City Union Bank Ltd Directors Report.

The Board of Directors of your Bank is pleased to present the Annual Report on business and operations of the Bank together with the Audited Financial Statements for the Financial Year ended 31st March, 2022.

ECONOMY OVERVIEW

In the beginning of the year 2022, as the World was emerging out of the pandemic which had ravaged the globe for the past two years, the global economy was once again exposed to turbulence with the emergence of the war in Europe, followed by sanctions on Russia by the Western Allies, and escalating geopolitical tensions. This has crippled the financial architecture with the Russian banks not participating in International Payment and Settlement systems as the fear of de-globalization looms large with various protectionist trade barriers. The expected positive benefits from the declining Omicron wave has been offset by the sharp escalation in geo political tensions. Global commodity and financial markets have been rattled on account of geopolitical tensions which includes the prices of crude oil, Gold, global food, etc. The Equity markets have seen sharp corrections since January 2022 amidst the global tensions with the market volatility index rising to one year high. The resurgence of the Covid-19 pandemic in some major economies such as China and Korea in March 2022, followed by the associated lockdowns severely impacted their domestic manufacturing leading to shortage of essential components in the global markets. The emergence of Russia Ukraine war in early March 2022 further dented the global trade.

In India, the real GDP rose by 8.9% in FY 2021-22 as per estimates revised by the National Statistical Office (NSO). During 2021-22, weakness in economic activity resurfaced in Q3 and aggravated further due to the emergence of the Omicron variant in January 2022. There was a gradual turnaround in February and March 2022 with an increase in urban demand for domestic air traffic due to ease in restrictions. Several high frequency service sector parameters viz; railway freight, GST Collections, toll collections, electricity & fuel consumption and capital goods imports showed a robust year-on-year expansion in February - March 2022. Merchandise exports remained buoyant and clocked double digit growth in March 2022. The Food grains production touched a new record in 2021-22. Capacity utilization in the manufacturing sector recovered to 72.4 percent in Q3 2021-22. Our countrys foreign exchange reserves increased by US$30.3 billion to US$607.3 billion in 2021-22. The ongoing Russian- Ukraine war has increased the prices of International crude oil due to which our currency has also slumped over 5% this year. Indias rupee is likely to stabilize at around 79-80 against the US dollar in the near term. Taking all these factors into consideration the real GDP growth for FY 2022-23 is projected at 7.2% with Q1 at 16.25%, Q2 at 6.2%, Q3 at 4.1% and Q4 at 4.0%.

BANKS PERFORMANCE

Under the above circumstances, the Bank recorded a total business of 88,846 crores, an increase of 9% over the previous year figure of 81,558 crores in FY 2021. The Net Profit of the Bank has increased to 760 crores from 593 crores. The Net Interest Income of the Bank stood at 1,916 crores, a 5% increase over FY 2021 position.

The key performance indicators i.e., the Return on Assets of the Bank stood at 1.35%, Return on Equity stood at 12.31%, the Net Interest Margin of the Bank stood at 3.98% and the Cost to Income ratio stood at 40.37% during the reporting year. The financial performance has been discussed in detail in the forthcoming paragraphs. During the year the Bank opened 25 additional branches to total 727 branches and has 1,732 ATMs as at 31st March 2022. On the digital front, the Bank had introduced debit card embedded smart watch and key chain - first time in India. It also continued to upgrade and strengthen its Information Technology framework to ensure smooth and secure customer friendly Banking. Further information on the state of affairs of the Bank has been discussed in detail in the Management Discussion a nd Analysis Report forming part of this Report.

Financial Highlights (Rs. in crore)
Particulars 2021-22 2020-21 Growth (%)
Share Capital 74 74 -
Reserves & Surplus 6,512 5,769 13%
Deposits 47,690 44,537 7%
Advances (Gross) 41,156 37,021 11%
Investments (Gross) 12,294 9,523 29%
Total Assets / Liabilities 61,531 53,312 15%
Total Income 4,864 4,823 1%
Total Expenses 3,269 3,356 -
Net Interest Income 1,916 1,830 5%
Operating Profit 1,595 1,468 9%
Provisions & Contingencies 835 815 -
Net Profit (A) 760 593 28%
Appropriations
Balance of Profit brought forward (B) 61 58 -
Amount available for appropriations (A+B) 821 651 -
Transfers to:
- Statutory Reserve 200 150 -
- Capital Reserve 4 105 -
- General Reserve 405 220 -
- Investment Reserve Account 1 0 -
- Special Reserve under IT Act, 1961 75 70 -
- Dividend 37 45 -
- Balance of Profit carried forward 99 61 -
Total 821 651 -

The Deposits and Advances for the current year stood at 47,690 crores and 41,156 crores respectively. The total business stood at 88,846 crores as compared to 81,558 crores for the previous year registering a growth of 9%.

The size of the Balance Sheet as on 31st March, 2022 is 61,531 crores as compared to 53,312 crores last year recording an increase of 15%.

PROFIT

During the year the Bank earned a Gross profit of 1,595 crores as compared to previous years figure of 1,468 crores registering an increase of 9%. The Net profit of the Bank for the current year was 760 crores as against 593 crores last year.

TOTAL INCOME

The Total Income earned by the Bank marginally increased for FY 2022 to record 4,864 crores as against 4,823 crores in FY 2021. The non-interest income of the Bank increased from 689 crores to 759 crores registering a growth of 10% on account of recoveries made from NPA. The total expenditure of the Bank decreased by 3% to record 3,269 crores as compared to 3,356 crores, in the previous year due to decrease in cost of deposits.

NET INTEREST INCOME

The Net Interest Income for FY 2022 stood at 1,916 crores as compared to 1,830 crores in the last year recording an increase of 5%.

