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Federal Bank Ltd.

BSE: 500469 Sector: Financials
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OPEN 84.60
VOLUME 1218188
52-Week high 110.35
52-Week low 67.05
P/E 12.31
Mkt Cap.(Rs cr) 16,809
Buy Price 84.55
Buy Qty 11410.00
Sell Price 84.70
Sell Qty 100.00
OPEN 84.60
CLOSE 83.70
VOLUME 1218188
52-Week high 110.35
52-Week low 67.05
P/E 12.31
Mkt Cap.(Rs cr) 16,809
Buy Price 84.55
Buy Qty 11410.00
Sell Price 84.70
Sell Qty 100.00

Federal Bank Ltd. (FEDERALBNK) - Director Report

Company director report

Your Board of Directors has immense pleasure in presenting this 88th Annual Report ofThe Federal Bank Limited along with the audited financial statements for the year ended31 March 2019.

Financial Results (र in Crore)
Financial Parameters for the year ended March 31 2019 March 31 2018
Net Interest Income 4176.35 3582.81
Fee and Other Income 1351.02 1159.12
Net Revenue 5527.37 4741.93
Operating Expense 2764.27 2450.90
Operating Profit 2763.10 2291.03
Net Profit 1243.89 878.85
Profit brought forward 1742.49 1451.27
Total Profit Available for appropriation 2986.38 2330.12
Transfer to Revenue Reserves 143.93 97.07
Transfer to Statutory Reserves 310.97 219.71
Transfer to Capital Reserves 34.48 26.83
Transfer to / (from) Investment Reserve Account 0.00 -23.57
Transfer to Special Reserve 84.00 57.00
Dividend pertaining to previous year paid during the year 198.01 174.97
Tax on dividend 40.70 35.62
Balance Carried over to Balance Sheet 2174.29 1742.49
Financial Position
Deposits 134954.34 111992.49
Advances 110222.95 91957.47
Total Business (Deposits + Advances) 245177.29 203949.96
Other Borrowings 7781.32 11533.50
Investments 31824.47 30781.08
Total Assets (Balance Sheet Size) 159339.99 138313.95
Equity Capital 397.01 394.43
Return on Total Assets (%) 0.88 0.75
Return on Equity (%) 9.81 8.39
Earnings Per Share (र) 6.28 4.62
Book value per share (र) 66.87 61.28
Operating cost to Income (%) 50.01 51.69
Capital Adequacy Ratio (%) Basel (III) 14.14 14.70


Previous year figures have been regrouped / reclassified where necessary to conform tocurrent year's classification

Highlights of Performance

During the year 2018-19 your Bank has delivered robust growth in all the businesssegments. Total business of your Bank improved by 20.21% to reach at र 245177.29 Cr ason 31 March 2019. 20.50% growth in deposits and 19.86% growth in advances (net) helpedyour bank to clock this number. Total deposits reached र 134954.34 Cr and advances (net)reached र 1 10222.95 Cr and on averages deposit portfolio of your bank grew by 19.09%to reach र 1 16752.51 Cr and advance portfolio grew by 24.33% to reach र 98337.60 Cr.On the NR side NRE deposits had a growth rate of 17.66% to reach '50109.16Cr and NRESavings clocked a growth of 10.40% to reach '13675.63 Cr. The total NR business of yourBank stood at '53159.37 Cr with a growth of 17.94%.

Growth in Business

On CASA front Savings deposit touched र 35489 Cr with 13% growth and Currentdeposits stood at र 7899 Cr with a growth of 25%. Your Bank registered a healthy CASAgrowth of 16% to reach र 43388 Cr. CASA ratio of your Bank stood at 32.15%.

The investment portfolio of your Bank has reached र 31824.47 Cr as on 31 March 2019.The average investment as on 31 March 2019 is र 30338.06 Cr.


The Operating Profit of your Bank increased by 20.61% to र 2763.1 Cr and Net Profitof your bank is up by 41.54% to र 1243.89 Cr. Healthy traction in core income streamshas helped your Bank to have a good momentum in core operating performance. Net InterestIncome improved by 16.57% to र 4176.35 Cr while the Non-Interest Income rose to र1351.02 Cr showing a rise of 16.56%. Total income of your Bank during the fiscal year2019 recorded 17.03% growth to reach र 12770.05 Cr. Income from advances increased by20.57% to reach र 9089.62 Cr. The yield on advances stood at 9.24% and the yield onInvestments at 7.47 %. The Net Interest Margin for the fiscal year is at 3.14% as against3.21% in the previous year.

Return on Average Equity and Return on Average Total Assets stood at 9.81 % and 0.88%respectively. Earnings per Share (face value of र 2 each) of the Bank as on 31 March2019 were र 6.28. Book value per share increased to र 66.87 during FY 19.


Higher revenue growth and better cost management resulted in Cost / Income Ratioimproving to 50.01% in 2018-19 as against 51.69% last year. The total expenses of yourBank increased by 16.08% to reach र 10006.95 Cr and by an increase of 17.38% interestexpenses increased to र 7242.68 Cr in FY 19.Operating Expenses of the Bank during thefiscal year grew to र 2764.27 Cr.

The cost of deposits of the Bank has come down during the year. The cost of deposits ofthe Bank is 5.78% as on 31 March 2019. The Interest expenses as percentage to total incomestood at 56.72%.


During the fiscal year the Bank's spread on advances (gross) decreased to 3.46% andspread on investments (gross) increased to 1.69%. The Spread (net of provisions) onadvance increased to 2.82% from 2.74% of last year.

Asset Quality

The Gross NPA of your Bank as on 31 March 2019 stood at र 3260.68 Cr. Gross NPA as apercentage to Gross Advances is 2.92% which is lower than 3.00% as at the end of FY18. TheNet NPA stood at र 1626.20 Cr and this as a percentage to Net Advances is 1.48%. TheProvision Coverage Ratio (including technical write-offs) stood at 67.16%.

Net Worth & Capital Adequacy

The Net Worth of your Bank grew by 9.83% to र 13273.04 Cr as against र 12084.91 Crin the previous year. Historically your Bank has been strong on capital adequacy. CRAR ofthe Bank calculated in line with Basel III norms stood at 14.14% which is considerablyhigher than the 9% stipulated by RBI. Of this Tier 1 CRAR is at 13.38%.

Business Overview

Your Bank continued its consistent performance during FY 2018-19 with the totalbusiness of the Bank increasing by 20.21% to र 245177.29 Cr.

There is no change in the nature of business of the Bank for the year under review.Further information on the business overview and outlook and state of the affairs of theBank is discussed in detail in the Management Discussion & Analysis.

Employee Productivity

Business per employee of your Bank during the period stood at र 20.15 Cr animprovement of 17.08% for the year and the profit per employee of the Bank stood at र10.22 Lakh during the fiscal.

Expansion of Network

The Bank has 1251 branches and 1669 ATMs and 269 cash recyclers as on 31 March 2019.The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC BankingUnit (IBU) in Gujarat International Finance Tec-City (GIFT City).

