csb bank ltd share price Management discussions

Economic Overview Global Economy

Fiscal 2023 proved to be an extraordinary year. It was one of the most difficult years that the global economy experienced – at least since the start of the global financial crisis around a decade and a half ago. The world economy was recovering steadily, supported by a slew of policy measures to provide fiscal stimulus to the economy across the board, followed by robust private consumption and public spending, and inflation was just a perceived risk after two years of the raging pandemic but the outbreak of the Russia-Ukraine conflict in February 2022 posed significant headwinds to growth, resulting in a gloomy and uncertain outlook for the global economy. This conflict prompted the US-led coalition to impose economic sanctions on Russia, which accentuated a global energy crisis, especially in Europe, and pushed up energy prices. It also hampered the normalisation of global supply chains, pushing up commodity and food prices significantly in most major economies. In a bid to tame historically high inflation, central banks across the globe led by the US Federal Reserve, resorted to synchronised monetary tightening at the fastest pace not seen since the 1980s. Further, Chinas stringent zero-COVID policy weighed heavily, with global GDP growth slowing down to 3.3% in 2022 from 6.5% in 2021.

Global inflation averaged 8.5% in 2022. Further, the collapse of Silicon Valley Bank (SVB), followed by Signature Bank and First Republic Bank in the US, and the Swiss regulator-led takeover of Credit Suisse by UBS fueled fears of a global banking crisis. However, a milder winter in Europe helped stave off the energy crisis while Chinas faster-than-expected recovery post-reopening in the latter half of 2022 helped partially offset the negative impact. The worst expectations seem to be behind, with the US job market staying strong and German growth being revised marginally upwards.

The trajectory of the global economy in 2023 will depend on the confluence of various factors, including inflation, interest rates, and financial markets, against a complex geopolitical backdrop. The impact of higher interest rates will weigh on economic growth and earnings. The International Monetary Fund (IMF) estimates the world economic growth to bottom out at 2.8% in 2023, and pick up to 3.0% in 2024, led by economies in Asia, especially India and China. Further, the IMF expects global inflation to moderate to 6.6% in 2023, and further to 4.3% in 2024.

Global Banking Industry

For banks globally, 2022 was a tumultuous year of multiple shocks and growing uncertainty. Banks emerged strong from the pandemic with strong margins and Tier 1 capital ratios at their highest level in 20 years. But geopolitical and other lingering economic and social effects of the pandemic resulted in central banks all over the world aggressively hiking interest rates to contain inflation. As a result, inflation has started cooling down however, there are fears about inflation remaining stronger for longer.

Come 2023, global financial stability has been shrouded with uncertainty following the collapse of two US banks and the rescue of the embattled Swiss Bank, Credit Suisse by UBS. The collapse was caused mainly by the fleeing of uninsured depositors out of the realisation that high-interest rates have led to large losses in these banks securities portfolios. Citing heightened risks for the sector after the rapid unravelling of SVB Financial Group fuelled fears of contagion, Moodys cut the rating of the US financial system from stable to negative.

However, the US Financial Stability Oversight Council assuaged fears of instability in the US banking system, saying it was "sound and resilient" despite the stress on some institutions. Central banks responded to the crisis by using depositors insurance and making extra cash available to make sure financial transactions continued as usual. This crisis does not appear to be the same system-wide problem as in 2008. Investors, though, remain wary.

Indian Economy

Though the global economy is navigating through rough waters, the Indian economy has demonstrated high resilience and continues to remain a bright spot in the global economy. India is expected to emerge as the fastest-growing major world economy, with an expected GDP growth of 6.5%-7%, according to the Economic Survey 2022-23. Robust private consumption, higher capital investment cycle for both the government and the corporates, strengthening corporate balance sheets and credit growth in retail as well as small businesses, along with government initiatives like PLI, National Logistics Policy and PM Gati Shakti Yojana, are expected to be the key drivers of economic growth going forward.

Although inflationary pressures remain, prompting the RBI to raise its policy rates cumulatively by 250 bps to 6.5% by March 2023 from 4% in April 2022, the RBI in the two latest Monitory Policy Committee (MPC) meetings in April 2023 and June 2023, paused the rate hikes after six consecutive rate increases. However, the RBI Governor mentioned that withdrawal of accommodation was continuing and the pause was only for now due to moderation in the hawkish stance from the Fed, weakness in the US dollar and the recent improvement in Indias current account position and stressed that the MPC will not hesitate to take any further rate hikes if concerns about Indian inflation increase further. The unchanged policy rate stance has been met by non-committal forward guidance, clearly adding more stress to the fluid and uncertain global situation, implying macro assessments might require appropriate adjustments from the policy perspective. Going forward, the RBI expects inflation for the fiscal to be between 5.2% and 5.3%.

For FY23 fiscal, the Index of Industrial Production (IIP) grew 5.1%, impressive, coming on the back of a growth of 11.4% for FY22. For the year, the manufacturing sector grew 4.5% y-o-y, electricity grew 8.9% y-o-y, and mining grew 5.8% y-o-y. Indias factory activity expanded at its quickest pace in the calendar year, driven by strong new orders and output. The PMI (Purchasing Managers Index) for April 2023 stood at 57.2 from 56.4 in the previous month. It stood at 57.6 a year ago.

Indias overall exports scaled new heights, registering 14% growth over the previous year to reach an all-time high of $770 billion. Out of this, service exports increased 27% to $323 billion, and merchandise exports increased 6% to $447 billion.

The total gross collections of GST for FY23 stood at H18.10 lakh crore, and the average gross monthly collection for the year stood at H1.51 lakh crore, up 22% y-o-y. On the other hand, the forex reserves depleted by $28 billion during the year and stood at $578.44 billion as a result of a sharp jump in fuel prices due to the geopolitical crisis putting pressure on Indian currency and RBI having to sell dollars from reserves. However, with things stabilising, currently, the reserves stand at an 11-month high of $596 billion.

Opportunities: Strong domestic demand driven by a young population, rising incomes, strong investment momentum through government spending on infrastructure and private sector investment in manufacturing and services and improving exports driven by recovering global economies, are the major opportunities.

Challenges: Global geopolitical risks and sticky inflation that could lead to higher interest rates in global economies for longer could be the main challenges.

Outlook

The Economic Survey of 2022-23 expects the Indian economy to deliver robust economic growth in the range of 6%-6.8% in FY2024, depending upon the trajectory of economic and political developments globally. The optimistic growth forecast follows positives like the rebound of private consumption given a boost to production activity, higher capital expenditure (Capex) by the government, the strengthening of the balance sheets of the corporates, well-capitalised banks ready to increase the credit supply and the credit growth to the Micro, Small, and Medium Enterprises (MSME) sector among others. Further support to growth, will come from an expansion of public digital platforms and inclusive and developmental policies of the government, like PM Gati Shakti, National Logistics Policy, PM Rashtriya Awas Yojana and PLI Scheme, to name a few. The ongoing Russia-Ukraine conflict and global inflation remaining sticky, leading to Central Bank keeping high-interest rates for longer, are key risks to growth.

Source: Economic Survey 2021-22

Industry Overview and Outlook

Although the global banking industry is going through fears of financial contagion, Indian banks are well-capitalised with robust balance sheets and improving asset quality on the back of stringent regulations, supervision and capital requirements. The Indian banking sector is expected to be the worlds third-largest domestic banking sector by 2050 as per the PwC report titled "Banking in 2050".

Key Banking Parameters Credit and Deposit Growth

The banking sector witnessed remarkable progress in FY2023 as both incremental deposit and credit growth reached unprecedented levels. Incremental credit stood at H17.83 lakh crore, and incremental deposit stood at H15.78 lakh crore. As a result of this incremental credit deposit ratio stood at a 15-year high of 113%. For FY2023, the banking sector reported deposits of H180.44 lakh crore and loans of H136.75 lakh crore, leading to a credit-deposit ratio of 75.8 per cent. This ratio is the highest in the past three years, up from 72.2 per cent the previous year.

ICRA expects the growth momentum to remain strong in FY2024, with Incremental credit growth of H15.0-16.0 trillion in FY2024. Next years impetus for credit growth is expected to come from the governments infrastructure push (budgetary allocation of H10 trillion) and higher working capital demand partly due to higher inflation and corporate credit.

As per CRISIL, retail loans (26% of total advances) are expected to grow the fastest at 17%-19%. As per CRISIL, demand for home loans stays robust. MSME portfolio is expected to grow at a reasonable 16%-18%. Agri growth is expected around 10%, supported by a normal monsoon harvest. Corporate credit (45% of overall credit) is expected to grow at a 2-year CAGR of 10%-12% up to FY2024, a meagre 3% increase from the FY19-22 period.

NPAs are down at multi-year lows, and asset quality is expected to further improve with GNPAs and Net NPAs declining to 3.9-4.3% and 1.1-1.3%, respectively by March 2024. The fresh slippages have been granular with better recoveries and upgrades leading to lower net slippages, as well as credit losses. The sale of NPAs under the asset reconstruction companies (ARCs), including NARCL, could further moderate these headline metrics.

Capital Adequacy

PSU banks have a cushion of over 100 bps over Tier 1 capital requirement of 7.6%, and 80% of private sector banks have a capital adequacy cushion of 300 bps over Tier I capital requirements. Driven by expectations of healthy internal capital generation, banks are expected to be largely self-sufficient in capital requirements.

With improved growth and better asset quality to drive improvement in profitability, the Return on Assets (RoA), and the Return on Equity (RoE) of banks are expected to improve to 1.2-1.3% and 16.1-16.8%, respectively by FY2024 against 0.9-1.0% and 12.9-13.9%, respectively in FY2023.

Till March 31, 2023, debt funds enjoyed a much lower effective taxation rate as the long-term capital gain tax on a debt fund held for 3 years or more was only 20% with indexation benefit. As per the new rule, the return from the debt fund will now be added to the income of the taxpayers and will be charged at the applicable tax slab. This has brought debt MF on par with FD in terms of taxation and will result in bank deposits regaining their shine as an investment option.

Government/Regulatory Impetus to the Sector

The Union Budget 2023-24 announced capital expenditure of H10 lakh crore, a whopping increase of 37% over the previous years outlay, which would have a multiplier effect on the economy. Sector-specific policies like the Production Linked Incentive (PLI) scheme to boost domestic manufacturing across 15 sectors.

Credit Guarantee Scheme for MSME

The revamped scheme will take effect from April 1, 2023, through the infusion of H9,000 crore in corpus. This will enable additional collateral-free credit of H2 lakh crore. The cost of credit will be reduced by about one per cent.

National Financial Information Registry

The Government of India is setting up National Financial Information Registry for efficient lending, financial inclusion and stability. The government has also allowed credit cards to be linked with UPI, allowing users to pay with credit cards using UPI in the future. The RBI also released its Payments Vision

2025 document, which aims for a threefold increase in digital payments, an increase in debit card usage, and less cash in circulation.

Non-Deliverable Forex Derivative Contracts in Indian Rupee

RBI has now proposed to permit banks with IBUs to offer non-deliverable foreign exchange derivative contracts involving the Indian rupee to resident users in the onshore market. This measure will deepen the forex market in India and provide enhanced flexibility to residents in meeting the hedging requirements.

The RBI has also proposed expanding the scope of UPI by permitting the operation of pre-sanctioned credit lines at banks through UPI. This will further encourage innovation. During the year, RBI also decided of allowing all inbound travellers in India to use UPI for their merchant payments. RBI also proposed to extend its purview of regulations to online payment aggregators, along with online payment regulators to bring in regulatory synergy and convergence on data standards. To simplify the efficiency of regulatory processes, RBI has decided to have a web-based centralised portal named Prabha. The portal will show time limits for deciding on the applications and approvals sought. To improve and widen the access of depositors and beneficiaries to information on unclaimed deposits, it has been decided to develop a web portal to enable search across multiple banks for possible unclaimed deposits.

Central Bank Digital Currency

After making impressive progress towards digital payments, RBI is now focussing on CBDC or Central Bank Digital Currency. The government announced the introduction of the CBDC (digital rupee: eH), an RBI-controlled and -managed digital counterpart of the countrys fiat currency. The RBI launched the pilot in the wholesale and retail segments within a closed user group and selected banks. It is a reimagined and digital version of the physical currency, the same as sovereign paper currency.

