Karnataka Bank Ltd Directors Report.

Your Directors have the pleasure in presenting the 95 Annual Report of the Bank together with the Audited Statement of Accounts for the year ended 31 March 2019 and the Auditors Report.


Performance highlights for the reporting financial year are as under:

(Rs.. in crore)
Particulars As on / for the year ended 31.03.2019 As on / for the year ended 31.03.2018
Deposits 68452.12 62871.29
Advances 54828.20 47251.75
Investments 16184.99 15444.45
Gross Income 6907.92 6378.09
Operating Profit 1449.81 1473.16
Net Profit 477.24 325.61

The total business turnover of the Bank stood at Rs.123280.32 crore as on 31 March 2019, registering a growth of 11.95 percent as against the turnover of Rs.110123.04 crore as on 31 March 2018. The total assets of the Bank increased from Rs.70373.68 crore to Rs.79045.76 crore recording a growth of 12.32 percent for the year 2018-19. The market share of the Bank in business turnover has increased to 0.56 percent as compared to 0.54 percent as on 31 March 2018.

The total deposits of the Bank grew to Rs.68452.12 crore as on 31 March 2019 from Rs.62871.29 crore as on 31 March 2018, registering a growth of 8.88 percent.

During the year, low cost deposits of the Bank, viz., Savings and Current Account Deposits have shown growth of 9.17 percent and constituted 28.06 percent of the total deposits of the Bank as on 31 March, 2019.

The total advances grew to Rs.54828.20 crore as on 31 March 2019 from Rs.47251.75 crore as on 31 March 2018 an increase of 16.03 percent. The Credit Deposit Ratio increased from 75.16 percent to 80.10 percent re ecting robust credit growth. The priority sector advances increased from Rs.20594.27 crore to Rs.21878.22 crore forming 48.05 percent of Adjusted Net Bank Credit (ANBC) and agricultural advances increased from Rs.6877.51 crore to Rs.7082.90 crore which, together with eligible deposit under Rural Infrastructure Development Fund (RIDF), constituted 15.73 percent of ANBC. Lending under various socio-economic schemes has shown satisfactory progress.

The total investments increased from Rs.15444.45 crore as on 31 March 2018 to Rs.16184.99 crore as on 31 March 2019. The ID ratio stood at 23.64 percent as on 31 March, 2019 as against 24.57 percent as on 31 March, 2018.


The gross income of the Bank for the year ended 31 March 2019 stood at Rs.6907.92 crore as against Rs. 6378.09 crore in the last financial year showing a growth of 8.31 percent. The total expenditure (excluding provisions and contingencies) stood at Rs.5458.11 crore for the year ended 31 March 2019 as against Rs.4904.93 Crore for the year ended 31 March 2018. The net interest income was Rs.1905.12 crore, showing a growth of 2.56 percent over the previous year.


Your Bank earned an operating profit of Rs.1449.81 crore for the year 2018-19 as against Rs.1473.16 crore for the previous year. The net profit of the Bank increased to an all time high of Rs.477.24 crore during the year 2018-19 from Rs.325.61 crore during the previous year, showing a robust growth of 46.57 percent.


The net profit of Rs.477.24 crore which along with a sum of Rs.102.23 crore brought forward from the previous year, aggregating to Rs.579.47 crore, is appropriated as under:

Appropriation Rs. in crore
Transfer to Statutory Reserve 180.00
Transfer to Capital Reserve 0.00
Transfer to Revenue and Special Reserves 109.70
Transfer to Investment Fluctuation Reserve 67.91
Dividend of 2018 paid during the year 2019 84.78
Tax on dividend paid as above 17.43
Balance carried over to Balance Sheet (including proposed Dividend and tax) 119.65
Total 579.47


Having regard to the overall performance of the Bank, the Board of Directors recommends a dividend of Rs.3.50 per share i.e., 35 percent on the paid up capital (previous year 30 percent) for the reporting year. The dividend payout ratio for the year works out to 20.73 percent as against last years 26.04 percent.

In accordance with the revised Accounting Standard (AS)-4 ‘Contingencies and Events occurring after the Balance Sheet date noti ed by MCA on 30 March 2016, the proposed dividend including dividend distribution tax amounting to Rs.119.24 crore has not been shown as an appropriation from the Profit for the year ended 31 March 2019.


The earnings per share (basic) and the book value per share as on 31 March 2019 stood at Rs.16.89 and Rs. 204.71 respectively. This was Rs.11.52 and Rs.191.44 respectively during last year.


The capital funds of the Bank increased from Rs.5414.25 crore to Rs.6306.95 crore, registering a growth of 16.49 percent. The Capital Adequacy Ratio (CAR) stood at 13.17 percent as on 31 March 2019, as per BASEL III norms (Previous year 12.04 percent). The Bank has been consistently maintaining the Ratio well above the minimum CAR of 10.875 percent stipulated by the Reserve Bank of India. The market capitalization as on 31 March 2019 was Rs.3777.05 crore with a high of Rs.3777.05 crore as on 29 March 2019 and a low of Rs.2657.92 crore as on 23 October 2018.


Your Bank has been focusing on containing the non-performing assets through a better credit monitoring as well as intensi ed the orts to recover the impaired assets. The Banks Gross NPAs as on 31 March 2019 was at Rs.2456.38 crore (4.41 percent) as on 31 March 2019 as against Rs.2376.07 crore (4.92 percent) as on 31 March 2018. The net NPAs stood at Rs.1616.71 crore (2.95 per cent) as against Rs.1400.51 crore (2.96 per cent) as on 31 March 2018. The Provision Coverage Ratio (PCR) improved to 58.45 percent as on 31 March 2019 from 54.56 percent as on 31 March 2018.


Pursuant to the Guidelines issued by RBI on Accounting Standard 17 (Segment Reporting), the Bank has identified four business segments viz., Treasury, Corporate / Wholesale Banking, Retail Banking and Other Banking Operations for the year ended 31 March 2019 as under:

Treasury Operations: Bank has earned total revenue of Rs.1307.60 crore from Treasury operations with a contribution of Rs.293.06 crore to profit before tax and un-allocable expenditure.

Corporate / Wholesale Banking: The revenue earned by the Bank during the year under report from this Segment was Rs.2840.48 crore with a contribution of Rs.28.36 crore to profit before tax and un-allocable expenditure.

Retail Banking: This Segment has earned revenue of Rs.2356.29 crore with a contribution of Rs. 235.84 crore to profit before tax and un-allocable expenditure.

Other Banking Operations: This segment has generated revenues of Rs.386.34 crore with a contribution of Rs.87.48 crore to profit before tax and un-allocable expenditure.


During the year under report, your Bank achieved a turnover of Rs.12560.49 crore in foreign exchange business as against Rs.14932.52 crore in the previous year. The outstanding advances to export sector stood at Rs.1574.28 crore as on 31 March 2019.


