Karur Vysya Bank Ltd Directors Report.

To the Members,

The Board of Directors of your Bank take great pleasure in presenting the 103rd Annual Report on the business and operations of the Bank together with the audited accounts for the financial year ended March 31, 2022.

KEY PERFORMANCE INDICATORS

The Banking Industry has withered off the pandemic shock and delivered a revived performance on the back of economic recovery. Financial Year 2021- 22 has been a landmark year for your Bank with uptick in most of the vital business parameters and highlights of which are furnished below:

Particulars March 31, 2022 (Rs. in Crore) March 31, 2021 (Rs. in Crore)
Deposits 68,676.16 63,278.43
Advances 57,549.52 52,820.13
Investments 17,755.08 16,465.46
Total Income 6,356.73 6,389.26
Total Expenditure 4,726.52 5,097.74
Operating Profit 1,630.21 1,291.51
Net NPA 1,260.79 1,719.39
Net Profit 673.27 359.39

@ Figures for the previous period have been re-grouped and re-classified in adherence to RBI Master Direction on Financial Statements - Presentation and Disclosure dated 30.08.2021, where necessary, to make them comparable with current period figures.

TOTAL BUSINESS

Your Banks total business crossed the milestone figure of Rs.1,25,000 Crore and reached Rs.1,26,225.68 Crore as on March 31, 2022, an increase of Rs.10,127.12 Crore over the previous financial year position of Rs.1,16,098.56 Crore.

DEPOSITS

The Gross Deposits grew by 8.53% and stood at Rs.68,676.16 Crore as on March 31, 2022, an increase of Rs.5,397.73 Crore over the previous financial year position of Rs.63,278.43 Crore.

The Term Deposits grew by 7.56% and stood at Rs.44,772.51 Crore as on March 31, 2022, an increase of Rs.3,147.90 Crore over the previous financial year position of Rs.41,624.61 Crore.

Your Banks CASA balances grew by 10.39% and stood at Rs.23,903.65 Crore as on March 31, 2022, an increase of Rs.2,249.82 Crore over the previous financial year position of Rs.21,653.83 Crore. The CASA balance as on March 31, 2022 is constituted by Savings Bank deposits of Rs.16,982.71 Crore and Other Demand Deposits of Rs.6,920.94 Crore. The CASA ratio of the Bank as on March 31, 2022 stood at 35%.

ADVANCES

During the year, your Banks credit portfolio grew by 8.95% and stood at Rs.57,549.52 Crore as on March 31, 2022, an increase of Rs.4,729.39 Crore over the previous financial year position of Rs.52,820.13 Crore.

Growth in Advances is majorly contributed by Agriculture, Commercial and Retail Advances during the period under review. As your Bank decided to cautiously grow its Corporate book, the growth was muted at 1.61% (after deducting technical write offs). The details of the Advances portfolios for financial year 2021-22 and financial year 2020-21 along with their comparative growth is furnished in the table below:

CLASSIFICATION OF ADVANCES PORTFOLIO

Particulars March 31, 2022 (Rs. in Crore) March 31, 2021 (Rs. in Crore) y-o-y Growth %
Agriculture 13,043.68 11,530.98 13.12
Retail (Personal Banking) 13,264.83 12,256.90 8.22
Commercial 18,697.86 16,687.37 12.05
Corporate 12,543.15 12,344.87 1.61
Total Advances 57,549.52 52,820.13 8.95

As on March 31, 2022, the Priority Sector Lending of your Bank stood at Rs.25,216.01 Crore and constituted 47.04% of its Adjusted Net Bank Credit (ANBC) as against the statutory mandate of 40%.

AGRICULTURE ADVANCES

Your Banks average Agriculture Advances, in terms of RBI guidelines, stood at Rs.10,476.49 Crore as on March 31, 2022, which constituted 20.25% of ANBC, as against the regulatory stipulation of 18%. Average Advances to Micro Enterprises and Weaker Sections stood at 7.59% and 11.69% respectively. Your Bank has continuously achieved and surpassed the statutory Agriculture target by its focused lending strategies to the Agriculture and its allied sectors.

ASSET QUALITY

Your Bank has been focusing on containing the slippages through better credit monitoring as well as intensified efforts to recover the impaired assets. Banks vigorous follow up through its dedicated Call Center, feet-on-street capabilities at branches, dedicated Asset Recovery Branches and time- tested recovery process have resulted in a much improved Asset Quality.

The improvement in Asset Quality is also largely attributable to the robust risk management practices of the Bank, tightening of credit evaluation and focus on granulised and diversified loan book spread across different customer segments and products.

NPA Management Committee and Executive Committees are monitoring and reviewing the recovery process for initiating timely and speedy action for Recovery.

The Gross NPAs of your Bank reduced by 1.89% and stood at Rs.3,431.04 Crore, a reduction of Rs.711.83 Crore over the previous year position of Rs.4,142.87 Crore. Correspondingly, Net NPA of your Bank also reduced by 1.13% and stood at Rs.1260.79 Crore as on March 31, 2022, a reduction of Rs.458.60 Crore over the previous financial year position of Rs.1,719.39 Crore. In terms of percentage, your Banks Gross Non-Performing Assets (Gross NPA) and Net Non-Performing Assets (Net NPA) stood at 5.96% and 2.28% as against 7.85% and 3.41% of the previous year respectively. Further, Your Banks SMA30+ levels has been well contained and confined to 0.82% as against 1.63% of previous year.

Your Bank has carried out focused recovery drive on a continuous basis which resulted in improved recovery performance during the past three years. The Provision Coverage Ratio stood at 80.27% and your Bank is continuously strengthening the ratio for the past five years.Your Bank will take all possible steps to curtail slippages and expedite recovery in existing SMA / NPAs.

INVESTMENTS

Your Banks investment portfolio increased by 7.83% and stood at Rs.17,755.08 Crore as on March 31, 2022, an increase of Rs.1,289.62 Crore over the previous financial year position of Rs.16,465.46 Crore. The average investment for the financial year 2021-22 stood at Rs.17,079.04 Crore. The investment portfolios composition is consistent with the Investment Policy of the Bank which emphasises on liquidity and regulatory management besides providing gains.

Interest income earned on investments during the financial year 2021-22 was Rs.924.78 Crore, a marginal decrease from the previous year earnings of Rs.941.79 Crore. Profit booked through sale of investments was at Rs.56.96 Cr for the financial year 2021-22. With a view to prevent large volatility, Modified Duration of overall portfolio including Held to Maturity (HTM) was maintained at a lower level of 3.07 years. Liquidity position was maintained at comfortable levels throughout the year under review.

FOREIGN EXCHANGE TRANSACTIONS

Banks merchant turnover stood at Rs.21,623 Crore as compared to the previous financial years level of Rs.20,021 Crore. Export credit registered a growth of 13.23% during the year, from Rs.1,194.82 Crore of the previous financial year to Rs.1,352.85 Crore. The Income earned through foreign exchange transactions was Rs.66.02 Crore for the financial year 202122 as against Rs.57.80 Crore for the financial year 2020-21. Exchange Profit of Rs.36.98 Crore and Commission & others of Rs.29.04 Crore forms part of the Total Income.

