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South Indian Bank Ltd.

BSE: 532218 Sector: Financials
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OPEN 21.70
VOLUME 555877
52-Week high 34.75
52-Week low 20.90
P/E 11.41
Mkt Cap.(Rs cr) 3,818
Buy Price 21.10
Buy Qty 10827.00
Sell Price 21.15
Sell Qty 11247.00
OPEN 21.70
CLOSE 21.60
VOLUME 555877
52-Week high 34.75
52-Week low 20.90
P/E 11.41
Mkt Cap.(Rs cr) 3,818
Buy Price 21.10
Buy Qty 10827.00
Sell Price 21.15
Sell Qty 11247.00

South Indian Bank Ltd. (SOUTHBANK) - Director Report

Company director report



To the Members

The Board of Directors is pleased to place before you the 86th Annual Report of theBank along with the Audited Balance Sheet as at March 31 2014 and the Profit and LossAccount for the year ended March 31 2014.


The performance highlights of the Bank for the financial year ended March 31 2014 areas follows:

Key Parameters Rs. in crore
2013-14 2012-13
Deposits 47491.00 44262.00
Gross Advances 36403.00 32014.00
Total Gross Business 83894.00 76276.00
Net Profit 507.50 502.27
Capital & Reserves 3368.05 3003.61
Capital Adequacy (%) - Basel-II 12.53 13.91
Basel-III Earnings Per Share (EPS): 12.42 NA
(a) Basic EPS (in Rs. ) [face valueRs. 1/-] 3.78 4.03
(b) Diluted EPS (in Rs. [face valueRs. 1/-] 3.77 4.00
Book Value per Share (in Rs. ) [face valueRs. 1/-] 25.06 22.44
Gross NPA as % of Gross Advances 1.19 1.36
Net NPA as % of Net Advances 0.78 0.78
Return on Average Assets (%) 1.00 1.17


The Bank had achieved a net profit of Rs. 507. 50 crore during the year against the netprofit of Rs. 502. 27 crore posted during the previous year. The Bank was able to achievethis growth in net profit essentially on account of higher scale of operations bettermanagement of assets and liabilities and focus on enhancement of non-interest revenue ofthe Bank..

The Operating Profit for the year under review was Rs. 928. 95 crore beforedepreciation taxes and provisions. Net profit was Rs. 507. 50 crore and the profitavailable for appropriation was Rs. 544. 46 crore as per details given below:

(Rs. in crore)
Profit before depreciation taxes & provisions 928.95
Less: Depreciation 44.61
Provision for NPA/NPIs 137.12
Provision for FITL 5.64
Provision for depreciation on investments (28.47)
Provision for Income Tax/Wealth Tax 221.43
Provision for standard advances 31.09
Provision for restructured advances 9.70
Provision for Impaired Assets 0.33
Net Profit 507.50
Brought forward from last year 36.96
Profit available for appropriation 544.46
Appropriations (Rs.incrore)
Transfer to Statutory Reserve 126.88
Transfer to Capital Reserve 0.84
Transfer to Revenue & Other Reserves 220.00
Transfer to Special Reserve u/s 36(1) (viii) of The 17.00
Income Tax Act 1961
Transfer to / (from) Investment Reserve 14.09
Proposed Dividend 107.52
Dividend Tax on Proposed Dividend 18.27
Carried over to Balance Sheet 39.86
Total 544.46


The Board of Directors recommended a dividend of 80% (tax- free in the hands ofshareholders) i. e. @ Rs. 0. 80 per Equity Share of face value of Rs. 1/- per sharevis-a-vis 70% i. e. Rs. 0. 70 per share declared last year.


During the last financial year the Bank has opened 54 new branches and 200 ATMs acrossthe country. The Bank has been successful in widening its presence pan India with 794branches and 9 service branches. The branch network now covers 29 states / unionterritories and has a network of 1000 ATMs.

The Bank further plans to open 25 new branches 25 Extension Counters 250 ATMs 3 USBsand increasing the network of branches to establish foot prints in the states not coveredhither to Arunachal Pradesh and Sikkim during the current financial year.


The Bank's issued and paid up capital stood at Rs. 134. 39 crore as on March 31 2014.During the year 54 09 172 stock options granted under Employee Stock Option Scheme hadbeen exercised by eligible employees.

The capital plus reserves of the Bank has gone up from Rs. 3 003. 61 crore to Rs. 3368. 05 crore owing to plough back of profits during the year.


The Bank is subject to the capital adequacy guidelines mandated by RBI which are basedon the framework of the Basel Committee on Banking Supervision. As per Basel IIIguidelines the Bank is required to maintain a minimum Capital to Risk Weighted AssetsRatio (CRAR) of 9% {11. 5% including Capital Conservation Buffer (CCB)} with minimumCommon Equity Tier I (CET1) of 5. 5% (8% including CCB) as on 31st March 2019. Theseguidelines on Basel III are to be implemented beginning 1st April 2013 in a phasedmanner the minimum capital required to be maintained by the Bank for the year ended 31stMarch 2014 is 9% with minimum Common Equity Tier 1 (CET1) of 5%.

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31 2014according to Basel III guidelines is 12. 42% as against the statutory requirement of 9%.Tier I CRAR constituted 10. 79% while Tier II CRAR worked out to 1. 63%.

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31 2014according to Basel II guideline is 12. 53% as against the statutory requirement of 9%.Tier I CRAR constituted 10. 89% while Tier II CRAR worked out to 1. 64%. The Bank isfollowing Standardized approach Standardized Duration approach and Basic Indicatorapproach for measurement of capital charge in respect of credit risk market risk andoperational risk respectively.


The Bank's shares continue to be listed on The Cochin Stock Exchange Ltd. BSE Ltd.and The National Stock Exchange of India Ltd. The Bank confirms that it has paid thelisting fees to all the Stock Exchanges for the year 2014-15.


The Bank has achieved a total gross business of Rs.83894 crore consisting of totaldeposit of Rs. 47491 crore and gross advances of Rs.36403 crore as on March 31 2014registering a growth of 9.99% over the previous year.

In CASA segment the Bank has achieved a year on year growth of 19.34%. During theyear 2013-14 8. 01 lacs new SB A/cs had been opened. The Bank has accorded priority tomeaningful financial inclusion exercise during the period under reporting.


The total deposits of the Bank increased to Rs. 47 491 crore from Rs. 44 262 crore ason March 31 2013 registering a growth of 7. 30%.

The break-up of the deposit as on March 31 2014 is as under:

Amount ( Rs. in crore) % to total Deposits
Current Deposits 1888.27 3.98
Savings Deposits 7936.63 16.71
Term Deposits 37666.19 79.31
Total 47491.09 100.00


Gross advances of the Bank registered an increase of 13. 71% to touch a gross figureof Rs. 36 403. 10 crores. Total Priority sector advances as at the end of the financialyear stood at Rs. 13 376. 72 crores constituting 40. 66% of the Adjusted Net Bank Credit(ANBC). Exposure to agricultural sector amounted to Rs. 4 556. 59 crores forming 13. 85%of ANBC as at the end of the financial year. Break-up of exposure under Priority sector isfurnished below:

Amount ( Rs. in crore)
Agriculture & Allied activities (including investments in RIDF) 4556.59
Small Enterprises 6509.26
Other Priority Sector 2310.87
Total Priority Sector 13376.72

* As per RBI guidelines indirect lending in excess of 4. 5% of ANBC is not reckonedfor computing achievement under 18 percent target for agriculture sector. Hence theachievement under 18 percent target comes to 10. 41%. However same is reckoned forcomputing achievement under the overall priority sector target of 40 percent of ANBC.


