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CSB Bank Ltd.

BSE: 542867 Sector: Financials
NSE: CSBBANK ISIN Code: INE679A01013
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OPEN 269.15
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VOLUME 6935
52-Week high 372.95
52-Week low 197.05
P/E 17.00
Mkt Cap.(Rs cr) 4,683
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

CSB Bank Ltd. (CSBBANK) - Director Report

Company director report

Dear Shareholders

Your Directors have great pleasure in presenting you the 100th Annual Reporttogether with the Audited Statement of Accounts of the Bank for the financial year ended31st March 2021.

BUSINESS OVERVIEW

In the FY 2020 21 the total income increased by Rs.541.61 crore to Rs.2273.11crore from Rs.1731.50 crore in the corresponding previous financial year. In thesame period Interest income increased by Rs.362.40 crore to Rs.1872.29crore from Rs.1509.89 crore and the non-interest income increased by Rs.179.21crore to Rs.400.82 crore from Rs.221.61 crore in the corresponding previousfinancial year. In the same period the total Operating Profit of the Bank increased by Rs.332.63crore to Rs.613.21 crore from Rs.280.58 crore and Net Profit increased by Rs.205.68crore to 218.40 crore from Rs.12.72 crore in the corresponding previous financialyear. Despite the Covid-19 pandemic which disrupted the operations of the Bank in manyways especially first quarter and last month of the fourth quarter in the financial year2020-21 the Bank has reported a record net profit of Rs.218.40 crore in thefinancial year 2020-21 compared to Rs.12.72 crore in the corresponding previousfinancial year. The profit came on the back drop of a strong growth in net interest income(NII) supported by increased yield on advance/investments and decrease in the cost ofdeposits/funds Non-interest income was backed primarily by treasury profits recovery inwritten off accounts processing fee commissions on selling bankassurance products andPSLC (priority sector lending certificate) income.

In the same period the Bank's total advances grew by Rs.3151.51 crore to Rs.15386.96crore led by an over 61% growth in gold loans to Rs.6131 crore from Rs.3800crore and Deposits grew by Rs.3349.36 crore to Rs.19140.04 crore from Rs.15790.68crore in the corresponding previous financial year. Gross non-performing assets (NPA)decreased by Rs.15.94 crore to Rs.393.49 crore as on March 31 2021 from Rs.409.43as on March 31 2020. The gross NPA as percentage of advances fell by 86 basis points to2.68% as on March 31 2021 as against 3.54% as on March 31 2020 in the correspondingprevious financial year. Net NPAs also fell to 1.17% (Rs.168.81 crore) as of March31 2021 from 1.91% (Rs.216.94 crore) as on March 31 2020. Provision coverageratio improved to 84.89% at the end of the financial year from 80.02% in the correspondingprevious financial year.

Total Assets have increased by Rs.4473.11 crore and stood at Rs.23337.35crore as on March 31 2021 as against

Rs.18864.24 crore as on March 31 2020. Net Advances have increased by Rs.3071.77crore and reached Rs.14438.12 crore as on March 31 2021 as against Rs.11366.35crore as on March 31 2020.

There is no change in the nature of business of the Bank for the year under review.

FINANCIAL SUMMARY

The financial performance of the Bank for the fiscal 2020-21 is as given below:

Particulars March 31st 2021 March 31st 2020
Deposits 19140.04 15790.68
Borrowings Tier II Bonds Nil Nil
Net Advances 14438.12 11366.35
Total Assets/Liabilities 23337.35 18864.24
Net Interest Income (NII) 941.39 592.29
Non Interest Income 400.82 221.61
Operating Profit/ (Loss) 613.21 280.58
Provisions and
Contingencies (Other than tax) 320.66 146.58
Profit /(Loss) before Tax 292.55 134.00
Provision for taxes 74.15 121.28
Net Profit /(Loss) 218.40 12.72
Add: Surplus/(Deficit)
brought forward from last period (513.96) (513.96)
Profit & Loss Account balance before appropriations (295.56) (501.24)
Appropriations
Statutory Reserve u/s 17 of the Banking Regulation Act 1949. 54.60 3.18
Capital Reserve 117.67 8.33
Special Reserve 1.66 1.21
Investment Fluctuation 40.00 0.00
Reserve
Balance carried over to Balance Sheet (509.49) (513.96)
Key Performance Indicators
Capital Adequacy Ratio 21.37 22.46
(CRAR)% Basel – III
Earnings per share (in `) 12.59 0.88
Book value per share (in `) 125.67 113.04
Net Interest Margin% 4.81 3.74
Cost Income Ratio% 54.31 65.53
Return On Assets (ROA)% 0.99 0.07
Return On Equity (ROE)% 12.48 0.99

CENTENARY CELEBRATIONS- UPDATES

Bank on November 26 2020 celebrated 100 years of its glorious existence and this wasa rare achievement in the corporate world as there may not be many institutions in thisworld which has accomplished this rare feat of achieving this 100 years of legacy. CSBBank was established in the year 1920 by 11 prominent business families of respectablestature from Thrissur Kerala in the name and style of The Catholic Syrian Bank Ltd. tocater to the Banking needs of the local society. With the support and clientele from allcommunities the Bank grew from a very tiny Bank into its present position of a Bank withmore than 500 branches pan India. Though the Centenary celebrations for the occasion wasplanned on a grand scale due to COVID 19 pandemic the celebrations were held on asubdued note in virtual mode on November 26 2021. During the celebrations the foundersof the Bank were remembered who had the vision to bring about this institution intobeing providing employment and livelihood to 1000s of people. Special thanks were offeredto the Management team staff members and the present Promoters of the Bank FIH MauritiusInvestments Ltd who had brought about the dynamic and appreciable changes in the Bankincluding the change of name from The Catholic Syrian Bank Ltd. to CSB Bank Ltd. so thatthe Bank could face the future more confidently. Listing of shares of the Bank during the100th year of its existence on the bourses was an unparalleled achievementespecially so because the shares were ultimately listed post one of the most successfullPOs in the year 2019.

TOTAL BUSINESS

The total business of your Bank stood at Rs.34528 crore as on March 31 2021as against Rs.28031 crore a year before registering a y-o-y growth of 23.18%.

DEPOSITS

Aggregate deposits of the Bank as on March 31 2021 stood at Rs.19140.04 croreas against Rs.15790.68 crore a year before registering a y-o-y growth of 21.21%.

Total CASA deposits grew by Rs.1555.21 crore to Rs.6161.80 crore from Rs.4606.59crore of corresponding previous year. Total Term Deposits grew by Rs.1794.16 croreto Rs.12978.24crore from Rs.11184.08 crore of corresponding previous year.Total NRI Deposits grew by Rs.394.28 crore to Rs.4308.50 crore from Rs.3914.22crore of corresponding previous year.

ADVANCES

During the period under review the Bank's gross advances increased to Rs.15388crore against Rs.12240 crore as on March 31 2020 registering a y-o-y growth of25.72%. The gross CD Ratio of the Bank stood at 80.40% against 77.52% in the correspondingprevious year.

Gold loan portfolio grew by 61% to Rs.6131 crore as on 31.03.2021 from Rs.3800crore of corresponding previous year whereas Two Wheeler and Agri & MFI portfoliogrew by 119% and 252% in FY 21.

PRIORITY SECTOR LENDING

Priority Sector Advance extended by your Bank grew by

Rs.960.38 crore to Rs.4934.95 crore from Rs.3974.57 crore ofcorresponding previous year.

ASSETS QUALITY

Asset quality of banks is expected to come under further pressure as the impact ofCovid-19 pandemic is likely to pose challenges to the financial performance of banks.Non-performing assets of banks have increased sharply in the last quarter of the fiscal onrecognition of the un-recognised NPAs in the wake of the Hon'ble Supreme Court direction.

Close monitoring of Special Mention Accounts [SMA] was one of the focus area of yourBank during the just concluded fiscal. For the first time apart from SMA-1 & 2accounts the Bank made it a policy to monitor SMA-0 accounts including Proforma NPAs alsoin its pursuit of improving asset quality. This helped in containing the stressed assetsat historically low levels. Multi-level monitoring of SMA portfolio and monitoring ofstressed accounts in the SME segment by dedicated Relationship Managers have paid richdividends. Tele calling for improving collection of retail loans collection throughexternal agencies in the two wheeler segment are some of the innovations brought in by thebank in the recent past. Automation of Early Warning Signals [EWS] identification isanother important technological improvements made during the financial year. The systemhelps identifying stress in accounts in early stages itself and take appropriatecorrective steps.

