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Directors Report of Jammu & Kashmir Bank Ltd.

Mar 31, 2015

Dear Members,

The Board of Directors have pleasure in presenting the 77th Annual Report of your Bank, together with the audited Balance Sheet, Profit and Loss Account and the report on business and operations for the year ended 31st March, 2015.

Performance at a Glance

* The aggregate business of the bank stood at Rs. 110342.01 Crore at the end of the financial year 2014-15.

* The bank achieved deposit figure of Rs. 65756.19 Crore as on 31st March, 2015. CASA deposits of the bank at Rs. 27476.39 Crore constituted 41.79 percent of total deposits of the bank.

* Cost of deposits for current FY stood at 6.72 percent.

* The net advances of the bank stood at Rs. 44585.82 Crore as on 31st March, 2015.

* Yield on advances for the current FY stood at 11.52 percent.

* Priority sector advances (Gross) stood at Rs. 17124 Crore as on 31st March, 2015.

* The bank effected cumulative cash recovery, up-gradation of NPA's and technical write-off of Rs. 545.14 Crore during FY 2014-15.

* Investment portfolio of the bank stood at Rs. 25124.30 Crore as on 31st March, 2015.

Financial Performance Rs. In Crore

April 1, 2014 to April 1, 2013 to Particulars March 31, 2015 March 31, 2014

Deposits 65,756 69,336

Borrowings 2,340 1,765

Advances 44,586 46,385

Total Assets/ 76,085 78,620 Liabilities

Net Interest 7,061 6,767 Income

Non Interest 594 390 Income

Operating Profit 1,836 1,900

Provisions and 1,016 148 Contingencies

Profit before Tax 821 1,752

Provision for 312 570 taxes

Net Profit 509 1,182

Amount available 509 1,182 for appropriation

Appropriations

Statutory Reserve under section 17 of the Banking Regulation Act, 1949 127 296

Capital Reserve -- --

General Reserves 247 596

Investment Reserve 12 7

Proposed Dividend and Tax thereon 123 283

Key performance Indicators

Net Interest Margin 3.81% 4.16%

Post tax return 0.70% 1.74% on assets

Post Tax Return on Equity 8.60% 22.34%

Cost to Income Ratio 43.42% 38.21%

Insurance Business

The bank earned an income of Rs. 33.42 Crore from the Insurance Business. In life insurance, the bank mobilized business of Rs. 199.61 Crore and in non-life segment, business of Rs. 122.35 Crore was mobilized during the year.

Income Analysis

* The Interest income of the bank recorded a growth of Rs. 294.13 Crore and increased from Rs. 6767.00 Crore in the year 2013-14 to Rs. 7061.13 Crore in the year 2014-15. Interest expenses increased from Rs. 4082.52 Crore to Rs. 4410.22 Crore during the year. The Net Interest Income stood at Rs. 2650.91 Crore for FY 2014-15.

* The Net Income from operations [Interest Spread plus Non-interest Income] increased to Rs. 3244.88 Crore in the financial year 2014-15 from Rs. 3074.74 Crore in the financial year 2013-14.

* The Operating Expenses registered an increase of Rs. 234.06 Crore during the financial year 2014-15 and stood at Rs.1409.05 Crore as compared to Rs. 1174.99 Crore in 2013-14.

* The Cost to Income ratio (Operating Expenses to Net Operating Income) stood at 43.42 percent in the financial year 2014-15.

Gross Profit

The Gross Profit for the financial year 2014-15 stood at Rs.1835.83 Crore.

Provisions

The Provision for Loan Losses, Provision on Standard Assets, Taxation and others aggregated to Rs. 1327.23 Crore in the financial year 2014-15.

Net Profit

The bank registered a Net Profit of Rs. 508.60 Crore for the financial year 2014-15.

Branch/ATM Network

During the financial year 2014-15, 40 new branches were established, thereby taking the number of branches to 817 as on 31-03-2015, spread over 20 states and one union territory. The area-wise breakup of the branch network (excluding extension counters/ mobile branches and Service branches) as at the end of FY 2014-15 is as under:

Area Branches

Metro 45

Urban 186

Semi-Urban 152

Rural 434

Total 817

During the financial year 2014-15, 85 ATMs were commissioned thereby taking the number of ATMs to 885 as on 31.03.2015.

Dividend

Your Bank is rewarding its shareholders by way of consecutive cash dividends considering the consistent financial performance of your bank and promising future prospects while retaining capital to maintain a healthy Capital Adequacy Ratio and to support future growth. In continuance of the earlier trends of cash dividends, the Board of Directors have recommended Dividend at a rate of 210% (Rs. 2.10 per equity share) for approval by the shareholders at this Annual General Meeting.

Net worth & Capital Adequacy Ratio (CAR)

* The Net Worth of the Bank increases to Rs. 6110.05 Crore on 31st March, 2015 from Rs. 5723.61 Crore on 31st March, 2014. The Bank has implemented the Basel III guidelines on capital regulations w.e.f. June, 2013.

* Capital Adequacy Ratio under Basel III stood at 12.57% as on 31st March, 2015 well above RBI stipulated norm of 9%. The tier I component of CRAR is 11.26% as on 31st March, 2015. The Return on Average Net Worth stood at 8.60% for the FY 2014-15. Earnings per share and Book Value per Share for the FY 2014-15 stood at Rs. 10.49 and Rs. 100.54 respectively.

awards & Recognitions

During the year under review, your bank was recognized by various institutions and following awards were presented to the Bank.

* Excellence award for pMJDY for outstanding performance under the Pradhan Mantri Jan Dhan Yojna which aims to eradicate financial untouchability and bring all the unbanked areas within the folds of formal economy.

* Global csR excellence & Leadership award by ABP News in the category of Community Service for outstanding achievements in economic, environmental and social dimensions by identifying and rewarding exemplary businesses in various aspects of Corporate Social Responsibility.

* star performance award 2014 to JKB Financial Services Ltd. (A wholly owned subsidiary of the Bank) under best performer among active Demat accounts (Big DP's Category) by National Securities Depository Limited.

advertising and publicity

Promoting our brand image proactively, we further positioned our brand deeper within the ever-widening public consciousness and thereby enhanced our brand equity during the year.

The bank's products, services and facilities were successfully advertised while as it's functioning and achievements were effectively communicated to the respective target audiences including customers, share-owners, stakeholders and general public through properly tailored and packaged messages using relevant multi-media outlets across our operational geography. Present in the virtual space of social media networking, the bank firmed up its online presence and processes of image-building.

Subsidiary Company

As on March 31, 2015, your Bank has one Subsidiary, JKB Financial Services Limited (JKBFSL)

Performance and Financial Position of JKBFSL

JKB Financial Services Ltd. performed well during the Financial year 2014-15. The operating income of the Company for the year ended 31st March, 2015 stands at Rs. 506.61 lacs as against Rs. 293.27 lacs for the year ended 31st March, 2014, registering an increase of 72.74%. Other incomes of the company increased by Rs. 100.51 lacs to Rs. 164.47 lacs from Rs. 63.96 lacs for the immediately preceding year, registering an increase of 158%. The Total income of the Company has registered an increase of 88% during the year increasing from Rs. 357.23 lacs for the year ended March 31, 2014 to Rs. 671.08 lacs for the year ended March 31, 2015. The Company has been able to reduce its net loss before tax to Rs. 11.60 lacs for the year ended 31st March, 2015 as against a loss of Rs. 142.06 lacs for the year ended 31st March 2014, registering a decrease of 91.83%.

During the year under review, bank increased its stake in JKBFSL by 100% by contributing Rs. 1000 lacs in share capital of the company, increasing its paid up capital to 2000 lacs for the year ended 31st March, 2015 as against Rs. 1000 lacs as on 31st March, 2014.

J&K Grameen Bank (Regional Rural Bank Sponsored by J&K Bank)

The J & K Grameen Bank (JKGB) came into existence on 30th June ,2009 with the issuance of statutory notification by GoI, MoF, Department of Financial Services under sub-section (1) of section 23 (A) of the Regional Rural Banks Act, 1976 vide F. No. 1/4/2006-RRB providing for amalgamation of Kamraz Rural Bank and Jammu Rural Bank into a single new Regional Rural Bank under the name of J & K Grameen Bank with its Head Office at Jammu and has commenced business effective from 01.07.2009.

Area of operation:

The area of operation of the J&K Grameen Bank comprises of 11 districts of the State viz. Baramulla, Bandipora, Kupwara, Jammu, Kathua, Rajouri, Poonch, Leh, Kargil, Samba, Kishtwar and parts of three districts viz. Ganderbal, Srinagar and Samba.

No. of Branches (as on 31-03-2015) : 216

No. of Employees (as on 31-03-2015) : 960

Capital structure:

In terms of the RRBs Act, 1976, the authorized capital of J&K Grameen Bank is fixed at Rs. 5.00 Crore. The issued and paid up capital of the bank is Rs. 2.00 Crore, fully subscribed by the Central Government, State Government and Sponsor Bank in the ratio of 50:15:35 respectively. Like-wise the Additional Share Capital of the bank amounting to Rs. 95.16 Crores is fully subscribed by all the three shareholders as per above prescribed ratio.

Performance of J&K Grameen Bank as on 31.03.2015 (Audited):

Business:

The business of the bank increased from Rs. 3430.82 Crores to Rs. 3760.61 Crores during the year 2014-15, registering a growth rate of 9.61 percent.

Deposits:

The deposits of the bank increased from Rs. 2405.90 Crore to Rs. 2586.69 Crore during the year 2014-15, thereby registering a growth rate of 7.51 percent.

Advances:

The gross advances of the bank as on 31st March 2015 stood at Rs.1173.92 Crores as against Rs. 1024.92 Crore as on the corresponding date of the previous year, recording a growth of 14.54 percent.

cD Ratio:

The CD Ratio of the bank stood at 45.38 percent as on 31st March 2015 against 42.60 percent as on 31st March 2014 indicating an increase of 2.78 percent.

priority sector advances:

The priority sector advances of the bank as on 31st March 2015 stood at Rs. 857.19 Crore as against Rs. 725.71 Crore as on the corresponding date of the previous year, recording a growth of 18.12 percent. Priority sector constituted 72 percent of total advances against benchmark of 60 percent (RRB Specific).

NpA position:

The gross NPAs of the bank as on 31.03.2015 stood at Rs. 156.99 Crore which accounts for 13.37 percent of gross advances. The Net NPA as on 31.03.2015 stood at Rs. 105.23 Crore which accounts for 9.38 percent of net advances.

Business per Employee:

The business per employee as on 31st March 2015 stood as Rs. 3.92 Crore.

