The Board of Directors of your Bank is pleased to present the Annual Report on businessand operations of the Bank together with the Audited Financial Statements for theFinancial Year ended 31 March 2018.
Financial Highlights (Rs. in crore)
|Particulars ||2017-18 ||2016-17 ||Growth (%) |
|Share Capital ||66 ||60 ||10% |
|Reserves & Surplus ||4097 ||3510 ||17% |
|Deposits ||32853 ||30116 ||9% |
|Advances (Gross) ||28239 ||24112 ||17% |
|Investments (Gross) * ||8015 ||7082 ||13% |
|Total Assets / Liabilities ||39937 ||35271 ||13% |
|Total Income ||3935 ||3658 ||8% |
|Total Expenses ||2727 ||2664 ||2% |
|Net Interest Income ||1430 ||1199 ||19% |
|Operating Profit ||1208 ||994 ||22% |
|Provisions & Contingencies ||616 ||491 ||25% |
|Net Profit (A) ||592 ||503 ||18% |
|Appropriations || || || |
|Balance of Profit brought forward (B) ||33 ||7 || |
|Amount available for appropriations (A+B) ||625 ||510 || |
|Transfers to: || || || |
|- Statutory Reserve ||150 ||130 || |
|- Capital Reserve ||29 ||27 || |
|- General Reserve ||334 ||275 || |
|- Special Reserve under IT Act 1961 ||50 ||45 || |
|- Dividend & Dividend Tax ||** 24 ||0 || |
|- Balance of Profit carried forward ||38 ||33 || |
|Total ||625 ||510 || |
* the figures of the previous year have been regrouped / reclassified wherevernecessary.
** Paid during FY 2018 pertaining to FY 2017 as per MCA notification on revised AS 4dated 30 March 2016.
The deposits and advances for the current year stood at Rs. 32853 crore and Rs. 28239crore respectively. The total business stood at Rs. 61092 crore as compared to Rs. 54228crore for the previous year registering a growth of 13%.
The size of the Balance Sheet as on 31 March 2018 was Rs. 39937 crore as compared tothe previous year position of Rs. 35271 crore recording an increase of 13%.
GROSS PROFIT (Rs. in Cr)
During the year the Bank earned an operating profit of Rs. 1208 crore registering anincrease of 22% as compared to previous year's figure of Rs. 994 crore. The net profit ofthe Bank for the current year was Rs. 592 crore as against Rs. 503 crore for the previousyear registering a growth of 18%.
NET PROFIT (Rs. in Cr)
A total income of Rs. 3935 crore was earned by the Bank as against Rs. 3658 crore inthe previous FY 2017 posting a growth of 8%. The total expenditure of the Bank increasedby 2% to record Rs. 2727 crore as compared to previous year figure of Rs. 2664 crore.The Net Interest Income for the year under review increased by 19% from Rs. 1199 crore toRs. 1430 crore. The non-interest income of the Bank increased to Rs. 532 crore from Rs.484 crore registering 10% growth.
NET INTEREST INCOME (Rs. in Cr)
Your Bank has earned an income of Rs. 21.91 crore by way of selling PSLC certificateand expended Rs. 5.87 crore towards the purchase of PSL certificate to meet out the shortfall in agriculture category. With that your Bank has earned a net income of Rs. 16.04crore. The provision for tax for the year increased to Rs. 198 crore from Rs. 190 crore.The provision for NPA stood at Rs. 303 crore vis-a-vis Rs. 252 crore last year. The totalprovisions increased by Rs. 125 crore to Rs. 616 crore from Rs. 491 crore.
The Bank's total deposits for the year under review increased by Rs. 2737 crore fromRs. 30116 crore to Rs. 32853 crore registering a growth of 9% over previous year. Duringthe current year CASA increased by Rs. 918 crore to
Rs. 7957 crore from Rs. 7039 crore recording a growth of 13%. The cost of deposit ofthe Bank decreased from 6.82% to 6.29% in the current year.
DEPOSITS (Rs. in Cr)
The Gross Advances of the Bank increased by Rs. 4127 crore to Rs. 28239 crore fromRs. 24112 crore posting a growth of 17%. The yield on advances declined to 11.46% from12.10% during the financial year due to stiff competition among Banks. The Gross and NetNPA for the year under review stood at 3.03% and 1.70% respectively as compared to 2.83%and 1.71% previous year.
ADVANCES (Rs. in Cr)
During the year the Banking industry witnessed turmoil on asset quality and NPAs wereon the rise. However your Bank resorted to constant monitoring of advances to reduceslippages and speeded up its recovery process to reduce the NPA level. The Bank continuedto concentrate on lending to MSMEs especially of small ticket loans.
The Bank has fourteen Credit Processing Centers covering almost all branches. Athorough credit appraisal is done at these centers before final clearance is issued by theAdministrative office. Thus the marketing approach rigor in credit evaluation and themanagers' intimate knowledge of customers - all help in keeping your Bank's level of NPAmoderate.
