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Federal Bank Ltd.

BSE: 500469 Sector: Financials
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OPEN 56.50
VOLUME 3084022
52-Week high 96.95
52-Week low 35.70
P/E 7.78
Mkt Cap.(Rs cr) 11,280
Buy Price 56.55
Buy Qty 1642.00
Sell Price 56.65
Sell Qty 81.00
OPEN 56.50
CLOSE 56.95
VOLUME 3084022
52-Week high 96.95
52-Week low 35.70
P/E 7.78
Mkt Cap.(Rs cr) 11,280
Buy Price 56.55
Buy Qty 1642.00
Sell Price 56.65
Sell Qty 81.00

Federal Bank Ltd. (FEDERALBNK) - Director Report

Company director report

Your Directors have pleasure in presenting the 89th Annual Report on the business andoperations of the Bank together with the audited accounts for the financial year endedMarch 31 2020.

Financial Results

(Rs in Crore)

Financial Parameters for the year ended March 31 2020 March 31 2019
Net Interest Income 4648.90 4176.35
Fee and Other Income 1931.41 1351.02
Net Revenue 6580.31 5527.37
Operating Expense 3375.61 2764.27
Operating Profit 3204.70 2763.10
Net Profit 1542.78 1243.89
Profit brought forward 2174.29 1742.49
Total Profit Available for appropriation 3717.07 2986.38
Transfer to Revenue Reserves 147.46 143.93
Transfer to Statutory Reserves 385.70 310.97
Transfer to Capital Reserves 135.83 34.48
Transfer to Special Reserve 96.00 84.00
Dividend pertaining to previous year paid during the year 278.22 198.01
Tax on dividend 57.19 40.70
Balance Carried over to Balance Sheet 2616.67 2174.29
Financial Position (as on)
Deposits 152290.08 134954.34
Advances 122267.91 110222.95
Total Business (Deposits + Advances) 274557.99 245177.29
Other Borrowings 10372.43 7781.32
Investments 35892.68 31824.47
Total Assets (Balance Sheet Size) 180638.05 159339.99
Equity Capital 398.53 397.01
Return on Total Assets (%) 0.94 0.88
Return on Equity (%) 11.10 9.81
Earnings Per Share ( Rs ) 7.76 6.28
Book value per share ( Rs ) 72.86 66.87
Operating cost to Income (%) 51.30 50.01
Capital Adequacy Ratio (%) Basel (III) 14.35 14.14


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

Highlights of Performance

During the year 2019-20 your Bank has delivered robust growth in all the businesssegments.Total business of your Bank improved by 11.98% to reach at Rs 274557.99 Crores ason March 31 2020. 12.85% growth in deposits and 10.93% growth in advances (net) helpedyour Bank to clock this number. Total deposits reached Rs 152290.08 Crores and advances(net) reached Rs 122267.91 Crores and on averages deposit portfolio of your Bank grew by17.93% to reach Rs 137688.94 Crores and advance portfolio grew by 16.02% to reach Rs114095.06 Crores.

On the NR side NRE deposits had a growth rate of 14.20% to reach Rs 57223.13 Croresand NRE Savings clocked a growth of 12.89% to reach Rs 15437.89 Crores. The total NRbusiness of your Bank stood at Rs 60685.78 Crores with a growth of 14.16%.

Growth in Business

On CASA front Savings deposit touched Rs 39195.44 Crores with 10.44% growth andCurrent deposits stood at Rs 7254.80 Crores. Your Bank registered a healthy CASA growth of7.06% to reach Rs 46450. 24 Crores. CASA ratio of your Bank stood at 30.50%.

The investment portfolio of your Bank has reached Rs 35892.68 Crores as on March 312020. The average investment as on March 31 2020 is Rs 32617.58 Crores.


The Operating Profit of your Bank increased by 15.98% to Rs 3204.70 Crores and NetProfit of your Bank is up by 24.03% to Rs 1542.78 Crores. Healthy traction in core incomestreams has helped your Bank to have a good momentum in core operating performance. NetInterest Income improved by 11.31% to Rs 4648.90 Crores while the Non-Interest Income roseto Rs 1931.41 Crores showing a rise of 42.96%.

Total income of your Bank during the fiscal year 2020 recorded 18.58% growth to reachRs 15142.16 Crores. Income from advances increased by 17.40% to reach Rs 10670.87 Crores.The yield on advances stood at 9.35% and the yield on Investments (excluding trading gain)at 6.70%. The Net Interest Margin for the fiscal year is at 3.05% as against 3.14% in theprevious year.

Return on Average Equity and Return on Average Total Assets stood at 11.10% and 0.94%respectively. Earnings per Share (face value of Rs 2 each) of the Bank as on March312020 were Rs 7.76. Book value per share had increased to Rs 72.86 during FY 20.


The total expenses of your Bank increased by 19.29% to reach at Rs 11937.47 Crores andby an increase of 18.21% interest expenses increased to Rs 8561.85 Crores in FY20.Operating Expenses of the Bank during the fiscal year grew to Rs 3375.61 Crores.

The cost of deposits of the Bank increased to 5.88% as on March 31 2020. The Interestexpenses as percentage to total income stood at 56.54%.


During the fiscal year the Bank's spread on advances (gross) stood at 3.47% and spreadon investments (gross) increased to 2.68%. The Spread (net of provisions) on advance stoodat 2.59%.

Asset Quality

The Gross NPA of your Bank as on March 31 2020 stood at Rs 3530.83 Crores. Gross NPAas a percentage to Gross Advances is 2.84% which is lower than 2.92% as at the end ofFY19. The Net NPA stood at Rs 1607.17 Crores and this as a percentage to Net Advances is1.31%. The Provision Coverage Ratio (including technical writeoffs) stood at 72.48%.

Net Worth & Capital Adequacy

The Net Worth of your Bank grew by 9.38% to Rs 14517.61 Crores as against Rs 13273.04Crores in the previous year. Historically your Bank has been strong on capital adequacy.CRAR of the Bank calculated in line with Basel III norms stood at 14.35% which isconsiderably higher than the 10.875% (Including CCB) stipulated by RBI. Of this Tier 1CRAR is at 13.29%.