INCOME

Your Banks Interest Income increased by 2.14% and reached Rs.5,587.67 Crore for the financial year 2021-22, a marginal increase of Rs.117.24 Crore over the previous year earnings of Rs.5,470.43 Crore. Net Interest Income of your Bank increased by 15.08% and reached to Rs.2,715.37 Crore, an increase of Rs.355.86 Crore over the previous year Net Interest Income of Rs.2,359.51 Crore. The growth in Net Interest Income is in tandem with the topline growth in loan books of the Bank. Further, your Bank earned Non-Interest Income of Rs.769.06 Crore for the financial year 2021-22. The Yield on Advances and Investment stood at 8.47% and 5.41% respectively.

EXPENDITURE

Your Banks Interest expenditure reduced by 7.67% and reached Rs.2,872.30 Crore for the financial year 2021-22, a saving of Rs.238.61 Crore over the previous year Interest Expenditure of Rs.3,110.91 Crore. The Operating expenses also decreased from Rs.1,986.83 Crore of the previous financial year to Rs.1,854.22 Crore. Your Bank regularly monitored both its operating and establishment expenses during the year and tight controls are exercised on the expenditures.

Your Banks Cost of Deposits eased to 4.30% as against 4.96% of the previous financial year. The Net Interest Margin (NIM) improved by 29 bps and stood at 3.69% over the previous year position of 3.40%, consequent to improvement in Spread between yield on funds and cost of funds to 3.02%.

PROFIT

Your Banks Operating Profit increased by Rs.338.70 Crore and reached Rs.1,630.21 Crore for the financial year 2021-22, registering a significant growth rate of 26.23% over the previous year Operating Profit of Rs.1,291.51 Crore. Your Banks Net Profit sharply increased by Rs.313.88 Crore and stood at Rs.673.27 Crore for the Financial Year 2021-22, a remarkable growth rate of 87.34% over the previous year profit of Rs.359.39 Crore.

APPROPRIATIONS

The Net Profit of Rs.673.27 Crore along with Rs.1.06 Crore brought forward from the previous financial year, aggregating to Rs.674.33 Crore, was appropriated as follows:

Appropriation - Transfer to Amount (Rs. in Crore)
Statutory Reserve 168.40
Capital Reserve 15.52
Investment Fluctuation Reserve -
Special Reserve 40.00
General Reserve 320.00
Balance carried to Balance Sheet (including Proposed Dividend of Rs.128 Crore 130.41

DIVIDEND

Your Bank has formulated the Dividend Distribution Policy as per the requirements of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ("SEBI LODR") and guidelines issued by Reserve Bank India. The objective of the Policy is to ensure an equitable balance between rewarding the shareholders through dividend and retaining sufficient funds for future growth of the Bank. The Dividend Distribution Policy is available on the Banks website at https://www.kvb.co.in/docs/dividend-distribution-policy.pdf

Accordingly, considering the capital position of the Bank and the quantum of dividend pay-out permitted, Board of Directors of the Bank are pleased to recommend a Dividend of Rs.1.60 per equity share of face value of Rs.2/- each i.e., 80%, for the financial year 2021-22, payable to those shareholders whose names appear in the Register of Members as on Book Closure/ Record Date. The Dividend pay-out is in accordance with Banks Dividend Distribution Policy and is subject to the approval of the shareholders at the ensuing 103rd Annual General Meeting and also any regulatory/statutory authorities, if required.

In accordance with Accounting Standards 4 - Contingencies and Events occurring after the Balance Sheet date - notified by the MCA on March 30, 2016, the proposed dividend amounting to Rs.128.00 Crore has not been shown as an appropriation from the Profit and Loss account as of March 31, 2022 and correspondingly not reported under Other Liabilities and Provisions as at March 31, 2022 (is reported under balance of profit).

PANDEMIC AND GEO POLITICAL IMPACT ON BUSINESS

The disruptions from repeated waves of COVID-19 have come in the way of sustained recovery and the quarterly trends in GDP essentially followed the ebbs and flows of the pandemic with no country, institution, society or individual being immune from COVID-19s impact. Consequently, a single strategy may not suffice. Supported by the Governments extensive vaccination drive, your Bank proactively managed the portfolio and strengthened its capital buffers.

Further, the Central Government and RBI collectively implemented a host of relief measures including extension of tenor, restructuring of advances, extension of emergency credit lines backed by the guarantee of NCGTC Ltd, ease of assessment and renewal, FITL assistance to service the working capital interest etc. Your Bank extended all the applicable relief measures to the customers to help them come out of the operational, financial, business continuity and cash flow related issues:

• Extended Guaranteed Emergency Credit Line (GECL) of Rs.2,452 Crore

• Exposures totaling to Rs.1,274 Crore were permitted for restructuring as a part of relief measure

• All the relief measures shall be phased out by March 2023.

Russias invasion of Ukraine caused Europes largest refugee crisis since World War II. The war in Europe is lingering and we are facing newer challenges each passing day which is accentuating the existing supply chain disruptions. As a result, food, energy and commodity prices remain elevated. KVB has ‘NIL exposure to Russia or Ukraine, as on May 2022.

As per Economists, Prices of commodities, services, manufacturing have been soaring in the last 12 months. Inflation began in 2021 and the Ukraine war only accelerated it.

As the economy continues to recover from COVID-19, due to the ongoing Russia-Ukraine conflict, financial markets have exhibited increased volatility. Business strategies are developed duly taking in to account the possible impact of inflation, rising interest rates, its sequential effect on both the social and economic activities of the customers. Business targets are derived and assigned, factoring the competition. KVBs strategic focus is to offer need-specific financial solutions/ products/services by providing customer experience through delivery of quick and efficient services.

Your Bank is monitoring the developments closely without losing sight on looking into the requirements for interim course corrections on our business strategies. Your Bank is well placed in terms of capital adequacy, business growth and continuity, availability of resources including human resources, technology infrastructure, well designed policies, systems and controls, to take the business forward duly insulating our Bank from all the foreseeable risks.

SHARE CAPITAL

The Authorised share capital of the Bank stood at Rs.200.00 Crore divided into 100 Crore equity shares with a face value of Rs.2/- each as on March 31, 2022. During the financial year under review, there has been no change in the Authorised share capital of the Bank.

During the financial year under review, the Bank has allotted 989 Equity Shares of face value Rs.2 each pertaining to Rights and Bonus Issues held in the abeyance category. Further, Bank has allotted 6,89,964 Equity Shares of face value Rs.2 each to the employees who exercised their options under KVB ESOS 2011 Scheme and KVB ESOS 2018 Scheme.

Post allotment of the aforesaid equity shares, the Issued Share Capital increased from Rs.159,99,75,284 to Rs.160,13,55,212 comprising 80,06,77,606 equity shares with a face value Rs.2/- each and the Paid-up Share Capital increased from Rs.159,86,41,438 to Rs.160,00,23,344 comprising 80,00,11,672 equity shares with a face value Rs.2/- each. Other than the aforementioned, there is no change in capital structure of the Bank during the year under review.

The Banks Net owned funds grew to Rs.7,596.20 Crore as on March 31, 2022 from Rs.6,959.74 Crore of the previous financial year. The Market Capitalisation of the Bank stood at Rs.3,704.05 Crore as on March 31, 2022.

EARNINGS PER SHARE/BOOK VALUE

Banks Earnings Per Share (Basic) stood at Rs. 8.42 and the Book Value of shares as on March 31, 2022 was Rs.94.95 per fully paid equity share of face value Rs.2/- each.