SWOT Analysis

Strengths	Weaknesses	Opportunities	Threats
Pan-India Presence Bank has 703 branches and 528 ATMs/CRMs across 16 States and 4 UTs in India. In line with our business focus on SMEs, we have a decent presence in the SME clusters in the country as identified by UNIDO.	Low Investments in Technology	Resilient Domestic Economy	Margin Pressure
	In FY2023, we launched the SBS 2030 change management theme in the Bank & substantial investment in technology is being made every year.	The strong domestic market shall support growth. Segments like Manufacturing, exports, renewables, EVs, personal loans etc. are likely to be the key growth drivers. Bank Credit growth is set to stay robust in FY 24 with reasonable asset quality.	NIMs of banks may come under pressure considering the elevated levels of deposit interest rates, which are expected to continue for some more time and the impact of repricing spillover to FY2024.
	However, when compared to the peer group, our investment in technology looks relatively lower.	While the Gold/SME/WSB verticals will find better opportunities, the revamped/recently set up retail verticals will be able to establish themselves with the initial growth momentum, which will infuse a lot more confidence in the right scale-up.	Banks should be able to contain this impact to some extent as they gradually pass over the policy rate hikes to the loan customers.
Strengths	Weaknesses	Opportunities	Threats
Strong Capital Base	Speed of Product Delivery	Tech Innovations	Competition from peer
CRAR of the Bank is one of the best in the industry, giving adequate headroom for growth. Further, the RWA to total assets is one of the lowest in the industry.	Bank is a late entrant in offering a few of the products like Credit Cards and other retail products. Now, Bank is having all the products on par with the competitors in our product bouquet, and the gaps are being addressed.	The pace of tech innovations will bring in cost efficiencies and improved customer user experience. Setting up Digital Banking Units (DBUs) on a larger scale can be the next big step in Indias digital banking space.	banks, Small Finance Banks (SFBs), NBFCs, Fintech Companies Bank may face strong competition from peer banks in all principal lines of business.
		As Bank is in the build phase of the SBS journey where major tech investments are envisaged, we are in a position to upgrade ourselves with the best- tested solutions, which will place us at par or slightly ahead of the industry standards.	Primary competitors are public sector banks & private sector commercial banks for all the products and services. We are facing stiff competition from Small Finance Banks on deposit pricing and from NBFCs in the Gold Loan segment.
Retail Offering Driven by Strong Gold Loan	Geographic Concentration in South India	Conducive Environment to Sustain Our Core Strengths	Market Volatility Any strong data releases
Portfolio Our retail offering is primarily driven by Gold Loan portfolio growth which has the benefits of higher yield, low stress, low capital requirements, liquid security etc.	More than 75% of the branch net work is concentrated in southern states of the country and having a well-established brand value. However as per current distribution strategy of the Bank, more branches are getting opened in the high deposit centres of Northern and Western India, which will reduce the south concentration and tap the high potential centres.	An increase in the gold prices and demand for gold will bode well for the growth of the Gold Loan portfolio in the Bank. Resilient growth is seen in the agriculture segment, and the expectations of good weather and decent Rabi harvest will strengthen the rural demand.	resulting from the continuing geopolitical unrest, increase in commodity prices, supply disruptions etc. may lead to the re-emergence of the rate hike cycle. The lower-than-expected loan growth rates may intensify the asset quality strains and keep credit costs at elevated levels.
		SME/MSME sector is expected to contribute significantly towards the growth in exports going forward and act as a strong catalyst towards reaching the $1 trillion target by FY30.
		The rollout of new products and setting up of the new Transaction Banking Group (TBG) vertical will help the Bank to get a decent share of the business.
Stable Resource Profile The retail deposit base of the Bank is quite strong and stable with a renewal pattern of more than 90%.	Lower Branding Spends Branding spending of the Bank may be lower as compared to other banks. Bank has put in a revamped marketing and branding team. As a first step towards aggressive marketing of the products and services, Bank has initiated digital campaigns and will gradually progress towards other media.	Favourable Yield Movements The softening of yields post the recent policy announcements will help in booking some treasury profits, and in maintaining the cost of funds at a reasonable level.	Cyber Threats Any security breaches/online frauds may pose a threat to the system. Due to the increased tech and digital advancements, cyber- attacks have emerged as the most significant hazards to the financial sector and the number of instances has gone up. Hackers have improved their technology and expertise, thus adding to the vulnerability of the banks in preventing attacks consistently.
Asset Quality The Asset Quality ratio of the Bank is one of the best among peer-sized banks and the PCR with write-off is in excess of 90%. Apart from this, the Bank is holding the contingency provisions far higher than the Net NPA book of the Bank. Bank is pursuing its accelerated provisioning policy for NPAs whereby the provisioning is being made higher than the RBI prescriptions.	Modest-sized Franchise with Moderately diversified Asset3Mix Despite 100-plus years of vintage, Bank is having a modest customer franchise. Bank is building scale for most of its products, including retail segments, and this will take some time to achieve material scale and seasoning. Bank will continue to focus on gold loans to keep benefitting from higher yields, low credit costs and lower risk weights.	Expanding the Footprints Bank is in fast expansion mode since FY2021 and has opened 100 branches in each of these FYs since then. Opening branches in semi-urban/rural locations will help the Bank to participate more in the FI initiatives launched by the government.	Retention of Talent Bank acquired about 2200 employees in the last FY. Though Bank has an established system to reward excellence and promote meritocracy, attrition could be an emerging threat due to the better prospects offered by competitors.

Outlook and Business Strategy

Elevated and persistent levels of inflation in both developed and developing economies are eroding real incomes. The monetary tightening measures adopted by economies to counter inflation have led to an increasingly challenging macroeconomic and financial environment, and many countries are at risk of entering a vicious cycle of weak investment, slow growth and rising debt-servicing burdens. Rising interest rates and diminishing purchasing power have weakened consumer confidence and investor sentiment, further clouding the near-term growth prospects of the world economy. Global trade has softened due to tapering demand for consumer goods, the prolonged war in Ukraine, and continued supply chain challenges.

Amidst the global shocks and challenges, the domestic economy continues to be resilient, stable and fully functional. Inflation, though elevated, is declining in response to front-loaded monetary policy actions and supply-side interventions. In the financial sector, buoyant demand for bank credit and some revival in the investment cycle are seen, thus benefiting improved asset quality, profitability and robust capital and liquidity buffers.

In FY2024, Indias GDP is projected at 6.5%, with anticipated support from strong credit growth, resilient financial markets, and the governments continued thrust on capital spending and infrastructure. However, lingering geopolitical tensions, tight global financial conditions and market volatility might pose some downside risks to this.

The change management theme of Sustain, Build and Scale (SBS) 2030 is up and running in the Bank, and Bank is progressing in the desired direction. In the first year of the SBS journey, Bank could sustain our core strengths and start the build phase. All the verticals planned for FY 23 are set up and have started contributing. FY2024 will be the most crucial year with sizeable investments in technology and full-service franchise infrastructure. On the distribution front, Bank will continue with its branch expansion policy with a pan-India focus with more than 60% of branches targeted for opening in the West and North regions.

Considering the government assumed nominal GDP growth of 10.5% for FY 2023-24, the banking industry advances growth is expected to be around 12%. On the front of the advance, Bank would endeavour to outpace the industry by 70 to 100% with SME and Retail focus. The Gold portfolio will continue to lead the loan growth for some more time and will come down gradually as the Bank scale the other retail book with the systems and processes falling in place. On the deposit front, Bank will strive to maintain the growth that Bank achieved in FY2023. Opening branches in the high deposit centres, solution-based current account sourcing and acquisition of customers by the revamped TASC vertical, improved NR focus etc. will help the Bank in building CASA franchise and deposit base.

The key non-business priorities for FY2024 would be to plug in the gaps in the leadership, STP journey, creation of a service framework, stabilisation of new verticals, partnerships and alliances, geographic expansion, and most importantly, the tech platform and architecture.

Business Overview Retail Banking

Banks Retail Banking portfolio includes a wide range of products like CASA Accounts, Deposits, loans, forex, credit card etc. to domestic and NRI customers. In the segment, the Bank offers need-based products ranging from meeting personal and business requirements of different segments of customers.

Bank has been offering a secured, convenient, and cost-effective 24*7 banking facility through its wide range of digital products and services; thereby boosting digital transactions, customer brand recall and stickiness.

The outlook of the retail franchise is very positive as Bank has built a very robust system, and processes to offer best-in-class products and services. In FY2024 also, there is an aggressive plan to increase the branch footprint in different parts of the country. Bank has heavily invested in hiring the right profile of manpower as well as upgrading the skills of the existing resources as the Bank believes that service will be a key differentiator. Bank intends to offer a full suite of products and services tailored to the needs of different segments of customers. The Right Product, Right Processes, Right Team and the Right Distribution will help Bank to accelerate its growth in the coming year.

SME Banking

With the Indian economy emerging as one of the leading economies of the world, major impetus is being given to strengthen the SME sector. The sector has gained significant importance due to its contribution to the Gross Domestic Product (GDP) of the country and exports.

The SME team is working relentlessly to make the Bank emerge as the preferred partner for SMEs. Bank is engaged in the implementation of multiple initiatives to ensure best-in-class product services are delivered to Customers. The Bank has focused on leveraging Branch channels to reach out to potential customers. Bank has also introduced two sub-segments called Business Banking Segment (BBG) and Emerging

Enterprise segment (EEG) within SME business for a differentiated approach towards micro, small and medium enterprises in terms of turnover and exposure. In addition to this, Banks key focus is on simplifying policy and process through technology enablement.

The SME franchise of the Bank continues to focus on improving client-level profitability by working closely with customers through a robust relationship management structure covering portfolio Hygiene and wallet share.

Wholesale Banking

The Wholesale Banking Segment caters to corporate clients, primarily medium-sized enterprises. Wholesale Banking comprises Corporate Lending, Capital Markets, Securitisation and Supply Chain Finance divisions.

Bank offers a range of Commercial Banking products and services such as Working Capital Financing, Corporate Loans, Term Loans, Trade Credit, Bill Financing, Supply Chain Financing, Securitisation Transactions, TReDS, etc. The division also provides banking services to Financial Institutions, viz. NBFCs, Banks, Insurance Companies, Mutual Funds, Brokers, etc.

Treasury Management

Banks treasury operations primarily consists of statutory reserves management, asset liability management, liquidity management, investment and trading in fixed income and money market instruments and foreign exchange operations. Treasury operations are aimed at maintaining an optimum level of liquidity, while complying with the RBI mandated Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Bank maintains SLR through a portfolio of dated securities and treasury bills of the Government of India, state development loans and other securities as may be permitted by the RBI from time to time. In addition, the portfolio is churned to optimize yield and reap benefit from price movements. Apart from sovereign debt instruments, Treasury also invests and trades in Commercial Papers, Bonds and

Debentures, Mutual funds, Alternate Investment Funds, Pass Through Certificates, Certificates of Deposits, and Equity to manage short-term surplus liquidity and to improve yield and trading profit. Treasury also conducts the Banks foreign exchange transactions in accordance with the guidelines issued by RBI, FEDAI and other regulatory bodies from time to time and makes revenue from various transactions.

Review of Performance Total Business

Total business of the Bank stood at H45,995 crore as on March 31, 2023, as against H36,931 crore a year before, registering a y-o-y growth of 25%.

Total Assets

Total Assets have increased by H3,806.01 crore and stood at H29,162.28 crore as on March 31, 2023 as against H25,356.27 crore as on March 31, 2022, registering a growth of 15 % on an annual basis.

Total Deposits

Total deposits of the Bank stood at H24,505.81 crore as on March 31, 2023, compared to the previous years level of H20,188.30 crore, registering a growth of 21% on a y-o-y basis.

CASA

• During the period under review, CASA has reached a figure of H7,886.26 crore as on March 31, 2023, from H6,795.17 crore as on March 31, 2022, registering a growth of 16.06% on an annual basis and H1,091.09 crore in absolute terms.

• CASA ratio was at a healthy 32.18% at the end of financial year 2023.

• The aggregate NRI deposits of the Bank at the end of FY2023 stood at H4,925.62 crore, compared to previous year level of H4,525.47 crore, registering a growth of 8.84%.

Classification of Deposits Portfolio (J In Cr)

	FY23	FY22	Growth	Growth %
Demand Deposits	1,985.71	1336.32	649.39	48.60%
Savings Deposits	5,900.55	5458.85	441.70	8.09%
CASA	7,886.26	6795.17	1,091.09	16.06%
Term Deposits	16,619.55	13393.13	3,226.42	24.09%
Total Deposits	24,505.81	20,118.30	4,317.52	21.39%

CASA Strategy

The Branch Banking Vertical is focused on Deposits (including low-cost deposits) and cross-selling to existing customers. We have introduced segmented product offerings to customers for meeting their banking requirements. To cater to affluent customers, products like Zenith, Elite and Prime have been launched. Similarly, CA variants have been launched for customers engaged in Exports and Imports. Cash Deposit Machines have been introduced at 200 locations to offer a 24*7 facility to Current account customers. The focus is to acquire good quality customers and build a franchise.

Bank has engaged in many partnerships and alliances to offer various transactional avenues for its customers. Tie-ups have been done with Payment Services companies like Pinelabs and Worldline to provide Point of Sales (POS) machines to customers. QR code facility is also offered. For Savings account customers, Bank is offering E Broking accounts in partnership with IIFL Securities. Credit Cards and Debit cards are offered for ease of transaction. New features have been added to Net Banking/ Mobile Banking platforms to increase digital banking penetration.

The branches are more focused on providing better customer experiences through efficient customer services and products to all categories of customers of the Bank and thereby generating cross-selling opportunities and revenue. On-boarding of customers has been revamped to enhance customer experience and the CRM solution as a tool, is actively used by customer interfacing staff which helps in increasing the sales productivity effectively. The sales and customer relationship team comprising of Business Development Executives, Relationship Managers/ Officers and Customer Relationship Executives as customer interfacing staff have been strengthened to achieve the sales and service objectives of the Bank. Bank is aggressively focusing on acquiring High net worth customers and high-value accounts to build premium CASA franchises.

Bank has received an Agency bank license from RBI to undertake general banking businesses of central and state governments as per the guidelines framed by RBI. Specialised teams have been built up for key growth segments including Government business, TASC and other potential growth segments.

Advances

Banks total advances (gross) stood at H21,489.09 crore as on March 31, 2023, as against H16,742.39 as on March 31, 2022, registering a growth of 28%. The Gross CD ratio of the Bank improved to 87.69% in Financial Year 2022-23 as against 82.93% in the Financial Year 2021-22.

Retail Assets

The retail assets portfolio of the Bank comprises Gold loans and other retail loans viz. Personal Loans, Auto Loans and Credit Cards. The re-classification of retail loan portfolios other than gold loans was carried out in FY2023 with a new vertical being formed and subverticals for each segment of loans.

Gold Loans

Gold Loan Portfolio of our Bank as on March 31, 2023, stood at H9,701 crore from H6,570 crore as on March 31, 2022, registering a growth of 48% on a y-o-y basis. Gold Loan continues to be the mainstay of the Bank in terms of advance portfolio. Our key strategy of penetrating the rural and semi–urban markets, which are dominated by unorganised sectors through our increased branch network has worked well in improving the portfolio.

Other Retail Loans

The Retail Assets portfolio of the Bank stood at H1546.84 crore as of March 31, 2023 as compared to H1215.84 crore as of March 31, 2022. The Book largely comprises Personal Loans, Mortgage Loans, Two wheeler loans, Vehicle Loans, Education Loans & Healthcare finance.

Retail Assets advances registered a growth of 27 % on a y-o-y basis. The core strategy in Retail Assets has been deepening the existing product offering within existing branches coupled with identifying the right target segments and keeping the associated risks under control. In FY2023, the focus was more on the Personal loan and Auto loan segments. Within Auto Loan, banks have different product propositions starting mainly with new car loans, commercial vehicles and inventory finance.

Personal Loan

Bank has started a dedicated personal Loan vertical during the financial year, offering various personal loan products in different geographies. Bank has also implemented a Loan Origination System (LOS) to streamline the loan journey, robust deduplication logic, and faster credit decisions to reduce overall TAT, and better customer experience in the personal loan segment. PL portfolio of the Bank has shown substantial growth during the year to H233 crore. The figure is post-re-classification, and FY2023 is the first year after a new vertical is formed.

Auto Loans

The automotive industry in India is one of the main pillars of the economy. The Auto Industry3contributes 8% of the countrys total export and accounts for 2.3% of Indias total GDP. India is the sixth largest in passenger vehicles in the World. The electric vehicle (EV) market is estimated to reach H50,000 crore in India by 2025. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles.

