South Indian Bank Ltd


BSE: 532218 | NSE: SOUTHBANK | ISIN: INE683A01023 
Market Cap: [Rs.Cr.] 3,259 | Face Value: [Rs.] 1
Industry: Banks - Private Sector

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Director's Report

DIRECTORS

TO THE SHAREHOLDERS

To the Members,

The Board of Directors are pleased to place before you, the 85th AnnualReport of the Bank along with the Audited Balance Sheet as at March 31, 2013 and theProfit and Loss Account for the year ended March 31, 2013.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2013 areas follows:

Rs in Crore
Key Parameters 2012-13 2011-12
Deposits 44262.00 36501.00
Gross Advances 32014.00 27473.00
Total Gross Business 76276.00 63974.00
Net Profit 502.27 401.66
Capital & Reserves 3003.61 2167.48
Capital Adequacy (%) - Basel-I 11.46 11.64
Basel-II 13.91 14.00
Earnings Per Share (EPS) :
(a) Basic EPS (in Rs ) [face value Rs 1/-] 4.03 3.55
(b) Diluted EPS ( in Rs ) [face value Rs 1/-] 3.99 3.50
Book Value per Share (in Rs ) [face value Rs 1/-] 22.44 19.12
Gross NPA as % of Gross Advances 1.36 0.97
Net NPA as % of Net Advances 0.78 0.28
Return on Average Assets (%) 1.17 1.12

FINANCIAL PERFORMANCE

Profit

The Bank had achieved a record net profit of Rs 502.27 crore during the yearregistering a growth of 25.05% over the previous year. The Bank could achieve this healthygrowth 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 888.48 crore before depreciation,taxes and provisions. Net profit was Rs 502.27 crore and the profit available forappropriation was Rs 525.45 crore as per details given below:

( Rs in crore)
Profit before depreciation, taxes & provisions 888.48
Less : Depreciation 39.89
Provision for NPA/NPIs 131.90
Provision for depreciation on investments 11.24
Provision for Income Tax/Wealth Tax 153.59
Provision for standard advances 32.49
Provision for restructured advances 18.63
Provision for Impaired Assets -1.53
386.21
Net Profit 502.27
Brought forward from last year 23.18
Profit available for appropriate on 525.45

Appropriations

( Rs in crore)
Transfer to Statutory Reserve 125.57
Transfer to Capital Reserve 6.21
Transfer to Revenue & Other Reserves 240.00
Transfer to Special Reserve u/s 36(1) (viii) of The Income Tax Act, 1961 13.00
Transfer to/(from) Investment Reserve (5.69)
Transfer to/(from) present value provision for ADWDRS 0.00
Proposed Dividend 93.82
Dividend Tax on Proposed Dividend 15.58
Carried over to Balance Sheet 36.96
Total 525.45

Dividend

The Board of Directors recommended a dividend of 70% (tax-free in the hands ofshareholders), i.e., @ Rs 0.70 per Equity Share of face value of Rs 1/- per sharevis--vis 60%, i.e. Rs 0.60 per share declared last year.

EXPANSION PROGRAMME / POLICY OF THE BANK

During the year, the Bank opened 50 new branches and 137 ATMs across the country. TheBank has been successful in widening its coverage across the country with 750 branchestransforming it into a pan India institution. The branch network now covers 29states/union territories and has a network of 800 ATMs. The Bank plans to open more newbranches and ATMs in the current financial year so as to reach the corporate goal of 800Branches and 1000 ATMs by March 31, 2014.

CAPITAL & RESERVES

The Bank’s issued and paid up capital stood at Rs 133.85 crore as on March 31,2013. In September, 2012, the Bank successfully completed issue of 20 crore Equity Sharesof face value of Rs 1/- each @ Rs 22.13 per share inclusive of premium Rs 21.13 per shareto Qualified Institutional Investors under the guidelines issued by Securities andExchange Board of India. Further, during the year, 47,88,959 stock options granted underEmployee Stock Option Scheme were exercised by eligible employees.

The capital plus reserves of the Bank has therefore gone up from Rs 2,167.48 crore to ahealthy level of Rs 3,003.61 crore owing to fresh capital infusion with premium and ploughback of profits during the year.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)-Basel I & Basel II

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2013 interms of Basel I guideline was 11.46% as against the statutory requirement of 9%. Tier Iconstituted 9.94% while the share of Tier II was 1.52%.

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank as on March 31, 2013 interms of Basel II guideline stood at 13.91%, as against the statutory requirement of 9%.Tier I CRAR constituted 12.05% while Tier II CRAR worked out to 1.86%.

Pursuant to Reserve Bank of India guidelines, the Bank migrated to new Capital Adequacyframework w.e.f. March 31, 2009.The Bank has adopted Standardized Approach for CreditRisk,

Standardised Duration Approach for Market Risk and Basic Indicator Approach forOperational Risk while computing the Capital requirement under Basel II guidelines.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Bank’s shares continue to be listed on The Cochin Stock Exchange Ltd., BSELtd., 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 2013-14.

BUSINESS ACHIEVEMENTS

The Bank achieved a total gross business of Rs 76,276 crore, consisting of totaldeposit of Rs 44,262 crore and gross advances of Rs 32,014 crore as on March 31, 2013registering a growth of 19.23% over the previous year.

In CASA segment, the Bank has achieved a year on year growth of 14.67%. During theyear, 2012-13, 7.01 lacs new SB A/cs were opened. The Bank accorded priority to meaningfulfinancial inclusion exercise during the period under reporting.

Deposits

The Bank could increase its total deposits to Rs 44,262 crore from Rs 36,501 crore ason March 31, 2012, registering a growth of 21.26%.

The break up of the deposits as on March 31, 2013 is as under:-

Amount % to total
( Rs in crore) Deposits
Current Deposits 1,547.35 3.50
Savings Deposits 6,685.47 15.10
Term Deposits 36,029.47 81.40
Total 44,262.29 100.00

Advances

Gross advances of the Bank registered an increase of 16.53%, to touch a gross figure ofRs 32,014 crore. Total Priority sector exposure as at the end of the financial year stoodat Rs 8,591.76 crore, constituting 31.24% of the Adjusted Net Bank Credit (ANBC). Exposureto agricultural sector amounted to Rs 2,259.37 crore, forming 8.21% of ANBC as at the endof the financial year. Break-up of exposure under Priority sector is furnished below:

Amount
( Rs in crore)
Agriculture & Allied activities 2,259.37
Small Enterprises 4,551.48
Other Priority Sector 1,780.91
Total Priority Sector 8,591.76

INVESTMENTS

Gross Domestic Product (GDP) for April- December 2012, declined to 5% from 6.60% a yearago. Inflation, as per latest WPI data, was about 5.96% during March, 2013. Even asheadline inflation eased, there were upside pressures on food inflation throughout theyear essentially because of unusual spike in vegetable and cereal prices. With fallingGlobal commodity prices, normal monsoon forecast and domestic demand supply balance, WPIinflation is expected to be moderated and to be range bound around 5.50 % during 2013 -14.Latest data on Industrial production (IIP) reflects signs of revival with latest IIP indexshowing 2.5% growth over last year. Current Account Deficit (CAD) surged to 6.7% of GDP,rising sharply from the 5.3% of GDP in the previous quarter. This was largely attributableto a sharp increase in the trade deficit from US$48.3 billion (11.5% of GDP) in 3rdQuarter to $59.6 billion (12.3% of GDP) in 4th Quarter. As per the growthestimates of Reserve Bank of India, moderation in inflation, further gradual monetaryeasing and continued policy measures from the government etc. are expected to boost GDPgrowth to 5.7% during the FY 2013-14.

Bank’s gross investment portfolio increased from Rs 9,399.87 crore (March 31,2012) to Rs 12,523.47 crore (March 31, 2013), registering a growth of 33.23%. Investmentdeposit ratio increased from 25.75% as on March 31, 2012 to 28.29% as on March 31, 2013.Yield on Investments improved from 6.92% as on March 31, 2012 to 7.22 % as on March31,2013. Profit on sale of investments attained as on March 31, 2013 stood at Rs 57.72Crore as against Rs 40.78 Crore as on March 31,2012, which shows a growth of 41.54%.

NON-PERFORMING ASSETS (NPA) MANAGEMENT

During the year 2012-13, as a result of the focused approach by the Bank through earlyrecovery of NPAs, by initiating prompt and effective measures under the SARFAESI Act,follow up of recovery cases pending before DRTs and civil courts, one time compromisesettlements of accounts, conduct of recovery camps, etc., Bank could recover NPAs to theextent of Rs 270.73 crore, (recovery including up-gradation) as against the target of Rs203.00 crore, which was up from Rs 176.86 crore as on March 31, 2012. Recovery figurereported above, includes the amount of Rs 25.50 Crore realized through sale of 19 NPAaccounts with a Net Book Value (NBV) of Rs 7.74 Crore to ARCIL (Asset ReconstructionCompany India Ltd).

Despite recovery made during the year, the Gross NPA of the Bank increased from Rs267.16 crore as on March 31,2012 to Rs 433.87 crore as on March 31,2013 and consequentlynet NPA increased from Rs 76.51 Crore as on March 31,2012 to Rs 249.53 Crore as on March31,2013. In terms of percentage, GNPA increased from 0.97 % as on March 31, 2012 to 1.36 %as on March 31, 2013 and net NPA increased from 0.28 % as on March 31, 2012 to 0.78 % ason March 31, 2013. Despite the hike in GNPA and NNPA compared to previous years figures,the level in percentage terms was better than the industry average. Above increase in NPAwas mainly due to the slippage of 3 large value accounts in the Corporate sector with anaggregate outstanding of Rs 248.77 crore.

INFORMATION TECHNOLOGY (IT) AND IT ENABLED SERVICES

Information Technology and its potential to offer innovative solutions have paramountimportance for growth and sustenance of the Banks. The turnaround time for rolling out atechnology product in banks has been visibly diminishing, which essentially calls for arobust, adaptable system in place to execute projects right from conception to completion.

The Bank, an early adopter of technology with a view to providing safe and convenientbanking facilities to its customers, has introduced host of services and facilities forenhancing the customer satisfaction. The Bank has been successfully functional withFinacle Core Banking Solution (CBS) from Infosys for several years. CBS has been the keycomponent in introducing the following technology services by the Bank for the benefit ofits customers.

Real time on line ATMs having affinity with NFS (National Financial Switch),Master and VISA payment and settlement agencies.

Global Debit Card operations with VISA and MAESTRO.

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

Internet Banking & E –Commerce including NEFT support for otherbank remittances

Mobile Banking & 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 & On-line Trading Facility

Point of Sales (POS)

Bullion Sales

Portfolio Investment Scheme for NRI community

IT initiatives/Solutions embarked during the year

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

Implementation of APBS (Aadhar Payment Bridge System) in the bank for directcredit of government subsidies to customer’s accounts based on the Aadhar number.

Pilot launch of 2nd Factor Authentication for Net banking Customers whichwill provide additional security over and above User ID & Password with One TimePassword facility

National Pension Scheme for Corporate customers

Bulk Note Acceptor Machine provided to select branches to accept currencynotes from customers with direct credit to beneficiary’s account number

Enabling debit cards for ‘Card Not Present Transactions’ categoryon Internet (e-commerce transactions)

Information Security and Risk Management

As banks adopt technology as part of their ongoing strategic agenda to face challengesin the emerging realities of banking, they are increasingly exposed to technology risks.It is 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’s IS audit policies and systems hasalready taken these aspects into consideration and it includes the new supervisoryinitiatives in the form of Risk Based Supervision (RBS) and Risk Based Internal Audit(RBIA) under Basel II.

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.

Bank is in the process of implementing the stipulations and guidelines articulated andissued by RBI based on the working group recommendations on Electronic Banking, TechnologyRisk, Information Security and Cyber Frauds as part of the IT governance programme.

Upcoming Initiatives

The Bank proposes to introduce the following initiatives to augment the customersatisfaction during the year.

Major Upgrade of Core Banking Software to version 10 with a host of valueadditions

Automation of Customer Relationship Management

Workflow and Document Management Solutions for movement towards paperlessoffice

State of Art Call Center

Major Upgrade of Internet banking Software with enhanced facilities

IT Training

During the year, many training programmes were attended by the Bank’s officers inpremier institutions such as IDRBT and in international universities/institutions invarious countries to keep themselves abreast with the advancements in IT, InformationSecurity, CRM etc.

Awards and Accolades

During the year, the Bank bagged the Technology Excellence award, instituted by IDRBTfor Managing IT Risk and we are receiving this prestigious award from IDRBT for the thirdtime.

Gopalakrishna Committee Recommendations Management Philosophy & Measures

Gopalakrishna Committee Recommendations on Information Security, Electronic Banking,Technology Risk and Cyber Frauds as applicable to the Bank has been taken up forenforcement and implementation. Effective measures have been taken to address theidentified gaps in each area such as IT Governance, Information Security, IT Service outsourcing, IS Audit, IT Operations, Cyber Frauds, Business Continuity Plan (BCP), CustomerEducation and Legal issues. The IT Organization set up has been redrawn to suit thefunctions/roles specified in the recommendations with segregation of duties. Technology,Development, IT Operations and IT Assurance functions have been clearly divided and nowindependently headed. IT Strategy Committee of Board, IT Steering Committee, InformationSecurity Committee and Chief Information Officer (CISO) reporting independently to HeadRisk Management is in place. Existing Information Security Policy has been subject to amassive review to incorporate the necessary changes as required and covered by theGopalakrishna Committee recommendations and other associated policies such as customereducation policy, IT service out sourcing policy, IT strategy policy etc, are also drawnup which prescribes defined process and procedure for implementation of various aspects inthe specified areas. BCP policy and plan have been reviewed to effectuate the necessarychanges as per the recommendations. All other remaining areas are also focused to negatethe gaps identified.

