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Preliminary Placement Document
Subject to Completion
Not for Circulation
Strictly Confidential
Serial No. _________
THE LAKSHMI VILAS BANK LIMITED The Lakshmi Vilas Bank Limited (the “Bank”) was incorporated on November 3, 1926 under the erstwhile Indian Companies Act, 1913. Our Bank was licensed under the Banking Regulation Act, 1949 on June 19, 1958 and became a scheduled commercial bank under the Second Schedule of the RBI Act on August 11,
1958. The registered office of our Bank is located at Salem Road, Kathaparai P. O., Karur – 639 006, Tamil Nadu. Telephone: +91 4324 220051; Facsimile:
+91 4324 223607. The corporate office of our Bank is located at LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil Nadu. Contact Person: Mr. N. Ramanathan; Telephone: +91 44 2220 5306; Facsimile: +91 44 2220 5317; Email: [email protected]; website: www.lvbank.com; Corporate
Identification Number of our Bank is L65110TN1926PLC001377. For further detail, see “General Information” on page 238. Our Bank is issuing up to [●] equity shares of face value of ₹ 10 each (the “Equity Shares”) at a price of ₹ [●] per Equity Share, including a premium of ₹ [●]
per Equity Share (the “Issue Price”), aggregating to ₹ [●] million (the “Issue”), only to Qualified Institutional Buyers, as defined under the Securities and
Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (the “SEBI ICDR Regulations”). For further details, please see “Summary of the Issue” on page 23.
ISSUE IN RELIANCE UPON SECTION 42 OF THE COMPANIES ACT, 2013, AS AMENDED, RULE 14 OF COMPANIES (PROSPECTUS AND
ALLOTMENT OF SECURITIES) RULES, 2014 AS AMENDED, AND OTHER APPLICABLE PROVISIONS OF THE COMPANIES ACT, 2013
AND RULES MADE THEREUNDER, AND CHAPTER VI OF THE SEBI ICDR REGULATIONS.
THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING MADE TO QUALIFIED
INSTITUTIONAL BUYERS, AS DEFINED IN SEBI ICDR REGULATIONS (“QIBs”) IN RELIANCE UPON CHAPTER VI OF SEBI ICDR
REGULATIONS AND SECTION 42 OF THE COMPANIES ACT, 2013, AS AMENDED, AND RULES MADE THEREUNDER. THIS
PRELIMINARY PLACEMENT DOCUMENT IS PERSONAL TO EACH PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER
OR INVITATION OR SOLICITATION OF AN OFFER TO THE PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN
OR OUTSIDE INDIA OTHER THAN QIBs. THIS PRELIMINARY PLACEMENT DOCUMENT WILL BE CIRULATED ONLY TO SUCH QIBs
WHOSE NAMES ARE RECORDED BY OUR BANK PRIOR TO MAKING AN INVITATION TO SUBSCRIBE TO EQUITY SHARES.
Invitations, offer and sales for subscription of the Equity Shares shall only be made pursuant to this Preliminary Placement Document, the Application Form, Confirmation of Allocation Note and the Placement Document. For further details, see “Issue Procedure” on page 191. The distribution of this Preliminary
Placement Document or the disclosure of its contents to any person, other than QIBs and persons retained by QIBs to advise them with respect to their purchase
of the Equity Shares, is unauthorized and prohibited. Each prospective investor, by accepting delivery of this Preliminary Placement Document, agrees to observe the foregoing restrictions and to make no copies of this Preliminary Placement Document or any documents referred to in this Preliminary Placement Document.
A copy of this Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 under the Companies (Prospectus and Allotment of
Securities) Rules, 2014, as amended) has been delivered to BSE Limited (the “BSE”) and National Stock Exchange of India Limited (the “NSE”, and together with the BSE, the “Stock Exchanges”). A copy of the Placement Document will also be delivered to the Stock Exchanges. Our Bank shall also make the requisite
filings with the Registrar of Companies, Chennai, Tamil Nadu (the “RoC”) and the Securities and Exchange Board of India (the “SEBI”) within the stipulated
period as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules, 2014. This Preliminary Placement Document has not been reviewed by the SEBI, the Reserve Bank of India (the “RBI”), the Stock Exchanges, the RoC or any other regulatory or listing authority.
This Preliminary Placement Document has not been and will not be registered as a prospectus with the RoC and will not be circulated or distributed to the public
in India or any other jurisdiction and will not constitute a public offer in India or any other jurisdiction.
THE ISSUE IS MEANT ONLY FOR QIBS BY WAY OF A PRIVATE PLACEMENT AND IS NOT AN OFFER TO THE PUBLIC OR TO ANY
OTHER CLASS OF INVESTORS.
INVESTMENTS IN THE EQUITY SHARES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST
ANY FUNDS IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENT.
PROSPECTIVE INVESTORS ARE ADVISED TO READ THE SECTION TITLED “RISK FACTORS” ON PAGE 31 CAREFULLY BEFORE
TAKING AN INVESTMENT DECISION IN THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT
THE PARTICULAR CONSEQUENCES TO IT OF AN INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS
PRELIMINARY PLACEMENT DOCUMENT.
The information on our Bank’s website or any website directly or indirectly linked to our Bank’s website does not form part of this Preliminary Placement Document and prospective investors should not rely on such information contained in, or available through, such websites for their investment in this Issue.
All Equity Shares representing our Bank’s outstanding subscribed and paid up capital is listed on the Stock Exchanges. The closing price of the outstanding
shares on BSE and NSE was ₹ 81.30 and ₹ 80.80, respectively, as on March 6, 2019. In-principle approval under Regulation 28(1) of the SEBI Listing Regulations (as defined below) for listing of the Equity Shares has been received from the BSE and the NSE on March 7, 2019. Applications to the Stock Exchanges will be
made for obtaining listing and trading approvals for the Equity Shares offered through this Preliminary Placement Document. The Stock Exchanges assume no
responsibility for the correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of our business or the Equity Shares.
YOU ARE NOT AUTHORIZED TO (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; OR (2)
REPRODUCE THIS PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER; OR (3) RELEASE ANY PUBLIC
ADVERTISEMENTS OR UTILIZE ANY MEDIA, MARKETING OR DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT
LARGE ABOUT THE ISSUE. ANY DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS
UNAUTHORIZED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF APPLICABLE LAWS OF INDIA
AND OTHER JURISDICTIONS.
THIS PRELIMINARY PLACEMENT DOCUMENT HAS BEEN PREPARED BY OUR BANK SOLELY FOR PROVIDING INFORMATION IN
CONNECTION WITH THE PROPOSED ISSUE OF THE EQUITY SHARES DESCRIBED IN THIS PRELIMINARY PLACEMENT DOCUMENT.
The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the
laws of any state of the United States and may not be offered or sold in the United States (as defined in Regulation S under the Securities Act (“Regulation S”)),
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. The Equity Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S. For a description of the
selling restrictions in certain other jurisdictions, see “Selling Restrictions” on page 201. The Equity Shares are transferable only in accordance with the restrictions
described in “Transfer Restrictions” on page 206.
BOOK RUNNING LEAD MANAGER
Srei Capital Markets Limited
This Preliminary Placement Document is dated March 7, 2019.Th
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TABLE OF CONTENTS
NOTICE TO INVESTORS .................................................................................................................................. 1
REPRESENTATIONS BY INVESTORS .......................................................................................................... 3
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE .............................................................................. 9
PRESENTATION OF FINANCIAL AND OTHER DATA ........................................................................... 10
MARKET AND INDUSTRY DATA ................................................................................................................. 11
FORWARD LOOKING STATEMENTS ........................................................................................................ 12
ENFORCEMENT OF CIVIL LIABILITIES .................................................................................................. 14
EXCHANGE RATES ......................................................................................................................................... 15
DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 16
SUMMARY OF BUSINESS .............................................................................................................................. 21
SUMMARY OF THE ISSUE ............................................................................................................................ 23
SUMMARY FINANCIAL INFORMATION ................................................................................................... 25
RISK FACTORS ................................................................................................................................................ 31
MARKET PRICE INFORMATION ................................................................................................................ 59
USE OF PROCEEDS ......................................................................................................................................... 63
CAPITALISATION ........................................................................................................................................... 64
CAPITAL STRUCTURE ................................................................................................................................... 65
DIVIDEND POLICY ......................................................................................................................................... 70
INDUSTRY OVERVIEW .................................................................................................................................. 71
BUSINESS ........................................................................................................................................................... 79
SELECTED STATISTICAL INFORMATION ............................................................................................... 97
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................................................................................................................................. 120
REGULATIONS AND POLICIES ................................................................................................................. 145
BOARD OF DIRECTORS AND SENIOR MANAGEMENT ...................................................................... 157
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION ............................................................ 171
ISSUE PROCEDURE ...................................................................................................................................... 191
PLACEMENT ................................................................................................................................................... 200
SELLING RESTRICTIONS ........................................................................................................................... 201
TRANSFER RESTRICTIONS ........................................................................................................................ 206
SECURITIES MARKET OF INDIA .............................................................................................................. 207
DESCRIPTION OF EQUITY SHARES ........................................................................................................ 211
STATUTORY AUDITORS ............................................................................................................................. 215
STATEMENT OF TAX BENEFITS............................................................................................................... 216
LEGAL PROCEEDINGS ................................................................................................................................ 223
GENERAL INFORMATION .......................................................................................................................... 238
FINANCIAL INFORMATION ....................................................................................................................... 240
DECLARATION .............................................................................................................................................. 241
APPLICATION FORM ................................................................................................................................... 243
1
NOTICE TO INVESTORS
Our Bank has furnished and accepts full responsibility for the information contained in this Preliminary Placement
Document and confirms that, to the best of its knowledge and belief, having made all reasonable enquiries, this
Preliminary Placement Document contains all information with respect to our Bank and the Equity Shares that is
material in the context of this Issue. The statements contained in this Preliminary Placement Document relating
to our Bank and the Equity Shares are, in all material respects, true and accurate and not misleading. The opinions
and intentions expressed in this Preliminary Placement Document with regard to our Bank and the Equity Shares
are honestly held, have been reached after considering all relevant circumstances, are based on information
presently available to our Bank and are based on reasonable assumptions. There are no other facts in relation to
our Bank and the Equity Shares, the omission of which would, in the context of this Issue, make any statement in
this Preliminary Placement Document misleading in any material respect. Further, all reasonable enquiries have
been made by our Bank to ascertain such facts and to verify the accuracy of all such information and statements.
The Book Running Lead Manager (“BRLM”) has made reasonable enquiries but has not separately verified all
of the information contained in this Preliminary Placement Document (financial, legal or otherwise). Accordingly,
neither the BRLM nor any of its affiliates, shareholders, directors, officers, employees, counsels, representatives,
or agents make any express or implied representation, warranty or undertaking, and no responsibility or liability
is accepted by the BRLM or any of its affiliates, shareholders, directors, officers, employees, counsels,
representatives or agents as to the accuracy or completeness of the information contained in this Preliminary
Placement Document or any other information supplied in connection with the Equity Shares. Each person
receiving this Preliminary Placement Document acknowledges that such person has not relied on the BRLM or
any of its affiliates, shareholders, directors, officers, employees, counsels, representatives or agents or affiliates
in connection with such person’s investigation of the accuracy of such information or such person’s investment
decision, and each such person must rely on its own examination of our Bank and the merits and risks involved
in investing in the Equity Shares.
No person is authorized to give any information or to make any representation not contained in this Preliminary
Placement Document and any information or representation not so contained must not be relied upon as having
been authorized by or on behalf of our Bank or the BRLM. The delivery of this Preliminary Placement Document
at any time does not imply that the information contained in it is correct as at any time subsequent to its date.
The Equity Shares offered in the Issue have not been approved, disapproved or recommended by any other
regulatory authority in any jurisdiction. No such authority has passed on or endorsed the merits of this
Issue or the accuracy or adequacy of this Preliminary Placement Document. Any representation to the
contrary may be a criminal offence in certain jurisdictions.
No action has been taken by our Bank or the BRLM that would permit the offer or sale of the Equity Shares or
distribution of this Preliminary Placement Document in any jurisdiction, other than India, where action for that
purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither
this Preliminary Placement Document nor any other Issue-related materials may be distributed or published in or
from any country or jurisdiction, except under circumstances that will result in compliance with any applicable
rules and regulations of any such country or jurisdiction.
The Equity Shares offered in the Issue, have not been and will not be registered under the Securities Act or the
laws of any state of the United States and may not be offered or sold in the United States, except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws. The Equity Shares are being offered and sold only outside the United States in
offshore transactions in reliance on Regulation S. For a description of the selling restrictions in certain other
jurisdictions, see “Selling Restrictions” on page 201. The Equity Shares are transferable only in accordance with
the restrictions described in the section titled “Transfer Restrictions” on page 206.
Purchasers of the Equity Shares will be deemed to make the representations, warranties, acknowledgments and
agreements set forth in the sections “Representations by Investors”, “Selling Restrictions” and “Transfer
Restrictions” on pages 3, 201 and 206, respectively.
In making an investment decision, prospective investors must rely on their own examination of our Bank and the
terms of this Issue, including the merits and risks involved. Investors should not construe the contents of this
Preliminary Placement Document as legal, tax, accounting or investment advice. Investors should consult their
own counsel and advisors as to business, legal, tax, accounting and related matters concerning the Issue. In
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addition, neither our Bank nor the BRLM is making any representation to any offeree or purchaser of the Equity
Shares regarding the legality of an investment in the Equity Shares by such offeree or purchaser under applicable
legal, investment or similar laws or regulations.
Each investor, offeree or purchaser of the Equity Shares in this Issue is deemed to have acknowledged,
represented and agreed that it is eligible to invest in India and in the Equity Shares under Indian law,
including Chapter VI of the SEBI ICDR Regulations and is not prohibited by SEBI or any other statutory,
regulatory or judicial authority from buying, selling or dealing in securities, including the Equity Shares.
Each purchaser of Equity Shares in this Issue also acknowledges that it has been afforded an opportunity
to request from us and has reviewed information relating to us and the Equity Shares.
The information on the website of our Bank, www.lvbank.com, or any website directly or indirectly linked to this
website or on the website of the BRLM or any of its affiliates or any website directly or indirectly linked to such
websites does not constitute or form a part of this Preliminary Placement Document. Prospective investors should
not rely on the information contained in, or available through, any such websites.
This Preliminary Placement Document contains a summary of some terms of certain documents, which are
qualified in their entirety by the terms and conditions of those documents.
3
REPRESENTATIONS BY INVESTORS
All references to “you” or “your” in this section are to the prospective investors in this Issue. By bidding for and
subscribing to any of the Equity Shares in this Issue, you are deemed to have represented, warranted,
acknowledged and agreed to our Bank and the BRLM as follows:
(a) you (i) are a QIB as defined in Regulation 2(1)(ss) of the SEBI ICDR Regulations and are not excluded
pursuant to Regulation 179(2)(b) of the SEBI ICDR Regulations; (ii) have a valid and existing registration
under applicable laws of India (as applicable); and (iii) undertake to acquire, hold, manage or dispose of
any Equity Shares that are Allocated to you for the purposes of your business in accordance with Chapter
VI of the SEBI ICDR Regulations and (iv) undertake to comply with the SEBI ICDR Regulations, the
Companies Act and all other applicable laws, including in respect of reporting requirements, if any;
(b) if you are not a resident of India, but a QIB, you are (i) an Eligible FPI as defined in this Preliminary
Placement Document and have a valid and existing registration with SEBI under the applicable laws in
India; or (ii) a multilateral or bilateral development financial institution; or (iii) an FVCI and have a valid
and existing registration with SEBI under applicable laws in India. Further, if you are a non-resident QIB,
then the investment amount will be paid out of inward remittance of foreign exchange received through
normal banking channels and as per RBI’s notification no. FEMA 20/2000 - RB dated May 3, 2000, as
amended from time to time;
(c) you are eligible to invest in India and in our Bank under applicable laws, including the SEBI ICDR
Regulations, the Companies Act and the rules made thereunder, Foreign Exchange Management (Transfer
or Issue of Security by a Person Resident Outside India) Regulations, 2017, as amended and any
notification, circulars or clarification issued thereunder, and have not been prohibited by SEBI or any other
regulatory or statutory authority or otherwise, from buying, selling or dealing in securities;
(d) you will make all necessary filings with the appropriate regulatory authorities including with the RBI, as
required, pursuant to applicable laws;
(e) if you are Allotted Equity Shares pursuant to this Issue, you shall not, for a period of one year from the date
of Allotment, sell the Equity Shares so acquired except on the recognised Stock Exchanges;
(f) you are aware that this Preliminary Placement Document has not been, and will not be, registered as a
prospectus under the Companies Act, 2013 and the SEBI ICDR Regulations or under any other law in force
in India and no Equity Shares will be offered in India or overseas to the public or any members of the public
in India or any other class of investors, other than QIBs. You are aware that this Preliminary Placement
Document has not been reviewed or affirmed by SEBI, RBI, Stock Exchanges or any other regulatory or
listing authority and is intended for use only by QIBs. This Preliminary Placement Document has been
filed (and the Placement Document will be filed) with the Stock Exchanges and this Preliminary Placement
Document has been displayed (and the Placement Document will be displayed) on the websites of our Bank
and the Stock Exchanges;
(g) you are permitted and have necessary capacity to acquire/subscribe to the Equity Shares under the laws of
all relevant jurisdictions which apply to you and that you have fully observed such laws and obtained all
such governmental and other consents in each case which may be required thereunder and complied with
all necessary formalities and have obtained all necessary consents and authorities to enable you to commit
to participation in this Issue and to perform your obligations in relation thereto (including without
limitation, in the case of any person on whose behalf you are acting, all necessary consents and
authorisations to agree to the terms set out or referred to in this Preliminary Placement Document), and
complied with all the necessary formalities and that you will honour such obligations;
(h) neither our Bank nor the BRLM nor any of their respective shareholders, directors, officers, employees,
counsels, representatives, agents or affiliates is making any recommendation to you or, advising you
regarding the suitability of any transactions it may enter into in connection with this Issue; your
participation in this Issue is on the basis that neither the BRLM nor any of its shareholders, directors,
officers, employees, counsels, representatives, agents or affiliates have any duty or responsibilities to you
for providing the protection afforded to their clients or customers for providing advice in relation to this
Issue and are not in any way acting in any fiduciary capacity;
4
(i) you confirm that, either: (i) you have not participated in or attended any investor meetings or presentations
by our Bank or its agents (“Bank Presentations”) with regard to our Bank or this Issue; or (ii) if you have
participated in or attended any Bank Presentations: (a) you understand and acknowledge that the BRLM
may not have knowledge of the statements that our Bank or its agents may have made at such Bank
Presentations and are therefore unable to determine whether the information provided to you at such Bank
Presentations may have included any material misstatements or omissions, and, accordingly you
acknowledge that the BRLM has advised you not to rely in any way on any information that was provided
to you at such Bank Presentations, and (b) confirm that you have not been provided any material
information that was not publicly available;
(j) you are aware and understand that the Equity Shares are being offered only to QIBs and are not being
offered to the general public and the allotment of the Equity Shares shall be on a discretionary basis at the
discretion of our Bank in consultation with the BRLM;
(k) you understand that all statements other than statements of historical fact included in this Preliminary
Placement Document, including, without limitation, those regarding our Bank’s financial position, business
strategy, plans and objectives of management for future operations (including development plans and
objectives relating to our products), are forward-looking statements. You understand that such forward-
looking statements involve known and unknown risks, uncertainties and other important factors that could
cause actual results to be materially different from future results, performance or achievements expressed
or implied by such forward-looking statements. You understand that such forward-looking statements are
based on numerous assumptions regarding our present and future business strategies and environment in
which our Bank may operate in the future. You are aware that you should not place reliance on forward
looking statements, which speak only as at the date of this Preliminary Placement Document. None of our
Bank, the BRLM or their shareholders, directors, officers, employees, counsels, representatives, agents or
affiliates assumes any responsibility to update any of the forward-looking statements contained in this
Preliminary Placement Document;
(l) you have been provided a serially numbered copy of this Preliminary Placement Document and have read
this Preliminary Placement Document in its entirety including, in particular, the section titled “Risk
Factors” on page 31;
(m) you confirm that in making your investment decision, (i) you have relied on your own examination of our
Bank and the terms of this Issue, including the merits and risks involved; (ii) you have made your own
assessment of our Bank, the Equity Shares and the terms of this Issue based solely on the information
contained in this Preliminary Placement Document and no other disclosure or representation by our Bank,
the BRLM or any other party; (iii) you have received all information that you believe is necessary or
appropriate in order to make an investment decision in the Issue; and (iv) relied upon your investigation
and resources in deciding to invest in this Issue.
(n) you confirm that an investment in the Equity Shares involves a high degree of risk and that the Equity
Shares are, therefore, a speculative investment and that you are a sophisticated investor and have such
knowledge and experience in financial and business matters as to be capable of evaluating the merits and
risks of the investment in the Equity Shares and you and any accounts for which you are subscribing to the
Equity Shares: (i) are each able to bear the economic risk of the investment in the Equity Shares; (ii) will
not look to our Bank, the BRLM or their respective shareholders, directors, officers, employees, counsels,
representatives, agents or affiliates for all or part of any such loss or losses that may be suffered including
losses arising out of non-performance by our Bank of any of its obligations or any breach of any
representations and warranties by our Bank, whether to you or otherwise; (iii) are able to sustain a complete
loss on the investment in the Equity Shares; (iv) are seeking to subscribe to/acquire the Equity shares in
this Issue for investment purposes and not with a view to resale or distribution ; and (v) have no reason to
anticipate any change in your or their circumstances, financial or otherwise, which may cause or require
any sale or distribution by you or them of all or any part of the Equity Shares;
(o) you confirm that neither the BRLM nor any of its shareholders, directors, investors, officers, employees,
counsels, agents, representatives or affiliates have provided you with any tax advice or otherwise made any
representations regarding the tax consequences of purchase, ownership or disposal of the Equity Shares
(including, but not limited, to this Issue and the use of the proceeds from the Equity Shares). You confirm
that you will obtain your own independent tax advice from a reputable service provider and will not rely
on the BRLM or any of its shareholders, investors, officers, employees, counsels, agents, representatives
5
or affiliates when evaluating the tax consequences in relation to the purchase, ownership or disposal of the
Equity Shares (including, but not limited to, this Issue and the use of the proceeds from the Equity Shares).
You waive and agree not to assert any claim against our Bank, the BRLM or any of their shareholders,
directors, investors, officers, employees, counsels, agents, representatives or affiliates with respect to the
tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever situated;
(p) where you are acquiring the Equity Shares for one or more managed accounts, you represent and warrant
that you are authorized in writing, by each such managed account to acquire the Equity Shares for each
managed account and to make (and you hereby make) the representations, warranties, acknowledgements,
undertakings and agreements herein for and on behalf of each such account, reading the reference to “you”
to include such accounts;
(q) you agree and acknowledge that in terms of section 42(8) of the Companies Act, 2013, our Bank shall file
the list of QIBs to whom Equity Shares are Allotted pursuant to the Issue along with other particulars with
the RoC within 15 days of such Allotment and other filings required under the Companies Act, 2013;
(r) you confirm that you are not a ‘Promoter’ of our Bank, as defined under section 2(69) of the Companies
Act, 2013 and the SEBI ICDR Regulations, and are not a person related to the Promoters, either directly or
indirectly and your Bid does not directly or indirectly represent the Promoters or Promoter Group (as
defined under the SEBI ICDR Regulations) or persons related to the Promoter of our Bank;
(s) you confirm that you have no rights under a shareholders’ agreement or voting agreement with the
Promoters or persons related to the Promoters, no veto rights or right to appoint any nominee director on
the Board of Directors of our Bank other than such rights acquired, if any, in the capacity of a lender not
holding any Equity Shares of our Bank, the acquisition of which shall not deem you to be a person related
to the Promoter;
(t) you are aware and understand that you have no right to withdraw your Bid after the Issue Closing Date;
(u) you confirm that you are eligible to apply and hold the Equity Shares Allotted to you together with any
Equity Shares held by you prior to the Issue. Further, you confirm that your aggregate holding after the
Allotment of the Equity Shares shall not exceed the level permissible as per any applicable regulation,
including but not limited to the Banking Regulation Act, 1949, Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 and in the event of your holding of our Equity Shares reaches any
applicable limits as may be prescribed, you will make the appropriate disclosures and obtain the necessary
permissions in this regard form the relevant Authorities/ RBI;
(v) you confirm that the Bid submitted by you would not eventually result in triggering a tender offer under
the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,
2011, as amended (the “Takeover Code”);
(w) you confirm that your aggregate holding, together with other QIBs participating in this Issue that belong to
the same group or are under common control as you, pursuant to the Allotment under the present Issue,
shall not exceed 50% of this Issue. For the purposes of this representation:
i. the expression “belongs to the same group” shall be interpreted by applying the concept of
“companies under the same group” as provided in sub-section (11) of section 372 of the Companies
Act, 1956; and
ii. “Control” shall have the same meaning as is assigned to it under Regulation 2 (i)(e) of the Takeover
Code;
(x) you shall not undertake any trade in the Equity Shares credited to your beneficiary account until such time
that the final listing and trading approval for the Equity Shares is issued by the Stock Exchanges;
(y) you are aware of and acknowledge and represent the following in respect of your shareholding in our Bank:
i. if your aggregate holding in the paid-up share capital of our Bank, whether direct or indirect,
beneficial or otherwise held by you, your relatives, associate enterprises and persons acting in
concert exceeds 5.00% of the total paid-up share capital of our Bank or entitles you to exercise
6
5.00% or more of the total voting rights of our Bank, you shall seek prior approval of the RBI, in
accordance with the terms of the Reserve Bank of India.
ii. if you are Allotted more than 5.00% of the total number of Equity Shares Allotted in this Issue, we
shall be required to disclose your name, the number of Equity Shares Allotted to you, the pre and
post issue shareholding pattern of our Bank, to the Stock Exchanges and the Stock Exchanges will
make the same available on their website and you consent to such disclosure being made by us.
iii. to the best of your knowledge and belief, your aggregate holding, together with other QIBs in the
Issue that belong to the same group or are under common control as you, pursuant to the Allotment
under this Issue to you shall not exceed 50.00% of the Issue.
For the purposes of this representation, the expression ‘belongs to the same group’ shall be interpreted by
applying the concept of ‘companies under the same group’ as provided in subsection (11) of section 372 of
the Companies Act, 1956; and ‘control’ shall have the same meaning as is assigned to it by clause (e) of
sub- regulation 1 of regulation 2 of the Takeover Code;
(z) you are aware that our Bank shall make necessary filings with the RoC pursuant to the Allotment (which
shall include certain details such as your name, address and number of Equity Shares Allotted) and if the
Allotment of Equity Shares in the Issue results in you being one of the top 10 shareholders of our Bank or
any other change in the shareholding of our Bank, as set out in Section 93 of the Companies Act, 2013, we
shall also be required to disclose your name and shareholding details to the RoC within 15 days of
Allotment, and you consent to such disclosure being made by our Bank;
(aa) you are aware that if our Company decides to allocate Equity Shares to you in the Issue, your name and
your post-Issue shareholding (assuming full subscription in the Issue) will be included as a “proposed
allottee” in the Issue in the Placement Document;
(bb) you are aware that (i) applications for in-principle approval, in terms of Regulation 28 of the SEBI Listing
Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were
made and an approval has been received from each of the Stock Exchanges; and (ii) the application for the
listing and trading approval will be made only after Allotment. There can be no assurance that the final
approvals for listing and trading of the Equity Shares will be obtained in time or at all. Neither our Bank
nor the BRLM or any of their shareholders, directors, officers, employees, counsel, representatives, agents
or affiliates shall be responsible for any delay or non-receipt of such final approvals for listing and trading
or any loss arising from such delay or non-receipt;
(cc) you are aware and understand that the contents of this Preliminary Placement Document is the exclusive
responsibility of our Bank and neither the BRLM nor any person acting on its behalf, nor any of its
shareholders, directors, officers, employees, counsels, advisors, representatives, agents or affiliates have,
or shall have, any liability for any information, representation or statement contained in this Preliminary
Placement Document or any information previously published by or on behalf of our Bank and will not be
liable for your decision to participate in this Issue based on any information, representation or statement
contained in this Preliminary Placement Document or otherwise. By accepting a participation in this Issue,
you agree and confirm that you have neither received nor relied on any other information, representation,
warranty or statement made by or on behalf of either of the BRLM or our Bank or any other person and
neither the BRLM, nor our Bank or our respective directors, officers, employees, counsels, advisors,
representatives, agents or affiliates or any other person will be liable for your decision to participate in this
Issue based on any other information, representation, warranty or statement that you may have obtained or
received;
(dd) you understand that the information regarding our Bank’s business, products and services, including the
statements made in the section titled “Business”, have been reproduced from information available in the
public domain;
(ee) you understand that neither the BRLM nor its affiliates have any obligation to purchase or acquire all or
any part of the Equity Shares purchased by you in this Issue or to support any losses directly or indirectly
sustained or incurred by you for any reason whatsoever in connection with this Issue, including non-
performance by our Bank of any of its obligations or any breach of any representations or warranties by
our Bank, whether to you or otherwise;
7
(ff) you agree to indemnify and hold our Bank and the BRLM and its affiliates harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any
breach of the representations, warranties, acknowledgements and agreements made by you in this
Preliminary Placement Document. You agree that the indemnity set forth in this section shall survive the
resale of the Equity Shares;
(gg) our Bank, the BRLM and their respective affiliates and others will rely on the truth and accuracy of the
foregoing representations, warranties, acknowledgements and agreements which are given to the BRLM
on its own behalf and on behalf of our Bank and are irrevocable;
(hh) any dispute arising in connection with this Issue will be governed by and construed in accordance with the
laws of the Republic of India and the courts at Chennai, India shall have exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this Preliminary Placement Document and the
Placement Document;
(ii) each of the representations, warranties, acknowledgements, undertakings and agreements set forth above
shall continue to be true and accurate at all times up to and including the Allotment, listing and trading of
the Equity Shares on the Stock Exchanges; and
(jj) you have made, or been deemed to have made, as applicable, the representations, warranties,
acknowledgments and agreements set forth in this section and in the sections titled “Selling Restrictions”
and “Transfer Restrictions” on pages 201 and 206, respectively.
Off-Shore Derivative Instruments (P-Notes)
Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of
Regulation 22 of the SEBI (FPI) Regulations, a FPI (other than Category III foreign portfolio investors and
unregulated broad based funds which are classified as Category II FPI by virtue of their investment manager being
appropriately regulated), including the affiliates of the BRLM, may issue, subscribe or otherwise deal in offshore
derivative instruments as defined under the SEBI (FPI) Regulations as any instrument, by whatever name called,
which is issued overseas by a FPI against securities held by it that are listed or proposed to be listed on any
recognized stock exchange in India, as its underlying security (all such offshore derivative instruments are referred
to herein as “P-Notes”) for which they may receive compensation from the purchasers of such P-Notes, listed or
proposed to be listed on any recognized stock exchange in India only in favour of those entities which are regulated
by any appropriate foreign regulatory authorities in the countries of their incorporation or establishment subject
to compliance with “know your client” requirements. Further, P-Notes shall not be issued to or transferred to
persons who are resident Indians or non-resident Indians and to entities that are beneficially owned by them. A
FPI shall also ensure that further issue or transfer of any instrument referred to above, issued by or on behalf of
it, is made only to persons who are regulated by appropriate foreign regulatory authorities. P-Notes have not been
and are not being offered or sold pursuant to this Preliminary Placement Document. This Preliminary Placement
Document does not contain any information concerning P-Notes, including, without limitation, any information
regarding any risk factors relating thereto.
In terms of the SEBI (FPI) Regulations, the issue of Equity Shares to a single FPI or an investor group (which
means the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be 10%
or above of our post-Issue Equity Share capital. As per the circular issued by SEBI on November 24, 2014, these
investment restrictions shall also apply to subscribers of offshore derivative instruments. Two or more subscribers
of offshore derivative instruments having a common beneficial owner shall be considered together as a single
subscriber of the offshore derivative instruments. In the event a prospective investor has investments as an FPI
and as a subscriber of offshore derivative instruments, these investment restrictions shall apply on the aggregate
of the FPI and offshore derivative instruments investments held in the underlying company.
The FPI is required to collect a regulatory fee of $ 1,000 or any other amount, as may be specified by SEBI from
time to time, from every subscriber of P-Notes issued by it and deposit the same with SEBI by way of electronic
transfer in the designated bank account of SEBI. FPI is required to deposit this regulatory fee once every three
years, provided that for the block of three years beginning April 1, 2017, the FPI shall collect and deposit the
regulatory fee within two months from the date of notification of the Securities and Exchange Board of India
(Foreign Portfolio Investors) (Fourth Amendment) Regulations, 2017 (i.e. July 20, 2017).
8
Any P-Notes that may be issued are not securities of our Bank and do not constitute any obligations of, claim on,
or interests in our Bank. Our Bank has not participated in any offer of any P-Notes, or in the establishment of the
terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any P-Notes that may be
offered are issued by, and are solely the obligations of, third parties that are unrelated to our Bank. Our Bank and
the BRLM do not make any recommendation as to any investment in P-Notes and do not accept any responsibility
whatsoever in connection with any P-Notes. Any P-Notes that may be issued are not securities of the BRLM and
do not constitute any obligations of, or claims on, the BRLM. Affiliates of the BRLM which are FPIs may
purchase, to the extent permitted by applicable laws, the Equity Shares in the Issue and any P-Notes thereof.
Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate
disclosure as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the
issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any
P-Notes or any disclosure related thereto. Prospective investors are urged to consult with their own
financial, legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including
whether P-Notes are issued in compliance with applicable laws and regulations.
9
DISCLAIMER CLAUSE OF THE STOCK EXCHANGE
As required, a copy of this Preliminary Placement Document has been submitted to the Stock Exchanges. The
Stock Exchanges do not in any manner:
1. warrant, certify or endorse the correctness or completeness of any of the contents of this Preliminary
Placement Document;
2. warrant that the Equity Shares issued pursuant to this Issue will be listed or will continue to be listed on the
Stock Exchanges; or
3. take any responsibility for the financial or other soundness of our Bank, our Promoters, our management or
any scheme or project of our Bank.
It should not for any reason be deemed or construed to mean that this Preliminary Placement Document has been
cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquires any
Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have any
claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such person
consequent to, or in connection with, such subscription/acquisition whether by reason of anything stated or omitted
to be stated herein or for any other reason whatsoever.
10
PRESENTATION OF FINANCIAL AND OTHER DATA
In this Preliminary Placement Document, all references to “USD”, US$ and “U.S. Dollars” are to the legal
currency of the United States and references to “₹”, “Rs.”, “INR” and “Rupees” are to the legal currency of the
Republic of India.
In this Preliminary Placement Document, unless otherwise specified or the context otherwise indicates or implies,
references to:
• “you”, “your”, “offeree”, “purchaser”, “subscriber”, “recipient”, “investors” and “potential investor” are to
the prospective investors in the Equity Shares issued pursuant to the Issue; and
• unless otherwise specified, “us”, “we”, “our” “the Bank” “our Bank” and “the Issuer” refers to The Lakshmi
Vilas Bank Limited.
Financial Data
Our Bank publishes its financial statements in Indian Rupees. Our Bank prepares its financial statements in
accordance with Indian Generally Accepted Accounting Principles (“Indian GAAP”) and the Banking Regulation
Act, 1949, and the circulars and guidelines issued by the RBI from time to time.
MCA, in its press release dated January 18, 2016, issued a roadmap for implementation of Ind-AS converged with
IFRS for non-banking financial companies, scheduled commercial banks, insurers, and insurance companies,
which was subsequently confirmed by the RBI through its circular dated February 11, 2016. This circular requires
our Bank to prepare Ind-AS based financial statements for the accounting period commencing April 1, 2018 with
comparative financial statements for the accounting period on ending March 31, 2018. The implementation of
Ind-AS by banks requires certain legislative changes in the format of financial statements to comply with
disclosures required by Ind-AS. Recently, in April 2018, the RBI deferred the effective date for implementation
of Ind-AS by one year, by which point the necessary legislative amendments are expected to have been completed.
Scheduled commercial banks in India will now be required to prepare Ind-AS based financial statements for the
accounting periods beginning from April 1, 2019 onwards with comparatives for the accounting periods ending
March 31, 2019.
Indian GAAP differs in certain respects from International Financial Reporting Standards (“IFRS”). Further we
have not yet adopted the Indian Accounting Standards Rules notified on February 16, 2015 (“Ind-AS”). We have
not attempted to quantify the impact of Ind-AS or IFRS on the financial data included in this Preliminary
Placement Document, nor do we provide a reconciliation of our financial statements, to those of Ind-AS or IFRS.
Ind-AS and IFRS differs in significant respects from Indian GAAP. The nature and extent of the possible impact
of Ind-AS on our financial reporting and accounting practices is currently uncertain, and there can be no assurance
that such impact will not be significant. Accordingly, the degree to which the financial statements prepared in
accordance with Indian GAAP and included in this Preliminary Placement Document will provide meaningful
information is entirely dependent on the reader’s level of familiarity with the respective accounting practices. Any
reliance by persons not familiar with Indian accounting practices on the financial disclosures presented in this
Preliminary Placement Document should accordingly be limited and our Bank urges you to consult your own
advisors regarding such differences and their impact on the financial data. For further details, please see “Risk
Factors” on page 31.
In this Preliminary Placement Document, certain monetary thresholds have been subject to rounding adjustments;
accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which
precede them.
Unless the context requires otherwise, the financial data in this Preliminary Placement Document is derived from
our Bank’s financial statements. Our Financial Year commences on April 1 of each year and ends on March 31
of the succeeding year, so all references to a particular “Fiscal Year”, “Fiscal”, “Financial Year” or “FY” are to
the 12 months ended on March 31 of that year. Our audited financial statements for the Financial Years ending
March 31, 2016, March 31, 2017 and March 31, 2018 that appear in this Preliminary Placement Document have
been prepared by our Bank in accordance with Indian GAAP.
All the numbers in this document, other than in sections titled “Financial Information” on page 240, have been
presented in million or in whole numbers where the numbers have been too small to present in million, unless
stated otherwise.
11
MARKET AND INDUSTRY DATA
Information regarding market size, market share, market position, growth rates and other industry data pertaining
to our Bank’s business contained in this Preliminary Placement Document consists of estimates based on data and
reports compiled by governmental bodies, professional organisations and analysts and on data from other external
sources, and on our Bank’s knowledge of markets in which it competes. The statistical information included in
this Preliminary Placement Document relating to the various sectors in which our Bank operates has been
reproduced from various trade, industry and regulatory/government publications and websites, including that of
the RBI.
The information in this Preliminary Placement Document includes reports that have been prepared by World Bank
that have the following disclaimer: “This is an adaptation of an original work by The World Bank. Views and
opinions expressed in the adaptation are the sole responsibility of the author or authors of the adaptation and are
not endorsed by The World Bank.”
This data is subject to change and cannot be verified with complete certainty due to limits on the availability and
reliability of the raw data and other limitations and uncertainties inherent in any statistical survey.
Neither our Bank, the BRLM, nor any other person connected with the Issue has independently verified this data
and/ or any representation regarding the accuracy or completeness of such data. Similarly, while we believe our
Bank’s internal estimates to be reasonable, such estimates have not been verified by any independent source and
our Bank cannot assure potential investors as to their accuracy. Similarly, internal estimates and surveys, industry
forecasts and market research, while believed to be reliable, have not been independently verified and neither our
Bank nor the BRLM makes any representation as to the accuracy and completeness of information based on trade,
industry and government publications and websites, data reports compiled by government bodies, professional
organisations and analysts, or from other external sources.
The extent to which the market and industry data used in this Preliminary Placement Document is
meaningful depends on the reader’s familiarity with and understanding of the methodologies used in
compiling such data.
12
FORWARD LOOKING STATEMENTS
Certain statements contained in this Preliminary Placement Document that are not statements of historical fact
constitute “forward-looking statements.” Investors can generally identify forward-looking statements by
terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “can”,
“may”, “objective”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, “will likely
result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, or other words
or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also
forward-looking statements. However, these are not the exclusive means of identifying forward-looking
statements. All statements regarding the expected financial condition and results of operations and business plans
and prospects of our Bank are forward-looking statements. These forward-looking statements include statements
as to the business strategy, planned projects, revenue and profitability (including, without limitation, any financial
or operating projections or forecasts), new business and other matters regarding our Bank discussed in this
Preliminary Placement Document that are not historical facts.
These forward-looking statements and any other projections contained in this Preliminary Placement Document
(whether made by our Bank or any third party) are predictions and involve known and unknown risks,
uncertainties, assumptions and other factors that may cause the actual results, performance or achievements of our
Bank to be materially different from any future results, performance or achievements expressed or implied by
such forward looking statements or other projections.
Important factors that could cause our actual results, performances and achievements to be materially different
from any of the forward-looking statements include, among others:
• volatility in interest rates and other market conditions;
• our inability to manage our loan exposures and non-performing assets;
• failure to sustain or achieve growth of our deposit base, including our current and savings account deposit
base;
• cases of fraud involving our Bank from time to time;
• challenges in developing fee income business;
• concentration of loans to and deposits from certain customers;
• non-compliance with RBI directives and the procedural guidelines that govern our Bank;
• any inability to manage maturity and interest rate mismatches between our assets and liabilities;
• failure to maintain capital adequacy requirements;
• any increase in the CRR and the SLR;
• regional concentration in southern India;
• non-availability of funding and increase in funding costs;
• our inability to sustain growth of our retail banking business;
• changes in the regulatory environment, under which we operate, or our inability to comply with the
regulations; and
• any change in the tax laws in India.
By their nature, certain of the market risk disclosures are only estimates and could be materially different from
what actually occurs in the future. As a result, actual future gains, losses or impact on revenue or income could
materially differ from those that have been estimated, expressed or implied by such forward-looking statements
or other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about us
that could cause actual results to differ materially from those contemplated by the relevant forward-looking
statement. Additional factors that could cause the actual results, performance or achievements of our Bank to
differ include but are not limited to, those discussed under the sections titled “Risk Factors”, “Business” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 31, 79 and
120, respectively.
The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs of
the management of our Bank, as well as the assumptions made by and information currently available to the
management. Our Bank believes that the expectations reflected in such forward-looking statements are reasonable
at this time, our Bank cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, investors are cautioned not to place reliance on such forward-looking statements. In any event, these
statements speak only as of the date of this Preliminary Placement Document or the respective dates indicated in
this Preliminary Placement Document, and our Bank undertakes no obligation to update or revise any of them,
13
whether as a result of new information, future events or otherwise. If any of these risks and uncertainties
materialize, or if any of our Bank’s underlying assumptions prove to be incorrect, the actual results of operations
or financial condition of our Bank could differ materially from that described herein as anticipated, believed,
estimated or expected. All subsequent forward-looking statements attributable to our Bank are expressly qualified
in their entirety by reference to these cautionary statements.
14
ENFORCEMENT OF CIVIL LIABILITIES
Our Bank is incorporated under the laws of India. All of our Directors and Key Managerial Personnel named
herein are residents of India and all or a substantial portion of the assets of our Bank is located in India. As a
result, it may be difficult or may not be possible for investors outside India to effect service of process upon our
Bank or on such persons in India, or to enforce judgments against them obtained outside India.
India is not a signatory to any international treaty in relation to the recognition or execution of foreign judgments.
Recognition and execution of foreign judgments is provided for under section 13 and section 44A of the Code of
Civil Procedure, 1908, as amended (“Civil Code”).
Section 13 of the Civil Code provides that a foreign judgment shall be conclusive as to any matter directly
adjudicated upon between the same parties or parties litigating under the same title except:
(a) where the judgement has not been pronounced by a court of competent jurisdiction;
(b) where the judgement has not been given on the merits of the case;
(c) where the judgement appears on the face of the proceedings that the judgement was founded on an incorrect
view of international law or a refusal to recognize the law of India in cases where such law is applicable;
(d) where the proceedings in which the judgment was obtained were opposed to natural justice;
(e) where the judgement has been obtained by fraud; or
(f) where the judgement sustains a claim founded on a breach of any law then in force in India.
A foreign judgment which is conclusive under Section 13 of the Civil Procedure Code may be enforced in India
(i) by instituting execution proceedings; or (ii) by instituting a suit on such judgment.
Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court
(within the meaning of that section) in any country or territory outside India which the Government has by
notification declared to be in a reciprocating territory, it may be enforced in India by proceedings in execution as
if the foreign judgment had been rendered by the relevant court in India. Under Section 14 of the Civil Code, a
court in India shall, upon the production of any document purporting to be a certified copy of a foreign judgment,
presume that the foreign judgment was pronounced by a court of competent jurisdiction, unless the contrary
appears on record but such presumption may be displaced by proving want of jurisdiction. However, section 44A
of the Civil Code is applicable only to monetary decrees not being in the nature of any amounts payable in respect
of taxes or other charges of a like nature or in respect of a fine or other penalties and does not include arbitration
awards. Furthermore, the execution of the foreign decree under Section 44A of the Civil Procedure Code is also
subject to the exceptions under Section 13 of the Civil Procedure Code, as mentioned above.
A total of 11 territories have been declared by the Government to be a reciprocating territory for the purposes of
Section 44A of the Civil Code, comprising: the United Kingdom; Aden; Fiji; Singapore; Malaysia; Trinidad and
Tobago; New Zealand, the Cook Islands (including Niue) and the Trust Territories of Western Samoa; Hong
Kong; Papua New Guinea; Bangladesh; and the United Arab Emirates. A judgment of a court in a jurisdiction that
is not a reciprocating territory may be enforced only by a fresh suit upon the judgment and not by proceedings in
execution. Such a suit has to be filed in India within three years from the date of the foreign judgment in the same
manner as any other suit filed to enforce a civil liability in India.
It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought
in India. Furthermore, it is unlikely that an Indian court would enforce a foreign judgment if it viewed the amount
of damages awarded as excessive or inconsistent with public policy. Further, any judgment or award denominated
in a foreign currency would be converted into Rupees on the date of such judgment or award and not on the date
of payment A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to
repatriate outside India any amount recovered pursuant to the execution of such a judgement, and any such amount
may be subject to tax in accordance with applicable laws.
15
EXCHANGE RATES
Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency
equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the
conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares.
The following table sets forth information with respect to the exchange rates between the Rupee and the U.S.
Dollar (₹ per US$), for the periods indicated. The exchange rates are based on the reference rates released by RBI,
which are available on the website of RBI. No representation is made that any Rupee amounts could have been,
or could be, converted into U.S. Dollars at any particular rate, the rates stated below, or at all.
On March 6, 2019, the exchange rate (RBI reference rate) was ₹ 70.58 to US$ 1.00.
(₹ Per US$) Period end Average (1) High Low
Fiscal:
2016 66.33 65.46 68.78 62.16
2017 64.84 67.09 68.72 64.84
2018 65.04 64.45 65.76 63.35
Quarter ended:
December 31, 2018 69.79 72.13 74.39 69.66
September 30, 2018 72.55 70.03 72.81 68.30
June 30, 2018 68.58 67.04 68.94 64.93
March 31, 2018 65.04 64.31 65.23 63.35
December 31, 2017 63.93 64.74 65.55 63.93
Months ended:
January 31, 2019 71.03 70.73 71.38 69.48
December 31, 2018 69.79 70.73 72.04 69.79
November 30, 2018 69.66 71.85 73.83 69.66
October 31, 2018 73.99 73.63 74.39 72.80
September 30, 2018 72.55 72.22 72.81 70.77
August 31, 2018 70.93 69.55 70.93 68.36
(Source: www.rbi.org.in and www.fibil.org.in)
(1) Average of the official rate for each working day of the relevant period.
Note: If the RBI reference rate is not available on a particular date due to a public holiday, exchange rates of the previous working day has
been disclosed.
16
DEFINITIONS AND ABBREVIATIONS
Our Bank has prepared this Preliminary Placement Document using the definitions and abbreviations set forth
below, which you should consider when reading the information contained herein. The following list of certain
capitalized terms used in this Preliminary Placement Document is intended for the convenience of the
reader/prospective investor only and is not exhaustive. Unless otherwise specified, the capitalized terms used in
this Preliminary Placement Document shall have the meaning as defined hereunder. Further any references to any
statute or regulations or policies shall include amendments thereto, from time to time and any reference to a
statutory provision shall include any subordinate legislation made from time to time under that provision.
Bank Related Terms
Term Description
Articles or Articles of
Association
The articles of association of our Bank, as amended from time to time
Auditors The statutory auditors of our Bank, namely, P. Chandrasekar LLP, Chartered Accountants
Audited Financial
Statements
Collectively, the audited financial statements for the Fiscal Years ended (i) March 31,
2018, read along with all the notes thereto (ii) March 31, 2017 read along with all the
notes thereto and (iii) March 31, 2016, read along with all the notes thereto, all prepared
under the Indian GAAP.
Bank/Issuer/Company The Lakshmi Vilas Bank Limited, incorporated on November 3, 1926 under the Indian
Companies Act, 1913 and having its registered office at Salem Road, Kathaparai P. O.,
Karur – 639 006, Tamil Nadu
Board of Directors or Board The Board of Directors of our Bank
Corporate Office The corporate office of our Bank, located at LVB House, No. 4, Sardar Patel Road,
Guindy, Chennai – 600 032, Tamil Nadu
Director(s) Director(s) of our Bank, unless otherwise specified
Financial Statements The Audited Financial Statements and Unaudited Financial Statements
LBC The Lakshmi Business Credit scheme
LCVL Lakshmi Commercial Vehicle Loans
LHL Lakshmi Home Loan
LKCC Lakshmi Kisan Credit Card
LLAP Lakshmi Loan Against Properties
LLAS Lakshmi Loan Against Securities
LPVL Lakshmi Personal Vehicle Loans
LRL Lakshmi Rental Loan
Memorandum or
Memorandum of Association
The Memorandum of Association of our Bank, as amended from time to time
Key Managerial Personnel Key management/ managerial personnel of our Bank in terms of the SEBI ICDR
Regulations and the Companies Act, 2013 and as disclosed in “Board of Directors and
Senior Management” on page 157.
Promoters K. R. Pradeep, S. G. Prabhakharan, M. P. Shyam, N. Malayalaramamirtham
Promoter Group Unless the context requires otherwise, the entities forming part of our promoter group in
accordance with SEBI ICDR Regulations and which are disclosed by us to the Stock
Exchanges from time to time
Registered Office Salem Road, Kathaparai P.O., Karur – 639 006, Tamil Nadu
RFL Religare Finvest Limited
RoC Registrar of Companies, Tamil Nadu at Chennai
Unaudited Financial
Statements
The unaudited financial information as of and for the nine months ended December 31,
2018 prepared pursuant to the requirements of Regulation 33 of the SEBI (Listing
Obligation and Disclosure Requirements) Regulation, 2015 and subjected to limited
review.
Issue Related Terms
Term Description
AIF(s) Alternative investment funds, as defined and registered with SEBI under the Securities
and Exchange Board of India (Alternative Investment Funds) Regulations, 2012.
AML Anti-Money Laundering Regulation
Allocated /Allocation The allocation of Equity Shares, following the determination of the Issue Price, to QIBs
on the basis of Application Forms submitted by them, in consultation with the BRLM and
in compliance with Chapter VI of the SEBI ICDR Regulations
Allot/Allotment/Allotted Unless the context otherwise requires, the issue and allotment of Equity Shares pursuant
to this Issue
17
Term Description
Allottee(s) QIBs who are Allotted Equity Shares of our Bank pursuant to this Issue
Application Form The form (including any revisions thereof) pursuant to which a Bidder indicates its
interest to subscribe for the Equity Shares of our Bank pursuant to the Issue
“Book Running Lead
Manager” or “BRLM”
Srei Capital Markets Limited
BSE BSE Limited
Bid An indication of interest by a QIB, including all revisions and modifications of interest,
as provided in the Application Form, to subscribe for Equity Shares in Issue
Bidders A QIB who has made a Bid pursuant to the terms of this Preliminary Placement Document
and the Application Form
Bid Amount The price per Equity Share indicated in the bid multiplied by the number of Equity Shares
Bid for by such QIB and payable by the QIB in the Issue.
Bidding Period / Issue Period The period between the Issue Opening Date and Issue Closing Date inclusive of both
dates during which Bidders can submit their Bids
CAN/Confirmation of
Allocation Note
Note or advice or intimation to Bidders confirming the Allocation of Equity Shares to
such QIBs after determination of the Issue Price, and requesting payment for the entire
applicable Issue Price for all the Equity Shares Allocated to such QIBs
Cut Off Price The Issue Price of the Equity Shares to be issued pursuant to the Issue which shall be
finalised by our Bank in consultation with the BRLM
Closing Date The date on which the Allotment of the Equity Shares offered pursuant to this Issue is
expected to be made, i.e., on or about [●]
Depositories Act The Depositories Act, 1996, as amended from time to time
Depository A depository registered with SEBI under SEBI (Depositories and Participant)
Regulations, 1996, as amended
Designated Date The date of credit of Equity Shares pursuant to the Issue to the Allottees’ demat accounts,
as applicable to the relevant Allottees
DP / Depository Participant A depository participant as defined under the Depositories Act
Eligible FPIs FPIs that are eligible to participate in this Issue and do not include Category III foreign
portfolio investors (who are not eligible to participate in the Issue)
Equity Shares The equity shares of face value of ₹ 10 each of our Bank
Escrow Account The bank account titled Lakshmi Vilas Bank - QIP 2019 Escrow Account opened by our
Bank with the Escrow Agent, subject to the terms of the Escrow Agreement, into which
the application monies payable by Bidders in connection with subscription to Equity
Shares pursuant to the Issue shall be deposited
Escrow Bank/ Escrow Agent The Lakshmi Vilas Bank Limited, acting through its branch office at Mumbai Fort, 104,
Mumbai Samachar Marg, Fort, Mumbai – 400 001, Maharashtra
Escrow Agreement The agreement entered into amongst our Bank, the Escrow Agent and the BRLM
FDI Foreign Direct Investment
FEMA Foreign Exchange Management Act, 1999, and the regulations framed thereunder
Foreign Portfolio Investor(s)/
FPI(s)
Foreign portfolio investors as defined under the SEBI (FPI) Regulations and includes
persons who have been registered under the SEBI (FPI) Regulations.
Floor Price The floor price of ₹ 65.96 per Equity Share, which has been calculated in accordance with
Regulation 176 of Chapter VI of the SEBI ICDR Regulations. Our Bank may offer a
discount of not more than 5% on the Floor Price in terms of Regulation 176 of the SEBI
ICDR Regulations
FVCI Foreign venture capital investors as defined and registered with SEBI under the Securities
and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000, as
amended
Issue The offer and issue and Allotment of up to [●] Equity Shares each at a price of ₹ [●] per
Equity Share, including a premium of ₹ [●] per Equity Share, aggregating ₹ [●] million
to QIBs pursuant to the SEBI ICDR Regulations and the Companies Act, 2013
Issue Closing Date [●], the last date up to which the Application Forms shall be accepted by our Bank (or the
BRLM, on behalf of our Bank)
Issue Opening Date March 7, 2019, the date on which the acceptance of the Application Forms shall have
commenced by our Bank (or the BRLM, on behalf of our Bank)
Issue Price A price per Equity Share of ₹ [●]
Issue Size The aggregate size of the Issue, aggregating to ₹ [●] million
Mutual Fund A mutual fund registered with SEBI under the SEBI (Mutual Funds) Regulations, 1996,
as amended
NSDL National Securities Depository Limited
NSE National Stock Exchange of India Limited
Placement Agreement The placement agreement entered into amongst by and between our Bank and the BRLM
Placement Document The Placement Document to be issued in accordance with Chapter VI of the SEBI ICDR
Regulations and section 42 of the Companies Act, 2013 and the rules thereunder
18
Term Description
Preliminary Placement
Document
This preliminary placement document-cum-application form dated March 7, 2019 issued
in accordance with Chapter VI of the SEBI ICDR Regulations and section 42 of the
Companies Act, 2013 and the rules thereunder.
QIBs or Qualified
Institutional Buyers
A qualified institutional buyer as defined under Regulation 2(1)(zd) of the SEBI ICDR
Regulations
Regulation S Regulation S under the Securities Act
Relevant Date March 7, 2019, which is the date of the meeting wherein the Board of Directors, or a duly
authorised committee, decides to open the Issue
SEBI The Securities and Exchange Board of India constituted under the SEBI Act
SEBI Act The Securities and Exchange Board of India Act, 1992, as amended from time to time
SEBI (FPI) Regulations Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014
SEBI ICDR Regulations SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, including
instructions and clarifications issued by SEBI from time to time
SEBI Listing Regulations The Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015
Securities Act U.S. Securities Act of 1933
SENSEX An index of 30 constituent stocks traded on BSE representing a sample of large, liquid
and representative companies
Shareholders Persons holding Equity Shares of our Bank, unless otherwise specified in the context
thereof.
Stock Exchanges The BSE and NSE
STT Securities Transaction Tax
Takeover Code The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as
amended from time to time
U.S. or United States United States of America
QIP Qualified Institutions Placement
VCF Venture Capital Fund
Industry Terms
Term Description
A&DB Agri, Commercial and Development Banking group
AFI Annual Financial Inspection
ALCO Asset Liability Management Committee
ALM Asset Liability Management
ANBC Adjusted Net Bank Credit
ATMs Automated Teller Machines
Bankers’ Books Evidence Act Bankers’ Books Evidence Act, 1891
Banking Regulation Act The Banking Regulation Act, 1949
BR Base Rate
BSBDA Basic savings bank deposit accounts
Basel II Recommendations of the Basel Committee on Banking Supervision dated June
2004
Basel III Recommendations of the Basel Committee on Banking Supervision dated
December 2010
Brickwork Brickwork Ratings India Private Limited
C&IB / Corporate and Institutional
Banking group
Business unit of the Bank comprising of accounts of businesses with revenues
exceeding ₹ 750.00 million
CAR Capital Adequacy Ratio
CARE CARE Ratings Limited
CAGR Compounded Annual Growth Rate
CBS Core Banking Solutions
CBLO Collateralised Borrowing and Lending Obligation
CCIL Clearing Corporation of India Limited
CEOBE Credit equivalent amount of off-balance sheet exposures
CET I Common Equity Tier 1
CIBIL Credit Information Bureau of India Limited
CIR Credit Information Report
CRAR Capital to Risk Weighted Assets Ratio
CRM Customer relationship management
CRR Cash Reserve Ratio
CASA Current Account and Saving Account
Corporate Banking group Erstwhile business unit of the Bank comprising of accounts of public or private
19
Term Description
limited companies.
DICGC Deposit Insurance and Credit Guarantee Corporation
DIN Director Identification Number
DRT Debts Recovery Tribunal
ECGC Export Credit Guarantee Corporation of India Limited
EPS Earnings Per Share
FATCA Foreign Account Tax Compliance Act
FD Fixed Deposit
FEDAI Foreign Exchange Dealers’ Association of India
FIPB Foreign Investment Promotion Board of India
IBA Indian Banks Association
ICA Inter creditor agreement
ICDS Income Computation and Disclosure Standards
IDRBT Institute of Development and Research in Banking Technology, Hyderabad
IMPS Immediate Payment Service
IMT Instant money transfer
Interest Coverage Ratio Aggregate of earnings before taxes, depreciation on Bank’s property and total
interest expended divided by total interest expended for the Fiscal
IRDAI Insurance Regulatory Development Authority of India
ISE Inspection for Supervisory Evaluation
IT Information Technology
KYC Know Your Customer Norms as stipulated by the Reserve Bank of India
LAF Liquidity Adjustment Facility
Large Corporate Account Any account with outstanding advance of more than ₹ 250.00 million.
LCR Liquidity Coverage Ratio
MFI Micro-Finance Institution
MSF Marginal Standing Facility
MCLR Marginal Cost of Funds Based Lending Rate
MSMEs Micro Small and Medium Enterprises
NAV Net Asset Value
NBFCs Non-Banking Financial Companies
NECS National Electronic Clearing Services
NIM Net Interest Margin
NOCs No Objection Certificates / National Operating Centres, as applicable
NPA Non-Performing Asset
NPCI National Payment Corporation of India
NRE Non-resident (external)
NRE Deposit Non-resident (external) deposits
Negotiable Instruments Act Negotiable Instruments Act, 1881
New Banks Licensing Guidelines Guidelines on Licensing of New Banks in the Private Sector issued by the RBI on
February 22, 2013
Operating Profit Profit before provisions and contingencies
PCA Prompt Corrective Action
PFRDA Pension Fund Regulatory and Development Authority
PMJDY The Pradhan Mantri Jan Dhan Yojana
RBS Risk Based Supervision
RBI Act or the Reserve Bank of
India Act
The Reserve Bank of India Act, 1934
RDB Act The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
Repatriation “Investment on repatriation basis” means an investment the sale proceeds of which
are, net of taxes, eligible to be repatriated out of India, and the expression
‘Investment on non-repatriation basis’, shall be construed accordingly.
RIDF Rural Infrastructure Development Fund
SARFAESI Act
2002/Securitisation Act
Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002
SBNs Specified Bank Notes
SCB Scheduled commercial bank
SLR Statutory Liquidity Ratio
SPARC Supervisory Programme for Assessment of Risk and Capital
TASC Trusts, Association and Clubs
Tier I Capital The core capital of a bank, which provides the most permanent and readily available
support against unexpected losses. It comprises paid-up capital and statutory
reserves including other disclosed reserves, if any, revaluation reserves (at a
20
Term Description
discount of 55.0%), capital reserves, innovative perpetual debt instruments,
perpetual non-cumulative preference shares as reduced by equity investments in
subsidiaries, intangible assets, deferred tax asset and losses in the current period and
those brought forward from the previous period
Tier II
Capital
The general provisions and loss reserves (allowed up to a maximum of 1.25% of
risk-weighted assets), hybrid debt capital instruments, subordinated debt,
Innovative perpetual debt instruments and perpetual non-cumulative preference
shares.
TPP Third party products
TRV Total relationship value amount
Conventional and General Terms
Term Description
AGM Annual General Meeting
ASBA Application Supported by Blocked Account
Category III Foreign Portfolio
Investor
FPIs who are registered as “Category III foreign portfolio investors” under the SEBI
(FPI) Regulations
CDSL Central Depository Services (India) Limited
CIN Corporate Identity Number
Companies Act The Companies Act, 1956 and/or the Companies Act, 2013, as applicable.
Companies Act, 1956 The Companies Act, 1956 (without reference to the provisions thereof that have
ceased to have effect upon the notification of the Notified Sections) and the rules
made thereunder
Companies Act, 2013 The Companies Act, 2013, to the extent in force pursuant to notification of the
Notified Sections, and the rules made thereunder
CSR Corporate Social Responsibility
EBITDA Earnings before interest, tax, depreciation and amortisation. It is computed as profit
/(loss) before exceptional items and tax plus finance cost plus depreciation and
amortisation
FEMA Foreign Exchange Management Act, 1999
Financial Year or Fiscal Year or
Fiscal /FY
The period of 12 months ended March 31 of that particular year, unless otherwise
stated
FIU-IND Financial Intelligence Unit – India
GAAP Generally Accepted Accounting Principles
GAAR General Anti-Avoidance Rules
GDP Gross Domestic Product
GoI or Government of India Government of India
GST Goods and Service Tax
GVA Gross Value Added
IAS Rules The Companies (Indian Accounting Standards) Rules, 2015 notified by the MCA on
February 16, 2015
ICAI The Institute of Chartered Accountants of India
IFRS International Financial Reporting Standards
Ind-AS Indian Accounting Standards
Income Tax Act The Income Tax Act, 1961
Indian GAAP Generally Accepted Accounting Principles of India as applicable to banks.
Insider Trading Regulations The Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 2015
MCA Ministry of Corporate Affairs
NABARD National Bank for Agriculture and Rural Development
Net worth Paid up share capital plus all reserves and surplus (excluding revaluation reserves)
NHB National Housing Bank
Notified Sections Sections of the Companies Act 2013 that have been notified by the Government of
India
NRI Non-Resident Indian.
p.a. Per annum
PAT Profit After Tax
PAN Permanent Account Number
RBI Reserve Bank of India
Rupee /Rs./ INR/ ₹ The legal currency of the Republic of India
SIDBI Small Industries Development Bank of India
21
SUMMARY OF BUSINESS
OVERVIEW
We are a private sector bank in south India, with over a nine-decade history, being run by a professional senior
management team. We believe that we have transitioned from a South India focussed corporate lending bank to
one having a national focus, with a diversified portfolio of retail, MSME/ SME, corporate lending and fee based
products. We have a wide presence through a network of 1,620 customer outlets which includes 569 branches,
1,046 ATMs and five extension counters across 18 states and one union territory, as of December 31, 2018. We
have 162 branches in metropolitan cities, 125 branches in urban areas, 173 branches in semi-urban areas and 109
branches in rural areas, as of December 31, 2018. We had customer accounts of more than 2.26 million banking
customers as of December 31, 2018.
We offer a comprehensive range of products and services including savings accounts, current accounts, term
deposits, international debit cards, corporate and retail loans, depository services, locker facilities, mobile and
internet banking services, bill payment services, foreign exchange services, payment and remittance services, and
repatriation schemes. For further details, see “Business – Product Portfolio” on page 86.
We also offer a number of para-banking products and services, which include distribution of life insurance, general
insurance and health insurance products, for which we have agreed to act as corporate agents of Max Life
Insurance Company Limited, Birla Sun Life Insurance Company Limited, HDFC ERGO General Insurance
Company Limited, DHFL Pramerica Life Insurance Company Limited, Future Generali India Insurance Company
Limited and Cigna TTK Health Insurance Company Limited. We provide money transfer services through branch
channels as well as through direct remittance and we have arrangements with Weizmann Forex Limited. We also
have arrangements with a number of asset management companies for distribution of various mutual fund
schemes. We also offer depository services which allow our customers to open demat accounts at our designated
branches and hold securities in electronic form. We are also registered as a “banker to the issue” with SEBI and
can receive ASBA applications in initial public offerings. For further details, see “Business – Product Portfolio”
on page 86.
The treasury operations of our Bank undertake liquidity management to maintain required liquidity, while
complying with the cash reserve ratio (“CRR”) and the statutory liquidity ratio (“SLR”). Our treasury operations
comprise primarily of statutory reserves management, liquidity management, investment and trading activities
and foreign exchange activities. We are also involved in investing in commercial papers, mutual funds, certificates
of deposits and floating rate instruments in order to manage short-term surplus liquidity. Treasury activities are
supported by appropriate technology, information systems and risk management systems.
We have organized our business model around the following three business units being: (i) the retail banking
group which handles the retail banking segment, (ii) the Agri, Commercial and Development Banking group
(“A&DB”), i.e. the erstwhile MSME / rural banking group, which handles the SME/ MSME banking segments,
rural banking segment, and mid-commercial banking segment, and (iii) the Corporate and Institutional Banking
group, the erstwhile corporate banking group which handles the corporate customer segment. The retail banking
segment comprises of loans and advances to individuals, HUFs, trusts and clubs. The A&DB group comprises of
loans and advances made available to micro, small and medium enterprises in addition to loans made available
for the purposes of agricultural activities. Loans to private and public limited companies that do not fall within
any of the above divisions are categorized as loans to the C&IB group. For further details of our business divisions,
see “Business – Our Business Divisions” on page 84.
Our interest income from A&DB group and Corporate Banking group have grown at a CAGR of 5.76% and
12.40%, from Fiscal 2016 to Fiscal 2018, respectively.
We have issued and have outstanding subordinated bonds, which have been assigned the rating of “CARE BBB”
(triple B; outlook: credit watch with negative implications) by CARE in November 2018, as against the earlier
rating of “CARE BBB” (triple B; outlook: negative) assigned by CARE in October 2018. Brickwork have also
assigned the rating “BWR BBB-“ (triple B minus; outlook: credit watch with developing implications) in February
2019 for our Series VII(B) bonds as against the earlier rating of BWR BBB+ (triple B plus; outlook: stable)
assigned by Brickwork in July 2018.
22
Our total assets have increased from ₹ 286,704.80 million as of March 31, 2016 to ₹ 404,292.26 million as of
March 31, 2018 at a CAGR of 18.75%. Our total deposits have grown from ₹ 254,309.62 million as of March 31,
2016 to ₹ 333,094.83 million as of March 31, 2018 at a CAGR of 14.45%. Our CASA deposits increased from ₹
44,155.12 million as of March 31, 2016 to ₹ 70,150.34 million as of March 31, 2018 at a CAGR of 26.04%. Our
net profit increased from ₹ 1,802.36 million for the fiscal year ended March 31, 2016 to ₹ 2,560.72 million for the
fiscal year ended March 31, 2017, however, there was a net loss of ₹ 5,848.66 million for the fiscal year ended
March 31, 2018 and a net loss of ₹ 6,296.66 million for the nine months ended December 31, 2018. In addition,
our number of branches have increased from 460 as of March 31, 2016 to 569 as of December 31, 2018. As on
December 31, 2018 total deposits and CASA deposits stood at ₹ 307,869.89 million and ₹ 70,362.95 million
respectively.
OUR COMPETITIVE STRENGTHS
- Strong south India focussed franchise with significant growth potential;
- Wide distribution of branches providing broad spectrum of services;
- Strong customer relations provide opportunities for cross selling;
- Professional and experienced management; and
- Streamlined risk management controls and continue to focus on growing the technology enabled platform.
STRATEGIES
- Leverage our existing network of our branches to penetrate into our customer base and expand our product
offerings;
- To focus on leveraging technology for improved customer service and business growth;
- Emphasis on enhancing CASA growth;
- Continue to focus on retail and MSME banking segments;
- Increase in fee-based income; and
- Further strengthen risk management capabilities and improve efficiencies.
23
SUMMARY OF THE ISSUE
The following is the general summary of the terms of the Issue. The summary should be read in conjunction with, and
is qualified in its entirety by, more detailed terms appearing in this Preliminary Placement Document, including under
the sections titled “Risk Factors”, “Use of Proceeds”, “Issue Procedure” and “Description of Equity Shares”.