DEPOSITS

The Banks total Deposits for the year under review increased by 3,153 crores to record 47,690 crores from 44,537 crores registering a growth of 7% over previous year. During the current year CASA increased by 2,548 crores to record 15,529 crores from 12,981 crores depicting a growth of 20%. The cost of deposit of the Bank decreased to 4.68% from 5.36% in the previous year.

ADVANCES

Gross Advances of the Bank increased by 4,135 crores to 41,156 crores from 37,021 crores, posting a growth of 11%. The yield on advances declined to 9.36% from 9.91% during the reporting year. The decline in yield is due to reduction in rate of interest given to many borrowers on account of stiff competition and increase in Jewel loan & ECLGS portfolio which comprises of lower ROI. For FY 2022, the Bank achieved the target / subtargets prescribed by the RBI for Priority sector, Agriculture, Micro Enterprises, Small / Marginal farmers and weaker section.

The Gross NPA and Net NPA for the year under review stood at 4.70% and 2.95% respectively as compared to 5.11% and 2.97% in the previous year.

The provision for tax for the reporting year increased to 225 crores from 100 crores in previous year. The provision made for NPA for the financial year was 554 crores vis-a-vis 599 crores last year. The total provision decreased by 40 crores to 835 crores from 875 crores in the previous year.

TREASURY OPERATIONS

Domestic Treasury

The gross Investment increased by 2,771 crores to 12,294 crores as on 31st March 2022 from 9,523 as on 31st March 2021. Out of this, the investments in Government bonds alone remained at 12,137 crores constituting 98.72% of the total investment. The Non-SLR investments declined by 33 crores mainly on account of reduction in Security Receipts. In first half of financial year, yields were range bound as Regulator kept the system in surplus liquidity and through conducting Government Securities acquisition programme. In the second half, the withdrawal of Government Securities Acquisition programme ("G-SAP") and subsequent high borrowing projected in FY2023, led the yields to spike. Towards the end of financial year global uncertainties clouded the market with high inflation and commodities prices started to drag the global growth. During the year, the Bank utilized the volatile yield movements and through timely sale of securities, booked a profit to the tune of 62.10 crores.

Forex Treasury

During the financial year 2021-22, Indian Rupee weakened against USD by 3.21%. Indian rupee against USD opened at 73.42 and closed at 75.78. Major reasons attributed for weaker rupee were hawkish fed amid rising inflation, persistent surge in crude oil price, rising bond yields and weak risk appetite. During the fourth quarter of the FY 2021-22, outbreak of the war between Ukraine and Russia impacted the local currency and favoured US dollar. The intervention of the RBI at timely intervals through its monetary policy reduced the pace of depreciation of the rupee. During the FY 2021-22, profit on our foreign exchange operation stood at 194.74 crores as against 91.91 crores during the previous financial year

NET WORTH & CAPITAL ADEQUACY RATIO

Net Worth

The paid-up Share Capital of the Bank increased to 73.96 crores as on 31st March, 2022 from 73.88 crores as on 31st March, 2021. During the reporting period the Bank has allotted 7,62,802 equity Shares to employees under Employee Stock Options pursuant to CUB ESOS Scheme 2008 & CUB ESOS Scheme 2017.

The Net worth of the Bank stands improved to 6,549.75 crores as on 31st March, 2022 from 5,798.85 crores as on 31stMarch, 2021.

Capital Adequacy Ratio

As per Basel III regulations, banks are required to maintain a minimum Pillar 1 Capital (Tier I + Tier II) to Risk Weighted Assets Ratio (CRAR) of 9% on an ongoing basis. Besides this minimum capital requirement, Basel III also required creation of capital conservation buffer and countercyclical buffer of 2.50% at the end of March 2018 in a phased manner beginning from 31st March, 2015 @ 0.625% in each year up to 31st March, 2018. The RBI had issued circulars on various dates extending the transitional period for full implementation of Basel III Capital Regulations due to the unfavorable economic situation and also due to the continuing stress on account of COVID-19 crisis. Now the minimum regulatory requirement under Basel III with Capital Conservation Buffer (CCB) is 11.50% (9.00%+2.50%) with effect from 01.10.2021. The CRAR required to be maintained for the period ended 31.03.2022 is 11.50 %. The Bank has maintained Tier I CRAR of 19.78% and total CRAR of 20.85% as at 31st March, 2022 which are well above the norms prescribed by the RBI.

DIVIDEND

The Board of the Bank at its meeting held on 27th May, 2022 had recommended Dividend of 100% (i.e ^ 1/- per equity share on face value of ^ 1/- each fully paid up) for the year ended 31st March, 2022 subject to the approval of shareholders at the ensuing Annual General Meeting ("AGM"). The dividend, if any, declared at the AGM will be paid to the shareholders as on the record date specified for such purpose, within the prescribed time. The dividend payout for FY 2022 is in accordance with the Dividend Distribution Policy ("the policy") of the Bank framed in terms of Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosures Requirements) Regulations, 2015 and the same has been uploaded in the website of the Bank. Weblink:

https://www.cityunionbank.com/downloads/DividendDistributionPolicy.pdf

In case any shareholder has not claimed dividend(s) for previous year(s), they may kindly approach the Bank or its Registrar and Transfer Agents ("RTA").

BRANCH EXPANSION

Our Bank did not go for any aggressive branch expansion during the year and it added only 25 branches to total 727 as on 31st March, 2022. The total number of ATMs stood at 1,732 (includes 789 Bulk Note Recycler Machines (BRM) which performs the job of accepting and dispensing cash). As on 31st March, 2022 the Bank had a total of 1,110 onsite ATMs 622 offsite ATMs.

