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Directors Report of South Indian Bank Ltd.

Mar 31, 2016

The Board of Directors is pleased to place before you, the 88th Annual Report of the Bank along with the Audited Balance Sheet as at March 31, 2016 and the Profit and Loss Account for the year ended March 31, 2016.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2016 are as follows:

Key Parameters Rs. in crore

2015-16 2014-15

Deposits 55720.73 51912.49

Gross Advances 41470.79 37725.65

Total Gross Business 97191.52 89638.14

Operating Profit 879.28 816.26

Net Profit 333.27 307.20

Capital & Reserves 3841.93 3589.40

Capital Adequacy (%) - Basel-III 11.82 12.01

Earnings Per Share (EPS) :

(a) Basic EPS (in Rs.) 2.47 2.28 [face value Rs. 1/-]

(b) Diluted EPS (in Rs.) 2.47 2.27 [face value Rs. 1/-]

Book Value per Share (in Rs.) 28.45 26.59 [face value Rs. 1/-]

Gross NPA as % of Gross Advances 3.77 1.71

Net NPA as % of Net Advances 2.89 0.96

Return on Average Assets (%) 0.55 0.56

FINANCIAL PERFORMANCE

Profit

The Net Operating Income (Net Interest Income and other income) of the Bank increased by Rs.163.82 crore (8.79%) from Rs.1,863.30 crore to Rs.2,027.12 crore. The growth in Non Interest Income was Rs.20.35 crore (4.09%) during the year. The Bank made an Operating Profit of Rs.879.28 crore as against Rs.816.26 crore during the previous year and had made a net profit of Rs.333.27 crore during the year as compared to a net profit of Rs.307.20 crore during the previous year.

The Operating Profit for the year under review was Rs.879.28 crore before taxes and provisions as against Rs.816.26 crore (after considering the impact of policy change in depreciation) for the year 2014-15. Net profit was Rs.333.27 crore and the profit available for appropriation was Rs.428.49 crore as per details given below:

(Rs. in crore)

Profit before depreciation, taxes and provisions 879.28

Less: Provision for NPI 13.40

Provisions for Non- Performing Assets 391.90

Provision for FITL (25.40)

Provision for Depreciation on 29.81 Investments

Provision for Income Tax 176.40

Provision for Standard Assets (0.79)

Provision for Restructured Assets (36.90)

Provision for Other Impaired Assets 2.64

Provision for Un-hedged Forex Exposure (5.05) 546.01

Net profit 333.27

Brought forward from previous year 95.22

Profit available for appropriation 428.49

Appropriations (Rs. in crore)

Transfer to Statutory Reserves 83.32

Transfer to Capital Reserves 24.53

Transfer to General Reserves 50.00

Transfer from Investment Reserve (10.05)

Transfer to Special Reserve 25.72

Proposed Dividend 67.52

Dividend Tax on Proposed Dividend 13.74

Balance carried over to Balance Sheet 173.71

Total Appropriation 428.49

Dividend

The Board of Directors recommended a dividend of 50% (tax- free in the hands of shareholders other than Individuals whose dividend income is above Rs.10 lakh), i.e., @ Rs.0.50 per Equity Share of face value of Rs.1/- per share.

expansion programme

The Bank had been successful in widening its network across India with 834 branches, 42 extension counters and 1287 ATMs. The Bank has opened 29 new offices (12 branches and 17 extension counters) and 87 ATMs across the country during the financial year 2015-16. The branch network now covers 30 States/Union Territories.

The Bank plans to open a maximum of 50 new offices (with a mix of Branches and Extension Counters) and 150 ATMs (including 50 Cash Deposit Machines) during the financial year 2016-17.

CAPITAL & RESERVES

The Bank''s issued and paid up capital stood at Rs.135.03 crore as on March 31, 2016. During the year, 157005 stock options granted under Employee Stock Option Scheme had been exercised by eligible employees.

The capital plus reserves of the Bank has moved up from Rs.3,589.40 crore to Rs.3,841.93 crore on account of exercise of options and plough back of profits during the year.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)- BASEL III

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2016 according to Basel III guidelines is 11.82 as against the statutory requirement of 9.625 (including Capital Conservation Buffer). Tier I CRAR constitutes 9.83 while Tier II CRAR works out to 1.99.

The Bank follows standardized approach, Standardized Duration approach and Basic Indicator approach for measurement of capital charge in respect of credit risk, market risk and operational risk respectively.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Bank''s shares continue to be listed on BSE Ltd. and The National Stock Exchange of India Ltd. During the year, the Bank has executed a uniform Listing Agreement with BSE Ltd. and The National Stock Exchange of India Ltd. pursuant to SEBI (LODR) Regulations 2015. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2016-17.

business ACHIEVEMENTS

The Bank has achieved a Gross Business of Rs.97,191.52 crore, consisting of Total Deposit of Rs.55,720.73 crore and Gross Advances of Rs.41,470.79 crore as on March 31, 2016.

Deposits

The total deposits of the Bank increased from Rs.51,912.49 crore as on March 31, 2015 to Rs.55,720.73 crore registering a growth of 7.34%.

The break-up of the deposit as on March 31, 2016 is as under:-

Amount (Rs. in crore) % to total Deposits

Current Deposits 1983.13 3.56

Savings Deposits 10475.84 18.80

Term Deposits 43261.76 77.64

Total 55720.73 100.00

The Bank during the year focused on Core Deposit, the segment witnessed a growth of 14.24%. Savings Bank Deposits grew by 18.12% on a year on year basis. During the financial year 2015-16, the Bank had opened 3.89 lakh new Savings Bank Accounts and 1 1,035 Current Accounts. The Bank, as a part of effective cost management of liabilities, took steps to shed Bulk Deposits and Certificate of Deposit of Rs.2,055.43 crore. NRI Deposits has grown by 25.54% to Rs.14,303.09 crore.

The Bank has accorded priority to meaningful financial inclusion during the period under reporting while opening new deposit relationships.

Advances

During the year, the gross advances of the Bank registered a subdued growth of 9.93%, to touch Rs.41,470.79 crore. Low growth reflects, inter-alia, slow off take of credit and also a focused approach towards credit underwriting to ensure quality of assets. Total Priority Sector advances as at the end of the financial year stood at Rs.19,144.65 crore, constituting 47.44% of the Adjusted Net Bank Credit (ANBC). Exposure to agricultural sector amounted to Rs.7,902.37 crore forming 19.58% of ANBC as at the end of the financial year. Break-up of exposure under Priority Sector is furnished below:

Amount (Rs. in crore)

Agriculture & Allied activities (including 7902.37 investments in RIDF)

MSME 8610.58

Other Priority Sector 2631.70

Total Priority Sector 19144.65

INVESTMENTS

Bank''s gross investment portfolio stood at Rs.14,618.93 crore as on March 31, 2016 compared to Rs.14,086.14 crore as on March 31, 2015, registering a growth of 3.78%. Investment Deposit ratio moved from 27.13 as on March 31, 2015 to 26.24 as on March 31, 2016.

Profit on sale of investment for FY 2015-16 stood at Rs.136.54 crore. Total interest income from investments for the year was Rs.1,007.78 crore. Yield on Investments (Profit interest earned to average investments) during FY 16 was 8.48%.

non-performing ASSETS (NPA)

During the year 2015-16, as a result of focused and sustained efforts for early recovery of NPAs, through prompt and effective measures under the SARFAESI Act, follow up of recovery cases pending before DRTs and civil courts, one time compromise settlements of accounts, asset sale to ARC, etc., Bank could recover NPAs to the extent of Rs.451.38 crore (recovery including up-gradation Rs.134.63 crore), as against the target of Rs.350.00 crore. Special thrust was given on selection and underwriting of credit, adequate due diligence and improvement in credit administration to ensure improvement in the quality of assets.

During the year, the Gross NPA of the Bank has increased from Rs.643.45 crore as on March 31, 2015 to Rs.1,562.36 crore as on March 31, 2016 and Net NPA increased from Rs.357.05 crore as on March 31, 2015 to Rs.1185.26 crore as on March 31, 2016. Despite improvement in recovery of NPAs, fresh slippage to the tune of Rs.1,342.52 crore during the year led to increase in the level of gross NPA to Rs.1,562.36 crore. In terms of percentages, the GNPA increased from 1.71% as on March 31, 2015 to 3.77% as on March 31, 2016 and Net NPA increased from 0.96% as on March 31, 2015 to 2.89% as on March 31, 2016.

INFORMATION TECHNOLOGY (IT) and IT ENABLED SERVICES

Ever growing dependence on technology and digitalization has changed the contour of delivery channels of financial services in the Industry. Customers, today have the convenience of technology to Bank anywhere, anytime.

Information Technology and its huge potential to offer innovative solutions have paramount importance for growth and sustenance of the Banks. The demand and expectations of the customers have increased and the turnaround time for rolling out a technology product in banks has visibly diminished, which essentially calls for a robust, agile and adaptable system in place to execute projects right from initiation to consumption. The Bank, an early adopter of technology with a view to providing safe,secure and convenient banking facilities to its customers, has introduced host of services and facilities for enhancing customer satisfaction. The Bank has been successfully functional with Finacle Core Banking Solution (CBS) from Infosys for several years and is the third Bank in the country to have migrated the latest Finacle 10 version from the old Finacle 7 version. Being one among the first banks to do so, ensures that the Bank would have a very robust and renewed platform, which can be leveraged for great customer service.

In its constant endeavour to ensure customer delight, the Bank has introduced.

- ATM network across the country, which supports MasterCard, VISA and RuPaycards allowing customer quick access to money

- All variants of Debit Cards to customers (VISA, MAESTRO and RuPay) ensuring cashless purchases

- Mobile Banking and M-commerce (with support for other bank money transfer through IMPS, P2A, P2M (issuer), Unstructured Supplementary Service Data (USSD code *99#), Missed call services for retrieving balance through SMS etc) for next generation customers

- Investment in equity through primary and secondary market using ASBA (Application Supported by Blocked Amount), Demat Accounts and tie-up with leading broking firms through online trade, to help customers diversify their investment portfolio.

- Foreign inward Instantaneous remittance with own payment Hub system which is real-time integrated with exchange houses abroad, so as to allow Bank''s diaspora to send funds to their near and dear back home.

- Point of Sale(POS)terminals to merchant customers, who would then be able to digitize their collections, without resorting only to cash receipts.

- Portfolio Investment Scheme for NRI Community, allowing them to invest in Indian equity market

- Central Plan Scheme Monitoring System (CPSMS), which links to the DBT (direct beneficiary transfer) for instant receipt of Govt. subsidies to the beneficiaries of various Govt. schemes

- Kiosk based Financial Inclusion Solution to enable the Bank reach nook and corner of the country, even in remote villages using technology enabled tools.

- Cash Deposit Machines, for customers who wish to deposit money in their accounts quickly at any time.

- Advanced version of Internet Banking Application with augmented security controls and enhanced customer friendly features, which offers 24/7/365 banking.

- Captive Security Operation Centre (CSOC) in line with GKC (Gopalakrishna Committee recommendations of RBI for monitoring and management of IT Systems) which does round the clock monitoring of security attacks.

- Fraud Risk Management Solution (FRM) for ATM / POS / CNP channel to ensure customer is alerted when unauthorized transactions happen in their accounts.

- Business Process Management solution leading to a paperless environment and reduced turnaround time for customer service (Liabilities and Assets Opening)

- Payment Options such as Automated Clearing House (ACH) Payment Service, Cheque Truncation System, RTGS/ NEFT etc.

- Account Opening for NRI/MSME directly from website IT initiatives/Solutions embarked during the year

The following list demonstrates a few of the IT enabled services/ solutions that the Bank has launched during the year to serve its Customers in a better and efficient way.

- Core renewal of CBS to Finacle 10, with enriched features leading to increased internal efficiency of operations, augmented control over various functions through stream lined processes.

- SIB Mirror mobile application (developed in house) with innovative features

- E-KYC solution for direct Aadhar based services

- Graphical Intelligent online manual (GIEOM) for online training of staff

- Loan Origination System to digitize and speed up turnaround time

- Launching Prime Minister Schemes

a. Pradhan Mantri Jeevan Jyothi Bheema Yojana (PMJBY)

b. Pradhan Mantri Suraksha Bheema Yojana (PMSBY)

c. Atal Pension Yojana (APY)

d. Sovereign Gold Bond Scheme (SGB)

- Green PIN Project which allows customers to create their own debit card PIN in any SIB ATM, without the need of a paper based PIN.

- Introducing OTP based 3-D secure services for online purchases using debit cards.

- Institutional Fee Payments - in multiple modes (Branch, Card based, ATM based, Web-Based, Virtual Account Number based etc.)

- Issuance of RuPay EMV Card, being one of the first banks to do so.

- Issuance of MasterCard Titanium

- Issuance of Master Card World

- Enabling e-commerce transactions in Rupay cards

- Enabling Visa Fast Fund transactions for card to card transfer

- Discover Card Acceptance in Bank''s POS machines

- Issuance of Rupay Platinum EMV

- SIB Rewardz, a exciting loyalty program for customers

- NPCI-VAS:Mobile Banking Registration & Aadhaar Number seeding Transaction through ATM

- IRCTC Integration for online ticket booking

- CRAYONS -Online user creation Process for self registration of Internet Banking through website

- Email OTP using Missed Call, for customer convenience

- IMPS Foreign Inward Remittance - to receive funds 24/7 from exchange houses

- Enabled Generate OTP and Change MPIN options through National Unified USSD Platform in mobile banking

- ISO 27001 implementation for DC/DR and IT operations.

- Technology solution for Basel II advanced approach in Risk Management

- 24X7 Toll Free Customer Support Center

Information Security and Risk Management

As banks adopt sophisticated technology to face challenges in the emerging realities of banking, they are increasingly exposed to technology risks. It is therefore imperative for each bank to work out appropriate IT risk management strategies to secure its most vital information asset and ensure that related risk management systems and processes are strengthened on continual basis to secure both present and future banking activities. Bank''s Information Security Policy and other IT Policies - IT Operation Policy, IT Governance Policy, IT outsourcing Policy and Information Security systems have already taken these aspects into consideration. Further, the Information Security of banking IT functions has been strengthened through implementation of a captive SOC (Security Operation Centre).

The Bank has been providing awareness on e-threats to its customers and staff on a continued basis so that both proactive and reactive measures can be initiated, as deemed appropriate, to mitigate potential risks associated with e-threats.

The Bank has been implementing the stipulations and guidelines articulated and issued by RBI based on the working group recommendations on Electronic Banking Technology Risk, Information Security and Cyber Frauds as part of the IT governance programme (Gopalakrishna Committee Report).

IT Training

During the year, many training programmes had been attended by the Bank''s officers in premier institutions such as IDRBT, NIBM to keep themselves abreast with the advancements in IT, Information Security, CRM etc. Further, during the financial year 2015-16, the Bank has conducted training programme on Finacle-10 and imparted training to 1,173 officers and 784 clerks.

Gopalakrishna Committee Recommendations Management Philosophy & Measures

Gopalakrishna Committee Recommendations on Information Security, Electronic Banking, Technology Risk and Cyber Frauds as applicable to the Bank have been taken up for enforcement and implementation. Effective measures have been taken to address the identified gaps in each area such as IT Governance, Information Security, IT Service outsourcing, IS Audit, IT Operations, Cyber Frauds, Business Continuity Plan (BCP), Customer Education and Legal issues. The IT Organization setup has been redrawn to suit the functions/roles specified in the recommendations with segregation of duties. Technology, Development, IT Operations and IT Assurance functions have been clearly divided and now independently headed.

IT Strategy Committee of the Board, IT Steering Committee, Information Security Committee and Chief Information Officer (CIO) are in place, and Chief Information Security Officer (CISO) reports independently to the Head of Risk Management.

Revamped Information Security policy incorporating the various guidelines and stipulations mentioned in the report has been approved by Board and is in place. Presently the policy is under the process of review to make it in alignment with ISO 27001 guidelines. In addition, other IT Policies such as IT Operation Policy, IT Governance Policy and IT Outsourcing Policy are also enforced.

The progress of implementation of GKC recommendations are reviewed by IT Strategy Committee of Board and Board of Directors on quarterly basis. The major items which are under process to achieve compliance to GKC recommendations are as follows:

1. Comprehensive Fraud Risk Management.

2. ISO 27001 Implementation

The full compliance with the GKC recommendation will be realized in a time bound manner with creation of various infrastructural support required for the same.

transaction banking department

The Transaction Banking Department of the Bank has commenced its activities in a modest way under the name and style of CPC - Central Processing Centre in Thrissur in May 2015. The prime objective of CPC is to centralize the back office operations, which had been happening in branches and offices with a view to bring standardization, compliance and scalability. The operations were commenced with liability portfolio - Customer Creation and CASA opening covering SB, CD and NRI. In August 2015, a new Department namely Transaction Banking Department (TBD) has come in to being and CPC got attached to it as one of its divisions. Thereafter TBD has widened its functional operations and at present it has 6 divisions as given below:

Retail Liability Operations (TBD.CPC) - Customer Creation and Opening CASA, PIS

Retail Asset Operations (TBD.CDMC) - Opening Loan Accounts, LC and BG

Payment & Settlement Operations - RTGS/NEFT, Aadhaar (TBD.PSD) Mapping

Service Operations (TBD.Service) - Delivery Channels (Debit Card, Net Banking, Mobile banking, Welcome kit)

Support Operations (TBD. Support) - Channel Reconciliation Audit & Compliance Reporting - Rectification of (TBD.A&C) Internal/External Audit comments

It functions from multiple locations. The main centre is located at Kalamassery, Ernakulam, Kerala and the first alternate centre has been functional in Coimbatore.

COMPLIANCE DEPARTMENT

The Bank has institutionalized a strong compliance culture and mechanism across the organization, pursuant to its strategic goals of transparency and trust, among all its stakeholders. The Bank has a dedicated Independent Compliance Department headed by a Dy. General Manager for ensuring regulatory compliance, across all its businesses and operations. The key functions of this department includes, dissemination of key regulatory updates affecting the various business verticals of the Bank, review of processes from a regulatory compliance perspective, provide guidance on compliance-related matters, impart training to employees on compliance aspects, among others.

BUSINESS DEVELOPMENT DEPARTMENT

In order to support and monitor the existing branch network and to provide continuous focus on Business Development of the Bank, the Bank has formed an exclusive full-fledged Business Development Department by segregating the "Business Monitoring Cell" from Planning & Development Department with effect from January 7, 2016.

Business Development Department is providing continuous mentoring for both the Deposit and Advance portfolio of the Bank, monitoring of Green Channel Branches, review of daily/ weekly business position of all ROs/Branches, conducting of conference & meetings to promote Business Growth etc.

RISK MANAGEMENT

Risk is an integral part of banking business. Managing risk is fundamental to banking and is the key to sustained profitability and stability. Management of risk aims at to achieve best trade-off between risk and return and to ensure optimum Risk Adjusted Return on Capital (RAROC). Sound risk management is critical to a Bank''s success. Business and revenue growth have therefore to be aligned in the context of the risks embedded in the Bank''s business strategy and balance sheet of the various types of risks the Bank is exposed to, the most important are credit risk, market risk and operational risk. The identification, measurement, monitoring and mitigation of risks continue to be key focus areas for the Bank. The risk management function attempts to anticipate vulnerabilities at the transaction level or at the portfolio level through quantitative examinations of embedded risks. The risk management strategy of the Bank is based on a clear understanding of various risks, disciplined risk assessment, risk measurement procedures and continuous monitoring for mitigation. The policies and procedures established for this purpose are continuously evaluated and benchmarked against the best practices followed in the industry. Through continuous refinement/improvement of the risk measurement/management systems, the Bank aims to ensure regulatory compliance as well as better return on and utilisation of capital.

Risk Appetite

Risk appetite of the Bank refers to the level of risk that a banking organization is prepared to accept in pursuit of its financial and strategic objectives, before action is deemed necessary to reduce the risk. It can be determined through the assessment of risk taking capabilities of the Bank in the form of sound risk mitigation techniques and capital base. Risk Appetite forms a key input to the business and capital planning process by linking business strategy to risk appetite. Risk appetite of the Bank is defined by the Board of Directors through the Risk Appetite Statement which encompasses the general risk appetite of the Bank as well as risk appetite with respect to specific categories of risks. Qualitative elements, quantitative measures, and risk tolerances as well as targeted limits for various categories of risks are included within the risk appetite and are monitored on a quarterly basis. The framework ensures that aggregate risk exposure of the Bank is always within the desired risk bearing capacity.

Risk Management Policy Framework

The Bank has a comprehensive policy framework which contains separate policies for identification, measurement and management of all material risks including but not limited to credit, market, operational, liquidity and other Pillar-II risks. The Bank has put in place an integrated risk management policy which ensures independence of the risk governance structure. The details of risk management practices are provided in Management Discussion and Analysis Report annexed to the Director''s Report.

Compliance with Basel III and Basel II framework

In compliance with regulatory guidelines on Pillar I of Basel III norms, Bank has computed capital charge for credit risk as per the Standardized Approach, for market risk as per the Standardized Duration Method and for operational risk as per the Basic Indicator Approach. To address the issues of Pillar II, the Bank has implemented ICAAP (Internal Capital Adequacy Assessment Process), integrating capital planning with budgetary planning and to capture residual risks which are not addressed in Pillar I, like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk, pension obligation risk etc. the Bank has adopted a common framework for additional disclosures under Pillar III for adhering to market discipline of Basel II and Basel III guidelines. This requires the Bank to disclose its risk exposures, risk assessment processes and its capital adequacy to the market in a more consistent and comprehensive manner.

The Bank has initiated steps for moving over to Advanced Approach under the Basel II framework for CRAR computation in line with the relevant guidelines issued by Reserve Bank of India. In this regard, consultants and system implementation partners have been engaged and the implementation process has started.

INTERNATIONAL BANKING

The total forex business turnover of the Bank for the year ended 31st March 2016 was Rs.17,7381.86 crore (comprising Merchant Turnover Rs.12,362.72 crore and Interbank Turnover Rs.1,65,019.14 crore). The Bank earned an exchange profit of Rs.45.18 crores recording an increase of 42.67%. The Bank has also earned a profit of Rs.0.32 crores from bullion business and has sold 6.037 kg of gold during the FY 2015-16.

At present the Bank is having rupee inward remittance arrangement with 5 Banks and 31 Exchange Houses and turnover for the year ended March 2016 was Rs.7,390.02 crore registering an increase of 2.92% as compared to the previous financial year. During the FY 2015-16 the Bank continued providing managerial support to M/s. Hadi Express Exchange, UAE. The Bank has presently deputed 19 officers of the Bank to manage the operations of Hadi Express Exchange. Considering the scope in improving Bank''s remittance business through arrangements with EH''s, the Bank has deputed four officers to UAE with UAE Exchange Centre, Al Ansari Exchange and Al Fardan Exchange.

The International Banking Division of the Bank has initiated the centralization of trade finance operations in stages. By centralized trade finance operations at a single location, deploying talented sources, Bank will be able to impart professional services to its trade finance customers ensuring strict FEMA / RBI guidelines. Presently all inward remittances have been centralized and centralization of outward remittances is in progress. Rest of the trade finance operations is scheduled to be completed in due course.

NRI PORTFOLIO

The NRI deposits constitute 26% of the total deposits and 30% of the Core Deposits of the Bank. The Bank is having a separate NRI Division, in Kalamassery, Kochi, headed by an Assistant General Manager and its functions and working are monitored by a Deputy General Manager and General Manager in the Marketing Department of the Bank. The dedicated officers and staff working in NRI Division are rendering support and assistance to NRIs and all the Branches gave an impetus to the growth of NRI business of the Bank. The Branch level NRI Relationship Officers and the NRI Desk functioning in major NRI business Branches are giving special care and attention to all of the Bank''s NRI patrons.

NRI Division is also taking care of NRE/NRO welcome kit account opening through which instant activation and operation of Account is possible. Such accounts are available at all the Branches of Hadi Express Exchange, UAE; selected SIB branches and to the marketing officers deputed to various Exchange Houses in UAE. The welcome kit account opening is widely accepted in the market and added momentum to the NRE/NRO SB Accounts opening, which improves the share of low cost Deposits of the Bank. The NRI CASA deposits (NRE/NRO SB and CD) constitute 24% of the total CASA of the Bank.

The online NRE/NRO account opening facility available in Bank''s website is enabling NRIs across the world in opening NRI accounts in your Bank at the comfort of their home/office. The Skype calling (Skype id: talk2nricell) in NRI Division make possible for NRIs for an audio video talk with officials working in Head Office NRI Division. In order to have a personal interaction and get together with the top executives of the Bank, NRI meets were held at eleven centers in Kerala. All these efforts coupled with the service and efforts of SIBIANs working all over India resulted in achieving 26% growth in the total NRI Deposit during the financial year 2015-16.

TRAINING

The Bank accords utmost importance to the process of skill enhancement. Training Programme are conducted at SIB Staff Training College (SIBSTC), Thrissur and at 6 Regional Training Centres (RTCs) at Regional Office for enhancement of professional skills of the staff. The training programmes are designed to develop competency of operating personnel while imbibing the SIBIANS'' spirit and culture through an effective learning process. The success of these programmes reflects on the enhanced organizational productivity. SIBSTC and the RTCs identify gaps in skill of the personnel and provide learning to them for qualitative improvement. During the financial year 2015-16, the Bank has imparted training to 3,203 officers, 1,358 clerks and 121 sub staff in various aspects of banking operations. Further, during the financial year 2015-16, the Bank has conducted training programme on Finacle-10 and imparted training to 1,173 officers and 784 clerks. Thus, the Bank has provided training to a total of 6,639 personnel, which is about 85.33% of total staff strength of 7,780 as on March 31, 2016. This is in consonance with the Bank''s vision towards continuous up-gradation of skills to ensure that the staff members meet the rising expectations of customers and discharge services professionally covering the entire gamut of banking operations.

MARKETING

The Marketing Department of the Bank plays a critical role in generating new business for the Bank through customer acquisition. The department also takes initiatives in product development and promotion by creating awareness on products and by driving customer-centric campaigns.

The products and services under the domain of Marketing Department can be broadly classified as Technology, Third Party Products and Value added services.

Technology Products of the Bank

The Bank has effectively leveraged technology and introduced several variants of traditional products and new e-based services, tailor-made to the diversified needs of customers. Technology services like ATM/Debit cards, internet banking, mobile banking etc. have transformed the customers'' banking experience from branch banking to anytime, anywhere banking. Bank has set up a separate Digital Products Division to take care of product development, process improvement and promotion of all technology products.

- Any Branch Banking System: All the branches of the Bank are inter-connected and are capable of providing online, real-time transactions to its customers. As information is centralized and updates are available simultaneously at all places, single-window service has become possible, leading to effective service-delivery to customers. Customers can Deposit/Withdraw freely without any tariff charge from any branch.

- SIB ATM cum Debit Cards: The Bank is offering Visa, Master and RuPay debit cards to its customers. Using SIB debit cards, Bank''s customers can withdraw cash through ATMs of any Bank in India and international usage is allowed through EMV chip cards. The Bank has also enabled its debit cards for POS/Online transactions.

Co-branded Foreign Currency Travel Card launched in association with Axis Bank is specifically designed for customers who travel abroad and is available in 8 foreign currencies - USD, GBP, AUD, EUR, CHF, CAD, SGD and JPY.

The Bank is issuing only EMV Chip cards, from February 1, 2016 facilitating highly secure international card transactions. Currently Bank issues Visa Classic EMV, RuPay Classic EMV, RuPay Platinum EMV, MasterCard Titanium EMV and MasterCard World EMV cards which can be used both in International and Domestic ATM/POS/ONLINE. Green PIN facility is available for all Debit cards, by Bank''s Customers can Self generate/reset their ATM PIN at any SIB ATM counters and the service is available 24 x 7. This project is part of SIB''s Green initiatives and helps to save paper.

SIB Rewardz is the loyalty program from SIB, by which customers can earn reward points while shopping using their SIB debit cards. These points can be redeemed for a number of exiting products and services through the portal www.sibrewardz.com. and through offline stores.

Customers are also given the option of 3D secure password or One Time Password (OTP) to complete their Online transactions using SIB Debit cards, thus making the process a lot more convenient and secure.

VISA Fast Funds is a service offered to the customers to receive money to their VISA Debit card. Customers can receive money instantly to their VISA Debit card any time 24 x 7 without any additional cost.

- Internet Banking: The internet banking service under the brand name"SIBerNet" has helped to position the Bank as a technology-driven Bank offering superior banking services to both retail and corporate customers. With new online service called CRAYONS, now customers can register and activate for SIBerNet service through online without visiting the branch. Increased transactional limits, Fund Transfers (RTGS/NEFT/Within Bank), online bill payments, Online deposit opening, online offerings to deity and also to avail booking of doctors online, Block Debit card, stop payment of cheque online, Direct IRCTC ticket booking, KSEB bill payments, Apply for IPO (Initial Public offering through SIBerNet-ASBA) retrieval of forgot SIBerNet User ID etc. are a few of the services offered through SIBerNet. In addition to these, the Bank has also introduced Direct and Indirect Tax Payment facility for its retail and corporate Customers.

- Mobile Banking: Banks are in process of transforming Mobile Banking application into a Digital Bank. Your Bank''s Pride,'' SIB Mirror'', an in-house built Mobile banking application, which has become a magic in the Mobile banking space and a symbol of technological excellence among Mobile banking Applications .It has been enriched with lot of Unique features such as Shake to Know Balance, Shake to Transfer funds, Augmented Reality, Click to Share Account Info, along with E-Statement of all accounts (SB/ CD/Loan/Deposit), Fund Transfers, Mobile/DTH recharge, ATM Card Block, Social Money, Cheque status, Clearing cheque info, Complaint module etc. and it is available in all platforms. ''SIB Mirror'' has won third prize in IDRBT Banking Application Contest 2016.

Other mobile banking services offered by the Bank areSIB M-Pay, SMS Banking and SIB missed Call service. SIB M-Pay allows customers to make instant inter/intra Bank fund transfers 24X7. SIB M-Pay uses NPCI''s IMPS fund transfer mechanism to transfer funds instantly to other Bank accounts. Customer are also able to do online/merchant payments, access m-passbook and other value-added services like mobile recharge and DTH recharge. Through SIB Missed call service, the customers are able to know the balance with just a missed call.