By initiating appropriate recovery steps in a time bound manner the bank could recover/ upgrade substantial amounts of NPAs during the year. Account by account follow up oflarge value NPAs at Head Office level has also proved to be very effective in recoverymaximisation.

Compromise / One Time Settlement of NPAs as a strategy was vigorously pursued by thebank for NPA recovery during the year. Major chunk of the NPA recovery achieved is throughCompromise / One Time Settlement/ LOK Adalats. By organising Recovery Camps in variouslocations substantial retail NPAs could be recovered during the year.

Physical possession of secured assets by moving application before the concernedauthority and auction of secured assets under SARFAESI was conducted at few centres to theextent it was permitted by the authorities. Similarly the bank had also resorted tofiling under Revenue Recovery Act filing of suits in Civil Courts / DRTs as a last resortfor recovery of the dues.

The various initiatives taken resulted in cash recovery of Rs.69.23 Crore and upgradation of NPAs to the tune of Rs.12.05 Crore. The Gross NPA level of the Bank ason March 31 2021 stood at a level of Rs.393.49 Crore as compared to Rs.409.43Crore in the corresponding period of the previous financial year. The Gross NPA and NetNPA ratios are at 2.68% and 1.17% respectively as against 3.54% and 1.91% respectively inthe previous financial year. The provision coverage ratio as on March 31 2021 improved to84.89% from the level of 80.02% in the previous year.

Further during the period under review your bank could recover Rs.73.01 Crorefrom the prudentially written off portfolio. Interest recovery during the period amountedto Rs.19.42 Crore.

During the current financial year also your bank's focus would be on arresting freshdelinquencies through close monitoring and recovery of NPAs by initiating appropriate andtimely recovery steps.

FINANCIAL PERFORMANCE

Net Interest Income (NII) increased to Rs.941.39 crore in FY 2020 21 as against Rs.592.29crore in FY 2019 20.

Treasury Income increased to Rs.125.12 crore in FY 2020 21 from Rs.30.20crore in FY 2019 20. Non Treasury Other Income increased to Rs.275.70 crore in FY2020 21 from Rs.191.41 crore in FY 2019 20.

Provision other than taxes increased by Rs.174.08 crore (118.76%) from Rs.146.58crore to Rs.320.66 crore.

The Operating Profit for the year under review was Rs.613.21 crore before taxesand provisions as against

Rs.280.58 crore for the year 2019-20 mainly on account of increased net interestincome and other income.

The Net Profit for the year was Rs.218.40 crore as compared to a Net Profit of Rs.12.72crore during the previous year

DIVIDEND

The Board of Directors of the Bank have expressed their inability to recommend dividendfor the financial year ended March 31 2021 in view of the restrictions under Section 123(1) of the Companies Act 2013 that no company shall declare dividend unless carried overprevious losses and depreciation not provided in previous year or years are set offagainst profit of the company for the current year and also inadequacy of profitsavailable for dividend after the mandatory appropriations to the reserves.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments affecting the financial position of theBank which has occurred between the end of the financial year of the Bank i.e. March 31st2021 and the date of the Directors' Report i.e. July 05 2021.

PAID-UP CAPITAL AND RESERVES

As on March 31st 2021 the Paid up Equity Capital of the

Bank stood at Rs.173.48 crore comprising 173485827 fully paid up Equity Sharesof Rs.10/- each. The free reserves and surplus after adjusting debit balance inProfit and Loss Account stood at Rs.1580.21 crore as on March 31st2021 as against Rs.1460.37 crore as on March 31st 2020.

CAPITAL ADEQUACY

As per the Basel III Capital Adequacy Framework the Capital to Risk Weighted AssetsRatio (CRAR) as assessed by the Bank as on March 31st 2021 is 21.37 %. Thisis much higher than the minimum CRAR of 10.875% stipulated by the Reserve Bank of India.

The Tier I and Common Equity CRAR stood at 19.96% well above the minimum of 7% and5.5% respectively.

ALLOTMENT OF SHARES

The Bank on March 30 2021 allotted 30000 equity shares under the CSB Employee StockOption Scheme 2013 for an issue price of Rs.147.25 per share (Rs.10/-towards share capital and Rs.137.25 towards share premium). Consequently theIssued and Subscribed Share Capital of the Bank stands increased from Rs.1734558270/-to Rs.1734858270/- and that of the Share Premium account of the Bank from Rs.17916962366.74to

Rs.17921079866.74.

PROMOTER HOLDING - FIH MAURITIUS INVESTMENTS LTD (FIHM).

Pursuant to approval accorded by the shareholders by way of special resolution passedin the Extraordinary General Meeting of the Bank held on March 21 2018 and in terms ofReserve Bank of India approval vide letter DBR.

PSBD.No.341/16.1.060/2018 19 dated July 12 2018 and

DBR.PSBD.No.1643/ 16.01.060/2018-19 dated August 27 2018 and approval of Department ofFinancial Services (DFS) Ministry of Finance Government of India vide letter

No. F.No.26/5/2018 BOA dated October 9 2018 FIH

Mauritius Investments Ltd (FIHM) promoter of the Bank holds 86262976 shares whichconstitute 49.72 % in the paid up capital of the Bank.

Out of the 86262976 shares held by FIHM in the Bank 69394331 are locked-in untilAugust 7 2024 as advised by Reserve Bank of India in terms of its approval to FIHM toacquire up to 51 % in the post issue paid-up capital of the Bank. This 69394331 sharesincludes the minimum promoters' contribution required to be locked-in and the same waslocked in for a period of three years from the date of allotment of shares under theInitial Public offer of the Bank completed on December 2 2019 pursuant to Regulation 16and other applicable regulations of the SEBI (Issue of Capital and DisclosureRequirements) Regulations 2018.

Pursuant to Section 12(2) of Banking Regulation Act and a Gazette Notification no.DBR.PSBD. No. 1084/16.13.100/2016-17 dated July 21 2016 voting rights of FIHM arecurrently capped at 26% of the total voting rights of the Bank.

FIHM holding in the Bank is subject to the dilution schedule of the said investment asmandated by Reserve Bank of India vide letter dated DBR.PSBD.No.1643/ 16.01.060/2018-19dated August 27 2018. Dilution schedule is spread over a period of fifteen years from thedate of completion of their investment in the Bank.

FIHM is an investment holding company incorporated under the laws of Mauritius. FIHM iswholly owned by Fairfax India Holdings Corporation (Fairfax India) a Fairfax groupcompany. Founded in 2014 Fairfax India is a publicly listed Toronto-based investmentholding company whose objective is to achieve long-term capital appreciation by investingin Indian businesses. With a permanent capital base Fairfax India takes a long-term valueapproach towards its investments in India. Fairfax India is controlled by FairfaxFinancial Holdings Limited (Fairfax Financial).

Fairfax Financial is a publicly listed Toronto-based holding company which through itssubsidiaries is engaged in property and casualty insurance and reinsurance and theassociated investment management. Fairfax Financial has been under present managementsince 1985. Mr. V. Prem Watsa has been the Chairman and CEO of Fairfax Financial since1985 and the Chairman of Fairfax India since its inception in 2014.

FIHM's investment in the Bank is in tune with Reserve Bank of India vide MasterDirection No. DBR. PSBD.

No.56/16.13.100/2015 16 dated November 19 2015

‘Prior approval for acquisition of shares or voting rights in Private SectorBanks' and Reserve Bank of India Master Direction DBR.PSBD.No.95/16.13.100/2015-16 May 122016 on ‘Ownership in Private Sector Banks Directions 2016.'

CREDIT RATING

CRISIL vide letter dated March 19 2021 has reaffirmed the rating ‘CRISIL A1+'to the Rs.2000 crore Certificate of Deposits Programme and Rs.2000 croreShort Term Fixed Deposits Programme of the Bank.

