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Company Information

Home » Market » Company Information

Karur Vysya Bank Ltd.

Sep 26, 09:53
82.45 +0.40 (+ 0.49 %)
 
VOLUME : 7671
Prev. Close 82.05
Open Price 82.20
TODAY'S LOW / HIGH
81.40
 
 
 
82.50
Bid PRICE (QTY.) 82.45 (248)
Offer PRICE (Qty.) 82.65 (211)
52 WK LOW / HIGH
81.20
 
 
 
126.94
Sep 26, 09:44
82.60 +0.20 (+ 0.24 %)
 
VOLUME : 129776
Prev. Close 82.40
Open Price 82.40
TODAY'S LOW / HIGH
81.70
 
 
 
82.60
Bid PRICE (QTY.) 82.50 (1269)
Offer PRICE (Qty.) 82.60 (2016)
52 WK LOW / HIGH
81.10
 
 
 
127.13
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Market Cap. ( ₹ ) 6602.25 Cr. P/BV 1.05 Book Value ( ₹ ) 78.37
52 Week High/Low ( ₹ ) 127/81 FV/ML 2/1 P/E(X) 19.10
Bookclosure 18/08/2018 TTM EPS ( ₹ ) 3.05 Div Yield (%) 2.70
NOTES TO ACCOUNTS
You can view the entire text of Notes to accounts of the company for the latest year
Year End :2017-03 

A. BACKGROUND

The Karur Vysya Bank Limited, incorporated in Karur, India is a publicly held banking company governed by the Banking Regulation Act, 1949 and is engaged in providing a wide range of banking and financial services including commercial banking and treasury operations.

B. BASIS OF PREPARATION

The financial statements are prepared following the going concern concept, on historical cost basis and conform to the Generally Accepted Accounting Principles (GAAP) in India which encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, notified Accounting Standards (AS) issued under Section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the banking industry in India.

Use of Estimates:

The preparation of the financial statements require management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statement and the reported income and expenses during the reported period. The Management believes that the estimates and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately in future periods.

1. INTER BRANCH TRANSACTIONS:

Inter Branch/Office accounts reconciliation has been completed upto 31.03.2017 and all the inter branch entries have been reconciled upto 31.03.2017.

2. BALANCING OF BOOKS:

The books of accounts have been balanced and tallied in all branches of the Bank as on 31.03.2017.

3.1.1 Sale and transfers to / from HTM Category

During the year, the bank has sold Government securities from Held to Maturity (HTM) category exceeding 5% of the book value of investments in HTM category at the beginning of the year.The Bank sold securities aggregating Rs.2,696.83 crore from the HTM category during FY 2016-17, and by sale of securities from HTM category, the Bank has booked a profit of Rs.150.26 crore. An amount of Rs.73.87 crore (being net of tax & statutory reserve) is transferred to capital reserve. As on 31st March, 2017, the book value of SLR investment held under Held to Maturity category was Rs.10,378.52 crore which shows marked to market appreciation of Rs.314.78 crore.

3.1.2 The percentage of SLR investment under Held to Maturity Category as on 31.03.2017 was 18.49 % of Demand and Time Liability of the bank ( previous year 20.51% ) which is within permissible limit as per RBI guidelines.

3.1.3 In accordance with RBI guidelines, securities amounting to Rs.106.76 crore have been shifted from AFS to HTM category and Rs.406.31 crore from HTM to AFS category and the resultant depreciation of Rs.0.93 crore has been charged to Profit and Loss account during the first quarter of the current financial year.

3.1.4 Pursuant to RBI circular FMRD DIRD.10/14.03.002/2015-16 dated May 19, 2016,as amended, the Bank has with effect from November 26,2016 considered its repo / reverse repo transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing Facility (MSF) of RBI as Borrowings/Lendings, as the case may be. Hitherto, the repo/reverse repo transactions were included under Investments. Figures for the previous periods/year have been regrouped/ reclassified to conform to current periods/year classification. The above regrouping/ reclassification has no impact on the profit of the Bank for the quarter/year ended 31st March, 2017 or the previous periods/year.

