Mar 31, 2022
Basel III disclosures
In accordance with RBI circular DOR.CAP.REC.3/21.06.201/2022-23 dated April 01, 2022, read together with RBI circular DBR.No.BP.BC.1/21.06.201/2015-16 dated July 01, 2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations. Accordingly, necessary disclosures have been made available on the Bank''s website - https://www. kvb.co.in/about-us/disclosures/pillar-III-disclosures/. These disclosures have not been subjected to audit by the Statutory Central Auditors.
The Board of Directors have recommended a dividend of 80% i.e. ''1.60 per equity share of '' 2.00 each for the year 202122, subject to the approval of the shareholders at the ensuing Annual General Meeting.
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 for the year ended March 31, 2022 (and correspondingly not reported under Other Liabilities and Provisions as at March 31, 2022). However, capital adequacy ratio has been computed by reducing the proposed dividend.
2b. Liquidity coverage ratio (LCR)
i. Qualitative disclosure
Pursuant to RBI guidelines on implementation of Basel III framework applicable to Banks in India with effect from January 01, 2015, measurement of LCR by Bank is undertaken for stress testing. LCR promotes short term resilience of Banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days. As per extant regulatory guidelines, the minimum LCR to be maintained by Banks is specified at 100%.
i.a Objective
LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the Bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.
Bank has consistently maintained LCR above 100% during FY 2021-22 i.e. at levels higher than the required regulatory minimum level, on an ongoing basis.
i.b Composition of HQLA
⢠Cash in hand
⢠Excess CRR balance as on that particular day
⢠Excess Government Securities in excess of minimum SLR requirement
⢠Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (presently to the extent of 2% of NDTL as allowed for MSF)
⢠Facility to avail liquidity for liquidity coverage ratio at 15% of NDTL
⢠AAA rated bonds and AA- & above and marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%
⢠Common Equity Shares not issued by the Bank or any of its affiliated entities and included in NSE CNX Nifty and/ or S&P BSE Sensex indices.
2c. Net Stable Funding Ratio (NSFR)
Qualitative disclosure
NSFR = Amount of available stable funding (ASF) 4- Amount of required stable funding (RSF).
NSFR indicates that the Bank maintains a stable funding profile in relation to the composition of its assets and off-balance sheet activities and promotes funding stability i.e. resilience over a longer-term time horizon by requiring Banks to fund their activities with more stable sources of funding, on an on-going basis.
ASF is defined as the portion of capital and liabilities, expected to be reliable over the time horizon considered by NSFR, which extends to one year. RSF is a function of the liquidity characteristics and residual maturity of various assets (including off-balance sheet exposures) held. RBI has mandated that minimum NSFR of 100% is to be maintained with effect from October 01, 2021.
NSFR standard is structured to:
a) Ensure that investment banking inventories, off-balance sheet exposures, securitisation pipelines and other assets and activities are funded with at-least a minimum amount of stable liabilities;
b) Avoid over-reliance on wholesale funding during times of buoyant market liquidity;
c) Counterbalance the cliff-effects of the liquidity coverage ratio approach;
d) Offset incentives for institutions to fund their stock of liquid assets with short-term funds that mature just outside the supervisory defined horizon for LCR; and
e) Require stable funding for all illiquid assets and securities held, including those held in HFT/AFS i.e. reckon illiquidity and not the assumed execution turnover period.
The following assumptions are used by RBI in the calibration of NSFR:
⢠Longer-term liabilities are assumed to be more stable than short-term liabilities;
⢠Short-term (maturing in less than one year) deposits provided by retail customers and funding provided by small business customers are behaviourally more stable than wholesale funding of the same maturity from other counterparties;
⢠For the sake of continuity and resilience of credit creation, stable funding for some proportion of lending to the real economy is required;
⢠Banks may seek to roll over a significant proportion of maturing loans to preserve customer relationships;
⢠Short-dated assets (maturing in less than one year) require a smaller proportion of stable funding because these could be allowed to mature without rolling-over;
⢠Unencumbered, high-quality assets that can be securitised or traded or used as collateral to secure additional funding, do not need to be wholly financed with stable funding; and
⢠At least a small portion of the potential calls on liquidity arising from off-balance sheet commitments and contingent funding obligations need to be met by stable funding.
NSFR is measured on a quarterly basis and advanced techniques such as stress testing, sensitivity analysis etc. are conducted
periodically to assess the impact of various contingencies.
Quantitative disclosure - The following table sets out the details of NSFR of the Bank
3.3 Sale and Transfers to/from Held to Maturity (HTM) Category
During the year, sale of securities from HTM category does not exceed 5% of the book value of investments held in HTM category at the beginning of the year. The market and book value of investments held in HTM category as on March 31, 2022 is '' 14,726.40 crore and '' 14,796.08 crore respectively ('' 13,290.74 crore and '' 13,259.82 crore respectively during the previous year), and shows a mark to market depreciation of '' 69.68 crore (mark to market appreciation of '' 30.92 crore during the previous year).
In accordance with RBI guidelines, during the first quarter of FY 2021-22, securities amounting to '' 919.61 crore ('' 5,016.26 crore during the previous year) have been shifted from HTM to AFS category and '' 755.72 crore (Nil during the previous year) from AFS to HTM category. Depreciation required to be provided on account of shifting of securities during the current year was '' 5.21 crore (Nil during the previous year).
3.6 Transfer to Capital Reserve
Net profit on sale of securities includes profit of '' 27.65 crore on sale of securities from HTM category ('' 151.81 crore during the previous year). As per RBI guidelines, an amount of '' 15.52 crore, after netting of taxes and transfer to Statutory Reserve, is transferred to Capital Reserve for the year ended 31.03.2022 ('' 85.20 crore during the previous year).
3.7 SLR investments Under HTM Category
The percentage of SLR investment under HTM category as on March 31, 2022 was 21.37% of Demand and Time Liability of the Bank (previous year 20.47%) which is within permissible limit as per RBI guidelines The market and book value of investments held in HTM category as on March 31, 2022 is '' 14,726.40 crore and '' 14,796.08 crore respectively ('' 13,290.74 crore and '' 13,259.82 crore respectively during the previous year), and shows a mark to market depreciation of '' 69.68 crore (mark to market appreciation of '' 30.92 crore during the previous year).
3.8 Interest income on investment is net of amortisation expenses of '' 135.74 crore ('' 122.73 crore during previous year)
4.5 Divergence in asset classification and provisioning
Reserve Bank of India had not conducted assessment and Inspection for Supervisory Evaluation (ISE) under section 35 of Banking Regulation Act 1949 on the audited financials for the year ended March 31, 2021 in FY 2021-22. Further, the Bank has not received any communication from RBI regarding divergence on audited financials for the year ended March 31, 2021 in FY 2021-22.
4.8 Details of resolution plan implemented under the Resolution Framework for COVID-19 related stress
(RBI circular 1. DOR.No.BP.BC/3/21.04.048/2020-21 dated August 06, 2020 (Resolution Framework 1.0) and 2. DOR. STR.REC.11/21.04.048/2021-22 dated May 05,2021 (Resolution Framework 2.0) âCO VID-19 Related Stress of Individuals and Small businesses â)
5.6 Intra Group Exposures - The Bank has no intra group exposures on 31.03.2022 and 31.03.2021
5.7 Unhedged Foreign Currency Exposure (UFCE)
Bank has a laid down Credit Policy, specifying that in respect of foreign currency loan exposure above USD Two million, hedging is to be insisted upon; its waiver shall be considered on merits, on a case to case basis, and after ensuring obtention of a minimum cash margin of 5% on the exposure towards exchange rate fluctuation risk. In case of foreign currency loan extended to finance exports, considering the availability of natural hedge, hedging of risks may not be insisted upon. For foreign currency exposure of Corporate Borrowers, hedging is to be insisted upon in respect of exposures exceeding the thresholds specified. UFCE shall exclude items which are effective hedge of each other. Natural hedges and financial hedges already made shall be excluded for arriving at the UFCE.
Bank shall make incremental provisioning and capital provisioning as under, as prescribed by RBI, and shall adopt the provisioning and capital provisioning requirements of RBI in respect of those entities on which total exposure of the Banking system is above '' 25 crore. Bank shall follow the RBI guidelines in respect of smaller entities (i.e. total exposure of the Banking system is at '' 25 crore or less) and shall make an incremental provisioning of 10 bps over and above the extant standard asset provisioning for the unhedged exposure. In case of consortium/MBA lending, Bank shall make provisioning on the pro rata exposure of our Bank, provided the borrower is having foreign exchange business relationship with the Bank. Bank holds a provision of '' 5.51 crore as on 31.03.2022 (Previous year '' 5.41 crore) towards UFCE of its clients.
7.3 Disclosures on risk exposure in derivatives Qualitative Disclosure
Structure. Organisation. Scope. Nature of risk management in derivatives
Dealing in derivatives is centralised in the integrated Treasury of the Bank. Treasury is segregated into three functional areas i.e., front office, mid office and back office.
Derivative transactions are entered into by the front office; mid office conducts an independent check of the transactions entered into by the front office and ensures compliance with various internal and regulatory guidelines. Back Office undertakes activities such as confirmation, settlement, accounting, risk monitoring and reporting.
Rupee derivative deals are executed for hedging or for trading. The risk in the derivatives portfolio is monitored by assessing the MTM position of the portfolio on a daily basis and the impact on account of probable market movements. The overall portfolio is operated within the risk limit fixed by the Bank. Forex derivative deals are offered to clients on back-to-back basis. The outstanding deals are marked to market on monthly basis. The MTM values are informed to the clients every month and margin topped up where required. Banks have been permitted to adopt the Current Exposure Method for measurement of Credit Exposure of Derivative products as per extant RBI guidelines.
The Board reviews the risk profile of the outstanding portfolio at regular intervals.
Accounting
Accounting policies for derivatives adopted by the Bank are as per RBI guidelines. Hedge swaps are accounted for like a hedge of the asset or liability. The income/expense on hedge swaps are accounted on accrual basis except where swap transactions whose underlying is subjected to MTM. Such hedge swaps are marked to market on a monthly basis and the gain/losses are recorded as an adjustment to the designated asset/liability. The non-hedge swaps are marked to market every month and the MTM losses in the basket are accounted in the books while MTM profits are ignored.
Collateral security
As per market practice, no collateral security is insisted for the contracts with counter parties like Banks/PDs etc. For deals with corporate clients, appropriate collateral security/margin etc. are stipulated whenever considered necessary.
Credit risk mitigation
Most of the deals are contracted with Banks/major PDs/highly rated clients and no default risk is anticipated on the deals with them.
The market making and the proprietary trading activities in derivatives are governed by the derivatives policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. As far as forex derivatives are concerned, they are undertaken on back-to-back basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The Bank measures and Monitors risk using Price Value of a Basis Point (PVBP) approach. Risk reporting on derivatives forms an integral part of the management information system and the marked to market position and the PVBP of the derivatives portfolio is reported on a daily basis to the top management.
Risk monitoring on forex derivatives is done on a monthly basis. It is reported to the Top Management and related clients on monthly basis.
12. Disclosure of penalties imposed by RBI
During the year RBI has levied the following penalties -
1. '' 73,250/- emanating out of deficiencies found while processing the notes currency notes remitted by the Bank (Previous year '' 27,500/-).
2. '' One crore for non-compliance with certain provisions of directions on âLending to Non-Banking Financial Companies (NBFCs)'', âBank Finance to Non-Banking Financial Companies (NBFCs)'', âLoans and Advances - Statutory and Other Restrictions'', âCreation of a Central Repository of Large Common Exposures - Across Banks'' read with the contents of Circular on âReporting to Central Repository of Information on Large Credits (CRILC)'' (Previous year Nil).
13. Disclosures on Remuneration
Qualitative Disclosure
a Information relating to the composition and mandate of the nomination and remuneration committee (NRC)
The Nomination & Remuneration Committee (NRC) of the Board consists of three Directors, out of which two are Independent Directors. Further as per RBI guidelines a Member of Risk Management Committee of the Board is also Member in NRC. The Composition complies with RBI guidelines,
provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (âSEBI LODR'').
The mandate of NRC includes:
a. To formulate criteria for determining qualifications, positive attributes and independence of a director, in terms of fit and proper criteria issued by the RBI from time to time.
b. To devise a policy on Board Diversity;
c. To formulate/review criteria for evaluation of performance of Chairman, Independent Directors, Board of Directors, Committees of Board.
d. To recommend persons who are qualified to become Directors and who may be appointed in senior Management in accordance with the criteria laid down and recommend to the Board of Directors their appointment and removal.
e. To frame/review Compensation Policy towards ensuring effective alignment between
remuneration and risk. Directors and Senior Management Personnel shall be part of the Compensation Policy.
f. To also review and recommend to the Board, all remuneration, in whatever form, payable to Directors & senior Management.
g. To consider grant of stock options to employees, administer and supervise the Employee Stock Option Plans in conformity with statutory provisions and guidelines;
h. To provide inputs to Board for making disclosures regarding policies, appointments, remuneration etc. of Directors and Senior Management personnel in the Annual Reports/ Directors Reports/Financial Statements etc. as may be required by the regulations from time to time.
i. To perform any other functions or duties as stipulated by the Companies Act, RBI, SEBI, Stock Exchanges and any other regulatory authority or under any applicable laws as may be prescribed from time to time.
b. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy
The Bank has a Board approved Compensation Policy in terms of the RBI guidelines, provisions of Companies Act,2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The compensation payable to MD & CEO and MRTs is divided into fixed and variable components. The proportion of variable pay shall increase significantly along with the level of seniority and/or responsibility. NRC shall work in close coordination with the Risk Management and Asset Liability Management Committee of the Board in order to achieve effective alignment between remuneration and risks. NRC will review the policy from time to time.
The Compensation Policy of the Bank covers the compensation payable to all the employees including the MD&CEO/WTD, Key Managerial Personnel, Material Risk Takers (MRT) and Control Function Staff as per the guidelines of RBI as also fee payable to Non- Executive Directors/Independent Directors. No remuneration is paid to Non-Executive Directors/ Independent Directors except Part- time Chairman other than the Sitting Fees for attending Board/ Committee meetings. Part- time (Non-Executive) Chairman is entitled for a fixed remuneration-honorarium, as approved by Reserve Bank of India and Shareholders of the Bank.
Remuneration to employees (other than MD & CEO and MRTs) is defined by the IBA pay scale/CTC pay structure, both of which are approved by the Board. The IBA pay scale is an industry standard across all PSBs and old generation private banks, while the CTC pay structure specific to KVB has been formulated on the basis of comparative industry practices. The objective is to suitably compensate every employee as per his position in the organisation so as to adequately recognise his contributions.
Objective of the Compensation Policy is to align the compensation with prudent risk taking;
⢠Compensation must be adjusted for all types of risks
⢠Compensation outcomes must be symmetric with risk outcomes
⢠Compensation pay-out schedules must be sensitive to the time horizon of risks
⢠The proportion of cash, equity and other forms of compensation must be consistent with risk alignment.
c. Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks
With respect to MD&CEO/MRT the clauses of Compensation Policy adopted by the Bank address the issues pertaining to current and future risks. A wide variety of measures of credit, market and liquidity risks are used by the Bank in implementation of risk adjustment. This risk adjustment has both quantitative and qualitative elements. The Policy effectively aligns the compensation with prudent risk taking and shall be symmetrical with risk outcomes as well as sensitive to the time horizon of risk.
Risks measures relating to the compensation payable are reviewed on timely basis and are updated to suit the skill gaps and current day needs.
The remuneration (other than MD & CEO and MRTs) as per IBA/CTC package is position/designation specific and not necessarily risk specific. However, there are sufficient systems and procedures in place in the Bank (including Malus/Claw back clauses in the employment contracts, continuous
monitoring/auditing etc) to ensure risk mitigation and prevention.
Board of Directors of the Bank through its NRC shall exercise oversight & effective governance over the framing and implementing the Compensation Policy.
d. Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration
Bank follows a performance-based remuneration, which motivates and rewards high performers who strengthen long-term customer relations, and generate income and shareholder value. The Bank while designing the compensation structure ensures that there is a proper balance between fixed pay and variable pay. Bank ensures that variable pay shall relate to the performance. The variable pay could be in cash, stock linked instruments or a mix of both.
While fixing the variable pay, NRC shall assess the performance parameters under financial and non-financial areas of operations. The financial performance of the Bank is factored while determining the amount of variable remuneration to be paid. Variable Pay shall be fixed on the basis of performance matrix broadly categorised as a) Bank as a whole, b) Business Unit, c) Individual, based on the quantitative and qualitative criteria. The quantitative criteria shall relate to the performance of the Bank and certain qualitative factors taking into account the, Governance Improvement Measures, Cost to Income Ratio, Capital Adequacy Ratio, extraordinary items, appropriate risk management and efficient consumption of capital, etc as set out by NRC.
In the event of negative growth of the Bank and/or the relevant line of business in any year, the deferred compensation shall be subjected to malus and claw back arrangements in tune with the RBI guidelines.
e. A discussion of the Bankâs policy on deferral and vesting of variable remuneration and a discussion of the Bankâs policy and criteria for adjusting deferred remuneration before vesting and after vesting
As per the Compensation Policy, variable pay is eligible on the achievement of certain business/ compliance targets fixed by the Management. The structuring of remuneration in case of MD&CEO/ WTD shall be subject to the approval of RBI.
Deferral arrangements for variable pay in case of Managing Director & Chief Executive Officer/WTD and other employees who are MRTs and Control Function Staff, in adherence to FSB implementation standards shall be; a minimum of 60% of the total variable pay shall be under deferral arrangements.
if cash component of variable pay equals or exceeds ''25.00 Lakhs, then at least 50% of the cash bonus shall be deferred.
The deferral period shall be a minimum of three years applicable to both cash and non-cash components of the variable pay. Deferred remuneration shall either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting shall be not before one year from the commencement of the deferral period. The vesting shall be no faster than on a pro-rata basis. Additionally, vesting, shall not take place more frequently than on a yearly basis, to ensure a proper assessment of risks before the application of expost adjustments.
Subject to Bank''s ESOP schemes, NRC at its discretion may specify a retention period after the vesting of stock linked instruments which have been awarded as variable pay during which they cannot be sold or accessed.
In cases where the compensation by way of share linked, instruments is not permitted by law/regulations, the entire variable pay can be in cash, subject to deferral/ vesting/malus-claw back norms.
f. Description of the different forms of variable remuneration (i.e. cash and types of share-linked instruments) that the Bank utilises and the rationale for using these different forms
Variable pay is purely based on performance and is measured through score cards. Bank ensures that the compensation structure is comprehensive and considers both, qualitative and quantitative performance measures. The variable pay would be in the form of cash & non-cash components (in the form of Share linked instruments).
Bank has Employees Stock Option Scheme i.e. ESOS. NRC may grant stock options under the Employees Stock Options Plan/Scheme from time to time in terms of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (Erstwhile SEBI(Share Based Employee Benefits) Regulations, 2014.
In case of other employees Bank also subscribes to different forms of variable pay such as performance linked incentives, Ex-gratia for other employees, non-cash incentives, Bonus, any other incentives by whatever name called having the similar features. The Bank shall not grant any severance pay (other than the terminal benefits and gratuity as per the provisions). Bank shall not provide any facility or funds or permit to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
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. The Bank uses stock options as a compensation tool to attract and retain critical talent and encourage employees to align individual performances with that of the 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:
⢠Karur Vysya Bank Employees Stock Option Scheme 2011 (âKVB-ESOS-2011â)
⢠Karur Vysya Bank Employees Stock Option Scheme 2018 (âKVB-ESOS-2018â)
The grants made under the said schemes are in accordance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (Erstwhile SEBI (Share Based Employee Benefits) Regulations, 2014).
1. Vesting eligibility under these schemes are purely based on achievement of performance matrix of FY 2020-21. The vesting period shall be
under deferral arrangement upto three years from the date of grant based on the employees left over service period in the Bank, however minimum vesting period of one year is mandatory.
2. Consequent to the performance assessment for FY 2020-21 and on the basis of eligibility conditions during the year, 1,04,25,254 options (ESOS 2011 scheme - 85,88,605 options and ESOS 2018 scheme - 18,36,649 options) were lapsed, and the said options were added back to the Employee Stock Option pools.
3. The Bank has granted 1,35,710 options of face value '' 2/- each to Material Risk Takers (MRTs) - MD & CEO and President & COO under KVB ESOS 2018 scheme during the year In terms of RBI Guidelines on Compensation Policy, the said grant is part of their variable pay non-cash component for the performance assessment period of FY 2020-21. The vesting period shall be under deferral arrangement of three years from the date of grant.