- Point of Sale (POS): The Bank, in association with M/s. Atos Worldline India Pvt. Ltd. is offering two types of POS terminals - PSTN (wired terminal) & GPRS (wireless). Atos is the market leader in India in this segment and the primary service provider for POS acquiring services to a number of leading public sector and private sector Banks in the country.

Third Party Products

To cater to the needs of a diverse customer base, the Bank has made arrangements with several companies to distribute products like insurance, pension and mutual funds to customers.

Insurance (Life/General): The Bank acts as a corporate agent for the distribution of insurance products of both M/s Life Insurance Corporation of India and M/s Bajaj Allianz General Insurance Company for life insurance and general insurance respectively.

Mutual Funds: Mutual Fund is a popular form of investment since it provides the advantages of professional portfolio management and dividend reinvestment. The Bank has tie up with 14 leading Mutual Fund companies thereby offering a variety of mutual fund products to customers.

Bonds: The Bank has been enrolled as a Channel Partner for the distribution of bonds issued by different companies, through Bank''s tie up with IFIN - a subsidiary of IFCI (Industrial Financial Corporation of India) Financial services Limited. Through this tie up the Bank has been enrolled as a channel partner of IFCI for the distribution of capital gain bonds and tax free bonds.

Depository Services: The Bank offers Depository services for the benefit of its customers. Through this facility, customers can hold their securities in electronic form in demat account with M/s Central Depository Services (India) Ltd. (CDSL). For e-trading, the Bank offers SIBerTrade - the online trading facility to buy /sell stocks for its domestic customers from stock exchanges in India through tie-up with M/s. Geojit BNP Paribas Financial Services Ltd. & M/s. Religare Securities Ltd. SEBI has also registered the Bank as Self Certified Syndicate Bank (SCSB) for accepting application under Application Supported by Blocked Amount (ASBA) through all the branches of the Bank. ASBA enables the Bank''s customers to apply for IPO/FPO, rights issues etc. by marking a lien on the account instead of actual debit at the time of applying, which is more beneficial for the customers. Bank is also offering Portfolio Investment Scheme (PIS) - an extensive share trading facility for its NRI customers through tie-up with M/s. Geojit. Under PIS, NRI customers can directly invest in the Indian securities market through recognized stock exchanges under repatriable/non-repatriable basis.

New Pension System: The Bank acts as a Point of Presence to provide services to subscribers of New Pension System introduced by Pension Fund Regulatory and Development Authority (PFRDA). All branches of the Bank are designated for collecting NPS applications and contributions. An additional tax benefit of Rs. 50000/- under Sec 80 CCD (1B) was introduced for NPS contributions. APY was introduced by Govt. of India in place of NPS Lite providing minimum assured pension from Rs.1000 to Rs.5000 to subscribers is also available to Bank''s customers.

PAN Application servicing: The Bank has made arrangement with M/s UTI Technology Services Ltd. (UTITSL) for servicing applications for PAN card. On an average the Bank processes 15,000 applications per year.

sIB E-Pay: In association with BSNL, the Bank is facilitating the payment of BSNL Landline bill of its customers through their accounts maintained with the branches. A customer can avail this facility by submitting a mandate form at the branch where the account is being maintained. Once registered, the BSNL landline bill of the customer will be automatically debited from the customer''s account every month. The key feature of this facility is that it is totally hassle free and is offered free of cost to the customers.

Cash Management service (Premium Collection): The Bank is offering Cash Management Service (Premium Collection) to customers in association with Tata AIG, Exide Life Insurance Co. Ltd (formerly known as ING Vysya) and ICICI Prudential Life Insurance Co. Ltd. Under this arrangement, Bank''s customers as well as walk-in customers can remit life insurance premium through branch counters. This facility is offered free of cost to customers.

Centralized Direct Debit service: The Bank has entered into tie-up with leading aggregator M/s. Billdesk Services for Centralized Direct Debit arrangement. Through this tie up Bank''s customers will be able to make regular payments like monthly/ quarterly/half yearly payments of Mutual Fund SIP investments/ Loan EMIs (Vehicle/Equipment Loans)/Insurance premium etc. by directly debiting their account and thereby making the payments to various billers/institutions. This facility is available to all customers irrespective of their branches being located in ECS/non-ECS locations. The Bank has similar arrangements with 3 companies - TVS Credit Services, Sundaram Finance Ltd and Shriram City Union Finance.

TOLL FREE: The Bank has subscribed to toll free numbers from Idea Cellular Ltd. (Toll Free number- 1800 843 1800) and BSNL (Toll Free Number- 1800 425 1809) to enable customers to contact the Bank without incurring any cost. In addition, a land-line connection dedicated for international customers is also available. Toll free centre is now functioning in 4 shifts, 24 x 7 with staff members who are capable of handling multiple languages. In addition to this a channel support team is working 24 x 7 at the same premises who are focused to support and escalation of issues related to technology products.

Marketing and promotional activities of the Bank are vital in identifying customer needs and designing differentiated products to cater to those needs. While the department is keen to introduce new and varied products, facilitating customer adoption and providing customer assistance assumes equal significance during its operation. The Bank strives to comply with regulatory requirements during the entire sales process, and thereafter during support.

Visibility Enhancement initiatives

The Bank has undertaken many brand promotion initiatives in various media like Newspaper, Television, Radio, hoarding and online social media. Outdoor branding was mainly focussed in major metros like Bangalore, Delhi, Chennai and Hyderabad by the way of branding bus shelters and by placing hoardings at prime locations. The Bank had branded Ernakulam South Railway station in Kerala and have introduced innovative branding in NMMT Volvo bus in Mumbai. The Bank has conducted two press conferences and more than 10 press releases on major product launch or events done by the Bank. Two television commercials were produced during this financial year starring Bank''s Brand Ambassador Sri Mammootty. These TV commercial were launched in all the prominent TV channels in Kerala and also in the main English Finance/Business channels for Bank''s brand promotion. Subsequently the Bank has also aired its TVC in major high end theatres of metro cities during the launch of Film ''Dilwale''. During the national pre budget and Budget period the Bank has aired its TVC in the channels like CNN IBN, CNBC, Times Now, ET now and Zee Business. FM radio advertisement for gold loan promotion was done in the leading FM stations of the cities Chennai, Coimbatore, Bangalore and Hyderabad. Also the Bank had joined national campaign of CNBC named "Inside Kerala" that has established the Bank''s national brand presence. The Bank had also sponsored the 35th Annual National management Convention of Kerala Management Association. The Bank had published its corporate advertisement starring Sri Mammootty in main dailies during Valentine''s Day and product promotion of SIB mirror. The Bank had associated with Global media events for the programme ''Golden Achievement Awards Dubai'' 3rd Edition 2015 that had good coverage in Middle East. Interview with MD and CEO was done by leading dailies like Business Line, Mathrubhumi and The New Indian Express, which enhanced your Bank''s brand image in the market.

The Social Media arm of the Bank functioning in Marketing Department constantly launches various brand and product promos in the diverse social media platforms maintained by your Bank. Presently your Bank maintains official page in face book, Twitter, YouTube and Google plus. The page gives facility for the customers to input their valuable suggestions/feedbacks and also seek queries regarding new products and services rendered by your Bank.

HUMAN RESOURCE

Human Resource is the single most important catalyst for effective and efficient operation of any organization. Competition has rendered this dimension still more critical. The Bank has a team of committed, self-motivated and empathetic workforce who strive to meet the customers'' requirements. To augment the existing manpower in line with the Bank''s healthy and sustained growth and expansion of network, the Bank has continued its initiatives of major talent acquisition and retention policies in the FY 2015-16.

Manpower

As on March 31, 2016, the Bank had 7,780 personnel on its rolls. Cadre wise break-up is as under:

Cadre Male Female Total

Officers 2634 1354 3988

Clerk 1459 1561 3020

Peon 456 28 484

Part-time employees 71 217 288

Total 4620 3160 7780

Infusion of young personnel has brought down the average age of employees of the Bank to 34 years as on March 31, 2016. Number of Staff Members having Professional Qualification as on March 31, 2016 is as under:

Educational stream Number of staff

Management 1389

Post- Graduation 1234

CA 66

CS 6

Engineering 986

PHD 1

Legal 76

ICWA/CMA 43

Maintenance of Personnel data

Maintenance of staff records was streamlined under "HRMSS" (Human Resources Management Software Solution System). The personnel data can be accessed by all controlling offices and various reports based on the data can be generated for the quick disposal of staff related matters. To make HRMSS more comprehensive, the Bank had introduced new modules such as Travelling Allowance, User feedback and suggestions, Subsistence Allowance etc., in addition to the existing modules like Expense Maintenance, Pension Maintenance, Marketing Excellence, Transfers, Promotion Maintenance, HRA, Leave and LFC, Training, Online Annual Performance Appraisal of Officers upto Chief General Manager cadre, Service Record, etc.

Motivational Initiatives

Some of the initiatives undertaken by the Bank in order to boost the morale of the Bank employees are as under:

a) Promotions: The Bank has been offering healthy career progression opportunities. During the financial year, 234 clerical staff had been promoted to Scale I, 158 officers to Scale II and 124 Officers to various senior cadres.

b) Implementation of the Xth wage revision settlement - Settlement signed between IBA and Officers/Workmen unions on salary revision of Officers and Award staff had been successfully implemented and the revised salary and arrears for the period from November 1, 2012 released to all the eligible staff members on June 29, 2015.

c) New medical insurance scheme in lieu of the existing hospitalisation scheme - The Bank has implemented the new medical insurance scheme formulated by IBA with United India Insurance Company (UIIC) in lieu of the erstwhile hospitalisation scheme on the terms and conditions specified by IBA. Under this scheme the premium amount is borne by the Bank.

Industrial Relations

Industrial relations in the Bank have been cordial and harmonious. The representatives of Workmen Union, Officers Association and Management have been working collectively with a sense of ownership for the shared objective of all- round growth and prosperity of the Bank. On account of the cordial industrial relations with both the associations, Bank has achieved considerable growth over the years.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the financial year 2008-09, the Bank instituted an Employee Stock Option Scheme to enable its employees to be a partner in the future growth and financial success of the Bank. The Banks'' shareholders approved the plan on August 18, 2008 for the issuance of stock options to the employees.

Till March 31, 2016, 3,80,32,680 stock options were vested, out of which 2,02,44,141 stock options were exercised by eligible employees. The money realized due to exercise of the said options was Rs.26,31,64,978.30/- and consequently 2,02,44,141 shares of Rs.1/- each have been allotted to the employees/legal heirs concerned.

A Certificate of Auditors pursuant to Regulation 13 of SEBI (Share Based Employee Benefits) Regulations 2014 will be placed to the AGM for the scrutiny of Shareholders.

The total options granted under seven phases of SIB ESOS 2008 works out to 4.21% of the paid up share capital of the Bank as at March 31, 2016. The scheme has generated intended motivation amongst the staff.

Statutory disclosures regarding details of the stock options granted, vested, exercised and forfeited and expired during the year under review are annexed to this Report.

SIB- Executive Brief

"SIB Executive Brief" - a daily news update on Banking, Finance, Economy, Industry, Market Rates etc. is being provided by SIB Staff Training College. It is E-mailed on a daily basis to Board members, to the executives and it is also made available at SIB-Insight for access to all the staff members.

E-Learning Tests

The Bank has completed 12 online tests through E-learning Application during the year 2015-16 on various topics such as Manual of Instruction - Documentation, Finacle 10 etc. Prizes were awarded for the toppers in these tests. It is encouraging to note that the learning process is taken up with great enthusiasm and competitive spirit, the fruit of which is visible in the increasing number of branches/offices emerging as toppers. The E-learning platform will be utilized increasingly for improving the knowledge level of the staff members.

E- Learning test for Prob. Officers

From January 2016, onwards the Bank is conducting an E-Learning test for Prob. Officer on a monthly basis to upgrade their knowledge level on a continuous basis.

E-Circular

The Bank has since migrated to issuance of e-circulars in place of manual circulars. All the circulars of the Bank are uploaded using the ''e-circular software''. In e-circular, Bank''s policies, Guidelines and Forms are also uploaded so as to empower the branches with readily accessible pool of information/guidelines.

SIB students'' ECONOMIC forum (SIBSEF)

Students'' Economic Forum is a monthly publication from the SIB Staff Training College and it provides an analysis of contemporary themes relating to developments in Economy, Banking and Finance. So far, 292 themes have been published since the first publication which was launched in December 1991. The publication is celebrating its "Silver Jubilee" year. During the year the Bank has published the fifth volume of compendium, comprising the theme 202 to 280. In response to the requests from readers, the first 201 themes of this publication were compiled in 4 volumes and published. The objective of this venture is to kindle interest in economic affairs among the younger generation and also to provide a learning platform to the student community. The hard copies of the publication numbering about 3,100 are being sent to all the branches/ offices, reputed schools / colleges / academic institutions, RBI offices, other Banks, government organizations and corporate offices. It has wide acceptance among students, bankers and academic community. The Subjects discussed during Financial year 2015-16 are - Bitcoin, GIRO, Railway Budget, Economic Survey and Union Budget 2015-16 (Part - I), Railway Budget, Economic Survey and Union Budget 2015-16 (Part - II), Foreign Trade Policy 2015-2020, Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds- Part - I, Information Security, Electronic Banking, Technology Risk Management and Cyber Frauds - Part - II, Gold Monetization Scheme and Sovereign Gold Bonds Scheme, Payment Banks and Small Banks, Ease of Doing Business, Railway Budget and Economic Survey, Union Budget Part - I. These themes are made available in the Bank''s Website.

Awards & Accolades

The Bank has received following awards/rewards during the financial year:

- Social Banking Excellence Award 2015 (Runner up position in Rural Banking-Small Bank) instituted by ASSOCHAM Inspiring Work Places Award 2015 for best HR & Talent Practices among Private Sector Banks instituted by the Banking Frontiers.

- Banking Technology Excellence Award 2014-15 for "Cyber Security Risk Management" from IDRBT, the technical arm of Reserve Bank of India.

- The SIB''s green initiative ''Green PIN'' won award at the MasterCard Payment Strategy Workshop 2015 held in Pune.

- Prize in IDRBT Banking Application Contest for the innovative mobile banking app "SIB Mirror".

ISO certification

The Personnel Department of the Bank received the ISO 9001:2008 Certification. This certification acknowledges that the policies, practices and methods adopted by the department are system oriented and in tandem with international standards.

Achievements and milestones:

The Bank has signed MoU with NSIC, to facilitate loans to MSE and thus promotes the MSME credit portfolio of the Bank.

Foreign Exchange Advisory Cell

The Bank has launched Foreign Exchange Advisory Cell to Provide advisory services by subject experts on FEMA rules and trade finance related issues to the general public. The complimentary service is available to all Foreign Exchange Trade Fraternity.

PARTICULARS REGARDING CONSERVATION OF ENERGY. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO PURSUANT TO SUB SECTION (3) (m) OF SECTION 134 OF THE COMPANIEs ACT, 2013 READ WITH RULE (8) (3) OF THE COMPANIES (ACCOUNTS) RULES, 2014

The Bank has undertaken various initiatives for energy conservation at its premises. Further, the Bank has used information technology extensively in its operation and consistently pursuing its goal of technological up-gradation in a cost efficient manner for delivering quality customer service. The Bank, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to encourage export credit.

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

The Bank has zero tolerance approach towards any action on the part of any executive/employees which may fall under the ambit of ''Sexual Harassment'' at workplace, and is fully committed to uphold and maintain the dignity of every women staff working in the Bank. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. All the employees (permanent, contractual, temporary, trainees) are covered under this policy.

Number of complaints pending as at the beginning of the financial year - Nil

Number of complaints filed during the financial year - Nil

Number of complaints pending as at the end of the financial year - Nil

Particulars of Employees

Information as required by the provisions of Section 197 of the Companies Act, 2013, read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, is given under:

Name Remuneration Date of Qualification Experience Last Designation commence ment and Aage(in Gross years) (Rs.) Net (Rs.)* (in years) of Employment Emplo yment

V G. Mathew, Chief General

M.Sc CAIIB MD & CEO 83,36, 325.00 55,86, 162.00 38 02.01.2014 Manager, 62 years SBI

*Net of Taxes paid

The ratio of the remuneration of each director to the median employee''s remuneration and other details in terms of sub- section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed to this report.

THE ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES:

A brief outline of the Bank''s CSR Policy, including overview of projects or programs to be undertaken /undertaken.

South Indian Bank''s CSR Policy:

South Indian Bank is grateful to the society for the support and encouragement in the Bank''s growth and development. The Bank believes that no organization can make sustainable development without the patronage of the society. The Bank is committed in the integration of social and environmental concerns in its business operations and also in the interactions with its stakeholders. The Bank shall continue to have among its objectives, the promotion and growth of the national economy and shall continue to be mindful of its social and moral responsibilities to customers, shareholders, employees and society. Bank is committed to financing the economic and developmental activities of the nation with concern for human rights and environment.

Overview of Activities:

In line with the CSR policy and in accordance with Schedule VII of the Companies Act 2013, South Indian Bank undertook various activities during the FY 2015-16 which had significant impact on the society. These activities include:

- Setting up homes and hostels for women and orphans.

- Training to promote sports.

- Making available safe drinking water.

- Conservation of natural resources.

- Eradicating hunger, poverty and malnutrition.

- Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently abled.

- Promoting Preventive healthcare and sanitation.

- Contribution to the Prime Minister''s National Relief Fund.

Web-Link to the CSR Policy:

http://southindianbank.com/content/viewContentLvl1.aspx7lin kIdLvl2=215&LinkIdLvl3=778&linkId=778

Composition of CSR Committee:

The Bank understands its responsibility towards the society and environment in which it operates. The Bank has constituted Corporate Social Responsibility Committee at the board level to monitor the CSR activities.

Members of the Committee are:

1. Sri Francis Alapatt (Chairman of the Committee)

2. Sri V G. Mathew (MD & CEO)

3. Sri Mohan E. Alapatt (Member)

4. Smt. Ranjana S. Salgaocar (Member)

The composition is as per Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014.

Average net profit before tax of the Company for the last three financial years: Rs.578.54 crore

Prescribed CSR Expenditure (two per cent of the amount as above): Rs.11.57 crore.

Details of CSR spent during the Financial Year:

a. Total amount to be spent for the Financial Year 2015-16: Rs.11,57,00,000/-.

b. Amount unspent, if any: Rs.9,26,81,520/-.

c. Manner in which the amount spent during the financial year is detailed below:

Projects or Programs (1) Amount outlay Sl CSR Project or Sector in which Local area or other (2) (budget) No. activity identified the Project is Specify the State and project or covered District where projects or programs wise programs was undertaken

(Rs. in 000'')

1 Providing drinking Making available - Other, Palakkad District, 12.00 water facilities safe drinking Kerala water

2 Construction of Setting up homes - Local area, Thrissur 3000.00 houses for women and hostels for District, Kerala and orphans women and orphans

3 Training and Training to - Other, Kottayam District, 1000.00 enhancement promote sports Kerala of sports skill development

4 Providing nutritious Eradicating - Other, Kottayam District, 100.00 meals hunger, poverty Kerala and malnutrition

5 Capital creation Conservation of - Other, Pathanamthitta 1000.00 for conservation of natural resources District, Kerala natural resources

6 Promoting basic Promoting - Local area, Thrissur 36406.48 amenities at schools/ Education District, Kerala colleges, conducting _ Other awareness programs Thiruvananthapuram including financial District, Kerala literacy camps/ activities - Other, North 24 Parganas District, West Bengal

- Other, Udupi District, Karnataka

- Pan India

7 Conducting medical Promoting - Local area, Thrissur 2204.00 camps, investment Preventive District, Kerala in preventive health Heath are and - Other, Coimbatore District, care programs Sanitation Tamil Nadu

- Pan Kerala

Contribution to the Contribution Pan India 15000.00 Prime Minister''s to the Prime

8 National Relief Fund Minister''s National Relief Fund

Total 58722.48

Sl. No. CSR Project or activity identified Amount spent on the Cumulative Expenditure Amount subheads: upto the spent: Direct (1) Direct Expenditure Repporting or through on projects or programs Period impleme nting (2) overheads: agency

(Rs. in 000'') (Rs. in 000'')

1 Providing drinking water facilities 12.00 12.00 Direct

2 Construction of houses fro women and orphans 3000.00 3000.00 Direct

3 Training and enhancement of sports skill development 350.00 1000.00 Direct

4 Providing nutritious meals 100.00 100.00 Direct

5 Capital creation for conseravation of natural resources 1000.00 1000.00 Direct

6 Promoting basic amenties at schools/ colleges, conducting awareness programs including financial litracy camps/activities 3556.48 3556.48 Direct

7 Conducting medical camps, investment in preventive health care programs 0.00 0.00 Direct

8 Contribution to the Prime Minister''s National Relief Fund 15000.00 15000.00 Direct

Total 23018.48 23668.48

The Bank''s CSR mission is to contribute to the social and economic development of the community. Through a series of interventions, the Bank seeks to mainstream economically, physically and socially challenged groups and to draw them into the cycle of growth, development and empowerment.

Reason for not spending the two percent of average net profit of the last three financial years or any part thereof:

In the FY 2015-16, the Bank revamped its CSR activities to fall in line with the new rules and regulations in accordance with the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014. In the FY 2015-16, the Bank spent Rs.2.30 crore towards CSR activities, which constitutes 19.90% of CSR Budget of the year. The Bank stays committed to its corporate social responsibility and intends to continually increase the impact of its CSR initiatives. The Bank has utilised the reporting year to lay a foundation on which to build and plan future projects and currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come the Bank will maximise its efforts to meet the targeted CSR spends.

Responsibility Statement:

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

FINANCIAL INCLUSION

Financial inclusion aims to ensure the availability of formal and basic banking services to all Indian households, including those in the un-banked and under-banked areas. South Indian Bank has adopted several financial inclusion initiatives, including Kiosk banking.

Kiosk Banking Model - Bank Mitra / Business Correspondent (BC)

The Kiosk banking complies with the open standards recommended by the Indian Banks'' Association (IBA) and the Institute for Development and Research in Banking Technology (IDRBT) and is capable of incorporating the Unique Identity Solution being implemented by the Unique Identity Authority of India (UIDAI). Under Kiosk Banking Model, the Bank is able to provide basic banking services in un-banked/ under- banked areas through outlets such as common service centres, Individual Business Correspondents [BC], small retail shops, etc. with a laptop based solution.

Kiosk centres offers basic banking services such as customer enrollment, deposits, withdrawal, fund transfers, balance enquiry, FD, RD remittance etc. to potential customers. Customers can open new basic savings account in Kiosk centres by providing KYC documents and biometrics. The Bank has implemented Kiosk Banking Model in the state of Kerala through 53 Akshaya centers, who are acting as common service centres in the state and 76 Individual BC''s in Tamil Nadu. As on March 31, 2016, 39,016 customers have opened accounts under the Bank''s Kiosk Banking Model.

Financial Literacy Centres

Financial Literacy is the ability to understand how money works in our day to day life and how someone manages it, how he/she invests it and how a person offers it to others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with their financial resources. 12 FLCs have been allotted to the Bank by SLBC in the state of Kerala to disseminate financial literacy to the people and it is functioned through retired bank employees, school teachers and retired government employees.

Pullu - Model Village of South Indian Bank

The Bank has been servicing Pullu Village in Chazhoor Panchayat of Thrissur Dist. in Kerala under Bank''s Financial Inclusion initiative since 2010. In order to ensure meaningful Financial Inclusion and to facilitate BC based operations in the village, Bank has opened Ultra Small Branch at Pullu on November 1, 2013. The village was since adopted by the Bank and various welfare measures were initiated in Pullu. Propagation of Bio farming, conducting financial literacy sessions, providing agricultural credit, organizing medical camps are few of such initiatives the Bank has undertaken in the village. The only L.P School in Pullu village which was struggling for survival was given a helping hand by the Bank and they were provided with furniture worth Rs.1.00 lakh. A model poultry unit was set up in the school compound in order to take care of the nutritional needs of the children.

Government of India Scheme - PMJDY

Pradhan Mantri Jan Dhan Yojana (PMJDY), is conceived as a national mission on financial inclusion initiated by Honourable Prime Minister on August 15, 2014. The scheme envisages universal access to banking facilities, with at least one basic banking account for every household. In line with the directives given by Ministry of Finance and SLBC, PMJDY scheme is implemented in the Bank since August 18, 2014.

A survey on 2,68,690 Households was conducted by the Bank under PMJDY to identify Households not having bank accounts. The Bank has opened 1, 03,108 BSBDA accounts as on January 31, 2016 under PMJDY and balance outstanding in those accounts exceeds Rs.14.21 crore at present. Rupay Debit Cards has been issued in PMJDY accounts providing customers with the benefit of accidental insurance coverage of Rs.1.00 Lac.

Social Security schemes in insurance and pension sectors (PMJJBY, PMSBY & APY), introduced by the Government of India were given high priority by the Bank and 2,40,777 customers have already joined the schemes through the Bank. Pradhan Mantri Mudra Yojana (PMMY), Government scheme intended to support the micro enterprises is also implemented in the Bank as part of social banking.

Green Initiatives in Corporate Governance

As a responsible corporate citizen, the Bank supports and pursues the ''Green Initiative'' of the Ministry of Corporate Affairs ("MCA"). In conformance with such initiatives, the Bank will effect electronic delivery of documents including the notice and explanatory statement of Annual General Meeting, Audited Financial Statements, Directors'' Report, Auditors'' Report etc., for the year ended March 31, 2016, to the e-mail address which the Shareholders have previously registered with their Depository Participant (DP) as their valid e-mail address. Investors desirous of refreshing / updating their e-mail addresses are requested to do so immediately in their respective DP accounts. The e-mail addresses indicated in respective DP accounts which will be periodically downloaded from NSDL/ CDSL will be deemed to be their registered e-mail address for serving notices / documents including those covered under Section 136 of the Companies Act, 2013.

Shareholders holding shares in physical form and desirous of availing electronic form of delivery of documents are requested to update their e-mail addresses with Bank''s Registrar and Transfer Agents by a written request. A request format for registering e-mail ids with the Registrar is enclosed. Shareholders holding shares in demat segment are requested to inform their e-mail ids to their respective DPs.

ANTI - MONEY LAUNDERING (AML)

Transactions processed through the Core Banking Solution are monitored for detecting suspicious transactions, using TCS Bancs Compliance, an AML application to comply with the provisions under Prevention of Money Laundering Act (PMLA).

The Bank has set up a Centralized Processing Centre (CPC) for liability side customer creation with the objective of full KYC compliance and to use KYC as a fraud prevention tool. The Bank has brought all branches under the CPC model during the Financial Year 2015-16.

The Bank had implemented UIDAI''s e-KYC services for Aadhaar authentication, in 50 branches during the Financial Year 2015-16, which will be scaled up to all the branches during the current year.

The Board has nominated Mr. V. G. Mathew, MD & CEO as the "designated director", as per PMLA Act.

The Bank has attached great importance for compliance of KYC/AML/CFT norms by the customers as per the Reserve Bank of India directive.

FATCA-CRs

The Bank has registered as a reporting entity under FATCA, under GIIN No. IIK7HU.99999.SL.356, to comply with the reporting requirement under the inter Governmental agreement entered between Indian and US Government.

directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and the Code of Conduct on Corporate Governance adopted by the Bank. The Board comprises of 10 Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, small scale industry, agriculture, and information technology.

Excluding the MD & CEO, all other members of the Board are Non-Executive Directors and Seven Directors out of the total 10 Directors are Independent Directors. Declaration has been obtained from the Independent Directors as required under the RBI Regulations, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and Companies Act, 2013. The remuneration and other benefits paid to MD & CEO of the Bank and other Non-Executive and Independent Directors during the finnancial year 2015-16 are disclosed in Corporate Governance Report.

Composition of Audit Committee

The Audit Committee of the Board is chaired by Sri K. Thomas Jacob, who is a Chartered Accountant. The other members of the committee are Sri Salim Gangadharan (Non-Executive Independent Director), Sri Cheryan Varkey (Non-Executive Director) and Sri Mohan E. Alapatt (Non-Executive Independent Director) The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee, incorporated in the Bank''s Code of Corporate Governance, are in accordance with the SEBI (LODR) Regulations, 2015 entered into by the Bank with Stock Exchanges where the Bank''s shares are listed, Companies Act, 2013 and RBI guidelines.

Independent Directors

In terms of the definition of Independence of Director as prescribed under Regulation 27(2) of the SEBI (LODR) Regulations, 2015 and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Directors are Independent Directors of the Bank as on the date of this report

1. Sri Mohan E. Alapatt (DIN: 00025594)

2. Sri K.Thomas Jacob (DIN: 00812892)

3. Dr. John Joseph Alapatt (DIN: 00021735)

4. Sri Francis Alapatt (DIN: 01419486)

5. Sri Salim Gangadharan (DIN: 06796232)

6. Smt. Ranjana S. Salgaocar (DIN: 00120120)

7. Sri Parayil George John Tharakan (DIN: 07018289)

Woman Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Regulation 17 of the SEBI (LODR) Regulations 2015, the Bank has appointed Smt. Ranjana S. Salgaocar as Woman Director on the Board of the Bank.

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

Criteria for appointment as Director of the Bank

Nomination Committee of the Board shall identify and ascertain the integrity, qualification, expertise and experience of the person who is considered for being appointed/reappointed as Director of the Bank and apply due diligence in compliance with the Banking Regulation Act, 1949, Reserve Bank of India directives on Fit & Proper Criteria, all other applicable provision of the Companies Act, 2013, SEBI (LODR) Regulations, 2015 including any amendments from time to time and Nomination Policy of the Bank.