Bank is now catering to all segments of the Auto market viz. Two Wheeler, Car Loans, Commercial Vehicle Loans, Fleet operators etc. It is also offering inventory funding and dealer financing.

Credit Cards

Bank has ventured into the credit card business this year with a partnership with Master Card co-branded with One Card. One Card is Indias only Mobile First Credit Card where users can manage every aspect of the card on a mobile app. The card was launched in the last quarter of FY2023 and the segment is expected to grow sizeably in FY2024.

Agriculture And Micro Finance Franchise

Agriculture and allied sectors are playing a major role in the economy of India, which is the largest livelihood provider, where more than 50% of the workforce is engaged in. The most resilient sector during the COVID pandemic was Agriculture. It continues to contribute a significant figure to the Gross Domestic Product. Sustainable agriculture, in terms of food security, rural employment, and environmentally sustainable technologies such as soil conservation, sustainable natural resource management and biodiversity protection, are essential for holistic rural development.

Bank caters to each segment of the Agri value chain – individuals (farmers, professionals and self-employed), traders (dealers/distributors, aggregators), processors and rural institutions using customised propositions across product segments. The Bank meets the credit-related requirements of its agriculture customers through its unique set of products such as Kisan Credit Cards, Investment credit, Financing Agri Allied activities and Agri Ancillary units. These initiatives are designed to support the farmers engaged in agri and allied activities for maximisation of their agricultural income by ensuring optimum utilisation of their farm assets.

The increased presence of the Banks branches in rural and semi-urban areas provides a great opportunity for Bank for improving its exposure to Agriculture and Priority sector. The Agri & MFI vertical could grow from H1,064 crore in FY2022 to H1,419 crore in FY2023, registering a growth of H355 crore in absolute terms or 33% on a y-o-y basis.

Bank has a variety of tailor-made schemes to meet emerging market demands and for better credit delivery. Bank has deployed a handful of specialised Relationship Managers and Agricultural Officers to cater to the needs of our valued farmer clients at their doorsteps. Bank is committed to continuing the growth in this portfolio with improved vigour and increasing its contribution to the upward trajectory of the Banks business.

MSME Loans

The MSME sector is the backbone of our countrys economy, there are a large number of entrepreneurs and workers who are part of these micro, small and medium enterprises. Equity and debt capital support is vital for these MSMEs as they go through many opportunities and risks in business. Scheduled banks and SME development banks have been playing a vital role to make this sector thrive.

The Bank offers Micro, Small and Medium Enterprise loans to businesses in various parts of India. The Existing Product offering is in the form of term loans, cash credit and overdrafts against collateral for self-employed businesses.

The MSME advances of the Bank stood at H267.30 crore as on March 31, 2023, as compared to H322.68 crore as on March 31, 2022, due to the re-classification of portfolios.

Priority Sector Loans (PSL)

Bank also plays a vital role in priority sector lending, meant for the overall development of the economy. Lending to the vital players of the economy such as Agriculture, MSME, education, housing and social infrastructure, etc., as part of priority sector lending, is the core strength of the Bank.

Bank adopted various measures with a reinforced focus on lending to small and marginal farmers, micro enterprises and weaker sections of the Society. Separate verticals are formed to cater to these segments with the support of experienced and specialised teams under the verticals.

The quarterly average Priority Sector advance for the FY 2022-23 is 71.42 % of Adjusted Net Bank Credit, which is against 40% prescribed by the Reserve Bank of India. Bank has also achieved the sub-targets under Agriculture, Small and Marginal Farmers, Weaker Sections and Micro Enterprises.

Bank could sell PSLC – Small and Marginal Category to the tune of H2,000 crore and purchased PSLC – Micro Enterprises category to the tune of H850 crore during the year 2022-2023.

Financial Inclusion

The objective of financial inclusion is to extend financial services to the large unserved population of the country to unlock its growth potential. It also strives to achieve more inclusive growth by making finance available to the poor, in particular, by bringing the low-income groups within the perimeter of the formal banking sector. The financial inclusion initiatives of the banks provide access to a formal credit system and provide credit support for consumption and investment, thereby leading to strong and sustainable livelihoods for individuals and households. The implementation of Financial Inclusion Schemes is a national priority and banks are playing a vital role in achieving these objectives of government. RBI has formalised National Strategy for Financial Inclusion to achieve these objectives across the country. The vision of the National Strategy for Financial Inclusion is Universal Access to Financial Services, Providing a Bouquet of Financial Services, Effective Coordination, Customer Protection and Grievance Redressal, Financial Literacy and Education and Access to Livelihood and Skill Development.

Through the methods like Financial Literacy and Credit Counselling Centres (FLCCs) and by extending the banking outreach through Business Correspondents, Bank has enabled the channels for encouraging the savings of the unserved population of the country and offers new business avenues for lending to this group.

Bank has 57 Rural Branches and 7 FLCCs to strengthen financial literacy activities at the field level. As part of the financial inclusion initiative, Bank has reached out to approx. 1,89,000 families to extend small-value credit through microfinance loans.

Pradhan Mantri Jan Dhan Yojana (PMJDY)

Bank has 137117 BSBDAs (Basic Savings Bank Deposit Accounts), and 2438 KCC Accounts (Kisan Credit Cards) outstanding as of March 31, 2023. Out of the BSBDA accounts opened, 72785 accounts were opened under Pradhan Mantri Jan Dhan Yojana.

PMJJBY, PMSBY and APY

Three social security schemes namely Pradhan Mantri Jeevan Jyothi Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) were launched by Honble Prime Minister on April 8, 2015. Bank has 3479 PMJJBY, 13920 PMSBY and 5018 APY accounts outstanding as on March 31, 2023.

Business Through Business Correspondent (BC) Model

As part of the commitment towards sustainable ‘inclusive growth in the rural and semi-urban segment, Bank has always focused on key partnerships to create viable business models, while providing ‘access to finance to the bottom-of-the-pyramid (BOP) customers. In this background, Bank has developed sustainable livelihood programmes to provide financial and non-financial services through business correspondents. The model developed is to empower the financially excluded class of people. It also promotes socioeconomic development at the grass root level through community- based approach, through Self Help Groups (SHG) and Joint Liability Groups (JLG).

During the period under review, the Bank has extended credit to 1,89,000 women borrowers through the micro-lending programmes through the Business Correspondents model. Bank has reached out to more than a lakh of families through this initiative with the support of 16 Business Correspondents empanelled by the Bank across the geographies. Total business outstanding as on March 31, 2023, in Micro Finance business under the BC model is 474 Crores, registering a growth of 58% from H300 crore as of March 31, 2022.

Corporate Lending

The Corporate Banking Segment caters to corporate clients, primarily medium-sized enterprises, offering a range of products to meet the working capital requirements of corporate customers. Bank also takes active participation in funding capex requirements of its customers by extending term loans and project finance. The product offerings are suitably structured, taking into account of clients risk profile and specific needs specified by them.

Bank follows a risk-adjusted return philosophy in wholesale banking and is focused on growing mid-size corporate assets. The Bank is committed to continuously improving its efficiency and processes for a better experience for clients, leading to mutually beneficial relationships. Managed by small tight-knit, inter-disciplinary pan-India teams with great success, Wholesale Banking Division has achieved an overall growth of 16% in asset book, closing at H6,331.51 crore as on March 31, 2023 as compared to H5,443.84 crore as on March 31, 2022.

The Banks corporate book closed at H4,720.98 crore on March 31, 2023, as compared to H4,113.32 crore as on March 31, 2022, registering a y-o-y growth of 15 % despite a de-growth in the corporate non-fund based book which stood at H592.25 crore as on March 31, 2023 vis-a-vis H759.64 crore as on March 31, 2022. While the funded book has grown by 15%, through medium-ticket-sized transactions with a loyal set of legacy customers as well as several newly on-boarded clients, growth was offset by heavy run-downs due to anticipated repayments and prepayment in our funded loan-heavy portfolio.

Direct Assignment & Securitisation business has also witnessed a 15.35% increment this Financial Year.

Bank intends to build value through a customer-centric focus on maintaining existing portfolio quality, and through the identification of key focus sectors for calculated market development and penetration to ensure sustainable asset growth and profitability. Bank is also constantly looking to streamline and improve the quality of our business credit underwriting, disbursement processes and operations to improve TAT and experience. Bank continues to focus on Mid-Market enterprises as a key segment for corporate lending to maintain granular ticket size and better Net Interest Margin. Bank intends to focus on a rapid increase in manpower to cater to our steadily increasing client base and diversified focus in sub-segments, building strength in our regional teams while also attempting to roll out new corporate product offerings to cater to the diverse needs of our valued customers.

A few of the client-focused corporate banking services as under: Supply Chain Finance

The supply chain finance division of the corporate banking team has focused on products mainly TReDS- Trade Receivables e-Discounting System. TReDS would facilitate the discounting of trade receivables of MSMEs from corporates and other buyers including Government departments and Public Sector Undertakings (PSUs).

TReDS being a complete digital platform helps the Bank to considerably reduce the cost of acquisition of customers. The funding of MSMEs on the TReDS platform qualifies for priority sector lending which enhances the compliance of our Bank. TReDS is one of the many digital steps taken by the Bank to reach out to its customers.

TReDS portfolio de-grew by 90% in FY 2022-23 to H10.25 crore as compared to H100.47 crore as on March 31, 2022, mainly due to adverse market conditions, increased rate scenarios and competition from PSBs and other Private Sector Banks.

LCBD portfolio grew by 81% in FY 2022-23 to H500.11 crore as compared to H276.26 crore as of March 31, 2022

Structured Finance

Bank helps NBFC clients by acquiring their existing assets pools by Direct Assignment (DA)/Pass-Through Certificates (PTC). This also helps Bank to achieve PSL targets.

The assignments loans grew by 15.35% in FY 2022-23 to H1,100.17 crore as compared to H953.79 crore as on March 31, 2022.

Cash Management Services

Bank offers Cash/Cheque Collection facility for all clients. This facility helps in timely depositing of cash as well as cheques in customers Bank account and is backed by proper MIS that helps in reconciling and managing funds efficiently.

E-Collection which is part of Cash Management services facilitates customers to get the payer details and credit information for recurring inward Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) transactions in the current account.

Bank plans to offer full range of advanced Cash Management products that would help its business to process clients Receivable and Payable, efficiently. These products will help the Bank in optimising clients cash flow position and ensure effective management of their business operation.

SME Lending

Bank continues to adhere to its commitment to fulfil needs of SMEs across various sectors and Geographies. With a vision to become one of the preferred partner for SMEs, Bank has taken up various strategic initiatives such as streamlining our products and processes, systems to ensure high-quality services are offered to Customers on a timely manner.

Bank has created a specialised team of professionals to deliver our commitment to Customers. Our dedicated Sales, credit, risk and Operations team are working closely on these mission to strengthen the commitment as Bank continues to offer timely and hassle-free business solutions to the SME sector.

While Bank continues to focus on its hub-and-spoke model to offer lending and other value added services to Customers, it is also creating few key specialised SME Branches within the hub branches to offer all forms of banking services and products required by SMEs for growth of their business.

Bank has launched a knowledge series initiative called ‘InFocus in association with CRISIL Research to offer insight and trends on few key industrial sectors to Customers and reach to support SMEs through Industry/ associations.

Bank is also focusing on increasing its bouquet of trade and forex business offerings to increase revenue share, in addition to building up robust Cash Management System (CMS) and Supply Chain Finance business.

Broadly, Banks SME strategy and initiatives are getting revolved around few major areas as shown below:

• Creating specialised set of SME Banking professional to support deliver best-in-class products and services to Customers.

• Leverage Branch distribution channel to increase SME business penetration and align with market.

• Focus on building a robust Customer engagement model to grow along with the Customer.

• Market-aligned products and processes to deliver hassle free financing to SMEs.

• Process improvement initiatives through technology enablement to enhance operational efficiency.

• Improving trade and forex business to increase revenue share.

• Providing superior Customer experience by continuing to work on simplifying processes and improving the overall ecosystem through adoption of world-class leading technology solutions.

• Focus on increasing wallet share and profitability at Customer level by offering customised solutions through superior relationship management.

• With CRISIL Knowledge series In Focus started and to be continued throughout FY2024, we are connecting with Trade bodies and industry associations through this project and build up relation for creating sourcing funnel.

• Tied up with Fintech ‘Yubi (credavenue) for sourcing SME and LAP leads. Few more fintechs in the final stage of closure Q1 of FY 2024.

• Entered into tie up with Namaste Credit (Fintech platform) for LAP sourcing.

• New geographies added in a phased manner i.e. Phase 1: Punjab, Gujarat and Rajasthan, Phase 2: MP, Kolkata, U.P. and A.P. Manpower deployment in new locations like Jaipur, Surat, Rajkot, Chandigarh, Ludhiana, Indore, Vijayawada etc. in FY 2024.

The SME advances of the Bank (including MSME) stood at H2,490.84 crore as on March 31, 2023 as compared to H2,448.76 crore as on March 31, 2022, clocking a growth of 2% during FY 2022-23.

Integrated Treasury Operations

During the first half of FY 2022-23, financial markets across the world experienced increased volatility on account of geopolitical hostilities and aggressive monetary policy actions by major central banks to combat elevated inflation pressures. This resulted in hardening of bond yields across major economies. The hike in the repo rate by 40 bps in an unscheduled meeting in May 2022 along with the 50 bps hike in the CRR further weakened the sentiments in the domestic market. However, towards the end of the first half year, the yields softened owing to the fall in crude prices and on expectations of Indias likely inclusion in global bond indices. The 10-year benchmark closed at 7.40% by September 2022 end. The G-sec yields were largely range-bound during the second half year. In March 2023, the yields softened taking cues from softening US yields and the benchmark closed at 7.31 % at the end of March 2023. The yields on T-bills and other Money Market instruments firmed up across tenors in sync with the hike in policy repo rate and moderation in surplus liquidity.

Equity markets declined during the first half and the Benchmark BSE Sensex closed 1.95% down at 57,427. However during H2, markets began on a positive note amidst strong buying by FPIs and robust corporate earnings. BSE Sensex touched an all-time high of 63,284 on December 1, 2022. In early Q4, rising US Fed terminal rate projections dampened sentiments and markets remained under pressure amidst spill overs triggered by the banking turmoil in the US and Europe. However, foreign investors turned net buyers in March 2023. Also domestic institutional investors were net buyers amidst steady retail participation through the Systematic Investment Plan route. These enabled the market to remain resilient and BSE Sensex gained 2.73 % in H2 to close at 58,992 on March 31, 2023.