Share Value

Earnings Per Share (face value र 2 /- each) of your Bank has improved to 6.28 from4.62 during the year under review. Return on Equity during the year reached 9.81% in thefiscal year ended 31 March 2019.


Continuing the Bank's policy of striking a fine balance between retained earnings anddividend distribution the Board of Directors have recommended a dividend of 70% i.e. र1.40 per Equity Share

on face value of र 2/- each for the year 2018-19 (previous year 50% i.e र 1.00 perEquity Share) subject to the approval of the members in the ensuing Annual GeneralMeeting. Protecting shareholders' value has always been a guiding philosophy of the Bank.


(र in Thousands)

FY 2018-19 FY 2017-18
Transfer to Revenue Reserve 1439300 970732
Transfer to Statutory Reserve 3109700 2197114
Transfer to Capital Reserve 344800 268319
Transfer to/(from) Investment Reserve Account - (235721)
Transfer to Special Reserve 840000 570000
Dividend pertaining to previous year paid during the year 1980092 1749634
Tax on dividend 407014 356184
Balance carried over to Balance Sheet 21742841 17424864
Total 29863747 23301126

Material changes and commitment affecting financial position of the Bank

There are no material changes affecting the financial position of the Bank which haveoccurred between the end of the financial year of the Bank to which the financialstatements relate and the date of the report.

Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status of the company and its future operations

There are no material orders passed by the regulators or courts or tribunals impactingthe going concern status and company's operations in future.

Dividend Distribution Policy

In accordance with the Regulation 43A of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 the Bank hasformulated a Dividend Distribution Policy and the same is annexed herewith as Annexure VI.The Policy is hosted on the website of the Bank and can be viewed in the following link:https://www.federal- + Distribution + Policy/ea1bb41c-64fc-4fb5-bce5-bf96dea3432b Deposits

Being a Banking company the disclosures required as per Rule 8(5) (v) & (vi) ofthe Companies (Accounts) Rules 2014 read with Section 73 and 74 of the Companies Act2013 are not applicable to the Bank.

Increase of Capital

In FY 2018-19 Paid up Capital of the Bank was increased by an amount of र 25811528by allotment of 12905764 ESOS shares of '

2/- each. The Paid up Capital of the Bank as on 31 March 2019 is र 3970096156consisting of 1985050203 equity shares of र 2/- each

Investor Education and Protection Fund

As per the Companies Act 2013 dividend unclaimed for more than seven years from thedate of declaration is to be transferred to Investor Education and Protection Fund. On05th November 2018 the Bank had transferred र 8967228.00/- to the above Fund beingthe unclaimed dividend for the year 2011.

Employee Stock Option Scheme (ESOS)

The Bank has instituted Employee Stock Option Schemes duly approved by theshareholders of the Bank to enable its employees including Whole Time Directors toparticipate in the future growth and financial success of the Bank. The Employee StockOption Schemes are in accordance with the SEBI guidelines as amended from time to time.The eligibility and number of options to be granted to an employee is determined on thebasis of various parameters such as scale designation performance grades period ofservice Bank's performance and such other parameters as may be decided by the NominationRemuneration Ethics and Compensation Committee of the Board from time to time in its solediscretion.

The Bank's shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010)on December 24 2010 and the Federal Bank Limited Employee Stock Option Scheme 2017 (ESOS2017) on July 14 2017.

Under ESOS 2010 the Nomination Remuneration Ethics and Compensation Committeegranted 34720200 options during the year 2011-12 24484750 options during the year2012-13 26094250 options during the year 2013-14 11156450 options during 2014-151025000 options during the year 2015-16 965000 options during the year 2016-17 and100000 options during the year 2017-18. The options granted which are non transferablewith vesting period of 1 2 3 & 4 years subject to standard vesting conditions mustbe exercised within five years from the date of vesting. As on 31 March 2019 56340076options had been exercised and 24147513 options were in force.

Under ESOS 2017 the Nomination Remuneration Ethics and Compensation Committeegranted 22318348 options during the year 2017-18 and 37231307 options during the year2018-19 the options granted which are non transferable with vesting period of 11.25 22.50 3 & 3.75 years subject to standard vesting conditions must be exercised withinfive years from the date of vesting. As on 31 March 2019 2425 options had been exercisedand 50336281 options were in force.

Other statutory disclosures as required by the SEBI guidelines/ Securities and ExchangeBoard of India (Share Based Employee Benefits) Regulations 2014 on ESOP are given inwebsite of the Bank in the link:

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element ofour fundamentals right from the day the Bank was founded. Our founder's values & ethosbased on trust got embedded in the Bank's policies & principles. CSR in Federal Bankbegan with the first act of cultivating banking habits in the agrarian society toeffectively utilize idle money for productive purposes.

Overview of some of the major CSR programs undertaken by the Bank during FY 2018-19 aredetailed in the Management Discussion and Analysis part of the Annual Report.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 2018-19 as per Section 135 of theCompanies Act 2013 comes to र 22.47Cr. Amount spent by the Bank this year towards CSRwas '17.04 Cr. Through various projects which are already sanctioned your Bank will bethoughtfully spending the CSR funds earmarked for the purpose. The ratio adopted was80:20 wherein 80% of the CSR funds will be utilized for long term sustainable projectsand 20% of the funds will be utilized to meet location specific requests. The Bank hadalso embarked on some major projects last year in the field of education Youthengagement skill development support to differently abled etc. By choosing long termsustainable projects Bank has taken an approach which brings steady and long lastingimpact on the society. During August 2018 our state witnessed one of the worst naturalcalamities of the Century which rendered many homeless and had vast impact on economiccondition of the state. Being a responsible organization we had donated र 4.00 Cr. toChief Ministers Distress Relief Fund and extended support to the affected through ourZonal offices at various places in the State.

The details of the other CSR activities of FY 2018-19 are mentioned in Annexure II tothis report.

Risk Management

The Board of Directors oversees the enterprise wide risk management of the Bank. TheRisk Management Committee of the Board sets the standards and governs the risk managementfunctions thereby bringing in a top to down focus on risk management. Integrated RiskManagement Department co-ordinates and administers the risk management functions in theBank. The Department has three divisions for managing the main risk streams Credit riskMarket risk and Operational risk. Dedicated teams within the Divisions are responsible forassessment monitoring and reporting of various material risks. Default risk and assetquality of loan portfolio are monitored and managed by the Credit Risk Division. The Bankhas established an independent Mid Office as part of Market Risk Division for real timemonitoring of Treasury activities. Business Continuity

Management and Information and Cyber Security measures form part of operational riskmanagement. Risk Management policies are approved by the Board of Directors and reviewedfrom time to time with updated regulatory and internal guidelines. Executive level riskmanagement committees namely Credit Risk Management Committee Asset LiabilityManagement Committee Operational Risk Management Committee and Information SecurityCommittee regularly assess the respective risks and direct corrective actions whereverrequired. The risk management functions are co-ordinated by a senior Executive designatedas Chief Risk Officer who reports directly to the Managing Director & CEO. TheExecutive level committees report to the Risk management Committee of the Board thevarious risk events and the direction and level of the various risks. All material risksof the Bank emerging in the course of its business are identified assessed and monitoredin the Internal Capital Adequacy Assessment Process (ICAAP). In our view presently thereare no material risks which pose as a threat to the net worth and continuous functioningof the Bank.

