City Union Bank Ltd Directors Report

Dear shareholders

The Board of Directors of your Bank is pleased to present the Annual Report on business and operations of your Bank together with the Audited Financial Statements for the Financial Year ended March 31, 2024.

ECONOMY OVERVIEW

The world continued to witness the negative effects of the ongoing Russia-Ukraine war in the beginning of FY 2024. This was further aggravated in October 2023 when another catastrophe in the form of Israel - Palestine war erupted. Regular clashes between Israeli forces and Hamas in the West Bank area cast a severe and adverse impact on trade and commerce in the Asian region, displacing many people from their homes robbing them of their livelihood. Frequent attacks by Pirates in the Red Sea Zone on Merchant Ships have resulted in trade being re-routed along the Cape of Good Hope leading to cost escalation for shipping companies with around 51% dip in the average daily container vessels between January - March of 2024 than the last quarter of 2023. As per the estimate of Organization for Economic Cooperation and Development, the re-alignment of shipping routes has affected 9% of world maritime trade and 18% of long distance ocean trade especially between Europe and Asia. The drought in the Panama Canal area of Latin America has also affected the journey time and escalated cost by 60% compared to 2023.

On the Economic front, a threat of potential debt crisis looms large over the global economic landscape. The Global Debt Monitor unit of the International Monetary Fund (IMF) reported that the total global debt has increased to USD 235 trillion which comes to 238% of Global GDP. As most of the countries are conducting elections in 2024, expenditures are expected to surpass budgets severely impacting fiscal prudence. Debt servicing costs are spiraling and interest rates are likely to remain at an elevated level, adversely impacting the financial stability by straining government finances and household budgets leading to shortage of funds for credit growth and investments. This can severely impact sovereign ratings and constrain governments ability to raise resources for productivity-enhancing public investments.

In the Emerging Market Economies, there is a boom in consumer confidence especially in India, Indonesia Vietnam and Mexico. In China, high frequency indicators of consumer spending have moderated and the growth of industrial production has remained subdued. Among the Asian emerging economies, according to OECD, India, Vietnam and Indonesia are expected to experience stable and rapid growth, while inflation is expected to moderate further, provided food prices remain insulated from extreme weather events. Internationally there is a growing optimism that India is on the cusp of a long awaited economic takeoff. The IMF has revised Indias GDP growth by 2 percentage points for 2023-24, echoing the similar opinion of the World Economic Outlook (WEO) which has predicted a robust economic growth for India, supported by growth in domestic demand and a rising working age population.

Indian Economy

The domestic economy is experiencing a strong positive momentum. The Gross Domestic Product (GDP) expanded at 7.6 per cent in FY 2023-24, from 7.0 per cent in FY 2022-23, supported by robust fixed investment. On the supply side, economic activity was lifted by the boost in the manufacturing sectors profitability. While the services activity sustained momentum, the agricultural sector activity exhibited a slowdown. The Manufacturing sector is expected to maintain the momentum on the back of sustained profitability. The headline inflation softened to 5.1 percent in January - February 2024 from 5.7 per cent in December 2023. The core (CPI excluding food and fuel) inflation stood at 3.2 per cent in April 2024. The uncertainties in food price would get exacerbated by the increasing incidence of climate shocks, lower reservoir levels especially in the southern states and the extreme hot weather conditions during April - May 2024 and this would weigh on the inflation outlook. The services exports were predominantly driven by software exports and travel exports during FY 2023-24.

The new phenomenon of Global Capability Centres (GCC) in India has provided a significant boost to our software exports. With an expected 15.2 percent share in world remittances in FY 2024, India continues to be the largest recipient of inwards remittances globally. Overall the current account deficit in FY 2024-25 is expected to remain well within its sustainable level. Touching a new milestone, Indias Foreign Exchange reserves reached a historical high of USD 651.5 billion as on May 31, 2024.

OUTLOOK

As per the report of RBI, the Annual Financial Results for FY 2023-24 indicate that the banking system remained sound and resilient, backed by improvement in asset quality, sustained capital adequacy and rise in profitability. The Non Banking Finance Companies (NBFCs) also displayed strong financials, in line with banking sector. The Gross Non Performing Assets (GNPAs) of Scheduled Commercial Banks are below 3 per cent of total advances as at March 31, 2024. Going forward, your Bank will continue to focus on further improving the governance standards, risk management practices, and compliance culture across the organization.