Criteria For Determining Qualifications, Positive Attributes

a) The professional and personal ethics, integrity and track record.

b) Special knowledge or practical experience in Banking, accountancy, agriculture and rural economy, co-operation, economics, finance, Marketing, Information Technology, law, small-scale industry or any other field useful to the Banking Company in the opinion of Reserve Bank of India.

c) Ability to provide insights and practical wisdom based on their experience and expertise relevant to the Bank''s line of business.

d) Details of his/her association with other Companies/LLPs/ Firms (including NBFC).

e) Details of substantial interest in other Companies/LLPs/Firms (including NBFC).

f) Details of financial facilities, if any, availed from the Bank.

g) Details of default in the re-payment of loans, availed from the Bank or any other bank, if any.

h) Commitment to enhancing stockholder value.

i) Ability to develop a good working relationship with members of the Board and contribute to the working relationship with senior management of the Bank.

j) Whether he/she suffers from any of the disqualifications envisaged under the provisions of Banking Regulation Act, 1949, Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

k) Any other factors as the Committee may deem fit and in the best interests of the Bank and its stockholders.

Criteria for determining Independence of a director

The Criteria of Independence of a director is determined based on conditions as laid down in the Companies Act, 2013. The independent director shall at the first meeting of the Board in which he/she participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his/her status as an independent director, give a declaration that he/she meets the criteria of independence.

REMUNERATION POLICY:

Remuneration Policy for Employees of the Bank:

The Bank has a Board approved Compensation Policy which deals with the Compensation & Benefits of the Employees of the Bank and Whole-time Directors.

The objectives of the Compensation Policy of the Bank inter-alia includes, to provide a fair and persistent basis for motivating, inspiring and rewarding the employees appropriately, according to their jobs/role size, performance, accomplishments, contribution, skill, aptitude and competence to implement standards on sound compensation practices and incentives and to provide effective governance of compensation payable to the WTDs/CEO and other staff, alignment of compensation with prudent risk taking and effective supervisory oversight. The disclosure requirement of the remuneration is separately provided in "Disclosure under Basel III norms."

REMUNERATION POLICY OF DIRECTORS:

Remuneration of MD & CEO and Other Employees (including Key Managerial Personnel):

The Board approved Compensation Policy deals with the Compensation & Benefits of the Whole-time Directors/MD & CEO. The remuneration of the Whole-time Directors/MD & CEO is recommended by the Nomination & Remuneration Committee (NRCB) to the Board for approval after considering the factors prescribed under the Compensation Policy.

The Board considers the recommendations of NRCB and approves the remuneration, with or without modifications, subject to shareholders'' and regulatory approvals. The remuneration payable to Whole-time Directors/MD & CEO is subject to prior approval of the Reserve Bank of India (RBI). Therefore, the remuneration or any revision in remuneration to Whole-time Directors/MD & CEO is payable only after receipt of the approval from RBI.

For the other employees (including Key Managerial Personnel and Compliance staff), the Board, based on the recommendation of the NRCB may devise appropriate compensation structure. The compensation paid to other employees that include Award Staff, Officers coming under Scale I to IV and executives coming under Scale V to VII is fixed based on the periodic industry level settlements with Indian Banks Association. The variable compensation paid to functionaries is based on the Performance Linked Incentive Scheme, which has been formulated on the basis of performance parameters set in Performance Management System.

Remuneration of Chairman:

The NRCB recommends the remuneration of the non-executive Chairman to the Board which is considered and approved by the Board in the same manner subject to Shareholders'' and regulatory approvals. The NRCB, while recommending the remuneration of the part-time Chairman considers the Function, Role and Responsibilities of the Chairman and Regulatory guidelines as applicable etc.

The remuneration payable to the Chairman is subject to prior approval of the Reserve Bank of India (RBI). Therefore, the remuneration or any revision in remuneration of the Chairman is payable only after receipt of the approval from RBI.

Remuneration of Non-Executive Directors (NEDs):

The NEDs are paid sitting fees for attending each meeting of the Board of Directors or any committee thereof as approved by the Board, within the permissible limit prescribed under the Companies Act, 2013, SEBI (LODR) Listing Regulations 2015 and other regulatory guidelines, as amended from time to time. The Board while recommending the change in the sitting fees considers various factors like size and complexity of organization, Comparison with the peer Banks and Regulatory guidelines as applicable etc. while recommending the change in the sitting fees to the Board.

Policy on Board Diversity:

Pursuant to SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 to ensure compliance with the applicable provisions, the Bank has devised a policy on Board diversity to ensure adequate diversity in its Board of Directors. The Bank believes that diversity underpins the successful operation on an effective Board and embraces diversity as a means of enhancing the business. With a view to achieve sustainable and balanced development, the Bank sees increasing diversity at the Board level as an essential element in supporting the attainment of its strategic objectives. A diverse Board includes and makes good use of differences in the skills, regional and industry experience, background, race, gender and other qualities of directors.

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

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

The NRCB has the responsibility to lead the process for Board appointments and for identifying and nominating, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments are based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. The Policy of Board Diversity is displayed in bankswebsite.(https://www. southindianbank.com/UserFiles/file/Rupay/DISCLOSURE/Policy_ on_Board_diversity.pdf)

Board Level Performance Evaluation

The Companies Act, 2013 and SEBI (LODR) Regulations, 2015 stipulates the performance evaluation of the Directors including Chairman, 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.

The process for formal annual performance evaluation is as under:

- Committee of Independent Directors at their separate meeting 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 (excluding the director being evaluated) and submit its report to the Nomination & Remuneration committee.

- The Board Evaluate the performance of Board level committees.

- Nomination & Remuneration Committee evaluated/ review the performance of each Director recommends the appointment/reappointment/ continuation of Directors to the Board. Based on the recommendation of Nomination & Remuneration Committee, Board will take the appropriate action.

The criteria for performance evaluation are as under:

Performance Evaluation of Non-Executive Directors. MD & CEO and Chairman

Participation at Board/Committee Meetings, Managing Relationship, Knowledge and skill, Personal attributes, Compliance and Corporate Governance; Leadership; Strategy Formulation, Strategy Execution, Financial Planning/ Performance, Relationships with the Board, Human Resource Management and Succession Planning, Personal Qualities; Resources; Conduct of Meetings.

Performance Evaluation of Board

Composition and Diversity; Strategic Foresight, Value Creation, Process and Procedures, Oversight of the Financial Reporting Process and Internal Controls, Oversight of Audit Functions, Corporate Governance, Corporate Culture, Monitoring of business activities, Understanding of the business of the Bank and Regulatory environment; Contribution to effective corporate governance and transparency in the Company''s Operations; Deliberations/decisions on the Company''s strategies, policies, plans and guidance to the Executive Management.

Performance Evaluation of the Board Level Committees

The performance and effectiveness of the Committee; Frequency and duration; Spread of talent and diversity in the Committee; Understanding of regulatory environment and developments; Interaction with the board.

auditors

a) statutory Auditors:

The shareholders at its 87th Annual General Meeting held on July 15, 2015, appointed M/s Deloitte Haskins & Sells, Chartered Accountants, Chennai as Statutory Central Auditors of the Bank for the audit of Bank''s accounts for the year 2015-16.

M/s Deloitte Haskins & Sells, Chartered Accountants, vacates the office at the end of the Annual General Meeting to be held this year but are eligible for re-appointment for the Financial Year 2016-17.

b) secretarial Auditors and secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, the Bank had appointed M/s KSR & Co., Company Secretaries LLP, Practicing Company Secretaries, Coimbatore as its Secretarial Auditors to conduct the secretarial audit of the Bank for the FY 2015-16. The Bank provided all assistance and facilities to the Secretarial Auditor for conducting their audit. The Report of Secretarial Auditor for the FY 2015-16 is annexed to this report.

Audit and Inspection

Regular Inspection of the branches is conducted at periodical intervals on the basis of Risk Based Internal Audit approach. From August 2015 onwards, RBIA of branches is being conducted more objectively through audit software. Concurrent audit at branches is done by qualified Chartered Accountants/ retired officers covering 68% of business of the Bank. Bank has brought almost all isolated remote branches under the ambit of concurrent audit, irrespective of the business volume of such branches. Concurrent audit of International Banking Division, Treasury Department, Credit Department and Data Centre is also conducted. In the light of centralization of activities like account opening, retail loan processing, etc., the Bank has implemented concurrent audit system in Transaction Banking Dept. and Retail Hub during the year 2015-16. In addition to the above, the Bank conducts Stock Audit, Credit Audit, KYC/AML Audit, Information System Audit, Revenue Audit, Surprise Inspection of gold & cash, exclusive Gold Loan asset verification etc. at branches. Information System Audit of CBS and major applications for the financial year 2015-16 was done by external audit firm. Besides, all the branches are subjected to statutory audit on yearly basis. Transaction monitoring alerts are generated from software on certain rules set. These alerts are monitored at HO and clarifications are called for from branches wherever necessary. ROs are having facilities for scrutiny of all alerts wherever needed. The branch operations are centrally analyzed for ensuring compliance to KYC/ AML/CFT guidelines with the help of AML software. Fraud Risk Monitoring Cell (FRM Cell) is established to prevent fraudulent activity in the customer accounts in which almost 20 rules have enabled w.r.t. card related activities to generate alerts.

explanation for auditors'' comments in the

REPORT

The Auditors report for the year 2015-16 does not contain any qualification.

CORPORATE GOVERNANCE

A separate report profiling Corporate Governance as required under applicable regulations of the SEBI (LODR) Regulations 2015 and a certificate from M/s Deloitte Haskins & Sells, Chartered Accountants, Statutory Auditors of the Bank, are annexed to this Report.

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, 2016 in form no. MGT-9 is annexed to this report.

Subsidiary Companies

The Bank did not have any subsidiary Company during the previous financial year. The Board of Directors has formulated a policy for determining ''material'' subsidiaries pursuant to the provisions of the Listing Regulations. The same is displayed on the website of the Bank (https://www.southindianbank.com/ content/viewContentLvl1.aspx?linkIdLvl2=215&LinkIdLvl3=781 &linkId=781).

Related Party Transactions

The Board of Directors has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The same is displayed on the website of the Bank (https://www.southindianbank.com/content/viewContentLvl1. aspx?linkIdLvl2=215&LinkIdLvl3=782&linkId=782).

Since there were no Related Party tranctions, Form AOC-2 is not applicable to the Bank.

strictures and Penalties

During the last three years, there were no penalties or strictures imposed on the Bank by the Stock Exchange(s) and/or SEBI and/ or any other statutory authorities on matters relating to capital market.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This has been dealt with in a separate section in the Annual Report.

Directors'' Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the Director''s Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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 Bank at the end of the financial year 2015-16 and of the profit of the Bank for that period;

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

(d) the directors had prepared the annual accounts for the financial year ended on March 31, 2016, on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

(f) 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.

acknowledgements

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where the Bank operates, other Government and Regulatory Authorities, including stock exchanges, where the Bank''s shares are listed and correspondent Banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the Bank''s shareholders and customers for their continued support, patronage and goodwill. The Board further places on record its appreciation for the valuable services rendered by M/s Deloitte Haskins & Sells, Statutory Auditors, during their tenure. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a Bank. The Bank gladly acknowledges this fact and thanks all of them for their diligence and loyalty towards the Bank. The Board expresses its sincere appreciation for the dedicated services rendered by officers and employees of the Bank at all levels.



By Order of the Board

(AMITABHA GuHA) (V. G. MATHEW)

CHAIRMAN MANAGING DIRECTOR & CEO

DIN : 02836707 DIN : 05332797

Place : Hyderabad

Date : June 1, 2016


Mar 31, 2015

To the Members,

The Board of Directors is pleased to place before you, the 87th Annual Report of the Bank along with the Audited Balance Sheet as at March 31,2015 and the Profit and Loss Account for the year ended March 31, 2015.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2015 are as follows:

Key Parameters Rs. in crore

2014-15 2013-14

Deposits 51912.49 47491.09

Gross Advances 37725.65 36403.10

Total Gross Business 89638.14 83894.19

Operating Profit 816.26 884.35

Net Profit 307.20 507.50

Capital & Reserves 3589.40 3368.05

Capital Adequacy (%) - Basel-II 12.06 12.53

Basel-III 12.01 12.42

Earnings Per Share (EPS) :

(a) Basic EPS (in Rs.) 2.28 3.78

[face value Rs. 1/-]

(b) Diluted EPS ( in Rs.) 2.27 3.77

[face value Rs. 1/-]

Book Value per Share (in Rs.) 26.59 25.06

[face value Rs. 1/-]

Gross NPA as % of Gross Advances 1.71 1.19

Net NPA as % of Net Advances 0.96 0.78

Return on Average Assets (%) 0.56 1.00

FINANCIAL PERFORMANCE Profit

The Net Operating Income of the Bank increased by Rs.96.07 crore (5.44%) from Rs.1767.24 crore to Rs.1863.30 crore. The growth in Non-Interest Income was Rs.128.61 crore (34.90%) during the year. The Bank achieved an Operating Profit of Rs.816.26 crore as against Rs.884.35 crore during the previous year and has achieved a net profit of Rs.307.20 crore during the year against the net profit of Rs.507.50 crore posted during the previous year. The moderation in profit is primarily attributable to increased provisioning requirements emanating from loan loss, Funded Interest Term Loan (FITL), restructured assets, employee benefits based on the recently concluded industry wide wage settlement and actuarial liability on superannuation benefits due to softening of market yield.

The Operating Profit for the year under review was Rs.880.89 crore before depreciation, taxes and provisions as against Rs.928.95 crore for the year 2013-14. Net profit was Rs.307.20 crore and the profit available for appropriation was Rs.347.06 crore as per details given below:

(Rs. in crores)

Profit before depreciation, taxes and provisions 880.89

Less: Depreciation on Fixed Assets@ (1.11)

Provisions for Non-Performing Assets 223.58

Provision for FITL 86.82

Provision for depreciation on investments 13.72

Provision for Income/Wealth Tax 160.75

Provision for standard Assets 31.37

Provision for restructured Assets 32.56

Provision for other Impaired Assets 10.88

Provision for Un-hedged Forex exposure 15.12 573.69

Net profit 307.20

Brought forward from previous year 39.86

Profit available for appropriation 347.06

@ In view of the change in accounting policy, the write back amounting to Rs.65.74 crore off set with current year depreciation Rs.64.63 crore.

Appropriations

(Rs. in crores)

Transfer to Statutory Reserves 76.81

Transfer to Capital Reserves 3.86

Transfer to General Reserves 50.00

Transfer from Investment Reserve (6.79)

Transfer to Special Reserve 30.00

Proposed Dividend 81.01

Dividend Tax on Proposed Dividend 16.95

Balance carried over to Balance Sheet 95.22

Total Appropriation 347.06

Dividend

The Board of Directors recommended a dividend of 60% (tax- free in the hands of shareholders), i.e., @ Rs.0.60 per Equity Share of face value of Rs.1/- per share.

EXPANSION PROGRAMME

The Bank had been successful in widening its network pan India with 822 branches and 1200 ATMs. The Bank has opened 53 new offices (28 branches and 25 extension counters) and 200 ATMs across the country during the financial year 2014-15. The branch network now covers 30 states/union territories.

The Bank further plans to open a maximum of 50 new offices (with a mix of Branches & Extension Counters) and 150 ATMs during the financial year 2015-16.

CAPITAL & RESERVES

The BankRs.s issued and paid-up capital stood at Rs.135.02 crore as on March 31, 2015. During the year, 62,04,475 stock options granted under Employee Stock Option Scheme had been exercised by eligible employees.

The capital plus reserves of the Bank has moved up from Rs.3368.05 crore to Rs.3589.40 crore on account of the above and the plough back of profits during the year.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)- Basel III & Basel II

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2015 according to Basel III guidelines is 12.01%, as against the statutory requirement of 9%. Tier I CRAR constitutes 10.43% while Tier II CRAR works out to 1.58%.

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31,2015 according to Basel II guideline is 12.06%, as against the statutory requirement of 9%. Tier I CRAR constitutes 10.46% while Tier II CRAR works out to 1.60%.

The Bank follows standardized approach, Standardized Duration approach and Basic Indicator approach for measurement of capital charge in respect of credit risk, market risk and operational risk respectively.

LISTING AGREEMENT WITH STOCK EXCHANGES

The BankRs.s shares continue to be listed on BSE Ltd. and The National Stock Exchange of India Ltd. The Bank confirms that it has paid the listing fees to both the Stock Exchanges for the year 2015-16.

The Cochin Stock Exchange Limited, where the shares of the Bank were listed, had been exited from the Equity Trading Business w.e.f. 23rd December, 2014 vide SEBI order No.WTM/ RKA/ MRD/163/2014 dtd. 23rd December, 2014.

BUSINESS ACHIEVEMENTS

The Bank has achieved a total Gross Business of Rs.89,638.14 crore, consisting of Total Deposit of Rs.51,912.49 crore and Gross Advances of Rs.37,725.65 crore as on March 31,2015.

Deposits

The total deposits of the Bank increased from Rs.47,491.09 crore as on March 31,2014 to Rs.51,912.49 crore registering a growth of 9.31%.

The break-up of the deposit as on March 31, 2015 is as under:

Amount (Rs. in crore) % to total Deposits

Current Deposits 1817.85 3.50

Savings Deposits 8868.45 17.08

Term Deposits 41226.19 79.42

Total 51912.49 100.00

The Bank during the year concentrated more on Core Deposit, the segment witnessed a growth of 20.61%. Savings Bank Deposits grew by 11.74% on a year to year basis. During the financial year 2014-15, the Bank had been opened 5.77 lakh new Savings Bank Accounts and 13,245 Current Accounts. The Bank, as a part of effective cost management of liabilities, took steps to shed off Bulk Deposits of Rs.2,837.22 crore. NRI Deposits has grown by 29.17% to Rs.1 1,393.15 crore.

The Bank has accorded priority to meaningful financial inclusion exercise during the period under reporting while opening new deposit relationship.

Advances

During the year, the gross advances of the Bank registered a subdued growth of 3.63%, to touch Rs.37,725.65 crore. Low growth indicated earlier reflects, inter-alia, slow off-take of credit and also a pragmatic approach towards due diligence to ensure quality of assets. Total Priority Sector advances as at the end of the financial year stood at Rs.15,597.02 crore, constituting 41.02% of the Adjusted Net Bank Credit (ANBC). Exposure to agriculture sector amounted to Rs.6,281.80 crore forming16.52%* of ANBC as at the end of the financial year. Break-up of exposure under Priority Sector is furnished below:

Amount (Rs. in crore)

Agriculture & Allied activities 6,281.80 (including investments in RIDF)

Small Enterprises 7,287.45

Other Priority Sector 2,027.77

Total Priority Sector 15,597.02

* As per RBI guidelines, indirect lending in excess of 4.5% of ANBC is not reckoned for computing achievement under the sub-target of 18% for the agriculture sector due to which the achievement under the subsector is 11.81%. However, the same is reckoned for computing achievement under the overall priority sector of 40% of ANBC.

INVESTMENTS

Although global economy is improving slowly, Euro Zone Economies are yet to fully recover from the after effects of the global financial crisis. Economic growth in USA is firming up on the backdrop of improving labour and housing market. Even though Quantitative Easing by US Fed came to an end, global liquidity still remains high on the backdrop of quantitative easing by European Union and Japan. Crude oil prices plunged on the backdrop of weak demand outlook and concern over US shale gas supply.

India remains beneficiary of fall in crude oil prices with moderation in inflation, containing fiscal deficit and current account deficit. Considering the easing of inflationary pressures, RBI has cut the policy rate by 50 bps during the year. Industrial activity witnessed marginal recovery with cumulative growth in IIP improving to 2.8% in FY 2015 from contraction of 0.1% during FY 2014. Global rating agency S & P upgraded its outlook on IndiaRs.s sovereign rating to stable from negative. Overall, debt and equity markets remained buoyant during FY 2015.

BankRs.s gross investment portfolio stood at Rs.16,717.16 crore as on March 31, 2015 compared to Rs.14,351.77 crore as on March 31, 2014, registering a growth of 16.48%. Investment Deposit ratio moved from 30.22% as on March 31, 2014 to 32.20% as on March 31, 2015.

Profit on sale of investment registered healthy growth from Rs.69.88 crore in FY 2014 to Rs.164 crore in FY 2015. Total interest income from investments for the FY 2015 was Rs.1,053.73 crore as against Rs.954.48 crore for the FY 2014, registering a growth of 10.40%.

NON-PERFORMING ASSETS (NPA) MANAGEMENT

During the year 2014-15, as a result of the focused and sustained efforts like early recovery of NPAs, through prompt and effective measures under the SARFAESI Act, follow up of recovery cases pending before DRTs and civil courts, one time compromise settlements of accounts, etc., Bank could recover NPAs to the extent of Rs.278.80 crore, (recovery including up- gradation Rs.85.40 crore) as against the target of Rs.250.00 crore. Special thrust was given on selection and underwriting of credit, adequate due diligence and improvement in credit administration to ensure improvement in the quality of assets.

During the year, the Gross NPA of the Bank has increased from Rs.432.62 crore as on March 31, 2014 to Rs.643.45 crore as on March 31, 2015 and Net NPA increased from Rs.281.67 crore as on March 31, 2014 to Rs.357.05 crore as on March 31, 2015. Despite improvement in recovery of NPAs, fresh slippage to the tune of Rs.306.66 crore during the year led to increase in the level of gross NPA to Rs.643.45 crore. In terms of percentages, the GNPA increased from 1.19% as on March 31, 2014 to 1.71% as on March 31, 2015 and Net NPA increased from 0.78% as on March 31, 2014 to 0.96% as on March 31, 2015.

INFORMATION TECHNOLOGY (IT) AND IT ENABLED SERVICES

Ever growing dependence on technology and digitalization has changed the contour of delivery channels of financial services in the Industry. The major players - both domestic and international- have been adopting progressively updated and state of art technology. This has created greater awareness in customers about products and delivery systems.

Indian Banking industry, today is in the midst of IT second phase of revolution. A combination of regulatory and competitive factors has led to increasing dependence on comprehensive automation in the Indian Banking Industry.

Information technology has basically been used under different avenues in Banking like Communication and Connectivity, Business Process Reengineering, new product rollout etc. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.

Information Technology and its huge potential to offer innovative solutions have paramount importance for growth and sustenance of the Banks. The turnaround time for rolling out a technology product in banks has been visibly diminishing, which essentially calls for a robust, adaptable system in place to execute projects right from initiation to consumption.

The Bank, an early adopter of technology with a view to providing safe and convenient banking facilities to its customers, has introduced host of services and facilities for enhancing customer satisfaction. The Bank has been successfully functional with Finacle Core Banking Solution (CBS) from Infosys for several years. CBS has been the key component in introducing the following latest technology services by the Bank for the benefit of its customers.

- Real time on-line ATMs having affinity with NFS (National Financial Switch), Master, VISA and RuPay payment and settlement agencies.

- Debit Card operations with VISA, MAESTRO and RuPay.

- Mobile Banking and M-commerce (with support for other bank money transfer through IMPS, P2A, P2M (issuer), Unstructured Supplementary Service Data (USSD code *99#), Missed call services for retrieving balance through SMS etc).

- ASBA (Application Supported by Blocked Amount).

- Foreign inward Instantaneous remittance with own payment Hub system.

- De-mat and On-line Trading Facility.

- Point of Sale (POS).

- Portfolio Investment Scheme for NRI Community.

- Central Plan Scheme Monitoring System (CPSMS).

- Kiosk based Financial Inclusion Solution.

- Cash Deposit Machines.

- Advanced version of Internet Banking Application with augmented security controls and enhanced customer friendly features.

- Captive Security Operation Centre (CSOC) in line with GKC (Gopalakrishna Committee recommendations of RBI for monitoring and management of IT Systems).

- Fraud Risk Management Solution (fRm) for ATM/POS/CNP channel.

- Business Process Management solution leading to a paperless environment and reduced turnaround time.

- Mobile Pass Book for customers.

- Automated Clearing House (ACH) Payment Service.

- MSME loan application through website.

- NRI account opening through website.

- Direct Benefits Transfer for transferring Govt. subsidies.

- SIB Mirror mobile application (developed in house).

IT initiatives/Solutions embarked during the year

The following list demonstrates a few of the IT enabled services/ solutions that the Bank has launched during the year to serve its Customers in a better and efficient way.

- Version migration of CBS with enriched features leading to increased internal efficiency of operations, augmented control over various functions through stream lined processes.

- ISO 27001 implementation for DC/DR and IT operations.

- Technology solution for Basel II advanced approach.

- Integrated CRM solution to help business users for better understanding of our customers.

- Foreign Inward Remittance through Mobile Banking.

- Premium variant of ATM Cards (Master Card Platinum, RuPay Platinum MasterCard World EMV Chip Card).

- Prime Minister Social Security Schemes like Atal Pension Yojana (APY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

- Centralized Processing Centre (cPc).

Information Security and Risk Management

As banks adopt progressively sophisticated technology as part of their ongoing strategic tool to face challenges in the emerging realities of banking, they are increasingly exposed to technology risks. It is therefore imperative for each bank to work out appropriate IT risk management strategies to secure its most vital information asset and ensure that related risk management systems and processes are strengthened on continual basis to secure both present and future banking activities. SIBRs.s Information Security Policy and other IT Policies - IT Operation Policy, IT Governance Policy, IT outsourcing Policy and Information Security systems have already taken these aspects into consideration. Further, the Information Security of banking IT functions is getting strengthened through implementation of a captive SOC (Security Operation Centre).

The Bank has been providing awareness on e-threats to its customers and staff on a continued basis so that both proactive and reactive measures can be initiated, as deemed appropriate, to mitigate potential risks associated with e-threats.

The Bank has been implementing the stipulations and guidelines articulated and issued by RBI based on the working group recommendations on Electronic Banking Technology Risk, Information Security and Cyber Frauds as a part of the IT governance programme (Gopalakrishna Committee Report).

IT Training

During the year, many training programmes had been attended by the BankRs.s officers in premier institutions such as IDRBT,

NIBM to keep themselves abreast with the advancements in IT, Information Security, CRM etc.

Gopalakrishna Committee Recommendations Management Philosophy & Measures

Gopalakrishna Committee Recommendations on Information Security, Electronic Banking, Technology Risk and Cyber Frauds as applicable to the bank have been taken up for enforcement and implementation. Effective measures have been taken to address the identified gaps in each area such as IT Governance, Information Security, IT Service outsourcing, IS Audit, IT Operations, Cyber Frauds, Business Continuity Plan (BCP), Customer Education and Legal issues. The IT Organization setup has been redrawn to suit the functions/roles specified in the recommendations with segregation of duties. Technology, Development, IT Operations and IT Assurance functions have been clearly divided and now independently headed.

IT Strategy Committee of the Board, IT Steering Committee, Information Security Committee and Chief Information Officer (CIO) are in place, and Chief Information Security Officer (CISO) reports independently to the Head of Risk Management.

Revamped Information Security policy incorporating the various guidelines and stipulations mentioned in the report has been approved by Board and is in place. Presently the policy is under the process of review to make it in alignment with ISO 27001 guidelines. In addition, other IT Policies such as IT Operation Policy, IT Governance Policy and IT Outsourcing Policy are also enforced.

The progress of implementation of GKC recommendations are reviewed by IT Strategy Committee of Board and Board of Directors on quarterly basis. The major items which are under process to achieve compliance to GKC recommendations are as follows:

1. Comprehensive Fraud Risk Management.

2. ISO 27001 Implementation

3. Near line DR Center Solution

The full compliance with the GKC recommendation will be realized in a time bound manner with creation of various infrastructural support required for the same.

Awards and Accolades:

The Bank has received the following awards/rewards during the financial year

Banking Technology Excellence Award-(tenth edition-2014) for Rs.Best IT TEAMRs.-(Small Bank category) from IDRBT, the technical arm of Reserve Bank of India.

Special Recognition among private sector banks "Banking Frontiers - Inspiring Work Places Award" during the year 2014-15.

Best Bank (Private Sector) in the BFSI (Banking, Financial Services and Insurance) Awards 2015 instituted by ABP News.

RISK MANAGEMENT

Risk is an integral part of the banking business. Management of risk is aiming at achieving best trade-off between risk and return becomes a national corollary. Sound risk management is critical to a bankRs.s success. Business and revenue growth have therefore to be weighed in the context of the risks embedded in the bankRs.s business strategy. Of the various types of risks the Bank is exposed to, the most important are credit risk, market risk and operational risk. The identification, measurement, monitoring and mitigation of risk continued to be key focus area for the Bank. The risk management function attempts to anticipate vulnerabilities at the transaction level or at the portfolio level through quantitative examinations of embedded risks. The risk management strategy of the Bank is based on a clear understanding of various risks, disciplined risk assessment, risk measurement procedures and continuous monitoring for mitigation. The policies and procedures established for this purpose are continuously monitored and benchmarked against the best practices followed in the industry.

Risk Management Policy Framework

The Bank has a comprehensive policy framework which contains separate policies for identification, measurement and management of all material risks including but not limited to credit, market, operational, liquidity and other Pillar-II risks. The bank has put in place an integrated risk management policy which ensures the independence of the risk governance structure. The details of Risk Management practices are provided in Management Discussion and Analysis Report annexed to the DirectorRs.s Report.

Compliance with Basel III and Basel II framework

In compliance with regulatory guidelines on Pillar I of Basel III norms, Bank has computed capital charge for credit risk as per the Standardized Approach, for market risk as per the Standardized Duration Method and for operational risk as per the Basic Indicator Approach. To address the issues of Pillar II, the Bank has implemented ICAAP (Internal Capital Adequacy Assessment Process), integrating capital planning with budgetary planning and to capture residual risks which are not addressed in Pillar I, like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk etc. the Bank has adopted a common framework for additional disclosures under Pillar III for adhering to market discipline of Basel II and Basel III guidelines. This requires the Bank to disclose its risk exposures, risk assessment processes and its capital adequacy to the market in a more consistent and comprehensive manner.

The Bank has initiated steps for moving over to Advanced Approach under the Basel II framework for CRAR computation in line with the relevant guidelines issued by Reserve Bank of India. To expedite the process, consultants and system implementation partners have since been engaged.

INTERNATIONAL BANKING

The total forex business turnover for the year ended March 31, 2015 was Rs.1,92,534.64 crore (comprising Merchant Turnover of Rs.10,714.35 crore and Interbank Turnover Rs.1,81,820.29 crore) recording an increase of 15.08% as compared to the previous financial year. The Bank earned an exchange profit of Rs.31.59 crore. The Bank has also earned a profit of Rs.1.74 crore from bullion business and has sold 41.56 kg of gold during the FY 2014-15.