Issuer The Lakshmi Vilas Bank Limited
Issue Size Up to [●] Equity Shares aggregating up to ₹ [●] million.
A minimum of 10% of the Issue Size shall be available for Allocation to Mutual Funds only, and
the balance Equity Shares shall be available for Allocation to all QIBs, including Mutual Funds
In case of under-subscription or no subscription in the minimum portion mentioned above, such
portion or part thereof may be Allotted to other eligible QIBs.
Face Value ₹ 10 per Equity Share
Issue Price ₹ [●] per Equity Share
Floor Price The floor price for the Issue calculated on the basis of Regulation 176 of Chapter VI of the SEBI
ICDR Regulations is ₹ 65.96 per Equity Share. Our Bank may offer a discount of up to 5% on
the Floor Price in terms of Regulation 176 of the SEBI ICDR Regulations. Except as set out
herein, in terms of the SEBI ICDR Regulations, the Issue Price cannot be lower than the Floor
Price.
Eligible Investors / Eligible
QIBs
QIBs as defined in Regulation 2(1)(ss) of the SEBI ICDR Regulations to whom this Preliminary
Placement Document and the Application Form is circulated and who are eligible to bid and
participate in the Issue and QIBs not excluded pursuant to Regulation 179(2)(b) of the SEBI
ICDR Regulations. For further details, see “Issue Procedure”, “Selling Restrictions” and
“Transfer Restrictions” on pages 191, 201 and 206, respectively. The list of QIBs to whom this
Preliminary Placement Document and Application Form is delivered shall be determined by the
BRLM in consultation with our Bank, at its sole discretion.
Dividend For details, see “Description of Equity Shares”, “Dividend Policy” and “Statement of Tax
Benefits” on pages 211, 70 and 216, respectively.
Indian Taxation For the details of the tax benefits available to our Bank, see “Statement of Tax Benefits” on page
216.
Date of Board Resolution
authorizing the Issue
June 26, 2018
Date of passing of
Shareholders Resolution
authorizing the Issue
August 8, 2018
Equity Shares issued prior
to the Issue
258,090,428 Equity Shares
Equity Shares subscribed,
and paid-up prior to the
Issue
256,071,902 Equity Shares
Issue Procedure The Issue is being made only to QIBs in reliance on Section 42 of the Companies Act, 2013,
read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, and
Chapter VI of the SEBI ICDR Regulations. For further details, see “Issue Procedure” on page
191.
Equity Shares subscribed
and paid up after the issue
[●] Equity Shares
Listing Our Bank has received in principle approvals dated March 7, 2019 from BSE and NSE, pursuant
to Regulation 28 of the SEBI Listing Regulations. Our Bank shall apply to the Stock Exchanges
for the final listing and trading approval after the Allotment and after the credit of Equity Shares
to the beneficiary account with the Depository Participant.
Lock-up Please see the sub-section titled “Lock-up” of the section titled “Placement” on page 200 for a
description of restrictions on our Bank in relation to Equity Shares.
Proposed allottees Please see “Capital Structure - Proposed allottees” on page 69 for names of the proposed
allottees and the percentage of post Issue capital that may be held by them in our Bank.
Transferability
Restriction
The Equity Shares being Allotted pursuant to this Issue shall not be sold for a period of one year
from the date of Allotment, except on the Stock Exchanges. For details in relation to other
transfer restrictions, see “Transfer Restrictions” on page 206.
Use of Proceeds The net proceeds of the Issue, after deduction of fees, commissions and expenses in relation to
the Issue, are expected to aggregate to approximately ₹ [●] million. Please see “Use of Proceeds”
on page 63 for further information.
Risk Factors Please see “Risk Factors” on page 31 for a discussion of risks that you should consider before
participating in the Issue.
Closing Date The Allotment is expected to be made on or about [●].
24
Ranking The Equity Shares being issued pursuant to the Issue shall be subject to the provisions of the
Memorandum and Articles of Association and shall rank pari passu in all respects with the
existing Equity Shares including the rights in respect of dividends after the closing. The holders
of such Equity Shares will be entitled to participate in dividends and other corporate benefits, if
any, declared by our Bank after the Closing Date, in compliance with the Companies Act, 2013,
the SEBI Listing Regulations and other applicable laws and regulations. The holders of such
Equity Shares may attend and vote in shareholders’ meetings in accordance with the provisions
of the Companies Act, 2013. For detail, see the section titled “Description of Equity Shares” on
page 211.
Voting Rights of Share
Holders
For details, see “Description of Equity Shares – Voting Rights” on page 212.
Security codes for the
Equity Shares
ISIN: INE694C01018
BSE Code: 534690
NSE Code: LAKSHVILAS * The subscribed and paid up share capital of our Bank does not include 2,018,526 Equity Shares kept in abeyance or forfeited shares and lapsed shares.
25
SUMMARY FINANCIAL INFORMATION
The following summary financial information as of and for the Fiscals 2016, 2017 and 2018 and the nine months
ended December 31, 2018 have been derived from our Financial Statements, as applicable, included elsewhere
in this Preliminary Placement Document. You should read the following summary financial information in
conjunction with our Financial Statements and the related notes and the section titled “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”. Our historical results do not necessarily indicate
our results expected for any future periods.
Solely for the convenience of the reader, the selected data set out below are presented in “₹ in million” format,
which is different from our Financial Statements. Neither the information set forth below nor the format in which
it is presented should be viewed as comparable to information prepared in accordance with Indian GAAP, IFRS
or other accounting principles.
Balance Sheet (₹ in million)
As at March 31,
2016
(Audited)
As at March 31,
2017
(Audited)
As at March 31,
2018
(Audited)
I. Capital & Liabilities
a. Capital 1,794.62 1,914.47 2,559.94
b. Reserves & surplus 15,841.32 19,448.95 20,716.74
c. Deposits 254,309.62 305,533.54 333,094.83
d. Borrowings 7,230.08 17,731.32 40,127.80
e. Other liabilities & provisions 8,145.99 7,818.93 7,792.95
Total 287,321.63 352,447.21 404,292.26
II. Assets
a. Cash & Balances with Reserve Bank of India 12,865.02 14,548.05 16,981.69
b. Balances with banks and money at call & short
notice
821.09 1,690.72 3,167.94
c. Investments 65,454.05 86,517.30 107,677.48
d. Advances 196,437.39 237,289.12 257,682.02
e. Fixed Assets 3,669.99 3,591.19 4,024.54
f. Other Assets 8,074.09 8,810.83 14,758.59
Total 287,321.63 352,447.21 404,292.26
Contingent Liabilities 36,870.15 31,996.51 48,723.04
Bills for collection 8,844.31 8,784.49 12,773.32
Profit and Loss Account
(₹ in million) Fiscal 2016
(Audited)
Fiscal 2017
(Audited)
Fiscal 2018
(Audited)
I. Income
a. Interest Earned 25,682.99 28,466.58 30,416.22
b. Other Income 3,045.32 5,027.68 3,468.08
Total 28,728.31 33,494.26 33,884.30
II. Expenditure
a. Interest Expended 19,229.93 20,640.04 22,510.21
b. Operating Expenses 5,427.14 6,513.66 7,820.30
c. Provisions & Contingencies 2,268.88 3,779.84 9,402.45
Total 26,925.95 30,933.54 39,732.96
III. Net Profit for The Year 1,802.36 2,560.72 (5,848.66)
Profit brought forward 0.82 0.04 622.64
Transfer from Investment Reserve 7.27 0.00 0.00
Total 1,810.45 2,560.76 (5,226.02)
IV. Appropriations
a. Transfer to Statutory Reserve 452.00 641.00 -
b. Transfer to Capital Reserve 60.42 771.62 862.59
c. Transfer to Other Reserves 500.00 465.50 -
d. Investment Reserve 0.00 0.00 -
e. Transfer to Special Reserve u/s 36(1)(viii) of the
IT Act, 1961
150.00 60.00 -
f. Proposed Dividend 538.39 0.00 517.88
26
Fiscal 2016
(Audited)
Fiscal 2017
(Audited)
Fiscal 2018
(Audited)
g. Tax on Proposed Dividend 109.60 0.00 104.77
h. Balance carried over to Balance Sheet 0.04 622.64 (6,711.25)
Total 1,810.45 2,560.76 (5,226.02)
Earnings Per Share - Basic (₹) 10.05 14.07 (28.29)
Earnings Per Share - Diluted (₹) 10.05 13.95 (28.11)
Cash Flow Statement (₹ in million)
Fiscal 2016
(Audited)
Fiscal 2017
(Audited)
Fiscal 2018
(Audited)
Cash flow from operating
activities
Net profit as per profit & loss
account
1,802.36 2,560.72 (5,848.66)
Adjustments for:
Provisions & Contingencies 2,268.88 3,779.84 9,402.45
Depreciation 377.63 480.56 588.42
Loss on sale of assets 0.79 (2.65) 1.83
Income Tax / TDS paid (570.00) (1,250.00) (680.00)
Net cash flow before
changes in working capital
3,879.66 5,568.47 3,464.04
Changes in working capital
Liabilities:
Increase/Decrease in
Deposits 34,667.49 51,223.92 27,561.30
Refinances 2,248.08 10,801.24 23,391.48
Other Liabilities (1,706.93) (3,304.93) (8,420.46)
35,208.64 58,720.23 42,532.32
Assets: Increase/Decrease in
Investments 4,942.49 21,063.26 21,650.73
Advances 32,917.20 40,851.72 20,392.90
Other Assets 122.91 103.07 5,267.76
(37,982.60) (62,018.05) (47,311.39)
Net cash flow from
operating activities
1,105.70 2,270.65 (1,315.03)
Cash flow from investing
activities
Purchase of Fixed Assets (678.09) (406.21) (1,035.22)
Sale of Fixed Assets 3.25 6.60 11.62
Net cash flow from
Investing activities
(674.84) (399.61) (1,023.60)
Cash flow from financing
activities
Share issue including share
premium net of forfeited
shares
23.47 1,626.07 7,863.22
Proceeds received from Tier
II Bonds
1,401.00 - 1,000.00
Repayment of Tier II Bonds (1,000.00) (300.00) (1,995.00)
Dividends paid (356.43) (644.46) (618.72)
Net Cash Flow from
financing activities
68.04 681.61 6,249.50
Cash flow for the year 498.90 2,552.65 3,910.87
Cash & Cash equivalents at
the beginning of the year
13,187.21 13,686.11 16,238.77
Cash & Cash equivalents at
the year end
13,686.11 16,238.77 20,149.64
27
Summary Profit and Loss Information for the nine months ended December 31, 2018
(₹ in million) Profit and Loss A/c Nine months ended
December 31, 2018
(Unaudited)
Nine months ended
December 31, 2017
(Unaudited)
I. Income
a. Interest Earned 21,576.43 23,389.96
b. Other Income 1,928.44 3,085.24
TOTAL 23,504.86 26,475.20
II. Expenditure
a. Interest Expended 17,376.97 16,688.62
b. Operating Expenses 6,035.67 5,540.33
c. Provisions & Contingencies 6,388.88 3,872.40
TOTAL 29,801.52 26,101.35
III. Net Profit (6,296.66) 373.85
Reservations, qualifications and adverse remarks in the last five financial years
Period Reservation, qualification and adverse remark and their
impact on the financial statements and financial position of
our Bank
Corrective steps taken and proposed to
be taken by our Bank
Year ended
March 31,
2018
Emphasis of Matter
1. The auditors have drawn attention to Note No. 3.3.6 of
the financial statements, regarding deferment of
provision for mark to market losses on investments of ₹
982.9 million;
2. Further, the auditors have drawn attention to Note No. 4.4.2 of the financial statements, regarding deferment of
gratuity provision of ₹ 112.7 million.
The Auditors opinion is not qualified in respect of these
matters.
As permitted by RBI vide circular
DBR.NO.BP.BC.102/21.04.048/2017-18
dated April 2, 2018, our Bank has opted to
spread the provisioning for mark to market
losses on investments held in AFS and HFT
for the quarter ended March 31,2018
equally over four quarters. Accordingly,
Bank has provided ₹ 327.6 million for
depreciation of the investment portfolio for
the quarter ended March 31, 2018. The
balance amounting to ₹ 982.9 million has
been provided in the subsequent three
quarters, till the quarter ended December
31, 2018.
As permitted by RBI vide its circular
DBR.BP.9730/21.04.018/2017-18 dated
April 27, 2018, our Bank has opted to
spread the additional liability on account of
the enhancement in gratuity limits from ₹
1.0 million to ₹ 2.0 million. Accordingly,
employee cost for the quarter ended March
31, 2018 includes the 1/4th of the impact
amounting to ₹ 37.5 million and
unamortised portion of ₹ 112.7 million as
on March 31, 2018 was equally spread over
the next two quarters, and accordingly
stands provided.
Qualification
The financial statements of our Bank include advances (net of
provisions) of ₹ 257,682.00 million after adjustment of third
party deposits amounting to ₹ 7,940.00 million duly supported
by legal opinions. However, the said adjustment is being
disputed by the deposit holder. Pending a final resolution to
the dispute, we are unable to comment on the impact, if any on
the financial statements and legal/regulatory consequences.
In the Audited Financial Statements, the
advances of our Bank (net of provisions) is
shown at ₹ 257,682.0 million after the
adjustment of loans against third party
deposits amounting ₹ 7,940.0 million. The
said deposits relate to Religare Finvest
Limited and the same were held as security
for the loans extended to RHC Holding
Private Limited and Ranchem Private
Limited Over the last year, our Bank had
28
Period Reservation, qualification and adverse remark and their
impact on the financial statements and financial position of
our Bank
Corrective steps taken and proposed to
be taken by our Bank
The series of transactions leading to the above adjustment has
resulted in shortfall in CRR maintenance. Penal consequences
if any, thereon is not ascertainable.
continuously pursued with the depositor
and borrowers for regularization of the
loans resulting in some iterations in the
deposits and loans.
Eventually, on account of continuing
default in clearing the loans, the said
deposits were closed and the proceeds were
adjusted to clear the said loans. As per the
legal opinion received by our Bank, the
adjustment of deposits against the loans is
lawful. Religare Finvest Limited has filed a
suit in the last week of May 2018 against
our Bank before the Hon'ble High Court,
Delhi, disputing the said adjustment and the
same is being defended appropriately by
our Bank and based on the legal advice our
Bank believes that no loss will arise on this
score.
On account of the iterations in the deposits
and loans with retrospective effect,
mentioned above, there could be a small
notional shortfall in the maintenance of
CRR for a short period. Our Bank has
already notified RBI of the notional
shortfall in CRR maintenance but has also
provided ₹ 7.66 million towards interest
payable, if any for the shortfall. No
regulatory proceedings are pending in this
regard. As the shortfall was notional, the
matter was referred to RBI and RBI vide
their letter bearing reference number
DBR.CO.No.2438/12.07.42/2018-19 dated
21.09.2018 has advised that the matter has
been examined and have decided not to
impose penal interest in the matter.
Year ended
March 31,
2017
Emphasis of Matter
The auditors have drawn attention to Note No.2.4.4.C of the
financial statements, regarding deferment of charging off to
Profit and Loss account, the loss of ₹ 312.9 million on sale of
advances to Asset Reconstruction Companies;
Further, auditors have also drawn attention to Note No. 4.27
of the financial statements, regarding deferment of charging
off to Profit and Loss account, the loss of ₹ 191.5 million
relating to advance accounts reported as fraud.
The Auditors opinion is not qualified in respect of these
matters.
The unamortised amount of ₹ 312.90
million had been charged to profit and loss
account in the subsequent quarters and
stood fully provided by March 31, 2018.
The unamortised amount of Rs. 191.50
million had been charged to profit and loss
account in the subsequent quarters and was
fully provided for, by March 31, 2018.
Year ended
March 31,
2016
Emphasis of Matter
The auditors have drawn attention to Note No.2.4.4.C of the
financial statements, regarding deferment of loss of ₹ 956.0
million on sale of advances to Asset Reconstruction
Companies. The auditor’s opinion is not qualified in respect of
this matter.
Note No.2.4.4.C states: RBI vide its circular
no.DBR.No.BP.BC.94/ 21.04.048/2014-15 dated May 21,
2015 has extended permission to banks to provide the net
The unamortised amount of ₹ 956.0 million
as on March 31, 2016 was charged to profit
and loss account in the subsequent quarters
and was fully provided by March 31, 2017.
29
Period Reservation, qualification and adverse remark and their
impact on the financial statements and financial position of
our Bank
Corrective steps taken and proposed to
be taken by our Bank
shortfall on account of sale of assets up to March 31, 2016 to
asset reconstruction company over a period of two years.
Consequently, ₹ 763.3 million (previous year ₹ 274.3 million)
has been charged to the profit and loss account for the year
ended March 31, 2016. The unamortized amount on this
account as on March 31, 2016 is ₹ 956.0 million (previous year
₹ 729.9 million)
Year ended
March 31,
2015
Emphasis of Matter
a. The auditors have drawn attention to note No.3.4.4.C of
the financial statements, regarding deferment of loss to
the extent of ₹ 729.9 million on sale of advances to asset
reconstruction companies. The note states:
“The net shortfall on account of sale of assets to reconstruction
companies amounting to ₹ 1,004.2 million is being amortized
over a period of 2 years, as per RBI circular No.
RBI/502/DBOD.BP.BC.No. 98/21.04.132/2013-14 dated 26-
02-2014. Consequently, ₹ 274.3 million has been charged to
profit and loss account for the year ended March 31, 2015. The
unamortized amount on this account as on March 31, 2015 is
₹ 729.9 million.”
b. The auditors have also drawn attention to note No.3.4.4.D
of the financial statements, regarding deferment of loss to
the extent of ₹ 401.8 million in respect of frauds in
advances. The note states:
“As permitted by RBI vide its circular RBI/2014-
15/535/DBR.No.BP.BC.83/21.04.048/2014-15 dated April 1,
2015, the outstanding balance in fraud accounts relating to
advances amounting to ₹ 535.4 million, is being provided over
a period of four quarters. Consequently, ₹ 133.6 million has
been charged to the profit and loss account for the quarter
ended March 31, 2015. The balance amount to be provided as
on March 31, 2015 is ₹ 401.8 million.”
The auditor’s opinion is not qualified in respect of these
matters.
The unamortised amount of ₹ 729.9 million
as on March 31, 2015 was fully provided for
in the subsequent quarters.
The balance amount to be provided of ₹
401.8 million was charged to profit and loss
account by March 2016.
Year ended
March 31,
2014
Without qualifying their opinion, the auditors have drawn
attention to the following:
a. Note No. 3.10 of the Schedule 18 to the financial
statements, regarding deferment of pension liability and
gratuity liability of our Bank, pursuant to the exemption
granted by the Reserve Bank of India to our Bank from
application of the provisions of Accounting Standard
(AS) 15, Employees Benefits vide circular no.
DBOD.BP.BC/80/21.04.018/2010-11, dated 09-02-2011
on “Re-opening of Pension Option to the employees and
Enhancement in Gratuity Limits - Prudential Regulatory
Treatment.” Accordingly, out of the unamortized amount
of ₹ 372.4 million as on April 1, 20l3, our Bank has
amortized ₹ 155.6 million for pension and ₹ 30.6 million
for gratuity, being proportionate amount for the year
ended March 31, 2014 and balance amount to be
amortized in future periods for pension is ₹ 155.6 million
and for gratuity is ₹ 30.6 million.
b. Note No. 3.10 of the Schedule 18 to the financial
statements, which states that, pending receipt of opinion
from the Expert Advisory Committee of the Institute of
Chartered Accountants of India, the provision for pension
The balance amount to be amortised for
pension of ₹155.6 million and for gratuity
of ₹ 30.6 million have been fully amortised
in March 2015.
As per opinion dated March 5, 2015 taken
from ICAI, no corrective steps are to be
taken.
30
Period Reservation, qualification and adverse remark and their
impact on the financial statements and financial position of
our Bank
Corrective steps taken and proposed to
be taken by our Bank
liability as on March 31, 2014 has been made based on
the actuarial valuation.
c. Note No. 7 of the Schedule 18 to the financial statements,
which describes creation of Deferred Tax Liability
(“DTL”) on Special Reserve under section 36 (1) (viii) of
the Income Tax Act, 1961 pursuant to RBI’s Circular No.
DBOD. No. BP.BC. 77 / 21.04.018 / 2013-14 dated
December 20, 2013, whereby the DTL of ₹ 78.7 million
pertaining to periods up to March 31, 2013 has been
adjusted to the general reserve of our Bank and DTL of ₹
31.1 million on the special reserve created during the
financial year ended March 31, 2014 has been charged to
the profit and loss account in accordance with the
accounting treatment prescribed by the Reserve Bank of
India.
From March 31, 2014 onwards, every year,
DTL has been created on special reserve u/s
36(i)(viii) of the Income Tax Act, 1961, as
directed by RBI.
31
RISK FACTORS
Any investment in equity shares involves a high degree of risk. Prospective investors should carefully consider
these risks relating to our Bank’s business, together with all other information contained in this Preliminary
Placement Document before making a decision to invest in this Issue. These risks and uncertainties are not the
only risks faced by our Bank; additional risks and uncertainties that are not presently known to our Bank, or that
it may currently believe to be immaterial, may also have an adverse effect on its business, results of operations,
financial condition, cash flows or prospects or cause the market price of the Equity Shares to fall significantly. If
any of the risks contemplated actually materialises, our Bank’s business, results of operation, financial condition,
cash flow or prospects may be adversely affected, the price of the Equity Shares could consequently decline and
you may lose all or part of your investment in this Issue. Unless otherwise stated in the relevant risk factors set
forth below, our Bank is not in a position to specify or quantify the financial or other risks mentioned herein. To
obtain a complete understanding of our Bank’s business, you should read this section in connection together with
the sections titled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” on pages 79 and 120, respectively.
This Preliminary Placement Document also contains certain forward looking statements that also involve risks
and uncertainties. Actual risks could differ materially from those anticipated in these forward looking statements
as a result of certain factors, including considerations described below and in the section titled “Forward Looking
Statements” on page 12. Investors should pay particular attention to the fact that our Bank is an Indian Bank and
is subject to a legal and regulatory regime that may be different from that applicable in other countries. Investors
should consult their own tax, financial and legal advisors about the particular consequences of an investment in
the Issue.
RISKS ASSOCIATED WITH OUR BUSINESS
1. Any further increase in our Bank’s portfolio of NPAs or any increase in the defaults by our customers
in addition to changes in the RBI mandated provisioning requirement may adversely affect our financial
condition and results of operations.
As of March 31, 2016, March 31, 2017, March 31, 2018 and December 31, 2018, our gross NPAs were ₹ 3,912.50
million, ₹ 6,401.94 million, ₹ 26,942.12 million and ₹ 33,642.77 million, representing 1.97%, 2.67%, 9.98% and
13.95% of our gross advances, respectively. As of March 31, 2016, March 31, 2017, March 31, 2018 and
December 31, 2018, the NPAs net of provisions were ₹ 2,316.41 million, ₹ 4,184.16 million, ₹ 14,578.90 million
and ₹ 17,162.16 million, representing 1.18%, 1.76%, 5.66% and 7.64% of our net advances, respectively.
As at March 31, 2018 and December 31, 2018, our Bank provided for 55.07% and 55.93% of its total NPAs
(including prudential write-offs) respectively pursuant to applicable regulatory guidelines and the quality of
security available. An increase in provisions will be required, if there is (i) any deterioration in the quality of the
security created in favour of our Bank or if the realisable value of the assets deteriorate; or (ii) further ageing of
the assets after it being classified as a non-performing asset. If we are unable to make such requisite increase in
provisions, there may be an adverse impact on our financial condition and affect the market price of the Equity
Shares.
Our NPAs increased in Fiscal 2018 (in comparison with Fiscal 2017) primarily due to the substantial increase in
the slippages of our corporate loan accounts and slippages due to revision in the framework for resolution of
stressed assets by the RBI (vide their circular dated February 12, 2018). Accordingly, the decrease in the
provisioning coverage for our NPAs in Fiscal 2018 (in comparison with Fiscal 2017) may be attributed to the
slippages of accounts, including standard restructured accounts. There can be no assurance that the percentage of
NPAs that we will be able to recover will be similar to our past experience of recoveries of NPAs or that the
restructuring of any of our existing accounts in accordance with the various circulars issued by RBI from time to
time (including but not limited to RBI circular bearing number RBI/2018-19/100
DBR.No.BP.BC.18/21.04.048/2018-19 dated January 1, 2019) will be successful in recovering our dues. Further,
any inadequate documentation to secure the collateral taken may have an adverse impact on the realisation of
securities taken for our loans. We also have investments in security receipts arising from the sale of non-
performing assets to asset reconstruction companies. There can be no assurance that asset reconstruction
companies will be able to recover these assets and redeem our investments in security receipts and that there will
be no reduction in the value of these investments. Further, our Bank has undertaken various portfolio buyouts
from NBFCs and MFIs. The concerned NBFC/MFI from whom such accounts were acquired is responsible for
the recovery in these accounts, and our Bank does not have any direct control over the relevant borrower. As such,
32
any adverse performance by accounts forming part of such acquired portfolios could also increase our NPAs,
which may materially and adversely affect our business, results of operations and financial condition.
Our Bank has a policy of internal rating of the borrowing facilities wherein we categorise our borrowers into three
categories, namely, high risk borrowers, moderate risk borrowers and low risk borrowers. The internal rating of
the borrowers on the basis of obligor ratings ranges from LVB1 to LVB9 (safest to riskiest). However, we do not
carry out internal rating for some of our borrowers such as loan against fixed deposits, agricultural loans, loans to
employees etc.
The portfolio classified on the basis of high risk, medium risk and low risk for March 31, 2018 and December 31,
2018 is furnished below:
(₹ in million) March 31, 2018 December 31, 2018
Sr.
No.
Risk
Intensity
Rating Credit
outstanding
% of Gross
Standard
Advances
Credit outstanding % of Gross
Standard
Advances
1 Low Risk LVB1,
LVB2&
LVB3
104,540.97 43.00 60,568.46 29.18
2 Medium
Risk
LVB4 &
LVB5
74,007.34 30.44 55,849.26 26.90
3 High Risk LVB6,
LVB7,
LVB8 &
LVB9
17,333.06 7.13 16,527.25 7.96
4 Sub Total 195,881.37 80.58 132,944.97 64.04 5 Exempted
from Rating
35,887.02 14.76 72,869.32 35.10
6 Products
Withdrawn
0.00 0.00 0.00 0.00
7 Grand Total 231,768.39 95.34 205,814.29 99.14 8 Unrated (9-
7)
11,334.84 4.66 1,788.93 0.86
9 Total Gross
Standard
Advances
243,103.23 100.00 207,603.22 100.00
Borrowers in the high risk category could be especially vulnerable if economic conditions worsen or economic
growth is slow, which could adversely affect our business, results of operations and financial condition. In the
event there is a further increase in the NPAs, our Bank may be required to update or modify this system of
classification of their borrowers to contain such increase.
Our ability to reduce or contain the level of our NPAs may be affected by a number of factors that are beyond our
control including, a sharp and sustained rise in interest rates, unemployment, slowdown in the Indian economy
affecting our borrowers, political stability, international and cross border conflicts, changes in international trade
policies and practices, movements in global commodity markets and exchange rates, global competition, adverse
changes in government policies, laws or regulations and performance of various industries. In addition, the
expansion of our business may also cause the level of our NPAs to increase as we may continue to lend without
certainty of borrower being able to repay, whether as a result of our ability to implement our policies and
procedures effectively. Although we constantly endeavour to improve our appraisal, monitoring and collections,
we cannot assure you that we will be successful in our efforts or that the overall quality of our loan portfolio may
not deteriorate in the future. Our Bank had hired external consultants to have a view of its assets and claims made
against the Bank. The Bank takes into account all such factors and considerations from time to time, to enable it
to take steps to reduce losses and better enable recovery. In the event of the RBI effecting any changes to the
prudential norms requiring banks to maintain higher provisioning norms for non-performing assets, such increase
in provisioning requirement would adversely impact our profitability. If we are not able to control and reduce our
NPAs, it could adversely affect our business, financial condition and results of operations.
33
2. Our Bank has been impleaded in certain legal proceedings initiated by Religare Finvest Limited
involving an amount of ₹ 7,914.48 million, which if determined against us, could adversely affect our
business, results of operations and financial condition.
Our Bank is involved in a legal proceeding wherein, Religare Finvest Limited (“RFL”) has filed a suit for
declaration and recovery of ₹ 7,914.48 million against us (“Suit”). It has been alleged that our Bank had, without
sufficient cause, liquidated certain fixed deposits of RFL aggregating to ₹ 7,914.48 million (“Fixed Deposits”)
against loans availed by RHC Holding Private limited and Ranchem Private Limited (together, the “Defaulting
Entities”). RFL also alleged that it had not at any time, authorised, permitted or sanctioned the alleged
encumbrance on its Fixed Deposits or the liquidation of its Fixed Deposits. Our Bank in its written statement,
while denying the allegations made in the Suit, have alleged that RFL and the Defaulting Entities were
managed/controlled by the same promoter group. Our Bank has also alleged that they had notified RFL that they
had marked lien on the Fixed Deposits. While the matter is currently pending, no assurances can be given as to
whether these proceedings will be settled in our favour or against us. If we fail to successfully defend ourselves,
we may be required to pay significant amount of damages and consequently, our business, financial conditions,
reputation and results of operations could be materially adversely affected. Additionally, in this regard, SEBI had
issued a summons to the Managing Director seeking certain details in relation to this matter and the materiality
policy of our Bank. Our Bank has submitted a reply to the said summons. We have also received a notice from
the office of the Registrar of Companies, Tamil Nadu, Ministry of Corporate Affairs, Government of India
pursuant to a complaint made by RFL wherein it has been stated that our Bank has misrepresented and manipulated
accounts, among others.
For further details, see the section titled “Legal Proceedings – Litigation against our Bank” on page 223.
3. Our results of operations largely depend on our net interest income and volatility in interest rates and
other market conditions could adversely impact our business and results of operations.
Our results of operations largely depend on our net interest income. Interest income constituted 89.76% (i.e., ₹
30,416.22 million) and 91.80% (i.e. ₹ 21,576.43 million) while net interest income constituted 23.33% (i.e., ₹
7,906.01 million) and 17.87% (i.e. ₹ 4,199.46 million), of our total income, for Fiscal 2018 and nine months ended
December 31, 2018, respectively.
As of March 31, 2018, of our average interest-earning assets, 89.26% (i.e., ₹ 332,512.53 million) have floating
interest rates, while all of our interest-bearing liabilities have fixed interest rates. Our net interest margin (“NIM”)
decreased from 2.85% as of March 31, 2017 to 2.38% as of March 31, 2018. Further, the NIM of our Bank as on
December 31, 2018 was 1.62%. The adverse impact on the NIM of our Bank, along with certain other financial
parameters of our Bank can be majorly attributed to the increase in the NPAs, among other factors affecting our
business. For further details, please see “- Any increase in our Bank’s portfolio of NPAs or any increase in the
defaults by our customers in addition to changes in the RBI mandated provisioning requirement may adversely
affect our financial condition and results of operations.”
Further, any decrease in the interest rates applicable to our assets, without a corresponding decrease in the interest
rates applicable to our liabilities, will also result in a decline in our net interest income and may consequently
reduce our NIM.
In the event of falling interest rates, our borrowers may not be willing to continue to pay correspondingly higher
interest rates on their borrowings and may choose to repay their loans if they are able to switch to more
competitively priced loans offered by other banks. Inversely, we may be required in the future, to reduce the price
of our products in light of our competition and to increase or maintain the quality of our portfolio. Although in
the past, we have passed on the increase in the interest rates linked to our interest bearing-liabilities to our
borrowers, we cannot assure you that we will continue to pass such increase in our costs to our borrowers.
Any inability to retain customers as a result of changing interest rates may adversely impact our earnings in future
periods which would adversely impact our business and results of operations.
4. A substantial portion of our NPAs are attributable to Large Corporate Accounts and any adverse
performance by such Large Corporate Accounts could have a material adverse impact on our financial
condition and results of operations.
34
As of March 31, 2016, March 31, 2017 and March 31, 2018, our lending to Large Corporate Accounts constituted
38.54% (i.e., ₹ 76,382.80 million), 47.83% (i.e., ₹ 114,592.70 million) and 54.70% (i.e., ₹ 147,722.90 million),
respectively, of our gross advances.
Further, as of March 31, 2016, March 31, 2017 and March 31, 2018, of our total gross NPAs, 34.10% (i.e., ₹
1,333.97 million), 47.43% (i.e. ₹ 3,036.33 million) and 67.50% (i.e., ₹ 18,185.50 million), respectively, attributed
to Large Corporate Accounts. As on March 31, 2018, our total exposure for top four NPA accounts is ₹ 5,242.09
million, which would account for 19.46% of the total NPA exposure. In the past, our results of operations have
been impacted by provisioning for certain loans to Large Corporate Accounts which turned into NPAs. Any
adverse performance by these Large Corporate Accounts could significantly increase our NPAs, which may
materially and adversely affect our business, results of operations and financial condition.
Further, our results of operations have also been impacted by provisioning for certain loans to mid – corporate
SME, agricultural and retail loans accounts which have turned into NPAs, and as such any adverse performance
by such accounts could also increase our NPAs, which may materially and adversely affect our business, results
of operations and financial condition.
5. Our Bank has been, and may in the future, be penalized for not being in compliance with RBI directives
and such other procedural guidelines that govern our Bank, including but not limited to those prescribed
by SEBI and the MCA. Any regulatory investigations, fines, sanctions, and requirements relating to
conduct of business could materially and adversely affect our business and financial results, or cause
serious reputational harm
The RBI is empowered under the Banking Regulation Act to impose penalties on banks and their employees to
enforce applicable regulatory requirements. We have been penalized for non-compliance of certain RBI circulars
in the past. In July 2013 and October 2012, a penalty amounting to ₹ 25.00 million and ₹ 7,000, respectively was
imposed on our Bank for non-compliance with RBI directives. Further, the RBI had issued a warning to our Bank
pursuant to the speaking order dated November 30, 2015 in relation to the show cause notice for offering higher
rate of interest on incremental non-resident (external) deposits (“NRE Deposit”) post March 1, 2014, in
contravention of interest rate directive on NRE deposits by RBI. Further, vide its order dated January 6, 2017, the
RBI has imposed a monetary penalty of ₹ 30.00 million for contravention of certain instructions where in the
following charges were levied on our Bank, namely (i) opening of current accounts without obtaining NOCs (ii)
the extension of bill discounting facilities to non-constituents and walk-in customers, (iii) non-monitoring of end
use and diversion of funds, (iv) transgressing discretionary powers, (v) non adherence of KYC norms; and (vi)
delays in reporting of frauds etc. The RBI has also issued a ‘Caution Advice’ to our Bank disapproving our Bank’s
non-compliance with their advice of reducing our dependence on bulk deposits as a source of funding.
In Fiscal 2018, the RBI has also imposed a total penalty of ₹ 163,500 on account of defective/counterfeit notes
detected on currency remittances made to RBI by our Bank through our various branches, pursuant to our currency
chest transactions. Further, the Clearing Corporation of India Limited imposed a penalty of ₹ 13,830 towards two
instances of intra-day shortfall in maintenance of margin requirement in Security Guarantee Fund deals.
Additionally, we receive notices seeking information or documents or advising caution in relation to certain
actions, from other statutory authorities such as SEBI, MCA etc.
Any failure to comply with RBI directives or such other procedural guidelines that govern our Bank, may
adversely affect our business, financial condition and results of operations.
6. Our inability to improve the share of CASA deposits may result in higher cost of deposits and thereby
affect the profitability of our Bank in future
As on March 31, 2018 and December 31, 2018, we had total deposits of ₹ 333,094.83 million and ₹ 307,869.90
million respectively. The share of CASA deposits amounted to 21.06% of total deposits in Fiscal 2018 vis-à-vis
19.11% in Fiscal 2017. Failure by us to maintain the growth in CASA deposits at a rate proportionate to the growth
of our business may affect our costs and thereby the profitability of our Bank.
7. We have concentrations of loans to and deposits from certain customers, which expose us to risk of
credit losses and premature withdrawal of deposits from these customers that could materially and
adversely affect our business, results of operations and financial condition.
35
As of March 31, 2016, March 31, 2017 and March 31, 2018, our total advances to the 20 largest borrowers were
₹ 25,258.30 million, ₹ 29,665.00 million and ₹ 36,098.10 million respectively. The percentage of advances to the
20 largest borrowers to total advances of our Bank accounted for approximately 11.43%, 11.34% and 12.30%, as
of March 31, 2016, March 31, 2017 and March 31, 2018, respectively. We cannot assure you that these borrowers
will continue to honour their commitments and there will be no defaults in future. We cannot assure you that there
will not be any delay in payments of interest and/or principal from these borrowers.
As of March 31, 2016, March 31, 2017 and March 31, 2018, our total deposits of the 20 largest depositors were ₹
44,209.70 million, ₹ 54,301.20 million and ₹ 56,929.80 million, respectively. The percentage of deposits of the
20 largest depositors to total deposits of our Bank accounted for approximately 17.38%, 17.77% and 17.09%, as
of March 31, 2016, March 31, 2017 and March 31, 2018, respectively. We cannot assure you that there will not
be any premature withdrawal or non-renewal of deposits from these depositors.
In the event any of the above risk materialises, our business, results of operations and financial conditions may
be adversely affected.
8. We face maturity mismatches between our assets and liabilities. If we fail to sustain or achieve growth
of our deposit base, including our current and savings account deposit base, our business may be
adversely affected.
We meet our funding requirements through short-term (i.e. maturity up to one year) and long-term (i.e. maturity
for more than one year) deposits from retail depositors and mid-to-large corporate depositors. Banks usually face
a bucket-wise asset-liability mismatch where, typically, the inflows do not match with the outflows in that
particular bucket, based on residual maturity.
As of March 31, 2018, we have an asset liability mismatch. The bucket-wise negative mismatches are as under:
(₹ in million) Maturity period Mismatch to
outflow (in
%)(a)(b)
Mismatch to
outflow
Cumulative
Mismatch to
Cumulative
Outflows %*
Limit fixed**
Overdue to Day 1 696.91% 37,212.93 696.91% -5.00%
2-7 Days -68.70% -23,606.45 34.27% -10.00%
8-14 Days -35.95% -3,842.08 19.38% -15.00%
15-30 Days* 108.06% 13,116.01 36.59% -20.00%
31 Days to 2 months* -52.49% -10,555.30 14.92% -30.00%
More than 2 months and up to 3 months* -6.03% -1,002.15 11.41% -30.00%
3-6 Months 4.05% 1,368.76 9.54% -35.00%
6 Months- 1 Year -57.79% -38,370.94 -12.88% -40.00%
1-3 Years 20.46% 23,175.88 -0.80% -25.00%
3-5 Years 281.77% 27,744.14 7.83% -20.00%
Over 5 Years -28.30% -26,125.60 -0.21% -10.00%
(a) Minus sign indicates negative mismatch percentages
(b) Mismatch to outflow has been arrived at based on the formula: (Assets – Liabilities)/Liabilities*100
* Mismatch amount is taken
** As per the relevant guidelines issued by RBI and ALM policy, we are monitoring the cumulative mismatch to cumulative
outflows against the limits fixed by RBI and our Board. As on March 31, 2018, all the time buckets are well within the limits
fixed
Assumptions for calculating the asset liability mismatch are based on the guidelines of RBI circular on structural
liquidity.
Further, asset liability mismatch results in liquidity risk that reflects the possible mismatch of assets and liabilities
in a particular bucket. The liquidity risk in a bank arises on account of unanticipated withdrawals of deposits, non-
renewal of deposits and delay in anticipated repayment of advances.
We have constituted an Asset Liability Committee (“ALCO”) primarily to address the abovementioned risks. We
cannot guarantee that ALCO will be able to effectively address asset and liability mismatch or that we will be able
to implement steps proposed by it.
36
However, if the abovementioned risks materialise, we may face liquidity problem, resulting in an asset liability
mismatch. As a result, we may be required to pay higher rates to attract deposits, which may have an adverse
impact on our business and results of operations.
Any failure on our part to minimize the asset liability mismatch resulting in higher liquidity risk may adversely
affect our business, financial condition and results of operations.
9. Any inability to obtain adequate capital due to change in regulations or lack of access to capital or
otherwise could materially and adversely affect our results of operations and financial condition.
We are subject to regulations relating to capital adequacy of banks, which determines the minimum amount of
capital we must hold as a percentage of the risk-weighted assets on our portfolio, or capital-to-risk asset ratio
(“CRAR”). The RBI has prescribed conditions for the Basel III capital regulation framework in India, and on July
1, 2015, the RBI issued a master circular on Basel III capital regulations, consolidating all relevant guidelines on
Basel III issued up to June 30, 2015 (together, the “RBI Basel III Capital Regulations”). The Basel III Guidelines
came into effect on April 1, 2013, and, subject to a series of transitional arrangements to be phased in over a period
of time, will be fully implemented by March 31, 2020.
Basel III reforms strengthen the bank-level i.e. micro prudential regulation, with the intention to raise the resilience
of individual banking institutions in periods of stress. Besides, the reforms have a macro prudential focus also,
addressing system wide risks, which can build up across the banking sector, as well as the procyclical
amplification of these risks over time. These global regulatory and supervisory standards mainly seek to raise the
quality and level of capital to ensure banks are better able to absorb losses on both a going concern and a gone
concern basis, increase the risk coverage of the capital framework, introduce leverage ratio to serve as a backstop
to the risk-based capital measure, raise the standards for the supervisory review process and public disclosures
etc.
The Basel III Guidelines require, among other things, higher levels of Tier I capital and common equity, capital
conservation buffers, maintenance of a minimum prescribed leverage ratio on a quarterly basis, higher deductions
from common equity and Tier I capital for investments in subsidiaries, changes in the structure of non-equity
instruments eligible for inclusion in Tier I capital and loss absorbency features for non-equity Tier I and Tier II
capital. As of March 31, 2020, banks are required to maintain a common equity Tier I ratio adequacy ratio of
5.5%, minimum Tier I capital of 7.0%, minimum total capital of 9.0% and a capital conservation buffer of 2.5%.
However, the implementation of the capital conservation buffer commenced from March 31, 2016.
Due to increase of size of assets and accordingly the risk weighted assets, there is an impact on the CRAR under
the Basel III standards. While the minimum CRAR required to be maintained by our Bank as on March 31, 2018
is 10.875% (which includes a capital conservation buffer of 1.875%) under the Basel III standards, we maintained
a CRAR of 9.81% as of March 31, 2018 and 7.57% as of December 31, 2018, and there can be no assurance that
we will be able to increase and subsequently maintain our CRAR within the regulatory requirements in the future.
Further, any adverse developments could affect our ability to continue to satisfy the capital adequacy
requirements, including deterioration in our asset quality, decline in the values of our investments or applicable
risk weight for different asset classes. In case the CRAR falls further below the regulatory minimum requirement
in future, we may be constrained in further expanding our business.
With the implementation of the Basel III guidelines, we may be required to improve the quality, quantity and
transparency of Tier I capital, which will now have to be predominantly equity shares. In addition, these changes
may result in the incurrence of substantial compliance and monitoring costs. Furthermore, with the
implementation of Basel III guidelines, our ability to support and grow our business could be limited by a declining
capital adequacy ratio, if we are unable to access or face difficulty in accessing the capital or have difficulty in
obtaining capital in any other manner. Further, in relation to the laws applicable to us, see “Regulations and
Policies” on page 145.
If we fail to meet capital adequacy requirements, the RBI may take certain actions, including restricting our
lending and investment activities and the payment of dividends by us. These actions could materially and
adversely affect our reputation, results of operations and financial condition.
10. Any future issuance of Equity Shares or such other capital raising programmes of our Bank may dilute
your shareholding or result in a change in control, and sales of the Equity Shares by our major
shareholders may adversely affect the trading price of our Equity Shares.
37
Any future equity issuances by our Bank may lead to the dilution of the shareholdings in our Bank. In addition,
any sales of substantial amounts of the Equity Shares in the public market after the completion of this Issue,
including by our major shareholders, or the perception that such issuance or sales may occur could adversely
affect the trading price of the Equity Shares and could significantly impair our future ability to raise capital through
offerings of the Equity Shares. We cannot predict what effect, if any, market sales of the Equity Shares held by
the major shareholders of our Bank or the availability of these Equity Shares for future sale will have on the
market price of our Equity Shares. We may also issue Equity Shares pursuant to the LVB ESOS-2010 or the LVB
ESOS-2017.
Additionally, pursuant to the resolution of its Board on June 26, 2018, wherein approval was accorded to our Bank
(subject to the approval of the Shareholders) for, among others, issuance of up to 150,000,000 Equity Shares or
other securities convertible into such number of Equity Shares and the board meeting of our Bank proposed to be
held on March 8, 2019 (where they may approve the raising of funds by way of issue of Equity Shares on
preferential basis and the issuance of unsecured, subordinated, fully paid-up, non-convertible, non-cumulative,
Basel III compliant, perpetual debt instruments in the nature of debentures), our Bank may undertake certain other
capital raising programmes. Our Bank has subsequently appointed certain advisors to advise on such capital
raising programmes that our Bank may undertake in the future, subject to various factors such as market demand,
commercial requirements of the Bank, pricing, receipt of the necessary regulatory/statutory approvals, etc. Such
capital raising programmes, depending on the number of Equity Shares being issued and the nature of such
issuance (which may be by way of preferential allotment or otherwise) could result in a dilution of your
shareholding in our Bank, or substantial sale of Equity Shares by the existing shareholders of our Bank (which
may include our Promoters) which may further result in a change of control of our Bank.
11. We face significant risks and challenges in developing fee income business, which may affect our
business and results of operations.
As part of our growth strategy, we have been diversifying and expanding our para-banking activities to offer
distribution of life insurance, general insurance and health insurance products, money transfer services through
branch channels as well as through direct remittance, promotion of mutual fund schemes, depository services,
services as a PAN Service Agent and ASBA services. Additionally, as part of our banking services, we offer letter
of credit, bank guarantees and forex transaction facilities to our corporate clientele. Such products and services
entail a number of risks and challenges, including but not limited to the following:
• Our inability to understand the preferences of our customers or potential customers and thereby provide
customised solution;
• inability to attract and retain personnel who are able to implement, supervise and conduct the new business;
• insufficient financial and other resources to support an expanded range of products and services;
• failure to obtain additional approvals and licences from regulators, including the RBI, the IRDAI, and
SEBI;
• failure of counterparties to our para-banking related agreements in maintaining licenses / registrations or
delays in informing us of such failure;
• competition from similar offerings or products and services by our competitors in the banking and non-
banking financial services sectors;
• lower growth or profitability potential than we anticipate;
• failure to identify new segments and offer attractive new products and services in a timely fashion, putting
us at a disadvantage to our competitors;
• changes in regulations or Government policies that may restrict or cap the interest rates or fees and
commissions that we may charge customers in any of our new businesses or compel changes to our business
models and viability of our businesses;
• any negative publicity arising due to regulatory or other actions against third parties with whom we are
associated and over whom we have no control; and
• inability to respond promptly to new technology developments and be in a position to dedicate resources
to upgrade our systems and compete with new players entering the market.
If we are unable to successfully expand and diversify our products and services, our fee income from such products
and services may be less than anticipated, which could have a material adverse effect on our business and financial
results.
38
12. RBI guidelines relating to prompt corrective action could materially and adversely affect our business,
future financial performance and results of operations.
On April 13, 2017, the RBI had revised the Prompt Corrective Action (“PCA”) framework for banks. The new
PCA framework has stipulated thresholds for capital ratios, non-performing assets, profitability and leverage for
banks. When the PCA framework is triggered, the RBI would have a range of discretionary actions it can take to
address the outstanding issues. These discretionary actions include conducting supervisory meetings, conducting
reviews, advising banks’ boards for altering business strategy, review of capital planning, restricting staff
expansion, removing of managerial persons, restrictions in undertaking businesses, restrictions on payment of
dividend and superseding the Board. If we are covered under the PCA framework, it could materially and
adversely affect our business, future financial performance and results of operations.
As per the PCA framework, the indicators like CRAR, common equity tier I ratio, net NPA ratio and return on
assets will be monitored by the RBI before invocation of PCA on our Bank under the risk threshold of 1 or 2 or
3. In addition, the leverage ratio would also be monitored by the RBI. Breach of any risk threshold would result
in invocation of PCA on our Bank.
Threshold I Indicator Bank’s position as on December 31, 2018
(as on March 31, 2018)
Capital CAR 2.50% below 10.875% (i.e. 8.375%) 7.57% (9.81%)
Common equity tier 1 ratio 1.625% below 7.375% (i.e. below 5.750%) 5.57% (8.05%)
Asset quality-net NPA
ratio
More than 6.0% 7.64% (5.66%)
Profitability-return on
asset
Negative return on assets for two consecutive
years
(-)2.14 for the nine months ended December
31, 2018 ((-)1.57 for the year ended March
31, 2018)
Leverage-tier I leverage
ratio
Less than or equal to 4% 2.92% (4.58%)
If our Bank is unable to improve upon the above indicators by March 31, 2019, it is likely that the RBI may decide
to invoke action our Bank under the PCA framework. This would involve restriction on dividend distribution /
remittance of profit, directing our Promoters to bring in capital and / or any other discretionary actions that the
RBI may decide to take against us.
13. We are required to maintain cash reserve ratio (“CRR”) and statutory liquidity ratio (“SLR”) and any
increase in these requirements could materially and adversely affect our business, financial condition
and results of operations.
As a result of the statutory reserve requirements stipulated by the RBI, we may be more exposed structurally to
interest rate risk than banks in other countries. Under the RBI regulations, we are subject to a CRR requirement
under which we are currently required to keep 4.00% of our net demand and time liabilities in current account
with the RBI. We do not earn interest on cash reserves maintained with the RBI. The RBI may further increase
the CRR requirement as a monetary policy measure and has done so on numerous occasions. Increases in the CRR
requirement could materially and adversely affect our business, results of operations and financial condition.
During Fiscal 2018, our Bank had retrospectively reinstated certain deposits at a later date which resulted in a
notional shortfall in our Bank’s CRR on such retrospective date. Additionally, there is no assurance that we will
continue to maintain our CRR requirements in the future, which may result in us not being in compliance with the
requirements stipulated by the RBI.
In addition, under the RBI regulations, our liabilities are subject to a SLR requirement, according to which 19.25%
of our demand and time liabilities need to be invested in Government securities, state government securities and
other securities approved by the RBI from time to time. As on December 31, 2018, we have invested 20.66% of
our demand and time liabilities in Government securities, state government securities and such other securities.
In our experience, these securities generally carry fixed coupons. When the interest rate rises, the value of these
fixed coupon securities depreciates. We cannot assure you that investment in such securities will provide returns
better than other market instruments. Further, any increase in the CRR and the SLR requirements, would reduce
the amount of cash available for lending, which may materially and adversely affect our business, financial
condition and results of operations.
39
14. We have regional concentration in southern India, especially Tamil Nadu. Any adverse change in the
economic condition of Tamil Nadu and other states in southern India and expansions into territories
which we are not familiar with, can also have an adverse effect on our results of operations.
As of December 31, 2018, out of our 569 branches, 494 branches were located in southern India (including 295
branches which were located in Tamil Nadu) constituting 86.82% of our total branch network. Our branches
located in southern India received deposits of ₹ 261,728.95 million, including ₹ 166,145.48 million received by
branches located in Tamil Nadu, constituting 85.01% and 53.97%, respectively, of our total deposits as of
December 31, 2018.
Our concentration in southern India, and specifically in Tamil Nadu, exposes us to any adverse economic, political
and environmental circumstances in that region as compared to other public and private sector banks that have
more diversified national presence. Any disruption, disturbance or sustained downturn in the economy of Tamil
Nadu or other states in southern India where we have a presence, could adversely affect our business, financial
condition and results of operations.
Additionally, while we continue to expand our operations outside of our traditional areas such as Tamil Nadu and
other states in southern India, we face risks with our operations in geographic areas in which we do not possess
the same level of familiarity with the economic condition, consumer base and commercial operations. In addition,
our competitors may already have established operations in areas outside southern India and we may find it
difficult to attract customers in such new areas. We may not be able to successfully manage the risks of such an
expansion, which could have a material adverse effect on our business, financial condition and results of
operations.
15. Foreign investment in the Equity Shares, and acquisitions or transfers of our Equity Shares resulting
in an aggregate holding of 5% or more are subject to limits specified by the RBI. Further, in relation to
our foreign investment, we are required to comply with the various provisions of the Foreign Exchange
Management Act, 1999 (“FEMA”).
Under Indian laws, the aggregate permissible foreign investment, including FDI and investment by FPIs and NRIs
in a private sector bank is limited to an aggregate of 49% of the paid-up capital under the automatic route and up
to 74% of the paid-up capital under the approval route. Further, under Indian law, while the aggregate FPIs’ and
NRIs’ holding, cannot exceed 24% and 10%, respectively, of the paid-up capital, with the approval of the board
of directors and the shareholders by way of a special resolution and other regulatory approvals, the aggregate FPIs
and NRI holding in a bank can be increased up to 74% and 24%, respectively, subject to the overall limit of 74%,
as indicated above.
Pursuant to the Banking Regulation Act read with ‘Prior Approval for acquisition of shares or voting rights in
Private Sector Banks: Directions, 2015 dated November 19, 2015, any acquisition or transfer of shares in a private
bank which will take the aggregate holding of an individual or a group to 5% or more of the paid-up capital of a
bank requires the prior approval of the RBI.
Our foreign shareholding is restricted to 49% of our paid-up capital, with the aggregate shareholding of NRI not
exceeding 24% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to resolution
passed by our shareholders in the annual general meeting held on September 26, 2014. As of December 31, 2018,
our aggregate shareholding of FPIs was 4.62% of our paid-up capital and shareholding held by NRIs was 1.84%
of our total paid up capital. For further details, see “Principal Shareholders and other Information” on page 171.
The aforementioned regulatory framework could adversely affect the liquidity, free transferability of the Equity
Shares and in turn have an adverse effect on the price of the Equity Shares.
16. Non-availability of funding and increase in funding costs could adversely affect our business and our
financial condition. In case our depositors do not roll over term deposits or if we fail to increase our
term deposits, our liquidity position may be adversely affected and we may be required to pay higher cost
to attract and/or retain further deposits.
Currently our primary source of funding is deposits which include demand deposits, savings bank deposits and
term deposits. Our other sources of funding include long-term Tier II debt and inter-bank borrowings. As of March
31, 2016, March 31, 2017, March 31, 2018 and December 31, 2018, 97.24% (i.e. ₹ 254,309.62 million), 94.51%
40
(i.e. ₹ 305,533.54 million), 89.25% (i.e., ₹ 333,094.83 million) and 92.40% (i.e., ₹ 307,869.89 million),
respectively, of our primary funding consisted of deposits. The cost of funds is sensitive to interest rate
fluctuations. The pricing on our issuances of debt will also be negatively impacted by any downgrade or potential
downgrade in our credit ratings. In addition, attracting customer deposits in the Indian market is competitive. The
rates that we must pay to attract deposits are determined by numerous factors such as the prevailing interest rate
structure, competitive landscape, Indian monetary policy and inflation and some of these factors are beyond our
control.
Our depositors may not roll over term deposits on maturity, which may force us to pay higher interest rates in
order to attract and/or retain further deposits. If we fail to sustain or achieve the growth rate of our deposit base,
including our current and savings account deposit base, our business, liquidity position and financial condition
may be adversely affected.
17. We may be unable to sustain the growth rate of our retail banking business, which could adversely
impact our growth prospects.
As a part of our retail growth strategy, we have been expanding our presence through increase in our branch
network to increase our current accounts and saving accounts deposits. While our gross advances under retail
banking business grew in Fiscal 2016 and 2018, there was a decline in Fiscal 2017. Our gross advances under
retail banking business as of March 31, 2016, March 31, 2017 and March 31, 2018 were ₹ 26,395.20 million, ₹
21,953.00 million and ₹ 26,813.60 million, respectively, with a decline of 16.83% from March 31, 2016 to March
31, 2017 and an increase of 22.14% from March 31, 2017 to March 31, 2018. Further, our deposits under retail
banking business, excluding deposits undertaken on differential rate of interest scheme as per RBI notifications,
as of March 31, 2016, March 31, 2017 and March 31, 2018 were ₹ 128,629.90 million, ₹ 142,712.67 million and
₹ 152,654.34 million, respectively, with an increase of 10.95% from March 31, 2016 to March 31, 2017 and an
increase of 6.97% from March 31, 2017 to March 31, 2018.
We intend to continue our focus on further growth in retail banking business by offering new products and services
and by cross-selling to our customers through marketing. With our services like “LVB e-lounge” and “LVB Crown
Services”, we anticipate continued demand in the retail banking business. Growth of our retail portfolio is subject
to various factors including geographic location of our proposed branches, availability of funding in such
locations, competitiveness at such locations and approvals from RBI for opening certain branches. We cannot
assure you that we will be able to grow at the rate we have experienced in the past, which could materially and
adversely affect our business and future results of operations.
18. Our branch expansion plans may have an adverse effect on the capital outlay which in turn may
adversely affect the financial condition and results of operations of our Bank.
Pursuant to the RBI letter dated February 11, 2014, permission of the RBI is required for opening any branches
in the Tier 1 centres. We had received approval from the Reserve Bank of India, to open 75 branches in Tier 1 to
Tier 6 cities pursuant to a letter dated October 5, 2017 and since the date of this approval, we have opened 28
branches in Tier 1 cities and 29 branches in Tier 2 to Tier 6 cities as on December 31, 2018 and sought permission
from RBI to surrender licenses for 15 branches, in addition to seeking an extension of timeline to open the
remaining three branches. Our branch expansion plans may have an adverse effect on the capital outlay which in
turn may adversely affect the financial condition and results of operations of our Bank.
19. If we are unable to obtain, renew or maintain our statutory and regulatory permits and approvals
required to operate our business and the failure to obtain the same in a timely manner or at all may
subject us to sanctions and penalties pursuant to inspection and supervision by regulatory authorities, or
otherwise, it may have a material and adverse effect on our business, financial condition and results of
operations.
We require certain statutory and regulatory permits and approvals to operate our business. Under certain of our
contractual arrangements, we are also required to hold all necessary and applicable approvals and licenses from
authorities such as RBI, SEBI and the Insurance Regulatory and Development Authority. In the event that such
approvals and licenses lapse or are revoked by the granting authorities, we may not be able to provide such services
which could have an adverse effect on our business and financial condition. Further, we cannot assure you that
we have obtained all the necessary licenses under the relevant state legislations, including those governing the
41
registration of establishments of our branches and labour-related legislations, particularly where specific
exemptions have not been provided for scheduled commercial banks.
Failure by us to renew, maintain or obtain the required permits or approvals, including those set forth above, may
result in the interruption of our operations and may have an adverse effect on our business, financial condition
and results of operations.
20. The Indian banking industry is very competitive and our success will depend on our ability to compete
effectively.
We face competition from public and private sector Indian commercial banks and foreign commercial banks in
all our products and services. Some of such banks are large institutions and may have much larger customer and
deposit bases, larger branch networks and wider capital base extending all over India. Further, a few banks have
experienced higher growth, achieved better profitability and increased their market shares relative to us. We also
face competition in some or all of our products and services from NBFCs, small finance banks, co-operative and
payment banks and digital wallets, mutual funds and other entities operating in the financial sector.
The RBI has liberalised the licensing regime for banks in India and intends to issue licenses on an ongoing basis.
This could also lead to a greater presence or new entries of Indian and foreign banks offering a wider range of
products and services, which could adversely affect our competitive environment. The New Banks Licensing
Guidelines were issued by the RBI in February 2013 specifying that, subject to meeting certain other criteria,
select entities or groups in the private sector, entities in the public sector and non-banking financial companies
with a successful track record of at least 10 years would be eligible to promote banks. Subsequently, in 2015 two
new private sector banks i.e. IDFC Bank Limited and Bandhan Bank Limited have been added to Schedule II of
RBI Act after getting an in-principle approval in 2014. On August 19, 2015 the RBI granted in-principle approval
to 11 applicants to set up payment banks. In September 2015, the RBI granted in-principle licenses to 10 applicants
for small finance banks, most of which are microfinance non-banking finance companies. The RBI has also
released guidelines with respect to a continuous licensing policy for universal banks in the private sector in August
2016.
Further, vide its discussion paper dated April 7, 2017, the RBI had contemplated introducing wholesale and long-
term finance banks. These banks will focus primarily on lending to infrastructure sector and small, medium and
corporate businesses. These banks will also be able to provide refinancing to lending institutions. Such banks can
also act like market makers in corporate bonds, credit derivatives and take out financing amongst others. We
cannot assure you that we will not face competition from these banks in the segments that are common to their
and our business.
In order to respond to the competitive environment in our industry, we constantly look for opportunities to venture
into areas ancillary to banking business. Currently, we provide services such as money transfer services, mutual
funds and portfolio management service, cross-selling of insurance products including life insurance and general
insurance, PAN card services, depository participant services and new pension system pursuant to tie-ups with
various independent third parties. While providing such services, we are required to enter into contractual
arrangement with such third parties, typically acting as their agents and are thus dependent on their maintaining
their registration. Salient terms and conditions of such contractual arrangement, inter-alia, include providing
indemnity to the other party, which can be invoked in cases such as breach of any condition, representation or
warranty given by either party. Typically, such indemnity clause operates in favour of us and the other party,
however, in certain cases the obligation to indemnify is solely on us. In case we are required to indemnify the
other party or are unable to collect under the indemnity we are owed, our business and financial condition may be
adversely affected. In addition, some of these agreements are past their initial term and are currently under
automatic renewal, unless terminated by such other party.
Our future success will depend in large part on our ability to respond in an effective and timely manner and our
ability to compete effectively. Increased competitive pressure may have an adverse impact on our business,
financial condition and results of operations.
21. We are involved in certain legal proceedings which if determined against us, could affect our business
and financial condition.
We are involved in a number of civil, tax and recovery proceedings instituted by and against us before various
judicial, regulatory, statutory and quasi-judicial authorities, including the debt recovery tribunals from time to
42
time for recovery of overdue amounts from various borrowers. For further details, see section titled “Legal
Proceedings” on page 223.
Further, our Bank and our Directors have also received a legal notice from one of our former employees, who has
made a claim for damages pursuant to certain alleged non-compliances with the disclosure requirements set out
under the SEBI Listing Regulations and SEBI ICDR Regulations. Our Bank has since then, submitted its reply to
the said legal notice.
No assurances can be given as to whether these proceedings will be settled in our favour or against us. Such
litigation could divert management time and attention and consume financial resources in their defence or
prosecution. In addition, should any new developments arise, such as changes in Indian law or rulings against us
by the regulators, appellate courts or tribunals, we may need to make provisions in our financial statements, which
could increase our expenses and current liabilities. If we fail to successfully defend our claims or if our provisions
prove to be inadequate, our business, financial condition, reputation and results of operations could be adversely
affected.
22. We are subject to Risk Based Supervision (“RBS”) by the RBI. Non-compliance with the RBI
observations issued during the RBS could adversely affect our business, financial condition or results
of operations.
Our Bank is subject to Inspection for Supervisory Evaluation (“ISE”) by the RBI under section 35 of the Banking
Regulation Act, 1949, which is a revised RBS framework i.e. Supervisory Programme for Assessment of Risk
and Capital (“SPARC”). Under SPARC, the RBI has developed an integrated system for the assessment of risk
and impact of failure of individual banks (“IRISc”). This IRISc model is based on both quantitative and qualitive
assessment of banks and is risk focused in nature instead of being performance oriented solely. The RBI does both
an offsite review and an onsite inspection. In the past, the RBI has made certain observations regarding our
business and operations, capital adequacy, asset quality, compliance with statutory and regulatory norms,
appointment of directors with specific expertise, credit administration, NPA analysis, quality of non-SLR
portfolio, earnings appraisal, attrition, information technology systems, treasury funds and liquidity management,
risk assessment and acquisition of retail portfolios.
The IRISc model is a structured and multi-tiered model which supports the assessment of risk in banks adjusted
for the available capital. It takes into account credit, market, operations (IT and non-IT), compliance, liquidity and
other pillar II risks. IRISc is used to estimate a bank’s risk of failure, the capital add-on required for a given risk
failure score and the impact of this failure on the banking system.
We have taken note of RBI observations and suggestions and continue to implement the same to improve our
operations. While we attempt to be in compliance with all regulatory provisions applicable to us, in the event we
are not able to comply with certain observations made by the RBI, we may be subject to penalties by the RBI
which may have a material adverse effect on our business, reputation, financial condition or results of operations
23. Deterioration in the performance of any of the industry sectors where we have significant exposure may
adversely impact our business, results of operations and financial condition.
Our total exposure to corporate borrowers is dispersed across various industry sectors, the most significant of
which are infrastructure, basic metal and metal products and textiles which represented which represented 8.88%
(i.e., ₹ 26,514.47 million), 3.91% (i.e., ₹ 11,671.06 million) and 3.96 % (i.e., ₹ 11,816.88 million), respectively,
of our outstanding fund and non-fund based exposures as of March 31, 2018.
Further, it has been our policy to diversify the exposure over different industry sectors. We have fixed exposure
norms (sectoral cap) for major industry sectors. For example, our internal policies set out limit of our credit
exposure to any particular industry depending upon the nature of that industry.
While we are working towards reducing our exposure to certain industry sectors, any significant deterioration in
the performance of the industry sector we currently lend to (including ‘priority sectors’), driven by events not
within our control, such as regulatory action or policy announcements by Government or State government
authorities, would adversely impact the ability of borrowers in that industry sector to service their debt obligations.
We cannot assure you that we will be able to diversify our exposure over different industry sectors in the future.
Failure to maintain diverse exposure resulting in industry sector concentration may adversely impact our business,
43
financial condition and results of operation, in case of any significant deterioration in performance of such industry
sector.
24. We operate in a regulated industry and any changes in the regulations or enforcement initiatives may
adversely affect our business, financial condition or results of operation.
Banks in India are subject to detailed supervision and regulation by the RBI. In addition, banks are generally
subject to changes in Indian law, as well as to changes in regulation and government policies and accounting
principles. Since 2012, the RBI has made several changes in regulations applicable to banking companies,
including:
• implementation of RBI Basel III Capital Regulations;
• additional capital and provisions for unhedged foreign currency exposure;
• additional capital for credit value adjustments;
• guidelines on framework for domestic systemically important banks;
• guidelines on intra-group exposures;
• guidelines to calculate lending rates under marginal cost of funds;
• FATCA compliance guidelines;
• framework for revitalizing distressed assets; and
• amendment to the Banking Regulation Act, permitting the Central Government to authorise the RBI to
issue directions to banks to initiate insolvency proceedings in respect of a default, in the manner set out
under the Insolvency and Bankruptcy Code, 2016.
We are subject to a wide variety of banking and financial services laws and regulations and a large number of
regulatory and enforcement authorities in each of the jurisdictions in which we operate. The laws and regulations
or the regulatory or enforcement environment in any of those jurisdictions may change at any time and that may
have an adverse effect on the products or services we offer, the value of our assets or our business in general. For
instance, as per the “Guidelines on Information security, Electronic Banking, Technology risk management and
cyber frauds” issued by the RBI, our Bank is required to constitute an IT Strategy Committee, with at least one
director who has substantial IT expertise in managing technology. We currently do not have a Director with
expertise in IT and we cannot assure you that such Director shall be appointed in due time, and thus may not be
in compliance with the requirements set out by the RBI in this regard.
Also, the laws and regulations governing the banking and financial services industry have become increasingly
complex governing a wide variety of issues, including interest rates, liquidity, capital adequacy, securitisation,
investments, ethical issues, money laundering, privacy, record keeping, marketing and selling practices, with
sometimes overlapping jurisdictional or enforcement authorities. Future changes in laws and regulations and
failure or the apparent failure to address any regulatory changes or enforcement initiatives could have an adverse
impact on our business, our future financial performance and our shareholders’ funds, harm our reputation, subject
us to penalties, fines, disciplinary actions or suspensions of any kind or increase our litigation risks and have an
adverse effect on the price of our Equity Shares.
There are a number of restrictions under the Banking Regulation Act, which impede our operating flexibility and
affect or restrict investors’ rights. These include the following:
• Section 12(2) of the Banking Regulation Act states that “no person holding shares in a banking company
shall, in respect of any shares held by him, exercise voting rights on poll in excess of 10.00% of the total
voting rights of all the shareholders of the banking company”.
• Section 12B(1) of the Banking Regulation Act states that “no person (hereinafter referred to as "the
applicant") shall, except with the previous approval of the Reserve Bank, on an application being made,
acquire or agree to acquire, directly or indirectly, by himself or acting in concert with any other person,
shares of a banking company or voting rights therein, which acquisition taken together with shares and
voting rights, if any, held by him or his relative or associate enterprise or person acting in concert with
him, makes the applicant to hold five per cent. or more of the paid-up share capital of such banking
company or entitles him to exercise five per cent. or more of the voting rights in such banking company.”
• Section 15(1) of the Banking Regulation Act states that “no banking company shall pay any dividend on
its shares until all its capitalised expenses (including preliminary expenses, organization expenses, share-
44
selling commission, brokerage, amounts of losses incurred and any other item of expenditure not
represented by tangible assets) have been completely written off”.
• Section 17(1) of the Banking Regulation Act requires every banking company to create a reserve fund and
to transfer out of the balance of the profit of each year as disclosed in the profit and loss account a sum
equivalent to not less than 20.00% (the RBI circular dated September 23, 2000 has fixed this limit at
25.00%) of such profit before paying any dividend.
• Section 19 of the Banking Regulation Act restricts the forming of subsidiaries by banks except for limited
purposes, which may prevent us from exploiting emerging business opportunities. Similarly, Section 23 of
the Banking Regulation Act contains certain restrictions on banking companies regarding the opening of
new places of business and transfers of existing places of business, which may affect our operational
flexibility.
