Mar 31, 2022
TOTAL BUSINESS
Your Bank''s total business crossed the milestone figure of ''1,25,000 Crore and reached ''1,26,225.68 Crore as on March 31, 2022, an increase of ''10,127.12 Crore over the previous financial year position of ''1,16,098.56 Crore.
DEPOSITS
The Gross Deposits grew by 8.53% and stood at ''68,676.16 Crore as on March 31, 2022, an increase of ''5,397.73 Crore over the previous financial year position of ''63,278.43 Crore.
The Term Deposits grew by 7.56% and stood at ''44,772.51 Crore as on March 31, 2022, an increase of ''3,147.90 Crore over the previous financial year position of ''41,624.61 Crore.
Your Bank''s CASA balances grew by 10.39% and stood at ''23,903.65 Crore as on March 31, 2022, an increase of ''2,249.82 Crore over the previous financial year position of ''21,653.83 Crore. The CASA balance as on March 31, 2022 is constituted by Savings Bank deposits of ''16,982.71 Crore and Other Demand Deposits of ''6,920.94 Crore. The CASA ratio of the Bank as on March 31, 2022 stood at 35%.
The Board of Directors of your Bank take great pleasure in presenting the 103rd Annual Report on the business and operations of the Bank together with the audited accounts for the financial year ended March 31, 2022.
The Banking Industry has withered off the pandemic shock and delivered a revived performance on the back of economic recovery. Financial Year 2021- 22 has been a landmark year for your Bank with uptick in most of the vital business parameters and highlights of which are furnished below:
Particulars |
March 31, 2022 ('' in Crore) |
March 31, 2021 ('' in Crore)@ |
Deposits |
68,676.16 |
63,278.43 |
Advances |
57,549.52 |
52,820.13 |
Investments |
17,755.08 |
16,465.46 |
Total Income |
6,356.73 |
6,389.26 |
Total Expenditure |
4,726.52 |
5,097.74 |
Operating Profit |
1,630.21 |
1,291.51 |
Net NPA |
1,260.79 |
1,719.39 |
Net Profit |
673.27 |
359.39 |
@ Figures for the previous period have been re-grouped and re-classified in adherence to RBI Master Direction on Financial Statements - Presentation and Disclosure dated 30.08.2021, where necessary, to make them comparable with current period figures.
During the year, your Bank''s credit portfolio grew by 8.95% and stood at ''57,549.52 Crore as on March 31, 2022, an increase of ''4,729.39 Crore over the previous financial year position of ''52,820.13 Crore.
Growth in Advances is majorly contributed by Agriculture, Commercial and Retail Advances during the period under review. As your Bank decided to cautiously grow its Corporate book, the growth was muted at 1.61% (after deducting technical write offs). The details of the Advances portfolios for financial year 2021-22 and financial year 2020-21 along with their comparative growth is furnished in the table below:
CLASSIFICATION OF ADVANCES PORTFOLIO
Particulars |
March 31, 2022 ('' in Crore) |
March 31, 2021 ('' in Crore) |
y-o-y Growth % |
Agriculture |
13,043.68 |
11,530.98 |
13.12 |
Retail (Personal Banking) |
13,264.83 |
12,256.90 |
8.22 |
Commercial |
18,697.86 |
16,687.37 |
12.05 |
Corporate |
12,543.15 |
12,344.87 |
1.61 |
Total Advances |
57,549.52 |
52,820.13 |
8.95 |
As on March 31, 2022, the Priority Sector Lending of your Bank stood at ''25,216.01 Crore and constituted 47.04% of its Adjusted Net Bank Credit (ANBC) as against the statutory mandate of 40%.
Your Bank''s average Agriculture Advances, in terms of RBI guidelines, stood at ''10,476.49 Crore as on March 31, 2022, which constituted 20.25% of ANBC, as against the regulatory stipulation of 18%. Average Advances to Micro Enterprises and Weaker Sections stood at 7.59% and 11.69% respectively. Your Bank has continuously achieved and surpassed the statutory Agriculture target by its focused lending strategies to the Agriculture and its allied sectors.
Your Bank has been focusing on containing the slippages through better credit monitoring as well as intensified efforts to recover the impaired assets. Bank''s vigorous follow up through its dedicated Call Center, feet-on-street capabilities at branches, dedicated Asset Recovery Branches and time-tested recovery process have resulted in a much improved Asset Quality.
The improvement in Asset Quality is also largely attributable to the robust risk management practices of the Bank, tightening of credit evaluation and focus on granulised and diversified loan book spread across different customer segments and products.
NPA Management Committee and Executive Committees are monitoring and reviewing the recovery process for initiating timely and speedy action for Recovery.
The Gross NPAs of your Bank reduced by 1.89% and stood at ''3,431.04 Crore, a reduction of ''711.83 Crore over the previous year position of ''4,142.87 Crore. Correspondingly, Net NPA of your Bank also reduced by 1.13% and stood at ''1260.79 Crore as on March 31, 2022, a reduction of ''458.60 Crore over the previous financial year position of ''1,719.39 Crore. In terms of percentage, your Bank''s Gross Non-Performing Assets (Gross NPA) and Net Non-Performing Assets (Net NPA) stood at 5.96% and 2.28% as against 7.85% and 3.41% of the previous year respectively. Further, Your Bank''s SMA30 levels has been well contained and confined to 0.82% as against 1.63% of previous year.
Your Bank has carried out focused recovery drive on a continuous basis which resulted in improved recovery performance during the past three years. The Provision Coverage Ratio stood at 80.27% and your Bank is continuously strengthening the ratio for the past five years.Your Bank will take all possible steps to curtail slippages and expedite recovery in existing SMA / NPAs.
Your Bank''s investment portfolio increased by 7.83% and stood at '' 17,755.08 Crore as on March 31, 2022, an increase of ''1,289.62 Crore over the previous financial year position of ''16,465.46 Crore. The average investment for the financial year 2021-22 stood at ''17,079.04 Crore. The investment portfolio''s composition is consistent with the Investment Policy of the Bank which emphasises on liquidity and regulatory management besides providing gains.
Interest income earned on investments during the financial year 2021-22 was ''924.78 Crore, a marginal decrease from the previous year earnings of ''941.79 Crore. Profit booked through sale of investments was at '' 56.96 Cr for the financial year 2021-22. With a view to prevent large volatility, Modified Duration of overall portfolio including Held to Maturity (HTM) was maintained at a lower level of 3.07 years. Liquidity position was maintained at comfortable levels throughout the year under review.
Bank''s merchant turnover stood at ''21,623 Crore as compared to the previous financial year''s level of ''20,021 Crore. Export credit registered a growth of 13.23% during the year, from ''1,194.82 Crore of the previous financial year to ''1,352.85 Crore. The Income earned through foreign exchange transactions was ''66.02 Crore for the financial year 202122 as against ''57.80 Crore for the financial year 2020-21. Exchange Profit of ''36.98 Crore and Commission & others of ''29.04 Crore forms part of the Total Income.
INCOME
Your Bank''s Interest Income increased by 2.14% and reached ''5,587.67 Crore for the financial year 2021-22, a marginal increase of ''117.24 Crore over the previous year earnings of ''5,470.43 Crore. Net Interest Income of your Bank increased by 15.08% and reached to ''2,715.37 Crore, an increase of ''355.86 Crore over the previous year Net Interest Income of ''2,359.51 Crore. The growth in Net Interest Income is in tandem with the topline growth in loan books of the Bank. Further, your Bank earned Non-Interest Income of ''769.06 Crore for the financial year 2021-22. The Yield on Advances and Investment stood at 8.47% and 5.41% respectively.
EXPENDITURE
Your Bank''s Interest expenditure reduced by 7.67% and reached ''2,872.30 Crore for the financial year 2021-22, a saving of ''238.61 Crore over the previous year Interest Expenditure of ''3,110.91 Crore. The Operating expenses also decreased from ''1,986.83 Crore of the previous financial year to ''1,854.22 Crore. Your Bank regularly monitored both its operating and establishment expenses during the year and tight controls are exercised on the expenditures.
Your Bank''s Cost of Deposits eased to 4.30% as against 4.96% of the previous financial year. The Net Interest Margin (NIM) improved by 29 bps and stood at 3.69% over the previous year position of 3.40%, consequent to improvement in Spread between yield on funds and cost of funds to 3.02%.
PROFIT
Your Bank''s Operating Profit increased by ''338.70 Crore and reached ''1,630.21 Crore for the financial year 2021-22, registering a significant growth rate of 26.23% over the previous year Operating Profit of ''1,291.51 Crore. Your Bank''s Net Profit sharply increased by ''313.88 Crore and stood at ''673.27 Crore for the Financial Year 2021-22, a remarkable growth rate of 87.34% over the previous year profit of ''359.39 Crore.
APPROPRIATIONS
The Net Profit of ''673.27 Crore along with ''1.06 Crore brought forward from the previous financial year, aggregating to ''674.33 Crore, was appropriated as follows:
Appropriation - Transfer to |
Amount ('' in Crore) |
Statutory Reserve |
168.40 |
Capital Reserve |
15.52 |
Investment Fluctuation Reserve |
- |
Special Reserve |
40.00 |
General Reserve |
320.00 |
Balance carried to Balance Sheet (including Proposed Dividend of ''128 Crore |
130.41 |
Your Bank has formulated the Dividend Distribution Policy as per the requirements of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (âSEBI LODRâ) and guidelines issued by Reserve Bank India. The objective of the Policy is to ensure an equitable balance between rewarding the shareholders through dividend and retaining sufficient funds for future growth of the Bank. The Dividend Distribution Policy is available on the Bank''s website at https://www.kvb.co.in/docs/dividend-distribution-policy.pdf
Accordingly, considering the capital position of the Bank and the quantum of dividend pay-out permitted, Board of Directors of the Bank are pleased to recommend a Dividend of ''1.60 per equity share of face value of ''2/- each i.e., 80%, for the financial year 2021-22, payable to those shareholders whose names appear in the Register of Members as on Book Closure/ Record Date. The Dividend pay-out is in accordance with Bank''s Dividend Distribution Policy and is subject to the approval of the shareholders at the ensuing 103rd Annual General Meeting and also any regulatory/statutory authorities, if required.
In accordance with Accounting Standards 4 - Contingencies and Events occurring after the Balance Sheet date - notified by the MCA on March 30, 2016, the proposed dividend amounting to ''128.00 Crore has not been shown as an appropriation from the Profit and Loss account as of March 31, 2022 and correspondingly not reported under Other Liabilities and Provisions as at March 31, 2022 (is reported under balance of profit).
PANDEMIC AND GEO POLITICAL IMPACT ON BUSINESS
The disruptions from repeated waves of COVID-19 have come in the way of sustained recovery and the quarterly trends in GDP essentially followed the ebbs and flows of the pandemic with no country, institution, society or individual being immune from COVID-19''s impact. Consequently, a single strategy may not suffice. Supported by the Government''s extensive vaccination drive, your Bank proactively managed the portfolio and strengthened its capital buffers.
Further, the Central Government and RBI collectively implemented a host of relief measures including extension of tenor, restructuring of advances, extension of emergency credit lines backed by the guarantee of NCGTC Ltd, ease of assessment and renewal, FITL assistance to service the working capital interest etc. Your Bank extended all the applicable relief measures to the customers to help them come out of the operational, financial, business continuity and cash flow related issues:
⢠Extended Guaranteed Emergency Credit Line (GECL) of '' 2,452 Crore
⢠Exposures totaling to ''1,274 Crore were permitted for restructuring as a part of relief measure
⢠All the relief measures shall be phased out by March 2023.
Russia''s invasion of Ukraine caused Europe''s largest refugee crisis since World War II. The war in Europe is lingering and we are facing newer challenges each passing day which is accentuating the existing supply chain disruptions. As a result, food, energy and commodity prices remain elevated. KVB has âNIL'' exposure to Russia or Ukraine, as on May 2022.
As per Economists, Prices of commodities, services, manufacturing have been soaring in the last 12 months. Inflation began in 2021 and the Ukraine war only accelerated it.
As the economy continues to recover from COVID-19, due to the ongoing Russia-Ukraine conflict, financial markets have exhibited increased volatility. Business strategies are developed duly taking in to account the possible impact of inflation, rising interest rates, its sequential effect on both the social and economic activities of the customers. Business targets are derived and assigned, factoring the competition. KVB''s strategic focus is to offer need-specific financial solutions/ products/services by providing customer experience through delivery of quick and efficient services.
Your Bank is monitoring the developments closely without losing sight on looking into the requirements for interim course corrections on our business strategies. Your Bank is well placed in terms of capital adequacy, business growth and continuity, availability of resources including human resources, technology infrastructure, well designed policies, systems and controls, to take the business forward duly insulating our Bank from all the foreseeable risks.
The Authorised share capital of the Bank stood at ''200.00 Crore divided into 100 Crore equity shares with a face value of ''2/- each as on March 31, 2022. During the financial year under review, there has been no change in the Authorised share capital of the Bank.
During the financial year under review, the Bank has allotted 989 Equity Shares of face value ''2 each pertaining to Rights and Bonus Issues held in the abeyance category. Further, Bank has allotted 6,89,964 Equity Shares of face value ''2 each to the employees who exercised their options under KVB ESOS 2011 Scheme and KVB ESOS 2018 Scheme.
Post allotment of the aforesaid equity shares, the Issued Share Capital increased from ''159,99,75,284 to ''160,13,55,212 comprising 80,06,77,606 equity shares with a face value ''2/- each and the Paid-up Share Capital increased from ''159,86,41,438 to ''160,00,23,344 comprising 80,00,11,672 equity shares with a face value ''2/- each. Other than the aforementioned, there is no change in capital structure of the Bank during the year under review.
The Bank''s Net owned funds grew to ''7,596.20 Crore as on March 31, 2022 from ''6,959.74 Crore of the previous financial
year. The Market Capitalisation of the Bank stood at ''3,704.05 Crore as on March 31, 2022.
Bank''s Earnings Per Share (Basic) stood at ''8.42 and the Book Value of shares as on March 31, 2022 was ''94.95 per fully paid equity share of face value ''2/- each.
DEBT INSTRUMENTS & CREDIT RATING
The Bank had issued Basel III Compliant Unsecured, Redeemable Non-Convertible Tier II Bonds to the value of ''487 Crore with a coupon rate of 11.95% p.a. and a tenor of 123 months (maturing on June 12, 2029) in March 2019 through Private Placement, having a call option at 5th Coupon Payment date i.e., March 12, 2024 or on any Coupon Payment date thereafter. The third coupon interest has been duly paid to the Debenture holders on March 12, 2022.
Status of credit rating: |
||||
Particulars |
Rating Agency |
Rating |
Rating Action |
Date of Revision |
Basel III Tier II Bonds - Issue of ^ 1,200 Crore where ^ 487 Crore was utilised |
ICRA |
[ICRA] A(Positive)#A |
Reaffirmed |
December 28, 2021 |
India Ratings & Research |
IND A /Stable A |
Affirmed |
February 07, 2022 |
|
Certificate of Deposits Programme - |
ICRA |
[ICRA] A1 |
Reaffirmed |
July 02, 2021 |
''3,000 Crore |
[ICRA] A1 |
Reaffirmed |
September 30, 2021 |
|
[ICRA] A1 |
Reaffirmed |
December 28, 2021 |
||
[ICRA] A1 1 |
Reaffirmed |
March 25, 2022 |
||
CRISIL |
CRISIL A1 |
Reaffirmed |
May 12, 2021 |
|
CRISIL A1 |
Reaffirmed |
July 16, 2021 |
||
CRISIL A1 |
Reaffirmed |
September 22, 2021 |
||
CRISIL A1 |
Reaffirmed |
December 07, 2021 |
||
CRISIL A1 1 |
Reaffirmed |
February 24, 2022 |
# The outlook is revised to Positive from Stable
A Instruments with this rating are considered to have an adequate degree of safety with respect to the timely servicing of financial obligations. Such instruments carry a low credit risk.
The Bank''s Capital Adequacy Ratio firmed further and stood at 19.46% as on March 31, 2022, as per BASEL III norms. This is well above the statutory limit of 11.50% (9% plus Capital Conservation Buffer of 2.50% is required to be maintained as of March 31, 2022) as prescribed by the Reserve Bank of India Guidelines.
Your Bank does not have any Subsidiaries or Associates /JVs to report during the year under review.
MANAGEMENT DISCUSSION AND ANALYSIS
Pursuant to provisions of the Regulation 34(2) (e) of SEBI (LODR) Regulations, 2015, the Management Discussion and Analysis Report for the year is provided in a separate section of the Annual Report.
NETWORK OF BRANCHES
We have seen rapid changes in the banking sector, especially the rise of digitalisation of customer interface due to the quick adaptability of customers to digital transactions, more so after the pandemic outbreak. Your Bank believes that more and more customers shall prefer the digital mode of operations, rather than visiting bank branches, and hence is focusing on enhancing its digital capabilities accordingly.
Your Bank has added 11 Branches, Five back offices and a Currency Chest during the financial year 2021-22. The branch network including Corporate Business Units, Business Banking Units, Asset Recovery Branches, NEO and Precious Metal Division totals to 822 as on March 31, 2022, excluding three Extension Counters and five Satellite Offices.
During the year under review, your Bank has installed 81 new ATMs and 21 Bunch Note Recycler Machines (BNRM) to provide uninterrupted Banking services to customers. As
The Bank also conducted soiled note exchange melas and distribution of coins through its branches in coordination with Currency Chests.
of March 31, 2022, there are 1,639 ATMs, 584 Bunch Note Recycler Machines (BNRM), 178 Self-Service Passbook Kiosks.
Financial Inclusion ensures availability of basic banking services and products to all, thereby reaching the unreached, unbanked and under-banked areas. Bank has been the pioneer in taking initiative in the area of Financial Inclusion. Bank is providing various Business Correspondents (BCs) services & implementing comprehensive Financial Inclusion Programme through effective utilisation of BCs in Sub Service Area (SSA). SSA is a cluster of few villages and is linked to one base branch of the Bank.
Your Bank has reached the underprivileged segment of the society and extended its focused financial services through 142 Bank Mitras in rural villages, 3 Bank Mitras in urban locations with 39 Ultra Small Branches. The Bank Mitra use Micro ATM for providing the banking services.
Your Bank continues to provide basic financial products including Basic Savings Bank Deposit Account (BSBDA), Insurance products and Pension accounts and thereby support the Government in implementation of various social welfare schemes.
Pradhan Mantri Jan Dhan Yojana (PMJDY):
Your Bank has opened 1003 PMJDY accounts during the year under review. The balances outstanding in the PMJDY accounts as on March 31, 2022 was ''18.82 Crore. The Bank has issued 1003, Rupay Debit Cards under PMJDY accounts during the year. Micro ATM devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting Rupay Card transactions/Aadhaar enabled Payment system (AePs)/ Third Party deposit, Balance enquiry, Mini statement. Bank Mitras have done 7.76 Lakh transactions, amounting to ''88.11 Crore during the year under report which includes of DBT/Old Age Pension/MGNREGS transactions.
Micro credit (SHGS Bank linkage):
Your Bank is providing credit facilities to Self-Help Groups (SHG) and Joint Liability Groups (JLG) to meet the credit needs of the poor. As on March 31, 2022, the Bank has 152 JLG loans with outstandings of ''1.46 Crore.
CURRENCY CHEST
Bank has opened a new Currency Chest at Trichy during the Year under review. As on March 31, 2022, your Bank has eight Currency Chests across different locations in Tamil Nadu, Andhra Pradesh, Telangana and Karnataka to supply adequate cash to Branches & ATMs and the Clean Note Policy of RBI is being adhered to. Currency Chests also support the branches to maintain cash within the retention limit for smooth operations.
Financial literacy:
Financial Literacy programes are intended to provide basic banking knowledge to people across various corners of the Society. Your Bank has been in the forefront in creating awareness to the rural mass on the financial services and products through the Financial Literacy Campaigns. During
the 2021-22, your Bank has conducted 55 financial literacy campaigns in Rural, Semi Urban/Urban areas.
TECHNOLOGY INITIATIVES
Your Bank''s digital strategy combines the best of traditional and digital banking worlds. Your bank is continuously focusing on creating innovative products & solutions while upholding previous standards and supports overall growth of business.
During this period, your bank has incorporated new functionalities in Internet Banking, Mobile Banking and Digital Lending System. These features strengthen the customer engagement levels and enhances sophistication to users to carry out their banking needs. Your Bank introduced many technological initiatives, apart from refining the existing offerings, which includes the following:
⢠E-sign Based Savings & Individual Current Account Opening (paperless process).
⢠Issuance of EMV Debit Cards (VISA) with Contactless feature for usage in POS terminals.
⢠Channels claims (ODR) enabled in Dlite - Mobile Banking & Internet Banking.
⢠Self-service Debit card controls (Hotlist, Card On/Off, Enable & Disable of transaction options like E-commerce, POS, ATM, International and Contactless) enabled in Internet banking.
DIGITAL TRANSFORMATION PROJECT Web based online business loans:
Your bank has digitised its entire range of products in the Loan Portfolio viz. Retail Loans, Commercial Advances and Corporate Borrowings. Your Bank is making the best use of its technological infrastructure to manage operations from on-boarding of borrowers till disbursement of loans, resulting in better portfolio performance. Your Bank is the first to implement a complete end-to-end digitised loan sanction process flow and has been consistently redefining the Rule Engine with underwriting models on an ongoing basis. We are poised to grow our market share by leveraging our digital capabilities and have also digitised Credit, Risk and Monitoring activities for better internal control.
During the year, your Bank has implemented the digital journeys for commercial & agricultural products. Also, your Bank is regularly upgrading the existing digital lending system to adhere the compliance norms and adding functionalities for business growth.
Retail loans on mobile/Tablet:
During the year, the Retail Loan segment of your bank was strengthened further by including more loan products on the tablet-based application, as a part of its Digital
Transformation. The Retail Lending Digital application is now equipped with Housing Loans, Personal Loans, Vehicle Loans, Education Loans, Loan against Sovereign Gold Bonds, OD against property, GECL and FITL Loans, thus empowering the branches/business units to source quality applications from the market.
This digital system will also enable your bank to fetch the bank statement via Account Aggregator Eco System for all Retail loans with ease. Also, your Bank has added the Pre-Approved Personal loan journey via Dlite Mobile Banking App. Customers spanning across all geographies are now offered various loan products with quicker turnaround time and best-in-class user experience on the digital platform.
Co-Lending initiations:
Your Bank has commenced co-lending activities with Non-Banking Finance Companies in the Commercial Vehicle and Construction Equipment segments. In the Retail segment, your Bank has on-boarded and sanctioned consumer durable loans to 18.54 Lakh of customers during this fiscal year. Going forward, your Bank will continue to focus new business opportunities under this model for widening its horizons.
The Board and Senior Management of your Bank have instituted a robust Information Security Management System (ISMS) to protect the Bank''s Information Assets in accordance with the determined risk profile of the assets. Information Security function designs, develops, implements, maintains and monitors the Information Security Management System (ISMS). The Chief Information Security Officer (CISO) is responsible for providing leadership and oversight in the effective implementation and operation of ISMS in accordance with approved Policies and Procedures.
The ISMS is designed not just to focus on Confidentiality, Integrity and Availability of Information; but also, on the other principles such as Authenticity, Non-Repudiation and Accountability in order to ensure the following:
⢠Safety and privacy of sensitive customer and Bank information.
⢠Protect against any anticipated threats or hazards to the security or integrity of such information.
⢠Protect against unauthorised access to or use of such information that could result in harm or inconvenience to any customer.
The ISMS identifies reasonably foreseeable internal and external threats that could result in unauthorised disclosure, misuse, alteration or destruction of customer information or customer information systems. It assesses the likelihood and potential damage of these threats, taking into consideration
the sensitivity of customer information and assesses the sufficiency of policies, procedures, organisational structures, customer information systems, and other arrangements in place to control the risks.
Your Bank is maintaining the standard process of ISO/IEC 27001 by M/s TUV SUD since 2018, which is the international standard that is recognised globally for managing risks to the Information Security.
Your Bank has invested in modern technology solutions for timely application of security patches in the IT systems, host-based intrusion prevention, network behaviour analysis, privileged access control and introduced & implemented next generation firewalls and Web Application Firewall to manage and control identified risks in a manner corresponding with the sensitivity of the information and the complexity and scope of the Bank''s activities.
Your Bank has established fully functional Security Operations Centre (SOC) to monitor and defend the cyber combat in 24 x 7 x 365 days to protect the Bank Information and also invested in Artificial Intelligent based monitor and defence solution against Dark web cyber combat to protect the Bank Information.
Apart from technology tools and solution to safeguard the Bank''s Information, Bank contribute equally to up skill the awareness of employees about new threats in the cyber security landscape.
CALL CENTRE
The Call Centre of your Bank is a one stop Contact point of the bank which addresses queries / requests from customers, all over the world and works seamlessly round the clock.
Inbound contact centre:
Predominantly Inbound contact center receives calls / e-mails from customers and there is a dedicated team to honour the customers'' requirements. We also verify the rightness of transactions of our customers through outbound calls based on the triggers from our automated fraud transaction monitoring system. Further, inbound contact centre of your Bank facilitates the customers through Video-KYC for converting Low KYC accounts opened through Dlite in to Full KYC account, verification calls for the changes in registered Mobile number requested through Dlite & Internet Banking, feed-back calls for Door-step banking services.
Outbound contact centre:
Outbound Contact Centre calls the customers on behalf of the Bank for Sales/Service and collection purposes. The outbound call activity begins with onboarding potential customers and cross selling/up selling the services of the Bank to existing customers as well. Your Bank greets the new CASA customers of the Bank and also the new borrowers including
Corporate/Retail Credit Card customers by way of welcome callings which would help them to understand their rights & obligations promptly.
Tele-collection activities are designed with a view to improve the collection efficiency and consists of two segments viz., Predue calling and Postdue Calling. Predue calling is initiated to remind the customers of their due date and the EMI amount which is due to be paid. This calling helps customer to ensure that the EMI''s are serviced on time. Post Due Date calling is initiated to customers who have missed to pay their dues on the agreed payment date. The intensity of outbound calls for collection are segregated based on Severity of delinquency, No of Days Past Due, Track on repayment and customer''s Relationship with bank.
There is no change in the nature of business of the Bank during the financial year.
SYSTEM FOR INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY
Your Bank has computerised solutions at par to New-gen Private Sector Banks in order to serve its customers in respect of all banking requirements. Adequate infrastructure has been established in processing the day to day transactions. âFlexcubeâ is the CBS platform used in the Bank which is commonly used in several well-known banks in the Country. The CBS platform has well defined set-up to ensure internal financial controls viz., maker-checker requirements with adequate credentials. Automation of interest & charges application and accounting transactions ensures necessary internal financial control. IT audit in respect of CBS is also being conducted as per the stipulated periodicity which ensures adherence to the regulatory and mandatory guidelines. Exclusive unswerving reporting software is used by Bank with appropriate systems and protocols which have periodical review. The same ensures reporting of Bank''s business without any ambiguity. The Bank has standardised operating procedures in monitoring the account operations to have effective internal controls. Separate monitoring team has been identified to prevent and detect frauds and errors in the Bank. Compliance of regulatory /mandatory requirements are being taken care by an individual team which has its exclusive procedure in adhering to regulated and framed policies besides reporting of financial information in a disciplined manner. These systems enable the Bank to have established internal control over financial information reporting.
The Bank has Board approved policies in respect of various banking activities like lending, investment, borrowing etc. with well-defined hierarchy of officials vested with sanctioning powers. Inspection Department and Risk Management Department review various aspects of internal control,
adherence to procedure and review credit assessment protocols periodically.
Internal Financial controls of the branches are verified by the statutory branch auditors during their branch audit and covered in the report. Statutory Central Auditors of the Bank audit the internal controls over financial reporting of the Bank and submit a report to the Board of directors. Thus, the Bank ensures that the Internal Financial Controls placed are operating effectively.
RISK MANAGEMENT
Risks are inherent in any business and banking is no different. The Bank has adopted a multi-layered risk management framework to identify, assess, monitor and manage risks through the effective use of processes and information technology.
Objective of the risk management of the Bank is to balance the trade-off between risk and return, and ensure that the Bank operates within the Board approved risk appetite statement. An independent risk management function ensures that the risk is managed through risk management architecture as well as through policies and processes approved by the Board of Directors encompassing independent identification, measurement and management of risks across the various businesses of the Bank. The risk management function in the Bank strives to proactively anticipate vulnerabilities at the transaction as well as at the portfolio level, through quantitative or qualitative examination of the risks. The Bank continues to focus on refining and improving its risk measurement systems including automation of processes, not only to ensure compliance with regulatory requirements, but also to ensure better risk-adjusted return and optimal capital utilisation. The Board reviews the risk profile of the Bank at periodic intervals and ensures that risk levels are within the defined risk appetite.
The independent risk management structure within the Bank is responsible for managing the credit risk, market risk, liquidity risk, operational risk, other Pillar II risks like reputational risk and strategic risk.
The Board is responsible for designing the overall risk management framework by approving various policies relating to the Risk functions and has delegated powers to Board Level Risk Management and Asset Liability Management Committee (RM & ALM) for monitoring the implementation of Risk Governance Framework, compliance to various policies & processes. The RM & ALM ensures the same by closely monitoring & guiding the functions through Executive Level Credit Risk Management Committee, Market Risk Management Committee, Operational Risk Management Committee and Fraud Risk Management Committee, Asset Liability Management Committee, which regularly assess the functional efficiency of the Bank''s risk management processes. Minutes of these Committee meetings are placed
to the RM & ALM Committee of the Board for its perusal and further guidance.
Risk Management department maintain different policies covering inter alia credit, credit risk rating, market, liquidity, treasury, operational risk, risk culture, strategic risk management and integrated risk management functions.
Bank''s risk management objectives broadly cover proper identification, assessment, measurement, monitoring, controlling, mitigation and reporting of the risks across various business segments of the Bank. The risk management strategy adopted by your Bank is based on a clear understanding of the risks and level of risk appetite, which is dependent on the willingness of the Bank to take risks in the normal and stressed course of business.
Your Bank is viewing risk management as a core competency and tries to ensure sound management of risks through timely identification, assessment and management. The goal of risk management is to ensure that the Bank takes only calculated risks, which it can understand, monitor, mitigate and control, thereby minimising unexpected outcomes. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored.
Your Bank is well capitalised and CRAR stands at 19.46% as on March 31, 2022. Capital provides the buffer required to manage and meet the unexpected risks / losses that materialise in spite of prudent and timely risk management actions. In our opinion presently there are no material risks which threaten the existence of the Bank.
VIGIL MECHANISM/WHISTLE-BLOWER POLICY
In compliance with RBI Guidelines, provisions of the Companies Act, 2013, the Listing Regulations and SEBI (Prohibition of Insider Trading) Regulations, 2015 as amended; your Bank has in place the âWhistle-Blower Policyâ since 2011. The Policy also incorporates the Protected Disclosure Scheme (PDS) for Private Sector Banks, instituted by the Reserve Bank of India. The Audit Committee of the Board reviews the complaints received through Vigilance Mechanisms on quarterly basis. The Bank''s Whistle-Blower Policy is in synchronisation with all statutory and regulatory guidelines on Vigilance Mechanism. The details of the Whistle-Blower Policy is available on the website of the Bank. https://www.kvb.co.in/docs/whistle-blower-policy.pdf
DISCLOSURES PERTAINING TO THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The details related to Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are furnished in
the Corporate Governance Report that forms part of this Annual Report.
All transactions entered into by your Bank with related parties are repetitive in nature and are in ordinary course of business on an arm''s length basis. Omnibus approval is obtained from the Audit Committee for transactions which are repetitive in nature and the same are reviewed on periodic basis. The Bank''s policy on Related Party Transactions can be viewed at: https:// www.kvb.co.in/docs/related-party-transactions-policy.pdf.
During the year, your Bank has not entered into any materially significant transactions with the related parties, which could lead to potential conflict of interest, other than transactions entered into in the ordinary course of its business. Therefore, the provisions of Section 188 of the Companies Act, 2013 are not attracted and hence filing of AOC-2 is not applicable to the Bank.
AUDIT COMMITTEE RELATED DISCLOSURE UNDER SUB-SECTION 8 OF SECTION 177 OF THE COMPANIES ACT, 2013
The Bank has constituted a Board level Audit Committee in line with the requirements of the Companies Act, 2013, SEBI LODR and Reserve Bank of India guidelines, as amended from time to time. Board has accepted all the recommendations of the Audit committee. The details of the composition of the Audit Committee are disclosed in the Corporate Governance Report that forms part of this Annual Report.
DISCLOSURE RELATED TO DETAILS OF DEPOSITS ACCEPTED UNDER RULE 8(5) (V) OF COMPANIES (ACCOUNTS) RULES, 2014
Being a Banking company, the disclosures required as per Rule 8(5) (V) of Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
Disclosure requirements under Section 134(3)(g) of the Companies Act, 2013 are exempted to Banking companies, since the loans made, guarantees given, securities provided or acquisition of securities are in the ordinary course of business as specified in Section 186 (11) of the Companies Act, 2013.
In terms of Section 139 of the Companies Act, 2013 read with Sec 30(1A) of the Banking Regulation Act, 1949, it is proposed to re-appoint, M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank, who are retiring at the conclusion of the ensuing 103rd Annual General Meeting (AGM) and are eligible for re-appointment, subject to the approval of shareholders of the Bank. The Bank has received consent from the Auditors on their reappointment and confirmation to the effect that they are not disqualified to be re-appointed as the Auditors of the Bank in terms of the provisions of the Companies Act, 2013 and the rules made thereunder.
Accordingly, the Board of Directors have recommended to the shareholders, the re-appointment of M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank, to hold office from the conclusion of the ensuing 103rd AGM till the conclusion of the next AGM. Fee payable to Statutory Audit is proposed at ''1,10,00,000/-(Rupees One Crore Ten Lakh only) plus applicable taxes and out of pocket expenses with a cap of 10% of fees for the financial year 2022-23, subject to the approval of RBI and Shareholders of the Bank.
Members are requested to consider the re-appointment of M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan,
Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank.
Pursuant to the Regulation 33(1)(d) of the SEBI LODR, the Statutory Auditors have confirmed that they are subjected to the peer review process of the Institute of Chartered Accountants of India (ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.
Independent Auditorsâ Report
The Joint Statutory Central Auditors of the Bank viz., M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) together with M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S), have audited the accounts of the Bank for the FY 2021-
22 and their Report is annexed. Pursuant to Section 143(3) (i) of the Companies Act, 2013, the Statutory Auditors have also reported on the adequacy and operating effectiveness of the internal financial controls system over financial reporting, which has been enclosed as âAnnexure Aâ to Independent Auditor''s Report.
There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY 2021-22.
During the period under review, no frauds were reported by the Auditors under sub-section (12) of Section 143 of the Companies Act, 2013.
Secretarial audit and secretarial compliance report
In line with Sec 204 of the Companies Act, 2013 and Regulation 24A (1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Bank has appointed M/s Bapulal Yasar & Associates, Company Secretaries, Madurai to undertake the Secretarial Audit of the Bank for the FY 2021-22. The Bank produced all necessary records to the Secretarial Auditors for smooth conduct of their Audit. The Secretarial Audit Report for the FY 2021-22 is annexed to this report as Annexure - 1.
There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY 2021-22.
Pursuant to regulation 24A (2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI circular No. CIR/CFD/CMD1/27/2019 dated February 09, 2019, the Bank has obtained Secretarial Compliance Report, from the Secretarial Auditors of the Bank on compliance of all applicable SEBI Regulations and circulars/guidelines issued thereunder and the copy of the same was submitted to Stock Exchange within the prescribed timelines.
IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (IND AS)
Reserve Bank of India''s (RBI) guidelines for implementation of Ind AS by Banks in India are awaited. In the interim, Bank has submitted half yearly proforma Ind AS statements as per prescribed RBI guidelines. Further details are given in Schedule 18 - Notes to Account of the Balance Sheet.
COMPLIANCE WITH SECRETARIAL STANDARDS
Your Bank is in compliance with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India during the FY 2021-22.
Disclosures relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 134(3)(m) of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014 are detailed as under:
Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation at its branches/offices by installing LED lights in a phased manner. VRF (Variant Refrigerant Flow) AC Units have been installed at Trichy Divisional Office building to save electricity by energy conservation technology. During the FY 202122, Bank had spent ''0.35 Crore towards procuring energy conservation equipment.
Your Bank owns a 850 KW Wind Turbine Generator at Govindanagaram, Theni District in Tamil Nadu and the said unit generated 14,41,465 units during the year under review. The Bank is utilising the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also premises of Divisional Office at Chennai.
Your Bank has included additional level of security in accessing the core banking solution. Bio-Metric authentication acts as the second/additional level of authentication in addition to the password which is in place. This action envisages better control in accessing the core banking solution.
Bank owned payment gateway:
Bank is now equipped to offer the Payment Gateway services on its own for the merchant customers. The need of having bank owned payment gateway has further emphasised for the new business area of the bank in dealing with various Government Business. A robust near real-time fraud risk monitoring has been put in place to monitor the transactions routed through the payment gateway.
Online Mutual Fund:
Bank is offering the Mutual Funds business in an online mode now to cater the needs of the customers especially the younger generation to avail the services on the go. The solution will help the customers in managing the mutual fund portfolio end-to-end online. In addition, Bank is leveraging various schemes offered by the Asset Management Companies. The solution provides automated advisory services to plan the future of the customers based on their age and need.
DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016) DURING THE YEAR ALONG WITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR
Being a Banking company as a part of its recovery mechanism during the year under review, Bank has filed two cases in NCLT under IBC, 2016 amounting to book value of ''402.93 Crore, which are ordered for Liquidation. Further, there are no applications filed against bank under IBC, 2016.
DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF
Being Banking Company, the aforesaid provision is not applicable to your Bank.
PARTICULARS OF EMPLOYEES
The information as required under Section 197(12) of the Companies Act, 2013 read with Rules 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as Annexure - 2.
EMPLOYEE STOCK OPTION SCHEME
Your Bank has formulated and adopted Employee Stock Option Schemes to provide a platform to employees for participating in the ownership of the Bank and in its long-term growth. Bank uses stock options as a compensation tool to attract and retain critical talent and encourage employees to align individual performances with that of Banks'' objectives. Currently the Bank has the following Schemes in compliance with the provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEBSE Regulationâ) erstwhile SEBI (Share Based Employee Benefits) Regulations, 2014.
⢠Karur Vysya Bank Employees Stock Option Scheme 2011 (âKVB-ESOS-2011â)
⢠Karur Vysya Bank Employees Stock Option Scheme 2018 (âKVB-ESOS-2018â)
During the year, the Employee Stock Option Schemes of the Bank are aligned with the prevailing provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (âSEBI SBEB & SE Regulationsâ) keeping the basic structure, terms and conditions of the scheme as originally approved by the shareholders of the Bank.
Enhancing the financial inclusion:
Bank has tied-up with additional vendors to enhance the coverage of the Financial Inclusion through technology solutions. Instant onboarding of the customers through AADHAAR enabled payment system and the ability to initiate the financial transactions is the unique feature of this solution. In addition, few of the Banking services will also be offered to the customers to cater the financial needs of the customers.
Government related business:
Bank has been permitted to handle Government related business and steps had been taken for acquiring the Government related business. Now, Bank is entitled to collect the Direct and InDirect Taxes on behalf of CBDT / CBIC through appropriate software/business application and the system integration is under process. Your Bank has ventured into a new arena which was earlier handled by the public sector banks only.
FOREIGN EXCHANGE EARNINGS AND OUTGO
Your Bank continuously supports and encourages the country''s export efforts through its export financing operations. The details on foreign exchange earnings and outgo are furnished in the Foreign Exchange Transactions section that forms part of this report.
MATERIAL EVENTS THAT HAVE HAPPENED AFTER THE BALANCE SHEET DATE
There are no material events/changes and commitments, which affect the financial position of the Bank between the end of the financial year of the Bank and the date of the Directors'' Report.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS
During the FY 2021-22, no significant and material orders were passed by the Regulators or Courts or Tribunals against the Bank which impacts its going concern status and Bank''s operations in future.
Being Banking Company, your Bank is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.
The Annual Return for the financial year ended March 31, 2022, as required under Section 92 (3) and Section 134(3)(a) of the Companies Act, 2013 is available on the Bank''s website at https://www.kvb.co.in/investor-corner/annual-general-meeting/.
During the period under review, your Bank has granted 1,35,710 options under KVB-ESOS-2018 to Key Managerial Personnel (Managing Director & CEO and President & COO) of the Bank towards their variable pay as a part of noncash component. The said variable pay is in accordance with Bank''s Compensation policy read with Reserve Bank of India circular DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 04, 2019. Further Bank has allotted 6,89,964 Equity Shares of face value ''2 each to the employees who have exercised their options from the grants made in the year FY 2019-20 under KVB ESOS 2011 Scheme and KVB ESOS 2018 Scheme.
Your Bank''s Secretarial Auditors, M/s Bapulal & Yasar Associates, Company Secretaries, have certified that the Bank''s above-mentioned Schemes have been implemented in accordance with the Resolutions passed by Shareholders for 2011 & 2018 Schemes and the SEBI SBEB & SE Regulations. Disclosures as required under the SEBI SBEB & SE Regulations are available on Bank''s website at https://www.kvb.co.in/investor-corner/other-disclosures/ esos-disclosures/.
TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND
As per Sections 124 and 125 of the Act read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (âIEPF Rules''), the unpaid dividend remaining unclaimed for consecutive period of 7 years and its corresponding shares are liable to be transferred to the Investor Education and Protection Fund (âIEPF''). The said requirement does not apply to shares in respect of which there is a specific Order of Court, Tribunal or Statutory Authority, restraining transfer of the shares. Further details are provided in the Corporate Governance Report that forms part of this Annual Report.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Your Bank continues to work on the lines that the Founding Fathers envisaged for delivering back to society across its areas of operation. What was defined as âCharity Accountâ in the Articles of Association of the Bank written in 1916 at the time of establishment of the Bank has emerged as the modern day Corporate Social Responsibility.
A Corporate Social Responsibility (CSR) Committee has been constituted in accordance with the provisions of Section 135 of the Companies Act, 2013, read with the amended Companies (Corporate Social Responsibility Policy) Rules, 2014.
During the current year, your bank has CSR obligation of '' 7.59 Crore. Further in line with the CSR policy of the Bank, spends have been spread across the core focus areas viz., health, sanitation, clean drinking water, education, skill development and environment protection. Your Bank has also taken up projects in areas of animal welfare, women empowerment and COVID related support, as defined in Schedule VII of the Companies Act.
The brief outline of the CSR policy of the Bank, overview of the projects taken up by the Bank and other mandatory disclosures are annexed to this Report as Annexure - 3.
BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORTING (BRSR)
ESG has been the forefront of your Bank''s business activities. We strongly believe the significance of environmental, social and governance aspects on The Bank''s performance and have been proactively taking initiatives in this regard.
Due credit must be given to the Indian capital markets regulator, The Securities & Exchange Board of India (SEBI) for taking the lead in putting together the Business Responsibility & Sustainability Reporting (BRSR) framework. We believe it is the right step towards making ESG disclosures consistent and measureable across entities to facilitate better benchmarking.
Regulation 34(2)(f) of the SEBI LODR read with SEBI circular SEBI/HO/CFD/CMD-2/P/CIR/2021/562 states that with effect from the FY 2022-23, filing of BRSR shall be mandatory for the top 1000 listed companies (by market capitalisation) and shall replace the existing BRR. Filing of BRSR is voluntary for the FY 2021-22. In view of our measures to adapt to the regulatory requirements and build transparency among our stakeholders, we have published our first business responsibility and sustainability report for FY 2021-22.
The Business Responsibility & Sustainability Reporting (BRSR) of the Bank for the FY 2021-22 is annexed to this Report as Annexure - 4.
The composition of the Board of Directors is in compliance with all the relevant applicable statutory regulations. The Board meets at regular intervals to discuss and decide on Bank''s business policy and strategy, apart from other items of business. During the year under review, Fourteen Board Meetings were conducted and the relevant periodicity for holding the meetings was complied. The schedule of the meetings of the Board is circulated in advance to the Members of the Board, for their consideration and approval. Details of the composition of Board, Meetings held and attendance of
the Directors at such Meetings are provided in the Corporate Governance Report which forms part of Annual Report.
Pursuant to Section 134(3) (p) the Companies Act, 2013, Regulation 17(10) of SEBI (LODR) Regulations,2015 and other applicable regulations, Board has carried out annual evaluation of its own performance (Board as a whole), all its Directors, Committees of the Board, its Non-Executive Chairman and MD & CEO. The manner of evaluation conducted during the FY 2021-22 is furnished in the Corporate Governance Report that forms part of this Annual Report.
The Board comprises of Eleven Directors as on the date of this report, with rich experience and specialised knowledge in various areas of relevance to the Bank including Accountancy, Agriculture and Rural Economy, Trade & Commerce, Banking, Co-Operation, Economics, Finance, Law, MSME, Information Technology, Payment & Settlement Systems, Commerce, Human Resources, Risk Management, Business Management, Strategic Planning, Credit Recovery, Marketing, Credit, Cyber Security, Treasury Operations, Audit, Taxation, Governance, Supervision and Business Analytics.
Appointment
Dr Meena Hemchandra (DIN: 05337181), was co-opted as an Additional Director of the Bank under ââNon-Executive Independent Directorâ category by the Board in its meeting held on May 26, 2022, pursuant to the recommendation of the Nomination and Remuneration Committee, subject to the approval of the Shareholders of the Bank.
Dr Meena Hemchandra is a career central banker with over 35 years of experience in various departments of the Reserve Bank of India. She was Executive Director of Reserve Bank of India in-charge of Supervision of Banks, Non-Banking Finance Companies and Cooperative Banks from June 2015 till her superannuation in November 2017. Dr Meena Hemchandra is representing Majority Sector - âEconomics, Banking, Agricultural and Rural Economy, Finance, Business Management, Treasury Operations, Payments & Settlements System, Information Technology, Cyber Security, Risk Management, Supervision and Business analyticsâ on the Board.
Approval of the shareholders is being requested for the appointment of Dr Meena Hemchandra as Non-Executive Independent Director of the Bank.
Further, Board has recommended the candidature of Dr Meena Hemchandra for the position of Non-executive Independent
(part-time) Chairperson of the Bank to Reserve Bank of India for their approval. A resolution relating to noting of Board''s recommendation and approval for remuneration has been placed before this Annual General Meeting.
Shri Murali Ramaswami (DIN: 08659944), was co-opted as an Additional Director of the Bank under âNon-Executive Independent Directorâ category by the Board in its meeting held on June 14, 2022, pursuant to the recommendation of the Nomination and Remuneration Committee, subject to the approval of the Shareholders of the Bank.
Shri Murali Ramaswami is a seasoned banker having wide experience for more than 30 years. He started his career with Vijaya Bank and rose to the position of Executive Director. He has also worked as an Executive Director in Bank of Baroda during the year 2019-2020. Shri Murali Ramaswami is representing Majority Sector - âBanking, Credit, Finance, Accountancy, Marketing, Payments & Settlements System, Information Technology and Treasury Operations" on the Board.
Approval of the shareholders is being requested for the appointment Shri Murali Ramaswami as Non-Executive Independent Director of the Bank.
Opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year:
Board has appointed Dr Meena Hemchandra (DIN: 05337181) and Shri Murali Ramaswami (DIN: 08659944), as Additional Directors of the Bank under "Non-Executive Independent Directorâ category based on the extensive due diligence carried out by the NRC on the declarations submitted by them in terms of fit & proper criteria and other applicable statutory guidelines issued by Reserve Bank of India from time to time.
Board noted that Dr Meena Hemchandra is a career central banker with over 35 years of intense experience in various departments of Reserve Bank of India and retired as Executive Director in RBI. Further Shri Murali Ramaswami is a seasoned banker having more than three decades of experience in banking domain with diverse & distinct experience of heading various facets of Banking and retired as Executive Director in Bank of Baroda.
Adverting to the above, in the opinion of the Board the Independent Directors appointed during the year possess requisite qualifications, proficiency, expertise, track record, integrity, independence, vast and rich experience in the field of Banking.
Retirement by rotation
Shri R Ramkumar (DIN: 00275622), Non-Executive Non-Independent Director, retires by rotation at the ensuing 103rd Annual General Meeting (AGM) and being eligible, offers himself for re-appointment in terms of Sec 152 of the Companies Act, 2013. He hails from the promoter''s family and was on the Board since June 25, 2018 and would be representing âMinority Sector- Business Management, Finance, Human Resourcesâ
Approval of the shareholders is being requested for re-appointment of Shri R. Ramkumar as Non-Executive Non-Independent Director of the Bank liable to retire by rotation.
The brief profile and details in terms of Regulation 36 (3) of SEBI LODR and the Secretarial Standard on General Meetings, in respect of the Director''s seeking appointment/ re-appointment has been annexed to the Notice of the ensuing AGM and also in the Corporate Governance Report that forms part of this Annual Report.
Retirement on completion of tenure Shri N S Srinath (DIN: 01493217), Non-Executive (Independent) Part-time Chairman of the Bank, demitted office consequent to completion of his three years tenure at the close of office hours on May 26, 2022. Board places on record its sincere appreciation for the valuable services rendered by him during his tenure as Director of the Bank as also as the Chairman of the Bank.
Dr V G Mohan Prasad (DIN: 00002802), Non-Executive Independent Director of the Bank, demitted office at the close of office hours on June 14, 2022 consequent to completion of his eight years tenure in terms of Section 10A(2A)(1) of the Banking Regulation Act, 1949. Board places on record its sincere appreciation for the valuable services rendered and contribution made by him during his tenure as Director of the Bank.
Apart from the above, there were no changes in the Directors holding office.
The following are the changes in Key Managerial Personnel (âKMPâ) of the Bank during the financial year 2021-22:
Shri M D Ramesh Murthy, Chief Financial Officer of Bank demitted the office at the close of the office hours on February 09, 2022 consequent to his resignation.
Shri R Ramshankar has been designated as Chief Financial Officer & Key Managerial Personnel of the Bank effective from February 10, 2022.
Apart from the aforesaid, there were no changes in the KMPs.
APPOINTMENT & REMUNERATION OF DIRECTORS
Criteria for determining qualifications, positive attributes for appointment/ Re-appointment of Directors
Pursuant to provisions of Section 178(3) of the Companies Act, 2013 and relevant guidelines of RBI, the Nomination and Remuneration Committee (NRC) formulated the criteria for determining qualifications, positive attributes and independence of a Director to adhere the various provisions and guidelines as detailed below:
⢠âFit and Proper'' criteria as per Dr. Ganguly Committee Norms which stipulates age, educational qualification, experience, track record, integrity, etc., and various circular instructions and guidelines issued by Reserve Bank of India from time to time.
⢠Norms laid down by the Banking Regulation Act, 1949 as amended from time to time which stipulates substantial interest, sectorial representation as per Section 10A(2) (a), restrictions as per Section 16 and 20 of the Banking Regulation Act, 1949, etc.,
⢠Disqualification/Conflict of Interest of Directors, and other norms as per the provisions of the Companies Act, 2013 and rules made thereunder from time to time.
⢠Criteria of Independence of a Director as per the provisions of the Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.
⢠Applicable listing regulations as amended from time to time.
⢠Articles of Association of the Bank.
⢠Any other factors as the NRC may deem fit and in the best interest of the Bank and its stakeholders.
The terms and conditions of appointment of Independent Director are available on the website of the Bank at https:// www.kvb.co.in/docs/terms-and-conditions-of-appointment-of-independent-directors.pdf.
Your Bank''s Nomination and Remuneration Committee (NRC) oversees matters of succession planning of its Directors, Senior Management and also Key Managerial Personnel & the Board of the Bank ensures that proper plans are put in place for orderly succession of appointment to the Board and to Senior Management of the Bank including KMPs.
Policy on remuneration of directors
The remuneration of Directors is governed by the Compensation Policy of the Bank in terms of RBI circular no. DOR.Appt. BC.No.23/29.67.001/2019 20 dated November 04, 2019, which covers the aspects of remuneration payable to Board of Director, Whole Time Directors/ Chief Executive Officers/ Material Risk Takers, KMPs, Control Function Staff and all other employees. This Policy is in tune with the guidelines issued by the Reserve Bank of India, provisions of the Companies Act, 2013 and the SEBI LODR amended from time to time. Your Bank has adopted a board approved compensation policy on the basis of the aforesaid regulatory guidelines and the Policy is available on the Bank''s website at https://www.kvb.co.in/ docs/investor-compensation-policy.pdf.
DECLARATION BY INDEPENDENT DIRECTORS
Your Bank has received necessary declarations from all the Independent Directors under Section 149(7) read with 149(6) of the Companies Act and Regulation 25(8) read with Regulation 16(1)(b) of the SEBI LODR, that they meet the criteria of independence laid down thereunder. As required under Schedule IV of the Companies Act, 2013, Board has reviewed the declarations submitted by the Independent Directors and opined that, they fulfil all the conditions specified in the Companies Act, 2013 and SEBI LODR, and are independent of the management.
Your Bank has received necessary declarations from all the Independent Directors under Section 149(7) read with 149(6) of the Companies Act and Regulation 25(8) read with Regulation 16(1)(b) of the SEBI LODR, that they meet the criteria of independence laid down thereunder. As required under Schedule IV of the Companies Act, 2013, Board has reviewed the declarations submitted by the Independent Directors and opined that, they fulfil all the conditions specified in the Companies Act, 2013 and SEBI LODR, and are independent of the management.
FAMILIARISATION PROGRAMMES OF INDEPENDENT DIRECTORS
All Directors including Independent Directors are made familiar with their rights, roles and responsibilities in the Bank at the time of appointment and also on a recurrent basis. Details of familiarisation programmes attended by all Directors including Independent Directors are provided at https://www.kvb.co.in/ investor-corner/, pursuant to regulation 46 of SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015. Other details on the same are also covered in Corporate Governance Report forming part of Annual Report.
The details on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under SEBI LODR and the Companies Act, 2013 and the rules made thereunder are deliberated in Corporate Governance Report that forms part of this Annual Report.
A certificate from M/s Bapulal & Yasar Associates, Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under SEBI LODR is annexed to this report.
DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the Directors'' Responsibility Statement, it is hereby confirmed that:
a) In the preparation of the annual accounts, 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 judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss 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 on a going concern basis;
e) 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; and
f) 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.
Your Bank received the following awards during
FY 2021-22, majority of the same for implementation of
innovative technologies.
1. Best Use of AI/ML & Data Analytics - Joint Winner (Small Banks) - IBA Banking technology Awards, 2021
2. Best IT Risk and cyber Security Risk Initiatives - Joint Runner-up (Small Banks) - IBA Banking technology Awards, 2021
3. Best Cloud Adoption - Winner (Small Banks) - IBA Banking technology Awards, 2021
4. Digi Dhan Award of Excellence for second highest digital transactions for FY 2019-20 - Ministry of Electronics & Information Techology
5. BFSI Silver Award for Digital Solutions including Lending, Mobile Banking & Video KYC - Skoch Group
6. Best Technology Enabler of the Year - ASSOCHAM 8th MSMEs Summit of Excellence
7. Best MSME Bank of the Year - Runner Up (Private Sector Bank''s category) - ASSOCHAM 8th MSMEs Summit of Excellence
8. Best MSME Friendly Bank (Private Sector), 2021 - Runner up - Chamber of Indian Micro Small & Medium Enterprises
9. Best Innovative Bank (Private Sector) - Runner up -Chamber of Indian Micro Small & Medium Enterprises
10. Excellence in supporting Education and Skill - Special Recognition - ASSOCHSM CSR & Sustainability Awards, 2021
11. Exemplary Community Economic Development Work with sustainable impact - Rotary CSR Award, 2021
12. Second Best Bank Branch in Kerala under Old Private Sector Bank Category - Thrissur branch - State Forum of Bankers'' Clubs, Kerala
The Board of Directors place on record their gratitude to the Government of India, Reserve Bank of India, Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), National Stock Exchange and Bombay Stock Exchange, Rating Agencies, Statutory Auditors, Secretarial Auditors, various State Governments & Union Territories and other regulatory authorities in India for their valuable guidance and strong support.
The Board express their sincere thanks to the Bank''s valued shareholders, esteemed customers, and all other stakeholders and well-wishers for their continued faith, confidence and patronage on us and look forward for their continuous support.
The Board also appreciates entire staff for their sincere and dedicated services rendered for overall performance of the Bank during the year and look forward to their continued cooperation in the realisation of the corporate goals of the Bank in the years ahead.
For and on behalf of the Board of Directors
Dr Meena Hemchandra B Ramesh Babu
Non-Executive Independent Managing Director & CEO (Additional) Director
Place: Karur Date: July 04, 2022
Instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk.
Mar 31, 2019
DIRECTORS'' REPORT
To the Members
Your Directors are immensely pleased to present the 100th Annual Report of business and operations of your Bank together with audited statement of accounts for the financial year ended 31st March 2019.
Key Performance Indicators
Your Bank achieved reasonable growth in its operations during the year under review. The Indian economic environment, while exhibiting its traditional robustness, still had to contend with pockets of stress - e.g. increased asset quality related issues, liquidity driven issues arising from Non-bank lenders being unable to access professional markets which in turn had a knock on effect on the economy in general. In addition, the year saw a heightening of risks associated with cyber security. Under these circumstances, your Bank made significant progress as highlighted below:
Particulars |
31.03.2019 (Rs in Cr) |
31.03.2018 (Rs in Cr) |
Deposits |
59,867.95 |
56,890.09 |
Advances |
50,615.66 |
45,973.14 |
Investments |
15,136.52 |
15,992.25 |
Total Income |
6,778.59 |
6,599.59 |
Total Expenditure |
5,067.81 |
4,822.26 |
Operating Profit |
1,710.78 |
1,777.32 |
Net Profit |
210.87 |
345.67 |
Total Business
The total business of your Bank reached Rs 1,10,483.61 Cr as on 31st March 2019 as compared to Rs 1,02,863.23 Cr of previous year with a growth of 7.41%.
Deposits
Your Bank''s Gross Deposits improved to Rs 59,867.95 Cr as on 31st March 2019 from Rs 56,890.09 Cr of previous year, by registering a growth of 5.23%.
Term deposits increased by 4.07% to Rs 41,952.97 Cr from Rs 40,313.14 Cr of previous year, while Savings Bank deposits improved by 10.01% to Rs 12,101.39 Cr from Rs 11,000.57 Cr and other demand deposits improved by 4.25% to Rs 5,813.59 Cr from Rs 5,576.38 Cr of previous year. Total CASA deposits of your Bank grew by 8.07% to Rs 17,914.98 Cr from Rs 16,576.95 Cr of previous year.
Advances
Credit portfolio grew by 10.10%, (which was marginally lower than that of the industry), and crossed the Rs 50,000 Cr land-mark during the year to Rs 50,615.66 Cr, up from Rs 45,973.14 Cr during the previous year. Out of which, Priority sector advances of the Bank improved by 6.02% to Rs19,684.52 Cr from Rs18,567.61 Cr of previous year. It constitutes 43.01% of Bank''s Adjusted Net Bank Credit (ANBC) as against the statutory mandate of 40%.
Classification of Advances Portfolio
Particulars |
March 2019 (Rs in Cr) |
March 2018 (Rs in Cr) |
Y-o-Y Growth % |
Commercial |
17,056 |
16,095 |
5.97 |
Corporate |
14,169 |
14,397 |
(1.58) |
Agriculture |
8,113 |
7,861 |
3.21 |
Retail (Personal Banking) |
11,278 |
7,620 |
48.01* |
Total Advances |
50,616 |
45,973 |
10.10 |
* Y-o-Y growth is 24.37% excluding Inter-Bank Participatory Certificates (IBPC)
Agriculture Advances
Your Bank''s average Agriculture Advances in terms of RBI guidelines stood at Rs 8,345.83 Cr as on 31st March 2019, which constitutes 18.82% of ANBC, as against the regulatory stipulation of 18%. Average advances to micro enterprises and weaker sections stood at 9.71% and 11.93% respectively. Your Bank has achieved the targets stipulated as per regulatory guidelines under priority sector, agricultural lending and weaker section advances.
Asset Quality
Asset quality parameters, on an industry-wide basis, continue to be stressed. This is despite resolution processes - for large exposures - improving during the period. Your Bank has taken many steps to improve asset quality. Starting with ensuring that new loans are underwritten using the most up-to-date techniques
- including but not limited to the use of statistically validated score-cards with overlays for customer authentication and fraud control - to enhancing collections capabilities across customer segments, are actions that your Bank has taken over this year. This has resulted in reduction in stressed accounts (SMA 1/2
- i.e. those that have not paid for greater than 30 days but less than 90 days) to levels significant below historical levels. This has been achieved by creating collections/recovery mechanisms -Asset Recovery Branches, Tele-calling Capabilities, Enhanced Collection Systems - and greater managerial focus. This has also enabled our branches to focus more on business by improving collections/recovery efficacy.
Risk acceptance processes in the bank have been reviewed and changed to ensure that the underwriting processes are effective. This has been achieved in the following ways: first, by creation of statistically validated score-cards that rely on validate-able information; second, by greater use of Credit Bureau and other validated information sources; third, by restructuring and enhancing the Risk Department to enable it more effectively oversee risk; fourth, by reducing and limiting single party exposure so as to avoid event risks of the nature observed in the Corporate Book. Whilst newer vintages of loans are performing significantly better than older vintages - on a like for like basis
- older vintages still contribute to a greater share of the current balances. The latter fact has an impact on NPA accretion for the present; however, such impact reduces with time.
During the year, your Bank''s Corporate and Commercial portfolios experienced high NPA formation (Gross Slippages). However, the reduction in stressed assets (i.e. SMA 1/2) points to movement in the right direction from a portfolio quality perspective. Bank experienced higher slippages to Gross Non-Performing Assets (Gross NPA stood at 8.79% in FY 2018-19 as against 6.56% of previous year) mainly due to slippage in Corporate/Consortium and Commercial accounts. Other portfolios - e.g. Retail and Agriculture - continued to perform well. It may be noted that the highest growth asset segment for the Bank was Retail, during the period.
The Gross and Net NPA stood at Rs 4,449.57 Cr and Rs 2,420.34 Cr for the FY 2018-19 as against Rs 3,015.76 Cr and Rs 1,862.83 Cr of previous year. The Bank has increased its Provision Coverage Ratio (PCR) by 36 basis point to 56.86% as against the last fiscals'' 56.50%. The Bank has recorded a Cash recovery of Rs 440.84 Cr during FY 2018-19 as against Rs 179.09 Cr of previous year.
Senior Executives of your Bank had taken initiative to handle high value accounts as a special task and have monitored the progress in recovery.
The Bank had delegated requisite powers to Branch Heads and Divisional Heads to make quick decisions for speedy recovery from all those small value accounts by offering one time settlements to all the eligible accounts. Various OTS adalats and camps have been conducted to offer quick settlements and ensured recovery subsequently.
e-Auctions of immovable & movable properties secured to the Bank were carried out throughout the year and special thrust was given in taking physical possession of immovable properties by moving application before the concerned authority under SARFAESI Act.
As a part of improving its recovery mechanism the Bank had also utilized various legal tools and also moved DRT wherever it is required for obtaining orders in favour of the Bank.
Large and high value accounts had been referred to NCLT as directed by RBI and few have been resolved and few more are in the process. Resolutions through the IBC route -where they have taken place expeditiously - give banks an opportunity to increase the usage of this new mechanism.
As mentioned earlier, to enhance collections efficacy in Retail/Small Ticket Commercial loans, your Bank has started a centralized outbound calling facility for pre-delinquent, delinquent and NPA accounts. This has helped to improve portfolio performance. Your Bank has enhanced loan monitoring and recovery efforts. Bank has witnessed good reduction in SMA-1 and SMA-2 during FY 2018-19.
Disclosure on Divergence in Asset Classification and Provisioning
In terms of the RBI circular DBR.BPBC.No.32/21.04.018/2018-19 dated 1st April 2019, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statements, wherever either or both of the following conditions are satisfied: (a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period and (b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period. Since the divergence for the year 2017-18 is lesser than the threshold prescribed above, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI''s annual supervisory process for FY 2017-18.
Investments
The investment portfolio of the Bank stood at Rs 15,136.52 Cr as on 31st March 2019 as against Rs 15,992.25 Cr of previous year. The average investment stood at Rs 16,364.93 Cr as on 31st March 2019. The investment portfolio composition is consistent with the corporate requirement, risk appetite and investment policy of the Bank.
Interest income earned on investments was Rs 1,150.59 Cr for the FY 2018-19 as against Rs 1,122.93 Cr of previous year, by registering a growth of 2.46%. Profit on sale of investments was Rs 70.48 Cr for the FY 2018-19 as against Rs 101.08 Cr of previous year. With a view to prevent large volatility, the portfolio was downsized and modified duration was reduced in AFS & HTM portfolio. Liquidity position was comfortable throughout the FY 2018-19.
Foreign Exchange Transactions
During the year under report, the merchant turnover of the Bank stood at Rs 26,256 Cr as against Rs 26,679 Cr of previous year. Export credit declined by 25.55% to Rs 1,294 Cr for the FY 2018-19, as against Rs 1,738 Cr of previous year.
In the FY 2018-19, the total Income earned through forex transactions declined by 19.76% to Rs 81.52 Cr as against Rs 101.60 Cr for the previous year. Out of the total income earned, exchange profit accounted for Rs 41.85 Cr and Commission & others accounted for Rs 39.67 Cr.
While Exchange income remained flat, decline in commission & other income was a result of drop in interest & other income on customer facilities such as Buyers Credit coupled with reduction in business in specific industries - e.g. timber - and also as a consequence of revised business models which envisaged reduction and/or limiting the exposure levels in the corporate segment.
Income
The interest income of your Bank has increased by Rs 116.17 Cr and stood at Rs 5,815.82 Cr for the FY 2018-19. Net Interest Income of the bank increased from Rs 2,298.11 Cr to Rs 2,362.82 Cr, by registering a growth of 2.82%.
Non-Interest Income for the FY 2018-19 grew by 6.98% to Rs 962.77 Cr from Rs 899.93 Cr of previous year. Yield on advances declined from 10.29% to 9.75% and Yield on investment increased from 7.00% to 7.03%.
Expenditure
The interest expenditure of your Bank increased from Rs 3,401.54 Cr to Rs 3,453.00 Cr for the FY 2018-19. Operating expenses increased from Rs 1,420.72 Cr to Rs 1,614.81 Cr for the FY 2018-19, registering an increase of 13.66% (Rs 194.09 Cr), owing to higher establishment expenses.
Cost of Deposits of the Bank stood at 5.80% for FY 2018 -19 as against 5.99% of previous year, a decrease by 0.19%. In spite of the fact of increase in total deposit by 5.23%, your Bank aggressively reduced Cost of Deposits by sourcing low cost/ no cost deposits during the year under report. Your Bank''s Net Interest Margin (NIM) decreased from 3.86% to 3.67% and the Spread decreased from 3.22% to 2.90% for FY 2018-19.
Profit
The operating profit of your Bank for the FY 2018-19 was Rs 1,710.78 Cr as against Rs 1,777.32 Cr of previous year and the net profit of the Bank declined to Rs 210.87 Cr as against Rs 345.67 Cr of previous year, due to increase in operating expenses and provisioning requirements.
Appropriations
During the year under report, your Bank has appropriated net profit of Rs 210.87 Cr along with Rs 1.70 Cr brought forward from the previous year, aggregating to Rs 212.57 Cr as under:
Appropriation - Transfer to |
Amount (Rs in Cr) |
Statutory Reserve |
52.80 |
Capital Reserve |
22.17 |
General Reserve |
22.50 |
Investment Fluctuation Reserve |
30.53 |
Special Reserve |
25.00 |
Balance carried to Balance Sheet* |
59.57 |
''Including proposed Dividend & Dividend distribution tax amount of Rs 57.82Cr.
Dividend
Bank had formulated Dividend Distribution Policy as per the requirements of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (''Listing Regulations''). The objective of the Policy is to establish the parameters to be considered by the Board before declaring or recommending dividend. The Policy endeavours to strike an optimum balance between rewarding shareholders through dividend and ensuring that sufficient funds are retained for growth of the Bank. Bank has a consistent track record in dividend distribution. The dividend policy of the Bank is available in Bank''s website and can be accessed at https://www.kvb.co. in/docs/dividend-distribution-policy.pdf.
Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of Rs 0.60 per Equity Share of face value of Rs 2 each (i.e., 30%) for the FY 2018-19, payable to the shareholders whose name appear in the Register of Members as on the Record Date. The total dividend payment works out to ? 47.96 Cr excluding dividend tax and the pay-out ratio works out to 22.74% excluding dividend tax. The dividend is subject to the approval of the shareholders at the Annual General Meeting. This dividend will be subject to dividend distribution tax and is to be paid by the Bank. In terms of revised Accounting Standards (AS)-4 ''Contingencies and Events occurring after the Balance sheet date''as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend & tax thereon, and the same is included in the balance of profit for the year ended 31st March 2019. However, the effect of the proposed dividend including tax on dividend aggregating to ? 57.82 Cr has been reckoned in determining capital funds in the computation of capital adequacy ratio as at 31st March 2019.
Share Capital
The Authorised Capital of the Bank is ? 200.00 Cr with 100 Cr Equity Shares of face value of Rs 2/- each and the Paid-up Capital of the Bank stood at Rs 159,86,21,894 consisting of 79,93,10,947 Equity Shares of face value of Rs 2/- each as on 31st March 2019.
During the year under report, Directors of your Bank recommended the issue of Bonus shares in the ratio of one share for every ten equity shares held as on the record date (i.e. August 18, 2018) which was duly approved by the shareholders in the 99th Annual General Meeting and 7,26,63,937 shares were allotted on 20th August 2018. Consequent to resolution of disputes, Bank has allotted 7,639 shares pertaining to various Right and Bonus Issues held in abeyance category. Pursuant to the allotments, paid-up share capital increased from Rs 145.32 Cr to Rs 159.86 Cr.
Net owned funds of your Bank increased by Rs 153.27 Cr to Rs 6,364.98 Cr from Rs 6,211.71 Cr of previous year. The market capitalization of your Bank as on 31st March 2019 stood at Rs 5,699.09 Cr.
Earnings per share/Book Value
The earnings per share (Basic) stood at ? 2.64 and the book value per equity share of Rs 2/- each fully paid stood at ? 79.56 as on 31st March 2019.
Debt Instruments & Credit Rating
The Bank had issued Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) Bonds to the value of Rs 150.00 Cr in September 2009. ICRA Limited had revised the rating of Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) debt instruments as "ICRA A" (Outlook on Long Term: Stable) from "ICRA A " (Outlook on Long Term: Negative). Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.
During the year under report, Bank issued 48,700 BASEL III compliant unsecured, redeemable, non-convertible, Tier II Bonds in the Nature of Debentures of face value Rs 1,00,000 each aggregating to Rs 487.00 Cr (Rupees Four Hundred and Eighty Seven Crore only) on private placement basis with a coupon rate of 11.95% p.a. and tenor of 123 months (maturing on 12th June 2029). The issue was opened on 08th March 2019 and allotment was made on 12th March 2019. The issue was rated by ICRA Ltd (''ICRA'') and India Ratings & Research Pvt. Ltd (''India Ratings''). ICRA had assigned a rating of "ICRAA(hyb) (Stable)" and India Ratings assigned a rating of "Ind A (Stable)". The Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk.
CRISIL has re-affirmed A1 rating (pronounced as CRISIL A One Plus) for Rs 3000 Cr Certificate of Deposits Programme of your Bank. ICRA Limited has re-affirmed ICRAA1 (Pronounced as ICRA A One Plus) rating to the Bank''s Certificate of Deposits Programme for Rs 3000 Cr. Both the ratings indicate a very strong degree of safety regarding timely payment of financial obligations.
The details of Credit Rating and change/revision in the Credit Ratings for various debt instruments issued by the Bank from time to time are provided in the Corporate Governance Report forming part of this Annual Report.
Capital Adequacy
Capital Adequacy Ratio stood at 16% as per BASEL III norms. The Bank''s Capital Adequacy Ratio is well above the statutory limit of 9% (10.875% including Capital Conservation Buffer) prescribed by the Reserve Bank of India.
During FY 2018-19, in order to augment capital and strengthen capital adequacy, Bank has issued unsecured redeemable non-convertible Basel III compliant Tier II bonds to the tune of Rs 487.00 Cr through private placement.
Subsidiaries and Associates
Your Bank does not have any Subsidiaries or Associates to report during the year under review.
Management Discussion and Analysis
The Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2)(e) of the Listing Regulations is presented in a separate section forming part of this Annual Report.
Network of Branches
The Banking sector has been witnessing numerous changes in the recent past and the implementation of digital technology across the globe which helps the people to operate their bank accounts through smart phones. Customers have the option of doing any banking transaction through alternate channel other than Locker operations. Hence the branch expansion model was studied, twelve non performing branches and one Extension Counter were merged with nearer Branches during the year under report. The total number of branches including Asset Recovery Branches and Corporate Business Units stood at 789 as on 31st March 2019.
Your Bank has 1,645 ATMs, 534 Bunch Note Recycler Machines (BNRM), 158 Self-service Passbook Kiosks and 58 CTS enabled Cheque Deposit Kiosks as on 31st March 2019 for providing prompt service to the customers.
Currency Chest
Your Bank has Currency Chests in Tamil Nadu, Andhra Pradesh, Telangana and Karnataka at 7 different locations for providing adequate cash supply to branches & ATMs. Currency Chests plays a vital role in providing effective customer service at branches and support the branches in adhering to the Clean Note Policy of RBI. Branches are also remitting their excess cash as well as soiled cash to our Currency Chests which in turn helps branches to maintain minimum cash balance. Currency Chests are providing adequate Sorted cash for loading ATM''s which is as per the RBI guidelines. Currency Chests are also conducting soiled note exchange and coin mela''s through the chest attached branches by which the lower denomination currencies and coins are distributed to customers and general public.
Financial Inclusion
Financial Inclusion ensures availability of basic banking services and products to all, thereby reaching the unreached, un-banked and under-banked areas. Your Bank has taken up the mammoth task of delivering the benefits of financial services to the doorsteps of majority of unbanked population. Your Bank is using the technology backed solutions by utilizing the services of Bank Mitras in reaching the unreached segment of the society. With the active support of Bank Mitras, Bank is offering basic financial services to Self-Help Groups (SHGs) and Joint Liability Groups (JLGs). By this way, Bank has scaled up products and service offerings at their doorstep.
Your Bank has reached the deprived segment of the society and extended its focussed financial services through 125 Bank Mitras in rural villages, 3 Bank Mitras in urban locations with 39 Ultra Small Branches. Your Bank continues to provide basic financial products including Basic Savings Bank Deposit Account (BSBDA), Insurance products and Pension accounts and thereby support the Government in implementation of various social welfare schemes.