14.6 Status with regard to Ind AS Implementation
Ministry of Corporate Affairs (MCA), Government of India, notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. Vide press release dated January 18, 2016, MCA notified the roadmap for implementation of Indian Accounting Standards (IndAS) (converging with the Internal Financial Reporting Standards (IFRS)) for Scheduled Commercial Banks (SCBs) excluding Regional Rural Banks, Non-Banking Financial Companies and Insurance Companies. Accordingly, RBI, vide circular DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, advised SCBs to follow IndAS from April 01, 2018, subject to guidelines/directions to be issued in this regard.
RBI initially deferred IndAS implementation by SCBs to April 01, 2019; subsequently, vide circular DBR.BP.BC. No.29/21.07.001/2018-19 dated March 22, 2019, implementation of IndAS by SCBs has been deferred till further notice. RBI has not issued any further notification on implementation of IndAS by SCBs during the financial year 2021-22.
In compliance to the RBI circular dated February 11, 2016, the status of IndAS implementation is given below:
Proforma IndAS statements have to be submitted to RBI on half-yearly basis with effect from FY 2021-22 (as against quarterly basis up to the previous year); accordingly, proforma IndAS statements for the half-year ended September 30, 2021 have been prepared and submitted to RBI. Bank has evaluated IndAS solution offered by various vendors. It is proposed to procure a suitable software to enable the Bank to comply with IndAS requirements including, inter alia, to evaluate, determine and measure probability of default, loss given default, expected credit loss, effective interest rate etc., as well as support accounting, reporting and MIS generation for reporting purposes.
14.8Disclosure on amortisation of expenditure on account of enhancement in family pension of employees of Banks
The revision in family pension payable to employees of the Bank covered under 11th Bipartite Settlement and Joint Note dated November 11, 2020 was quantified on August 26, 2021; the Bank opted to amortise the additional liability of '' 80.26 crore based on actuarial valuation during the three quarters of financial year 2021-22 equally, and has been accordingly expensed to Profit & Loss Account i.e. '' 26.76 crore during the quarter ended September 30, 2021, '' 26.75 crore during the quarter ended December 31, 2021 and '' 26.75 crore during the quarter ended March 31, 2022.
14.9 Disclosure requirement as per accounting standards (AS)
In compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards, the following information is disclosed:
a. There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per AS-5.
For the preparation of these financial results, the Bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended March 31, 2022.
b. Revenue Recognition (AS-9)
Bank recognises revenue on accrual basis, as per details given in item C.1 of the Accounting Policy of the Bank (Schedule 17).
c. Effects of changes in foreign Exchange Rates (AS-11)
Bank has followed the guidelines issued by RBI and FEDAI, in order to comply with the applicable requirements under AS-11. Accordingly, foreign exchange transactions are accounted as per details given item C.6 of the Accounting Policy of the Bank (Schedule 17).
The Bank is following AS-15 (Revised 2005) âEmployee Benefits'' as under:
a. In respect of Contributory Plan, viz.,
Provident Fund: The Bank pays fixed contribution at pre-determined rates to a separate trust, which invests in permitted securities. The obligation of the Bank is limited to such fixed contribution.
National pension scheme: As per industry settlement dated April 27, 2010, employees who have joined on or after April 01, 2010 are covered under National Pension System (NPS) regulated by Provident Fund Regulatory Development Authority (PFRDA). Employer''s contribution to NPS has been recognised as expenditure in the Profit and Loss account.
b. In respect of Defined Benefit Plans, viz.,
Gratuity: The Bank provides for Gratuity, a defined benefit plan (the Gratuity Plan) covering the eligible employees. The Gratuity Plan provides a lump sum payment to vested employees on retirement, death, incapacitation or termination of employment, of an amount based on respective employee''s salary and tenure of employment.
Pension: The Bank provides for Monthly pension, a defined benefit plan (the Pension Plan) covering the eligible employees. The Pension Plan provides a monthly pension after the retirement of the employees till death and to the family after his death of the pensioner based on the respective employee''s salary and tenure of the employment.
1. Business Segments
For the purpose of segment reporting, the reportable segments are identified into Treasury, Corporate/Wholesale Banking, Retail Banking and other Banking operations, in compliance with RBI guidelines. Brief description of activities of each segment and revenue attributable thereto is as under:
1. Treasury portfolio comprises of investments in Central and State Government securities, debt instruments of Banks, FIs, Insurance companies, PSUs and Corporates, certificate of deposits, equity shares, mutual funds, security receipts etc. as well as forward contracts, derivatives and foreign exchange operations on proprietary account and for customers, including trading in these instruments as well as borrowing and lending operations.
Treasury income is primarily earned through interest on investments, forex income as well as income from securities trading; expenditure includes interest on funds borrowed and other allocated overheads.
2. Corporate/Wholesale banking is based on RBI definition and comprises of credit facilities and other banking services provided to corporate and other clients where value of individual exposure exceeds '' 5 crore.
Revenue comprises of interest and fees/charges earned from such clients and expenses are those incurred on interest towards funds utilised and other allocated overheads.
3. Retail banking comprises of lending and other banking services to individuals/small business customers, other than corporate/wholesale banking customers.
Revenue comprises of interest and fees/charges earned from such clients and expenses are those incurred on interest towards funds utilised and other allocated overheads.
4. Other banking operations includes items not included above i.e. para-banking activities like bancassurance, third party product distribution, demat services and other banking transactions and includes items like deposits in RIDF, MSME Funds etc.
Income earned from such services and costs related thereto are reported thereunder.
2. Geographical Segment
The Bank operates only in India and hence the reporting consists only of domestic segment.
Segment information is prepared on the basis of management estimates/assumptions and is based on internal reporting systems. Methodology adopted in compiling the above information has been relied upon by the auditors.
i. Accounting for Investments in associates in Consolidated Financial Statements (AS-23)
The Bank has no Associates. Hence reporting under AS-23 is not applicable.
j. Discontinuing operations (AS-24)
The Bank has not discontinued any of its operations. Hence reporting under AS-24 is not applicable.
k. Interim Financial Reporting (AS-25)
Quarterly financial reviews have been carried out as per extant RBI and SEBI guidelines, and reporting/filing of the prescribed information has been complied with by the Bank.
l. Impairment of Assets (AS - 28)
In the opinion of the Management, there is no impairment of its Fixed Asset to any material extent as at March 31, 2022 requiring recognition in terms of Accounting Standard 28.
14.11 The Bank has deposited an amount of '' 391.05 crore towards disputed tax liability. In the opinion of the Bank, no provision is considered necessary based on favourable decisions by various courts.14.12 Disclosure on Investor Education and Protection Fund (IEPF)
As per the Companies Act 2013, dividends unclaimed for more than seven years from the date of their declaration and all shares in respect of which dividends remain unclaimed for the last seven consecutive years are to be transferred to Investor Education and Protection Fund.
In compliance with the above provisions, the unclaimed dividend amount of '' 41,86,013/- for the FY 2013-14 and 1,01,333 shares of face value '' 2/- each, in respect of which the dividends remain unclaimed from FY 2013-14 for the last seven consecutive years, were transferred to the IEPF during the year ended March 31, 2022 within the timelines.
14.13 Corporate social responsibility (CSR)
The Bank has incurred an expenditure of '' 3.63 crore towards CSR and has also provided '' 3.96 crore during the year for various future projects and its appropriateness for spending/coverage under CSR (Previous year '' 7.40 crore).
14.14 Description of Contingent Liabilities
a. Claims against the Bank not acknowledged as debts
These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank.
b. Liability on account of forward exchange and derivative contracts
The Bank presently enters into foreign exchange contracts and interest rate swaps with interbank counterparties and customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows in the same currency based on fixed rates or benchmark reference. The notional amounts of such foreign exchange contracts and derivatives provide a basis for comparison with instruments recognised on the Balance Sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Bank''s exposure to credit or price risks. The fluctuation of market rates and prices cause fluctuations in the value of these contracts and the contracted exposure become favourable (assets) or unfavourable (liabilities).
c. Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations.
d. Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.
e. Other items for which the Bank is contingently liable
Includes Capital commitments and amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF). (Refer schedule 12 for amounts relating to contingent liability.)
14.15 Inter-branch transactions
Inter Branch/Office accounts reconciliation has been completed upto March 31, 2022 and all the inter branch entries have been reconciled upto March 31, 2022.
The books of accounts have been balanced and tallied in all branches of the Bank as on March 31, 2022.
15. Disclosure under rule 11(e) of the Companies (Audit & Auditors) rules, 2014
The Bank, as part of its normal business, grants loans and advances to Non-Banking Finance Company/ies, real estate promoters/developers, makes investment, provides guarantees (including against margin/guarantees received from third parties/banks) and accepts deposits and borrowings from its customers, other entities and persons. Also, the Bank, as part of its normal business, avails refinance from financial institutions and other entities wherein the proceeds are applied to a category of customers with specific profile parameters. These transactions are part of Bank''s authorised normal business, which is conducted in adherence to extant regulatory requirements.
Other than the transactions described above -
1. No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities (âIntermediariesâ) with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend to or invest in other persons or entities identified by or on behalf of the Bank (âUltimate Beneficiariesâ) or provide any guarantee, security or like on behalf of the Ultimate Beneficiaries.
2. The Bank has not received any funds from any person(s) or entity(ies) (âFunding Partyâ) with the understanding, whether recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend to or invest in other persons or entities identified by or on behalf of the Funding Party (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries
16. Figures of the previous year have been regrouped/rearranged/reclassified wherever necessary
Mar 31, 2019
Notes to Account
8.3 Qualitative disclosure around LCR
Pursuant to RBI guidelines on implementation of Basel III framework applicable to banks in India with effect from January 01, 2015, LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
Objective
LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.
The bank has consistently maintained LCR above 100% during FY 2018-19 as against the regulatory minimum of 90% (till December 2018) / 100% (from January 2019). The quarterly daily average LCR of the Bank for the quarter ended March 2019 is 253.27%.
Composition of HQLA
Cash in hand
Excess CRR balance as on that particular day Excess Government Securities in excess of minimum SLR requirement
Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF)
Facility to avail liquidity for liquidity coverage ratio at 9% of NDTL
AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50% Common equity shares not issued by the bank/financial institution/NBFC or any of its affiliated entities and included in NSE CNX Nifty and / or S & P BSE Sensex indices.
9. Disclosure requirement as per Accounting Standards (AS)
In compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards, the following information is disclosed:
9.1 There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per AS-5.
For the preparation of these financial results, the bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended March 31, 2019.
9.2 Employee Benefits (AS -15)
The Bank is following AS-15 (Revised 2005) ''Employee Benefits'' as under:
a. In respect of Contributory Plan, viz., Provident Fund, the Bank pays fixed contribution at pre-determined rates to a separate trust, which invests in permitted securities. The obligation of the Bank is limited to such fixed contribution.
b. In respect of Defined Benefit Plans, viz., Gratuity and Pension, provision has been made based on actuarial valuation as per the guidelines.
c. In respect of Leave Encashment, provisioning requirement has been made based on actuarial valuation.
d. As per industry settlement dated April 27, 2010, employees who have joined on or after 01.04.2010 are covered under National Pension System (NPS) regulated by Provident Fund Regulatory Development Authority (PFRDA). Employer''s contribution to NPS has been recognised as expenditure in the profit and loss account.
e. The disclosure requirements as per the AS-15 are given below Principal Actuarial Assumptions
Particulars |
Gratuity |
Pension |
Privilege Leave |
|||
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Discount Rate (%) |
7.78 |
7.71 |
7.79 |
7.71 |
7.78 |
7.71 |
Salary escalation rate (%) |
5.50 |
5.50 |
5.50 |
5.50 |
5.50 |
5.50 |
Attrition rate (%) |
0.50 |
1.62 |
0.50 |
2.57 |
0.50 |
1.01 |
Expected rate of return on Plan Assets (%) |
7.78 |
8.26 |
7.79 |
8.85 |
- |
- |
Expenses recognized in Profit and Loss Account
Rs in crore
Particulars |
Gratuity |
Pension |
Privilege Leave |
|||
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Current Service Cost |
10.26 |
7.44 |
14.46 |
12.78 |
0.84 |
0.74 |
Past Service Cost |
- |
22.24 |
- |
- |
- |
- |
Interest cost on benefit obligation |
12.40 |
9.23 |
35.03 |
30.92 |
8.94 |
8.09 |
Expected return on plan assets |
(13.30) |
(11.52) |
(40.93) |
(35.77) |
- |
- |
Net Actuarial (gain) / loss recognised in the year |
0.60 |
8.21 |
108.97 |
25.75 |
9.42 |
3.40 |
Expenses recognised in the Profit and Loss Account |
9.96 |
35.60 |
117.53 |
33.68 |
19.20 |
12.23 |
Changes in the present value of the defined benefit obligation
(Rs in crore)
Particulars |
Gratuity |
Pension |
Privilege Leave |
|||
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Present value of obligation at the beginning of the year |
160.85 |
123.09 |
454.29 |
423.67 |
115.89 |
107.84 |
Current Service Cost |
10.26 |
7.44 |
14.46 |
12.78 |
0.84 |
0.74 |
Past Service Cost |
- |
22.24 |
- |
- |
- |
- |
Interest Cost |
12.40 |
9.23 |
35.03 |
30.92 |
8.94 |
8.09 |
Net actuarial (gain) / loss on obligation |
(0.43) |
7.34 |
92.50 |
17.46 |
9.42 |
3.40 |
Benefits Paid |
(15.03) |
(8.49) |
(62.70) |
(30.54) |
(6.35) |
(4.18) |
Present value of the defined benefit obligation at the end of the year |
168.05 |
160.85 |
533.58 |
454.29 |
128.74 |
115.89 |
Change in the fair value of plan assets
(Rs in crore)
Particulars |
Gratuity |
Pension |
Privilege Leave |
|||
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair value of plan assets at the beginning of the year |
161.03 |
126.62 |
462.46 |
437.55 |
- |
- |
Expected Return on plan assets |
13.30 |
11.52 |
40.93 |
35.77 |
- |
- |
Contribution by employer |
9.79 |
32.25 |
109.37 |
27.97 |
6.35 |
4.18 |
Benefits Paid |
(15.03) |
(8.49) |
(62.70) |
(30.54) |
(6.35) |
(4.18) |
Actuarial gain / (loss) |
(1.03) |
(0.87) |
(16.47) |
(8.29) |
- |
- |
Fair value of plan assets at the end of the year |
168.06 |
161.03 |
533.59 |
462.46 |
- |
- |
9.3 Segment Reporting: (AS-17)
A. Business Segments
For the purpose of segment reporting, the reportable segments are identified into Treasury, Corporate/Wholesale banking, Retail banking and other banking operations, in compliance with RBI guidelines. Brief description of activities of each segment and revenue attributable thereto is as under:
1. Treasury portfolio comprises of investments in Central and State Government securities, debt instruments of Banks, FIs, Insurance companies, PSUs and corporates, certificate of deposits, equity shares, mutual funds, security receipts etc. as well as forward contracts, derivatives and foreign exchange operations on proprietary account and for customers, including trading in these instruments as well as borrowing and lending operations.
Treasury income is primarily earned through interest on investments, forex income as well as income from securities trading; expenditure includes interest on funds borrowed and other allocated overheads.
2. Corporate/ Wholesale banking is based on RBI definition and comprises of credit facilities and other banking services provided to corporate and other clients where value of individual exposure exceeds Rs 5 crore.
Revenue comprises of interest and fees / charges earned from such clients and expenses are those incurred on interest towards funds utilized and other allocated overheads.
3. Retail banking comprises of lending and other banking services to individuals/small business customers, other than corporate/wholesale banking customers.
Revenue comprises of interest and fees / charges earned from such clients and expenses are those incurred on interest towards utilised and other allocated overheads.
4. Other Banking Operations includes items not included above i.e. para-banking activities like bancassurance, third party product distribution, demat services and other banking transactions and includes items like deposits in RIDF, MSME Funds etc.
Income earned from such services and costs related thereto are reported thereunder.
B. Geographical Segment
The Bank operates only in India and hence the reporting consists only of domestic segment.
Segment information is prepared on the basis of management estimates/ assumptions and is based on internal reporting systems. Methodology adopted in compiling the above information has been relied upon by the auditors.
Part A: Business segments
Rs in crore
SN |
Particulars |
2018-19 (Audited) |
2017-18 (Audited) |
a |
Segment Revenue |
||
1. Treasury Operations |
1,307.25 |
1,345.22 |
|
2. Corporate/Wholesale Banking Operations |
1,653.86 |
1,709.86 |
|
3. Retail Banking Operations |
3,792.50 |
3,526.60 |
|
4. Other Banking Operations |
24.98 |
17.90 |
|
Total |
6,778.59 |
6,599.58 |
|
b |
Segment Results |
||
1. Treasury Operations |
345.90 |
382.84 |
|
2. Corporate/Wholesale Banking Operations |
484.84 |
555.14 |
|
3. Retail Banking Operations |
1,098.55 |
1,045.55 |
|
4. Other Banking Operations |
22.19 |
16.18 |
|
Total |
1,951.48 |
1,999.71 |
|
c |
Unallocated Income/Expenses |
240.69 |
222.39 |
d |
Operating Profit |
1,710.79 |
1,777.32 |
e |
Income Taxes |
111.37 |
157.98 |
f |
Other Provisions |
1,388.55 |
1,273.67 |
g |
Exceptional Item |
Nil |
Nil |
h |
Net Profit |
210.87 |
345.67 |
i |
Other Information |
Nil |
Nil |
j |
Segment Assets |
||
1. Treasury Operations |
15,604.18 |
16,555.43 |
|
2. Corporate/Wholesale Banking Operations |
13,598.70 |
14,029.84 |
|
3. Retail Banking Operations |
34,982.11 |
30,770.30 |
|
4. Other Banking Operations |
Nil |
Nil |
|
5. Unallocated Assets |
5,155.12 |
5,585.86 |
|
Total Segment Assets |
69,340.11 |
66,941.43 |
|
k |
Segment Liabilities |
||
1. Treasury Operations |
14,462.91 |
16,479.82 |
|
2. Corporate/Wholesale Banking Operations |
12,260.53 |
12,307.40 |
|
3. Retail Banking Operations |
31,542.55 |
26,992.90 |
|
4. Other Banking Operations |
Nil |
Nil |
|
5. Unallocated Liabilities |
4,651.62 |
4,897.12 |
|
Total (a) |
62,917.31 |
60,677.24 |
|
1 |
Capital Employed (Segment Assets-Segment Liabilities) |
||
1. Treasury Operations |
1,141.27 |
1547.57 |
|
2. Corporate/Wholesale Banking Operations |
1,338.17 |
1,311.82 |
|
3. Retail Banking Operations |
3,439.86 |
2,876.60 |
|
4. Other Banking Operations |
Nil |
Nil |
|
5. Unallocated Liabilities |
503.50 |
528.20 |
|
Total (b) |
6,422.80 |
6,264.19 |
|
Total Segment Liabilities (a b) |
69,340.11 |
66,941.43 |
Part B: Geographic segments
Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branch.
9.4 Related Party Transactions (AS-18)
Disclosure about transactions with Key Management Personnel
Key Management Personnel |
Designation |
Item |
Amount (Rs ) |
Shri. B. Swaminathan (retired on Jan,19, 2019) |
Chairman |
Honorarium |
7,20,968.00 |
Shri. N.S. Srinath (with effect from Mar.26, 2019) |
Chairman |
Honorarium |
Nil |
Shri. P.R. Seshadri |
MD & CEO |
Remuneration |
1,28,98,416.00 |
(Rs in crore)
Items/ Related Party |
Parent (as per ownership or control) |
Subsidiaries |
Associates/ Joint ventures |
Key Management Personnel |
Relatives of Key Management Personnel |
Total |
||||||
March 31st |
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
2019 |
2018 |
Borrowings |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
Deposit |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
3.05 (maximum during the year 6.12) |
2.51 (maximum during the year 4.32) |
Nil |
Nil |
3.05 |
2.51 |
Placement of deposits |
||||||||||||
Advances |
||||||||||||
Investments |
||||||||||||
Non-funded commitments |
||||||||||||
Leasing/HP arrangements availed |
NIL |
|||||||||||
Leasing/HP arrangements provided |
||||||||||||
Purchase of fixed assets |
||||||||||||
Sale of fixed assets |
||||||||||||
Interest paid |
Nil |
Nil |
Nil |
Nil |
Nil |
Nil |
0.13 |
0.17 Ni |
Nil |
0.13 |
0.17 |
|
Interest received |
||||||||||||
Rendering of services |
||||||||||||
Receiving of services Management contracts |
NIL |
9.5 Earnings per Share (AS-20)
(Rs in crore)
Computation of Basic EPS (before and after Extraordinary items) |
|||
SN |
Particulars |
2018-19 |
2017-18 |
1 |
Net Profit (Rs in crore) |
210.87 |
345.67 |
2 |
Weighted number of shares |
79,93,10,947 |
72,37,78,019 |
3 |
Basic EPS (A/B) (Rs) |
2.64 |
4.78 |
4 |
Nominal Value per share (?) |
2.00 |
2.00 |
Computation of Diluted EPS (before and after Extraordinary items) |
|||
SN |
Particulars |
2018-19 |
2017-18 |
1 |
Net Profit (Rs in crore) |
210.87 |
345.67 |
2 |
Weighted number of shares (including Potential Equity Shares) |
79,93,19,500 |
72,37,78,019 |
3 |
Diluted EPS (A/B) (Rs) |
2.64 |
4.78 |
4 |
Nominal Value per share (?) |
2.00 |
2.00 |
Note -There are no extraordinary items recognised in the profit and loss account during FY 2018-19 and FY 2017-18; accordingly, EPS is disclosed as above.