Internal control systems and their adequacy

The Bank has through the years developed and stabilized an effective internal controlsystem calibrated to the risk appetite of the Bank and aligned to the scale size andcomplexity of its operations. The scope and authority of the internal audit function isdefined in the Audit and Inspection Policy of the Bank duly approved by the Board ofDirectors. In order to help Bank achieve its mission of adopting the best professionalpractices prevailing in the industry while framing the policy substantial inputs aretaken from - RBI guidance note on Risk Based Internal Audit 'The internal audit functionin banks' published by Basel Committee on Banking Supervision and Model Audit Manual onInternal & Concurrent Audit Systems in Public Sector Banks. Audit and InspectionPolicy is reviewed annually. Policy is reviewed considering various guidelines of RBIBasel Committee recommendations ICAI guidelines other statutory / regulatory guidelinesdirections of Board / Audit Committee of the Board issued from time to time and periodicinternal guidelines / instructions issued by the Bank. At the enterprise level theInspection and Audit Department on a continuous basis assesses and monitors theeffectiveness of the control systems and its adequacy to meet the growing complexities.The audit function essentially validates the compliance of Bank's processes and operationswith regulatory guidelines accounting procedures and Bank's own internal rules andguidelines. A department level group meets on periodical intervals to discuss latestinternal / RBI / regulatory guidelines for ensuring that the required changes areimplemented for making the audit function updated and dynamic.

The Bank has a robust system towards escalating the audit findings to appropriatelevels in the hierarchy of management and discussions in various committees towardssuggesting corrective action and its follow up. The Bank in compliance of the requirementsof Section 138 of the Companies Act 2013 has designated the Head of Inspection and AuditDepartment as Internal Auditor. Audit being an independent function the Internal Auditoris reporting to the Audit Committee of the Board of Directors. The Bank has various typesof audit which inter-alia include Risk Based Internal Audit Information System AuditConcurrent Audit Gold Loan Audit and Management Audit. Branches are risk rated and thefrequency of Risk Based Internal Audit is decided based on Risk - Audit Matrix defined inAudit and Inspection Policy. Significant audit findings and observations are presented toInspection Review Committee of Executives and a report on the meetings of InspectionReview Committee of Executives along with significant audit findings directions /suggestions of the committee and action taken in such cases are placed to the AuditCommittee of the Board for review periodically. Other findings are placed before adepartment level committee called the 'Inspection Department Review Committee' for reviewand its observations are placed before Inspection Review Committee of Executives.

As per the requirement of Companies Act 2013 Bank has formulated Internal FinancialControls framework. Risk and Controls associated with each process in the Bank aredocumented under the Internal Financial Controls Framework. Inspection and AuditDepartment plays a significant role in testing the control effectiveness for each processunder the framework.

The Internal Audit function provides independent assurance to the Board of Directorsand Senior Management on the quality and effectiveness of the Bank's internal controlrisk management and governance systems and processes thereby helping the Board and SeniorManagement protect the Bank and its reputation.

Vigil Mechanism/Whistle Blower Policy

Based on RBI directions Bank 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. Functions ofVigilance Department covers both prevention as well as investigation of frauds. VigilanceDepartment conducts Preventive Vigilance Workshops and Preventive Vigilance Audits toensure the effectiveness of fraud prevention mechanism of the Bank. Vigilance Departmentalso issue alerts / communications on a regular basis that disseminates various modusoperandi of frauds in the banking industry which enable the Branches/ Offices to preventsimilar kind of fraudulent attempts. Similar thrust is given by the Bank in educatingcustomers as well. The customers are made well updated on the various fraudulentactivities happening in the Banking Industry through various means including SMSE-Mails posters at Branches ribbon messages on Bank website internet banking webpageetc for prevention of all types of frauds including Cyber Frauds.

As a part of Detective Vigilance all the cases of frauds reported in the Bank areinvestigated in detail. Lacunae if any observed during the course of investigation areplugged and cases where systemic corrections are required are placed before theCommittees concerned for corrective measures / necessary directions.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS)with a view to enhancing public confidence in the Bank and also in compliance of RBIdirections in this regard. The policy aims at establishing an efficient vigil mechanism inthe Bank to quickly spot aberrations and deal with it at the earliest. It is disseminatedamong the employees assuring confidentiality and protection to the whistle blower againstany personal vindictive actions such as humiliation harassment or any other form ofunfair treatment. Directors and Employees of the Bank employee representative bodiescustomers stakeholders non-governmental organizations (NGO) and members of the publiccan lodge complaints / disclosures under this scheme. A dedicated e-mail ID is providedfor sending complains/disclosures under PDS. Vigilance Department conducts investigationof all complaints /information received through the PDS and submits report to MD &CEO. The details of the complaints and findings are also placed before the Audit Committeeof the Board on a quarterly basis. The scheme is popularised through various measures suchas preventive vigilance classes internal circulars alerts etc. No personnel have beendenied access for giving any information as envisaged in the Protected Disclosure scheme.The PDS Document is made available in Bank's website and Intranet.

Website link to Bank's Whistle Blower Policy/Vigil Mechanism is Whistle+Blower+policy/558aea51-1335-4546-9c9a-28c5030377a1

Subsidiaries of the Bank

As on 31 March 2019 the Bank has one unlisted subsidiary named Fedbank FinancialServices Limited and one unlisted fully-owned subsidiary Federal Operations and ServicesLimited.

Fedbank Financial Services Limited

Fedbank Financial Services Limited is a diversified Non-DepositTaking &Systemically Important (ND-SI) NBFC offering multiple loan products such as Loan againstProperty (LAP) Structured Finance and Loan against pledge of Gold ornaments. It alsodistributes loan products of The Federal Bank Limited.The Fedbank Financial ServicesLimited issued 40042500 number of equity shares of face value of र 10/- each to TrueNorth Fund VI LLP on private placement basis on November 13 2018 pursuant which theBank's shareholding in Fedbank Financial Services Limited decreased from 100% to 82.59%.The total loan portfolio of Fedbank Financial Services Limited as on 31 March 2019 is र1992 Crores as against र 1413 Crores as on 31March 2018. The Profit after tax of thecompany for the year ended 31 March 2019 increased to र 35.08 Crores from र 30.80Crores for the year ended 31 March 2018.

Federal Operations and Services Limited

The Bank floated a wholly owned subsidiary company named Federal Operations andServices Ltd (FedServ) on October 26 2018 with the main objects of providing bankingoperational services technology oriented services and support functions. The totalrevenue of FedServ for the period ended on 31 March 2019 is र 1.28 Crores. The entirerevenue pertains to services provided by the company to the Bank only. Company started itsoperations on 01 December 2018 and this was the first year of operation of the company.The Company had net loss for the period ended 31 March 2019 of र 28.59 Lakhs afterwriting of preliminary expenditure in full.