Business Overview

Your Bank continued its consistent performance during FY 2019-20 with the totalbusiness of the Bank increasing by 11.98% to Rs 274557.99 Crores.

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 Report.

Employee Productivity

Business per employee of your Bank during the period stood at Rs 22.21 Crores animprovement of 10.22% for the year and the profit per employee of the Bank stood at Rs12.48 Lakh during the fiscal.

Expansion of Network

The Bank has 1263 branches and 1937 ATMs/Recyclers as on March 31 2020. The Bank alsohas its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) inGujarat International Finance Tec-City (GIFT City).

Share Value

Earnings Per Share (face value Rs 2 /- each) of your Bank has improved to Rs 7.76 fromRs 6.28 during the year under review. Return on Equity during the year reached 11.10% inthe fiscal year ended March 31 2020.


( Rs in Thousands)

FY 2019-20 FY 2018-19
Transfer to Revenue Reserve 1474611 1439300
Transfer to Statutory Reserve 3856953 3109700
Transfer to Capital Reserve 1358289 344800
Transfer to Special Reserve 960000 840000
Dividend pertaining to previous year paid during the year 2782229 1980092
Tax on dividend 571895 407014
Balance carried over to Balance Sheet 26166675 21742841
Total 37170652 29863747

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.

Change in Capital Structure and Listing of Shares

The paid up share capital of the Bank as on March 31 2020 is Rs 3985329144/-divided into 1992664572 equity shares of Rs 2/- each. The Bank's equity shares arelisted on the National Stock Exchange of India Limited (NSE) and BSE Limited (BSE). Duringthe year 7612869 equity shares of Rs 2/- each were allotted under ESOP scheme of theBank and admitted for trading in NSE and BSE. Further 1500 shares were allotted by way ofrelease of rights abeyance shares.

Important changes which have occurred after the close of Financial Year

After the close of Financial Year 695150 equity shares of Rs 2/- each were allottedunder ESOP scheme of the Bank and have been admitted for trading on NSE and BSE.Accordingly the paid up share capital of the Bank as on May 31 2020 is Rs 3986719444divided into 1993359722 equity shares of Rs 2/- each.

The shares are actively traded on NSE and BSE and have not been suspended from trading.

During the year under review the Bank had allotted 1000 rated unsecured redeemablenon-convertible Basel III compliant lower tier II subordinated bonds aggregating to Rs300 crore on private placement basis.


Reserve Bank of India vide its circular dated April 17 2020 has directed that banksshall not make any further dividend payouts from profits pertaining to the financial yearended March 31 2020 until further instructions with a view that banks must conservecapital in an environment of heightened uncertainty caused by Covid-19 pandemic.

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 formulated in accordance with the SEBI guidelines as amended from timeto time. The eligibility and number of options to be granted to an employee is determinedon the basis of various parameters such as scale designation performance grades periodof service Bank's performance and such other parameters as may be decided by theNomination Remuneration Ethics and Compensation Committee of the Board from time to timein its sole discretion.

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 nontransferablewith vesting period of 1 to 5 years subject to standard vesting conditions must beexercised within five years from the date of vesting. As on March 31 2020 63463678options had been exercised and 16057341 options were in force.

Under ESOS 2017 the Nomination Remuneration Ethics and Compensation Committeegranted 22318348 options during the year 2017-18 37231307 options during the year2018-19 and 30522736 options during the year 2019-20. The options granted which arenon-transferable with vesting period of 1 to 4 years subject to standard vestingconditions must be exercised within five years from the date of vesting. As on March 312020 491692 options had been exercised and 77227910 options were in force. Otherstatutory disclosures as required by the SEBI guidelines/ Securities and Exchange Board ofIndia (Share Based Employee Benefits) Regulations 2014 on ESOS are given in website ofthe Bank in the link: shareholder-information.

Transfer to Investor Education and Protection Fund

Transfer of Unpaid/ Unclaimed Dividend

Pursuant to the provisions of Section 124(5) of the Act the dividend which remainedunclaimed/unpaid for a period of seven years from the date of transfer to unpaid dividendaccount is required to be transferred to the Investor Education and Protection Fund (IEPF)established by the Central Government.

As a result the unclaimed/unpaid dividend for the year 2011-12 amounting to Rs9342315/- which remained unpaid and unclaimed for a period of 7 years has been alreadytransferred by your Bank to the IEPF.

Your Bank has uploaded the details of unclaimed/ unpaid dividend for the financial year2012-13 onwards on its website viz. and on website of the Ministryof Corporate Affairs viz. and the same gets revised/updated from time totime pursuant to the provisions of IEPF (Uploading of Information Regarding Unpaid andUnclaimed Amount Lying with Companies) Rules 2012.

Further the unpaid dividend amount pertaining to the financial year 2012-13 will betransferred to IEPF during the Financial Year 2020-21.

Transfer of Equity Shares

Pursuant to the provisions of Section 124(6) of the Act and the Investor Education andProtection Fund (IEPF) Authority (Accounting Audit Transfer and Refund) Rules 2016notified by the Ministry of Corporate Affairs on September 7 2016 and subsequentlyamended vide notification dated February 28 2017 all the equity shares of the Bank inrespect of which dividend amounts have not been paid or claimed by the shareholders forseven consecutive years or more are required to be transferred to demat account of IEPFAuthority. Upon transfer of such shares all benefits (like dividend bonus splitconsolidation etc.) if any accruing on such shares shall also be credited to the Accountof IEPF and the voting rights on such shares shall remain frozen till the rightful ownerclaims the shares. Shares which were transferred to the demat account of IEPF Authoritycan be claimed back by the shareholder by following the procedure prescribed under theaforesaid rules.

Accordingly 300131 equity shares of 121 members of your Bank were transferred toDemat Account of IEPF Authority on October 04 2019. Your Bank had sent individual noticeto all the aforesaid 121 members and has also published the notice in the leading Englishand Malayalam newspapers.