3.2.1 Disclosures on risk exposure in derivatives: Qualitative Disclosure:

Structure, Organisation, Scope, Nature of risk management in derivatives:

The organization structure consists of Treasury Department which is segregated into three functional areas i.e., front office, mid office and back office.

Rupee derivative deals are executed for hedging or for trading. The risk in the derivatives portfolio is monitored by assessing the Mark to Market (MTM) position of the portfolio on a daily basis and the impact on account of probable market movements. The overall portfolio is operated within the risk limit fixed by the Bank.

Forex derivative deals are offered to clients on back-to-back basis. The outstanding deals are marked to market on monthly basis. The MTM values are informed to the clients every month and margin topped up where required.

The Board reviews the risk profile of the outstanding portfolio at regular intervals.

Accounting:

Accounting Policies as per RBI guidelines have been adopted. The hedge swaps are accounted for like a hedge of the asset or liability. The income / expense on hedge swaps are accounted on accrual basis except where swap transactions whose underlying is subjected to mark to market. Such hedge swaps are marked to market on a monthly basis and the gain / losses are recorded as an adjustment to the designated asset / liability. The Non hedge swaps are marked to market every month and the MTM losses in the basket are accounted in the books while MTM profits are ignored.

Collateral Security:

As per market practice, no collateral security is insisted on for the contracts with counter parties like Banks / PDs etc. For deals with Corporate Clients, appropriate collateral security / margin etc. are stipulated whenever considered necessary.

Credit Risk Mitigation:

Most of the deals are contracted with Banks / major PDs/highly rated clients and no default risk is anticipated on the deals with them.

Dealing in derivatives is centralized in the treasury of the Bank. Derivative transactions are entered into by the treasury front office. Treasury middle office conducts an independent check of the transactions entered into by the front office and ensures compliance with various internal and regulatory guidelines. Back Office undertakes activities such as confirmation, settlement, accounting, risk monitoring and reporting.

The market making and the proprietary trading activities in derivatives are governed by the derivatives policy of the Bank, which lays down the position limits, stop loss limits as well as other risk limits. As far as forex derivatives are concerned, they are undertaken on back-to-back basis only.

Risk monitoring on derivatives portfolio is done on a daily basis. The Bank measures and monitors risk using PVBP (Price Value of a Basis Point) approach. Risk reporting on derivatives forms an integral part of the management information system and the marked to market position and the PVBP of the derivatives portfolio is reported on a daily basis to the top management.

Risk monitoring on forex derivatives is done on a monthly basis. It is reported to the top management and related clients on monthly basis.

* The above divergence is due to two borrowal accounts, of which, one account with an outstanding balance of Rs.175.38 crore was treated as a Standard Asset as on 31.03.2016 by the bank in compliance of the RBI guidelines relating to “Stand Still” clause under the Strategic Debt Restructuring (SDR) scheme, since the scheme was under implementation. As the time limit for implementation of the scheme was complete during the year, the Bank classified this account as NPA. However, in the subsequent inspection by the RBI, the effective date of NPA was deemed as 30th June 2014, thereby treating the same as a divergence as on 31.03.2016.

3.3.1 Disclosures related to Restructured Advances (enclosed separately)

3.3.2 Strategic Debt Restructuring (SDR)

During the year, the Bank has been allotted 9,29,640 number of shares with a face value of Rs.10 /- at the rate of Rs.11.09 per share amounting to a book value of Rs.1.03 crore on account of SDR mechanism in respect of one borrowal account with an aggregate exposure of Rs.30.02 crore under consortium arrangement.

3.4.1. Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the bank.

The Bank has not exceeded the prudential credit exposure limits in respect of Single Borrower Limit and Group Borrower Limit other than food credit.

3.4.2.Unsecured Advances:

The total of advances for which intangible securities such as charge over the rights, licenses, authorisations, etc. have been taken as securities is NIL.

3.5 Disclosure of penalties imposed by RBI:

During the year RBI has levied penalty of Rs.0.01 crore emanated out of deficiencies found while processing the currency notes remitted by currency chests.