At present the Bank is having rupee inward remittance arrangement with 5 Banks and 32 Exchange Houses and turnover for the year ended March 2015 was Rs.7,180.67 crore registering an increase of 23.14% as compared to the previous financial year. During the FY 2014-15, Bank has concluded 2 new Rupee Drawing arrangements under speed remittance from UAE with GCC Exchange and Joyalukkas Exchange. The Bank continued providing managerial support to M/s Hadi Express Exchange, UAE. We have presently deputed 17 officers of the Bank to manage the operations of Hadi Express Exchange. Considering the scope in improving our remittance business through arrangements with EHRs.s, the Bank has deputed 4 officers to UAE with UAE Exchange Centre, Al Ansari Exchange and Al Ahalia Money Exchange.

NRI PORTFOLIO

The NRI Division of the Bank aims at personalized and dedicated services to NRI customers. It also extends support to branches / customers, takes initiatives and closely monitors the growth of NRI Business. In order to improve the NRI business and to ensure better service to NRIs at branch level, NRI relationship officers were selected at all branches having NRI business of Rs.5 crore and above and also set up an NRI desk in all branches having NRI business of Rs.10 crore and above. NRI deposit of the Bank constitutes 28% of the total bankRs.s core deposits and NRE/NRO savings bank deposits amounts 21.99% of the total CASA of the Bank. Total NRI deposit registered a growth of 29.17% during 2014-15.

NRI Division has been successfully implementing Welcome Kits to NRE privilege accounts enabling instant activation. Such accounts are now available at all branches of Hadi Express Exchange, at selected branches of SIB in Kerala and to marketing officers in UAE. The initiative is widely accepted in the market and added momentum in opening of NRE SB accounts, thereby improving the share of low cost deposits of the Bank. The next generation service to the NRI customers "ONLINE NRE/NRO account opening" facilitates NRIs to open NRE/NRO accounts at the comfort of their home/office. A new channel of communication has been introduced in NRI Division through skype (skype id "talk2nricell") to facilitate video/audio calling for NRIs. To accelerate NRI business growth and to retain valued customer in our fold, NRI meets were arranged at all regions in Kerala. The Bank had opened and managed a stall in the Indian Pavilion during the Dubai Shopping Festival, at UAE to promote NRI services. All these efforts resulted in achieving a growth in the total NRI deposit business of the Bank, during 2014-15.

TRAINING

The Bank accords utmost importance to the process of skill enhancement. Training Programmes are conducted at SIB Staff Training College (SIBSTC), Thrissur and at 6 Regional Training Centers (RTCs) at ROs for enhancement of professional skills of the staff. The training programmes are designed to develop competency of operating personnel while imbibing the SIB spirit and culture through an effective learning process. The success of these programmes reflects on the enhanced organizational productivity. SIBSTC and the RTCs identify gaps in skills of the personnel and provide learning to them for qualitative improvement. During the year 2014-15, the Bank has imparted training to 2,416 officers, 1,476 clerks and 147 sub-staff in various aspects of banking operations. Thus, the Bank has provided training to a total of 4,039 of its personnel, which is about 52% of total staff strength of 7,825 as on March 31, 2015. This is in consonance with the BankRs.s vision towards continuous up-gradation of skills to ensure that the staff members meet the rising expectations of customers and discharge services professionally covering the entire gamut of banking operations.

MARKETING

The Marketing Department of the Bank plays a critical role in generating new business for the Bank through customer acquisition. The department also takes initiatives in product development and promotion by creating awareness on products and by driving customer-centric campaigns.

The products and services under the domain of Marketing Department can be broadly classified as Technology, Third Party Products and Value added services.

Technology Products of the Bank

The Bank has effectively leveraged technology and introduced several variants of traditional products and new e-based services, tailor made to the diversified needs of customers. Technology services like ATM /Debit cards, internet banking, mobile banking etc. have transformed the customersRs. banking experience from branch banking to anytime, anywhere banking.

- Any Branch Banking System: All the branches of the Bank are inter-connected and are capable of providing online, real-time transactions to its customers. As information is centralized and updates are available simultaneously at all places, single-window service has become possible, leading to effective service-delivery to customers. Customers can Deposit/Withdraw freely without any tariff/charge from any branch.

- SIB ATM cum Debit Cards: The Bank is offering Visa, Master and RuPay debit cards to its customers. Using SIB debit cards, BankRs.s customers can withdraw cash through ATMs of any Bank in India and international usage is allowed through EMV chip cards. The Bank has also enabled its debit cards for POS/Online transactions.

Co-branded Foreign Currency Travel Card launched in association with Axis Bank is specifically designed for customers who travel abroad and is available in 8 foreign currencies - USD, GBP, AUD, EUR, CHF, CAD, SGD and JPY. The Bank launched international EMV Chip and PIN based cards in Visa platform for facilitating highly secure international card transactions. Domestic only RuPay cards are also available to customers for use at domestic ATMs and POS terminals. Bank will be launching its high end variant cards in RuPay and Master card platform in near future.

- Internet Banking: The internet banking service under the brand name "SIBerNet" has helped to position the Bank as a technology-driven Bank offering superior banking services to both retail and corporate customers. Fund Transfer (RTGS/NEFT), online bill payments, Online deposit opening, donations to temples etc. are a few of the services offered through SIBerNet. In addition to these, the Bank has also introduced Direct and Indirect Tax Payment facility for its retail and corporate customers.

- Mobile Banking: Mobile banking services help customers maintain a virtual connection with the Bank at all times. SMS, SIB M-Pay, SIB M-Passbook and SIB missed Call service are the mobile banking based services currently offered by the Bank. SIB Mobile Service (SMS) enables customers to receive instant intimation on their account activities via SMS alerts and also to enquire important information over SMS.

The enhanced mobile banking service of the Bank-"SIB M-Pay", offers 24x7 inter/intra Bank fund transfers, with immediate credit of the beneficiary account. The fund transfer facility is facilitated through the IMPS (Immediate Payment Service) platform of NPCI. In addition to the fund transfer service, SIB M-Pay customers are offered value- added services like mobile recharge, DTH recharge etc. also.

The Bank was a pioneer in introducing SIB M-Passbook application that allows customers to access account transaction details on their smart phones. The app is available in all platforms- iOS (iPhones), Android, Windows and Blackberry.

SIB Missed Call service was launched during November 2014, helping the customers to know the balance with just a missed call.

- Point of Sale (POS): The Bank, in association with M/s Atos Worldline India Pvt. Ltd. is offering two types of POS terminals - PSTN (wired terminal) & GPRS (wireless). Atos is the market leader in India in this segment and the primary service provider for POS acquiring services to a number of leading public sector and private sector Banks in the country.

Third Party Products

To cater to the needs of a diverse customer base, the Bank has made arrangements with several companies to distribute products like insurance, pension and mutual funds to customers.

Insurance (Life/General): The Bank acts as a corporate agent for the distribution of insurance products of both M/s Life Insurance Corporation of India and M/s Bajaj Allianz General Insurance Company for life insurance and general insurance respectively.

Mutual Funds: Mutual Fund is a popular form of investment since it provides the advantages of professional portfolio management and dividend reinvestment. The Bank has tie up with 13 leading Mutual Fund companies thereby offering a variety of mutual fund products to customers.

Bonds: The Bank has enrolled as a Channel Partner for the distribution of bonds issued by different companies, through BankRs.s tie-up with IFIN - a subsidiary of IFCI (Industrial Financial Corporation of India) Financial Services Limited. Through this tie up the Bank has been enrolled as a channel partner of IFCI for the distribution of capital gain bonds and tax free bonds.

Depository Services: The Bank offers Depository services for the benefit of its customers. Through this facility, customers can hold their securities in electronic form in demat account with M/s Central Depository Services (India) Ltd. (CDSL). For e-trading, the Bank offers SIBerTrade - the online trading facility to buy /sell stocks for its domestic customers from stock exchanges in India through tie-up with M/s Geojit BNP Paribas Financial Services Ltd. & M/s Religare Securities Ltd. SEBI has also registered the Bank as Self Certified Syndicate Bank (SCSB) for accepting application under Application Supported by Blocked Amount (ASBA) through all the branches of the Bank. ASBA enables the BankRs.s customers to apply for IPO/FPO, rights issues etc. by marking a lien on the account instead of actual debit at the time of applying, which is more beneficial for the customers. Bank is also offering Portfolio Investment Scheme (PIS) - an extensive share trading facility for its NRI customers through tie-up with M/s Geojit. Under PIS, NRI customers can directly invest in the Indian securities market through recognized stock exchanges under repatriable/non-repatriable basis.

New Pension System: The Bank acts as a Point of Presence to provide services to subscribers of New Pension System introduced by Pension Fund Regulatory and Development Authority (PFRDA). All branches of the Bank are designated for collecting NPS applications and contributions.

Pan Application Servicing: The Bank has made arrangement with M/s UTI Technology Services Ltd. (UTITSL) for servicing applications for PAN card. On an average the Bank processes 15,000 applications per year.

SIB E-Pay: In association with BSNL, the Bank is facilitating the payment of BSNL Landline bill of its customers through their accounts maintained with the branches. A customer can avail this facility by submitting a mandate form at the branch where the account is being maintained. Once registered, the BSNL landline bill of the customer will be automatically debited from the customerRs.s account every month. The key feature of this facility is that it is totally hassle free and is offered free of cost to the customers.

Cash Management Service (Premium Collection): The Bank is offering Cash Management Service (Premium Collection) to customers in association with Tata AIG, Exide Life Insurance Co. Ltd. (formerly known as ING Vysya) and ICICI Prudential Life Insurance Co. Ltd. Under this arrangement, BankRs.s customers as well as walk-in customers can remit life insurance premium through branch counters. This facility is offered free of cost to customers.

Centralized Direct Debit Service: The Bank has entered into tie-up with leading aggregator M/s Billdesk Services for Centralized Direct Debit arrangement. Through this tie-up BankRs.s customers will be able to make regular payments like monthly/ quarterly/half yearly payments of Mutual Fund SIP investments/ Loan EMIs (Vehicle/Equipment Loans)/Insurance premium etc. by directly debiting their account and thereby making the payments to various billers/institutions. This facility is available to all customers irrespective of their branches being located in ECS/non-ECS locations. The Bank has similar arrangements with 3 companies - TVS Credit Services, Sundaram Finance Ltd. and Shriram City Union Finance.

TOLL FREE: The Bank has subscribed to toll free numbers from Idea Cellular Ltd. (Toll Free number- 1800 843 1800) and BSNL (Toll Free Number-1800 425 1809) to enable customers to contact the Bank without incurring any cost. In addition, a land-line connection dedicated for international customers is also available. Functioning hours of Toll Free Centre is from 8:30 a.m. to 8:30 p.m. during week days and from 8:30 a.m. to 4:30 p.m. on Saturdays.

Marketing and promotional activities of the Bank are vital in identifying customer needs and designing differentiated products to cater to those needs. While the department is keen to introduce new and varied products, facilitating customer adoption and providing customer assistance assumes equal significance during its operation. The Bank strives to comply with regulatory requirements while taking every endeavour to avoid pitfalls in mis-selling BankRs.s products.

Visibility Enhancement Initiatives

The Bank has undertaken many brand promotion initiatives in various media like Newspaper, Television, Radio, outdoor and online media. Outdoor brandings were concentrated in major metros like Bangalore, Delhi, Chennai, Hyderabad, Coimbatore and Erode through bus shelters and hoardings. All major inaugural events and financial results were covered through print and electronic media. TV Commercials were released on Pan India basis in channels like CNBC, ET Now and in Manorama News, Asianet, Surya, Mazhavil Manorama, Indiavision, Reporter, Kairali, Amrita TV, Jai Hind TV, Jeevan TV in Kerala. Manorama Indian Open Badminton Championship was sponsored by the Bank. Along with the sponsorship of Manorama India Open Badminton Championship, stall space was provided for in the All Kerala Exhibition called Rs.ParpidomRs., which was conducted in all the districts of Kerala. We also ventured into government initiated programmes such as Rs.Clean Campus Safe CampusRs. & Rs.Bhoomigeetham 2014Rs.. Both these programs focused upon various welfare issues in Kerala. South Indian Bank was the title sponsor for National Premier Chess Championship which was organized by CMS College and Kottayam Chess Academy. Also, for the 34th Annual National Management Convention conducted by Kerala Management Association (KMA), South Indian Bank was the title sponsor. Asianet Satellite Communications Ltd. has introduced a fresh and unique branding activity called logo on navigation bar, for which we have associated with Asianet Satellite Communication for the initial launch.

The Bank has its own official fan pages in Facebook, Twitter, YouTube etc. The BankRs.s official Facebook page contains various information about the Bank. The page also gives an opportunity to the customers to provide their valuable suggestions/ feedbacks and also to seek clarifications regarding the products & services by making queries. Also, details of new branches and ATMs opened across the country are updated on a daily basis. BankRs.s official Facebook page also provides general banking information with regard to various products and services. The BankRs.s official Twitter page is integrated with Facebook and the contents shared in the Facebook page are posted as "tweets".

HUMAN RESOURCE

Human Resource is the single most important catalyst for effective and efficient operation of any organization. Competition has rendered this dimension still more critical. The Bank has a team of committed, self-motivated and empathetic workforce, who strive to meet the customersRs. requirements. To augment the existing manpower in line with the BankRs.s healthy & sustained growth and expansion of network, the Bank has continued its initiatives of major talent acquisition and retention policies in the FY 2014-15.

Manpower

As on March 31, 2015, the Bank had 7,826 personnel on its rolls. Cadre wise break-up is as under:

Cadre Men Women Total

Officers 2594 1293 3887

Clerk 1531 1591 3122

Peon 483 30 513

Part-time employees 74 229 303

Total 4682 3143 7825

Infusion of young personnel has brought down the average age of employees of the Bank to 34 years as on March 31, 2015.

Number of Staff Members having professional Qualification as on March 31, 2015 is as under:

Educational Stream Number of Staff

Management 1290

Post Graduation 1095

CA 75

CS 5

Engineering 828

PHD 1

Legal 82

ICWA/CMA 44

Maintenance of Personnel data

Maintenance of staff records was streamlined under "HRMSS" (Human Resources Management Software Solution) System. The personnel data can be accessed by all controlling offices and various reports based on the data can be generated for the quick disposal of staff related matters. To make HRMSS more comprehensive, we have introduced new modules such as Expense Maintenance, Pension Maintenance, Marketing

Excellence, in addition to the existing modules like Transfers, Promotion Maintenance, HRA, Leave and LFC, Training, Online Annual Performance Appraisal of Officers upto Scale IV, Service Record etc.

Motivational Initiatives

Some of the initiatives undertaken by the Bank in order to boost the morale of the Bank employees are as under:

a) Promotions: The Bank has been offering healthy career progressive opportunities. During the financial year, 440 clerical staffs had been promoted to Scale I, 193 officers to Scale II and 189 Officers to various senior cadres.

b) Staff Welfare Scheme (SWS) 2014 was implemented in the FY 2014-15, offering job opportunities to the children of voluntarily retired staff members in officers/clerical/ subordinate cadres. 1 Probationary Officer, 23 Probationary Clerks and 8 Probationary Peons were selected under this scheme based on suitability and through due diligence process.

c) The Bank had introduced SIB Ashwas Plus - an insurance scheme in tie-up with Rs.The New India Assurance Co. Ltd.Rs. for staff members who have retired from the service of the Bank either on superannuation or under VRS/SWS. Under SIB Ashwas Plus, 70% of the premium shall be borne by the Bank, reassuring the BankRs.s concern and support to its staff members even after their retirement.

Industrial Relations

Industrial relations in the Bank have been cordial and harmonious. The representatives of Workmen Union, Officers Association and Management have been working collectively with a sense of ownership for the shared objective of all- round growth and prosperity of the Bank. On account of the cordial industrial relations with both the associations, Bank has achieved considerable growth over the years.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the financial year 2008-09, the Bank had instituted an Employee Stock Option Scheme to enable its employees to be a partner in the future growth and financial success of the Bank. The BanksRs. shareholders approved the plan on August 18, 2008 for the issuance of stock options to the employees. Compensation and Remuneration Committee of the Board on 27th March, 2015 has recommended to the Board to grand options at a discount of 10% on the closing price of shares quoted on NSE on 26th March, 2015.

Till March 2015, 3,12,55,600 stock options were vested, out of which 2,00,87,136 stock options were exercised by eligible employees. The money realized due to exercise of the said options was Rs.26,01,75,108.20/- and consequently 2,00,87,136 shares of Rs.1/- each has been allotted to the concerned employees/legal heirs.

The total options granted under seven phases of SIB ESOS 2008 consist 4.21% of the paid up share capital of the Bank as at March 31, 2015. The scheme has generated intended motivation amongst the staff.

Statutory disclosures regarding details of the stock options granted, vested, exercised and forfeited and expired during the year under review is annexed to this report.

SIB-Executive Brief

"SIB Executive Brief" - a daily news update on Banking, Finance, Economy, Industry, Market Rates etc. is being provided by SIB Staff Training College. It is E-mailed on a daily basis to Board members, to the executives and it is also made available at SIB- Insight for access to all the staff members.

E-Learning Tests

The Bank has completed 12 online tests through E-learning Application during the year 2014-15. There were various topics covered during these tests such as Banking procedures, BankRs.s Operations Manual-Advance version etc. Prizes were awarded for the toppers in these tests. It is encouraging to know that the learning process is taken up with great enthusiasm and competitive spirit, the fruit of which is visible in the increasing number of branches/offices emerging as toppers. The E-learning platform will be utilized increasingly for improving the knowledge level of the staff members.

E-Circular

The Bank has since migrated to issuance of e-circulars in place of manual circulars. All the circulars of the Bank are uploaded using the Rs.e-circular softwareRs.. In e-circular, BankRs.s policies, Guidelines and Forms are also uploaded so as to empower the branches with readily accessible pool of information/guidelines.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The Bank has undertaken various initiatives for energy conservation at its premises. Further, the Bank has used information technology extensively in its operation and consistently pursuing its goal of technological up-gradation in a cost efficient manner for delivering quality customer service.

The Company, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to encourage export credit.

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

The Bank has zero tolerance approach towards any action on the part of any executive/employees which may fall under the ambit of Rs.Sexual HarassmentRs. at workplace, and is fully committed to uphold and maintain the dignity of every women staff working in the Bank. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. All the employees (permanent, contractual, temporary, trainees) are covered under this policy.

Number of complaints pending as on the beginning of the financial year - Nil

Number of complaints filed during the financial year - Nil Number of complaints pending as on the end of the financial year - Nil

Particulars of Employees

Information as required by the provisions of Section 134 of the Companies Act, 2013, read with the Companies (Particulars of Employees) Rules, 1975, as amended vide GSR 289 (E) dated March 31, 2011 [Companies (Particulars of Employees) Amendments Rules, 2011], is given under:

#Ceased to be the Managing Director & CEO of the Bank w.e.f. September 30, 2014.

## Appointed as Managing Director & CEO of the Bank w.e.f. 1st October, 2014. The above gross remuneration does not includes Rs.15,75,348/- paid to Mr. V. G. Mathew in the capacity of Executive Vice President during the period 01.04.2014 to 30.09.2014.

The ratio of the remuneration of each director to the median employeeRs.s remuneration and other details in terms of sub- section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are annexed to this report.

THE ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES:

A brief outline of the BankRs.s CSR Policy, including overview of projects or programs undertaken / to be undertaken.

South Indian BankRs.s CSR Policy:

The South Indian Bank is grateful to the society for the support and encouragement in the bankRs.s growth and development. The Bank believes that no organization can make sustainable development without the patronage from the society. The Bank is committed in the integration of social and environmental concerns in its business operations and also in the interactions with its stakeholders. The Bank shall continue to have among its objectives, the promotion and growth of the national economy and shall continue to be mindful of its social and moral responsibilities to customers, shareholders, employees and society. Bank is committed to financing the economic and developmental activities of the nation with concern for human rights and environment.

Overview of Activities:

In line with the CSR policy and in accordance with Schedule VII of the Companies Act, 2013, South Indian Bank undertook various activities during the FY 2014-15 which had significant impact on the society. These activities include:

- Livelihood enhancement projects.

- Training to promote sports.

- Setting up old age homes, day care centres and such other facilities for Senior citizens.

- Contribution to technology incubators located within academic institutions which are approved by Central Govt.

- Ensuring environmental sustainability.

- Promoting education, including special education and employment enhancing vocational skills especially among children, women, elderly and the differently abled.

- Promoting Preventive healthcare and sanitation.

Web-Link to the CSR Policy:

http://southindianbank.com/content/viewContentLvl1.aspx?lin

kIdLvl2=215&LinkIdLvl3=778&linkId=778

Composition of CSR Committee:

The Bank understands its responsibility towards the society and environment in which it operates. The bank has constituted Corporate Social Responsibility Committee at the board level to monitor the CSR activities.

Members of the Committee are:

1. Mr. Francis Alapatt (Chairman of the Committee)

2. Mr. V G. Mathew (MD & CEO)

3. Mr. Mohan E. Alapatt (Member)

4. Ms. Ranjana S. Salgaocar (Member)

The composition is as per Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014.

Average net profit before tax of the Company for the last three financial years: Rs.599.17 crore

Prescribed CSR Expenditure (two per cent of the amount as above): Rs.11.98 crore.

Details of CSR spent during the Financial Year:

a. Total amount to be spent for the Financial Year 2014-15: Rs.11,98,00,000/-.

b. Amount unspent, if any: Rs.10,52,45,154.50.

c. Manner in which the amount spent during the financial year is detailed below:

BankRs.s CSR mission is to contribute to the social and economic development of the community. Through a series of interventions, the Bank seeks to mainstream economically, physically and socially challenged groups and to draw them into the cycle of growth, development and empowerment.

In the FY 2014-15, the Bank revamped its CSR activities to fall in line with the new rules and regulations in accordance with the Companies Act, 2013 and Companies (Corporate Social Responsibility Policy) Rules, 2014. The Bank spent a sum of Rs.1,45,54,845.50 under CSR for the FY 2014-15. Through these CSR spent, the Bank were able to touch the lives of many. During the FY 2014-15; additional activities like Swachh Bharat, Clean Ganga and Financial Inclusion were also included in the ambit of CSR. In the FY 2015-16, the Bank is committed to increase its CSR spent so as to increase its continued focus towards sustainable development of social sector.

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

Financial Inclusion

Financial inclusion aims to ensure the availability of formal and basic banking services to all Indian households, including those in the un-banked and under-banked areas. South Indian Bank has adopted several financial inclusion initiatives, including Kiosk banking.

Kiosk Banking Model - Bank Mitra / Business Correspondent (BC)

The Kiosk banking complies with the open standards recommended by the Indian BanksRs. Association (IBA) and the Institute for Development and Research in Banking Technology (IDRBT) and is capable of incorporating the Unique Identity Solution being implemented by the Unique Identity Authority of India (UIDAI). Under Kiosk Banking Model, the Bank is able to provide basic banking services in un-banked/under- banked areas through outlets such as common service centres, Individual Business Correspondents [BC], small retail shops etc. with a laptop based solution.

Kiosk centres offers basic banking services such as customer enrollment, deposits, withdrawal, fund transfers, balance enquiry, FD, RD remittance etc. to potential customers. Customers can open new basic savings account in Kiosk centres by providing KYC documents and biometrics. The Bank has implemented Kiosk Banking Model in the state of Kerala through 53 Akshaya centers, who are acting as common service centres in the state and 64 Individual BCRs.s in Tamil Nadu. As on March 31, 2015, 28,822 customers have opened accounts under our Kiosk Banking Model.

Financial Literacy Centres

Financial Literacy is the ability to understand how money works in our day today life and how someone manages it, how he/she invests it and how a person offers it to others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with their financial resources. 12 FLCs have been allotted to the Bank by SLBC in the state of Kerala to disseminate financial literacy to the people and it is functioned through retired bank employees, school teachers and retired government employees.

Pullu - Model Village of South Indian Bank

The Bank has been servicing Pullu Village in Chazhoor Panchayat of Thrissur Dist. in Kerala under BankRs.s Financial Inclusion initiative since 2010. In order to ensure meaningful Financial Inclusion and to facilitate BC based operations in the village, Bank has opened Ultra Small Branch at Pullu on November 1, 2013. The village was since adopted by the Bank and various welfare measures were initiated in Pullu. Propagation of Bio farming, conducting financial literacy sessions, providing agricultural credit, organizing medical camps are few of such initiatives the Bank has undertaken in the village.

Government of India Scheme - PMJDY

Pradhan Mantri Jan Dhan Yojana (PMJDY), is conceived as a national mission on financial inclusion initiated by Honorable Prime Minister on 15.08.2014. The scheme envisages universal access to banking facilities, with at least one basic banking account for every household. In line with the directives given by Ministry of Finance and SLBC, PMJDY scheme is implemented in our Bank since 18.08.2014.

A survey on 2,68,690 Households was conducted by the Bank under PMJDY to identify Households not having bank accounts. The Bank has opened 1, 02,217 BSBDA accounts as on 31.01.2015 under PMJDY and balance outstanding in those accounts exceeds Rs.10 crore at present. Rupay Debit Cards has been issued in PMJDY accounts providing customers with the benefit of accidental insurance coverage of Rs.1.00 lac.

Green Initiatives in Corporate Governance

As a responsible corporate citizen, the Bank supports and pursues the Rs.Green InitiativeRs. of the Ministry of Corporate Affairs ("MCA"). In conformance with such initiatives, the Bank will effect electronic delivery of documents including the notice and explanatory statement of Annual General Meeting, Audited Financial Statements, DirectorsRs. Report, AuditorsRs. Report etc., for the year ended March 31, 2015, to the e-mail address which the Shareholders have previously registered with their Depository Participant (DP) as their valid e-mail address. Investors desirous of refreshing / updating their e-mail addresses are requested to do so immediately in their respective DP accounts. The e-mail addresses indicated in respective DP accounts which will be periodically downloaded from NSDL/ CDSL will be deemed to be their registered e-mail address for serving notices / documents including those covered under Section 136 of the Companies Act, 2013.

Shareholders holding shares in physical form and desirous of availing electronic form of delivery of documents are requested to update their e-mail addresses with BankRs.s Registrar and Transfer Agents by a written request. A request format for registering e-mail ids with the Registrar is enclosed. Shareholders holding shares in demat segment are requested to inform their e-mail ids to their respective DPs.

SIB STUDENTSRs. ECONOMIC FORUM (SIBSEF)

StudentsRs. Economic Forum is a monthly publication from the SIB Staff Training College and it provides an analysis of contemporary themes relating to developments in Economy,

Banking and Finance. So far, 280 themes have been published since the first publication which was launched in December 1991. In response to the requests from readers, the first 201 themes of this publication were compiled in 4 volumes and published. The objective of this venture is to kindle interest in economic affairs among the younger generation and also to provide a learning platform to the student community. The hard copies of the publication numbering 3,500 are being sent to all the branches/ offices, reputed schools / colleges / academic institutions, RBI offices, other Banks, government organizations and corporate offices. It has wide acceptance among students, bankers and academic community. The Subjects discussed during the Financial Year 2014-15 include Corporate Social Responsibility (CSR), Shadow Banking System (SBS), Forex facilities for residents, Take over code, Economic survey: Highlights, Union Budget 2014-15 Part I, Union Budget 2014-15 Part II, Microfinance sector, Charter of Customer Rights; Capacity building in banks, Over-the-counter (OTC) derivatives market reforms, Whistle BlowersRs. Protection bill etc. These themes are made available in the BankRs.s Website.

ANTI - MONEY LAUNDERING (AML)

Transactions processed through the Core Banking Solution are monitored for detecting suspicious transactions, using TCS Bancs Compliance, an AML application to comply with the provisions under Prevention of Money Laundering Act (PMLA).

The Offsite Monitoring Teams set up for post facto verification of KYC compliance while establishing new customer relationships by the branches has stabilized fully now.

The Bank has initiated steps for starting a Centralized Processing Centre (CPC) for liability side customer creation with the objective of full KYC compliance and to use KYC as a fraud prevention tool. The Bank aims to bring all branches under the CPC model during the Financial Year 2015-16.

The Board has nominated Mr. V. G. Mathew, MD & CEO as the "designated director", as per PMLA Act.

The Bank has attached great importance for compliance of KYC/AML/CFT norms by the customers as per the Reserve Bank of India directive.

COMPLIANCE DEPARTMENT

The Bank has institutionalized a strong compliance culture and mechanism across the organization, pursuant to its strategic goals of transparency and trust, among all its stakeholders. The Bank has a dedicated Independent Compliance Department headed by a Dy. General Manager for ensuring regulatory compliance, across all its businesses and operations. The key functions of this department includes, dissemination of key regulatory updates affecting the various business verticals of the Bank, review of processes from a regulatory compliance perspective, provide guidance on compliance-related matters, impart training to employees on compliance aspects, among others.

DIRECTORS

During the year, pursuant to the applicable provision of the Companies Act, 2013, Banking Regulation Act, 1949, the provisions of the Articles of Association of the Bank and approval of Reserve Bank of India vide its letter DBOD.Appt. No. 3926/08.51.001/2014-15 dtd. 11.09.2014 Mr. V G. Mathew (DIN-05332797) has been appointed as Managing Director and Chief Executive Officer and he shall also be a Whole-time Key Managerial Person of the Bank for a period of three years from 1st October, 2014 till 30th September, 2017.

Mr. Mathew L. Chakola (DIN-00633502) and Mr. Paul Chalissery (DIN-00836980) have been appointed as an Independent Director of the Bank for the purpose of Section 149(2) of the Companies Act, 2013 with effect from April 1, 2014 for a period of 6 months and they demitted the office of directorship w.e.f. September 30, 2014, upon completion of 8 year term as stipulated under the Banking Regulation Act,1949. The Board places on record its appreciation for the invaluable services rendered by them during their tenure as Directors.

Pursuant to Sections 149, 152 of the Companies Act, 2013 and Section 10A (2A) of the Banking Regulation Act, 1949 and with the approval of the shareholders Dr. John Joseph Alapatt (DIN-00021735) was appointed for a period of five years, Sri Mohan E. Alapatt (DiN-00025594) was reappointed for the period upto February 28, 2018 and Sri K. Thomas Jacob (DIN-00812892) was reappointed for the period upto August 30, 2018, as Independent Directors not liable to retire by rotation w.e.f. April 1, 2014.