CRISIL vide letter dated June 3 2021 has assigned ‘CRISIL A /Stable' rating tothe proposed Rs.500 Crore Tier II Basel III compliant bonds issue Programme of theBank. The bonds issue programme the Bank is under initial stage and has to bematerialised.

DEPOSITS ISSUANCE PROGRAMME

Bank under the Certificate of Deposits Programme raised Rs.1160 crore fromvarious Mutual funds and Banks during the period under review with an amount of Rs.660Crore outstanding as on 31.03.2021. Bank has not raised deposits under the Short TermFixed Deposits Programme.

ISSUE OF EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS

As on the date of this Report the Bank has not issued any equity shares withdifferential voting rights.

ISSUE OF SWEAT EQUITY SHARES

As on the date of this Report the Bank has not issued any sweat equity shares.

EMPLOYEES STOCK OPTION SCHEMES

1. CSB Employees Stock Option Scheme 2013

Pursuant to receipt of approval of the shareholders by postal ballot on August 182014 the Bank had formulated a stock option scheme called "CSB Employees StockOption Scheme 2013" ("ESOS 2013" or "Scheme"). Pursuant to clause26.2 of the scheme the Board vide resolution dated May 23 2019 amended the scheme forthe purpose of compliance with SEBI (Share Based Employee Benefits) Regulations 2014considering Initial Public Offering ("IPO") of shares of the Bank in the year2019.

The Scheme was effective from April 1 2013. The scheme envisages to offer long termshare based employee benefits as performance incentive to select employees enable valuecreation for shareholders by aligning employees' interests with that of the Bank and toattract retain and motivate high quality talent.

The scheme will be administered by the Nomination & Remuneration Committee of theBoard. Under the Scheme the Bank can offer issue and allot Equity Shares not exceeding5% of the issued Equity Shares of the Bank at any point of time which was capped pursuantto the Board vide resolution dated May 23 2019 at 2092356 equity shares being shares/options reserved of not exceeding 5% (five per cent) of the issued equity shares of theBank with reference to issued equity shares of the Bank as on August 18 2014 i.e. dateof approving the scheme by shareholders.

Against the options granted in the earlier year for a term of 10 years (includingvesting period) and against those options remaining in force an equal number of equityshares will be allotted to the beneficiary upon exercise of the option within the saidperiod.

Under the Scheme 820000 stock options were granted over a period of time since June2015. Out of 820000 granted 790000 options were lapsed over a period of time and30000 options were exercised by one grantee in the financial year 2021. All the Optionsgranted and exercised shall carry an exercise price of Rs.147.25 per option. TheBank on April 8 2021 obtained trading approval for the shares allotted pursuant to theoption exercised and allotted on March 30 2021.

Pursuant to the Board vide resolution dated May 23 2019 the Bank decided not to makeany fresh grants under the ESOS scheme-2013 under any circumstances and the scheme wouldcontinue only to facilitate exercise of the options already granted under the scheme andthe scheme will continue till such period only so to facilitate to exercise the optionalready granted. Post allotment of 30000 shares pursuant to exercise of options grantedin 2015 and the rest of the options granted were lapsed over a period of time the Schemestands automatically discontinued with effect from March 31 2021 as per Board videresolution dated May 23 2019.

2. CSB Employees Stock Option Scheme 2019

The Bank on receipt of approval of the shareholders by postal ballot on May 4 2019has formulated a stock option scheme called "CSB Employees Stock Option Scheme2019" ("ESOS 2019" or "Scheme"). The Scheme is in compliance withthe SEBI (Share Based Employee Benefits) Regulations 2014. The 2019 ESOS Scheme waseffective from May

4 2019. The scheme is intended to promote the culture of employee ownership as well asto attract retain motivate and incentivize talents in the Bank. The Scheme shall beadministered through an employee stock option trust ("ESOS Trust") in the natureof an irrevocable employee welfare trust in due compliance with the applicable laws. Underthe Scheme the Bank on July 12 2019 allotted 5000000 equity shares to CSB ESOSTrust at an issue price of Rs.10/- per share. Under the trust route the Bankallots shares to the trust and the trust will transfer the shares to the eligibleemployees at the time of exercise of option by eligible employees on meeting terms ofgrant fixed by the Nomination & Remuneration Committee. In case of trust route ofissuance of ESOPs the trust on its own will not have funds to be able to acquire theshares from the Bank as the trust is not a business trust and is specifically created withthe objective of issuance of ESOPs to the employees. Trust has to find out other avenuesfor sourcing of fund for purchasing shares from the Bank. In terms of Section 20 of theBanking Regulation Act 1949 the Bank cannot lend to trust to purchase its own shares.

Being a Pre-IPO Scheme in terms of Regulation 12(1) of the Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014 ("SEBI SBEBRegulations") any fresh grant of Options can be made under ESOS 2019 in case suchESOS 2019 is in compliance with the SEBI SBEB Regulations and ratified by the members ofthe Bank post IPO. Accordingly the ESOS 2019 was placed before the members at the AnnualGeneral Meeting held on July 20 2020 for ratification though the ESOS 2019 as well asthe Trust originally introduced were already in conformity with the SEBI SBEB Regulationsand ratification obtained. Besides the Scheme was amended at the Annual General Meetingof the Bank held on July 20 2020 inter alia to increase the Options Reserve by anadditional quantum of 11672791 options. The source of corresponding number of sharesequivalent to 11672791 options shall be in the form of (i) fresh issue of shares up to3000000 shares and (ii) secondary acquisition by the Trust up to 8672791 shares. Withthis the total Options Reserve under ESOS 2019 stood at 16672791 options. A few othermodifications were also made in the Scheme as per the prevailing regulations.

Under the Scheme 1038150 stock options were granted in the financial year 2020-21and 888150 options were in force at the end of the financial year.

Out of the 888150 options which were in force as on March 31 2021 455000 optionswere granted on different dates carry an exercise price of Rs.10 per option and433150 options granted on March 30 2021 carry an exercise price of Rs.75 peroption. All the options granted have to be vested subject to the vesting conditions and beexercised within the period as per the terms of the respective grant and the Scheme.

433150 stock options referred above were granted to Managing Director & CEOunder the scheme @

Rs.75/- per option on March 30 2021 as performance grant for the period fromDecember 9 2016 to March 31 2020. The said grant is as per approval of Reserve Bank ofIndia dated March 23 2021. The

Bank originally sought approval of Reserve Bank of India for grant of 3470000 stockoptions were reduced initially to 1800000 options and subsequently to 1786400 optionsagainst which approval has been received from RBI for grant of stock options for a fairvalue of Rs.7.5 crore for the same period with a condition that the intrinsic valueof options to be granted shall not be more than

Rs.7.5 crore as on the date of RBI approval i.e. March 23 2021. Accordingly theBank granted 433150 options equivalent to the intrinsic value as per RBI letter. Optionsgranted to him will be vested equally over a period of three years and shall be exercisedover the period commencing from the date of 1st vesting of Options and endingon or before March 31 2024.

3. Amendment proposed in the CSB Employees Stock Option Scheme 2019

Bank in the ensuing Annual General Meeting proposes to amend the scheme subject toapproval of members of the Bank to comply with the requirements of the Guideline No.DOR.Appt.

BC.No.23/ 29.67.001/2019-20 dated November

4 2019 issued by the Reserve Bank of India ("RBI Guidelines") and approvalsissued thereunder in specific cases of retirement and general cases of retirement ofoption grantees by allowing vesting of unvested employee stock options("Options") after the date of retirement as determined by the Nomination andRemuneration Committee ("Committee") of the Board of Directors of the Bank. Thisis especially relevant as the Bank grants Options as part of remuneration on the basis ofannual pay cycle which vests over at least next 3 (three) years in a staggered way. Incase of retirement in the meantime before completion of vesting the unvested Optionswould lapse in case not allowed to vest resulting in loss of Options/ remuneration of thepast annual pay cycle for which Bank would have consumed the concerned option grantee'scontribution. However any vesting after retirement shall be subject to usual malus andclawback requirement as prescribed under the Scheme read with RBI Guidelines.

