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Notes to Accounts of South Indian Bank Ltd.

Mar 31, 2023

a) Liquidity Coverage Ratio (LCR)

i) Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of India''s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows from January 01, 2019. The daily average LCR of the bank for the quarter ended March 2023 is 199.46%.

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed up to 2% of NDTL in the form of borrowing limit available through Marginal Standing Facility (MSF) and 5% of NDTL as Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). From February 2016 onwards, RBI has allowed Banks to reckon an additional 3% of NDTL as FALLCR. This has been further increased by 1% from July 2016, 2% from June 2018 and another 2% from October 2018, onwards. Further, towards harmonisation of the effective liquidity requirements of banks with the LCR, RBI has permitted banks to reckon an additional 2% of Government securities within the mandatory SLR requirement as FALLCR in a phased manner from April 04, 2019.As on March 31, 2023, FALLCR stands at 16.00%.

Bank has a well-diversified funding portfolio and has a lower dependence on wholesale funds. Retail deposits which are considered as stable deposits from a liquidity perspective forms the major funding source of the Bank. The Bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source. The Bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) in order to ensure that banks maintain a stable funding profile in relation to the composition of their assets, liabilities and off-balance sheet activities. NSFR ensures resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding.

NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") of the Bank is a function of the liquidity characteristics and residual maturities of the various assets as well as the off-balance sheet (OBS) exposures of the Bank. As per the RBI Guideline, Bank is required to maintain a minimum NSFR of 100% on an ongoing basis effective from October 1, 2021.

The NSFR of the Bank as on 31^st March 2023 is at 158.92% as against the regulatory minimum of 100% and the table given below sets out the details of NSFR of the Bank as on the aforesaid date.

c) Sale and transfer to/from HTM category/Permanent Category

During the year ended March 31, 2023, the aggregate book value of sales and transfer of securities to/from HTM

category did not exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

In accordance of RBI guidelines, the 5% threshold limit referred to above is excluding the following:

i) The one-time transfers of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year.

ii) Additional shifting of securities explicitly permitted by the Reserve Bank of India from time to time and direct sales from HTM for bringing down SLR holdings in HTM category consequent to a downward revision in SLR requirement by RBI.

iii) Sales to Reserve Bank of India under pre-announced open market auctions.

iv) Repurchase of Government Securities by Government of India from banks.

v) Repurchase of State Development Loans by respective state governments under buyback/switch operations and

vi) Additional shifting of securities explicitly permitted by the Reserve Bank of India.

g) Unhedged Foreign Currency Exposure

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion. In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage.

Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines. The Bank has maintained provision of ?13.72 Crore and additional capital of ? 14.96 Crores on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2023.

* As per RBI guideline, for exposures to smaller entities which are having unhedged foreign currency exposure, banks may have the option of following a standardised method which would require an incremental provisioning of 10 bps over and above extant standard asset provisioning. Banks following standardised method for smaller entities will not be required to get UFCE data from these entities. Smaller entities are entities on which total exposure from banking system is at ? 50 Crore or less.

As per bank''s Board approved policy, it was decided to collect UFCE data from all customers who are having exposure above ? 5.00 Crore and for exposure below ''5.00 Crore bank is not collecting UFCE data. However for such accounts the bank is maintaining an incremental provision of 10bps over and above the extant standard asset provision on the outstanding balance.

c) Disclosures on Risk Exposure in Derivatives.

i) Qualitative Disclosure.

The Bank undertakes over the counter and exchange traded derivative transactions for Balance Sheet management and also for proprietary trading/ market making. Bank offers derivative products to the customers to enable them to hedge their exposure within the prevalent regulatory guidelines.

These transactions expose the Bank to various risks primarily credit, market, operational, legal, and reputation. There is functional separation between the Front Office, risk and Back Office for undertaking derivative transactions. The derivative transactions are governed by the Investment, forex and derivative policy and market risk management policy of the Bank as well as by the extant RBI guidelines. Various operational/risk limits are set up and actual exposures are monitored vis-a-vis the limits allocated. Risk Limits are in place for risk parameters viz. VaR, Stop Loss, Dealer Limit, Deal size limit. Actual positions are monitored against these limits on a daily basis and breaches, if any, are reported promptly. The MTM position of the derivative portfolio is monitored on a regular basis. The impact on derivative portfolio on account of the probable market movements are assessed on regular basis.

Bank deals in derivatives for hedging foreign currency assets/liabilities subject to the prevailing regulatory guidelines. Transactions for hedging and trading are recorded separately. For hedge transactions, the Bank identifies the hedged item (asset or liability) at the inception of the transaction itself. The effectiveness is ascertained at the time of inception of the hedge and periodically thereafter. Transactions related to foreign exchange forwards, Currency futures etc. are marked to market (MTM) on the reporting dates and the MTM is accounted in the books. Collateral requirements for derivative transactions are determined based on usual credit appraisal process. For the purpose of credit risk mitigation, most of the deals have been contracted with Banks/ Major primary dealers and no default risk is anticipated on the deals with them.

Foreign exchange forward contract has not been included in the above disclosure. The notional principal amount of foreign exchange contracts classified as trading on March 31, 2023 amounted to '' 16269.20 Crore (Previous Year '' 24,286.43 Crore) and mark to market position was asset of '' 123.15 crore (previous year '' 139.11 Crore) and liability of '' 102.64 crore (Previous year '' 94.51 crore). The notional principal amount of Foreign exchange contacts classified as hedging on March 31 2023 amounted to '' 3334.66 Crore (Previous year '' 2865.58 Crore).

The notional principal amounts of derivatives reflect the volume of transactions outstanding as at the Balance Sheet date and do not represent the amounts at risk. Interest rate derivative represents interest rate swaps.

d) Credit Default Swaps

The bank has not undertaken any transactions in credit default swaps during the year ended March 31, 2023 and March 31, 2022.

8. Securitisation-Transactions

The Bank has not undertaken any securitisation transactions during the year ended March 31, 2023 and March 31, 2022.

9. Off-balance Sheet SPVs sponsored

There are no SPVs sponsored by the Bank as at March 31, 2023 and March 31, 2022.

10. Transfers to Depositor Education and Awareness Fund (DEA Fund):

In accordance with the guidelines issued by the RBI, the Bank transfers the amount to the credit of any account which has not been operated upon for a period of ten years or any deposits or any amount remaining unclaimed for more than ten years to DEAFund.

During the year, short sale of securities amounting to ? 45 Crore were kept open for value date 22.12. 2021. Market Reverse Repo for ? 35 Crore was taken against 45 Cr short sale and Purchase of Market Reverse Repo for ? 10 Crore against the securities short 6.67% GS 2035 was not taken which lead to shortage of security balance by ?10 Crore in Subsidiary General Ledger (SGL). The same has been reported to the appropriate authority. There is no other such incidence incurred during the period. Further we also confirm that all investments and Forex transactions are in compliance with RBI directives and Banks Investment Policy.

13. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Nomination & Remuneration Committee. Composition:

The Nomination & Remuneration committee of the Board consists of three members and all three members are members of Risk Management committee of the Board to facilitate effective governance of compensation.

The roles and responsibilities of the Nomination & Remuneration Committee inter-alia includes the following:
Sl. No.	Name of Agenda item
1	Scrutinizing the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and to decide whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors. and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 2011 on Fit & Proper Criteria of the Banks.
2	Recommend to the Board for its consideration and approval on the size and composition of the Board taking into account the available and needed diversity and balance in terms of experience, knowledge, skills, and judgment of the Directors
3	To devise a Succession Planning Policy for the Board and Senior Management.
4	To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/ removal of Directors.
5	To identify persons who are qualified to become Directors/ KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/or removal.
6	To formulate the criteria for evaluation of Independent Directors and the Board/Committees.
7	To devise a policy on Board diversity.
8	To carry out any other function as is mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable.
9	To perform such other functions as may be necessary or appropriate for the performance of its duties.
10	To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.
11	The Committee shall work in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.
12	With respect to the variable pay, both cash and non-cash Performance Linked Incentive Schemes, the Committee is empowered to: a) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes; b) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee; c) Coordinate the progress of growth of business vis -a- vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary; d) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity. e) To identify Material Risk Takers (MRTs) as per the recommendations made by MD & CEO and to fix variable pay and other terms of payment including component (Cash and non-cash), deferment and divergence clause in line with compensation policy and other RBI guidelines and other policies and guidelines of the bank.
13	The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 and is empowered to formulate detailed terms and conditions of the Scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

Sl. No.	Name of Agenda item
14	To obtain necessary clearances and approvals from regulatory authorities, appoint Merchant Bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.
15	To oversee the administration of Employee benefits, such as Provident Fund, Pension Fund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which are recognized in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.
16	The Committee may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board.
17	Any other matters regarding remuneration to WTDs/MD & CEO and other staffs of the Bank as and when permitted by the Board.
18	To conduct the annual review of the Compensation Policy.
19	To fulfil such other powers and duties as may be delegated to it by the Board.
20	To review HR Strategy aligning with business strategy of the Bank.
21	To review the skill gaps and talent pool creation.
22	To do any other matters regarding remuneration to whole-time directors/ non-executive directors /part-time chairman, Chief Executive Officers / Material Risk Takers (MRTs) and employees (risk control and compliance staff and all other categories of staff) of the Bank including signing/ joining bonus occurring in the context of hiring new staff and be limited to first year, in the form of share-linked instruments only, as and when permitted by the Board. Such bonus will neither be considered part of fixed pay nor part of variable pay.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

â¢ The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD.No.BC.72/29.67.001/2011-12 dated January 13, 2012.

â¢ The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the remuneration is fixed by Board / Committee.

â¢ Further, the compensation structure for the Whole Time Directors (WTDs) / Managing Director & Chief Executive Officer (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013 and Section 35B (1) of Banking Regulation Act 1949.

â¢ The Reserve Bank of India vide circular DOR. Appt.BC. No. 23/29.67.001/2019-20 dated November 4, 2019 issued a detailed revised Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff. Accordingly, the Compensation Policy has been modified by incorporating the revised provisions of the RBI circular.

c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It will include the nature and type of the key measures used to take account of these risks.

The Board of Directors through the NRC shall exercise oversight and effective governance over the framing and implementation of the Compensation Policy. Human Resource Management under the guidance of MD & CEO shall administer the Compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

For Material Risk Takers:

The Bank will refer to the Basel Committee on Banking Supervision (BCBS) report entitled Range of Methodologies for Risk and Performance Alignment of Remuneration published in May 2011 for guidance wherever required. It intends to enhance the banks'' and supervisors'' understanding of risk-adjusted remuneration. This report, by providing some clarification on design of risk-adjusted remuneration schemes, will support and facilitate the greater adoption of sound practices in the banking sector. Some of the key stipulations of the report are as under:

1. In order for incentive-based remuneration to work, the variable part of remuneration will be truly and effectively variable and can even be reduced to zero in line with the symmetry principle defined by the FSB. A key element that supervisors expect is the ability for banks to demonstrate that the methodologies they developed to adjust variable remuneration to risk and performance are appropriate to their specific circumstances.

2. The methodologies for adjusting remuneration to risk and performance will also be consistent with the general risk management and corporate governance framework.

3. Performance measures and their relation to remuneration packages will be clearly defined at the beginning of the performance measurement period to ensure that the employees perceive the incentives mechanism. The usual annual determination of bonuses will be based on rules, processes and objectives known in advance, recognizing that some discretion will always be needed.

4. Bank will use a combination of financial and non-financial measures to assess employee performance and adapt the measurement to each employee''s specific situation. Qualitative factors (like knowledge, skills or abilities), might play an important role when it comes to judging and rewarding some activities- particularly when these serve to reinforce the bank''s risk management goals.

5. The nature and extent to which risk adjustments are needed depends first on the extent to which performance measures capture risks, but in all cases, some form of risk adjustment is needed as remuneration is often awarded before the final outcome of an activity is known. Risks taken need to be estimated (ex ante), risk outcomes observed (ex post) and both ex ante estimates and ex post outcomes will affect payoffs.

6. Risk adjustments need to take into account the nature of the risks involved and the time horizons over which they could emerge. The impact of remuneration adjustments will be linked to actions taken by employees and/or business units, and their impact on the level of risk taken on by the bank.

7. The nature of the award process, which links the variable remuneration of each individual employee with bonus pools and the total amount of variable remuneration at a bank''s level, is also an area that will be carefully considered by banks and supervisors, as it directly influences how and when performance and risk adjustment are or can be used.

8. Considering the above parameters, the Board may approve suitable methodologies for fixing of risk adjusted remuneration, as appropriate, based on the recommendations of Risk Management committee and review/ approval of the Nomination and Remuneration Committee on the same.

The compensation structure for the Whole-Time Directors/ Chief Executive Officers / Material Risk Takers (MRTs)of the bank shall be as under:

Fixed Pay and Perquisites

Based on the recommendations of the Nomination and Remuneration Committee, and subject to the approval of Reserve Bank of India (for MD & CEO and Executive Directors), Board shall fix the fixed portion of compensation payable which is reasonable, taking into account all relevant factors including adherence to statutory requirements and industry practice.

Variable Pay

In order to have a proper balance between the cash and share-linked components in the variable pay, the variable pay are to be structured in the form of share-linked instrument (including Cash-linked Stock Appreciation Rights (CSARs)), or a mix of cash and share-linked instruments. Only 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 to be exercised.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration.

a) The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

> The performance of the Bank

> The performance of the business unit

> Individual performance of the employee

> Other risk perceptions and economic considerations.

The criteria for identification of MRTs are subject to the following:

The persons who satisfy the qualitative criteria and any one of the quantitative criteria as detailed below:

(I) Standard Qualitative Criteria:

â¢ Relate to the role and decision-making power of staff members (e.g., General manager, member of management body) having jointly or individually, the authority to commit significantly to risk exposures, etc.

and

(II) Standard Quantitative Criteria:

â¢ Their total remuneration exceeds a certain threshold (to be recommended by MD & CEO to NRC for approval); the determination of which may be done prudently by the bank,

â¢ They are included among the 0.3% of staff with the highest remuneration in the bank,

â¢ Their remuneration is equal to or greater than the lowest total remuneration of senior management and other risk-takers.

MD & CEO is considered as Material Risk Taker, whose compensation will be guided by the provisions applicable to WTD/CEO as per the policy. However the Board, on recommendation of NRC, will specify additional Material Risk Takers (MRTs) whose actions have a material impact on the risk exposure of the bank from time to time.

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.

> Variable Pay

The assessment of the variable pay will be based on ''Key Performance Indicators'' (KPI) achievement of respective whole-time directors/ Chief Executive Officers / Material Risk Takers (MRTs).

a. Limit on Variable Pay:

A. For Whole-Time Directors and Chief Executive Officers

i. In compliance to the RBI Guidelines and other applicable rules and regulations at least 50%, should be variable and paid on the basis of individual, business-unit and firm-wide measures that adequately measure performance. The total variable pay shall be limited to a maximum of 300% of the fixed pay (for the relative performance measurement period).

ii. In case variable pay is up to 200% of the fixed pay, a minimum of 50% of the variable pay; and in case variable pay is above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.

iii. In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay, but shall not be less than 50% of the fixed pay.

iv. The deterioration in the financial performance of the bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

B. For Material Risk Takers (MRTs)

i. In compliance to the RBI Guidelines and other applicable rules & regulations 50% of total pay for all MRTs should be variable pay and paid on the basis of individual, business-unit and firm-wide measures that adequately measure performance.

ii. 50% of the variable pay should be via noncash instruments.

iii. The deterioration in the financial performance of the bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

The Board will from time to time specify the Material Risk

Takers (MRTs).

b. Deferral of Variable Pay

(i) For senior executives, including WTDs, and other employees who are MRTs, a minimum of 60% of the total variable pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus should also be deferred.

(ii) However, in cases where the cash component of variable pay is under ''25 lakh, deferral requirements is not applicable.

c. Period of Deferral Arrangement

The deferral period should for a period three years.

This would be applicable to both the cash and noncash components of the variable pay arrangements.

d. Vesting:

Deferred remuneration should be spread out over

the course of the deferral period on a pro rata

basis as follows:

> not more than 33.33 % of the total deferred variable pay should vest at the end of first year.

> Further, not more than 33.33 % of total deferred variable pay should vest at the end of second year.

Additionally, vesting should not take place more frequently than on a yearly basis to ensure a proper assessment of risks before the application of ex post adjustments.

In case of employee''s death or permanent disability, whole of the deferred variable pay (Cash component) shall immediately vest in the employee''s legal heirs, or the employee, as the case maybe.

e. Share-linked Instruments

Such instruments shall be included as a component of variable pay. Norms for grant of share-linked instruments should be framed by banks in conformity with relevant statutory provisions and should form part of the bank''s compensation policy. The details of share-linked instruments granted should also be disclosed in terms of the disclosure requirements stipulated in these Guidelines. Share-linked instruments should be fair valued on the date of grant by the bank using Black-Scholes model.

Malus / Clawback

(a) The deferred compensation should be subject to malus/clawback arrangements in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year.

(b) A set of situations as detailed below are hereby identified, which require the invocation of the malus and clawback clauses that may be applicable as detailed below:

i) Applying of Malus / Clawback arrangement on entire variable pay on occurrence of the following Situations:

â¢ identified fraud / misconduct by the executive (whole-time directors, Chief Executive Officers / Material Risk Takers (MRTs)) pertaining to the corresponding period for which the clause to be applied.

ii) Applying of Malus / Clawback arrangement on unvested portion of deferred variable pay on occurrence of the following situation:

â¢ Reporting of operating loss or more than 50% fall in operating profit in any year

iii) Applying of Malus clause on unvested portion of deferred variable pay on occurrence of the following situation:

â¢ Wherever the assessed divergence in bank''s provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure as

detailed below: (As referred in RBI circular No. DBR.BP. BC.No.32/21.04.018/2018-19 dated April 1, 2019, as amended from time to time),

a. the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

b. the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period

Further, in such situations, no proposal for increase in variable pay (for the assessment year) shall be entertained. In case the bank''s post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if criteria for public disclosure are triggered either on account of divergence in provisioning (clause (a) or both provisioning (clause (a) and asset classification (Clause (b).

Any other act detrimental to the interest of the Bank including and not restricted to violation of Code of Conduct, violation of Framework for dealing with Conflict of Interest, violation of rules and regulations of the Bank, failure to discharge fiduciary and regulatory duties - and in respect of which the Bank would reserve the right to institute appropriate civil, criminal or other proceedings at the risks, costs and consequences of such individual''s,

As part of the criteria for the application of Malus and clawback, the following period during which malus and/or clawback can be applied will be 36 months from application of the clause. covering at least deferral and retention periods (a period of time after the vesting of instruments which have been awarded as variable pay during which they cannot be sold or accessed)

short-term measures, their independence may be compromised. If their compensation is too low, the quality of such employees may be insufficient for their tasks and their authority may be undermined. The mix of fixed and variable compensation for control function personnel should be weighted in favour of fixed compensation. Therefore, the requirement of minimum 50% of total compensation to be paid in the form of variable pay will not be applicable for this category of staff. However, a reasonable proportion of compensation has to be in the form of variable pay, so that exercising the options of malus and/or clawback, when warranted, is not rendered infructuous.

