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Company Information

Home » Market » Company Information

Karur Vysya Bank Ltd.

Aug 21
59.60 +0.75 (+ 1.27 %)
 
VOLUME : 20204
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59.85
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55.45
 
 
 
99.70
Aug 21
59.70 +0.85 (+ 1.44 %)
 
VOLUME : 399837
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59.90
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Market Cap. ( ₹ ) 4771.94 Cr. P/BV 0.74 Book Value ( ₹ ) 80.35
52 Week High/Low ( ₹ ) 100/55 FV/ML 2/1 P/E(X) 22.63
Bookclosure 18/07/2019 TTM EPS ( ₹ ) 2.98 Div Yield (%) 3.73
DIRECTOR'S REPORT
You can view full text of the latest Director's Report for the company.
Year End :2019-03 

DIRECTORS' REPORT

To the Members

Your Directors are immensely pleased to present the 100th Annual Report of business and operations of your Bank together with audited statement of accounts for the financial year ended 31st March 2019.

Key Performance Indicators

Your Bank achieved reasonable growth in its operations during the year under review. The Indian economic environment, while exhibiting its traditional robustness, still had to contend with pockets of stress - e.g. increased asset quality related issues, liquidity driven issues arising from Non-bank lenders being unable to access professional markets which in turn had a knock on effect on the economy in general. In addition, the year saw a heightening of risks associated with cyber security. Under these circumstances, your Bank made significant progress as highlighted below:

Particulars

31.03.2019 (Rs in Cr)

31.03.2018 (Rs in Cr)

Deposits

59,867.95

56,890.09

Advances

50,615.66

45,973.14

Investments

15,136.52

15,992.25

Total Income

6,778.59

6,599.59

Total Expenditure

5,067.81

4,822.26

Operating Profit

1,710.78

1,777.32

Net Profit

210.87

345.67

Total Business

The total business of your Bank reached Rs 1,10,483.61 Cr as on 31st March 2019 as compared to Rs 1,02,863.23 Cr of previous year with a growth of 7.41%.

Deposits

Your Bank's Gross Deposits improved to Rs 59,867.95 Cr as on 31st March 2019 from Rs 56,890.09 Cr of previous year, by registering a growth of 5.23%.

Term deposits increased by 4.07% to Rs 41,952.97 Cr from Rs 40,313.14 Cr of previous year, while Savings Bank deposits improved by 10.01% to Rs 12,101.39 Cr from Rs 11,000.57 Cr and other demand deposits improved by 4.25% to Rs 5,813.59 Cr from Rs 5,576.38 Cr of previous year. Total CASA deposits of your Bank grew by 8.07% to Rs 17,914.98 Cr from Rs 16,576.95 Cr of previous year.

Advances

Credit portfolio grew by 10.10%, (which was marginally lower than that of the industry), and crossed the Rs 50,000 Cr land-mark during the year to Rs 50,615.66 Cr, up from Rs 45,973.14 Cr during the previous year. Out of which, Priority sector advances of the Bank improved by 6.02% to Rs19,684.52 Cr from Rs18,567.61 Cr of previous year. It constitutes 43.01% of Bank's Adjusted Net Bank Credit (ANBC) as against the statutory mandate of 40%.

Classification of Advances Portfolio

Particulars

March 2019 (Rs in Cr)

March 2018 (Rs in Cr)

Y-o-Y Growth %

Commercial

17,056

16,095

5.97

Corporate

14,169

14,397

(1.58)

Agriculture

8,113

7,861

3.21

Retail (Personal Banking)

11,278

7,620

48.01*

Total Advances

50,616

45,973

10.10

* Y-o-Y growth is 24.37% excluding Inter-Bank Participatory Certificates (IBPC)

Agriculture Advances

Your Bank's average Agriculture Advances in terms of RBI guidelines stood at Rs 8,345.83 Cr as on 31st March 2019, which constitutes 18.82% of ANBC, as against the regulatory stipulation of 18%. Average advances to micro enterprises and weaker sections stood at 9.71% and 11.93% respectively. Your Bank has achieved the targets stipulated as per regulatory guidelines under priority sector, agricultural lending and weaker section advances.

Asset Quality

Asset quality parameters, on an industry-wide basis, continue to be stressed. This is despite resolution processes - for large exposures - improving during the period. Your Bank has taken many steps to improve asset quality. Starting with ensuring that new loans are underwritten using the most up-to-date techniques

- including but not limited to the use of statistically validated score-cards with overlays for customer authentication and fraud control - to enhancing collections capabilities across customer segments, are actions that your Bank has taken over this year. This has resulted in reduction in stressed accounts (SMA 1/2

- i.e. those that have not paid for greater than 30 days but less than 90 days) to levels significant below historical levels. This has been achieved by creating collections/recovery mechanisms -Asset Recovery Branches, Tele-calling Capabilities, Enhanced Collection Systems - and greater managerial focus. This has also enabled our branches to focus more on business by improving collections/recovery efficacy.

Risk acceptance processes in the bank have been reviewed and changed to ensure that the underwriting processes are effective. This has been achieved in the following ways: first, by creation of statistically validated score-cards that rely on validate-able information; second, by greater use of Credit Bureau and other validated information sources; third, by restructuring and enhancing the Risk Department to enable it more effectively oversee risk; fourth, by reducing and limiting single party exposure so as to avoid event risks of the nature observed in the Corporate Book. Whilst newer vintages of loans are performing significantly better than older vintages - on a like for like basis

- older vintages still contribute to a greater share of the current balances. The latter fact has an impact on NPA accretion for the present; however, such impact reduces with time.

During the year, your Bank's Corporate and Commercial portfolios experienced high NPA formation (Gross Slippages). However, the reduction in stressed assets (i.e. SMA 1/2) points to movement in the right direction from a portfolio quality perspective. Bank experienced higher slippages to Gross Non-Performing Assets (Gross NPA stood at 8.79% in FY 2018-19 as against 6.56% of previous year) mainly due to slippage in Corporate/Consortium and Commercial accounts. Other portfolios - e.g. Retail and Agriculture - continued to perform well. It may be noted that the highest growth asset segment for the Bank was Retail, during the period.