RISK MANAGEMENT

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 aBank’s success. Business and revenue growth have therefore to be weighed in thecontext of the risks embedded in the Bank’s business strategy. Of the various typesof risks the Bank is exposed to, the most important are credit risk, market risk (whichincludes liquidity risk and price risk) and operational risk. The identification,measurement, monitoring and mitigation of risks, continued to be a key focus area for theBank. The risk management function attempts to anticipate vulnerabilities at thetransaction level or at the portfolio level, as appropriate, through quantitativeexaminations of embedded risks. The risk management strategy of the Bank is based on aclear understanding of various risks, disciplined risk assessment, risk measurementprocedures and continuous monitoring for mitigation. The policies and proceduresestablished for this purpose are continuously bench marked with the best practicesfollowed 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 and Investment Committee ensure adherence to the implementation ofthe above risk management policies, develop Asset Liability Management Policy andInvestment Policy within the above risk framework.

Compliance with 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 risk,earnings risk, strategic risk, reputation risk etc. Bank has adopted a common frameworkfor additional disclosures under Pillar III for adhering to market discipline of Basel IIguidelines. This requires the Bank to disclose its risk exposures, risk assessmentprocesses and its capital adequacy to the market in a more consistent and comprehensivemanner.

INTERNATIONAL BANKING

The total forex business turnover for the year ended March 31, 2013 was Rs 92,765.37crore (comprising Merchant Turnover Rs 16,565.48 crore and Interbank Turnover Rs 76,199.89cr) recording an increase of 76.15% as compared to the previous financial year. The Bankearned an exchange profit of Rs 27.42 crore showing a year on year increase of 7.07%.

At present the Bank is having rupee inward remittance arrangement with 5 Banks and 32Exchange Houses (EHs) and turnover for the year ended March 31, 2013 was Rs 4,729.47 croreregistering an increase of 18.59% as compared to the previous financial year. During theFY 2012-13, Bank concluded two new Rupee remittance tie ups, viz. Arab National Bank, KSAand Asia Express Exchange, Oman. The Bank continued providing managerial support to M/s.Hadi Express Exchange, UAE. The Bank has presently deputed 14 officers to manage theoperations of Hadi Express Exchange.

Considering the scope in improving Bank’s remittance business through arrangementswith EHs, Bank has decided to depute its officers to various Middle East countries.Presently the Bank has deputed three officers to UAE with UAE Exchange Centre and AlAnsari Exchange.

NRI PORTFOLIO

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 business of the Bank constitutes 14.75% of the total Bank deposits. NRE/ NROsavings bank deposits constitute 20% of the total CASA deposits of the Bank.

In FY 2012-13, the NRI Division has successfully implemented Welcome kits to NREprivilege accounts featuring instant activation. Such accounts are now available at allbranches of Hadi Express Exchange and marketing officers at UAE. The product is widelyaccepted in the market and it added momentum in opening of NRE SB accounts , improving theshare of low cost deposits of the Bank. To increase the momentum of NRI business growthand valued customer retention, NRI Division arranged NRI meets in Switzerland and Germanyand also in every Kerala region. The Bank had opened and managed a stall in the IndianPavilion during the Dubai Shopping Festival, at UAE to promote NRI services. All thoseefforts resulted in achieving a record growth of 37.87% in the total NRI deposit businessof the Bank as against 21.06% in FY 2011-12.

TRAINING

The Bank accords utmost importance to human resources development. Training programmesare conducted at SIB Staff Training College (SIBSTC), Thrissur and at 7 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 reflect 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 2012-13, the Bank imparted training to 2,252 officers, 1,497clerks and 158 sub staff in various aspects of banking operations. Thus, the Bank couldprovide training to a total of 3,907 of its personnel, which is about 61% of total staffstrength of 6,383 as on March 31, 2013. This is in consonance with the Bank’s visiontowards continuous up-gradation of skills to ensure that the staff members meet the risingexpectations of customers and discharge services professionally covering the entire gamutof banking operations.

MARKETING

Marketing Department has within its fold, technology products and third party products,bancassurance and value added services that cater to the varied requirements of thecustomers. The department educates and promotes various products through campaignslaunched from time to time. This has ensured better customer retention on the one hand andinduction of large number of fresh customers on the other hand. The activities ofMarketing Department are articulated in tandem with the efforts of the branches, regionaloffices and with the regional marketing officers to help to identify businessopportunities and achieve corporate goals.

ANY BRANCH BANKING

The Bank offers a wide range of SB & CD products with Any Branch Banking facilityto suit the needs of various customer segments. Through Real Time GrossSettlement/National Electronic Fund Transfer (RTGS/NEFT), customers can transfer/ receivefunds to/from accounts with any other banks in India, who are the members of this paymentsystem. Customers can also send/receive funds to/from abroad through various onlinereal-time remittance services provided by the Bank. The products such as CD Smart andSIB-Mahila, Youth Plus, etc. cater to specific segments of the customer base. The productshave been well received by the customers. Constant innovations are being done on theexisting product lines to make it more attractive.

SIB PURE GOLD

The Bank launched bullion banking on September 6, 2011 for sale of gold coins/ingots ofdenomination 1, 3, 4, 8, 20, 50 & 100gm, with 999.9 purity branded as "SIB PureGold", through all the Branches of the Bank. SIB Pure Gold is packaged in atamper-proof cover and is sourced from world’s renowned refinery PAMP, Switzerlandwith purity being ASSAY certified. In the FY 2012-13, the Bank could sell 361.75kg of SIBPure Gold through various campaigns and also through Grand Kerala Shopping Festival(GKSF).

TECHNOLOGY PRODUCTS

Internet Banking

SIBerNet – Internet banking service of the Bank offers Self, Third Party andExternal Fund Transfer (RTGS/NEFT), which enables Bank’s customers to do transactionon a round the clock basis. To facilitate online transaction for Internet Bankingcustomers, Bank has arrangements with 7 leading online payment aggregators like Billdesk,Tech Process, CC Avenues, Times of Money Ltd (TOML), IBIBO, Paymate and Atom TechnologyLtd. To enable online offering facility to SIBerNet customers, the Bank has establishedarrangements with famous temples like Attukal Bhagavathy Temple and Sri Padmanabha SwamyTemple, Trivandrum and Sri Krishna Temple, Guruvayur. In order to cater to the needs ofBank’s customers in an instantaneous way the Bank introduced instant Pin Mailers forSIBerNet which enables the customer to receive User Id and Password over the counterinstantly when they are applying for internet banking facility. In addition to these theBank is introducing Direct and Indirect Tax Payment facility for its Retail and CorporateCustomers.

The Bank was successful in enrolling 70,081 SIBerNet registrations in the FY 2012-13with 53% growth compared to 50% in FY 2011-12. The growth can be attributed to variouscampaigns launched round the year to increase the number of registrations.

Mobile Banking

Customers of the Bank enjoy the benefit of mobile banking service wherein, thetransaction alerts are sent to the customers (including the mobile nos. registered outsideIndia) on a real time basis, using SMS technology. Last year the Bank has launched SIBM-Pay, the enhanced mobile banking services for the benefit of domestic customers whichoffers 24X7 instant inter/intra bank fund transfers even on bank holidays. The fundtransfer facility is facilitated using the IMPS (Immediate Payment Service) platform ofNPCI. The facility also enables the registered user to enjoy value added services likemobile recharge, DTH recharge, flight ticket booking, movie ticket booking etc. usingtheir mobile phones. The Bank had planned exclusive marketing strategies for this product,which resulted in large number of registrations.

The SMS registration of the Bank were 2,81,245 in the FY 2012-13 with a growthpercentage of 119% compared 60% in FY 2011-12 and the number of M-Pay registration of theBank were 1,34,535 in the FY 2012-13 with a growth percentage of 379%. The Bank has beenfloating different campaigns to motivate the staff members to create customer awarenessabout mobile banking.

Debit Cards

The Bank is offering both Visa and Maestro debit cards to its customers. Using SIBdebit cards Bank’s customers can withdraw cash through ATMs of any bank in India andalso across the globe wherever Visa/Master logo is displayed. Visa cards have threevariants namely Classic, Gold and Platinum which offers a wide variety of features such asenhanced cash withdrawal limits, online transaction limits, POS transaction limits etc.Bank has enabled its Visa cards and Maestro cards for online transactions. Co-brandedForeign Currency Travel Card was launched on 29th January 2013 in association with AxisBank. The cards are available in 7 foreign currencies: USD, GBP, AUD, EUR, CHF, CAD andJPY.

The Bank has issued 4,78,589 debit cards during the FY 2012-13. The Bank was successfulin increasing card base and card usage on account of innovative marketing campaigns suchas Smart Shopper Contest. Bank proposes to launch Chip based cards, RuPay Cards andMasterCard during the FY 2013-14.

THIRD PARTY PRODUCTS

Depository Services

The Bank offers Depository services for the benefit of its customers. Through thisfacility, customers can hold their securities in electronic form in demat account withCentral Depository Services (India) Ltd. (CDSL). Bank has now attained the Permanentregistration from SEBI for the demat operations.

For e-trading, the Bank offers SIBerTrade – the online trading facility to buy/sell stocks for its domestic customers from stock exchanges in India through a tie-upwith M/s. Geojit BNP Paribas Financial Services Ltd. SEBI has also registered the Bank asSelf Certified Syndicate Bank (SCSB) for accepting application under Application Supportedby Blocked Amount (ASBA) through all the branches of the Bank. ASBA enables theBank’s customers to apply for IPO/FPO, rights issues etc. by marking a lien on theaccount instead of actual debit at the time of applying, which is more beneficial for thecustomers. Bank is also offering Portfolio Investment Scheme (PIS) – an extensiveshare trading facility for its NRI customers through a tie-up with M/s. Geojit. Under PIS,NRI customers can directly invest in the Indian securities market through recognized stockexchanges under repatriable/ non-repatriable basis.

During the the last financial year, Demat services of the Bank have registered 1,568new registrations with a total customer base of 10,832.

Insurance (Life/General)

Since June, 2009 the Bank has been acting as a corporate agent of Life InsuranceCorporation of India for selling the life insurance products. This year, the Bank has beenfocusing more on non-single premium products, considering the fact that this is morebeneficial for the Bank in terms of revenue on the one hand, while being complementary toBank’s core business growth strategy, on the other.

Various campaigns had been launched during the year by the Bank & LIC to focus onincreasing the Regular Premium Business.

General Insurance products such as health policy packages and policies to protect theassets and goods against various perils are also made available to customers. The Bankacts as a corporate agent for the distribution of insurance products of M/s Bajaj AllianzGeneral Insurance Company.

General insurance business of the Bank has recorded growth of 18% over the year witharound Rs 13 crore Gross Premium collected during the year. The success can be attributedto the marketing activities of the Bank to generate more business.

New Pension System

The Bank was appointed as a Point of Presence to provide services to subscribers of NewPension System introduced by Pension Fund Regulatory and Development Authority (PFRDA).The Bank has been appointed as an Aggregator for NPS Lite and is the only major bank inthis segment. All the branches are designated for collecting NPS Lite applications andcontributions. In the last financial year, the Bank has acquired around 5,000 newcustomers for NPS Lite.

Pan Application Servicing

Based on the representations received from the customers, the Bank had made a directarrangement with M/s UTI Technology Services Ltd. (UTITSL) for servicing the PAN cardapplications.

This is in addition to the already launched KYC Certification services for the MutualFund Investors, in association with M/s CDSL Ventures Ltd. (CVL). On an average the Bankis processing 15,000 applications per year.

SIB E-Pay

In association with BSNL, the Bank is facilitating the payments of BSNL Landline billsof its customers through their accounts maintained with the branches. The customers canavail this facility by submitting a duly filled mandate form at the branches where theymaintain their account. Once registered, the BSNL landline bills of the customer will beautomatically debited from the customer’s account, the very next month onwards. Thisfacility is limited to Kerala branches only. The key feature of this facility is that itis totally hassle free and is offered free of cost to the customers. The Bank is earningrevenue from BSNL for facilitating this service.

Cash Management Services

The Bank is offering Cash Management Services to the customers in association with TataAIG, ING Vysya and ICICI Prudential Life Insurance Co. Ltd. Under this arrangement,Bank’s customers as well as the walk-in customers can remit life insurance premiumthrough the branch counters. The remittance will be accepted only in cash and up to anamount of Rs 49,999/-. This facility is offered free of cost to the customers. The Bank isearning revenue from the insurance companies for facilitating this service.

Mutual Funds

Mutual Funds are one of the preferred investment options for all those who wish toavoid direct investments in stock markets, yet earn more than what traditional savingsavenues offer. A retail customer always prefers to invest in Mutual Funds wherein hisinvestment will be completely diversified into various sectors by a professional fundmanager. The Bank is already having tie up with 13 leading Mutual Fund companies to offervariety of mutual fund products to the Bank’s customers. The Bank has revamped theservices in mutual fund business and will be targeting Systematic Investment Plan (SIP)type products aggressively, in the coming year. In the last financial year, the Bank hascanvassed 3,200 fresh SIP’s.

Bonds

During the FY 2012-13, the Bank has been enrolled as a Channel Partner for thedistribution of the bonds issued by different companies, through Bank’s tie up withIFIN- a subsidiary of IFCI (Industrial Financial Corporation of India) Financial servicesLimited. Through this tie up the Bank has been enrolled as a channel partner of IFCI forthe distribution of:

1. Capital Gain Bonds.

2. Tax free Bonds.

Within a short span of time, Bank has canvassed 11 Capital Gain Bond applicationsconstituting to a total amount of Rs 1.10 crore from the customers. Customers can downloadthe application forms and product features of these bonds directly from Bank’swebsite or through any of its branches.

