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Directors Report of Federal Bank Ltd.

Mar 31, 2023

Your directors take pleasure in presenting the 92nd Annual Report on the business and operations of The Federal Bank Limited (âthe Bank"), together with the audited accounts for the Financial Year (FY) ended March 31,2023.

FINANCIAL RESULTS

Financial results are presented in the table below:

('' in Crore)
Financial Parameters for the year ended	March 31, 2023	March 31, 2022
Net Interest Income	7,232.16	5,961.96
Fee and Other Income	2,330.00	2,089.09
Net Revenue	9,562.16	8,051.05
Operating Expense	4,767.76	4,293.20
Operating Profit	4,794.40	3,757.85
net Profit	3,010.59	1,889.82
Profit brought forward	4,105.55	3,305.38
Total Profit Available for appropriation	7,116.14	5,195.20
Appropriations:
Transfer to Revenue Reserves	426.57	266.72
Transfer to Statutory Reserves	752.65	472.46
Transfer to Capital Reserves	11.32	87.40
Transfer to Investment Fluctuation Reserve	0.97	-
Transfer to Special Reserve	160.69	123.34
Dividend pertaining to previous year paid during the year	378.66	139.74
Balance Carried over to Balance Sheet	5,385.28	4,105.54
Financial Position
Deposits	213,386.04	181,700.59
Advances	174,446.89	144,928.33
Total Business (Deposits Advances)	387,832.93	326,628.92
Other Borrowings	19,319.28	15,393.12
Investments	48,983.35	39,179.46
Total Assets (Balance Sheet Size)	260,341.83	220,946.31
Equity Capital	423.24	420.51
Ratios
Return on Total Assets (%)	1.28	0.94
Return on Equity (%)	15.02	10.87
Earnings Per Share (?)	14.27	9.13
Book value per share (?)	101.22	88.75
Operating cost to Income (%)	49.86	53.32
Capital Adequacy Ratio (%) Basel (III)	14.81	15.77
Previous year figures have been regrouped / reclassified, where necessary to conform to current year''s classification.

HIGHLIGHTS OF PERFORMANCE

During the year 2022-23, your Bank delivered an excellent performance amidst a conducive but volatile environment in the market. Total business of your Bank improved by 18.74% to reach '' 3,87,832.93 Crore as on March 31, 2023. A strong growth of 20.37% in Net Advances supported by a 17.44% growth in

Total Deposits helped your Bank to grow its Total Business to its current levels. Net Advances as on March 31, 2023 stood at '' 1,74,446.89 Crore with average advances growing by 17.22%, touching '' 1,57,642.13 Crore. Total Deposits reached '' 2,13,386.04 Crore as on March 31, 2023, with average deposits over the year touching '' 1,88,228.57 Crore posting a growth of 11.15%.

Your Bank was able to post all time high quarterly Net Profits consecutively for all four quarters of the year, culminating in an all-time high annual Net Profit of '' 3,010.59 Crore for the financial year. RoA has increased by 34 bps to 1.28% while RoE has increased by 415 bps to 15.02%. EPS has increased to '' 14.27 improving by 56.29%.

GROWTH iN BUSiNESS

On CASA front, Savings deposit touched '' 55,451.99 Crore with a growth of 1.73% and Current deposits stood at '' 14,288.99 Crore with a growth of 13.30%. Your Bank registered a CASA growth of 3.90% to reach '' 69,740.98 Crore. CASA ratio of your Bank stood at 32.68%.

The investment portfolio (net) of your Bank has reached '' 48,983.35 Crore as on March 31, 2023 and the average investment as on March 31, 2023, is '' 44,018.61 Crore.

PROFiTABiUTY

The Bank delivered an annual operating profit of '' 4,794.40 Crore as on March 31, 2023. The annual net profit is at '' 3,010.59 Crore as on March 31, 2023 up from '' 1,889.82 Crore as on March 31, 2022. Net Interest Income improved by 21.31% to '' 7,232.16 Crore while the Non-Interest Income stood at '' 2,330.00 Crore.

Total income of your Bank during the fiscal touched '' 19,133.64 Crore and Income from advances reached '' 13,491.84 Crore. The yield on advances stood at 8.56% and the yield on Investments (excluding trading gain) stood at 6.35%. The Net Interest Margin for the fiscal year is at 3.31% as against 3.20%, in the previous year. Return on Average Equity and Return on Average Total Assets stood at 15.02% and 1.28% respectively. Earnings per Share (face value of '' 2 each) of the Bank, as on March 31,2023, was '' 14.27.

EXPENDiTURE

The total expenses of your Bank stood at '' 14,339.24 Crore and interest expenses increased by 24.32% to '' 9,571.48 Crore as on March 31, 2023. Operating Expenses of the Bank during the fiscal year increased to '' 4,767.76 Crore.

The cost of deposits of the Bank increased to 4.58% as on March 31,2023. The Interest expenses as percentage to total income stood at 50.02%.

SPREAD

During the fiscal year, the Bank''s spread on advances (gross) stood at 3.98% and spread on investments (gross) declined to 1.95%. The spread (net of provisions) on advance stood at 3.60%

ASSET QUALiTY

The Gross NPA of your Bank as on March 31, 2023, stood at '' 4,183.77 Crore. Gross NPA as a percentage to Gross Advances is at 2.36%. The Net NPA stood at '' 1,205.01 Crore and Net NPA percentage is at 0.69% as on March 31, 2023. The Provision Coverage Ratio (excluding technical write offs) stood at 70.02% and Provision Coverage Ratio (including technical write offs) stood at 83.49% as on March 31, 2023.

NET WORTH & CAPiTAL ADEQUACY

The Net Worth of your Bank grew by 14.78% to '' 21,419.49 Crore as against '' 18,660.98 Crore in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 14.81% which is higher than the RBI stipulation. Of this, Tier 1 CRAR is at 13.02%.

business ovERviEw

Your Bank continued its consistent performance during FY 2022-23 with the total business of the Bank increasing by 18.74% to reach '' 3,87,832.93 Crore.

There is no change in the nature of business of the Bank for the year under review. Further information on the business overview and outlook and state of the affairs of the Bank is discussed in detail in the Management Discussion & Analysis Report.

employee productivity

Business per employee of your Bank during the period stood at '' 29.55 Crore, an improvement of 14.80% for the year and the profit per employee of the Bank stood at '' 22.94 Lakh during the fiscal.

expansion of network

The Bank has 1355 branches and 1916 ATM/Recyclers (including 2 Mobile ATM''s) as on March 31, 2023. The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City

(GIFT City).

SHAREvALuE

Earnings per Share (face value '' 2 /- each) of your Bank have improved to '' 14.27 from '' 9.13 during the year under review. Return on Equity during the year reached 15.02% in the fiscal year ended March 31, 2023. Book value per share had increased to '' 101.22 as on March 31,2023.

appropriations
	('' in Thousands)
	FY 2022-23	FY 2021-22
Transfer to Revenue Reserve	4,265,747	2,667,208
Transfer to Statutory Reserve	7,526,486	4,724,554
Transfer to Capital Reserve	113,247	874,033
Transfer to Investment Fluctuation Reserve	9,690	-
Transfer to Special Reserve	1,606,900	1,233,400
Dividend pertaining to previous year paid during the year	3,786,630	1,397,396
Balance carried over to Balance Sheet	53,852,696	41,055,453
total	71,161,396	51,952,044

MATERIAL CHANGES AND COMMiTMENTS, iF ANY, AFFECTiNG THE FINANCIAL POSITION OF THE BANK WHICH HAVE oCCuRRED BETwEEN THE End oF THE Financial

year of the bank to which the financial statements

RELATE AND THE DATE oF THE REPoRT

No material changes and commitments which could affect your Bank''s financial position have occurred between the end of the financial year of your Bank and date of this report.

change in capital structure and listing of shares

The subscribed and paid-up share capital of the Bank as on March 31,2023 is '' 4,232,402,286/- divided into 2,116,201,143 equity shares of '' 2/- each. The Bank''s equity shares are listed on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). During the year 1,36,37,270 equity shares of '' 2/- each were allotted under Employee Stock Option scheme (ESOP) of the Bank and 17,500 equity shares of '' 2/- each were allotted against rights entitlements released from abeyance. All the above equity shares were admitted for trading in NSE and BSE.

As on March 31, 2023, Bank has an outstanding of 4,695 units rated, unsecured, redeemable, non-convertible, Basel III compliant lower tier II subordinated bonds aggregating to '' 1995 Crore.

Important changes which have occurred after the close of Financial Year After the close of Financial Year,19,63,075 equity shares of '' 2/- each were allotted under ESOP scheme of the Bank and have been admitted for trading on NSE and BSE. Accordingly, the paid-up share capital of the Bank as on July 15, 2023 is '' 4,23,63,28,436 divided into 2,11,81,64,218 equity shares of '' 2/- each. The shares are actively traded on NSE and BSE and have not been suspended from trading.

dividend

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 50% i.e. '' 1.00 per Equity Share on face value of '' 2/- each for the year 2022-23 (previous year: 90%) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders'' value has always been a guiding philosophy of the Bank.

As per the prevailing provisions of the Income Tax Act, 1961, the dividend, if declared, will be taxable in the hands of the shareholders at the applicable rates. For details, shareholders are requested to refer to the Notice of 92nd Annual General Meeting of the Bank.

CREDIT RATING

The details of Credit Ratings of your Bank as on March 31,2023 are as follows;

â¢ CRISIL A1 for the Certificate of Deposit Programme of the Bank.

â¢ CRISIL A1 for the Short-Term Fixed Deposits of the Bank.

â¢ CRISIL AA /Stable for the Fixed Deposits of the Bank.

â¢ CARE AA (Positive) [Double A, Outlook: Positive] for the

Tier II bonds (Under Basel III).

â¢ IND AA/ Positive by India Rating and Research for the Tier II bonds (Under Basel III).

During the year under review, Outlook for Tier II bonds was changed from Stable to Positive. The Bank had also obtained

rating for Fixed Deposits of the Bank.

employee stock option scheme (Esos)

The Bank has instituted Employee Stock Option Schemes, duly approved by the shareholders of the Bank to enable its employees including Whole Time Directors to participate in the future growth and financial success of the Bank. The Employee Stock Option Schemes are formulated in accordance with the SEBI guidelines, as amended from time to time. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, performance, grades, period of service, Bank''s performance and such other parameters as may be decided by the Nomination, Remuneration, Ethics and Compensation Committee of the Board from time to time in its sole discretion.

The Bank''s shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010) on December 24, 2010 and Employee Stock Option Scheme 2017 (ESOS 2017) on July 14, 2017.

Under ESOS 2010, the Nomination, Remuneration, Ethics and

Compensation Committee granted 3,47,20,200 options during the year 2011-12, 2,44,84,750 options during the year 201213, 2,60,94,250 options during the year 2013-14, 1,11,56,450 options during 2014-15, 10,25,000 options during the year 2015-16, 9,65,000 options during the year 2016-17 and 100,000 options during the year 2017-18. The options granted which are non-transferable, with vesting period of 1 to 5 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on March 31, 2023, 50,38,853 options had been exercised and 15,59,870 options were in force.

Under ESOS 2017, the Nomination, Remuneration, Ethics and

Compensation Committee granted 2,23,18,348 options during the year 2017-18, 3,72,31,307 options during the year 201819, 3,05,24,986 options during the year 2019-20, 1,68,84,159 options during the year 2020-21,37,33,250 options during the year 2021-22 and 45,03,375 options during the year 2022-23. The options granted which are non-transferable, with vesting period of 1 to 4.25 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on March 31, 2023, 85,98,417 options had been exercised and 7,22,83,662 options were in force.

Other statutory disclosures as Required under Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 on ESOS are given in website of the Bank in the link: https:/www. federalbank.co.in/web/guest/shareholder-information.

TRANSFER TO iNVESTOR EDUCATiON AND PROTECTiON FUND (iEPF)TRANSFER OF UNPAiD/ UNCLAiMED DiViDEND TO iEPF

Pursuant to Sections 124 and 125 of the Act read with Investor Education and Protection Fund Authority (Accounting, Audit,

As a result, the unclaimed/unpaid dividend for the year 2014-15 amounting to '' 1,11,64,280.60/- which remained unpaid and unclaimed for a period of 7 years has been already transferred by your Bank to the IEPF.

Further, the unpaid dividend amount pertaining to the financial year 2015-16 will be transferred to IEPF during the Financial Year 2023-24 within statutory timelines. Members are requested to ensure that they claim the dividends referred above before they are transferred to the said Fund. The due dates for transfer of unclaimed dividend to IEPF are provided in the report on Corporate Governance.

Your Bank has uploaded the details of unclaimed/ unpaid

dividend for the financial year 2015-16 onwards on its website viz., www.federalbank.co.in and on website of the Ministry of Corporate Affairs viz., www.iepf.gov.in and the same gets revised/updated from time to time pursuant to the provisions of IEPF (Uploading of Information Regarding Unpaid and Unclaimed Amount lying with Companies) Rules, 2012.

TRANSFER OF SHARES TO iEPF

Pursuant to the provisions of Section 124(6) of the Act and the Investor Education and Protection Fund (IEPF) Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 notified by the Ministry of Corporate Affairs on September 07, 2016 and subsequently amended vide notification dated February 28, 2017, all the equity shares of the Bank in respect of which dividend amounts have not been paid or claimed by the shareholders for seven consecutive years or more are required to be transferred to demat account of IEPF Authority. The said requirement does not apply to shares in respect of which there is a specific Order of Court, Tribunal or Statutory Authority, restraining transfer of the shares.

Upon transfer of such shares, all benefits (like dividend, bonus, split, consolidation etc.), if any, accruing on such shares shall also be credited to the Account of IEPF and the voting rights on such shares shall remain frozen till the rightful owner claims the shares. Shares which were transferred to the demat account of IEPF Authority can be claimed back by the shareholder by following the procedure prescribed under the aforesaid rules. Accordingly, 2,88,095 equity shares of 291 members of your Bank were transferred to demat account of IEPF Authority. Your Bank had sent individual notice to all the aforesaid 291 members and has also published the notice in the leading English and Malayalam newspapers.

The details of the nodal officer appointed by the Bank under the provisions of IEPF are disseminated in the website of the Bank viz., https:/www.federalbank.co.in/unclaimed-dividend-warrants.

DIRECTORS

As on March 31, 2023, Bank''s Board consists of 11 members, with rich experience and specialised knowledge in various areas of relevance to the Bank, including Accountancy, Agriculture and Rural Economy, Banking, Co-Operation, Information Technology, Accountancy, Credit, Treasury Operations, Human Resources, Governance, Compliance, Economics, Finance, Small - Scale Industry, Law, Payment & Settlement systems, Risk Management, Business Management. Besides the Chairman, the Board comprises seven Non-Executive Independent Directors including one woman Independent Director and three Executive Directors.

Ms. Shalini Warrier (DIN: 08257526) was re-appointed as Executive Director of the Bank for a period of three years with effect from January 15, 2023 till January 14, 2026 with the approval of Reserve Bank of India vide letter DoR. GOV. No. S6506/08.38.001/2022-23 dated January 11, 2023. Further, approval of the shareholders for re-appointment of Ms. Shalini Warrier as Executive Director of the Bank, was also obtained through postal Ballot on April 06,2023.

Mr. Harsh Dugar (DIN: 00832748) was appointed as Additional Executive Director of the Bank for a period of three years with effect from June 23, 2023 for a period of 3 years with the approval of Reserve Bank of India vide letter DoR.GOV.No. 1627/08.38.001/2023-24 dated June 22, 2023. Accordingly, approval of the shareholders for the appointment of Mr. Harsh Dugar as the Executive Director of the Bank through ordinary resolution is being sought at the ensuing AGM of the Bank.

RBI had vide its letter DoR.GOV.No.1676/08.38.001/2023-24 dated June 26, 2023 accorded its approval for the appointment of Mr. A P Hota (DIN- 02593219), Independent Director, as Part Time Chairman of the Bank with effect from June 29, 2023, till January 14, 2026, consequent to retirement of Mr. C Balagopal (DIN: 00430938), Part time Chairman and Independent Director from the Board of the Bank with effect from end of June 28, 2023 upon completion of his tenure of 8 years on the Board of the Bank, in accordance with the regulatory requirements.

Mr. Ashutosh Khajuria (DIN: 05154975), Executive Director and Key Managerial Personnel of the Bank has retired from the Board of the Bank upon completion of his term of office from end of day, April 30, 2023.

In accordance with the provisions of the Act and the Articles of Association of the Bank, Mr. Shyam Srinivasan (DIN: 02274773) MD&CEO of the Bank, is liable to retire by rotation at the ensuing Annual General Meeting and being eligible have offered himself for re-appointment.

The Shareholders in the 91st AGM had approved the reappointment of Mr. Shyam Srinivasan (DIN: 02274773) as Managing Director & Chief Executive Officer of the Bank for a period of three years with effect from September 23, 2021 to September 22, 2024 and Mr. Ashutosh Khajuria (DIN: 05154975) as an Executive Director of the Bank for the period from May 01,2022 to April 30, 2023. The shareholders had also approved the appointment Mr. Sankarshan Basu (DIN: 06466594) and Mr. Ramanand Mundkur (DIN:03498212) as Independent Directors of the Bank for a term of five consecutive years with effect from October 01,2021.

The Board is of the opinion that the independent directors appointed during the year possesses necessary integrity, expertise and experience (including the proficiency).

Necessary information pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in respect of directors to be appointed and re-appointed at the ensuing Annual General Meeting are given in the Annexure to the Notice convening the Annual General Meeting scheduled to be held on August 18, 2023.

None of the Directors of your Bank are disqualified for being appointed as directors, as specified in Section 164(2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules, 2014.

KEY MANAGERIAL PERSONNEL

As on March 31, 2023, the following Directors/Executive continued as Key Managerial Personnel of the Bank:

Mr. Shyam Srinivasan - Managing Director & Chief Executive Officer

Mr. Ashutosh Khajuria -Executive Director

Ms. Shalini Warrier - Executive Director

Mr. Venkatraman Venkateswaran - Chief Financial Officer

Mr. Samir P Rajdev - Company Secretary

During the year, the shareholders of the Bank had approved the

re-appointment of Mr. Shyam Srinivasan (DIN: 02274773) as

Managing Director & Chief Executive Officer of the Bank for a

period of three years with effect from September 23, 2021 to

September 22, 2024 and Mr. Ashutosh Khajuria(DIN: 05154975)

as an Executive Director of the Bank for the period from May 01,

2022 to April 30, 2023. _f

After the end of the financial year and up to the date of the Report

Mr. Harsh Dugar (DIN: 00832748) was appointed as Additional Executive Director (KMP) of the Bank for a period of three years with effect from June 23, 2023 for a period of 3 years with the approval of Reserve Bank of India vide letter DoR.GOV.No. 1627/08.38.001/2023-24 dated June 22, 2023. Accordingly, approval of the shareholders for the appointment of Mr. Harsh Dugar as the Executive Director (KMP) of the Bank through ordinary resolution is being sought at the ensuing AGM of the Bank.

DECLARATiON BY iNDEPENDENT DiRECTORS

The Bank has received declaration from all the Independent Directors that they continue to meet the criteria of independence as provided under the Companies Act, 2013 (the Act) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and comply with the Code for Independent Directors as specified under Schedule IV of the Act. In terms of the Companies (Creation and Maintenance of databank of Independent Directors) Rules, 2019 read with the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019, the Independent Directors of the Bank has enrolled his/ her name in the online databank of Independent Directors maintained by the Government.

The Independent Directors have also confirmed that they are not aware of any circumstance or situation, which exists or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgement and without any external influence.

In the opinion of the Board, the Independent Directors are persons of high repute, integrity and possess the relevant expertise and experience in their respective fields. They fulfil the conditions specified in the Act and the Rules made thereunder and are independent of the Management.

MEETiNGS

The Board meets at regular intervals to discuss and decide on Bank/ business policy and strategy apart from other items of business. A tentative annual calendar of the Board and Committee meetings are circulated to the Directors well in advance to facilitate them to plan their schedule and to ensure meaningful participation in the meetings. However, in case of a special and urgent business need, the approval of the Board/ Committee is taken by passing resolutions by circulation, as permitted by law, which are noted and confirmed in the subsequent Board/Committee meeting.

The notice of Board and Committee meetings is given well in advance to all the Directors. The agenda and pre-reads are circulated well in advance before each meeting to all Directors for facilitating effective discussion and decision making. Considerable time is spent by the Directors on discussions and deliberations at the Board and Committee meetings.

During the financial year, seventeen (17) Board Meetings, twenty-one (21) Audit Committee Meetings and other Committee Meetings were convened and held, the details of which are given in the Corporate Governance report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013.

The details of the constitution of the Board and its Committees are detailed in the Corporate Governance report.

subsidiaries of the bank

As on March 31,2023, the Bank has one unlisted wholly owned subsidiary, M/s. Federal Operations and Services Limited and one unlisted subsidiary M/s. Fedbank Financial Services Limited.

federal operations and services limited

Federal Operations and Services Limited (FedServ) is a wholly owned subsidiary company of The Federal Bank Limited (the Bank) incorporated on October 26, 2018. FedServ received approval from RBI on November 09, 2018, for commencing its operations. FedServ started its operations w.e.f. December 01, 2018. FedServ provides operational and technology-oriented services to the Bank.

As on March 31, 2023, FedServ''s Board of Directors has following five members-

Mr. Abhaya Prasad Hota, Non-Executive Independent Director & Chairman

Mr. Venkatraman Venkateswaran, Non- Executive Director

Mr. Ajith Kumar K K, Non- Executive Director

Mr. Johnson K Jose, Non- Executive Director

Mr. Prashant Preman, Wholetime Director

During the year ended on March 31, 2023, FedServ has taken

significant operational activities of the Bank which includes

LCRD Back office, Document scanning and Application Support.

FedServ is carrying out 125 operational activities of the Bank as on March 31, 2023. Company does not deal in loans and advances, neither it accepts deposits. FedServ is operating from three locations: - Kochi in Kerala, Visakhapatnam in Andhra Pradesh and Bengaluru in Karnataka.

The total revenue of FedServ for the year ended on March 31, 2023, was '' 61.85 Crore. '' 59.50 Crore pertains to services provided by the Company to the Bank and '' 2.35 Crore relates to the indirect incomes. The Company had a net profit of '' 4.78 Crore for the year ended on March 31, 2023. The Net worth of FedServ at the beginning of the year was '' 16.27 Crore and closing net worth of FedServ as on March 31, 2023, was '' 20.62 Crore.

FedServ will help the Bank in serving the customers better and reducing the cost of operations significantly. FedServ will also help the Bank to improve turnaround time of various operational processes, improve First Time Right (FTR) rate and enable the Bank to become FIRST CHOICE Bank of customers.

The Profit after tax of the Company for the year ended March 31, 2023, increased to '' 4.78 Crore from '' 3.46 Crore for the year ended March 31, 2022. The total assets of the Company increased to '' 26.07 Crore as on March 31,2023, from '' 19.83 Crore as on March 31, 2022.

FEDBANK FiNANCiAL SERVICES LiMiTED

Fedbank Financial Services Limited ("Fedfina") is a subsidiary company of The Federal Bank Limited (the "Bank"), which

was incorporated on April 17, 1995, in Kerala at Kochi under the Companies Act, 1956, and was granted a certificate of incorporation by the Registrar of Companies, Kerala at Kochi. The Reserve Bank of India has, pursuant to the certificate of registration dated August 24, 2010, granted approval to Fedfina, to carry on the business of a non-banking financial institution without accepting public deposits. Fedfina provides various multiple loan products such as Loan against Property (LAP) and Loan against pledge of gold ornaments. It also distributes loan products of the Bank. It has 575 branches as of March 31, 2023, across India providing multiple loan products to various segments of borrowers.

Fedfina''s Board of Directors comprises of the following seven members:

Mr. Balakrishnan Krishnamurthy- Chairman and Independent Director

Mr. Anil Kothuri - Managing Director and Chief Executive Officer Mr. Shyam Srinivasan - Non-Executive Director

Ms. Gauri Rushabh Shah - Independent Director

Mr. Maninder Singh Juneja - Non-Executive Nominee Director

Mr. Ashutosh Khajuria - Non-Executive Nominee Director

Mr. Peruvemba Ramachandran Seshadri- Additional Director in capacity of Independent Director

The total revenue of Fedfina for the financial year ended on March 31,2023, is '' 1,214.67 Crore as against '' 883.64 Crore for the financial year ended March 31, 2022. The revenue increased by 37% on the back of growth of 41% in loan book during the year. The net profit of the Company increased by 74% to '' 180.13 Crore for the financial year ended March 31,2023, as against '' 103.46 Crore for the financial year ended March 31,2022. The Net worth of Fedfina at the beginning of the financial year, that is, April 01, 2022, was '' 1,153.52 Crore and closing Net worth of Fedfina as on March 31, 2023 was '' 1,355.68 Crore.

The total loan portfolio of Fedfina as on March 31, 2023 was '' 8,102.74 Crore as against '' 5,760.94 Crore as on March 31,2022. The total assets of the Company increased to '' 9,070.99 Crore as on March 31,2023, from '' 6,555.71 Crore as on March 31,2022. Note: The figures reported above for Fedfina are as per the audited IndAS financial statements.

associate companies

As on March 31, 2023, the Bank has two Associate Companies named M/s. Ageas Federal Life Insurance Company Limited (Formerly known as IDBI Federal Life Insurance Co Limited) and M/s. Equirus Capital Private Limited.

JOINT VENTURE IN LIFE INSURANCE BUSINESS

The Bank''s Joint Venture Life Insurance Company, in association with Ageas Insurance International N.V., namely Ageas Federal Life Insurance Company Limited, commenced operations in March 2008. As on March 31, 2023, the Bank has a total stake of '' 208 Crore in the equity of the Company holding 26% of the equity capital. The total premium collected by Ageas Federal Life Insurance Company Limited during the period ended March 31, 2023 was '' 2,289 Crore. The Company has declared final dividend of 7.125% for the FY 2022-23.

On the financial front, the net profit grew by 21% in FY 202223, reaching '' 114 crore. This was the 11th consecutive year of profit for the Company. The total premium rose by 4% to '' 2,289 crore in FY 2022-23 from '' 2,207 crore in FY 2021-22.

An understanding of customers'' evolving needs and catering to them with the appropriate products and solutions has helped the Company to improve their VNB margin to 31.23%. Superior

customer service and a focus on developing long-lasting relationships with the customers has borne fruit with the 13th month persistency reaching 80% and the Company being in the top quartile of all persistency buckets.

Mr. Shyam Srinivasan, Managing Director and Chief Executive Officer and Ms. Shalini Warrier, Executive Director of the Bank are Non-Executive Directors in Ageas Federal Life Insurance Company Limited.

INVESTMENT BANKiNG ASSOCiATE

As of March 31,2023, Bank holds 19.79% equity stake in Equirus Capital Private Limited. Pursuant to the right of proportionate representation on the Board as well as the power to participate in the financial, operational matters like approval of the business plans, policies, budgets, managerial remuneration, change in KMP etc., the same has been treated as an associate concern as per AS 23 Accounting for Investments in Associates in Consolidated Financial Statements. Equirus Capital Private Limited is a private company domiciled in India and is engaged in the business of Investment banking. It has 4 subsidiaries named Equirus Securities Private Limited, Equirus Insurance Broking Private Limited, Equirus Wealth Private Limited and Equirus Finance Private Limited. The total turnover of Equirus Capital Private Limited on a consolidated basis was '' 157.60 Crore in FY 2023 against '' 152.23 Crore for FY 2022.

Mr. Harsh Dugar, Executive Director of the Bank is a Nominee Director on the Board of Equirus Capital Private Limited.

DEPOSITS

Being a Banking Company, the disclosures required as per Rule 8(5) (v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to the Bank.

LOANS, GUARANTEES OR INVESTMENTS IN SECURITIES

Pursuant to Section 186 (11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking Company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3) (g) of the Companies Act, 2013.

The details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.

Not applicable related party transactions

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Bank and were on arm''s length basis. There were no materially significant related party transactions entered by the Bank with Related parties which may have a potential conflict with the interest of the Bank. All Related Party Transactions were placed before the Audit Committee of the Board for approval. Prior omnibus approval for transactions which are of repetitive nature is obtained from the Audit Committee and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.

The policy on Related Party Transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Bank and the link for the same is https:/www. federalbank.co.in/our-commitments.

Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm''s length basis, disclosures as per Form AOC-2 is not applicable to the Bank. There were also no material contracts or arrangement or transactions with related parties during the period.

corporate social responsibility

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element of our fundamentals, right from the day the Bank was founded. Our founder''s values & ethos based on trust got embedded in the Bank''s policies & principles. CSR in Federal Bank began with the first act of cultivating banking habits in the agrarian society to effectively utilise idle money for productive purposes. The details of the CSR initiatives undertaken during the financial year ended March 31,2023 and other details required to be given under section 135 of the Companies Act, 2013 read with rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in Annexure I forming part of this Report.

The CSR Policy as recommended by the CSR Committee and as approved by the Board is available on the website of the Bank and can be accessed at https:/www. federalbank.co.in/documents/10180/24 4853009/ CSR Policy 2022-23.pdf/b4802e4d-6e8d-3b50-f5a6-e043c97ea340?t=1667373939724

ENERGY CONSERVATION, TECHNOLOGY ABSORPTiON, FOREiGN EXCHANGE EARNINGS AND OUTGO

The Bank is very conscious about the need for energy management and as a team endeavour to contribute to low carbon economy and acknowledges that it is a continuous process. Your Bank has taken various initiatives to reduce its carbon footprint and improve resource efficiency. It ranges from using better technology to improve energy efficiency, recycling and generating energy from renewable sources. For more details, please refer ESG section of the Annual Report and Business Responsibility and Sustainability Report forming part of the Annual Report. The Bank prides itself on continuous investment in technology upgrades that are designed to deliver cost effective best in class customer service.

The Bank has used information technology extensively in its operations, for more details please refer the section on Technology and Digital Updates portion of Directors report and Management Discussion & Analysis Report forming part of the Annual Report. Through its export-financing operations, the Bank supports and encourages the country''s export efforts.

risk management

The Bank''s Risk Management framework is based on a clear understanding of various risks, robust risk assessment and measurement procedures and constant monitoring. The Board of Directors oversees all the risks assumed by the Bank. Specific Committees are constituted to facilitate focused oversight of various functions. The Risk Management Committee of the Board sets the standards and governs the risk management functions, thereby bringing in a top to down focus on risk management. The Risk Management Committee of the Board reviews all risk management policies of the Bank. The Committee reviews the Risk Appetite framework, Internal Capital Adequacy Assessment Process (ICAAP) and Stress testing. The Committee oversees setting up of risk limits and exposure ceilings, implementation of Basel III guidelines and the activities of the executive level risk management committees. The Committee assesses the level and direction of major risks pertaining to credit, market, liquidity, operational, reputation, technology, information security, compliance and capital as a part of the risk dashboard. In addition, the Committee oversees risks of subsidiaries covered under the Group Risk Management Framework.

The Risk Management Policies approved by the Board of Directors and reviewed from time to time with updated regulatory and internal guidelines form the governing framework for each type of risk.

The Integrated Risk Management Department of the Bank co-ordinates and administers the risk management functions in the Bank. The Department has three divisions for managing the main risk streams, Credit risk, Market risk and Operational risk. Dedicated teams within the divisions are responsible for assessment, monitoring and reporting of various material risks. Default risk and asset quality of loan portfolio are monitored and managed by the Credit Risk Division. Market Intelligence Unit (MIU) formed for the purpose of monitoring large value accounts is linked to Credit Risk Division. The Bank has established an independent Mid Office as part of Market Risk Division for monitoring and management of risks in Bank''s Treasury portfolios. A dedicated ALM team manages the liquidity risk and interest rate risk. A dedicated E&S/ESG team is also established as part of the Integrated Risk Management Department. The Business Continuity Management, Information and Cyber Security measures and Information Technology Risk forms part of Operational Risk Management. All the three divisions are independent of business operations and coordinate with representatives of the business units to implement the Bank''s risk management Policies and frameworks. Executive level risk management Committees namely, Credit Risk Management Committee, Asset Liability Management Committee, E&S Committee, Operational Risk Management Committee and Information Security Committee regularly assess the respective risks and direct corrective actions wherever required. The risk management functions are coordinated by a Senior Executive designated as Chief Risk Officer who reports directly to the Managing Director & CEO. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored in the Internal Capital Adequacy Assessment Process (ICAAP). In our view, all the material risks of the Bank are identified, assessed and managed adequately.

whistle blower policy/vigil mechanism

Fraud Risk is managed by the Bank methodically in line with the robust Fraud Risk Management Policy of the Bank which

covers all significant aspects like various mitigation measures and the surveillance mechanism that complements prevention, detection, investigation and monitoring of both, internal and external frauds. Public and employees are sensitised on different fraud prevention techniques. With a view to create an atmosphere of alertness, Vigilance Communications (Alerts) are issued on a regular basis that disseminates various modus operandi of frauds across the employees along with suggestions on safeguards and precautions to be adopted to

prevent such frauds. Preventive Vigilance Workshop is a flagship programme designed by Vigilance Department for employees which explicates different gaps exploited by miscreants to perpetrate fraud in the banking industry. The programme also ensures deliverance of strategies to be taken to avert such frauds. Fraud Prevention Committee meetings are conducted at Branches on a regular basis so as to discuss various modus operandi of trending frauds and their corresponding preventive measures. Branches are identified based on risk rating and Preventive Vigilance Audits are conducted annually in the identified Branches.

Customer awareness on fraudulent activities is another area that is well covered by the Bank through multiple communication

channels including SMS, E-Mails, posters at Branches, ribbon messages on Bank website, internet banking webpage, etc. Bank is also giving special focus to Cyber related frauds and awareness messages are disseminated among the public through various mediums including social media, website, etc. A dedicated campaign is launched, titled âTwice is Wise" with an aim to spread awareness among the public, on cyber related frauds. Posters and videos cautioning the public about novel fraud incidents were shared through social media handles, TV channels, web channels, etc.

All cases reported in the Bank are investigated in detail as part of detective vigilance activity. Need for process refinements/ systemic corrections, if any observed during the course of investigation are highlighted in the forums concerned for corrective measures/necessary directions. Process refinements/systemic corrections are implemented to avert similar incidents in future.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS) with a view to enhance public confidence in the Bank and also in compliance of RBI directions

in this regard. The policy aims at establishing an effective vigil mechanism in the Bank to quickly spot aberrations and deal with it at the earliest. It is disseminated among the employees assuring confidentiality and protection to the whistle blower against any personal vindictive actions such as humiliation, harassment or any other form of unfair treatment. Directors and Employees of the Bank, employee representative bodies, customers, stakeholders, non-governmental organisations (NGO) and members of the public can lodge complaints / disclosures under this scheme. A dedicated e-mail ID is provided for sending complaints/disclosures under PDS. Investigation is conducted in all complaints /information received through the PDS mechanism and investigation reports are placed before MD & CEO. The details of the complaints and findings

are also placed before the Audit Committee of the Board on a quarterly basis for review. The scheme is popularised through various measures such as preventive vigilance classes, internal circulars, alerts etc. No personnel have been denied access for giving any information as envisaged in the Protected Disclosure scheme. PDS policy is made available in Bank''s website and Intranet.Website link to Bank''s Whistle Blower Policy is https:/www.federalbank.co.in/documents/10180/45777/ Whistle Blower policy.pdf/558aea51-1335-4546-9c9a-28c5030377a1?t=1624965099030.

SiGNiFiCANT AND MATERiAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRiBUNALS iMPACTiNG THE GoiNG CoNCERN STATuS oF THE CoMPANY AND iTS FUTURE OPERATiONS

During the financial year 2022-23, the Bank has not received any significant or material orders passed by any Regulatory Authority, Court or Tribunal which shall impact the going concern status and Bank''s operations in future.

STATUTORY AUDiTORS

The Shareholders in the 89th AGM held on July 16, 2020 approved the appointment M/s. Varma & Varma, Chartered Accountants (Registration No. 004532S), Kochi for a period of four (4) years together with M/s. Borkar & Muzumdar, Chartered Accountants (Registration No. 101569W), Mumbai for a period of three (3) years as Joint Statutory Central Auditors of the Bank from the conclusion of 89th AGM till the conclusion of 93rd and 92nd AGM respectively.

RBI vide circular dated DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated April 27, 2021 brought in âGuidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors" As per Para 8.1 of the said circular, in order to protect the independence of the auditors/audit firms, entities will have to appoint the SCAs/SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year.

To comply with the requirements of the aforesaid RBI Circular dated April 27, 2021, the Shareholders in the 90th AGM held on July 09, 2021 approved revision of tenure of appointment of M/s. Varma & Varma, one of the Joint Statutory Central Auditors, as three years with effect from FY 2020-21.

RBI vide its letter DOS.RPO.No. S2722/08.09.005/2022-23 dated 28.07.2022 had granted approval for appointment of M/s. Varma & Varma, Chartered Accountants and M/s. Borkar & Muzumdar, Chartered Accountants as the Joint Statutory Central Auditors of the Bank for FY 2022-23 for their third year.

There is no qualification or adverse remark in Auditors'' Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

The present Statutory Auditors of the Bank, M/s. Varma & Varma, Chartered Accountants, Kochi and M/s. Borkar & Muzumdar, Chartered Accountants, Mumbai are retiring at the conclusion of this Annual General Meeting after completion of their term for three years.

As mandated by RBI guidelines for Entities with asset size of '' 15,000 crore and above as at the end of the previous year, the Statutory Audit of the Bank shall be conducted under joint audit of a minimum of two audit firms (Partnership firms / Limited Liability Partnerships (LLPs))

Basis the recommendation of the Audit Committee in its meeting held on May 17, 2023, the Board of Directors of the Bank in its meeting held on May 27, 2023, have recommended the appointment of M/s. Suri & Co, Chartered Accountants (Registration No. 004283S), Chennai, together with M/s. MSKA & Associates, Chartered Accountants (Registration No. 105047W), Mumbai for a period of 3 years as Joint Statutory Auditors of the Bank from the conclusion of 92nd AGM till the conclusion of 95th AGM, for the approval of RBI and the shareholders of the Bank.

As per the requirement of the Companies Act, 2013, M/s. Suri & Co, Chartered Accountants and M/s. MSKA & Associates, Chartered Accountants have confirmed that their appointment if made would be within the limits specified under Section 141(3) (g) of the Act and they are not disqualified to be appointed as statutory auditor/s in terms of the provisions of the proviso to Section 139(1), Section 141(2) and Section 141(3) of the Act and the provisions of the Companies (Audit and Auditors) Rules, 2014. RBI vide letter Ref CO.DOS.RPD.No. S2374/08.09.005/2023-24 dated June 27, 2023 had granted approval for appointment of M/s Suri & Co, Chartered Accountants (FRN 004283S) and M/s M S K A & Associates, Chartered Accountants (FRN 105047W) as the Joint Statutory Auditors of the Bank for the FY 2023-24 for their First year.

Accordingly, approval of the members is requested for appointment of M/s. Suri & Co, Chartered Accountants together with M/s. MSKA & Associates , Chartered Accountants for a period of three (3) years as Joint Statutory Auditors of the Bank from the conclusion of 92nd AGM till the conclusion of 95th AGM and on such terms and conditions, including remuneration, as may be approved by the Board or Audit Committee of the Board of the Bank, subject to the approval of the RBI every

year. The Board or Audit Committee of the Board will negotiate and finalise the remuneration of the Joint Statutory Auditors depending on their roles and responsibilities / scope of work. The remuneration paid to the Statutory Auditors will be disclosed in the Corporate Governance Report as well as the Annual Financial Statements of the Bank on an annual basis. M/s. Suri & Co, established in 1939, is present across 4 states with 8 branches including one in Kochi. The firm has 10 full time partners consisting of distinguished Chartered Accountants and a team of more than 210 . The Firm has been in existence for more than 8 decades with dedicated, focused, specialised and well-structured team. The firm is having 45 years'' experience in Statutory Central Audit of 15 Commercial Banks.

M/s MSKA & Associates, established in 1978, is an Indian partnership firm registered with the Institute of Chartered Accountants of India (ICAI) and the PCAOB (US Public Company Accountancy Oversight Board). M S K A & Associates is having its presence in 10 cities across the country including Kochi. The firm is having a Statutory central audit experience of 32 years in 13 Commercial Banks and total count of 22 Full Time Partners associated with the firm for more than 3 years.

As required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, M/s. Suri & Co, Chartered Accountants (Registration No. 004283S), Chennai, and M/s. MSKA & Associates, Chartered Accountants (Registration No. 105047W), Mumbai have confirmed that they hold a valid certificate issued by the Peer Review Board of ICAI.

SECRETARiAL AUDiT AND SECRETARiAL COMPUANCE REPORT

Pursuant to the provisions of Section 204 of The Companies Act, 2013 your Bank has appointed M/s. M Damodaran &

Associates LLP, Company Secretaries, Chennai as Secretarial Auditor to conduct Secretarial Audit of the Bank for the FY 202223. Accordingly, the Secretarial Audit Report for FY 2022-23 is annexed to this report as Annexure II. There are no reservations, adverse remark or disclaimer in the Secretarial Audit Report.

No offence of fraud was reported by the Secretarial Auditor of the Bank.

Pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 08, 2019, the Bank has obtained Secretarial Compliance Report, certified by CS Puzhankara Sivakumar (COP: 2210), M/s SEP & Associates, Company Secretaries, Kochi for Financial Year ended March 31, 2023, on compliance of all applicable SEBI Regulations and circulars/ guidelines issued thereunder and the copy of the same was submitted with the Stock Exchanges.

COMPLIANCE WiTH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS

The Bank has complied with Secretarial standards issued by the Institute of Company Secretaries of India on Board Meetings and General Meetings.

ANNUAL RETURN

The Annual Return for the Financial Year ended March 31,2023 as required under Section 92 and Section 134 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the Bank''s website, https:/www.federalbank.co.in/shareholder-information.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its Consolidated Financial Statement including its subsidiaries M/s. Fedbank Financial Services Limited and M/s. Federal Operations and Services Limited and Associates, M/s. Ageas Federal Life Insurance Company Limited and M/s. Equirus Capital Private Limited, which is forming part of this Annual report. The financial position and performance of its subsidiaries & Associates are given in Form AOC-1, the statement containing salient features of the financial statements of the subsidiaries/Associate Companies/Joint Venture.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its Standalone and the Consolidated Financial

Statements has been hosted on its website, www.federalbank. co.in. Further, as per fourth proviso to the said Section, the Audited Annual Accounts of the said Subsidiary Companies of the Bank, considered as part of the Consolidated Financial Statements have also been hosted on the Bank''s website, www.federalbank.co.in. The said documents have been hosted on the website of the Subsidiary Companies of the Bank also, in compliance with the said Section.

The documents/details available on the Bank''s website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (''AS'') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of > the Bank along with its Subsidiaries and Associates for the year

ended March 31,2023 forms part of the Annual Report.

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In compliance with the Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, separate Section on Management Discussion and Analysis, as approved by the Board, which includes details on the state of affairs of the Bank, forms part of this Annual Report.

CORPORATE GOvERNANCE

Corporate Governance has been an integral part of the way your Bank has been doing business since inception. The Bank believe that good Corporate Governance emerges from the application of the best and sound management practices and compliance with the laws coupled with adherence to the highest standards of transparency and business ethics.

Your Bank seeks to embed and sustain a culture that will enable us to achieve our objectives through effective corporate governance and enhance transparent engagement with key stakeholders.

A separate report on Corporate Governance setting out the governance structure, principal activities of the Board and its Committees and the policies and practices that enable the Board to fulfil its stewardship responsibilities together with a Certificate from the Secretarial Auditor of the Bank regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations forms part of this Annual report.

INTERNAL COMPLAINTS COMMITTEES (INFORMATION uNDER THE SExuAL HARASSMENT OF wOMEN AT wORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013)

The Bank had constituted Internal Complaints Committee, as per letter and spirit contained in the provisions of âThe Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013", at 9 Zones and Head Office to prevent and redress the complaints relating to sexual harassment and to organise workshops/ awareness programmes to empower women employees while handling cases relating to sexual harassment. Workshops/ awareness programmes regarding women empowerment were conducted at various locations

pan India. The data with regard to the redressal of complaints by the Internal Complaints Committee are as follows:
No. of complaints received for the year FY2022-23	1
No. of complaints disposed of during FY 2022-23	1
No. of cases pending for more than 90 days	Nil
No. of workshops/ awareness programme against sexual harassment carried out	10
Nature of action taken by the employer/ District Officer	Appropriate action taken

THE DETAiLS OF APPLiCATiON MADE OR ANY PROCEEDiNG PENDiNG UNDER THE iNSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016) DuRING THE Year Along wiTH THEiR sTATus As AT THE END OF THE FINANCIAL Year.

As per section 3 clause 7 of The Insolvency and Bankruptcy Code, 2016, Corporate person does not include any financial service provider, thereby the Bank is excluded from the purview of the Code, 2016.

There has been several applications made or are pending in the name of the Bank as a Financial creditor against any default occurred as part of the course of business. The particulars of the Corporate debtor and claim value is annexed to this report as Annexure Mi.

DiViDEND DisTRiBuTiON POLiCY

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated and adopted a Dividend Distribution Policy, which was reviewed by the Board and the same is available on the website of the Bank at https:Zwww.federalbank.co.in/our-commitments.

INTERNAL CONTROL sYsTEMs AND THEiR ADEQuACY

The Bank has through the years developed and stabilised an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit and Inspection Policy of the Bank, duly approved by the Board of Directors. In order to help Bank in achieving its mission of adopting the best professional practices prevailing in the industry, while framing the policy, substantial inputs are taken from - RBI guidance note on Risk Based Internal Audit, ''The internal audit function in banks'' published by Basel Committee on Banking Supervision and RBI Circular on ''Concurrent Audit System''. Audit and Inspection Policy

is reviewed annually. Policy is reviewed considering various guidelines of RBI, Basel Committee recommendations, ICAI guidelines, other statutory / regulatory guidelines, directions of Board / Audit Committee of the Board issued from time to time and periodic internal guidelines / instructions issued by the Bank. Risk based Audit framework is reviewed in line with the present business model and industry best practices. At the enterprise level, the Internal Audit Department, on a continuous basis, assesses and monitors the effectiveness of the control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank''s processes and operations with regulatory guidelines, accounting procedures and Bank''s own internal rules and guidelines. A department level group meets on periodical intervals to discuss latest internal / RBI / regulatory guidelines for ensuring that the required changes are implemented for making the audit function updated and dynamic.

The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of Management and discussions in various committees towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section 138 of the Companies Act, 2013, has designated the Head of Internal Audit Department as Chief Internal Auditor of the Bank. Chief Internal Auditor of the Bank directly reports to the Managing Director & CEO of the Bank. Audit Committee of the Board reviews the adequacy and effectiveness of the Internal Audit Function. The Bank has various types of audits which inter-alia include Risk Based Internal Audit, Information System Audit, Third Party Risk Audit, Offsite Audit (audit through use of technology and data analysis), Concurrent Audit, Gold Loan Audit and Management Audit. Branches / Departments are risk rated and the frequency of Risk Based Internal Audit / Management Audit is decided based on the Risk Rating of the unit. Significant Audit findings and observations are presented to Inspection Review Committee of Executives and a report on the meetings of Inspection Review Committee of Executives along with significant audit findings, directions / suggestions of the Committee and action taken in such cases are placed to the Audit Committee of the Board for review periodically. Other findings are placed before a department level committee called the ''Inspection Department Review Committee'' for review and its observations are placed before Inspection Review Committee of Executives.

As per the requirement of Companies Act, 2013, Bank has formulated Internal Financial Controls framework. Risk and Controls associated with each process in the Bank are

documented under the Internal Financial Controls Framework. Internal Audit Department plays a significant role in testing the control effectiveness for each process under the framework. The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the Bank''s internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the Bank and its reputation.

POLICY ON BOARD DIVERSITY

Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank as contained in the Banking Regulation Act, 1949 and satisfying

the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognises and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also takes into account factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board; ushers in independence in the performance of the Board; eradicates the gender bias in the Board; achieves sustainable and balanced performance and development; supports the attainment of strategic objectives & also ensures compliance of applicable law/s and good corporate practices.

Nomination, Remuneration, Ethics and Compensation Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board. Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments, the regulatory requirements for appointment of at least one Woman Independent Director on the Board of the Bank is also considered.

BANK''S POLICY ON DIRECTORS'' APPOINTMENT AND

REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POsiTivE ATTRIBuTEs, INDEPENDENCE OF A DIRECTOR AND OTHER MATTERs PROviDED uNDER suB-sECTION (3) OF sECTION 178 OF COMPANIEs ACT, 2013

a) qualifications, experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the Bank''s policies, operations, and needs. Not less than fifty-one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering and technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry. The Bank shall ensure to include in its Board need based representation of skills such as marketing, risk management, strategic planning, treasury operations, credit recovery, information technology, payment & settlement systems, human resources and business management. The Board should also have at least One Woman Independent Director in its composition.

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The age limit of Managing Director and Chief Executive Officer and Whole Time Directors shall be in the range of 35-70 years.

The age limit of Non- Executive Directors shall be in the

range of 35-75 years.

b) disqualification/conflicts of interest

1. The Bank''s Directors shall be subject to the disqualifications/prohibitions contained in the Companies Act 2013, as amended and the Banking Regulation Act 1949, as amended with respect to directorship of companies in general or banking companies in particular.

conflicts of interest as a Director of the Bank. A Director shall promptly inform the Board/committee of any actual or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any committee of which he is a member, and shall refrain from participating in a discussion on the matter.

C) SUGGESTED CRiTERiA FOR DETERMiNiNG ATTRiBUTES OF A DiRECTOR AS REQUiRED TO BE SPECiFiED UNDER COMPANiES ACT, 2013 iNCLUDE

1. Integrity in personal and professional dealings.

2. Wisdom and ability to take appropriate decisions.

3. Ability to read and understand financial statements

4. Ability to deal with others with a sense of responsibility, firmness, and cooperation.

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

D) SUGGESTED CRiTERiA FOR DETERMiNiNG iNDEPENDENCE OF A DiRECTOR

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI-LODR Regulations, 2015. The Independent Director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an Independent Director, give a declaration that he meets the criteria of independence as regulatorily required and that he is not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact his ability to discharge his duties with an objective independent judgment and without any external influence. The Board of Directors shall take on record the declaration and confirmation submitted by the Independent Director after undertaking due assessment of the veracity of the same.

In addition to the above, the following mandatory compliances have to be complied with by the Independent Directors:

Every Independent Director shall apply online to the IICA for inclusion of his/ her name in the data bank for a period of one year / five years / life time.

Every Independent Director shall submit a declaration of compliance of registration of name in databank of Independent Directors to the Board each time he submits the declaration required under sub section (7) of section 149 of the Companies Act.

The Independent Directors shall also comply with the provisions contained in Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014 with regard to registration on Independent Directors Databank.

E) LiMiT OF DiRECTORSHiPS AND MEMBERSHiPS iN COMMiTTEES

A Director cannot hold directorship in more than 20 companies at the same time and out of this he cannot be director of more than 10 public companies as per Companies Act, 2013. Further, as per Regulation 17A of SEBI (LODR) Regulations, 2015, a Director shall not hold directorship in more than seven listed entities with effect from April 01, 2020.

A person shall not serve as an Independent Director in more than seven listed entities. Provided that any person who is serving as a whole time director/managing director in any listed entity shall serve as an Independent Directorin not more than three listed entities.

The count for the number of listed entities on which a person is a director / Independent Director shall be only those whose equity shares are listed on a stock exchange A Director shall not be a member of more than ten committees, or chair more than five committees, of companies, including the Bank, of which he is a director (For the purpose of reckoning the limit under this sub-clause, Chairmanship / membership of the Audit Committee and the Stakeholders'' Relationship Committee of all public companies alone shall be considered).Every Director shall promptly inform the Bank of any appointment of the Director as a director of another company, or as a member or the chairman of any committee of any of the other companies, and of any changes in such membership/chairmanship.

POliCy ON REMUNERATiONPOliCy ON REMUNERATiON TO NON-ExECUTivE DiRECTORS/ iNDEPENDENT DiRECTORS

The Policy of the Bank for the payment of remuneration to Non- Executive Directors / Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non-

Executive Directors / Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http:/www.federalbank.co.in/shareholder-information.

As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy, during FY 2022-23, Non-Executive Director/ Independent Directors of the Bank were paid sitting fees for attending Board/Committee meetings and in addition, profit linked commission for FY 2021-22 was also paid during the year. Non- Executive Part Time Chairman was paid remuneration in addition to sitting fees with the approval of RBI.

