ING Vysya Bank Ltd Merged Directors Report

The Board of Directors have pleasure in presenting the Eighty Third Annual Report of the Bank together with the Audited Statements of Accounts for the year ended 31 March 2014, Auditors’ Report thereon and other documents and statements as are required.

Financial and Business Performance

For the year ended 31 March 2014, the Bank posted a net profit of Rs. 657.85 Crore compared to Rs. 612.96 Crore for 2012-13. The pre-tax profit improved to Rs. 977.76 Crore compared to Rs. 901.44 Crore during the Previous year. The Net Interest Income for the year 2013-14 increased to Rs. 1,753.15 Crore registering an increase of 13.94 %.

The aggregate business of the Bank reached Rs. 77,045.62 Crore as at 31 March 2014 compared to Rs. 73,106.02 Crore as at 31 March 2013. The Net Advances increased to Rs. 35,828.85 Crore for the year ended 31 March 2014 from Rs. 31,772.03 Crore at the end of the Previous year recording a growth of 12.77%. The Total Deposits of the Bank stood at Rs. 41,216.77 Crore as at 31 March 2014.

As against a regulatory target of 40% of Adjusted Net Bank Credit for Priroity sector lending, the Bank achieved 40.70% as of 31 March 2014, having achieved 38.16% as of 31 March 2013. Export advances increased to Rs. 2,257.50 Crores from Rs. 1,930.90 Crores at the end of the Previous year. The export credit as a percentage of adjusted net bank credit stood at 7.11% (Previous year 6.72%) as of 31 March 2014. The outstanding credit to Scheduled Castes/Scheduled Tribe borrowers stood at Rs. 209.26 crore and the percentage of recovery to demand as of 31 March 2014 was 52.60 % (Previous year 30.45 %) of the amounts fallen due. The Net NPA Ratio as of 31 March 2014 is 0.28% as against 0.03 % as of 31 March 2013.

Paid up-capital and Capital Adequacy Ratio

The paid up capital of the Bank stood at Rs. 188.64 Crore as at 31 March 2014 as compared to Rs. 154.85 Crore as at 31 March 2013.

The Bank has adopted the New Capital Adequacy Framework (Basel III) from 1 April 2013. Under this framework, the Capital Adequacy Ratio (CAR) stood at 16.76% as at 31 March 2014 as against the Reserve Bank of India’s (RBI) stipulated minimum of 9%. Of this, Tier I Capital was 14.63% and Tier II Capital was 2.13% as compared to 10.49% and 2.75 % respectively as at 31 March 2013. CAR for Previous year are as computed under Basel II guidelines.

An overview on financials and business performance is presented in the Management Discussion and Analysis Report, forming part of this Annual Report.

Appropriation of Profits and Dividend

In compliance with the requirement under the Banking Regulation Act, 1949 and the guidelines issued thereunder by the RBI, the Directors propose to transfer Rs. 164.46 Crore (Previous year Rs. 153.24 Crore) to Statutory Reserve, Rs. 0.08 Crore (Previous year Rs. 1.63 Crore) to Capital Reserve and Rs. 0. 36 Crore (Previous year Rs. 0.22 Crore transferred from Investment Reserve) to Investment Reserve, for the year ended 31 March 2014.

Taking into account the regulatory restrictions, the Board of Directors recommend the payment of dividend at 60% on the face value of fully paid-up shares against 55% of the previous year. The outflow on account of the proposed dividend, including the dividend tax, would be Rs. 132.42 Crore.

The dividend recommended, on approval would be paid to all those shareholders whose names appear as Beneficial Owners as at the end of 12 June 2014 as per the list to be furnished by Depositories (viz., NSDL and CDSL) in respect of the shares held in electronic form and those shareholders whose names appear in the Register of Members of the Bank as members after giving effect to all valid transfers of shares in physical form which will be lodged with the Bank on or before 12 June 2014.

Consolidated Financial Statements

As required under AS 21 issued by the Institute of Chartered Accountants of India (ICAI), the Bank’s consolidated financial statements are included in this Annual Report incorporating the accounts of its wholly owned subsidiary company viz., ING Vysya Financial Services Limited in line with the basis of consolidation as explained in the Notes to the said consolidated statements.

Statutory Disclosures

The requisite particulars to be disclosed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, in respect of the options granted etc., under the existing and new schemes are furnished in Annexure-I to this report.

The particulars of employees required under Section 217(2A) of the Companies Act, 1956 and the rules made thereunder, are given in the annexure appended hereto (Annexure- II) forming part of this report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to Corporate Secretary at the Registered Office of the Bank.

The provisions of Section 217(1)(e) of the Companies Act, 1956 regarding to conservation of energy and technology absorption are not applicable to the Bank. The Bank has, however, used information technology extensively in its operations.

Subsidiaries

The main object of ING Vysya Financial Services Limited (IVFSL), a wholly owned subsidiary of the Bank, is to carry on business of non-fund / fee based activities of marketing and distribution of various financial products / services of the Bank, apart from recovery of the old lease rentals due to the company.

Subsequent to transfer of the Wealth Management Services of IVFSL to the Bank in April 2007, IVFSL continues to provide services to the Bank, as may be required from time to time on a non-exclusive contract basis.

IVFSL has earned a net profit of Rs. 0.40 Crore for the year 2013-14.

As required under Section 212 of the Companies Act, 1956, the Balance Sheet, Directors’ Report and other documents pertaining to IVFSL, along with a statement of interest of the Bank in the subsidiary, are attached to the financial statements of the Bank.

In compliance with Secretarial Standard on Board’s Report-SS-10, the Board of Directors hereby affirm that it has reviewed the affairs of the subsidiary company.