For calculating the Variable Pay of Risk Control and Compliance Staff the ''Key Performance Indicators'' (KPI) will be totally different and the modalities of the same will be recommended by the Nomination and Remuneration Committee to the Board for approval.

f) Description of the different forms of variable remuneration (i.e. cash and types of share linked instruments) that the bank utilizes and the rationale for using these different forms.

For Material Risk Takers both cash and non-cash

Performance Linked Incentive Schemes to those

employees who are eligible for incentives., In this regard

the Committee is empowered to:

i) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

ii) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

iii) Coordinate the progress of growth of business vis -avis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

v) To identify Material Risk Takers (MRTs) as per the recommendations made by MD & CEO and to fix variable pay and other terms of payment including component (Cash and non-cash), deferment and divergence clause in line with compensation policy and other RBI guidelines and other policies and guidelines of the bank.

For Others

The Board will from time to time specify the Risk Control and Compliance Staff.

a) Based on the recommendations of the Committee, Board may fix the variable pay not exceeding 50% of the fixed pay in a year. Within this ceiling, at higher levels of responsibility, the proportion of variable pay will be higher. The variable pay may be in cash, or stock linked instruments or a mix of both.

b) ''Variable pay'' means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

i. Performance Linked Incentives'' to those employees who are eligible for incentives.

ii. Ex-gratia for other employees who are not eligible for Performance linked Incentives.

iii. Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965

iv. Any other incentives, by whatever name called having the features similar to the above.

c) The Board may adopt principles similar to that enunciated for WTDs/CEOs, as appropriate, for variable pay-timing, Malus/Clawback, guaranteed bonus and hedging.

d) Employee Stock Option Scheme/Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable.

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. Further, a Press Release was issued by the MCA on January 18, 2016 outlining the roadmap for implementation of Indian Accounting Standards (IND AS) converged with International Financial Reporting Standards (IFRS) for banks. As per earlier instructions, banks in India were required to comply with the IND AS for financial statements for accounting periods beginning from April 01, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Progressing towards IND AS, the Bank had prepared pro forma financials as on June 30, 2017 as per extant regulatory guidelines and submitted the same to the RBI. On April 05, 2018, the RBI had announced deferment of implementation date by one year with IND AS being applicable to banks for accounting periods beginning April 01, 2019 onwards. In preparation for the same, the Bank has been submitting quarterly pro-forma financials to the RBI from quarter ended June 30, 2018.On March 22, 2019, the RBI has announced deferment of the implementation of IND AS by banks till further notice. However, the Bank continues to submit to the RBI proforma financials on half year basis

h) Disclosure of facilities granted to directors and their relatives

Bank has not extended any fund or non-fund (guarantees, Letter of Credit, etc) facilities to directors, their relatives, companies or firms in which they are interested for the Financial year 2022-23 as per section 20 of BR Act, 1949.

i) Details of Single Counterparty Limit / Limit for Group of Connected Counterparties exceeded by the Bank

RBI has prescribed limits linked to bank''s eligible capital base in respect of exposure to single counter party and group of connected counter parties. During the year ended March 31, 2023 and March 31, 2022, the Bank was within the limits prescribed by the RBI.

6. Letter of Comfort (LoCs) issued by Banks:

The Bank has not issued any reportable Letter of Comfort on behalf of subsidiaries during the year ended March 31, 2023 and March 31, 2022 respectively.

7. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2023 was ?. 1300.00 Crores (Previous Year: ?1,300.00 Crore).

1) Transactions with WOS are shown excluding GST and TDS

2) In compliance with the guidelines given as per annexure to SEBI circular No SEBI/HO/CFD/CMD1/CIR/P/2021/662 November 22, 2021, The South Indian Bank Ltd, being a listed bank, is not required to provide the disclosures with respect to related party transactions involving loans, inter-corporate deposits, advances or investments made or given by the bank.

3) In compliance with the guidelines given as per annexure to SEBI circular No SEBI/HO/CFD/CMD1/CIR/P/2021/662 November 22, 2021 transactions such as acceptance of fixed deposits by banks, undertaken with related parties, at the terms uniformly applicable /offered to all shareholders/ public only are reported under deposit.

4) The Bank, being a scheduled commercial bank, as per RBI circular RBI/DBR/2015-16/19 dated March 03, 2016, has allowed additional interest of one per cent per annum, over and above the rate of interest mentioned in the schedule of interest rates on savings or a term deposits of bank''s staff and their exclusive associations as well as on deposits of Chairman, Managing Director and such other Executives appointed for a fixed tenure.

5) Value of the related party transaction for deposit is the balance in fixed deposit outstanding as on 31.03.2023.

6) Regulation 23 of Listing regulations, as amended from time to time, grant exemptions from seeking approval of the Audit Committee of the Board for the transactions entered into by and between the holding company and its wholly owned subsidiary company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

7) None of the Directors/ KMPs/ relatives are holding substantial shares/ securities of the Bank.

8) As part of additional disclosure internal KMP data are also disclosed during the period ended 31.03.2023 in line with reporting made for the half year ended 30.09.2022.

9) Transactions with common directors of subsidiary and Bank is shown under Directors.

10) Mr. Parayil George John Tharakan (DIN-07018289), has retired from the office as a Non-Executive Independent Director of the Bank on November 24, 2022, upon completion of his 8-year term, as per Section 10A(2A) of Banking Regulation Act 1949, hence in the closing balance (Deposits) details of his/ his relatives'' deposits were not included in reporting as the same will not be coming under the preview of RPT.

11) The CSR activity of Bank is carried out by a trust formed by Bank in this regard. Since the Trust is acting on behalf of Bank and amount are spent as Bank''s CSR expenditure, these transactions are not treated as RPT

11. Employee Benefits

a) Provident Fund:

Employees, who have not opted for pension plan are eligible to get benefits from provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon are paid on retirement, death, incapacitation or termination of employment. Both the employee and the Bank contribute a specified percentage of the salary to the South Indian Bank Employees'' Provident Fund. The Bank has no obligation other than the monthly contribution.

The Bank recognized ?0.24 Crore (Previous Year: ?0.24 Crore) for provident fund contribution in the Profit and Loss Account.

b) New Pension Scheme

As per the industry level settlement dated April 27, 2010, employees who joined the services of the Bank on or after April 1, 2010 are not eligible for the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Basic Pay and Dearness Allowance towards DCPS and the Bank will also make a contribution of 14%. There is no separate Provident Fund for employees joining on or after April 1, 2010.

The Bank recognized ?45.05 Crore (Previous Year: ?35.80 Crore) for DCPS contribution in the Profit and Loss Account.

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 prescribed under section 133 of the Companies Act, 2013

ii) Disclosure on amortization of expenditure on account of enhancement in family pension of employees of banks

"Reserve Bank of India vide letter dated October 4, 2021 has permitted all member banks of Indian Banks'' Association covered under the 11^th Bipartite Settlement to amortize the additional liability on account of revision in family pension over a period not exceeding five years, beginning with the Financial Year ended March 31, 2022. The bank has recognized the entire additional liability estimated at ? 43 crores and opted to amortize the same over a period of seven quarters beginning with the quarter ended September 30, 2021. Accordingly, an amount of ? 24.57 Crore (Previous year ? 18.43 crore) has been written off during the year ended March 31, 2023 in respect of the said additional liability and the balance is ? Nil.

The following table as furnished by Actuary sets out the funded status of gratuity / pension plan and the amount recognized in the Bank''s financial statements as at March 31, 2023.

(i) Discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, taken in to account the inflation, seniority, promotion and other relevant factors.

j) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave has been actuarially determined and an amount of ?54.63 Crore (Previous year ?60.36 Crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

12. Micro Small and Medium Industries

Under the Micro, Small and Medium enterprises development Act 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payment to micro, and small enterprises or of interest payments due to delays in such payments. The above is based on information available with the Bank which has been relied on by the auditors.

13. Segment Reporting

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI from time to time. The Bank operates in the following business segments;

a) Treasury:

The treasury segment primarily consists of interest earnings on investments portfolio of the bank, gains or losses on investment operations and earnings from foreign exchange business. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses. Segmental expenses are allocated as per board approved policy.

b) Corporate / Wholesale Banking:

The Corporate / Whole sale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to corporate customers and the charges / fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses. Segmental expenses are allocated as per board approved policy.

c) Retail banking:

The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to non-corporate customers and the charges / fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses. Segmental expenses are allocated as per board approved policy.

In accordance with RBI circular DOR.AUT.REC.12/22.01.001/2022-2023 dated April 07, 2022 on establishment of Digital Banking Units, the Bank has presented ''Digital Banking'' as sub-segment of the Retail Banking Segment. Assets of DBU consists of mainly credit card, loan against deposits opened through digital mode etc.

d) Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs. Segmental expenses are allocated as per board approved policy.

e) Unallocated

All items that cannot be allocated to reportable segments are included in unallocated portion.

14.	Description of Contingent Liabilities*
Sl. No Contingent liability		Brief Description
1	Claims not acknowledged as debts	This includes liability on account of, and other legal cases filed against the bank. The bank is a party to various legal proceedings in the ordinary course of business and these are contested by the Bank and are therefore subjudice. The Bank does not expect the outcome of these proceedings to have a material adverse impact on the Bank''s financial position.
2	Liability on account of outstanding forward contracts	The Bank enters into foreign exchange contracts with interbank participants on its own account and for its customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contract rate.
3	Guarantees on behalf of constituents in India and outside India, Acceptances, endorsements and other obligations	As a part of banking activities, the Bank issues Letter of Guarantees and documentary credit on behalf of its customers, with a view to augment the customer''s credit standing. Through these instruments, the Bank undertakes to make payments for its customers'' obligations, either directly or in case the customer fails to fulfill their financial or performance obligations.
4	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).
* Also refer schedule - 12

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/ Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in these cases is possible but not probable and hence no provision is required in these cases. However, the contingent liability has been disclosed with respect to these cases.

15. Provision for Long Term Contracts

The Bank has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the bank has reviewed and recorded adequate provision as required under any Law/Accounting Standards for material foreseeable losses on such long-term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

17. Corporate Social Responsibility

Operating expenses include ? 1.86 Crore (Previous Year ? 6.06 Crore) for the year ended March 31, 2023 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013. The Bank has spent 2.02 % of its average net profit for the last three financial years as part of its CSR for the year ended March 31, 2023. The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact.

18. Investor Education and Protection Fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

19. Operating Leases

Lease payments for assets taken on operating lease are recognised as an expense in the Profit and Loss Account as per the lease terms. During the year an amount of ? 108.86 Crore (Previous year: ? 100.62 Crore) was charged to Profit and loss account.

20. Disclosure as to Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014

The Bank, as part of its normal banking business grants loans and advances, makes investment, provides guarantees to and accept deposits and borrowings from its customers, other entities and persons. These transactions are

conducted after proper due diligence and ensuring adherence to all regulatory requirements including "Know Your Customer" guidelines.

Other than the transactions described above which are carried out in the normal course of business, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or deposits or any other sources or kinds of funds) by the Bank to or in any other persons or entities, including foreign entities ("intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank ("Ultimate Beneficiaries"). The Bank has also not received any funds from any parties (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries..

21. Proposed Dividend

The Board of Directors has proposed a dividend of ''0.30 per Equity share (30%) (Previous year Nil) for the year ended March 31, 2023, subject to the approval of the shareholders at the ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after Balance Sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend including dividend distribution tax of ''62.78 Crore is not recognized as liability as on March 31, 2023. However, effect of the proposed dividend has been reckoned in determin

Mar 31, 2022

b) Draw Down from Reserves

The Bank has not undertaken any drawdown from reserves during the years ended March 31,2022 and March 31, 2021.

c) Credit to Reserve

Bank credited back '' Nil (Previous year '' 30.45 Crore) drawn down from revenue and other reserves relating to unamortized amount of three fraud cases as permitted by the RBI in accordance with DBR No.BPBC.92/21.04.048/2015-16 dated April 18, 2016.

e) Capital Infusion:

During the year ended March 31, 2022 the Bank has not allotted any equity shares.

During the year ended March 31, 2021, the Bank has allotted 28,3018,867 (Twenty-eight crore thirty lakh eighteen thousand eight hundred and sixty-seven) equity shares ("Shares") of face value of '' 1 (Indian Rupees One only) at a premium of INR 7.48/- each (Indian Rupees Seven and Paisa Forty-eight only) on preferential basis, aggregating to '' 239.99 Crore. Accordingly, share capital increased by '' 28.30 Crore and share premium increased by '' 211.70 Crore

i) Qualitative Disclosure around LCR

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed up to 2% of NDTL in the form of borrowing limit available through Marginal Standing Facility (MSF) and 5% of NDTL as Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). From February 2016 onwards, RBI has allowed Banks to reckon an additional 3% of NDTL as FALLCR. This has been further increased by 1% from July 2016, 2% from June 2018 and another 2% from October 2018, onwards. Further, towards harmonisation of the effective liquidity requirements of banks with the LCR, RBI has permitted banks to recon an additional 2% of Government securities within the mandatory SLR requirement as FALLCR in a phased manner from April 04, 2019.As on March 31, 2021, FALLCR stands at 15.00%. On account of COVID-19 pandemic, RBI had increased MSF from 2% to 3% w.e.f March 27, 2020 to December 31, 2021. However, it was further reduced back to 2% from 3% of NDTL from January 01, 2022 onwards.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (63.75%) and unsecured wholesale funding (25.69%) which are maturing in the period. The Bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source. The Bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

i) Qualitative Disclosure

The NSFR of the Bank as on 31^st March 2022 is at 153.92% as against the regulatory minimum of 100% and the table given below sets out the details of NSFR of the Bank as on the aforesaid date.

c) Sale and transfer to/from HTM category

During the year ended March 31, 2022, the aggregate book value of sales and transfer of securities to/from HTM category exceeded 5% of the book value of investments held in HTM category at the beginning of the year.

The 5% threshold limit referred to above is excluding the following:

i) The one-time transfers of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year,

iii) Sales to Reserve Bank of India under pre-announced open market auctions and

iv) Repurchase of Government Securities by Government of India from banks.

The market value of investments held in HTM category was '' 19,238.69 Crores whereas book value is '' 19,365.44 Crores as on March 31, 2022.

a) In respect of securities held under HTM category premium of '' 256.53Crore (Previous Year '' 114.85 Crore) has been amortised during the year and debited under interest received on Government securities.

b) Profit on sale of securities from HTM category amounting to '' 156.08 Crore (Previous Year: '' 298.59 Crore) has been taken to Profit and Loss Account. During the year, the Bank had appropriated '' 76.16 Crore (Previous Year '' 167.58 Crore), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

¹As permitted by RBI vide its Circular DBR.No.BP.BC.18/21.04.045/2018-19 dated January 1, 2019 DOR.No.BP BC.34/21.04.048/2019-20 dated February 11, 2020, DOR.No.BP BC/4/21.04.048/2020-21 dated August 06, 2020 and DOR. STR.REC.12/21.04.048/2021-22 dated May 05, 2021 the bank restructured 177 eligible MSME accounts with outstanding of '' 657.74 crore during the year. Out of which accounts amounting to '' 646.95 crore have been retained as Standard. Additional Standard Asset provision of '' 111.98 crore (Previous year '' 54.99 crore) is maintained in the books towards such accounts.

² The bank has restructured an amount of '' 197 crore for eligible borrowers who were affected by floods in the state of Kerala during the financial year 2018-19 based on RBI Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18 dated July 03, 2017 and as per the scheme formulated by SLBC Kerala. Such accounts were upgraded to Standard Accounts on completion of the period as stipulated by RBI making such accounts eligible for upgradation to standard accounts.

³ Bank has restructured certain accounts by extending the DCCO in line with the Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances dated July 01, 2015 and Prudential Framework for Resolution of Stressed Assets dated June 7, 2019. As per the aforesaid guidelines, accounts to be retained as Standard Restructured by extending DCCO subject to compliance of certain conditions which has been complied.

⁴ As permitted by RBI vide its Circular DOR.No.BP BC/3/21.04.048/2020-21 dated August 06, 2020 and DOR.STR. REC.11/21.04.048/2021-22 dated May 05, 2021 the bank has granted restructuring in 499 accounts with an outstanding of '' 899.88 crore during the year. Out of which accounts amounting to '' 895.58 crore have been retained as Standard. Additional Standard Asset provision of '' 124.92 crore (Previous year '' 9.47 crore) is maintained in the books towards such accounts.

e) Disclosure on Divergence in Asset Classification and Provisioning for NPAs:

There are no divergences observed by RBI for the financial year 2020-21 in respect of Bank''s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning.

f) Disclosure of Transfer of Loan Exposures

Disclosures as per Master Direction - Reserve Bank of India (Transfer of Loan Exposures) Directions 2021 dated September 24, 2021 for the loans transferred/acquired during the year ended March 31, 2022 are given below;

g) Unhedged Foreign Currency Exposure

Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines. The Bank has maintained provision of '' 12.06 Crore and additional capital of '' 8.95 Crores on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2022.

c) Disclosures on Risk Exposure in Derivatives.

i) Qualitative Disclosure.

Reported promptly. The MTM position of the derivative portfolio is monitored on a regular basis. The impact on derivative portfolio on account of the probable market movements are assessed on regular basis.

*Only Currency futures are reported in currency derivatives. There was nil contracts outstanding as on 31-03-2022.

Foreign exchange forward contracts have not been included in the above disclosure. The notional principal amount of foreign exchange contracts classified as Trading as on March 31,2022 amounted to '' 24,286.43 Crore (Previous Year '' 3,829.45 Crore) and marked to market position was asset of '' 94.51Crore (Previous Year '' 54.33 Crore) and liability of '' 139.11Crore (Previous Year '' 68.65 Crore). The notional principal amount of foreign exchange contracts classified as hedging on March 31, 2022 amounted to '' 2865.58 Crore (Previous Year '' 430.59 Crore).

d) Credit Default Swaps

The bank has not undertaken any transactions in credit default swaps during the year ended March 31,2022 and March 31, 2021.

8. Securitisation Transactions

The Bank has not undertaken any securitisation transactions during the year ended March 31, 2022 and March 31,2021.

13. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Nomination & Remuneration Committee.

Composition:

The Nomination & Remuneration committee of the Board consists of four members of which three members from Risk Management committee of the Board facilitate effective governance of compensation.

The roles and responsibilities of the Nomination & Remuneration Committee inter-alia includes the following:

1. Scrutinizing the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and to decide whether to extend or continue the term of appointment of the independent director, on the basis of the report of performance evaluation of independent directors and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 201 1 on Fit & Proper Criteria of the Banks.

2. Recommend to the Board for its consideration and approval on the size and composition of the Board taking into account the available and needed diversity and balance in terms of experience, knowledge, skills and judgment of the Directors.

3. To devise a Succession Planning Policy for the Board and Senior Management.

4. To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/ removal of Directors.

5. To identify persons who are qualified to become Directors/ KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/or removal.

