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Lakshmi Vilas Bank Ltd.

BSE: 534690 Sector: Financials
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OPEN 22.10
52-Week high 97.35
52-Week low 22.05
Mkt Cap.(Rs cr) 742
Buy Price 23.00
Buy Qty 135.00
Sell Price 22.05
Sell Qty 248018.00
OPEN 22.10
CLOSE 23.20
52-Week high 97.35
52-Week low 22.05
Mkt Cap.(Rs cr) 742
Buy Price 23.00
Buy Qty 135.00
Sell Price 22.05
Sell Qty 248018.00

Lakshmi Vilas Bank Ltd. (LAKSHVILAS) - Director Report

Company director report



The Directors of your Bank wish to present this 91st Annual Report on thebusiness and operations of your Bank together with the Audited Accounts for the year ended31st March 2018 (FY 2017-18).


The highlights of the financial performance of your Bank for the year ended 31stMarch 2018 are as under:

For the year ended
Particulars ($ in crore)
31st March 2018 31st March 2017
Deposits 33309.48 30553.35
Advances (net) 25768.20 23728.91
Investments (net) 10767.75 8651.73
Total Income 3388.43 3349.42
Operating Profit 355.38 634.06
Provisions & Contingencies 940.24 377.98
Net profit (-)584.86 256.07

Your bank registered a growth of 10.64% in business and attained a total business of $60314.02 crore in FY 2017-18 as against total business of $ 54511.81 crore in FY2016-17.

Deposits grew by 9.02% from $ 30553.35 crore as at 31st March 2017 to $33309.48 crore as at 31st March 2018. CASA represented 21.06% of totaldeposits. Total advances (net) expanded by 8.59% from $ 23728.91 crore to $ 25768.20crore in the same period. The total Priority Sector Advances were $ 8801.64 crores forming41.81% of Adjusted Net Bank Credit (ANBC) against the regulatory prescription of 40% ofANBC for the FY 2017-18.

The total Agricultural Advances stood at $ 3793.54 crores forming 18.02% of ANBCagainst the regulatory prescription of 18.00% of ANBC. Of which loans to Small andMarginal Farmers stood at $ 1970.29 crores forming 9.36% of ANBC against the mandatoryrequirements of 8.00% of ANBC for the year 2017-18.

Our Bank's advances to Micro Enterprises under MSME were at 7.60% of ANBC amounting to$ 1599.14 crores against the mandatory requirements of 7.50% of ANBC for the year 2017-18.

Bank's advances to Weaker Sections were $ 2133.28 crores forming 10.13% of ANBC againstthe mandatory requirements of 10.00% of ANBC for year 2017-18.

The Bank continues to comply with the regulatory guidelines under priority sectoragricultural lending micro enterprises and weaker section advances.

The Bank's exposures to sensitive sectors including Real Estate and Capital Market weremaintained well within the regulatory limits as well as overall internal ceilingsprescribed for such exposures.

As at the end of the year under review the total investments (net) of the Bank stoodat $ 10767.75 crore as against $ 8651.73 crore as on 31st March 2017.

Your Bank's Treasury continues to focus on sound Asset-Liability Management and onservicing clients with appropriate treasury products and was managed reasonably well in asystematic way in a year when yields were constantly rising.


The Bank has posted an operating profit of $ 355.38 crores in FY 2017-18 against $634.06 crores in the previous year FY 2016-17. Excluding Treasury profits the operatingprofit for 2017-18 was $ 290.98 crores as against $ 374.10 crores in the Previous Year.The net loss for the year after provisions and taxes amounted to $ 584.87 crores asagainst a net profit of $ 256.07 crores recorded in 2016-17.


For the year ended
Particulars ($ in crore)
31st March 2018 31st March 2017
Profit brought forward 62.26 0.00
Transfer from Investment Reserve 0.00 0.00
Amount available for appropriation (-)522.60 256.07
Transfer to
Statutory Reserve 0.00 64.10
Capital Reserve 86.26 77.16
Other Reserve 46.55
Investment Reserve 0.00 0.00
Special Reserve u/s 36(i)(viii)of the IT Act 1961 0.00 6.00
Proposed Dividend/Dividend paid for FY 2016-17 51.79 0.00
Corporate Dividend Tax - FY2016-17 10.47 0.00
Balance of profit carried forward (-)671.12 62.26


In view of the Net Loss for the FY 2017-18 your Board of Directors is unable torecommend any dividend for the year.

Your Bank has a Board approved Dividend Distribution Policy which has been formulatedin line with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and extant RBI Circulars / Directives. The Dividend Distribution Policyhas been enclosed as Annexure J to the Directors' Report. The Policy has also been madeavailable in the website of the Bank and can be accessed at

5. RIGHTS ISSUE 2017-18:

During the year 63987006 equity shares were allotted to eligible shareholders onRights Basis in line with Chapter II (10) of the Securities and Exchange Board of India(Issue of Capital and Disclosure Requirements) Regulations 2009. These shares were issuedat a premium of $ 112/-to the face value of $ 10/-.

As on March 31 2018 the post-issue paid-up capital of your Bank stood at $2559937530 comprising 255993753 equity shares of $ 10 each.


During the year the Bank had allotted equity shares to eligible shareholders on RightsBasis on 03.01.2018. The issue was done in order to enhance the capital adequacy ratio inline with the RBI norms and the proceeds of the issue were used primarily to enhance theBank's Capital Adequacy Ratio and to increase our capacity to lend and for generalcorporate purposes subject to compliance of applicable laws. There was no variationprompting disclosure under Regulation 32 of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015.


Earnings per Share stood at $ (-)28.29 for the year ended 31st March 2018as compared to $ 14.07 as on 31st March 2017. Book Value of the share stoodat $ 84.39 on 31st March 2018 as compared to $ 102.74 as on 31stMarch 2017.