POLiCY ON REMUNERATE TO MD & CEO, EXECUTIVE DiRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

The Compensation / Remuneration Policy of the Bank as

approved by the Board contains the policy for payment of remuneration to MD & CEO, Executive Directors, Key Managerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

core principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

COMPENSATION OF Managing Director & CEO, wHOLE TIME DiRECTORS And MATERIAL RlSk Takers (MRTS)

The compensation paid out to the referred functionaries is divided into two components:

The fixed compensation is determined based on the relevant factors such as industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span and adherence to statutory requirements. All the fixed items of compensation, including the perquisites, will be treated as part of fixed pay. Perquisites that are reimbursable would also be included in the fixed pay so long as there are monetary ceilings on these reimbursements. Contributions towards superannuation/retiral benefits will also be treated as part of fixed pay. (Approval from RBI to be taken as per section 35B of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

The variable compensation for Whole Time Directors, Managing Director & Chief Executive Officer and Material Risk Takers is

fixed based on organisational performance (both business-unit and firm-wide) and KPAs set for the official. The organisation''s performance is charted based on Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. The Score Card provides a mix of Financial and Non-Financial, Quantitative and Qualitative Metrics. The variable pay is paid in the form of share-linked instruments, or a mix of cash and share-linked instruments. While considering/ recommending the variable pay in respect of Managing Director & CEO and Whole Time Directors, serious supervisory observations (if any) shall be factored, which will be ensured through suitable processes.

RISK, CONTROL AND COMPLIANCE STAFF

Members of staff engaged in financial and risk control, including internal audit, are compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the Bank. The total fixed and variable compensation paid out to the employees in the Risk Control and Compliance Function is decided independent of business parameters. The mix of fixed and variable compensation for control function personnel is weighted in favour of fixed compensation, to ensure autonomy and independence from business goals.

OTHER CATEGORIES OF STAFF

The compensation package applicable to Executives in Level IV to VII was fixed and governed based on the periodical industry level settlements under IBA pattern. To make the Compensation Structure market driven and competitive, a new performance based compensation package called âGrander Compensation Package" has been introduced for Executives in Level IV and above with effect from May 01, 2017 which consists of both fixed and variable compensation. The Compensation Package of Executives under Non Grander Compensation Package comprises of fixed compensation (determined based on the relevant factors such as industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span) and variable compensation (comprising of cash, share-linked instruments, or a mix of both cash and share-linked instruments).

The compensation paid to Award Staff and Officers coming under Scale I to III is fixed based on the periodic industry level settlements with Indian Banks'' Association. The present scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package is as per provisions of 11th Bipartite Settlement/ Joint note dated November 11, 2020.

LiMIT ON VARIABLE PAY AND DEFERRED COMPENSATiON Managing Director & CEO, Whole Time Directors and Material Risk takers (MRTs): In order to have a proper balance between fixed pay and variable pay, at least 50% of the total compensation

would be variable. Deferral arrangements would invariably exist for the variable pay, regardless of the quantum of pay. For such executives of the Bank, a minimum of 60% of the total variable

pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under '' 25 Lakh, deferral requirements would not be necessary. The deferral period would be minimum of three years.

Risk control and compliance staff: At least 25% of the total compensation would be variable and the total variable pay will be limited to a maximum of 100% of the fixed pay (for the relative

performance measurement period). Deferral arrangements would invariably exist for the variable pay, if the Variable Pay exceeds 75% of the fixed pay. In such cases a minimum of 60% of the total variable pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under '' 25 Lakh, deferral requirements would not be necessary. other categories of staff: The variable pay would be in the form of cash, share-linked instruments, or a mix of both cash and share-linked instruments. The total variable pay will be limited to a maximum of 300% of the fixed pay (for the relative performance measurement period). Deferral arrangements would invariably exist for the variable pay, if the Variable Pay exceeds 200% of the fixed pay. In such cases a minimum of 60% of the total variable pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under '' 25 Lakh, deferral requirements would not be necessary.

severance pay and guaranteed bonus

Severance pay (other than gratuity or terminal entitlements or as entitled by statute) is not paid to any official of the Bank. Guaranteed Bonus on joining in the form of Cash/equities/ deposits/ bonds/debentures etc. or multiyear guaranteed bonus (like retainer fees) is not paid to any official in the organisation. However, to attract talent, sign on bonus or joining bonus can be paid, but this will be limited to the first year only and it will be given as Employee Stock Options only.

hedging

No compensation scheme or insurance facility would be provided by the Bank to employees to hedge their compensation structure to offset the risk alignment mechanism (deferral pay and claw back arrangements) embedded in their compensation arrangement. Compliance arrangements are in place to ensure that employees do not insure or hedge their compensation structure.

malus / claw back arrangement

The variable compensation is covered under Malus / Claw back arrangements in case of all categories of employees. In the event of subdued or negative contributions of the Bank and/or the relevant line of business in any year, the deferred compensation will be subjected to:

â¢ Malus arrangement wherein Bank shall withhold vesting of all or part of the amount of deferred remuneration.

â¢ Claw back arrangement wherein the employees shall be liable to return previously paid or vested remuneration to the Bank. The deferred compensation, if any, paid to such functionaries shall be subject to Claw back arrangements, which will entail the Bank to recover proportionate amount of variable compensation from such functionaries, on account of an act or decision taken by the official which has brought forth a negative contribution to the Bank at a prospective stage.

The malus and claw back provisions would cover the deferral and retention periods. If an Official covered under these provisions is responsible for any act or omission or non-compliance of regulatory guidelines resulting in a penalty being imposed by any Regulators or engages in a detrimental conduct, the Bank would be entitled to recover proportionate amount of variable compensation from such functionaries within 48 months from the date of payment/vesting of variable compensation. The Bank has put in place appropriate modalities, performance thresholds and detailed framework to cover the trigger points with or invoking malus/claw back, taking into account relevant statutory and regulatory stipulations, as applicable.

committee of management for reviewing the linkage of risk based performance with remuneration

a) The Committee shall review the Compensation paid visa-vis risk taking by the Executives to ensure that prudent risk taking is recognised in the compensation framework

b) The Committee shall analyse the risk reward correlation and ensure that excess risk taking is not encouraged

c) The Committee shall review the performance based variable compensation paid every year and ensure that an optimum risk reward balance is maintained.

d) Linkage of performance during a performance measurement period with levels of remuneration.

e) Bank''s policy on deferral and vesting of variable remuneration and criteria for adjusting deferred remuneration before vesting and after vesting.

f) The Committee shall establish appropriate compliance arrangements to ensure employees do not insure or hedge their compensation structure.

g) The Committee shall update the details to the Nomination and Remuneration Committee on an annual basis.

FAMILIARISATION PROGRAMMES FOR INDEPENDENT DiRECTORS

The details of familiarisation programmes are disclosed on the Bank''s website, https:/www.federalbank.co.in/shareholder-information

BOARD EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) and other applicable Regulations of the SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance and of the directors individually, as well as the evaluation of the working of its various Committees for the year under consideration.

The evaluation process was initiated by putting in place, a structured questionnaire after taking into consideration inputs received from the Directors, covering various aspects of the Board''s functioning, such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. Thereafter a separate exercise was carried out in digital mode using a board evaluation software to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the NonIndependent Directors were carried out by the Independent Directors. The Directors expressed their overall satisfaction with the evaluation process.

1. PERFORMANCE EVALUATION OF INDEPENDENT DIRECTORSCriteria for evaluation include:

a. Attendance at the Board and Committee meetings

b. Study of agenda in depth prior to meeting and active participation at the meeting

c. Contributes to discussions on strategy as opposed to focus only on agenda

d. Participate constructively and actively in the Committees of the Board in which they are Chairpersons or Members

e. Exercises his skills and diligence with due and reasonable care and brings an independent judgement to the Board

f. Knowledge and Competency: i) How the person fares across different competencies as identified for effective functioning of the entity and the Board ii) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates

g. The Director remains abreast of developments affecting the Company and external environment in which it operates independent of his being apprised at meetings

h. Whether person is independent from the entity and the other directors and there are no conflict of interest

i. Whether the person demonstrates highest level of integrity (including conflict of interest disclosures, maintenance of confidentiality, etc.)

2. performance evaluation of chairperson

Criteria for evaluation include:

a. Works effectively with the Board as a whole

b. Ability to elicit inputs from all Board Members and steer the discussions to a logical conclusion

c. Works with the Board and directs the management for creating an effective process for long-range or strategic planning for the Company

d. Whether the Chairperson displays efficient leadership, is open-minded, decisive, courteous, displays professionalism, able to coordinate the discussion, etc. and is overall able to steer the meeting effectively

e. Whether the Chairperson is able to keep shareholders'' interest in mind during discussions and decisions

f. Whether the Chairperson is impartial in conducting discussions, seeking views and dealing with dissent, etc

g. Handling of critical situations concerning the Bank

h. Thinks strategically to promote growth, improve financial performance and gain competitive advantage.

i. Understands financial planning, budgeting and management of the organisation''s investments and overall organisation financial perspective.

3. PERFORMANCE EVALUATION OF NON-iNDEPENDENTDiRECTORS (MD & CEO AND EXECUTIVE DIRECTORS)Criteria for Evaluation include:

Quantitative Targets:

a. Achievements of performance against targets set

Qualitative Targets:

a. Apprises the Board regarding the organisation''s financial position and operational budget so as to enable the Board to make informed financial decisions

b. Provides Leadership in developing strategies and organisational plans with the management and the Board of Directors

c. Ensures that the Board is kept informed about all issues concerning the Bank

d. Media interaction and ability to project positive image of the Company

e. Effectively pursues the performance goals in relation to mission and objective of the organisation

f. Motivating employees, providing assistance & directions and supervising & safeguard of confidential information

g. Establishment of internal control processes, monitoring policies and encouraging suggestions

h. Cultivates effective Relationship with Industry Foras, Community and business leaders and Regulatory Bodies and Public Officials

i. Ensures compliance with all legal and regulatory requirements

j. Undertaking of various Developmental initiatives within the organisation

k. Compliance with ethical standards & code of conduct and exercising duties diligently

4. performance evaluation of board and committees

Criteria for Evaluation of Board include:

a. If Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success, representing sectors laid down by the regulators, given its current and future position

b. New Board members participate in an orientation programme to educate them on the organisation, their responsibilities, and the organisation''s activities, the Board encourages a culture that promotes candid communication

c. The Board oversees management''s procedures for enforcing the organisation''s code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board

d. The Board oversees risk management through inputs from the Risk Management Committee

e. The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures

f. The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank

g. The Board oversees the compliance processes

h. The Board views the organisation''s performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc.

i. The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company

j. The Board has defined an effective Code of Conduct for the Board and Senior Management

k. Whether the Board monitors and manages potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions

Criteria for Evaluation of Committees include

a. The Committee Terms of Reference and composition continue to be appropriate

b. The mandate, composition and working procedures of committees of the Board of Directors is clearly defined and disclosed

c. Committee meetings are organised properly in number, timing and location

d. The Committee is effective in carrying out its mandate

e. The Committee members receive adequate material in advance of Committee meetings, in sufficient time and detail to permit members to effectively consider issues to be dealt with

f. The Committee allocates the right amount of time for its work

g. Whether the Committee has fulfilled its functions as assigned by the Board and laws as may be applicable

h. Whether adequate independence of the Committee is ensured from the Board

i. Whether the Committee''s recommendations contribute effectively to decisions of the Board

5. ASSESSMENT OF FLOW OF INFORMATION Criteria for evaluation include:

The agenda and related information are circulated in advance of meetings to allow board members sufficient time to study and understand the information. Information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board, periodically etc. Update on the compliance with the regulatory, statutory or listing requirements are placed before the Board.

Business RESPONSiBiLiTY And SUSTAiNABiLiTY Report

In July 2011, the Ministry of Corporate Affairs, Government of India, came out with the ''National Voluntary Guidelines on Social,

and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalisation shall submit a Business Responsibility and Sustainability report in the format as specified by the SEBI from time to time. The Business Responsibility and Sustainability report for the financial year 2022-23 forms part of this Annual Report.

technology and digital updates and measures taken in it governance, information security, it audit, it operations, it services outsourcing

TECHNOLOGY AND DIGITAL uPDATEs

IT provides the strong foundation that enables your Bank to grow extensively and gain market share. In the following paragraphs, we provide more details of the entire governance structure over IT, with focus on information security.

IT governance comprise processes that ensure the effective and efficient use of IT in enabling our organisation to achieve its goals. It is an integral part of corporate governance and consists of the organisational structures, leadership and process that ensure IT sustains and extends the organisation''s strategy and objectives. The governance of IT is effectively supervised by the Board of Directors through the IT & Operations Sub-Committee consisting of minimum three Directors with at least one Independent Director. All members of the Committee have extensive experience in IT & Operations and are able to provide effective guidance and direction to the management team. Executive Level Committee which oversee the IT governance function include the Operations Risk Management Committee (ORMC), the Information Security Committee (ISC) and the Project Steering Committee (PSC).

Your Bank has a well-defined Information System Security Policy and a Cyber Security Policy. The effective implementation of these policies is supervised by the Information Security Committee and by the IT & Operations Committee of the Board. In recognition of the need for enhanced systems security, your Bank conducts a wide range of system audits, using internal and external auditors. These range from the quarterly Vulnerability Assessments (VA) and Penetration Testing (PT) to concurrent audits to an annual end to end audit of IT infrastructure. All the applications, both web based and mobile based apps exposed to internet are subjected to external penetration testing (PT) before releasing to use.

Bank has deployed best in the class infrastructure to provide availability of service to users and customers without fail. The installed infrastructure is tested for its reliability and robustness

by periodic audits. In addition, periodic Disaster Recovery Tests are conducted to ensure the ability to move to the Disaster Recovery infrastructure in the event of downtime in the main production capability.

More details on digital initiatives of the Bank are available in the Management Discussion and Analysis Report, forming part of this Annual Report.

PARTICULARS OF EMPLOYEES

In terms of Section 136 of the Companies Act, 2013, the copy of the financial statements of the Bank, including the consolidated financial statements, the auditor''s report and relevant annexures to the said financial statements and reports are being sent to the Members and other persons entitled thereto, excluding the information in respect of the employees of the Bank containing the particulars as specified in Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5 (2) of the said Rules is available on the website: https:/www.federalbank.co.in/shareholder-information.

The ratio of the remuneration of each Director to the median remuneration of the employees of the Bank and other details in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure IV.

DIRECTOR''S RESPONSIBILITY STATEMENT

To the best of our knowledge and belief and according to the information and explanations obtained to us, the Directors make the following statements in terms of Section 134 (3) (c) of the Companies Act, 2013:

1. that in the preparation of the annual financial statements for the year ended March 31, 2023, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2023 and of the profit of the Bank for the year ended on that date;

3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act,

2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

4. that the annual financial statements have been prepared on a going concern basis;

5. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

6. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively;

awards and accolades

Celebrating Excellence and Innovation

In the past year, your Bank has achieved remarkable recognition and garnered prestigious awards, highlighting our commitment to excellence and innovation in the banking industry. These accolades serve as a testament to our unwavering dedication to creating a positive workplace culture and delivering exceptional services to our customers.

One of our proudest achievements was being honoured as the âMost Preferred Workplace 2022-23" in the BFSI sector. This recognition reinforces our efforts to cultivate a thriving and inclusive work environment that attracts and retains top talent. We firmly believe that a happy and engaged workforce leads to superior customer experiences, and this accolade validates our commitment to nurturing our employees.

Furthermore, we are delighted to announce that your Bank was bestowed with the prestigious âBest Private Sector Bank" award in the ''large Private Sector Bank'' category at the SFBKC Banking Excellence Award 2022. This recognition by the State

Forum of Bankers'' Clubs Kerala is a testament to our relentless pursuit of excellence in providing top-notch banking services and solutions to our valued customers.

Your Bank won the esteemed âExcellence in Mobile Banking" award at ''The Retail Banker International Asia Trailblazer Awards 2023. This recognition showcases our commitment to leveraging technology and providing seamless mobile banking experiences that cater to the evolving needs of our customers. Your Bank''s partnership with Rupeek has also been recognised as the âBest FinTech Partnership/Start-up Alliance Initiative of the Year" This award underscores our commitment to fostering innovative collaborations that bring value and convenience to our customers.

Your Bank bagged the Silver Shield at the prestigious ICAI Awards for Excellence in Financial Reporting for the year ended March 31, 2022.

In addition to these accolades, your Bank has also been acknowledged for our innovative practices and commitment to diversity. We were recognised among the âTop 20 Most Innovative Practices" at the DivHERsity Awards 2023. This recognition underscores our dedication to fostering a culture of creativity and innovation, empowering our employees to think differently and explore new possibilities.

Notably, your Bank is the only commercial bank in India to be

honoured by Great Place to Work among the âTop 50 India''s Best Work placesâ¢" for building a culture of innovation. This distinction showcases our commitment to creating an environment where our employees thrive, collaborate, and bring their best ideas forward. It is a testament to our belief in the power of innovation as a driver of success.

These awards and accolades would not have been possible without the dedication and hard work of our incredible team. We are immensely proud of each and every member who contributes to our bank''s success and helps us deliver exceptional banking experiences to our customers.

As we celebrate these achievements, we remain committed to continuously raising the bar and setting new benchmarks in the banking industry. We will continue to innovate, embrace diversity, and create a workplace where our employees can thrive and reach their full potential. With the trust and support of our valued customers, we are confident that we will continue to achieve greater heights in the future.

ACKNOWLEDGEMENT

Your Directors place on record their deep appreciation to every member of Federal family for their hard work, dedication and commitment, to whom the credit for the Bank''s achievements goes, particularly during this unprecedented year.

The Board of Directors take this opportunity to express their deep sense of gratitude to Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors also wish to express their gratitude to Investment Banks, Rating Agencies and Stock Exchanges for their wholehearted support. The Directors record their sincere gratitude to the esteemed customers and all other well-wishers for their continued patronage.

And to you, our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

Mar 31, 2022

Your Directors take pleasure in presenting the 91^st Annual Report on the business and operations of The Federal Bank Limited (âthe Bank"), together with the audited accounts for the Financial Year (FY) ended March 31,2022.

FINANCIAL RESULTS

Financial results are presented in the table below:		('' in Crore)
Financial Parameters for the year ended	March 31, 2022	March 31, 2021
Net Interest Income	5,961.96	5,533.71
Fee and Other Income	2,089.09	1,958.70
Net Revenue	8,051.05	7,492.41
Operating Expense	4,293.20	3,691.72
Operating Profit	3,757.85	3,800.69
Net Profit	1,889.82	1,590.30
Profit brought forward	3,305.38	2,616.67
Total Profit Available for appropriation	5,195.21	4,206.97
Appropriations:
Transfer to Revenue Reserves	266.72	229.57
Transfer to Statutory Reserves	472.46	397.57
Transfer to Capital Reserves	87.40	153.45
Transfer to Special Reserve	123.34	120.99
Dividend pertaining to previous year paid during the year	139.74	-
Balance Carried over to Balance Sheet	4,105.55	3,305.39
Financial Position (as on )
Deposits	181,700.59	172,644.48
Advances	144,928.33	131,878.60
Total Business (Deposits Advances)	326,628.92	304,523.08
Other Borrowings	15,393.12	9,068.50
Investments	39,179.46	37,186.21
Total Assets (Balance Sheet Size)	220,946.31	201,367.39
Equity Capital	420.51	399.23
Ratios
Return on Total Assets (%)	0.94	0.85
Return on Equity (%)	10.87	10.38
Earnings Per Share (?)	9.13	7.97
Book value per share (?)	88.75	80.71
Operating cost to Income (%)	53.32	49.27
Capital Adequacy Ratio (%) Basel (III)	15.77	14.62
Previous year figures have been regrouped / reclassified, where necessary to conform to current year''s classification.

HIGHLIGHTS OF PERFORMANCE

During the year 2021-22, your Bank delivered steady performance amidst the volatile environment in the market. Total business of your Bank improved by 7.26 % to reach '' 3,26,628.92 Cr as on March 31, 2022. 5.25 % growth in deposits and 9.90% growth in advances (net) helped your Bank to clock this number. Total deposits reached '' 1,81,700.59 Cr and advances (net) reached 1,44,928.33 Cr and on averages, deposit portfolio of your Bank

grew by 8.54% to reach '' 1,69,339.74 Cr and advance portfolio grew by 9.03% to reach '' 1,34,478.77 Cr.

On the NR side, NRE deposits had a growth rate of 5.41% to reach '' 67,416.25 Cr and NRE Savings clocked a growth of 6.18% to reach '' 19,442.33 Cr. The total NR business of your Bank stood at '' 72,636.98 Cr with a growth of 6.69%.

GROWTH IN BUSINESS

On CASA front, Savings deposit touched '' 54,509.67 Cr with 14.30% growth and Current deposits stood at '' 12,611.54 Cr. Your Bank registered a healthy CASA growth of 14.99% to reach '' 67,121.21 Cr. CASA ratio of your Bank stood at 36.94%.

The investment portfolio of your Bank has reached '' 39,179.46 Cr as on March 31,2022 and the average investment as on March 31,2022 is '' 37,909.01 Cr.

PROFITABILITY

The Bank delivered an annual operating profit of '' 3,757.85 Cr as on March 31, 2022. The annual net profit is at '' 1,889.82 Cr as on March 31, 2022 up from '' 1,590.30 Cr as on March 31,2021. Net Interest Income improved by 7.74% to '' 5,961.96 Cr while the Non-Interest Income stood at '' 2,089.09 Cr.

Total income of your Bank during the fiscal touched '' 15,749.85 Cr and Income from advances reached '' 10,829.75 Cr. The yield on advances stood at 8.05% and the yield on Investments (excluding trading gain) at 6.17%. The Net Interest Margin for the fiscal year is at 3.20 % as against 3.16%, in the previous year.

Return on Average Total Assets stood at 10.87%. Book value per share had increased to '' 88.75 during FY 22.

EXPENDITURE

The total expenses of your Bank reached '' 11,992.00 Cr and interest expenses reduced by 6.39% to '' 7,698.80 Cr in FY 22. Operating Expenses of the Bank during the fiscal year grew to '' 4,293.20 Cr.

The cost of deposits of the Bank reduced to 4.33% as on March 31, 2022. The Interest expenses as percentage to total income stood at 48.88 %.

SPREAD

During the fiscal year, the Bank''s spread on advances (gross) stood at 3.72% and spread on investments (gross) at 2.85%. The Spread (net of provisions) on advance stood at 3.27%

ASSET QUALITY

The Gross NPA of your Bank as on March 31, 2022 stood at '' 4,136.74 Cr. Gross NPA as a percentage to Gross Advances is 2.80%. The Net NPA stood at '' 1,392.62 Cr and Net NPA percentage is at 0.96% as on March 31, 2022. The Provision Coverage Ratio stood at 65.54% as on March 31,2022.

NET WORTH & CAPITAL ADEQUACY

The Net Worth of your Bank grew by 15.83% to '' 18,660.98 Cr as against '' 16,111.20 Cr in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank

calculated in line with Basel III norms stood at 15.77% which is considerably higher than the RBI stipulation. Of this, Tier 1 CRAR is at 14.43%.

BUSINESS OVERVIEW

Your Bank continued its consistent performance during FY 2021-22 with the total business of the Bank increasing by 7.26 % to reach '' 326,628.92 Cr.

EMPLOYEE PRODUCTIVITY

Business per employee of your Bank is at '' 25.79 Cr during the fiscal, an improvement of 6.22% and the profit per employee of the Bank is at '' 14.92 Lakh, an improvement of 17.68%.

EXPANSION OF NETWORK

The Bank has 1282 branches, 1885 ATMs/Recyclers as on March 31, 2022. The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).

SHARE VALUE

Earnings per Share (face value '' 2 /- each) of your Bank have improved to '' 9.13 from '' 7.97 during the year under review. Return on Equity during the year reached 10.87% in the fiscal year ended March 31, 2022.

APPROPRIATIONS

('' in Thousands)
	FY 2021-22	FY 2020-21
Transfer to Revenue Reserve	2,667,208	2,295,718
Transfer to Statutory Reserve	4,724,554	3,975,743
Transfer to Capital Reserve	874,033	1,534,458
Transfer to Special Reserve	1,233,400	1,209,900
Dividend pertaining to previous year paid during the year	1,397,396	-
Balance carried over to Balance Sheet	41,055,453	33,053,829
TOTAL	51,952,044	42,069,648

Material Changes and Commitments, if any, affecting the Financial Position of the Bank which have occurred between the end of the Financial Year of the Bank to which the financial statements relate and the date of the report

No material changes and commitments which could affect your Bank''s financial position have occurred between the end of the financial year of your Bank and date of this report.

CHANGE IN CAPITAL STRUCTURE AND LISTING OF SHARES

The subscribed and paid-up share capital of the Bank as on March 31,2022 is '' 4,205,092,746/- divided into 2,102,546,373 equity shares of ''2/- each. The Bank''s equity shares are listed on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). During the year, 104,846,394 equity shares of ''2/- each were allotted to International Finance Corporation ("IFC"), IFC Financial Institutions Growth Fund, LP ("FIG") and IFC Emerging Asia Fund, LP ("EAF") under preferential allotment and 1,547,231 equity shares of ''2/- each were allotted under Employee Stock Option scheme (ESOP) of the Bank. All the above equity shares were admitted for trading in NSE and BSE.

As on March 31, 2022, Bank has an outstanding of 3,700 units rated, unsecured, redeemable, non-convertible, Basel III compliant tier II subordinated bonds aggregating to '' 1000 crores.

Important changes which have occurred after the close of Financial Year

After the close of Financial Year, 945,492 equity shares of ''2/- each were allotted under ESOP scheme of the Bank and have been admitted for trading on NSE and BSE as on June 30, 2022. Further, 17,500 equity shares were allotted against rights entitlements released from abeyance in accordance with the order of Honorable High Court of Kerala. Accordingly the paid-up share capital of the Bank as on June 30,2022 is ''4,207,018,730 divided into 2,103,509,365 equity shares of ''2/- each. The shares are actively traded on NSE and BSE and have not been suspended from trading.

DIVIDEND

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 90% i.e. '' 1.80 per Equity Share on face value of '' 2/- each for the year 2021-22 (previous year: 35%) subject to the approval of the members in the 91^st Annual General Meeting. Protecting shareholders'' value has always been a guiding philosophy of the Bank.

CREDIT RATING

The details of Credit Ratings of your Bank as on March 31,2022 are as follows;

â¢ CRISIL A1 for the Certificate of Deposit Programme of the Bank

â¢ CRISIL A1 for the Short-Term Fixed Deposits of the Bank

â¢ CARE AA (Stable) [Double A, Outlook: Stable] for the Tier II

bonds (Under Basel III)

â¢ IND AA/Stable by India Rating and Research for the Tier II bonds (Under Basel III)

During the year under review, there were no revisions in the credit ratings obtained by the Bank.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

The Bank''s shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010) on December 24, 2010 and Employee Stock Option Scheme 2017 (ESOS 2017) on July 14, 2017.

Under ESOS 2010, the Nomination, Remuneration, Ethics and Compensation Committee granted 34,720,200 options during the year 2011-12, 24,484,750 options during the year 2012-13, 26,094,250 options during the year 2013-14, 11,156,450 options during 2014-15, 1,025,000 options during the year 2015-16, 965,000 options during the year 2016-17 and 100,000 options during the year 2017-18. The options granted which are non-transferable, with vesting period of 1 to 5 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. During the Financial Year FY 22, 9,18,047 options had been exercised and 8,277,686 options were in force as on March 31, 2022.

Under ESOS 2017, the Nomination, Remuneration, Ethics and

Compensation Committee granted 22,318,348 options during the year 2017-18, 37,231,307 options during the year 2018-19, 30,524,986 options during the year 2019-20, 16,884,159 options during the year 2020-21 and 3,733,250 options during the year 2021-22. The options granted which are non-transferable, with vesting period of 1 to 4.25 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. During the Financial Year FY 22, 629,184 options had been exercised and 77,129,660 options were in force as on March 31,2022.

Other statutory disclosures as required Regulation 14 of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 on ESOS are given in website of the Bank in the link: https:Zwww.federalbank.co.in/ web/guest/shareholder-information.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Transfer of Unpaid/ Unclaimed Dividend to IEPF

Pursuant to Sections 124 and 125 of the Act read with Investor Education and Protection Fund Authority (Accounting, Audit,

Transfer and Refund) Rules, 2016 (''IEPF Rules''), all unpaid or unclaimed dividends are required to be transferred by the Bank to the Investor Education and Protection Fund (âIEPF" or âFund") established by the Central Government, after completion of seven years from the date the dividend is transferred to unpaid/ unclaimed account. As a result, the unclaimed/unpaid dividend for the year 2013-14 amounting to '' 10,023,822/- which remained unpaid and unclaimed for a period of 7 years has already been transferred by your Bank to the IEPF.

Further, the unpaid dividend amount pertaining to the financial year 2014-15 will be transferred to IEPF during the Financial Year 2022-23 within statutory timelines. Members are requested to ensure that they claim the dividends referred above before they are transferred to the said Fund. The due dates for transfer of unclaimed dividend to IEPF are provided in the section report on Corporate Governance.

Your Bank has uploaded the details of unclaimed/ unpaid

dividend for the financial year 2014-15 onwards on its website viz., www.federalbank.co.in and on the website of IEPF Authority viz., www.iepf.gov.in and the same gets revised/updated from time to time pursuant to the provisions of IEPF (Uploading of Information Regarding Unpaid and Unclaimed Amount lying with Companies) Rules, 2012.

Transfer of Shares to IEPF

Pursuant to the provisions of Section 124(6) of the Act and the Investor Education and Protection Fund (IEPF) Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 notified by the Ministry of Corporate Affairs on September 7, 2016 and based on subsequent amendments, if any all the equity shares of the Bank in respect of which dividend amounts have not been paid or claimed by the shareholders for seven consecutive years or more are required to be transferred to demat account of IEPF Authority. The said requirement does not apply to shares in respect of which there is a specific Order of Court, Tribunal or Statutory Authority, restraining transfer of the shares.

Accordingly, 155,899 equity shares of 182 members of your Bank were transferred to demat account of IEPF Authority. Your Bank had sent individual notice to all the aforesaid 182 members and has also published the notice in the leading English and Malayalam newspapers.

The details of the nodal officer appointed by the Bank under the provisions of IEPF are disseminated in the website of the Bank viz., https:/www.federalbank.co.in/unclaimed-dividend-warrants.

DIRECTORS

As on March 31, 2022, Bank''s Board consists of 11 members, with rich experience and specialized knowledge in various areas of relevance to the Bank, including Accountancy, Agriculture and Rural Economy, Banking, Co-Operation, Information Technology, Credit, Treasury Operations, Human Resources, Governance, Compliance, Economics, Finance, Small - Scale Industry, Law, Payment & Settlement systems, Risk Management and Business Management. Besides the Chairman, the Board comprises seven Non-Executive Independent Directors including one woman Independent Director and three Executive Directors.

During the year, Reserve Bank of India vide their letter DOR. GOV. No. S289/08.38.001/2021-22 dated July 09, 2021 had approved the re-appointment of Mr. Shyam Srinivasan as Managing Director & Chief Executive Officer (MD & CEO) (DIN: 02274773) of the Bank for a period of three years w.e.f. September 23, 2021 till September 22, 2024. Accordingly, approval of the shareholders for re-appointment of Mr. Shyam Srinivasan as MD & CEO of the Bank through ordinary resolution is being sought at the ensuing AGM of the Bank.

During the year, RBI had vide their letter DOR. GOV. No. S 1019/08.38.001/2021-22 dated September 09, 2021 accorded its approval for the appointment of Mr. C Balagopal (DIN-00430938), Independent Director, as Part Time Chairman of the Bank with effect from November 22, 2021 till June 28, 2023, consequent to retirement of Ms. Grace Elizabeth Koshie (DIN- 06765216), Chairperson and Non-Executive NonIndependent Director from the Board of the Bank with effect from the closure of business hours on November 21, 2021 upon completion of her tenure of 8 years on the Board of the Bank, in accordance with the regulatory requirements.

Mr. Ashutosh Khajuria (DIN: 05154975) was re-appointed as Executive Director of the Bank for a period of one year with effect from w.e.f. May 01, 2022 till April 30, 2023 with the approval of Reserve Bank of India vide letter DOR. GOV. No. S441/08.38.001/2022-23 dated April 21,2022. Accordingly, approval of the shareholders for re-appointment of Mr. Ashutosh Khajuria as Executive Director of the Bank, through Ordinary Resolution is being sought at the ensuing AGM of the Bank.

In accordance with the provisions of the Act and the Articles of Association of the Bank, Mr. Ashutosh Khajuria (DIN: 05154975) Executive Director of the Bank, is liable to retire by rotation at the ensuing Annual General Meeting and being eligible have offered himself for re-appointment.

Pursuant to the recommendation of the Nomination, Remuneration, Ethics and Compensation Committee, the Board of Directors of the Bank approved the appointment of Mr. Sankarshan Basu (DIN: 06466594) and Mr. Ramanand Mundkur (DIN:03498212) as an Additional Non-Executive Independent Director of the Bank, with effect from October 01,2021. Pursuant to the provisions of Section 161 of the Act, the said directors continue to hold office as an Additional Director of the Bank, up to the date of the ensuing AGM or the last date, on which the AGM should have been held, whichever is earlier. Your Bank has received notices in writing from members proposing the candidature of Mr. Sankarshan Basu and Mr. Ramanand Mundkur as a Directors (Non-Executive Independent) on the Board of the Bank. Further, the NRC and the Board of Directors of the Bank have also recommended their appointment as an Independent Director, not liable to retire by rotation, to the Shareholders at the ensuing AGM for a period of five years with effect from October 01,2021.

The Board is of the opinion that the Independent Directors appointed during the year possesses necessary integrity, expertise and experience (including the proficiency).

The Shareholders in the 90^th AGM had approved the reappointment of Mr. Shyam Srinivasan (DIN: 02274773) as Managing Director & Chief Executive Officer of the Bank for a period of one year with effect from September 23, 2020 to September 22, 2021 and Mr. Ashutosh Khajuria as an Executive Director for the period from April 01,2021 to April 30, 2022.

Mr. K Balakrishnan (DIN:00034031) Independent Director of the Bank, retired from the Directorship of the Bank effective from September 24, 2021, upon completion of his tenure as Independent Director.

Necessary information pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in respect of Directors to be appointed and re-appointed at the ensuing Annual General Meeting are given in the Annexure to the Notice convening the 91^st Annual General Meeting scheduled to be held on July 27, 2022.

None of the Directors of your Bank are disqualified for being appointed as Directors, as specified in Section 164(2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules, 2014.

KEY MANAGERIAL PERSONNEL

As on March 31, 2022, the following Directors/Executives continued as Key Managerial Personnel of the Bank:

Mr. Shyam Srinivasan - Managing Director & Chief Executive Officer

Mr. Ashutosh Khajuria -Executive Director Ms. Shalini Warrier - Executive Director Mr. Venkatraman Venkateswaran - Chief Financial Officer Mr. Samir P Rajdev - Company Secretary

During the year, Mr. Shyam Srinivasan, MD & CEO of the Bank who is Key Managerial Personnel was re-appointed as MD & CEO of the Bank for a period of three years w.e.f. September 23, 2021 till September 22, 2024.

The Board of Directors of the Bank at its meeting held on May 17, 2021, has approved the appointment of Mr. Venkatraman Venkateswaran as Chief Financial Officer and Key Managerial Personnel of the Bank with effect from Tuesday, May 18, 2021.

As Chief Financial Officer, Mr. Venkatraman Venkateswaran will report directly to Managing Director & CEO of the Bank.

After the end of the financial year and up to the date of the Report.

Mr. Ashutosh Khajuria (DIN: 05154975), Executive Director of the Bank, who is also a Key Managerial Personnel was re-appointed as Executive Director of the Bank for a period of one year with effect from May 01, 2022 till April 30, 2023 with the approval of

Reserve Bank of India.

DECLARATION BY INDEPENDENT DIRECTORS

(Creation and Maintenance of databank of Independent Directors) Rules, 2019 read with the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019, the

Independent Directors of the Bank has enrolled his/ her name in the online databank of Independent Directors maintained by the Government.

MEETINGS

The Board meets at regular intervals to discuss and decide on Bank/ business policy and strategy apart from other items of business. A tentative calendar of the Board and Committee meetings is circulated to the Directors well in advance to facilitate them to plan their schedule and to ensure meaningful participation in the meetings. However, in case of a special and urgent business need, the approval of the Board/Committee is taken by passing resolutions by circulation, as permitted by law, which are noted and confirmed in the subsequent Board/Committee meeting.

The notice of Board and Committee meetings are given in advance to all the Directors. The agenda and pre-reads are circulated well in advance before each meeting to all Directors for facilitating effective discussion and decision making. Considerable time is spent by the Directors on discussions and deliberations at the Board and Committee meetings.

During the financial year, nineteen (19) Board Meetings, sixteen (16) Audit Committee Meetings and other Committee Meetings were convened and held, the details of which are given in the Corporate Governance report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013.

The details of the constitution of the Board and its Committees are detailed in the Corporate Governance report.

SUBSIDIARIES OF THE BANK

As on March 31, 2022, the Bank has one unlisted wholly owned subsidiary, M/s. Federal Operations and Services Limited and one unlisted subsidiary M/s. Fedbank Financial Services Limited.

Federal Operations and Services Limited

Federal Operations and Services Limited (FedServ) is a wholly owned subsidiary company of The Federal Bank Limited (the Bank) incorporated on October 26, 2018. FedServ received approval from RBI on November 09, 2018 for commencing its operations. FedServ started its operations w.e.f. December 01, 2018. FedServ provides operational and technology-oriented services to the Bank.

As on March 31,2022, FedServ''s Board of Directors has following five members-

Mr. C Balagopal, Chairman

Mr. Ajith Kumar K K, Non- Executive Director

Mr. Johnson K Jose, Non- Executive Director

Mr. Prashant Preman, Wholetime Director

Mr. Venkatraman Venkateswaran, Non- Executive Director

During the year ended on March 31, 2022, FedServ has taken significant operational activities of the Bank which includes technical helpdesk, VC & Asset management. FedServ is carrying out 109 operational activities of the Bank as on March 31, 2022.

Company does not deal in loans and advances, neither it accepts deposits. FedServ is operating from two locations:- Kochi in Kerala and Visakhapatnam in Andhra Pradesh.

The total revenue of FedServ for the year ended on March 31, 2022 was ''44.10 Crores. ''42.67 Crores pertains to services provided by the Company to the Bank and ''1.43 Crores relates to the indirect incomes. The Company had a net profit of ''3.46 Crores for the year ended on March 31, 2022. The Net worth of FedServ at the beginning of the year was ''12.82 Crores and closing net worth of FedServ as on March 31,2022 was ''16.27 Crores.

The Profit after tax of the Company for the year ended March 31, 2022 increased to ''3.46 Crores from ''1.84 Crores for the year ended March 31, 2021. The total assets of the Company increased to ''19.83 Crores as on March 31, 2022 from ''14.96 Crores as on March 31,2021.

Fedbank Financial Services Limited

Fedbank Financial Services Limited (Fedfina) is a subsidiary company of The Federal Bank Limited (the Bank) incorporated on April 17, 1995. Fedfina received approval from RBI on August 24, 2010 for the business of a non-banking financial institution

without accepting public deposits. It is a Non-deposit taking & Systemically Important (ND-SI) NBFC. Fedfina has a well-tailored suite of products targeted to match the customers'' needs, which includes housing loans, small ticket loan against property (âLAP"), medium ticket LAP, unsecured business loans, and gold loans. It also distributes loan products of the Bank. It has over 516 branches across India providing multiple loan products to various segments of borrowers.

Fedfina''s Board of Directors comprises following six members

Mr. K Balakrishnan - Chairman & Independent Director

Mr. Anil Kothuri - Managing Director & Chief Executive Officer

Mr. Shyam Srinivasan - Non Executive Director

Ms. Gauri Rushabh Shah - Independent Director

Mr. Maninder Singh Juneja - Nominee Director

Mr. Ashutosh Khajuria - Nominee Director

ASSOCIATE COMPANIES

As on March 31, 2022, the Bank has two Associate Companies named M/s. Ageas Federal Life Insurance Company Limited (Formerly known as IDBI Federal Life Insurance Co Ltd.) and M/s. Equirus Capital Private Limited.

Joint Venture in Life Insurance Business

The Bank''s Joint Venture Life Insurance Company, in association with IDBI Bank Limited and Ageas Insurance International N.V.

(formerly known as Fortis), namely Ageas Federal Life Insurance Company Limited (âformerly known as IDBI Federal Life Insurance Company Limited"), commenced operations in March 2008. As on March 31,2022, the Bank has a total stake of ''208 Crores in the equity of the Company holding 26% of the equity capital. The total premium collected by Ageas Federal Life Insurance Company Limited during the period ended March 31, 2022 was '' 2,207.30 Crores. The Company has declared final dividend of 3.5% for the FY 2021-22.

Investment Banking Associate

As of March 31, 2022, Bank holds 19.89% equity stake in Equirus Capital Private Limited. Pursuant to the right of proportionate representation on the Board as well as the power to participate in the financial, operational matters like approval of the business plans, policies, budgets, managerial remuneration, change in KMP etc., the same has been treated as an associate concern as per AS 23 Accounting for Investments in Associates in Consolidated Financial Statements. Equirus Capital Private Limited is a private

company domiciled in India and is engaged in the business of Investment banking. It has 3 subsidiaries named Equirus Securities Private Limited, Equirus Insurance Broking Private Limited and Equirus Wealth Private Limited. The total turnover of Equirus Capital Private Limited on a consolidated basis was ''152.23 Crores in FY 2022 against ''65.42 Crores for FY 2021.

Mr. Harsh Dugar, Group President & Country Head - Wholesale Banking of the Bank is a Nominee Director on the Board of Equirus Capital Private Limited.

DEPOSITS

LOANS, GUARANTEES OR INVESTMENTS IN SECURITIES

RELATED PARTY TRANSACTIONS

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element of our fundamentals, right from the day the Bank was founded. Our founder''s values & ethos based on trust got

embedded in the Bank''s policies & principles. CSR in Federal Bank began with the first act of cultivating banking habits in

the agrarian society to effectively utilize idle money for productive purposes.

The details of the CSR initiatives undertaken during the financial year ended March 31,2022 and other details required to be given under section 135 of the Companies Act, 2013 read with rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 are given in Annexure I forming part of this Report.

The CSR Policy as recommended by the CSR Committee and as approved by the Board is available on the website of the Bank and can be accessed at https:Zwww.federalbank.co.in/ documents/10180/45777/Corporate Social Responsibility Policy. pdf/2d979fe6-8723-4210-a2ff-136784690413?t= 1509453008436.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The Bank is very conscious about the need for energy management and as a team endeavours to contribute to low carbon economy and acknowledges that it is a continuous process. Your Bank has taken various initiatives to reduce its carbon footprint and improve resource efficiency. It ranges from using better technology to improve energy efficiency, recycling and generating energy from renewable sources. For more details, please refer ESG section of the Annual Report and Business Responsibility and Sustainability Report forming part of the Annual Report. The Bank prides itself on continuous investment in technology upgrades that are designed to deliver cost effective best in class customer service.

The Bank has used information technology extensively in its operations, for more details please refer the section on Technology and Digital Updates portion of Directors Report and Management Discussion & Analysis Report forming part of the Annual Report. Through its export-financing operations, the Bank supports and encourages the country''s export efforts.

RISK MANAGEMENT

Process (ICAAP) and Stress testing. The Committee oversees setting up of risk limits and exposure ceilings, implementation of Basel III guidelines and the activities of the executive level risk management committees. The Committee assesses the level and direction of major risks pertaining to credit, market, liquidity, operational, reputation, technology, information security, compliance and capital as a part of the risk dashboard. In addition, the Committee oversees risks of subsidiaries covered under the Group Risk Management Framework.

The Risk Management Policies approved by the Board of Directors and reviewed from time to time with updated regulatory and internal guidelines form the governing framework for each type of risk.

The Integrated Risk Management Department of the Bank coordinates and administers the risk management functions in the Bank. The Department has three divisions for managing the main risk streams, Credit risk, Market risk and Operational risk. Dedicated teams within the divisions are responsible for assessment, monitoring and reporting of various material risks. Default risk and asset quality of loan portfolio are monitored and managed by the Credit Risk Division. Market Intelligence Unit (MIU) formed for the purpose of monitoring large value accounts is linked to Credit Risk Division. The Bank has established an independent Mid Office as part of Market Risk Division for monitoring and management of risks in Bank''s Treasury portfolios. Business Continuity Management, Information and Cyber Security measures and Information Technology Risk forms part of Operational Risk Management. The Bank has set up a robust information in cyber security framework for securing its IT infrastructure and systems. The Information Security Team is headed by the Chief Information Security Officer (CISO), who reports to the CRO. A Security Operations Center (SOC) which performs security monitoring round the clock, is also functioning under the leadership of CISO. All the three divisions are independent of business operations and coordinate with representatives of the business units to implement the Bank''s risk management Policies and frameworks. Executive level risk management Committees namely, Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and Information Security Committee regularly assess the respective risks and direct corrective actions wherever required. The risk management functions are coordinated by a Senior Executive designated as Chief Risk Officer who reports directly to the Managing Director & CEO. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored in the Internal Capital Adequacy Assessment Process (ICAAP). In our view, all the material risks of the Bank are identified, assessed and managed adequately.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

Fraud risk is managed by the Bank methodically in line with the

robust Fraud Risk Management Policy of the Bank which covers all significant aspects like various mitigation measures and the

surveillance mechanism that complements prevention, detection, investigation and monitoring of both, internal and external

frauds. Public and employees are sensitised on different fraud prevention techniques. With a view to create an atmosphere of alertness, Vigilance Communications (Alerts) are issued on a regular basis that disseminates various modus operandi of frauds in the banking industry along with suggestions on safeguards and precautions to be adopted to prevent such frauds. Preventive Vigilance Workshop is a flagship program designed flawlessly by Vigilance Department for employees which explicates different gaps exploited by miscreants to perpetrate fraud in the banking industry and the program also ensures deliverance of strategies to be taken to avert such frauds. Preventive Vigilance Audits are conducted at select branches and also ensures periodic conduct of Fraud Prevention Committee meetings at branches with a view to prevent frauds. Customer awareness on fraudulent activities is another area that is well covered by the Bank through various effective communication channels including SMS, E-Mails, posters at Branches, ribbon messages on Bank website, internet banking webpage, etc. All cases reported in the Bank are investigated in detail as part of detective vigilance activity. Need for process refinements/ systemic corrections, if any observed during the course of investigation are highlighted in the forums concerned for corrective measures/necessary directions. Process refinements/ systemic corrections are implemented to avert similar incidents in future.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS) with a view to enhance public confidence in the Bank and also in compliance of RBI directions in this regard. The policy aims at establishing an effective vigil mechanism in the Bank to quickly spot aberrations and deal with it at the earliest. It is disseminated among the employees assuring confidentiality and protection to the whistle blower against any personal vindictive actions such as humiliation, harassment or any other form of unfair treatment. Directors and Employees of the Bank, employee representative bodies, customers, stakeholders, non-governmental organizations (NGO) and members of the public can lodge complaints / disclosures under this scheme. A dedicated e-mail ID is provided for sending complaints/disclosures under PDS. Investigation is conducted in all complaints /information received through the PDS mechanism and investigation reports are placed before MD & CEO. The details of the complaints and findings are also placed before the Audit Committee of the Board on a quarterly basis for review. The scheme is popularised through various measures such as preventive vigilance classes, internal circulars, alerts etc. No personnel have been denied access for giving any information

as envisaged in the Protected Disclosure Scheme. PDS policy is

made available in Bank''s website and Intranet. Website link to Bank''s Whistle Blower Policy is https:Zwww.federalbank.co.in/ documents/10180/45777/Whistle Blower policy/558aea51-1335-4546-9c9a-28c5030377a1.

Details regarding Internal Complaints Committees (Information under the Sexual Harassment of Women at Workplace

(Prevention, Prohibition and Redressal Act, 2013) has been separately captured in this report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY AND ITS FUTURE OPERATIONS

During the financial year 2021-22, the Bank has not received any significant or material orders passed by any Regulatory Authority, Court or Tribunal which shall impact the going concern status and Bank''s operations in future.

STATUTORY AUDITORS

The Shareholders in the 89^th AGM held on July 16, 2020 approved the appointment M/s. Varma & Varma, Chartered Accountants (Registration No. 004532S), Kochi for a period of four (4) years together with M/s. Borkar & Muzumdar, Chartered Accountants (Registration No. 101569W), Mumbai for a period of three (3) years as Joint Statutory Central Auditors of the Bank from the conclusion of 89^th AGM till the conclusion of 93^rd and 92^nd AGM respectively.

RBI vide circular dated DoS.CO.ARG/SEC.01/08.91.001/2021 -22 dated April 27, 2021 brought in âGuidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors". As per Para 8.1 of the said circular, in order to protect the independence of the auditors/audit firms, entities will have to appoint the SCAs/ SAs for a continuous period of three years, subject to the firms satisfying the eligibility norms each year.

To comply with the requirements of the aforesaid RBI Circular dated April 27, 2021, the Shareholders in the 90^th AGM held on July 9, 2021 approved revision of tenure of appointment of M/s. Varma & Varma, one of the Joint Statutory Central Auditors, as

three years with effect from FY 2020-21.

RBI vide its letter DOS.ARG.No. PS-100 /08.09.005/2021-2022 dated July 20, 2021 had granted approval for appointment of

M/s. Varma & Varma, Chartered Accountants and M/s. Borkar & Muzumdar, Chartered Accountants as the Joint Statutory Central Auditors of the Bank for FY 2021-22 for their second year.

Pursuant to the amendment made to Section 139 of the Companies Act, 2013 by the Companies (Amendment) Act,

2017, effective from May 07, 2018, the requirement of seeking ratification of the members for the appointment / re-appointment of the Statutory Auditors has been withdrawn from the Statute. Hence, the resolution seeking ratification of the members for re-appointment at the ensuing AGM is not being sought for the reappointment of M/s. Varma & Varma, Chartered Accountants and M/s. Borkar & Muzumdar, Chartered Accountants as Joint Statutory Central Auditors of the Bank.

There is no qualification or adverse remark in Auditors'' Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Act.

SECRETARIAL AUDIT AND SECRETARIAL COMPLIANCE REPORT

Pursuant to the provisions of Section 204 of The Companies Act, 2013 your Bank has appointed CS EP Madhusudhanan (COP: 21874), Partner of SEP & Associates, Company Secretaries, Kochi as Secretarial Auditor to conduct Secretarial Audit of the Bank for the FY 2021-22. Accordingly, the Secretarial Audit Report for FY 2021-22 is annexed to this report as Annexure II. There are no reservations, adverse remark or disclaimer in the Secretarial Audit Report.

No offence of fraud was reported by the Secretarial Auditor of the Bank.

Pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 08, 2019, the Bank has obtained Secretarial Compliance Report, certified by CS Puzhankara Sivakumar (COP: 2210), SEP & Associates, Company Secretaries, Kochi for Financial Year ended March 31, 2022, on compliance of all applicable SEBI Regulations and circulars/ guidelines issued thereunder and the copy of the same was submitted with the Stock Exchanges.

COMPLIANCE WITH SECRETARIAL STANDARDS ON BOARD AND GENERAL MEETINGS

The Bank has complied with Secretarial standards issued by the Institute of Company Secretaries of India on Board Meetings and General Meetings.

ANNUAL RETURN

The Annual Return for the Financial Year ended March 31, 2022 as required under Section 92 and Section 134 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is available on the Bank''s website, https:/www.federalbank.co.in/shareholder-information.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its Consolidated Financial Statement including its subsidiaries M/s. Fedbank Financial Services Limited and M/s. Federal Operations and Services Limited and Associates, M/s. Ageas Federal Life Insurance Company Limited (Formerly known as IDBI Federal Life Insurance Co Ltd.) and M/s. Equirus Capital Private Limited, which is forming part of this Annual report. The financial position and performance of its subsidiaries & Associates are given in Form AOC-1, the statement containing salient features of the financial statements of the subsidiaries/Associate Companies/Joint Venture.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its

Standalone and the Consolidated Financial Statements has been hosted on its website, www.federalbank.co.in. Further, as per fourth proviso to the said Section, the Audited Annual Accounts of the said Subsidiary Companies of the Bank, considered as part of the Consolidated Financial Statements have also been hosted on the Bank''s website, www.federalbank.co.in. The said documents have been hosted on the website of the Subsidiary Companies of the Bank also, in compliance with the said Section.

The documents/details available on the Bank''s website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (''AS'') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its Subsidiaries and Associates for the year ended March 31, 2022 forms part of the Annual Report.

REQUIREMENT FOR MAINTENANCE OF COST RECORDS

The Bank is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In compliance with the Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, separate Section on Management Discussion and Analysis, as approved by the Board, which includes details on the state of affairs of the Bank, forms part of this Annual Report.

CORPORATE GOVERNANCE

Corporate Governance has been an integral part of the way your Bank has been doing business since inception. The Bank believe that good Corporate Governance emerges from the application

of the best and sound management practices and compliance with the laws coupled with adherence to the highest standards of transparency and business ethics.

Your Bank seeks to embed and sustain a culture that will enable us to achieve our objectives through effective corporate governance and enhance transparent engagement with key stakeholders.