6. To formulate the criteria for evaluation of Independent Directors and the Board/Committees.

7. To devise a policy on Board diversity.

8. To carry out any other function as is mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable.

9. To perform such other functions as may be necessary or appropriate for the performance of its duties.

10. To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.

11. The Committee shall work in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure that the cost/ income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

12. With respect to the variable pay, both cash and noncash Performance Linked Incentive Schemes, the Committee is empowered to:

a) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

b) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

c) Coordinate the progress of growth of business vis -a- vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

d) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

e) To identify Material Risk Takers (MRTs) as per the recommendations made by MD & CEO and to fix variable pay and other terms of payment including component (Cash and non-cash), deferment and divergence clause in line with compensation policy and other RBI guidelines and other policies and guidelines of the bank.

13. The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 and is empowered to formulate detailed terms and conditions of the Scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

14. To obtain necessary clearances and approvals from regulatory authorities, appoint Merchant Bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

15. To oversee the administration of Employee benefits, such as Provident Fund, Pension Fund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which are recognized in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.

16. The Committee may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board.

17. Any other matters regarding remuneration to WTDs/ MD & CEO and other staffs of the Bank as and when permitted by the Board.

18. To conduct the annual review of the Compensation Policy.

19. To fulfill such other powers and duties as may be delegated to it by the Board.

20. To review HR Strategy aligning with business strategy of the Bank.

21. To review the skill gaps and talent pool creation.

22. To do any other matters regarding remuneration to whole-time directors/ non-executive directors /part-time chairman, Chief Executive Officers / Material Risk Takers (MRTs) and employees (risk control and compliance staff and all other categories of staff) of the Bank including signing/ joining bonus occurring in the context of hiring new staff and be limited to first year as and when permitted by the Board.

Information relating to the design and structure of

remuneration processes and the key features and

objectives of remuneration policy.

â¢ The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD.No.BC.72/29.67.001/201 1-12 dated January 13, 2012.

pursuant to clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013 and Section 35B (1) of Banking Regulation Act 1949.

â¢ The Reserve Bank of India vide circular DOR.Appt. BC.No.23/29.67.001/2019-20 dated November 4, 2019 issued a detailed revised Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff. Accordingly, the Compensation Policy has been modified by incorporating the revised provisions of the RBI circular.

b) Description of the ways in which current and future risks are taken into account in the remuneration processes. It will include the nature and type of the key measures used to take account of these risks.

For Material Risk Takers:

2. The methodologies for adjusting remuneration to risk and performance will also be consistent with the general risk management and corporate governance framework.

3. Performance measures and their relation to remuneration packages will be clearly defined at the

beginning of the performance measurement period to ensure that the employees perceive the incentives mechanism. The usual annual determination of bonuses will be based on rules, processes and objectives known in advance, recognizing that some discretion will always be needed.

4. Bank will use a combination of financial and nonfinancial measures to assess employee performance and adapt the measurement to each employee''s specific situation. Qualitative factors (like knowledge, skills or abilities), might play an important role when it comes to judging and rewarding some activities-particularly when these serve to reinforce the bank''s risk management goals.

8. Considering the above parameters, the Board may approve suitable methodologies for fixing of risk adjusted remuneration, as appropriate, based on the recommendations of Risk Management committee and review/approval of the Nomination and Remuneration Committee on the same.

The compensation structure for the Whole-Time Directors/ Chief Executive Officers / Material Risk Takers (MRTs)of the bank shall be as under:

Fixed Pay and Perquisites

into account all relevant factors including adherence to statutory requirements and industry practice.

Variable Pay

In order to have a proper balance between the cash and share-linked components in the variable pay, the variable pay are to be structured in the form of share-linked instrument (including Cash-linked Stock Appreciation Rights (CSARs)), or a mix of cash and share-linked instruments. Only 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 to be exercised.

c) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration.

a) The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

> The performance of the Bank

> The performance of the business unit

> Individual performance of the employee

> Other risk perceptions and economic considerations.

The criteria for identification of MRTs are subject to the following:

The persons who satisfy the qualitative criteria and any one of the quantitative criteria as detailed below:

(I) Standard Qualitative Criteria:

and

(II) Standard Quantitative Criteria:

â¢ Their total remuneration exceeds a certain threshold (to be recommended by MD & CEO to NRC for approval); the determination of which may be done prudently by the bank,

â¢ They are included among the 0.3% of staff with the highest remuneration in the bank,

â¢ Their remuneration is equal to or greater than the

lowest total remuneration of senior management and other risk-takers.

d) 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.

> Variable Pay

In order to have a proper balance between the cash and share-linked components in the variable pay, the variable pay are to be structured in the form of share-linked instrument (including Cash-linked Stock Appreciation Rights (CSARs )), or a mix of cash and share-linked instruments. Only 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 to be exercised.

The assessment of the variable pay will be based on ''Key Performance Indicators'' (KPI) achievement of respective whole-time directors/ Chief Executive Officers / Material Risk Takers (MRTs).

a. Limit on Variable Pay:

A. For Whole-Time Directors and Chief Executive Officers

iv. The deterioration in the financial performance of the bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

B. For Material Risk Takers (MRTs)

ii. 50% of the variable pay should be via noncash instruments.

iii. The deterioration in the financial performance of the bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

The Board will from time to time specify the Material

Risk Takers (MRTs).

b. Deferral of Variable Pay

(ii) However, in cases where the cash component of variable pay is under Rs.25 lakh, deferral requirements is not applicable.

c. Period of Deferral Arrangement

The deferral period should be for a period of three years. This would be applicable to both the cash and non-cash components of the variable pay arrangements.

d. Vesting:

Deferred remuneration should be spread out over the course of the deferral period on a pro rata basis as follows:

> not more than 33.33 % of the total deferred variable pay should vest at the end of first year.

> Further, not more than 33.33 % of total deferred variable pay should vest at the end of second year.

Additionally, vesting should not take place more frequently than on a yearly basis to ensure a proper assessment of risks before the application of ex post adjustments.

In case of employee''s death or permanent disability, whole of the deferred variable pay (Cash component) shall immediately vest in the employee''s legal heirs, or the employee, as the case maybe.

e. Share-linked Instruments

Malus / Clawback

(a) The deferred compensation should be subject to malus/clawback arrangements in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year.

(b) A set of situations as detailed below are hereby identified, which require the invocation of the malus and clawback clauses that may be applicable as detailed below:

i) Applying of Malus / Clawback arrangement on entire variable pay on occurrence of the following Situations:

ii) Applying of Malus / Clawback arrangement on unvested portion of deferred variable pay on occurrence of the following situation:

â¢ Reporting of operating loss or more than 50% fall in operating profit in any year

iii) Applying of Malus clause on unvested portion of deferred variable pay on occurrence of the following situation:

â¢ Wherever the assessed divergence in bank''s provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure as detailed below: (As referred in RBI circular No. DBR. BP.BC.No.32/21.04.018/2018-19 dated April 1, 2019, as amended from time to time),

a. the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported

profit before provisions and contingencies for the reference period, and

b. the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period

Further, in such situations, no proposal for increase in variable pay (for the assessment year) shall be entertained. In case the bank''s post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if criteria for public disclosure are triggered either on account of divergence in provisioning (clause (a)) or both provisioning (clause (a)) and asset classification (Clause (b)).

Any other act detrimental to the interest of the Bank including and not restricted to violation of Code of Conduct ,violation of Framework for dealing with Conflict of Interest, violation of rules and regulations of the Bank, failure to discharge fiduciary and regulatory duties - and in respect of which the Bank would reserve the right to institute appropriate civil, criminal or other proceedings at the risks, costs and consequences of such individual''s.

As part of the criteria for the application of malus and clawback, the following period during which malus and/or clawback can be applied will be 36 months from application of the clause, covering at least deferral and retention periods (a period of time after the vesting of instruments which have been awarded as variable pay during which they cannot be sold or accessed)

Members of staff engaged in financial and risk control, including internal audit, should be compensated in a manner that is independent of the business areas they oversee and commensurate with their key role in the bank. Effective independence and appropriate authority of such staff are necessary to preserve the integrity of financial and risk management''s influence on incentive compensation. Back office and risk control employees play a key role in ensuring the integrity of risk measures. If their own compensation is significantly affected by short-term measures, their independence may be compromised. If their compensation is too low, the quality of such employees may be insufficient for their tasks and their authority may be undermined. The mix of fixed and variable compensation for control function personnel should be weighted in favour of fixed compensation. Therefore, the requirement of minimum 50% of total compensation to be paid in the form of variable pay will not be applicable for this category of staff. However, a reasonable proportion of compensation has to be in the form of variable pay, so that exercising the options of malus and/or clawback, when warranted, is not rendered infructuous.

e) Description of the different forms of variable remuneration (i.e. cash and types of share linked instruments) that the bank utilizes and the rationale for using these different forms.

For Material Risk Takers

both cash and non-cash Performance Linked Incentive

Schemes to those employees who are eligible for

incentives.,

in this regard the Committee is empowered to:

i) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

ii) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

iii) Coordinate the progress of growth of business vis -avis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

For Others

The Board will from time to time specify the Risk Control and Compliance Staff.

i. Performance Linked Incentives'' to those employees who are eligible for incentives.

ii. Ex-gratia for other employees who are not eligible for Performance linked Incentives.

iii. Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965

iv. Any other incentives, by whatever name called having the features similar to the above.

c) The Board may adopt principles similar to that enunciated for WTDs/CEOs, as appropriate, for variable pay-timing, Malus/Clawback, guaranteed bonus and hedging.

d) Employee Stock Option Scheme/Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable.

were filed by the Bank without exercising such option. Necessary adjustments have been made in the current year ended March 31, 2022 to recognise the impact of the said change. The excess provision for tax held in books consequent to the favourable Income Tax orders received during the financial year amounting to '' 69.60 Crores has been written back as on 31.03.2022.

² Hon''ble Appellate Tribunal for SAFEMA/FEMA/PMLA/NDPS, PBPT Act, vide order dated January 25, 2021 has set aside the penalty order issued in an earlier year by The Directorate of Enforcement, Mumbai towards imposition of penalty and remanded the case to the Adjudicating Authority for deciding it afresh in accordance with law. Consequent to the appellate order and based on legal opinion obtained by the Bank, there is no monetary penalty payable by the bank until determined to the contrary by the Adjudicating Authority pursuant to the fresh adjudication. Accordingly, the bank has written back the provision created in earlier years towards such penalty amounting to ''63 Crores during the Financial Year 2020-2021.

³ The Bank had acquired certain land parcels under a partial Debt Asset Swap transaction ("DAS") in earlier years aggregating ''110 Crores and classified them as "Non-Banking Assets acquired in satisfaction of claims" in the Balance Sheet. During the FY 2020-2021 Bank had provided '' 64.59 Crore and made full provision towards the Non Banking Assets of the bank. During the FY 2021-2022 Bank had sold certain properties including the said property and '' 62.74 Crore (after adjusting the expenses) was credited back to the provision.

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Ministry of Corporate Affairs (MCA), Government of India has notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015. Further, a Press Release was issued by the MCA on January 18, 2016 outlining the roadmap for implementation of Indian Accounting Standards (IND AS) converged with International. Financial Reporting Standards (IFRS) for banks. As per earlier instructions, banks in India were required to comply with the IND AS for financial statements for accounting periods beginning from April 01, 2018 onwards, with comparatives for the periods ending March 31, 2018 or thereafter. Progressing towards IND AS, the Bank had prepared pro forma financials as on June 30, 2017 as per extant regulatory guidelines and submitted the same to the RBI. On April 05, 2018, the RBI had announced deferment of implementation date by one year with IND AS being applicable to banks for accounting periods beginning April 01,2019 onwards. In preparation for the same, the Bank has been submitting quarterly pro-forma financials to the RBI from quarter ended June 30, 2018. On March 22, 2019, the RBI has announced deferment of the implementation of IND AS by banks till further notice. However, the Bank continues to submit to the RBI proforma financials on half year basis.

* Notes

1) The disclosure on Related party Transaction is made in line the SEBI disclosure requirement for listed Banks as stipulated vide SEBI circular No SEBI/HO/CFD/CMD1/CIR/P/2021/662 November 22, 2021)

2) Transactions with WOS are shown excluding GST and TDS

3) In compliance with the guidelines as per annexure to SEBI circular No SEBI/HO/CFD/CMD1/CIR/P/2021/662 November 22, 2021, The South Indian Bank Ltd, being a listed bank, is not required to provide the disclosures with respect to related party transactions involving loans, inter-corporate deposits, advances or investments made or given by the bank.

4) In compliance with the guidelines as per annexure to SEBI circular No SEBI/HO/CFD/CMD1/CIR/P/2021/662 November 22, 2021 transactions such as acceptance of fixed deposits by banks, undertaken with related parties, at the terms uniformly applicable /offered to all shareholders/ public only are reported under deposit.

5) The Bank, being a scheduled commercial bank, as per RBI circular RBI/DBR/2015-16/19 dated March 03, 2016, has allowed additional interest of one per cent per annum, over and above the rate of interest mentioned in the schedule of interest rates on savings or a term deposits of bank''s staff and their exclusive associations as well as on deposits of Chairman, Managing Director or such other Executives appointed for a fixed tenure.

6) Value of the related party transaction for deposit is the balance outstanding as on 31.03.2022.

7) Regulation 23 of Listing regulations, as amended from time to time, grant exemptions from seeking approval of the Audit Committee for the transactions entered into by and between the holding company and its wholly owned subsidiary company, whose accounts are consolidated with such holding company and placed before the shareholders at the general meeting for approval.

8) Transactions with common directors of subsidiary and bank are shown under Directors/KMP

11. Employee Benefits

a) Provident Fund:

The Bank recognized '' 0.24 Crore (Previous Year: '' 0.26 Crore) for provident fund contribution in the Profit and Loss Account.

b) New Pension Scheme

As per the industry level settlement dated April 27, 2010, employees who joined the services of the Bank on or after April 1,2010 are not eligible for the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Basic Pay and Dearness Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate Provident Fund for employees joining on or after April 1, 2010.

The Bank recognized '' 35.80 Crore (Previous Year: '' 31.50 Crore) for DCPS contribution in the Profit and Loss Account.

ii. Disclosure on amortisation of expenditure on account of enhancement in family pension of employees of banks

Reserve Bank of India vide letter dated October 4, 2021 has permitted all member banks of Indian Banks'' Association covered under the 11th Bipartite Settlement to amortize the additional liability on account of revision in family pension over a period not exceeding five years, beginning with the Financial Year ended March 31,2022. The bank has recognised the entire additional liability estimated at '' 43 crores and opted to amortize the same over a period of seven quarters beginning with the quarter ended September 30, 2021. Accordingly, an amount '' 18.42 crores has been written off during the year ended March 31,2022 in respect of the said additional liability and the balance amounting to '' 24.57 crores has been carried forward as unamortized expenditure.

The following table as furnished by Actuary sets out the funded status of gratuity / pension plan and the amount recognized in the Bank''s financial statements as at March 31, 2022.

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, taken in to account the inflation, seniority, promotion and other relevant factors.

j) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave has been actuarially determined and an amount of '' 60.36 Crore (Previous year '' 83.29 Crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

12. Micro Small and Medium Industries

13. Segment reporting

a) Treasury:

b) Corporate / Wholesale Banking:

c) Retail banking:

d) Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

e) Unallocated

All items that cannot be allocated to reportable segments are included in unallocated portion.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly this is considered as the only secondary segment.

In accordance with RBI guidelines in regard to business segments of banks, the bank has determined the business segments and the required disclosures are as follows:

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/ Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in Unsecured these cases is possible but not probable and hence no provision is required in these cases. However, a contingent liability has been disclosed with respect to these cases.

15. Provision for long term contracts

The Bank has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the bank has reviewed and recorded adequate provision as required under any Law/ Accounting Standards for material foreseeable losses on such long-term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

17. Corporate social responsibility

Operating expenses include '' 6.06 Crore (Previous Year '' 11.68 Crore) for the year ended March 31, 2022 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013.

The Bank has spent 2.01% of its average net profit for the last three financial years as part of its CSR for the year ended March 31,2022. The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact.

18. Investor education and protection fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

19. Operating Leases

Lease payments for assets taken on operating lease are recognised as an expense in the Profit and Loss Account as per the lease terms. During the year an amount of '' 100.62 Crore (Previous year: '' 95.08 Crore) was charged to Profit and loss account.

20. Disclosure as to Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014

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 ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank ("Ultimate Beneficiaries"). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

21. ''As per RBI "Master Direction on Financial Statements - Presentation and Disclosures" dated August 30, 2021, as amended, schedule 18 has been redrafted and new disclosures made wherever necessary and additional disclosures apart from the mandatory disclosures were also made for a better disclosure of financial statements

22. Figures of the previous year have been regrouped to conform to the current year presentation wherever necessary.

Mar 31, 2019

Background

The South Indian Bank Limited (''SIB'' or the ''Bank''), incorporated on January 29, 1929 at Thrissur, as a private limited company and was later converted into a public limited company on August 1 1, 1939. SIB has a network of 894 branches/offices in India and provides retail and corporate banking, para banking activities such as debit card, third party financial product distribution, in addition to Treasury and Foreign Exchange Business. SIB is governed by Banking Regulation Act, 1949, The Companies Act, 2013 and other applicable Acts/Regulations for Banks. Its shares are listed in BSE Limited and National Stock Exchange of India Limited.

Basis of Preparation

The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of the bank used in the preparation of these financial statements conform in all material aspects to Generally Accepted Accounting Principles in India ("Indian GAAP"), the circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time and the Accounting Standards prescribed under Section 133 of the Companies Act, 2013 (as amended) and the relevant provisions of the Companies Act, 2013 ("the Act") and current practices prevailing within the banking industry in India. The Bank follows the historical cost convention and accrual method of accounting in the preparation of the financial statements, except where otherwise stated. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.

A: Disclosures as per RBI''s Master Circular on Disclosure in Financial Statements

Amounts in Notes forming part of the financial statements for the year ended March 31, 2019 are denominated in Rupees crore (unless specified otherwise) to conform to extant RBI guidelines.

1. Capital Adequacy Ratio

The Bank computes Capital Adequacy Ratio as per RBI guidelines. As per Basel III guidelines, the Bank is required to maintain a minimum Capital to Risk Weighted Assets Ratio (CRAR) of 9% {10.875% including Capital Conservation Buffer (CCB)}, with minimum Common Equity Tier I (CET1) of 5.50% (7.375% including CCB) as on March 31, 2019. These guidelines on Basel III have been implemented on April 1, 2013 in a phased manner. The Capital adequacy Ratio of the Bank calculated as per Basel III Capital Regulations is set out below.

2. Capital Infusion

During the year ended March 31, 2019, the Bank allotted 8,51,071 Equity Shares (Previous Year: 59,95,121 Equity Shares) aggregating to face value Rs.0.09 crore (Previous Year: Rs.0.60 crore) in respect of stock options exercised.

Accordingly, share capital increased by Rs.0.09 crore (Previous year: Rs.0.60 crore) and share premium increased by Rs.1.71 crore (Previous year: Rs.11.98 crore).