Net Owned Funds (NOF) of the Bank increased from $ 1966.85 crores as at the end of FY2017 to $ 2160.41 crores as at the end of FY 2018 reflecting a growth of 9.84%.

The Capital Adequacy Ratio (CAR) as on 31st March 2018 as per BASEL III is9.81%. The Tier-I and Tier-II components of Capital Adequacy Ratio were maintained at8.05% and 1.76% respectively.

It is heartening to mention that the rights issue had received overwhelming responseand participation by the existing shareholders. The Bank is proposing to go in for raisingof further capital to bolster Tier-I to take care of regulatory prescriptions as well asto fund planned growth for at least the next two years.


Ministry of Corporate Affairs (the "MCA") had given a roadmap on convergenceto Ind AS by banks mandating them to adopt Ind AS from April 1 2018. Consequently openingbalance sheet was required to be drawn as on April 1 2018.

Progressing towards Ind AS Bank has prepared the Proforma Statement (Unaudited) forthe half year ended 30.9.2016 and for the Quarter ended 30.6.2017 with the opening BalanceSheet as on 1.4.2017 as per extant regulatory guidelines as advised by RBI circularDBR.BP.BC.No.2535/21.07.001/2017-18 dated September 13 2017 and submitted to RBI.

However on April 05 2018 Reserve Bank of India (RBI) has announced deferment ofimplementation of Indian Accounting Standards (Ind AS) by one year for scheduledcommercial banks. Accordingly the FY 2019-20 would be the first year of Ind AS with FY2018-19 as the comparative year. Bank is in the process of upgrading the Core BankingSystem and has initiated necessary steps for the preparation of financial statements asper Ind AS.


The Gross NPA of all the banks in the country has seen upward movement during the FY17-18. The Indian Banks' Gross NPA/Bad loans stood at $ 10.25 lakh crores as on 31.03.18.This is 11.80% of the total loans given by the banking industry. During the FY2018 thetotal bad loans of scheduled banks rose substantially by $ 3.13 lakh crores. Both publicand private sector banks have faced significant challenges from the bad loan.Our bankdespite accelerated efforts to maintain good health in the quality of the accounts couldnot control the addition of NPA during the FY 17-18 due to reasons beyond its control(i.e.) the failure of majority of industries granted under infrastructure Iron andsteel textiles etc. The introduction of IBC (Insolvency and Bankruptcy Code) could notbring any drastic results as it is in its initial implementation stage.

With concerted efforts substantial reduction in NPA of $ 862.Cr has beeneffected;while the unprecedented slippage of standard assets to NPA has eclipsed the goodrecovery performance.

The Bank has intensified recovery efforts and these are expected to result insignificant improvement in the NPA ratios during the year. Initiatives include disposal ofsecured assets under SARFAESI/DRT enforcement of favourable decrees as well as sale ofassets to ARCs. In this connection the Bank has seen considerable interest to purchasesuch stressed assets from various interested entities and with these efforts bank ishopeful of significant achievement in reduction of NPA.


The Bank had obtained license to open 75 new branches (69 General Banking Branches and6 Commercial Banking Branches) during 2017-18 to extend its reach and opened 67 branchesduring the year including 2 personal Banking (one in Chennai and the other in Bangalore)and 6 commercial banking branches. The Bank's network spread as on 31st March2018 stood at 548 branches with 540 General Banking branches 7 Commercial BankingBranches 1 Satellite branch and 7 extension counters with its presence spread across 18states and the union territory of Puducherry. The Bank has added 62 new ATMs during theFiscal 2017-18 and the ATM network stood at 1020 which includes 596 Offsite ATMs.

The Bank's augmented Branch and ATM network continues to provide quality banking andfinancial services to its customers. The Bank continues to focus on providing fine banking&financial services to all its customers.


Financial Inclusion is the delivery of banking services at an affordable cost to thevast sections of disadvantaged low income groups and providing timely and adequate creditwhere needed. The essence of financial Inclusion is to ensure that a range of appropriatebasic financial services are made available to every individual enabling them tounderstand and access those services. Pradhan Mantri Jan Dhan Yojana (PMJDY) projectensure to open at least one bank account to every family/household and issuing ofpersonalized Rupay Debit cards. Rupay debit cards have in-built accidental insurancecoverage.

The bank has implemented the financial inclusion plan in 363 Villages & wardsallotted by SLBC in Tamilnadu. The Bank has opened 184018 Basic Savings Bank DepositAccounts (BSBDA) including 85555 accounts under PMJDY as on March 31 2018.


During financial year 2017-18 the rupee marginally depreciated by 0.5% against a 2.1%gain in previous fiscal year on account of rising twin deficit. Rupee remained largelystable in comparison to other Asian currencies amid global recovery. Sovereign creditrating upgrade by Moody's from Baa3 to Baa2 recovery of economic growth in second half ofthe year and record high RBI foreign exchange reserves of USD 424 Billion contributed to astable rupee for most part of the year. U.S Federal Reserve continued to remain ontightening path by increasing interest rates thrice during the financial year with betterthan expected U.S.economic growth and rising inflation. The Bank of England increased itsinterest rates for the first time since 2008.

In the reporting financial year the Bank has made a substantial growth in the foreignexchange turn over and achieved $ 11192.64 Crores as against $ 6416.29 Crores in theprevious year and is geared for a higher growth.


The liabilities business continued its growth trajectory in FY18.

• The Bank ended FY18 with total deposits of INR 33309 Crores.

• Current and Savings Account (CASA) balances registered a y-o-y growth of 20%.

• The growth of CASA on a cumulative daily average balance (CDAB) basis was 23%.CASA as a part of total deposits grew to 21% in line with the Bank's objectives for thebusiness.


• The Bank continued with the strategy of expanding the CROWN and NR franchise.