The Net Worth of FedServ at the beginning of the year was र 5 Cr. and closing networth of FedServ as on 31 March 2019 was र 4.71 Cr. During the year Bank has investedin equity shares of company amounting to र 5 Cr.

Associate Companies

As on 31 March 2019 the Bank has two Associate Companies named IDBI Federal LifeInsurance Company Limited and Equirus Capital Private Limited.

Joint Venture in Life Insurance Business

The Bank's Joint Venture Life Insurance Company in association with IDBI Bank Limitedand Ageas Insurance International N.V (Formerly known as Fortis) namely IDBI Federal LifeInsurance Company Limited (erstwhile IDBI Fortis Life Insurance Company Limited)commenced operations in March 2008. Currently the Bank has a total stake of र 208 Cr. inthe equity of the company holding 26% of the equity capital. The total premium collectedby IDBI Federal Life Insurance Company Limited during the period ended 31 March 2019 isर 1933 Cr. The Company has declared a dividend of 10% for the FY 2018-19.

Investment Banking Associate

During the year the Bank had invested in 8.74% equity shares of Equirus Capital PrivateLimited on July 12 2018. Pursuant to the right of proportionate representation on Boardas well as power to participate in the financial operational matters like approval ofbusiness plan policies budgets managerial remuneration change in KMP etc. the samehas been treated as an associate concern as per AS 23 Accounting for Investments inAssociates in Consolidated Financial Statements. The Bank's Associate Equirus CapitalPrivate Limited is a private company domiciled in India and is engaged in the business ofInvestment banking. Equirus Capital Private Limited has 3 subsidiaries named EquirusSecurities Private Limited Equirus Digital Private Limited and Equirus Wealth PrivateLimited.

The total turnover of Equirus Capital Private Limited on a consolidated basis was र51.46 Crore for FY 2019 as against र 34.84 Crore for FY 2018.

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies

Act 2013 read with Rule 8 of Companies (Accounts) Rules 2014 the Bank has preparedits consolidated financial statement including its subsidiaries Fedbank Financial ServicesLimited and Federal Operations and Services limited and associates IDBI Federal lifeInsurance company limited and Equirus capital private limited which is forming part ofthis Annual report. The financial position and performance of its subsidiaries /Associates is given in the statement containing salient features of the financialstatements of the subsidiaries / Associate Companies / Joint Venture (Given as AnnexureV) which forms part of the consolidated financial statements.

In accordance with third proviso to Section 136(1) of the Companies Act 2013 theAnnual Report of the Bank containing therein its standalone and the consolidatedfinancial statements has been hosted on its website Further as perfourth proviso to the said section the audited annual accounts of the said subsidiarycompany of the Bank have also been hosted on the Bank's website Thesaid documents have been hosted on the website of the subsidiary company of the Bank alsoin compliance with the said section.

The documents / details available on the Bank's website (www. willalso be available for inspection by any Member at its Registered Office. Further pursuantto the provisions of Accounting Standard (र AS') 21 Consolidated Financial Statementsnotified under Section 133 of the Companies Act 2013 read together with Rule 7 of theCompanies (Accounts) Rules 2014 issued by the Ministry of Corporate Affairs theConsolidated Financial Statements of the Bank along with its subsidiaries and associatesfor the year ended March 31 2019 forms part of the Annual Report.

Corporate Governance

Corporate governance is essentially a set of standards systems and procedures aimedat effective honest transparent and responsible management of a company within theapplicable statutory and regulatory structures. This code represents a set of desirablecorporate governance practices to be adopted by the Bank. The Code takes into account therelevant statutory and SEBI / stock exchange listing requirements and Reserve Bank ofIndia (RBI) directives and other guidelines under the Companies Act 2013. The efficacy ofthe Code lies in how well it is put into practice. In adopting the Code the stress is inits substance and spirit rather than on its form.

Good corporate governance practices help support and strengthen corporate actions aimedat achieving the corporate objective. The Bank's principle corporate objective like thatof any corporate business entity is to perpetuate its business while protecting andenhancing over the long term the value of the investments of its shareholders in theBank.

A copy of the Code of Conduct for the Board of Directors and Management is available onBank's website.

A separate section on corporate governance standards followed by the Bank and relevantdisclosures as per regulatory requirements forms part of this Annual Report.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act1949 the Companies Act 2013 SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("Listing Agreement") and the Code of Corporate Governanceadopted by the Bank. The Board comprises of eleven Directors as on the date of thisreport with rich experience and specialized knowledge in various areas of relevance tothe Bank including banking accountancy MSME finance small scale industryagriculture strategic planning risk managementinformation technology and Payment andSettlement Systems.

Mr. K Balakrishnan who was appointed as additional Independent Director on 25 September2018 and Mr Siddhartha Sengupta and Mr Manoj Fadnis who are appointed as additionalIndependent Directors as on date of this report will be regularized in this AGM. The Bankalso proposes the re-appointment of Mr C Balagopal as an Independent Director of the Bankin this AGM after the completion of his first term of appointment.

The detailed profile of all the directors recommended for appointment/ re-appointmentin this AGM are mentioned in the Notice of Annual General Meeting for the benefit ofshareholders as required under law.

During the year Mr. Dilip Sadarangani was appointed by the Board as the Chairman of theBank for which approval from RBI was obtained vide letter DBR. Appt.No.6191/08.38.001/2018-19 dated January 25 2019.

During the year Mr. Harish Engineer ceased to be the Director on the Board of the Bankw.e. f 01 October 2018 on completion of 70 years of age. Mr. Deepak Maheshwari wasappointed as an Additional Independent Director on the Board of the Bank w.e.f 22 June2018 and he resigned from the Board w.e.f 01 January 2019 to take up a role as seniorexecutive position in a leading financial organization. Mr. K Balakrishnan was appointedas an Additional Independent Director on the Board of the Bank w.e.f 25 September 2018.Mr. Ganesh Sankaran Executive Director of the Bank resigned from the Board of the Bankw.e.f 15 February 2019. The Board places on record their appreciation for the commendablecontribution made by the Directors during their tenure in the Bank.

Apart from the above mentioned Directors Mr Siddhartha Sengupta and Mr Manoj Fadniswere appointed as Additional Independent Directors as on date of this report.

Excluding Mr. Shyam Srinivasan MD & CEO and Mr. Ashutosh Khajuria ExecutiveDirector & Chief Financial Officer all other members of the Board are Non-Executiveand Independent Directors. Necessary declarations were obtained from the IndependentDirectors as required under the RBI Regulations SEBI (Listing

Obligations and Disclosure Requirements) Regulations 2015 and section 149 (6) ofCompanies Act 2013. The remuneration and other benefits paid to MD & CEO of the Bankand Executive Directors during the year are disclosed in the annexure to this Report andin Corporate Governance Report. The Non Executive Independent Directors except Chairmanof the Board are paid only sitting fees for attending every meeting of the Board /Committees of the Board within the limits as prescribed under the Companies Act 2013.During the year Mr. Dilip Sadarangani the Chairman of the Board as on 31st March 2019was paid an amount of र 1.50 lakhs per month as remuneration w.e.f 25th January 2019 asapproved by the Board and RBI in addition to sitting fee for attending Board / Committeemeetings. The Bank has framed a Comprehensive Compensation Policy for Non-ExecutiveDirectors of the Bank (Other than Part Time Chairman) which is detailed in the headingPolicy on Remuneration to Non-Executive Directors/ Independent Directors.