9.6 Accounting for Taxes on Income (AS-22)
The Bank has recognized Deferred Tax Asset/ Liability (DTA/DTL) and has accounted for the Net Deferred Tax as on March 31, 2019. Major components of Deferred Tax Assets and Deferred Tax Liabilities are as under:
Deferred Tax Liabilities
(Rs in crore)
Particulars |
2018-19 |
2017-18 |
1 . Depreciation on Fixed Asset |
17.70 |
19.04 |
2. Special Reserve u/s 36(1)(viii) of the Income Tax Act,1961 |
111.82 |
102.09 |
TOTAL |
129.52 |
121.13 |
Deferred Tax Assets
(Rs in crore)
Particulars |
2018-19 |
2017-18 |
1 . Provision for leave encashment |
44.99 |
44.26 |
2. Provision for Bad and doubtful debts |
22.41 |
36.24 |
3. Others |
19.63 |
23.80 |
TOTAL |
87.03 |
104.30 |
Note : The provision for Income Tax has been worked based on the Income Computation and Disclosures Standards (ICDS).
9.7 Impairment of Assets (AS - 28)
In the opinion of the Management, there is no impairment of its Fixed Asset to any material extent as at March 31,2019 requiring recognition in terms of Accounting Standard 28.
9.8 Description of Contingent Liabilities.
a) Claims against the Bank not acknowledged as debts
These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank.
b) Liability on account of forward exchange and derivative contracts
The Bank presently enters into foreign exchange contracts and interest rate swaps with interbank counterparties and customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows in the same currency based on fixed rates or benchmark reference. The notional amounts of such foreign exchange contracts and derivatives provide a basis for comparison with instruments recognized on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Bank''s exposure to credit or price risks. The fluctuation of market rates and prices cause fluctuations in the value of these contracts and the contracted exposure become favorable (assets) or unfavorable (liabilities).
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.
e) Other items for which the bank is contingently liable
Includes Capital commitments and amount transferred to RBI under the Depositor Education and Awareness Fund (DEAF). (Refer schedule 12 for amounts relating to contingent liability.)
10. ADDITIONAL DISCLOSURES
10.1 Disclosure of Complaints
(a) Customer Complaints (including ATM transaction complaints) as on 31.03.2019
Particulars |
2018-19 |
2017-18 |
No. of complaints pending at the beginning of the year |
39 |
52 |
No. of complaints received during the year* |
59,110 |
84,105 |
No. of complaints redressed # |
59,107 |
84,118 |
No. of complaints pending at the end of the year |
42 |
39 |
# Includes ATM failed transactions complaints received and redressed of 58,414 during FY 2018-19 (Previous Year 83,376 complaints).
(b) Awards passed by Banking Ombudsman
Particulars |
2018-19 |
2017-18 |
1 . No. of unimplemented awards at the beginning of the year |
Nil |
Nil |
2. No. of awards passed by Banking Ombudsman during the year |
||
3. No. of awards implemented during the year |
||
4. No. of unimplemented awards at the end of the year |
Note: The above data has been compiled on the basis of the guidelines of RBI and certain assumptions made by management and have been relied upon by auditors.
10.2 Disclosure of Letter of Comfort (LOCs)
The amount of Letter of Comfort issued during the year 2018-19 was Nil (Previous year Rs 3,875.39 crore) and outstanding as on March 31, 2019 was Nil (Previous year Rs 1,180.45 crore).
10.3 Bancassurance Business
The bank has received an amount of Rs 22.52 crore (Life Insurance Rs 16.48 crore and Non-Life Insurance Rs 6.04 crore) towards fee/remuneration in respect of the bancassurance business undertaken during FY 2018-19. [Previous year Rs 15.60 crore (Life Insurance Rs 10.93 crore and Non-Life Insurance Rs 4.67 crore)]
10.4 Transfers to Depositor Education and Awareness Fund (DEAF):
As per RBI guidelines, the credit balance in accounts which have not been operated upon for a period often years or any deposit or any amount remaining unclaimed for a period exceeding ten years is transferred to DEAF as per details given below.
Particulars |
2018-19 |
2017-18 |
Opening balance of amounts transferred to DEAF |
98.56 |
83.60 |
Add : Amounts transferred to DEAF during the year |
15.84 |
16.22 |
Less : Amounts reimbursed by DEAF towards claims |
2.30 |
1.26 |
Closing balance of amounts transferred to DEAF |
112.10 |
98.56 |
10.5 Disclosure on Priority Sector Lending Certificates sold/purchased during the year
(Rs in crore)
Particulars |
2018-19 |
2017-18 |
PSLC purchased during the year |
||
(I) PSLC -Agriculture |
Nil |
Nil |
(II) PSLC- SF/MF |
300.00 |
|
(III) PSLC- Micro Finance |
Nil |
|
(IV) PSLC- General |
Nil |
|
Total |
300.00 |
|
PSLC sold during the year |
||
(I) PSLC -Agriculture |
Nil |
Nil |
(II) PSLC- SF/MF |
500.00 |
500.00 |
(III) PSLC- Micro Finance |
200.00 |
Nil |
(IV) PSLC- General |
1,300.00 |
300.00 |
Total |
2,000.00 |
800.00 |
10.6 Disclosure on Provisioning relating to frauds
(Rs in crore)
SN |
Particulars |
2018-19 |
2017-18 |
A |
Number of Frauds reported during the year |
51 |
14 |
B |
Amount involved in fraud net of recoveries / interest reversal on NPA |
73.25 |
19.43 |
C |
Provisions made during the year |
73.25 |
19.43 |
D |
Quantum of unamortised provision debited from ''Other Reserves'' at the end of the year |
Nil |
Nil |
(Rs in crore)
10.7 Disclosure of Remuneration Qualitative Disclosure
a) Information relating to the composition and mandate of the Nomination and Remuneration Committee (NRC):
The Nomination & Remuneration Committee (NRC) of the Board consists of four Directors, majority being Independent Directors. The Composition complies with RBI guidelines, provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (''SEBI LODR'').
The mandate of Nomination and Remuneration Committee includes:
a) To formulate criteria for determining qualifications, positive attributes and independence of a director, in terms of fit and proper criteria issued by the RBI.
b) To devise a policy on Board Diversity;
c) To formulate/review criteria for evaluation of performance of Chairman, Independent Directors, Board of Directors, Committees of Board.
d) To recommend persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down, and recommend to the board of directors their appointment and removal.
e) To frame/review Compensation Policy towards ensuring effective alignment between remuneration and risk. Directors and Senior Management Personnel shall be part of the Compensation Policy.
f) To also review and recommend to the board, all remuneration, in whatever form, payable to Directors & senior management.
g) To consider grant of stock options to employees, administer and supervise the Employee Stock Option Plans in conformity with statutory provisions and guidelines;
h) To provide inputs to Board for making disclosures regarding policies, appointments, remuneration etc. of Directors and Senior Management personnel in the Annual Reports/ Directors Reports/Financial Statements etc. as may be required by the regulations from time to time.
i) To perform any other functions or duties as stipulated by the Companies Act, RBI, SEBI, Stock Exchanges and any other regulatory authority or under any applicable laws as may be prescribed from time to time.
b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:
The Bank has Board approved Compensation Policy in terms of the RBI guidelines. NRC shall work in close co-ordination with the Risk Management and Asset Liability Management Committee of the Board in order to achieve effective alignment between remuneration and risks.
The Compensation Policy of the Bank covers the compensation payable to all the employees including the Part-time (Non-Executive) Chairman, MD&CEO/WTD, Key Managerial Personnel and Senior Management as per the guidelines of RBI. NRC will review the policy from time to time.
As the Bank is a party to the Bi-partite settlements at all India level in respect of workmen cadre employees and Officer Employees for the payment of salary and other emoluments, the Bank follows the emoluments / compensation as arrived at in each Bi-partite settlement. Currently bank has given its mandate to Bi-partite settlement at all India level that all employees up to the Scale III cadre would be subjected to such emoluments / compensation structure. Presently Bank is following the emoluments/compensation structure as arrived at the Bi-partite settlements from Scale IV to VII cadres. Taking into account the said Bi-partite salary structure, the policy excludes all risk takers who are under contract of employment. Compensation for employees appointed under CTC basis is determined based on the industry standards, the exposure, skill sets, talent and qualification attained. Bank shall ensure that the salary package payable to them shall be in line with RBI guidelines.
Objective of the Compensation policy is to align the compensation with prudent risk taking; Compensation must be adjusted for all types of risks Compensation outcomes must be symmetric with risk outcomes Compensation pay-out schedules must be sensitive to the time horizon of risks The proportion of cash, equity and other forms of compensation must be consistent with risk alignment.
c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:
Compensation Policy adopted by the Bank address the issues pertaining to current and future risks. Risk measures in the policy are reviewed on timely basis and are updated to suit the skill gaps and current day needs. A wide variety of measures of credit, market and liquidity risks are used by the bank in implementation of risk adjustment. This risk adjustment has both quantitative and qualitative elements. The Policy effectively aligns the compensation with prudent risk taking and shall be symmetrical with risk outcomes as well as sensitive to the time horizon of risk.
Bank being a party to IBA settlement all emoluments / compensation are as arrived in IBA structure. Further Bank also has (Cost to Company) CTC structure for which a comprehensive framework has been adopted. Bank also recognises long term incentives in the form of ESOPS. The remuneration system strives to maintain the ability to attract, retain, reward and motivate the talent in order to enable the Bank to attain its strategic objectives.
Board of Directors of the Bank through its NRC shall exercise oversight & effective governance over the framing and implementing the Compensation policy.
d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:
Bank would ensure that the compensation is adjusted to all types of risk, symmetrical with risk outcomes as well as sensitive to the time horizon of risk. Bank follows a performance-based remuneration, which motivates and rewards high performers who strengthen long-term customer relations, and generate income and shareholder value.
The Bank while designing the compensation structure ensures that there is a proper balance between fixed pay and variable pay. The variable pay could be in cash, stock linked instruments or a mix of both, However Employees Stock Option shall not form part of the total compensation as per the policy adopted in line with the RBI Guidelines. Bank ensures that variable pay shall relate to the performance of the Bank.
While fixing the Variable Pay, performance parameters under financial and non-financial areas of operations are assessed. The financial performance of the bank is factored while determining the amount of variable remuneration to be paid. The Bank''s compensation policy stipulates that Variable pay shall not exceed 40% of the fixed pay in any year.
In the event of negative growth of the bank and or the relevant line of business in any year, the deferred compensation shall be subjected to malus and claw back arrangements in tune with the RBI guidelines.
e) A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting:
As per the Compensation Policy, variable pay is eligible on the achievement of certain business/compliance targets fixed by the management. Compensation policy of the Bank prescribes the maximum variable pay, which shall not exceed 40 per cent of the fixed pay. In terms of the RBI extant guidelines, the variable pay is fixed to 70 per cent of the fixed pay and deferral arrangement for payment of variable pay is necessitated where such proposed variable pay exceeds substantial portion of the fixed pay, i.e. 50% or more. However, as the variable pay limit fixed by the Bank is less than the threshold limit for having the deferral arrangement of variable remuneration. Hence, the criteria for adjusting deferred remuneration do not arise to the Bank.
f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:
The Bank ensures that the compensation structure is comprehensive and considers both, qualitative and quantitative performance measures. Bank uses an optimum mix of cash, non-cash, ESOPS to decide the compensation of all employees. Variable pay is purely based on performance and is measured through score cards.
Bank subscribes to different forms of variable pay such as performance linked incentives, Ex-gratia for other employees, non-cash incentives, Bonus, any other incentives by whatever name called having the similar features.
Bank has Employees Stock Option Scheme or Plan i.e. ESOS or ESOP NRC may grant stock options under the Employees Stock Options Plan/Scheme from time to time in terms of SEBI (Share Based Employee Benefits) Regulations, 2015. Such Stock Options will be excluded from the components of variable pay.
The Bank shall not grant any severance pay (other than the terminal benefits and gratuity as per the provisions).
Bank shall not provide any facility or funds or permit to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
Quantitative Disclosures:
Particulars |
2018-19 |
2017-18 |
a) Number of meetings held by the Remuneration Committee during the financial year and remuneration paid to its members. |
5 Meetings and remuneration of Rs 3.80 lakh |
5 Meetings and remuneration of Rs 4.80 lakh |
b) Number of employees having received a variable remuneration award during the financial year |
Nil |
Nil |
c) Number and total amount of sign-on awards made during the financial year |
||
d) Details of guaranteed bonus, if any, paid as joining / sign on bonus |
||
e) Details of severance pay, in addition to accrued benefits, if any |
||
f) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms |
||
g) Total amount of deferred remuneration paid out in the financial year |
||
h) Breakdown of amount of remuneration awards for the financial year to show fixed and variable, deferred and non-deferred |
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i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and / or implicit adjustments |
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j) Total amount of reductions during the financial year due to ex-post explicit adjustments |
||
k) Total amount of reductions during the financial year due to ex-post implicit adjustments |
10.8 Stock options
Bank has granted 7,25,000 Stock Options to its Senior Management & other employees under KVB ESOS 2011 and ESOS 2018 Schemes. Further Nomination and Remuneration Committee granted 10,00,000 stock options under KVB ESOS 2018 to MD&CEO subject to the approval of RBI and the same was not acceded by the Reserve Bank of India. A sum of Rs 0.29 crore has been provided as Employee Compensation Cost being the proportionate accounting value in respect of stock option.
10.9 Disclosure on Investor Education and Protection Fund
As per the Companies Act 2013, dividend unclaimed (including respective shares) for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. In compliance with the above provisions, the unclaimed dividend amount due to be transferred to the Investor Education and Protection Fund (IEPF) during the year ended March 31, 2019 has been transferred without any delay.
10.10 The Bank has deposited an amount of Rs 387.94 crore towards disputed tax liability. In the opinion of the Bank, no provision is considered necessary based on favourable decisions by various courts.
10.11 Basel III disclosures
In accordance with RBI circular DBOD. No. BPBC.1/21.06.201/2015-16 dated 01.07.2015, read together with RBI circular DBR. No.BPBC.80/21.06.201/2014-15 dated 31.03.2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations. Accordingly, Pillar 3 disclosures under Basel III capital regulations have been made available on the Bank''s website at the following link- http://www.kvb.co.in/footer/pillarlll_disclosures.html. These disclosures have not been subjected to audit by the Statutory Central Auditors.
10.12 Corporate Social Responsibility (CSR)
The bank has incurred an expenditure of Rs1.99 crore and has provided Rs 13.39 crore towards CSR, after carrying out the process of identifying various projects and its appropriateness for spending (Previous year Rs 3.70 crore).
10.13 Inter-branch transactions
Inter Branch/Office accounts reconciliation has been completed upto March 31, 2019 and all the inter branch entries have been reconciled upto March 31, 2019.
10.14 Balancing of books
The books of accounts have been balanced and tallied in all branches of the Bank as on March 31, 2019.
10.15 Disclosure of penalties imposed by RBI
During the year RBI has levied the following penalties -
1. Rs 4,11,300/- emanating out of deficiencies found while processing the notes remitted by our currency chests.
2. Rs Five crore and Rs One crore for non-compliance of IRAC norms, need for discipline at time of opening current accounts and directions issued on time bound implementation and strengthening of SWIFT related controls.
10.16 Status with regard to Ind AS Implementation
As per RBI notification DBR.BPBC.No.76/21.07.001/2015-16 dated February 11, 2016, the progress, status and strategy for Ind AS implementation is given below :
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 also been held with vendors to identify an appropriate solution to handle the Ind AS measurement, accounting and reporting requirements. 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. As a prudential safeguard, Bank has taken various measures in preparation of migration to IndAS standards, including increasing CRAR so as to meet the capital requirements, if any, which may arise on migration. During the year 2018-19, Bank has prepared and submitted proforma IndAS statements on quarterly basis, including the opening proforma IndAS financial statements as on 1st April 2018, in compliance of RBI instructions.
11. Figures of the previous year have been regrouped/rearranged/reclassified wherever necessary
N. S. SRINATH |
P.R.SESHADRI |
Dr. V.G. MOHAN PRASAD |
CHAIRMAN |
MD & CEO |
DIRECTOR |
M.K. VENKATESAN |
A.K. PRABURAJ |
CA K.L. VIJAYALAKSHMI |
DIRECTOR |
DIRECTOR |
DIRECTOR |
M.V. SRINIVASAMOORTHI |
Dr. K.S. RAVICHANDRAN |
R. RAMKUMAR |
DIRECTOR |
DIRECTOR |
DIRECTOR |
SRIRAM RAJAN |
J. NATARAJAN |
|
ADDITIONAL DIRECTOR |
PRESIDENT & COO |
|
T. SIVARAMA PRASAD |
M. SRINIVASA RAO |
As per our report of even date |
GENERAL MANAGER & CFO |
COMPANY SECRETARY |
For Walker Chandiok & Co. LLP, |
Chartered Accountants |
||
Firm Regn. No: 001076N/N500013 |
||
Krishnakumar Ananthasivan |
||
Partner |
||
Membership No.: 206229 |
||
Place: Karur |
||
Date: May 15th 2019 |
Mar 31, 2018
A. BACKGROUND
The Karur Vysya Bank Limited, incorporated in Karur, India is a publicly held banking company governed by the Banking Regulation Act, 1949 and is engaged in providing a wide range of banking and financial services including commercial banking and treasury operations.
B. BASIS OF PREPARATION
The financial statements are prepared following the going concern concept, on historical cost basis and conform to the Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, notified Accounting Standards (AS) issued under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.
Use of Estimates:
The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities including contingent liabilities as of the date of the financial statement and the reported income and expenses during the reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.
1. INTER BRANCH TRANSACTIONS:
Inter Branch / Office accounts reconciliation has been completed upto 31.03.2018 and all the inter branch entries have been reconciled upto 31.03.2018.
2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of the Bank as on 31.03.2018.
3. DISCLOSURES AS PER RESERVE BANK OF INDIA REQUIREMENTS:
3.1.1 Disclosure on rights issue:
During the quarter ended 31st December 2017, Bank has offered 11,87,81,048 Equity shares of Rs. 2/- each at a price of 76/- including the premium of Rs. 74/- per share [comprising of 10,16,21,048 Equity shares on rights basis in the ratio of 1:6 (i.e. one Equity share for every six fully paid-up Equity shares held as on the record date viz. 13th October 2017) aggregating to Rs. 772.32 crore and reservation of up to 1,71,60,000 Equity shares for the eligible employees of the Bank aggregating up to Rs. 130.42 crore]. Bank has allotted 11,73,17,101 shares (including 1,59,14,160 shares to employees under employee reservation portion), after keeping in abeyance entitlements to the extent of 2,18,107 shares, aggregating to Rs. 891.61 crore under the Rights Issue of Equity shares, on 22nd November 2017.
Pursuant to the Rights issue, Earnings Per Share (EPS) in respect of previous year / periods has been restated as per Accounting Standard (AS) 20 on âEarnings Per Shareâ, prescribed under Section 133 of the Companies Act, 2013.
The Rights issue has resulted in an increase of Rs. 23.46 crore in Share Capital and Rs. 864.96 crore (net of share issue expenses amounting to Rs. 3.18 crore) in Share Premium account.