During the year the recovery stands improved to Rs. 206 crore as against Rs. 146 crorein FY 2017. Thus through the process of sustained recoveries the Bank was able tomaintain slippage level around 2% of advances. Priority Sector Advances stood at Rs.12463.76 crore as at 31 March 2018 as compared to previous year amount of Rs. 11813.52crore. The Bank has achieved 58.59% of Adjusted Net Bank Credit (ANBC) against theregulatory prescription of 40% of ANBC in Priority Sector lendings on an average basis asprescribed by RBI. The total agricultural advances stood at Rs. 4797.62 crore as at st 31March 2018 as against Rs. 3707.09 crore as on 31 March 2017. The Bank had achieved22.55% of ANBC against the RBI prescribed level of 18% on an average basis in respect ofagriculture advances.
The gross investments increased by Rs. 933 crore to Rs. 8015 crore as on 31 March2018 from Rs. 7082 crore as on 31 March 2017 registering a growth of 13%. Out of thetotal investments the investments in Government Bonds alone amounted to Rs. 7638 crore.
The year 2017-18 witnessed tremendous changes in bond yields. As the effects ofdemonization began to fade away during the last quarter of previous year yield onbenchmark security stabilized at 6.80% levels. During the first half of financial year2017-18 implementation of GST and rate cut by RBI resulted in a market rally with thebenchmark yield settling at 6.50%. However during the second half of the financial yearbond yield turned bearish following few significant national and international events.Global cues were also weak on account of geopolitical tensions in Korean peninsula andincreasing crude prices. The benchmark yield closed at 7.41% as markets cooled down afterthe Government announced lower borrowing in first half of next financial year.
It is noteworthy to mention that during the times of hardening of the bond yield theBank had earned
Rs. 94 crore by timely booking of profit in Government securities as compared to Rs.108 crore in last year. The average yield on investments decreased to 6.95% in the currentfinancial year from 7.23% in the previous year.
Indian Rupee witnessed a volatile movement during the financial year 2017-18. USD-INRopened at 64.80 and closed at 65.17 after touching a high of 65.90 and low of 63.24 duringthe period. Indian Rupee strengthened in the middle against USD on account of weakeconomic and political indications in both USA and Europe. However towards the end of thefinancial year Rupee lost most of its gains as the result of bearish trend in DomesticMarkets and tensions over trade war between USA and China. By judiciously dealing withvolatility the bank earned a profit of Rs. 9.17 crore out of the total exchange profit ofRs. 64.95 crore.
NET WORTH & CAPITAL ADEQUACY RATIO
The paid up share capital of the Bank increased from Rs. 60 crore as on 31 March 2017to Rs. 66 crore as on 31 March 2018. During the reporting period the Bank has allotted60106488 bonus equity shares and also 3557840 equity shares as Employee StockOptions to employees of the Bank pursuant to CUB ESOS Scheme 2008.
The Net worth of the Bank improved to Rs. 4149 crore as on 31 March 2018 from Rs.3556 crore as of 31 March 2017.
|Capital Adequacy Ratio: || || |
|CRAR ||BASEL II ||BASEL III |
|Minimum Prescribed CRAR ||9% ||10.875% (PY. 10.25%)* |
|CUB CRAR ||16.46% (PY. 16.09%) ||16.22% (PY. 15.83%) |
*As per the concept of Capital Conservation Bu er (CCB) under BASEL III norms the Bankis required to maintain CCB of 2.50% at the end of March 2019 in a phased manner beginningfrom 31 March 2016 @ 0.625% in each year up to 31 March 2019. The framework of CCB isintended to strengthen the ability of banks to withstand adverse economic environmentconditions and provide the mechanism for rebuilding capital during early stages ofeconomic recovery. Thus by retaining a greater portion of earnings during the period ofupturn the Banks will be able to support ongoing business operations / lending activitiesduring the period of stress. The Bank is maintaining CRAR well above the prescribedminimum by RBI.
Your Directors are pleased to recommend a dividend of Rs. 0.30 per equity share of FaceValue of Rs. 1/- each for the year ended 31 March 2018 (previous year Rs. 0.30 per equityshare) subject to the approval of the Shareholders.
During May 2018 the Board of Directors of your Bank recommended the issue of 1 bonusequity share for every 10 equity shares of face value of Rs. 1/- each (1:10) already heldby the shareholders on a record date subject to shareholders' approval by Postal Ballot.Further as resolved by the Board the shares allotted to the shareholders pursuant tobonus issue are also eligible to participate in dividend to be declared by theshareholders at the ensuing Annual General Meeting. The Board recommends the dividend forapproval by the shareholders at the ensuing Annual General Meeting.