BANKS PERFORMANCE

In the above backdrop, your Bank recorded a total business of Rs.1,02,138 crore, an increase of Rs.5,769 crore over the previous year figure of Rs.96,369 crore, a 6% increase over FY 2023 position.

The Net Profit of the Bank has increased to Rs.1,016 crore from Rs.937 crore, 8% increase over FY 2023 position. The Net Interest Income of the Bank stood at Rs.2,123 crore. The key performance indicators i.e., the Return on Assets of the Bank stood at 1.52%, Return on Equity stood at 12.86%, the Net Interest Margin of the Bank stood at 3.65% and the Cost to Income ratio stood at 47.06% during the reporting year. The financial performance has been discussed in detail in the subsequent paragraphs. During the year the Bank opened 48 additional branches to total 800 branches and has 1,677 ATMs as at March 31, 2024. Further information on the state of affairs of the Bank has been discussed in detail in the Management Discussion and Analysis Report forming part of this Report.

FINANCIAL HIGHLIGHTS

			(Rs. in crore)
Particulars	2023-24	2022-23	Growth (%)
Share Capital	74	74	-
Reserves & Surplus	8,327	7,383	13%
Deposits	55,657	52,398	6%
Advances (Gross)	46,481	43,971	6%
Investments (Gross)	15,673	14,360	9%
Total Assets/Liabilities	70,826	66,595	6%
Total Income	6,012	5,525	9%
Total Expenses	4,495	3,707	21%
Net Interest Income	2,123	2,163	-
Operating Profit	1,517	1,818	-
Provisions & Contingencies	501	881	-
Net Profit (A)	1,016	937	8%
Appropriations
Balance of Profit brought forward (B)	109	100	-
Amount available for appropriations (A+B)	1,125	1,037	-
Transfers to:
Statutory Reserve	280	250	-
Capital Reserve	6	4	-
General Reserve	555	480	-
Investment Reserve Account	12	40	-
Special Reserve under IT Act, 1961	85	80	-
Dividend	74	74	-
Balance of Profit carried forward	113	109	-
Total	1,125	1,037	-

The total Business stood at Rs.1,02,138 crore as compared to Rs.96,369 crore for the previous year registering a growth of 6%. The size of the Balance Sheet as on March 31, 2024 is Rs.70,826 crore as compared to Rs.66,595 crore last year recording an increase of 6%.

PROFIT

Gross profit and Net Profit of the Bank stood at Rs.1,517 crore and Rs.1,016 crore respectively.

TOTAL INCOME

The Total Income earned by the Bank increased for FY 2024 to record Rs.6,012 crore as against Rs.5,525 crore in FY 2023, registering an increase of 9%. The non-interest income of the Bank decreased to Rs.742 crore from Rs.810 crore. The total expenditure of the Bank increased to Rs.4,495 crore as compared to Rs.3,707 crore, in the previous year, registering an increase of 21%, which was majorly on account of tie-up with Boston Consulting Group for automation of Loan products.

NET INTEREST INCOME

The Net Interest Income for FY 2024 stood at Rs.2,123 crore as compared to Rs.2,163 crore in the last year.

DEPOSITS

The Banks total Deposits for the year under review increased by Rs.3,259 crore to record Rs.55,657 crore from Rs.52,398 crore registering a growth of 6% over previous year. During the current year CASA increased by Rs.1,393 crore to record Rs.17,050 crore from Rs.15,657 crore. The cost of deposit of the Bank stood at 5.59% in FY 2024 as compared to 4.66% in FY 2023.

ADVANCES

Gross Advances of the Bank increased by Rs.2,510 crore to record Rs.46,481 crore from Rs.43,971 crore, posting a growth of 6%. The yield on advances improved to 9.72% from 9.23% during the reporting year. The Bank achieved the target/sub-targets prescribed by the RBI for Priority sector, Agriculture, Micro Enterprises, Small/Marginal farmers and weaker section.

GROSS ADVANCES

The Gross NPA and Net NPA for the year under review stood at 3.99% and 1.97% respectively as compared to 4.37% and 2.36% in the previous year.

The total provision decreased by Rs.380 crore to Rs.501 crore from Rs.881 crore in the previous year. The provision for tax for the reporting year stood at Rs.215 crore. The provision for NPA for the financial year was Rs.327 crore.