DEBT INSTRUMENTS & CREDIT RATING

The Bank had issued Basel III Compliant Unsecured, Redeemable Non-Convertible Tier II Bonds to the value of Rs.487 Crore with a coupon rate of 11.95% p.a. and a tenor of 123 months (maturing on June 12, 2029) in March 2019 through Private Placement, having a call option at 5th Coupon Payment date i.e., March 12, 2024 or on any Coupon Payment date thereafter. The third coupon interest has been duly paid to the Debenture holders on March 12, 2022.

Status of credit rating:

Particulars Rating Agency Rating Rating Action Date of Revision
Basel III Tier II Bonds - Issue of ^ 1,200 Crore where ^ 487 Crore was utilised Certificate of Deposits Programme - Rs.3,000 Crore ICRA [ICRA] A(Positive)#A Reaffirmed December 28, 2021
India Ratings & Research IND A+/Stable A Affirmed February 07, 2022
ICRA [ICRA] A1 + Reaffirmed July 02, 2021
[ICRA] A1 + Reaffirmed September 30, 2021
[ICRA] A1 + Reaffirmed December 28, 2021
[ICRA] A1 + * Reaffirmed March 25, 2022
CRISIL CRISIL A1 + Reaffirmed May 12, 2021
CRISIL A1 + Reaffirmed July 16, 2021
CRISIL A1 + Reaffirmed September 22, 2021
CRISIL A1 + Reaffirmed December 07, 2021
CRISIL A1 + * Reaffirmed February 24, 2022

# The outlook is revised to Positive from Stable

 

A Instruments with this rating are considered to have an adequate degree of safety with respect to the timely servicing of financial obligations. Such instruments carry a low credit risk.

* 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.

CAPITAL ADEQUACY

The Banks Capital Adequacy Ratio firmed further and stood at 19.46% as on March 31, 2022, as per BASEL III norms. This is well above the statutory limit of 11.50% (9% plus Capital Conservation Buffer of 2.50% is required to be maintained as of March 31, 2022) as prescribed by the Reserve Bank of India Guidelines.

SUBSIDIARIES AND ASSOCIATES

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

MANAGEMENT DISCUSSION AND ANALYSIS

Pursuant to provisions of the Regulation 34(2) (e) of SEBI (LODR) Regulations, 2015, the Management Discussion and Analysis Report for the year is provided in a separate section of the Annual Report.

NETWORK OF BRANCHES

We have seen rapid changes in the banking sector, especially the rise of digitalisation of customer interface due to the quick adaptability of customers to digital transactions, more so after the pandemic outbreak. Your Bank believes that more and more customers shall prefer the digital mode of operations, rather than visiting bank branches, and hence is focusing on enhancing its digital capabilities accordingly.

Your Bank has added 11 Branches, Five back offices and a Currency Chest during the financial year 2021-22. The branch network including Corporate Business Units, Business Banking Units, Asset Recovery Branches, NEO and Precious Metal Division totals to 822 as on March 31, 2022, excluding three Extension Counters and five Satellite Offices.

During the year under review, your Bank has installed 81 new ATMs and 21 Bunch Note Recycler Machines (BNRM) to provide uninterrupted Banking services to customers. As of March 31, 2022, there are 1,639 ATMs, 584 Bunch Note Recycler Machines (BNRM), 178 Self-Service Passbook Kiosks.

CURRENCY CHEST

Bank has opened a new Currency Chest at Trichy during the Year under review. As on March 31, 2022, your Bank has eight Currency Chests across different locations in Tamil Nadu, Andhra Pradesh, Telangana and Karnataka to supply adequate cash to Branches & ATMs and the Clean Note Policy of RBI is being adhered to. Currency Chests also support the branches to maintain cash within the retention limit for smooth operations.

The Bank also conducted soiled note exchange melas and distribution of coins through its branches in coordination with Currency Chests.

FINANCIAL INCLUSION

Financial Inclusion ensures availability of basic banking services and products to all, thereby reaching the unreached, unbanked and under-banked areas. Bank has been the pioneer in taking initiative in the area of Financial Inclusion. Bank is providing various Business Correspondents (BCs) services & implementing comprehensive Financial Inclusion Programme through effective utilisation of BCs in Sub Service Area (SSA). SSA is a cluster of few villages and is linked to one base branch of the Bank.

Your Bank has reached the underprivileged segment of the society and extended its focused financial services through 142 Bank Mitras in rural villages, 3 Bank Mitras in urban locations with 39 Ultra Small Branches. The Bank Mitra use Micro ATM for providing the banking services.

Your Bank continues to provide basic financial products including Basic Savings Bank Deposit Account (BSBDA), Insurance products and Pension accounts and thereby support the Government in implementation of various social welfare schemes.

Pradhan Mantri Jan Dhan Yojana (PMJDY):

Your Bank has opened 1003 PMJDY accounts during the year under review. The balances outstanding in the PMJDY accounts as on March 31, 2022 was Rs.18.82 Crore. The Bank has issued 1003, Rupay Debit Cards under PMJDY accounts during the year. Micro ATM devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting Rupay Card transactions/Aadhaar enabled Payment system (AePs)/ Third Party deposit, Balance enquiry, Mini statement. Bank Mitras have done 7.76 Lakh transactions, amounting to Rs. 88.11 Crore during the year under report which includes of DBT/Old Age Pension/MGNREGS transactions.

Micro credit (SHGS Bank linkage):

Your Bank is providing credit facilities to Self-Help Groups (SHG) and Joint Liability Groups (JLG) to meet the credit needs of the poor. As on March 31, 2022, the Bank has 152 JLG loans with outstandings of Rs.1.46 Crore.

Financial literacy:

Financial Literacy programes are intended to provide basic banking knowledge to people across various corners of the Society. Your Bank has been in the forefront in creating awareness to the rural mass on the financial services and products through the Financial Literacy Campaigns. During the 2021-22, your Bank has conducted 55 financial literacy campaigns in Rural, Semi Urban/Urban areas.

TECHNOLOGY INITIATIVES

Your Banks digital strategy combines the best of traditional and digital banking worlds. Your bank is continuously focusing on creating innovative products & solutions while upholding previous standards and supports overall growth of business.

During this period, your bank has incorporated new functionalities in Internet Banking, Mobile Banking and Digital Lending System. These features strengthen the customer engagement levels and enhances sophistication to users to carry out their banking needs. Your Bank introduced many technological initiatives, apart from refining the existing offerings, which includes the following:

• E-sign Based Savings & Individual Current Account Opening (paperless process).

• Issuance of EMV Debit Cards (VISA) with Contactless feature for usage in POS terminals.

• Channels claims (ODR) enabled in Dlite - Mobile Banking & Internet Banking.

• Self-service Debit card controls (Hotlist, Card On/Off, Enable & Disable of transaction options like E-commerce, POS, ATM, International and Contactless) enabled in Internet banking.

DIGITAL TRANSFORMATION PROJECT Web based online business loans:

Your bank has digitised its entire range of products in the Loan Portfolio viz. Retail Loans, Commercial Advances and Corporate Borrowings. Your Bank is making the best use of its technological infrastructure to manage operations from on-boarding of borrowers till disbursement of loans, resulting in better portfolio performance. Your Bank is the first to implement a complete end-to-end digitised loan sanction process flow and has been consistently redefining the Rule Engine with underwriting models on an ongoing basis. We are poised to grow our market share by leveraging our digital capabilities and have also digitised Credit, Risk and Monitoring activities for better internal control.