With the transfer of aforesaid shares into IEPF Authority as at March 31 2020 atotal of 5956062 equity shares of the Bank were lying in the Demat A/c of the IEPFAuthority.

The details of the nodal officer appointed by the Bank under the provisions of IEPF aredisseminated in the website of the Bank viz.


As on March 312020 Bank's Board consists of 11 members. Besides the Chairperson aNon-Executive Independent Woman Director the Board comprises of seven Non-ExecutiveIndependent Directors and three Executive Directors including two Women Directors.

During the year Mr. Shyam Srinivasan was re-appointed as Managing Director & ChiefExecutive Officer (MD & CEO) (DIN: 02274773) of the Bank for a period of one yearw.e.f. September 23 2019 till September 22 2020 with the approval of Reserve Bank ofIndia (RBI) Accordingly approval of the shareholders for re-appointment of Mr. ShyamSrinivasan through ordinary resolution is being sought at the ensuing AGM of the Bank. Interms of the provisions of Section 152 of the Companies Act 2013 Mr. Shyam SrinivasanMD & CEO being longest in office shall retire at the ensuing Annual General Meeting(AGM) and being eligible offers himself for reappointment. The Board recommends hisappointment.

Pursuant to the recommendation of the Nomination Remuneration Ethics and CompensationCommittee ('NRC') the Board of Directors of the Bank approved the proposal forappointment of Ms. Grace Koshie as Non-Executive Non Independent Director of the Bank witheffect from July 17 2020 till November 21 2021 subject to the approval of shareholdersin ensuing AGM. Accordingly approval of the shareholders to appoint Ms. Grace Koshie as aNon-Executive Non Independent Director of the Bank through ordinary resolution is beingsought at the ensuing AGM of the Bank.

Ms. Grace Koshie was appointed as Part time Chairperson of the Bank with effect fromNovember 07 2019 till her current tenure as Director of Bank with the approval of RBI.Accordingly approval of the shareholders to take on record of appointment of Ms. GraceKoshie as Part time Chairperson of the Bank through ordinary resolution is being sought atthe ensuing AGM of the Bank.

Pursuant to the recommendation of the NRC the Board of Directors of the Bank approvedthe appointment of Mr. Sudarshan Sen (DIN: 03570051) as an Additional Director(Independent) of the Bank with effect from February 11 2020. Pursuant to the provisionsof Section 161 of the Act he continues to hold office as an Additional Director of theBank up to the date of the ensuing Annual General Meeting (AGM') or the last date onwhich the AGM should have been held whichever is earlier. Your Bank has received a noticein writing from a member proposing the candidature of Mr. Sudarshan Sen as a Director(Non-Executive Independent) on the Board of the Bank. Further the NRC and the Board ofDirectors of the Bank have also recommended his appointment as an Independent Directornot liable to retire by rotation to the Shareholders at the ensuing AGM for a period offive years with effect from February 11 2020.

During the year Mr. Ashutosh Khajuria (DIN: 05154975) was re-appointed as ExecutiveDirector of the Bank designated as Executive Director and Chief Financial Officer for aperiod of one year with effect from January 28 2020 to March 31 2021 with the approvalof Reserve Bank of India Accordingly approval of the shareholders for re-appointment ofMr. Ashutosh Khajuria through ordinary resolution is being sought at the ensuing AGM ofthe Bank. Further pursuant to the recommendation of the Nomination Remuneration Ethicsand Compensation Committee ('NRC') the Board of Directors of the Bank with the approvalof Reserve Bank of India appointed Ms. Shalini Warrier Chief Operating Officer (DIN:08257526 ) as an Additional Director of the Bank with effect from January 15 2020.Pursuant to the provisions of Section 161 of the Act she continues to hold office as anAdditional Director of the Bank up to the date of the ensuing Annual General Meeting(AGM') or the last date on which the AGM should have been held whichever is earlier.Your Bank has received a notice in writing from a member proposing the candidature of Ms.Shalini Warrier as a Director (Executive) on the Board of the Bank. Further the NRC andthe Board of Directors of the Bank have also recommended her appointment as an ExecutiveDirector to the Shareholders at the ensuing AGM for a period of three years with effectfrom January 15 2020.

Mr. Siddhartha Sengupta (DIN: 08467648) and Mr. Manoj Fadnis (DIN: 01087055) wereappointed as Additional Non- Executive Independent Directors on the Board of the Bankeffective from June 13 2019. The shareholders in the 88th Annual General Meeting held onJuly 25 2019 approved the appointment of Mr. Siddhartha Sengupta and Mr. Manoj Fadnis asIndependent Directors of the Bank for a period of five (5) years with effect from the dateof their appointment by the Board. Further the shareholders of the Bank at the 88thAnnual General Meeting held on July 25 2019 approved the appointment of Mr. KBalakrishnan as Independent Director of the Bank for a period of three (3) years witheffect from September 25 2018 and Mr. C Balagopal as Independent Director of the Bankwith effect from August 11 2019 for a period of five (5) years or till the date of hisretirement whichever is earlier.

Mr. Dilip Sadarangani (DlN- 06610897) Part Time Chairman and Independent Director ofthe Bank retired from the Directorship of the Bank effective from September 08 2019upon completion of 70 years of age in accordance with the regulatory requirements of RBI.CA Nilesh S Vikamsey (DIN- 00031213) Independent Director retired from the Bankeffective from June 24 2019 upon completing his eight-year term as a Director on theBoard of the Bank in accordance with the regulatory requirements of RBI.

Necessary information pursuant to SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 in respect of directors to be appointed and re-appointedat the ensuing Annual General Meeting are given in the Annexure to the Notice conveningthe Annual General Meeting scheduled to be held on July 16 2020. None of the Directors ofyour Bank are disqualified for being appointed as directors as specified in Section164(2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules2014.