Mr. Francis Alapatt (DIN 01419486) and Mr. Salim Gangadharan (DIN-06796232) have been appointed as an Independent Director of the Bank for the purpose of Section 149(2) of the Companies Act, 2013 with effect from April 1, 2014 for a period of five years, and further that they shall not be liable to retire by rotation. Mr. Cheryan Varkey (DIN-06884551) was appointed as Director of the Bank in the 86th Annual General Meeting and his period of office is liable for determination by retirement of directors by rotation.

Smt. Ranjana S. Salgaocar (DIN-00120120) and Mr. Parayil George John Tharakan, (DIN-07018289) have been appointed as additional Directors of the Bank w.e.f. 1st October, 2014 and November 25, 2014 respectively pursuant to Clause 49 of Listing Agreement and Section 149(1) & 161 of the Companies Act, 2013.

The Board represents various domain skill and also addresses the issue of diversity.

AUDITORS

a) Statutory Auditors:

The shareholders at its 86th Annual General Meeting held on 16th day of July, 2014, appointed M/s S. R. Batliboi & Associates LLP (formerly known as M/s S. R. Batliboi & Associates), Chartered Accountants, Chennai, as the Central Auditors for the audit of BankRs.s accounts for the year 2014-15. M/s S. R. Batliboi & Associates LLP, Chartered

Accountants, Chennai, will vacate the office at the end of the ensuing Annual General Meeting. Having completed a term of four years of continuous audit, the said firm is not eligible for re-appointment. Therefore, the shareholders will have to appoint a new firm as Statutory Central Auditors for the audit of the BankRs.s accounts for the financial year 2015-16. Based on the application submitted by the Bank the Reserve Bank of India conveyed their approval vide letter No. DBS.ARS. No. 14271/08.21.005/2014-15 dated May 14, 2015 for appointment of M/s Deloitte Haskins & Sells, Chartered Accountants, Chennai as Statutory Central Auditors of the Bank. A resolution will be placed before you at the ensuing Annual General Meeting, seeking approval for appointing M/s Deloitte Haskins & Sells as the Statutory Auditors of the Bank. The Board recommends the appointment of the said firm as the Auditors of the Bank for the financial year 2015-16.

b) Secretarial Auditors and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, the Bank had appointed M/s KSR & Co., Company Secretaries LLP, Practicing Company Secretaries, Coimbatore 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. The Report of Secretarial Auditor for the FY 2014-15 is annexed to this report.

Audit and Inspection

Regular Inspection of the BankRs.s branches is conducted at periodical intervals on the basis of Risk Based Internal Audit approach. Concurrent audit at branches by qualified Chartered Accountants/retired officers covering 67% of business of the Bank. Concurrent audit of International Banking Division and Treasury Department are also conducted. In addition to the above, the Bank conducts Stock Audit, Credit/Legal Audit, KYC/ AML Audit, Information System Audit, Revenue Audit to check income leakages, Surprise Inspection of gold & cash, Forensic Audit by external agencies in cases where it is found necessary, exclusive Gold Loan asset verification etc. at branches. This year, Bank has brought almost all isolated remote branches under the ambit of concurrent audit, irrespective of the business volume of such branches. Also, the frequency of Gold Loan Inspection has been increased. Information System Audit of CBS and major applications for the current financial year 2014-15 was done by an external approved auditing firm. Besides, all the branches are subjected to statutory audit on yearly basis. RBI conducts Risk Based Supervision of the Bank. An Offsite Monitoring Team is functioning in all Regional Offices mainly to oversee compliance of KYC/AML guidelines in the newly opened operative accounts by branches. Bank is sending alerts (of large value) generated from a software to branches & ROs to facilitate verification of the branch operations, in which some deviations from the laid down procedures / rules are detected by the system. ROs are provided with a terminal of this software for scrutiny of all alerts wherever needed. Above all, all alerts, generated by this system, are analyzed by a central team for the correctness of the branch operations connected to such alerts. The branch operations are analyzed for KYC/ AML/CFT guidelines compliance also centrally with the help of another software and the alerts generated from this are followed up. Statutory reporting of the violations is also done centrally.

EXPLANATION FOR AUDITORSRs. COMMENTS IN THE REPORT

The Auditors report for the year 2014-15 does not contain any qualification.

CORPORATE GOVERNANCE

A separate report profiling Corporate Governance as required under Clause 49 of the Listing Agreement with Stock Exchanges, and a certificate from M/s S. R. Batliboi & Associates LLP, Chartered Accountants, Statutory Auditors of the Bank, are annexed to this Report.

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 is annexed to this report.

Subsidiary Companies

The Bank did not have any subsidiary Company during the previous financial year. The Board of Directors has formulated a policy for determining Rs.materialRs. subsidiaries pursuant to the provisions of the Listing Agreement. The same is displayed on the website of the Bank (https://www.southindianbank.com/ content/viewContentLvl1.aspx?linkIdLvl2=215&LinkIdLvl3=781 &linkId=781).

Related Party Transactions

The Board of Directors has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions pursuant to the provisions of the Companies Act, 2013 and Listing Agreement. The same is displayed on the website of the Bank (https://www.southindianbank.com/ content/viewContentLvl1.aspx?linkIdLvl2=215&LinkIdLvl3=782 &linkId=782).

Strictures and Penalties

During the last three years, there were no penalties or strictures imposed on the Bank by the Stock Exchange(s) and/or SEBI and/ or any other statutory authorities on matters relating to capital market.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This has been dealt with in a separate section in the Annual Report.

DirectorsRs. Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the DirectorRs.s

Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts for the financial year ended March 31, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) 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 Bank at the end of the financial year 2014-15 and of the profit of the Bank for that period;

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

(d) the directors had prepared the annual accounts for the financial year ended on March 31, 2015, on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

(f) 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.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where the Bank operates, other Government and Regulatory Authorities, including stock exchanges, where the BankRs.s shares are listed and correspondent Banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the BankRs.s shareholders and customers for their continued support, patronage and goodwill. The Board further places on record its appreciation for the valuable services rendered by M/s S. R. Batliboi & Associates LLP, Statutory Auditors, during their tenure. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a Bank. The Bank gladly acknowledges this fact and thanks all of them for their diligence and loyalty towards the Bank. The Board expresses its sincere appreciation for the dedicated services rendered by officers and employees of the Bank at all levels.

By Order of the Board

(AMITABHA GUHA) (V. G. MATHEW)

CHAIRMAN MANAGING DIRECTOR & CEO

DIN : 02836707 DIN : 05332797

Place: Nedumbassery, Kochi Date : June 2, 2015


Mar 31, 2012

The Board of Directors are pleased to place before you, the 84th Annual Report of the Bank along with the Audited Balance Sheet as at March 31, 2012 and the Profit and Loss Account for the year ended March 31, 2012.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2012 are as follows:

Rs in crore Key Parameters 2011-12 2010-11

Deposits 36501.00 29721.00

Gross Advances 27473.00 20659.00

Total Gross Business 63974.00 50380.00

Net Profit 401.66 292.56

Capital & Reserves 2167.48 1845.16

Capital Adequacy (%) - Basel-I 11.64 13.17

Basel-II 14.00 14.01

Earning Per Share (EPS) :

(a) Basic EPS (in Rs) [face value Rs 1/-] 3.55 2.59

(b) Diluted EPS ( in Rs) 3.50 2.58 [face value Rs 1/-]

Book Value per Share (in Rs) [face value Rs 1/-] 19.12 16.33

Gross NPA as % of Gross Advances 0.97 1.11

Net NPA as % of Net Advances 0.28 0.29

Return on Average Assets (%) 1.12 1.05



FINANCIAL PERFORMANCE

Profit

The Bank has achieved a record net profit of Rs 401.66 crore during the year registering a growth of 37.29% over the previous year. The Bank could achieve this phenomenal growth in net profit essentially on account of higher scale of operations and better management of assets and liabilities of the Bank. The Operating Profit for the year under review is Rs 682.72 crore before depreciation, taxes and provisions. Net profit is Rs 401.66 crore and the profit available for appropriation is Rs 420.13 crore as per details given below:

(Rs in crore)

Profit before depreciation, taxes & provisions 682.72

Less : Depreciation: 31.20

Provision for NPA/NPIs: 21.34

Provision for depreciation on investments: 14.07

Provision for Income Tax/Wealth Tax: 170.69

Provision for standard advances: 39.75

Provision for restructured advances: 4.01 281.06

Net Profit: 401.66

Brought forward from last year: 18.47

Profit available for appropriation: 420.13

Appropriations (Rs in crore)

Transfer to Statutory Reserve 100.42

Transfer to Capital Reserve 0.51

Transfer to Revenue & Other Reserves 211.52

Transfer to Special Reserve u/s 36(i) (viii) of The 14.00 Income Tax Act, 1961

Transfer to/(from) Investment Reserve (7.13)

Transfer to/(from) present value provision for ADWDRS (1.52)

Proposed Dividend 68.10

Dividend Tax on Proposed Dividend 11.05

Carried over to Balance Sheet 23.18

Total 420.13

Dividend

The Board of Directors has recommended a dividend of 60% (tax-free in the hands of shareholders), i.e., @ Rs 0.60/- per Equity Share of face value of Rs 1/- per share as against 50%, i.e.Rs 0.50/- per share declared last year.

EXPANSION PROGRAMME / POLICY OF THE BANK

During the year, the Bank opened 58 new branches and 174 ATMs across the country. The Bank has been successful in widening its coverage across the country with 700 branches and 2 extension counters transforming it into a pan India institution. The branch network now covers 27 states/union territories and has a network of 663 ATMs.

The Bank plans to open more new branches and ATMs in the current financial year so as to reach the corporate goal of 750 Branches and 750 ATMs by March 31, 2013.

CAPITAL & RESERVES

The Bank was having an issued and paid up capital of Rs 113.37 crore as on March 31, 2012. Capital & Reserves of the Bank has improved from Rs 1,845.16 crore to a healthy level of Rs 2,167.48 crore due to plough back of profits.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)- BaseI I & Basel II

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2012 according to Basel I guideline is 11.64% as against the statutory requirement of 9%. Tier I CRAR constituted 9.60% while Tier II CRAR represented 2.04%.

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2012 according to Basel II guideline is 14.00%, as against the statutory requirement of 9%. Tier I CRAR constituted 11.54% while Tier II CRAR worked out to 2.46%.

Pursuant to Reserve Bank of India guidelines, the Bank migrated to new Capital Adequacy framework w.e.f. March 31, 2009. The Bank has adopted Standardized Approach for Credit Risk, Standardised Duration Approach for Market Risk and Basic Indicator Approach for Operational Risk while computing the Capital requirement under Basel II guidelines.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Bank's shares continue to be listed on The Cochin Stock Exchange Ltd., BSE Ltd., and The National Stock Exchange of India Ltd. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2012-13.

BUSINESS ACHIEVEMENTS

The Bank achieved a total gross business of Rs 63,974 crore, consisting of total deposit of Rs 36,501 crore and gross advances of Rs 27,473 crore as on March 31, 2012 registering a growth of 26.98% over the previous year.

In CASA segment, the Bank has achieved a year to year growth of 12.11%.

During the year 2011-12, 6.30 Lakh new SB A/cs were opened.

Deposits

The Bank could increase its total deposits to Rs 36,501 crore from Rs 29,721 crore last year, registering a growth of 22.81%.

The break up of the deposits as on March 31, 2012 is as under:-

Amount % to total (Rs in crore) Deposits

Current Deposits 1,261.82 3.46

Savings Deposits 5,917.49 16.21

Term Deposits 29,321.22 80.33

Total 36,500.53 100.00

Advances

Gross advances of the Bank registered an increase of 32.98%, to touch a gross figure of Rs 27,473 crore. Total Priority sector advances as at the end of the financial year stood at Rs 5,221.50 crore, constituting 25.27% of the Adjusted Net Bank credit (ANBC). Exposure to agricultural sector amounted to Rs 1,993.16 crore, forming 9.65% of ANBC as at the end of the financial year.

Split up of exposure under Priority sector is furnished below :

Amount (Rs in crore)

Agriculture & Allied activities 1,993.16

Small Enterprises 1,765.53

Other Priority Sector 1,462.81

Total Priority Sector 5,221.50

INVESTMENTS

Indian GDP growth slowed in the financial year 2011-12 on account of the higher interest rates as well as global volatilities. Higher trade deficit of $185 billion, and increase in external debt burden were putting pressure on INR. Headline Wholesale Price Index (WPI) inflation, which remained above 9 per cent during April-November 2011, moderated to 6.9 per cent by end-March 2012, consistent with the Reserve Bank's indicative projection of 7 per cent.

Liquidity conditions remained in a deficit mode throughout 2011-12. Average net injection of liquidity under the daily Liquidity Adjustment Facility (LAF) increased from around Rs 50,000 crore during April-September 2011 to around Rs 140,000 crore during February 2012 and further to Rs 160,000 crore during March 2012, partly reflecting a build-up in government cash balances. In order to mitigate the liquidity tightness, the Reserve Bank of India conducted Open Market Operations (OMOs) aggregating around Rs 130,000 crore between November 2011 and March 2012. Further, the Cash Reserve Ratio (CRR) was reduced by 125 basis points (50 basis points effective January 28, 2012 and 75 basis points effective March 10, 2012), injecting primary liquidity of about Rs 80,000 crore. RBI continued hiking the LAF repo and reverse repo rates touching a peak of 8.50% and 7.50% respectively in the previous year. The Bond market and the equity market was trading in a range with negative bias throughout the financial year.

Our Bank's gross investment portfolio increased by 5.34% to Rs9 ,399.87 crore as against a deposit growth of 22.81% resulting in a healthy investment deposit ratio of 25.75% as on March 31, 2012.

NON-PERFORMING ASSETS (NPA) MANAGEMENT

During the year 2011-12, the Bank had taken focused steps for recovery of Non-Performing Assets by initiating prompt and effective measures for recovery under the Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), follow up of recovery cases filed before DRT and civil courts, one time settlement of accounts, conduct of recovery camps etc.

As a result of the various initiatives taken as above, Bank could recover NPAs to the tune of Rs 176.86 crore during the year (up from Rs 167.24 crore as on previous year) as against the target of Rs 192 crore. The Gross and Net NPAs of the Bank as on March 31, 2012 were Rs 267.16 crore and Rs 76.51 crore as against Rs 230.34 crore and Rs 60.02 crore respectively as on March 31, 2011.

Percentage of Gross NPA to Gross Advance declined to 0.97% as on March 31, 2012 from 1.11% as at March 31, 2011 and percentage of net NPA to net Advances also came down from 0.29% as on March 31, 2011 to 0.28% as on March 31, 2012. Both the percentage of GNPA & NNPA are comparable with the best in the industry.

During the year, with effect from quarter ended June 2011 onwards, Bank could smoothly switch over to fully automated NPA classification and provisioning of accounts, much ahead of the RBI stipulated date. As a prudent measure, with a view to build up provision and capital buffer, Bank has adopted a policy for additional provisioning in NPA accounts, which is effective from quarter ended March 31, 2012. NPA provisioning in percentage thus stood at 71.36%.

INFORMATION TECHNOLOGY (IT) AND IT ENABLED SERVICES

Information Technology and its adoption to offer innovative solutions has been paramount importance for sustenance of banks. The turnaround time for rolling out a technology product in banks has been visibly diminishing, which essentially calls for a robust system in place to articulate projects right from conception to execution.

The Bank, an early adopter of technology with a view to providing safe and convenient banking facilities to its customers, has introduced host of services and facilities for enhancing the customer satisfaction. The Bank has been successfully functional with Core Banking Solution (CBS) and achieved 100% roll out in CBS as on March 31, 2007. CBS has been the key component in introducing the following technology services by the Bank for the benefit of its customers.

- Real time on line ATMs having affinity with NFS (National Financial Switch), Master and VISA payment and settlement agencies.

- Global Debit Card operations with VISA and MAESTRO.

- Straight Through Processing (STP) for RTGS and NEFT Payment systems

- Internet Banking & E -Commerce

- Mobile Banking & M-Commerce

- ASBA (Application Supported by Blocked Amount)

- Foreign Inward Instantaneous remittance with own Payment Gateway System

- Demat & On Line Trading Facility

- Point of Sales (POS)

- Bullion Sales

- Portfolio Investment Scheme for NRI community

IT initiatives/Solutions embarked during the year

The Bank has launched following IT enabled services/Solutions during the year to serve its customers in a better and efficient way.

IMPS (Interbank Mobile Payment System): This facilitates instant interbank transfer of funds. This initiative is launched in association with NPCI (National Payment Corporation of India). Both JAVA based (application) and SMS based mode of operations are available. Transactions are validated through registered mobile number and unique MMID (Mobile Money Identifier) with 24X7 availability and instant debit/credit intimation to both sender and receiver.

Point of Sale Solution (POS): Facilitates acceptance of VISA, MASTER and MAESTRO cards. Launched in association with M/s FIS Payment Systems Ltd.

Core Hardware Migration: In line with the capacity planning envisaged by the Bank, the Core hardware has been changed to the latest which can cater to Bank's needs for next 5 years.

Bullion Sales: 24 Carat pure gold of 999.9 purity. Manufactured in Switzerland by PAMP refineries, one of the renowned global gold refiners with purity being ASSAY certified. Currently launched in the states of Kerala, Tamil Nadu, Karnataka and Andhra Pradesh.

Portfolio Investment Solution for NRIs: Enables NRIs to purchase shares from secondary market. Partnering with M/s Geojit BNP Paribas Financial Services Ltd. for this initiative. Facility is offered both in online and offline mode.

Information Security and Risk Management

As banks embrace technology as part of their new strategic agenda to face competition in the emerging realities of banking, they are increasingly exposed to IT risks. It is therefore imperative for any bank to work out appropriate IT risk management strategies to secure its most vital information asset and ensure that related risk management systems and processes are strengthened on continual basis to secure both present and future banking activities. SIB's IS audit system has already factored these aspects into consideration and it includes the new supervisory initiatives in the form of Risk Based Supervision (RBS) and Risk Based Internal Audit (RBIA) under Basle II.

Bank has been providing awareness on e-threats to its customers and staff in an incessant basis so that both proactive and reactive measures can be instituted, as deemed appropriate to thwart risks associated with menace of e-threats.

Bank is in the process of implementing the stipulations and guidelines issued by RBI based on the working group recommendations on Electronic Banking, Technology Risk, Information Security and Cyber Frauds as part of the IT governance programme.

Upcoming Initiatives

Bank would like to introduce the following initiatives to augment the customer convenience in the related areas during the year.

- Online Debit Card Payments

- 2nd Factor Authentication for net banking

- Online Tax Payments

- Prepaid Travel Cards

- Automated Dataflow from Bank to RBI as per the RBI directions on the same

IT Training

During the year under reporting, many IT training programmes in relevant areas were attended by the Bank's resource in premier institutions such as IDRBT, NIBM, IIM etc. to equip themselves abreast with the advancement and rapid changes in IT.

Awards and Accolades

During the year, the Bank bagged the Technology Excellence Award, instituted by IDRBT and the Bank has been designated for the Great Mind Challenge for Business award during the year, given away by IBM, a global IT solution company for implementation of innovative IT solutions.

RISK MANAGEMENT

Risk is an integral part of the banking business and the Bank aims at delivering superior value to shareholders by achieving an appropriate trade-off between risk and return. Sound risk management and balancing risk-return trade-off are critical to a Bank's success. Business and revenue growth have therefore to be weighed in the context of the risks embedded in the Bank's business strategy. Of the various types of risks the Bank is exposed to, the most important are credit risk, market risk (which includes liquidity risk and price risk) and operational risk. The identification, measurement, monitoring and mitigation of risks, continued to be a key focus area for the Bank. The risk management function attempts to anticipate vulnerabilities at the transaction level or at the portfolio level, as appropriate, through quantitative examinations of embedded risks. The risk management strategy of the Bank is based on a clear understanding of various risks, disciplined risk assessment, risk measurement procedures and continuous monitoring for mitigation. The policies and procedures established for this purpose are continuously benchmarked with the best practices followed in the Industry.

The Bank's risk management structure is overseen by the Board of Directors. Appropriate policies to manage various types of risks are approved by Risk Management Committee (RMC), which provides strategic guidance while reviewing portfolio behaviour. The senior level management committees like Credit Risk Management Committee (CRMC), Market Risk Management Committee (MRMC) and Operational Risk Management Committee (ORMC) develop the risk management policies and vet the risk limits. The Asset Liability Management Committee and Investment Committee ensure adherence to the implementation of the above risk management policies, develop Asset Liability Management Policy and Investment Policy within the above risk framework.

Compliance with Basel II framework

In tune with regulatory guidelines on Pillar I of Basel II norms, Bank has computed capital charge for credit risk as per the Standardized Approach, for market risk as per the Standardized

Duration Method and for operational risk as per the Basic Indicator Approach. To address the issues of Pillar II, the Bank has implemented ICAAP (Internal Capital Adequacy Assessment Process), integrating capital planning with budgetary planning and to capture residual risks which are not addressed in Pillar I like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk etc. Bank has adopted a common framework for additional disclosures under Pillar III for adhering to market discipline of Basel II guidelines. This requires the Bank to disclose its risk exposures, risk assessment processes and its capital adequacy to the market in a more consistent and comprehensive manner.

INTERNATIONAL BANKING

The total forex business turnover for the year ended 31st March, 2012 was Rs 52,662.15 crore recording an increase of 47.67% as compared to the previous financial year and Bank earned an exchange profit of Rs 31.88 crore showing a year on year increase of 59.87%.

The Bank has successfully implemented online remittance facility with M/s. UAE Exchange Centre, Abu Dhabi and UAE Exchange, Kuwait on Real time basis. This will ensure immediate credit to Bank's customers, with a unique feature of informing the beneficiaries and remitter through SMS within 60 seconds of remittance, branded as "SIB Flash". Bank will be extending this facility to few more exchange houses within a short span.

At present the Bank is having rupee inward remittance arrangement with 4 Banks and 32 Exchange Houses and turnover for the year ended March 2012 was Rs 3,988.02 crore registering an increase of 37.48% as compared to the previous financial year. The Bank continued providing managerial support to M/s Hadi Express Exchange, UAE, with five branches.

NRI PORTFOLIO

The Bank has the unique distinction of opening the first exclusive NRI Branch in Kerala and still occupies the prime position with 7 exclusive NRI Branches in the state. The total NRI Deposit of the Bank as on March 31, 2012 constitutes 20% of the Bank's total retail deposit.

The NRI Division of the Bank has been setup to provide dedicated and personalized service to the Bank's NRI customers. In the FY 2011-12, the Division has successfully co-ordinated NRI Meets in Dubai-UAE, Doha-Qatar, and Jeddah & Riyadh in Saudi Arabia to reach out to Bank's customers in various GCC countries. To build up the momentum of NRI business growth and valued customer retention, the division has successfully co- ordinated NRI Meets with cultural events in all the Regions of the Bank in Kerala. The Bank has deputed officers to Bank's stall at Dubai Shopping Festival (DSF), Global Village to promote

NRI services. NRI Division also extends support to the branches in their NRI related matters and closely monitors the growth of NRI business. In the FY 2011-12, the Bank has recorded a growth of 21.06% as against 6.47% in the FY 2010-11. NRI Newsletter, a quarterly publication from NRI Division continues to provide useful information to the Bank's NRI customers.

TRAINING

The Bank accords utmost importance to human resources development. Training programmes are conducted at SIB Staff Training College (SIBSTC), Thrissur and at 7 Regional Training Centers (RTCs) at ROs for enhancement of professional capabilities of the staff. The training programmes are designed for skill enhancement and also to imbibe SIB culture through an effective learning process. The success of these programmes reflects on the enhanced organizational productivity. SIBSTC and the RTCs identify gaps in skill of the personnel and provide learning to them for qualitative improvement. During the year 2011-12, the Bank imparted training to 2,151 officers, 1,454 clerks and 237 sub-staff in various aspects of banking operations. Thus, the Bank could provide training to a total of 3,842 of its personnel, which is about 65% of total staff strength of 5,879 as on March, 31 2012. This is in consonance with the Bank's vision towards continuous upgradation of skills to ensure that the staff members meet the rising expectations of customers and discharge services professionally covering the entire gamut of banking operations.

MARKETING

The Bank has a vibrant and evolving marketing strategy, designed to achieve the overall business objectives. By creating products and services fine tuned to match the varied interests of our patrons, the Bank has ensured customer retention on the one hand, while bringing in a large number of new customers on the other. As in the past, the early mover advantage in technology adoption has helped the Bank to roll out marketing campaigns in an aggressive manner.

Any Branch Banking

The Bank offers a wide range of SB & CD products with Any Branch Banking facility to suit the needs of various customer segments. Through Real Time Gross Settlement/National Electronic Fund Transfer (RTGS/NEFT), customers can transfer/ receive funds to/from accounts with any other Banks in India, who are the members of this payment system. Customers can also send/receive funds to/from abroad through various online real-time remittance services provided by the Bank. The products such as CD Smart (introduced in FY 2011-12) and SIB-Mahila, Youth Plus etc. caters to specific segments of the customer base. The products have been well-received by the customers. Constant innovations are being done on the existing product lines to make it more attractive and customer friendly.

SIB Pure Gold

The Bank has launched bullion banking on September 6, 2011 for sale of gold coins/ingots of denomination 1, 3, 4, 8, 20, 50 & 100 gm, with 999.9 purity branded as "SIB Pure Gold", through Bank's branches in Kerala, Tamil Nadu, Andhra Pradesh and Karnataka. SIB Pure Gold, is packaged in a tamper-proof cover and is sourced from world's renowned refinery PAMP, Switzerland with purity being ASSAY certified.

TECHNOLOGY PRODUCTS Internet Banking

SIBerNet - Internet banking service of the Bank offers Self, Third Party and External Fund Transfer (RTGS/NEFT), which enables our customers to do transaction on a round the clock basis. To facilitate online transaction for Internet Banking customers, Bank has arrangements with 5 leading online payment aggregators like Billdesk, Tech Process, CC Avenues, Times of Money Ltd (TOML) and Atom Technology Ltd. To enable online offering facility to SIBerNet customers, the Bank has established arrangements with famous temples like Attukal Bhagavathy Temple and Sri Padmanabha Swamy Temple, Trivandrum and Sri Krishna Temple, Guruvayur. In order to cater to the needs of Bank's customers in an instantaneous way the Bank introduced Instant Pin Mailers for SIBerNet which enables the customer to receive User Id and Password over the counter instantly when they are applying for internet banking facility. In addition to these the Bank is introducing Direct and Indirect Tax Payment facility for its Retail and Corporate Customers.

The Bank was successful in enrolling 44,314 SIBerNet registrations in the FY 2011-12 with 50% growth compared to 41.27% in FY 2010-11. The growth can be attributed to various campaigns launched round the year to increase the number of registrations.

Mobile Banking

Customers of the Bank enjoy the benefit of mobile banking service wherein the transaction alerts are sent to the customers (including the mobile nos. registered outside India) on a real time basis, using SMS technology. Last year the Bank has launched SIB M-Pay, the enhanced mobile banking services for the benefit of domestic customers which offers 24X7 instant inter/intra Bank fund transfers even on bank holidays. The fund transfer facility is facilitated using the IMPS (Interbank Mobile Payment Service) platform of NPCI. The facility also enables the registered user to enjoy the value added services like mobile recharge, DTH recharge, flight ticket booking, movie ticket booking etc. using their mobile phones. The Bank had planned exclusive marketing strategies for the new product, which resulted in 40,000 registrations in a short span of 2 months.

The SMS registration of the Bank were 1,28,517 in the FY 2011-12 with a growth percentage of 60% compared to 34.78% in FY 2010-11. The Bank has been floating different campaigns to motivate the staff members to create customer awareness about mobile banking.

Debit Cards

The Bank is offering both Visa and Maestro debit cards to its customers. Using SIB debit cards Bank's customers can withdraw cash through ATMs of any Bank in India and also across the globe wherever Visa/Master logo is displayed. Visa cards have three variants namely Classic, Gold and Platinum which offers a wide variety of services such as enhanced cash withdrawal limits, online transaction, POS transaction limits etc. Recently the Bank has enabled its Visa cards for online transactions and Maestro cards will be enabled soon for the same. The Bank is also looking forward to launch travel card soon.

The Bank has issued 4,92,218 debit cards during the FY 2011- 12, registering a growth of 30% over last year. The Bank was successful in increasing card base and card usage on account of innovative marketing campaigns such as Smart Shopper Contest.

THIRD PARTY PRODUCTS

Depository Services

The Bank offers Depository services for the benefit of its customers. Through this facility, customers can hold their securities in electronic form in demat account with Central Depository Services (India) Ltd. (CDSL). For e-trading, the Bank offers SIBer Trade - the online trading facility to buy /sell stocks for its domestic customers from stock exchanges in India through a tie-up with M/s Geojit BNP Paribas Financial Services Ltd. SEBI has also registered the Bank as Self Certified Syndicate Bank (SCSB) for accepting application under Application Supported by Blocked Amount (ASBA). ASBA enables the Bank's customers to apply for IPO/FPO, rights issues etc., by marking a lien on the account instead of actual debit at the time of applying, which is more beneficial for the customers. During the year, the Bank has also launched its Portfolio Investment Scheme (PIS) - an extensive share trading facility for its NRI customers through a tie-up with M/s Geojit. Under PIS, NRI customers can directly invest in the Indian securities market through recognized stock exchanges.

Demat services of the Bank has registered a growth of 5% over the year with 765 new registrations.

Insurance (Life/General)

Since June, 2009 the Bank has been acting as a corporate agent of Life Insurance Corporation of India for selling the life insurance products. This year, the Bank has been focusing more on non-single premium products, considering the fact that this is more beneficial for the Bank in terms of revenue on the one hand, while being complementary to Bank's core business growth strategy, on the other.

Various campaigns had been launched during the year by the Bank & LIC to focus on increasing the Regular Premium Business.

General Insurance products such as health policy packages and policies to protect the assets and goods against various perils are also made available to customers. The Bank acts as a corporate agent for the distribution of insurance products of M/s Bajaj Allianz General Insurance Company.

General insurance business of the Bank has recorded growth of 11% over the year with around Rs 11 crore Gross Premium collected during the year. The success can be attributed to the marketing activities of the Bank to generate more business.