Financial Year 2014 was a challenging year with overall economic slowdown on thebackdrop of halted investment cycle firm inflation and tight monetary condition. Althoughmarket witnessed heightened volatility initially on the news of fed tapering it gotabsorbed finally without major difficulties. We expect gradual economic recovery in2014-15 with better investment prospect on the backdrop of improved current accountdeficit global economic recovery and growth inducing policy initiatives of the newfederal government. However a weak monsoon could upset prospect of early economicrecovery at the expected level.

Bank's gross investment portfolio stood at Rs. 14 351. 77 crores as on March 31 2014compared with Rs. 12 523. 47 crores as on March 31 2013 registering a growth of 14.60%. Investment Deposit ratio has increased to 30. 22% as on March 31 2014 from 28. 29%as on March 31 2013.

Even in the challenging environment profit on sale of investment registered healthygrowth from Rs. 57. 72 crores in FY2013 to Rs. 69. 88 crores in FY2014. Total interestincome from investments for the FY2014 was Rs. 954. 48 crores as against Rs. 746. 39crores for the FY2013 registering a growth of 27. 88%.


During the year 2013-14 as a result of the focused and sustained efforts like earlyrecovery of NPAs through prompt and effective measures under the SARFAESI Act follow upof recovery cases pending before DRTs and civil courts one time compromise settlements ofaccounts etc. Bank has recovered NPAs to the extent of Rs. 532. 69 crore (recoveryincluding up- gradation Rs. 301. 16 crores) as against the target of Rs. 250. 00 crore.The recovery during the current year also surpassed the recovery of Rs. 270. 73 crore forthe previous financial year ended March 31 2013. The thrust on selection of creditadequate due diligence and improvement in credit administration were maintained ensuringimprovement in quality of assets.

During the year the Gross NPA of the Bank declined from Rs. 433. 87 crore as on March31 2013 to Rs. 432. 62 crore as on March 31 2014. But Net NPA marginally increased fromRs. 249. 53 crore as on March 31 2013 to Rs. 281. 67 Crore as on March 31 2014. Out ofthis GNPA of Rs. 432. 62 crores Rs. 186. 28 crores is accounted by fresh slippage andprovision requirement was only Rs. 38. 16 crores. In terms of percentage GNPA improvedfrom 1. 36 % as on March 31 2013 to 1. 19 % as on March 31 2014 and net NPA remainunchanged at 0. 78% as on March 31 2014.


The growing competition arising out of increasing customer expectations and increasingneed of risk management pushed Indian Banks to adopt technology more vigorously forsurvival and growth.

Indian banking industry today is in the midst of an IT evolution. A combination ofregulatory and competitive reasons has led to increasing importance of total bankingautomation in the Indian Banking Industry.

Information Technology has basically been used under two different verticals inBanking. One is IT infrastructure and controls and other is Application of IT forimproving business process and developing customer centric solutions. Informationtechnology enables sophisticated and product development better market infrastructureimplementation of reliable techniques for control of risks and helps the financialintermediaries to reach geographically distant and diversified markets.

The Bank has been an early adopter of technology with a view to providing safe andconvenient banking facilities to its customers having introduced host of services andfacilities for enhancing the customer satisfaction. The Bank has been successfullyfunctional with Finacle Core Banking Solution (CBS) from Infosys for several years. CBShas been the key component in introducing the following technology services by the Bankfor the benefit of its customers.

• Debit Card operations with VISA MAESTRO and RuPay.

• Straight Through Processing (STP) for RTGS and NEFT payment systems.

• Internet Banking and E-Commerce including NEFT support for other bankremittances.

• Mobile Banking and M-Commerce (with support for other bank money transferthrough IMPS).

• ASBA (Application Supported by Blocked Amount).

• Foreign Inward Instantaneous remittance with own Payment Hub system.

• Demat and On-line Trading Facility.

• Point of Sales (POS).

• Bullion Sales.

• Portfolio Investment Scheme for NRI community.

• Central Plan Scheme Monitoring System (CPSMS).

• Kiosk based Financial Inclusion Solution.

• Cash Deposit Machines.

IT initiatives/Solutions embarked during the year

The following list elucidates a few of the IT enabled services / solutions that theBank has launched during the year to serve its customers in a better and efficient way.

• Various new products offered to customers which includes enhancements indelivery channels such as Internet Banking Mobile Banking and ATM.

• Version migration of CBS with enriched features leading to increased internalefficiency of operations augmented control over various functions through streamlinedprocesses.

• Version migration of Internet Banking Application with augmented securitycontrols and features.

• Captive Security Operation Centre in line with GKC (Gopalakrishna Committee)recommendations of RBI for monitoring and management of IT systems.

• Enterprise Wide Fraud Risk Management Solution in line with the recommendationsof GKC.

• ISO 27001 implementation for DC/DR and IT Operations.

• Business Process Management solution leading to a paperless environment to alarge extent.

• Technology solution for Basel II advanced approach/Basel III implementation.

• Integrated CRM solution to help business users for better understanding ofBank's customers.

• Rupay debit card - An NPCI initiative.

• Mobile Pass Book for customers on all platforms such as Andorid iOS Blackberryand Windows.

Information Security and Risk Management

As banks adopt technology as part of their ongoing strategic tool to face challenges inthe emerging realities of business they are increasingly exposed to technology risks. Itis therefore imperative for each bank to work out appropriate IT risk managementstrategies to secure its most vital information asset and ensure that related riskmanagement systems and processes are strengthened on continual basis to secure bothpresent and future banking activities. SIB Rs. s Information Security Policy and other ITPolicies - IT Operation Policy IT Governance Policy IT out sourcing Policy andInformation Security systems have already taken these aspects into consideration. Furtherthe Information Security of banking IT functions is getting strengthened throughimplementation of a captive SOC (Security Operation Centre).

The Bank has been providing awareness on e-threats to its customers and staff on acontinued basis so that both proactive and reactive measures can be initiated as deemedappropriate to mitigate potential risks associated with e-threats.

The Bank has been implementing the stipulations and guidelines articulated and issuedby RBI based on the working group recommendations on Electronic Banking Technology RiskInformation Security and Cyber Frauds as part of the IT governance programme(Gopalakrishna Committee Report).

IT Training

During the year many training programmes had been attended by the Bank's officers inpremier institutions such as IDRBT NIBM to keep themselves abreast with the advancementsin IT Information Security CRM etc.

Awards and Accolades

During the period under review the Bank has received the following awards for itsachievements from different quarters/ agencies:

• Awards from the Sunday Standard instituted by The New Indian Express Group forBest Banker (mid-sized) 2013 Best Private Sector Banker Best Banker - All roundexpansion and Best Banker - Efficiency and Profitability.

• Prestigious IBA Banking Technology Award 2012-13.

• The Business Excellence Award 2012-13 instituted by the Trivandrum Chamber ofCommerce and Industry.

• Dr. V. A. Joseph MD & CEO has been declared as one among the best 100 CEOs'of India by Business Today's ' Roll of Honour - CEOs' survey conducted in association withPrice Waterhouse Coopers.

Gopalakrishna Committee Recommendations Management Philosophy and Measures

Gopalakrishna Committee Recommendations on Information Security Electronic BankingTechnology Risk and Cyber Frauds as applicable to the Bank has been taken up forimplementation. Effective measures have been taken to address the identified gaps in eacharea such as IT Governance Information Security IT Service out sourcing IS Audit ITOperations Cyber Frauds Business Continuity Plan (BCP) Customer Education and Legalissues. The IT Organization set up has been redrawn to suit the functions / rolesspecified in the recommendations with segregation of duties. Technology Development ITOperations and IT Assurance functions have been clearly divided and now independentlyheaded.