3.1. a) During the financial year 2018-19, the bank has debited to profit and loss account '' 34.38 crore of unamortized mark to market loss on investments in AFS and HFT as at March 31, 2018 as per RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018.

b) In respect of securities held under HTM category premium of Rs.46.44 crore (Previous Year Rs.40.27 crore) has been amortised during the year and debited under interest received on Government securities.

c) Profit on sale of securities from HTM category amounting to Rs.74.53 crore (Previous Year: Rs.60.31 crore) has been taken to Profit and Loss Account. During the year, the Bank had appropriated Rs.36.37 crore (Previous Year Rs.29.88 crore), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

d) During the year, the Bank had appropriated Rs.22.15 crore (Previous Year : '' nil), to Investment Fluctuation Reserve, being an amount of net profit on sale of investments (net of taxes and transfer to Statutory Reserve) to protect against future increase in yield.

¹ Amounts reported under Columns 4, 5, 6 and 7 above are not mutually exclusive.

² Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities and securities acquired by way of conversion of debt in line with extant RBI guidelines.

³ Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities, securities acquired by way of conversion of debt and security receipts in line with extant RBI guidelines.

⁴ Includes Non-SLR State Government special bonds with Book Value Rs.456.39 crore.

¹ Amounts reported under Columns 4, 5, 6 and 7 above are not mutually exclusive.

⁴ Includes Non-SLR State Government special bonds with Book Value Rs.501.85 crore.

4. Sale and transfers to/from HTM Category

During the years ended March 31, 2019 and March 31, 2018, the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The 5% threshold referred to above does not include one-time transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per the extant RBI guidelines, sale of non SLR SL bond under Ujwal Discom Assuarance Yogana (UDAY Scheme), sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

5. Derivatives

The Bank undertakes exchange traded currency future transaction for proprietary trading only. There is functional separation between the front Office, risk and Back Office for undertaking derivative transactions. The currency future transactions are governed by the Foreign Exchange policy of the Bank. Various limits are set up and actual exposure is monitored vis-a-vis the limits allocated. Risk Limits are in place for risk parameters viz. VaR, Stop Los, Dealer Limit, Deal size limit. Actual positions are monitored against these limits on a daily basis and breaches, if any, are reported promptly.

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. Bank does not have any Forward Rate Agreement or Interest Rate Swaps.

The notional principal amount of foreign exchange contracts classified as trading on March 31, 2019 amounted to Rs.1563.53 crore (Previous Year Rs.3928.26 crore). For these trading contracts, on March 31, 2019, marked to market position was asset of Rs.60.06 crore (Previous Year Rs.33.01 crore) and liability of Rs.78.19 crore (Previous Year Rs.24.60 crore). The notional principal amount of foreign exchange contracts classified as hedging on March 31, 2019 amounted to Rs.806.07 crore (Previous Year Rs.2428.93 crore).

Asterisk denotes figure belowRs.1,00,000/-

1. Fresh Restructuring includes fresh sanction/increase in existing accounts : Bank has undertaken restructuring during the FY 2018-19 under the natural calamity restructuring scheme and One Time Restructuring Schemes of RBI and the increase of Rs.192.67 crore is on account of Fresh Restructuring and increase in advances in those accounts restructured in the past.

2. Write off of restructured accounts includes recoveries/closure/Sale in existing accounts : Bank has written off restructured asset of Rs.51.77 crore (Provision Rs.1.59 crore).

3. The bank maintains a provision for diminution in fair value of assets amounting to Rs.4.35 crore (PY Rs.5.56 crore), of which assets holding Rs.3.78 crore (PY Rs.3.97 crore) of such provision, have shown satisfactory performance as per RBI guidelines are not disclosed above.

Asterisk denotes figure below Rs.1,00,000/-

1. Fresh Restructuring includes fresh sanction/increase in existing accounts : Bank has not undertaken any fresh restructuring during the FY 2017-18 and the increase of Rs.22.55 crore is on account of increase in advances in those accounts restructured in the past.

2. Write off of restructured accounts includes recoveries/closure/Sale in existing accounts : Bank has written off restructured asset of Rs.104.52 crore (Provision Rs.4.53 crore). The restructured portfolio have reduced by an amount of Rs.192.36 crore by way of recovery in existing accounts or on account of sale of asset.

3. The bank maintains a provision for diminution in fair value of assets amounting to Rs.5.56 crore (PY Rs.10.25 crore), of which assets holding Rs.3.97 crore (PY Rs.4.12 crore) of such provision, have shown satisfactory performance as per RBI guidelines are not disclosed above.

*RBI circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 permitted banks to continue the exposures to MSME borrowers registered under Goods and Services Tax (GST) to be classified as standard assets where the dues between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates. Accordingly, the bank has continued to classify exposure to eligible MSME borrowers of Rs.130.10 crore (Previous year Rs.109.17 crore) as standard. In accordance with the provisions of the circular the bank had not recognised interest income of Rs.4.94 crore (Previous Year Rs.4.63 crore) and has created a standard asset provision of Rs.6.51 crore (Previous Year Rs.5.46 crore) in respect of such accounts.

**The bank has restructured an amount of Rs.160 crore for eligible borrowers who were affected by floods in the state of Kerala during the financial year 2018-19 based on RBI Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18 dated 03 July, 2017 and as per the scheme formulated by SLBC Kerala.

Classification of assets and liabilities under different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the returns submitted to the RBI, which has been relied upon by the auditors.

Disclosure format of maturity pattern has been revised by RBI vide circular DBR.BP.BC.No.86/21.04.098/2015-16 dated March 23, 2016. Previous year numbers has been reclassified/rearranged accordingly.

6. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank

During the years ended March 31, 2019, March 31, 2018 and March 31, 2017, the bank has exceeded the credit exposure to single borrower and group borrowers limit as per prudential exposure limit prescribed by RBI w.r.t. investment of Rs.1,057.15 crore in security receipt issued by M/s. Phoenix ARC. The regulator has instructed the Bank not to take any further exposure to the ARC till the exposure is brought within the prudential limit prescribed under large exposure''s framework.

7. Penalties levied by the Reserve Bank of India

The penalty imposed by RBI during the year ended March 31, 2019 was Rs.5,00,75,900/- (Previous year Rs.2,52,450/-).

In exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, RBI vide letter dated May 15, 2018 had imposed a monetary penalty of Rs.5 crore on the bank for violation of regulatory guidelines observed during statutory inspection with respect to financial position as on March 31, 2016 and March 31, 2017 as detailed in RBI''s press release and the Banks intimation to the Stock Exchanges dated May 18, 2018.

8. Disclosure on Divergence in Asset Classification and Provisioning for NPAs: as per RBI Circular vide DBR.BPBC. No.63/21.04.018/2016-17 dated 18^th April, 2017.

In terms of RBI Circular No. DBR.BP.BC.No.32/21.04.018/2018-19 dated April 1, 2019 banks are required to disclose the divergence in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statement if such divergence exceed the threshold prescribed by the RBI. The divergences identified by RBI for the Financial Year ended March 31, 2018 are less than the prescribed thresholds for the year ended March 31, 2018.

9. Overseas Assets, NPAs and Revenue - Nil

10. Off-balance Sheet SPVs sponsored - Nil

11. Drawn Down from Reserves

The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2019 and March 31, 2018, except:

a) Rs.33.00 crore (Previous Year: Nil) from Revenue and Other Reserves being unamortized balance of additional provision on Debt Asset Swap transaction, as permitted by RBI vide letter: DBS (T).No./424/02.02.006/2018-19 dated May 02, 2019.

b) As a onetime measure, an amount of Rs.50.00 crores and Rs.42.78 crores pertaining to profits for FY 2015-16 and FY 2016-17, respectively, has been transferred from Revenue and Other Reserves and Rs.11.19 crore pertaining to profits for FY 2015-16 from Balance in Profit and Loss Account (Previous Year Rs.13.50 crores pertaining to profits for FY 2014-15) to Special Reserve u/s 36 (1) (viii) of Income Tax Act, 1961, to make good the shortfall in the special reserve created for the respective years. Out of the total Deferred Tax Liability created, Rs.21.18 crores and Rs.14.80 crores pertaining to amounts transferred for FY 2015-16 and 2016-17, respectively, has been drawn down from the Balance in Profit and Loss Account.

Credit to Reserve

- During FY 17-18 the Bank credited back Rs.76.05 crore drawn down from revenue and other reserves relating to unamortised balance of loss pertaining to advances sold to ARC as per RBI Circular: DBR.No.BP.BC.102/21.04.048/2015-16 dated June 13, 2016.

i) The Bank had acquired certain land parcels under a partial Debt Asset Swap transaction ("DAS") in earlier years aggregating Rs.110 crores and classified them as "Non-Banking Assets acquired in satisfaction of claims" in the Balance Sheet up to March 31, 2018. The Reserve Bank of India vide their letter dated May 2, 2019 ref DBS (T) No./424/02.02.006/2018-19 to the bank prescribed provisioning norms for DAS transactions in respect of assets acquired under DAS from a particular borrower pursuant to which the Bank has provided an amount of Rs.11 crores for the year ended March 31, 2019 and the balance of Rs.33 crores is debited against other reserves and will be amortized in the profit and loss account by proportionately reserving the debit to the other reserves over the three subsequent quarters.

12. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Nomination & Remuneration Committee.

Composition:

The Nomination & Remuneration committee of the Board consists of three members of which one member from Risk Management committee of the Board facilitate effective governance of compensation.

The roles and responsibilities of the Nomination & Remuneration Committee inter-alia includes the following:

- Scrutinize the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 2011 on Fit & Proper Criteria of the Banks.

- To devise a Succession Planning Policy for the Board and Senior Management.

- To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/removal of Directors.

- To identify persons who are qualified to become Directors/KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/or removal.

- To formulate the criteria for evaluation of Independent Directors and the Board/Committees.

- To devise a policy on Board diversity.

- To carry out any other function as is mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable.

- To perform such other functions as may be necessary or appropriate for the performance of its duties.

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related policies on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The Committee shall work in close co-ordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

- With respect to the Performance Linked Incentive Schemes, the Committee is empowered to:

(i) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

(ii) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

(iii) Co-ordinate the progress of growth of business vis-a-vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as considered necessary;

(iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

- The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 and is empowered to formulate detailed terms and conditions of the Scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To obtain necessary clearances and approvals from regulatory authorities, appoint Merchant Bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

- To oversee the administration of Employee benefits, such as, Provident Fund, Pension Fund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which are recognised in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006 (as amended).

- The Committee may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board;

- Any other matters regarding remuneration to WTDs/MD & CEO and other staffs of the Bank as and when permitted by the Board.

- To conduct the annual review of the Compensation Policy.

- To review HR Strategy aligning with business strategy of the Bank.

- To review the skill gaps and talent pool creation.

- To fulfill such other powers and duties as may be delegated to it by the Board.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD. No.BC.72/29.67.001/2011-12 dated January 13, 2012.

The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the remuneration is fixed by Board/Committee. Further, the compensation structure for the Whole Time Directors (WTDs)/Managing Director & Chief Executive Officer (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to Clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013 and Section 35B (1) of Banking Regulation Act, 1949.

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 Board of Directors through the NRC shall exercise oversight and effective governance over the framing and implementation of the Compensation Policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration. The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

- The performance of the Bank

- The performance of the business unit

- Individual performance of the employee

- Other risk perceptions and economic considerations.

Further, the Bank has not identified any employee as "risk taker" for the purpose of variable pay under this compensation policy.

- Where the variable pay constitutes a substantial portion of the fixed pay, i.e., 50% or more, an appropriate portion of the variable pay, i.e., 40% will be deferred for over a period of 3 years.

- In case of deferral arrangements of variable pay, the deferral period shall not be less than three years. Compensation payable under deferral arrangements shall vest no faster than on a pro-rata basis.

- The Board may adopt principles similar to that enunciated for WTDs/CEOs, as appropriate, for variable pay-timing, m''alus/clawback, guaranteed bonus and hedging.

- Employee Stock Option Scheme/Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable will be excluded from the components of variable pay.

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.

Variable pay means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

(i) Performance Linked Incentives to those employees who are eligible for incentives.

(ii) Ex-gratia for other employees who are not eligible for Performance linked Incentives.

(iii) Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965.

(iv) Any other incentives, by whatever name called having the features similar to the above.

13. Securitisation Transactions

The Bank has not undertaken any securitisation transactions during the year ended March 31, 2019 and March 31, 2018.

14. Credit Default Swaps

The bank has not undertaken any transactions in credit default swaps during the year ended March 31, 2019 and March 31, 2018.

15. Letter of Comfort (LoCs) issued by Banks

The Bank has not issued any reportable Letter of Comfort on behalf of subsidiaries during the year ended March 31, 2019 and March 31, 2018 respectively.

16. Unhedged Foreign Currency Exposure

Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines. The Bank has maintained provision of Rs.13.06 crore (Previous Year Rs.11.96 crore) and additional capital of Rs.12.90 crore (Previous Year Rs.10.04 crore) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2019.

17. Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of India''s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows from 1st January, 2019. The daily average LCR of the bank for the quarter ended March 2019 is 234.10%.

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed up to 2% of NDTL in the form of borrowing limit available through Marginal Standing Facility (MSF) and 5% of NDTL as Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). From February 2016 onwards, RBI has allowed Banks to reckon an additional 3% of NDTL as FALLCR. This has been further increased by 2% from July 2016, 2% from June 2018 and another 2% from October 2018, onwards. As on 31st March 2019, Banks are allowed to consider 13% of NDTL as FALLCR. Further, towards harmonisation of the effective liquidity requirements of banks with the LCR, RBI has permitted banks to recon an additional 2% of Government securities within the mandatory SLR requirement as FALLCR in a phased manner from 4^th April, 2019.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (53.45%) and unsecured wholesale funding (39.27%) which are maturing in the period. The Bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source. The Bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

18. Transfers to Depositor Education and Awareness Fund (DEAF):

19. Intra-Group Exposure - Nil.

20. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2019 was Rs.508.33 crore (Previous Year: Rs.1200 crore).

21. Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period)¹-²

There are no accounts under SDR Scheme and which are currently under stand-still period (Previous Year: Rs. Nil).

22. Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to affect the change of ownership outside SDR Scheme and which are currently under stand-still period (Previous Year: Rs.Nil).

23. Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to effect the change of ownership of projects under implementation (Previous Year: Nil).

24. Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on 31 March, 2019

There were no accounts during the year where S4A has been applied.

25. Employee Benefits

a) Provident Fund:

The Bank recognized Rs.0.21 crore (Previous Year: Rs.0.21 crore) for provident fund contribution in the Profit and Loss Account.

b) New Pension Scheme:

As per the industry level settlement dated April 27, 2010, employees who joined the services of the Bank on or after 1st April, 2010 are not eligible for the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Basic Pay and Dearness Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate Provident Fund for employees joining on or after April 1, 2010.

The Bank recognized Rs.21.49 crore (Previous Year: Rs.17.59 crore) for DCPS contribution in the Profit and Loss Account.

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 prescribed under Section 133 of the Companies Act, 2013.

The following table as furnished by Actuary sets out the funded status of gratuity/pension plan and the amount recognised in the Bank''s financial statements as at March 31, 2019.

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, taken in to account the inflation, seniority, promotion and other relevant factors.

j) Compensation for absence on Privilege/Sick/Casual Leave

The charge on account of compensation for privilege/sick/casual leave has been actuarially determined and an amount of Rs.20.69 crore (Previous year Rs.27.41 crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

k) During the Financial Year 2018-19, the Bank has debited to Profit and Loss Account Amount Rs.20.45 crore (Previous Year: Nil) of unamortised gratuity expenditure as at March 31, 2018 as per RBI Circular DBR. BP.9730/21.04.018/2017-18 dated April 27, 2018.

26. Micro Small and Medium Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments.

27. Segment reporting

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;

a) Treasury:

b) Corporate/Whole sale Banking:

The Corporate/Whole sale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

c) Retail banking:

The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

d) Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly this is considered as the only secondary segment.

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in these cases is possible but not probable and hence no provision is required in these cases. However, a contingent liability has been disclosed with respect to these cases.

28. Provision for long term contracts

The Bank has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the bank has reviewed and recorded adequate provision as required under any Law/ Accounting Standards for material foreseeable losses on such long-term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

29. Corporate social responsibility

Operating expenses include Rs.12.22 crore (Previous Year Rs.7.28 crore) for the year ended March 31, 2019 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013.

The Bank has spent 1.84% of its average net profit for the last three financial years as part of its CSR for the year ended March 31, 2019.The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact

30. Investor education and protection fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

31. Provisioning pertaining to fraud accounts

The Bank has reported 120 cases as fraud during the Financial Year ended March 31, 2019 amounting to Rs.34.41 crore and has provided for the same in full.

32. Proposed Dividend:

The Board of Directors has proposed a dividend of Rs.0.25 per Equity share (25%) [(Previous year Rs.0.40 per Equity Share) (40%)] for the year ended March 31, 2019, subject to the approval of the shareholders at the ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after Balance Sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend including dividend distribution tax of Rs.54.54 crore is not recognized as liability as on March 31, 2019. Accordingly, the liability has not been reckoned in capital funds for computing capital adequacy ratio as at March 31, 2019. Capital adequacy ratio after considering the impact of proposed dividend is 12.50% as at March 31, 2019.

33. Figures of the previous year have been regrouped to conform to the current year presentation wherever necessary.

Mar 31, 2018

37. Qualitative Disclosure around LCR:

The Bank measures and monitors the LCR in line with the Reserve Bank of India''s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows by January 1, 2019. However, with a view of providing transition time, the guidelines mandate a minimum requirement of 90% w.e.f. January 1, 2018 and a step up of 10% to reach the minimum requirement of 100% by January 1, 2019. The adequacy in the LCR maintenance is an outcome of a conscious strategy of the Bank towards complying with LCR mandate ahead of the stipulated time lines. The quarterly daily average LCR of the bank for the quarter ended March 2018 is 141.57%.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (48.98%) and unsecured wholesale funding (36.12%). The bank intends to fund the short-term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source. The bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

38. Transfers to Depositor Education and Awareness Fund (DEAF):

39. Intra-Group Exposure : Nil.

40. Inter-bank participation with risk sharing:

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2018 was Rs,1200 Crore (Previous Year: Rs,600 Crore).

¹ The Bank has not taken stand-still benefit for NPA cases and hence these cases are excluded.

² Cases where SDR has been revoked or not implemented within the permitted RBI timelines have been excluded in subsequent periods. During the year ended March 31, 2018, the Bank has not recognised an amount of Rs,Nil towards interest on cases covered under the SDR scheme (Previous Year: Rs,3.64 Crore).

44. Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period):

There are no accounts where the bank has decided to affect the change of ownership outside SDR Scheme and which are currently under stand-still period (Previous Year: Rs,Nil).

45. Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period):

There are no accounts where the bank has decided to effect the change of ownership of projects under implementation (Previous Year: Rs,Nil).

46. Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on 31 March, 2018

There were no accounts during the year where S4A has been applied.

47. Disclosure on Divergence in Asset Classification and Provisioning for NPAs: as per RBI Circular vide DBR.BPBC. No.63/21.04.018/2016-17 dated 18^th April, 2017

1. The Bank classifies advances into performing and non-performing advances (NPAs) as per the RBI guidelines. NPAs are identified and provided for based on RBI''s prudential norms on income recognition, asset classification and provisioning.