Mr. Ashutosh Khajuria Executive Director of the Bank is liable to retire at this AGMin compliance with Section 152 of Companies Act 2013as required under the regulationsregarding retirement of directors by rotation. The detailed profile of Mr. AshutoshKhajuria recommended for reappointment in this AGM is mentioned in the Notice for theAnnual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of four Non Executive Independent Directors and ischaired by Ms. Grace Koshie Non-Executive Independent Director. The Committee wasreconstituted twice in the financial year 2018-19. The other members of the Committee areMr. Nilesh Vikamsey Ms. Shubhalakshmi Panse and Mr. A P Hota who are Non-ExecutiveIndependent Directors as on the date of this report. The constitution of the Committee isin compliance with the regulatory requirements. The terms of reference of the AuditCommittee incorporated in the Bank's Code of Corporate Governance are in accordance withthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 CompaniesAct 2013 and RBI guidelines which are detailed in Corporate Governance section of thisreport.

Independent Directors

In terms of the definition of Independence of Director as prescribed under SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and Section 149(6) ofCompanies Act 2013 and based on the confirmation / disclosures / declarations receivedfrom the Directors the following Directors are Independent Directors of the Bank as onthe date of this report:

1. Mr. Dilip Sadarangani (DIN - 06610897)
2. Mr. Nilesh Vikamsey (DIN - 00031213)
3. Ms. Grace Elizabeth Koshie (DIN - 06765216)
4. Ms. ShubhalakshmiPanse (DIN - 02599310)
5. Mr. C Balagopal (DIN - 00430938)

6. Mr. A P Hota (DIN - 02593219)

7. Mr. K Balakrishnan (DIN - 00034031)

8. Mr. Siddhartha Sengupta* (DIN - 08467648)

9. Mr. Manoj Fadnis* (DIN - 01087055)

‘Appointed as Additional Independent Directors on the Board of the Bank on13.06.2019

A meeting of Independent Directors for FY 2018-19 was conducted on 26 February 2019 toevaluate the performance of Board as a whole evaluation of Non-Independent Directors andChairman of the Board and assess the flow of information. The meeting was attended by allthe Independent Directors of the Bank.

Women Director

In terms of the provisions of Section 149 of the Companies Act 2013 and Clause17(1)(a) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015(LODR Regulations) a company shall have at least one Woman Director on the Board of thecompany. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directorson the Board of the Bank.

Bank's policy on directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of a director and othermatters provided under sub-section (3) of section 178;

a) Qualifications Experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowledge skillsexperience and judgment relevant to the Bank's policies operations and needs. Not lessthan fifty-one percent of the total number of Directors shall be persons having specialknowledge skills or valuable experience in one or more fields such as banking financemanagement economics law accountancy agriculture and rural economics cooperativemovement trade industry infrastructure engineering and technology. At least twoDirectors shall be persons having special knowledge or practical experience in agricultureand rural economy cooperation or small-scale industry. The Bank shall ensure to includein its Board need based representation of skills such as marketing technology &systems risk management strategic planning treasury operations credit recoveryPayment and Settlement Systems etc.

2. The directors should be able to devote sufficient time and attention to thedischarge of their duties to the Bank.

3. The directors shall preferably be in the range of 35-70 years of age.

b) Disqualification / Conflicts of interest

1. The Bank's Directors shall be subject to the disqualifications / prohibitionscontained in the Companies Act 2013 and the Banking Regulation Act 1949 with respect todirectorship of companies in general or banking companies in particular.

2. A Director shall not be a director of any other company or partner or proprietor ofa firm where such directorship partnership or proprietorship involves or is likely toinvolve actual or potential conflicts of interest as a Director of the Bank. A Directorshall promptly inform the Board / committee of any actual or potential conflicts ofinterest with respect to any matter that may come up for the consideration of the Board orof any committee of which he is a member and shall refrain from participating in adiscussion on the matter.

c) Suggested criteria for determining attributes of a director as required to bespecified under Companies Act 2013 include

1. integrity in personal and professional dealings.

2. wisdom and ability to take appropriate decisions.

3. ability to read and understand financial statements

4. ability to deal with others with a sense of responsibility firmness andcooperation.

5 refrain from any action that would lead to loss of his independence.

d) Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditionsspecified in Section 149 (6) of the Companies Act 2013 and SEBI-LODR Regulations 2015.

The independent director shall at the first meeting of the Board in which heparticipates as a director and thereafter at the first meeting of the Board in everyfinancial year or whenever there is any change in the circumstances which may affect hisstatus as an independent director give a declaration that he meets the criteria ofindependence. The terms and conditions of appointment of Independent Director is disclosedon the website of the Bank and a web link thereto is :

Policy on Board Diversity

Policy on Board Diversity of the Bank mainly depends on the qualifications forappointment of Directors of the Bank as contained in the Banking Regulation Act 1949 andsatisfying the Fit and Proper Criteria for directors as per the regulatory requirement ofRBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintainthe highest standards of corporate governance and recognizes and embraces the benefits ofdiversity in the boardroom. Diversity is ensured through consideration of a number offactors including but not limited to skills regional and industry experience backgroundand other qualities. In forming its perspective on diversity the Bank also take intoaccount factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board usher in independencein the performance of the Board; eradicate the gender bias in the Board; achievessustainable and balanced performance and development; support the attainment of strategicobjectives & also ensures compliance of applicable laws and good corporate practices.

The Nomination Remuneration Ethics and Compensation Committee has the responsibilityfor leading the process for Board appointments and for identifying and nominating forapproval by the Board candidates for appointment to the Board. The benefits of diversitycontinue to influence succession planning and continue to be the key criteria for thesearch and nomination of directors to the Board.

Board appointments will be based on merit and candidates will be considered againstobjective criteria having due regard for the benefits of diversity on the Boardincluding gender. While making Board appointments the requirement as per the CompaniesAct 2013 for appointment of atleast one woman director on the Board of the Bank will alsobe considered.

Policy on Remuneration

Policy on remuneration to Non-Executive Directors/ Independent Directors

The Policy of the Bank for the payment of remuneration to NonExecutive Directors /Independent Directors of the Bank is explained in the Comprehensive Compensation Policyfor Non Executive Directors / Independent Directors (other than Part Time Chairman) asapproved by the Board of Directors and is disclosed on the website of the Bank and a weblink thereto is: shareholder-information

As required under Banking Regulation Act 1949 prior approval of RBI is required togive remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy during FY 2018-19 Non-Executive Independent Directors of the Bankare paid only sitting fee for attending Board/Committees meetings and reimbursement ofexpenses for participation in Board/Committee meetings other than Non- Executive Part TimeChairman who is paid remuneration in addition to sitting fee for attendingBoard/Committees meetings and reimbursement of expenses for participation inBoardCommittee meetings with the approval of RBI.

