changes better reflect the actual use of assets acquired and is in conformity with the Companies Act,2013.

On account of this change in accounting policy, the bank has in the fourth quarter, reversed an amount of Rs. 1088.93 lakhs representing the excess depreciation charge for the period upto 31st March, 2014 and disclosed the same as an exceptional item. As a result of this change, the net profit for the current year and fourth quarter is higher by Rs. 1088.93 lakhs and the basic and diluted earnings per share is higher by Rs. 0.19 &Rs. 0.18 per share.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognised on cash basis.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees'' Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post-retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard 15 (Revised) is as under.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - Nil

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration - Rs. 44,15,000/-

b) as Loan availed - Outstanding as on 31st March, 2015 : Rs. 43,15,301/-

ix) Accounting for Investments in Associates in CFS - AS 23

The Bank has no Associates.

x) Discontinuing Operations - AS 24

The Bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

9. Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

Letters of Comfort issued during the financial year 2014-15 : Nil

10. Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the Bank as on 31st March, 2015 is 57.54%.

Bancassurance Business

Income from Bancassurance Business for the financial year 2014-15 is Rs. 4.24 crore.

Concentration of Deposits, Advances, Exposures and NPAs

Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

Unamortized Pension and Gratuity Liabilities - Nil.

Disclosures relating to Securitisation

The outstanding amount of securitised assets as per books of the SPVs sponsored by the Bank and total amount of exposures retained by the bank as on 31stMarch, 2015 - Nil.

Credit Default Swaps

The bank has not entered into Credit Default Swaps during the Current Financial Year.

Intra-Group Exposures - Nil

11. Unhedged Foreign Currency Exposure

a) In terms of RBI circular No. DBOD. NO. BP. BC. 85/21.06.200/2013-14 dated 15th January, 2014 with regard to Capital and Provisioning Requirements for exposures to entities with Unhedged Foreign Currency Exposure, the Bank has a policy approved by the Board of Directors.

b) The provision required for UFC exposure as on 31stMarch, 2015 is Rs. 1.13 crore has been made.

c) The incremental capital requirement for the unhedged forex exposure as on 31st March, 2015 has been determined based on the additional risk weight value of Rs. 743.88 lakhs for the UFC exposure.

12. Quality disclosure around LCR

Liquidity Coverage Ratio has been prescribed by RBI based on LCR Standards published by BCBS.The LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario in the immediate 30 days period.

LCR is defined as :

Stock of High Quality Liquid Assets(HQLA) > 100 %

Total net cash outflows over the next 30 calendar days

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for the next 30 days period under a significantly severe liquidity stress scenario specified by RBI w.e.f 1st January, 2015.

While The BCBS specifies a ratio of minimum 100 % for all banks, RBI has made a graduated increase from 60 % to attain 100 % by 2019 as given in the schedule below :

Composition of High Quality Liquid Assets(HQLA):

* Cash in hand

* Excess CRR balance as on that particular day

* Excess Government Securities in excess of minimum SLR requirement

* Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (presently to the extent of 2% of NDTL as allowed for MSF)

* Facility to avail liquidity for liquidity coverage ratio at 5% of NDTL

* Repo borrowings should be deducted

* AAA rated bonds and AA- & above rated bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%

* Common equity shares not issued by the bank and included in NSE CNX Nifty and / or S & P BSE Sensex indices.

As regards the concentration of funding sources, the term "deposits from public" is the major source for the bank.

The currency mismatch in respect of foreign currency assets and liabilities is very minimal.

13. Income Tax

Provision for income tax in the current year is consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 323 crore (under Appeal) {previous year - Rs. 249 crore}, the Bank has to its support, appellate orders decided in its favour on similar issues.

14. Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31st March, 2015. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

15. Employees Stock Option

The bank has allotted 71,91,961 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

16. The Bank issued 4,66,35,576 shares having face value of Rs.1/- each at a premium of Rs. 74.05 as qualified institutions placement and the expenses of Rs. 8.77 crore were amortized against the share premium received.

17. In accordance with the RBI circular DBOD. No. BPBC.2/21.06.201/2013-14 dated 1st July, 2013, banks are required to make half yearly Pillar III disclosures under Basel III capital requirements with effect from 30th September, 2013.The disclosures have been made available on the Bank''s web site.

18. The Bank has earmarked Rs. 6.32 crore towards CSR during the year 2014-15. Out of which Rs. 3.54 crore has been spent (accounted under Schedule - 16 : Operating Expenses - XII Other Expenditure) and the balance will be disbursed based on the works completed.