Centralized Direct Debit Service

The Bank is now tied up with the leading aggregator M/s. Billdesk Services for theCentralized Direct Debit arrangement. Through this tie up Bank’s customers will beable to make regular payments like monthly/quarterly/half yearly payments of Mutual FundSIP investments/Loan EMIs (Vehicle/ Equipment Loans)/Insurance premium etc. by directlydebiting their account and thereby making the payments to various billers/institutions.This facility will be made available to all the customers irrespective of their branchesbeing located in ECS/ non-ECS locations.

VISIBILITY ENHANCEMENT INITIATIVES

The Bank has undertaken many brand promotion initiatives in various media likeNewspaper, Television, Radio, outdoor and online media. The advertisements wereconcentrated in major metros like Bangalore, Delhi, Mumbai, Kolkata, Chennai and Hyderabadand enhanced the visibility of the Bank at these centres. The Bank was the Title Sponsorand official Bankers to the prestigious Grand Kerala Shopping Festival Season -6.

The Bank marked its presence on social media on 16th November, 2012. The Bank has itsown official fan pages in Facebook, Twitter and YouTube. Bank’s official Facebookpage contains various information about the Bank such as mission and history of the Bank.The page also gives an opportunity to the customers to provide their valuablesuggestions/feedbacks and also to make clarifications regarding the products &services by making queries. Bank’s page provides information about the interest ratesof Deposits (Domestic/NRI) and in identifying the nearest branch and ATM. Bank’sofficial Facebook page also provides general banking and the Bank’s productinformation through various photos daily (Everyday a new photo is added to the photoalbum). The Bank’s official Twitter page is integrated with Facebook and the contentsshared in the Facebook page are posted as "tweets".

TOLL FREE

Toll Free centered at HO-Marketing Department was operational since August 7, 2008 withthe toll free telephone facility subscribed from Idea Cellular Ltd (Toll Free number- 1800843 1800 & 1800 833 1800 and BSNL (Toll Free Number- 1800 425 1809). Further to this,we are having one land-line connection mainly intended for international customers.Functioning hours of Toll Free Centre is from 8:30 am to 8:30 pm during week days and from8:30 am to 4:30 pm on Saturdays.

PERSONNEL

Keeping pace with the Bank’s healthy and sustained growth, the Bank continued itsinitiatives of major talent acquisition and retention policies in the FY 2012-13. The Bankhas embarked upon recruitment drive to acquire manpower of required skills. The totalnumber of employees at the year end was 6,383. Of the total 6,383 employees, there are 877Post graduates, 950 Management Graduates, 605 Engineers, 79 Law Graduates, 71 CharteredAccountants, 25 Cost Accountants and 2 PhDs.

The major talent acquisition initiatives of the Bank include general recruitments andcampus recruitments of clerks & officers from Colleges/Business Schools all overIndia. During the year the Bank has recruited 258 officers and 727 clerks. Of the officersjoined, 180 are MBA graduates, 67 Engineers and 10 Law graduates.

Staff position

As on March 31, 2013, the Bank had 6,383 personnel on its rolls. Cadre wise break up isas under:

Cadre Men Women Total
Officers 2088 893 2981
Clerk 1339 1228 2567
Peon 515 24 539
Part-time employees 103 193 296
Total 4045 2338 6383

The average age of employees of the Bank was 36 years as on March 31, 2013. Out of thetotal number of staff members, 51% are below the age of 30 years.

Maintenance of staff records were streamlined under "HRMSS" (Human ResourcesManagement Software Solution). The personnel data can be accessed by all controllingoffices and various reports based on the data can be generated for the quick disposal ofstaff related matters. To make HRMSS more comprehensive, more modules like HRA, SpecialMedical Aid, Disciplinary action, Loan maintenance, NPS, ADF reports have been included.

Staff Motivation

a) Promotions : The Bank is offering excellent career progression opportunities and 270clerical staff were promoted to Scale I, 235 officers to Scale II and 128 Officers tovarious Senior cadres.

b) Ad-hoc payment: In anticipation of structured wage revision under the XthBipartite Settlement mechanism, the Bank has already started disbursing an ad-hoc paymentof 10% of Basic Pay plus DA along with the salary from the month of January 2013 onwards.

c) Staff Welfare Scheme (SWS) 2012 was introduced in the FY 2012-2013 offering jobopportunities to the children of staff members in officers/clerical/subordinate cadres. 6Probationary Officers, 25 Probationary Clerks and 10 Probationary Peons were selectedunder this scheme.

d) Introduction of Staff Welfare Fund: Bank’s Board has also introduced a StaffWelfare Fund to take care of the various welfare related matters of the staff members.

EMPLOYEE STOCK OPTION SCHEME (ESOS)

During the financial year 2008-09, the Bank instituted an Employee Stock Option Schemeto enable its employees to be a partner in the future growth and financial success of theBank. The Banks’ shareholders approved the plan on August 18, 2008 for the issuanceof stock options to the employees.

Till March 2013, 1,82,91,200 stock options were vested, out of which 84,73,489 stockoptions were exercised by eligible employees. The money realized due to exercise of thesaid options was Rs 10,96,21,860.27 and consequently 84,73,489 shares of Rs 1/- each havebeen allotted to the concerned employees/legal heirs.

The total options granted under five phases of SIB ESOS 2008 works out to 2.49% of thepaid up share capital of the Bank as at March 31, 2013. The scheme has generated intendedmotivation amongst the staff. With a view to establishing highest standards of personalethics, all the Directors of the Bank including the Chairman and Managing Director &CEO have voluntarily decided not to accept any stock options, though the shareholders ofthe Bank were gracious enough to permit grant of stock options to all the Directors of theBank during the 80th Annual General Meeting.

SIBLINK

"SIBLINK", Bank’s corporate magazine, has been functioning asan internal PR tool educating and motivating the staff for better performance. It ispublished every quarter.

SIB- Executive Brief

"SIB Executive Brief" - a daily news update on Banking, Finance, Economy,Industry, 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 year2012-13. There were various topics covered during these tests such as Banking procedures,Bank’s Operations Manual etc. Prizes were awarded for the toppers in these tests. Itis encouraging to know that the learning process is taken up with great enthusiasm andcompetitive spirit, the fruit of which is visible in the increasing number of branches/offices emerging as toppers. The E-learning platform will be utilized increasingly forimproving the knowledge level of the staff members. The Bank has also conducted 20 MockTests for JAIIB & CAIIB examinations of IIBF during the months of September, October,November 2012 and March 2013.

E-Circular

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’. Ine-circular, Bank’s policies, Guidelines and Forms are also uploaded so as to empowerthe branches with readily accessible pool of information/ guidelines.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988

The operations of the Bank are not energy intensive. However, the Bank has taken allpossible measures to control and reduce consumption of energy. The Bank continues toundertake possible measures for innovation and absorption of technology in bankingbusiness.

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 217(2A) of the Companies Act,1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended vide GSR289 (E) dated March 31, 2011 [Companies (Particulars of Employees) Amendments Rules,2011], is given under:

Remuneration
Name, Qualification and Age (in years) Desig- nation Gross ( Rs ) Net ( Rs )# Experience (in years) Date of commence- ment of Employment Last Employment
V.A.Joseph, M.Com., LLB, CAIIB, PhD (HRD), MPM, 62 Years. MD & CEO 70,39,800 50,75,652 41 December, 2003 General Manager of Syndicate Bank at Mumbai

# Net of Taxes paid

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Bank’s CSR policy strictly conforms to the guidelines of RBI and Ministry ofCorporate Affairs on CSR. The Bank necessarily focuses on major areas like Education,Health care, Sustainable livelihood, Infrastructure development and social causes and aspecific budget is allocated for such activities.

Education

The Bank has associated itself with leading FM Channel ‘Club FM’ in Keralaand conducted ‘Paadam Onnu Oru Kai Sahayam’ a program that has provided poorstudents with Bag, Books, Pencil, Box and Umbrella in four districts. The Bank has alsoassociated itself with various organizations like Thrissur Round Table in nationalprojects like ‘Freedom through Education’.

Health Care

The Bank believes that providing quality care for older people and for people withlearning and physical disabilities involves more than merely meeting physical needs.Health Care activities are given prime importance and Bank’s efforts included helpingpoor patients with long term illness with medical treatment. The Bank has also associatedwith Y’s Men International to support Kidney affected patients . The Bank hassupported Kidney Federation of India by donating a Dialysis Unit for the treatment of poorpeople and also supported 16 challenged children of Adarsh Charitable Trust for a periodof 1 year for their medical needs.

Social Causes

The Bank has associated with Rotary Club of Cochin and Corporation of Cochin to convertthe Electric Crematorium to LPG based automated one to ensure safety and efficiency. TheBank has associated with "Chethanalaya" a registered NGO working for thedevelopment of weaker section of the society for celebrating ‘Ability Utsav’.The purpose of the event was to empower the disabled and to draw public attention towardstheir rights. The Bank has also supported inmates of institutions like"Karunalayam","Snehalayam" and "Prerana Samjik Seva Kendra".

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 conformancewith such initiatives, the Bank will effect electronic delivery of documents including thenotice and explanatory statement of Annual General Meeting, Audited Financial Statements,Directors’ Report, Auditors’ Report etc. for the year ended March 31, 2013, tothe email address which the Shareholders have previously registered with their DepositoryParticipant (DP) as their valid email address. Investors desirous of refreshing / updatingtheir email addresses are requested to do so immediately in their respective DP accounts.The email addresses indicated in respective DP accounts which will be periodicallydownloaded from NSDL / CDSL will be deemed to be their registered email address forserving notices / documents including those covered under Section 219 of the CompaniesAct, 1956.

Shareholders holding shares in physical form desirous of availing electronic form ofdelivery of documents are requested to update their email addresses with our Registrar andTransfer Agents by a written request if they wish to avail this facility. A request formatfor registering e-mail ids with the Registrar is enclosed. Shareholders holding shares indemat segment are requested to inform their e-mail ids to their respective DPs.

Grand Kerala Shopping Festival (Season-6)

The Bank was the title sponsor of the prestigious Grand Kerala Shopping Festival- (GKSFSeason-6 )an initiative of the Kerala Government involving Tourism Department inco-ordination with the Industries & Commerce Department, Finance Department and LocalSelf Government Departments. This is the second year the Bank is associating with KeralaGovernment with an intention to transform the state into a hub for international shoppingexperience and thereby "Launch Shopping Tourism" in the state. Association withthis festival helped the Bank to get maximum visibility and publicity. The Bank hasactively participated in the GKSF Global Village and all the District events conducted byDept of Tourism & GKSF.

SIB STUDENTS’ ECONOMIC FORUM (SIBSEF)

Students’ Economic Forum is a monthly publication from the SIB Staff TrainingCollege and it provides an analysis of contemporary themes relating to developments inEconomy, Banking and Finance. So far, 258 themes have been published since the firstpublication which was launched in December 1991. In response to the requests from readersand well wishers, the first 201 themes of this publication were compiled in 4 volumes andpublished. The objective of this venture is to kindle interest in economic affairs amongthe younger generation and also to empower the student community. The hard copies of thepublication numbering 3,130 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 the year 2012-13 include - KAIZEN, Union Budget 2012-13 part1 and part 2, Credit Guarantee Fund Trust for Micro & Small Enterprises, PrioritySector Lending: Targets & Classifications, The Central Registry of SecuritizationAsset Reconstruction and Security Interest of India (CERSAI), Cloud Computing, RevisedGuidelines on CDR Mechanism, White Label ATMs, G20 Summit, International FinancialReporting Standards, India’s Credit Rating Outlook. The soft copy of this publicationis being sent to all the "Youth Plus" account holders by e-mail and it is madeavailable in the Bank’s website.

FINANCIAL INCLUSION

FI Initiatives

The Central Government, Regulatory authorities and financial institutions are strivinghard to make our nation 100% financially included. Since the Financial Inclusion enable usto reach the poor masses of population in the country, RBI has specifically instructed allthe financial institutions to extend their support to the poor and make services of theBank more meaningful and broad based . The Bank has been exploring the opportunities towiden the area of operation to deliver financial services to meet the basic financialrequirements of and hitherto uncovered population.

As part of the Financial Inclusion initiatives, Bank engages Business Correspondents(BCs), who in turn extend basic banking services to the people in the said locations. TheBank has formulated an exclusive smartcard based Savings Bank A/c with built in ODfacility "South Indian Bank Financial Inclusion Smart Card (SIB FINS Card) A/c".This product is tailor- made to suit the special requirements of this segment of customersand can hold up to 10 accounts / banking services of the customer. The different types ofaccounts that can be held in the SIB FINS Card are recurring deposit, term deposits, loanaccounts, etc. The Bank’s Financial Inclusion initiatives as on date stand asfollows:

FI Initiatives Actuals

S. No. Particulars Position as on 31.03.2013
No. of villages covered 100
No. of BCs appointed in Villages 71
No. of urban Centres covered 10
No. of Customers serviced 10758
Total Balance outstanding (amount in lakhs) Rs 29.87

Out of 100 villages covered by the Bank, 97 villages are serviced through BusinessCorrespondents (BCs) and three villages are being serviced by branches. The Bank hasopened 11,932 Smart Card based No-frill accounts through BCs. The Bank is providing onsitetraining to the branch officials as well as to the BC to facilitate customer enrollmentand transactions through custom made Master Terminals. The BC Model of Banking ispopularized through promotional materials, brochures, posters etc. with"SWABHIMAAN" logo in states of Tamil Nadu, Kerala and Andhra Pradesh.