Note on Spreading of MTM Losses:-
As per RBI Circular DBR.No.BP.BC.102/21.04.048/2017-18 dated 02.04.2018 Banks are permitted to spread the provisioning on MTM losses on Investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018. The provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss is incurred. Accordingly, the Bank has spread the provisioning on MTM losses for the quarters ended December 31, 2017 and March 31, 2018 as follows:
(a) For the quarter ended December 2017, out of total depreciation of Rs. 18.80 crore on SLR Investments under AFS portfolio, a provision of 50% (i.e. Rs. 9.40 crore) has been made as on 31-03-2018 and balance 50% would be provided during the next 2 quarters i.e. June 2018 (i.e. Rs. 4.70 crore) & September 2018 (i.e. Rs. 4.70 crore) each 25% respectively.
(b) For the quarter ended March 2018, out of an incremental depreciation of Rs. 17.40 crore on SLR Investments under AFS portfolio, a provision of 25% (i.e. Rs. 4.35 crore) has been made as on 31-03-2018 and balance 75% would be provided during the next 3 quarters i.e. June 2018 (i.e. Rs. 4.35 crore), September 2018 (i.e. Rs. 4.35 crore) and December 2018 (i.e. Rs. 4.35 crore) each 25% respectively.
3.2.1 Sale and transfers to / from HTM Category
Sale of securities from HTM category did not exceed 5% of the book value of investments held in HTM category at the beginning of the year.
3.2.2 The percentage of SLR investment under HTM (Held to Maturity) category as on 31.03.2018 was 19.49% of Demand and Time Liability of the bank (previous year 18.49%) which is within permissible limit as per RBI guidelines.
3.2.3 In accordance with RBI guidelines, during the first quarter of the current financial year securities amounting to Rs. 723.60 crore (Face Value Rs. 700 crore) were transferred from HTM to AFS category and the resultant appreciation of Rs. 26.58 crore has been ignored.
3.2.4 RBI vide its circular RBI/2017-18/70 DBR.No.Ret.BC.90/12.02.001/2017-18 dated October 4, 2017 advised banks that in order to align the ceiling on the SLR holdings under HTM category with the mandatory SLR, it was advised to reduce the ceiling from 20.50% to 19.50% in a phased manner i.e. 20.00% by December 31, 2017 and 19.50% by March 31, 2018 and allowed shifting / sale of excess securities from HTM. Accordingly, the bank has shifted securities worth Rs. 360.86 crore (Face Value Rs. 360.37 crore) during the third quarter and Rs. 119.26 crore (Face Value Rs. 120.00 crore) during the fourth quarter from HTM to AFS category and the resultant appreciation of Rs. 20.52 crore and Rs. 2.72 crore respectively were ignored.
3.3.1 Disclosures on risk exposure in derivatives: Qualitative Disclosure: Structure, Organisation, Scope, Nature of risk management in derivatives:
The organization structure consists of Treasury Department which is segregated into three functional areas i.e., front office, mid office and back office.
Rupee derivative deals are executed for hedging or for trading. The risk in the derivatives portfolio is monitored by assessing the mark to market (MTM) position of the portfolio on a daily basis and the impact on account of probable market movements. The overall portfolio is operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis. The outstanding deals are marked to market on monthly basis. The MTM values are informed to the clients every month and margin topped up where required.
The Board reviews the risk profile of the outstanding portfolio at regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge swaps are accounted for like a hedge of the asset or liability. The income / expense on hedge swaps are accounted on accrual basis except where swap transactions whose underlying is subjected to mark to market. Such hedge swaps are marked to market on a monthly basis and the gain / losses are recorded as an adjustment to the designated asset / liability. The non-hedge swaps are marked to market every month and the MTM losses in the basket are accounted in the books while MTM profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the contracts with counter parties like Banks / PDs etc. For deals with Corporate Clients, appropriate collateral security / margin etc. are stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals are contracted with Banks / major PDs/ highly rated clients and no default risk is anticipated on the deals with them.
Dealing in derivatives is centralized in the treasury of the Bank. Derivative transactions are entered into by the treasury front office. Treasury middle office conducts an independent check of the transactions entered into by the front office and ensures compliance with various internal and regulatory guidelines. Back Office undertakes activities such as confirmation, settlement, accounting, risk monitoring and reporting.
The market making and the proprietary trading activities in derivatives are governed by the derivatives policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. As far as forex derivatives are concerned, they are undertaken on back-to-back basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The Bank measures and monitors risk using PVBP (Price Value of a Basis Point) approach. Risk reporting on derivatives forms an integral part of the management information system and the marked to market position and the PVBP of the derivatives portfolio is reported on a daily basis to the top management.
Risk monitoring on forex derivatives is done on a monthly basis. It is reported to the top management and related clients on monthly basis.
3.4.1.1 Strategic Debt Restructuring (SDR) and Others
During the year, Bank has been allotted the following equity shares / OCDs under Strategic Debt Restructuring (SDR), Scheme for Sustainable Structuring of Stressed Assets (S4A) and Corporate Debt Restructuring (CDR):
(a) 1,02,43,423 number of equity shares with face value of 10/- each at the rate of 10/- per share amounting to a book value of Rs. 10.24 crore on account of SDR mechanism in respect of one borrowal account with an aggregate exposure of Rs. 58.44 crore under consortium arrangement.
(b) 17,93,453 number of equity shares with face value of Rs. 10/- each at the rate of Rs. 146.03 per share amounting to a book value of Rs. 26.19 crore and 31,626 number of OCDâs with face value of Rs. 1,000/- each at the rate of Rs. 1,000/- per unit amounting to a book value of Rs. 3.16 crore on account of S4A mechanism in respect of one borrowal account with an aggregate exposure of Rs. 78.89 crore under consortium arrangement.
(c) In one borrowal account, 1,33,000 number of NCDâs with face value of Rs. 100/- each at the rate of Rs. 100/- per unit amounting to a book value of Rs. 1.33 crore on account of âRight of Recompenseâ for exiting CDR.
Note: In terms of RBI guidelines vide circular DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016, the Bank had debited General Reserves an amount of Rs. 185.07 crore as on 31.03.2017, being unamortised loss on sale of NPAs to ARCs during 2015-16, which was to be proportionately debited to Profit and Loss account during the current financial year i.e. Rs. 63.18 crore each in the quarter ended June 2017 and September 2017 and the remaining Rs. 58.71 crore during the quarter ending December 2017. However, the entire amount of Rs. 185.07 crore has been debited to Profit and Loss account and credited to General Reserves during the half year ended 30th September 2017.
The net funded exposure of the bank in respect of foreign exchange transactions with each country is within 1% of the total assets of the Bank and hence no provision is required in terms of RBI guidelines.
3.5.1. Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank:
The Bank has not exceeded the prudential credit exposure limits in respect of Single Borrower Limit and Group Borrower Limit other than food credit.
3.5.2. Unsecured Advances:
The total of advances for which intangible securities such as charge over the rights, licenses, authorisations, etc. have been taken as securities is NIL.
3.6 Disclosure of penalties imposed by RBI:
During the year RBI has levied penalty of Rs. 8,50,350/emanating out of deficiencies found while processing the notes remitted by currency chests. The penalties levied are pertaining to Specified Bank Notes (SBN) remittances of Currency Chests and Karolbagh, Delhi branch to RBI (as Bank does not have a currency chest at Delhi, Karolbagh branch acted as pooling branch and remitted the SBNs received from customers of Delhi branches to RBI).
4. Disclosure requirement as per Accounting Standards (AS):
In compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards, the following information is disclosed:
4.1 Net Profit or loss for the period, Prior Period Items and Changes in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per AS-5.
For the preparation of these financial results, the bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended March 31, 2017.
4.2 Revenue Recognition (AS-9):
Income / Expenditure items recognized on cash basis are either not material or does not require disclosure under AS-9.
4.3. Employee Benefits (AS -15) :
The Bank is following AS-15 (Revised 2005) âEmployee
Benefitsâ as under:
a. In respect of Contributory Plan, viz., Provident Fund, the Bank pays fixed contribution at pre-determined rates to a separate trust, which invests in permitted securities. The obligation of the Bank is limited to such fixed contribution.
b. In respect of Defined Benefit Plans, viz., Gratuity and Pension, provision has been made based on actuarial valuation as per applicable guidelines.
c. In respect of Leave encashment, provision has been made based on actuarial valuation.
d. Ministry of Labour and Employment, Government of India, on 29th March, 2018 enhanced the ceiling on gratuity payable to an employee under Payment of Gratuity Act, 1972 from Rs. 10 lakh to Rs. 20 lakh. Bank has provided for the entire amount of additional liability during the year and has not availed the dispensation of spreading the provision over a period of four quarters as permitted by RBI.
4.4 Accounting for Taxes on Income (AS-22):
The Bank has recognized Deferred Tax Asset / Liability (DTA/DTL) and has accounted for the Net Deferred Tax as on 31.03.2018. Major components of Deferred Tax Assets and Deferred Tax Liabilities are as under:
4.5. Impairment of Assets (AS - 28):
In the opinion of the Management, there is no impairment of its Fixed Asset to any material extent as at 31.03.2018 requiring recognition in terms of Accounting Standard 28.
4.6. The Bank has deposited an amount of Rs. 255.57 crore (previous year Rs. 250.32 crore) towards disputed tax liability. In the opinion of the Management, no provision is considered necessary based on favourable decisions by various courts.
@The Bank had made a provision of Rs. 35.52 crore being 15% of the outstanding food credit availed by the State Government of Punjab as at 31.03.2016. During the year ended March 31, 2018 an excess provision of Rs. 15.67 crore was written back. (Also refer to Note 10)
5.1 Addition to Reserves General Reserve
In terms of RBI guidelines vide circular DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016, the Bank had debited General Reserves an amount of Rs. 185.07 crore as on 31.03.2017, being unamortised loss on sale of NPAs to ARCs during 2015-16, which was to be proportionately debited to Profit and Loss account during the current financial year i.e. Rs. 63.18 crore each in the quarter ended June 2017 and September 2017 and the remaining Rs. 58.71 crore during the quarter ending December 2017. However, the entire amount of Rs. 185.07 crore has been debited to Profit and Loss account and credited to General Reserves during the half year ended 30th September 2017.
# Includes ATM failed transactions complaints received and redressed of 83,376 during FY 2017-18 (Previous Year 17,742 complaints). The increase is due to migration of NFS message format for ATM / BNRM transactions routed through our switch. There were also frequent network fluctuations due to increase in the number of ATM / BNRM transactions during the financial year 2017-18 which was set right after December 2017.
Note:The above data has been compiled on the basis of the guidelines of RBI and certain assumptions made by management and have been relied upon by auditors.
5.2 Disclosure of Letter of Comfort (LOCs) :
The amount of Letter of comfort issued during the year 2017-18 was Rs. 3,875.39 crore (Previous year Rs. 3,664.13 crore) and outstanding as on 31.03.2018 was Rs. 1,180.45 crore (Previous year Rs. 1,284.61 crore)
5.3 Provision Coverage Ratio (PCR)
The Provision Coverage Ratio as on 31.03.2018 is 56.50%.
5.4 Bancassurance Business:
The bank has received an amount of Rs. 15.60 crore (Life Insurance Rs. 10.93 crore and Non-Life Insurance Rs. 4.67 crore) towards fee /remuneration in respect of the bancassurance business undertaken during 01.04.2017 to 31.03.2018. [Previous year Rs. 9.36 crore (Life Insurance Rs. 6.66 crore and Non-Life Insurance Rs. 2.70 crore)].
5.5 Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)
NIL
5.6 Unamortised Pension and Gratuity Liabilities
NIL
5.7 Disclosures on Remuneration Qualitative Disclosure
(a) Information relating to the composition and mandate of the Nomination & Remuneration (NRC) Committee:
The Nomination & Remuneration Committee (NRC) of the Board consists of five Directors. The Composition complies with RBI guidelines, provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 (âSEBI LODRâ).
The mandate of Nomination and Remuneration Committee includes:
1. Recommendation of appointment / reappointment of Directors, MD&CEO / WTD of the Bank.
2. Recommending to the Board a policy relating to the remuneration for the MD&CEO / WTD, Part-time (Non-Executive) Chairman of the Bank and President & COO.
3. Devising a policy on diversity of Board Of Directors.
4. Framing of guidelines for the ESOS and considering granting of ESOS, administering and supervising the ESOS with particular reference to quantum of options to be granted, grant price, vesting price, exercise period etc., to the eligible employees.
5. No external consultantsâ advice had been sought by the Bank in the remuneration process.
6. Compensation Policy of the Bank, is approved by the Board, pursuant to the guidelines issued by RBI. The Policy is applicable to the MD&CEO / WTD, Non-Executive Directors, Part-time (Non-Executive) Chairman and President & COO. All other employeesâ upto Scale III cadre are covered under Industry level Bi-partite settlements of IBA.
7. To perform any other functions or duties as stipulated by the Companies Act, RBI, SEBI, Stock Exchanges and any other regulatory authority or under any applicable laws as may be prescribed from time to time.
(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:
NRC is entrusted with the responsibility of recommending to the Board an appropriate compensation payable to the Part-time (Non-Executive) Chairman, MD&CEO / WTD and the President & COO in the light of the guidance from the regulator from time to time.
The Compensation payable to MD&CEO / WTD of the Bank is divided into fixed and variable components. The fixed remuneration represents a significant proportion of total remuneration taking into account all relevant factors including the prevalent industry practices. Variable pay shall relate to the performance of the Bank and there is proper balance between fixed pay and variable pay. Variable pay must be paid on the basis of achievement of certain basic targets such as reaching business figures including net profits and other qualitative factors taking into account the extraordinary items, appropriate risk management and efficient consumption of capital and comparison of results with industry performance.
As the Bank is a party to the Bipartite settlement of IBA, the compensation of staff engaged in control functions like Risk and Compliance are covered under these Bipartite settlement which cover all employees upto the scale VII cadre. Recently, Bank has given its mandate to cover all employees till the Scale III cadre.
(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:
NRC may use a wide variety of measures of credit, market and liquidity risks in implementation of risk adjustment. The risk adjustment methods should preferably have both quantitative and judgmental elements. Bank has system of measuring and reviewing these risks.
The risk parameters used for setting of performance objectives and for measuring performance which includes besides financial performance, adherence to internal processes and compliance. Compensation is effectively aligned in both fixed and variable pay. There is a proper balance between fixed and variable pay. Bank shall not offer any guaranteed bonus based on its performance in tune with the sound risk management principles. The Bank shall not grant any severance pay to the MD&CEO/ WTD and Bank shall not provide any facility or fund or permit MD&CEO/ WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:
Bank would ensure that the compensation is adjusted to all types of risk, symmetrical with risk outcomes as well as sensitive to the time horizon of risk.
The variable pay could be in cash, stock linked instruments or a mix of both. Variable pay shall relate to the performance of the Bank.
Variable pay is considered only for MD&CEO / WTD of the Bank. Variable pay shall not exceed 40% of the fixed pay in any year.
For the Part-time (Non-Executive) Chairman of the Bank, only fixed pay / salary is payable apart from the sitting fees payable for attending the Board or Board Committee Meetings.
In the event of negative growth of the bank and or the relevant line of business in any year, the deferred compensation shall be subjected to malus and clawback arrangements in tune with the RBI guidelines.
(e) A discussion of the bankâs policy on deferral and vesting of variable remuneration and a discussion of the bankâs policy and criteria for adjusting deferred remuneration before vesting and after vesting:
For MD&CEO / WTD: If the variable pay is significant, then the bank would defer the payment over a period of three years.
(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:
The Bank has paid only fixed remuneration to MD&CEO / WTD for the year 2017-18 as per RBI approval.
NRC may recommend a reasonable number of Stock Options under the ESOS to MD&CEO / WTD while granting ESOS as per SEBI Regulation. ESOS shall not form part of the total compensation of MD&CEO / WTD as per the Compensation Policy.
The Bank shall not grant any severance pay (other than the terminal benefits and gratuity as per the provisions) to the MD&CEO / WTD.
Bank shall not provide any facility or funds or permit MD&CEO / WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
5.8 Disclosures relating to Securitisation
The bank has not sponsored any SPVs for Securitization transactions.
5.9 Credit Default Swaps
Bank has not initiated any trade in Credit Default Swaps.
5.10 Intra Group Exposures
NIL
5.11 Provision for Unhedged Foreign Currency Exposure :
The Bank has made a provision of Rs. 1.40 crore (Previous Year Rs. 1.54 crore) towards unhedged forex exposure for its clients for the year ended 31.03.2018.
5.12 During the financial year 2017-18, the Bank has not granted any stock options.
6.1 Qualitative disclosure around LCR
The LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
Objective:
The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.
The LCR requirement is binding on banks from January 1, 2015; with a view to provide a transition time for banks, the requirement has been fixed at minimum 60% for the calendar year 2015 i.e. with effect from January 1, 2015 and rise in equal steps to reach the minimum required level of 100% from January 1, 2019 as per the time line given below:
Composition of HQLA:
- Cash in hand
- Excess CRR balance as on that particular day
- Excess Government Securities in excess of minimum SLR requirement
- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF)
- Facility to avail liquidity for liquidity coverage ratio at 9% of NDTL
- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%
- Common equity shares not issued by the bank / financial institution / NBFC or any of its affiliated entities and included in NSE CNX Nifty and / or S & P BSE Sensex indices.
7. Basel III disclosures
In accordance with RBI circular DBOD. No. BP.BC.1/21.06.201/2015-16 dated 01.07.2015, read together with RBI circular DBR. No.BP.BC.80/21.06.201/2014-15 dated 31.03.2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations. Accordingly, Pillar 3 disclosures under Basel III capital regulations have been made available on the Bankâs website at the following link - https://www.kvb.co.in/footer/pillarIII_disclosures.html. These disclosures have not been subjected to audit by the Statutory Central Auditors.
8. Corporate Social Responsibility
The bank has incurred an expenditure of Rs. 3,69,74,106/- towards Corporate Social Responsibility after carrying out the process of identifying various projects and its appropriateness for spending (Previous year Rs. 1.60 crore).
9. UDAY Scheme
In compliance with RBI communication DBR.BP.No.11657/21.04.132/2015-16 dated 17th March 2016, the investments in DISCOM bonds of Rs. 24.33 crore (which were envisaged to be converted into SDL) have been classified as Non Performing Investments and provision of Rs. 9.73 crore has been made therefor.
10. Provision for Food Credit
The Bank had made a provision of Rs. 35.52 crore being 15% of the outstanding food credit availed by the State Government of Punjab as at 31.03.2016. During the year ended March 31, 2018 an excess provision of Rs. 15.67 crore was written back as per RBI circular DBR(BP) No. /3992/21.04.048/2016-17 dated October 3, 2016 and balance provision of Rs. 7.17 crore is held as on March 31st, 2018.
11. Status with regard to Ind-AS Implementation
As per RBI notification DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, Bank has to disclose the strategy for Ind-AS implementation, including the progress made in this regard.
Implementation Strategy & Progress during the year
The Bank has set up a Steering Committee for implementation of Ind-AS. The Steering Committee of 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 selected vendors has been undertaken during the year.
Bank has submitted Proforma Ind-AS Financial Statement to RBI for the half-year ended September 30th, 2016 and also for the quarter ended June 30th, 2017 as per RBI guidelines.
12. Ministry of Labour and Employment, Government of India on 29th March, 2018 enhanced the ceiling on gratuity payable to an employee under Payment of Gratuity Act, 1972 from Rs. 10 lakh to Rs. 20 lakh. Bank has provided for the entire amount of additional liability during the year and has not availed the dispensation of spreading the provision over a period of four quarters as permitted by RBI.
13. Disclosure on Investor Education and Protection Fund
As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. In compliance with the above provisions, the unclaimed dividend amount due to be transferred to the Investor Education and Protection Fund (IEPF) during the year ended March 31, 2018 has been transferred without any delay.
14. The Board of Directors recommends a dividend of Rs. 0.60 per equity share of Rs. 2/- each for the year 2017-18, subject to the approval of the members at the ensuing Annual General Meeting. In accordance with AS-4, Contingencies and Events Occurring after the Balance Sheet date notified by the MCA on March 30, 2016, the proposed dividend including corporate dividend tax amounting to Rs. 52.46 crore has not been shown as an appropriation from the Profit and Loss appropriation account as of March 31, 2018 and correspondingly not reported under Other Liabilities and Provisions as at March 31, 2018. For computation of capital adequacy ratio as at 31.03.2018, Bank has adjusted the proposed dividend and tax thereon for determining capital funds.
15. Figures of the previous year have been regrouped / rearranged / reclassified wherever necessary.
Mar 31, 2017
A. BACKGROUND
The Karur Vysya Bank Limited, incorporated in Karur, India is a publicly held banking company governed by the Banking Regulation Act, 1949 and is engaged in providing a wide range of banking and financial services including commercial banking and treasury operations.