Banks Integrated Treasury at Mumbai successfully managed the investment and trading operations of the Bank and maintained Statutory Reserve requirements at optimal levels. The Fixed Income & Money Market Desk at Integrated Treasury actively traded in Government securities, Certificates of Deposits, Commercial Paper, Corporate Bonds & Debentures and Alternate Investment Instruments maximising the Banks trading profit.

Considering the rising inflationary trends and upward movement in the interest rate, the Bank undertook cautious trading in fixed income instruments and avoided provisioning requirement on the trading portfolio.

Total investments of the Bank as on March 31,2023 was H5,993.09 crore (BV) compared to H7,142.07 crore (BV) as on March 31, 2022. The decrease was on account of unwinding of low-yielding investments. However, the interest income earned from investment operations increased to H404.61 crore during the financial year 2022-23 compared to H380.92 crore for the previous year. The Bank made a profit of H16.39 crore on sale of investments compared to H17.77 crore for the previous year.

Foreign Exchange Transactions

During the first half year, the global outlook turned negative due to the combined impact arising out of geopolitical tensions and synchronised monetary tightening by central banks to rein in inflation. These developments triggered portfolio outflows from emerging market economies, resulting in sharp depreciation of their currencies. Compared to emerging market peers, the Rupee performed better, supported by stronger macroeconomic fundamentals. The Rupee touched an all-time low of 83.2 per US dollar on October 20, 2022, but it recovered soon, supported by depreciating US dollar and net inflows through foreign portfolio investments. The Rupee remained range-bound during the remaining period of the second half year. Rupee Forward premia declined during H1 on account of narrowing interest rate differentials and one-month forward premium averaged 3.36% during H1. During the second half, Forward premiums fell sharply and the 1-month forward premia declined to an average of 2.39% during H2.

The Merchant desk of Integrated Treasury is fully equipped and provides centralised cover operations for Forex requirements originating from branches. The desk also extends advisory services to corporates, SME and MSME customers to manage their forex exposures. The Proprietary trading desk undertook trading operations in major currencies and in addition, utilised the arbitrage opportunities between the domestic and overseas markets thus augmenting the revenue of the Bank.

During FY 2022-23, the Bank earned an income of H12.31 crore from Foreign exchange operations comprising H9.47 crore of foreign exchange profit and H2.84 crore of commission from forex transactions.

Bancassurance

The Bank is making the most of the current financial market by increasing its product awareness and digital adoption. It is also recognising the importance of building relationships with third-parties for the distribution of financial products such as life insurance, non-life insurance and standalone health insurance. The Bank has entered into Corporate Agency tie-ups with multiple insurers and is following an open architecture model, which allows us to offer a wide range of insurance products from various insurance providers. By doing so, Bank can cater to the diverse needs of our customers and provide them with the best possible options. To further enhance the offerings, the Bank plans to leverage analytics, customer insights, and technology to better assess customer needs and provide them with tailored solutions. This strategy will enable the Bank to deepen the relationship with our customers and offer them a personalised experience.

Life Insurance

Life insurance is not only essential for the financial well-being of loved ones but can also help policyholders achieve various financial goals at different stages of life. The market offers a variety of life insurance products that cater to different requirements, including risk coverage for loss of life, long-term savings, goal-based planning, and tax benefits. The Bank currently provides a wide range of life insurance products across customer segments and is a corporate agent for multiple insurance companies such as M/s Edelweiss Tokio Life Insurance Company Limited, M/s HDFC Life Insurance Co. Ltd, and M/s ICICI Prudential Life Insurance Co. Ltd. In the financial year 2022-23, the Bank witnessed an overall growth of 46% in life insurance, with a premium of H205.01 crore compared to H140.15 crore in the previous financial year.

Non-Life Insurance

The Bank has established partnerships with reputable players in the non-life insurance market to distribute general insurance products. Bank is a corporate agent of M/s Reliance General Insurance Company Ltd., M/s Go Digit General Insurance Co. Ltd., and M/s ICICI Lombard General Insurance Company Ltd. The Bank offers various insurance products to its customers, including home, health, motor, personal accident, fire, and critical illness insurance on a non-risk participation basis. Individuals are increasingly recognising the need to plan their finances to manage not only their own health but also that of their families. Therefore, the Bank has focused on the retail health market and partnered with M/s Aditya Birla Health Insurance Co. Ltd to offer a wide range of products to secure customers health. In the financial year 2022-23, the Bank witnessed an overall growth of 50% in non-life insurance, with a premium of H17.84 crore compared to H11.86 crore in the previous financial year.

Financial Performance with Respect to Operational Performance

During fiscal 2022-23, the Interest income rose to H2,319.65 crore as against H2,038.31 crore of previous fiscal, reflecting growth of 13.80%. Interest expenses increased by 11.39% and stood at H985.81 crore as against the previous year figure of H885.01 crore. The interest expense and interest income has been increased in line with increase in business and increase in interest rates. The Net Interest Income increased to H1,333.85 crore from H1,153.30 crore y-o-y growth of 15.66%. Non-interest income increased by 28.04% from H246.80 crore to H316.01 crore for the year ended March 31, 2023.

For the year ended March 31, 2023, the Net Interest Margin of the Bank rose by 21 basis points from 5.27% to 5.48%, compared to the previous fiscal. Bank has disposed low interest earning assets during the year which helped to improve the NIM during the current year.

Bank reported an Operating Profit of H707.40 crore compared to H613.72 crore in the previous fiscal, reported an increase of 15.26%. The increase was primarily due to increase in the net interest income.

Operating revenue of Bank reported a y-o-y growth of 15.34% and stood at H2,635.66 crore as against previous year figure of H2,285.11 crore. The increase in operating revenue is mainly on account of increase in interest income. The operating expenses increased to H942.46 crore from H786.38 crore reporting an increase of 19.85% mainly on account of increase in staff cost and other operating expense in line with increase in business and branches.

Bank has posted a Net Profit of H547.36 crore in FY 2022-23 as against Net Profit of H458.49 crore in FY 2021-22. The3 increase in profit was mainly on account of increased Net Interest Income and increased recovery of non-performing advances.

Cost Income ratio of the Bank stood at 57.12% in the year ended March 31, 2023, compared to 56.17% in the corresponding previous year.

The Return on Assets was 2.06 % at the end of the fiscal under report as against 1.90 % in the previous fiscal.

The Earning per Share (EPS) and Book value of share as on March 31, 2023, stood at H31.55 and H184.66, respectively as against H26.43 and H152.83 as on March 31, 2022. The Banks Return on Equity stood at 20.35% as against 21.28 % for the previous fiscal FY 2022.

Income

Total income of the Bank has increased by H350.55 crore and stood at H2,635.66 crore as on March 31, 2023. Net Interest Income of the Bank increased to H1,333.85 crores from H1,153.30 crores registering a growth of 15.66%.

Non-Interest Income increased from H246.80 crore to H316.01 crore in FY 2023 due to increase in commission income, processing fee and charges recovered from deposit accounts.

Expenditure

The interest expenditure increased from H885.01 crore in FY 2022 to H985.81 crore in FY 2023 mainly on account of increase in deposit interest. Operating expenses increased from H786.38 crore in FY 2022 to H942.46 crore in FY 2023 mainly on account of increase in staff cost and other operating expense in line with increase in business and branches. Cost of Deposits increased to 4.38% in FY 2023 from 4.31% in FY 2022 in line with the increasing trend of interest rates.

Key Financial Ratio

(a) Details of significant changes (i.e. change of 25 % or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefor or sector specific equivalent ratios, as applicable are given below:

Particulars	March 31, 2023	March 31, 2022
Capital Adequacy Ratio (CRAR)% Basel – III	27.10	25.90
Earnings per share (in )	31.55	26.43
Book value per share (in )	184.66	152.83
Net Interest Margin%	5.48	5.27
Cost-Income Ratio%	57.12	56.17
Return On Assets (ROA)%	2.06	1.90
Return On Equity (ROE)%	20.35	21.28
Gross NPA %	1.26	1.81
Net NPA %	0.35	0.68
Leverage Ratio	9.98	9.12
Interest Income as a % to working funds	8.72	8.47
Operating profits as a % to working funds	2.66	2.55

Capital Adequacy ratio increased to 27.10% compared to 25.90% due to increase in capital fund from H2,581.39 crore to H3,170.73 crore.

Bank has disposed low interest earning assets during the year which helped to improve the NIM during the current year. Net Interest Income (NII) increased from H1,153.30 crore to H1,333.85 crore due to increase in volume of business of the Bank. Increase in NII contributed to improved net profits. Resultant to which the EPS, ROA, Leverage ratio and Book value per Share have progressed upward. ROE of the Bank has reduced due to increase in average equity of the Bank on comparison with the profit generated. Cost Income Ratio of the Bank has increased due to increase in operating expenses. Growth in standard advances and recovery of Non Performing Advances contributed to improve Gross NPA % and Net NPA %.

(b) Details of any change in Return on Net worth as compared to the immediately previous financial year along with a detailed explanation thereof.

Return on net worth decreased to 20.35% from 21.28% of the previous year on account of increase in average net worth of the Bank on comparison with net profit.

Disclosure of Accounting Policy

The significant accounting policy of the Bank is mentioned in Schedule 17 of the financial statements.

The Bank has followed the same accounting policies in the preparation of these financial results as followed in the annual financial statements for the year ended March 31, 2022.

NPA Management

After the significant impact of COVID-19 stress, Indian banks have improved their performance in all the key functionaries including the recovery of Bad loans. The close monitoring and follow-up mechanisms of the Banks have prevented the accounts from fresh slippages during the recent past. Moreover, the effectiveness in recovery from the NPA accounts in addition to the up gradation of the recent NPAs has paved the way for reversal of the provisions created which has resulted in reduction in the credit cost of the Banks. The immediate actions initiated for recovery resulted in substantial reduction in the bad loan portfolio of the Banks.

Bank was effective in prevention of fresh slippages and recovery of NPAs through intensive recovery actions, both legally and through continuous persuasion with the parties concerned. Bank has been efficacious in initiating immediate legal actions after the account turning NPA by utilising the SARFEASI Act wherever the accounts are secured in nature in addition to approaching the legal forums for recovery. Bank has also constructively utilised the Government . mechanism for recovery especially under small & unsecured accounts by initiating the RR mechanism in Kerala. Bank has given opportunity to the borrowers for settlement through compromise melas/ one-time settlements conducted at various parts of the country. In Kerala state, Revenue authorities are also conducting melas in co-operation with Banks for early settlement of the bad loan accounts.

The exposure of the Bank under cashew industry with reference to Kerala state, was given prime attention by formulating a special OTS package. Bank was successful in getting a breakthrough in hard core NPA accounts under the cashew segment and could recover a sizeable amount. Bank has been utilizing all available mechanisms including DRTs, action under SARFEASI Act, resolution under the IBC and so on to effect recovery.

The initiatives taken by the Bank has resulted in cash recovery and up gradation of NPAs to the tune of H73.39 crore and H18.90 crore respectively during the year. The Gross NPA level of the Bank as on March 31, 2023 stood at a level of H262.56 crore as compared to H289.51 Crore in the corresponding period of the previous financial year. The Gross NPA and Net NPA ratios are at 1.26% and 0.35% respectively as against 1.81% and 0.68% respectively in the previous financial year. The provision coverage ratio as on March 31, 2023 improved to 92.11% from the level of 89.65% in the previous year. Further, during the period under review, Bank could recover H70.74 Crore from the prudentially written off (PWO) portfolio. Interest recovery during the period amounted to H16.49 Crore.

Bank is more focussed on nipping the NPA accretion in the bud at the stage of SMA itself rather than allowing them to turn into NPA.

Going forward, Banks focus would be on arresting fresh delinquencies through close monitoring and recovery of NPAs by initiating appropriate and timely recovery steps, with more focus on recovery in PWO accounts, all secured advances and unsecured advances too. Bank is also exploring the ways to upgrade the accounts by the way of restructuring/rescheduling the eligible NPA accounts.

Risk Management Overview

A robust risk management system ensures long-term financial security and stability. The overall responsibility off-setting our risk appetite and effective risk management rests with our Banks Board.

The Board focuses on

• Approving and relooking Risk Management Framework and policies, which are subjected to review and up-gradation on an ongoing basis, in tune with regulatory guidelines and best practices in the Industry.

• Assessing the effectiveness of the risk mitigation plan implemented by the Integrated Risk Management Department.

• Providing strategic guidance on various initiatives undertaken/to be undertaken by us towards management and mitigation of various risks.

The Integrated Risk Management Department is headed by a Chief Risk Officer who coordinates various risk management functions of the Bank. The Bank has a well-experienced risk management team with specialised knowledge in various areas to handle the risk management functions.

The objective of risk management is to have an optimum balance between risk and return. The Risk Management functions of the Bank focus on taking a risk by choice rather than by chance. The Bank has aligned its business strategies to a Risk Appetite Framework to maximise return on capital. A risk related pricing structure has thus been made operative to handle the pricing of loans to evaluate returns vis-?-vis risks assumed. The Bank has put in place a robust Risk Appetite Framework and has various business tolerance levels in sync with Business plans. The framework ensures business heads operate within the guardrails of risk management. The major risks are credit and market risks, including the interest rate and liquidity, information and cyber security, and other operational risks. Bank has established robust policies, procedures, methodologies, and frameworks to manage material risks systematically.

The Bank has a proactive approach to risk management. Its risk philosophy involves developing and maintaining a healthy portfolio within its risk appetite and regulatory framework. The Bank has policies and procedures to measure, assess, monitor, and manage risks systematically across all its portfolios. The Bank is committed to creating an environment of increased risk awareness at all levels. It also aims at constantly upgrading risk controls and security measures, including cyber security measures, climate related financial risks to ensure avoidance or mitigation of various risks.

The Chief Risk Officer reports directly to the MD & CEO/ Risk Management Committee (RMC) of the Board. Risk Management is a Board-driven function in the Bank with the Risk Management Committee (RMC) at the apex level supported by operational level committees of top executives for managing various risks.