During the reporting year, the Bank has replaced old BRM machines with new ones and closed loss making off site ATMs, the details of which are as follows:

Particulars ATM BRM Total
Opened 55 72 137
Closed 70 49 119

As for the branch spread, as on date, 89% of branches are operational in South, 6% in West, 4% in North and 1% in Eastern parts of India.

FINANCIAL INCLUSION

Financial Inclusion is a concept where the banking financial solution and services are offered to every individual without any forms of discrimination as well as to ensure even the under privileged get easy access to banking channels. The objectives of financial inclusion are to provide the following:

• Basic savings bank deposit accounts

• Servicing products (including investment and pension)

• Simple credit products and overdrafts linked with no frills account

• Remittance and money transfer facilities

• Pension and Insurance products

Your bank has witnessed tremendous progress in the successful implementation of financial inclusion, especially to the citizens in rural areas. The Bank has already implemented Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme and there are 85,477 accounts as on March 2022. The Bank has 3,75,425 Basic Savings Bank Deposit accounts, including 1,07,859 accounts sourced through Business Correspondents (BCs). To cater to the needs of customers of unbanked areas, the bank has established BC Outlets in those places and is providing all banking services through Business Correspondents (BCs). Your bank has 131 BCs and 6 BC outlets for rendering services to the village level beneficiaries. The Business Correspondents of the bank make regular visits to the villages and provides doorstep banking services.

Your Bank is very much keen in creating awareness on Financial Inclusion and also on the promotion of Government schemes for social welfare, Pension, Insurance viz Atal Pension Yojana (APY), MUDRA, PMJJBY, PMSBY etc., The bank has 41,292 APY accounts, 69,521 PMJJBY accounts and 1,12,306 PMSBY accounts under the schemes.

Your Bank has got eKYC facility and Aadhaar enabled Payment System (AePS), for rendering quick services to the rural public. Besides, the bank has deployed POS machines, at various locations, which are very much helpful for doing merchant transactions. The bank has continuously ensured uninterrupted Banking services in the unbanked areas with the help of digital banking services. Your bank is proud of extending contribution to the social welfare schemes of the Government, for our Nation building.

As done in the past, Financial Literacy Week is being conducted by the Bank with the aim of furthering financial literacy, developing credit discipline and encourage availing credit from formal financial institutions by the customers. As per the objectives of the National Strategy for Financial Education 2020-2025, focus of the Bank will be on the following three topics with a view to promote digital transactions in a more secured manner:

• Convenience of digital transactions

• Security of digital transaction

• Protection of customers

Your Bank has conducted campaigns at various places for observing the Financial Literacy Week in an effective manner and to educate its customers properly.

HUMAN RESOURCE DEVELOPMENT

Human Resource Development and Industrial atmosphere plays a prominent role in an organizations growth and your Bank has always maintained cordial relations among its employees at all times. As a part of HR strategy, the Bank offers its employees various monetary and nonmonetary benefits based on their performance in the form of ESOP, Performance Linked Pay (PLP) & Ex-gratia and ensures that each employee feels part of the Bank and strives to deliver to the best of his abilities.

During the year, Human Resource function played a pivotal role to provide a cordial safe work atmosphere to all employees by implementing the COVID guidelines issued by health ministry and state guidelines on staff strength at workplace. Further, awareness is being created on regular basis with regard to precautions and safety measures to be adopted by employees while on and off the work place.

In line with the Banks expansion plans, 25 new branches were opened in various states for which the Human Resources Department provided adequate manpower. Specific efforts were made towards talent acquisition, skill development, and manpower training. Employees are identified and imparted trainings at various areas of banking. Job rotation is being followed to ensure every employee gains experience in all the areas of banking.

In tune with the future expansion, the bank is constantly upgrading and revisiting its manpower requirements through developing a talent pool. The members of the talent pool are being groomed by giving trainings at various centers of excellence in our staff college at Chennai and Kumbakonam apart from SIBSTC, NIBM, CAFRAL, IRDBT etc. It is pertinent to note here that there has not even been a single occasion of employee unrest in the Banking history of CUB. Continuous efforts are being made to enhance the quality and efficiency of existing personnel.

As on 31st March, 2022, the Bank has 5,367 on-roll employees, comprising of 59 employees in Executive cadre, 2,271 in Management cadre and 3,037 in Workmen cadre.

EMPLOYEES STOCK OPTION SCHEME (ESOS)

The Bank has implemented Employee Stock Option Scheme CUB ESOS 2008 for grant of stock options to eligible employees of the Bank. The Shareholders of the Bank approved the scheme on 26th April, 2008 at an Extra Ordinary General meeting of the Bank. The maximum aggregate number of options that may be granted under this scheme is 5,00,00,000. As per the scheme, exercise price of the options shall be decided by the Compensation & Remuneration Committee at the time of grant of stock options. The Bank offers ESOS to its employees which vests over a period of five years from the date of grant of options i.e., 15% options each for first three years and 25% and 30% for fourth and fifth year respectively. The options are offered at prevailing market prices at the time of grant to the employees. However the same shall vary pursuant to corporate action viz., Rights Issue, Bonus Issue etc. There were no material changes in the ESOS of the Bank during the period under review and the same is in compliance with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014 as amended from time to time ("SEBI SBEB Regulations"). As at the end of 31st March, 2022, the Bank has granted 4,83,08,740 options and only 16,91,260 options are yet to be granted under the scheme.