During the year, your Bank has implemented the digital journeys for commercial & agricultural products. Also, your Bank is regularly upgrading the existing digital lending system to adhere the compliance norms and adding functionalities for business growth.

Retail loans on mobile/Tablet:

During the year, the Retail Loan segment of your bank was strengthened further by including more loan products on the tablet-based application, as a part of its Digital

Transformation. The Retail Lending Digital application is now equipped with Housing Loans, Personal Loans, Vehicle Loans, Education Loans, Loan against Sovereign Gold Bonds, OD against property, GECL and FITL Loans, thus empowering the branches/business units to source quality applications from the market.

This digital system will also enable your bank to fetch the bank statement via Account Aggregator Eco System for all Retail loans with ease. Also, your Bank has added the Pre-Approved Personal loan journey via Dlite Mobile Banking App. Customers spanning across all geographies are now offered various loan products with quicker turnaround time and best-in-class user experience on the digital platform.

Co-Lending initiations:

Your Bank has commenced co-lending activities with Non-Banking Finance Companies in the Commercial Vehicle and Construction Equipment segments. In the Retail segment, your Bank has on-boarded and sanctioned consumer durable loans to 18.54 Lakh of customers during this fiscal year. Going forward, your Bank will continue to focus new business opportunities under this model for widening its horizons.

INFORMATION SECURITY

The Board and Senior Management of your Bank have instituted a robust Information Security Management System (ISMS) to protect the Banks Information Assets in accordance with the determined risk profile of the assets. Information Security function designs, develops, implements, maintains and monitors the Information Security Management System (ISMS). The Chief Information Security Officer (CISO) is responsible for providing leadership and oversight in the effective implementation and operation of ISMS in accordance with approved Policies and Procedures.

The ISMS is designed not just to focus on Confidentiality, Integrity and Availability of Information; but also, on the other principles such as Authenticity, Non-Repudiation and Accountability in order to ensure the following:

• Safety and privacy of sensitive customer and Bank information.

• Protect against any anticipated threats or hazards to the security or integrity of such information.

• Protect against unauthorised access to or use of such information that could result in harm or inconvenience to any customer.

The ISMS identifies reasonably foreseeable internal and external threats that could result in unauthorised disclosure, misuse, alteration or destruction of customer information or customer information systems. It assesses the likelihood and potential damage of these threats, taking into consideration the sensitivity of customer information and assesses the sufficiency of policies, procedures, organisational structures, customer information systems, and other arrangements in place to control the risks.

Your Bank is maintaining the standard process of ISO/IEC 27001 by M/s TUV SUD since 2018, which is the international standard that is recognised globally for managing risks to the Information Security.

Your Bank has invested in modern technology solutions for timely application of security patches in the IT systems, host-based intrusion prevention, network behaviour analysis, privileged access control and introduced & implemented next generation firewalls and Web Application Firewall to manage and control identified risks in a manner corresponding with the sensitivity of the information and the complexity and scope of the Banks activities.

Your Bank has established fully functional Security Operations Centre (SOC) to monitor and defend the cyber combat in 24 x 7 x 365 days to protect the Bank Information and also invested in Artificial Intelligent based monitor and defence solution against Dark web cyber combat to protect the Bank Information.

Apart from technology tools and solution to safeguard the Banks Information, Bank contribute equally to up skill the awareness of employees about new threats in the cyber security landscape.

CALL CENTRE

The Call Centre of your Bank is a one stop Contact point of the bank which addresses queries / requests from customers, all over the world and works seamlessly round the clock.

Inbound contact centre:

Predominantly Inbound contact center receives calls / e-mails from customers and there is a dedicated team to honour the customers requirements. We also verify the rightness of transactions of our customers through outbound calls based on the triggers from our automated fraud transaction monitoring system. Further, inbound contact centre of your Bank facilitates the customers through Video-KYC for converting Low KYC accounts opened through Dlite in to Full KYC account, verification calls for the changes in registered Mobile number requested through Dlite & Internet Banking, feed-back calls for Door-step banking services.

Outbound contact centre:

Outbound Contact Centre calls the customers on behalf of the Bank for Sales/Service and collection purposes. The outbound call activity begins with onboarding potential customers and cross selling/up selling the services of the Bank to existing customers as well. Your Bank greets the new CASA customers of the Bank and also the new borrowers including

Corporate/Retail Credit Card customers by way of welcome callings which would help them to understand their rights & obligations promptly.

Tele-collection activities are designed with a view to improve the collection efficiency and consists of two segments viz., Predue calling and Postdue Calling. Predue calling is initiated to remind the customers of their due date and the EMI amount which is due to be paid. This calling helps customer to ensure that the EMIs are serviced on time. Post Due Date calling is initiated to customers who have missed to pay their dues on the agreed payment date. The intensity of outbound calls for collection are segregated based on Severity of delinquency, No of Days Past Due, Track on repayment and customers Relationship with bank.

CHANGE IN NATURE OF BUSINESS

There is no change in the nature of business of the Bank during the financial year.

SYSTEM FOR INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

Your Bank has computerised solutions at par to New-gen Private Sector Banks in order to serve its customers in respect of all banking requirements. Adequate infrastructure has been established in processing the day to day transactions. "Flexcube" is the CBS platform used in the Bank which is commonly used in several well-known banks in the Country. The CBS platform has well defined set-up to ensure internal financial controls viz., maker-checker requirements with adequate credentials. Automation of interest & charges application and accounting transactions ensures necessary internal financial control. IT audit in respect of CBS is also being conducted as per the stipulated periodicity which ensures adherence to the regulatory and mandatory guidelines. Exclusive unswerving reporting software is used by Bank with appropriate systems and protocols which have periodical review. The same ensures reporting of Banks business without any ambiguity. The Bank has standardised operating procedures in monitoring the account operations to have effective internal controls. Separate monitoring team has been identified to prevent and detect frauds and errors in the Bank. Compliance of regulatory /mandatory requirements are being taken care by an individual team which has its exclusive procedure in adhering to regulated and framed policies besides reporting of financial information in a disciplined manner. These systems enable the Bank to have established internal control over financial information reporting.

The Bank has Board approved policies in respect of various banking activities like lending, investment, borrowing etc. with well-defined hierarchy of officials vested with sanctioning powers. Inspection Department and Risk Management Department review various aspects of internal control, adherence to procedure and review credit assessment protocols periodically.

Internal Financial controls of the branches are verified by the statutory branch auditors during their branch audit and covered in the report. Statutory Central Auditors of the Bank audit the internal controls over financial reporting of the Bank and submit a report to the Board of directors. Thus, the Bank ensures that the Internal Financial Controls placed are operating effectively.

RISK MANAGEMENT

Risks are inherent in any business and banking is no different. The Bank has adopted a multi-layered risk management framework to identify, assess, monitor and manage risks through the effective use of processes and information technology.

Objective of the risk management of the Bank is to balance the trade-off between risk and return, and ensure that the Bank operates within the Board approved risk appetite statement. An independent risk management function ensures that the risk is managed through risk management architecture as well as through policies and processes approved by the Board of Directors encompassing independent identification, measurement and management of risks across the various businesses of the Bank. The risk management function in the Bank strives to proactively anticipate vulnerabilities at the transaction as well as at the portfolio level, through quantitative or qualitative examination of the risks. The Bank continues to focus on refining and improving its risk measurement systems including automation of processes, not only to ensure compliance with regulatory requirements, but also to ensure better risk-adjusted return and optimal capital utilisation. The Board reviews the risk profile of the Bank at periodic intervals and ensures that risk levels are within the defined risk appetite.