Financial Inclusion is not just a social responsibility but the Bank considers it as abusiness opportunity as well. Bringing more number of people into the banking fold ensurethe widening of customer base of the Bank. It is envisaged that pension payments, labourwelfare payments, kerosene and LPG subsidy as well as public distribution system subsidywill be routed through bank accounts. Total subsidy outlay for the financial year isestimated to be over Rs 3,20,000 Crores. If the enitre amount is transferred through thebanks, the impact it will make in the banking system will be immense. Direct BenefitTransfer (DBT) is already started and the Bank is also offering the Aadhaar Based PaymentSystem (ABPS).

Financial Literacy Centre

The Bank has initiated awareness programmes through Financial Literacy Centres (FLCs).FLCs aim at facilitating 100% Financial Inclusion and sustained rural empowerment andfinancial education. The goal of FLCs is to impart financial literacy in the form ofsimple messages like Why Save, Why Save early in your Life, Why Save with banks, Whyborrow from Banks, Why borrow as far as possible for income generating activities, Whyrepay in time, Why insure yourself, Why Save for your retirement etc. and will mainlyfocus on the large rural population who are unaware of planning their basic financialneeds and the role of the banks in addressing their financial requirements. Specificinstructions and guidelines have been issued by RBI to provide training to the people whoare designated at allotted FLCs in the state.

As a first step to the ongoing process of implementation of Financial Literacy Centresin the Bank, State Level Banker’s Committee (SLBC) of Kerala has allotted 12 Blocksof Villages in Kerala for establishment of FLCs to the Bank. In co-ordination with M/sAkshaya Centres, an e- governance initiative of Govt. of Kerala, the Bank has successfullycovered these 12 blocks. Branch which is attached to the FLC is designated as base branchwhich co-ordinates the functioning of that FLC. Adequate training is given on a continuingbasis to FLC coordinators who will provide basic financial knowledge of importance insavings and borrowings to people who are financially illiterate. The Bank strives toachieve 100% Financial Inclusion through proper education and awareness to rural masses byway of Financial Literacy Centres.

ANTI - MONEY LAUNDERING (AML)

The transactions processed in the Core Banking Solution (CBS) are monitored forsuspicious transactions through the AML application, TCS Bancs Compliance, supplied by M/sTata Consultancy Services (TCS). The alert processing set up for processing the alertsgenerated by the AML application is decentralized and the first level monitoring of thealerts is done by the branches themselves and the second level processing is done by theOfficers at the AML Central Cell.

During the current financial year, the Bank has set up an Off Site Monitoring Team(OMT) at all the Regional Offices of the Bank as a preventive vigilance initiative and tostrengthen the level of KYC/AML/CFT compliance by the branches.

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

DIRECTORS

Sri Paul Chalissery and Dr. N. J. Kurian who retired at the 84th AnnualGeneral Meeting held on June 28, 2012 were reappointed as Directors of the Bank. Sri JoseAlapatt retired from the Board w.e.f. May 11, 2013 on completing 8 years of Directorshipas stipulated under the Banking Regulation Act, 1949. The Board places on record itsappreciation for the invaluable services rendered by him during his tenure as Director.

Dr. John Joseph Alapatt was appointed as Additional Director by the Board of Directorsat its meeting held on September 24, 2012. Pursuant to the provisions of Section 260 ofthe Companies Act, 1956 Dr. John Joseph Alapatt vacates his office at the ensuing AnnualGeneral Meeting. A member has expressed his intention to propose Dr. John Joseph Alapattas candidate to the office of a director of the Bank, and have given notice in writingalong with the deposit amount of Rs 500/- each, in terms of Section 257 of the CompaniesAct, 1956.

In terms of the provisions of the Companies Act, 1956 and the Articles of Associationof the Bank, Sri Mohan E. Alapatt and Sri K. Thomas Jacob are the directors who retire byrotation at the ensuing Annual General Meeting and being eligible for reappointment, theBoard recommends their re-appointment as the Directors of the Bank.

AUDITORS

The shareholders at its 84th Annual General Meeting held on June 28, 2012,appointed M/s. S R Batliboi & Associates LLP (formerly known as M/s. S R Batliboi& Associates), Chartered Accountants, Chennai, as the Central Auditors for the auditof Bank’s accounts for the year 2012-13.

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 2013-14.

AUDIT AND INSPECTION

Regular Inspection of the Bank’s branches is conducted at periodical intervals onthe basis of Risk Based Internal Audit approach. Concurrent audit at branches by qualifiedChartered Accountants/retired officers covering 60.32% of business of the Bank andconcurrent audit of International Banking Division and Treasury Department are alsoconducted. In addition to the above, the Bank conducts Stock Audit, Credit Audit, KYC/ AMLAudit, Information System Audit, Revenue Audit to check income leakages, SurpriseInspection, Forensic Audit by external agencies in cases where it is found necessary andexclusive Gold Loan asset verification, etc. at branches. Information System Audit of CBSand major applications for the current financial year 2012-13 was done by an externalapproved agency. Besides, all the branches are subjected to statutory audit on yearlybasis. In addition to the above, RBI also conducts Annual Financial Inspection of theBank. In this financial year, Bank has started Offsite Monitoring mechanism in allRegional Offices to oversee compliance of KYC/AML guidelines in the operative accountsopened by branches, to analyze branch operations daily through a software to detectirregular transactions and to monitor the sudden large fluctuations in branch businessfigures.

EXPLANATION FOR AUDITORS’ COMMENTS IN THE REPORT

The Statutory Central Auditors have qualified their Audit Report as follows:

"Basis of Qualified Opinion

Attention is invited to note A-26 of the Schedule 18 of the financial statementsregarding a non performing advance of Rs 150 crores and in respect of which aprovision of Rs 90 crores has been made by the management of the Bank based onspecial dispensation obtained from the Reserve Bank of India (RBI) vide RBI letter datedDBS (T) No.674/02.05.06/2012-13 dated December 31, 2012 from complying with the"Prudential Norms on Income Recognition, Asset Classification and Provisioningpertaining to Advances" issued by the RBI. As the ultimate recoverability of the netcarrying amount is uncertain, pending final determination thereof we are unable to commenton the recoverability of the carrying amount and consequential effects of these matters onthe financial statements."

"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 discussed in the basis forqualified opinion discussed above, the said accounts together with the notes thereongive the information required by the Banking Regulation Act, 1949 as well as the CompaniesAct, 1956, in the manner so required for the banking companies and give a true and fairview in conformity with the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Bank as at 31stMarch, 2013;

ii. in the case of the Profit and Loss Account of the profit for the year ended on thatdate; and

iii. in the case of the Cash Flow Statement, of cash flows for the year ended on thatdate."

Management Explanation for Auditor’s comments

In view of the ongoing negotiations with the borrower the Bank is hopeful of recoveringthe dues, thereby warranting a lower provision. However, the Bank has made provision assuggested by the regulatory communication vide RBI letter dated DBS (T)No.674/02.05.06/2012-13 dated December 31, 2012.

CORPORATE GOVERNANCE

A separate report on the status of implementation of Corporate Governance as requiredunder Clause 49 of the Listing Agreement with Stock Exchanges, and a certificate from M/sS. R. Batliboi & Associates LLP, Chartered Accountants, Statutory Auditors of theBank, are annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

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

DIRECTORS’ RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 217 (2AA) of the Companies Act, 1956, the Boardof Directors hereby declare that:

1. In the preparation of annual accounts for the financial year ended March 31, 2013,the 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 2012-13and 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, 2013, on a going concern basis.

ACKNOWLEDGEMENTS

The Board of Directors places on record its gratitude to the Reserve Bank of India,Securities 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 meaningful support and guidance, during the year. The Boardalso places on record its gratitude to the Bank’s shareholders and customers fortheir continued support, patronage and goodwill. The Board further places on record itsappreciation for the valuable services rendered by M/s S R Batliboi & Associates LLP,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 thank its personnel for their sense of ownershipand loyalty towards the Bank. The Board also expresses its sincere appreciation for thededicated service rendered by officers and employees of the Bank at all levels.

By Order of the Board
Place : Ernakulam (AMITABHA GUHA)
Date : May 20, 2013 CHAIRMAN

Annexure to Directors’ Report for the year ended March 31, 2013

STATUTORY DISCLOSURES REGARDING ESOS

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
Particulars Options Exercise price ( Rs ) Options Exercise price ( Rs ) Exercise price ( Rs ) Options Options Exercise price ( Rs ) Options Exercise price ( Rs )
Options outstanding at the beginning of the year 2,63,19,670 12.93 4,76,500 24.98 9,33,000 24.12 - - - -
Options granted during the year - - - - - - 21,000 12.93 10,66,500 21.65
Options exercised during the year 47,75,009 12.93 4,950 24.98 - - - - - -
Options vested during the year 89,77,200 12.93 1,35,450 24.98 - - - - - -
Forfeited/lapsed during the year 29,95,676 12.93 31,000 24.98 40,000 24.12 - - 3,000 21.65
Options outstanding at the end of the year 1,85,48,985 12.93 4,40,550 24.98 8,93,000 24.12 21,000 12.93 10,63,500 21.65
Total Number of Options in force as on March 31,2013 2,09,67,035

Other details are as under:

Money realized by exercise of options Rs 6,18,64,517.37
Pricing Formula:
a) for Tranche 1, Tranche 2, Tranche 3 & Tranche 5 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 50000.00*
Mr. Abraham Thariyan 50000.00
Mr. Cheryan Varkey 42000.00
Mr. Joseph George Kavalam 36000.00
Mr. A. G. Varughese 36000.00
Mr. Thomas Joseph K. 36000.00
Mr. C. J. Jose Mohan 36000.00
Mr. John Thomas 36000.00
Mr. N. A. Murali 30000.00
Mr. T. J. Raphael 30000.00
*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 3.99
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 – Rs 12.93, Tranche 2 – Rs 24.98, Tranche 3 – Rs 24.12 Tranche 4 – Rs 12.93 and Tranche 5 – Rs 21.65
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 – Rs 8.57, Tranche 2 – Rs 17.03, Tranche 3 – Rs 22.57, Tranche 4 – Rs 23.10 and Tranche 5 – Rs 24.26

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

Had compensation cost of the ESOS outstanding being determined based on the fair valueapproach instead of intrinsic value method, the Bank’s net profit and earning pershare would have been as indicated below:

Net profit as reported Rs 502.27 Crore
Proforma Net profit based on fair value approach Rs 502.22 Crore
Basic EPS as reported Rs 4.03
Basic EPS (Proforma) Rs 4.03
Diluted EPS as reported Rs 3.99
Diluted EPS (Proforma) Rs 3.98

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 31.03.2013 Year ended 31.03.2012
Particulars Tranche 1 Tranche 2 Tranche 3 Tranche 4 Tranche 5 Tranche 1 Tranche 2 Tranche 3
Exercise Price per share ( Rs ) 12.93 24.98 24.12 12.93 21.65 12.93 24.98 24.12
Weighted Average Share Price per share ( Rs ) 8.57 17.03 22.57 23.10 24.26 8.57 17.03 22.57
Expected Volatility 28.26% 28.26% 28.26% 28.26% 28.26% 30.00% 30.00% 30.00%
Historical Volatility 43.50% 31.33% 29.23% 31.32% 28.94% 43.50% 31.33% 29.23%
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 2.19 to 4.20 2.28 to 4.28 2.20 to 4.21
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% 8.20% to 8.32% 8.20% to 8.47% 8.20% to 8.47%
Expected Dividend Yield 8.17% 4.11% 3.10% 3.03% 3.10% 7.00% 3.52% 2.66%
The Price of underlying share in market at the time of grant of option ( Rs ) 14.37 27.75 26.80 23.50 24.05 14.37 27.75 26.80

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Economic Scenario

Growth of the Indian Economy slowed much more than anticipated, with both manufacturingand services activity constrained by supply bottlenecks and sluggish external demand.Growth rate of 9.2 percent in the fourth quarter of 2010-11 has come down continuously to4.5 percent by the end of the third quarter of 2012-13, which is the lowest in 15quarters. The deceleration in the services sector growth, which has been the mainstay ofhigh growth in the recent period, had dragged down overall economic activity andemployment creation. The agriculture output was dented by deficient rainfall that impactedkharif crop. Domestic policy uncertainties, governance concerns, the impact of earliermonetary tightening and the slacking of external demand continue to adversely impactgrowth.

For Global economies 2012-13 was a better year when compared with year previous tothat. Near-term risks in the advanced economies have receded during the past financialyear. However, the improvement is yet to fully transmit to economic activity which remainssluggish. A slow recovering is taking place in the US driven by improvement in the housingsector and employment conditions.

Inflation which continued to be a major concern for the Indian Economy has moderateddue to the tight monetary policy of the Central Bank. Headline inflation, as measured bythe Wholesale Price Index (WPI) has come down to an average of 7.3 percent in 2012-13 from8.9 percent in 2011-12. The easing was particularly significant in last quarter of2012-13, with the year-end inflation recording at 6 percent. Even as headline inflationeased, there were upside pressures on food inflation through the year 2012-13 owing to anunusual spike in vegetable prices in April 2012 followed by rise in cereal prices due todelayed monsoon and the sharp increase in the minimum support price for paddy. This isquite evident from the fact that retail inflation, as measured by the new consumer priceindex, averaged 10.2 percent during 2012-13.