Directors

Since the last Annual General Meeting, three Directors of the Bank have resigned from the Board. Mr. Lars Kramer resigned from the office of Director effective 28 March 2014 in view of his enhanced responsibilities as CFO of ING Commercial Bank. Mr. Peter Staal resigned from the office of Director effective 31 March 2014 due to greater commitments in Europe. Mr. Richard Cox resigned from the office of Director effective 31 March 2014 after holding the office of Director of our Bank for a tenure of nearly eight continuous years.

Retirement of Directors by rotation

Mr. Mark Newman, will retire by rotation in terms of Section 152 of the Companies Act, 2013 at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.

A brief resume of the Director is furnished in the Annexure to the Notice convening the ensuing Annual General Meeting.

Registrars and Share Transfer (R&T) Agents

Karvy Computershare Private Limited, Hyderabad continues to be the R & T Agent for the shares of the Bank.

Auditors

The Statutory Auditors viz. M/s. BSR & Co. LLP (erstwhile M/s BSR & Co.), Chartered Accountants, Mumbai, who were re-appointed at the 82^nd Annual General Meeting held on 25 June 2013 are retiring at the ensuing AGM and being eligible for re-appointment under the guidelines of Reserve Bank of India (RBI), offer themselves for re-appointment for the fourth consecutive year.

The Shareholders are requested to appoint the above auditors and authorize the Board of Directors to determine their remuneration. The re-appointment of Auditors is subject to the approval of the Reserve Bank of India.

Other Reports

As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a detailed report on Corporate Governance is included in this Annual Report.

Directors’ Responsibility Statement

As required by Section 217(2AA) of the Companies Act, 1956, the Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) that they had selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for the year under review;

(iii) that they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

(iv) that they had prepared the accounts for the financial year ended 31 March 2014 on a going concern basis.

Board Confirmation

The Board receives quarterly compliance certificate from the CEO of the bank certifying that the bank has devised proper systems to ensure compliance on an ongoing basis of all directions/instructions given by Reserve Bank of India, all governing laws and applicable statues and internal policy guidelines. On the basis of CEO certification and pursuant to Secretarial Standard on Board’s Report- SS-10, the Board confirms the same for the financial year ended 31 March 2014.

Acknowledgements

The Board of Directors place on record their gratitude for the guidance and cooperation received from the Reserve Bank of India and other regulatory bodies. The Directors also place on record their appreciation of the encouragement and patronage received from valued customers, shareholders and other stakeholders like financial institutions, bondholders etc., and look forward to their continued support. The Directors also take this opportunity to express their appreciation for the good work and efforts put in by the employees of the Bank.

Finally, the Directors acknowledge the Members for their trust and support.

	For and on behalf of the Board
Place : Bangalore	Arun Thiagarajan
Date : 29 April 2014	Chairman

ANNEXURE TO DIRECTORS’ REPORT

Statutory Disclosures as of 31 March 2014 regarding ESOS under Clause 12 of the Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999

	ESOS Scheme 2005
		Tranche 2	ESOS Scheme	ESOS Scheme	ESOS Scheme
Particulars	Tranche 1	(Loyalty	2007	2010	2013
		Options)
Options Granted	465,212	525,285	8,599,476	12,650,475	942,700
Date of AGM Resolution	22 September 2005	22 September 2005	11 May 2007	1 July 2010	25 June 2013
Options Vested	314,884	508,100	7,155,776	7,133,348	-
Options Exercised	301,068	407,832	6,198,575	4,156,508	-
Total number of Shares arising as a result of exercise of Option	301,068	407,832	6,198,575	4,156,508	-
Options Lapsed	161,694	50,663	899,050	1,535,795	53,550
Variation of terms of options	NIL	NIL	NIL	NIL	NIL
Money realised by exercise of options (in Rs.)	36,966,887.00	75,375,510.24	1,476,011,764	1,435,929,237	-
Total number of options in force	2,450	66,790	1,501,851	6,958,172	889,150

Pricing Formula for ESOS 2005	Exercise price is equivalent to 75% of the average price of the shares during the past six months in the Stock Exchange where the Stocks are traded in highest number.
Pricing Formula for ESOS 2007, ESOS 2010 & ESOS 2013	Exercise price is latest available closing price, prior to the date of meeting of the board of directors in which options are granted in the Stock Exchange where the Shares are traded in the highest number.

Employee wise details of grant to Senior Managerial Personnel

Name	2013-14	2012-13
Mr. B. Ashok Rao	35,000	40,000
Mr. Janak Desai (Resigned from services of the Bank on 6 February 2014)	65,000	55,000
Ms. Susan Poot	-	-
Mr. Jayant Mehrotra	52,000	65,000
Mr. Brett Morgan	-	-
Ms. Meenakshi A	36,000	45,000
Mr. Prasad C V G (Resigned from the services of the Bank on 30 September 2013)	-	25,000
Mr. Prasad J M	32,000	45,000
Mr. Mahesh Dayani	80,000	80,000
Mr. Samir Bimal (Resigned from services of the Bank in 25 September 2012)	-	40,000
Mr. Shailendra Bhandari	110,000	115,000
Mr. Uday Sareen (Transferred to the role of ING DiBa Germany on 03 December 2012)	55,000	80,000
Mr. Appa Rao M V S	6,500	12,000
Mr. Aniruddha Paul (Appointed as Chief Information Officer on 01 July 2013)	32,500	30,000
Any other employee who received a grant in any one year of the options amounting to 5% or more of the options granted during the year.	NIL	NIL
Identified employees who were granted options during any one year, equal to or exceeding 1% of the issued capital ( exclude outstanding warrants and conversations) of the company at the time of grant.	NIL	NIL

The details on Employees compensation cost is given under ‘Employee Stock Option Scheme’ in the Notes on Accounts (Schedule 18) of the Balance sheet (Page no. 56).