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Karur Vysya Bank Ltd.

BSE: 590003 Sector: Financials
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VOLUME 43788
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P/E 20.60
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OPEN 98.30
CLOSE 98.50
VOLUME 43788
52-Week high 150.20
52-Week low 93.75
P/E 20.60
Mkt Cap.(Rs cr) 7,110
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Karur Vysya Bank Ltd. (KARURVYSYA) - Director Report

Company director report

to the Members

Your Directors are pleased to present the 98th Annual Report of business andoperations of your Bank together with audited financial statement of accounts forthe year ended 31st March 2017.

Key Performance indicators

This year has been a mix of opportunities and challenges for the Indian Banking sector.Despite the challenges your Bank continues to perform well by leveraging upon its branchnetwork clientele and innovative electronic channel. The details of the Key PerformanceIndicators for the financial year 2016-17 are detailed as under:

Particulars 31.03.2017 31.03.2016
(Rs in cr) Rs ( in Cr)
Deposits 53699.81 50078.90
Advances 41434.98 39475.70
Investments 14955.48 14602.40
Total Income 6404.57 6150.21
Total Expenditure 4833.60 4847.15
Operating Profit 1570.97 1303.06
Net Profit 605.98 567.63

total Business

During the year under report the total business of your Bank reached a level of Rs95135 Cr from a level of Rs 89555 Cr for FY 16 posted a growth of 6.23% y-o-y. deposits

Bank improved its business with gross deposits growing by 7.23% to Rs 53699.81 Cr forFY 17 against Rs 50078.90 Cr in the previous fiscal.

Savings Bank deposits of the Bank increased by 30.35% to Rs 9968.28 Cr from Rs7647.32 Cr of the previous fiscal and demand deposits grew by 22.18% from Rs 4027.20 Crto Rs 4920.50 Cr. CASA deposits increased from Rs 11675 Cr as at FY 16 to Rs 14888 Cras at FY 17 and recorded a growth rate of 27.52% as against the 18.62% growth in theprevious fiscal. Term deposits grew by 1.06% to Rs 38811 Cr from Rs 38404 Cr in the FY16.


Aggregate advances grew by 4.96% to Rs 41434.98 Cr from

Rs 39475.70 Cr over the pervious fiscal. Average achivement in Priority Sectoradvances were at Rs 17010 Cr at the end of FY 17 representing 44.21% of Bank's AdjustedNet Bank Credit (ANBC) as against the statutory requirement of 40% of ANBC.

Your Bank's average agriculture advances as at the end of the FY 17 were at Rs7458 Cr representing 19.40% of the ANBC as against the regulatory prescription of 18%.Bank's average advances to micro enterprises and weaker sections were at 6.43% and 11.13%respectively. The Bank continues to comply with the regulatory guidelines under prioritysector agricultural lending and weaker section advances.

Asset Quality

Your Bank has been focusing on containing the non-performing assets through bettercredit monitoring as well as intensified efforts to recover the impaired assets. The Banktook several initiatives to contain slippages and speed up recovery from overdue loanaccounts. These include identification of stressed accounts for restructuring/rephasing intime conduct of Adalats at Divisional Office levels regular follow-up of overduesthrough call centre and e-auctions.

However in view of the continued slowdown in the economy and delinquencies in thecorporate segment the Bank's Net Non-Performing Assets (Net NPA) stood at 2.53% inFY 17 as against 0.55% in the pervious fiscal. The Bank's Provision Coverage Ratio (PCR)stood at 57.83%. i nvestments

The investment portfolio of the Bank registered a growth of 3.12% to touch Rs 14955.48Cr from Rs 14602.40 Cr in the previous fiiscal. The investment portfolio composition isconsistent with the corporate requirement risk perception and investment policy of theBank.

Income earned on investments during FY 17 was

Rs 1106.04 Cr as against Rs 1095.78 Cr in the previous fiscal registering a growth of0.94%. Low growth is on account of overall fall in yields in the market and due to sale ofsecurities from HTM category during the year. Profit was Rs 204.64 Cr as in FY 17 asagainst Rs 94.41 Cr in the previous fiscal showing a quantum growth of 116.76%.

Liquidity position was comfortable throughout the FY 17. i ncome

The interest income for FY 17 constitutes 87.79% of the total income whereas the samewas 88.51% for the pervious fiscal. The gross interest income component grew by 3.29%y-o-y from

Rs 5443.43 Cr in FY 16 to Rs 5622.35 Cr in FY 17. However the Net Interest Income grewby 16.41% y-o-y from Rs 1781.37 Cr to Rs 2073.70 Cr. Non-interest income increased to Rs782.22 Cr from Rs 706.81 Cr a growth of 10.67%.