The Gross and Net NPA stood at Rs 4,449.57 Cr and Rs 2,420.34 Cr for the FY 2018-19 as against Rs 3,015.76 Cr and Rs 1,862.83 Cr of previous year. The Bank has increased its Provision Coverage Ratio (PCR) by 36 basis point to 56.86% as against the last fiscals' 56.50%. The Bank has recorded a Cash recovery of Rs 440.84 Cr during FY 2018-19 as against Rs 179.09 Cr of previous year.

Senior Executives of your Bank had taken initiative to handle high value accounts as a special task and have monitored the progress in recovery.

The Bank had delegated requisite powers to Branch Heads and Divisional Heads to make quick decisions for speedy recovery from all those small value accounts by offering one time settlements to all the eligible accounts. Various OTS adalats and camps have been conducted to offer quick settlements and ensured recovery subsequently.

e-Auctions of immovable & movable properties secured to the Bank were carried out throughout the year and special thrust was given in taking physical possession of immovable properties by moving application before the concerned authority under SARFAESI Act.

As a part of improving its recovery mechanism the Bank had also utilized various legal tools and also moved DRT wherever it is required for obtaining orders in favour of the Bank.

Large and high value accounts had been referred to NCLT as directed by RBI and few have been resolved and few more are in the process. Resolutions through the IBC route -where they have taken place expeditiously - give banks an opportunity to increase the usage of this new mechanism.

As mentioned earlier, to enhance collections efficacy in Retail/Small Ticket Commercial loans, your Bank has started a centralized outbound calling facility for pre-delinquent, delinquent and NPA accounts. This has helped to improve portfolio performance. Your Bank has enhanced loan monitoring and recovery efforts. Bank has witnessed good reduction in SMA-1 and SMA-2 during FY 2018-19.

Disclosure on Divergence in Asset Classification and Provisioning

In terms of the RBI circular DBR.BPBC.No.32/21.04.018/2018-19 dated 1st April 2019, banks are required to disclose the divergences in asset classification and provisioning consequent to RBI's annual supervisory process in their notes to accounts to the financial statements, wherever either or both of the following conditions are satisfied: (a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period and (b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period. Since the divergence for the year 2017-18 is lesser than the threshold prescribed above, no disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI's annual supervisory process for FY 2017-18.

Investments

The investment portfolio of the Bank stood at Rs 15,136.52 Cr as on 31st March 2019 as against Rs 15,992.25 Cr of previous year. The average investment stood at Rs 16,364.93 Cr as on 31st March 2019. The investment portfolio composition is consistent with the corporate requirement, risk appetite and investment policy of the Bank.

Interest income earned on investments was Rs 1,150.59 Cr for the FY 2018-19 as against Rs 1,122.93 Cr of previous year, by registering a growth of 2.46%. Profit on sale of investments was Rs 70.48 Cr for the FY 2018-19 as against Rs 101.08 Cr of previous year. With a view to prevent large volatility, the portfolio was downsized and modified duration was reduced in AFS & HTM portfolio. Liquidity position was comfortable throughout the FY 2018-19.

Foreign Exchange Transactions

During the year under report, the merchant turnover of the Bank stood at Rs 26,256 Cr as against Rs 26,679 Cr of previous year. Export credit declined by 25.55% to Rs 1,294 Cr for the FY 2018-19, as against Rs 1,738 Cr of previous year.

In the FY 2018-19, the total Income earned through forex transactions declined by 19.76% to Rs 81.52 Cr as against Rs 101.60 Cr for the previous year. Out of the total income earned, exchange profit accounted for Rs 41.85 Cr and Commission & others accounted for Rs 39.67 Cr.

While Exchange income remained flat, decline in commission & other income was a result of drop in interest & other income on customer facilities such as Buyers Credit coupled with reduction in business in specific industries - e.g. timber - and also as a consequence of revised business models which envisaged reduction and/or limiting the exposure levels in the corporate segment.

Income

The interest income of your Bank has increased by Rs 116.17 Cr and stood at Rs 5,815.82 Cr for the FY 2018-19. Net Interest Income of the bank increased from Rs 2,298.11 Cr to Rs 2,362.82 Cr, by registering a growth of 2.82%.

Non-Interest Income for the FY 2018-19 grew by 6.98% to Rs 962.77 Cr from Rs 899.93 Cr of previous year. Yield on advances declined from 10.29% to 9.75% and Yield on investment increased from 7.00% to 7.03%.

Expenditure

The interest expenditure of your Bank increased from Rs 3,401.54 Cr to Rs 3,453.00 Cr for the FY 2018-19. Operating expenses increased from Rs 1,420.72 Cr to Rs 1,614.81 Cr for the FY 2018-19, registering an increase of 13.66% (Rs 194.09 Cr), owing to higher establishment expenses.

Cost of Deposits of the Bank stood at 5.80% for FY 2018 -19 as against 5.99% of previous year, a decrease by 0.19%. In spite of the fact of increase in total deposit by 5.23%, your Bank aggressively reduced Cost of Deposits by sourcing low cost/ no cost deposits during the year under report. Your Bank's Net Interest Margin (NIM) decreased from 3.86% to 3.67% and the Spread decreased from 3.22% to 2.90% for FY 2018-19.

Profit

The operating profit of your Bank for the FY 2018-19 was Rs 1,710.78 Cr as against Rs 1,777.32 Cr of previous year and the net profit of the Bank declined to Rs 210.87 Cr as against Rs 345.67 Cr of previous year, due to increase in operating expenses and provisioning requirements.

Appropriations

During the year under report, your Bank has appropriated net profit of Rs 210.87 Cr along with Rs 1.70 Cr brought forward from the previous year, aggregating to Rs 212.57 Cr as under:

Appropriation - Transfer to

Amount (Rs in Cr)

Statutory Reserve

52.80

Capital Reserve

22.17

General Reserve

22.50

Investment Fluctuation Reserve

30.53

Special Reserve

25.00

Balance carried to Balance Sheet*

59.57

'Including proposed Dividend & Dividend distribution tax amount of Rs 57.82Cr.