IT Strategy Committee of the Board IT Steering Committee Information SecurityCommittee and Chief Information Security Officer (CISO) reporting independently to HeadRisk Management are in place.

Revamped Information Security Policy factoring the various guidelines and stipulationsmentioned in the report has been approved by Board and is in place besides other ITPolicies such as IT Operation Policy IT Governance Policy and IT Out Sourcing Policy.

The progress of implementation of GKC recommendations are reviewed by IT StrategyCommittee of Board and the Board on quarterly basis. The major items which are underprocess which would enable the Bank to achieve full compliance to GKC are as follows:

1. Security Operation Centre

2. Comprehensive Fraud Risk Management Solution

3. ISO 27001 Implementation

4. Near line DR Center Solution


Risk is an integral part of the banking business and the Bank aims at deliveringsuperior value to shareholders by achieving an appropriate trade-off between risk andreturn. Sound risk management and balancing risk-return trade-off are critical to a Bank'ssuccess. Business and revenue growth have therefore to be weighed in the context of therisks embedded in the Bank's business strategy. Of the various types of risks the Bank isexposed to the most important are credit risk market risk (which includes liquidity riskand price risk) and operational risk. The identification measurement monitoring andmitigation of risks continued to be a key focus area for the Bank. The risk managementfunction attempts to anticipate vulnerabilities at the transaction level or at theportfolio level as appropriate through quantitative examinations of embedded risks. Therisk management strategy of the Bank is based on a clear understanding of various risksdisciplined risk assessment risk measurement procedures and continuous monitoring formitigation. The policies and procedures established for this purpose are continuouslybenchmarked with the best practices followed in the Industry.

The Bank's risk management structure is overseen by a Committee of the Board.Appropriate policies to manage various types of risks are approved by Risk ManagementCommittee (RMC) which provides strategic guidance while reviewing portfolio behaviour.The senior level management committees like Credit Risk Management Committee (CRMC)Market Risk Management Committee (MRMC) and Operational Risk Management Committee (ORMC)develop the risk management policies and vet the risk limits. The Asset LiabilityManagement Committee ensures adherence to the implementation of the above risk managementpolicies develop Asset Liability Management Policy within the above risk framework.

Compliance with Basel III and Basel II framework

In compliance with regulatory guidelines on Pillar I of Basel II norms Bank hascomputed capital charge for credit risk as per the Standardized Approach for market riskas per the Standardized Duration Method and for operational risk as per the BasicIndicator Approach. To address the issues of Pillar II the Bank has implemented ICAAP(Internal Capital Adequacy Assessment Process) integrating capital planning withbudgetary planning and to capture residual risks which are not addressed in Pillar I likecredit concentration risk interest rate risk in the banking book liquidity riskearnings risk strategic risk reputation risk etc. Bank has adopted a common frameworkfor additional disclosures under Pillar III for adhering to market discipline of Basel IIand Basel III guidelines. This requires the Bank to disclose its risk exposures riskassessment processes and its capital adequacy to the market in a more consistent andcomprehensive manner.

Risk Management Practices

It is imperative to have a robust and effective risk management practices not only tomanage risks inherent in the banking business but also the risks emanating from financialmarkets as a whole. The Bank has put in place risk management architecture and practicesthat is overseen by a Committee of Directors. The Bank has in place a robust riskmanagement structure which proactively identifies the risk faced by the Bank and helps inmitigating it while maintaining proper tradeoff between risk and return therebymaximizing the shareholder value.

Business Continuity Plan which suits the present scenario covering all criticalprocesses of the Bank is in place. The Bank has also set up an operationalised DisasterRecovery Centre for its Core Banking Operations.

In furtherance of the goals of effective risk management the Bank has strengthened itsrisk management processes by tuning fine its internal rating models internal ratingmigration study and also through introduction of comprehensive upgraded policies forcredit and operational risk. Credit monitoring system was further streamlined for focusedattention on improvement in asset quality. The Bank has also introduced risk managementprocesses like Risk and Control Self Assessment (RCSA) framework Stress Testing frameworkand risk based pricing model linked to rating during the year. The market situationsBank's liquidity positions and the peer group pricing are closely monitored for revisingthe various interest rates.

Skill sets of mid-offices of the Bank were strengthened and its functions were madebroad based further for effective monitoring of market risk.

Apart from the Risk Management Committee of the Board at apex level the Bank has astrong Bank-wide risk management structure with Credit Risk Management Committee MarketRisk Management Committee and Operational Risk Management Committee at senior managementlevel operational risk management specialists in all Regional Offices and dedicatedmid-office at Treasury Department/International Banking Division at operational level.

The Bank continued with the system of comprehensive risk profiling of the Bank in linewith regulatory guidelines that will facilitate integrated risk management with assessmentof the direction of risk.

The Bank has appointed consultants as part of moving into advanced approach under theBasel II framework as stipulated by the Reserve Bank of India. As per the scheduled roadmap Bank is to move into the Advanced Approach by September 30 2015.

The Bank has taken necessary steps to comply with the 'Guidelines on implementation ofBasel- III capital regulations in India' in a phased manner as directed by the RBI.


The total forex business turnover for the year ended March 31 2014 wasRs. 141195.49crore (comprising Merchant Turnover Rs.11840.48 crore and Interbank TurnoverRs.129355.01 cr) recording an increase of 52.21% as compared to the level of previousfinancial year. The Bank earned an exchange profit of Rs.34.89 crores showing a year onyear increase of 27.24%. The Bank has also earned a profit of Rs.3.78 crores from bullionbusiness and has sold 168 kg of gold during the FY 2013-14.

At present the Bank is having rupee inward remittance arrangement with 5 Banks and 32Exchange Houses and turnover for the year ended March 2014 was Rs.5831.29 croreregistering an increase of 23.30 % as compared to the previous financial year. During theFY 2013-14 Bank has concluded correspondent banking arrangement in Singapore Dollar (SGD)with HSBC Singapore. The Bank continued providing managerial support to M/s. Hadi ExpressExchange UAE exclusively for marketing the remittance business of the Bank.

Considering the scope in scaling up remittance business through arrangements with EH'sthe Bank has decided to depute its officers to various middle east countries. Presentlythe Bank has deputed four officers to UAE with UAE Exchange Centre Al Ansari Exchange andAl Ahalia Money Exchange.

The Bank has shifted to new Integrated Treasury Management Software 'Intellect - Tx'of M/s Polaris Financial Technologies Ltd on September 30 2013.


The NRI Division of the Bank aims at personalized and dedicated services to NRIcustomers. It also extends support to branches and closely monitors the growth of NRIbusiness. NRI deposit of the Bank constitutes 26% of the total bank's Core deposits.NRE/NRO savings bank deposits constitute 20% of the total CASA of the Bank.

Since FY 2012-13 NRI Division had successfully implemented Welcome kits to NREprivilege accounts enabling instant activation. Such accounts are now available at allbranches of Hadi Express Exchange Marketing Officers at UAE and at selected branches ofSIB in Kerala. The initiative is widely accepted in the market and it added momentum inopening of NRE SB accounts improving the share of low cost deposits of the Bank. NRIDivision also extended yet another next generation service to the NRI customers byimplementing ONLINE NRE/ NRO account opening which can be done at the comfort of theirhome / office. To increase the momentum of NRI business growth and valued customerretention Overseas NRI meets were arranged at Kuwait & Oman and in every Keralaregions. As part of focusing NRI customers outside Kerala region one NRI meet wasarranged in AHMEDABAD region also. The Bank had opened and managed a stall in the IndianPavilion during the Dubai Shopping Festival at UAE to promote NRI services. All thoseefforts had resulted in achieving a growth of 35% in the total NRI deposit business of theBank.