2. Based on application of RBI''s prudential norms as stated above, the bank classified and made the prescribed provisions against NPAs as at the end of March 31, 2017.

6. Employee Benefits

a) Provident Fund:

The Bank recognized Rs,0.21 Crore (Previous Year: Rs,0.19 Crore) for provident fund contribution in the Profit and Loss Account.

b) New Pension Scheme:

The Bank recognized Rs,17.59 Crore (Previous Year: Rs,14.67 Crore) for DCPS contribution in the Profit and Loss Account.

d) Ministry of Labour and Employment, Government of India on March 29, 2018 has enhanced the gratuity ceiling to an employee under Payment of Gratuity Act, 1972 to Rs,20 Lakhs from earlier limit of Rs,10 Lakhs. This change has resulted to an increase an incremental gratuity liability amounting to Rs,27.26 Crore. As per RBI circular DBR. BP. 9730/21.04.018/2017-18 dated April 27, 2018, the bank has an option to spread the incremental gratuity expenditure over four quarters beginning with the quarter ended March 31, 2018. The bank has availed the option to spread the incremental gratuity expenditure over four quarters, beginning with the quarter ended March 31, 2018. Accordingly, during the quarter and year ended March 31, 2018 the bank has charged to the profit and loss account an amount of Rs,6.81 Crore and the unamortised gratuity expenditure as at March 31, 2018 is Rs,20.45 Crore. Had the above circular been not issued by the RBI, Net Profit of the Bank for the year would have been lower by Rs,13.37 Crore (net of taxes) pursuant to the application of AS 15 "Employee Benefits".

The following table as furnished by Actuary sets out the funded status of gratuity/pension plan and the amount recognised in the Bank''s financial statements as at March 31, 2018.

*Not applicable

Notes: (i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, taken in to account the inflation, seniority, promotion and other relevant factors.

k) Compensation for absence on Privilege/Sick/Casual Leave

The charge on account of compensation for privilege/sick/casual leave has been actuarially determined and an amount of

Rs,27.41 Crore (Previous year Rs,25.94 Crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

7. Micro Small and Medium Industries

8. Segment reporting

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;

a) Treasury:

b) Corporate/Whole sale Banking:

The Corporate/Whole sale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

c) Retail banking:

The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

d) Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly this is considered as the only secondary segment.

* Also refer schedule - 12

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in these cases is possible but not probable and hence no provision is required in these cases. However, a contingent liability has been disclosed with respect to these cases.

10. Provision for long-term contracts:

The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the bank has reviewed and recorded adequate provision as required under any Law/ Accounting Standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

11. Corporate social responsibility:

Operating expenses include Rs,7.28 Crore (Previous Year Rs,4.03 Crore) for the year ended March 31, 2018 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013.

The Bank has spent 1.32% of its average net profit for the last three financial years as part of its CSR for the year ended March 31, 2018. The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact

12. Investor education and protection fund:

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

13. Provisioning pertaining to fraud accounts:

The Bank has reported 13 cases as fraud during the Financial Year ended March 31, 2018 amounting to Rs,94.69 Crore and has provided for the same in full.

During the year ended March 31, 2017, bank identified a Non Performing Advance as a fraud case. The net book value of Rs,115.64 Crore was amortised over a period of four quarters beginning from December 31, 2016. Accordingly, the Bank has charged Rs,57.82 Crore (Previous year: Rs,57.82 Crore) during the year ended 31st March, 2018 and umamortised amount as at March 31, 2018 is Nil (Previous year: Rs,57.82 Crore).

14. Proposed Dividend:

The Board of Directors has proposed a dividend of Rs,0.40 per Equity share (40%) [(Previous year Rs,0.40 per Equity Share) (40%)] for the year ended March 31, 2018, subject to the approval of the shareholders at the ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after Balance Sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend including dividend distribution tax of Rs,87.26 Crore is not recognized as liability as on March 31, 2018. Accordingly the liability has not been reckoned in capital funds for computing capital adequacy ratio as at March 31, 2018. Capital adequacy ratio after considering the impact of proposed dividend is 12.51% as at March 31, 2018.

15. Figures of the previous year have been regrouped to conform to the current year presentation wherever necessary. The figures of previous year were audited by a firm of Chartered Accountants other than S.R Batliboi & Co. LLP.

Mar 31, 2017

1. Changes in Classification:

2. 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 year have been regrouped/reclassified to conform to current year''s classification. The above regrouping/reclassification has no impact on the profit of the Bank for the year ended March 31, 2017 or the previous year.

3. The Board of Directors has proposed a dividend of Rs.0.40 per Equity share (40%) [(Previous year Rs.0.50 per Equity Share) (50%)] for the year ended March 31, 2017, subject to the approval of the shareholders at the ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after Balance Sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend including dividend distribution tax of Rs.86.82 Crore is not recognized as liability as on March 31, 2017. Accordingly the liability has not been reckoned in capital funds for computing capital adequacy ratio as at March 31, 2017. Capital adequacy ratio after considering the impact of proposed dividend is 12.16% as at March 31, 2017.

4. Disclosures as per RBI''s Master Circular on Disclosure in Financial Statements

Amounts in Notes forming part of the financial statements for the year ended 31st March, 2017 are denominated in Rupees Crore (unless specified otherwise) to conform to extant RBI guidelines.

5. Capital Adequacy Ratio:

The Bank computes Capital Adequacy Ratio as per RBI guidelines. As per Basel III guidelines, the Bank is required to maintain a minimum Capital to Risk Weighted Assets Ratio (CRAR) of 9% {11.5% including Capital Conservation Buffer (CCB)}, with minimum Common Equity Tier I (CET1) of 5.5% (8% including CCB) as on 31st March, 2019. These guidelines on Basel III have been implemented on 1st April, 2013 in a phased manner. The minimum capital required to be maintained by the Bank for the year ended 31st March, 2017 is 10.25% with minimum Common Equity Tier 1 (CET1) of 6.75% (including CCB of 1.25%). The Capital adequacy Ratio of the Bank calculated as per Basel III Capital Regulations is set out below:

In accordance with RBI Guidelines, banks are required to make Pillar 3 disclosures under Basel III Capital Regulations. The Bank has made these disclosures which are available on its website at the following link :-

http://www.southindianbank.com/content/viewContentLvl1.aspxRs.linkIdLvl2=854&LinkIdLvl3=880&linkId=880 Pillar 3 disclosures have not been subjected to audit.

6. Capital Infusion:

During the year ended March 31, 2017, the Bank allotted 18,18,866 Equity Shares (Previous Year: 1,57,005 Equity Shares) aggregating to face value Rs.0.18 Crore (Previous Year: Rs.0.01 Crore) in respect of stock options exercised.

Accordingly, share capital increased by Rs.0.18 Crore (previous year: Rs.0.01 Crore) and share premium increased by Rs.3.60 Crore (Previous Year: Rs.0.32 Crore).

The Bank, vide its Letter of Offer dated February 20, 2017 offered up to 45,07,09,302 Equity Shares of Face Value of Rs.1/- each at a price of Rs.14/- per Equity Share (including Share Premium of Rs.13/- per Equity Share) for an amount aggregating to Rs.630.99 Crore to the existing Equity Shareholders of the Bank on rights basis in the ratio of One Equity Share for every Three Equity Shares held by the Equity Shareholders on the record date i.e. February 17, 2017. The Company has allotted 45,07,08,052 Equity Shares on 27th March, 2017, the remaining 1250 Equity Shares being kept in abeyance.

Accordingly, share capital increased by Rs.45.07 Crore (Previous Year: Rs. Nil) and share premium increased by Rs.585.92 Crore (Previous Year: Rs. Nil).

7. Investments under SLR HTM (excluding specified investments as per RBI norms) account for 19.92%(Previous Year 20.40%) of demand and time liabilities as at the end of March 2017 as against permitted ceiling of 20.50% (Previous Year 21.50%) stipulated by RBI.

8. In respect of securities held under HTM category premium of Rs.28.78 Crore (Previous Year: Rs.18.88 Crore) has been amortized during the year and debited under interest received on Government securities.

9. Profit on sale of securities from HTM category amounting to Rs.79.55 Crore (Previous Year: Rs.50 Crore) has been taken to Profit and Loss Account. During the year, the Bank had appropriated Rs.39.55 Crore (Previous Year Rs.24.53 Crore), net of taxes and transfer to statutory reserve to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

10. Sale and transfers to/from HTM Category:

During the years ended March 31, 2017 and March 31, 2016, the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The 5% threshold referred to above does not include one-time transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per the extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS/HFT consequent to the reduction of ceiling on SLR securities under HTM.

11. Derivatives:

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading/speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps. Hence disclosure relating to derivatives is not applicable to the bank for the years ended 31st March, 2017 and 31st March, 2016.

The notional principal amount of foreign exchange contracts classified as trading on March 31, 2017 amounted to Rs.2389.34 Crore (Previous Year Rs.4,705.11 Crore). For these trading contracts, on March 31, 2017, marked to market position was asset of Rs.12.09 Crore (Previous Year Rs. 46.80 Crore) and liability of Rs.28.07 Crore (Previous Year Rs.46.76 Crore). The notional principal amount of foreign exchange contracts classified as hedging on March 31, 2017 amounted to Rs.1902.01 Crore (Previous Year Rs.1,444.51 Crore).

With effect from 01.04.2016, in respect of accounting of swap cost pertaining to FCNR Deposits/Overseas Borrowings, Bank has adopted amortization method over the period of swap tenure, as against the mark-to-market method. This change in policy does not have any financial impact over the full period of the swap. The impact of the change in the policy as described above is reduction in profit after tax by Rs.7.98 Crore for the Year ended 31st March, 2017. Had this policy been adopted in the previous year, the reported after tax profit number for the Year ended 31st March, 2016, would have been lower Rs.1.64 Crore.

12. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank:

During the years ended 31st March, 2017 and 31st March, 2016, the bank''s credit exposure to single borrower and group borrowers was within the prudential exposure limit prescribed by RBI

During the year ended 31st March, 2017, bank has invested an amount of Rs.1057.15 Crore in the Security Receipt issued by an ARC. As per RBI Master circular on Exposure Norms - DBR.No.Dir.BC.12/13.03.00/2015-16 Dated July 01, 2015 - "Banks''/ FIs'' investments in debentures/bonds/security receipts/pass-through certificates (PTCs) issued by an SC/RC as compensation consequent upon sale of financial assets will constitute exposure on the SC/RC. In view of the extraordinary nature of the event, banks/FIs will be allowed, in the initial years, to exceed the prudential exposure ceiling on a case-to-case basis."

The above investment exceeds the prudential exposure ceiling, for which the bank has sought approval from RBI for such exceeding.

13. Penalties levied by the Reserve Bank of India

The penalty imposed by RBI during the year ended March 31, 2017 was Rs.1,17,193/- (Previous year Rs.32,400/-)

Due to oversight, there was a single incident of SGL bouncing on 27th October, 2016. Based on the bank''s explanation/ representation, RBI has taken a lenient view and has waived imposition of any monetary penalty in this regard. Disclosure of the above fact is made in accordance with the letter issued by RBI vide letter no.: PD0.NDS.Bounce/08.03.000/949/2016-17 dated 21^st November, 2016.

14. Overseas Assets, NPAs and Revenue - Nil

15. Off-balance Sheet SPVs sponsored - Nil

16. Drawdown from Reserves

The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2017 and March 31, 2016, except:

17. towards share issue expenses of Rs. 4.73 Crore, incurred for the equity raised through the Right Issue during the year ended March 31, 2017, which have been adjusted against the share premium account in terms of Section 52 of the Companies Act, 2013.

18. Rs. Nil (Previous Year Rs. 10.05 Crore) from Investment Reserve Account in accordance with RBI guidelines on ''Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by banks''.

19. Rs.76.05 Crore (Previous Year: Nil) from Revenue and Other Reserves being unamortized balance of loss pertaining to advances sold to ARC, as permitted by RBI vide Circular: DBR.No.BP.BC.102/21.04.048/2015-16 dated June 13, 2016.

20. Rs. 57.82 Crore (Previous year Rs. Nil) from revenue and other reserves being unamortized amount of a fraud case as permitted by the RBI in accordance with DBR No.BP.BC.92/21.04.048/2015-16 dated April 18, 2016 (Refer note C.13 of Schedule 18).

21. Disclosures on Remuneration

22. Information relating to the composition and mandate of the Nomination & Remuneration Committee.

Composition:

The Nomination & Remuneration committee of the Board consists of three members of which one member from Risk

Management Committee of the Board facilitate effective governance of compensation.

The roles and responsibilities of the Nomination & Remuneration Committee inter-alia includes the following:

23- Scrutinizing the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 201 1 on Fit & Proper Criteria of the Banks.

24- To devise a Succession Planning Policy for the Board and Senior Management.

25- To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/removal of Directors.

26- To identify persons who are qualified to become Directors/KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/or removal.

27- To formulate the criteria for evaluation of Independent Directors and the Board/Committees.

28- To devise a policy on Board diversity.

29- To carry out any other function as is mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable.

30- To perform such other functions as may be necessary or appropriate for the performance of its duties.

31- To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.

32- The Committee shall work in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

33- With respect to the Performance Linked Incentive Schemes, the Committee is empowered to:

34. Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

35. Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

36. Coordinate the progress of growth of business vis-a-vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as considered necessary;

37. On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

38- The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 and is empowered to formulate detailed terms and conditions of the Scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

39- To obtain necessary clearances and approvals from regulatory authorities, appoint Merchant Bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

40- To oversee the administration of Employee benefits, such as, Provident Fund, Pension Fund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which are recognized in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.

41- The Committee may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board.

42- Any other matters regarding remuneration to WTDs/MD & CEO and other staffs of the Bank as and when permitted by the Board.

43- To conduct the annual review of the Compensation Policy.

44- To fulfill such other powers and duties as may be delegated to it by the Board.

45. Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD. No.BC.72/29.67.001/2011-12 dated January 13, 2012.

Further, the compensation structure for the Whole Time Directors (WTDs)/Managing Director & Chief Executive Officers (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013.

46. 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 Board of Directors through the NRC shall exercise oversight and effective governance over the framing and implementation of the Compensation Policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

47. Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration. The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

48- The performance of the Bank

49- The performance of the business unit

50- Individual performance of the employee

51- Other risk perceptions and economic considerations.

52. Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of India''s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows by January 1, 2019. However, with a view to providing transition time, the guidelines mandate a minimum requirement of 80% w.e.f. January 1, 2017 and a step up of 10% every year to reach the minimum requirement of 100% by January 1, 2019. The adequacy in the LCR maintenance is an outcome of a conscious strategy of the Bank towards complying with LCR mandate ahead of the stipulated time lines. The quarterly daily average LCR of the bank for the quarter ended March 2017 is 227.81%.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (56.82%) and unsecured wholesale funding (23.89%). The bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source. The bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

53. Transfers to Depositor Education and Awareness Fund (DEAF):

54. Intra-Group Exposure - Nil.

55. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2017 was Rs.600 Crore (Previous Year: Rs.689 Crore).

56. Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to affect the change of ownership outside SDR Scheme and which are currently under stand-still period (Previous Year: Nil).

57. Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to affect the change of ownership of projects under implementation (Previous Year: Nil).

58. Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on 31 March, 2017

There were no accounts during the year where S4A has been applied.

59: Other Disclosures

60. Fixed Assets

a) Premises of the Bank were revalued as on April 1, 2016 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs.276.76 Crore to Rs.390.50 Crore and the resultant appreciation in the value amounting to Rs.113.74 Crore has been credited to revaluation reserve during the year.

61. Employee Benefits

62. Provident Fund

The Bank recognized Rs.0.19 Crore (Previous Year: Rs.0.31 Crore) for provident fund contribution in the Profit and Loss Account.

63. New Pension Scheme

As per the industry level settlement dated 27th April, 2010, employees who joined the services of the Bank on or after 1st April, 2010 are not eligible for the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Basic Pay and Dearness Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate Provident Fund for employees joining on or after 01.04.2010.

The Bank recognized Rs.14.67 Crore (Previous Year: Rs.13.74 Crore) for DCPS contribution in the Profit and Loss Account.

The employee benefits on account of pension, gratuity and leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 prescribed under Section 133 of the Companies Act, 2013.

The following table as furnished by Actuary sets out the funded status of gratuity/pension plan and the amount recognized in the Bank''s financial statements as at March 31, 2017.

64. Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

65. Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

66. The estimates of future salary increases, considered in actuarial valuation, taken in to account the inflation, seniority, promotion and other relevant factors.

67. Compensation for absence on Privilege/Sick/Casual Leave

The charge on account of compensation for privilege/sick/casual leave has been actuarially determined and an amount of Rs.25.94 Crore (Previous year Rs.25.27 Crore) has been debited to Profit and Loss Account.

The above information is as certified by actuary and relied upon by the auditor.

68. Small and Micro Industries

69. Segment reporting

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;

70. Treasury:

71. Corporate/Wholesale Banking:

The Corporate/Wholesale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

72. Retail banking:

The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on loans made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

73. Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly this is considered as the only secondary segment.

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in these cases is possible but not probable and hence no provision is required in these cases. However, a contingent liability has been disclosed with respect to these cases.

74. Provision for long term contracts

75. Corporate social responsibility

Operating expenses include Rs.4.03 Crore (Previous Year Rs.2.30 Crore) for the year ended March 31, 2017 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013.

The Bank has spent 0.70% of its average net profit for the last three financial years as part of its CSR for the year ended March 31, 2017. As a responsible Bank, it has approached the mandatory requirements of CSR spend positively by utilizing the reporting year to lay a foundation on which to build and scale future projects and partnerships. The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact. In the years to come, the Bank will further strengthen its processes as per requirement.

76. Investor education and protection fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

77. Provisioning pertaining to fraud accounts

The Bank has reported 10 cases as fraud during the Financial Year ended March 31, 2017 amounting to Rs.314.03 Crore and has provided for the same in full except the following:

During the Year ended 31st March, 2017, bank identified a Non-Performing Advance as a fraud case. The net book value of Rs.115.64 Crore has been decided to be amortized over a period of four quarters beginning December 31, 2016. Accordingly, the Bank has charged Rs.57.82 Crore during the year ended 31st March, 2017 and unamortized amount of Rs.57.82 Crore has been drawn from Revenue and other reserves and will be charged to profit and loss account during the next two quarters in equal installments as permitted by the RBI in accordance with DBR No.BP.BC.92/21.04.048/2015-16 dated April 18, 2016.

Bank does not have any unamortized loss on fraud accounts as on March 31, 2017 except as disclosed above.

78. Disclosure of Specified Bank Notes (SBNs)

As per the clarification from RBI, the provisions of the MCA Notification dated 30th March, 2017 requiring companies to disclose details of the SBNs held and transacted during the notified period is not applicable to Banks.

79. Figures of the previous year have been regrouped to conform to the current year presentation wherever necessary.

Mar 31, 2016

1. Sale and transfers to/ from HTM Category

During the current year, the value of sales/transfers of securities to/from HTM category (excluding one-time transfer of securities and sales to RBI under OMO auctions) was within 5% of the book value of investments held in HTM category at the beginning of the year.

2. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps. The notional principal amount of foreign exchange contracts classified as trading on March 31, 2016 amounted to Rs.4,705.11 crore (Previous Year Rs.19,452.70 crore). For these trading contracts, on March 31, 2016, marked to market position was asset of Rs.46.80 crore (Previous Year Rs.140.63 crore) and liability of Rs.46.76 crore (Previous Year Rs.140.70 crore). The notional principal amount of foreign exchange contracts classified as hedging on March 31, 2016 amounted to Rs.1,444.51 crore (Previous Year Rs.1,072.48 crore).

3. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bankr

During the year ended 31 March, 2016 and 31 March, 2015, the Bank''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

4. Overseas Assets, NPAs and Revenue - Nil

24. Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purpose vehicle which is required to be consolidated in the consolidated financial statements as per accounting norms.

5. Drawdown from Reserves

a) The Bank has drawn down Rs.10.05 crore (Previous Year Rs.6.79 crore) from Investment Reserve Account in accordance with RBI guidelines on ''Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by banks''.

b) During the previous year, in accordance with the requirements of Schedule II of the Companies Act 2013, the Bank has re- assessed the useful lives of the fixed assets and an amount of Rs.9.38 crore (net of taxes) has been drawn from the Revenue and Other Reserve in respect of assets whose useful life is nil as at April 1, 2014.

6. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Nomination & Remuneration Committee.

Composition.

The Nomination & Remuneration committee of the Board consists of three members of which one member from Risk Management Committee of the Board facilitate effective governance of compensation.

The roles and responsibilities of the Nomination & Remuneration Committee inter-alia includes the following:

- Scrutinizing the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 201 1 on Fit & Proper Criteria of the Banks.

- To devise a Succession Planning Policy for the Board and Senior Management.

- To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/ removal of Directors.

- To identify persons who are qualified to become Directors/ KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/ or removal.

- To formulate the criteria for evaluation of Independent Directors and the Board/Committees.

- To devise a policy on Board diversity.

- To carry out any other function as is mandated by the Board from time to time and / or enforced by any statutory notification, amendment or modification, as may be applicable.

- To perform such other functions as may be necessary or appropriate for the performance of its duties.

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The Committee shall work in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

- With respect to the Performance Linked Incentive Schemes, the Committee is empowered to:

(i) Draw up terms and conditions and approve the changes, if any, to the Performance Linked Incentive schemes;

(ii) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

(iii) Coordinate the progress of growth of business vis -a- vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as considered necessary;

(iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

- The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 and is empowered to formulate detailed terms and conditions of the Scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To obtain necessary clearances and approvals from regulatory authorities, appoint Merchant Bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

- To oversee the administration of Employee benefits, such as, provident fund, Pension Fund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which are recognized in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.

- The Committee may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board;

- Any other matters regarding remuneration to WTDs/MD & CEO and other staffs of the Bank as and when permitted by the Board.

- To conduct the annual review of the Compensation Policy.

- To fulfill such other powers and duties as may be delegated to it by the Board.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD. No.BC.72/29.67.001/201 1-12 dt. January 13, 2012.

The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the fixed remuneration is fixed by Board / Committee.

Further, the compensation structure for the Whole Time Directors (WTDs) / Managing Director & Chief Executive Officers (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013.

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 Board of Directors through the NRC shall exercise oversight and effective governance over the framing and implementation of the Compensation Policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration. The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

- The performance of the Bank

- The performance of the business unit

- Individual performance of the employee

- Other risk perceptions and economic considerations.

Further, the Bank has not identified any employee as "risk taker" for the purpose of variable pay under this compensation policy.

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.

- Where the variable pay constitutes a substantial portion of the fixed pay, i.e., 50% or more, an appropriate portion of the variable pay, i.e., 40% will be deferred for over a period of 3 years.

- In case of deferral arrangements of variable pay, the deferral period shall not be less than three years. Compensation payable under deferral arrangements shall vest no faster than on a pro rata basis.

- The Board may adopt principles similar to that enunciated for WTDs / CEOs, as appropriate, for variable pay-timing, m''alus / clawback, guaranteed bonus and hedging.

- Employee Stock Option Scheme / Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable will be excluded from the components of variable pay.

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.

Variable pay means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

(i) Performance Linked Incentives to those employees who are eligible for incentives.

(ii) Exgratia for other employees who are not eligible for Performance linked Incentives.

(iii) Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965

(iv) Any other incentives, by whatever name called having the features similar to the above.

7. Securitisation Transactions

The Bank has not done any securitisation transactions during the year ended 31 March, 2016 and 31 March, 2015.

8. Credit Default Swaps

The bank has not taken any transactions in credit default swaps during the year ended March 31, 2016 and March 31, 2015.

9. Letter of Comfort (LoCs) issued by Banks:

The Bank has not issued any reportable Letter of Comfort during the year ended March 31, 2016 and March 31, 2015 respectively.

10. Unhedged Foreign Currency Exposure

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion. In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage.

Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines. The Bank has maintained provision of Rs.10.07 crore (Previous Year Rs.15.12 crore) and additional capital of Rs.8.42 crore (Previous Year Rs.17.10 crore) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2016.

11. Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of India''s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows by January 1, 2019. However, with a view to providing transition time, the guidelines mandate a minimum requirement of 70% w.e.f. January 1, 2016 and a step up of 10% every year to reach the minimum requirement of 100% by January 1, 2019. The adequacy in the LCR maintenance is an outcome of a conscious strategy of the Bank towards complying with LCR mandate ahead of the stipulated time lines. The monthly average LCR of the bank for the quarter March 2016 is 143.94%.

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed upto 2% of NDTL in the form of borrowing limit available through Marginal Standing Facility (MSF) and 5% of NDTL as Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). From February 2016 onwards, RBI has allowed Banks to reckon an additional 3% of NDTL as FALLCR. Level 1 asset contributes to 97.99% of the total high quality liquid assets of the bank of which the major contribution is from the Government securities.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (59.36%) and unsecured wholesale funding (27.75%). The bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source.

Bank has only forward contract as derivative exposure. The bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

12. Intra-Group Exposure - Nil.

13. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2016 was ''689 crore (Previous Year: Nil).

B: Other Disclosures

1. Fixed Assets

a) Premises of the Bank were revalued as on March 31, 2011 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs.192.31 crore to Rs.326.18 crore and the resultant appreciation in the value amounting to Rs. 133.87 crore has been credited to revaluation reserve during 2010-11.

b) The software capitalized under Fixed Asset (Net of depreciation) was Rs.24.86 crore (PY Rs.13.34 crore) as at March 31, 2016.

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, take account the inflation, seniority, promotion and other relevant factors.

h) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave has been actuarially determined and an amount of Rs.25.27 crore (Previous year Rs.18.98 crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

14. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year-end together with interest paid/ payable as required under the said Act have not been given.

15. Segment reporting

Business Segments have been identified and reported taking into

Mar 31, 2015

Background

The South Indian Bank Limited (Rs.SIBRs. or the Rs.BankRs.) was incorporated on January 29, 1929 at Thrissur as a private limited company and was later converted into a public limited company on August 11, 1939. SIB has a network of 842 branches in India and provides retail and corporate banking, Para banking activities such as debit card, third party product distribution, in addition to Treasury and Foreign Exchange Business. SIB is governed by Banking Regulation Act, 1949 and other applicable Acts/Regulations. Its shares are listed in Bombay Stock Exchange and National Stock Exchange. The bank has de-listed its shares from the Cochin Stock Exchange during the year.

As at As at March 31, 2015 March 31,2014 Rs.(''000) Rs.(''000)

SCHEDULE 1 - CONTINGENT LIABILITIES (Refer Schedule 17(11))

I. Claims against the Bank not acknowledged as debts:

(i) Service Tax disputes 211,117 21,600

(ii) Others 71,606 62,542

II. Liability on account of outstanding Forward

Exchange Contracts1 249,159,994 169,284,431

III. Guarantees given on behalf of constituents in India 14,795,637 11,746,807

IV Acceptances, endorsements and other obligations 7,522,969 10,234,262

V. Other items for which the bank is contingently liable:

(i) Capital Commitments 17,580 -

(ii) Transfers to Depositor Education and Awareness Fund (DEAF) 421,800 -

TOTAL 272,200,703 191,349,642

1 Represents notional amount

2. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps.

Item (ii) above includes Rs.82.07 crores in respect of sale of certain non-performing financial assets for which, the Bank has, in terms of RBI Circular DBOD.BP.BC.No.9/21.04.048/2014-15 on "Prudential norms on income recognition, asset classification and provisioning pertaining to advances" dated July 1, 2014 spread the net short fall in recovery of net book value of Rs. 8.32 crores included in item (v) above, over a period of two years. Consequently an amount of Rs. 1.66 crores has been charged to the profit and loss account during the year ended March 31, 2015 and the unamortized balance as at March 31,2015 amounts to Rs. 6.66 crores. The shortfall in respect of sale of standard financial assets amounting to Rs. 29.42 crores has been debited to the profit and loss account.

3. Penalties levied by the Reserve Bank of India

The penalty imposed by RBI during the year ended March 31, 2015 was Rs.52,550/- (Previous year Rs.47,830/-)

4. Draw Down from Reserves

a) In accordance with the requirements of Schedule II of the Companies Act, 2013, the Bank has re-assessed the useful lives of the fixed assets and an amount of Rs.9.38 crores (net of taxes) has been drawn from the Revenue and Other Reserve in respect of assets whose useful life is nil as at April 1, 2014.

b) In accordance with Reserve Bank of India guidelines vide circular No. DBOD. No. BP BC. 77/ 21.04.018/ 2013-14 dated December 20, 2013, the Bank has created Deferred Tax Liability amounting to Rs.20.49 crore during the previous year on the Special Reserve under Section 36 (i) (viii) of Income Tax Act. Out of the total DTL created an amount of Rs.14.71 crore pertaining to the Special Reserve outstanding as at March 31,2013 has been drawn from the General Reserve as permitted.

c) During the previous year, in accordance with the exemption from the provisions of Section 13 of Banking Regulation Act, 1949 granted vide Central Government Notification No. S.O.214 (E) dated January 21,2014, the bank had appropriated an amount of Rs.4.49 crore from Share Premium Account towards expenditure incurred in connection with Qualified Institutional Placement Issue as per the provisions of Section 78 of the Companies Act, 1956. There is no such transfer in the current year.

B: OTHER DISCLOSURES

1. Fixed Assets

Premises of the Bank were revalued as on March 31, 2011 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs.192.31 crore to Rs.326.18 crore and the resultant appreciation in the value amounting to Rs. 133.87 crore has been credited to revaluation reserve during 2010-11.

The software capitalized under Fixed Asset (Net of depreciation) was Rs.13.34 crores. (PY Nil) as at March 31, 2015.

5. Related party disclosure:

a. Key Management Personnel

Sri V. G. Mathew, Managing Director & Chief Executive Officer. (01.10.2014 to 31.03.2015) Dr. V. A. Joseph, Managing Director & Chief Executive Officer. (01.04.2014 to 30.09.2014) Sri C. P. Gireesh, Chief Financial Officer (01.04.2014 to 31.03.2015)

Sri Jimmy Mathew, Company Secretary (01.04.2014 to 31.03.2015)

6. Employee Benefits

a) Retirement Benefits

The bank has recognized the following amounts in the Profit and Loss account towards employee benefits as under:

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 (revised).

During the year ended 31.03.201 1, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September 1995 and had not opted for the pension scheme earlier. Consequently, 2217 employees had exercised their option for the pension scheme and the bank has incurred an extra liability of Rs.135.13 crore. Further, during the year ended 31.03.201 1, the limit of gratuity payable to the employees of the bank was also enhanced from Rs.3.50 Lakhs to Rs.10.00 Lakhs, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs. 21.40 crore. The extra cost of pension and gratuity to employees works out to Rs.156.53 crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs.156.53 crore is required to be charged to the Profit and Loss account for the year ended 31.03.201 1. However, in accordance with the circular issued by Reserve Bank of India vide reference number DBOD.BP.BC.80/21.04.018/2010-11 dated February 9, 2011, and made applicable to our bank vide DBOD No.BP. BC.15896/21.04.018/2010-11 dated April 8, 2011, the Bank would amortize the amount of Rs.156.53 crore over a period of five years. During the current year 2014-15, bank has amortized an amount of Rs.22.49 crore (Rs.20.41 crore towards pension and Rs.2.08 towards gratuity) to complete the amortization. Had the above circular been not issued by the RBI, Net profit of the Bank for the year would have been higher by Rs.14.85 crore pursuant to the application of AS 15.

9. Tier II Bonds

Lower Tier II Bonds outstanding as at March 31,2015 (included under Schedule 14 Borrowings) is Rs.200.00 crore (Previous Year Rs. 200.00 crore).

Amount reckoned for Tier II Capital as per RBI guidelines is Rs.200.00 crore (Previous Year Rs.200.00 crore).

10. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Remuneration Committee.

Composition

The remuneration committee of the Board consists of three members of which one member from Risk Management Committee of the Board facilitate effective governance of compensation.

The roles and responsibilities of the Compensation & Remuneration Committee are as follows:

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to all employees and the WTDs / MD & CEO including performance linked incentives, perquisites, stock option scheme etc., with a view to attract, motivate and retain employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The CRC works in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The CRC also ensures that the cost / income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

- With respect to the performance linked incentive schemes, the CRC is empowered to:

(i) Draw up terms and conditions and approve the changes, if any, to the performance linked incentive schemes;

(ii) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

(iii) Coordinate the progress of growth of business vis -a- vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

(iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity / equity.

- The CRC also functions as the Compensation Committee as prescribed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and is empowered to formulate detailed terms and conditions of the scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To obtain necessary clearances and approvals from regulatory authorities, appoint merchant bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

- To oversee the administration of employee benefits, such as, provident fund, pension fund, gratuity, compensation for absence on privilege / sick / casual leave etc., which are recognized in accordance with Accounting Standard 15 (revised) notified under Section 133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts) Rules, 2014.

- The CRC may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board.

- Any other matters regarding remuneration to WTDs / MD & CEO and other staffs of the Bank as and when permitted by the Board.

- To conduct the annual review of the Compensation Policy.

- To fulfill such other powers and duties as may be delegated to it by the Board.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD. No.BC.72/29.67.001/2011-12 dt. January 13, 2012.

The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the fixed remuneration is fixed by Board / Committee.

Further, the compensation structure for the Whole Time Directors (WTDs) / Managing Director & Chief Executive Officers (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to clause 95 of Articles of Association of the Bank read with Section 197 of the Companies Act, 2013.

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 Board of Directors through the CRC shall exercise oversight and effective governance over the framing and implementation of the Compensation Policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration. The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

- The performance of the Bank

- The performance of the business unit

- Individual performance of the employee

- Other risk perceptions and economic considerations.

Further, the Bank has not identified any employee as "risk taker" for the purpose of variable pay under this compensation policy.

e) A discussion of the bankRs.s policy on deferral and vesting of variable remuneration and a discussion of the bankRs.s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

- Where the variable pay constitutes a substantial portion of the fixed pay, i.e., 50% or more, an appropriate portion of the variable pay, i.e., 40% will be deferred for over a period of 3 years.

- In case of deferral arrangements of variable pay, the deferral period shall not be less than three years. Compensation payable under deferral arrangements shall vest no faster than on a pro rata basis.

- The Board may adopt principles similar to that enunciated for WTDs / CEOs, as appropriate, for variable pay-timing, mRs.alus / clawback, guaranteed bonus and hedging.

- Employee Stock Option Scheme / Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable will be excluded from the components of variable pay.

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.

- Variable pay means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

I. Performance Linked Incentives to those employees who are eligible for incentives.

II. Exgratia for other employees who are not eligible for Performance linked Incentives.

III. Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965

IV. Any other incentives, by whatever name called having the features similar to the above.

12. Credit Default Swaps: The bank has not taken any credit default swaps during the year and the balance outstanding as at March 31, 2015 is nil.

NO Contingent liability Brief Description

1 Claims not acknowledged as debts This includes liability on account of Service tax, and other legal cases filed against the bank. The bank is a party to various legal proceedings in the ordinary course of business and these are contested by the Bank and are therefore subjudice. The bank does not expect the outcome of these proceedings to have a material adverse impact on the bankRs.s financial position.

2 Liability on account of outstanding The bank enters into foreign exchange contracts with interbank participants on its own forward contracts account and for its customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contract rate.

3 Guarantees on behalf of constituents As a part of banking activities, the Bank issues Letter of Guarantees on behalf of its in India customers. Guarantees generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfill its financial or performance obligations.

4 Acceptances, endorsements and As a part of banking activities, the Bank issues documentary credit on behalf of its other obligations customers. Documentary credits such as letters of obligations, enhancing the credit standing of the customers of the bank which generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfill its financial obligations

5 Other items for which the bank is These include amounts which may become payable in respect of capital commitments. contingently liable

* Also refer schedule - 12

17. Unhedged Foreign Currency Exposure :

The Bank has in place a policy on managing credit risk arising out of unhedged foreign currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of borrowers by reviewing their foreign currency product portfolio and encouraging them to hedge the unhedged portion. In line with the policy, assessment of unhedged foreign currency exposure is a part of assessment of borrowers and is undertaken while proposing limits or at the review stage.

Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on a periodic basis. The Bank also maintains incremental provision towards the unhedged foreign currency exposures of its borrowers in line with the extant RBI guidelines. The Bank has maintained provision of Rs.15.12crores (PY Nil) and additional capital of Rs.17.10 crores (PY Nil) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31,2015.

19. Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of IndiaRs.s circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". The LCR guidelines aim to ensure that a bank maintains an adequate level of unencumbered High Quality Liquid Assets (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. 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. Banks are required to maintain High Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows by January 1, 2019. However, with a view to provide transition time, the guidelines mandate a minimum requirement of 60% w.e.f. January 1, 2015 and a step up of 10% every year to reach the minimum requirement of 100% by January 1, 2019. The adequacy in the LCR maintenance is an outcome of a conscious strategy of the Bank towards complying with LCR mandate ahead of the stipulated time lines. The monthly average LCR of the bank for the quarter ended March 2015 is 107.06%.

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed upto 2% of NDTL in the form of borrowing limit available through Marginal Standing Facility (MSF) and 5% of NDTL as Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR). Level 1 asset contributes to 98.27% of the total high quality liquid assets of the bank of which the major contribution is from the Government securities.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (47.15%) and unsecured wholesale funding (28.84%). The bank intends to fund the short term cash outflows from extremely liquid Government securities and funding for estimated cash outflows considered in LCR computation substantially flows from this source.

Bank has only forward contract as derivative exposure. The bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

20. Figures of the previous year have been regrouped to confirm to the current year presentation wherever necessary.

Mar 31, 2014

1. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps.

2. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the bank

During the year the bank had sanctioned credit limits, with the approval of the Board, to the following borrowers which were in excess of prudential exposure limits as indicated hereunder.