4. CSB Employees Stock Option Scheme – Statutory Compliance

A Certificate of Statutory Auditors pursuant to Regulation 13 of SEBI (Share BasedEmployee Benefits) Regulations 2014 that the Bank's above mentioned Schemes have beenimplemented in accordance with the SEBI (Share Based Employee Benefits) Regulations andthe Resolutions passed by the Shareholders for the 2013 and the 2019 Scheme will beplaced to the Annual General Meeting for the scrutiny of Shareholders.

The disclosure as required as per rule 12(9) of the Companies (Share Capital andDebentures) Rules 2014 and Regulation 14 of SEBI (Share Based Employee Benefits)Regulations 2014 in respect of the stock options granted by the Bank under the schemesforms part of this report as Annexure-I.

BUSINESS RESPONSIBILITY REPORT

In compliance with Regulation 34(2)(f) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Business Responsibility Report of the Bank for the FY2020-21 in the format as specified by SEBI describing the initiatives taken by the Bankfrom an environmental social and governance perspective forms part of this Report asAnnexure-II.

The same has been hosted on the website of the Bank and can be accessed athttps://csb.co.in/investor-relations > General meetings > Annual General Meeting– 2021.

BUY-BACK OF SHARES OR PROVISION OF FINANCIAL theASSISTANCE FOR PURCHASE OF THE BANK'SSHARES

The Bank has not effected any buy back of its shares or provided any financialassistance for purchased subscription of its shares to any persons including directorsand employees of the Bank in terms of Section 67 of the Companies Act 2013.

REDEMPTION OF CSBL BONDS

Bank has not issued any bonds during the period under review. Bonds issued by the Bankin earlier periods were redeemed as per the redemption schedule and no bonds wereoutstanding at the beginning and end of the financial year.

DEPOSITS

Being a banking company the disclosures required as per Rule 8(5)(v)&(vi) of theCompanies (Accounts) Rules 2014 read with Sections 73 and 74 of the Companies Act 2013are not applicable to our Bank.

SUBSIDIARY COMPANY

The Bank does not have any subsidiaries joint ventures or associate companies. Thereare no companies which have become or ceased to be its subsidiaries joint ventures orassociate companies during the year under review.

Bank has formulated a Policy for determination of material subsidiary pursuant to theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 and the same is displayed on the website of the Bank at:https://www.csb.co.in/pdf/Policy_ for_Determining_Material_Subsidiaries.pdf

RISK MANAGEMENT POLICY

The Bank has a comprehensive policy framework which contains separate policies foridentification measurement monitoring & control and mitigation of all material risksincluding but not limited to credit market operational liquidity and other Pillar IIrisks. The Bank has put in an integrated risk management policy which ensures independenceof the risk governance structure. IRMD Charter is included in the Integrated RiskManagement policy. The risk management policy details the principles rules and guidelinesto be adopted by the Bank for managing and controlling various kinds of risks throughvarious sub policies. The policies are implemented in an uninterrupted reliable andcomprehensive manner across the entire bank. The details of risk management practices areprovided in the Management Discussion and Analysis Report annexed to the Director'sReport.

WHISTLE BLOWER POLICY / VIGIL MECHANISM

Bank has put in place a Whistle Blower Policy / Vigil Mechanism to report concernsabout unethical behaviour violations of system and procedures of our Bank violation oflaw questionable business practices or grave misconduct by employees of the Bank thatcould lead to financial loss or reputation to the Bank actual or suspected fraud andothers. Whistle Blower Policy is published in the website of the Bank and therebyawareness is given to all the stake holders about the same so as to make the said Policyand the Scheme an effective tool in the reporting and prevention of frauds. As per thePolicy /Mechanism Directors and employees of the Bank customers stakeholdersNon-Governmental Organizations (NGO) and others can lodge complaints / disclosures. TheAudit Committee of the Board will oversee the vigil mechanism through the Committeeprocesses. The Policy /Mechanism provides reassurance of protection to the whistle blowerfrom victimisation discrimination or reprisals for having blown the whistle in theinterest of the Bank with good faith. The Chairman of Audit Committee shall directly heargrievances of victimisation of employees and directors who used vigil mechanism to reportgenuine concerns. The Bank affirms that no employee has been denied access to the AuditCommittee of the Board under the Whistle Blower/ Vigil Mechanism in the Bank.

A topic on Whistle Blower Policy available in the Bank and Ethics & Code ofconduct has been included in every session of the training programme conducted at theBank's staff Training College for enhancing awareness of fraud risk and for promoting aculture of compliance among the employees. Bank is ensuring that the systems andprocedures are scrupulously followed by all the employees of the bank. Bank is takingstringent actions against employees who do not comply the instructions of the Bank.

Bank based on RBI directions has put in place a Fraud Risk Management Policy thatcovers the various controlling monitoring and surveillance mechanism of the Bank toprevent frauds and to manage the risk of loss in the event of a fraud. As a part ofVigilance all the cases of frauds reported in the Bank are investigated in detail.

Lacunae if any observed during the course of investigation are plugged and cases wheresystemic corrections are required are placed before the Audit Committee for correctivemeasures / necessary directions. Apart from investigation of fraud Vigilance Departmentalso conducts Preventive Vigilance Audits to ensure the effectiveness of fraud preventionmechanism in the Bank. This will promote a culture of compliance among the employees.Wherever deficiencies are observed the branches are suitably cautioned so that suchdeficiencies are not recurred and incidents of frauds can be minimized. VigilanceDepartment also issue caution advises on a regular basis that disseminates various modusoperandi of frauds in the banking industry including that has happened in our Bank. Thiswill enable the Branches / Offices to prevent similar kind of fraudulent attempts infuture.

Bank has taken all efforts to prevent frauds by strengthening the existing controlmeasures and by reiterating the systems and procedures to update and alert the employees.Bank has a well-organized Inspection Department which conducts regular and comprehensiveinspections (RBIA) of branches and offices at specified intervals and also oversees allother Audits and Inspections of the Bank. Over the last few years the Bank has takenseveral measures to plug the gaps in the areas of appraisal monitoring internal systemsetc. to strengthen the overall control system on loan assets. The Bank had strengthenedthe internal audit machinery functions of vigilance department and put in placeappropriate mechanism information systems and required infrastructure to preventrecurrence early detection of frauds on an ongoing basis.

MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis Report forthe year under review as stipulated under Regulation 34(2) (e) of the Listing Regulationsis presented in a separate section forming part of this Annual Report.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

Bank has implemented adequate procedures and internal control systems which providereasonable assurance regarding reliability of financial reporting and preparation offinancial statements. Bank is operating in a fully computerized environment with CoreBanking System supported by diverse application platforms for handling special businesssuch as treasury trade finance retail loans etc. The process of recording oftransactions in each application platform is subject to various forms of control such asin built system checks maker checker authorisations and independent post transactionreviews etc. The financial statements are prepared based on computer system outputs.Responsibility of preparations of financial statements is entrusted to a dedicated unitwhich is independent of business.

UPDATE ON IND AS IMPLEMENTATION

The Institute of Chartered Accountants of India had issued IND AS (a revised set ofaccounting standards) which largely converges the Indian accounting standards withInternational Financial Reporting Standards (IFRS). The Ministry of Corporate Affairs(MCA) had notified these accounting standards (IND AS) for adoption in 2015 and issued theroad map for implementation of new Indian Accounting Standards (IND AS) in January 2016.Banking companies were required to implement Indian Accounting Standards (IND AS) fromApril 1 2018 onwards with comparatives for the year beginning April 1

2017. RBI vide First Bi monthly Monetary Policy 2018 19 on April 5 2018 had deferredthe implementation of IND AS by one year pending necessary legislative amendments to theBanking Regulation Act 1949 as also the level of preparedness of many bank. RBI videCircular DBR. BP.BC.

No.29/21.07.001/2018 19 dated March 22 2019 has further deferred the implementation ofIND AS till further notice as the legislative amendments recommended by the Reserve Bankof India was under consideration of the Government of India.

The Bank had commenced the process of IND AS implementation from FY 2016 17 itself. Asper

Directions the Bank has taken the following further steps towards implementation ofIND AS during the year 2020 21:

a) Submitted quarterly Performa IND AS financial statements for the on quarterly basisas required by RBI.

b) The Bank will continue its preparedness towards migration to IND AS as perregulatory requirement and to liaise with RBI and industry bodies on various aspectspertaining to IND AS implementation.