INTERNAL COMPLAINTS COMMITTEES (INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013)

The Bank had constituted Internal Complaints Committee, as per letter and spirit contained in the provisions of âThe Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013" at 9 Zones and Head Office to prevent and redress the complaints relating to sexual harassment and to organize workshops/ awareness programs to empower women employees while handling cases relating to sexual harassment. Workshops/ awareness programs regarding women empowerment were conducted at various locations pan India. The data with regard to the redressal of complaints by the Internal Complaints Committee are as follows:

No. of complaints received for the year FY-2021-22	1
No. of complaints disposed off during FY-2021-22	1
No. of cases pending for more than 90 days	Nil
No. of workshops/ awareness program against sexual harassment carried out	14
Nature of action taken by the employer/	Appropriate
District Officer	action taken

DIVIDEND DISTRIBUTION POLICY

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend

Distribution Policy. The policy has been displayed on the Bank''s website at https:/www.federalbank.co.in/our-commitments.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Bank has through the years developed and stabilized an effective internal control system calibrated to the risk appetite

of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit and Inspection Policy of the Bank, duly

approved by the Board of Directors. In order to help Bank achieve its mission of adopting the best professional practices prevailing in the industry, while framing the policy, substantial inputs are taken from - RBI guidance note on Risk Based Internal Audit, ''The

internal audit function in banks'' published by Basel Committee on Banking Supervision and RBI Circular on ''Concurrent Audit System''. Audit and Inspection Policy is reviewed annually. Policy is reviewed considering various guidelines of RBI, Basel Committee recommendations, ICAI guidelines, other statutory / regulatory guidelines, directions of Board / Audit Committee of the Board issued from time to time and periodic internal guidelines / instructions issued by the Bank. At the enterprise level, the Inspection and Audit Department, on a continuous basis, assesses and monitors the effectiveness of the control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank''s processes and operations with regulatory guidelines, accounting procedures and Bank''s own internal rules and guidelines. A department level group meets on periodical intervals to discuss latest internal / RBI / regulatory guidelines for ensuring that the required changes are implemented for making the audit function updated and dynamic.

The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of Management and discussions are held in various Committees, covering corrective actions to reduce the incidence of audit findings, with adequate follow up of the implementation thereof. The Bank in compliance of the requirements of Section 138 of the Companies Act, 2013, has designated the Head of Inspection and Audit Department as Internal Auditor of the Bank. Internal Auditor of the Bank directly reports to the Managing Director & CEO of the Bank. Audit Committee of the Board reviews the adequacy and effectiveness of the Internal Audit Function. The Bank has various types of audit which inter-alia include Risk Based Internal Audit, Information System Audit, Third Party Risk Audit, Offsite Audit (audit through use of technology and data analysis), Concurrent Audit, Gold Loan Audit and Management Audit. Branches / Departments are risk rated and the frequency of Risk Based Internal Audit / Management Audit is decided based on the Risk Rating of the unit. Significant Audit findings and observations are presented to Inspection Review Committee of Executives and a report on the meetings of Inspection Review Committee of Executives along with significant audit findings, directions / suggestions of the Committee and action taken in such cases are placed to the Audit Committee of the Board for review periodically. Other findings are placed before a department level committee called the ''Inspection Department Review Committee'' for review and its observations are placed before Inspection Review Committee of Executives.

As per the requirement of Companies Act, 2013, Bank has formulated Internal Financial Controls Framework. Risk and Controls associated with each process in the Bank are documented under the Internal Financial Controls Framework. Inspection and Audit Department plays a significant role in testing the control effectiveness for each process under the framework.

The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the Bank''s internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the Bank and its reputation.

POLICY ON BOARD DIVERSITY

Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank as contained in the Banking Regulation Act, 1949 and satisfying

the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also takes into account factors based on its own business model and specific needs from time to time.

BANK''S POLICY ON DIRECTORS'' APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF A DIRECTOR AND OTHER MATTERS PROVIDED UNDER SUB-SECTION (3) OF SECTION 178 OF COMPANIES ACT, 2013

a. Qualifications, Experience and knowledge

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The age limit of Managing Director and Chief Executive

Officer and Whole Time Directors shall be in the range of 35-70 years.

4. The age limit of Non- Executive Directors shall be in the range of 35-75 years.

b. Disqualification / Conflicts of interest

1. The Bank''s Directors shall be subject to the disqualifications / prohibitions contained in the Companies, Act 2013 and the Banking Regulation Act,

1949 with respect to directorship of companies in general or banking companies in particular.

or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any Committee of which he is a member, and shall refrain from participating in a discussion on the matter.

c. Suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include

1. Integrity in personal and professional dealings.

2. Wisdom and ability to take appropriate decisions.

3. Ability to read and understand financial statements

4. Ability to deal with others with a sense of responsibility, firmness, and cooperation.

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

d. Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he/ she meets the criteria of independence. The terms and conditions of appointment of Independent Director are disclosed on the website of the Bank and a web link thereto is: https:Zwww.federalbank.co.in/shareholder-information.

POLICY ON REMUNERATION

Policy on Remuneration to Non-Executive Directors/ Independent Directors

The Policy of the Bank for the payment of remuneration to Non- Executive Directors / Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for NonExecutive Directors / Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http:/www. federalbank.co.in/shareholder-information.

As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy, during FY 2021-22, Non-Executive Director/ Independent Directors of the Bank are paid sitting fees for

attending Board/ Committees meetings and in addition, profit linked commission for FY 2020-21 was also paid during the year. Non- Executive Part Time Chairman was paid remuneration in addition to sitting fees with the approval of RBI.

POLICY ON REMUNERATION TO MD & CEO, EXECUTIVE DIRECTORS, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES

The Compensation / Remuneration Policy of the Bank as approved

by the Board contains the policy for payment of remuneration to MD & CEO, Executive Directors, Key Managerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

Compensation of Managing Director & CEO, Whole Time Directors and Material Risk Takers (MRTs)

The compensation paid out to the referred functionaries is divided into two components:

The fixed compensation is determined based on the relevant factors such as industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span and adherence to statutory requirements. All the fixed items of compensation, including the perquisites, will be treated as part of fixed pay. Perquisites that are reimbursable would also be included in the fixed pay so long as there are monetary ceilings on these reimbursements. Contributions towards superannuation/ retiral benefits will also be treated as part of fixed pay. (Approval from RBI to be taken as per section 35B of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

The variable compensation for Whole Time Directors, Managing Director & Chief Executive Officer and Material Risk Takers is fixed based on organizational performance (both business-unit and firm-wide) and KPAs set for the official. The organization''s performance is charted based on Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. The Score Card provides a mix of Financial and Non-Financial, Quantitative and Qualitative Metrics. The variable pay is paid in the form of share-linked instruments, or a mix of cash and share-linked

instruments. While considering/ recommending the variable pay in respect of Managing Director & CEO and Whole Time Directors, serious supervisory observations (if any) shall be factored, which will be ensured through suitable processes.

Risk, Control and Compliance Staff

Other categories of Staff

The compensation paid to Award Staff and Officers coming under Scale I to III is fixed based on the periodic industry level settlements with Indian Banks'' Association. The present scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package is as per provisions of 11^th Bipartite Settlement/ Joint note dated November 11, 2020.

Limit on Variable Pay and Deferred compensation

Managing Director & CEO, Whole Time Directors and Material Risk Takers (MRTs): In order to have a proper balance between fixed pay and variable pay, at least 50% of the total compensation

would be variable. Deferral arrangements would invariably exist for the variable pay, regardless of the quantum of pay. For such executives of the Bank, a minimum of 60% of the total variable

pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under '' 25 lakh, deferral requirements would not be necessary. The deferral period would be minimum of three years.

Risk Control and Compliance Staff: At least 25% of the total compensation would be variable and the total variable pay will be limited to a maximum of 100% of the fixed pay (for the relative

Other categories of Staff: The variable pay would be in the form of cash, share-linked instruments, or a mix of both cash and share-linked instruments. The total variable pay will be limited to a maximum of 300% of the fixed pay (for the relative performance measurement period). Deferral arrangements would invariably exist for the variable pay, if the Variable Pay exceeds 200% of the fixed pay. In such cases a minimum of 60% of the total variable pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under ''25 lakh, deferral requirements would not be necessary.

Severance Pay and Guaranteed Bonus

Severance pay (other than gratuity or terminal entitlements or as entitled by statute) is not paid to any official of the Bank.

Guaranteed Bonus on joining in the form of Cash/equities/ deposits/ bonds/debentures etc. or multiyear guaranteed bonus (like retainer fees) is not paid to any official in the organization. However, to attract talent, sign on bonus or joining bonus can be paid, but this will be limited to the first year only and it will be given as Employee Stock Options only.

Hedging

Malus / Claw back arrangement

The variable compensation is covered under Malus / Claw back arrangements in case of all categories of employees. In the event of subdued or negative contributions of the bank and/or the relevant line of business in any year, the deferred compensation will be subjected to:

â¢ Malus arrangement wherein Bank shall withhold vesting of all or part of the amount of deferred remuneration.

BOARD EVALUATION

Thereafter a separate exercise was carried out in digital mode using a board evaluation software to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the NonIndependent Directors were carried out by the Independent Directors. The Directors expressed their overall satisfaction with the evaluation process.

1. Performance Evaluation of Independent Directors

Criteria for evaluation include:

a. Attendance at the Board and Committee meetings

b. Study of agenda in depth prior to meeting and active participation at the meeting

c. Contributes to discussions on strategy as opposed to focus only on agenda

d. Participate constructively and actively in the

Committees of the Board in which they are

Chairpersons or Members

e. Exercises his skills and diligence with due and reasonable care and brings an independent judgement to the Board

f. Knowledge and Competency: i) How the person

fares across different competencies as identified for effective functioning of the entity and the Board ii) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates

g. The Director remains abreast of developments

affecting the company and external environment in which it operates independent of his being apprised at meetings

â¢ Claw back arrangement wherein the employees shall be liable to return previously paid or vested remuneration to the bank. The deferred compensation, if any, paid to such functionaries shall be subject to Claw back arrangements, which will entail the Bank to recover proportionate amount of variable compensation from such functionaries, on account of an act or decision taken by the official which has brought forth a negative contribution to the Bank at a prospective stage.

Executive Director (ED) level Committee for reviewing the linkage of Risk based performance with Remuneration

a) The Committee shall review the Compensation paid vis-avis risk taking by the Executives to ensure that prudent risk taking is recognized in the compensation framework

b) The Committee shall analyse the risk reward correlation and ensure that excess risk taking is not encouraged

c) The Committee shall review the performance based variable compensation paid every year and ensure that an optimum risk reward balance is maintained.

d) Linkage of performance during a performance measurement period with levels of remuneration.

e) Bank''s policy on deferral and vesting of variable remuneration and criteria for adjusting deferred remuneration before vesting and after vesting.

f) The Committee shall establish appropriate compliance arrangements to ensure employees do not insure or hedge their compensation structure.

g) The Committee shall update the details to the Nomination and Remuneration Committee on an annual basis.

FAMILIARIZATION PROGRAMMES FOR INDEPENDENT DIRECTORS

The details of familiarization programmes are disclosed on the Bank''s website, https/www.federalbank.co.in/shareholder-

information

h. Whether person is independent from the entity and the other directors and there are no conflict of interest

i. Whether the person demonstrates highest level of integrity (including conflict of interest disclosures, maintenance of confidentiality, etc.)

2. Performance Evaluation of Chairman

Criteria for evaluation include:

a. Works effectively with the Board as a whole

b. Ability to elicit inputs from all Board Members and steer the discussions to a logical conclusion

c. Works with the Board and directs the management for creating an effective process for long-range or strategic planning for the Company

e. Whether the Chairperson is able to keep shareholders'' interest in mind during discussions and decisions

f. Whether the Chairperson is impartial in conducting discussions, seeking views and dealing with dissent, etc

g. Handling of critical situations concerning the Bank

h. Thinks strategically to promote growth, improve financial performance and gain competitive advantage.

i. Understands financial planning, budgeting and management of the organization''s investments and overall organization financial perspective.

3. Performance Evaluation of Non-Independent Directors

(MD & CEO and Executive Directors)

Criteria for Evaluation include:

Quantitative Targets:

a. Achievements of performance against targets set

Qualitative Targets:

a. Apprises the Board regarding the organization''s financial position and operational budget so as to enable the Board to make informed financial decisions

b. Provides Leadership in developing strategies and organizational plans with the management and the Board of Directors

c. Ensures that the Board is kept informed about all issues concerning the Bank

d. Media interaction and ability to project positive image of the Company

e. Effectively pursues the performance goals in relation to mission and objective of the organization

f. Motivating employees, providing assistance & directions and supervising & safeguard of confidential information

g. Establishment of internal control processes, monitoring policies and encouraging suggestions

h. Cultivates effective Relationship with Industry Fora, Community and business leaders and Regulatory Bodies and Public Officials

i. Ensures compliance with all legal and regulatory requirements

j. Undertaking of various Developmental initiatives within the organisation

k. Compliance with ethical standards & code of conduct and exercising duties diligently

4. Performance Evaluation of Board and Committees I. Criteria for Evaluation of Board include:

b. New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization''s activities, the Board encourages a culture that promotes candid communication

c. The Board oversees management''s procedures for enforcing the organization''s code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board

d. The Board oversees risk management through inputs from the Risk Management Committee

e. The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures

f. The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank

g. The Board oversees the compliance processes

h. The Board views the organization''s performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and

with reference to areas where significant differences are apparent etc.

i. The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company

j. The Board has defined an effective Code of Conduct for the Board and Senior Management

Criteria for Evaluation of Committees include

a. The Committee Terms of Reference and composition continue to be appropriate

b. The mandate, composition and working procedures of committees of the Board of Directors is clearly defined and disclosed

c. Committee meetings are organized properly in number, timing and location

d. The Committee is effective in carrying out its mandate

e. The Committee members receive adequate material in advance of Committee meetings, in sufficient time and detail to permit members to effectively consider issues to be dealt with

f. The Committee allocates the right amount of time for its work

g. Whether the Committee has fulfilled its functions as assigned by the Board and laws as may be applicable

h. Whether adequate independence of the Committee is ensured from the Board

i. Whether the Committee''s recommendations contribute effectively to decisions of the Board

5. Assessment of Flow of Information Criteria for evaluation include:

The agenda and related information are circulated in advance of meetings to allow board members sufficient time to study and understand the information, Information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board, periodically etc. Update on the compliance with the regulatory, statutory or listing requirements are placed before the Board.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In July 2011, the Ministry of Corporate Affairs, Government of India, came out with the ''National Voluntary Guidelines on Social,

Environmental and Economic Responsibilities of Business. These guidelines contain certain principles that are to be adopted by companies as part of their business practices and require disclosures regarding the steps taken to implement these principles through a structured reporting format, viz. Business Responsibility Report. Pursuant to Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015, the requirement of submitting a Business Responsibility Report shall be discontinued after the financial year 2021-22 and thereafter, with effect from the financial year 2022-23, the top one thousand listed entities based on market capitalization shall submit a Business Responsibility and Sustainability report in the format as specified by the SEBI from time to time: Provided further that even during the financial year 2021-22, the top one thousand listed entities may voluntarily submit a Business Responsibility and Sustainability Report in place of the mandatory Business Responsibility Report. Your Bank has voluntarily adopted Business Responsibility and Sustainability Report for FY 22 and forms part of this Annual Report.

TECHNOLOGY AND DIGITAL UPDATES AND MEASURES TAKEN IN IT GOVERNANCE, INFORMATION SECURITY, IT AUDIT, IT OPERATIONS, IT SERVICES OUTSOURCING Technology and Digital updates

IT governance comprise processes that ensure the effective and efficient use of IT in enabling our organization to achieve its goals. It is an integral part of corporate governance and consists of the organizational structures, leadership and process that ensure IT sustains and extends the organization''s strategy and objectives.

The governance of IT is effectively supervised by the Board of Directors through the IT & Operations Sub-Committee consisting of minimum three Directors with at least one Independent Director. All members of the Committee have extensive experience in IT & Operations and are able to provide effective guidance and direction to the management team.

Executive Level Committee which oversee the IT governance function include the Operations Risk Management Committee

(ORMC), the Information Security Committee (ISC) and the Project Steering Committee (PSC).

In recognition of the need for enhanced systems security, your Bank conducts a wide range of system audits, using internal and external auditors. These range from the quarterly Vulnerability Assessments (VA) and Penetration Testing (PT) to concurrent audits to an annual end to end audit of IT infrastructure. All the applications, both web based and mobile based apps exposed to internet are subjected to external penetration testing (PT) before releasing to use.

Bank has deployed best in the class infrastructure to provide availability of service to users and customers without fail. The installed infrastructure is tested for its reliability and robustness by periodic audits. In addition, periodic Disaster Recovery Tests are conducted to ensure the ability to move to the Disaster Recovery infrastructure in the event of downtime in the main production capability.

More details on digital initiatives of the Bank are available in the Management Discussion and Analysis Report, forming part of this Annual Report.

PARTICULARS OF EMPLOYEES

DIRECTOR''S RESPONSIBILITY STATEMENT

1. that in the preparation of the annual financial statements for the year ended March 31, 2022, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

2. that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2022 and of the profit of the Bank for the year ended on that date;

3. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

4. that the annual financial statements have been prepared on a going concern basis;

5. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

6. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively;

AWARDS AND ACCOLADES

Your Bank has won various awards and accolades in the Financial Year 2021-22. Technology and digital have taken

centre stage and your Bank continues to focus on innovation with customer convenience. The awards are a testimony to the Bank''s commitment on the digital front. The various initiatives to establish digital at the fore, have brought in acclaim for the Bank.

Your Bank has been recognised as the ''Best mid-sized Bank'' in the 26th ''Business Today - KPMG Annual Survey.

Your Bank emerged winner of Plaque at the prestigious ICAI Awards for Excellence in Financial Reporting for the year ended March 31,2021.

Your Bank won Ministry of Electronics and Information Technology (MeitY) Award for achieving 2nd Position for the Digital Payment Performance for the FY 2020-21 among the Indian Banks.

Your Bank was the winner of the Utkrisht Puraskar at the Digi Dhan Awards for overall performance in Digital Payments.

On the HR front, your Bank has been recognized as a ''Great Place to Work'' in a study conducted by the Great Place to WorkÂ® Institute

for second time in a row. Great Place to WorkÂ® Institute works with companies around the world to build a High-Trust, High-Performance Culture that drives better business performance.

Your Bank was conferred with multiple awards in Infosys Finacle Client Innovation Awards in the mid-size bank segment under 5 categories namely Corporate Banking Digitization (Automatic Opening of Accounts through BPM), Customer Journey Reimagination (Fed-e-Point self-service customer portal), Modern Technologies-led Innovation (AI based Digital Lending Platform), Process Innovation (Be Your Own Master - Top Up Demand Loan) and Product Innovation (Cross Border Remittance Automation and InstaDemat).The Bank has also emerged as a runner up in the category Ecosystem-led Innovation (NeoBanking).

Your Bank was conferred with 3 awards by IBA. The Bank is the winner of ''Best Fintech Adoption, runner up for ''Best Technology Bank of the Year'' and received a special mention award for ''Best Cloud Adoption.

Your Bank won an award for Best use of Cloud in Banking at the 3rd Annual BFSI Technology Excellence Awards 2022.

Your Bank won the prestigious Finnoviti Award instituted by Banking Frontiers for "Fed-E-Studio" the self-service Banking kiosk for customers.

Your Bank won ''Private Sector Bank of the Year'' Award (Gold Category ) at the 20th edition of Outlook Money Awards.

ACKNOWLEDGEMENT

And to you, our shareholders, we are deeply grateful for the confidence and faith that you have always reposed in us.

For and on behalf of the Board of Directors

Sd/-

Mr. C Balagopal

Place: Aluva Chairman of the Board

Date:30.06.2022 (DIN-00430938)

Mar 31, 2019

DIRECTOR REPORTS

Your Board of Directors has immense pleasure in presenting this 88th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended 31 March, 2019.

Financial Results

(Rs in Crore)

Financial Parameters for the year ended	March 31, 2019	March 31, 2018
Net Interest Income	4,176.35	3,582.81
Fee and Other Income	1,351.02	1,159.12
Net Revenue	5,527.37	4,741.93
Operating Expense	2,764.27	2,450.90
Operating Profit	2,763.10	2,291.03
Net Profit	1,243.89	878.85
Profit brought forward	1,742.49	1,451.27
Total Profit Available for appropriation	2,986.38	2,330.12
Appropriations:
Transfer to Revenue Reserves	143.93	97.07
Transfer to Statutory Reserves	310.97	219.71
Transfer to Capital Reserves	34.48	26.83
Transfer to/ (from) Investment Reserve Account	0.00	-23.57
Transfer to Special Reserve	84.00	57.00
Dividend pertaining to previous year paid during the year	198.01	174.97
Tax on dividend	40.70	35.62
Balance Carried over to Balance Sheet	2,174.29	1,742.49
Financial Position
Deposits	1,34,954.34	1,11,992.49
Advances	1,10,222.95	91,957.47
Total Business (Deposits + Advances)	2,45,177.29	2,03,949.96
Other Borrowings	7,781.32	11,533.50
Investments	31,824.47	30,781.08
Total Assets ( Balance Sheet Size)	1,59,339.99	1,38,313.95
Equity Capital	397.01	394.43
Ratios
Return on Total Assets (%)	0.88	0.75
Return on Equity (%)	9.81	8.39
Earnings Per Share (?)	6.28	4.62
Book value per share (Rs)	66.87	61.28
Operating cost to Income (%)	50.01	51.69
Capital Adequacy Ratio (%) Basel (III)	14.14	14.70

Note:

Previous year figures have been regrouped/ reclassified, where necessary to conform to current year's classification

Highlights of Performance

During the year 2018-19, your Bank has delivered robust growth in all the business segments. Total business of your Bank improved by 20.21% to reach at Rs 245177.29 Cr as on 31 March 2019. 20.50% growth in deposits and 19.86% growth in advances (net) helped your bank to clock this number. Total deposits reached Rs 134954.34 Cr and advances (net) reached Rs 110222.95 Cr and on averages, deposit portfolio of your bank grew by 19.09% to reach Rs 116752.51 Cr and advance portfolio grew by 24.33% to reach Rs 98337.60 Cr.

On the NR side, NRE deposits had a growth rate of 17.66% to reach Rs 50109.16Cr and NRE Savings clocked a growth of 10.40% to reach Rs 13675.63 Cr. The total NR business of your Bank stood at Rs 531 59.37 Cr with a growth of 17.94%.

Growth in Business

On CASA front, Savings deposit touched Rs 35489 Cr with 13% growth and Current deposits stood at Rs 7899 Cr with a growth of 25%. Your Bank registered a healthy CASA growth of 16% to reach Rs 43388 Cr. CASA ratio of your Bank stood at 32.1 5%.

The investment portfolio of your Bank has reached Rs 31824.47 Cr as on 31 March 2019. The average investment as on 31 March 2019 is Rs 30338.06 Cr.

Profitability

The Operating Profit of your Bank increased by 20.61% to Rs 2763.1 Cr and Net Profit of your bank is up by 41.54% to Rs 1243.89 Cr. Healthy traction in core income streams has helped your Bank to have a good momentum in core operating performance. Net Interest Income improved by 16.57% to Rs 4176.35 Cr while the Non-Interest Income rose to Rs 1351.02 Cr, showing a rise of 16.56%. Total income of your Bank during the fiscal year 2019 recorded 17.03% growth to reach Rs 12770.05 Cr. Income from advances increased by 20.57% to reach Rs 9089.62 Cr. The yield on advances stood at 9.24% and the yield on Investments at 7.47 %. The Net Interest Margin for the fiscal year is at 3.14% as against 3.21%, in the previous year.

Return on Average Equity and Return on Average Total Assets stood at 9.81 % and 0.88% respectively. Earnings per Share (face value of Rs 2 each) of the Bank, as on 31 March 2019 were Rs 6.28. Book value per share increased to Rs 66.87 during FY 19.

Expenditure

Higher revenue growth and better cost management resulted in Cost / Income Ratio improving to 50.01 % in 2018-19 as against 51.69% last year. The total expenses of your Bank increased by 16.08%, to reach Rs 10006.95 Cr and by an increase of 17.38%, interest expenses increased to Rs 7242.68 Cr in FY 19. Operating Expenses of the Bank during the fiscal year grew to Rs 2764.27 Cr.

The cost of deposits of the Bank has come down during the year. The cost of deposits of the Bank is 5.78% as on 31 March 2019. The Interest expenses as percentage to total income stood at 56.72%.

Spread

During the fiscal year the Bank's spread on advances (gross) decreased to 3.46% and spread on investments (gross) increased to 1.69%. The Spread (net of provisions) on advance increased to 2.82% from 2.74% of last year.

Asset Quality

The Gross NPA of your Bank as on 31 March 2019 stood at Rs 3260.68 Cr. Gross NPA as a percentage to Gross Advances is 2.92% which is lower than 3.00% as at the end of FY18. The Net NPA stood at Rs 1626.20 Cr and this as a percentage to Net Advances is 1.48%. The Provision Coverage Ratio (including technical write-offs) stood at 67.16%.

Net Worth & Capital Adequacy

The Net Worth of your Bank grew by 9.83% to Rs 13273.04 Cr as against Rs 12084.91 Cr in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 14.14% which is considerably higher than the 9% stipulated by RBI. Of this, Tier 1 CRAR is at 13.38%.

Business Overview

Your Bank continued its consistent performance during FY 2018-19 with the total business of the Bank increasing by 20.21% to Rs 245177.29 Cr.

Employee Productivity

Business per employee of your Bank during the period stood at Rs 20.1 5 Cr, an improvement of 17.08% for the year and the profit per employee of the Bank stood at Rs 10.22 Lakh during the fiscal.

Expansion of Network

The Bank has 1251 branches and 1669 ATMs and 269 cash recyclers as on 31 March 2019. The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).

Share Value

Earnings Per Share (face value Rs 2/- each) of your Bank has improved to 6.28 from 4.62 during the year under review. Return on Equity during the year reached 9.81% in the fiscal year ended 31 March 2019.

Dividend

Continuing the Bank's policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 70% i.e. Rs 1.40 per Equity Share Â on face value of Rs 2/- each for the year 2018-19 (previous year 50% i.e Rs 1.00 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders' value has always been a guiding philosophy of the Bank.

Appropriations

(Rs in Thousands)

Â	FY 2018-19	FY 2017-18
Transfer to Revenue Reserve	1,439,300	970,732
Transfer to Statutory Reserve	3,109,700	2,197,114
Transfer to Capital Reserve	344,800	268,319
Transfer to/(from) Investment Reserve Account	Â	(235,721)
Transfer to Special Reserve	840,000	570,000
Dividend pertaining to previous year paid during the year	1,980,092	1,749,634
Tax on dividend	407,014	356,184
Balance carried over to Balance Sheet	21,742,841	17,424,864
Total	29,863,747	23,301,126

Material changes and commitment affecting financial position of the Bank

There are no material changes affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank to which the financial statements relate and the date of the report.

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the company and its future operations

There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

Dividend Distribution Policy

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend Distribution Policy and the same is annexed herewith as Annexure VI. The Policy is hosted on the website of the Bank and can be viewed in the following link: https://www.federal-bank. co.in/documents/10180/45777/Dividend +Distribution + Policy/ ea1 bb41 c-64fc-4fb5-bce5-bf96dea3432b Deposits

Being a Banking company, the disclosures required as per Rule 8(5) (v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to the Bank.

Increase of Capital

In FY 2018-19, Paid up Capital of the Bank was increased by an amount of Rs 25811 528 by allotment of 12905764 ESOS shares of Rs 2/- each. The Paid up Capital of the Bank as on 31 March 2019 is Rs 3,970,096,1 56 consisting of 1985050203 equity shares of Rs 2/- each

Investor Education and Protection Fund

As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. On 05th November 2018 the Bank had transferred Rs 8,967,228.00/- to the above Fund, being the unclaimed dividend for the year 2011.

Employee Stock Option Scheme (ESOS)

The Bank has instituted Employee Stock Option Schemes, duly approved by the shareholders of the Bank to enable its employees including Whole Time Directors to participate in the future growth and financial success of the Bank. The Employee Stock Option Schemes are in accordance with the SEBI guidelines, as amended from time to time. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, performance, grades, period of service, Bank's performance and such other parameters as may be decided by the Nomination, Remuneration, Ethics and Compensation Committee of the Board from time to time in its sole discretion.

The Bank's shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010) on December 24, 2010 and the Federal Bank Limited Employee Stock Option Scheme 2017 (ESOS 2017) on July 14, 2017.

Under ESOS 2010, the Nomination, Remuneration, Ethics and Compensation Committee granted 34720200 options during the year 2011-12, 24484750 options during the year 2012-13, 26094250 options during the year 2013-14, 11156450 options during 2014-15, 10,25,000 options during the year 2015-16, 9,65,000 options during the year 2016-17 and 1,00,000 options during the year 2017-18. The options granted which are non transferable, with vesting period of 1, 2, 3 & 4 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2019, 56340076 options had been exercised and 24147513 options were in force.

Under ESOS 2017, the Nomination, Remuneration, Ethics and Compensation Committee granted 22318348 options during the year 2017-18 and 37231307 options during the year 2018-19, the options granted which are non transferable, with vesting period of 1,1.25, 2, 2.50, 3 & 3.75 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2019, 2425 options had been exercised and 50336281 options were in force.

Other statutory disclosures as required by the SEBI guidelines/ Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 on ESOP are given in website of the Bank in the link: https://www.federalbank.co.in/web/guest/ shareholder-information

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element of our fundamentals right from the day the Bank was founded. Our founder's values & ethos based on trust got embedded in the Bank's policies& principles. CSR in Federal Bank began with the first act of cultivating banking habits in the agrarian society to effectively utilize idle money for productive purposes.

Overview of some of the major CSR programs undertaken by the Bank during FY 2018-19 are detailed in the Management Discussion and Analysis part of the Annual Report.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 2018-19 as per Section 135 of the Companies Act, 2013, comes to Rs 22.47Cr. Amount spent by the Bank this year towards CSR was Rs 17.04 Cr. Through various projects which are aIready sanctioned, your Bank will be thoughtfully spending the CSR funds earmarked for the purpose. The ratio adopted was 80:20, wherein 80% of the CSR funds will be utilized for long term sustainable projects and 20% of the funds will be utilized to meet location specific requests. The Bank had also embarked on some major projects last year in the field of education, Youth engagement, skill development, support to differently abled etc. By choosing long term sustainable projects, Bank has taken an approach which brings steady and long lasting impact on the society.

During August 2018, our state witnessed one of the worst natural calamities of the Century which rendered many homeless and had vast impact on economic condition of the state. Being a responsible organization, we had donated Rs 4.00 Cr. to Chief Ministers Distress Relief Fund and extended support to the affected through our Zonal offices at various places in the State.

The details of the other CSR activities of FY 2018-19 are mentioned in Annexure II to this report.

Risk Management

The Board of Directors oversees the enterprise wide risk management of the Bank. The Risk Management Committee of the Board sets the standards and governs the risk management functions, thereby bringing in a top to down focus on risk management. Integrated Risk Management Department co-ordinates and administers the risk management functions in the Bank. The Department has three divisions for managing the main risk streams, Credit risk, Market risk and Operational risk. Dedicated teams within the Divisions are responsible for assessment, monitoring and reporting of various material risks. Default risk and asset quality of loan portfolio are monitored and managed by the Credit Risk Division. The Bank has established an independent Mid Office as part of Market Risk Division for real time monitoring of Treasury activities. Business Continuity

Management and Information and Cyber Security measures form part of operational risk management. Risk Management policies are approved by the Board of Directors and reviewed from time to time with updated regulatory and internal guidelines. Executive level risk management committees, namely, Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and Information Security Committee regularly assess the respective risks and direct corrective actions wherever required. The risk management functions are co-ordinated by a senior Executive designated as Chief Risk Officer who reports directly to the Managing Director & CEO. The Executive level committees report to the Risk management Committee of the Board the various risk events and the direction and level of the various risks. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored in the Internal Capital Adequacy Assessment Process (ICAAP). In our view, presently there are no material risks which pose as a threat to the net worth and continuous functioning of the Bank.

Internal control systems and their adequacy

The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of management and discussions in various committees towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section Â 138 of the Companies Act 2013, has designated the Head of Inspection and Audit Department as Internal Auditor. Audit being an independent function, the Internal Auditor is reporting to the Audit Committee of the Board of Directors. The Bank has various types of audit which inter-alia include Risk Based Internal Audit, Information System Audit, Concurrent Audit, Gold Loan Audit and Management Audit. Branches are risk rated and the frequency of Risk Based Internal Audit is decided based on Risk - Audit Matrix defined in Audit and Inspection Policy. Significant audit findings and observations are presented to Inspection Review Committee of Executives and a report on the meetings of Inspection Review Committee of Executives along with significant audit findings, directions / suggestions of the committee and action taken in such cases are placed to the Audit Committee of the Board for review periodically. Other findings are placed before a department level committee called the 'Inspection Department Review Committee' for review and its observations are placed before Inspection Review Committee of Executives.

As per the requirement of Companies Act 2013, Bank has formulated Internal Financial Controls framework. Risk and Controls associated with each process in the Bank are documented under the Internal Financial Controls Framework. Inspection and Audit Department plays a significant role in testing the control effectiveness for each process under the framework.

The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the Bank's internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the Bank and its reputation.

Vigil Mechanism/Whistle Blower Policy

Based on RBI directions, Bank has put in place a Fraud Risk Management Policy that covers the various controlling, monitoring and surveillance mechanism of the Bank to prevent frauds and to manage the risk of loss in the event of a fraud. Functions of Vigilance Department covers both prevention as well as investigation of frauds. Vigilance Department conducts Preventive Vigilance Workshops and Preventive Vigilance Audits to ensure the effectiveness of fraud prevention mechanism of the Bank. Vigilance Department also issue alerts/ communications on a regular basis that disseminates various modus operand! of frauds in the banking industry, which enable the Branches/ Offices to prevent similar kind of fraudulent attempts. Similar thrust is given by the Bank, in educating customers as well. The customers are made well updated on the various fraudulent activities happening in the Banking Industry, through various means including SMS, E-Mails, posters at Branches, ribbon messages on Bank website, internet banking webpage, etc for prevention of all types of frauds, including Cyber Frauds.

As a part of Detective Vigilance all the cases of frauds reported in the Bank are investigated in detail. Lacunae if any observed during Â the course of investigation are plugged and cases where systemic corrections are required, are placed before the Committees concerned for corrective measures/ necessary directions.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS) with a view to enhancing public confidence in the Bank and also in compliance of RBI directions in this regard. The policy aims at establishing an efficient vigil mechanism in the Bank to quickly spot aberrations and deal with it at the earliest. It is disseminated among the employees assuring confidentiality and protection to the whistle blower against any personal vindictive actions such as humiliation, harassment or any other form of unfair treatment. Directors and Employees of the Bank, employee representative bodies, customers, stakeholders, non-governmental organizations (NGO) and members of the public can lodge complaints / disclosures under this scheme. A dedicated e-mail ID is provided for sending complains/disclosures under PDS. Vigilance Department conducts investigation of all complaints /information received through the PDS and submits report to MD & CEO. The details of the complaints and findings are also placed before the Audit Committee of the Board on a quarterly basis. The scheme is popularised through various measures such as preventive vigilance classes, internal circulars, alerts etc. No personnel have been denied access for giving any information as envisaged in the Protected Disclosure scheme. The PDS Document is made available in Bank's website and Intranet.

Website link to Bank's Whistle Blower Policy/Vigil Mechanism is https://www.federal bank. co. in/documents/10180/45777/ Whistle+Blower+policy/558aea51-1335-4546-9c9a-28c5030377a1

Subsidiaries of the Bank

As on 31 March 2019, the Bank has one unlisted subsidiary named Fedbank Financial Services Limited and one unlisted fully-owned subsidiary Federal Operations and Services Limited.

Fedbank Financial Services Limited

Fedbank Financial Services Limited is a diversified Non-Deposit-Taking & Systemically Important (ND-SI) NBFC offering multiple loan products such as Loan against Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. It also distributes loan products of The Federal Bank Limited.The Fedbank Financial Services Limited issued 4,00,42,500 number of equity shares of face value of Rs 10/- each to True North Fund VI LLP on private placement basis on November 13, 2018, pursuant which the Bank's shareholding in Fedbank Financial Services Limited decreased from 100% to 82.59%. The total loan portfolio of Fedbank Financial Services Limited as on 31 March 2019 is Rs 1992 Crores as against Rs 1413 Crores as on 31 March 2018. The Profit after tax of the company for the year ended 31 March 2019 increased to Rs 35.08 Crores from Rs 30.80 Crores for the year ended 31 March 2018.

Federal Operations and Services Limited

The Bank floated a wholly owned subsidiary company named Federal Operations and Services Ltd (FedServ) on October 26, 2018 with the main objects of providing banking operational services, technology oriented services and support functions. The total revenue of FedServ for the period ended on 31 March 2019 is Rs 1.28 Crores. The entire revenue pertains to services provided by the company to the Bank only. Company started its operations on 01 December 2018 and this was the first year of operation of the company. The Company had net loss for the period ended 31 March 2019 of Rs 28.59 Lakhs after writing of preliminary expenditure in full.

The Net Worth of FedServ at the beginning of the year was Rs 5 Cr. and closing net worth of FedServ as on 31 March 2019 was Rs 4.71 Cr. During the year, Bank has invested in equity shares of company amounting to Rs 5 Cr.

Associate Companies

As on 31 March 2019, the Bank has two Associate Companies named IDBI Federal Life Insurance Company Limited and Equirus Capital Private Limited.

Joint Venture in Life Insurance Business

The Bank's Joint Venture Life Insurance Company, in association with IDBI Bank Limited and Ageas Insurance International N.V. (Formerly known asFortis), namely IDBI Federal Life Insurance Company Limited (erstwhile IDBI Fortis Life Insurance Company Limited), commenced operations in March 2008. Currently the Bank has a total stake of ? 208 Cr. in the equity of the company holding 26% of the equity capital. The total premium collected by IDBI Federal Life Insurance Company Limited during the period ended 31 March 2019 is Rs 1,933 Cr. The Company has declared a dividend of 10% for the FY 2018-19.

Investment Banking Associate

During the year the Bank had invested in 8.74% equity shares of Equirus Capital Private Limited on July 12, 2018. Pursuant to the right of proportionate representation on Board as well as power to participate in the financial, operational matters like approval of business plan, policies, budgets, managerial remuneration, change in KMP etc., the same has been treated as an associate concern as per AS 23 Accounting for Investments in Associates in Consolidated Financial Statements. The Bank's Associate Equirus Capital Private Limited is a private company domiciled in India and is engaged in the business of Investment banking. Equirus Capital Private Limited has 3 subsidiaries named Equirus Securities Private Limited, Equirus Digital Private Limited and Equirus Wealth Private Limited. The total turnover of Equirus Capital Private Limited on a consolidated basis was Rs 51.46 Crore for FY 2019 as against Rs 34.84 Crore for FY 2018.

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including its subsidiaries Fedbank Financial Services Limited and Federal Operations and Services limited and associates IDBI Federal life Insurance company limited and Equirus capital private limited, which isforming part of this Annual report. The financial position and performance of its subsidiaries / Associates is given in the statement containing salient features of the financial statements of the subsidiaries/Associate Companies / Joint Venture, (Given as Annexure V) which forms part of the consolidated financial statements.

The documents / details available on the Bank's website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (AS') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its subsidiaries and associates for the year ended March 31, 2019 forms part of the Annual Report.

Corporate Governance

Corporate governance is essentially a set of standards, systems, and procedures aimed at effective, honest, transparent, and responsible management of a company within the applicable statutory and regulatory structures. This code represents a set of desirable, corporate governance practices to be adopted by the Bank. The Code takes into account the relevant statutory and SEBI / stock exchange listing requirements and Reserve Bank of India (RBI) directives and other guidelines under the Companies Act 2013. The efficacy of the Code lies in how well it is put into practice. In adopting the Code, the stress is in its substance and spirit rather than on its form.

Good corporate governance practices help support and strengthen corporate actions aimed at achieving the corporate objective. The Bank's principle corporate objective, like that of any corporate business entity, is to perpetuate its business while protecting and enhancing, over the long term, the value of the investments of its shareholders in the Bank.

A copy of the Code of Conduct for the Board of Directors and Management is available on Bank's website.

A separate section on corporate governance standards followed by the Bank and relevant disclosures, as per regulatory requirements forms part of this Annual Report.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Agreement") and the Code of Corporate Governance adopted by the Bank. The Board comprises of eleven Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, strategic planning, risk management jnformation technology and Payment and Settlement Systems.

Mr. K Balakrishnan who was appointed as additional Independent Director on 25 September 2018 and Mr Siddhartha Sengupta and Mr Manoj Fadnis who are appointed as additional Independent Directors as on date of this report will be regularized in this AGM. The Bank also proposes the re-appointment of Mr C Balagopal as an Independent Director of the Bank in this AGM after the completion of his first term of appointment.

The detailed profile of all the directors recommended for appointment/ re-appointment in this AGM are mentioned in the Notice of Annual General Meeting for the benefit of shareholders as required under law.

During the year Mr. Dilip Sadarangani was appointed by the Board as the Chairman of the Bank for which approval from RBI was obtained vide letter DBR. Appt. No.6191/08.38.001/2018-19 dated January 25, 2019.

During the year Mr. Harish Engineer ceased to be the Director on the Board of the Bankw.e.f 01 October 2018, on completion of 70 years of age. Mr. Deepak Maheshwari was appointed as an Additional Independent Director on the Board of the Bank, w.e.f 22 June 2018 and he resigned from the Board w.e.f 01 January 2019 to take up a role as senior executive position in a leading financial organization. Mr. K Balakrishnan was appointed as an Additional Independent Director on the Board of the Bank w.e.f 25 September 2018. Mr. Ganesh Sankaran, Executive Director of the Bank resigned from the Board of the Bank w.e.f 15 February 2019. The Board places on record their appreciation for the commendable contribution made by the Directors, during their tenure in the Bank.

Apart from the above mentioned Directors Mr Siddhartha Sengupta and Mr Manoj Fadnis were appointed as Additional Independent Directors as on date of this report.

Excluding Mr. Shyam Srinivasan, MD & CEO and Mr. Ashutosh Khajuria, Executive Director & Chief Financial Officer, all other members of the Board are Non-Executive and Independent Directors. Necessary declarations were obtained from the Independent Directors as required under the RBI Regulations, SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015 and section 149 (6) of Companies Act, 2013. The remuneration and other benefits paid to MD& CEO of the Bank and Executive Directors during the year are disclosed in the annexure to this Report and in Corporate Governance Report. The Non Executive Independent Directors, except Chairman of the Board, are paid only sitting fees for attending every meeting of the Board / Committees of the Board within the limits as prescribed under the Companies Act, 2013. During the year Mr. Dilip Sadarangani, the Chairman of the Board, as on 31 st March 2019 was paid an amount of Rs 1.50 lakhs per month as remuneration w.e.f 25th January 2019, as approved by the Board and RBI in addition to sitting fee for attending Board / Committee meetings. The Bank has framed a Comprehensive Compensation Policy for Non-Executive Directors of the Bank (Other than Part Time Chairman) which is detailed in the heading Policy on Remuneration to Non-Executive Directors/ Independent Directors.

Mr. Ashutosh Khajuria, Executive Director of the Bank is liable to retire at this AGM in compliance with Section 152 of Companies Act, 2013,as required under the regulations regarding retirement of directors by rotation. The detailed profile of Mr. Ashutosh Khajuria, recommended for reappointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of four Non Executive, Independent Directors and is chaired by Ms. Grace Koshie, Non-Executive Independent Director. The Committee was reconstituted twice in the financial year 2018-19. The other members of the Committee are Mr. Nilesh Vikamsey, Ms. Shubhalakshmi Panse and Mr. A P Hota who are Non-Executive Independent Directors as on the date of this report.

The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee incorporated in the Bank's Code of Corporate Governance, are in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Companies Act, 2013 and RBI guidelines, which are detailed in Corporate Governance section of this report.

Independent Directors

In terms of the definition of Independence of Director as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 201 5 and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures/ declarations received from the Directors, the following Directors are Independent Directors of the Bank as on the date of this report:

1. Mr. Dilip Sadarangani	(DIN -0661 0897)
2. Mr. Nilesh Vikamsey	(DIN -00031213)
3. Ms. Grace Elizabeth Koshie	(DIN -0676521 6)
4. Ms. ShubhalakshmiPanse	(DIN -02599310)
5. Mr. C Balagopal	(DIN - 00430938)

*Appointed as Additional Independent Directors on the Board of the Bank on 13.06.2019

A meeting of Independent Directors for FY 2018-19 was conducted on 26 February 2019 to evaluate the performance of Board as a whole, evaluation of Non-independent Directors and Chairman of the Board and assess the flow of information. The meeting was attended by all the Independent Directors of the Bank.

Women Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 17(1)(a) of the SEBI(Listing Obligations and Disclosure Requirements), Regulations 2015 (LODR Regulations) a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.

Bank's policy on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178;

a) Qualifications, Experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the Bank's policies, operations, and needs. Not less than fifty-one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering, and technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry. The Bank shall ensure to include in its Board need based representation of skills such as marketing, technology & systems, risk management, strategic planning, treasury operations, credit recovery, Payment and Settlement Systems etc.

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The directors shall preferably be in the range of 35-70 years of age.

b) Disqualification / Conflicts of interest

1. The Bank's Directors shall be subject to the disqualifications/ prohibitions contained in the Companies Act 2013 and the Banking Regulation Act 1949 with respect to directorship of companies in general or banking companies in particular.

2. A Director shall not be a director of any other company, or partner or proprietor of a firm, where such directorship, partnership, or proprietorship involves or is likely to involve actual or potential conflicts of interest as a Director of the Bank. A Director shall promptly inform the Board/committee of any actual or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any committee of which he is a member, and shall refrain from participating in a discussion on the matter.

c) Suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include

1. integrity in personal and professional dealings.

2. wisdom and ability to take appropriate decisions.

3. ability to read and understand financial statements

4. ability to deal with others with a sense of responsibility, firmness, and cooperation.

5 refrain from any action that would lead to loss of his independence.

d) Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI-LODR Regulations, 201 5.

The independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence.

The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank and a web link thereto is :

https://www.federalbank.co.in/our-commitments

Policy on Board Diversity

Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank as contained in the Banking Regulation Act, 1949 and satisfying the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also take into account factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board, usher in independence in the performance of the Board; eradicate the gender bias in the Board; achieves sustainable and balanced performance and development; support the attainment of strategic objectives & also ensures compliance of applicable laws and good corporate practices.

6. Mr. A P Hota	(DIN -02593219)
7. Mr. K Balakrishnan	(DIN -00034031)
8. Mr. Siddhartha Sengupta*	(DIN - 08467648)
9. Mr. Manoj Fadnis*	(DIN -01087055)

The Nomination, Remuneration, Ethics and Compensation Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments, the requirement as per the Companies Act, 2013 for appointment of atleast one woman director on the Board of the Bank will also be considered.

Policy on Remuneration

Policy on remuneration to Non-Executive Directors/ Independent Directors

The Policy of the Bank for the payment of remuneration to Non-Executive Directors/ Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non Executive Directors / Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http://www.federalbank.co.in/ shareholder-information

As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy during FY 2018-19, Non-Executive Independent Directors of the Bank are paid only sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board/Committee meetings other than Non-Executive Part Time Chairman, who is paid remuneration in addition to sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board Committee meetings, with the approval of RBI.

Policy on remuneration to MD & CEO, Executive Director, Key Managerial Personnel and other employees

The Compensation / Remuneration Policy of the Bank as approved by the Board contains the policy for payment of remuneration to MD & CEO, Executive Directors, Key Managerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

Compensation of Managing Director & CEO, Whole Time Directors and Senior Executives

(Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span. (Approval from RBI to be taken as per section 3BB of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and Senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on Performance Scorecard which considers various financial indicators like business growth, revenue earned, cost deployed, profit earned, ROA/ROE, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through score cards for Managing Director & CEO /WTDs. The score card provides a mix of financial and non-financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.

Compensation Package to Executives in Level IV and above

Executives in Level 4 and above are covered under Grander Compensation Package, which was introduced in the Bank from May 2017.

Compensation paid to employees on IBA package

The compensation paid to Award Staff and Officers coming under Scale I to III is fixed based on the periodic industry level settlements with Indian Banks' Association. The scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package has been revised consequent to the 10th Bipartite Settlement.

Key Managerial Personnel who were appointed or have resigned during the year

In compliance with Section 203 of the Companies Act, 2013, no Key Managerial Personnel have been appointed or have resigned during FY 2019.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulated under the listing agreement with the stock exchanges in India is presented in a separate section forming part of this Annual Report.

Loans, Guarantees or Investments in Securities

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except subsection (1), do not apply to a loan made, guarantee given or security provided or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Internal Complaints Committees (Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013)

For particulars relating to Internal Complaints Committee (Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013) kindly refer the section Corporate Governance report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) and other applicable regulations of the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance and of the directors individually, as well as the evaluation of the working of its various Committees for the year under consideration.

Thereafter a separate exercise was carried out to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the Non Independent Directors were carried out by the Independent Directors. The Directors expressed their overall satisfaction with the evaluation process.

I) Performance Evaluation of Non-independent Directors (MD & CEO and Executive Director)

Criteria for Evaluation include:

Quantitative Targets:

i) Achievements of performance against targets set

Qualitative Targets :

ii) Appraises the Board regarding the organization's financial position and operational budget so as to enable the Board to make informed financial decisions iii) Provides Leadership in developing strategies and organizational plans with the management and the Board of Directors iv) Ensures that the Board is kept informed about all issues concerning the Bank v) Media interaction and ability to project positive image of the Company vi) Effectively pursue the performance goals in relation to mission and objective of the organization vii) Motivating employees, providing assistance & directions viii) Supervising& Safeguard of confidential information ix) Establishment of internal control processes, monitoring policies and encouraging suggestions x) Cultivates effective Relationship with Industry Forums, Community and business leaders, Regulatory Bodies and Public Officials, xi) Ensures compliance with all legal and regulatory requirements.

Evaluation Outcome

i) The MD & CEO and EDs adequately endeavor to implement Board decisions and are very strong in media interactions and have put in efforts in building and reinforcing the Brand and Image of the Bank ii) The Executives constantly endeavor to enhance internal control processes, monitor execution of policies and are very receptive to suggestions iii) Attendance of MD & CEO and EDs at the Board and Committee meetings was good iv) They present financial reports to the Board on a regular basis and submit an annual budget for Board review, revision and approval v) They regularly appraise the Board on the organization's financial position and operational budgets that aids the Board to make informed financial decisions vi) The MD has adequate qualities of leadership in developing strategy & execution for achieving them vii)The MD / ED has demonstrated a sound knowledge of Board governance procedures and has consistently followed them viii) The MD / ED has accurately communicated his concept, vision, mission, strategies, goals, and directions for the Bank to stakeholders ix) The MD/ED has accurately identified and analyzed problems and issues confronting the Bank.

II) Performance Evaluation of Independent Directors including Chairman

Criteria for evaluation include:

i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depth prior to meeting and active participation at the meeting iii) Contributes to discussions on strategy as opposed to focus only on agenda iv) Participate constructively and actively in the Committee of the Board in which they are chairpersons or members v) Exercises his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board vi) The Director remains abreast of developments affecting the company and external environment in which it operates independent of his being appraised at meetings vii) Knowledgeand Competency: a) How the person fares across different competencies as identified for effective functioning of the entity and the Board b) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates viii) Whether the person demonstrates highest level of integrity, including conflict of interest disclosures, maintenance of confidentiality, etc

Evaluation Outcome

i)The Board directors considered the Chairman's evaluation and noted positive comments about his leadership qualities ii) The Chairman has promoted constructive debate and effective decision making at the board iii) The Chairman has managed the meetings effectively and has promoted a sense of participation in all the Board meetings.

The evaluation done of Independent Directors, broughtout the fact that good attendance of Independent Directors was there in the Board and committee meetings. They are knowledgeable, ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as Independent directors. The Independent Directors also demonstrate highest level of integrity, including conflict of interest, disclosures and maintenance of confidentiality. It was also noted that the Independent Directors exercise his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board and also the Directors remains abreast of developments affecting the company and external environment in which it operates.

III) Performance Evaluation of Board and Committees

A. Criteria for Evaluation of Board include:

i) If Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank's success, representing sectors laid down by the regulators, given its current and future position ii) New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization's activities, the Board encourages a culture that promotes candid communication iii) The Board oversees management's procedures for enforcing the organization's code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board iv) The Board oversees risk management through in puts from the Risk Management Committee v) The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures vi) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank vii) The Board oversees the compliance processes viii) The Board views the organization's performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc. ix) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company, x) The Board has defined an effective Code of Conduct for the Board and Senior Management, xi) Whether the Board monitors and manages potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions.

B. Criteria for Evaluation of Committees include:

i) The Committee's Terms of Reference and composition is reviewed annually and is found to be constituting of Directors representing sectors laid down by the regulator and continue to be appropriate ii) Committee meetings are organized properly in number, timing and location iii) The Committee allocates the right amount of time for its work etc iv) The Committee is effective in carrying out its mandate v) Whether adequate independence of the Committee is ensured from the Board vi) Whether the Committee has fulfilled its functions as assigned by the Board and laws as may be applicable.