Dividend

Bank had formulated Dividend Distribution Policy as per the requirements of Regulation 43A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, ('Listing Regulations'). The objective of the Policy is to establish the parameters to be considered by the Board before declaring or recommending dividend. The Policy endeavours to strike an optimum balance between rewarding shareholders through dividend and ensuring that sufficient funds are retained for growth of the Bank. Bank has a consistent track record in dividend distribution. The dividend policy of the Bank is available in Bank's website and can be accessed at https://www.kvb.co. in/docs/dividend-distribution-policy.pdf.

Consistent with this policy and in recognition of the overall performance during the year under review, your Directors are pleased to recommend a dividend of Rs 0.60 per Equity Share of face value of Rs 2 each (i.e., 30%) for the FY 2018-19, payable to the shareholders whose name appear in the Register of Members as on the Record Date. The total dividend payment works out to ? 47.96 Cr excluding dividend tax and the pay-out ratio works out to 22.74% excluding dividend tax. The dividend is subject to the approval of the shareholders at the Annual General Meeting. This dividend will be subject to dividend distribution tax and is to be paid by the Bank. In terms of revised Accounting Standards (AS)-4 'Contingencies and Events occurring after the Balance sheet date'as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend & tax thereon, and the same is included in the balance of profit for the year ended 31st March 2019. However, the effect of the proposed dividend including tax on dividend aggregating to ? 57.82 Cr has been reckoned in determining capital funds in the computation of capital adequacy ratio as at 31st March 2019.

Share Capital

The Authorised Capital of the Bank is ? 200.00 Cr with 100 Cr Equity Shares of face value of Rs 2/- each and the Paid-up Capital of the Bank stood at Rs 159,86,21,894 consisting of 79,93,10,947 Equity Shares of face value of Rs 2/- each as on 31st March 2019.

During the year under report, Directors of your Bank recommended the issue of Bonus shares in the ratio of one share for every ten equity shares held as on the record date (i.e. August 18, 2018) which was duly approved by the shareholders in the 99th Annual General Meeting and 7,26,63,937 shares were allotted on 20th August 2018. Consequent to resolution of disputes, Bank has allotted 7,639 shares pertaining to various Right and Bonus Issues held in abeyance category. Pursuant to the allotments, paid-up share capital increased from Rs 145.32 Cr to Rs 159.86 Cr.

Net owned funds of your Bank increased by Rs 153.27 Cr to Rs 6,364.98 Cr from Rs 6,211.71 Cr of previous year. The market capitalization of your Bank as on 31st March 2019 stood at Rs 5,699.09 Cr.

Earnings per share/Book Value

The earnings per share (Basic) stood at ? 2.64 and the book value per equity share of Rs 2/- each fully paid stood at ? 79.56 as on 31st March 2019.

Debt Instruments & Credit Rating

The Bank had issued Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) Bonds to the value of Rs 150.00 Cr in September 2009. ICRA Limited had revised the rating of Unsecured Redeemable Non-convertible Subordinated (Lower Tier II) debt instruments as "ICRA A" (Outlook on Long Term: Stable) from "ICRA A " (Outlook on Long Term: Negative). Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

During the year under report, Bank issued 48,700 BASEL III compliant unsecured, redeemable, non-convertible, Tier II Bonds in the Nature of Debentures of face value Rs 1,00,000 each aggregating to Rs 487.00 Cr (Rupees Four Hundred and Eighty Seven Crore only) on private placement basis with a coupon rate of 11.95% p.a. and tenor of 123 months (maturing on 12th June 2029). The issue was opened on 08th March 2019 and allotment was made on 12th March 2019. The issue was rated by ICRA Ltd ('ICRA') and India Ratings & Research Pvt. Ltd ('India Ratings'). ICRA had assigned a rating of "ICRAA(hyb) (Stable)" and India Ratings assigned a rating of "Ind A (Stable)". The Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and such instruments carry low credit risk.

CRISIL has re-affirmed A1 rating (pronounced as CRISIL A One Plus) for Rs 3000 Cr Certificate of Deposits Programme of your Bank. ICRA Limited has re-affirmed ICRAA1 (Pronounced as ICRA A One Plus) rating to the Bank's Certificate of Deposits Programme for Rs 3000 Cr. Both the ratings indicate a very strong degree of safety regarding timely payment of financial obligations.

The details of Credit Rating and change/revision in the Credit Ratings for various debt instruments issued by the Bank from time to time are provided in the Corporate Governance Report forming part of this Annual Report.

Capital Adequacy

Capital Adequacy Ratio stood at 16% as per BASEL III norms. The Bank's Capital Adequacy Ratio is well above the statutory limit of 9% (10.875% including Capital Conservation Buffer) prescribed by the Reserve Bank of India.

During FY 2018-19, in order to augment capital and strengthen capital adequacy, Bank has issued unsecured redeemable non-convertible Basel III compliant Tier II bonds to the tune of Rs 487.00 Cr through private placement.

Subsidiaries and Associates

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

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulated under Regulation 34(2)(e) of the Listing Regulations is presented in a separate section forming part of this Annual Report.

Network of Branches

The Banking sector has been witnessing numerous changes in the recent past and the implementation of digital technology across the globe which helps the people to operate their bank accounts through smart phones. Customers have the option of doing any banking transaction through alternate channel other than Locker operations. Hence the branch expansion model was studied, twelve non performing branches and one Extension Counter were merged with nearer Branches during the year under report. The total number of branches including Asset Recovery Branches and Corporate Business Units stood at 789 as on 31st March 2019.

Your Bank has 1,645 ATMs, 534 Bunch Note Recycler Machines (BNRM), 158 Self-service Passbook Kiosks and 58 CTS enabled Cheque Deposit Kiosks as on 31st March 2019 for providing prompt service to the customers.