4. Disclosure requirement as per Accounting Standards (AS):

I n compliance with the guidelines issued by the RBI regarding disclosure requirements of the various Accounting Standards, the following information is disclosed:

4.1 Net Profit or loss for the period, Prior Period Items and Changes in Accounting Policies (AS-5):

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as per AS-5.

For the preparation of these financial results, the bank has followed the same accounting policies and generally accepted practices adopted for the preparation of audited financial statements for the year ended March 31, 2017.

4.2 Revenue Recognition (AS-9):

Income / Expenditure items recognized on cash basis are either not material or does not require disclosure under AS-9.

4.3. Employee Benefits (AS -15) :

The Bank is following AS-15 (Revised 2005) ‘Employee Benefits’ as under:

a. In respect of Contributory Plan, viz., Provident Fund, the Bank pays fixed contribution at pre-determined rates to a separate trust, which invests in permitted securities. The obligation of the Bank is limited to such fixed contribution.

b. In respect of Defined Benefit Plans, viz., Gratuity and Pension, provision has been made based on actuarial valuation as per the guidelines.

c. In respect of Leave Encashment, provisioning requirement has been made based on actuarial valuation.

The disclosure requirements as per the Accounting Standards are given below:

4.4 Accounting for Taxes on Income (AS-22):

The Bank has recognized Deferred Tax Asset / Liability (DTA/DTL) and has accounted for the Net Deferred Tax as on 31.03.2017.

4.5. Impairment of Assets (AS - 28) :

In the opinion of the Management, there is no impairment of its Fixed Asset to any material extent as at 31.03.2017 requiring recognition in terms of Accounting Standard 28.

4.6. The Bank has deposited an amount of Rs.251.39 crore towards disputed tax liability. In the opinion of the Bank, no provision is considered necessary based on favourable decisions by various courts.

5.1 Draw Down from Reserves General Reserve

In terms of RBI circular DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016, the bank has debited to General Reserve an amount of Rs.185.07 crore, being unamortised amount of loss on sale of assets to ARCs during the Financial Year 2015-16. (Refer Note No. 3.4.4)

5.2 Disclosure of Letter of Comfort (LOCs) :

The amount of Letter of Comfort issued during the year 2016-17 was Rs.3664.13 crore (Previous year Rs.3395.57 crore) and outstanding as on 31.03.2017 was Rs.1284.61 crore (Previous year Rs.1447.19 crore)

5.3 Provision Coverage Ratio (PCR)

The Provision Coverage Ratio as on 31.03.2017 is 57.83%.

5.4 Bancassurance Business:

The bank has received an amount of Rs.9.36 crore (Life Insurance Rs.6.66 crore and Non-Life Insurance Rs.2.70 crore) towards fee/ remuneration in respect of the bancassurance business undertaken during 01.04.2016 to 31.03.2017.

5.5 Off-balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

NIL

5.6 Unamortised Pension and Gratuity Liabilities

NIL

5.7 Disclosures on Remuneration Qualitative Disclosure

(a) Information relating to the composition and mandate of the Nomination & Remuneration (NRC) Committee

Nomination and Remuneration Committee of the Board consists of five directors and its composition complies with RBI guidelines, provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

The mandate of the Nomination & Remuneration Committee includes:

Recommendation of appointment/ reappointment of Directors, MD & CEO/WTD of the Bank.

Recommending to the Board a policy relating to the remuneration for the MD & CEO/WTD, Non-Executive Independent (Part-time) Chairman of the Bank and President & COO.

Framing of guidelines for the ESOS and considering granting of ESOS administering and supervising the ESOS with particular reference to quantum of options to be granted, grant price, vesting period, exercise period etc., to the eligible employees.

No external consultants’ advice had been sought by the Bank in the remuneration process.