New Pension System

The Bank was appointed as a Point of Presence to provide services to subscribers of New Pension System introduced by Pension Fund Regulatory and Development Authority (PFRDA). The Bank has been appointed as an Aggregator for NPS Lite and is the only major bank in this segment. All the branches are designated for collecting NPS Lite applications and contributions. In the last financial year, the Bank has acquired around 5,000 new customers for NPS Lite.

PAN Application Servicing

Based on the representations received from the customers, the Bank had made a direct arrangement with M/s UTI Technology Services Ltd. (UTITSL) for servicing the PAN card applications. This is in addition to the already launched KYC Certification services for the Mutual Fund Investors, in association with M/s CDSL Ventures Ltd. (CVL). On an average the Bank is processing 15,000 applications per year.

Mutual Funds

Mutual Funds are one of the preferred investment options for all those who wish to avoid direct investments in stock markets, yet earn more than what traditional savings avenues offer. The Bank is already having tie up with 13 leading Mutual fund companies to offer variety of mutual fund products to the Bank's customers. The Bank has revamped the services in mutual fund business and will be targeting SIP (Systematic Investment Plan) type products aggressively, in the coming year.

VISIBILITY ENHANCEMENT PROGRAMMES

The Bank has undertaken many brand promotion initiatives in various media like Newspaper, Television, Radio, outdoor and online media during the year 2011-12. The advertisements concentrated in major metros like Bangalore, Delhi, Mumbai, Kolkata, Chennai and Hyderabad and has enhanced the visibility of the Bank at these centres. The Bank was the Title Sponsor and official Bankers to the prestigious Grand Kerala Shopping Festival Season -5.

PERSONNEL

Pacing with the Bank's significant growth, the Bank has engaged itself in major talent acquisition and articulation of retention policies in the FY 2011-12. The Bank is envisaging to have staff complement of 7,500 employees on its rolls by March 31, 2013. To achieve this target, Bank has embarked upon recruitment drive to acquire manpower of required skills. The total number of employees as at the year end was 5,879. This growth in personnel has been dovetailed with the business growth target of the Bank. Of the total 5,879 employees, there are 764 Postgraduates, 700 Management Graduates, 397 Engineers, 88 Law Graduates, 63 Chartered Accountants, 24 Cost Accountants and 2 Ph.Ds.

The major skill acquisition initiatives of the Bank include local/ general recruitments and campus recruitments. During the year the Bank has recruited 294 officers and 346 clerks. Of the officers joined, 174 are MBA graduates, 60 Engineering graduates and 20 Chartered Accountants. The Bank also selected 400 persons through general recruitment as Clerks for the year 2012-13.

Staff position

As on March 31, 2012, the Bank had 5879 personnel on its rolls as against 5619 as on March 31, 2011. Cadre wise break up is as under:

Cadre Male Female Total

Officers 1925 753 2678

Clerk 1241 1154 2395

Peon 533 24 557

Part-time employees 96 153 249

Total 3795 2084 5879

The average age of employees of the Bank is 38 years as on March 31, 2012. Out of the total number of staff members, 46% comes below the age of 30 years.

Maintenance of staff records was streamlined under "HRMSS" (Human Resources Management System Software). The personnel data can be accessed by all controlling offices and various reports based on the data can be generated. To make HRMSS more comprehensive the Bank has included more modules like training, Gratuity, Deputation etc. in it.

Staff Motivation:

In order to motivate and enhance the level of ownership and loyalty of the Bank employees, the Bank has modified the existing service conditions like HRA, Conveyance allowance etc. of all cadres.

Staff Welfare Scheme (SWS) 2011 was introduced in the FY 2011-2012 offering job opportunities to the children of staff members in officers/clerical/subordinate cadres. 17 Probationary Officers, 35 Probationary Clerks and 21 Probationary Peons were selected under this scheme.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the financial year 2008-09, the Bank instituted an Employee Stock Option Scheme to enable its employees to be a partner in the future growth and financial success of the Bank. The Banks' shareholders approved the plan on August 18, 2008 for the issuance of stock options to the employees. Compensation and Remuneration Committee of the Board on November 21, 2009 has recommended to the Board to grant options at a discount of 10% on the closing price of the shares quoted on NSE on November 20, 2009. Under SIB ESOS 2008 (1st Tranche) the Bank granted 3,07,25,000 options to eligible employees. Further, Compensation and Remuneration Committee of the Board on October 21, 2010 has recommended to the Board to grant options at a discount of 10% on the closing price of the shares quoted on NSE on October 20, 2010. Under SIB ESOS 2008 (2nd Tranche), the Bank granted 5,10,500 options to eligible employees. Further, Compensation and Remuneration Committee of the Board on February 16, 2012 has recommended to the Board to grant options at a discount of 10% on the closing price of the shares quoted on NSE on February 15, 2012. Under SIB ESOS 2008 (3rd Tranche), the Bank granted 9,42,000 options to eligible employees.

Till March 2012, 90,34,050 stock options vested, out of which 36,93,530 stock options were exercised by eligible employees. The money realized due to exercise of the said options was Rs 4,77,57,342.90 and consequently 36,93,530 shares of Rs 1/- each have been allotted to the concerned employees/legal heirs.

The total options granted under three phases of SIB ESOS 2008 works out to 2.84% of the paid up share capital of the Bank as at March 31, 2012. The scheme has generated intended motivation amongst the staff. With a view to maintain highest standards of personal ethics, all the Directors of the Bank including the Chairman and Managing Director & CEO have voluntarily decided not to accept any stock options, though the shareholders of the Bank were gracious enough to permit grant of stock options to all the Directors of the Bank during the 80th Annual General Meeting.

SIBLINK

'SIBLINK', Bank's corporate in-house magazine, has been functioning as an internal PR tool educating and motivating the staff for better performance and is published every quarter.

SIB-Executive Brief

"SIB-Executive Brief" - a daily news update on Banking, Finance, Economy, Industry, Market Rates etc. is being provided by SIBSTC. It is e-mailed on a daily basis to Board members and to the executives and it is also made available at SIB-Insight for access to all the staff members.

E-Learning Tests

The Bank has completed 12 online tests through E-learning Application during the year 2011-12. There were various topics covered during these tests such as Banking procedures, Bank's Operations Manual etc. Prizes were awarded for the toppers in these tests. It is encouraging to know that the learning process is taken up with great enthusiasm and competitive spirit, the fruit of which is visible in the increasing number of branches/ offices emerging as toppers. The E-learning platform will be utilized increasingly for improving the knowledge level of the staff members.

E-Circular

The Bank has since migrated to issuance of e-circulars in place of manual circulars. All the circulars of the Bank are uploaded using the 'e-circular software'. In e-circular, Bank's Policies, Guidelines and Forms are also uploaded so as to empower the branches with readily accessible pool of information/ guidelines.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

The operations of the Bank are not energy intensive. However, the Bank has taken all possible measures to control and reduce consumption of energy. The Bank continues to undertake possible measures for innovation and absorption of technology in banking business.

The Company, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to encourage export credit.

PARTICULARS OF EMPLOYEES

During the year there were no employees in receipt of remuneration covered by Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended vide GSR 289 (E) dated March 31, 2011 [Companies (Particulars of Employees) Amendments Rules, 2011].

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Bank's CSR policy epitomizes active participation in the social and economic development of the society. The policy on Corporate Social Responsibility strictly conforms to the guidelines of RBI and Ministry of Corporate Affairs on CSR. The Bank necessarily focuses on major areas like Education, Health care, Sustainable Livelihood, Infrastructure Development and Social Causes and a specific budget is allocated for such activities.

Education

The Bank has provided financial assistance to the deserving students of low income family for professional studies. Bank has also supported the low income family students with various study aids and provided free school uniforms & books.

Healthcare

With the objective of supporting marginalized people to meet their diverse needs in healthcare, the Bank has collaborated with various charitable and healthcare institutions. The Bank's efforts included free food distribution to the poor patients of charitable organizations. The Bank has also associated with fund raising program of Lions Club International, Trivandrum 'Suhaani Raat 2011' for supporting the visually challenged and the poor people suffering from heart ailments. The Bank has also extended financial support for the poor and needy with serious heart problems and provided Home care for people who are crippled with terminal heart disease by associating with 'Carithas Heart Foundation'.

Sustainable Development

Sustainable development addresses the needs of the present without compromising the resources of future generations to meet their own needs. For this, it requires the balancing of environmental, social and economic demands. The Bank is committed in the integration of social & environmental concerns in its business operations & also in the interactions with our stakeholders. As a part of the Bank's social obligation, it has partnered with 'Lourdes Metropolitan Cathedral', at Sacred Heart Church, Chembukavu, Thrissur for 'Harithavalkaranam' project concentrating in the re-establishment of green cover, either naturally or artificially. The project will definitely help in the sustainable development of the society ensuring optimum utilization of resources like land & water. Bank has also supported Solar Electrification project in Thane-Raigad district.

Social Causes

The Bank has been supporting various charitable institutions. The Bank has associated with Chetanalaya a registered NGO working for the development of the marginalized section of the society since 1970 for celebrating the 'Ability Utsav'. The purpose of the event was to empower the disabled and to draw public attention towards their rights. The Bank has also supported in the ceiling work of building of 'Amala Care Centre' - Home for Mentally Challenged to resist summer heat. Housing projects for homeless were also undertaken.

Green Initiatives in Corporate Governance

As a responsible corporate citizen, the Bank supports and pursues the 'Green Initiative' of the Ministry of Corporate Affairs ("MCA"). In conformance with such initiatives, the Bank will effect electronic delivery of documents including the notice and explanatory statement of Annual General Meeting (AGM), Audited Financial Statements, Directors' Report, Auditors' Report etc. for the year ended March 31, 2012, to the email address which the Shareholders have previously registered with their Depository Participant (DP) as their valid email address. Investors desirous of refreshing / updating their email addresses are requested to do so immediately in their respective

DP accounts. The email addresses indicated in respective DP accounts which will be periodically downloaded from NSDL / CDSL will be deemed to be their registered email address for serving notices / documents including those covered under Section 219 of the Companies Act, 1956.

Emails are being sent to available email addresses to enable investors to indicate their choice in case they desire to receive printed copies of documents/notices/annual reports. Shareholders holding shares in physical form desirous of availing electronic form of delivery of documents are requested to update their email addresses with our Registrar and Transfer Agents by a written request if they wish to avail this facility. A request format for registering e-mail ids with the Registrar is enclosed. Shareholders holding shares in demat segment are requested to inform their e-mail ids to their respective DPs.

SIB STUDENTS' ECONOMIC FORUM (SIBSEF)

Students' Economic Forum is a monthly publication from the SIB Staff Training College and it provides an analysis of contemporary themes relating to developments in Economy, Banking and Finance. So far, 244 themes have been published since the first publication which was launched in December 1991. In response to the requests from readers and well- wishers, the first 201 themes of this publication were compiled in 4 volumes and published. The objective of this venture is to kindle interest in economic affairs among the younger generation and also to empower the student community. The hard copies of the publication numbering 3000 are being sent to all the branches/offices, reputed schools/colleges/academic institutions, RBI offices, other Banks, government organizations and corporate offices. It has wide acceptance among students, bankers and academic community. The subjects discussed during the year 2011-12 include - Emerging Market Economies - EMEs & BRICS; RBI Monetary Policy Statement 2011-2012; Internet Mobile Payment Service; Foreign Contribution (Regulation) Act; The New Pension System; The S&P Downgrade, CIBIL Credit Information Bureau (India) Limited; Deregulation of SB Interest; Entry of New Banks in Private Sector; FDI in Indian Retail Sector; Basel III: RBI's Draft Guidelines and Banks' Preparedness; and Financial Holding Company. The soft copy of this publication is being sent to all the "Youth Plus" account holders by e-mail and it is made available in the Bank's website.

FINANCIAL INCLUSION INITIATIVES

Inclusive growth of all sections of the people is a pre-requisite for the country to achieve the status of a developed country. Financial Inclusion (FI) is one of the major means to achieve all round growth. FI, inter-alia, aims at ensuring the availability of formal and basic banking services to all the households, including those residing in the un-banked/under banked areas. For this purpose the Bank has introduced a smart card based FI project, where the basic banking services are being provided through Business Correspondents duly appointed by the Bank.

As per the Bank's Financial Inclusion plan, the Bank had to cover 39 villages and 5 urban locations by March 31, 2012. Meanwhile, various State Level Bankers' Committee had allotted 42 villages (39 villages with population above 2,000 and 3 villages with population below 2000) to the Bank. These villages are attached to 25 base branches and spread across 4 States in the country - Kerala, Andhra Pradesh, Tamil Nadu and Chhattisgarh. As on March 31, 2012, the Bank has covered 5 urban centers and all the 42 villages allotted by various SLBCs. Out of the 42 villages, 39 villages are being covered through Business Correspondent (BC) model and the remaining 3 villages are being serviced by branches. The Bank has appointed 40 Business Correspondents and opened more than 2,000 Smart card based No-frill accounts through these BCs. As part of the implementation process, the Bank has provided onsite training to the branch officials as well as to the Business Correspondents. In order to popularize the BC model, Bank has also supplied promotional materials, brochures, posters etc. with "sWaBHIMAAN" logo in Tamil Nadu and Kerala.

As a business continuity plan, the Bank has installed 'Master Terminals' in 5 base branches. With this facility, the customers can make smart card based transactions at the base branches, in case of non-availability of BC. The Bank proposes to install the Master Terminals at the other base branches in a phased manner. The Bank had extended a small over draft facility in Smart card accounts. In order to motivate the BCs, the Bank had also hiked the various remuneration/incentives payable to them.

As on date there are 2.66 lakh No-frill accounts opened through branches/Business Correspondents. The total no. of Students accounts stands at 9.33 lakh. These accounts are with very low minimum balance (Rs 0 to Rs 150) and there is no non-commitment charge for not maintaining the minimum balance.

ANTI - MONEY LAUNDERING (AML)

The Bank has attached great importance to Anti-Money Laundering and the transactions of all the branches of the Bank have been brought under the ambit of AML software. The alerts generated from the AML software are monitored on a daily basis and suspicious transactions are reported to FIU-India.

During the year under review, the Bank has migrated to a newer version 4.0 of the AML Software whereby the first level of processing of alerts has been decentralized to the branches.

- In line with the RBI Guidelines, the Bank is strictly following the "Know Your Customer" norms at the time of opening New Accounts.

DIRECTORS

During the year, pursuant to the applicable provisions of the Banking Regulation Act, 1949, the provisions of the Articles of Association of the Bank and approval of RBI vide its letter DB0D.5473/08:51:001/2011-12 dated October 10, 2011 Dr. V. A. Joseph, has been re- appointed as Managing Director and CEO of the Bank for a further period of 3 years with effect from October 1, 2011 to September 30, 2014, on the terms and conditions as mentioned in the approval letter.

Sri Jose Alapatt and Sri Mathew L. Chakola who retired at the 83rd Annual General Meeting held on July 15, 2011 were reappointed as Directors of the Bank. At the said meeting Sri K. Thomas Jacob and Sri H. Suresh Prabhu were appointed as Directors of the Bank, liable to retire by rotation.

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Sri Paul Chalissery and Dr. N. J. Kurian are the Directors who retire by rotation at the ensuing Annual General Meeting, and being eligible for re- appointment, the Board recommends their re-appointment as the Directors of the Bank.

AUDITORS

The shareholders at its 83rd Annual General Meeting held on July 15, 2011, appointed M/s S R Batliboi & Associates, Chartered Accountants, Chennai, as the Central Auditors for the audit of Bank's accounts for the year 2011-12.

M/s S R Batliboi & Associates, Chartered Accountants, Chennai, vacate office at the end of the Annual General Meeting to be held this year but are eligible for re-appointment for the Financial Year 2012-13.

AUDIT AND INSPECTION

Regular Inspection of the Bank's branches is conducted at periodical intervals on the basis of Risk Based Internal Audit approach. Concurrent audit at branches by qualified Chartered Accountants/Retired Officers covering 59.8% of business of the Bank and concurrent audit of International Banking Division and Treasury Department by external auditors are also conducted. In addition to the above the Bank conducts Stock Audit, Credit Audit, Information System Audit of branches, Revenue Audit to check income leakages, Surprise Inspection and Exclusive Gold Loan Asset Verification etc. at branches. Information System Audit of CBS and major applications for the current year (2011-12) was done by an external approved agency. Besides, all the branches are subjected to statutory audit on yearly basis. In addition, RBI also conducts Annual Financial Inspection of the Bank. The Bank has also implemented online transaction analysis software to oversee the daily activities at branches.

EXPLANATION FOR AUDITORS' COMMENTS IN THE REPORT

The Auditors' Report for the year 2011-12 does not have any qualifications. Hence, no explanation is offered in this regard.

CORPORATE GOVERNANCE

A separate report on the status of implementation of Corporate Governance as required under Clause 49 of the Listing Agreement with Stock Exchanges, and a certificate from M/s S. R. Batliboi & Associates, Chartered Accountants, Statutory Auditors of the Bank, are annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This has been dealt with in a separate section in the Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217 (2AA) of the Companies Act, 1956, the Board of Directors hereby declare that:

1. In the preparation of annual accounts for the financial year ended March 31, 2012, the applicable accounting standards have been followed and proper explanation has been furnished to the extent of departures from those standards.

2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2011-12 and of the profit of the company for that period.

3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Directors have prepared the annual accounts for the financial year ended on March 31, 2012, on a going concern basis.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where the Bank operates, other Government and Regulatory Authorities, including stock exchanges, where the Bank's shares are listed and correspondent Banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the Bank's shareholders and customers for their continued support, patronage and goodwill. The Board further places on record its appreciation for the valuable services rendered by M/s S R Batliboi & Associates, Statutory Auditors, during their tenure. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a Bank. The Bank gladly acknowledges this fact and thank all of them for their diligence and loyalty towards the Bank. The Board expresses its sincere appreciation for the dedicated service rendered by officers and employees of the Bank at all levels.

By Order of the Board

Place : Thrissur (AMITABHA GUHA)

Date : May 7, 2012 CHAIRMAN


Mar 31, 2011

The Directors are pleased to place before you, the 83rd Annual Report of the Bank along with the Audited Balance Sheet as at March 31, 2011 and the Profit and Loss Account for the year ended March 31, 2011.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2011 are as follows:

Rs. in Crore Key Parameters 2010-11 2009-10

Deposits 29721.00 23012.00

Gross Advances 20659.00 15970.00

Total Gross Business 50380.00 38982.00

Net Profit 292.56 233.76

Capital & Reserves 1845.16 1484.71

Capital Adequacy (%) –Basel-I 13.17 14.73

Basel-II 14.01 15.39

Earning Per Share (EPS) :

(a) Basic EPS (in Rs.) 2.59 2.07 [face value Rs.1/-]

(b) Diluted EPS ( in Rs.) 2.58 2.06 [face value Rs.1/-]

Book Value per Share (in Rs.) 16.33 13.14 [face value Rs. 1/-]

Gross NPA as % of Gross Advances 1.11 1.32

Net NPA as % of Net Advances 0.29 0.39

Return on Average Assets (%) 1.05 1.07

FINANCIAL PERFORMANCE

Profit

The Bank has achieved a record net profit of Rs. 292.56 Crore during the year registering a growth of 25.15% over the previous year. The Bank could achieve this quantitative enhancement in net profit essentially on account of higher scale of operations and better management of assets and liabilities of the Bank.

The Profit and Loss Account shows an Operating Profit of Rs. 548.08 Crore before depreciation, tax and provision as per details given below:

(Rs. in Crore)

Profit before depreciation, taxes & provisions 548.08

Less: Depreciation : 22.82

Provision for NPA/NPIs : 28.84

Provision for depreciation on investments : 9.37

Provision for contingencies : 20.00

Provision for Income Tax/ Wealth Tax : 152.94

Provision for standard advances : 21.60

Provision for restructured advances : (0.05) 255.52

Net Profit : 292.56

Transfer from Investment Reserve : 4.70

Brought forward from last year : 17.03

Profit available for appropriation : 314.29

Appropriations

Transfer to Statutory Reserve 73.15

Transfer to Revenue & Other Reserves 150.00

Transfer to Special Reserve u/s 36(i) (viii) of 7.00 Income Tax Act, 1961

Proposed Dividend 56.50

Dividend Tax on Proposed Dividend 9.17

Carried over to Balance Sheet 18.47

Total 314.29

Dividend

The Board of Directors has recommended a dividend of 50% (tax-free in the hands of shareholders), i.e., @ Rs. 0.50/- per Equity share of face value of Rs.1/- per share as against 40%, i.e. Rs.0.40/- per share declared last year.

EXPANSION PROGRAMME / POLICY OF THE BANK

During the year, the Bank opened 61 new branches and 116 ATMs across the country. The Bank has been successful in widening its coverage across the country with 641 branches and 3 extension counters transforming it to a pan Indian Institution. The branch network now covers 26 states/union territories and has a network of 489 ATMs.

The Bank plans to open more new branches and ATMs in the current financial year so as to reach the corporate goal of 700 Branches and 600 ATMs by March 31, 2012.

CAPITAL & RESERVES

The Bank was having an issued and paid up capital of Rs. 113.01 Crore as on March 31, 2011. Capital & Reserves of the Bank has improved from Rs.1484.71 Crore to a healthy level of Rs. 1845.16 Crore due to plough back of profits and revaluation of premises.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)- Basel I & Basel II

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2011 according to Basel I guideline is 13.17% as against the statutory requirement of 9%. Tier I CRAR constituted 10.60% while Tier II CRAR represented 2.57%.

The Capital to Risk Weighted Assets Ratio(CRAR) of the Bank as on March 31, 2011 according to Basel II guideline is 14.01%, as against the statutory requirement of 9%. Tier I CRAR constituted 11.27% while Tier II CRAR worked out to 2.74%.

As per Reserve Bank of India guidelines, the Bank has migrated to new Capital Adequacy framework w.e.f. March 31, 2009. The Bank has adopted Standardised Approach for Credit Risk, Standardised Duration Approach for Market Risk and Basic Indicator Approach for Operational Risk while computing the Capital requirement under Basel II guidelines.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Banks shares continue to be listed on The Cochin Stock Exchange Ltd., The Bombay Stock Exchange Ltd., and The National Stock Exchange of India Ltd. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2011-12.

BUSINESS ACHIEVEMENTS

The Bank could achieve a total gross business of Rs. 50380 Crore, consisting of total deposit of Rs. 29721 Crore and gross advances of Rs. 20659 Crore as on March 31, 2011 registering a growth of 29.24% over the previous year.

In CASA segment, the Bank has achieved a year to year growth of 20%.

During the year 2010-11, 7.51 Lakh new SB A/cs were opened, of which, 2.82 Lakh accounts belong to students. This was specifically aimed at inculcating banking and savings habit among the younger generation.

Deposits

The Bank increased its total deposits to Rs. 29721 Crore from Rs.23012 Crore last year, registering a growth of 29.15%.

The break up of the deposits as on March 31, 2011 is as under:-

Amount % to total (Rs. in Crore) Deposits

Current Deposits 1201.00 4.04

Savings Deposits 5203.00 17.51

Term Deposits 23317.00 78.45

Total 29721.00 100.00

Advances

Total advances of the Bank registered a growth of 29.07%, to touch a gross level of Rs. 20,659 Crore. Total Priority sector advances have improved to Rs. 6,291.76 Crore, constituting 39.40 % of the Adjusted Net Bank Credit (ANBC) as at the end of the financial year. Exposure to agricultural sector amounted to Rs. 3,686.70 Crore, forming 23.09 % of ANBC as at the end of the financial year.

Details of exposure under various sub-heads of the priority sector is furnished below :

Amount (Rs. in Crore)

Agriculture & Allied activities 3686.70

Small Enterprises 1265.75

Other Priority Sector 1339.31

Total Priority Sector 6291.76

INVESTMENTS

Indian economy has continued its broad based growth during the financial year 2010-11 registering an impressive GDP growth rate. But the inflationary pressures persisted both from domestic demand and higher global commodity prices on account of gradual global recovery from financial crisis witnessed in the past years. RBI has moved, in a calibrated manner, in the direction of normalizing the policy prescriptions. Repo and Reverse Repo rates were hiked 175 and 225 basis points respectively. SLR was reduced to 24% from 25% and CRR has been increased from 5.75% to 6.00%. The monetary policy initiatives were intended to moderate inflation by controlling demand pressures and inflationary expectations, creation of a macro environment conducive to sustainable growth, to generate liquidity environment consistent with more effective transmission of policy actions and to reduce the volatility of short-term rates in a narrower corridor. Liquidity in the system got tightened sporadically during the year under review, especially after the 3G / Broad band auctions held in June, 2010. The borrowing under Repo has occasionally crossed 1% of NDTL which was within the comfort level of RBI. The interest rates have risen due to the liquidity tightness and peaked in March 2011. This resulted in pushing up the cost of deposits.

During the first half of the financial year Indian equity market witnessed a consolidation mode. In the second half of the financial year equity market has shown some volatility. The Banks gross investment portfolio has increased by 24.80% to Rs. 8941.06 Crore as against a deposit growth of 29.15% resulting in a more healthy investment deposit ratio of 30.08% against 31.13% on March 31, 2010.

NON-PERFORMING ASSETS (NPA) MANAGEMENT

During the year 2010-11, the Bank had taken focused steps for recovery of Non-performing Assets through recovery camps, issue of notice under Securities and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI), One-time settlements, etc.

As a result of the various initiatives taken, the Bank could recover NPAs to the tune of Rs. 167.24 Crore during the year against the target of Rs. 180 Crore. The Gross and Net NPAs of the Bank as on March 31, 2011 were Rs. 230.34 Crore and Rs. 60.02 Crore against Rs. 211.00 Crore and Rs. 61.57 Crore respectively as on March 31, 2010.

The Percentage of Gross NPA to Gross Advance came down from 1.32% as on March 31, 2010 to 1.11% as on March 31, 2011. Another encouraging achievement in NPA management was that the Bank could reduce the percentage of net NPA to net Advances from 0.39% to 0.29% as on March 31, 2011, a level comparable with the best in the industry.

INFORMATION TECHNOLOGY (IT) AND IT ENABLED SERVICES

The Bank has been progressively introducing a host of products and services deploying the best technology available. Rapid advancement in Information Technology (IT) made a paradigm shift in the way business at large has been conducted and banking sector was also not an exception. The fierce competition being experienced in the banking horizon especially from foreign banks as well as new generation private sector banks drove the managements of old generation private sector banks and Public Sector Banks to adopt IT in the most effective and rewarding manner. SIBertech [Deployment of Core Banking Solution (CBS) through networking of branches] was one of the early adopted measures in this direction, by the Bank.

The Bank has been ahead vis-a-vis other players to accomplish 100% CBS status as on March 31, 2007.

Leveraging on the CBS platform, the Bank could introduce a host of IT enabled services such as Anywhere Banking, on line ATMs (VISA, MASTER and NFS), Net Banking, Mobile banking, E commerce, M Commerce, ASBA etc.

Major IT initiatives during the year

The nucleus of CBS (Core Banking Solution) which is the centralized repository of data/information commonly known as Data Center (DC) has been relocated to a new spacious location with most modern facilities and state-of-the-art technologies. The new set up will be able to take care of the Banks business requirements in terms of IT for the next 10 years, at least. The new DC is green-complied as well.

ASBA (Application Supported by Blocked Accounts) has been introduced to enable application for primary market issues, by marking of lien on accounts, enabling the customer to manage their resources better with tangible gain of interest. VISA (Both global debit cum ATM card) operation was launched last year. This is in addition to the tie-ups with Mastercard & NFS ATM networks. Remittance Automation Facility for instantaneous fund transfer from abroad was introduced to enable online real time remittances from middle-east. A major architectural change in network connectivity was also undertaken to ensure more uptime and network resiliency. Straight Through Processing (STP) for fund transfer using RTGS/NEFT and net banking has been introduced which ensures end to end automation of fund transfer from/to other banks without any manual intervention.

Information System Security Awareness As a part of awareness programmes against the threats emanating from Phishing, Spoofing, and other kinds of E-threats details have been published in the Banks web site as well as net banking home page. Further, for educating customers and branches on the impact of E-Threats circulars/

E Mails/customers meets/structured training sessions have been issued/organized. Such initiatives form part of continuing awareness programme of the Bank.

The Banks web site contains guidance column for customers with regard to the safety measures to be undertaken to guard against the possible E-Threats. Mobile alerts are also being sent periodically to make customers vigilant about such eventualities. The Bank has also subscribed to services of an industry expert agency in monitoring the web site and preventing it from being hacked.

IT Training

During the year, several IT Training programmes (both advanced and basic) in relevant areas were organized to keep the operating and other staff informed of the advancement and rapid changes in IT.

RISK MANAGEMENT

Risk is an integral part of the banking business and the Bank aims at delivering superior value to shareholders by achieving an appropriate trade-off between risk and return. Sound risk management and balancing risk-return trade-off are critical to a Banks success. Business and revenue growth have therefore to be weighed in the context of the risks embedded in the Banks business strategy. Of the various types of risks the Bank is exposed to, the most important are credit risk, market risk (which includes liquidity risk and price risk) and operational risk. The identification, measurement, monitoring and mitigation of risks, continued to be a key focus area for the Bank. The risk management strategy of the Bank is based on a clear understanding of various risks, disciplined risk assessment, risk measurement procedures and continuous monitoring for mitigation. The policies and procedures established for this purpose are continuously benchmarked with the best practices followed in the Industry.

The Banks risk management structure is overseen by the Board of Directors. Appropriate policies to manage various types of risks are approved by Risk Management Committee (RMC), which provides strategic guidance while reviewing portfolio behavior. The senior level management committees like Credit Risk Management Committee (CRMC), Market Risk Management Committee (MRMC) and Operational Risk Management Committee (ORMC) develop the risk management policies and vet the risk limits. The Asset Liability Management Committee and Investment Committee ensure adherence to the implementation of the above risk management policies, develop Asset Liability Management Policy and Investment Policy within the above risk framework.