• A team of Relationship Managers acquire new CROWN relationships and work withour existing CROWN customers to evolve as their preferred financial partner.

• The LVB CROWN SERVICES segment of customers accounted for a Savings Bank book ofINR 668 Crores a y-o-y growth of 81%.

• To enable non-resident customer to open accounts when they are overseas theBank has introduced "Virtual Relationship Manager" and more importantly pickup of Account Opening Forms and documents through DHL absolutely free of cost.

• The NR book has grown impressively by 76% y-o-y.

• The Bank has continued to customize products and services to address bankingrequirements of various segments. Accordingly 15 new and revamped products in Current andSavings Accounts have been launched with bespoke benefits.

• LVB Vyapaar launched towards the end of FY17 contributed handsomely with feeincome as well as a growing Current Account book.


The Equity Shares of the Bank are listed with the National Stock Exchange of India LtdMumbai and BSE LtdMumbai which is enhancing the liquidity of your equity shares.


During the financial year 2017-18 your bank had implemented the following digitalinitiatives:

Your Bank had introduced various digital features and services to serve you better.Bharat - QR Card Management and Card Less Cash withdrawal features were enabled in mobilebanking. Customers can now scan the QR at the merchant location and make payment instantlywithout need for swiping his/her debit card. The card management feature can be used forlocking/unlocking the cards temporarily manage the card limits for cash withdrawale-commerce and POS set the Green Pin change the debit card PIN. This is in addition tothe card hot-listing feature already available in mobile banking.

Further to meet the ad-hoc cash requirements of customers card-less cash feature isenabled through IMT (Instant Money Transfer). The customer can initiate cash payment toany other beneficiary in India using the mobile number. The beneficiary can use thesecured credentials shared to him directly by the sender and also one received by him onhis phone number to withdraw cash from any of IMT enabled ATMs including your Bank's ATMs.

This year your Bank had launched UPI (Unified Payment Interface) application - LVBUpaay in IOS in addition to Android platform launched during last year. USSD 2.0 servicesare enabled for customers wherein the customers can inquire the balance carry out fundtransfer by dialing *99#.

New version of Information Kiosk had been launched by your Bank with enhanced userexperience which facilitates customers to recharge mobile DTH block debit cards setGreen Pin for debit card cheque status inquiry including the stop payment various intraand interbank fund transfer options along with other options to inquire the accountbalances account statement last 10 transactions etc.

Now retail internet banking users are empowered to set and manage the limits forfinancial transactions and also set the limit for beneficiaries added by them. In additionto the above 'Aadhaar Seeding' feature is enabled in retail internet banking.


Life Insurance:

Bank has entered strategic alliance with three leading Life Insurance companies in thecountry Max Life Insurance Birla Sun Life Insurance and DHFL Pramerica Life InsuranceCompany Ltd to offer life insurance cover to the valued customers of the Bank. Theproducts offered to our clients are more diversified and tailor made to meet theirrequirements.

During the financial year 2017-18 the Bank has insured 9077 lives and grown by 54% andthe premium collection has increased from $ 28.41 Crs to $ 38.07 Crs registering Y-o-Ygrowth of 34%.

General Insurance:

Bank has tied up with Future Generali General Insurance Company Ltd to offer non-lifeinsurance products to the various customer segments. During the yearthe Bank collectedthe general insurance premium of $ 17.68 Crs while coveringthe assets of our customers.

Health Insurance:

The Bank has tied up with M/s. Cigna TTK Standalone Health Insurance Company Ltd tooffer health insurance products to the customers; The Bank collected health insurancepremium of $ 5.75 Crs during the year and covered 4721 customers.

Wealth Management:

1. FISDOM - Bank has tied up with M/s. Finwizard Technology Pvt Ltd (widely known asFISDOM) to offer mobile based wealth management services to our customers.

• Fisdom enables end-to-end digital transactions for mutual funds and this isfirst time in India.

• Our customers can invest in equity debt and liquid instruments through Fisdomof almost all leading AMCs.

• The Bank has acquired 12500 clients with AUM of $ 35 Cr

• The monthly SIP book stood at $ 2 Cr.

• Bank has explored NPS enrollment option in Fisdom App interested customer canenroll into NPS in fully digital platform and generate the PRAN instantly.

2. The Bank tied up with M/s. Centrum Wealth Management Limited (CWML) offering end toend wealth solution to our Ultra HNI clients CWML is an established player in the marketwith AUM of INR 10000Cr and expertise in area of complete Private Banking.

18. RISK:

The objective of risk management of the Bank is to achieve optimum return whileoperating within acceptable level of risk appetite. The Bank has an independent riskmanagement function which is tasked with managing risk through policies and processesapproved by the Board of Directors. These encompass identification measurement andmanagement or risks across the various businesses of the Bank. The risk managementfunction in the Bank strives to scientifically study vulnerabilities of process acrossbusiness portfolios through quantitative or qualitative examination of the embedded risksand controls. The function continues to focus on refining and improving its riskmanagement systems through automation of processes and building and strengtheningcontrols. The Bank has in place a Risk Management Committee of the Board of Directors. TheBank has formulated and adopted a robust risk management framework. The Bank has in placecommittees such as Credit Risk Management Committee (CRMC) Asset Liabilities Committee(ALCO) Operational Risk Management Committee (ORMC) Business Continuity ManagementCommittee (BCMC) Information Systems and Steering Committee (ISSC). These committees meetfrequently and discuss risk related issues arising from businesses and processes and haveactive participation from Top Management of the Bank.