• Section 25 of the Banking Regulation Act requires each banking company to maintain assets in India
equivalent to not less than 75.00% of its demand and time liabilities in India, which in turn may restrict us
from building overseas asset portfolios and exploiting overseas business opportunities.
• We are required to obtain approval of RBI for the appointment and remuneration of our part time chairman
and other whole time directors. RBI has powers to remove managerial and other persons from office, and
to appoint additional directors.
• We are also required to obtain approval of the RBI for the creation of floating charges on the undertaking
or any property of our Bank or any part thereof, thereby affecting leverage. The Banking Regulation Act
also contains provisions regarding production of documents and availability of records for inspection.
• A compromise or arrangement between us and our creditors or any class of them or between us and our
shareholders or any modification in such arrangement or compromise will not be sanctioned by any High
Court unless such compromise or arrangement or modification, as the case may be, is certified by RBI in
writing as capable of being implemented and as not being detrimental to the interests of our depositors.
Our amalgamation with any other banking company will require the sanction of RBI and shall be in
accordance with the provisions of the Banking Regulation Act. The provisions for winding-up of banking
companies as specified in the Banking Regulation Act are at variance with the provisions of the Companies
Act. Further, RBI can also apply for winding up of a banking company in certain circumstances and can
also be appointed as the liquidator and the GoI could acquire the undertakings of banking companies in
certain cases.
The forms of business in which we may engage are specified and regulated by the Banking Regulation Act.
Pursuant to the provisions of section 8 of Banking Regulation Act, we cannot directly or indirectly deal in the
buying, selling or bartering of goods, except in connection with the realisation of security given to us or held by
us, or in connection with bills of exchange received for collection or negotiation, or in connection with the
administration of estates as executor, trustee or otherwise, or in connection with any business covered under
section 6(1)(o) of the Banking Regulation Act. Goods for this purpose means every kind of movable property,
other than actionable claims, stocks, shares, money, bullion and specie and all instruments referred to in section
6(1)(a) of Banking Regulation Act. Unlike a company incorporated under the Companies Act, which may amend
the objects clause of its Memorandum of Association to commence a new business activity, banking companies
may only carry on business activities permitted by Section 6 of the Banking Regulation Act or specifically
permitted by the Reserve Bank of India. This may restrict our ability to pursue profitable business opportunities
as they arise.
25. Our success depends, in large part, upon our management team and skilled personnel and our ability
to attract and retain such persons. In the event we are not be able to attract talented employees, or are
unable to motivate and retain our existing employees, the future of our business and operations may be
affected.
In the process of implementing our growth strategy, we have built a team of professionals with relevant
experience, including credit evaluation, risk management, treasury, technology and marketing. Prior to joining us,
the members of our senior management held key positions at leading Indian private sector and foreign banks. Our
future success is highly dependent on our senior management to maintain our strategic direction, manage our
current operations and risk profile and meet future business challenges, including our planned branch network
expansion.
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As the banking business is service oriented, our performance and success depends largely on our ability to nurture
and retain the continued service of our management team and skilled personnel. We do not maintain key man
insurance and the loss of, or inability to attract or retain, such persons could adversely affect our business and
results of operations. Our employment agreements with these personnel do not obligate them to work for us for
any specified period, and do not contain non-compete or non-solicitation clauses in the event of termination of
employment. If one or more of key personnel are unable to continue in their present positions, we may not be able
to replace them with persons of comparable skill and expertise promptly or at all, and we may not be able to
contain or limit any further attrition and further augment our management team appropriately as we add newer
products and services and expand our business, either of which could have a material adverse effect on our
business, operations and financial results. Some of our employees who are holding senior positions including our
senior management personnel, have continued in service after their super annuation for specified periods of time.
As we continue to expand our business and introduce new products including expanding our para-banking
activities, experienced personnel are very critical to our business.
As of December 31, 2018, we had 4,881 employees. With the increase in competition for qualified personnel, we
continue to face challenge to recruit a sufficient number of suitably skilled personnel, particularly as we continue
to grow. In the event we are not able to attract talented employees, or are unable to motivate and retain our existing
employees, the future of our business and operations may be affected.
26. The statutory auditors of our Bank have qualified their opinion/conclusion in their audit report for the
year ended March 31, 2018 and limited review for the three months ended June 30, 2018 and have
further made certain observations in their audit report for the years ended March 31, 2014, March 31,
2015, March 31, 2016, March 31, 2017 and March 31, 2018. Certain observations have also been made
by our Statutory Auditor in their limited review report for the six months ended September 30, 2018 and
the nine months ended December 31, 2018.
The erstwhile statutory auditors of our Bank have qualified their opinion/conclusion in the audit report and limited
review report of our Bank for the year ended March 31, 2018 and the three months ended June 30, 2018
respectively, to the extent of certain adjustments of certain third-party deposits against advances made by our
Bank, which are currently sub-judice. Further, the reports of the auditors for the year ended March 31, 2014,
March 31, 2015, March 31, 2016, March 31, 2017 and March 31, 2018 and limited review report for the six
months ended September 30, 2018 and nine months ended December 31, 2018 contain matters of emphasis
relating to, inter alia, deferment of provision for mark to market losses on investment, deferment of loss in respect
of frauds in advances, deferment of pension and gratuity liability, creation of deferred tax liability, and deferment
of loss on sale of advances to asset reconstruction companies. There is no assurance that our audit reports for any
future fiscal periods will not contain qualifications, matters of emphasis or other observations. For further details,
see section titled “Summary Financial Information” on page 25.
27. We are subject to various operational and other risks associated with the financial industry which, if
materialised, may have an adverse impact on our business.
The proper functioning of our financial control, risk management, accounting or other data collection and
processing systems, together with the communication networks connecting our various branches and offices is
critical to our operations and ability to compete effectively. We are exposed to many types of operational risk,
including:
• fraud or other misconduct by employees or outsiders for reasons which not be attributable to us also;
• unauthorised transactions by employees and third parties (including violation of regulations for prevention
of corrupt practices, and other regulations governing our business activities);
• unauthorised use of debit cards at ATMs;
• misplacing of confidential information of our customers;
• misreporting or non-reporting with respect to statutory, legal or regulatory reporting and disclosure
obligations;
• any breach of network security; and
• operational errors, including clerical or record keeping errors or errors resulting from faulty computer or
telecommunications systems.
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In addition, we may also be exposed to other different types of risk during our operations, including but not limited
to credit risk, counterparty risk, market risk, liquidity risk and operational risk. For further details, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 120.
In the past, various fraud cases were reported which have been noted and acted on by our Bank, based on our
internal procedures. The fraud cases reported during Fiscal 2017 and 2018 involved an aggregate amount of ₹
1,099.69 million and ₹ 1,579.67 million, respectively. For further details on material frauds committed against
our Bank in the last three years, see “Legal Proceedings” on page 230. The increase in the number of reported
frauds in Fiscal 2018 is primarily due to the special investigations carried out by the audit and inspection
department of our Bank. In light of the increase in the number of fraud cases reported in Fiscal 2018, our Bank
has centralised its credit operations through its Commercial Banking Operations, is periodically conducting
assessment exercises and studies and has implemented certain other measures. While we believe we have adopted
appropriate policies and procedures, they may not be fully effective. Unexpected shortcomings in these policies
and procedures or a failure to follow them may have a materially adverse effect on our business, financial position
or results of operations. There may also be instances in the future where certain accounts that form part of a
multiple banking / consortium arrangement has been declared fraudulent by such other consortium members,
pursuant to which we will be mandated to report the same as fraud, regardless of whether the account maintained
with us is standard.
We have also experienced fraud committed by our employees ranging from misuse of discretionary powers to
misappropriation of funds. For further details, see “Legal Proceedings” on page 223. We make efforts to recover
the amounts involved in such cases or take steps to ensure such frauds do not occur in the future. We cannot assure
you that such incidents will not happen or we will be able to recover such amount in the future. Further, we cannot
assure you that any such incident will not have an adverse effect on our reputation. Further, in the past, there have
been certain employees who have been found to be non-compliant with our Bank’s policies and accordingly, our
Bank has dismissed, removed, or taken such other disciplinary action against them. However, it is not always
possible to deter misconduct by employees and the precautions we take and the systems we have put in place to
prevent and deter such activities may not be effective in all cases. Any instances of such misconduct or fraud
could adversely affect our reputation, business, results of operations and financial condition. Further, while we
are currently involved in legal proceedings involving various accounts in our Bank, we cannot assure you that
such accounts will not be classified as fraud or otherwise in the future, based on further investigation of the same
that may be conducted by the Bank or any observations of the RBI.
We provide certain services such as, money transfer, counter payments collection and tax collection through other
agencies. We are exposed to the risk that external vendors or service providers may be unable to fulfil their
contractual obligations to us (or will be subject to the same risk of fraud or operational errors by their respective
employees) and to the risk that its (or its vendors’) business continuity and data security systems prove to be
inadequate. Although we maintain a system of controls designed to keep operational risk at appropriate levels,
there can be no assurance that we will not suffer losses from operational risks in the future which can have an
adverse effect on our business, results of operations, financial condition and the price of the Equity Shares.
28. Due to the limited information regarding loan servicing histories of customers in India, we may be at a
higher risk compared to banks with lending operations in more developed countries. We depend on the
accuracy and completeness of information furnished by the customers and counterparties and any
misrepresentation, errors or incompleteness of such information could cause our business to suffer.
Our principal activity is providing financing to borrowers, including individuals, SMEs and MSMEs. The credit
risk of our borrowers may be higher than in other economies due to the higher uncertainty in our regulatory,
political and economic environment and the inability of our borrowers to adapt to global technological advances.
In addition, India’s system for gathering and publishing statistical information relating to the Indian economy
generally or specific economic sectors within it or corporate or financial information relating to companies or
other economic enterprises is not as comprehensive as those of several countries with established market
economies. Although India has a credit information bureau, adequate information regarding loan servicing
histories, particularly in respect of individuals and small businesses, is limited. CIBIL does not presently report
information from retailers, utility companies and trade creditors and no other nationwide bureau of this nature
presently exists. Further, in the event that the CIBIL report is not up-to-date, we may not be able to accurately
assess the credit-worthiness of our borrower which may increase our risk of exposure to default by borrower. As
our lending operations are primarily limited to India, we may be exposed to a greater potential for loss compared
to banks with lending operations in more developed countries. Inadequate loan servicing histories for borrowers
47
increase the risk of exposure and may lead to an increase in our NPAs which may adversely affect our business,
results of operations and financial condition.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may
rely on information furnished to us by or on behalf of our customers and counterparties, including financial
statements and other financial information. We may also rely on certain representations as to the accuracy and
completeness of that information and, with respect to financial statements, on reports of independent auditors. For
example, in deciding whether to extend credit, we may assume that a customer's audited financial statements
conform to generally accepted accounting principles and present fairly, in all material respects, the financial
condition, results of operation and cash flows of the customer.
The difficulties associated with the inability to accurately assess the value of collateral and to enforce rights in
respect of collateral, along with the absence of such accurate statistical, corporate and financial information, may
decrease the accuracy of our assessments of credit risk, thereby increasing the likelihood of borrower default on
our loan and decreasing the likelihood that we would be able to enforce any security in respect of such a loan or
that the relevant collateral will have a value commensurate to such a loan. Moreover, the availability of accurate
and comprehensive credit information on retail customers and small businesses in India is more limited than for
larger corporate customers, which reduces our ability to accurately assess the credit risk associated with such
lending.
Difficulties in assessing credit risks associated with our day-to-day lending operations may lead to an increase in
the level of our non-performing and restructured assets, which could materially and adversely affect our business,
financial condition and results of operations.
29. We may be unable to foreclose on collateral or there may be decreases in the value of collateral which,
if a borrower defaults, may result in failure to recover the expected value of the collateral, exposing us
to a potential loss.
As of March 31, 2016, March 31, 2017 and March 31, 2018, 96.10% (i.e., ₹ 188,785.99 million), 98.25% (i.e., ₹
233,145.99 million) and 98.46% (i.e., 253,716.39 million), respectively, of our total advances were secured by
charges on tangible assets, mortgages on immovable property, bank/ government guarantees and stocks. In certain
cases, we obtain security by way of pledge of shares and assignment of life insurance policies. Any decrease in
the value of collateral at the time of recovery will have an adverse impact on the quantum of recovery.
In India, foreclosure on collateral generally requires a written petition to a court or tribunal. Although special
tribunals have been set up for expeditious recovery of debts due to banks, any proceedings brought may be subject
to delays and administrative requirements that may result, or be accompanied by, a decrease in the value of the
collateral. In addition to the debt recovery and security enforcement mechanisms available to lenders under
Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the SARFAESI Act, the RBI provides
for various mechanisms that may be adopted by banks to deal with stressed assets. The GOI has also enacted the
Insolvency and Bankruptcy Code, 2016 to provide a consolidated framework to address the concerns of lenders
and to provide corporate debtors with an exit mechanism. As on December 31, 2018, our Bank has an exposure
to 22 applications admitted before the NCLT under the Insolvency and Bankruptcy Code, 2016, amounting to ₹
11,260.40 million. Accordingly, the Banking Regulation Act has also been amended vide the Banking Regulation
(Amendment) Act, 2017 effective from May 4, 2017, allowing the Central Government to authorise the RBI to
issue directions to banks to initiate insolvency proceedings in respect of a default, in the manner set out under the
Insolvency and Bankruptcy Code, 2016.
Accordingly, the RBI has instructed our Bank, along with other consortium banks, to initiate insolvency
proceedings against nine identified corporate borrowers. The RBI has further advised our Bank that the minimum
provisions required to be maintained against these accounts should be the higher of (i) 50% for the secured portion
of the outstanding balance plus 100% for the unsecured portion, or (ii) provisions required to be maintained under
the extant classification norms. The additional provisions, as required in each case, should be proportionately
spread over the remaining quarters of the current Fiscal (starting from the second quarter of this Fiscal), so that
the required provisions would be fully in place by March 2018. If the liquidation order is passed, it will attract
100 % provisions, on an immediate basis. Prior to the receipt of such instructions from the RBI, our Bank had
restructured the loans of two borrowers and the account of one borrower had been classified as NPA.
There can be no assurance that these regulatory measures will have a favourable impact on our efforts to recover
NPAs. Any failure to recover the expected value of the collateral would expose us to potential losses. As a result
48
of the foregoing factors, realisation of the full value of collateral may become difficult, which could have an
adverse effect on our business and financial condition.
30. A portion of our advances are unsecured. In case we are unable to recover such advances in a timely
manner or at all, it may adversely affect our business, financial condition and results of operations.
As of March 31, 2016, March 31, 2017 and March 31, 2018, our unsecured advances were 3.90% (i.e., ₹ 7,651.40
million), 1.75% (i.e., ₹ 4,143.12 million) and 1.54% (i.e., ₹ 3,965.63 million), respectively, of our total advances.
While we have been selective in our lending policies and strive to satisfy ourselves with the credit worthiness and
repayment capacities of our customers, there can be no assurance that we will be able to successfully implement
our lending policy and recover the interest and the principal advanced by us in a timely manner or at all. Any
failure to recover the unsecured advances given to our customers would expose us to a potential loss which could
adversely affect our business, financial condition and results of operations.
31. Non-compliance with mandatory AML and KYC policies in opening and/or operating the accounts
could expose us to additional liability and harm our business and reputation.
Banks are mandated to comply with applicable anti-money laundering (“AML”) and know your client (“KYC”)
regulations in India. These laws and regulations require us, among other things, to adopt and enforce AML and
KYC policies and procedures. For further details, see “Regulations and Policies” on page 145. While we have
adopted policies and procedures aimed at collecting and maintaining all AML and KYC related information from
our customers in order to detect and prevent the use of our banking networks for illegal money-laundering
activities, there may be instances where we may be used by other parties in attempts to engage in money-
laundering and other illegal or improper activities. In this regard, the RBI has directed our Bank to review its
internal systems to ensure compliance with the KYC-AML guidelines issued by the RBI, and to fix staff
accountability with respect to non-compliance of its directions vide speaking order dated February 24, 2016 in
relation to the Show Cause Notice dated November 24, 2015 for contravention of KYC-AML guidelines with
regard to the opening and subsequent monitoring of transactions of one of the current accounts. Further, in the
past, the RBI had imposed a penalty of ₹ 25.00 million on us for non-adherence with certain KYC policies and
procedures for walk-in customers including for sale of third party products.
Although we believe that we have adequate internal policies, processes and controls in place to prevent and detect
AML activity and ensure KYC compliance, and have taken necessary corrective measures, there can be no
assurance that we will be able to fully control instances of any potential or attempted violation by other parties
and may accordingly be subject to regulatory actions including imposition of fines and other penalties by the
relevant government agencies to whom we report, including the FIU-IND. Our business and reputation could
suffer if any such parties use or attempt to use us for money-laundering or illegal or improper purposes and such
attempts are not detected or reported to the appropriate authorities in compliance with applicable regulatory
requirements.
32. Certain of our branches and ATMs are located on premises that have been taken on lease. Further,
some of the agreements we enter into for the said leases are inadequately stamped, not registered and
may not be renewed in time. The termination of any of these leases or our inability to exercise our rights
under the lease agreements may cause disruption in our operations.
As of December 31, 2018, out of a total of 569 branches, 553 branches were located at premises taken on a lease
basis. Such lease agreements are generally for a fixed tenure and while we endeavor to renew the leases post their
expiry, there may be delays in completing the process of renewal. Further, our ATMs are primarily located on
leased premises. Our business, financial condition, and operating results could be adversely affected if we are
unable to negotiate favourable lease and renewal terms for our existing branches where our customers are located.
In case of non-renewal of leases for our existing branches, we will be forced to procure alternative space for our
existing branches. Although we procure space that satisfies the safety, operational and financial criteria for our
branches, we cannot assure you that we will be able to identify such space at commercially reasonable terms or at
all. Failure to identify such space can adversely affect our financial condition and results of operation. The location
of our branches is also critical to our business as some of these locations maybe strategic and thereby generate
business for our Bank.
Any breach of the terms and conditions of these lease agreements could result in the termination of such
agreements and force us to establish operations at another location, which may disrupt our operations temporarily.
49
Additionally, some of our lease agreements may not be adequately stamped and some of our immoveable
properties for our offices, which are taken on lease, may have one or more irregularities of title such as inadequate
stamping and/ or non-registration of lease agreements and non-execution of such lease agreements. Any such
irregularity may result in our inability to enforce our rights under such lease agreements which may disrupt our
operations and adversely affect our business, financial condition and result of operations and may also result in
loss of our customers.
Any failure to renew lease agreements for these premises on terms and conditions favourable to our Bank may
require it to shift the concerned ATMs to new premises. This might affect our business operations as these may
not necessarily be at locations where our branches are also located.
33. As of March 31, 2018, we had certain contingent liabilities. If any of our contingent liabilities
materialise, our liquidity, business, prospects, financial conditions and results of operations could be
adversely affected.
The contingent liabilities as of March 31, 2018 are as follows:
(in ₹ million) Contingent Liabilities March 31, 2018
Amount
Claims against us not acknowledged as debts 1,358.54
Liability on account of outstanding forward exchange contracts 23,390.48
Guarantees given on behalf of constituents
- in India 10,855.46
- outside India 988.17
Acceptances, endorsements and other obligations 11,704.22
Other items for which the Bank is contingently liable 426.16
Total 48,723.04
The contingent liabilities have arisen in the normal course of our business and are subject to the prudential norms
as prescribed by RBI. Our off-balance sheet liabilities consist of, among other things, liability on account of
forward exchange and derivative contracts, guarantees and documentary credits given by us. If any of the
contingent liabilities specified above materialises, our liquidity, business prospects, financial conditions and
results of operations could be adversely affected.
34. Our ability to pay dividends in the future will depend upon our future earnings, financial condition,
cash flows, working capital requirements, capital expenditures and restrictive covenants in our
financing arrangements and our inability to declare dividend or declare dividend at a rate lower than
past trends may adversely affect the trading price of our Equity Shares.
Our future ability to pay dividends will depend on our earnings, financial condition and capital requirements, as
detailed in our recently adopted dividend distribution policy and our ability to comply with the conditions
prescribed by the RBI for declaration of dividends by banks. Our ability to pay dividends could also be restricted
under certain financing arrangements that we enter into from time to time. We cannot assure you that we will
generate sufficient income to cover our operating expenses, comply with the regulatory requirements and pay
dividends to our shareholders, as is the case for Fiscal 2018. The details of dividend paid by our Bank in the last
three years are as follows:
Fiscal Year Dividend Per Share (In ₹) Dividend Percentage (%)
2018 - -
2017 2.70 27%
2016 3.00 30%
In addition, dividends that we have paid in the past may not be reflective of the dividends that we may pay in
future. The amount of our future dividend payments, if any, will depend upon our future earnings, financial
condition, cash flows, working capital requirements, terms and conditions of our indebtedness, capital
expenditures and regulation. In the event we are unable to declare dividend, for any reason, including those set
out above, or declare dividend at a rate lower than past trends, it may adversely affect the trading price of our
Equity Shares. For further details, see “Dividend Policy” on page 70.
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35. Our Bank has experienced negative cash flows from operating activities and investing activities in
certain recent fiscal periods.
Our Bank has experienced negative cash flows from operating activities and investing activities in recent fiscal
years. In Fiscal 2018, net cash used in operating activities was ₹ 1,315.03 million and in Fiscal 2016, 2017 and
2018, net cash used in investing activities was ₹ 674.84 million, ₹ 399.61 million and ₹ 1,023.60 million,
respectively. For further information, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” on page 120. Negative cash flows over extended periods, or significant negative cash flows
in the short term, could materially impact our ability to operate its business and implement growth plans.
36. Our insurance coverage could prove inadequate to satisfy potential claims. If we were to incur a serious
uninsured loss or a loss that significantly exceeds the limits of our insurance policies, it could have a
material adverse effect on our business, results of operations and financial condition.
We have taken out insurance within a range of coverage consistent with industry practice in India to cover certain
risks associated with our business, including money and securities in safe or transit, goods held in trust, coins/
currency and buildings. We cannot assure you that our current insurance policies will insure us fully against all
risks and losses that may arise in the future. In addition, even if such losses are insured, we may be required to
pay a significant deductible on any claim for recovery of such a loss, or the amount of the loss may exceed our
coverage for the loss. In addition, our insurance policies are subject to annual review, and we cannot assure you
that we will be able to renew these policies on similar or otherwise acceptable terms, if at all. If we were to incur
a serious uninsured loss or a loss that significantly exceed the limits of our insurance policies, it could have a
material adverse effect on our business and financial condition.
37. A further downgrade in the credit rating of our Unsecured Redeemable Non-Convertible Subordinated
Lower Tier-II Bonds could materially and adversely affect its business, financial condition and results
of operations.
We have issued and have outstanding subordinated bonds, which have been assigned the rating of “CARE BBB”
(triple B; outlook: credit watch with negative implications) by CARE in November 2018, as against the earlier
rating of “CARE BBB” (triple B; outlook: negative) assigned by CARE in October 2018. Brickwork have also
assigned the rating “BWR BBB-“ (triple B minus; outlook: credit watch with developing implications) in February
2019 for our Series VII(B) bonds as against the earlier rating of BWR BBB+ (triple B plus; outlook: stable)
assigned by Brickwork in July 2018. A further downgrade in credit rating may negatively affect our Bank's ability
to obtain funds and increase the financing costs by increasing the interest rates of its outstanding debt or the
interest rates at which our Bank is able to refinance existing debt or incur new debt, which may adversely affect
its business, financial condition and results of operations.
38. Our risk management policies and procedures may not adequately address unanticipated risks. Inability
to develop and implement effective risk management policies may adversely affect our business,
prospects, financial condition and results of operations.
We have devoted significant resources to developing our risk management policies and procedures and expect to
continue to do so in the future. Despite this, our policies and procedures to identify, monitor and manage risks
may not be fully effective and/or implemented as originally expected. Some of our methods of managing risk are
based upon the use of observed historical market behaviour. As a result, these methods may not accurately predict
future risk exposures which could be significantly greater than indicated by the historical measures. As we seek
to expand the scope of our operations, we also face the risk of inability to develop risk management policies and
procedures that are properly designed for those new business areas. Implementation and monitoring may prove
particularly challenging with respect to businesses that we have recently initiated. Inability to develop and
implement effective risk management policies may adversely affect our business, prospects, financial condition
and results of operations.
39. The Government of India (“GoI”) has in the past and may in the future direct us to implement certain
schemes that are aimed at serving the interest of farmers and/or a cross section of the public. Such
schemes may not necessarily be aimed at maximizing our profits and may adversely affect our business,
financial condition and results of operations.
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As per the “Master Direction - Priority Sector Lending - Targets And classification” dated July 7, 2016, our Bank
is required to lend 40.0% of their adjusted net bank credit (“ANBC”) or the credit equivalent amount of off-
balance sheet exposures (“CEOBE”), whichever is higher, as defined by the RBI, to certain eligible sectors
categorised as priority sectors. In the event that our Bank fails to meet the minimum criteria as set out in the
guidelines, in respect of priority sector lending, the shortfall in lending to priority sector shall be allocated for
contribution to the Rural Infrastructure Development Fund (“RIDF”) established with NABARD and other Funds
with NABARD/NHB/SIDBI/ MUDRA Ltd., as decided by the RBI from time to time.
There may be instances where our Bank may not be able to achieve the required level of priority sector lending,
targets and sub targets. For example, as of March 31, 2017, our Bank had a shortfall in lending to the micro
enterprises sector, whereby our lending was 7.01% as compared to a target of 7.50% of our Adjusted Net Bank
Credit (as defined under the Master Direction - Priority Sector Lending - Targets and Classification dated July 7,
2016). Considering that the priority sector lending entails a higher risk because there is lack of adequate
infrastructure to monitor the cash flows of the relevant borrowers and that our Bank may face hurdles in the
enforcement of the underlying security(ies), grant of such loans could have an adverse impact on our profitability.
Further, any change in RBI policy, including directed lending norms, may result in our inability to meet the priority
sector lending requirements as well as require us to increase our lending to relatively riskier segments and may
result in an increase in NPAs in the directed lending portfolio.
Further, pursuant to the interest subvention scheme made available to our Bank in respect of short term crop loans
up to ₹ 0.3 million per farmer given by the rural and semi–urban branches, the loans are granted at a fixed rate of
7% per annum. The Government of India grants interest subvention of 2% on such loans and the loans are to be
granted at a fixed rate of 7%. Effectively, the loans are granted at 9% which is below the base rate, hence grant of
such loan will have an adverse impact on profits. As on December 31, 2018, the aggregate loan outstanding under
the scheme was ₹ 5,218 million.
40. We have third-party arrangements with various companies to facilitate para-banking services. We
cannot assure you that these third parties will adhere to their contractual obligation and consequently
have an adverse effect on our business.
We have entered into agreements with third parties to offer a number of para-banking products and services which
include distribution of life insurance, general insurance and health insurance products. We provide money transfer
services through branch channels as well as through direct remittance. We have also tied up with a number of
asset management companies for promotion of various mutual fund schemes. Our ability to offer such para
banking services is dependent on such third parties being in compliance with the applicable regulations and having
obtained valid registrations with the relevant regulatory authorities, as may be required. In case of any dispute,
we cannot assure you that the terms of such agreements will not be breached, which may incur litigation costs.
Such additional cost, in addition to the cost of entering into agreement with third parties in same industry will
have an adverse effect on our business.
41. We may face labour disruptions that could interfere with our operations. Any such disruption in future
may have a material adverse effect on our business, financial condition or results of operation.
We are exposed to the risk of strikes and other industrial actions. As of December 31, 2018, we employed 4,881
employees. Most of our employees are part of trade unions. We have also in the past had a few strikes and
stoppages on account of our employees’ unions participating in all India strikes. While we believe that we have a
strong working relationship with the unions / associations, there can be no assurance that our Bank will continue
to have such a relationship in the future. If the employees' union was to call for a work stoppage or other similar
action, we may be forced to suspend all or part of our operations until the dispute is resolved. If any such work
stoppage or disruption was to occur, possibly for a significant period of time, our business, financial condition or
results of operation would be adversely affected.
42. New product/services offered by us may not be successful and we may not grow in any new business
area which may have a material adverse effect on our business, financial condition or results of
operation.
We introduce new products/services to explore new business opportunities on a regular basis. We cannot assure
you that all our new products/services will gain customer acceptance and this may result in our incurring pre-
operative expenses and launch costs without any assurance that such products will be successful or may fail market
52
penetration. Further, our inability to grow in any new business areas could adversely affect our business and
financial performance. For further details, see “Business” on page 79.
43. Some of our corporate records relating to certain filings made with the Registrar of Companies in the
past are not traceable and the records available with us may not be complete in all aspects.
We are unable to trace copies of certain corporate records and filings in relation to equity shares issued and allotted
by our Bank in the past. In particular, we have been unable to trace: (i) corporate resolutions and filings with the
RoC in relation to changes in our authorised share capital from incorporation till September 9, 2005; (ii)
resolutions for the issue and allotments of equity shares from its incorporation on November 3, 1926 till January
11, 1995; and (iii) filings with the RoC in relation to issue and allotment of Equity Shares from its incorporation
on November 3, 1926 till June 27, 2002. While we believe that these forms were duly filed on a timely basis, we
have not been able to obtain copies of these documents, including from the RoC and have placed reliance on other
documents, including board resolutions and their agenda for allotment of shares, annual reports and audited
financial statements for corroborating the share capital history of our Bank. Further, in certain cases relating to
the RoC filings made in the past and some of which are available with us, there could be certain discrepancies in
relation to dates with respect to allotment of Equity Shares. We cannot assure you that these form filings and
corporate records will be available in the future or that we will not be subject to any penalty imposed by the
competent regulatory authority.
44. Any failure or material weakness of our internal control system could cause significant errors, which
may have a materially adverse effect on our reputation, business, financial position or results of
operations.
We are responsible for establishing and maintaining adequate internal measures commensurate with our size and
complexity of operations. Our internal or concurrent audit functions are equipped to make an independent and
objective evaluation of the adequacy and effectiveness of internal controls on an ongoing basis to ensure that the
various divisions adhere to our policies, compliance requirements and internal circular guidelines. While we
periodically test and update, as necessary, our internal control systems, we are exposed to operational risks arising
from the potential inadequacy or failure of internal processes or systems, and our actions may not be sufficient to
guarantee effective internal controls in all circumstances. Given our high volume of transactions, it is possible
that errors may repeat or compound before they are discovered and rectified. Our systems and internal control
procedures that are designed to monitor our operations and overall compliance may not identify every instance of
non-compliance or every suspicious transaction. We face operational risks in our various businesses and there
may be losses due to deal errors, settlement problems, pricing errors, inaccurate reporting, breaches of
confidentiality, fraud and failure of mission critical systems or infrastructure. As a result, we may suffer monetary
losses or adverse reputation effects which, in each case, could be material, and could have a material adverse
effect on our business, financial position or results of operation.
45. Statistical and industry data in this Preliminary Placement Document may be incomplete or unreliable.
Statistical and industry data used throughout this Preliminary Placement Document has been obtained from
various government and industry publications. Our Bank believes the information contained therein has been
obtained from sources that are reliable, but it has not independently verified it and the accuracy and completeness
of this information is not guaranteed and its reliability cannot be assured. The market and industry data used from
these sources may have been reclassified by our Bank for purposes of presentation. In addition, market and
industry data relating to India, its economy or its industries may be produced on different bases from those used
in other countries. As a result, data from other market sources may not be comparable. The extent to which the
market and industry data presented in this Preliminary Placement Document is meaningful will depend upon the
reader’s familiarity with and understanding of the methodologies used in compiling such data. Statements from
third parties that involve estimates are subject to change, and actual amounts may differ materially from those
included in this Preliminary Placement Document. Such data involves risks, uncertainties and numerous
assumptions and is subject to change based on various factors. Accordingly, investment decisions should not be
based on such information.
46. Our Bank’s business and activities may be regulated by the Competition Act and any adverse application
or interpretation of the Competition Act could materially and adversely affect its business, financial
condition and results of operations.
53
The Competition Act seeks to prevent business practices that have or are likely to have an appreciable adverse
effect on competition in India and has established the CCI. Under the Competition Act, any arrangement,
understanding or action, whether formal or informal, which has or is likely to have an appreciable adverse effect
on competition is void and attracts substantial penalties. Any agreement which, directly or indirectly, determines
purchase or sale prices, limits or controls the production, supply or distribution of goods and services, or shares a
market by way of geographical area or number of customers is presumed to have an appreciable adverse effect on
competition. Provisions of the Competition Act relating to the regulation of certain acquisitions, mergers or
amalgamations, which have a material adverse effect on competition and regulations with respect to notification
requirements for such combinations, came into force on June 1, 2011. The effect of the Competition Act on the
business environment in India is still evolving and unclear and it is difficult to predict its impact on our Bank’s
growth and expansion strategies. The CCI has extra territorial powers and can investigate any agreements, abusive
conduct or combination occurring outside India if such agreement, conduct or combination has an appreciable
adverse effect on competition in India. If our Bank is affected, directly or indirectly, by the application or
interpretation of any provision of the Competition Act or any enforcement proceedings initiated by the CCI or
any adverse publicity that may be generated due to scrutiny or prosecution by the CCI, it may adversely affect its
business, results of operations, financial condition or prospects.
47. A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian
economy, which could adversely impact us. A rapid decrease in reserves would also create risk of higher
interest rates and a consequent slowdown in growth.
Flows to foreign exchange reserves can be volatile, and any past declines may have adversely affected the
valuation of the Rupee. There can be no assurance that India’s foreign exchange reserves will not decrease again
in the future. Further decline in foreign exchange reserves, as well as other factors, could adversely affect the
valuation of the Rupee and could result in reduced liquidity and higher interest rates that could adversely affect
our business, financial condition and results of operations.
48. Our Bank may face cyber threats attempting to exploit its network to disrupt services to customers and/
or theft of sensitive internal Bank data or customer information. This may cause damage to its
reputation and adversely impact its business and financial results.
Our Bank offers internet banking services to its customers. Its internet banking channel includes multiple services
such as electronic funds transfer, bill payment services, usage of credit cards on-line, requesting account
statements, and requesting cheque books. Our Bank is therefore exposed to various cyber threats including (i)
phishing and trojan software targeting its customers, wherein fraudsters send unsolicited mails to our Bank’s
customers seeking account sensitive information or to infect customer machines to search and attempt exfiltration
of account sensitive information; and (ii) hacking, wherein attackers seek to hack into our Bank’s website with
the primary intention of causing reputational damage to it by disrupting services; and (iii) data theft, wherein cyber
criminals may attempt to enter our Bank’s network with the intention of stealing its data or information. In
addition, our Bank also faces the risk of its customers incorrectly blaming our Bank and terminating their accounts
with it for any cyber security breaches that may have occurred on their own system or with that of an unrelated
third party. Any cyber security breach could also subject our Bank to additional regulatory scrutiny and expose it
to civil litigation and related financial liability.
49. Significant security breaches could adversely impact our Bank’s business.
Our Bank seeks to protect its computer systems and network infrastructure from physical break-ins as well as
security breaches and other disruptive problems caused by our Bank’s increased use of the internet. Computer
break-ins and power disruptions could affect the security of information stored in and transmitted through these
computer systems and network infrastructure. There may be areas in the systems that have not been properly
protected from security breaches and other attacks. Our Bank employs security systems, including firewalls and
password encryption, designed to minimize the risk of security breaches. Although our Bank intends to continue
to implement security technology and establish operational procedures to prevent break-ins, damage and failures,
there can be no assurance that these security measures will be adequate or successful. Failed security measures
could have a material adverse effect on our Bank’s business, its future financial performance and the trading price
of the Equity Shares. Our Bank’s business operations are based on a high volume of transactions. Although our
Bank takes measures to safeguard against systems related and other fraud, there can be no assurance that it would
be able to prevent fraud.
54
EXTERNAL RISK FACTORS
50. There could be political, economic or other factors that are beyond our control but may have a material
adverse impact on our business and results of operations should they materialize.
The following external risks, amongst others, may have a material adverse impact on our business and results of
operations should any of them materialize:
• Political instability, a change in the Government or a change in the economic and deregulation policies
could adversely affect economic conditions in India in general and our business in particular;
• Fluctuations in macro-economic factors that are outside of our control, including growth in GDP, inflation,
fiscal deficits, disposable household income in India, international and domestic political and economic
conditions, fiscal and monetary policies of governments and central banks, and changes in interest rates,
that may lead to business and financial losses in the future. As a result of (i) the volatility of these macro-
economic factors, including exchange rates and interest rates, (ii) provisions we make from period to period
for nonperforming assets, commitments and contingencies (such as for letters of credit and bank
guarantees), (iii) volatility in our trading operations, our results of operations have varied from period to
period in the past and may fluctuate or decrease in the future due to these and other factors.
• Civil unrest, acts of violence, terrorist attacks, regional conflicts or situations or war involving India or
other countries could materially and adversely affect the financial markets which could impact our
business. Such incidents could impact economic growth or create a perception that investment in Indian
companies involves a higher degree in risk which could reduce the value of our Equity Shares;
• Natural disasters in India may disrupt or adversely affect the Indian economy, the health of which our
business depends on;
• Any downgrading of India's sovereign rating by international credit rating agencies may negatively impact
our business and access to capital. In such event, our ability to grow our business and operate profitably
would be severely constrained;
• Instances of corruption in India have the potential to discourage investors and derail the growth prospects
of the Indian economy. Corruption creates economic and regulatory uncertainty and could have an adverse
effect on our business, profitability and results of operations; and
• The Indian economy has had sustained periods of high inflation. Should inflation continue to increase
sharply, our profitability and results of operations may be adversely impacted. High rates of inflation in
India could increase our employee costs, decrease the disposable income available to our customers and
decrease our operating margins, which could have an adverse effect on our profitability and results of
operations.
51. Significant differences exist between Indian GAAP used throughout our financial information and
other accounting principles, such as IFRS, with which investors may be more familiar with and may
consider material to their assessment of our conditions.
Our financial statements are prepared in conformity with Indian GAAP, consistently applied during the periods
stated, except as provided in the related reports, and no attempt has been made to reconcile any of the information
given in this Preliminary Placement Document to any other principles or to base it on any other standards. Indian
GAAP differs from accounting principles and auditing standards with which prospective investors may be familiar
in other countries such as IFRS. The degree to which financial information in this Preliminary Placement
Document will provide meaningful information depends on your familiarity with Indian GAAP and the
Companies Act and therefore, no undue reliance should be put by persons not familiar with Indian GAAP on the
financial disclosures presented in this Preliminary Placement Document.
52. Investors may not be able to enforce a judgment of a foreign court against us.
55
Our Bank is a limited liability company incorporated under the laws of India. Our Directors and our senior
management are residents of India and all the assets of our Bank are located in India. As a result, it may not be
possible for investors to effect service of process upon our Bank or such persons in jurisdictions outside India, or
to directly enforce against them judgments obtained in courts outside India. Moreover, it is unlikely that a court
in India would award damages on the same basis as a foreign court if an action were brought in India or that an
Indian court would enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent
with Indian public policy.
53. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect
your ability to sell, or the price at which you can sell, Equity Shares at a particular point in time.
We are subject to a daily “circuit breaker” imposed by all Stock Exchanges in India, which does not allow
transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker operates
independently of the index-based market-wide circuit breakers generally imposed by SEBI on the Stock
Exchanges. The percentage limit on our circuit breakers is set by the Stock Exchanges based on the historical
volatility in the price and trading volume of our Equity Shares.
The Stock Exchanges do not inform us of the percentage limit of the circuit breaker in effect from time to time,
and may change it without our knowledge. This circuit breaker limits the upward and downward movements in
the price of the Equity Shares. As a result of this circuit breaker, no assurance may be given regarding your ability
to sell your Equity Shares or the price at which you may be able to sell your Equity Shares at any particular time.
54. You may be subject to Indian taxes arising out of capital gains. Any gain realised on the sale of equity
shares held for more than 12 months to an Indian resident, which are sold other than on a recognised
stock exchange and as result of which no Securities Transaction Tax (STT) has been paid, will be subject
to capital gains tax in India.
Under current Indian tax laws, unless specifically exempted, capital gains arising from the sale of Equity Shares
in an Indian company are generally taxable in India. Any gain realized on the sale of listed equity shares on a
stock exchange held for more than 12 months will not be subject to long-term capital gains tax in India if Securities
Transaction Tax (“STT”) is paid on the sale transaction and additionally, as stipulated by the Finance Act, 2017,
STT had been paid at the time of acquisition of such equity shares, except in the case of such acquisitions where
STT could not have been paid, as notified by the GoI under notification no. 43/2017/F. No. 370142/09/2017-TPL
on June 5, 2017. However, Finance Act, 2018, taxes such long term capital gains exceeding ₹ 100,000 arising
from sale of Equity Shares on or after April 1, 2018. Accordingly, you may be subject to payment of long-term
capital gains tax in India, in addition to payment of STT, on the sale of any Equity Shares held for more than 12
months. STT will be levied on and collected by a domestic stock exchange on which the Equity Shares are sold.
Further, any gain realized on the sale of listed equity shares held for a period of 12 months or less will be subject
to short-term capital gains tax in India. Capital gains arising from the sale of the Equity Shares may be partially
exempt or exempt from taxation in India in cases where such exemption is provided under a treaty between India
and the country of which the seller is resident. Generally, Indian tax treaties do not limit India’s ability to impose
tax on capital gains. As a result, residents of other countries may be liable for tax in India as well as in their own
jurisdiction on a gain upon the sale of the Equity Shares.
55. Banking is a heavily regulated industry and material changes in the regulations which govern our Bank,
may adversely affect our business.
Banks in India are subject to detailed supervision and regulation by the RBI. In addition, the financial condition
and results of operations of banks are susceptible to material change pursuant to changes in law, as well as to
changes in regulations, government policies and accounting principles. Any such changes may adversely affect
our Bank's business, future financial performance and the price of the Equity Shares. For further details in relation
to the laws applicable to us, see “Regulations and Policies” on page 145.
56. Financial instability in other countries could disrupt our business and cause the price of our Equity
Shares to decrease.
The Indian market and the Indian economy are, to a certain extent, influenced by economic and market conditions
in other countries, particularly market conditions in the United States and Europe. Although, financial turmoil
56
elsewhere in the world in past years has had limited impact on the Indian economy, investors should be aware that
there is a recent history of financial crises and boom-bust cycles in multiple markets in both the emerging and
developed economies which leads to risks for all financial institutions, including us. Although economic
conditions are different in each country, investors’ reactions to developments in one country can have adverse
effects on the securities of companies in other countries, including India. A loss of investor confidence in the
financial systems of India or other markets may cause volatility in the Indian financial markets and indirectly, in
the Indian economy in general. This could negatively impact the Indian economy, including the movement of
exchange rates, interest rates and flow of funds in India. Any significant financial disruption could have an adverse
effect on our business, future financial condition and the price of our Equity Shares. Although the recent financial
crisis has had a limited direct impact on us, we remain subject to the risks posed by the indirect impact of the
global credit crisis on the economy, some of which cannot be anticipated and the vast majority of which are not
in our control. We also remain subject to counterparty risk to financial institutions that fail or are otherwise unable
to meet their obligations to us.
57. We are exposed to fluctuations in foreign exchange rates.
As a financial intermediary, we are exposed to exchange rate risk. We comply with regulatory limits on our
unhedged foreign currency exposure. However, we are exposed to fluctuations in foreign currency rates for our
unhedged exposure. Adverse movements in foreign exchange rates may impact our borrowers negatively which
may in turn impact the quality of our exposure to these borrowers. Volatility in foreign exchange rates could
adversely affect our future financial performance and the market price of the Equity Shares.
58. We cannot guarantee that the Equity Shares will be listed on the Stock Exchanges in a timely manner,
if at all.
In accordance with Indian law and practice, after our Board or committee passes the resolution to allot the Equity
Shares but prior to crediting such Equity Shares into the Depository Participant accounts of the QIBs, we are
required to apply to the Stock Exchanges for listing and trading approvals. After receiving the listing and trading
approvals from the Stock Exchanges, we will credit the Equity Shares into the Depository Participant accounts of
the respective QIBs and apply for the final listing and trading approvals from the Stock Exchanges. There could
be a delay in obtaining these approvals from the Stock Exchanges, which in turn could delay the listing of the
Equity Shares on the Stock Exchanges. Any delay in obtaining these approvals would restrict your ability to
dispose of your Equity Shares.
59. An investor will not be able to sell any of the Equity Shares other than on a recognized Indian stock
exchange for a period of 12 months from the date of this Issue.
The Equity Shares are subject to restrictions on transfers. Pursuant to the SEBI ICDR Regulations, for a period of
12 months from the date of the issue of the Equity Shares, QIBs subscribing to the Equity Shares may only sell
their Equity Shares on the Stock Exchanges and may not enter into any off market trading in respect of these
Equity Shares. We cannot be certain that these restrictions will not have an impact on the price and liquidity of
the Equity Shares.
60. Investors will be subject to market risks until the Equity Shares credited to the investor’s demat account
are listed and permitted to trade.
Investors can start trading the Equity Shares allotted to them only after they have been credited to an investor’s
demat account, are listed and permitted to trade. Since the Equity Shares are currently traded on the Stock
Exchanges, investors will be subject to market risk from the date they pay for the Equity Shares to the date when
trading approval is granted for the same. Further, there can be no assurance that the Equity Shares allocated to an
investor will be credited to the investor’s demat account or that trading in the Equity Shares will commence in a
timely manner.
61. Applicants to the Issue are not allowed to withdraw their Bids after the Bid /Issue Closing Date.
In terms of the SEBI ICDR Regulations, applicants in the Issue are not allowed to withdraw their Bids after the
Bid/Issue Closing Date. The Allotment of Equity Shares in this Issue and the credit of such Equity Shares to the
applicant’s demat account with depository participant could take approximately seven days and up to 10 days
from the Bid/Issue Closing Date. However, there is no assurance that material adverse changes in the international
or national monetary, financial, political or economic conditions or other events in the nature of force majeure,
57
material adverse changes in the business, results of operation or financial condition of our Bank, or other events
affecting the applicant’s decision to invest in the Equity Shares, would not arise between the Bid/ Issue Closing
Date and the date of Allotment of Equity Shares in the Issue. Occurrence of any such events after the Bid/Issue
Closing Date could also impact the market price of the Equity Shares. The applicants shall not have the right to
withdraw their Bids in the event of any such occurrence. Our Bank may complete the Allotment of the Equity
Shares even if such events may limit the applicants’ ability to sell the Equity Shares after the Issue or cause the
trading price of the Equity Shares to decline.
62. After this Issue, the price of our Bank’s Equity Shares may be volatile.
The Issue Price will be determined by us in consultation with the Book Running Lead Manager, in compliance
with Chapter VI of the SEBI ICDR Regulations, and it may not necessarily be indicative of the market price of
the Equity Shares after this Issue is completed. The trading price of the Equity Shares may fluctuate after this
Issue due to a variety of factors, including our Bank’s results of operations and the performance of the its business,
competitive conditions, general economic, political and social factors, the performance of the Indian and global
economy and significant developments in India’s fiscal regime, volatility in the Indian and global securities
market, performance of its competitors, the Indian financial services industry and the perception in the market
about investments in the financial services industry, changes in the estimates of its performance or
recommendations by financial analysts and announcements by our Bank or others regarding contracts,
acquisitions, strategic partnerships or capital commitments. In addition, if the stock markets in general experience
a loss of investor confidence, the trading price of the Equity Shares could decline for reasons unrelated to our
Bank’s business, financial condition or operating results. The trading price of the Equity Shares might also decline
in reaction to events that affect other companies in our Bank’s industry even if these events do not directly affect
us. Each of these factors, among others, could adversely affect the price of the Equity Shares. There can be no
assurance that an active trading market for the Equity Shares will be sustained after this Issue, or that the price at
which the Equity Shares have historically traded will correspond to the price at which the Equity Shares are offered
in this Issue or the price at which the Equity Shares will trade in the market subsequent to this Issue.
63. Since our Equity Shares are quoted in Indian rupees in India, foreign investors may be subject to
potential losses arising out of exchange rate risk on the Indian rupee and risks associated with the
conversion of Indian rupee proceeds into foreign currency.
Foreign investors are subject to currency fluctuation risk and convertibility risk since our Equity Shares are quoted
in Indian rupees on the Indian Stock Exchanges on which they are listed. Dividends on our Equity Shares will
also be paid in Indian rupees. Investors that seek to convert the Indian rupee proceeds of a sale of Equity Shares
into foreign currency and export the foreign currency will need to obtain the approval of the RBI for each such
transaction. Holders of Indian rupees in India may also generally not purchase foreign currency without general
or special approval from RBI.
64. Public companies in India, including us, will be required to prepare financial statements under Ind-AS.
We have not determined with any degree of certainty the impact of such adoption on our financial
reporting.
India has decided to adopt the “Convergence of its existing standards with IFRS” and has not adopted IFRS. These
“Converged IFRS / synchronised Accounting Standards” are referred to in India as Ind-AS. The Ministry of
Corporate Affairs, Government, has through a notification dated February 16, 2015, set out the Ind-AS and the
timelines for their implementation. The Institute of Chartered Accountants of India has issued Ind-AS (a revised
set of accounting standards) which converges the Indian accounting standards with International Financial
Reporting Standards. The Ministry of Corporate Affairs has confirmed the Ind-AS for adoption.
The Ministry of Corporate Affairs, in its press release dated January 18, 2016, issued a roadmap for
implementation of Ind-AS converged with IFRS for scheduled commercial banks, insurers, insurance companies
and non-banking financial companies. This roadmap requires these institutions to prepare Ind-AS based financial
statements for the accounting periods beginning from April 1, 2018 onwards with comparatives for the periods
ending March 31, 2018. The RBI, by its circular dated February 11, 2016, initially required all scheduled
commercial banks to comply with Ind-AS for financial statements for the periods stated above. However, pursuant
to a press release dated April 5, 2018, the RBI has now deferred the requirement of the scheduled commercial
banks to implement Ind-AS by one year, in light of the proposed legislative changes to the format of financial
statements, prescribed under the third schedule to the Banking Regulation Act to keep it in line with the format as
required under the Ind-AS.
58
While we are in the process of assessing possible impact of Ind-AS on our financial reporting, the nature and
extent of such impact is still uncertain. In this Preliminary Placement Document, we have not made any attempt
to quantify or identify the impact of the differences between Ind-AS and Indian GAAP as applied to our historical
financial statements and there can be no assurance, therefore, that our financial condition, results of operations,
cash flows or changes in shareholders’ equity will not appear materially different under Ind-AS than under Indian
GAAP. Further, the new accounting standards may require change, among other things, our methodology for
estimating allowances for expected loan losses and for classifying and valuing our investment portfolio and our
revenue recognition policy. For estimation of expected loan losses, the new accounting standards may require us
to calculate the present value of the expected future cash flows realizable from our advances, which may result in
us recognizing allowances for expected loan losses in the future which may be higher or lower than under current
Indian GAAP. In our transition to Ind-AS reporting, we may encounter some difficulties in the ongoing process
of implementing and enhancing our adequate technology support, management information systems including the
maintenance of parallel books under both the accounting norms. Further, there is no significant body of established
practice on which to draw in forming judgments regarding the new system’s implementation and application. Any
of these factors relating to compliance of Ind-AS may adversely affect our financial condition and results of
operations.
65. The new taxation system could adversely affect our Bank’s business.
Three major reforms in Indian tax laws have recently been enacted, namely, central, state and interstate goods and
services tax (“GST”) laws, the general anti-avoidance rules (“GAAR”) and safe harbour rules:
• The Government of India has introduced a comprehensive national GST regime that combines taxes and
levies by the Central and state Governments into a unified rate structure. Given that this law has been
introduced recently, we are unable to assess how GST will impact our results of operations.
• The provisions of the GAAR have come into effect from the beginning of Fiscal 2017. The GAAR
provisions are intended to catch arrangements declared as ‘impermissible avoidance arrangements’, which
is defined in the Income Tax Act as any arrangement, the main purpose or one of the main purposes of
which is to obtain a tax benefit and which satisfy at least one of the following tests: (i) creates rights, or
obligations, which are not ordinarily created between persons dealing at arms-length; (ii) results, directly
or indirectly, in misuse, or abuse, of the provisions of the Income Tax Act; (iii) lacks commercial substance
or is deemed to lack commercial substance, in whole or in part; or (iv) is entered into, or carried out, by
means, or in a manner, which are not ordinarily employed for bona fide purposes. The onus to prove that
the transaction is not an “impermissible avoidance agreement” is on the assessee, that is, an arrangement
shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried
out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the
arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole
arrangement is not to obtain a tax benefit. With the GAAR provisions coming into force, the tax authorities
have wide powers, including the denial of tax benefit or the denial of a benefit under a tax treaty.
We have not determined the impact of these recent and proposed laws and regulations on our business. Uncertainty
in the applicability, interpretation or implementation of any amendment to, or change in, governing law, regulation
or policy in the jurisdictions in which we operate, including by reason of an absence, or a limited body, of
administrative or judicial precedent may be time consuming as well as costly for us to resolve and may impact the
viability of our current business or restrict our ability to grow our business in the future. Further, if we are affected,
directly or indirectly, by the application or interpretation of any provision of such laws and regulations or any
related proceedings, or are required to bear any costs in order to comply with such provisions or to defend such
proceedings, our business and financial performance may be adversely affected.
59
MARKET PRICE INFORMATION
The Equity Shares have been listed and are available for trading on the BSE and the NSE. As on the date of this
Preliminary Placement Document, 258,090,428 Equity Shares comprises of the issued share capital of our Bank,
of which 256,071,902 Equity Shares are fully paid up (excluding 2,018,526 Equity Shares kept in abeyance,
forfeited shares and lapsed shares). The authorised share capital of our Bank, as on the date of this Preliminary
Placement Document, comprises of 500,000,000 Equity Shares of ₹ 10 each.
The following tables set forth the reported high, low and average market prices and the trading volumes of the
Equity Shares on the BSE and the NSE on the dates on which such high and low prices were recorded for financial
years ended March 2016, March 2017 and March 2018:
BSE
Fiscal
year
Period
depicting
change in
capital
structure
High
(₹)
Date of
High
Number
of
Equity
Shares
traded
on the
date of
high
Total
Volume
of
Equity
shares
traded
on the
date of
high (₹
in
million)
Low
(₹)
Date
of low
Number
of
Equity
Shares
traded
on the
date of
low
Total
Volume
of
Equity
shares
traded
on date
of low (₹
in
million)
Total
Volume
during the
period (No.
of shares)
Total
Volume
of
Equity
shares
traded in
value (₹
in
million)
Avera
ge
price
for the
period
(₹)
2016 April 1,
2015 –
May 11, 2015*
106.60 April 10,
2015 397,822 41.94 97.3
April 24,
2015
147,263 14.32 8,247,194 846.67 102.52
May 12,
2015 – May 27,
2015*
104.70 May 14,
2015 43,867 4.59 99.1
May
26,
2015
172,542 17.12 790,310 80.95 102.36
May 28, 2015 –
Septembe
r 20, 2015*
99.70 May 29,
2015 45,814 4.54 72.25
Septem
ber 7,
2015
78,372 5.64 6,872,434 613.39 87.70
Septembe
r 21, 2015 – March
31, 2016*
99.95 January 1, 2016
73,794 7.27 79.15
Septem
ber 23,
2015
30,491 2.39 11,784,449 1,070.08 89.83
2017 April 1, 2016 –
January 3,
2017#
158.3
Septembe
r 22, 2016
95,996 15.18 79.25
May
20, 2016
8,937 0.71 14,018,579 1,817.80 123.35
January 4, 2017 –
March 31, 2017#
169.15 March 6,
2017 279,772 46.48 135.55
January 9,
2017
25,865 3.51 16,091,219 2473.16 151.57
2018 April 1,
2017 -
May 9, 2017*
197.90 April 25,
2017
189,303 37.23 166.35 April
10,
2017
186,201 31.03 5,955,290 1,065.29 178.09
May 10,
2017 - October
26, 2017*
207.85 July 5,
2017
192955 39.88 139.80 Octobe
r 13, 2017
178,143 25.02 20,557,658 3,658.82 178.12
October 27, 2017 -
Novembe
r 19, 2017*
167.70 November 17,
2017
217,548 35.72 150.95 October 31,
2017
154,103 23.22 2,889,033 453.63 156.57
Novembe
r 20, 2017 –
December
4, 2017##
184.75 Novembe
r 23, 2017
317,542 58.14 166.75 Novem
ber 28, 2017
270,041 44.67 28,22,152 488.4 173.57
December
5, 2017 –
March 31, 2018##
153.40 Decembe
r 5. 2017
153,307 23.62 95.00 March
27,
2018
90,377 8.63 11,571,864 1,541.10 127.93
60
(Source: www.bseindia.com)
*The period pertains to the change in capital structure due to allotment of shares pursuant to conversion of ESOPs into equity shares. The
period commences from the date of issue of listing and trading approval by BSE being the date on which BSE recognised the said change in capital structure.
#Change in capital structure due to allotment of equity shares of ₹ 10/- each in the QIP. The share prices up to January 3, 2017 are prior to
the receipt of listing and trading approval dated January 4, 2017 from BSE, being the date on which BSE recognised the said change in capital structure. The share prices from January 4, 2017 onwards are from the date of receipt of listing and trading approval dated January 4, 2017
from BSE, being the date on which BSE recognised the said change in capital structure.
##The record date for rights issue was fixed as December 6, 2017. The share price up to December 4, 2017 are cum rights and the share prices from December 5, 2017 onwards are ex-rights.
NSE
Fiscal
Year
Period
depicting
change
in
capital
structure
High
(₹)
Date of
High
Number
of
Equity
Shares
traded
on the
date of
high
Total
Volume
of
Equity
shares
traded
on the
date of
high (₹
in
million)
Low
(₹)
Date
of low
Number
of
Equity
Shares
traded
on the
date of
low
Total
Volume
of
Equity
shares
traded
on the on
date of
low (₹ in
million)
Total
Volume
during the
period (No.
of shares)
Total
Volume
of
Equity
shares
traded in
value (₹
in
million)
Avera
ge
price
for the
period
(₹)
2016 April 1,
2015 – May 11,
2015*
106.65 April 10,
2015 1,519,92
2 161.09 97.40
April
24,
2015
425,579 41.47 24,693,791 2,555.67 102.60
May 12, 2015 –
May 28,
2015*
105.00 May 15,
2015 430,181 45.05 99.40
May
28, 2015
270,794 26.86 3,646,628 373.16 102.23
May 29,
2015 –
Septembe
r 21,
2015*
100.10 May 29,
2015 465,222 46.27 72.40
Septem
ber 7,
2015
341,064 24.66 43,867,172 3,914.25 87.49
September 22,
2015 –
March 31,
2016*
100.10 January
4, 2016 301,589 30.17 79.00
September 22,
2015
138,418 11.16 50,509,903 4,581.01 90.00
2017 April 1,
2016 – January
3, 2017#
158.45
Septembe
r 22,
2016
1,665,466
263.07 79.15
May
19,
2016
178,955 14.21 107,861,44
1 13,083.0
9 123.42
January 4, 2017 –
March
31, 2017#
169.15 March 6,
2017 1,373,78
2 229.20 135.80
Januar
y 9,
2017
596,845 81.11 56,270,800 8,549.88 151.54
2018 April 1,
2017 - May 10,
2017*
198.30 April 25,
2017
1,447,77
0
284.76 166.50 April
7, 2017
643,845 108.71 25,244,816 4,570.36 178.25
May 11, 2017 -
October
26, 2017*
207.55 July 5, 2017
685,812 141.76 140.20 October 13,
2017
529,203 74.35 88,366,092 15,706.69
178.13
October
27, 2017 -
Novembe
r 16, 2017*
161.90 Novembe
r 16, 2017
871,826 138.78 150.60 Octobe
r 31, 2017
418,914 63.05 10,178,343 1602.30 155.79
Novembe
r 17, 2017 –
Decembe
r 4, 2017##
185.05 Novembe
r 23, 2017
2,698,55
6
495.07 166.85 Novem
ber 28, 2017
1,784,28
4
295.37 21,423,484 3719.32 173.30
61
Decembe
r 5, 2017
– March
31, 2018##
154.05 Decembe
r 5, 2017
760,308 117.36 95.00 March
27
2018
1,023,92
9
98.12 59,768,863 7,544.96 128.03
(Source: www.nseindia.com)
*The period pertains to the change in capital structure due to allotment of shares pursuant to conversion of ESOPs into equity shares. The
period commences from the date of issue of listing and trading approval by NSE being the date on which NSE recognised the said change in
capital structure. #Change in capital structure due to allotment of equity shares of ₹10/- each in the QIP. The share prices up to January 3, 2017 are prior to
the receipt of listing and trading approval dated January 4, 2017 from NSE, being the date on which NSE recognised the said change in
capital structure. The share prices from January 4, 2017 onwards are from the date of receipt of listing and trading approval dated January 4, 2017 from NSE, being the date on which NSE recognised the said change in capital structure.
##The record date for rights issue was fixed as December 6, 2017. The share price upto December 4, 2017 are cum rights and the share prices
from December 5, 2017 onwards are ex-rights.
Notes:
1. High, low and average prices are based on the daily closing prices.
2. In case of two days with the same high or low price, the date with the higher volume has been considered.
(i) The following tables set forth the reported high, low and average market prices and the trading volumes of
the Equity Shares on the BSE and the NSE on the dates on which such high and low prices were recorded
during each of the six months preceding the date of filing of this Preliminary Placement Document:
BSE
Month High (₹) Date of
High
Number
of Equity
Shares
traded
on the
date of
high
Total
Volume
of Equity
shares
traded on
the date
of high
(million)
Low
(₹)
Date of
low
Number
of Equity
Shares
traded
on the
date of
low
Total
Volume
of Equity
shares
traded on
the on
date of
low
(million)
Total
Volume
during the
period
(No. of
shares)
Total
Volume
of Equity
shares
traded in
value (₹
in
million)
Average
price for
the
period
(₹)
January
2019
87.10 January 1,
2019
1,474 00.13 66.20 January
30, 2019
37,469 2.50 1,112,906 83.97 76.11
December 7, 2018 –
December
31, 2018*
88.60 December 7, 2018
27,514 2.43 86.60 December 14, 2018
15,588 1.36 224,348 19.59 87.14
December 1, 2018 –
December 6, 2018*
89.80 December 3, 2018
25,248 2.27 87.70 December 6, 2018
9,123 0.80 47,431 4.24 88.65
November
2018
90.7
November
9, 2018
123,833 11.23 86.95 November
29, 2018
94,666 8.27 2,202,125 196.66 89.19
October
2018
92.85 October
23, 2018
330,348 30.67 79.50 October
17, 2018
125,694 10.06 7,456,711 640.26 84.62
September 5, 2018 –
September
30, 2018
96.90 September 6, 2018
141,548 13.42 71.05 September 28, 2018
274,628 21.45 2,405,783 217.42 91.02
September
1, 2018 –
September 4, 2018
94.05 September
3, 2018
118,805 11.23 94.00 September
4, 2018
17,028 1.60 135,833 12.83 94.03
August
2018
101.75 August 1,
2018
108,979 11.12 92.70 August 14,
2018
110,205 10.38 2,257,978 219.62 96.91
(Source: www.bseindia.com) *The period pertains to the change in capital structure due to allotment of shares pursuant to conversion of ESOPs into equity shares. The
period commences from the date of issue of listing and trading approval by BSE being the date on which BSE recognised the said change in
capital structure.
NSE
62
Month High
(₹)
Date of
High
Number
of
Equity
Shares
traded
on the
date of
high
Total
Volume of
Equity
shares
traded on
the date of
high
(million)
Low
(₹)
Date of low Number
of
Equity
Shares
traded
on the
date of
low
Total
Volume of
Equity
shares
traded on
the on date
of low
(million)
Total
Volume
during the
period (No.
of shares)
Total
Volume
of
Equity
shares
traded in
value (₹
in
million)
Average
price for
the
period
(₹)
January
2019
86.85 January 1,
2019
278,906 24.27 66.4
0
January 30,
2019
600,988 40.53 11,207,448 837.31 75.90
December
7, 2018 –
December 31, 2018*
88.60 December
7, 2018
1,228,30
1
108.15 86.7
0
December
26, 2018
1091168 94.67 8,860,563 775.13 87.19
December
1, 2018 – December
6, 2018*
89.90 December
03, 2018
390,902 35.15 87.7
5
December
5, 2018
442,890 38.86 2,149,950 189.45 88.89
November 2018
90.85 November 7, 2018
184,401 16.75 87.6 November 27, 2018
820,205 71.94 13,126,426 1,172.39 89.23
October
2018
92.45 October 23,
2018
2,430,16
1
225.96 79.5
0
October 9,
2018
880,896 70.16 28,475,392 2,389.68 84.73
September
6, 2018 –
September 30, 2018
97.10 September
6, 2018
1,291,23
6
123.87 71.8
0
September
28, 2018
2,451,50
3
192.58 13,671,272 1,219.89 90.97
September
1, 2018 – September
5, 2018
94.45 September
4, 2018
336,209 31.67 93.6
5
September
5, 2018
504,111 46.96 1,188,656 111.56 93.95
August 2018
101.80 August 1, 2018
297,109 30.26 92.60
August 14, 2018
754,996 70.55 12,634,744 1,229.84 97.07
(Source: www.nseindia.com)
*The period pertains to the change in capital structure due to allotment of shares pursuant to conversion of ESOPs into equity shares. The
period commences from the date of issue of listing and trading approval by NSE being the date on which NSE recognised the said change in
capital structure.
The following table sets forth the market price on the BSE and the NSE on the first working day following the
approval of the Board of Directors for the Issue, i.e., June 27, 2018:
BSE NSE
Open High
Low Close Number of
Equity
Shares
traded
Turnover
(₹ million)
Open High Low Close Number of
Equity
Shares
traded
Turnover
(₹ million)
112.05 112.90
109.50 110.65
128,484 14.27 112.10
113.00 109.00
110.70 410,205 45.38
(Source: www.bseindia.com and www.nseindia.com)
63
USE OF PROCEEDS
The gross proceeds from the Issue will be approximately ₹ [●] million (“Gross Proceeds”).
The net proceeds from the Issue, after deducting fees, commissions and expenses of the Issue, will be
approximately ₹ [●] million (“Net Proceeds”).
We will apply the Net Proceeds primarily for augmenting Tier I capital, subject to compliance with applicable
laws and regulations.
In accordance with the policies approved by the Board and as permissible under applicable laws and government
policies, our management will have flexibility in deploying the Net Proceeds. Pending utilisation for the purposes
described above, we intend to temporarily invest funds in creditworthy instruments, including money market
Mutual Funds and deposits with banks and corporates. Such investments would be in accordance with the
investment policies as approved by the Board from time to time and all applicable laws and regulations.
The Net Proceeds are not proposed to be utilised towards any specific project. Accordingly, the requirement to
disclose a) break up of cost of project, b) means of financing such project, and c) proposed deployment status of
proceeds at each stage of the project, are not applicable,
Neither our Promoters nor our Directors are making any contribution either as part of the Issue or separately in
furtherance of the use of the proceeds. Further, neither our Promoters nor our Directors shall receive any proceeds
from the Issue, whether directly or indirectly. Since the Issue is only made to QIBs, our Promoters, Directors or
Key Managerial Personnel are not eligible to subscribe in the Issue.
Our main objects clause and objects incidental or ancillary to the main objects clause of our Memorandum of
Association enable us to undertake the activities towards which the proceeds from this Issue will be applied.
Our Bank shall not utilise monies raised through the Issue until the Allotment is made and the return of Allotment
is filed with the RoC, or receipt of final listing and trading approvals from the Stock Exchanges, whichever is
later.
64
CAPITALISATION
The following table sets forth the capitalization of our Bank as at March 31, 2018 and as adjusted to give effect
to the Issue. This table should be read in conjunction with the sections titled “Summary Financial Information”,
“Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Financial Information” on pages 25, 31, 120 and 240 respectively.
(₹ in million)
As of March 31, 2018
Unadjusted As adjusted for the Issue*
Shareholders’ funds
Capital 2,559.94 [●]
Reserves and surplus 20,716.74 [●]
Total shareholders’ funds (A) 23,276.69 [●]
Demand Deposits 20,912.64 [●]
Savings Bank Deposits 49,248.68 [●]
Term Deposits 262,933.51 [●]
Deposits (B) 333,094.83 [●]
Borrowings (C) 40,127.80 [●]
Total debt (B+C) 373,222.63 [●]
Total capitalization (A+B+C) 396,499.32 [●] Note: * The figures for the respective financial statement line items under the post-Issue column are unaudited and derived after considering only
the impact of the issue of [●] Equity Shares of ₹ 10 each at a premium of ₹ [●] per Equity Share (aggregating to ₹ [●] million) through the
Issue and not considering any other transactions or movements for such financial statement line items after March 31, 2018. These Equity Shares are yet to be Allotted. In the post-Issue details, the reserves and surplus amount has not been adjusted for Issue-related expenses that
will be deducted from the amount of share premium received from the Issue, and the debt amount has not been adjusted for any
proceeds/repayment of loans post March 31, 2018. Since March 31, 2018 78,149 Equity Shares have been allotted pursuant to the exercise of options granted under
the LVB ESOS-2010, however, the above capitalisation statement does not give effect to the Equity Shares issued
and allotted by our Bank post March 31, 2018. As on the date of this Preliminary Placement Document, 4,129,779
stock options are outstanding under LVB ESOS-2010.