The Bank accords utmost importance to human resources development. Training Programmesare conducted at SIB Staff Training College (SIBSTC) Thrissur and at 9 Regional TrainingCenters (RTCs) at ROs for enhancement of professional skills of the staff. The trainingprogrammes are designed to develop competency of operating personnel while imbibing theSIB spirit and culture through an effective learning process. The success of theseprogrammes reflects on the enhanced organizational productivity. SIBSTC and the RTCsidentify gaps in skill of the personnel and provide learning to them for qualitativeimprovement. During the year 2013-14 the Bank has imparted training to 2 647 officers1 200 clerks and 53 sub staff in various aspects of banking operations. Thus the Bankhas provided training to a total of 3 900 of its personnel which is about 55% of totalstaff strength of 7 111 as on March 31 2014. This is in consonance with the Bank'svision towards continuous upgradation of skills to ensure that the staff members meet therising expectations of customers and discharge services professionally covering the entiregamut of banking operations.


The Marketing Department of the Bank plays a critical role in generating new businessfor the Bank and customer acquisition. The department is engaged in creating awareness onproducts and promoting products by driving customer-centric campaigns.

The products and services under the ambit of Marketing Department can be broadlyclassified as either Technology or Third Party Products.

Technology Products of the Bank

The Bank has effectively leveraged technology and introduced several variants oftraditional products and new e-based services tailor made to the diversified needs ofcustomers. Technology services like ATM cards internet banking mobile banking etc. havetransformed the customer's banking experience from branch banking to anytime anywherebanking.

Any Branch Banking System: All the branches of the Bank areinter-connected and are capable of providing online real-time transactions to itscustomers. As information is centralized and updates are available simultaneously at allplaces single-window service has become possible leading to effective service-deliveryto customers. Customers can Deposit / Withdraw freely without any tariff charge from anybranch.

SIB ATM cum Debit Cards: The Bank is offering both Visa and Maestro debitcards to its customers. Using SIB debit cards Bank's customers can withdraw cash throughATMs of any Bank in India and also across the globe wherever Visa / Mastero logo isdisplayed. The Bank has also enabled its Visa cards and Maestro cards for onlinetransactions. Co-branded Foreign Currency Travel Card launched in association with AxisBank is specifically designed for customers who travel abroad and is available in 7foreign currencies - USD GBP AUD EUR CHF CAD and JPY.

The Bank launched international EMV Chip and PIN based cards in Visa platform forfacilitating highly secure international card transactions. Domestic only RuPay cards arealso available to customers for use at domestic ATMs and POS terminals.

Internet Banking: The internet banking service under the brand name"SIBerNet" has helped to position the Bank as a technology-driven Bank offeringsuperior services to both retail and corporate customers. Fund Transfer (RTGS/ NEFT)online bill payments donations to temples etc. are a few of the services offered throughSIBerNet. In addition to these the Bank has also introduced Direct and Indirect TaxPayment facility for its retail and corporate Customers.

Mobile Banking: Mobile banking services help customers maintain a virtualconnection with the Bank at all times. SMS SIB M-Pay and SIB M-Passbook are the mobilebanking based services currently offered by the Bank. SIB Mobile Service (SMS) enablescustomers receive instant intimation on their account activities via SMS alerts and alsoenquire important information over SMS.

The enhanced mobile banking service of the Bank - "SIB M-Pay" offers 24x7inter/intra Bank fund transfers with immediate credit of the beneficiary account. Thefund transfer facility is facilitated through the IMPS (Immediate Payment Service)platform of NPCI. In addition to the fund transfer service SIB M-Pay customers areoffered value- added services like mobile recharge DTH recharge etc. also.

The Bank was a pioneer in introducing SIB M-Passbook application that allows customersto access account transaction details on their smart phones. The app is available in allplatforms - iOS (iPhones) Android Windows and Blackberry.

Point of Sale (POS): The Bank in association with M/s. Atos WorldlineIndia Pvt. Ltd. is offering two types of POS terminals - PSTN (wired terminal) and GPRS(wireless). Atos is the market leader in India in this segment and the primary serviceprovider for POS acquiring services to a number of leading public sector and privatesector Banks in the country.

Third Party Products

To cater to the needs of a diverse customer base the Bank has made arrangements withseveral companies to distribute products like insurance and mutual funds to customers.

Insurance (Life/General): The Bank acts as a corporate agent for the distributionof insurance products of both Life Insurance Corporation of India and M/s. Bajaj AllianzGeneral Insurance Company for life insurance and general insurance respectively.

Mutual Funds: Mutual Fund is a popular form of investment since it provides theadvantages of professional portfolio management and dividend reinvestment. The Bank hastie up with 13 leading Mutual Fund Companies thereby offering a variety of mutual fundproducts to customers.

Bonds: The Bank has enrolled as a Channel Partner for the distribution of bondsissued by different companies through Bank's tie up with IFIN - a subsidiary of IFCI(industrial Financial Corporation of India) Financial services Limited. Through thistie-up the Bank has been enrolled as a channel partner of IFCI for the distribution ofcapital gain bonds and tax free bonds.

Depository Services: The Bank offers Depository Services for the benefit of itscustomers. Through this facility customers can hold their securities in electronic formin demat account with Central Depository Services (India) Ltd. (CDSL). For e-trading theBank offers SIBerTrade - the online trading facility to buy / sell stocks for its domesticcustomers from stock exchanges in India through tie-up with M/s. Geojit BNP ParibasFinancial Services Ltd. SEBI has also registered the Bank as Self Certified Syndicate Bank(SCSB) for accepting application under Application Supported by Blocked Amount (ASBA)through all the branches of the Bank. ASBA enables the Bank's customers to apply for IPO /FPO rights issues etc. by marking a lien on the account instead of actual debit at thetime of applying which is more beneficial for the customers. Bank is also offeringPortfolio Investment Scheme (PIS) - an extensive share trading facility for its NRIcustomers through tie-up with M/s. Geojit. Under PIS NRI customers can directly invest inthe Indian securities market through recognized stock exchanges under repatriable /non-repatriable basis.

New Pension System: The Bank acts as a Point of Presence to provide services tosubscribers of New Pension System introduced by Pension Fund Regulatory and DevelopmentAuthority (PFRDA). The Bank has been appointed as an Aggregator for NPS Lite. All branchesof the Bank are designated for collecting NPS Lite applications and contributions.

Pan Application Servicing: The Bank has made arrangement with M/s UTI TechnologyServices Ltd. (UTITSL) for servicing applications for PAN card. On an average the Bankprocesses 15 000 applications per year.

SIB E-Pay: In association with BSNL the Bank is facilitating the payment of BSNLLandline bill of its customers through their accounts maintained with the branches. Acustomer can avail this facility by submitting a mandate form at the branch where theaccount is being maintained. Once registered the BSNL landline bill of the customer willbe automatically debited from the customer's account every month. The key feature of thisfacility is that it is totally hassle free and is offered free of cost to the customers.

Cash Management Service (Premium Collection): The Bank is offering Cash ManagementService (Premium Collection) to customers in association with Tata AIG Exide LifeInsurance Co. Ltd. (formerly known as ING Vysya) and ICICI Prudential Life Insurance CoLtd. Under this arrangement Bank's customers as well as walk-in customers can remit lifeinsurance premium through branch counters. This facility is offered free of cost tocustomers.

Centralized Direct Debit Service: the Bank has entered into tie-up with leadingaggregator M/s. Billdesk Services for Centralized Direct Debit arrangement. Through thistie-up Bank's customers will be able to make regular payments like monthly/quarterly/halfyearly payments of Mutual Fund SIP investments/ Loan EMIs (Vehicle/EquipmentLoans)/Insurance premium etc. by directly debiting their account and thereby making thepayments to various billers/institutions. This facility is available to all customersirrespective of their branches being located in ECS/non-ECS locations. The Bank hassimilar arrangements with 3 companies. TVS Credit Services Sundaram Finance Ltd. andSriram City Union Finance.