Evaluation Outcome of Board/Committee

The Board has performed on all the parameters and the Board of the Bank is well balanced in terms of diversity of experience and skill sets to meet the requirements of the Bank and also confirm to the Regulatory requirements.

The Directors had an elaborate discussion on the subject including the criteria for evaluation of Board. The assessment covered various components relating to aspects like the Structure and Composition of Board, its culture, processes and procedures, effectiveness, Financial Reporting and Internal Controls, Conflict of Interest and Compliance and Regulations. Almost all members gave the highest rating as " Good".

In almost all the committees the directors have rated on various parameters as good.

IV) Assessment of flow of information Criteria for Evaluation include:

Evaluation Outcome

The assessment of the Members about the flow of information to the Board and its committees revealed that almost all members rated the flow under various dimensions as "Good".

Evaluation of Senior Management Personnel in the Bank

The compensation paid out to KMP is divided into two components. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span.

The variable compensation for Managing Director & CEO and Senior Executives (Non-Grander Compensation Package) is to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay will be paid purely based on performance and is measured through Score Cards for Managing Director & CEO / WTDs. Key Performance Indicators (KPAs) to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs.

An ED level Committee comprising of ED and Heads of Risk Division and HR Department ensures alignment of risk and financial control in Compensation in respect of employees.

â¢ The Committee shall review the Compensation paid vis-a-vis risk taking by the Executives to ensure that prudent risk taking is recognized in the compensation framework

â¢ The Committee shall analyse the risk reward correlation and ensures that excess risk taking is not encouraged

â¢ The Committee shall review the performance based variable compensation paid every year and ensures that an optimum risk reward balance is maintained.

Meetings

During the year nine Board meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per the Listing Regulations.

Related Party Transactions

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Bank and were on arm's length basis. There were no materially significant related party transactions entered by the Bank with Related parties which may have a potential conflict with the interest of the Bank. All Related Party Transactions were placed before the Audit Committee of the Board for approval. Prior omnibus approval for transactions which are of repetitive nature is obtained from the Audit Committee and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.

The policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Bank and the link for the same is http://www.federalbank.co.in/ our-commitments

Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm's length basis, disclosures as per Form AOC-2 is not applicable to the Bank. There Â were also no material contracts or arrangement or transactions at arm's length basis during the period.

Business Responsibility Report

Business Responsibility Report as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been hosted on the website of the Bank (https://www.federalbank.co.in/shareholder-information). Any Member interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.

Technology and digital updates and measures taken in IT Governance, Information Security, IT Audit, IT Operations, IT Services outsourcing

Technology and Digital updates:

During the financial year 2018-19 your Bank focused extensively on Digital Banking. The Management Discussion and Analysis provides more details about the technical and digital updates of the bank during FY 2018-19

Information Technology (IT) Governance:

The governance of IT is effectively supervised by the Board of Directors through the IT & Operations Sub-Committee of the Board. The IT & Operations Committee, that meets on a quarterly basis, is chaired by an independent Non-Executive Director and has 2 Non-Executive Directors as members, along with the MD & CEO. All members of the Committee have extensive experience in IT & Operations and are able to provide effective guidance and direction to the management team.

Executive level committee which oversee the IT governance function include the Operations Risk Management Committee (ORMC), the Information Security Committee (ISC) and the Project Steering Committee (PSC). Implementation of large projects is overseen by dedicated Project Steering Committees.

Operations Committee of the Board.

Bank has deployed best in the class infrastructure to provide availability of service to users and customers without fail. The installed infrastructure is tested for its reliability and robustness by periodic audits. In addition, periodic Disaster Recovery Tests are conducted to ensure the ability to move to the Disaster Recovery Infrastructure in the event of down time in the main production capability.

The Bank is conducting employee and customer awareness on cyber frauds, vishing/phishing attacks etc through SMS, E-Mails and popup messages in Banks' website and mobile banking applications. Bank has done separate awareness workshops for Directors on the cyber frauds and its impacts. As a measure to assess the effectiveness of awareness among employees Bank is conducting 'Redteam' exercises on a quarterly basis. Bank has implemented most of the Gopalakrishna Committee recommendations on Information Security, Electronic Banking, Technology Risk and Cyber Fraud. The progress of pending items for implementations are followed up for completion in a time bound manner.

Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo

The Bank has undertaken various initiatives for energy conservation at its premises, further details are given under Principle 6 of Section E of the Business Responsibility Report. The Bank prides itself on continuous investment in technology upgrades that are designed to deliver cost effective best in class customer service. The Bank has taken measures to improve the operational efficiency by adopting Robotic Process Automation technology that can enable a virtual workforce that works around the clock and can handle higher volumes with accuracy. Bank has made investments in blockchain technology and has gone live with remittance arrangement with one of the leading exchange houses in GCC. Bank has setup a Testing Center of Excellence (TCoE), an independent test organization within the Bank, to ensure quality of the bank applications and products. The Bank has used information technology extensively in its operations, for more details please refer the section on Technology and Digital Updates portion forming part of Management Discussion and Analysis. Through its export-financing operations, the Bank supports and encourages the country's export efforts.

Compliance with the ICSI Secretarial Standards

The Bank has complied with relevant Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) related to the Board Meetings and General Meeting during the year. Requirement for Maintenance of Cost Records

The Bank is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2018-19 also. These awards are actually a testimony of Bank's commitment on digital front with various initiatives which brought in acclaim from both customers and stakeholders.

Your Bank has won the best bank of year award at the Dhanam Banking and Finance Summit. Your Bank is one of front runners in adopting this technology. Your Bank's Cross Border Remittance Solution using blockchain technology was declared as Winner under the category "Emerging blockchain technology solution of the year" for BFSI innovative technology awards 2018. Bank was also adjudged winner of "best use of blockchain technology" at drivers of digital awards 2018. Your Bank won 1st prize in Best Technology Bank Award 2019 instituted by Indian Banks Association. NPCI National Payment Excellence award 2018 was awarded to your Bank.

Auditors

Statutory Audit

M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, carried out the statutory central audit of the Bank during Financial Year 2018-19. Additionally 1234 number of branches/ offices were subjected to branch statutory audit by various branch auditors appointed by the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank. The resolution for the appointment of M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, as the Joint Central Statutory Auditors of the Bank from the conclusion of the 88th Annual General Meeting till the conclusion of 89th Annual General Meeting is placed in the Notice to shareholders for AGM.

Secretarial Audit

The Board had in its meeting dated 13 March 2019, appointed M/s. SVJS & Associates, practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Financial Year ended 31 March 2019,in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report is annexed herewith as "Annexure III". With regard to Secretarial Auditors noting regarding delay of two days in filing Statement of Investor Complaints under Regulation 13(3), it was explained that the exchange (BSE) has taken on record the submission made by the Bank on the delayed filings.

Extract of Annual Return

Pursuant to Section 134 (2) (a) and Section 92 (3) of the Companies Act, 2013, the extract of the Annual Return in the prescribed format (MGT-9) is annexed as Annexure I to this Report. Further, the Annual Return of the Bank in the prescribed Form MGT-7 is available on the website of the Bank at the link: www.federalbank.co.in

Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) of CA 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available on the website: https://www.federalbank.co.in/ shareholder-information.

Stock Exchange Information

The Bank's Equity Shares are listed on:

1. BSE Limited, Phiroze Jeejeebhoy Towers.Dalal Street, Mumbai -400 001

2. National Stock Exchange Ltd. "Exchange Plaza", Bandra - Kurla Complex Bandra East, Mumbai - 400 051.

3. The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Director's Responsibility Statement

a) that in the preparation of the annual financial statements for the year ended March 31, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2019 and of the profit of the Bank for the year ended on that date.

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d) that the annual financial statements have been prepared on a going concern basis;

e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Your bank exhibited resilience during the unprecedented Kerala floods. The support given by your bank to the employees which in turn reciprocated by each employee to the customers, made your bank stand tall and proud, yet humble, during the most needy hour. We remember with gratitude the monumental support exhibited by various stakeholders of your bank in maintaining the business continuity.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, Rating Agencies and Stock Exchanges for their wholehearted support.

The Directors record their sincere gratitude to the Bank's shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

Â	For and on behalf of the Board of Directors
Â	Â
Aluva	Mr. Dilip Sadarangani (DIN- 06610897)
Date: 13 June 2019	Chairman of the Board

Annexures

Annexure I

Extract of Annual Return as on the financial year ended 31.03.2019

[Pursuant to Section 92(3) of the Companies Act, 2013, and Rule 12(1) of the Companies (Management and Administration) Rules, 2014]

FORM NO. MGT - 9

1. Registration and Other Details
CIN	L65191KL1931PLC000368
Registration Date	23 April 1931
Name of the Company	THE FEDERAL BANK LIMITED
Category/Sub-category of the Company	Company having Share Capital Non-Government Company
Address of the Registered Office and contact details	Federal Towers, P B NO 103, Aluva, Ernakulam - 683 101, Tel-0484 2630996 Email: [email protected]
Whether Listed company	Yes
Name address and contact details of Registrar and Transfer Agent	M/s. Integrated Registry Management Services Private Limited, 2nd Floor, Kences Towers,
	No.1,Ramakrishna Street,
	Off: North Usman Road.T Nagar, Chennai-600017,
	Phone No: 044-28140801-03,
	Email: [email protected]

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10% or more of the total turnover of the company shall be stated:-

SI. No	Name and Description of main products /services	NIC Code of the Product/ Service	% to total turnover of the Bank
1	Banking services and Financial Services	64191	100%

I. PARTICULARS OF SUBSIDIARY AND ASSOCIATE COMPANIES -

SI. No	Name and address of the Company	CIN/GLN	Holding /subsidiary/ associate	% of Shares held	Applicable Section
1.	Fed bank Financial Services Limited	U65910KL 1995PLC008910	Subsidiary	82.59%	2(87)
2.	Federal Operations and Services Limited	U74999KL 2018PLC055298	Subsidiary	100%	2(87)
3	IDBI Federal Life Insurance Company Limited	U66010MH 2007PLC167164	Associate	26%	2(6)
4	Equirus Capital Private Limited	U65910MH 2007PTC1 72599	Associate	8.74%	2(6)

IV. SHAREHOLDING PATTERN

Â (Equity Share Capital Break up as percentage of Total Equity) (i) Category-wise Shareholding

Category of Shareholder		No. of shares held at the beginning of the year (as on 01.04.2018)				No. of shares held at the end of the year (as on 31.03.2019)				% Change during the year
Category of Shareholder		Demat	Physical	Total	% of Total Shares	Demat	Physical	Total	% of Total Shares	% Change during the year
A	SHAREHOLDING OF PROMOTER AND PROMOTER GROUP	Â	Â	Â	Â	Â	Â	Â	Â	Â
(1)	Indian	Â	Â	Â	Â	Â	Â	Â	Â	Â
a	Individual/Hindu Undivided Family	0	0	0	Â	0	0	0	Â	Â
b	Central Government/State Government(s)	0	0	0	Â	0	0	0	Â	Â
c	Bodies Corporate	0	0	0	Â	0	0	0	Â	Â
d	Financial Institutions/Banks	0	0	0	Â	0	0	0	Â	Â
e	Any other(specify)	0	0	0	Â	0	0	0	Â	Â
Â	SUB TOTAL A(1)	0	0	0	0.000	0	0	0	0.000	Â
(2)	Foreign	Â	Â	Â	Â	Â	Â	Â	Â	Â
a	lndividual(Non Resident/ Foreign Individuals)	0	0	0	Â	0	0	0	Â	Â
b	Bodies corporate	0	0	0	Â	0	0	0	Â	Â
c	Institutions	0	0	0	Â	0	0	0	Â	Â
d	Any other(specify)	0	0	0	Â	0	0	0	Â	Â
Â	SUB TOTAL A(2)	0	0	0	0.000	0	0	0	0.000	Â
Â	Total Shareholding of promoter and Promoter Group(A)=A(1)+A(2)	0	0	0	Â	0	0	0	Â	Â
B	Public Shareholding	Â	Â	Â	Â	Â	Â	Â	Â	Â
(1)	Institutions	Â	Â	Â	Â	Â	Â	Â	Â	Â
a	Mutual Funds/UTI	471569965	68750	471638715	23.920	439017853	74750	439092603	22.120	Â
b	Financial Institutions/Banks (Including Foreign Banks)	47955939	95500	48051439	2.440	57399630	95500	57495130	2.900	Â
c	Central Government/State Government(s)	10	0	10	0.000	10	0	10	0.000	Â
d	Venture Capital Funds	Â	Â	Â	Â	Â	Â	Â	Â	Â
e	Insurance Companies	36910880	0	36910880	1.870	32566530	0	32566530	1.640	Â
f	Foreign Institutional Inves tors	766556319	203500	766759819	38.880	753544738	203500	753748238	37.970	Â
g	Foreign Venture Capital Investors	Â	Â	Â	Â	Â	Â	Â	Â	Â
h	Any other(specify)	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	Alternative Investments	16024921	0	16024921	0.810	7829371	0	7829371	0.390	Â
Â	SUB TOTAL B(1)	1339018034	367750	1339385784	67.920	1290358132	373750	1290731882	65.020	-2.900
(2)	Non-Institutions	Â	Â	Â	Â	Â	Â	Â	Â	Â
a	Bodies Corporate (Including NBFCs)	60610301	378320	60988621	3.090	86157438	289320	86446758	4.350	Â
b	lndividuals(ResidenVNRI/ Foreign National)	0	0	0	Â	Â	Â	Â	Â	Â
(i)	Individual shareholders holding Nominal share Capital upto Rs 1 Lakh	265605241	25986679	291591920	14.790	286304046	21330869	307634915	15.500	Â
(ii)	Individual shareholders holding Nominal share Capital above Rs1 Lakh	197845380	3133350	200978730	10.190	232064700	1833020	233897720	11.780	Â
c	Any other(specify)	Â	Â	Â	Â	Â	Â	Â	Â	Â
a	Limited Liability Partnership	3366838	0	3366838	0.170	4388427	0	4388427	0.220	Â
b	Trust	12111248	58800	12170048	0.620	8094021	58800	8152821	0.410	Â
c	Overseas Corporate Bodies	0	6000	6000	0.000	0	0	0	Â	Â
d	Investor Education and Protection Fund	5056858	0	5056858	0.260	5680842	0	5680842	0.290	Â
e	Foreign Body Corporate	3367241	0	3367241	0.170	0	0	0	Â	Â
f	Clearing Member	17183809	0	17183809	0.870	10269951	0	10269951	0.520	Â
g	Directors	5123000	0	5123000	0.260	8568595	0	8568595	0.430	Â
h	Foreign National/ QFI	0	0	0	0.000	4617	0	4617	0.000	Â
Â	SUB TOTAL B(2)	570269916	29563149	599833065	30.420	641532637	23512009	665044646	33.500	3.080
Â	Total Public Share Holding (B) = B(1) + B(2)	1909287950	29930899	1939218849	98.330	1931890769	23885759	1955776528	98.530	0.200
Â	TOTAL(A) + (B)	1909287950	29930899	1939218849	98.330	1931890769	23885759	1955776528	98.530	Â
C	Shares held by Custodians for GDRs and ADRs	32925590	0	32925590	1.670	29273675	0	29273675	1.470	Â
Â	Grand Total (A)+(B)+(C)	1942213540	29930899	1972144439	100.000	1961164444	23885759	1985050203	100.000	0.000

(ii) Shareholding of Promoters

SI No.	Shareholders Name	Shareholding at the beginning of the year			Shareholding at the end of the year			% change in shareholding during the year
SI No.	Shareholders Name	No. of shares	% of total shares of the company	% of shares pledged/ encumbered to total shares	No. of shares	% of total shares of the company	% of shares pledged /encumbered to total shares	Â
Â	Â	NIL	Â	Â	Â	Â	Â	Â

(iii) Change in Promoters Shareholding

SI No.	Â	Shareholding at the beginning of the year		Cumulative Shareholding during the year
SI No.	Â	No. of shares	% of total shares of the company	No. of shares	% of total shares of the company
Â	At the beginning of the year	Â	Â	Â	Â
Â	Date wise Increase/ Decrease in Shareholding during the year specifying the reasons for increase /decrease (e.g. allotment /transfer/ bonus/ sweat equity etc):	Â	NIL	Â	Â
Â	At the End of the year	Â	Â	Â	Â

(iv) Shareholding Pattern of top ten shareholders (other than Directors, Promoters and Holders of GDRs and ADRs)

SI No.	For Each of the Top 10 Shareholders	Shareholding at the beginning of the year (1 April, 2018)		Shareholding at the end of the year (31 March,2019)
SI No.	For Each of the Top 10 Shareholders	No. of shares	% of total shares of the company	No. of shares	% of total shares of the company
1	ICICI Prudential	65699449	3.33	80051471	4.03
2	Yusuffali Musaliam Veettil Abdul Kader	74828640	3.79	74828640	3.77
3	Reliance Capital Trustee Co Ltd	42660864	2.16	70083976	3.53
4	HDFC Trustee Company Ltd	71340720	3.62	57758817	2.91
5	East Bridge Capital Master Fund Limited	48345447	2.45	48345447	2.44
6	Amansa Holdings Private Limited	58001055	2.94	47161424	2.38
7	Life Insurance Corporation of India	40344910	2.05	45799910	2.31
8	Rakesh Jhunjhunwala	34771060	1.76	44721060	2.25
9	East Bridge Capital Master Fund I Ltd	Nil	0.00	37729342	1.90
10	Aditya Birla Sun Life Trustee Private Limited	41943687	2.13	35224187	1.77
11	Fidelity Investment Trust	29526202	1.50	34320594	1.73
12	Bank Muscat India Fund	33351210	1.69	33351210	1.68

Note:

1. The shares of the Bank are substantially held in dematerialized form, and are traded on a daily basis and hence the date wise increase/decrease in shareholding is not indicated.

2. The top ten shareholders after consolidation of shares held by the institutions/individuals based on the PAN, as on 31st March 2019 is considered for the above purpose.

V.Shareholding of Directors and Key Managerial Personnel

For Each of the Directors and KMP	Shareholding at the beginning of the year		Cumulative Shareholding during the year
For Each of the Directors and KMP	No. of shares	% of total shares of the company	No. of shares	% of total shares of the company
Mr. Shyam Srinivasan, MD & CEO	Â	Â	Â	Â
Shareholding at the beginning of the year (as on 01.04.2018)	48,81,000	0.25	48,81,000	0.25
lncrease(purchase of ESOS shares on 07.06.2018)*	35,27,570	0.18	84,08,570	0.42
Decrease(Sale of shares on 12.09.2018)	2,00,000	0.01	82,08,570	0.41
Increase (purchase of shares on 16.11.2018)*	25	0.00	82,08,595	0.41
Shareholding at the end of the year (as on 31.03.2019)	82,08,595	0.41	82,08,595	0.41
Mr. Ashutosh Khajuria, ED & CFO	Â	Â	Â	Â
Shareholding at the beginning of the year (as on 01.04.2018)	2,42,000	0.01	2,42,000	0.01
lncrease(purchase of ESOS shares on 29.05.2018)	1,00,000	0.01	3,42,000	0.02
Decrease (Sale of shares on 27.07.2018)	1,30,000	0.01	2,12,000	0.01
Decrease (Sale of shares on 24.10.2018)	1,00,000	0.01	1,12,000	0.01
Decrease (Sale of shares on 02.11.2018)	50,000	0.00	62,000	0.00
lncrease(purchaseof ESOS shares on 3.12.2018)	1,60,000	0.01	2,22,000	0.01
Decrease (Sale of shares on 12.02.2019)	1,00,000	0.01	1,22,000	0.01
lncrease(purchase of ESOS shares on 28.02.2019)	2,00,000	0.01	3,22,000	0.02
Shareholding at the end of the year (as on 31.03.2019)	3,22,000	0.02	3,22,000	0.02
Mr. Girish Kumar G, Company Secretary	Â	Â	Â	Â
Shareholding at the beginning of the year (as on 01.04.2018)	16,290	0.00	16,290	0.00
lncrease(purchase of ESOS shares on 01.08.2018)	7,000	0.00	23,290	0.00
Decrease (Sale of shares on 07.08.2018)	3,400	0.00	19,890	0.00
Increase (purchase of ESOS shares on 14.09.2018)	7,500	0.00	27,390	0.00
Decrease (Sale of shares on 30.10.2018)	3,000	0.00	24,390	0.00
Decrease (Sale of shares on 29.11.2018)	1,200	0.00	23,190	0.00
Decrease (Sale of shares on 03.12.2018)	500	0.00	22,690	0.00
Decrease (Sale of shares on 14.12.2018)	2,200	0.00	20,490	0.00
Decrease (Sale of shares on 19.12.2018)	1,800	0.00	18,690	0.00
Decrease (Sale of shares on 24.12.2018)	700	0.00	17,990	0.00
Increase (purchase of ESOS shares on 02.01.2018)	3,000	0.00	20,990	0.00
Decrease (Sale of shares on 01.02.2018)	4,100	0.00	16,890	0.00
Increase (purchase of ESOS shares on 07.03.2018)	5,500	0.00	22,390	0.00
Decrease (Sale of shares on 29.03.2018)	500	0.00	21,890	0.00
Shareholding at the end of the year (as on 31.03.2019)	21,890	0.00	21,890	0.00
Mr. K Balakrishnan, Director	Â	Â	Â	Â
Shareholding at the beginning of the year (as on 01.04.2018)	0	0.00	0	0.00
Increase (purchase of shares on 13.04.2018)	32,000	0.00	32,000	0.00
Increase (purchase of shares on 7.9.2018)	6,000	0.00	38,000	0.00
Shareholding at the end of the year (as on 31.03.2019)	38,000	0.00	38,000	0.00

NOTE: 1. None of the Non-Executive Independent Directors of the Bank hold shares of the Bank as at beginning and at end of the year except Mr K Balakrishnan who holds 38,000 shares as on 31st March 2019.

2. *as per the value approved by the Nomination, Remuneration, Ethics and Compensation Committee of the Board and paid by MD &CEO. 3. For purchase of ESOS the date of allotment has been taken and mentioned.

VI. INDEBTEDNESS

Indebtedness of the Company including interest outstanding / accrued but not due for payment

(Rs in Crore)

Â	Secured Loans excluding deposits	Unsecured Loans	Total Indebtedness
Indebtedness at the beginning of the financial year	Â	Â	Â
i) Principal Amount	2,603.33	6,245.88	8,849.22
ii) Interest due but not paid	-	-	-
iii) Interest accrued but not due	7.93	64.61	72.54
Total (i+ ii+ iii)	2,611.26	6,310.49	8,921.76
Change in Indebtedness during the financial year	Â	Â	Â
â¢ Addition	2,04,498.68	65,270.65	2,69,769.33
â¢ Reduction	206,495.42	66,487.31	2,72,982.74
Net Change	-1,996.74	-1,216.66	-3,213.40
Indebtedness at the end of the financial year	Â	Â	Â
i) Principal Amount	613.34	5,052.00	5,665.34
ii) Interest due but not paid	Â	Â	Â
iii) Interest accrued but not due	1.18	41.83	43.01
Total (i+ii + iii)	614.52	5,093.83	5,708.35

VII. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A.Remuneration to Managing Director, Whole -time Directors and/or Manager:

SI. No	Particulars of Remuneration	Name of MD/WTD/Manager			Total Amount (in Rs)
SI. No	Particulars of Remuneration	Mr.Shyam Srinivasan (MD & CEO)	Mr. Ashutosh Khajuria(ED & CFO)	Mr. Ganesh Sankaran %	Total Amount (in Rs)
1.	Gross salary	Â	Â	Â	Â
(a)	Salary as per provisions contained in section 17(1) of the Income- tax Act, 1961	1,20,00,000.00	22,00,008.00	18,79,935.72	1,60,79,943.72
(b)	Value of perquisites u/s 17(2) Income-tax Act, 1961	14,39,608.00	10,99,948.00	87,732.00	26,27,288.00
(c)	Profits in lieu of salary under section 17(3) Income-tax Act, 1961	Â	Â	Â	Â
2.	Stock Option *** (perquisite value of ESOS)	14,57,54,251.25	1,96,24,700.00	NIL	16,53,78,951.25
3.	Sweat Equity	NIL	NIL	NIL	NIL
4.	Commission As % of profit Others, specify...	NIL	NIL	NIL	NIL
5.	Others, please specify	Â	Â	Â	Â
i)	Leave encashment	33,333.00	5,66,667.00	13,38,889.00	19,38,889.00
ii)	Leave travel concession	NIL	4,00,000.00	NIL	4,00,000.00
iii)	Performance Linked Incentive	NIL	NIL	NIL	NIL
IV)	House Rent Allowance	-	-	14,77,132.00	14,77,132.00
v)	Personal Fixed Pay	-	45,99,999.96	40,39,284.00	86,39,283.96
Â	Total**	13472941.00	8866622.96	88,22,972.72	3,11,62,536.38
Â	Ceiling as per the Act	NA	NA	NA	Â

** Does not include the value of stock options exercised during the year, if any

*** This includes stock options granted and vested in previous years, and exercised during the last financial year % Resinged from the Board of the Bank w.e.f 15.02.2019

Note: 1. In addition to above, Provident Fund of Rs1200000.00 was made in respect of Mr. Shyam Srinivasan, MD & CEO, Rs 2,20,001.00 was made in respect of Mr. Ashutosh Khajuria, Executive Director & CFO and Rs 1,87,994.00 to Mr. Ganesh Sankaran, erstwhile Executive Director during FY 2018-19. 1.During FY 2018-19, MD & CEO relinquished his entire ESOS eligibility and offered his grant to the ESOS pool.

2. The options relating to ESOS 2010 Scheme were availed by MD & CEO and ED before it lapsed, in accordance with terms of the scheme. External financing was availed by them for exercising the ESOS options. Perquisite tax has been paid by MD & CEO, Mr. Shyam Srinivasan and Executive Director Mr. Ashutosh Khajuria, on an amount of 14,57,54,251.25 and 1,96,24,700.00 respectively relating to perquisite for ESOS.

B. Remuneration to other directors:

SI. No	Particulars of Remuneration	Name of Directors									Total Amount (in Rs)
SI. No	Particulars of Remuneration	Mr. Dilip Sadarangani	CA. Nilesh Vikamsey	Mr. Harish Engineer"	Ms. Grace Koshie	Ms. Shub-halakshmi Panse	Mr. C Balagopal	Mr. A P Hota	Mr. Deepak Mahesh-wari %%	Mr. K Bal-akrishnan%	Total Amount (in Rs)
1	Independent Directors	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	â¢ Fee for attending board and committee meetings	1,993,871Â®	1,820,000	525,000	2,090,000	2,180,000	1,100,000	1,685,000	625,000	690,000	12,708,871
Â	â¢ Commission	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	â¢ Others, please specify (Remuneration with RBI approval)	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	Total (1)	1,993,871Â®	1,820,000	525,000	2,090,000	2,180,000	1,100,000	1,685,000	625,000	690,000	12,708,871
Â	Sweat Equity	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
2	Other Non - Executive Directors	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	â¢ Fee for attend ing board committee meetings	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	â¢ Commission	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	â¢ Others , please specify	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	Total (2)	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	Total (B) = (1+2)	1,993,871Â®	1,820,000	525,000	2,090,000	2,180,000	1,100,000	1,685,000	625,000	690,000	12,708,871
Â	Total Managerial Remuneration	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â
Â	Overall Ceil ing as per the Act^	Â	Â	Â	Â	Â	Â	Â	Â	Â	Â

Note:Â® Includes an amount of Rs 333871 paid as remuneration with the approval of Board and RBI during the year to Mr. Dilip Sadarangani, who is the Chairman of the Board of the Bankw.e.f 25 January 2019.

% - Mr K Balakrishnan joined as Independent Director on the Board of the Bank w.e.f 25 September 2018.

%%- Mr Deepak Maheshwari resigned from the Board of the Bank w.e.f 01 January 2019

# #- Mr. Harish Engineer retired from the Board of the Bank w.e.f 01st October 2018.

Section 197 of the Companies Act, 2013 does not by virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies

C. Remuneration To Key Managerial Personnel Other Than MD/ MANAGER/WTD

SI. No	Particulars of Remuneration	Name of Key Managerial Personnel	Total Amount
Â	Â	Girish Kumar Ganapathy(SVP CUM COMPANY SECRETARY)	Â
1.	Gross salary	Â	Â
Â	a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961	28,98,787.83	28,98,787.83
Â	b) Value of perquisites u/s 17(2) Income-tax Act, 1961	32,400.00	32,400.00
Â	c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961	Â	Â
2.	Stock Option *** (perquisite value of ESOS)	6,40,450.00	6,40,450.00
3.	Sweat Equity	Â	Â
4.	Commission	Â	Â
Â	As % of profit	-	-
5.	Others , please specify Performance Linked Incentive	2,80,000.00	2,80,000.00
Â	Total**	3211187.83	3211187.83

** Does not include the value of stock options exercised during the year, if any

*** This includes stock options granted and vested over several previous years, but exercised during the last financial year.

VIII. Penalties / Punishment / Compounding of offences:

Type	Section of the Companies Act	Brief description	Details of penalties / punishment/ compounding fees imposed	Authority (RD/NCLT/ Court)	Appeal made, if any (give details)
A. COMPANY
Penalty	Â	Â	Â	Â	Â
Punishment	Â	Â	None	Â	Â
Compounding	Â	Â	Â	Â	Â
B. DIRECTORS
Penalty	Â	Â	Â	Â	Â
Punishment	Â	Â	None	Â	Â
Compounding	Â	Â	Â	Â	Â
C. OTHER OFFICERS IN DEFAULT
Penalty	Â	Â	Â	Â	Â
Punishment	Â	Â	None	Â	Â
Compounding	Â	Â	Â	Â	Â

Penalty has been levied by RBI aggregating to an amount of Rs 500.28 lakhs (aggregate amount of Rs 4.74 lakhs for Year FY 2017-18) for various regulatory issues such as penalty on currency chest, penalty relating imposed for violations of RBI guidelines, directions etc. observed during statutory inspection of the Bank with reference to financial position as on March 31, 2017 paid during FY 2018-19.

Annexure II

1 .Composition of the CSR Committee

CSR Committee of the Board

Every company having net worth of rupees five hundred crore or more, or turnover of Rupees One Thousand Crore or more or a net profit of Rupees Five Crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board, consisting of three or more directors, out of which at least one director shall be an independent director. CSR Committee of the Board consists of three independent directors, MD & CEO and Executive Director of the Bank. As on 31 March 2019 the Committee consists of:

Mr. A. P Hota (Chairman)

â¢ Mr. K Balakrishnan (Director)

â¢ Mr. Shyam Srinivasan (MD & CEO)

â¢ Mr. Ashutosh Khajuria (Executive Director)

2. A brief outline of the company's CSR policy, including overview of projects or programs undertaken and a reference to the web-link to the CSR Policy and Projects or Programs.

For us in Federal Bank, reaching out to people who needs assistance is part of the values passed by our founder. The objectives we intend to achieve through CSR programs aims at developing communities and environment sustainability to create a protected future for the generations to come. The Corporate Social Responsibility activities of the Bank touches a wider footprint through areas like Health, Education, Women empowerment, Environment Sustainability and other activities permitted by the Schedule VII of the Companies Act, 2013.

Objectives of CSR

â¢ To make meaningful contribution for the improvement of those lying at the bottom of social pyramid and thereby act as socially conscious, well governed and successful corporate citizen of the country.

â¢ To ensure that the activities undertaken will bring maximum relief to the intended beneficiaries and thereby contribute to the long term development of the society, by providing socially and environmentally sustainable benefits, measurable in economic terms, demonstrating the social commitment of the Bank in the same manner it services the customers, employees and shareholders.

CSR Initiatives covered by the policy include:

1. Poverty alleviation

2. Education and skill development

3. Gender equality and welfare of senior citizen

4. Ensuring environmental sustainability and ecological balance

5. Protection of National Heritage

6. Benefit of Armed Force veterans

7. Promote rural, nationally recognized Paralympicsand Olympic sports

8. Contribution to Prime Minister's National Relief Fund or any other fundsset up by the Central Government.

9. Providing financial assistance to technology incubators

10. Development projects for rural and slum areas

11. Prevention of Child Abuse & Child labor

12. Support to Swatch Bharat

13. Promotion of Digitization

The above objectives are broad based, and will be construed in a liberal manner within the framework of the Act.

Core CSR activities for the Financial Year 2018-19

Existing	New Additions
Youth engagement	Women empowerment
Education	Digitization
Promoting Vocational Skills	Support to Swatch Bharat Mission
Healthcare	Â

The detailed policy on CSR of the Bank and projects or programs is published in the Bank's website and the web link to it is: http//www. federalbank.co.in/our-commitments.

3. Net Profit before Tax of the Company for the last three financial years

Year	Net Profit(Before Tax)
2016	Rs 719.65 Cr.
2017	Rs 1306.50 Cr.
2018	Rs 1343.86 Cr.

4. Prescribed CSR Expenditure (two per cent of the amount as in Item 3 above)

Average Net Profit calculated for three preceding financial years is Rs 1123.34 Cr. Out of this 2% of Average Net Profit for three preceding financial years comes to Rs 22.47 Cr.

Details of CSR spent during the financial year

(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
SI.No	CSR project or activity identified	Sector in which the project is covered	Projects or programs (1) Local area or other (2) Specify the State and district where projects or programs was undertaken	Amount outlay (budget) project or program wise (in lakhs)	Amount spent on the projects or programs Sub heads: (1) Direct expenditure on projects or programs (2) Overheads (in lakhs)	Cumulative expenditure up to the reporting period (in lakhs)	Amount Spent direct or through implementing agency (in lakhs)
1	Education, & Skill Building	Promoting Education, Vocational Skills, Youth Engagement	Pan India	1531.79	1167.19	3809.73	Directly by the Bank . As given in column (6)
2	Scholarships through Federal Bank Hormis Me morial Foundation	Promoting Education	Kerala, Tamilnadu, Maharashtra, Gujarat	202.00	137.07	653.82	Directly by the Bank . As given in column (6)
3	Health Care & Safety	Healthcare, Preventive Healthcare,	Pan India	200.00	67.82	378.74	Directly by the Bank As given in column (6)
4	Welfare, Poverty Alleviation & Women empowerment	Eradicating hunger, poverty, setting up homes	Pan India	120.00	288.19	154.30	Directly by the Bank As given in column (6)
5	Environment Sus-tainability/Swachh Bharat	Environment Conservation Swachh Bharat	Pan India	122.00	24.4	220.61	Directly by the Bank As given in column (6)
6	Rural Development	Rural & Social Development, welfare of SC/ST	Pan India	120.00	9.47	337.24	Directly by the Bank As given in column (6)
7	Miscellaneous (Overheads)	Â	Â	10.00	10.01	19,96	Â
Â	Total	Â	Â	2305.79	1704.15	5574.40	Â

Corporate Social Responsibility is an area that can help, build value system among employees and make them feel part of social change. With this objective, the Bank had decided to involve staff members as part of our employee social responsibility initiatives. As part of this, welfare projects were successfully completed with the active participation of employees pan India on Founder's Day. Many other projects were successfully completed with the active participation of employees across the country like Digitizing the Nilavarapatti Village, and undertaking many infrastructural developmental activities at the village. To meet the location specific requests emanating from the field, 20% of the total CSR budget would be earmarked. Several major projects that can have long term impact were selected during the year; some of the major initiatives rolled out during the year were Speak for India Season 4 that touched more than 122000 students in Kerala, Karnataka, Maharashtra& Tamilnadu and gave a platform for many students to develop their communication skills and confidence levels. Bank started the Federal Skill Academy at Ernakulam and Coimbatore aimed at up skilling hundreds of youth in alignment with the Skill India Mission of the Government. This Financial Year we have opened two more Skill Academies at Kolhapur & Karnal to extend our Skill Development activities to the states Maharashtra & Haryana. In line with our commitment to conserve environment and natural resources we partnered with Mathrubhumi for the SEED project. Apart from this we also supported several organizations across India who are engaged in Philanthropic/social activities. Our objective remains to associate with projects that help to uplift the downtrodden and the needy sections in the society and to passionately involve in such activities that bring about obvious positive change in the society that will nurture and nourish the future generations and aim at creating significant difference in the overall socio-economic development and environment sustainability. Having spent 75.86% (amount spent Rs 17.04 Cr.) this year towards CSR as per section 135 of the Companies Act 2013, your Bank is committed to increase its CSR impact by selecting projects that have long term sustainability.

The Bank has budgeted for an amount of Rs 23.06 Cr. (Allocated funds Rs 22.47 Cr.). But could spend only Rs 17.04 Cr. Even though the Bank had planned for digitization & Village adopt ion of four villages, we could complete only one village in FY 2018-19 due to the natural calamities affected Kerala during August 2018 which resulted in shifting our focus to rehabilitate the affected people. We are continuing with Adoption & Digitization of more villages in FY 2019-20. We could not spent allocated amount as Scholarship since most of the students selected were studying at Govt Institutions which has comparatively lower fee structure. In the healthcare sector, our long term project partners postponed their fund requirements in FY 2018-19 due to Kerala Flood and these funds will be released in FY 2019-20. Bank has already sanctioned various CSR projects which are devised to give sustained support. Our objective through corporate social initiatives is to bring out marked difference in the upliftment of the society and the world we live in. Your Bank is passionately involved in such activities that create obvious positive change in the society and will nurture and nourish the future generations.

The CSR Committee confirms that the implementation and monitoring of CSR Policy is in compliance with CSR objectives and Policy of the Bank

Sd/-	Sd/-
Mr. Shyam Srinivasan	Mr A P Hota
(Managing Director & Chief Executive Officer)	(Chairman CSR Committee)

Annexure

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31.03.2019

[Pursuant to Section 204 (1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

The Members,

The Federal Bank Ltd.

Federal Towers, P.B. No. 103 Alwaye-683101

We, SVJS & Associates, Company Secretaries, have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by The Federal Bank Ltd. [ON: L6B191KL1931PLC000368] (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/ statutory compliances and expressing our opinion thereon.

Based on our verification of the books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on 31.03.2019, complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books.forms and returns filed and other records maintained by The Federal Bank Ltd. ("the Company") for the financial year ended on 31.03.2019 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA) and the rules made thereunder;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act'):-

a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

c) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014

d) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008

e) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

f) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;

g) The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and The Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to the extent applicable.

(vi) As informed to us, the following other laws are specifically applicable to the Company.

1. The Banking Regulation Act, 1949 and Banking Regulation (Companies) Rules, 1949

2. Reserve Bank of India Act, 1934

3. The Banking Ombudsman Scheme, 2006

4. The Bankers' Books Evidence Act, 1891

5. The Banking Companies (Period of Preservation of Records) Rules, 1985

6. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and The Security Interest (Enforcement) Rules, 2002

7. The Prevention of Money-Laundering Act, 2002 and The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005

8. The Industrial Disputes (Banking and Insurance Companies) Act, 1949

9. The Deposit Insurance and Credit Guarantee Corporation Act,1961 and The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961

10. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and

11. Credit Information Companies (Regulation) Act, 2005

We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards land 2 issued by The Institute of Company Secretaries of India;

(ii) The Listing Agreements entered into by the Company with Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above. There has been delay of two days in filing statement on investor complaints under Regulation 13 (3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015. The Exchange (BSE) has taken on record the submission made by the listed entity on the delayed filing.

We further report that the Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance.and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions of the board were unanimous and the same was captured and recorded as part of the minutes.

We further report that there are adequate systems and processes in the Company commensurate with its size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

We further report that during the audit period there were no instances of:

i. Public/Right/Preferential issue of shares/debentures/sweat equity;

ii. Redemption/Buy-back of securities;

iii. Merger/amalgamation/ reconstruction;

iv. Foreign technical collaborations.

During the period, the following issues have taken place:-

SI. No.	Method of Issue	Mode of Approval	Date of Approval	Number of shares issued/Amount
1	Issue of Debt Securities	Shareholders' approval by way of special resolution at Annual General Meeting	10.08.2018	Shareholders' approval obtained for borrowing/raising funds in Indian currency by way of issue of debt instruments upto Rs 8000 Crore.

During the aforesaid period, a resolution was passed under Section 180 (1) (c) of the Companies Act, 2013, at the Annual General Meeting held on 10.08.2018 increasing the borrowing powers to Rs 12,000 Crore over and above the paid up capital and free reserves including securities premium.

This report is to be read with Annexure A of even date and the same forms an integral part of this report.

Â	For SVJS & Associates
Â	Company Secretaries
Â	CS Vincent P.O.
Kochi	Managing Partner
13.06.2019	CP No.: 7940, FCS: 3067

Annexure A

ANNEXURE TO THE SECRETARIAL AUDIT REPORT OF EVEN DATE

The Members

The Federal Bank Ltd.

Federal Towers, P.B. No. 103 Alwaye-683101

Our Secretarial Audit Report of even date is to be read along with this letter.

1. Maintenance of the secretarial records is the responsibility of the management of the Company. Our responsibility as Secretarial Auditors is to express an opinion on these records, based on our audit.

2. During the audit, we have followed the practices and processes as were appropriate, to obtain reasonable assurance about the correctness of the contents of the secretarial records. We believe that the process and practices we followed provide a reasonable basis for our report.

3. The correctness and appropriateness of financial records and Books of Accounts of the Company have not been verified.

4. We have obtained the Management Representation about the compliance of laws, rules and regulations and happening of events etc., wherever required.

5. The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards etc. is the responsibility of management. Our examination was limited to the verification of the procedures and compliances on test basis.

6. While forming an opinion on compliance and issuing the Secretarial Audit Report, we have also taken into consideration the compliance related actions taken by the Company after 31st March 2019 but before issue of the Report.

7. We have considered actions carried out by the Company based on independent legal/professional opinion as being in compliance with law, wherever there was scope for multiple interpretations.

Â	For SVJS & Associates
Â	Company Secretaries
Kochi	CS Vincent P.O.
13.06.2019	Managing Partner
Â	CP No.: 7940, FCS: 3067

Annexure IV

The ratio of the remuneration of each director to the median employee's remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Sr. No	Requirements	Disclosure
1.	The Ratio of Remuneration of each Director to the Median Remuneration of Employees for the Financial YearÂ®	Mr. Shyam Srinivasan, MD & CEO : 18.42
		Mr. Ashutosh Khajuria, ED & CFO: 12.12
		Mr. Ganesh Sankaran, ED : 12.06
2.	The percentage increase in remuneration of each director(MD/ED), Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year	Mr. Shyam Srinivasan, MD & CEO: 0.25%
		Mr. Ashutosh Khajuria, ED & CFO : 5.47%
		Mr. Ganesh Sankaran, ED :1.35%
		Mr. Girish Kumar Ganapathy, CS : 7.50%
3.	The percentage increase* in the median remuneration of employees in The financial year	4.21%
4.	The number of permanent employees on the rolls of company	12227
5.	Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration	The average percentage increase made in the Salary of total employees other than the KMP for the financial year is around 4.21 %, while the average increase in the remuneration of KMP's are as follows MD & CEO : 0.25% ED & CFO : 5.47% ED: 1.35%
6.	The key parameters for any variable component of remuneration availed by the directors	The variable compensation for Managing Directors CEO and Senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the Revenue Point Index/ Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay will be paid purely based on performance and is measured through Score Cards for Managing Director & CEO / WTDs. The Score Card provides a mix of financial and Non Financial, Quantitative and Qualitative Metrics. KPAs to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs.
7.	Affirmation that the remuneration is as per the remuneration policy of the Bank	Yes, it is confirmed.

Note:

1. Have considered the Fixed Pay for the computation of ratios.

2. Fixed Pay includes Basic Salary, Allowances and value of Perquisites computed as per Income Tax rules but excludes Gratuity, PF and Perquisite values on ESOP.

@ - The sitting fees paid to other directors are not considered for this calculation.

Annexure V

Form AOC 1

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES AND ASSOCIATES/JOINT VENTURES OF THE BANK AS ON MARCH 31, 2019

PURSUANT TO FIRST PROVISION TO SUB-SECTION (3) OF SECTION 129 READ WITH RULE 5 OF COMPANIES (ACCOUNTS) RULES, 2014)

STATEMENT CONTAINING SALIENT FEATURES OF THE FINANCIAL STATEMENT OF SUBSIDIARIES / ASSOCIATE COMPANIES / JOINT VENTURES

PART "A": SUBSIDIARIES

1.	SI. No.	1	2
2.	Name of the subsidiary:	Fedbank Financial Services Limited	Federal Operations and Services Limited
3.	The date since when subsidiary was acquired	17/04/1995	26/10/2018
4.	Reporting period for the subsidiary concerned, if different from the holding company's reporting period.	NA	NA
5.	Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries.	NA	NA
6.	Share Capital	2,300,425	50,000
7.	Reserves & surplus	2,321,957	(2859)
8.	Total assets	21,285,345	56,968
9.	Total Liabilities	16,662,963	9,827
10.	Investments	125,050	Â
11.	Turnover	2,589,181	12,875
12.	Profit before taxation	493,474	(3354)
13.	Provision for taxation	14,2656	(495)
14.	Profit after taxation	350,818	(2859)
15.	Proposed Dividend	NIL	NIL
16.	Extent of shareholding (in%)	82.59	100

Notes:

1. Names of subsidiaries which are yet to commence operations - NIL

2. Names of subsidiaries which have been liquidated or sold during the year. - NIL

PART "B": ASSOCIATES AND JOINT VENTURES

STATEMENT PURSUANT TO SECTION 129 (3) OF THE COMPANIES ACT, 2013 RELATED TO ASSOCIATE COMPANIES AND JOINT VENTURES

SI. No.	Name of Associates/Joint Ventures	IDBI Federal Life Insurance Company Limited	Equirus Capital Private Limited
1	Latest audited Balance Sheet	31/03/2019	31/03/2019
2	Date on which the Associate or Joint Venture was associated or acquired	23/11/2006	12/07/2018
3	Shares of Associate/Joint Ventures held by the company on the year end	Â	Â
Â	Number of shares held	208,000,000	3,600,000
Â	Amount of Investment in Associates/Joint Venture (Rs '000)	2,080,000	68,490
Â	Extent of Holding (in%)	26%	8.74%
4	Description of how there is significant influence	Investment more than 20%	Right of proportionate representation in the Board as well as power to participate in the financial/ operational matters like approval of business plan, policies, budgets, managerial remuneration, change in KMP etc
5	Reason why the associate/joint venture is not consolidated	NA	NA
6	Networth attributable to Shareholding as per latest audited Balance Sheet (Rs '000)	2,373,419	37,488
7	Profit/ Loss for the year 2018-19 (Rs '000)	Â	Â
Â	i. Considered in Consolidation	350,238	5,386
Â	ii. Not Considered in Consolidation	977,486	35,614

1. Names of associates or joint ventures which are yet to commence operations - NIL

2. Names of associates or joint ventures which have been liquidated or sold during the year - NIL.

Â	For and on behalf of the Board of Directors
Krishnakumar K Girish Kumar Ganapathy	Ashutosh Khajuria	Shyam Srinivasan
Senior Vice President Company Secretary	Executive Director & CFO	Managing Director & CEO
Â	(DIN:051 54975)	(DIN: 02274773)
Dilip G Sadarangani	Â	Â
Chairman	Â	Â
(DIN: 06610897)	Â	Â
Directors:	Â	Â
Nilesh S Vikamsey (DIN: 00031213)	Grace Elizabeth Koshie (DIN: 06765216)
Shubhalakshmi Panse (DIN: 02599310)	C Balagopal I	[DIN: 00430938)
A P Hota (DIN: 02593219)	K Balakrishnan I	[DIN: 00034031)
Place: Mumbai	Â	Â
Date: 4 May, 2019	Â	Â

Annexure VI

DIVIDEND DISTRIBUTION POLICY

I. OBJECTIVE:

Securities and Exchange Board of India (SEBI) has, on July 08, 2016, notified the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016. Through this notification, SEBI has inserted Regulation 43A after Regulation 43 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 {SEBI (LODR) Regulations}. As per the regulation, the top five hundred listed entities based on market capitalization, as on March 31 of every financial year, are required to formulate a Dividend Distribution Policy which should be disclosed in their annual reports and on their website.

In terms of Regulation 43A of SEBI (LODR) Regulations, it is mandatory for the Bank to frame the Dividend Distribution Policy, as it falls within the top BOO listed entities as on March 31, 2018 in terms of market capitalization. Accordingly, the following 'Dividend Distribution Policy' has been framed, approved and adopted by the Board of Directors of the Bank.

II. POLICY:

1. The Policy will be called as " Federal Bank Dividend Distribution Policy'.

2. General Principles of the Bank regarding distribution of dividend

The intent of the Bank is to reward the shareholders of the Bank by sharing a portion of the profits, whilst also ensuring that sufficient funds are retained for growth of the Bank. The dividend for each year would be recommended by the Board at its discretion within the set guidelines of Government and Reserve Bank of India and after taking into account the financial performance of the Bank, its future plans, internal and external factors, compliance with Companies Act 2013 and its rules, statutory restrictions, etc, for approval by the shareholders in General Meeting.

3. Eligibility criteria for declaration of dividend

As per the guidelines (DBOD.NO.BP.BC.88/ 21.02.067/2004-05 dated May 04, 2005), issued by Reserve Bank of India, Bank will be eligible to declare dividends only when it complies with the following minimum prudential requirements: The bank should have:

â¢ CRAR of at least 9% for preceding two completed years and the accounting year for which it proposes to declare dividend.

â¢ Net NPA less than 7%.

In case any bank does not meet the above CRAR norm, but is having a CRAR of at least 9 % for the accounting year for which it proposes to declare dividend, would be eligible to declare dividend provided its Net NPA ratio is less than 5%.

i) The Bank should comply with the provisions of Sections 1 5 and 17 of the Banking Regulation Act, 1949.

ii) The Bank should comply with the prevailing regulations/ guidelines issued by RBI, including creating adequate provisions for impair ment of assets and staff retirement benefits, transfer of profits to Statutory Reserves etc.

iii) The proposed dividend should be payable out of the current year's profit.

iv) The Reserve Bank has not placed any explicit restrictions on the Bank for declaration of dividends.

4. Quantum of dividend payable:

The Bank, if it fulfils the eligibility criteria set out at paragraph No.3 above, may declare and pay dividends subject to the following:

i) The dividend payout ratio shall not exceed 40 % and shall be as per the matrix furnished in Annexure.

[Dividend payout ratio shall be calculated as a percentage of 'dividend payable in a year' (excluding dividend tax) to 'net profit during the year'.]

ii) In case the profit for the relevant period includes any extra-ordinary profits/ income, the payout ratio shall be computed after excluding such extra-ordinary items for reckoning compliance with the prudential payout ratio.

iii) The financial statements pertaining to the financial year for which the bank is declaring a dividend should be free of any qualifications by the statutory auditors, which have an adverse bearing on the profit during that year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend payout ratio.

5. Board oversight

The interests of all stakeholders and the following aspects shall be taken into account while deciding on the proposals for declaring dividend:

a) The interim dividend paid, if any;

b) The Risk Based Supervision findings of Reserve Bank of India with regard to divergence in identification of NPAs, shortfall in provisioning;

c) The auditors' qualification pertaining to the statement of accounts;

d) The Basel III capital requirements; and

e) The Bank's long term growth plans.

6. Other parameters in terms of Regulation 43A of SEBI (LODR) Regulations:

a) The circumstances under which the shareholders of the listed entities may or may not expect dividend

The Board of the Bank may not recommend any dividend in the event of inadequacy of profits or whenever the Bank has incurred losses or

if the eligibility criteria for recommendation of dividend has not been met by the Bank, including any regulatory restriction placed on the Bank on declaration of dividend or if the Board strongly believes the need to conserve capital for growth or for other exigencies.

b) The financial parameters that shall be considered while declaring dividend

The Board of Directors of the Company would consider the following financial parameters before declaring or recommending dividend to shareholders:

â¢ Any interim dividend paid

â¢ Internal capital planning framework/ policy

â¢ Dividend payout trends (the dividend payout ratio will be calculated as a percentage of dividend (excluding dividend tax) recommended for the year to the net profit for that year)

â¢ Tax implications if any, on distribution of dividends

â¢ Cost of raising funds from alternate sources of capital

â¢ Such other factors and/or material events which the Bank's

Board may consider relevant.

c) Internal and external factors that shall be considered for declaration of dividend

Board will take into account various internal factors, such as business growth plans/future capital requirements etc. The decision of the Board regarding dividend shall be final.

The dividend payout decision of the Bank will also depend on certain external factors such as the state of the economy of the country, compliance with Companies Act 2013 and its rules, other statutory and regulatory provisions, share holder expectations including individual shareholders, tax regulations including the treatment of deferred tax assets etc. as may be applicable at the time of declaration of the dividend.

d) Policy as to how the retained earnings shall be utilized

The retained earnings will mainly be utilized for the purpose of the Bank's growth plans, improvement in CRAR and such other purposes as per the guidelines issued by RBI and Government of India from time to time.

e) Parameters that shall be adopted with regard to various classes of shares:

Presently authorized share capital of the Bank comprises of Equity Shares only. As and when the Bank issues other kind of shares, the Board of Directors may suitably amend this Policy.