The yield on advances dropped from 11.67% to 11.34% and yield on investments decreasedmarginally from 7.54% to 7.22%. expenditure

The interest expenditure fell from Rs 3662.03 Cr in FY 16 to Rs 3548.65 Cr inFY 17 showing a decline of 3.10% (Rs 113.38 Cr). Operating expenses increased from Rs1185.12 Cr in FY 16 to Rs 1284.95 Cr in FY 17 with an increase of 8.42% (Rs 99.83 Cr).Cost of deposits fell from 7.40% in FY 16 to 6.60% in FY 17. The reduction in interestexpenditure helped Net Interest Margin increase from 3.43% in FY 16 to 3.70% in FY 17.

During the FY 17 the spread on funds increased from 2.71% to 3.09%.


Your Bank displayed a healthy growth in business and earnings with a operating profitof Rs 1570.97 Cr for the FY 17 registering a growth of 20.56% over the operatingprofit of Rs 1303.06 Cr in the pervious fiscal. The net profit of the Bank registereda growth of 6.76% (grew by Rs 38.35 Cr) and stood at Rs 605.98 Cr as against Rs 567.63 Crin the previous fiscal.


The net profit ofRs 605.98 Cr which along with a sum of Rs 2.20 Cr brought forward fromthe previous year aggregating Rs 608.18 Cr is appropriated as under:

Appropriation – transfer to Amount ( Rs in cr)
- Statutory Reserve 152.00
- Capital Reserve 73.87
- General Reserve 164.00
- Special Reserve 25.00
Balance carried to Balance Sheet* A1+ rating (pronounced CRISIL 193.31

*Including Proposed Dividend and dividend distribution tax amount of Rs 190.67 Cr.

Sub-division of equity shares

The Board of Directors at its meeting held on 19th September 2016 considered andapproved the sub-division of one equity share of the Bank having face value of Rs 10/-each into five equity shares of face value of Rs 2/- each and consequential alteration inthe relevant clauses of Memorandum and Articles of Association of the Bank and the samewas approved by the Members of the Bank through postal ballot on October 27 2016. Boardof

Directors of the Bank fixed November 18 2016 as Record Date for the purpose ofsub-division of face value of equity shares of the Bank. Accordingly equity shares of facevalue of Rs 2/- each were issued to all the members who were holding equity shares of Rs10/- each on November 18 2016.

Share capital

Pursuant to sub-division the Authorised Capital of the Bank was Rs 200.00 Crcomprising of 100 Cr Equity Shares of face value of Rs 2/- each and the Paid-up Capital ofthe Bank was

Rs 121.86 Cr comprising of 609322270 Equity Shares of face value of Rs 2/- eachfully paid up.

The net owned funds of the Bank increased from Rs 4572.95 Cr to Rs 4845.02 Cr a riseof Rs 272.07 Cr registering a growth rate of 5.95%.

The market capitalization of your Bank's shares at the end of FY 17 was Rs6824.41 Cr.

Debt instruments

The Bank had issued Unsecured Redeemable Non-convertible Subordinated (Lower Tier II)Bonds to the value of Rs 150.00 Cr in September 2009. During the year under report Bankdid not raise any TIER II capital. capital Adequacy

Capital Adequacy ratio stood at 12.54% as per BASEL III norms. The Bank's CapitalAdequacy Ratio is well above the statutory limit of 9% (10.25% including capitalconservation buffer) prescribed by the Reserve Bank of India. credit rating

ICRA Limited had rated the Unsecured Redeemable Non-convertible Subordinated(Lower Tier II) debt instruments issued in the year 2009 by re-affirming its A+ rating.Investment with such rating are considered to have adequate degree of safety regardingtimely servicing of financial obligations. A one CRISIL has re-affirmed plus) for Rs 30 bnCertificate ICRA Limited has confirmed ICRA A1+ (Pronounced ICRA A one plus) rating to theBank's Certificate of Deposits Programme for Rs 30 bn. Both the ratings indicate a verystrong degree of safety regarding timely payment of financial obligations.