3. Penalties levied by the Reserve Bank of India

The penalty imposed by RBI during the year ended March 31, 2014 was Rs.47,830 (Previous year Nil)

4. Provisions and Contingencies debited to Profit and Loss Account (Rs. in Crore)

Break up of ''Provisions and Contingencies'' (Rs. in Crore) shown under the head Expenditure in Profit and Loss Account 31.03.2014 31.03.2013

Provision for NPA/NPIs 136.92 131.90

Provision for taxes (Net)* 242.41 182.97

Deferred Tax (Net) (20.97) (29.38)

Provision for Standard Assets 31.09 32.49

Provision for Restructured Advances 9.70 18.63

Provision for depreciation in the value of investments (28.47) 11.23

Others 6.]6 (1.53)

TOTAL 376.84 346.31

* Includes Wealth Tax Rs.0.03 Crore (Rs.0.02 Crore).

5. Draw Down from Reserves

a) In accordance with Reserve Bank of India guidelines vide Circular No. DBOD. No. BP. BC. 77/21.04.018/2013-14 dated December 20, 2013, the Bank has created Deferred Tax Liability amounting to Rs.20.49 Crore during the current year on the Special Reserve under Section 36 (1) (viii) of Income Tax Act. Out of the total DTL created an amount of Rs.14.71 Crore pertaining to the Special Reserve outstanding as at March 31, 2013 has been drawn from the General Reserve as permitted.

b) In accordance with the exemption from the provisions of Section 13 of Banking Regulation Act, 1949 granted vide Central Government Notification No. S.0.214 (E) dated January 21, 2014, the bank had appropriated an amount of Rs.4.49 Crore from Share Premium Account towards expenditure incurred in connection with QIP Issue as per the provisions of Section 78 of the Companies Act, 1956.

B. OTHER DISCLOSURES

1. Fixed Assets

Premises of the Bank were revalued as on 31.03.2011 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs.192.31 Crore to Rs.326.18 Crore and the resultant appreciation in the value amounting to Rs.133.87 Crore has been credited to revaluation reserve during 2010-11.

Note: In FY 2012-13, the Board of Directors of the Bank passed a resolution to not withdraw any amount in the future from the Special Reserve created under Section 36(1)(Viii) of the Income Tax Act 1961. Accordingly, the Bank treated the tax difference arising on account of the special reserve as a permanent difference and reversed the deferred tax liability previously created in March 31, 2012 in respect of such Special Reserve.

Pursuant to a Notification No. DBOD. No. BP.BC.77 / 21.04.018 / 2013-14 dated December 20, 2013 issued by the Reserve Bank of India, all banks are now required to create deferred tax liability in respect of the Special Reserve created under Section 36(1)(Viii) of the Income Tax Act 1961 on a prudent basis. Accordingly, the Bank has created a deferred tax liability of Rs.20.49 Crores as at March 31, 2014. Out of this amount, an amount of Rs.14.71 Crores which pertains to periods prior to March 31, 2013 has been debited to the general reserve and the amount of Rs.5.78 Crores which pertains to the year ended March 31, 2014 has been debited to the profit and loss account in accordance with the accounting treatment prescribed by the Reserve Bank of India through the above notification. Had the Bank debited the opening deferred tax liability for financial years up to March 31, 2013 to the profit and loss account in accordance with accounting principles generally accepted in India, the profit after tax of the Bank for the year ended March 31, 2014 would have been lower by Rs.14.71 Crores.

6. Related Party Disclosure:

a. Key Management Personnel

Dr. V. A. Joseph, Managing Director & Chief Executive Officer.

b. Gross Remuneration paid Rs.79.24 Lakhs (Previous year Gross Rs.70.40 Lakhs).

Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits as they are determined on an actuarial basis for the bank as a whole.

The employee benefits on account of pension, gratuity and leave have been ascertained on actuarial valuation in accordance with Accounting Standard 15 (revised).

During the year ended 31.03.2011, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September, 1995 and had not opted for the pension scheme earlier. Consequently, 2217 employees had exercised their option for the pension scheme and the bank has incurred an extra liability of Rs.135.13 Crore. Further, during the year ended 31.03.2011, the limit of gratuity payable to the employees of the bank was also enhanced from Rs.3.50 Lakhs to Rs.10.00 Lakhs, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs.21.40 Crore. The extra cost of pension and gratuity to employees works out to Rs.156.53 Crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs.156.53 Crore is required to be charged to the Profit and Loss account for the year ended 31.03.2011. However, in accordance with the Circular issued by Reserve Bank of India vide reference number DBOD.BPBC.80 / 21.04.018 / 2010- 11 dated February 9, 2011, and made applicable to our bank vide DBOD No.BP.BC.15896 / 21.04.018 / 2010- 11 dated April 8, 2011, the Bank would amortize the amount of Rs.156.53 Crore over a period of five years. During the current year 2013-14, bank has amortized an amount of Rs.28.23 Crore (Rs.24.72 Crore towards pension and Rs.3.51 Crore towards gratuity) and balance unamortized amount to be carried forward as on 31.03.2014 is Rs.22.49 Crore. Had the above circular been not issued by the RBI, Net Profit of the Bank for the year would have been higher by Rs.18.63 Crore pursuant to the application of AS 15 and the reserve would have been lower by Rs.22.49 Crore.

h) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave has been actuarially determined and a charge of Rs.11.52 Crore (Previous year Rs.10.97 Crore) has been debited to Profit and Loss account.

7. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year-end together with interest paid / payable as required under the said Act have not been given.

8. Tier II Bonds

Lower Tier II Bonds outstanding as at March 31, 2014 is Rs.200.00 Crore (Previous Year Rs.265.00 Crore). Amount reckoned for Tier II Capital as per RBI guidelines is Rs.200.00 Crore (Previous Year Rs.200.00 Crore).

9. Disclosures on Remuneration

(a) Information relating to the composition and mandate of the Remuneration Committee.

The Board of Directors of Bank through the Compensation and Remuneration Committee (CRC) of the Board oversee the framing, review and implementation of compensation policy. The CRC comprise 4 independent directors including the non-executive chairman.

CRC of the Bank as on March 31, 2014 is having the following independent directors:

- Mr. Amitabha Guha, Chairman

- Mr. Paul Chalissery

- Mr. Mohan E. Alapatt

- Dr. John Joseph Alapatt

The roles and responsibilities of the CRC are as follows:

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to all employees and the WTDs / MD & CEO including performance linked incentives, perquisites, stock option scheme etc., with a view to attract, motivate and retain employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The CRC works in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The CRC also ensures that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

- With respect to the performance linked incentive schemes, the CRC is empowered to:

a) Draw up terms and conditions and approve the changes, if any, to the performance linked incentive schemes;

b) Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

c) Coordinate the progress of growth of business vis-a-vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

d) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity / equity.

- The CRC also functions as the Compensation Committee as prescribed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and is empowered to formulate detailed terms and conditions of the scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To obtain necessary clearances and approvals from regulatory authorities, appoint merchant bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

- To oversee the administration of employee benefits, such as, provident fund, pension fund, gratuity, compensation for absence on privilege / sick / casual leave etc., which are recognized in accordance with Accounting Standard 15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.

- The CRC may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board.

- Any other matters regarding remuneration to WTDs/MD&CEO and other staffs of the Bank as and when permitted by the Board.

- To conduct the annual review of the Compensation Policy.

- To fulfill such other powers and duties as may be delegated to it by the Board.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its Circular No. DBOD. No. BC. 72/29.67.001 /2011-12 dtd. 13/01 /2012.

The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the fixed remuneration is fixed by Board / Committee.

Further, the compensation structure for the Whole Time Directors (WTDs) / Managing Director & Chief Executive Officers (MDSCEO)of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to Clause 95 of Articles of Association of the Bank read with the Section 309 (1) of the Companies Act, 1956.

(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 Board of Directors through the CRC shall exercise oversight and effective governance over the framing and implementation of the Compensation policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration and 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.

The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

- The performance of the Bank

- The performance of the business unit

- Individual performance of the employee

- Other risk perceptions and economic considerations.

Further, the Bank has not identified any employee as "risk taker" for the purpose of variable pay under this compensation policy.

(e) 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.

- Variable pay means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

i. Performance Linked Incentives to those employees who are eligible for incentives.

ii. Ex-gratia for other employees who are not eligible for Performance linked Incentives.

iii. Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965.

iv. Any other incentives, by whatever name called having the features similar to the above.

- Where the variable pay constitutes a substantial portion of the fixed pay, i.e., 50% or more, an appropriate portion of the variable pay, i.e., 40% will be deferred for over a period of 3 years.

- In case of deferral arrangements of variable pay, the deferral period shall not be less than three years. Compensation payable under deferral arrangements shall vest no faster than on a pro rata basis.

- The Board may adopt principles similar to that enunciated for WTDs /CEOs, as appropriate, for variable pay-timing, malus/clawback, guaranteed bonus and hedging.

- Employee Stock Option Scheme / Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable, will be excluded from the components of variable pay.

10. Credit Default Swaps: NIL.

11. Description of contingent liabilities

Sl. Contingent liability * Brief Description No.

1. Claims not acknowledged as This includes liability on account of Service tax, and other legal cases filed against the bank. The debts bank is a party to various legal proceedings in the ordinary course of business and these are contested by the Bank and are therefore sub judice. The bank does not expect the outcome of these proceedings to have a material adverse impact on the bank''s financial position.

2. Liability on account of The bank enters into foreign exchange contracts with inter-bank participants on its own account outstanding forward contracts and for its customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contract rate.

3. Guarantees on behalf of As a part of banking activities, the Bank issues Letter of Guarantees on behalf of its customers, constituents in India Guarantees generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfil its financial or performance obligations.

4. Acceptances, endorsements and As a part of banking activities, the Bank issues documentary credit on behalf of its customers, other obligations Documentary credits such as letters of obligations, enhancing the credit standing of the customers of the bank which generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfil its financial obligations.

5. Other items for which the bank These include amounts which may become payable in respect of capital commitments, is contingently liable

* Also refer Schedule - 12

12. Figures of the previous year have been regrouped to confirm to the current year presentation wherever necessary.

SCHEDULE 13 - CONTINGENT LIABILITIES

I. Claims against the Bank not acknowledged as debts:

(i) Service Tax disputes 21,600 21,600

(ii) Others 62,542 65,830

II. Liability on account of outstanding Forward

Exchange Contracts1 169,284,431 72,584,035

III. Guarantees given on behalf of constituents in India 11,746,807 25,339,493

IV. Acceptances, endorsements and other obligations 10,234,262 7,538,973

V. Other items for which the bank is contingently liable:

Capital Commitments - - 283,700

TOTAL 191,349,642 105,833,631

Mar 31, 2013

General

The South Indian Bank Limited (SIB) was incorporated on January 29, 1929 at Trichur as a private limited company and was later converted into a public limited company on August 11, 1939. SIB has a network of 750 branches in India and provides retail and corporate banking, para banking activities such as debit card, third party product distribution, in addition to Treasury and Foreign Exchange Business. SIB is governed by Banking Regulation Act, 1949 and other applicable Acts / Regulations. Its shares are listed in leading stock exchanges in India.

Basis of Preparation

The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of SIB used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Companies (Accounting Standards) Rules, 2006 as amended to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, and the historical cost convention, except where otherwise stated.

The preparation of financial statements requires the management to make estimates and assumptions in 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 reporting period. Management believes that the estimates and assumptions used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.

1. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps.

2. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the bank

During the current and previous year the bank had not sanctioned credit limits which were in excess of prudential exposure limits.

3. Penalties Levied by the Reserve Bank of India

No penalties were levied by the Reserve Bank of India during the financial years ended March 31, 2013 and March 31, 2012.

1. The provision has been made in accordance with prudential norms on Income recognition, asset classification and provisioning pertaining to advances, in respect of non-performing advances and investments and a special dispensation issued by Reserve Bank of India (RBI) vide their letter No. DBS (T) No.674/02.05.06/2012-13 dated December 31, 2012, for an advance of Rs. 150.00 Crore. Accordingly, the bank has recognized a provision of Rs. 90.00 Crore up to March 31, 2013 in respect of the above advance and the remaining provision is proposed to be made as permitted by RBI taking in to account the outcome of ongoing negotiations for settlement with the borrower.

2. Includes Wealth Tax Rs. 0.02 Crore (Rs.. 0.02 Crore)

3. The bank has adopted a board resolution that it has no intention to make withdrawal from the special reserve created and maintained under Section 36(1)(viii) of the Income Tax Act , the special reserve created and maintained is not capable of being reversed and thus it becomes a permanent difference. Accordingly the bank does not create any deferred tax liability on the said reserve and has reversed the deferred tax liability amounting to Rs. 9.82 Crore created during earlier years.

4. Draw Down from Reserves

In accordance with Reserve Bank of India guidelines, an amount net of taxes and net of transfer to statutory reserves of Rs. 5.69 Crore (Previous Year Rs. 7.13 Crore), has been drawn from Investment Reserve Account and credited to Profit and Loss account to the extent of provisions made during the year towards depreciation in investments in AFS and HFT categories.

A. OTHER DISCLOSURES 1. Fixed Assets

Premises of the Bank were revalued as on 31.03.2011 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs. 192.31 Crore to Rs. 326.18 Crore and the resultant appreciation in the value amounting to Rs. 133.87 Crore has been credited to revaluation reserve during 2010-11.

5. Related Party Disclosure

a. Key Management Personnel

Dr. V A. Joseph, Managing Director & Chief Executive Officer.

b. Gross Remuneration paid Rs. 70.40 Lakhs (Previous year Gross Rs. 56.79 Lakhs).

Note: The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits as they are determined on an actuarial basis for the bank as a whole.

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 (revised).

During the year ended 31.03.2011, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September 1995 and had not opted for the pension scheme earlier. Consequently, 2217 employees had exercised their option for the pension scheme and the bank has incurred an extra liability of Rs. 135.13 Crore. Further, during the year ended 31.03.2011, the limit of gratuity payable to the employees of the bank was also enhanced from Rs.3.50 Lakhs to Rs.10.00 Lakhs, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs. 21.40 Crore. The extra cost of pension and gratuity to employees works out to Rs. 156.53 Crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs. 156.53 Crore is required to be charged to the Profit and loss account for the year ended 31.03.201 1. However, in accordance with the circular issued by Reserve Bank of India vide reference number DBOD.BP.BC.80/21.04.018/2010-11 dated February 9, 2011, and made applicable to our bank vide DBOD No.BP.BC.15896/21.04.018/2010-11 dated April 8, 2011, the Bank would amortize the amount of Rs.156.53 Crore over a period of five years. During the current year 2012-13, bank has amortized an amount of Rs. 33.59 Crore (Rs.. 28.74 Crore towards pension and Rs. 4.85 Crore towards gratuity) and balance unamortized amount to be carried forward as on 31.03.2013 is Rs. 50.72 Crore. Had the above circular been not issued by the RBI, Net profit of the Bank for the year would have been higher by Rs. 22.69 Crore pursuant to the application of AS 15 and the reserve would have been lower by Rs. 50.72 Crore.

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, take account the inflation, seniority, promotion and other relevant factors.

h) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave, has been actuarially determined and a charge of Rs. 10.97 Crore (Previous year write-back of Rs. 2.55 Crore) has been debited to Profit and Loss account.

(Note: The above information is as certified by Actuary and relied upon by Auditors.)

6. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year-end together with interest paid/payable as required under the said Act have not been given.

7. Tier II Bonds

Lower Tier II Bonds outstanding as at March 31, 2013 is Rs. 265.00 Crore (Previous Year Rs. 265.00 Crore).

Amount reckoned for Tier II Capital as per RBI guidelines is Rs. 200.00 Crore (Previous Year Rs. 213.00 Crore).

8. Disclosures on Remuneration

(a) Information relating to the composition and mandate of the Remuneration Committee.

The Board of Directors of Bank through the Compensation and Remuneration Committee (CRC) of the Board oversee the framing, review and implementation of compensation policy. The CRC comprise 4 independent directors including the non executive chairman.

CRC of the Bank as on March 31, 2013 is having the following independent directors:

- Mr. Amitabha Guha, Chairman

- Mr. Paul Chalissery

- Mr. Mohan E. Alapatt

- Dr. John Joseph Alapatt

The roles and responsibilities of the CRC are as follows:

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related polices on remuneration packages payable to all employees and the WTDs/MD & CEO including performance linked incentives, perquisites, stock option scheme etc. with a view to attract, motivate and retain employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The CRC works in close coordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The CRC also ensures that the cost/income ratio of the Bank supports the remuneration package consistent with maintenance of sound capital adequacy ratio.

- With respect to the performance linked incentive schemes, the CRC is empowered to:

a. Draw up terms and conditions and approve the changes, if any, to the performance linked incentive schemes;

b. Moderate the scheme on an ongoing basis depending upon the circumstances and link the same with the recommendations of Audit Committee;

c. Coordinate the progress of growth of business vis -a- vis the business parameters laid down by the Board and Audit Committee and effect such improvements in the scheme as are considered necessary;

d. On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

- The CRC also functions as the Compensation Committee as prescribed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and is empowered to formulate detailed terms and conditions of the scheme, administer, supervise the same and to allot shares in compliance with the guidelines and other applicable laws.

- To obtain necessary clearances and approvals from regulatory authorities, appoint merchant bankers and do such other things as may be necessary in respect of the Employees Stock Option Scheme.

- To oversee the administration of employee benefits, such as, provident fund, pension fund, gratuity, compensation for absence on privilege/sick/casual leave etc., which are recognized in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006.

- The CRC may suggest amendments to any stock option plans or incentive plans, provided that all amendments to such plans shall be subject to consideration and approval of the Board;

- Any other matters regarding remuneration to WTDs/MD&CEO and other staffs of the Bank as and when permitted by the Board.

- To conduct the annual review of the Compensation Policy

- To fulfill such other powers and duties as may be delegated to it by the Board.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy.

The Bank has formed the compensation policy based on the Reserve Bank of India guidelines vide its circular no. DBOD.No.BC.72/29.67.001/2011-12 dtd. 13/01/2012.

The fixed remuneration and other allowances including retirement benefits of all subordinate, clerical and officers up to the rank of General Manager (Scale VII) is governed by the industry level wage settlement under Indian Banks Association (IBA) pattern. In respect of officers above the cadre of General Manager, the fixed remuneration is fixed by Board/Committee.

Further, the compensation structure for the Whole Time Directors (WTDs)/ Managing Director & Chief Executive Officers (MD & CEO) of the bank are subject to approval of Reserve Bank of India in terms of Section 35 B of the Banking Regulation Act, 1949. The payment of compensation also requires approval of the shareholders of the Bank in the General Meeting pursuant to Clause 95 of Articles of Association of the Bank read with the Section 309 (1) of the Companies Act, 1956.

(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 Board of Directors through the CRC shall exercise oversight and effective governance over the framing and implementation of the Compensation policy. Human Resource Management under the guidance of MD & CEO shall administer the compensation and Benefit structure in line with the best suited practices and statutory requirements as applicable.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration and 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.

The factors taken in to account for the annual review and revision in the variable pay and performance bonus are:

- The performance of the Bank

- The performance of the business unit

- Individual performance of the employee,

- Other risk perceptions and economic considerations

Further, the Bank has not identified any employee as "risk taker" for the purpose of variable pay under this compensation policy.