The disclosures pursuant to Regulation 14 of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 has been hosted in the website of the Bank and also the same is annexed hereto as Annexure I (weblink: https: / / cityunionbank.com/downloads/CUB_ESOS_Rep ort_2020.pdf)

In addition, the shareholders of the Bank at its meeting held on 23rd August, 2017 approved new CUB ESOS Scheme 2017 for 3,00,00,000 options on terms and conditions similar to previous one. During the reporting year 5,12,800 stock options were granted to the eligible employees under CUB ESOS Scheme 2017. As on 31st March, 2022, the Bank has granted 39,74,800 options (including 34,62,000 options granted during previous year) and 2,60,25,200 options are yet to be granted under the scheme.

AUTOMATION / DIGITAL BANKING

Banking service now-a-days has moved from branch banking to palm of customer to do banking on their convenience and comfort. With the advancement of information technology and availability of easy access of network through mobile phones, there has been a surge in the use of digital payments in the economy which is encouraging cashless transactions. Thus digital banking has become the order of the day.

Banking services through digital banking has embraced major section of the public across the globe which gained momentum since the beginning of the pandemic.

• The bank as on 31st March 2022 had 727 branches and 1,732 ATMs (includes 789 Bulk Note Recycler Machine).

• Bank also deployed 610 passbook kiosk and 589 cheque deposit kiosk across its branches.

• The bank has also been spreading its Self Service Bank branches (e-Lounge) and enabling our ATMs / BRMs for cardless deposit and withdrawals, self-service kiosk for passbook and cheque deposit machine.

• Customers can manage their digital payments / transactions by setting their own limit for the ATM, POS and E-com channel transactions. They can enable / disable International usage of the card also through Net / Mobile Banking

• Bank has made its presence in Social Media Banking through WhatsApp, Facebook, Twitter and YouT ube.

• Our customers are enjoying CUB e-Wallet, Unified Payment Interface (UPI), BHIM and *99# a NUUP (National Unified USSD Platform), Bharat Bill Payment System (BBPS), Bharat QR - Scan & Pay in BHIM / UPI, ASBA and Aadhaar Enabled Payment System (AEPS).

• Bank is utilising V-CIP (VKYC) for customer on- boarding and account opening across India

• FASTag facility to make payments at Vehicle Toll Plazas

• A customer friendly Contact Centre (Call Centre) with Interactive Voice Response System (IVRS), is put in place to promote customer support on Multi-language on 24x7 basis.

• Bank has PCI DSS certification for the digital card environment

Wearable Keychain and CUBFit Watch

• In order to make payment on the go, your bank has introduced its payment mode to their customers through wearables. To begin with, CUB has made tie up with RuPay to make the "tap and go" payments through a key chain and CUBFit watch.

• This is an advanced technology by embedding chip into the wearables to make payments. Contactless card can be tapped at the merchant PoS devices and transactions upto 5,000/- can be performed without entering PIN.

CUB UPI123 Pay

• In the series of its innovation, your bank has now introduced UPI Payment solution for feature phones - CUB UPI 123PAY. Customers of any bank can now perform UPI transactions using feature phone / smart phone through CUB BHIM Voice IVR by calling 08045163581.

• The feature phone solution is expected to help in offering payment services to the unserved and underserved segment of the population.

• The Banks Customers can get more details from the Banks website. (Weblink: https://www.cityunionbank.com/upi-123pay)

Enhanced UI of CUB BHIM UPI application

• We have enhanced our CUB BHIM UPI Application with added features like Pay to contact, Self Pay etc.

Apply Card Online

• Introduced the facility to apply debit card online through net banking and mobile banking without visiting branch. Customers can apply for a fresh card or for a replacement card against their lost /blocked card. Card status can also be tracked online.

Easy Buy

• In an enrichment to our CUB All in one Mobile app, the Bank has now integrated Easy Buy, a shopping platform in the mobile app comprising marketplace modules like Flipkart, Bigbazaar, Myntra, Netmeds, etc. EasyBuy is built to meet shopping needs of the consumers and to use a single app for all their online shopping needs instead of downloading multiple apps for specific purpose.

RuPay Credit Card

• The Bank has acquired BIN (Bank Identification Number) from RuPay for issuance of secured RuPay Discover Credit Card which can be used internationally with features like lounge access, insurance coverage upto 2 Lakhs and other applicable offers issued by RuPay.

Cyber Security Measures

As the convenience in doing banking transactions through digital channels increases, the risks in cyber environment also increase. New types of cyber frauds are emerging with the introduction of new digital channels. As the Bankers are the custodians of Depositors money, the bank takes utmost care to ensure the implementation of necessary security measures to protect public interest and necessary mitigation measures.

• The Bank has implemented latest technology tools to cover the protection, detection and response for all cyber security threats and risks.

• The Bank has established a 24*7 Security Operation Centre (SOC). The SOC takes steps to prevent the attempts from the IOC (Indicators of Compromise) and IOA (Indicators of Attack).

• The Bank participates in the cyber drills conducted by IDRBT to enhance our threat detection and prevention capabilities.

• The Bank provides training on information security and cyber security to the concerned employees of the bank.

• The Bank conducts Readiness Assessment among employees to detect and respond for a cyber-incident.

OTHER BUSINESS ACTIVITY

During FY 2019, the Bank started the marketing and distribution of Health Insurance and Mutual Fund products in tie up with following organizations, to offer additional services to all its stakeholders.

• Star Health and Allied Insurance Co. Ltd., for distribution of Health Insurance products.

• Integrated Enterprises India Ltd., for distribution of Mutual Fund products through online platform to our customers in Demat form and through branch network.

• BSE Star Mutual Fund to offer Mutual Fund products through web based platform and through branch network.

• Finwizard Technology Pvt. Ltd. (widely known as FISDOM) to offer Mobile based Mutual Fund Investment solution.

The above services are fully functional. During the reporting year the Bank has earned an income of 21.03 crores as against 16.49 crores in the previous year from Bancassurance income.