⢠ATM
⢠BNRM
⢠Self-Service
Performance highlights under Financial Inclusion
Your Bank has opened 10,083 PMJDY accounts during the year with outstanding balance of Rs 18.43 Cr as on 31st March 2019. The Bank has issued 9,578 Rupay Debit Cards under PMJDY accounts during the year under report. Hand-held devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting Rupay Cards/Smartcards. Bank Mitras have done 10.78 lakh transactions, amounting to Rs 132.85 Cr during the year under report which includes of DBT/Old Age Pension/MGNREGS transactions.
Financial Literacy campaign
Financial Literacy programes are intended to provide basic banking knowledge to people across various corners of the Society. Your Bank has been in the forefront in creating awareness to the rural mass on the financial services and products through the Financial Literacy Campaigns. During the FY 2018-19, your Bank has conducted 155 financial literacy campaigns in Rural, Semi Urban/Urban areas.
Performance under Sovereign Gold Bond Scheme, 2015
During the year, your Bank has collected a total subscription of Rs 11.76 Cr for 37,202 grams of gold in six tranches under the Sovereign Gold Bond Scheme, 2015.
Technology Initiatives
Your Bank has always been a forerunner in embracing & leveraging evolving technology, to provide enchanting customer experience. The financial market, in which the banks operate, is increasingly characterized by new generation of customers who are very busy (i.e. time-short and therefore, impatient), individualistic and seeking customised & flexible financial solutions.
⢠Opening of savings accounts through Bank''s website and mobile App: Your bank has introduced self-service mode for opening of saving accounts through Bank''s website and mobile App. Accounts can be opened quickly, through a few simple steps requiring limited guidance.
⢠Self-registration to internet banking facility for retail users: PIN mailers are passe. Your Bank enabled the self-service mode for availing internet banking facility, which is completely paperless. Now, customers can enable internet banking at their convenience without visiting the branch.
⢠SMS based blocking/unblocking of accounts: Your bank has enabled the facility to block all accounts of a customer
by way of a single SMS sent from his/her registered mobile, if they notice any unauthorized transaction in their accounts.
* Implementation of ATM E-receipts: To fall in line with the ''Go Green'' initiative of the Govt, your Bank has replaced physical paper receipts with e-receipts in its ATMs and cash recyclers.
Digital Transformation Project
Your Bank, foresaw the tectonic shift in the customers behaviour
- their increasing acquaintance with technology, and their increasing desire to consume at the click of a button. Since October 2017, your Bank decided to engage customers in a manner that they expected to be engaged - i.e. in a user friendly digital environment. This resulted in our journey to create one of the most advanced, automated, paper-less, digital, liability/ loan product set. Over the last year, all our retail loans - home loans, loans against property, vehicle loans, personal loans etc.
- and our commercial loans (below Rs 2 Cr threshold) - overdrafts and term facilities - were converted to this mode. Your Bank today provides most of its loans (in number of loans) through this automated process - thereby cutting turnaround times and enhancing customer satisfaction. Most importantly, this change is positioning your Bank to bank the millennial/younger customers more effectively. In addition, with the launch of the KVB Dlite App
- an app that has garnered over 1 million downloads - similar capabilities have been made available for customers requiring banking accounts.
The digital loan products were designed to be a fully digital end-to-end, rule based, with strong underwriting and authentication processes providing a seamless albeit paperless experience for customers. The inbuilt score-cards in the digital system enable a more granular understanding of risk being accepted. This in-turn, has enabled us to ensure that loan pricing is reflects the risk accepted. Whilst risk pricing is limited by market forces, the new tools provide your Bank with information regarding areas wherein current market pricing of risk is unacceptable thereby enabling appropriate refocusing. The newer cohorts originated using the new system are currently exhibiting performance characteristics - on a like for like basis - significantly superior to older cohorts underwritten using the judgmental models of the past.
In this journey, your Bank has integrated its systems with various information providers - Credit Bureaus (CIBIL TransUnion & Experian), data providers and data validators. This has enabled your Bank to access validated information like GST data, Financial Returns filed with ROC etc. so as to make the loan
underwriting process quick and error free. In addition, the system has powerful fraud monitoring & control process starting with mechanisms to detect identity fraud and documentation related fraud. The latter is provided by accessing the data validators referred to earlier. It also formalises processes and streamlines them. For instance, if physical verification is required, the system creates a task for an appropriate entity to perform the verification.
Now, your Bank has a full bouquet of retail & commercial loan products available in digital form with best-in-the-class underwriting processes reducing turn-around-time to loan sanction to 15 minutes (where all prerequisites are met)- probably the first of its kind in the banking industry.
This initiative has enabled your Bank to grow retail loans -the best performing risk segment in the market - at a pace significantly faster than the market. Your Bank has been successful in realigning its offerings, retraining its staff, re-architecting its processes so as enable it to compete in this extremely competitive market place. As a consequence home loans grew at 29% and loans against property at 23%. The dynamic pricing of loans based on risk derived using scorecards is resulting in improved yield. As mentioned earlier, newer cohorts originated using the new digital platform are performing better on a like for like basis.
"KVB DLite" - Your Bank''s all in one digital banking application provides the highest quality banking services to our customer set. It enables over 1 million of our customers who have downloaded the application to transfer funds, pay bills, shop - through an integrated shopping platform. In addition, it enables new customers'' access our banking services in minutes - subject to KYC processes being completed subsequently. This new facility will enable us to make available our products more effectively as it emerges as a mechanism for cross sell.
Your bank has been at the forefront of technological change. This paradigm shift in banking provides new and exciting opportunities that your Bank will leverage to continue its legacy of success.
Information Security
The Board and Executive Management of your Bank has instituted an Information Security function for designing, developing, implementing and maintaining an Information Security Management System (ISMS) to protect the Bank''s Information Assets in accordance with the determined risk profile of the assets. The Chief Information Security Officer (CISO) is responsible for providing leadership and oversight in the effective implementation and operation of ISMS in the Bank in
accordance with approved Policies and Procedures. The ISMS considers the nature of the Bank''s business along with internal and external factors and is aligned with the overall objectives and policies. The ISMS promotes security awareness amongst staff members and service providers, aims to facilitate all the constituents such as IT Department, Data Centre, Disaster Recovery Site, Branches and Offices to implement the controls and monitors its effectiveness. Your Bank accords top priority for regulatory compliance and within a record time of less than 2 years, most of the mandatory controls stipulated by RBI through Cyber Security Framework have been implemented.
Your Bank has invested in modern technology solutions for timely application of security patches in the IT systems, host based intrusion prevention, network segregation, privileged access control and firewalls for superior vulnerability management. Thus, vulnerabilities in the IT systems are prevented from being exploited across the network and hence are minimal. Notwithstanding these preventive control measures, your Bank has a reliable Vulnerability Assessment (VA) and Penetration Testing (PT) process to assess the IT systems periodically, detect vulnerabilities and undertake timely remediation measures.
Call Centre
Your Bank has a dedicated, 24/7 call centre to handle outbound and inbound calls. Outbound call facility is being used to follow up recoveries in SMA & NPA accounts and welcome calls for the newly on-boarded CASA customers. The queries, complaints and service requests emanating from the customers are received through inbound call facilities for resolution. The call centre offers multilingual services in English and select regional languages. Apart from carrying out the above operations, call centre also seeks potential leads from interested customers for up-selling and cross-selling.
System for Internal Financial Control and its Adequacy
Your Bank is operating in a fully computerized environment with Core Banking System, handling the various day to day financial transactions. CBS is supported by diverse application platforms for handling various functions such as treasury, trade finance, retail loans etc., The process of recording of transactions in each application platform is subject to various forms of control such as in-built system checks, maker checker authorisations and independent post transaction reviews etc., Besides, Bank has also put in place various reporting systems as well as internal inspection/concurrent audit system to monitor the day to day operations. Annual audit of all the branches is also undertaken with the help of independent external auditors. The Bank has implemented adequate procedures and internal controls which provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements and were operating effectively during the year.
Risk Management
Managing risk is an integral part of a bank''s function. Your Bank is exposed principally to the following risk types - credit, market, liquidity, operational, information security and fraud. Risk management is a principal responsibility of the Board. The Board approves the risk policies of the institution. A Board approved "Risk Appetite Statement" articulates the risk that your Bank is willing to run.
The Board establishes the overall risk parameters within which your bank operates by ensuring that the various risk related policies - approved by it - are, in the considered view of the Board, appropriate. These are reviewed and reapproved from time to time. The Board has delegated to specified Board Committees powers that enable the orderly discharge of the risk function. Several Management Committees provide support to the Board as part of the Risk Governance Framework.
Your Bank has continuously enhanced its risk management capabilities over time. Today, the risk function consists of several sub-components - Risk Policy, Risk Underwriting, Risk Analytics, Fraud Risk Management, Information Security Risk etc. It is your Bank''s policy to ensure that these functions are appropriately staffed and equipped. This is required to ensure that risk acceptance and risk management are appropriate to the risk underwritten.
Executive level risk management committees, such as Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and Fraud Risk Management Committee regularly assess the functional efficiency of the Bank in risk management and refine the policies and processes.
Your Bank is viewing the risk management as a core competency and tries to ensure sound management of risks through timely identification, assessment and management. The goal of risk management is to ensure that the Bank takes only well-calculated risks, which it can understand, monitor, mitigate and control, thereby minimising unexpected outcomes. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored.
Your Bank is well capitalised - CRAR stands at 16% as on 31st March 2019. Capital provides the buffer required to manage
unexpected/unanticipated risks that materialise in spite of every prudent risk management action. Your Bank''s portfolio of Corporate and Commercial Loans have not performed as expected, leading to higher NPA accretion. This has been partly compensated by elevated provisioning during the period. However, Net NPA continues to higher than that of peers. Whilst this is an area of concern, the healthy capital structure, changes made to underwriting and collection processes mitigate incremental risk accretion.
In our opinion presently there are no material risks which threaten the existence of the Bank.
Vigil Mechanism/Whistle Blower Policy
In compliance with RBI Guidelines, provisions of the Companies Act, 2013, the Listing Regulations and SEBI (Prohibition of Insider Trading) Regulations, 2015 as amended; your Bank has in place the "Whistle Blower Policy" since 2011. The Policy also incorporates the Protected Disclosure Scheme (PDS) for Private Sector Banks, instituted by the Reserve Bank of India. The Audit Committee of the Board reviews the complaints received through Vigil Mechanisms on quarterly basis. The Bank''s Whistle Blower Policy is in synchrony with all statutory and regulatory guidelines on Vigil Mechanism. The Whistle Blower Policy of the Bank is available in Bank''s website and can be accessed at https://www.kvb.co.in/docs/whistle-blower-policy.pdf.
Compliance of Anti Sexual Harassment Norms & Ensuring safety of Women employees
The Bank has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013]. The same has been elaborated in the Corporate Governance forming part of this Annual Report.
Related Party Transactions
During the year under review, the Bank has not entered into any materially significant transactions, which could lead to potential conflict of interest, other than transactions entered into in the ordinary course of its business.
Transactions entered into by the Bank with related parties in the normal course of its business were placed before the Audit Committee of the Board (ACS). Omnibus approval is obtained from the Audit Committee for transactions which are repetitive in nature and the same are reviewed on periodic basis. There are no material related party transactions during the year under report. Therefore the provisions of Section 188 of the Companies Act, 2013 are not attracted. Accordingly, AOC-2 is not applicable to the Bank.
Audit Committee Related Disclosure under Sub-Section 8 of Section 177 of the Companies Act, 2013
The Board of the Bank has constituted the Audit Committee under the extant guidelines of Reserve Bank of India (RBI), provisions of the Companies Act, 2013 and Listing Regulations. The details of the composition of the Audit Committee are furnished in the Corporate Governance Report.
Deposits Related Disclosure under Rule 8(5)(v) of Companies (Accounts) Rules, 2014
Being a banking company, the disclosures required as per rule 8(5)(v) of the Companies (Accounts) rules, 2014, read with section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
Particulars of Loans, Guarantees and Investments
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act, 2013.
Auditors Statutory Auditors
In terms of Section 139 of the Companies Act, 2013 read with Sec 30(1 A) of the Banking Regulation Act, it is proposed to re-appoint, M/s Walker Chandiok & Co. LLP, Chartered Accountants, Kochi, (Firm Registration Number 001076N/N500013) who are retiring at the conclusion of the ensuing Annual General Meeting (AGM) and are eligible for re-appointment, subject to the approval of the Reserve Bank of India and shareholders of the Bank. The Bank has received consent from the Auditors and confirmation to the effect that they are not disqualified to be appointed as the Auditors of the Bank in terms of the provisions of the Companies Act, 2013 and the rules made thereunder.
Accordingly, the Board of Directors have recommended to the shareholders, the reappointment of M/s Walker Chandiok & Co. LLP, Chartered Accountants, Kochi (Firm Registration Number 001076N/N500013) as Statutory Auditors of the Bank to hold office from the conclusion of the ensuing AGM till the conclusion of the next AGM. Fee payable to Statutory Audit is proposed at Rs 68,00,000/- (Rupees Sixty Eight Lakh only) plus out of pocket expenses with a cap of 15% of fees and applicable GST for the FY 2019-20, subject to the approval of RBI and Shareholders of the Bank.
Members are requested to consider the re-appointment of M/s Walker Chandiok & Co. LLP as Statutory Auditors of the Bank.
Pursuant to the Regulation 33(1)(d) of the Listing Regulations, the Statutory Auditors have confirmed that they are subjected to the peer review process of the Institute of Chartered Accountants of India (ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.
Independent Auditors'' Report
M/s Walker Chandiok & Co. LLP, Statutory Auditors of the Bank, have audited the accounts of the Bank for the FY 2018-19 and their Report is annexed. Pursuant to Section 143(3)(i) of the Companies Act, 2013, the Statutory Auditors have also reported on the adequacy and operating effectiveness of the internal financial controls system over financial reporting, which has been enclosed as "Annexure A" to Independent Auditor''s Report.
There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY 2018-19.
During the FY 2018-19, no frauds were reported by Auditors under sub-section (12) of Section 143 of the Companies Act, 2013.
Secretarial Audit
Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank, with the approval of its Board appointed M/s Solaiyappan & Associates, Company Secretaries, Salem to conduct the Secretarial Audit of the Bank for the FY 2018-19. The Bank produced all necessary records to the Secretarial Auditors for smooth conducting of their Audit. The Secretarial Audit Report is annexed herewith as Annexure -1.
There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY 2018-19.
Implementation of Indian Accounting Standards (Ind AS)
The Bank has formed a Steering Committee for implementation of Ind AS. Bank has engaged a consultant to assist in the preparation of proforma Ind AS financial statements as well as process changes required for implementation of Ind AS. The analysis of current accounting framework, policies, data extraction, documentation etc. have been undertaken and are being continuously updated as a part of this process. Further, discussions have been also held with various solution providers to handle the Ind AS accounting & system requirements, including generation of various data and reports required for preparation and submission of financial statements. These activities will be continued during the year 2019-20, in view of RBI directives on extension in time lines for implementation of Ind AS by Banks. During the FY 2018-19, Bank has prepared and submitted proforma Ind AS statements on quarterly basis, including the opening proforma Ind AS financial statements as on 1st April 2018, in compliance of RBI instructions.
Compliance with Secretarial Standards
The Board of Directors confirm that the Bank has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India (ICSI) related to the Board meetings and General Meetings during the year.
Statutory Disclosures
Considering the nature of its activities as an entity in the Financial Services sector, your Bank has voluntarily taken steps towards conservation of energy, technology absorption and foreign exchange earnings and outgo. Ensuring compliance of the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014, the relevant disclosures to be made are as under:
Conservation of Energy
Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation across all its premises by installing LED lights in phased manner. VRF (Variant Refrigerant Flow) AC Units have been installed at Back Offices in Chennai and Mumbai to save electricity by energy conservation technology. During the year under report, Bank has spent Rs 1.67 Cr towards procuring of energy conservation equipment.
Your Bank owns 850 KW Wind Turbine Generator at Govindanagaram, Theni District, Tamilnadu, installed in the year of 2011. The Bank is utilizing the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also Divisional Office, Chennai premises. 15,05,762 units were generated by the wind mill during the year under report.
Technology Absorption
New technology in banking is already transforming the financial sector, and the traditional banking landscape is set to rapidly change in the next few years. Safety features will help to protect the applications and remote applications will make it easier to do your banking without visiting a branch. Your Bank uses the sophisticated technologies to offer better services in a secure, reliable and affordable manner and sustain competitive advantage over other banks.
In order to provide quick and efficient customer service, your Bank has rolled out the Digital Transformation Process through which the Account opening and Retail/SME lending solution process is digitized as on date and the required customer data is verified online from the respective entities.
Your Bank has launched KVB DLite, all-in-one mobile banking App for both Financial and Non-Financial operations with enriched User Interface design, loaded with many user-friendly options and Enhanced Security Features which has crossed one million downloads. Your Bank is consistently maintaining the state of art infrastructure with optimum utilization of the resources.
Your Bank has made strategic investments in the space of Information Security and implementing the best standards for safe guarding information assets and building up sound security features for the protection of customer information and touch points.
Your Bank has been awarded ISO 27001 certification for the various IT offices in establishing a framework of policies and procedures that includes all legal, physical and technical controls involved in the organization''s information risk management process.
Bank has not imported any Technology during the last three years reckoned from the beginning of the financial year and no amount was spent towards Research and Development.
Foreign Exchange Earnings and Outgo
Your Bank continuously supports and encourages the country''s export efforts through its export financing operations. The details on foreign exchange earnings and outgo forms part of this report.
Material events that have happened after the Balance Sheet date
No material changes and commitments affecting the financial position of the Bank which has occurred between the end of the Financial Year of the Bank i.e., 31st March 2019 and the date of the Directors'' Report i.e., 28th May 2019.
Significant and Material Orders passed by Regulators
During the year under report, there are no significant and material orders that were passed by the Regulators or Courts or Tribunals against the Bank impacting the going concern status and Bank''s operations in future.
Maintenance of Cost Records
Being Banking Company, your Bank is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.
Extracts of Annual Return
Pursuant to provision of sec 134(3)(a) and sec 92(3) of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return as at 31st March 2019 is uploaded in Bank''s website and can be accessed at https://www.kvb.co.in/investor-corner/annual-general-meeting/mgt-9-extract-of-annual-return/.
Particulars of Employees
The statement containing the ratio of remuneration of each Director to the median employee''s remuneration and particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rules 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure -2.
Employee Stock Option Scheme
The Bank has formulated and adopted Employee Stock Option Schemes to provide a platform to employees for participating in the ownership of the Bank and in its long-term growth. Your Bank uses stock options as a compensation tool to attract, retain the critical talent and encourage employees to align individual performances with that of Banks'' objectives. Currently Bank has the following Schemes in compliance with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations):
⢠Karur Vysya Bank Employees Stock Option Scheme 2011 ("KVB-ESOS-2011")
⢠Karur Vysya Bank Employees Stock Option Scheme 2018 ("KVB-ESOS-2018")
During the year under review, the Nomination and Remuneration Committee has granted 7,25,000 Stock Options to employees under both the schemes. Further MD & CEO was granted 10,00,000 stock options under KVB-ESOS-2018, subject to the approval of RBI and the same was not acceded by the Reserve Bank of India.
Pursuant to corporate action by way of Bonus issue in the ratio of 1:10 i.e., 1 (one) Equity Shares for every 10 (ten) Equity Shares of face value of Rs 2 each, the pool of options under KVB-ESOS-2018 Scheme and the outstanding options granted under
KVB-ESOS-2011 Scheme and the exercise price were adjusted during the year under report.
There are no material changes made to the above Schemes and these Schemes are in compliance with the SEBI SBEB Regulations. Your Bank''s Statutory Central Auditors, M/s Walker Chandiok & Co, LLP, have certified that the Bank''s above-mentioned Schemes have been implemented in accordance with the SEBI SBEB Regulations, and the Resolutions passed by the Shareholders for the 2011 & the 2018 Scheme. Disclosure as required under the SEBI SBEB Regulations is uploaded in Bank''s website and can be accessed at https://www.kvb.co.in/investor-corner/esos-disclosures/.
Corporate Social Responsibility (CSR)
Your bank recognizes its responsibility towards the society and environment in which it operates. In line with the Banks'' CSR objectives, your Bank has committed to various community development projects that have a large positive impact and Sustainable Development. In accordance with the provisions of Section 135 of the Companies Act, 2013, read with Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended, the Bank has constituted the Corporate Social Responsibility (CSR) Committee of the Board.
During the year under report, resources deployed and CSR spends had increased significantly over the previous Financial Year. The CSR activities of the Bank touches a wider footprint through areas like Health, Education, Women empowerment, Environment sustainability and other activities permitted by the Schedule VII of the Companies Act, 2013.
The brief outline of the CSR Policy, overview of the programs undertaken by the Bank, the composition of the CSR Committee, prescribed CSR expenditure and details of the amounts spent by the Bank on CSR activities during the year under review, have been provided in Annexure - 3 to this report.
Your Bank is committed to identify and support outreach programmes aimed at developing and advancing the community. All CSR spends are as per the allocations made to it and unspent money if any would be used in the due course. Further committee reaffirmed to strengthen its processes to evaluate all projects which will benefit the society in a large way as per the requirements and is passionately committed towards CSR objectives.
Business Responsibility Report (BRR)
In compliance with Regulation 34(2)(f) of the Listing Regulations the Business Responsibility Report describing the initiatives
taken by the Bank from an environmental, social and governance perspective, in the format as specified by SEBI. The same has been hosted on the website of the Bank and can be accessed at https://www.kvb.co.in/investor-corner/annual-general-meeting/ agm-business-report/.
The Business Responsibility Report (BRR) of the Bank for the FY 2018-19 forms part of this Report as Annexure - 4.
Board Meetings
The schedule of the meetings of the Board is circulated in advance to the Members of the Board, for their consideration and approval. During the period under report, eighteen Board meetings were held and the gap between the said meetings did not exceed the limit of 120 days, as prescribed under the relevant regulations. Details of the composition of Board, Meetings held and attendance of the Directors at such Meetings are provided in the Corporate Governance Report.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out annual evaluation of its own performance (Board as a whole), all its Directors, Committees of the Board, its Non-Executive Chairman and MD & CEO. The manner of evaluation conducted during the year under report is furnished in the Corporate Governance Report.
Board of Directors
The Board comprises of ten Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including Banking, Accountancy, Law, MSME, Trade & Commerce, Finance, Agriculture, Human Resource Management and Information Technology.
Chairman of the Board
Shri N S Srinath (DIN: 01493217), was appointed as Non-Executive Part-time Chairman of the Bank for a period of three years in the Board meeting held on 25th March 2019 subject to the approval of Reserve Bank of India. Further RBI accorded its approval in terms of section 10B(1A)(i) of the Banking Regulation Act, 1949 vide its letter DBR.Appt.No.9955/08.41.001/2018-19 dated 27th May 2019 for the appointment of Shri N S Srinath as Non-Executive Part-time Chairman of the Bank for a period of three years with effect from 27th May 2019. Pursuant to RBI''s approval and in terms of Provisions of Section 149 of Companies Act, 2013, Section 10A(2A) of the Banking Regulation Act, 1949, Board recommends the continuation of his second term as an Independent Director Co-terminus with his tenure as Chairman of the Bank. Approval of the shareholders is being requested by way of agenda items in the Notice of the ensuing AGM.
Appointment
Shri Sriram Rajan (DIN: 02162118), a senior Information Technology professional with 18 years of experience spanning the entire IT landscape was co-opted as an Additional Director in the category of ''Non-Executive Independent Director'' in the Board meeting held on 19th January 2019. He is representing Majority Sector "Information Technology" on the Board. He has signified his willingness to seek election as Non-Executive Independent Director at the ensuing AGM.
Approval of the shareholders is being requested for the appointment of Shri Sriram Rajan as Non-Executive Independent Director of the Bank.
Re-appointment
Smt CA K L Vijayalakshmi (DIN: 07116809), was on the Board since 22nd March 2015. She is representing Minority Sector "Commerce & Special Knowledge - Accountancy" on the Board. She was elected as a Non-Executive Independent Director at the 97th AGM held on 21st July 2016 for a period of 3 years. The three years term of her appointment ends on 20th July 2019.
Dr K S Ravichandran (DIN: 00002713), was on the Board since 26th May 2016. He is representing Majority Sector "Law" on the Board. He was elected as a Non-Executive Independent Director at the 97th AGM held on 21st July 2016 for a period of 3 years. The three years term of his appointment ends on 20th July 2019.
Based on the expertise, knowledge, integrity, relevant experience in professions, performance evaluation and substantial contribution made by the Non-Executive Independent Directors Smt CA K L Vijayalakshmi (DIN: 07116809) and Dr K S Ravichandran (DIN: 00002713), the Board recommends their re-appointment for second term pursuant to the provisions of Section 10A of Banking Regulation Act and Sec 149(10) and Sec 152 read with Companies (Appointment and Qualification of Directors) Rules, 2014. Approval of the shareholders is being requested for re-appointment of the Non-Executive Independent Directors Smt CA K L Vijayalakshmi (DIN: 07116809) and Dr K S Ravichandran (DIN: 00002713).
Retirement by Rotation
In terms of Sec 152 of the Companies Act, 2013, Non-Executive Non-independent Director Shri A K Praburaj (DIN: 07004825),
retire by rotation and being eligible offer himself for re-election at the ensuing Annual General Meeting (AGM). He is one of the Promoters of the Bank. He was on the Board since 09th December 2014 and represents Minority Sector "Trade & Commerce".
Approval of the shareholders is being requested for re-appointment of Shri A K Praburaj as Non-Executive Non-independent Director of the Bank.
The relevant details including profiles of directors seeking appointment/re-appointment/retirement by rotation are included separately in the AGM Notice and also in the Corporate Governance report forming part of this Annual Report.
Cessations
Shri B Swaminathan (DIN: 00245189), Non-Executive Part-time Chairman of the Bank, demitted office consequent to completion of his three years tenure at the close of office hours on 19th January 2019. Board places on record its sincere appreciation for the valuable services rendered by him during his tenure as Director of the Bank as also as the Chairman of the Bank.
Shri A J Suriyanarayana (DIN: 02251823), Non-Executive Non-independent Director of the Bank, demitted office after office hours on 26th October 2018 consequent to completion of his eight years tenure in terms of Section 10A(2A)(1) of the Banking Regulation Act, 1949. Board places on record its sincere appreciation for the valuable services rendered and contribution made by him during his tenure as Director of the Bank.
Apart from the above, there were no changes in the Directors holding office.
Key Managerial Personnel
During the year under report, there is no Appointment or Retirement of Key Managerial Personnel.
Appointment & Remuneration of Directors
Criteria for determining qualifications, positive attributes for Appointment/Re-appointment of Directors
Pursuant to provisions of Section 178(3) of the Companies Act, 2013 and relevant guidelines of RBI, the Nomination and Remuneration Committee (NRC) formulated the criteria for determining qualifications, positive attributes and independence of a Director to adhere the various provisions and guidelines as detailed below:
''Fit and Proper'' criteria as per Dr Ganguly Committee Norms which stipulates age, educational qualification, experience, track record, integrity etc., and various circular instructions and guidelines issued by Reserve Bank of India from time to time.
Norms laid down by the Banking Regulation Act, 1949 as amended from time to time which stipulates substantial interest, sectorial representation as per Section 10A(2)(a), restrictions as per Section 16 and 20 of the Banking Regulation Act, 1949 etc.,
Disqualification/Conflict of Interest of Directors, and other norms as per the provisions of the Companies Act, 2013 and rules made thereunder from time to time.
Criteria of Independence of a Director as per the provisions of Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.
Applicable regulations of Listing Regulations as amended from time to time.
Articles of Association of the Bank.
Any other factors as the NRC may deem fit and in the best interest of the Bank and its stakeholders.
The terms and conditions of appointment of Independent Director are disclosed on the website of the Bank and can be accessed at https://www.kvb.co.in/docs/terms-and-conditions-of-the-independent-directors.pdf.
Policy on Remuneration of Directors
The remuneration of Directors is governed by the Compensation Policy of the Bank. This Policy is in tune with the guidelines issued by the Reserve Bank of India, provisions of Companies Act, 2013 and the Listing Regulations amended from time to time. The Compensation Policy of the Bank in terms of RBI circular no. DBOD.No.BC.72/29.67.001/2011-12 dated 13th January 2012 covers the aspects of remuneration payable to Whole Time Director (WTD) i.e. MD & CEO, Non-Executive Chairman, Non- Executive/Independent Directors, Key Managerial Personnel of the Bank, staff engaged in financial & risk control functions and all other employees. The Policy is available on the website of the Bank and can be accessed at https://www.kvb.co.in/docs/investor-compensation-policy/pdf.
Declaration by Independent Directors
The Bank has received necessary declarations from all the Independent Directors under Section 149(6) of the Act and Regulation 16(1 )(b) of the SEBI LODR that they meet the criteria of independence laid down thereunder. Based on the declarations submitted by the Independent Directors, Board is of the opinion that, they fulfil the conditions specified in the Act and SEBI LODR and are independent of the management.
Familiarization Programmes of Independent Directors
All Directors including Independent Directors are made familiar with their rights, roles and responsibilities in the Bank at the time of appointment and also on a recurrent basis. Directors are offered opportunity to attend the Programmes conducted by CAFRAL, IDRBT, Boston Consulting Group and other Management Institutes to familiarize with the latest trends in credit appraisal, Cyber Security, SME lending in Digital era, IT Strategy, Risk and Governance issues. Considering the Role and responsibilities of Audit Committee few programmes on Risk Management, analytics driven monitoring, risk management in UPSI were organised. The details of programmes undertaken for familiarizing the Directors are disclosed in Corporate Governance Report, which forms part of this Annual Report.
Corporate Governance
Aseparate section on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under Listing Regulations and Companies Act, 2013 and the rules made thereunder is enclosed as an annexure to this report.
A certificate from M/s Solaiyappan & Associates, Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is annexed to this report.
Directors'' Responsibility Statement
Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the Directors'' Responsibility Statement, it is hereby confirmed that:
a) In the preparation of the annual accounts, 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 and of the profit and loss 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 on a going concern basis;
e) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively; and
f) 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;
Awards and Accolades
Your Bank received the following Awards and Accolades during FY 2018-19:
1. "Best MSME Bank" from Chamber of Indian Micro Small and Medium Enterprises (CIMSME).
2. Palarivattom Branch has been selected as the 3rd Best performing Branch in Kerala under Private Sector category for the year 2017-18 in the State Forum of Bankers'' Clubs Kerala (SFBCK) Banking Excellence Award 2018.
Acknowledgements
The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Statutory Auditors, Secretarial Auditors, various State Governments and regulatory authorities in India for their valuable guidance, support and co-operation. The Board also acknowledges with gratitude the cooperation and support received from stock exchanges, rating agencies and other banking/financial institutions.
The Board takes this opportunity to place on record its deep sense of gratitude to its loyal shareholders for extending their support during the year and looks forward to their continued association in the years ahead.
The Board thanks the valued customers for their goodwill, patronage and continued support and looks forward to their continued patronage in scaling greater heights.
The Board appreciates the sincere and dedicated services displayed by its entire staff and highly values their commitment in improving the Bank''s performance.
Mar 31, 2018
To the Members
The Directors are pleased to present the 99th Annual Report of business and operations of your Bank together with audited statement of accounts for the year ended 31st March 2018.
Key Performance Indicators
Indian Banking Industry contended with multiple challenges tied to regulations, heightened asset quality stress levels, new competitors and operating risks during the year under report. In spite of this, your Bank has been able to achieve reasonable growth in its operations. Performance highlights for FY18 in the key areas of operation are as detailed under:
Particulars |
31.03.2018 (Rs. in Cr) |
31.03.2017 (Rs. in Cr) |
Deposits |
56,890.09 |
53,699.81 |
Advances |
45,973.14 |
41,434.98 |
Investments |
15,992.25 |
14,955.48 |
Total Income |
6,599.59 |
6,404.57 |
Total Expenditure |
4,822.26 |
4,833.60 |
Operating Profit |
1,777.33 |
1,570.97 |
Net Profit |
345.67 |
605.98 |
Total Business
The total business of your Bank stood at Rs.1,02,863.23 Cr as on March 31, 2018, as against Rs.95,134.79 Cr a year before, registering y-o-y growth of 8.12%.
Deposits
Your Bankâs Gross Deposits increased to Rs.56,890.09 Cr as on March 31, 2018, as against Rs.53,699.81 Cr as on March 31, 2017, by registering a growth of 5.94%. Demand deposit stood at Rs.5,576.38 Cr as on March 31, 2018.
Savings Bank deposits grew by 10.36% from Rs.9,968.28 Cr to Rs.11,000.57 Cr. CASA deposits recorded a healthy growth of 11.34% reaching Rs.16,576.95 Cr from Rs.14,888.63 Cr. Term deposits increased to Rs.40,313.14 Cr from Rs.38,811.18 Cr by registering a growth of 3.87%.
Advances
During this FY 2017-18, your Bankâs Advances portfolio grew by 10.95% reaching Rs.45,973.14 Cr as against Rs.41,434.98 Cr in the previous fiscal. Priority sector advances of the Bank increased to Rs.18,567.61 Cr from Rs.17,010.00 Cr and recorded a growth of 9.16%. It constituted 46.31% of Bankâs Adjusted Net Bank Credit (ANBC) as against the statutory prescription of 40%.
Classification of Advances Portfolio:
Particulars |
FY 2017-18 (Rs. in Cr) |
FY 2016-17 (Rs. in Cr) |
Y-o-Y Growth % |
Commercial |
16,095 |
14,504 |
10.97 |
Corporate |
14,397 |
13,612 |
5.77 |
Agriculture |
7,861 |
6,979 |
12.64 |
Retail (Personal Banking) |
7,620 |
6,340 |
20.19 |
Total Advances |
45,973 |
41,435 |
10.95 |
Classification of Retail Portfolio:
(Rs. in Cr)
Segment |
March 2018 |
March 2017 |
Housing Loans |
2,795 |
2,330 |
Mortgage Loans (LAP) |
1,393 |
965 |
Vehicle Loans |
1,017 |
921 |
Jewel Loans |
578 |
596 |
Personal Loans |
296 |
316 |
Education Loans |
261 |
266 |
Others |
1,280 |
946 |
Total |
7,620 |
6,340 |
Agriculture Advances
Average Agriculture advances of your Bank stood at Rs.8,218.34 Cr, constituting 20.50% of ANBC as at March 31, 2018 against the regulatory stipulation of 18%. Your Bankâs average advances to micro enterprises and weaker sections stood at 8.88% and 13.44% respectively. Your Bank continues to achieve the targets stipulated as per the regulatory guidelines under priority sector, agricultural lending and weaker section advances.
Asset Quality
The Banking industry in India continued to face a challenging period with increase in Non-Performing Assets particularly from Corporate Segment due to various macro economic and other factors. Bank experienced higher slippages to Net Non-Performing Assets (Net NPA stood at 4.16% in FY18 as against 2.53% of earlier fiscal) mainly due to slippage in Corporate / Consortium accounts.
The Bank has taken numerous measures to arrest the fresh slippages and is in the process of strengthening its credit underwriting system. The net NPA stood at Rs.1,862.83 Cr for the FY18 compared to Rs.1,033.46 Cr for the FY17. The Provision Coverage Ratio (PCR) stood at 56.50% as compared to 57.83% in the previous year.
Bank introduced a follow-up mechanism with Senior Executives dedicated for close monitoring of NPA accounts having outstanding of Rs.50.00 lakh and above. In order to improve penetration in NPA accounts, Division-wise monitoring of daily recovery progress was introduced. In addition, the Bank initiated various steps to strengthen the recovery mechanism process including opening of specialised Asset Recovery Branches and recovered Rs.559.80 Cr out of which, Cash Recovery was Rs.179.09 Cr.
For speedy decisions on One Time Settlement (OTS), the Bank delegated requisite powers to Branch Heads for sanction of OTS of NPAs up to Rs.5.00 lakh.
e-Auctions of immovable & movable properties secured to the Bank were carried out throughout the year. Special thrust was given in taking physical possession of immovable properties by moving application before the concerned authority under SARFAESI Act. Bank participated in Lok adalats actively during the year under report and recovered an amount of Rs.120 Cr through compromise from 1417 accounts.
NPA Accounts of above Rs.100 lakh are reviewed by the Senior Management through Conference call / video conference with the Divisional Managers / Branch Heads to guide them in recovery initiatives.
Loan Monitoring is further enhanced and recovery efforts have been intensified. Your Bank is optimistic on reduction in slippages.
During the fiscal 2017-18, your Bank has started 3 Asset Recovery Branches (ARB) at Chennai, Hyderabad and Madurai to ensure specific thrust on recovery and follow-up. ARBs will provide close follow up with their specialized skills and the Branches can now concentrate more on business growth. The ARBâs handle NPA accounts above Rs.15 Lakh adhering to guidelines issued by RBI from time to time. A new initiative is taken to conduct settlements through Adalats in all Branches having large number / value NPA accounts in every quarter. This thrust for recovery is giving encouraging results.
Outbound Calls
In order to cater the need for improving collection mechanism of retail loans, Bank has started Centralised outbound calls facility for SMA follow-up, which is making a reasonable impact on the retail segment. The outbound call facility is being used to call Pre-delinquent customers i.e. 3 days prior intimation is given to the customers about their repayment due date, Delinquent accounts falling under SMA on PAN India basis. The outbound collection call services are introduced to support the branches in reduction of SMAâs & NPAâs. Going forward, your Bank is planning to use this facility to commercial loan borrowers as well.