Currency Chest

Your Bank has Currency Chests in Tamil Nadu, Andhra Pradesh, Telangana and Karnataka at 7 different locations for providing adequate cash supply to branches & ATMs. Currency Chests plays a vital role in providing effective customer service at branches and support the branches in adhering to the Clean Note Policy of RBI. Branches are also remitting their excess cash as well as soiled cash to our Currency Chests which in turn helps branches to maintain minimum cash balance. Currency Chests are providing adequate Sorted cash for loading ATM's which is as per the RBI guidelines. Currency Chests are also conducting soiled note exchange and coin mela's through the chest attached branches by which the lower denomination currencies and coins are distributed to customers and general public.

Financial Inclusion

Financial Inclusion ensures availability of basic banking services and products to all, thereby reaching the unreached, un-banked and under-banked areas. Your Bank has taken up the mammoth task of delivering the benefits of financial services to the doorsteps of majority of unbanked population. Your Bank is using the technology backed solutions by utilizing the services of Bank Mitras in reaching the unreached segment of the society. With the active support of Bank Mitras, Bank is offering basic financial services to Self-Help Groups (SHGs) and Joint Liability Groups (JLGs). By this way, Bank has scaled up products and service offerings at their doorstep.

Your Bank has reached the deprived segment of the society and extended its focussed financial services through 125 Bank Mitras in rural villages, 3 Bank Mitras in urban locations with 39 Ultra Small Branches. 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.

• ATM

• BNRM

• Self-Service

Performance highlights under Financial Inclusion

Your Bank has opened 10,083 PMJDY accounts during the year with outstanding balance of Rs 18.43 Cr as on 31st March 2019. The Bank has issued 9,578 Rupay Debit Cards under PMJDY accounts during the year under report. Hand-held devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting Rupay Cards/Smartcards. Bank Mitras have done 10.78 lakh transactions, amounting to Rs 132.85 Cr during the year under report which includes of DBT/Old Age Pension/MGNREGS transactions.

Financial Literacy campaign

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 FY 2018-19, your Bank has conducted 155 financial literacy campaigns in Rural, Semi Urban/Urban areas.

Performance under Sovereign Gold Bond Scheme, 2015

During the year, your Bank has collected a total subscription of Rs 11.76 Cr for 37,202 grams of gold in six tranches under the Sovereign Gold Bond Scheme, 2015.

Technology Initiatives

Your Bank has always been a forerunner in embracing & leveraging evolving technology, to provide enchanting customer experience. The financial market, in which the banks operate, is increasingly characterized by new generation of customers who are very busy (i.e. time-short and therefore, impatient), individualistic and seeking customised & flexible financial solutions.

• Opening of savings accounts through Bank's website and mobile App: Your bank has introduced self-service mode for opening of saving accounts through Bank's website and mobile App. Accounts can be opened quickly, through a few simple steps requiring limited guidance.

• Self-registration to internet banking facility for retail users: PIN mailers are passe. Your Bank enabled the self-service mode for availing internet banking facility, which is completely paperless. Now, customers can enable internet banking at their convenience without visiting the branch.

• SMS based blocking/unblocking of accounts: Your bank has enabled the facility to block all accounts of a customer

by way of a single SMS sent from his/her registered mobile, if they notice any unauthorized transaction in their accounts.

* Implementation of ATM E-receipts: To fall in line with the 'Go Green' initiative of the Govt, your Bank has replaced physical paper receipts with e-receipts in its ATMs and cash recyclers.

Digital Transformation Project

Your Bank, foresaw the tectonic shift in the customers behaviour

- their increasing acquaintance with technology, and their increasing desire to consume at the click of a button. Since October 2017, your Bank decided to engage customers in a manner that they expected to be engaged - i.e. in a user friendly digital environment. This resulted in our journey to create one of the most advanced, automated, paper-less, digital, liability/ loan product set. Over the last year, all our retail loans - home loans, loans against property, vehicle loans, personal loans etc.

- and our commercial loans (below Rs 2 Cr threshold) - overdrafts and term facilities - were converted to this mode. Your Bank today provides most of its loans (in number of loans) through this automated process - thereby cutting turnaround times and enhancing customer satisfaction. Most importantly, this change is positioning your Bank to bank the millennial/younger customers more effectively. In addition, with the launch of the KVB Dlite App

- an app that has garnered over 1 million downloads - similar capabilities have been made available for customers requiring banking accounts.

The digital loan products were designed to be a fully digital end-to-end, rule based, with strong underwriting and authentication processes providing a seamless albeit paperless experience for customers. The inbuilt score-cards in the digital system enable a more granular understanding of risk being accepted. This in-turn, has enabled us to ensure that loan pricing is reflects the risk accepted. Whilst risk pricing is limited by market forces, the new tools provide your Bank with information regarding areas wherein current market pricing of risk is unacceptable thereby enabling appropriate refocusing. The newer cohorts originated using the new system are currently exhibiting performance characteristics - on a like for like basis - significantly superior to older cohorts underwritten using the judgmental models of the past.

In this journey, your Bank has integrated its systems with various information providers - Credit Bureaus (CIBIL TransUnion & Experian), data providers and data validators. This has enabled your Bank to access validated information like GST data, Financial Returns filed with ROC etc. so as to make the loan

underwriting process quick and error free. In addition, the system has powerful fraud monitoring & control process starting with mechanisms to detect identity fraud and documentation related fraud. The latter is provided by accessing the data validators referred to earlier. It also formalises processes and streamlines them. For instance, if physical verification is required, the system creates a task for an appropriate entity to perform the verification.

Now, your Bank has a full bouquet of retail & commercial loan products available in digital form with best-in-the-class underwriting processes reducing turn-around-time to loan sanction to 15 minutes (where all prerequisites are met)- probably the first of its kind in the banking industry.