The Board of Directors of the Bank approves the Risk appetite and Risk policies for the Bank. The RMC supervises the implementation of the risk strategy and policies, reviews the level and direction of risk, prudential ceilings, and portfolio diversification and monitors the risk reporting. The risk strategy and policies are effectively communicated to all branches and offices of the Bank.

The Integrated Risk Management Department coordinates and administers the risk management functions in the Bank. The Risk Department has four divisions for managing the main risk streams, Credit Risk, Market Risk, Operational Risk and Information Security Risk. Dedicated teams within the divisions are responsible for assessing, monitoring, and reporting various material risks.

Credit Risk

Credit Risk is managed through a Board-approved framework that sets out policies, procedures and reporting in line with international best practices.

Mitigation

The Credit Risk Management Committee (CRMC) oversees the credit risk function in the Bank. In line with its asset quality management objective, Bank strives to maintain a strong asset quality through disciplined credit risk management. Bank has a well-defined credit appraisal mechanism and risk assessment practices for identification, measurement and monitoring. Bank has various instruments for credit risk management, including credit risk management policies, Credit approval Committee, Prudential exposure limits, Risk Rating system, Risk-based pricing and Portfolio Management.

Bank has a well-defined internal rating/scoring models for SME, MSME, Retail and Corporate Credit Risk Assessment. The major part of the internal rating is carried out by expert rating models provided/vetted by CRIS, the subsidiary of CRISIL.

Segment-wise and borrower category-wise exposure limits are fixed and monitored by the Bank to address concentration risk. Bank has a standardised and well- defined approval process for all advances and adopts a committee approach for credit sanctions, and has approval committees at various levels.

The Bank has various credit risk mitigation measures such as exposure limits for single and group borrowers, exposure limits for sensitive sectors, benchmark financial ratios, hurdle rates, etc.

Bank has also put in place Altmans Z score models to know the strength and weaknesses of credit proposals.

The Bank is implementing Centralised Rating Solutions by CRISIL (CRISIL RAM), hosting rating models in a web-based solution and revamping rating models. The upgrade will enable the Bank to smoothen the rating process and adopt the best industry practices.

Market Risk

Market risk arises mainly from Banks statutory reserve management and trading activity in interest rate instruments, equity and forex markets. The Bank has a well-developed framework comprising Board-approved policies and established practices for managing market risk. The Bank has set its risk appetite and Value-at-Risk limits to measure and control interest rate, equity price, forex, liquidity, and other market-related risks.

Market risk addresses the risk that the value of ‘on or off-balance-sheet positions will be adversely affected by changes in market interest rates, currency exchange rates, equity and commodity prices and the possibility of resultant loss to the Bank. The focal point of market risk management is to assist the business verticals in maximising risk-adjusted return by providing analytics- driven inputs regarding market risk exposures, portfolio performance vis-?-vis risk exposures and comparable benchmarks.

Bank to measure and control market risk, interest rate risk, equity price risk and forex risk. The Bank uses various tools like stress testing, modified duration, PV01, VaR, position limits, stop-loss limits, NOOP limits, AGL etc. Bank has established an independent Mid-Office at the floor of Treasury, as part of Market Risk Management Division, which reports directly to the Head of Market Risk and functions as the risk control unit for the treasury activities.

Mitigation

The Mid Office scrutinises the treasury deals and transactions from the market and operational risk perspectives. The Bank has put vibrant policies for the smooth conduct of businesses exposed to market risk and effective management of all market risk exposures.

The policies and practices also monitor and control liquidity risk arising out of its banking book, trading book, and off-balance sheet exposures.

The capital charge for market risk is currently computed under the Standardised Duration Approach. Value-at-Risk (VaR) is used to monitor Banks trading portfolio risk. According to Banks policy prescriptions, the VaR and Stressed VaR for market portfolios are monitored periodically.

Liquidity & Interest Rate Risk

Liquidity risk is the potential inability to fund an increase in assets, decrease in liabilities or meet obligations as they fall due without incurring unacceptable losses.

Interest rate risk is the chance that a change in interest rates will negatively impact the value of an investment. Liquidity risk is monitored through Liquidity Coverage Ratio (LCR), Structural Liquidity Statements, Short Term Dynamic Liquidity Monitoring, Liquidity Ratio Analysis, prudential limits for negative gaps in various time buckets, etc.

Interest rate risk is the risk where changes in market interest rates affect our earnings through changes in our Net Interest Income (NII) and the market value of equity through changes in the economic value of our interest rate sensitive assets, liabilities and off-balance sheet positions. Interest rate risk on Trading Portfolios is monitored daily through Market Risk Measurement tools such as VaR, PV01, etc.

Mitigation

• Our Asset Liability Management Policy provides a framework for managing liquidity risk and interest rate risk. The Bank has approved risk appetite limits and other liquidity and interest rate risk tolerance limits. Further, our Bank has the necessary framework to manage intraday liquidity risk.

• Banks Asset Liability Management Committee (ALCO) is responsible for monitoring adherence to liquidity risk and interest rate risk limits.

• While the maturity gap and stock ratio limits help manage liquidity risk, assessing the impact on the net interest income and economic value of equity help to mitigate interest rate risk. This is complemented by a stress testing programme covering liquidity and interest rate risk.

• Bank also undertakes various studies to assess the behavioral pattern of non-contractual assets and liabilities and embedded options available to customers, which are used while managing maturity gaps.

• Liquidity Coverage Ratio (LCR), a global standard to assess an organisations ability to meet its payment obligations, is used to measure a banks liquidity position. LCR level ensures that Bank have adequate stock of unencumbered High-Quality Liquid Assets (HQLA) that can be converted into cash quickly and immediately to meet the liquidity needs under a 30-day liquidity stress scenario. Based on Basel III norms, RBI has mandated banks to maintain a minimum LCR of 100 % from Jan 1, 2019.

• The Bank has a healthy Contingency Funding Plan (CFP) for taking action to ensure that the Bank has adequate liquid financial resources to meet its liabilities as they fall due. CFP is also periodically reviewed.

• RBI has also mandated a minimum Net Stable Funding Ratio (NSFR) of 100 % from Oct 1, 2021. NSFR indicates that the Bank maintains a stable funding profile regarding the composition of its assets and off-balance sheet activities. As a prudent risk management practice, the Bank has monitored this ratio and is adequately prepared to adhere to RBI mandated requirements.

The Bank has also put in place a professionally vetted Stress Testing policy comparable to peer bank standards, wherein sensitivity/scenario analyses are carried out to know the impact on NII and CRAR of the Bank. The current policy has value additions on methodologies adopted and covers stress test for Climate-related Financial risks, upgraded model for plausible stress conditions on banks prime gold loan portfolio, evaluation of stress on Retail and Wholesale products basis Macroeconomic scenarios, introduction of stress impact on illiquid investments. Annual Back testing of stress-tested results ensure the efficacy of the Stress Testing Model.

Our Banks Liquidity Coverage Ratio Dash Board throws light on the Top Management to gauge the Banks liquidity position comprising availability of High-quality liquid assets and likely outflow of funds. Liquidity Management Policy of the Bank is also enriched to ensure that Bank holds necessary SLR assets (as defined by RBI from time to time) at 1 % over and above the mandatory SLR limits as stipulated by RBI from time to time in lieu of keeping stipulated level of minimum stock of liquid assets.

Operational Risk

The Bank has a well-defined Operational Risk Management framework for effective management of Operational Risk in the organisation, whose implementation is supervised by the Operational Risk Management Committee (ORMC) and reviewed by the Risk Management Committee (RMC) of the Board.

Mitigation

In conformity with RBI guidelines, the Bank has evolved a robust Operational Risk Management Policy. This policy provides the framework to identify, assess, monitor, control, and report operational risks arising from the failure of internal processes, people, systems and external events.

Key elements of the Banks Operational Risk Management, among others, include timely Incident reporting, ongoing review of Systems and Controls, enhancing risk awareness through Risk & Control Self-Assessment (RCSA), and monitoring of Key Risk Indicators (KRIs) and aligning Risk Management activities with Business Strategy. The Bank created a repository of Internal Loss Data as part of Operational Risk Management and carried out Root Cause Analysis.

The Bank has a detailed Business Continuity Plan (BCP) to ensure continuity of operations at the Branches and Offices during disruptions. BCP enabled us to ensure minimum business disruption during the yesteryears natural disasters, such as the floods in the southern part and the disruption caused by the COVID-19 pandemic.

As part of the Change Management framework, all new/ modified products/processes are screened through the Product/Process Evaluation Committee (PEC), mainly from Compliance, Legal, Information Technology/ Security, Accounts, Inspection & Audit and Risk point of view.

Climate Risk

Climate change risk has become a crucial challenge to the financial industry. The Bank is committed to reducing the impact of climate change risk. It is consciously working towards sustainable development of its banking operations to achieve economic growth while maintaining the quality of environmental and social ecosystems.

Mitigation

As a policy matter, to reduce the greenhouse effect, the Bank does not finance borrowers for setting up new units producing/consuming Ozone Depleting Substances (ODS) and small/medium scale units engaged in the manufacturing of aerosol units using Chlorofluorocarbons (CFC) which enables a reduction in the greenhouse effect.

In order to address the likely impact of Climate-related financial risk vs market risk and liquidity risk Bank has put in place models to ascertain the stress arising out of Physical and Transition risks and the Pillar 2 capital that would be set apart shall be the capital required under baseline stress conditions.

Cyber Risk

Cyber Risk can be defined as the risk of financial loss, disruption or reputational damage to an organisation resulting from the failure of its IT systems. These episodes include malicious cyber incidents (cyber-attacks) where the threat actor intends to harm (e.g. ransom ware attacks, hacking incidents, or employee data theft).

It pertains to online business activity such as Internet Banking, Mobile Banking, Electronic Systems and storage of sensitive information over computer networks. Common categories of Cyber Risk include inter-alia, Hacker Attacks, Data Breach, Virus/Malware transmission and Cyber Extortion. Financial gain continues to be a primary driver of the most sophisticated criminal offences. It presents evolving challenges as criminal networks reinvest their revenue into developing more advanced capabilities.

Cyber Risk can drive up costs and impact revenue. It can harm an organisations ability to innovate and gain and maintain customers. Cyber risk poses commercial losses and public relations problems, disruption of operations and the possibility of extortion. Cyber-attacks also expose an organisation to negligence claims, the inability to meet contractual obligations and a damaging loss of trust among customers. A data breach will affect the Banks brand name and influence the customers confidence in the Bank. Protecting key information assets is critical to the sustainability and competitiveness of business today. Financial institutions like banks are taking the front foot regarding their cyber preparedness.

Third-party risk and supply chain risk are also adding to cyber risk. Third-party risk is the potential threat to employee and customer data, financial information and operations from the organisations supply chain and other outside parties that provide products and services and have access to privileged systems. This is especially significant since often, these external parties do not have the same security standards and protection as our Bank holds and, as a result, are used as a conduit into the organisation. Cybercriminals have become highly sophisticated and specific when targeting banks and their users. They often work to identify weak links that will enable access to highly confidential data, such as financials and customer data. Repeatedly organisations are breached due to the security weaknesses introduced by third parties that possess sensitive information or are granted access to systems.

Managing this risk is a crucial component of protecting companies data and must be a continuous, real-time process that includes review, monitoring, and management of vendors throughout the entirety of the relationship.

Mitigation

To safeguard the Bank from cyber threats and supply chain attacks, the Bank has set up the cyber security framework and follows multi-layered architecture for cyber defence mechanisms starting from endpoint security to perimeter security. Bank has a strong incidence response team to detect and respond to cyber incidents. The Bank is continuously creating cyber security awareness among employees and customers. Risk assessment of IT assets and the third-party is done regularly and gaps identified are fixed in a time-bound manner. Senior management and Board-level meetings are conducted every quarter to analyse the Banks security posture and mitigate the identified gaps.

Based on research reports by BIS for addressing cyber security related financial risk, Bank shall estimate the Pillar 2 capital requirements equivalent to around 1 % of Banks operating income under Minor stress conditions.

Cyber Security Framework

Cyber security risks are products of three elements: threat, vulnerability and impact. The Bank has a holistic risk picture based on periodic vulnerability assessments and threat intelligence from advisory bodies such as CERT-In (Indian Computer Emergency Response Team) and IB-CART (Indian Banks – Centre for Analysis of Risks and Threats). The Bank has invested in advanced systems such as antivirus/anti-malware, threat protection, WAF, Anti-DDOS, PIM, NAC, NextGen firewalls, Web application firewalls, Email Security, Anti-APT with sandbox, DNS Security, API gateways and Endpoint detection and response in all the endpoints which have user behaviour analytics. Bank continues to invest in enhancing the overall effectiveness of the Banks security posture to enable the Bank to prioritise and align its resources to detect and respond to cyber incidents quickly and prevent emerging cyber security risks. The Bank is assessing the Banks security posture by third parties like BitSight and STORMS. They have given advanced category rating for Banks cyber security posture. Banks IT, Information Security and data centres are ISO 27001:2013 certified.

Information Security Management Department is headed by Chief Information Security Officer (CISO) to address cyber security risks. As part of the cyber security framework, proactive security measures adopted by the Bank are On-Premise Security Operations Centre, advanced anti-phishing, anti-malware and anti-rogue services, Privileged Identity Management Solution, Web Application Firewall, Intrusion Detection and Prevention System for protecting network-level threats and for preventing unwanted and malicious network transmissions, Network Access Control which will allow only authorised users to connect to Banks network, Data Leakage Prevention solution to prevent data leakage, through email, web and endpoints, DDOS mitigation service to avoid the denial of services, DMARC &SPF protection to enhance the email security standards, Vulnerability Assessment and Penetration Testing, with dedicated VAPT tools like Tenable and Burp suite, SSL encryption for data transfers, Deep Server Security to enhance security at server levels, API gateway Security Solution to authenticate and provide secure API connections, Email Security Solutions to strengthen email security using Anti–APT solution with sandboxing, Artificial Intelligence based SIEM, User Behaviour analysis based End Point Detection and Response (EDR) solution and dedicated VPN solution with security controls, Hard disk encryption and data leakage protection solutions at endpoint, network and email to vent data leakage etc. The Bank continues to invest in advanced technologies to enhance the systems to mitigate Zero-day threats.

The Bank is conducting VAPT by an external agency to identify the vulnerabilities and mitigate them. Information Security audits are conducted by an external agency every year to determine the vulnerabilities/bugs in various IT applications and mitigate them. An external agency does source code audits of critical applications to identify the vulnerabilities in the applications and necessary steps to minimise the same. To evaluate

Banks preparedness against cyber-attacks, Bank participated in the cyber–drill conducted by IDRBT.