TOLL FREE: The Bank has subscribed to toll free numbers from Idea Cellular Ltd.(Toll Free number - 1800 843 1800) and BSNL (Toll Free Number 1800 425 1809) to enablecustomers to contact the Bank without incurring any cost. In addition a landlineconnection dedicated for international customers is also available. Functioning hours ofToll Free Centre is from 8:30 a.m. to 8:30 p.m. during week days and from 8: 30 a. m. to4: 30 p. m. on Saturdays.

Marketing and promotional activities of the Bank are vital in identifying customerneeds and designing differentiated products to cater to those needs. While the departmentis keen to introduce new and varied products facilitating customer adoption and providingcustomer assistance assumes equal significance during its operation. The Bank strives tocomply with regulatory requirements while taking every endeavour to avoid pitfalls inmis-selling Bank's products.

Visibility Enhancement Initiatives

The Bank has undertaken many brand promotion initiatives in various media likeNewspaper Television Radio outdoor and online media. Outdoor brandings wereconcentrated in major metros like Bangalore Delhi Mumbai Kolkata Chennai and Hyderabadthrough bus shelters and hoardings. The Bank's 85th Anniversary celebrations and SIBExcellence award show were aired in ET Now and Amrita TV We produced two commercialswhich created much hype in the media world and these were well acclaimed televisioncommercials of Mr. Mammootty the Bank's Brand Ambassador. All major inaugural events andfinancial results were covered globally through print and media associates.

The Bank has its own official fan pages in Facebook Twitter and YouTube. The Bank'sofficial Facebook page contains various information about the Bank such as mission andhistory of the Bank. The page also gives an opportunity to the customers to provide theirvaluable suggestions/feedbacks and also to seek clarifications regarding the products andservices by making queries. The Bank's page provides information about the interest ratesof Deposits (Domestic/NRI) and in identifying the nearest branch and ATM. Also details ofnew branches and ATMs' opened across the country are updated on a daily basis. Bank'sofficial Facebook page also provides general banking and the Bank's product informationthrough various photos daily (Everyday a new photo is added to the photo album). TheBank's official Twitter page is integrated with Facebook and the contents shared in theFacebook page are posted as "tweets".


Sri Nikhil Kumar honourable Governor of Kerala inaugurated the 85th Anniversarycelebrations of the Bank on February 1 2014 at Thrissur. SIB Excellence Awards were alsopresented to Six globally acclaimed personalities hailing from Kerala for their life-timeachievements. The awardees were Padma Vibhushan Dr. E. Sreedharan former ManagingDirector of DMRC renowned poet Padma Vibhushan Dr. ONV Kurup playback singer Sri P.Jayachandran renowned oncologist Dr. V. P. Gangadharan cine artist Sri Innocent(President AMMA) and Chairman of V-Guard Industries Sri Kochouseph Chittilappilly.


Human Resource is the major catalyst for effective and efficient operation of anyorganization. The Bank has a team of committed self-motivated and empathetic workforcewho strive to meet the customers' requirements and at the same time also meet the Bank'stargets. To augment the existing manpower in line with the Bank's healthy and sustainedgrowth and expansion of network the Bank has continued its initiatives of major talentacquisition and retention policies in the FY 2014-15.

New Talent Acquisition

The major talent acquisition initiatives of the Bank include local/general recruitmentsand campus recruitments of clerks & and officers from Colleges/Business Schools allover India. During the year the Bank has recruited 241 officers and 1119 clerks. The creamlayer of these inductees include 117 MBA graduates 52 Engineers 30 Cost Accountants 15Law graduates 25 Agriculture Officers and 2 Security Officers.


The total manpower at the end of the year was 7 111. Bank's talent pool consists of976 Postgraduates 1170 Management Graduates 647 Engineers 90 Law Graduates 91Chartered Accountants 51 Cost Accountants and 2 PhDs. As on

March 31 2014 the Bank had 7 111 personnel on its rolls. Cadre wise break-up is asunder:

Cadre Men Women Total
Officers 2363 1107 3470
Clerk 1425 1390 2815
Peon 480 30 510
Part-time employees 80 236 316
Total 4348 2763 7111

Infusion of young personnel has brought down the average age of employees of the Bankto 34 years as on March 31 2014.

Maintenance of Personnel Data

Maintenance of staff records were streamlined under "HRMSS" (Human ResourcesManagement Software Solution) System. The personnel data can be accessed by allcontrolling offices and various reports based on the data can be generated for the quickdisposal of staff related matters. To make HRMSS more comprehensive we have introducedmodules such as ID Card Request Logging System Online Annual Performance Appraisal ofOfficers upto Scale IV in addition to the existing modules like Service RecordTransfers Promotion Maintenance HRA Leave and LFC Training etc.

Motivation Plans

Some of the initiatives undertaken by the Bank in order to boost the morale of the Bankemployees are as under:

a) Promotions: The Bank is offering good opportunities to its employees. During thefinancial year 289 clerical staff were promoted to Scale I 236 officers to Scale II and164 Officers to various Senior cadres.

b) Staff Welfare Scheme (SWS) 2013 was also implemented in the FY 2013-2014 offeringjob opportunities to the children of staff members in officers/clerical/subordinatecadres. 4 Probationary Officers 16 Probationary Clerks and 14 Probationary Peons wereselected under this scheme.

c) The Bank had introduced SIB Ashwas - a top up cover insurance scheme with 'The NewIndia Assurance Co. Ltd. ' for reimbursing the difference of the medical expenses actuallyincurred by an employee/Officer for his/her treatment less the amount reimbursed underbank's scheme in terms of national level settlement for reimbursement of hospitalizationexpenses subject to certain limits exclusion etc. in terms of the Policy.

Industrial Relations

Industrial relations in the Bank have been cordial and harmonious. The representativesof Workmen Union Officers Association and Management have been working collectively witha sense of ownership for all-round growth and prosperity of the Bank. On account ofcordial industrial relations Bank has achieved considerable growth over the years.


During the financial year 2008-09 the Bank had instituted an Employee Stock OptionScheme to enable its employees to be a partner in the future growth and financial successof the Bank. The Banks' shareholders approved the plan on August 18 2008 for the issuanceof stock options to the employees. Compensation and Remuneration Committee of the Board onDecember 3 2013 has recommended to the Board to grant options at a discount of 10% on theclosing price of shares quoted on NSE on December 2 2013.

Till March 2014 3 01 55 000 stock options were vested out of which 84 73 489stock options were exercised by eligible employees. The money realized due to exercise ofthe said options was Rs. 17 95 91 374/- and consequently 1 38 82 661 shares ofRs.1/- each has been allotted to the concerned employees/legal heirs.

The total options granted under six phases of SIB ESOS 2008 works out to 4.06% of thepaid up share capital of the Bank as at March 31 2014. The scheme has generated intendedmotivation amongst the staff. With a view to establishing highest standards of personalethics Managing Director & CEO and other Directors of the Bank have voluntarilydecided not to accept any stock options though the shareholders of the Bank were graciousenough to permit grant of stock options to all the Directors of the Bank during the 80thAnnual General Meeting.


"SIBLINK" Bank's corporate magazine has been functioning as an internal PRtool educating and motivating the staff for better performance. It is published everyquarter.

SIB- Executive Brief

"SIB Executive Brief" - a daily news update on Banking Finance EconomyIndustry Market Rates etc. is being provided by SIB Staff Training College. It isE-mailed on a daily basis to Board members to the executives and it is also madeavailable at SIB-Insight for access to all the staff members.