CORPORATE GOVERNANCE

The Bank continues its endeavour to adopt the best prevalent Corporate GovernancePractices. A separate section on Corporate Governance standards followed by your Bank andthe relevant disclosures as stipulated under SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and Companies Act 2013 and the rules made thereunder isenclosed as an annexure to this report.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE BANK

Pursuant to Section 186 (11) of the Companies Act 2013 the provisions of Section 186of Companies Act 2013 except sub section (1) do not apply to a loan guarantee given orsecurity provided or any investment made by a banking company in the ordinary course ofbusiness.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions with related parties were entered in the books as prescribed duringthe financial year were in the ordinary course of business only. However there were noabsolute comparable data available to compare the terms of contracts or arrangements so asto establish such transactions were on arm's length basis the Bank decided to considersuch contracts or arrangements as related party transactions and obtained requisiteapprovals for the said transactions as prescribed in the section 188 of the Companies Act2013 as amended and Rule 15 of the Companies (Meetings of Board and its Powers) Rules2014 and further reported the same as related party transactions.

As per the policy on dealing with Related Party Transactions Audit Committee shallreview at least on a quarterly basis the details of Related Party Transactions enteredinto by the Bank pursuant to each of the omnibus approval given and such omnibus approvalsshall be valid for a period not exceeding one financial year and shall require freshapprovals after the expiry of such financial year.

Bank has also obtained omnibus approval of the Audit RBI Committee for the respectivetransaction under 188 of the Companies Act 2013 and Rule 6A of the Companies (Meetings ofBoard and its Powers) Rules 2014 though no transaction were consummated during theperiod ended March 31 2021.

There were no materially significant related party transactions with the Bank'sDirectors Management or their relatives which could have had a potential conflict withthe interests of the Bank.

The particulars of contracts or arrangements with related parties entered into duringthe year under review in terms of Section 188(1) of the Companies Act 2013 are providedin Form AOC 2 as Annexure -III in terms of 134(3)(h) of the

Companies Act 2013.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR policy of the Bank aims to identify and support all projects/programs/subjectsundertaken as part of the Bank's Corporate Social Responsibilities/commitments within theframework of Schedule VII of the Companies Act 2013 and the Companies (Corporate SocialResponsibility Policy) Rules 2014 as amended from time to time. The Policy was lastamended in March 2021 to incorporate the requirements of the Companies (Corporate SocialResponsibility Policy) Amendment Rules 2021.

The main objective of CSR policy of the Bank is to make CSR a key business process forsustainable development of the society. The CSR Policy will guide and govern the Bank'sactivities in focus areas namely rural development and inclusiveness and other areas ofspecial interest ultimately for sustainable development of the society across.

The Bank continued with CSR activity during the period under view in a limited waythough it was not mandatory to spend for the said period in terms of Section 135 of theCompanies Act 2013 and CSR Rules 2014 as the average net profit of the Bank for the lastthree years was in the negative zone. As a responsible citizen the Bank will continuewith a slew of measures for fulfilment of its commitment to the society as a whole. TheBank in terms of the requirements of Section 135 of the Companies Act 2013 and CSR Rules2014 has set up a Board level Corporate Social Responsibility (CSR)

Committee to look after the CSR initiatives of the Bank. The CSR Committee shall (a)formulate and recommend to the Board a Corporate Social Responsibility Policy as perSchedule VII of the Companies Act 2013 read with the Companies (Corporate SocialResponsibility Policy) Rules 2014. (b) recommend the amount of expenditure to be incurredon the activities as part of the CSR programme of the Bank; (c)monitor the corporatesocial responsibility policy of the company from time to time and (d) formulate andrecommend to the Board an annual action plan in pursuance of its CSR policy.

The brief outline of the CSR Policy overview of the programs undertaken by the Bankthe composition of the CSR Committee prescribed CSR expenditure and details of theamounts spent by the Bank on CSR activities during the year under review have beenprovided in Annexure - IV to this report.

AUDITORS a) Statutory Auditors

The Statutory Central Auditors viz. B S R & CO. LLP 5th Floor LodhaExcelus Apollo Mills Compound N. M. Joshi Marg Mahalaxmi Mumbai- 400011 MaharashtraFirm Regn. Number: 101248W/W-100022 who were appointed at the 99th AnnualGeneral Meeting held on July 20 2020 will be retiring at the ensuing Annual GeneralMeeting and are eligible for reappointment as per the guidelines of the Reserve Bank ofIndia (RBI).

In terms of Reserve Bank of India Guidelines No. DoS.CO.ARG/SEC.01/08.91.001/2021-22dated April 27 2021 regarding "Appointment of Statutory Central Auditors(SCAs)/Statutory Auditors (SAs) in Commercial Banks (excluding RRBs) UCBs and NBFCs(including HFCs)" read with FAQ dated June 11 2021 the statutory audit of theentities with asset size of Rs.15000 crore and above as at the end of previousyear should be conducted under joint audit of a minimum of two audit firms andaccordingly the Bank has to appoint two audit firms from financial year 2021-22 onwards asper the guidelines.

In line with said guidelines the Board on recommendation of the Audit Committee of theBoard recommends the appointment of

B S R & CO. LLP Chartered Accountants 5th Floor Lodha Excelus ApolloMills Compound N. M. Joshi Marg Mahalaxmi Mumbai-400011 Maharashtra Firm Regn.Number: 101248W/W-100022 for a period of two (2) years together with Mukund M. Chitale& Co Chartered Accountants 2nd Floor Kapur House Paranjape B SchemeRoad No.1 Vile Parle (East) Mumbai – 400057 Firm Registration Number : 106655Wbeing the first preferred choice of firm to the RBI for the second joint statutoryauditor for a period of three (3) years as the Joint Statutory Auditors of the Bank tohold office from the conclusion of 100th Annual General Meeting till theconclusion of the 102nd and 103rd Annual General Meetings of theBank respectively subject to the specific approval of Reserve Bank of India for each yearduring their tenure in terms of Section 30(1A) of the Banking Regulation Act 1949 forthe purpose of audit of the Bank including certifications reporting on internalfinancial controls of the Bank's accounts at its head office branches and all thecontrolling and other offices.

Bank has received consent from the said firms and confirmation to the effect that theyare not disqualified to be appointed as the Statutory Central Auditors of the Bank interms of the provisions of the Companies Act 2013 and rules made here under and ReserveBank of India Guidelines dated April 27 2021. Accordingly the Board of Directorsrecommended the appointment of B S R & CO. LLP Chartered Accountants 5thFloor Lodha Excelus Apollo Mills Compound N. M. Joshi Marg Mahalaxmi Mumbai-400011Maharashtra Firm Regn. Number: 101248W/W-100022 for a period of two (2) years togetherwith Mukund M. Chitale &Co Chartered Accountants 2nd Floor Kapur HouseParanjape B Scheme Road No.1 Vile Parle (East) Mumbai – 400057 Firm RegistrationNumber : 106655W being the first preferred choice of firm to the RBI for the second jointstatutory auditor for a period of three (3) years as the Joint Statutory Auditors of theBank to hold office from the conclusion of 100th Annual General Meeting tillthe conclusion of the 102nd and 103rd Annual General Meetings of theBank respectively on such remuneration to be decided subject to the approval of ReserveBank of India(RBI) in terms of Section 30(1A) of the Banking Regulation Act 1949 andapproval of the shareholders of the Bank in terms of Section 139 142 143 and otherapplicable provisions if any of the Companies Act 2013 read with the Companies (Auditand Auditors) Rules 2014 and other applicable rules.

Pursuant to the Regulation 33(1) (d) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Joint Statutory Auditors have confirmed that they aresubjected to the peer review process of the Institute of Chartered Accountants of India(ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.