To assess the security posture and incident response Bank is conducting red team exercises to penetrate the systems by third party. Table top exercise related to Ransom ware is undertaken to determine the preparedness against ransom attacks, and necessary steps are taken to mitigate the same. Necessary measures are taken to assess third party and supply chain risk, and actions are taken to minimise the same. The Bank has always taken continuous steps to create cyber security awareness among employees and customers through training/Newsletters/SMS/Emails. The information security team is conducting red team exercises like Phishing campaigns related to Ransom ware etc. creating and gauging the incident response and awareness among employees.

Special cyber security awareness programmes are conducted for Executives of the Bank (AGM and above) and the Banks IT Team. Necessary communications for creating cyber awareness among customers are done through SMS/Email and videos. A dedicated Fraud Risk Monitoring team is available to monitor customer transactions and report frauds in the customer accounts.

As part of the Banks Cyber Security Policy and Cyber Crisis Management Plan, Bank has availed of Cyber Risk Insurance to cover any losses arising from cyber risks/ threats.

Disclosures

In compliance with the Reserve Bank of India guidelines on Basel II – Pillar 3 – Market Discipline, the Bank has put in place a Disclosure Policy duly approved by the Board of Directors and the disclosures on a quarterly/ Half- yearly/Annual basis, as per the policy are displayed on the Banks Website/Annual Report.

Compliance Risk

Compliance risk is the risk of legal or regulatory sanctions, material financial loss, or loss of reputation which a bank may suffer due to its failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to its banking activities.

Compliance laws, rules and standards have various sources, including primary legislation, regulations and standards issued by legislators and supervisors, market conventions, codes of practice promoted by industry associations, and internal codes of conduct applicable to the staff members of the Bank will be the critical sources for compliance laws, rules and standards.

These rules and standards may go beyond what is legally binding.

Compliance laws, rules and standards generally cover matters such as observing proper standards of market conduct, managing conflicts of interest, treating customers fairly, and ensuring the suitability of customer advice. They also include specific areas such as preventing money laundering and terrorist financing. They must contain transparency and disclosure norms and may extend to tax laws relevant to structuring of banking products or customer advice.

The Compliance Function envisages strict observance of all statutory provisions contained in various legislations such as the Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, Prevention of Money Laundering Act, etc., as well as to ensure observance of other regulatory guidelines issued from time to time; standards and codes prescribed by IBA, FEDAI, FIMMDA, BCSBI, etc., and also Banks internal policies and fair practices code.

Mitigation

A good Compliance Culture is built to maintain the reputation and win the trust of customers, investors and regulators. Such culture is an essential element in the safe and sound functioning of the Bank and, if not followed effectively, may adversely affect the Banks risk profile. Compliance with core elements like following the laws, rules, regulations, and various codes of conduct and being in adherence with fair practice codes, managing conflict of interest and treating customers fairly to assist build a true Compliance Culture is ensured.

The Bank promotes awareness of compliance obligations and ethical values to maintain an appropriate compliance culture throughout its businesses. Compliance is not to be seen as an activity of the Compliance Department alone but as a culture that shall pervade across the Bank.

As a part of the Compliance framework of the Bank, it is envisaged to embed compliance in every department of the Bank effectively as a part of the corporate culture that emphasises standards of honesty and integrity. The organisation holds itself to high standards when carrying on business and, at all times, strives to observe the spirit as well as the letter of the law.

Risk Appetite and Risk Management Practices

The overall responsibility of setting the Banks risk appetite and effective risk management policies and strategies rests with the Board of Directors. The Bank has put in place a vibrant Risk Appetite Framework. In tune with the guidelines of RBI, the Board has constituted a Risk Management Committee of the Board (RMC).

The major risks namely Credit, Market, Liquidity and Operational risk are managed through following Sub Committees of RMC namely; Credit Risk Management Committee (CRMC), Operational Risk Management Committee (ORMC), Asset Liability Management Committee (ALCO) and IT Security Committee. The Committees described above work within the overall guidelines and policies approved by the Board. Several meetings of Risk Management Committee (RMC) and executive-level risk committees have been conducted during the year.

Compliance with Basel II and Basel III Framework

The Bank has been calculating capital ratios every quarter as per Basel III norms, along with Basel II norms, since April 1, 2013. The Bank has also been in line with the regulatory guidelines on Pillar I of Basel II and III Norms.

It has computed the capital charge for credit risk as per the Standardized Approach and for market risk by the Standardized Duration Method. In order to account for the illiquidity of positions in Trading portfolio, an adjustment to the current valuation of less liquid positions is calculated and deducted from Common Equity Tier -1 (CET-1) Capital of the Bank while calculating CRAR for regulatory purpose. The capital charge for operational risk has been as per the Basic Indicator Approach.

As a prudent measure, ICAAP policy of the Bank is value added with addition of Cyber Security Risk and Climate Risk in Pillar II capital computations.

Our Bank has put in place a robust Stress Testing Framework. It consists of a series of sensitivity and scenario tests on various risk areas like default risk, credit concentration risk, interest rate risk in the banking book, and market risk, among others. Top Consulting Firm with good market credential is appointed in relation to enhancement of its Stress Testing framework. Accordingly, enhancements in the Stress testing framework were done in calculating the default risk for eight credit portfolios by using macroeconomic based scenarios, Gold loan portfolio based on actual gold prices VaR model, introducing additional stress for Illiquid investments in trading portfolio based on a sensitivity model, and climate related financial risks based on physical and transition risks etc.

Business Continuity Plan

The Bank is having a comprehensive Business Continuity Plan (BCP) to ensure continuity of critical business operations of the Bank identified through criticality assessment using Business impact analysis

(BIA) at times of disruptions. In line with the Business Continuity Plan, Bank has constituted a BCP Committee incorporating the heads of all major departments to exercise, maintain and invoke business continuity plan as needed. A core team called Emergency Operation Team is also in place to act immediately upon a crisis and for the supervision of recovery under alternative operations arrangements during a disaster and the team ensures that the business functions are back to normalcy with minimum delay.

During the pandemic, Bank was able to work seamlessly as Bank has BCP plans in place with defined BCP locations and resources for critical applications. Secured Work from home facilities are provided for critical teams. Disaster Recovery drill for the core banking system (CBS) and critical systems of the Bank is conducted at regular intervals to ensure the competence of the same during emergencies apart from undertaking periodical testing of recovery speed of critical applications from alternate locations.

Internal Control, Internal Audit

Internal Audit Department (IAD) is a crucial component of the internal control system of a bank. IAD is responsible for serving as third line of defence in the internal control system, providing independent assurance to the Board of Directors and Management on the effectiveness of risk management and internal controls.

To strengthen our governance arrangements and align with the latest RBI guidelines related to the RBIA framework, the Head of Internal Audit reports directly to the ACB.

The internal audit conducted in our Bank is risk-based and covers various units, businesses, support and control functions and branches according to the audit plan approved by the ACB.

During the audit, there is an emphasis on the significance of efficient risk management and control, along with suitable transaction testing. The audit also provides recommendations to mitigate current risks and protect the Bank against a range of potential threats.

The reports of Inspection and Audit Department (IAD) on Banks control and governance processes are effective in managing risks and preventing fraud. Additionally, these reports are instrumental in ensuring that the Bank remains compliant with regulatory requirements, as well as internal policies and procedures. Its independent and objective assessments make certain that the Banks assets are safeguarded and provide high quality counsel to the Top Management. The Audit Committee of Executives first discusses compliance and design level controls, and then the Audit Committee of the Board addresses the key issues arising from the Audit Reports.

These reports support the Top Management and the Board to identify and address any weaknesses or gaps and find out proper remedy/solution. ACB provides guidance and direction on improving the controls across the organisation. The department further monitors the implementation of its recommendations and the directions of ACB to ensure that they are properly implemented and effective in mitigating the identified gaps.

Concurrent Audits by a large and experienced Chartered Accountant Audit firm complement the internal audit function by subjecting the Banks operations to further scrutiny, taking into account risk perception and covering critical functions. Critical functions like Treasury, Compliance, CPC - General, Credit Monitoring, Asset Recovery and business functions like Two Wheeler finance, Retail Advances, Advances under SME & MSME are covered here ensuring coverage of all areas as prescribed by RBI. Synopsis of Concurrent Audit Reports for the entire Bank are regularly placed before the Audit Committee of the Board.

Considering the high-risk nature of Gold loans, IAD had conducted 900 Gold Loan audits in last FY: 2022-2023 apart from that 336 branches have also been audited under Risk Based Internal Audits. These audits serve to pinpoint any gaps in the appraisal and monitoring processes, which prompts corrective and prompt recovery actions by the Management.

In the FY 2022-23, Bank conducted a special assignment to review and vet all the Tranche data points submitted to the RBI. Audits like this enables the Bank to ensure accuracy and authenticity of the data being submitted to regulators. A Thematic Audit was carried out by IAD at the Centralised Processing Unit in Chennai, where documents are centrally stored, and identified several gaps that were subsequently highlighted.

Internal Audit department also have an Offsite Surveillance Team which plays a critical role in ensuring regulatory compliance. Offsite Surveillance involves the use of various data sources and it enables our Bank to proactively identify and address potential risks before they materialise.

Outsourced Vendors and Currency Chests of the Bank are also subjected to audit at periodic intervals as per the extant guidelines.

Further, IAD performs Information System Audit to ensure the integrity, confidentiality and availability of their information assets. It involves a comprehensive evaluation of the Banks information systems, including hardware, software, data and processes, to identify any weakness or vulnerability that could compromise the security or effectiveness of the Banks operations.

Vigilance Function

Vigilance Department of the Bank controls the incidents of fraud in the Bank. The department covers the functions of preventive vigilance and matters connected with vigilance investigation. Vigilance Department sources its information on malpractices/frauds/suspected frauds through two sources i.e. Internal and External source. Internal source broadly include inputs by way of complaints (from staff, customers, whistle blower, third-party etc.), preventive vigilance audit, regular/ surprise inspection, gold audit, computer audit, report of senior officials visit to branches etc. and External source include Media reports (both print & electronic), Reports from law enforcement agencies, other banks, Regulatory authorities etc. Vigilance Department conducts a detailed investigation into the incidents with the permission of Chief Vigilance Officer. The synopsis of the investigation report is then submitted to the Chief Vigilance Officer for further action. A consolidated monthly report is also submitted to MD&CEO. If an element of fraud is detected/suspected, the incident will be reported to RBI as fraud/suspected fraud. The Bank also initiates action against the culprits and take step to recover the amount. The Department analyses the root cause of the fraud and suggests corrective measures for improving the systems & controls to avoid recurrence of similar frauds in future. In the event lapses are observed on the part of Bank staff, explanations are called for from such employees. Examination of staff accountability is conducted after obtaining reply from the concerned staff. If disciplinary proceedings are to be initiated against the staff, the file is transferred to the HR Department for further action. If third parties such as gold appraisers, Chartered Accountants, valuers, legal advisors, etc., are involved in the fraud or lapses are observed on their part, explanations are called for from them. In the event reply is not satisfactory and found accountable, they are immediately removed from Banks approved panel. In applicable cases, their names will be referred to IBA to include them in the Caution List of IBA.

Bank has appointed the Chief Vigilance Officer for monitoring all Vigilance & Departmental proceedings related matters including processing of individual Vigilance and disciplinary proceedings cases.

Vigilance Department plays a dynamic role and has implemented various steps in the prevention of frauds. Preventive measures include spreading awareness on potential fraudulent activities and instigating a compliant environment among all employees of the Bank. Vigilance Department has started effective fraud prevention mechanism by conducting periodical Preventive Vigilance Audits.

Wherever deficiencies are observed, the same are intimated to the respective branches and Zonal Offices for rectification and to avoid recurrence of similar irregularities/deficiencies. In cases where there are severe deficiencies, explanations are called for from those responsible for such deficiencies. If their reply are not found satisfactory, the files are transferred to the HR Department for initiating disciplinary proceedings against them.

Vigilance Department also issue caution advices on a regular basis elaborating the modus operandi of various frauds occurring in the banking industry including our Bank. This enables the Branches/Offices to prevent similar kind of fraudulent attempts in future.

Branch and ATM Network Status

The Bank has opened 100 branches in the financial year 2023. The Bank had also opened 101 and 100 branches respectively in the last two financial years (FY2021 and FY2022), as part of its branch expansion strategy/ programme.

As on March 31, 2023, the Bank has 703 branches excluding 3-service branches, 3- Asset Recovery Branches and 528 ATMs/CRMs spread across 16 states and 4 union territories. During the period under review, no branches of the Bank were merged with nearby branches/closed as part of its rationalisation strategy.

Branch Expansion Programme

As part of the branch expansion strategy/plan of the Bank, Bank has opened 100 branches in the financial year 2023. The Bank has opened 101 branches in FY2021 and 100 each in FY2022 and FY2023, as part of the same strategy.

96 out of the 100 branches opened in FY 23 were outside Kerala predominantly in Andhra Pradesh, Telengana and parts of Northern/Western India as part of the strategy of the Bank to expand beyond the home state to reduce the concentration risk. Newly opened branches since FY2022 have contributed to a total business of more than H5-,000 crore as on March 31, 2023.

In addition to 100 new branches opened in 2022-23, as part of expanding network to cover more geographies and create a national presence, the plans are afoot to open another set of new 100 branches PAN India, targeting the locations with CASA, Gold, Agri and SME/

MSME focus and the same is expected to be completed by the end of FY 2023-24.

Expansion of ATM Network and Value Additions

During the year, Bank installed 107 more new ATM/ CRMs making the total to 528 on-site and off-site ATM/ CRMs. For increasing the Security Controls at ATMs and for securing card transactions, multiple layers of security features were incorporated and EMV roll out has been completed in all Diebold and Vortex ATMs. With this, all ATMs of the Bank have become EMV complied. The Bank has implemented One Time Combination Lock for all ATMs. The newly opened ATM Kiosks are aesthetically designed with colour code and special ambience to increase customer pride, footfall and loyalty.

As part of offering value added services, the Bank has now enabled IMPS Fund Transfer, Stop Cheque Payment and Intra Bank Fund Transfer facility through ATMs/ CDMs. Card-less cash withdrawal facility has also been introduced in CSB ATM/CRMs to provide customers the convenience of withdrawing money without using their debit card.