7. Review of Policy

The Board of Directors of the Bank will review the policy annually. If the Board proposes to declare dividend on the basis of criteria in addition to those specified in the policy, or proposes to modify the criteria, it shall disclose such changes along with the rationale for the same on the Bank's website and in the Annual Report.

8. Disclosure of Policy

The policy will be available on the Bank's website and will also be disclosed in the Bank's Annual Report.

Annexure

Matrix of Criteria as laid out by RBI for maximum permissible range of Dividend Payout Ratio

(As per RBI Circular No. RBI/2004-05/451; DBOD.NO.BP.BC. 88/21.02.067/2004-05 dated May 04, 2005)

Category	CRAR	Net NPA Ratio
Category	CRAR	Zero	More than zero but less than 3%	From 3% to less than 5%	From 5% to less than 7%
Â	Â	Range of Dividend Payout Ratio
A	11% or more for each of the last 3 years	Up to 40	Up to 35	Up to 25	Up to 1 5
B	10% or more for each of the last 3 years	Up to 35	Up to 30	Up to 20	Up to 10
C	9% or more for each of the lasts years	Up to 30	Up to 25	Up to 15	Up to 5
D	9% or more in the Current year	Up to 10		Up to 5	Nil

Â	For and on behalf of the Board of Directors
Â	Â
Aluva	Mr. Dilip Sadarangani (DIN- 06610897)
Date: 13 June 2019	Chairman of the Board

Mar 31, 2018

DIRECTORS¹ REPORT

The Board of Directors has immense pleasure in presenting this 87th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended 31 March, 2018.

Financial Results (Rs, i_{n Crore})

Financial Parameters for the year ended	March 31, 2018	March 31, 2017
Net interest income	3,582.81	3,052.64
Fee and Other income	1,159.12	1,081.81
Net Revenue	4,741.93	4,134.45
Operating Expense	2,450.90	2,209.53
Operating Profit	2,291.03	1,924.91
Net Profit	878.85	830.79
Profit brought forward	1,451.27	1,056.98
Total Profit Available for appropriation	2,330.12	1,887.77
Appropriations:
Transfer to Revenue Reserves	97.07	131.43
Transfer to Statutory Reserves	219.71	207.70
Transfer to Capital Reserves	26.83	65.85
Transfer to/(from) investment Reserve Account	-23.57	-14.49
Transfer to Special Reserve	57.00	46.00
Dividend pertaining to previous year paid during the year	174.97	0.02
Tax on dividend	35.62	0.00
Balance Carried over to Balance Sheet	1,742.49	1,451.27
Financial Position (as on 31.03.2018)
Deposits	11 1,992.49	97,664.56
Advances	91,957.47	73,336.27
Total Business (Deposits Advances)	203,949.96	171,000.83
Other Borrowings	1 1,533.50	5,897.32
investments	30,781.08	28,196.09
Total Assets ( Balance Sheet Size)	138,313.95	1 14,976.93
Equity Capital	394.43	344.81
Ratios
Return on Total Assets (%)	0.75	0.84
Return on Equity (%)	8.39	9.89
Earnings Per Share (Rs,)	4.62	4.83
Book value per share (Rs,)	61.28	51.37
Operating cost to income (%)	51.69	53.44
Capital Adequacy Ratio (%) Basel (iii)	14.70	12.39

Note:

1. Previous year figures have been regrouped / reclassified, where necessary to conform to current year''s classification.

Highlights of performance

During the year 2017-18, your Bank has delivered robust growth in all the business segments. Total business of your Bank improved by 19.27% to reach at Rs, 203,949.96 Cr as on 31 March 2018. 14.67% growth in deposits and 25.39% growth in advances (net) helped your Bank to clock this number. Total deposits reached Rs, 111,992.49 Cr and advances (net) reached Rs, 91,957.47 Cr and on averages, deposit portfolio of your bank grew by 13.34% to reach Rs, 98,038.12 Cr and advance portfolio grew by 25.97% to reach Rs, 79,094.18 Cr.

On the NR side, NRE deposits had a growth rate of 16.97% to reach Rs, 42,586.31 Cr and NRE Savings clocked a growth of 17.44% to reach Rs, 12,386.81 Cr. The total NR business of your Bank stood at Rs, 45,071.86 Cr with a growth of 16.83%.

Growth in Business

On CASA front, Savings deposit touched Rs, 30,919.83 Cr with 17.13% growth and Current deposits stood at Rs, 6,332.01 Cr with a growth of 16.40%. Your bank registered a healthy CASA growth of 17.01% to reach Rs, 37,251.84 Cr. CASA ratio of your bank stood at 33.26%.

The investment portfolio of your Bank has reached Rs, 30,781.07 Cr as on 31 March 2018. The average investment as on 31 March 2018 is Rs, 28,809.53 Cr.

Profitability

The Operating Profit of your Bank increased by 19.02% to Rs, 2,291.03 Cr and Net Profit of your Bank is up by 5.78% to Rs, 878.85 Cr. Healthy traction in core income streams has helped your bank to have a good momentum in core operating performance. Net interest income improved by 17.37% to Rs, 3,582.81 Cr while the Non-interest income rose to Rs, 1,159.12 Cr, showing a rise of 7.15%.

Total income of your Bank during the fiscal year 2018 recorded 11.81% growth to reach Rs, 10,911.98 Cr. income from advances increased by 15.17% to reach Rs, 7,538.78 Cr. The yield on advances stood at 9.53% and the yield on investments at 7.48 %. The Net Interest Margin for the fiscal year is at 3.21% as against 3.31%, in the previous year.

Return on Average Equity and Return on Average Total Assets stood at 8.37 % and 0.75% respectively. Earnings per Share (face value of Rs, 2 each) of the Bank, as on 31 March 2018 was Rs, 4.46. Book value per share had increased to Rs, 61.55 during FY 18.

Expenditure

Higher revenue growth and better cost management resulted in Cost / income Ratio improving to 51.69% in 2017-18 as against 53.44% last year. The total expenses of your bank increased by 10.04%,to reach at Rs, 8,620.95 Cr and by an increase of 9.69%, interest expenses increased to Rs,6,170.05 Cr in FY 18.Operating

Expenses of the Bank during the fiscal year grew to Rs,2,450.90 Cr. The cost of deposits of the Bank has come down during the year. The cost of deposits of the Bank is 5.84% as on 31 March 2018. The interest expenses as percentage to total income stood at 56.54%.

Spread

During the fiscal year the Bank''s spread on advances (gross) decreased to 3.69% and spread on investments (gross) decreased to 1.64%. The Spread (net of provisions) on advance decreased to 2.74% from 3.53% of last year.

Asset Quality

The Gross NPA of your Bank as on 31 March 2018 stood at Rs, 2,795.62 Cr. Gross NPA as a percentage to Gross Advances is 3% which is higher than 2.33% as at the end of FY17. The Net NPA stood at Rs,1,551.96 Cr and this as a percentage to Net Advances is 1.69%. The Provision Coverage Ratio (including technical writeoffs) stood at 64.50%.

Net worth and Capital Adequacy

The Net Worth of your Bank grew by 37.06% to Rs,12,138.49 Cr as against Rs, 8,856.47 Cr in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel iii norms stood at 14.70% which is considerably higher than the 9% stipulated by RBi. Of this, Tier 1 CRAR is at 14.18%.

Business Overview

Your Bank continued its consistent performance during FY 2017-18 with the total business of the Bank increasing by 19.27% to Rs, 203,949.96 Cr.

Employee Productivity

Business per employee of your Bank during the period stood at Rs,17.21 Cr, an improvement of 17.39% for the year and the profit per employee of the Bank stood at Rs, 7.415 Lakh during the fiscal.

Expansion of Network

The Bank has 1252 branches and 1696 ATMs as on 31 March 2018. The Bank also has its Representative Office at Abu Dhabi and Dubai and an iFSC Banking Unit (iBU) in Gujarat international Finance Tec-City (GiFT City).

Share Value

Earnings Per Share (face value Rs, 2 /- each) of your Bank has declined from 4.82 to 4.46 during the year under review. Return on Equity

reached 8.37% in the fiscal year ended 31 March 2018. Dividend

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 50% i.e. Rs,1.00 per Equity Share on face value of Rs, 2/- each for the year 2017-18 (previous year 45% i. e Rs, 0.90 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders'' value has always been a guiding philosophy of the Bank. (Rs, in Thousands)

Appropriations

	FY 2017-18	FY 2016-17
Transfer to Revenue Reserve	970,732	1,314,286
Transfer to Statutory Reserve	2,197,114	2,076,971
Transfer to Capital Reserve	268,319	658,459
Transfer to/(from) investment Reserve Account	(235,721)	(144,930)
Transfer to Special Reserve	570,000	460,000
Dividend pertaining to previous year paid during the year	1,749,634	201
Tax on dividend	356,184	41
Balance carried over to Balance Sheet	17,424,864	14,512,668
TOTAL	23,301,126	18,877,696

Material changes and commitment affecting financial position of the Bank

There are no material changes affecting the financial position of the bank which have occurred between the end of the financial year of the bank to which the financial statements relate and the date of the report.

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the company and its future operations

There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future.

Dividend Distribution Policy in accordance with the Regulation 43A of securities and exchange board of India (listing obligations and disclosure requirements) regulations, 2015, the Bank has formulated a dividend distribution policy and the same is annexed herewith as Annexure VIII. The Policy is hosted on the website of the bank and can be viewed in the following link httos://www. Federalbank. Co.in/documents/10180/45777/dividend distribution poHcy/ ea1bb41c-64fc-4fb5-bce5-bf96dea3432b

Deposits

Being a banking company, the disclosures required as per rule 8(5)(v) & (vi) of the companies (accounts) rules, 2014, read with section 73 and 74 of the companies act, 2013 are not applicable to your bank.

Increase Of Capital

in FY 2017-18,the paid up capital of the bank was increased by an amount of Rs, 431,034,482 by allotment of 215,517,241 equity shares of Rs, 2/- each raised by way of qualified institutional placement and Rs, 65,154,068 by allotment of 32,577,034 esos shares of Rs, 2/- each and Rs, 9500 by allotment of 4750 shares by way of release of rights abeyance shares. The paid up capital of the bank as on 31 March 2018 is Rs, 3,944,284,628 consisting of 1,972,144,439 equity shares of Rs, 2/- each

Investor Education And Protection Fund

As per the companies act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to investor education and protection fund. On 04th October 2017 the bank had transferred Rs, 6,269,885/- to the above fund, being the unclaimed dividend for the year 2010.

Employee Stock Option Scheme (ESOS)

The Bank has instituted Employee Stock Option Schemes, duly approved by the shareholders of the Bank to enable its employees including Whole Time Directors to participate in the future growth and financial success of the Bank. The Employee Stock Option Schemes are in accordance with the SEBi guidelines, as amended from time to time. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, performance, grades, period of service, Bank''s performance and such other parameters as may be decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors. The Bank''s shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010) on December 24, 2010 and the Federal Bank Limited Employee Stock Option Scheme 2017 (ESOS 2017) on July 14, 2017.

Under ESOS 2010, the Nomination, Remuneration, Ethics & Compensation Committee granted 34,720,200 options during the year 2011-12, 24,484,750 options during the year 2012-13, 26,094,250 options during the year 2013-14, 11,156,450 options during 2014-15, 1,025,000 options during the year 2015-16, 965,000 options during the year 2016-17 and 100,000 options during the year 2017-18. The options granted which are non transferable, with vesting period of 1,2,3 and 4 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2018, 32,577,034 options had been exercised and 38,476,532 options were in force. Under ESOS 2017, the Compensation Committee granted 22,318,348 options during the year 2017-18, the options granted which are non transferable, with vesting period of 1, 2 and 3 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2018, no options had been exercised and 15,770,539 options were in force. Other statutory disclosures as required by the SEBi guidelines/ Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 on ESOP are given in Annexure II to this report.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been an inherited and inbuilt element of our fundamentals - right from the day the Bank was founded. Our founder''s values & ethos based on trust got embedded in the Bank''s policies and principles. CSR in Federal Bank began with the first act of cultivating banking habits in the agrarian society - to effectively utilize idle money for productive purposes.

Overview of some of the major CSR programs undertaken by the Bank during FY 2017-18 is detailed in the Management Discussion and Analysis part of the Annual Report.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 2017-18 as per Section 135 of the Companies Act, 2013, comes to Rs,23.88 Crores. Amount spent by the Bank this year towards CSR was Rs,14.01 Crores. Through various projects which are already sanctioned, your Bank will be thoughtfully spending the CSR funds earmarked for the purpose. The ratio adopted was 80:20, wherein 80 % of the CSR funds will be utilized for long term sustainable projects and 20 % of the funds will be utilized to meet location specific requests. The Bank had also embarked on some major projects last year in the field of education, youth engagement, skill development, support to differently abled individual/persons etc. By choosing long term sustainable projects, Bank has taken an approach which brings steady and long lasting impact on the society.

The details of the CSR activities of FY 2017-18 are mentioned in Annexure iV to this report.

Risk Management

The Board of Directors oversees the enterprise wide risk management functions of the Bank. A separate Risk Management Committee of the Board supervises the risk management functions, thereby bringing in a top to down focus on risk management. integrated Risk Management Department co-ordinates and administers the risk management functions in the Bank. The Department has three dedicated divisions for managing Credit risk, Market risk and Operational risk. Dedicated teams within the Divisions are responsible for assessment, monitoring and reporting of risks across the Bank. The Bank has established an independent Mid Office as a part of Market Risk Division to monitor the Treasury activities. Business Continuity Plans & information Security Plans also form part of risk management functions in the Bank. Risk Management policies are approved by Board of Directors, and reviewed from time to time. Executive level risk management committee, such as Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and information Security Committee regularly assess the functional efficiency of the Bank in risk management and refine the policies and processes. Responsibility for identification, measurement and controlling of risk in various spheres of activities of the Bank is vested with a Senior Executive designated as Chief Risk Officer, who reports directly to the Managing Director & CEO. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored. In our opinion presently there are no material risks which threaten the current functioning of the Bank.

Internal control systems and their adequacy

The Bank has through the years developed and stabilized an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit and Inspection Policy of the Bank, duly approved and recommended by the Audit Committee of the Board and approved and adopted by the Board of Directors. in order to help Bank achieve its mission of adopting the best professional practices prevailing in the industry, while framing the policy, substantial inputs are taken from - RBi guidance note on Risk Based internal Audit, ''The internal audit function in banks'' published by Basel Committee on Banking Supervision and Model Audit Manual on internal & Concurrent Audit Systems in Public Sector Banks. Audit and inspection Policy is reviewed annually. Policy is reviewed considering various guidelines of RBi, Basel Committee recommendations, iCAi guidelines, other statutory / regulatory guidelines, directions of Board / Audit Committee of the Board issued from time to time and periodic internal guidelines / instructions issued by the Bank. At the enterprise level, the inspection and Audit Department, on a continuous basis, assesses and monitors the effectiveness of the control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank''s processes and operations with regulatory guidelines, accounting procedures and Bank''s own internal rules and guidelines. A department level committee meets on periodical intervals to discuss latest internal / RBi / regulatory guidelines for ensuring that the required changes are implemented for making the audit function updated and dynamic.

The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of management and discussions in various committee towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section 138 of the Companies Act 2013, has designated the Head of inspection and Audit Department as internal Auditor. Audit being an independent function, the internal Auditor is reporting to the Audit Committee of the Board of Directors. The Bank has various types of audit which inter-alia include Risk Based internal Audit, information System Audit, Concurrent Audit, Gold Loan Audit and Management Audit. Branches are risk rated and the frequency of Risk Based Internal Audit is decided based on Risk - Audit Matrix defined in Audit and Inspection Policy. Significant Audit findings and observations are presented to inspection Review Committee of Executives and a report on the meetings of inspection Review Committee of Executives along with significant audit findings, directions / suggestions of the committee and action taken in such cases is placed to the Audit Committee of the Board for review periodically. Other findings are placed before a department level committee called the ''inspection Department Review Committee'' for review and its observations are placed before inspection Review Committee of Executives.

As per the requirement of Companies Act 2013, Bank has formulated internal Financial Controls framework. Risk and Controls associated with each process in the Bank are documented under the internal Financial Controls Framework. inspection and Audit Department plays a significant role of testing the control effectiveness for each process under the framework.

The internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the bank''s internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the bank and its reputation.

Vigil Mechanism/Whistle Blower Policy

Bank has a comprehensive Fraud Risk Management Policy that speaks on various control systems, monitoring and surveillance mechanism so as to prevent, detect and investigate frauds both internal and external. Vigilance department plays a dynamic role in prevention as well as investigation of frauds. Preventive measures include spreading awareness on potential fraudulent activities and instigating a compliant environment among all employees of the Bank. Effectiveness of fraud prevention mechanism is ensured by conducting industrious Preventive Vigilance Workshops, Preventive Vigilance Audits and alerts to all employees on regular basis that disseminates various modus operandi of frauds in the banking industry. Bank has been keen on educating customers against fraudulent activities through various channels including SMS, E-mails, posters at Branches, scroll messages on Bank website and internet banking webpage, etc. Suspected frauds/complaints/ internal irregularities are promptly investigated by the Vigilance

Department. Crucial factors of investigation like the methodology, investigating officer from the Vigilance Department, scope of investigation, etc are under the discretion of Chief Vigilance Officer and he/ she reports to MD & CEO directly.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS) with a view to enhancing public confidence in the Bank and also in compliance of RBI directions in this regard. The policy aims at establishing an efficient vigil mechanism in the Bank to quickly spot aberrations and deal with it at the earliest. it is disseminated among the employees assuring confidentiality and protection to the whistle blower against any personal vindictive actions such as humiliation, harassment or any other form of unfair treatment. Directors and Employees of the Bank, employee representative bodies, customers, stakeholders, non-governmental organizations (NGO) and members of the public can lodge complaints/disclosures under this scheme. A dedicated e-mail iD is provided for sending complaints/disclosures under PDS. Vigilance Department conducts investigation of all complaints /information received through the PDS and submits report to MD & CEO. The details of the complaints and findings are also placed before the Audit Committee of the Board on a quarterly basis. The scheme is popularised through various measures such as preventive vigilance classes, internal circulars, alerts etc. No personnel have been denied access for giving any information as envisaged in the Protected Disclosure Scheme. The PDS Document is made available in Bank''s website and intranet.

Website link to Bank''s Whistle Blower Policy/Vigil Mechanism is http://www. federalbank. co.in/documents/10180/45777/ Whistle Blower policy/558aea51-1335-4546-9c9a-28c5030377a1

Subsidiary of the Bank

As on 31 March 2018, the Bank has one unlisted fully-owned subsidiary named Fedbank Financial Services Limited. Fedbank Financial Services Limited is a diversified Non-Deposit-Taking & Systemically important (ND-Si) NBFC offering multiple loan products such as Loan against Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. it also distributes loan products of The Federal Bank Limited.

The total loan portfolio of Fedbank Financial Services Limited as on 31 March 2018 is Rs, 1413 Crores as against Rs, 962 Crores as on 31 March 2017. The Profit After Tax of the company for the year ended 31 March 2018 increased to Rs, 30.80 Crores from Rs, 22.53 Crores for the year ended 31 March 2017.

The Bank and Fedbank Financial Services Limited (Fedfina) have entered into definitive agreements for Fedfina, to issue fresh equity shares constituting 26% of the post issue paid up share capital of Fedfina, to a fund managed by True North Enterprise Private Limited subject to statutory and regulatory approval.

Joint Venture in Life Insurance Business

The Bank''s Joint Venture Life insurance Company, in association with iDBi Bank Limited and Fortis insurance international N.V. (now Ageas), namely iDBi Federal Life insurance Company Limited (erstwhile iDBi Fortis Life insurance Company Limited), commenced operations in March 2008. Currently the Bank has a total stake of Rs, 208 Crore in the equity of the company holding 26 % of the equity capital. The total premium collected by iDBi Federal Life insurance Company Limited during the period ended 31 March 2018 is Rs, 1783 Crores.

Consolidated Financial Statements

in accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including its subsidiary, Fedbank Financial Services Limited and associate iDBi Federal Life insurance Company Limited, which is forming part of this Annual report. The financial position and performance of its subsidiary/ Associate is given in the statement containing salient features of the financial statements of the subsidiaries/Associate Companies/Joint Venture, (Given as Annexure VII) which forms part of the consolidated financial statements.

in accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and the consolidated financial statements has been hosted on its website www.federalbank.co.in. Further, as per fourth proviso to the said section, the audited annual accounts of the said subsidiary company of the Bank have also been hosted on the Bank''s website www.federalbank.co.in. The said documents have been hosted on the website of the subsidiary company of the Bank also, in compliance with the said section. The documents/details available on the Bank''s website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (''AS'') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its subsidiary for the year ended March 31, 2018 forms part of the Annual Report.

Corporate Governance

Corporate governance is essentially a set of standards, systems, and procedures aimed at effective, honest, transparent, and responsible management of a company within the applicable statutory and regulatory structures. This Code represents a set of desirable, corporate governance practices to be adopted by the Bank. The Code takes into account the relevant statutory and SEBi/stock exchange listing requirements and Reserve Bank of India (RBi) directives and other guidelines under the Companies Act 2013. The efficacy of the Code lies in how well it is put into practice. in adopting the Code, the stress is in its substance and spirit rather than on its form.

Good corporate governance practices help support and strengthen corporate actions aimed at achieving the corporate objective. The Bank''s principal corporate objective, like that of any corporate business entity, is to perpetuate its business while protecting and enhancing, over the long term, the value of the investments of its shareholders in the Bank. A copy of the Code of Conduct for the Board of Directors and Management is available on Bank''s website.

A separate section on Corporate Governance standards followed by the Bank and the relevant disclosures, as per regulatory requirements forms part of this Annual Report.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act,201 3, SEBi (Listing Obligations and Disclosure Requirements) Regulations,2015 ("Listing Agreement") and the Code of Corporate Governance adopted by the Bank. The Board comprises of eleven Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, strategic planning, risk management, information Technology and Payment and Settlement Systems During FY 2017-18 RBi approval was obtained vide letter DBR. Appt No.6837/08.38.001/2017-18 dated 25th January 2018 for reappointment of Mr. Ashutosh Khajuria, Executive Director of the Bank for a further period of 2 years w.e.f 28th January 2018 based on the revised terms and conditions to be made effective from 01st February 2018. The Board had on 16.04.2018 approved the reappointment of Mr. Ganesh Sankaran as Executive Director with a seat on the Board of the Bank, for a period of two years with effect from completion of his present term based on the revised terms and conditions approved by the Board at its meeting held on 19 October 2017, subject to RBi approval.

Mr. A P Hota who was appointed as an Additional independent Director on 15 January 2018 and Mr Deepak Maheshwari who is appointed as an Additional independent Directors as on date of this report will be regularized in this AGM. The Bank has also proposed the confirmation of reappointment of Mr Ashutosh Khajuria as Executive Director of the Bank as approved by RBi and also reappointment of Mr. Ganesh Sankaran as Executive Director of the Bank for which RBi approval is awaited, in this AGM.

The detailed profile of all the directors recommended for appointment/ reappointment in this AGM are mentioned in the Notice of Annual General Meeting for the benefit of shareholders as required under law.

During the year Mr. Nilesh Vikamsey was appointed by the Board as the Chairman of the Bank, subject to RBi approval w.e.f 01st March 2018 on the stepping down of Mr. K M Chandrasekhar as Director from the Board of the Bank.

Mr. K M Chandrasekhar, independent Director and past Chairman of the Bank retired as Director from the Board of the Bank w.e.f 01st March 2018 on attaining seventy years of age, as per the regulatory requirements. The Board places on record their appreciation for the commendable contribution made by Mr. K M Chandrasekhar, as independent Director during his tenure in the Bank.

Excluding the MD & CEO, Executive Director & Chief Financial Officer, Mr. Ashutosh Khajuria and Executive Director, Mr. Ganesh Sankaran, all other members of the Board are Non-Executive and independent Directors. Necessary declarations were obtained from the independent Directors as required under the RBi Regulations, SEBi (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Companies Act. The remuneration and other benefits paid to MD & CEO of the Bank and Executive Directors during the year are disclosed in Annexure I to this Report and in Corporate Governance Report. The Non Executive independent Directors, except Chairman of the Board, are paid only sitting fees for attending every meeting of the Board/ Committee of the Board within the limits as prescribed under the Companies Act, 2013. During the year Mr. K M Chandrasekhar the Chairman of the Board, till 28th February 2018 was an paid an amount of Rs, 1.25 lakhs per month(Rs, 15,00,000/- per annum) as remuneration, as approved by the Board and RBi in addition to sitting fee for attending Board / Committee meetings. The Board had in its meeting dated 22nd February 2018 approved the appointment of Mr. Nilesh Vikamsey as the Chairman of the Board of the Bank from 01st March 2018 and also approved the payment of remuneration of an amount of Rs,1.50 Lakh per month in addition to payment of sitting fee for attending Board/Committee meetings for which the RBi approval is awaited. The Bank has framed a Comprehensive Compensation Policy for Non-Executive Directors of the Bank (Other than Part Time Chairman) which is detailed in the heading ''Policy on Remuneration to Non-Executive Directors/independent Directors.'' Mr. Ganesh Sankaran, Executive Director of the Bank is liable to retire at this AGM in compliance with Section 152 of Companies Act, 2013,as required under the regulations regarding retirement of directors by rotation. The detailed profile of Mr. Ganesh Sankaran, recommended for reappointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of three Non Executive, independent Directors, chaired by Ms. Grace Koshie, a Non-Executive independent Director. The Committee was reconstituted once in the financial year 2017-18. The other members of the Committee are Mr. Nilesh S Vikamsey, Ms. Shubhalakshmi Panse and Mr. A P Hota who are Non-Executive independent Directors as on the date of this report.

The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee incorporated in the Bank''s Code of Corporate Governance, are in accordance with the SEBi (Listing Obligations and Disclosure Requirements) Regulations, 2015, Companies Act, 2013 and RBi guidelines, which are detailed in Corporate Governance section of this report.

Independent Directors

In terms of the definition of Independence of Director as prescribed under SEBi (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures/declarations received from the Directors, the following Directors are independent Directors of the Bank as on the date of this report:

1. Mr. Nilesh S Vikamsey (DiN- 00031213)

2. Mr. Dilip G Sadarangani (DiN- 06610897)

3. Mr. Harish H Engineer (DiN- 01843009)

4. Ms. Grace Elizabeth Koshie (DiN- 06765216)

5. Ms. Shubhalakshmi Panse (DiN- 02599310)

6. Mr. C Balagopal (DiN- 00430938)

7. Mr. A P Hota (DiN- 02593219)

8. Mr. Deepak Maheshwari (DiN- 08163253)

A meeting of independent Directors was conducted on 10 April 2018 to evaluate the performance of Board as a whole, evaluation of Non-independent Directors and Chairman of the Board and assess the flow of information. The meeting was attended by all the independent Directors of the Bank.

Woman Director in terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 17(1 )(a) of the SEBi(Listing Obligations and Disclosure Requirements), Regulations 2015(LODR Regulations) a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.

Bank''s policy on directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178;

a) Qualifications, Experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the

Bank''s policies, operations, and needs. Not less than fifty-one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering, and technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry. The Bank shall ensure to include in its Board need based representation of skills such as marketing, technology and systems, risk management, strategic planning, treasury operations, credit recovery, Payment and Settlement Systems etc.

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The directors shall preferably be in the range of 35-70 years of age.

b) Disqualification/Conflicts of interest

1. The Bank''s Directors shall be subject to the disqualifications/ prohibitions contained in the Companies Act 2013 and the Banking Regulation Act 1949 with respect to directorship of companies in general or banking companies in particular.

c) Suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include

1. integrity in personal and professional dealings.

2. wisdom and ability to take appropriate decisions.

3. ability to read and understand financial statements

4. ability to deal with others with a sense of responsibility, firmness, and cooperation.

5. refrain from any action that would lead to loss of his independence.

d) Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBi-LODR Regulations, 2015.

The terms and conditions of appointment of independent Director is disclosed on the website of the Bank and a web link thereto is : https.//www. federalbank. co. in/documents/10180//63602//Terms and conditions of Appointment of independent Directo rs/4e33ba77-1cc5-42b4-aa02-ab4b84a62324

Policy on remuneration to Non-Executive Directors/Independent Directors

The Policy of the Bank for the payment of remuneration to Non-Executive Directors/independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non Executive Directors/independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http://www. federalbank.co.in/shareholder-information As required under Banking Regulation Act, 1949 prior approval of RBi is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy during FY 2017-18, Non- Executive independent Directors of the Bank are paid only sitting fee for attending Board/Committee meetings and reimbursement of expenses for participation in Board/Committee meetings other than Non Executive Part Time Chairman, who is paid remuneration in addition to sitting fee for attending Board/Committee meetings and reimbursement of expenses for participation in Board/ Committee meetings, with the approval of RBi.

Policy on remuneration to MD & CEO, Executive Director, Key Managerial Personnel and other employees

The Compensation / Remuneration Policy of the Bank as approved by the Board contains the policy for payment of remuneration to Executive Directors including MD & CEO, Key Managerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBi, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

Compensation of Managing Director & CEO, Whole Time Directors and Senior Executives (Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span. (Approval from RBi to be taken as per section 35B of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization''s performance is charted based on Performance Scorecard which takes into account various financial indicators like business growth, revenue earned, cost deployed, profit earned, ROA/ROE, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through score cards for Managing Director & CEO / WTDs. The score card provides a mix of financial and non financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.

Grander Compensation Package to Executives in Level IV and above

The compensation package applicable to Executives in Level 4 to 7 was fixed and governed based on the periodical industry level settlements under iBA pattern. The annual increment is based on seniority under iBA pattern, whereas it is linked to performance rating in competitive organizations. Hence, to make the compensation structure market driven and competitive, a new performance based compensation package called "Grander Compensation Package" has been introduced for Executives in Level 4 (AVP) and above with effect from 01.05.2017. The Grander Pay structure is expected to bring more performance focus and greater productivity. Compensation under the "Grander Compensation Package" will depend on the annual performance rating of the Executive concerned.

Compensation paid to employees on IBA package

The compensation paid to Award Staff and Officers coming under Scale I to III is fixed based on the periodic industry level settlements with Indian Banks'' Association. The scale of pay and other service conditions applicable to employees, whose compensation package is governed under iBA package has been revised consequent to the 10th Bipartite Settlement.

Policy on Board Diversity

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. in forming its perspective on diversity, the Bank also take into account factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board, usher in independence in the performance of the Board; eradicate the gender bias in the Board; achieves sustainable and balanced performance and development; support the attainment of strategic objectives and also ensures compliance of applicable laws and good corporate practices.

The Nomination, Remuneration, Ethics & Compensation Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments, the requirement as per the Companies Act,2013 for appointment of at least one woman director on the Board of the Bank will also be considered.

Key Managerial Personnel who were appointed or have resigned during the year in compliance with Section 203 of the Companies Act, 2013, no Key Managerial Personnel have been appointed or have resigned during FY 2018.

Management Discussion and Analysis

Loans, Guarantees or Investments in Securities

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except subsection (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Internal Complaints Committee

Bank had constituted internal Complaints Committee, as per letter and spirit contained in the provisions of "The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013", at 9 Zones and Head Office to prevent and redress the complaints relating to sexual harassment and to organize workshops/ awareness programs to empower women employees while handling cases relating to sexual harassment. Workshops/ awareness programs regarding women empowerment were conducted at various locations pan India. The data with regard to the redressal of complaints by the internal Complaints Committee are as follows:

a) No. of complaints received for the year FY2018 : 2

b) No. of complaints disposed of during FY 2018 : 2

c) No. of cases pending for more than 90 days : Nil

d) No. of workshops/ awareness program against : 09

sexual harassment carried out

e) Nature of action taken by the employer/ District Officer: Administrative/disciplinary action taken/initiated.

Board evaluation

Thereafter a separate exercise was carried out to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the independent Directors was carried out by the entire Board, other than the independent Director concerned. The performance evaluation of the Chairman and the Non independent Directors were carried out by the independent Directors. The Nomination, Remuneration, Ethics and Compensation Committee carried out the performance evaluation of all the Directors of the Bank. The Directors expressed their overall satisfaction with the evaluation process.

I) Performance Evaluation of Non-Independent Directors (MD & CEO and Executive Director)

Criteria for Evaluation include:

i) Achievements of performance against targets set ii) Appraises the Board regarding the organization''s financial position and operational budget so as to enable the Board to make informed financial decisions iii) Provides Leadership in developing strategies and organizational plans with the management and the Board of Directors iv) Ensures that the Board is kept informed about all issues concerning the Bank v) Media interaction and ability to project positive image of the Company vi) Effectively pursue the performance goals in relation to mission and objective of the organization vii) Motivating employees, providing assistance & directions viii) Supervising & Safeguard of confidential information

ix) Establishment of internal control processes, monitoring policies and encouraging suggestions x) Cultivates effective Relationship with industry Forums, Community and business leaders, Regulatory Bodies and Public Officials.

Evaluation outcome

i) Attendance of MD &CEO and EDs at the Board and Committee meetings was good; ii) They present financial reports to the Board on a regular basis and submit an annual budget for Board review, revision and approval; iii) They regularly appraise the Board on the organization''s financial position and operational budgets that aids the Board to make informed financial decisions; iv) The Executives constantly endeavor to enhance internal control processes, monitor execution of policies and are very receptive to suggestions. v) The MD has adequate qualities of leadership in developing strategy and execution for achieving them vi) The MD & CEO and EDs adequately endeavor to implement Board decisions and are very strong in media interactions and have put in efforts in building and reinforcing the Brand and image of the Bank. vii) MD demonstrates his commitment to the Organization goals, is ethical, motivates and guides employees for better performance. viii) His personal rapport and good relationship with industry forums / regulatory bodies, etc are highlights and testimony of the respect and prominence of Federal Bank in the Indian banking landscape.

II) Performance Evaluation of Independent Directors including Chairman

Criteria for evaluation include:

i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depth prior to meeting and active participation at the meeting iii) Contributes to discussions on strategy as opposed to focus only on agenda iv) Participate constructively and actively in the Committee of the Board in which they are chairpersons or Members v) Exercises his/her skills and diligence with due and reasonable care and brings an independent judgment to the Board vi) The Director remains abreast of developments affecting the company and external environment in which it operates independent of his being appraised at meetings vii) Knowledge and Competency: a) How the person fares across different competencies as identified for effective functioning of the entity and the Board b) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates viii) Whether the person demonstrates highest level of integrity, including conflict of interest disclosures, maintenance of confidentiality, etc

Evaluation Outcome

The evaluation done, brought out the fact that good attendance of independent Directors was there in the Board and committee meetings. They are knowledgeable, ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as independent directors. The independent Directors also demonstrates highest level of integrity, including conflict of interest disclosures and maintenance of confidentiality. it was also noted that the independent Directors exercises his/ her skills and diligence with due and reasonable care and brings an independent judgement to the Board and also the Directors remains abreast of developments affecting the company and external environment in which it operates.

III) Performance Evaluation of Board and Committee

A. Criteria for Evaluation of Board include:

i) if Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success, representing sectors laid down by the regulators, given its current and future position ii) New Board members participate in an orientation program to get educated on the organization, their responsibilities, and the organization''s activities, the Board encourages a culture that promotes candid communication iii) The Board oversees management''s procedures for enforcing the organization''s code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board iv) The Board oversees risk management through inputs from the Risk Management Committee v) The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures vi) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank vii) The Board oversees the compliance processes viii) The Board views the organization''s performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc. ix) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company,

x) The Board has defined an effective Code of Conduct for the Board and Senior Management. xi) Whether the Board monitors and manages potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions.

B. Criteria for Evaluation of Committee include:

i) The Committee''s Terms of Reference and composition is reviewed annually and is found to be constituting of Directors representing sectors laid down by the regulator and continue to be appropriate

ii) Committee meetings are organized properly in number, timing and location iii) The Committee allocates the right amount of time for its work etc iv) The Committee is effective in carrying out its mandate v) Whether adequate independence of the Committee is ensured from the Board vi) Whether the Committee has fulfilled its functions as assigned by the Board and laws as may be applicable.

Evaluation Outcome of Board/Committee

i) The structure and composition of the Board is appropriate with adequate number of Directors and a good balance of diverse professional backgrounds, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success in it''s current and future position; ii) The proportion of independent to non-independent directors is good; iii) The Board demonstrates integrity, credibility, trustworthiness, active and effective participation at Board and Committee meetings which are held at reasonable and regular intervals; iv) The Board and Committee processes and procedures are good with different committee reviewing different functional areas of the Bank''s operations. v) The Board and its Committee also reviews Bank''s performance, risk management, financial reporting, compliances, technology, operations with adequate frequency of meetings etc.

IV) Assessment of flow of information Criteria for Evaluation include:

The agenda and related information are circulated in advance of meetings to allow board members sufficient time to study and understand the information, information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board, periodically, etc. Update on the compliance with the regulatory, statutory or listing requirements are placed before the Board.

Evaluation Outcome

The flow of information to the Board and its committee is generally good.

Evaluation of Senior Management Personnel in the Bank

The variable compensation for Managing Director & CEO and Senior Executives (Non-Grander Compensation Package) to be fixed based on organizational performance and KPAs set for the official. The organization''s performance is charted based on the Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay will be paid purely based on performance and is measured through Score Cards for Managing Director & CEO / WTDs. Key Performance indicators (KPis) to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs. An ED level Committee has been constituted for reviewing the linkage of risk based performance with remuneration, for employees above Level 5. The Committee with the assistance of Risk Department & HR will study the business and industry environment, analyze and categorize the risks into immediate and long term and streamline the components of the compensation plan like proportion of the total variable compensation to be paid to Senior Employees so as to ensure financial stability of the organization. These committee would also analyze various factors to ascertain whether cost/ income ratio supports the remuneration package provided to Senior Executives and other officials consistent with maintenance of sound capital adequacy ratio.

Meetings

During the year ten Board meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per the Listing Regulations.

Related Party Transactions

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Bank and were on arm''s length basis. There were no materially significant related party transactions entered by the Bank with related parties which may have a potential conflict with the interest of the Bank. All Related Party Transactions were placed before the Audit Committee of the Board for approval. Prior omnibus approval for transactions which are of repetitive nature is obtained from the Audit Committee and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.

Business Responsibility Report

Business Responsibility Report as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been hosted on the website of the Bank (https://www.federalbank.co.in/ shareholder-information ) Any Member interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.

Technology and digital updates and measures taken in IT governance, Information Security, IT audit, IT operations, IT services outsourcing

Technology and Digital updates:

During the financial year 2017-18 your Bank focused extensively on Digital Banking. Growth in the number of digital transactions has been exponential since November 2016 and continuing the same till date. in line with the country''s drive to Digitalize India, the Bank introduced a range of innovative products this year; and below are a few to mention.

Federal Bank Cross Border Remittance Solution

Declared as Winner under the category "Emerging Block chain Technology Solution of the Year" for BFSi innovative Technology Awards 2018, Federal Bank caters to the cross border remittance solution using Block Chain Technology. Federal Bank envisions a one stop solution for payments and financial services, Nonresident customers and partners. The concept which makes the service unique is, its one of the very few Block chain solutions that are fully functional and Federal Bank is one of the first Indian bank to develop an in house block chain solution. The Block chain code is designed in such a way that the basic architecture can be used to deploy further user cases such as Loyalty points, KYC database, etc. which will further showcase the power of block chain technology and real-time settlement of remittance process across multiple parties, which helps exchange houses to achieve considerable efficiency.

BYOM Flexi-EMI

Federal Bank''s completely digital loan series- Be Your Own Master (BYOM) introduced BYOM- Flexi EMi loan, a unique product to its variants of digital loans, which reach out to a million customers of our bank every year. Through this service customers can convert their online purchases made using Federal bank''s debit cards to EMi options offered by the bank, completely online.

API Banking Platform

Federal bank has developed an APi marketplace to collaborate with various FinTechs and Corporate to offer seamless banking experience. With our API banking platform, FinTechs would now be empowered to innovate banking services including wallets, apps, cards, payments, and accounts. Corporate houses can easily utilize various banking services by directly integrating with their internal ERPs. We are on boarding mByom Consultancy as our first merchant in the platform, who is developing a micro procurement app for agriculture produce.

PayLite

Federal Bank introduced a comprehensive web based solution for processing bulk transactions of corporate clients. Corporate customers being an integral part of the bank''s customer base, bank caters to their need for processing daily bulk transactions with this product.

Partner in Digital India Mission- First Bank to enroll as Issuer to DigiLocker

Federal Bank is the first bank in the country to become an issuer of documents through Digi locker. Now, the bank issues documents such as TDS certificates, interest certificates, bank account statements, etc. directly to the DigiLocker account of the customers and they can access the documents by logging in to their digilocker account, which is linked to their aadhaar number.

FASTag

Federal Bank started issuing Fastag, a product from NPCi. FASTag is linked to a prepaid account from which the applicable toll amount is deducted. The tag employs Radio-Frequency Identification (RFID) technology and is affixed on the vehicle''s windscreen after the tag account is active. FASTag is a perfect solution for a hassle free trip on national highways.

Information Technology (IT) Governance:

iT provides the strong foundation that enables your Bank to grow extensively and gain market share. in the following paragraphs, we provide more details of the entire governance structure over iT, with focus on information security.

iT governance is the processes that ensure the effective and efficient use of IT in enabling our organization to achieve its goals. it is an integral part of corporate governance and consists of the organizational structures, leadership and process that ensure iT sustains and extends the organization''s strategy and objectives. The governance of iT is effectively supervised by the Board of Directors through the iT & Operations Committee of the Board. The iT & Operations Committee, that meets on a quarterly basis, is chaired by an independent Non Executive Director and has 2 Non Executive Directors as members, along with the MD & CEO. All members of the Committee have extensive experience in iT & Operations and are able to provide effective guidance and direction to the management team.

Executive level committee which oversee the iT governance function include the Operational Risk Management Committee (ORMC), the information Security Committee (iSC) and the Project Steering Committee (PSC).

Your Bank has a well-defined Information System Security Policy and a Cyber Security Policy. The effective implementation of these policies is supervised by the information Security Committee and by the iT & Operations Committee of the Board. in recognition of the need for enhanced systems security, your Bank conducts a wide range of system audits, using internal and external auditors. These range from the quarterly Vulnerability Assessments (VA) and Penetration Testing (PT) to concurrent audits to an annual end to end audit of iT infrastructure. All the applications, both web based and mobile based apps exposed to internet are subjected to external penetration testing (PT) before releasing to use.

Bank has deployed best in the class infrastructure to provide availability of service to users and customers without fail. The installed infrastructure is tested for its reliability and robustness by periodic audits. in addition, periodic Disaster Recovery Tests are conducted to ensure the ability to move to the Disaster Recovery infrastructure in the event of downtime in the main production capability.

The Bank is conducting employee and customer awareness on cyber frauds, vishing/phishing attacks etc through SMS, eMails and popup messages in banks'' website and mobile banking applications. Bank has done separate awareness workshops for Directors on the cyber frauds and its impacts. As a measure to assess the effectiveness of awareness among employees Bank is conducting ''Redteam'' exercises on a quarterly basis. Bank has implemented most of the Gopalakrishna Committee recommendations on information Security, Electronic Banking, Technology Risk and Cyber Fraud. The progress of pending items for implementations are followed up for completion in a time bound manner.

Compliance with the ICSI Secretarial Standards

The Bank has complied with relevant Secretarial Standards issued by the institute of Company Secretaries of India (iCSi) related to the Board Meetings and General Meeting during the year.

AUDITORS Statutory Audit

M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, carried out the statutory central audit of the Bank during Financial Year 2017-18. Additionally 1234 number of branches / offices were subjected to branch statutory audit by various branch auditors appointed by the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank. The resolution for the appointment of M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, as the Joint Central Statutory Auditors of the Bank from the conclusion of the 87th Annual General Meeting till the conclusion of 88th Annual General Meeting is placed in the Notice to shareholders for AGM.

Secretarial Audit

The Board had in its meeting dated 13 March 2018, appointed M/s. SVJS & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Financial Year ended 31 March 2018, in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report is annexed herewith as "Annexure V".

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2017-18 also. The Bank continues its thrust on technology and digital with an impetus on innovation.

For the innovative BYOM (Be Your Own Master) Flexi EMi product, your Bank has won the Finnoviti Award for 2018. Your Bank successfully rolled out instant account opening through the branches and has won SKOCH Smart Technologies for Growth Award 2017'', Process innovation at the Finacle forum 2017 by infosys for it. As a recognition for your Bank for use of technology, bank has won the iBA Banking technology Conference, Expo & Awards 2017 for best use of Digital and Channels Technology among Small Banks. For innovative HR Policies, your bank has won the KMA Excellence Awards 2017.Your Bank was adjudged the winner in Outlook Money Award in Banks category for the year 2017. Your Bank was also bestowed with ''The Bank of the Year Award instituted'' by Dhanam Business Magazine and Golden Leaf Award as ''Trusted National Financial (Banking) Brand of Kerala'' instituted by Future Kerala Business and Financial Daily.

Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo

Extract of Annual Return

Pursuant to sub-section (3) of Section 92 of the Companies

Act,2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the details forming part of the extract of the Annual Return as at March 31,2018 in form MGT 9 is annexed herewith as "Annexure III".

Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended forms part of this report as Annexure I

Stock Exchange Information

The Bank''s Equity Shares are listed on:

1. BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai

- 400 001 and

2. National Stock Exchange Ltd. "Exchange Plaza", Bandra - Kurla Complex Bandra East, Mumbai - 400 051.

3. The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Director''s Responsibility Statement

in accordance with Section 134(3)(c), 134(5) of the Companies Act, 2013, your Directors state that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at the end of financial year March 31, 2018 and profit and loss account for that period.

(c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

(d) the directors have prepared the annual accounts on a going concern basis.

(e) the directors have laid down the internal financial controls followed by the Bank and that such internal financial controls are adequate and are operating effectively.

(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to investment Banks, rating agencies and Stock Exchanges for their wholehearted support.

The Directors record their sincere gratitude to the Bank''s shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Aluva Mr. Nilesh Vikamsey

(DIN- 00031213)

22 June 2018 Chairman of the Board

Mar 31, 2017

The Board of Directors has immense pleasure in presenting this 86th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended 31 March, 2017.

Financial Results (Rs. In Crore)

Financial Parameters for the year ended	31 March 2017	31 March 2016
Net Interest Income	3,052.65	2,507.71
Fee and Other Income	1,081.81	808.20
Net Revenue	4,134.46	3,315.91
Operating Expense	2,209.53	1,892.12
Operating Profit	1,924.93	1,423.78
Net Profit	830.81	475.65
Profit brought forward	1,056.98	1,092.37
Total Profit Available for appropriation	1,887.79	1,568.02
Appropriations:
Transfer to Revenue Reserves	131.43	45.40
Transfer to Statutory Reserves	207.70	118.91
Transfer to Capital Reserves	65.85	6.34
Transfer to/(from) Investment Reserve Account	-14.49	-8.21
Transfer to Special Reserve	46.00	32.00
Provision for Dividend (Refer Note 1 below)	0.02	120.48
Provision for Dividend Tax (Refer Note 1 below)	0.00	24.53
Transfer to Share capital pursuant to issue of Bonus shares	0.00	171.59
Balance Carried over to Balance Sheet	1,451.29	1,056.98
Financial Position (as on)
Deposits	97,664.56	79,171.71
Advances	73,336.28	58,090.14
Total Business (Deposits Advances)	1,71,000.84	1,37,261.85
Other Borrowings	5,897.32	5,114.57
Investments	28,196.09	25,155.49
Total Assets (Balance Sheet Size)	1,14,976.93	94,581.37
Equity Capital	344.81	343.79
Ratios
Return on Total Assets (%)	0.84	0.57
Return on Equity (%)	9.89	6.06
Earnings Per Share (Rs.)	4.83	2.77
Book value per share (Rs.)	51.37	46.24
Operating cost to Income (%)	53.44	57.06
Capital Adequacy Ratio (%) Basel (III)	12.39	13.93

Note:

1. The Bank has not appropriated proposed dividend (including tax) pursuant to change in Accounting Standard (AS) 4 âContingencies and Events occurring after the Balance sheet dateâ.

2. Previous year figures have been regrouped / reclassified, where necessary to conform to current year''s classification.

Highlights of performance

Growth in Business

During the year 2016-17, your bank has tried to bring in substantial and all-round improvement in various financial parameters. Total business of your Bank improved by 24.58%to reach at Rs.171000.84 Cr as on 31 March 2017. 23.36% growth in deposits and 26.25% growth in advances helped your bank to clock this number. Total deposits reached Rs.97664.57 Cr and advances reached Rs.73336.28Cr and on averages, deposit portfolio of your bank grew by 18.71% to reach Rs.86502.75Cr and advance portfolio grew by 22.31% to reach Rs.62787.70 Cr.

On the NR side, NRE deposits had a growth rate of 18.46% to reach Rs.36407.17 Cr and NRE Savings clocked a growth of 16.01% to reach Rs.10547.42 Cr. The total NR business of your bank stood at Rs.38577.93 Cr with a growth of 18.35%.

On CASA front, Savings deposit touched Rs.26397.67 Cr with 23.23% growth and Current deposits stood at Rs.5439.96 Cr with a growth of 27.02%. Your bank registered a healthy CASA growth of 23.86% to reach Rs.31837.63 Cr. CASA ratio of your bank stood at 32.60%.

The investment portfolio of your Bank has reached Rs.28196.09 Cr as on 31 March 2017. The average investment as on 31 March 2017 is Rs.25948.30 Cr.

Profitability

The Operating Profit of your Bank increased by 35.20% to Rs.1924.93 Cr and Net Profit of your bank is up by 74.66% to Rs.830.79 Cr. Healthy increase in core income streams, improving asset quality has helped your bank to have a sharp rise in profitability. Net Interest Income improved by 21.73% to Rs.3052.65 Cr while the Non-Interest Income rose to Rs.1081.81 Cr, showing a rise of 33.85%.

Total income of your Bank during the fiscal year 2017 recorded 14.06 % growth to reach Rs.9759.20 Cr. Income from advances increased by 15.46% to reach Rs.6545.68 Cr. The yield on advances stood at 10.43% and the yield on Investments at 8.13 %. The Net Interest Margin for the fiscal year is at 3.31% as against 3.14%, in the previous year.

Return on Average Equity and Return on Average Total Assets stood at 9.89 % and 0.84% respectively. Earnings per Share (face value of Rs.2 each) of the Bank, as on 31 March 2017 was Rs.4.83. Book value per share had increased to Rs.51.37 during FY 17.

Expenditure

Higher revenue growth and better cost management resulted in Cost / Income Ratio improving to 53.44% in 2016-17 as against 57.06% last year. The total expenses of your bank increased by 9.84%,to reach at Rs.7834.27 Cr and by an increase of 7.33%, interest expenses increased to Rs.5624.74 Cr in FY 17.Operating Expenses of the Bank during the fiscal year grew to Rs.2209.53 Cr. The cost of deposits of the Bank has come down during the year. The cost of deposits of the Bank is 6.25% as on 31 March 2017. The Interest expenses as percentage to total income stood at 57.64%.

Spread

During the fiscal year the Bank''s spread on advances (gross) increased to 4.18% and spread on investments (gross) stood at 1.88%. The Spread (net of provisions) on advance improved to3.53% from 3.02% of last year.

Asset Quality

The Gross NPA of your Bank as on 31st March 2017 stood at Rs.1727.05 Cr. Gross NPA as a percentage to Gross Advances is 2.33% which is lower than 2.84% as at the end of FY16. The Net NPA stood at Rs.941.20 Cr and this as a percentage to Net Advances is 1.28%. The Provision Coverage Ratio (including technical writeoffs) stood at 71.75%.

Net worth & Capital Adequacy

The Net Worth of your Bank grew by 11.42% to Rs.8856.47 Cr as against Rs.7948.96 Cr in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 12.39% which is considerably higher than the 9% stipulated by RBI. Of this, Tier 1 CRAR is at 11.81%.

Business Overview

Your Bank continued its consistent performance during FY 2016-17 with the total Business of the Bank increasing by 24.58% to Rs.171000.84 Cr.

Employee Productivity

Business per employee of your Bank during the period stood at Rs.14.66 Cr, an improvement of 21.88% for the year and the profit per employee of the Bank stood at Rs.7.12 Lakh during the fiscal.

Network Coverage

The Bank has 1252 branches and 1667 ATMs as on 31st March 2017. The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).

Share Value

Earnings Per Share (face value Rs.2/- each) of your Bank has improved from 2.77 to 4.83 during the year under review. Return on Equity during the year reached 9.89 % in the fiscal year ended 31 March 2017.

Dividend

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 45% i.e. Rs.0.90 per Equity Share on face value of Rs.2/- each for the year 2016-17 (previous year 35% i. e Rs.0.70 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders'' value has always been a guiding philosophy of the Bank.