Key Management Personnel

During the year the following directors/executives continued as Key ManagerialPersonnel of the Bank:

Mr. Shyam Srinivasan - Managing Director & Chief Executive Officer

Mr. Ashutosh Khajuria -Whole-time Director & Chief Financial Officer

Ms. Shalini Warrier - Executive Director & Chief Operating Officer

Mr. Samir P Rajdev - Company Secretary & Vice President

In view of retirement of Mr. Girish Kumar Ganapathy as the Company Secretary andCompliance Officer of the Bank w.e.f. November 30 2019 the Board at its meeting held onNovember 16 2019 appointed Mr. Samir P Rajdev (ACS No. 17849) as the Company Secretaryand Compliance Officer of the Bank w.e.f December 01 2019 upon due recommendations ofthe NRC.

Declaration by Independent Directors The Bank has received declaration from all theIndependent Directors that they continue to meet the criteria of independence as providedunder the Companies Act 2013 (the Act) and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and comply with the Code for Independent Directors asspecified under Schedule IV of the Act.

The Directors have also confirmed that they are not aware of any circumstance orsituation which exists or may be reasonably anticipated that could impair or impacttheir ability to discharge their duties with an objective independent judgement andwithout any external influence.

In the opinion of the Board the Independent Directors possess the requisite expertiseand experience and are the persons of high integrity and repute. They fulfill theconditions specified in the Act and the Rules made thereunder and are independent of theManagement.


The Board meets at regular intervals to discuss and decide on Bank/ business policy andstrategy apart from other items of business. The Board exhibits strong operationaloversight with regular presentations by business heads to the Board. The Board andCommittee meetings are prescheduled and a tentative annual calendar of Board and CommitteeMeetings is circulated to the directors well in advance to help them plan their scheduleand to ensure meaningful participation at the meetings.

During the year under review fourteen (14) Board Meetings and nine (9) Audit CommitteeMeetings and other Committee 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.

The details of the constitution of the Board and its Committees are given in theCorporate Governance report.

Subsidiaries of the Bank

As on March 31 2020 the Bank has one unlisted wholly owned subsidiary M/s. FederalOperations and Services Limited and one unlisted subsidiary named M/s. Fedbank FinancialServices Limited.

Federal Operations and Services Limited

Federal Operations and Services Limited (FedServ) is a wholly owned Subsidiary Companyof The Federal Bank Limited (the Bank) incorporated on October 26 2018. FedServ receivedapproval from RBI on November 09 2018 for commencing its operations. FedServ started itsoperations w.e.f. December 01 2018. FedServ provides operational and technology orientedservices to the Bank.

FedServ's Board of Directors is comprises of following four members-

1. Mr. Balagopal C Chairman

2. Ms. Shalini Warrier Director

3. Mr. Ajith Kumar K K Director

4. Mr. Johnson K Jose Whole-time Director

During the year ended on March 31 2020 FedServ has taken significant operationalactivities of the Bank which includes CASA Opening Account Maintenance Trade FinancePayment & Settlement and ATMs & Branch Monitoring. FedServ is carrying out 78operational activities of the Bank as on March 31 2020. Company do not deal in loans andadvances neither it accepts deposits. FedServ is operating from two locations:- Kochi inKerala and Visakhapatnam in Andhra Pradesh.

The total revenue of FedServ for the period ended on March 31 2020 is Rs 18.95 Crores.The full revenue pertains to services provided by the Company to the Bank only. TheCompany had a net profit of Rs 1.27 Crores for the year ended on March 31 2020. The Networth of FedServ at the beginning of the year was Rs 4.71 Crores and closing net worth ofFedServ as on March 31 2020 was Rs 10.98 Crores. During the year Bank has invested inpreference shares of Company amounting to Rs 5 Crores.

FedServ will help the Bank in serving the customers better and reducing the cost ofoperations significantly. FedServ will also help the Bank to improve Turnaround time ofvarious operational processes improve First Time Right (FTR) rate and enable the bank tobecome FIRST CHOICE Bank of customers.

The Profit after tax of the Company for the year ended March 31 2020 increased to Rs1.27 Crores from a loss of Rs 0.29 Crores for the year ended March 31 2019. The totalassets of the Company increased to Rs 13.69 Crores as on March 312020 from Rs 5.70 Croresas on March 31 2019.

Fedbank Financial Services Limited

Fedbank Financial Services Limited (Fedfina) is a Subsidiary Company of The FederalBank Limited (the Bank) incorporated on 17th April 1995. Fedfina received approval fromRBI on 24th August 2010 for commencing its operations. It is a Non-deposit takingNon-DepositTaking & Systemically Important (ND-SI) NBFC. Fedfina provides variousmultiple loan products such as Loan against Property (LAP) Structured Finance and Loanagainst pledge of Gold ornaments. It also distributes loan products of the Bank. It hasover 300 branches across India providing multiple loan products to various segment ofborrowers.

Fedfina's Board of Directors is comprises of following six members

Mr. K Balakrishnan - Chairman

Mr. Anil Kothuri - Managing Director & Chief Executive Officer

Mr. Shyam Srinivasan - Director

Ms. Gauri Rushabh Shah - Director

Mr. Maninder Singh Juneja - Director

Mr. Ashutosh Khajuria - Director

The total revenue of Fedfina for the year ended on March 312020 is Rs 471.27 Crores asagainst Rs 258.91 Crores for the year ended March 31 2019. Revenue grew by 82% on theback of growth of 83% in loan book during the year. The net profit of the Company grew by13% to Rs 39.54 Crores for the year ended March 312020 as against Rs 35.08 Crores for theyear ended March 31 2019. The Net worth of Fedfina at the beginning of the year was Rs462.24 Crores and closing Net worth of Fedfina as on March 31 2020 was Rs 694.04 Crores.During the year Bank has invested in equity shares of Company amounting to Rs 59.20Crores.

The total loan portfolio of Fedfina as on March 312020 is Rs 3650.75 Crores asagainst Rs 1991.75 Crores as on March 31 2019. The total assets of the Company increasedto Rs 4035.10 Crores as on March 31 2020 from Rs 2128.55 Crores as on March 31 2019.

Note: The figures reported above for Fedfina are as per the audited financialstatements prepared for the consolidation as per AS 21 Consolidated Financial Statements.