19. There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March, 2015 as per the records available.

20. Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2014

1.1 Sale and Transfer to / from HTM category:

The value of sales and transfer of securities to / from HTM category doesn''t exceeds 5 percent of the book value of investments held in HTM category at the beginning of the year. Hence no disclosure required.

The Bank in terms of RBI circular DBOD. BP. BC. No. 41/21.04.141/2013-14 dated August 23, 2013 has transferred SLR securities of Rs. 541 crore from AFS to HTM category and booked a loss of Rs. 0.26 crore on the transfer of such securities.

1.2 Disclosures on risk exposure in derivatives:

1.2.1 - Qualitative Disclosure:

A. Structure and Organisation for Management of risk in derivatives trading

Operations in the Treasury are segregated into three functional areas, namely Front office, Mid-office and Back-office, equipped with necessary infrastructure and trained officers, whose responsibilities are well defined. The Bank enters into plain vanilla forward contracts only to backup/cover customer transactions as also for proprietary trading purpose.

The Integrated Treasury policy of the Bank clearly lays down the scope of usages, approval process as also the limits like the open position limits, deal size limits and stop loss limits for trading.

The Mid-Office is handled by Risk Management Department. Daily report is generated by Risk Management department for appraisal of the risk profile to the senior management for Asset and Liability Management.

B. Scope and nature of risk measurement, risk reporting and risk monitoring systems

Outstanding forward contracts are monitored by Risk Management Department against the limits (counterparty, stop loss, Open Position, VaR, Aggregate Gap) fixed by the Board and approved by RBI (wherever applicable) and exceedings, if any, are reported to the Board for ratification.

C. Policies for hedging and/or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants

The Bank''s policy lays down that the transactions with the corporate clients are to be undertaken only after the inherent credit exposures are quantified and approved for customer appropriateness and suitability and necessary documents like ISDA agreements etc. are duly executed. The Bank adopts Current Exposure Method for monitoring the credit exposures.

While sanctioning the limits, the competent authority stipulates condition of obtaining collaterals/margin as deemed appropriate. The derivative limits are reviewed periodically along with other credit limits.

D. Accounting policy for recording the hedge and non-hedge transactions, recognition of Income premiums and discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation

Valuation of outstanding forward contracts are done as per FEDAI guidelines in force. Marked to market profit & loss are taken to Profit & Loss account. MTM profit & loss calculated as per Current Exposure method are taken into account while sanctioning forward contract limits to customers and collaterals/cash margins are prescribed for credit and market risks.

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts is also considered while arriving at the total exposure of each customer/borrower. The Bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid-office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

1.3 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

1.4 Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - NIL

2. PENALTIES IMPOSED BY RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

3. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of Income / Expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

As mentioned in Accounting Policy (2) of Income / Expenditure of certain items recognised on cash basis.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration : Rs. 24,90,000/- b) as Loan availed - Outstanding as on 31.03.2014 : Rs. 43,08,112/-

vii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

ix) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

x) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

4.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year, except for providing Deferred Tax Liability on Special Reserve under Section 36 (1) (viii) of the Income tax Act, 1961 as mentioned in para 9 (viii).

4.2 Letters of Comfort issued in during financial year 2013-14 : NIL

4.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2014 is 61.74%.

4.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2013-14 : Rs. 3.97 crore.

4.5 Concentration of Deposits, Advances, Exposures and NPAs

4.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs. (Domestic / Overseas)

4.7 Unamortized Pension and Gratuity Liabilities Â NIL

4.8 Disclosures on remuneration Qualitative Disclosures :

(a) Information relating to the composition and mandate of the Remuneration Committee.

Compensation Committee comprising of three members constituted to oversee the framing, review and implementation of Compensation Policy.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

Key Features:

i) Board oversees the design of the compensation package and operations.

ii) Compensation commensurate with the responsibility and accountability.

Objectives:

a) Alignment of compensation with prudent risk taking.

b) Effective Supervisory oversight.

c) Sound Compensation Practices.

(c) Description of the ways in which current and future risks are taken in to account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks.

Compensation related to the types of risks and symmetric with risk outcomes.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration.

Qualitative features such as skills, knowledge and abilities are factored in.

(e) A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

i) ESOP and Reservation in Rights Issue to be the components of share based payment

ii) Ex-gratia payment to be denied only in extreme cases of indiscipline, misuse of trust etc.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms.

Financial incentives, Ex-gratia and ESOPs form part of variable remuneration components.

4.9 Income Tax

Provision for income tax in the current year is consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 249 crore (under Appeal), the bank has to its support appellate orders decided in its favour on similar issues.