Policy on remuneration to MD & CEO Executive Director Key Managerial Personneland other employees

The Compensation / Remuneration Policy of the Bank as approved by the Board containsthe policy for payment of remuneration to MD & CEO Executive Directors KeyManagerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBI Compensation/Remuneration Policy has been designedwith the following Core Principles:

Core Principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

Compensation of Managing Director & CEO Whole Time Directors and Senior Executives

(Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards theexposure skill sets talent and qualification attained by the official over his/hercareer span. (Approval from RBI to be taken as per section 35B of the Banking RegulationAct while deciding the fixed and variable compensation part for Managing Director &CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and Senior Executives (Non- IBA package) to be fixed based on organizational performance and KPAs set for theofficial. The organization's performance is charted based on Performance Scorecard whichconsiders various financial indicators like business growth revenue earned costdeployed profit earned ROA/ROE NPA position and other intangible factors likeleadership and employee development. Variable pay is paid purely based on performance andis measured through score cards for Managing Director & CEO /WTDs. The score cardprovides a mix of financial and non-financial quantitative and qualitative metrics. KPAsto contain targets on risk adjusted metrics such as RAROC RARORAC in addition to targeton NPAs.

Compensation Package to Executives in Level IV and above

Executives in Level 4 and above are covered under Grander Compensation Package whichwas introduced in the Bank from May 2017.

Compensation paid to employees on IBA package

The compensation paid to Award Staff and Officers coming under Scale I to III is fixedbased on the periodic industry level settlements with Indian Banks' Association. The scaleof pay and other service conditions applicable to employees whose compensation package isgoverned under IBA package has been revised consequent to the 10th Bipartite Settlement.

Key Managerial Personnel who were appointed or have resigned during the year

In compliance with Section 203 of the Companies Act 2013no Key Managerial Personnelhave been appointed or have resigned during FY 2019.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulatedunder the listing agreement with the stock exchanges in India is presented in a separatesection forming part of this Annual Report.

Loans Guarantees or Investments in Securities

Pursuant to Section 186 (11) of the Companies Act 2013 the provisions of Section 186of Companies Act 2013 except subsection (1) do not apply to a loan made guaranteegiven or security provided or any investment made by a banking company in the ordinarycourse of business. The particulars of investments made by the Bank are disclosed inSchedule 8 of the Financial Statements as per the applicable provisions of BankingRegulation Act 1949.

Internal Complaints Committees (Information under the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013)

For particulars relating to Internal Complaints Committee (Information under the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013) kindlyrefer the section Corporate Governance report.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Regulation 17(10) and otherapplicable regulations of the Listing Regulations the Board has carried out an annualperformance evaluation of its own performance and of the directors individually as wellas the evaluation of the working of its various Committees for the year underconsideration.

The evaluation process was initiated by putting in place a structured questionnaireafter taking into consideration inputs received from the Directors covering variousaspects of the Board's functioning such as adequacy of the composition of the Board andits Committees Board culture execution and performance of specific duties obligationsand governance.

Thereafter a separate exercise was carried out to evaluate the performance ofindividual Directors including the Chairman of the Board who were evaluated on specifiedparameters. The performance evaluation of the Independent Directors was carried out by theentire Board other than the Independent Director concerned. The performance evaluation ofthe Chairman and the Non Independent Directors were carried out by the IndependentDirectors. The Directors expressed their overall satisfaction with the evaluation process.

I) Performance Evaluation of Non-Independent Directors (MD & CEO and ExecutiveDirector)

Criteria for Evaluation include:

Quantitative Targets:

i) Achievements of performance against targets set Qualitative Targets :

ii) Appraises the Board regarding the organization's financial position and operationalbudget so as to enable the Board to make informed financial decisions iii) ProvidesLeadership in developing strategies and organizational plans with the management and theBoard of Directors iv) Ensures that the Board is kept informed about all issues concerningthe Bank v) Media interaction and ability to project positive image of the Company vi)Effectively pursue the performance goals in relation to mission and objective of theorganization vii) Motivating employees providing assistance & directions viii)Supervising & Safeguard of confidential information ix) Establishment of internalcontrol processes monitoring policies and encouraging suggestions x) Cultivates effectiveRelationship with Industry Forums Community and business leaders Regulatory Bodies andPublic Officials. xi) Ensures compliance with all legal and regulatory requirements.

Evaluation Outcome

i) The MD & CEO and EDs adequately endeavor to implement Board decisions and arevery strong in media interactions and have put in efforts in building and reinforcing theBrand and Image of the Bank

ii) The Executives constantly endeavor to enhance internal control processes monitorexecution of policies and are very receptive to suggestions iii) Attendance of MD &CEO and EDs at the Board and Committee meetings was good iv) They present financialreports to the Board on a regular basis and submit an annual budget for Board reviewrevision and approval v) They regularly appraise the Board on the organization's financialposition and operational budgets that aids the Board to make informed financial decisionsvi) The MD has adequate qualities of leadership in developing strategy & execution forachieving them vii)The MD / ED has demonstrated a sound knowledge of Board governanceprocedures and has consistently followed them viii) The MD / ED has accuratelycommunicated his concept vision mission strategies goals and directions for the Bankto stakeholders ix) The MD/ED has accurately identified and analyzed problems and issuesconfronting the Bank.

II) Performance Evaluation of Independent Directors including Chairman

Criteria for evaluation include:

i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depthprior to meeting and active participation at the meeting iii) Contributes to discussionson strategy as opposed to focus only on agenda iv) Participate constructively and activelyin the Committee of the Board in which they are chairpersons or members v) Exerciseshis/her skills and diligence with due and reasonable care and brings an independentjudgement to the Board vi) The Director remains abreast of developments affecting thecompany and external environment in which it operates independent of his being appraisedat meetings vii) Knowledge and Competency: a) How the person fares across differentcompetencies as identified for effective functioning of the entity and the Board b)Whether the person has sufficient understanding and knowledge of the entity and the sectorin which it operates viii) Whether the person demonstrates highest level of integrityincluding conflict of interest disclosures maintenance of confidentiality etc

Evaluation Outcome

i)The Board directors considered the Chairman's evaluation and noted positive commentsabout his leadership qualities ii) The Chairman has promoted constructive debate andeffective decision making at the board iii) The Chairman has managed the meetingseffectively and has promoted a sense of participation in all the Board meetings.

The evaluation done of Independent Directors broughtout the fact that good attendanceof Independent Directors was there in the Board and committee meetings. They areknowledgeable ethical and bring their respective expertise in the deliberations and makevaluable contributions. They have adequate understanding of their role andresponsibilities as Independent directors. The Independent Directors also demonstratehighest level of integrity including conflict of interest disclosures and maintenance ofconfidentiality. It was also noted that the Independent Directors exercise his/her skillsand diligence with due and reasonable care and brings an independent judgement to theBoard and also the Directors remains abreast of developments affecting the company andexternal environment in which it operates.