During the financial year the Bank had expanded its branch network by adding 50 morebranches and 141 ATM's across the country totalling 600 branches and 1621 ATM's as on 31March 2018. The Bank has a major presence in the state of Tamil Nadu and is enlarging itspresence in other states too by taping potential markets. Out of the additions aforesaidduring FY 2018 the Bank has opened 2 branches in Maharashtra 4 in Rajasthan 6 inKarnataka 1 in Telengana 1 in Seemandhra and 36 branches in Tamilnadu including 10Banking outlets manned by Business Correspondents. The branches opened were as per theguidelines issued by the RBI on opening of Branches in unbanked and under-banked regions.
NO. OF BRANCHES
A. FINANCIAL INCLUSION
The Government of India and the Reserve Bank of India continued its e orts in promoting_inancial inclusion as one of the important national objectives of the country and tospread the reach of banking services to the un-banked rural population of India. The Bankas in the past continued to support the above by serving the un-served with various_inancial inclusion programs announced by the Govt. of India.
The Bank following RBI directions has covered all the allotted 45 villages havingpopulation of over 2000 and 101 villages having population of over 1000 and below 2000including unbanked and remote villages by introducing ICT (Information Communication& Technology) based services using hand held devices Multifunction Kiosk ATMs andBulk Note Acceptor. The services are o ered by engaging of Business Correspondents (BC) /Customer Service Providers (CSP). This ensures o ering Banking service at the door stepsof customers in a cost e ective manner. Further during FY 2018 the Bank has opened 10branches under 'Banking Outlet' model managed by BCs and their activities are monitored bythe branches to which they are attached. It is ensured that they cater to business areaswithin 8-10 km from the base branch. The usage through ICT model has paved way for costreduction in opening of bank accounts instead of establishing a branch. While the conceptof _inancial inclusion is usually regarded as a regulatory prescription your Bank hasviewed it as a viable business opportunity for Banks as it enhances the ability of theBank to rapidly expand its presence without too much increase in cost factor. The Bank hasperformed well across all _inancial inclusion parameters.
Further during the year under review Basic Savings Bank Deposits (BSBD) accountsnumbering 110533 were opened and 96362 Biometric Smart Cards were issued to thebene_iciaries. Savings Bank Linked Overdraft Facility Micro Insurance ProductsElectronic Bene it Fund Transfer (EBT) payments have been extended to such accountholders.
i. PRADHAN MANTRI JAN-DHAN YOJANA (PMJDY)
'Pradhan Mantri Jan-Dhan Yojana' (PMJDY) is a _lagship _inancial inclusion programme ofGovt. of India which was launched by our Hon'ble Prime Minister on 28 August 2014 acrossthe country.
Under this programme the Bank has been allotted 264 wards apart from 146 villagesalready allotted under the Rural Financial Inclusion scheme. The Bank had conducted surveyof all 180211 households in all these 264 wards.
The Bank has opened 84370 PMJDY accounts till 31 March 2018 through all its branchesfrom the date of launch and Rupay cards were issued for the account holders under thescheme. As the overdraft facility is one of the features under PMJDY scheme Bank isconsidering the same based on conditions _ixed by IBA to the PMJDY account holders fromRs. 1000 to Rs. 5000.
ii. PRADHAN MANTRI JEEVAN JYOTHI BIMA YOJANA (PMJJBY)
This scheme was launched by Hon'ble Prime Minister on 9 May 2015. The scheme provideslife insurance cover to people in the age group of 18 - 50 years. Risk cover is availableup to 55 years subject to payment of premium of Rs. 330/- p.a. Risk coverage is Rs. 2lakh in case of death due to any reason. The Insurance premium for the scheme is autodebited from the bank account of the respective subscriber. The Bank has a tie up with LICfor this scheme and the number of persons enrolled under the scheme as on 31 March 2018was 48442.
iii. PRADHAN MANTRI SURAKSHA BIMA YOJANA (PMSBY)
This Scheme provides _inancial cover against personal accident of the subscribers. Itis open for the age group between 18 - 70 years at a nominal annual premium of Rs. 12/-.Risk cover is Rs. 2.00 lakh for death due to accident or full disability and Rs. 1.00 lakhfor partial disability. The Insurance Premium for the scheme is auto debited from the bankaccount of the respective subscriber. The Bank is having a tie up with the New IndiaAssurance Co. Ltd for this scheme. The enrollment under the scheme as on 31 March 2018numbered 74196.
iv. ATAL PENSION YOJANA (APY)
The Government of India launched Atal Pension Yojana for the bene it of all citizensespecially for the poor and under privileged. Under APY it is open for the age groupbetween 18 - 40 years. After completion of 60 years of age the subscribers will be givenguaranteed minimum pension ranging between Rs. 1000 Rs. 5000 per month depending upontheir contribution. The subscriber through our Bank numbered 6609 as on 31 March 2018.
B. FINANCIAL LITERACY
During the year under review the Bank continued to conduct _inancial educationprogrammes to impart _inancial literacy to the rural population. The Bank's personnel havepersonally visited the villages and schools in rural areas for imparting _inancialeducation.