65
CAPITAL STRUCTURE
The Equity Share capital of our Bank as on the date of this Preliminary Placement Document is as follows:
(₹ in million) Aggregate
nominal value
Authorized Capital
500,000,000 Equity Shares of ₹ 10 each 5,000.00
Issued share capital prior to the Issue
258,090,428 Equity Shares of ₹ 10 each 2,580.90
Subscribed and paid-up share capital prior to the Issue*
256,071,902 Equity Shares of ₹ 10 each 2,560.72
Present Issue being offered in terms of this Preliminary Placement Document
Up to [●] Equity Shares at a premium of ₹ [●] [●]
Paid-up share capital after the Issue
[●] Equity Shares [●]
Securities premium account
Before the Issue 15,114.23
After the Issue [●] * The subscribed and paid up share capital of our Bank does not include 2,018,526 Equity Shares kept in abeyance, or forfeited shares and
lapsed Equity Shares.
(a) As at December 31, 2018, our Promoter and Promoter Group held 8.88% of the paid-up share capital of our
Bank. Our Bank is presently compliant with the provisions relating to minimum public shareholding as
required by the SEBI Listing Regulations.
(b) The Issue has been authorized by the meeting of the Board held on June 26, 2018 and by the shareholders
pursuant to a special resolution dated August 8, 2018.
Share capital history of our Bank
The history of the share capital of our Bank since inception is as follows:
Date/
Calendar
Year of
Issue/
Allotment
Number of
Equity Shares
Face
Value
(₹)
Issue
Price
(₹)
Cumulative
Number of Paid
Up Equity
Shares
Cumulative Paid
up capital (₹)
Nature of
consideration
Reason for
Allotment
1926 7,500 10 10 7,500 75,000 Cash Subscription
to
Memorandum
of
Association
and further
Allotment
1929 2,010 10 10 9,510 95,100 Cash Further
Allotment
1930 440 10 10 9,950 99,500 Cash Further
Allotment
1931 50 10 10 10,000 100,000 Cash Further
Allotment
1947 10,000 10 15 20,000 200,000 Cash Further
Allotment
1953 5,000 10 15 25,000 250,000 Cash Further
Allotment
1957 12,124(1) 10 - 37,124 371,240 Other than cash Bonus Issue
1958 114 10 - 37,238 372,380 Other than cash
(Bonus) Allotment of
Equity Shares
on release of
bonus shares
kept in
abeyance
1959 127 10 - 37,365 373,650 Other than cash
(Bonus)
66
Date/
Calendar
Year of
Issue/
Allotment
Number of
Equity Shares
Face
Value
(₹)
Issue
Price
(₹)
Cumulative
Number of Paid
Up Equity
Shares
Cumulative Paid
up capital (₹)
Nature of
consideration
Reason for
Allotment
1960 12,580 10 20 49,945 499,450 Cash Further
Allotment
1961 25,055 10 20 75,000 750,000 Cash Further
Allotment
1962 727 10 - 75,727 757,270 - Shares to
Karur
Mercantile
Bank
pursuant to a
share swap
1963 464 10 - 76,191 761,910 - Shares to
Karur
Mercantile
Bank
pursuant to a
share swap
1964 24 10 - 76,215 762,150 - Shares to
Karur
Mercantile
Bank
pursuant to a
share swap
1971 37 10 10 76,252 762,520 Cash Further
Allotment
1974 152,504 10 11 228,756 2,287,560 Cash Further
Allotment
1977 20 10 10 228,776 2,287,760 Cash Further
Allotment
1982 114,388 10 10 343,164 3,431,640 Cash Rights issue
1986 343,164 10 10 686,328 6,863,280 Cash Rights Issue
1988 600,000 10 10 1,286,328 12,863,280 Cash Public Issue
1989 643,164 10 10 1,929,492 19,294,920 Cash Rights issue
1993 958,521(2) 10 40 2,888,013 28,880,130 Cash Rights Issue
January 12,
1995
2,874,138(3) 10 - 5,762,151 57,621,510 Other than cash
(Bonus)
Bonus Issue
March 31,
1995
5,737,826(4) 10 35 11,499,977 114,999,770 Cash Rights Issue
August 4,
1995
2,000 10 35 11,501,977 115,019,770 Cash Allotment of
Equity Shares
on release of
bonus &
rights shares
kept in
abeyance
August 4,
1995
900 10 - 11,502,877 115,028,770 Other than cash
(Bonus)
February 20,
1996
5,146 10 35 11,508,023 115,080,230 Cash
August 21,
1996
554 10 35 11,508,577 115,085,770 Cash
December
24, 1997
50 10 35 11,508,627 115,086,270 Cash
November
29, 1999
200 10 35 11,508,827 115,088,270 Cash
June 28,
2002
50 10 35 11,508,877 115,088,770 Cash
June 28,
2002
25 10 - 11,508,902 115,089,020 Other than cash
(Bonus)
July 16,
2005
8,035,046(5)(10) 10 55 19,543,948 195,439,480 Cash Rights issue
March 20,
2006
(9,379) 10 - 19,534,569 195,345,690 - Forfeiture
November
25, 2006
9,752,515(6) 10 - 29,287,084 292,870,840 Other than cash
(Bonus)
Bonus issue
February 1,
2007
70 10 55 29,287,154 292,871,540 Cash Allotment of
Equity Shares
67
Date/
Calendar
Year of
Issue/
Allotment
Number of
Equity Shares
Face
Value
(₹)
Issue
Price
(₹)
Cumulative
Number of Paid
Up Equity
Shares
Cumulative Paid
up capital (₹)
Nature of
consideration
Reason for
Allotment
on release of
rights shares
kept in
abeyance
February 10,
2007
19,502,401(7)(11) 10 50 48,789,555 487,895,550 Cash Rights Issue
January 30,
2008
268 10 50 48,789,823 487,898,230 Cash Allotment of
Equity Shares
on release of
bonus and
rights shares
kept in
abeyance
January 30,
2008
169 10 - 48,789,992 487,899,920 Other than cash
(Bonus)
June 25,
2008
(14,144) 10 - 48,775,848 487,758,480 - Forfeiture
November
27, 2008
219 10 50 48,776,067 487,760,670 Cash Allotment of
Equity Shares
on release of
bonus and
rights shares
kept in
abeyance
November
27, 2008
109 10 - 48,776,176 487,761,760 Other than cash
(Bonus)
May 14,
2009 2,520 10 47.54 48,778,696 487,786,960 Cash
May 14,
2009 780 10 - 48,779,476 487,794,760 Other than cash
(Bonus)
December
23, 2009
48,729,320(8) 10 54 97,508,796 975,087,960 Cash Rights issue
October 4,
2010
50 10 - 97,508,846 975,088,460 Other than cash
(Bonus)
Allotment of
Equity Shares
on release of
bonus and
rights shares
kept in
abeyance
October 4,
2010 100 10 50 97,508,946 975,089,460 Cash
October 4,
2010 14,944 10 54 97,523,890 975,238,900 Cash
February
12, 2011
1,950 10 54 97,525,840 975,258,400 Cash
April 16,
2012
945 10 - 97,526,785 975,267,850 Other than cash
(Bonus)
April 16,
2012 1,890 10 55 97,528,675 975,286,750 Cash
April 16,
2012 4,590 10 50 97,533,265 975,332,650 Cash
April 16,
2012 7,425 10 54 97,540,690 975,406,900 Cash
August 24,
2013
20,000 10 61.25 97,560,690 975,606,900 Cash LVB ESOS-
2010
Allotment
September
2, 2014
81,260,919(9) 10 50 178,821,609 1,788,216,090 Cash Rights issue
December 3,
2014
100,000 10 61.25 178,921,609 1,789,216,090 Cash LVB ESOS-
2010
Allotment January 28,
2015
245,000 10 61.25 179,166,609 1,791,666,090 Cash LVB ESOS-
2010
Allotment April 29,
2015
45,000 10 45.27 179,211,609 1,792,116,090 Cash LVB ESOS-
2010
Allotment May 21,
2015
60,000 10 36.95 179,271,609 1,792,716,090 Cash LVB ESOS-
2010
Allotment September
11, 2015
190,000 10 36.95 179,461,609 1,794,616,090 Cash LVB ESOS-
2010
Allotment
68
Date/
Calendar
Year of
Issue/
Allotment
Number of
Equity Shares
Face
Value
(₹)
Issue
Price
(₹)
Cumulative
Number of Paid
Up Equity
Shares
Cumulative Paid
up capital (₹)
Nature of
consideration
Reason for
Allotment
January 3,
2017
11,985,138 10 140 191,446,747 1,914,467,470 Cash QIP
Allotment
May 5, 2017 360,000 10 55 191,806,747 1,918,067,470 Cash LVB ESOS-
2010
Allotment
October 20,
2017
100,000 10 70 191,906,747 1,919,067,470 Cash LVB ESOS-
2010
Allotment
November
16, 2017
100,000 10 90 192,006,747 1,920,067,470 Cash LVB ESOS-
2010
Allotment
January 3,
2018
63,987,006(12) 10 122 255,993,753 2,559,937,530 Cash Rights Issue
June 14,
2018
59,845 10 72 256,053,598 2,560,535,980 Cash LVB ESOS-
2010
Allotment
August 30,
2018
12,965 10 72 256,066,563 2,560,665,630 Cash LVB ESOS-
2010
Allotment
November
29, 2018
5,339 10 72 256,071,902 2,560,719,020 Cash LVB ESOS-
2010
Allotment
Total 256,071,902
(1) 135 Equity Shares kept in abeyance in the bonus issue of Equity Shares during the year 1957, which subsequently lapsed.
(2) 6,225 Equity Shares kept in abeyance, in the rights issue of Equity Shares during the year 1993;
(3) 20,100 Equity Shares kept in abeyance, in the bonus issue of Equity Shares during the year 1995, of which the 19,075 Equity Shares are
outstanding;
(4) 50,650 Equity Shares kept in abeyance in the rights issue of Equity Shares during the year 1995, of which 42,050 Equity Shares are
outstanding;
(5) 68,820 Equity Shares kept in abeyance in the rights issue of Equity Shares during the year 2005, of which 66,300 Equity Shares are
outstanding;
(6) 83,204 Equity Shares kept in abeyance in the bonus issue of Equity Shares during the year 2006, of which 81,251 Equity Shares are
outstanding;
(7) 169,038 Equity Shares kept in abeyance in the rights issue of Equity Shares during the year 2006, of which 162,501 Equity Shares are
outstanding;
(8) 435,133 Equity Shares kept in abeyance in the rights issue of Equity Shares during the year 2009, of which 410,814 Equity Shares are
outstanding;
(9) 696,503 Equity Shares kept in abeyance in the rights issue of Equity Shares during the year 2014;
(10) Out of 8,035,046 Equity Shares, 5,770,013 Equity Shares were partly paid up at ₹ 5 per Equity Share on application. Subsequently, the
Equity Shares were fully paid up except for 9,379 Equity Shares, which were forfeited.
(11) Out of 19,502,401 Equity Shares, 11,334,862 Equity Shares were partly paid up at ₹ 5 per Equity Share on application. Subsequently,
the shares were fully paid up except for 14,144 Equity Shares which were forfeited.
(12) 510,149 Equity Shares kept in abeyance in the rights issue of Equity Shares during the Fiscal 2018
In the last one year preceding the date of this Preliminary Placement Document, our Bank has not made any
allotments (either on preferential basis, or private placements or rights issue) including for consideration other
than cash, other than allotment pursuant to LVB ESOS 2010.
Employee Stock Option Scheme – 2010 (“LVB ESOS-2010”)
Our Bank instituted LVB ESOS-2010 pursuant to a special resolution dated August 4, 2010 passed by the
shareholders of our Bank. Under LVB ESOS-2010, our Bank can grant employee stock options exercisable into
not more than 5,000,000 Equity Shares of ₹ 10 each. The eligibility and number of options to be granted to an
employee is determined on the basis of criteria laid down in the LVB ESOS-2010 and is approved by the
Nomination, Remuneration and Compensation Committee (earlier known as the Compensation Committee) of the
Board of Directors. The options granted shall be capable of being exercised within a period of 5 years from the
date of vesting of the respective options. The LVB ESOS-2010 shall continue to be in force until (i) its termination
by the Board, or (ii) the date on which all of the options available for issuance under the LVB ESOS-2010 have
69
been issued and exercised, whichever is earlier.
As on December 31, 2018, an aggregate of 5,427,928 options have been granted of which, 1,298,149 options have
been exercised, 630,804 options have vested but are yet to be exercised, 2,255,683 options have been cancelled,
1,243,292 options are yet to be vested under the LVB ESOS 2010.
Employee Stock Option Scheme – 2017 (“LVB ESOS-2017”)
Our Bank instituted LVB ESOS-2017 pursuant to a special resolution dated July 18, 2017 passed by the
shareholders of our Bank. Under LVB ESOS-2017, our Bank can grant employee stock options exercisable into
not more than 5,000,000 Equity Shares of ₹ 10 each. The eligibility and number of options to be granted to an
employee is determined on the basis of criteria laid down in the LVB ESOS-2017 and is approved by the
Nomination, Remuneration and Compensation Committee of the Board of Directors. The options granted shall be
capable of being exercised within a period of 5 years from the date of vesting of the respective options. The LVB
ESOS-2017 shall continue to be in force until (i) its termination by the Board or Nomination, Remuneration and
Compensation Committee as per provisions of Applicable Laws, or (ii) the date on which all of the options
available for issuance under the LVB ESOS-2017 have been issued and exercised, whichever is earlier. No option
has been granted under LVB ESOS-2017, as on date.
Proposed allottees
The names of the proposed allottees and the percentage of post Issue capital that may be held by them in our Bank
is set forth below:
Sr.
No.
Name of the proposed
allottee
Number of Equity Shares
proposed to be allotted
Number of Equity Shares
proposed to be allotted
Percentage of the post-
Issue capital (%)
[●] [●] [●]
Note: The above table has been intentionally left blank and will be filled-in before filing of the Placement
Document with the Stock Exchanges.
Other Confirmation
No change in control of our Bank is expected as a consequence to the Issue.
70
DIVIDEND POLICY
The declaration and payment of dividends by our Bank is governed by the applicable provisions of the Companies
Act, 2013, the Banking Regulation Act and the rules, regulations and guidelines issued by the RBI and our
Memorandum and Articles of Association.
The payment of dividends by banks is subject to restrictions under the Banking Regulation Act. Section 15(1) of
the Banking Regulation Act states that no banking company shall pay any dividend on its shares until all its
capitalised expenses (including preliminary expenses, organisation expenses, share-selling commissions,
brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have
been completely written off. In addition, section 17(1) of the Banking Regulation Act and the relevant circulars
of the RBI in this regard, requires every banking company to create a reserve fund and, out of the balance of the
profit of each year as disclosed in the profit and loss account, transfer a sum equivalent to not less than 25% of
the net profit before appropriations to the reserve fund before declaring any dividend. Further, in May 2005, the
RBI issued guidelines on “Declaration of Dividends by Banks”, which prescribed certain conditions for
declaration of dividends by banks.
Our Bank has adopted a dividend distribution policy, whereby our Bank would generally take into account the
following financial parameters before recommending dividends to shareholders: (i) profitability and key financial
metrics; (ii) any interim dividends paid; (iii) Auditors' qualifications pertaining to the statement of accounts, if
any; (iv) Bank's capital position and requirements as per Internal Capital Adequacy Assessment Process
(“ICAAP”) projections and other regulatory norms; and (v) any other parameters as may be imposed by the
regulators from time to time.
While recommending/declaring dividend, our Board shall also consider various factors and other material events
which the Board may consider as relevant.
The details of dividends declared by our Bank in the last three financial years are as follows:
Particulars Fiscal 2016 Fiscal 2017 Fiscal 2018
Face value of Equity Shares (₹ per share) 10.00 10.00 10.00
Interim Dividend (₹ in million) - - -
Final Dividend (₹ in million)* 538.39 517.88 -
Total Dividend (₹ in million)* 538.39 517.88 -
Dividend per Equity Share (in ₹) 3.00 2.70 -
Dividend Rate (%) 30% 27% -
Dividend Distribution Tax (₹ in million)* 109.60 105.43 - * In accordance with revised Accounting Standards (AS) 4-Contingencies & Events occurring after the balance sheet date notified by the
MCA on March 30, 2016, the proposed dividend including corporate dividend tax amounting to ₹ 623.31 million has not been shown as an appropriation from the profit & loss appropriation account as of March 31, 2017 and consequently not reported the same under “Other
liabilities and Provisions” as of March 31, 2017. For computation of capital adequacy ratio as of March 31, 2017, our Bank has adjusted the
proposed dividend for determining capital funds.
71
INDUSTRY OVERVIEW
The information in this section includes extracts from publicly available information, data and statistics and has
been derived from various publications and industry sources from the RBI. Neither our Bank, nor the Book
Running Lead Manager nor any other person connected with the Issue has independently verified this information.
Industry sources and publications generally state that the information contained therein has been obtained from
sources believed to be reliable, but their accuracy, completeness and underlying assumptions are not guaranteed
and their reliability cannot be assured. Industry sources and publications are also prepared based on information
as of specific dates and may no longer be current or reflect current trends. Industry sources and publications may
also base their information on estimates, projections, forecasts and assumptions that may prove to be incorrect.
Accordingly, investors should not place undue reliance on, or base their investment decision on this information.
The information in this section also includes an adaptation of an original work (World Bank. 2018. Global
Economic Prospects, June 2018: The Turning of the Tide? Washington, DC: World Bank. doi: 10.1596/978-1-
4648-1257-6. License: Creative Commons Attribution CC BY 3.0 IGO.) by The World Bank (“Work”). Views and
opinions expressed in the adaptation are the sole responsibility of the author of adaption, i.e. our Bank and are
not endorsed by The World Bank. The Work is a product of the staff of The World Bank with external contributions.
The findings, interpretations, and conclusions expressed in the Work do not necessarily reflect the views of The
World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not
guarantee the accuracy of the data included in the Work. The boundaries, colors, denominations, and other
information shown on any map in the Work do not imply any judgment on the part of The World Bank concerning
the legal status of any territory or the endorsement or acceptance of such boundaries.
The World Bank does not necessarily own each component of the content contained within the Work. The World
Bank therefore does not warrant that the use of any third-party-owned individual component or part contained in
the Work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement
rests solely with our Bank. If our Bank re-uses a component of the Work, it is our Bank’s responsibility to
determine whether permission is needed for that re-use and to obtain permission from the copyright owner.
Examples of components can include, but are not limited to, tables, figures, or images.
ECONOMY OVERVIEW
Global Economy Overview
Global growth for 2018 and 2019 is projected to remain at the 2017 level of 3.7 per cent, though the expansion
has become less balanced and the downside risks to global growth have risen. The global PMI, while still
expansionary, also points to ebbing of activities. The key drivers of risk are trade conflict, inflation risk in
Advanced Economies (AEs) and normalisation of their monetary policies and central banks’ balance sheets.
Nevertheless, AEs are expected to grow at 2.4 per cent in 2018 (a marginally faster pace than in 2017) and 2.1 per
cent in 2019 while growth in Emerging Markets and Developing Economies (EMDEs) is expected to be steady at
4.7 per cent in both 2018 and 2019, though the latter will be susceptible to a stronger dollar, emerging dynamics
on the global trade front, and geopolitical risks.
In the meanwhile, financial conditions in AEs have tightened as their monetary policy regimes shift towards
normalcy. The recent tightening in financial conditions in the US is largely driven by volatility swings in equity
markets and the marginal widening of investment grade credit spreads. After the latest Fed rate hike in December
2018, the aggregate policy regime in US appears to have significantly tightened as per the latest financial
conditions index (FCI), leading to median rate hike forecast for 2019 being trimmed from three to two. Financial
conditions in Europe remain constricted by the developments in Britain and Italy. Indications from Bank of Japan
(BoJ) point towards a rethink in its Quantitative Easing (QE) program although the reaction of currency markets
is muted, so far. (Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018
available on www.rbi.org.in)
72
Indian Economy Overview
On the domestic front, growth in gross domestic product (GDP) slowed down to 7.1 per cent year-on-year (y-o-
y) in Q2:2018-19 from 8.2 per cent in Q1:2018-19, weighed down by moderation in private consumption. On the
supply side, growth of gross value added (GVA) at basic prices decelerated to 6.9 per cent in Q2:2018-19,
reflecting moderation in agriculture and industrial activities.
Fiscal deficit was brought down sequentially from 4.1 per cent of the GDP in 2014-15 to 3.9 per cent in 2015-16,
and further to 3.5 per cent in 2017-18. Since fiscal discipline is particularly important from ratings agencies’
perspective, considering that India remains a relatively high debt and high deficit country among similarly rated
countries, the government has been taking steps to stick to the fiscal deficit target of 3.3 per cent in 2018-19.
Going forward, the ongoing trade related dispute between US and China which until now has had a limited impact
on global trade flows remains a significant risk. Additionally, outlook for international crude oil prices feeding
into input costs remains uncertain with potential implications for India’s terms of trade which worsened in H1:
2018-19. (Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
As per estimates, India’s GDP is forecast to grow by 7.3 percent in FY2018/19 and 7.5 percent thereafter. (Source:
World Bank. 2019. Global Economic Prospects, January 2019: Darkening Skies Washington, DC: World Bank.
doi: 10.1596/978-1-4648-1343-6. License: Creative Commons Attribution CC BY 3.0 IGO.)
Inflation
Headline inflation which averaged 4.8% during Q1:2018-19, is likely to face upside risks over the rest of the year
from a number of sources, warranting continuous vigil and a readiness to head off those pressures from getting
generalised. Rising global commodity prices, especially of crude oil, and recent global financial market
developments are firming up input cost pressures. The staggered impact of HRA revisions by various state
governments could also pose an upside risk through second round effects. Much will depend on how food prices
play out and how effective are the supply management strategies. On the whole, headline inflation is projected at
4.6% in Q2:2018-19; 4.8% in H2 and 5.0% in Q1:2019-20, including the HRA impact for central government
employees, with risks evenly balanced. Excluding the impact of HRA revisions, headline inflation is projected at
4.4% in Q2:2018- 19; 4.7-4.8% in H2 and 5.0% in Q1:2019-20. (Source: RBI Annual Report 2017-18 available
on www.rbi.org.in).
INDIAN BANKING INDUSTRY
The Reserve Bank of India (“RBI”)
The RBI is the central regulatory and supervisory authority for the Indian banking sector. It was established on
April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934.
The main functions of the RBI are as follows:
• Monetary Authority: it formulates, implements and monitors the monetary policy with the objective of
maintaining price stability while keeping in mind the objective of growth.
• Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations
within which the country's banking and financial system functions with the objective of maintaining public
confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.
• Manager of Foreign Exchange: Manages the Foreign Exchange Management Act, 1999 with the objective
of facilitating external trade and payment and promote orderly development and maintenance of foreign
exchange market in India.
• Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation to give the
public adequate quantity of supplies of currency notes and coins and in good quality.
• Development role: Performs a wide range of promotional functions to support national objectives.
73
The related functions of the RBI are as follows:
• Banker to the Government: performs merchant banking function for the central and the state governments;
also acts as their banker.
• Banker to banks: maintains banking accounts of all scheduled banks.
(Source: https://www.rbi.org.in/Scripts/AboutusDisplay.aspx)
Banks in India may be categorised as scheduled banks and non-scheduled banks, where the former are banks that
are included in the second schedule to the RBI Act, 1934, as amended. These banks comprise scheduled
commercial banks and scheduled cooperative banks.
As of June 30, 2018 there were 149 scheduled commercial banks (“SCB”) in the country, including 56 regional
rural banks. As of September 30, 2018, scheduled commercial banks had a nationwide network of 140,805 offices
and 62.70% of these branches were located in rural or semi-urban areas of the country. (Source: www.rbi.org.in
– Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks)
PERFORMANCE OF SCHEDULED COMMERCIAL BANKS
SCBs’ credit growth on a year-on-year (y-o-y) basis improved across bank groups between March and September
2018. The performance of the PSBs has witnessed an overall improvement with credit growth increasing from 5.9
per cent in March 2018 to 9.1 per cent in September 2018 and deposit growth increasing from 3.2 per cent to 5
per cent in the same period. SCBs’ net interest income (NII) growth improved in September 2018 as compared to
March 2018, while there was decline in other operating income (OOI). This, along with higher growth in operating
expenses (OE), pulled down the earnings before provisions and tax (EBPT). However, growth in provisions was
lower between March and September 2018. The share of NII in total operating income improved in September
2018 as compared to March 2018. Interestingly, net interest margins (NIM) of SCBs have improved mainly due
to PSBs. Higher growth in NII improved the NIM of the PSBs, though still lower than PVBs and FBs. Profitability
ratios of SCBs continued to be impacted. However, ratios improved from their March 2018 levels. Individually,
in a sample of 55 SCBs, 24 banks were able to improve their return on asset (RoA) in September 2018 as compared
to March 2018. On the other hand, private sector banks, which were able to maintain their profitability till recently,
have experienced decline in their profitability ratios. The RoA of 8 out of 19 PVBs in the sample improved in
September 2018 as compared to March 2018. The liquidity coverage ratio (LCR), intended to build banks’ short-
term resilience to potential liquidity disruptions, improved for PSBs and PVBs in September 2018. PSBs are able
to maintain better LCR than the PVBs.
(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
CREDIT GROWTH AND THE ROLE OF BANKS
The growth in SCBs’ credit started decelerating from November 2016 and reached an all-time low of 3.7% on
March 3, 2017. Although credit growth recovered in the subsequent fortnights, it trailed well below its trajectory
in the previous year through April-October 2017. Besides the aftershock of demonetisation, weak demand for new
bank financing and deleveraging by banks struggling with provisions for mounting loan delinquency also took
74
their toll. Non-banks replaced bank credit as sources of funding for the commercial sector during this phase. From
November 10, 2017, credit growth picked up as the quickening of economic activity spurred a hesitant recovery
and levels of non-performing assets started plateauing albeit at elevated levels. By December 22, 2017, credit
growth touched double digit –10.3% for the first time since September 30, 2016. As on March 31, 2018, credit
growth stood at 10.0% significantly higher than 4.5% last year. (Source: RBI Annual Report 2017-18 available
on www.rbi.org.in)
SCBs’ credit growth stood at 12.8% as on June 22, 2018 (5.6% during the corresponding fortnight in the previous
year). The recovery in credit growth from November 2017 onwards benefited mainly from a favourable base effect
as credit levels a year ago were dampened by demonetisation effects. Nonetheless, momentum also provided
tailwinds, indicating an upswing in credit in tune with gradually improving domestic demand conditions.
However, the credit to GDP gap continued to be negative through 2017-18, implying that actual credit demand
remained lower than its potential. Non-food credit growth accelerated to 10.2% by March 2018 from 5.2% a year
ago. Bank loans to industry picked up slowly on a brightening outlook. Shifts into bank credit were also
incentivised by the tightening of financing conditions in respect of non-bank sources of finance on account of the
hardening of bond yields from October 2017 onwards. (Source: RBI Annual Report 2017-18 available on
www.rbi.org.in)
Credit growth was largely driven by private sector banks, which were resilient in the face of these tectonic shifts,
with their credit portfolio growing at 18.7% during the year as compared to 5.3% by public sector banks (PSBs)
and 3.8% by foreign banks. Among PSBs, those under prompt corrective action (PCA) turned out to be laggards,
though signs of revival were evident in this category as well during 2018-19 so far. During Q1:2018-19, non-food
credit has maintained its momentum, with credit accelerating to 12.9% as on June 22, 2018 as compared to a
meagre 6.3% a year ago. (Source: RBI Annual Report 2017-18 available on www.rbi.org.in)
Credit Quality of Large Borrowers
Share of large borrowers in SCBs’ total loan portfolios and their share in GNPAs was at 54.6 per cent and 83.4
per cent respectively at the end of September 2018. Top 100 large borrowers accounted for 16.0 per cent of gross
advances and 21.2 per cent of GNPAs of SCBs. In the large borrower accounts, proportion of funded amount
outstanding with any signs of stress (including SMA-0, 1, 2, restructured loans and NPAs) has come down from
30.4 per cent in March 2018 to 25.4 per cent in September 2018, while the proportion of SMA-212 loans in the
total funded amount outstanding has increased marginally from 0.7 per cent in March 2018 to 1.1 per cent in
September 2018.
(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
Recent Trends in Sectoral Deployment of Bank Credit
Data on sectoral deployment of bank credit collected from select 41 scheduled commercial banks, accounting for
about 90% of the total non-food credit deployed by all scheduled commercial banks, for the month of December
2018 is as follows:
(₹ in billion)
75
Sr. No. Sector
Outstanding as on
March
31,2017
March
30, 2018 Dec 21,
2018*
I Gross Bank Credit (II + III) 71,455 77,303 82,413
II Food Credit 511 419 771
III Non-food Credit (1 to 4) 70,945 76,884 81,462
1 Agriculture & Allied Activities 9,924 10,302 10,821
2 Industry (Micro & Small, Medium and Large) 26,798 26,993 27,494
3 Services 18,022 20,505 22,330
4 Personal Loans 16,200 19,085 20,997
5 Priority Sector 24,356 25,532 26,279
Note: (1). Data are provisional and relate to select banks which cover about 90 per cent of total non-food credit
extended by all scheduled commercial banks. (2) Priority Sector is as per old definition and does not conform to
FIDD Circular FIDD.CO.Plan.BC.54/04.09.01/2014-15 dated April 23, 2015.
Highlights of the sectoral deployment of bank credit are given below:
o On a year-on-year (y-o-y) basis, non-food bank credit increased by 12.8% in December 2018 as compared
with an increase of 10.0% in December 2017
o Credit to agriculture and allied activities increased by 8.4% in December 2018 in comparison with an increase
of 9.5% in December 2017
o Credit to industry rose by 4.4% in December 2018 as against contraction of 2.1% in December 2017.
o Credit to the services sector expanded by 23.2% in December 2018 as compared with that of 14.7% in
December 2017
o Personal loans increased by 17.0% in December 2018, down from an increase of 18.9% in December 2017.
(Source: Sectoral Deployment of Bank Credit – December 2018, available on www.rbi.org.in)
Asset Quality
Asset quality showed improvement with SCBs’ gross non-performing assets (GNPA) ratio declining from 11.5
per cent in March 2018 to 10.8 per cent in September 2018. Their net non-performing assets (NNPA) ratio also
registered a decline during the period. In a sign of possible recovery from the impaired asset load, the GNPA ratio
of both public and private sector banks showed a half-yearly decline, for the first time since March 2015, the
financial year-end prior to the launch of Asset Quality Review (AQR). Among the broad sectors, the asset quality
of industry sector improved in September 2018 as compared to March 2018 whereas that of agriculture and retail
sectors deteriorated. The improvement in asset quality of industry sector was marked by a reduction in fresh
slippages in September 2018. Among the sub-sectors within industry, stressed advances ratios of ‘mining’, ‘food
processing’ and ‘construction’ sectors have increased in September 2018 as compared to March 2018.
(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
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(Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available on
www.rbi.org.in)
PRIORITY SECTOR LENDING
The priority sector lending (PSL) mechanism seeks to provide an access to credit for those vulnerable sections of
the society, who are often deprived of it due to their perceived lack of credit worthiness. Small value loans to
farmers for agriculture and allied activities, micro small and medium enterprises, poor people for housing, students
for education, other low income groups and weaker sections are included under the priority sector. Social
infrastructure and renewable energy sectors are also covered under the priority sector. The performance of
scheduled commercial banks (SCBs) in terms of their achievement on priority sector lending (PSL) targets is
given below
(Rupees Billion) End- March Public Sector Banks Private Sector Banks Foreign Banks
1 2 3 4
2017 19,889 7,110 1,238
(39.5) (42.5) (36.4)
2018 20,723 8,046 1,402
(39.9) (40.8) (38.3)
Notes: Figures in parentheses are percentage to adjusted net bank credit (ANBC) or credit equivalent of off
balance sheet exposures (CEOBE), whichever is higher, in the respective groups
(Source: RBI Annual Report 2017-18 available on www.rbi.org.in)
To augment the flow of funds to Priority sector Reserve Bank of India has taken important regulatory initiatives
like Co-origination of Loans by Banks and NBFCs for lending to Priority Sector. All scheduled commercial banks
(excluding Regional Rural Banks and Small Finance Banks) may engage with Non-Banking Financial Companies
- Non-Deposit taking - Systemically Important (NBFC-ND-Sis) to co-originate loans for the creation of priority
sector assets. The bank can claim priority sector status without recourse to the NBFC. Minimum 20 per cent of
the credit risk by way of direct exposure will be on NBFC’s books till maturity and the balance will be on the
bank’s books. (Source: Financial Stability Report, Issue No. 18, Reserve Bank of India, December 2018 available
on www.rbi.org.in)
MSME SECTOR
The measures taken by the Reserve Bank for facilitating flow of credit to MSMEs and other steps taken by the
government over the last few years have resulted in an increase in credit flow to MSEs. As announced in the first
bi-monthly monetary policy statement for 2016-17 on April 5, 2016, a framework for accreditation of credit
counsellors was prepared by the Reserve Bank, and provided to the SIDBI which subsequently launched the CCCs
scheme in July 2017. The SIDBI, acting as a registering authority of CCCs, has issued operational guidelines on
the scheme. The CCCs are expected to advise the MSMEs in preparing business proposals, and financial
documents/ statements. The CCCs would also share information with MSMEs on suitable credit instruments
available in the market. In pursuance of greater awareness, the Reserve Bank has advised banks to sensitise their
field level functionaries/dealing officials about the scheme. As on June 30, 2018, 512 credit counselling
institutions and 13 certified credit counsellors were registered with the SIDBI.
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Credit Flow to MSEs
Year Number of Accounts Amount Outstanding MSE credit as percent of
ANBC
(million) (Rupees Billion)
2016-2017 23.2 10,701.3 14.3
2017-2018 25.9 11,493.5 14.6
(Source: RBI Annual Report 2017-18 available on www.rbi.org.in)
The Insolvency and Bankruptcy Regime
The insolvency and bankruptcy regime, which came into effect in 2016, has been providing a market-driven,
time-bound process for insolvency resolution of a corporate debtor, thereby helping financial institutions to clean
up their balance sheets. Most importantly, it is aiding a paradigm shift in the extant credit culture and discipline.
The Insolvency and Bankruptcy Code (Code) 2016 provides for the reorganisation and insolvency resolution of
corporate persons, among others, in a time bound manner for maximising the value of assets of such persons to
promote entrepreneurship, credit availability and balancing the interests of all stakeholders. It separates the
commercial aspects of insolvency resolution from its judicial aspects and empowers the stakeholders of the
corporate debtor (CD) and the Adjudicating Authority (AA) to decide matters expeditiously within their respective
domains. It provides an incentive-compliant, market driven and a time-bound process for insolvency resolution
of a CD. The Code critically depends on financial creditors for its success.
As at the end of September 2018, 816 corporate debtors were undergoing the resolution process. About 48 per
cent of the admitted corporate insolvency resolution processes are triggered by operational creditors (OC) and
about 38 per cent by financial creditors (FC), mostly banks. Of the 1,198 corporates in the resolution process up
to September 2018, 112 were closed on appeal or review, 52 resulted in a resolution and 212 yielded liquidations;
this is broadly consistent with expectations under the Code in its initial days of implementation.
Till September 2018, NCLT 10 had resolved 50 cases involving admitted claims by FCs aggregating to ₹ 1,249.77
billion. However, the median admitted claim was much lower at ₹ 0.85 billion and the third quartile of the admitted
claim stood at ₹ 10.51 billion implying that so far significant efforts have been for resolving smaller claims. For
claims beyond the third quartile threshold, the average recovery was at 46.66 per cent while the median recovery
was 39.53 per cent implying higher recovery in some higher claim cases. For admitted claims by FCs below the
third quartile, the average recovery was 36.37 per cent while the median recovery was higher at 53.88 per cent
implying a somewhat lower recovery for the higher claims. (Source: Financial Stability Report, Issue No. 18,
Reserve Bank of India, December 2018 available on www.rbi.org.in)
OUTLOOK
Going forward, the up-tick in credit growth is likely to be supported by the progress being made under the aegis
of the Insolvency and Bankruptcy Code, 2016 (IBC) in addressing stress on balance sheets of both corporates and
banks, recapitalisation of PSBs, and a positive outlook on the economy. The prevailing negative credit-to-GDP
gap indicates that there is sufficient scope for credit absorption and expansion in bank lending on a sustained
basis. (Source: RBI Annual Report 2017-18 available on www.rbi.org.in)
Several initiatives set in motion to secure the soundness of the banking system are expected to reach critical mass
during 2018-19. First, keeping in view the IBC process and the need to put in place a harmonised and simplified
generic framework for resolution of stressed assets, the Reserve Bank has introduced a new framework for
resolution of stressed assets, which is more outcome-oriented and provides considerable flexibility for banks to
determine the minutiae of the restructuring process. The recent amendments to the IBC are expected to improve
the efficiencies in decision making under it. The voting threshold for the committee of creditors has been brought
down to 66% from 75% for all major decisions, including approval of resolution plans and recommendation for
extension of the period of the corporate insolvency resolution process (CIRP). Furthermore, a special dispensation
has been provided to micro, small and medium enterprises (MSMEs), recognising their importance in employment
generation and exports.
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Second, institutional reforms in India’s financial system and credit information availability are poised for a
transformation. Drawing on the recommendations of the task force (Chairman: Shri Yeshwant M. Deosthalee),
the Reserve Bank has decided to set up a pubic credit registry (PCR) with an Implementation Task Force (ITF)
assigned to design the logistics.
Third, the Reserve Bank has put in place a graded enforcement action framework for any lapses observed in
conducting a bank’s statutory audit to address large divergences in asset classification and provisioning in the
credit portfolio of banks as well as rein in the rising incidence of frauds in the Indian banking system. As pointed
out in the Detailed Assessment Report of the Financial Sector Assessment Program (FSAP) of the IMF-World
Bank, legal reforms facilitating ownership-neutral regulation and supervision of the banking system would
empower the Reserve Bank further in supervisory enforcement. (Source: RBI Annual Report 2017-18 available
on www.rbi.org.in)
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BUSINESS
OVERVIEW
We are a private sector bank in south India, with over a nine-decade history, being run by a professional senior
management team. We believe that we have transitioned from a South India focussed corporate lending bank to
one having a national focus, with a diversified portfolio of retail, MSME/ SME, corporate lending and fee based
products. We have a wide presence through a network of 1,620 customer outlets which includes 569 branches,
1,046 ATMs and five extension counters across 18 states and one union territory, as of December 31, 2018. We
have 162 branches in metropolitan cities, 125 branches in urban areas, 173 branches in semi-urban areas and 109
branches in rural areas, as of December 31, 2018. We had customer accounts of more than 2.26 million banking
customers as of December 31, 2018.
We offer a comprehensive range of products and services including savings accounts, current accounts, term
deposits, international debit cards, corporate and retail loans, depository services, locker facilities, mobile and
internet banking services, bill payment services, foreign exchange services, payment and remittance services, and
repatriation schemes. For further details, see “Business – Product Portfolio” on page 86.
We also offer a number of para-banking products and services, which include distribution of life insurance, general
insurance and health insurance products, for which we have agreed to act as corporate agents of Max Life
Insurance Company Limited, Birla Sun Life Insurance Company Limited, HDFC ERGO General Insurance
Company Limited, DHFL Pramerica Life Insurance Company Limited, Future Generali India Insurance Company
Limited and Cigna TTK Health Insurance Company Limited. We provide money transfer services through branch
channels as well as through direct remittance and we have arrangements with Weizmann Forex Limited. We also
have arrangements with a number of asset management companies for distribution of various mutual fund
schemes. We also offer depository services which allow our customers to open demat accounts at our designated
branches and hold securities in electronic form. We are also registered as a “banker to the issue” with SEBI and
can receive ASBA applications in initial public offerings. For further details, see “Business – Product Portfolio”
on page 86.
The treasury operations of our Bank undertake liquidity management to maintain required liquidity, while
complying with the cash reserve ratio (“CRR”) and the statutory liquidity ratio (“SLR”). Our treasury operations
comprise primarily of statutory reserves management, liquidity management, investment and trading activities
and foreign exchange activities. We are also involved in investing in commercial papers, mutual funds, certificates
of deposits and floating rate instruments in order to manage short-term surplus liquidity. Treasury activities are
supported by appropriate technology, information systems and risk management systems.
We have organized our business model around the following three business units being: (i) the retail banking
group which handles the retail banking segment, (ii) the Agri, Commercial and Development Banking group
(“A&DB”), i.e. the erstwhile MSME / rural banking group, which handles the SME/ MSME banking segments,
rural banking segment, and mid-commercial banking segment, and (iii) the Corporate and Institutional Banking
group, the erstwhile corporate banking group which handles the corporate customer segment. The retail banking
segment comprises of loans and advances to individuals, HUFs, trusts and clubs. The A&DB group comprises of
loans and advances made available to micro, small and medium enterprises in addition to loans made available
for the purposes of agricultural activities. Loans to private and public limited companies that do not fall within
any of the above divisions are categorized as loans to the C&IB group. For further details of our business divisions,
see “Business – Our Business Divisions” on page 84.
Our interest income from A&DB group and Corporate Banking group have grown at a CAGR of 5.76% and
12.40%, from Fiscal 2016 to Fiscal 2018, respectively.
We have issued and have outstanding subordinated bonds, which have been assigned the rating of “CARE BBB”
(triple B; outlook: credit watch with negative implications) by CARE in November 2018, as against the earlier
rating of “CARE BBB” (triple B; outlook: negative) assigned by CARE in October 2018. Brickwork have also
assigned the rating “BWR BBB-“ (triple B minus; outlook: credit watch with developing implications) in February
2019 for our Series VII(B) bonds as against the earlier rating of BWR BBB+ (triple B plus; outlook: stable)
assigned by Brickwork in July 2018.
Our total assets have increased from ₹ 286,704.80 million as of March 31, 2016 to ₹ 404,292.26 million as of
March 31, 2018 at a CAGR of 18.75%. Our total deposits have grown from ₹ 254,309.62 million as of March 31,
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2016 to ₹ 333,094.83 million as of March 31, 2018 at a CAGR of 14.45%. Our CASA deposits increased from ₹
44,155.12 million as of March 31, 2016 to ₹ 70,150.34 million as of March 31, 2018 at a CAGR of 26.04%. Our
net profit increased from ₹ 1,802.36 million for the fiscal year ended March 31, 2016 to ₹ 2,560.72 million for the
fiscal year ended March 31, 2017, however, there was a net loss of ₹ 5,848.66 million for the fiscal year ended
March 31, 2018 and a net loss of ₹ 6,296.66 million for the nine months ended December 31, 2018. In addition,
our number of branches have increased from 460 as of March 31, 2016 to 569 as of December 31, 2018. As on
December 31, 2018 total deposits and CASA deposits stood at ₹ 307,869.89 million and ₹ 70,362.95 million
respectively.
OUR COMPETITIVE STRENGTHS
We believe that the following strengths distinguish us in a competitive Indian banking industry:
Strong south India focussed franchise with significant growth potential
We have a wide presence in south India with 494 branches out of which 295 branches are in the state of Tamil
Nadu, 60 branches in the state of Karnataka, 69 branches in the state of Andhra Pradesh, 52 branches in Telangana,
13 branches in Kerala and five in Puducherry as on December 31, 2018. We believe the South Indian states are
rich in resources and provide higher opportunity for resource mobilization. We believe the region has good
potential for retail business, along with agriculture SME and commercial loans. Additionally, as of December 31,
2018, we have a wide distribution of 106 branches in the rural areas of the South India which provide us an edge
in our priority sector banking due to its rich agricultural resources and a large catchment area for low cost deposits.
Wide distribution of branches providing broad spectrum of services
As of December 31, 2018, our operations cover 18 states and one union territory across India, with 1,620 customer
outlets which include 569 branches, 1,046 ATMs and five extension counters. As of December 31, 2018, we have
162 branches in metropolitan cities, 125 branches in urban areas, 173 branches in semi-urban areas and 109
branches in rural areas. Our Bank offers a diverse range of retail and mid-commercial products and services across
retail banking, wholesale banking, agricultural lending and SME segments, including short-term and long-term
deposits, secured and unsecured loans, internet banking, mutual fund distribution and life, health and general
insurance distribution. While the majority of our branches are situated in south of India, we also have branches in
the major cities of India, such as Mumbai, Delhi, Kolkata and Ahmedabad. Our branch network allows us to
provide banking services to a wide variety of customers, including large and medium businesses to small
corporates, institutions and state-owned enterprises, as well as commercial, agricultural, industrial and retail
customers. As of December 31, 2018, we had 2.26 million customer accounts reflecting our large customer base.
Strong customer relations provide opportunities for cross selling
Over the 91 years of our existence, we have significantly grown our operations from being a regional bank to a
banking institution covering a wide spectrum of products and services across many states in India. We further
seek to leverage our brand recall across several states in India. With vast banking experience, we believe we have
built strong and long-standing relationships with a large number of customers. We have differentiated our products
based on customer segmentation aiming at wider financial product delivery. For example, our “LVB Crown
services” caters to the high net worth individual customers, having been designed to offer better service and
enhanced benefits to its premium customers.
As part of our para-banking activities, we offer distribution of life insurance, general insurance and health
insurance products, money transfer services through branch channels as well as through direct remittance,
promotion of mutual fund schemes, depository services, services as a PAN Service Agent and ASBA services.
Offering para-banking activities to our existing customer base has been one of the drivers of our growth. We
conduct frequent campaigns to market the above products along with our business partners.
Professional and experienced management
We have a professional senior management team led by Mr. Parthasarathi Mukherjee, Managing Director and
CEO. Supporting our Managing Director and CEO is Mr. S. Sundar, our Chief Financial Officer. Our senior
management team has vast experience in the banking sector. Mr. Parthasarathi Mukherjee, prior to joining our
Bank, was the group executive, corporate relationships and international business at Axis Bank Limited. Mr. S.
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Sundar was the chief financial officer of City Union Bank Limited from 2011 to 2015. For further detail, see
“Board of Directors and Senior Management” on page 157.
The other members of our senior management team have in-depth knowledge of banking operations and
management and have a strong focus on continuing to formulate and implement our turnaround and growth
strategy as our business grows and evolves. We have been able to build a team of professionals with relevant
experience, including credit evaluation, risk management, treasury, technology and marketing. Our senior
management team has been responsible for the formulation of our new strategy to emphasise on the prepositioning
of our balance sheet and business mix, improving operating efficiency, leveraging on the strengths of our
distribution network and existing resources, deepening customer relationships and improving the brand. As of
December 31, 2018, our total employee strength was 4,505, in addition to our sales force of 376.
Streamlined risk management controls and continue to focus on growing the technology enabled platform
We believe that prudent risk management policies, procedures and controls are critical for the long-term
sustainable development of our business. We have implemented risk management procedures for most of our
credit exposures. The credit risk management consists of internal credit rating methodology, credit scoring method
for retail structured products, risk-based pricing methodology, control mechanisms and incorporating external
rating of the borrower as a part of our credit risk assessment. The credit decisions also take into account prudent
and efficient capital allocation A separate risk management department formulates and implements credit risk
valuation and approves risk management framework and policies, oversees the credit approval process and
periodically reviews the same. Our goal is to continually improve our credit risk management procedures, credit
evaluation, rating methodology, monitoring and control mechanisms to maintain the quality of our loan and
investment portfolios. Our Bank is also in the process of implementing credit and operational risk module through
a renowned consultant. Our Bank has centralised the credit operations and monitoring function through its
Commercial Banking branches which enables our Bank to detect and report frauds quickly and also takes steps to
recover the losses in a time bound manner.
Through our technology platform we offer internet banking to our retail and corporate customers, mobile banking,
SMS banking, Immediate Payment Service (“IMPS”), online tax payments and online trading. This also enables
us to provide comprehensive customer data which enables us to (1) cross sell our products and services; (2)
generate reports required for various regulatory filings; and (3) helps support the management to access key data
on real time basis through Executive Dashboard. We have set up a primary data centre at Chennai which houses
our IT infrastructure. Our Bank continues to focus on identifying the right personnel and implementing the
technology platform. We have also set up a disaster recovery site at Bangalore and a board approved Business
Continuity Plan. We continue to take steps to upgrade our hardware and network setup to enhance core banking
and internet banking platform for long term sustainability and customer convenience.
In addition, we recently introduced the ‘Bharat – QR’, ‘Card Management’ and ‘Card Less Cash Withdrawal’
features in the mobile banking facility. Customers can now scan the QR at a merchant location and make payment
instantly without swiping their debit card. The card management feature can be used for locking/unlocking the
cards temporarily, manage the card limits for cash withdrawal, e-commerce and POS, set the green pin and change
the debit card PIN. This is in addition to the card hot-listing feature already available in our mobile banking
facility.
Further, in order to meet the ad-hoc cash requirements of our customers, card-less cash feature is enabled through
instant money transfer (“IMT”). Pursuant to this facility, the customer can initiate cash payment to any other
beneficiary in India using his or her mobile number. The beneficiary can use the secured credentials shared with
him or her directly by the sender and also one received on the beneficiary’s phone number to withdraw cash from
any of IMT enabled ATMs including any of our Bank’s ATMs. Furthermore, a new version of information kiosk
has been recently launched by our Bank with enhanced user experience which facilitates customers to recharge
mobile, direct to home services, block debit cards, set green pin for debit card, enable cheque status inquiry
including the stop payment facility and provide various intra and interbank fund transfer options including
checking the account balances and account statement.
STRATEGIES
Leverage our existing network of our branches to penetrate into our customer base and expand our product
offerings.
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We intend to continue to penetrate our existing markets by leveraging our brand recall, especially in southern
India and transitioning from a product centric approach to a customer centric approach, by engaging our customers
more proactively to better understand their needs. We believe our wide network of branches in South India gives
us the ability to continue to reach out to our customers and offer them our products and services efficiently. We
will continue to focus on improving our technology to support our network of branches and build our brand for
better penetration in contiguous markets. We plan to strengthen our HR practices and focus on augmenting skills
of our employees and make strategic additions to fill any vacancy in our Bank.
We had received approval from the Reserve Bank of India, to open 75 branches in Tier 1 to Tier 6 cities pursuant
to a letter dated October 5, 2017 and since the date of this approval, we have opened 28 branches in Tier 1 cities
and 29 branches in Tier 2 to Tier 6 cities as on December 31, 2018 and sought permission from the RBI to
surrender licenses for 15 branches, in addition to seeking an extension of timeline to open the remaining three
branches. Additionally, while we intend to utilise our existing branch network to expand our reach towards our
customer base, we may, as per our business requirements and in the best interest of our Bank, consider a selective
branch expansion in other select locations in India, with the intent of providing improved and efficient services to
our clients.
To focus on leveraging technology for improved customer service and business growth
Technology has driven products and services in the banking industry and we have devoted substantial resources
to achieve seamless integration of our people, processes, data and applications. Information technology is a
strategic tool for our business operations to gain a competitive advantage and to improve overall productivity and
efficiency in the organisation. All of our technology initiatives are aimed at enhancing value, offering customer
convenience and improving service levels while optimising costs.
We believe that our initiatives to implement new technology and automation have resulted in improved overall
productivity and efficiency in our Bank, including with respect to our employees. We intend to continue to
implement new technology as it becomes available and continuously upgrade the skills of our employees through
training. We expect to continue our policy of making investments in technology and as such enhance our
productivity per employee, while providing customer-centric solutions to our customers. Our goal is to have an
omnichannel presence through a ‘phygital’ (physical and digital) approach to enable a seamless transaction
interface for our individual and corporate customers.
Emphasis on enhancing CASA growth
We seek to increase our CASA deposits and reduce our dependence on bulk deposits in order to reduce cost of
funds. As of December 31, 2018, CASA accounts 22.85% of our total deposits. In order to increase our CASA
and retail deposits, we have set up an exclusive and dedicated team for liabilities and product development. This
team comprises of product specialists to develop new products and also to enhance the features of existing
products in an endeavour to be the trend setter in the market. We have a dedicated sales force for acquisition of
CASA across regions. We have developed product sales specialists for acquiring current account and value based
businesses and intend to continue to focus on strengthening such teams and also acquire new customers in addition
retaining the existing ones by offering attractive interest rates. We continue to focus on (i) increasing CASA share
through branch specific initiatives, and (ii) retention of the existing business and acquire new customers for our
Bank.
As senior high value customers (which also include NRI customers) tend to prefer branch banking, we continue
to focus on our product offerings through our existing branch network. The process change currently implemented
in the organization is aimed at ensuring that the focus of branches would be sourcing CASA and selling third party
products (“TPP”). In addition, all verticals have been given targets under CASA and TPP which we expect to
lead to a healthy growth of low cost deposits. For further details, refer to “CASA Strategy” on page 87.
Continue to focus on retail and MSME banking segments
A majority of our liability and asset customers are in the retail or the A&DB group. The advances by the retail
group and A&DB group constituted 66.49% of our gross advances as on December 31, 2018. We aspire to be a
retail and A&DB focussed bank. We intend to continue our focus on retail and MSME banking with the intention
to increase advances to this category of customers and to mobilise low cost CASA deposits from them. We have
adopted granular customer segmentation for focused strategies. Further, during the Fiscal ended 2018, we had
taken the following strategic steps to achieve more growth of MSME business: (i) creation of a separate business
83
vertical “A&DB” to handle MSME, rural and commercial lending, distinct from the corporate advances; (ii) create
a structure consisting of separate sub-verticals of relationship managers and credit analyst (at the regional MSME
Centres); (iii) creation of credit analysts team at our corporate office under a dedicated credit department
exclusively for A&DB; and (iv) creation of the credit committee structure at the regional offices of our Bank
which are similar to those at the corporate office.
Increase in advances to this category of customers not only will help in increasing our net interest margins, it will
also help us in reducing our risk arising from large loan accounts becoming NPA. Further, we can cross sell our
other products to this category of customers. We have set-up dedicated relationship managers, in every region, to
source MSME business. In retail, our initial focus was on vehicle loan and mortgages and we have continued to
expand to cover other products in a phased manner. For instance, our Bank has opened specialised personal
banking branches at Chennai and Bengaluru. We have also established retail assets centres at Chennai and
Bengaluru.
Increase in fee-based income
In order to increase our fee-based income, we started distributing financial products (third-party investment
products, such as mutual funds and insurance products, and provide wealth management services) to improve our
penetration and customer reach by diversifying our source of revenues.
We have entered into agreements with providers of life, health and general insurance products to distribute life,
health and general insurance policies, respectively. Fee based income (including commissions on the sale of
insurance products, brokerage on marketing of mutual funds and demat transaction and maintenance charges)
constituted 48.32%, 26.67% and 35.11%, of the total non-interest income in Fiscals 2016, 2017 and 2018,
respectively. Our total fee based income, as on March 31, 2016, March 31, 2017, March 31, 2018 was ₹ 1,471.37
million, ₹ 1,340.69 million and ₹ 1,217.64 million, respectively.
The total fee-based income from TPP, such as, life insurance, general insurance, mutual fund, forex and NPS grew
from ₹ 61.65 million in Fiscal 2016 to ₹ 109.12 million in Fiscal 2018. For Fiscal 2016, the life insurance products
constituted 78.67% of our total fee based income from TPP, which declined to 71.60% in Fiscal 2018. For Fiscal
2016, the general insurance products constituted 19.40% of the total fee based income from TPP, which increased
to 26.70% that included 7.92% of health insurance products, in Fiscal 2018. For Fiscal 2016, the mutual funds
and NPS constituted 1.80% and 0.13%, respectively, of the total fee-based income from TPP, as compared to
1.20%, and 0.04%, respectively, in Fiscal 2018.
We intend to continue to focus on strengthening our sales teams which market various products which include
Bancassurance (both life and non-life), mutual funds, three-in-one accounts (depository participant accounts, on-
line trading accounting and CASA account) and other wealth management products, thereby increasing our
income. Our Bank has and intends to continue developing specialised services and products for its high net worth
customers, including making available relationship managers for their requirements.
There is an enhanced focus on FOREX transactions (both fund based and non-fund based) and increasing revenues
from non-fund based business by way of issuing letter of credit / guarantees (both inland & foreign).
Our Bank has also enhanced its focus on the non fund business and foreign exchange business by creating a
separate vertical called the ‘Transaction Banking’ department which works on pre-sanctioning of non-fund based
limits to Bank’s clients, concentrating on non-credit relationships and establishing contacts with certain large
clients requiring letter of credit and bank guarantee requirements and other related services.
Since, March 31, 2016 to December 31, 2018, the number of our ATM machines has increased from 910 to 1,046.
Such increase in the number of ATMs set up by us allows us to generate fees from other bank customers who use
our ATMs to withdraw money, which provides us with additional growth opportunities and enhances visibility of
our Bank across India.
Further strengthen risk management capabilities and improve efficiencies
We have adopted a prudent risk management strategy and enhance our risk management organisational structure
and processes in order to create an effective risk management system. We aim to continue to enhance our credit
risk management systems and processes in line with growth of business. We intend to continue to strengthen our
84
credit and risk functions. We believe that our efforts in strengthening risk management may improve our asset
quality.
We have set up central processing cells at all our regional office centres, which currently process retail and MSME
assets. We also have a central processing cell for liability product, for opening the account so as to adhere to KYC
/ AML requirements. We also intend to have a central processing cell for the wholesale credit facility. We believe
this centralised processing cell will help in reducing the manpower requirement at branch level, thereby allowing
the branch staff to devote their time in sourcing the CASA, improving the TPP sales and assist in improving
efficiency of operations, thereby reducing operational cost, in addition to strengthening the risk management
framework. Additionally, to ensure KYC compliance and fraud prevention, the process of creation of customer
identification and customer profile modification for all types of accounts has been entrusted to our central
processing cell.
We believe a key to our success is the ability to retain, motivate and develop talented and experienced
professionals. We intend to focus on cultivation of a high-quality and professional workforce through provision
of training and development programs for employees to enhance professional knowledge and capabilities,
resulting in improved efficiencies. We will continue to effect improvements in our technology platform to help us
enhance our product delivery capabilities and achieve efficiencies.
MAJOR EVENTS IN OUR CORPORATE HISTORY
Year Event
1926 Incorporation of our Bank
1958 License from the RBI under the Banking Regulation Act and became a Scheduled Commercial Bank
1976 License to deal in foreign exchange
1988 Initial Public Offering
2009 Launched four Savings Bank products - Lakshmi Savings Gold, Lakshmi Savings Star Gold, Lakshmi
Savings Youth Power & Lakshmi Savings Balance Free Account
2010 Tie up with International VISA Debit Card
Formulated and instituted an employee stock option plan for all the staff of our Bank
2011 Launched digital initiatives - SMS alert, mobile banking services
2013 Obtained RBI approval for opening 71 branches
2015 Launched “LVB Crown Services”, a suite of products and services, designed exclusively for high net
worth individual clients of our Bank
2016 Obtained RBI approval for opening 52 branches
2017 Formulated and instituted a second employee stock option plan for all the staff of our Bank
Completion of qualified institutional placement of the Equity Shares amounting to ₹ 1,678 million
2018 Completion of a rights issue of Equity Shares amounting to ₹ 7,868.70 million
OUR BUSINESS DIVISIONS
We have organized our business model around the following three business units being: (i) the retail banking
group which handles the retail banking segment, (ii) the Agri, Commercial and Development Banking group
(“A&DB”), the erstwhile MSME / rural banking group, which handles the (SME/ MSME banking segments, rural
banking segment, and mid-commercial banking segment), and (iii) the Corporate and Institutional Banking group,
the erstwhile corporate banking group which handles the corporate customer segment. The retail banking segment
comprises of loans and advances to individuals, HUFs, trusts and clubs.
The table below sets forth the composition of our loan and advances by business divisions as of March 31, 2016,
March 31, 2017, March 31, 2018 and the nine months ended December 31, 2018.
(Amount in ₹ million, except for percentages) Strategic Business
units
As of March 31,
2016 2017 2018
Advances % Advances % Advances %
Retail banking group 26,395.20 13.32 21,953.10 9.16 26,813.60 9.93
Agri, Commercial and
Development
Banking group
86,542.10 43.66 95,876.80 40.02 102,676.30 38.02
• SME/ MSME
banking
41,705.90 21.04 41,746.70 17.42 43,128.90 15.97
• Rural banking 30,655.90 15.47 40,749.30 17.01 45,291.80 16.77
85
Strategic Business
units
As of March 31,
2016 2017 2018
Advances % Advances % Advances %
• Mid-commercial
banking
14,180.30 7.15 13,380.80 5.59 14,255.60 5.28
Corporate Banking
group
85,252.00 43.02 121,754.70 50.82 140,555.40 52.05
198,189.30 100.00 239,584.60 100.00 270,045.30 100.00
(Amount in ₹ million, except for percentages) Strategic Business units As of December 31, 2018
Advances %
Retail banking group 23,835.29 9.88%
Agri, Commercial and Development
Banking group
136,547.44 56.60%
• SME/ MSME banking 53,463.67 22.16%
• Rural banking 41,048.98 17.02%
• Mid-commercial banking 42,034.79 17.43%
Corporate and Institutional Banking
group
80,846.16 33.51%
241,228.89 100.00
Retail Banking Group
Retail banking group comprises of loans and advances to individuals, HUFs, trusts and clubs. For the year ended
March 31, 2018, total loans to retail banking customers was ₹ 26,813.60 million, which was 9.93% of our total
loan and advances during this period and for the nine months ended December 31, 2018, total loans to retail
banking customers was ₹ 23,835.29 million, which was 9.88% of our total loan and advances during this period.
Additionally, our Bank has introduced prepaid cards and gift cards (which are currently being issued only to our
existing customers) which provide certain benefits to customers. The gift cards may be gifted to other beneficiaries
by the relevant gift card holder. This has been enabled through active association with service aggregators and
gamification through instant reward points to customers. Additionally, several customer segmentations through
product diversification with an active usage of data analytics has been a key driver for the growth of our retail
banking group. Our retail banking division has grown at a CAGR of 0.79% over the last three completed financial
years.
Agri, Commercial and Development Banking Group
Agri, Commercial and Development Banking group comprises of loans and advances to MSMEs, emerging
businesses with revenues up to ₹ 750.00 million annually, and agricultural and allied rural services businesses.
For the year ended March 31, 2018, total loans to MSME, mid-commercial and rural loans were ₹ 102,676.30
million, which was 38.02% of our total loan and advances during this period, and for the nine months ended
December 31, 2018, total loans to MSME, mid-commercial and rural loans were ₹ 136,547.44 million, which was
56.60% of our total loan and advances during this period. This group has grown at a CAGR of 8.92% over the
last three completed financial years.
MSME Banking
MSME banking comprises loans and advances made available to micro, small and medium enterprises with
revenue up to ₹ 750.00 million, irrespective of the value of the loan. This includes lending to MSMEs against
GST receivables. New data available to us like GST has enabled validation of viable MSME businesses for the
purposes of lending. For the year ended March 31, 2018, total loans to SME/ MSME banking customers was ₹
43,128.90 million, which was 15.97% of our total loans and advances during this period, and for the nine months
ended December 31, 2018, the total loans to MSME banking customers was ₹ 53,463.67 million, which was
22.16% of our total loans and advances during this period.
Rural Banking
Rural banking segment comprises the loans made for the purposes of agricultural activities, irrespective of the
value of the loan. For the year ended March 31, 2018, total loans to rural banking customers was ₹ 45,291.80
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million, which was 16.77% of our total loan and advances during this period, and for the nine months ended
December 31, 2018, total loans to rural banking customers was ₹ 41,048.98 million, which was 17.02% of our
total loan and advances during this period. Our rural banking segment has grown at a CAGR of 21.55% over the
last three completed financial years. Our strong presence in rural areas helps us reach the customer therein and
meet out priority sector lending requirements.
Mid-commercial Banking
Mid-commercial banking segment comprises of loans to such other emerging businesses with revenues up to ₹
750.00 million annually, irrespective of the value of the loan. For the year ended March 31, 2018, total loans to
mid-commercial banking customers was ₹ 14,255.60 million, which was 5.28% of our total loan and advances
during this period, and for the nine months ended December 31, 2018, total loans to mid-commercial banking
customers was ₹ 42,034.79 million, which was 17.43% of our total loan and advances during this period.
Corporate and Institutional Banking Group
Corporate and Institutional Banking group comprises loans and advances to businesses with revenues beyond ₹
750.00 million annually. For the year ended March 31, 2018, total loans to Corporate Banking customers was ₹
140,555.40 million, which was 52.05% of our total loan and advances during this period, and for the nine months
ended December 31, 2018, total loans to Corporate and Institutional Banking group customers was ₹ 80,846.16
million, which was 33.51% of our total loan and advances during this period. Our Corporate Banking group has
grown at a CAGR of 28.40% over the last three completed financial years.
PRODUCT PORTFOLIO
Our product portfolio is being expanded to suit the needs of our customers across age groups and segments. We
offer varied options under savings bank accounts for different categories of customers. Such options include a
basic bank account, an account aimed at non-profit making organizations such as trusts, associations, societies,
clubs, etc. with comprehensive banking services, a “Titanium”, “Gold” and “Star Gold” account for high net worth
individuals, corporate salary accounts and bank accounts customized for children and youth.
Our current account services offer a wide range of products that seeks to cater to the requirements of small business
to large corporate houses. We also offer debit cards for partnerships and private entities which hold current
accounts with our Bank. We also provide fixed deposit services and a number of schemes that allows customers
to choose the nature, quantum and the term of deposits they wish to place with our Bank.
Product portfolio includes products and services that suit the needs of our customers and which includes the
following:
Deposits
We have a range of options under savings bank accounts to suit the needs of customers across age groups and
profiles. Starting from basic bank account, youth power for students, working women, salary accounts, non-
resident customers, accounts for non-profit organizations such as trusts, associations, societies, clubs, etc. we
provide a gamut of comprehensive banking services.
For the more affluent customers, in 2015, we had introduced a high value savings account service “LVB Crown
Services”. The average quarterly balance required for this account is ₹ 200,000 in a savings account or ₹ 100,000
in savings bank account with a total relationship value of ₹ 1,000,000. The account comes with many features,
including ‘Rupay Platinum International’ debit card which is free for the first year and is chargeable at ₹ 100 per
year for the subsequent years. The account holders are also entitled to a discount of 25% on availing safe deposit
lockers services.
For the women customers, our Bank has introduced a new savings bank account “LVB Saanvi” which is a savings
account with features and benefits which among others, includes a free ‘Platinum International debit card’.
Depending on the location and the category of the branches, the average quarterly balance ranges from ₹ 3,000 to
₹ 5,000.
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Additionally, for the customers within the age group of 12 to 24 years, our Bank has introduced a new savings
bank account, “Lakshmi Savings Youth Power” where the minimum balance requirement is only ₹ 100, however,
the cheque book and net banking facility is available only to customers over the age of 18 years.
Our Bank has also implemented the financial inclusion plan in 363 villages and wards allotted by State Level
Bankers’ Committee in Tamil Nadu as on March 31, 2018. Financial Inclusion is the delivery of banking services
at an affordable cost to the vast sections of disadvantaged, low income groups and providing timely and adequate
credit where needed. The essence of financial inclusion is to ensure that a range of appropriate basic financial
services are made available to every individual, enabling them to understand and access those services. The
Pradhan Mantri Jan Dhan Yojana (“PMJDY”) project ensures the opening of at least one bank account per
family/household and issuing of personalized Rupay Debit cards. These Rupay debit cards have in-built accidental
insurance coverage. Our Bank has opened 184,018 basic savings bank deposit accounts (“BSBDA”) including
85,555 accounts under PMJDY, as on March 31, 2018.
Our current account services offer a wide range of products that cater to the requirements of every business, small
or large corporate houses. Considering the wide range of transactions and varied business requirements of mid-
sized and large corporates, we have appointed relationship managers to ensure seamless service, convenience and
for ease of transacting. For current account holders, we offer customized solutions including cash management
services. We also provide fixed deposit services and a number of schemes that allow customers to choose the
nature, quantum and the term of deposits they wish to place with us.
Additionally, considering the emerging competitive landscape and ever-changing transactional and banking
requirements of Trusts, Association and Clubs (“TASC”), our Bank has expanded its portfolio to six TASC
products with three variants, each in TASC savings account and TASC current account. TASC savings account
comes with the requirement of maintaining an average quarterly balance of ₹ 10,000. Further, Lakshmi TASC
Prime Account has a requirement of maintaining an average quarterly balance of ₹ 100,000 or a total relationship
value amount (“TRV”) of ₹ 1,000,000, including fixed deposit and recurring deposit. Lakshmi Premium TASC
Account customers are required to maintain an average quarterly balance of ₹ 500,000 or a TRV of ₹ 2,500,000,
including fixed deposit and recurring deposit. Our Bank has also introduced a new current account product
‘RERA’ to fetch builders accounts. Additionally, our Bank has launched a “Just a Dollar” current account product
wherein trade businesses/customers can transact any amount at a fee of one dollar. Further we have specific tie
ups with certain service providers to help incentivise customers towards debit card transactions of our Bank.
Our current and savings account deposits and the corresponding percentage to total deposits as of March 31, 2016,
March 31, 2017, March 31, 2018 and for the nine months ended December 31, 2018 are set out in the table below:
(₹ in million, except percentages)
Deposits As of March 31 As of December 31,
2018 2016 2017 2018
Amount % of total Amount % of total Amount % of
total
Amount % of total
Current
account
16,364.48 6.44% 18,393.72 6.02 20,901.66 6.27 17,710.5
5
5.75%
Saving
account
27,790.64 10.93% 39,996.09 13.09 49,248.68 14.79 52,652.4 17.10%
CASA Strategy
With the increase in household income levels in India and the consequent need for diversified financial services,
the retail sector has emerged as a rapidly growing opportunity for banks with the skills and infrastructure to
adequately service this market. Deposits from retail customers represent a significant, low-cost source of funding.
We have in the past three Fiscals focused our efforts on growing our CASA.
We have a tiered pricing on savings bank deposits, with interest rates starting at 4% for balances up to ₹ 0.1
million, 5.25% for incremental balances above ₹ 0.10 million to ₹ 0.50 million and 6.25% for incremental
balances above ₹ 0.50 million up to ₹ 100 million and 6.50% for incremental balance above ₹ 100 million.