Investments
The investment portfolio of the Bank has reached Rs.15,992.25 Cr as on March 31, 2018 as against Rs.14,955.48 Cr as on March 31, 2017, y-o-y growth of 6.93%. The average investment as on March 31, 2018 stood at Rs.16,030.61 Cr. The investment portfolio composition is consistent with the corporate requirement, risk perception and Investment Policy of the Bank.
Income earned on investments during 2017-18 was Rs.1,122.93 Cr as against Rs.1,106.04 Cr in 2016-17 registering a marginal increase of Rs.16.89 Cr (i.e. 1.53%). Low growth is on account of overall fall in yields in the market and due to sale of securities from HTM category during the year. Profit on sale of investments was Rs.101.08 Cr for the fiscal 2017-18 as against Rs.204.64 Cr recorded in the previous fiscal. Liquidity position was comfortable throughout the year 2017-18.
Income
Interest income of your Bank has increased by Rs.77.30 Cr and stood at Rs.5,699.65 Cr as on 31st March 2018. Net Interest Income of the bank increased to Rs.2,298.11 Cr from Rs.2,073.70 Cr, registering a growth of 10.82%.
Non-Interest Income grew by 15.05%, y-o-y from Rs.782.22 Cr to Rs.899.93 Cr.
Yield on advances dropped from 11.34% to 10.29% and Yield on investment slightly decreased from 7.22% to 7.00%.
Expenditure
The interest expenditure reduced from Rs.3,548.65 Cr in FY17 to Rs.3,401.54 Cr in FY18, registering a decline of 4.14%. Operating expenses increased from Rs.1,284.95 Cr in FY17 to Rs.1,420.72 Cr in FY18 working out to an increase of 10.57% (Rs.135.77 Cr).
Cost of Deposits reduced from 6.60% in FY17 to 5.99% in FY18 due to mobilisation of low cost / no-cost deposits during the year under report. Increase of Net Interest Margin (NIM) from 3.70% in FY17 to 3.86% in FY18 and growth in spread on funds from 3.10% in FY17 to 3.22% in FY18.
Profit
Your Bank earned an operating profit of Rs.1,777.32 Cr against Rs.1,570.97 Cr of last fiscal, registering a y-o-y growth of 13.14%.
The net profit of the Bank reduced fromRs.605.98 Cr to Rs.345.67 Cr due to highest provisioning requirements.
Appropriations
The net profit of Rs.345.67 Cr which along with a sum of Rs.2.64 Cr brought forward from the previous year aggregating Rs.348.31 Cr is appropriated as under:
Appropriation - Transfer to |
Amount (Rs. in Cr) |
- Statutory Reserve |
87.00 |
- Capital Reserve |
12.05 |
- General Reserve |
160.00 |
- Special Reserve |
35.00 |
Balance carried to Balance Sheet* |
54.26 |
* Including Proposed Dividend & dividend distribution tax amount of Rs.52.46 Cr.
Share Capital
The Authorised Capital of the Bank is Rs.200.00 Cr comprising of 100 Cr Equity Shares of face value of Rs.2/- each and the Paid-up Capital of the Bank is Rs.145.33 Cr comprising of 72,66,39,371 Equity Shares of face value of Rs.2/- each fully paid-up.
During the fiscal 2017-18, the Bank has successfully raised capital by way of Rights Issue in the ratio of one Rights Share for every six shares held on the record date (i.e., October 13, 2017) along with Employee Reservation Portion (collectively referred as âRights Issueâ) of 11,73,17,101 Equity Shares of face value of Rs.2/- each for cash at a price of Rs.76/- per Equity Share (including a premium of Rs.74/- per Equity Share) aggregating to Rs.891.61 Cr. The Rights Issue was over subscribed by 1.53 times, which shows the belief and confidence on the Bankâs business and its future. The Rights Shares allotment was made on 22nd November, 2017. The paid-up share capital stands increased to Rs.145.33 Cr. consequent to the allotment of Rights issue.
The net-owned funds of the Bank increased from Rs.4,845.02 Cr to Rs.6,211.71 Cr registering a growth of 28.21% with an increase of Rs.1,366.69 Cr.
The market capitalization of your Bank at the end of March, 2018 was Rs.7,299.09 Cr.
Employee Stock Option Scheme
During the year under report, your Bank has not granted any stock options under Employee Stock Option Scheme (ESOS).
Debt Instruments
The Bank had issued Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) Bonds to the value of Rs.150.00 Cr in September 2009. During the year under report, Bank did not raise any TIER II capital.
Capital Adequacy
Capital Adequacy ratio stood at 14.43% as per BASEL III norms. The Bankâs Capital Adequacy Ratio is well above the statutory limit of 9% (10.875% including Capital Conservation Buffer) prescribed by the Reserve Bank of India.
Credit Rating
ICRA Limited had rated the Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) debt instruments issued in the year 2009 by re-affirming its A rating. Investments with such rating are considered to have adequate degree of safety regarding timely servicing of financial obligations.
CRISIL has re-affirmed A1 rating (pronounced as CRISIL A One Plus) for Rs.30 bn Certificate of Deposits Programme of your Bank. ICRA Limited has re-affirmed ICRA A1 (Pronounced as ICRA A One Plus) rating to the Bankâs Certificate of Deposits Programme for Rs.30 bn. Both the ratings indicate a very strong degree of safety regarding timely payment of financial obligations.
Foreign Exchange Transactions
The merchant turnover of the Bank increased at 18.49% reaching Rs.26,679 Cr in FY18 from Rs.22,516 Cr in FY17. Export credit grew by 9.93% reaching to Rs.1,738 Cr in FY 18 as against Rs.1,581 Cr in FY17.
Income earned by the Bank through forex transactions is Rs.101.60 Cr in FY18 as against Rs.95.97 Cr in FY17, posting a growth of 5.87%. Of the total income earned to the tune of Rs.101.60 Cr, exchange profit accounted for Rs.43.59 Cr and Commission and others accounted for Rs.58.01 Cr.
Dividend
Bank had formulated Dividend Distribution Policy as per the Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (âListing Regulationsâ). Dividend Policy of the Bank balances the objectives and retaining capital in order to fund future growth of the Bank. Bank has a consistent track record in dividend distribution. The dividend distribution policy of the Bank is available in your Bankâs website http://www.kvb.co.in/pdf/dividend-distribution-policy.pdf.
Consistent with this policy and in recognition of the overall performance, your Directors are pleased to recommend a dividend of Rs.0.60 per Equity Share of face value of Rs.2 each i.e., 30% for the FY18. The total dividend payment works out to Rs.43.59 Cr excluding dividend tax and the pay-out ratio works out to 12.61% excluding dividend tax. The dividend is subject to the approval of the shareholders at the Annual General Meeting. This dividend will be subject to dividend distribution tax and is to be paid by the Bank. In terms of revised Accounting Standards (AS) 4 âContingencies and Events occurring after the Balance sheet dateâ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend & tax thereon and the same is included in the balance of profit.
Earnings Per Share / Book Value
The Earnings Per Share (Basic) and the Book Value per equity share of Rs.2/- each fully paid as on 31 March 2018 were at Rs.4.98 and Rs.85.49 respectively.
Subsidiaries and Associates
Your Bank does not have any Subsidiaries or Associates to report during the year under report.
Board Meetings
During the FY 2017-18, twenty one meetings of the Board were held, the details of which are given in the Corporate Governance Report which is forming part of this report.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out annual evaluation of its own performance (Board as a whole), all its Directors, Committees of the Board, its Non-Executive Chairman and MD&CEO.
The manner of evaluation conducted during the year under report is furnished in the Corporate Governance Report.
Disclosure to be made under Sub-Section 8 of Section 177 of the Companies Act, 2013
The Board of the Bank had constituted the Audit Committee under the extant guidelines of Reserve Bank of India (RBI), provisions of the Companies Act, 2013 and Listing Regulations. The details of the composition of the Audit Committee is furnished in the Corporate Governance Report.
System for Internal Financial Control and its Adequacy
Your Bank is operating in a fully computerized environment with Core Banking System supported by diverse application platforms for handling special business such as treasury, trade finance, retail loans etc., The process of recording of transactions in each application platform is subject to various forms of control such as in-built system checks, maker checker authorisations and independent post transaction reviews etc., The financial statements are prepared based on computer system outputs. Responsibility of preparations of financial statements is entrusted to a dedicated unit which is independent of business. The Bank has implemented adequate procedures and internal controls which provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements and were operating effectively during the year.
Implementation of Indian Accounting Standards (Ind-AS)
As per RBI notification DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, Bank has to disclose its strategy for Ind-AS implementation, including the progress made in this regard.
The Bank has set up a Steering Committee for implementation of Ind-AS. The Steering Committee of the Bank is analyzing the current accounting framework and Ind-AS for changes in significant accounting policies, preparation of disclosures, documentation. Assessment of the software / solution offered by select vendors has been undertaken during the year.
Bank has submitted Proforma Ind-AS Financial Statement to RBI for the half-year ended 30th September 2016 and also for the quarter ended 30th June 2017 as per RBI guidelines.
The Reserve Bank of India through its press release dated 5th April 2018 has deferred the implementation of Ind-AS by one year for Scheduled Commercial Banks. In accordance with the same, the Ind-AS is applicable to banks from 1st April 2019.
Network of Branches
During the FY 2017-18, Bank has opened 79 branches including 2 Digital branches and 1 Extension Counter. The Bank has also opened 6 Corporate Business Units (CBU), 5 Central Loan Processing Cells (CLPC), 3 Asset Recovery Branches (ARB) and a Currency Chest at Hyderabad. The total no. of branches as on 31.03.2018 stood at 790.
Your Bank has 1795 ATMs and 533 BNA Recyclers meant for serving the customers of the Bank as on 31st March 2018, which includes 78 ATMs and 90 BNA Recyclers installed during the year under report.
Bank has installed 158 Self-service passbook Kiosks and 58 CTS enabled Cheque Deposit Kiosks during the FY 2017-18.
Currency Chest
Currency Chests are established by the Bank in Tamil Nadu, Andhra Pradesh, Telangana, Karnataka at 7 different locations for providing adequate cash supply to branches & ATMs. Currency Chests plays a vital role in providing effective customer service at branches and help the branches to adhere Clean Note Policy of RBI.
Currency Chests help the branches to accept soiled & mutilated notes from general public and from customers over the cash counters. Apart from conducting soiled note melas at the chest attached branches, lower denomination currencies and coins are distributed to customers and general public by the Currency Chests through our various branches.
Technology Initiatives
Your Bank has always been a forerunner in implementing robust IT services which would enhance productivity and efficiency of our products and services besides delighting customers.
Your Bank introduced a number of significant IT-driven initiatives during the FY18 covering various facets of banking system. They are as under:
- Digital Banking
During the year, Bank has initiated digital transformation project and engaged Boston Consulting Group (BCG) to draw the road map and implement the project. We are glad to share that, in the first phase, Bank has rolled out end-to-end paperless Digital Application for Home Loan processing and Digital Customer Portal for renewal of working capital limits up to Rs.100 lakh. Both the applications are well received by the market and Bank is embarking on digitalising entire lending system of the Bank and creating a Digital Application for Customer on boarding and services.
- Bharat QR (BQR)
We have introduced a mobile application, Bharat QR (BQR), a new initiative by National Payments Corporation of India (NPCI) in the payment system which aims to increase the merchant based digital transaction by displaying their QR at their outlets. The Mobile application is available for facilitating both merchants and customers to make payments.
- Digital Village
Your bank has implemented the Digital village at Kathirampatty (Near Erode, Tamilnadu) and Bandarupalli village (Near Guntur, Andhra Pradesh) to promote financial literacy among the people and to create awareness of bankâs digital services. The objective is to open accounts for the residents of the village thereby enabling the villagers to do their day-to-day transactions through their account by using the touch-points like Cash Recycler, Automatic Passbook Kiosk, Micro ATMâs, Tablets etc., The day-to-day transactions covered under this will range from withdrawal & deposit of cash, payment of utility bills, subscription to purchase of goods and the users are encouraged to use the internet banking in the Tablets available at the branch. Branch has been equipped with a Television facilitating the villagers to view the agriculture related programme and to make use of the same in their daily life. Restricted Wi-Fi facility at a radius of 1.5 kms has been provided to the villagers at free of cost to make use of our Bankâs Digital Applications in their own gadget and operating the same from their home or at any location within the village. In order to provide novel shopping experience in the village, Bank has on-boarded few shopkeepers in the village on Micro-ATM as Banking Correspondence wherein the customers use their Aadhaar cum Biometric details to authorize the transactions during the purchase of household and grocery items. All these lead to the foundation for a less-cash society.
- ISO: 27001
Your Bank has been certified with ISO/IEC 27001:2013 conformance on 20th February 2018 by the certifying body M/s. TUV SUD South Asia Pvt. Ltd, Chennai. ISO 27001:2013 is a global certification which provide the standards for establishment, implementation, monitoring & review, maintenance & improvement and an overall management & control framework for managing an organizationâs information security risks.
It is indeed a privilege for the Bank to receive the ISO 27001:2013 Information Security Management System (ISMS) certification for few offices, which is a highly recognized trust mark for the highest levels of internal controls towards information security management, business continuity and disaster recovery. Information Security is an integral part of the overall Risk Management Framework at KVB. Through this certification, we have taken a step forward towards its vision and strategy to establish the highest standards of Corporate Governance, benchmarked with global best practices, ensuring that the organization is managed and monitored in a responsible manner.
- Near Line Data Centre
Your bank has established a Near DC (NDC), so as to have a synchronous replication between DC & NDC and to ensure zero data loss. In case of any disaster at DC, the latest data can be retrieved from Near DC. The asynchronous replication between DC & DRS will still happen at the current time lag of 15-30 min to ensure cost effectiveness.
The NDC will be synchronously replicated from DC through storage based replication, which means that the data written at Data Centre Storage will be committed only after data being written on the Near Data Centre Storage. Your Bank is now able to achieve zero data loss on the critical applications being hosted in the Near Data Centre.
- National Electronic Toll Collection (NETC) - Acquiring
Electronic Toll Collection is a secure and interoperable solution for NHAI toll collection. NETC system will reduce wait time at toll counters, reduce fuel consumption and cash handling considerably. NETC system will use RFID tag which is pasted on the windshield of vehicle. The RFID Tag on the vehicle is read by the long range RFID reader hoisted on the NETC lanes which will allow vehicle without manual intervention.
We have taken one toll plaza at Rothak city towards acquiring of NETC tags and we are able to process the NETC tags affixed to the vehicles.
- e-Surveillance at offsite ATMs
During the FY 2017-18, your Bank has implemented remote monitoring of offsite ATM premises through e-Surveillance for 422 locations. The solution is capable of monitoring the ATM locations, Energy management, Incident control and alerting mechanism to alert the response team to take action on the incident monitored in the ATM premises. Centralized team is placed to monitor the ATM locations on 24*7 basis. Remote monitoring of ATM premises through e-Surveillance is one of the best initiative through âInternet of Thingsâ to have better operational control with cost reduction. As on date, 515 ATMs and its locations are monitored under e-Surveillance.
- Implementation of Green Pin at ATMs
Your Bank has implemented âGreen Pinâ which helps the customers to generate their ATM pin on their own and it is a trend set towards the Green Initiative.
Financial Inclusion
With the basic objective of bringing the large unserved population under the banking mainstream, the Bank is striving towards a more inclusive growth by making financial products and services available to financially excluded and marginalized sections of the society in particular. As per the Government of India and the Reserve Bank of India directions, the Bank has been actively pursuing the agenda of Financial Inclusion (FI). The Bank has 61 Financial Inclusion (FI) Branches and also engaged 117 Business Correspondent Agents (BCAs) under Business Correspondents (BC) model. In addition, 38 Ultra Small Branches (USBs) are also operational in the Bank.
The business correspondents are paying the old age pension and the NAREGA payments to the eligible persons at their door steps using the hand held devices.
Pradhan Mantri Jan Dhan Yojana (PMJDY):
PMJDY is the initiative from Government of India for comprehensive financial inclusion of the households hitherto excluded from the purview of banking and empowering them with benefits and facilities provided by the banking industry. Accounts opened under PMJDY are issued with RuPay Debit card, accidental Insurance coverage to the extent of Rs.1 lakh, life insurance cover of Rs.30,000/-. The Bank was allotted 409 Urban Wards for implementation of PMJDY
Performance highlights under PMJDY:
- Opened 1,89,296 accounts under PMJDY and mobilized a CASA deposit of Rs.17.65 Crore.
- Hand-held devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting RuPay Cards / Smartcard. The Bank has issued 1,86,828 RuPay Debit Cards to all eligible account holders.
- Bank Mitras have done 11.52 lakh transactions, amounting to Rs.123.53 Crore during the year.
- Bank Mitra have done 8,01,127 DBT transactions during the year.
Financial Literacy campaign:
Financial Literacy has been identified as pre-requisite for effective financial inclusion. Which is an integral part of Pradhan Mantri Jan-Dhan Yojana. In order to let the beneficiaries make best use of the financial services, your bank during the financial year FY2017-18 has conducted 244 financial literacy campaigns in Rural, Semi Urban / Urban areas.
Aadhaar Enrolments Updating Centres:
As per the Directions of Ministry of Financial Service, Karur Vysya Bank is the first Private Sector Bank to start Aadhaar enrolment centre in India. The First Aadhaar enrolment / Updation centre was started in Nelson Manickam Road Branch in Chennai, which was inaugurated by Mr. D M Gajare, Asst. Director General, UIDAI, Regional Office, Bengaluru. Subsequently more centres were started to facilitate customers to enroll for getting Aadhaar and to seed their Aadhaar number in their Bank account.
Performance under Sovereign Gold Bond Scheme, 2015
Your Bank could mobilize total subscription denominated in units of gold of 62,813 grams amounting to Rs.17.92 Cr in three tranches.
Management Discussion and Analysis
The Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2)(e) of the Listing Regulations is presented in a separate section forming part of this Annual Report.
Risk Management
Given the risks and challenges that the Bank faces, having a robust Risk Management system is of paramount importance for ensuring the financial stability and sustained growth of the Bank. A well designed Integrated Risk Management system has been put in place by the Bank to identify measure and manage the Risks faced by the Bank in the course of conducting its business. The Board sets the Risk Appetite of the Bank and the overall Risk Management strategies to be adopted by the Bank. The Risk Management and Asset Liability Management Committee (ALCO) of the Board assists in formulating various Risk Management Policies, oversee the implementation of the Risk Management strategies and monitor the risk levels across the Bank. The Bank has created a strong Risk Management structure at the Executive levels by forming Risk Committees with special focus - Credit Risk Management Committee (CRMC), Operational Risk Management Committee (ORMC), Market Risk Management Committee (MRMC) and Asset & Liability Management Committee (ALCO).
The Bank has a Risk Management Department (RMD) headed by the Chief Risk Officer (CRO) with requisite independence to effectively discharge the Risk Management Function. While RMD acts as a nodal centre for co-ordinating the Risk Controls and mitigation measures in the Bank, other Departments / Offices / Branches manage the risks in their respective business areas.
The Bank has Board-approved Risk Management Policy covering various operational areas that provides the foundation for formulating and approving business development initiatives and the day-to-day functioning of the Bank in accordance with the Risk Appetite set by the Board. These policies are updated from time to time and reviewed at least annually. It is also ensured that the policies are not only in line with the current regulatory guidelines but also provide sufficient opportunity for the Bank to maximize its growth and profits while maintaining the risks at acceptable levels.
Vigil Mechanism / Whistle Blower Policy
The Bank has in place the âWhistle Blower Policyâ since 2011. The said Policy is in compliance with RBI Guidelines, provisions of the Companies Act, 2013 and the Listing Regulations. The Audit Committee of the Board quarterly reviews the Vigil Mechanisms in the Bank.
The Policy also incorporates suggestions of the Protected Disclosure Scheme for Private Sector Banks, instituted by the Reserve Bank of India. In compliance with RBI guidelines on âStaff Empowermentâ, the Board of Directors has reviewed the Whistle Blower Policy of the Bank during the FY 18.
Related Party Transactions
All transactions entered with âRelated Partiesâ during the year under review were on âarmâs length basisâ and are in the âordinary course of businessâ. There are no material related party transactions during the year under report. Therefore the provisions of Section 188 of the Companies Act, 2013 do not attract. Accordingly AOC-2 is not applicable to the Bank.
Compensation Policy
The Bank has in place a Compensation Policy for its Whole Time Directors, Chairman and President & COO, in terms of the Section 178 of the Companies Act, 2013, the rules made thereunder and Listing Regulations.
Particulars of Loans, Guarantees and Investments
The provisions relating to Section 134(3)(g) of the Companies Act, 2013 on particulars of loans, guarantees and investments are not applicable to Banking Company and as such no disclosures are being made in this regard.
Auditors
Statutory Auditors
M/s Abarna & Ananthan, Chartered Accountants, Bengaluru have been the Statutory Auditors of the Bank since the conclusion of 95th Annual General Meeting of the Bank and have to retire at the conclusion of the ensuing Annual General Meeting. As per the regulations of Reserve Bank of India, the same auditors cannot be re-appointed for a period beyond four years. Hence, they are not eligible for re-appointment. The Bank places on record their earnest appreciation of the professional services rendered by M/s Abarna & Ananthan, Chartered Accountants, Bangalore, as Statutory Auditors of the Bank.
In terms of Section 139 of the Companies Act, 2013 read with Sec 30 (1A) of the Banking Regulation Act, 1949, it is proposed to appoint M/s Walker Chandiok & Co. LLP, Mumbai (Firm Registration No. 001076N/N500013) as Statutory Auditors of the Bank from the conclusion of the this Annual General Meeting till the conclusion of next Annual General Meeting of the Bank. Fees payable to the Statutory Audit is proposed at Rs.68,00,000, plus out of pocket expenses and applicable GST for the FY 2018-19, subject to approval of the RBI and shareholders of the Bank. M/s Walker Chandiok & Co. LLP, have confirmed their eligibility to be appointed as Statutory Auditors in terms of Section 141 of the Companies Act, 2013 and applicable rules. Accordingly, the Bank sought the approval of Reserve Bank of India and RBI accorded their approval vide their letter DBS.ARS.No.1406/08.12.005/2017-18 dated 22nd June 2018 for appointment of M/s Walker Chandiok & Co. LLP, Chartered Accountants, Mumbai as the Statutory Auditors for the year 2018-19.
Members are requested to consider the appointment of M/s Walker Chandiok & Co. LLP as Statutory Auditors of the Bank.
Pursuant to the Regulation 33(1)(d) of the Listing Regulations, the Statutory Auditors have confirmed that they have subjected themselves to the peer review process of the Institute of Chartered Accountants of India (ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.
Independent Auditorsâ Report
M/s Abarna & Ananthan, Chartered Accountants, Statutory Auditors of the Bank, have audited the accounts of the Bank for the year 2017-18 and their Report is annexed. Pursuant to Section 143(3)(i) of the Companies Act, 2013, the Statutory Auditors have also reported on the adequacy and operating effectiveness of the internal financial controls system over financial reporting, which has been enclosed as âAnnexure Aâ to Independent Auditorâs Report.
There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY18.
During the FY 18, no frauds were reported by Auditors under sub-section (12) of Section 143 of the Companies Act, 2013.
Secretarial Audit
Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank, with the approval of its Board appointed M/s. Solaiyappan & Associates, Company Secretaries, Salem to conduct the Secretarial Audit of the Bank for the FY 18. The Bank produced all necessary records to the Secretarial Auditors for smooth conducting of their Audit. The Secretarial Audit Report is annexed herewith as Annexure 1.
There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY18.
Statutory Disclosures
The Disclosures to be made under sub-section (3)(m) of Sec 134 of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014 by your Bank are explained as under:
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
Conservation of Energy
Considering the nature of its activities as an entity in the Financial Services sector, the Bank has voluntarily taken steps towards conservation of energy and technology absorption thus ensuring compliance of the provisions of Section 134 of the Companies Act, 2013. However the Bank has adopted the following in the areas of conservation of energy, technology absorption:
Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation across all its premises. Your Bank owns 850 KW Wind Turbine Generator at Govindanagaram, Theni District, Tamil Nadu. Installed in the year 2011, the Bank is utilizing the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also its Divisional Office, Chennai premises. 17,08,987 units were generated during the fiscal under report by wind mill.
Your Bank Installed LED lights in all the new branches opened during the FY 2017-18. VRF (Variant Refrigerant Flow) AC Units have been installed in new Divisional Office Building at Coimbatore and Back Offices in Chennai to save electricity by energy conservation technology.
Technology Absorption
Technology is now becoming the great facilitator in the Bank towards achieving the business goals. Your Bank has adopted modern ways of banking practices with the help of technology along with the traditional ways of Banking, which has still remained quite fundamental. Your Bank uses the sophisticated technologies to offer better services in a secure, reliable and affordable manner and sustain competitive advantage over other banks.
Your Bank has been awarded ISO 27001 certification for the various IT offices in establishing a framework of policies and procedures that includes all legal, physical and technical controls involved in the organizationâs information risk management process.
In order to provide quick and efficient customer service, your Bank has initiated the Digital Transformation Process through which the SME lending solution process is digitized as on date with threshold of â1 Cr and the required data is verified online from the respective entities. Your Bank is consistently maintaining the state of the art infrastructure with optimum utilization of the resources.
Foreign Exchange Earnings and Outgo
Foreign exchange earnings and outgo form part of the normal banking operations. The Bank supports and encourages the countryâs export efforts through its export financing operations. The details of foreign exchange earnings and outgo are mentioned elsewhere in the report.
Material events that have happened after the Balance Sheet date
No material changes and commitments affecting the financial position of the Bank which has occurred between the end of the Financial Year of the Bank i.e., March 31, 2018 and the date of the Directorsâ Report i.e., June 25, 2018.
There are no significant and material orders that were passed by the Regulators or Courts or Tribunals against the Bank impacting the going concern status and Bankâs operations in future.
Extracts of Annual Return
Pursuant to sub-section 3(a) Sec 134 and sub-section 3 of Sec 92 of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return as at March 31, 2018 in Form MGT-9 forms part of this report as Annexure 2.
Particulars of Employees
The ratio of remuneration of each Director to the median employeeâs remuneration and other details and the statement containing particulars of employees in terms of sub-section 12 of Sec 197 of the Companies Act, 2013 read with Rules 5(1) and (2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 forms part of this report as Annexure 3.
Further in terms of the said rules, no employee of the Bank holds by himself or along with his / her spouse and dependent children not less than two percent of the equity shares of the Bank.
Corporate Social Responsibility (CSR)
The Bank has constituted the Corporate Social Responsibility (CSR) Committee of the Board, in accordance with the provisions of Section 135 of the Companies Act, 2013, read with Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended.
The brief outline of the CSR Policy, overview of the programs undertaken by the Bank, the composition of the CSR Committee, prescribed CSR expenditure and details of the amounts spent by the Bank on CSR activities during the year under review, have been provided in Annexure - 4 to this report.
Your bank recognizes its responsibility towards the society and environment in which it operates and accordingly had been working towards CSR and Sustainable Development. The resources deployed and spent had increased significantly over the previous Financial Year. Bank is committed to identify and support outreach programmes aimed at developing and advancing the community. A steady and cautionary approach was adopted in the initial years so that sufficient platform / expertise is built to take forward the Bankâs CSR commitment. The entire expenditure could not be spent in one particular year as the proposals that were received were not viable for implementation, certain projects at evaluation stage could not ensure that the benefits reach a substantial number of people and hence were not considered and certain projects for which commitment given by the Bank could not be spend due to lack of ability of implementation partners in identifying scalable, sustainable projects.
Committee expressed its desire to enhance CSR spending to meet the Bankâs CSR commitment under the provisions of the Act. Further it will continue to strengthen its processes to evaluate all projects which will benefit the society in a large way as per the requirements and is passionately committed towards CSR objectives.
Business Responsibility Report (BRR)
In compliance with Regulation 34(2)(f) of the Listing Regulations the Business Responsibility Report describing the initiatives taken by the Bank from an environmental, social and governance perspective, in the format as specified by SEBI. The same has been hosted on the website of the Bank at the link http://www. kvb.co.in/global/business_responsibility_report.html.
The Business Responsibility Report (BRR) of the Bank for the year 2017-18 forms part of this Report as Annexure 5.
Criteria for determining qualifications, positive attributes for Appointment/Re-appointment of Directors
Pursuant to Section 178(3) of the Companies Act, 2013, the Nomination and Remuneration Committee (NRC) formulated the criteria for determining qualifications, positive attributes and independence of a Director to adhere the various provisions and guidelines as detailed below:
- Fit and Proper criteria as per Dr Ganguly Committee Norms which stipulates age, educational qualification, experience, track record, integrity etc., and various circular instructions and guidelines issued by Reserve Bank of India from time to time.
- Norms laid down by the Banking Regulation Act, 1949 as amended from time to time which stipulates substantial interest, sectorial representation as per Section 10A(2) (a), restrictions as per Section 16 and 20 of the Banking Regulation Act, 1949 etc.,
- Disqualification / Conflict of Interest of Directors and other norms as per the provisions of the Companies Act, 2013 and rules made thereunder from time to time.
- Criteria of Independence of a Director as per the provisions of Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.
- Applicable regulations of Listing Regulations as amended from time to time.
- Articles of Association of the Bank.
- Any other factors as the NRC may deem fit and in the best interest of the Bank and its stakeholders.
The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank at the link http://www.kvb. co.in/pdf/ID_Terms_and_Conditions.pdf.
Appointment and Retirement of Key Managerial Personnel
Shri J Natarajan, was appointed as President & Chief Operating Officer of the Bank and Key Managerial Personnel with effect from 01st April 2018, consequent to retirement of Shri K Venkateswara Rao, President & Chief Operating Officer, who demitted office at the close of the office hours on 31st March 2018 consequent to completion of his tenure of office.
Shri J Natarajan is a Post Graduate in Economics and a Certified Associate of Indian Institute of Bankers (CAIIB). He has rich experience in all the facets of Banking Operations over 34 years.
Board of Directors
In terms of Sec 152 of the Companies Act, 2013, Non-Executive Non-Independent Directors Shri M K Venkatesan (DIN:00032235) and Shri M V Srinivasamoorthi (DIN: 00694618), retire by rotation and being eligible offer themselves for re-election at the ensuing Annual General Meeting (AGM).
Shri M K Venkatesan (DIN:00032235), aged 61 years, is a graduate in Economics. He is one of the Promoters of the Bank. He is engaged in âMundy Businessâ dealing with agricultural commodities including seed processing and representing majority sector âMSMEâ. He was co-opted as an Additional Director of the Bank on 09.12.2014 and was elected as a Director at the 96th AGM held on 22.07.2015. Further he was re-appointed at the 97th AGM of the Bank. He had held two terms earlier as a Director of the Bank from 22.02.1992 to 18.02.2000 and 26.11.2003 to 26.07.2009. He is liable to retire by rotation.
Shri M V Srinivasamoorthy (DIN: 00694618), aged 54 years, is a graduate in Chemistry. He belongs to the promoter family of the Bank. He is engaged in textile business and exporting readymade garments, home textiles for the past 20 years. He is representing majority sector âMSMEâ. He was co-opted as an Additional Director of the Bank on 27.08.2015 and was elected as a Director at the 97th AGM held on 21.07.2016. He is liable to retire by rotation.
Managing Director and Chief Executive Officer
Consequent to completion of tenure of office, Shri K Venkataraman (DIN: 02443410), Managing Director & Chief Executive Officer demitted office at the close of office hours on 31st August 2017. Board has co-opted Shri P R Seshadri (DIN: 07820690) as an additional director of the Bank and appointed him as Managing Director & Chief Executive Officer of the Bank for a period of three years from the date of taking charge i.e 04th September 2017 on the terms and conditions approved by Reserve Bank of India. He would be representing Majority Sector - âBankingâ in the Board of the Bank.
Reserve Bank of India vide its letter DBR.Appt. No. 1499/08.41.001/2017-18 dated 14th August 2017 has accorded their approval under the provisions of the Section 35 B of the Banking Regulation Act, 1949, for the appointment of Shri P R Seshadri as the Managing Director & Chief Executive Officer of the Bank. In terms of the provisions of the Section 161 of the Companies Act, 2013 and Article 24 of the Articles of Association of the Bank, Shri P R Seshadri has been appointed as an Additional Director of the Bank and hold office upto the date of ensuing Annual General Meeting. Your Directors recommended for approval of the appointment of Shri P R Seshadri as a Director and Managing Director & Chief Executive Officer of the Bank. The terms and conditions approved by the Reserve Bank of India are furnished in the Notice of the Annual General Meeting.
Shri P R Seshadri aged 54 years, is a Bachelor of Engineering (B.E.-Electrical) with distinction from Delhi College of Engineering and a Post Graduate Diploma in Management from Indian Institute of Management, Bangalore (IIM, Bangalore). He is a senior Banker with Commercial and Retail Banking experience of over 25 years spanning multiple geographies. He made significant contributions to Citibankâs business in India. He has proven track record of building and leading large teams to execute and deliver complex business objectives. He has significant business success in leadership roles enabled by wide range of experiences, intimate business knowledge, ability to create inclusive and motivated teams and an innate bias for measured action. He has working experience in highly regulated banking environments across multiple geographies and interfaced with regulators from the USA (as an offshore branch of Citibank N.A. or a fully - owned subsidiary of it) UK, Singapore, Hong Kong, India etc.,
The relevant details including profile of the Directors who are seeking election/re-election at this Annual General Meeting are furnished separately in the Notice of the AGM.
Cessations
Shri K Venkataraman (DIN: 02443410), Managing Director and Chief Executive Officer of the Bank demitted office at the close of office hours on 31st August 2017 consequent to completion of his tenure. Board places on record for the excellent and valuable services rendered and contribution made by Shri K Venkataraman for the growth of the Bank during his tenure of six years.
Shri G Rajasekaran (DIN: 00035582), Non-Executive Non-Independent Director of the Bank, demitted office after office hours on 19th June 2018 consequent to completion his tenure of 8 years in terms of Section 10A(2A)(1) of the Banking Regulation Act, 1949. Board places on record for the excellent and valuable services rendered and contribution made by him during his tenure as Director of the Bank.
Apart from the above, there were no changes in the directors holding office.
Declaration by Independent Directors
The Bank has received necessary declaration from each Independent Director under Sec 149(6) of the Companies Act, 2013 and the Listing Regulations that they met the criteria of independence laid down in the Companies Act, 2013 and Listing Regulations.
Familiarization Programmes of Independent Directors
All Independent Directors are familiar with their roles, rights and responsibilities in the Bank at the time of appointment and also on a recurrent basis. The details of various programmes undertaken for familiarizing the Independent Directors are disclosed in Corporate Governance Report, which forms part of this Annual Report.
Confirmation as to Compliance of applicable laws
It is hereby confirmed that the Bank has proper systems in place to ensure compliance of all laws applicable to the Bank.
Corporate Governance
A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under Listing Regulations and Companies Act, 2013 and the rules made thereunder is enclosed as an annexure to this report.
A certificate from Shri CS S Solaiyappan, Practicing Company Secretary, confirming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is annexed to this report.
Directorsâ Responsibility Statement
Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the Directorsâ Responsibility Statement, it is hereby confirmed that:
a) In the preparation of the annual accounts, 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 and of the profit and loss 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 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.
Awards and Accolades
Your Bank received the following Awards and Accolades during FY 2017-18:
1. Best Small Bank for 2016 - Runner up Award from Business World in association with PricewaterhouseCoopers.
2. Award from Kamikaze Payments & Cards Summit 2017 for most disruptive payments technology of the year for FASTag.
3. Best Payments Technology Initiative of the Year for application meant for turmeric mundy dealers issued by Kamikaze Payments & Cards Summit 2017.
4. Best Bank Award for Innovative use of Technology among Small Banks from the Institute for Development & Research in Banking Technology, Hyderabad (IDRBT). Your Bank receiving the award from IDRBT for the ninth year consecutively.
5. Top Performer Award for number of Demat Accounts opened under Bank Category from National Securities Depository Limited (NSDL) - Second Place.
6. Winner-up award given by National Payment Corporation of India at their national Excellence Awards 2017 towards the best performance in Cheque Truncation System (CTS) under small-sized Banks.
Acknowledgements
The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, Securities and Exchange Board of India (SEBI), various State Governments and regulatory authorities in India for their valuable guidance, support and co-operation. The Board also acknowledges with gratitude the co-operation and support received from Stock Exchanges, rating agencies and other banking / financial institutions.
The Board takes this opportunity to place on record its deep sense of gratitude to its loyal shareholders for extending their support during the year and look forward to their continued association in the years ahead.
The Board thanks the valued customers for their goodwill, patronage and continued support and looks forward to their continued patronage in scaling greater heights.
During the fiscal, the Bank has received various recognitions and accolades for its excellence in the Banking domain. The Board is thankful to all such organisations and agencies for formally recognising the Bankâs efforts.
The Board appreciates the sincere and dedicated services displayed by its entire staff and highly values their commitment in improving the Bankâs performance.
For and on behalf of the Board of Directors,
Place: Karur B Swaminathan
Date: June 25, 2018 Chairman
Mar 31, 2017
To the Members
The Directors are pleased to present the 98th Annual Report of business and operations of your Bank together with audited financial statement of accounts for the year ended 31st March, 2017.