The Board recommended dividend of Rs 2.60 per Equity Share of face value of Rs 2/- eachi.e. 130% for the FY 17 thus maintaining 100% or more dividend for the fourteenth yearin succession. The total dividend payment works out to Rs 158.42 Cr excluding dividend taxand payout ratio works out to 26.14% excluding dividend tax. The dividend is subject tothe approval of the shareholders at the Annual General Meeting. Bank had formulatedDividend Distribution Policy as per the Regulation 43A of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 (‘Listing Regulations') and the sameis available in your Bank's website.

Earnings per share / Book Value

The earnings per share (Basic) and the book value per share of Rs 2/- each fully paidas on 31.03.2017 were at Rs 9.95 and Rs 79.51 respectively.

Foreign exchange transactions

The merchant turnover of the Bank grew by 9.08% to reach Rs 22516 Cr in FY 17 asagainst Rs 20642 Cr in FY 16. Export credit stood at Rs 1581 Cr in FY 17 as against Rs1286 Cr in FY 16 a growth of 22.94% over the previous fiscal. Your Bank earned a totalincome of Rs 95.97 Cr in FY 17 on forex transactions against Rs 111.17 Cr in FY 16. Of thetotal income earned to the tune of Rs 95.97 Cr exchange profit Rs 38.38 Cr and Commissionand others accounted for Rs 57.59 Cr.

System for internal Financial control and its Adequacy

The Bank is operating in a fully computerized environment with Core Banking Systemsupported by diverse application platforms for handling special business such as treasurytrade finance retail loans etc. The process of recording of transactions in eachapplication platforms is subject to various forms of control IT driven such as in-builtsystem checks maker checker authorisations and independent post transactions reviews etc.The financial statements are prepared based on computer system outputs. Responsibility ofpreparations of financial statements is entrusted to a dedicated unit which is independentof business. The Bank has implemented adequate procedures and internal controls whichprovide reasonable assurance regarding reliability of financial reporting and preparationof financial statements and were operating effectively during the year.

Subsidiaries and Associates

Your Bank does not have any Subsidiaries or Associates to report.

Board Meetings

During the year twenty four meetings of the Board were held the details of which aregiven in the Corporate Governance Report which is forming part of this report.

Board evaluation

Pursuant to the provisions of the Companies Act 2013 and the Listing Regulations theBoard has carried out annual evaluation of its own performance (Board as a whole) all itsDirectors Committees of the Board its Non-Executive Chairman and


The manner of evaluation conducted by the Bank has been reported in the CorporateGovernance Report.

Disclosure to be made under Sub-Section 8 of Section 178 of the companies Act 2013.

The Board of the Bank had constituted the Audit Committee under the extant guidelinesof Reserve Bank of India (RBI) provisions of the Companies Act 2013 and ListingRegulations and the details of the composition of the Audit Committee is furnished in theCorporate Governance Report.

Network of branches

Your Bank has 711 branches and 1747 ATMs as on 31.03.2017. The Bank had added 44branches and 115 ATMs during the year to improve its footprint throughout the countryincluding un-banked centres in tune with RBI guidelines. accounted for technologyinitiatives

Your Bank continued to actively leverage its proven IT initiatives to offer a widearray of advanced financial services and products embedded with the latest technology andsecurity features to cater to the needs of its customers and target group and furthertheir banking convenience.

YourBank introduced a number of significant during the FY 17 covering various facets ofbanking system.

They are as under:

BNA Recyclers

All the Cash Deposit Machines are migrated as Recyclers with the machines functioningas ATMs also as cash withdrawal can be made in the same machine and the cash deposited bythe customers can be recycled for withdrawals. Our Bank has 444 cash recyclers.

Tablet Based Account Opening

We have implemented on-line opening of Savings and Current accounts for individualsusing tablet systems based on Aadhaar details to enable immediate enrolling of customersat their doorstep.

Multifunction KIOSK

We have launched self-service kIOSks through which customer himself can deposit outwardcheques through the KIOSK. The customer cheques so deposited are immediately scanned andavailable for participating in the clearing in the immediate next settlement cycle therebyreducing the collection time drastically.

Customers can use this Automatic Passbook Printing kIOSks for getting their passbooksprinted automatically and immediately. The customer on inserting their Passbook into theprinter the printer will automatically print the passbook by turning pages without anyhassles to the customers. Thus passbook printing can be done at any time of the day.

The pass book kIOSks are deployed in 156 branches of your Bank and the Bankproposed to roll out the same in more branches in FY 18.