We utilize technology with the aim to enhance customer experience through secure transactions online, including
on mobile phones. We launched our mobile phone application in 2016, through which we intend to capitalize on
cross-sell opportunity to existing and new customers. We have dedicated internal and external teams constantly
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working to improve both the quality and quantum of services offered through digital channels. We have launched
door step banking services through which we provide add-on service such as cash pick-up service for our savings
bank account holders, current account holders, cash credit account holders and customers availing overdraft
services. Further, the Reserve Bank of India has directed the banks to make concerted efforts to provide basic
banking facilities for senior citizens and differently abled persons, including pick up of cash, instruments / cheques
/ demand draft to be deposited in their account, KYC documents and life certificate as well as assisting in cash
withdrawal and providing demand draft facilities against withdrawal, with effect from December 31, 2017. In
compliance with the directions of the Reserve Bank of India, we have initiated providing such facilities to the
senior citizens aged more than 70 years and differently abled/infirm persons with medically certified chronic
illness or disability, against applicable charges.
Our CASA increased from ₹ 44,155.12 million as of March 31, 2016 to ₹ 58,389.81 million as of March 31, 2017
to ₹ 70,150.34 million as of March 31, 2018 and to ₹ 70,362.95 million as of December 31, 2018. This growth
has been achieved by the contribution of both new as well as existing branches.
Our marketing efforts are fine-tuned to reach existing and prospective customers through advertising and presence
in print, television, radio, and social media.
Loans
We offer a number of loan products such as loan against property, loan against securities, business credit loans,
loans for subscribing in initial public offers, personal vehicle loans and commercial vehicle loans, educational
loans, loans to MSMEs, agriculture credit products, etc. The details of our products are as follows:
Sl. No. Product Name Details
1. Cash credit/
overdraft facilities
Under the cash credit facility, a line of credit is provided to the borrower, up to a pre-
established amount based on the borrowers’ projected level of inventories, receivables
and cash deficits.
2. Term loans Our term loan products primarily comprise of financing for fixed asset purchases,
including construction of factory, building and acquisition of machinery. These loans
repayment are subject to the cash flows generated from the projects for which the loans
are taken.
3. Export credits We provide export finance to customers for working capital requirements by way of pre-
shipment and post-shipment facilities. This facility is offered against firm orders and letter
of credit from overseas buyers.
4. Bill purchase and
discounting
We provide bill purchase and discounting facilities to customers. Genuine trade bills and
instruments are purchased or discounted. These are self-liquidating type of facilities, as
the repayment is by way of proceeds of the instrument or through letters of credit issued
by other banks.
5. The Lakshmi
Business Credit
scheme (“LBC”)
LBC is a special scheme by which working capital requirement of a borrower is met with
liberalized terms and conditions. Under this scheme, business enterprises engaged in
trading, manufacturing or services activity are financed to cater to their genuine working
capital requirements. The borrower may be an individual, a proprietorship concern,
partnership firm, HUF or a body corporate.
6. Lakshmi Loan
Against Securities
(“LLAS”)
Scheme for
financing against
securities
LLAS was introduced in continuation of our initiatives to cater to the credit requirements
of existing customers, who have exposure to capital market and to attract new customers
with the objectives of increasing our credit portfolio as well as CASA.
7. Lakshmi Loan
against properties
(“LLAP”)
LLAP allows customers to unlock the potential of their property for genuine financial
requirement.
8. Lakshmi Home
Loan (“LHL”)
LHL is extended for construction and repair of homes.
9. Lakshmi
Commercial
Vehicle Loans
(“LCVL”)
LCVL is extended for the purchase of new commercial vehicles.
10. Lakshmi Personal
Vehicle Loans
(“LPVL”)
LPVL is extended for the purchase of vehicles for personal use.
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Sl. No. Product Name Details
11. Lakshmi Kisan
Credit Card
(“LKCC”)
LKCC is an agricultural loan product designed for meeting the short term credit (crop
loan) requirement including purchases of inputs, investment credit requirements including
purchase of farm equipment & machinery and maintenance expenses for crops /farm and
non-farm credit needs of farmers.
12. Lakshmi Rental
Loan (“LRL”)
Owners of commercial and residential properties and who receive rental income thereon
are eligible to avail our LRL facility.
13. Vidya Lakshmi
Loans (“VLL”)
VLL is extended for students for finance educational costs
14. JDL (Agri) - ISS Interest subvention Scheme for short term crop loan against pledge of gold jewels up to ₹
300,000, to enable the farmers to avail the concessional crop loans at 7% of interest and
provides for an additional subvention of 3% for prompt repayment within a period of one
year from the date of advance. Net rate of interest to farmers would come down to 4% p.a.
14. Non Fund Based
facilities
Guarantees: We issue guarantees on behalf of our borrowers in favour of corporations and
government authorities. This facility is generally secured by collateral.
Letter of Credit (LC): We issue letter of credit on behalf of our customers for the import
of raw material or capital goods on secured terms.
Our current exposure limit for a single borrower is 15% of capital funds and for a group of borrowers is 40% of
capital funds. Further, limits on exposures to certain sectors are determined along with risk management
committee and is monitored and reviewed regularly. At present, the following prudential exposure limits and
ceilings are adopted by us for single borrower and borrowers belonging to a group:
S. No. Description Limit/ceiling
1. Prudential credit
exposure limit to
single borrower
15% of our Bank’s capital funds.
An additional 5% exposure (i.e. up to 20%) provided the additional credit exposure is on
account of funding for specific infrastructure projects.
In addition to the above, our Bank may, in exceptional circumstances and with the
approval of the Board, consider enhancement of the exposure to a borrower up to a further
5% of capital funds, subject to the conditions prescribed in this regard by RBI.
2. Prudential credit
exposure limit to
borrowers
belonging to a
group.
40% of our Bank’s capital funds.
An additional 10% exposure (i.e. up to 50%) provided the additional credit exposure is on
account of extension of credit to infrastructure projects.
In addition to the above, our Bank may, in exceptional circumstances and with the
approval of the Board, consider enhancement of the exposure to a borrower up to a further
5% of capital funds, subject to the conditions prescribed in this regard by RBI.
Interest Rate Derivative
Interest rate derivative was introduced in our Bank to enable the treasury to manage their exposure to the interest
rate risk through RBI approved rupee interest rate derivative products. This is offered by our Bank as a hedging
tool by undertaking overnight index swaps, to protect our customers against the changes in market interest rates.
This product is available for customer segments permitted by the RBI to meet their hedging requirements.
Securitization
Our Banks’ exposure to securitization transaction is referred to as ‘securitisation exposures’. Securitization is a
process by which assets are sold to a ‘bankruptcy remote’ special purpose vehicle (“SPV”) in return for an
immediate cash payment. The cash flow from the underlying pool of assets is used to service the securities issued
by the SPV. Our Bank is looking for more number of opportunities under securitization. In order to explore the
possibilities of expanding the scope of lending activities under the RBI Basel III Capital Regulations, to ensure
the monitoring and management of securitization exposures, to explain the process of entering into securitization
transactions, credit risk assessment and credit monitoring and to ensure a clear assignment of roles and
responsibilities for facilitating the securitization transactions, the extant policy guidelines on securitization was
refined so as to keep it in line with the business requirements as well as within the purview of the regulatory
framework.
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Project Shashakt
Based on the recommendations of Sunil Mehta Committee set up for faster resolution of stressed assets, the Indian
Banks Association (“IBA”) has introduced ‘Project Shashakt’ involving a ‘bank led resolution process’ and a
‘five-pronged strategy’ for resolution of stressed assets / NPAs in the Indian banking industry. Under the bank led
resolution approach, the IBA devised an inter creditor agreement (“ICA”) to authorize the lead bank to implement
a resolution plan within a period of 180 days. Pursuant to the resolution of our Board dated October 24, 2018, our
Bank signed the ICA on December 7, 2018. Being a signatory to the ICA, in accounts under consortium / multiple
banking arrangements, our Bank is required to participate in such bank led resolution plan.
Para-banking Activities
Our Bank offers the following para-banking activities:
Insurance
We distribute insurance policies as an agent for third-party insurance companies and offer life insurance, general
insurance and health insurance products. We have agreements with Max Life Insurance Company Limited, Birla
Sun Life Insurance Company Limited and DHFL Pramerica Life Insurance Company Limited for providing life
insurance products to our customers and with Future Generali India Insurance Company Limited and HDFC
ERGO General Insurance Company Limited for general insurance business distribution. For offering health
insurance products, we have an agreement with Cigna TTK Health Insurance Company Limited. As of March 31,
2018, 0.31% of our other income was attributable to our insurance business.
Money Transfer Services
Money Transfer through Branch Channels: We have entered into foreign inward remittances arrangements with
Weizmann Forex Limited for extending the Western Union Money Transfer facility to our customers.
Money Transfer through Direct Remittances: We have tied up with Times of Money - Remit 2 India for inward
remittance from abroad. This enables the NRIs to directly remit the amount to their account / residents.
Mutual Funds and Portfolio Management Services
Our Bank has agreements with multiple asset management companies for promoting various mutual fund schemes.
We are acting as a distributor of portfolio management services of UTI Asset Management Company Limited,
Reliance Capital Asset Management Services Limited and Sundaram Asset Management Company Limited.
Depository Participant Services
We offer depository services to our customers and in order to allow us to provide such services, we are registered
as depository participant with the NSDL. Our customers can open demat accounts at our designated branches and
hold securities in electronic form with the NSDL.
Online Trading Services
We have tied-up with Way2Wealth Brokers Private Limited and IDBI Capital Market Services Limited for the
purposes of offering online trading services. Our customers can open online trading accounts through our
designated branches and can trade in equity and futures & options on the Stock Exchanges.
Online wealth management platform
This application based online wealth management platform provides a simple approach to manage money through
Mission FINFIT. The application, called ‘FISDOM’, is completely online and paperless, and will empower
customers to get guidance and make investments from anywhere, on-the-go. With FISDOM, our Bank is
extending customized investments solutions, by understanding customers’ objectives and priorities and then
determining the goals thereby helping set out a sound approach for effective solutions.
Other services
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Our Bank has been registered with the PFRDA to act as point of presence for NPS and has enabled the eNPS
facility for subscribers. Our Bank is registered as a “banker to the issue” with SEBI and can receive ASBA
applications. It has also adopted the Prime Minister Jeevanjyoti Bima Yojana, Prime Minister Suraksha Bima
Yojana and Atal Pension Yojana.
We have also entered into an arrangement with an app based online wealth management service provider which
enables our customers to make investments and thereby enabling all such activities online. Our Bank has also
introduced the ‘Rupay Platinum International’ debit card for its customers, which is used in ATM transaction. Our
Bank has launched LVB UPAAY, which is the UPI application of Lakshmi Vilas Bank and leverages the
interoperability of unified payment interface to extend the simplicity, comfort and convenience of managing all
accounts of the user with different banks.
RISK MANAGEMENT AND ASSET QUALITY
The risk management team of our Bank is structured as per Basel and regulatory guidelines. The risk management
team of our Bank comprises of credit risk, operation risk and market risk management professionals headed by
the chief risk officer. This team is responsible for all policy enablement, monitoring and regulatory reporting
aspects of Banking. The chief risk officer has a direct line of reporting to the risk management committee of the
Board. Retail lending is undertaken by a retail lending group which is led by a head of consumer lending and retail
banking while corporate lending has been centralized to the corporate office. The branches are excluded from
taking lending decisions and such decisions are undertaken by “MSME centres” which cater to rural, commercial
credit and retail lending. We have authorised our branches to be responsible for customer acquisition and servicing
and continue handling only loans against deposits, LAS, JDLs and government sponsored schemes.
In keeping with our focus on streamlining and strengthening the credit post sanction operations, the commercial
banking operations group has taken over the processing and monitoring of corporate and MSME exposures. Our
Bank has opened seven specialised commercial banking branches, to offer specialised services to corporates and
MSME customers. Also, the disbursement of loan/overdraft facility against the deposit for certain category of
borrowers are centralised at the commercial banking branches. Further, as a step towards centralisation and to
mitigate the risk on usage of swift codes, our Bank has centralised the out bound swift code operations of all B-
Category branches at commercial banking branches at Chennai.
We aim to enhance our credit risk management systems and processes with the growth of business. For instance,
in accordance with our lending policy, for advances of ₹ 50.00 million and more, we undertake mandatory checks
with records of the RBI. The due diligence exercise also involves reviewing the “Defaulters and Caution Lists”
circulated by CIBIL/Equifax, RBI, ECGC and IBA, as well as obtaining the Credit Information Report (“CIR”)
from CIBIL, if available, or the CIR from other credit information companies approved by the RBI.
Our Bank is in constant endeavour to reduce the GNPAs, and we intend to improve upon and refine our risk
management tools and systems. Over the last three Fiscals 2018, 2017 and 2016 and the nine months ended
December 31, 2018, our GNPAs across our business divisions are provided below:
(₹ in million, except the percentages)
Strategic Business
units
As of March 31,
2016 2017 2018
GNPA % of total
GNPA
GNPA % of total
GNPA
GNPA % of total
GNPA
Retail banking group
(A)
155.62 3.98% 158.30 2.47% 428.10 1.59%
SME / MSME
Banking/ Rural
Banking / Mid-
Commercial Banking
Group (B)
1,499.62 38.34% 2,209.12 34.51% 6,691.60 24.84%
• SME/ MSME
banking
731.87 18.71% 1,211.87 18.93% 3,314.30 12.30%
• Rural banking 145.45 3.72% 204.19 3.19% 1,180.30 4.38%
• Mid-commercial
banking
622.30 15.91% 793.06 12.39% 2,197.00 8.15%
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Strategic Business
units
As of March 31,
2016 2017 2018
GNPA % of total
GNPA
GNPA % of total
GNPA
GNPA % of total
GNPA
Corporate Banking
group (C)
2,257.26 57.69% 4,034.52 63.02% 19,822.40 73.57%
Total (A+B+C) 3,912.50 100.00% 6,401.94 100.00% 26,942.10 100.00%
Strategic Business units As of December 31, 2018
GNPA % of total GNPA
Retail banking group (A) 736.48 2.19%
SME / MSME Banking/ Rural Banking /
Mid-Commercial Banking Group (B)
8,701.56 25.86
• SME/ MSME banking 4,727.55 14.05
• Rural banking 1,691.03 5.03
• Mid-commercial banking 2,282.98 6.79
Corporate and Institutional Banking group
(C)
24,204.73 71.95
Total (A+B+C) 33,642.77 100.00%
BRANCH NETWORK
As of December 31, 2018, we have 569 branches across 18 states and one union territory in India. A summary of
our branches as categorized by region and by the type of branch as of December 31, 2018 is set out below.
Demographic network of branches
As of December 31, 2018
Type of Branch Number of Branches
Metropolitan 162
Urban 125
Semi-urban 173
Rural 109
Total 569
State wise distribution of branches
As of December 31, 2018
State/Union Territory Number of Branches
Tamil Nadu 295
Andhra Pradesh 69
Karnataka 60
Maharashtra 24
Gujarat 13
Kerala 13
Delhi 9
Haryana 4
Puducherry 5
Uttar Pradesh 2
West Bengal 4
Chhattisgarh 4
Jharkhand 2
Madhya Pradesh 4
Orissa 5
Rajasthan 2
Punjab 1
Chandigarh 1
Telangana 52
Total 569
93
SALES, MARKETING AND BRANDING
Brand promotion is integral for brand driven businesses to increase brand recall in customers. We believe that
product differentiation and marketing efforts help reach out to new customer segments. We have increased our
offline and online advertising efforts.
We have also undertaken a number of marketing initiatives, which we believe will increase brand recall. We have
created an official “Facebook” page, allowing us to have a presence on the social networking platform and to
channelize customer interaction.
CAPITAL ADEQUACY
Indian banks have to comply with the regulatory limits and requirements as prescribed under the RBI Basel III
Capital Regulations, on an ongoing basis, with full implementation of such regulations by March 31, 2019. As of
December 31, 2018, our capital adequacy ratio under the RBI Basel III Capital Regulations was 7.57% and our
Tier I capital adequacy ratio was 5.57% and our Common Equity Tier 1 (“CET I”) capital adequacy ratio was
5.57%. As of March 31, 2018, our capital adequacy ratio under the RBI Basel III Capital Regulations was 9.81%.
In particular, our Tier I capital adequacy ratio was 8.05% and our CET I capital adequacy ratio was 8.05%.
We were required by the RBI to maintain a minimum CRAR of 10.875% as on March 31, 2018 and 11.50% as
on March 31, 2020 (including capital conservation buffer of 2.50%). We moved to RBI Basel III Capital
Regulations as implemented by RBI from April 1, 2013. Indian banks must comply with the regulatory limits and
requirements as prescribed under RBI Basel III Capital Regulations, on an ongoing basis, with full implementation
of such regulations by March 31, 2020. As per capital adequacy guidelines under RBI Basel III Capital
Regulations, by March 31, 2019, we are required to maintain a common equity Tier I adequacy ratio of 5.5%,
minimum Tier I capital of 7.0%, minimum total capital of 9.0% and a capital conservation buffer of 2.5%. We
have not been able to maintain the minimum CRAR as required under the RBI Basel III Capital Regulations. For
further details, see “Risk Factors - Any inability to obtain adequate capital due to change in regulations or lack
of access to capital or otherwise could materially and adversely affect our results of operations and financial
condition” on page 36.
The following table sets out our capital adequacy ratios during the last three fiscals and the nine months ended
December 31, 2018:
S. No. Ratio As at March 31 As at
December
31, 2018 2016 2017 2018
1. Tier I capital adequacy ratio (%) 8.69 8.75 8.05 5.57%
2. Common Equity Tier 1 capital adequacy ratio (%) 8.69 8.75 8.05 5.57%
3. Capital adequacy ratio under the RBI Basel III (%) 10.67 10.38 9.81 7.57%
PRIORITY SECTOR LENDING
Commercial banks in India are required by the RBI to lend, through advances or investments, 40.00% of their
ANBC or credit equivalent amount of off-balance sheet exposures, whichever is higher, to specified sectors known
as “priority sectors”, subject to certain exemptions permitted by RBI from time to time. Priority sector advances
include advances to the agriculture sector, micro and small enterprises, vulnerable groups in society, housing and
education finance. Any shortfall in the amount required to be lent to the priority sectors may be required to be
deposited with the Rural Infrastructure Development Fund established by NABARD or funds with other financial
institutions as specified by the RBI.
As of March 31, 2018, our gross lending to priority sectors was ₹ 100,993.63 million, which constituted 42.11%
of our ANBC of ₹ 239,826.80 million.
The following table sets out a breakdown of our priority sector lending in the form of advances for the periods
indicated: (₹ in million, except the percentages)
94
Priority Sector
Advances
As of March 31,
2016 2017 2018
Advances % of Total
PSL
Advances % of Total
PSL
Advances % of Total
PSL
Agricultural
Advances
30,861.46 41.99% 35,727.20 43.62% 43,529.37 43.10%
Manufacturing
Enterprises
14,406.52 19.60% 13,476.87 16.45% 14,673.82 14.53%
Services Enterprises 23,683.96 32.22% 27,086.24 33.07% 33,482.43 33.15%
Other advances like
Housing, Education,
Microcredit & etc.
4,546.14 6.19% 5,617.51 6.86% 9,308.01 9.22%
Total Priority Sector
Lending
73,498.08 100.00% 81,907.82 100.00% 100,993.63 100.00%
NON-PERFORMING ASSETS AND PROVISIONING
The following table set out the gross NPAs in each sector as of March 31, 2016, 2017 and 2018:
(₹ in million) INDUSTRY NAME March 31, 2016 March 31, 2017 March 31, 2018
Amount % Amount % Amount %
Other Textiles 119.27 3.05% 291.69 4.56% 557.26 2.07%
All Engineering 5.69 0.15% 39.85 0.62% 236.50 0.88%
Infrastructure 61.50 1.57% 14.34 0.22% 6,983.65 25.92%
Chemicals, dyes, paints etc. 298.91 7.64% 296.95 4.64% 34.11 0.13%
Trading 843.46 21.56% 1,069.03 16.70% 3,126.43 11.60%
Iron & Steel 608.70 15.56% 109.82 1.72% 4,650.99 17.26%
Cotton Textiles 15.29 0.39% 23.71 0.37% 75.39 0.28%
Gems & Jewellery 76.62 1.96% 207.64 3.24% 380.31 1.41%
Construction 0.00 0.00% 0.00 0.00% 0 0.00%
Food Processing 521.53 13.33% 364.93 5.70% 955.44 3.55%
Vegetable oils & Vanaspati 0.00 0.00% 955.16 14.92% 955.16 3.55%
Mining 499.08 12.76% 398.94 6.23% 1,388.11 5.15%
Rubber & Rubber Products 15.92 0.41% 19.52 0.30% 104.66 0.39%
Leather & Leather Products 0.31 0.01% 4.49 0.07% 3.05 0.01%
Automobiles include trucks 3.19 0.08% 12.55 0.20% 33.86 0.13%
Other Metal & Products 5.95 0.15% 6.78 0.11% 1,279.41 4.75%
Cements 3.00 0.08% 30.40 0.47% 6.49 0.02%
Jute Textiles 1.98 0.05% 1.90 0.03% 2.05 0.01%
Electricity 0.00 0.00% 1.22 0.02% 0 0.00%
Tea 0.00 0.00% 0.00 0.00% 0 0.00%
Tobacco & Tobacco Products 0.00 0.00% 0.00 0.00% 295.33 1.10%
Petroleum 0.00 0.00% 0.00 0.00% 0 0.00%
Computer software 0.00 0.00% 0.00 0.00% 0 0.00%
Other industries 211.31 5.40% 795.05 12.42% 495.79 1.84%
Residual 620.79 15.87% 1,757.97 27.46% 5,378.15 19.96%
Total gross NPA 3,912.50 100.00% 6,401.94 100.00% 26,942.12 100.00%
The following table set out the provisioning in each sector as of March 31, 2016, 2017 and 2018: (₹ in million)
Industry Name March 31, 2016 March 31, 2017 March 31, 2018
Other Textiles 13.71 37.35 226.21
All Engineering 1.35 9.43 101.27
Infrastructure 11.55 0.01 3,451.84
Chemicals, dyes, paints etc. 49.48 72.84 9.92
Trading 198.90 180.92 1,273.48
Iron & Steel 88.81 12.45 1,197.32
Cotton Textiles 2.40 5.62 16.22
Gems & Jewellery 0.12 19.72 315.50
Construction 0.00 0.00 0.00
Food Processing 521.53 84.23 307.95
Paper & Paper Products 39.86 2.03 10.67
Vegetable oils & Vanaspati 0.00 143.27 307.90
95
Industry Name March 31, 2016 March 31, 2017 March 31, 2018
Mining 74.86 99.73 559.57
Rubber & Rubber Products 2.61 1.18 15.39
Leather & Leather Products 0.05 0.67 0.70
Automobiles include trucks 0.78 2.51 1.13
Other Metal & Products 1.13 1.19 279.04
Cements 0.45 10.27 1.29
Jute Textiles 0.41 0.29 0.50
Electricity 0.00 0.18 0.00
Tea 0.00 0.00 0.00
Tobacco & Tobacco Products 0.00 0.00 9.81
Petroleum 0.00 0.00 0.00
Computer software 0.00 0.00 0.00
Other industries 5.54 212.62 226.09
Residual 121.14 807.74 3,378.71
Total 1,134.68 1,704.25 11,690.51
For further information on our management of our NPAs, see “Selected Statistical Information” and
“Management’’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 97 and
120.
Recovery strategies adopted by our Bank
Our Bank has created a centralised empowered team to focus on the resolution and recovery of stressed and
impaired assets, with junior nodal officers assigned to each of the regional offices to monitor and speed up the
recovery process. As soon as any account is classified as an NPA, depending upon the security position of the
NPA accounts, the recovery measures are initiated immediately. The actions include the steps under the
SARFAESI Act for the enforcement of security interest and further timely measures as provided under the
SARFAESI Act. The recovery suit is filed on the defaulting borrower through available legal measures. NCLT is
also considered as one of the effective measures for forcing the defaulter to avoid liquidation of assets.
Notwithstanding the same, branches are also advised through recovery verticals for examining the settlement of
dues under acceptable OTS. Further, the recovery vertical also takes steps to ascertain the details of other
unencumbered properties owned by the defaulting borrower/ guarantor to enable the bank to attach such properties
in the suit filed accounts, in order to increase the chances of recovery. Our Bank is also effectively utilising the
“Lok Adalat” process for recovery.
INFORMATION TECHNOLOGY
We have adopted modern technology towards automation and enhanced customer experience by implementing
large scale technological reforms for long term sustainability. The objective of our IT strategy is to streamline the
transaction lifecycle, from sourcing to processing to servicing.
We have enabled card management and other payment options such as card-less cash payments, Bharat QR in our
mobile banking application ‘LVB Mobile’. We have also enabled other payment channels such as the unified
payment interface (‘LVB – Upaay’), e-lounges comprising of passbook printing kiosks, cheque truncation kiosks,
cash depositors and dispensers, and information kiosk for our customers. LVB Upaay can also be used by non-
customer to initiate payment through various modes by linking other banks’ accounts. We have also implemented
the customer relationship management (“CRM”) software for improving customer relationship and for creating /
managing new leads. We have commenced the project for “Loan Originating System” to drive operational
efficiency as well as focus on customer needs. Objective of our Loan Originating System is to transform the whole
loan origination process in order to achieve the objective of eliminating delays, errors, costs of paper and manual
processes. Additionally, our Bank has introduced “Welcome kit” to facilitate the customer to commence using
our services as soon as the savings account is opened and to reduce turn-around time for on-boarding customers.
We have received a number of awards in the past for our innovations such as the ‘Excellence in banking
technology for managing IT infrastructure among small banks’ from the Institute of Development and Research
in Banking Technology, Hyderabad (“IDRBT”, which is established by the RBI), and an award from the National
Payment Corporation of India (“NPCI”) in the ‘Scheduled banks - Small Banks category’ in recognition of
excellent performance in National Automated Clearing House, among others.
96
Our Bank is modernizing various customer touch points by implementing advanced digital banking platforms.
We are also working towards introducing ‘API banking’ for collaborating with various industries. Further, our
Bank is in the process of implementing an enterprise financial services application, for prudent allocation of capital
through funds transfer pricing, performance analyzer, profitability management, liquidity and asset liability
management. This will enable our Bank to ascertain the product profitability, branch profitability and segment
profitability. Our Bank is also in the process of upgrading the existing core banking solutions. Our Bank is also
implementing fraud and risk module to improve the operational risk mechanism and online real-time transaction
tracking monitoring as part of KYC and AML
HUMAN RESOURCES
We place importance in developing our human resources. For financial year ended March 31, 2016, March 31,
2017 and March 31, 2018 the total number of employees were 3,565, 4,043 and 4,623, respectively. As on
December 31, 2018, we had 4,881 employees, of whom 1,580 employees were professionals in business
management, accountancy, engineering, law, computer science or economics. As of March 31, 2016, March 31,
2017, March 31, 2018 and December 31, 2018, business per employee (including sales executives) (i.e. the sum
of advances and deposits divided by the number of employees) amounted to ₹ 109.91 million, ₹ 114.60 million,
₹ 113.00 million and ₹ 110.07 million, respectively. We continue to conduct online tests to educate our employees
about various products.
COMPETITION
We face strong competition in all our principal lines of business from other commercial banks and other financial
institutions in India. Our primary competitors are government-controlled public sector banks, major private sector
banks, foreign banks with operations in India and, for certain products, non-banking financial institutions. Our
competition with other commercial banks and financial institutions primarily focuses on the variety, pricing and
quality of products and services, convenience of banking facilities, reach of distribution network and brand
recognition, as well as information technology capabilities. The extensive geographic reach of many of these
institutions enables product delivery in remote parts of the country.
PROPERTIES
Our registered office is located at Salem Road, Kathaparai, P.O., Karur – 639 006, Tamil Nadu and the corporate
office is located LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil Nadu. As of December
31, 2018, 16 of our branches are situated on properties owned by our Bank and 553 branches are under lease. Our
ATMs are primarily located on leased premises.
INTELLECTUAL PROPERTY
We utilise a number of different forms of intellectual property in our business including our “Lakshmi Vilas”
brand and the names of the various products we provide to our customers.
97
SELECTED STATISTICAL INFORMATION
The following unaudited information should be read together with our financial statements included in this Placement Document and the section “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”. Our financial statements have been prepared in accordance with Indian GAAP. Footnotes appear at the end
of each related section of tables. Certain information included in this section has been derived from the periodic returns filed with the RBI which are based on our books of
account and underlying records
Average Balance Sheet
The table below present the average balances for interest-earning assets and interest-bearing liabilities together with the related interest revenue and expense amounts, resulting
in the presentation of the average yields and cost for each period. The average balance is the average of fortnightly balances outstanding, which we are reporting to RBI on
each reporting Friday. The average yield on average interest-earning assets is the ratio of interest revenue to average interest-earning assets (except that investments include
equity investments and interest revenue with respect to investments including dividends on such equity investments). The average cost on interest-bearing liabilities is the ratio
of interest expense to average interest-bearing liabilities. The average balances of advances include NPAs.
(₹ in million, except percentages) Year ended March 31 2016 2017 2018
Average
Balance
Interest
Income /
Expense
Average
Yield / Cost
(%)
Average
Balance
Interest
Income /
Expense
Average
Yield /
Cost
(%)
Average
Balance
Interest
Income /
Expense
Average
Yield /
Cost
(%)
Interest earning assets:
Advances 166,921.17 20,382.70 12.21% 198,309.18 22,397.10 11.29% 229,564.39 23,314.70 10.16%
Investments 64,775.11 5,194.00 8.02% 75,702.67 5,775.94 7.63% 100,736.03 6,930.54 6.88%
Others 913.10 467.11 2,212.11
Total interest earning assets 232,609.37 25,576.70 274,478.95 28,173.04 332,512.53 30,245.24
Non-interest earning assets:
Cash & Bank balance 11,749.30 16,607.98 16,144.43
Fixed assets 2,588.03 3,610.82 3,899.68
Other assets 11,327.41 15,083.38 19,985.01
Total non - interest earning assets 25,664.74 35,302.18 40,029.13
Total assets 258,274.11 309,781.13 372,541.66
Interest-bearing liabilities:
Deposits 224,427.92 18,332.92 8.17% 266,331.65 19,381.61 7.28% 294,541.00 19,879.94 6.75%
Borrowings 6,596.18 897.01 13.60% 11,760.60 1,258.43 10.70% 38,787.74 2,630.27 6.78%
98
Year ended March 31 2016 2017 2018
Average
Balance
Interest
Income /
Expense
Average
Yield / Cost
(%)
Average
Balance
Interest
Income /
Expense
Average
Yield /
Cost
(%)
Average
Balance
Interest
Income /
Expense
Average
Yield /
Cost
(%)
Total interest bearing liabilities 231,024.10 19,229.93 278,092.25 20,640.04 333,328.74 22,510.21
Non-interest bearing liabilities:
Capital and reserves 16,508.72 19,470.21 23,701.33
Other liabilities 10,741.29 12,218.67 15,511.58
Total non - interest bearing
liabilities
27,250.01 - 31,688.88 39,212.92
Total liabilities 258,274.11 309,781.13 372,541.66
Financial Ratios and other Financial Information
Key Accounting Ratios
For the Period/year ended March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Basic Earnings per Share (EPS) (₹) 10.05 14.07 (28.29) (14.59)%
Book Value per Share/ Net Asset value per share (₹) 88.7 102.74 84.39 60.07
Return on Net worth (%) 13.3% 15.83% (33.76)% (59.26)%
OTHER RATIOS
Gross NPA to Gross Advances Ratio (%) 1.97% 2.67% 9.98 % 13.95%
Net NPA to Net Advances Ratio (%) 1.18% 1.76% 5.66 % 7.64%
Return on Assets (%) 0.69% 0.83% (1.57)% (2.14)%
Provision Coverage Ratio (%) 68.55% 59.51% 55.07% 55.93%
Return on equity (%) 11.74% 14.39% (28.34) (45.71)%
Capital Adequacy Ratio (%) (Basel-III) 10.67% 10.38% 9.81% 7.57%
Tier I (%) 8.69% 8.75% 8.05% 5.57%
Tier II (%) 1.98% 1.63% 1.76% 2.00%
Cost to Income Ratio (%) 57.14% 50.67% 68.76% 98.50%
Total employees (including sales executives) 4,011 4,569 5,127 4,881
Business per Employee (₹ in million)* 109.91 114.61 113.00 110.07
Operating Profit per Employee (₹ in million)* 1.02 1.39 0.69 0.02
99
For the Period/year ended March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Net Profit per Employee (₹ in million)* 0.45 0.56 (1.14) (1.29)
Business Per Branch (₹ in million) 983.69 1,133.30 1,100.62 965.02
Profit Per Branch (₹ in million) 3.92 5.32 (10.67) (11.07)
* For the purpose of calculation, employee includes sales executives.
Other Key Accounting Ratios
For the Period/year ended March 31, 2016 March 31, 2017 March 31, 2018
Net Interest Margin (%) 2.78% 2.85% 2.38%
Interest Income/ Working Funds (%) 9.89% 9.17% 8.15%
Non-Interest Income/ Working Funds (%) 1.17% 1.62% 0.93%
Operating Expenses/ Average Assets (%) 2.10% 2.10% 2.10%
Provision / Average Asset (%) 0.88% 1.22% 2.52%
Credit/ Deposit Ratio (%) (net) 77.93% 78.42% 81.07%
Operating Profit/ Average Working Funds (%) 1.57% 2.04% 0.95%
Yield on Advances (%) 12.21% 11.29% 10.16%
Average Yield on Investments (%) 8.02% 7.63% 6.88%
Cost of Deposits (%) 8.17% 7.28% 6.75%
Definitions of Key Ratios
Basic Earnings per Share (EPS) (₹) Net Profit / Weighted average number of Equity Shares outstanding for the year
Book Value per Share/ Net Asset value per share (₹) Net worth at year end/ No. of Equity Shares
Business Per Branch (₹) (Deposit + Advances)/ No. of branches
Business per Employee (₹) (Deposit + Advances)/ No. of Employees
Capital Adequacy Ratio (%) (BASEL III) Capital Funds / Risk Weighted Assets
Cost of Deposits (%) Interest paid on deposit / Average Deposit.
Cost to Income Ratio Operating Costs / Net Interest Income
Credit/ Deposit Ratio (%) (net) Net Advances / Deposits
Gross Profit per Employee (₹)* Operating Profit / No. of Employees
Interest Income/ Working Funds (%) Interest Income/ Average Working Funds (Average of monthly total assets as per Form X)
Net Interest Margin (%) Net interest income / Average interest earning assets
Net NPA to Net Advances Ratio (%) Net NPAs/ Net Advances
Net Profit per Employee (₹) Net Profit/No. of Employees
Non-Interest Income/ Working Funds (%) Non-Interest Income/ Average Working Funds (Average of monthly total assets as per Form X)
100
Operating Expenses/ Average Assets (%) Operating Expenses / Average of fortnightly total Assets as per Form A
Operating Profit/ Average Working Funds (%) Operating Profit / Average of fortnightly total Assets as per Form A
Profit Per Branch (₹) Net profit / No. of branches
Provision / Average Asset (%) Provisions and Contingencies / Average of fortnightly Total Assets as per Form A
Provision Coverage Ratio (%) (Provisions + Technical Write-off) / (Gross NPA + Technical Write-Off)
Return on Assets (%) Net Profit/ Average Total Assets
Return on Average Assets (%) Net Profit/ Average of fortnightly Total Assets as per Form A
Return on equity (%) Net Income/ Shareholders’ Equity
Return on Net worth (%) Net Profit/ Average Net worth
Tier I (%) Tier I Capital/ Risk Weighted Assets
Tier II (%) Tier II Capital/ Risk Weighted Assets
Yield on Advances (%) Interest on Advances / Average advances
Yield on Investments (%) Interest on Investments / Average investments
State Wise Distribution of Branches
Geographical distribution of the branches of our Bank for the period mentioned under:
March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
State/Union
Territory
No. of
Branches
No. of
extensio
n
counter
s
% share of
total
No. of
Branches
No. of
extensi
on
counte
rs
% share of
total
No. of
Branches
No. of
extension
counters
% share of
total
No. of
Branches
No. of
extensio
n
counter
s
% share of
total
Tamil Nadu 257 4 55.89% 266 4 55.33% 285 4 52.01% 295 3 51.85%
Andhra
Pradesh 48 2 10.71% 55 1 11.48%
65 1 11.86% 69 1 12.13%
Karnataka 47 1 10.28% 48 1 10.04% 60 1 10.95% 60 1 10.54%
Kerala 12 0 2.57% 12 - 2.46% 13 0 2.37% 13 0 2.28%
Telangana 29 - 0.00% 31 1 6.56% 46 1 8.39% 52 0 9.14%
Puducherry 4 0 0.86% 5 - 1.02% 5 0 0.91% 5 0 0.88%
Total
Southern
India
397 7 86.51% 417 7 86.89%
474 7 86.50% 494 5 86.82%
Other States
Maharashtra 19 0 4.07% 19 - 0.82% 23 0 4.20% 24 0 4.22%
101
March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
State/Union
Territory
No. of
Branches
No. of
extensio
n
counter
s
% share of
total
No. of
Branches
No. of
extensi
on
counte
rs
% share of
total
No. of
Branches
No. of
extension
counters
% share of
total
No. of
Branches
No. of
extensio
n
counter
s
% share of
total
Gujarat 12 0 2.57% 12 - 2.46% 13 0 2.37% 13 0 2.28%
Delhi 8 0 1.71% 8 - 1.64% 9 0 1.64% 9 0 1.58%
Haryana 4 0 0.86% 4 - 0.82% 4 0 0.73% 4 0 0.70%
Uttar Pradesh 2 0 0.43% 2 - 0.41% 2 0 0.36% 2 0 0.35%
West Bengal 3 0 0.64% 3 - 0.61% 4 0 0.73% 4 0 0.70%
Chhattisgarh 4 0 0.86% 4 - 0.82% 4 0 0.73% 4 0 0.70%
Jharkhand 2 0 0.43% 2 - 0.41% 2 0 0.36% 2 0 0.35%
Madhya
Pradesh
4 0 0.86% 4 - 0.82% 4 0 0.73% 4 0 0.70%
Orissa 3 0 0.64% 4 - 0.82% 5 0 0.91% 5 0 0.88%
Rajasthan 2 0 0.43% 2 - 0.41% 2 0 0.36% 2 0 0.35%
Punjab 0 0 0.00% 0 0 0.00% 1 0 0.18% 1 0 0.18%
Chandigarh 0 0 0.00% 0 0 0.00% 1 0 0.18% 1 0 0.18%
Total Others 63 0 13.49% 64 - 13.11% 74 0 13.50% 75 0 13.18%
Grand Total 460 7 100.00% 481 7 100.00% 548 7 100.00% 569 5 100.00%
Demographic Network of Branches
Demographic network of branches for the last five quarters, i.e. quarters ended December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31,
2018 are stated as under:
Type No. of Branches
December 31, 2017 March 31, 2018 June 30, 2018 September 30, 2018 December 31, 2018
Metro 148 156 161 162 162
Rural 105 106 107 108 109
Semi Urban 149 163 170 173 173
Urban 117 123 123 125 125
Total 519 548 561 568 569
Division-wise Break up of Customers
The details of the number of our customers over the last three Fiscals and the nine months ended December 31, 2018 are as follows:
102
Particulars Fiscal 2016 Fiscal 2017 Fiscal 2018
Retail Banking 38,233 35,954 34,453
SME / MSME Banking/ Rural Banking / Mid-Commercial Banking 156,134 159,500 154,400
• SME / MSME Banking 18,428 16,334 13,019
• Rural Banking 135,354 139,093 136,915
• Mid-Commercial Banking 2,352 4,073 4,466
Corporate Banking 630 601 438
Total number of customers 194,997 196,055 189,291
Particulars December 31, 2018
Retail Banking 31,536
SME / MSME Banking/ Rural Banking / Mid-Commercial Banking 161,463
• SME / MSME Banking 12,092
• Rural Banking 144,943
• Mid-Commercial Banking 4,428
Corporate and Institutional Banking 383
Total number of customers 193,382
State Wise Distribution of Business (Deposit + Advances)
The state wise distribution of business (deposit + advances) is as given below:
(₹ in million)
Particulars March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Tamil Nadu 219,997.81 230,366.63 246,978.10 244,592.29
Karnataka 65,919.85 74,145.18 78,870.49 63,754.43
Andhra Pradesh 26,171.93 31,224.33 35,573.40 35,832.35
Telangana 24,868.60 28,648.62 34,281.84 33,697.81
Kerala 14,467.01 16,384.28 29,777.41 31,905.87
Puducherry 2,262.57 2,677.94 2,855.27 3,094.85
Total Southern India 353,687.77 383,446.98 428,336.50 412,877.03
103
Particulars March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Other States
Maharashtra 7,654.70 92,503.32 119,585.63 89,952.52
Delhi 4,671.46 35,700.19 23,432.63 20,704.23
Gujarat 1,335.78 8,608.13 8,604.99 7,786.66
West Bengal 58,375.69 6,230.41 8,775.05 9,436.21
Orissa 1,671.61 11,087.84 4,102.68 798.91
Rajasthan 5,318.90 1,210.46 1,878.88 1,160.82
Madhya Pradesh 504.12 1,921.19 3,111.64 1,269.99
Haryana 1,448.07 1,940.00 2,457.26 2,294.35
Uttar Pradesh 808.37 918.83 1,112.80 991.04
Jharkhand 636.83 818.06 769.96 718.67
Chhattisgarh 16,385.61 732.69 955.48 971.46
Punjab 0.00 0.00 0.83 89.99
Chandigarh 0.00 0.00 15.85 46.31
Total Others 98,811.14 161,671.12 174,803.67 136,221.17
Grand Total Business 452,498.91 545,118.10 603,140.17 549,098.77
Deposits
State wise distribution of deposits is as given below:
(₹ in million)
Particulars March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Tamil Nadu 129,313.83 142,468.35 159,086.09 166,145.48
Karnataka 35,483.78 40,073.51 39,163.44 33,209.99
Andhra Pradesh 13,126.24 16,373.24 19,782.98 21,341.22
Telangana 11,288.12 14,527.70 17,915.13 18,886.23
Kerala 10,659.44 13,087.93 20,617.94 20,002.11
Puducherry 1,437.23 1,708.06 1,891.86 2,143.92
Total Southern India 201,308.64 228,238.79 258,457.43 261,728.95
Other States
Maharashtra 4,192.45 39,997.74 47,247.53 25,055.86
Delhi 1,759.57 14,680.72 10,398.15 9,566.23
104
Particulars March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Gujarat 953.11 4,656.58 4,645.59 4,557.42
West Bengal 31,083.98 2,172.70 1,874.77 1,711.10
Orissa 1,237.59 10,975.06 3,941.60 611.06
Rajasthan 5,219.89 547.68 764.65 408.31
Madhya Pradesh 316.71 1,333.96 2,481.70 862.70
Haryana 1,123.72 1,266.46 1,527.17 1,482.12
Uttar Pradesh 646.31 744.70 858.27 878.12
Jharkhand 449.80 512.26 404.31 389.12
Chhattisgarh 6,017.85 406.88 477.52 487.60
Punjab 0.00 0.00 0.78 88.86
Chandigarh 0.00 0.00 15.35 42.43
Total Others 53,000.98 77,294.74 74,637.40 46,140.93
Grand Total Deposits 254,309.62 305,533.53 333,094.83 307,869.89
Break-up of Deposits
Break-up of Deposits of our Bank as on March 31, 2016, March 31, 2017 and March 31, 2018 is as under:
(₹ in million) Particulars March 31, 2016 March 31, 2017 March 31, 2018
Demand Deposits (Including Demand Deposit from Banks) 16,364.32 18,447.43 20,912.64
Saving Bank Deposits 27,790.64 39,996.09 49,248.68
Term Deposits 210,154.36 247,090.01 262,933.51
• Bulk (accepted under DRI – Other than Card Rate) 45,755.36 61,423.80 -
• Bulk (at Card Rate) 35,769.10 42,953.54 110,279.17
• Retail 128,629.90 142,712.67 152,654.34
As of March 31, 2016, the demand deposits, savings deposits and term deposits were 6.43%, 10.93% and 82.64% of the total deposits mix. As of March 31, 2017, the demand
deposits, savings deposits and term deposits were 6.02% 13.09% and 80.87% of the total deposits mix. As of March 31, 2018, the demand deposits, savings deposits and term
deposits were 6.27%, 14.79% and 78.94% of the total deposits mix.
Average Cost of Deposit
Details of average cost of deposits as on March 31, 2016, March 31, 2017 and March 31, 2018, is as under:
105
For the period/year ended March 31, 2016 March 31, 2017 March 31, 2018
Saving Bank Deposits 5.26% 5.14% 5.38 %
Term Deposits 8.92% 8.06% 7.42 %
Maturity Profile of Deposits
Maturity profile of deposits as on March 31, 2016, March 31, 2017 and March 31, 2018, is as under:
(₹ in million) Year ended March 31, 2016 March 31, 2017 March 31, 2018
Amount % Amount % Amount %
Up to 1 year 114,279.38 44.94% 148,209.23 48.51% 156,446.34 46.97%
1 year to 3 years 82,527.26 32.45% 90,556.77 29.64% 101,610.53 30.50%
3 years to 5 years 17,402.78 6.84% 12,563.98 4.11% 9,341.38 2.80%
Over 5 years 40,100.20 15.77% 54,203.55 17.74% 65,696.58 19.72%
Total 254,309.62 100.00% 305,533.53 100.00% 333,094.83 100.00%
Term Deposits
Category wise break-up of term deposits as on March 31, 2018 is as under:
(₹ in million)
CASA Details
March 31, 2018
Maturity Retail Corporate Banking Total
1-14 days 3,712.34 6,778.42 10,490.76
15-28 days 4,326.29 7,097.81 11,424.09
29 days to 3 months 16,155.83 25,491.84 41,647.67
3 – 6 months 25,324.26 17,517.32 42,841.58
6 – 12 months 48,326.94 44,106.81 92,433.75
1 – 3 years 44,139.57 10,208.07 54,347.64
3 – 5 years 4,862.87 921.09 5,783.96
Over 5 years 3,248.97 715.09 3,964.05
Total 150,097.07 112,836.45 262,933.51
106
CASA Breakup into Current Account & Savings Bank Account is stated as under:
(₹ in million, unless otherwise specified)
Particulars
As at
March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Savings 27,790.64 39,996.09 49,248.68 52,652.40
Current 16,364.48 18,393.72 20,901.66 17,710.55
Total CASA 44,155.12 58,389.81 70,150.34 70,362.95
CASA as a percentage of total deposits (%) 17.36% 19.11% 21.06% 22.85%
Advances
Gross & Net Advances as on the end of the last three Fiscals and the nine months ended December 31, 2018, is as given under:
(₹ in million) As at March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Gross Advances 198,189.29 239,584.56 270,045.30 241,228.88
Net Advances 196,437.39 237,289.11 257,682.02 224,748.22
Total net advances at the end of the last three Fiscals is as given under:
(₹ in million) Particulars As at March 31, 2016 As at March 31, 2017 As at March 31, 2018
Secured Advances 188,785.99 233,145.99 253,716.39
Unsecured Advances 7,651.40 4,143.12 3,965.63
Total net Advances 196,437.39 237,289.11 257,682.02
State-wise distribution of advances:
State-wise distribution of advances as on the end of the last three Fiscals and the nine months ended December 31, 2018 is as given under:
(₹ in million) Particulars As at March 31, 2016 As at March 31, 2017 As at March 31, 2018 December 31, 2018
Tamil Nadu 90,683.98 87,898.27 87,892.01 78,446.81
Karnataka 30,436.07 34,071.67 39,707.05 30,544.44
Andhra Pradesh 13,045.69 14,851.09 15,790.42 14,491.13
Telangana 13,580.48 14,120.92 16,366.71 14,811.58
Kerala 3,807.57 3,296.36 9,159.47 11,903.75
107
Particulars As at March 31, 2016 As at March 31, 2017 As at March 31, 2018 December 31, 2018
Puducherry 825.34 969.88 963.41 950.93
Total Southern India 152,379.13 155,208.19 169,879.07 151,148.64
Other States
Maharashtra 3,462.25 52,505.58 72,338.10 64,896.66
Delhi 2,911.89 21,019.47 13,034.48 11,138.00
Gujarat 382.67 3,951.55 3,959.40 3,229.25
West Bengal 27,291.71 4,057.71 6,900.28 7,725.11
Orissa 434.02 112.78 161.08 187.84
Rajasthan 99.01 662.78 1,114.24 752.52
Madhya Pradesh 187.41 587.23 629.93 407.29
Haryana 324.35 673.55 930.08 812.23
Uttar Pradesh 162.06 174.12 254.53 112.92
Jharkhand 187.03 305.80 365.65 329.55
Chhattisgarh 10,367.76 325.80 477.96 483.86
Punjab 0.00 0.00 0.04 1.14
Chandigarh 0.00 0.00 0.50 3.88
Total Others 45,810.16 84,376.37 100,166.27 90,080.24
Grand Total Advances 198,189.29 239,584.56 270,045.34 241,228.88
Break-up of Advances:
A. Details of Gross Advances
(₹ in million) Particulars As at March 31, 2016 As at March 31, 2017 As at March 31, 2018
Retail Banking 26,395.20 21,953.10 26,813.60
SME / MSME Banking/ Rural Banking / Mid-Commercial Banking 86,542.10 95,876.80 102,676.30
• SME / MSME Banking 41,705.90 41,746.70 43,128.90
• Rural Banking 30,655.90 40,749.30 45,291.80
• Mid-Commercial Banking 14,180.30 13,380.80 14,255.60
Corporate Banking 85,251.99 121,754.70 140,555.40
Total Gross Advances 198,189.29 239,584.60 270,045.30
Particulars As at December 31,
2018
Retail Banking 23,835.29
SME / MSME Banking/ Rural Banking / Mid-Commercial Banking 136,547.44
• SME / MSME Banking 53,463.67
• Rural Banking 41,048.98
108
• Mid-Commercial Banking 42,034.79
Corporate and Institutional Banking 80,846.16
Total Gross Advances 241,228.89
B. Breakup of net advances into Term loans and Working Capital advances
(₹ in million)
As at
March 31, 2016 March 31, 2017 March 31, 2018
Term Loans 72,072.02 100,685.91 99,121.21
Working Capital 124,365.37 136,603.20 158,560.81
Total Advances 196,437.39 237,289.11 257,682.02
C. Industry wise Distribution of Exposures:
Industry wise distribution of exposure in Fiscal 2018:
109
(₹ in million) Sl. No Industry Funded Exposure Non-funded
Exposure
Total Exposure % of Gross Credit
Exposure
1 Mining and Quarrying 2,170.89 145.41 2,316.30 0.78
2 Food Processing 2,211.77 108.32 2,320.08 0.78
3 Beverages (excluding Tea & Coffee) and Tobacco 3,647.14 222.50 3,869.64 1.30
4 Textiles 10,866.90 949.98 11,816.88 3.96
5 Leather and Leather products 45.13 0.20 45.33 0.02
6 Wood and Wood Products 950.99 687.42 1,638.41 0.55
7 Paper and Paper Products 715.69 19.90 735.59 0.25
8 Petroleum (non-infra), Coal Products (non-mining) and Nuclear
Fuels
91.47 44.49 135.96 0.05
9 Chemicals and Chemical Products (Dyes, Paints, etc.) 3,060.16 2,055.84 5,116.00 1.71
10 Rubber, Plastic and their Products 468.28 2.86 471.14 0.16
11 Glass & Glassware 315.82 0.57 316.39 0.11
12 Cement and Cement Products 291.77 0.00 291.77 0.10
13 Basic Metal and Metal Products 11,301.43 369.63 11,671.06 3.91
14 All Engineering 2,121.48 947.54 3,069.12 1.03
15 Vehicles, Vehicle Parts and Transport Equipment 290.48 0.15 290.63 0.10
16 Gems and Jewelry 1,211.58 117.89 1,329.48 0.45
17 Infrastructure 20,955.48 5,558.99 26,514.47 8.88
18 Other Industries 3,320.13 26.10 3,346.23 1.12
Other Industries Residual Advance 210,906.02 12,235.50 223,141.52 74.77
Total 274,942.60 23,493.28 298,435.88 100.00
Exposure to the Top 10 borrower companies as of March 31, 2018:
Industry of the Borrower Outstanding Amount
of the Borrower (₹ in
million)
Outstanding
Amount of the
Industry (₹ in
million)
Outstanding to the
Borrower as a % of
Gross Advances
Outstanding to the Borrower as
a % of the Outstanding
Amount of the Industry
Asset
Quality
Borrower 1 Residual 3,399.40 210,906.01 1.24% 1.61% STD
Borrower 2 Infrastructure 2,600.00 20,955.48 0.95% 12.41% STD
Borrower 3 Residual 2,539.50 210,906.01 0.92% 1.20% STD
Borrower 4 Residual 2,026.80 210,906.01 0.74% 0.96% STD
Borrower 5 Residual 2,007.80 210,906.01 0.73% 0.95% STD
Borrower 6 Residual 2,000.00 210,906.01 0.73% 0.95% STD
Borrower 7 Metal & Metal Products 1,900.00 11,301.43 0.69% 16.81% STD
Borrower 8 Residual 1,852.70 210,906.01 0.67% 0.88% STD
110
Industry of the Borrower Outstanding Amount
of the Borrower (₹ in
million)
Outstanding
Amount of the
Industry (₹ in
million)
Outstanding to the
Borrower as a % of
Gross Advances
Outstanding to the Borrower as
a % of the Outstanding
Amount of the Industry
Asset
Quality
Borrower 9 Residual 1,764.90 210,906.01 0.64% 0.84% STD
Borrower 10 Residual 1,600.00 210,906.01 0.58% 0.76% STD
As of March 31, 2018, the total exposure to the top 20 borrowers based on fund-based exposure is 13.32% and total exposure to the top 50 borrowers based on fund-based
exposure is 24.26% (excluding IPBC Exposure).
Export Credit
The following table provides a summary of the total export credit for the last three Fiscals:
Year Ended March 31, 2016 March 31, 2017 March 31, 2018
Export Credit (₹ in million) 2,924.30 2,209.40 2,127.72
% of the Export Credit to Adjusted Net Bank Credit 1.77% 1.11% 0.89%
Interest Coverage Ratio (₹ in million)
Fiscal years ended Nine months ended December
31, 2018 2018 2017 2016 Net Profits (i) (5,848.66) 2,560.72 1,802.36 (6,296.66)
Depreciation on Bank property (ii) 588.42 480.55 377.63 400.00
Interest expended (iii) 22,510.21 20,640.04 19,229.93 17,376.97
Cash Profits (iv) - (i) + (ii) + (iii) 17,249.97 23,681.31 21,409.92 11,080.31
Interest coverage ratio (iv) / (iii) 0.77 1.15 1.11 0.64
Asset Liability Management
The following table sets forth our asset-liability gap position as of March 30, 2018, which was the last reporting Friday in the financial year ended March 31, 2018:
(₹ in million)
111
Out Flows
Next Day 2 days to 7
days
8 days to 14
days 15-30 Days
31 days and
up to 2
months
More than 2
months and
up to 3
months
Over 3
months & up
to 6 months
Over 6
months & up
to 1 year
Over 1 year &
up to 3 years
Over 3 years
& up to 5
years
Over 5 years Total
OUTFLOWS
Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2,559.94 2,559.94
Reserves &
Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 20,716.74 20,716.74
Deposits 3,596.41 8,064.35 5,391.63 8,379.12 14,196.44 11,308.11 2,8851.52 52,869.86 101,610.53 9,341.38 65,696.58 309,305.93
Interbank
deposits 0.00 254.22 0.00 2,150.43 4,447.53 3,838.82 2,729.55 10,368.35 0.00 0.00 0.00 23,788.90
Borrowings 0.00 25,690.80 5,000.00 1,000.00 250.00 250.00 0.00 1,250.00 3,000.00 505.00 3,182.00 40,127.80
Other Liabilities 1,716.21 189.02 105.79 175.37 404.73 403.92 1,262.11 0.00 8,644.66 0.00 166.61 13,068.43
Off Balance
Sheet 27.05 162.30 189.34 432.79 811.48 811.48 934.43 1,910.39 0.00 0.00 0.00 5,279.24
A. TOTAL
OUTFLOWS 5,339.67 34,360.69 10,686.77 12,137.71 20,110.17 16,612.33 33,777.61 66,398.60 113,255.19 9,846.38 92,321.87 414,846.99
IN FLOWS
Cash 3,441.57 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,441.57
Balances with
RBI 228.24 355.31 236.24 366.16 624.25 504.21 1,290.66 2,276.09 4,421.35 402.15 2,835.46 13,540.13
Balances with
other Banks 406.44 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.30 0.00 2.50 415.24
Investments 35,953.06 2,739.01 1,269.65 1,658.53 2,827.57 2,481.36 6,040.66 11,258.03 21,553.69 6,193.84 16,413.25 108,388.66
Advances 2,460.40 4,899.88 5,268.90 23,089.39 5,783.31 12,315.14 26,416.48 10,414.31 99,093.37 30,994.52 37,083.27 257,818.97
Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4,024.54 4,024.54
Other Assets 62.90 60.02 69.91 139.64 319.73 309.47 898.56 0.00 10,656.36 0.00 5,837.26 18,353.85
Off Balance
Sheet 0.00 0.00 0.00 0.00 0.00 0.00 500.00 4,079.24 700.00 0.00 0.00 5,279.24
B. TOTAL
INFLOWS 42,552.60 8,054.24 6,844.69 25,253.72 9,554.86 15,610.17 35,146.37 28,027.67 136,431.07 37,590.52 66,196.28 411,262.19
C = GAP(B-A) 37,212.93 (26,306.45) (3,842.08) 13,116.01 (10,555.30) (1,002.15) 1,368.76 (38,370.94) 23,175.88 27,744.14 (26,125.60) (3,584.80)
112
Priority Sector Lending
As stipulated by RBI, commercial banks in India are required to lend 40% of their adjusted net bank credit to specified sectors known as “priority sectors”, subject to certain
exemptions permitted by RBI from time to time. Priority sector advances include loans to agriculture, small-scale industry and services and loans to weaker section, housing
and education finance up to certain ceilings, lending for specific infrastructure projects and also investments in instruments issued by notified institutions. We are required to
comply with the priority sector lending requirements as of March 31 in each Fiscal. Any shortfall in the amount required to be lent to the agricultural sector may be required to
be deposited with government sponsored Indian developmental banks such as NABARD.
Details of sector-wise distribution of Gross Priority Sector advances for the last three Fiscals are given below:
(₹ in million)
Reporting date
March 31, 2016 March 31, 2017 March 31, 2018
Amount
As a % of the Adjusted
Net Bank Credit of the
preceding year Amount
As a % of the Adjusted
Net Bank Credit of the
preceding year Amount
As a % of the
Adjusted Net Bank
Credit of the
preceding year
Total Priority Sector Advances 73,498.08 37.08% 81,907.80 41.27% 100,993.60 42.11%
Total Agricultural Advances 30,861.46 15.57% 35,727.20 18.00% 43,529.40 18.15%
Weaker Section Advances 17,720.16 8.94% 20,185.27 10.17% 23,358.80 9.74%
Asset Classification of Performing and Non-Performing Assets
Recognition of Non-Performing Assets
Asset Classification of Performing and Non-Performing Assets for the last three Fiscals and the nine months ended December 31, 2018 is given below:
(₹ in million) Classification of assets as on March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Standard Assets 194,276.80 233,182.62 243,103.18 207,566.43
Sub Standard Assets 2,138.21 3,461.61 11,097.39 11,172.17
Doubtful Assets I 415.33 1,070.10 11,707.91 10,150.98
Doubtful Assets II 672.96 817.36 2,325.73 8,572.70
Doubtful Assets III 2.93 54.73 111.92 1,157.42
Loss Assets 683.06 998.14 1,699.17 2,589.50
Gross NPAs 3,912.50 6,401.94 26,942.12 33,642.77
Gross Advances 198,189.29 239,584.56 270,045.30 241,209.20
Policy for making provisions for non-performing assets
113
Substandard assets A general provision of 15% on total outstanding should be made without making any allowance for DICGC/ECGC guarantee cover and securities available. The
'unsecured exposures' which are identified as 'sub-standard' would attract additional provision of 10%, i.e., a total of 25% on the outstanding balance. However,
unsecured exposures in respect of Infrastructure loan accounts classified as Sub-standard, in case of which certain safeguards such as escrow accounts are available,
it will attract an additional provision of 5% only i.e., a total of 20%.
Doubtful assets Doubtful I - 100 % of the unsecured portion and 25 % of the secured portion
Doubtful II - 100 % of the unsecured portion and 40 % of the secured portion
Doubtful III - 100 % of the unsecured portion and 100 % of the secured portion
Loss assets 100 % to be provided or written-off.
Standard Assets provisions and Floating provisions
As of March 31, 2018, our Bank holds provision for standard assets of ₹ 983.10 million as required under RBI guidelines. As of the same date, our Bank does not hold any
floating provision as per our Board approved policy.
Further, our Bank is also required, as per recent regulatory guidelines, to provide for likely losses on lending to borrowers who have unhedged foreign currency exposure in
their portfolio. Such provision is computed based on certain directions and computation methodology given in such guidelines. The provision so held by our Bank as of March
31, 2018 amounted to ₹ 20.26 million.
Non-accrual Policy
In order to bring uniformity in accounting interest application in the NPA accounts, banks have been directed by the RBI to adhere to accounting procedure. As per the
accounting procedure, when an account turns into NPA, banks should reverse the interest already charged and not collected by debiting profit and loss account.
Thereafter, banks are permitted to apply applicable interest in the loan account, however the interest so accrued shall not be credited to the profit and loss account and instead
shall be taken to the interest suspense account. As and when recovery comes in the account, bank shall reverse proportionate amount from interest suspense account to the
credit of profit and loss account till the accrued interest get nullified.
Details of NPAs and GNPAs
(₹ in million except as otherwise provided)
Particulars As on March 31
As on December 31, 2018 2016 2017 2018
Gross NPA at the beginning of the year 4,546.20 3,912.50 6,401.94 26,942.12
Addition during the year 1,969.00 5,972.03 29,160.20 12,049.73
Reduction during the year 2,602.69 3,482.59 8,620.01 5,349.08
• Upgradation 212.03 264.82 2,585.26 2,513.85
• Recoveries* 1,698.06 2,302.72 3,314.60 1,930.50
• Technical / prudential write offs 688.81 885.52 2,121.70
• Write offs (other than technical / prudential write
offs) 3.80 29.53
598.40 904.73
114
Particulars As on March 31
As on December 31, 2018 2016 2017 2018
Gross NPA at the end of the year 3,912.50 6,401.94 26,942.12 33,642.77
Provision 1,134.68 1,704.25 11,690.51 15,793.99
Amount kept in sundries 13.01 13.29 53.65 40.68
DICGC & ECGC Balance 214.10 211.89 200.98 200.96
Other netting items 234.30 288.35 418.08 444.96
Net NPA at the end of the year 2,316.41 4,184.16 14,578.90 17,162.18
Gross Advances 198,189.29 239,584.56 270,045.34 241,209.20
Gross NPAs 3,912.50 6,401.94 26,942.12 33,642.77
Gross NPAs to Gross Advances (%) 1.97% 2.67% 9.98% 13.95%
Net Advances 196,437.39 237,289.13 257,682.03 224,728.56
Net NPAs 2,316.41 4,184.16 14,578.90 17,162.18
Net NPA to Net Advances (%) 1.18% 1.76% 5.66% 7.64%
* includes cash recovery, sale to ARC and purchase of non-banking assets.
The Recovery/ ARC sale as of fiscal year ended March 31, 2016, March 31, 2017, March 31, 2018 and the nine months ended December 31, 2018 is ₹ 1,419.86 million, ₹
1,224.90 million, ₹ 1,496.19 million and ₹ 1,978.68 million, respectively.
Gross NPA (GNPA) as a % of Total Advances
Particulars As on March 31, 2016 As on March 31, 2017 As on March 31, 2018
Retail GNPA as % of Retail advances 0.59% 0.72% 1.60 %
SME / MSME GNPA as % of SME / MSME advances 1.75% 2.90% 7.68 %
Corporate Banking GNPA as % of Corporate Banking advances 2.65% 3.31% 14.10 %
Rural GNPA as % of Rural advances 0.47% 0.50% 2.61 %
Mid-Commercial GNPA as % of Mid-Commercial advances 4.39% 5.93% 15.41%
Particulars As on December 31, 2018
Retail GNPA as % of Retail advances 3.09%
SME / MSME GNPA as % of SME / MSME advances 8.84%
C&IB GNPA as % of C&IB advances 29.94%
Rural GNPA as % of Rural advances 4.12%
Mid-Commercial GNPA as % of Mid-Commercial advances 5.43%
Sector / Industry analysis of Gross Non-Performing Assets
115
An industry-wise analysis of gross Non-Performing Assets for Fiscal 2018 is shown below:
(₹ in million) INDUSTRY NAME Fiscal 2018
Amount %
Food Processing 955.44 3.55%
Wood and Wood Products 175.20 0.65%
Basic Metal and Metal Products 5,930.40 22.01%
Mining and Quarrying 1,388.11 5.15%
Chemicals and Chemical Products (Dyes, Paints, etc.) 34.11 0.13%
Textiles 1,329.80 4.94%
Gems and Jewellery 380.31 1.41%
Infrastructure 6,983.65 25.92%
All Engineering 236.50 0.88%
Other Industries 969.38 3.60%
Total gross NPA 26,942.12
Fresh Slippages:
(₹ in million)
Particulars Fiscal 2016 Fiscal 2017 Fiscal 2018
Number of Accounts 2,142 2,049 2,423
Amount 1,968.99 5,972.03 29,160.22
Restructuring of Debt
In respect of restructured or rescheduled accounts, we make provisions for the erosion in fair value of restructured advances in accordance with the general framework of the
restructuring of advances as per the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances dated July 1,
2015 issued by the RBI. The erosion in fair value of advances is computed as the difference between the fair values before and after restructuring.
The fair value before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and
the principal, discounted at a rate equal to our BPLR or base rate, whichever is applicable to the borrower, as of the date of restructuring plus the appropriate term premium and
credit risk premium for the borrower category on the date of the restructuring.
Restructured Assets
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The RBI has issued prudential guidelines on the restructuring of assets by banks. The guidelines essentially deal with the norms/conditions, the fulfilment of which is required
to maintain the category of the restructured account as a ‘standard asset’. Similar guidelines apply to assets categorized as substandard. Substandard accounts which have been
subjected to restructuring, whether in respect of principal instalment or interest amount, are eligible to be upgraded to the standard category only after the specified period, i.e.
a period of one year after the date when the first payment of interest or principal, whichever is earlier, falls due, subject to satisfactory performance during the period. If there
is a failure to meet payment or other terms of a restructured loan, it may be considered a failed restructuring, in which case it is no longer classified as a restructured loan. We
restructure assets on a case-by-case basis after our management has determined that restructuring is the best means of maximizing realization of the asset.
Pursuant to its circular dated February 12, 2018, the RBI has established a new regulatory framework for resolution of stressed assets (“Revised Framework”). Pursuant to the
Revised Framework, in case of a restructuring, the accounts classified as ‘standard’ shall be immediately downgraded as NPAs (i.e., ‘sub-standard’) at the outset. The NPAs,
upon restructuring, would continue to have the same asset classification as prior to restructuring. Such accounts may be upgraded only when all the outstanding loan/facilities
in the account demonstrate ‘satisfactory performance’ (i.e., payments in respect of the borrower entity are not in default at any point in time) during the ‘specified period’ as
defined in the Revised Framework. For large accounts (i.e. where the aggregate exposure of the lenders is more than ₹ 1 billion), any upgrade shall be subject to an additional
requirement of an ‘investment grade’ credit rating of the borrower’s credit facilities. Further, if the satisfactory performance is not demonstrated during the ‘specified period’,
the account shall, immediately on default, be reclassified as per the repayment schedule that existed before the restructuring. Any future upgrade for such accounts shall be
contingent on implementation of a fresh resolution plan and demonstration of satisfactory performance thereafter.
Details of Restructured Book:
(₹ in million) Particulars March 31, 2016 March 31, 2017 March 31, 2018
Total Restructured Book 10,647.70 12,420.04 9,260.59
Industry wise restructured book:
(₹ in million) Sl. No Name of the Industry March 31, 2018
1 Iron 1,667.55
2 Infrastructure 3,049.41
3 Metals & Minerals 856.12
4 Power 1,606.28
5 Communication 835.70
6 Gems and Gold 58.74
7 Textile 191.00
8 Shipyard 26.32
9 Aluminium 448.73
10 Pharma 260.40
11 Others 260.34
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Sl. No Name of the Industry March 31, 2018
Total 9,260.59
As of March 31, 2018, the concentration of restructured assets between industries such as iron, infrastructure, metals and minerals, power, and others is 18.01%, 32.93%,
9.24%, 17.35%, and 22.47%, respectively.
Restructured Standard Assets:
(₹ in million) Particulars Fiscal 2016 Fiscal 2017 Fiscal 2018
Retail Banking 350.02 297.90 1.14
SME / MSME Banking/ Rural Banking / Mid-Commercial Banking 265.16 427.10 6.03
• SME / MSME Banking 265.16 7.00 6.03
• Rural Banking 0 0.00 0.00
• Mid-Commercial Banking 0 420.10 0.00
Corporate Banking 6,877.85 8,920.96 753.29
Total Gross Advances 198,189.29 239,584.56 270,045.34
Restructured Standard Assets top 20 borrowers:
(₹ in million) Sr. No. Borrower March 31, 2017 % of Total March 31, 2018 % of Total
1 Top 5 5,301.80 54.96 759.33 99.85
2 6 to 10 2,454.30 25.44 1.14 0.15
3 11 to 15 1,489.00 15.44 0 0
4 16 to 20 398.10 4.13 0 0
5 Others 2.80 0.03 0 0
Total 9,646.00 100.00 760.47 100.00
GNPA: borrower concentration
(₹ in million) Sl.