Key Performance indicators
This year has been a mix of opportunities and challenges for the Indian Banking sector. Despite the challenges, your Bank continues to perform well by leveraging upon its branch network, clientele and innovative electronic channel. The details of the Key Performance Indicators for the financial year 2016-17 are detailed as under:
Particulars |
31.03.2017 (Rs. in cr) |
31.03.2016 (Rs. in Cr) |
Deposits |
53,699.81 |
50,078.90 |
Advances |
41,434.98 |
39,475.70 |
Investments |
14,955.48 |
14,602.40 |
Total Income |
6,404.57 |
6,150.21 |
Total Expenditure |
4,833.60 |
4,847.15 |
Operating Profit |
1,570.97 |
1,303.06 |
Net Profit |
605.98 |
567.63 |
Total Business
During the year under report the total business of your Bank reached a level of Rs.95,135 Cr from a level of Rs.89,555 Cr for FY 16, posted a growth of 6.23% y-o-y.
Deposits
Bank improved its business with gross deposits growing by 7.23% to Rs.53,699.81 Cr for FY 17 against Rs.50,078.90 Cr in the previous fiscal.
Savings Bank deposits of the Bank increased by 30.35% to Rs.9,968.28 Cr from Rs.7,647.32 Cr of the previous fiscal and demand deposits grew by 22.18% from Rs.4,027.20 Cr to Rs.4,920.50 Cr. CASA deposits increased from Rs.11,675 Cr as at FY 16 to Rs.14,888 Cr as at FY 17 and recorded a growth rate of 27.52% as against the 18.62% growth in the previous fiscal. Term deposits grew by 1.06% to Rs.38,811 Cr from Rs.38,404 Cr in the FY 16.
Advances
Aggregate advances grew by 4.96% to Rs.41,434.98 Cr from Rs.39,475.70 Cr over the pervious fiscal. Average achivement in Priority Sector advances were at Rs.17,010 Cr at the end of FY 17 representing 44.21% of Bankâs Adjusted Net Bank Credit (ANBC) as against the statutory requirement of 40% of ANBC.
Your Bankâs average agriculture advances as at the end of the FY 17 were at Rs.7,458 Cr, representing 19.40% of the ANBC, as against the regulatory prescription of 18%. Bankâs average advances to micro enterprises and weaker sections were at 6.43% and 11.13% respectively. The Bank continues to comply with the regulatory guidelines under priority sector, agricultural lending and weaker section advances.
Asset Quality
Your Bank has been focusing on containing the non-performing assets through better credit monitoring as well as intensified efforts to recover the impaired assets. The Bank took several initiatives to contain slippages and speed up recovery from overdue loan accounts. These include identification of stressed accounts for restructuring/rephasing in time, conduct of Adalats at Divisional Office levels, regular follow-up of over dues through call centre and e-auctions.
However, in view of the continued slowdown in the economy and delinquencies in the corporate segment, the Bankâs Net Non-Performing Assets (Net NPA) stood at 2.53% in FY 17 as against 0.55% in the pervious fiscal. The Bankâs Provision Coverage Ratio (PCR) stood at 57.83%.
Investments
The investment portfolio of the Bank registered a growth of 3.12% to touch Rs.14,955.48 Cr from Rs.14,602.40 Cr in the previous fiscal. The investment portfolio composition is consistent with the corporate requirement, risk perception and investment policy of the Bank.
Income earned on investments during FY 17 was Rs.1,106.04 Cr as against Rs.1,095.78 Cr in the previous fiscal registering a growth of 0.94%. Low growth is on account of overall fall in yields in the market and due to sale of securities from HTM category during the year. Profit on sale of investments was Rs.204.64 Cr as in FY 17 as against Rs.94.41 Cr in the previous fiscal, showing a quantum growth of 116.76%.
Liquidity position was comfortable throughout the FY 17.
Income
The interest income for FY 17 constitutes 87.79% of the total income whereas the same was 88.51% for the pervious fiscal. The gross interest income component grew by 3.29% y-o-y from Rs.5,443.43 Cr in FY 16 to Rs.5622.35 Cr in FY 17. However the Net Interest Income grew by 16.41% y-o-y from Rs.1,781.37 Cr to Rs.2,073.70 Cr. Non-interest income increased to Rs.782.22 Cr from Rs.706.81 Cr, a growth of 10.67%.
Expenditure
The interest expenditure fell from Rs.3,662.03 Cr in FY 16 to Rs.3,548.65 Cr in FY 17 showing a decline of 3.10% (Rs.113.38 Cr). Operating expenses increased from Rs.1,185.12 Cr in FY 16 to Rs.1,284.95 Cr in FY 17 with an increase of 8.42% (Rs.99.83 Cr).
Cost of deposits fell from 7.40% in FY 16 to 6.60% in FY 17.
The reduction in interest expenditure helped Net Interest Margin increase from 3.43% in FY 16 to 3.70% in FY 17.
During the FY 17 the spread on funds increased from 2.71% to 3.09%.
Profit
Your Bank displayed a healthy growth in business and earnings with a operating profit of Rs.1,570.97 Cr for the FY 17, registering a growth of 20.56% over the operating profit of Rs.1,303.06 Cr in the pervious fiscal. The net profit of the Bank registered a growth of 6.76% (grew by Rs.38.35 Cr) and stood at Rs.605.98 Cr as against Rs.567.63 Cr in the previous fiscal.
Appropriations
The net profit of Rs.605.98 Cr which along with a sum of Rs.2.20 Cr brought forward from the previous year aggregating Rs.608.18 Cr is appropriated as under:
Appropriation - Transfer to |
Amount (Rs. in Cr) |
- Statutory Reserve |
152.00 |
- Capital Reserve |
73.87 |
- General Reserve |
164.00 |
- Special Reserve |
25.00 |
Balance carried to Balance Sheet* |
193.31 |
*Including Proposed Dividend and dividend distribution tax amount of Rs.190.67 Cr.
Sub-division of equity shares
The Board of Directors at its meeting held on 19th September, 2016 considered and approved the sub-division of one equity share of the Bank having face value of Rs.10/- each into five equity shares of face value of Rs.2/- each and consequential alteration in the relevant clauses of Memorandum and Articles of Association of the Bank and the same was approved by the Members of the Bank through postal ballot on October 27, 2016. Board of Directors of the Bank fixed November 18, 2016 as Record Date for the purpose of sub-division of face value of equity shares of the Bank. Accordingly equity shares of face value of Rs.2/- each were issued to all the members who were holding equity shares of Rs.10/- each on November 18, 2016.
Share capital
Pursuant to sub-division, the Authorised Capital of the Bank was Rs.200.00 Cr comprising of 100 Cr Equity Shares of face value of Rs.2/- each and the Paid-up Capital of the Bank was Rs.121.86 Cr comprising of 60,93,22,270 Equity Shares of face value of Rs.2/- each fully paid up.
The net owned funds of the Bank increased from Rs.4,572.95 Cr to Rs.4,845.02 Cr, a rise of Rs.272.07 Cr registering a growth rate of 5.95%.
The market capitalization of your Bankâs shares at the end of FY 17 was Rs.6,824.41 Cr.
Debt instruments
The Bank had issued Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) Bonds to the value of Rs.150.00 Cr in September 2009. During the year under report, Bank did not raise any TIER II capital.
Capital Adequacy
Capital Adequacy ratio stood at 12.54% as per BASEL III norms. The Bankâs Capital Adequacy Ratio is well above the statutory limit of 9% (10.25% including capital conservation buffer) prescribed by the Reserve Bank of India.
Credit Rating
ICRA Limited had rated the Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) debt instruments issued in the year 2009 by re-affirming its A rating. Investment with such rating are considered to have adequate degree of safety regarding timely servicing of financial obligations.
CRISIL has re-affirmed A1 rating (pronounced CRISIL A one plus) for Rs.30 bn Certificate of Deposits Programme of your Bank. ICRA Limited has confirmed ICRA A1 (Pronounced ICRA A one plus) rating to the Bankâs Certificate of Deposits Programme for Rs.30 bn. Both the ratings indicate a very strong degree of safety regarding timely payment of financial obligations.
Dividend
The Board recommended dividend of Rs.2.60 per Equity Share of face value of Rs.2/- each i.e., 130% for the FY 17, thus maintaining 100% or more dividend for the fourteenth year in succession. The total dividend payment works out to Rs.158.42 Cr excluding dividend tax and payout ratio works out to 26.14% excluding dividend tax. The dividend is subject to the approval of the shareholders at the Annual General Meeting. Bank had formulated Dividend Distribution Policy as per the Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (âListing Regulationsâ) and the same is available in your Bankâs website.
Earnings per share / Book Value
The earnings per share (Basic) and the book value per share of Rs.2/- each fully paid as on 31.03.2017 were at Rs.9.95 and Rs.79.51 respectively.
Foreign Exchange Transactions
The merchant turnover of the Bank grew by 9.08% to reach Rs.22,516 Cr in FY 17 as against Rs.20,642 Cr in FY 16.
Export credit stood at Rs.1,581 Cr in FY 17 as against Rs.1,286 Cr in FY 16, a growth of 22.94% over the previous fiscal.
Your Bank earned a total income of Rs.95.97 Cr in FY 17 on forex transactions against Rs.111.17 Cr in FY 16. Of the total income earned to the tune of Rs.95.97 Cr, exchange profit accounted for Rs.38.38 Cr and Commission and others accounted for Rs.57.59 Cr.
System for internal Financial Control and its Adequacy
The Bank is operating in a fully computerized environment with Core Banking System supported by diverse application platforms for handling special business such as treasury, trade finance, retail loans etc. The process of recording of transactions in each application platforms is subject to various forms of control such as in-built system checks, maker checker authorisations and independent post transactions reviews etc. The financial statements are prepared based on computer system outputs. Responsibility of preparations of financial statements is entrusted to a dedicated unit which is independent of business. The Bank has implemented adequate procedures and internal controls which provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements and were operating effectively during the year.
Subsidiaries and Associates
Your Bank does not have any Subsidiaries or Associates to report.
Board Meetings
During the year, twenty four meetings of the Board were held, the details of which are given in the Corporate Governance Report which is forming part of this report.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the Board has carried out annual evaluation
The manner of evaluation conducted by the Bank has been reported in the Corporate Governance Report.
Disclosure to be made under Sub-Section 8 of Section 178 of the companies Act, 2013.
The Board of the Bank had constituted the Audit Committee under the extant guidelines of Reserve Bank of India (RBI), provisions of the Companies Act, 2013 and Listing Regulations and the details of the composition of the Audit Committee is furnished in the Corporate Governance Report.
Network of branches
Your Bank has 711 branches and 1747 ATMs as on 31.03.2017. The Bank had added 44 branches and 115 ATMs during the year to improve its footprint throughout the country including un-banked centres in tune with RBI guidelines.
Technology Initiatives
Your Bank continued to actively leverage its proven IT initiatives to offer a wide array of advanced financial services and products embedded with the latest technology and security features, to cater to the needs of its customers and target group and further their banking convenience.
Your Bank introduced a number of significant IT driven initiatives during the FY 17 covering various facets of banking system. They are as under:
- BNA Recyclers
All the Cash Deposit Machines are migrated as Recyclers with the machines functioning as ATMs also as cash withdrawal can be made in the same machine and the cash deposited by the customers can be recycled for withdrawals. Our Bank has 444 cash recyclers.
- Tablet Based Account Opening
We have implemented on-line opening of Savings and Current accounts for individuals using tablet systems based on Aadhaar details to enable immediate enrolling of customers at their doorstep.
- Multifunction KIOSK
We have launched self-service KIOSKs through which customer himself can deposit outward cheques through the KIOSK. The customer cheques so deposited are immediately scanned and available for participating in the clearing in the immediate next settlement cycle thereby reducing the collection time drastically.
Customers can use this Automatic Passbook Printing KIOSKs for getting their passbooks printed automatically and immediately. The customer on inserting their Passbook into the printer, the printer will automatically print the passbook by turning pages without any hassles to the customers. Thus passbook printing can be done at any time of the day.
The pass book KIOSKs are deployed in 156 branches of your Bank and the Bank proposed to roll out the same in more branches in FY 18.
- Digitization of Loan Proposals
We have implemented Digitization of Loan Proposals in order to enable a quick transition of loan documents for processing at loan processing cells and in an electronic form. This helps to reduce the turnaround time to process credit proposals. There will be minimal physical movement of checklist documents from the branches to Central Loan Processing Centre (CLPC)/ Divisional Office (DO)/Central Office (CO).
- Unified Payment Interface (UPI)
We have introduced a mobile application, Unified Payment Interface (UPI), a new initiative by National Payments Corporation of India (NPCI) in the payment system which aims to simplify by enabling both sender and receiver to initiate a payment in a secured manner via Mobile application.
- Bharat Interface for Money (BHIM) is another mobile application provided by M/s NPCI that lets the users to make simple, easy and quick payment transactions using Unified Payments Interface (UPI). Users can easily make direct bank to bank payments instantly and collect money using just Mobile number or Payment address.
- Bharat Bill Payment System (BBPS) is an integrated bill payment system in the country that offers interoperable and accessible bill payment / utility bill payments such as electricity, water, gas, DTH, telecom etc. Other types of payments such as School / University fees, Municipal taxes/ Statutory payments and other bills, mutual funds and insurance premium, various Government taxes will be included as and when Reserve Bank of India approves the same. We are one of the pilot Banks identified by NPCI for this initiative.
- National Electronic Toll Collection (NETC) - FASTAG
Electronic Toll Collection is a secure and interoperable solution for NHAI toll collection. NETC system will reduce wait time at toll counters, reduce fuel consumption and cash handling considerably. NETC system will use RFID tag which is pasted on the windshield of vehicle. The RFID Tag on the vehicle is read by the long range RFID reader hoisted on the NETC lanes which will allow vehicle without manual intervention. FASTAG (stickable) with different color variant for different types of vehicles (as prescribed by NPCI) will be issued to the customers. We are one of the five Banks identified by NHAI & NPCI for this initiative and the only Bank in the South.
Financial inclusion
In our efforts to provide the expanded services to the existing and new customers in the rural as well as in urban India, we have successfully implemented Financial Inclusion Scheme. Under the PMJDY scheme the Bank was required to cover 409 Wards in semi urban and urban areas in addition to 117 villages and 2 urban locations allotted in Tamil Nadu State under Urban Financial Inclusion.
Your Bank has covered all the 409 Wards, 117 villages and 2 urban locations through Business Correspondents spread over Tamil Nadu, Andhra Pradesh, Telangana and Karnataka States. The Bank has 39 Ultra Small Branches as at 31.03.2017. Financial literacy has been identified as a pre-requisite for effective financial inclusion and an integral part of Pradhan Mantri Jan-Dhan Yojana in order to let the beneficiaries make best use of the financial services being made available to them. Your Bank has conducted 72 financial literacy camps in rural/ unbanked rural branches.
Your Bank introduced a separate Savings Bank Product for PMJDY, through which the Bank opened 28,599 accounts with an outstanding balance of Rs.3.05 Cr as at 31.03.2017. In FY 17, your Bank enrolled 87,484 customers under Pradhan Mantri Suraksha Bima Yojana, 1,36,865 customers under Pradhan Mantri Jeevan Jyoti Bima Yojana and 509 customers in Atal Pension Yojana.
Performance under Sovereign Gold Bond Scheme, 2015
Your Bank could mobilise total subscription denominated in units of gold of 65,350 grams amounting to Rs.19.72 Cr in four tranches. Management discussion and Analysis
The Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2)(e) of the Listing Regulations is presented in a separate section forming part of this Annual Report.
Risk Management
The Bank has Risk Management Department, independent of business functions, covering Credit Risk, Market Risk, Operational Risk and Assets-Liabilities Management (ALM) functions. Risk Management functions in the Bank has been
The Bank has comprehensively articulated various risk policies which specify the risk appetite / strategies, risk measurement methodologies, monitoring and control measures for the respective business segments. The policies have been framed keeping risk appetite as the central objective and business strategies have been aligned to risk policies.
The Bank has implemented âInternal Capital Adequacy Assessment Processâ (ICAAP) in line with the Basel III requirements. The Bank has set up a Board-level Committee, viz., âRisk Management & Asset Liability Management Committeeâ to examine risk policies and procedures developed by the Bank and to monitor adherence to various risk parameters and prudential limits by different operating Departments.
Vigil Mechanism/Whistle Blower Policy
The Bank has in place the âWhistle Blower Policyâ since 2011. The said Policy is in compliance with RBI Guidelines, provisions of the Companies Act, 2013 and the Listing Regulations. The Vigil Mechanism at the Bank requires submission of Quarterly Reviews before the Audit Committee of the Board.
The Policy also incorporates suggestions of the Protected Disclosure Scheme for Private Sector Banks, instituted by the Reserve Bank of India. In compliance with RBI guidelines on âStaff Empowermentâ, the Board of Directors has reviewed the Whistle Blower Policy of the Bank during the FY 17.
Related Party transactions
All transactions entered with âRelated Partiesâ during the year under review were on âarmâs length basisâ and in the âordinary course of businessâ and therefore do not attract the provisions of Section 188 of the Companies Act, 2013. Accordingly AOC-2 is not applicable to the Bank.
Employee Stock option Scheme
During the year under report, your Bank has not granted any stock options under Employee Stock Option Scheme (ESOS).
Compensation Policy
The Bank has in place a Compensation Policy for its Whole Time Directors, Chairman and President & COO, in terms of the Section 178 of the Companies Act, 2013, the rules made thereunder and Listing Regulations.
Particulars of Loans, Guarantees and Investments
The provisions relating to Section 134(3)(g) of the Companies Act, 2013 on particulars of loans, guarantees and investments are not applicable to Banking Company and as such no disclosures are being made in this regard.
Auditors
Statutory Auditors
The Members of the Bank at the 97th Annual General Meeting of the Bank held on 21st July, 2016, have approved the appointment of M/s Abarna & Ananthan, Chartered Accountants, Bengaluru as Statutory Auditors of the Bank for a period of two years, subject to the approval of the Reserve Bank of India, to hold office from the conclusion of the 97th AGM till the conclusion of the 99th AGM of the Bank to be held in 2018, subject to ratification of the appointment by the Members at the 98thAnnual General Meeting. Accordingly the appointment of M/s Abarna & Ananthan, Chartered Accountants, Bengaluru as Statutory Auditors of the Bank is required to be ratified by the Members at the 98th Annual General Meeting of the Bank, subject to the approval of Reserve Bank of India. The Bank has received the consent from the Auditors and confirmation to the effect that they are not disqualified to be appointed as the Auditors of the Bank in terms of the provisions of the Companies Act, 2013 and rules made thereunder. Accordingly, the Board of Directors has recommended the ratification of appointment of M/s Abarna & Ananthan, Chartered Accountants, Bengaluru as Statutory Auditors of the Bank, to hold office from the conclusion of the ensuing Annual General Meeting till the conclusion of the 99th Annual General Meeting of the Bank on remuneration to be decided by the Board thereof, to the members for approval. There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY 17.
During FY 17, no frauds were reported by Auditors under Sub-section (12) of Section 143 of the Companies Act, 2013.
Secretarial Audit
Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank, with the approval of its Board appointed âSolaiyappan & Associatesâ Company Secretaries, Salem to conduct the Secretarial Audit of the Bank for the FY 17. The Secretarial Audit Report is annexed herewith as Annexure 1.
There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY 17.
Statutory Disclosures
The Disclosures to be made under sub-section (3)(m) of Sec 134 of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014 by your Bank are explained as under:
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Conservation of Energy
Considering the nature of its activities as an entity in the Financial Services sector, the Bank has voluntarily taken steps towards conservation of energy and technology absorption thus ensuring compliance of the provisions of Section 134 of the Companies Act, 2013. However the Bank has adopted the following in the areas of conservation of energy, technology absorption:
Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation across all its premises. Your Bank owns 850 KW Wind Turbine Generator at Govindanagaram, Theni District, Tamil Nadu. Installed in the year 2011, the Bank is utilizing the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also its Divisional Office, Chennai premises. 18,21,049 units were generated during the fiscal under report by wind mill.
Technology Absorption
Technology is a key enabler and core facilitator to the goals of your Bank and is identified as one of the strategic pillars of the Bank. Your Bank has been at the forefront of leveraging technology to provide better products and services to its customers, ever since technology entered into the banking industry in the country. Your Bank has a state-of-the-art technology. All Departments within the Bank use IT to deliver superior products and services to the customers.
Your Bank was qualified by National Payment Corporation of India and National Highways Authority of India for the National Electronic Toll Collection (NETC) project as one of the Pilot Banks. Very few Banks in India were qualified for this digital initiative of National Highways wherein your Bank can issue and acquire RFID based tags which can be used by vehicles to pay the toll fee digitally across the country.
Similarly, your Bank was qualified by National Payment Corporation of India for the Bharat QR (Quick Response) Code project as one of few Pilot Banks wherein dynamic and fixed payments can be effected through Mobile phones without using any debit/credit card. The payment can also be initiated through UPI (Unified Payment Interface) launched by Government of India.
Your Bank has also been qualified by the National Payment Corporation of India for the Bharat Bill Payment System (BBPS) as one of the pilot banks where all utility bills across the Banks and merchants can be paid through us under one umbrella.
With a view to support new and innovative methods for ensuring customer delight, your Bank has been upgrading various systems which are already in place as also implemented new systems and platforms. Your Bank has augmented direct channels infrastructure and further embarked on upgrading its core banking system. To ensure highly resilient IT infrastructure and its optimum utilization, the Bank has implemented virtualization in its data centres which has reduced its carbon footprint. Foreign Exchange Earnings and outgo Foreign exchange earnings and Outgo form part of the normal banking operations. The Bank supports and encourages the countryâs export efforts through its export financing operations. The details of foreign exchange earnings and outgo are mentioned elsewhere in the report.
Material events that have happened after the Balance Sheet date
No material changes and commitments affecting the financial position of the Bank have occurred between the end of the Financial Year to which the Financial Statements relate and the date of report.
There are no significant and material orders that were passed by the Regulators or Courts or Tribunals against the Bank impacting its going concern status or the Bankâs operations in future. Extracts of Annual Return
Pursuant to sub-section 3(a) Sec 134 and sub-section 3 of Sec 92 of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return as at March 31, 2017 in Form MGT-9 forms part of this report as Annexure 2.
Particulars of Employees
The ratio of remuneration of each Director to the median employeeâs remuneration and other details and the statement containing particulars of employees in terms of sub-section 12 of Sec 197 of the Companies Act, 2013 read with Rules 5(1) and (2) of the Companies (Appointment & Remuneration of Managerial Personnel) Amendment Rules, 2016 forms part of this report as Annexure 3.
No employee of the Bank was in receipt of the remuneration as specified in Rule 5(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Amendment Rules, 2016 under section 197(12) of the Companies Act, 2013 and further in terms of the said rules no employee of the Bank holds
Corporate Social responsibility (CSR)
The Bank has constituted the Corporate Social Responsibility (CSR) Committee of the Board, in accordance with the provisions of Section 135 of the Companies Act, 2013, read with Companies (Corporate Social Responsibility policy) Rules, 2014 as amended. The Bank has in place a CSR policy which was reviewed by the Board annually. CSR expenditure and details of the amounts spent by the Bank on CSR activities during the year has been enclosed to this report as Annexure 4.
Business responsibility report (BRR)
The Securities & Exchange Board of India (SEBI), vide their Circular dated November 4, 2015, have published revised format of the Business Responsibility Report and have mandated the top 500 listed entities, based on market capitalization in Stock Exchanges, to include the âBusiness Responsibility Reportâ (BRR) as part of the Annual Report, describing the initiatives taken by the listed entity from an environmental, social and governance perspective, in the format as specified by SEBI.
In view of the above and in compliance with Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility Report (BRR) of the Bank forms part of this Report as Annexure 5.
Criteria for determining qualifications, positive attributes for Appointment/re-appointment of directors
Pursuant to Section 178(3) of the Companies Act, 2013, the Nomination and Remuneration Committee (NRC) formulated the criteria for determining qualifications, positive attributes and independence of a director to adhere the various provisions and guidelines as detailed below:
- Fit and Proper criteria as per Dr Ganguly Committee Norms which stipulates age, educational qualification, experience, track record, integrity etc., and various circular instructions and guidelines issued by Reserve Bank of India from time to time.
- Norms laid down by the Banking Regulation Act, 1949 as amended from time to time which stipulates substantial interest, sectoral representation as per Section 10A(2)(a), restrictions as per Section 16 and 20 of the Banking Regulation Act, 1949 etc.,
- Disqualification / Conflict of Interest of Directors and other norms as per the provisions of Companies Act, 2013 and rules made thereunder from time to time.
- Criteria of Independence of a Director as per the provisions of Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.
- Applicable regulations of Listing Regulations as amended from time to time.
- Articles of Association of the Bank.
- Any other factors as the NRC may deem fit and in the best interest of the Bank and its stakeholders.
The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank at the link http://www.kvb. co.in/pdf/ID_Terms_and_Conditions.pdf.
Board of directors
In terms of Sec 152 of the Companies Act, 2013, Non-Executive Non-Independent Directors Shri G Rajasekaran (DIN: 00035582) and Shri A K Praburaj (DIN: 07004825), retire by rotation and being eligible offer themselves for re-election at the ensuing Annual General Meeting (AGM).
In terms of the provisions of Sec 149(10) and Sec 152 read with Companies (Appointment and Qualification of Directors) Rules, 2014, the Non-Executive Independent Directors Shri N S Srinath (DIN: 01493217) and Dr V G Mohan Prasad (DIN: 00002802) shall be eligible for re-appointment and seeking re-appointment for a second term.
Shri N S Srinath, an Independent Director of the Bank, was co-opted as an Additional Director on 29.06.2012. He was appointed as a Director in the AGM held on 30.07.2012. Pursuant to Sections 149 and 152 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014, Shri N S Srinath was appointed as an Independent Director of the Bank, upto a period of 3 years in the AGM held on 23.07.2014. The three years term of his appointment ends on 22.07.2017.
Dr V G Mohan Prasad, an Independent Director of the Bank, was co-opted as an Additional Director on 15.06.2014. Pursuant to Sections 149, 152 and 161 of the Companies Act, 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014, Dr V G Mohan Prasad was appointed as an Independent Director of the Bank upto a period of 3 years in the AGM held on 23.07.2014. The three years term of his appointment ends on 22.07.2017.
In terms of Section 149(10) of the Companies Act, 2013, an Independent Director shall hold office for a term upto five consecutive years on the Board of a company but shall be eligible for re-appointment for a further period upto five years on passing of a special resolution by the company. Further, in terms of Section 10A(2A) of the Banking Regulation Act, 1949, no director of a banking company, other than its Chairman or whole-time Director, by whatever name called, shall hold office continuously for a period exceeding eight years.
Shri N S Srinath is completing his five years period on 28.06.2017 and in compliance of Section 10A(2A) of the Banking Regulation Act, 1949 he may be re-appointed for a second term upto the completion of his continuous period of eight years.
Dr V G Mohan Prasad is completing three years period on 14.06.2017 and in compliance of Section 10A(2A) of the Banking Regulation Act, 1949 he may be re-appointed for a second term upto the completion of his continuous period of eight years.
In the opinion of the Board of Directors they fulfil the conditions specified in the Companies Act, 2013 and the Rules made thereunder and meet the criteria of independence as provided under Section 149(6) of the Companies Act, 2013. Further their appointment is in compliance with the provisions of Sec 10A of the Banking Regulation Act, 1949, in particular, on account of Shri N S Srinath and Dr V G Mohan Prasad have the requisite experience/ expertise required under Section 10A(2) of the Banking Regulation Act, 1949. The said Independent Directors are not liable to retire by rotation.
The tenure of Shri K Venkataraman (DIN: 02443410), MD & CEO of the Bank concluded at the close of the office hours on 31st May 2017 as per the terms of his re-appointment. Bank had already taken initiatives to select suitable successor for being appointed as MD & CEO of the Bank which is at final stage. In view of the importance of ensuing statutory compliances of the Bank for the year ending March 2017, Board in the meeting held on 21.03.2017 resolved to extend the tenure of Shri K Venkataraman, MD & CEO of the Bank for a period of three months effective from 1st June 2017 to 31st August 2017, subject to the approval of Reserve Bank of India.
The Bank made an application to Reserve Bank of India for approval for extension of term of Shri K Venkataraman, MD & CEO of the Bank under the existing terms & conditions. Reserve Bank of India vide their letter DBR.Appt.No.11915/08.41.001/2016 - 17 dated April 7, 2017 accorded their approval for extension of tenure of Shri K Venkataraman to continue as MD & CEO of the Bank for a period of three months from 1st June 2017 to 31st August 2017, under the existing terms & conditions.
Shri K K Balu, Independent Director of the Bank demitted office consequent to the completion of his two years tenure ended on 22.07.2016.
Board places on record its appreciation for the valuable services rendered by Shri K K Balu during his tenure.
Apart from the above, there were no changes in the directors holding office.
Declaration by independent directors
The Bank has received necessary declaration from each Independent Director under Sec 149(7) of the Companies Act, 2013 and the Listing Regulations that they meet the criteria of independence laid down in the Companies Act, 2013 and Listing Regulations.
Confirmation as to Compliance of applicable laws
It is hereby confirmed that the Bank has proper systems in place to ensure compliance of all laws applicable to the Bank. Corporate Governance
A separate section on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under Listing Regulations and Companies Act, 2013 and the rules made thereunder forms part of this report.
A certificate from Shri CS S Solaiyappan, Practicing Company Secretary, confirming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations is annexed to this report.
Directorsâ responsibility Statement
Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the Directorsâ Responsibility Statement, it is hereby confirmed that
(a) In the preparation of the annual accounts, 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 and of the profit and loss 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 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.
(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.
Awards and Accolades
Your Bank received the following Awards and Accolades during the year 2016-17.
1. Business Today - KPMG Best Small Bank Award for 2015-16.
2. Best Bank in National Level under Private Sector Category for 2015-16 from the State Forum of Bankersâ Club of Kerala.
3. Best Bank Award among the Small Banks for Digital Banking from the Institute for Development and Research in Banking Technology (IDRBT) for the year 2015-16.
4. Best Bank among Small Banks for Managing IT Ecosystems from the Institute for Development and Research in Banking Technology (IDRBT) for the year 2015-16. Your Bank receiving the IDRBT award for the eight year in succession.
5. Dun & Bradstreet award for Best Private Sector Bank for Priority Sector Lending.
6. Best Bank Award for Credit Quality from Financial Express for the year 2013-14.
7. Star Performer Award for new accounts opened under Bank Category from National Securities Depository Limited (NSDL) - Second Place.
8. First Prize for achieving highest disbursal under Solar Irrigation Pumps - Off Grid & Decentralized Solar Applications Programme for FY 16 from Ministry of New & Renewable Energy, Govt. of India.
9. Second Prize under Branch Wise Performance (for Belgaum Branch) for achieving highest disbursal under Solar Irrigation Pumps - Off Grid & Decentralized Solar Applications Programme for FY 16 from Ministry of New & Renewable Energy, Govt. of India.
Acknowledgements
The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India for their valuable guidance, support and co-operation. The Board also acknowledges with gratitude the co-operation and support received from Stock Exchanges, rating agencies and other banking /financial institutions.
The Board takes this opportunity to place on record its deep sense of gratitude to its loyal shareholders for extending their support during the year and looks forward to their continued association in the years ahead.
The Board thanks the valued customers for their goodwill, patronage and continued support and looks forward to their continued patronage in scaling greater heights.
During the fiscal the Bank has received various recognitions and accolades for its excellence in the Banking domain. The Board is thankful to all such organisations and agencies for formally recognising the Bankâs efforts.
The Board appreciates the sincere and dedicated services displayed by its entire staff and highly values their commitment in improving the Bankâs performance.
For and on behalf of the Board of Directors,
Place: Karur B Swaminathan
Date: 08.06.2017 Chairman
Mar 31, 2015
To the members
The Directors are pleased to present the 96th Annual Report of
business and operations of your Bank together with audited accounts for
the year ended March 31,2015.
Particulars 31.03.2015 31.03.2014
(Rs. in Cr) (Rs. in Cr)
Gross Deposits 44690.27 43757.68
Gross Advances 36690.77 34225.98
Total Income 5976.71 5680.41
Total Expenditure 5033.42 4842.62
Operating Profit 943.29 837.79
Net Profit 464.28 429.60
Appropriations: Transfer to
Statutory Reserve 120.00 128.00
Capital Reserve 12.16 1.75
General Reserve 58.50 157.00
Special Reserve 60.00 NIL
Investment Reserve 53.00 (21.00)
Proposed Dividend 158.42 139.99
Dividend Tax 32.25 23.79
Total Business
The total business of the Bank stood at Rs. 81381.04 Cr as on March
31,2015, against Rs. 77983.66 Cr a year before, growth of 4.36%.
Deposits
Gross deposits increased by 2.13% to Rs. 44690.27 Cr against Rs. 43757.68
Cr last year. Savings Deposits increased by 16.75% to Rs. 6314 Cr. Demand
Deposits stood at Rs. 3528 Cr. CASA increased from Rs. 8989 Cr as at
31.03.2014 to Rs. 9842 Cr as on 31.03.2015 recording a y-o-y growth of
9.49%. CASA deposits constituted 22% of the total deposits.
Term Deposits increased from Rs. 34768.79 Cr as on 31.03.2014 to Rs.
34848.10 Cr as at the end of March 31,2015.
Advances
During this fiscal, your Bank recorded a growth of 7.20% in its loan
book with the advances increasing to Rs. 36690.77 Cr as at 31.03.2015
from Rs. 34225.98 Cr as at the end of March 31,2014.
Priority sector advances were at Rs. 14332.70 Cr at the end of March 31,
2015, representing 41.43% of Bank''s Adjusted Net Bank Credit (ANBC) of
the previous fiscal. Your Bank has thus achieved its overall priority
sector lending requirements of 40% of ANBC.
Your Bank''s agriculture advances as at the end of the fiscal 2014- 15
were at Rs. 6447.81 Cr, representing 18.72% of the ANBC, as against the
regulatory prescription of 18%. The Bank has also achieved its weaker
section advances requirement which stood at 10.20% as against the
mandatory norm of 10%.
Recovery
Your Bank has been focusing on containing the non-performing assets
through better credit monitoring as well as intensified efforts to
recover the impaired assets. The Bank took several initiatives to
contain slippages and speed up recovery from overdue loan accounts.
These include identification of stressed accounts for
restructuring/rephasing in time, conduct of lok adalats at Divisional
office levels, regular follow-up of overdues through call centre and
e-auctions.
However in view of the continued slowdown in the economy and
delinquencies in the corporate segment, the Bank''s gross NPAs have
increased from Rs. 279.18 Cr as on 31.03.2014 to Rs. 677.78 Cr as at the
end of the fiscal 2014-15. The Gross NPA of the Bank stood at 1.85% up
from 0.82%, a year ago. The Net NPAs of the Bank stood at Rs. 280.97 Cr
(0.78%) at the end of the fiscal under report as against Rs. 139.91 Cr
(0.41%) at the end of previous fiscal 2013-14.
The Bank maintains a provision coverage ratio of 75.20%.
Share Capital
As at the end of the FY15, your Bank''s paid up share capital stood at Rs.
121.63 Cr, consisting of 12,16,29,609 Equity shares of Rs.10/- each fully
paid up. There has been an increase in the paid up capital to the tune
of Rs. 14.45 Cr on account of issue and allotment of shares to the
Qualified Institutional Investors to the extent of Rs. 13.41 Cr during
August 2014 and allotment of shares consequent to the exercise of
options under Employees Stock Option Schemes. During the year under
report, the Net owned funds of your Bank increased from Rs. 3326.34 Cr as
at the end of FY 14 to Rs. 4246.03 Cr as at the end of FY15, an increase
of Rs. 919.69 Cr (27.65%).
The Capital Adequacy Ratio stood at 14.63 % as per BASEL II and 14.62%
under BASEL III norms. The Bank has been consistently maintaining the
Ratio well above the minimum of 9% stipulated by the Reserve Bank of
India. The market capitalization of your Bank''s shares at the end of
March 31,2015 was Rs. 6615.43 Cr.
Employees Stock Options Scheme
During the fiscal 2014-15, the employees of the Bank exercised the
stock options granted to them to the extent of 10,29,775 options. There
were no unvested options at the end of the fiscal 2014-15. The Bank has
not granted any stock options during the year under report.
Credit Rating
ICRA Limited had rated the Unsecured Redeemable Non- convertible
Subordinated (Lower Tier II) debt instruments issued during the earlier
year by re-affirming its A rating.
CRISIL has reaffirmed A1 rating (pronounced CRISIL A one plus) for
Rs.30 bn Certificate of Deposits Programme of your Bank. ICRA Limited has
confirmed ICRA A1 (pronounced ICRA A one plus) rating to the Bank''s
Certificate of Deposits Programme for Rs.30 bn. Both the ratings
indicate a very strong degree of safety regarding timely payment of
financial obligations.
Dividend
Having regard to the overall performance of the Bank and the positive
outlook for the current fiscal, the Board of Directors recommended a
dividend of Rs. 13/- per share (i.e. 130% on the paid up capital same as
the previous fiscal) for the reporting year, thus maintaining 100%
dividend or more for the twelfth year in a row since 2004. The total
dividend outgo including dividend distribution tax will be Rs. 190.67 Cr.
Investments
The aggregate investments of the Bank as on 31st March 2015 was Rs.
12833.03 Cr with maturity mix of securities consistent with risk
perceptions and investment policies of the Bank.
Income earned on investments during the fiscal 2014-15 was at Rs.1177.56
Cr registering an slight decrease of Rs. 19.82 Cr (i.e. 1.6%) as against
Rs.1197.38 Cr recorded during the previous fiscal 2013- 14.Profit on sale
of investments was Rs. 71.03 Cr for the fiscal 2014- 15 as against
Rs.103.73 Cr recorded in the previous fiscal 2013-14.