Appropriations (in 000)

	FY 2016-17	FY 2015-16
Transfer to Revenue Reserve	13,14,286	4,54,011
Transfer to Statutory Reserve	20,76,971	11,89,120
Transfer to Capital Reserve	6,58,459	63,365
Transfer to/(from) Investment Reserve Account	(1,44,930)	(82,119)
Transfer to Special Reserve	4,60,000	3,20,000
Dividend (including tax/cess thereon) pertaining to previous year paid during the year	242	1,511
Proposed dividend	_-	12,03,289
Tax on proposed dividend	_-	2,45,274
Transfer to Share capital pursuant to issue of Bonus shares	_-	17,15,891
Balance carried over to Balance Sheet	1,45,12,668	1,05,69,814
Total	1,88,77,696	1,56,80,156

Note: 1. The proposed equity dividend (excluding dividend distribution tax) amounting to Rs.155.16 crore is not accounted as liabilities in fiscal 2017 in accordance with the revised AS 4 - ''Contingencies and events occurring after the balance sheet date.

Material changes and commitment affecting financial position of the bank

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the company and its future operations

There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future;

Dividend Distribution Policy

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend Distribution Policy and the same is annexed herewith as Annexure VIII. The Policy is hosted on the website of the Bank and can be viewed in the following link https://www.federalbank.co.in/ documents/10180/45777/Dividend Distribution Policy/1a3c7 d86-1d61-45c3-aa24-6ea421644de9

Deposits

Being a Banking company, the disclosures required as per Rule 8(5)(v)&(vi) of the Companies (Accounts) Rules,2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.

Increase of Capital

In FY 2016-17,The Paid Up Capital of the Bank was increased by an amount of Rs.1,01,97,140 by allotment of 50,98,570 ESOS shares of Rs.2/- each. The Paid up Capital of the Bank as on 31 March 2017 is Rs.344,80,90,828 consisting of 172,40,45,414 equity shares of Rs.2/- each.

Investor Education and Protection Fund

As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. On 18 October 2016 the Bank had transferred Rs.6743545/- to the above Fund, being the unclaimed dividend for the year 2009.

Employee Stock Option Scheme (ESOS)

The Bank has instituted an Employee Stock Option Scheme, duly approved by the shareholders of the Bank to enable its employees including whole time Directors to participate in the future growth and financial success of the Bank. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, work performance, grades, period of service, annual fixed pay, Bank''s performance and such other parameters as may be decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors.

The Bank''s shareholders had approved the scheme for issuance of stock options to employees including Whole Time Directors as on December 24, 2010.

The option conversion price was set to be the closing price on the day previous to the grant date. The compensation committee granted 3,47,20,200 options during the year 2011-12, 244,84,750 options during the year 2012-13, 260,94,250 options during the year 2013-14, 11156450 options during 2014-15, 10,25,000 options during the year 2015-16 and 9,65,000 options during the year 2016-17. The options granted which are non transferable, with vesting period of 1,2,3 & 4 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2017, 13564404 options had been exercised and 7,18,02,986. options were in force.

Other statutory disclosures as required by the SEBI guidelines/ Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 on ESOP are given in Annexure II to this report.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element of our fundamentals - right from the day the Bank was founded. Our founder''s values & ethos based on trust got embedded in the Bank''s policies & principles. CSR in Federal Bank began with the first act of cultivating banking habits in the agrarian society - to effectively utilize idle money for productive purposes.

Overview of some of the major CSR programs undertaken by the bank during FY 2016 - 17 are detailed in the Management Discussion and Analysis part of the Annual Report.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 2016-17 as per Section 135 of the Companies Act, 2013, comes to Rs.23.01 Crores. Amount spent by the Bank this year towards CSR was Rs.15.42 Crores. Through various projects which are already sanctioned, your Bank will be thoughtfully spending the CSR funds earmarked for the purpose. The ratio adopted was 80:20, wherein 80 % of the CSR funds will be utilized for long term sustainable projects and 20 % of the funds will be utilized to meet location specific requests. The Bank had also embarked on some major projects last year in the field of education, Youth engagement, skill development, support to differently abled etc. By choosing long term sustainable projects, Bank has taken an approach which brings steady and long lasting impact on society.

The details of the CSR activities of FY 2016-17 are mentioned in Annexure IV to this report.

Risk Management

The Board of Directors oversees the enterprise wide risk management functions of the Bank. A separate Risk Management Committee of the Board supervises the risk management functions, thereby bringing in a top to down focus on risk management. Integrated Risk Management Department co-ordinates and administers the risk management functions in the Bank. The Department has three dedicated divisions for managing Credit risk, Market risk and Operational risk. Dedicated teams within the Divisions are responsible for assessment, monitoring and reporting of risks across the Bank. The Bank has established an independent Mid Office as a part of Market Risk Division to monitor the Treasury activities. Business Continuity Plans & Information Security Plans also form part of risk management functions in the Bank. Risk Management policies are approved by Board of Directors, and reviewed from time to time. Executive level risk management committees, such as Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee, Business Continuity Management Committee and Information Security Committee regularly assess the functional efficiency of the Bank in risk management and refine the policies & processes. Responsibility for identification, measurement and controlling of risk in various spheres of activities of the Bank is vested with a Senior Executive designated as Chief Risk Officer, who reports directly to the Managing Director & CEO. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored. In our opinion presently there are no material risks which threaten the current functioning of the Bank.

Internal control systems and their adequacy

The Bank has through the years developed and stabilized an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit Policy of the Bank, duly approved and recommended by the Audit Committee of the Board, approved and adopted by the Board. In order to help Bank achieve its mission of adopting the best professional practices prevailing in the industry, while framing the policy, substantial inputs are taken from - Model Audit Manual on Internal & Concurrent Audit Systems in Public Sector Banks, ''The internal audit function in banks'' published by Basel Committee on Banking Supervision, RBI guidance note on Risk Based Internal Audit. At the enterprise level, the Inspection and Audit Department, on a continuous basis, assesses and monitors the effectiveness of the control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank''s processes and operations with regulatory guidelines, accounting procedures and Bank''s own internal rules and instructions. A department level committee called the ''Learning Committee'' meets on periodical intervals to discuss newly published Internal Circulars and RBI guidelines and notes the changes to be incorporated in the yearly review of Audit & Inspection Policy / Manual which ensures that Audit is dynamic. The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of Management and discussions in various committees towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section 138 of the Companies Act 2013, has designated the Head of Inspection and Audit Department as Internal Auditor. Audit being an independent function, the Internal Auditor is reporting to the Audit Committee of the Board of Directors (ACB). The Bank has various types of audit which inter-alia include Risk Based Internal Audit, Concurrent Audit and Management Audit. The Risk Based Internal Audit provides for Risk Rating of Branches. Serious findings and observations of all types are presented to Inspection Review Committee of Executives (IRCE) and reviewed by the Audit Committee of the Board. Other findings are discussed and analyzed by a department level committee called the ''Inspection Department Review Committee'' (IDRC) and its observations, are placed before IRCE.

The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the bank''s internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the bank and its reputation.

Vigil Mechanism/Whistle Blower Policy

Bank has a comprehensive ''Fraud Risk Management Policy'' and ''Whistle Blower Policy'' which are reviewed and updated from time to time. The Fraud Risk Management Policy covers the control systems and monitoring, surveillance and oversight mechanism for fraud prevention and control aimed at managing the risk of loss on account of frauds. Vigilance Department of the Bank has the twin roles of investigation of fraud and prevention of frauds. Preventive measures taken for enhancing the awareness of fraud risk and for promoting a culture of compliance among the employees include preventive vigilance workshops, preventive vigilance audits, circulation of modus operandi of frauds occurred in banking industry etc. Bank is also promoting customer awareness on frauds especially cyber frauds through different communication channels, as an effective tool in prevention of frauds. The ''Whistle Blower Policy'' of the Bank is named as ''Protected Disclosure Scheme'' as per the guidelines of RBI. The Protected Disclosure Scheme'' is available in Bank''s website and Bank''s intranet site. As per the Scheme, directors and employees of the Bank, customers, stakeholders, non governmental organizations (NGO) and members of general public can lodge complaints/disclosures under the scheme. The complaints/disclosures under the scheme would cover the areas such as corruption, misuse of office, criminal offences, suspected/ actual fraud, failure to comply with existing rules and regulations, acts resulting in financial loss/operational risk, loss of reputation etc detrimental to the interest of the Bank, the depositors and the public. No personnel have been denied access for giving any information as envisaged in the Protected Disclosure Scheme. Website link to Bank''s Whistle Blower Policy/Vigil Mechanism is http://www.federalbank.co.in/documents/10180/45777/ Whistle Blower policy/558aea51-1335-4546-9c9a-28c5030377a1

Subsidiary of the Bank

As on 31 March 2017, the Bank has one unlisted fully-owned subsidiary named Fedbank Financial Services Limited. Fedbank Financial Services Limited is a diversified Non-Deposit-Taking & Systemically Important (ND-SI) NBFC offering multiple loan products such as Loan against Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. It also distributes loan products of The Federal Bank Limited The total loan portfolio of Fedbank Financial Services Limited as on 31 March 2017 is Rs.962 Crores as against Rs.611 Crores as on 31 March 2016. The Profit After Tax of the company for the year ended 31 March 2017 increased to Rs.22.53 Crores from Rs.12.25 Crores for the year ended 31 March 2016.

Joint Venture in Life Insurance Business

The Bank''s Joint Venture Life Insurance Company, in association with IDBI Bank Limited and Fortis Insurance International N.V. (now Aegeas), namely IDBI Federal Life Insurance Company Limited (erstwhile IDBI Fortis Life Insurance Company Limited), commenced operations in March 2008. Currently the Bank has a total stake of Rs.208 Cr in the equity of the company holding 26 % of the equity capital. The total premium collected by IDBI Federal Life Insurance Company Limited during the period ended 31 March 2017 is Rs.1,565 Crore.

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including its subsidiary, Fedbank Financial Services Limited which is forming part of this report. The financial position and performance of its subsidiary/ Associate is given in the statement containing salient features of the financial statements of the subsidiaries/Associate Companies/Joint Venture, (Given as Annexure VII) which forms part of the consolidated financial statements.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and the consolidated financial statements has been hosted on its website www.federalbank.co.in. Further, as per fourth proviso to the said section, the audited annual accounts of the said subsidiary company of the Bank have also been hosted on the Bank''s website www.federalbank.co.in. The said documents have been hosted on the website of the subsidiary company of the Bank also, in compliance with the said section. The documents/details available on the Bank''s website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (''AS'') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its subsidiary for the year ended March 31, 2017 forms part of the Annual Report.

Corporate Governance

Corporate governance is essentially a set of standards, systems, and procedures aimed at effective, honest, transparent, and responsible management of a company within the applicable statutory and regulatory structures. This Code represents a set of desirable, corporate governance practices to be adopted by the Bank. The Code takes into account the relevant statutory and SEBI/stock exchange listing requirements and Reserve Bank of India (RBI) directives and other guidelines under the Companies Act 2013. The efficacy of the Code lies in how well it is put into practice. In adopting the Code, the stress is its substance and spirit rather than on its form.

Good corporate governance practices help support and strengthen corporate actions aimed at achieving the corporate objective. The Bank''s principle corporate objective, like that of any corporate business entity, is to perpetuate its business while protecting and enhancing, over the long term, the value of the investments of its shareholders in the Bank. A copy of the Code of Conduct for the Board of Directors and Management is available on Bank''s website.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act,201 3, SEBI (Listing Obligations and Disclosure Requirements) Regulations,2015 (âListing Agreementâ) and the Code of Corporate Governance adopted by the Bank. The Board comprises of ten Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, strategic planning, risk management and information technology.

During FY 2016-17 RBI approval was obtained vide letter No.DBR Appt No.1374/08.38..001/2016-17 dated 28th July, 2016 for reappointment of Mr. Shyam Srinivasan MD & CEO of the Bank for a further period of 3 years w.e.f 23rd September 2016 till 22nd September 2016. Mr. Ganesh Sankaran was appointed as Executive Director on the Board of the Bank, for a period of two years w.e.f 04th July 2016,for which RBI approval was obtained vide its letter no. DBR. Appt No.163/08.38.001/2016-17 dated 04th July 2016 and as such Mr. Ganesh Sankaran took charge as Executive Director of the Bank w.e.f 04th July 2016 after getting the RBI approval.

The first term of appointment of the Independent Directors of the Bank (Mr. Nilesh Vikamsey, Mr. K M Chandrasekhar, Mr. Dilip Sadarangani, Mr. Harish Engineer, Ms. Grace Koshie and Ms. Shubhalakshmi Panse) ends on 17th July 2017. The Bank has proposed their reappointment as Independent Directors in this AGM.

In the previous year AGM held on 11th August 2016, three Additional Directors were regularized as Directors with the shareholders approval. Mr. C Balagopal as Non-Executive Independent Director, Mr. Ashutosh Khajuria and Mr. Ganesh Sankaran as Executive Directors.

During the year Mr. K M Chandrasekhar took charge as the Chairman of the Bank w.e.f 01st March 2017 on the stepping down of Mr. Nilesh Vikamsey as Chairman for which RBI approval was obtained vide letter DBR.Appt.No.1062/08.38.001/2016-17 dated March 07, 2017.

Mr. Sudhir M Joshi, Independent Director of the Bank retired as Director from the Board of the Bank w.e.f 28th February 2017 on attaining seventy years of age, as per the regulatory requirements. The Board places on record their appreciation for the commendable contribution made by Mr. Sudhir M Joshi, as Independent Director during his tenure in the Bank.

Excluding the MD & CEO, Executive Director & Chief Financial Officer, Mr. Ashutosh Khajuria and Executive Director, Mr. Ganesh Sankaran, all other members of the Board are Non-Executive and Independent Directors. Necessary declarations were obtained from the Independent Directors as required under the RBI Regulations, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Companies Act. The remuneration and other benefits paid to MD & CEO of the Bank and Executive Directors during the year are disclosed in Annexure I to this Report and in Corporate Governance Report. The Non Executive Independent Directors, except Chairman of the Board , are paid only sitting fees for attending every meeting of the Board/ Committees of the Board within the limits as prescribed under the Companies Act, 2013. The Chairman of the Board (Mr. Nilesh S Vikamsey, upto 28th February 2017 and Mr. K M Chandrasekhar from 01st March 2017 ) are paid sitting fee for attending Board / Committee meetings and in addition to it an amount of Rs.1.25 lakhs per month(Rs.15,00,000/- per annum) as remuneration, as approved by the Board and RBI. The Bank has framed a Comprehensive Compensation Policy for Non-Executive Directors of the Bank(Other than Part Time Chairman) which is detailed in the heading Policy on Remuneration to Non-Executive Directors/Independent Directors. Mr. Ashutosh Khajuria, Executive Director & Chief Financial Officer of the Bank is liable to retire at this AGM in compliance with Section 152 of Companies Act, 2013, as required under the regulations regarding retirement of directors by rotation. The detailed profile of Mr. Ashutosh Khajuria, recommended for re-appointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of three Non Executive, Independent Directors, chaired by Ms. Grace Koshie, a Non-Executive Independent Director. The Committee was re-constituted once in the financial year 2016-17. The members of the Committee are Ms. Grace Koshie, Mr. Nilesh S Vikamsey and Ms. Shubhalakshmi Panse who are Non-Executive Independent Directors.

The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee incorporated in the Bank''s Code of Corporate Governance, are in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Companies Act, 2013 and RBI guidelines, which are detailed in Corporate Governance section of this report.

Independent Directors

In terms of the definition of Independence of Director as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Directors are Independent Directors of the Bank as on the date of this report:

1. Mr. K M Chandrasekhar (DIN- 06466854)

2. Mr. Nilesh S Vikamsey (DIN- 00031213)

3. Mr.Dilip G Sadarangani (DIN- 06610897)

4. Mr. Harish H Engineer (DIN- 01843009)

5. Ms. Grace Elizabeth Koshie (DIN- 06765216)

6. Ms. Shubhalakshmi Panse (DIN- 02599310)

7. Mr. C Balagopal (DIN- 00430938)

During the year a meeting of Independent Directors was conducted on 31 March 2017 to evaluate the performance of Board as a whole, evaluation of Non-Independent Directors and Chairman of the Board and assess the flow of information. The meeting was attended by all the Independent Directors of the Bank.

Women Directors

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 17(1 )(a) of the SEBI(Listing Obligations and Disclosure Requirements), Regulations 2015(L0DR Regulations) a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.

a) Qualifications, Experience and Knowledge

1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the Bank''s policies, operations, and needs. Not less than fifty-one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering, and technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry. The Bank shall ensure to include in its Board need based representation of skills such as marketing, technology & systems, risk management, strategic planning, treasury operations, credit recovery etc.

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The directors shall preferably be in the range of 35-70 years

b) Disqualification/Conflicts of interest

c) Suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include

1. integrity in personal and professional dealings.

2. wisdom and ability to take appropriate decisions.

3. ability to read and understand financial statements

4. ability to deal with others with a sense of responsibility, firmness, and cooperation.

5. refrain from any action that would lead to loss of his independence.

d) Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI-LODR Regulations, 2015.

The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank and a web link thereto is : https://www.federalbank.co.in/documents/10180//63602//Terms and conditions of Appointment of Independent Directo rs/4e33ba77-1cc5-42b4-aa02-ab4b84a62324

Policy on remuneration to Non-Executive Directors/ Independent Directors

The Policy of the Bank for the payment of remuneration to Non-Executive Directors/Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non Executive Directors/Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http://www. federalbank.co.in/shareholder-information As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy during FY 2016-17, Non- Executive Independent Directors of the Bank are paid only sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board/Committee meetings other than Non- Executive Part Time Chairman, who is paid remuneration in addition to sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board/Committee meetings, with the approval of RBI.

Policy on remuneration to MD & CEO, Executive Director, Key Managerial Personnel and other employees

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of compensation.

2. Alignment of compensation with prudent risk taking.

3. Effective supervisory oversight and stakeholder engagement.

Compensation of Managing Director & CEO, Whole Time Directors and senior Executives

(Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span. (Approval from RBI to be taken as per section 35B of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization''s performance is charted based on the performance scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through score cards for Managing Director & CEO /WTDs. The score card provides a mix of financial and non financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.

Compensation paid to Senior Executives and other staff members on IBA package

The compensation paid to other officials that include Award Staff, Officers coming under Scale I to III and Senior Executives coming under Scale IV to VII is fixed based on the periodic industry level settlements with Indian Banks'' Association. The variable compensation paid to functionaries is based on the Performance Linked Incentive Scheme, which has been formulated on the basis of performance parameters set in Performance Management System. The scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package has been revised consequent to the 10th Bipartite Settlement.

Policy on Board Diversity

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also take into account factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board ;usher in independence in the performance of the Board; eradicate the gender bias in the Board; achieves sustainable and balanced performance and development ;support the attainment of strategic objectives & also ensures compliance of applicable law/s and good corporate practices.

The Nomination Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments, the requirement as per the Companies Act,2013 for appointment of atleast one woman director on the Board of the Bank will also be considered.

Key Managerial Personnel who were appointed or have resigned during the year

In compliance with Section 203 of the Companies Act, 2013, no Key Managerial Personnel have been appointed or have resigned during FY 2017.

Management Discussion and Analysis

Loans, guarantees or investments in securities

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except subsection (1), do not apply to a loan made, guarantee given or security provided by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Internal Complaints Committees

Bank had constituted Internal Complaints Committees, as per letter and spirit contained in the provisions of âThe Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013â, at 9 Zones and Head Office to prevent and redress the complaints relating to sexual harassment and to organize workshops/ awareness programs to empower women employees while handling cases relating to sexual harassment. Workshops/ awareness programs regarding women empowerment were conducted at various locations pan India. The data with regard to the redressal of complaints by the Internal Complaints Committees is as follows:

a) No. of complaints received for the year FY2017: 0

b) No. of complaints disposed of during FY 2017 : 0

c) No. of cases pending for more than 90 days : Nil

d) Nature of action taken by the employer/ District Officer: NA

Board evaluation

Thereafter a separate exercise was carried out to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the Non Independent Directors were carried out by the Independent Directors. The Nomination, Remuneration, Ethics and Compensation Committee carried out the performance evaluation of all the Directors of the Bank. The Directors expressed their overall satisfaction with the evaluation process.

I) Performance Evaluation of Non-Independent Directors (MD & CEO and Executive Director)

Criteria for Evaluation include:

Evaluation Outcome

i) Attendance of MD & CEO and EDs at the Board and Committee meetings was good; ii) They present financial reports to the Board on a regular basis and submits an annual budget for Board review, revision and approval; iii) They regularly appraise the Board on the organization''s financial position and operational budgets that aids the Board to make informed financial decisions; iv) The Executives constantly endeavor to enhance internal control processes, monitor execution of policies and are very receptive to suggestions. v) The MD & CEO has adequate qualities of leadership in developing strategy & execution for achieving them vi) The MD & CEO and EDs adequately endeavor to Implement Board decisions and are very strong in media interactions and have put in efforts in building and reinforcing the Brand and Image of the Bank. vii) MD & CEO demonstrates his commitment to the Organisation goals, is ethical, motivates & guides employees for better performance. viii) His personal rapport and good relationship with industry forums / regulatory bodies, etc are highlights and testimony of the respect and prominence of Federal Bank in the Indian banking landscape.

II) Performance Evaluation of Independent Directors including Chairman Criteria for evaluation include:

i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depth prior to meeting and active participation at the meeting iii) Contributes to discussions on strategy as opposed to focus only on agenda iv) Participate constructively and actively in the Committees of the Board in which they are chairpersons or Members v) Exercises his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board vi) The Director remains abreast of developments affecting the company and external environment in which it operates independent of his being appraised at meetings vii) Knowledge and Competency: a) How the person fares across different competencies as identified for effective functioning of the entity and the Board b) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates viii) Whether the person demonstrates highest level of integrity, including conflict of interest disclosures, maintenance of confidentiality, etc

Evaluation Outcome

The evaluation done, brought out the fact that good attendance of Independent Directors was there in the Board and committee meetings. They are knowledgeable, ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as Independent directors. The Independent Directors also demonstrates highest level of integrity, including conflict of interest disclosures and maintenance of confidentiality. It was also noted that the Independent Directors exercises his/ her skills and diligence with due and reasonable care and brings an independent judgement to the Board and also the Directors remains abreast of developments affecting the company and external environment in which it operates.

III) Performance Evaluation of Board and Committees

A. Criteria for Evaluation of Board include:

If Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success, representing sectors laid down by the regulators, given its current and future position ii) New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization''s activities, the Board encourages a culture that promotes candid communication iii) The Board oversees management''s procedures for enforcing the organization''s code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board iv) The Board oversees risk management through inputs from the Risk Management Committee v) The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures vi) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank vii) The Board oversees the compliance processes viii) The Board views the organization''s performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc. ix) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company.

x) The Board has defined an effective Code of Conduct for the Board and Senior Management.

xi) Whether the Board monitors and manages potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions

B. Criteria for Evaluation of Committees include:

i) The Committee''s Terms of Reference and composition is reviewed annually and is found to be constituting of Directors representing sectors laid down by the regulator and continue to be appropriate

Evaluation Outcome of Board/Committees

i) The structure and composition of the Board is appropriate with adequate number of Directors and a good balance of diverse professional backgrounds, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success in it''s current and future position; ii) The proportion of independent to non-independent directors is good; iii) The Board demonstrates integrity, credibility, trustworthiness, active and effective participation at Board & Committee meetings which are held at reasonable and regular intervals; iv) The Board and Committee processes and procedures are good with different committees reviewing different functional areas of the Bank''s operations. v) The Board and its Committees also reviews Bank''s performance, risk management, financial reporting, compliances, technology, operations with adequate frequency of meetings etc.

IV) Assessment of flow of information

Criteria for Evaluation include:

The agenda and related information are circulated in advance of meetings to allow board members sufficient time to study and understand the information, Information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board, periodically, etc. Update on the compliance with the regulatory, statutory or listing requirements are placed before the Board.

Evaluation Outcome

The flow of information to the Board and its committees is generally good.

Evaluation of Senior Management Personnel in the Bank

The compensation paid out to KMP is divided into two components . The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span.

The variable compensation to Senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization''s performance is charted based on the Revenue Point Index / Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay are paid purely based on performance. Key Performance Indicators (KPAs) to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs. An ED level Committee has been constituted for reviewing the linkage of risk based performance with remuneration, for employees above Level 5. The Committee with the assistance of Risk Department & HR will study the business and industry environment, analyze and categorize the risks into immediate and long term and streamline the components of the compensation plan like proportion of the total variable compensation to be paid to Senior Employees so as to ensure financial stability of the organization. These committees would also analyze various factors to ascertain whether cost/ income ratio supports the remuneration package provided to Senior Executives and other officials consistent with maintenance of sound capital adequacy ratio.

Meetings

During the year eleven Board meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per the Listing Regulations.

Related Party Transactions

Business Responsibility Report

As stipulated in the Listing Regulations the Business Responsibility Report describing the initiatives taken by the Bank from environmental, social and governance perspective forms part of the Annual Report. Business Responsibility Report as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been hosted on the website of the Bank (https:// www.federalbank.co.in/shareholder-information) Any Member interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.

Technology and digital updates and measures taken in IT governance, Information security, IT audit, IT operations, IT services outsourcing

Technology and Digital updates:

During the financial year under review, your Bank focused extensively on Digital Banking. In line with the nation''s drive towards Digital India, the Bank introduced a range of innovative products in the Digital Banking arena. A few examples are:

a) BYOM or Be Your Own Master

Federal Bank BYOM is a step towards redefining the way of retail lending in banking. Through BYOM a customer can avail a personal loan anytime, anywhere, available 24*7. Through this product customer gets the loan amount credited to his/ her operative account instantly within seconds. This facility neither requires a customer to visit a branch nor does require signature on any documents. BYOM is a web application that can be accessed on a computer or tablet or mobile device.

We have seen tremendous response to the product within hours of the launch of the product. The offers are given to the customer periodically during festive seasons. The product has been widely accepted by our customers, which has resulted in an incremental growth of this portfolio. Considering the immense potential the product offers, we look forward to utilize the platform to include more customers. The engine is capable of processing other retail loans, online consumer finance and can also integrate with online web/ mobile applications, making it versatile.

b) 4TiGO

Federal Bank associated with a Fintech startup company 4TiGO for developing a UBER type technology platform for trucks. 4TiGO developed a mobile platform which is expected to transform the industrial logistics ecosystem for greater efficiency and effectiveness by creating a networked community of fleet owners, Transport agents, brokers, truckers and transport companies.

Now Agents, Consigner, Consignees, Fleet owners can become the part of a mobile network and people can online book their shipments and pay when the shipment reaches the destination.

The app handles the complete dynamics of transport and your Bank is providing the technology for 4TiGO to handle the complex end to end financial transactions.

c) UPI and Merchant Services

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood. It also caters to the âPeer to Peerâ collect request which can be scheduled and paid as per requirement and convenience.

With the above context in mind, NPCI conducted a pilot launch with a few member banks. The pilot launch was on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their UPI enabled Apps on Google Play store from 25th August, 2016 onwards.

Your Bank is proud to become one among the banks which piloted a UPI PSP app as per the mandates of NPCI so be a part of the historical UPI network, which is supposed to change the whole concept of payment in the country. India is the only country with such a unique inter-operable payment technology which can help billions of Indians to connect to a common payment network called UPI. LOTZA is available for download in Playstore.

Federal Bank''s Lotza UPI Merchant services were launched by the Bank to support merchants go digital by connecting to the UPI platform. Lotza scan and pay, which is one among the Lotza UPI merchant services, helps small merchants to accept payments from any UPI based mobile app like BHIM or Lotza by just scanning the QR code displayed at the shop. The shopkeeper gets an instant SMS confirmation, once payment is received. For larger merchants, there are two products, one is the Lotza - Merchant app which can generate a dynamic QR code and the customers can just scan the QR and make the payment using BHIM/Lotza or any other UPI app. The app notifies the merchant or cashier upon receipt of the payment. This is useful in supermarkets, restaurants, fuel stations etc. Then Bank has uPOS, which is an alternative to the traditional POS machine that can generate a printed receipt upon a successful transaction. This offering is an important innovation from the Bank which will be soon integrated with Aadhaar Enabled Payment Service enabling payments using Aadhaar number and fingerprint.

d) Fed Book Selfie-Lite

Fed Book Selfie-lite is the latest version of the Bank''s instant account opening mobile app FedBook Selfie. The new version allows customers to open and operate new Bank account instantly. FedBook Selfie has revolutionized the way customers open their Savings Bank accounts now. The app uses the Aadhaar OTP based e-KYC service to authenticate the customer and open the account. The app converts automatically into an electronic passbook once the customer successfully completes account opening. The app was launched post demonetization with a view to help citizens of the country to open accounts with much ease, without the need to visit a Bank branch.

e) Fed e-POS

e-POS is an innovative payment system that helps merchants to accept payments through cards/net banking without a physical POS (Point Of Sale)terminal. Demonetization resulted in massive demand for POS machines in the country. However, there is a demand-supply mismatch and as a result, merchants find it difficult to get hold of a POS machine. e-POS as an innovation helps merchants to accept payments using debit/credit cards. Merchants who wish to use this facility can register in the e-POS portal of Federal Bank. After registration, merchants can use this platform to bill a customer by capturing Mobile Number of the customer, Bill Amount and Bill Number. Once submitted, the customer receives an SMS with instructions to make payment. Customers can use the link available in the SMS to make payments using his debit/credit card or net banking.

The financial year also saw the Bank upgrade the Core Banking Solution (CBS) and move to a higher version of Finacle. This investment in the latest technology in the industry puts your Bank in a strong position to drive towards higher automation and straight through processing while at the same time, enhances the ability to leverage new technology like block chain, artificial intelligence and robotics process automation.

Information Technology (IT) Governance:

IT governance is the processes that ensure the effective and efficient use of IT in enabling our organization to achieve its goals. It is an integral part of corporate governance and consists of the organizational structures, leadership and process that ensure IT sustains and extends the organization''s strategy and objectives. The governance of IT is effectively supervised by the Board of Directors through the IT & Operations Sub-Committee of the Board. The IT & Operations Committee, that meets on a quarterly basis, is chaired by an independent Non Executive Director and has 2 Non Executive Directors as members, along with the MD & CEO. All members of the Committee have extensive experience in IT & Operations and are able to provide effective guidance and direction to the management team.

Executive level committees which oversee the IT governance function include the Operations Risk Management Committee (ORMC), the Information Security Committee (ISC) and the Project Steering Committee (PSC).

The Bank is conducting employee and customer awareness on cyber frauds, vishing/phishing attacks etc through SMS, eMails and popup messages in banks'' website and mobile banking applications. Bank has done separate awareness workshops for Directors on the cyber frauds and its impacts. Bank has implemented most of the Gopalakrishna Committee recommendations on Information Security, Electronic Banking, Technology Risk and Cyber Fraud. The progress of pending items for implementations are followed up for completion in a time bound manner.

AUDITORS

Statutory Audit

M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, carried out the statutory central audit of the Bank during Financial Year 2016-17. Additionally 1231 number of branches / offices were subjected to branch statutory audit by various branch auditors appointed by the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank, except 1 branch which was unaudited. The resolution for the appointment of M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, as the Joint Central Statutory Auditors of the Bank from the conclusion of the 86th Annual General Meeting till the conclusion of 87th Annual General Meeting is placed in the Notice to shareholders for AGM.

Secretarial Audit

The Board had in its meeting dated 22 December 2016, appointed M/s. SVJS & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Financial Year ended 31 March 2017, in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report is annexed herewith as âAnnexure Vâ.

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2016-17 also. Technology and digital has taken centre stage and your Bank continues to focus on innovation with customer convenience.

For the innovative online loan platform BYOM (Be Your Own Master), your Bank has won SKOCH Smart Technologies Gold Award in 2016. Your Bank has also won the MasterCard Innovation Awards 2016 under the categories ''Debit Cards Initiatives'' and ''Acquiring Business Initiatives''. The Bank won the award in the ''Debit cards Initiatives'' category for the launch of Soft PIN service, which enables the Bank''s customers to set PIN for their debit cards through any of the bank''s ATMs thus enabling them to activate their cards even without visiting the branch. Your Bank was also adjudged the winner in the ''Acquiring Business Initiatives'' category for the Easy Payments Fee Payment portal, which facilitates any institution that subscribes to the service to accept online remittances apart from the normal branch remittance. Your Bank was awarded as ''The Best Performed Old Private Sector Bank in Kerala for the year 2015-16'' by State Forum of Bankers Club Kerala. On HR front your Bank has received the prestigious 6th Annual Greentech HR Award for âTechnology Excellence in HRâ. This award is a recognition for various technological HR platforms like FAME, Fed E HRM, HR Direct & Fed Campus.

Energy conservation, technology absorption, foreign exchange earnings and outgo

Extract of Annual Return

Pursuant to sub-section (3) of Section 92 of the Companies Act,2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the details forming part of the extract of the Annual Return as at March 31,2017 in form MGT 9 is annexed herewith as Annexure III.

Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended forms part of this report as Annexure I.

Stock Exchange Information

The Bank''s Equity Shares are listed on:

1. BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001 and

2. National Stock Exchange Ltd. âExchange Plazaâ, Bandra â Kurla Complex Bandra East, Mumbai - 400 051.

3. The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Director''s Responsibility Statement

In accordance with Section 134(3)(c), 134(5) of the Companies Act, 2013, your Directors state that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(d) the directors have prepared the annual accounts on a going concern basis.

(e) the directors have laid down the internal financial controls followed by the Bank and that such internal financial controls are adequate and are operating effectively.

(f) the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, rating agencies and Stock Exchanges for their wholehearted support.

For and on behalf of the Board of Directors

Aluva K M Chandrasekhar (DIN 06466854)

07 June 2017 Chairman of the Board

Mar 31, 2015

Dear Members,

The Board of Directors has immense pleasure in presenting this 84th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended March 31, 201 5.

Financial Results Amount(Rs. in Crore)

Financial Parameters for the year ended 31 March 2015 31 March 2014

Net Interest Income 2,380.41 2,228.61

Fee and Other Income 87831 693.85

Net Revenue 3,258.72 2,922.46

Operating Expense 1,630.93 1,442.07

Operating Profit 1,627.79 1,480.39

Net Profit 1,005.75 838.89

Profit brought forward 787.36 516.38

Total Profit Available for appropriation 1,355.27

Appropriations:

Transfer to Statutory Reserves 251.66 209.73

Transfer to Revenue Reserves 109.87 103.07

Transfer to Capital Reserves 28.76 17.95

Transfer to Investment Reserve 46.28 -

Transfer to Special Reserves 38.23

Proposed Dividend 188.49 171.06

Provision for Dividend Tax 38.37 27.87

Depreciation on Expired assets 2.31 -

Balance Carried over to Balance Sheet 787.36

Financial Position (as on)

Deposits 70,824.99 59,731.28

Advances 51,284.99 43,436.10

Total Business (Deposits Advances) 1,22,109.98 1,03,167.38

Other Borrowings 5,687.96

Investments 24,409.19 24,117.85

Total Assets ( Balance Sheet Size) 82,850.48 74,594.15

Equity Capital 171.33 171.06

Ratios

Return on Total Assets (%) 1.20

Return on Equity (%) 13.77 12.80

Earnings Per Share (Rs) 9.81

Book value per share (Rs) 90.33 80.36

Operating cost to Income (%) 50.05 49.34

Capital Adequacy Ratio (%) Basel (III) 15.46 15.14

Highlights of Performance Growth in Business

Total business of your Bank reached Rs. 1 221 09.98 Cr as on 31 Mar 201 5. Total deposits increased by 1 8.57% from Rs. 59731.28 Cr in FY''14 to Rs. 70824.99 Cr in FY''15. The total advances of your Bank stood at Rs. 51 284.99 Cr at the end of the year.

Average deposit portfolio of the bank had grown by 11.43% to reach Rs. 63342.04 Cr and average advance portfolio had grown by 11.42% to reach Rs. 46689.24 Cr.

NRE deposits led the path showing a growth rate of 27.71%, an increase from Rs. 1 8973.56 Cr to Rs. 24230.90 Cr and Retail deposits followed the suit by growing @ 1 7.86 % from Rs. 57269.57 Cr to Rs. 67499.05 Cr. CASA deposits also displayed a growth of 17.11 % to reach, Rs. 21 549.57 Cr from '' 1 8400.79 Cr.

The Savings deposits of the Bank has touched to 1 7726.91 Cr by growing 1 5.98% over that of the previous fiscal of Rs.1 5284.26 Cr.

The investment portfolio of the Bank registered a growth of 1.21% to reach Rs. 24409.1 9 Cr from Rs. 2411 7.85Cr in the previous fiscal. The average investments on Y-o-Y registered a growth of 4.23% basis as compared to the previous fiscal year.

Net Profit

During the year ended March 31, 2015, your Bank clocked a net profit of Rs. 1005.75 Cr.

As a result of refinement in asset quality, the Bank could rein in the total provisioning to Rs. 622.04 Cr. This was mainly aided by a reduced loan loss provisioning of Rs. 204.35 Cr (even at a provi- sion coverage ratio of 83.94%). An amount of Rs. 51 5.29 Cr was earmarked for taxes.

Return on Average Equity and Return on Average Total Assets stood at 13.77 % and 1.32 % respectively.

Earnings per Share ( face value of Rs 2 each) of the Bank, as on 31 st Mar 201 5 was Rs. 11.75 comparable to Rs. 9. 81 in the previous year. Book value per share has increased from Rs 80.36 in FY 14 to Rs. 90.33 during FY 15.

Operating Profit

The Operating Profit of your Bank had grown as compared to previous year to reach Rs. 1 627.79 Cr

The Net Interest Margin of the Bank for the year stood at 3.27 %, despite the interest rate volatility. Net Interest Income of the Bank for the period increased to Rs. 2380.41 Cr from Rs. 2228.61 Cr. During the financial year ended 31 st March 201 5, the total non- interest income of the Bank grew to Rs. 878.31 Cr.

Expenditure

The fiscal year ended 2015 witnessed an increase in the total expenses of the Bank which reached Rs 6669.98 Cr from Rs.61 59.53 Cr, an increase of 8.29%. Interest expenses increased to Rs. 5039.05 Cr in FY 15 from Rs. 471 7.46 Cr in FY 14. Operating Expenses of the Bank during the fiscal year grew from Rs1442.07 Cr to Rs.1630.93 Cr. This is mainly due to increase in salary & allowances, expenses related to branches expansion etc.

The cost of deposits of the bank has come down during the year. The cost of deposits is 7.31% as compared to 7.40% in the previous year. Average Cost of all funds (Deposits Borrowings Bonds) recorded a marginal decrease and reached 7.44 % from 7.56 %. The Interest expenses as percentage to total income stood at 60.73 %. The Cost to Income ratio of the Bank stands at 50.05 % (49.34 % in FY 2014)

In the current fiscal, the CASA to Total deposits of the Bank de- creased marginally from 30.81% in FY14 to 30.43% in FY15. However, the deposit mix resulted in higher interest expense of Rs.5039.05 Cr, an increase of 6.82% over previous year.

Income

Total income of the Bank during the fiscal year 2015 recorded 8.61 % growth to reach '' 8297.77 Cr from the previous fiscal year figure of '' 7639.92 Cr. The interest income component grew by 6.82 % Y-o-Y while other income increased to Rs. 878.31 from Rs. 693.85 Cr.

Income from advances increased by 8.70 % to reach Rs. 5446.83 Cr from Rs. 5011.08 Cr. At the same time, income from investments registered a steep rise to reach Rs. 1 835.92 Cr from Rs. 1 776.83 Cr clocking a 3.33 % annual growth.

The yield on advances stood at 11.67% and the yield on Invest- ments at 7.1 2 %. The Net Interest Margin for the fiscal year is at 3.27% as against 3.32 %, in the previous year. Focused attention on streams of fee based income and other income resulted in an increase of 26.58%. The total other income grew to Rs. 878.31 Cr in the current fiscal from Rs. 693.85 Cr in the previous fiscal.

Spread

During the fiscal year the Bank''s spread on advances (gross) de- creased to 4.36% from 4.55 % and spread on investments (gross) stood at 0.80% from 0.44 %. The Spread (net of provisions) on advance decreased to 3.92% from 4.01 % of last year.

Loan Asset Quality

In the fiscal 2014-1 5, your Bank consolidated its credit underwrit- ing processes through Hub System which was implemented a few years back. The coordinated efforts of National Credit Hub, Credit Monitoring Cells and the Stressed Assets Management Cell ensure that fresh slippages were reduced to a large extent.

The Bank''s Gross NPA and Net NPA stood at 2.04 % and 0.73% respectively as at the end of 31 st March 201 5 as against 2.46% and 0.74%, respectively during 2013-14.

The total provisions held against non-performing advances, ex- pressed as a percentage of gross NPAs amounted to 83.94 % (including technically written off accounts) at the end of FY 2014- 15.

The Bank managed its NPA portfolio prudently, by considering and executing all options viz. SARFAESI, Compromise, Lok Adalat and DRT that offered the best return to the Bank.

Provision Coverage

As on 31st March 2015, the Bank held a total provision of Rs.666.38 Cr. Provision coverage for NPAs as at 31st March 2015 stood at 63 %. As on 31st March 2015, the provision coverage ratio of the Bank, including written off accounts is 83.94 %. As per the RBI directive, Banks should hold minimum provision coverage of 70 % including technically written off accounts.

Capital Adequacy

Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 15.46% which is considerably higher than the 9 % stipu- lated by RBI. Of this, Tier 1 CRAR is at 14.81 %.

Share Value

Earnings Per Share (face value Rs. 2 /- each) of your Bank has in- creased from Rs. 9.81 to Rs. 11.75 during the year under review. Return on Equity during the year reached 13.77 % in the fiscal year ended 31 st March 201 5.

State of the Affairs of the Bank

Your Bank continued on its consistent performance during FY 2014-1 5 with PAT crossing the land mark figure of Rs. 1 000 Crore. The total Business of the Bank increased by 18.36% to Rs.122109.98 Cr for the year ended 31st March 2015.

There is no change in the nature of business of the Bank for the year under review. Further information on the Business overview and outlook and State of the affairs of the Bank is discussed in detail in the Management Discussion & Analysis.

Dividend

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 11 0% i.e. Rs.2.20 per Equity Share on face value of Rs. 2/- each for the year 2014-1 5 (previous year 100% i.e Rs. 2 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Enhancing shareholders value has always been a guiding philosophy of the Bank.

The amounts, the Bank proposes to carry to any reserves

Reserve Amount (Rs. in Crore)

Transfer to Revenue Reserve 109.87

Transfer to Statutory Reserve 251.66

Transfer to Capital Reserve 28.76

Transfer to Investment Reserve Account 46.28

Transfer to Special Reserve 35.00

There are no material changes affecting the financial position of the company which have occurred between the end of the finan- cial year of the company to which the financial statements relate and the date of the report.

There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company''s operations in future;

Deposits

Being a banking company, the disclosures required as per Rule 8(5)(v)&(vi) of the Companies (Accounts) Rules,2014, read with Section 73 and 74 of the Companies Act, 201 3 are not applicable to your Bank.

Increase of Capital

The Paid Up Capital of the Bank was increased by an amount Rs. 26,86,824/- by subscription of 13,40,412 ESOS shares of Rs. 2/- each and subscription of 3000 Rights-2007 released from abeyance. The Paid up Capital of the Bank as on 31.03.201 5 is Rs.1 71,33,1 0,394/- consisting of 8566551 97 shares of Rs. 2/- each.

Employee Productivity

Business per employee of the bank during the period stood at Rs. 11.15 Crore and the profit per employee of the Bank stood at Rs. 9.38 Lakh during the fiscal.

Employee Stock Option Scheme (ESOS)

The Bank has instituted an Employee Stock Option Scheme to enable its employees including whole time Directors to participate in the future growth and financial success of the Bank. Under the Scheme 4,27,58,250 options can be granted to the employees. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, work performance, grades, period of service, annual fixed pay, Bank''s performance and such other parameters as decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors

The Bank''s shareholders had approved the scheme for issuance of stock options to employees including whole time Directors on December 24, 201 0.

The option conversion price set has to be the closing price on the day previous to the grant date. The Compensation Com- mittee granted 1,73,60,100 options during the year 2011-12, 1,22,42,375 options during the year 2012-13, 130,47,125 options during 2013-14 and 55,78,225 options during 2014-1 5. The options granted which are non transferable, with vesting period of 1,2,3 & 4 years subject to standard vesting conditions, and must be exercised within five years from the date of vesting. As on 31 March 201 5, 14,14,692 options had been exercised and 4,05,62,093 options were in force.

Other statutory disclosures as required by the SEBI guidelines on ESOP are given in Annexure II to this report.

Investor Education and Protection Fund

As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. On 15.10.2014 the Bank had transferred Rs. 41,80,576/- to the above Fund, being the unclaimed dividend for the year 2007.

Expansion of Network

Your Bank has 1247 branches and 1485 ATMs as on 31st March 2015. The Bank had opened additional 73 branches and 1 26 ATMs during the year to improve its footprint throughout the country including un-banked centers as per RBI''s guidelines. The Bank had opened maximum number of branches in the states of Tamilnadu, Punjab, Gujarat, Karnataka and Maharashtra and also Kerala.

Corporate Social Responsibility CSR Policy

For us in Federal Bank reaching out to people who needs assistance is part of the values passed down by our Founder Shri K P Hormis. The objectives we intend to achieve through our CSR programs aim at developing communities and create a sustainable future for the generations to come. Our activities touch a wider footprint through areas like Health, Education, Woman empowerment, En- vironment sustainability, and other activities as permitted under Companies Act, 2013, all aimed at creating a meaningful differ- ence in the society where we live and operate in.

Objectives

i. To identify and implement CSR projects aimed at uplifting the weaker sections of the social strata and to support the needy, disabled and elderly people.

ii. To empower youth, children and woman through Skill building programs

iii. To get involved in activities that can build a sustainable environ- ment for future generations

Geographical Coverage

Bank with its presence pan India, will be extending its CSR activi- ties across all geographies.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 201 5 as per Section 135 of the Companies Act 2013 comes to Rs. 23.83 Crores. Amount spent by the Bank this year towards CSR was Rs. 7.27 Crore. Your bank is committed to increase its CSR impact including the balance amount of Rs. 16.56 Crore for FY 2015. Since long term sustainability is a key factor that will decide success of CSR programs, a steady and cautionary approach was adopted in the first year so that sufficient platform/expertise is build to take forward Bank''s CSR activities in the future.

Risk Management

The Board of Directors oversees the enterprise wide risk man- agement functions of the Bank. A separate Risk Management Committee of the Board is in place for bringing in a top to down focus on risk management. Risk management is coordinated and administered by the Integrated Risk Management Department. The Department has three dedicated divisions for credit risk, market risk and operational risk management. Treasury activi- ties are separately monitored by the Mid Office, which is a part

of Integrated Risk Management Department. Business Continu- ity plans and Information Security plans also form part of risk management functions in the Bank. Bank has also established a Transaction Monitoring Cell to provide a 360 degree surveil- lance coverage of the operations of the Bank. Risk Management policies are approved by the Board of Directors, and reviewed from time to time. Executive level risk management committees, such as Credit Risk Management Committee, Asset Liability Man- agement Committee, Operational Risk Management Committee, Business Continuity Plan Committee, Information Security Com- mittee, regularly assess the functional efficiency of the Bank in risk management and refine the policies and processes. Responsibility for identification, measurement and controlling of risk in various spheres of activities of the Bank is vested with a senior executive at the level of General Manager, who functions as the Chief Risk Officer of the Bank, reporting to the Managing Director & CEO. All material risks of the Bank, emerging in the course of its business are identified, assessed and monitored and in our opinion present- ly there is no material risk which threatens the current functioning of the Bank.

Internal Control Systems and their adequacy

The Bank has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Inspection and Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Bank, its compliance with operating systems, accounting procedures and policies based on the internal audit reports. The scope and authority of the Internal Audit function is defined in the Audit Policy of the Bank.

The audit findings are discussed in the internal committees of the Bank and corrective action in their respective areas are undertaken to strengthen the controls. Significant audit observations and cor- rective actions thereon are presented to and reviewed by the Audit Committee of the Board.

Vigil Mechanism/Whistle Blower Policy

Bank has comprehensive "Fraud Risk Management Policy" and "Whistle Blower Policy" which are reviewed and updated from time to time. The Whistle Blower Policy is available in Bank''s website and Bank''s intranet site. As per the Whistle Blower Policy, Directors and employees of the Bank, customers, stakeholders, non governmental organizations (NGO) and members of general public can lodge complaints/disclosures under the scheme. Vigi- lance Department of the Bank has the twin roles of investigation of frauds and prevention of frauds. Preventive measures for en- hancing awareness of fraud risk and for promoting a culture of compliance among the employees preventive vigilance audits, vigilance workshops, circulation of modus operandi of frauds

occurred in banking industry etc are done. Bank is also promoting customer awareness on frauds especially cyber frauds through dif- ferent communication channels, as an effective tool in prevention of frauds.

Website link to Bank''s Whistle Blower Policy/ Vigil Mechanism is http://www.federalbank.co.in/documents71 01 80//44686// Whistle Blower policy.pdf/67c51 21 d-ac8d-4861 -b801 - 5a6ee891 3b4e

Subsidiary and Audited financial statements of the Bank''s Subsidiaries

Fedbank Financial Services Limited is a fully-owned subsidiary of the Bank. The audited financial statements, the Auditors Report thereon and the Board''s Report for the year ended March 31, 2015 of Fedbank Financial Services Limited, is available on the website of the Bank as required under the regulations.

Joint Venture in Life Insurance Business

The Bank''s joint venture Life Insurance Company, in associa- tion with IDBI Bank Limited and Fortis Insurance International N.V. (now Aegeas), namely IDBI Federal Life Insurance Company Limited, (erstwhile IDBI Fortis Life Insurance Company Limited) commenced operations in March 2008. Currently the Bank has a total stake of Rs. 208 Crore in the equity of the company holding 26% of the equity capital.

Corporate Governance

The Bank has adopted a Code of Corporate Governance which while taking care of and safe guarding the interest of sharehold- ers and all other stakeholders also provides good management, adoption of prudent risk management techniques. The Code of Corporate Governance and Code of Conduct for the Board of Di- rectors and Management was amended with effect from January 1 5, 201 5 with the approval of the Board to keep pace with the changing governance structure and to comply with requirements of Companies Act, 201 3, Lisitng Agreement and other regulations applicable to the Banking sector.

The Code also aims at identifying and recognizing the Board of Directors and the Management of the Bank as the principal in- struments through which good corporate governance principles are articulated and implemented, giving utmost importance to identify and recognize transparency, accountability and fair treat- ment amongst all the stakeholders, which is in tune with statutory and regulatory structures. A copy of the Code of Corporate Gov- ernance and Code of Conduct for the Board of Directors and Management is available on Bank''s website.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act,2013, Listing Agreement, and the Code of Corporate Governance adopted by the Bank. The Board comprises of nine Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, ac- countancy, MSME, finance, small scale industry, agriculture, and information technology.

Ms. Shubhalakshmi Panse was appointed as an Additional Inde- pendent Director on the Board of the Bank w.e.f. 29.04.2014 who was appointed as an Independent Director by the shareholders of the Bank at the Annual General Meeting of the Bank held on July 17, 2014.

Dr. M.Y Khan ceased to be a director of the Bank w.e.f. 24.06.2014, on completing seventy years of age as per Code of Corporate Gov- ernance. The Board places on record their appreciation for the commendable contribution made by Dr. M.Y Khan, as a Director, during his tenure in the Bank.

Mr. Abraham Chacko, Executive Director of the Bank retired as Director from the Board of the Bank w.e.f 30.04.201 5 on comple- tion of his term of office.

Excluding the MD & CEO, all other members of the Board are Non-Executive and Independent Directors. Declaration has been obtained from the Independent Directors as required under the RBI Regulations, Listing Agreement and Companies Act. The re- muneration and other benefits paid to MD & CEO of the Bank and Executive Director during the year are disclosed in Annexure I to this Report and in Corporate Governance report. The non- executive Independent Directors apart from Prof. Abraham Koshy, are paid sitting fees for attending every meeting of the Board/ Committees of the Board within the limits as prescribed under the Companies Act, 2013. Prof. Abraham Koshy , Chairman of the Board is paid sitting fees for attending Board / Committee meetings in addition an amount of Rs. 1.25 lakhs per month as honorarium, as approved by the Board and RBI.

In compliance with the Companies Act,2013 all the existing Inde- pendent Directors of the Bank, were re-appointed as Independent Directors at the last Annual General Meeting of the Bank held on 17th July 2014 .

Mr. Shyam Srinivasan, Managing Director & Chief Executive Officer of the Bank is liable to retire at this AGM in compliance with Section 1 52 of Companies Act, 2013, regarding retirement of di- rectors by rotation. The detailed profile of Mr. Shyam Srinivasan, recommended for re-appointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of four Non-Executives, Independ- ent Directors, chaired by Nilesh S Vikamsey CA, a Non-Executive Independent Director. The Committee was re-constituted once in the financial year 2014-15.The members of the Committee are Nilesh S Vikamsey CA, Mr. Dilip G Sadarangani, Ms. Grace Koshie and Ms. Shubhalakshmi Panse who are Non-Executive In- dependent Directors. Dr. M Y Khan ceased to be a member of the Committee w.e.f. 24.06.2014. Ms. Shubhalakshmi Panse was nominated as a member w.e.f 26.06.2014.