No.
Borrower March 31, 2017 % of Total March 31, 2018 % of Total December 31, 2018 % of Total
1 Top 5 3,036.30 47.43% 6,306.85 23.41% 6,284.93 18.68
2 6 to 10 994.50 15.53% 4,367.94 16.21% 4,280.16 12.72
3 11 to 15 559.40 8.74% 3,003.26 11.15% 3,256.76 9.68
4 16 to 20 339.30 5.30% 2,296.42 8.52% 2,477.41 7.36
5 Others 1,472.44 23.00% 10,967.65 40.71% 17,343.50 51.55
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Sl.
No.
Borrower March 31, 2017 % of Total March 31, 2018 % of Total December 31, 2018 % of Total
Total 6,401.94 100.00% 26,942.12 100.00% 33,642.77 100.00%
Restructured NPAs top 20 borrowers:
(₹ in million) Sl.
No.
Borrower March 31, 2017 % of Total March 31, 2018 % of Total
1 Top 5 1,985.34 71.57% 5,454.47 64.17%
2 6 to 10 663.31 23.91% 2,256.02 26.54%
3 11 to 15 124.97 4.51% 693.69 8.16%
4 16 to 20 0.41 0.01% 95.92 1.13%
5 Others 0.00 0.00% 0.00 0.00%
Total 2,774.03 100.00% 8,500.11 100.00
Investments
(₹ in million) Investments March 31, 2017 March 31, 2018
Investments in India
Government Securities (including treasury bills, & zero coupon bonds) 79,107.02 96,409.36
Other approved securities 0.00 0.00
Shares 1,674.46 2,254.13
Debentures & Bonds 2,887.34 6,306.19
Subsidiaries and Joint Ventures 0.00 0.00
Others (including Commercial Paper, Mutual Funds, Security Receipt, Units, etc.) 3,362.44 3,712.32
Gross Investments in India 87,031.26 108,681.99
Less: Depreciation 513.96 1,004.51
Net Investments in India 86,517.30 107,677.48
Investments outside India 0.00 0.00
Total 86,517.30 107,677.48
Capital Adequacy Position of our Bank
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The Capital Adequacy Ratio (“CAR”) of our Bank, as per Basel III, as on March 31, 2017 was 10.38% as against the RBI stipulation of 10.25%. The CAR of our Bank, as per
Basel III, as on March 31, 2018 was 9.81% as against the RBI stipulation of 10.875%. CAR of our Bank, as per Basel III, as on December 31, 2018 was 7.57% as against the
RBI stipulation of 10.875%. Details of capital vis-à-vis risk weighted assets are as under:
(₹ in million, unless otherwise specified) As on March 31, 2016 March 31, 2017 March 31, 2018 December 31, 2018
Capital Funds 19,253.95 23,212.48 23,474.75 14,931.47
Tier I Capital:
Paid up Equity Capital 1,794.62 1,914.47 2,559.94 2,560.72
Less: Investment in Subsidiary - - -
Reserves & Surplus (net of
DTA/DTL)
13,890.37 17,642.94 16,707.19 8,224.71
Total Tier I Capital 15,684.99 19,557.41 19,267.13 10,785.43
Tier II Capital:
Revaluation Reserve - - - -
General Provisions 874.96 1,382.68 957.82 984.68
Subordinated Debt 2,694.00 2,272.40 3,249.80 3,249.80
Total Tier II Capital 3,568.96 3,655.08 4,207.62 4,146.03
Total Capital Fund 19,253.95 23,212.48 23,474.75 14,931.47
Risk Weighted Assets 180,457.18 223,601.41 239,228.71 193,741.67
Capital Adequacy Ratio (%) 10.67% 10.38% 9.81% 7.57%
Tier I (%) 8.69% 8.75% 8.05% 5.57%
Tier II (%) 1.98% 1.63% 1.76% 2.00%
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition is based on our Financial Statements. You should
read this discussion together with the sections titled “Selected Statistical Information”, “Business” and
“Financial Information” on pages 97, 79 and 240. You should also read “Risk Factors” and “Forward Looking
Statements” on pages 31 and 12, both of which discuss a number of factors and contingencies that could affect
our financial condition, results of operations and cash flows.
Our Financial Statements included in this Preliminary Placement Document are prepared in accordance with
Indian GAAP, which differs in certain material respects from IFRS. Accordingly, the degree to which the
Financial Statements included in this Preliminary Placement Document will provide meaningful information to a
prospective investor in countries other than India is entirely dependent on that reader’s level of familiarity with
Indian accounting processes.
All references to a particular financial year are to the 12 months ended March 31 of that year. All financial data
in this section are on a standalone basis as we do not and did not have any subsidiaries or associates during the
period under review.
Overview
We are a private sector bank in south India, with over a nine-decade history, being run by a professional senior
management team. We believe that we have transitioned from a South India focussed corporate lending bank to
one having a national focus, with a diversified portfolio of retail, MSME/ SME, corporate lending and fee based
products. We have a wide presence through a network of 1,620 customer outlets which includes 569 branches,
1,046 ATMs and five extension counters across 18 states and one union territory, as of December 31, 2018. We
have 162 branches in metropolitan cities, 125 branches in urban areas, 173 branches in semi-urban areas and 109
branches in rural areas, as of December 31, 2018. We had customer accounts of more than 2.26 million banking
customers as of December 31, 2018.
We offer a comprehensive range of products and services including savings accounts, current accounts, term
deposits, international debit cards, corporate and retail loans, depository services, locker facilities, mobile and
internet banking services, bill payment services, foreign exchange services, payment and remittance services, and
repatriation schemes. For further details, see “Business – Product Portfolio” on page 86.
We also offer a number of para-banking products and services, which include distribution of life insurance, general
insurance and health insurance products, for which we have agreed to act as corporate agents of Max Life
Insurance Company Limited, Birla Sun Life Insurance Company Limited, HDFC ERGO General Insurance
Company Limited, DHFL Pramerica Life Insurance Company Limited, Future Generali India Insurance Company
Limited and Cigna TTK Health Insurance Company Limited. We provide money transfer services through branch
channels as well as through direct remittance and we have arrangements with Weizmann Forex Limited. We also
have arrangements with a number of asset management companies for distribution of various mutual fund
schemes. We also offer depository services which allow our customers to open demat accounts at our designated
branches and hold securities in electronic form. We are also registered as a “banker to the issue” with SEBI and
can receive ASBA applications in initial public offerings. For further details, see “Business – Product Portfolio”
on page 86.
The treasury operations of our Bank undertake liquidity management to maintain required liquidity, while
complying with the cash reserve ratio (“CRR”) and the statutory liquidity ratio (“SLR”). Our treasury operations
comprise primarily of statutory reserves management, liquidity management, investment and trading activities
and foreign exchange activities. We are also involved in investing in commercial papers, mutual funds, certificates
of deposits and floating rate instruments in order to manage short-term surplus liquidity. Treasury activities are
supported by appropriate technology, information systems and risk management systems.
We have organized our business model around the following three business units being: (i) the retail banking
group which handles the retail banking segment, (ii) the Agri, Commercial and Development Banking group
(“A&DB”), i.e. the erstwhile MSME / rural banking group, which handles the SME/ MSME banking segments,
rural banking segment, and mid-commercial banking segment, and (iii) the Corporate and Institutional Banking
group, the erstwhile corporate banking group, which handles the corporate customer segment. The retail banking
segment comprises of loans and advances to individuals, HUFs, trusts and clubs. The A&DB group comprises of
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loans and advances made available to micro, small and medium enterprises in addition to loans made available
for the purposes of agricultural activities. Loans to private and public limited companies that do not fall within
any of the above divisions are categorized as loans to the C&IB group. For further details of our business divisions,
see “Business – Our Business Divisions” on page 84.
Our interest income from A&DB group and Corporate Banking group have grown at a CAGR of 5.76% and
12.40%, from Fiscal 2016 to Fiscal 2018, respectively.
We have issued and have outstanding subordinated bonds, which have been assigned the rating of “CARE BBB”
(triple B; outlook: credit watch with negative implications) by CARE in November 2018, as against the earlier
rating of “CARE BBB” (triple B; outlook: negative) assigned by CARE in October 2018. Brickwork have also
assigned the rating “BWR BBB-“ (triple B minus; outlook: credit watch with developing implications) in February
2019 for our Series VII(B) bonds as against the earlier rating of BWR BBB+ (triple B plus; outlook: stable)
assigned by Brickwork in July 2018.
Our total assets have increased from ₹ 286,704.80 million as of March 31, 2016 to ₹ 404,292.26 million as of
March 31, 2018 at a CAGR of 18.75%. Our total deposits have grown from ₹ 254,309.62 million as of March 31,
2016 to ₹ 333,094.83 million as of March 31, 2018 at a CAGR of 14.45%. Our CASA deposits increased from ₹
44,155.12 million as of March 31, 2016 to ₹ 70,150.34 million as of March 31, 2018 at a CAGR of 26.04%. Our
net profit increased from ₹ 1,802.36 million for the fiscal year ended March 31, 2016 to ₹ 2,560.72 million for the
fiscal year ended March 31, 2017, however, there was a net loss of ₹ 5,848.66 million for the fiscal year ended
March 31, 2018 and a net loss of ₹ 6,296.66 million for the nine months ended December 31, 2018. In addition,
our number of branches have increased from 460 as of March 31, 2016 to 569 as of December 31, 2018. As on
December 31, 2018 total deposits and CASA deposits stood at ₹ 307,869.89 million and ₹ 70,362.95 million
respectively.
Significant factors affecting our results of operations
A majority of our income comprises of interest earned on advances and bill discounting and interest / income
generated from securities, interest from other activities, other income from the third-party mutual funds and
insurance products distribution and other services. Our major expenses comprise interest expense on deposits and
short-term borrowings from the RBI, banks and financial institutions and the RBI, operating expenses and
provisions and contingencies.
The following is a discussion of certain factors that have had, and we expect will continue to have, a significant
effect on our financial results.
Interest rates and growth of net interest income
Our results of operations largely depend on our net interest income. Net interest income represents the excess of
interest earned from interest-earning assets (performing assets (which are not NPA or such other assets which do
not currently yield income) and investments) over the interest paid on interest-bearing customer deposits and
borrowings. Interest income constituted 89.40%, 84.99% and 89.76% while net interest income constituted
22.46%, 23.37% and 23.33% of our total income, for Fiscals 2016, 2017 and 2018, respectively. Net interest
income is dependent on the interest rates we charge on our interest-earning assets and interest that we pay on our
interest-bearing liabilities which also include deposits and borrowing by our Bank. Such interest rates are highly
sensitive to many external factors beyond our control, including growth rates in the economy, inflation, money
supply, RBI’s monetary policies, deregulation of the financial sector in India, domestic and international economic
and political conditions and other factors.
Any decrease in the interest rates applicable to our assets, without a corresponding decrease in the interest rates
applicable to our liabilities, will result in a decline in our net interest income and may consequently reduce our
net interest margin. In the event of decreasing interest rates, our borrowers may not be willing to continue to pay
correspondingly higher interest rates on their borrowings and may choose to repay their loans if they are able to
switch to more competitively priced loans offered by other banks. Although in the past, we have passed on the
increase in the interest rates linked to our interest bearing-liabilities to our borrowers, we cannot assure you that
we will continue to pass such increase in our costs to our borrowers. Moreover, changes in interest rates could
also adversely affect demand for our loan products.
Ability to increase non-interest income
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Our other income (which includes income from commission, exchange and brokerage, profit on sale of
investments, profit on sale of land, building and other assets, profit on exchange transactions, income by way of
dividend on companies in India etc.) constituted 10.60%, 15.01% and 10.24 % of our total income for Fiscals
2016, 2017 and 2018, respectively. We intend to continue to introduce products to the market which will
supplement our interest income and continue to push cross-selling efforts to enhance our non-interest income. To
do so, we will need to continue to hire and train a dedicated sales force and to create incentives for customers to
purchase products from us thereby enabling us to derive fee and commission-based income. However, the
increasing sophistication of our customers, offerings of similar and more diverse range of products and services
by our competitors and changes in the regulatory environment, amongst other factors, could adversely impact our
ability to grow our non-interest income.
Our ability to improve profitability will depend, among other factors, on our success in increasing fee income
from existing and new customers of our para-banking activities. Para-banking activities undertaken by us as agents
include distribution of third party insurance products such as life insurance, general insurance and health insurance
as well as money transfer activities, mutual funds and portfolio management services, online trading services,
depository participant services, etc. For further details, please see “Business – Product Portfolio” on page 86. In
order to provide such services, we have entered into agreements with various third parties. Our increasingly
diversified product and service portfolio aid the improvement of the non-interest income generated by us.
Capital adequacy and liquidity requirements
The RBI has issued guidelines for implementation of Basel III from April 1, 2013 in a phased manner wherein
Indian banks are required to improve the quality and consistency of their capital base, enhance risk coverage and
supplement the risk - based capital requirement with a leverage ratio. The RBI may change the applicable risk
weightage for different classes of asset from time to time. Any incremental capital adequacy requirement may
impact our ability to grow our business. Implementation of Basel III in a phased manner or other capital adequacy
requirements imposed by RBI may result in incurrence of substantial compliance and monitoring costs by our
Bank. The capital adequacy requirements prescribed by Basel III guidelines are more stringent than the
requirements prescribed by the earlier guidelines and compliance with such requirements will have an impact on
our financial results, including certain key indicators of financial performance, such as the return on equity, gross
profit etc.
RBI, as part of Basel III Liquidity framework, has issued and will continue to issue guidelines on liquidity
management applicable to banks. Additionally, there are specific guidelines on liquidity, ALM and interest rate
sensitivity issued by the RBI from time to time which we are required to comply with. The various liquidity
requirements deal with Liquidity Coverage Ratio (“LCR”), Liquidity Monitoring tools, Stress Testing, and other
Liquidity Ratios. LCR became effective on September 30, 2014, and Intra Day Liquidity Monitoring became
effective from January 1, 2015, whereas the Net Stability Funding Ratio, with respect to which draft guidelines
have been issued by the RBI, became applicable from January 1, 2018.
Ability to manage NPA levels
As of March 31, 2016, March 31, 2017, March 31, 2018 and December 31, 2018, our gross NPAs represented
1.97%, 2.67%, 9.98% and 13.95% of our gross advances during the respective periods. The NPAs net of
provisions were ₹ 2,316.41 million, ₹ 4,184.16 million, ₹ 14,578.90 million and ₹ 17,162.16 million, representing
1.18%, 1.76%, 5.66% and 7.64% of our net advances as of March 31, 2016, March 31, 2017, March 31, 2018 and
as on December 31, 2018, respectively. If there is any deterioration in the quality of our security or further ageing
of the assets after being classified as non-performing, we may be required to increase our provisions. Moreover,
our ability to manage NPA levels will depend on our ability to recover NPAs in a manner consistent with past
abilities and further improve our internal controls and processes. Our ability to reduce or contain the level of our
NPAs may also be affected by several factors that are beyond our control including, a sharp and sustained rise in
interest rates, unemployment, slowdown in the Indian economy, movements in global commodity markets and
exchange rates, competition, adverse changes in government policies, laws or regulations and performance of
various industries.
Our ability to control costs and to achieve operating efficiencies
We use several methods to achieve operating efficiencies, such as centralizing our processing (including with
respect to account-opening for current, savings and customer maintenance transactions, including reducing the
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time taken for the issue of cheque books and updating customer records), upgrading and rationalizing
infrastructure and technology, adopting continuous process and system improvement measures. On the other hand,
our operating costs continue to rise owing to growing branch network and hiring more employees. Our ability to
sustain our growth strategy and increase the yield on our investments will depend on our continued success at
achieving reductions in these costs and achieving operating efficiencies.
The Indian economy and the credit environment
On the domestic front, while the economic growth is firming up, conditions that strengthened fiscal consolidation,
inflation moderation and a benign current account deficit over the last few years are changing, thereby warranting
caution. The gross fiscal deficit was at 3.5% of GDP in Fiscal 2017 and remained at 3.5% in Fiscal 2018. The
fiscal deficit is budgeted to decline to 3.3% of GDP in Fiscal 2019. There could be challenges on the fiscal front
unless there is buoyancy in tax receipts and/ or a restraint on expenditure. (Source: Financial Stability Report,
Issue No. 17, Reserve Bank of India, June 2018)
Over the rest of 2018- 19, the acceleration of growth that commenced in 2017-18:H2 is expected to be consolidated
and built upon. Keeping in view the evolving economic conditions, real GDP growth for 2018- 19 is expected to
increase to 7.4% from 6.7% in the previous year, with risks evenly balanced. (Source: RBI Annual Report 2017-
18 available on www.rbi.org.in).
As per estimates, India’s growth is forecast to further increase to 7.5% by the end of the forecast horizon (April
1, 2019-March 31, 2020) (Source: World Bank. 2018. Global Economic Prospects, June 2018: The Turning of
the Tide? Washington, DC: World Bank. doi: 10.1596/978-1-4648-1257-6. License: Creative Commons
Attribution CC BY 3.0 IGO).
Inflation
Inflation eased to its lowest level in the new consumer price index (“CPI”) series in June 2017, with food prices
going into deflation. The delayed softening of food prices in the fourth quarter brought relief and the year ended
with the lowest annual average inflation of 3.6% since Fiscal 2013. Headline inflation which averaged 4.8% during
the first quarter of Fiscal 2019, is likely to face upside risks over the rest of the year and is projected at 4.6% in
the second quarter of Fiscal 2019; 4.8% in the second half year of Fiscal 2019 and 5.0% in the first quarter of
Fiscal 2020, including the HRA impact for Central government. The conduct of monetary policy is expected to
keep the medium term target for CPI inflation of 4% within the tolerance band of +/ (-) 2%, while supporting
growth. (Source: RBI report on The Economy- Review and Prospects available on www.rbi.org.in)
Regulations and policies for Indian banks
Our operations are regulated by the RBI and are subject to detailed supervision of RBI. The Government, through
the RBI, is actively involved in the management of the Indian economy and in implementing their social policies.
Accordingly, we are subject to changes in regulations and government policies and accounting principles relevant
to the banking industry. Any changes in the laws, rules, regulations, guidelines or norms applicable to the banking
industry, whether favourable or unfavourable to us, could materially impact our business, results of operations
and financial condition. For example, the reserve requirements (designed to maintain the strength of the Indian
banking sector but also to reduce liquidity and therefore the availability of credit) and requirements to lend to
certain priority sectors and requirements discouraging lending in certain specified sectors, such as real estate,
commodities and capital markets, etc. would affect the composition of our asset portfolio and our profitability.
We are also subject to periodic inspection by the RBI.
In addition, on November 8, 2016, the Government of India announced the demonetisation of all existing ₹ 500
and ₹ 1,000 banknotes. As a result, the Reserve Bank of India has withdrawn all prevailing ₹ 500 and ₹ 1,000
banknotes as legal tender, effective from November 9, 2016. This policy was introduced to, among other reasons,
(i) lower cash circulation in the country as a means of counteracting corruption, which is often directly cash-linked
and (ii) eliminate counterfeit money. The immediately ensuing impact of demonetisation on our business was a
sharp increase in our current accounts and savings accounts, and a short-term decrease in loan growth in some of
our retail and SME loan books. We also saw an increase in our various digital channels’ utilisation.
The goods and service tax (“GST”) that is implemented with effect from July 1, 2017 seeks to combine taxes and
levies by the GoI and state governments into a unified rate structure, and replace indirect taxes on goods and
services such as central excise duty, service tax, customs duty, central sales tax, state VAT, cess and surcharge
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and excise that are currently being collected by the GoI and state governments. As the taxation regime in India is
undergoing a significant overhaul, its consequent effects on the banking system cannot be determined at present
and there can be no assurance that such effects would not adversely affect our Bank’s business and future financial
performance.
See the section “Regulations and Policies” on page 145.
Sources and Cost of Funding
Recent macroeconomic conditions have restricted the ability of banks and financial institutions to raise funding
amid tight liquidity conditions, resulting in a renewed emphasis on customer deposits as a source of funding. Our
primary interest-bearing liability is our deposit base.
To continue to source low-cost funding through customer deposits, we must, among other things, further develop
our rapidly expanding branch network, increase brand recall and develop products and services to distinguish
ourselves in an increasingly competitive industry. However, increasing customer sophistication, competition for
funding, any sharp increase in prevailing interest rates and changes to the RBI’s liquidity and reserve requirements
may increase the rates that we pay on our deposits.
In addition, we have issued, and may continue to issue, subordinated debt to further enhance our capital adequacy
ratios and build long-term stable funding. As of March 31, 2018, we had ₹ 3,687.00 million of Tier II debt
outstanding, which constituted 0.91% of our total liabilities as of that date and as of December 31, 2018, we had
₹ 3,687.00 million of Tier II debt outstanding, which constituted 1.09% of our total liabilities as of that date.
Significant Accounting Policies
A. Basis of Accounting:
The financial statements are prepared following the going concern concept, on historical cost basis unless
otherwise stated 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, Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013 read with
Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the
banking industry in India.
B. 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 statements
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.
C. Principal Accounting Policies
1. Transactions Involving Foreign Exchange:
(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the
year as per the guidelines issued by FEDAI. The resultant profit or loss is accounted for.
(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date
of the respective transaction.
(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the
corresponding forward rates for the residual maturity of the contract, in accordance with the guidelines
of FEDAI and the provisions of AS-11. The difference between revalued amount and the contracted
amount is recognized as profit or loss, as the case may be.
(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the
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rates prevailing on the Balance Sheet date.
2. Investments:
(a) Investments are categorized under the heads ‘Held to Maturity’, ‘Available for Sale, and ‘Held for
Trading’ and are valued in accordance with the guidelines of the Reserve Bank of India.
(b) Brokerage / commission etc., paid in connection with the acquisition of investments is charged to revenue
and not included in cost.
(c) Broken period interest paid / received on debt instruments is treated as interest expended / income.
(d) Security receipts are valued at NAV as declared by Securitisation Companies.
(e) The excess of acquisition cost over the face value of securities under “Held to Maturity” category is
amortised over the remaining period to maturity.
(f) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are
charged to the profit and loss account. Cost of investments is computed based on the Weighted Average
Rate method.
(g) Profit / loss on sale of investments in the 'Held to Maturity' category is recognized in the profit and loss
account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements)
to capital reserve. Profit / loss on sale of investments in 'Available for Sale' and 'Held for Trading'
categories is recognised in the profit and loss account.
(h) All Repo and Reverse Repo transactions are accounted for as borrowing and lending transactions
respectively in accordance with the extant RBI guidelines.
3. Advances:
3.1 In accordance with the prudential norms issued by RBI:
(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;
(b) Provisions are made for loan losses, and
(c) General provision for standard advances is made.
3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part
recovery towards NPA accounts receipts held under sundries, and provision made for sacrifice of interest
/ diminution in the value of restructured advances measured in present value terms as per RBI guidelines.
4. Fixed Assets and Depreciation:
(a) Fixed assets are accounted for at their historical cost except for Land and Buildings which are accounted
at their revalued cost.
(b) Software is capitalised along with computer hardware and included under Other Fixed Assets.
(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the
useful life specified in Schedule II to the Companies Act, 2013 except for hand held communication
devices which are depreciated in full considering the fast changing technology and obsolescence.
(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33%
as per the guidelines issued by the Reserve Bank of India.
(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately,
is provided on the total cost.
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5. Employee Benefits:
(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision
for Leave Encashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as
per Accounting Standard 15. Contribution made by us to Provident Fund and Contributory Pension
Scheme are charged to the profit & loss account.
(b) We follow the intrinsic value method to account for our employee compensation costs arising from grant
of employee stock options.
6. Provision for Taxation:
Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial
pronouncements and legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22
(Accounting for Taxes on Income).
7. Revenue Recognition:
(a) Income is accounted for on accrual basis.
(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to
the significant uncertainty in collection thereof.
(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.
(d) Dividend Income on Investments is accounted based on declaration basis.
8. Segment Reporting:
(a) We recognise the business segment as the primary reporting segment and geographical segment as the
secondary reporting segment, in accordance with the RBI guidelines and in compliance with the
Accounting Standard 17.
(b) Business Segment is classified into (i) Treasury (ii) Corporate and Wholesale Banking, (iii) Retail
Banking and (iv) Other Banking Operations.
(c) Geographical Segment consists only of the Domestic Segment since we do not have any foreign
branches.
9. Earnings Per Share:
Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20
“Earnings per share”. Basic earnings per equity share are computed by dividing net profit by the weighted
average number of equity shares outstanding for the year. Diluted earnings per equity share are computed
using the weighted average number of equity shares and dilutive potential equity shares outstanding during
the period.
10. Impairment of Assets:
We assess, at each balance sheet date, whether there is any indication that an asset may be impaired.
Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets
exceeds their estimated recoverable amount.
11. Provisions, Contingent Liabilities and Contingent Assets:
(a) As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets”, we
recognize provisions only when it has a present obligation as a result of a past event and it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and
when a reliable estimate of the amount of the obligation can be made.
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(b) Contingent Liability is recognised and disclosed only when a legal dispute is pending before a court of
law/ forum/ banking ombudsman.
(c) Contingent Assets are not recognized in the financial statements since this may result in the recognition
of income that may never be realised.
12. Net Profit:
The net profit as per the Profit & Loss account is arrived at after necessary provisions towards:
(a) Taxation.
(b) Advances and other assets.
(c) Shortfall in the value of investments
(d) Staff Retirement benefits.
(e) Other usual and necessary provisions.
13. Cash and Cash Equivalents:
Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at
Call and Short Notice. Cash flows are reported using indirect method, whereby profit (loss) before tax is
adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future
operating cash receipts or payments and item of income or expenses associated with investing or financing
cash flows. The cash flows from operating, investing and financing activities of our Bank are segregated.
Changes in the accounting policy if any in the last three years and their effect on our profits and reserves
There are no changes in our accounting policies in the last three financial years.
Regrouping of Repo / Reverse Repo transactions
Pursuant to RBI circular FMRD. DIRD. 10/14.03.002/2015-16 dated May 19, 2016, our Bank, has with effect
from 3rd October 2016, considered its Repo / Reverse Repo transactions under Liquidity Adjustment Facility
(LAF) and Marginal Standing facility (MSF) of RBI as borrowings / Lending, as the case may be. Consequently,
interest expended on repo borrowing with RBI is included under "Interest Expended" and interest earned on
reverse repo with RBI under "Interest Earned - Interest on Balances with Reserve bank of India and other inter-
bank funds". Hitherto, the repo/ reverse repo transactions were included under "Investments" and interest thereon
was included under " Interest Earned - Income on Investments".
Results of Operations
The table below sets forth a summary of our financial results containing significant items of our income and
expenditure for Fiscal 2016, Fiscal 2017 and Fiscal 2018. (₹ in million)
Fiscal 2016 Fiscal 2017 Fiscal 2018
Amount % of total
income
Amount % of total
income
Amount % of total
income
Income
a. Interest Earned 25,682.99 89.40 28,466.58 84.99 30,416.22 89.76
b. Other Income 3,045.32 10.60 5,027.68 15.01 3,468.08 10.24
Total 28,728.31 100.00 33,494.26 100.00 33,884.30 100.00
Expenditure
Interest Expended 19,229.93 66.94 20,640.04 61.62 22,510.21 66.43
Operating Expenses 5,427.14 18.89 6,513.66 19.45 7,820.30 23.08
Provisions &
Contingencies
2,268.88 7.90 3,779.84 11.28 9,402.45 27.75
Total 26,925.95 93.73 30,933.54 92.35 39,732.96 117.26
Net Profit for The Year 1,802.36 6.27 2,560.72 7.65 (5,848.66) (17.26)
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Fiscal 2016 Fiscal 2017 Fiscal 2018
Amount % of total
income
Amount % of total
income
Amount % of total
income
Income
(after tax)
Segment Reporting
Business Segment
We have four primary business segments, which are (a) Treasury Operations, (b) Corporate/ Wholesale Banking
Operations, (c) Retail Banking Operations, and (d) Other Banking Operations. These segments have been
categorised in accordance with applicable law.
The following table sets out the segment revenue and result across our primary reportable segment: (₹ in million)
Particulars Year ended March 31
2016 2017 2018
1. Segment Revenue
a. Treasury Operations 5,956.46 8,663.14 7,799.64
b. Corporate / wholesale banking operations 8,601.91 9,332.20 7,763.01
c. Retail banking operations 14,034.69 15,226.23 18,113.68
d. Other banking operations 135.26 272.68 207.97
Total 28,728.32 33,494.25 33,884.30
2. Segment Results (Operating Profit):
a. Treasury Operations 1,018.89 3,104.25 1,432.15
b. Corporate / wholesale banking operations 1,154.82 1,290.36 585.87
c. Retail banking operations 1,789.80 1,706.74 1,367.02
d. Other banking operations 107.73 239.21 168.75
Total 4,071.24 6,340.56 3,553.79
Operating Profit (including exceptional
items)
4,071.24 6,340.56 3,553.79
Provisions Other Than Tax 1,768.88 2,539.84 13,061.55
Profit Before Tax 2,302.36 3,800.72 (9,507.76)
Less: Tax expenses 500.00 1240.00 (3,659.10)
Net Profit 1,802.36 2,560.72 (5,848.66)
Geographical Segment
We make no reporting under “Geographical Segments” as all our operations are in India.
Components of Income and Expenditure
Income
Our income comprises of income from interest earned and other income.
Income from interest earned
Income from interest earned comprises of interest on advances (earned on the advances made by us) and discounts
on bills, income from investments, interest received from inter-bank lending, reverse repo transaction from RBI
and other interest income. Income from investments consists of interest on securities and other investments. Our
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securities portfolio consists primarily of Government securities and we meet our SLR requirements through these
investments. We also hold debentures and bonds issued by public sector undertakings and other corporations,
commercial paper, certificate of deposits, equity shares, preference shares, mutual fund units and security receipts.
Other Income
Other income consists of income from non-interest bearing sources including income from commission, exchange
and brokerage which include fees from opening Letter of credit and negotiating bills under Letter of credit,
issuance of all types of Guarantees, Loan processing fees etc., profit on sale of investments, profit on exchange
transactions, income earned by way of dividends from companies in India and miscellaneous income.
Miscellaneous income primarily includes commission received from the sales of third party products, mutual fund
products and fees collected from customers like folio charges, commitment charges etc.
Expenditure
Interest Expended
Our interest expended consists of interest on deposits and interest on borrowing from the RBI and inter-bank
borrowing, call money, interest on Tier II borrowings and interest on other borrowings. Both our interest income
and expenditure are affected by fluctuations in interest rates as well as the volume of activity. Our interest
expenditure is also affected to the extent we fund our activities with low interest or non-interest deposits (CASA),
and to the extent to which we rely on other borrowings.
Operating Expenses
Our operating expenses consist principally of employee expenses, rent, taxes and lighting expenses, printing and
stationery expenses, advertisement and publicity expenses, depreciation on our Bank's property, Director's fees,
allowances, expenses of Auditors’ fees including branch auditors, law charges, postage, telegrams, telephones
expenses, repairs & maintenance, insurance expenses and other expenditure.
Provisions and Contingencies
Our provisions and contingencies predominantly comprise of provision towards standard assets, provision towards
non-performing assets, provision for MAT credit, provision for gratuity, provision for pension, provision for
restructured advances, provision for depreciation in market value of investments, provision for foreign currency
unhedged, provision for other assets and provision for income tax.
Nine months ended December 31, 2018 compared to nine ended December 31, 2017
Summary of Profit and Loss Account
(in ₹ million, except percentages)
Nine months ended December 31 % change
2018 2017
Net Interest Income 4,199.46 6,701.34 (37.33)%)
Other Income 1,928.44 3,085.24 (37.49)%
Operating Expenses 6,035.67 5,540.33 8.94%
Provisions and Contingencies 6,388.88 3,872.40 64.99%
Net Profit (6,296.66) 373.85 (1,784.27)%
Net Interest Income
Our net interest income decreased by 37.33% from ₹ 6701.34 million in the nine months ended December 31,
2017 to ₹ 4,199.46 million in the nine months ended December 31, 2018. The following table sets forth the
components of our net interest income:
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(in ₹ million, except percentages)
Nine months ended December 31 % change
2018 2017
Interest / discount on advances / bills 16,438.93 18,173.20 (9.54)%
Income on Investments 5,052.80 5,100.34 (0.93)%
Interest on balance with RBI and other
inter-bank funds
56.19 58.81 (4.46)%
Others 28.51 57.61 (50.50)%
Interest Income 21,576.43 23,389.96 (7.75)%
Interest on deposits 15,932.70 14,758.10 7.96%
Interest on RBI / Inter-Bank Borrowings 1,444.27 1,930.52 (25.19)%
Interest Expended 17,376.97 16,688.62 4.12%
Net Interest Income* 4,199.46 6,701.34 (37.33)% *Net interest income represents the excess of interest earned from interest-earning assets (performing assets and investments) over the interest
paid on interest-bearing customer deposits and borrowings.
The decrease in net interest income is primarily due to the following reasons:
Interest Income
Our total interest income decreased by 7.75%, from ₹ 23,389.96 million in the nine months ended December 31,
2017 to ₹ 21,576.43 million in the nine months ended December 31, 2018. The decrease in interest income was
primarily due to a decrease by 9.54% in our interest income on advances which is due to a decrease in our total
advances and increase in the gross non-performing advances, during the period.
Interest Expended
Our total interest expense increased by 4.12%, from ₹ 16,688.62 million in the nine months ended December 31,
2017 to ₹ 17,376.97 million in the nine months ended December 31, 2018. The increase in interest expense was
primarily due to the increase in the interest on deposits by 7.96% which is primarily due to an increase in the
average deposits and deposits in our savings bank accounts across the period.
Other income
Our other income decreased by 37.49 % from ₹ 3,085.24 million in the nine months ended December 31, 2017 to
₹ 1,928.44 million in the nine months ended December 31, 2018. This decrease was primarily due to decrease in
bad debt recovery and our trading profit in the nine months ended December 31, 2018 as compared to the nine
months ended December 31, 2017.
Operating Expense
Our operating expenses increased by 8.94%, from ₹ 5,540.33 million in the nine months ended December 31,
2017 to ₹ 6,035.67 million in the nine months ended December 31, 2018. These operating expenses primarily
constituted basic, dearness and other allowances as per the annual increments allowed. In addition to this, there
was also an increase in the dearness allowance declared and in the provisions made for gratuity. The other
expenses constituted payment towards insurance premium (including payment of depository insurance and credit
guarantee corporation premium), outsourcing of ATMs, law charges, housekeeping charges, ATMs / point of sale
transactions related expenses, among others.
Provisions and contingencies
Our provisions and contingencies increased by 64.99%, from ₹ 3,872.4 million in the nine months ended
December 31, 2017 to ₹6,388.88 million in the nine months ended December 31, 2018, primarily due to an
increase in provisions for mark-to-market losses on investments (permitted to be spread over four quarters), our
NPAs and certain non-banking assets of our Bank, which was offset by a reduction in income tax provisions due
to recognition of net deferred tax assets on timing differences.
Net Profit
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Due to the reasons mentioned above, our net profit declined by 1,784.27% from net profit of ₹ 373.85 million in
the nine months ended December 31, 2017 to a net loss of ₹ 6,296.66 million in the nine months ended December
31, 2018.
Fiscal 2018 compared to Fiscal 2017
Summary of profit and loss account during this period
(in ₹ million, except percentages)
Fiscal % change
2017 2018
Net Interest Income 7,826.54 7,906.01 1.02
Other Income 5,027.68 3,468.08 (31.02)
Operating Expenses 6,513.66 7,820.30 20.06
Provisions and Contingencies 3,779.84 9,402.45 148.75
Net Profit 2,560.72 (5,848.66) (328.40)
Net Interest Income
Our net interest income increased by 1.02% from ₹ 7,826.54 million in Fiscal 2017 to ₹ 7,906.11 million in Fiscal
2018. The following table sets forth the components of our net interest income: (in ₹ million, except percentages)
Fiscal % change
2017 2018
Interest / discount on advances / bills 22,397.10 23,314.70 4.10
Income on Investments 5,775.94 6,930.54 19.99
Interest on balance with RBI and other
inter-bank funds
122.83 70.30 (42.77)
Others 170.70 100.68 (41.02)
Interest Income 28,466.58 30,416.22 6.85
Interest on deposits 19,381.61 19,879.94 2.57
Interest on RBI / Inter-Bank
Borrowings
1,258.43 2,630.27 109.01
Interest Expended 20,640.04 22,510.21 9.06
Net Interest Income* 7,826.54 7,906.01 1.02
*Net interest income represents the excess of interest earned from interest-earning assets (performing assets and investments)
over the interest paid on interest-bearing customer deposits and borrowings.
The increase in net interest income is primarily due to the following reasons:
Interest Income
Our total interest income increased by 6.85%, from ₹ 28,466.58 million in Fiscal 2017 to ₹ 30,416.22 million in
the Fiscal 2018. The increase in interest income was due to the following reasons:
• our interest income on advances and discounts on bills increased by 4.10%. This increase was primarily
due to an increase in the gross advances by ₹ 30,460.78 million.
• our interest income on investments increased by 19.99%. This increase was primarily due to increase in
statutory liquidity ratio by 21.87% in Fiscal 2018 as compared to Fiscal 2017 and our net investments
having increased by 24.46%.
• Our interest on other inter-bank lending has decreased by 42.77%. This decline was primarily due to
lower inter-bank lending. The average surplus fund received during the demonetization was parked in
the term repo and the same was not available in Fiscal 2018.
• Other interest income has declined by 41.02%. This decline was primarily due to the decline in the
interest received on income tax refund.
Interest Expended
132
Our total interest expense increased by 9.06%, from ₹ 20,640.04 million in Fiscal 2017 to ₹ 22,510.21 million in
Fiscal 2018. The increase in interest expense was due to the following reasons:
• Our interest on deposits increased by 2.57%. This increase was primarily due to an increase in savings
Bank account balance and an increase in deposits and time deposit from Banks; and
• Our interest expense on borrowing from RBI and inter-bank borrowings increased by 109.01%. This
increase was primarily due to increase in money market borrowing under the collateralized borrowing
and lending obligation / repo / call segments and increase in interest paid on subordinated bonds
Other income
The components of our other income are as follows: (in ₹ million, except percentages)
Fiscal % change
2017 2018
Commission, exchange and brokerage 1,340.69 1,217.64 (9.18)
Profit/ (loss) on sale of investments 2,599.59 644.02 (75.23)
Profit/ (loss) on sale of land, buildings and other assets 2.64 (1.84) (169.43)
Profit/ (loss) on exchange transactions 133.03 121.80 (8.44)
Income earned by way of dividends from companies in India 31.75 32.99 3.89
Miscellaneous income 919.98 1,453.46 57.99
Total 5,027.68 3,468.07 (31.02)
There was a decline in trading profit in Fiscal 2018 as compared to Fiscal 2017. The market yields have gone up
during the year resulting in decline in prices of securities. In the raising yield scenario, our Bank has sold securities,
within the policy frame work to reduce mark-to market losses at the year end and also to align with the market.
There was decline in commission and exchange due to reduction in processing charges.
Increase in miscellaneous income is due to increase in the bad debt recovery of ₹ 399.04 million made during the
current year and increase in charges for non – maintenance of minimum balance in savings account and income
from ATM/POS transactions.
Operating Expense
The components of our operating expenses are as follows: (in ₹ million, except percentages)
Fiscal % change
2017 2018
Payments to and provision for employees 3,347.09 3,921.34 17.16
Rent, taxes and lighting 634.98 765.27 20.52
Printing and stationery 66.23 74.24 12.09
Advertisement and publicity 96.47 94.42 (2.13)
Depreciation on bank’s property 480.55 588.42 22.45
Director's fees, allowances 14.00 11.73 (16.21)
Auditors’ fees & expenses (including the branch auditors) 13.87 18.24 31.51
Law charges 20.43 23.46 14.83
Postage, telegrams, telephones, etc., 127.99 143.70 12.27
Repairs and maintenance 43.67 71.37 63.43
Insurance 265.87 333.58 25.47
Other expenditure 1,402.51 1,774.53 26.53
Total 6,513.66 7,820.30 20.06
Our operating expenses increased by 20.06% from ₹ 6,513.66 million in Fiscal 2017 to ₹ 7,820.30 million in
Fiscal 2018. This increase was primarily due to the following:
a. an increase in employee expenses: Such increase was due to increase in basic pay and allowance as well as
an increase in the number of our employees, in addition to the proportionate compensation expenses on stock
options based on intrinsic value. Additionally, provisions for the wage revision which, if implemented, is
expected to take effect from November 2017 has been made in the books for the period from November
2017 to March 2018.
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b. Ministry of Labour and Employment, Government of India on March 29, 2018 enhanced the gratuity payable
to an employee under Payment of Gratuity Act, 1972 to not exceed ₹ 2.00 million from earlier limit of ₹ 1.00
million. One-fourth of the additional liability due to such change have been charged to the P&L as employee
cost for the quarter ended March 31, 2018.
c. increase in the premium paid towards deposit insurance to Credit Guarantee Corporation, due to increase in
deposits.
d. increase in rent and lighting expenses due to increase in number of branches and ATMs operated by us in
the Fiscal 2018.
e. an increase in depreciation due to increase in fixed assets added in new branches and ATMs.
f. increase in professional charges including one-time payments in certain cases.
g. increase in payment made for POS and to NFS / VISA and ATM fees due to increase in transaction volumes.
Provisions and contingencies
Provisions and contingencies increased by 148.75% from ₹ 3,779.84 million in Fiscal 2017 to ₹ 9,402.45 million
in Fiscal 2018 primarily due to the following:
• Our provisioning towards NPA increased from ₹ 2,354.86 million in the Fiscal 2017 to ₹ 13,021.41 million
in Fiscal 2018. Our NPA provisioning coverage was 55.07% as of March 31, 2018 and our gross and net
NPAs were 9.98% and 5.66% of our gross advances and net advances, respectively.
• Provision for depreciation of market value of investments increased from ₹ 23.55 million in Fiscal 2017 to
₹ 533.40 million in Fiscal 2018 on account of adverse movement in interest rates.
Further, our provision for taxation declined by 395.09% from ₹ 1,240.00 million in the Fiscal 2017 to ₹ (3,659.10)
million in the Fiscal 2018, primarily since our Bank has recognized net deferred tax asset as on March 31, 2018
aggregating to ₹ 4,649.52 million on timing difference pertaining to surplus provisions for doubtful advances,
standard advances, leave encashment etc. in accordance with the Accounting Standard 22 on “Taxes and Income”
issued by the ICAI.
Net Profit
Due to the reasons mentioned above, our net profit declined by 328.40% from ₹ 2,560.72 million in Fiscal 2017
to net loss of ₹ 5,848.66 million in Fiscal 2018.
Fiscal 2017 compared to Fiscal 2016
Summary of profit and loss account during this period
(in ₹ million, except percentages)
Fiscal % change
2016 2017
Net Interest Income 6,453.06 7,826.54 21.28
Other Income 3,045.32 5,027.68 65.10
Operating Expenses 5,427.14 6,513.66 20.02
Provisions and Contingencies 2,268.88 3,779.84 66.59
Net Profit 1,802.36 2,560.72 42.08
Net Interest Income
Our net interest income increased by 21.28% from ₹ 6,453.06 million in Fiscal 2016 to ₹ 7,826.54 million in
Fiscal 2017. The following table sets forth the components of our net interest income: (in ₹ million, except percentages)
Fiscal % change
2016 2017
Interest / discount on advances / bills 20,382.70 22,397.11 9.88
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Fiscal % change
2016 2017
Income on Investments 5,194.00 5,775.94 11.20
Interest on balance with RBI and other
inter-bank funds
32.68 122.83 275.86
Others 73.61 170.70 131.90
Interest Income 25,682.99 28,466.58 10.84
Interest on deposits 18,332.92 19,381.61 5.72
Interest on RBI / Inter-Bank
Borrowings
897.01 1,258.43 40.29
Interest Expended 19,229.93 20,640.04 7.33
Net Interest Income* 6,453.06 7,826.54 21.28
*Net interest income represents the excess of interest earned from interest-earning assets (performing assets and investments)
over the interest paid on interest-bearing customer deposits and borrowings.
The increase in net interest income is primarily due to the following reasons:
Interest Income
Our total interest income increased by 10.84%, from ₹ 25,682.99 million in Fiscal 2016 to ₹ 28,466.58 million in
the Fiscal 2017. The increase in interest income was due to the following reasons:
• our interest income on advances and discounts on bills increased by 9.88%. This increase was primarily
due to an increase in the gross advances by ₹ 41,395.30 million.
• our interest income on investments increased by 11.20%. This increase was primarily due to increase in
SLR securities by 35.24% in 2017 as compared to 2016 and our net investments having increased by
32.18%.
• Our interest on other inter-bank funds has increased by 275.86%. This increase was primarily due to
higher inter-bank lending.
• Other interest income has increased by 131.90%. This increase is primarily due to the interest received
on income tax refund. Additionally, the interest on other interbank funds increased as the average surplus
received during the demonetization was parked in term repo.
Interest Expended
Our total interest expense increased by 7.33%, from ₹ 19,229.93 million in Fiscal 2016 to ₹ 20,640.04 million in
Fiscal 2017. The increase in interest expense was due to the following reasons:
• Our interest on deposits increased by 5.72%. This increase was primarily due to an increase in savings
account balance under CASA, and an increase in deposits.; and
• Our interest expense on borrowing from RBI and inter-bank borrowings increased by 40.29%. This
increase was primarily due to increase in money market borrowing under the collateralized borrowing
and lending obligation / repo / call segments and increase in interest paid on borrowing under refinance
as the loan of ₹ 2,000 million was raised during the month of March 2016.
Other income
The components of our other income are as follows: (in ₹ million, except percentages)
Fiscal % change
2016 2017
Commission, exchange and brokerage 1,471.37 1,340.69 (8.88)
Profit/ (loss) on sale of investments 533.58 2,599.59 387.21
Profit/ (loss) on sale of land, buildings and other assets (0.79) 2.64 (435.44)
Profit/ (loss) on exchange transactions 166.46 133.03 (20.08)
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Fiscal % change
2016 2017
Income earned by way of dividends from companies in India 29.73 31.75 6.79
Miscellaneous income 844.98 919.98 8.88
Total 3,045.33 5,027.68 65.10
Commission, exchange and brokerage income decreased primarily due to reduction in commission for letter of
credit lease rentals. Profit on sale of investments increased due to increase in trading volume and favourable
movement in interest rates. Miscellaneous income has increased primarily due to an increase in income from
service charges, debit and ATM card charges.
Operating Expense
The components of our operating expenses are as follows: (in ₹ million, except percentages)
Fiscal % change
2016 2017
Payments to and provision for employees 2,753.52 3,347.09 21.56
Rent, taxes and lighting 583.48 634.98 8.83
Printing and stationery 57.72 66.23 14.74
Advertisement and publicity 83.84 96.47 15.06
Depreciation on bank’s property 377.63 480.55 27.25
Director's fees, allowances 11.53 14.00 21.42
Auditors’ fees & expenses (including the branch auditors) 12.50 13.87 10.96
Law charges 11.62 20.43 75.82
Postage, telegrams, telephones, etc., 133.65 127.99 (4.23)
Repairs and maintenance 34.12 43.67 27.99
Insurance 238.24 265.87 11.60
Other expenditure 1,129.29 1,402.51 24.19
Total 5,427.14 6,513.66 20.02
Our operating expenses increased by 20.02% from ₹ 5,427.14 million in Fiscal 2016 to ₹ 6,513.66 million in
Fiscal 2017. This increase was primarily due to:
a. an increase in employee expenses. Such increase was due to increase in basic pay and allowance as well as
an increase in the number of our employees in addition to the proportionate compensation expenses on stock
options based on intrinsic value.
b. increase in the premium paid towards deposit insurance to Credit Guarantee Corporation, due to increase in
deposits.
c. increase in rent and lighting expenses due increase in number of branches and ATMs operated by us in the
Fiscal 2017.
d. increase in premium staff group health medical insurance policy, and increase in the intrinsic valuation for
the provision for pension, gratuity and leave encashment made on an actuarial basis.
e. an increase in depreciation due to increase in fixed assets added in new branch ATMs.
f. payment of penalty of ₹ 30.00 million to the RBI. For further details, please see “Risk Factors” on page 331.
Provisions and contingencies
Provisions and contingencies increased by 66.59% from ₹ 2,268.88 million in Fiscal 2016 to ₹ 3,779.84 million
in Fiscal 2017 primarily due to increase in provisioning towards NPA. Our provisioning towards standard assets
decreased from ₹ 170.00 million for the Fiscal 2016 to ₹ 151.70 million for the Fiscal 2017. Our provisioning
towards NPA increased from ₹ 1,767.65 million in the Fiscal 2016 to ₹ 2,354.90 million in the Fiscal 2017. Our
NPA provisioning coverage was 59.51% as of March 31, 2017 and our gross and net NPAs were 2.67% and 1.76%
of our gross advances and net advances, respectively.
Our provision for taxation increased by 148% from ₹ 500.00 million in the Fiscal 2016 to ₹ 1,240.00 million in
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the Fiscal 2017, primarily due to increase in taxable income.
Net Profit
Due to the reasons mentioned above, our net profit increased by 42.08% from ₹ 1,802.36 million in Fiscal 2016
to ₹ 2,560.72 million in Fiscal 2017.
Discussion on our assets and liabilities
Assets
The following table sets forth the principal components of our assets as of March 31, 2016, March 31, 2017, and
March 31, 2018.
(in ₹ million, except percentages)
As at March 31
2016 %
change
year on
year
2017 %
change
year
on
year
2018
Cash & Balances with RBI 12,865.02 13.08 14,548.05 16.73 16,981.69
Balances with banks and money at call and short notice 821.09 105.91 1,690.72 87.37 3,167.94
Investments 65,454.05 32.18 86,517.30 24.46 107,677.48
Advances 196,437.39 20.80 237,289.11 8.59 257,682.02
Fixed Assets 3,669.99 (2.15) 3,591.20 12.07 4,024.54
Other Assets 8,074.09 9.12 8,810.83 67.51 14,758.59
Total Assets 287,321.63 22.67 352,447.21 14.71 404,292.26
Assets as at March 31, 2017 and March 31, 2018
Our total assets have increased by 14.71% from ₹ 352,447.21 million as at March 31, 2017 to ₹ 404,292.26 million
as at March 31, 2018 primarily due to the following reasons:
a. Cash and balances with RBI: Cash in hand, including foreign currency notes, has increased by 0.85% from ₹
3,412.65 million as at March 31, 2017 to ₹ 3,441.57 million as at March 31, 2018. Balances with the RBI, in
current account, has also increased by 21.60% from ₹ 11,135.40. million as at March 31, 2017 to ₹ 13,540.12
million as at March 31, 2018.
b. Balances with banks and money at call and short notice:
• Balances with banks, in current accounts and other deposit accounts in India, has increased by 109.26%
from ₹ 198.43 million as at March 31, 2017 to ₹ 415.24 million as at March 31, 2018 due to surplus cash
held for the purposes of customer remittances and withdrawal. Balances with banks, in current accounts
outside India, has decreased by 86.57% from ₹ 392.29 million as at March 31, 2017 to ₹ 52.70 million
as at March 31, 2018 pursuant to the import/export transactions of our customers.
• As at March 31, 2018, money at call and short notice with banks, with RBI in reverse repo and with other
institutions was at ₹ 2,700.00 million as compared to ₹ 1,100.00 million as at March 31, 2017.
c. Investments: Investments have increased by 24.46% from ₹ 86,517.30 million as at March 31, 2017 to ₹
10,767.48 million as at March 31, 2018. This is primarily due to increase of our investments in government
securities by 21.67% from ₹ 79,107.02 million as at March 31, 2017 to ₹ 96,251.55 million as at March 31,
2018. We have also increased our investment in the shares of other companies by 34.96% from ₹ 1,349.83
million as at March 31, 2017 to ₹ 1,821.67 million as at March 31, 2018. We have also increased our other
investments, such as investments in commercial papers, mutual funds, units, etc., by 9.27% from ₹ 3,237.19
million as at March 31, 2017 to ₹ 3,537.41 million as at March 31, 2018. Further, we have also increased our
investments in debentures and bonds from ₹ 2,823.26 million as at March 31, 2017 to ₹ 6,066.85 million as at
March 31, 2018.
d. Advances: Advances have increased due to an increase in cash credit facility, overdrafts and loans repayable
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on demand, availed by our borrowers by 2.02% from ₹ 151,284.42 million as at March 31, 2017 to ₹
154,346.38 million as at March 31, 2018. Term loans given by us have increased by 28.12% from ₹ 77,366.48
million as at March 31, 2017 to ₹ 99,121.21 million as at March 31, 2018.
e. Fixed Assets: Bank’s fixed assets have increased due to addition/modification made in our Bank’s premises
worth ₹ 1.92 million, and purchase of software, server, interior/electrical work etc. for the new branches
amounting to of ₹ 1,033.30 million during Fiscal 2018.
f. Other assets have increased by 67.51% from ₹ 8,810.83 million in March 31, 2017 to ₹ 14,758.59 million in
March 31, 2018 predominantly due to increase in accrued interest, increase in advance tax and tax deducted
at source and increased deferred tax assets
Assets as at March 31, 2016 and March 31, 2017
Our total assets have increased by 22.67% from ₹ 287,321.63 million as at March 31, 2016 to ₹ 352,447.20 million
as at March 31, 2017 primarily due to the following reasons:
a. Cash & Balances with RBI: Cash in hand, including foreign currency notes, has increased by 8.03% from ₹
3,159.09 million as at March 31, 2016 to ₹ 3,412.65 million as at March 31, 2017. Balances with the RBI, in
current account, has also increased by 14.73% from ₹ 9,705.93 million as at March 31, 2016 to ₹ 11,135.40
million as at March 31, 2017.
b. Balances with banks and money at call and short notice:
• Balances with banks, in current accounts in India, has decreased by 1.75% from ₹ 201.97 million as at
March 31, 2016 to ₹ 198.43 million as at March 31, 2017 due to reduced surplus cash held for the purposes
of customer remittances and withdrawal. Balances with banks, in current accounts outside India, has
decreased by 36.64% from ₹ 619.12 million as at March 31, 2016 to ₹ 392.29 million as at March 31,
2017 pursuant to the export transactions of our customers.
• As at March 31, 2017, money at call and short notice with other institutions was at ₹ 1,100.00 million as
compared to nil as at March 31, 2016.
c. Investments: We have increased our investments in government securities by 35.24% from ₹ 58,494.29
million as at March 31, 2016 to ₹ 79,107.02 million as at March 31, 2017. We have also increased our
investment in the shares of other companies by 69.13% from ₹ 798.12 million as at March 31, 2016 to ₹
1,349.83 million as at March 31, 2017. We have also increased our other investments, such investments in
commercial papers, mutual funds, security receipts, units, etc., by 24.07% from ₹ 2,609.19 million as at March
31, 2016 to ₹ 3,237.19 million as at March 31, 2017.
d. Advances: Advances have increased due to an increase in working capital limits to our borrowers by 19.84%
from ₹ 106,783.41 million as at March 31, 2016 to ₹ 127,964.99 million as at March 31, 2017. Term loans
given by us have increased by 39.70% from ₹ 72,072.02 million as at March 31, 2016 to ₹ 100,685.91 million
as at March 31, 2017.
e. Fixed Assets: Bank’s fixed assets have increased due to addition in new premises of worth ₹ 1.86 million
during Fiscal 2017. Furniture and fixtures of ₹ 404.35 million have been added during Fiscal 2017. Other
assets have increased by 9.12% from March 31, 2016 to March 31, 2017 predominantly due to increase in
accrued interest, increase in advance tax paid and increased deferred tax assets.
Liabilities and Shareholders’ Funds
The following table sets forth the principal components of our liabilities and shareholders’ funds as at March 31,
2016, March 31, 2017 and March 31, 2018.
(in ₹ million, except percentages)
138
As of March 31,
2016 %
change
year on
year
2017 %
change
year on
year
2018
Capital 1,794.62 6.68 1,914.47 33.72 2,559.94
Reserve and Surplus 15,841.32 22.77 19,448.95 6.52 20,716.74
Total shareholders’ funds 17,635.94 21.14 21,363.42 8.96 23,276.69
Deposits 254,309.62 20.14 305,533.54 9.02 333,094.83
Borrowings 7,230.08 145.24 17,731.32 126.31 40,127.80
Other liabilities and provisions 8,145.99 (4.01) 7,818.93 (0.33) 7,792.94
Total liabilities and shareholders’ funds 287,321.63 22.67 352,447.21 14.71 404,292.26
Liabilities as at March 31, 2017 and March 31, 2018
Our total liabilities increased by 14.71% from ₹ 352,447.21 million as of March 31, 2017 to ₹ 404,292.26 million
as of March 31, 2018, primarily due to the following reasons:
a. Capital: Our capital increased by 33.72% from ₹ 1,914.47 million as of March 31, 2017 to ₹ 2,559.94. million
as of March 31, 2018 due to the issue of Equity Shares by us pursuant to the rights issue and shares issued
under ESOP.
b. Reserve and surplus: Our reserves and surplus have increased by 6.52% from ₹ 19,448.95 million in Fiscal
2017 to ₹ 20,716.74 million in Fiscal 2018. This was primarily on account of increase in the share premium
account by 89.33% from ₹ 8,079.81 million as of March 31, 2017 to ₹ 15,297.56 million as of March 31, 2018
due to issue of Equity Shares by us pursuant to a rights issue at a price of ₹ 122 per share which includes a
share premium of ₹ 112 per share. There is no change under the special reserve under Section 36(1)(viii) of
the Income Tax Act, 1961 and stands at ₹ 624.50 million as of March 31, 2017 and March 31, 2018. The
statutory reserve remains the same while the capital reserve has increased by 61.49%. There is an increase in
the revenue and other reserves by 24.33% from ₹ 2,165.27 million as on March 31, 2017 to ₹ 2,692.03 million
as on March 31, 2018 due to a reversal of ₹ 312.90 million and ₹ 191.50 million, being the unamortized amount
of loss on sale of advances to an asset reconstruction company and loss on frauds in advances account
respectively, which has been debited to the other reserves as mandated under the circular bearing
DBR.NO.BP.BC.102/21.04.048/2015-16 dated June 13, 2016, issued by the RBI now transferred to general
reserve during Fiscal 2018. The above increase was offset by a decrease in balance in profit and loss account
from a positive balance of ₹ 622.64 million as at March 31, 2017 to a negative balance of ₹ 6,711.25 million.
c. Deposits: Deposits have increased by 9.02% during this period primarily due to increase in term deposit,
demand deposits and saving bank deposit.
d. Borrowings: Borrowings increased by 126.31% from ₹ 17,731.32 million as on March 31, 2017 to ₹ 40,127.80
million as of March 31, 2018, due to increase in the borrowings from SIDBI amounting to ₹ 3,000.00 million
and increase in money market borrowings against surplus SLR securities, increase in MSF and REPO
borrowing from RBI amounting to ₹ 24,293.48 million.
e. Other liabilities and provisions: The other liabilities and provisions decreased by 0.33% from ₹ 7,818.93
million as at March 31, 2017 to ₹ 7,792.95 million as at March 31, 2018. The inter office adjustment balance
reduced from ₹ 480.64 million as on March 31, 2017 to ₹ 115.17 million as on March 31, 2018. The contingent
provisions against the standard assets of our Bank increased by 12.48% from ₹ 874.00 million as on March
31, 2017 to ₹ 983.10 million as on March 31, 2018. Interest accrued increased from ₹ 2,105.69 million as on
March 31, 2017 to ₹ 2,257.01 million as on March 31, 2018. Bills Payable increased from ₹ 662.31 million as
on March 31, 2017 to ₹ 844.88 million as on March 31, 2018.
Liabilities as at March 31, 2016 and March 31, 2017
Our total liabilities increased by 22.67% from ₹ 287,321.63 million as of March 31, 2016 to ₹ 352,447.21 million
as of March 31, 2017, primarily due to the following reasons:
a. Capital: Our capital increased by 6.68% from ₹ 1,794.62 million as of March 31, 2016 to ₹ 1,914.47 million
as of March 31, 2017 due to the issue of Equity Shares issued by us pursuant to a qualified institutional
placement.
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b. Reserve and surplus: The share premium account increased by 22.91% from ₹ 6,573.59 million as of March
31, 2016 to ₹ 8,079.81 million as of March 31, 2017 due to issue of Equity Shares by us pursuant to a qualified
institutional placement at a price of ₹ 140 per share which includes a share premium of ₹ 130 per share.
Revenue and other reserves marginally decreased by 0.80% from ₹ 2,181.75 million as of March 31, 2016 to
₹ 2,165.27 million as of March 31, 2017. The special reserve under Section 36(1)(viii) of the Income Tax Act,
1961 increased by 10.63% from ₹ 564.50 million as of March 31, 2016 to ₹ 624.50 million as of March 31,
2017 pursuant to transfer from the profits generated by our Bank. The statutory reserve and capital reserve has
increased by 15.36% and 122.27% respectively. There is a decrease in the revenue reserve from ₹ 2,181.75
million as on March 31, 2016 to ₹ 2,165.27 million as on March 31, 2017 due to a charge of ₹ 312.90 million
and ₹ 191.50 million, being the unamortized amount of loss on sale of advances to an asset reconstruction
company and loss on frauds in advances account respectively, which has been debited to the other reserves as
mandated under the circular bearing DBR.NO.BP.BC.102/21.04.048/2015-16 dated June 13, 2016, issued by
the RBI.
c. Deposits: Deposits have increased by 20.14 % from ₹ 254,309.61 million as on March 31, 2016 to ₹ 305,533.54
million as of March 31, 2017, primarily due to increase in Term Deposit, demand deposits and saving bank
deposit.
d. Borrowings: Borrowings increased by 145.24% from ₹ 7,230.08 million as on March 31, 2016 to ₹ 17,731.32
million as of March 31, 2017, due to increase in money market borrowing against surplus SLR securities and
borrowing from banks amounting to ₹ 2,500 million.
e. Other liabilities and provisions: The inter office adjustment balance increased from ₹ 44.04 million as on
March 31, 2016 to ₹ 480.64 million as on March 31, 2017. The contingent provisions against the standard
assets of our Bank increased by 21% from ₹ 722.30 million as of March 31, 2016 to ₹ 874.00 million as of
March 31, 2017. Bills payable decreased from ₹ 778.57 million as on March 31, 2016 to ₹ 662.31 million as
on March 31, 2017. Interest accrued decreased from ₹ 2,245.24 million as on March 31, 2016 to ₹ 2,105.69
million as on March 31, 2017.
Liquidity and Capital Resources
Capital Adequacy
The following table sets out our capital adequacy ratios as of March 31, 2016, March 31, 2017 and March 31,
2018 calculated according to guidelines prescribed by the RBI. (₹ in million)
As of March 31,
2016 2017 2018
Common Equity Tier I 15,684.99 19,557.41 19,267.13
Additional Tier I - - -
Tier I Capital 15,684.99 19,557.41 19,267.13
Tier II Capital 3,568.96 3,655.08 4,207.62
Total Capital 19,253.95 23,212.48 23,474.75
Credit Risk – RWA
153,125.03 185,268.87 198,974.09
Market Risk – RWA 14,850.21 23,675.10 23,048.31
Operational Risk – RWA 12,481.94 14,657.44 17,206.31
Total Risk weighted assets 180,457.18 223,601.41 239,228.71
Common Equity Capital (CET I) Adequacy Ratio (BASEL III) 8.69 8.75 8.05
Capital Adequacy Ratio – Tier I Capital (BASEL III) 8.69 8.75 8.05
Capital Adequacy Ratio – Tier II Capital (BASEL III) 1.98 1.63 1.76
Total Capital Adequacy Ratio (BASEL III) 10.67 10.38 9.81
We have adopted a Board-approved policy on our internal capital adequacy and assessment process, which defines
and sets processes to review and improve the techniques used for identification, measurement and assessment of
all material risks and resultant capital requirements.
Tier I capital consists of equity capital, statutory reserves, other disclosed free reserves, capital reserves and
innovative perpetual debt instruments eligible for inclusion in Tier I capital. The Tier II capital consists of general
140
provision and loss reserves, upper Tier II instruments and subordinate debt instruments eligible for inclusion in
Tier II capital.
RBI requires us to maintain a minimum CRAR of 10.875% as on March 31, 2018 and 11.50% as on March 31,
2020 (including capital conservation buffer of 2.50%). We moved to RBI Basel III Capital Regulations as
implemented by RBI from April 1, 2013. Indian banks must comply with the regulatory limits and requirements
as prescribed under RBI Basel III Capital Regulations, on an ongoing basis, with full implementation of such
regulations by March 31, 2019. As per capital adequacy guidelines under Basel III, by March 31, 2020, we are
required to maintain a common equity Tier I adequacy ratio of 5.5%, minimum Tier I capital of 7.0%, minimum
total capital of 9.0% and a capital conservation buffer of 2.5%. We have not been able to maintain the minimum
CRAR as required under the RBI Basel III Capital Regulations. For further details, see “Risk Factors - Any
inability to obtain adequate capital due to change in regulations or lack of access to capital or otherwise could
materially and adversely affect our results of operations and financial condition” on page 36. For a description
of the RBI’s capital adequacy guidelines, see section titled “Regulations and Policies” on page 145.
As of December 31, 2018, our capital adequacy ratio under the RBI Basel III Capital Regulations was 7.57%.
Our current sources of funding (other than equity capital) are deposits and borrowings (which include the
unsecured Tier II bonds). The cost of funds obtained is sensitive to interest rate fluctuations, which expose us to
the risk that increasing interest rates will reduce our margins, if we are unable to pass on the increased rates to our
customers.
Cash Flows (₹ in million)
Fiscal
2016 2017 2018
Net cash flow from (used in) operating activities 1,105.70 2,270.65 (1,315.03)
Net cash flow from (used in) investing activities (674.84) (399.61) (1,023.60)
Net cash flow from (used in) financing activities 68.04 681.61 6,249.50
Net increase/ decrease in cash and cash equivalent 498.90 2,552.65 3,910.87
Cash and cash equivalents at the beginning of the year 13,187.21 13,686.11 16,238.77
Cash and cash equivalents at the end of the year 13,686.11 16,238.77 20,149.64
Pursuant to the RBI circular dated July 16, 2015, we have included our deposits placed with
NABARD/SIDBI/NHB on account of shortfall in priority sector targets under “Other Assets”. Previously, this
was accounted under “Investments”. Interest income on these deposits have been included under “Interest Earned
– Others”. Previously, such interest income was included under “Interest Earned – Income on Investments”.
Accordingly, prior period numbers were regrouped/ reclassified.
Cash Flows from (used in) Operating Activities
Our net loss as per our profit and loss account was ₹ 5,848.66 million in Fiscal 2018. The net cash flow after
adjustment for provisions/depreciation was ₹ 3,464.04 million which was adjusted primarily for increase in
deposits by ₹ 27,561.30 million and refinances of ₹ 23,391.48 million. This was offset by an increase in advances
given of ₹ 20,392.90 million, increase in investments made of ₹ 21,650.73 million and decrease in other liabilities
of ₹ 8,420.46 million and increase in other assets ₹ 5,267.76 million.
Net cash generated from operations in Fiscal 2017 was ₹ 2,270.65 million. Our net profit after taxes was ₹ 2,560.72
million, which was adjusted primarily for increase in deposits by ₹ 51,223.92 million, provision and contingencies
of ₹ 3,779.84 million, refinances of ₹ 10,801.24 million and depreciation of ₹ 480.55 million. This was offset by
an increase in advances given of ₹ 40,851.72 million, increase in investments made of ₹ 21,063.26 million and
decrease in other liabilities of ₹ 3,304.93 million and increase in other assets ₹ 103.07 million.
Net cash generated from operations in Fiscal 2016 was ₹ 1,105.70 million. Our net profit after taxes was ₹ 1,802.36
million, which was adjusted primarily for increase in deposits by ₹ 34,667.49 million, provision and contingencies
of ₹ 2,268.88 million, refinances of ₹ 2,248.08 million and depreciation of ₹ 377.63 million. This was offset by
an increase in advances given of ₹ 32,917.20 million, an increase in investments made of ₹ 4,942.49 million,
decrease in other liabilities of ₹1,706.93 million and increase in other assets purchased by ₹ 122.91 million.
Cash Flows from (used in) Investing Activities
141
Net cash used in investing activities was ₹ (1,023.60) million in Fiscal 2018 primarily due to purchase of fixed
assets of ₹ 1,035.22 million, which was primarily offset by sale of fixed assets of ₹ 11.62 million.
Net cash used in investing activities was ₹ (399.61) million in Fiscal 2017, primarily due to purchase of fixed
assets of ₹ 406.21 million, which was primarily offset by sale of fixed assets of ₹ 6.60 million.
Net cash used in investing activities was ₹ 674.84 million in Fiscal 2016, primarily due to purchase of fixed assets
of ₹ 678.09 million, which was partially offset by sale of fixed assets of ₹ 3.25 million.
Cash Flows from (used in) Financing Activities
Net cash generated from financing activities was ₹ 6,249.50 million in Fiscal 2018 primarily due to funds received
from the proceeds of the issue of Equity Shares through a rights issue, including share premium amounting to ₹
7,863.22 million and fresh mobilization through New Tier II Bonds amounting to ₹ 1,000.00 million. This was
partially offset by repayment of Tier II Bonds aggregating to ₹ 1,995.00 million and dividend and tax paid on
dividend of ₹ 618.72 million.
Net cash generated from financing activities was ₹ 681.61 million in Fiscal 2017, primarily due to funds received
from the proceeds of the issue of Equity Shares through a qualified institutional placement, including share
premium amounting to ₹ 1,626.08 million. This was partially offset by repayment of Tier II Bonds aggregating to
₹ 300.00 million and dividend and tax paid on dividend of ₹ 644.46 million.