Business per Branch:

The business per branch as on 31st March 2015 stood as Rs. 17.41 Crore as against Rs. 16.74 Crores as on corresponding date of the previous year, recording a growth of 4 percent.

Profitability:

The bank has shown net profit of Rs. 1.79 Crore as on 31st March 2015 against previous year's Net profit of Rs. 12.55 Crore.

Per Employee Net profit:

The Net Profit per employee as on 31st March 2015 stood as Rs. 0.19 lacs.

Lead Bank responsibility

a. convener JKsLBc

The J&K Bank is the only Private Sector Bank in the country assigned with the responsibility of convening State Level Bankers' Committee (SLBC) meetings. The bank continued to discharge its Lead Bank responsibility in 12 districts i. e Srinagar, Ganderbal, Budgam, Baramulla, Bandipora, Kupwara, Anantnag, Kulgam, Pulwama, Shopian, Poonch and Rajouri out of 22 districts of J&K State satisfactorily. The other 10 districts i.e. Jammu, Samba, Kathua, Udhampur, Reasi, Doda, Ramban, Kishtwar, Leh and Kargil are managed by State Bank of India.

The State Annual Credit Plan (ACP) for the FY 2014-15 was launched in time and its implementation was monitored on quarterly intervals in State Level Bankers' Committee meetings. During the FY 2014-15, out of the total ACP target of Rs. 19,993.88 Crore for the State, banks operating in the State disbursed credit of Rs. 16,886.64 Crore, registering an achievement of 84.46 percent. This includes Priority Sector credit of Rs. 9,025.40 Crore disbursed by banks in favour of 3,74,083 beneficiaries against the target of Rs.12,464.10 Crore for 6,74,773 beneficiaries (72.41 percent achievement in financial terms and 55.44 percent in physical terms) and Non-priority sector credit of Rs. 7,861.24 Crore in favour of 1,30,173 beneficiaries against the target of Rs. 7,529.78 Crore for 2,08,685 beneficiaries (104.40 percent achievement in financial terms and 62.37 percent in physical terms).

Out of the total Priority Sector credit of Rs. 9,025.40 Crore disbursed by all banks in the State upto 31st March 2015, J&K Bank alone has disbursed Rs. 6,245.92 Crore against the target of Rs. 7,036.58 Crore, thereby achieving 89 percent of its annual ACP target, which accounts for a lion's share of 69 percent of the total flow of credit to priority sector by all banks in the State.

During FY 2014-15, following meetings were conducted

* Four Quarterly J&K State Level Bankers Committee (SLBC) meetings, viz. 93th, 94th, 95th and 96th to review performance under ACP 2014-15 were held on 22nd May 2014, 20th August 2014, 3rd December 2014 and 23rd February 2015 respectively.

* One meeting of Steering Sub-Committee of J&K SLBC to monitor IT enabled Financial Inclusion, FLCCs & Credit Plus Activities was held on 24th June 2014.

* A Meeting of the Sub-Committee of J&K SLBC on Relaxation to Trade and Industry in J&K State was held on 24th June 2014.

* Two meetings of the Sub-Committee of J&K SLBC for Export Promotion in J&K State were held on 28th June 2014 and 30th January 2015.

* One meeting of Sub-Committee of J&K SLBC for State Level Rural Livelihood Mission (SRLM) was held on 10th July 2014.

* Two meetings of Sub-Committee of State Level Inter Institutional Committee (SLIIC) to work out the rehabilitation of Sick MSMEs units in J&K State were held on 3rd July 2014 and 20th January 2015.

* One Special J&K SLBC meeting was conducted on 23rd September 2014 for taking stock of the situation in aftermath of natural calamity (Floods) that hit the J&K State in the month of September 2014.

* One meeting of Sub-Committee of J&K SLBC for reviewing the progress made in implementation of various packages approved by RBI post 2014 floods was held on 4th October 2014.

* One meeting of State Level Implementation Committee (SLIC) for Pradhan Mantri Jan Dhan Yojana (PMJDY) was held on 31st December 2014.

* One meeting of State Level Steering Committee (SLRC) for RSETIs was held on 29th January 2015.

* One meeting to review the progress made in implementation of National Crop Insurance Programme /Rashtriya Fasal Bima Karyakaram was held on 26th March 2015.

b. Implementation of Financial Inclusion Plan (FIP) under SLBC

* The target for providing Information & Communication Technology (ICT) based banking services in the 795 identified unbanked villages (having population over 2000) in Phase-I of Financial Inclusion Plan was accomplished successfully by providing coverage to all the 795 villages. The progress in bringing the house-holds under the ambit of banking in the said 795 villages is being monitored regularly in quarterly SLBC meetings.

* The Roadmap for coverage of 5582 villages (having population below 2000) during the years 2012-13, 2013- 14, 2014-15 and completion upto August 14, 2015, was formulated as per regulatory requirements of RBI, which were allocated to five Financial Inclusion participating banks, viz. J&K Bank (3271 villages), SBI (753 villages), Punjab National Bank (294 villages), J&K Grameen Bank (1026 villages) and EDB (238 villages). Its implementation is being monitored quarterly by Lead Bank Department and against the target of 4077 villages set for coverage upto the end of FY 2014-2015 - 4319 villages stand covered by the FIP Participating banks upto 31st March 2015 constituting 106 percent of the target set for said period. The remaining 1263 villages are to be covered till August 14, 2015, as per the revised statutory directives.

c. Setting up of RSETIs in J&K State:

In terms of Ministry of Rural Development guidelines, Government of India, setting up the Rural Self Employment Training Institutes (RSETIs) in all the districts of J&K State was assigned by Lead Bank Department /J&K SLBC to two banks, viz. J&K Bank and SBI as per their Lead Bank responsibility. Accordingly, J&K Bank has set up 12 RSETIs in its allocated 12 lead districts of Srinagar, Ganderbal, Budgam, Baramulla, Bandipora, Kupwara, Anantnag, Kulgam, Pulwama, Shopian, Poonch and Rajouri. State Bank of India has also set up 10 RSETIs in its allocated 10 lead districts of Jammu, Samba, Kathua, Udhampur, Reasi, Doda, Ramban, Kishtwar, Leh and Kargil. The Performance of RSETIs in conducting training camps and the number of persons benefited is being regularly reviewed in quarterly SLBC meetings.

d. Setting up of FLCs in J&K State:

In terms of RBI guidelines, target of setting of Financial Literacy Centres (FLCs) in all the districts of the state has been fully accomplished with J&K Bank having made 12 FLCs operational in its 12 allocated lead districts and SBI having made 10 FLCs operational in its 10 allocated lead districts. The performance of FLCs in conducting the Financial Literacy Camps in their respective districts is being reviewed at various forums including SLBC meetings.

e. 100 percent coverage of farmers under KCC Scheme:

The initiative of 100 percent coverage of farmers under KCC Scheme was launched in J&K State in terms of GoI, MoF directives. Its implementation is being vigorously pursued with all the stakeholders including banks, Agriculture Department, Lead District Managers, etc. Upto the end of March 2015, banks sanctioned a total number of 8,41,879 KCCs in J&K State against which 7,17,576 KCCs holders have been disbursed credit amounting to Rs. 5276.47 Crore.

Board of Directors

Your Bank has ten (10) Directors consisting of two( 2) promoter Directors (Non Independent) including Chairman & CEO, Three (03) Non Executive Independent Directors, Four (04) Non Executive Rotational Directors, and One (1) RBI Nominee Director, as on March 31, 2015.

Independent and Non-Independent Non independent Executive director

Mr. Mushtaq Ahmad, Non Independent Executive Director has been serving as the Chairman & CEO of the Bank since October 6, 2010, with the approval of Reserve Bank of India (RBI).

Non independent Non executive director

Mr. Bharat Bhushan Vyas, IAS, Principal Secretary to Govt. Finance Department, J&K Govt. is the Non Independent non Executive Director of the Bank.

independent Non executive directors

In terms of the definition of 'Independent Director' as prescribed under Clause 49 of the Listing Agreement entered with Stock Exchanges and Section 149(6) of the Companies Act, 2013 and based on the declarations/disclosures received from the Directors, the following Non-Executive Directors are Independent Directors:-

1. Mr. Vikrant Kuthiala

2. Mr. Dalip Kumar Kaul

3. Mr. Khaver Alam Jeelani

Non executive Rotational directors

The following directors are non Executive Rotational directors on the Board of the bank.

1. Mr. M. I. Shahdad Rotational Director

2. Prof. Nisar Ali Rotational Director

3. Mr. A. M. Matto Rotational Director

4. Mr. R. K. Gupta Rotational Director

Non executive reserve Bank Nominee Director

Mr. J. P. Sharma, General Manger, Reserve Bank of India is the RBI Nominee Director on the Board of the Bank.

Appointments/Resignations from the Board of Directors

a. Mr. Hari Narayan Iyer, Additional Director was recalled by the Reserve Bank of India on 31-10-2014 and was replaced by Mr. D. K. Meena, General Manager RBI on the Board of the Bank. Mr. D. K., Meena was replaced by Mr. N. P. Topno General Manager by the Reserve Bank of India on 26-11- 2014. Mr. J. P. Sharma, General Manager, Reserve Bank of India replaced Mr. N. P. Topno as additional Director on the Board of the Bank w.e.f 12.03.2015

b. Mr. Nihal C. Garware, appointed as Additional Director of the Bank w.e.f 4th August, 2014, resigned from the Board of the Bank with effect from 23rd December, 2014 owing to personal reasons.

Directors place on record their deep appreciation for the valuable services rendered by Mr. Hari Narayan Iyer, Mr. N. P. Topno and Mr. Nihal C. Garware during their tenure as Directors of the Bank.

c. Mr. R. K. Gupta was reappointed as Director in the last Annual General Meeting of the Shareholders of the Bank held on 2nd August, 2014.

d. Mr. Vikrant Kuthiala, Mr. Dalip Kumar Kaul and Mr. Khaver Alam Jeelani were appointed as Independent Directors in the last Annual General Meeting of the Shareholders of the Bank held on 2nd August, 2014.

directors retiring by rotation

In terms of Section 152 of the Companies Act, 2013, Mr. M. I. Shahdad being longest in the office shall retire at the ensuing Annual General Meeting of the Bank.

Appointments/Resignations of the Key Managerial Personnel

Mr. Mushtaq Ahmad Chairman & CEO, Mr. R. K. Shah, Chief Financial Officer and Mr. Abdul Majid Bhat, Company Secretary of the Bank are the Key Managerial Personnel as per the provisions of the Companies Act, 2013. Mr. Mushtaq Ahmad and Mr. Abdul Majid Bhat were already in office before the commencement of the Companies Act, 2013, while as Mr. R. K. Shah was appointed as Chief Financial officer of the Bank by the Board of the Bank on 16th May, 2015.