Further, taking benefit of the revised the IRDAIs guidelines on "Open Architecture Policy on Insurance Distribution", for augmenting the Banks Non-Interest income, it is proposed by the Board on this report date that the Bank would be signing agreements as Corporate Agent in Life Insurance, General Insurance and Health Insurance business for marketing / distribution of their products through the Branch network of the Bank, the details of which is set out below:

Life Insurance

Tata AIA Life Insurance Company Bajaj Allianz Life Insurance Company

General Insurance

Shriram General Insurance Company Royal Sundaram General Insurance Company

Health Insurance

Care Health Insurance Company

Aditya Birla Health Insurance Company

SUBSIDIARIES AND ASSOCIATES

Your Bank does not have any Subsidiaries or Associates to report during the year under this report.

BOARD MEETING

The Board meetings of the Bank were held in accordance with the Companies Act, 2013, the Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. During the year under review 12 (twelve) meetings were held. The details of such meetings along with the constitution of the Board and its committees are given under report on Corporate Governance forming part of this report.

BOARD OF DIRECTORS & KEY MANAGERIAL PERSONNEL

Retirement(s)

Shri. R. Mohan (DIN : 06902614)

Shri. R. Mohan, Part-Time Chairman of the Bank has completed his tenure on 03rd May, 2022 as per his appointment terms approved by RBI vide its letter no. DBR.APPT.NO.8631 /08.42.001/2018-19 dt.10th April 2019. Further, as per the provisions of Section 10A(2A)(i) of the Banking Regulation Act, 1949, Shri. R Mohan, has vacated his office of Director as Independent Director on the close of business hours of 27th June, 2022 on account of completion of tenure (8 years).

The Board hereby places on record its warm appreciation over the excellent services rendered by Shri. R Mohan during his tenure.

Appointment / Re-appointment

Shri. M. Narayanan (DIN 00682297)

Pursuant to the provisions of Section 35B and Section 10B (1A) of the Banking Regulation Act, 1949, Shri. M. Narayanan, Independent Director, has been appointed as the Part-Time Chairman of the Bank for a period of two (2) years w.e.f 04th May 2022. After the retirement of Shri R. Mohan, the Reserve Bank of India has accorded its approval in this regard vide its letter no. DOR.GOV. No.S663/08.42.001/2022-23 dated 04th May, 2022.

Shri. M Narayanan, aged 63 years is a graduate in Mathematics (B.Sc) from Loyola College, Chennai and is a qualified Chartered Accountant ("CA") , Cost Accountant and System Auditor (DISA). Presently he is practicing as a Chartered Accountant since 2003, handling Taxation, providing virtual CFO and Management Consultancy services to MSME companies, undertaking Internal Audit of corporates in all segments (MSME to Large). Prior to taking up CA Practice, he served in Industry for over 20 years in companies of repute like BHEL, Dalmia Cements, Fenner, RAMCO Cements and Dishnet whereat he has handled Finance, Accounts & Taxation at various levels up to CFO. Recently, he had completed the certification programme in IT & Cyber security for Board members conducted by Institute for Development and Research in Banking technology (IDRBT), Hyderabad. Shri. M Narayanan hails from an Agricultural family and he has been actively involved in Agriculture for over 30 years.

The Board recommends his appointment as the Part-Time Chairman of the Bank for approval by shareholders in the Notice calling this Annual General Meeting. The relevant details of Shri. M. Narayanan pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended and Secretarial Standard - 2 is disclosed separately in such Notice.

Professor Veezhinathan Kamakoti (DIN 03537382)

Prof. V Kamakoti was co-opted as Additional Director on the Board of the Bank w.e.f 27th May, 2022 to hold office till the ensuing Annual General Meeting of the Bank.

Prof. V Kamakoti, B.E., M.S., Ph.D, aged 53 years is the Director of IIT Madras. He has special knowledge in secured system engineering & security in information technology. Being a professor in Computer Science he will add more value to the Bank on improvement and development in technology front. Further he has done a project titled "Re-generative Agriculture Stack Architecture (RASA)" executed by IIT Madras. Earlier he was on the Board of the Bank from 27th April, 2011 to 26th April, 2019. Pursuant to RBI circular no.DOR.GOV.REC.8/29.67.001/2021-22 dated 26th April, 2021, he has been co-opted for a second term on completion of the mandatory cooling period. He is quite a knowledgeable person whose contribution in the first term was very useful to the Bank, especially in the area of Information Technology and cyber security.

In the opinion of the Board, Prof. V Kamakoti, can effectively participate and represent in the Board of the Bank. The Board recommends his appointment as an Independent Director on the Board of the Bank (not liable to retire by rotation) for approval by shareholders in the Notice calling the ensuing Annual General Meeting. The relevant details of Prof. V Kamakoti pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Secretarial Standard - 2 is disclosed separately in such Notice.

Shri. Gurumoorthy Mahalingam (DIN 09660723)

Shri. G Mahalingam was co-opted as an Additional Director on the Board of the Bank w.e.f 06th July, 2022 to hold office till the ensuing Annual General Meeting.

Shri. G. Mahalingam, M.Sc. (Stat.), MBA., CAIIB., aged 65 years is a career Regulator in the Financial Sector having worked for 34 years in RBI holding the position of Executive Director at the time of retirement and 5 years in Securities and Exchange Board of India ("SEBI"). He holds a Masters degree in Statistics and Operations Research from IIT Kanpur and MBA in International Banking from the UK. Shri. Mahalingam has extensive experience in Banking Regulation and Supervision as also in market regulation and operations. His stint with SEBI as a Member of the Board paved the way for his dealing with Mutual funds, FPIs, Listed companies and securities law enforcement. As a quasi judicial member, he has passed more than 500 orders during his tenure in SEBI dealing with a variety of subjects in capital markets.