This initiative has enabled your Bank to grow retail loans -the best performing risk segment in the market - at a pace significantly faster than the market. Your Bank has been successful in realigning its offerings, retraining its staff, re-architecting its processes so as enable it to compete in this extremely competitive market place. As a consequence home loans grew at 29% and loans against property at 23%. The dynamic pricing of loans based on risk derived using scorecards is resulting in improved yield. As mentioned earlier, newer cohorts originated using the new digital platform are performing better on a like for like basis.

"KVB DLite" - Your Bank's all in one digital banking application provides the highest quality banking services to our customer set. It enables over 1 million of our customers who have downloaded the application to transfer funds, pay bills, shop - through an integrated shopping platform. In addition, it enables new customers' access our banking services in minutes - subject to KYC processes being completed subsequently. This new facility will enable us to make available our products more effectively as it emerges as a mechanism for cross sell.

Your bank has been at the forefront of technological change. This paradigm shift in banking provides new and exciting opportunities that your Bank will leverage to continue its legacy of success.

Information Security

The Board and Executive Management of your Bank has instituted an Information Security function for designing, developing, implementing and maintaining an Information Security Management System (ISMS) to protect the Bank's Information Assets in accordance with the determined risk profile of the assets. The Chief Information Security Officer (CISO) is responsible for providing leadership and oversight in the effective implementation and operation of ISMS in the Bank in

accordance with approved Policies and Procedures. The ISMS considers the nature of the Bank's business along with internal and external factors and is aligned with the overall objectives and policies. The ISMS promotes security awareness amongst staff members and service providers, aims to facilitate all the constituents such as IT Department, Data Centre, Disaster Recovery Site, Branches and Offices to implement the controls and monitors its effectiveness. Your Bank accords top priority for regulatory compliance and within a record time of less than 2 years, most of the mandatory controls stipulated by RBI through Cyber Security Framework have been implemented.

Your Bank has invested in modern technology solutions for timely application of security patches in the IT systems, host based intrusion prevention, network segregation, privileged access control and firewalls for superior vulnerability management. Thus, vulnerabilities in the IT systems are prevented from being exploited across the network and hence are minimal. Notwithstanding these preventive control measures, your Bank has a reliable Vulnerability Assessment (VA) and Penetration Testing (PT) process to assess the IT systems periodically, detect vulnerabilities and undertake timely remediation measures.

Call Centre

Your Bank has a dedicated, 24/7 call centre to handle outbound and inbound calls. Outbound call facility is being used to follow up recoveries in SMA & NPA accounts and welcome calls for the newly on-boarded CASA customers. The queries, complaints and service requests emanating from the customers are received through inbound call facilities for resolution. The call centre offers multilingual services in English and select regional languages. Apart from carrying out the above operations, call centre also seeks potential leads from interested customers for up-selling and cross-selling.

System for Internal Financial Control and its Adequacy

Your Bank is operating in a fully computerized environment with Core Banking System, handling the various day to day financial transactions. CBS is supported by diverse application platforms for handling various functions such as treasury, trade finance, retail loans etc., The process of recording of transactions in each application platform is subject to various forms of control such as in-built system checks, maker checker authorisations and independent post transaction reviews etc., Besides, Bank has also put in place various reporting systems as well as internal inspection/concurrent audit system to monitor the day to day operations. Annual audit of all the branches is also undertaken with the help of independent external auditors. The Bank has implemented adequate procedures and internal controls which provide reasonable assurance regarding reliability of financial reporting and preparation of financial statements and were operating effectively during the year.

Risk Management

Managing risk is an integral part of a bank's function. Your Bank is exposed principally to the following risk types - credit, market, liquidity, operational, information security and fraud. Risk management is a principal responsibility of the Board. The Board approves the risk policies of the institution. A Board approved "Risk Appetite Statement" articulates the risk that your Bank is willing to run.

The Board establishes the overall risk parameters within which your bank operates by ensuring that the various risk related policies - approved by it - are, in the considered view of the Board, appropriate. These are reviewed and reapproved from time to time. The Board has delegated to specified Board Committees powers that enable the orderly discharge of the risk function. Several Management Committees provide support to the Board as part of the Risk Governance Framework.

Your Bank has continuously enhanced its risk management capabilities over time. Today, the risk function consists of several sub-components - Risk Policy, Risk Underwriting, Risk Analytics, Fraud Risk Management, Information Security Risk etc. It is your Bank's policy to ensure that these functions are appropriately staffed and equipped. This is required to ensure that risk acceptance and risk management are appropriate to the risk underwritten.

Executive level risk management committees, such as Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and Fraud Risk Management Committee regularly assess the functional efficiency of the Bank in risk management and refine the policies and processes.

Your Bank is viewing the 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 well-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 - CRAR stands at 16% as on 31st March 2019. Capital provides the buffer required to manage

unexpected/unanticipated risks that materialise in spite of every prudent risk management action. Your Bank's portfolio of Corporate and Commercial Loans have not performed as expected, leading to higher NPA accretion. This has been partly compensated by elevated provisioning during the period. However, Net NPA continues to higher than that of peers. Whilst this is an area of concern, the healthy capital structure, changes made to underwriting and collection processes mitigate incremental risk accretion.

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 Vigil Mechanisms on quarterly basis. The Bank's Whistle Blower Policy is in synchrony with all statutory and regulatory guidelines on Vigil Mechanism. The Whistle Blower Policy of the Bank is available in Bank's website and can be accessed at https://www.kvb.co.in/docs/whistle-blower-policy.pdf.

Compliance of Anti Sexual Harassment Norms & Ensuring safety of Women employees

The Bank has complied with provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013]. The same has been elaborated in the Corporate Governance forming part of this Annual Report.

Related Party Transactions

During the year under review, the Bank has not entered into any materially significant transactions, which could lead to potential conflict of interest, other than transactions entered into in the ordinary course of its business.

Transactions entered into by the Bank with related parties in the normal course of its business were placed before the Audit Committee of the Board (ACS). Omnibus approval is obtained from the Audit Committee for transactions which are repetitive in nature and the same are reviewed on periodic basis. There are no material related party transactions during the year under report. Therefore the provisions of Section 188 of the Companies Act, 2013 are not attracted. Accordingly, 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 Board of the Bank has constituted the Audit Committee under the extant guidelines of Reserve Bank of India (RBI), provisions of the Companies Act, 2013 and Listing Regulations. The details of the composition of the Audit Committee are furnished in the Corporate Governance Report.