The average yield on investments decreased to 7.50% during the year
under report over the previous fiscal of 7.61%. Liquidity position of
the Bank was comfortable throughout the year.
The Bank has put in place the risk management tools like Duration,
Modified Duration and Value at Risk for all interest bearing
securities.
Forex Transactions
The merchant turnover of the Bank grew by 18.49% to reach Rs.18493 Cr as
against Rs.15607 Cr during the previous fiscal 2013-14. The year on year
export credit grew at 15%. Your Bank has earned a total income of
Rs.89.13 Cr on Forex business during the fiscal 2014-15 as against Rs.79.07
Cr earned during the last fiscal 2013-14 registering an increase of
12.72%. Of this, Exchange Profit increased from Rs.35.59 Cr to Rs.43.76 Cr
and other income (commission and others) increased from Rs.43.48 Cr to
Rs.45.37 Cr with exchange profit recording an increase of 22.95% and
commission income an increase of 4.34%.
Distribution Net Work
During the year your Bank opened 56 branches in 6 States. One Satellite
branch was upgraded to full fledged branch. Your Bank has added 28
ATMs.
As at the end of fiscal 2014-15, your Bank has 2274 customer outlets
comprising of 629 branches and 1645 ATMs, with PAN India presence.
Debit Cards
Your Bank has issued 9.81 lakh debit cards during the year taking the
total number of cards issued viz: ATM card, VISA, Master EMV Chip,
Maestro, Rupay Debit and Rupay Kissan to 53.63 lakh.
POS
During FY 15, your bank installed 800 POS terminals across various
merchant locations, taking the total to 9234 as at 31.03.2015. During
the year under report 80.76 lakh transactions were made through KVBPOS
and the gross value of the transactions routed through such terminals
stood at Rs. 2348.16 cr.
Technology Initiatives
The application of technology in day to day operations of the Bank has
been responsible for augmenting and enhancing productivity levels apart
from simplifying mundane tasks. The Bank''s success could be attributed
to proper technology plan targeted at introducing customer friendly
delivery channels providing value added services and facilitating
improvement in overall internal efficiency and decision making process
by bringing in an effective Management Information System and complying
with the regulatory norms. In this direction, the Bank has been lining
up various IT initiatives that add value to the customer convenience
apart from enhancing the internal efficiency.
Technology initiatives launched during the fiscal 2014-15 are given
below:
- Launching of Mobile POS and Handheld GPRS POS
In order to give impetus to CASA business, a preferred IT solution viz:
Mobile POS and Handheld GPRS POS was launched. It guarantees a lot of
mobility and ease in acquiring card transactions in real time purchase
scenarios. It is a preferred payment method to replace Cash on Delivery
Scenario. Wireless and Rechargeable battery gives the equipment the
extra edge. It promotes the customer acceptance of POS Payment in a big
way.
- Launching of Multi-Currency Travel Card Multi-Currency Travel Card
obliterates the need for carrying different currencies during an
overseas trip. Single card is used to load USD, EURO & SGD. Card can be
used for ATM operations, POS purchases & E-Commerce transactions.
Online Access to Travel Card Account is through Password. The card is
loaded with all 3 currencies USD / EURO / SGD
- E-passbook
An in-house Android Application developed and styled as an E-Book,
whereby customers of your bank having smart phones can view account
statements and balance details in the mobile itself using the phone
number registered with the bank database.
- Missed call facility
It provides banking services, if the customers give a missed call from
his registered mobile to a designated mobile number for this purpose.
The response is in the form of an SMS . The services offered are
Balances of Running Accounts up to 5 in number and maximum limit of two
missed calls a day. It also can provide Account Statement Enquiry for 3
accounts and a maximum limit of two missed calls per day.
- Anti-Phishing, Anti-Trojan and Anti-Pharming Services
Your bank has implemented Anti-phishing, Anti-pharming and Anti-Trojan
services for preventing any malicious attacks from fraudsters.
Golden Vision Initiatives
Members of the Bank are aware that the Bank has embarked upon Golden
Vision Initiatives during the year 2009 and M/s Boston Consulting
Group, a global consultancy firm of consultants, has been engaged to
assist and advise the bank in its journey of ''Golden Vision'' of
attaining ''125000 Cr business by the centenary year of the Bank in
2016. Most of their recommendations were put in place since their
engagement in the year 2009.
The following initiatives are launched during the fiscal under report.
1. Institutional sales force programs (Divisional sales force) to
target liability (CASA) products from institutional customers (e.g. Mid
- large Corporates, Trusts, Associations, Govt. institutions).
2. Collections / Receivables & Payment module, to meet out the
specific requirement of corporate customers.
3. Commercial sales force team at the branch level comprising of
relationship officers - Commercial Banking (RO - CBG). Target of this
program was to mobilize CA deposits and SME advances.
4. Structured third party sales programs (insurance and mutual funds)
to increase the other income of KVB. In addition, a focused program was
launched in September last year focusing on the debit card usage of the
bank to increase interchange income.
5. Special drives / campaigns viz., for increasing the usage of
alternate delivery channel viz., usage of debit cards both on- line and
in POS terminals and rewarding with loyalty points to the users.
6. Deployment of self-service machines, based on user patterns and
transaction profile of the branches has been carried out. Your Bank
has now covered 50% of branch network with Cash Deposit Machines.
Financial Inclusion
With the basic objective of bringing the unserved population under the
banking mainstream, the Bank is striving towards the more inclusive
growth by making financial products and services available to poor in
particular. As per the Government of India and Reserve Bank directions
your Bank has been actively pursuing the agenda of Financial Inclusion
with key interventions in four groups namely expanding banking
infrastructure, offering appropriate financial products, making
extensive and intensive use of technology and through advocacy and
stakeholder participation.
Your Bank has covered all the 117 allocated villages under rural
Financial Inclusion. These 117 villages are spread over Tamilnadu,
Andhra Pradesh, Telangana and Karnataka States.
Ultra Small Branches (USBs)
During the Fiscal under report, the Bank opened 14 USBs, taking the
count of USBs to 42 as on March 31,2015.
We have conducted 140 Financial Literacy Campaigns through our 98
rural/unbanked branches. We have also conducted 914 Financial Literacy
Campaigns through our metro, urban and semi- urban branches.
Pradhan Mantri Jan-Dhan Yojana (PMJDY)
As per the directions of Department of Financial Services, Government
of India your Bank started implementing "Pradhan Mantri Jan-Dhan
Yojana" which focuses on coverage of households in urban areas also as
against the earlier plan which focused on coverage of villages. The
PMJDY will ensure that all households in the country, both rural and
urban, will get access to the financial services, like bank account
with Rupay debit card, access to credit, remittance, insurance and
pension. Under the PMJDY scheme our Bank has been allotted with 409
wards in semi urban and urban areas, apart from the 117 villages
already allotted under rural financial inclusion scheme. Your Bank
conducted survey of all 1,99,242 households in all these 409 wards and
opened 108502 Basic Savings Bank Deposit Accounts and 104889 Rupay
cards were issued under PMJDY Scheme. All the households bank accounts
are now with either our bank or other bank/s.
Statutory Audit
M/s. Abarna & Ananthan, Chartered Accountants, Bangalore will retire at
the conclusion of the forthcoming Annual General Meeting and are
eligible for re-appointment, subject to the approval of the Reserve
Bank of India. The Bank has received consent from the Auditors and
confirmation to the effect that they are not disqualified to be
appointed as the Auditors of the Bank in terms of the provisions of the
Companies Act, 2013 and the rules made thereunder. Accordingly, the
Board of Directors has recommended to the shareholders for approval the
re- appointment of M/s. Abarna & Ananthan, Chartered Accountants,
Bangalore, as the Statutory Auditors of the Bank to hold office from
the ensuing AGM till the conclusion of the next AGM on a remuneration
to be decided by the Board or Committee thereof.
Secretarial Audit
Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and
the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, the Bank, with the approval of its Board appointed Shri S
Solaiyappan, Practicing Company Secretary to undertake the Secretarial
Audit of the Bank for the financial year ended 31.03.2015. The
Secretarial Audit Report is annexed herewith as Annexure 1.
Statutory Disclosures
The Disclosures to be made under sub-section (3) (m) of Section 134 of
the Companies Act, 2013 read with Rule (8) (3) of the Companies
(Accounts) Rules, 2014 by your Bank are explained as under:
Considering the nature of activities of the Bank, the provisions of
Section 134 of the Companies Act, 2013 relating to conservation of
energy and technology absorption do not apply to the Bank.
However the bank has adopted the following in the areas of conservation
of energy, technology absorption:
The Bank has installed one 850 KW Wind Turbine Generator at
Govindanagaram Village, Theni District, Tamil Nadu in 2011 and has been
utilizing the wind power generated for the Registered and Central
Office at Karur and the Divisonal Office premises at Chennai. 14,57,545
units were generated during the fiscal under report by the windmill.
One floor at the Central Office complex and some select branches were
equipped with energy efficient LED lights. Motion detector sensors were
installed in some select branches of the Bank.
The Bank is making extensive use of technology in all its operations
and is also constantly pursuing its goal of technological upgradation
in a cost effective manner to provide quality customer service.
The Bank supports and encourages the country''s export efforts through
its export financing operations.
The statement containing particulars of employees as required under Sec
197(12) of the Companies Act, 2013, read with Rule 5(2) of the
Companies (Appointment & Remuneration of Managerial Personnel) Rules,
2014 forms part of this report.
The ratio of remuneration of each director to the median employee''s
remuneration and other details in terms of sub-section 12 of Sec 197 of
the Companies Act, 2013 read with Rule 5 (1) of the Companies
(Appointment & Remuneration of Managerial Personnel) Rules, 2014 are
forming part of this report as Annexure 2.
It is hereby confirmed that the bank has proper systems in place to
ensure compliance of all laws applicable to the Bank.
Extract 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 extract of the
Annual Return as at March 31, 2015 forms part of this report as
Annexure 3.
Board of Directors
In accordance with the provisions of Companies Act, 2013 and the
Articles of Association of the Bank, Director Shri G Rajasekaran,
retires by rotation and being eligible, offered himself for re-
appointment.
Shri. M K Venkatesan, Shri A K Praburaj and Smt K L Vijayalakshmi were
appointed as Additional Directors of the Bank during the year under
report in terms of the provisions of Section161 of the Companies Act,
2013 and Article 27 of the Articles of Association of the Bank. They
hold office upto the date of the ensuing Annual General Meeting of the
Bank. Bank has received notices from them individually signifying their
candidature for the office of Director of the Bank, along with deposit
prescribed under provision of Section 160 of Companies Act, 2013.
The brief resume and details of directors who are to be re-
appointed/appointed are furnished in the Corporate Governance Report
annexed.
Director Shri S Ganapathi Subramanian would be continuing upto the date
of this AGM consequent upon attainment of maximum age criteria
prescribed under the extant guidelines. Board places on record its
sincere appreciation of the services rendered by him during his tenure
as Director.
Directors'' Responsibility Statement
Pursuant to the requirement under Section 134 (5) of the Companies Act,
2013 with respect to the Directors'' Responsibility Statement, it is
hereby confirmed that
(a) In the preparation of the annual accounts, 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 and of the profit and loss
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 this Act for safeguarding the assets of the Bank and for
preventing and detecting fraud and other irregularities;
(d) The directors had prepared the annual accounts 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.
Awards and Accolades
Your Bank has received the following awards and recognition during the
year 2014-15.
1. Master Card payments Strategy Workshop, Goa 2014 - Karur Vysya Bank
received the Innovation Award for implementation of RFID enabled Debit
Card Program.
2. "Best Bank Award for Business Intelligence Initiatives among Small
Banks" instituted by The Institute for Development and Research in
Banking Technology (IDRBT) in the IDRBT- Banking Technology Excellence
Awards 2013-14 from the Hon''ble RBI Governor Shri. Raghuram Rajan. Your
Bank has bagged the said Information Technology Award from IDRBT
consecutively for the sixth time.
3. "EDGE 2014 Award for managing IT Security" by Information Week
magazine for the use of IT for maximizing business impact.
4. National Payments Excellence Awards 2014 - Runner Up in Mid Sized
Banks Category in recognition of excellent performance in National
Financial Switch (NFS) ATM Network. The award was sponsored by NPCI.
5. State Forum of Bankers'' Clubs (Kerala) in their 6th Banking
Excellence Award 2014, adjudged KVB as the Second Best Bank in the
Private Sector Category at National level and presented the award.
6. RUNNER UP AWARD in the old private sector bank category in FY
2012-13, Financial Express Best Banks Award.
7. Received BEST TECH SAAVY BANK- Runner Up award in MSME Banking
Excellence Awards- 2014 constituted by Chamber of Indian Micro Small &
Medium Enterprises (cimsme).
Acknowledgements
Your Bank is grateful to the RBI, Government of India, SEBI and other
authorities and agencies, Financial Institutions and correspondent
banks for their valuable support and guidance.
The Directors also express their deep sense of appreciation to all
staff members of the bank for their dedicated service and commitment
towards bank''s vision for sustainable growth. Finally, the Board wishes
to sincerely thank all the customers, shareholders, other stake holders
for their valuable support and look forward to their continued support
in the years to come.
For and on behalf of the Board of Directors,
Place: Karur K P Kumar
Date : 28.05.2015 Chairman
Mar 31, 2014
Dear Shareholders,
The Board of Directors have great pleasure in presenting the 95th
Annual Report together with audited Balance Sheet and Profit and Loss
Account for the year ended March 31, 2014.
31.03.2014 31.03.2013
Particulars (Rs.in Cr) (Rs. in Cr)
Gross Deposits 43757.68 38652.98
Gross Advances 34225.98 29705.89
Total Income 5680.41 4694.99
Total Expenditure 4842.62 3846.16
Operating Profit 837.79 848.83
Net Profit 429.60 550.32
Appropriations: Transfer to
Statutory Reserve 128.00 165.00
Capital Reserve 1.75 16.52
General Reserve 157.00 123.00
Special Reserve NIL 50.00
Investment Reserve (21.00) 21.00
Proposed Dividend 139.99 150.05
Dividend Tax 23.79 25.50
Total Business
During the year ended 31.03.2014, Total Business of the Bank recorded
an increase of 14.08% at Rs. 77983.66 Cr as compared toRs. 68358.87 Cr as
on 31.03.2013.
Deposits
Your Bank''s total Deposits stood at Rs. 43757.68 Cr as on 31.03.2014,
showing an absolute increase of Rs. 5104.70 Cr and a growth rate of
13.21% over the previous year. The share of CASA deposits (Current and
Savings) in Total Deposits stood at 20.54%.
- Current Deposits stood at Rs. 3580.44 Cr as on 31.03.2014 as compared
to Rs. 3053.35 Cr as at the end of 31.03.2013 recording a y-o-y growth of
17.26%.
- Savings Bank Deposits increased to Rs. 5408.45 Cr as on 31.03.2014, up
from Rs. 4385.80 Cr as on 31.03.2013, growing at a rate of 23.32%.
- Term Deposits increased from Rs. 31213.83 Cr as on 31.03.2013 to Rs.
34768.79 Cr as on 31.03.2014, registering a growth rate of 11.39%.
Advances
The Bank has registered qualitative credit growth of 15.22% during the
FY 2013-14. The Gross Advances of the Bank increased from Rs. 29705.89 Cr
as on 31.03.2013 to Rs. 34225.98 Cr as on 31.03.2014.
Priority Sector Advances aggregated Rs. 12617.70 Cr at the end of March
2014, representing 42.13% of Bank''s Adjusted Net Bank Credit (ANBC) of
the previous fi scal. The Bank has achieved the prescribed target for
Priority Sector Advances for the last three years consecutively.
KVB''s agricultural advances stood at Rs. 5895.29 Cr, constituting 19.69%
of ANBC as at the end of March 2014 against the regulatory prescription
of 18%. Additionally, your Bank''s fi nance to Weaker Sections were at
10.54% against the mandatory requirement of 10%.
Recovery
In spite of the difficult economic conditions that prevailed during
the year under report, the Bank has taken necessary steps to contain
NPAs and has used all available tools of recovery including negotiated
settlements and legal means. Your Bank constituted special recovery
teams and organized recovery camps at various centers. Bank has
effectively used the provisions of SARFAESI Act to secure maximum
recovery. Frequent Lok Adalats were conducted especially in respect of
small value NPA accounts. The Bank has framed a policy for sale of
assets to ARCs. Your Bank has revisited its Recovery Policy to
facilitate quick settlement in existing NPA accounts. The Divisional
Offices are empowered with more discretionary powers to settle
existing NPAs. Focused attention was given to accounts which are under
SMA categories to avoid slippages into NPAs.
In percentage term, gross NPA Ratio of the Bank stood at 0.82% as on
31.03.2014 as against 0.96% at the end of previous fi scal 12-13. In
absolute term, Gross NPA stood at Rs. 279.18 Cr as on 31.03.2014. Net NPA
Ratio of the Bank stood at 0.41% as on 31.03.2014 as against 0.37% as
on 31.03.2013. In absolute term, Net NPAs stood at Rs. 139.91 Cr as at
the end of the fi scal under report.
The Bank continues to maintain Provision Coverage Ratio of 75%.
Share Capital
As at March 31, 2014, the Paid-up Equity Capital of the Bank stood at Rs.
107.18 Cr consisting of 10,71,81,106 shares of Rs. 10/- each.
The Net Owned funds of the Bank as at 31st March 2014 was Rs. 3326.34 Cr
comprising paid up equity capital and reserves.
The Capital Adequacy Ratio stood at 12.77% as per BASEL II norms. The
Capital Adequacy under BASEL III norms stood at 12.60%. The Bank has
been consistently maintaining the ratio well above the minimum of 9%
stipulated by the Reserve Bank of India.
The market capitalization of your shares at the end of March 31, 2014
was Rs. 4022.51 Cr.
Employee Stock Options Scheme
The information required to be furnished pursuant to Clause 12 of the
SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 are annexed to this report and form part of this
report.
Credit Rating
CRISIL has reaffi rmed A1 rating (pronounced CRISIL A one plus) for Rs.
30 bn Certifi cate of Deposits Programme of your Bank. ICRA Limited
has confi rmed ICRA A1 (Pronounced ICRA A one plus) rating to the
Bank''s Certifi cate of Deposits Programme for Rs. 30 bn. Both the ratings
indicate a very strong degree of safety regarding timely payment of fi
nancial obligations.
Dividend
The Board recommended dividend of Rs. 13/- per Equity Share i.e., 130%
for the fi scal 2013-14. The dividend is subject to the approval of the
shareholders at the Annual General Meeting. This is the tenth year in
succession your Bank has been paying 100% or more dividend
consecutively since 2004. The total dividend outgo including
distribution tax will be Rs. 163.78 Cr which works out to 38.12% of the
Net Profit for 2013-14.
Investments
The gross domestic investments of your Bank stood at Rs. 13445.46 Cr as
at 31.03.2014 as against Rs. 13868.85 Cr as on 31.03.2013.
Income earned on investments during the fi scal 2013-14 was at Rs.
1197.38 Cr registering an increase of Rs. 247.03 Cr (i.e. 25.99%) as
against Rs. 950.35 Cr recorded during the previous fi scal 2012-13. Profi
t on sale of investments was Rs. 103.73 Cr for the fi scal 2013-14 as
against Rs. 88.35 Cr recorded in the previous fi scal 2012-13.
The average yield on investments decreased to 7.61% during the year
under report over the previous fi scal of 7.67%. Liquidity position of
the Bank was comfortable throughout the year.
Forex Transactions
The merchant turnover of the Bank grew by 54.39% to reach Rs. 15607 Cr as
against Rs. 10109 Cr during the previous fi scal 2012-13. The year on
year export credit grew at 11%. Your Bank has earned a total income of
Rs. 79.07 Cr on forex business during the fi scal 2013-14, as against Rs.
54.51 Cr earned during the last fi scal 2012-13, registering an
increase of 45.06%. Of this, Exchange Profit increased from Rs. 23.16 Cr
to Rs. 35.59 Cr and other income (commission and others) increased from Rs.
31.35 Cr to Rs. 43.48 Cr with forex Profit recording an increase of
53.67% and commission income an increase of 38.69%.
Branch Network
During the financial year 2013-14, Bank opened 21 Branches and added
345 ATMs. With this, as at the end of March 31, 2014 the Bank has a
total network of 572 branches and 1617 ATMs with PAN India presence.
The aggregate customer outlets of the Bank (both Branch net work and
ATMs installed) rose to 2189. To facilitate remittance of cash on real
time basis to customers'' accounts, your Bank has introduced 153 Cash
Deposit Machines or Bunch Note Acceptors (BNA).
Debit Cards
Your Bank has issued 8.48 lakh debit cards during the fi scal 2013-14
taking the total number of debit cards issued to 43.8 lakhs.
POS
During the year under report, your Bank installed 4552 POS terminals
across various merchant locations, taking the total to 8434 numbers as
at 31.03.2014. The gross value of transactions routed through such
terminals stood at Rs. 964.76 Cr till 31.03.2014.
Technology Initiatives
Your Bank is a front runner in technology initiatives having
implemented 100% Core Banking Solution (CBS) in 2005. In order to
leverage CBS platform and robust IT infrastructure implemented in the
Bank, many new initiatives were undertaken during the fi scal under
report. Internal effi ciency, customer service, Business Process
Re-engineering (BPR) as well as Information Security were the focus
areas.
The following new initiatives were introduced to add value to the
customer convenience during the FY 2013-14.
A special product known as ''Scholar Card'', for students and staff of
educational institutions, was launched. This card, based on RIFD
Technology, can be used for all kinds of payments and access system
like attendance, library, laboratory etc.
Online Password reset/unlocking of user ID is implemented to strengthen
the safety and security of our Net Banking System.
Your Bank has launched BNA Â Remittance Card exclusively for depositing
cash in Cash Deposit Machines.
Bank has also launched International EMV chip based debit cards.
Your Bank launched e-collect portal in our Bank''s website for
collection of fee for Educational Institutions.
The Bank also has launched IRCTC ticket booking through Direct Debit
Facility.
Golden Vision Initiatives
As already informed in the previous report, M/s Boston Consulting Group
are assisting the Bank in its pursuit of attaining next higher level of
growth and development including achieving the targeted business growth
of Rs. 125000 Cr by the centenary year of the Bank in 2016. Their
recommendations are being implemented under "Golden Vision"
initiatives.
During the year under report, the following initiatives were
undertaken:
(a) Introduced personalized service to HNI customers of the bank under
KVB Pride. Under this, the services include door step banking, EMV
certifi ed chip embedded debit card, free banking privileges, reward
points etc.
(b) Branches having high potential of cash remittances are provided
with Cash Deposit Machines (CDMs). The facility is available with
instant cash credit to the customers accounts, 153 CDMs are deployed
over 150 branches.
(c) Lead Management Software has been launched across all branches for
effective and effi cient management of sales management team.
(d) Introduced Career Development System for all officer cadre
employees across the Bank.
(e) Single Window system was rolled out to 75 branches this year taking
the total of such branches to 212 across the country.
Financial Inclusion
Your Bank has covered all the 117 allocated villages for providing
basic banking services under the Financial Inclusion Plan. These
villages are covered under the Plan with Business Correspondent
operated banking outlets. As at the end of March 31, 2014, 46,237 basic
savings accounts (no frill accounts) with Bio-Metric smart cards were
opened with BC agents in FI villages.Your Bank has also opened 28 Ultra
Small Branches in the allotted villages to provide banking facility for
the under privileged section of the society. Going forward the Bank is
in the process of opening some more Ultra Small Branches/Brick & Mortar
branches in the allotted villages wherever feasible.
Statutory Audit
M/s R K Kumar & Co., Chennai retire at the conclusion of the ensuing
Annual General Meeting. They have been associated with the Bank as
Statutory Auditors for the past four financial years and are not
eligible for re-appointment in accordance with the RBI''s policy of
rotation and resting. The Board places on record its deep appreciation
of the professional services rendered by M/s. R K Kumar & Co., Chennai
during their association with the Bank.
M/s. Abarna & Ananthan, Chartered Accountants, Bangalore are proposed
to be appointed as Statutory Auditors of the Bank from the conclusion
of the ensuing Annual General Meeting till the conclusion of next
Annual General Meeting of the Bank in terms of Section 139 of the
Companies Act, 2013 read with Sec 30 (1A) of the Banking Regulation
Act, 1949.
Reserve Bank of India vide letter DBS.ARS.No. 15260/ 08.12.005/2013-14
dated June 3, 2014 conveyed their approval for their appointment as the
Statutory Auditors of the Bank for the year 2014-15 for their fi rst
year.
A certifi cate from M/s. Abarna & Ananthan has been received to the
effect that their appointment, if made, would be within the prescribed
limits under Section 141 of the Companies Act, 2013.
Statutory Disclosures
Considering the nature of activities of the Bank, the provisions of
Section 217(1)(e) of the Companies Act, 1956 relating to conservation
of energy and technology absorption do not apply to the Bank. However
the Bank is making extensive use of technology in all its operations
and is also constantly pursuing its goal of technological upgradation
in a cost effective manner to provide quality customer service.
The Bank supports and encourages the country''s export efforts through
its export fi nancing operations.
The Statement containing particulars of employees as required under the
provisions of Sec 217(2A) of the Companies Act, 1956, read with
Companies (Particulars of Employees) Rules, 1975, as amended, forms
part of this report.
It is hereby confi rmed that the bank has proper systems in place to
ensure compliance of all laws applicable to the Bank.
Board of Directors
Shri K P Kumar, was appointed as (Part-time) Non- Executive -
Independent Chairman of the Bank, with the prior approval of the
Reserve Bank of India, for an initial period three years from
24.09.2010. He is re-appointed as the (Part-time) Non-Executive -
Independent Chairman for a further period of two years from 24.09.2013
vide RBI letter DBOD.6277/08.41.001/2013-14 dated 01.10.2013. Approval
of members is sought for the re-appointment of Shri K P Kumar, as
(Part-time) Non-Executive - Independent Chairman of the Bank at the
ensuing Annual General Meeting as per details provided in the Notice.
Shri K Venkataraman was appointed, with the prior approval of Reserve
Bank of India, as the Bank''s Managing Director and CEO for three years
from 01.06.2011. As his term of office was upto 31.05.2014, the Board
of the Bank approved his re-appointment for a further period of three
years from 01.06.2014. RBI has vide its letter DBOD. No.
18973/08.41.001/2013-14 dated 23.05.2014 accorded its approval for the
re-appointment as recommended by the Board of the Bank. Approval of
members is sought for the re-appointment of Shri K Venkataraman as MD &
CEO of the Bank at the ensuing Annual General Meeting as per details
provided in the Notice.
In accordance with the provisions of Companies Act and the Articles of
Association of the Bank, Non-Executive (Non-Independent) Director Shri
A J Suriyanarayana, retires by rotation and is eligible for
re-appointment.
Pursuant to Section 149 and 152 of the Companies Act, 2013 and Sec 10 A
(2A) of the Banking Regulation Act, 1949, approval of the shareholders
have been sought for the appointment of Shri K K Balu, as an
Independent Director not liable to retire by rotation for a period up
to two years, Shri N S Srinath, as an Independent Director not liable
to retire by rotation for a period up to three years and B Swaminathan
as an Independent Director not liable to retire by rotation for a
period up to three years.
Shri CA K Ramadurai will hold office till the date of forthcoming
Annual General Meeting consequent to the attainment of maximum age
limit prescribed under extant guidelines of RBI. Board places on
record its gratitude for the valuable contribution rendered by him
during his tenure as Director on the Board.
The brief resume and details of directors who are to be appointed as
Independent Directors are furnished in the Corporate Governance Report
annexed.
Directors'' Responsibility Statement
Pursuant to the requirement under Section 217 (2AA) of the Companies
Act, 1956 with respect to the Directors'' Responsibility Statement, it
is hereby confi rmed that:
(a) in the preparation of the annual accounts, 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 company at the end of the financial year and of the Profit and
loss of the company for that period;
(c) the directors had taken proper and suffi cient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the company and
for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern
basis.
Awards and Accolades
Your Bank has received the following awards and recognition during the
year 2013-14.
(i) Best Small Bank Award given by Business World Magna Awards 2014
recognising Banking excellence.
(ii) State Forum of Banker''s Club, Kerala Excellence Awards 2014
selected KVB as the third Best bank among private sector banks at the
national level and presented the award.
(iii) The Sunday Standard Best Bankers'' Awards 2013 awarded the Best
Banker Growth Mid Sized award to your Bank.
(iv) Institute of Public Enterprises (IPE)-BFSI awarded "Best Bank in
Private Sector" in June 2013.
(v) Kompella Portfolio Investment Advice Magazine, Hyderabad recognized
KVB as the ''Top Bank in the Old Private Sector'' and "Third best Bank of
the quarter" among public sector, old private sector and new private
sector banks for the quarter ended 30.06.2013.
(vi) Best Bank award among small Banks by IDRBT for "Banking Technology
(Electronic Payment Systems)" for the year 2012-13.
(vii) In the NSDL Star Performer Awards 2013, KVB bagged "Top Performer
in New Accounts opened (Bank Category)".
Your Bank is ranked as the 188th rank among India''s Most valuable Top
500 Companies based on Market Capitalisation as per November 2013 issue
of Business Today.
Fortune India December 2013 publication listed KVB as 227th Company
under Top 500 Companies in India.
Corporate Social Responsibility
Your Bank, as a responsible corporate citizen, has been carrying out
well over the years certain initiatives like participation in social,
cultural, educational, medical and sports activities aimed at improving
the quality of life of the people and society. Your Bank believes fi
rmly that being an integral part of the society, it is the all round
growth of the society which contributes ultimately the growth of the
organization. Some of the CSR expenditure undertaken during the year
2013-14 are given below:
- Contributed a sum of Rs. 12.57 lakh towards educational cause.
- Donations amounting to Rs. 20.65 lakh to various
organizations/hospitals for Health Care.
- Donations made to the tune of Rs. 15.20 lakh towards welfare of poor
and downtrodden.
- Contribution made to the tune of Rs. 14.83 lakh for charitable purpose
to various organizations/institutions.
- One lakh was sponsored to an athlete for participation in world
championship in the World Biathle 2013 at Cyprus.
Acknowledgements
The Directors are grateful to the shareholders of the Bank for the
trust and confi dence reposed by them in the Bank.
The Directors are also grateful to the Reserve Bank of India,
Government of India, State Governments, Securities and Exchange Board
of India and the Stock Exchanges for the guidance and support extended
by them to the Bank.
The Board thanks its valued customers and other stakeholders for their
patronage and looks forward to the growing of this mutually supportive
relationship in future.
The Board expresses its deep sense of appreciation to all employees for
their contribution in your Bank''s quest for sustained growth and profi
tability and look forward to their continued contribution in scaling
new heights.
Place: Karur For and on behalf of the Board of Directors,
Date : 15.06.2014 K P Kumar
Chairman
Mar 31, 2013
Dear Shareholders,
The Directors are pleased to present the 94th Annual Report and the
audited accounts for the financial year ended March 31, 2013.
Financial Performance
The financial performance for the year under review are presented
below:
31.03.2013 31.03.2012
Particulars (Rs. In Cr) (Rs. In Cr)
Gross Deposits 38652.98 32111.59
Gross Advances 29705.89 24205.11
Total Income 4694.99 3620.52
Total Expenditure 3846.16 2894.81
Operating Profit 848.83 725.71
Net Profit 550.32 501.72
Appropriations: Transfer to
Statutory Reserve 165.00 150.50
Capital Reserve 16.52 3.14
General Reserve 123.00 156.80
Special Reserve 50.00 35.00
Investment Reserve 21.00 -
Proposed Dividend 150.05 150.05
Dividend Tax 25.50 24.34
The aggregate business of the Bank reached Rs. 68359 Cr as at 31st
March 2013 showing an increase of 21.38% on a year-on- year basis
(y-o-y).
Deposits
Deposits grew by 20.37% from Rs. 32111.59 Cr in FY 12 to Rs. 38652.98
Cr in FY 13. The growth recorded by your bank was higher than the 14.3%
growth in deposits recorded in the banking system during the fiscal
under report.
CASA deposits grew at 20.93% and stood at Rs. 7439.15 Cr as at the end
of 31.03.2013 as against Rs. 6151.58 Cr as on 31.03.2012. Term
deposits were at Rs. 31213.83 Cr as against Rs. 25960.01 Cr as at the
end of the previous fiscal 2011-12, recording a growth of 20.24%.
Deposit growth in the banking system has slowed in the recent years
largely due to households looking at investments in alternate assets
such as gold, equities, real estate etc expecting higher and inflation
adjusted returns.
Credit portfolio
The gross advances of your bank were at Rs. 29705.89 Cr as at the end
of the fiscal 2012-13 as against Rs. 24205.11 Cr in the previous fiscal
2011-12 recording a growth of 22.73% during the year under report when
compared to 14.1% growth seen in the banking system for 2012-13.
Priority sector advances of your bank surged from Rs. 7526.92 Cr as at
the end of March 2012 to Rs. 10196.40 Cr as at the end of March 2013
and formed 42.04% of the Adjusted Net Bank Credit (ANBC) against the
mandated target of 40%.
The total agricultural advances of your bank recorded a growth of
34.33% over the previous year and rose to Rs. 5194.32 Cr as at
end-March 2013. Your Bank''s agricultural advances formed 21.42% of ANBC
as at the end-March 2013 against the mandated target of 18%. Also the
advances made to weaker sections were at 11.24% against the regulatory
requirement of 10%.
Average Credit Deposit Ratio of the Bank during the fiscal was 75.48%.
Recovery
Your Bank has put in place strong systems for resolution and recovery
of non-performing loans besides strengthening its due diligence, credit
appraisal and post-sanction loan monitoring systems to minimize and
mitigate the problem of increasing NPAs. Your Bank continues to apply a
multi pronged strategy for better NPA management viz: Preventive
actions, Recovery, upgradation, resolution and settlement, initiation
of legal proceedings including under SARFAESI, besides sale of assets.
As a result of concerted action the Gross NPAs have declined from Rs.
320.99 Cr (1.33%) as at 31.03.2012 to Rs. 285.86 Cr (0.96%) as at the
end of 31.03.2013. The Net NPAs which were at Rs. 78.78 Cr (0.33%)
during FY 12 have risen marginally to Rs. 108.74 Cr (0.37%). Your Bank
has a provision coverage ratio of 75.20% as at 31.03.2013.
Share Capital
The paid up capital of the Bank stood at Rs. 107.18 Cr as at 31st March
2013. During the year under report, the Bank made an allotment of 700
shares which was kept under abeyance category.
Your Bank''s net owned funds as at 31st March 2013 was Rs. 3085.19 Cr
comprising paid up equity capital of Rs. 107.18 Cr and reserves of Rs.
2978.01 Cr.
Your Bank''s Capital Adequacy Ratio (CAR) was comfortable at 14.41%
under Basel II as on 31.03.2013. The Bank has been maintaining a higher
Capital Adequacy Ratio consistently over and above the regulatory
prescription of 9%.
The market capitalization of your shares as at the end of fiscal
2012-13 was Rs. 4827.43 Cr. In terms of market capitalization, your
Bank was at 187th rank in the country.
Employee Stock Options Scheme
Out of the 10 lakh Stock options available under KVBESOS 2008, 9,78,454
options were granted, exercised and allotted earlier. 21,546 options
which were remaining under the said Scheme were granted to the
employees on 01.03.2013.
Your Bank has framed KVBESOS 2011 pursuant to the 40 lakh options
approved by the shareholders in the Annual General Meeting held on
27.07.2011. Out of the said 40 lakh options, 14,71,656 lakh options
were granted on 01.03.2013.
Particulars pursuant to Clause 12 of the SEBI (Employee Stock Option
Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are annexed
to this report and form part of this report.
Credit Rating
CRISIL has re-affirmed A1 rating (pronounced "CRISIL- A one plus")
for Rs. 20 billion Certificate of Deposits programme of your Bank. ICRA
Limited has confirmed ICRA A1 (pronounced "ICRA-A one plus")
rating to the Bank''s Certificate of Deposits Programme for Rs. 2000 Cr.
Both the ratings indicate a very strong degree of safety regarding
timely payment of financial obligations.
Dividend
Inspite of the tough economic environment, keeping in tune with the
good financial performance of the Bank, your Directors are pleased to
recommend a dividend of Rs. 14/- per equity share of face value of Rs.
10/- each for the year ended 31.03.2013, amounting to Rs. 175.55 Cr
(inclusive of tax of Rs. 25.50 Cr). The dividend will be paid to the
members whose names appear in the Register of Members as on 19.07.2013;
in respect of shares held in dematerialised form, it will be paid to
members whose names are furnished by National Securities Depository
Limited and Central Depository Services (India) Limited, as beneficial
owners.
It may be noted that it is now for a decade (since 2003-04), that your
bank has been paying 100% or more to its shareholders.
The dividend payout for the year under review has been formulated in
accordance with the Bank''s policy to pay sustainable dividend linked to
long term growth objectives of the Bank to be met by internal accruals
and to meet the shareholders'' aspirations.
Investments
The gross domestic investments of your Bank stood at Rs. 13868.85 Cr as
at 31.03.2013 as against Rs. 10581.27 Cr as on 31.03.2012, thus
recording an increase of 31.07% during the fiscal 2012-13. Net
investments registered an increase of Rs. 3331.16 Cr during the year to
reach Rs. 13837.26 Cr as at the end of the fiscal 31.03.2013 from Rs.
10506.10 Cr as at 31.03.2012.
Income on investments stood at Rs. 950.35 Cr as at 31.03.2013,
registering a rise of Rs. 234.11 Cr (32.68%) when compared to the
previous fiscal income of Rs. 716.24 Cr. The profit on sale of
investments was at Rs. 88.34 Cr for the fiscal 2012-13 as against Rs.