Digitization of Loan Proposals

We have implemented Digitization of Loan Proposals in order to enable a quicktransition of loan documents for processing at loan processing cells and in an electronicform. This helps to reduce the turnaround time to process credit proposals. There will beminimal physical movement of checklist documents from the branches to Central LoanProcessing Centre (CLPC)/ Divisional Office (DO)/Central Office (CO).

Unified Payment Interface (UPI)

We have introduced a mobile application Unified Payment Interface (UPI) a newinitiative by National Payments Corporation of India (NPCI) in the payment system whichaims to simplify by enabling both sender and receiver to initiate a payment in a securedmanner via Mobile application.

Bharat Interface for Money (BHIM) is another mobile application provided by M/sNPCI that lets the users to make simple easy and quick payment transactions using UnifiedPayments Interface (UPI). Users can easily make direct bank to bank payments instantly andcollect money using just Mobile number or Payment address.

Bharat Bill Payment System (BBPS) is an integrated bill payment system in thecountry that offers interoperable and accessible bill payment / utility bill payments suchas electricity water gas DTH telecom etc. Other types of payments such as School /University fees Municipal taxes/ Statutory payments and other bills mutual funds andinsurance premium various Government taxes will be included as and when Reserve Bank ofIndia approves the same. We are one of the pilot Banks identified by NPCI for thisinitiative.

National Electronic Toll Collection (NETC) - FASTAG

Electronic Toll Collection is a secure and interoperable solution for NHAI tollcollection. NETC system will reduce wait time at toll counters reduce fuel consumptionand cash handling considerably. NETC system will use RFID tag which is pasted on thewindshield of vehicle. The RFID Tag on the vehicle is read by the long range RFID readerhoisted on the NETC lanes which will allow vehicle without manual intervention. FASTAG(stickable) with different color variant for different types of vehicles (as prescribed byNPCI) will be issued to the customers. We are one of the fiveBanks identified by NHAI& NPCI for this initiative and the only Bank in the South.

Financial inclusion

In our efforts to provide the expanded services to the existing and new customers inthe rural as well as in urban India we have successfully implemented Financial InclusionScheme. Under the PMJDY scheme the Bank was required to cover 409 Wards in semi urban andurban areas in addition to 117 villages and 2 urban locations allotted in Tamil Nadu Stateunder Urban

Financial Inclusion.

Your Bank has covered all the 409 Wards 117 villages and 2 urban locationsthrough Business Correspondents spread over Tamil Nadu Andhra Pradesh Telangana andKarnataka States. The Bank has 39 Ultra Small Branches as at 31.03.2017. Financialliteracy has been identified as a pre-requisite for effective financial inclusion and anintegral part of Pradhan Mantri Jan-Dhan Yojana in order to let the beneficiaries makebest use of the financial services being made available to them. Your Bank has conducted72 financial literacy camps in rural/ unbanked rural branches.

Your Bank introduced a separate Savings Bank Product for PMJDY through which the Bankopened 28599 accounts with an outstanding balance of Rs 3.05 Cr as at 31.03.2017. In

FY 17 your Bank enrolled 87484 customers under Pradhan Mantri Suraksha Bima Yojana136865 customers under Pradhan Mantri Jeevan Jyoti Bima Yojana and 509 customers in AtalPension Yojana.

Performance under Sovereign Gold Bond Scheme 2015

Your Bank could mobilise total subscription denominated in units of gold of 65350grams amounting to Rs 19.72 Cr in four tranches.

Management discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34(2)(e) of the Listing Regulations is presented in a separate sectionforming part of this Annual Report. risk Management

The Bank has Risk Management Department independent of business functions coveringCredit Risk Market Risk Operational Risk and Assets-Liabilities Management (ALM)functions. Risk Management functions in the Bank has been aligned with best industrypractice and is being enhanced progressively adapting to dynamic business environmentand market conditions.

The Bank has comprehensively articulated various risk policies which specify the riskappetite / strategies risk measurement methodologies monitoring and control measures forthe respective business segments. The policies have been framed keeping risk appetite asthe central objective and business strategies have been aligned to risk policies.

The Bank has implemented "Internal Capital Adequacy Assessment Process"(ICAAP) in line with the Basel III requirements. The Bank has set up a Board-levelCommittee viz. "Risk Management & Asset Liability Management Committee" toexamine risk policies and procedures developed by the Bank and to monitor adherence tovarious risk parameters and prudential limits by different operating Departments.