B. BASIS OF PREPARATION
The financial statements are prepared following the going concern concept, on historical cost basis and conform to the Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, notified Accounting Standards (AS) issued under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.
Use of Estimates:
The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statement and the reported income and expenses during the reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.
1. INTER BRANCH TRANSACTIONS:
Inter Branch/Office accounts reconciliation has been completed upto 31.03.2017 and all the inter branch entries have been reconciled upto 31.03.2017.
2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of the Bank as on 31.03.2017.
3.1.1 Sale and transfers to / from HTM Category
During the year, the bank has sold Government securities from Held to Maturity (HTM) category exceeding 5% of the book value of investments in HTM category at the beginning of the year.The Bank sold securities aggregating Rs.2,696.83 crore from the HTM category during FY 2016-17, and by sale of securities from HTM category, the Bank has booked a profit of Rs.150.26 crore. An amount of Rs.73.87 crore (being net of tax & statutory reserve) is transferred to capital reserve. As on 31st March, 2017, the book value of SLR investment held under Held to Maturity category was Rs.10,378.52 crore which shows marked to market appreciation of Rs.314.78 crore.
3.1.2 The percentage of SLR investment under Held to Maturity Category as on 31.03.2017 was 18.49 % of Demand and Time Liability of the bank ( previous year 20.51% ) which is within permissible limit as per RBI guidelines.
3.1.3 In accordance with RBI guidelines, securities amounting to Rs.106.76 crore have been shifted from AFS to HTM category and Rs.406.31 crore from HTM to AFS category and the resultant depreciation of Rs.0.93 crore has been charged to Profit and Loss account during the first quarter of the current financial year.
3.1.4 Pursuant to RBI circular FMRD DIRD.10/14.03.002/2015-16 dated May 19, 2016,as amended, the Bank has with effect from November 26,2016 considered its repo / reverse repo transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) of RBI as Borrowings/Lendings, as the case may be. Hitherto, the repo/reverse repo transactions were included under Investments. Figures for the previous periods/year have been regrouped/ reclassified to conform to current periods/year classification. The above regrouping/ reclassification has no impact on the profit of the Bank for the quarter/year ended 31st March, 2017 or the previous periods/year.
3.2.1 Disclosures on risk exposure in derivatives: Qualitative Disclosure:
Structure, Organisation, Scope, Nature of risk management in derivatives:
The organization structure consists of Treasury Department which is segregated into three functional areas i.e., front office, mid office and back office.
Rupee derivative deals are executed for hedging or for trading. The risk in the derivatives portfolio is monitored by assessing the Mark to Market (MTM) position of the portfolio on a daily basis and the impact on account of probable market movements. The overall portfolio is operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis. The outstanding deals are marked to market on monthly basis. The MTM values are informed to the clients every month and margin topped up where required.
The Board reviews the risk profile of the outstanding portfolio at regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge swaps are accounted for like a hedge of the asset or liability. The income / expense on hedge swaps are accounted on accrual basis except where swap transactions whose underlying is subjected to mark to market. Such hedge swaps are marked to market on a monthly basis and the gain / losses are recorded as an adjustment to the designated asset / liability. The Non hedge swaps are marked to market every month and the MTM losses in the basket are accounted in the books while MTM profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the contracts with counter parties like Banks / PDs etc. For deals with Corporate Clients, appropriate collateral security / margin etc. are stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals are contracted with Banks / major PDs/highly rated clients and no default risk is anticipated on the deals with them.
Dealing in derivatives is centralized in the treasury of the Bank. Derivative transactions are entered into by the treasury front office. Treasury middle office conducts an independent check of the transactions entered into by the front office and ensures compliance with various internal and regulatory guidelines. Back Office undertakes activities such as confirmation, settlement, accounting, risk monitoring and reporting.
The market making and the proprietary trading activities in derivatives are governed by the derivatives policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. As far as forex derivatives are concerned, they are undertaken on back-to-back basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The Bank measures and monitors risk using PVBP (Price Value of a Basis Point) approach. Risk reporting on derivatives forms an integral part of the management information system and the marked to market position and the PVBP of the derivatives portfolio is reported on a daily basis to the top management.
Risk monitoring on forex derivatives is done on a monthly basis. It is reported to the top management and related clients on monthly basis.
* The above divergence is due to two borrowal accounts, of which, one account with an outstanding balance of Rs.175.38 crore was treated as a Standard Asset as on 31.03.2016 by the bank in compliance of the RBI guidelines relating to âStand Stillâ clause under the Strategic Debt Restructuring (SDR) scheme, since the scheme was under implementation. As the time limit for implementation of the scheme was complete during the year, the Bank classified this account as NPA. However, in the subsequent inspection by the RBI, the effective date of NPA was deemed as 30th June 2014, thereby treating the same as a divergence as on 31.03.2016.
3.3.1 Disclosures related to Restructured Advances (enclosed separately)
3.3.2 Strategic Debt Restructuring (SDR)
During the year, the Bank has been allotted 9,29,640 number of shares with a face value of Rs.10 /- at the rate of Rs.11.09 per share amounting to a book value of Rs.1.03 crore on account of SDR mechanism in respect of one borrowal account with an aggregate exposure of Rs.30.02 crore under consortium arrangement.
3.4.1. Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank.
The Bank has not exceeded the prudential credit exposure limits in respect of Single Borrower Limit and Group Borrower Limit other than food credit.
3.4.2.Unsecured Advances:
The total of advances for which intangible securities such as charge over the rights, licenses, authorisations, etc. have been taken as securities is NIL.
3.5 Disclosure of penalties imposed by RBI:
During the year RBI has levied penalty of Rs.0.01 crore emanated out of deficiencies found while processing the currency notes remitted by currency chests.
4. Disclosure requirement as per Accounting Standards (AS):
I n compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards, the following information is disclosed:
4.1 Net Profit or loss for the period, Prior Period Items and Changes in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per AS-5.
For the preparation of these financial results, the bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended March 31, 2017.
4.2 Revenue Recognition (AS-9):
Income / Expenditure items recognized on cash basis are either not material or does not require disclosure under AS-9.
4.3. Employee Benefits (AS -15) :
The Bank is following AS-15 (Revised 2005) âEmployee Benefitsâ as under:
a. In respect of Contributory Plan, viz., Provident Fund, the Bank pays fixed contribution at pre-determined rates to a separate trust, which invests in permitted securities. The obligation of the Bank is limited to such fixed contribution.
b. In respect of Defined Benefit Plans, viz., Gratuity and Pension, provision has been made based on actuarial valuation as per the guidelines.
c. In respect of Leave Encashment, provisioning requirement has been made based on actuarial valuation.
The disclosure requirements as per the Accounting Standards are given below:
4.4 Accounting for Taxes on Income (AS-22):
The Bank has recognized Deferred Tax Asset / Liability (DTA/DTL) and has accounted for the Net Deferred Tax as on 31.03.2017.
4.5. Impairment of Assets (AS - 28) :
In the opinion of the Management, there is no impairment of its Fixed Asset to any material extent as at 31.03.2017 requiring recognition in terms of Accounting Standard 28.
4.6. The Bank has deposited an amount of Rs.251.39 crore towards disputed tax liability. In the opinion of the Bank, no provision is considered necessary based on favourable decisions by various courts.
5.1 Draw Down from Reserves General Reserve
In terms of RBI circular DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016, the bank has debited to General Reserve an amount of Rs.185.07 crore, being unamortised amount of loss on sale of assets to ARCs during the Financial Year 2015-16. (Refer Note No. 3.4.4)
5.2 Disclosure of Letter of Comfort (LOCs) :
The amount of Letter of Comfort issued during the year 2016-17 was Rs.3664.13 crore (Previous year Rs.3395.57 crore) and outstanding as on 31.03.2017 was Rs.1284.61 crore (Previous year Rs.1447.19 crore)
5.3 Provision Coverage Ratio (PCR)
The Provision Coverage Ratio as on 31.03.2017 is 57.83%.
5.4 Bancassurance Business:
The bank has received an amount of Rs.9.36 crore (Life Insurance Rs.6.66 crore and Non-Life Insurance Rs.2.70 crore) towards fee/ remuneration in respect of the bancassurance business undertaken during 01.04.2016 to 31.03.2017.
5.5 Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)
NIL
5.6 Unamortised Pension and Gratuity Liabilities
NIL
5.7 Disclosures on Remuneration Qualitative Disclosure
(a) Information relating to the composition and mandate of the Nomination & Remuneration (NRC) Committee
Nomination and Remuneration Committee of the Board consists of five directors and its composition complies with RBI guidelines, provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.
The mandate of the Nomination & Remuneration Committee includes:
Recommendation of appointment/ reappointment of Directors, MD & CEO/WTD of the Bank.
Recommending to the Board a policy relating to the remuneration for the MD & CEO/WTD, Non-Executive Independent (Part-time) Chairman of the Bank and President & COO.
Framing of guidelines for the ESOS and considering granting of ESOS administering and supervising the ESOS with particular reference to quantum of options to be granted, grant price, vesting period, exercise period etc., to the eligible employees.
No external consultantsâ advice had been sought by the Bank in the remuneration process.
Compensation policy of the Bank, approved by the Board, pursuant to the guidelines issued by RBI. The policy is applicable to the MD & CEO/WTD, Non-Executive Independent (Part-time) Chairman and President & COO. All other employees up to Scale VII cadre are covered under Industry level Bi-partite Settlements of IBA.
(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy
NRC is entrusted with the responsibility of recommending to the Board an appropriate compensation payable to the Non-Executive Independent (Part-time) Chairman, MD & CEO/WTD and the President & COO in the light of the guidance from the regulator from time to time.
The Compensation payable to MD & CEO/ WTD of the Bank is divided into fixed and variable components. The fixed remuneration represents a significant proportion of total remuneration taking into account all relevant factors including the prevalent industry practices. Variable pay shall relate to the performance of the Bank and there is proper balance between fixed pay and variable pay. Variable pay must be paid on the basis of achievement of certain basic targets such as reaching business figures including net profits and other qualitative factors taking into account the extraordinary items, appropriate risk management and efficient consumption of capital and comparison of results with industry performance.
As the Bank is a party to the Bipartite settlements of IBA, the compensation of staff engaged in control functions like Risk and Compliance are covered under these Bipartite settlements which cover all employees upto the Scale VII cadre.
The Nomination and Remuneration Committee of the Board reviewed the Compensation policy of the Bank on 21.03.2017. There were no changes made in the Compensation policy during the year.
(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks
NRC may use a wide variety of measures of credit, market and liquidity risks in implementation of risk adjustment. The risk adjustment methods should preferably have both quantitative and judgmental elements. Bank has system of measuring and reviewing these risks.
The risk parameters used for setting of performance objectives and for measuring performance which includes besides financial performance, adherence to internal processes and compliance. Compensation is effectively aligned in both fixed and variable pay. There is a proper balance between fixed and variable pay. Bank shall not offer any guaranteed bonus based on its performance in tune with the sound risk management principles. The Bank shall not grant any severance pay to the MD & CEO/ WTD and Bank shall not provide any facility or fund or permit MD & CEO/ WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration Bank would ensure that the compensation is adjusted to all types of risk, symmetrical with risk outcomes as well as sensitive to the time horizon of risk.
The variable pay could be in cash, stock linked instruments or a mix of both. Variable pay shall relate to the performance of the Bank.
Variable pay is considered only for MD & CEO/WTD of the Bank. Variable pay shall not exceed 40% of the fixed pay in any year.
For the Part-time (Non-Executive) Chairman of the Bank, only fixed pay/salary is payable apart from the sitting fees payable for attending the Board or Board Committee Meetings.
In the event of negative growth of the bank and or the relevant line of business in any year, the deferred compensation shall be subjected to malus and clawback arrangements in tune with the RBI guidelines.
(e) A discussion of the bankâs policy on deferral and vesting of variable remuneration and a discussion of the bankâs policy and criteria for adjusting deferred remuneration before vesting and after vesting
For MD & CEO/WTD: If the variable pay is significant, then the bank would defer the payment over a period of three years.
(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms
The Bank has paid only fixed remuneration to MD & CEO/WTD for the year 2016-17 as per RBI approval.
NRC may recommend a reasonable number of Stock Options under the ESOS to MD & CEO/WTD while granting ESOS as per SEBI Regulation. ESOS shall not form part of the total compensation of MD & CEO/WTD as per the Compensation Policy.
The Bank shall not grant any severance pay (other than the terminal benefits and gratuity as per the provisions) to the MD & CEO/WTD.
Bank shall not provide any facility or funds or permit MD & CEO/WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.
5.8 Disclosures relating to Securitisation
The bank has not sponsored any SPVs for Securitization transactions.
5.9 Credit Default Swaps
Bank has not initiated any trade in Credit Default Swaps.
5.10 Intra Group Exposures
NIL
5.11 Provision for Unhedged Forex Exposure :
The Bank has made a provision of Rs.1.54 crore (Previous Year Rs.1 crore) towards unhedged forex exposure for its clients for the year ended 31.03.2017.
5.12 During the financial year 2016-17, the Bank has not granted any stock options.
6.1 Qualitative disclosure around LCR
The LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
Objective:
The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.
The LCR requirement is binding on banks from January 1, 2015; with a view to provide a transition time for banks, the requirement has been fixed at minimum 60% for the calendar year 2015 i.e. with effect from January 1, 2015 and rise in equal steps to reach the minimum required level of 100% from January 1, 2019 as per the time line given below:
Composition of HQLA:
- Cash in hand
- Excess CRR balance as on that particular day
- Excess Government Securities in excess of minimum SLR requirement
- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF)
- Facility to avail liquidity for liquidity coverage ratio at 8% of NDTL
- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%
- Common equity shares not issued by the bank/financial institution/NBFC or any of its affiliated entities and included in NSE CNX Nifty and / or S & P BSE Sensex indices.
For FY 2015-16, the values were arrived based on simple averages of monthly observations over the previous quarter. (i.e. the average is calculated over a period of 90 days.)
As specified in the RBI Circular RBI/2014-15/529 DBR.No.BP.BC.80/21.06.201/2014-15 dated March 31, 2015 âPrudential Guidelines on Capital Adequacy and Liquidity Standards - Amendmentsâ, for FY 2016-17 upto Q3, the values were arrived based on simple averages of monthly observations while for Q4(i.e. from 01/01/2017 to 31/03/2017) the values were calculated simple averages on daily observations. After considering all the 4 quarters average values, the âTotal un-weighted Values (average)â and âTotal weighted Values (average)â has been calculated.
7. Basel III disclosures
In accordance with RBI circular DBOD. No. BPBC.1/21.06.201/2015-16 dated 01.07.2015, read together with RBI circular DBR. No.BP.BC.80/21.06.201/2014-15 dated 31.03.2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations.
Accordingly, Pillar 3 disclosures under Basel III capital regulations have been made available on the Bankâs website at the following link -http://www.kvb.co.in/footer/pillarIII_disclosures.htm
These disclosures have not been subjected to audit by the Statutory Central Auditors.
8. Corporate Social Responsibility
The bank has incurred an amount of Rs.1.60 crore towards Corporate Social Responsibility and is in the process of identifying various projects and its appropriateness for spending in future.
9. UDAY Scheme
In compliance with RBI communication DBR.BP.No.11657/21.04.132/2015-16 dated 17th March 2016, the investments in DISCOM bonds of Rs.24.33 crore (which were envisaged to be converted into SDL) have been classified as Non Performing Investments and provision of Rs.6.08 crore has been made therefor.
10. The Bank had made a provision of Rs.35.52 crore being 15% of the outstanding food credit availed by the State Government of Punjab as at 31.03.2016. During the year ended March 31, 2017 an excess provision of Rs.12.68 crore was written back.
11. The Bank was grouping loss on sale of assets to ARC under Operating Expenses upto December 2016. However, from the quarter ended 31.03.2017, it has been regrouped under Provisions & Contingencies. Accordingly, the figures of the previous year have also been regrouped.
12. Status with regard to Ind AS Implementation
As per RBI notification DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, Bank has to disclose the strategy for Ind AS implementation, including the progress made in this regard.
Implementation Strategy
The Bank has formulated a Steering Committee for implementation of Ind AS. The Steering Committee of Bank is analyzing the current accounting framework and Ind AS for changes in significant accounting policies, preparation of disclosures, documentation.
Progress on Ind AS implementation.
The bank has submitted Proforma Ind AS Financial Statement to RBI for the half year ended September 30, 2016 on 31st December 2016.
13. Figures of the previous year have been regrouped/rearranged/reclassified wherever necessary.
Mar 31, 2015
1. INTER BRANCH TRANSACTIONS:
Inter Branch/Office accounts reconciliation has been completed upto
31.03.2015 and all the Inter branch entries have been reconciled upto
31.03.2015.
Contingent Assets are not recognized since this may result in the
recognition of income that may never be realized.
2. Net Profit
The net profit disclosed in the Profit and Loss Account is after
providing for:
Provision for Taxes,
Provision for Standard Assets and Non Performing Assets,
Provision for Depreciation on investments, employee benefits and
Other usual and necessary provisions 2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of
the bank as on 31.03.2015.
2.1.1 Sale and transfers to / from HTM Category
During the year, the bank has sold government securities from Held to
Maturity category exceeding 5% of the book value of investments held in
HTM category at the beginning of the year. By sale of securities from
HTM category, the Bank had booked a profit of Rs. 24.57 crore. An amount
of Rs. 12.16 crore (being net of tax and statutory reserve) is
transferred to Capital Reserve. As on 31st March 2015, the book value
of SLR investments held under Held to Maturity category was Rs. 10,178.11
crore which shows marked to market appreciation of Rs.26.42 crore as on
that date.
2.2.2 SGL Bouncing : Nil
2.2.3 The percentage of SLR investment under Held to Maturity Category
as on 31.03.2015 was 21.70 % of Demand and Time Liability of the bank
(Previous year 22.94 %), which is within permissible limit as per RBI
guidelines .
3.1 Derivatives
3.1.1 Disclosures on risk exposure in derivatives: Qualitative
Disclosure:
Structure, Organisation, Scope, Nature of risk management in
derivatives:
The organization structure consists of Treasury Department which is
segregated into three functional areas i.e., front office, mid office
and back office.
Rupee derivative deals are executed for hedging or for trading. The
risk in the derivatives portfolio is monitored by assessing the mark to
market (MTM) position of the portfolio on a daily basis and the impact
on account of probable market movements. The overall portfolio is
operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis.
The outstanding deals are marked to market on monthly basis. The MTM
values are informed to the clients every month and margin topped up
where required.
The Board reviews the risk profile of the outstanding portfolio at
regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge
swaps are accounted for like a hedge of the asset or liability. The
income / expense on hedge swaps are accounted on accrual basis except
where swaps transactions whose underlying is subjected to mark to
market. Such hedge swaps are marked to market on a monthly basis and
the gain / losses are recorded as an adjustment to the designated asset
/ liability. The Non hedge swaps are marked to market every month and
the MTM losses in the basket are accounted in the books while MTM
profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the
contracts with counter parties like Banks / PDs etc. For deals with
Corporate Clients, appropriate collateral security / margin etc. are
stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals are contracted with Banks / Major PDs/highly
Dealing in derivatives is centralized in the treasury of the Bank.
Derivative transactions are entered into by the treasury fron! office.
Treasury middle office conducts an independent check of the
transactions entered into by the front office and ensures compliance
with various internal and regulatory guidelines. Back Office
undertakes activities such as confirmation, settlement, accounting,
risk monitoring and reporting.
The market making and the proprietary trading activities in derivatives
are governed by the derivatives policy of the Bank, which lays down the
position limits, stop loss limits as well as other risk limits. As far
as forex derivatives are concerned, they are undertaken on back-to-back
basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The
Bank measures and monitors risk using FVBF (Price Value of a Basis
Point) approach. Risk reporting on derivatives forms an integral part
of the managemen! information system and the marked to market position
and the PVBP of the derivatives portfolio reported on a daily basis tc
the top management.
Risk monitoring on forex derivatives is done on a monthly basis. It is
reported to the top management and related clients on monthly basis.
3.1.2. Details of Single Borrower Limit (SGL), Group Borrower Limit
(GBL) exceeded by the bank.
The Bank has not exceeded the prudential credit exposure limits in
respect of Single Borrower Limit and Group Borrower Limit other than
food credit.