The appointment of Shri. G Mahalingam, a person who has served in two important regulatory institutions at a senior position and who has an indisputably wholesome experience in financial sector, would be most beneficial to the Bank particularly in Regulatory matters, Finance, Forex & Treasury etc.

The Board recommends his appointment as an Independent Director on the Board of the Bank (not liable to retire by rotation) for approval by shareholders in the Notice calling the ensuing Annual General Meeting. The relevant details of Shri. G Mahalingam pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended and Secretarial Standard - 2 are disclosed separately in such Notice.

Shri. Narayanan Subramaniam (DIN : 00166621)

Shri. Narayanan Subramaniam currently an Independent Director on the Board of the Bank was co-opted as an Additional Director w.e.f. 20th June, 2017, which was duly approved by the shareholders in their meeting held on 23rd August, 2017. His current term is due to expire on 22nd August, 2022.

In accordance with the provisions of Section 149(10) of the Companies Act, 2013, an Independent Director can hold office for a maximum term of upto five (5) consecutive years on the Board of the company and shall be eligible for re-appointment for another term of five years subject to passing of Special Resolution by the members and disclosure of such appointment on Boards Report. Further, in respect of Banking Companies, the provisions of section 10A(2) of the Banking Regulation Act, 1949 (Banking Act) specify that the overall tenure of non-executive Directors should not exceed a period of eight (8) consecutive years.

Keeping in view the provisions of both the Companies Act, 2013 and the Banking Regulation Act, 1949 and pursuant to the recommendations of the Nomination Committee, the Board of Directors of the Bank at its meeting held on 06th July, 2022 considered and approved a proposal to reappoint Shri. Narayanan Subramaniam as Independent Director on the Board of the Bank w.e.f., 23rd August, 2022 for the remaining period up to 19th June, 2025 as permitted under the Banking Regulation Act, 1949 from the date of his first appointment in the Bank subject to the approval of Shareholders by means of Special Resolution at the ensuing Annual General Meeting of the Bank.

Accordingly, the Board recommends the re-appointment of Shri. Narayanan Subramaniam for a second term as an Independent Director on the Board of the Bank (not liable to retire by rotation) for approval by shareholders in the Notice calling the ensuing Annual General Meeting. The relevant details of Shri. Narayanan Subramaniam pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended and Secretarial Standard - 2 are disclosed separately in such Notice.

Directors to retire by Rotation - All directors on the Board except the Managing Director and CEO of the Bank are Independent Directors. Hence the provisions of Section 152(6) of Companies Act, 2013 relating to retirement of directors by rotation do not apply considering the present composition of the Board of Directors. Independent Directors are not required to retire in terms of Section 149(13) of the said Act. Accordingly no Director including MD & CEO is required to retire by rotation at the ensuing Annual General Meeting.

Declaration by Independent Directors

The Bank has received relevant declarations from all the Independent Directors under Section 149(6), 149(7) of the Companies Act, 2013, notifications issued by the Ministry of Corporate Affairs and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board is satisfied that the Independent Directors meet the criteria of independence as stipulated under the aforesaid provisions of the Companies Act, 2013.

Further, in compliance with MCA notification no.G.S.R.805(E) dt.22nd October, 2019, all Independent Directors of the Bank have registered themselves in the Independent Directors databank of Indian Institute of Corporate Affairs and are qualified / exempt from undertaking Self Assessment Exam.

Familiarization program for Independent Directors

The details of programme for familiarization of Independent Directors with the Bank, their roles, rights and responsibilities in the Bank and related matters are provided separately under the Corporate Governance Report forming part of this Annual Report.

Performance Evaluation

In line with the provisions of the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and relevant notifications / guidelines issued by SEBI in this regard, there exists a structured criterion as approved by the Nomination committee of the Board for carrying out the performance evaluation of the Board as a whole, its committees as well as Independent Directors, MD & CEO and Chairman.

The necessary evaluations / review were carried out by the Board and Independent Directors to determine the effectiveness of the Board, its Committees, MD & CEO, Chairman and individual Directors. Additional information on performance evaluation is set out in Corporate Governance section forming part of this Annual Report.

Key Managerial Personnel

Dr. N. Kamakodi, Managing Director & CEO and Shri. V. Ramesh, Chief Financial Officer & Company Secretary of the Bank, continue to be the "Key Managerial Personnel" of the Bank pursuant to the provisions of Section 2(51) read with Section 203 of the Companies Act, 2013.

AUDITORS

Statutory Central Auditor

M/s. Jagannathan & Sarabeswaran, Chartered Accountants, Chennai and M/s. K Gopal Rao & Co., Chartered Accountants, Chennai were appointed as the Joint Statutory Central Auditors of the Bank in the previous Annual General Meeting (AGM) held on 19th August, 2021. The term of the present Joint Auditors will conclude at the conclusion of the ensuing Annual General Meeting of the Bank and being eligible has offered themselves for re-appointment in line with RBI guideline dated 27th April, 2021. Consent has been received from the present Auditors for their re-appointment and also a confirmation to the effect that they are not disqualified to be appointed as Statutory Central Auditors of the Bank in terms of Companies Act, 2013 & the rules made there under. An application was made to the Reserve Bank of India seeking its approval for the appointment of M/s. Jagannathan & Sarabeswaran, Chartered Accountants, Chennai and M/s. K Gopal Rao & Co., Chartered Accountants, Chennai to act as Joint Statutory Central Auditors for the FY 2022-23. Based on the above, RBI vide its letter no. ARG. No.S1077/08.13.005/2022-23 dated 3rd June, 2022 has given its approval for their appointment for FY 2022-23. Members are requested to consider and approve their appointment as the Joint Statutory Central Auditors of the Bank for FY 2022-23.