The overall risk appetite and risk philosophy of the Bank is articulated by theManagement to the Risk Management Committee and Board of Directors. The risk appetiteframework provides guidance to the management on the permitted levels of exposure tovarious businesses and maps to the business strategy of the Bank. Further the InternalCapital Adequacy Assessment Process (ICAAP) of the Bank assesses all the significant risksassociated with various businesses and projects the requirement of capital. Theindependent risk management structure within the Bank is responsible for managing thecredit risk market risk liquidity risk operational risk other Pillar II risks likereputation risk and strategic risks and exercising oversight on risks associated withoutsourcing. The Bank has in place well-defined policies appropriate for the variousrisks viz. credit risk market risk operational risk liquidity risk counterparty riskcountry risk reputational risk strategic risk and outsourcing risk. These are reviewedperiodically in order to benefit from internal and external experience. IT and cyber riskhas assumed significance in keeping with the rising risk in these areas and to keep pacewith regulatory advisories.


The Bank has an independent Audit and Inspection Department which subjects all thebranches of the Bank besides the Treasury Currency Chests Service Branches RegionalOffices and every department of the Corporate Office to regular inspection. The Bank alsocarries out regular IS audits covering application systems and processes in businessunits.

Key areas including Treasury centralized operations departments and a large number ofbranches are under concurrent audit. Concurrent audit is carried out by qualified externalauditors and meets requirements of Risk Based Supervision. In addition the Bank alsocarries out thematic audits in selected businesses from time to time.

The Audit Committee of the Board constituted in line with RBI guidelines and as per therequirements of SEBI Regulationsreviews the adequacy of the audit and compliancefunctions including the policies procedures and techniques. The Composition of AuditCommittee of the Board is provided elsewhere in the report.

During the year there were no instances wherein the Board has not accepted therecommendations of the Audit Committee of the Board.


The staff strength of the Bank was increased from 4043 as on 31.03.2017 to 4623 as on31.03.2018 to cater to the manpower requirement on account of branch expansion andbusiness growth. Further 504 Sales Personnel were also engaged to boost sales. The Bank'sfocus on training human resources on a continual basis gained momentum by conductingonline e-learning duly leveraging technology. The Bank has trained a considerable numberof resources in offsite training programmes conducted by reputed institutions such as RBICAB SIBSTC IIBF NIBM & FEDAI. Further the Bank has entered into a strategictraining collaboration with M/s. Manipal Global Academy of BFSI and launched "MissionEnlighten" which shall facilitate in bridging the skill gap and developing theinternal talent pool.


Disclosure under Section 186 of the Companies Act 2013 does not apply to BankingCompany.


There were no related party transactions during the year under review and Form AOC-2 isnot applicable to the Bank. During the FY 2017-18 the Bank did not have any MaterialRelated Party Transaction.

The Bank has an approved policy on Related Party Transactions which has been disclosedon the website and can be viewed at

23. OUTLOOK 2018-19:

The expected growth in Global economy could provide an impetus to India's exports. Thevarious favourable indicators such as moderate levels of inflation anticipated growth inthe industrial sector expectation of greater stability in GST much awaited recovery ininvestment levels and ongoing structural reforms could propel India's economy to grow atan accelerated pace. However the country's growth could be impacted by the increase incrude oil prices along with the protectionist tendencies in some countries. The outlookfrom the recently tabled Economic Survey depicts a positive trend for the economy in thelong term which forecasts India to be the world's fastest growing large economy in thenext 10 years.


Going forward economic activity is expected to gather pace in 2018-19 benefittingfrom a conducive domestic and global environment. First the teething troubles relating toimplementation of the GST are receding. Second credit off-take has improved in the recentperiod and is becoming increasingly broad-based which portends well for the manufacturingsector and new investment activity. Third large resource mobilisation from the primarymarket could strengthen investment activity further in the period ahead. Fourth theprocess of recapitalisation of public sector banks and resolution of distressed assetsunder the Insolvency and Bankruptcy Code (IBC) may improve the business and investmentenvironment. Fifth global trade growth has accelerated which should encourage exports.Sixth the thrust on rural and infrastructure sectors in the Union Budget could rejuvenaterural demand and also crowd in private investment.

India's GDP growth saw a temporary dip in the last two quarters of 2016-17 and in thefirst quarter of 2017-18 due to demonetization and disruptions surrounding the initialteething trouble in implementation of GST. The Indian economy is set to revert to itsgrowth trend in the coming years and growth is expected to firm up in 2018-19 on the backof higher private consumption and improvement in investment.


• Real Gross Domestic Product (GDP) is likely to grow by 6.6 per cent in 2017-18and may accelerate by 70 basis points (bps) in 2018-19 to 7.3% on the back of support fromprivate consumption and investment.

• Real Gross Value Added (GVA) is expected to grow by 7.1 per cent in 2018-19supported by activity in the industry and services sectors.


Headline Consumer Price Index (CPI) inflation is expected to increase till Q1:2018-19and thereafter remain below 5% till Q4:2018-19 Forecasters have assigned the highestprobability of CPI inflation being in the range 4.5-4.9% in March 2019.

Exports and imports:

The volume of merchandise exports is forecast to rise by 9.4% in 2018-19 slightly morethan the rate of growth in the previous year. The volume of imports on the other hand isexpected to drop sharply. If lower imports help in increasing domestic production thatwill be a positive.

Current account deficit:

The Current Account Deficit (CAD) is expected at 1.9% of GDP in 2017-18 and is likelyto increase by 20 bps to 2.1% of GDP in 2018-19.

The banking sector:

The banking sector has been experiencing high balance sheet stress with the corporatedebt overhang and associated banking sector credit quality concerns. The implementation ofthe new Insolvency and Bankruptcy Code is an important step towards improving the creditbehaviour.

Recapitalization of the Public Sector Banks will improve the banking sector's abilityto support growth have the potential to ease stress on the banking sector andreinvigorate bank credit.