None of the Key Managerial Personnel has resigned during the year under review.

Number of Meetings of the Board

During the year under review, eleven Board Meetings were held, in due compliance with statutory provisions, on following dates:

15.05.2014; 12.06.2014; 14.07-2014; 04.08.2014; 13.08.2014; 25.08.2014; 09.10.2014; 12.11.2014; 22.12.2014; 07.02.2015; 17.03.2015.

Participation of directors in board Meetings is provided in the Statement on Corporate Governance annexed to this report

Committees of the Board

The Bank has following Committees of the Board:

* Audit Committee

* Management Committee

* Monitoring of Large Value Frauds Committee

* Stakeholders Relationship Committee

* Information Technology Strategy Committee

* Corporate Social Responsibility Committee

* Integrated Risk Management Committee

* Customer Service Committee

* Nomination Committee

* Nomination and Remuneration Committee

* Legal & Estates Committee

The compositions, powers, roles, terms of reference, etc. of relevant committees are given in detail in the statement on Corporate Governance annexed to this report.

Corporate Social Responsibility Policy

The Bank has in place Board approved Policy on Corporate Social Responsibility. The policy is available on the website of the Bank. ( http://www.jkbank.net). The statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure 1.

performance Evaluation of the Board

The Nomination & Remuneration Committee and the Board of Directors at their meetings held on 16th May, 2015 had laid down the criteria for performance evaluation of Directors, Chairman & CEO, Board level Committees and Board as a whole and also the evaluation process for the same.

The performance of the members of the Board, the Board level Committees and the Board were evaluated at the meetings of the Committee of Independent Directors and the Board of Directors held on 22nd June, 2015.

process of performance Evaluation

The Companies Act, 2013 and revised Clause 49 of the Listing Agreement entered with the Stock Exchanges stipulates the performance evaluation of the Directors including Chairperson, Board and its Committees. Considering the said provisions, the Bank has devised the process and the criteria for the performance evaluation which has been recommended by the Nomination & Remuneration Committee and approved by the Board at their meetings held on May 16, 2015.

The process for performance evaluation is as under:

* Committee of Independent Directors evaluates the performance of Non-Independent Directors including Chairman of the Bank and the Board as a whole

* The Board evaluates the performance of the Independent Directors and Board level Committees of the Board.

* Based on the recommendation of Independent Directors in their report, Board takes the appropriate action, wherever required.

The criteria for performance evaluation are as under:

Performance Evaluation of Non-Executive Directors, MD & ceo and chairman

Attendance at the meetings; Participation and contribution; Responsibility towards stakeholders; Contribution in Strategic Planning; Compliance and Governance; Participation and Updation of Knowledge.

performance Evaluation of Board

Composition and Diversity; Committees of the Board; Board & Committee meetings; Induction Program; Team Work; Cohesiveness of Board decisions; Board Procedure; Performance Culture; Succession planning; Discussions at Board Meetings; Understanding of the business of the Bank; Understanding the role and effectiveness; Foresight to avoid crisis and effectiveness in crisis management; Understanding of the regulatory environment; Strategy and Growth; Risk Management and Financial Controls; Quality of Decision making and Board's Communication systems.

performance by the Board Level committees

Composition and Balance of skill sets; Frequency and duration; Overall contribution; Relationships; Communication; Understanding of regulatory environment and developments; Interaction with the Board.

corporate Governance

The Bank has established a tradition of exemplary practices in corporate governance. It encompasses not only regulatory and legal requirements, but also several voluntary practices, aimed at high level business ethics, effective supervision and enhancement of stakeholder volume.

Several matters have been voluntary included in the statement on corporate governance annexed to this report, besides certificate from the Central Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

management Discussion and analysis

The Management Discussion and Analysis Report for the year under review as stipulated under Clause 49 of the listing agreement with the Stock Exchanges is presented in a separate section forming part of this Report.

Vigil Mechanism

The Bank has implemented a Whistle Blower Policy pursuant to which Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of J&K Bank Code of Conduct, fraud, bribery, corruption, employee misconduct, illegality, health & safety, environmental issues and wastage/misappropriation of banks funds/assets, etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower who avail of such mechanism and also provides for direct access to Chairman of the Audit Committee, in exceptional cases. The details of the Whistle Blower Policy are available on the website of the Bank (http://www.jkbank.net)

Risk Management Policy

Bank has Board approved risk management policies to identify measure and manage all types of risk inherent in the banking operations.

The credit risk policy aims at ensuring sustained growth of healthy loan portfolio while identifying and managing various risk components of credit portfolio. The policy articulates the different areas of credit risk in the backdrop of strategy and business goals of the Bank. It identifies high risk areas / promising industries / sectors / segments and aims at striking a balance between risk and return on assets to ensure optimal value to all stakeholders.

The Market Risk Policy aligned to regulatory guidelines, defines and stipulates internal limits for various products and business activities relating to trading book and for taking exposures across all segments of the market based on relevant market analysis, business strategy and Bank's risk appetite. The policy stipulates risk limits such as stop-loss limits, overnight limit, daylight limit, aggregate gap limit, individual gap limit, inter-bank dealing limits and Investment limits. These are aligned with market dynamics, business strategy, investment size, management experience and Bank's risk appetite.

The operational risk management policy outlines a suitable framework for managing operational risk as per the regulatory guidelines. The policy addresses a wide range of matters relating to organizational structure for operational risk, role of various operational risk responsibility centres, identification, assessment, control and mitigation of operational risk and framework for risk reporting. A comprehensive Business Continuity Plan (BCP) has been formulated and Disaster Recovery setup has been put in place to ensure continuity of critical operations in the event of any business disruption.

A Board approved Internal Capital Adequacy Assessment Process (ICAAP) policy has been put in place to assess adequacy of capital under stress conditions that supports not only three primary risks of credit, market and operational risk but other residual risks like Interest rate risk in banking book, liquidity risk, credit concentration risk, strategic risk and reputational risk.

The Bank has Board approved Stress Testing Policy in place that determines the stress testing framework in tune with the regulatory guidelines and market practices. The two categories of stress tests used by the Bank are Sensitivity Analysis and Scenario Analysis. Stress testing is undertaken with respect to relevant parameters at three levels of severity - Baseline, Medium, and Severe. The Bank adopts different approaches of running a stress test to see the net impact on Bank's Capital Adequacy under stress condition.

Loans, Guarantees or Investment in Securities

Pursuant to section 186(11) of the Companies Act, 2013 loans made, guarantees given or securities provided or acquisition of shares by a Banking company in the ordinary course of its business are exempted from disclosure in the Annual Report.

Contracts or Arrangements with related parties

Considering the nature of the Industry in which the Bank operates, transactions with related parties of the Bank are in the ordinary course of business and are also on arm's length basis. There were no materially significant related party transactions entered by the Bank with promoters, Directors, Key managerial personnel or other persons which may have a potential conflict with the interests of the Bank. However, M/s Gupta Gupta & Associates, Chartered Accountants, a firm in which Mr. R. K. Gupta, Director of the Bank, is a partner acts as Tax Consultants of the Bank at an annual consultation fee of Rs. 5 lakhs. Keeping in view third proviso to Section 188(1) of the Companies Act, 2013 read with Ministry of Corporate Affairs, Govt. of India Notification No. 1/22/2013-CL-V dated 9th June, 2014 the said transaction has been entered into in the ordinary course of business of the Bank and is at Arm's length. Hence, no disclosure relating to the same needs to be made by the Bank.

The policy on 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.jkbank.net/ disclosure&policy/relatedpartytransactionspolicy.html)

Consolidated Financial Statements

Pursuant to Section 129 of the Companies Act, 2013, the Bank has prepared Consolidated Financial Statements of the Bank and also of its Subsidiary, JKBFSL, in the same form and manner as that of the Bank which shall be laid before the ensuing 77th Annual General Meeting of the Bank along with the laying of the Banks Financial Statements under sub-section (20) of Section 129 i.e. Standalone Financial Statements of the Bank.

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, 2015 form part of this Annual Report.

Internal Financial Control systems and their adequacy

Your bank had laid down set of standards, processes and structures which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively.

Auditors

Statutory Auditors

The Central Statutory and Branch auditors of the Bank are appointed by the Comptroller & Auditor General of India (C&AG) pursuant to Section 139(5) of the Companies Act, 2013. The Bank had five (5) Central Statutory auditors appointed by the C&AG of India for the year under review as under:

1. Gupta Sharma & Associates, Chartered Accountants, Jammu

2. Dhar Tikoo & Co, Chartered Accountants, Srinagar

3. Arora Vohra & Co, Chartered Accountants, Jammu

4. Darshan Nagpal & Associates, Chartered Accountants, Srinagar

5. Dhram Raj & Co., Chartered Accountants, Jammu Secretarial Auditors

Pursuant to Section 204 of the Companies Act 2013, your Bank has appointed M/s Ghulam Geelani Reshi & Associates, Practicing Company Secretaries, Srinagar as its Secretarial Auditors to conduct the secretarial Audit of the Bank for the FY 2014-15. The Bank provided all assistance and facilities to the Secretarial Auditor for conducting their audit.

Secretarial Audit Report

The report of Secretarial Auditor for the FY 2014-15 is annexed to this report as Annexure 2. The Board's replay to Observations of the Secretarial Auditor are furnished as under:

Observation 1:

Appointment of the Woman Director on the Board is yet to take place, as mandated by the provisions of the Section 149 of the Companies Act, 2013 and in pursuance to Clause 49 of the Listing Agreement governing Corporate Governance

Board's response:

Bank is in the process of identifying suitable candidate with relevant banking experience and knowledge for appointment as woman Director on the Board of the Bank

observation 2:

The Reserve Bank of India (RBI) Nominee director, Mr. D.K. Meena has not intimated Director identification Number to the Bank and consequently Bank has not filed form DIR_12/11 in respect of his appointment and removal, appointed vide RBI Order DBOD.PSBD.NO.62981/16.05.08/2014-15 dated Oct, 28th, 2014 However RBI has overriding power on companies Act, 2013 to appoint Director pursuant to provisions of Sub Section (1) of Section 36AB of Banking Regulation Act, 1949.

Board's Response:

Mr. D. K. Meena was appointed as Director on the Board of the Bank on 1st Nov. 2014 by the Reserve Bank of India vide its order DBOD. PSBD.No 6298/16.05.08/2014- 15 Dated 28th Oct. 2014 under section 36AB of the Banking Regulation Act, 1949. However, 36AC of the Act provides that any appointment or removal of a director, chief executive officer or other officer or employee in pursuance of section 36AA or section 36AB shall have effect notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956) or any other law for the time being in force or in any contract or any other instrument. Thus an order issued by the RBI under section 36AB of the Act has overriding effect over the provisions of the Companies Act, 1956 (Now Companies Act, 2013). However the relevant forms stand filed as on date.