During the reporting cycle the Bank has conducted such literacy programmes in fourteen(14) villages around Tamil Nadu and twelve (12) meetings in schools. Adequate measureshave been taken under this process to impart _inancial education for the underprivilegedsections including educational institutions. Further the Bank has tied up with twoagencies viz. Commonwealth Inclusive Growth Foundation and Velicham Finance Pvt. Ltdwhich have engaged the services of 146 Business Correspondents to serve the remote andunbanked regions in Tamil Nadu. The villagers were educated about the Indian Bankingsystem the use of technology digital products security aspects etc.
EMPLOYEES STOCK OPTION SCHEME (ESOS)
The Bank implemented an Employee Stock Option Scheme 'CUB ESOS 2008' for grant of stockoptions to eligible employees of the Bank. The Shareholders of the Bank approved thescheme on 26 April 2008 at an Extra Ordinary General meeting of the Bank. The maximumaggregate number of options that may be granted under this scheme is 50000000. As perthe scheme exercise price of the options shall be decided by the Compensation &Remuneration Committee at the time of grant of stock options. The Bank o ers ESOS to itsemployees which vests over a period of _ive years from the date of grant of options i.e.15% options each for _irst three years and 25% and 30% for fourth and _ifth yearrespectively. The shares are o ered at prevailing market prices at the time of grant tothe employees however the same shall vary pursuant to corporate action viz. RightsIssue Bonus Issue etc. There were no material changes in the ESOS of the Bank during theperiod under review and the same is in compliance with the provisions of SEBI (Share BasedEmployee Bene its) Regulations 2014. The disclosures pursuant to Regulation 14 of theSEBI (Share Based Employee Bene_its) Regulations 2014 have been set out in the website ofthe Bank (weblink: https://www.cityunionbank.com/investor) and also the same isannexed hereto as Annexure I.
In addition the shareholders of the Bank at its meeting held on 23 August 2017approved new CUB ESOS Scheme 2017 for 30000000 options on terms and conditions similarto previous one. No options have been granted to any employees of the Bank during theprevious year under this scheme.
HUMAN RESOURCE DEVELOPMENT
The Bank continued its e ort to improve the quality of the employees which is the keysuccess for achieving the preset goals / standards of the organization and is committed toequip them with expertise enabling them to seamlessly move with ongoing technologicaladvancements. The Bank aims to provide long term sustained and meaningful careers toemployees across the organization through talent management. The Bank continued to deputeits employees to various training institutions like SIBSTC NIBM CAB CAFRAL IDRBT etc.to enhance knowledge and operational ef iciency. The Bank has implemented various employeebene_it measures as agreed with the Sta Union during the year 2016 viz. PerformanceLinked Pay (PLP) Ef iciency Bar mechanism to identify resource persons Group Medi-claimbene its enhanced ex-gratia based on performance parameters etc. which has motivated theemployees to focus on standard of service and customer satisfaction.
There exists a cordial relationship between the management and the employees. It ispertinent to note here that there has not even been a single occasion of employee unrestin the Banking history of CUB. Continuous e orts are being made to enhance the quality ofexisting personnel and to attract new talents.
As on 31 March 2018 the Bank has 5319 employees comprising of 54 Executives in topmanagement cadre 2010 Of icers (including Special Assistants) 2950 Clerks and 305Subordinate Sta as compared to 4689 employees in the previous year.
'Technology' plays a vital role in managing and ful illing the current demand andenhanced quality service to the customers. Changes are happening in the Banking technologyand in digital payments systems. The Bank is deploying all possible technology enabled& digital payment systems to cater the needs of the customers.
The Bank has deployed CBS BaNCS for transaction processing system developed by M/s TataConsultancy Services which is being used by few major & peer Banks.
During the year under review the Bank has widened the ATMs to 1621 locations whichincludes 700 o -site ATMs. The Bank has deployed 987 Cash Dispenser ATMs and 634 CashDeposit (Bulk Note Acceptors) which are having recycling of deposited cash (BRM) facility.
The Bank has opened 44 self service Bank branches (e-Lounge) having Bulk Note AcceptorCash dispenser Multi functional KIOSK Cheque deposit KIOSK and Self Passbook KIOSK.
The Bank is o ering personal and corporate internet banking and mobile Banking servicesto the customers. All _inancial transactions are carried out with second factorauthentication. DSC (Digital Signature Certi icate) is also available as second factorauthorization and is made mandatory for online transactions of Rs. 10.00 lakhs and abovefor Corporate Customers. Apart from deposits funds transfer the Bank's internet &mobile banking is having 'utility bill payment' services online Term Deposit opening andonline 'loan against deposit'. The Bank has also introduced Aadhar seeding validating thesame from UIDAI through OTP on their registered mobile. The Bank also enabled the DigitalPayment 'Aadhar Enabled Payment System' to their customers. The Bank has introduced e-Kycaccount opening and Sel ie account opening schemes also which eliminates time taken foraccount opening.