Reserve Bank of India (RBI) has deferred the implementation of Indian AccountingStandards (Ind AS) by one year for Scheduled Commercial Banks i.e. 2019-20 would be thefirst year of Ind AS with 2018-19 as the comparative year. This will provide time for thebanks to improve their preparedness on technical and operational side requirements forthe smooth implementation of Ind As.


Corporate Governance of the Bank continues to rest on the fundamental pillar of highethical values designed to enhance and protect the interests of all the stakeholders. TheBank has complied with the Corporate Governance provisions as specified in SEBI (ListingObligation and Disclosure Requirements) Regulations 2015. In addition to complying withthe mandatory requirements the Bank is also complying with having separate offices of theChairman and Chief Executive Officer which is a discretionary requirement under theRegulations. However the same is also in compliance with the RBI directive. Further allthe Directors on the Board have executed deed of covenant and undertaking individually inline with the recommendations of Dr. Ganguly Committee Report. Pursuant to SEBI (ListingObligation and Disclosure Requirements) Regulations 2015 a Management Discussion andAnalysis is presented in Annexure-A and Report on Board Committees is furnished inAnnexure-B. Composition of the Board of Directors together with the attendance ofDirectors at various meetings of the Board its Committees and Annual General Meeting andthe number of directorships held by them alongwith the details of Audit Committee andStakeholders Relationship Committee are furnished in Annexure-C including composition ofthe Audit Committee. General Shareholders' information is furnished in Annexure-D.


During the financial year the Board met 16 times. The Board meetings were held inaccordance with the provisions of the Companies Act 2013. The details of the meetingsheld are provided in the Corporate Governance Report that forms part of this AnnualReport.


According to the Articles of Association of our Bank the number of Directors of theBank shall not be less than three and more than fifteen and not less than fifty-onepercent of the total number of Directors shall be persons who satisfy the requirements ofSection10A of the Banking Regulation Act. The process of Due Diligence is undertaken incompliance of Directives/Guidelines/Circulars issued by RBI from time to time in thematter of appointment/re-appointment of Director. The Non-Executive Chairman of the Bankand the Managing Director of the Bank are appointed with prior approval of the RBI. Basedon the vacancies that may arise in the Board from time to time the Board follows a dueprocess of appointment of directors through prior due diligence in line with theregulatory advice given by RBI SEBI and MCA by way of Circulars / Guidelines /Regulations / enactments. The Nomination Remuneration and Compensation Committee of theBoard have formulated criteria for evaluation for the appointment or re-appointment ofdirectors including Independent Directors. The Managing Director &CEO of the Bank ispaid remuneration as approved by the RBI but is not paid any sitting fees. TheNon-Executive Chairman of the Bank is paid honorarium as approved by the RBI along withsitting fees paid for attending Board/Board Committee meetings. Other than the MD&CEOand Part-time Chairman no other directors are paid any remuneration/honorarium apart fromsitting fees for attending Board and Board Committee Meetings. The details of remunerationof the MD&CEO and that of the sitting fees paid to the other directors are availableelsewhere in the report. The Senior Management and the other KMPs of the Bank along withother employees are paid remuneration based on internal HR policies of the Bank. Thesenior management of the Bank along with the KMPs abide by the Code of Conduct prescribedby the Bank. The code of conduct has been disclosed at the Bank's website and can beviewed at For the FY 2017-18 theMD&CEO ED&CFO (employed till 21.10.2017) and Company Secretary are the KeyManagerial Personnel (KMPs) of the Bank as stipulated by the Companies Act 2013. As on31.03.2018 other than the MD&CEO there are no other Whole Time Directors in the bank.


The Company has duly obtained necessary declarations from each Independent Directorunder Section 149(7) of the Companies Act 2013 that he/she meets the Criteria ofIndependence as laid down in the Companies Act 2013 and Regulation 16 of SEBI (ListingObligation and Disclosure Requirements) Regulations 2015 and the Company has alsoobtained the 'Fit and Proper' declaration as prescribed by the Reserve Bank of India.


The performance of the Board as a whole and that of the individual Directors and ofvarious Committees of the Board were evaluated based on the 'Criteria for evaluation ofIndependent Directors and the Board' as formulated by the Nomination Remuneration andCompensation Committee of the Board. The Board had already taken note of the evaluationmade by the Independent Directors on the Board at their meeting held on 27.03.2018. Duringthe evaluation the Independent Directors had noted that the performance of theNon-Executive Chairman of the Board the Non-Independent Directors and the Board as awhole was found to be satisfactory. Based on the inputs received from the evaluationconducted by the Independent Directors and also considering certain specific criteriadepending on the role of the director/committee in the Bank and the criteria forevaluation framed by the Nomination Remuneration and Compensation Committee of the Boardthe subject of Board Evaluation consisted of the following:

1. Evaluation of Board as a whole.

2. Evaluation of Board Committees.

3. Evaluation of Individual Directors of the Board.

• Evaluation of Managing Director.

• Evaluation of Non-Independent Directors.

• Evaluation of Independent Directors

While evaluating the performance of the Board Board Committees and IndividualDirectors the Directors considered various parameters including those formulated by theNomination Remuneration and Compensation Committee of the Board and the Guidance Note onBoard Evaluation prescribed by SEBI. Some of the factors considered include the Structureof the Board the mix of qualification the functions of the Board etc. Being governed bythe Banking Regulation Act 1949 SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 and Companies Act 2013 the mandatory Committees of the Board have beenentrusted with specific roles and responsibilities under the relevant regulatoryprovisions. Besides the mandatory Committees as prescribed by the regulators the Boardhas separately constituted certain Committees with specific reasons viz. the HR Committeeof the Board and the Capital Raising Committee of the Board.