Employee Remuneration

A. PARTICULARS OF EMPLOYEES AS PER RULE 2 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 FOR THE YEAR ENDED 31st MARCH, 2015, ARE AS UNDER:

I. EMPLOYED THROUGHOUT THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING Rs. 60,00,000/- OR MORE PER ANNUM

sr. Name of Designa- Remuneration Nature of No. the tion/ received per Employment Employee Nature of month Duties (Rs in lakhs)

1 Mr. Chairman 5.50 In whole Mushtaq &Chief time Ahmad Executive employment Officer of the Bank

Name of Qualification Experience Date of Age of Last the in years commence- the employee Employee ment employee ment of (Years) held employ - before ment joining the company

Mr. B. A: 43 years 06-10-2010 64 J&K Bank Mushtaq CAIIB-I Ltd. Ahmad

In addition during the year Chairman & CEO of the Bank was paid performance bonus @ 35% of basic pay for the FY 2013-14, which was duly approved by the Reserve Bank of India.

II. EMPLOYED FOR A PART OF THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING Rs. 5, 00,000/- OR MORE PER MONTH NIL

B. The ratio of the remuneration of each director to the median employees' 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 are forming part of this report as Annexure 3.

Statutory Disclosures

(1) The disclosures to be made under sub-section (3)(m) of Section 134 of the Companies Act 2013 read with Rule (8)(3) of the Companies (Accounts) Rules , 2014 by your Bank are explained as under:

(A) Conservation of Energy

(i) The steps taken or impact on conversation of energy:

Technology initiatives aimed at reducing the carbon footprint of the Bank are mentioned below:-

* Relocation of Banks Data centre to a high energy efficient and environment friendly Data Centre at Noida from Sify Technologies.

* Discontinuation of paper circulars for internal communication.

* Automation of MIS reports to discontinue paper based regulatory and internal reports.

* Dedicated intranet site for E-newsletter in place of a paper newsletter.

* Use of energy star compliant computing and communication hardware.

* Web Page for Green Banking

(ii) The steps taken by the Bank for utilizing alternate source of energy:

* Endeavour to use Energy efficient Devices: Bank of late has started using the equipments which consume less power and are more Energy efficient as per the BEE Indian Standards.

a) Switching over from CFL/ Fluorescent Lamp To LED Lights

b) Shifting to new technology for Air Conditioning i.e VRV/VRF

c) Shall explore the possibility of using sensor based Electrical devices in future.

* Bank has installed Solar UPS in some of the ATMs of the Bank. We shall further explore the use of renewable energy for street lights etc.

(B) Technology Absorption

(i) The efforts made towards technology absorption;

Technology absorption needs stable and conducive policy and governance framework. As such, J&K Bank has adopted IT governance model for restructuring the IT organizational structure as per the recommendations of RBI. As part of the implementing IT governance model, J&K bank has taken following steps:

a) Board level IT Strategy Committee was constituted to assist the Board on all aspects of IT Governance including monitoring the implementation of all strategic plans.

b) IT Steering Committee and Project Steering Committee were constituted to take the Bank closer to a more effective and efficient way of managing IT so as to deliver the ultimate value.

c) Restructured IT organizational structure in the bank by creating different functional departments/divisions like i) Technology and Development ii) IT Operations and iii) IT Assurance.

Trainings are being conducted on regular basis to train the banks staff at gross root level to make full use of the technology in order to reduce the operating costs and bring in efficiencies to business processes.

(ii) The benefits derived like product improvement, cost reduction, product development or import substitution

Following technology initiatives taken by the bank have brought efficacy in the processes besides reduction in the effort and cost involved in handling such operations.

a. Fixed Asset Management Automation

In order to centralize the Asset data of the Bank for effective monitoring and application of depreciation, a centralized system was put in place. Automation of Asset Management has helped the bank in effective and efficient centralized monitoring of banks assets besides saving effort and time involved in application of depreciation.

b. MIs Reporting automation

Implementation of MIS system in the Bank has replaced time consuming periodic paper reports/ statements submitted by the branches to the concerned authorities besides building an efficient decision support system. The MIS application provides timely, accurate, reliable and verifiable information that hasten reporting as well as Banks decision- making process.

c. Automation of Banks stationery Department.

Automation of Banks Stationery department has integrated the central stationery department and all stationery depots of the bank through a centralized software application which has an industry standard inventory management system. The system provides stock issuance/management services with real-time inventory maintenance.

d. WAN Acceleration.

Implementation of WAN acceleration was taken up to accelerate the wide area application traffic of VSATs and low speed leased lines to ensure improved and efficient delivery of services to the customer of the Bank.

e. High speed Network for ATMs & Branches.

In order to enhance service quality of branches and ATMs, network of 150 branches and 130 ATMs in J&K State were upgraded to high speed MPLS and 3G network respectively.

(iii) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year).

Nil

(iv) Your Bank has not incurred any expenditure on Research and Development during the year under review.

(C) Foreign Exchange Earnings and Outgo

The Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo during the year in terms of actual outflow.

During the year ended March 31st, 2015 the bank earned ' 24.78 Lacs and spent Rs. 5.59 Lacs in Foreign currency. This does not include Foreign currency cash flows in derivatives and Foreign currency exchange transactions.

(2) No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status of the Bank's operations in future.

(3) Number of cases filed, if any, and their disposal under Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and redressal) Act, 2013.

Your Bank has Zero tolerance towards any action on the part of any executive/employee which may fall under the ambit of 'Sexual Harassment' at workplace, and is fully committed to uphold and maintain the dignity of every women executive/ employee working in the Bank.

(4) No Stock options were issued to the Director's of your Bank

Extracts of annual Return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extracts of the Annual Return as at March 31, 2015 forms part of this report as annexure 4.

Directors responsibility statement

The Board of Directors hereby confirms that:-

i. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii. the directors had 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 company at the end of the financial year and of the profit and loss of the company for that period;

iii. the directors had 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 company and for preventing and detecting fraud and other irregularities;

iv. the directors had prepared the annual accounts on a going concern basis; and

v. the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

Explanation.-"internal financial controls" means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

vi. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

acknowledgement

The Directors thank the valued customers, shareholders, well- wishers and correspondents of the bank in India and abroad for their goodwill, patronage and support. The Directors acknowledge with gratitude the valuable and timely advice, guidance and support received from Government of India, Government of Jammu & Kashmir, Reserve Bank of India, Securities and Exchange Board of India (SEBI), Insurance Regulatory Developmental Authority (IRDA), NABARD, SIDBI, IBA, FIMMDA, FEDAI, Stock Exchanges, Ministry of Corporate Affairs, Registrar of Companies, Comptroller & Auditor General of India, Financial Institutions and the Central Statutory Auditors of the bank in the functioning of the bank.

The Directors place on record their deep appreciation of the valuable contribution of the members of the staff at all levels for the progress of the bank during the year and look forward to their continued cooperation in realization of the corporate goals in the years ahead.

For and on behalf of the Board of Directors

Place : Srinagar (J&K) Mushtaq Ahmad Date : 22nd June, 2015 Chairman & CEO


Mar 31, 2014

1. 1.1. Your Board of Directors have pleasure in

presenting the 76th Annual Report of your bank, together with the audited Balance Sheet, Proft and Loss Account and the report on business and operations for the year ended March 31, 2014.

1.2. The bank has delivered a strong performance in 2013-14. The bank''s strategy of consolidation, re- engineering, re-pricing and re-organization has resulted in productive and effcient growth, robust balance sheet, reality asset book and substantial provisions. Financial highlights for the year under review are presented below:

2. PERFORMANCE AT A GLANCE

2.1 The aggregate business of the bank stood at Rs.115720.46 Crore at the end of the fnancial year 2013-14, an increase of Rs. 12299.43 Crore over the previous year''s fgure of Rs.103421.03 Crore. In percentage terms, the growth registered was 11.89%.

2.2 The total deposits of the bank grew by Rs.5115.24 Crore from Rs.64220.62 Crore as on 31st March, 2013 to Rs.69335.86 Crore as on 31st March, 2014. CASA deposits of the bank at Rs.27083 Crore constituted 39.06 % of total deposits of the bank.

2.3 Cost of deposits for current FY stood at 6.70%.

2.4 The bank continued its prudent approach in expanding quality credit assets in line with its policy on Credit Risk Management. The net advances of the bank increased by Rs.7184.19 Crore from Rs.39200.41 Crore as on 31st March, 2013 to Rs.46384.60 Crore as on 31st March, 2014, a growth of 18.33%.

2.5 Yield on advances for the current FY stood at 12.23 %.

2.6 Priority sector advances (Gross) stood at Rs.13131.66 Crore as on 31st March, 2014.

3. The bank''s performance in the recovery of NPA''s during the year continued to be good. The bank effected cumulative cash recovery, up-gradation of NPA''s and technical write-off of Rs.270.95 Crore.

4. Investment portfolio of the bank increased by Rs.454.01 Crore from Rs.25741.06 Crore as on 31st March 2013 to Rs.26195.07 Crore as on 31st March, 2014.

5. Insurance Business

5.1. The bank earned an income of Rs.31.31 Crore from the Insurance Business. In life insurance, the bank mobilized business of Rs.63.29 Crore and in non-life segment, business of Rs.113.63 Crore was mobilized during the year.

6. Income Analysis

6.1. The Interest income of the bank recorded a growth of Rs.630.20 Crore and increased from Rs.6136.80 Crore in the year 2012-13 to Rs.6767.00 Crore in the year 2013-14. Interest expenses increased from Rs.3820.76 Crore to Rs.4082.52 Crore during the year. The Net Interest Income increased from Rs.2316.04 Crore to Rs.2684.48 Crore on YoY basis.

6.2. The Net Income from operations [Interest Spread plus Non-interest Income] increased to Rs.3074.74 Crore in the fnancial year 2013-14 from Rs.2799.77 Crore in the fnancial year 2012- 13.

6.3. The Operating Expenses registered an increase of Rs.185.98 Crore during the fnancial year 2013- 14 and stood at Rs.1174.99 Crore as compared to Rs.989.01 Crore in 2012-13.

6.4. The Cost to Income ratio (Operating Expenses to Net Operating Income) stood at 38.21% in the fnancial year 2013-14.

7. Gross Proft

7.1 The Gross Proft for the fnancial year 2013-14 stood at Rs.1899.75 Crore.

8. Provisions

8.1. The Provision for Loan Losses, Provision on Standard Assets, Taxation and others aggregated to Rs.717.28 Crore in the fnancial year 2013-14.