Compensation policy of the Bank, approved by the Board, pursuant to the guidelines issued by RBI. The policy is applicable to the MD & CEO/WTD, Non-Executive Independent (Part-time) Chairman and President & COO. All other employees up to Scale VII cadre are covered under Industry level Bi-partite Settlements of IBA.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy

NRC is entrusted with the responsibility of recommending to the Board an appropriate compensation payable to the Non-Executive Independent (Part-time) Chairman, MD & CEO/WTD and the President & COO in the light of the guidance from the regulator from time to time.

The Compensation payable to MD & CEO/ WTD of the Bank is divided into fixed and variable components. The fixed remuneration represents a significant proportion of total remuneration taking into account all relevant factors including the prevalent industry practices. Variable pay shall relate to the performance of the Bank and there is proper balance between fixed pay and variable pay. Variable pay must be paid on the basis of achievement of certain basic targets such as reaching business figures including net profits and other qualitative factors taking into account the extraordinary items, appropriate risk management and efficient consumption of capital and comparison of results with industry performance.

As the Bank is a party to the Bipartite settlements of IBA, the compensation of staff engaged in control functions like Risk and Compliance are covered under these Bipartite settlements which cover all employees upto the Scale VII cadre.

The Nomination and Remuneration Committee of the Board reviewed the Compensation policy of the Bank on 21.03.2017. There were no changes made in the Compensation policy during the year.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks

NRC may use a wide variety of measures of credit, market and liquidity risks in implementation of risk adjustment. The risk adjustment methods should preferably have both quantitative and judgmental elements. Bank has system of measuring and reviewing these risks.

The risk parameters used for setting of performance objectives and for measuring performance which includes besides financial performance, adherence to internal processes and compliance. Compensation is effectively aligned in both fixed and variable pay. There is a proper balance between fixed and variable pay. Bank shall not offer any guaranteed bonus based on its performance in tune with the sound risk management principles. The Bank shall not grant any severance pay to the MD & CEO/ WTD and Bank shall not provide any facility or fund or permit MD & CEO/ WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration Bank would ensure that the compensation is adjusted to all types of risk, symmetrical with risk outcomes as well as sensitive to the time horizon of risk.

The variable pay could be in cash, stock linked instruments or a mix of both. Variable pay shall relate to the performance of the Bank.

Variable pay is considered only for MD & CEO/WTD of the Bank. Variable pay shall not exceed 40% of the fixed pay in any year.

For the Part-time (Non-Executive) Chairman of the Bank, only fixed pay/salary is payable apart from the sitting fees payable for attending the Board or Board Committee Meetings.

In the event of negative growth of the bank and or the relevant line of business in any year, the deferred compensation shall be subjected to malus and clawback arrangements in tune with the RBI guidelines.

(e) A discussion of the bank’s policy on deferral and vesting of variable remuneration and a discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting

For MD & CEO/WTD: If the variable pay is significant, then the bank would defer the payment over a period of three years.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms

The Bank has paid only fixed remuneration to MD & CEO/WTD for the year 2016-17 as per RBI approval.

NRC may recommend a reasonable number of Stock Options under the ESOS to MD & CEO/WTD while granting ESOS as per SEBI Regulation. ESOS shall not form part of the total compensation of MD & CEO/WTD as per the Compensation Policy.

The Bank shall not grant any severance pay (other than the terminal benefits and gratuity as per the provisions) to the MD & CEO/WTD.

Bank shall not provide any facility or funds or permit MD & CEO/WTD to insure or hedge his/her compensation structure to offset the risk alignment effects embedded in the compensation package.

5.8 Disclosures relating to Securitisation

The bank has not sponsored any SPVs for Securitization transactions.

5.9 Credit Default Swaps

Bank has not initiated any trade in Credit Default Swaps.

5.10 Intra Group Exposures

NIL

5.11 Provision for Unhedged Forex Exposure :

The Bank has made a provision of Rs.1.54 crore (Previous Year Rs.1 crore) towards unhedged forex exposure for its clients for the year ended 31.03.2017.

5.12 During the financial year 2016-17, the Bank has not granted any stock options.

6.1 Qualitative disclosure around LCR

The LCR promotes short term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.