TREASURY OPERATIONS

Domestic Treasury

The gross Investments increased by Rs.1,313 crore to Rs.15,673 crore as on March 31, 2024 from Rs.14,360 crore as on March 31, 2023. Out of this, the investments in Government Bonds alone remained at Rs.15,520 crore constituting 99.02% of the total Investment. A fall in crude oil price and US treasury yield, provided support to the bond prices. However, in the second half of the FY 2024, bond market witnessed a sell off. On the domestic front, the Reserve Bank of India kept the policy rates unchanged at 6.50% during the year. The RBIs indication of managing liquidity through Open Market Operation (OMO) sales, kept the bonds under pressure. Towards the end of the FY 2024, bond yield softened on optimism over inclusion of domestic bond in JP Morgan Global Bond Index, benign inflation and renewed hopes of interest rate cut. During the year, the Bank booked a profit of Rs.32.64 crore by sale of securities as against Rs.7.63 crore in the previous year.

Forex Treasury

During the reporting year, Indian Rupee weakened against USD by 1.39%. Indian rupee opened at Rs.82.3325 and closed at Rs.83.3050 against USD. Geopolitical tension caused by the war between Ukraine & Russia and Israel & Palestine, impacted the local currency and favoured US

Dollar. The Red sea crisis and oil production cuts by OPEC also increased the demand for dollar. The intervention of the RBI reduced the pace of depreciation of the rupee. The Central Banks reserves during the FY 2024 increased by 11.65%. During the FY 2024, profit from our foreign exchange operation stood at Rs.71.80 crore as against Rs.151.60 crore during the previous financial year.

NET WORTH & CAPITAL ADEQUACY RATIO

Net Worth

The paid-up Share Capital of the Bank increased to Rs.74.07 crore as on March 31, 2024 from Rs.74.04 crore as on March 31, 2023. During the reporting period, the Bank has allotted 2,55,519 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 Rs.8,374.23 crore as on March 31, 2024 from Rs.7,420.92 crore as on March 31, 2023.

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%. Now the minimum regulatory requirement of CRAR under Basel III including Capital Conservation Buffer (CCB) is 11.50% (9.00%+2.50%) with effect from October 1, 2021. The Bank has maintained Tier I CRAR of 22.69% and total CRAR of 23.73% as at March 31, 2024, which are well above the norms prescribed by the RBI.

DIVIDEND

The Board of the Bank at its meeting held on May 20, 2024, had recommended a Dividend of 150% i.e. Rs.1.50/- per equity share on face value of Rs.1/- each fully paid up [including a Special Dividend of Rs.0.50 paise per equity share in commemoration of 120^th year of operations of the Bank] for the Financial Year ended March 31, 2024 subject to the approval of shareholders at the ensuing Annual General Meeting. The dividend, if 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 2024 is in accordance with the Dividend Distribution Policy of the Bank and the same has been uploaded in the website of the Bank. Weblink:

https://www.cityunionbank.com/filemanager/July24/Dividend%20Distribution%20policy_01.04.2017.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. The details on Unclaimed Dividends and transfers to IEPF Account of Govt. of India is given in a separate Report on Corporate Governance forming part of this Report.

BRANCH EXPANSION

During the financial year, the Bank expanded its branch network by adding 48 more branches across the country totaling 800 branches as on March 31, 2024. The total ATMs stood at 1,677 (including 860 Bulk Note Acceptor Machines (BRM) which performs the job of accepting and dispensing cash. As on March 31, 2024 the Bank had a total of 1,140 Onsite ATMs and 537 Offsite ATMs.

The details on the ATMs/BRMs opened, replaced and closed during the year are as follows:

Particulars	ATM	BRM	Total
Opened	26	67	93
Replaced	21	17	38
Closed	65	29	94

As for the Branch spread, as on date 87% of branches are operational in South, 6% in West, 4% in North, 2% in Central, 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 and to ensure that even the under privileged get easy access to banking channels. A detailed information on Financial Inclusion aspects of the Bank is set-out in Management Discussion & Analysis report forming part of this Report.

HUMAN RESOURCE DEVELOPMENT

The details on the Human Resource Management functions of the Bank is set-out in detail in Management Discussion and Analysis Report which forms part of this Report.