26.20 Cr recorded in the previous fiscal 2011-12.
The average yield on investments improved to 7.67% during the year
under report over the previous fiscal of 7.49%. Liquidity position of
the Bank was comfortable throughout the year.
Forex Transactions
The merchant turnover of the Bank was up by 8.36% during the fiscal
2012-13 to reach Rs. 10109 Cr as against Rs. 9329 Cr during the
previous fiscal 2011-12. The Bank has earned a profit on exchange of
Rs. 23.16 Cr and other income (commission and others) of Rs. 31.35 Cr
during the fiscal 2012-13.
Branch Net work
During the year 2012-13, for the first time in the history of your
bank, 100 new branches were opened across India, taking the number of
branches from 451 to 551.
In terms of the mix of the branches, the branch net work is fairly
spread across all the population groups with Metro 16 %, Urban 26%,
Semi-Urban 40% and Rural 18%.
Delivery Channels ATMs
Your Bank operationalised 465 ATMs across the country during the FY 13.
Of the 465 ATMs, 124 are on-site and 341 are offsite. The total ATM
population of your bank comes to 1277 as at the end of the fiscal
2012-13.
Taking into account the branches as well as the ATMs installed, the
total customer outlets of the bank rose to 1826 as at 31.03.2013 from
1276 as at the end of the previous fiscal 2011-12.
Debit Cards
As at the end of fiscal 2012-13, the total number of cards issued by
the Bank were at 3.54 million, of which 710365 cards were issued during
the fiscal 2012-13.
POS
During the year under report, your Bank installed 3142 POS terminals
across various merchant locations, taking the total to 5844 numbers as
at 31.03.2013.
The gross value of transactions routed through such terminals stood at
Rs. 422.58 Cr till 31.03.2013.
Technology Initiatives
Information technology continued to be the thrust area for the Bank as
in the past. During the fiscal your Bank introduced/ developed various
IT initiatives that are aimed at enhancing customer convenience and
internal efficiency and decision making process through effective
Management Information Systems.
State of the art Disaster Recovery (DR) Data Centre was built and your
Bank deployed all latest technology in the Data Centre complying with
robust and best in class technology infrastructure.
The following new initiatives were introduced to add value to the
customer convenience:
- Installed 88 cash deposit machines to accept cash from customers
for directly crediting to their own account or to third party account
at select branches. The system can sort the cash, identify suspicious
notes, accepts only good notes and provide receipt with denomination.
- Implementation of Interbank Mobile Payment System (IMPS) through
net banking. This facility will enable the customer to make funds
transfers to others (including accounts maintained in other banks) as
an alternate channel. It will instantaneously remit the funds like RTGS
and works on 24x7 basis.
- KVB has built its own captive Contact Centre at Tidel Park with 50
seater capacity and with Interactive Voice Response System (IVRS) for
customers to do phone banking including funds transfer and also can
avail customer support from the agents on multi-languages on 24x7 basis
using proclaimed application.
- Implementation of mobile wallet: It is a pre-paid virtual card
available on the mobile. No need for customers to carry cash or cards
for purchases.
As the technology landscape is undergoing significant changes your Bank
will continue to introduce systems in line with the new trends in the
industry which delivers value to our customers.
Golden Vision initiatives
Members of the bank are aware that the bank has engaged the services of
Boston Consulting Group (BCG) with the mandate to assist the bank in
all spheres with particular reference to reaching the targeted business
of Rs. 125000 Cr by the Centenary year 2016.
Their services are being continued and the bank has been implementing
the recommendations of BCG. Organisational setup has been reoriented
with a customer centric focus.
The Bank is in the process of putting in place a robust branch
operating model capable of supporting the growing volumes of business.
Your Bank has been focusing on improving the in-branch experience of
the customers by redesigning the branches to create the best-in-class
lay-out and ambience at its high footfall branches.
In order to reduce the waiting time for transaction processing, the
bank has rolled out Single Window System of banking services in 75
branches.
Financial Inclusion
Your Bank was allotted 117 villages through SLBC for providing basic
banking services under the Financial Inclusion Plan. The Bank has
covered all the 117 villages by adopting Business Correspondent model.
The Bank has opened 26278 basic savings accounts (no frill accounts)
with Bio-Metric smart cards under Financial Inclusion Scheme. In order
to take it forward further the Bank is in the process of opening Ultra
Small Branches/Brick & Mortar branches in the allotted villages
wherever feasible.
Special Reserve
In accordance with the provisions of Section 36 (1) (viii) of the
Income Tax Act, 1961 (as amended), a deduction is available to a
company for any Special Reserve created or maintained to the extent of
20% of the profit derived from the business for providing long term
finance for industrial or agricultural development or development of
infrastructure facility or housing in India. As your Bank has extended
credit facility by way of term loans for housing, power, roads and
other segments of infrastructure during last fiscal, it was decided to
avail the said benefit. Your Bank has created special reserve to the
extent of Rs. 50 Cr for the said purpose in 31.03.2013.
During the last four fiscal years commencing from 2009-10, your bank
has created an aggregate amount of Rs. 145 Cr towards the Special
Reserve.
Statutory Audit
The Statutory audit was carried out by M/s R K Kumar & Co, Chartered
Accountants, Chennai. Their report is being annexed and forms part of
this report.
The statutory auditors will retire at the ensuing Annual General
Meeting. Their re-appointment is being placed before the shareholders
for approval. The Bank has received a certificate from the Auditors
confirming that their appointment, if made, would be within the
prescribed limits specified under Sec 224 (1B) of the Companies Act,
1956 as also the extant guidelines issued by RBI. The auditors have
also submitted the Peer Review certificate issued to them by the
Institute of Chartered Accountants of India (ICAI).
Statutory Disclosures
Considering the nature of activities of the Bank, the provisions of
Section 217(1) (e) of the Companies Act, 1956 relating to conservation
of energy and technology absorption do not apply to the Bank. However
the Bank is making extensive use of technology in all its operations
and is also constantly pursuing its goal of technological upgradation
in a cost effective manner to provide quality customer service.
The Bank supports and encourages the country''s export efforts through
its export financing operations.
As required under the provisions of Sec 217(2A) of the Companies Act,
1956, read with Companies (Particulars of Employees) Rules, 1975, as
amended, your Directors report that during the fiscal 2012-13, none of
the employees were in receipt of remuneration requiring disclosure.
It is hereby confirmed that the bank has proper systems in place to
ensure compliance of all laws applicable to the Bank.
Board of Directors
Messrs K Parameshwara Rao, V Santhanaraman and Hemant Kaul have
resigned as Directors during the year under report. The Board places on
record its gratitude for the valuable contribution rendered by them
during their tenure as Directors on the Board.
Shri N S Srinath was co-opted as an Additional Director of the Bank in
the Board meeting held on 29.06.2012. He was elected as a Director of
the Bank at the 93rd Annual General Meeting held on 30.07.2012.
Shri B Swaminathan was co-opted as an Additional Director by the Board
effective 31st January 2013, to hold office till the 94th Annual
General Meeting. Notice as required under Sec 257 of the Companies Act,
1956 has been received in respect of his appointment as Director of the
Bank. Proposal to appoint him as Director, liable to retire by
rotation, is being placed before the shareholders at the ensuing Annual
General Meeting.
Directors Messrs MGS Ramesh Babu and S Ganapathi Subramanian are
retiring by rotation at the forthcoming Annual General Meeting and are
eligible for re-appointment. They have offered themselves for
re-appointment.
As per Clause 49 of the Listing Agreement, brief resume of the
Directors who are seeking re-appointment and the Additional Director
seeking appointment as Director are furnished in the Corporate
Governance Report attached to this Directors'' Report.
Directors'' Responsibility Statement
Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended,
your Directors hereby report:
(a) In the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper explanation
relating to material departures;
(b) The Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the Bank at the end of the financial year and of the profit of the
Bank for that period;
(c) The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of this Act for safeguarding the assets of the Bank and for
preventing and detecting fraud and other irregularities; and
(d) The Directors have prepared the annual accounts on a going concern
basis.
Awards and Accolades
Your Bank received several awards during FY13 for its consistent and
all round performance. Given below are the awards won/ accolades
received during the year 2012-13.
Financial Express-Best Old Private Sector Bank, 2012 (Runner up)
- Best Private Sector Bank award from Bloomberg UTV Financial
Leadership Awards 2012
- Best Small Bank award from Business World - Price Waterhouse
Coopers Awards 2012
- Award for Consistent Performance in growth and profits under Small
Bank Category 2012 presented by CNBC TV 18.
- IPE BFSI Best Employer Brand Award 2012 given by Institute of
Public Enterprises, Hyderabad.
- IPE Corporate Excellence Awards (CEO''s) Banking & Finance, 2012
presented by Institute of Public Enterprises, Hyderabad.
- Business Leadership Award Category given by Institute of Public
Enterprises under Global HR Excellence Awards (CEO''s).
- ''Outstanding contribution to Brand building award'' presented by
Indira group of Institutes, Pune in their 12th Indira Awards for
Marketing Excellence.
Apart from the above, the Institute for Development and Research in
Banking Technology (IDRBT) for its Annual Technology Excellence Awards
2011 selected KVB in respect of the following categories:
(a) Best IT Implementation and Management and
(b) Managing IT Risk Corporate Social Responsibility
Your Bank''s commitment, work ethics and business processes encourage
all its employees and other participants to ensure positive impact and
its commitment towards corporate social responsibility.
Your Bank has been extending its patronage by way of donations and
sponsorship for various humanitarian activities in the field of
education, health and other social causes as a part of its commitment
towards Corporate Social Responsibility.
The Bank extended donations towards funding the following activities.
Health care
(a) Contributed a sum of Rs. 3.24 lakh to Rotary Texcity, Karur to
conduct Medical Centre for one year
(b) Contributed a sum of Rs. 5 lakh to Sri Sathya Sai Trust, Mumbai
towards free heart check up camp and surgery conducted by them for the
benefit of economically weaker sections of the public
(c) A sum of Rs. 2 lakh was donated towards support to severly
underweight children in Karur District programme organized by the
District Collector, Karur- a mission initiative of District
Administration to fight malnutrition among children in the age group of
6 months to 5 years.
Education
(a) Reimbursement of school fees to some children for Rs. 1.19 lakh
(b) Contributed to Rashtrotthana Parishat, Bangalore for running PARV
School at Kolar District, Karnataka
(c) Donation of Rs. 3.60 lakh towards the Single Teacher School
initiative of Swami Vivekananda Rural Development Society, Chennai
(d) Provision of 1000 numbers of ceiling fans to select schools in
Tamil Nadu and Andhra Pradesh at a cost of Rs. 12.90 lakh.
Apart from the above your Bank has also contributed to the Anandam
Charitable Trust, Chennai a home for destitute senior citizens in the
age group of 63 to 93 years for their development activities.
Management Discussion and Analysis Report for the year under report and
Report on Corporate Governance as stipulated under Clause 49 of the
Listing Agreement are provided in separate sections forming part of the
Annual Report.
Acknowledgements
Your Directors place on record their gratitude for the guidance and
cooperation received from the Reserve Bank of India, Government of
India, State Governments and other regulatory bodies. The Directors
also place on record their appreciation of the encouragement and
patronage received from valued customers and other stake holders and
look forward to their continued support. The Directors also take this
opportunity to express their appreciation for the hard work, dedication
and efforts put in by the employees of the Bank.
For and on behalf of the Board of Directors
Karur K P Kumar
24.05.2013 Chairman
Mar 31, 2012
The Board of Directors is pleased to present 93rd Annual Report of the
Bank along with the Audited Balance Sheet as on March 31, 2012 and the
Profit and Loss Account for the year ended March 31, 2012.
Macroeconomic Developments
As per the Advanced Estimates released by the Central Statistical
Office (CSO), the Indian economy was expected to register a growth rate
of 6.9% in 2011-12.
Agriculture including allied activities accounted for 13.9% of the
Gross Domestic Product (GDP) at 2004-05 prices as against 14.5%
recorded in 2010-11. The production of food grains during 2011-12 has
been estimated at 250.42 mn tones. This is mainly due to the increase
in the production of rice in some of the major rice- producing states
in the country viz: Assam, Jharkhand, West Bengal, Bihar and Uttar
Pradesh. The stock position of food grains in the central pool is
comfortable for meeting the Public Distribution System. Higher level of
agricultural output and the ample stocks augur well for bringing down
the headline inflation.
Industrial growth slowed down sharply during the fiscal under report
led by contraction in mining and poor performance of the manufacturing
sector. The industrial activity slowed down on account of variety of
reasons such as subdued investment demand due to decline in business
confidence, weak demand for consumer durables, cumulative impact of
monetary tightening, reflecting interest rate sensitivity, domestic
policy uncertainties and slackening of external demand. In the coal and
natural gas segments of the mining sector there was contraction in
production. Growth moderated in manufacturing sector and given its
large share in IIP, led the slowdown in the industry. The cumulative
growth rate of manufacturing sector during FY2012 slowed down to 2.9%
compared to 8.9% in the same period of the FY2011.
The share of services in the India's GDP was 56.3% in 2011-12 as per
the Advanced Estimates. The services sector is the principal source of
employment in urban areas while the agriculture sector is the primary
employment providing factor in the rural areas. There was a moderation
in the services sector due to the slow down in construction.
The inflation remained persistently high and sticky at around 9% during
2011 and signs of moderation was there lately. The headline inflation
which was 9.7% at the start of the financial year 2011-12, touched
double digits in September 2011 and declined to 6.6% in January 2012.
Consumer Price Index (CPI) inflation for the major indices declined to
below 7% in December 2011. A major cause for the inflation continues to
be high fuel prices driven by increase in international oil prices.
Monetary policy was strongly anti-inflationary till the third quarter
and thereafter it has taken a neutral stance on account of deceleration
and declining inflation momentum.
Going forward it is expected that the inflation would be at around
current levels. The near terms inflation trajectory is subject to
significant upside risks particularly from high oil prices, impact of
significant depreciation of rupee, higher freight rates and taxes.
During the first half of 2011-12, India's exports witnessed a growth
rate of 40.6%. However since October 2011, there has been a
deceleration as a result of crisis originating in the periphery and
spreading to the core economies in the euro area. Imports registered a
growth of 29.4%. Non-POL imports grew by 25.7%. The Non-POL and non
bullion imports reflect the import of capital goods needed for
industrial activity and for imports needed for the exports. Bullion
imports grew by 46.2%. The trade deficit at 40.4% was higher than the
2010-11 figure. India has to make progress in diversifying its imports
and exports to weather the global crisis emanating from Europe and
America.
The balance of payments came under significant stress during the third
quarter of 2011-12 as the current account deficit (CAD) widened largely
and capital inflows declined resulting in drawing down of reserves. A
significant fall in capital flows particularly in the form of banking
capital and investment inflows has pulled the overall balance of
payments position to a deficit of $12.8 bn in Q3 2011-12. Cumulative
Balance of payments during April to December 2011 stood as deficit of
$7.1 bn against $11 bn surplus a year ago. The forex reserves during
2011-12 was $294.40 bn as against $274.33 bn for the year 2010-11.
The cumulative investment inflows during the FY 2012 stood at $64.26
bn, 3.1% lower than $66.32 bn during FY2011. Cumulative foreign direct
investments for FY2011-12 amounts to $34.83 bn which was 17% lower than
$21.38 bn in FY 2010-11.Cumulative portfolio investments was 45% lower
during the FY 2012 from $ 31.47 bn in FY 2011 to $ 17.41 bn. However
the cumulative external commercial borrowings rose by 40% to $35.97 bn
during FY2011-12 from $25.78 bn in the previous fiscal 2010-11.
However going forward the global economy appears to be still in a
stalemate with domestic risks to growth persisting globally. The euro
zone crisis has not seen a credible resolution yet and the zone is
entering into a recession. The growth in emerging markets like China
and India appears to be slowing down than what is anticipated, but
these two economies do have the potential to provide some support for
the global recovery.
The external factors such as Euro zone crisis, volatility in foreign
investment flows and the domestic factors such as continued monetary
control policies and inflation control measures coupled with declining
investment rates and weak and declining industrial production will
place downside pressures on GDP growth in FY 2013.
It is however expected that the growth is expected to be marginally
higher in the current fiscal 2012-13 than the previous fiscal.
Performance Highlights
Your Bank posted yet another year of impressive results with a healthy
top line growth and robust earnings reflecting the efficacy of its
corporate strategy. The business volume touched Rs. 56,317 Cr as at the
end of the fiscal year 2012 over the corresponding previous fiscal year
volume of Rs.42, 774 Cr.
The performance highlights of the bank for the year ended 31st March
2012 are as follows:
Sl.
No. Particulars Amount (Rs in Cr)
1 Gross Deposits 32111.59
2 Gross Advances 24205.11
3 Total Income 3620.52
4 Operating Profit 725.71
5 Net Profit 501.72
Sl.
No. Appropriations Amount (Rs in Cr)
Transfer to
1 Statutory Reserve 150.50
2 Capital Reserve 3.14
3 General Reserve 156.80
4 Special Reserve 35.00
5 a) Proposed Dividend 150.05
b) Dividend Tax (inclusive of
Surcharge and Education cess) 24.34
Deposits
The gross deposits of the bank grew from Rs. 24,721.85 Cr as on
31.03.2011 to Rs.32,111.59 Cr as on 31.03.2012, recording a growth of
29.89% against the growth of the banking industry at 17.4% during
2011-12.
CASA deposits were at Rs. 6,151.58 Cr as at the end of 31.03.2012 as
against Rs.5,755.32 Cr as on 31.03.2011. Time Deposits were at
Rs.25,960.01 Cr as against Rs.18,966.53 Cr as on 31.03.2011.
During the fiscal 2011-12, your Bank conducted NRI Utsav to mobilise
the NRI deposits and the result is encouraging.
Credit Portfolio
Your Bank has been according top priority to the asset quality. The
total advances of the bank grew from Rs. 18,052.41Cr as on 31.03.2011
to Rs.24,205.11 Cr as on 31.03.2012, an increase of 34.08%. The growth
in the advances portfolio was impressive when compared to the
industry's growth rate of 19.3%.
The regulatory guidelines require that 40% of the Bank's adjusted net
bank credit as at the end of the previous fiscal year, shall be lent to
certain specified sectors categorized as 'Priority Sectors'. Your bank
has lent Rs.7,526.92 Cr as on 31.03.2012 constituting 41.60%, well
above the regulatory requirement of 40%. As at 31.03.2012, your bank
has surpassed RBI stipulation of 18% in respect of agricultural credit
by recording 21.90% and the advances made to weaker sections was at
10.18% against the regulatory requirement of 10%.
New Products
Your bank has expanded the product suite with the introduction of the
following new products during the fiscal year under report.
In order to garner all types of retail business from Educational
Institutions the bank launched a comprehensively packaged product to
suit Educational Institutions called KVB Edu Plus Scheme.
To cater to the exclusive requirements of NRIs - Home Loan for NRIs was
launched. The product has been titled 'KVB- Gruhapravesh'. It is a
retail loan product with many features to attract NRI customers into
our fold.
KVB has introduced KVB Transport Plus loan product for financing
transport operators for Term Loans and Working Capital Limits.
Recovery
Your Bank has been able to contain the Non performing Assets to a large
extent despite slow down in the economy and high interest rate
prevailed during the fiscal under report.
As has been the practice, the Bank is following a cautious approach and
focused very much on the asset quality especially in view of slow down
in economic growth. Many pro-active measures were initiated such as
dissemination of information, motivation, support to the operating
units and monitoring progress at Central Office level. Thus the bank
continued its triple action strategy viz: (a) Preventive Actions by
constant monitoring (b) Recovery and Upgradation and (c) Resolution and
Settlement which helped to contain growth of NPAs and maintain asset
quality. These measures helped the functionaries at the operational
level to identify early the accounts showing stress and classify them
as Special Monitoring Accounts and follow up with these accounts to
regularise / recover overdues in time and prevent slippages to NPAs.
The Gross NPA of the Bank as on March 31, 2012 was at Rs.320.99 Cr
(1.33%) as against Rs.228.15 Cr (1.45%) as at the end of the previous
year 2010-11. This is mainly on account of large amounts of slippages
to NPAs despite the best efforts. The net NPAs of the Bank stood at
Rs.78.78 Cr (0.33%) as at the end of the fiscal year 2012 up by 0.26%
over the previous fiscal figure of 0.07%.
Share Capital
During the year under review the Bank called for the payment of First
Call of Rs. 40/- and Second Call of Rs.35/- per share for the Rights
shares allotted on 30.03.2011. The calls were duly paid by the
shareholders and the shares upgraded to fully paid category. The
amount collected towards the call monies amounted to Rs. 228.47 Cr. Out
of this amount a sum of Rs. 12.18 Cr was credited to Share Capital
account and the balance of Rs.216.29 Cr towards Securities Premium
Account of the bank.
On 25.06.2011, the Bank allotted 5,08,204 equity shares under KVB ESOS
2008. The amount subscribed by the employees to the shares allotted
under ESOS was Rs. 7.62 Cr.
The paid up capital of the Bank stood at Rs. 107.18 Cr as at the end of
31st March 2012 which includes Call amounts collected and the allotment
of equity shares under ESOS.
The net owned funds of the bank stood at Rs. 2,708.22 Cr as at the end
of the fiscal 2011-12 up 28.08% over the previous fiscal. The Capital
to Risk Weighted Assets Ratio (CRAR) as per BASEL II as on 31.03.2012
stood at 14.33%. The bank has been consistently maintaining the ratio
well above the regulatory minimum of 9% prescribed by Reserve Bank of
India. The market capitalization as on March 31, 2012 was Rs.3,992 Cr.
Employee Stock Options Scheme
Out of the 10,00,000 stock options available under the KVBESOS 2008,
9,78,454 options were granted, exercised and allotted so far. 21,546
Stock Options are still available for grant.
Shareholders of the Bank have approved KVBESOS 2011 for 40,00,000 stock
options in the last AGM held on 27.07.2011. The Bank is in the process
of formulating the Scheme for the same.
No employee stock option was granted during the year either under
KVBESOS 2008 or under KVBESOS 2011.
Particulars pursuant to Clause 12 of the SEBI (Employees Stock Option
and Stock Purchase Scheme) Guidelines, 1999 do not arise as no stock
option was granted during the fiscal under report and no stock option
is outstanding as on 31.03.2012.
Credit Rating
The Credit Rating Agency, ICRA Ltd has accorded A1 rating to your
Bank's Certificate of Deposit Programme of Rs.2,000 Cr. The rating
symbol, A1 indicates very strong degree of safety regarding timely
payment of financial obligations.
CRISIL has assigned A1 rating for the Certificate of Deposit Programme
of 20 billion (Rs.2,000 cr) of the Bank. The said rating is considered
to have very strong degree of safety regarding timely payment of
financial obligations.
Dividend
In appreciation of the confidence reposed by the members in the Bank
and their continued support and also taking into account the overall
profitability position, future requirement of capital for incremental
business projections and strengthening the capital adequacy, the Board
of Directors of your Bank has recommended a dividend of Rs.14/-per
equity share (140%) for the year ended March 31, 2012.
In terms of Sec 115 (O) of the Income Tax Act, 1961 the Bank will pay
the Dividend Distribution Tax. Accordingly the total outflow on account
of Dividend for the year 2011-12 will be Rs. 174.39 Cr including
Dividend Distribution Tax.
Investments
The aggregate domestic investments of the bank were at Rs.10,581.27 Cr
as on March 31, 2012 as against Rs.7,776.30 Cr as on March 31, 2011
registering an increase of 36.07% during the fiscal 2011-12. Net
investments which were at Rs.7,731.76 Cr, registered an increase of
Rs.2,774.34 Cr (35.88%) as on 31.03.2012 to reach Rs.10,506.10 Cr as at
31.03.2012.
Income on investments stood at Rs.716.25 Cr as on 31.03.2012,
registering a rise of Rs.192.69 Cr (36.80%) when compared to the
previous fiscal income of Rs.523.56 Cr.
The average yield on investments improved to 7.49% during the year
under report over the previous fiscal of 7.20%. Liquidity position of
the Bank was comfortable throughout the year.
Forex Transactions
During the year 2011-12, the merchant turn over increased from Rs.8,079
Cr to Rs.9,329 Cr registering a growth of 15.47%. The Bank has earned a
profit on Exchange of Rs.32.99 Cr for 2011-12 with a growth of 34.60%
over the previous year earnings of Rs.24.51 Cr. Other income
(commission and others) earned during the fiscal 2011-12 was at Rs.
30.75 Cr with a growth of 27.75% over the previous fiscal year earnings
of Rs.24.07 Cr.
Branch network
With the opening of 81 new branches during the fiscal 2011-12 and the
upgradation of one satellite branch into a full fledged branch, your
bank has been successful in expanding its network across the country as
planned, with 451 branches. The Bank has also opened a new Divisional
Office at Vizag taking the total number of Divisional Offices to 11 as
at 31.03.2012.
Delivery Channels ATMs:
Your bank operationalised 337 new ATMs across the country. As at
31.03.2012, the Bank had a total of 825 own ATMs.
Taking into account the branches as also the ATMs installed, the total
customer outlets of the bank rose to 1,276 as at 31.03.2012 from 857 as
on 31.03.2011.
Debit Cards:
As at the end of March 31, 2012, the total number of debit cards issued
by the bank were at 26,30,283. Out of which 5,33,954 cards were issued
during the fiscal 2011-12.
POS Machines:
As on 31st March 2012, your bank installed 3,376 POS machines at
various merchant establishments throughout the country. The total value
of transactions routed through our terminals stood at Rs.162.29 Cr till
31st March 2012.
In order to incentivise the customers of our bank for carrying out more
number of transactions through POS and e-POS by using our Debit cards,
your bank has tied up with M/s Loylty Rewardz Management Pvt Ltd and
launched a programme by the name Anmol Rewards for the benefit of the
customer.
Technology initiatives
The following technology initiatives were implemented during 2011-12.
(a) Image based account opening for reducing the turn around time and
for providing quick services to the customers of the Bank. This project
has been short listed by MIS Asia Magazine, Singapore as one of the top
100 unique technology initiatives at Asia Level and taking a cue from
the same the Bank launched this initiative.
(b) For on line bill payment, the bank has tied up Times Money.
(c) The bank also started video conferencing on regular and periodical
basis with the Divisional Offices for review of their performance and
for conducting product awareness programmes for the branches.
(d) Multi-redundant service providers for MPLS VPN for our branches to
extend un-interrupted customer service.
(e) On line Deposit account opening by customers through net banking.
(f) Mobile ATM at Karur to provide ATM service to areas which does not
have ATMs in the location.
(g) Master Card service. Bank has VISA principal membership.
(h) Inter-bank mobile payment service (IMPS) for funds transfer across
banks through mobile banking.
As a part of the green initiative, your bank has implemented Solar
based power for the UPS, Lighting, fans etc at 6 of our branches.
Other initiatives
Your Bank has entered into agreement with SBI Cards to issue KVB SBI
Co-branded Credit Card to customers of our bank. The cards are issued
with two variants viz: Gold & More and Platinum. The cards are visa
enabled and has worldwide acceptance with 24 million across the world
and in 6,00,000 outlets in India. It has many other features to suit
the needs of the customers.
Bank's customers can make direct tax payment through net banking.
During the year we have introduced 'Door step' banking for cash pickup.
Your bank also launched sale of silver bars apart from the sale of gold
coins in all its branches to augment fee based income.
In our last report, members were informed that the Bank has engaged the
services of Boston Consulting Group (BCG) with the mandate to assist
the Bank in areas such as attaining the target of the gross business of
Rs.1,25,000 Cr business by the centenary year 2016, organizational
restructuring, Business Reengineering Process, innovation in products
and services etc.
The bank started implementing the major recommendations of BCG under
"Golden Vision" Initiatives and periodically reviewing the progress of
the project implementation. During the year among the implementation of
various other recommendations, organizational restructuring has been
carried out at Central Office and at the Divisional offices level. The
Bank has to continue its journey of Golden vision consolidating the
gains already made, ramping up the Key Business Development and support
initiatives across the entire bank and targeting the crucial areas for
transmission was felt required and their services are being continued.
Financial inclusion
Financial inclusion (FI) is a process which over a period of time makes
a qualitative difference to the lives of all those who are covered
under the process through financial literacy and awareness campaign and
credible and easy access to banking facilities.
The bank has covered all the allotted 42 villages having a population
of over 2,000 and above for implementing the financial inclusion
programme. The bank has engaged Business correspondents in all the
villages covered under the FI Plan. Under the financial inclusion plan,
the bank has issued smart cards and opened 'no frill' accounts. The
Bank has trained the nodal branch managers for the financial inclusion
plan.
Going forward your bank will focus on leveraging branch network and
utilise the Business Correspondents to enhance financial inclusion plan
by offering banking facilities to the unbanked and growing
relationships with those customers over a period of time.
Special Reserve
In terms of Sec 36 (1) (viii) of the Income Tax Act, 1961 (as amended),
a deduction is available to a company for any Special Reserve created
and maintained to the extent of 20% of the profit derived from the
business for providing long term finance for industrial or agricultural
development or development of infrastructure facility or housing in
India. As your Bank has extended credit by way of term loans for
housing, power, roads and other segments of infrastructure during the
last fiscal, it was decided to avail the said benefit. Accordingly a
sum of Rs.35 cr was created by way of special reserve during the fiscal
under report. It may be noted that the bank has created special reserve
to the extent of Rs.30 cr each for the said purpose in 31.03.2010 and
31.03.2011. The total special reserve created during the last three
years till 31.03.2012 accounted for Rs.95 cr.
Statutory Audit
The statutory audit was carried out by M/s R K Kumar & Co, Chartered
Accountants, Chennai. Their report is being annexed and forms part of
this report. The statutory auditors will retire at the ensuing Annual
General Meeting. Their re-appointment is being placed before the
shareholders for approval. Certificate from the Auditors have been
received to the effect that their re-appointment, if made, would be
within the prescribed limits specified under Sec 224 (1B) of the
Companies Act, 1956. The auditors have also submitted the Peer Review
certificate issued to them by the Institute of Chartered Accountants of
India (ICAI).
Statutory Disclosures
Considering the nature of the Bank's business, the provisions of Sec
217 (1) (e) of the Companies Act, 1956 relating to conservation of
energy and technology do not apply to your Bank. The Bank has, however,
used information technology extensively in its operations.
There was no employee who was in receipt of remuneration during the
year ended March 31, 2012 requiring disclosure under Sec 217 (2A) of
the Companies Act, 1956 read with Companies (Particulars of Employees)
Rules, 1975.
Board of Directors
Your Board has ten members including the Non-Executive Chairman besides
Managing Director and Chief Executive Officer.
Shri P T Kuppuswamy, demitted office of MD & CEO on 31st May 2011
consequent to the expiry of his term of office. Shri K Venkataraman
took over as the MD & CEO on 6th June 2011. It may be noted that the
terms of his appointment were already approved by the shareholders in
the 92nd AGM held on 27.07.2011.
Dr. V G Mohan Prasad demitted office as Director of the bank on
27.07.2011 consequent to the completion of his tenure in terms of the
Banking Regulation Act, 1949. Dr S Krishna Kumar, has resigned as a
Director of the bank with effect from 29.12.2011. Board places on
record its sincere appreciation of the services rendered by them during
their tenure as Directors of the Bank. CA Shri K Ramadurai and Shri K K
Balu were inducted as Additional Directors of the bank during the year
under report. They are seeking election as Directors of the Bank at the
ensuing Annual General Meeting.
In terms of Clause 49 of the Listing Agreement, brief resume of the
above directors who are seeking election at the ensuing Annual General
Meeting is furnished in the Corporate Governance Report attached to
this Directors' Report.
Directors' Responsibility Statement
As per Section 217 (2A) of the Companies Act, 1956 as amended, your
Directors report that:
1. The Accounts for the year 2011-12 were prepared by following
Accounting Standards in so far as they apply to the Banks.
2. Accounting policies adopted and applied consistently by the bank
are in tune with the guidelines issued by Reserve Bank of India from
time to time. Reasonable and prudent judgements and estimates have been
made in the accounts so as to give a true and fair view of the state of
affairs of the bank as on 31.03.2012 and of the profit of the bank for
the financial year ended on 31.03.2012.
3. Proper and sufficient care was taken for maintaining adequate
records in accordance with the provisions of the Companies Act, 1956 in
so far as they apply to banks.
4. The annual accounts for the year ended 31st March 2012 have been
prepared on a 'Going Concern' basis.
Awards and Accolades
The continued good performance of the bank has won laurels and
appreciation from several quarters during the year 2011-12. The awards
and accolades won during the year are listed below:
- Your Bank has been conferred the Best Cost Efficient Private Sector
Bank by FICCI-IBA under FIBAC Best Bank Award 2011. The award was
received from the hands of Shri Prithviraj Chavan, Hon'ble Chief
Minister of Maharashtra.
- The Bank has won Best Bank Award for Mobile Banking among Small
Banks from IDRBT Banking Technology Excellance Awards 2010-11 by the
Institute for Development and Research in Banking Technology,
Hyderabad.
- KVB was adjudged as the Best Old Private Sector Bank by CNBC-TV18
Best Banks & Financial Institutions Awards, 2011 by CNBC-TV18-MCX. The
award was received from the hands of Hon'ble Minister for Corporate
Affairs Shri Veerappa Moily.
- Financial Express India's Best Bank Awards, 2011 conferred Best Old
Private Sector Bank- Runner Up. The award was presented by Shri Pranab
Mukherjee, Hon'ble Finance Minister of India.
- Business World-Price Waterhouse Coopers Best Bank Awards, 2011
adjudged your Bank as the Best Small Bank and Fastest Growing Small
Bank. Shri Pranab Mukherjee, Hon'ble Finance Minister of India,
presented the award.
- The Bank was rated as the second in the Mid-sized banker category
as also the best mid sized bank in quality of assets (Balance Sheet
Size less than Rs.50,000 cr) by the Business To-day-KPMG.
- The State Forum of Bankers' Club, Kerala conferred the Best Private
Sector Bank, 2010-11 award.
KVB is a responsible corporate citizen and the same is recognized by
the Central Excise and Service Tax Commissionerate, Trichy by giving
'Top Tax Payer' award. We are second highest service tax payer under
the 'Services' category.
During the current fiscal your bank received BEST PRIVATE SECTOR BANK
2012 award from the Bloomberg-UTV Financial Leadership Awards 2012. MD
& CEO of the Bank received the award from the Hon'ble Finance Minister
Shri Pranab Mukherjee.
Corporate Social Responsibility
Your Bank has been extending its patronage by way of donations and
sponsorship for various humanitarian activities in the field of
education, health and other social causes as a part of its commitment
towards Corporate Social Responsibility.
The Bank extended donation towards funding the following activities
(a) Rs. 2.50 lakh towards Ambulane to Shakuntala Devi Maternity
Hospital, Royapuram, Chennai
(b) Rs.2.70 lakh to Rotary Texcity, Karur, to conduct medical camps for
one year
(c) Rs.3 lakh to Bharat Vikas Parishad Charitable Trust, Bangalore for
establishment of Centre for manufacture of artificial limbs and
re-habilitation.
(d) Rs.50,000/- to Arogya Sadan Charitable Trust, Kolkata for their
care centre of mentally challenged persons.
(e) Rs.8.87 lakh to Akshaya Foundation, Bangalore for purchase of van
for distribution of mid-day meals to school children.
(f) Rs. 5 lakh to B.W. Lions Super Speciality Eye Hospital, Bangalore
for expansion of the eye hospital.
(g) Rs.50,000/- to Patthi Adinarayanaiah Ramakrishnamma Vidhya
Samasthe, Munganahalli, Karnataka.
Your Bank has contributed Rs. 50 lakh to the Tamil Nadu Chief
Minister's Thane Cyclone Relief Fund.
Besides the above the Bank has also contributed to the cultural cause
by donating a sum of Rs. 25 lakh to the renovation of the auditorium of
Narada Gana Sabha, Karur. Rs.2.76 lakh was donated to Sri Kasi
Annapurna Vasavi Arya Vysya Vrudhashramam and Nithyanna Satram.
Management Discussion and Analysis Report for the year under report and
Report on Corporate governance as stipulated under Clause 49 of the
Listing Agreement are provided in separate sections forming part of the
Annual Report.
Acknowledgements
The Directors thank the valued customers, shareholders, well- wishers
and correspondent banks, business associates for their goodwill,
patronage and support.
Your Directors acknowledge with gratitude the valuable and timely
advice, guidance and support received from GOI, RBI, SEBI, NSE,
Depositories and various State Governments in the functioning of the
Bank.
The Directors place on record their deep appreciation of the valuable
contribution of the members of the staff at all levels for the
consistent growth of the Bank which took the bank to greater heights
and look forward to their continued co-operation in realization of the
corporate goals in the years ahead.
For and on behalf of the Board of Directors
Place : Karur K.P. Kumar
Date : 25.05.2012 Chairman
Mar 31, 2011
The Board of Directors take great pleasure in presenting this 92nd
Annual Report on the business and operations of your bank together with
the audited accounts for the year ended year ended 31st March 2011.
Economic Overview
The global economic recovery is broadly on track and continues to move
rapidly though there are large output gaps in advanced economies and
closing gaps in emerging and developing markets. International
Monetary Fund has projected world real GDP to slow down to 4.4% in 2011
from 5% in 2010. The key to downslide was primarily on account of oil
prices.