Currency Chest

Banks Currency Chests are situated in Market Road, Ernakulam and Singanellur, Coimbatore. These chests are providing adequate support by supply of cash to branches and ATMs. The role of currency chest in providing effective and timely customer service is phenomenal.

Currency Chests play a vital role in adhering to Clean Note Policy of RBI and help branches to accept soiled and mutilated notes from general public and from customers over the cash counters.

Technology Adoption

As part of Digital Banking initiatives, Bank has successfully completed many new Projects and Enhancements in the year 2022-23. Listed are a few of the major projects and change requests of the year 2022-23, and also provided a quick glance on some of the important projects which were taken up in the current financial year and work is in progress.

1. Lead Management System

Lead Management system helps the Bank to capture leads for both asset and liability class at the branches as well as sales executives in the field. This system will help provide business intelligence in terms of lead conversion and increase revenue. This is a Software as a Service system and hosted in the AWS cloud. This system went live in Q4 FY 23

2. Security Enhancement through TLS 1.2 Encryption

To increase the security of systems and restrict any fraudulent activities, all the ATMs, CRMs, self-service machines, and Core Banking system was upgraded to the TLS 1.2 encryption standard.

3. Digital Lending Systems

Bank has embarked on building new loan origination systems. These systems are being built with digital journey which will help to convert leads and disburse loans at a much faster pace. The solution is integrated with all the necessary interfaces which will significantly reduce the manual paperwork. This system is deployed in banks own server. The application interacts with Core banking system via API. This is now enabled for Personal Loan and has gone live in the last financial year Q3 and Q4.

The Gold Loan system is now integrated with Hunter for fraud checking and Karza for Know Your Customer validation, Aadhar and CIBIL score verification.

The Corporate Loan Origination system went live in Q4 FY23. This will help Bank to serve the corporate customers much faster efficiently and securely.

Further through FY24, Bank will be working to roll out more lending systems like Education loan, Home loan, loan against property, Auto Loan, Loan Management system etc. to name a few.

4. CSB Bank-One Card Co-branded Credit Card

The Bank has launched credit card in Q4 FY23. This is rolled out for both existing Bank customers and new to bank customers. One Card app is designed for the digital onboarding journey.

5. Contact Center

The Bank has opened a second contact centre in Mumbai. This is an out bound contact centre which will help in sales and marketing of the products of the Bank. The leads for the business are being generated via this centre.

Bank is working on extending the contact centre to also have an inbound contact centre. This will cater to the customer complaints and requests. This will be operational by Q2 FY24.

6. Post Shipment Solution

Processing of export loans and bills are now moved to a centralized location. A centralized team will be doing the maker and checker process. This will ensure error free processing of loans.

7. Locker Module Revamp

Customers now get an intimation via SMS on the access of the lockers. This will ensure integrity for the customer and alert any fraudulent activities on the lockers.

8. VISA and RuPay Cards

• Contactless Tap & Pay: All the debit cards are now enabled with Tap and Pay facility. A limit can be set by the customers via net banking and mobile banking and use the tap and pay facility at POS.

• International mobile numbers for Rupay card holders are now enabled which will allow the international customer to transact using the Rupay debit cards.

9. UPI Based Enhancements

• The limit for UPI based transactions is increased to support customers.

• Autopay Standing Instructions option is enabled which will help the customers to schedule payment instructions via UPI.

• Enabling the UDIR online Settlement customers can now settle any failure transaction within an hours time.

10. Net-Banking and Mobile Banking Enhancements

The system is made more secured and resilient following the suggestions by RBI.

• Geolocation capturing provides location-based restrictions, notifies customer and backs of unusual transactions.

• Device binding/SIM Binding to give the customer a greater security in user authentication.

• OTP has been made mandatory for all transactions.

• Enabling online dispute resolution: disputes can be raised online from the CSB Bank net banking portal or Mobile Banking portal.

• Introduced RTGS, Standing Instruction and card on-off facility in Net Banking. Customer can now transfer money via RTGS, schedule payment of bills (telephone, electricity etc) via Standing Instruction and customer now can switch on or switch off the debit card.

• Bank have now moved Net Banking to a 3-Tier Architecture. This will increase reliability, stability, and security of the system.

• Bank have integrated different government payment gateways into the Net banking.

• For the premier customer of the Bank a customised Net banking page is provided which will give an elevated customer experience.

• Transaction declines have been brought down to less than 0.5% both Net banking and Mobile banking.

11. New Core Banking System

The Bank has decided to replace the existing core banking system with a new advanced modern core banking system. Evaluation of the market leading systems is being done along with negotiations with the vendors. Bank plan to start the implementation and migration of the core banking system through the FY24.

12. OmniChannel, Net Banking and Mobile Banking revamp

With the growing need of the customer to manage the banking online, CSB bank has a strategy to implement Omnichannel – to provide a seamless experience to the customers across the geography, revamp the existing net banking and mobile banking.

13. New Data Center in Mumbai

To cater to the needs of business and manage the growth, Bank is working to open a new data centre in Mumbai and migrate the existing DR from Bangalore to Mumbai. The new data centre will be a state-of-art facility which is reliable, resilient, and scalable.

Cyber Security Framework in Banks vide notification dated 2nd June, 2016 issued by RBI.

As per the Cyber Security Frameworks in Banks, the Bank implemented the following measures:

• The Bank has also formulated Cyber Security Policy and Cyber Crisis Management Plan. The policy will highlight the risks from cyber threats and the measures to address/mitigate these risks. These policies are reviewed by the Board annually.

• The Bank has also identified the inherent risks and the controls in place to adopt appropriate cyber- security framework.

• To improve the Security posture of the Bank, implemented on premise SIEM solution using Splunk, Anti- phishing, Anti-malware and Anti-Rogue services, PIM (Privileged Identity Management) solution, Active Directory, Intrusion Detection and Prevention System, Network Access Control, Data leakage Prevention system, Deep Server Security, End Point Detection and Response, DDOS (Distributed Denial of Service) Mitigation Appliance, Refreshed internal and external firewalls at DC and DR with next generation Firewalls, Implemented Link load Balancers for Internet leased lines at DC and DR, Upgrade of Link Load Balancer for replication links at DC and DR, implemented email security with Barracuda gateway and Anti- APT solution, implemented DDI solution(DNS, DHCP, and IPAM ), API gateway security solution is implemented, Hard Disk encryption to prevent data leakage, Database Activity Monitoring, Data Classification etc.

• Conducting VAPT by an external agency every year to identify the vulnerabilities and mitigating them. Conducting Information Security Audit by an external agency every year to identify the vulnerabilities/ bugs in various IT applications and mitigating them. Conducting Source code audit of critical applications by an external agency to identify the vulnerabilities in the applications and mitigating them. Internal team is also conducting vulnerability assessment of servers and the vulnerabilities identified are mitigated by regularly patching the system.

• Red team exercises are conducted frequently by external agency to assess the security posture and incident response of the Bank. Table top exercise related to Ransom ware is conducted to assess the ransom ware preparedness of the Bank and necessary action plans are defined to mitigate the gaps.

• Bank is participating in the cyber drills conducted by IDRBT to assess the security preparedness of the Bank.

• Bank has taken cyber insurance to mitigate the residual risk.

• Bank implemented On-premise SIEM and logs are collected from all critical systems to correlate and identify the cyber-attacks. All the critical alerts generated from SOC are being reviewed and appropriate action is being initiated to close the alerts regularly.

• All Public facing applications traffic is routed through Web Application Firewall and any malicious traffic is quarantined.

• Bank is continuously educating its staff and customers on precautions to be taken while performing online transactions through SMS/E-mails/Newsletters, etc. Phishing exercises are being conducted to test the Cyber Security awareness among the employees and also guiding the employees on Dos and Donts.

• Role based cyber security training programs are conducted.

• Banks Senior executives and directors have attended cyber security programme conducted by IDRBT.

• Bank is assessing the security posture by external rating agencies like Bitsight and STORMs and agency has given excellent rating to the Bank based on their assessment.

• Bank security controls are in alignment with CIS controls

Strategy for Digital Penetration and Customer Engagement

Digital Banking products have played a crucial role in enhancing the customer experience and loyalty, which are vital for any banks long-term success in the highly competitive banking industry.

CSB Bank has been offering a secured, convenient, and cost effective 24*7 banking facility through its wide range of digital products & services; thereby boosting digital transactions, customer brand recall and stickiness.

The Bank has seen a significant increase in Digital Transactions this year compared to last year. The total digital transaction penetration in March 2023 improved to 89.59% as compared to 86.89% reported in the corresponding previous period.

Bank is observing a positive shift among customers towards active usage of Digital Banking Channels for their day-to-day banking needs, thereby contributing to an incremental reduction in operating costs.

Online Broking Services

Demat and Trading facility is being extended to the Banks customers through 3-in-1 tie up with broking firm namely M/s IIFL Securities Ltd.

Under the 3-in-1 tie up, the current/savings account is maintained with the Bank while demat and trading account facility are provided by the third-party service providers. Fund transfer from customers CA/SB accounts to the trading account is enabled through the net banking platform of the Bank through API integration whereas the fund transfers from trading account to customers bank account with CSB is executed by the brokerage, based on customer instruction. Under the referral arrangement, the leads generated by the Banks branches are passed on to the brokerage firms for on-boarding the customer.

During the year under review, Bank received a commission income of H5.91 lakh from the broking firm.

Compliance Function

As part of its ongoing efforts to address Bank supervisory issues and enhance sound practices in Banking organizations, Reserve Bank of India in tandem with the recommendations of Basel Committee on Banking Supervision, has issued guidelines on the ‘compliance function in Banking organizations. The Compliance Function envisages strict observance of all statutory provisions contained in various legislations such as Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, Prevention of Money Laundering Act etc. as well as to ensure observance of other regulatory guidelines issued from time to time; standards and codes prescribed by IBA, FEDAI, FIMMDA, BCSBI etc; and also Banks internal policies and fair practices code.

The Bank has a full-fledged Compliance Cell that envisages strict observance of all statutory provisions contained in various legislations such as the Banking Regulation Act, Reserve Bank of India Act, Foreign Exchange Management Act, PMLA Act, etc. It also ensures observance of other regulatory guidelines issued from time to time, standards and codes prescribed by IBA, BCSBI, etc., as well as the Banks internal policies. The purpose of the compliance function is to assist the Bank in managing its compliance risk which can be defined as "the risk of legal or regulatory sanctions, material financial loss, or loss to reputation a Bank may suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory organization standards, and codes of conduct applicable to its Banking activities. Strong compliance culture is a pre-requisite for an effective compliance function. As the compliance area is critically important in identifying, evaluating and addressing legal and reputational risks, Bank-wide compliance program is being designed to look at across various business lines and activities as a whole and to consider how activities in one area of the Bank may affect the legal and reputational risks of other business lines and the entire enterprise. It is very important for the Bank to demonstrate a good Compliance Culture to maintain the reputation and win the trust of customers, investors and regulators. Such culture is essential element in the safe and sound functioning of the Bank and if not followed effectively may adversely affect the Banks risk profile. The Banks Board of Directors shall be overall responsible for overseeing the effective management of the Banks compliance function and compliance risk.

Compliance Officers have been appointed at all Departments/Offices so as to effectively ensure compliance and report to the Chief Compliance Officer through the appointed Principal Officer of the Bank. The Chief Compliance Officer is the nodal point of contact between the Bank and the Regulator and in turn assists the top management in effectively managing the AML & Compliance risks faced by the Bank and will also be a participant in the quarterly informal discussions held with RBI. The compliance function shall aim to measure compliance risk by using performance indicators during compliance risk assessment. Appropriate softwares have also been put in place to monitor compliance of regulations and submission of returns effectively. The Compliance Cell also imparts annual training on compliance functions to the compliance officers. To ensure that the employees are kept abreast on the subject, necessary training on Compliance/KYC/AML/ CFT is imparted to all members in coordination with Banks Institute of Learning and Development on an ongoing basis. Members awareness is also effectively enhanced through General E-learnings, Targeted Online Trainings, Circulars, FAQs, etc., and the Staff members are also encouraged to undertake Subject awareness Quiz programmes, Certification courses in KYC/AML/ CFT by granting incentives/benefits upon passing the programmes/certifications.

Customer Service

Customer satisfaction always plays an important role in the growth of any organization, especially in a service industry like banking. In the present day competitive environment, customers have umpteen number of choices and customer retention is a challenging task.

Bank believes that satisfied customers will give word of mouth publicity, which will help in the customer acquisition efforts of employees of the Bank. Success of any business depends upon the fast and prompt service rendered to the customers. It is needless to mention that success of a service industry like banking is largely dependent on the level of customer satisfaction.

Bank ensures that customer complaints received through various sources are resolved within the shortest possible time and to the best satisfaction of the customers. Bank has always endeavoured to provide excellent service to customers and focused on keeping up with the industry trends.

The advances in technology has brought in a paradigm shift in the way banking business is conducted.

Leveraging on the technology platform, there has been a manifold increase in the penetration, productivity and efficiency of banking products and services.

Technology has also transformed the way in which Banks approach customer service. With multifarious modes of communication and 24*7 availability towards understanding customer issues and improving the customer experience, the Bank has put in place a well- defined Customer Grievances Redressal System, wherein customers can approach Bank through multiple channels for redressal of their grievances – Banks

Branches, 24*7 Call Centre or register their complaints online on Banks Complaint Management System.

Imbibing new technologies and the many ways they can be used to offer more convenient, secure and simply better service to their customers, Bank is committed to reaching out to the customers. Keeping abreast with the latest trends in Banking, Bank has launched a number of products and services that are aimed at satisfying specific needs of its clientele. Bank has always been receptive to Customer feedback and has fine-tuned the products and services to a very large extent. Customer service will continue to be the focal point in maintaining and improving the Banks role within the Banking Industry.

Bank has already constituted a sub-committee of the Board, (known as the Customer Service Committee of the Board) in line with RBI directives, besides having an Executive Level Committee on Customer Service which has representation from customer groups. The functions of the sub- committee of the Board include, inter alia, suggesting, implementing and reviewing measures for enhancing the quality of customer services and improving the level of satisfaction for all the categories of clientele at all times. To ensure constant focus, the Board of Directors periodically reviews the functioning of this sub- committee.

Customer Satisfaction Surveys is an exercise to identify gaps, initiating corrective action and improving customer experience. Feedback from the survey is a source for evaluating customers rating of services extended, ways and means for improving customer service, providing infrastructure at branches, and greater awareness on Banks products and facilities. Bank has also introduced NPS system to identify the satisfaction level of services.