Associate Companies

As on March 31 2020 the Bank has two Associate Companies named M/s. IDBI Federal LifeInsurance Company Limited and M/s. 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 Rs 208 the equity of the Company holding 26% of the equity capital. The total premiumcollected by IDBI Federal Life Insurance Company Limited during the period ended March312020 is Rs 1836 Crores. The Company has declared & paid interim dividend of 4.65%for the FY 2019-20.

Mr. Shyam Srinivasan Managing Director and Chief Executive Officer and Mr. AshutoshKhajuria Executive Director and Chief Financial Officer of the Bank are Non-ExecutiveDirectors in IDBI Federal Life Insurance Company Limited.

Investment Banking Associate

As of March 31 2020 Bank holds 19.90% stake in Equirus Capital Private Limited.Pursuant to the right of proportionate representation on Board as well as power toparticipate in the financial operational matters like approval of business planpolicies budgets managerial remuneration change in KMP etc. the same has been treatedas an associate concern as per AS 23 Accounting for Investments in Associates inConsolidated Financial Statements. Equirus Capital Private Limited is a private companydomiciled in India and is engaged in the business of Investment banking. It has 3subsidiaries named Equirus Securities Private Limited Equirus Digital Private Limited andEquirus Wealth Private Limited. Total turnover of Equirus Capital Private Limited on aconsolidated basis was Rs 45.06 Crores in FY 2020 against Rs 51.46 Crores for FY 2019.

Mr. Harsh Dugar Country Head - Wholesale Banking of the Bank is a Nominee Director onthe Board of Equirus Capital Private Limited.


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.

Loans Guarantees or Investments in Securities

Pursuant to Section 186(11) of the Companies Act 2013 loans made guarantees givensecurities provided or acquisition of securities by a banking Company in the ordinarycourse of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act 2013.

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 with related parties during the period.

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.

The details of the CSR initiatives undertaken during the financial year ended March 312020 and other details required to be given under section 135 of the Companies Act 2013read with rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules 2014are given in Annexure I forming part of this Report.

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.

Bank implemented Information Rights Management (IRM) solution to protect and controlbank documents and files while sharing. Bank implemented payment card industry Datasecurity standard and become PCI-DSS Certified on November 12 2019 The Bank has usedinformation technology extensively in its operations for more details please refer thesection on Technology and Digital Updates portion forming part of Directors report.Through its export-financing operations the Bank supports and encourages the country'sexport efforts.

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 materialrisks. 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 andCyber Security measures form part of operational risk management. Risk Management policiesare approved by the Board of Directorsand reviewed from time to time with updatedregulatory and internal guidelines. Executive level risk management committees namelyCredit Risk Management Committee Asset Liability Management Committee Operational RiskManagement Committee and Information Security Committee regularly assess the respectiverisks and direct corrective actions wherever required. The risk management functions areco-ordinated by a senior Executive designated as Chief Risk Officer who reports directlyto the Managing Director & CEO. The Executive level committees report to the RiskManagement Committee of the Board on the various risk events and the direction and levelof the various risks. All material risks of the Bank emerging in thecourse of its businessare identified assessed and monitored in the Internal Capital Adequacy Assessment Process(ICAAP). In our view all the material risks of the Bank are identified assessed andmanaged adequately.

Vigil Mechanism/Whistle Blower Policy

Bank has a comprehensive Fraud Risk Management Policy that speaks on various controlsystems monitoring and surveillance mechanism so as to prevent detect and investigatefrauds both internal and external. Vigilance department plays a dynamic role in preventionas well as investigation of frauds. Preventive measures include spreading awareness onpotential fraudulent activities and instigating a compliant environment among allemployees of the Bank. Effectiveness of fraud prevention mechanism is ensured byconducting Preventive Vigilance Workshops Preventive Vigilance Audits and alerts to allemployees on regular basis that disseminates various modus operandi of frauds in thebanking industry. Bank has been keen on educating customers against fraudulent activitiesthrough various channels including SMS E-mails posters at Branches scroll messages onBank website and internet banking webpage etc. Suspected frauds/complaints/internalirregularities are promptly investigated by the Vigilance Department.

As part of Detective Vigilance all the cases of suspected frauds reported in the Bankare investigated in detail. Lacunae if any observed during the course of investigation areplugged and wherever warranted systemic corrections are implemented.

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 rules inthis regard. The policy aims at establishing an efficient vigil mechanism in the Bank toquickly spot aberrations and deal with it at the earliest. It is disseminated among theemployees assuring confidentiality and protection to the whistle blower against anypersonal vindictive actions such as humiliation harassment or any other form of unfairtreatment. Directors and Employees of the Bank employee representative bodies customersstakeholders non-governmental organizations (NGO) and members of the public can lodgecomplaints/disclosures under this scheme. The Head of Vigilance Department in the Bankwill be the nodal officer to receive complaints under the scheme. In exceptional cases theChairman of the Audit Committee may act as the nodal officer. A dedicated e-mail ID isprovided for sending complaints/ disclosures under PDS. An e-mail ID for sendingcomplaints to the Chairman of Audit Committee in exceptional cases is also provided.Vigilance Department conducts investigation of all complaints / information receivedthrough the PDS and submits report to MD & CEO. The details of the complaints andfindings are also placed before the Audit Committee of the Board on a quarterly basis. Thescheme is popularised through various measures such as preventive vigilance classesinternal circulars alerts etc. No personnel have been denied access for giving anyinformation as envisaged in the Protected Disclosure scheme. The PDS Document is madeavailable in Intranet and Bank's website under section"Customer Relations - Codes Policies & Disclosures.

Significant and Material Orders passed by the Regulators or Courts or TribunalsImpacting the Going Concern Status of the Company and its Future Operations

The Bank has not received any significant or material orders passed by any RegulatoryAuthority Court or Tribunal which shall impact the going concern status and Bank'soperations in future.

Statutory Auditors

M/s B S R & Co. LLP Chartered Accountants together with M/s M M Nissim & CoChartered Accountants Joint Statutory Central Auditors of your Bank retire on theconclusion of the Eighty Nineth Annual General Meeting of the Bank. They have beenauditors of the Bank for last four financial years. Pursuant to the guidelines issued bythe Reserve Bank of India (RBI) an audit firm is allowed to continue as the statutoryauditor of a bank for a continuous period of four years only.