Indian Primary equity market remained subdued in 2012-13. Its recovery depends onimprovement in macroeconomic fundamentals, continued fiscal consolidation and revival ofglobal growth. However, strong FII inflows, especially in the second half of 2012-13augured well for the Indian equity market and the rupee, although the market movementswere also conditioned by domestic slowdown and governance concerns. Key stockmarket indicators show that price to earnings (PE) and price to book value (PB) ratiosdeclined in 2012-13 in comparison with the past two years. The Indian financial market, inFebruary 2013, had a new entrant viz., the MCX Stock Exchange Limited.

Banking Scenario

The Banking sector registered a subdued deposit growth of 13.5 percent during 2012-13.The time deposit growth was hit mainly by the near-zero real interest rate due to highinflation. Now with the ebb in inflation and the consequent increase in the real interestrate, the deposit growth is expected to pick up in the current financial year.

Slow down in the economy adversely affected the credit growth of Banking Sector.Besides sluggish demand, a major factor that led to the low credit growth of the bankingsector over the past year is the deterioration in its asset quality. The deterioration incredit quality, on the other hand, impeded the supply of domestic credit. Notwithstandingthe large injection of liquidity by the Reserve Bank, adverse sentiments emanating fromglobal and domestic developments somewhat dampened credit expansion.

The year-on-year bank credit growth to industry at 15.7 per cent in March 2013moderated considerably, from 20.3 per cent in March 2012. Deceleration in credit growth toindustry was observed in all the major sub-sectors, barring leather, chemicals, cement,wood products, food processing, textiles, glass and vehicles. Non-food credit growthdecelerated from 18.2 per cent at the beginning of 2012-13 and remained close to 16.0 percent for the major part of the year. Early results of corporate performance in the lastquarter of 2012-13 indicate continuing moderation in sales though profit margins increasedslightly.

Money supply (M3) growth was around 14.0 per cent during Q1 of 2012-13 but deceleratedthereafter to 11.2 per cent by end-December as time deposit growth slowed down. There wassome pick up in deposit mobilization in Q4, taking deposit growth to 14.3 per cent byend-March. Consequently, M3 growth reached 13.3 per cent by end-March 2013, slightly abovethe revised indicative trajectory of 13.0 per cent.

Pursuant to the enactment of The Banking Laws (Amendment) Act, 2012, Section 26A hasbeen inserted in the Banking Regulation Act, 1949 which, inter alia, empowers theReserve Bank to establish a Depositor Education and Awareness Fund. The Fund will becredited with the amount to the credit of any account in India with a banking companywhich has not been operated upon for a period of ten years or any deposit or any amountremaining unclaimed for more than ten years within a period of three months from theexpiry of ten years. The Fund shall be utilised for promotion of depositors’ interestand for such other purposes considered necessary for the promotion of depositors’interests as specified by the Reserve Bank from time to time. However, the act does notprevent a depositor from claiming his/her deposit or operating his/her account or depositafter the expiry of the period of ten years.

Economic and Banking Outlook

According to the monetary policy published by RBI, economic activity during the currentyear is expected to show only a modest improvement over last year, with a pick-up likelyonly in the second half of the year. Agricultural growth could return to trend levels ifthe monsoon is normal as recently forecast. Growth in services and exports may remainsluggish too, given that global growth is unlikely to improve significantly from 2012.Accordingly, the Reserve Bank’s baseline projection of GDP growth for 2013-14 is 5.7per cent.

The global inflation outlook for the current year appears more benign compared to lastyear on expectations of some softening of crude oil and food prices. Accordingly, importedinflation is likely to be lower provided the exchange rate remains broadly stable. In thedomestic economy, food inflation is likely to be a source of upside pressure because ofpersisting supply imbalances. Also, the timing and magnitude of administered pricerevisions, particularly of electricity and coal, will impact the rate of inflation in2013-14. Considering the domestic demand-supply balance, the outlook for global commodityprices and the forecast of a normal monsoon, RBI expects the WPI inflation to berange-bound around 5.5 per cent during 2013-14.

RBI has projected M3 growth for 2013-14 at 13.0 per cent for policy purposes.Consequently, aggregate deposits of Commercial Banks are projected to grow by 14.0 percent. Keeping in view the resource requirements of the private sector, the growth innon-food credit of Commercial Banks is projected at 15.0 per cent.

The broad stance of the monetary policy of the Reserve Bank is intended to :

continue to address the accentuated risks to growth;

guard against the risks of inflation pressures re-emerging and adverselyimpacting inflation expectations, even as corrections in administered prices releasesuppressed inflation; and

appropriately manage liquidity to ensure adequate credit flow to theproductive sectors of the economy.

Opportunities and Threats

The biggest risk to the economy stems from the Current Account Deficit (CAD) and itsfinancing. The current account deficit during 2012-13 was historically the highest, andwas well above the sustainable level of 2.5 per cent of GDP as estimated by the ReserveBank. A large CAD, appreciably above the sustainable level year after year, will putpressure on servicing of external liabilities.

The Reserve Bank has slashed the policy rate in its annual monetary policy. However,the Reserve Bank feels it is critical to consolidate and build on the recent gains incontaining inflation. Further adjustments in policy rates by RBI in the FY 2013-14 willdepend on how growth – inflation dynamics evolve. If the stance of RBI is going tocontinue, the liquidity position of Banks in the country will be better and it willtranslate into better credit growth in the coming financial year.

The recovery in 2013-14 is likely to be slow-paced. The indicative projections ofgrowth and inflation for 2013-14 are subject to a number of variables. Recovery at thecurrent juncture will critically depend on supply-side action to remove a host ofmicro-constraints and structural bottlenecks that impede production and investment,especially in growth-driving sectors such as road and power. The government has initiatedaction in this direction, but progress has been slow, making it imperative for decisiveaction to be taken quickly on the outstanding issues. Failure to do so could lead tomultiple problems and cause further deterioration in the asset quality of bank finance,choke off flow of debt as well as equity finance to stressed firms and stall recovery inits tracks. In addition, a significant dose of public investment stimulus could crowd-inprivate investment, but such a stimulus needs to be financed within the budgetaryconstraints by downsizing its current spending.

The implementation of Basel – III will further strengthen financial stability ofIndian Banks. However, significantly higher requirement of capital to do the same amountof business will put pressure on return on equity of Banks.

Re-Classification of Priority Sector Guidelines- loan limit for micro and smallenterprises (MSEs) in the services sector, increased from Rs 20 million to Rs 50 millionper borrower; increase of loan limit from Rs 10 million to Rs 50 million per borrower forbank loans to dealers/sellers of fertilisers etc. and other inputs which are classified asindirect finance to agriculture and raise the limit on pledge loans (including againstwarehouse receipts) from the current limit of Rs 2.5 million to Rs 5 million forclassification as direct agriculture loans in the case of individual farmers and asindirect agriculture loans in the case of corporate, partnership firms and institutionsengaged in agriculture and allied activities.

Introduction of Financial Inclusion Plan 2013-16 shall lead to the establishment ofbanking outlets in more than 2 lakh villages. To provide the next stage of universalcoverage and facilitating Electronic Benefit Transfer (EBT), banks have been advised todraw up the next FIP for the period 2013-16 and the submitted FIP shall be discussed withReserve Bank of India.

Reserve Bank had issued guidelines on classification of certain exposures as CommercialReal Estate (CRE) exposures in September 2009. The CRE exposures generally attract higherrisk weights and higher provisioning requirements, considering the inherent pricevolatility nature of CRE exposure. However, it has been generally observed that theresidential housing complex sector under the CRE poses lower risk than the othercomponents of CRE sector. Accordingly Reserve Bank of India has proposed to carve out asub-sector of ‘CRE-Residential Housing’ within the CRE sector with appropriateprudential regulatory norms on risk weights and provisioning.

The Central Government has decided to issue new banking licenses. This move of theCentral Government will improve the competitiveness and customer service of banks ingeneral. Recruitments spree in Banking industry is bound to continue considering thearrival of new Banks in addition to the vacancy caused by retirement and expansion of theexisting players.

Financial Performance Vs Operational Performance

For the first time in the history of the Bank, the Net Profit reached the level of Rs502.27 Crore as against Rs 401.66 Crore last year. The total gross business of the Bankgrew from Rs 63,974 Crore to Rs 76,276 Crore. While the deposits grew from Rs 36,501 Croreto Rs 44,262 Crore, gross advances grew from Rs 27,473 Crore to Rs 32,014 Crore. Foodcredit increased to Rs 554.85 Crore from Rs 407.38 Crore and non-food credit stood at Rs31,459.18 Crore vis--vis Rs 27,065.62 Crore in the last year, posting an increase of Rs4,393.56 Crore. The Board has recommended a dividend of 70% i. e. @ Rs 0.70 per equityshare of Rs 1/- each, which is subject to approval of the shareholders.

The percentage of Gross NPA to Gross Advances stood at 1.36% and the Net NPA to NetAdvances at 0.78% as on March 31, 2013. The Capital Adequacy Ratio of the Bank was 11.46%under Basel I and 13.91% under Basel II norms as on March 31, 2013 as against the RBImandated level of 9%. Book value per share rose from Rs 19.12 to Rs 22.44 during the year2012-13.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Insider Trading Code

The Bank has articulated a Code for prevention of Insider Trading pursuant toSecurities and Exchange Board of India (Insider Trading) (Amendment) Regulation 2002 toprevent practices of Insider Trading. The Chief Financial Officer has been designated asCompliance Officer for this purpose. The Chairman, Managing Director, Directors and SeniorManagement of the Bank have affirmed compliance with this Code.

Code of Conduct

The Bank has formulated a Code of Conduct for its Directors and Officers. This manualcontains comprehensive regulations on ethical standards to be mandatorily observed by theChairman, Managing Director, Directors and Core Management Team consisting of officersfrom Scale IV and above who have affirmed compliance with the Code of Conduct.

Whistle Blower Policy

The Bank has adopted a Whistle Blower Policy pursuant to which employees of the Bankcan raise their concerns relating to fraud, malpractice or any other activity or eventwhich is against the interest of the Bank or society as a whole.

Other Internal Controls

The Bank is having a full-fledged Inspection and Vigilance Department, which ensuresadherence to the set rules and regulations by the Branches/Regional Offices/Departments atthe Administrative Office. Internal inspectors conduct inspection at regular intervals andsuch reports are placed to Audit Committee of Executives (ACE)/Audit Committee of Board(ACB) as the case may be. ACE/ACB reviews the reports and ensures that corrective stepsare taken to rectify the lapses/ irregularities pointed out.

Risk Management Practices

It is imperative to have good risk management practices not only to manage risksinherent in the banking business but also the risks emanating from financial markets as awhole. The Bank has put in place a risk management architecture and practices that isoverseen by a Committee of Directors. The Bank has in place a robust risk managementstructure which pro-actively identifies the risk faced by the Bank and helps in mitigatingit, while maintaining proper tradeoff between risk and return thereby maximizing theshareholder value.

Business Continuity Plan has been totally revamped to suit the present scenariocovering all critical processes of the Bank. The Bank has also set up an operationalisedDisaster Recovery Centre for its Core Banking Operations and also made use of the sameduring the year.

In furtherance of the goals of effective risk management, the Bank has strengthened itsrisk management processes by fine tuning 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 Control and Self Assessment (RCSA) framework, Stress Testing frameworkand risk based pricing model linked to rating during the year. The market situations,Bank’s liquidity positions and the peer group performances are closely monitored forrevising the various interest rates.

Skill sets of mid-offices of the Bank were strengthened and its functions were madebroadbased 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 dedicated midoffice 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.

The Bank has also taken steps to move into the advanced approaches under the Basel IIframework as stipulated by the Reserve Bank of India.

The Bank has taken necessary steps to comply with the ‘Guidelines onimplementation of Basel- III capital regulations in India’ in a phased manner asdirected by the RBI.

Human Resource Development / Industrial Relations

Human Resources policies and practices of the Bank focus on attracting, motivating andretaining qualified and skilled manpower. Concurrent with these objectives, steps aretaken to improve manpower efficiency. Given the market challenges, there has beenconsiderable focus on optimizing the existing resources - through internal job postings,transfers and skill development initiatives. Training and development has assumedsignificant importance. The Bank’s Staff Training College identifies the gaps inresource capability of the personnel and train them for qualitative improvement. Duringthe financial year, Bank could provide training to 2,252 of its Officers, 1,497 clericalstaff and 158 sub staff in different facets of Bank’s operations.

To motivate the employees further and to inculcate in them a sense of ownership,Employees’ Stock Option Scheme (ESOS) was approved by the shareholders at the AnnualGeneral Meeting held on August 18, 2008. The Bank has introduced Tranche 1 of the schemein 2009-10, Tranche 2 of the scheme in 2010-11, Tranche 3 of the scheme in 2011-12 andTranche 4 & Tranche 5 during the current financial year subject to the regulatoryguidelines in this regard. Further, during the year, 47,88,959 stock options granted underEmployee Stock Option Scheme were exercised by eligible employees.

Industrial relations in the Bank have been cordial and harmonious. The representativesof Workmen Union, Officers Association and Management have been working collectively forachieving all-round growth and prosperity of the Bank. On account of cordial industrialrelations, Bank has achieved considerable growth over the years.

By Order of the Board
Place : Ernakulam (AMITABHA GUHA)
Date : May 20, 2013 CHAIRMAN

ANNEXURE TO THE DIRECTORS’ REPORT

Report on Corporate Governance pursuant to Clause 49 of the Listing Agreement enteredinto with the Stock Exchanges and forming part of the report of the Board of Directors

Corporate Governance ensures high standards of transparency, accountability, ethicaloperating practices, professional management thereby enhancing shareholders' value andprotecting the interest of the stakeholders such as depositors, creditors, customers,suppliers and employees. The Bank is committed to the highest standards of CorporateGovernance by ensuring integrity in financial reporting, disclosure of materialinformation, continuous improvement of internal controls and sound investor relations.