As per the roadmap given by Reserve Bank of India (RBI) vide circular dated 11 February, 2017, transition to "Indian Accounting Standards (Ind AS)" in banks were to commence from the accounting period beginning 1 April, 2018 onwards. However, the regulator had deferred the implementation of Ind AS for Scheduled Commercial Banks by one year i.e., from the accounting period beginning 1 April, 2019. Now the RBI vide its circular No.DBR.BP.BC.No.29/21.07.001/2018-19 dated 22 March, 2019 has deferred implementation of Ind AS till further notice.

However, your Bank is prepared to implement Ind AS and towards this direction, Bank has conducted diagnostic study on various disparities between current Accounting framework and Ind AS and ascertained various areas having an impact on measurement, accounting and disclosure of financial assets & liabilities and provisioning requirements. Besides, changes required to carried out in CBS and IT systems of the Bank, to accommodate Ind AS are also being looked into and as stipulated by RBI, Bank has been submitting the Proforma Ind AS Financial statements from time to time.


With a view to maintain a healthy capital position on an ongoing basis, Bank raised an amount of Rs.720.00 crore by issuing subordinated debt instruments (i.e. Unsecured Non-Convertible Subordinated (Lower Tier-2) BASEL III Debt Instruments) as part of Tier 2 Capital under two series i.e. Series V (Rs.400 crore) in the month of November 2018 and Series VI (Rs.320 crore) in the month of February 2019 on private placement basis. Further, below table provides debt instruments outstanding as on 31 March 2019:

Series Date of Issue Face Value per Bond Number of Bonds Amount Tenure from date of issue Coupon Rate (% p.a.) Credit Rating Listing ISIN of the Bonds
(Rs. crore)
IV 17.11.2012 10,00,000 2,500 250.00 11 INE614B08021
V 16.11.2018 1,00,000 40,000 400.00 120 months 12 ICRA A & CARE A Listed on NSE- INE614B08039
VI 18.02.2019 1,00,000 32,000 320.00 12 Segment INE614B08047


1. Your Bank has paid interest on these debt instruments on a timely basis since the issue of respective debt instruments.

2. During the reporting year, bonds issued under Series III (Rs.200 crore) were redeemed upon maturity on 27th September, 2018 along with payment of interest.

3. Series I (Rs.120.50 crore) and Series II (Rs.29.50 crore) were since redeemed during FY2017-18.

4. CREDIT RATING: ICRA Limited ("ICRA") and Credit Analysis and Research Limited, ("CARE") have retained the rating at "ICRA A" and "CARE A" respectively. The instruments with these rating are considered to have adequate/high degree of safety regarding timely servicing of financial obligations. Such instruments carry very low credit risk.

Further, during the reporting year, Bank had issued Certi cate of Deposits (CDs) in di erent tranches to meet the short term liquidity mismatch and the amount outstanding under CDs as on 31 March 2019 stood at Rs.811.57 crore. The ICRA has rated these CDs assigned A+. The instruments with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such instruments carry lowest credit risk. The modi er "+" reflect the comparative standing within the category.


Your Bank has adopted a Policy on distribution of Dividend to the shareholders pursuant to the Regulation 43A of the SEBI (LODR) Regulations, 2015. Gist of the Dividend Distribution Policy is as under:

Being a Banking entity, Dividend Distribution Policy is guided by the RBI Circular DBOD.No.BP.BC.8821.02.67/2004-05 dated 5 May, 2005 with regard to eligibility criteria for distribution of dividend.

Factors considered for recommendation of dividend include both internal factors such as financial performance, dividend payout trends, tax implications, corporate actions and external factors such as shareholders expectations, macro environment etc.

Factors considered for determining the quantum of dividend include financial performance, capital fund requirements to support future business growth, having regard to the dividend payout ratio prescribed under the aforesaid RBI Guidelines etc.

The Dividend Distribution Policy of the Bank is available in our Banks website at https:// karnatakabank.com/investor-portal/corporate-governance.


Your Bank being a listed entity, has made an attempt to address the concept introduced under the framework of International Integrated Reporting Council and detailed Integrated Report has been hosted on the Banks website under Investor Portal section and the same can be accessed here: www.karnatakabank.com> Investor Portal>CorporateGovernance.


Global Economy

The global economy showed a downward trend in the FY 2018-19 coupled with uncertainty relating to Brexit, geo-political concerns, on-going trade tensions etc. In ation remained below target in several economies. The accommodative policy stance adopted by the scal and monetary authorities in several countries is expected to provide a cushion to counter the slowdown.

Financial markets have been driven by uncertainties surrounding US-China trade negotiations and Brexit. In the US, the equity market has experienced some selling pressures on account of escalation of trade tensions with Asian EME. Equity markets in most EMEs lost enthusiasm due to the declining risk appetite on rising geo-political uncertainties and weakening global trade prospects. In many EMEs, bond yields have been falling with central banks adopting accommodative monetary policy to boost economic growth.

Domestic Economy

On the domestic front, the National Statistical Office (NSO) released (i) estimates of gross domestic product (GDP) for Q4 2018-19 and (ii) provisional estimates of national income for 2018-19 wherein, the GDP growth for 2018-19 has been estimated at 6.8 per cent year-on-year (y-o-y), down by 20 basis points from the second advance estimates released on February 28, pulled down by a downward revision in private final consumption expenditure and moderation in exports. Quarterly data show that domestic economic activity decelerated sharply to 5.8 per cent in Q4:2018-19 from 6.6 per cent in Q3 and 8.1 per cent in Q4:2017-18. Gross fixed capital formation growth also declined to 3.6 per cent, after double digits position in the past few quarters. Private consumption growth also moderated. The drag on aggregate demand from net exports increased in Q4 due to a sharper deceleration in exports relative to imports.

On the supply front, the agriculture and allied activities contracted marginally in Q4 of 2018-19 due to a decline in rabi production. According to the third advance estimates, foodgrains production for 2018-19 was lower by 0.6 per cent compared with the previous year mainly due to lower production of rice, pulses and coarse cereals. However, there has been a catch-up in foodgrains production relative to earlier estimates. Growth in manufacturing activity weakened to 3.1 per cent from 6.4 percent over the past few quarters. Construction activity also showed a slowing trend. Service sector growth, however, accelerated, supported by financial, real estate and professional services, public administration, defence and other services.

Headline CPI in ation has declined sharply since mid-2018, driven by the sustained fall in food in ation. CPI in ation excluding food and fuel has also moderated somewhat, though its level remains elevated. Overall, CPI in ation fell from 3.7 per cent in August-September 2018 to 2.6 per cent in February 2019 after touching a low of 2.0 percent in January 2019. Further, delayed monsoon has hit several areas resulting in water shortage thus leading to slower growth in cultivation. However, the overall impact of the monsoon can be assessed only after Q3 2019-20.