9. Net Proft and Dividend

9.1. The bank registered a Net Proft of Rs.1182.47 Crore for the fnancial year 2013-14.

9.2. The Board of Directors has recommended a dividend of 500 per cent for the fnancial year 2013-14.

9.3. In terms of extant guidelines, the bank will pay the dividend distribution tax for the fnancial year 2013-14. Accordingly, the total outfow on account of dividend for the year 2013-14 will be Rs.283.58 Crore including the dividend distribution tax.

10. Net Worth and CRAR

10.1. The Net Worth of the bank increased to Rs.5723.61 Crore on 31st March, 2014 from Rs.4864.69 Crore on 31st March, 2013.

10.2. The bank has implemented the Basel-III guidelines on capital regulations w.e.f. June, 2013.

10.3. Capital Adequacy Ratio under Basel III stood at 12.69 % as on March, 2014 well above RBI stipulated norm of 9 %. The tier I component of CRAR is 11.22% as on 31st March, 2014.

10.4. The Return on Average Net Worth stood at 22.34% for FY 2013-14. Earnings per Share and Book Value per Share for the fnancial year 2013-14 stood at Rs.243.92 and Rs.1159.63 against Rs.217.64 and Rs.992.09 respectively for the previous year.

11. Branch/ATM Network

11.1 During the fnancial year 2013-14, 92 new branches were established, thereby taking the number of branches to 777 as on 31-03- 2014, spread over 20 states and one union territory. The area-wise breakup of the branch network (excluding extension counters/ mobile branches and Service branches) as at the end of FY 2013-14 is as under:

Area Branches

Metro 44

Urban 181

Semi-Urban 152

Rural 400

Total 777

11.2 During the fnancial year 2013-14, 187 ATMs, both onsite & offsite, were commissioned thereby taking the number of ATMs to 800 as on 31.03.2014.

12. IT initiatives during FY 2013-14

With a view to provide greater convenience and alternate channels to the customers, bank launched

various IT initiatives during fnancial year 2013-14. The details of various technology initiatives taken during FY 2013-14 are enumerated below:

Cheque Truncation System (CTS) was introduced at RCC Mumbai, Ludhiana, Nasik, Kolkata, Indore, Bhopal, Raipur, Baroda, Ahmedabad, Surat, Pune and Nagpur.

Second Factor Authentication (2FA) was introduced to strengthen the security mechanism around e-Banking transactions and to avoid proliferation of cyber attacks.

EMV cards were issued for both credit as well as debit products to further strengthen their security features.

As part of initiatives to add more features through delivery channels, Merchant payments were enabled through mobile banking.

The bank established its own payment gateway to offer e-commerce platform to its customeRs.

13. Advertising and Publicity

Continuing with our proactive brand promotion and positioning within the wider public consciousness, we maintained and enhanced our brand equity during the year.

The bank''s products, services & facilities were successfully advertised while as its functioning and achievements were effectively communicated to the respective target audiences including customers, share-owners, stakeholders and general public through properly packaged messages using wider and relevant mediums.

The bank also entered into the virtual space of social media networking to augment further its on- line presence and processes of image-building .

14. Corporate Social Responsibility-CSR

With ever-increasing focus on activities for the larger community welfare through CSR, J&K Bank retained a collective focus on its various dimensions like people and their health, environment, education and society at large. Year 2013-14 being the Platinum one, the bank remained more agile towards its societal obligations to further its vision of "People''s Empowerment through Servant Leadership". J&K Bank through its CSR activities continued to enhance value creation in the society and the community it operates in through its services, conduct and initiatives so as to promote sustained growth in fulfllment of its role as a socially responsible corporate.

15. Major CSR Initiatives taken by the Bank

Health remained the prime CSR activity of the bank. Sizeable contributions were made to various health related projects, either directly or through implementing agencies . Under "J&K Bank Health for All" bank donated fve (05) Dialysis machines to SKIMS to cater to the needs of the poor patients suffering from chronic renal failure. Bank also undertook various Health initiatives through NGOs like Cancer Society of Kashmir, Maya Foundation, and Hemophilia Society of Delhi. Free Health Camps were held at far fung areas across the state where the needy and poor patients were provided free medicines and free clinical tests. In addition, bank donated vehicles, wheel chairs and provided monetary donations to the NGOs primarily dealing with differently-abled children like Voluntary Medicare Society, Hari Prabhu Sanstha, Chotey Taarey Foundation and otheRs.

Rising to the occasion, bank responded promptly to the earthquake victims of Chenab Valley after the region was hit by it on 1st May, 2013 and donated around One Thousand (1000) tents to the victims as their households had either been completely damaged or rendered unlivable.

Education remained one of the thrust areas of the bank under CSR for the year 2013-14. In a major initiative under "Education for better tomorrow" the bank facilitated "Soft Skills Programme for Police Personnel" to educate them about dealing with the general public in stressful circumstances. More than fve thousand (5000) police personnel got beneftted through this CSR act of the bank. Bank continued its partnership with local NGOs for professionally managing education of more than 100 children having various forms of disabilities, with particular focus on children belonging to lower economic strata and orphans.

i Under its fagship programme "Save Environment/

Heritage" bank continued to maintain nine (09) i , major parks across the state.

A Bank continued to provide a fantastic blend of w banking and non-banking services to the pilgrims of Shri Amaranth cave ranging from the services of registration to insurance etc., under the aegis of CSR. Haj pilgrims and people of all other faiths were also given due cognizance and support on this front.

16. LEAD BANK RESPONSIBILITY

The J&K Bank is the only private sector bank in the country assigned with the responsibility of convening State Level Bankers'' Committee meetings. The bank continued to discharge its Lead Bank responsibility satisfactorily in 12 out of total 22 districts of J&K State, i. e. Srinagar, Ganderbal, Budgam, Baramulla, Bandipora, Kupwara, Anantnag, Kulgam, Pulwama, Shopian, Poonch and Rajouri. The other 10 districts i. e Jammu, Samba, Kathua, Udhampur, Reasi, Doda, Ramban, Kishtwar, Leh and Kargil are managed by State Bank of India.

The State Annual Credit Plan (ACP) for the FY 2013-14 was launched in time and its implementation was monitored at quarterly intervals in State Level Bankers'' Committee meetings. During the FY 2013-14 out of the total ACP target of Rs.16,322.68 Crore for the State, banks operating in the State disbursed credit of Rs.10,268.58 Crore, registering an achievement of 63%. This includes Priority Sector credit of Rs.5,701.15 Crore disbursed by banks in favour of 3,06,919 benefciaries against the target of Rs.10,142.46 Crore for 6,13,489 benefciaries (56% achievement in fnancial terms and 50% in physical terms) and Non-priority sector credit of Rs.4,567.43 Crore in favour of 1,06,569 benefciaries against the target of Rs.6,180.22 Crore for 1,67,745 benefciaries (74% achievement in fnancial terms and 64% in physical terms).

Out of the total priority sector credit of Rs.5,701.15 Crore disbursed by all banks in the State upto 31st March, 2014, J&K Bank alone disbursed Rs.3,619.13 Crore which constitutes 63.48% of the total credit provided to priority sector by all banks in the State.

During the FY 2013-14, following meetings were conducted:

- Four Quarterly State Level Bankers Committee (SLBC) meetings, viz. 89th, 90th, 91st and 92nd to review performance under ACP 2013-14 were held on 6th June, 2013, 29th August 2013, 16th December, 2013 and 10th March, 2014 respectively.

- One Special SLBC meeting was conducted on 8th May, 2013 on the occasion of visit of Hon''ble Governor, RBI, Dr. D. Subbarao to J&K State.

- Two meetings of Steering Sub-Committee of SLBC to monitor IT enabled Financial Inclusion, FLCCs & Credit plus Activities were held on 24th July, 2013 and 15th January, 2014.

- Three meetings of Sub-Committee of State Level Inter Institutional Committee (SLIIC) to discuss and work out the rehabilitation of Individual Sick MSME units in J&K State were held on 16th May, 2013, 11th October, 2013 and 8th February, 2014.

Implementation of Financial Inclusion Plan (FIP):

- The target of providing Information & Communication Technology (ICT)-based banking services in the 795 identifed unbanked villages (having population over 2000) in Phase-I of Financial Inclusion Plan was accomplished successfully by providing coverage to all the 795 villages. The progress in bringing all the house-holds in the 795 villages under the ambit of banking is being monitored regularly in quarterly SLBC meetings.

- The roadmap for coverage of 5582 villages (having population below 2000) during the years 2012-13, 2013-14, 2014-15 and beyond 2015, was formulated as per regulatory requirements of RBI. The Same was allocated to fve participating banks, viz. J&K Bank (3271 villages), SBI (753 villages), Punjab National Bank (294 villages), J&K Grameen Bank (1026 villages) and EDB (238 villages). Its implementation is being vigorously monitored by J&K Bank.

Responsibility of setting up of RSETIs in J&K State:

In terms of Ministry of Rural Development guidelines, Government of India, setting up the Rural Self Employment Training Institutes (RSETIs) in all the districts of J&K State was assigned by Lead Bank Department /J&K SLBC to two banks, viz. J&K Bank and SBI as per their Lead Bank responsibility. Accordingly, J&K Bank has set up 12 RSETIs in its allocated 12 lead districts of Srinagar, Ganderbal, Budgam, Baramulla, Bandipora, Kupwara, Anantnag, Kulgam, Pulwama, Shopian, Poonch and Rajouri. The Performance of RSETIs in conducting training camps and the number of persons benefted is being regularly reviewed in quarterly SLBC meetings.

Responsibility of setting up of FLCs in J&K State:

In terms of RBI guidelines, target of setting Financial Literacy Centres (FLCs) in all the districts of the state has been fully accomplished with J&K Bank operationalizing 12 FLCs in its 12 allocated lead districts and SBI operationalizing 10 FLCs in its 10 allocated lead districts. The performance of FLCs in conducting the Financial Literacy Camps in their respective districts is being reviewed at various meetings including SLBC meetings.

100% coverage of farmers under KCC Scheme:

The initiative of 100% coverage of farmers under Kissan Credit Card (KCC) Scheme was launched in J&K State in compliance to directives of Ministry of Finance, Government of India. Its implementation is being vigorously pursued with all the stakeholders including banks, Agriculture Department, Lead District Managers etc. Upto the end of March 2014, banks have sanctioned a total number of 7, 44,470 KCCs in J&K State against which 5, 86,364 KCCs amounting to Rs.3,718.68 Crore have been disbursed.