E-Learning Tests

The Bank has completed 12 online tests through E-learning Application during the year2013-14. There were various topics covered during these tests such as Banking proceduresBank's Operations Manual- Advance version etc. Prizes were awarded for the toppers inthese tests. It is encouraging to know that the learning process is taken up with greatenthusiasm and competitive spirit the fruit of which is visible in the increasing numberof branches/offices emerging as toppers. The E-learning platform will be utilizedincreasingly for improving the knowledge level of the staff members. The Bank has alsoconducted 20 Mock Tests for JAIIB & CAIIB examinations of IIBF during the months ofApril May September and October 2013.


The Bank has since migrated to issuance of e-circulars in place of manual circulars.All the circulars of the Bank are uploaded using the 'e-circular software'. In e-circularBank's policies Guidelines and Forms are also uploaded so as to empower the branches withreadily accessible pool of information/ guidelines.


The provisions of Section 217(1)(e) of the Companies Act 1956 relating to conservationof energy and technology absorption do not apply to the Bank. However the Bank isconstantly pursuing its goal of technological upgradation in a cost efficient manner fordelivering quality customer service.

The Company being a banking company and an authorized dealer in Foreign Exchange hastaken all possible steps to encourage export credit.

Particulars of Employees

Information as required by the provisions of Section 134 of the Companies Act 1956read with the Companies (Particulars of Employees) Rules 1975 as amended vide GSR 289(E) dated March 31 2011 [Companies (Particulars of Employees) Amendments Rules 2011] isgiven under:

Name Qualification and Age (in years)



Experience (in years)

Date of commencement of Employment Last Employment
Gross (Rs.) Net (Rs.)#
V A. Joseph M. Com. LLB CAIIB PhD (HRD) MPM 63 Years. MD & CEO 7923960 5687379 42 December 2003 General Manager of Syndicate Bank at Mumbai

# Net of Taxes paid


The Bank's CSR policy strictly conforms to the guidelines of RBI and Ministry ofCorporate Affairs. The Bank focuses on major areas like Education Health careSustainable livelihood Infrastructure development and social causes. A specific budget isallocated for such activities. As a part of CSR the Bank has provided an overallfinancial assistance of ' 63. 42 lakhs in the financial year 2013-2014.

The recent enactment of the Companies Act 2013 has necessitated recalibration ofBank's CSR Policy to make it compliant with the provisions of the Act. As provided in theAct and pursuant to the same the Board of Directors has during the year constituted athree member Corporate Social Responsibility (CSR) Committee of the Board comprising ofMD & CEO and two Independent Directors. The new CSR Policy on approval willsupersede the extant policy and take retrospective effect from April 1 2014. Some of thescope of activities of CSR are:


As a part of CSR initiative the Bank has concentrated in education segment. The Bankprovided school kits to poor students and provided financial assistance for themaintenance of schools. The Bank also associated with association like Club FMSnehalayam Jesus charitable society etc. for this purpose. The Bank has provided Rs.20.08 lakhs towards this segment.

Health Care

Cancer Care for Life is a scheme of Regional Cancer Centre (RCC) Thiruvananthapuramgiving treatment benefits to cancer patients. The Bank is supporting the cause and effortsof RCC by facilitating enrollments and sharing a part of the cost as an additional supportto this scheme through CSR. We are contributing 10% in different schemes to the personsenrolled and only the net amount has to be paid by the members to join the scheme. TheBank has collected a total membership amount of Rs.2.00 crores and contributed Rs.5.5lakhs for this noble venture during this FY 2013-14. The scheme is open to all Indiancitizens and the Bank has decided to continue this scheme for FY 2014-15.

Social Causes

Further under CSR activity for the FY 2013-14 the Bank has given prior importance tosocial welfare. in association with Panaji Corporation we have provided financialassistance for the purchase of Tipper van for waste management under corporate socialresponsibility. We have also provided financial assistance for the upliftment ofdifferently abled children. The Bank has provided Solar lanterns to eligible households inPullu village. As a part of CSR Bank has provided an overall financial assistance ofRs.21. 86 lakhs in the financial year

2013- 14 towards social needs.


The Bank has launched new Banking channel viz. Kiosk Banking Model. Kiosk BankingModel is a new channel of banking model in which the basic banking services are deliveredat customer end. Under Kiosk Banking Model we provide banking services in unbanked/underbanked areas through outlets such as Common Service Centres BC model Small retail Shopsetc with a Laptop based solution.

Kiosk Centres offers basic banking services to potential customers like Customerenrolment Deposits Withdrawal Fund transfers Balance enquiry FD RD remittance etc.Customers can open new Basic Savings Account in the Kiosk Centre by providing KYCdocuments and biometrics. They can do banking transactions without a cheque leaf or ATMcard. All the above transactions will be authenticated through Biometric data available atUIDAI or Bank's own server. The centres are linked to one of Bank's base branches formonitoring purpose.

The Bank has tied up with M/s. CSC eGovernance India Ltd. to provide Kiosk Bankingservices to customers. Initially the Bank has implemented Kiosk Banking Model in the stateof Kerala through Akshaya centres who are acting as Common Service Centres in the state.


The Bank has been serving Pullu village in Chazhoor Panchayat of Thrissur District inKerala under Bank's Financial Inclusion initiative since 2010. The Bank has been carryingout Financial Inclusion operations in Pullu through ICT based BC model of FinancialInclusion with Bank's Alapad Branch as the base branch. We had undertaken a detailedfinancial assessment survey at Pullu for assessing the socio-economic status and financialstanding of villagers.

In order to ensure meaningful Financial Inclusion and to facilitate the BC basedoperations in the village we had opened an Ultra Small Branch at Pullu on 1st November2013. The Bank had adopted Pullu village during the inaugural function of USB forfurthering the development processes to be undertaken at Pullu village. We had identifiedthe gap existing in the financial literacy level of villagers and had arranged FinancialLiteracy classes to the villagers.

Following activities were undertaken by the Bank for the betterment of villagers ofPullu.

• The Bank has provided seed packets for cultivation and necessary support infarming.

• The Bank had opened 264 National Pension Scheme (NPS) accounts in the villagewith minimum contribution.

• KCC Agri and other DRI loans were granted to villagers for agriculturalactivities in the village.

• The Bank had given micro finance facility to all Financial Inclusion Accountsmaintained by the BC.

• Micro credits were given for improving income generating venture.

• The Bank had insured the entire population of Pullu who have attained 18 yearsof age under Personal Accident Death Insurance.

Green Initiatives in Corporate Governance

• As a responsible corporate citizen the Bank supports and pursues the 'GreenInitiative' of the Ministry of Corporate Affairs ("MCA"). In conformance withsuch initiatives the Bank will effect electronic delivery of documents including thenotice and explanatory statement of Annual General Meeting Audited Financial StatementsDirectors' Report Auditors' Report etc. for the year ended March 31 2014 to the emailaddress which the Shareholders have previously registered with their DepositoryParticipant (DP) as their valid e-mail address. Investors desirous of refreshing /updating their e-mail addresses are requested to do so immediately in their respective DPaccounts. The e-mail addresses indicated in respective DP accounts which will beperiodically downloaded from NSDL / CDSL will be deemed to be their registered emailaddress for serving notices / documents including those covered under Section 219 of theCompanies Act 1956.

• Shareholders holding shares in physical form desirous of availing electronicform of delivery of documents are requested to update their email addresses with Bank'sRegistrar and Transfer Agents by a written request if they wish to avail this facility. Arequest format for registering e-mail ids with the Registrar is enclosed. Shareholdersholding shares in demat segment are requested to inform their e-mail ids to theirrespective DPs.