The financial year 2018-19 also posed several challenges for the Indian banks with slow deposit growth and slow credit growth, continued stress on asset quality, high provisioning costs etc. However, access to banking system has improved over the years due to persistent government the orts to promote banking-technology and to promote expansion in unbanked and under-banked areas. In the banking sector as such, credit expanded by 13.24 per cent while deposits grew by 10.03 percent in the financial year 2018-19. Banking sector continued to face challenges in areas of NPA, provisioning, decelerating growth of credit to industry, systemic issues in non-banking finance companies (NBFCs) etc. Coordinated the orts of Central Government, Regulator and Banks have been continued to overcome the problems relating to distressed assets. As per the agenda set earlier, the Government has initiated the process of consolidation of nationalized banks.

Besides, the Government of India has made an attempt to streamline the process of resolution of NPA and stressed assets by amending the Insolvency and Bankruptcy Code (IBC), which is emerging as a good tool in the hands of lenders. However, the resolution process has been evidencing regulatory interventions since the corporates are approaching Appellate Tribunal seeking extension of time for resolution. Through the recent circular on Resolution of Stressed Assets- Revised Framework dated 7 June, 2019, Reserve Bank of

India has streamlined the recovery process which would augur well to the Banks.


With the stable government at the centre, the policy framework and the implementation of prioritized agendas defined earlier to boost the economic activity are expected to witness pace. It may result in enhanced spending on infrastructure, speedy implementation of projects, some more initiatives in consolidation of nationalized Banks and continuation of reforms etc. The Governments thrust on infrastructure development may open-up for further in flow of capital funds and improved employment opportunities. These developments are expected to spur private investment in these sectors.

Also, the advancements in technology have brought the mobile and internet banking services to the fore front. The banking sector is giving greater emphasis on providing improved services to their clients with the help of digital channels and also upgrading their technology infrastructure, in order to enhance the customers overall experience as well as give banks a competitive edge. Besides, lending through digital platforms is ever increasing and your Bank treats it as an opportunity for co-operation and collaboration with n-tech companies.


In the normal course of business, banks are exposed to various risks, namely, Credit Risk, Market Risk and Operational Risk, besides other residual risks such as Liquidity Risk, Interest Rate Risk, Concentration Risk, Strategic Risk, Reputation Risk etc. With a view to the ciently manage such risks, your Bank has put in place various risk management systems and practices. In line with the guidelines issued by the Reserve Bank of India from time to time, your Bank continues to strengthen various risk management systems that include policies, tools, techniques, systems and other monitoring and forewarning mechanisms.

Your Bank aims at enhancing and maximizing the shareholder value by achieving appropriate trade-o between risks and returns. Your Banks risk management objectives broadly cover proper identi cation, assessment, measurement, monitoring, controlling, mitigation and reporting of the risks across various business segments of the Bank. The risk management strategy adopted by your Bank is based on a clear understanding of the risks and level of risk appetite, which is dependent on the willingness of your Bank to take risks in the normal course of business. A Board level committee, viz., Risk & Capital Management Committee (RCMC) periodically reviews the risk pro le, evaluates the overall risk faced by the Bank and develops policies and strategies for its the ective management.

Various senior management committees such as Credit Policy Committee (CPC), Asset-Liability Management Committee (ALCO), Operational Risk Management Committee (ORMC) etc., operate within the broad policy framework of the Bank to ensure and enhance the risk control and governance framework within the Bank.

The Risk Management Department at Head Office oversees the overall implementation of various risk management initiatives across the Bank.

In line with the guidelines issued by RBI, your Bank has taken the necessary steps to move over to Basel II Advanced Approaches as per the Road Map approved by the Banks Board in this regard. As a part of the Basel III, Pillar III-Market Disclosure requirement, your Bank has made a detailed disclosure, which is appended to this report as Annexure II. The Bank conforms to the Basel III guidelines from 1 April, 2013.

In compliance with Basel guidelines, the Bank has put in place a policy document for Internal Capital Adequacy Assessment Process (ICAAP) to evaluate its capital adequacy relative to its risks. Stress testing framework for various stress scenarios is also put in place for a better understanding of the likely impact of adverse market movements/events on the capital and earnings. The results of the ICAAP and Stress testing are reviewed periodically to assess the capital requirement for the projected business growth, keeping in view the risk appetite and risk pro le of the Bank. Board level Risk & Capital Management Committee (RCMC) reviews the risk appetite, risk pro le, business projections as well as capital assessments of your Bank at periodical intervals.

To evaluate and review the performance of various business units/products/customers etc., your Bank has introduced Fund Transfer Pricing (FTP) and Customer Profitability Management Systems (CPMS) for a better management of risk and return. FTP & CPMS enable the Bank to assess the profitability at various levels like branch, product, customers, accounts, regions etc. The system enables the Bank to perform various profitability related analysis and helps the Bank to make more business-focused decisions to increase the long-term profitability.

For continuous monitoring of customer induced transactions under various Alternate Delivery Channels (ADC) and Core Banking Solution (CBS), your Bank has put in place a Enterprise Level Fraud Risk Management System (ELFRMS) from September 2016. This is an automated transaction monitoring system which, based on a range of scenarios, triggers various alerts for carrying out analysis from various risks and fraud angles. The system acts as a check on potential fraud incidents as a preventive measure and is intended to identify the potential fraudulent transactions covering various channels like internet banking, mobile banking, debit card, POS, CBS etc. on real time basis, based on prede ned probable fraud scenarios.

Cyber risk is a concern for all businesses including banking business. Your Bank has taken adequate steps to address cyber risks by implementing ‘Cyber Security Framework as per RBI guidelines and has deployed various Information Security systems such as Application Firewall, Web Security Gateway, End Point Security systems, Honey Pot systems and Privilege Identity Management (PIM) to protect its information systems. Bank has also put in place ‘Security Operations Center (SOC), wherein logs are monitored through ‘Security Information Event Management (SIEM) tools. All security Device Monitoring & Management is carried out on 24*7*365 basis to identify and prevent any device malfunctioning/ malicious activities.

A Board level Committee (IT Strategy & Governance Committee) gives directions, approves IT Security related policies apart from overseeing preparedness in respect of ‘Information Security of your Bank.

Senior Management of your Bank including majority of the Board members have undergone Cyber Security Training at IDRBT, Hyderabad. Further, your Bank has been complying with the RBI/other regulatory instructions relating to cyber security threat advisories. A Senior Management Committee (Information Security Steering Committee) regularly reviews the information security arrangements and implementation of Information Security programs in the Bank.

Your Bank has nominated a Chief Information Security Officer (CISO), who is responsible for articulating and enforcing the policies that Bank uses to protect the information assets apart from coordinating security related issues in implementation of new systems under Information Technology in the Bank.

During the reporting year, Bank has participated in Cyber Security Drills conducted by IDRBT and RBI-CSITE with a view to strengthen its internal cyber resilience system. Further, your Bank has conducted internal table-top exercise to ensure preparedness and the ectiveness of incident response system.