Vigil Mechanism/Whistle Blower Policy

The Bank has in place the "Whistle Blower Policy" since 2011. The said Policyis in compliance with RBI Guidelines provisions of the Companies Act 2013 and theListing Regulations. The Vigil Mechanism at the Bank requires submission of QuarterlyReviews before the Audit Committee of the Board.

The Policy also incorporates suggestions of the Protected

Disclosure Scheme for Private Sector Banks instituted by the Reserve Bank of India. Incompliance with RBI guidelines on "Staff Empowerment" the Board of Directorshas reviewed the

Whistle Blower Policy of the Bank during the FY 17. related Party transactions

All transactions entered with ‘Related Parties' during the year under review wereon "arm's length basis" and in the ‘ordinary course of business' andtherefore do not attract the provisions of Section 188 of the Companies Act 2013.Accordingly AOC-2 is not applicable to the Bank. employee Stock option Scheme

During the year under report your Bank has not granted any stock options underEmployee Stock Option Scheme (ESOS). compensation Policy

The Bank has in place a Compensation Policy for its Whole Time Directors Chairman andPresident & COO in terms of the Section 178 of the Companies Act 2013 the rulesmade thereunder and Listing Regulations.

Particulars of Loans Guarantees and Investments

The provisions relating to Section 134(3)(g) of the Companies Act 2013 on particularsof loans guarantees and investments are not applicable to Banking Company and as such nodisclosures are being made in this regard.


Statutory Auditors

The Members of the Bank at the 97th Annual General Meeting of the Bank held on 21stJuly 2016 have approved the appointment of M/s Abarna & Ananthan CharteredAccountants Bengaluru as Statutory Auditors of the Bank for a period of two yearssubject to the approval of the Reserve Bank of India to hold office from the conclusionof the 97th AGM till the conclusion of the 99th AGM of the Bank to be held in2018 subject to ratification of the appointment by the Members at the 98 thAnnual General Meeting. Accordingly the appointment of M/s Abarna & AnanthanChartered Accountants Bengaluru as Statutory

Auditors of the Bank is required to be ratified by the Members at the 98thAnnual General Meeting of the Bank subject to the approval of Reserve Bank of India. TheBank has received the consent from the Auditors and confirmation to the effect that theyare not disqualified to be appointed as the Auditors of the Bank in terms of theprovisions of the Companies Act 2013 and rules made thereunder. Accordingly the Board ofDirectors has recommended the ratification of appointment of M/s Abarna & AnanthanChartered Accountants Bengaluru as Statutory Auditors of the Bank to hold office fromthe conclusion of the ensuing Annual General Meeting till the conclusion of the 99thAnnual General Meeting of the Bank on remuneration to be decided by the Board thereof tothe members for approval. There are no qualifications made by the Statutory Auditors intheir report for the FY 17.

During FY 17 no frauds were reported by Auditors under Sub-section (12) ofSection 143 of the Companies Act 2013.

Secretarial Audit

Pursuant to the provisions of Sec 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Bank with theapproval of its Board appointed "Solaiyappan & Associates" CompanySecretaries Salem to conduct the Secretarial Audit of the Bank for the FY 17. TheSecretarial Audit Report is annexed herewith as Annexure 1.

There are no qualifications made by the Secretarial Auditors in their report for theFY 17.

Statutory disclosures

The Disclosures to be made under sub-section (3)(m) of Sec 134 of the Companies Act2013 read with Rule (8)(3) of the Companies (Accounts) Rules 2014 by your Bank areexplained as under: conservation of energy technology Absorption Foreign exchangeearnings and outgo conservation of energy

Considering the nature of its activities as an entity in the Financial Services sectorthe Bank has voluntarily taken steps towards conservation of energy and technologyabsorption thus ensuring compliance of the provisions of Section 134 of the Companies Act2013. However the Bank has adopted the following in the areas of conservation of energytechnology absorption: Your Bank has undertaken various energy efficiency improvementinitiatives for energy conservation across all its premises. Your Bank owns 850 KW WindTurbine Generator at Govindanagaram Theni District Tamil Nadu. Installed in the year2011 the Bank is utilizing the power generated by Wind Turbine Generator for itsRegistered & Central Office at Karur and also its Divisional Office Chennai premises.1821049 units were generated during the fiscal under report by wind mill. technologyAbsorption

Technology is a key enabler and core and facilitator material orders that weretothe goals of your

Bank and is identified as one of the strategic pillars of the Bank. Your Bank has beenat the forefront of leveraging technology to provide better products and services to itscustomers ever since technology entered into the banking industry in the country. Your

Bank has a state-of-the-art technology. All Departments within the Bank use IT todeliver superior products and services to the customers.