III) Performance Evaluation of Board and Committees

A. Criteria for Evaluation of Board include:

i) If Board is of appropriate size and has the appropriate balance and diversity ofbackground business experience industry knowledge skills and expertise in areas vitalto the Bank's success representing sectors laid down by the regulators given its currentand future position ii) New Board members participate in an orientation program to educatethem on the organization their responsibilities and the organization's activities theBoard encourages a culture that promotes candid communication iii) The Board overseesmanagement's procedures for enforcing the organization's code of conduct Action TakenReports on the discussion/directions of the Board are submitted at regular intervals tothe Board iv) The Board oversees risk management through inputs from the Risk ManagementCommittee v) The Board considers the quality and appropriateness of financial reportingincluding the transparency of disclosures vi) The Board ensures compliance with therelevant provisions of the Companies Act and other regulatory provisions as applicable tothe Bank vii) The Board oversees the compliance processes viii) The Board views theorganization's performance from the competitive perspective - industry and peersperformance industry trends and budget analysis and with reference to areas wheresignificant differences are apparent etc. ix) The Board ensures compliance with therelevant provisions of the Companies Act and other regulatory provisions as applicable tothe Company. x) The Board has defined an effective Code of Conduct for the Board andSenior Management. xi) Whether the Board monitors and manages potential conflicts ofinterest of management members of the board of directors and shareholders includingmisuse of corporate assets and abuse in related party transactions.

B. Criteria for Evaluation of Committees include:

i) The Committee's Terms of Reference and composition is reviewed annually and is foundto be constituting of Directors representing sectors laid down by the regulator andcontinue to be appropriate ii) Committee meetings are organized properly in number timingand location iii) The Committee allocates the right amount of time for its work etc iv)The Committee is effective in carrying out its mandate v) Whether adequate independence ofthe Committee is ensured from the Board vi) Whether the Committee has fulfilled itsfunctions as assigned by the Board and laws as may be applicable.

Evaluation Outcome of Board/Committee

The Board has performed on all the parameters and the Board of the Bank is wellbalanced in terms of diversity of experience and skill sets to meet the requirements ofthe Bank and also confirm to the Regulatory requirements.

The Directors had an elaborate discussion on the subject including the criteria forevaluation of Board. The assessment covered various components relating to aspects likethe Structure and Composition of Board its culture processes and procedureseffectiveness Financial Reporting and Internal Controls Conflict of Interest andCompliance and Regulations. Almost all members gave the highest rating as "Good".

In almost all the committees the directors have rated on various parameters as good.

IV) Assessment of flow of information Criteria for Evaluation include:

The agenda and related information are circulated in advance of meetings to allow boardmembers sufficient time to study and understand the information Information on the annualoperating plans and budgets and other updates are provided to the Board; Updates onoperating results of the Bank is furnished to the Board periodically etc. Update on thecompliance with the regulatory statutory or listing requirements are placed before theBoard.

Evaluation Outcome

The assessment of the Members about the flow of information to the Board and itscommittees revealed that almost all members rated the flow under various dimensions as"Good".

Evaluation of Senior Management Personnel in the Bank

The compensation paid out to KMP is divided into two components. The fixed compensationis to be determined based on the industry standards the exposure skill sets talent andqualification attained by the official over his/her career span.

The variable compensation for Managing Director & CEO and Senior Executives(Non-Grander Compensation Package) is to be fixed based on organizational performance andKPAs set for the official. The organization's performance is charted based on thePerformance Scorecard which takes into account various financial indicators like revenueearned cost deployed profit earned NPA position and other intangible factors likeleadership and employee development. Variable pay will be paid purely based on performanceand is measured through Score Cards for Managing Director & CEO / WTDs. KeyPerformance Indicators (KPAs) to contain targets on Risk Adjusted Metrics such as RAROCRARORAC in addition to target on NPAs.

An ED level Committee comprising of ED and Heads of Risk Division and HR Departmentensures alignment of risk and financial control in Compensation in respect of employees.

• The Committee shall review the Compensation paid vis-a-vis risk taking by theExecutives to ensure that prudent risk taking is recognized in the compensation framework

• The Committee shall analyse the risk reward correlation and ensures that excessrisk taking is not encouraged

• The Committee shall review the performance based variable compensation paidevery year and ensures that an optimum risk reward balance is maintained.


During the year nine Board meetings were convened and held the details of which aregiven in the Corporate Governance Report. The intervening gap between the meetings waswithin the period prescribed under the Companies Act 2013 and also as per the ListingRegulations.

Related Party Transactions

All related party transactions that were entered during the financial year were in theordinary course of the business of the Bank and were on arm's length basis. There were nomaterially significant related party transactions entered by the Bank with Related partieswhich may have a potential conflict with the interest of the Bank. All Related PartyTransactions were placed before the Audit Committee of the Board for approval. Prioromnibus approval for transactions which are of repetitive nature is obtained from theAudit Committee and accordingly the required disclosures are made to the Committee onquarterly basis in terms of the approval of the Committee.

The policy on materiality of Related Party Transactions and also on dealing withRelated Party Transactions as approved by the Audit Committee and the Board of Directorsis uploaded on the website of the Bank and the link for the same is our-commitments

Since all related party transactions entered into by the Bank were in the ordinarycourse of business and were on an arm's length basis disclosures as per Form AOC-2 is notapplicable to the Bank. There were also no material contracts or arrangement ortransactions at arm's length basis during the period.

Business Responsibility Report

As stipulated in the Listing Regulations the Business Responsibility Report describingthe initiatives taken by the Bank from environmental social and governance perspectiveforms part of the Annual Report. Business Responsibility Report as stipulated underRegulation 34 of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 has been hosted on the website of the Bank( information). Any Member interested inobtaining a physical copy of the same may write to the Company Secretary at the RegisteredOffice of the Bank.

Technology and digital updates and measures taken in IT Governance InformationSecurity IT Audit IT Operations IT Services outsourcing

Technology and Digital updates:

During the financial year 2018-19 your Bank focused extensively on Digital Banking. TheManagement Discussion and Analysis provides more details about the technical and digitalupdates of the bank during FY 2018-19

Information Technology (IT) Governance:

IT provides the strong foundation that enables your Bank to grow extensively and gainmarket share. In the following paragraphs we provide more details of the entiregovernance structure over IT with focus on information security.

IT governance is the processes that ensure the effective and efficient use of IT inenabling our organization to achieve its goals. It is an integral part of corporategovernance and consists of the organizational structures leadership and process thatensure IT sustains and extends the organization's strategy and objectives.

The governance of IT is effectively supervised by the Board of Directors through the IT& Operations Sub-Committee of the Board. The IT & Operations Committee that meetson a quarterly basis is chaired by an independent Non-Executive Director and has 2Non-Executive Directors as members along with the MD & CEO. All members of theCommittee have extensive experience in IT & Operations and are able to provideeffective guidance and direction to the management team.

Executive level committee which oversee the IT governance function include theOperations Risk Management Committee (ORMC) the Information Security Committee (ISC) andthe Project Steering Committee (PSC). Implementation of large projects is overseen bydedicated Project Steering Committees.

Your Bank has a well-defined Information System Security Policy and a Cyber SecurityPolicy. The effective implementation of these policies is supervised by the InformationSecurity Committee and by the IT & Operations Committee of the Board.