Your Bank being a time-tested entity, in its endeavour to continue to be a "Relevant and Signi cant Bank", has initiated transformation project/journey by name - ‘KBL VIKAAS to meet the growth aspirations by focusing on human resources and driven by technology. The transformation exercise mainly focuses on (a) growth with improved sales productivity, the ciency and designing new products (b) cost optimization with process automation and digitization (c) profitability boosters with pricing optimization and focus on fee income and (d) shareholder value enhancement through investor engagement, communication and corporate branding. Human resources, digital and IT transformation are identified as the main enablers for transformation by focusing on the entire ecosystem of the Bank. In this regard Bank has partnered with the Boston Consulting Group (India) Pvt.Ltd, (BCG), a leading global management consulting firm and worlds leading advisor on business strategy. Project KBL VIKAAS is a long term plan and expected to play a major role in realizing aspirational goals culminating in emergence of new Karnataka Bank coinciding with the celebration of Centenary year of the Bank during the year 2024.

In this regard, Bank has formed a Steering Committee, an internal core team to implement and monitor the progress of the transformation project. Steering Committee meetings (SCM) are held regularly and progress of the project is also reviewed by the Board periodically.

Under this project the bank has already implemented several new initiatives. Some of them are:

a. Credit process transformation i.e., ne-tuned the credit delivery system under Retail Loans and MSME loans by establishing Regional Loan Processing Centers (RLPC) at all the Regional Offices of the Bank with separate vertical for Sales and Sanction.

b. KBL FORCE, a Lead Management System (LMS) which is designed for providing end to end management of leads.

c. Onboarded alternate channels to source the leads for business generation like Direct Selling Agent (DSA), Business Sourcing Associate (BSA), Marketing Referral Agent (MRA) and also leads sourced through analytics. Leads are also sourced by collaboration with Fintech Companies.

d. On boarding of sales associates for feet on street services.

e. Sales promotion activities daily Branch huddle, events, campaigns etc.

f. Generating and providing daily dashboards on the business/business generated to the concerned Executives/sta members to enable them for monitoring and rhythmic review.

g. Regional Collection Hubs (RCH) at all the Regions of the Bank .

h. New collection tool (KBL Collect+) for real time access of data and record the discussions and the progress in recovery to support RCHs.

i. Revised ‘Performance Management System named as ‘KBL RISE (Recognition Inspiration and Satisfaction of Employees) duly supported by ‘Role Capture and ‘Performance Measurement tool.

j. Training of the executives and the sta members for reskilling, up skilling and improved the ciency.

k. Relaunched campaign "KBL Vijaypath" for canvassing Third Party Products like General Insurance, Life Insurance, Health Insurance, Mutual Fund etc.

For better customer service and satisfaction and improved customer experience the Bank has tied up with an the cient call center handling company (Contact Centre) through strategic partnership. The Contact Centre is equipped to handle inbound service calls as well as outbound sales and collection calls. Further, for a unique digital experience, the Bank has also established Digi Branch with sophisticated IT setup at Basavanagudi, Bengaluru. As part of the IT Transformation, the bank has established a Digital Centre of Excellence (DCoE) which will spearhead the end to end customer journey digitization, the Information Technology enabled transformation of the Bank.


During the year under report, your Bank has opened 39 new branches in 5 States - 1 in the State of Gujarat, 2 in the state of Rajasthan, 3 in the state of Andhra Pradesh, 4 in the state of Telangana and 29 in the state of Karnataka. Out of these 39 branches, 9 branches have been opened in unbanked rural centres under financial inclusion initiatives of the Bank and 1 branch has been opened under Left Wing Extremism (LWE) a ected district.

As on 31 March 2019, your Bank had 836 banking outlets and 1 extension counter spread across 22 States and 2 Union Territories. Apart from the above, your Bank has 12 Regional o ces, an International Division, a Data Centre, a Customer Care Centre, 4 Service branches, 3 Currency Chests, 2 Central Processing Centres, 6 Asset Recovery Management branches and 1 Digital Centre of Excellence.

Further, for a better ambience and improved customer service, your Bank has shifted 13 branches/o ces to new premises during the year 2018-19.


Every customer is important to us. Keeping this in mind, several customer-centric initiatives have been introduced by your Bank during the year under report.

Reserve Bank of India vide their letter dated 3 September, 2018 has informed that as a part of customer centric approach, a review of the Internal Ombudsman (IO) was undertaken and it has been decided to extend the concept of IO to all Scheduled Commercial Banks (excluding Regional Rural Banks) with 10 or more banking outlets. As such, your Bank has appointed Internal Ombudsman w.e.f 1 March, 2019.

Bank is actively involved in putting in place system and procedures on banking services rendered to customers as per the guidelines received from RBI, IBA and BCSBI from time to time.


With an aim to provide diversi ed financial products & services and to maximize value added services to the customers, Bank provides Parabanking-Third Party Products such as Life Insurance, General Insurance, Mutual Funds etc.

Bank has tied up with PNB Metlife India Insurance Co. Ltd. and LIC of India for distribution of life insurance products and Universal Sompo General Insurance Co. Ltd. and Bajaj Allianz General Insurance Co. Ltd. for distribution of general insurance products. Bank has also tied up with various Mutual Fund houses for distribution of mutual fund units. The Social Security Schemes [PMJJBY & PMSBY] and NPS facility (National Pension Scheme) are also extended at all the branches of the Bank.

During April 2019, the Bank has tied up another insurance partner viz., Bharti AXA Life Insurance Co. Ltd. for the distribution of its life insurance products in the branches of the Bank.


Your Bank has bagged following awards during the year under report in recognition of its achievement under technology initiatives, social banking, export performance etc.

ASSOCHAM Social Banking Excellence Awards 2018, under small bank category: o Winner in Technology. o Runner up in priority sector lending other than Agriculture. o Runner up in Overall best social banking award.

IBA banking technology Awards 2019, under small bank category: o Runner up in ‘Most Customer Centric Bank.

ET NOW - Employee Engagement Leadership Awards instituted by ET NOW World HRD Congress:

o Best Employee Engagement in Banking Sector. o Best Change Management Program.

o Best Learning & Development Strategy.

o Best use of Training in Employee EngagementBest E-Learning module online award.

"Bank with Best Technology Orientation" and "Best Corporate Social Responsibility Practices" awards instituted by ET NOW World BFSI Congress.

• Award in Atal Pension Yojana "Perform for Pride" Campaign under Branch Category, conducted by PFRDA.

• Award in Atal Pension Yojana "Lead to Leap Award" Campaign, conducted by PFRDA.

• ASSOCHAM SMEs Excellence Award 2018, under "Excellent Service (Private Sector)" category, instituted by ASSOCHAM.

• Award in Atal Pension Yojana "Winners Arts of Possible" Campaign 2018-19, conducted by PFRDA.