Students' Economic Forum is a monthly publication from the SIB Staff Training Collegeand it provides an analysis of contemporary on themes relating to developments in EconomyBanking and Finance. So far 268 themes have been published since the first publicationwhich was launched in December 1991. In response to the requests from readers the first201 themes of this publication were compiled in 4 volumes and published. The objective ofthis venture is to kindle interest in economic affairs among the younger generation andalso to provide a learning platform to the student community. The hard copies of thepublication numbering 3 500 are being sent to all the branches/ offices reputed schools/ colleges / academic institutions RBI offices other Banks government organizations andcorporate offices. It has wide acceptance among students bankers and academic community.The Subjects discussed during Financial year 2013-14 include Union Budget Part—IUnion Budget Part-II The Higgs Boson Dynamic Provisioning RI0+20 New Companies Bill:Highlights Inroads Banking Structure In India - The Way Forward Findings Of ForensicScrutiny - Guidelines For Prevention Of Frauds Payment System Vision Document-2015Financial Stability And Development Council (FSDC) Interim Budget 2014-15. The soft copyof this publication is being sent to all the "Youth Plus" account holders bye-mail and it is made available in the Bank's Website.


Transactions processed through the Core Banking Solution is monitored for detectingsuspicious transactions are done using TCS Bancs Compliance - AML application todischarge the obligation cast on the Bank under Prevention of Money Laundering Act.

The Offsite Monitoring Teams set up for post facto verification of KYC compliance whileestablishing new customer relationships by the branches are stabilized fully now.

The Board has nominated Dr. V A. Joseph MD & CEO as the "designateddirector" as per the provisions of Prevention of Money Laundering (PMLA) AmendmentAct.

The Bank has attached great importance to compliance of KYC/ AML/CFT norms by thecustomers as per the Reserve Bank of India directive in the interest of the nation.


During the year pursuant to the applicable provision of the Banking Regulation Act1949 the provisions of the Articles of Association of the Bank and approval of ReserveBank of India vide its letter DBOD. 7894/08.51.001/2013-14 dtd. October 24 2013 SriAmitabha Guha (DIN 02836707) has been re-appointed as Part-time Chairman of the Bank fora further period of 3 years with effect from 2nd November 2013 till 1st November 2016on the terms and conditions stipulated in the approval letter.

Sri Mohan E. Alapatt (DIN 00025594) and Sri K. Thomas Jacob (DIN 00812892) who retiredat the 85th Annual General Meeting held on June 28 2013 were re-appointed as Directors ofthe Bank. Sri Jose Alapatt (DIN 00043444) retired from the Board w. e.f. May 11 2013 oncompleting 8 years of Directorship as stipulated under the Banking Regulation Act 1949.Sri H. Suresh Prabhu (DIN 03359835) and Dr. N. J. Kurian (DIN 01646207) had resigned fromthe Board w. e.f. November 2 2013 and April 25 2014 respectively. The Board places onrecord its appreciation for the invaluable services rendered by them during their tenureas Directors.

Sri Francis Alapatt (DIN 01419486) was appointed as an Additional Director at itsmeeting held on November 1 2013. Sri Salim Gangadharan (DIN 06796232) was appointed asDirector by the Board of Directors on January 16 2014 in the casual vacancy caused by theresignation of Sri H. Suresh Prabhu.

Sri Cheryan Varkey (DIN 06884551) was appointed as Additional Director by the Board ofDirectors at its meeting held on May 28 2014.

Pursuant to the provisions of Section 161 of the Companies Act 2013 Sri FrancisAlapatt Sri Salim Gangadharn and Sri Cheryan Varkey vacates their office at the ensuingAnnual General Meeting. Three members have expressed their intention to propose SriFrancis Alapatt Sri Salim Gangadharan and Sri Cheryan Varkey as candidates to the officeof director(s) of the Bank and have given notices in writing along with the depositamount of Rs1 00 000/- each in terms of Section 160 of the Companies Act 2013.

Further pursuant to Sections 149 152 of the Companies Act 2013 and Section 10A (2A)of the Banking Regulation Act 1949 approval of the shareholders has been sought for theappointment of Dr. John Joseph Alapatt for a period of five years Sri Mohan E. Alapattfor the period upto February 28 2018 Sri K. Thomas Jacob for the period upto August 302018 Sri Mathew L. Chakola and Sri Paul Chalissery for period upto September 30 2014 asIndependent Directors not liable to retire by rotation.


The shareholders at its 85th Annual General Meeting held on June 28 2013 appointedM/s. S. R. Batliboi & Associates LLP (formerly known as M/s. S. R. Batliboi &Associates) Chartered Accountants Chennai as the Central Auditors for the audit ofBank's accounts for the year 2013-14.

M/s. S. R. Batliboi & Associates LLP Chartered Accountants Chennai vacate officeat the end of the Annual General Meeting to be held this year but are eligible forre-appointment for the Financial Year 2014-15.

Audit and Inspection

Regular Inspection of the Bank's branches is conducted at periodical intervals on thebasis of Risk Based Internal Audit approach. Concurrent audit at branches by qualifiedChartered Accountants/retired officers covering 65% of business of the Bank. Concurrentaudit of International Banking Division and Treasury Department are also conducted. Inaddition to the above the Bank conducts Stock Audit Credit Audit KYC/ AML AuditInformation System Audit Revenue Audit to check income leakages Surprise Inspection ofgold and cash Forensic

Audit by external agencies in cases where it is found necessary exclusive Gold Loanasset verification etc. at branches. This year Bank has brought almost all isolatedremote branches under the ambit of concurrent audit irrespective of the business volumeof such branches. Also the frequency of Gold Loan Inspection has been increased.Information System Audit of CBS and major applications for the current financial year201314 was done by an external approved auditing firm. Besides all the branches aresubjected to statutory audit on yearly basis. RBI conducts Annual Financial Inspection ofthe Bank. An Offsite Monitoring Team is functioning in all Regional Offices mainly tooversee compliance of KYC/AML guidelines in the operative accounts newly opened bybranches. Bank is sending alerts (of large value) generated from a software to branchesand ROs to facilitate verification of the branch operations in which some deviations fromthe laid down procedures / rules are detected by the system. ROs are provided with aterminal of this software for scrutiny of all alerts wherever needed. Above all allalerts generated by this system are analyzed by a central team for the correctness ofthe branch operations connected to such alerts. The branch operations are analyzed forKYC/ AML/ CFT guidelines compliance centrally with the help of another software and thealerts generated from this are followed up. Statutory reporting of the violations is alsodone centrally.


The Auditors report for the year 2013-14 does not contain any qualification. Howeverthere are following matters of emphasis:

"Emphasis of Matter

We draw attention to Note 18. B. 7 to the financial statements which describes thedeferment of pension and gratuity liability relating to existing employees of the Bank tothe extent of Rs.156.53 crores and the unamortized liability of Rs.22.49 crores as atMarch 31 2014 pursuant to the exemption granted by the Reserve Bank of India and madeapplicable to the Bank vide Letter No. DBOD No. BP. BC. 15896 /21.04. 018 /2010-11 datedApril 8 2011 from the application of the provision of the Accounting Standard (AS) 15Employee Benefits. Our opinion is not qualified in respect of this matter.

We draw attention to Note 18. B. 5to the financial statements which describes creationof Deferred Tax Liability ("DTL") on Special Reserve under section 36(1)(viii)of the Income Tax Act 1961 pursuant to RBI's Circular No. DBOD. No. BP. BC. 77/21. 04.018/2013-14 dated December 20 2013 whereby the DTL of Rs.14. 71 crores pertaining toperiod upto March 31 2013 has been adjusted to the general reserve of the Bank and DTL ofRs.5. 78 crores on the special reserve created during the financial year ended March 312014 has been charged to the profit and loss account. Our opinion is not qualified inrespect of this matter. "

Since the above comments are self explanatory no explanation is offered in thisregard.