The independent risk management structure within the Bank is responsible for managing the credit risk, market risk, liquidity risk, operational risk, other Pillar II risks like reputational risk and strategic risk.

The Board is responsible for designing the overall risk management framework by approving various policies relating to the Risk functions and has delegated powers to Board Level Risk Management and Asset Liability Management Committee (RM & ALM) for monitoring the implementation of Risk Governance Framework, compliance to various policies & processes. The RM & ALM ensures the same by closely monitoring & guiding the functions through Executive Level Credit Risk Management Committee, Market Risk Management Committee, Operational Risk Management Committee and Fraud Risk Management Committee, Asset Liability Management Committee, which regularly assess the functional efficiency of the Banks risk management processes. Minutes of these Committee meetings are placed to the RM & ALM Committee of the Board for its perusal and further guidance.

Risk Management department maintain different policies covering inter alia credit, credit risk rating, market, liquidity, treasury, operational risk, risk culture, strategic risk management and integrated risk management functions.

Banks risk management objectives broadly cover proper identification, 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 the Bank to take risks in the normal and stressed course of business.

Your Bank is viewing risk management as a core competency and tries to ensure sound management of risks through timely identification, assessment and management. The goal of risk management is to ensure that the Bank takes only calculated risks, which it can understand, monitor, mitigate and control, thereby minimising unexpected outcomes. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored.

Your Bank is well capitalised and CRAR stands at 19.46% as on March 31, 2022. Capital provides the buffer required to manage and meet the unexpected risks / losses that materialise in spite of prudent and timely risk management actions. In our opinion presently there are no material risks which threaten the existence of the Bank.

VIGIL MECHANISM/WHISTLE-BLOWER POLICY

In compliance with RBI Guidelines, provisions of the Companies Act, 2013, the Listing Regulations and SEBI (Prohibition of Insider Trading) Regulations, 2015 as amended; your Bank has in place the "Whistle-Blower Policy" since 2011. The Policy also incorporates the Protected Disclosure Scheme (PDS) for Private Sector Banks, instituted by the Reserve Bank of India. The Audit Committee of the Board reviews the complaints received through Vigilance Mechanisms on quarterly basis. The Banks Whistle-Blower Policy is in synchronisation with all statutory and regulatory guidelines on Vigilance Mechanism. The details of the Whistle-Blower Policy is available on the website of the Bank. https://www.kvb.co.in/docs/whistle-blower-policy.pdf

DISCLOSURES PERTAINING TO THE SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The details related to Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 are furnished in the Corporate Governance Report that forms part of this Annual Report.

RELATED PARTY TRANSACTIONS

All transactions entered into by your Bank with related parties are repetitive in nature and are in ordinary course of business on an arms length basis. Omnibus approval is obtained from the Audit Committee for transactions which are repetitive in nature and the same are reviewed on periodic basis. The Banks policy on Related Party Transactions can be viewed at: https:// www.kvb.co.in/docs/related-party-transactions-policy.pdf.

During the year, your Bank has not entered into any materially significant transactions with the related parties, which could lead to potential conflict of interest, other than transactions entered into in the ordinary course of its business. Therefore, the provisions of Section 188 of the Companies Act, 2013 are not attracted and hence filing of AOC-2 is not applicable to the Bank.

AUDIT COMMITTEE RELATED DISCLOSURE UNDER SUB-SECTION 8 OF SECTION 177 OF THE COMPANIES ACT, 2013

The Bank has constituted a Board level Audit Committee in line with the requirements of the Companies Act, 2013, SEBI LODR and Reserve Bank of India guidelines, as amended from time to time. Board has accepted all the recommendations of the Audit committee. The details of the composition of the Audit Committee are disclosed in the Corporate Governance Report that forms part of this Annual Report.

DISCLOSURE RELATED TO DETAILS OF DEPOSITS ACCEPTED UNDER RULE 8(5) (V) OF COMPANIES (ACCOUNTS) RULES, 2014

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

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

Disclosure requirements under Section 134(3)(g) of the Companies Act, 2013 are exempted to Banking companies, since the loans made, guarantees given, securities provided or acquisition of securities are in the ordinary course of business as specified in Section 186 (11) of the Companies Act, 2013.

AUDITORS Statutory auditors

In terms of Section 139 of the Companies Act, 2013 read with Sec 30(1A) of the Banking Regulation Act, 1949, it is proposed to re-appoint, M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank, who are retiring at the conclusion of the ensuing 103rd Annual General Meeting (AGM) and are eligible for re-appointment, subject to the approval of shareholders of the Bank. The Bank has received consent from the Auditors on their reappointment and confirmation to the effect that they are not disqualified to be re-appointed as the Auditors of the Bank in terms of the provisions of the Companies Act, 2013 and the rules made thereunder.

Accordingly, the Board of Directors have recommended to the shareholders, the re-appointment of M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank, to hold office from the conclusion of the ensuing 103rd AGM till the conclusion of the next AGM. Fee payable to Statutory Audit is proposed at Rs.1,10,00,000/- (Rupees One Crore Ten Lakh only) plus applicable taxes and out of pocket expenses with a cap of 10% of fees for the financial year 2022-23, subject to the approval of RBI and Shareholders of the Bank.

Members are requested to consider the re-appointment of M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) and M/s Sundaram & Srinivasan,

Chartered Accountants (Registration No. FRN 004207S) as Joint Statutory Central Auditors of the Bank.

Pursuant to the Regulation 33(1)(d) of the SEBI LODR, the Statutory Auditors have confirmed that they are subjected to the peer review process of the Institute of Chartered Accountants of India (ICAI) and that they hold a valid certificate issued by the Peer Review Board of ICAI.

Independent Auditors? Report

The Joint Statutory Central Auditors of the Bank viz., M/s R G N Price & Co., Chartered Accountants (Registration No. FRN 002785S) together with M/s Sundaram & Srinivasan, Chartered Accountants (Registration No. FRN 004207S), have audited the accounts of the Bank for the FY 2021- 22 and their Report is annexed. Pursuant to Section 143(3) (i) of the Companies Act, 2013, the Statutory Auditors have also reported on the adequacy and operating effectiveness of the internal financial controls system over financial reporting, which has been enclosed as "Annexure A" to Independent Auditors Report.

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY 2021-22.

During the period under review, no frauds were reported by the Auditors under sub-section (12) of Section 143 of the Companies Act, 2013.

Secretarial audit and secretarial compliance report

In line with Sec 204 of the Companies Act, 2013 and Regulation 24A (1) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Bank has appointed M/s Bapulal Yasar & Associates, Company Secretaries, Madurai to undertake the Secretarial Audit of the Bank for the FY 2021-22. The Bank produced all necessary records to the Secretarial Auditors for smooth conduct of their Audit. The Secretarial Audit Report for the FY 2021-22 is annexed to this report as Annexure - 1.

There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY 2021-22.

Pursuant to regulation 24A (2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI circular No. CIR/CFD/CMD1/27/2019 dated February 09, 2019, the Bank has obtained Secretarial Compliance Report, from the Secretarial Auditors of the Bank on compliance of all applicable SEBI Regulations and circulars/guidelines issued thereunder and the copy of the same was submitted to Stock Exchange within the prescribed timelines.

IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (IND AS)

Reserve Bank of Indias (RBI) guidelines for implementation of Ind AS by Banks in India are awaited. In the interim, Bank has submitted half yearly proforma Ind AS statements as per prescribed RBI guidelines. Further details are given in Schedule 18 - Notes to Account of the Balance Sheet.

COMPLIANCE WITH SECRETARIAL STANDARDS

Your Bank is in compliance with the applicable Secretarial Standards issued by The Institute of Company Secretaries of India during the FY 2021-22.

STATUTORY DISCLOSURES

Disclosures relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, pursuant to Section 134(3)(m) of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014 are detailed as under:

CONSERVATION OF ENERGY

Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation at its branches/offices by installing LED lights in a phased manner. VRF (Variant Refrigerant Flow) AC Units have been installed at Trichy Divisional Office building to save electricity by energy conservation technology. During the FY 202122, Bank had spent 0.35 Crore towards procuring energy conservation equipment.

Your Bank owns a 850 KW Wind Turbine Generator at Govindanagaram, Theni District in Tamil Nadu and the said unit generated 14,41,465 units during the year under review. The Bank is utilising the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also premises of Divisional Office at Chennai.

TECHNOLOGY ABSORPTION

Your Bank has included additional level of security in accessing the core banking solution. Bio-Metric authentication acts as the second/additional level of authentication in addition to the password which is in place. This action envisages better control in accessing the core banking solution.

Bank owned payment gateway:

Bank is now equipped to offer the Payment Gateway services on its own for the merchant customers. The need of having bank owned payment gateway has further emphasised for the new business area of the bank in dealing with various Government Business. A robust near real-time fraud risk monitoring has been put in place to monitor the transactions routed through the payment gateway.

Online Mutual Fund:

Bank is offering the Mutual Funds business in an online mode now to cater the needs of the customers especially the younger generation to avail the services on the go. The solution will help the customers in managing the mutual fund portfolio end-to-end online. In addition, Bank is leveraging various schemes offered by the Asset Management Companies. The solution provides automated advisory services to plan the future of the customers based on their age and need.

Enhancing the financial inclusion:

Bank has tied-up with additional vendors to enhance the coverage of the Financial Inclusion through technology solutions. Instant onboarding of the customers through AADHAAR enabled payment system and the ability to initiate the financial transactions is the unique feature of this solution. In addition, few of the Banking services will also be offered to the customers to cater the financial needs of the customers.

Government related business:

Bank has been permitted to handle Government related business and steps had been taken for acquiring the Government related business. Now, Bank is entitled to collect the Direct and InDirect Taxes on behalf of CBDT / CBIC through appropriate software/business application and the system integration is under process. Your Bank has ventured into a new arena which was earlier handled by the public sector banks only.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Bank continuously supports and encourages the countrys export efforts through its export financing operations. The details on foreign exchange earnings and outgo are furnished in the Foreign Exchange Transactions section that forms part of this report.

MATERIAL EVENTS THAT HAVE HAPPENED AFTER THE BALANCE SHEET DATE

There are no material events/changes and commitments, which affect the financial position of the Bank between the end of the financial year of the Bank and the date of the Directors Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

During the FY 2021-22, no significant and material orders were passed by the Regulators or Courts or Tribunals against the Bank which impacts its going concern status and Banks operations in future.

MAINTENANCE OF COST RECORDS

Being Banking Company, your Bank is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.

EXTRACTS OF ANNUAL RETURN

The Annual Return for the financial year ended March 31, 2022, as required under Section 92 (3) and Section 134(3)(a) of the Companies Act, 2013 is available on the Banks website at https://www.kvb.co.in/investor-corner/annual-general- meeting/.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (31 OF 2016) DURING THE YEAR ALONG WITH THEIR STATUS AS AT THE END OF THE FINANCIAL YEAR

Being a Banking company as a part of its recovery mechanism during the year under review, Bank has filed two cases in NCLT under IBC, 2016 amounting to book value of Rs.402.93 Crore, which are ordered for Liquidation. Further, there are no applications filed against bank under IBC, 2016.

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF

Being Banking Company, the aforesaid provision is not applicable to your Bank.

PARTICULARS OF EMPLOYEES

The information as required under Section 197(12) of the Companies Act, 2013 read with Rules 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as Annexure - 2.

EMPLOYEE STOCK OPTION SCHEME

Your Bank has formulated and adopted Employee Stock Option Schemes to provide a platform to employees for participating in the ownership of the Bank and in its long-term growth. Bank uses stock options as a compensation tool to attract and retain critical talent and encourage employees to align individual performances with that of Banks objectives. Currently the Bank has the following Schemes in compliance with the provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEBSE Regulation") erstwhile SEBI (Share Based Employee Benefits) Regulations, 2014.

• Karur Vysya Bank Employees Stock Option Scheme 2011 ("KVB-ESOS-2011")

• Karur Vysya Bank Employees Stock Option Scheme 2018 ("KVB-ESOS-2018")

During the year, the Employee Stock Option Schemes of the Bank are aligned with the prevailing provisions of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SEBI SBEB & SE Regulations") keeping the basic structure, terms and conditions of the scheme as originally approved by the shareholders of the Bank.

During the period under review, your Bank has granted 1,35,710 options under KVB-ESOS-2018 to Key Managerial Personnel (Managing Director & CEO and President & COO) of the Bank towards their variable pay as a part of noncash component. The said variable pay is in accordance with Banks Compensation policy read with Reserve Bank of India circular DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 04, 2019. Further Bank has allotted 6,89,964 Equity Shares of face value Rs.2 each to the employees who have exercised their options from the grants made in the year FY 2019-20 under KVB ESOS 2011 Scheme and KVB ESOS 2018 Scheme.

Your Banks Secretarial Auditors, M/s Bapulal & Yasar Associates, Company Secretaries, have certified that the Banks above-mentioned Schemes have been implemented in accordance with the Resolutions passed by Shareholders for 2011 & 2018 Schemes and the SEBI SBEB & SE Regulations. Disclosures as required under the SEBI SBEB & SE Regulations are available on Banks website at https://www.kvb.co.in/investor-corner/other-disclosures/ esos-disclosures/.

TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND

As per Sections 124 and 125 of the Act read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (‘IEPF Rules), the unpaid dividend remaining unclaimed for consecutive period of 7 years and its corresponding shares are liable to be transferred to the Investor Education and Protection Fund (‘IEPF). The said requirement does not apply to shares in respect of which there is a specific Order of Court, Tribunal or Statutory Authority, restraining transfer of the shares. Further details are provided in the Corporate Governance Report that forms part of this Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Bank continues to work on the lines that the Founding Fathers envisaged for delivering back to society across its areas of operation. What was defined as "Charity Account" in the Articles of Association of the Bank written in 1916 at the time of establishment of the Bank has emerged as the modern day Corporate Social Responsibility.

A Corporate Social Responsibility (CSR) Committee has been constituted in accordance with the provisions of Section 135 of the Companies Act, 2013, read with the amended Companies (Corporate Social Responsibility Policy) Rules, 2014.

During the current year, your bank has CSR obligation of Rs.7.59 Crore. Further in line with the CSR policy of the Bank, spends have been spread across the core focus areas viz., health, sanitation, clean drinking water, education, skill development and environment protection. Your Bank has also taken up projects in areas of animal welfare, women empowerment and COVID related support, as defined in Schedule VII of the Companies Act.