Net cash generated from financing activities was ₹ 68.04 million in Fiscal 2016, primarily due to cash generated
from proceeds received from Tier II Bonds of ₹ 1,401.00 million and pursuant to exercise of stock options under
the LVB ESOS-2010 (including share premium net of forfeited shares) of ₹ 23.47 million. This was partially
offset by repayment of Tier II Bonds aggregating to ₹ 1,000.00 million and dividend and tax paid on dividend of
₹ 356.43 million.
Financial Instruments and Off-balance sheet items
Contingent Liabilities (₹ in million)
Fiscal 2018
Claims against us not acknowledged as debts 1,358.54
Liability on account of outstanding forward exchange contracts 23,390.48
Guarantees given on behalf of constituents
• In India 10,855.46
• Outside India 988.17
Acceptances, Endorsements & Other Obligations 11,704.23
Other items for which we are contingently liable 426.16
Total 48,723.04
As of March 31, 2018, our contingent liabilities were ₹ 48,723.04 million, which comprised of the claims against
us which is not acknowledged as debt such as legal proceedings in the normal course of business, the outcome of
which our Bank does not expect to have adverse effect on its financials, outstanding foreign exchange contracts,
outstanding guarantees, outstanding obligations, acceptances and endorsements and others. For further details, see
“Financial Information” on page 240.
Qualitative disclosure about risks and risk management
The risks associated with our business can be broadly classified into three major categories namely, credit risk,
operational risk and market risk. We have developed our risk management systems to ensure that there is an
appropriate balance between risk and return and we have implemented comprehensive policies and procedures to
identify, measure, monitor and control risk throughout our organization. Our risk management strategy is based
on understanding the various types of risk, assessment of the risk and continuous monitoring of the risk. For
further details about the types of risks we manage and our risk management policies and structures see sub-section
titled “Risk Management” below.
Risk Management
Credit risk
142
The credit risk policy supports and is aligned with our priority of achieving growth and at the same time
maintaining asset quality to ensure long term sustainable profitability over business cycles. It encompasses credit
approval processes for all business segments, along with the guidelines for monitoring and mitigating the risks
associated with them. We also undertake the exercise of measuring the credit risks involved in the composition of
our present portfolio and realigning them to have a better risk-reward composition. We endeavor to continuously
enhance our internal risk assessment capabilities. We currently have four committees for approving credits.
Interest rate risk
Our balance sheet consists predominantly of Rupee assets and liabilities, movements in Indian interest rates
constitute the main source of interest rate risk. The short and intermediate impact of changes in interest rates is on
our net interest income. In the longer term, changes in interest rates impact cash flows on assets, liabilities and off
balance sheet items, creating a risk to our net worth as a result of re-pricing “mismatches” and other interest rate
sensitive positions.
We measure exposure to fluctuations in interest rates primarily by way of gap analysis, providing a static view of
the maturity and re-pricing characteristics of balance sheet positions. We prepare an interest rate gap report by
classifying all assets and liabilities into various time period categories according to contracted maturities or
anticipated re-pricing dates. The difference in the amount of assets and liabilities maturing or being re-priced in
any time period category would then give us an indication of the extent of exposure to the risk of potential changes
in the margins on new or re-priced assets and liabilities.
Liquidity risk
Liquidity risk arises from the absence of liquid resources, when funding loans, and repaying deposits and
borrowings. This could be due to a decline in the expected collection, or our inability to raise adequate resources
at an appropriate price. This risk is minimized through a mix of strategies, including increasing current account
and savings deposits and following a forward-looking borrowing program based on projected loans and maturing
obligations.
We monitor liquidity risk through our asset liability management function aided by liquidity gap reports. This
involves the categorization of all assets and liabilities in different maturity profiles, and evaluating them for any
mismatches in any maturities, especially in the short term. The asset liability management policy is based on RBI
guidelines and our asset liability management committee’s guidelines and establishes the maximum allowed
mismatches in the various maturities. We undertake behavioral analysis of the non-maturity products, namely
CASA, Cash Credit and Overdraft accounts on a periodic basis to ascertain the volatility of balances in these
accounts.
Our asset liability management policy defines the gap limits for the structural liquidity and the liquidity profile is
analyzed on both static and dynamic basis by tracking cash inflow and outflow in the maturity ladder based on
the expected occurrence of cash flow. As part of the liquidity management and contingency planning, we assesse
potential trends, demands, events and uncertainties that could result in adverse liquidity conditions. The liquidity
profile is estimated on an active basis by considering the growth in deposits, advances and investment obligations.
The concentration of large deposits is monitored on a periodic basis. Emphasis has been placed on growing Retail
deposits and avoiding as far as possible bulk deposits. We periodically conduct liquidity stress testing for all types
of risks (i.e.) credit, market and operational risk in accordance with the RBI guidelines in this regard.
Exchange rate risk
Exchange rate risk is the risk that we may suffer losses as a result of adverse exchange rate movements during a
period in which we have an open position in an individual foreign currency. To evaluate the extent of our exchange
rate risk, a liquidity gap report for each currency is prepared. Gaps or mismatch of maturities can arise either
because of proprietary trading positions or due to a customer transaction resulting in a long or short position for
us.
We engage in trading activities in the foreign currency markets that expose us to exchange rate risks. In addition,
our foreign exchange business exposes us to foreign currency interest rate risks that arise from maturity
mismatches of foreign currency positions, and settlement risk, which is the risk of default by counterparties. We
mitigate these foreign exchange risks by setting counterparty limits and subjecting the overall foreign currency
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positions to an overnight open exchange position limit that has been approved by the RBI. We also offer foreign
currency advances and deposits and foreign currency hedge instruments such as swaps, forwards, and currency
options to customers, which are primarily banks and corporate customers, and we actively hedge exchange risks
arising out of these customer positions.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or
external events. In general, some major sources of operational risk are process reliability, IT security, outsourcing
operations, dependence on key suppliers, fraud, error, regulatory compliance, and recruiting, training and
maintaining staff.
Our operational risk management framework is defined in the operational risk management policy approved by
the Board of Directors. To understand our operational risk exposure, we identify, assess and document the
operational risks inherent in all our material products, activities and process events. The framework comprises
identification, assessment, management and mitigation of risks through tools like incident reporting, loss
reporting, key operational risk indicators, risk and control self-assessment, and periodic risk identification and
controls evaluation. We have put in place a structure of well-defined policies, processes and procedures that are
designed to mitigate material operational risks.
Brief details of the Tier II bonds
Instruments Series - VII (B) Series - VIII Series - IX Series – X
Date of Allotment February 10, 2012 March 24, 2014 September 30, 2015 June 9, 2017
Date of Redemption February 10, 2022 March 24, 2024 September 30, 2025 June 9, 2024
Rate of Interest 11.40% 11.80% 11.50% 10.70%
Nature of Instrument Unsecured Redeemable Non-Convertible Subordinated Lower Tier
II bonds (“Tier II Bonds”)
Amount Subscribed
(₹ in million)
505 781 1,401 1,000
Face Value of the Bond (₹ in
million)
1 1 0.5 0.5
Optional call date
contingent call dates and
redemption amount
Our Bank has not reserved any call option to redeem these bonds prior to their maturity.
These bonds are redeemable at par.
Issuance, Trading and Listing
on
NSE
Credit Ratings
We have issued and have outstanding subordinated bonds, which have been assigned the rating of “CARE BBB”
(triple B; outlook: credit watch with negative implications) by CARE in November 2018, as against the earlier
rating of “CARE BBB” (triple B; outlook: negative) assigned by CARE in October 2018. Brickwork have also
assigned the rating “BWR BBB-" (triple B minus; outlook: credit watch with developing implications) in February
2019 for our Series VII(B) bonds as against the earlier rating of BWR BBB+ (triple B plus; outlook: stable)
assigned by Brickwork in July 2018.
Implementation of Indian Accounting Standards
The MCA notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015, pursuant to
which the banking companies were exempted to comply with Ind-AS for preparation of financial statements.
However, in terms of the MCA press release dated January 18, 2016, the scheduled commercial banks are required
to prepare Ind-AS based financial statements on consolidated and standalone basis in relation to accounting period
beginning from April 1, 2018 onwards, with comparatives for the period ending March 31, 2018 or thereafter and
not even voluntarily before that. Further, pursuant to the notification dated February 11, 2016, RBI has advised
scheduled commercial banks to inter alia, set up a Steering Committee headed by an official of the rank of an
Executive Director (or equivalent) comprising members from cross-functional areas of the bank to immediately
initiate the Ind-AS implementation process. Accordingly, our Bank has submitted the proforma financial
statement for the half year ended September 30, 2017 under Ind-AS to RBI.
Material developments post December 31, 2018
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Except as disclosed below, there have been no developments since December 31, 2018 which materially and
adversely affects or is likely to affect, our profitability, or the value of our assets or our ability to pay our liabilities:
• RBI pursuant to its circular dated January 1, 2019, has permitted restructuring of eligible MSME loans that
are standard as on January 1, 2019, without affecting the asset classification norms. This restructuring
envisages additional provision of 5% on the particular loan restructured. This will impact the provision and
consequent reduction in earnings to our Bank to the extent of restructuring to be effected, if any. These
guidelines are valid until March 31, 2020.
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REGULATIONS AND POLICIES
The following is an overview of certain sector-specific Indian laws and regulations which are relevant to our
Bank’s business. Taxation statutes such as the Income Tax Act, labour laws such as Contract Labour (Regulation
and Abolition) Act, 1970 and other miscellaneous regulations and statutes prescribed by the Central, State, and
regulatory bodies in India, such as the Trade Marks Act, 1999, apply to us as they do to any other Indian company.
The main legislation governing commercial banks in India is the Banking Regulation Act. Other important laws
include the Reserve Bank of India Act, the Negotiable Instruments Act, the SARFAESI Act, Banker's Books
Evidence Act, Foreign Exchange Management Act and the Recovery of Debt due to Banks and Financial
Institutions Act, 1993. Additionally, the RBI, from time to time, issues guidelines to be followed by banks. Banking
companies are also subject to the purview of the Companies Act, 2013 to the extent applicable, and in case of
such banks whose equity shares are listed on the Stock Exchanges (such as ourselves), various regulations of the
SEBI would additionally apply to such companies, including the SEBI Listing Regulations.
The description of laws and regulations set out below is not exhaustive and is only intended to provide general
information to investors and is neither designed nor intended to be a substitute for professional legal advice. The
statements below are based on the current provisions of Indian law, and the judicial and administrative
interpretations thereof, which are subject to change or modification by subsequent legislative, regulatory,
administrative or judicial decisions.
Reserve Bank of India Act, 1934
RBI may, subject to certain conditions, direct the inclusion or exclusion of any bank from the second schedule of
the RBI Act. Our Bank is a scheduled commercial bank. Scheduled banks are required to maintain cash reserves
with the RBI. In this regard, RBI may stipulate an average daily balance requirement to be complied with by such
banks and may direct that such banks regard a transaction or class of transactions as a liability. Further, RBI may
direct any banking company to submit returns for the collection of credit information and may also furnish such
information to a banking company upon an application by such company. RBI has the power to impose penalties
against any person for inter-alia failure to produce any book, account or other document or furnish any statement,
information or particulars which such person is duty-bound to produce or furnish under the RBI Act, or any order,
regulation or direction thereunder.
Banking Regulation Act, 1949
Commercial banks in India are required to obtain a licence from the RBI to carry on banking business in India.
Such licence is granted to the bank subject to compliance with certain conditions some of which include: (i) that
the bank has the ability to pay its present and future depositors in full as their claims accrue; (ii) that the affairs of
the bank are not being, or are not likely to be conducted in a manner detrimental to the interests of present or
future depositors; (iii) that the bank has adequate capital structure and earnings prospects; and (iv) that public
interest will be served if such licence is granted to the bank. Our Bank has obtained a banking license from the
RBI. The RBI has the power to cancel the licence if a bank fails to meet the conditions or if the bank ceases to
carry on banking operations in India. Additionally, the RBI has issued various reporting and record-keeping
requirements for such commercial banks. These regulations are with respect to maintenance of assets, accounts
audits and filing of returns. The appointment of the auditors of the banks is subject to the approval of the RBI.
The RBI can direct a special audit in public interest, or in the interest of the banking company, or in the interest
of its depositors. It also sets out the provisions in relation to the loan granting activities of a banking company.
The Banking Regulation Act specifies the business activities in which a bank may engage. Banks are prohibited
from engaging in business activities other than the specified activities. Natural persons and non-financial
institutions can hold up to 10% of the share capital. Non-listed, non-regulated and non-diversified financial
institutions can hold up to 15% of the share-capital whereas listed, well-diversified and regulated financial
institutions can hold up to 40% of the total share capital. No shareholder in a bank can exercise voting rights on
poll in excess of 10% of total voting rights of all the shareholders of the bank. This ceiling can be raised to 26%
by the RBI in a phased manner. Pursuant to amendments to the Banking Regulation Act in January 2013, private
sector banks are permitted, subject to the guidelines framed by the RBI, to issue perpetual, redeemable or
irredeemable preference shares in addition to ordinary equity shares.
Further, the Banking Regulation Act, as amended, requires any person to seek prior approval of the RBI, to acquire
or agree to acquire, directly or indirectly, shares or voting rights of a bank, by himself or with persons acting in
concert, wherein such acquisition (taken together with shares or voting rights held by him or his relative or
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associate enterprise or persons acting in concert with him) results in aggregate shareholding of such person to be
5% or more of the paid up capital of a bank or entitles him to exercise 5% or more of the voting rights in a bank.
Further, the RBI may, by passing an order, restrict any person holding more than 5% of the total voting rights of
all the shareholders of the banking company from exercising voting rights on poll in excess of the said 5%, if such
person is deemed to be not fit and proper by the RBI.
Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 25% of the net
profit before appropriations before any dividend is declared. If there is an appropriation from this account, the
bank is required to report the same to the RBI within 21 days, explaining the circumstances leading to such
appropriation.
Certain amendments also permit the RBI to establish a ‘Depositor Education and Awareness Fund’, which will
take over the bank’s deposit accounts that have not been claimed or operated for a period of 10 years or more. The
amendments also confer power on the RBI (in consultation with the central government) to supersede the board
of directors of a banking company for a period not exceeding a total period of 12 months, in public interest or for
preventing the affairs of the bank from being conducted in a manner detrimental to the interest of the depositors
or any banking company or for securing the proper management of any banking company.
The appointment, re-appointment, or termination of the appointment of a chairman, managing director or whole-
time director, chief executive officer of a bank shall have effect only if it is made with the previous approval of
the RBI. Further, no amendment in relation to the maximum permissible number of directors, appointment,
reappointment, termination of appointment or remuneration of the chairman, managing director, whole-time
director or any other director, chief executive officer shall have effect unless approved by the RBI. RBI is also
empowered to remove a chairman, managing director and whole-time directors from office on the grounds of
public interest, interest of depositors, securing the proper management. Moreover, RBI may order meetings of the
board of directors to discuss any matter in relation to the bank, appoint observers to such meetings, make such
changes to the management as it may deem necessary, and may also order the convening of a general meeting of
the bank’s shareholders to elect new directors. The RBI may impose penalties on banks, directors and its
employees in case of infringement of regulations under the Banking Regulation Act. The penalty may be a fixed
amount or may be related to the amount involved in the contravention. The penalty may also include
imprisonment. Banks are also required to disclose the penalty in their annual report.
Regulatory reporting and examination procedures
The RBI is empowered under the Banking Regulation Act to inspect a bank. The RBI monitors prudential
parameters at regular intervals. To this end and to enable off-site monitoring and surveillance by the RBI, banks
are required to report to the RBI on various aspects. The RBI conducts periodical on-site inspections on matters
relating to the bank's portfolio, risk management systems, internal controls, credit allocation and regulatory
compliance, at regular intervals. Further, the RBI also conducts on-site supervision of selected branches with
respect to their general operations and foreign exchange related transactions.
Maintenance of records
The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner and
file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents
and availability of records for inspection by shareholders as stipulated under the Companies Act and the rules
thereunder would apply to our Bank as in the case of any company. The master circular on “Know Your Customer
(KYC) norms/ Anti-Money Laundering (AML) Standards/ Combating of Financing of Terrorism (CFT)/
Obligation of banks under PMLA, 2002” issued by the RBI on July 1, 2015 also provides for transactional and
identification records to be maintained for a minimum period of five years from date of transaction and fiveyears
from the cessation of relationship with the client respectively. Additionally, the RBI has issued the “Master
Direction - Know Your Customer (KYC)) Direction, 2016” dated February 25, 2016 (and updated as on July12,
2018) which provides for maintenance / preservation of certain records for a minimum period of five years from
the date of the transaction or five years after the business relationships have ended, as the case may be.
Regulations relating to the opening of branches
As per the RBI circular DBR.No.BAPD.BC.69/22.01.001/2016-17 dated May 18, 2017, the domestic scheduled
commercial banks are permitted to open, unless otherwise specifically restricted, Banking Outlets in Tier 1 to Tier
6 centres without having the need to take permission from the RBI in each case. ‘Banking Outlet’ for a domestic
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scheduled commercial bank, a small finance bank and a payment bank is a fixed point service delivery unit,
manned by either bank’s staff or its business correspondent where services of acceptance of deposits, encashment
of cheques/ cash withdrawal or lending of money are provided for a minimum of 4 hours per day for at least five
days a week.
At least 25% of the total number of ‘Banking Outlets’ opened during a financial year should be opened in
unbanked rural centres i.e. a rural (Tier 5 and 6) centre that does not have a CBS-enabled ‘Banking Outlet’ of a
scheduled commercial bank, a small finance bank, a payment bank or a regional rural bank nor a branch of local
area bank or licensed co-operative bank for carrying out customer based banking transactions. To encourage the
banks to open/frontload more number of banking outlets in unbanked rural centres, they will be allowed to carry
forward the benefit of the ‘Banking Outlets’, if any, opened in excess of the aforementioned requirement, for a
period of two years. Banks having general permission may shift, merge or close all ‘Banking Outlets’ (except
rural outlets and sole semi-urban outlets) at their discretion.
Banks shall furnish the information in the prescribed format on opening of new place of business i.e.
branch/office/NAIOs (Non-Administratively Independent Office) and on change in status – merger, conversion,
closure etc. to the Department of Statistics and Information Management.
Capital adequacy requirements
The RBI has set out the minimum capital adequacy standards for banks based on the guidelines of the Basel
Committee on Banking Supervision. The RBI Basel III Capital Regulations have become effective from April 1,
2013 and will be fully implemented by March 31, 2020, in a phased manner. Under the “Master Circular on Basel
III Capital Regulations” dated July 1, 2015, a bank is required to maintain a minimum total Capital to Risk Asset
Ratio (“CRAR”) of 9% and Tier 1 CRAR of 7%. In addition to the total CRAR, the capital conservation
buffer will required to be maintained at 2.50% in the form of common equity tier I, by March 31, 2019. However,
basis the meeting of the RBI Central Board on November 19, 2018, the requirement to maintain a capital
conservation buffer of 2.50% for banks has been extended to March 31, 2020.
Further, under “Guidelines on Implementation of Basel III Capital Regulations in India”, RBI has permitted Banks
to raise Additional Tier 1 (“AT1”) capital which may include inter-alia perpetual non-cumulative preference
shares that comply with regulatory requirements, debt capital instruments eligible for inclusion in AT1 capital and
that comply with regulatory requirements. One of the important criteria for AT1 instruments is that they should
have principal loss absorption through either (i) conversion into common shares at an objective pre-specified
trigger point or (ii) a write-down mechanism which allocates losses to the instrument at a pre-specified trigger
point.
The RBI also permits banks to raise Basel III compliant Tier II capital in the form of (i) debt capital instruments;
(ii) preference share capital instruments that could be perpetual cumulative preference shares, redeemable non-
cumulative preference shares (RNCPS) or redeemable cumulative preference shares. These instruments also need
to have certain loss absorption features. The RBI Basel III Capital Regulations have further been revised pursuant
to notification dated March 1, 2016 issued by the RBI, to the effect that the treatment of certain balance sheet
items vis-à-vis revaluation reserves, foreign currency transitional reserve and deferred tax assets have been aligned
with the conditions prescribed by the Basel Committee on Banking Supervision.
Liquidity coverage ratio
The Basel III Framework on Liquidity Standards introduced two liquidity ratios i.e. Liquidity Coverage Ratio
(“LCR”) and Net Stable Funding Ratio (“NSFR”) as well as liquidity risk monitoring tools. In June 2014, the
RBI issued guidelines in relation to LCR, liquidity risk monitoring tools and LCR disclosure standards pursuant
to the publication of the ‘Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools’ in January
2013 and the ‘Liquidity Coverage Ratio Disclosure Standards’ in January 2014 by the Basel Committee On
Banking Supervision, which provided enhanced guidance on liquidity, risk governance, measurement, monitoring
and reporting to the RBI on liquidity positions. The guidelines stipulate that banks were to ensure a LCR of 60%
for the calendar year 2015 with effect from January 1, 2015 and will be expected to transition to a LCR of 100%
in January 2019. Further, the RBI issued the guidelines on NFSR on May 17, 2018 with the objective to ensure
that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet
activities.
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Prudential norms on income recognition, asset classification and provisioning pertaining to advances
(“Prudential Norms”)
The RBI, pursuant to its Master Circular on Prudential Norms issued on July 1, 2015, classifies NPAs into (i) sub-
standard assets; (ii) doubtful assets; and (iii) loss assets. These guidelines specify provisioning requirements
specific to the classification of the assets.
In July 2005, the RBI issued guidelines on sales and purchases of NPAs between banks, financial institutions and
NBFCs. These guidelines require that the board of directors of a bank must establish a policy for purchases and
sales of NPAs. An asset must have been classified as non-performing for at least two years by the seller bank to
be eligible for sale. In October 2007, the RBI issued guidelines regarding valuation of NPAs being put up for sale.
Further, the RBI pursuant to the circular on Prudential Norms has decided that banks should maintain provisioning
coverage ratio, including floating provisions, of at least 70.00%.
The RBI revised the “Prudential Guidelines on Restructuring of Advances by Banks and Financial Institutions”
on May 30, 2013. Pursuant to those guidelines, from April 1, 2015 advances (classified as a standard asset) that
are restructured (other than due to change in date of commencement of commercial operation of infrastructure
and non-infrastructure projects) would be immediately classified as sub-standard on restructuring and the
nonperforming assets, upon restructuring, would continue to have the same asset classification as prior to
restructuring and slip into further lower asset classification categories as per the extant asset classification norms
with reference to the pre-restructuring repayment schedule. Such accounts may be upgraded only when all the
outstanding loan/facilities in the account demonstrate “satisfactory performance” during the ‘specified period’ as
defined in the revised framework. Further, if the satisfactory performance is not demonstrated during the ‘specified
period’, the account shall immediately on default, be reclassified as per the repayment schedule that existed before
the restructuring.
The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDDBFI Act”)
The RDDBFI Act was enacted for adjudication of disputes pertaining to debts due to banks and financial
institutions exceeding ₹ 1 million. The RDDBFI Act provides for the constitution of debt recovery tribunals,
before which banks and financial institutions may file applications for recovery of debts. Further, no court or other
authority, except the Supreme Court or a High Court exercising jurisdiction under Articles 226 and 227 of the
Constitution of India, shall have, or is entitled to exercise, any jurisdiction, powers or authority in relation to the
aforementioned matter. The tribunals may pass orders for directions including inter- alia recovery of such dues by
the bank as may be deemed fit along with a recovery certificate to such effect from the presiding officer of the
respective tribunal; attachment of the secured properties towards the dues to the bank: injunctive orders restraining
the debtors from alienating, transferring or disposing of such secured properties; appointment of receivers and/or
local commissioners with respect to such secured properties and distribution of proceeds from sale of such secured
properties towards dues. Pursuant to the recovery certificate being issued, the recovery officer of the respective
debt recovery tribunal shall effectuate the final orders of the debt recovery tribunal in the application. Unless such
final orders of the debt recovery tribunal have been passed with the consent of the parties to an application, an
appeal may be filed against such final orders of the debt recovery tribunal before the debt recovery appellate
tribunal, which is the appellate authority constituted under the RDDBFI Act.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(“SARFAESI Act”)
The SARFAESI Act provides for sale of financial assets by banks and financial institutions to asset reconstruction
companies. The Act enables the enforcement of security interest created in favour of a secured creditor, without
the intervention of court or tribunal. Further, a secured creditor may, under certain conditions, also take over the
management of the business of the borrower including the right to transfer by way of lease, assignment or sale for
realising the secured asset. The Prudential Norms issued by the RBI describe the process to be followed for sale
of financial assets to asset reconstruction companies. The banks may not sell financial assets at a contingent price
with an agreement to bear a part of the shortfall on ultimate realisation. However, banks may sell specific financial
assets with an agreement to share in any surplus realised by the asset reconstruction company in the future.
Consideration for the sale may be in the form of cash, bonds or debentures or security receipts or pass-through-
certificates issued by the asset reconstruction company or trusts set up by it to acquire the financial assets.
Pursuant to the amendment of the SARFAESI Act in January 2013, means for recovery of assets available to
banks and financial institutions have been strengthened. Further, banks and financial institutions have been
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empowered to bid and purchase immovable property in full or partial satisfaction of the bank’s claim against the
defaulting borrower at any subsequent sale, if they cannot find a buyer for the securities. The amendment also
enables banks and financial institutions to enter into a settlement or compromise with the borrower and empowers
DRTs to pass an order acknowledging any such settlement or compromise.
The Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016 (the “I&BC”) was enacted and notified in the Gazette of India on
May 5, 2016. The I&BC covers individuals, companies, limited liability partnerships, partnership firms and other
legal entities incorporated with limited liability under any law currently in force (except for financial service
providers). The salient features of the I&BC are as follows:
• Under the provisions of the I&BC, insolvency resolution can be triggered at the first instance of default
and the process of corporate insolvency resolution has to be completed within stipulated time limit.
• For individuals, the I&BC provides for two distinct processes, namely – “Fresh Start” and “Insolvency
Resolution” and lays down the eligibility criteria for the debtor for the purposes of making an application
for a “fresh start” process.
• The National Company Law Tribunal (“NCLT”) and the Debt Recovery Tribunal (“DRT”) are designated
as the adjudicating authorities for corporate persons, and partnership firms and individuals, respectively,
for resolution of insolvency, liquidation and bankruptcy.
• The I&BC also provides for establishing the Insolvency and Bankruptcy Board of India for regulation of
insolvency professionals, insolvency professional agencies and information utilities.
Priority sector lending
The RBI circular on “Priority Sector Lending - Targets and Classification” dated July 7, 2016 sets out the broad
policy in relation to priority sector lending. In accordance with this circular, the priority sectors for all scheduled
banks include (i) agriculture; (ii) micro, small and medium enterprises (“MSMEs”); (iii) education; (iv) housing,
(v) social infrastructure; (vi) export credit; (vii) renewable energy and (viii) others. The circular also prescribes
the details of eligible activities under the aforesaid categories. Under the RBI guidelines, the priority sector lending
targets are linked to Adjusted Net Bank Credit (“ANBC”) (outstanding bank credit minus bills rediscounted with
RBI and other approved Financial Institutions plus permitted non SLR bonds/debentures under Held to Maturity
category plus other investments eligible to be treated as part of priority sector lending (e.g. investments in
securitised assets)) or credit equivalent amount of off-balance sheet exposure, whichever is higher, as on March
31 of the previous year. Currently, the total priority sector lending target for domestic banks is 40% of ANBC or
credit equivalent amount of off-balance sheet exposure, whichever is higher.
Exposure norms
As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, the RBI has
prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to
individual borrowers and to all companies in a single group (or sponsor group). The RBI has prescribed exposure
ceiling for a single borrower as 15% of capital funds and group exposure limit as 40% of capital funds. Relaxations
are permitted in exceptional circumstances and if lending to the infrastructure sector. The total exposure to a single
NBFC has been limited to 10% of the bank’s capital funds while exposure to non-banking asset finance company
has been restricted to 15% of the bank’s capital funds. The limit may be increased to 15% and 20%, respectively,
provided that the excess exposure is on account of funds lent by the NBFC to the infrastructure sector.
The aggregate exposure of a bank to the capital markets in all forms (both fund based and non-fund based) should
not exceed 40% of its net worth, on both standalone and consolidated basis as on March 31 of the previous year.
Short-selling of Government securities
As per the “Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment
Portfolio by Banks” dated July 1, 2015, banks and primary dealers are allowed to undertake short sale of
government dated securities, subject to the short position being covered within a maximum period of three months,
including the day of trade, and in accordance with the conditions prescribed therein. Further, such short positions
shall be covered only by outright purchase of an equivalent amount of the same security or through a long position
in the ‘when issued market’ or allotment in primary auction. Securities that are short sold are to be invariably
delivered on the settlement date. Entities shall meet their delivery obligations by borrowing securities in the repo
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market or through outright purchase. However, securities acquired under Reserve Bank’s Liquidity Adjustment
Facility or any other liquidity facility shall not be used for delivery into short sale.
Regulations relating to interest rates on deposits and advances
The RBI has issued “Reserve Bank of India - Interest rate on Deposits Directions, 2016” dated March 3, 2016.
Scheduled commercial banks are required to pay interest on deposits of money (other than current account
deposits) accepted by them or renewed by them in their Domestic, Ordinary Non-Resident (“NRO”), Non-
Resident (External) (“NRE”) accounts and Foreign Currency (Non-Resident) (“FCNR”) accounts (Banks)
scheme deposit account), subject to certain conditions prescribed by these directions. Banks are required to put in
place a comprehensive policy on interest rates on deposits duly approved by the board of directors or any
committee thereof. Further, certain additional restrictions have been prescribed to determine interest rates for
savings deposits and term deposits. Additionally, interest rates offered by banks on NRO and NRE deposits cannot
be higher than those offered by them on comparable domestic rupee term deposits.
Deposit insurance
Demand and time deposits of up to ₹ 100,000 accepted by Indian banks (other than primary co-operative societies)
have to be mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a wholly-owned
subsidiary of the RBI. Banks are required to pay the insurance premium for the eligible amount to the Deposit
Insurance and Credit Guarantee Corporation on a half yearly basis. The cost of the insurance premium cannot be
passed on to the customer.
Prevention of Money Laundering Act, 2002
In order to prevent money laundering activities, the PMLA was enacted which seeks to prevent money laundering
and to provide for confiscation of property derived from, or involved in money laundering, and for incidental
matters connected therewith. Section 12 of the PMLA casts certain obligations on, inter alia, banking companies
in relation to preservation and reporting of customer account information. The RBI has advised all banks to go
through the provisions of the PMLA and the rules notified thereunder and to take all steps considered necessary
to ensure compliance with the requirements of section 12 of the PMLA.
Regulations relating to KYC and anti-money laundering
The RBI issued the “Reserve Bank of India (Know Your Customer (KYC) Directions, 2016” on February 25,
2016 consolidating the guidelines for KYC and anti-money laundering procedures. Banks are not permitted to
make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are
presented beyond the period of three months from the date of such instrument. Further, banks are required to
frame their KYC policies incorporating (i) customer acceptance policy, (ii) customer identification procedures,
(iii) monitoring of transactions and (iv) risk management.
Regulations relating to maintenance of statutory reserves
A bank is required to maintain, on a daily basis, CRR, which is a specified percentage of its DTL, excluding
interbank deposits, by way of a balance in a current account with the RBI. At present the required CRR is 4%.
The RBI does not pay any interest on CRR balances. The CRR has to be maintained on an average basis for a
fortnightly period and the minimum daily maintenance of CRR should be 90% effective from fortnight beginning
April 16, 2016. The RBI may impose penal interest at the rate of 3% above the bank rate on the amount by which
the reserve falls short of the CRR required to be maintained on a particular day. If the shortfall continues further
the penal interest charged shall be increased to a rate of 5% above the bank rate in respect of each subsequent day
during which the default continues.
In addition to the CRR, a bank is required to maintain SLR, a specified percentage of its NDTL by way of liquid
assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed by the
RBI from time to time, pursuant to Section 24 of the Banking Regulation Act. As per RBI Circular RBI/2018-
19/86 DBR.No.Ret.BC.10/12.02.001/2018-19, it has been decided to reduce the SLR from 19.50% of their Net
Demand and Time Liabilities to (i) 19.25% from January 5, 2019; (ii) 19.00% from April 13, 2019; (iii) 18.75%
from July 6, 2019; (iv) 18.50% from October 12, 2019; (v) 18.25% from January 4, 2020; and (vi) 18.00% from
April 11, 2020. Further, the RBI has permitted banks to avail funds from the RBI on an overnight basis, under the
marginal standing facility, against their excess SLR holdings. Additionally, they can also avail themselves of
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funds, on an overnight basis below the stipulated SLR, up to 2% of their respective NDTL outstanding at the end
of the second preceding fortnight.
Regulations relating to authorised dealers for foreign exchange and cross-border business transactions
The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the
Foreign Exchange Management Act, and rules / regulations issued thereunder. All branches should monitor all
non-resident accounts to prevent money laundering. The RBI master direction on “External Commercial
Borrowings and Trade Credits”, dated January 1, 2016, states that no financial intermediary, including banks, will
be permitted to raise external commercial borrowings or provide guarantees in favour of overseas lenders for
external commercial borrowings.
The RBI master circular on “Risk Management and Interbank Dealings”, dated July 5, 2016, states that all
categories of overseas foreign currency borrowings of banks, including existing external commercial borrowings
and loans or overdrafts from their head office, overseas branches and correspondents and overdrafts in nostro
accounts (not adjusted within five days), shall not exceed 100% of their unimpaired Tier I capital or USD $ 10
million (or its equivalent), whichever is higher. Overseas borrowings for the purpose of financing export credit,
subordinated debt placed by head offices of foreign banks with their branches in India as Tier II capital, capital
funds raised/ augmented by the issue of innovative perpetual debt instruments and any other overseas borrowings
with the specific approval of the RBI would continue to be outside the limit of 100%.
Secrecy obligations
A bank’s obligations relating to maintaining secrecy arise out of Section 13 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (for public sector banks specifically) and common law
principles governing its relationship with its customers. Further, according to the Master Circular on Customer
Service dated July 1, 2015, wherever banks desire to collect information for purposes other than KYC
requirements, it should not form part of the account opening form. Subject to certain exceptions, a bank cannot
disclose any information to third parties. Further, the RBI may, in the public interest, publish the information
obtained from the bank.
Foreign ownership restrictions
The total foreign ownership in an Indian private sector bank cannot exceed 74.00% (49.00% under the automatic
route and beyond 49.00% and up to 74.00% under the approval route) of the paid-up capital subject to guidelines
for setting up branches or subsidiaries of foreign banks issued by the RBI. Section 12 of the Banking Regulation
Act prohibits any shareholder of the bank from exercising voting rights on poll in excess of 10.00% of total voting
rights of all the shareholders of the bank. However, the RBI may increase this ceiling to 26.00% in a phased
manner.
The “Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016” (“Directions on Ownership”)
dated May 12, 2016, envisages diversified shareholding in private sector banks by a single entity/corporate
entity/group of related entities. Pursuant to the Directions on Ownership, ownership limits for all shareholders in
the private sector bank in the long run shall be stipulated under two broad categories: (i) natural persons
(individuals) and (ii) legal persons (entities/institutions). Further, separate limits are now stipulated for (i) non-
financial and (ii) financial institutions; and among financial institutions, for diversified and non-diversified
financial institutions. The voting rights are capped at 15.00% or as notified by the Reserve Bank from time to
time.
The approval of RBI is required for the acquisition or transfer of the shares of our private sector banks, which take
the aggregate holding (direct and indirect, beneficial or otherwise) of an individual, his relatives, associate
enterprises and persons acting in concert with him to 5.00% or more of the bank’s total paid up share capital or
entitles him to exercise 5.00% or more of the total voting rights of the bank, in accordance with the terms of the
“Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)
Directions, 2015”. Further, SEBI has through circular dated April 5, 2018, put in place a new system for
monitoring the foreign investment limits in listed Indian companies, and pursuant to its circular dated May 17,
2018, SEBI has directed that the system be made operational from June 1, 2018. Accordingly, the listed Indian
companies shall be required to appoint any one depository as their designated depository to facilitate the
monitoring of the foreign investment limits.
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Issue of shares by private sector banks
The “Reserve Bank of India (Issue and Pricing of Shares by Private Sector Banks) Directions, 2016” provides
general permission for issue of shares by private sector banks through the routes mentioned therein subject to
certain conditions, inter alia: the issue of shares is required to be in compliance with the Companies Act, 2013,
Foreign Exchange Management Act, 1999 and SEBI regulations; the issue of shares has the approval from the
bank’s board or shareholders, as may be required under the Companies Act 2013 or applicable SEBI regulations.
Downstream investment by banks
In accordance with the Consolidated Foreign Direct Investment Policy effective from June 7, 2016, issued by the
Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India,
downstream investments made by a banking company, as defined in section 5 (C) of the Banking Regulation Act,
incorporated in India, which is owned or controlled by non-residents/ non-resident entity under corporate debt
restructuring, or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to
defaults in loans, shall not count towards indirect foreign investment. However, their 'strategic downstream
investment' i.e. investment by these banking companies in their subsidiaries, joint ventures and associates shall
count towards indirect foreign investment.
Regulation of financial services provided by banks
The “Reserve Bank of India (Financial Services provided by Banks) Directions, 2016” dated May 26, 2016 require
banks to comply with certain restrictions while undertaking financial services including in relation to risk
mitigation measures, limits on investment that can be made by banks in companies undertaking financial services.
The directions also provide for specific regulations for certain financial services such as, inter alia, setting of an
infrastructure debt fund, underwriting activities, mutual fund business, insurance.
Guidelines for merger and amalgamation of private sector banks
The “Reserve Bank of India (Amalgamation of Private Sector Banks) Directions, 2016” dated April 21, 2016
relate to: (i) an amalgamation of two banking companies; and (ii) an amalgamation of a NBFC with a banking
company. In the case of an amalgamation of two banking companies, the draft scheme of amalgamation must be
approved by the two-third majority of the total members of the board and two-thirds majority in value of the
shareholders who are present in person or by proxy at the relevant general meeting of each of the banking
companies. Additionally, such approved draft scheme must also be submitted to the RBI for sanction.
Where a NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the
approval of the board and the RBI before it is submitted to the NCLT for approval.
Guidelines on management of intra-group transactions and exposures
The RBI issued the “Guidelines on Management of Intra-Group Transactions and Exposures” on February 11,
2014. Pursuant to the said guidelines, RBI has prescribed quantitative limits on financial intra-group transactions
and exposures and prudential measures for the non-financial intra-group transactions and exposures. The objective
of these guidelines is to ensure that banks engage in intra-group transactions and exposures in safe and sound
manner in order to contain concentration and contagion risks arising out of such transactions.
Capital and provisioning requirements for exposures to entities with unhedged foreign currency exposure
RBI issued a circular relating to “Capital and Provisioning Requirements for Exposures to entities with Unhedged
Foreign Currency Exposure” on January 15, 2014. Pursuant to these guidelines, RBI has introduced incremental
provisioning and capital requirements for bank exposures to entities with unhedged foreign currency exposures.
The circular also lays down the method of calculating the incremental provisioning and capital requirements. The
banks will be required to calculate the incremental provisioning and capital requirements at least on a quarterly
basis. This framework became fully effective from April 1, 2014.
Framework for revitalising distressed assets in the economy
The RBI has, pursuant to its circular dated February 12, 2018 established a new regulatory framework for
resolution of stressed assets (“Revised Framework”). Pursuant to the Revised Framework, existing guidelines
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and schemes for debt resolution such as corporate debt restructuring, flexible restructuring of existing long term
project loans, strategic debt restructuring, change in ownership outside the strategic debt restructuring and the
scheme for sustainable restructuring of stressed asset have been withdrawn. In addition, the guidelines /framework
for joint lenders’ forum has also been discontinued.
According to the Revised Framework, the lenders must identify incipient stress in loan accounts immediately on
default by classifying stressed assets as SMA. Our Bank must report these classifications having an aggregate
exposure of $50 million or more to the CRILC on a weekly basis.
Guidelines on the reporting requirement under Foreign Account Tax Compliance Act (“FATCA”) and
Common Reporting Standards (“CRS”)
In 2010, USA enacted a law known as Foreign Account Tax Compliance Act (“FATCA”) with the objective of
tackling tax evasion through obtaining information in respect of offshore financial accounts maintained by USA
residents and citizens. The provisions of FATCA essentially provide for 30% withholding tax on US source
payments made to Foreign Financial Institutions unless they enter into an agreement with the Internal Revenue
Service to provide information about accounts held with them by USA persons or entities controlled by USA
persons. India has signed the Inter-Governmental Agreement (“IGA”) with the USA on July 9, 2015, for
improving international tax compliance and implementing the FATCA.
The Reserve Bank of India issued “Reporting requirement under Foreign Account Tax Compliance Act (FATCA)
and Common Reporting Standards (CRS)” dated August 28, 2015. This reporting requirement must be read with
the amendment to the Income Tax Rules, 1962 (“Rules”) vide notification dated August 7, 2015 issued by the
Central Board of Direct Taxes which have added Rule 114F (definitions), 114G (Information to be maintained
and reported) and 114H (due diligence requirement) to the Rules for operationalisation of IGA and CRS. All the
concerned financial institutions (as defined under the Rules) should refer to the amended Rules and take steps for
complying with the reporting requirements.
Framework for dealing with Domestic Systemically Important Banks
The Reserve Bank had issued the Framework for dealing with Domestic Systemically Important Banks (“D-
SIBs”) on July 22, 2014. The D-SIB Framework requires the Reserve Bank to disclose the names of banks
designated as D-SIBs every year in August starting from August 2015. The Framework also requires that D-SIBs
may be placed in four buckets depending upon their Systemic Importance Scores (“SISs”). Based on the bucket
in which a D-SIB is placed, an additional common equity requirement has to be applied to it, as mentioned in the
D-SIB Framework. The D-SIB Framework specifies a two-step process of identification of D-SIBs. In the first
step, the sample of banks to be assessed for systemic importance has to be decided. The selection of banks in the
sample for computation of SIS is based on analysis of their size as a percentage of annual GDP. The additional
Common Equity Tier 1 requirements applicable to D-SIBs will be applicable from April 1, 2016 in a phased
manner and would become fully effective from April 1, 2019.
The Banking Ombudsman Scheme, 2006
The Banking Ombudsman Scheme, 2006 provides the extent and scope of the authority and functions of the
Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and
advances and other specified matters. On February 3, 2009, the said scheme was amended to provide for revised
procedures for redressal of grievances by a complainant under the scheme.
Declaration of dividend by banks
The payment of dividends by banks is subject to restrictions under the Banking Regulation Act. Section 15(1) of
the Banking Regulation Act states that no banking company may pay any dividend on its shares until all its
capitalised expenses (including preliminary expenses, organisation expenses, share-selling commissions,
brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have
been completely written off. In addition, Section 17(1) of the Banking Regulation Act requires every banking
company to create a reserve fund and, out of the balance of the profit of each year as disclosed in the profit and
loss account, transfer a sum equivalent to not less than 20.00% of such profit to the reserve fund before declaring
any dividend. This requirement of transferring funds to reserve fund has now been increased to 25%. Further, in
May 2005, the RBI issued guidelines on Declaration of Dividends by Banks, which prescribed certain conditions
for declaration of dividends by banks.
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Consolidated Supervision Guidelines
In 2003, the RBI issued guidelines for consolidated accounting and consolidated supervision for banks. These
guidelines became effective on August 1, 2003. The principal features of these guidelines are:
• Consolidated financial statements: Banks are required to annually prepare consolidated financial statements
intended for public disclosure.
• Consolidated prudential returns: Banks are required to submit to the RBI, at periodic intervals, consolidated
prudential returns reporting their compliance with various prudential norms on a consolidated basis, excluding
insurance subsidiaries.
Marginal Cost of Funds based Lending Rate (“MCLR”)
Pursuant to the notification issued by RBI dated December 17, 2015, all rupee loans sanctioned and credit limits
renewed with effect from April 1, 2016 are to be priced with reference to the MCLR which is the internal
benchmark for such purposes. MCLR comprises of: (a) marginal cost of funds; (b) negative carry on account of
CRR; (c) operating costs and; (d) tenor premium. In terms of the notification, the board of directors of the banks
are required to adopt a policy delineating the components of spread charged to a customer. Actual lending rates
are to be determined by adding the components of spread to the MCLR. Further, no lending below the MCLR of
a particular maturity for all loans linked to that benchmark is permitted. The aforementioned notification provides
exemption to certain loans from being linked to MCLR as the benchmark for determining interest rate. Further,
the aforementioned notification also provides for review of MCLR, reset of interest rates, treatment of interest
rates linked to base rate charged to existing borrowers and mandates all the banks to move to the MCLR based
pricing from April 1, 2016.
Regulations relating to making loans and advances
The provisions of the Banking Regulation Act govern the making of loans by banks in India. In addition, the RBI
also issues directions in relation to the loan activities of banks. Some of the major requirements that banks are to
observe are as follows:
• The RBI has prescribed norms for banks lending to non-bank financial companies and the financing of public
sector disinvestment.
• RBI introduced the “MCLR” in the place of “Base Rate” with effect from April 1, 2016 for all loans and
advances. However, those advances sanctioned up to March 31, 2016 which come for renewal subsequently
i.e. from April 1, 2016, MCLR will be applicable. Pursuant to the notification issued by RBI dated December
17, 2015, all rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 are to be priced
with reference to the MCLR which is the internal benchmark for such purposes. MCLR comprises of: (a)
marginal cost of funds; (b) negative carry on account of CRR; (c) operating costs and; (d) tenor premium.
The Notification mandates that, the board of directors of the banks shall adopt a policy delineating the
components of spread charged to a customer. Actual lending rates are to be determined by adding the
components of spread to the MCLR. Further, no lending below the MCLR of a particular maturity for all
loans linked to that benchmark is permitted. The aforementioned notification provides exemption to certain
loans from being linked to MCLR as the benchmark for determining interest rate. Further, the Notification
also provides for review of MCLR, reset of interest rates, treatment of interest rates linked to base rate
charged to existing borrowers and mandates all the banks to move to the MCLR based pricing from April 1,
2016.
• Section 21A of the Banking Regulation Act provides that the rate of interest charged by a bank shall not be
reopened by any court on the ground that the rate of interest charged by a bank is excessive. The Banking
Regulation Act provides for protection to banks for interest rates charged by them.
• Section 20 of the Banking Regulation Act provides that banks shall not grant loans on the security of their
own shares. Further, banks cannot grant loans or advances to or on behalf of their directors.
Classification and Reporting of Fraud Cases
The RBI issued a Master Direction on July 1, 2016 in relation to the classification and reporting of fraud cases.
The circular classifies fraud cases into: (i) misappropriation and criminal breach of trust; (ii) fraudulent
encashment through forged instruments, manipulation of books of account or through fictitious accounts and
conversion of property; (iii) unauthorized credit facilities extended for reward or for illegal gratification; (iv)
negligence and cash shortages; (v) cheating and forgery; (vi) irregularities in foreign exchange transactions and;
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(vii) any other type of fraud not coming under the specific heads as above. Cash shortage resulting from negligence
and fraudulent forex interaction involving irregularities and violations of regulations have also to be reported as
fraud if the intention to cheat is suspected or proved. Information relating to frauds for the quarters ending June,
September and December may be placed before the audit committee of the board of directors during the month
following the quarter to which it pertains, irrespective of whether or not these are required to be placed before the
board/management committee in terms of the calendar of reviews prescribed by the RBI. Banks are also required
to conduct an annual review of the frauds and place a note before the board of directors for information. The
reviews for the year-ended March may be put up to the Board before the end of the next quarter i.e. for the quarter
ended June 30 and such reviews need not be sent to RBI. These may be preserved for verification by the RBI’s
inspecting officers.
Banks need to furnish Fraud Monitoring Return (“FMR”) in individual fraud cases, irrespective of the amount
involved, to the RBI within three weeks from the date of detection. Further, the circular requires all banks to
constitute a special committee for monitoring and follow up of cases of frauds involving amounts of ₹ 10 million
and above exclusively, while the audit committee may continue to monitor all cases of fraud in general. The
special committee is required to review such fraud cases as and when they come to light. The special committee
in case of private sector banks should consist of two members of the audit committee of the board and two
members from the Board excluding the RBI nominee. In addition to the FMR, banks are also required to furnish
a Flash Report (FR) for frauds involving amounts of ₹ 50 million and above within a week of such frauds coming
to the notice of the bank’s head office.
Liquidity Adjustment Facility
Liquidity Adjustment Facility (“LAF”) is a facility extended by RBI to scheduled commercial banks (excluding
Regional Rural Banks) and primary dealers to avail of liquidity in case of requirement or park excess funds with
the RBI in case of excess liquidity on an overnight basis against government securities as collateral. Therefore,
LAF enables liquidity management on a day to day basis and enables RBI to transmit interest rate signals to the
market. The operations of LAF are conducted by way of repurchase agreements with RBI being the counter-party
to all the transactions. The interest rate in LAF is fixed by the RBI from time to time. LAF is an important tool of
monetary policy.
Collateralised Borrowing and Lending Obligation
Collateralised Borrowing and Lending Obligation (“CBLO”) is a money market instrument operated by the
Clearing Corporation of India Limited (“CCIL”), facilitating borrowing and lending of funds to market
participants who are admitted as members in CBLO segment in a collateralized environment. By participating in
the CBLO market, CCIL members can borrow or lend funds against the collateral of eligible securities. Eligible
securities include central government securities including treasury bills, and such other securities as specified by
CCIL from time to time. Borrowers under CBLO have to deposit the required amount of eligible securities with
the CCIL based on which CCIL fixes the borrowing limits. CCIL matches the borrowing and lending orders
submitted by the members and notifies them. While the securities held as collateral are in custody of the CCIL,
the beneficial interest of the lender on the securities is recognized through proper documentation.
Moratorium, reconstruction and amalgamation of banks
A high court may, upon the application by a banking company which is temporarily unable to meet its obligations,
make an order staying the commencement or continuance of all actions and proceedings against a bank for a fixed
period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend it
for a total moratorium period not exceeding six months. The said application is required to be accompanied by a
report by the RBI that, in its opinion, the said banking company will be able to pay its debts if the application is
granted. Further, the RBI may also make an application to the central government for an order of moratorium.
During the said moratorium, the RBI may prepare a scheme for the reconstruction of a banking company or for
the amalgamation of the banking company with any other banking institution if it is satisfied that it is necessary:
a) in public interest, b) in interests of depositors, c) to secure the proper management of the banking company, d)
in interests of the banking system of the country as a whole. Such a moratorium cannot exceed a period of six
months. The RBI may make modifications to the draft scheme pursuant to receipt of suggestions and objections
from the banking company, the transferee bank or any other banking company concerned in the amalgamation,
and from any members, depositors or other creditors of each of the banks concerned. The central government may
sanction the scheme with or without such modifications.
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IRDA (Registration of Corporate Agents) Regulations, 2015 (“RCA Regulations”)
The RCA Regulations define applicant widely to include companies, LLPs, co-operative societies, banking
companies, NGOs and any other person recognized by the IRDAI to act as a corporate agent. There are different
categories of corporate agents envisaged by the RCA Regulations such as life, general, health and composite. The
RCA Regulations cover registration of applicants who are registered as corporate agents for the purpose of
soliciting, procuring and servicing of insurance business of life insurers, general insurers and health insurers
during the validity of their certificate of registration. It lays down the forms and fees that are required to be
filled/paid by the applicant for registration and renewal. While considering the application, the IRDAI shall take
into account whether the applicant is suffering from any disqualifications under the Insurance Act, 1938, whether
he has the necessary infrastructure, whether any person directly/indirectly connected with the applicant has been
refused a licence, whether the applicant has fulfilled the required academic qualifications and hours of theoretical
and practical training along with other conditions. Once the registration is issued, it shall be valid for a period of
three years from the date of issue. The RCA Regulations also lay down several conditions in accordance to which
the corporate agent has to operate.
Submission of credit information
According to the Credit Information (Companies) Regulation Act, 2005 (“CICRA”), a “credit institution” means
a banking company and every credit institution shall become a member of at least one Credit Information
Company (“CIC”). A CIC, may, by notice in writing, require its members to furnish such credit information as it
may deem necessary. Further, RBI, through its notification dated January 15, 2015, has directed that: a) all credit
institutions shall become members of all CICs and submit data, including historical data, to them, b) credit
institutions shall keep the credit information collected/ maintained by them, updated regularly on a monthly basis
or at such shorter intervals as may be mutually agreed upon between the credit institution and the CIC under the
CICRA.
Implementation of Indian Accounting Standards (“Ind-AS”)
As per RBI circular DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, banks have been directed to
be in preparedness to submit proforma Ind-AS financial statements to RBI from the half-year ended September
30, 2016. Further, RBI vide its circular DBR.BP.BC.No 106/21.07.001/2015-16 dated June 23, 2016 furnished
the formats for balance sheet, profit and loss account and notes.
Revised Prompt Corrective Action (PCA) framework for banks The RBI vide its circular dated April 13, 2017 has reviewed and revised the Prompt Corrective Action (PCA)
framework for banks, which is effective from April 1, 2017. The PCA framework sets out certain ‘risk thresholds’,
the breach of which would mandate the relevant bank to implement certain mandatory and discretionary actions.
The aforementioned ‘risk thresholds’ takes into consideration the capital adequacy ratio, net non-performing
advances ratio, return on assets and the leverage ratio of the relevant bank.
Resolution of Stressed Assets
The RBI has issued guidelines on April 18, 2017 advising all scheduled commercial banks to make additional
provisions in respect of advances to stressed sectors of the economy. The banks are required to put in place a
board approved policy for making provisions for standard assets at rates higher than the regulatory minimum,
based on evaluation of risk and stress in various sectors. This evaluation needs to be on a quarterly basis.
The RBI has issued guidelines on September 1, 2016 to restrict scheduled commercial banks’ investment in
Security Receipts (“SRs”) backed by their own stressed assets. With effect from April 1, 2017, where the
investment in a bank in SRs backed by stressed assets sold by it, under an asset securitisation is more than 50%
of the SRs backed by its sold assets and issued under that securitisation, provisioning requirement on SRs will be
higher of the provisioning rate required in terms of net asset value declared by the SCs/ RCs and provisioning rate
as applicable to the underlying loans, assuming that the loans notionally continued in the books of the bank. With
effect from April 1, 2018, this threshold of 50% will be reduced to 10%.
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BOARD OF DIRECTORS AND SENIOR MANAGEMENT
Board of Directors
The composition of our Board is governed by the provisions of the Companies Act, the SEBI Listing Regulations,
the Banking Regulation Act, and our Articles of Association. As per the provisions of our Articles of Association,
the Board shall comprise of not less than three Directors and not more than 15 Directors. The Directors appointed
by Reserve Bank of India will not be counted for determining the maximum strength of the Board as per Section
36AB of the Banking Regulation Act and hence their number will be excluded for determining the maximum
number of Directors on the Board and for the purposes of compliance with corporate governance requirements.
We currently have 10 Directors on our Board, which include two Nominee Directors appointed by RBI, one
Executive Director (MD and CEO), five Independent and Non – Executive Directors and two Non-Independent
and Non-Executive Directors, of which one director is a woman Director.
Further, the Banking Regulation Act and RBI notification dated November 24, 2016 requires that not less than
51% of the total Directors have specialised knowledge or practical experience in one or more of the following
areas: accountancy, agriculture and rural economy, banking, cooperation, economics, finance, law, small-scale
industry, information technology, payment and settlement systems, human resources, risk management, business
management and any other fields that the RBI may specify. Out of the aforesaid number of Directors, not less
than two Directors are required to have specialized knowledge or practical experience in agriculture and rural
economy, co-operation or small-scale industry. Also, not less than 51% of the Directors, shall be persons who do
not have substantial interest in, or be connected with, whether as an employee, manager or managing agent, of
any company (not being a company registered under Section 25 of the Companies Act, 1956 or Section 8 of the
Companies Act, 2013) or firm which carries on any trade, commerce or industry which is not a small scale
industrial concern, or be proprietors of any trading, commercial or industrial concern which is not a small scale
industrial concern, or are any proprietors of any trading, commercial or industrial concern, not being a small scale
industrial concern.
Further, under the Banking Regulation Act, the appointment or re-appointment of Chairman and whole-time
Directors requires the approval of the RBI. The RBI has also prescribed “fit and proper” criteria to be considered
when appointing or re-appointing directors of banks, with our Bank’s Directors being required to make
declarations confirming their on-going compliance with such criteria. As on date of this Preliminary Placement
Document, the Board of Directors of our Bank is in compliance with the abovementioned conditions.
Pursuant to the provisions of the Companies Act, at least two-thirds of the total number of directors excluding the
Independent Directors are liable to retire by rotation, with one-third of such number retiring at each annual general
meeting. A retiring director is eligible for re-election. Further, the Independent Directors may be appointed for a
maximum of two terms of up to five consecutive years each. Pursuant to the provisions of the Banking Regulation
Act, none of the directors other than whole-time Directors may hold office continuously for a period of eight
years.
The following table sets forth details of our board of directors at the date of this Preliminary Placement Document:
Sr.
No. Name, Address, Age and Term DIN Occupation Designation
1. Mr. B. K. Manjunath
Address:
8th Cross, Kumarapark West, Bangalore North,
Bengaluru – 560 020, Karnataka, India
Age: 58
Term: Three years from June 6, 2017
00319891 Professional Non-Executive Chairman
and Independent Director
2. Mr. Parthasarathi Mukherjee
Address:
“Isha Aara", Flat No.101, No.1, Sri Labdhi
Colony, Alwarpet, Chennai 600 018, Tamil
Nadu, India
02446180 Service Managing Director & Chief
Executive Officer
158
Sr.
No. Name, Address, Age and Term DIN Occupation Designation
Age: 58
Term: Two years from January 25, 2019
3. Dr. Y N Lakshminarayana Murthy
Address:
No 187, 12th Main, Nagendra Block,
Banashankari 3rd Stage, Bengaluru – 560 050,
Karnataka, India
Age: 65
Term#: Three years from July 18, 2017
(originally appointed on June 10, 2016)
07534836 Retired Independent and Non-
Executive Director
4. Mr. Kusuma R Muniraju
Address:
70/1, Shankaramutt Road, Opp Police Station
Shankarapuram, Basavanagudi, Bengaluru – 560
004, Karnataka, India
Age: 69
Term#: Two years from July 18, 2017, or such
other period as prescribed by the extant
regulations/circulars of RBI (originally
appointed on July 1, 2016)
02111974 Professional Independent and Non-
Executive Director
5. Ms. Anuradha Pradeep
Address:
A4, Hulkul Residency, 81, Lavelle Road,
Bengaluru – 560 001, Karnataka, India
Age: 51
Term#: Appointed on March 21, 2017. Liable to
retire by rotation
00291763 Professional Non-Independent and Non-
Executive Director
6. Mr. Hemant Kaul
Address:
A-105, Atray Path, Shyam Nagar, Jaipur – 302
019, Rajasthan, India.
Age: 63
Term#: Three years from July 18, 2017
(originally appointed on April 26, 2017)
00551588 Consultant Independent and Non-
Executive Director
7. Mr. G. Sudhakara Gupta
Address:
FG-2, CASA XS, NO.3/246, Manapakkam Main
Road, Manapakkam, Chennai 600 125, Tamil
Nadu, India
Age: 60
Term#: Appointed on September 27, 2017.
Liable to retire by rotation.
00005150 Consultant Non-Independent and Non-
Executive Director
159
Sr.
No. Name, Address, Age and Term DIN Occupation Designation
8. Mr. H.S. Upendra Kamath
Address:
No.429/A, 8th Main Road, Vijaya Bank Layout,
Bilekahalli, off Bannerughatta Main
Road, Bengaluru – 560 076, Karnataka, India
Age: 65
Term#: Two years from August 8, 2018
(originally appointed on April 20, 2018)
02648119 Retired Independent and Non-
Executive Director
9. Mr. Suvendu Pati
Address:
Flat No. 204, Manjeera Apts, RBI Officers
Quarters, Ameerpet, Secunderabad, Begumpet,
Hyderabad – 500 016, Telangana, India
Age: 49
Term##: Appointed for a period of two years
from February 12, 2018 to February 11, 2020, or
till further orders whichever is earlier
07452701 Service RBI nominee
Director
10. Mr. Rajnish Kumar
Address:
A/21, RBI Officers Quarters, Cunningham Road,
Bangalore North, Bengaluru – 560 001,
Karnataka, India
Age: 47
Term###: Appointed for a period of two years
with effect from May 17, 2017 to May 16, 2019
or till further orders, whichever is earlier
07833241 Service RBI nominee
Director
# Subject to Section 10A(2A) of the Banking Regulation Act pursuant to which no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years
## Appointed by RBI pursuant to its Order No. DBR. PSBD. No. 10152/16.05.013/2015-16 dated February 12, 2016 in exercise of the power conferred by sub-section (1) of Section 36AB of the Banking Regulation Act, in public interest for a period of two years from February 12, 2016 to
February 11, 2018 or till further orders, whichever is earlier. Subsequently, the term was extended from for a period of two years from February
12, 2018 to February 11, 2020 vide Order No.DBR.PSBD.No.7227/16.05.013/2017-18 dated February 9, 2018. As per sub-section (2) of Section
36AB and Section 36 AC of the Banking Regulation Act, the appointment of such directors is effective notwithstanding anything contained in the
Memorandum of Association and Articles of Association of our Bank.
### Appointed by RBI pursuant to its Order No. DBR.PSBD No.13562/16.05.013/2016-17 dated May 17, 2017 in exercise of the power conferred
by sub-section (1) of Section 36AB of the Banking Regulation Act, in public interest for a period of two years from May 17, 2017 to May 16, 2019
or till further orders, whichever is earlier. As per sub-section (2) of Section 36AB and Section 36 AC of the Banking Regulation Act, the appointment of such directors is effective notwithstanding anything contained in the Memorandum of Association and Articles of Association of our Bank.
Brief Biographies of the Directors
B. K. Manjunath
Mr. B. K. Manjunath is the Non-Executive Chairman and Independent Director of our Bank. He has been
associated as Non-Executive Chairman with our Bank from June 6, 2017. He is a member of Institute of Chartered
Accountants of India. He had also served as an Independent Director of our Bank during the period from 2008 to
2015.
Parthasarathi Mukherjee
160
Mr. Parthasarathi Mukherjee is the Managing Director and Chief Executive Officer of our Bank. He has been
associated as Managing Director and Chief Executive Officer with our Bank from January 25, 2016. Before
joining our Bank, he was the group executive of corporate relationships group and international business at Axis
Bank.
Y. N. Lakshminarayana Murthy
Dr. Y. N. Lakshminarayana Murthy is an Independent and non – executive Director on our Board. He has been
associated with our Bank since June 10, 2016. He holds a master degree in science (agriculture) in soil science
and a PhD in soil science and agricultural chemistry from University of Agricultural Sciences, Bangalore.
Kusuma R. Muniraju
Mr. Kusuma R. Muniraju is an Independent and Non-Executive director on our Board and has been so appointed
with effect from July 1, 2016. He holds a bachelor degree in science from University of Mysore and LL.B. degree
from University of Bangalore. He has been enrolled as an advocate with Mysore State Bar Council since 1971.
He had also served as an Independent Director of our Bank during the period from 1990 to 1998 and 2008 to 2013.
Anuradha Pradeep
Ms. Anuradha Pradeep is one of the promoter directors of our Bank and is a Non-Independent and Non-Executive
Director on our Board. She has been associated with our Bank since March 21, 2017. She holds a bachelor degree
in academic law from Bangalore University and is enrolled with Karnataka State Bar Council since 1991. She is
an Independent Legal practitioner by profession practicing in the High Court of Karnataka since past 25 years.
Hemant Kaul
Mr. Hemant Kaul is an Independent and Non-Executive Director on our Board. He has been associated with our
Bank since April 26, 2017. He holds a bachelor degree in science from Rajasthan University and master degree
in business administration from Rajasthan University. He served as an executive director at Axis Bank. He was
the managing director & CEO of Bajaj Allianz General Insurance Company Limited from December 2009 till
March 2012.
G. Sudhakara Gupta
Mr. G. Sudhakara Gupta is a Non-Independent and Non-Executive Director on our Board and has been so
appointed with effect from September 27, 2017. He holds a bachelor’s degree in commerce from the University
of Madras. He had also served as a Non-Independent Director of our Bank during the period from 2006 to 2009.
H.S Upendra Kamath
Mr. H.S Upendra Kamath is an Independent and non-executive Director on our Board. He has been associated
with our Bank since April 20, 2018. He was an executive director in Canara Bank from 2009 to 2011 and was the
chairman and managing director of Vijaya Bank from 2011 to 2013. Later, he has also served as the Managing
Director and CEO of Tamilnad Mercantile Bank Limited from 2014 to 2017.
Suvendu Pati
Mr. Suvendu Pati is the RBI nominee Director on our Board. He is a General Manager with the Reserve Bank of
India at its Regional Office in Hyderabad.
Rajnish Kumar
Mr. Rajnish Kumar is the RBI nominee Director on our Board. He is a General Manager with the Reserve Bank
of India, Bengaluru.
Compensation of Directors
161
The Nomination, Remuneration and Compensation Committee determines and recommends to the Board the
compensation proposed to be paid to the Executive Directors. Presently, the Chairman is eligible for honorarium
payments and sitting fees for the Board and committee meetings which he participates in, as per approval from
RBI and the other Non-Executive Directors are paid only the sitting fees for the Board and committee meetings
they participate and are not eligible for any other remuneration.
The non-executive Directors are paid remuneration consisting of sitting fees, which is determined by the Board
of Directors. Our Bank pays sitting fees of ₹ 35,000 per Board and Committee meeting attended by the Non-
Executive Directors.
The table below sets forth the details of the compensation paid by our Bank to the present Non-Executive Directors
and the remuneration (including sitting fees, honorarium, salaries and perquisites) paid by our Bank to its Non-
Executive Chairman and Managing Director and CEO in Fiscal Year 2019 (to the extent applicable) and for the
Fiscal Years 2018, 2017 and 2016: (in ₹)
Name of the Director Fiscal 2019 (until
January 31, 2019)
Fiscal 2018 Fiscal 2017 Fiscal 2016
Non – Executive Chairman and Managing Director & CEO
B. K. Manjunath1 2,575,000.00 2,575,000.00 NA NA
Parthasarathi Mukherjee2 696,910.00* 50,954,194.98* 6,342,919.76* 1,118,676.02*
Non-Executive directors
Y N Lakshminarayana
Murthy3
945,000.00 875,000.00 455,000.00 NA
Kusuma R Muniraju4 1,050,000.00 1,610,000.00 840,000.00 NA
Anuradha Pradeep5 1,085,000.00 1,645,000.00 Nil NA
Hemant Kaul6 735,000.00 945,000.00 NA NA
G. Sudhakara Gupta7 1,260,000.00 455,000.00 NA NA
H.S Upendra Kamath8 1,225,000.00 NA NA NA
Suvendu Pati9 NA NA NA NA
Rajnish Kumar10 NA NA NA NA Note:
1. Appointed w.e.f. June 6, 2017. The amount paid by our Bank to Mr. B. K. Manjunath in Fiscal 2019 includes honorarium of ₹ 1,000,000.00 and sitting fees of ₹ 1,575,000.00, and the amount paid in Fiscal 2018 includes an honorarium of ₹ 1,000,000.00 and
sitting fees of ₹ 1,575,000.00.
2. Mr. Parthasarathi Mukherjee has not claimed his salary from February 2018, and has made claim only to his perquisites as per his terms of appointment since February 2018.
3. Co-opted as an Additional Director w.e.f. June 10, 2016
4. Co-opted as an Additional Director w.e.f. July 1, 2016 5. Co-opted as an Additional Director w.e.f. March 21, 2017 6. Co-opted as an Additional Director w.e.f. April 26, 2017
7. Co-opted as an Additional Director w.e.f. September 27, 2017 8. Co-opted as an Additional Director w.e.f. April 20, 2018
9. Appointed w.e.f. February 12, 2016
10. Appointed w.e.f. May 17, 2017 * includes value of perquisites u/s 17(2) of the Income Tax Act.
Terms and Conditions of Appointment of Non-Executive Chairman, B. K. Manjunath
In terms of Section 35B of the Banking Regulation Act, the RBI has conveyed its approval for appointment of
Mr. B. K. Manjunath as the Part-time Chairman (Non-Executive) of our Bank for a period of three years from the
date of his taking charge. Pursuant to the approval, Mr. B. K. Manjunath has taken charge as the Non-Executive
Chairman of our Bank from June 6, 2017. The terms and conditions for his remuneration which is approved by
the Shareholders pursuant to special resolution dated July 18, 2017 and the RBI is as mentioned below:
Sl.
No.
Particulars Details
1. Honorarium ₹ 1,200,000 lakhs per annum
2. Other allowances (DA, house rent, conveyance, entertainment,
etc.)
Not applicable
Perquisites
1. Free furnished house Not applicable
2. Free use of bank’s car for official purpose Bank’s car with chauffer, fuel at Bank’s cost.
3. Provident Fund/ Gratuity/ Pension Not applicable
162
4. Travelling & Halting Allowance Travel – A single return fare by Train in AC I
Class or business class / I class by Air
Stay – In business class hotel.