The evaluation of Board Committees was done taking into account their mandatecomposition frequency of their meetings independence of the Committees from the Boardcontribution of the Committees to the decisions of the Board through recommendations andto the Management through decisions etc. The Managing Director & CEO of the Bank wasevaluated based on the Business targets set and the Bank's overall performance during theyear managing and executing the Board approved business plans operational plans riskmanagement and financial affairs of the organization; ensuring proper coordinationbetween the Board and the Senior Management; Motivating employees and resolving majoremployee related issues thus maintaining a healthy work environment; Ensuring strictmonitoring of the internal control processes.

The Non-Executive Directors (both Independent and Non-Independent) of the Bank wereevaluated based on their attendance and active participation in the Board and Committeemeetings openness to new ideas and ability to challenge old practices and throwing up newideas for discussion; Coordination and rapport with the fellow Board Members; the positivecontribution of the individual Directors who come from a professional background and thequality of suggestions and guidance given by them through their participation in themeetings with an understanding of the business of the Bank and an understanding of theirrole and responsibilities and the overall effectiveness; the broad based discussions atBoard/Committee Meetings the understanding of the regulatory requirements; remainingabreast of various developments in the Indian banking arena and keeping up with thevarious modifications / re-enactments of statutory enactments applicable to the Bank likethe Companies Act SEBI Regulations and the Banking Regulation Act 1949; approach towardsconflicts resolution and their contribution in enhancing the Board's overall effectivenessand integrity and maintaining of confidentiality.

The Independent Directors of the Bank were also provided a familiarization programabout the bank and their ability to bring in an independent judgment to the issues handledby the Board without getting influenced otherwise. The evaluation with respect toindividual non-executive directors revolved around various factors as mentioned above andit was ensured that the Board members evaluated their fellow member Directors in theabsence of the Director being evaluated.


Resignations/Cessation of tenure of appointment:

• Shri N.S. Venkatesh Executive Director and Chief Financial Officer of the Bankresigned with effect from 21.10.2017 after serving on the Board of the Bank for a periodof 1 year and 3 months.

• Shri S G Prabhakaran retired from the Board on 06.06.2018 as per the provisionsof Section 10A (2A) of the Banking Regulation Act 1949 after serving on the Boardcontinuously for a period of eight years.

• Shri Pankaj Vaish vacated his office by operation of law on 18.07.2017 pursuantto the provisions of Section 161 of the Companies Act 2013 after serving in the Board foraround 10 months in the current tenure of appointment.

• Shri Prakash P Mallya vacated his office by operation of law on 18.07.2017pursuant to the provisions of Section 161 of the Companies Act 2013 after serving in theBoard for around 10 months in the current tenure of appointment.

• During the year Smt. E V Sumithasri retired from the Board on 03.09.2017 aftercompleting the tenure of appointment approved by the shareholders. After her retirementshe was re-appointed by the Board as Additional Director (Non-Executive and Independent)on 27.09.2017. However she resigned from the Board with effect from 30.03.2018 afterserving on the Board for around 6 months in the present term.

• During the year Shri S Dattathreyan retired from the Board on 26.09.2017 aftercompleting the tenure of appointment approved by the shareholders. After his retirementhe was re-appointed by the Board as Additional Director (Non-Executive and Independent) on27.09.2017. However he retired from the Board on 07.03.2018 as per the provisions ofSection 10A (2A) of the Banking Regulation Act 1949 after serving on the Boardcontinuously for a period of eight years.


• Shri G Sudhakara Gupta was appointed as an Additional Director on 27.09.2017pursuant to the provisions of Section 161 of the Companies Act 2013 and classified asNon-Executive and Non-Independent Director in terms of Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 and representingBusiness under minority sector as per Banking Regulation Act 1949.

• Shri H S Upendra Kamath was appointed as an Additional Director on 20.04.2018pursuant to the provisions of Section 149 (4) and Section 161 of the Companies Act 2013and classified under Independent category in terms of Regulation 16(1)(b) of theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 and representing Banking (Practical Experience) and Small Scale Industry(Special Knowledge) under majority sector as per Banking Regulation Act 1949.

• During the year the tenure of appointment of Shri Suvendu Pati was extended byRBI for a period of two years from February 12 2018 to February 11 2020 or till furtherorders whichever is earlier.

Re-appointment of Director retiring by rotation:

Smt Anuradha Pradeep Director will be retiring by rotation at the ensuing 91st AnnualGeneral Meeting and being eligible offers herself for re-appointment.

Key Managerial Personnel

• Shri N S Venkatesh who took charge as the Executive Director of the Bank on01.07.2016 was additionally designated as the Chief Financial Officer of the Bank witheffect from 26.12.2016 in addition to the responsibilities as Executive Director of theBank resigned with effect from 21.10.2017 after serving as Chief Financial Officer forabout 10 months.

• Shri S Sundar took charge as the Chief Financial Officer of the Bank with effectfrom 27.04.2018.

Apart from the above there were no changes in the Key Managerial Personnel during theyear.


The Board of Directors of your Bank confirms that in the preparation of the annualaccounts for the year ended March 31 2018:

• The applicable accounting standards have been followed along with properexplanation relating to material departures if any.

• The Directors had selected such accounting policies and applied themconsistently and made judgments and estimates thatare reasonable and prudent so as to givea true and fair view of the state of affairs of the company at the end of the financialyear and of the profit and loss of the Company for that period.

• The Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of applicable laws governingbanks in India for safeguarding the assets of the Company and for preventing and detectingfraud and other irregularities.

• The Directors had prepared the annual accounts on a going concern basis;

• The Directors had laid down internal financial controls to be followed by thecompany and that such internal financial controlsare adequate and were operatingeffectively; and

• The Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.


Your Bank as a responsible corporate citizen has been supporting various philanthropicactivities by donating such initiatives to the tune of $ 15.56 Lacs. Further your bankhas also taken several initiatives in the area of CSR.