EMPLOYEES STOCK OPTION SCHEME (ESOS)

The Bank implemented Employee Stock Option Scheme CUB ESOS 2008 [ESOS] for grant of stock options to eligible employees of the Bank. The Shareholders of the Bank approved the scheme on April 26, 2008 at an Extraordinary General meeting of the Bank. The maximum aggregate number of options that may be granted under this scheme is 5 crore. As per the scheme, exercise price of the options shall be decided by the Board 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, 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 is adjusted pursuant to corporate actions 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 March 31, 2024, the Bank has 13,91,260 options yet to be granted under the scheme.

In addition, the shareholders of the Bank at its meeting held on August 23, 2017 approved CUB ESOS Scheme 2017 for 3 crore options on terms and conditions mostly similar to previous one. As on March 31, 2024, 2,57,63,822 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 asAnnexurel. Weblink : https://www.cityunionbank.com/filemanager/June24/esop2024%20final.pdf

TECHNOLOGY

The present generation Banking system has moved from branch banking to the palm of customer to perform the transactions at their convenience and comfort. The advent of digital payment due to advancement of information technology and availability of easy access of network through mobile, flourish the cashless transactions. Thus, digital banking has become order of the day. With new/innovative technology, the banking service enrooted to all sphere of public. Some of the recent technology initiatives of the Bank are given below :

Digital Loan Originating System

Analysing the customers comfort and convenience, the Bank has implemented Digital Loan Originating System for Housing Loan, Loan Against Property, Vehicle loan and MSME loan. The Bank is also going to extend the same for all spheres of lending. The Bank has implemented automated AI based system for Credit Assessment Report to approve/reject loan proposals. System is now able to generate scorecard, credit decision and risk based pricing to the customer.

Conversational Payments - "Hello UPI" in UPI123Pay

The Bank had already launched IVR based payment product UPI123 for feature phones through which customers can make payments through a step by step process. As part of next innovation, the Bank has launched "HELLO UPI" Conversational Payment through UPI123Pay in Regional Languages. Customers can now make conversational payments through their Smart Phone or Feature Phone in their own language using voice. This will benefit majority of customers who prefer conversing in their own language and also benefit Senior Citizens and visually impaired to make payments. Globally, Conversational payments are on an increasing trend where voice is used in day-to-day activities. The "Hello UPI" facility was launched by RBI Governor as part of the NPCIs Global Fintech Fest (GFF) held during September 2023.

Aadhaar based registration in UPI123 pay

Currently customers can register UPI service by using their ATM card. In order to facilitate customers who do not have ATM card and to make them utilize UPI payments, CUB has launched an initiative which will facilitate registering for UPI through their Aadhaar. The customers need to follow simple steps to register themselves using their Aadhaar credentials and start making payments using UPI. This will promote increased usage of UPI by customers who, for want of ATM card did not have access to this facility.

UPI Lite

The Bank has extended the UPI Lite service, which enables small value transactions for the convenience of many users. In this, the customer can perform offline payments to merchants or persons without using MPIN. Additionally, Multiple Lite Account can be created by the customer on different UPI Apps for the same Bank Account.

Voice Biometric for Mobile Banking login

Users across the globe are moving away from PIN-based systems to solutions that offer them convenient and fast authentication. In continuation to the present authentication process, the Bank launched "Voice Biometric" - based authentication facility for customers to login into Mobile banking.

Further, a separate section on Digital Lending initiatives of the Bank together with Cyber Security & Digital Products, is provided in the beginning of Annual Report.

OTHER BUSINESS ACTIVITY

The Bank has Corporate Agency tie-up with 8 Insurance Companies for augmenting the Non-interest Income, the details of which are given below :

A) Life Insurance Business :

1. LIC of India

2. Bajaj Allianz Life Insurance Company

3. TATA AIA Life Insurance Company

B) Standalone Health Insurance Business :

1. Star Health and Allied Insurance Company Ltd

2. Aditya Birla Health Insurance Company

3. Care Health Insurance

C) General Insurance Business :

1. Royal Sundaram General Insurance Company

2. Shriram General Insurance Company

The Bank offers Insurance products of all the above companies to its customers. During the reporting year, the Bank has earned a Fee income of Rs.54.64 crore as against Rs.26.72 crore in the previous year, through cross selling of Insurance Products.