The customers of the Bank also enjoy CUB e-Wallet Uni_ied Payment Interface (UPI) and'*99#' a NUUP (National Uni ied USSD Platform) an innovative payment service launched byNPCI working on Unstructured Supplementary Service Data (USSD). The Bank also is part ofBharat Bill Payment System (BBPS) as Bharat Bill Payment System Operating Unit (BBPOU) andlaunched Bharat QR. Scan and Pay Bharat QR option is also made available in BHIM UPI.
A customer friendly Captive Contact Centre (Call Centre) with Interactive VoiceResponse System (IVRS) is put in place to promote customer support on multi-languages24x7 basis.
The Bank introduced 'chat-bot' service powered by 'Arti icial Intelligence' thatintract with the customers via chat interface either auditory (Ask Lakshmi) or textual(Chat-Box in website and social media) which will work round the clock without any humanintervention and answers customer queries. This has been deployed in _ive centers so far.
The Bank has rolled out FASTag facility for making payments by vehicles in Toll Plazaselectronically through rechargeable prepaid instruments.
As a green initiative Green PIN for ATM card is implemented by which the customerscan themselves set the PIN in the ATM with OTP veri ication to the registered mobilenumber. The Bank has introduced Spend Analyser in our Net Banking through which thecustomers can view their spending pattern of the amounts remitted through Net / MobileBanking. Customers are provided with the option of enabling / disabling their cardsthrough Net / Mobile Banking and to set their own limits for ATM / POS / e-Comtransactions.
Now CUB customers can get their credit card (virtual) instantaneously and start doingtransactions. Customer can login to Net banking account and apply for credit card in a fewclicks. Customer has to choose a Fixed Deposit account link it to credit card and _ix owncredit limit on the card. Customer gets credit card (virtual) instantaneously. The FDcontinues to earn you the interest.
AWARDS & ACCOLADES
The Bank has been awarded the Best Small sized bank for FY 2015-16 by Business World -PWC Best Banks' Survey 2016 (Second Year in a row).
The Bank won Financial Express Best Bank award in the category "Top Old PrivateSector Bank" for FY 2015-16 (Third Year in a row).
SUBSIDIARIES AND ASSOCIATES
Your Bank does not have any Subsidiaries or Associates to report during the year underreport.
All Board meetings of the Bank were held in accordance with the Companies Act 2013the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI)and SEBI Listing Regulations 2015. During the year thirteen meetings were held thedetails of which are given under report on Corporate Governance forming part of thisreport.
BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL
Shri. V.N. Shiva Shankar was co-opted as an Additional
Director into the Board of the Bank on 7 February 2018 to hold the of ice till theconclusion of the ensuing Annual General Meeting. He is a quali_ied lawyer CompanySecretary and Cost / Management Account with over 25 years of rich experience in theIndian corporate sector. Pursuant to the provisions of the Companies Act 2013 and theBanking Regulation Act 1949 Shri. Shiva Shankar has specialized knowledge in the areasof Corporate Laws Mergers Capital Markets and allied subjects. In the opinion of theBoard Shri. Shiva Shankar is a dynamic and competent professional who can e ectivelyparticipate and represent in the Board of the Bank. The Board recommends his appointmentas an Independent Director on the Board of the Bank for approval by shareholders in theNotice calling this Annual General Meeting. The relevant details of Shri. Shiva Shankarpursuant to SEBI Listing Regulations 2015 are disclosed separately in such Notice.
Dr. T.S. Sridhar M.A. Ph.D is a retired I.A.S of icer was co-opted as anAdditional Director into the Board of the Bank on 7 February 2018 to hold the of ice tillthe conclusion of the ensuing Annual General Meeting. He has held top positions in theGovernment including Additional Chief Secretary Commissioner of Revenue Administrationetc. He has successfully led various Govt. programs / schemes. Dr. T.S. Sridhar hasspecialized knowledge in Rural Economy Agriculture Co-operation MSME Banking SmallSavings and Industry & Finance sector. Pursuant to the provisions of the CompaniesAct 2013 and the Banking Regulation Act 1949 Dr. Sridhar in the opinion of the Boardis a person with diverse knowledge and experience who can e ectively participate andrepresent in the Board of the Bank. The Board recommends his appointment as IndependentDirector on the Board of the Bank for approval by shareholders in the Notice calling thisAnnual General Meeting. The relevant details of Dr. Sridhar pursuant to SEBI ListingRegulations 2015 are disclosed separately in such Notice.
Shri. C.R. Muralidharan and Justice (Retd.) S.R. Singharavelu retired fromthe Board of the Bank on 24 February 2018 on account of completion of 8 years term as perthe provisions of Banking Regulation Act 1949.
The Board hereby places on record its warm appreciation over the excellent servicesrendered by Shri. C.R. Muralidharan and Justice (Retd.) S.R. Singharavelu during theirtenure.