The brief outline of the CSR policy of the Bank, overview of the projects taken up by the Bank and other mandatory disclosures are annexed to this Report as Annexure - 3.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORTING (BRSR)

ESG has been the forefront of your Banks business activities. We strongly believe the significance of environmental, social and governance aspects on The Banks performance and have been proactively taking initiatives in this regard.

Due credit must be given to the Indian capital markets regulator, The Securities & Exchange Board of India (SEBI) for taking the lead in putting together the Business Responsibility & Sustainability Reporting (BRSR) framework. We believe it is the right step towards making ESG disclosures consistent and measureable across entities to facilitate better benchmarking.

Regulation 34(2)(f) of the SEBI LODR read with SEBI circular SEBI/HO/CFD/CMD-2/P/CIR/2021/562 states that with effect from the FY 2022-23, filing of BRSR shall be mandatory for the top 1000 listed companies (by market capitalisation) and shall replace the existing BRR. Filing of BRSR is voluntary for the FY 2021-22. In view of our measures to adapt to the regulatory requirements and build transparency among our stakeholders, we have published our first business responsibility and sustainability report for FY 2021-22.

The Business Responsibility & Sustainability Reporting (BRSR) of the Bank for the FY 2021-22 is annexed to this Report as Annexure - 4.

BOARD MEETINGS

The composition of the Board of Directors is in compliance with all the relevant applicable statutory regulations. The Board meets at regular intervals to discuss and decide on Banks business policy and strategy, apart from other items of business. During the year under review, Fourteen Board Meetings were conducted and the relevant periodicity for holding the meetings was complied. The schedule of the meetings of the Board is circulated in advance to the Members of the Board, for their consideration and approval. Details of the composition of Board, Meetings held and attendance of the Directors at such Meetings are provided in the Corporate Governance Report which forms part of Annual Report.

BOARD EVALUATION

Pursuant to Section 134(3) (p) the Companies Act, 2013, Regulation 17(10) of SEBI (LODR) Regulations,2015 and other applicable regulations, Board has carried out annual evaluation of its own performance (Board as a whole), all its Directors, Committees of the Board, its Non-Executive Chairman and MD & CEO. The manner of evaluation conducted during the FY 2021-22 is furnished in the Corporate Governance Report that forms part of this Annual Report.

BOARD OF DIRECTORS

The Board comprises of Eleven Directors as on the date of this report, with rich experience and specialised knowledge in various areas of relevance to the Bank including Accountancy, Agriculture and Rural Economy, Trade & Commerce, Banking, Co-Operation, Economics, Finance, Law, MSME, Information Technology, Payment & Settlement Systems, Commerce, Human Resources, Risk Management, Business Management, Strategic Planning, Credit Recovery, Marketing, Credit, Cyber Security, Treasury Operations, Audit, Taxation, Governance, Supervision and Business Analytics.

Appointment

Dr Meena Hemchandra (DIN: 05337181), was co-opted as an Additional Director of the Bank under ??Non-Executive Independent Director" category by the Board in its meeting held on May 26, 2022, pursuant to the recommendation of the Nomination and Remuneration Committee, subject to the approval of the Shareholders of the Bank.

Dr Meena Hemchandra is a career central banker with over 35 years of experience in various departments of the Reserve Bank of India. She was Executive Director of Reserve Bank of India in-charge of Supervision of Banks, Non-Banking Finance Companies and Cooperative Banks from June 2015 till her superannuation in November 2017. Dr Meena Hemchandra is representing Majority Sector - "Economics, Banking, Agricultural and Rural Economy, Finance, Business Management, Treasury Operations, Payments & Settlements System, Information Technology, Cyber Security, Risk Management, Supervision and Business analytics" on the Board.

Approval of the shareholders is being requested for the appointment of Dr Meena Hemchandra as Non-Executive Independent Director of the Bank.

Further, Board has recommended the candidature of Dr Meena Hemchandra for the position of Non-executive Independent (part-time) Chairperson of the Bank to Reserve Bank of India for their approval. A resolution relating to noting of Boards recommendation and approval for remuneration has been placed before this Annual General Meeting.

Shri Murali Ramaswami (DIN: 08659944), was co-opted as an Additional Director of the Bank under "Non-Executive Independent Director" category by the Board in its meeting held on June 14, 2022, pursuant to the recommendation of the Nomination and Remuneration Committee, subject to the approval of the Shareholders of the Bank.

Shri Murali Ramaswami is a seasoned banker having wide experience for more than 30 years. He started his career with Vijaya Bank and rose to the position of Executive Director. He has also worked as an Executive Director in Bank of Baroda during the year 2019-2020. Shri Murali Ramaswami is representing Majority Sector - "Banking, Credit, Finance, Accountancy, Marketing, Payments & Settlements System, Information Technology and Treasury Operations" on the Board.

Approval of the shareholders is being requested for the appointment Shri Murali Ramaswami as Non-Executive Independent Director of the Bank.

Opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the independent directors appointed during the year:

Board has appointed Dr Meena Hemchandra (DIN: 05337181) and Shri Murali Ramaswami (DIN: 08659944), as Additional Directors of the Bank under "Non-Executive Independent Director" category based on the extensive due diligence carried out by the NRC on the declarations submitted by them in terms of fit & proper criteria and other applicable statutory guidelines issued by Reserve Bank of India from time to time.

Board noted that Dr Meena Hemchandra is a career central banker with over 35 years of intense experience in various departments of Reserve Bank of India and retired as Executive Director in RBI. Further Shri Murali Ramaswami is a seasoned banker having more than three decades of experience in banking domain with diverse & distinct experience of heading various facets of Banking and retired as Executive Director in Bank of Baroda.

Adverting to the above, in the opinion of the Board the Independent Directors appointed during the year possess requisite qualifications, proficiency, expertise, track record, integrity, independence, vast and rich experience in the field of Banking.

Retirement by rotation

Shri R Ramkumar (DIN: 00275622), Non-Executive Non-Independent Director, retires by rotation at the ensuing 103rd Annual General Meeting (AGM) and being eligible, offers himself for re-appointment in terms of Sec 152 of the Companies Act, 2013. He hails from the promoters family and was on the Board since June 25, 2018 and would be representing "Minority Sector- Business Management, Finance, Human Resources"

Approval of the shareholders is being requested for re-appointment of Shri R. Ramkumar as Non-Executive Non-Independent Director of the Bank liable to retire by rotation.

The brief profile and details in terms of Regulation 36 (3) of SEBI LODR and the Secretarial Standard on General Meetings, in respect of the Directors seeking appointment/ re-appointment has been annexed to the Notice of the ensuing AGM and also in the Corporate Governance Report that forms part of this Annual Report.

Retirement on completion of tenure Shri N S Srinath (DIN: 01493217), Non-Executive (Independent) Part-time Chairman of the Bank, demitted office consequent to completion of his three years tenure at the close of office hours on May 26, 2022. Board places on record its sincere appreciation for the valuable services rendered by him during his tenure as Director of the Bank as also as the Chairman of the Bank.

Dr V G Mohan Prasad (DIN: 00002802), Non-Executive Independent Director of the Bank, demitted office at the close of office hours on June 14, 2022 consequent to completion of his eight years tenure in terms of Section 10A(2A)(1) of the Banking Regulation Act, 1949. Board places on record its sincere appreciation for the valuable services rendered and contribution made by him during his tenure as Director of the Bank.

Apart from the above, there were no changes in the Directors holding office.