Regional Rural Bank sponsored by J&K Bank:

The J & K Grameen Bank came into existence on 30th June, 2009 with the issuance of statutory notifcation by GoI, MoF, Department of Financial Services under sub-section (1) of section 23 (A) of the Regional Rural Banks Act, 1976 vide F. No. 1/4/2006-RRB providing for amalgamation of Kamraz Rural Bank and Jammu Rural Bank into a single new Regional Rural Bank under the name of J&K Grameen Bank, with its Head Offce at Jammu. The bank commenced its business from 01.07.2009.

Area of Operation:

In terms of GoI notifcation dated 30-6-2009, the notifed area of operation of J&K Grameen Bank comprises of districts of Baramulla, Bandipora, Kupwara, Jammu, Kathua, Rajouri, Poonch, Leh and Kargil and parts of three districts viz. Ganderbal, Srinagar and Samba.

Business:

The business of the bank increased from Rs.3,022.51 Crore to Rs.3,438.09 Crore during the year 2013-14, registering a growth rate of 13.74%.

Deposits

The deposits of the bank increased from Rs.2,165.22 Crore to Rs.2,407.43 Crore during the year 2013-14, registering a growth rate of 11.18%.

Advances

The gross advances of the bank as on 31st March, 2014 stood at Rs.1,030.66 Crore as against Rs.857.29 Crore as on the corresponding date of the previous year, recording a growth of 20.22%

CD Ratio:

The CD Ratio of the bank increased by 3.22% from 39.59% as on March 2013 to 42.81% as on 31st March, 2014.

Priority Sector Advances:

The priority sector advances of the bank as on 31st March, 2014 stood at Rs.729.82 Crore as against Rs.590.61 Crore as on the corresponding date of the previous year, recording a growth of 23.57%. Priority sector advances constituted 70.81% of total advances which is much above the bench mark of 60%.

NPA Position:

The gross NPAs of the bank as on 31.03.2014 stood at Rs.85.40 Crore which accounts for 8.29% of gross advances. The Net NPA as on 31.03.2014 stood at Rs.47.44 Crore which accounts for 4.78% of net advances (Pre-audit).

Proftability:

Net Proft of the bank stood at Rs.13.44 Crore as on 31st March, 2014. (Pre-audit fgures)

CBS/ Computerization:

The bank achieved 100% CBS rollover of its branch network.

Capital to Risk-weighted Asset Ratio:

The CRAR position of J&K Grameen Bank as on 31st March, 2014 stood at 13.19%, which is much above the mandatory requirement of 9%.

Business per Employee:

The business per employee as on 31st March, 2014 stood as Rs.3.40 Crore.

Proft per Employee:

The proft per employee as on 31st March, 2014 stood as Rs.1.33 lakh.

Deposits per Employee:

The deposits per employee as on 31st March, 2014 stood as Rs.2.38 Crore.

Advances per Employee:

The advances per employee as on 31st March, 2014 stood as Rs.1.02 Crore.

Business per Branch:

The business per branch as on 31st March, 2014 stood as Rs.16.77 Crore.

Deposits per Branch:

The deposits per branch as on 31st March, 2014 stood as Rs.11.74 Crore.

Advances per Branch:

The advances per branch as on 31st March, 2014 stood as Rs.5.03 Crore.

Proft per Branch:

The Proft per branch as on 31st March, 2014 stood as Rs.6.55 lakh (Pre-audit).

17. FINANCIAL INCLUSION:

With the objective of reaching out to the large hitherto unbanked population and extend fnancial services to unlock its growth potential, the bank formulated Financial Inclusion Plan (FIP) for delivery of basic banking services in allotted identifed unbanked villages. The details of village allocation and other FIP related information is mentioned hereunder:

- SLBC has allocated 536 villages having population of above 2000 and 3271 villages having population of below 2000 to the bank for providing ICT (Information Communication Technology) based fnancial services by the end of March 2016. Bank has already brought 536 villages ( 2000 Population) under the ambit of fnancial inclusion by opening of Business units and providing BC (Business Correspondent) coverage in all the villages.

- Out of 3271 below 2000 population villages scheduled to be covered by the end of March 2016, 1696 villages have been rolled out for extending ICT based fnancial services at the end of March 2014 well above the target of 1600 villages set for FY 2013-14.

- Bank has also identifed and rolled out to BCs 340 unbanked villages under self set target, thereby taking the total number of villages rolled out under fnancial inclusion to 2572 as on March 2014.

- As on March 2014, bank had opened 124 Business units in identifed allocated villages under fnancial inclusion, comprising of 33 business units in villages having above 2000 population and 91 business Units in villages having below 2000 population.

- The target for household coverage in the rolled out villages stands at 7.56 lac, out of which 4.69 lac households have been covered which constitutes 62.09% of total households.

- 695 VLEs of CSC''s have been engaged as BC and are linked to 439 Base branches/ Business units for providing ICT enabled fnancial services in the State, thereby taking the total number of BCs to 697.

- Number of accounts opened in 2572 rolled out villages has reached 12.18 lakh comprising of 6.05 lac No Frill Accounts/ Basic saving bank deposit accounts/ ISSS/ MGNREGA and 6.13 lac other accounts.

- Upto March 2014, 69686 transactions have been generated through the operation of Smart Cards involving an amount of Rs. 14.61 Crore.

- Micro Credit products as mentioned below are being utilized for credit delivery through ICT based smart card mechanism, especially for fnancial inclusion programme.

Differential Rate of Interest (F I)

Micro Credit Card (FI)

Micro-Overdraft to Ujala accounts (F I)

RBI selected Villages (Progress/ Achievements)

- 15 model villages allocated to the bank by RBI for 100% fnancial inclusion in the State have been made functional through Smart Cards.

- 5252 smart cards have been issued in 15 RBI selected model villages and 8695 accounts have been opened.

Implementation of EBT & DBT

The J&K State Government entrusted the responsibility of execution of EBT/DBT in all the districts of the State to the J&K Bank . To start with, SLBC identifed six districts (Srinagar, Ganderbal, Rajouri, Jammu, Kargil, and Leh) on pilot basis for implementation of EBT/DBT. In these six districts, the monthly benefts under IGNOAP scheme are being released directly to benefciary accounts through the electronic mode .Validation of accounts in remaining 16 districts of the State is in progress.

Financial Literacy cum Credit Counseling Centres

- In compliance to RBI directive, the bank operationalised Financial Literacy cum Credit Counseling Centres in 12 districts in the State where J&K Bank performs the lead bank responsibility.

- 633 outdoor fnancial literacy camps have been conducted by 12 FLCs in the respective lead districts imparting training and information to 59133 persons.

Financial Literacy Camps through Rural Branches

- The bank conducted 1160 fnancial literacy camps in the villages situated in the close vicinity of various rural branches of the bank. A total of 56977 persons attended these camps.

18. CORPORATE GOVERNANCE

a) J&K Bank has established a tradition of exemplary practices in corporate governance. It encompasses not only regulatory and legal requirements, but also several voluntary practices, aimed at a high level of business ethics, effective supervision and enhancement of stakeholder value.

b) Several matters have been voluntarily included in the statement on corporate governance annexed to this report, besides certifcate from the Central Statutory Auditors regarding compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement.

19. BOARD OF DIRECTORS

a. Mr. Mushtaq Ahmad, Chairman and CEO of the bank was reappointed as Chairman and CEO of the bank for a period of 3 years with effect from 6th October, 2013 by the Reserve Bank of India.

b. Mr. Bharat Bhushan Vyas, IAS, Principal Secretary to Government, Finance Department, J&K Govt. was nominated by the Government of J&K as director on the Board of the bank with effect from 24th April, 2013.

c. Mr. Hari Narayan Iyer, Additional Director was reappointed by the Reserve Bank of India with effect from 7th Oct. 2013 till 31st Oct. 2014.

d. Mr. A. M. Matto and Prof. Nissar Ali, were reappointed as Directors at the last Annual General Meeting of the Shareholders of the bank held on 22nd June, 2013.

e. With a view to broad-basing the Board, Mr. Nihal C. Garware, an eminent personality, was re-appointed as Additional Director of the bank w.e.f 24.06.2013. The bank has gained immensely from his guidance and wide ranging experience and expertise.

f. Mr. R. K. Gupta retires by rotation at the ensuing Annual General Meeting in accordance with provisions of Companies Act, 2013 and is eligible for reappointment.

g. Mr. Vikrant Kuthiala, who in the opinion of Board is eligible for appointment as Independent Director, is proposed to be appointed as Independent Director on the Board of the Bank.

20. Name of the Board of Directors of the Bank

1. Mr. Mushtaq Ahmad Chairman & CEO

2. Mr. Bharat Bhushan Vyas, (IAS) Director

3. Mr. Hari Narayan Iyer Director

4. Mr. M. I. Shahdad Director

5. Mr. Vikrant Kuthiala Director

6. Prof. Nisar Ali Director

7. Mr. A. M. Matto Director

8. Mr. R. K. Gupta Director

9. Mr. Nihal C. Garware f Director

21. Directors Responsibility Statement

The Board of Directors hereby confrms that:- i. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

ii. the directors had 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 company at the end of the fnancial year and of the proft and loss of the company for that period;

iii. the directors had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

iv. the directors had prepared the annual accounts on a going concern basis; and

v. the directors, had laid down internal fnancial controls to be followed by the company and that such internal fnancial controls are adequate and were operating effectively.

vi. the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

23. Acknowledgements

a. The Directors thank the valued customers, shareholders, well-wishers and correspondents of the bank in India and abroad for their goodwill, patronage and support.

b. The Directors acknowledge with gratitude the valuable and timely advice, guidance and support received from Government of India, Government of Jammu & Kashmir, Reserve Bank of India, Securities and Exchange Board of India (SEBI), Insurance Regulatory Developmental Authority (IRDA), NABARD, SIDBI, IBA, FIMMDA, FEDAI, Stock Exchanges, Ministry of Corporate Affairs, Registrar of Companies, Comptroller & Auditor General, Financial Institutions and the Central Statutory Auditors of the bank in the functioning of the bank.

c. The Directors place on record their deep appreciation of the valuable contribution of the members of the staff at all levels for the progress of the bank during the year and look forward to their continued co- operation in realization of the corporate goals in the years ahead.

0For and on behalf of the Board of Directors Place: Srinagar (J&K Mushtaq Ahmad

Date: 15.05.2014 Chairman & CEO


Mar 31, 2012

Dear Members,

1.1. The Board of Directors have pleasure in presenting the 74th Annual Report of your Bank, together with the audiThed Balance Sheet, Profit and Loss Account and the report on business and operations for the year ended 31st March, 2012.