The required details on Corporate Governance are given hereunder:

1. BOARD OF DIRECTORS

Composition of Board

The composition and category of the Directors along with their attendance at BoardMeetings and shareholdings in the Bank as on March 31, 2013 are given below:

No. of Board Meetings
Sl. No. Name of Director Category of Director Held during the tenure Attended Attendance of last AGM on 28/06/2012 No. of Shares held % of holding
1. Sri Amitabha Guha, Chairman INE 11 11 Present 7,000 0.001%
2. Dr. V. A. Joseph, M.D. & CEO Whole Time Director 11 11 Present 128,550 0.010%
3. Sri Jose Alapatt, Director INE 11 4 Absent 76,250 0.006%
4. Sri Paul Chalissery, Director INE 11 11 Present 124,390 0.009%
5. Sri Mathew L. Chakola, Director INE 11 10 Present 157,000 0.012%
6. Dr. N. J. Kurian, Director INE 11 10 Present 28,750 0.002%
7. Sri Mohan E. Alapatt, Director INE 11 6 Absent 62,000 0.005%
8. Sri K. Thomas Jacob, Director INE 11 11 Present 54,000 0.004%
9. Sri H. Suresh Prabhu, Director NE 11 11 Present 15,000 0.001%
10. Dr. John Joseph Alapatt* INE 6 6 NA 216,720 0.016%

INE – Independent Non-Executive Director

NE – Non-Executive Director

* Dr. John Joseph Alapatt was appointed as Additional Director w.e.f. September 24,2012.

Board Meetings

A total of 11 Board Meetings were held during the year and their dates are:

07/05/2012, 22/05/2012, 28/06/2012, 16/07/2012, 08/09/2012, 24/09/2012, 19/10/2012,28/11/2012, 15/01/2013, 05/03/2013 and 30/03/2013.

Committee position of Directors in the Bank as on March 31, 2013

The name of each Committee with the name of its respective Chairman as on 31.03.2013 isfurnished below:

1. Management Committee - Chairman - Sri Amitabha Guha
2. Audit Committee - Chairman - Sri K. Thomas Jacob
3. Nomination Committee - Chairman - Dr. V. A. Joseph
4. N P A Review Committee - Chairman - Sri H. Suresh Prabhu
5. Compensation & Remuneration Committee - Chairman - Sri Amitabha Guha
6. Customer Service Committee - Chairman - Dr. N. J. Kurian
7. Shareholders / Investors Grievance Committee - Chairman - Sri Paul Chalissery
8. Committee to Prevent and Review Frauds in the Bank - Chairman - Dr. V. A. Joseph
9. Premises Committee - Chairman - Sri Mathew L. Chakola
10. Risk Management Committee - Chairman - Sri H. Suresh Prabhu
11. Information Technology Strategy Committee - Chairman - Sri Mohan E. Alapatt

None of the Directors is a member of more than ten Board Committees or Chairman of morethan five such Committees, as required under Clause 49 of the Listing Agreement.

Directorship of Directors in other Public Limited Companies and Public Institutions

Sri Amitabha Guha, Part-time Chairman, is a Director on the Board of Vijaysri OrganicsLimited, Hyderabad; Gangavaram Port Ltd., Hyderabad, Xpro India Ltd., New Delhi, BSCPLInfrastructure Ltd., Hyderabad and Member, Board of Governors, Asian Institute of BusinessManagement, Bhubaneswar.

No other Director holds Directorship in any other Public Limited Company.

2. COMMITTEES OF BOARD

(A) MANAGEMENT COMMITTEE

Management Committee of Board has been constituted based on RBI guidelines vide itsCircular No. DBOD. No. BP. BC.96/21.03.038/2004-05 dated 10th June, 2005 mainlyto sanction credit proposals beyond the powers of MD & CEO and all other matterspermitted by the Board from time to time. The members of the Committee as on March 31,2013 are Sri Amitabha Guha – Chairman, Dr. V. A. Joseph, Sri Paul Chalissery, Sri K.Thomas Jacob and Sri H. Suresh Prabhu.

A total of 22 meetings were held during the year.

(B) AUDIT COMMITTEE

The Audit Committee of the Board is chaired by Sri K. Thomas Jacob, who is a CharteredAccountant. The other members of the committee are Dr. John Joseph Alapatt, Sri PaulChalissery, and Sri Mathew L. Chakola as on March 31, 2013. The terms of reference ofAudit Committee are harmonised with the requirements of Clause 49 of the Listing Agreementand responsibilities enjoined upon it by the RBI, which inter alia includes the following:

a) Oversight of the Bank's financial reporting process and the disclosure of itsfinancial information to ensure that the financial statement is correct, adequate andcredible.

b) Recommending to the Board, the appointment, reappointment or, if required, thereplacement of the statutory auditor together with the fixation of audit fees and approvalof payment for any other services rendered by the statutory auditors.

c) Reviewing with management the annual financial statements before submission to theBoard with special emphasis on accounting policies and practices, compliance withaccounting standards and other legal requirements concerning financial statements.

d) Reviewing the adequacy of the Audit and Compliance functions, including theirpolicies, procedures, techniques and other regulatory requirements.

e) Review, as far as the situation necessitates all other reports including Risk BasedInternal Audit Reports, which are presently being put up before the committee.

f) Review of all reports as per the calendar of reviews stipulated by the RBI; and g)Any other terms of reference as may be included from time to time in Clause 49 of thelisting agreement.

The Committee met 9 times during the year.

(C) NOMINATION COMMITTEE

This Committee was constituted by the Board for the specific purpose of scrutinizingthe declarations received from persons to be appointed as directors as well as from theexisting directors seeking re-appointment and make references to the appropriateauthority/persons to ensure compliance with the requirements indicated by Reserve Bank ofIndia, vide their directive dated June 25, 2004 on 'Fit & Proper Criteria' ofDirectors of Banks. The members of the Committee as on March 31, 2013 are Dr. V. A. Joseph– Chairman, Sri Amitabha Guha, Sri Paul Chalissery and Sri Mohan E. Alapatt.

The Committee met once, during the year.

(D) N P A REVIEW COMMITTEE

This Committee has been constituted to review all NPA Accounts above Rs 50.00 Lakh. TheCommittee meets once in a quarter. The members of the Committee as on March 31, 2013 areSri H. Suresh Prabhu – Chairman, Dr. V. A. Joseph, Dr. N. J. Kurian and Sri JoseAlapatt.

The Committee met 4 times during the year.

(E) COMPENSATION AND REMUNERATION COMMITTEE

Reserve Bank of India vide its Circular No. DBOD. No.BC.72/29.67.001/2011-12 dtd.13.01.2012, directed all Private Sector and Foreign Banks to formulate and adopt aComprehensive Compensation Policy covering all their employees by March 2013 forimplementation from the financial year 2013-14 and to conduct annual review thereof.Taking into account of these guidelines, the Bank has formulated a ComprehensiveCompensation Policy which was approved by the Board of Directors of the Bank at itsmeeting held on February 16, 2012. The terms of reference of the existing Compensation andRemuneration Committee was accordingly modified to that extent. The Members of theCommittee as on March 31, 2013 are Sri Amitabha Guha – Chairman, Sri Mohan E.Alapatt, Dr. John Joseph Alapatt and Sri Paul Chalissery.

The Terms of reference of the Committee are harmonized with the provisions of CompaniesAct, 1956/AS-15, Listing Agreement/Banking Regulation Act and other RBI Guidelines, whichinter-alia, includes the following:

a) To oversee the framing, review and implementation of Bank's overall compensationstructure and related policies on remuneration packages payable to the WTDs/ MD & CEOand other staff including performance linked incentives, perquisites, Stock option schemeetc. with a view to attract, motivate and retain employees and review compensation levelsvis-a-vis other Banks and the industry in general.

b) The Committee shall work in close coordination with the Risk Management Committee ofthe Bank, in order to achieve effective alignment between remuneration and risks. TheCommittee will also ensure that the cost/income ratio of the Bank supports theremuneration package consistent with maintenance of sound capital adequacy ratio.

c) With respect to the Performance Linked Incentive Schemes, the Committee is empoweredto:

i) Draw up terms and conditions and approve the changes, if any, to the PerformanceLinked Incentive schemes;

ii) Moderate the scheme on an ongoing basis depending upon the circumstances and linkthe same with the recommendations of Audit Committee;

iii) Coordinate the progress of growth of business vis -a- vis the business parameterslaid down by the Board and Audit Committee and effect such improvements in the scheme asare considered necessary;

iv) On completion of the year, finalize the criteria of allotment of marks to ensureobjectivity/equity.

d) The Committee shall also function as the Compensation Committee as prescribed underthe SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999 and is empowered to formulate detailed terms and conditions of the Scheme,administer, supervise the same and to allot shares in compliance with the guidelines andother applicable laws.

e) To obtain necessary clearances and approvals from regulatory authorities, appointMerchant Bankers and do such other things as may be necessary in respect of the EmployeesStock Option Scheme.

f) To oversee the administration of Employee benefits, such as, provident fund, PensionFund, Gratuity, Compensation for absence on Privilege/Sick/Casual Leave etc., which arerecognized in accordance with Accounting Standard-15 (revised) specified in the Companies(Accounting Standards) Rules, 2006.

g) The Committee may suggest amendments to any stock option plans or incentive plans,provided that all amendments to such plans shall be subject to consideration and approvalof the Board;

h) Any other matters regarding remuneration to WTDs/MD & CEO and other staff of theBank as and when permitted by the Board.

i) To conduct the annual review of the Compensation Policy

j) To fulfill such other powers and duties as may be delegated to it by the Board.

The committee met 4 times during the year.

(F) CUSTOMER SERVICE COMMITTEE

The Committee is entrusted with the responsibility of monitoring the quality ofservices rendered to the customers and also ensuring implementation of directives receivedfrom RBI in this regard. The terms of reference of the Committee inter-alia, are toformulate comprehensive deposit policy incorporating the issues arising out of death of adepositor for operations of his account, the product approval process and any other issueshaving a bearing on the quality of customer services rendered.

The members of the Committee as on March 31, 2013 are Dr. N. J. Kurian – Chairman,Sri Amitabha Guha, Dr. V. A. Joseph and Dr. John Joseph Alapatt.

Besides, in accordance with RBI guidelines, the Bank has been inviting two persons tothe Committee as special invitees, one representing the customers of the Bank and theother an expert in customer services, with a view to strengthening the corporategovernance structure in the banking system and also to bring about ongoing improvements inthe quality of customer services provided by the Bank.

The committee met 4 times during the year.

(G) SHAREHOLDERS / INVESTORS GRIEVANCE COMMITTEE

The Committee looks into redressal of complaints from shareholders and investors liketransfer of Shares, non-receipt of Annual Reports, non-receipt of declared dividends etc.The Committee also ratifies share transfers / transmission / name deletion cases etc. fromtime to time. The members of the Committee are Sri Paul Chalissery – Chairman, SriJose Alapatt, Sri Mathew L. Chakola and Dr. N. J. Kurian.

The terms of reference of Shareholders / Investors Grievance Committee have beenexpanded and the following agenda items are being placed before the committee:

a) Consolidated statement of transfer of shares/transmission/ deletion etc., dulyapproved by General Manager from time to time.

b) Certificate issued by Practicing Company Secretary (PCS) in connection withReconciliation of share capital audit every quarter, physical share transfer audithalf-yearly and Corporate Governance Report annually.

c) Details of shareholder complaints received redressed, pending etc. during aparticular quarter.

d) List of Top 10/100 shareholders at the end of every quarter.

e) Any other item with the permission of the Board.

The Committee met 4 times during the year.

Status of Shareholder Complaints as on March 31, 2013

No. of Complaints
Sl. No. Items Pending/ Received Redressed Pending
1 Non-receipt of Refund Order/ Allotment credit 1 1 0
2 Non-receipt of Dividend Warrants 50 50 0
3 Request for issue of duplicate share certificates 107 107 0
4 Complaints received from BSE/ NSE/SEBI/ROC 26 26 0
5 Other miscellaneous complaints 26 26 0
6 Non-receipt of share certificate after transfer 1 1 0
Total 211 211 0

(H) COMMITTEE TO PREVENT AND REVIEW FRAUDS IN THE BANK

In terms of Reserve Bank of India guidelines, this committee has been constituted bythe Bank with a view to provide focused attention on preventing and monitoring of fraudsinvolving amounts of Rupees One Crore and above. The members of the Committee as on March31, 2013 are Dr. V. A. Joseph – Chairman, Sri Amitabha Guha, Sri H. Suresh Prabhu andSri K. Thomas Jacob.

The Committee met 2 times during the year.

(I) PREMISES COMMITTEE

A Premises Committee was constituted by the Board of Directors at its meeting held onDecember 28, 2007 to oversee and monitor the improvements to the Head Office building anda new Data Centre building at Rajagiri Valley, Kakkanad, Kochi. Its terms of referenceinclude calling tenders from reputed architects and contractors, scrutinizing,shortlisting and negotiating their site plans, estimates, finalizing their appointment,fees and other terms and conditions and monitoring the progress of the project. Themembers of the Committee as on March 31, 2013 are Sri Mathew L. Chakola – Chairman,Dr. V. A. Joseph, Sri Paul Chalissery and Sri K. Thomas Jacob.

The Committee met 2 times during the year.

(J) RISK MANAGEMENT COMMITTEE

In terms of the guidelines of Reserve Bank of India on the Asset Liability Management /Risk Management Systems, a Risk Management Committee of Board (RMC) has been constituted.The members of the committee as on March 31, 2013 are Sri H. Suresh Prabhu –Chairman, Sri Amitabha Guha, Dr. V. A. Joseph and Dr. John Joseph Alapatt. The committeemeets at least once in a quarter.