Besides the above appointments and cessations the appointment of Shri N. Subramaniamand cessation of Shri T.K. Ramkumar occurred during FY 2017 - 18 and the same were dulyreported to the shareholders in the previous AGM held on 23 August 2017.
Directors to retire by Rotation - The application of provisions of Section 152(6)arises only when the Board of Directors of the public company comprises of such number ofdirectors who are not prohibited or restricted by the Act to retire by rotation. Alldirectors on the Board except the Managing Director and CEO of the Bank are IndependentDirectors. Hence the provisions of Section 152(6) of Companies Act 2013 relating toretirement of directors by rotation do not apply considering the present composition ofthe Board of Directors. Independent Directors are not required to retire in terms ofSection 149(13) of the said Act. Accordingly no director is required to retire by rotationat this annual general meeting.
Declaration by Independent Directors
The Bank has received relevant declarations from all the Independent Directors underSection 149(7) of the Companies Act 2013 noti ications issued by the Ministry ofCorporate A airs and SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (Listing Regulations') and the Board is satis_ied that the Independent Directorsmeet the criteria of independence as stipulated under statutory laws.
Familiarization program for Independent Directors
The details of programme for familiarization of Independent Directors with the Banktheir roles rights and responsibilities in the Bank and related matters are providedseparately under the Corporate Governance Report forming part of this Annual Report.
In line with the provisions of the Companies Act 2013 SEBI Listing Regulations 2015and relevant noti ications / guidelines issued by SEBI in this regard there exists astructured criterion as approved by the Nomination committee of the Board for carrying outthe performance evaluation of the Board as a whole its committees as well as IndependentDirectors.
The necessary evaluations / review were carried out by the Board and IndependentDirectors to determine the e ectiveness of the Board its Committees Chairman andindividual Directors. Additional information on performance evaluation is set out inCorporate Governance section forming part of this report.
Key Managerial Personnel
The following of icials of the Bank continue to be the "Key ManagerialPersonnel" pursuant to the provisions of Section 2(51) read with Section 203 of theCompanies Act 2013 :
|Sl.No. ||Name ||Designation |
|1. ||Dr. N. Kamakodi ||MD & CEO |
|2. ||Shri. V. Ramesh ||General Manager - CFO & CS |
M/s. Sundaram & Srinivasan Chartered Accountants Chennai was appointed as theStatutory Central Auditors
of the Bank in the previous AGM held on 23 August 2017. The term of the presentAuditor will conclude at the ensuing Annual General Meeting of the Bank and being eligiblehas offered themselves for re-appointment.
Consent has been received from the present Auditors for their re-appointment and also acon irmation to the e ect that they are not disquali ied to be appointed as StatutoryAuditors of the Bank in terms of Companies Act 2013 & the rules made there under. TheReserve Bank of India has accorded its approval for the appointment of M/s. Sundaram &Srinivasan Chartered Accountants Chennai to act as Statutory Central Auditors for theFinancial Year 2018-19. Members are requested to consider and approve their appointment asStatutory Central Auditors of the Bank for FY 2018-19.
Pursuant to Section 204 of the Companies Act 2013 read with Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Bank has appointed M/s B.K.Sundaram & Associates Practicing Company Secretaries Tiruchirapalli as SecretarialAuditor to conduct the Secretarial Audit of the Bank for Financial Year 2017-18. Thereport of Secretarial Auditor 'Secretarial Audit Report' is annexed to this report as
DIRECTORS RESPONSIBILITY STATEMENT
In accordance with Section 134 (5) of the Companies Act 2013 the Board of Directorsof the Bank hereby declares and con irms that:-
I) In the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures.
ii) The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of a airs of the Bank at the end of the _inancial year and of thePro it & Loss of the Bank for that period.
iii) The Directors had taken proper and suf icient care for the maintenance of adequateaccounting records in accordance with the provisions of applicable laws governing banks inIndia for safeguarding the assets of the Bank and for preventing and detecting fraud andother irregularities.
iv) The Directors had prepared the annual accounts on a going concern basis.
v) The Directors had laid down adequate internal _inancial controls to be followed bythe Bank and that such internal _inancial controls are adequate and were operating eectively; and vi) The Directors has devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operating eectively.
INSIDER TRADING NORMS
The Bank has formulated a Code of Conduct pursuant to SEBI (Prohibition of InsiderTrading) Regulations 2015 to regulate monitor and ensure reporting of trading by theemployees and other connected persons to comply with the provisions of SEBI ListingRegulations. Such policy is adopted to maintain highest ethical standards in dealing withsecurities of the Bank by persons to whom it is applicable. The code of conduct andrelated policy are available in the Bank's website (weblink: https://www.cityunionbank.com/downloads/Insider_trade_code_2015.pdf).
MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK
There are no material changes and commitments a ecting the _inancial position of theBank which has occurred between the end of the _inancial year of the Bank
i.e. 31 March 2018 and the date of Directors Report i.e. 22 June 2018.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS
During the year under review no signi icant and material orders were passed by theRegulators or courts or tribunals impacting the going concern status and Bank's operationin future.
Remuneration / Compensation Policy
The Bank has adopted a Compensation Policy in accordance with the directives issued bythe Reserve Bank of India. The Bank has constituted a Compensation & RemunerationCommittee which oversees the framing implementation and review of the Compensation Policyof the Bank. The Remuneration Policy of the Bank is briefed under Corporate GovernanceReport forming part of Annual Report.
Risk Management Policy
The Bank has in place an Integrated Risk Management framework supported by detailedpolicies and processes for management of Credit Risk Market Risk Liquidity RiskOperational Risk and various other Risks. The details on the Risk Management framework ofthe Bank is set out in the Management Discussion and Analysis section appended to thisReport.
DIVIDEND DISTRIBUTION POLICY
Pursuant to an amendment noti ication issued by the Securities Exchange Board of Indiaduring the year 2016 the Bank has framed a policy on Dividend Distribution taking intoaccount the guidelines prescribed by the Reserve Bank of India on 'Declaration of Dividendby Scheduled Commercial Banks'. The same is available at the website of the Bank (weblink:https://www.cityunionbank.com/downloads/Divide ndDistributionPolicy.pdf).
UNCLAIMED DIVIDEND AND SHARES
Your Bank in compliance with the provisions of Section 125 of the Companies Act 2013together with the applicable rules and circulars issued thereunder by the Ministry ofCorporate A airs has transferred 1583197 equity shares to the IEPF Authority inrespect of which no claim of dividend has been made continuously for a period of sevenyears.
Further in terms of the said provisions consequent to expiry of seven years period:
a. Unclaimed amounts pertaining to Dividend declared during FY 2009-10 has beentransferred to IEPF during the _inancial year under review and
b. Unclaimed amount pertaining to Dividend declared during FY 2010-11 together withshares will be transferred during _inancial year 2018-19 within the stipulated time.
BUSINESS RESPONSIBILITY REPORT
As per SEBI Listing Regulations 2015 a Business Responsibility Report describing theBank's social environmental and governance aspects are attached as part of this Annualreport.
Being a Banking company the disclosures as required pursuant to Rule 8(5)(v) &(vi) of the Companies (Accounts) Rules 2014 read with Section 73 & 74 of theCompanies Act 2013 are not applicable to your Bank.
INTERNAL FINANCIAL CONTROLS
The Bank has put in place adequate internal _inancial controls commensurate with thesize and scale of operations. The Bank has in all material aspects adequate internalcontrol systems over _inancial reporting and these controls have taken into considerationthe essential components of internal control stated in the guidance note on Audit ofInternal Financial Controls over Financial Reporting issued by the Institute of CharteredAccountants of India. Such internal _inancial controls over _inancial reporting wereoperating e ectively as at the end of the _inancial year. More details have been set outin Management Discussion and Analysis Report which forms part of this report.
RELATED PARTY TRANSACTIONS
The Board of Directors of the Bank has adopted a policy on Related Party transactionswhich is in line with the Companies Act 2013 and SEBI Listing Regulations 2015. Therewere no signi icant "Related Party Transactions" of any material _inancial& commercial nature with the Bank by the Directors and their relatives that would havepotential con_lict with the interest of the Bank at large. A detailed policy on theRelated Party Transaction is available at the Bank's website (weblink: https://www.cityunionbank.com/downloads/documents/CUB_Related_Party_Transaction.pdf).
LOANS GUARANTEES OR INVESTMENTS
All loans guarantees or investments made in securities by the Bank are exempt pursuantto the provisions of section 186 (11) of the Companies Act 2013 and hence does notattract any disclosure required under section 134 (3)(g) of the Companies Act 2013.
EXTRACT OF ANNUAL RETURN
Pursuant to Section 134(3)(a) of the Companies Act 2013 (the Act) read with Rule12(1) of Companies (Management & Administration) Rules 2014 an extract of AnnualReturn in form MGT - 9 as provided under Sub-section (3) of Section 92 of the Act isappended to this report as Annexure III.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
In compliance with the Section 135 of the Companies Act 2013 read with the Companies(Corporate Social Responsibility Policy) Rules 2014 and the related noti ications /circulars / guidelines issued by MCA the Bank has established Corporate SocialResponsibility (CSR) Committee. The Bank has established CUB Foundation a non-pro itentity to identify recommend and oversee the CSR initiatives of the Bank.
A Report on CSR activities as required under Rule 9 of the Companies (Corporate SocialResponsibility) Rules 2014 is furnished under Annexure IV to this report.