1.2. The Bank has delivered a strong performance in 2011-12. The Bank's straThegy of consolidation, re- engineering, re-pricing and re-organisation has resulThed in productive and efcient growth, robust balance sheet, top- notch asset book and substantial provisions. Financial highlights for the year under review are presenThed below:

2. PERFORMANCE AT A GLANCE

2.1 The aggregaThe business of the Bank crossed yet another psychological mark and stood at Rs. 86,424.32 Crores at the end of the FY 2011- 12. The total business of the Bank increased by Rs. 15,554.75 Crores from the previous year's fgure of Rs. 70,869.57 Crores, regisThering a growth of 22%.

2.2 The total deposits of the Bank have grown by Rs. 8,670.97 Crores from Rs. 44,675.93 Crores as on 31st March, 2011 to Rs. 53,346.90 Crores as on 31st March, 2012, regisThering growth of 19.41%. CASA deposits of the Bank at Rs. 21,715 Crores constituThed 40.71% of total deposits of the bank.

2.3 Cost of deposits for current FY stood at 5.92% compared to 5.05% for FY 2010-11.

2.4 The Bank continued its prudent approach in expanding quality credit assets in line with its policy on Credit Risk Management. The net advances of the Bank increased by Rs. 6,883.78 Crores from Rs. 26,193.64 Crores as on 31st March, 2011 to Rs. 33,077.42 Crores as on 31st March, 2012, a growth of 26.28%.

2.5 Yield on advances for the current FY improved to 11.45% compared to 10.68% for FY 2010-11.

2.6 Priority sector advances stood at Rs. 10,294.38 Crores as on 31st March, 2012.

3. The Bank's performance in the recovery of NPA's during the year continued to be good. The Bank efecThed cumulative cash recovery; up-gradation of NPA's and Thechnical wriThe-of of Rs. 316.91 Crores compared to Rs. 232.63 Crores in the previous year.

4. Investment portfolio of the bank increased by

Rs. 1,928.55 Crores from Rs. 19,695.77 Crores as on 31st March, 2011 to Rs. 21,624.32 Crores as on 31st March, 2012.

5. INSURANCE BUSINESS

5.1. The Bank earned an income of Rs. 29.56 Crores from the Insurance Business. In life insurance, the Bank mobilised business of Rs. 100.39 Crores and in non-life segment, business of Rs. 77.53 Crores was mobilised during the year.

6. INCOME ANALYSIS

6.1. InTherest income of the Bank recorded a growth of Rs. 1,122.45 Crores and increased from Rs. 3,713.13 Crores in the year 2010-11 to Rs. 4,835.58 Crores in the year 2011-12. InTherest expenses increased from Rs. 2,169.47 Crores to Rs. 2,997.22 Crores during the year. The Net InTherest Income increased from Rs. 1,543.66 Crores to Rs. 1,838.36 Crores on YoY basis.

6.2. The Net Income from operations [InTherest Spread plus Non-inTherest Income] has increased to Rs. 2,172.48 Crores in the FY 2011-12 from Rs. 1,908.42 Cr in the FY 2010-11, growing by 13.84%.

6.3. The Operating Expenses have shown an increase of Rs. 43.22 Crores during the

FY 2011-12 and stood at Rs. 802.15 Crores as compared to Rs. 758.93 Crores in 2010-11

6.4. The Cost to Income ratio (Operating

Expenses to Net Operating Income) has come down from 39.77 % in the FY 2010-11 to 36.92% in the FY 2011-12.

7. GROSS PROFIT

7.1. The Gross Profit for the FY 2011-12 stood at Rs. 1,370.33 Crores as compared to Rs. 1,149.49 Crores in the FY 2010-11 regisThering a growth of 19.21%.

8. PROVISIONS

8.1. The Provision for Loan Losses, Provision on Standard Assets, Taxation and others aggregaThed to Rs. 567.08 Crores in the FY 2011-12 as compared to Rs. 534.29 Crores in the FY 2010-11.

9. NET PROFIT AND DIVIDEND

9.1. The Bank regisThered highest ever Net Profit of Rs. 803.25 Crores for the FY 2011-12 compared to Rs. 615.20 Crores for the FY 2010-11, regisThering an impressive growth of 30.57%.

9.2. The Board of Directors has recommended record dividend of 335% for the FY 2011-12.

9.3. In Therms of extant guidelines, the Bank will pay the dividend distribution tax for the FY 2011-12. Accordingly the total outfow on account of dividend for the year 2011-12 will be Rs. 188.76 Crores including the dividend distribution tax.

10. NET WORTH AND CRAR

10.1. The Net Worth of the Bank increased to Rs. 4,093.18 Crores on 31st March, 2012 from Rs. 3,478.68 Crores on 31st March, 2011.

10.2. The Capital to Risk AdjusThed Assets Ratio [CRAR] under BASEL-I stood at 12.53% as on 31st March, 2012 as against 13.30% as on 31st March, 2011 which is much above the norm of 9% stipulaThed by the Reserve Bank of India. The Tier I component of CRAR is 10.43% as on 31st March, 2012 compared to 10.99% as on 31st March, 2011.

10.3. The Bank has implemenThed new capital adequacy framework w.e.f. 31st March, 2009. Under new norms, bank's CRAR (BASEL-II) works out to 13.36% which is higher than the CRAR as compuThed under BASEL- I norms. The advantage has sThemmed mainly from higher raThed Investment / Credit portfolio. The Tier I component of CRAR under new norms is 11.12% as against 10.43% under BASEL -I.

10.4. The Return on Average Net Worth, Earnings per Share and Book Value per Share for the FY 2011-12 stood at 21.22%, Rs. 165.69 and Rs. 844.34, against 18.96%, Rs. 126.90 and Rs. 717.58 respectively for the previous year.

11. BRANCH NETWORK

11.1. During the FY 2011-12, 55 new branches were established, thereby taking the number of branches to 603 as on 31-03-2012, spread over 20 staThes and one union Therritory. The area-wise breakup of the branch network (excluding exThension counThers/ mobile branches and service branches) is as under:

Area Business Units

Metro 039

Urban 168

Semi-Urban 123

Rural 273

TOTAL 603

12. IT INITIATIVES DURING FY 2011-12

12.1. Thechnology has played a pivotal role in the growth of the Bank. T&ISD department has always been in the forefront in delivering solutions in line with the changing business needs of the organisation. As a matTher of policy the department has always provided industry best solutions so as to align the Thechnology with business goals. The details of various Thechnology initiatives taken during the FY 2011-12 are enumeraThed below:

10 branches were compuTherised

during the year taking the total count of compuTherised business units as on 31st March, 2012 to 634 out of a total business unit count of 640 which includes 603 business units & 37 ExThension CounThers.

90 new SOLs were opened on Core

Banking Platform during 2011-12 taking the total count of SOLS on CBS as on 31st March, 2012 to 671.

177 ATMs were procured, out of which 147 were commissioned during FY 2011-12 taking the aggregaThe number of commissioned ATMs to 508 as on 31st March, 2012.

E-Banking facility has been made available at all the CBS branches of the Bank and the number of e-Banking customer accounts stood at 164,580 as on 31.03.2012.

The project covering Domestic, Forex and derivative modules stands implemenThed. The VaR engine also stands implemenThed and various combinations of VaR modules are being ThesThed by the users.

All the CBS branches of the Bank are enabled for RTGS and NEFT facility.

In far fung and unbanked areas, the bank is providing basic banking services through three mobile vans.

CorporaThe Module of CTS (Cheque Truncation) was deployed and made functional at Chennai grid in addition to already functioning grid at NCR (Delhi) region. The new software will support country wide CTS and in future the sysThem will pave way for setting up a country-wide centralised Inward Clearing Centre for betTher and speedy customer service.

The CCTVs were installed at 23 more branches taking the total count to 219. In addition, CCTVs were installed at 300 ATM locations.

Out of 13 Currency Chests, 12

Currency Chests have been equipped with all the Security gadgets required under regulatory guidelines.

SysThem Level Asset Classifcation for bringing transparency and efciency in asset classifcation was implemenThed and in the frst phase asset classifcation of accounts with sanctioned limit of ? 50 lakh and above was implemenThed through the sysThem.

13. ADVERTISING AND PUBLICITY

During the year, the Bank continued to position its brand favourably in public memory and psyche. The products, services, achievements and future plans were efectively communicaThed to the customers, shareholders and the general public through creatively conceived, developed and packaged advertisements.

14. CORPORAThe SOCIAL RESPONSIBILITY-CSR

The CorporaThe Social Responsibility (CSR) of the J&K Bank seeks to recognise obligations towards society and aims to inThegraThe the CSR ideals into its mission for optimising both business and social performance. The contribution to CSR is considered as an asset rather than expenditure.

Our CSR revolves round peoples' empowerment through generous and innovative economic support and fnancial inThervention. From matThers of health to heritage, education to entrepreneurship, poverty to pathetic disabilities, our CSR policy covers it all. The aim is to instill a sense of relief and proThection among the most vulnerable sections of society, provide avenues for peoples' enThertainment, susThenance and empowerment. The approaches adopThed in conceiving, handling and implementing CSR initiatives are simple yet professional and at times massive yet methodical.

We believe in employing innovative and inTherventionary means to ensure maximisation of returns; both social and economical, though from a long-Therm perspective. Capitalising on the expertise of the professionals and organisations pursuing various causes of societal concern continue to be our guiding force in the implementation and execution of our CSR initiatives.

15. MAJOR CSR INITIATIVES TAKEN BY THE BANK

Education Sector continued to receive priority in the Bank's CSR expenditure. Besides providing free stationery to large number of children coming from poor economic backgrounds, Bank donaThed dozens of compuThers, laptops and other learning aids to the individuals as well as instituThes. Apart from providing educational sponsorship by way of bearing tuition fee, cost of stationery and uniform of scores of poor students, Bank donaThed a hefty sum for purchase of books for library of a remoThe educational instituThe in South Kashmir. Moreover, a school bus was donaThed to a local welfare Trust for ferrying poor students receiving free quality education in the Trust schools.

More than one hundred trolleys and wheel chairs were distribuThed to the leading hospitals of the staThe to contribuThe for betTher patient care. The initiative followed the growing public concern regarding incapacities of health instituThes in providing quality healthcare.

The Bank adopThed Tulwari, a remoThe village along the LoC in district Baramulla, for treatment and rehabilitation of village children sufering from 'Hemophilia A, a life consuming inheriThed disorder in which patient's blood doesn't clot to stop the bleeding. A mechanism, to provide quality treatment, worked out with the Society for Hemophilia care, New Delhi authorities has proved a life saver for the children of the village afecThed with this deadly disorder.

Apart from continuing generous support to various activities and initiatives of the diferently abled persons, J&K Bank undertook the responsibility of sponsoring education and rehabilitation of 25 special children belonging to poor families. The students were identifed following a survey and laTher their education/ rehabilitation was arranged through a local not-for- Profit foundation espousing the cause of and running a school for such children. Sponsorship includes all expenses including tuition fee, stationery, uniform, physiotherapy and other relaThed things.