Your Bank was qualified by National Payment Corporation of

India and National Highways Authority of India for the National

Electronic Toll Collection (NETC) project as one of the Pilot Banks. Very few Banks inIndia were qualified for this digital initiative of National Highways wherein your Bankcan issue and acquire RFID based tags which can be used by vehicles to pay the toll feedigitally across the country.

Similarly your Bank was qualified by National Payment Corporation of India for theBharat QR (Quick Response) Code project as one of few Pilot Banks wherein dynamic andfixed payments can be effected through Mobile phones without using any debit/credit card.The payment can also be initiated through UPI (Unified Payment Interface) launched byGovernment of India.

Your Bank has also been qualified by the National Payment Corporation of India for theBharat Bill Payment System (BBPS) as one of the pilot banks where all utility bills acrossthe Banks and merchants can be paid through us under one umbrella. With a view to supportnew and innovative methods for ensuring customer delight your Bank has been upgradingvarious systems which are already in place as also implemented new systems and platforms.Your Bank has augmented direct channels infrastructure and further embarked on upgradingits core banking system. To ensure highly resilient IT infrastructure and its optimumutilization the Bank has implemented virtualization in its data centres which has reducedits carbon footprint.

Foreign exchange earnings and outgo

Foreign exchange earnings and Outgo form part of the normal banking operations. TheBank supports and encourages the country's export efforts through its export financingoperations. The details of foreign exchange earnings and outgo are mentioned elsewhere inthe report.

Material events that have happened after the Balance Sheet date

No material changes and commitments affecting the financial position of the Bank haveoccurred between the end of the Financial Year to which the Financial Statements relateand the date of report.

There are no significant by the Regulators or Courts or Tribunals against the Bankimpacting its going concern status or the Bank's operations in future. extracts ofAnnual return

Pursuant to sub-section 3(a) Sec 134 and sub-section 3 of Sec 92 of the Companies Act2013 read with Rule 12 of the Companies (Management and Administration) Rules 2014 theextract of the Annual Return as at March 31 2017 in Form MGT-9 forms part of thisreport as Annexure 2.

Particulars of employees

The ratio of remuneration of each Director to the median employee's remuneration andother details and the statement containing particulars of employees in terms ofsub-section 12 of Sec 197 of the Companies Act 2013 read with Rules 5(1) and (2) of theCompanies (Appointment & Remuneration of Managerial Personnel) Amendment Rules 2016forms part of this report as Annexure 3. No employee of the Bank was in receipt of theremuneration as specified in Rule 5(2) of the Companies (Appointment & Remuneration ofManagerial Personnel) Amendment Rules 2016 under section 197(12) of the Companies Act2013 and further in terms of the said rules no employee of the Bank holds by himself oralong with his/her spouse and dependent children not less than two percent of the equityshares of the Bank. corporate Social responsibility (cSr)

The Bank has constituted the Corporate Social Responsibility

(CSR) Committee of the Board in accordance with the provisions of Section 135 of theCompanies Act 2013 read with Companies (Corporate Social Responsibility policy) Rules2014 as amended. The Bank has in place a CSR policy which was reviewed by the Boardannually. CSR expenditure and details of the amounts spent by the Bank on CSR activitiesduring the year has been enclosed to this report as Annexure 4.

Business responsibility report (Brr)

The Securities & Exchange Board of India (SEBI) vide their Circular dated November4 2015 have published revised format of the Business Responsibility Report and havemandated the top 500 listed entities based on market capitalization in Stock Exchangesto include the ‘Business Responsibility Report' (BRR) as part of the Annual Reportdescribing the initiatives taken by the listed entity from an environmental social andgovernance perspective in the format as specified by SEBI. In view of the above and incompliance with Regulation 34(2)(f) of the Listing Regulations the BusinessResponsibility Report (BRR) of the Bank forms part of this Report as Annexure 5.

Criteria for determining qualificationspositive attributes forAppointment/re-appointment of directors

Pursuant to Section 178(3) of the Companies Act 2013 the Nomination and RemunerationCommittee (NRC) formulated the criteria for determining qualificationspositive attributesand independence of a director to adhere the various provisions and guidelines as detailedbelow:

Fit and Proper criteria as per Dr Ganguly Committee Norms which stipulates ageeducational qualification experience track record integrity etc. and various circularinstructions and guidelines issued by Reserve Bank of India from time to time.