Corporate Social Responsibility (CSR)

In accordance with the directives of Government of India Bank is required to spend 2%of the average net profit of the last 3 Financial Years or any part thereof on CSRactivities. The Bank has disclosed its CSR policy in the website and the same can beviewed at The AnnualReport on the CSR activities undertaken during the year as per the format specified by theMinistry of Corporate Affairs is forming part of this Report and is annexed to this Reportas Annexure E.


The Business Responsibility Report prepared in accordance with the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 has been made available on the Bank's website at


Pursuant to Section 134(3)(a) of the Companies Act 2013 the extract of Annual Returnin Form MGT 9 is appended to this Annual Report as Annexure F and a copy of the same willbe made available in the website of the bank and can be accessed at


The Bank has complied with the applicable Secretarial Standards issued by the Instituteof Company Secretaries of India (ICSI).


The disclosures pursuant to the provisions (as amended) of Section 197 read with Rule 5of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 andthe disclosures pursuant to the provisions of Section 197 (12) read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are enclosedas Annexure-G.


In the year 2010 the shareholders of the Bank have approved the issue of sharesthrough Stock Option Scheme (ESOS 2010). During FY 17-18 total of 560000 options wereexercised by the Managing Director Former Executive Director and Chief Risk Officer outof the grants made under ESOS 2010. In the year 2017 the shareholders of the Bank haveapproved the issue of shares through Employees Stock Option Scheme 2017 (ESOS - 2017). Theimplementation of both the said schemes is in accordance with the applicable SEBIRegulations.

All the options granted so far have been under ESOS 2010 and no options have beengranted under ESOS 2017 till date. There is no material changes made in the schemes duringthe year and all the schemes are in compliance of Securities and Exchange Board of India(Share Based Employee Benefits) Regulations 2014.

Statutory disclosures regarding ESOS have been furnished in Annexure H to the reportand can be viewed at annualreport.aspx.


The provisions of Section 134(1) (m) of the Companies Act 2013 and the applicable ruleunder the Companies (Accounts) Rules2014 relating to conservation of energy andtechnology absorption do not apply to your Bank. The Bank has however used InformationTechnology extensively in its operations. The Bank continues to encourage the country'sexports and will endeavor to enlarge its export financing.


Attention is invited to Note 8 of Notes to Accounts (Schedule 18) for the year ended 31stMarch 2018:

In the audited financial statement it has been reported that the advances of the bank(net of provisions) was $ 25768 crore after the adjustment of third party depositsamounting $ 794 crore. The said deposits relate to M/s. Religare Finvest Ltd and the samewere held as security for the loans extended to M/s. RHC Holding Pvt. Ltd & M/s.RanchemPvt Ltd. On account of default in clearing the loans the said deposits were closedand the proceeds were adjusted to clear the said loans. As per legal opinion received bythe bank the adjustment of deposits against loans is lawful. Now M/s. Religare FinvestLtd has filed a suit in CS.(COMM).940/2018 against our Janpath Branch before the Hon'bleHigh Court Delhi disputing the said adjustment and the same is being defendedappropriately by the bank.

Apart from the above no further material changes have occurred between the end of thefinancial year to which the financial statements relate and the date of the report.Further to SEBI regulations the Bank is already making disclosures which are material innature on an ongoing basis.


During the year under review no significant or material orders were passed by anyregulators or courts or tribunals against the Bank other than those disclosed separatelyin the financial statements Directors Report and in the Corporate Governance Report.


• The Bank was imposed a penalty of $ 74500.00 on Specified Bank Notes (SBN)currency remittances made to RBI by our Currency Chests for defective/counterfeit currencydetected ($ 1000/- $ 5000/- & $ 68500/- paid by our Vijayawada Chennai and Salemcurrency chests respectively).

• The Bank was imposed a penalty of $ 89000.00 on Specified Bank Notes (SBN)currency remittances made to RBI by our Ahmedabad Branch and Janpath Branch Delhi fordefective/counterfeit currency detected ($ 31000/- & $ 58000/- respectively).

• The Bank was imposed a penalty of $ 13830 by Clearing Corporation of IndiaLimited ("CCIL") towards two instances of intra-day shortfall in maintenance ofmargin requirement in Security Guarantee Fund (SGF) deals on 22.09.2017 and 27.09.2017.The margin requirements were immediately replenished on the same date however CCIL hascharged a penal amount on technical ground for the shortfall on 27.09.2017.


In order to provide protection against sexual harassment of women at workplace and forthe prevention and redressal of complaints of sexual harassment and for matters connectedtherewith or incidental thereto as sexual harassment results in violation of thefundamental rights of a woman to equality under Articles 14 and 15 of the Constitution ofIndia and her right to life and to live with dignity under Article 21 of the Constitutionand right to practice any profession or to carry on any occupation which includes a rightto a safe environment free from sexual harassment a well-defined policy in line with theprovisions of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 has been adopted in the bank. The complaints registered under theAct on actions covered under the ambit of Sexual Harassment at work place are handled bya committee represented by Senior Executives of the Bank a lady Law Officer and anexternal member. Redressal of such complaints are dealt in a prudent manner giving equalopportunity to both the aggrieved and the accused for representation of the case andwithout affecting the dignity and self-esteem of the women employee (permanentcontractual temporary trainee).

Number of complaints pending as on the beginning of the financial year - Nil Number ofcomplaints filed during the financial year - 2 Number of complaints pending as on the endof the financial year - Nil


Disclosure of information in the public interest by the employees of an organization isincreasingly gaining acceptance by public bodies for ensuring better governance standardsand probity in the conduct of affairs. Large scale corporate frauds had necessitatedinternationally various legislative measures for safeguarding public interest throughenactments.

As a proactive measure for strengthening financial stability and with a view to enhancepublic confidence in the robustness of the financial sector RBI has formulated a schemecalled "Protected disclosures scheme for private sector and foreign banks".