A separate report profiling Corporate Governance as required under Clause 49 of theListing Agreement with Stock Exchanges and a certificate from M/s. S.R. Batliboi &Associates LLP Chartered Accountants Statutory Auditors of the Bank are annexed to theReport.


This has been dealt with in a separate section in the Annual Report.


Pursuant to the requirement under Section 217(2AA) of the Companies Act 1956 withrespect to the Directors' Responsibility Statement it is hereby confirmed that:

1. In the preparation of annual accounts for the financial year ended March 31 2014the applicable accounting standards have been followed and proper explanation has beenfurnished to the extent of departures from those standards.

2. The Directors have 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 company at the end of the financial year 2013-14and of the profit of the company for that period.

3. The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 1956 andBanking Regulation Act 1949 for safeguarding the assets of the Company and for preventingand detecting fraud and other irregularities.

4. The Directors have prepared the annual accounts for the financial year ended onMarch 31 2014 on a going concern basis.


The Board of Directors places on record its gratitude to the Reserve Bank of IndiaSecurities and Exchange Board of India Government of India Government of Kerala and allother state Governments where the Bank operates other Government and RegulatoryAuthorities including stock exchanges where the Bank's shares are listed andcorrespondent Banks for their strong support and guidance during the year. The Board alsoplaces on record its gratitude to the Bank's shareholders and customers for theircontinued support patronage and goodwill. The Board further places on record itsappreciation for the valuable services rendered by M/s. S. R. Batliboi & AssociatesLLP Statutory Auditors during their tenure. The single most important pillar of anyInstitution is its personnel more so in the case of a service entity like a Bank. TheBank gladly acknowledges this fact and thanks all of them for their diligence and loyaltytowards the Bank. The Board expresses its sincere appreciation for the dedicated servicesrendered by officers and employees of the Bank at all levels.

By Order of the Board



Place: Thrissur

Date: May 28 2014

Annexure to Directors Report for the year ended March 31 2014


Details of the stock options granted vested exercised and forfeited & expiredduring the year under review are as under:


Tranche 1

Tranche 2

Tranche 3

Tranche 4

Tranche 5

Tranche 6

Options Exercise price (Rs.) Options Exercise price (Rs.) Options Exercise price (Rs.) Options Exercise price (Rs.) Options Exercise price (Rs.) Options Exercise price (Rs.)
Options outstanding at the beginning of the year 18548985 12.93 440550 24.98 893000 24.12 21000 12.93 1063500 21.65 - -
Options granted during the year - - - - - - - - - - 21352100 18.72
Options exercised during the year 5406772 12.93 2400 24.98 - - - - - - -
Options vested during the year 11846800 12.93 131250 24.98 254700 24.12 - - - - 17000 18.72
Forfeited/lapsed during the year 3091223 12.93 135400 24.98 47500 24.12 1000 12.93 101000 21.65 108800 18.72
Options outstanding at the end of the year 10050990 12.93 302750 24.98 845500 24.12 20000 12.93 962500 21.65 21243300 18.72
Total Number of Options in force as on March 31 2014 33425040

Other details are as under:

Money realised by exercise of options Rs.69969513.96
Pricing Formula:
a) for Tranche 1 Tranche 2 Tranche 3 Tranche 5 & Tranche 6 a) At a discount of 10% on closing market price on Stock Exchange with the highest trading volume on the immediately preceding trading day of the dates of grant.
b) Tranche 4 b) At a discount of 45% on closing market price on Stock Exchange with the highest trading volume on the immediately preceding trading day of the date of grant.
Details of options granted to Senior managerial personnel Name Options Granted
Mr. H. Suresh Prabhu 50000*
Mr. Abraham Thariyan 105000
Mr. Cheryan Varkey 97000
Mr. Joseph George Kavalam 88500
Mr. Varughese A. G. 88500
Mr. ThomasJosephK. 78500
Mr. John Thomas 78500
Mr. Murali N A. 65000
Mr. Raphael T. J. 72500
Mr. Abraham K. George 72500
Mr. Benoy Varghese 72500
* Granted while he was an employee of the Bank.
Other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year None
Identified employees who were granted option during the year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant None
Variation of terms of Options Nil
Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) - 20 'Earnings Per Share' Rs.3.77
Weighted-average exercise prices of Options whose:
• exercise price either equals market price Nil
• exercise price greater than market price Nil
• exercise price less than the market price The price of the stock options granted are:
Tranche 1 - 12. 93 Tranche 2 -24. 98 Tranche 3 - 24. 12 Tranche 4 - 12. 93 Tranche 5-21. 65 and Tranche 6 - 18. 72
Weighted-average fair value of Options whose:
• exercise price either equals market price Nil
• exercise price greater than market price Nil
• exercise price less than the market price The price of the fair value options granted are:
Tranche 1 - 8. 57 Tranche 2 - 17. 03 Tranche 3 - 22. 57 Tranche 4-23. 10 Tranche 5 - 24. 26 and Tranche 6 - 23. 49

Impact of fair value method on net profit and on EPS:

Had compensation cost for the ESOS outstanding being determined based on the fair valueapproach instead of intrinsic value method the Bank's net profit and earnings per sharewould have been as indicated below:

Particulars 31-03-2014
Net Profit as reported (Rs. in Crore) 507.50
Proforma Net profit based on fair value approach (Rs. in Crore) 506.47
Basic EPS as reported (Rs.) 3.78
Basic EPS (Proforma) (Rs.) 3.78
Diluted EPS as reported (Rs.) 3.77
Diluted EPS (Proforma) (Rs.) 3.76

In computing the above information certain estimates and assumptions have been made bythe management which has been relied upon by the auditors.

Description of the method and significant assumptions used to estimate fair value:

The Securities Exchange Board of India (SEBI) has prescribed two methods to account forstock grants; (i) the intrinsic value method; (ii) the fair value method. The Bank adoptsthe intrinsic value method to account for the stock options it grants to the employees.Intrinsic value is the amount by which the quoted market price of the underlying shareexceeds the exercise price of the option: The fair value of the options is estimated onthe date of grant using Black Scholes options pricing model with followinginputs/assumptions:


Year ended 31-03-2014

Year ended 31-03-2013

1 2 3 4 5 6 1 2 3 4 5
Exercise Price per share ( Rs. ) 12.93 24.98 24.12 12.93 21.65 18.72 12.93 24.98 24.12 12.93 21.65
Weighted Average Share Price per share ( Rs. ) 8.57 17.03 22.57 23.10 24.26 23.49 8.57 17.03 22.57 23.10 24.26
Expected Volatility (%) 28.26 28.26 28.26 28.26 28.26 29.95 28.26 28.26 28.26 28.26 28.26
Historical Volatility (%) 43.50 31.33 29.23 31.32 28.94 32.19 43.50 31.33 29.23 31.32 28.94
Life of the options granted (Vesting and Exercise period in years) 4.20 3.28 to 4.28 2.20 to 4.21 2.09 to 4.09 2.15 to 4.16 2.16 to 4.16 4.20 3.28 to 4.28 2.20 to 4.21 2.09 to 4.09 2.15 to 4.16
Average Risk Free Interest rate (%) 7.98 7.88 to 7.98 7.89 to 7.94 7.88 to 7.95 7.89 to 8.09 8.61 to 8.88 7.98 7.88 to 7.98 7.89 to 7.94 7.88 to 7.95 7.89 to 8.09
Expected Dividend Yield (%) 8.17 4.11 3.10 3.03 2.89 3.41 8.17 4.11 3.10 3.03 2.89