Massive plantation drive on World Plantation Day, fnancing and encouraging of cycling events, road shows and other events organised for promoting the cause of environment also remained among the priorities. Pertinently, subsequent to its development, the Bank dedicaThed Shaheed Park to people in South Kashmir.

AfTher formation of a full-fedged Sports Board during FY10-11, Bank took the initiative forward in FY 2011-12 by formally launching its own Football Academy. CommitThed to the development of sports especially football, which happens to be the staThe game of J&K, the idea behind launching J&K Bank Football Academy is to nurture and groom the budding footballers of the staThe to prepare them to fnd a berth in senior side at national and inThernational level.

16. LEAD BANK RESPONSIBILITY

The J&K Bank is the only PrivaThe Sector Bank in the country assigned with the responsibility of convening StaThe Level Bankers' CommitThee meetings. The Bank continued to discharge its lead bank responsibility in 12 out of 22 districts of J&K StaThe satisfactorily.

16.1. In Therms of guidelines issued by Ministry of Rural Development, Government of India, J&K Bank was assigned the responsibility of setting up Rural Self Employment & Training InstituThes (RSETIs) in the assigned 12 lead districts. In this regard, the Bank has already accomplished the target by setting up RSETIs in all allocaThed Lead Districts.

16.2. During the FY 2011-12, the following meetings were conducThed by the Bank:

Four QuarTherly StaThe Level Bankers CommitThee (SLBC) meetings, viz. 81st, 82nd, 83rd and 84th to review performance under ACP.

One Special SLBC meeting addressed by Dr. D. Subbarao, Hon'ble Governor, Reserve Bank of India.

Meeting of Sub-CommitThee of J&K SLBC on Relaxation/ Concessions to trade and industry in J&K staThe.

Workshop on Credit GuaranThee Trust Fund Scheme and enhancing fow of credit to Agriculture Sector in J&K.

Meeting of the STheering Sub-

CommitThee of J&K SLBC to monitor fow of credit to Agriculture Sector.

Meeting of the STheering Sub-CommitThee of J&K SLBC to monitor IT enabled Financial Inclusion in J&K StaThe.

Meeting of the Sub-group of J&K SLBC constituThed to prepare a Workable Action Plan for enhancing CD. Ratio of J&K StaThe.

Meeting of the Sub-CommitThee of J&K SLBC for Export Promotion.

The district level and block level meetings, such as DCC/ DLRC/ BLBC, and other relative meetings under Lead Bank Scheme were held during the FY 2011-12 as per schedule in all the 12 lead districts.

17. REGIONAL RURAL BANK

The J&K Grameen Bank is the regional rural bank sponsored by the Bank. The area of operation of the J&K Grameen Bank spans over 11 districts (Baramulla, Bandipora, Kupwara, Jammu, Kathua, Rajouri, Poonch, Leh, Kargil, Samba and Kishtwar) of J&K StaThe. The Grameen Bank has a branch network of 184 branches with 944 employees. The performance of the Grameen Bank has improved considerably during FY 2011-12. The fnancial highlights (unaudiThed) of the Bank for the year under review are highlighThed below:

17.1. Business

The business of the Bank increased from ? 2,116.50 Crores to ? 2,549.51 Crores during the year 2011-12 regisThering a growth raThe of 20.46%.

17.2. Deposits

The deposits of the Bank have increased from ? 1,594.99 Crores to ? 1,870.86 Crores during the year 2011-12 thereby regisThering a growth raThe of 17.30%.

17.3. Advances

The gross advances of the Bank as on 31st March, 2012 stood at Rs. 678.65 Crores as against Rs. 521.39 Crores as on the corresponding daThe of the previous year recording a growth of 30.16%.

17.4. Priority Sector Advances

The priority sector advances of the Bank as on 31st March, 2012 stood at Rs. 479.02 Crores as against Rs. 359.85 Crores as on the corresponding daThe of the previous year recording a growth of 33.12%. Advances to priority sector constituThe 70.58% of total advances.

17.5. NPA Position

The gross NPA of the Grameen Bank as on 31.03.2012 stood at Rs. 43.86 Crores constituting 6.46% of gross advances, while as Net NPA as on 31.3.2012 stood at 6.97 Crores constituting 1% of net advances.

17.6. Profitability

The bank has shown operating Profit of Rs. 25.00 Crores and net Profit of Rs. 11.00 Crores as on 31st March, 2012.

18. FINANCIAL INCLUSION

In order to cover the unbanked population in rural areas and special segments of population in urban areas, the Bank has formulaThed a comprehensive Financial Inclusion Plan. The FIP envisages providing basic banking services in 535 SLBC allotThed villages and 725 other unbanked villages of the StaThe of Jammu & Kashmir in a phased manner upto March, 2013. FIP is being implemenThed through a mix of branch network and Business Correspondent Model by engaging Common Service Centres (CSC) for delivery of services through Smart cards. The coverage has reached 836 unbanked villages comprising of 467 SLBC and 369 Non-SLBC villages as on 31.03.2012. The total number of 4.34 lac accounts have been opened in these identifed villages, covering 1.92 lacs households.

18.1. The Bank has undertaken setting up of

Common Service CenThers known as Khidmat Centres under the e- governance initiative of Government of India. Out of 1109 Common Service CenThers to be set up, seven hundred Common Service CenThers have been established across the StaThe upto March, 2012.

19. CORPORAThe GOVERNANCE

19.1 J&K Bank has established a tradition of exemplary practice in CorporaThe Governance. It encompasses not only regulatory and legal requirements, but also several voluntary practices, aimed at a high level of business ethics, efective supervision and enhancement of stakeholder value.

19.2 Several matThers have been voluntarily included in the staThement on CorporaThe Governance annexed to this report, besides certifcaThe from the Central Statutory Auditors regarding compliance of conditions of CorporaThe Governance as stipulaThed in Clause 49 of the Listing Agreement.

20. BOARD OF DIRECTORS

a. Mr. Sudanshu Pandey, IAS, Commissioner/ Secretary, Finance Department, J&K Govt. was recalled by the StaThe Government of J&K with efect from 02.03.2012.

b. Mr. Arnab Roy, Regional Director, Reserve Bank of India, ceased to be a Director w.e.f 6th October, 2011 pursuant to RBI directives.

c. Mr. Ashok Kumar Mehta and Mr. Abdul Majid Mir, Executive Directors retired from the services of the Bank w.e.f 31st May, 2011 and 30th June, 2011 on attaining the age of superannuation.

d. Mr. B. L. Dogra, afTher completing eight years of continuous services on the Board of the Bank ceased to hold the ofce of Director afTher 1st June, 2011 in view of the provision of Section 10A (2A) (i) of the Banking Regulation Act. 1949.

Directors place on record their deep appreciation for the valuable service rendered by Mr. Sudhanshu Pandey, IAS, Mr. Arnab Roy, Mr. A. K. Mehta, Mr. Abdul Majid Mir and Mr. B. L. Dogra during their Thenure as Directors of the Bank.

e. Mr. Hari Narayan Iyer, General Manager, Reserve Bank of India, Rural Planning & Credit Department, Jaipur was appoinThed as Additional Director on the Board of the Bank by the Reserve Bank of India with efect from 7th October, 2011 for a period of 2 years.

f. Mr. R. K. Gupta and Prof. Nisar Ali were reappoinThed as Directors at the last Annual General Meeting of the Shareholders of the Bank held on 09.07.2011.

g. With a view to broad-basing the Board, Mr. Nihal C. Garware, an eminent personality, was re-appoinThed as Additional Director of the Bank w.e.f 09.07.2011. The Bank has gained immensely from his guidance and wide ranging experience and expertise.

h. Mr. M. I. Shahdad and Mr. Vikrant Kuthiala, retiring by rotation at the ensuing Annual General Meeting in accordance with Article 76 of the Articles of Association of the Bank and provisions of Companies Act, 1956 and are eligible for reappointment.

21. NAME OF THE BOARD OF DIRECTORS OF THE BANK

1. Mr. Mushtaq Ahmad Chairman & CEO

2. Mr. Hari Narayan Iyer Director

3. Mr. M. I. Shahdad Director

4. Mr. Vikrant Kuthiala Director

5. Prof. Nisar Ali Director

6. Mr. A. M. Matto Director

7. Mr. R. K. Gupta Director

8. Mr. Nihal C. Garware Director

22 DIRECTORS RESPONSIBILITY STATheMENT

The Board of Directors hereby confrms that:- i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to maTherial departures.

ii) We have selecThed such accounting policies and applied them consisThently and made judgments and estimaThes that are reasonable and prudent so as to give a true and fair view of the staThe of afairs of the Company at the end of the fnancial year and the Profit /loss for the period under report.

iii) We have taken proper and sufcient care for the mainThenance of adequaThe accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and deThecting frauds and other irregularities.

iv) We have prepared the annual accounts on a going concern basis.

23. PARTICULARS OF EMPLOYEES

PARTICULARS OF EMPLOYEES AS PER SECTION 217(2A) OF THE COMPANIES ACT, 1956, READ WITH THE COMPANIES (PARTICULARS OF EMPLOYEES) RULES, 1975, FOR THE YEAR ENDED 31st MARCH, 2012, ARE AS UNDER:

a. EMPLOYED THROUGH OUT THE FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING Rs. 6,000,000/- OR MORE PER ANNUM: -NIL- b. EMPLOYED FOR PART OF THE

FINANCIAL YEAR AND IN RECEIPT OF REMUNERATION AGGREGATING Rs. 500,000/- OR MORE PER MONTH: - NIL -

24 ACKNOWLEDGEMENTS

a. The Directors thank the valued customers, shareholders, well-wishers and correspondents of the Bank in India and abroad for their goodwill, patronage and support.

b. The Directors acknowledge with gratitude the valuable and timely advice, guidance and support received from Government of India, Government of Jammu & Kashmir, Reserve Bank of India, Securities and Exchange Board of India (SEBI), Insurance Regulatory Developmental Authority (IRDA), NABARD, SIDBI, IBA, FIMMDA, FEDAI, Stock Exchanges, Deptt. of Company Afairs, Registrar of Companies, Comptroller & Auditor General, Financial Institutions and the Statutory Central Auditors of the Bank in the functioning of the Bank.

c. The Directors place on record their deep appreciation of the valuable contribution of the members of the staf at all levels for the progress of the Bank during the year and look forward to their continued co-operation in realisation of the corporaThe goals in the years ahead.

For and on behalf of the Board of Directors

Mushtaq Ahmad

Chairman & CEO

Place: Srinagar (J&K) DaThed: 12th May, 2012



 
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