Accordingly it is proposed to appoint M/s. Varma & Varma Chartered Accountants(Registration No. 004532S) together with M/s. Borkar & Muzumdar Chartered Accountants(Registration No. 101569W) as Joint Statutory Central Auditors of the Bank in place of M/sB S R & Co. LLP Chartered Accountants and M M Nissim & Co Chartered Accountantswho have completed four years as the Statutory Auditors of the Bank.

The appointments of Joint Statutory Central Auditors along with the relevant detailsare proposed to the members in the Notice of the Eighty Nineth Annual General Meeting.

RBI vide its letter DOS. ARG. No. PS-8/08.09.005/2019-20 dated June 04 2020 hadgranted approval for appointment of M/s. Varma & Varma Chartered Accountants and M/s.Borkar & Muzumdar Chartered Accountants as Joint Statutory Central Auditors of theBank for FY 2020-21.

There is no qualification or adverse remark in Auditors Rs Report. There is no incidentof fraud requiring reporting by the Auditors under Section 143(12) of the Act.

Secretarial Audit and Secretarial Compliance Report

Pursuant to the provisions of Section 204 of The Companies Act 2013 your Bank hasappointed CS EP Madhusudhanan Partner of SEP & Associates Company Secretaries asSecretarial Auditor to conduct Secretarial Audit of the Bank for the FY 2019-20.Accordingly the Secretarial Audit Report for FY 2019-20 is annexed to this report asAnnexure II. There are no reservations adverse remark or disclaimer in the SecretarialAudit Report.

No offence of fraud was reported by the Secretarial Auditor of the Bank.

Pursuant to circular no. CIR/CFD/CMD1/27/2019 dated February 09 2019 issued by SEBIthe Bank has obtained Secretarial Compliance Report from Practicing Company Secretarieson compliance of all applicable SEBI Regulations and circulars/ guidelines issuedthereunder and the copy of the same was submitted with the Stock Exchanges.

Compliance with Secretarial Standards on Board and General Meetings

The Bank has complied with Secretarial standards issued by the Institute of CompanySecretaries of India on Board Meetings and General Meetings.

Extract of Annual Return

Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Act and Rule12(1) of the Companies (Management and Administration) Rules 2014 the extract of AnnualReturn as at March 31 2020 forms part of this Report as Annexure III. The Annual Returnwill be made available in the Bank's website under section"Shareholders Information".

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies Act 2013 readwith Rule 8 of Companies (Accounts) Rules 2014 the Bank has prepared its ConsolidatedFinancial Statement including its subsidiaries Fedbank Financial Services Limited andFederal Operation and Services Limited and Associates IDBI Federal Life Insurance CompanyLimited and Equirus Capital Private Limited which is forming part of this Annual report.The financial position and performance of its subsidiaries/ Associates is given in FormAOC-1 the statement containing salient features of the financial statements of thesubsidiaries/Associate Companies/Joint Venture.

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 asper fourth proviso to the said section the Audited Annual Accounts of the saidSubsidiaries Company of the Bank considered as part of the consolidated financialstatements have also been hosted on the Bank's website The saiddocuments have been hosted on the website of the subsidiary Companies of the Bank also incompliance with the said section.

The documents/details available on the Bank's website ( will alsobe available for inspection by any Member at its Registered Office. Further pursuant tothe provisions of Accounting Standard ('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 2020 forms part of the Annual Report.

Requirement for Maintenance of Cost Records

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

Management Discussion and Analysis Report

In compliance with the Regulation 34 of the SEBI (Listing Obligations and DisclosureRequirements) Regulation 2015 separate Section on Management Discussion and Analysis asapproved by the Board which includes details on the state of affairs of the Bank formspart of this Annual Report.

Corporate Governance

Your board seeks to embed and sustain a culture that will enable us to achieve ourobjectives through effective corporate governance and enhance transparent engagement withkey stakeholders.

In our constant endeavour to benchmark our policies and practices and in light ofvarious developments in the realm of corporate governance and regulatory reforms yourBank continues to maintain and implement the highest standards of corporate governance andethical business practices.

A separate report on Corporate Governance setting out the governance structureprincipal activities of the Board and its Committees and the policies and practices thatenable the Board to fulfill its stewardship responsibilities together with a Certificatefrom the Secretarial Auditor of the Bank regarding compliance of conditions of CorporateGovernance as stipulated under Listing Regulations forms part of this Annual report.

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

Bank had constituted Internal Complaints Committee as per letter and spirit containedin the provisions of "The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013" at 9 Zones and Head Office to prevent andredress the complaints relating to sexual harassment and to organize workshops/ awarenessprograms to empower women employees while handling cases relating to sexual harassment.Workshops/ awareness programs regarding women empowerment were conducted at variouslocations pan India. The data with regard to the redressal of complaints by the InternalComplaints Committee are as follows:

a No. of complaints received for the year FY 2019-20 5
b No. of complaints disposed of during FY 2019 - 20 4
c No. of cases pending for more than 90 days Nil
d No. of workshops/ awareness program against sexual harassment carried out 11
e Nature of action taken by the employer/ District Officer Appropriate action taken

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 IV.The policy has been displayed on the Bank's website at

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 Rs The internal auditfunction in banks Rs published by Basel Committee on Banking Supervision and Model AuditManual on Internal & Concurrent Audit Systems in Public Sector Banks. Audit andInspection Policy is reviewed annually. Policy is reviewed considering various guidelinesof RBI Basel Committee recommendations ICAI guidelines other statutory / regulatoryguidelines directions of Board / Audit Committee of the Board issued from time to timeand periodic internal guidelines / instructions issued by the Bank. At the enterpriselevel the Inspection and Audit Department on a continuous basis assesses and monitorsthe effectiveness of the control systems and its adequacy to meet the growingcomplexities. The audit function essentially validates the compliance of Bank's processesand operations with regulatory guidelines accounting procedures and Bank's own internalrules and guidelines. A department level group meets on periodical intervals to discusslatest internal / 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.