3.1.3. Unsecured Advances:
The total of advances for which intangible securities such as charge
over the rights, licenses, authorisations, etc have been taken as
securities is NIL
3.2 Disclosure of Penalties imposed by RBI :
No penalty was imposed by RBI during the year. ( Previous year- Nil )
4. DISCLOSURE REQUIREMENT AS PER ACCOUNTING STANDARDS (AS):
In compliance with the guidelines issued by the RBI regarding
disclosure requirements of the various Accounting Standards, the
following information is disclosed:
4.1 Net Profit or loss for the period, Prior Period Items and Changes
in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in
the Profit & Loss account, which requires a disclosure as per AS-5.
For the preparation of these financial results, the bank has followed
the same accounting policies and generally accepted practices adopted
for the preparation of audited financial statements for the year ended
March 31,2015, except for accounting of depreciation on fixed assets.
Disclosure regarding Depreciation policy: In the current year,
effective from April 1,2014 the Bank has changed the accounting policy
of charging depreciation having regard to change in the estimated
useful life of the assets, from Written down value method(WDV), to
Straight line method (SLM) in respect of all fixed assets other than
buildings .The management believes that the aforesaid changes better
reflect the actual use of assets acquired and is in conformity with the
Companies Act,2013.
On account of this change in accounting policy, the bank has in the
current quarter, reversed an amount of Rs. 866.64 lakh representing the
excess depreciation charge for the period upto March 31,2014 and
disclosed the same as an exceptional item. As a result of this change,
the net profit for the current year is higher by Rs. 866.64 lakh and
current quarter Rs. 866.64 lakh and the basic and diluted earnings per
share is higher by Rs. 0.74 per share.
In accordance with the requirement of schedule II of Companies Act,
2013 the Bank has also reassessed the useful life of the fixed asset
and an amount of Rs. 6386 lakh has been charged to the financial results
of the current year representing the depreciation on the carrying value
of the asset as on April 1,2014 on the remaining useful life.
4.1 Revenue Recognition: (AS-9):
Income / Expenditure items recognized on cash basis are either not
material or does not require disclosure under AS-9.
4.2. Employee Benefits : (AS -15) :
The Bank is following AS-15 (Revised 2005) ''Employee Benefits'' as
under:
(i) In respect of Contributory Plan, viz., Provident Fund, the Bank
pays fixed contribution at pre-determined rates to a separate Trust,
which invests in permitted securities. The obligation of the Bank is
limited to such fixed contribution.
(ii) In respect of Defined Benefit Plans, viz., Gratuity and Pension,
provision has been made based on actuarial valuation as per the
guidelines.
(iii) In respect of Leave encashment provisioning requirement has been
made based on actuarial valuation.
Part B: Geographic segments
Geographical Segment consists only of the Domestic Segment since the
Bank does not have any foreign branch.
Complied by: Dion Global Solutions Limited
SCHEDULES
Annual Report 2014 - 15
4.3 Earnings per Share (AS-20):
Sl. No. Particulars 2014 - 15 2013 - 14 1 Basic EPS after
Extraordinary items (Rs.) 39.86 40.08 2 Basic EPS before Extraordinary
items (Rs.) 39.12 40.08 3 Diluted EPS after Extraordinary items (Rs.) 39.78
39.78 4 Diluted EPS before Extraordinary items (Rs.) 39.04 39.78
Computation of Basic EPS (after Extraordinary items)
Sl. No. Particulars 2014 - 15 2013 - 14 a Net Profit (Rs. in crore)
464.28 429.60 b Weighted number of shares 116478007 107181106 c Basic
EPS (A/B) (Rs.) 39.86 40.08 d Nominal Value per share (Rs.) 10.00 10.00
Computation of Diluted EPS (after Extraordinary items)
Sl. No. Particulars 2014 - 15 2013 - 14 A Net Profit (Rs. in crore)
464.28 429.60 b Weighted number of shares (including Potential Equity
Shares) 116712852 107999676 c Diluted EPS (A/B) (Rs.) 39.78 39.78 d
Nominal Value per share (Rs.) 10.00 10.00
Computation of Basic EPS (before Extraordinary items)
Sl. No. Particulars 2014 - 15 2013 - 14 A Net Profit (Rs. in crore)
455.61 429.60 b Weighted number of shares 116478007 107181106 c Basic
EPS (A/B) (Rs.) 39.12 40.08 d Nominal Value per share (Rs.) 10.00 10.00
Computation of Diluted EPS (before Extraordinary items)
Sl. No. Particulars 2014 - 15 2013 - 14 A Net Profit (Rs. in crore)
455.61 429.60 b Weighted number of shares (including Potential Equity
Shares) 116712852 107999676 c Diluted EPS (A/B) (Rs.) 39.04 39.78 d
Nominal Value per share (Rs.) 10.00 10.00
4.4. Impairment of Assets (AS - 28)
In the opinion of the Management, there is no impairment of its Fixed
Asset to any material extent as at 31.03.2015 requiring recognition in
terms of Accounting Standard 28.
General Reserve
The Bank has withdrawn an amount of Rs. 30.00 crore from the General
Reserve and appropriated the same to Special Reserve u/s 36(1)(viii) of
the Income Tax Act.
5.1 Disclosure of Letter of Comfort (LOCs) :
The amount of Letter of comfort issued during the year 2014-15 was Rs.
2058.46 crore (Previous year Rs. 1648.81 crore)and outstanding as on
31.03.2015 was Rs. 948.61crore(Previous year Rs. 773.12 crore)
5.2 Provision Coverage Ratio (PCR)
The Provision Coverage Ratio as on 31.03.2015 was 75.20 %
5.3 Bancassurance Business:
The bank has received an amount of Rs. 8.68 crore (Life Insurance - Rs.
6.08 crore and Non Life Insurance - Rs. 2.60 crore) towards
fee/remuneration in respect of the bancassurance business undertaken
during 01.04.2014 to 31.03.2015.
5.4 Overseas Asset, NPAs and Revenue:NIL
5.5 Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms) : Nil
5.6 Unamortised Pension and Gratuity Liabilities
In accordance with the guidelines issued by Reserve Bank of India vide
their Circular No. DBOD.BP. BC.80/21.04.018/2010-11 dated 09.02.2011,
the Bank has debited Profit & Loss Account a sum of Rs. 14.44 crore
during the year ended 31.03.2015 on proportionate basis towards
unamortized liability of Rs. 28.87 crore (being amortized over 5 years
beginning from 31.03.2011) on account of reopening of pension option
during 2010-11 for existing employees who had not opted for pension
earlier. Thus the entire unamortized amount has been debited to P& L
account over a period of 5 years and balance is nil as on 31.03.2015.
The Bank has debited Profit & Loss Account a sum of Rs. 2.46 crore during
the year ended 31.03.2015 on proportionate basis towards unamortized
liability (being amortized over 5 years beginning from 31.03.2011) on
account of gratuity liability arising out of wage settlement limit.
Thus the entire unamortized amount has been debited to P& L account
over a period of 5 years and balance is nil as on 31.03.2015.
5.7 Disclosures on Remuneration:
Qualitative Disclosure:
(a) Information relating to the composition and mandate of the
Compensation & Remuneration Committee:
The Compensation & Remuneration Committee (CRC) of the Board consists
of six Directors. The Composition complies with both RBI guidelines and
the provisions of Companies Act, 2013.
The Mandate of the Remuneration committee includes:
Determining the Bank''s policies on remuneration packages payable to
Non-Executive Chairman, MD & CEO/WTD and the President. Positions up to
the General Manager level are covered under the salary and other
emoluments as per IBA package under Bipartite settlements.
Considering granting of Employees Stock Options and administering and
supervising the Employee Stock Option Scheme with particular reference
to quantum of options to be granted, grant price, vesting period,
exercise period etc.
Prescribing procedures for making fair and reasonable adjustments to
the number of options granted in case of any corporate actions such as
rights issue, bonus issue, mergers etc., including conditions under
which the options shall lapse due to the reasons specified in the ESOS
of the Bank.
Complying with the applicable laws regarding compensation /
remuneration payable to the persons covered under the compensation
policy as also the Regulations governing ESOS in terms of SEBI
Regulations and other applicable laws in connection therewith.
(b) Information relating to the design and structure of remuneration
processes and the key features and objectives of remuneration policy:
The Compensation Policy approved by the Board, is in alignment with the
RBI guidelines contained in its circular DBODNo.BC.72/29.67.001/2011-12
dated 13.01.2012.
CRC is entrusted with the responsibility of recommending to the Board
an appropriate compensation payable to the Non- Executive Chairman, MD
& CEO/WTD and the President and COO in the light of the guidance from
the regulator from time to time, bank''s own requirement as also taking
into account the prevailing market practices of payment of
compensation, the cost to income ratio and the capital adequacy ratios
which should support the remuneration packages. CRC shall working close
co-ordination with the Risk Management and ALM Committee of the Board
in order to achieve effective alignment between remuneration and risks.
(c) Description of the ways in which current and future risks are taken
into account in the remuneration processes. It should include the
nature and type of the key measures used to take account of these
risks:
The Committee would be taking into account the following factors while
reviewing or making recommendation for reviewing the remuneration for
the persons covered under the Policy:
For MD & CEO/WTD, the compensation payable is divided into fixed and
variable components. The fixed component represented a significant
proportion of total remuneration taking into account all relevant
factors including the prevalent industry practice. Approval of RBI is
obtained for the fixed compensation payable to MD & CEO/WTD.
For the Non-Executive Chairman of the Bank, only fixed pay/honorarium
is payable apart from the sitting fees payable for attending the Board
or Board Committee Meetings.
For the President, compensation payable is only fixed pay taking into
account the industry practices, experience, performance and potential
risk taking etc. apart from perquisites and other allowances applicable
to the General Manager Cadre or such higher quantum as may be
recommended by the CRC. President is also eligible for Employee Stock
Options as may be decided by the CRC as per the SEBI guidelines.
(d) Description of the ways in which the bank seeks to link performance
during a performance measurement period with levels of remuneration:
Bank would ensure that the compensation is adjusted to all types of
risk, symmetrical with risk outcomes as well as sensitive to the time
horizon of risk.
The variable pay could be in cash, stock linked instruments or a mix of
both. Variable pay shall relate to the performance of the Bank.
Variable pay is considered only for MD & CEO/WTD of the Bank. Variable
pay shall not exceed 40% of the fixed pay in any year. This is payable
on the basis of achievement of certain business targets such as
reaching business figures including net profits and other qualitative
factors taking into account the extraordinary items, appropriate risk
management and efficient consumption of capital and comparison of
results with the industry performance (bench marking).
In the event of negative contributions of the bank and or the relevant
line of business in any year, the deferred compensation shall be
subjected to malus and clawback arrangements in tune with the RBI
guidelines.
(e) A discussion of the bank''s policy on deferral and vesting of
variable remuneration and a discussion of the bank''s policy and
criteria for adjusting deferred remuneration before vesting and after
vesting:
Presently no variable remuneration is being paid to the President &
COO.
For MD & CEO/WTD: If the variable pay is significant, then the bank
would defer the payment over a period of three years.
(f) Description of the different forms of variable remuneration (i.e.
cash, shares, ESOPs and other forms) that the bank utilizes and the
rationale for using these different forms:
The Bank has paid only fixed remuneration to MD & CEO for the year
2013-14 as per RBI approval. For the year under report CRC has not
recommended variable pay.
MD & CEO has been granted 5000 options under KVBESOS 2011 at a price of
Rs. 275/- per option. Vesting period was over on 31.03.2014. The options
were fully exercised as on 31.03.2015.
Apart from MD & CEO, no other executive or employee is eligible for
variable pay.
The Bank shall not grant any severance pay (other than the terminal
benefits and gratuity as per the provisions) to the WTD/MD & CEO or any
other executive.
Bank shall not provide any facility or funds or permit MD/WTD to insure
or hedge his/her compensation structure to offset the risk alignment
effects embedded in the compensation package.
Quantitative Disclosures:
(g) Number of meetings held by the Remuneration Committee during the
financial year and remuneration paid to its members.
During the fiscal 2014-15, one meeting was held on 28.05.2014. The
members were paid sitting fees for having attended the meeting. Amount
of sitting fees paid was Rs. 5000/- per member/per sitting. Aggregate
amount paid for the fiscal was at Rs. 25000/-.
(h) Number of employees having received a variable remuneration award
during the financial year 2014-15: Nil Number and total amount of
sign-on awards made during the financial year: Nil
Details of guaranteed bonus, if any, paid as joining / sign on bonus:
Nil Details of severance pay, in addition to accrued benefits, if any:
Nil
(i) Total amount of outstanding deferred remuneration, split into cash,
shares and share-linked instruments and other forms: Nil
Total amount of deferred remuneration paid out in the financial year:
Nil
(j) Breakdown of amount of remuneration awards for the financial year
to show fixed and variable, deferred and non- deferred: Nil
(k) Total amount of outstanding deferred remuneration and retained
remuneration exposed to ex post explicit and / or implicit adjustments
: Nil
Total amount of reductions during the financial year due to ex-post
explicit adjustments: Nil Total amount of reductions during the
financial year due to ex-post implicit adjustments: Nil
5.8 Disclosures relating to Securitisation
The bank has not sponsored any SPVs for Securitization transactions.
5.9 Credit Default Swaps
Bank has not initiated any trade in Credit Default Swaps.
5.10 Provision for Unhedged forex Exposure :
The Bank has made a provision of Rs. 4.00 crore towards unhedged forex
exposure for its clients for the year ended 31.03.2015.
5.11 During the financial year 2014-15, the Bank had allotted 1029775
shares pursuant to the exercise of stock options by certain employees.
5.12 The Bank issued 13412015 shares having face value of Rs. 10/- at a
price of Rs. 466 as Qualified Investors placement with necessary approval
from SEBI and the expenses of QIP issue of Rs. 7.78 crore was netted off
against the share premium.
5.13 Pending final settlement of wage revision of employees, an
expenditure of Rs. 20 crore is provided during the year apart from adhoc
payment made to employees.
6.1 Qualitative disclosure around LCR
The LCR promotes short term resilience of banks to potential liquidity
disruptions by ensuring that they have sufficient high quality liquid
assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
Objective:
The LCR standard aims to ensure that a bank maintains an adequate level
of unencumbered HQLAs that can be converted into cash to meet its
liquidity needs for a 30 calendar day time horizon under a
significantly severe liquidity stress scenario specified by
supervisors. At a minimum, the stock of liquid assets should enable the
bank to survive until day 30 of the stress scenario, by which time it
is assumed that appropriate corrective actions can be taken.
Composition of HQLA:
- Cash in hand
- Excess CRR balance as on that particular day
- Excess Government Securities in excess of minimum SLR requirement
- Government Securities within the mandatory SLR requirement to the
extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL
as allowed for MSF)
- Facility to avail liquidity for liquidity coverage ratio at 5% of
NDTL
- From the above deduct the borrowings under REPO transactions
- AAA rated bonds and AA- & above bonds and adding marketable
securities representing claims guaranteed by sovereigns having risk
weights higher than 20% but not higher than 50%
- Common equity shares not issued by the bank and included in NSE CNX
Nifty and / or S & P BSE Sensex indices.
6.2 The Bank has recognized the Income Tax Liability of Rs.. 103.78 crore
on its Book Profits in terms of section 115JB of the Income Tax Act and
a sum of 77.27 crore being MAT credit entitlement under section 115 JAA
of the Income Tax act, 1961 has been recognized and treated as an
Asset.
6.3 In accordance with the RBI circular DBOD. No.
BPBC.2/21.06.201/2013-14 dated 01.07.2013, banks are required to make
half yearly Pillar Ill disclosures under Basel Ill capital requirements
with effect from 30th September, 2013.The disclosures have been made
available on the banks web site at the following link
http://www.kvb.co.in/footer/pillarlll_disclosures.html
6.4 The bank has incurred an amount of Rs. 1,13,65,543.00 towards
Corporate Social Responsibility and is in the process of identifying
various projects and its appropriateness for spending in future.
7. Figures of the previous year have been
regrouped/rearranged/reclassified wherever necessary.
Mar 31, 2014
(000''s omitted)
AS ON AS ON
31.03.2014 31.03.2013
Rs. Rs.
SCHEDULE 12 - CONTINGENT LIABILITIES
I Claims against the Bank not
acknowledged as debts 4,77,46 6,61,44
II Liability on account of outstanding
a) Forward Exchange Contracts 7287,77,65 6311,87,83
b) Derivatives NIL NIL
III Guarantees given on behalf of
Constituents in India 2359,21,26 2002,91,14
IV Acceptances, Endorsements and
other Obligations 1654,66,14 1463,30,54
V Other items for which the Bank
is contingently liable NIL NIL
TOTAL 11306,42,51 9784,70,95
1. INTER-BRANCH TRANSACTIONS:
Inter Branch/office accounts reconciliation has been completed upto
31.03.2014 and all the Inter branch entries have been reconciled upto
31.03.2014.
2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of
the Bank up to 31.03.2014.
3.2.3 Sale and transfers to / from HTM Category
Sale of securities from HTM category during the year does not exceed 5%
of the book value of investments held in HTM category at the beginning
of the year.
3.2.4 During the year ended March 31, 2014 there was one instance of
SGL bouncing for which RBI has not imposed any penalty.
3.2.5 The percentage of SLR investments under "Held to Maturity"
category as on 31.03.2014 was 22.94% of Demand and Time Liability of
the Bank (Previous year 20.93%), which is within the permissible limit
as per RBI guidelines.
3.3.3 Disclosures on risk exposure in derivatives: Qualitative
Disclosure:
Structure, Organisation, Scope, Nature of risk management in
derivatives:
The organization structure consists of Treasury Department which is
segregated into three functional areas i.e., front office, mid office
and back office.
Rupee derivative deals are executed for hedging or for trading. The
risk in the derivatives portfolio is monitored by assessing the mark to
market (MTM) position of the portfolio on a daily basis and the impact
on account of probable market movements. The overall portfolio is
operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to- back basis.
The outstanding deals are marked to market on monthly basis. The MTM
values are informed to the clients every month and margin topped up
where required.
The Board reviews the risk profi le of the outstanding portfolio at
regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge
swaps are accounted for like a hedge of the asset or liability. The
income / expense on hedge swaps are accounted on accrual basis except
where swaps transactions whose underlying is subjected to mark to
market. Such hedge swaps are marked to market on a monthly basis and
the gain / losses are recorded as an adjustment to the designated asset
/ liability. The Non hedge swaps are marked to market every month and
the MTM losses in the basket are accounted in the books while MTM profi
ts are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the
contracts with counter parties like Banks / PDs etc. For deals with
Corporate Clients, appropriate collateral security / margin etc. are
stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals are contracted with Banks / Major PDs/ highly rated
clients and no default risk is anticipated on the deals with them.
Dealing in derivatives is centralized in the treasury of the Bank.
Derivative transactions are entered into by the treasury front office.
Treasury middle office conducts an independent check of the
transactions entered into
by the front office and ensures compliance with various internal and
regulatory guidelines. Back office undertakes activities such as confi
rmation, settlement, accounting, risk monitoring and reporting.
The market making and the proprietary trading activities in derivatives
are governed by the derivatives policy of the Bank, which lays down the
position limits, stop loss limits as well as other risk limits. As far
as forex derivatives are concerned, they are undertaken on back-to-back
basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The
Bank measures and monitors risk using PVBP (Price Value of a Basis
Point) approach. Risk reporting on derivatives forms an integral part
of the management information system and the marked to market position
and the PVBP of the derivatives portfolio is reported on a daily basis
to the top management.
Risk monitoring on forex derivatives (forex forward contracts) is done
on a monthly basis. It is reported to the top management and related
clients on monthly basis.
3.4.4 Details of Non-performing financial assets purchased / sold
The Bank has not purchased / sold any Non Performing Assets to banks
during the financial year 2013-14 (Previous Year  NIL)
3.7.4. Details of Single Borrower Limit (SGL), Group Borrower Limit
(GBL) exceeded by the bank:
The Bank has not exceeded the prudential credit exposure limits in
respect of Single Borrower Limit and Group Borrower Limit.
3.7.5 Unsecured Advances:
The total of advances for which intangible securities such as charge
over the rights, licenses, authorisations etc have been taken as
securities is Nil.
3.8 Disclosure of Penalties imposed by RBI:
No penalty was imposed by the RBI during the year. (Previous year -
Nil)
4. DISCLOSURE REQUIREMENT AS PER ACCOUNTING STANDARDS (AS):
In compliance with the guidelines issued by the RBI regarding
disclosure requirements of the various Accounting Standards, the
following information is disclosed:
4.1 Net Profit or loss for the period, Prior Period Items and Changes
in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in
the Profit & Loss Account, which requires a disclosure as per AS-5.