Compliance with Basel II framework

The Bank has migrated to Basel II norms during Financial Year

2008-09. In tune with regulatory guidelines on Pillar I of Basel II norms, Bank has computed capital charge for credit risk as per the Standardized Approach, for market risk as per the Standardized Duration Method and for operational risk as per the Basic Indicator Approach. To address the issues of Pillar II, the Bank has implemented ICAAP (Internal Capital Adequacy Assessment Process) during the year integrating capital planning with budgetary planning and to capture residual risks which are not addressed in Pillar I like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk etc. Bank has adopted a common framework for additional disclosures under Pillar III for adhering to market discipline of Basel II guidelines. This requires the Bank to disclose its risk exposures, risk assessment processes and its capital adequacy to the market in a more consistent and comprehensive manner.

INTERNATIONAL BANKING

In its quest for providing quality and hassle free service to the NRI clientele, the Bank has introduced two new products. The Bank has successfully implemented online remittance facility with M/s. UAE Exchange Centre, Abu Dhabi on Real time basis. This will ensure immediate credit to Banks customers, with a unique feature of informing the beneficiaries and remitter through SMS within 60 seconds of remittance, branded as SIB Flash.

Another product branded "SIB eazyRemit" was launched, to provide online cross border remittance in USD that facilitates a remitter in US to transfer funds to India online, using the internet platform, at a nominal cost, in association with M/s. Bank of New York Mellon. This facility has been extended to other bank customers as well.

The Bank has entered into MTSS sub-agency arrangement with M/s. Weizmann Forex Limited towards payment of inward remittances under Western Union Money transfer scheme.

With an objective to provide remittance facilities to NRIs in the gulf, the Bank had entered into Speed Remittance arrangement (SIB Express) with 4 more Exchange Houses in the current fiscal viz. M/s Delma Exchange, AbuDhabi, M/s Muthoot Exchange, Dubai, M/s Alamoudi Exchange, Saudi Arabia and M/s Al Dar For Exchange Works, Doha, Qatar. At present the Bank is having inward remittance arrangement with 4 banks and 31 Exchange Houses.

The Bank continued providing managerial support to Hadi Express Exchange, UAE, with four branches. The Bank had also set up a stall in Global Village Dubai, in connection with Dubai Shopping Festival 2011.

RBI has authorized the Bank as a nominated agency for import of gold. The Bank is on the verge of launching the product "SIB

Pure Gold". The product offers different denominations of pure gold coins, with a fineness of 999.9.

To improve forex business turnover of the Bank, the Bank has received necessary approvals for upgrading 7 more branches to "B" category, bringing the total number of "B" category branches to 32.

NRI PORTFOLIO

The Bank has the unique distinction of opening the first exclusive NRI branch in Kerala and still occupies the prime position with 8 exclusive NRI branches in the state. The total NRI deposit of the Bank as on March 31, 2011 constitutes 19.50 % of the Banks total retail deposit.

The NRI Division of the Bank has since been strengthened to provide dedicated service to the Banks NRI Customers. The Division is also offering WELCOME KIT-Centralized NRI Account Opening facility through Hadi Express Exchange to increase the customer base in UAE. The Division also extends support to the branches in their NRI related matters and closely monitor the growth of NRI business. NRI Newsletter, a quarterly publication from NRI Division continues to provide useful information to the Banks NRI Customers.

TRAINING

The Bank accords utmost importance to human resources development. Training programmes are conducted in SIB Staff Training College (SIBSTC), Thrissur and at 7 Regional Training Centers (RTCs) at ROs for enhancement of professional capabi- lities of the staff. The training programmes are designed to impart knowledge as well as catalyzing a positive attitudinal change in the participants. The improvements made in human resources has refected in enhancement of organizational productivity. SIBSTC and the RTCs identify gaps in skill of the personnel and provide learning to them for qualitative improvement. During the year 2010-11, the Bank imparted training to 1272 officers, 990 clerks and 285 sub staff in various aspects of banking operations. Thus, the Bank could provide training to a total of 2547 of its personnel, which is about 45 percent of total staff strength of 5619 as on March, 31 2011. This is in consonance with the Banks vision towards continuous up-gradation of skills to ensure that the staff members meet the rising expectations of customers and discharge services professionally covering the entire gamut of banking operations.

MARKETING

The Bank has embedded its marketing strategies to ensure all round business growth and to counter the competitiveness in the market. An array of products and services were introduced keeping in view customers preferences and as a result, the Bank was able to live up to their expectations. This exercise has helped the Bank to design each customer contact point as easy

and result oriented as possible. The Bank has leveraged on the Core Banking platform to offer varied financial products and services in a seamless and effective manner.

Any Branch Banking

The Bank offers a wide range of SB & CD products with Any Branch Banking facility to suit the needs of various customer segments. Through Real Time Gross Settlement / National Electronic Fund Transfer (RTGS / NEFT), customers can transfer/ receive funds to/from accounts with any other bank in India, who are the members of this payment system. Customers can also send /receive funds to /from abroad through various online realtime remittance facilities provided by the Bank. The new products launched by the Bank such as SIB-Mahila, Youth Plus etc. caters to specific segments of the customer base. The products have been well received by the customers.

Internet Banking

SIBerNet - the internet banking service of the Bank, facilitates online and any-time banking transactions. During the year, the Bank had launched the facility of RTGS/NEFT for the Banks internet banking customers to transfer the funds to any other bank accounts in India. In addition to the existing arrangements with the three leading online payment aggregators viz., BillDesk, TechProcess and CCAvenues, the Bank has now made arrangements with M/s. Times Of Money Ltd. (TOML) and M/s. ATOM Technologies Ltd. to facilitate online transaction for the internet banking customers. During the year, Bank had also made arrangements with the temples like Attukal Bhagavathi temple, Trivandrum and Sree Padmanabha Swamy temple, Trivandrum, to facilitate online offerings/donations for the internet banking customers. This is in addition to the existing arrangement with Guruvayur Sree Krishna temple in Kerala.

Mobile Banking

Customers of the Bank enjoy the benefit of Mobile Banking Service wherein, transaction alerts are sent to the customers (including NRIs) on a real time basis, using SMS technology. Last year, the Bank had launched M-Commerce facility as a value added service in association with M/s. Paymate. M-commerce is an entirely new breed of secured payment channel, which ensures online and real time payments by debit to the customers bank account which is authenticated through the registered mobile phone number of the customer. Facilities like account based fund transfer, utility bill payments, online recharge etc. are also made available using this facility. The Bank is in the final stage of implementing Interbank Mobile Payment Service (IMPS). IMPS offer an instant, 24X7, interbank electronic fund transfer service through mobile phones.

THIRD PARTY PRODUCTS

Depository Services

The Bank offers Depository services for the benefit of its customers. Through this facility, customers can hold their securities in electronic form with Central Depository Services (India) Ltd. (CDSL). For e-trading, the Bank has launched SIBer Trade - the online trading facility to buy stocks and shares from Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd. (NSE) through a tie-up arrangement with Geojit BNP Paribas Financial Services Ltd. During the year, SEBI has registered the Bank as Self Certified Syndicate Bank [SCSB] for accepting application under Application Supported by Blocked Amount (ASBA). ASBA enables the Banks customers to apply for IPO/FPO and rights issues by allowing a lien on the account instead of actual payment while applying. The Bank also plans to implement PIS (Portfolio Invest Scheme) service which will enable its NRI customers to directly invest in the secondary market.

New Pension System

The Bank was appointed as a Point of Presence to provide services to subscribers of New Pension System introduced by Pension Fund Regulatory and Development Authority (PFRDA). Currently this service can be availed through 551 designated branches, which will be extended to all branches soon.

PAN Application Servicing

Based on the representations received from the customers, the Bank had made a direct arrangement with M/s. UTI Technology Services Ltd.(UTITSL) for servicing the PAN card applications. This is in addition to the already launched KYC Certification services for the Mutual Fund Investors, in association with M/s. CDSL Ventures Ltd. (CVL).

Mutual Funds

Mutual Funds are one of the preferred investment options for all those who wish to avoid direct investment in stock markets, yet earn more than what traditional saving avenues offer. The bank is already having tie up with 14 leading mutual fund companies to offer variety of mutual fund products to the Banks customers.

Insurance (Life/General/Health)

Since June, 2009 the Bank has acted as a corporate agent of Life Insurance Corporation (LIC) of India for selling the life insurance products. The Bank is No. 1 among the bank channel partners of LIC in terms of growth of number of policies canvassed (67%) during the year as compared to the previous year.

General Insurance products such as health policy packages and policies to protect the assets and goods against various perils are also made available to the customers. The Bank acts as a corporate agent for the distribution of insurance products of M/s. Bajaj Allianz General Insurance Company.

The Bank has entered into an arrangement with M/s. Cholamandalam MS General Insurance Company to offer Health Insurance coverage to the customers at competitive rates of premium and a very efficient after sales service. A discount of 5% was provided to the Banks shareholders availing the policy, and around 5% of such total policies canvassed by the Bank during last year, was from the shareholders.

The Bank had also made arrangements with M/s. Kotak Mahindra Life Insurance Co. Ltd. to provide life insurance coverage for the Banks home loan borrowers under group insurance.

Debit Cards

The Bank has launched VISA International shopping cum debit card during the year. With this, the Banks customers can withdraw cash through ATMs of any bank in India and also across the globe wherever VISA/Master logo is displayed. In addition to the existing Maestro cards, the Bank had introduced three varieties of debit cards under VISA viz. Classic, Gold and Platinum which offers a wide variety of services like enhanced cash withdrawal limits, online transaction limits, POS transaction limits and so on.

The Bank is in the final stages of deploying its own Point Of Sales (POS) terminals at various merchant locations who are maintaining their accounts with the Bank. The Bank is also launching travel cards in association with M/s. Travelex, which will be made available soon.

VISIBILITY ENHANCEMENT PROGRAMMES

The Bank has undertaken many promotional initiatives through print, audio and visual media during the year 2010-11. The advertisements concentrated in major cities like Bangalore, Delhi, Mumbai, Kolkata, Chennai and Hyderabad and has enhanced the visibility of the Bank at these centres.

This year witnessed more outdoor campaigns like outdoor hoardings, exterior train branding, trolley advertisements etc.

PERSONNEL

The Bank is envisaging to have staff complement of 7500 employees on its rolls by March 31, 2013. To achieve this target, Bank has embarked upon recruitment drive to acquire manpower of required skills. The total number of employees as at the year end was 5619. This growth in personnel has been dovetailed with the business growth target of the Bank.

Staff position

As on March 31, 2011, the Bank had 5619 personnel on its rolls as against 5132 as on March 31, 2010. Cadre wise break up is as under:

Designation Male Female Total

Officers 1813 675 2488

Clerks 1160 1092 2252

Sub-staff 596 21 617

3569 1788 5357

Part-time employees 98 164 262

TOTAL STAFF 3667 1952 5619

Maintenance of staff records was streamlined under "HRMSS" (Human Resources Management System Software). The personnel data can be accessed by all controlling offices and various reports based on the data can be generated.

Implementation of terms and conditions of National level bipartite settlement on Wage Revision and Pension

The salary scales of employees and officers were revised in terms of the settlement with arrears w.e.f. November 1, 2007. The Bank had made full provision for arrears of salary and hence there was no impact on account of its payment during the year.

Another option for Pension

Existing employees who were in the service of the Bank prior to September 29, 1995 and had opted for PF earlier were given another opportunity to join the Pension scheme subject to complying with certain terms and conditions. Majority of the employees exercised the option of the pension. Employees who had already retired were also given another option for pension.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the financial year 2008-09, the Bank instituted an Employee Stock Option Scheme to enable its employees to be a partner in the future growth and financial success of the Bank. The Banks shareholders approved the plan on August 18, 2008 for the issuance of stock options to the employees. Compensation and Remuneration Committee of the Board on November 21, 2009 has recommended to the Board to grant options at a discount of 10% on the closing price of the shares quoted on NSE on November 20, 2009. Under SIB ESOS 2008 (1st Tranche) the Bank granted 3,07,25,000 options to eligible employees. Further, Compensation and Remuneration Committee of the Board on October 21, 2010 has recommended to the Board to grant options at a discount of 10% on the

closing price of the shares quoted on NSE on October 20, 2010. Under SIB ESOS 2008 (2nd Tranche), the Bank granted 5,10,500 options to eligible employees. The total options granted under two phases of SIB ESOS 2008 works out to 2.76% of the paid up share capital of the Bank as at March 31, 2011. The scheme has generated intended motivation amongst the staff.

With a view to maintaining highest standards of personal ethics, all the Directors of the Bank including the Chairman and Managing Director & CEO have voluntarily decided not to accept any stock options, though the shareholders of the Bank were gracious enough to permit grant of stock options to all the Directors of the Bank during the 80th Annual General Meeting.

Exercise period of the Options

The exercise period under SIB ESOS-2008 commences from the completion of 2 years from the date of grant of options and expires on completion of 1 year from the dates of vesting of options. Further details pertaining to Employee Stock Options has been incorporated in an annexure to this report.

SIBLINK

"SIBLINK, Banks corporate in-house magazine, has been functioning as an internal PR tool educating and motivating the staff for better performance and is published every quarter.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

The operations of the Bank are generally not energy intensive. However, the Bank has taken all possible measures to control and reduce consumption of energy. The Bank continues to undertake possible measures for innovation and absorption of technology in banking business.

The Company, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to encourage export credit.

PARTICULARS OF EMPLOYEES

During the year there were no employees in receipt of remuneration covered by Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended vide GSR 289 (E) dated March 31, 2011 [Companies (Particulars of Employees) Amendments Rules, 2011].

DISCLOSURE IN RESPECT OF EXPENDITURE INCURRED ON PENSION FUND AND GRATUITY FUND LIABILITY

During the year, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September, 1995 and had not earlier opted for the pension scheme. Consequently, 2217 employees had exercised their

option for the pension scheme and the Bank had incurred an additional liability of Rs. 135.13 Crore. Further, during the year the limit of gratuity payable to the employees of the bank was also enhanced from Rs. 3.50 Lakh to Rs. 10.00 Lakh, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank increased by Rs. 21.40 Crore. The additional cost of pension and gratuity to employees works out to Rs. 156.53 Crore.

In compliance of provisions of the Accounting Standard (AS) 15, the entire amount of Rs. 156.53 Crore is required to be charged to the Profit and Loss account of the current year. However, in accordance with the guidelines issued by Reserve Bank of India vide reference number DBOD.BP.BC.80/21.04.018/2010- 11 dated February 9, 2011, and made applicable to the Bank vide DBOD No.BP.BC.15896/21.04.018/2010-11 dated April 8, 2011, the Bank decided to amortise the amount of Rs. 156.53 Crore over a period of five years. Accordingly, Rs. 31.31 Crore (representing one-fifth of Rs.156.53 Crore) has been charged to the profit and loss account of the current year. The residual amount of Rs.125.22 Crore had been carried forward for accounting in next four years. The liability arising on account of retired employees who exercised option for pension amounting to Rs. 3.88 Crore had been charged in full to the Profit and Loss Account of the current year.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Banks CSR policy epitomizes active participation in the social and economic development of the society. The policy on Corporate Social Responsibility strictly conforms to the guidelines of RBI and Ministry of company affairs on CSR.

The Bank necessarily focuses on major areas like Education, Health Care, Sustainable Livelihood, Infrastructure Development and Social Causes and a specific budget is allocated for such activities.

Education

The Bank has supported many low income family students with financial assistance and provided them with free uniform and books. The Bank also conducts various motivational camps as an effort to spark the desire in these students to learn and acquire knowledge.

Healthcare

With the objective of supporting marginalized people through helping them to meet their diverse needs in health care, the Bank has collaborated with various charitable and health care institutions. The Banks efforts included free eye test camps, free food distribution to the poor patients of Govt. health care centres and preventive health through awareness programmes. The Bank has also associated with Lions-Divyakarunya Heart

Project, named as Hridayathalam which offerered free open heart surgeries for 70 or more deserving patients including children suffering from serious heart ailments.

Sustainable Development

Sustainable development addresses the needs of the present without compromising the resources of future generations to meet their own needs. For this, it requires the balancing of environmental, social and economic demands. As a part of the Banks social obligation, it has partnered with Chethanalaya, a Delhi based NGO and ran a campaign in Delhi to bring awareness among the public about the need of environmental protection by avoiding the usage of plastic bags. The campaign has been much acclaimed by various national agencies as it focused on "Go Green". The Bank is promoting energy saving concepts and projects generating electricity through wind mill plants etc.

The Banks new corporate building has got 3 star rating from Bureau of Energy Effciency (BEE) and a 5 star rating is expected on completion of the entire renovation processes. The Bank has been encouraging, financing and setting up of non-conventional energy generation units. The Bank has also concentrated on Infrastructure development and extends assistance for construction of toilet block and community hall. Rain water harvesting tanks of the Banks Head Office building of 80,000 litres capacity is yet another example of eco-friendly processes adopted by the Bank.

Social Causes

The Bank has been supporting various charitable institutions in its efforts to bring awareness about AIDS, early detection of cancer and other chronic diseases. Campaigns against usage of drugs, alcohol and smoking are also given priority.

Inclusive growth of all sections of the people is a pre-requisite for the country to achieve the status of a developed country by the year 2020. Financial Inclusion (FI) is one of the major means to achieve all round growth. FI, inter-alia, aims at ensuring the availability of formal and basic banking services to all the households, including those residing in the un-banked/under banked areas. The Bank has been an early bird in adopting Financial Inclusion initiatives and it is now expanding its wings to uncovered areas. With eight decades of rich experience in personalized banking services the Bank has designed a simple, secure and smart banking product-FINS Card A/C(Financial Inclusion Smart Card Account) to achieve the goals of financial inclusion.

Green Initiatives in Corporate Governance

As a responsible corporate citizen, the Bank supports and pursues the Green Initiative of the Ministry of Corporate

Affairs ("MCA"). In conformance with such initiatives, the Bank will effect electronic delivery of documents including the notice and explanatory statement of Annual General Meeting (AGM), Audited Financial Statements, Directors Report, Auditors Report etc. for the year ended March 31, 2011, to the email address which the Shareholders have previously registered with their Depository Participant (DP) as their valid email address. Investors desirous of refreshing / updating their email addresses are requested to do so immediately in their respective DP accounts. The email addresses indicated in respective DP accounts which will be periodically downloaded from NSDL / CDSL will be deemed to be their registered email address for serving notices / documents including those covered under Section 219 of the Companies Act, 1956.

Emails are being sent to available email addresses to enable investors to indicate their choice in case they desire to receive printed copies of documents/notices/annual reports. Shareholders holding shares in physical form desirous of availing electronic form of delivery of documents are requested to update their email addresses with our Registrar and Transfer Agents by a written request if they wish to avail this facility. A request format for registering e-mail ids with the Registrar is enclosed. Shareholders holding shares in demat segment are requested to inform their e-mail ids to their respective DPs.

SIB STUDENTS ECONOMIC FORUM (SIBSEF)

Students Economic Forum is a monthly publication from the SIB Staff Training College and it provides an analysis of contemporary themes relating to developments in economy, Banking and Finance. So far, 232 themes have been published since the first publication which was launched in December 1991. In response to the requests from readers and well wishers, the first 201 themes of this publication were compiled in 4 volumes and published. The objective of this venture is to kindle interest in economic affairs among the younger generation and also to empower the student community. The hard copies of the publication numbering 3000 are being sent to all the branches/ offices, reputed schools / colleges / academic institutions, RBI offices, other banks, government organizations and corporate offices. It has wide acceptance among students, bankers and academic community. The subjects discussed during the year 2010-11 include - RBI Annual Policy Statement 2010-11, Sovereign Debt Crisis, Business of Financial Inclusion Part I & II, Base Rate – Basis for Lending Rates Part – I & II, Infrastructure Financing – Part I & II, Currency War / Competitive Devaluation, New Capital Framework for banks – Basel III – Part I & II, and Union Budget 2011-12 – Growth with Fiscal Correction. The soft copy of this publication is being sent to all the "Youth Plus" account holders by e-mail and it is made available in the Banks website.

FINANCIAL INCLUSION INITIATIVES

As per the Financial Inclusion Plan of the Bank, 100 villages are to be covered under the project through BC model by the year ending March 2013. As per the FIP implementation plan projections, the Bank had to cover 5 villages by March 31, 2011. As on March 31, 2011, the Bank implemented the project in 7 villages. Meanwhile, various State Level Bankers Committees have allotted 39 villages to the Bank, having population above 2000 for Financial Inclusion to be covered by March 2012. These villages are attached to 23 branches and spread across 4 States in the country – Kerala, Andhra Pradesh, Tamil Nadu and Chattisgarh. As on March 2011, the Bank has covered all the 3 villages allotted to the Bank in the States of Kerala and Andhra Pradesh. As a part of the implementation process, the Bank has provided onsite training to the branch officials as well as to the Business Correspondents appointed in the above 7 locations. On behalf of the 46 participating member banks in FIP, IBA had launched a National Level Awareness Campaign on Financial Inclusion titled "SWABHIMAAN" on February 10, 2011. The Bank has already contributed its share to meet the expenditure involved.

During the year ended March 31, 2011, the Bank opened 71,000 No frills A/cs through the branches, where there is no penalty for not maintaining the stipulated minimum balance of Rs. 10/-. In addition to this 2.72 Lakh of Students A/cs were also opened, where there is no penalty for non maintenance of the stipulated minimum balance of Rs.150/-. During the year 2010-2011, Bank could roll out the SmartCard based FI project on pilot basis in 7 villages. In addition to the 100 villages to be covered under FIP through BC model, the Bank has committed to cover 10 urban locations through the BC model. Of this, 5 locations will be covered by the year ending March 31, 2012.

ANTI-MONEY LAUNDERING (AML)

The Bank has accorded great importance to Anti-Money Laundering and the transactions of all the branches of the Bank have been provided AML software platform. The alerts generated from the AML software are monitored on a daily basis and suspicious transactions are reported to FIU-India.

In line with the RBI Guidelines, the Bank has developed a culture of compliances of "Know Your Customer" norms.

E-CIRCULAR

The Bank has since migrated to issuance of e-circulars in place of manual circulars. All the circulars of the Bank are uploaded using the e-circular software. In e-circular, Banks policies, Guidelines and Forms are also uploaded so as to empower the branches with readily accessible pool of information/ guidelines.

DIRECTORS

Sri Paul Chalissery and Dr. N. J. Kurian who retired at the 82nd Annual General Meeting held on July 14, 2010 were re- appointed as Directors of the Bank. At the said meeting Sri Mohan E. Alapatt was appointed as Director of the Bank, liable to retire by rotation.

Sri A. S. Narayanamoorthy, Dr. C. J. Jose and Sri Davy K. Manavalan retired from the Board w.e.f. July 18, 2010, August 30, 2010 and March 27, 2011 respectively. The Board places on record its appreciation for the valuable services rendered by them during their tenure as Directors.

Sri K. Thomas Jacob was appointed as Additional Director by the Board of Directors at its meeting held on August 31, 2010.

Sri H. Suresh Prabhu was appointed as Additional Director by the Board of Directors at its meeting held on December 1, 2010.

Sri G. A. Shenai demitted his office as Part-time Non-executive Chairman and Director of the Bank after the closure of business hours on October 22, 2010 on completion of his term. The Board places on record its appreciation for the valuable services rendered by Sri G. A. Shenai during his term of office as Part- time Non-executive Chairman and Director of the Bank.

Sri Amitabha Guha, former Dy. Managing Director of State Bank of India, was appointed as Additional Director of the Bank on August 31, 2010. With the Approval of Reserve Bank of India, he took charge as Part-time Non-executive Chairman of the Bank for a period of 3 years w.e.f. November 2, 2010.

Pursuant to the provisions of Section 260 of the Companies Act, 1956, Sri K. Thomas Jacob and Sri H. Suresh Prabhu vacates their office at the ensuing Annual General Meeting. Two members have expressed their intentions to propose Sri K. Thomas Jacob and Sri H. Suresh Prabhu as candidates to the office of a director of the Bank, and have given notices in writing along with the deposit amount of Rs. 500/- each, in terms of Section 257 of the Companies Act, 1956.

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Sri Jose Alapatt and Sri Mathew L. Chakola are the directors who retire by rotation at the ensuing Annual General Meeting, and being eligible for re-appointment, the Board recommends their re-appointment as the Directors of the Bank.

AUDITORS

The Statutory Central Auditors M/s Deloitte Haskins & Sells, Chartered Accountants, Chennai will retire at the ensuing Annual General Meeting. Having completed a term of four years of continuous audit, the said firm is not eligible for

re-appointment. Therefore, the shareholders will have to appoint a new firm as Statutory Central Auditors for the audit of the Banks accounts for the year 2011-12. RBI has approved the appointment of M/s S R Batliboi & Associates, Chartered Accountants, Chennai. A resolution will be placed before you at the ensuing Annual General Meeting seeking approval for appointing M/s S R Batliboi & Associates as the Statutory Auditors of the Bank. The Board recommends the appointment of the said firm as the Auditors of the Bank for the Financial Year 2011-12.

AUDIT AND INSPECTION

Regular Inspection of the Banks branches is conducted at periodical intervals on the basis of the rating awarded to the branches. Concurrent audit at branches by qualified Chartered Accountants covering 56% of business of the Bank and concurrent audit of International Banking Division and Treasury Department by external auditors are also conducted. In addition to the above the Bank also conduct Stock Audit, Credit Audit, Information System Audit, Risk based Internal Audit, Revenue Audit to check income leakages, Surprise Inspection and exclusive Gold loan asset verification etc. at branches. Besides, all the branches are subjected to statutory audit on yearly basis. In addition, RBI also conducts an Annual Financial inspection of the Bank. The Bank has also implemented online transaction analysis software to oversee the daily activities at branches.

EXPLANATION FOR AUDITORS COMMENTS IN THE REPORT

The Auditors Report for the year 2010-11 does not have any qualifications. Hence, no explanation is offered in this regard.

CORPORATE GOVERNANCE

A separate report on the status of implementation of Corporate Governance as required under Clause 49 of the Listing Agreement with Stock Exchanges, and a certificate from M/s Deloitte Haskins & Sells, Statutory Auditors of the Bank, are annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This has been dealt with in a separate section in the Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217 (2AA) of the Companies Act, 1956, the Board of Directors hereby declare that:

1. In the preparation of annual accounts for the financial year ended March 31, 2011, the applicable accounting standards have been followed and proper explanation has

been furnished to the extent of departures from those standards.

2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2010-11 and of the profit of the company for that period.

3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Directors have prepared the annual accounts for the financial year ended on March 31, 2011, on a going concern basis.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where the Bank operates, other Government and Regulatory Authorities, including stock exchanges, where the Banks shares are listed and correspondent banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the Banks shareholders and customers for their continued support, patronage and goodwill. The Board further places on record its appreciation for the valuable services rendered by M/s Deloitte Haskins & Sells, Statutory Auditors, during their tenure. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a bank. The Bank gladly acknowledges this fact and thank all of them for their diligence and loyalty towards the Bank. The Board expresses its sincere appreciation for the dedicated service rendered by employees of the Bank at all levels.

By Order of the Board

(AMITABHA GUHA) CHAIRMAN

Place: Thrissur Date : May 21, 2011


Mar 31, 2010

The Directors are pleased to place before you the 82nd Annual Report of the Bank along with the Audited Balance Sheet as at March 31, 2010 and the Profit and Loss Account for the year ended March 31, 2010.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2010 are as follows: -

Key Parameters Rs. in crore

2009-10 2008-09

Deposits 23012.00 18092.00

Gross Advances 15970.00 11965.00

Total Gross Business 38982.00 30057.00

Net Profit 233.76 194.75

Net Worth 1484.71 1304.00

Capital Adequacy (%) - Basel-I 14.73 13.89

Basel-II 15.39 14.76 Earning Per Share (EPS) :

(a) Basic EPS (in Rs.) 20.69 17.23

(b) Diluted EPS ( in Rs.) 20.58 17.23

Book Value per Share (in Rs.) 131.39 115.40 Gross NPA as % of

Gross Advances 1.32 2.18

Net NPA as % of Net Advances 0.39 1.13

Return on Average Assets (%) 1.07 1.09

FINANCIAL PERFORMANCE

Profit

The Bank has achieved a record net profit of Rs.233.76 Crore during the year registering a growth of 20.1% over the previous year. The Bank could achieve this improvement in net profit mainly on account of higher scale of operations and better management of assets and liabilities of the Bank.

The Profit and Loss Account shows an Operating Profit of Rs. 427.33 crore before depreciation, tax and provision as per details given below :

(Rs. in crore)

Profit before depreciation, taxes & provisions 427.33

Less : Depreciation : 16.76

Provision for NPA/NPIs : 37.19

Provision for depreciation on investments : (40.94)

Provision for contingencies : 33.00

Provision for Income Tax/ Wealth Tax : 133.55

Provision for standard advances : 6.43

Provision for restructured advances : 7.58 193.57

Net Profit :233.76

Brought forward from last year : 14.67

Profit available for appropriation : 248.43

Appropriations

Transfer to Statutory Reserve 58.45

Transfer to Capital Reserve 0.69

Transfer to Revenue & Other Reserves 90.00

Transfer to Investment Reserve 20.27

Transfer to Special Reserve u/s 36(i) (viii) of The 9.28 Income Tax Act, 1961

Proposed Dividend 45.20

Dividend Tax on Proposed Dividend 7.51

Carried over to Balance Sheet 17.03

Total 248.43

Dividend

The Board of Directors has recommended a dividend of 40% (tax-free in the hands of shareholders), i.e., @ Rs.4/- per Equity share of face value of Rs.10/- per share as against 30%, i.e. Rs.3/- per share declared last year. This is, however subject to the approval of shareholders at the Annual General Meeting.

EXPANSION PROGRAMME / POLICY OF THE BANK

The Bank has been successful in spreading its coverage across the country from South to North and West to East with 580 branches and 3 extension counters. The branch network now covers 26 states/union territories and has an ATM network at 373 centres. During the year, the Bank opened 50 new branches and 93 ATMs across the country.

The Bank plans to open 60 more new branches and 107 new ATMs in the current financial year so as to reach the corporate goal of 640 Branches and 480 ATMs by March 31, 2011.