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 ushers inindependence in the performance of the Board; eradicates the gender bias in the Board;achieves sustainable and balanced performance and development; support the attainment ofstrategic objectives & also ensures compliance of applicable laws and good corporatepractices.

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 at least one woman director on the Board of the Bank willalso be considered.

Bank's Policy on Directors Rs Appointment and Remuneration including Criteria forDetermining Qualifications Positive Attributes Independence of a Director and othermatters provided under sub-Section (3) of Section 178 of Companies Act 2013.

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 (Listing Obligations andDisclosure Requirements) Regulations 2015. The independent director shall at the firstmeeting of the Board in which he participates as a director and thereafter at the firstmeeting of the Board in every financial year or whenever there is any change in thecircumstances which may affect his status as an independent director give a declarationthat he/ she meets the criteria of independence. The terms and conditions of appointmentof Independent Director is disclosed on the website of the Bank and a web link thereto is: our-commitments.

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 2019-20 Non-Executive Independent Directors of the Bankare paid sitting fee for attending Board/ Committees meetings and reimbursement ofexpenses for participation in Board/Committee meetings and in addition profit linkedcommission for FY 2018-19 were also paid during the year. Non- Executive Part TimeChairman was paid remuneration in addition to sitting fee with the approval of RBI.

Policy on Remuneration to MD & CEO Executive Directors 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 ManagingDirector & CEO Whole Time Directors and Senior Management Personnel.

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 WTD's and SeniorManagement Personnel to be fixed based on organizational performance and KPAs set for theofficial. The organization's performance is charted based on the Performance Scorecardwhich takes into account various financial indicators like revenue earned cost deployedprofit earned NPA position and other intangible factors like leadership and employeedevelopment. Variable pay will be paid purely based on performance and is measured throughScore Cards for Managing Director & CEO / WTDs. The Score Card provides a mix ofFinancial and Non-Financial Quantitative and Qualitative Metrics. KPAs to contain targetson Risk Adjusted Metrics such as RAROC RARORAC in addition to target on NPAs. Whileconsidering/ recommending the variable pay in respect of Managing Director & CEO andWhole Time Directors serious supervisory observations (if any) shall be factored whichwill be ensured through suitable processes

Grander Compensation Package to Executives in Level IV and above

The Compensation package applicable to Executives in Level IV to VII are governed underthe provisions of Grander Compensation Package a performance linked pay structureimplemented in the Bank from with effect from 01.05.2017. Annual Increment under the"Grander Compensation Package" will depend on the annual performance rating ofthe Executive concerned.

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 between Indian Banks Rs Association. Thepresent scale of pay and other service conditions applicable to employees whosecompensation package is governed under IBA package is as per provisions of 10th BipartiteSettlement.

Limit on Variable Pay

The variable compensation offered to an official would not exceed 70% of the totalfixed compensation Severance Pay and Guaranteed Bonus

Severance pay (other than gratuity or terminal entitlements or as entitled by statute)is not paid to any official of the Bank Guaranteed Bonus on joining in the form ofCash/equities/deposits/ bonds/debentures etc. or multiyear guaranteed bonus (like retainerfees) will not be paid to any official in the organization. However to attract talentsign on bonus or joining bonus can be paid but this will be limited to the first yearonly and it will be given as Employee Stock Options only


No compensation scheme or insurance facility would be provided by the Bank to employeesto hedge their compensation structure to offset the risk alignment mechanism (deferral payand claw back arrangements) embedded in their compensation arrangement.

Compensation Recovery Policy

Malus/ claw back arrangement or a compensation recovery policy is provided which willentail the Bank to recover proportionate amount of variable compensation paid to the abovefunctionaries on account of an act or decision taken by the official which has broughtforth a negative contribution to the bank at a prospective stage. If an Official coveredunder Compensation Recovery Policy is responsible for any act or omission or noncompliance of regulatory guidelines resulting in a penalty being imposed by any Regulatorsor engages in a detrimental conduct against the interests of the Bank as determined bythe Nomination Committee of the Board within 36 months from the date of payment ofvariable compensation the Bank may require such covered official to reimburse the Bankwithin 6 months for all or a portion of any bonus incentive payment equity based awardor other compensation received by such Covered Official.

Committees to mitigate risks caused by an individual decision

In order to further balance the impact of market or credit risks caused to the Bank byan individual decision taken by a senior level executive MD & CEO or WTD's the bankhas constituted various committees to take decisions on various aspects:

• Credit limits are sanctioned by committees at different levels.

• Investment decisions of the Bank are taken and monitored by Investment committeeand there is an upper limit in treasury dealings where individual decisions can be taken.

• Interest rates on asset and liability products for different buckets are decidedand monitored by the Asset Liability Committee of the Board (ALCO). Banks Rs exposures toliquidity risk are also monitored by ALCO.

Executive Director (ED) level Committee for reviewing the linkage of Risk basedperformance with Remuneration

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.

a) 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

b) The Committee shall analyses the risk reward correlation and ensure that excess risktaking is not encouraged

c) The Committee shall review the performance based variable compensation paid everyyear and ensure that an optimum risk reward balance is maintained.

d) Linkage of performance during a performance measurement period with levels ofremuneration.

e) Bank's policy on deferral and vesting of variable remuneration and criteria foradjusting deferred remuneration before vesting and after vesting.

f) The Committee shall establish appropriate compliance arrangements to ensureemployees do not insure or hedge their compensation structure.

g) The Committee shall update the details to the Nomination and Remuneration Committeeon an annual basis.

Deferred compensation and Performance Linkage

In the event of variable compensation paid to MD & CEO ED and Senior Executivesexceeds more than 50% of the fixed compensation for the year on account of highlevel of Bank's performance 60% of the variable pay so entitled to the official will bedeferred for payment over a period of 3 years. The amount is parked in an escrow accountand the payment will be made in the ratio of 20:30:50 over a period of three years i.e.