Deposits Related Disclosure under Rule 8(5)(v) of Companies (Accounts) Rules, 2014

Being a banking company, the disclosures required as per rule 8(5)(v) of the 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

Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the Companies Act, 2013.

Auditors Statutory Auditors

In terms of Section 139 of the Companies Act, 2013 read with Sec 30(1 A) of the Banking Regulation Act, it is proposed to re-appoint, M/s Walker Chandiok & Co. LLP, Chartered Accountants, Kochi, (Firm Registration Number 001076N/N500013) who are retiring at the conclusion of the ensuing Annual General Meeting (AGM) and are eligible for re-appointment, subject to the approval of the Reserve Bank of India and shareholders of the Bank. The Bank has received consent from the Auditors and confirmation to the effect that they are not disqualified to be 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 reappointment of M/s Walker Chandiok & Co. LLP, Chartered Accountants, Kochi (Firm Registration Number 001076N/N500013) as Statutory Auditors of the Bank to hold office from the conclusion of the ensuing AGM till the conclusion of the next AGM. Fee payable to Statutory Audit is proposed at Rs 68,00,000/- (Rupees Sixty Eight Lakh only) plus out of pocket expenses with a cap of 15% of fees and applicable GST for the FY 2019-20, subject to the approval of RBI and Shareholders of the Bank.

Members are requested to consider the re-appointment of M/s Walker Chandiok & Co. LLP as Statutory Auditors of the Bank.

Pursuant to the Regulation 33(1)(d) of the Listing Regulations, 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

M/s Walker Chandiok & Co. LLP, Statutory Auditors of the Bank, have audited the accounts of the Bank for the FY 2018-19 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 Auditor's Report.

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors in their report for the FY 2018-19.

During the FY 2018-19, no frauds were reported by Auditors under sub-section (12) of Section 143 of the Companies Act, 2013.

Secretarial Audit

Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank, with the approval of its Board appointed M/s Solaiyappan & Associates, Company Secretaries, Salem to conduct the Secretarial Audit of the Bank for the FY 2018-19. The Bank produced all necessary records to the Secretarial Auditors for smooth conducting of their Audit. The Secretarial Audit Report is annexed herewith as Annexure -1.

There are no qualifications, reservations or adverse remarks made by the Secretarial Auditors in their report for the FY 2018-19.

Implementation of Indian Accounting Standards (Ind AS)

The Bank has formed a Steering Committee for implementation of Ind AS. Bank has engaged a consultant to assist in the preparation of proforma Ind AS financial statements as well as process changes required for implementation of Ind AS. The analysis of current accounting framework, policies, data extraction, documentation etc. have been undertaken and are being continuously updated as a part of this process. Further, discussions have been also held with various solution providers to handle the Ind AS accounting & system requirements, including generation of various data and reports required for preparation and submission of financial statements. These activities will be continued during the year 2019-20, in view of RBI directives on extension in time lines for implementation of Ind AS by Banks. During the FY 2018-19, Bank has prepared and submitted proforma Ind AS statements on quarterly basis, including the opening proforma Ind AS financial statements as on 1st April 2018, in compliance of RBI instructions.

Compliance with Secretarial Standards

The Board of Directors confirm that the Bank has complied with the applicable Secretarial Standards issued by the Institute of Companies Secretaries of India (ICSI) related to the Board meetings and General Meetings during the year.

Statutory Disclosures

Considering the nature of its activities as an entity in the Financial Services sector, your Bank has voluntarily taken steps towards conservation of energy, technology absorption and foreign exchange earnings and outgo. Ensuring compliance of the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule (8)(3) of the Companies (Accounts) Rules, 2014, the relevant disclosures to be made are as under:

Conservation of Energy

Your Bank has undertaken various energy efficiency improvement initiatives for energy conservation across all its premises by installing LED lights in phased manner. VRF (Variant Refrigerant Flow) AC Units have been installed at Back Offices in Chennai and Mumbai to save electricity by energy conservation technology. During the year under report, Bank has spent Rs 1.67 Cr towards procuring of energy conservation equipment.

Your Bank owns 850 KW Wind Turbine Generator at Govindanagaram, Theni District, Tamilnadu, installed in the year of 2011. The Bank is utilizing the power generated by Wind Turbine Generator for its Registered & Central Office at Karur and also Divisional Office, Chennai premises. 15,05,762 units were generated by the wind mill during the year under report.

Technology Absorption

New technology in banking is already transforming the financial sector, and the traditional banking landscape is set to rapidly change in the next few years. Safety features will help to protect the applications and remote applications will make it easier to do your banking without visiting a branch. Your Bank uses the sophisticated technologies to offer better services in a secure, reliable and affordable manner and sustain competitive advantage over other banks.

In order to provide quick and efficient customer service, your Bank has rolled out the Digital Transformation Process through which the Account opening and Retail/SME lending solution process is digitized as on date and the required customer data is verified online from the respective entities.

Your Bank has launched KVB DLite, all-in-one mobile banking App for both Financial and Non-Financial operations with enriched User Interface design, loaded with many user-friendly options and Enhanced Security Features which has crossed one million downloads. Your Bank is consistently maintaining the state of art infrastructure with optimum utilization of the resources.

Your Bank has made strategic investments in the space of Information Security and implementing the best standards for safe guarding information assets and building up sound security features for the protection of customer information and touch points.

Your Bank has been awarded ISO 27001 certification for the various IT offices in establishing a framework of policies and procedures that includes all legal, physical and technical controls involved in the organization's information risk management process.

Bank has not imported any Technology during the last three years reckoned from the beginning of the financial year and no amount was spent towards Research and Development.