• Award in Atal Pension Yojana "Winners of Winning Wednesday" Campaign under Branch Category, conducted by PFRDA.

• Award in Atal Pension Yojana "Winners of Winning Wednesday" Campaign under RO Category, conducted by PFRDA.

• Best Performing Bank award in the Atal Pension Yojana ‘People First campaign at Tamilnadu for 100 percent Branch Activation of APY scheme, conducted by PFRDA.

• Best Performing Bank award in the Atal Pension Yojana ‘Icons of Inspiration Campaign held from 14 March, 2018 to 31 March 2018, conducted by PFRDA.

‘Best MSME Bank Award Runner Up instituted by Chamber of Indian Micro Small & Medium Enterprises [CIMSME].

"Best Performing Bank Private Bank" category for the Atal Pension Yojana [APY] performance during 2017-18.

STP Award 2017: In recognition of Banks outstanding payment formatting and straight through rate, instituted by Bank of New York, Mellon.


Financial Inclusion means making available the full range of banking services at an a ordable cost to the people who do not have access to banking services. It mainly focuses on the section of society not having formal financial institutional support. Through the Financial Inclusion Plan, Bank aims at ‘connecting people with the Bank and not just opening accounts. This includes meeting the small credit needs of the rural public, giving them access to the payments system, providing remittance facility and life and health insurance. E orts are being made to optimize the resources to achieve the goal of extending banking facilities to the un-banked areas/deprived sections.

Your Bank has 184 branches located in the rural areas and o er banking facilities to the rural clientele in the gram panchayats or villages where these branches are located. All the rural branches are also acting as Financial Literacy Centers (FLCs) and imparting banking literacy among the rural populace.

In accordance with announcement of Prime Minister Jan Dhan Yojana (PMJDY) on 15 August, 2014 revised Strategy and Guidelines of Department of Financial Services (DFS), Ministry of Finance, Govt. of India, are considered for implementation of Financial Inclusion activities in the Bank. PMJDY takes in to account both rural sub service areas (SSAs) and urban wards for Financial Inclusion. Under the revised financial inclusion plan, in rural areas, Bank is allocated with 214 Gram Panchayats (GPs) for Financial Inclusion, covering 297 Sub service Areas (SSAs) consisting of 1039 villages in the states of Karnataka, Chattisgarh, Maharashtra and Andhra Pradesh and in urban areas, 313 wards are allocated in Karnataka and other states. The Gram Panchayats are covered under Brick and Mortar Branch approach and Business Correspondents (BC) Model. Your Bank has been issuing RuPay PMJDY Debit Cards under the domestic card payment scheme launched by the National Payments Corporation of India (NPCI) and has also introduced Aadhaar Enabled Payments System (AEPS) at all BC locations of the Bank. As on 31 March 2019 Bank has covered 168 SSAs of 106 GPs through Brick and Mortar Branches.


Your Bank has entered into an agreement with BASIX Sub-ki Transaction Ltd. to provide BC services and as on 31st March 2019, 140 SSAs of 109 GPs covering villages of Karnataka, Andhra Pradesh and Chattisgarh States were covered under the above arrangement by deploying Business Correspondents. During the FY 2018-19, 2152 savings accounts canvassed by BC agents with an outstanding balance of Rs. 7.93 Lakhs.


As permitted by the Reserve Bank of India your Bank had opened USBs. As on 31 March 2019, your Bank has 35 USBs.


Your Bank is actively participating in Direct Bene t Transfer (DBT) Programme of Govt. of India, wherein, the Govt. would transfer benefits of various Schemes directly to the bene ciaries Aadhaar enabled bank accounts and also accounts seeded with LPG ID in case of transfer of subsidy for LPG. For this purpose, Bank has on boarded with NPCI for Aadhaar Payment Bridge System (APBS) under National Automated Clearing House (NACH). Revised DBTL was introduced on 15 November, 2014 and launched throughout the country on 1 January, 2015.


Your Bank has sponsored 5 FLCs at B.C Road, Tiptur, Hangal, Kundagol and Alur jointly with M/s Jnana Jyothi Financial Literacy and Credit Counseling Trust, Manipal. During the financial year 5 FLCs sponsored by the Bank have conducted 2293 Financial Literacy campaigns and 92711 participants have been covered. In adherence to RBI guidelines all the rural branches of your Bank are also conducting financial literacy Camps.


Three Social Security Schemes-Prime Minister Jeevan Jyothi Bima Yojana (PMJJBY), Prime Minister Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) have been launched by Honble Prime Minister on 1st June 2015. All the branches of your Bank are actively involved in providing these schemes to the customers across the country.


In accordance with announcements of Prime Minister Jan Dhan Yojana (PMJDY) on 15 August, 2014, revised Strategy and Guidelines of Department of Financial Services (DFS), Ministry of Finance, Govt. of India, has been considered for implementation of Financial Inclusion activity of the Bank. PMJDY takes in to account both rural, semi urban, urban and metro areas for providing basic banking facilities to the unbanked populace. PMJDY also provides scope for RuPay debit card that is inclusive of Rs.1 lakh accidental insurance.

All the branches across the country have opened accounts under PMJDY and are issuing RuPay Debit Card. Since 15 August, 2014, Bank has opend 2,28,916 PMJDY accounts with an outstanding balance of Rs. 56.03 crore and 61,051 PMJDY RuPay cards have been issued.


Your Bank has introduced AEPS transaction services o ered by National Payments Corporation of India (NPCI) at all Business Correspondent (BC) locations of the Bank. Banks customer having any type of SB account that is Aadhaar enabled can now transact at the BC point.


Businesses play an important role in the growth of an economy. The growth of the economy becomes meaningful only when the economic output generated contributes to the overall welfare of the society. Towards this end, business establishments have to embed sustainability into the core of their business operations to create shared value for business and society. The Corporate Social Responsibility initiatives of the Bank are designed to make a positive impact on a wide range of areas of social life like healthcare, education/ livelihood enhancement, empowering women/ socially and economically disadvantaged, environmental sustainability/ green initiatives, protection of heritage/ culture, promotion of sports, rural development etc., aimed at promoting the overall development of the society. Further, to minimize the urban - rural divide, your Bank has been strengthening its rural orientation through initiatives aimed at imparting financial literacy and extending banking services to the people in rural unbanked areas, in a fair and transparent manner, at an a ordable cost.

Further, pursuant to Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board has set-up a Committee of Directors namely, ‘Corporate Social Responsibility (CSR) Committee and has also put in place a Policy on Corporate Social Responsibility (CSR Policy) to undertake projects/programmes in pursuance to the above Policy. The contents of the CSR Policy along with the report on amount spent on various projects/ programmes during the financial year 2018-19 is detailed in Annexure V to this report pursuant to Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014.