Independent Auditors' Report

B S R & CO. LLP Chartered Accountants Mumbai Firm Regn. Number: 101248W/W-100022Statutory Central Auditors of the Bank have audited the accounts of the Bank for the FY2020-21 and their Report is annexed. Pursuant to Section 143(3)(i) of the Companies Act2013 the Statutory Auditors have also reported on the adequacy and operatingeffectiveness of the internal financial controls system over financial reporting whichhas been enclosed as "Annexure A" to Independent Auditor's Report. There are noqualifications reservations or adverse remarks made by the Statutory Auditors in theirreport for the FY 2020-21.

b) Secretarial Auditors and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act 2013 the Bank appointed "M/s. SVJS& Associates" Company Secretaries Kochi as its Secretarial Auditors to conductthe secretarial audit of the Bank for the Financial Year 2020 21. The Bank produced allnecessary records to the Secretarial Auditors for smooth conducting of their Audit. TheReport of Secretarial Auditor for the said period is annexed to this report as Annexure-V. There are no qualifications reservations or adverse remarks made by the SecretarialAuditors in their report for the FY 2020-21.

COMPLIANCE TO SECRETARIAL STANDARDS

The relevant Secretarial Standards issued by the Institute of Company Secretaries ofIndia (ICSI) related to the Board Meetings and General Meeting have been complied with bythe Bank.

TRANSFER OF UN-CLAIMED/UN-PAID DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND(IEPF)

Dividend transferred to Unpaid Dividend account and remaining unpaid or unclaimed for aperiod of seven years from the date of such transfer has to be transferred to InvestorEducation and Protection Fund as per Section 124 (5) of the Companies Act 2013. Incompliance with above the Bank on October 30 2020 transferred Rs.1417817 /- tothe above Fund being the unclaimed dividend for the financial year 2012 13.

TRANSFER OF EQUITY SHARES TO INVESTOR EDUCATION AND PROTECTION FUND AUTHORITY

In terms of the provisions of the Section 124(6) of the Companies Act 2013 read withthe Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 (as amended) and other applicable rules notifications and circularsif any every company is required to transfer the shares in respect of which dividendremains unpaid / unclaimed for a period of seven (7) consecutive years to the InvestorEducation Protection Fund (IEPF) Authority.

To comply with the above the Bank had on November 18 2020 transferred 104932shares comprising of 826 folios/records to Investor Education and Protection FundAuthority through M/s. Central Depository Services (India) Limited (CDSL) in respect ofwhich dividend was not claimed for consecutive 7 years from the date of transfer to unpaiddividend account of the Bank for the respective year(s).

UNCLAIMED SHARE APPLICATION MONEY

Unclaimed Share application money in respect of Rights issue 2013 and allotmentcompleted on March 30 2013 was due for transfer to the Investor Education and ProtectionFund after the due date i.e. March 30 2020 as per provisions of the Section 125(2) (h)of the Companies Act 2013.

To comply with the above requirements the Bank on April 3 2020 transferred Rs.118260/-to the Investor Education and Protection Fund being the unclaimed share application moneyin respect of Rights Issue 2013.

COMPENSATION/ REMUNERATION POLICY

The Bank has formulated a Compensation Policy which deals with the compensation andbenefits of all the employees of the Bank and Directors including Part time ChairmanManaging Director & CEO Executive and Non

Executive Directors and the details of the same have been included in the Report onCorporate Governance which forms part of this Report.

The Bank has fine-tuned the policy in the financial year under review in line with thechanges proposed by Reserve Bank of India ‘Guidelines on Compensation of Whole TimeDirectors/ Chief Executive Officers/ Material Risk Takers and Control Function staff'dated November 4 2019.

NOMINATION POLICY

Bank adopted policy for appointment and orderly succession of appointment of Part timeChairman

Managing Director & CEO Directors Key Managerial Personnel and Senior Managementteam in the Bank. The details of the same have been included in the Report on CorporateGovernance which forms part of this Annual Report.

The Nomination policy is displayed on the website of the Bank at:https://www.csb.co.in/pdf/NominationPolicy.pdf

DETAILS OF DIRECTORS/EMPLOYEES REMUNERATION

The details of Directors/Employees remuneration etc. as required under Sec 197(12) ofthe Companies Act 2013 read with Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms part of this Report as Annexure-VI.

Besides the details of remuneration paid to the Managing Director & CEO Directorsand Key Managerial Personnel forms part of this report as Annexure-VII.

BOARD OF DIRECTORS

The composition of the Board of Directors is governed by the Banking Regulation Act1949 Circulars and Guidelines issued by the Reserve Bank of India from time to time theCompanies Act 2013 SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 and in accordance with the best practices in corporate governance adopted by theBank. As on the date of this report the Board comprises of Eight Directors. The directorspossess rich experience and specialized knowledge in various areas of relevance to theBank.

The Board functions as the governing body and also through various Committeesconstituted to oversee specific areas. Policy formulation setting up of goals evaluationof performance and control functions vest with the Board. The Committees have oversight ofoperational and supervisory issues assigned to them by the Board from time to time.

Appointment/changes in the Board of the Bank since the last Board's report dated June22 2020 is as given under:

APPOINTMENT OF NON-EXECUTIVE DIRECTORS

Mr. Sumit Maheshwari (DIN: 06920646) was reappointed as a director liable to retire byrotation at the 99th Annual General Meeting held on July 20 2020.

PART-TIME CHAIRMAN

Mr. Madhavan Menon (DIN: 00008542) ceased to be the Part-time Chairman of the Bank witheffect from July 22 2020 upon expiry of his extended tenure of appointment as per ReserveBank of India letter no. DoR. Appt. no.8065/ 08.36.001/2019-20 dated April 24 2020. Mr.Madhavan Menon continues on the Board as Non-Executive Director. Mr. Madhavan Menon is oneof the two directors nominated by promoters of the Bank M/s. FIH Mauritius InvestmentsLtd.

The Board places on record its appreciation of the valuable contributions advises andservices of Mr. Madhavan Menon during his tenure as the Part-time Chairman of the Bank.The Board also took note of the sheer professionalism displayed by Mr. Madhavan Menonduring his tenure by sharing unbiased decisive and professional opinions keeping in viewof all the stakeholders' interest at hand.

Mr. Madhavan Aravamuthan (DIN: 01865555) was appointed as the Part-time Chairman of theBank in place of

Mr. Madhavan Menon for the period starting from August 10 2020 and up to June 28 2022on receipt of approval of Reserve Bank of India pursuant to the section 10B(1A) (i) of theBanking Regulation Act 1949. Mr. Madhavan Aravamuthan has been on the Board of the Banksince December 13 2018 as an Independent Director.

APPOINTMENT OF MR. PRALAY MONDAL AS DEPUTY MANAGING DIRECTOR

Pursuant to the recommendation of the NRC the Board at its meeting held on June 82021 approved the appointment of Mr. Pralay Mondal as a Director and the Deputy ManagingDirector of the Bank for a period of 5 (five) years with effect from the date ofapproval of Reserve Bank of India in terms of Section 35B of the Banking Regulation Act1949 and the terms and conditions relating to the said appointment includingremuneration are subject to the approval of the RBI and the Shareholders of the Bank.During the said period Mr. Pralay Mondal shall be liable to retire by rotation.

APPOINTMENT OF INDEPENDENT DIRECTORS

Mrs. Sharmila Abhay Karve (DIN: 05018751) was appointed as an Additional Director(Non- Executive Independent category) of the Bank w.e.f. July 20 2020 for a period ofthree (3) years pursuant to the provisions of Section 149161(1) of the Companies Act2013 and Rules made thereunder Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 and Article 133 of the Articlesof Association of the Bank.

Mr. Sudhin Bhagwandas Choksey (DIN: 00036085) was appointed as an Additional Director(Non- Executive Independent category) of the Bank w.e.f. March 30 2021 for a period upto January 30 2024 pursuant to the provisions of Section 149161(1) of the Companies Act2013 and Rules made thereunder Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 and Article 133 of the Articlesof Association of the Bank.

Mr. Sunil Srivastav (DIN: 00237561) was appointed as an Additional Director (Non-Executive Independent category) of the Bank w.e.f. June 8 2021 for a period of three (3)years pursuant to the provisions of Section 149161(1) of the Companies Act 2013 andRules made thereunder Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 and Article 133 of the Articles of Associationof the Bank. Necessary resolutions seeking approval of the members in connection withappointment of Mrs. Sharmila Abhay Karve Mr. Sudhin Bhagwandas Choksey and Mr. SunilSrivastav as Independent Directors of the Bank forms part of the notice of the ensuingAnnual General Meeting.