4.10 Inter - Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2014. Adjustment of outstanding entries in Inter - Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

4.11 Employees Stock Option

The bank has allotted 38,00,405 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

4.12 Credit Default Swaps

The bank has not entered into Credit Default Swaps during the Current Financial Year.

4.13 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

4.14 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2014 as per the records available.

4.15 Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2013

1.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

1.2 Unsecured Advances - Advances secured by intangible securities such as Rights, licences, authorisations, etc. - NIL

2. Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

3. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI''s guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

v) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Dr. N. Kamakodi

(ii) Related Party Transactions:

a) as Remuneration : Rs. 24,90,000/- b) as Loan availed - outstanding as on 31.03.2013 : Rs. 41,43,378/-

The bank issued Rights shares during the year at the rate of 1 equity share for every four equity shares held at an issue price of Rs. 20 per equity share including a premium of Rs. 19 per share. The earnings per share (EPS) has been arrived at after considering the right adjustment factor as provided in AS 20. Consequently, the weighted number of shares outstanding prior to the issue has been increased by 0.19 times (right adjustment factor) for this year as well as for the previous year ended 31.03.2012, as per the prescription of the Accounting Standards.

vii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

viii) Accounting for Taxes on Income - AS 22

The major components of the Deferred Tax Asset and Liabilities as at 31st March 2013 are as follows:

ix) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

x) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xi) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiii) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA''s and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

4.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

4.2 Letters of Comfort issued in respect of Subsidiaries during financial year 2012-13 : NIL

4.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2013 is 70.56%.

4.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2012-13 : Rs. 4.97 crore.

4.5 Concentration of Deposits, Advances, Exposures and NPAs

4.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

4.7 Unamortized Pension and Gratuity Liabilities Â NIL

4.8 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered necessary for earlier years towards disputed tax liability since for the tax claim of Rs. 213.30 cr (under Appeal by the Bank), the bank has to its support appellate orders decided in its favour on similar issues.

4.9 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2013. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

4.10 Employees Stock Option

The bank has allotted 17,39,237 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

4.11 Rights Issue

During the year, the bank allotted 10,43,34,379 equity shares to existing shareholders and 2,46,53,593 Equity Shares to employees under "Employee Reservation Portion" at an issue price of Rs. 20/- per equity share (including premium of Rs. 19/-) by way of Rights Issue of which Rs. 10/- per equity share has been received as application money and the balance of Rs. 10/- per equity share is receivable as call money in the first quarter of FY 2013-14.

4.12 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

4.13 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2013 as per the records available.

4.14 Previous year''s figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2012

SCHEDULE - 1 CONTINGENT LIABILITIES

I Claims against Bank not acknowledged as debts 1,36,12 1,17,92

II Liability for partly paid Investments Nil 1,99,08

III Liability on account of outstanding Forward Exchange Contracts 8283,18,84 3356,24,43

IV Guarantees given on behalf of constituents - In India 797,71,80 492,75,93

- Outside India 9,42,47 Nil

V Acceptances,endorsements and other obligations 610,00,38 310,04,63

VI Other items for which the Bank is contingently liable Nil Nil

Total 9701,69,61 4162,21,99

2.1 Disclosures on risk exposure in derivatives:

2.1.1 - Qualitative Disclosure:

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The credit exposure on account of forward contracts are also considered while arriving at the total exposure of each customer / borrower. The bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The Bank's treasury department operates under three functional areas namely Front Office, Mid Office and Back Office. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

3.1 Details of financial assets sold to Securitisation / Reconstruction company for Asset Reconstruction:

The bank has not sold any financial assets to Securitisation / Reconstruction Company for Asset Reconstruction. (Previous year - Nil).

3.2 Details of Non-performing financial assets purchased / sold:

The bank has not purchased / sold any financial assets from / to any Banks (Previous Year - NIL).

* The net funded exposure of the bank in respect of foreign exchange transactions with any country is within 1 % of the total assets of the Bank and hence no provision is required in terms of RBI guidelines.

4.1 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not exceeded during the year.

4.2 Unsecured Advances - Advances secured by intangible securities such as Rights, licences authorisations, etc. - NIL

5.1 Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

6. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI's guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank and its employees contribute a defined sum every month to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

a) The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) is as under:

Part B - Geographic Segment:

The bank operates only in India.

vi) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates / JV - NIL

Key Management Personnel - Shri S. Balasubramanian (upto 30.04.2011)

- Dr. N. Kamakodi (from 01.05.2011)

(ii) Related Party Transactions:

Substituted by: a) as Remuneration : Rs. 24,87,500/-

b) as Loan availed - outstanding as on 31.03.2012 : Rs. 42,31,424/-

viii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

x) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

xi) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA's and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

7.1 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

7.2 Letters of Comfort issued in respect of Subsidiaries during financial year 2011-12 : NIL

7.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2012 is 76.81%.