The Statutory Central Auditors have furnished their Report for FY 2022 which forms part of this report and there are no qualifications, reservations or adverse remarks made by the Auditors in their report. Further, the Auditors of the Bank has not reported any fraud under section 143(12) of the Companies Act, 2013.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Bank has appointed M/s. B. K. Sundaram & Associates, Practising Company Secretaries, Tiruchirapalli as Secretarial Auditor to conduct the Secretarial Audit of the Bank for the Financial Year 2021-2022. The report of Secretarial Auditor Secretarial Audit Report in the prescribed format is annexed to this report as Annexure II.

Pursuant to Regulations 24A of SEBI Listing Regulations 2015, read with relevant SEBI circular the Bank has obtained Secretarial Compliance Report certified by such auditor for the financial year ended 31st March, 2022, on compliance of all applicable SEBI regulations and circulars / guidelines issued thereunder and the copy of the same was submitted with the stock exchanges.

There are no observations, reservations or adverse remarks made by the Secretarial Auditor in their report except they have recorded a fact as to the levy of penalty of Rs.1 crores by RBI on account of non-compliance of its direction relating to waiver of margin / security requirements.

CostAudit

The requirement of maintaining cost records u/s 148(1) of the Companies Act 2013 is not applicable to the Bank.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with Section 134 (5) of the Companies Act, 2013, the Board of Directors of the Bank hereby declares and confirms that :-

i) In the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures.

ii) The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the State of Affairs of the Bank as at the end of the financial year and of the Profit & Loss of the Bank for that period.

iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of applicable laws governing Banks in India for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

iv) The Directors have prepared the annual accounts on a going concern basis.

v) The Directors have laid down adequate internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and

vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

INSIDER TRADING NORMS

The Bank has formulated / revised the Code of Conduct pursuant to SEBI (Prohibition of Insider Trading) Regulations, 2015 as amended from time to time ("SEBI PIT Regulations") to regulate, monitor and ensure reporting of trading by the designated persons and other connected persons. The said code had been reviewed and amended by the Board of Directors from time to time.

The code is adopted to maintain highest ethical standards in dealing with securities of the Bank by persons to whom it is applicable. The code of conduct and related policy are available in the Banks website. weblink:

https://www.cityunionbank.com/downloads/InsiderTrading_Mar2020.pdf

The Bank has taken necessary steps with Integrated Registry Management Services Private Limited, for incorporating the PAN in the database to facilitate reporting of trading by designated persons and other connected persons in accordance with SEBI PIT Regulations.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE BANK AND SIGNIFICANT / MATERIAL ORDERS PASSED BY THE REGULATORS

There are no material changes and commitments affecting the financial position of the Bank which occurred between the end of the financial year of the Bank i.e., 31st March, 2022 and the date of Directors Report i.e., 06 July, 2022.

During the year under review, no significant and material orders have been passed by the Regulators. However, in May, 2021, the Reserve Bank of India has imposed a monetary penalty of Rs.1 crore (Rupees One crore only) for non compliance with certain RBI directions (procedural aspects) relating to obtaining of collaterals in respect of some loans to MSME Sector & Education, and prescribing margin for Agriculture Credit.

POLICIES

Directors Appointment(s) and Remuneration / Compensation Policy

The Bank has formulated and adopted a policy on Board Diversity as per which the Nomination Committee of the Board of Directors of the Bank conducts the preliminary assessment for appointment of Directors on the Board of the Bank and makes suitable recommendations to the Board for its consideration.

The Nomination Committee identifies and assesses the qualifications and positive attributes of the proposed candidate for the position of Director based on the disclosures / declarations received from such person under the Companies Act, 2013, the Banking Regulation Act, 1949 and also RBI guidelines. The Nomination Committee makes a thorough scrutiny of the prospective candidate and certifies the fit and proper status to the Board after exercising above due diligence process.

Apart from the above, the Nomination Committee while appointment of an Independent Director also considers the Declaration on Independence furnished by the proposed candidate for the position of Director u/s 149 (6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Further, the Bank has a Compensation Policy which is in accordance with the directives issued by the Reserve Bank of India. The Bank has constituted a Compensation & Remuneration Committee which oversees the framing, implementation and review of the Compensation Policy of the Bank. The Remuneration Policy of the Bank is briefed under Corporate Governance Report forming part of Annual Report.

RISK MANAGEMENT POLICY

The Bank has in place an Integrated Risk Management framework supported by detailed policies and processes for management of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and various other Risks. The details on the Risk Management framework of the Bank is detailed in the Management Discussion and Analysis section appended to this Report.

BUSINESS RESPONSIBILITY REPORT

As per Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Bank has prepared the Business Responsibility Report describing the Banks social, environmental and governance aspects. The same is set out as a separate report forming part of this Annual report.

DEPOSITS UNDER CHAPTER V OF COMPANIES ACT, 2013

Being a Banking company, the disclosures as required pursuant to Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014 read with Section 73 & 74 of the Companies Act, 2013 are not applicable to your Bank.

INTERNAL FINANCIAL CONTROLS SYSTEMS & ADEQUACY

The Bank has put in place adequate internal financial controls commensurate with the size and scale of operations. The Bank has, in all material aspects, adequate Internal Control systems over financial reporting and these controls have been taken into consideration, the essential components of internal control stated in the guidance note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. Such Internal Financial Controls over Financial Reporting were operating effectively as at the end of the financial year. More details have been set out in Management Discussion and Analysis Report which forms part of this report.