The detailed profile of Mrs. Sharmila Abhay Karve Mr. Sudhin Bhagwandas Choksey andMr. Sunil Srivastav recommended for their appointment as Independent

Directors in the ensuing Annual General Meeting will be provided in the Notice of theAnnual General Meeting for the benefit of shareholders as per the provisions of theCompanies Act 2013 SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 and the Secretarial Standard on General Meetings (SS-2).

RETIREMENT OF INDEPENDENT DIRECTOR

Mr. Thomas Mathew (DIN: 01277149) Non- Executive Independent Director retired fromthe office of directorship with effect from September 25 2020 upon completion of histerm of appointment. As per the extant Reserve Bank of India guidelines prevailing at thetime the upper age limit prescribed for directors in the banking companies was 70 yearsand Mr. Thomas Mathew was nearing 70 years of age hence not did not pursue forreappointment.

The Board places on record its appreciation for the valuable contributions made to theBank and for the support and cooperation extended by Mr. Thomas Mathew during his tenureas an independent director of the Bank. The Board also acknowledged with thanks theprofessional and unbiased approach that Mr. Thomas Mathew had taken at the Board and theCommittee meetings and also his sincere efforts to build up a very strong complianceculture in the Bank.

RESIGNATION OF INDEPENDENT DIRECTOR

Mr. Syed Nagoor Ali Jinnah (DIN: 05238633) resigned from the position of theNon-Executive Independent Director of the Bank with effect from April 19 2021 on personalgrounds of health. Pursuant to Regulation 30 of SEBI (Listing Obligation and DisclosureRequirements) Regulation2015 read with Clause 7B of Part A of Schedule III Mr. SyedNagoor Ali Jinnah confirmed that there are no material reasons for his resignation fromthe position of Independent Director of the Bank other than on personal grounds of health.

The Board places on record its appreciation for the valuable contributions made to theBank and for the support and cooperation extended by Mr. Syed Nagoor Ali Jinnah during histenure as an independent director of the Bank. The Board also acknowledged with thanks theprofessional and unbiased approach that Mr. Syed Nagoor Ali Jinnah had taken at the Boardand the Committee meetings.

REAPPOINTMENT OF INDEPENDENT DIRECTORS

Mr. Madhavan's Aravamuthan first term as Non-Executive Independent Director of the Bankends on June 28 2022. The Board of Directors post satisfactory evaluation of hisperformance recommended reappointment of Mr. Madhavan Aravamuthan as Non-ExecutiveIndependent Director of the Bank to hold office for a period of three consecutive yearswith effect from June 29 2022 to June 28 2025.

Mrs. Bhama Krishnamurthy's first term as Independent Director of the Bank ends onSeptember 28 2021. The Board of Directors post satisfactory evaluation of herperformance recommended reappointment of Mrs. Bhama Krishnamurthy as Independent Directorof the Bank to hold office for a period of three consecutive years with effect fromSeptember 29 2021 to September 28 2024.

Necessary resolutions seeking approval of the members in connection with reappointmentof Mr. Madhavan Aravamuthan and Mrs. Bhama Krishnamurthy as Independent Directors of theBank forms part of the notice of the ensuing Annual General Meeting.

The detailed profile of Mr. Madhavan Aravamuthan and Mrs. Bhama Krishnamurthyrecommended for their reappointment as Independent Directors in the ensuing Annual GeneralMeeting will be provided in the Notice of the Annual General Meeting for the benefit ofshareholders as per the provisions of the Companies Act 2013 SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and the Secretarial Standard on GeneralMeetings (SS-2).

INDEPENDENT DIRECTORS- COMPLIANCE STATUS

The Bank fully satisfies the requirements of Section 149 of the Companies Act 2013 inconnection with the appointment of Independent Directors and the following are theIndependent Directors of the Bank as on the date of this report.

Sl. No Name of the Independent Director Term up to
1 Mrs. Bhama Krishnamurthy September
(DIN: 02196839) 28 2021
2 Mr. Madhavan Aravamuthan June 28
(DIN: 01865555) 2022
3 Mrs. Sharmila Abhay Karve July 19
(DIN: 05018751) 2023
4 Mr. Sudhin Bhagwandas Choksey January 30
(DIN: 00036085) 2024
5 Mr. Sunil Srivastav June 7 2024
(DIN: 00237561)

The performance of the Independent Directors is subject to evaluation as per Section149(8) of the Companies Act 2013 and read with Schedule IV to the said Act.

Pursuant to Rule 6(3) of The Companies (Appointment and Qualifications of Directors)Rules 2014 as amended all Independent directors of the Bank have registered in theIndependent Directors Data Bank as required under rule 6(1) and 6(2) of The Companies(Appointment and Qualifications of Directors) Rules 2014 as amended. The Board isconfident about their integrity expertise and experience in the relevant functionalareas.

DECLARATION BY INDEPENDENT DIRECTORS

All Independent Directors have confirmed of having complied with the criteria ofindependence as provided in Section 149(6) of the Companies Act 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 thatthey meet the criteria of independence laid down thereunder. Further they have alsocomplied with the Code for Independent Directors prescribed in Schedule IV to theCompanies Act 2013 and the Code of Conduct and Ethics for Board of Directors and SeniorManagement Personnel of the Bank. Based on the declarations submitted by the IndependentDirectors Board is of the opinion that they fulfil the conditions specified in the Actand SEBI LODR and are independent of the management.

Pursuant to rule 6(3) of The Companies (Appointment and Qualifications of Directors)Rules 2014 the Independent Directors of the Bank have affirmed that they had registeredas an Independent Director in the Independent Directors Data Bank as required under rule6(1) and 6(2) of The Companies (Appointment and Qualifications of Directors) Rules 2014and are also complied with the requirements of passing the online proficiencyself-assessment test/exempted from online proficiency self-assessment test in terms ofRule 6(4) of The Companies (Appointment and Qualifications of Directors) Rules 2014 asamended.

Board is of the opinion that Independent Directors appointed since the date of lastreport and up to the date of the report are being a person of integrity and has thenecessary knowledge experience and expertise and also complied requirements of passingthe online proficiency self-assessment test/exempted from online proficiencyself-assessment test in terms of Rule 6(4) of The Companies (Appointment andQualifications of Directors) Rules 2014 as amended for being appointed as an IndependentDirector of the Bank

FAMILIARIZATION PROGRAMMES OF INDEPENDENT DIRECTORS

All directors including Independent Directors are familiar with their roles rights andresponsibilities in the Bank at the time of appointment and also on a recurrent basis.Bank is also arranging Certification programme in IT and Cyber Security for its directors.

The details of various programmes undertaken/arranged for familiarizing the IndependentDirectors are disclosed in Corporate Governance Report which forms part of this AnnualReport.

WOMAN DIRECTOR

In terms of the provisions of Section 149(1) of the Companies Act 2013 the Bank isrequired to have at least one woman Director on the Board. Currently there are two womendirectors on the Board of the Bank. Mrs. Bhama Krishnamurthy (DIN: 02196839) was appointedas a Director since September 3 2018 and Mrs. Sharmila Abhay Karve (DIN: 05018751) sinceJuly 20 2020.

DIRECTORS RETIRING BY ROTATION

In terms of Section 152 of the Companies Act 2013 Non

Executive Director Mr. Madhavan Menon (DIN: 00008542) shall retire by rotation andbeing eligible offers himself for re appointment at the ensuing Annual General Meeting

(AGM).

Mr. Madhavan Menon (DIN: 00008542) was at first appointed as an Additional Director ofthe Bank with effect from September 03 2018 under the Section 161(1) of the Companies Act2013 and regularized his appointment as Director at 97th AGM held on September 29 2018liable to retire by rotation. Mr. Madhavan Menon was the Part-time Chairman of the Bankfor the period from April 22 2019 to July 21 2020.

Mr. Madhavan Menon is one of the two directors nominated by promoters of the Bank M/s.FIH Mauritius Investments Ltd.

Approval of the members of the Bank is being requested for re-appointment of Mr.Madhavan Menon as Non-Executive Non-Independent Director of the Bank. The detailedprofile of Mr. Madhavan Menon recommended for reappointment in the ensuing Annual GeneralMeeting will be provided in the Notice of the Annual General Meeting for the benefit ofshareholders as per the provisions of the Companies Act 2013 SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and the Secretarial Standard on GeneralMeetings (SS-2).