7.4 Bancassurance Business

Income from Bancassurance Business for the financial year 2011-12 : Rs. 3.25 crore.

7.5 Concentration of Deposits, Advances, Exposures and NPAs

7.6 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

7.7 Unamortized Pension and Gratuity Liabilities - NIL

7.8 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

No provision is considered for disputed taxes based on the orders received by the bank and similar decisions at various stages of the Tribunal and Higher judicial Forums.

7.9 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2012. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

7.10 Employees Stock Option

The bank has allotted 31,81,646 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

7.11 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

7.12 There are no dues to Micro and Small Enterprises calling for disclosure as at 31st March 2012 as per the records available.

7.13 Previous year's figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2011

1.1.1 - Qualitative Disclosure:

The Bank undertakes foreign exchange forward contracts for its customers and hedges them with other banks. The bank also deals with other banks in proprietary trading duly adhering to risk limits permitted by RBI, set in the policy and is monitored by mid office. The Marked to Market values are monitored on monthly basis for foreign exchange forward contracts. The credit equivalent is computed under current exposure method. The Bank's treasury department operates under three functional areas namely Front Office, Mid Office and Back Office. The operations are conducted in terms of the policy guidelines issued by Reserve Bank of India from time to time and as approved by the Board of the Bank.

2. ASSET QUALITY

a) Non Performing Loan Provisioning Coverage Ratio is 76.69% (Previous Year 70.27%).

b) The Bank has made provisions for Non Performing Assets at enhanced rates as advised in Reserve Bank of India's Circular DBOD.No.BP.BC 94/21.04.048/2011-12 dated 18.05.2011.

2.1 Details of financial assets sold to Securitisation / Reconstruction company for Asset Reconstruction:

The bank has not sold any financial assets to Securitisation / Reconstruction Company for Asset Reconstruction and hence no disclosure is given. (Previous year - Nil).

2.2 Details of Non-performing financial assets purchased / sold:

The bank has not purchased/sold any financial assets from/to Banks (Previous Year - NIL).

2.3 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank Single Borrower Limit / Group Borrower Limit has not been exceeded during the year.

2.4 Unsecured Advances - Advances secured by intangible securities such as Rights, licences authorisations, etc. - NIL

3. MISCELLANEOUS

3.1 Penalties imposed by RBI

No penalty was imposed on the bank by the Reserve Bank of India during the year.

4. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBI's guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The Bank along with its employees contributes a defined sum to City Union Bank Employees Pension Fund Superannuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employees.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

vi) Related Party disclosures - AS 18

(i) Related Parties:

Parent / Subsidiaries / Associates/JV - NIL

Key Management Personnel - Sri S. Balasubramanian, MD & CEO

(ii) Related Party Transactions:

Remuneration (cost to the bank) - Rs.27,00,000/-

viii) Consolidated Financial Statements (CFS) - AS 21

The bank has no subsidiaries.

ix) Accounting for Taxes on Income - AS 22

The Bank has complied with the provisions of Accounting Standard 22 on accounting for taxes on income issued by the Institute of Chartered Accountants of India.

x) Accounting for Investments in Associates in CFS - AS 23

The bank has no Associates.

xi) Discontinuing Operations - AS 24

The bank has not discontinued any operations.

xii) Intangible Assets - AS 26

The Bank has followed AS 26 - "Intangible Asset" issued by ICAI and the guidelines issued by RBI and has been consistent with the compliance.

xiii) Impairment of Assets - AS 28

In the opinion of the management there is no impairment to the assets to which AS 28 - "Impairment of Assets" applies.

xiv) Provisions & Contingencies - AS 29

The details of the provisions and contingencies, contingent liabilities, the movement of provisions on NPA's and depreciation on investments which are considered material are disclosed elsewhere under the appropriate headings as per RBI guidelines.

5.0 Drawdown from Reserves

The Bank has not drawn any amount from Reserves during the year.

5.1 Letters of Comfort issued in respect of Subsidiaries during financial year 2010-11 - NIL (Disclosure as per RBI's Mail Box instruction dated 11-Feb-2009)

5.2 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio (PCR) of the bank as on 31.03.2011 is 76.69%.

5.3 Overseas Assets, NPAs and Revenue

No SPV either Domestic or Overseas has been sponsored by the bank.

5.4 Off-Balance Sheet SPVs sponsored

The Bank has not sponsored any SPVs.