In the above perspective our Bank has formulated and implemented a "WhistleBlower Policy" which is made available in the Bank's Website and local intranet.During the year 2017-18 no personnel has been denied access to the Audit Committee. TheWeb link thereto is


Pursuant to the Regulation 25(7) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Bank has to conduct a familiarization programme fornewly inducted Independent Directors and the Bank has done accordingly. In compliance withRegulation 46 (2) (i) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the details of the familiarisation programme conducted are disclosed inthe website of the Bank and can be viewed at


The Bank has formulated a Code of Conduct pursuant to the SEBI (Prohibition of InsiderTrading) Regulations 2015 to regulatemonitor and ensure reporting of trading by theemployees and other connected persons towards achieving compliance with the SEBIRegulations and is designed to maintain highest ethical standards of dealing in securitiesof the Bank by persons to whom it is applicable. The code of conduct and related policyare available in the Bank's website and can be viewed at

45. AUDITORS: Statutory Auditors:

The Statutory audit of the Bank was carried out by M/s. R. K. Kumar & Co CharteredAccountants Chennai whose report is annexed and forms part of this report. The StatutoryCentral and Branch Auditors have audited all the branches and other offices of the Bank.The qualified opinion of the Statutory Auditors together with the basis and our responseto the same are furnished hereunder:


Basis for Qualified Opinion

* The financial statements of the bank include Advances (net of provisions) of $ 25768crore after adjustment of third party deposits amounting to $ 794 crore duly supported bylegal opinions. The said adjustment is being questioned by the deposit holder. Pendingresolution of the same we are unable to comment on the impact if any on the financialstatements and legal/ regulatory consequences.

* The series of transactions leading to the above adjustment has resulted in shortfallin CRR maintenance. Penal consequences if any thereon is not ascertainable.

Qualified Opinion

* In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matter described in the "Basisfor Qualified Opinion" paragraph the financial statements give the informationrequired by the Banking Regulation Act 1949 as well as the Companies Act 2013 in themanner so required for banking companies and give a true and fair view in conformity withaccounting principles generally accepted in India of the state of affairs of the Bank asat 31st March 2018 and its loss and its cash flows for the year then ended.


In the audited financial statement the advances of the bank (net of provisions) isshown at $ 25768.20 crores after the adjustment of loans against third party depositsamounting $ 794.00 crores. The said deposits relate to M/s. Religare Finvest Ltd and thesame were held as security for the loans extended to M/s. RHC Holding Pvt. Ltd & M/s.Ranchem Pvt Ltd. Over the last year the Bank had continuously pursued with the depositorand borrowers for regularization of the loans resulting in some iterations in the depositsand loans.

Eventually on account of continuing default in clearing the loans the said depositswere closed and the proceeds were adjusted to clear the said loans. As per legal opinionreceived by the bank the adjustment of deposits against the loans is lawful. M/s.Religare Finvest Ltd has filed a suit in the last week of May 2018 in CS.(COMM).940/2018against the bank before the Hon'ble

High Court Delhi disputing the said adjustment and the same is being defendedappropriately by the bank and based on the legal advice the bank believes that no losswill arise on this score.

On account of the iterations in the deposits and loans mentioned above there arose asmall resultant shortfall in the maintenance of CRR for a short period. The Bank hasalready notified RBI of the shortfall in CRR maintenance and has also provided $ 76.62lakhs towards interest payable if any for the shortfall. No regulatory proceedings arepending in this regard.

Quote: We draw attention to

(i) Note No. 3.3.6 of the financial statements regarding deferment of provision forMark to Market (MTM) losses on investment of $ 98.29 crores; and

(ii) Note No. 4.4.2 of the financial statements regarding deferment of Gratuityprovision of $ 11.27 crores Our opinion is not qualified in respect of these matters.


(i) Note No:3.3.6. As permitted by RBI vide circular DBR.NO.BP.BC.102/21.04.048/2017-18dated April 2 2018 the bank has opted to spread the provisioning for mark to market(MTM) losses on investments held in AFS and HFT for the quarter ended March 312018equally over four quarters. Accordingly Bank has provided $ 32.76 crore for depreciationof the Investment portfolio for the quarter ended March 2018. The balance amounting to $98.29 crore will be provided in the ensuing three quarters.

(ii) Note No:4.4.2. As permitted by RBI vide DBR.BP.9730/21.04.018/2017-18 dated27.04.2018 the bank has opted to spread the additional liability on account of theenhancement in Gratuity limits from $ 10 lakhs to $ 20 lakhs. Accordingly Employee costfor the quarter ended 31st March 2018 includes the 1/4th of the impactamounting to $ 3.75 crore and unamortised portion of $ 11.27 crore as on 31stMarch 2018 will be equally spread over the next three quarters.

Secretarial Auditor

Pursuant to the provisions of Companies Act 2013 the Bank has appointed Mr. K.Muthusamy Practicing Company Secretary Coimbatore (CoP 3176) as the Secretarial Auditorfor the FY 2017-18. The Secretarial Audit Report dated 14.06.2018 is annexed to thisreport as Annexure-I. There are no qualifications reservation or adverse remark ordisclaimer in the report.


Your Directors would like to thank the shareholders and customers for their continuedgoodwill and support. The Board also gratefully acknowledges the guidance and co-operationreceived from the Reserve Bank of India and other regulatory and government authoritieslike SEBI NSE BSE NSDL CDSL and Department of Income Tax.

Your Directors would also like to acknowledge the unstinted support provided by theManagement and staff including the Employees' Union and Officers' Association and lookforward to a more evolved relationship as steps are taken to re-orient the bank for thefuture.

For and on behalf of the Board of Directors
Place : Chennai B.K. Manjunath Parthasarathi Mukherjee
Date : 26.06.2018 Chairman of the Bank Managing Director & CEO