APPOINTMENT/ CHANGES IN KEY MANAGERIAL PERSONNEL

Mr. C.VR. Rajendran Managing Director & CEO Mr. B.K.Divakara Chief FinancialOfficer and Mr. Sijo Varghese Company Secretary are the Key Managerial Personnel as perthe provisions of the Companies Act 2013.

There were no changes in the Key Managerial Personnel since the date of last year'sreport.

BOARD AND ITS COMMITTEES Number of Meetings of the Board

Regular meetings of the Board are held to discuss and decide on various businesspolicies strategies and other businesses. Due to business exigencies certain decisionsare taken by Board through resolution passed by circulation from time to time.

The Board met Fourteen (14) times during the FY 2020 21 and the gap between the saidmeetings did not exceed the limit of 120 days as prescribed under the relevantregulations. Detailed information on the meetings of the Board is included in the reporton Corporate Governance which forms part of this Annual Report.

Committees of the Board

The Bank has various sub committees of the Board which have been formed as part of thebest corporate governance practices and/or in compliance with the requirements of therelevant provisions of applicable laws and the regulatory prescriptions.

The Bank has the following Sub Committees of the Board:

1. Audit Committee.

2. Nomination & Remuneration Committee.

3. Corporate Social Responsibility Committee.

4. Risk Management Committee.

5. IT Strategy Committee.

6. Stakeholders' Relationship Committee.

7. Customer Service Committee.

8. Management Committee.

9. NPA Management Committee.

10. Committee for Monitoring Large Value Frauds (CMF)

The details with respect to the compositions powers roles terms of reference etc.of the above Committees are given in detail in the ‘Report on Corporate Governance'which forms part of this Annual Report.

AUDIT COMMITTEE

Constitution of Audit Committee in the Bank in terms of the extant guidelines ofReserve Bank of India (RBI) provisions of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.

The Committee consists of three members as on date of the Report. The Committee ischaired by Mrs. Sharmila Abhay Karve Independent Director who is a Chartered Accountant.The other members of the Committee are Mr. Madhavan Menon (Non-Executive Non-Independent)and Mr. Madhavan Aravamuthan (Part time Chairman-

Independent)

The Committee discharges the functions laid down in the Companies Act and thoseprescribed by the Reserve Bank of India and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. It also discharges the functions delegated by the Boardof Directors from time to time. The ACB which held 9 meetings during the year has beenclosely overseeing and monitoring the Internal Control System and Procedures Inspectionand audit functions including follow up and compliance of audit reports. It has alsointeracted with the Auditors. The ACB acts as an effective tier to the Board in thematters of inspection audit and internal control system.

ANNUAL EVALUATION OF PERFORMANCE

Pursuant to the provisions of the Companies Act 2013 the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 and also in line with Board evaluationpolicy Bank has put in place a criteria for annual evaluation of performance ofChairperson Managing Director & CEO Directors Board Level Committees and the Boardas a whole.

The performance of the members of the Board other than independent Directors and theBoard as a whole has to be evaluated separately at the meeting of the IndependentDirectors.

The performance of the independent Directors to has been reviewed by the Board asprovided for under Section 149(8) read with Schedule IV of the Companies Act 2013. TheStatement indicating the manner in which formal annual evaluation of the DirectorsCommittees of the Board and the Board are given in detail in the report on CorporateGovernance which forms part of this Annual Report. The Board evaluation policy isdisplayed on the website of the Bank at: https://www.csb.co.in/pdf/PolicyonEvaluationoftheBoard.pdf

PARTICULARS REGARDING CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGNEXCHANGE EARNINGS AND OUTGO

Considering the nature of activities of the Bank with respect to the provisions ofSection 134(3)(m) of the Companies Act 2013 relating to conservation of energy andtechnology adoption the Bank is constantly pursuing and making all out efforts to achievethe desired goals as contained in the Act. Ensuring compliance of the provisions ofSection 134(3) (m) of the Companies Act 2013 read with Rule (8)(3) of the Companies(Accounts) Rules 2014 the relevant disclosures to be made are as under: a) Conservationof Energy

All attempts are being made to reduce energy consumption to the maximum extentpossible. As part of these measures a few branch offices of the Bank have been usingsolar power which is aimed at optimum utilisation of power in a cost effective manner.Apart from the above the Bank is installing LED lights in phased manner across. b)Technology Absorption

The required technology absorption is being made considering the nature of activitiesundertaken by the Bank. c) Foreign Exchange Earnings and Outgo

Foreign Exchange earnings and outgo are part of the normal banking business of theBank. Being an Authorised Dealer in Foreign Exchange the Bank has been taking allpossible steps to augment export credit.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

No significant and material orders were passed by the regulators or courts or tribunalsimpacting the going concern status and the Bank's operations in future.

MAINTENANCE OF COST RECORDS

Being a Banking Company the Bank is not required to make and maintain such accountsand cost records as specified by the Central Government under sub section

(1) of Section 148 of the Companies Act 2013 read with the Companies (Accounts) Rules2014.

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS

During the year under report there were no instances of frauds reported / reportableby the Auditors to the Audit Committee the Board of Directors or the Central Governmentunder Section143(12) of the Companies Act 2013.

STRICTURES AND PENALTIES

During the last 3 years there were no penalties or strictures imposed on the Bank bythe Stock Exchange(s) and/or SEBI and/or any other statutory authorities on mattersrelating to capital market activities.

DISCLOSURE ON MATERIALLY SIGNIFICANT TRANSACTION

The Bank has not entered into any materially significant transaction during the yearwhich could have a potential conflict of interest between the Bank and its directorsmanagement and /or their relatives etc. other than the transactions carried out in thenormal course of business.

DISCLOSURE UNDER THE INSOLVENCY AND BANKRUPTCY CODE 2016

Being a banking company the disclosures required as per Rule 8(5)(xi)&(xii) of theCompanies (Accounts) Rules 2014 on the details of application made or any proceedingpending under the Insolvency and Bankruptcy Code 2016 (31 of 2016) during the year alongwith their status as at the end of the financial year and the details of differencebetween amount of the valuation done at the time of one time settlement and the valuationdone while taking loan from the Banks or Financial Institutions along with the reasonsthereof are not applicable to the Bank.

ANNUAL RETURN

Pursuant to sub section 3(a) of Section 134 and sub section

(3) of Section 92 of the Companies Act 2013 read with Rule 11 of the Companies(Management and Administration) Rules 2014 as amended the Annual Return(MGT-7) as onMarch 31st 2021 will be displayed on the website of the Bank at:https://csb.co.in/investor-relations > General meetings > Annual General Meeting– 2021.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3) (c) of the Companies Act 2013 it ishereby confirmed that:

a. In the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures. b. Thedirectors have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Bank at the end of the financial year and of the profit andloss of the Bank for that period.

c. The directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Bank and for preventing and detecting fraud and otherirregularities.

d. The directors have prepared the annual accounts on a going concern basis.

e. The directors have laid down internal financial controls to be followed by the Bankand that such internal financial controls are adequate and were operating effectively.

f. The directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENTS

The Board of Directors is grateful to the Government of India Reserve Bank of IndiaSecurities and Exchange Board of India stock exchanges Insurance Regulatory andDevelopment Authority of India the domestic banking community the Registrar and ShareTransfer Agents and rating agencies for their support. The Board of Directors would liketo take this opportunity to express sincere thanks to its valued clients and customers fortheir continued patronage.

The Board also expresses its deep sense of appreciation to all the employees of theBank for their strong work ethics excellent performance professionalism teamworkcommitment and initiatives which has led to the Bank reinforcing its customer centricimage and making commendable progress in today's challenging environment. The Board looksforward for their continued dedicated and sincere services to take the Bank to greaterheights.

Finally The Board of Directors wish to record their deep sense of obligation andgratitude to all the Shareholders well wishers and all other stakeholders of the Bank fortheir patronage and look forward to continuing this mutually supportive and beneficialrelationship in future as well.

By Order of the Board

Sd/-

Madhavan Aravamuthan

Chairman

(DIN: 01865555)

Place: Thrissur

Date : July 05 2021

.