In order to carry the message of importance of customer service to the employees, especially the frontline staffs, efforts are taken for sensitising staff members at branches, through proper training. Redressel of customer complaints mostly starts at branch level. The primary ownership lies with Branch Head and Cluster Head. Bank has identified senior officers as Zonal Nodal Officer and these Zonal Nodal Officers are stationed at various Zonal Offices. Zonal Nodal Officers are closely coordinating with respective branches and departments and is ensuring early resolution of customer complaints. And those even beyond the purview of the Zonal Office are escalated to Branch Service Department at Head Office. Head of Branch Service Department is the Nodal Officer for Customer Grievances Redressal. Bank also identified a senior most officer as Principal Nodal Officer under Banking Ombudsman Scheme.

RBI has introduced Internal Ombudsman Scheme, and in line with this, Bank has appointed an Internal Ombudsman. The Internal Ombudsman examines customer complaints which are in the nature of deficiency in service that are partly or wholly being rejected by the Bank. The Bank internally referring all complaints which are not fully redressed to the Internal Ombudsman, before communicating the final decision to the customer.

All efforts are taken to address any kind of customer complaints and immediate resolution for the same. Bank believes that, satisfied customer is the Brand Ambassador of the Bank and CSB Bank will always ensure and deliver Customer Service at its Best.

Disposal statistics of Customer Complaints (Other than ATM) for the FY under review is given below:

	31.03.2023	31.03.2022
a) No. of complaints pending at the beginning of the year	62	97
b) No. of complaints received during the year	9,016	5,478
c) No. of complaints redressed during the year	9,039	5,513
d) No. of complaints pending at the end of the year	39	62

The resolution of customer complaints improved to 98% in the current year compared to 97% in the previous year.

Human Resource – An Overview

HR Department of the Bank plays a pivotal role in ensuring effective utilisation of its Human Resources who are considered to be the backbone of the Organization as a whole. The HR function assumes a critical role in enhancing employee performance and leveraging their potential in order to achieve the desired business outcomes. HR Departments role is to act as a driving force, ensuring balance and synergy between the Organizations vision and the interests of the workforce.

The Bank through its HR Department strives hard to ensure efficient as well as effective management of its Human Resources. As the entire work philosophy is shifting towards a modernized and automated approach, it is the duty of HR Department to develop effective HR frameworks and programs with a 360? view on all aspects of Human Resource Management.

Bank had implemented various modules under HRMS through software vendor M/s PeopleStrong. Most of the modules are stabilised. Continuous refinements have been made from time to time on the basis of feedback from various stakeholders. All modules are being used extensively, and has resulted in reduced manual work and reduced use of papers. There is improved user experience after implementation of SuperApp. However, the Bank seeks for further betterment and hence is on the path of evaluating other solutions available in the market.

Bank has introduced the concept of HR Business Partnering (HRBP). A separate team has been framed and developed to address the requirements of Employees. The Employees of the Bank have been geographically divided and specific HRBP Officers have been assigned to each area. HRBP also serves as a mode for expressing their career growth, as well as grievances if any.

Employees handling sensitive positions have been disassociated to the extent of 100% on surprise intimation, as decided by the Bank. The Bank has not accounted such surprise disassociations as leave, and hence no leave has been deducted from the Employees leave balances.

As a long term strategy, our Bank plans on expanding its branch banking network beyond the present borders and affirm its presence Pan India. In order to achieve our goal, talents have been pooled Pan India and qualified candidates matching each job role have been hired after rigorous recruitment process. These candidates are recruited on Cost to Company (CTC) basis and their remuneration is fixed on par with the Industry standards. More recruitment is on the cards, in alignment with the organizations requirements.

HR Policy - Facts and Figures

HR Policies are formal rules and procedures that dictate as to how certain matters should be addressed in the workplace including employee rights and duties. HR Policies are tied to employment laws. To avoid non-compliance and penalties from the government, employer must adhere to HR policies.

Our HR Policies cover the entire gamut of Human Resource processes in the Bank, including and not limited to Recruitment Policy, Internal Hiring Policy, Succession Planning Policy, Background Verification Policy, Employee Referral Policy, Induction Policy, Compensation Policy, Policy on Granting of Incentives/ Benefits to Staff, Policy on Training and Development, Policy on disassociation from work desk, Travel Policy, Policy on POSH (Prohibition3 of Sexual Harassment of Women at Workplace), Transfer Policy, Promotion Policy, Performance Appraisal Policy, Welfare Aspects of HRM Policy in the Bank, Reward/ Recognition System, Management of Industrial Relations, Employee Exit Process, Code of conduct for Employees while using social media and Leave and Working Hours Policy.

The Policy on Code of Conduct while using Social Media educates Banks employees, about the dos and donts to be kept in mind while sharing a comment, post, idea or concern on social media.

The total number of employees in the Bank during the end of FY 2023 is 6841 compared to 4663 in the previous financial year end. Rigorous talent acquisition in the recent years, especially in the fields of Sales portfolios such as CASA, Gold, etc. has contributed towards the increase in total employee count.

Financial Year	No. of employees recruited in the FY		No. of branches including Service and Recovery branches
	Operations	Sales
2023	713	4,389	709

The Total Hiring for the Financial Year is as follows:

Sr. No Cadre	No. of New Recruits
1 Officers (Including RSM/ASM/RE) etc.	1,673
2 Others (BDE/BSEs, RMEs, CREs/CROs,	3,429
GLOs)
Total	5,102

Wellbeing, Social Security and Safety Aspects for Employees of Human Resource Management Staff Loans

The Bank offers various perquisites to its IBA staff which include staff loans at concessional rate of interest, viz. Housing Loan, Motor Vehicle Loan, etc. Such loans are considered to be secure and ensures prompt repayment. Concessional rate of interest is offered to employees for availing Educational Loan for their children for higher studies.

POSH for Women

Women Employees are offered protection against sexual harassment at workplace, in accordance with the provisions of POSH Act passed by the Government of India in the year 2013.

Health Insurance and Term Policies

Facilities such as medical reimbursement and cashless hospitalisation are provided to all employees through tie up with various Insurance Companies and TPAs, wherein the insurance Premium is borne by the Bank. The scheme undertaken by the Indian Banks Association under arrangement with National Insurance Co. Ltd has been implemented and maintained successfully for IBA Employees. All Officers irrespective of their grade are covered for a Sum insured of H4,00,000/- and all Award Staff are covered for a Sum Insured of H3,00,000/-.

Group Insurance scheme is facilitated for IBA Employees with a death cover of H2.00 lakh for accidental death and H1.00 lakh otherwise. One of the group schemes facilitate death cover only, whereas the scheme GSLI, facilitates survival benefit where in the Employees are reimbursed with a certain sum at the time of exit from the organization.

Officers in IBA of Grade IV and above are covered under a Group personal accident policy for a sum insured of H7.50 lakh, for which the premium amount is borne by the Bank.

A Group personal accidental Policy has been introduced during FY 2022-23, for all employees, excluding Grade IV and above. The Policy offers two times of annual CTC capped at H20.00 lakh at the event of accidental death.

CTC Employees Group Medical Insurance is administered by Reliance General Insurance . Graded Sum Insured is H3.00 lakh/H4.00 lakh covering Employee + Spouse + 4 dependent Children. Apart from the medical insurance cover extended to employees by the Bank at its cost, Bank also have introduced Voluntary Parental Medical Insurance cover for all CTC employees, with premium at a very attractive rate, borne by the employees.

Option is available for both IBA & CTC Employee to opt for top-up of the sum insured if desired, wherein the premium amount for such portion is collected from the Employees. The scheme covers the Employees and their dependents.

All CTC employees, irrespective of their age have also been extended comprehensive annual health check- up package without any additional cost. This offer has been extended to the Bank by EkinCare Health which is also the TPA (Third Party Administrator) for the Group Medical Insurance with Reliance General Insurance Co. Ltd.

All Employees of the Bank are covered under a term Policy offered by Bajaj Allianz Life Insurance Co. Ltd. with a life cover of 2 times of CTC or H10.00 lakh, whichever is higher, subject to maximum 10 times of Annual CTC.

Medical Check-up

All IBA officers of the Bank, who have attained the age of 40 years, are eligible for reimbursement of expenses incurred for medical check-up once in a financial year, even without hospitalisation. All CTC employees are facilitated with one day leave every year for medical check-up.

Medical reimbursement and cashless hospitalisation is offered to CTC employees under arrangement with Reliance General Insurance.

Bereavement Leave

The Bank has introduced Bereavement Leave for the employees, at the incident of demise of their close relatives.

Menstrual Leave

On the occasion of International Womens day, the Bank has introduced Menstrual Leave for all women employees of the Bank, which can be availed once in a month. This is over and above the regular entitlement of other category of leaves.

Education Scholarship

Children of employees (IBA) who excel in their studies are provided with scholarship. Course fee and incentives are given to employees for passing various examinations/ courses conducted by the Indian Institute of Banking & Finance (IIBF), as decided by respective businesses.

National Pension Scheme

The Bank promotes National Pension Scheme shortly known as NPS, a social security initiative by the Central Government, encouraging people to invest in a pension account at regular intervals during the course of Employment. The Employees are facilitated with an online platform to instantly open their PRAN accounts under this scheme.

Employee Identity Cards

New Employee ID cards have been introduced in lieu of ID – cum – debit cards, as part of process simplification and quick availability of the same to the new joiners.

Learning and Development

The Learning and Development function continues to be aligned to the Banks business priorities during the financial year 2022-23. The focus has been majorly on getting the processes in place which will support the measurement of the ROI from learning initiatives taken.

Among the key initiatives taken, the "Institute of Learning and Development" (ILD) which is based at Ollur, Thrissur ensured that a roadmap was created for the capacity building programs which constituted the key functions of the Bank as mandated by RBIs circular on capacity building. This roadmap ensures that personnel manning key functions in roles like Treasury, Risk, Credit and Accounting are holding mandated certifications (or those in lieu of). At the same time, it lays down guidelines for personnel who are yet to attain the same.

Keeping in mind the statutory and compliance requirements, the Learning and Development team ensured that 99% of the Banks personnel had undertaken the POSH module and had undergone an assessment on the same. This included officials across all levels including officials in Top and Senior Management

Newly-recruited employees are taken through induction programmes immediately on joining the Bank which were held via online meeting platforms. Arrangements were made so that employees could attend the training sessions from their own locations. Additionally, a number of E-Courses, along with assessment tests have been assigned to employees during the year.

The Bank also avails of training programmes offered by renowned institutions like National Institute of Bank Management, Pune; Indian Institute of Banking & Finance, Institute for Development and Research in Banking Technology, Hyderabad;

Corporate Goals

CSB Bank is continuously engaged in improving the focus of its employees on linking their actions with the corporate goals. Our L&D Departments mission is to develop the Bank into a Focused Learning Organisation. CSBILD has achieved its highest coverage of employees during the year, through online virtual classes and e-learning methodology. Bank is constantly on the look- out for innovation and technological improvements.

The L&D Department has retained its ISO 9001:2015 certification obtained during the previous year. Meanwhile, the Bank has already begun efforts to recruit apprentices under the Government of Indias Apprenticeship Act.

The L&D Department co-creates the annual training calendar through discussions with the different Business Verticals and other departments agreeing on the training objectives and related deltas. In this manner, L&D acts as a partner to the Business Verticals in facilitating achievement of their goals.

A certification programme on compliance was held over a 8 day window, with 3755 employees clearing the assessment.

Branch Heads, Senior Relationship Managers/ Relationship Managers/Customer Relationship Officers, Branch Operations Managers, Business Development Executives, Gold Loan Officers, and other role holders were covered by training during the year.

Additionally, in all, 200 E-Lessons were uploaded and assigned to 6340 employees, and 202 online programs were conducted with 20,802 participants. 13 physical programs with 425 participants, and 53 external programs with 150 participants were conducted, ensuring a staff coverage of over 100%. From a Year on Year perspective, this resulted in a growth of 164% employee participation

HR Verticalisation

The organisation has embarked on the path to improve customer experience, without compromising on quality and efficiency of existing processes. To ensure that this happens, HR jointly with all senior management is transforming existing businesses into vertical structures, which is contemporary to current outlook in the industry and is backed by technology. This is being done in order to create higher efficiency and reduced operational/ credit risk, improvement on customer service as well as responsiveness and indeed trying to achieve and create better benchmarks on an ongoing basis.

In the structure being introduced, monitoring and review is also being done with the help of Performance Score Cards for assessment at individual, Unit, Business/ Functional level. Clear and concise Job descriptions are available for 68% unique job roles; 79% of the Bank employees are covered under scorecard based performance evaluation.

Education/Communication with regards to creating clarity on expectations is being delivered through regular/objective feedback to employees/units/ functions and feedback from them during appraisals which enables the organisation to change what is needed for aiding faster growth. PMS workshops were conducted for supervisors to enable them to conduct fair and objective appraisals. Performance Improvement Program (PIP) process along with quarterly and mid-year reviews were carried out to strengthen the Banks performance management processes.

HR is also ensuring that all its efforts are directed towards attaining the said objectives, creating a winning solution for all stake holders.

Industrial Relations

The Bank is having 6,841 employees on its fold as on March 31, 2023. Out of 6,841 employees, 1,124 employees both officers and Award Staff are governed under IBA pay structure. Whereas 5,706 employees are governed under Cost to Company basis. Bank has been deploying retired officers from Nationalised Banks in identified areas to improve the necessary skill set and expertise in the Bank. The number of employees deployed under contract basis in the Bank is 11. The average age of the employees of the Bank is 33.10 years.

		Total No. of Employees
Financial Year	IBA	CTC	Contract Basis	Total	Average Age (in Years)
2021-22	1,349	3,283	31	4,663	33.94
2022-23	1,124	5,706	11	6,841	33.10

The officers in Scale I to III under IBA pay structure which counts to 622 are affiliated to Officers Associations. There are two Officers Associations functioning in the Bank. There are three trade unions representing the Award Staff members (Clerks, Sub Staff and Part- time Sweepers) of the Bank. The Bank thrives to maintain a cordial and harmonious industrial relations with the Unions and Association by engaging with them.

	By order of the Board
	Sd/-
	Bhama Krishnamurthy
Place: Thrissur	Chairperson
Date: June 22,2023	(DIN:02196839)