Indian economy continued its good performance than most emerging
markets during the fiscal 2010-11 and it retained its position as the
second largest growing economy amongst the G20 countries. According to
the Central Statistical Organisation (CSO) GDP factor cost at constant
prices is expected to register a growth of 8.6% in FY 2010-11 while it
grew by 8% in the previous fiscal. Agriculture, aided by normal
monsoon, provided the impetus to growth. The agricultural production
rebounded in 2010-11 after suffering drought conditions in the
preceding year. With good Kharif and Rabi crops, food grains production
reached a new record. A satisfactory North-East Monsoon following
normal South-West monsoon, favourable reservoir positions etc., led to
the improved agricultural production. Higher agricultural production
and significant rise in the outputs of key agricultural products would
help in reducing the pressure on food prices. The agricultural growth
may also lead to better rural incomes and thus benefit the demand for
other sectors.
The growth in industrial sector was moderated mainly on account of high
base effect and sharp deceleration in capital and intermediate goods.
Except consumer goods almost all sectors exhibited slowdown. Higher
private consumption demand led to the higher growth in both durables
and non-durables segment.
The services sector growth was robust notwithstanding some deceleration
in government spending related services.
Exports improved during 2010-11. The exports grew by 37.5%, fastest
since independence and totalled US $ 246 billion. Imports also showed
an increase of 21.2% and totalled US $ 350 billion. Strong growth
performance facilitated moderation of the current account deficit to a
certain extent.
As the inflation stayed above the indicated projections during the
fiscal 2010-11, monetary policy was continually tightened by the
regulator throughout the year.
Monetary and liquidity conditions responded to the policy measures with
slow pace. Equity market witnessed good buying interest from FIIs
during the second and third quarter of 2010-11 followed by some
correction along with greater volatility. The calibrated policy
measures adopted has not impacted the growth momentum.
The stock market underperformed and remained volatile reflecting
several uncertainties. The activity in the primary segment of the
domestic capital market remained buoyant during the first three
quarters and moderated during the last quarter. During the year
resource mobilistion by mutual funds turned negative, owing to high
volatility in the market, lower retail investments, lower corporate
support and higher returns in bank deposits.
The macro economic outlook for the year 2011-12 remains favourable
though the high oil prices pose the biggest risk to both growth and
inflation.
Against this backdrop your banks performance during the last fiscal is
highlighted below:
Performance Highlights
Sl. No. Particulars (R s . i n cr)
1 Gross Deposits 24721.85
2 Gross Advances 18052.41
3 Total Income 2482.03
4 Operating Profit 600.58
5 Net Profit 415.59
Sl. No. Appropriations (Rs. in cr)
Transfer to
1 Statutory Reserve 125.00
2 Capital Reserve NIL
3 General Reserve 111.50
4 Special Reserve -Sec36(i)(viii)
as per income Tax Act 30.00
5 a) Proposed Dividend 128.63
b) Dividend Tax (inclusive of
Surcharge and Education cess) 20.87
Sl. No. Other Highlights: (Rs. in cr)
1 Net Worth 2059.19
2 Book Value per share (Rs.) 193.04
3 Earning per share (Rs.) 44.90
4 Capital Adequacy Ratio(%)-
BASEL I 12.16%
BASEL II 14.41%
Deposits
Aggregate deposits of the bank increased from Rs. 19271.85 cr in March
2010 to Rs.24721.85 cr in March 2011 registering an impressive growth
rate of 28.28%.
CASA constitute 23.28% of the total deposits. Savings deposits rose by
Rs.765.40 cr to touch Rs.3253.07 cr from Rs.2487.67 cr. registering a
growth rate of 30.77%. The savings bank campaign launched by the Bank
during the year under report accelerated savings deposits growth. Cost
of Deposits was lower at 6.67% compared with 7.13% during the last
fiscal.
Credit Portfolio
Your Bank continued its thrust on the quality while expanding the
assets base. The gross advances grew from Rs. 13675 cr as on 31st March
2010 to Rs.18052.41 cr as on 31st March 2011, an increase of 32.01%.
The credit portfolio is well diversified.
Your Bank continued to give added focus to the Priority Sector lending
in conformity with the national policies, regulatory expectations and
fulfillment of social objectives.
As per the regulatory guidelines, achievement under priority sector for
the fiscal 2010-11 is computed taking Adjusted Net Bank Credit (ANBC)
of March 2010 as the base. For the fiscal under report the percentage
of Priority Sector Advances to ANBC was at 41.05%, thus complying with
the stipulated norm of 40% under Priority Sector Credit.
Bank has also achieved the regulatory target of 18% under agricultural
advances which was at 18.29% as at 31.03.2011. The weaker section
advances was at 10.17% against the prescribed 10% norm.
Recovery
Your bank has adopted two pronged strategies to prevent slippages and
manage NPAs. On the one hand, aggressive thrust was given to effect
recovery by adopting specific strategies like conducting adalats,
filing of suits with DRT, initiating action taken under SARFASEI Act
and compromise settlements etc. On the other hand, thrust was given to
appropriate management of NPAs. Towards this end, willful defaulters
were identified and quick mortality cases evaluated and corrective
steps initiated. Sustained monitoring and continuous followup were
carried out to prevent further slippages into NPA category.
As a result , the Gross NPA level of the Bank came down from Rs. 235.34
crs to Rs.228.15 crs. The percentage of Gross NPA to Gross Advances
also registered a decline- i.e from 1.72% to 1.26%. The Net NPA
percentage came down significantly from 0.23%to 0.07% during the
fiscal. The ratio is one of the lowest in the industry. The Bank has
been consistently building up provisions for impaired assets from time
to time, which has resulted in achieving a Provision Coverage Ratio
(PCR) of 93.92% of the total reduction under NPA during the fiscal,
cash recovery accounted for 67.79%. Despite robust growth of credit
portfolio, during the past five years, the NPAs are constantly kept
under control by relentless follow up and recovery drive.
Share Capital
During the year under report the Board announced Bonus shares to the
shareholders in the ratio of 2 bonus shares for every five shares held
on the record date. The Bonus shares were allotted on 20.09.2010. With
the allotment of Bonus shares, the paid up share capital which stood at
Rs.54.44 cr as at 31st March 2010 stood increased to Rs.76.21 cr. The
Board also announced Rights shares in the ratio of 2 rights shares for
every five shares held on the record date inclusive of the Bonus
shares. The rights shares were issued and allotment of the said shares
were made on 30.03.2011. With the allotment of Rights shares, the paid
up share capital stands increased to Rs.94.49 cr. Further the bank has
received in advance towards First call money a sum of Rs.22.45 cr.
Credit Rating
The credit rating agency, CRISIL has reaffirmed "P1+" (pronouncd "P one
plus") rating for the Banks Rs. 10 billion Certificate of Deposit
Programme. The rating symbol "P1+" indicates that the degree of safety
with regard to timely payment of interest and principal on instrument
is very strong.
Dividend
Your banks policy of declaring the dividend is to reward the
shareholders as well as to plough back profit for maintaining a healthy
capital adequacy ratio and for supporting future growth. Accordingly
your Directors are pleased to propose a total dividend of 120% (i.e
Rs.12/- per share of Rs.10/-) for the year ended 31st March 2011 .
However the proposed dividend is on the enhanced capital on account of
Bonus and Rights shares allotted during the fiscal 2010-11. The payment
on account of dividend would be Rs.149.50 cr including dividend tax.
Board takes pleasure to mention here that this is 4th year in
succession that a dividend of 120% is paid.
Net owned Funds and Capital Adequacy
The net owned funds of the Bank crossed Rs.2000 crs and stood at
Rs.2136.98 cr. The Capital to Risk weighted Assets Ratio (CRAR) as per
BASEL I as at the end of March 2011 stood at 12.16%. As per BASEL II
norms, CRAR is 14.41 %. Your Bank continues to have the capital
adequacy ratio well above the regulatory minimum of 9%. Banks CRAR of
14.41% under BASEL II norms offers comfort and cushion for future
expansion and growth in asset portfolio.
Investments
The treasury is responsible for compliance with reserve requirements,
management of liquidity and interest rate risk on the Banks Balance
Sheet. Bank holds government securities in order to comply with the
regulatory requirements to meet the statutory liquidity ratio (SLR).
The aggregate investments of the Bank increased to Rs.7,776.31 cr at
the end of the financial year 2010-11 as against Rs.6,649.44 cr in the
FY 2009-10, an increase of 16.95%. Net investments rose by Rs.1,129.60
cr as on 31.03.2011, ie. from Rs.6602.16 cr to Rs.7,731.76 cr
registering a growth of 17.11%.
Incomes on investment stood at Rs.523.56 cr as on 31.03.2011,
registering a rise of Rs. 127.29 cr (32.12%) compared to the previous
year fiscal of Rs.396.27 cr.
The average yield on investments improved to 7.20% during the year
against previous fiscal of 7.00%. Liquidity position of the Bank was
comfortable through out the year.
Forex Transactions
Your bank achieved a merchant turnover of Rs.8079 cr during the fiscal
2010-11 as against Rs.6909 cr recorded in the previous fiscal. The
gross income earned from the forex operations was Rs.108.83 cr. The
export credit of the bank stood at Rs.837.72 cr as on March 31, 2011 as
against Rs.634.74 cr as on 31.03.2010, thus registering a growth of
31.98%.
Branch Network and Expansion
During the fiscal 2010-11, 34 branches were added by the Bank including
1 satellite branch that was upgraded as a full fledged branch, taking
the total branch network of the bank to 369.
During the fiscal 2010-11, 112 ATMs were brought into the network
taking the total to 488 (364 on site and 124 offsite).
Your Board continues to give thrust for opening brick-and-mortar
branches covering all the parts of the country in order to have a wider
pan India presence and has plans to open 75 branches and 150 ATMs
during the current fiscal 2011-12.
Technological Initiatives
Your banks emphasis on technology deployment as an instrument for
enhancing service quality continued during the year. A wide gamut of
services has been provided under Internet banking facility. The year
saw the implementation of additional security using RSA technology for
internet banking users, both corporate and retail. There has been a
steady increase in number of customers using the facility as also in
the volume of transactions.
The bank has also launched on line bill payments of Tamil Nadu
Electricity Board. Also soft launched mobile banking payment services
and inter-bank mobile payment service. Your bank implemented NEFT
payments through internet banking services.
At all your banks Currency Chests, Bio-metric and Proximity Card based
access control system was implemented.
Other initiatives
Members are aware that the Bank appointed Boston Consulting Group (BCG)
with the mandate to assist the bank in the areas such as attaining the
target of total business of Rs.1,25,000 cr
by the centenary year 2016, restructuring the organization, Business
re-engineering process, innovation of Products and services, study the
recruitment and promotion policies etc. The recommendation of the said
Group is being implemented under "Golden Vision Initiatives". While the
bank has implemented some of the important modules suggested by them,
the roll out of other modules is under study and will be implemented in
stages during the current fiscal. The modules that are rolled out under
the Golden Vision Initiatives are encouraging.
Your bank launched sale of Gold Coins during the year under report and
the income earned is quite encouraging.
Your bank has also launched the following products during the
FY2010-11:
(a) KVB Gift Card
(b) KVB Travel Card
(c) KVB Prestige - an SB product for High Networth Individuals
On the assets portfolio the following new products have been
introduced:
(a) KVB Rice Plus - to finance the Rice Mills
(b) KVB Timber Plus- to finance Timber merchants
Financial inclusion
With a view to provide banking facilities to the sections of society
which are so far deprived from the formal financial sector, the bank
implemented financial inclusion policy. SLBC, Tamilnadu had allotted 36
villages to your bank for implementation of the financial inclusion
scheme. The bank has adopted Business Development Model and has rolled
out the scheme in 34 villages taking the implementation to very
impressive rate of around 95%. As a part of the financial inclusion
drive, your bank formulated a special no frills savings bank product
known as "KVB Grama Jyoti" . Distibution of smart cards has also begun.
Special Reserve
Income tax deduction under Sec 36 (1) (viii) is available for any
Special Reserve created and maintained to the extent of 20% of the
profit derived from the business of providing long term finance for
industrial or agricultural development or development of infrastructure
facility or housing in India. As the Bank has extended Term Loans for
housing, power, roads and other segments of infrastructure in the last
year, it was decided to avail the said tax benefit. Accordingly your
bank has created a special reserve of Rs.30 cr during the fiscal under
report (previous year Rs.30 cr).
Statutory Audit
The statutory audit was carried out by M/s R K Kumar & Co., Chartered
Accountants, Chennai whose report is being annexed and forms part of
this report. The statutory auditors will hold office until the
conclusion of the ensuing Annual General Meeting. Their re-appointment
is being placed before the shareholders for approval. Certificate from
the Auditors has been received to the effect that their re-appointment,
if made, would be within the limits prescribed under Sec 224(1B) of the
Companies Act, 1956. The auditors have also submitted the Peer Review
Certificate issued to them by the Institute of Chartered Accountants of
India (ICAI).
Statutory Disclosures
The information required under the provisions of Sec 217 (2A) of the
Companies Act, 1956 read with The Companies (Particulars of Employees)
Rules 1975 as amended is NIL since none employed was in receipt of the
remuneration as specified in the said Rules.
Considering the nature of activities as an entity in the financial
services sector, the provisions of Sec 217(1)(e) of the Companies Act,
1956 relating to conservation of energy and technology absorption do
not apply to the Bank. The Bank has however made optimum use of
information technology in its various operations.
Employees Stock Option Scheme
The information pertaining to the Employees Stock Option Scheme 2008 is
given as an Annexure to this report.
Board of Directors
The Board consists of ten members including the Non-Executive Chairman
and Managing Director & Chief Executive Officer.
Reserve Bank of India, on the recommendation of the Board of Directors
appointed Shri K P Kumar as the Non-Executive Chairman of the bank for
a period of three years effective from 24.09.2010. The terms of
appointment are placed before the shareholders for their approval at
the ensuing Annual General Meeting.
As the term of the present Managing Director & Chief Executive Officer
Shri P T Kuppuswamy expires on 31st May 2011, the Board recommended the
appointment of Shri Krishnamoorthy Venkataraman as the MD & CEO for a
period of three years to RBI. The terms of his appointment as approved
by RBI are being placed before the shareholders for approval at the
ensuing Annual General Meeting.
Shri A J Suriyanarayana was co-opted as an Additional Director on
27.10.2010. He is seeking election as a Director at the ensuing Annual
General Meeting.
Directors Shri S Krishnakumar and Shri S Ganapathy Subramanian retire
by rotation and being eligible offer themselves for re- appointment.
In terms of Clause 49 of the Listing Agreement, brief resume of the
above directors who are seeking election at the ensuing Annual General
Meeting is furnished in the Corporate Governance Report attached to
this report.
During the year under report Shri A S Janarthanan, Non-Executive
Chairman, demitted office on 23.09.2010, after completing his tenure of
office. The Board wishes to place on record its deep sense of
appreciation for invaluable and immeasurable contribution to the growth
and development of the Bank during his long tenure as Director and as
Non-Executive Chairman.
Directors Responsibility Statement
In terms of Sec 217 (2A) of the Companies Act, 1956, your Directors of
the Bank report as under:
a. in the preparation of the annual accounts, the applicable
accounting standards as modified and advised by RBI have been followed
together with proper explanations for the deviations, if any.
b. Generally accepted accounting policies and the guidelines issued by
Reserve Bank of India have been followed consistently.
c. Reasonable and prudent judgments and estimates had been made so as
to give a true and fair view of the state of affairs of the bank as at
31.03.2011 and the profit of the bank for the year ended on that date.
d. Proper and sufficient care was taken for the maintenance of
adequate accounting records as per the applicable provisions governing
banks in India.
e. The annual accounts had been prepared on a going concern basis.
Awards and Recognition
1. Your Banks technological efforts were recognized yet again by the
Institute for Development and Research in Banking Technology,
Hyderabad. Your Bank has been awarded the Special Award - Best IT
Infrastructure Management, 2009. The Banking Technology Awards, 2009
were presented at a function at Hyderabad on 18th June 2010.
2. Your Bank was adjudged as the "Best Small Bank- 2010" by Business
World - Price Waterhouse Coopers
Corporate Social Responsibility
The Bank believes that its success is intrinsically linked to
sustainable environmental practices. Your Board resolved to go green
banking during the fiscal under report by installing a windmill of 850
KW at Rs.5.22 cr at Theni District, Tamil Nadu. The Bank has partnered
with Gamesa Wind Turbines for installation of the wind mill for its
captive use. The power generated by the windmill would be wheeled to
various HT consumption points of the bank in the State.
The bank has been associating with social and charitable initiatives
for the betterment of the society at large. Some of the initiatives the
bank associated with during the fiscal under report are:
1. Donations made to the Karnataka Arya Vysya Charitable Trust for
funding student scholarship.
2. Sponsored Cardiac service camp at Karur in association with Lions
Club and Madras Medical Mission
3. Donation made to the Sathyasai Trust for conducting Jaipur Foot
Camp
Acknowledgements
The Board of Directors wishes to place on record its sincere thanks to
the Reserve Bank of India, SEBI, Ministry of Finance, National Stock
Exchange, other Government and regulatory authorities, financial
institutions and correspondent banks, business associates for their
support and guidance. The Board of Directors are also grateful to the
valued customers, esteemed shareholders, stakeholders and public at
large for their patronage and confidence reposed in the bank.
The Board of directors also place on record their appreciation of the
commitment, sense of involvement and dedication exhibited by each staff
member in the overall development, growth and prosperity of the bank
and look forward to their continued support and whole-hearted
co-operation for realization of the corporate goals in the years ahead.
For and on behalf of the Board of Directors
Place : Karur K.P. Kumar
Date : 20.05.2011 Chairman
Mar 31, 2010
The Directors take pleasure in presenting the 91 st Annual Report, the
Audited Balance Sheet as at 31st March 2010 and the Profit and Loss
Account tor the year ended 31 st March 2010 along with the Auditors
Report.
ECONOMIC OVERVIEW
The global economy, which saw an unprecedented government intervention
during the economic crisis in 2008, continues to recover in the wake of
policy support and improving financial market conditions.
The Indian economy recovered quickly from the global financial crisis
thanks to the monetary and fiscal stimulus initiated by the RBI and the
Government. These factors ensured not only mitigating the adverse
impact but also quick recovery of the economy. The Indian economy is
now placed firmly on the recovery path. The advance estimates released
by the Central Statistical Organisation puts the GDP growth at 7.2% in
fiscal 2009-10, with industrial and service sectors growing at 8.2 and
8.7 percent respectively.
In the Agricultural front, South-West monsoon, deficient during 2009
with a shortfall of 23% in precipitation, brought drought in several
states. However the North-East monsoon during 2009 has been
satisfactory. The delayed withdrawal of South-West monsoon and the
above normal North-East monsoon and focused government attention
towards increasing the rabi production would result in higher rabi
output and thus off-set the losses in Kharif output. As per the advance
estimates for 2009-10, the total food grain production would decline by
7.5% over the previous year.
The industrial production, affected by cyclical slowdown and
international commodity price shocks in 2007-08 and global recession
during the last fiscal 2008-09, showed recovery path substantially.
There was a double digit growth in Index of Industrial Production
(IIP). The industrial growth was broad based, driven by the
manufacturing sector.
The services sector, which exhibited recovery in the second quarter,
showed down trend in third quarter of 2009-10. The decline was on
account of decline in growth of community, social and personal
services. There has been accelerated growth in the output of sub-groups
such as construction, trade, hotel, transport and communication.
The countrys external sector showed improvement with recovery signs
seen in the global economic environment resulting in turnaround of
exports, buoyancy in capital flows and acceleration in foreign exchange
reserves. The balance of payments position remained comfortable and
there has been a modest increase in current account deficit. As at the
end of March 2010, the countrys forex reserves were at US$ 279.10
billion.
Gaining traction from the economic turnaround the annual growth in Bank
credit recorded a 16.04% growth in line with the regulators projection
of 16% for the FY 2009-10. The deposits went up by 18.14% y-o-y as
against the revised growth projection of 18% fixed by RBI.
The aggregate business of your bank crossed yet another milestone
figure of Rs. 30,000 cr and stood at Rs. 32,946.85 cr at the end of the
financial year 2009-10. The total business of the bank increased by Rs.
7,282.56 cr from the previous years figure of Rs. 25,664.29 cr
registering a y-o-y growth of 28.38%.
PERFORMANCE HIGHLIGHTS
Against the backdrop of the economic turnaround, your bank has posted
good performance. The financial performance of your bank for the fiscal
2009-10 is given below:
Particulars Rs. (in cr)
01 Deposits 19,271.85
02 Gross Advances 13,675.00
03 Total Income 2,004.92
04 Operating Profit 463.22
05 Net Profit 336.03 Appropriations:
Transfer to
01 Statutory Reserve 101.00
02 Capital Reserve 5.20
03 General Reserve 133.00
04 Special Reserve-Sec 36(1 )(viii)
as per Income Tax Act 0.00
05 (a) Proposed Dividend 65.32
(b) Dividend Tax (inclusive of
Surcharge and Education cess) 11.10
Other Highlights:
01 Net Worth 1,619.98
02 Book Value per share (Rs.) 297.60
03 Earning per share (Rs.) 62.23
04 Capital Adequacy Ratio (%)
(under BASEL II) 14.49
DEPOSITS
The total deposits of the Bank have grown by Rs. 4,170.46 cr from Rs.
15,101.39 cr as on 31 st March 2009 to Rs. 19,271.85 cr as on 31st
March 2010, registering a growth of 27.62 %. Savings Deposits have
grown from a base of Rs. 1,808.82 crto Rs. 2,484.67 cr showing an
increase of Rs.675.85 cr from the previous financial year (37.36%),
mainly on account of the Savings Deposit campaign launched by the bank
during the year. The Demand Deposits grew by 37% to reach Rs. 2,050.53
cr as at the end of FY 2009-10 from Rs. 1,496.77 cr as at the end of
the previous fiscal 2008-09. Thus your bank posted an impressive growth
of 37.20% (y-o-y) under LCD segment.
CREDIT PORTFOLIO
Your Bank continued its prudent approach in expanding quality credit
assets in line with its policy on credit risk management. The advances
of the bank increased by Rs. 3,112.10 cr from Rs. 10,562.90 cr as on
31.03.2009 to Rs. 13,675.00 cr as on 31.03.2010, recording an
impressive growth of 29.46%. The growth of credit has been marked by a
broad-based expansion across sectors as diverse as agriculture, small
and medium industry, large industry and infrastructure.
During the year, the bank has adopted a number of strategies to achieve
sustainable credit growth and asset quality improvement thereby
ensuring higher earnings besides maintaining a well diversified credit
portfolio.
The priority sector credit accounts for Rs.4,521.86 cr as at the end of
the fiscal 2009-10, constituting 42.80% of the net bank credit of the
previous fiscal as per regulatory norms.
In terms of regulatory guidelines under BASEL II, the banks corporate
clients are to be rated by a credit rating agency. In this connection
your bank has already entered into MOU with CARE and also with CRISIL
for rating corporate clients. Further the bank has also entered into
MOU with SME Rating Agency of India Ltd (SMERA) for rating of the SME
borrowers.
RECOVERY
The bank has devised a strategic policy for recovery of NPAs. The
various measures adopted for recovery included one time settlements/out
of court settlements, Lok Adalat, filing of suits before the Debt
Recovery Tribunals and action taken under SARFASEI Act etc. Continuous
monitoring of stressed accounts at the Central Office as also at the
Divisional Offices yielded desired results in arresting slippage to
NPAs.
As a result of pro-active approach and the sustained efforts taken by
the bank, Gross NPA at the end of the fiscal amounted to Rs. 235.34 cr
(1.72%) as against Rs.205.86 cr (1.95%) previous fiscal. The percentage
of net NPA declined from 0.25% to 0.23%.
The bank has been keeping a strict vigil on the delinquency aspect,
keeping in view the dynamic credit growth. This has been amply
testified by the fact that the credit portfolio of the bank has posted
a four fold growth since 2003 from Rs.3,424 cr to Rs.13,675 cr, while
the Gross NPA has declined from Rs.255.47crtoRs.235.34cr.
As against the regulatory prescription of 70% coverage ratio for NPAs,
your bank maintains a higher provision of 86.85%.
SHARE CAPITAL
The paid up capital of the bank as on 31.03.2010 stood at Rs. 54.44 cr
as against Rs.53.95 cr during the previous year. The increase in the
paid up capital was due to the issue and allotment of 4,70,250 equity
shares under Employees Stock Option Scheme 2008 (Tranche I) as also
allotment of 13,710 equity shares which were kept in abeyance
consequent to settlement of legal disputes.
TIER II SUBORDINATED DEBTS
To augment capital adequacy, the bank issued during the year Unsecured
Redeemable Non-Convertible Subordinated (Tier II) Bonds (Series I) in
the nature of promissory notes for cash to the extent of Rs.150 cr. The
said bonds were allotted to a financial institution and a bank. The
subordinated debts are assigned a rating of LA+ (pronounced as LA
Plus) by ICRA. The rating indicates adequate credit quality.
CREDIT RATING
The Certificate of Deposit programme of the Bank for INR 20 billion
(Rs.2,000 cr) are rated P1+ by the credit rating agency CRISIL for
INR 10 billion (Rs.1,000 cr) and another INR 10 billion (Rs.1,000 cr)
by ICRA which has assigned the rating A1+. Both the ratings indicate
highest credit quality.
DIVIDEND
Rewarding shareholders with rich cash dividends as well as ploughing
back of profits to support banks future growth have been the twin
objectives of your bank over many years. Keeping in mind the overall
performance of the bank, your directors recommend a dividend of Rs.12/-
per equity share of Rs.10/- each. Shareholders are aware that this is
the third time in a row the bank has declared 120% dividend and the
seventh successive year the bank rewarding the shareholders with 100%
and above dividend. The outgo in the form of dividend (inclusive of
dividend tax) during the year 2009-10 would amount to Rs. 76.42 cr.
NET OWNED FUNDS AND CAPITAL ADEQUACY
The net owned funds of your bank increased from Rs. 1,350.16 cr to Rs.
1,619.98 cr, registering a growth of 19.98 %. The capital adequacy
ratio stood at 14.49% as per BASEL II norms and at 12.48% as per BASEL
I norms. The Bank has been maintaining Capital Adequacy Ratio well
above the regulatory minimum of 9% stipulated by the Reserve Bank of
India.
INVESTMENTS
The Gross investments of the bank grew by 39.82% to reach Rs.6,649.44
cr as on 31 st March 2010 from the level of Rs.4,755.61 cr as at the
end of the previous fiscal. The net investments rose from Rs.4,715.98
cr as on 31 st March 2009 to reach Rs.6,602.16 cr as at the end of
fiscal 2009-10.
Interest income on investments grew by 43.36% to reach Rs. 396.27 cr as
against Rs.276.41 cr earned during the last fiscal. The average yield
on investments during the year was 7% as against 6.92% during the
earlier fiscal. Liquidity position was generally comfortable throughout
the year. In order to improve the overall yield on the available short
term surplus funds, the bank deployed the funds judiciously in other
avenues.
FOREX OPERATIONS
During the year the bank achieved a merchant turnover of Rs.6,909 cr in
foreign exchange business. The gross income earned from the foreign
exchange operations was Rs.100.34 cr. The advances to export sector
were at Rs.634.74 cr as at the end of the fiscal 2009-10.
BRANCH NETWORK AND EXPANSION
In order to increase the market share over the years your bank has been
expanding its network. During the fiscal 2009-10, the bank has opened
23 new branches and 54 new ATMs. As at the end of the fiscal the total
number of branches and ATM centres of the Bank were at 335 and 376
respectively.
RISK MANAGEMENT
The bank has put in place a robust risk management system as per the
guidelines of the Reserve Bank of India to manage credit, market and
operational risks. The risk management architecture of the Bank is
being upgraded with the support of the external consultants by
enhancing the coverage of risk management policies, improving the risk
infrastructure and review mechanisms. The bank is also in the process
of installing sophisticated software system for integrated risk
management. Your bank has Board approved policies for Advances, ALM,
Investments and Information Security.
TECHNOLOGY INITIATIVES
Your bank is one of the forerunners in introducing technology. Ever
since it has embarked upon technology for its operations, it has been
constantly upgrading and foraying into various areas to leverage
technology to the benefit of the customers as well as the bank. The
technology initiatives during the year under report are:
(a) Virtual Key Board Security for internet Banking users.
(b) Secured instant Messaging System
(c) RTGS Service through internet banking
(d) Utility bill through Billdesk.com
(e) Online bill payments through our debit cards using VISA Bill pay.
(f) Two factor Authentication Tokens for internet Banking Users
The Bank has also revamped its Information Security Policy.
The Bank has also replaced all desktops in the bank which are more than
five years old.
Your bank has also implemented Digital Certificates issuance through a
registration office set up for E-mudhra.
OTHER INITIATIVES
During the year under report your Bank appointed Boston Consulting
Group (BCG) to suggest ways and means for the business re-engineering
process of the bank to achieve the total business of Rs.1,25,000 cr by
the time the bank celebrates its centenary year.
Theterms of appointment include restructuring of the organization,
business re-engineering process, developing brand equity,
rationalization of expenditure etc. The Group has submitted its
preliminary report and the bank has initiated steps to implement its
suggestions.
Your bank has made concerted efforts for brand building and the bank
continued to communicate messages on products, services, interest rates
and performance to the customers, shareholders and the general public
through advertisements and outdoor publicity units.
As a part of the brand building exercise, your bank has sponsored The
Business Line Club for the year 2009-10 under which the publication
arranges for lectures being delivered by leading management gurus and
industrialists in various educational institutions in Tamil Nadu and
Andhra Pradesh. Out of the 250 events planned by Business Line, 175
events have been conducted so far.
FINANCIAL INCLUSION
In terms of the RBI directives, your Bank has a Board approved policy
on financial inclusion to deliverbanking services at affordable cost to
vast sections of the disadvantaged and low income groups. As each bank
has been permitted to have its own strategy in line with its own
business model and comparative advantage, your bank has also planned
its model on financial inclusion. The policy covers the financial
inclusion for next three years through branchless banking model. Your
Bank has plans to implement the project in 2010-11 by appointing
Business Correspondents in villages where the population is above 2000.
In all the villages allotted by SLBC, no frill accounts will be opened
and Micro Credit and Micro Insurance products will be encouraged.
The bank has relationships with 19 micro finance institutions and has
extended credit facilities whereby nearly one lakh households have been
the beneficiaries of financial inclusion. Besides this, the bank has
extended direct credit to several SHGs and thereby sizeable households
have been brought under Financial Inclusion.
SPECIAL RESERVE
Sec 36 (1 )(viii) of the Income Tax Act, 1961 provides for deduction in
respect of any Special Reserve created and maintained to the extent of
20% of the profit derived from the business of providing long term
finance for industrial or agricultural development or development of
infrastructure facility or housing in India. In view of the Banks term
lending for housing, power, roads and other segments of infrastructure
in the last fiscal, it was decided to avail the tax benefit under Sec
36(1) (viii) of the Income Tax Act, 1961. Accordingly, the Bank has
created a Special Reserve of Rs. 30 cr during this year.
STATUTORY AUDIT
The statutory audit was carried out by M/s J L Sengupta & Co, Chartered
Accountants, Chennai (H.O.: Kolkata) whose report is being annexed and
forms part of this report. The Statutory Auditors will hold office
until the conclusion of the ensuing Annual General Meeting.
The Central Statutory Auditors have been associated with the bank
continuously for the last four years. In terms of the guidelines issued
by the Reserve Bank of India, the Statutory Auditors cannot continue to
hold the office beyond four years.
Reserve Bank of India, on the recommendation of the Board of the Bank,
approved the appointment of M/s R.K.Kumar & Co., Chartered Accountants,
Chennai as the Statutory Auditors to hold office from the conclusion of
the ensuing Annual General Meeting until the conclusion of the next
Annual General Meeting. The Bank received a certificate from the said
Auditors stating that their appointment, if approved by the members,
would be within the limits prescribed under Sec 224 (1B) of the
Companies Act, 1956.
STATUTORY DISCLOSURES
The information required under the provisions of Sec 217 (2A) of the
Companies Act, 1956 read with the Companies (Particulars of Employees)
Rules, 1975 as amended, is annexed elsewhere in this report.
The provisions of Sec 217 (1) (e) of the Companies Act, 1956 relating
to conservation of energy and technology absorption do not apply to
your bank. However the bank has used information technology extensively
in its operations.
EMPLOYEES STOCK OPTION SCHEME
The shareholders of the Bank approved 10,00,000 Employees Stock Options
at the Annual General Meeting held on 24.07.2008.
During the year under review first tranche stock options were vested on
01.01.2010. 4,70,250 stock options were exercised by the eligible
employees of the bank. The exercised options were duly allotted on
24.02.2010. The shares allotted underfirsttranche have a lock in period
of three years from the date of allotment.
The Bank granted second tranche of 5,29,750 stock options on 24.02.2010
to the eligible employees as determined by the Compensation Committee
of the Board and these stock options would vest after one year. The
vested options are exercisable over a period of one month from the date
of vesting.
Statutory disclosures regarding the grant of second tranche of ESOS
under Clause 12 of the SEBI Guidelines are provided in Annexure
attached to this report.
BOARD OF DIRECTORS
The Board has ten members as on 31.03.2010 including Part- Time
(Non-Executive) Chairman and a Managing Director and Chief Executive
Officer.
Shri M K Venkatesan, has not sought re-election at the last Annual
General Meeting due to personal reasons and hence demitted office of
the Director on 26.07.2009. The Board places on record its appreciation
for the valuable services and guidance rendered by him to the bank
during his tenure.
CA K Ramadurai, who was a member of the Board vacated office on
06.08.2009 in terms of Sec 10-A (2-A) (i) of the Banking Regulation
Act, 1949 viz: completion of tenure of office. He was also the Chairman
of the Audit Committee of the Board. The Board places on record its
sincere appreciation for the valuable contributions rendered by him for
the overall growth of the bank during his tenure.
CA S Ganapathi Subramanian, was co-opted as an Additional Director on
26.08.2009. He presently heads the Audit Committee of the Board.
Shri K Parameshwara Rao was co-opted as an Additional Director on
25.09.2009.
Shri V Santhanaraman was co-opted as an Additional Director on
13.03.2010.
The Additional Directors are seeking election as Directors of the Bank
in the ensuing Annual General Meeting.
Director Shri M G S Ramesh Babu retires by rotation and being eligible,
offers himself for re-appointment.
In terms of Clause 49 of the Listing Agreement, brief resume of the
above directors who are seeking election at the ensuring Annual General
Meeting is furnished in the Corporate Governance Report attached to
this report.
Director Dr T R Ramanathan, is not seeking re-election in view of the
attainment of the maximum age limit prescribed under the regulatory
guidelines. The Board also places on record its sincere appreciation
for the valuable services rendered by him during his tenure as a
Director of the Bank.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Sec 217 (2AA) of the Companies Act, 1956, the Directors of
the Bank state that:
a. in the preparation of the annual accounts, the applicable
accounting standards as modified and advised by RBI have been followed
together with proper explanations for the deviations if any.
b. generally accepted accounting policies and the guidelines issued by
the Reserve Bank of India have been followed consistently.
c. reasonable and prudent judgments and estimates had been made so as
to give a true and fair view of the state of affairs of the bank as at
31.03.2010 and the profit of the bank for the year ended on that date.
d. proper and sufficient care was taken for the maintenance of
adequate accounting records as per the applicable provisions governing
banks in India.
e. the annual accounts had been prepared on a going-concern basis.
AWARDS AND RECOGNITION
Your bank has received the following awards and recognition during the
fiscal under report:
1. Adjudged as the second best bank in the mid-size banks category
(balance sheet size Rs. 24000 cr and number of branches being more than
10) in a study conducted by the Business To-day magazine and KPMG. The
study was based on the published annual reports for the year 2008-09.
The award was given on 26.11.2009 at Mumbai.
2. Your bank has secured llo.1 position under the parameter
"productivity and efficiency" in the above mentioned survey.
3. The Banker Magazine, London has featured your bank among the TOP
1000 world banks and KVB is one of the 32 Indian banks featured in the
list.
4. Received the Gold CIO Award in the more than Rs. 1000 cr. category
of the Enterprise Connect Awards09 instituted by CIOL (Cybermedia
India Online Limited).
CORPORATE SOCIAL RESPONSIBILITY
The bank has been discharging its role as a corporate citizen to
various sections of the society on different occasions. Your bank has
undertaken several initiatives in the area of education, health care,
environment etc signifying its continued and long standing commitment
to social and community welfare. Your banks initiatives in this area
are channeled through institutions/ organizations who specialize in
these activities.
Some of the initiatives include: Contributions made to the KVBOA
Matriculation School, Karur, provision of ambulance to the St.
Margaret Education Society, New Delhi, construction of modern bio-gas
crematorium at Udumalpet and construction of open air stadium at Karur.
Liberally contributed to the project Green Hands of the Isha
Foundation.
The bank rose to the occasion when devastation struck Andhra Pradesh in
the form of floods in October 2009, the Bank on its own contributed
Rs.1 cr to the Chief Ministers Relief Fund there.
ACKNOWLEDGEMENTS
Your Directors convey their sincere gratitude to the Reserve Bank of
India, National Stock Exchange, SEBI, other Government and regulatory
authorities, financial institutions and correspondent banks for their
continued guidance and support.
Your Directors also place on record their gratitude to the banks
valuable shareholders, esteemed customers and other well- wishers for
their continued patronage and confidence reposed in the bank.
The Board wishes to place on record its appreciation for the dedicated
service rendered by the employees of the bank at all levels.
For and on behalf of the Board of Directors
Place: Karur, A S Janarthanan
Date: 20.05.2010 Chairman