5.5 Income Tax

Provision for income tax in the current year has been arrived at consistent with earlier years after considering various judicial decisions on certain disputed issues.

Of the disputed income tax of earlier years amounting to Rs.174.05 cr the bank has appellate orders in its favour for Rs.122.60 cr. No provision is considered for the entire disputed taxes based on the orders received by the bank and similar decisions at various stages of the Tribunal and Higher judicial Forums.

5.6 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2011. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, there is no consequential material impact.

5.7 Employees Stock Option

The bank has allotted 50,31,003 shares during the year to its eligible employees who have exercised their options granted under ESOS of the Bank.

5.8 In the absence of notification under Sec 441 A of the Companies Act, 1956 on the cess leviable for the purpose of rehabilitation / revival / protection of assets of Sick Industrial Company, no provision has been made for the same during the year.

5.9 Previous year's figures have been regrouped wherever necessary to conform to the current year classification.

Mar 31, 2010

1. DISCLOSURES AS PER ACCOUNTING STANDARDS

The bank has complied with the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India and the following disclosures are made in accordance with RBIs guidelines.

i) Prior Period Items - AS 5

There are no material prior period items of income / expenditure during the year requiring disclosure.

ii) Revenue Recognition - AS 9

Income / Expenditure of certain items recognised on cash basis (AS 9) are not considered to be material.

iii) Employee Benefits - AS 15

The liability towards Gratuity is met through annual premium payments determined on actuarial valuation by Life Insurance Corporation of India under their Group Gratuity Life Assurance Scheme.

The bank alongwith its employees subscribes to City Union Bank Employees Pension Fund Superan nuation Scheme of Life Insurance Corporation of India to meet the post retirement annuity payments of its employee.

Leave encashment benefits of employees are provided on an actuarial basis but not funded.

The summarized position of the employee benefits recognized in the Profit & Loss Account and Balance Sheet as required in accordance with Accounting Standard-15 (Revised) are as under:

v) Related Party disclosures - AS 18

Key Management Personnel

S. Balasubramanian, MD & CEO - Remuneration paid - Rs.24,60,000/- p.a.

The bank has issued Right share during the year at the rate of one equity share for every four equity shares held at an issue price of Rs.6/- per equity share including the premium of Rs.5/- per share. As a result of this, the earnings per share (EPS) has been arrived at after considering the right adjustment factor as provided in AS 20. Consequently, the weighted number of shares outstanding prior to the issue has been increased by 0.18 times (right adjustment factor) for this year as well as for the previous year ended 31.03.2009, as per the prescription of the Accounting Standards.

vii) Accounting for Taxes on Income - AS 22

The Bank has complied with the provisions of Accounting Standard 22 on accounting for taxes on income issued by the Institute of Chartered Accountants of India.

2 Income Tax

Provision for income tax in the current year has been arrived at in consistence with earlier years after considering various judicial decisions on certain disputed issues.

With regard to taxes on issues under dispute for the earlier years aggregating to Rs.146.97 cr which are pending before the Tax authorities, no provision is considered necessary based on the decisions of the appellate authorities in favour of the bank.

3 Agricultural Debt Waiver Scheme

In terms of Agricultural Debt Waiver and Relief Scheme, 2008, advances of eligible farmers have been considered as standard. Adequate provisions for loss in NPV terms and provisions for Non Performing Assets have been made as per RBI guidelines.

4 Inter Branch Reconciliation

Reconciliation of Central Office accounts maintained by branches has been completed upto 31.03.2010. Adjustment of outstanding entries in Inter Branch Reimbursement account, Clearing Difference Receivable, Funds in Transit and other similar accounts is in progress. In the opinion of the management, consequential impact on the above is not material.

5 Employees Stock Option

The Exercise period in respect of 15% of the 20250000 equity stock options granted in 2008 commenced on 06.12.2009 and shall be open for 3 years there from. The process of exercising the vested options by the employees has not yet started. Consequent upon the rights issue, the exercise price got reduced from Rs.13/- to Rs.11.60 per option and accordingly the number of options was increased to 22781250.

6 Right Issue

During the year, the bank issued 8,00,00,000 equity shares in rights to the existing shareholders at the rate of one equity share for every four equity shares held at a price of Rs.6/- per equity share including a premium of Rs.5/- per equity share. Accordingly the issued capital of the bank increased from Rs 32 crores to Rs 40 crores. The rights issue expenses of Rs.82.12 lakhs has been netted against Share Premium of the issue. An application is being made to the Reserve Bank of India, seeking necessary approval for the expense incurred.

7 Previous years figures have been regrouped wherever necessary to conform to the current year classification.

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