Objective:

The LCR standard aims to ensure that a bank maintains an adequate level of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario specified by supervisors. At a minimum, the stock of liquid assets should enable the bank to survive until day 30 of the stress scenario, by which time it is assumed that appropriate corrective actions can be taken.

The LCR requirement is binding on banks from January 1, 2015; with a view to provide a transition time for banks, the requirement has been fixed at minimum 60% for the calendar year 2015 i.e. with effect from January 1, 2015 and rise in equal steps to reach the minimum required level of 100% from January 1, 2019 as per the time line given below:

Composition of HQLA:

- Cash in hand

- Excess CRR balance as on that particular day

- Excess Government Securities in excess of minimum SLR requirement

- Government Securities within the mandatory SLR requirement to the extent allowed by RBI under MSF (Presently to the extent of 2% of NDTL as allowed for MSF)

- Facility to avail liquidity for liquidity coverage ratio at 8% of NDTL

- AAA rated bonds and AA- & above bonds and adding marketable securities representing claims guaranteed by sovereigns having risk weights higher than 20% but not higher than 50%

- Common equity shares not issued by the bank/financial institution/NBFC or any of its affiliated entities and included in NSE CNX Nifty and / or S & P BSE Sensex indices.

For FY 2015-16, the values were arrived based on simple averages of monthly observations over the previous quarter. (i.e. the average is calculated over a period of 90 days.)

As specified in the RBI Circular RBI/2014-15/529 DBR.No.BP.BC.80/21.06.201/2014-15 dated March 31, 2015 “Prudential Guidelines on Capital Adequacy and Liquidity Standards - Amendments”, for FY 2016-17 upto Q3, the values were arrived based on simple averages of monthly observations while for Q4(i.e. from 01/01/2017 to 31/03/2017) the values were calculated simple averages on daily observations. After considering all the 4 quarters average values, the “Total un-weighted Values (average)” and “Total weighted Values (average)” has been calculated.

7. Basel III disclosures

In accordance with RBI circular DBOD. No. BPBC.1/21.06.201/2015-16 dated 01.07.2015, read together with RBI circular DBR. No.BP.BC.80/21.06.201/2014-15 dated 31.03.2015, Banks are required to make Pillar 3 disclosures under Basel III capital regulations.

Accordingly, Pillar 3 disclosures under Basel III capital regulations have been made available on the Bank’s website at the following link -http://www.kvb.co.in/footer/pillarIII_disclosures.htm

These disclosures have not been subjected to audit by the Statutory Central Auditors.

8. Corporate Social Responsibility

The bank has incurred an amount of Rs.1.60 crore towards Corporate Social Responsibility and is in the process of identifying various projects and its appropriateness for spending in future.

9. UDAY Scheme

In compliance with RBI communication DBR.BP.No.11657/21.04.132/2015-16 dated 17th March 2016, the investments in DISCOM bonds of Rs.24.33 crore (which were envisaged to be converted into SDL) have been classified as Non Performing Investments and provision of Rs.6.08 crore has been made therefor.

10. The Bank had made a provision of Rs.35.52 crore being 15% of the outstanding food credit availed by the State Government of Punjab as at 31.03.2016. During the year ended March 31, 2017 an excess provision of Rs.12.68 crore was written back.

11. The Bank was grouping loss on sale of assets to ARC under Operating Expenses upto December 2016. However, from the quarter ended 31.03.2017, it has been regrouped under Provisions & Contingencies. Accordingly, the figures of the previous year have also been regrouped.

12. Status with regard to Ind AS Implementation

As per RBI notification DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, Bank has to disclose the strategy for Ind AS implementation, including the progress made in this regard.

Implementation Strategy

The Bank has formulated a Steering Committee for implementation of Ind AS. The Steering Committee of Bank is analyzing the current accounting framework and Ind AS for changes in significant accounting policies, preparation of disclosures, documentation.

Progress on Ind AS implementation.

The bank has submitted Proforma Ind AS Financial Statement to RBI for the half year ended September 30, 2016 on 31st December 2016.

13. Figures of the previous year have been regrouped/rearranged/reclassified wherever necessary.