The Bank also offers the following additional services through Net Banking & Mobile Banking Platforms :

• Opening of Demat A/c only

• Mutual Fund investment solution through Finwizard Technology Pvt Ltd (widely known as FISDOM) through Mobile Banking/Net Banking

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 [Listing Regulations]. 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. M. Narayanan (DIN 00682297)

Shri. M. Narayanan, Part-time Chairman of the Bank had completed his tenure on May 03, 2024 as per his appointment terms approved by RBI vide its letter no. DOR.GOV. No.S663/08.42.001/2022-23 dated May 04, 2022. Shri. M. Narayanan, vacated his office of Part-time Chairman on the close of business hours of May 03, 2024 as per the said approval and also, pursuant to the provisions of Section 10A(2A](i] of the Banking Regulation Act, 1949, he ceased to be a Director on completion of his 8 years tenure on the said date.

The Board hereby places on record its warm appreciation of the excellent services rendered by Shri. M. Narayanan during his tenure.

Appointment/Re-appointment :

Dr. N. Kamakodi (DIN 02039618)

During the reporting year, the RBI had approved the re-appointment of Dr. N. Kamakodi as the MD & CEO of the Bank for a period of 3 years w.e.f. May 1, 2023 and the same was approved by the Shareholders on July 2, 2023 through Postal Ballot by way of remote e-voting.

Shri. Gurumoorthy Mahalingam (DIN 09660723)

The RBI vide its letter no. DOR.GOV.No.280/08.42.001/ 2024-25 dated April 12, 2024 had approved the appointment of Shri. Gurumoorthy Mahalingam, Independent Director of the Bank, as the Part-time Non-Executive Chairman w.e.f. May 04, 2024 for a period of 3 years.

The Board recommends his appointment as Part-time Chairman of the Bank for approval by shareholders in the Notice calling the ensuing Annual General Meeting. The relevant details of Shri. Gurumoorthy Mahalingam pursuant to SEBI Listing Regulations, 2015 and Secretarial Standard - 2 [which includes his profile] is disclosed separately in the Notice.

Re-appointment of Shri. K. Vaidyanathan (DIN 07120706) and Shri. T.K. Ramkumar (DIN 02688194) as Independent Directors.

The Shareholders approved the re-appointment of Shri. K. Vaidyanathan and Shri. T.K. Ramkumar as Independent Directors of the Bank on April 29, 2024 with requisite majority, for their remaining tenure in the Bank pursuant to Section 10A(2A](i] and other relevant provisions of the Banking Regulation Act, 1949, Companies Act, 2013 and SEBI Listing Regulations, 2015, by way of Postal Ballot through remote e-voting.

Shri. R. Vijay Anandh (DIN 09656376)

The Bank appointed Shri. R. Vijay Anandh as Executive President of the Bank during December 2023. Thereafter, during February 2024, in order to comply with the requirements of RBI Circular No. DOR.HGG. GOV.REC.46/29.67.001/2023-24 dt.25.10.2023 (wherein the RBI had advised to ensure the presence of atleast two Whole - time Directors, including MD & CEO, on the Banks Boards), the Bank had made an application to RBI seeking its prior approval for his appointment as Executive Director (in Whole-time Director category). The RBI vide its letter no.DoR.Gov.No.1252/08.42.001/2024-25 dated May 28, 2024, accorded its prior approval for the appointment of Shri. R. Vijay Anandh as the Whole-time Director - Executive Director of the Bank for a period of 3 years. Pursuant to the aforesaid approval of the RBI, the Board at its meeting held on June 24, 2024, had approved the co-option of Shri. R. Vijay Anandh as an Additional Director of the Bank designated as Executive Director in the category of Whole-time Director, with effect from June 24, 2024, up to the date of the ensuing Annual General Meeting.

The Board recommends his appointment as Whole-time Director (Executive Director) of the Bank for approval by shareholders in the Notice calling the ensuing Annual General Meeting. The relevant details of Shri. R. Vijay Anandh as per to SEBI Listing Regulations, 2015 and Secretarial Standard - 2 [which includes his profile] are disclosed separately in the Notice.