Foreign Exchange Earnings and Outgo

Your Bank continuously supports and encourages the country's export efforts through its export financing operations. The details on foreign exchange earnings and outgo forms part of this report.

Material events that have happened after the Balance Sheet date

No material changes and commitments affecting the financial position of the Bank which has occurred between the end of the Financial Year of the Bank i.e., 31st March 2019 and the date of the Directors' Report i.e., 28th May 2019.

Significant and Material Orders passed by Regulators

During the year under report, there are no significant and material orders that were passed by the Regulators or Courts or Tribunals against the Bank impacting the going concern status and Bank's 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

Pursuant to provision of sec 134(3)(a) and sec 92(3) of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 the extract of the Annual Return as at 31st March 2019 is uploaded in Bank's website and can be accessed at https://www.kvb.co.in/investor-corner/annual-general-meeting/mgt-9-extract-of-annual-return/.

Particulars of Employees

The statement containing the ratio of remuneration of each Director to the median employee's remuneration and particulars of employees 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 forming part of this report as Annexure -2.

Employee Stock Option Scheme

The 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. Your Bank uses stock options as a compensation tool to attract, retain the critical talent and encourage employees to align individual performances with that of Banks' objectives. Currently Bank has the following Schemes in compliance with the provisions of SEBI (Share Based Employee Benefits) Regulations, 2014 (SBEB Regulations):

• 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 under review, the Nomination and Remuneration Committee has granted 7,25,000 Stock Options to employees under both the schemes. Further MD & CEO was granted 10,00,000 stock options under KVB-ESOS-2018, subject to the approval of RBI and the same was not acceded by the Reserve Bank of India.

Pursuant to corporate action by way of Bonus issue in the ratio of 1:10 i.e., 1 (one) Equity Shares for every 10 (ten) Equity Shares of face value of Rs 2 each, the pool of options under KVB-ESOS-2018 Scheme and the outstanding options granted under

KVB-ESOS-2011 Scheme and the exercise price were adjusted during the year under report.

There are no material changes made to the above Schemes and these Schemes are in compliance with the SEBI SBEB Regulations. Your Bank's Statutory Central Auditors, M/s Walker Chandiok & Co, LLP, have certified that the Bank's above-mentioned Schemes have been implemented in accordance with the SEBI SBEB Regulations, and the Resolutions passed by the Shareholders for the 2011 & the 2018 Scheme. Disclosure as required under the SEBI SBEB Regulations is uploaded in Bank's website and can be accessed at https://www.kvb.co.in/investor-corner/esos-disclosures/.

Corporate Social Responsibility (CSR)

Your bank recognizes its responsibility towards the society and environment in which it operates. In line with the Banks' CSR objectives, your Bank has committed to various community development projects that have a large positive impact and Sustainable Development. In accordance with the provisions of Section 135 of the Companies Act, 2013, read with Companies (Corporate Social Responsibility Policy) Rules, 2014 as amended, the Bank has constituted the Corporate Social Responsibility (CSR) Committee of the Board.

During the year under report, resources deployed and CSR spends had increased significantly over the previous Financial Year. The CSR activities of the Bank touches a wider footprint through areas like Health, Education, Women empowerment, Environment sustainability and other activities permitted by the Schedule VII of the Companies Act, 2013.

The brief outline of the CSR Policy, overview of the programs undertaken by the Bank, the composition of the CSR Committee, prescribed CSR expenditure and details of the amounts spent by the Bank on CSR activities during the year under review, have been provided in Annexure - 3 to this report.

Your Bank is committed to identify and support outreach programmes aimed at developing and advancing the community. All CSR spends are as per the allocations made to it and unspent money if any would be used in the due course. Further committee reaffirmed to strengthen its processes to evaluate all projects which will benefit the society in a large way as per the requirements and is passionately committed towards CSR objectives.

Business Responsibility Report (BRR)

In compliance with Regulation 34(2)(f) of the Listing Regulations the Business Responsibility Report describing the initiatives

taken by the Bank from an environmental, social and governance perspective, in the format as specified by SEBI. The same has been hosted on the website of the Bank and can be accessed at https://www.kvb.co.in/investor-corner/annual-general-meeting/ agm-business-report/.

The Business Responsibility Report (BRR) of the Bank for the FY 2018-19 forms part of this Report as Annexure - 4.

Board Meetings

The schedule of the meetings of the Board is circulated in advance to the Members of the Board, for their consideration and approval. During the period under report, eighteen Board meetings were held and the gap between the said meetings did not exceed the limit of 120 days, as prescribed under the relevant regulations. Details of the composition of Board, Meetings held and attendance of the Directors at such Meetings are provided in the Corporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, the 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 year under report is furnished in the Corporate Governance Report.

Board of Directors

The Board comprises of ten Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including Banking, Accountancy, Law, MSME, Trade & Commerce, Finance, Agriculture, Human Resource Management and Information Technology.

Chairman of the Board

Shri N S Srinath (DIN: 01493217), was appointed as Non-Executive Part-time Chairman of the Bank for a period of three years in the Board meeting held on 25th March 2019 subject to the approval of Reserve Bank of India. Further RBI accorded its approval in terms of section 10B(1A)(i) of the Banking Regulation Act, 1949 vide its letter DBR.Appt.No.9955/08.41.001/2018-19 dated 27th May 2019 for the appointment of Shri N S Srinath as Non-Executive Part-time Chairman of the Bank for a period of three years with effect from 27th May 2019. Pursuant to RBI's approval and in terms of Provisions of Section 149 of Companies Act, 2013, Section 10A(2A) of the Banking Regulation Act, 1949, Board recommends the continuation of his second term as an Independent Director Co-terminus with his tenure as Chairman of the Bank. Approval of the shareholders is being requested by way of agenda items in the Notice of the ensuing AGM.

Appointment

Shri Sriram Rajan (DIN: 02162118), a senior Information Technology professional with 18 years of experience spanning the entire IT landscape was co-opted as an Additional Director in the category of 'Non-Executive Independent Director' in the Board meeting held on 19th January 2019. He is representing Majority Sector "Information Technology" on the Board. He has signified his willingness to seek election as Non-Executive Independent Director at the ensuing AGM.