In recognition of the need for enhanced systems security your Bank conducts a widerange of system audits using internal and external auditors. These range from thequarterly Vulnerability Assessments (VA) and Penetration Testing (PT) to concurrent auditsto an annual end to end audit of IT infrastructure. All the applications both web basedand mobile based apps exposed to internet are subjected to external penetration testing(PT) before releasing to use.

Bank has deployed best in the class infrastructure to provide availability of serviceto users and customers without fail. The installed infrastructure is tested for itsreliability and robustness by periodic audits. In addition periodic Disaster RecoveryTests are conducted to ensure the ability to move to the Disaster Recovery Infrastructurein the event of down time in the main production capability.

The Bank is conducting employee and customer awareness on cyber fraudsvishing/phishing attacks etc through SMS E-Mails and popup messages in Banks' website andmobile banking applications. Bank has done separate awareness workshops for Directors onthe cyber frauds and its impacts. As a measure to assess the effectiveness of awarenessamong employees Bank is conducting 'Redteam' exercises on a quarterly basis. Bank hasimplemented most of the Gopalakrishna Committee recommendations on Information SecurityElectronic Banking Technology Risk and Cyber Fraud. The progress of pending items forimplementations are followed up for completion in a time bound manner.

Energy Conservation Technology Absorption Foreign Exchange Earnings and Outgo

The Bank has undertaken various initiatives for energy conservation at its premisesfurther details are given under Principle 6 of Section E of the Business ResponsibilityReport. The Bank prides itself on continuous investment in technology upgrades that aredesigned to deliver cost effective best in class customer service. The Bank has takenmeasures to improve the operational efficiency by adopting Robotic Process Automationtechnology that can enable a virtual workforce that works around the clock and can handlehigher volumes with accuracy. Bank has made investments in blockchain technology and hasgone live with remittance arrangement with one of the leading exchange houses in GCC. Bankhas setup a Testing Center of Excellence (TCoE) an independent test organization withinthe Bank to ensure quality of the bank applications and products. The Bank has usedinformation technology extensively in its operations for more details please refer thesection on Technology and Digital Updates portion forming part of Management Discussionand Analysis. Through its export-financing operations the Bank supports and encouragesthe country's export efforts.

Compliance with the ICSI Secretarial Standards

The Bank has complied with relevant Secretarial Standards issued by the Institute ofCompany Secretaries of India (ICSI) related to the

Board Meetings and General Meeting during the year. Requirement for Maintenance ofCost Records

The Bank is not required to maintain cost records as specified by the CentralGovernment under section 148(1) of the Companies Act 2013.

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2018-19 also.These awards are actually a testimony of Bank's commitment on digital front with variousinitiatives which brought in acclaim from both customers and stakeholders.

Your Bank has won the best bank of year award at the Dhanam Banking and Finance Summit.Your Bank is one of front runners in adopting this technology. Your Bank's Cross BorderRemittance Solution using blockchain technology was declared as Winner under the category"Emerging blockchain technology solution of the year" for BFSI innovativetechnology awards 2018. Bank was also adjudged winner of "best use of blockchaintechnology" at drivers of digital awards 2018. Your Bank won 1st prize in BestTechnology Bank Award 2019 instituted by Indian Banks Association. NPCI National PaymentExcellence award 2018 was awarded to your Bank.

Auditors Statutory Audit

M/s. B S R & Co. LLP Chartered Accountants Mumbai together with M/s M M Nissim& Co Chartered Accountants Mumbai carried out the statutory central audit of theBank during Financial Year 2018-19. Additionally 1234 number of branches / offices weresubjected to branch statutory audit by various branch auditors appointed by the Bank. Thestatutory central/branch auditors audited all the branches and other offices of the Bank.The resolution for the appointment of M/s. B S R & Co. LLP Chartered AccountantsMumbai together with M/s M M Nissim & Co Chartered Accountants Mumbai as the JointCentral Statutory Auditors of the Bank from the conclusion of the 88th Annual GeneralMeeting till the conclusion of 89th Annual General Meeting is placed in the Notice toshareholders for AGM.

Secretarial Audit

The Board had in its meeting dated 13 March 2019 appointed M/s. SVJS & Associatespracticing Company Secretaries to undertake the Secretarial Audit of the Bank during theFinancial Year ended 31 March 2019in compliance with the provisions of Section 204 of theCompanies Act 2013 and The Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. The Secretarial Audit Report is annexed herewith as "AnnexureIII". With regard to Secretarial Auditors noting regarding delay of two days infiling Statement of Investor Complaints under Regulation 13(3) it was explained that theexchange (BSE) has taken on record the submission made by the Bank on the delayed filings.

Extract of Annual Return

Pursuant to Section 134 (2) (a) and Section 92 (3) of the Companies Act 2013 theextract of the Annual Return in the prescribed format (MGT-9) is annexed as Annexure I tothis Report. Further the Annual Return of the Bank in the prescribed Form MGT-7 isavailable on the website of the Bank at the link:

Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) ofCA 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is available on the website:

The ratio of the remuneration of each Director to the median remuneration of theemployees of the Bank and other details in terms of Section 197(12) of the Companies Act2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are forming part of this report as Annexure IV.

Stock Exchange Information

The Bank's Equity Shares are listed on:

1. BSE Limited Phiroze Jeejeebhoy TowersDalal Street Mumbai - 400 001

2. National Stock Exchange Ltd. "Exchange Plaza" Bandra - Kurla ComplexBandra East Mumbai - 400 051.

3. The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Director's Responsibility Statement

To the best of our knowledge and belief and according to the information andexplanations obtained to us the Directors make the following statements in terms ofSection 134 (3) (c) of the Companies Act 2013:

a) that in the preparation of the annual financial statements for the year ended March31 2019 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;

b) that such accounting policies as mentioned in the Notes to the Financial Statementshave been selected and applied consistently and judgment and estimates have been made thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Bank as at March 312019 and of the profit of the Bank for the year ended on thatdate.

c) that proper and sufficient care has been taken 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) that the annual financial statements have been prepared on a going concern basis;

e) that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively;

f) that systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.

Your bank exhibited resilience during the unprecedented Kerala floods. The supportgiven by your bank to the employees which in turn reciprocated by each employee to thecustomers made your bank stand tall and proud yet humble during the most needy hour. Weremember with gratitude the monumental support exhibited by various stakeholders of yourbank in maintaining the business continuity.


The Board of Directors places on record its sincere thanks to the Government of IndiaReserve Bank of India various State Governments and regulatory authorities in India andoverseas for their valuable guidance support and cooperation. The Directors wish toexpress their gratitude to Investment Banks Rating Agencies and Stock Exchanges for theirwholehearted support.

The Directors record their sincere gratitude to the Bank's shareholders esteemedcustomers and all other well-wishers for their continued patronage. The Directors expresstheir appreciation for the contribution made by every employee of the Bank.

For and on behalf of the Board of Directors

Aluva Mr. Dilip Sadarangani (DIN- 06610897)

Date: 13 June 2019

Chairman of the Board