Directors to retire by Rotation

All directors on the Board except the Managing Director and CEO and Executive Director 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 and Executive Director 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 Regulations, 2015 as amended. 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. October 22, 2019, all Independent Directors of the Bank have registered themselves in the Independent Directors data bank 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 Regulations, 2015 and relevant notifications/guidelines issued by SEBI in this regard, there exists an evaluation matrix approved by the Nomination Committee of the Board which is used 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 a part of this Annual Report.

Key Managerial Personnel

In terms of Section 203(1) read with Section 2(51) of the Act and Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had the following KMPs as on March 31, 2024 :

• Dr. N. Kamakodi - Managing Director & CEO

• Shri. J. Sadagopan - Chief Financial Officer

• Shri. Venkataramanan S - Company Secretary

However, as on this report date, in addition to the above, Shri. R. Vijay Anandh is also a KMP who was co-opted as Additional Director in the category of Whole-time Director and designated as Executive Director w.e.f. June 24, 2024. His appointment is subject to approval of the shareholders at the ensuing Annual General Meeting.

AUDITORS

Joint Statutory Central Auditor

M/s. Jagannathan & Sarabeswaran, Chartered Accountants, Chennai and M/s. K. Gopal Rao & Co., Chartered Accountants, Chennai, Joint Statutory Central Auditors ("SCAs") of the Bank will retire at the conclusion of ensuing AGM. The Joint Statutory Central Auditors have furnished their Report for FY 2024 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.

As per RBI Circular No. DoS.CO.ARG/SEC.01/08.91.001/2021-22 dated April 27, 2021 read with the policy of the Bank on appointment of SCAs and the provisions of Section 139 of the Companies Act, 2013 and subject to the prior approval of RBI, the Board as per the recommendations of Audit Committee had considered & approved the appointment of M/s. P. B. Vijayaraghavan & Co., Chartered Accountants, Chennai (FRN 004712S) & M/s. M. Srinivasan & Associates, Chartered Accountants, Chennai (FRN 004050S) as the Joint Statutory Central Auditors of the Bank for FY 2024-25. Based on an application made by the Bank, the RBI vide its letter no. Co.DOS.RPD No. S2287/08.13.005/2004-25 dt. June 21, 2024, has accorded its approval for the aforesaid appointment which will be effective from the conclusion of ensuing AGM.

With respect to the above appointments, the Bank has received the consent from such Auditors and confirmation to the effect that they are not disqualified to be appointed as Joint Statutory Central Auditors of the Bank in terms of Companies Act, 2013 & the rules made there under and RBI guidelines. The Members are requested to consider and approve their appointments as Joint Statutory Central Auditors of the Bank as per the agenda set out in the Notice calling this Annual General Meeting.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act, 2013, read with Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Bank had appointed Shri. V. Sankar, Practising Company Secretary, Coimbatore, having C.P number 26960, as Secretarial Auditor to conduct the Secretarial Audit of the Bank for the Financial Year 2024. The Report of Secretarial Auditor Secretarial Audit Report in the prescribed format is annexed to this Report as Annexure ll.

Pursuant to Regulations 24A of SEBI Listing Regulations, 2015, read with relevant SEBI circular, the Bank has obtained Secretarial Compliance Report certified by the above Auditor for the financial year ended March 31, 2024, on compliance with all applicable SEBI Regulations and circulars/guidelines issued thereunder and the copy of the same was submitted to the Stock Exchanges within due timelines.

There are no adverse observations or remarks, reservations made by the Secretarial Auditor in their Report. The Auditor has recorded the fact of levy of penalty of Rs.66 lakh by RBI with regard to Non Compliance during FY 2022 with RBI directions on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances-Divergence in NPA Accounts and Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016.

Cost Audit

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 had been followed along with proper explanation relating to material departures.

ii) The Directors had selected such accounting policies and applied them consistently and made judgements 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 had 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 had prepared the annual accounts on a going concern basis.

v) The Directors had 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 had 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 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 is being 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/assets/frontend/pdf/others/Code_of_conduct_Prr_230322.pdf

All listed companies are required to maintain an in-house Structured Digital Database ("SDD") under Regulation 3(5) of SEBI (PIT) Regulations, 2015 and as under Regulation 9(2) through which Unpublished Price Sensitive Information (UPSI) are to be reported. In this regard our Bank has installed the required software which has been integrated in the Banks server. The trades of all Designated and Connected persons ("Insiders") are monitored on a continuous basis.