RELATED PARTY TRANSACTIONS

The Board of Directors of the Bank has adopted a policy on Related Party transactions which is in line with the Companies Act, 2013 and SEBI Listing Regulations, 2015. During the reporting year, no contracts or arrangements were made by the Bank attracting the provisions of Section 188 of the Companies Act, 2013 or SEBI Listing Regulations. A detailed policy on the Related Party Transaction is available at the Banks website.

(weblink: https://www.cityunionbank.com/downloads/documents/CUB_Related_Party_Transaction.pdf)

LOANS, GUARANTEES OR INVESTMENTS

All loans, guarantees or investments made in securities by the Bank are exempt pursuant to the provisions of section 186 (11) of the Companies Act, 2013 and hence do not attract any disclosure required under section 134 (3)(g) of the Companies Act, 2013.

ANNUAL RETURN u/s 92(3) OF COMPANIES ACT, 2013

The Annual Return pursuant to Section 92(3) of the Companies Act, 2013 is uploaded in the website of the Bank.

(Weblink: https://www.cityunionbank.com/downloads/FY%202019-2020.pdf)

CORPORATE SOCIAL RESPONSIBILITY (CSR)

In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, and the related notifications / circulars / guidelines issued by MCA, the Bank has established Corporate Social Responsibility (CSR) Committee. The Bank has established CUB Foundation, a non-profit entity to identify suitable deserving projects, recommend and oversee the CSR initiatives of the Bank.

The Annual Return on CSR activities as required under Rule 9 of the Companies (Corporate Social Responsibility) Rules 2014 is furnished under Annexure III to this report.

DISCLOSURE TO UNDER SECTION 177(8) OF COMPANIES ACT, 2013

The Board of the Bank had constituted the Audit Committee under the extant guidelines of Reserve Bank of India (RBI), provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The details of the composition of the Audit Committee are furnished in the Corporate Governance Report which forms part of this report.

CORPORATE GOVERNANCE

The Bank is committed to achieving the highest standards of Corporate Governance and it also adheres to the Corporate Governance requirements set by the Regulators / applicable laws. The Corporate Governance practices followed by the Bank aim to ensure value creation for all its stakeholders through ethical decision making and maintaining transparency.

A detailed report on Corporate Governance standards followed by the Bank as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Companies Act, 2013 and rules made there under alongwith Certificate of Compliance from the Statutory Auditors are furnished separately which forms part of this report.

MANAGEMENT DISCUSSION & ANALYSIS

A detailed Management Discussion and Analysis Report for the year under review as stipulated in SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 is presented as a separate section forming part of this Report.

OTHER DISCLOSURES

Conservation of Energy and Technology Absorption

In respect of the nature of activities carried out by the Bank, w.r.t. the provisions of Section 134 (m) of the Companies Act, 2013 relating to conservation of energy and technology absorption, the Bank has taken every effort to conserve energy. The Bank has been installing energy efficient equipments at all its branches including installation of Solar panels wherever feasible and power saving LED bulbs at majority of Branches and Central Office.

On the technological front, the Bank continued to offer reliable and secure banking service to its customers by facilitating the latest customer friendly technological solutions.

Foreign Exchange Earnings and Outgo

The Bank continues to encourage countrys export promotion by lending to exporters and offering them forex transaction facilities.

EMPLOYEES / OTHER DISCLOSURES

Disclosures under Section 197 of the Companies Act, 2013

The disclosures pursuant to the provisions of Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are furnished as Annexure IV.

The statement containing particulars of employees as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as Annexure V.

Disclosure under Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Bank is keen in maintaining and upholding the dignity of each and every woman at the work place. The Bank has a policy on Prevention of Sexual Harassment at workplace which provides for adequate safeguards and protection for women at the work place in the organization. The Bank has complied with the requirement of constitution of Internal Complaints Committee (ICC) under the Sexual Harassment of Women at work place (Prevention, Prohibition and Redressal) Act, 2013.

There exists an online Grievance redressal forum for women employees in the intranet server of the Bank wherein women employees of the Bank can file their Grievance / complaint under the act. During the reporting period, the ICC received 3 complaints out of which 2 complaints have been duly resolved by the ICC and 1 complaint has been withdrawn by the complainant. As on 31st March, 2022 no complaints are pending.

Whistle Blower / Vigil Mechanism

Pursuant to the provisions of Section 177(9) and (10) of the Companies Act 2013, a vigil mechanism for Directors and employees to report genuine concerns has been established. The Bank has a policy on whistle blower / vigil mechanism which is uploaded in the website of the Bank as well as intranet.

(weblink: https://www.cityunionbank.com/downloads/Whistleblower%20Policy.pdf)

There exists an online forum for all employees in the intranet server of the Bank to report genuine concerns under the mechanism. No application / compliant was received in this regard during FY 2021-2022.

All employees and Directors have access to the Chairman of the Audit Committee under extraordinary circumstances.

Compliance with Secretarial Standards and applicable laws

It is hereby confirmed that the Bank has complied with the Secretarial Standards issued by the Institute of Company Secretaries of India (SS-1 and SS-2) relating to Meetings of the Board, its Committees and Shareholders. Further proper systems are in place to ensure compliance of all laws applicable to the Bank.

ACKNOWLEDGEMENT

The Board of Directors of the Bank would like to take this opportunity to thank all its Customers and Stakeholders and wish to place on record its sincere appreciation for the assistance and co-operation received from the Reserve Bank of India (RBI), SEBI, IRDAI, NABARD, NHB, SIDBI, EXIM BANK, ECGC, DICGC, NPCI, Stock Exchanges, Depositories, Integrated Registry Management Services Private Limited, Life Insurance Corporation of India and all other authorities.

Your Directors also place on record their warm appreciation for the committed services rendered by the Banks Executives and all other employees.