An the ective and sound internal audit function provides independent assurance to the Board of Directors and Senior Management on the quality and the ectiveness of Banks internal control, risk management and governance systems and processes, thus helping the Board and the Senior Management in protecting the organization and its reputation.

Your Bank has put in place an the ective and robust internal control apparatus, commensurate with its size, geographical spread and complexity of operations. At the apex level, guidance and direction on the control aspects is vested with the Audit Committee of the Board of Directors which takes an overall view on the internal control aspects and formulates all the related policy guidelines. The Bank has put in place an independent Compliance Department in charge of the entire compliance functions of the Bank.

Historically, the internal audit system in the Bank has been concentrating on transaction testing, testing of accuracy and reliability of accounting records and financial reports, integrity, reliability and timeliness of control reports and adherence to legal and regulatory requirements. With the implementation of Risk-Based Internal Audit (RBIA), greater emphasis is placed on the internal auditors role in mitigating various risks. While continuing with the traditional risk management and control methods involving transaction testing etc., the risk-based internal audit would not only o er suggestions for mitigating current risk but also on potential future risk, thereby playing an important role in the risk management process of the Bank.

The risk assessment under RBIA would cover risks at various levels (corporate and branch; portfolio and individual transactions etc.) as also the processes in place to identify, measure, monitor and control the risks. The internal audit department is devising the RBIA risk assessment methodology, with the approval of the Board of Directors, keeping in view the size and complexity of the business undertaken by the Bank. The risk assessment process would include the identi cation of ‘inherent business risk in the various activities undertaken by the Bank and evaluate the the ectiveness of the control systems for monitoring the inherent risks of the business activities (‘Control Risk) and then draw up a risk-matrix by taking into account both the factors viz., inherent business and control risks.

With a view to seek periodic assurances on the adequacy and the cacy of internal control functions, the Bank causes periodic Regular Inspections and Information System (IS) Audit of all the branches and o ces. Besides, your Bank also covers select branches under concurrent audit, the aggregate turnover of which account for over 50 percent of the gross bank credit and over 50 percent of aggregate deposits of the Bank. Short Inspection of all the branches which are not subjected to concurrent audit is also caused besides, concurrent audit of treasury functions (both domestic and forex), International Division, Forex designated o ces, Central Processing Centre, external integrated audit of Centralised Payment & Reconciliation Cell, IS audit of Data Centre and DR Site by CERT-In empanelled external security auditing rm, besides handling other regular Internal Audits by CISA qualified and ISO 27001 Lead Auditors etc. st

During the year ended 31 March, 2019, the SWIFT messaging system and Regional Loan Processing

Centre (RLPC) were brought under the purview of concurrent audit.

Besides, the Bank has also been causing Stock and Credit audits of large borrowal accounts by external, professional audit rms in furtherance of the ective credit administration. The Bank has also taken prompt action on the implementation of the RBI Guidelines on Information Security, e-Banking, Technology Risk Management and Cyber Frauds.

To apprise the the ectiveness of management at di erent levels in accomplishing the assigned tasks towards achieving the overall corporate objectives, Management Audit is also introduced by your Bank for Departments at Head Office and Regional Offices. In the current year, it is proposed to introduce Risk rating of Regional Offices.

Your Bank has put in place the policies and procedures for ensuring an orderly and the cient conduct of its business, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records and timely preparation of reliable and transparent financial information. The Audit Committee of the Board periodically assesses the the ectiveness of the internal financial controls and their adequacy and issues directions for its strengthening wherever found necessary.


In order to have an the ective & strong monitoring and collection mechanism, Credit Monitoring Department(CrMD) is functioning at the Head Office and this concept has been further extended to Regional Office level by setting up Credit Monitoring Teams(CrMT). Further under the new collection mechanism, a dedicated 3 Tier Structure called ‘Regional Collection Hub(RCH) is set up at all the Regions bringing the existing CrMT under this 3-tier structure and two new teams namely, Regional Retail & Corporate Collection Teams (RRCT & RCCT) are formed to undertake bucket-wise(stress category wise) actions for collections /monitoring and drive early bucket collections of Retail loans and Corporate loans.

During the FY 2018-19, with a view to achieve new benchmarks in credit monitoring covering the areas of reduction of overall stress, timely renewal of working Capital limits, timely re-valuation of securities etc., a year long ‘Monitoring Excellence Initiative has been launched on 18 February 2019, i.e., on the Banks Founders Day, to be concluded on the next Founders Day i.e., 18 February 2020.


In view of the growing complexities in the processes, product o erings and systems and procedures in the Indian banking sector, pursuant to the recommendation of the High Level Steering Committee, Reserve Bank of India has shifted supervisory stance to risk-based approach called Supervisory Program for Assessment of Risk and Capital (SPARC) which is focusing on evaluating both present and future risks, identifying incipient problems and facilitating prompt intervention/ early corrective action etc. Your Bank has been included under the same and migrated to Risk Based Supervision since 31st March, 2015 and the system is working satisfactorily. A plan of action for monitoring various risks as advised by RBI has also been put in place.


Compliance function in the Bank is one of the key elements in the Banks Corporate Governance structure along with internal control and risk management process. As an important element in Corporate

Governance structure, the Bank has a robust Compliance Department with suficient independence to promote healthy compliance culture within the Bank. Bank ensures strict observance of all statutory provisions, guidelines from RBI and other Regulators, standards and codes prescribed by BCSBI, Banks internal policies and fair practices code. The compliance function includes interpretation/ dissemination of regulatory and statutory guidelines and ensures that controls and procedures capture the appropriate information to the Senior Management in their risk management function. The risk-based compliance programme of the Bank, under the supervision of Chief Compliance Officer, ensures appropriate coverage across businesses, besides verifying the level of compliance through ‘Compliance Testing of branches/business units. The Bank carries out an annual compliance risk assessment to identify and assess major compliance risk faced by it and take steps to manage the risks the ectively.


The growth of Banks business, introduction of prudential norms, Basel requirements, increasing regulatory and internal reporting and the various business decision making requirements have necessitated the Bank to build a well-coordinated information transmission system. Management Information System of the Bank (MIS) provides information to branches/o ces, top management, regulators and external agencies, financial reporting, capital computation, Risk Based Supervision (RBS), internal business reviews etc. The Bank has also implemented a Centralized Data Repository for Automatic Data Flow to RBI.


The Core Banking System (CBS) covers all the branches and o ces of the Bank. Further, Alternate Delivery Channels like ATM, Internet Banking, Mobile Banking, UPI App etc., have also been integrated with CBS. Disaster Recovery (DR) facilities for all the critical applications are established to ensure business continuity in the event of primary site failure. A three-way data replication aimed at zero data loss is also implemented for applications such as CBS, ATM and Internet Banking.

As a major step in Digital Transformation, Bank has established Digital Centre of Excellence (DCoE) in Bengaluru, to strengthen Technological Architecture of the Bank. DCoE works for implementation of banking products with latest technology on an on-going Basis.