Further, in order to exercise additional vigil on the trades conducted by all Insiders, the PAN of all the Insiders are linked in the database of RTA and thereby the RTA furnishes a Weekly Report to the Bank on trades conducted by the Insiders. In addition, the SEBI as per its circular dated July 19, 2023, has notified the freezing of transactions related to the PAN of Insiders at Depository Level effective October 1, 2023. Accordingly, the Demat

Accounts related to the PAN numbers of Insiders of the Bank are being frozen by our Designated Depository - NSDL for trading in the equity shares of the Bank, during the Trading Window Closure period beginning with the first day of the closure period till completion of two days after declaration of financial results.

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., March 31, 2024 and the date of Directors Report i.e., June 24, 2024. In this connection, it needs to be mentioned that during the reporting year, the RBI vide its order ref. CO.ENFD.DECB.No.5789102.02.00212023-2024 dated February 26, 2024 has levied a penalty of Rs.66 lakh towards non-compliance with RBI directions on Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Divergence in NPA Accounts and Reserve Bank of India [Know Your Customer (KYC)] Directions, 2016 during FY2022.

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 before the appointment of an Independent Director also considers the Declaration on Independence furnished by the proposed candidate for the position of Director under Section 149 (7) of the Companies Act, 2013 and SEBI Listing 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. Compensation policy is available at the Banks website. Weblink :

https://www.cityunionbank.com/filemanager/May24/compensationpolicy26032024final.pdf

RISK MANAGEMENT

Pursuant to Regulation 21 of SEBI Listing Regulations, the Bank has constituted the Risk Management Committee. The details of the said Committee together with the terms of reference are set out in the Report on Corporate Governance, which forms part of this Annual report.

Further, 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 AND SUSTAINABILITY REPORT

As per Regulation 34(2)(f) of SEBI Listing Regulations, 2015, your Bank has prepared the Business Responsibility and Sustainability Report setting out the Banks Social, Environmental and Governance aspects. The same is available in the website of the Bank . Weblink : https://www.cityunionbank.com/filemanager/July24/BRSR_FINAL_26072024.pdf

DEPOSITS UNDER CHAPTER V OF COMPANIES ACT, 2013

Being a Banking company, as Section 73 of Companies Act, 2013 is not applicable, the disclosures as required under Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014 of the Companies Act, 2013 are not applicable.

INTERNAL FINANCIAL CONTROL SYSTEMS & ITS ADEQUACY

The Bank has put in place adequate internal financial controls commensurate with the size and scale of its operations. The Bank has, in all material aspects, adequate Internal Control Systems Over Financial Reporting and these controls have been designated to capture 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, all transactions with related parties of the Bank were in the ordinary course of business and on an arms length basis. The Bank did not enter into any material transaction with such related parties, under Section 188 of the Companies Act, 2013, during the year. Form AOC-2, as required under Section 134 (3) (h) of the Act, read with Rule 8 (2) of the Companies (Accounts) Rules 2014, is attached as Annexure III forming part of this Report. A detailed policy on the Related Party Transaction is available at the Banks website. Weblink :

https://www.cityunionbank.com/filemanager/July24/RPT%20POLICY_26062023.pdf

LOANS, GUARANTEES OR INVESTMENTS

The 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 read with Rule 12 (1) of the Companies (Management and Administration) Rules, 2014 is uploaded in the website of the Bank. Weblink : https://www.cityunionbank.com/filemanager/Apr24/MGT7_2023.pdf

CORPORATE SOCIAL RESPONSIBILITY (CSR)

In compliance with Section 135 of the Companies Act, 2013 (the Act) read with the Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended from time to time and in consonance with the CSR policy, the Bank had undertaken a number of initiatives that contribute to society at large, in the areas of healthcare, education, environment and preservation & improvement of Water Bodies and preservation of the countrys rich culture and heritage.

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 IV to this Report.