• 20 % of the deferred compensation will be paid in the first year

• 30% of the deferred compensation in the second year; and

• 50 % of the deferred compensation in the third year FamiliarizationProgrammes for Independent Directors

The familiarising programme for the Independent Directors are disclosed in the Reporton Corporate Governance that forms part of this Annual Report. The details of suchfamiliarization programmes are also disclosed on the Bank's website section "Shareholders Information".

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Regulation 17(10) and otherapplicable Regulations of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board has carried out an annual performance evaluation of its ownperformance and of the directors individually as well as the evaluation of the working ofits various Committees for the year under consideration.

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:

a. Achievements of performance against targets set Qualitative Targets:

a. Appraises the Board regarding the organization's financial position and operationalbudget so as to enable the Board to make informed financial decisions

b. Provides Leadership in developing strategies and organizational plans with themanagement and the Board of Directors

c. Ensures that the Board is kept informed about all issues concerning the Bank

d. Media interaction and ability to project positive image of the Company

e. Effectively pursue the performance goals in relation to mission and objective of theorganization

f. Motivating employees providing assistance & directions

g. Supervising & Safeguard of confidential information

h. Establishment of internal control processes monitoring policies and encouragingsuggestions

i. Cultivates effective Relationship with Industry Forums Community and businessleaders Regulatory Bodies and Public Officials.

j. Ensures compliance with all legal and regulatory requirements.

II) Performance Evaluation of Independent Directors including Chairman

Criteria for evaluation include:

a. Attendance at the Board and Committee meetings

b. Study of agenda papers in depth prior to meeting and active participation at themeeting

c. Contributes to discussions on strategy as opposed to focus only on agenda

d. Participate constructively and actively in the Committee of the Board in which theyare chairpersons or members

e. Exercises his/her skills and diligence with due and reasonable care and brings anindependent judgement to the Board

f. The Director remains abreast of developments affecting the Company and externalenvironment in which it operates independent of his being appraised at meetings

g. Knowledge and Competency:

a) How the person fares across different competencies as identified for effectivefunctioning of the entity and the Board

b) Whether the person has sufficient understanding and knowledge of the entity and thesector in which it operates

h. Whether the person demonstrates highest level of integrity including conflict ofinterest disclosures maintenance of confidentiality etc

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 educate them on theorganization their responsibilities and the organization's activities the Boardencourages a culture that promotes candid communication

iii) The Board oversees management's procedures for enforcing the organization's codeof conduct Action Taken Reports on the discussion/directions of the Board are submittedat regular intervals to the 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 the relevant provisions of the Companies Act andother regulatory provisions as applicable to the Bank

vii) The Board oversees the compliance processes

viii) The Board views the organization's performance from the competitive perspective -industry and peers performance industry trends and budget analysis and with reference toareas where significant differences are apparent etc.

ix) The Board ensures compliance with the relevant provisions of the Companies Act andother regulatory provisions as applicable to the Company.

x) The Board has defined an effective Code of Conduct for the Board and SeniorManagement.

xi) Whether the Board monitors and manages potential conflicts of interest ofmanagement members of the board of directors and shareholders including misuse ofcorporate assets and abuse in related party transactions.

B. Criteria for Evaluation of Committees include:

i) The Committee's Terms of Reference and composition are reviewed annually and isfound to 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.

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.

Business Responsibility Report

In July 2011 the Ministry of Corporate Affairs Government of India came out with theRs National Voluntary Guidelines on Social Environmental and Economic Responsibilities ofBusiness'. These guidelines contain certain principles that are to be adopted by companiesas part of their business practices and require disclosures regarding the steps taken toimplement these principles through a structured reporting format viz. BusinessResponsibility Report. Pursuant to Regulation 34(2)(f) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 your Bank has prepared the BusinessResponsibility Report and forms part of this Annual Report.

Technology and Digital Updates and Measures taken in IT Governance InformationSecurity IT Audit IT Operations IT Services Outsourcing Technology and Digital updates

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 twoNon-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).

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 downtime in the main production capability.

The Bank is conducting employee and customer awareness on cyber fraudsvishing/phishing attacks etc through SMS eMails and popup messages in banks Rs websiteand mobile banking applications. Bank has done separate awareness workshops for Directorson the cyber frauds and its impacts. As a measure to assess the effectiveness of awarenessamong employees bank is conducting Rs Redteam Rs 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.

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 V.

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:

1. that in the preparation of the annual financial statements for the year ended March31 2020 the applicable accounting standards have been followed along with properexplanation relating to material departures if any;

2. 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 31 2020 and of the profit of the Bank for the year ended on thatdate.

3. 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;

4. that the annual financial statements have been prepared on a going concern basis;

5. that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively;

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

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2019-20 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 Technology senate award instituted by Indian Express group fortransforming recruitment process enabled by artificial intelligence-arguably a first inthe domestic banking space. Your Bank won the first prize as "The Best TechnologyBank of the year" in the Banking Technology 2019 awards organized by IBA. The Bankwas conferred with the Rs Best Bank Small - 1st Runner Up Rs award under the Rs OverallBest Bank Rs category at the 11th edition of Rs Magna Awards Rs instituted by Rs Businessworld'. Your Bank was also honored with Rs The Best Bank of Year 2019 Rs award by DhanamMagazine.

Your Bank is giving increased emphasis on the use of Robotic Process Automation. Asrecognition of the efforts your Bank has won the striking Rs Automation Excellence Rsaward under the category Rs Excellence in Banking & Financial Services' at an eventhosted by UiPath in association with Rs The Economic Times'. Bank has automated using RPAplatform 130 processes at centralized operations level as of March 312020. Your Bank hasalso won NSDL special recognition award for The First Bank in India to offer online demataccount opening facility and Best Innovative Strategy of the year by CII-CDT& ETBFSIExcellence Awards 2019 for the category Most Innovative partnership strategy of the year-by a Bank instituted by Economic Times.


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'sshareholders esteemed customers and all other well-wishers for their continued patronage.The Directors express their appreciation for the contribution made by every employee ofthe Bank.

For and on behalf of the Board of Directors
Aluva Ms. Grace Koshie (DIN-06765216)
Date: June 19 2020 Chairperson of the Board