Norms laid down by the Banking Regulation Act 1949 as amended from time to time whichstipulates substantial interest sectoral representation as per Section 10A(2)(a) restrictionsas per Section 16 and 20 of the Banking

Regulation Act 1949 etc.

Disqualification / Conflict of Interest of Directors and other norms as per theprovisions of Companies Act 2013 and rules made thereunder from time to time.

Criteria of Independence of a Director as per the provisions of Companies Act 2013 andrules made thereunder and other applicable provisions as amended from time to time.

Applicable regulations of Listing Regulations as amended from time to time.

Articles of Association of the Bank.

Any other factors as the NRC may deem fit and in the best interest of the Bank and itsstakeholders.

The terms and conditions of appointment of Independent Director is disclosed on thewebsite of the Bank at the link http://www.kvb.

Board of directors

In terms of Sec 152 of the Companies Act 2013 Non-Executive Non-Independent DirectorsShri G Rajasekaran (DIN: 00035582) and Shri A K Praburaj (DIN: 07004825) retire byrotation and being eligible offer themselves for re-election at the ensuing Annual GeneralMeeting (AGM).

In terms of the provisions of Sec 149(10) and Sec 152 read with Companies (Appointmentand Qualification of Directors) Rules 2014 the Non-Executive Independent Directors ShriN S Srinath

(DIN: 01493217) and Dr V G Mohan Prasad (DIN: 00002802) shall be eligible forre-appointment and seeking re-appointment for a second term.

Shri N S Srinath an Independent Director of the Bank was co-opted as anAdditional Director on 29.06.2012. He was appointed as a Director in the AGM held on30.07.2012. Pursuant to Sections 149 and 152 of the Companies Act 2013 read with theCompanies (Appointment and Qualification of Directors)

Rules 2014 Shri N S Srinath was appointed as an Independent

Director of the Bank upto a period of 3 years in the AGM held on 23.07.2014. The threeyears term of his appointment ends on 22.07.2017.

Dr V G Mohan Prasad an Independent Director of the Bank was co-opted as an AdditionalDirector on 15.06.2014. Pursuant to Sections 149 152 and 161 of the Companies Act 2013read with the Companies (Appointment and Qualification of Directors) Rules 2014 Dr V GMohan Prasad was appointed as an Independent Director of the Bank upto a period of 3 yearsin the AGM held on 23.07.2014. The three years term of his appointment ends on 22.07.2017.

In terms of Section 149(10) of the Companies Act 2013 an Independent Director shallhold office for a term upto five consecutive years on the Board of a company but shall beeligible for re-appointment for a further period upto five years on passing of a specialresolution by the company. Further in terms of Section 10A(2A) of the Banking RegulationAct 1949 no director of a banking company other than its Chairman or whole-timeDirector by whatever name called shall hold office continuously for a period exceedingeight years.

Shri N S Srinath is completing his five years period on 28.06.2017 and in compliance ofSection 10A(2A) of the Banking Regulation Act 1949 he may be re-appointed for a secondterm upto the completion of his continuous period of eight years.

Dr V G Mohan Prasad is completing three years period on 14.06.2017 and in compliance ofSection 10A(2A) of the Banking Regulation Act 1949 he may be re-appointed for a secondterm upto the completion of his continuous period of eight years. In the opinion of theBoard of Directors they fulfil the conditions specified in the Companies Act 2013 and theRules made thereunder and meet the criteria of independence as provided under Section149(6) of the Companies Act 2013. Further their appointment is in compliance with theprovisions of Sec 10A of the Banking Regulation Act 1949 in particular on account of

Shri N S Srinath and Dr V G Mohan Prasad have the requisite experience/ expertiserequired under Section 10A(2) of the

Banking Regulation Act 1949. The said Independent Directors are not liable to retireby rotation.

The tenure of Shri K Venkataraman (DIN: 02443410) MD & CEO of the Bankconcluded at the close of the office hours on 31st May 2017 as per the terms ofhis re-appointment. Bank had already taken initiatives to select suitable successor forbeing appointed as MD & CEO of the Bank which is at final stage. In view of theimportance of ensuing statutory compliances of the Bank for the year ending March 2017Board in the meeting held on 21.03.2017 resolved to extend the tenure of Shri KVenkataraman MD & CEO of the Bank for a period of three months effective from 1stJune 2017 to 31st August 2017 subject to the approval of Reserve Bank ofIndia.