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

Re-appointment

Smt CA K L Vijayalakshmi (DIN: 07116809), was on the Board since 22nd March 2015. She is representing Minority Sector "Commerce & Special Knowledge - Accountancy" on the Board. She was elected as a Non-Executive Independent Director at the 97th AGM held on 21st July 2016 for a period of 3 years. The three years term of her appointment ends on 20th July 2019.

Dr K S Ravichandran (DIN: 00002713), was on the Board since 26th May 2016. He is representing Majority Sector "Law" on the Board. He was elected as a Non-Executive Independent Director at the 97th AGM held on 21st July 2016 for a period of 3 years. The three years term of his appointment ends on 20th July 2019.

Based on the expertise, knowledge, integrity, relevant experience in professions, performance evaluation and substantial contribution made by the Non-Executive Independent Directors Smt CA K L Vijayalakshmi (DIN: 07116809) and Dr K S Ravichandran (DIN: 00002713), the Board recommends their re-appointment for second term pursuant to the provisions of Section 10A of Banking Regulation Act and Sec 149(10) and Sec 152 read with Companies (Appointment and Qualification of Directors) Rules, 2014. Approval of the shareholders is being requested for re-appointment of the Non-Executive Independent Directors Smt CA K L Vijayalakshmi (DIN: 07116809) and Dr K S Ravichandran (DIN: 00002713).

Retirement by Rotation

In terms of Sec 152 of the Companies Act, 2013, Non-Executive Non-independent Director Shri A K Praburaj (DIN: 07004825),

retire by rotation and being eligible offer himself for re-election at the ensuing Annual General Meeting (AGM). He is one of the Promoters of the Bank. He was on the Board since 09th December 2014 and represents Minority Sector "Trade & Commerce".

Approval of the shareholders is being requested for re-appointment of Shri A K Praburaj as Non-Executive Non-independent Director of the Bank.

The relevant details including profiles of directors seeking appointment/re-appointment/retirement by rotation are included separately in the AGM Notice and also in the Corporate Governance report forming part of this Annual Report.

Cessations

Shri B Swaminathan (DIN: 00245189), Non-Executive Part-time Chairman of the Bank, demitted office consequent to completion of his three years tenure at the close of office hours on 19th January 2019. 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.

Shri A J Suriyanarayana (DIN: 02251823), Non-Executive Non-independent Director of the Bank, demitted office after office hours on 26th October 2018 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

During the year under report, there is no Appointment or Retirement of Key Managerial Personnel.

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 Companies Act, 2013 and rules made thereunder and other applicable provisions as amended from time to time.

Applicable regulations of 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 disclosed on the website of the Bank and can be accessed at https://www.kvb.co.in/docs/terms-and-conditions-of-the-independent-directors.pdf.

Policy on Remuneration of Directors

The remuneration of Directors is governed by the Compensation Policy of the Bank. This Policy is in tune with the guidelines issued by the Reserve Bank of India, provisions of Companies Act, 2013 and the Listing Regulations amended from time to time. The Compensation Policy of the Bank in terms of RBI circular no. DBOD.No.BC.72/29.67.001/2011-12 dated 13th January 2012 covers the aspects of remuneration payable to Whole Time Director (WTD) i.e. MD & CEO, Non-Executive Chairman, Non- Executive/Independent Directors, Key Managerial Personnel of the Bank, staff engaged in financial & risk control functions and all other employees. The Policy is available on the website of the Bank and can be accessed at https://www.kvb.co.in/docs/investor-compensation-policy/pdf.

Declaration by Independent Directors

The Bank has received necessary declarations from all the Independent Directors under Section 149(6) of the Act and Regulation 16(1 )(b) of the SEBI LODR that they meet the criteria of independence laid down thereunder. Based on the declarations submitted by the Independent Directors, Board is of the opinion that, they fulfil the conditions specified in the Act and SEBI LODR and are independent of the management.

Familiarization 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. Directors are offered opportunity to attend the Programmes conducted by CAFRAL, IDRBT, Boston Consulting Group and other Management Institutes to familiarize with the latest trends in credit appraisal, Cyber Security, SME lending in Digital era, IT Strategy, Risk and Governance issues. Considering the Role and responsibilities of Audit Committee few programmes on Risk Management, analytics driven monitoring, risk management in UPSI were organised. The details of programmes undertaken for familiarizing the Directors are disclosed in Corporate Governance Report, which forms part of this Annual Report.

Corporate Governance

Aseparate section on Corporate Governance standards followed by your Bank and the relevant disclosures as stipulated under Listing Regulations and Companies Act, 2013 and the rules made thereunder is enclosed as an annexure to this report.

A certificate from M/s Solaiyappan & Associates, Company Secretaries, confirming compliance to the conditions of Corporate Governance as stipulated under Listing Regulations 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 judgments 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 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 and Accolades during FY 2018-19:

1. "Best MSME Bank" from Chamber of Indian Micro Small and Medium Enterprises (CIMSME).

2. Palarivattom Branch has been selected as the 3rd Best performing Branch in Kerala under Private Sector category for the year 2017-18 in the State Forum of Bankers' Clubs Kerala (SFBCK) Banking Excellence Award 2018.

Acknowledgements

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, Securities Exchange Board of India (SEBI), Ministry of Corporate Affairs (MCA), Statutory Auditors, Secretarial Auditors, various State Governments and regulatory authorities in India for their valuable guidance, support and co-operation. The Board also acknowledges with gratitude the cooperation and support received from stock exchanges, rating agencies and other banking/financial institutions.

The Board takes this opportunity to place on record its deep sense of gratitude to its loyal shareholders for extending their support during the year and looks forward to their continued association in the years ahead.

The Board thanks the valued customers for their goodwill, patronage and continued support and looks forward to their continued patronage in scaling greater heights.

The Board appreciates the sincere and dedicated services displayed by its entire staff and highly values their commitment in improving the Bank's performance.