The constitution of the Committee is in compliance with the regu- latory requirements.

The terms of reference of the Audit Committee and incorporated in the Bank''s Code of Corporate Governance, are in accordance with the listing agreements entered into by the Bank with Stock Exchanges where the Bank''s shares are listed, Companies Act, 2013 and RBI guidelines.

Independent Directors

In terms of the definition of Independence of Director as pre- scribed under Clause 49 of the Listing Agreement entered with Stock Exchanges and Section 149(6) of Companies Act, 201 3 and based on the confirmation / disclosures received from the Direc- tors, the following Directors are Independent Directors of the Bank as on the date of this report:

1. Prof. Abraham Koshy

2. CA. Nilesh S Vikamsey

3. Mr. Sudhir M Joshi

4. Mr. K M Chandrasekhar

5. Mr.Dilip G Sadarangani

6. Mr. Harish H Engineer

7. Ms. Grace Elizabeth Koshie

8. Ms. Shubhalakshmi Panse

Woman Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.

Bank''s policy on directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178;

A. Qualifications, Experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowl- edge, skills, experience, and judgment relevant to the Bank''s policies, operations, and needs. More specifically, the Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering, and technology. At least two Di- rectors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry.

2. The Directors should be able to devote sufficient time and at- tention to the discharge of their duties to the Bank.

3. The non-executive Directors shall preferably be in the range of 35-70 years.

B. Disqualification/Conflicts of interest

1. The Bank''s Directors shall be subject to the disqualifications/ prohibitions contained in the Companies Act 2013 and the Banking Regulation Act, 1949 with respect to directorship of companies in general or banking companies in particular.

2. A Director shall not be a director of any other company, or partner or proprietor of a firm, where such directorship, part- nership, or proprietorship involves or is likely to involve actual or potential conflicts of interest as a Director of the Bank. A Director shall promptly inform the Board/Committee of any actual or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any committee of which he is a member, and shall refrain from participating in a discussion on the matter.

The terms and conditions of appointment of Independent Direc- tors is disclosed on the website of the Bank and a web link thereto is : http://www.federalbank.co.in/shareholder-information

C. Criteria for determining attributes of a director

(i) integrity in personal and professional dealings.

(ii) wisdom and ability to take appropriate decisions.

(iii) ability to read and understand financial statements

iv) ability to deal with others with a sense of responsibility, firmness, and cooperation.

v) refrain from any action that would lead to loss of his inde- pendence.

D. Criteria for determining Independence of a director

The Criteria of Independence of a director is determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013.

The independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence.

Remuneration Policy

A. Policy on remuneration to Non-Executive Di- rectors/Independent Directors

The Policy of the Bank, based on the recommendation of the Nomination & Remuneration Committee for the payment of re- muneration to Non-Executive Directors/Independent Directors of the Bank is that the Non-Executive Directors will be paid only sitting fees for attending Board and Committees of the Board which is fixed within the limits of Companies Act, 2013 and as per the Listing Agreement.

B. Policy on remuneration to MD & CEO, Execu- tive Director, Key Managerial Personnel and other employees

The Compensation / Remuneration Policy of the Bank as approved by the Board contains the policy for payment of remuneration to Executive Directors including MD & CEO, Key Managerial Person- nel and for the employees of the Bank.

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of compensation.

2. Alignment of compensation with prudent risk taking.

3. Effective supervisory oversight and stakeholder engagement.

Change in the Policy

The following has been incorporated as an objective into the Policy for effective governance of compensation.

As per Section 178 of the Companies Act, 2013, the Nomina- tion and Remuneration committee shall formulate the criteria for determining qualifications, positive attributes and independence of a Director and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and

other employees. The Nomination and Remuneration committee while formulating the policy shall ensure that:

a) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully

b) Relationship of remuneration to performance is clear and meets appropriate benchmarks; and

c) Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and variable incentive pay reflecting short and long term perform- ance objectives appropriate to the working of the Company and its goals.

Monthly payment is being made to Whole Time Directors ie Managing Director & CEO and Executive Director as per terms and conditions approved by the Board and Reserve Bank of India. For Independent Directors only sitting fee is paid except to chairman of the Board to whom monthly payment is made additionally with the prior approval of Reserve Bank of India.

Compensation of Managing Director & CEO, Whole Time Directors and senior Executives (Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualifica- tion attained by the official over his/her career span. (Approval from RBI to be taken as per section 35B of the Banking Regula- tion Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization''s performance is charted based on the revenue point index / performance scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through Score cards for Managing Director & CEO /WTDs. The score card provides a mix of financial and non financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.

Compensation paid to Senior executives and other staff members on IBA package

The compensation paid to other officials that include Award Staff, Officers coming under Scale I to III and Senior executives coming under Scale IV to VII is fixed based on the periodic industry level settlements with Indian Bank Association. The variable compen- sation paid to functionaries is based on the Performance Linked Incentive Scheme, which has been formulated on the basis of performance parameters set in Performance Management System.

Policy on Board Diversity

Policy on Board Diversity of the bank mainly depends on the quali- fications for appointment of Directors of the Bank as contained in the Banking Regulation Act,1949 and satisfying the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate gov- ernance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In informing its perspective on diversity, the Bank also take into account factors based on its own business model and specific needs from time to time.

The Nomination Committee has responsibility for leading the process for Board appointments and for identifying and nominat- ing, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments are based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments the requirement as per the Companies Act, 2013 for appointment of at least one woman director on the Board of the Bank is also considered.

Key managerial personnel who were appointed or have resigned during the year

In compliance with Section 203 of the Companies Act, 2013, Mr.Shyam Srinivasan, MD & CEO, Mr. Abraham Chacko$, Executive Director, Mr. Girish Kumar G, Company Secretary and Mr. Sampath D,CFO were designated as the Key Managerial Personnel of the Bank at the Board meeting held on July 16, 2014. Mr. Sampath. D, was appointed as officiating CFO of the Bank w.e.f. April 29, 2014.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the listing agree- ment with the Stock Exchanges in India is presented in a separate section forming part of this Annual Report.

Loans, Guarantees or Investments in Securities

Pursuant to Section 186(11) of the Companies Act, 2013 loans made, guarantees given or securities provided or acquisition of securities by a Banking company in the ordinary course of its business are exempted from disclosure in the Annual Report.

Internal Complaints Committees

Your Bank has upheld the letter and spirit contained in "The Sexual Harassment of Women at Workplace (prevention, Prohibition and Redressal) Act, 201 3" (the Act). Board of Directors had resolved to constitute Internal Complaints Committees to function as per the provisions laid down in the Act and also to support the women employees by way of counseling. Your Bank has constituted ten Internal Complaints Committees (9 at Zones and 1 at Head Office) to prevent and redress the complaints relating to Sexual Harassment and to organize workshops/ awareness programs to empower women employees while handling cases relating to Sexual Harassment. Twenty employees were identified pan India and imparted a certification programme in employee counseling. These employees form part of the Internal Complaints Committee formed in various Zones of your Bank.

a. No. of complaints received in the year 2014 : 01

b. No. of complaints disposed of during the year 2014 : 01

c. Nature of action taken by the employer/ District Officer: As per the recommendations of the committee punishment was imposed on the respondent/ erring employee.

Variations in the market capitalisation of the Bank

Variations in the market capitalisation of the Bank, Price Earnings Ratio as at the closing date of the current financial year and previous financial year is mentioned below.

FY14 FY15 Variation Variation in % Market Capitalisation 8189.61 11312.13 3122.52 38.13 (Rs. in Crores)

PE Ratio 9.76 11.24 1.48 15.16

Closing Price of Federal Bank share was Rs.132.05(Face Value Rs.2 per share) on 31/03/2015.

Year Face Premium Rate Bonus Rate Increase Increase Value (Face (2004) (Face in in % Value) 2:1 Value Amount Rs.10) Rs.2

IPO 1994 10 80 90 30 6 126.05 2100.83%

Right 2007 10 240 250 N.A. 50 82.05 164.10% Issue

Board Evaluation

Pursuant to the provisions of the Companies Act, 201 3 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the directors in- dividually as well as the evaluation of the working of its various Committees.

A structured questionnaire was prepared after taking into consid- eration inputs received from the Directors, covering various aspects of the Board''s functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board other than the Independent Director Concerned. The per- formance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The Direc- tors expressed their overall satisfaction with the evaluation process but a few suggestions are being incorporated from the next year in relation to the current rating based system to a more qualitative approach.

Performance Evaluation of Non-Independent Directors (MD & CEO and Executive Director)

Criteria:

Attendance at the Board and Committee meetings; Presents fi- nancial reports to the board on a regular basis and submits an annual budget for board review; revision and approval; Appraises the Board regarding the organization''s financial position and operational budget so as to enable the Board to make informed financial decisions; enhancement of internal control processes; monitoring, execution of policies and encouraging suggestions, achievements of performance against budgets , leadership in de- veloping strategy & directions for their execution, implementing Board decisions across IT, Operations, HR, Audit, Risk etc, media interactions & public relations, pursuing Organisation goals, ethics, motivating & guiding employees for better performance, relationship with Industry foras / Regulatory bodies, Compliance etc

Evaluation

The MD,s & ED''s attendance at the Board and Committee meetings is very good; They present financial reports to the board on a regular basis and submits an annual budget for Board review; revision and approval; They regularly apprise the Board on the or- ganization''s financial position and operational budgets that aids the Board to make informed financial decisions; The Executives constantly endeavor to enhance internal control processes,monitor execution of policies and are very receptive to suggestions. The MD has adequate qualities of Leadership in developing strategy & execution for achieving them, The MD & ED adequately endeavor to Implement Board decisions and are very strong in media inter- actions and have put in large efforts in building and reinforcing the Brand and image of the bank. The MD demonstrates his com- mitment to the Organisation goals, is ethical, motivates & guides employees for better performance. His personal rapport and good relationship with industry foras / regulatory bodies, etc are high- lights and testimony of the respect and prominence of Federal Bank in the Indian banking landscape.

Performance Evaluation of Independent Directors including Chairman

Criteria:

Attendance at meetings of Board and Committees, Knowledge & Ethics,; Understanding of the roles, responsibilities and duties as director / Chairman; Contributions at Board/Committee meetings including on strategy and risk management;

Evaluation:

The evaluation done brings out good attendance of Independ- ent Directors in the Board and committee meetings. They are knowledgeable , ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as Inde- pendent directors.

Performance Evaluation of Board and Committees

Criteria;

Size, composition , balance and diversity of background; Pro- portion of Independent to Non Independent Directors; Effective Participation ;candidness of communication, Ability to handle conflicts; Review of Performance / Financial Reporting / Compli- ance / other Agenda of / by Bank ; Information given to Board / Committees, Effectiveness as per Terms of Reference of Board and its committees ; Value addition ; Review of Related Party transac- tions, Potential conflicts of interests; Corporate Governance norms of conduct; flow of information to board

Evaluation

The structure and composition of the Board is appropriate with adequate number of Directors and a good balance of diverse pro- fessional backgrounds, business experience, industry knowledge, skills and expertise in areas vital to the Bank''s success in it''s current and future position; The proportion of independent to non-in- dependent directors is good; The Board demonstrates integrity, credibility, trustworthiness, active and effective participation at Board & Committee meetings which are held at reasonable and regular intervals;

The Board and committee processes and procedures are good with different committees reviewing different functional areas of the Bank''s operations. The Board and its Committees also reviews Bank''s performance, risk management, financial reporting, com- pliances, technology, operations with adequate frequency of meetings etc..

The flow of information to the Board and its committees is gener- ally good.

Meetings

During the year nine Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and also the Listing Agreement.

Director''s Responsibility Statement

The Directors have taken proper and sufficient care for the main- tenance of adequate accounting records in accordance with the provisions of the Companies Act, 201 3 for safeguarding the assets of the Bank and for preventing and detecting fraud and other ir- regularities; and the Directors have prepared the annual accounts on a going concern basis.

To the best of the knowledge of the Directors and belief and ac- cording to the information and explanations obtained by them, your Directors make the following statements in terms of Section 1 34(3)(c) of the Companies Act, 2013:

a. that in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b. that such accounting policies as mentioned in the Notes to the Financial Statements, have been selected and applied consist- ently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31,201 5 and of the profit of the Company for the year ended on that date;

c. that proper and sufficient care has been taken for the mainte- nance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d. that the annual financial statements have been prepared on a going concern basis;

e. that proper internal financial controls were in place and that the financial controls were adequate and were operating ef- fectively;

f. that systems to ensure compliance with the provisions of all ap- plicable laws were in place and were adequate and operating effectively;

Related Party Transactions

All related party transactions that were entered into during the financial year were on arm''s length basis and were in the ordinary course of business. There are no materially related party transactions made by the Bank with, Directors, Key Managerial Personnel who may have a potential conflict with the interest of the Company at large.

Wherever related party transactions took place they were placed before the Audit Committee and also to the Board for approval. Omnibus approval of the Audit Committee will be taken on a quarterly basis for the transactions which are foreseen and of re- petitive nature, which at this juncture is not there. The policy on Related Party Transactions after the approval by the Board has to be uploaded on the Bank''s website. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Bank.

Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm''s length basis, form AOC-2 is not applicable to the Bank.

Technology and Digital Updates

The Bank has the following modes of technology related banking:

Mobile Banking

Mobile based transactions and the adoption of mobile based ap- plications is set to increase with growth in usage of smart phones over the generic phones. As part of our Mobile banking strategy we have adopted migration of existing mobile banking applica- tion to a platform based solution in order to achieve the flexibility and agility required in the mobile application development and deployment in all kinds of mobile operating systems (OS).

Introduction of industry first game changing innovations like FedBook and Scan N Pay has taken Customer Delight to unprec- edented heights redefining the benchmark of service excellence.

Fed Book is the Electronic version of a traditional bank pass book offered to Federal Bank customers free of cost. It helps customers to view all the transactions in their bank accounts.

''Scan N Pay'' is an innovative Mobile Application for inter-bank fund transfer using the IMPS (24x7) facility. By using ''Scan N Pay'', customers are freed from the hassles of keying in the details for fund transfer through IMPS. Transactions happening through ''Scan N Pay'' are executed in real time and confirmation messages are instantaneous which adds to the comfort level of Customers to use the application.

Mobile banking migration brings in the following benefits -

* UI change- Improves customer experience

* Availability of additional services to the customer

* Development management - Reduction in development time and cost due compatibility of platform across multiple mobile operating systems

* Adoption of this platform has enabled easy maintenance of applications across mobile OS due to availability of advanced change management system.

Internet Banking

As part of our technology absorption strategy our Internet Banking solution has undergone an upgrade to an advanced product version. Migration of Internet Banking solution facilitates easier interfacing with other peripheral and external systems.

Auditors Statutory Audit

M/s. Deloitte Haskins & Sells, Chartered Accountants, Chennai, and M/s. M P Chitale & Co., Chartered Accountants, Mumbai, jointly carried out the statutory central audit of the Bank during the Financial Year 2014-1 5. Additionally 1 220 number of branches were subjected to Branch Statutory Audit by 691 number of Branch Auditors. The statutory central/branch auditors audited all the branches and other offices of the Bank.

Secretarial Audit

The Board had in its meeting dated November 21, 2014, ap- pointed M/s. SVJS & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Fi- nancial Year ended March 31, 2015, in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies(Appointment and Remuneration of Managerial Per- sonnel) Rules, 2014. The Report of the Secretarial Audit Report is annexed herewith as "Annexure VI".

Awards and Accolades

Excellence in administration, business and technological advance- ment have made your Bank the recipient of a host of recognitions during FY1 5.

The year witnessed the Bank being showered with a number of awards and accolades for its HR initiatives, which included the Fourth Annual Greentech HR Award for Innovation in Recruit- ment, Fifth Asia''s Best Employer Brand Award for Innovation in Retention Strategies, Asia Training & Development Award for Ex- cellence in Training, ICE Award for Best In-house Magazine and NIB Award for Best In-house Magazine. Besides, Asia Pacific HRM Congress Awards 2014 conferred the citation of ''The CEO with HR orientation'' to Mr. Shyam Srinivasan, MD & CEO; and the citation of ''40 Most Talented HR Leaders'' and ''100 Most Talented Global HR Leaders'' to the HR Head of the Bank, Mr. Thampy Kurian.

As a recognition for innovation in Technology, the Bank won the prestigious Banking Technology Excellence Awards 2014 from the Institute for Development and Research in Banking Technology (IDRBT) in 4 out of a total of 5 categories in the mid-sized Banks segment. The Bank was adjudged as: (a) Best Bank for Use of Tech- nology for Financial Inclusion, (b) Best Bank for Social Media and Mobile Banking, (c) Best Bank for Business Intelligence Initiatives and (d) Best Bank for Best IT Team.

Apart from the above, Federal Bank won the CNBC TV1 8 Financial Inclusion Award for the work done by the Bank towards the cause of Financial Inclusion and empowerment of those at the bottom layer of the economy.

Your Bank was also chosen as the Best Bank among small banks in India in the Best Bank Survey, 2014 conducted by Business World- Price Waterhouse Coopers Combine; and as the ''Best Corporate Brand of the Year 2015'' jointly by Ernakulam Press Club and Public Relations Council of India (PRCI) - Kerala Chapter.

Consolidated Financial Statements

Pursuant to Section 1 29 of the Companies Act, 201 3, the Bank has prepared a Consolidated Financial Statements of the Bank and also of its Subsidiary, Fed bank Financial Services Limited, in the same form and manner as that of the Bank which shall be laid before the ensuing 84th Annual General Meeting of the Bank along with the laying of the Bank''s Financial Statement under sub- section (2) of Section 129 i.e. Standalone Financial Statement of the Bank.

Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

Considering the nature of activities of the Bank, the provisions of Section 1 34 (3) (m) of the Companies Act, 2013 relating to con- servation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of tech- nological up gradation in a cost-effective manner for delivering quality customer service. Through its export-financing operations, the Bank supports and encourages the country''s export efforts.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure III".

Particulars of Employees

As required by the provisions of Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of the employees who were in receipt of remuneration not less than sixty lakh rupees for FY 2014-1 5 are set out in the Annexure to the Director''s Report. (Annexure I).

The ratio of the remuneration of each director to the median em- ployee''s remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Mana- gerial Personnel ) Rules, 2014, are forming part of this report as Annexure VI.

Stock Exchange Information

The Bank''s Equity Shares are listed on:

1. BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001 and

2. National Stock Exchange Ltd. "Exchange Plaza", Bandra - Kurla Complex Bandra East, Mumbai - 400 051.

The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Govern- ments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, rating agencies and Stock Exchanges for their wholehearted support.

The Directors record their sincere gratitude to the Bank''s share- holders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Abraham Koshy Chairman of the Board

Aluva Date: 16 May 2015

Mar 31, 2013

Dear Shareholder''s

The Board of Directors has the immense pleasure of presenting the 82nd Annual Report of The Federal Bank Limited on its business and operations front along with the audited accounts for the year ended March 31, 2013.

FINANCIAL PARAMETERS For the year ended (Rs. Crores)

31-03-2013 31-03-2012

Net Interest Income 1,974.66 1,953.40

Fee and Other Income 664.44 532.34

Net Revenue 2,639.10 2,485.74

Operating Expense 1,179.54 979.27

Operating Profit 1,459.56 1,506.47

Net Profit 838.17 776.79

Profit brought forward 296.68 25.78

Total Profit Available for appropriation 1,134.85 802.57

Appropriations:

Transfer to Statutory Reserves 209.55 194.20

Transfer to Revenue Reserves 172.14 98.88

Transfer to Capital Reserves 22.95 5.40

Transfer to Special Reserves 33.70 28.50

Proposed Dividend 153.95 153.94

Provision for Dividend Tax 26.17 24.97

Balance Carried over to Balance Sheet 516.39 296.68

Financial Position (as on)

Deposits 57,614.86 48,937.12

Advances 44,096.71 37,755.99

Total Business (Deposits Advances) 101,711.57 86,693.11

Other Borrowings 5,186.99 4,241.03

Investments 21,154.59 17,402.49

Total Assets (Balance Sheet Size) 71,049.57 60,626.77

Equity Capital 171.06 171.05

Ratios

Return on Total Assets (%) 1.35 1.41

Return on Equity (%) 14.03 14.37

Earnings Per Share (Rs.) 49.00 45.41

Book value per share (Rs.) 364.74 333.61

Operating cost to Income (%) 44.69 39.40

Capital Adequacy Ratio (%) Basel (I) 13.09 13.83

Capital Adequacy Ratio (%) Basel (II) 14.73 16.64

The financial year (FY12-13 ) was marked by macroeconomic and inflationary challenges. Regulatory tightening was also a distinctive feature of the year. Your Bank was able to deliver a consistent set of numbers amidst all these challenges, through systematic and calibrated process corrections, planned de-bulking of exposures and deposits and via focused attention on market demands.

In FY 12-13 the Bank continued its strategic drive in its traditional areas of strength viz. retail, NRI, SME, agriculture and gold loans through value-added offerings. Our retail portfolio grew by 19.09% annually, supported by a growth in retail deposits by 17.45% and retail advances by 25.47%. Priority sector advances of the Bank declined by Rs.857.57 Cr in the last fiscal year and stood at Rs.11794.97 Cr as on 31st March 2013. Advances to the agriculture sector were marked by an increase of 8.89% and reached Rs.4702.80 Cr. The Bank exhibited robust performance in the gold loan business with an increase of 76.67% in the portfolio.

The Bank also continued the strategic expansion of its footprint by opening 153 branches during the financial year. The Bank''s branch strength as on 31stMarch 2013 stood at 1,103. The financial year saw your Bank cross the 1,000 branch milestone. The Bank also added 174 ATMs during the financial year bringing the ATM strength to 1,172 as on 31 Mar 2013. Post 2012-13, the Bank intends to continue its strategy of enhancing its presence in its chosen geographies outside the State of Kerala, which include the States of Tamil Nadu, Karnataka, Punjab, Gujarat and Maharashtra. The Bank will choose to pursue growth in areas where it has accumulated considerable experience over the years viz. agriculture, SME and NRI businesses.

Net Profit

During the year ended March 31, 2013, your Bank registered a net profit of Rs.838.17 Cr, an increase of 7.90% over the previous year.

As a result of a refinement in the asset quality, the Bank could rein in a total provisioning to Rs.621.39 Cr. This was mainly aided by a reverse effect of Rs.36.82 Cr of investment depreciation and a reduced loan loss provisioning of Rs.189.28 Cr (with an overall provision coverage of 80.96%. taking into account all written off accounts). An amount of Rs.355.59 Cr was earmarked for taxes and Rs. 113.34 Cr, for other purposes.

Return on Average Equity and Return on Average Total Assets stood at 14.03% and 1.35% respectively. Earnings per Share of the Bank, for the year FY 2012-13 stood at Rs.49.00 as compared to the previous fiscal year figure of Rs.45.41. Book value per share increased from Rs.333.61 in the previous fiscal year to Rs.364.74 in FY 12-13.

Operating Profit

In the financial year 2012-13, the Bank had continued its policy of reducing its reliance on bulk businesses, selecting advances through a tightly-sieved quality filter, increasing its footprint materially and augmenting its workforce to match the network growth. The Operating Profit of your Bank stood at 1,460 Cr.

The Net Interest Margin of the Bank for the year stood at 3.37%, despite the interest rate volatility. Net Interest Income of the Bank for the period increased from Rs.1,953.40 Cr to reach Rs.1,974.66 Cr.

The financial year ended March 2013, saw Total Non-interest Income of the Bank grew to Rs.664.44 from Rs.532.34 Cr in FY 11-12, clocking a growth of 24.81%.

Expenditure

The fiscal year ended 2013 witnessed an increase in the total expenses of the Bank which reached Rs.5,372.45 Cr from Rs.4,584.26 Cr with an increase of 17.19%. Interest expenses increased to Rs.4,192.91 Cr in FY 12-13 from Rs.3,604.99 Cr in FY 11-12.

Despite the strains on the macroeconomic level and increased costs, your Bank succeeded in reining in the cost of deposits to 7.58% compared to 7.41% of the previous year.

Average cost of all funds (deposits borrowings bonds) recorded a marginal increase and reached 7.67%. The growth in term deposit portfolio, the general increase in rate of interest offered on term deposits coupled with the deregulation of the rate of interest offered on NRE term deposits (INR) by the RBI contributed to an increase in the interest expenses on deposits. The interest expenses as percentage of the Total Income increased to 61.37% from 59.19% in FY 2012.

In the current fiscal, CASA increased from 513402 Crore to 515519 Crore. Average CASA grew by 23.49% from 511630 Crore to 514362 Crore. CASA to total deposits decreased marginally from 27.39% in FY 11-12 to 26.94% in FY 12-13, as term deposits grew at a faster pace. Operating Expenses of the Bank during the fiscal year grew from 5979.27 Cr to 51,179.54 Cr. This has been caused by increase in human capital related expenses (wages, DA, contribution to the New Pension Scheme, retirement benefits of employees among others) and depreciation.

The expenses on account of the opening of 153 new branches during the fiscal year have also contributed to the increase in operating expenses.

The Cost to Income ratio of the Bank stands at 44.69% (39.40% in FY 2012) which was a reflection of the varied strategic initiatives viz. increasing our footprint in chosen geographies and increase in manpower. Income growth was muted due to the reorienting of our sourcing to quality and lower risk segments and the impact on revenue due to slippage of some vintage accounts.

Income

Despite the macroeconomic slowdown, inflationary issues and other uncertainties that plagued the financial year, your Bank could hold its own by maintaining and growing quality assets as well as by implementing a market-oriented pricing policy.

The Total Income of the Bank during the fiscal year 2013 recorded a 12.17% growth to reach 56,832.01 Cr from the previous fiscal year figure of 56090.73 Cr. The interest income component grew by 10.96% while other income grew by 24.81% y-o-y.

Income from advances increased by 10.64% to reach 54,635.66 Cr. At the same time, income from investments registered a reasonable growth to reach 51,464.60 Cr clocking at a rate of 11.31% annually.

The yield on advances stood at 12.28% and the yield on investments at 7.24%. The Net Interest Margin for the fiscal year is at 3.37% as against 3.79% of the last fiscal, owing primarily to the lower yield on advances.

Focused attention on streams of fee-based income and other income resulted in an increase of 24.81%. The total other income grew from 5532.34 Cr in the previous fiscal to 5664.44 Cr in the current fiscal.

spread

During the fiscal year the Bank''s spread on advances (gross) decreased to 4.70% from 5.17% and spread on investments (gross) stood at 0.67%. The spread (net of provisions) on advances decreased from last year''s 4.50% to reach 4.20%.

Dividend

Continuing the Bank''s policy of striking a fine balance between retained earnings and dividend, your Bank''s Board has recommended a dividend of 59 per share on par with the dividend for the previous fiscal. Protecting the value for our shareholders'' has always been a guiding philosophy of the Bank.

investor education and Protection Fund

As per the Companies Act 1956, dividend unclaimed for more than seven years from the date of issue is to be transferred to Investor Education and Protection Fund. On 28.09.2012, we transferred 531,73,731 to the Fund.

Growth in Business

Total business of your Bank reached 51,01,711.57 Cr as on 31st March 2013. The Bank crossed an important milestone of 51,00,000 Cr. Total deposits increased by 17.73% from 548,937.12 Cr in FY''12 to 557,614.86 Cr in FY''13. The total advances of your Bank increased by 16.79% from 537,755.99 Cr in FY'' 12 to 544,096.71 Cr in FY''13.

NRE deposits clocked an increase of 65.21% to reach Rs. 13,156.98 Cr and retail deposits grew by 17.45% to touch Rs.48,484.37 Cr. CASA deposits also displayed a growth of 15.80% to reach Rs.15518.80 Cr.

The savings deposits of the Bank has touched Rs.12,743 Cr, growing by 16.59% over that of the previous fiscal of Rs.10,930 Cr.

The investment portfolio of the Bank burgeoned to Rs.21,154.59 Cr in the current fiscal from Rs.17,402.49 Cr in the previous fiscal, registering a growth of 21.56% compared to 19.71% in the previous fiscal year. The average investments on y-o-y registered a growth of 12.34% as compared to previous fiscal year growth of 44.31%.

Loan Asset Quality

In the fiscal 2012-13, your Bank consolidated its credit underwriting processes, which had been initiated in the previous fiscal by isolating the sourcing and sanctioning legs of the credit vertical. The credit monitoring cells, the Stressed Assets Management Cell and the National Credit Hub were strengthened with sufficient manpower and by making the processes leaner and more efficient. This could to a great extent ensure that fresh slippages can be reduced.

The Bank''s Gross NPA and Net NPA stood at 3.44% and 0.98% respectively as at the end of March 2013. The total provisions held against non-performing advances, expressed as a percentage of Gross NPAs amounted to 80.96% (including technically written-off accounts) at the end of FY 2012-13.

The Bank managed its NPA portfolio prudently, by considering and exercising options such as SARFAESI Act, compromise settlements, Lok Adalats and DRT.

Provision Coverage

As on 31 March 2013, the Bank held a total provision of Rs.1, 097.87 Cr. Provision coverage for NPAs as on 31 March 2013 stood at 70.65%. As per the RBI directive, banks should hold a minimum provision coverage of 70% including technically written-off accounts. As on 31 March 2013, the provision coverage ratio of the Bank, including technically written-off accounts is 80.96%.

Capital Adequacy

Historically, your Bank has been strong on capital adequacy. The CRAR of the Bank calculated in line with Basel II norms stood at 14.73% which is considerably higher than the 9% stipulated by the RBI. Of this, Tier-1 CRAR is 14.09%.

Employee Productivity

Business per Employee of the Bank during the period has grown from Rs. 10.13 Cr in FY2011-12 to Rs.10.75 Cr in and the profit per employee of the Bank stood at Rs.8.91 lakh during the fiscal.

Share Value

Earnings per Share of your Bank increased from Rs.45.41 to Rs.49.00 registering a growth of 7.90%. Return on Equity during the year reached 14.03% in the fiscal year ended 31st March 2013.

Employee stock Option scheme (Esos)

The Bank has instituted an Employee Stock Option Scheme to enable its employees including Wholetime Directors to participate in the future growth and financial success of the Bank. Under the Scheme 85,51,650 options can be granted to the employees. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, work performance, grades, period of service, annual fixed pay, Bank''s performance and such other parameters as may be decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors.

The Bank''s shareholders approved the scheme for issuance of stock options to employees including Wholetime Directors on 24th December 2010.

The option conversion price was set to be the closing price on the day previous to the grant date. The compensation committee granted 34,72,020 options during the year 2011 -12 and 24,48,475 options during the year 2012-13. The options granted are non-transferable, with vesting period of one to four years, subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2013, 1 1,631 options had been exercised and 54,46,279 options were in force.

Other statutory disclosures as required by the SEBI guidelines on ESOP are given in Annexure-II to this report.

Expansion of Network

Your Bank crossed the landmark of 1,000 branches in the current fiscal year to expand its footprint to 1,103 branches as on 31st March 2013. On 17.08.2012 (1st day of the Malayalam month of Chingam), Shri Vayalar Ravi, Honorable Union Minister for Overseas Affairs, inaugurated the 1,000th branch of your Bank commemorating the opening of the first Branch of Federal Bank some sixty seven years ago by our Founder Shri K P Hormis. The Bank was able to add 153 branches in the current fiscal year which included under- banked and un-banked centres as per RBI''s guidelines. This resulted in a footprint expansion of 16.11% from the previous year''s base. The Bank had opened a number of branches in the chosen five States of Tamil Nadu, Punjab, Gujarat, Karnataka and Maharashtra and also in Kerala.

Corporate Social Responsibility

Corporate Social Responsibility and sustainable development initiatives were incorporated in the Bank''s business strategies/policies. The Bank has a well-defined CSR policy which has been circulated among the employees and also made available in the intranet and in the Bank''s website.

Your Bank has always stood for the assistance and upliftment of the rural/agrarian community by devising specific schemes and inculcating banking habits in them.

Fedbank Hormis Memorial Foundation, a public charitable trust instituted by your Bank provides scholarships to the economically disadvantaged students for pursuing professional education courses. The Trust also endeavours to impart better knowledge and awareness in the field of banking to the less privileged particularly in far flung rural areas, through training programmes, seminars, award ceremonies among others.

The Bank runs a customer contact centre manned almost entirely by differently-abled personnel. The Bank, through its CSR cell lends a helping hand by sponsoring ambulances, computers, dialysis machines, medical equipments, elevators, free midday meals, environmental and healthcare projects, and social cultural and educational programmes among others. The cell also engages in community outreach programmes related to health, family welfare, environment, education, providing potable water, sanitation and empowerment of women and other marginalised groups.

As part of its employee engagement initiatives your Bank has participated wholeheartedly in promoting Earth Hour prescriptions, paperless banking, blood donation, adoption of population control measures and scores of such initiatives amongst its employees.

The Bank, leveraging its technological advantages, has influenced the lives of the less privileged in a meaningful way. Such as fishermen, farmers, coolies, construction workers, rickshaw pullers and migrant labourers, by bringing them to the centre from the peripheries. In the last fiscal, the Bank carried forward the initiative christened ''Fedjyothi'' through which the ICT (Information & Communication Technology) model accounts (which are operated using Biometric Smart Cards and Micro ATM) were delivered door- to-door to people in far flung and hard-to-reach areas, as a part of its financial inclusion programme. Long before the bill on Corporate Social Responsibility (CSR) was introduced, the Bank had started practicing CSR activities in line with the lofty ideals of its founder, Shri K P Hormis.

Awards and Accolades

- Your Bank received the NPCI award for being the highest contributor in number of IMPS (Immediate Payment Service) transactions, which is one of the clearest indicators of the technological preeminence of your Bank

- The Bank received the NPCI Award for Excellence in promotion of Inter Bank Payment Service.

- The Bank won the following IDRBT Banking Technology

Excellence Awards for the year 2011-12:

a) Best Bank Award among Small Banks for ''Mobile Banking and Electronic Payments''.

b) Best Bank Award among Small Banks for ''CRM and Business Intelligence Initiatives''.

IDRBT (Institute for Development and Research in Banking Technology) sets the benchmark and recognises technology implementation and absorption among banks aimed at improving customer service, customer convenience and overall productivity.

- National award of excellence ''Quality Brands India 2012- 14''

The Bank received the National award of excellence ''Quality Brands India 2012-14''. National award of excellence ''Quality Brands India 2012-14'' was awarded to the Bank on 20th June 2012. This is a prestigious award instituted by Quality Brands India Private Limited, an independent appraiser organisation established in 2008 to identify, recognise and honour business enterprises that excel in performance, research, growth and brand building in India.

- Rashtriya Udyog Ratna Award

The Bank bagged the Rashtriya Udyog Ratna Award on 20th June 2012. The National Education and Human Resource Development Organisation (NEHRDO) has recognised your Bank''s outstanding contribution to the national economic growth by presenting this award. NEHRDO is an organisation established to ensure the economic and social well-being of the nation through the development of individuals and institutions.

Corporate Governance

The Bank has adopted a Code of Corporate Governance which while taking care of and safeguarding the interest of shareholders and all other stakeholders also provides for good management, adoption of prudent risk management techniques and compliance with required standards of capital adequacy.

The Code also aims at identifying and recognising the Board of Directors and the Management of the Bank as the principal instruments through which good corporate governance principles are articulated and implemented, giving utmost importance towards ensuring transparency, accountability and equality of treatment amongst all the stakeholders in tune with statutory and regulatory requirements. A copy of the Code is available on our website.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 1956, Listing Agreement, and the Code of Corporate Governance adopted by the Bank. The Board comprises of nine Directors, as on 4th June 2013, with rich experience and specialised knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, and information technology.

Shri Shyam Srinivasan MD & CEO joined the Bank on 23.09.2010. Shri. P.C. John, Executive Director (ED), who was the Wholetime Director of the Bank, retired on 30 April 2013.

Excluding the MD & CEO and the ED all other members of the Board are Non-Executive and Independent Directors.

Prof. Abraham Koshy and Dr. M.Y.Khan were re-elected/ appointed as Directors of the Bank at its last Annual General Meeting held on 2nd August 2012.

The other Directors who are retiring at this AGM are Shri Suresh Kumar and CA Nilesh S. Vikamsey. Shri Suresh Kumar and CA Nilesh S. Vikamsey both being eligible, have offered themselves for reappointment.

Shri Suresh Kumar holds a Bachelor''s degree in Economics & Commerce (Hons.) from the University of Bombay. He started his career as a probationary officer in the State Bank of India (SBI). In 1979, he continued his banking career as a member of the Senior Management and Executive Committee (ExCo) of the Emirates Bank Group; following senior treasury and general management positions in Government of Dubai''s projects. He is a fellow of the Indian Institute of Bankers and has also completed several Advanced Management

Programmes at London, Wharton and Columbia Schools of Business. He has been the Founder-President of the Indian Business & Professional Council, Dubai and an active member of the Regional Chief Executive Forum of the Institute of International Finance (IIF). He retired in April 2012 as a CEO in the Emirates NBD Group, Dubai, and as a member of the Board of its subsidiaries. Currently, Shri Suresh Kumar is also Chairman of Federal Bank Financial Services Ltd and a non- executive Director on the Boards of IDBI Life Insurance Co. Ltd and ICICI Prudential Asset Management Co. Ltd. He has been a recipient of several accolades and recognition and was awarded the ''Hind Rattan'' (Jewel of India) on the 25th of January 2012. Shri Suresh Kumar holds 105,710 GDRs of The Federal Bank Limited

Shri Nilesh Shivji Vikamsey is a Chartered Accountant by profession, and holds a diploma in Information System Audit and was also associated with the Business Consultancy Studies course at the Bombay Chartered Accountants Society jointly with Jamnalal Bajaj Institute of Management Studies. He is the senior partner of Khimji Kunverji & Co, Chartered Accountants, a firm which has over 75 years of experience in the areas of auditing, taxation, corporate and personal advisory services, business and management consulting services, due diligence, valuations, inspections, and investigations. He is a member of the Central Council of the Institute of Chartered Accountants of India (ICAI). He has also acted as a Speaker/Chairman at various seminars, meetings, lectures held by various committees. He is a director in India Infoline Limited, India Infoline Investment Services Private Limited, Rodium Realty Limited, ICAI Accounting Research Foundation. Apart from being contributor to various articles, he has been managing audits/consultancy of large nationalised banks, foreign banks (Indian operations), large listed public and private limited companies.

CA Nilesh Shivji Vikamsey did not hold any shares of the Bank as on 31st March 2013.

Dr. T.C. Nair resigned from the Board of the Bank w.e.f 01.05.2013.

The Directors who were co-opted by the Board as additional directors are Dr. K. Cherian Varghese on 20.10.2012, Shri Sudhir M Joshi on 20.10.2012 , Shri K.M Chandrasekhar on 06.12.2012 and Shri Dilip Gena Sadarangani on 4.6.2013.

Dr. K. Cherian Varghese was co-opted to the Board as an Independent Director w.e.f 20.10.2012. He received his Ph.D (Commerce) in Business Policy and Administration from University of Mumbai. Presently, he is the chairman of Union KBC Trustee Company Private Ltd. He is also a member of Government of India''s MOU Task Force for PSUs. He has 36 years of experience as banker. During this period, he was the Chairman & Managing Director / CEO of Union Bank of India, Corporation Bank, and South Indian Bank Ltd. He also served as Executive Director of Central Bank of India and General Manager of Indian Bank. He was also the Chairman of the Board for Industrial and Financial Reconstruction (BIFR) of Government of India and the President of Indian Institute of Banking and Finance. He is an Associate of the Chartered Institute of Bankers, London. He was included in the roll of honour of the top fifty, of those who passed the Associate Examination of the Chartered Institute of Bankers, London from all over the globe and was awarded a honorary fellowship by the Indian Institute of Banking and Finance.

Dr.K.Cherian Varghese did not hold any shares of the Bank as on 31st March 2013.

Shri Sudhir Moreshwar Joshi was co-opted to the Board as an Independent Director w.e.f 20.10.2012. He is a professional banker with vast experience in the banking industry. He holds a Bachelor of Science degree in Chemistry from University of Pune and is a Certified Associate of the Indian Institute of Bankers. He was the Head of Treasury at HDFC Bank. He is also on the Board of National Securities Clearing Corporation of India Ltd. and is a member of its Executive Committee and Audit and Risk Committee. Previously, he has held key positions with State Bank of India. Shri Joshi was also part of the Times Bank Core Management Team as Executive Vice President (Treasury).

Shri Sudhir M Joshi did not hold any shares of the Bank as on 31st March 2013.

Shri K.M.Chandrasekhar was co-opted as an Independent Director of our Board on 06.12.2012. He is the Vice Chairman of Kerala State Planning Board. He entered the Indian

Administrative Service in 1970. Prior to that, he did his B.A (Honours) in Economics and M.A. in History from St. Stephen''s College, University of Delhi. After entering Government Service, he got the degree of M.A. in Management Studies from the University of Leeds in United Kingdom. He spent the first 25 years of his career in Kerala, holding positions as Managing Director of the State Civil Supplies Corporation, District Collector, Idukki, Director of Fisheries, Principal Secretary (Industries) and Principal Secretary (Finance). In 1996, he left Kerala on Central Government deputation and rose to the highest position that any Indian civil servant can occupy that of Union Cabinet Secretary. As Cabinet Secretary, he was the Head of all the Civil Services in India and reported directly to the Prime Minister of India. He retained that position for a full four years, a tenure that has not been matched by any other officer during the last 40 years. He retired from Government Service in 2011 at the age of 63, having served Government for 41 years. He also served as Joint Secretary in the Key Trade Policy Division of the Ministry of Commerce, Union Revenue Secretary, Deputy Chief of Mission in the Embassy of India, Brussels and the Ambassador and Permanent Representative of India in the World Trade Organisation in Geneva. It was he who introduced for the first time, the Performance Management and Evaluation System in the offices of Government of India. He has considerable management experience having been associated - as Chairman, Managing Director or Member of the Board of Directors - with more than 40 companies in the public, joint and private sector. He has written several articles and presented papers. He has also been consultant to the Commonwealth Secretariat and to the UN Food and Agriculture Organisation.

Shri K.M.Chandrasekhar did not hold any shares of the Bank as on 31st March 2013.

Shri Dilip G Sadarangani was co-opted as an Independent Director on 4.6.2013. He has wide experience in the realm of banking/technology/operations, and includes management, maintenance and support of IT software projects as well as IT operations. He has developed and put in place processes and IT policies and continuity plans in three leading Banks in India, Australia and Kuwait

Shri Dilip G Sadarangani holds a Bachelor of Science (Hons) degree from University of Bombay. He also holds a post graduate diploma in Computer Management from Jamnalal Bajaj Institute of Management, University of Bombay. He has developed business-technology strategies for ANZ Grindlays Bank, Standard Chartered Bank (SCB), India, Gulf Bank, Kuwait and Man Power, Asia Pacific. He was a key member of the Global Leadership team in ANZ Bank (Australia), Standard Chartered Bank (India & Global), and Gulf Bank (Kuwait) and Manpower Inc (Asia Pacific & Global) He was also a core member of the team which automated the first 50 branches of one of the largest financial institutions in the world -State Bank of India and led the replacement of disparate legacy systems with modern banking systems in ANZ Bank across Pacific Island nations, South Asia and Middle East. He drove the off-shoring of large volume of IT acitivities in ANZ and Standard Chartered Banks to India and Malayasia.

subsidiary

FedBank Financial Services Ltd. is a fully-owned subsidiary of the Bank. As required under Section 212 of the Companies Act, 1956, the financial statements relating to this company, the sole subsidiary of the Bank, for FY 12-13 are attached.

Annual Financial statements and Audit report

As required by Section 212 of the Companies Act, 1956, the Bank''s Balance Sheet as on 31 March 2013, its Profit and Loss account, and the Statutory Auditors'' report and statements required under the Section, are attached.

statutory Audit

M/s. Deloitte Haskins & Sells,Chartered Accountants, Chennai, and M/s. M P Chitale & Co., Chartered Accountants, Mumbai, jointly carried out the statutory central audit of the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank.

Joint Venture in Life insurance Business

The Bank''s joint venture Life Insurance Company, in association with IDBI Bank Limited and Fortis Insurance International N.V. (now Aegeas), namely IDBI Fortis Life Insurance Company Limited, renamed as IDBI Federal Life Insurance Company Limited, commenced operations in March 2008. Currently the Bank has a total stake of 5208 Cr in the equity of the company holding 26% of the equity capital. statutory Disclosure stock exchange Information

The Bank''s Equity Shares are listed on:

1. Bombay Stock Exchange Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.

2. National Stock Exchange Ltd. "Exchange Plaza" Bandra - Kurla Complex Bandra East, Mumbai - 400 051.

3. Cochin Stock Exchange Ltd. MES, Dr. P.K. Abdul Gafoor Memorial Cultural Complex 4th Floor, 36/1565, Judges Avenue, Kaloor, Kochi - 682 017.

The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Through its export-financing operations, the Bank supports and encourages the country''s export efforts.

Considering the nature of activities of the Bank, the provisions of Section 217 (1) (e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

Personnel

As required by the provisions of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the Annexure to the Directors'' Report. (Annexure I).

Director''s Responsibility statement

As required by section 217 (2AA) of the Companies Act, 1956, the Directors state that:

The Bank has in place a system to ensure compliance of all laws applicable to the Bank;

In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for that period;

The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; and

The Directors have prepared the annual accounts on a going concern basis.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, rating agencies and stock exchanges for their wholehearted support.

The Directors record their sincere gratitude to the Bank''s shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Aluva suresh Kumar

Date: 4th June 2013 Chairman of the Board

Mar 31, 2012

The Board of Directors has great pleasure in presenting the 81st Annual Report of The Federal Bank Limited on its business and operations front along with the audited accounts for the year ended March 31, 2012

In Financial Year 2011 - 2012 we delivered balanced and strong results attributing to year on year growth in all major parameters in the business front

For the year ended (Rs In Crores)

Financial Parameters 31-03-2012 31-03-2011

Net Interest Income 1,953.40 1,746.58

Fee and Other Income 532.34 516.81

Net Revenue 2,485.74 2,263.39

Operating Expense 979.27 836.14

Operating Profit 1,506.47 1,427.25

Net Profit 776.79 587.08

Profit brought forward 25.78 23.14

Total Profit Available for appropriation 802.57 610.22

Appropriations:

Transfer to statutory Reserves 194.20 146.80

Transfer to Revenue Reserves 98.88 232.11

Transfer to Capital Reserves 5.40 0.00

Transfer to Special Reserves 28.50 36.56

Proposed Dividend 153.94 145.39

Provision for Dividend Tax 24.97 23.58

Balance Carried over to Balance Sheet 296.68 25.78

Financial Position

Deposits 48,937.12 43,014.78

Advances 37,755.99 31,953.23

Total Business (Deposits Advances) 86,693.11 74,968.01

Other Borrowings 4,241.03 1,888.36

Investments 17,402.49 14,537.68

Total Assets ( Balance Sheet Size) 60,626.77 51,456.36

Capital 171.05 171.05

Ratios

Return on Total Assets (%) 1.41 1.34

Return on Equity (%) 14.37 11.98

Earnings Per Share (Rs) 45.41 34.32

Book value per share (Rs) 333.61 298.67

Operating cost to Income (%) 39.40 36.94

Capital Adequacy Ratio (%) Basel (I) 13.83 15.39

Capital Adequacy Ratio (%) Basel (II) 16.64 16.79

Your Bank could achieve this growth by addressing the challenges in macro-economic conditions, inflationary trends and stringent regulatory norms along with tight monetary measures. A focussed and defined approach in this fiscal year resulted in better performance on various strategic fronts which the Bank had identified.

In FY 12 we endeavoured to nurture Retail, NRI, SME, Agriculture and Gold through improved value propositions. Our retail portfolio grew by 21.16% annually, supported by a growth in retail deposits by 23.59 % and retail advances by 12.58 %. Your Bank took several initiatives in FY 12 to augment the advances to rural, agriculture and priority sector. Priority sector advances of the Bank scaled up by Rs 1,551.63 Cr in the last fiscal year and stood at Rs 1,2652.54 Cr as on 31 Mar 2012. Advances to agriculture witnessed a steady increase of 15.21 % and reached Rs 4,318.74 Cr. During the year the Bank delivered a healthy performance in gold loan business with an increase of 80.76 % in the portfolio.

The year also witnessed an aggressive footprint expansion with a 27.86 % growth in network. Your Bank's branch strength as on 31-March-2012 stood at 950. This included a healthy addition of 207 branches during FY 12. During the year the Bank's ATM network also grew by 202 thereby crossing the 1000 milestone and reaching 1005 ATMs as on 31 Mar 2012. The Bank has systematic plans to scale up its presence across select geographies outside the state of Kerala, which include the States of Tamilnadu, Karnataka, Punjab, Gujarat and Maharashtra. The Bank will focus on Agri, SME and NRI business in these states, which are segments where the Bank has accumulated invaluable expertise through its 66 years of existence.

Net Profit

During the fiscal year ended March 31, 2012, your Bank recorded an impressive growth in Net Profit and achieved Rs 776.79 Cr, registering an increase of 32.31 % over the previous year. Rationalised underwriting processes along with granular attention to asset management led to this healthy show in profits.

Consequent to the improvement in the asset quality of the Bank, we could curtail provisioning by a very large extent. The total provisions of the Bank during the year was Rs 729.68 Cr, of which Rs 34.86 Cr was for investments and Rs 392.71 Cr was for income tax. Provisions on account of loan losses for the year were reduced by 54.63 % to reach Rs 221.77 Cr from Rs 488.85 Cr. and Rs 80.34 Cr was marked for other purposes.

Return on Average Equity and Return on Average Total Assets rose up to 14.37 % and 1.41 % respectively along with the profit. Earnings per Share of the Bank, as on 31st Mar 2012, increased by 32.31 % to reach Rs 45.41 as compared to the previous fiscal year figure of Rs 34.32. Book value per share increased from Rs 298.67 in the previous fiscal year to Rs 333.61 in FY 12.

Operating Profit

Your Bank could deliver substantial growth in top line and bottom line overcoming the challenging macro environment. During the year the Bank posted an operating profit of Rs 1,506.47 Cr.

In FY 12 Risk Adjusted Net Interest Margin of the Bank scaled up to 3.36 % compared to the previous fiscal year rate of 3.04 %. The Net Interest Margin of the Bank for the year stood at 3.79 %, despite the interest rate volatility. Net Interest Income of the Bank for the period increased from Rs 1,746.58 Cr to reach Rs 1,953.40 Cr registering an annual growth of 11.84 %.

For the financial year ended March 2012, the total non-interest income of the Bank stood at Rs 532.34 Cr as against Rs 516.81 Cr in FY 11.

Expenditure

The fiscal year ended 2012 reported an increase in the total expenses of the Bank that reached Rs 4,584.26 Cr from Rs 3,141.59 Cr, registering an annual increase of 45.92 %. Interest expenses increased to Rs 3,604.99 Cr in FY 12 from Rs 2,305.45 Cr in FY 11.

During the year the cost of deposits of Bank climbed to 7.41 % as compared to 5.99 % in the previous fiscal year. Average Cost of all funds (Deposits Borrowings Bonds) recorded a marginal increase and reached 7.56 %. The growth in term deposit portfolio, the general increase in rate of interest offered on term deposits coupled with the deregulation of the rate of interest offered on NRE Term deposits (INR) by RBI contributed to increase in the interest expenses on deposits. Interest expenses as percentage to total income increased to 59.19 % from 50.46 % in FY 2011.

Your Bank in FY 12, as part of strategy, reduced the proportion of high value deposits and simultaneously increased the quantum of low cost deposits. As on 31 Mar 2012, the total high value deposits of the Bank stood at Rs 7,169.05 Cr as compared to Rs 9,272.42 Cr in the previous fiscal year. The share of current account and savings bank deposit account (CASA) to total deposits of the Bank improved from 26.5 % to 27.4 % as on 31 Mar 2012.

Operating Expenses of the Bank during the fiscal year grew to Rs 979.27 Cr from Rs 836.14 Cr. However, Employee cost of the Bank over the period has increased by 13.21 % from Rs 480.41 Cr to reach Rs 543.85 Cr. Wage revision, increase in Human Capital, Dearness Allowance, additional contribution towards New Pension Scheme, retirement benefits of employees etc. contributed to the increase in staff expense. Employee cost as percentage to total income declined from 10.51 % as at the end of last fiscal year to 8.93 % as at 31 Mar 2012.

The expenses on account of the opening of 207 new branches during the fiscal year have also contributed to the increase in operating expenses.

The Cost to Income ratio of the Bank stands at 39.40 % (36.94 % in FY 2011) and is by far one of the best in the Industry. This figure is maintained despite the opening of new branches and even after the spurt in recruitment during the last 2 financial years and increase in the other operating expenses.