4.2 Revenue Recognition: (AS-9):
Income / Expenditure items recognized on cash basis are either not
material or does not require disclosure under AS-9.
4.3 Employee Benefi ts: (AS-15):
The Bank is following AS-15 (Revised 2005) ''Employee Benefi ts'' as
under:
(i) In respect of Contributory Plan, viz., Provident Fund, the Bank
pays fixed contribution at pre-determined rates to a separate Trust,
which invests in permitted securities. The obligation of the Bank is
limited to such fixed contribution.
(ii) In respect of Defi ned Benefi t Plans, viz., Gratuity and Pension,
provision has been made based on actuarial valuation as per the
guidelines.
(iii) In respect Leave encashment, provision has been made based on
actuarial valuation.
4.8. Impairment of Assets (AS Â 28):
In the opinion of the Management, there is no impairment of its Fixed
Asset to any material extent as at 31.03.2014 requiring recognition in
terms of Accounting Standard 28.
5.3 Draw Down from Reserves:
A. Revenue Reserve
During the year, the Bank, pursuant to RBI''s circular No.DBOD. No. BP
BC. 77/21.04.018/2013-14 dated 20th December 2013, has created DTL of
Rs.. 49.29 crore on Special Reserve for the period up to March 31, 2013
and has adjusted the same directly from the Revenue Reserve.
B. Investment Reserve
In line with the RBI Guidelines, the bank has transferred a sum of Rs..
21.00 crore from the Investment Reserve account to General Reserve.
5.5 Disclosure of Letters of Comfort (LOCs):
The amount of Letters of Comfort issued during the year 2013-14 was
Rs..1648.81 Crore (Previous year Rs..1075.21 Crore) and outstanding as on
31.03.2014 was Rs..773.12 Crore (Previous year Rs..406.91 Crore).
5.6 Provision Coverage Ratio (PCR):
The Provision Coverage Ratio as on 31.03.2014 was 75.01%
5.7 Bancassurance Business:
The Bank has received an amount of Rs.. 8.37 Crore (life insurance -
Rs..6.13 Crore, Non-life insurance - Rs..2.24 Crore) towards Fee/
Remuneration in respect of the bancassurance business undertaken during
01.04.2013 to 31.03.2014.
5.11 Overseas Assets, NPAs and Revenue : NIL
5.12 Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms) : NIL
5.13 Unamortised Pension and Gratuity Liabilities:
In accordance with the guidelines issued by Reserve Bank of India vide
their Circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011, the
Bank has debited Profit & Loss Account a sum of Rs..14.44 Crore during
the year ended 31.03.2014 on proportionate basis towards unamortized
liability of Rs.. 28.87 Crore (being amortized over 5 years beginning
from 31.03.2011) on account of reopening of pension option during
2010-11 for existing employees who had not opted for pension earlier.
The balance amount of Rs.. 14.44 Crore will be dealt with as per
guidelines of RBI.
The Bank has debited Profit & Loss Account a sum of Rs..2.46 Crore
during the year ended 31.03.2014 on proportionate basis towards
unamortized liability of Rs..4.93 Crore (being amortized over 5 years
beginning from 31.03.2011) on account of gratuity liability arising out
of wage settlement limit. The balance amount of Rs..2.46 Crore will be
dealt with as per guidelines of RBI.
5.14 Disclosures on Remuneration: Qualitative Disclosure:
(a) Information relating to the composition and mandate of the
Compensation & Remuneration Committee:
The Composition & Remuneration Committee (CRC) of the Board consists of
fi ve Independent Directors inclusive of a member of Risk Management
and Asset Liability Management Committee of the Board.
The Mandate of the Remuneration committee includes:
Determining the Bank''s policies on remuneration packages payable to
Non-Executive Chairman, MD & CEO/WTD and the President. Positions up to
the General Manager level are covered under the salary and other
emoluments as per IBA package under Bipartite settlements.
Considering granting of Employees Stock Options and administering and
supervising the Employee Stock Option Scheme with particular reference
to quantum of options to be granted, grant price, vesting period,
exercise period etc.
Prescribing procedures for making fair and reasonable adjustments to
the number of options granted in case of any corporate actions such as
rights issue, bonus issue, mergers etc., including conditions under
which the options shall lapse due to the reasons specifi ed in the ESOS
of the Bank.
Complying with the applicable laws regarding compensation /
remuneration payable to the persons covered under the compensation
policy as also the Regulations governing ESOS in terms of SEBI
Regulations and other applicable laws in connection therewith.
(b) Information relating to the design and structure of remuneration
processes and the key features and objectives of remuneration policy.
The Compensation Policy approved by the Board, is in alignment with the
RBI guidelines contained in its circular DBOD
No.BC.72/29.67.001/2011-12 dated 13.01.2012.
CRC is entrusted with the responsibility of recommending to the Board
an appropriate compensation payable to the Non- Executive Chairman, MD
& CEO/WTD and the President and COO in the light of the guidance from
the regulator from time to time, bank''s own requirement as also taking
into account the prevailing market practices of payment of
compensation, the cost to income ratio and the capital adequacy ratios
which should support the remuneration packages. CRC shall work in close
co-ordination with the Risk Management and ALM Committee of the Board
in order to achieve effective alignment between remuneration and risks.
(c) Description of the ways in which current and future risks are taken
into account in the remuneration processes. It should include the
nature and type of the key measures used to take account of these
risks.
The Committee would be taking into account the following factors while
reviewing or making recommendation for reviewing the remuneration for
the persons covered under the Policy:
For MD & CEO/WTD, the compensation payable is divided into fixed and
variable components. The fixed component represented a signifi cant
proportion of total remuneration taking into account all relevant
factors including the prevalent industry practice. Approval of RBI is
obtained for the fixed compensation payable to MD & CEO/WTD.
For the Non-Executive Chairman of the Bank, only fixed pay/honorarium
is payable apart from the sitting fees payable for attending the Board
or Board Committee Meetings.
For the President, compensation payable is only fixed pay taking into
account the industry practices, experience, performance and potential
risk taking etc. apart from perquisites and other allowances applicable
to the General Manager Cadre or such higher quantum as may be
recommended by the CRC. President is also eligible for Employee Stock
Options as may be decided by the CRC as per the SEBI guidelines.
(d) Description of the ways in which the bank seeks to link performance
during a performance measurement period with levels of remuneration.
Bank would ensure that the compensation is adjusted to all types of
risk, symmetrical with risk outcomes as well as sensitive to the time
horizon of risk.
The variable pay could be in cash, stock linked instruments or a mix of
both. Variable pay shall relate to the performance of the Bank.
Variable pay is considered only for MD & CEO/WTD of the Bank. Variable
pay shall not exceed 40% of the fixed pay in any year. This is payable
on the basis of achievement of certain business targets such as
reaching business fi gures including net profits and other qualitative
factors taking into account the extraordinary items, appropriate risk
management and effi cient consumption of capital and comparison of
results with the industry performance (bench marking).
In the event of negative contributions of the bank and or the relevant
line of business in any year, the deferred compensation shall be
subjected to malus and clawback arrangements in tune with the RBI
guidelines.
(e) A discussion of the bank''s policy on deferral and vesting of
variable remuneration and a discussion of the bank''s policy and
criteria for adjusting deferred remuneration before vesting and after
vesting.
Presently no variable remuneration is being paid to the President &
COO.
For MD & CEO/WTD : If the variable pay is signifi cant, then the bank
would defer the payment over a period of three years.
(f) Description of the different forms of variable remuneration (i.e.
cash, shares, ESOPs and other forms) that the bank utilizes and the
rationale for using these different forms.
The Bank has not paid any variable remuneration to MD & CEO for the
year 2012-13. For the year under report the CRC is yet to decide the
variable remuneration.
MD & CEO has been granted 5000 options under KVBESOS 2011 at a price of
Rs..275/- per option. Vesting period is completed as on 31.03.2014. The
options are exercisable from 01.04.2014 to 31.03.2015.
Apart from MD & CEO, no other executive or employee is eligible for
variable pay.
The Bank shall not grant any severance pay (other than the terminal
benefi ts and gratuity as per the provisions) to the WTD/MD & CEO or
any other executive.
Bank shall not provide any facility or funds or permit MD/WTD to insure
or hedge his/her compensation structure to offset the risk alignment
effects embedded in the compensation package.
Quantitative Disclosures:
(g) Number of meetings held by the Remuneration Committee during the fi
nancial year and remuneration paid to its members.
During the fi scal 2013-14, two meetings were held on 04.01.2014 and
29.03.2014. The members were paid sitting fees for having attended the
meeting. Amount of sitting fees paid was Rs.. 5000/- per member/per
sitting. Aggregate amount paid for the fi scal was at Rs.. 45000/-.
(h) Number of employees having received a variable remuneration award
during the financial year 2013-14: NIL. Number and total amount of
sign-on awards made during the financial year: NIL Details of
guaranteed bonus, if any, paid as joining / sign on bonus: NIL Details
of severance pay, in addition to accrued benefi ts, if any: NIL
(i) Total amount of outstanding deferred remuneration, split into cash,
shares and share-linked instruments and other forms: NIL
Total amount of deferred remuneration paid out in the financial year:
NIL
(j) Breakdown of amount of remuneration awards for the financial year
to show fixed and variable, deferred and non-deferred:
NIL
(k) Total amount of outstanding deferred remuneration and retained
remuneration exposed to ex post explicit and / or implicit adjustments
: NIL
Total amount of reductions during the financial year due to ex-post
explicit adjustments: NIL
Total amount of reductions during the financial year due to ex-post
implicit adjustments : NIL
5.15 Disclosures relating to Securitisation
The bank has not sponsored any SPVs for Securitization transactions.
5.16 Credit Default Swaps
Bank has not initiated any trade in Credit Default Swaps.
6.1 Employee Stock Option
The Bank has granted 13,92,015 Stock Options in aggregate to its
employees and a sum of Rs. 24.61 Crore has been provided as Employee
Compensation Cost being the proportionate accounting value in respect
of stock option.
6.2 During the year, the Bank, pursuant to RBI''s circular No. DBOD.
No.BP.BC. 77/21.04.018/2013-14 dated 20th December 2013, has created
DTL of Rs. 49.29 crore on Special Reserve for the period up to March
31, 2013 and has adjusted the same directly from the Revenue Reserve.
6.3 The Bank has recognized the Income Tax Liability of Rs.95.99 crore
on its Book profits in terms of section 115JB of the Income Tax Act
and the entire sum, being MAT credit entitlement under section 115 JAA
of the Income Tax act, 1961 has been recognized and treated as an
asset.
6.4 In terms of RBI circular DBOD. No. BPBC.88/21.06.201/2012-13 dated
28.03.2013 banks have been advised to disclose the capital Adequacy
Ratio computed under Basel III regulations from the quarter ended June
2013. Accordingly, corresponding details for the previous year are not
furnished.
6.5 In accordance with the RBI circular DBOD. No.
BPBC.2/21.06.201/2013-14 dated 01.07.2013, banks are required to make
half yearly Pillar III disclosures under Basel III capital requirements
with effect from 30th September, 2013.The disclosures have been made
available on the banks web site at the following link
http://www.kvb.co.in/footer/pillarIII_disclosures.html
7. Figures of the previous year have been
regrouped/rearranged/reclassified wherever necessary.
Mar 31, 2013
A. BACKGROUND
The Karur Vysya Bank Limited, incorporated in Karur, India is a
publicly held Banking company engaged in providing a wide range of
banking and financial services including commercial banking and
treasury operations. It is a banking company governed by the Banking
Regulation Act, 1949.
B. BASIS OF PREPARATION
The financial statements are prepared following the going concern
concept, on historical cost basis and conform to the Generally Accepted
Accounting Principles, (GAAP) in India which encompasses applicable
statutory provisions, regulatory norms prescribed by the Reserve Bank
of India (RBI) from time to time, notified Accounting Standards (AS)
issued under the Companies (Accounting Standards) Rules, 2006 to the
extent applicable and current practices prevailing in the banking
industry in India.
Use of Estimates:
The preparation of the financial statements require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities including contingent liabilities as of the date of the
financial statement and the reported income and expenses during the
reported period. The Management believes that the estimates and
assumptions used in the preparation of the financial statements are
prudent and reasonable. Actual results could differ from these
estimates. The differences, if any between estimates and actual will be
dealt appropriately in future periods.
1. INTER-BRANCH TRANSACTIONS:
Inter Branch/Office accounts reconciliation has been completed upto
31.03.2013 and all the Inter branch entries have been reconciled upto
31.03.2013.
2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of
the Bank up to 31.03.2013.
3. INVESTMENTS:
The percentage of SLR investments under "Held to Maturity" category
as on 31.03.2013 was 20.93% of Demand and Time Liability of the Bank
(Previous year 23.24%), which is within the permissible limit as per
RBI guidelines.
4.1.1 Sale and transfers to / from HTM Category
The market value of Investments held in the HTM category was Rs..
8843.98 Crore and the excess of book value over market value was
Rs..28.94 Crore as on 31.03.2013.
4.1.2 Disclosures on risk exposure in derivatives: Qualitative
Disclosure: Structure, Organisation, Scope, Nature of risk management
in derivatives:
The organization structure consists of Treasury Department which is
segregated into three functional areas i.e., front office, mid office
and back office.
Rupee derivative deals are executed for hedging or for trading. The
risk in the derivatives portfolio is monitored by assessing the mark to
market (MTM) position of the portfolio on a daily basis and the impact
on account of probable market movements. The overall portfolio is
operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis.
The outstanding deals are marked to market on monthly basis. The MTM
values are informed to the clients every month and margin topped up
where required.
The Board reviews the risk profile of the outstanding portfolio at
regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge
swaps are accounted for like a hedge of the asset or liability. The
income / expense on hedge swaps are accounted on accrual basis except
where swaps transactions whose underlying is subjected to mark to
market. Such hedge swaps are marked to market on a monthly basis and
the gain / losses are recorded as an adjustment to the designated asset
/ liability. The Non hedge swaps are marked to market every month and
the MTM losses in the basket are accounted in the books while MTM
profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the
contracts with counter parties like Banks / PDs etc. For deals with
Corporate Clients, appropriate collateral security / margin etc. are
stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals are contracted with Banks / Major PDs/highly rated
clients and no default risk is anticipated on the deals with them.
Dealing in derivatives is centralized in the treasury of the Bank.
Derivative transactions are entered into by the treasury front office.
Treasury middle office conducts an independent check of the
transactions entered into by the front office and ensures compliance
with various internal and regulatory guidelines. Back Office undertakes
activities such as confirmation, settlement, accounting, risk
monitoring and reporting.
The market making and the proprietary trading activities in derivatives
are governed by the derivatives policy of the Bank, which lays down the
position limits, stop loss limits as well as other risk limits. As far
as forex derivatives are concerned, they are undertaken on back-to-back
basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The
Bank measures and monitors risk using PVBP (Price Value of a Basis
Point) approach. Risk reporting on derivatives forms an integral part
of the management information system and the marked to market position
and the PVBP of the derivatives portfolio is reported on a daily basis
to the top management.
Risk monitoring on forex derivatives is done on a monthly basis. It is
reported to the top management and related clients on monthly basis.
4.1.3. Details of Single Borrower Limit (SGL), Group Borrower Limit
(GBL) exceeded by the bank:
The Bank has not exceeded the prudential credit exposure limits in
respect of Single Borrower Limit and Group Borrower Limit.
4.1.4 Unsecured Advances:
The total of advances for which intangible securities such as charge
over the rights, licenses, authorisations etc have been taken as
securities is Nil.
4.2 Disclosure of Penalties imposed by RBI:
No penalty was imposed by the RBI during the year.
5. DISCLOSURE REQUIREMENT AS PER ACCOUNTING STANDARDS (AS):
In compliance with the guidelines issued by the RBI regarding
disclosure requirements of the various Accounting Standards, the
following information is disclosed:
5.1 Net Profit or loss for the period, Prior Period Items and Changes
in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in
the Profit & Loss account, which requires a disclosure as per AS-5.
5.2 Revenue Recognition: (AS-9):
Income / Expenditure items recognized on cash basis are either not
material or does not require disclosure under AS-9.
5.3 Employee Benefits: (AS-15):
The Bank is following AS-15 (Revised 2005) ''Employee Benefits'' as
under:
(i) In respect of Contributory Plan, viz., Provident Fund, the Bank
pays fixed contribution at pre-determined rates to a separate Trust,
which invests in permitted securities. The obligation of the Bank is
limited to such fixed contribution.
(ii) In respect of Defined Benefit Plans, viz., Gratuity and Pension,
provision has been made based on actuarial valuation as per the
guidelines.
(iii) In respect Leave encashment, provision has been made based on
actuarial valuation.
6.1 Disclosure of Letters of Comfort (LOCs):
The amount of Letters of Comfort issued during the year 2012-13 was Rs.
1075.20 Crore (Previous year Rs.1008.65 Crore) and outstanding as on
31.03.2013 was Rs. 406.91 Crore (Previous year Rs. 416.07 Crore).
6.2 Provision Coverage Ratio (PCR):
The Provision Coverage Ratio as on 31.03.2013 was 75.20%
6.3 Banc assurance Business:
The Bank has received an amount of Rs..8.33 Crore (life insurance -
Rs..6.37 Crore, Non-life insurance - Rs. 1.96 Crore) towards Fee/
Remuneration in respect of the bancassurance business undertaken during
01.04.2012 to 31.03.2013.
6.4 Overseas Assets, NPAs and Revenue : NIL
6.5 Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms) : NIL
6.6 Unamortised Pension and Gratuity Liabilities:
In accordance with the guidelines issued by Reserve Bank of India vide
their Circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011, the
Bank has debited Profit & Loss Account a sum of Rs..14.44 Crore during
the year ended 31.03.2013 on proportionate basis towards unamortized
liability of Rs.. 43.31 Crore (being amortized over 5 years beginning
from 31.03.2011) on account of reopening of pension option during
2010-11 for existing employees who had not opted for pension earlier.
The balance amount of Rs.. 28.87 Crore will be dealt with as per
guidelines of RBI.
The Bank has debited Profit & Loss Account a sum of Rs..2.40 Crore
during the year ended 31.03.2013 on proportionate basis towards
unamortized liability of Rs..7.33 Crore (being amortized over 5 years
beginning from 31.03.2011) on account of gratuity liability arising out
of wage settlement limit. The balance amount of Rs..4.93 Crore will be
dealt with as per guidelines of RBI.
6.7 Disclosures on Remuneration: Qualitative Disclosure: (a)
Information relating to the composition and mandate of the Remuneration
Committee:
Composition of the Compensation & Remuneration Committee (CRC) of the
Board as on 31.03.2013 is as under :
Shri. K P Kumar, Chairman,
Shri. M G S Ramesh Babu,
Shri. S Ganapathi Subramanian,
Shri. G Rajasekaran and Shri. A J Suriyanarayana.
There are three independent directors. Members from the Risk Management
Committee of the Board are also included. The Mandate of the
Remuneration committee includes:
Determining the Bank''s policies on remuneration packages payable to
Non-Executive Chairman, MD & CEO and the President. Positions up to the
General Manager level are covered under the salary and other emoluments
as per the Bipartite settlements.
Considering granting of Employees Stock Options and administering and
supervising the Employee Stock Option Scheme with particular reference
to quantum of options to be granted, grant price, vesting period,
exercise period etc.
Prescribing procedures for making fair and reasonable adjustments to
the number of options granted in case of any corporate actions such as
rights issue, bonus issue, mergers etc., including conditions under
which the options shall lapse due to the reasons specified in the ESOS
of the Bank.
Complying with the applicable laws regarding compensation /
remuneration payable to the persons covered under the compensation
policy as also the Regulations governing ESOS in terms of SEBI
Regulations and other applicable laws in connection therewith.
(b) Information relating to the design and structure of remuneration
processes and the key features and objectives of remuneration policy.
The Compensation Policy in tune with the RBI guidelines contained in
its circular DBOD No.BC.72/29.67.001/2011-12 dated 13.01.2012 has since
been approved by the Board.
CRC is entrusted with the responsibility of recommending to the Board
an appropriate compensation payable to the Non- Executive Chairman, MD
& CEO and the President and COO in the light of the guidance from the
regulator from time to time, bank''s own requirement as also taking into
account the prevailing market practices of payment of compensation, the
cost to income ratio and the capital adequacy ratios which should
support the remuneration packages. CRC shall work in close
co-ordination with the Risk Management and ALM Committee of the Board
in order to achieve effective alignment between remuneration and risks.