DISCLOSURE TO BE MADE UNDER SUB SEC (8) OF SEC 177 OF COMPANIES ACT 2013
The Board of the Bank had constituted the Audit Committee under the extant guidelinesof Reserve Bank of India (RBI) provisions of the Companies Act 2013 and ListingRegulations 2015. The details of the composition of the Audit Committee is furnished inthe Corporate Governance Report.
Corporate Governance of the Bank is an ethically driven business process that rests onthe fundamental pillar of high ethical values aimed at enhancing organization's brand andreputation and to protect the interests of all the stakeholders by taking ethical businessdecisions. The Bank is committed to achieving the highest standards of CorporateGovernance and also adheres to the Corporate Governance requirements set by the Regulators/ applicable laws. Accordingly the Board functions as trustees of the shareholder's andseeks to ensure that the long term economic value for its shareholders is achieved whilebalancing the interest of all the stakeholders.
A detailed section on Corporate Governance standards followed by the Bank as per SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 Companies Act 2013and rules made there under alongwith Certi icate of Compliance from the Statutory Auditorsare disclosed separately forming part of this report.
MANAGEMENT DISCUSSION & ANALYSIS
A detailed Management Discussion and Analysis Report for the year under review asstipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 ispresented as a separate section as part of this Annual Report.
Conservation of Energy and Technology Absorption
Considering the nature of activities carried out by the Bank the provisions of Section134 (m) of the Companies Act 2013 relating to conservation of energy and technologyobservation do not apply to the Bank. However every e ort is being made to conserveenergy. The Bank has put Solar Panels at various branches as part of energy conservationbesides installation of power saving LED bulbs at majority of branches and Central Of ice.Further it is proposed to set up Inverter technology based Air Conditioners to supportthe cause.
On the technological front the Bank strives to o er excellent banking service byfacilitating the latest customer friendly and secure technological solutions to itscustomers. However as informed to the Stock
Exchanges on 8 December 2017 during the third quarter there were certain impropertransactions amounting to Rs. 31.55 cr through VISA MASTER & NPCI networks throughATM switch which were approved outside the Bank's network. The Bank has a cyber insurancecover for Rs. 25 cr and insurance claim has been lodged. The Bank has provided a sum ofRs. 7 cr during the third quarter. Further as informed to the Stock Exchanges on 17February 2018 three fraudulent remittances amounting to Rs. 12.13 cr had gone throughour SWIFT system which were not initiated by us. Since your Bank reconciliation system wasvery tight your Bank could catch the attack in 3 attempts. Out of this the Bank receivedback Rs. 3.25 cr. An amount of Rs. 2.22 cr have been blocked and for getting back theremaining amount the Bank is taking e orts. During the fourth quarter the Bank has made aprovision of Rs. 6.66 cr.
Foreign Exchange Earnings and Outgo
The Bank continues to encourage country's export promotion by lending to exporters ando ering them forex transaction facilities.
Employees and Related Disclosures
Disclosures under Section 197 of the Companies Act 2013
The disclosures pursuant to the provisions of Section 197 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are furnishedas Annexure V.
The statement containing particulars of employees as required under Section 197(12) ofthe Companies Act 2013 read with Rule 5(2) of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is annexed as Annexure VI.
Disclosure under Section 22 of Sexual Harassment of women at workplace (PreventionProhibition and Redressal) Act 2013
The Bank gives utmost importance towards maintaining and upholding the dignity of eachand every woman working in the Bank. The Bank has a policy on Prevention of SexualHarassment at workplace which provides for adequate safeguards and protection for womenemployees working in the organization. No compliant was received in this regard during theyear 2017-18.
Con irmation has to compliance of applicable laws
It is hereby con irmed that the Bank has proper systems in place to ensure complianceof all laws applicable to the Banks.
Whistle Blower / Vigil Mechanism
Pursuant to the provisions of Section 177(9) and (10) of the Companies Act 2013 avigil mechanism for Directors and employees to report genuine concerns has beenestablished. The Bank has a policy on whistle blower / vigil mechanism which is uploadedin the website of the Bank as well as intranet (weblink: https://www.cityunionbank.com/downloads/Whistleblower%20Policy.pdf).
All employees and directors have access to the Chairman of the Audit Committee inappropriate and exceptional circumstances.
The Board of Directors of the Bank would like to take this opportunity to thank all theStakeholders and wish to place on record its sincere appreciation for the assistance andco-operation received from the Reserve Bank of India NABARD NHB IDBI SIDBI EXIM BANKECGC DICGC SEBI Stock Exchanges Depositories Karvy Computer share Pvt. Ltd. LifeInsurance Corporation of India United India Insurance New India Assurance TataConsultancy Services CCIL CIBIL Correspondent Banks Exchange Houses and otherauthorities.
Your Directors also place on record their warm appreciation for the committed servicesrendered by the Bank's Executives Sta and Workers.
| ||For and on behalf of the Board |
|Place : Chennai ||S. Mahalingam |
|nd || |
|Date : 22 June 2018 ||Chairman |