During the year under report, Bank has successfully migrated Finacle Core Banking Solution to an upgraded version w.e.f. 10.2.18 and the new version is providing better customer service. Your Bank has undertaken several other IT projects like UPI iOS application, withdrawal of Cash from POS machines etc. Several enhancements have been made in Internet Banking which includes on-boarding, enabling of Digi-Locker and Green Pin features. Mailkoot service which is bulk email facility is implemented for Digital Marketing. Robotic Process Automation is implemented in several elds like Active Directory user maintenance. Bank has also taken up e-Waste management to ensure safe disposal of hazardous electronic waste.

Your Bank will continue to take note of technological revolutions and take appropriate decision at the right time to provide premier banking services and also continue to be a tech-savvy Bank.

Further, in view of increased dependency on IT products and services and also increase in the volume of fraud/ attacks observed in the industry, Bank has put in place a robust ‘Cyber Security Policy and also initiated steps to further strengthen its IT, Cyber, and Information Security systems by putting in place required hardware/ software/ appliances in line with the industry best practices.


The Banking industry across the country is now being exposed to various changes/ challenges which have a direct impact on the existing systems and sphere of activities. The survival and prosperity of any industry depends upon the quality of its human resource and banking industry is not an exception to this.

Human Resource Development is the process of increasing the capacity of human resources through the development and thus, adds value to individuals, teams and the organization as a human system. Accordingly your Bank attributes the greatest importance to employee satisfaction and human resource development activities.

Your Bank deputes its employees to various training and development programs to upgrade their skills and competencies and contribute towards the growth of the Bank. The Bank has a well-established Sta Training College (ISO 9001:2015 certi ed) having state of the art infrastructure facilities and expertise in conducting training programs. Besides, Officers requiring specialized training are being deputed to various programs conducted at Indian Institute of Management (IIM) at Bengaluru and Ahmedabad, Centre for Advanced Financial Research and Learning (CAFRAL) at Mumbai, National Institute of Bank Management (NIBM) at Pune, Reserve Banks College of Agricultural Banking (CAB) at Pune, Institute for Development and Research in Banking Technology (IDRBT) at Hyderabad, Foreign Exchange Dealers Association of India (FEDAI) at Mumbai, BQ Academy at Mumbai and other leading institutes. During the year 2018-19, the Bank has deputed the employees to various trainings/ workshops/ conferences to update/improve their knowledge and skills. There were 3192, 2238 and 12 nominations to various programs in the category of Officers, Clerks and Sub-sta respectively covering 49.95 percent of the total sta strength during the year under report. Apart from traditional methods of training, your Bank has implemented e-Learning Module which enables the sta members to acquire knowledge on the subjects at their workstation through easy learning techniques without the necessity of attending classroom training.

‘Capacity Building is the process which involves development and strengthening the skills, instincts, abilities, processes and resources of the organization. Your Bank has put in place Capacity Building Policy, under which the specialized areas such as Treasury Operations, Risk Management, Credit Management, Accounting, Human Resource Management and Information Technology have been identified as the key areas for which acquiring of certi cation from the institutions approved by RBI have been made mandatory.

As on 31 March 2019, Bank had 8275 employees. The Business per employee (excluding inter-bank deposits) has improved from Rs.13.44 crore as on 31 March 2018 to Rs.14.90 crore as on 31 March 2019. Further, your Bank has maintained cordial industrial relations and employee discipline.Your Bank has put in place an institutional mechanism for protection of women employees at the workplace and adopted a policy pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, providing for protection of women employees against the sexual harassment of women at the workplace and redressal of such complaints. The details of the complaints under the above Policy for the year under report are as under:

Number of complaints pending as at the beginning of the financial year Nil
Number of complaints led during the financial year Nil
Number of complaints pending as on end of the financial year Nil


The Bank has implemented the Protected Disclosure Policy (Whistle Blower Policy) since the year 2007 intended to promote participation of employees at all levels and detection of corruption, misuse of Office, criminal o ences, suspected / actual fraud, failure to comply with the rules and regulations prescribed by the Banks and any events/ acts detrimental to the interest of the Bank, depositories and the public resulting in financial loss/operational risk, loss of reputation etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower who avails such mechanism and also provides for direct access to the Chief of Internal Vigilance (CIV) in general and Chairman of the Audit Committee, in exceptional cases. The Vigil mechanism is reviewed periodically. The details of Whistle Blower Policy is posted in our website and available at the link https://karnatakabank.com/sites/default/ les/2017-09/Policy%20on%20Disclosure%20Scheme.pdf


To enable timely reconciliation of various transactions carried out through technology enabled payment channels like NEFT, RTGS, IMPS, UPI etc., a separate centralized cell namely Centralised Payment and Reconciliation Cell(CPRC) has been set-up in the Bank which has improved the reconciliation and resolution of disputes, if any, in relation to these transactions.


In view of the changed business dynamics, shareholders expectations and regulatory and reporting mechanism, a regular connect with the shareholders is necessary. In this regard, Banks Investor Relation Cell has been disseminating corporate information on voluntary basis to the shareholders through email about financial results, major events, articles about the Bank in the media etc. During the reporting financial year, quarterly update of financial results of the Bank were disseminated to the shareholders besides, four earnings related conference calls were held to discuss with analysts and also one analyst meet at Mumbai. In addition, Banks Management participated in various earnings related discussions and the presentation made to the analysts during the participation have been hosted on the Banks website www.karnatakabank.com>Investor Portal > Analyst Presentations.


As on 31 March 2019, your Bank had a total of 9 Directors, including one woman director. All of them, except Mr. P Jayarama Bhat, Part-Time Non-Executive Chairman and Mr. Mahabaleshwara M S, Managing Director & CEO are Independent Directors. The details of the criteria for appointment and remuneration of Directors are provided in the report on Corporate Governance under Annexure III.

During the year under report, upon attainment of upper age limit of 70 years of age, Mrs. Usha Ganesh retired from o ce of the Independent Director on 04 July, 2018 as per extant guidelines of Reserve Bank of India. The Board places on record its appreciation for the valuable contribution and the guidance given by her during her tenure in o ce.

Mr. P Jayarama Bhat Part time Non-Executive Chairman, was reappointed as a Non Executive Director, liable to retire by rotation, at the 94th Annual General Meeting of the Bank held on 21 July, 2018 and being eligible for re-appointment, Mr. P Jayarama Bhat has o ered himself for reappointment. Considering his experience, knowledge and expertise and the contribution made during his tenure as Non-executive Chairman of the Bank, your Directors recommend for approval of his re-appointment as a Director of the Bank who is liable to retire by rotation at the ensuing 95th Annual General Meeting. A brief resume of Mr. P Jayarama Bhat is furnished in the notice of the Annual General Meeting.