(c) Description of the ways in which current and future risks are taken
into account in the remuneration processes. It should include the
nature and type of the key measures used to take account of these
risks.
The Committee would be taking into account the following factors while
reviewing or making recommendation for reviewing the remuneration for
the persons covered under the Policy:
In the case of whole time director / MD & CEO, the remuneration shall
be aligned to:
(a) Profitability of the Bank
(b) Industry''s current market practices
(c) Adjustment for all types of risks and are symmetric with risk
outcomes
(d) Pay-outs are sensitive to time horizon of the risk
(e) Mix of cash, equity and other methods of compensation consistent
with risk alignment
For the WTD / MD & CEO, the compensation shall be either fixed or fixed
and variable. ESOP is excluded from the compensation policy as the same
is governed under SEBI Regulations.
For the Non-Executive Chairman of the Bank, only fixed pay/honorarium
is payable apart from the sitting fees payable for attending the Board
or Board Committee Meetings.
For the President, compensation payable is only fixed pay taking into
account the industry practices, experience, performance and potential
risk taking etc. apart from perquisites and other allowances applicable
to the General Manager Cadre or such higher quantum as may be
recommended by the CRC. President is also eligible for Employee Stock
Options as may be decided by the CRC as per the SEBI guidelines.
(d) Description of the ways in which the bank seeks to link performance
during a performance measurement period with levels of remuneration.
Bank would ensure that the compensation is adjusted to all types of
risk, symmetrical with risk outcomes as well as sensitive to the time
horizon of risk.
The Bank shall not provide any facility or funds or permit the persons
covered under the policy to insure or hedge their compensation
structure to offset the risk alignment effects embedded in the
compensation package.
(e) A discussion of the bank''s policy on deferral and vesting of
variable remuneration and a discussion of the bank''s policy and
criteria for adjusting deferred remuneration before vesting and after
vesting.
Presently no variable remuneration is being paid to the MD & CEO,
Non-Executive Chairman and/or the President.
(f) Description of the different forms of variable remuneration (i.e.
cash, shares, ESOPs and other forms) that the bank utilizes and the
rationale for using these different forms.
Presently no variable remuneration is being paid to the MD & CEO,
Non-Executive Chairman and/or the President.
MD & CEO has been granted, subject to RBI approval, 5000 options under
KVBESOS 2011 at a price of Rs..275/- per option. The options are yet
to be vested on him.
Quantitative Disclosures:
(g) Number of meetings held by the Remuneration Committee during the
financial year and remuneration paid to its members.
One meeting of CRC was held on 28.02.2013. The members were paid
sitting fees for having attended the meeting. Amount of sitting fees
paid was Rs..5000/- per member, aggregating to Rs..25000/-.
(h) Number of employees having received a variable remuneration award
during the financial year 2012-13: NIL.
Number and total amount of sign-on awards made during the financial
year: NIL
Details of guaranteed bonus, if any, paid as joining / sign on bonus:
NIL Details of severance pay, in addition to accrued benefits, if any:
NIL
(i) Total amount of outstanding deferred remuneration, split into cash,
shares and share-linked instruments and other forms: NIL
Total amount of deferred remuneration paid out in the financial year:
NIL
(j) Breakdown of amount of remuneration awards for the financial year
to show fixed and variable, deferred and non-deferred: NIL
(k) Total amount of outstanding deferred remuneration and retained
remuneration exposed to ex post explicit and / or implicit adjustments
: NIL
Total amount of reductions during the financial year due to ex-post
explicit adjustments: NIL Total amount of reductions during the
financial year due to ex-post implicit adjustments : NIL
6.9 Disclosures relating to Securitisation
The bank has not sponsored any SPVs for Securitization transactions.
6.10 Credit Default Swaps
Bank has not initiated any trade in Credit Default Swaps.
7.1 Special Reserve U/s 36 (1) (viii) of I.T. Act :
As per Section 36 (1)(viii) of the Income Tax Act, 1961, the Bank has
appropriated an amount of Rs..50.00 crore towards Special Reserve for
the year 2012-13, being the eligible amount of deduction available
under the said provision.
7.2 Employee Stock Option
The Bank has granted 14,93,202 Stock Options in aggregate to its
employees during the year and a sum of Rs. 2.20 Crore has been provided
as Employee Compensation Cost being the proportionate accounting value
in respect of stock option.
8. Figures of the previous year have been regrouped / rearranged /
reclassified wherever necessary.
Mar 31, 2012
A. BACKGROUND
The Karur Vysya Bank Limited, incorporated in Karur, India is a
publicly held Banking company engaged in providing a wide range of
banking and financial services including commercial banking and
treasury operations. It is a banking company governed by the Banking
Regulation Act, 1949.
B. BASIS OF PREPARATION
The financial statements are prepared following the going concern
concept, on historical cost basis and conform to the Generally Accepted
Accounting Principles (GAAP), in India which encompasses applicable
statutory provisions, regulatory norms prescribed by the Reserve Bank
of India (RBI) from time to time, notified Accounting Standards (AS)
issued under the Companies (Accounting Standards) Rules, 2006 to the
extent applicable and current practices prevailing in the banking
industry in India.
Use of Estimates:
The preparation of the financial statements require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities including contingent liabilities as of the date of the
financial statement and the reported income and expenses during the
reported period. The Management believes that the estimates and
assumptions used in the preparation of the financial statements are
prudent and reasonable. Actual results could differ from these
estimates. The differences, if any between estimates and actual will be
dealt appropriately in future periods.
1. INTER-BRANCH TRANSACTIONS:
Inter branch/Office accounts reconciliation has been completed upto
31.03.2012 and all the Inter branch entries have been reconciled upto
31.03.2012.
2. BALANCING OF BOOKS:
The books of accounts have been balanced and tallied in all branches of
the Bank up to 31.03.2012. Reconciliation of accounts with Banks, in a
few branches, is in progress.
3. INVESTMENTS:
The percentage of SLR investments under "Held to Maturity" category as
on 31.03.2012 was 23.24% of Demand and Time Liability of the Bank
(Previous year 21.72%), which is within the permissible limit as per
RBI guidelines.
4.1.1 Sale and transfers to / from HTM Category
The market value of Investments held in the HTM category was Rs. 7859.07
Crore and the excess of book value over market value was Rs.294.76 Crore
as on 31.03.2012.
4.1.2 Disclosures on risk exposure in derivatives: Qualitative
Disclosure:
Structure, Organisation, Scope, Nature of risk management in
derivatives:
The organization structure consists of Treasury Department which is
segregated into three functional areas i.e., front office, mid office
and back office.
Rupee derivative deals are executed for hedging or for trading. The
risk in the derivatives portfolio is monitored by assessing the mark to
market (MTM) position of the portfolio on a daily basis and the impact
on account of probable market movements. The overall portfolio is
operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis.
The outstanding deals are marked to market on monthly basis. The MTM
values are informed to the clients every month after getting it from
the counterparty banks.
The Board reviews the risk profile of the outstanding portfolio at
regular intervals.
Accounting:
Accounting Policies as per RBI guidelines have been adopted. The hedge
swaps are accounted for like a hedge of the asset or liability. The
income / expense on hedge swaps are accounted on accrual basis except
where swaps transactions whose underlying is subjected to mark to
market. Such hedge swaps are marked to market on a monthly basis and
the gain / losses are recorded as an adjustment to the designated asset
/ liability. The Non hedge swaps are marked to market every month and
the MTM losses in the basket are accounted in the books while MTM
profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the
contracts with counter parties like Banks / PDs etc. For deals with
Corporate Clients, appropriate collateral security / margin etc. are
stipulated whenever considered necessary.
Credit Risk Mitigation:
Most of the deals have been contracted with Banks / Major PDs/highly
rated clients and no default risk is anticipated on the deals with
them.
Dealing in derivatives is centralized in the treasury of the Bank.
Derivative transactions are entered into by the treasury front office.
Treasury middle office conducts an independent check of the
transactions entered into by the front office and also undertakes
activities such as confirmation, settlement, accounting, risk
monitoring and reporting and ensures compliance with various internal
and regulatory guidelines.
The market making and the proprietary trading activities in derivatives
are governed by the derivatives policy of the Bank, which lays down the
position limits, stop loss limits as well as other risk limits. As far
as forex derivatives are concerned, they are undertaken on back-to-back
basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The
Bank measures and monitors risk using PVBP (Price Value of a Basis
Point) approach. Risk reporting on derivatives forms an integral part
of the management information system and the marked to market position
and the PVBP of the derivatives portfolio is reported on a daily basis
to the top management.
Risk monitoring on forex derivatives is done on a monthly basis after
getting the monthly MTM values from the counterparty banks. It is
reported to the top management and related clients on monthly basis.
4.2.1. Details of Single Borrower Limit (SGL), Group Borrower Limit
(GBL) exceeded by the bank.
The Bank has not exceeded the prudential credit exposure limits in
respect of Single Borrower Limit and Group Borrower Limit.
4.2.2 Unsecured Advances:
The total of advances for which intangible securities such as charge
over the rights, licenses, authorisations etc have been taken as
securities is NIL.
4.3.1 Disclosure of Penalties imposed by RBI: No penalty was imposed by
the Reserve Bank of India during the year.
5. DISCLOSURE REQUIREMENT AS PER ACCOUNTING STANDARDS (AS):
In compliance with the guidelines issued by the RBI regarding
disclosure requirements of the various Accounting Standards, the
following information is disclosed:
5.1 Net Profit or loss for the period, Prior Period Items and Changes
in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in
the Profit & Loss account, which requires a disclosure as per AS-5.
5.2 Revenue Recognition: (AS-9):
Income / Expenditure items recognized on cash basis are either not
material or does not require disclosure under AS-9.
5.3 Employee Benefits: (AS-15):
The Bank is following AS-15 (Revised 2005)
'Employee Benefits' as under:
(i) In respect of Contributory Plan, viz., Provident Fund, the Bank
pays fixed contribution at pre- determined rates to a separate Trust,
which invests in permitted securities. The obligation of the Bank is
limited to such fixed contribution.
(ii) In respect of Defined Benefit Plans, viz., Gratuity and Pension,
provision has been made based on actuarial valuation as per the
guidelines.
(iii) In respect Leave encashment provisioning requirement has been
made based on actuarial valuation.
5.3.1 The bank had provided for Rs.15.95 Crore towards Medical Leave up
to the previous year. The Medical leave being non encashable, the bank
has written back Rs.14.80 Crore, being the amount drawn from Reserve in
earlier year, to Reserve and the balance amount of Rs.1.15 crore to
Profit and Loss Account, as it is no longer required.
Part B: Geographic segments
Geographical Segment consists only of the Domestic Segment since the
Bank does not have any foreign branch.
5.4 Accounting for Taxes on Income (AS-22):
The Bank has recognized Deferred Tax Asset / Liability (DTA/DTL) and
has accounted for the Net Deferred Tax as on 31.03.2012.
5.5. Impairment of Assets (AS - 28)
In the opinion of the Management, there is no impairment of its Fixed
Asset to any material extent as at 31.03.2012 requiring recognition in
terms of Accounting Standard 28.
6.1 Disclosure of Letters of Comfort (LOCs)
The amount of Letters of Comfort issued during the year 2011-12 was Rs.
1008.65 Crore and outstanding as on 31.03.2012 was Rs.416.07 Crore.
6.2 Provision Coverage Ratio (PCR)
The Provision Coverage Ratio as on 31.03.2012 is 75.46%
6.3 Bancassurance Business:
The Bank has received an amount of Rs.5.52 Crore (Life Insurance -
Rs.4.00 Crore, Non-Life Insurance - Rs.1.52 Crore) towards Fee/
Remuneration in respect of the Bancassurance business undertaken during
01.04.2011 to 31.03.2012.
6.4 Overseas Assets, NPAs and Revenue : NIL
6.5 Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms) : NIL
6.6 Unamortised Pension and Gratuity Liabilities
In accordance with the guidelines issued by Reserve Bank of India vide
their Circular No.DBOD.BP.BC.80/21.04.018/2010-11 dated 09.02.2011, the
Bank has debited Profit & Loss Account a sum of Rs. 14.44 Crore during
the year ended 31.03.2012 on proportionate basis towards unamortized
liability of Rs. 57.75 Crore (being amortized over 5 years beginning
from 31.03.2011) on account of reopening of pension option during
2010-11 for existing employees who had not opted for pension earlier.
The balance amount of Rs 43.31 Crore will be dealt with as per
guidelines of RBI.
The Bank has debited Profit & Loss Account a sum of Rs. 2.46 Crore
during the year ended 31.03.2012 on proportionate basis towards
unamortized liability of Rs. 9.86 Crore (being amortized over 5 years
beginning from 31.03.2011) on account of gratuity liability arising out
of wage settlement limit. The balance amount of Rs. 7.33 Crore will be
dealt with as per guidelines of RBI.
7.1 Increase in Paid-up share capital and Share Premium:
The movement in Paid-up Share Capital and Share Premium during the year
ended 31.03.2012 is due to receipt of call money on Issue of Rights
shares and issue of shares under Employees Stock Option Scheme.
7.2 Special Reserve U/s 36 (1) (viii) of I.T. Act :
As per Section 36 (1)(viii) of the Income Tax Act, 1961, the Bank has
appropriated an amount of Rs.35.00 crore towards Special Reserve for the
year 2011-12, being the eligible amount of deduction available under
the said provision.
7.3 An amount of Rs 2.77 Crore being the amount appropriated for
Charities in the earlier years has been transferred to Reserves.
8. Figures of the previous year have been regrouped / rearranged /
reclassified wherever necessary.
Mar 31, 2010
1. INTER-BRANCH TRANSACTIONS
Inter branch/Office accounts reconciliation has been completed upto
31.03.2010 and all the Inter branch entries have been reconciled upto
31.03.2010.
2. BALANCING OF BOOKS
The books of accounts have been balanced and tallied in all branches of
the Bank up to 31st March 2010. The reconciliation of accounts with
other Banks has been completed up to 31st March 2010.
3. INVESTMENTS
In line with the extant guidelines of Reserve Bank of India, the Bank
has shifted certain securities from HTM category to AFS category and
NIL depreciation has been provided.
4. COMPLIANCE WITH ACCOUNTING STANDARDS
4.1 Net Profit or loss for the period, Prior Period Items and Changes
in Accounting Policies (AS-5):
There are no material prior period income and expenditure included in
the Profit & Loss account, which requires a disclosure as per AS-5.
4.2 Revenue Recognition: (AS-9):
Income / Expenditure items recognized on cash basis were either not
material or did not require disclosure under AS-9 (Revenue
Recognition).
4.3 Employee Benefits: (AS-15):
The Bank is following Accounting Standard 15 (Revised 2005) Employee
Benefits as under:
(i) In respect of Contributory Plan, viz., Provident Fund, the Bank
pays fixed contribution at pre-determined rates to a separate Trust,
which invests in permitted securities. The obligation of the Bank is
limited to such fixed contribution.
(ii) In respect of Defined Benefit Plans, viz., Gratuity and Pension,
provision has been made based on actuarial valuation as per the
guidelines.
(iii) In respect of other employee benefits such as Leave encashment
and Medical leave, provisioning requirement has been ascertained as per
actuarial valuation.
4.7 ACCOUNTING FOR TAXES ON INCOME (AS-22):
4.7.1 Appeals are pending with Income Tax Appellate Tribunal and
Commissioner of Income Tax (Appeals) for various years. No provision
is considered necessary for the disputed income tax on the basis of
favourable decisions.
4.7.2 The Bank has complied with Accounting Standard 22 "Accounting for
Taxes on Income" issued by the Institute of Chartered Accountants of
India.
4.8. INTANGIBLE ASSETS (AS-26)
Depreciation on software is calculated on straight-line method at
33.33% in compliance with Accounting Standard 26.
5.7 Disclosures on risk exposure in derivatives 5.7.1 Qualitative
Disclosure:
Structure, Organisation, Scope, Nature of risk management in
derivatives
The organization structure consists of Treasury Department which is
segregated into three functional areas i.e., front office, mid office
and back office.
Rupee derivative deals are executed for hedging or for trading. The
risk in the derivatives portfolio is monitored by assessing the mark to
market (MTM) position of the portfolio on a daily basis and the impact
on account of probable market movements. The overall portfolio is
operated within the risk limit fixed by the Bank.
Forex derivative deals are offered to clients on back-to-back basis.
The outstanding deals are marked to market on monthly basis. The MTM
values are informed to the clients every month after getting it from
the counterparty banks.
The Board reviews the risk profile of the outstanding portfolio at
regular intervals.
Accounting
Accounting Policies as per RBI guidelines have been adopted. The hedge
swaps are accounted for like a hedge of the asset or liability. The
income / expense on hedge swaps are accounted on accrual basis except
where swaps transactions whose underlying is subjected to mark to
market. Such hedge swaps are marked to market on a monthly basis and
the gain / losses are recorded as an adjustment to the designated asset
/ liability. The Non hedge swaps are marked to market every month and
the MTM losses in the basket are accounted in the books while MTM
profits are ignored.
Collateral Security
As per market practice, no collateral security is insisted on for the
contracts with counter parties like Banks / PDs etc. For deals with
Corporate Clients, appropriate collateral security / margin etc. are
stipulated whenever considered necessary.
Credit Risk Mitigation
Most of the deals have been contracted with Banks / Major PDs/highly
rated clients and no default risk is anticipated on the deals with
them.
Dealing in derivatives is centralized in the treasury of the Bank.
Derivative transactions are entered into by the treasury front office.
Treasury middle office conducts an independent check of the
transactions entered into by the front office and also undertakes
activities such as confirmation, settlement, accounting, risk
monitoring and reporting and ensures compliance with various internal
and regulatory guidelines.
The market making and the proprietary trading activities in derivatives
are governed by the derivatives policy of the Bank, which lays down the
position limits, stop loss limits as well as other risk limits. As far
as forex derivatives are concerned, they are undertaken on back-to-back
basis only.
Risk monitoring on derivatives portfolio is done on a daily basis. The
Bank measures and monitors risk using PVBP (Price Value of a Basis
Point) approach. Risk reporting on derivatives forms an integral part
of the management information system and the marked to market position
and the PVBP of the derivatives portfolio is reported on a daily basis
to the top management.
Risk monitoring on forex derivatives is done on a monthly basis after
getting the monthly MTM values from the counterparty banks. It is
reported to the top management and related clients on monthly basis.
5.16. Agricultural Debt Waiver and Debt Relief Scheme 2008
The bank has implemented the above scheme announced by the GOI.
A) Under debt waiver to small and marginal farmers, bank has submitted
a final claim of Rs.34.74 Crores duly certified by Statutory Auditors
out of which Rs.22.57 Crores received from the Government of India and
present Balance outstanding is Rs.12.17Crores.
B) As regards to Debt Relief Scheme, the Bank has so far settled an
amount of Rs.2.39 Crores to farmers as per the RBI guidelines. As the
scheme is extended up to 30/06/2010, final claim will be made
thereafter by the Bank. These accounts are classified as Standard
Advances.
5.19. Disclosure of Penalties imposed by RBI
No penalty was imposed by the Reserve Bank of India during the year.
5.20. Increase in Paid-up share capital and Share Premium
The increase in Paid-up share capital and Share Premium is due to
exercise of Employee Stock Option Scheme (ES0S) during the year ended
31st March 2010,
5.21. Creation of Special Reserve U/s 36 (1) (viii) of I.T. Act
As per Section 36 (1)(viii) of the Income Tax Act, 1961, the Bank has
created a Special Reserve of Rs.20.00 crore for the year 2009-
10 and Rs.10.00 crore transferred from General Reserve for the year
2008-09, being the eligible amount of deduction available under the
said provision.
5.22 Drawdown from General Reserve
An amount of Rs.10 crore has been transferred to profit & Loss account
as "below the line" item in the Profit & Loss Appropriation account
after determining the profit for the year to create Special Reserve U/s
36 (1) (viii) of IT. Act for the year 2008-09.
5.23 Impact on Change in Methodology of accounting and valuation of
investments
The bank has changed the methodology of accounting & valuation of
investments during the year 2009-10 from FIFO method to Weighted
Average Method. The impact on above in the profit and loss account is a
net gain of Rs.2.91 crore.
6.4 Overseas Assets, NPAs and Revenue : NIL
6.5 Off-balance sheet SPVs sponsored (which are required to be
consolidated as per accounting norms): NIL
6.6 Bancassurance Business
The Bank has received an amount of Rs.4.93 crore towards
Fee/remuneration in respect of the bancassurance business undertaken
during 01.04.2009 to 31.03.2010 (expenses reimbursement is not taken
into consideration)