Income Growth

Despite the compounded slowdown and uncertainties that prevailed throughout the year, your Bank could stride forward with its policy of creating select good quality assets. With its strong fundamentals, the Bank could navigate through this turbulent environment with its natural pace.

Total income of the Bank during the fiscal year 2012 recorded a 33.31 % growth to reach Rs 6,090.73 Cr from the previous fiscal year figure of Rs 4,568.84 Cr. This growth was primarily fuelled by increase in interest income, which grew by 37.18 %.

Income from advances increased by 32.22 % to reach Rs 4,189.76 Cr. At the same time, income from investments registered a steep rise to reach Rs 1,315.74 Cr clocking a 51.58 % annual growth.

The yield on advances increased to 12.58 % from the previous year's rate of 11.09 % and the return on advance (net of loan loss provisions) improved to 11.91 % from 9.37 % in 2011.

The yield on investments excluding trading income increased to 7.32 % as on March 2012 from 6.95 % as on March 2011. The net interest margin for the fiscal year is at 3.79 % against 4.22 % in March 2011, mainly contributed by the general hike in the cost of deposits.

Concerted efforts to increase the Fee Based Income and Other Income of the Bank resulted in Rs 532.34 Cr as against Rs 516.81 Cr in the previous fiscal year.

Spread

During the fiscal year the Bank's spread on advances (gross) increased to 5.17 % from 5.09 % and spread on investments (gross) stood at 0.36 %. The Spread (net of provisions) on advance grew from last year's 3.38% to reach 4.50 %.

Dividend

Adding value to shareholders continues to be one of the major objectives of the Bank. The Board of Directors recommended a dividend of Rs 9 per share as compared to Rs 8.5 in the previous fiscal year. The Bank has been traditionally rewarding its shareholders through cash dividends by striking a balance between cash dividends and future growth through retained earnings.

Investor Education and Protection Fund

As per the Companies Act 1956, dividend unclaimed for more than 7 years from the date of issue is to be transferred to Investor Education And Protection Fund. On 20.10.2011, we transferred Rs 29,23,183.00 to the Fund.

Growth in Business

Total business of your Bank has reached Rs 86,693.11 Cr as on 31 Mar 2012 with an increase of 15.64 % on a Y-o-Y basis. Total deposits increased to Rs 48,937.12 Cr registering a Y-o-Y growth of 13.77 %, while retail customer deposits recorded a growth of 23.59 % in FY 12. Advances increased in tandem with Deposits to Rs 37,755.99 Cr registering a Y-o-Y increase of 18.16 %.

As mentioned earlier, the Bank reduced its bulk deposits and gave added thrust to retail/low cost deposits to bring down the overall cost of resources. The growth achieved in retail customer base helped the Bank in reducing dependence on certificate of deposits and bulk deposits. The share of high value deposits were brought down to 14.65% from 21.56% in the previous year.

The average deposits of the Bank during the period grew by 24.57 % and average advances by 15.96 %.

Savings deposits of the Bank during FY 12 moved up by 19.48 % to reach Rs 10,929.95 Cr as compared to the base figure of Rs 9,148.29 Cr. During the fiscal year NRE deposits clocked an increase of 35.64 % to reach Rs 7,963.61 Cr.

Your Banks investment portfolio increased to Rs 17,402.49 Cr registering a growth of 19.71 % on Y-o-Y basis as compared to 11.36 % in the previous fiscal year. The average investments on Y-o-Y registered a growth of 44.31 % as compared to previous fiscal year growth of 8.99 %.

Loan Asset Quality

Your Bank could combat the delinquency levels for the year by sourcing quality proposals selectively and by continuous monitoring. The new credit hub system, succeeded in professionally isolating the sourcing and sanctioning functions of asset procurement. In the earlier system, Branches were the focal point for both credit sanctioning and dispensation. The institution of Credit Monitoring Cells (CMC) and Stressed Asset Management Cell (SMAC) (attached to various Zones/Regions) for continuous monitoring and managing the asset quality yielded the desired results.

The Bank's gross NPA and Net NPA improved to 3.35 % and 0.53 % respectively as against 3.49 % and 0.60 % as at the end of March 2011. Net NPAs of the Bank during the year marginally increased to Rs 199.00 Cr from 190.69 Cr as on 31 Mar 2011.

The Bank had taken stringent measures to contain fresh accretion to the NPA portfolio as well as to scale down the existing portfolio. SARFAESI proceedings were effectively employed and recovery agents were judiciously deployed after complying with RBI guidelines in respect of their codes of conduct. During the year the Bank launched a special campaign which was christened "War on NPA". The campaign was successful in educating the field and motivating them to act. This has resulted in successful reining in of the NPA portfolio. In adherence to RBI guidelines, one time settlement was permitted in deserving cases. These efforts have yielded positive results.

Provision Coverage

As on 31 Mar 2012, the Bank held a total provision of Rs 1,055.33 Cr. Provision coverage for NPAs as at 31 Mar 2012 stood at 81.13 %. As per the RBI directive, Banks should hold minimum provision coverage of 70 % including technically written off accounts. As on 31 Mar 2012, the provision coverage ratio of the Bank, including written off accounts is 88.85 %. It has been a prudent policy of the Bank to be conservative on the Provision Coverage Ratio as indicated by the figure above.

Capital Adequacy

Your Bank enjoys very strong capital adequacy. CRAR of the Bank calculated in line with Basel II norms stood at 16.64 % which is significantly in excess of the 9 % stipulated by RBI. Of this, Tier 1 CRAR is at 15.86 %.

Employee Productivity

Business Per Employee of the Bank during the period has grown to Rs 10.11 Cr from Rs 9.23 Cr in the previous fiscal year.

Profit Per Employee of the Bank increased by 25.48 % to reach Rs 9.11 Lakh from Rs 7.26 Lakh in the previous fiscal year.

Share Value Dimensions

Earnings Per Share of your Bank has increased from Rs 34.32 to Rs 45.41 registering a growth of 32.31 %. Return on Equity during the year grew by 19.88 % to reach 14.37 % from the previous fiscal year's figure of 11.98 %.

Employee Stock Option Scheme (ESOS)

The Bank has instituted an Employee Stock Option Scheme to enable its employees including whole time Directors to participate in the future growth and financial success of the bank. Under the Scheme 85,51,650 options can be granted to the employees. The employee stock option scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, work performance, grades, period of service, annual fixed pay, Bank's performance and such other parameters as may be decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors

The Bank's shareholders approved the scheme for issuance of stock options to employees including whole time Directors on December 24, 2010.

The option conversion price was set to be the closing price on the day previous to the grant date. The compensation committee granted 34,72,020 options during the year 2011 - 12. The options granted which are non transferable, with vesting period of 1, 2, and 3 & 4 years subject to standard vesting conditions, and must be exercised within five years from the date of vesting. As on 31 March 2012, 30,35,875 options were in force and none of them has been vested as first vesting date is 31st May 2012 or on completion of one year from the date of grant subject to standard vesting conditions and statutory approvals for the options granted during 2011-12.

The valuation method adopted at the time of the grant was fair value method and it has been changed to intrinsic value method as approved by the compensation committee of the Bank.

Other statutory disclosures as required by the SEBI guidelines on ESOP are given in Annexure II to this report.

Expansion of Network

Commemorating the 66th Founders day, 66 branches were opened in a single day on 18th October 2011. Another 100 branches were opened on 10th March 2012 across the country by the then Hon'ble Finance Minister of India, Shri. Pranab Kumar Mukherjee. The Bank was able to add 207 branches in the current fiscal year which included under-banked and un-banked centers as per RBI's guidelines. This resulted in a record footprint expansion of 27.86 % from base. Out of the 207 Branches opened in FY 12, more than 82 % fall in select five states Tamilnadu, Punjab, Gujarat, Karnataka and Maharashtra and also in Kerala.

Corporate Social Responsibility

Corporate Social Responsibility and Sustainable Development initiatives were incorporated in the Bank's business strategies/ policies. The Bank has a well-defined CSR Policy crafted in consultation with the stakeholders and circulated among the employees and also available in the intranet and Bank's website.

Your Bank has always stood for the assistance & upliftment of the rural/agrarian community by devising specific schemes and inculcating banking habits in them.

Fedbank Hormis Memorial Foundation, a public charitable trust instituted by your Bank provides scholarships to the economically needy students for pursuing professional education courses. The Trust is striving hard to inculcate better knowledge and awareness in the field of banking through training programmes, focused seminars, awards and so on.

The social & community initiatives of your Bank include setting up of Bank's own customer contact center manned by the differently abled personnel, supporting scores of NGOs/institutions with various types of assistance including building fund, sponsoring ambulances, computers, dialysis machines, elevators, offering free midday meals, supporting environmental and healthcare projects, social, cultural and educational programs etc. The mission includes partnering communities in health, family welfare, education, environment protection, providing potable water, sanitation, and empowerment of women and other marginalized groups.

The Bank has taken up credit-plus program called 'Samrudhi'which are extended to villages through the Community Development Societies (CDS).

By promoting paperless banking, blood donation, adopting small family norms, the Bank has come out successful in making employees a part of its CSR.

In consonance with RBI directives, Federal Bank has established a Trust- Federal Ashwas Trust - with the main objective of establishing and running the Federal Ashwas Financial Literacy and Credit Counselling Centers for providing financial education and credit counselling to the public.

In different ways, the Bank could reach out to the less privileged group such as fishermen, farmers, coolies, construction workers, rickshaw pullers, migrants at their convenience near their homes. Christened as 'Fedjyothi', the ICT (Information & Communication Technology) model accounts which are operated using Biometric Smart Cards and Micro ATM turned out to be an effective tool in the process of implementation of the Financial Inclusion program. The Bank opened a GramaJeevanBranchwhich aims at providing formal banking services to the entire unbanked village in a meaningful way. 'Farmers Club'- a grass root level informal forum of farmers - Organised by our rural and semi-urban branches with the support and financial assistance of NABARD stand for the benefit of the village farming community/ rural people. At Federal Bank Corporate Social Responsibility (CSR) is an embodiment of our commitment to the Society at large.

Awards and Accolades

- Your Bank has won the International ACI Excellence Award 2012 in the Payments Transformation category for two prestigious projects - Visa Money Transfer (Visa Fast Funds) & Federal Bank's Aadhar (UID) Based Authentication of Payments.

- The Bank has also won awards in 2 categories from the Kerala Management Association in 2011 - Innovative Cost Management Measures and Excellence in House Magazine.

- The Bank has won the Blue Dart World CSR Day - Global CSR Award for Best Corporate Social Responsibility Practice Overall.

- The Bank was ranked as the Best Bank among old private sector banks in 2010, by Financial Express.

- Your bank was ranked 497th bank in the world by "The Banker", the Internatinal Financial Affairs publication edited from London, in their July 2011 edition.

- The Golden Peacock Award, a prestigious award instituted by The Golden Peacock Awards Secretariat (GPAS), on the CSR front was awarded to us in this fiscal year.

Corporate Governance

The Bank has adopted a Code of Corporate Governance which while taking care of and safe guarding the interest of shareholders and all other stakeholders also provides for good management, adoption of prudent risk management techniques and compliance with required standards of capital adequacy.

The Code also aims at identifying and recognizing the Board of Directors and the Management of the Bank as the principal instruments through which good corporate governance principles are articulated and implemented, giving utmost importance to identify and recognize transparency, accountability and equality of treatment amongst all the stakeholders, which is in tune with statutory and regulatory structures. A copy of the Code is available on request.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 1956, Listing Agreement, and the Code of Corporate Governance adopted by the Bank. The Board comprises of 8 Directors with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, and information technology.

Shri. Shyam Srinivasan MD & CEO joined the Bank on 23.09.2010. Shri. P.C. John, Executive Director (ED), is the Whole Time Director of the Bank. Excluding the MD & CEO and the ED all other members of the Board are Non-Executive and Independent Directors.

Shri. Suresh Kumar was re-elected/appointed as Director of the Bank at its last Annual General Meeting held on 3rd September 2011.

Shri. Nilesh S Vikamsey was appointed as a Director of the Bank on 24.06.2011 and was elected as a Director of the Bank at its last Annual General Meeting held on 3rd September 2011.

The other Directors who are retiring at this AGM are Prof. Abraham Koshy and Dr. M.Y.Khan. Prof. Abraham Koshy and Dr. M.Y.Khan, being eligible, have offered themselves for reappointment.

Prof. Abraham Koshy, Ph.D (Fellow, IIM Ahmedabad), MBA, is an independent Director on the Board of the Bank since May 18, 2007. He was a member of the faculty at the School of Management Studies, Cochin University and thereafter the Centre for Management Development, Trivandrum. He subsequently became a member of the faculty of the Indian Institute of Management, Ahmedabad. He currently serves there as a Professor of Marketing . He is a Visiting Professor of various European Business schools/Universities and he conducts executive training programmes for senior executives of companies in India and abroad. He also provides advisory services for various companies. Apart from publishing several research papers and case studies in reputed journals, Prof.Koshy has co-authored a book on Marketing Management with legendary marketing guru, Prof. Kotler.

Prof. Koshy is also a Director of Malayala Manorama Printing and Publishing Co. and Autoline Industries Ltd. He is Chairman of the Risk Management Committee, Customer Service & Marketing Strategy Committee and Committee for Human Resources Policy of the Federal Bank Ltd. and also member of its Nomination, Remuneration and Ethics Committee. Prof. Abraham Koshy held 1000 shares of the Company as on March 31, 2012.

Dr. M. Y. Khan is an Independent Director on our Board since June 06, 2009. He is a professional banker with vast experience in Banking Industry. He is a Post Graduate in Science and also holds an Honorary Degree, Doctorate of Philosophy in Business Management (Ph.D) from Burkes University in U.K. He was former Chairman of Jammu & Kashmir Bank and made significant contributions for its growth. He was also heading J & K Tourism Development Corporation for 5 years as Managing Director. Dr.Khan had been nominated member of the Chattisgarh Economic Advisory Committee, Government of India, Member of the Banking and Financial Institutions Committee of FICCI and Member of the Managing Committee of Indian Banking Association Mumbai, Dr.Khan is the recipient of several prestigious awards like "Udyog Rattan" award, "Pride of India & IMM" award, for excellence as top professional manager, "Excellence Award" by Institute of Economic Studies, "Star Achievers Award" among several others. Currently he is on the Board of Zee Entertainment Enterprises Ltd, Bharath Hotels Ltd, ETA Star Health & Allied Insurance Company Ltd, United Corporate Park, Dhir Investments Plc and Unitech CIG Realty Fund.

He is the Chairman of the Audit Committee of Bharath Hotels Ltd and a member of the Audit Committee of The Federal Bank Ltd. Dr. M.Y. Khan did not hold any shares of the Company as on March 31, 2012.

Subsidiary

FedBank Financial Services Ltd. is a fully owned subsidiary of the Bank. As required under Section 212 of the Companies Act, 1956, the financial statements relating to this company, the sole subsidiary of the Bank, for FY 12 are attached.

Annual Financial Statements and Audit Report

As required by section 212 of the Companies Act, 1956, the Bank's Balance Sheet as on 31 March 2012, its profit and loss account, and the statutory auditors' report and statements required under the section, are attached.

Statutory Audit

M/s. Varma & Varma, Chartered Accountants, Kochi, and M/s. Price Patt& Co., Chartered Accountants, Chennai, jointly carried out the statutory central audit of the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank.

M/s. Price Patt & Co., one of the joint statutory central auditors of the Bank whose period was to expire at the conclusion of this Annual General Meeting, submitted their resignation vide their letter dated 14.06.2012, consequent to their appointment as statutory central auditor of Union Bank of India, a public sector bank for the year 2012-13, in view of the RBI guidelines that an audit firm cannot do the central audit of a private sector bank if they are statutory auditors in public sector banks effective from the year 2012-13. The same has been taken on record by the Audit Committee of the Board.

Joint Venture in Life Insurance Business

The Bank's joint venture Life Insurance Company, in association with IDBI Bank Limited and Fortis Insurance International N.V. (now Ageas), namely IDBI Fortis Life Insurance Company Limited, renamed as IDBI Federal Life Insurance Company Limited, commenced operations in March 2008. Currently the Bank has a total stake of Rs 208 Cr in the equity of the company holding 26 % of the equity capital.

Statutory Disclosure

Stock Exchange Information

The Bank's equity shares are listed on:

1. Bombay Stock Exchange Limited

Phiroze Jeejeebhoy Towers

Dalal Street, Mumbai - 400 001.

2. National Stock Exchange Ltd.

"Exchange Plaza"

Bandra - Kurla Complex

Bandra East, Mumbai - 400 051.

3. Cochin Stock Exchange Ltd.

MES, Dr. P.K. Abdul Gafoor

Memorial Cultural Complex

4th Fl, 36/1565, Judges Avenue,

Kaloor, Kochi - 682 017.

The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges listed above.

Through its export-financing operations, the Bank supports and encourages the country's export efforts.

Considering the nature of activities of the Bank, the provisions of Section 217 (1) (e) of the Companies Act, 1956 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost-effective manner for delivering quality customer service.

Personnel

As required by the provisions of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. (Annexure I).

Director's Responsibility Statement

As required by section 217 (2AA) of the companies act, 1956, the Directors state that:

The Bank has in place a system to ensure compliance of all laws applicable to the Bank;

In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

The directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for that period;

The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; and

The directors have prepared the annual accounts on a going concern basis.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, Various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and co-operation. The Directors wish to express their gratitude to investment Banks, rating agencies and stock exchanges for their excellent support.

The Directors record their sincere gratitude to the Bank's shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Aluva P.C. Cyriac

Date. 29th June 2012 Chairman of the Board

Mar 31, 2011

To The Members

The Board of Directors, Federal Bank is indeed pleased to present to you the 80th Annual Report of the business & operations along with the audited accounts for the year ended March 31, 2011.

Financial Performance

Your Bank did well in the financial year 2010-2011. Before we go into the bigger details, here's a quick glance through the highlights of the year.

Rs. In Cr

For the year ended Financial Parameters 31.03.11 31.03.10

Net Interest Income 1746.58 1410.83

Fee and Other Income 516.81 530.91

Net Revenue 2263.39 1941.74

Operating Expenses 836.14 676.89

Operating Profit 1427.25 1264.85

Net Profit 587.08 464.55

Profit Brought Forward 23.14 21.93

Total Profit Available for Appropriation 610.22 486.48

Appropriations:

Transfer to Statutory Reserves 146.80 116.14

Transfer to Revenue Reserves 232.11 208.27

Transfer to Capital Reserves 0.00 8.20

Transfer to Special Reserves 36.56 31.00

Proposed Dividend 145.39 85.52

Provision for Dividend Tax 23.58 14.21

Balance Carried Over to Balance Sheet 25.78 23.14

Financial Position:

Deposits 43014.78 36057.95

Advances 31953.23 26950.11

Total Business (Deposits Advances) 74968.01 63008.06

Other Borrowings 1888.36 1546.76

Investments 14537.68 13054.65

Total Assets (Balance Sheet Size) 51456.36 43675.61

Capital 171.05 171.03

Ratios:

Return on Total Assets (%) 1.34 1.15

Return on Equity (%) 11.98 10.30

Earnings Per Share (Rs.) 34.32 27.16

Book Value Per Share (Rs.) 298.67 274.24

Operating Cost to Income (%) 36.94 34.86

Capital Adequacy Ratio (%)(BaseII) 15.39 17.27

(Basel II) 16.79 18.36

We achieved a commendable net profit figure of Rs. 587.08 crore. In the light of the year's many challenges, including the stif competition within the financial sector, the economy's inflationary conditions and the tight money policy reflected in the RBI's monetary policy, this performance is indeed noteworthy. We recommend a dividend of Rs. 8.5 per share.

Operating Profit

The operating profit for the year saw a 12.84% increase - from Rs. 1264.85 crore in FY2010 to Rs. 1427.25 crore in FY 2011.

The operating profit excluding trading gains increased by 19.39% from Rs. 1157.14 crore to Rs. 1381.49 crore.

Trading profit decreased to Rs. 45.76 crore from Rs. 107.71 crore.

The Profit margin for the year increased to 12.85% from 11.05%.

The net interest income increased from Rs. 1,410.83 crore to Rs. 1746.58 crore but the fall in trading Profit led to a decrease in the non-interest income from Rs. 530.91crore to Rs. 516.81 crore.

Net Profit

The year ended 31 March 2011 saw a 26.38% increase in the net Profit. From Rs. 464.55 crore in FY 2010 to Rs. 587.08 crore, we could display a substantial improvement in net Profit and the Profit margin also increased to 12.85% from 11.05% This net Profit was after taking into account a total provision of Rs. 840.17 crore out of which the provision for income tax is Rs. 314.73 crore.

With increased Profits, return on average equity and return on average total assets followed suit, from 10.30% to 11.98% and 1.15 % to 1.34% respectively.

Income Growth

In the year ended 31 March 2011, your Bank registered an 8.67% increase in total income generated, growing from Rs. 4204.14 crore (FY2010) to Rs. 4568.84 crore (FY2011). This growth was primarily facilitated by the increase in interest income, which rose by 10.31% from Rs. 3673.23 crores to Rs. 4052.03 Crores.

The need to offer competitive rates towards maintaining/improving market share combined with increase in impaired assets, led to a fall in the yield on advances to 11.09% as against the 11.30% recorded on 31 March 2010.

Income from advances (Interest & exchange) as a percentage to total income increased to 69.36% as on 31 March 2011 from 67.78% for the year ended 31 March 2010. The rate of return on advances (net of provisions) decreased to 9.37% from last year's 9.66%. The reduction in yield is partially contributed by the de-recognition of interest in fresh NPA accounts and increased provisions. Yield on investments (excluding trading income) increased to 6.95% as on 31 March 2011 from 6.84% as on 31 March 2010.

Income from investments increased by 10.80%.

The volatility of the financial markets brought down the trading Profit from last year's Rs. 107.71 crore to Rs. 45.76 crore, therefore leading to the decrease in other income.

The net interest margin for the year increased to 4.22% from 3.82% in FY 2010.

We could improve the interest margin, which is a major performance yardstick, by bringing down the cost of deposit.

Expenditure

Total expenses for the year ended 31 March 2011 increased by 6.88% from Rs. 2939.29 crore to Rs. 3141.59 crore. Interest expenses increased to Rs. 2305.45 crore in FY 11 from Rs. 2,262.40 crore in FY 10. Rs. 2161.98 crore was the interest paid on deposits. We were able to bring the cost of deposits down to 5.99 % from last year's 6.55%.

Cost of all funds (Deposits Borrowings Bonds) decreased to 6.11% from 6.62% as on March 2010. We could increase our low cost retail deposits and reduce the high cost bulk deposits.

Average savings deposits have gone up to Rs. 8392.99 crore from Rs. 6915.20 crore last year. 32.19% of our total deposits are low cost deposits. Interest paid as percentage to total income decreased to 50.46% from 53.81% in FY 2010.

Operating expenses increased to Rs. 836.14 crore from Rs. 676.89 crore.

Staf related expenses stands at Rs. 480.41 crore. The staf cost increased by 31.24% and we grew by 374 employees during the year. Wage revision, increase in Dearness Allowance and additional contribution towards pension liability of second optees of pension led to the increase in staf expense.

The net liability arising on exercise of second option for Pension by employees (other than separated/ retired employees) is fully reckoned and disclosed as liability in the Balance Sheet. 1/5th of the said liability amounting to Rs. 33.71 crore, is charged to the Profit and Loss Account of the year and the balance unamortized amount of Rs. 134.72 crore is carried forward to be amortized equally over the succeeding four years. Employee and other costs as a percentage of average advances plus average investments increased to 2.03% as on 31 March 2011 from 1.84% as on 31 March 2010. The staf cost as percentage to total income increased to 10.51% from 8.71%.

The cost to income ratio stands at 36.94% as against 34.86% in March 2010.

Spread

Spread on advances to cost of deposits increased to 5.10% from 4.75% in FY 2010. Spread on investments (gross) increased from 1.23% to 1.33% this year. The spread (net of provisions) on advances grew from last year's 3.11% to 3.38%.

Dividend

We have recommended a dividend of Rs. 8.5 per share as compared to Rs. 5 per share declared for the last financial year. While recommending the dividend, we have taken into account the Profit that has to be retained for the future expansion and growth of the Bank and capital adequacy requirement. Retained earnings add to the net worth and is a benchmark of rating your Bank and gets refected in the share price, which translate into benefits for our investors in terms of capital appreciation on the shares held by them.

Investor Education and Protection Fund

As per the Companies Act 1956, dividend unpaid for

more than 7 years from the date of issue is to be transferred to Investor Education And Protection Fund. On 15.09.2010, we transferred Rs. 2053825.00 to the Fund.

Growth in Core Business

Total business (deposits plus advances) increased from Rs. 63008.06 crore to Rs. 74968.01 crore as on 31 March 2011.

Our deposits increased to Rs. 43014.78 crore registering a YoY growth of 19.29%. Advances touched Rs. 31953.23 crore, registering a YoY increase by 18.56%. But this growth is not refected in the case of average deposits and advances, as the spurt in the business was mainly during the second half of the financial year. We are taking measures to ensure your Bank's consistent and sustainable growth across the year. We avoided bulk deposits and gave thrust to retail deposits to bring down the cost.

The mix of average core deposits of SB, CD and Term Deposits improved to 23:5:72 from 21:4:75 during FY 2010.

Your Bank's investments portfolio increased to Rs. 14537.68 crore showing a 11.36% increase on YoY compared to 7.72% in FY 2010. The growth of average investments on YoY registered only 8.99% compared to 20.75% in FY2010. The volatility in the financial markets forced us to be cautious in terms of expanding the investment portfolio.

Loan Asset quality

Gross NPA as on March 31, 2011 stood at Rs. 1148.33 crore as against Rs. 820.97 crore in the previous year. Gross NPAs as percentage to Gross Advance stands at 3.49% as against 2.97% in the previous year. Net NPAs stood at Rs. 190.69 crore (0.60% of Net Advances) as against Rs. 128.79 crore (0.48% of Net advances) in the previous financial year. Fresh accretion to NPAs during the period is the major reason behind the rise. We have taken several measures to contain impaired assets, including utilising SARFAESI proceedings more efectively to improve the recovery of Non Performing Assets and engaging recovery agents after complying with RBI guidelines, in respect of their codes of conduct. In adherence to RBI guidelines, negotiated settlement is permitted in deserving cases. To prevent the accretion to the Non Performing Asset system, we've implemented stricter monitoring of credit and in the case of viable units, restructuring is permitted to overcome temporary difculties faced by them.

Provision coverage

As on 31.03.2011, the Bank held a total provision of Rs. 942.34 crores. This includes a Floating Provision of Rs. 179.52 crores. The total provision coverage for NPAs as on March 31, 2011 is 82.06%. As per the extant RBI directive, Banks should hold minimum provision coverage of 70% including technically written of accounts. As on 31st March 2011, Provision Coverage Ratio of our Bank, including technically written of accounts, is 89.77%. It indicates that the recovery of such assets will have a real favorable efect on our profitability as these provisions can be reversed to the Profit and loss account upon recovery of the non performing assets. Provisions as percentage of total income increased to 10.94% from 7.50%.

Financial Inclusion

The frst-ever Financial Inclusion Bank Branch in the state of Kerala, 'Grama Jeevan' branch was opened at Thuruthy in Vengoor West village, Ernakulam District. Allotted to the Bank for Financial Inclusion, the branch ofers full-fedged Banking facilities to the public, including round-the-clock ATM facility. Dr. D Subbarao, Hon'ble Governor of Reserve Bank of India visited the Grama Jeevan branch on the inaugural day itself.

ÃFederal Ashwas TrustÃ was established by the Bank with the primary objective of establishment and running of ÃFederal Ashwas Financial Literacy and Credit Counseling CentersÃ (FAFLCCs) to provide financial education and credit counseling to the public. The branchless Banking model of Financial Inclusion is implemented through individual Business Facilitators (BFs). In this model, Customer Service Points (CSPs) are manned by trained BF agents.

Capital adequacy

CRAR of the bank is 15.39% as per Basel I and as per BASEL II it is 16.79% as on 31.03.2011 which is far in excess of the 9% stipulated by RBI and it adds to the strength of our balance sheet.

Employee productivity

Business per employee increased to Rs. 9.23 crore from Rs. 8.13 crore in FY 2010.

Profit per employee increased to Rs. 7.26 lakh from Rs. 6.01 lakh as in the previous year.

Share value dimensions

Increase in net Profit brought about more earnings per share, from Rs. 27.16 in FY 2010 to Rs. 34.32 and return on equity increased to 11.98% (10.30% in FY 2010). The bookvalue increased to Rs. 298.67 as on 31 March 2011 from Rs. 274.24 as on 31 March 2010.

Expansion of Network

During the period, we grew by 71 branches and 73 ATMs. As on March 31, 2011, the total number of branches and ATMs of the Bank increased to 743 and 805 respectively, as against 672 and 732 in the last financial year.

To enhance the reach and geographical spread, your Bank seeks to add around 200 branches, subject to approval from RBI based on the cluster based model. With this approach, rather than one or two branches, we will open a cluster of branches in a potential locality and thereby enhance visibility and build on the Bank's brand image.

Restructuring of the bank

We have constituted a Marketing Department to promote our products better and to enhance the brand image of them. We now have Credit Hubs to improve the quality of our credit portfolio and for better credit risk management. The present regional set up has been given a facelift with the introduction of zonal set up and modifed role of regions, to give focused attention on business development.

Challenges ahead of us

RBI is evaluating to deregulate interest rates on Savings Bank accounts. They have already hiked the regulated interest rate on savings deposits from 3.5% to 4%. This would result in higher interest expenses and maintaining the present level of interest spread,

which is ahead of industry levels, will prove to be a challenge given the competitive scenario, where we have to ofer best interest rates for quality advance customers.

Reserve Bank of India has been continuously raising the policy rate in order to contain the inflationary pressures of the economy and maintaining the present level of net interest margin will be a real challenge.

Introduction of Basel III is under consideration by RBI. This may result in higher capital adequacy requirements. As we currently have a ratio of 16.79%, it wouldn't immediately pose a challenge to us. But eventually, we may have to increase our capital for business growth. Working Group constituted by RBI has recommended Financial Holding Company structure for Banks and other financial institutions. Once the recommendations get implemented, we will have to comply with the regulations.

Corporate governance

The Bank has adopted a Code of Corporate Governance, which simultaneously takes care of the interest of shareholders and other stakeholders, and provides for good management, adoption of prudent risk management techniques and compliance with required standards of capital adequacy. The code also aims at identifying and recognizing the Board of Directors and the Management of the Bank as the principal instruments, through which good corporate governance principles are articulated and implemented. This gives utmost importance towards identifying and recognizing transparency, accountability and equality of treatment amongst all the stakeholders, thus being in tune with statutory and regulatory structures. A copy of the Code is available upon request.

The corporate governance practices followed by the Bank are given in the annexure.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 1956, Listing Agreement, and the Code of Corporate Governance adopted by the Bank. The Board consists of 8 persons with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, finance, industry, agriculture, and information technology.

Shri. Shyam Srinivasan MD & CEO joined the Bank on 23/09/2010 on retirement of Shri. M. Venugopalan, MD & CEO who retired on July 31, 2010 after his tenure of appointment of 5 years and 3 months.

Shri. P. C. John, Executive Director, is whole time Director of the Bank. Excluding the MD & CEO and the ED all other members of the Board are Non-Executive and Independent Directors.

Shri. P. R. Kalyanaraman, Executive Director, retired on 1st January 2011 after his tenure of appointment of 3 years.

Mr. Abraham Chacko has joined the Bank as Executive Director efective 21st of May 2011.

Shri. P. C. Cyriac, Shri. Abraham Koshy and Dr. T. C. Nair were re-elected/ appointed as Directors of the Bank at its last Annual General Meeting held on 13th September 2010.

The Directors who are retiring at this AGM are Shri. P. H. Ravikumar and Shri.Suresh Kumar. Shri. P. H. Ravikumar will be retiring after rendering 7 years of valuable service to the Bank. Shri. Suresh Kumar being eligible have ofered himself for reappointment. Shri. Nilesh. S. Vikamsey was appointed as a Director of the Bank, as an Additional Director in the place of Shri. P. H. Ravikumar. A proposal moved by a member to appoint Shri. Nilesh S. Vikamsey as Director in this vacancy is placed before this AGM.

Shri. Suresh Kumar is an Independent Director on our Board. He holds a Bachelor's degree in Commerce (Hons.) from the University of Bombay and has completed advanced general and investment management programmes at London, Wharton and Columbia Schools of Business. He has been part of the Senior Management of Emirates Bank group since 1989. Prior to that he had held senior treasury and general management positions in Government of Dubai projects and the banking sector in India. He is a fellow of the Indian Institute of Bankers and the founder/ past President of the Indian Business and Professional Council in Dubai. He is also a member of the Regional Chief Executive Forum of the Institute of International Finance (IIF). He is currently the CEO of Emirates Financial Services PSC .

He is also the Chairman of the Board of Directors of Fedbank Financial Services Ltd.

Shri. Nilesh S. Vikamsey is a Chartered Accountant with over 16 years experience, and is partner of Khimji Kunverji & Co., Chartered Accountants. At present he is a member of many Committees of ICAI, including those noted below:

a) IFRS Implementation Committee

b) Disciplinary Committee (under Section 21B) C) Accounting Standards Board

d) Auditing & Assurance Standards Board

e) Expert Advisory Committee

f) Professional Development Committee

g) Internal Audit Standards Board

Currently he is an Independent Director in the following Companies: Listed Companies:

1) India Infoline Limited

2) Rodium Realty Limited Private Companies:

1) HLB Ofces & Services Pvt Limited

2) TruNil Properties Pvt Limited

3) BarKat Properties Pvt Limited

Subsidiary

FedBank Financial Services Ltd. is a fully owned subsidiary of the Bank. As required under Section 212 of the Companies Act, 1956, the financial statements relating to this company, the sole subsidiary of the Bank, for FY11 are attached.

Annual Financial Statements and Audit Report

As required by section 212 of the Companies Act, 1956, the Bank's Balance Sheet as on 31 March 2011, its Profit and loss account for FY11, and the statutory auditors' report and statements required under the section, are attached.

Statutory Audit

M/s. Varma & Varma, Chartered Accountants, Kochi,

and M/s. Price Patt & Co., Chartered Accountants, Chennai, jointly carried out the statutory central audit of the Bank. The statutory central/branch auditors audited all the branches and other ofces of the Bank.

Special Reserve created under section 36(1)(viii) of the Income Tax Act 1961.

As per section 36(1)(viii) of the Income tax Act, 1961, deduction is available for any Special Reserve created and maintained to the extent of 20% of the Profit derived from the business of providing long term fnance for industrial or agricultural development or development of infrastructure facility or housing in India. With the Bank's term lending for housing, power, bridges, roads and other segments of infrastructure in the last year and the availability of the tax benefit under the section 36(1)(viii) of the Income tax Act, the Bank has created a Special Reserve of Rs. 36.56 crore during this year (previous year Rs. 31 Crore), being the eligible amount of deduction available under the said section.

Joint Venture in Life Insurance Business

The Bank's joint venture Life Insurance Company, in association with IDBI Bank Limited and Fortis Insurance International N.V. (now Ageas), namely IDBI Fortis Life Insurance Company Limited, renamed as IDBI Federal Life Insurance Company Limited, commenced operations in March 2008. Currently the Bank has a total stake of Rs. 182 cr in the equity of the company holding 26% of the equity capital.

Statutory Disclosure

Stock Exchange Information

The Bank's equity shares are listed on:

1. Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers Dalal Street, Mumbai - 400 001.

2. National Stock Exchange Ltd. ÃExchange PlazaÃ

Bandra Ã Kurla Complex Bandra East, Mumbai - 400 051.

3. Cochin Stock Exchange Ltd. MES, Dr P K Abdul Gafoor Memorial Cultural Complex 4th Fl, 36/1565, Judges Avenue, Kaloor, Kochi Ã 682 017.

The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges listed above.

The requirement of disclosure of steps taken for conservation of energy and technology absorption does not apply to the Bank.

Through its export-fnancing operations, the Bank supports and encourages the country's export eforts.

The requirement of disclosure under section 217 (2A) of the Companies Act, 1956, is given as a separate annexure.

Personnel

As required by the provisions of Section 217 (2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. (Annexure I).

Directors' Responsibility Statement

As required by section 217 (2AA) of the Companies Act, 1956, the Directors state that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of afairs of the Bank at the end of the financial year and of the Profit of the Bank for that period;

c) the Directors have taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; and

d) the Directors have prepared the annual accounts on a going-concern basis.

Acknowledgement

The Board of Directors places on record its sincere thanks to Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and co-operation. The Directors also place on record the gratitude to investment Banks, rating agencies and stock exchanges for their excellent support.

The Directors record their sincere gratitude to the Bank's shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Aluva P.C.Cyriac

29 July 2011 Chairman of the Board

Mar 31, 2010

The Directors take great pleasure in presenting the 79th Annual Report on the business and operations of your Bank together with the audited accounts for the year ended March 31, 2010.

FINANCIAL PERFORMANCE

The financial highlights of your Bank for the financial year 2009-10 are given below:

Rs. in crore

For the year ended

Financial Parameters March 31,2010 March 31, 2009

Net Interest Income 1410.83 1,315.46

Fee and Other Income 530.91 515.77

Net Revenue 1941.74 1,831.23

Operating Expenses 676.89 571.45

Profit before Depreciation and Tax 909.73 835.85

Net Profit 464.55 500.49

Profit Brought Forward 21.93 14.62

Total Profit Available for Appropriation486.48 515.11

Appropriations:

Transfer to Statutory Reserves 116.14 125.12

Transfer to Revenue Reserves 208.27 197.25

Transfer to Capital Reserves 8.20 29.75

Transfer to Special Reserves 31.00 11.00

Transfer to Investment Fluctuation Reserve 0.00 0.00

Transfer to Contingency Reserve 0.00 30.00

Proposed Dividend 85.52 85.52

Provision for Dividend Tax 14.21 14.54

Balance Carried Over to Balance Sheet 23.14 21.93

Financial Position:

Deposits 36057.95 32,198.19

Advances 26950.11 22,391.88

Total Business (Deposits + Advances) 63008.06 54,590.07

Other Borrowings 1546.76 748.94

Investments 13054.65 12,118.97

Total Assets (Balance Sheet Size) 43675.61 38,850.86

Capital 171.03 171.03

Ratios:

Return on Total Assets (%) 1.15 1.48

Return on Equity (%) 10.30 12.13

Earnings Per Share (Rs.) 27.16 29.26

Book Value Per Share (Rs.) 274.24 252.93

Operating Cost to Income (%) 34.86 31.21

Capital Adequacy Ratio (%) 17.27 20.14

Considering the economic slowdown and the risks in going for exponential growth, your Bank had opted for a consolidation phase. But at the same time, the Bank used the opportunity for reaching out to new areas through Branch expansion, putting up of new ATMs and to improve and enhance various channels. Strategic investments were also made to enhance the shareholder value .

OPERATING PROFIT

Operating Profit registered a small growth from Rs.l, 259.78 crore to reach Rs. 1,264.85 crore. The liquidity overhang throughout the period under review affected the growth of operating profit. There was an increase in net interest income from Rs.l, 315.46 crore to Rs. 1,410.83 crore and the non-interest income has gone up from Rs.515.77 crore to Rs. 530.91 crore.

INCOME GROWTH

The interest/discount income from advances has gone up from Rs.2564.25 crore to Rs.2, 849.73 crore. In spite of the uncertainties prevailed in the economy, the Bank could create select good quality earning assets. Bank continued to enjoy a decent interest spread (4.75%) on advances. Based on the increase in interest income, total income has gone up from Rs.3831.15 crore to Rs.4204.14 crore registering a growth of 9.74%. Income from advances as percentage to total income was 67.78%. Income from investments recorded an increase of Rs. 118.86 crore and touched Rs.894.90 crore. Cumulative income from advances and investments recorded a growth of 11.92% and stood at Rs. 3,744.63 crore against Rs. 3,345.79 crore of the previous year. Yield on advances moved in tandem with the market movement of interest rates and decreased by 100 bps to 11.30%. Return on advances plus investments decreased to 10.20%% from 11 %. As a result of the adverse movement in the yield on advances, the net interest margin declined from 4.28% to 3.82% , still one of the best in the industry. The growth in other income was marginal with a growth of 2.93%from a level of Rs.515.77 crore to Rs.530.91 crore. Recovery from written off accounts contributed Rs.l 27.70 crore as against Rs.l 32.77 crore during the last financial year.

The net revenue, that is the net interest income plus other income, of the Bank increased by Rs. 110.51 crore fromRs. 1,831.23 crore as on March 31, 2009 to Rs. 1,941.74 crore.

EXPENDITURE

The Bank embarked upon organic expansion adding 60 branches and 115 ATMs. Total expenses for the financial year 2009-10 increased from Rs. 2,571.37 crore, to Rs. 2,939.29 crore registering an increase of 14.31 %. Interest expenses increased from Rs. 1,999.92 crore in FY 09 to Rs. 2,262.40 crore in FY 10. Cost of all funds (deposits plus borrowings plus bonds) decreased to 6.62% from 7.08% of last financial year. Cost of deposits witnessed a downward trend and has fallen by 43 bps to 6.55% from last years 6.98%. The Bank was conscious in shedding bulk deposits and concentrated on retail deposits. Interest rates did not show large movements during the last financial year. Operating expenses increased by Rs. 105.44 crore and amounted to Rs, 676.89 crore. Employee costs came to Rs.366.05 crore during the year compared to last years figure of Rs. 317.45 crore. Other operating expenses came to Rs. 310.84 crore. Employee costs as percentage to total income has gone up from 8.29% for the year ended March 31, 2009 to 8.71% for the year ended March 31, 2010. Cost to income ratio is 34.86% (31.21% % in FY 2008-09) which is still one of the best in the industry. This figure is maintained even after the spurt in recruitment during the last 2 financial years and increase in other operating expenses including expenses for technological advancement.

NET PROFIT

The net profit for the year after making all provisions, was Rs.464.55 crore as on March 31,2010 as against Rs. 500.49 crore showing a marginal decrease of 7.18%. Total provisions amounted to Rs. 800.30 crore, excluding Income Tax provisions amounting to Rs.395 crore. The profit margin decreased from 13.07% to

11.05%. Return on average equity stood at 10.30%. Earnings per share was at Rs.27.16 and the return on average total assets at 1.15%. Book value increased from Rs.252.93 as on March 31, 2009 to Rs.274.24 as of March 31, 2010.

DIVIDEND

The Bank has been consistently rewarding shareholders through cash pay outs after taking into account the requirement for ploughing back of profits to support growth. Retained profits add impetus for the future growth and enhance the value of the stake of the shareholders. In view of the satisfactory performance, the Board of Directors recommends a dividend of 50% on the paid up capital of the Bank which is the same percentage as that of last financial year.

GROWTH IN BUSINESS

Attracting new customers and further enhancing relationships with the existing customers were the cornerstones of the business philosophy of the Bank. New products were introduced taking into account the customer preferences. The policy of the Bank is to enter new geographies to enhance visibility of the Bank. Tiered Current and Savings Bank account products have started attracting customer interest. Most of the back office functions were centralised to take advantage of volume as well as expertise. Deposits grew to Rs.36057.95 crore clocking 11.99% growth. The Bank had assiduously avoided bulk deposits and hence the fall in growth rate of deposits. However, average deposits have shown a decent growth of 23.33%. Advances registered 20.36% growth touching a figure of Rs.26, 950.11 crore. Savings Bank deposits has grown from a base of Rs.6, 445.84 crore to Rs.7, 611.13 crore. The NRI deposits of the Bank stood at Rs. 7,350.71 crore. Investments grew to Rs. 13054.65 crore from Rs.12,118.97 crore. The size of the balance sheet for the year grew to Rs. 43,675.61 crore from Rs. 38,850.86 crore.

LOAN ASSET QUALITY

Loan delinquencies were higher during the year which was a fall out of the economic recession. Gross NPA as on March 31, 2010 stood at Rs.820.97 crore as against Rs.589.54 crore in the previous year. Gross NPAs as percentage to Gross Advance is 2.97% as against 2. 57 % in the previous year. Net NPAs stood at Rs. 128.79 crore (0.48% of Net Advances) as against Rs. 68.12 crore (0.30% of Net advances) in the previous financial year.

The Bank has initiated various measures to contain the NPA. Maximum thrust is given for recovery through SARFAESI Act. Proceedings and settlements are reached through compromise with a humanitarian approach. Services of Recovery Officers/Agents are used strictly adhering to Codes of Conduct prescribed by RBI. During the financial year 132 recovery camps and 14 Lok Adalaths were held at different centres and the results were overwhelming. A Mega Adalath was held exclusively for the Bank, which was inaugurated by the acting Chief Justice of Kerala.

As on 31.03.2010, the Bank held a total provision of Rs 684.43 crore. This includes a Floating Provision of Rs.l 79.52 crore. The total provision coverage for NPAs as on March 31, 2010 is 83.37 %. As per the extant RBI directive, banks should achieve provision coverage of 70 % (by Sept. 2010) including technically written off accounts. As on 31st March 2010, Provision Coverage Ratio of your bank including technically written off accounts is 91.82%.

EXPANSION OF NETWORK

During the financial year, the Bank opened 60 new branches and 115 new ATM centres. As on March 31, 2010, the total number of branches and ATM centres of the Bank increased to 672 and 732 respectively, as against 612 and 617 of last financial year.

CAPITAL ADEQUACY

The Capital to Risk-weighted Assets Ratio (CRAR) as per BASEL I as on March 31, 2010 stood at 17.27%. As per BASEL II CRAR came to 18.36%. As per RBI guidelines lower of the above two shall be reckoned and accordingly CRAR is 17.27%. Tier-1 CRAR (core CRAR) was 15.27%.

BUSINESS PRODUCTIVITY

The business per average employee increased to Rs. 8.13 crore as against Rs.7.50 crore of the fast financial year. Profit per employee stood at Rs. 6.01 lakh on an enhanced workforce.

EXTERNAL RATING

The certificate of deposit and short term fixed deposits (with a contracted maturity upto one year) of the bank are rated "PI +" by Crisil. Tier II subordinated debts issued by the bank aggregating to Rs.320 crore is rated "CARE AA" by Care and "AA - (Ind)" by Fitch.

CORPORATE GOVERNANCE

Your Bank is committed to achieving highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. The corporate governance practices followed by the Bank are given in the annexure.

BOARD OF DIRECTORS

The Board consists of nine members as on 31 March 2010, including Managing Director and Chief Executive Officer and two Executive Directors (whole time directors). All other members of the Board are Non-Executive & Independent Directors.

Shri. M. Venugopalan, Managing Director & Chief Executive Officer has laid down the office on July 31, 2010 after being at the helm of affairs for 63 months. He was Chairman & Chief Executive Officer of the Bank from May 01, 2005 to July 30, 2008. Pursuant to the implementation of the Dr.Ganguly Committee recommendations on Corporate Governance, he was designated as Managing Director & Chief Executive Officer from July 31, 2008. Shri. M. Venugopalan made significant contribution towards the development, growth and visibility of the Bank. He could successfully position the Bank with capital and bring in strategic structural and technological changes to remain agile to meet todays competition. The Board acknowledges his valuable services.

The Board has appointed Shri. Shyam Srinivasan, as the MD & CEO of the Bank on the retirement of Shri. M. Venugopalan. RBI has also accorded their approval vide letter DBOD No: 1785/08.38.001/2010-11 July 29, 2010 for the appointment of Shri. Shyam Srinivasan,

Shri. P. R. Kalyanaraman has taken charge of the office of MD and CEO from 31st July, 2010, as an interim arrangement as approved by RBI (Shri P. R. Kalyanaraman has been designated as MD & CEO in charge during the interim period,) and will work subject to the overall control of the Board, until Shri. Shyam Srinivasan, the new MD & CEO designate assumes office.

Prof. A.M. Salim retired from the Board on August 22, 2009 after rendering 8 years of valuable service in the Board. The Board extends its appreciation to the meritorious services of Prof. Salim as a member of the Board of the Bank.

Executive Director, Shri. K. S. Harshan retired from the Bank after completing a five year tenure in the Bank, out of which three years as a member of the Board, The Board acknowledges his valuable services.

Shri. P C Cyriac and Prof. Abraham Koshy are due to retire by rotation at the forthcoming Annual General Meeting (AGM), as per the Articles of Association of the Bank, our Code of Corporate Governance and the provisions of the Companies Act, 1956, Shri. P C Cyriac and Prof. Abraham Koshy being eligible, offer themselves for re-appointment.

Shri P Surendra Pai is retiring at the forthcoming AGM, after completing his term of appointment of three years as approved by the Board at the time of his initial appointment and is not offering himself for re-appointment. The Board records its appreciation of the valuable services of Shri P Surendra Pai as a member of the Board of the Bank.

A shareholder of the Bank has expressed his intention to propose Dr.T.C.Nair as a candidate for the office of directorship in this vacancy and has given notice in writing along with deposit of Rs.500/- in terms of Sec.257 of the Companies Act, 1956.

The Board also co-opted Shri. P.C. John as Executive Director from 1st May 2010 and RBI approval has been received vide letter DBOD No: 21949/08.38.001/2009-10 dated June 24, 2010.

SUBSIDIARY

Fedbank Financial Services Ltd. is a fully owned subsidiary of the Bank. As required under Section 212 of the Companies Act, 1956, the financial statements relating to this company, the sole subsidiary of the Bank, for FY10 are attached.

ANNUAL FINANCIAL STATEMENTS AND AUDIT REPORT

As required by section 212 of the Companies Act, 1956, the Banks balance sheet as on 31 March 2010, its profit and loss account for FY10, and the statutory auditors report and statements required under the section, are attached.

STATUTORY AUDIT

M/s. Varma & Varma, Chartered Accountants, Kochi, and M/s. Price Patt & Co., Chartered Accountants, Chennai, jointly carried out the statutory central audit of the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank.

Special Reserve created under section 36(l)(viii) of the Income Tax Act 1961.

As per section 36(1 )(viii) of the Income tax Act, 1961, deduction is available for any Special Reserve created and maintained to the extent of 20% of the profit derived from the business of providing long term finance for industrial or agricultural development or development of infrastructure facility or housing in India. Because of Banks term lending for housing, power, bridges, roads and other segments of infrastructure in the last year and the availability of the tax benefit under the section 36(l)(viii) of the Income tax Act, the Bank has created a Special Reserve of Rs.31crore during this year (previous year Rs.l 1 Crore), being the eligible amount of deduction available under the said section.

JOINT VENTURE IN LIFE INSURANCE BUSINESS

The Banks joint venture Life Insurance Company, in association with IDBI Bank Limited and Fortis Insurance International N.V., namely IDBI Fortis Life Insurance Company Limited commenced its operation in March 2008. The Bank has infused Rs. 117 crore as its share of capital into this company holding 26% of the equity capital of the company. The performance of this Life Insurance Company is encouraging and it has a range of customer-centric products.

AWARDS RECEIVED DURING THE YEAR

- Most Efficient Bank in India in the large bank category by Business Today - KPMG survey

- Federal Bank was adjudged, as the best bank among the Old Private Sector Banks category in the survey conducted by the Financial Express in association with Ernst & Young.

- Federal Bank has won the Great Mind Challenge award for implementing the most innovative solution for business. This award was introduced by IBM for the first time in India for business development initiatives. Federal Bank is the first Bank in India to receive the award

- Ranked 8th among all banks in India, in a study conducted by Economic Times under four parameters of growth, efficiency, financial strength and shareholder returns. Of these, our Bank was ranked No. 1 in Efficiency and Financial Strength.

STATUTORY DISCLOSURE

STOCK EXCHANGE INFORMATION

The Banks equity shares are listed on:

1. Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers Dalai Street, Mumbai - 400 001.

2. National Stock Exchange Ltd. "Exchange Plaza"

Bandra - Kurla Complex Bandra East, Mumbai-400 051.

3. Cochin Stock Exchange Ltd. MES, DrPK Abdul Gafoor Memorial Cultural Complex 4th Fl, 36/1565, Judges Avenue, Kaloor, Kochi - 682 017.

The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges listed above.

The requirement of disclosure of steps taken for conservation of energy and technology absorption does not apply to the Bank.

Through its export-financing operations, the Bank supports and encourages the countrys export efforts.

The requirement of disclosure under section 217(2A) of the Companies Act, 1956, is given as a separate annexure.

PERSONNEL

As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the Annexure to the Directors Report.

DIRECTORS RESPONSIBILITY STATEMENT

As required by section 21 7(2AA) of the Companies Act, 1956, the Directors state that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for that period;

c. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; and

d. the Directors have prepared the annual accounts on a going-concern basis.

Acknowledgement

The Board of Directors places on record its sincere thanks to Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and co-operation. The Directors also place on record the gratitude to investment banks, rating agencies and stock exchanges for their excellent support.

Your Directors record their sincere gratitude to the Banks shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contributions from every employee of the Bank.

For and on behalf of the Board of Directors

Aluva P.C. Cyriac

August 6, 2010 Chairman of the Board

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