CAPITAL & RESERVES

The Bank was having an issued and paid up capital of Rs. 113.01 crore as on March 31, 2010. The Net worth of the Bank has gone up from Rs.1304 crore to Rs.1484.71 crore due to plough back of profits during the year.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)-Basel I & Basel II

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2010 according to Basel I and Basel II guidelines was 14.73% and 15.39 % respectively. Tier I CRAR constituted 11.89% and 12.42% while Tier II CRAR constituted 2.84% and 2.97% under Basel I and Basel II respectively. This is against the statutory requirement of 9% stipulated by Reserve Bank of India.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Banks shares continue to be listed on The Cochin Stock Exchange Ltd., The Bombay Stock Exchange Ltd., and The National Stock Exchange of India Ltd. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2010-11.

BUSINESS ACHIEVEMENTS

The Bank could achieve a total gross business of Rs.38982 Crore, consisting of total deposits of Rs.23012 Crore and gross advances of Rs.15970 Crore as on March 31, 2010 registering a total business growth of 29.69% over the previous year.

Deposits: The Bank could increase its total deposits to Rs. 23012 Crore from Rs. 18092 Crore last year, registering a growth of 27.19%.

The break up of the deposits as on March 31, 2010 is as under:-

Amount % to total (Rs. in crore) Deposits

Current Deposits 1052.00 4.57

Savings Deposits 4272.00 18.56

Term Deposits 17688.00 76.87

Total 23012.00 100.00

Advances: Total advances of the Bank registered an increase of 33.47%, to touch a gross figure of Rs. 15970 Crore. Total Priority sector advances have improved to Rs.5090.93 Crore, constituting 41.92% of the Adjusted Net Bank Credit (ANBC) as on March 31, 2010. Exposure to agricultural sector amounted to Rs.2656.80 Crore, forming 21.88 % of ANBC as at the end of the financial year.

Split up of exposure under Priority Sector is furnished below :

Amount (Rs. in crore)

Agriculture & Allied activities (including eligible RIDF investments) 2656.80

Small Enterprises 1094.50

Other Priority Sector 1339.63

Total Priority Sector 5090.93

INVESTMENTS

The fiscal 2009-10 saw a divergent trend in long duration and short duration fixed income securities resulting in a steepening of yield curve. Longer end of the curve was under pressure on account of the higher government borrowing and rising inflationary expectations. The demand for the short term debt instrument was high due to higher liquidity in the system. In the second half of the fiscal, RBI initiated an exit from the soft monetary policy, began by a hike in SLR from 24% to 25%. This was followed by hikes in cash reserve requirements and repo and reverse repo rates. There was a spectacular rally in the equity market in the fiscal backed by a lower base, stable government at the Centre, sign of economic recovery, abundant liquidity and return of risk appetite in the markets.

During the fiscal, our Banks gross investment portfolio increased by 16.97% to Rs. 7164.29 crore as against a deposit growth of 27.19% resulting in a more healthy investment deposit ratio of 31.13% against 33.85% on March 31, 2009. The Statutory Liquidity Ratio (SLR) investments had grown by 38.69%. The Bank made a total trading profit of Rs. 78.02 crore against Rs.35.41 crore in previous year.

DISCLOSURE IN RESPECT OF VOLUNTARY RETIREMENT SCHEME (VRS) EXPENDITURE

The VRS expenditure incurred during the financial year 2006- 07 amounting to Rs. 7.20 crore has been getting amortised over a period of 4 years from the year 2006-07 and the unamortised amount was being carried forward as deferred revenue expenditure. The proportionate expenditure on VRS amounting to Rs. 1.81 crore (Previous year Rs.1.80 crore) has been charged to Profit and Loss account during the current year and hence there is no unamortised amount of VRS expenditure outstanding as at the end of the year as it stands fully absorbed during the last four years.

NON-PERFORMING ASSETS (NPA) MANAGEMENT

During the year 2009-10, the Bank had taken various steps for recovery of non-performing assets by conduct of recovery camps, issue of notice under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) one-time settlements, etc.

As a result of the various steps taken, the Bank could recover NPAs to the tune of Rs. 269.62 Crore during the year against the target of Rs. 225 Crore. The Gross and Net NPAs of the Bank as on March 31, 2010 were Rs. 211 Crore and Rs. 61.57 crore against Rs. 260.56 Crore and Rs.134.31 Crore respectively as on March 31, 2009. The percentage of Gross NPA to Gross Advance came down from 2.18% as on March 31, 2009 to 1.32% as on March 31, 2010.

The most notable achievement in NPA management was that the Bank could reduce the percentage of net NPA to net Advances from 1.13% to 0.39% as on March 31, 2010.

AUTOMATION AND COMPUTERISATION

Rapid advancement in Information Technology (IT) made a paradigm shift in the way business has been conducted and banking was also not an exception. The stiff and fierce competition being experienced in the banking horizon especially from foreign banks as well as new generation private sector banks forced the managements of old generation private sector banks to ponder upon new dimensions of banking, deploying IT in the best possible manner. Our Board of Directors and the Top Management embraced this idea in early 2000 and thus the SIBerTech initiative was born.

SIBerTech was the initiative to deploy Core Banking Solution (CBS) and Bank could achieve 100% CBS status as on March 31, 2007.

Leveraging on the CBS platform Bank could introduce a host of services such as Anywhere Banking, on line ATMs, Net Banking, Mobile Banking, E commerce, M commerce etc.

Information System Security Awareness

The menace of phishing, spoofing, various kinds of e-threats, etc. and precautionary measures to be taken by the users/ customers to thwart such potential perils have been incorporated in our web site as well as net banking home page, besides as ticker message in the home page of web site, as part of Customer Education. Further educating customers and branches on the impact of E-Threats periodically through circulars/e-mail mode/ customers meets/structured training sessions forms part of continuing awareness programme introduced by the Bank during the year.

Our web site is provided with a guidance column for customers in regard to the safety measures to be undertaken to guard against the possible E- Threats. Mobile alerts are also being sent periodically to make customers vigilant about the same. Bank is in the process of introducing two-factor authentication mechanism, which augments the existing security in net banking.

Major IT initiatives during the year

New Pension System was introduced in the Bank as per Pension Fund Regulatory Development Authority (PFRDA) guidelines and South Indian Bank is the only old generation private sector bank included for this purpose as of now. To encourage and smoothen the working of the New Pension Scheme, the entire operations have been computerised with access to the designated branches to upload all the information easily and quickly.

E commerce has been commenced with tie up with various service providers for bill payments, trading etc.

M commerce has been introduced through a tie up with M/s PayMate to facilitate purchase transactions through Mobile banking.

A new data centre with state-of-the-art technology and complying with green building concepts is being set up at Kakkanad, Kochi and the same is expected to be operational during the current year.

Banking Business Intelligent Solution, which is akin to CBS to facilitate various reporting and information processing under distinct subject areas such as Customer Intelligence, Financial Intelligence, Operational Intelligence and Risk Intelligence, is in the process of implementation.

IT Training

During the year, several IT Training programmes (both advanced and basic) in relevant areas to keep the resource abreast with the advancement and rapid changes in IT were arranged for the benefit of our staff at all levels.

RISK MANAGEMENT AND BASEL II

In the present volatile and rapidly changing financial scenario, it is imperative to have good risk management practices not only to manage risks inherent in the banking business but also the risks emanating from financial markets as a whole. During the year the risk management structure of the Bank was further strengthened to enable it to proactively identify and help in controlling the credit, operational and market risks faced by the Bank, while maintaining proper tradeoff between risk and return thereby maximizing the shareholder value.

The Banks risk management structure is overseen by the Board of Directors and appropriate policies to manage various types of risks are approved by Risk Management Committee of Board (RMC), which provides strategic guidance while reviewing portfolio behavior. The senior level management committees like Credit Risk Management Committee (CRMC), Market Risk Management Committee (MRMC) and Operational Risk Management Committee (ORMC) develop the risk management policies and vet the risk limits. The Asset Liability Management Committee, Credit Policy Planning and Intelligence Committee and Investment Committee ensure adherence to the implementation of the above risk management policies, and develop Asset Liability Management policy, Credit policy and Investment policy within the above risk framework. The risk management policies have laid down risk management processes to identify, measure and mitigate the risks to bring the risks within the tolerance level.

The Bank has already migrated to Basel II during FY 08-09 and assesses the capital adequacy for credit risk under Standardized Approach, market risk under Standardized Measurement Method and operational risk under Basic Indicator Approach. To address the issues of Pillar II, the Bank has implemented ICAAP framework (Internal Capital Adequacy Assessment Process) during the year for integrating capital planning with budgetary planning and to capture the residual risks which are not addressed in pillar I like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk etc. For adhering to market discipline as laid down in pillar III of Basel II guidelines, the Bank has adopted a common framework for disclosures. This requires the Bank to disclose its risk exposures, risk assessment processes and its capital adequacy to the market in a more consistent and comprehensive manner.

INTERNATIONAL BANKING

At present the Bank is having inward remittance arrangement with 4 Banks and 27 Exchange Houses. During the year, we had entered into an arrangement with the Commercial Bank of Qatar to improve inward remittances and trade related activities from Qatar. We have also initiated tie up with two banks in Saudi Arabia for participating in the growing trade between the two countries. With a view to improve remittance facilities to NRIs in the Gulf countries, the Bank has entered into Speed Remittance arrangement (SIB Express) with 3 new Exchange Houses and with 5 existing Exchange Houses with whom we already have Draft Drawing Arrangement.

To facilitate real time credit of inward remittances from overseas countries through Exchange Houses and Banks, we have launched a Web based Payment Hub which will provide instant credit to the beneficiarys account not only with our Bank but also for credit of other Banks account through National Electronic Fund Transfer (NEFT) facility provided by Reserve Bank of India. We have also entered into an arrangement with Bank of New York towards online remittance in US Dollar under SIBeazyRemit for Non resident Indians living in U.S.A.

The Bank continued providing managerial support to Hadi Express Exchange, UAE. The Exchange House opened two new branches at Ras Al Khaimah and Deira Dubai during the year, totaling the branch network to four. Bank had also set up a stall in Global Village Dubai, in connection with Dubai Shopping Festival, which attracted a large number of visitors during the festival period.

To improve forex business, Bank had upgraded 11 branches to B" category thus bringing the total number of "B" category branches to 25. The Bank has also started publishing the Exchange rates of all major currencies through our web-site on a daily basis. Bank is presently maintaining 11 nostro accounts in 8 major currencies.

During the year, the Bank has introduced Foreign Currency Non Resident (FCNR) Deposits in Australian Dollar (AUD) to

Non resident Indians residing in Australia, with a view to provide this additional facility of investment of their surplus savings in AUD in India.

Our Bank has signed a MOU with Colombo-headquartered Hatton National Bank and this tie-up is a mutually beneficial agreement that will facilitate cross-border business between India and Sri Lanka.

NRI PORTFOLIO

Our Bank has the unique distinction of opening the first exclusive NRI branch in Kerala and still occupies the prime position with eight exclusive NRI branches in the state. The total NRI deposit of our Bank as on March 31, 2010 constitutes 20.77% of the Banks total retail deposit.

The NRI Division of the Bank has since been strengthened to provide dedicated service to our NRI customers. The Division also offers best support to the branches in their NRI related matters and closely monitors the growth of NRI business. NRI Newsletter, a quarterly publication from NRI Division continues to provide useful information to our NRI customers.

TRAINING

The Bank is giving utmost importance for training and development of its Officers and Staff, as improvements made in human resources directly result in enhancement in organizations productivity. The Banks Staff Training College identifies the gaps in resource capability of the personnel and train them for qualitative improvement. During the financial year, Bank could provide training to 1486 of its Officers, 906 clerks and 116 sub staff in different facets of Banks operations. Hence, the Bank could impart training to a total of 2511 of its personnel during 2009-2010 which is about 49 percent of total staff strength of 5132 as on March 31, 2010. This is in pursuance of the Banks objective to provide opportunities for continuous upgradation of skills to our entire staff to ensure that they meet the rising expectations of our customers in the entire spectrum of banking operations.

MARKETING

Bank has taken various marketing oriented initiatives to ensure business growth and competitiveness in the market. Systems, procedures, products and services are designed from the customers point of view. This exercise has helped the Bank to design each customer touch point as easy and result oriented as possible. Bank has leveraged the Core banking system to offer varied financial products and services in a hassle free and effective manner.

Bank has a range of SB & CD products with Any Branch Banking facility to suit the needs of various customer segments. Through Real Time Gross Settlement / National Electronic Fund Transfer (RTGS / NEFT), customers can send funds to and receive funds from accounts with any other bank in India, who are the members of this payment system. Through the fast money mode of funds transfer, money can be sent / received between 2 customer accounts maintained within the Bank. Customers can also send and receive funds to and from abroad through the arrangements made with Society for Worldwide Inter-bank Financial Telecommunication (SWIFT).

During the year, the Bank has launched a special Savings Bank product exclusively for women called SIB MAHILA. This packaged savings bank product, which is linked to an RD account, is offered along with free insurance cover in respect of house-to-house travel and death due to accident. There are two categories of this product bundled with a variety of free banking / technology services. Targeting the investors in the Stock Market, Bank launched another SB product SB Invest where the customer is free to operate the account without any obligation to keep a minimum balance. This is a zero balance account but with complete banking facilities - at par payable cheques, any branch banking, net banking, mobile banking, online trading and demat service.

Bank offers the depository services for the benefit of the customers. Through this facility, customers can hold their securities in electronic form with Central Depository Services (India) Ltd. (CDSL). For e-trading, Bank has launched SIBer Trade - the online trading facility to buy stocks and shares from Bombay Stock Exchange Ltd (BSE) and National Stock Exchange of India Ltd. (NSE) through a tie-up arrangement with Geojit BNP Paribas Financial Services Ltd.

Pension Fund Regulatory and Development Authority (PFRDA) has launched the New Pension System (NPS) across the country. To cater this service to the subscribers of NPS, PFRDA has identified the Bank as a Point of Presence (POP) and the Bank launched the service w.e.f. May 1, 2009. It is proposed to offer this service through all our branches by the end of June 2010. With effect from April 1, 2010 tax will be deducted at source on interest earned on time deposit with banks at higher rates if Income Tax Permanent Account Number (PAN) is not made available. Based on the representations received from the customers, Bank has made a direct arrangement with M/s. UTI Technology Services Ltd. for servicing the PAN card applications. This is in addition to the already launched KYC Certification services for the Mutual Fund Investors, in association with M/s. CDSL Ventures Ltd. (CVL).

Mutual Funds are one of the preferred investment options for all those who wish to play safe, yet earn more than what traditional saving avenues offer. During the year, Bank entered in to a tie up with LIC Mutual Fund and with this, Bank offers a range of funds from 14 performing Mutual Fund companies.

From June 2009 onwards, Bank acts as a corporate agent of Life Insurance Corporation (LIC) of India for selling the life insurance products. All our branches are equipped to provide customised services to our account holders in the area of life insurance and with the wide and varied life insurance products provided by LIC, our Bank is in an unique position to meet the aspirations of our customers for protecting their families through innovative life insurance products from the countrys largest insurer, namely LIC of India.

General Insurance offers various health packages and policies to protect the assets and goods against various perils. Bank also acts as a corporate agent for the distribution of insurance products of M/s. Bajaj Allianz General Insurance Company. During the year, facility for online purchase of insurance policy is also provided in association with M/s. Bajaj Allianz General Insurance Company. Bank has entered in to an arrangement with M/s. Cholamandalam MS General Insurance Company to offer Health Insurance coverage to all our customers at competitive rates of premium and a very efficient after sales service.

SIBs ATM cum Debit Card (SIB Card) enables withdrawal of cash through ATMs across the globe. Customers can withdraw cash from any ATM displaying the CIRRUS logo of Mastercard International or the INFINET logo of Institute for Development and Research in Banking Technology (IDRBT), the technical arm of RBI (now taken over by National Payments Corporation of India). SIB Card can be used in merchant establishments equipped with Point-of-Sale (POS) terminals in India and abroad, displaying the MAESTRO logo of MasterCard International, for purchase of goods and services worth up to Rs.1 lakh per day. In order to widen the ATM/POS reach, Bank has recently acquired the principal membership of VISA International. With this Visa Internaltional membership, the Bank can issue and acquire the whole range of VISA debit cards and prepaid cards which are expected to be launched during the current year.

Sibernet - the internet banking service of the Bank, facilitates online and any-time banking transactions. Bank has made arrangements with three major aggregators in the country to provide e-commerce / online payment services to the customers. Customers can perform online transfer of funds from one account to another, online bills & utility payments, e-shopping, e-commerce and make offerings & book for Poojas with the famous Guruvayur Sree Krishna temple in Kerala.

Customers of the Bank enjoy the benefit of Mobile Banking Service where, transaction alerts are sent to the customers on a real time basis, using the SMS technology. This facility is available to NRI customers also. This year, the Bank has launched M- Commerce facility as a value added service in association with M/s. Paymate. M-commerce is an entirely new breed of secured payment channel, which involves online and real time payments by debit to the customers bank account which is authenticated through the registered mobile phone number of the customer.

The Banks award winning website provides a host of information to the customers. Customers can locate the branch and ATM in a locality based on State and District filters. Contact details of the branches along with the email ID, branch code, IFSC codes and name of branch managers are available for quick reference. Contact details of Head Office departments and Regional Offices are also available. Direct links to make online bill payments, online shopping and online trading are available in the homepage itself. Visitors can lodge the complaints, send the feedback on customer satisfaction, watch the stock information of the Bank, get the latest Forex rates etc. through the Banks website. Bank has also put in place a Call Centre with Toll Free facility at Kochi, and this has been operational for more than a year now.

PERSONNEL

In line with the growth in business volume as well as its geographical spread, the Bank has embarked upon a major recruitment drive with the primary objective of acquiring manpower of the right quality and numbers. Local recruitments have been made to synchronise with the culture of the particular region. Campus recruitments have also been done so as to retain its competitive edge and also to ensure that required skills are successfully brought on board.

New Software for maintenance of Personnel Data - Human Resources Management Software Solution (HRMSS)

In order to improve the management of Human Resource in the Bank, a new software has been put in place which serves to provide access to the Data Bank of all employees and is accessible through the Banks network by all branches and offices. The service records along with the photographs of the employees are all captured in the Data Bank and is available in HRMSS. To make it more comprehensive, more modules like details of deputation, promotion, leave and LFC records, the training needs of the employees etc. will be added to the Data Bank in the second phase which will be completed during the current year.

Introduction of Online Recruitment

Software for online registration of applications for general recruitment was developed in house. This facilitated online validation of eligibility criteria and invalid applications could be reduced substantially for the last recruitment test in January, 2010.

Talent Acquisition

Campus recruitment has become a thrust area for acquiring talented personnel in Banks workforce. A total number of 95 officers were recruited from campuses of various reputed colleges and universities from different centres during the year under review.

Talent Retention

Job satisfaction is the major morale booster for talent retention. Starting from comfortable posting & proper training, the Performance Linked Incentive Scheme of the Bank is very unique in the industry. They also have opportunity for promotions through fast track promotion policy. The attrition rate of Bank has been brought down below 2%.

Employee Stock Option

During the financial year 2008-09, the Bank has instituted an Employee Stock Option Scheme to enable its eligible employees to participate in the future growth and financial success of the Bank. The Banks shareholders approved the plan on

August 18, 2008 for the issuance of stock options to the employees. Compensation and Remuneration Committee of the Board granted the options on November 21, 2009 at a discount of 10% on the closing price of the shares quoted on NSE on November 20, 2009.

Under the Scheme, Bank has granted 30,72,500 options to eligible employees which works out to 2.72% of the paid up share capital of the Bank as at March 31, 2010. This scheme has been introduced by the management to reward eligible employees with options which when vested and exercised will give rise to acquisition by the said employees of Equity shares equivalent to the option exercised.

With a view to maintain highest standards of personal ethics, all the Directors of the Bank including the Chairman and Managing Director & CEO have voluntarily decided not to accept any stock options, though the shareholders of the Bank were gracious enough to permit grant of stock options to all the Directors of the Bank during the previous Annual General Meeting.

SIBLINK

‘SIBLINK, Banks corporate house magazine, has been functioning as an internal PR tool educating and motivating the staff for better performance and is published every quarter.

Staff Position

As on March 31, 2010, the Bank had 4860 personnel on its rolls on full time basis as against 4523 as on March 31, 2009. Cadre wise break up is as under:

Officers 2234

Clerks 1973

Sub staff 653

4860 Part-time employees 272

5132

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

The operations of the Bank are not energy intensive. However, the Bank has taken all possible measures to control and reduce consumption of energy. The Bank continues to undertake sufficient measures for innovation and absorption of technology in banking business.

With a view to conserve energy and to protect the environment, the Bank has taken a policy decision to buy only energy efficient equipments bearing 5 star rating of Bureau of Energy Efficiency of Government of India for all our requirements in future.

The Company, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to encourage export credit.

PARTICULARS OF EMPLOYEES

Information as required by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given under:-

Name, Designation Remun- Experience Qualification eration (in years) and Age (in years)

Dr. V.A.Joseph, M.Com., LLB, MD & CEO Rs.41.58 38 CAIIB, PhD lakhs (HRD), MPM, 59 Years.



Name , Date of Last Qualification commen- employ- and Age cement ment (in Years) of employ- ment

Dr. V.A.Joseph, M.Com., LLB, CAIIB, PhD (HRD), MPM, 59 Years. General December, Manager 2003 of Syndicate Bank at Mumbai

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Bank has formulated a CSR Policy to guide our strategic planning and provide a roadmap for our CSR initiatives, which is an integral part of overall business policy and is aligned with our business goals.

The CSR Policy covers the following core elements:

Care for all Stakeholders

Ethical functioning

Respect for Workers’ Rights and Welfare

Respect for Human Rights

Respect for Environment

Activities for Social and Inclusive Development

Implemented Minimum Wages for Contract workers

The Bank has always been keen in discharging its social responsibility. As part of the continued efforts to be an active player in the field of sustainable development, the Bank has been in the forefront to popularise inclusive growth. Towards achieving the objective, we are one of the pioneers in starting the no frill account for the less privileged. Bank has been making all out efforts in extending finance to small and micro-enterprises and the participation in the government sponsored schemes like SJSRY has been quite impressive. The Bank believes that agriculture and allied activities form an integral part of the development and therefore, emphasis is given to achieve maximum flow of credit to the eligible activities. Considerable assistance by way of finance and non-refundable contributions have been given towards palliative care, AIDS avoidance, general medical care for the under privileged, furtherance of education etc. Bank has adopted a few villages in Kerala with a view to cater to their all-inclusive growth.

The Bank is determined to ensure that environmental sustainability is given the adequate priority. We have been encouraging financing and setting up of non-conventional energy production units such as wind mill, solar energy gadgets etc. More emphasis will continue to be given towards growth of such units. Infrastructure development is a major requirement for the long term development. Accordingly the Bank has been participating in viable projects such as power generation, road and bridge construction, oil exploration etc., referred to for financing. As a long term sustenance strategy, while taking up medium and large scale projects with a threshold limit of Rs.50 crore and above, we are examining the impact on the environmental issues like carbon emission, damage to the eco system, effect on the virginity of the land surface etc.

The Bank has taken a decision that any new construction by the Bank shall conform to the green concept and towards this goal the new Data Centre building being constructed at Ernakulam is expected to get a good Green Rating by the Indian Green Building Council.

SIB STUDENTS ECONOMIC FORUM (SIBSEF)

Students Economic Forum, which has completed 18 years after its first publication was launched in December 1991. It is a monthly publication discussing and analyzing a theme relating to important economic affairs and events. So far 220 themes have been published. In response to the requests from our readers and well wishers, we compiled the first 201 themes of this publication in 4 volumes. The objective of this venture is to kindle interest in economic affairs in the minds of our younger generation and also to empower the student community. Although it is a publication primarily targeted at the student community, the feedbacks received at our end show that the booklet is being well referred to by academicians, administrators, bankers and researchers. It is also a source of reference for the editors of various publications, including banking journals.

The following topics were discussed during the year 2009-2010: IFRS (April-2009), RBI Annual Policy Statement - 2009-10 (May- 2009), Microfinance Part-I (June-2009), Microfinance - Part-II (July-2009), Union Budget 2009-10 (August-2009), Limited Liability Partnerships (September-2009), Interest Rate Futures (October- 2009), MSMEs (November-2009), ASEAN - India Free Trade Agreement (December-2009), Tax Reforms in India- Direct Taxes Code - Part-I (January-2010), Tax Reforms in India - Goods & Services Tax - Part II (February-2010), Union Budget - 2010- 11 - the path of Fiscal Prudence (March-2010). Open access is also made available to this publication through the "Students Corner" page of the Banks website.

FINANCIAL INCLUSION INITIATIVES

As on March 31, 2010, Bank has 580 branches in the country. Out of these, 358 branches are located in rural / semi-urban areas. Out of the proposed 60 new branches to be opened during the financial year 2010-2011, 33 branches (55%) will be opened in rural and semi-urban areas. We have so far opened 1,50,130 no frills accounts (basic SB Accounts facilitating financial inclusion), with a minimum balance requirement of just Rs.10/-. We have opened more than 5 lakh SIB Junior accounts, which is another financial inclusion product being offered by the Bank. This SB account is exclusively for the students.

In addition to this, Bank plans to adopt the Business Correspondent Model (Branchless Banking Model) for financial inclusion as permitted by RBI. As per the scheme, Business

Correspondents appointed by the Bank will facilitate basic banking services using the Hand Held Terminals (HHTs). Authentication will be done using the smart cards issued to the customers along with their finger print matches. It is proposed to implement the scheme on a pilot basis in 5 villages during the financial year 2010-11. As per the financial inclusion plan, the Bank proposes to cover at least 100 under banked villages by the end of financial year 2012-13.

ANTI - MONEY LAUNDERING (AML)

The Bank has attached great importance to Anti-Money Laundering and the transactions of all the branches of our Bank have been brought under the ambit of AML software. The alerts generated from the AML software are monitored on a daily basis and suspicious transactions are reported to Financial Intelligence Unit (FIU-India). In line with the RBI Guidelines, our Bank is strictly following the "Know Your Customer" norms at the time of opening new Accounts.

In order to educate the staff members at all levels, the Bank has provided a hand-book on "KYC/AML Guidelines", incorporating the various RBI Guidelines, to all the branch/ offices. We have also started conducting online tests on KYC/ AML, for the staff members at branches, so as to improve the knowledge level. With the motive of creating customer awareness towards compliance of KYC/AML guidelines, a notice was also published in leading newspapers.

E-CIRCULAR

The Bank has stopped the practice of issuing manual circulars and all the circulars of the Bank are uploaded using the e-circular software. In e-circular, Banks Policies, Guidelines and Forms are also uploaded so as to enable branches to take copies of the same for their immediate requirements.

DIRECTORS

Sri. A. S. Narayanamoorthy, Sri. Davy K. Manavalan and Sri. Mathew L. Chakola who retired at the 81st Annual General Meeting held on August 21, 2009, were re-appointed as Directors of the Bank. Dr. John Joseph retired from the Board w.e.f. February 12, 2010 on completing 8 years of Directorship as stipulated under the Banking Regulation Act, 1949. The Board places on record its appreciation for the invaluable services rendered by him during his tenure as Director. Sri. Mohan E. Alapatt was appointed as additional Director by the Board of Directors at its meeting held on March 1, 2010.

Pursuant to the provisions of Section 260 of the Companies Act, 1956, Sri. Mohan E. Alapatt vacates his office at the ensuing Annual General Meeting. A member of the Bank has expressed his intention to propose Sri. Mohan E. Alapatt as a candidate for being elected as a Director and has given a notice in writing along with a deposit of Rs. 500/-, in terms of Section 257 of the Companies Act, 1956.

In terms of the provisions of the Companies Act, 1956 and the Articles of Association of the Bank, Sri. Paul Chalissery and Dr. N. J. Kurian are the directors who retire by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment, and the Board recommends their re-appointment as the Directors of the Bank.

AUDITORS

The shareholders at its 81st Annual General Meeting held on August 21, 2009, appointed M/s. Deloitte Haskins & Sells, Chartered Accountants, Chennai, as the Central Auditors for the audit of Banks accounts for the year 2009-10.

M/s. Deloitte Haskins & Sells, Chartered Accountants, Chennai, vacate office at the end of the Annual General Meeting to be held this year but are eligible for re-appointment for the Financial Year 2010-11.

AUDIT AND INSPECTION

In addition to regular inspection of our branches at periodical intervals according to the rating awarded to the branches, we have a system of surprise inspection of branches as well. We also conduct Concurrent Audit in a selected number of branches, Stock Audit, Credit Audit, Revenue Audit to check income leakage etc. Besides, all our branches are subjected to statutory audit on yearly basis. Apart from this RBI also conducts an Annual Financial Inspection of our Bank.

In view of the various comprehensive audits and inspection covering all the areas of banking operations, a separate Management Audit is not considered necessary at present.

EXPLANATION FOR AUDITORS COMMENTS IN THE REPORT

The Auditors Report for the year 2009-10 does not have any qualifications. Hence, no explanation is required to be given in this regard.

CORPORATE GOVERNANCE

A separate report on the status of implementation of Corporate Governance as required under Clause 49 of the Listing Agreement with Stock Exchanges, and a certificate from M/s. Deloitte Haskins & Sells, Statutory Auditors of the Bank, are annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This has been dealt with in a separate section in the Annual Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217 (2AA) of the Companies Act, 1956, the Board of Directors hereby declare that: -

1. In the preparation of annual accounts for the financial year ended March 31, 2010, the applicable accounting

standards have been followed and proper explanation has been furnished to the extent of departures from those standards.

2. The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year 2009-10 and of the profit of the company for that period.

3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and Banking Regulation Act, 1949 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

4. The Directors have prepared the annual accounts for the financial year ended on March 31, 2010, on a going concern basis.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where we operate, other Government and Regulatory Authorities, including stock exchanges, where the Banks shares are listed and correspondent banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the Banks shareholders and customers for their continued support, patronage and goodwill. The pillars of any Institution are its staff, executives and administrators, more so in the case of a service institution like our Bank. The Bank has no hesitation in acknowledging this fact and thank all of them for their diligence and loyalty towards the Bank. The Board, therefore, expresses its deep appreciation for the dedicated service rendered by employees of the Bank at all levels.

Thrissur By Order of the Board

May 25, 2010 G.A. SHENAI CHAIRMAN