The committee inter-alia looks into the following aspects:

a) Review and approve on a regular basis the risk management policies recommended byRMCs, ALCO, including policies concerning credit risk, market risk, and operational risk.

b) Approve risk management governance structure of the Bank and deciding the allocationof resources.

c) Define the risk appetite of the Bank.

d) Approve the vendors for risk data warehouse and other risk management softwarerequirements.

e) Approve revisions in existing systems and policies to address risk managementrequirements and good practices.

f) Consider the effectiveness of overall risk management framework in meeting soundcorporate governance principles and identifying, managing and monitoring the key risks ofthe Bank.

g) Oversee and monitor the Bank's compliance with regulatory requirements.

h) Approve delegation of risk limits to management and approve any transactionsexceeding those delegated authorities.

i) Review risk mitigation plans on significant risks, which affects policy or procedurelevel changes for effective implementation.

The Committee met 4 times during the year.

(K) INFORMATION TECHNOLOGY STRATEGY COMMITTEE

This committee has been constituted w.e.f. March 2, 2010 to suggest improvement andmonitor the implementation of modern technology in the Bank. In compliance withGopalakrishna Committee report contained in RBI Circular RBI/2010-11/494DBS:CO:ITC:BC.No.6/31.02.008/2010-11 dated 29.04.2011 the name of the InformationTechnology Committee has been changed as "Information Technology StrategyCommittee" and the scope, terms of reference of the Committee has been amended w.e.f.28.11.2012. The members of the Committee as on March 31, 2013 are Sri Mohan E. Alapatt– Chairman, Sri Amitabha Guha, Dr. V. A. Joseph and Sri K. Thomas Jacob.

The Committee met 6 times during the year.

The revised terms of reference of the IT Strategy Committee, inter-alia, include thefollowing:

Suggest improvement and monitor the implementation of modern technology inthe Bank;

Approving IT strategy and policy documents;

Ensuring that the management has put an effective strate- gic planningprocess in place;

Ratifying that the IT strategy is indeed aligned with busi- ness strategy;

Ensuring that the IT organizational structure complements the business modeland its direction;

Ascertaining that management has implemented processes and practices thatensure that the IT delivers value to the business;

Ensuring IT investments represent a balance of risks and benefits and thatbudgets are acceptable;

Monitoring the method that management uses to deter- mine the IT resourcesneeded to achieve strategic goals and provide high-level direction for sourcing and use ofIT resources;

Ensuring proper balance of IT investments for sustaining Bank’s growth;

Make aware about exposure towards IT risks and controls, and evaluatingeffectiveness of management’s monitoring of IT risks;

Assessing Senior Management’s performance in imple- menting ITstrategies;

Issuing high-level policy guidance (eg: related to risk, fund- ing, orsourcing tasks);

Confirming whether IT or business architecture is to be designed, so as toderive the maximum business value from IT;

Overseeing the aggregate funding of IT at a bank-level, and ascertaining ifthe management has resources to en- sure the proper management of IT risks;

Reviewing IT performance measurement and contribution of IT to businesses(i.e. delivering the promised value);

Any other terms of reference as may be included from time to time by theBoard or Audit Committee or in compliance with RBI Guidelines.

(L) CAPITAL PLANNING & INFUSION COMMITTEE

The Committee was constituted by the Board on May 21, 2011 to take all decisions withregard to issue of capital through the QIP route and to take all necessary steps to raisetier-I capital upto the limit stipulated by the Board. The members of the Committee wereSri Amitabha Guha – Chairman, Dr. V. A. Joseph, Sri Paul Chalissery, Sri Mohan E.Alapatt, Sri K. Thomas Jacob and Sri H. Suresh Prabhu. On successful closure of the QIP,the Capital Planning & Infusion Committee of the Board has been dissolved w.e.f.September 24, 2012.

The Committee met 5 times during the year.

COMPOSITION OF COMMITTEES OF DIRECTORS AND THE ATTENDANCE AT THE MEETINGS

MANAGEMENT COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri Amitabha Guha 22 21
Dr. V. A. Joseph 22 22
Sri Paul Chalissery 22 21
Sri K. Thomas Jacob 22 22
Sri H. Suresh Prabhu 22 22

AUDIT COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri K. Thomas Jacob 9 9
Sri Mohan E. Alapatt* 6 4
Sri H. Suresh Prabhu* 6 6
Dr. John Joseph Alapatt# 5 4
Sri Paul Chalissery## 3 3
Sri Mathew L. Chakola## 3 3

* Ceased to be a member w.e.f. 28.11.2012

# Inducted into the Committee w.e.f. 24.09.2012

## Inducted into the Committee w.e.f. 28.11.2012

NOMINATION COMMITTEE

No. of meetings
Name Held during the tenure Attended
Dr. V. A. Joseph 1 1
Sri Amitabha Guha 1 1
Sri Mohan E. Alapatt 1 1
Sri Paul Chalissery 1 1

NPA REVIEW COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri H. Suresh Prabhu 4 4
Dr. V. A. Joseph 4 4
Dr. N. J. Kurian 4 4
Sri Jose Alappat* 2 0

* Inducted into the Committee w.e.f. 24.09.2012

COMPENSATION AND REMUNERATION COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri Amitabha Guha 4 4
Sri Paul Chalissery# 3 3
Mohan E. Alappat 4 2
Dr. John Joseph Alapatt* 2 2

* Inducted into the Committee w.e.f. 24.09.2012

# Ceased to be member w.e.f. 24.09.2012 and inducted into the

Committee w.e.f. 16.01.2013

CUSTOMER SERVICE COMMITTEE

No. of meetings
Name Held during the tenure Attended
Dr. N. J. Kurian 4 4
Sri Amitabha Guha 4 4
Dr. V. A. Joseph 4 4
Sri K. Thomas Jacob* 3 3
Dr. John Joseph Alapatt# 2 2

# Inducted into the Committee w.e.f. 24.09.2012

* Ceased to be a member w.e.f. 16.01.2013

SHAREHOLDERS/INVESTORS GRIEVANCE COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri Paul Chalissery 4 4
Sri Mathew L. Chakola 4 2
Dr. N. J. Kurian 4 4
Sri Jose Alappat 4 0

COMMITTEE TO PREVENT AND REVIEW FRAUDS IN THE BANK

No. of meetings
Name Held during the tenure Attended
Dr. V. A. Joseph 2 2
Sri Amitabha Guha 2 2
Sri H. Suresh Prabhu 2 2
Sri K. Thomas Jacob 2 2

PREMISES COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri Mathew L. Chakola 2 2
Dr. V. A. Joseph 2 2
Sri Paul Chalissery 2 2
Sri K. Thomas Jacob 2 2

RISK MANAGEMENT COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri H. Suresh Prabhu 4 4
Sri Amitabha Guha 4 4
Dr. V. A. Joseph 4 4
Dr. John Joseph Alapatt* 2 2

* Inducted into the Committee w.e.f. 24.09.2012

INFORMATION TECHNOLOGY STRATEGY COMMITTEE

No. of meetings
Name Held during the tenure Attended
Sri Mohan E. Alapatt 6 6
Sri Amitabha Guha 6 6
Dr. V. A. Joseph 6 6
Sri Paul Chalissery* 5 5
Sri K. Thomas Jacob** 2 2

* Ceased to be member w.e.f. 16.01.2013 ** Inducted into the Committee w.e.f.16.01.2013

CAPITAL PLANNING & INFUSION COMMITTEE*

No. of meetings
Name Held during the tenure Attended
Sri Amitabha Guha 5 4
Dr. V. A. Joseph 5 5
Sri H. Suresh Prabhu 5 5
Sri Mohan E. Alapatt 5 2
Sri K. Thomas Jacob 5 5
Sri Paul Chalissery 5 5

* The Committee is dissolved w.e.f. 24.09.2012

REMUNERATION PAID TO DIRECTORS DURING THE YEAR ENDED ON 31st MARCH , 2013

A) The Bank paid a total remuneration of Rs 70,39,800/- during the year to Dr. V. A.Joseph, the Managing Director and Chief Executive Officer of the Bank.

B) Details of honorarium paid to Part-time non-executive Chairman:

The Bank paid a honorarium of Rs 11,29,667/- during the year to Sri Amitabha Guha,Part-time Non-executive Chairman of the Bank.

C) Details of Remuneration paid to other non-executive Directors:

(Paid in the form of sitting fees for Board/Committee Meetings attended by them)

Sri Jose Alapatt – Rs 64,000/-, Sri Paul Chalissery – Rs 9,20,000/-, SriMathew L. Chakola – Rs 2,77,000/-, Dr. N. J. Kurian – Rs 3,60,000/-, Sri MohanE. Alapatt – Rs 3,63,000/-, Sri K. Thomas Jacob – Rs 8,45,000/-, Sri H. SureshPrabhu – Rs 8,15,000/- and Sri John Joseph Alapatt – Rs 2,88,000/-. Total amountpaid Rs 39,32,000/-.

3. BRIEF RESUME OF DIRECTORS SEEKING APPOINTMENT / RE-APPOINTMENT

Resume of Directors retiring by rotation at the 85th Annual General Meetingis given below:

a) Name : Sri Mohan E. Alapatt
Age : 49 years
Qualifications : B.E. (Mech.)
Experience : Qualified Engineer with considerable experience in varied industries over 20 years and is presently a Corporate Executive. He was Director of the Bank earlier for a period of 8 years from 30/04/1999 to 23/04/2007.
Present position : Non-executive Director
Sector : Minority

Sri Mohan E. Alapatt was appointed as an Additional Director of the Board on 1stMarch, 2010 and was elected as a Director at the 82nd Annual General Meetingheld on 14th July, 2010. He is an Engineer by profession and is presentlyworking as a Senior Corporate Executive. He is not a Director in any other Public LimitedCompany. He holds 62,000 shares in demat form. He is the Chairman of InformationTechnology Strategy Committee and member of Nomination Committee and Compensation andRemuneration Committee of the Board.

b) Name : Sri K. Thomas Jacob
Age : 59 years
Qualifications : B.Sc., FCA, DISA (ICAI)
Experience : He is a Senior Partner of M/s Thomas Jacob & Company, Chartered Accountants, Trivandrum for the last 30 years. Before this, he worked with prestigious organizations like RGN Price & Company, Chartered Accountants, Bangalore and Tata Engineering and Locomotive Company Limited. He has vast experience in Bank Audits, Audit of World Bank aided projects, Government Company/Corporation Statutory Audits, Insurance Company Audit, Internal Audit, Consultancy Service and Information System Audit besides other Statutory Audits.
Present position : Non-executive Director
Sector : Majority (Accountancy)

Sri K. Thomas Jacob was appointed as an Additional Director of the Board on August 31,2010 and elected as a Director at the 83rd Annual General Meeting held on 15thJuly, 2011. He is a practicing Chartered Accountant and not a Director in any other PublicLimited Company. He holds 54,000 shares in demat form. He is the Chairman of AuditCommittee of the Board and member of Management Committee, Committee to Prevent and Reviewfrauds in the Bank, IT Strategy Committee and Premises Committee.

Resume of the Director seeking appointment/re-appointment at 85th AnnualGeneral Meeting is given below:

a) Name : Dr. John Joseph Alapatt
Age : 59 years
Qualifications : MBBS, DLO
Experience : He is an industrialist, having around 25 years experience in managing a SSI unit along with his brother. He was a Director of the Bank for two terms of eight years each, during the periods from 1986 to 1994 and 2002 to 2010 representing majority sector – SSI.
Present position : Non-Executive Director
Sector : Majority - SSI

Dr. John Joseph Alapatt was appointed as an Additional Director of the Board onSeptember 24, 2012 and will hold office till the date of the 85th AnnualGeneral Meeting pursuant to Section 260 of the Companies Act, 1956. He is not a Directorin any other Public Limited Company. He holds 2,16,720 shares of the Bank. He is themember of Audit Committee, Compensation and Remuneration Committee, Risk ManagementCommittee and Customer Service Committee.

A member of the Bank has expressed his intention to propose Dr. John Joseph Alapatt asa candidate for being elected as a Director and has given a notice in writing with adeposit of Rs 500/- in terms of Section 257 of the Companies Act, 1956.

b) The present term of Sri Amitabha Guha, Part-time Non-Executive Chairman of the Boardgets completed on 1st November, 2013. The Board of Directors of the Bank at itsmeeting held on May 20, 2013 decided to re-appoint him as Chairman of the Board for afurther period 3 years on expiry of the present term and to revise the remunerationpayable to him subject to the approval of Reserve Bank of India. For approval of the termsand conditions of his appointment, an ordinary resolution is to be placed before theShareholders at the ensuing Annual General Meeting under the applicable provisions of theCompanies Act, 1956, the Banking Regulation Act, 1949 and the provisions of Articles ofAssociation of the Bank.

Sri Amitabha Guha, aged 64, is a Post Graduate from Calcutta University. He is avisionary having substantial exposure in the Banking Industry and has served in variousverticals of the State Bank Group. He retired as the Dy. Managing Director of State Bankof India in November, 2008. Earlier he was Managing Director of State Bank of Hyderabadand State Bank of Travancore. He is a Director of Vijaysri Organics Limited, Hyderabad;Gangavaram Port Ltd., Hyderabad, Xpro India Ltd., New Delhi, BSCPL Infrastructure Ltd.,Hyderabad and Member, Board of Governors, Asian Institute of Business Management,Bhubaneswar. He holds 7,000 shares in demat form. He is the Chairman of ManagementCommittee and Compensation & Remuneration Committee of the Board and Member ofNomination Committee, Risk Management Committee, Committee to Prevent and Review frauds inthe Bank, Customer Service Committee and Information Technology Strategy Committee.