Mr. B A Prabhakar, Independent Director, who was appointed as a Director on the Board of the Bank on 06 September, 2014, will be completing the tenure of 5 years as Independent Director on 05 September, 2019. Considering his participation in the Board deliberations and to the overall directions given by the Board, your Directors recommend for approval of his re-appointment as an Independent Director of the Bank as a special resolution at the ensuing 95th Annual General Meeting. Necessary explanatory statement has been furnished in the notice of the Annual General Meeting.


Mr. Mahabaleshwara M S has been appointed as the Managing Director & CEO of the Bank for a period of three years w.e.f.15 April , 2017, pursuant to the approval received from the Reserve Bank of India vide their letter DBR Appt.No.11838/08040.001/2017-18 dated 05 April , 2017, in accordance with Section 35B of the Banking Regulation Act, 1949.


Pursuant to the provisions of Section 149(6) of the Companies Act, 2013, your Bank has received necessary declarations from all the non-executive directors, except Mr. P Jayarama Bhat, con rming that they meet the criteria of independence for Independent Directors.


Your Board of Directors has laid down criteria for performance evaluation of Directors, Chairman, MD & CEO, Committees of the Board and Board as a whole and also the evaluation process for the same. The statement indicating the manner in which formal annual evaluation of the Directors, the Board and Committees of the Board etc., are given in detail in the report on Corporate Governance under Annexure

III. In pursuance to the above, Nomination and Remuneration Committee (NRC) of the Board and Independent Directors in their separate meetings held on 22 March, 2019 have reviewed and evaluated the performance of Board as a whole and the Managing Director & CEO.

Further, the Board has also reviewed the performance of committees of the Board and that of individual Independent Directors at its meeting held on 22 March, 2019.


All related party transactions that were entered into during the financial year were in the ordinary course of the business of the Bank and were on arms length basis. There were no materially significant related party transactions entered into by the Bank with Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of the Bank. As such disclosure in Form AOC-2 is not applicable. The policy on dealing with Related Party Transactions as approved by the Audit Committee/ Board has been placed in the website of the Bank.


In accordance with Section 134(3)(c), 134(5) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rule, 2014, your Directors state that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of a airs of the Bank as at the end of financial year 31st March 2019 and profit and loss for that period.

c) The Directors have taken proper and suficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

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

e) The Directors have laid down the internal financial controls followed by the Bank and that such internal financial controls are adequate and are operating the ectively.

f) The Directors have devised proper systems to ensure compliance with the provision of all applicable laws and that such systems were adequate and operating the ectively.


The disclosures under sub-section (3) of Section 134 of the Companies Act, 2013 and Companies (Accounts) Rules, 2014 are furnished below:

a) Conservation of energy and technology absorption: Considering the nature of the Banks business, the provisions of Section 134(3) of the Companies Act, 2013 relating to conservation of energy and technology absorption are not applicable to your Bank. The Bank has, however, used information technology in its operations extensively.

b) During the year ended 31 March 2019, the Bank has earned Rs.20.15 crore and spent Rs.1.58 crore in foreign currency.

c) There were no significant and material orders passed by the regulators or courts of tribunals impacting the going concern status and Banks operations in future.

d) Internal financial control systems and their adequacy: Your Bank has laid down standards, processes and structure facilitating the implementation of internal financial control across Bank and ensure that same are adequate and operating the ectively.

e) Key Managerial Personnel: Mr. Mahabaleshwara M S, MD & CEO, Mr. Y V Balachandra, CFO and Mr. Prasanna Patil, Company Secretary of the Bank were the Key Managerial Personnel of the Bank as on 31 March 2019 as per the provisions of the Companies Act, 2013. None of the Key Managerial Personnel has resigned during the year under report. Upon elevation of Mr. Balachandra Y V to the post of Chief Operating Officer (COO) of the Bank and entrustment of other functional reallocation to him, Mr. Muralidhara Krishna Rao, General Manager, has been designated as the Chief financial Officer of the Bank w.e.f. 13 May, 2019 in place of Mr. Y V Balachandra.

f) Remuneration of Directors: Disclosure pursuant to Section 197 (12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure VI to this report.

g) During the financial year 2018-19, there was no employee who was in receipt of remuneration requiring disclosure as per the limits prescribed under Section 197 of the Companies Act, 2013 read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.


During the year under report the Board met 12 times and the details thereof are provided in the report on Corporate Governance attached to this report.


The Bank had 9 Committees which were constituted to comply with the requirements of relevant provisions of the applicable laws and for operational the ciency. Details of the meetings of the Board and the Committees, their composition, terms of reference, powers, roles etc., are furnished in the report on Corporate Governance attached to this report.


Your Bank is committed to follow the best practice of corporate governance to protect the interest of all the stakeholders of the Bank, viz. shareholders, depositors and other customers, employees and the society in general and maintain transparency at all levels. A detailed report on corporate governance practices is given as Annexure III to this report.


a. Statutory Auditors

At the 94th Annual General Meeting, M/s Badari, Madhusudhan & Srinivasan, (Firm Registration No.005389S) Chartered Accountants and M/s Manohar Chowdhry & Associates, (Firm Registration No. 001997S) Chartered Accountants were appointed as joint Statutory Central Auditors of the Bank to hold o ce upto the ensuing 95th Annual General Meeting.

The Board of Directors proposes to the members the appointment of M/s Badari, Madhusudhan & Srinivasan, (Firm Registration No.005389S) Chartered Accountants, No. 132, II Floor, Kantha Court, Lalbagh Road, Bengaluru-560027 and M/s Manohar Chowdhry & Associates, (Firm Registration No.001997S) Chartered Accountants, New No.27, Subramaniam Street, Abiramapuram, Chennai-600018 jointly as Statutory Central Auditors of the Bank to hold o ce upto the conclusion of 96 Annual General Meeting. Pursuant to Section 30(1A) of the Banking Regulation Act, 1949, approval from Reserve Bank of India has been sought for the above appointments. The Bank has received consent from the above auditors and necessary con rmation from them that they are not disquali ed to be appointed as auditors of the Bank pursuant to the provisions of the Companies Act, 2013 and the Rules made thereunder.

b. Secretarial Auditor and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013 and the rules thereunder, your Bank had appointed M/s.Gopalakrishnaraj H H & Associates, Practising Company Secretary, Bengaluru as Secretarial Auditors to conduct the Secretarial Audit for the year ended 31 March 2019. The audit report from the Secretarial Auditor is annexed to this report as a part of Annexure III.


Your Directors would like to place on record their sincere gratitude to the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks for their continued guidance and support. Your Directors also place on record their gratitude to the Banks shareholders, depositors and other customers for their continued support, patronage and goodwill. Your Directors express their deep sense of appreciation to all the sta members, for their contribution in your Banks quest for sustained growth and profitability and look forward to their continued contribution in scaling greater heights.

For and on behalf of the Board of Directors

P Jayarama Bhat


Place : Bengaluru

Date : June 17, 2019