KEY MANAGERIAL PERSONNEL

The following are the changes in Key Managerial Personnel ("KMP") of the Bank during the financial year 2021-22:

Shri M D Ramesh Murthy, Chief Financial Officer of Bank demitted the office at the close of the office hours on February 09, 2022 consequent to his resignation.

Shri R Ramshankar has been designated as Chief Financial Officer & Key Managerial Personnel of the Bank effective from February 10, 2022.

Apart from the aforesaid, there were no changes in the KMPs.

APPOINTMENT & REMUNERATION OF DIRECTORS

Criteria for determining qualifications, positive attributes for appointment/ Re-appointment of Directors

Pursuant to provisions of Section 178(3) of the Companies Act, 2013 and relevant guidelines of RBI, the Nomination and Remuneration Committee (NRC) formulated the criteria for determining qualifications, positive attributes and independence of a Director to adhere the various provisions and guidelines as detailed below:

• ‘Fit and Proper criteria as per Dr. Ganguly Committee Norms which stipulates age, educational qualification, experience, track record, integrity, etc., and various circular instructions and guidelines issued by Reserve Bank of India from time to time.

• Norms laid down by the Banking Regulation Act, 1949 as amended from time to time which stipulates substantial interest, sectorial representation as per Section 10A(2) (a), restrictions as per Section 16 and 20 of the Banking Regulation Act, 1949, etc.,

• Disqualification/Conflict of Interest of Directors, and other norms as per the provisions of the Companies Act, 2013 and rules made thereunder from time to time.

• Criteria of Independence of a Director as per the provisions of the Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.

• Applicable listing regulations as amended from time to time.

• Articles of Association of the Bank.

• Any other factors as the NRC may deem fit and in the best interest of the Bank and its stakeholders.

The terms and conditions of appointment of Independent Director are available on the website of the Bank at https:// www.kvb.co.in/docs/terms-and-conditions-of-appointment- of-independent-directors.pdf.

Your Banks Nomination and Remuneration Committee (NRC) oversees matters of succession planning of its Directors, Senior Management and also Key Managerial Personnel & the Board of the Bank ensures that proper plans are put in place for orderly succession of appointment to the Board and to Senior Management of the Bank including KMPs.

Policy on remuneration of directors

The remuneration of Directors is governed by the Compensation Policy of the Bank in terms of RBI circular no. DOR.Appt. BC.No.23/29.67.001/2019 20 dated November 04, 2019, which covers the aspects of remuneration payable to Board of Director, Whole Time Directors/ Chief Executive Officers/ Material Risk Takers, KMPs, Control Function Staff and all other employees. This Policy is in tune with the guidelines issued by the Reserve Bank of India, provisions of the Companies Act, 2013 and the SEBI LODR amended from time to time. Your Bank has adopted a board approved compensation policy on the basis of the aforesaid regulatory guidelines and the Policy is available on the Banks website at https://www.kvb.co.in/ docs/investor-compensation-policy.pdf.

DECLARATION BY INDEPENDENT DIRECTORS

Your Bank has received necessary declarations from all the Independent Directors under Section 149(7) read with 149(6) of the Companies Act and Regulation 25(8) read with Regulation 16(1)(b) of the SEBI LODR, that they meet the criteria of independence laid down thereunder. As required under Schedule IV of the Companies Act, 2013, Board has reviewed the declarations submitted by the Independent Directors and opined that, they fulfil all the conditions specified in the Companies Act, 2013 and SEBI LODR, and are independent of the management.

Your Bank has received necessary declarations from all the Independent Directors under Section 149(7) read with 149(6) of the Companies Act and Regulation 25(8) read with Regulation 16(1)(b) of the SEBI LODR, that they meet the criteria of independence laid down thereunder. As required under Schedule IV of the Companies Act, 2013, Board has reviewed the declarations submitted by the Independent Directors and opined that, they fulfil all the conditions specified in the Companies Act, 2013 and SEBI LODR, and are independent of the management.

FAMILIARISATION PROGRAMMES OF INDEPENDENT DIRECTORS

All Directors including Independent Directors are made familiar with their rights, roles and responsibilities in the Bank at the time of appointment and also on a recurrent basis. Details of familiarisation programmes attended by all Directors including Independent Directors are provided at https://www.kvb.co.in/ investor-corner/, pursuant to regulation 46 of SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015. Other details on the same are also covered in Corporate Governance Report forming part of Annual Report.

CORPORATE GOVERNANCE

The details on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under SEBI LODR and the Companies Act, 2013 and the rules made thereunder are deliberated in Corporate Governance Report that forms part of this Annual Report.

A certificate from M/s Bapulal & Yasar Associates, Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under SEBI LODR is annexed to this report.

DIRECTORS? RESPONSIBILITY STATEMENT

Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the Directors Responsibility Statement, it is hereby confirmed that:

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

b) The Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit and loss of the Bank for that period;

c) The Directors had taken proper and sufficient 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 had prepared the annual accounts on a going concern basis;

e) The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; and

f) The Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively.

AWARDS AND ACCOLADES

Your Bank received the following awards during FY 2021-22, majority of the same for implementation of innovative technologies.

1. Best Use of AI/ML & Data Analytics - Joint Winner (Small Banks) - IBA Banking technology Awards, 2021

2. Best IT Risk and cyber Security Risk Initiatives - Joint Runner-up (Small Banks) - IBA Banking technology Awards, 2021

3. Best Cloud Adoption - Winner (Small Banks) - IBA Banking technology Awards, 2021

4. Digi Dhan Award of Excellence for second highest digital transactions for FY 2019-20 - Ministry of Electronics & Information Techology

5. BFSI Silver Award for Digital Solutions including Lending, Mobile Banking & Video KYC - Skoch Group

6. Best Technology Enabler of the Year - ASSOCHAM 8th MSMEs Summit of Excellence

7. Best MSME Bank of the Year - Runner Up (Private Sector Banks category) - ASSOCHAM 8th MSMEs Summit of Excellence

8. Best MSME Friendly Bank (Private Sector), 2021 - Runner up - Chamber of Indian Micro Small & Medium Enterprises

9. Best Innovative Bank (Private Sector) - Runner up - Chamber of Indian Micro Small & Medium Enterprises

10. Excellence in supporting Education and Skill - Special Recognition - ASSOCHSM CSR & Sustainability Awards, 2021

11. Exemplary Community Economic Development Work with sustainable impact - Rotary CSR Award, 2021

12. Second Best Bank Branch in Kerala under Old Private Sector Bank Category - Thrissur branch - State Forum of Bankers Clubs, Kerala

ACKNOWLEDGEMENTS

The Board of Directors place on record their gratitude to the Government of India, Reserve Bank of India, Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), National Stock Exchange and Bombay Stock Exchange, Rating Agencies, Statutory Auditors, Secretarial Auditors, various State Governments & Union Territories and other regulatory authorities in India for their valuable guidance and strong support.

The Board express their sincere thanks to the Banks valued shareholders, esteemed customers, and all other stakeholders and well-wishers for their continued faith, confidence and patronage on us and look forward for their continuous support.

The Board also appreciates entire staff for their sincere and dedicated services rendered for overall performance of the Bank during the year and look forward to their continued cooperation in the realisation of the corporate goals of the Bank in the years ahead.

For and on behalf of the Board of Directors

Dr Meena Hemchandra B Ramesh Babu
Non-Executive Independent (Additional) Director Managing Director & CEO

Place: Karur

Date: July 04, 2022