4. DETAILS OF GENERAL BODY MEETINGS HELD IN THE LAST 3 YEARS

Name of Meeting Day, Date and Time Venue Whether any Special Resolution(s) Passed
82nd Annual General Meeting Wednesday, 14th July, 2010, at 3.00 p.m. Casino Cultural Auditorium Ltd., T.B. Road, Thrissur No
83rd Annual General Meeting Friday, 15th July, 2011, at 10.00 a.m. Casino Cultural Auditorium Ltd., T.B. Road, Thrissur Yes.
1. Special Resolution passed for issue of shares through Qualified Institutional Placement (QIP)
84th Annual General Meeting Thursday, 28th June, 2012, at 10.00 a.m. Casino Cultural Auditorium Ltd., T.B. Road, Thrissur Yes.
1. Special Resolution passed for issue of shares.

No resolution was passed by postal ballot during the financial year under review.

5. DISCLOSURES

We have extended a home loan of Rs 30 Lacs to Dr. John Joseph Alapatt on July 1, 2010before joining the Board and the balance outstanding as on March 31, 2013 was Rs 22.97Lacs.

Information supplied to the Board

The Board is regularly presented with all information under the following headswhenever applicable and materially significant. These are submitted either as a part ofthe agenda papers well in advance of the Board/Committee Meetings or are tabled in courseof the Board/Committee Meetings.

Besides, all periodical returns and statements as prescribed by RBI are placed beforethe Board. All the policy documents relating to different aspects of Bank's functioningare also placed before the Board for their approval.

Among others, the following information are also furnished to the Board: -

1. Review of annual operating plans of business, capital budgets, updates.

2. Quarterly results of the Bank and its operating divisions or business segments.

3. Minutes of meetings of Audit Committee and all other Committees of the Board.

4. Any materially relevant default in financial obligations to and by the Bank.

5. Significant developments in human resources and industrial relations fronts.

6. Non-compliance of any regulatory or statutory provision or listing requirements aswell as shareholder services such as non-payment of dividend and delays in share transfer.

7. Materially important show cause, demand, prosecution and penalty notices received bythe Bank.

6. MEANS OF COMMUNICATION

The unaudited/audited quarterly/annual financial results of the Bank are forwarded tothe Cochin Stock Exchange Ltd., BSE Ltd. and National Stock Exchange of India Ltd.immediately after the Board meeting and are published in 2 newspapers, one a localMalayalam daily and the other a National newspaper. The result, Annual Report includingNotice and Explanatory Statement and presentation made to investors and analyst during theyear are also displayed on the Bank’s website at www.southindianbank.com

7. GENERAL SHAREHOLDER INFORMATION

Date 28th June, 2013
85th Annual General Meeting Day Friday
Time 10.00 a.m.
Venue Casino Cultural Auditorium Ltd., T. B. Road, Thrissur
Financial year 2012-13
Book Closure Date 22.06.2013 (Saturday) to 28.06.2013 (Friday) (both days inclusive).
Dividend Payment Date 5th July, 2013
Name & designation of Compliance Officer JIMMY MATHEW Company Secretary
Share Transfer Agents M/s. BTS Consultancy Services Pvt. Ltd.
M S Complex, 1st Floor,
No. 8, Sastri Nagar,
Near 200 Feet Road/RTO Kolathur,
Kolathur, CHENNAI – 600 099
Tell.: 044-25565121
Fax : 044-25565131
E-mail : ramesh@btsindia.co.in
helpdesk@btsindia.co.in
Contact Person – Sri S. Rameshbabu, Director
Bank’s Address for Correspondence The South Indian Bank Ltd.
"SIB House",
Secretarial Department,
P.B. No. 28, T.B. Road, Mission Quarters
Thrissur – 680 001, Kerala
Phone: 0487-2429333 Fax : 0487-2424760
E-mail address ho2006@sib.co.in
Bank’s Website http://www.southindianbank.com

LISTING OF THE BANK'S EQUITY SHARES

Bank's shares are listed on the following Stock Exchanges in India and their StockCodes are as under:

1. The Cochin Stock Exchange Ltd.

2. The BSE Ltd. – 532218

3. The National Stock Exchange of India Ltd. – SOUTHBANK

The listing fees payable to the Stock Exchanges for the financial year 2013-14 havealready been remitted.

The Market Price Data of Bank's Shares

The monthly high and low prices of the Bank's shares traded on the National StockExchange of India Ltd. (NSE), Mumbai and BSE Ltd. (BSE), Mumbai during the financial yearare as under:

BSE NSE
MONTH HIGH LOW HIGH LOW
April 25.65 23.05 25.90 23.40
May 24.80 20.70 27.00 20.75
June 24.50 22.70 25.15 22.10
July 26.25 22.50 25.90 22.50
August 23.80 20.10 24.75 20.05
September 23.80 21.25 23.70 21.15
October 24.20 21.75 24.20 21.80
November 25.15 22.50 25.15 22.40
December 28.15 24.90 28.20 24.90
January 30.65 26.40 30.60 26.40
February 27.90 24.00 27.95 24.00
March 25.25 22.30 25.25 22.00

Distribution of Shareholding as on March 31, 2013

CATEGORY PHYSICAL DEMAT
(NO. OF SHARES) NO. OF HOLDERS SHARES NO. OF HOLDERS SHARES
UP TO – 100 3760 51150 63045 3902979
101 – 200 2861 348791 28305 5058151
201 – 500 3125 1115070 42577 16565205
501 – 1000 3173 2166197 26129 22382518
1001 – 5000 27642 50972695 38522 87560919
5001 – 10000 1558 11587990 5479 40473331
10001 – 50000 1087 20472200 4331 87214741
50001 & ABOVE 121 16404910 725 972261542
TOTAL 43327 103119003 209113 1235419386
% to total Shares - 7.70 - 92.30

Total number of shareholders both physical and electronic put together is 2,52,440.

MEMBERS’ PROFILE AS ON MARCH 31, 2013 IS AS UNDER

SHARES TOTAL
S. NO. CATEGORY PHYSICAL DEMAT SHARES % OF SHARE HOLDING
1 RESIDENT INDIVIDUALS 84424253 337499919 421924172 31.52
2 INDIAN FINANCIAL INSTITUTIONS 0 120496227 120496227 9.00
3 FOREIGN INSTITUTIONAL INVESTORS 0 588563045 588563045 43.97
4 NON-RESIDENT INDIANS 14297390 15794773 30092163 2.25
5 BODIES CORPORATES 3582670 97187205 100769875 7.53
6 DIRECTORS & RELATIVES 814690 3155778 3970468 0.30
7 MUTUAL FUNDS 0 16500583 16500583 1.23
8 TRUSTS 0 20357878 20357878 1.52
9 BANKS 0 27302678 27302678 2.04
10 CLEARING MEMBERS 0 1294572 1294572 0.10
11 HUF 0 7266728 7266728 0.54
GRAND TOTAL 103119003 1235419386 1338538389 100.00

SHARE TRANSFER SYSTEM

The Bank has appointed M/s. B T S Consultancy Services Private Limited, Chennai as itsShare Transfer Agent and the share transfer/transmission, dividend payments and all otherinvestor related matters are attended to and processed at the office of Share TransferAgents of the Bank. The Share Transfer Agents, after processing the requests of investors,put up the same to the Bank's General Manager (Admin.), wherever necessary, for hisapproval and thereafter all such cases are put up to the Shareholders / InvestorsGrievance Committee of the Board of the Bank for its information.

Trading in the Bank's shares are now compulsorily in dematerialised form. However,members with share certificates in physical form can transfer their shareholding bysending the share certificates along with a copy of PAN card of the transferee and dulyexecuted and stamped transfer deed signed by the transferor (or on his/her behalf) and thetransferee, either to the Registered Office of the Bank or to the Bank's Share TransferAgents.

DEMATERIALISATION OF SHARES

The Equity shares of the Bank have been allotted International SecuritiesIdentification Number (ISIN) INE 683A01023. As at the end of March 2013, 1235419386 of theBank's shares have been converted into dematerialized form.

The Shareholders of the Bank who have not dematerialized their shares so far mayapproach any of the Depository Participants of National Securities Depository Ltd. (NSDL)and Central Depository Services (India) Ltd. (CDSL) for dematerializing theirshareholding.

UNPAID DIVIDEND

All dividends remaining unclaimed or unpaid including the balance in Dividend Accountupto and including financial year 1993-94 have been transferred to the General RevenueAccount of the Central Government. Any claim in respect of transferred amounts shall bemade to the Registrar of Companies, Kerala, Company Law Bhavan, Bharath Matha College,P.O., Kochi – 682 021.

In terms of Section 205A of the Companies Act, 1956, the amount which has remainedunclaimed/unpaid for a period of 7 years from the date of transfer to the Unpaid/UnclaimedDividend Account has to be transferred to the "Investors’ Education andProtection Fund" (The Fund) and thereafter, no claim can be made by any shareholderagainst the Bank or the fund for the dividend amount of that year. In terms of thissection, the unclaimed refund order amount of Follow-on Public Issue held in the year 2006have been transferred to the Fund.

The unpaid dividend for the financial 2005-06 will become due for transfer to the fundon August 13, 2013.

Recently, on May 10, 2012, the Ministry of Corporate Affairs has notified InvestorEducation and Protection Fund (Uploading of information regarding unpaid and unclaimedamounts lying with companies) Rules, 2012, whereby companies are required to identify andupload information regarding unclaimed amounts due to be transferred to IEPF on theMinistry’s website and also on Bank’s website.

Accordingly, the details of such unpaid / unclaimed amounts alongwith their respectivedue dates for transfer to IEPF are provided for the benefit of investors. The Shareholdersmay please claim their unclaimed / unpaid amount due to them by making a request to theCompany giving their particulars before the same are transferred to the IEPF.

EQUITY SHARES IN SUSPENSE ACCOUNT

As per Clause 5A (I) of the Listing Agreement, the company reports the followingdetails in respect of Equity Shares lying in the suspense account which were issuedpursuant to the Follow on Public Issue and the Bonus Shares thereon.

No. of Equity Shares*
No. of cases FPO2006 Bonus 2008 Total
Opening Balance as on April 1, 2012 44 133710 33310 167020
Request received during the year 3 3000 750 3750
Shares credited during the year 3 3000 750 3750
Closing Balance as on March 31, 2013 41 130710 32560 163270

* Number of Equity shares are re-stated into shares of face value of Rs 1/- each

The voting rights on the shares outstanding in the suspense account as on March 31,2013 shall remain frozen till the rightful owner of such shares claims the shares.

8. COMPLIANCE STATUS OF CLAUSE 49 OF THE LISTING AGREEMENT

The Bank has complied with all mandatory recommendations prescribed in Clause 49 of theListing Agreement. A certificate to this effect from the Bank's Statutory CentralAuditors, M/s. S. R. Batliboi & Associates LLP, Chartered Accountants, is annexed.

9. AFFIRMATION OF COMPLIANCE WITH CODE OF CONDUCT

I, V. A. Joseph, Managing Director and Chief Executive Officer of the Bank, herebydeclare that the Bank's Code of Conduct has been accepted and has been complied with, byall Board Members and Core Management Personnel of the Bank, as required under Clause49(1D) of the Listing Agreement "on Corporate Governance."

By Order of the Board
Place : Ernakulam Dr. V. A. JOSEPH
Date : May 20, 2013 MD & CEO
   

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(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
HDFC Bank 172,383.77 21.44 4.76 15.19 20.3 0.0 0.00
ICICI Bank 145,762.50 15.40 2.19 13.58 13.1 0.0 0.00
Axis Bank 68,834.03 11.61 2.08 13.26 18.5 0.0 0.00
Kotak Mah. Bank 61,698.06 40.29 5.74 16.76 15.6 0.0 0.00
IndusInd Bank 26,201.74 18.61 3.03 12.17 17.8 0.0 0.00
Yes Bank 15,039.42 9.70 2.59 12.32 24.8 0.0 0.00
ING Vysya Bank 10,842.49 15.74 1.97 12.55 14.6 0.0 0.00
J & K Bank 8,275.29 7.00 1.70 12.17 23.6 0.0 0.00
Stand.Chart.PLC 8,180.56 2.77 0.51 9.35 19.0 0.0 0.00
Federal Bank 8,070.23 10.30 1.27 12.31 13.9 0.0 0.00
Karur Vysya Bank 3,973.70 8.48 1.29 11.82 19.0 0.0 0.00
South Ind.Bank 3,258.96 6.08 1.14 11.56 20.5 0.0 0.00
City Union Bank 3,128.67 9.04 1.90 10.90 22.3 0.0 0.00
Karnataka Bank 2,239.10 7.53 0.78 11.39 12.8 0.0 0.00
DCB Bank 1,600.80 10.57 1.46 13.48 8.8 0.0 0.00

Futures & Options Quote

 
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Key Information

Key Executives:

Amitabha Guha , Part Time Chairman  

V A Joseph , Managing Director & CEO  

Paul Chalissery , Director  

Mathew L Chakola , Director  


Company Head Office / Quarters:
SIB House T B Road,
Mission Quarters,
Thrissur,
Kerala-680001
Phone : 91-487-2420020/2420058/2420113
Fax : 91-487-2442021
E-mail : head@sib.co.in
Web : http://www.southindianbank.com
Registrars:
BTS Consultancy Services Pvt L
No 4 Ramakrishna Ng
Nr Kumaran Matri Sch
Villivakkam
Chennai-600049Karvy House 46
Road No 4 Street No1
Banjara Hills
Hyderabad - 500034

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