The Bank made an application to Reserve Bank of India for approval for extension ofterm of Shri K Venkataraman MD & CEO of the Bank under the existing terms &conditions. Reserve Bank of India vide their letter DBR.Appt.No.11915/08.41.001/2016 - 17dated April 7 2017 accorded their approval for extension of tenure of Shri K Venkataramanto continue as MD & CEO of the Bank for a period of three months from 1stJune 2017 to 31st August 2017 under the existing terms & conditions.

The relevant details including profile of the Directors who are seeking re-election atthis Annual General Meeting are furnished separately in the Notice of the AGM.

Shri K K Balu Independent Director of the Bank demitted office consequent to thecompletion of his two years tenure ended on 22.07.2016.

Board places on record its appreciation for the valuable services rendered by Shri k kBalu during his tenure.

Apart from the above there were no changes in the directors holding office. declarationby independent directors

The Bank has received necessary declaration from each Independent Director under Sec149(7) of the Companies Act 2013 and the Listing Regulations that they meet the criteriaof independence laid down in the Companies Act 2013 and Listing Regulations.

Confirmation as to Compliance of applicable laws

It is hereby confirmed that the Bank has proper systems in place to ensure complianceof all laws applicable to the Bank.

Corporate Governance

A separate section on Corporate Governance standards followed by your Bank and therelevant disclosures as stipulated under Listing Regulations and Companies Act 2013 andthe rules made thereunder forms part of this report.

A certificate from Shri CS S Solaiyappan Practicing Company Secretary confirmingcompliance to the conditions of Corporate Governance as stipulated under ListingRegulations is annexed to this report. directors' responsibility Statement

Pursuant to Sec 134(5) of the Companies Act 2013 with respect to the Directors'Responsibility Statement it is hereby confirmed that

(a) In the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) The Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Bank at the end of the financial year and of theprofit and loss of the Bank for that period;

(c) The Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Bank and for preventing and detecting fraud and otherirregularities;

(d) The Directors had prepared the annual accounts on a going concern basis; (e) TheDirectors had laid down internal financial controls to followed by the Bank and that suchinternal financial controls are adequate and were operating effectively.

(f) The Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Awards and Accolades

Your Bank received the following Awards and Accolades during the year 2016-17.

1. Business Today KPMG Best Small Bank Award for 2015-16.

2. Best Bank in National Level under Private Sector Category for 2015-16 from the StateForum of Bankers' Club of Kerala.

3. Best Bank Award among the Small Banks for Digital Banking from the Institute forDevelopment and Research in Banking Technology (IDRBT) for the year 2015-16.

4. Best Bank among Small Banks for Managing IT Ecosystems from the Institute forDevelopment and Research in Banking Technology (IDRBT) for the year 2015-16. Your Bankreceiving the IDRBT award for the eight year in succession.

5. Dun & Bradstreet award for Best Private Sector Bank for Priority Sector Lending.

6. Best Bank Award for Credit Quality from Financial Express for the year 2013-14.

7. Star Performer Award for new accounts opened under Bank Category from NationalSecurities Depository Limited (NSDL) Second Place.

8. First Prize for achieving highest disbursal under Solar Irrigation Pumps Off Grid& Decentralized Solar Applications Programme for FY 16 from Ministry of New &Renewable Energy Govt. of India.

9. Second Prize under Branch Wise Performance (for Belgaum Branch) for achievinghighest disbursal under Solar Irrigation Pumps Off Grid & Decentralized SolarApplications Programme for FY 16 from Ministry of New & Renewable Energy Govt. ofIndia.


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 fortheir valuable guidance support and co-operation. The Board also acknowledges withgratitude the co-operation and support received from Stock Exchanges rating agencies andother banking /financial institutions.

The Board takes this opportunity to place on record its deep sense of gratitude to itsloyal shareholders for extending their support during the year and looks forward to theircontinued association in the years ahead.

The Board thanks the valued customers for their goodwill patronage and continuedsupport and looks forward to their continued patronage in scaling greater heights.

During the fiscal the Bank has received various recognitions and accolades for itsexcellence in the Banking domain. The Board is thankful to all such organisations andagencies for formally recognising the Bank's efforts.

The Board appreciates the sincere and dedicated services displayed by its entire staffand highly values their commitment in improving the Bank's performance.

For and on behalf of the Board of Directors
Place: Karur B Swaminathan
Date: 08.06.2017 Chairman