(e) 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.

- Variable pay means the compensation as fixed by the Board on recommendation of the Committee, which is based on the performance appraisal of an employee in that role, that is, how well they accomplish their goals. It may be paid as:

i. Performance Linked Incentives to those employees who are eligible for incentives.

ii. Ex-gratia for other employees who are not eligible for Performance linked Incentives.

iii. Bonus for those staff members who are eligible for bonus under the Payment of Bonus Act, 1965

iv. Any other incentives, by whatever name called having the features similar to the above.

- Where the variable pay constitutes a substantial portion of the fixed pay, i.e. 50% or more, an appropriate portion of the variable pay, i.e. 40% will be deferred for over a period of 3 years.

- In case of deferral arrangements of variable pay, the deferral period shall not be less than three years. Compensation payable under deferral arrangements shall vest no faster than on a pro rata basis.

- The Board may adopt principles similar to that enunciated for WTDs/CEOs, as appropriate, for variable pay-timing, malus/clawback, guaranteed bonus and hedging.

- Employee Stock Option Scheme/Employee Stock Option Plan as may be framed by the Board from time to time in conformity with relevant statutory provisions and SEBI guidelines as applicable, will be excluded from the components of variable pay.

9. Other Assets includes Rs. 5.12 Crore representing expenses incurred in relation to the Qualified Institutional Placement (QIP) issue of equity shares in excess of the amount permissible under Section 13 of the Banking Regulation Act, 1949. The bank has applied to the Central Government for necessary approval and pending receipt of the same has held such amount in Escrow account, not debited/charged such expense to the share premium account.

10. Figures of the previous year have been regrouped to confirm to the current year presentation wherever necessary.

Mar 31, 2012

General

The South Indian Bank Limited (SIB) was incorporated on January 29, 1929 at Trichur as a private limited company and was later converted into a public limited company on August 11, 1939. SIB has a net work of 700 branches in India and provides retail and corporate banking, para banking activities such as debit card, third party product distribution, in addition to Treasury and Foreign Exchange Business. SIB is governed by Banking Regulation Act, 1949 and other applicable Acts / Regulations. Its shares are listed in leading stock exchanges in India.

Basis of Preparation

The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of SIB used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by Reserve Bank of India (RBI) from time to time, the Accounting Standards (AS) issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Companies (Accounting Standards) Rules, 2006 as amended to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting, and the historical cost convention, except where otherwise stated.

The preparation of financial statements requires the management to make estimates and assumptions in 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 reporting period. Management believes that the estimates and assumptions used in preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.

Note:-

*Amount subjected to restructuring as on the date of approval of restructuring proposal.

Outstanding in the above restructured loans as at March 31, 2012 are Rs 52.58 Crore, Rs 1.52 Crore and Rs 505.37 Crore under CDR mechanism, SME Debt restructuring and others respectively.

1. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest Rate Swaps

* includes net credit of Rs 14.49 Crores in respect of earlier years (previous year -Nil)

(b) Disputed Tax for earlier years

The following deductions under the Income Tax Act, 1961 are considered in computing the income chargeable to tax

(i) Bad Debts written off u/s 36 (1) (vii) pertaining to non rural branches.

(ii) Provision for Bad and Doubtful debts u/s 36(1)(viia) subject to limits prescribed under the Act.

The above deductions were under dispute before the Supreme Court through Special Leave Petition (SLP). The earlier decision of Division Bench of Kerala High Court in favour of the Bank, have been reversed by the Full Bench of the Kerala High Court subsequently and the matter was pending before the Supreme Court. The total estimated liability on account of this dispute has been disclosed as contingent liability (refer Schedule 12) for the year ended 31.03.2011. During the current year, Honorable Supreme Court upheld the decision of the Division Bench in respect of that matter, relating to Bad Debts written off u/s 36(1)(iii) and accordingly, the contingent liability stands extinguished. Management continues to be confident of a favorable outcome in respect of the issues relating to Sec 36(1)(viia) and Sec 14A pending before the Supreme Court.

2. Penalties Levied by the Reserve Bank of India

No penalties were levied by the Reserve Bank of India during the financial years ended March 31, 2012 and March 31, 2011.

3. Draw Down from reserves

In accordance with Reserve Bank of India guidelines, an amount net of taxes and net of transfer to statutory reserves of Rs 7.13 Crore (Previous Year Rs 4.69 Crore), has been drawn from Investment Reserve Account and credited to Profit and Loss account to the extent of provisions made during the year towards depreciation in investments in AFS and HFT categories.

A : OTHER DISCLOSURES

1. Fixed Assets

Premises of the Bank were revalued as on 31.03.2011 in accordance with the policy formulated by the Bank based on RBI guidelines by professionally qualified independent valuers empanelled by the Bank using the indices based on current market price. The written down value of the premises has been increased from Rs 192.31 crore to Rs 326.18 crore and the resultant appreciation in the value amounting to Rs 133.87 crore has been credited to revaluation reserve during 2010-11.

4. Related party disclosure:

a) Key Management Personnel

Dr. V A Joseph, Managing Director & Chief Executive Officer.

b) Gross Remuneration paid Rs 56.79 Lakhs (Previous year Gross Rs 54.15 Lakhs).

Note: - The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits as they are determined on an actuarial basis for the bank as a whole

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 (revised).

During the year ended 31.03.2011, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September 1995 and had not opted for the pension scheme earlier. Consequently, 2217 employees had exercised their option for the pension scheme and the bank has incurred an extra liability of Rs 135.13 crore. Further, during the year ended 31.03.201 1, the limit of gratuity payable to the employees of the bank was also enhanced from Rs 3.50 lakh to Rs 10.00 Lakh, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs 21.40 crore. The extra cost of pension and gratuity to employees works out to Rs 156.53 crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs 156.53 crore is required to be charged to the Profit and loss account for the year ended 31.03.2011. However, in accordance with the circular issued by Reserve Bank of India vide reference number DBOD.BPBC.80/21 .04.018/2010-11 dated February 9, 2011, and made applicable to our bank vide DBOD No.BP.BC.15896/21.04.018/2010-11 dated April 8, 2011, the Bank would amortise the amount of Rs 156.53 crore over a period of five years. Accordingly, Rs 31.31 crore (representing one-fifth of Rs 156.53 crore) has been charged to the profit and loss account of the previous year and the balance amount of Rs 125.22 crore has been carried forward for write off in next four years. During the current year 2011-12, bank has amortised an amount of Rs 40.91 crores (Rs 34.23 Crore towards pension and Rs 6.68 towards gratuity) and balance unamortized amount to be carried forward as on 31.03.2012 is Rs 84.31 Crore. Accordingly, as a consequence of the above circular, profit of the Bank for the year is lower by Rs 40.91 crores and the reserves are higher by Rs 84.31 Crore.

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, take account the inflation, seniority, promotion and other relevant factors.

a) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave, has been actuarially determined and excess provision of Rs 2.55 crore (Previous year charge of Rs 0.69 Crore) has been credited to Profit and Loss account.

(Note: The above information is as certified by Actuary and relied upon by Auditors.)

5. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/ payable as required under the said Act have not been given.

6. Tier II Bonds

Lower Tier II Bonds outstanding as at March 31, 2012 is Rs 265.00 Crore (Previous Year Rs 265.00 Crore). Amount reckoned for Tier II Capital as per RBI guidelines is Rs 213.00 Crore (Previous Year Rs 226.00 Crore).

7. The figures of previous year were audited by a firm of Chartered Accountants other than S.R. Batliboi & Associates.

8. Figures of the previous year's have been regrouped to confirm to the current year presentation wherever necessary.

Mar 31, 2011

A : OTHER DISCLOSURES

1. Fixed Assets

Premises of the Bank were revalued as on 31.03.2011 in accordance with the policy formulated by the Bank based on RBI guidelines in this regard. The revaluation was done by professionally qualified independent valuers empanelled by the Bank. The written down value of the premises has been increased from Rs. 192.31 Crore to Rs. 326.18 Crore and the resultant appreciation in value amounting to Rs. 133.87 Crore has been credited to Revaluation Reserve.

2. Accounting for Employee Share Based Payments

The Shareholders of the Bank approved Employees Stock Option Scheme (ESOS) 2008 on August 18, 2008. Under the terms of the scheme, the Bank had granted Stock Options equivalent to 30,72,500 Equity Shares to the Employees of the Bank on 21Ã11Ã2009 and 510500 Equity Shares on 21Ã10Ã2010. Compensation Committee of the Board (CCB) granted the options on November 21, 2009 and October 21, 2010 at a discount of 10% on the closing price of the shares quoted on NSE on November 20, 2009 and October 20, 2010 respectively. The Bank had elected to use intrinsic value method to account the compensation cost of ESOS. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option.

3. Related party disclosure

a) Key Management Personnel

Dr. V. A. Joseph, Managing Director & Chief Executive Officer.

b) Gross Remuneration paid Rs. 54.15 Lakh (Previous year Gross Rs. 41.58 Lakh).

4. Employee Benefits

a) Retirement Benefits

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard Ã 15 (revised).

During the year, the Bank had re-opened the pension option for those employees who had joined the Bank prior to 29th September, 1995 and had not opted for the pension scheme earlier. Consequently, 2217 employees had exercised their option for the pension scheme and the bank has incurred an extra liability of Rs. 135.13 Crore. Further, during the year the limit of gratuity payable to the employees of the bank was also enhanced from Rs. 3.50 Lakhs to Rs. 10.00 Lakhs, pursuant to the amendment to the Payment of Gratuity Act, 1972. As a result, the gratuity liability of the Bank has increased by Rs. 21.40 Crore. The extra cost of pension and gratuity to employees works out to Rs. 156.53 Crore.

In terms of the requirements of the Accounting Standard (AS) 15, Employee Benefits, the entire amount of Rs. 156.53 Crore is required to be charged to the Profit and loss account of the current year. However, in accordance with the circular issued by Reserve Bank of India vide reference number DBOD.BP.BC.80/21.04.018/2010Ã11 dated February 9, 2011, and made applicable to our bank vide DBOD No.BP.BC.15896/21.04.018/2010Ã11 dated April 8, 2011, the Bank would amortise the amount of Rs. 156.53 Crore over a period of five years. Accordingly, Rs. 31.31 Crore (representing one-fifth of Rs. 156.53 Crore) has been charged to the profit and loss account of the current year and the balance amount of Rs. 125.22 Crore has been carried forward for write off in next four years. The liability arising on account of retired employees who exercised option for pension amounting to Rs. 3.88 Crore has been charged to the Profit and Loss Account of the current year.

Had the above circular been not issued by the RBI, profit of the Bank would have been lower by Rs. 125.22 Crore

g) Assumptions used by the actuary in accounting for gratuity, Pension and Compensation for Absence

*Not available

Notes:

(i) Discount rate is based on the prevailing market yields of Indian Government securities as at the balance sheet date for the estimated term of obligations.

(ii) Expected rate of return on plan assets is based on the average long term rate of return expected on investments of the funds during the estimated term of the obligations.

(iii) The estimates of future salary increases, considered in actuarial valuation, take account the inflation, seniority, promotion and other relevant factors.

h) Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave, has been actuarially determined and a provision of Rs. 0.69 Crore (Previous year excess provision Rs. 3.57 Crore credited) has debited to Profit and Loss account.

(Note: The above information is as certified by Actuary and relied upon by Auditors.)

5. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/ payable as required under the said Act have not been given.

6. Description of contingent liabilities

Sl. Contingent liability * Brief Description No.

1 Claims not acknowledged This includes liability on account of Income Tax, Service tax, and other as debts legal cases fled against the bank. The bank is a party to various legal proceedings in the ordinary course of business and these are contested by the Bank and are therefore subjudice. The bank does not expect the outcome of these proceedings to have a material adverse impact on the banks financial position.

2 Liability on account of The bank enters into foreign exchange contracts with inter bank outstanding forward participants on its own account and for its customers. Forward exchange contracts contracts are commitments to buy or sell foreign currency at a future date at the contract rate.

3 Guarantees on behalf of As a part of banking activities, the Bank issues Letter of Guarantees constituents in India on behalf of its customers. Guarantees generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfill its financial or performance obligations.

4 Acceptances, endorsements As a part of banking activities, the Bank issues documentary credit and other obligations on behalf of its customers. Documentary credits such as letters of obligations, enhancing the credit standing of the customers of the bank which generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfill its financial obligations.

5 Other items for which the These include amounts which may become payable in respect of capital bank is contingently liable commitments.

* Also refer schedule Ã 12

7. Previous years figures have been regrouped / given in brackets, wherever necessary to conform to the current year classification.

Mar 31, 2010

1. SEGMENT REPORTING

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following segments;

a) Treasury

The treasury services segment primarily consists of interest earnings on investments portfolio of the bank, gains or losses on investment operations and earnings from foreign exchange business. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

b) Corporate / Whole sale Banking

The Corporate / Whole sale Banking segment provides loans and other banking services to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to Corporate customers and the charges / fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

c) Retail banking

The Retail Banking segment provides loans and other banking services to non corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to non corporate customers and the charges / fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

d) Other Banking Operations

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Geographic segment

The Bank operates only in domestic segment.

2. EARNINGS PER SHARE (EPS)

The Bank reports Basic and Diluted Earnings per Equity Share in accordance with Accounting Standard 20, specified in Companies (Accounting Standards) Rules, 2006. Basic EPS has been computed by dividing Net Profit for the year by the weighted average number of Equity Shares outstanding for the period. Diluted EPS has been computed using the weighted average number of Equity Shares and dilutive potential equity shares outstanding as on the Balance Sheet date except where the results are anti dilutive.

3. TAXES ON INCOME

The income tax expense comprises current tax and deferred tax. Current tax is measured at the amount expected to be paid in respect of taxable income for the year in accordance with the Income Tax Act. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax asset is recognised subject to prudence and judgment that realization is more likely than not. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted before the balance sheet date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the profit and loss account in the period of the change.

4. IMPAIRMENT OF ASSETS

The bank assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimated recoverable amount.

5. ACCOUNTING FOR PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

In accordance with Accounting Standard 29, Provisions, Contingent Liabilities and Contingent Assets specified in Companies (Accounting Standards) Rules, 2006, the Bank recognizes provisions when it has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and when a reliable estimate of the amount of the obligation can be made.

Provisions are determined based on management estimate required to settle the obligation at the balance sheet date, supplemented by experience of similar transactions. These are reviewed at each balance sheet date and adjusted to reflect the current management estimates. In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss can not be reasonably estimated, a disclosure is made in the financial statements.

Contingent assets, if any, are not recognized in the financial statements since this may result in the recognition of Income that may never be realized.

6. NET PROFIT

Net Profit is arrived at after provisions for contingencies, which include Provision for:

i) Depreciation on Investments;

ii) Standard Assets and Non-Performing Advances and investments;

iii) Taxation in accordance with statutory requirements.

7. Asset quality

Percentage of net NPAs to net advances works out to 0.39 % (1.13% as on 31.03.2009).

Provision for Non-Performing Advances and unrealised interest thereon are deducted from various categories of advances on a proportionate basis except the Provision for Standard Assets, which is included under "Other Liabilities".

8. Derivatives

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations.

9. Penalties Levied by the Reserve Bank of India

No penalties were levied by the Reserve Bank of India during the financial years ended March 31, 2010 and March 31, 2009.

10. Reconciliation

Identification of items pending adjustment in inter branch accounts (including Extension counters), demand drafts paid and payable, sundries, inter bank and clearing have been completed upto March 31, 2010. Elimination of pending items in the above is in progress and in the opinion of the management, its consequential impact in the accounts will not be material.

In accordance with the guidelines issued by Reserve Bank of India vide Notification dated May 11, 2009, an amount of Rs. 0.25 Crore being the un-reconciled entries of individual value less than USD 2500 in nostro accounts originated upto March 31, 2002 have been credited to the Profit & Loss Account for the current year and is included in the amount appropriated to the Revenue and Other Reserves.

B: Other Disclosures

1. Fixed Assets

Some of the Banks Premises were revalued as on 31.03.2000 and as on 31.03.2005. The resultant appreciation in value has been credited to Revaluation Reserve.

2. Accounting for Employee Share Based Payments.

The Shareholders of the Bank approved Employees Stock Option Scheme ESOS 2008 on August 18, 2008. Under the terms of the scheme, the Bank had granted Stock Options equivalent to 30,72,500 Equity Shares to the Employees of the Bank. Compensation Committee of the Board (CCB) granted the options on November 21, 2009 at a discount of 10% on the closing price of the shares quoted on NSE on November 20, 2009.

The Bank had elected to use intrinsic value method to account the compensation cost of ESOS. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the option.

3. Related party disclosure:

a) Key Management Personnel

Dr. V A Joseph, Managing Director & Chief Executive Officer.

b) Remuneration paid Rs. 41.58 Lakhs (Previous year Rs. 36.67 Lakhs).

4. Employee Benefits

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation and provided for in accordance with Accounting Standard - 15 (revised).

a. Compensation for absence on Privilege / Sick / Casual Leave

The charge on account of compensation for privilege / sick / casual leave, has been actuarially determined and the excess provision of Rs. 3.57 Crore (Previous year shortfall of provision Rs. 18.77 Crore) has been credited / (debited) to Profit and Loss account.

(Note: The above information is as certified by Actuary and relied upon by Auditors.)

4. Expenditure on VRS.

The proportionate expenditure on VRS amounting to Rs 1.81 Crore (Previous year Rs. 1.80 Crore) has been charged to revenue and the balance expenditure to be amortised is NIL (Previous year Rs. 1.81 Crore).

5. Wage revision

Based on the recently concluded industry level settlement of wage revision, a sum of Rs. 29.50 Crore (Previous year Rs. 21.25 Crore) has been provided / paid towards arrears for the period from November 1, 2007 on an estimated basis and included under payments to and provision for employees.

6. The Bank has not received any intimation from "Suppliers" regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006 and hence disclosures, if any, relating to amounts unpaid as at the year end together with interest paid/ payable as required under the said Act have not been given.

7. Description of contingent liabilities

1 Claims not acknowledged This includes liability on account of Service tax, FERA and legal cases filed as debts against the bank. The bank is a party to various legal proceedings in the ordinary course of business and these are contested by the Bank and are therefore subjudice. The bank does not expect the outcome of these proceedings to have a material adverse impact on the banks financial position.

2 Liability on account of The bank enters into foreign exchange contracts with inter bank outstanding forward participants on its own account and for its customers. Forward exchange contracts contracts are commitments to buy or sell foreign currency at a future date at the contract rate.

3 Guarantees on behalf of As a part of banking activities, the Bank issues documentary credit and constituents in India guarantees on behalf of its customers. Documentary credits such as letters of obligations, enhancing the credit standing of the customers of the bank. Guarantees generally represent irrevocable assurances that the bank will make payments in the event of customer failing to fulfill its financial or performance obligations.

4 Acceptances, endorsements These include contingent liabilities on account of bills sent for collection. and other obligations

5 Other items for which These include amounts payable in respect of capital commitments. the bank is contingently liable * Also refer schedule - 12

12. Previous years figures have been regrouped / given in brackets, wherever necessary to conform to the current year classification.

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