Further, in accordance with Section 135(5) of the Act read with Rule 8(3)(a) of the Companies (Corporate Social Responsibility Policy) Rules, 2014, two of the projects funded in FY 2023 viz. Conservation and Restoration of Moovanallur Lake in Mannargudi Taluk, Thiruvarur District and Vidya Shakti Project under rural education are, required to undergo Impact Assessment through a third-party agency. Accordingly, assessment for Moovanallur Lake has been conducted by M/s. B. Balaumasudhan & Co., Chartered Accountants, Chennai and Vidya Shakti project by Social Audit Network, India and they have submitted their reports. As per MCA General Circular No.14 /2021 dated August 25, 2021, a summary of such Assessment reports are given hereunder while the complete report is given in the website of the Bank. Weblink :

https://www.cityunionbank.com/filemanager/July24/MOOVANALLURLAKE_MANNARGUDITALUKA.pdf

https://www.cityunionbank.com/filemanager/July24/Vidya%20Shakthi%20Project.pdf

Restoration of Moovanallur Lake in Mannargudi Taluk, Thiruvarur District

The project was conducted with Tamilnadu Cauvery Vivasayigal Sangam on the request made to City Union Bank Limited, by Moovanallur Panchayat President, and Moovanallur Grama Vivasayigal Sangam. The restoration of Moovanallur Lake in Mannargudi Taluk, Thiruvarur District, involved renovation, desiltation, removal of encroachments, and bush clearance. The objectives were to increase groundwater levels, prevent bore water from becoming salty, maximize storage and water carrying capacity, mitigate flooding, and restore soil quality.

This project aims to conserve water for drinking, farming, and other basic amenities, prevent water pollution, and protect the environment from drought, particularly in the delta region. The entire 130 acres now have water storage capacity and 350 acres of surrounding agricultural land benefit from this project. In addition, 1,000 families in the village and nearby areas benefit from increased agricultural and allied activities due to the enhanced water availability.

Vidya Shakthi Project

The Vidya Shakthi Program was launched in 2023 by consortium of Open Mentor Trust, IITM Pravartak, section 8 Company of IIT Madras and IFE Academy which have been providing recorded online lessons in software programming languages, software testing, databases and project management. These videos are in YouT ube offered free of cost. Based on this experience Kalvi Shakthi Program was launched in Tamil Nadu which offers free online teaching to Students from Class 6 to Class 12. This free online program has expanded to 32 districts in Tamil Nadu with 108 centers and benefiting 4000+ students. On being a successful model in Tamil Nadu, this model is replicated in Varanasi district of UP as well from Class 6 to Class 8 in Science and English.

DISCLOSURE TO BE MADE 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 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. 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 Regulations, 2015, Companies Act, 2013 and Rules made there under alongwith Certificate of Compliance issued by the Statutory Central Auditor is 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 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. The members may refer the Business Responsibility and Sustainability Report for more details on this aspect.

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. A separate para on Technology matters has been set out elsewhere in this Report.

Foreign Exchange Business

The Bank continues to encourage countrys export promotion by lending to exporters and offering them forex transaction facilities. The Bank also offers necessary foreign exchange transaction facilities to all users having underlying forex exposures.

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 V.

In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of limits set out in said rules forms part of this Report.

In accordance with the provisions of Section 136(1) of the Act, Annual Report excluding the aforesaid information, is being sent to the Members of the Bank and others entitled thereto. The said information is available for inspection by the Members at the registered office of the Bank during business hours up to the date of the ensuing AGM.

Any member interested in obtaining a copy thereof, may write to the Company Secretary of the Bank at its registered office or at secretary@cityunionbank.in

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

The Bank has a policy on Prevention of Sexual Harassment at Workplace, which provides protection for Women employees working in the organization. An Internal Complaint Committee ICC has been set up to redress the complaints received under Sexual Harassment. During the reporting period two complaints have been received by the ICC and one is pending as at the end of financial year.

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. Weblink :

https://www.cityunionbank.com/assets/frontend/pdf/others/Whistleblower-Policy.pdf

There exists an online forum for all employees in the intranet server of the Bank to report genuine concerns under the mechanism. During the reporting period 5 complaints were received under the Mechanism, out of which 4 cases had been disposed off and remaining 1 case is pending for disposal and investigation pertaining to the case is under process. The functioning of the mechanism is reviewed by the Audit Committee from time to time.

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 with 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 guidance, assistance and co-operation received from the Reserve Bank of India, 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 deep sense of appreciation for the Banks Executives, members of the Staff and all other employees for their unwavering commitment to serve the Bank to the best extent possible.

	For and on behalf of the Board
	Sd/-
	G. Mahalingam
Date : June 24, 2024	DIN 09660723
Place : Chennai	Chairman