Halting Allowance – As applicable to Whole
Time Director
5. Medical benefits As per actuals.
6. Other benefits a. Communicative Modes – Free use
b. Sitting fees – He will be paid sitting fees for
attending board meetings and other
committee meetings of the Board as
applicable to other non - executive directors
of the Bank.
c. Bonus: Not applicable
d. Club membership – Any two business clubs
e. Leave fare concession: Not applicable
Terms and Conditions of employment of the Managing Director, Parthasarathi Mukherjee:
In terms of Section 35B of the Banking Regulation Act, the RBI has conveyed its approval for appointment of
Mr. Parthasarathi Mukherjee as the Managing Director and Chief Executive Officer of our Bank for a period of
three years from the date of his taking charge. Pursuant to the approval, Mr. Parthasarathi Mukherjee has taken
charge as the Managing Director and Chief Executive Officer of our Bank from January 25, 2016. The Board of
Directors of our Bank at their meeting held on January 23, 2019 have re-appointed him as the Managing Director
& Chief Executive Officer of our Bank for an additional tenure of two years with effect from January 25, 2019,
on the following terms as approved by RBI under section 35B of the Banking Regulation Act vide its letter dated
January 23, 2019.The terms and conditions for his remuneration, as approved by the RBI is as mentioned below:
Sl. No. Particulars Details
Remuneration
1. Salary ₹ 4,800,000 per annum
2. Dearness Allowance Not Applicable
3. House Rent Allowance Not Applicable
4. Conveyance Allowance Not Applicable
5. Entertainment Allowance Reimbursement of actual
6. Other Allowances Share/Stock Options
With prior approval of RBI*
Performance Bonus
As may be approved by Board, subject to RBI approval.
Perquisites
1. Free Furnished house Free furnished residential accommodation.
2. Free use of Bank's car for
- official purpose
- private purpose on compensating
the bank with suitable amount.
Bank’s car with chauffeur with fuel at Bank’s cost for official and
personal use.
3. Provident Fund/Gratuity
PF - 10% on salary / pay on contributory basis.
Gratuity - 1 month’s salary and pay for every completed year of service
– payable on completion of tenure approved by RBI
4. Travelling, Lodging and Halting
Allowance - Single return fare by business / executive class for air travel on
official purposes
- Halting allowances, boarding charges and lodging charges as may
be decided by the Board of Directors from time to time
- 5. Medical benefits Actual for self and dependent family members for hospitalized treatment
in India.
6. Other benefits a. Communicative Modes – free use
b. Insurance Coverage
- ₹ 10.00 million for travel by air/train/road**
- ₹ 5.00 million for life insurance
c. Sitting fees – Not Eligible
d. Membership in club – subscription to two service clubs
e. Child Education: ₹ 0.50 million per annum on aggregate
163
*Share/Stock Option: As approved by the Compensation Committee of the Board, the RBI vide its letter dated June 28, 2016 gave its approval
for grant of 1.2 million Equity Shares to Mr. Parthasarathi Mukherjee at a price of ₹ 55.00 per option to be vested over a period of three
years. This exercise price has been modified to ₹ 35.00 per option pursuant to a resolution passed by the Nomination, Remuneration & Compensation Committee on February 22, 2018, following the rights issue of Equity Shares by the Bank. The grant of 1.2 million employee
stock options was under the terms of the earlier appointment of Mr. Parthasarathi Mukherjee as the Managing Director and Chief Executive
Officer of our Bank from 2016 to 2019.
Relationship with other Directors
None of the Directors on the Board are related to each other.
Interest of Directors
All the Directors may be deemed to be interested to the extent of fees payable to them for attending Board or
Board committee meetings and reimbursement of expenses payable to them. Additionally, our Chairman and
Managing Director and CEO may be deemed to be interested to the extent of remuneration and perquisites paid
to them for services rendered. Our Directors may also be regarded as interested in the Equity Shares that may be
subscribed by or allotted to their relatives or the companies, firms or trusts, in which they are interested as
directors, members, partners, trustees or promoters, or any stock options held by them. Our Directors may also be
deemed to be interested to the extent of any dividend that may be payable to them and other distributions that may
be provided to them in respect of the said Equity Shares.
Except as disclosed in this Preliminary Placement Document, our Directors do not have any financial or other
material interest in the Issue and there is no effect of such interest in so far as it is different from the interests of
other persons. Further, there were no outstanding transactions by our Bank in which the Directors were interested
parties.
Except as otherwise stated in this Preliminary Placement Document, our Bank has not entered into any contract,
agreement or arrangement in which any of the Directors are interested, directly or indirectly, and no payments
have been made to them in respect of any such contracts, agreements, arrangements which are proposed to be
made with them. Further, no Director has taken any loans from our Bank, other than those which are permitted by
the RBI in ordinary course of business.
Shareholding of Directors
As at December 31, 2018, our Directors held the following number of the Equity Shares and employee stock
options:
Name of Directors Number of Equity Shares held Percent of Total
Number of
Outstanding
Equity Shares
Number of employee stock
options held under LVB ESOS-
2010*
B. K. Manjunath,
Non-Executive
Chairman
212,839 0.08 Nil
Parthasarathi
Mukherjee, MD&CEO
480,000 0.19 1,200,000 options granted of which
360,000 options have been
exercised and 360,000 options have
vested but are yet to be exercised.
Y N Lakshminarayana
Murthy
1,626 Negligible Nil
Kusuma R Muniraju 360,126 0.14 Nil Anuradha Pradeep 8,288 Negligible Nil Hemant Kaul Nil - Nil G. Sudhakara Gupta 2,666 Negligible Nil H.S Upendra Kamath Nil - Nil
Leave - Casual leave 12 days per year
Ordinary leave (privilege leave) Not exceeding 30 days per year and subject to our Bank’s leave policy.
Unavailed privilege leave encashment is payable on completion of
tenure.
7. Leave Fare Concession Once in a year to any place in India for self and family. Single return
fare by the highest available class including incidentals.
164
Name of Directors Number of Equity Shares held Percent of Total
Number of
Outstanding
Equity Shares
Number of employee stock
options held under LVB ESOS-
2010*
Suvendu Pati Nil - Nil Rajnish Kumar Nil - Nil
* Under LVB ESOS-2017, no options have been granted to any Director till date.
Corporate Governance
The Board of Directors presently consists of 10 Directors. In compliance with the requirements of the SEBI Listing
Regulations, the Board of Directors consists of five independent Directors.
Our Bank has in place processes and systems whereby it complies with the requirements to the corporate
governance as required by the Companies Act, 2013 and the SEBI Listing Regulations. The corporate governance
framework is based on an effective independent Board, separation of the supervisory role of the Board from the
executive management team and constitution of the committees of the Board, as required under applicable law.
The Board of Directors presently consists of 10 Directors. In compliance with the requirements of the SEBI Listing
Regulations, the Board of Directors consists of five independent Directors.
The Board functions either as a full Board or through various committees constituted to oversee specific
operational areas.
Committees of Board of Directors
The Board of Directors has constituted committees, which function in accordance with the relevant provisions of
the Companies Act, directions from RBI and the SEBI Listing Regulations, as applicable. The following table sets
forth the members of the committees constituted as per SEBI Listing Regulations and the Companies Act, as of
the date of this Preliminary Placement Document:
1. Audit Committee
Audit Committee was last reconstituted with effect from January 11, 2019. The Audit Committee comprises
of six members: Mr. B. K. Manjunath, Mr. Kusuma R Muniraju, Mr. G. Sudhakara Gupta, Mr. H.S Upendra
Kamath, Mr. Suvendu Pati and Mr. Rajnish Kumar. Mr. B. K. Manjunath is the chairman of the Audit
Committee.
2. Stakeholders’ Relationship Committee (“SRC”)
Stakeholders’ Relationship Committee was last reconstituted with effect from January 11, 2019. The SRC
comprises of three members: Ms. Anuradha Pradeep, Dr. Y.N. Lakshminarayana Murthy and Mr. G.
Sudhakara Gupta. Ms. Anuradha Pradeep is the chairperson of the SRC.
3. Nomination, Remuneration and Compensation Committee (“NRCC”)
Nomination, Remuneration and Compensation Committee was last reconstituted with effect from January 11,
2019. The NRCC comprises of four members: Mr. Kusuma R Muniraju, Mr. B. K. Manjunath, Dr. Y.N.
Lakshminarayana Murthy and Ms. Anuradha Pradeep. Mr. Kusuma R Muniraju is the chairman of the NRCC.
4. Corporate Social Responsibility Committee (“CSRC”)
Corporate Social Responsibility Committee was last reconstituted with effect from January 11, 2019. CSRC
comprises of four members: Mr. B. K. Manjunath, Mr. Parthasarathi Mukherjee, Mr. Kusuma R Muniraju and
Ms. Anuradha Pradeep. Mr. B. K. Manjunath is the chairman of CSRC.
In addition to the above mentioned committees, pursuant to the directions of the RBI and as per the requirements
of our Bank, the other committees constituted by our Board of Directors are: (i) Risk Management Committee,
(ii) Fraud Monitoring Committee and Review Committee on Non-cooperative borrowers, (iii) Management
Committee, (iv) IT Strategy Committee, (v) HR Committee, (vi) Customer Service Committee, (vii) Wilful
Defaulters Review Committee, and (viii) Committee of Directors for Capital Raising are constituted consisting of
the members of the Board.
165
Management Organisation Chart of our Bank
166
Key Managerial Personnel of our Bank
In addition to our Managing Director and Chief Executive Officer, the Key Managerial Personnel of our Bank as
on the date of this Preliminary Placement Document include Mr. S. Sundar, Chief Financial Officer and Mr. N.
Ramanathan, Company Secretary and Compliance Officer:
Mr. S. Sundar, Chief Financial Officer
Mr. S. Sundar, is the Chief Financial Officer of our Bank since April 2018. He is also an associate member of the
Institute of Chartered Accountants of India. Prior to joining our Bank, he worked as the chief financial officer at
the City Union Bank Limited.
Mr. N. Ramanathan, Company Secretary and Compliance Officer
Mr. N. Ramanathan, is the Company Secretary and Compliance Officer of our Bank since December 2011. He
graduated from the Bharathiar University with a bachelor of law degree. He is also an associate member of the
Institute of Company Secretaries of India.
Senior Management Personnel of our Bank
The following are our senior management personnel (“Senior Management Personnel”) as on the date of this
Preliminary Placement Document:
Mr. Meenakshi Sundaram R. M.
Mr. Meenakshi Sundaram R. M. is the President and Head – Stressed assets. He is in charge of collections,
recoveries and corporate stressed assets.
Mr. Narayanan P. P.
Mr. P. P. Narayanan is the President and Head - MSME and transaction banking. He is in charge of MSME,
transaction banking and commercial banking operations.
Mr. Gurumoorthy D.
Mr. Gurumoorthy D. is the Vice President and Chief Compliance Officer. He is responsible for the compliance
function of our Bank.
Mr. Srinath M
Mr. Srinath M is the Senior Vice President and Chief Risk Officer. His is in charge of the risk department of our
Bank which includes operation risk, credit risk and market risk.
Dr. Thiruvettai Durai Pandi VP- Internal Ombudsman
Dr.Thiruvettai Durai Pandi is the Vice President - Internal Ombudsman. His responsibilities in our Bank include
addressing customers’ grievances and the internal ombudsman.
Mr. Gurumurthy R. K.
Mr. Gurumurthy R. K. is the Senior Vice President and Head - Treasury. He heads the treasury department and
he is responsible for the integrated treasury operations.
167
Mr. Kumarappan RM
Mr. Kumarappan RM is the Senior Vice President and Head - Stressed Assets and Recovery. His responsibilities
in our Bank as Head of Recovery include handling all NPA accounts and recovery.
Mr. Padmanabhan Premkumar
Mr. Padmanabhan Premkumar is the Senior Vice President and Head – Human Resources. He is responsible for
the human resources and administration functions in our Bank.
Mr. Ravindra Kumar G.
Mr. Ravindra Kumar G. is the Senior Vice President and Head – Law. His responsibilities in our Bank include
giving legal counsel and devising efficient defence strategies.
Mr. Manikandan M
Mr. Manikandan M is the Senior Vice President and Chief Digital and Technology Officer. His responsibilities in
our Bank as Chief Digital and Technology officer will focus on Digital Strategy of the Bank. He will be in charge
of digitalizing of various products and department activities. Apart from this, he will also look after the new
initiatives of technology department and CBS upgradation.
Ms. Neena Anand
Ms. Neena Anand is the Senior Vice President and Head – Operations and is also the Principal Nodal Officer. She
currently heads the operations department of our Bank and also acts as the Principal Nodal Officer.
Mr. Peeush Jain
Mr. Peeush Jain is the Senior Vice President and Head - Third Party Products, Retail Banking. His responsibilities
in our Bank include managing retail banking, covering retail liabilities and products. In addition to this, he is in
charge of our marketing department, digital banking, consumer lending and branch banking.
Mr. Vasant Shukla
Mr. Vasant Shukla is the Senior Vice President - Head Trading Desk and Asset Liability Management. He is in
charge of the trading desk in treasury covering both forex and fixed income market. He is also in charge of the
asset liability management desk and money market operations.
Mr. Apurv Gupta
Mr. Apurv Gupta is the Senior Vice President and Head – Branch Banking. His responsibilities includes
monitoring of regions’ performance in achieving business targets.
Mr. Sanjay Kumar Rai
Mr. Sanjay Kumar Rai is the Senior Vice President and Head - Corporate Banking. His responsibilities in our
Bank include corporate advances and credit processing.
Mr. Nachiappan N.
168
Mr. Nachiappan N. is Senior Vice President and Head - Commercial Banking Operations. He is responsible for
our commercial banking branches and credit management centre.
Mr. Venkatesh S.
Mr. Venkatesh S. is the Senior Vice President and Head – Corporate Relationships and Corporate Banking. His
responsibilities in our Bank include heading the relationship manager group of corporate banking, as well as
overseeing corporate advances and corporate relationship management.
Mr. Manmadha Rao Boyina
Mr. Manmadha Rao Boyina is the Senior Vice President and Head – Transaction Banking, RMG MSME. His
responsibilities in our Bank include growth of transaction banking and MSME - coverage (sales)
Mr. Sudhir Kaushik
Mr. Sudhir Kaushik is the Senior Vice President - investor relations and Regional Recovery Head. His
responsibilities in our Bank include looking after the investor relationships stationed in Mumbai. Additionally,
his responsibilities as a Regional Recovery Head include looking after the NPA recovery of the region.
Mr. Ramanan S
Mr Ramanan S is the Vice President and Head (A&I) and Chief of Internal Vigilance. His responsibilities in our
Bank include taking care of audit and inspection functions and internal vigilance function of our Bank.
Mr. Hariharan. K
Mr. Hariharan. K is the Vice President – Head Accounts. He is responsible for managing our accounts function
and balance sheet.
Mr. Sushanta Roy
Mr. Sushanta Roy is the Vice President and Head – Planning and Performance. His responsibilities in our Bank
include profitability planning and budgeting.
Mr. Seetharaman A.
Mr. A. Seetharaman is the Vice President and Head - Strategy. His responsibilities in our Bank include business
strategy and business intelligence.
Mr. Debraj Banerjee
Debraj Banerjee - Vice President – Investors Relations and Capital Management. His responsibilities in our Bank
include investor relations and capital management.
Mr. Muruganandham M.
Mr. Muruganandham M. is the Vice President and Head - MSME Credit. His responsibilities in our Bank include
managing the MSME vertical for Tamil Nadu and Puducherry region including the MSME advances credit
processing.
Mr. Saravanan. B
169
Mr. Saravanan B is the Vice President - MSME Sales. He is in charge of supervising the relationship managers of
our MSME vertical and also looks after the performance of the sales vertical.
Mr. Jayan M Pavithran
Mr. Jayan M Pavithran is the Vice President – MSME Credit. His responsibilities include looking after the MSME
portfolio of the regions other than Tamil Nadu and Puducherry, and other MSME related activities including
processing of MSME/SME advances.
Mr. Sekar T
Mr. Sekar T is the Vice President and Head - Corporate Stressed Assets and Collections. He is responsible for
monitoring overdue accounts and managing the collection team.
Mr. Gudimetla Narasimhamurthy
Mr Gudimetla Narasimhamurthy is the Vice President - Credit Risk. His responsibilities in our Bank include the
handling credit risk management activities.
Mr. Nandakumar S. D.
Mr. Nandakumar S. D. – Vice President, National Distribution Head - Business Banking. His responsibilities in
our Bank include the growth in current account, merchant acquiring business and managing business banking
relationship management channel.
Mr. Vikas Vinod Bhanpurkar
Mr. Vikas Vinod Bhanpurkar - Vice President and National Distribution Head - Personal Banking. His
responsibilities in our Bank include the growth in savings accounts and managing sales channels.
Mr. Vijaya Ramesh Kumar
Mr. Vijaya Ramesh Kumar is the Vice President and Head - Digital banking. His responsibilities in our Bank
includes growth of the digital banking portfolio.
Mr. Arun Janardhana
Mr. Arun Janardhana is the Vice President and Head - Wealth Management (TPP and cross selling). He is
responsible for the wealth management and third party products sales.
Mr. Prabhat Ranjan
Mr. Prabhat Ranjan is the Vice President and Head – Market risk. He is responsible for managing our market risk.
Mr. Ramesh S.
Mr. Ramesh S is the Vice President and Head - Administration. His responsibilities in our Bank include estate
and infrastructure management.
Mr. Sriramakrishnan S.
Mr. Sriramakrishnan S is the Vice President and Head - Estate. He is responsible for managing the Bank-owned
properties.
170
Ms. Rathiga B
Ms. Rathiga B is the Chief Information Officer of our Bank. Her responsibilities in our Bank include handling
technology banking, core banking solutions and all initiatives in relation to information technology and
information technology enabled services.
Compensation of our Key Managerial Personnel
Our Bank paid as aggregate remuneration of ₹ 64.71 million to its Key Managerial Personnel during Fiscal 2018.
Bonus or profit sharing plan of the Key Managerial Personnel and Senior Management
The Key Managerial Personnel and Senior Management may receive bonuses as part of their remuneration and
terms of their employment. We have not formulated a bonus or profit sharing plan.
Interest of Key Managerial Personnel and Senior Management
The Key Managerial Personnel and Senior Management of our Bank do not have any interest in our Bank other
than (a) their shareholding in our Bank; (b) the employee stock options under the LVB ESOS-2010 held by them;
(c) their remuneration and benefits to which they are entitled to as per their terms of appointment; and (d)
reimbursement of expenses incurred by them during the ordinary course of business. Our Key Mangerial
Personnel and Senior Management Personnel may also, from time to time, avail normal banking services of our
Bank.
None of the Key Managerial Personnel or Senior Management are related to each other. Further, none of our
Directors are related to any of the Key Managerial Personnel or Senior Management Personnel of our Bank.
Payment or Benefit to Officers of our Bank
The officers of our Bank is entitled only to statutory benefits upon termination of his/her employment in our Bank
or superannuation and is not entitled to any other benefit.
Shareholding of our Key Managerial Personnel
As at December 31, 2018, our Key Managerial Personnel held the following number of the Equity Shares and
employee stock options:
Name of the Key Managerial
Personnel
Number of Equity
Shares held
Number of employee stock option held under
LVB ESOS-2010*
Parthasarathi Mukherjee, MD &
CEO
480,000 1,200,000 options granted of which 360,000 options
have been exercised and 360,000 options have vested
but are yet to be exercised.
S. Sundar, Chief Financial Officer Nil Nil
N. Ramanathan, Company Secretary
and Compliance Officer
Nil 10,000 options of which 3,000 options have vested
but are yet to be exercised * Under LVB ESOS-2017, no options have been granted to any Key Managerial Personnel till date.
Other Confirmations
Except as disclosed in this Preliminary Placement Document, none of the Promoters, Directors or Key Managerial
Personnel of our Bank has any financial or other material interest in the Issue and there is no effect of such interest
in so far as it is different from the interests of other persons.
Neither our Bank, nor Promoters, nor its Directors have been identified as wilful defaulters, as defined in the SEBI
ICDR Regulations.
For details in relation to the related party transactions entered into by our Bank during the last three Fiscals, see
“Financial Information” on page 240.
171
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION
The following table presents information regarding the ownership of Equity Shares by the Shareholders as of December 31, 2018:
Table I - Summary Statement holding of specified securities:
Cate
gory
(I)
Category of
shareholder
(II)
Nos. of
shareh
olders
(III)
No. of fully
paid up
equity
shares held
(IV)
No. of
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underl
ying
Deposit
ory
Receipt
s
(VI)
Total nos.
shares held
(VII) =
(IV)+(V)+
(VI)
Sharehol
ding as a
% of
total no.
of shares
(calculate
d as per
SCRR,
1957)
(VIII) As
a % of
(A+B+C2
)
Number of Voting Rights held in each class
of securities
(IX)
No. of
Shares
Underlying
Outstandin
g
convertible
securities
(including
Warrants)
(X)
Shareholding,
as a %
assuming full
conversion of
convertible
securities (as
a percentage
of diluted
share capital)
(XI)=
(VII)+(X) As
a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or otherwise
encumbered
(XIII)
Number of
equity
shares held
in
demateriali
zed form
(XIV)
No. of Voting Rights Total
as a %
of
(A+B+
C)
No
.
(a)
As a %
of total
Shares
held
(b)
No.
(a)
As a %
of total
Shares
held
(b)
Class eg: X Class
eg: Y
Total
(A)
Promoter &
Promoter
Group
27 22,738,132 0 0 22,738,132 8.88 22,738,132 0 22,738,132 8.88 0 8.88 0 0.00 7,403,632 32.56 22,738,132
(B) Public 81,732 233,333,770 0 0 233,333,770 91.12 233,333,770 0 233,333,770 91.12 0 91.12 0 0.00 NA 225,430,660
(C)
Non
Promoter-
Non Public
0 0 0 0 0 0.00 0 0 0 0 0 0.00 0 0.00 NA 0
(C1)
Shares
Underlying
DRs
0 0 0 0 0 0.00 0 0 0 0 0 0.00 0 0.00 NA 0
(C2)
Shares held
by
Employee Trusts
0 0 0 0 0 0.00 0 0 0 0 0 0.00 0 0.00 NA 0
Total
81,759 256,071,902 0 0 256,071,902 100.00 256,071,902 0 256,071,902 100.00 0 100.00 0 0.00 7,403,632 2.90 248,168,792
172
Table II - Statement showing shareholding pattern of the Promoter and Promoter Group: Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
(1) Indian
A Individual/
Hindu
Undivided
Family 20 7,353,12
1 7,353,121 2.87 7,353,12
1 7,353,12
1 2.87 2.87 152,870 2.08 7,353,121
Name Anuradha
Pradeep 8,288 8,288 0.00 8,288 8,288 0.00 0.00 0 0.00 8,288
G P
PRAJNESH 18,933 18,933 0.01 18,933 18,933 0.01 0.01 0 0.00 18,933
G
SUDHAKA
RA GUPTA 2,666 2,666 0.00 2,666 2,666 0.00 0.00 0 0.00 2,666
K R
PRADEEP 6,420,37
8 6,420,378 2.51 6,420,37
8 6,420,37
8 2.51 2.51 0 0.00 6,420,378
M
BALASUBR
AMANIAN 8,707 8,707 0.00 8,707 8,707 0.00 0.00 0 0.00 8,707
M GEETHA 17,522 17,522 0.01 17,522 17,522 0.01 0.01 0 0.00 17,522
M K
PANDURA
NGA
SETTY 2,761 2,761 0.00 2,761 2,761 0.00 0.00 0 0.00 2,761
M P
SHYAM 180,829 180,829 0.07 180,829 180,829 0.07 0.07 0 0.00 180,829
M S
NIVEDITA 13,333 13,333 0.01 13,333 13,333 0.01 0.01 0 0.00 13,333
M S
SHARMILA 159,826 159,826 0.06 159,826 159,826 0.06 0.06 152,870 95.65 159,826
173
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
M SHALINI 8,633 8,633 0.00 8,633 8,633 0.00 0.00 0 0.00 8,633
N
SAIPRASA
D 134,865 134,865 0.05 134,865 134,865 0.05 0.05 0 0.00 134,865
N
DWARAKA
NATHAN 753 753 0.00 753 753 0.00 0.00 0 0.00 753
N
MALAYAL
ARAMAMI
RTHAM 79,634 79,634 0.03 79,634 79,634 0.03 0.03 0 0.00 79,634
N
SIVAKUM
AR 76,777 76,777 0.03 76,777 76,777 0.03 0.03 0 0.00 76,777
N SUSILA 11,965 11,965 0.00 11,965 11,965 0.00 0.00 0 0.00 11,965
P
VASANTH
A 21,619 21,619 0.01 21,619 21,619 0.01 0.01 0 0.00 21,619
S G
PRABHAK
HARAN 5,338 5,338 0.00 5,338 5,338 0.00 0.00 0 0.00 5,338
USHA R
PRABAKA
RAN 153,674 153,674 0.06 153,674 153,674 0.06 0.06 0 0.00 153,674
V N
JAYAPRAK
ASH 26,620 26,620 0.01 26,620 26,620 0.01 0.01 0 0.00 26,620
M.P.VIKRA
M SETTY 0 0 0.00 0 0 0.00 0.00 0 0.00 0
SASIKALA
DHEVI M
R. 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ANIRUDH
P KARE 0 0 0.00 0 0 0.00 0.00 0 0.00 0
174
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
PARINITA
P KARE 0 0 0.00 0 0 0.00 0.00 0 0.00 0
K R
NAGESH 0 0 0.00 0 0 0.00 0.00 0 0.00 0
K R
SATISH 0 0 0.00 0 0 0.00 0.00 0 0.00 0
G.
CHANDRA
LAKSHMI 0 0 0.00 0 0 0.00 0.00 0 0.00 0
B Central
Governmen
t/ State
Governmen
ts Name
C Financial
Institutions
/ Banks Name
D Any other
(Specify) 7 15,385,01
1 15,385,011 6.01 15,385,01
1 15,385,01
1 6.01 6.01 7,250,762 47.13 15,385,011
Name
ADVAITH
MOTORS
PVT LTD 2,630,02
0 2,630,020 1.03 2,630,02
0 2,630,02
0 1.03 1.03 1,972,00
0 74.98 2,630,020
ARISTON
CAPITAL
ASSET
HOLDINGS
PRIVATE
LIMITED 2,463,41
1 2,463,411 0.96 2,463,41
1 2,463,41
1 0.96 0.96 1,607,00
0 65.23 2,463,411
175
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
CAUVERY
MOTORS
PVT LTD 1,348,64
5 1,348,645 0.53 1,348,64
5 1,348,64
5 0.53 0.53 1,000,00
0 74.15 1,348,645
KARE
ELECTRON
ICS AND
DEVELOP
MENT
PRIVATE
LIMITED 1,679,42
5 1,679,425 0.66 1,679,42
5 1,679,42
5 0.66 0.66 0 0.00 1,679,425
Pranava
Electronics P
Ltd 4,549,95
2 4,549,952 1.78 4,549,95
2 4,549,95
2 1.78 1.78 0 0.00 4,549,952
TANGERIN
E CAPITAL
ASSET
HOLDINGS
LLP 2,694,88
1 2,694,881 1.05 2,694,88
1 2,694,88
1 1.05 1.05 2,671,762 99.14 2,694,881
XS REAL
PROPERTIES
PRIVATE
LIMITED 18,677 18,677 0.01 18,677 18,677 0.01 0.01 0 0.00 18,677
KARE
POWER
RESOURCES
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
KARE
INVESTMEN
TS PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
BRINDAVA
N
HYDROPOW
ER PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
176
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
GREENBAN
YAN POWER
PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
MPRIME
PREMISES
PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ILMS
PROJECTS
PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ILMS
BUILDERS
PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
MILESTONE
PLOT
DEVELOPER
S PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
PRANAVA
DMCC 0 0 0.00 0 0 0.00 0.00 0 0.00 0
PRANAVA
CITY
COMPLEX
PVT LTD. 0 0 0.00 0 0 0.00 0.00 0 0.00 0
HOLZWERK
INTERIOR
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ALPINE
HOLDINGS
LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
CHRYSALIS
PLAY-
SCHOOL
LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
SCOTWOOD
ESTATE LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
177
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
TANGERINE
STOCK
ESTATE LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
XS REAL
PROPERTIES
SERVICE
LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ACESTAR
PROPERTIES
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
HELIOS
ESTATE
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
AMARYLLIS
PROPERTIES
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
MAGENTA
CERAMIK
SYSTEMS
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ENVEEDU
PROPERTIES
LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
MAGENTA
RE ASSET
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
PALLAVA
ESTATE LLP 0 0 0.00 0 0 0.00 0.00 0 0.00 0
HOLZWERK
JARDINS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
178
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
INTERIOR
LLP
JACARAND
A
PROPERTIES
PVT LTD 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ALLBLESS
TRACON
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
DOTMARK
VINIMAY
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ALLLIKE
MARKETIN
G PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
AKSHARA
MOTORS
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ANANYA
SOFTWARE
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ADVAITH
SPARES &
ACCESSORI
ES PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ADVAITH
AUTOMATI
ON
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
179
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
MYSORE
SNACK
FOODS
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
MYSORE
VEGETABLE
OIL
PRODUCTS
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
ADVAITH
MARKETIN
G PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
LATHANGI
MOTORS
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
LATHANGI
AUTOMOBI
LES
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
WILWORTH
EARTH
MOVERS
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
LATHANGI
CYCLE AND
CARRIAGE
PRIVATE
LIMITED 0 0 0.00 0 0 0.00 0.00 0 0.00 0
WILWAY
ENGINEERI
NG AND
CONSTRUCT 0 0 0.00 0 0 0.00 0.00 0 0.00 0
180
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
IONS
PRIVATE
LIMITED
LATHANGI
EQUIPMENT
S PRIVATE
LIMITED
0 0 0.00 0 0 0.00 0.00 0 0.00 0
YASHASWI
NI MOTORS
PRIVATE
LIMITED
0 0 0.00 0 0 0.00 0.00 0 0.00 0
KRISHNA
INDUSTRIES
PRIVATE
LIMITED
0 0 0.00 0 0 0.00 0.00 0 0.00 0
VENKATES
HWARA
EXPORTS
0 0 0.00 0 0 0.00 0.00 0 0.00 0
K.V.N
FINANCE
0 0 0.00 0 0 0.00 0.00 0 0.00 0
SHRI
GAYATHIR
I CREDIT
CO
0 0 0.00 0 0 0.00 0.00 0 0.00 0
SHRI
GAYATHIR
I
FINANCIER
S
0 0 0.00 0 0 0.00 0.00 0 0.00 0
SHRI
GAYATHIRI
CHITS
0 0 0.00 0 0 0 0.00 0
K.N.VISWAN
ATHA
0 0 0.00 0 0 0 0.00 0
181
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
CHETTIYAR
& CO
SUSILA
LEASINGS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
GAYATHIR
I FINANCE
CORPORAT
IONS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
SHRI
GAYATHRI
FINANCE
&
INVESTME
NTS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
DHANESH
CHITS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
GAYATHIR
I
ASSOCIAT
ES 0 0 0.00 0 0 0.00 0.00 0 0.00 0
GAYATHIR
I
LEASINGS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
GAYATHIRI
CREDITS 0 0 0.00 0 0 0.00 0.00 0 0.00 0
Sri Gayathiri
& Co 0 0 0.00 0 0 0.00 0.00 0 0.00 0
Sub Total
A(1) 27
22,738,1
32
22,738,13
2 8.88
22,738,1
32 0
22,738,1
32 8.88 8.88 7,403,632 32.56 22,738,132
(2) Foreign
A Individual
(Non-
resident
Individuals
182
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Part
ly
paid
-up
equi
ty
shar
es
held
(V)
No. of shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholdin
g % of total
no. of shares
(calculated
as per
SCRR,
1957)
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of
Shares pledged
or otherwise
encumbered
(XIII)
Number of
equity shares
held in
dematerialize
d form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As
a
%
of
tot
al
Sh
are
s
hel
d
(b)
No.
(a)
As a
% of
total
Shar
es
held
(b)
Class X Class
Y
Total
/ Foreign
individuals
) Name
B Governme
nt Name
C Institutions Name
D Foreign
Portfolio
Investor Name
E Any other
(Specify)
Name
Sub Total
A(2) 0 0 0 0 0 0.00 0 0 0 0.00 0 0.00 0
0.0
0 0 0.00 0
Total
shareholding
of Promoter
and
Promoter
Group (A)=
(A)(1)
+(A)(2) 27 22,738,1
32 0 0 22,738,13
2 8.88 22,738,1
32 0 22,738,13
2 8.88 0 8.88 0 0.00 7,403,63
2 32.56 22,738,132
Table III - Statement showing shareholding pattern of the Public shareholder:
183
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Sharehol
ding % of
total no.
of shares
(calculate
d as per
SCRR,
1957)
As a % of
(A+B+C2
)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Numbe
r of
equity
shares
held in
demate
rialized
form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Appl
icabl
e)
(a)
As a % of
total
Shares
held (Not
Applicabl
e)
(b)
Class X Class
Y
Total
(1) Institutions
A Mutual
Funds/UTI 1 142 142 0.00 142 142 0.00 0.00 NA 142
Name
B Venture
capital
Funds NA
Name
Alternate
Investment Funds 3 460,700 460,700 0.18 460,700 460,700 0.18 0.18 NA 460,700
Name
d Foreign
Venture
Capital
Investors NA
Name
e Foreign
Portfolio
Investors 33 11,226,1
80 11,226,18
0 4.38 11,226,180 11,226,1
80 4.38 4.38 NA 11,226,1
80
EQ Assets
4,614,47
5 4,614,475 1.80 4,614,475 4,614,47
5 1.80 1.80 NA
4,614,47
5
f Financial
Institutions /
Banks 8
8,425,82
2 8,425,822 3.29 8,425,822
8,425,82
2 3.29 3.29 NA
8,425,82
2
LIFE
INSURANC
E
CORPORAT
ION OF
INDIA
5,471,00
4 5,471,004 2.14 5,471,004
5,471,00
4 2.14 2.14 NA
5,471,00
4
184
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Sharehol
ding % of
total no.
of shares
(calculate
d as per
SCRR,
1957)
As a % of
(A+B+C2
)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Numbe
r of
equity
shares
held in
demate
rialized
form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Appl
icabl
e)
(a)
As a % of
total
Shares
held (Not
Applicabl
e)
(b)
Class X Class
Y
Total
g Insurance
Companies 3 591,904 591,904 0.23 591,904 591,904 0.23 0.23 NA 591.904
h Provident
Funds /
Pension
Funds NA
i Any other
(Specify) -
Foreign
Banks NA
Name
Sub Total
B(1) 48
20,704,7
48 0 0
20,704,74
8 8.09 20,704,748 0
20,704,7
48 8.09 0 8.09 0 0 NA
20,704,7
48
(2) Central
Governmen
t / State
Governmen
t / President
of India 1 518,894 518,894 0.20 518,894 518,894 0.20 0.20 NA 518,894
Name
Sub Total
B(2) 1 518,894 0 0 518,894 0.20 518,894 0 518,894 0.20 0 0.20 0 0 NA 518894
(3) Non-
Institutions
a Individuals
i Individual
Shareholde
rs holding
Nominal
Share
Capital
upto ₹ 2
Lakhs 80,247
63,752,5
64
63,752,56
4 24.90 63,752,564
63,752,5
64 24.90 24.90 NA
56,127,7
35
185
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Sharehol
ding % of
total no.
of shares
(calculate
d as per
SCRR,
1957)
As a % of
(A+B+C2
)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Numbe
r of
equity
shares
held in
demate
rialized
form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Appl
icabl
e)
(a)
As a % of
total
Shares
held (Not
Applicabl
e)
(b)
Class X Class
Y
Total
ii Individual
Shareholde
rs holding
Nominal
Share
Capital in
excess of ₹ 2
Lakhs 477
48,481,0
15
48,481,01
5 18.93 48,481,015
48,481,0
15 18.93 18.93 NA
48,220,3
85
Name
YUNUS ZIA
5,247,74
2 5,247,742 2.05 5,247,742
5,247,74
2 2.05 2.05
5,247,74
2
Maninder
Singh
3,937,64
0 3,937,640 1.54 3,937,640
3,937,64
0 1.54 1.54
3,937,6
40
MARIANNA
N AROKIA
SWAMY
2,747,95
7 2,747,957 1.07 2,747,957
2,747,95
7 1.07 1.07
2,747,95
7
b NBFCs
Registered
with RBI 11 164,857 164,857 0.06 164,857 164,857 0.06 0.06 NA 164,857
c Employee
Trusts NA
d Overseas
Depositorie
s (holding
DRs)
(balancing
figure) NA
Name
e Any other 948
99,711,6
92
99,711,69
2 38.94 99,711,692
99,711,6
92 38.94 38.94 NA
99,694,0
41
Name
ADITYA
BIRLA SUN
5,984,92
4 5,984,924 2.34 5,984,924
5,984,92
4 2.34 2.34
5,984,92
4
186
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Sharehol
ding % of
total no.
of shares
(calculate
d as per
SCRR,
1957)
As a % of
(A+B+C2
)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Numbe
r of
equity
shares
held in
demate
rialized
form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Appl
icabl
e)
(a)
As a % of
total
Shares
held (Not
Applicabl
e)
(b)
Class X Class
Y
Total
LIFE
INSURANC
E
COMPANY
LIMITED
INDIA
INFOLINE
FINANCE
LIMITED
10,582,6
70
10,582,67
0 4.13 10,582,670
10,582,6
70 4.13 4.13
10,582,6
70
JUPITER
CAPITAL
PRIVATE
LIMITED
3,625,42
3 3,625,423 1.42 3,625,423
3,625,42
3 1.42 1.42
3,625,42
3
KARVY
STOCK
BROKING
LIMITED-
CLIENT
ACCOUNT-
BSE CM
9,883,68
4 9,883,684 3.86 9,883,684
9,883,68
4 3.86 3.86
9,883,68
4
M N
DASTUR
AND
COMPANY
PRIVATE
LIMITED
8,410,48
2 8,410,482 3.28 8,410,482
8,410,48
2 3.28 3.28
8,410,48
2
DHFL
PRAMERIC
A LIFE
INSURANC
E CO. LTD
9,186,91
5 9,186,915 3.59 9,186,915
9,186,91
5 3.59 3.59
9,186,91
5
MAX LIFE
INSURANC
E CO LTD
A/C
11,632,4
47
11,632,44
7 4.54 11,632,447
11,632,4
47 4.54 4.54
11,632,4
47
187
Category
and Name
of the
Shareholde
rs
(I)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total
nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Sharehol
ding % of
total no.
of shares
(calculate
d as per
SCRR,
1957)
As a % of
(A+B+C2
)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Numbe
r of
equity
shares
held in
demate
rialized
form
(XIV)
No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Appl
icabl
e)
(a)
As a % of
total
Shares
held (Not
Applicabl
e)
(b)
Class X Class
Y
Total
PARTICIPA
TING FUND
PLAZA
AGENCIES
(P) LTD
4,053,50
0 4,053,500 1.58 4,053,500
4,053,50
0 1.58 1.58
4,053,50
0
SIVAN
SECURITIE
S PRIVATE
LIMITED
3,885,42
2 3,885,422 1.52 3,885,422
3,885,42
2 1.52 1.52
3,885,42
2
SHAHI
EXPORTS
PRIVATE
LIMITED
2,636,07
5 - - 2,636,075 1.03 2,636,075 -
2,636,07
5 1.03 - 1.03 - - -
2,636,07
5
Sub Total
B(3) 81,683
212,110,
128 - -
212,110,1
28 82.83 212,110,128 -
212,110,
128 82.83 - 82.83 - - -
204,207,
018
Total Public
Shareholding
(B) =
(B)(1)+(B)(2)
+(B)(3) 81,732
233,333,
770 - -
233,333,7
70 91.12 233,333,770 -
233,333,
770 91.12 - 91.12 - - -
225,430,
660
-
188
Details of Equity Shares which remain unclaimed for public
No. of Shareholders No. of Shares held
18 12,235
Table IV - Statement showing shareholding pattern of the Non Promoter- Non Public shareholder
Category
and Name
of the
Shareholde
rs
(I)
PAN
(II)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholding
% calculated as
per SCRR,
1957
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Number of
equity
shares held
in
demateriali
zed form
(XIV) No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Applic
able)
(a)
As a %
of total
Shares
held
(Not
Applic
able)
(b)
Class X Clas
s Y
Total
(1) Custodian /
DR Holder
(c) (1) 0 0 0 0 0 0 0.00 0 0 0 0.00 0 0.00 0 0.00 NA 0
(2) Employee
Benefit
Trust
(under
SEBI
(Share
Based
Employee
Benefit)
Regulations
, 2014) (c)
(2) 0 0 0 0 0 0 0.00 0 0 0 0.00 0 0.00 0 0.00 NA 0
Total Non-
Promoter -
Non Public
Shareholdi 0 0 0 0 0 0 0.00 0 0 0 0.00 0 0.00 0 0.00 NA 0
189
Category
and Name
of the
Shareholde
rs
(I)
PAN
(II)
Nos. of
sharehold
ers
(III)
No. of
fully
paid up
equity
shares
held
(IV)
Partly
paid-
up
equity
shares
held
(V)
No. of
shares
underlying
Depository
Receipts
(VI)
Total nos.
shares
held
(VII) =
(IV)+(V)
+ (VI)
Shareholding
% calculated as
per SCRR,
1957
As a % of
(A+B+C2)
(VIII)
Number of Voting Rights held in each
class of securities
(IX)
No. of
Shares
Underlyi
ng
Outstand
ing
convertib
le
securities
(includin
g
Warrants
)
(X)
Total
Shareholdi
ng, as a %
assuming
full
conversion
of
convertible
securities
(as a
percentage
of diluted
share
capital)
(XI)=
(VII)+(X)
As a % of
(A+B+C2)
Number of
Locked in
shares
(XII)
Number of Shares
pledged or
otherwise
encumbered
(XIII)
Number of
equity
shares held
in
demateriali
zed form
(XIV) No. of Voting Rights Total
as a %
of
Total
Voting
Rights
No.
(a)
As a
% of
total
Shar
es
held
(b)
No.
(Not
Applic
able)
(a)
As a %
of total
Shares
held
(Not
Applic
able)
(b)
Class X Clas
s Y
Total
ng (C)= (C)
(1) +(C) (2)
Shareholding of our Bank in the format prescribed under the Form PAS-4
S. No. Category Pre-Issue (as on December 31, 2018) Post-Issue
No. of shares held %age of shareholding No. of shares held %age of shareholding
A Promoters’ Holding
1. Indian:
Individual 7,353,121 2.87 [●] [●]
Bodies Corporate 15,385,011 6.01 [●] [●]
Sub-total 22,738,132 8.88 [●] [●]
2. Foreign Promoters:
- - [●] [●]
Sub-total (a) 22,738,132 8.88 [●] [●]
B Non-Promoters’ Holding
1. Institutional Investors:
Mutual Funds/UTI 142 0.00 [●] [●]
Venture Capital Funds - [●] [●]
Alternate Investment Funds 460,700 0.18 [●] [●]
Foreign venture capital investors [●] [●]
Foreign portfolio investors 11,226,180 4.38 [●] [●]
Financial Institutions / Banks 8,425,822 3.29 [●] [●]
Insurance Companies 591,904 0.23 [●] [●]
Provident funds / Pension Funds - - [●] [●]
190
S. No. Category Pre-Issue (as on December 31, 2018) Post-Issue
No. of shares held %age of shareholding No. of shares held %age of shareholding
Any other (Specify) - - [●] [●]
20,704,748 8.09 [●] [●]
2. Non-institutional Investors:
Private corporate bodies 96,103,126 37.53 [●] [●]
Directors and their relatives 1,145,179 0.45 [●] [●]
Indian public 113,444,745 44.30 [●] [●]
Others [including Non-Resident Indians
(NRIs)]
1,935,972 0.76 [●] [●]
Sub-total (b) 233,333,770 91.12 [●] [●]
GRAND TOTAL 256,071,902 100.00 [●] [●]
191
ISSUE PROCEDURE
Below is a summary intended to present a general outline of the procedure relating to the bidding, payment,
Allocation and Allotment of the Equity Shares. The procedure followed in this Issue may differ from the one
mentioned below and the prospective investors are assumed to have appraised themselves of the same from our
Bank or the BRLM.
The prospective investors are advised to inform themselves of any restrictions or limitations that may be
applicable to them. Investors that apply in the Issue will be required to confirm and will be deemed to have
represented to our Bank, the BRLM and their respective directors, officers, agents, affiliates and representatives
that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire the Equity
Shares. Our Bank and the BRLM and their respective directors, officers, agents, affiliates and representatives
accept no responsibility or liability for advising any investor on whether such investor is eligible to acquire the
Equity Shares. For further details, see “Selling Restrictions” and “Transfer Restrictions” on pages 201 and 206,
respectively.
Qualified Institutions Placements
This Issue is being made to QIBs in reliance upon Chapter VI of the SEBI ICDR Regulations and section 42 of
the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules,
2014, through the mechanism of Qualified Institutions Placements (“QIP”) wherein a listed company in India
may issue and allot equity shares to QIBs on a private placement basis.
Our Bank is required to furnish a copy of the placement document to each stock exchange on which its equity
shares are listed. Accordingly, our Bank shall file a copy of this Preliminary Placement Document, and
subsequently file a copy of the Placement Document with the Stock Exchanges.
Our Bank shall also make the requisite filings with the RoC and the Stock Exchanges within the stipulated period
as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules,
2014.
Our Bank has received the in-principle approvals from BSE and the NSE dated March 7, 2019 under Regulation
28 of the SEBI Listing Regulations for the Issue. The Board of directors has authorized the Issue pursuant to the
resolution passed at by the Board at its meeting held on June 26, 2018. The shareholders of our Bank have
authorised the Issue pursuant to a special resolution dated August 8, 2018.
The Equity Shares offered in the Issue have not been and will not be registered under the Securities Act or the
laws of any state of the United States and may not be offered or sold in the United States, except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws. The Equity Shares are being offered and sold only outside the United States in
offshore transactions in reliance on Regulation S. For a description of the selling restrictions in certain other
jurisdictions, see “Selling Restrictions” on page 201. The Equity Shares are transferable only in accordance with
the restrictions described in the section titled “Transfer Restrictions” on page 206.
Issue Procedure
1. Our Bank and the BRLM shall identify the QIBs and circulate serially numbered copies of this Preliminary
Placement Document and the serially numbered Application Form, either in electronic form or physical form,
to QIBs and the Application Form shall be specifically addressed to such QIBs. Pursuant to section 42(3) of
the Companies Act, 2013, our Bank shall maintain complete record of the QIBs to whom this Preliminary
Placement Document and the serially numbered Application Form have been dispatched. Our Bank will make
the requisite filings with the RoC within the stipulated time period as required under the Companies Act,
2013 and the rules made thereunder.
2. The list of QIBs to whom the Application Form is delivered shall be determined by the BRLM in consultation
with our Bank, at its sole discretion. Unless a serially numbered Preliminary Placement Document along
with the Application Form is addressed to a particular QIB, no invitation to make an offer to subscribe
shall be deemed to have been made to such QIB. Even if such documentation were to come into the
possession of any person other than the intended recipient, no offer or invitation to offer shall be deemed to
have been made to such other person and any application that does not comply with this requirement shall be
treated as invalid.
3. QIBs may submit the Application Form along with a copy of the PAN or PAN allotment letter, duly
192
completed, including any revisions thereof, during the Bidding Period to the BRLM.
4. QIBs will be required to indicate the following in the Application Form:
(a) Full name of the QIB to whom Equity Shares are to be Allotted;
(b) number of Equity Shares Bid for;
(c) Bid Amount;
(d) a representation that it is outside the United States and is acquiring the Equity Shares in an offshore
transaction in reliance on Regulation S and it has agreed to certain other representations set forth in the
Application Form;
(e) the details of the depository account(s) to which the Equity Shares should be credited.
Note: Each sub-account of an FPI other than a sub-account which is a foreign corporate or a foreign
individual will be considered as an individual QIB and separate Application Forms would be required
from each such sub – account for submitting Bids. FPIs or sub accounts of FPIs, are required to indicate
the SEBI registration number in the Application Form. It may be noted that a sub-account which is a
foreign corporate or a foreign individual is not a “QIB” in terms of the SEBI ICDR Regulations.
5. QIBs will be required to transfer the Bid Amount in the Escrow Account. No payment shall be made by QIBs
in cash. Please note that any payment of Bid Amount shall be made from the bank accounts of the QIBs
applying for the Equity Shares and our Company shall keep a record of the bank account from where such
payment for subscriptions have been received. Monies payable on Equity Shares to be held by joint holders
shall be paid from the bank account of the person whose name appears first in the application. Until Allotment,
and the filing of return of Allotment by our Company with the RoC, or receipt of final listing and trading
approvals from the Stock Exchanges, whichever is later, all monies received for subscription of the Equity
Shares shall be kept in a separate bank account with a scheduled bank and shall be utilised only for the
purposes permitted under the Companies Act, 2013.
6. Once a duly filled in Application Form is submitted by the QIB, such Application Form constitutes an
irrevocable offer and the same cannot be withdrawn after the Issue Closing Date.
7. The Issue Closing Date shall be notified to the Stock Exchanges and upon such notification, the QIBs shall
be deemed to have been given notice of such date.
8. The Bids made by asset management companies or custodians of mutual funds shall specifically state the
names of the concerned schemes for which the Bids are made. In case of a mutual fund, a separate Bid can
be made in respect of each scheme of the mutual fund registered with SEBI. All such Bids/Application Forms
by or on behalf of various schemes of a mutual fund shall be treated as a single application.
9. Upon the receipt of the Application Forms and Bid Amount and after the Issue Closing Date, our Bank in
consultation with the BRLM shall decide (i) the Issue Price, (ii) the number of Equity Shares to be Allocated
and (iii) the QIBs to whom the same shall be Allocated. On determination of the Issue Price, the BRLM will
send the Confirmation of Allocation Note (“CAN”) to the QIBs who have been Allocated Equity Shares
along with serially numbered Placement Documents. The dispatch of the CANs shall be deemed a valid,
binding and irrevocable contract for the QIBs with respect to the Equity Shares Allocated to such QIB. Please
note that the allocation shall be at the absolute discretion of our Bank and will be based on the
recommendation of the BRLM.
10. Our Bank shall issue and allot Equity Shares as per the details in the CAN to the QIBs. Our Bank will intimate
the details of the Allotment to the Stock Exchanges.
11. After our Board (or a duly constituted committee thereof) passing the resolution for Allotment and prior to
crediting the Equity Shares into the depository participant accounts of the successful Bidders, our Bank shall
apply to the Stock Exchanges for listing.
12. After receipt of the listing approval from the Stock Exchanges, our Bank shall credit the Equity Shares into
the Depository Participant accounts of the respective QIB.
13. Our Bank shall then apply to the Stock Exchanges for the final trading and listing approvals.
193
14. The monies lying to the credit of the Escrow Account shall not be released until the final listing and trading
approvals of the Stock Exchanges for the listing and trading of the Equity Shares issued pursuant to this Issue
are received by our Bank.
15. The Equity Shares that have been credited to the beneficiary account with the Depository Participant of the
QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final listing and trading
approval from the Stock Exchanges.
16. Upon receipt of intimation of final listing and trading approval from the Stock Exchanges, our Bank may
inform the QIBs who have received an Allotment of the receipt of such approval. Our Bank and the BRLM
shall not be responsible for any delay or non-receipt of the communication of the final listing and trading
approvals from the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and
trading approval granted by the Stock Exchanges is also placed on their websites. QIBs are advised to apprise
themselves of the status of the receipt of the permissions from the Stock Exchanges or our Bank.
Qualified Institutional Buyers
Only QIBs as defined in Regulation 2(1)(ss) of the SEBI ICDR Regulations and not otherwise excluded pursuant
to Regulation 179(2)(b) of Chapter VI of the SEBI ICDR Regulations are eligible to invest. Under Regulation
179(2)(b) of the SEBI ICDR Regulations, no Allotment shall be made, either directly or indirectly, to any QIB
who is a Promoter or any person related to the Promoters. Currently QIBs include:
• Alternate investment funds registered with SEBI;
• Foreign Portfolio Investors other than Category III foreign portfolio investor, registered with SEBI;s;
• Foreign venture capital investors registered with SEBI;
• Insurance companies registered with Insurance Regulatory and Development Authority;
• Insurance funds set up and managed by the army, navy, or air force of the Union of India;
• Insurance funds set up and managed by the Department of Posts, India;
• Multilateral and bilateral development financial institutions;
• Mutual funds registered with SEBI;
• Pension Funds with minimum corpus of ₹ 250.00 million;
• Provident Funds with minimum corpus of ₹ 250.00 million;
• Public financial institutions as defined in section 2(72) of the Companies Act, 2013;
• Scheduled commercial banks;
• State industrial development corporations;
• National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of
Government of India published in the Gazette of India;
• Venture capital funds registered with SEBI; and
• Systemically important non-banking financial companies (i.e. NBFCs registered with the RBI and having
an asset size of over ₹ 5,000 million as per its last audited financial statements).
Eligible FPIs are permitted to participate in this Issue subject to compliance with applicable law and such
that the shareholding of the Eligible FPIs does not exceed the specified limits as prescribed under applicable
law in this regard. All non-resident QIBs shall ensure that the investment amount is paid as per RBI’s
notification no. FEMA 20(R)/ 2017-RB dated November 7, 2017, as amended from time to time.
In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which means
the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be 10.00% or
above of our post-Issue Equity Share capital. Further, in terms of the FEMA, the aggregate permissible foreign
investment, including FDI and investment by FIIs/FPIs and NRIs in a private sector bank is limited to an aggregate
of 49% of the paid up capital under the automatic route and up to 74% of the paid-up capital under the approval
route. Further, the aggregate FIIs/FPIs’ and NRIs’ holding, cannot exceed 24% and 10%, respectively, of the paid
up capital. However, with the approval of the board of directors and the shareholders by way of a special resolution
and other regulatory approvals, the aggregate FPIs and NRI holding in a bank can be increased up to 74% and
24%, respectively, subject to the overall limit of 74%, as indicated above. The aggregate limit of 24.00% has been
increased up to the sectoral cap of 49% by way of a resolution passed by the Board of Directors followed by a
special resolution passed by the shareholders of our Bank on September 26, 2014.
Also, prior approval of RBI is required for the acquisition or transfer of the shares of our Bank, which will take
the aggregate holding (both direct and indirect, beneficial or otherwise) of an individual, his relatives, associate
194
enterprises and persons acting in concert with him to 5.00% or more of our Bank’s total paid up share capital or
entitles him to exercise 5.00% or more of the total voting rights of our Bank, in accordance with the terms of the
Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions,
2015.
Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions which
may be specified by the Government from time to time.
In terms of FEMA, for calculating the aggregate holding of FPIs in a company, holding of all registered FPIs as
well as holding of FIIs (being deemed FPIs) shall be included.
Under Regulation 179(2)(b) of the SEBI ICDR Regulations, no allotment shall be made pursuant to this Issue,
either directly or indirectly, to any QIB being our Promoter or any person related to our Promoters. QIBs which
have all or any of the following rights shall be deemed to be persons related to our Promoters:
(i) Rights under a shareholders’ agreement or voting agreement entered into with our Promoter or persons
related to our Promoter;
(ii) Veto rights; or
(iii) A right to appoint any nominee director on the Board
Provided, however, that a QIB which does not hold any Equity Shares in our Bank and who has acquired the
aforesaid rights in the capacity of a lender shall not be deemed to be a person related to the Promoter.
Our Bank and the BRLM and any of their respective directors, officers, counsel, advisors, representatives,
agents or affiliates are not liable for any amendments or modification or changes in applicable laws or
regulations, which may occur after the date of this Preliminary Placement Document. QIBs are advised to
make their independent investigations and satisfy themselves that they are eligible to apply. QIBs are
advised to ensure that any single Application Form from them does not exceed the investment limits or
maximum number of Equity Shares that can be held by them under applicable law or regulation or as
specified in this Preliminary Placement Document. Further, QIBs are required to satisfy themselves that
any requisite compliance pursuant to this Allotment such as public disclosures under applicable laws is
complied with. QIBs are advised to consult their advisers in this regard. Furthermore, QIBs are required
to satisfy themselves that their Application Form would not eventually result in triggering an open offer
under the Takeover Code. The QIB shall be solely responsible for compliance with the provisions of the
Takeover Regulations, the SEBI (Prohibition of Insider Trading) Regulations, 2015 and other applicable
laws, rules, regulations, guidelines, notifications and circulars.
Note: Affiliates or associates of the BRLM who are QIBs may participate in this Issue subject to compliance with
applicable laws.
Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable
to each of them respectively, including in relation to lock-in requirements.
A minimum of 10% of the Equity Shares offered in the Issue shall be Allotted to Mutual Funds. If no Mutual Fund
is agreeable to take up the minimum portion as specified above, such minimum portion or part thereof may be
Allotted to other QIBs.
Bid Process
Application Form
QIBs are permitted to only use the serially numbered Application Forms (which is addressed to the QIB) supplied
by our Bank and the BRLM in either electronic form or by physical delivery for the purpose of making a Bid
(including any revision of a Bid) in terms of this Preliminary Placement Document and the Placement Document.
By making a Bid (including revisions thereof) for Equity Shares pursuant to the terms of this Preliminary
Placement Document, each QIB will be deemed to have made the following representations and warranties, and
the representations, warranties, acknowledgements and agreements made under “Representations by Investors”,
including:
195
1. The QIB confirms that it is a QIB in terms of Regulation 2(1)(ss) of the SEBI ICDR Regulations and has a
valid and existing registration under the applicable laws of India and is eligible to participate in this Issue
and is not excluded under Regulation 179 of the SEBI ICDR Regulations;
2. The QIB confirms that it is not a promoter of our Bank and is not a person related to the promoter of our
Bank, either directly or indirectly and its Application does not directly or indirectly represent the Promoter
or Promoter Group or a person related to the Promoter of our Bank;
3. The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the
Promoter or persons related to the Promoter, no veto rights or right to appoint any nominee director on the
Board of our Bank other than such rights acquired in the capacity of a lender (not holding any Equity Shares)
which shall not be deemed to be a person related to the Promoter;
4. The QIB has no right to withdraw its Bid after the Issue Closing Date;
5. The QIB confirms that if Equity Shares are Allotted pursuant to this Issue, it shall not, for a period of one
year from Allotment, sell such Equity Shares otherwise than on the floor of the Stock Exchange;
6. The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted and together with any
Equity Shares held by the QIB prior to this Issue. The QIB further confirms that its holding of the Equity
Shares does not, and shall not, exceed the level permissible as per any applicable regulations applicable to
the QIB;
7. The QIB confirms that the Bids will not eventually result in triggering an open offer under the Takeover
Code;
8. The QIB confirms that, to the best of its knowledge and belief, together with other QIBs in this Issue that
belongs to the same group or are under common control, the Allotment to the QIB shall not exceed 50% of
the Issue Size. For the purposes of this statement:
(a) The expression “belongs to the same group” shall derive meaning from the concept of “companies under
the same group” as provided in sub-section (11) of section 372 of the Companies Act, 1956; and
(b) “Control” shall have the same meaning as is assigned to it by sub-clause (e) of clause 1 of Regulation 2
of the Takeover Code;
9. The QIBs shall not undertake any trade in the Equity Shares credited to its Depository Participant account
until such time that the final listing and trading approval for the Equity Shares is issued by the Stock
Exchanges;
10. The QIB represents that it is outside the United States and is acquiring the Equity Shares in an offshore
transaction in reliance on Regulation S and it has agreed to certain other representations set forth in the
Application Form;
11. The QIBs are aware of, acknowledge, represent and agree to the following in respect of their shareholding
in our Bank that if their aggregate holding in the paid-up share capital of our Bank, whether direct or indirect,
beneficial or otherwise held by them, their relatives, associate enterprises and persons acting in concert
exceeds 5.00% of the total paid-up share capital of our Bank or entitles them to exercise 5.00% or more of
the total voting rights of our Bank, they shall seek prior approval of the RBI, in accordance with the terms
of the Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)
Directions, 2015; and
12. The QIBs acknowledge that, as required in terms of the RBI circular dated April 21, 2016, our Bank shall
report to the RBI, upon completion of the Allotment process, complete details of the issue including date of
the issue, details of the type of issue, issue size, details of pricing, name and number of the allottees, post
allotment shareholding position.
QIBs MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY
PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND
BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM. QIBs MUST ENSURE THAT
THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN
WHICH THE BENEFICIARY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUB-
ACCOUNTs OF AN FPI WOULD BE CONSIDERED AS AN INDEPENDENT QIB.
196
IF SO REQUIRED BY THE BRLM, THE QIB SUBMITTING A BID, ALONG WITH THE
APPLICATION FORM, WILL ALSO HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO THE
BRLM TO EVIDENCE THEIR STATUS AS A “QIB” AS DEFINED HEREINABOVE.
IF SO REQUIRED BY THE BRLM, THE ESCROW AGENT OR ANY STATUTORY OR
REGULATORY AUTHORITY IN THIS REGARD, INCLUDING AFTER ISSUE CLOSURE, THE QIB
SUBMITTING A BID AND/OR BEING ALLOTTED EQUITY SHARES IN THE ISSUE, WILL ALSO
HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO FULFILL THE KNOW YOUR CUSTOMER
(KYC) NORMS.
Demographic details such as an address and a bank account will be obtained from the Depositories as per the
Depository Participant account details given above.
The submission of an Application Form by the QIB shall be deemed a valid, binding and irrevocable offer for the
QIB to pay the entire Issue Price for its share of Allotment (as indicated by the CAN) and becomes a binding
contract on the QIB, upon issuance of the CAN by our Bank in favour of the QIB.
Submission of Application Form
All Application Forms shall be required to be duly completed with information including the name of the QIB,
the price and the number of Equity Shares applied. The Application Form shall be submitted to the BRLM either
through electronic form or through physical delivery at the following addresses:
Name of
the BRLM
Address Contact
Person
Email Investor Grievance
Phone
Srei Capital
Markets
Limited
‘Vishwakarma’,
86C, Topsia
Road (South),
Kolkata – 700
046, West
Bengal, India
Manoj
Agarwal
[email protected] Tel: +91 33 6602 3845
/ +91 33 6602 3755 /
+91 33 6602 3702 /
+91 98308 88504
The BRLM shall not be required to provide any written acknowledgement of the same.
All Application Forms duly completed, Bid Amount and a copy of the PAN card shall be submitted to the BRLM
as per the details provided in the respective PPD and Application Forms.
Permanent Account Number or PAN
Each QIB should mention its Permanent Account Number (“PAN”) allotted under the IT Act. The copy of the
PAN card or PAN allotment letter is required to be submitted with the Application Form. Bids without this
information will be considered incomplete and is liable to be rejected. It is to be specifically noted that applicant
should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this
ground.
Pricing and Allocation
Build-up of the book
The QIBs shall submit their Bids (including the revision thereof) through the Application Form within the Bidding
Period to the BRLM. Such Bids cannot be withdrawn after the Issue Closing Date. The book shall be maintained
by the BRLM.
Price discovery and Allocation
Our Bank, in consultation with the BRLM, shall finalize the Issue Price for the Equity Shares, which shall be at
or above the Floor Price. Our Bank may offer a discount of not more than 5% on the Floor Price in terms of
Regulation 176 of the SEBI ICDR Regulations. After finalisation of the Issue Price, our Bank shall update this
Preliminary Placement Document with the details of the Issue and file the Placement Document with the Stock
Exchange.
Method of Allocation
197
Our Bank shall determine the Allocation, in consultation with the BRLM, on a discretionary basis and in
compliance with Chapter VI of the SEBI ICDR Regulations.
Application Forms received from the QIBs at or above the Issue Price shall be grouped together to determine the
total demand. The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up
to a minimum of 10% of the Issue Size shall be undertaken subject to valid Application Form being received at
or above the Issue Price.
THE DECISION OF OUR BANK, IN CONSULTATION WITH THE BRLM, IN RESPECT OF
ALLOCATION SHALL BE FINAL AND BINDING ON ALL QIBs. QIBs MAY NOTE THAT
ALLOCATION OF EQUITY SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF OUR
BANK, IN CONSULTATION WITH THE BRLM, AND QIBs MAY NOT RECEIVE ANY
ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR ABOVE
THE ISSUE PRICE. NEITHER OUR BANK NOR THE BRLM IS OBLIGED TO ASSIGN ANY
REASONS FOR SUCH NON-ALLOCATION.
CAN
Based on the Application Forms received, our Bank, in consultation with the BRLM, will, in its sole and absolute
discretion, decide the list of QIBs to whom the serially numbered CAN shall be sent, pursuant to which the details
of the Equity Shares Allocated to them shall be notified to such QIBs. Additionally, the CAN would include the
probable designated date (“Designated Date”), being the date of credit of the Equity Shares to the QIB’s account,
as applicable to the respective QIBs.
The QIBs would also be sent a serially numbered Placement Document either in electronic form or by physical
delivery along with the serially numbered CAN.
The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a valid,
binding and irrevocable contract.
QIBs ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE
EQUITY SHARES THAT MAY BE ALLOCATED / ALLOTTED TO THEM PURSUANT TO THE
ISSUE.
Bank Account for the Payment of Bid Amount
Our Bank has opened an escrow account titled “Lakshmi Vilas Bank – QIP 2019 Escrow Account” (the “Escrow
Account”) with the Escrow Bank in terms of the arrangements between our Bank, the BRLM and The Lakshmi
Vilas Bank Limited (acting as the Escrow Bank). The Application Form includes details of the bank account(s)
for the electronic transfer of funds. Each QIB will be required to deposit the Bid Amount payable for the Equity
Shares Bid by it pursuant to the Application Form. QIBs can make payment of the Bid Amount only through
electronic transfer of funds from their own bank accounts.
Payments are to be made only through electronic fund transfer.
Note: Payments through cheques are liable to be rejected.
Designated Date and Allotment of Equity Shares
1. Subject to the satisfaction of the terms and conditions of the Placement Agreement, our Bank will ensure that
the Allotment of the Equity Shares is completed by the Designated Date provided in the CAN for the QIBs
who have paid the aggregate subscription amounts.
2. In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be made
only in the dematerialized form to the Allottees. Allottees will have the option to re-materialize the Equity
Shares, if they so desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.
3. Our Bank reserves the right to cancel this Issue at any time up to Allotment without assigning any reasons
whatsoever.
4. Post receipt of the listing approval of the Stock Exchanges, our Bank shall credit the Equity Shares into the
Depository Participant account of the QIBs.
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5. Following the Allotment and credit of Equity Shares into the QIBs Depository Participant account, our Bank
will apply for final listing and trading approval for trading on the Stock Exchanges.
6. In the event that we are unable to issue and Allot the Equity Shares offered in the Issue or on cancellation of
the Issue, within 60 days from the date of receipt of application money, in accordance with section 42 of the
Companies Act, 2013 we shall repay the application money within 15 days from expiry of 60 days, failing
which we shall repay that money with interest at the rate of 12% per annum from expiry of the 60 th day. The
application money to be refunded by us shall be refunded to the same bank account from which application
money was remitted by the QIBs.
7. In the unlikely event of any delay in the Allotment or credit of Equity Shares, or receipt of the listing approvals
or the final listing and trading approvals of the Stock Exchanges in relation to the Issue or the cancellation of
the Issue, no interest or penalty would be payable by our Bank.
8. The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to our Bank after
the receipt of the final listing and trading approval from the Stock Exchanges.
9. In case of QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, our Bank shall
disclose the name and the number of the Equity Shares Allotted to such QIB to the Stock Exchanges and the
Stock Exchanges shall make the same available on their website.
Refunds
In the event Bidders are not Allocated Equity Shares, for any reasons, for all or part of the Bid Amount submitted
by such Bidder, or the Bidder withdraws the Bid before the Issue Closing Date, or the Bidder has deposited Bid
Amount higher than the Issue Price, such Bidders will be refunded the Bid Amount (or the excess Bid Amount,
as applicable) paid by them. The refunds shall be made to the same bank account from which Bid Amount was
remitted by the QIBs. Such QIBs to whom refunds shall be made will receive a Refund Intimation Letter from
our Company providing details of the refund.
Other Instructions
Our Right to Reject Bids
Our Bank, in consultation with the BRLM, may reject Bids, in part or in full, without assigning any reasons
whatsoever. The decision of our Bank and the BRLM, in relation to the rejection of Bids, shall be final and
binding.
Monitoring of foreign investment limits
SEBI has through circular dated April 5, 2018, put in place a new system for monitoring the foreign investment
limits in listed Indian companies, and by its circular dated May 17, 2018, SEBI has directed that the system be
made operational from June 1, 2018. Accordingly, the listed Indian company shall have to appoint any one
depository as its designated depository for the purpose of monitoring the foreign investment limit.
The depository so chosen shall activate a red flag whenever the foreign investment is within 3% or less than 3%
of the aggregate NRI/FPI limits or the sectoral cap prescribed under FEMA and shall intimate the stock exchanges
of such red flag being activated.
Once the stock exchanges and depositories have intimated to the public that a red flag has been activated for the
scrip of our Bank, foreign investors shall take a conscious decision to trade in the shares of our Bank, with a clear
understanding that in the event of a breach of the aggregate NRI/FPI limits or the sectoral cap as prescribed under
FEMA, foreign investors shall be liable to disinvest the excess holding within five trading days from the date of
settlement of the trades.
Equity Shares in dematerialized form with NSDL or CDSL
1. The Allotment of the Equity Shares in this Issue shall be only in dematerialized form, (i.e., not in the form of
physical certificates but be fungible and be represented by the statement issued through the electronic mode).
2. A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant
of either NSDL or CDSL prior to making the Bid.
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3. Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the
Depository Participant) of the QIB.
4. Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity
with NSDL and CDSL. The Stock Exchanges has electronic connectivity with NSDL and CDSL.
5. The trading of the Equity Shares would be in dematerialized form only for all QIBs in the demat segment of
the Stock Exchanges.
6. Our Bank will not be responsible or liable for the delay in the credit of the Equity Shares due to errors in the
Application Forms or on part of the QIBs.
Compliance officer
N. Ramanathan
Company Secretary and Compliance Officer
The Lakshmi Vilas Bank Limited
Corporate Office, “LVB House”
No.4, Sardar Patel Road,
Guindy, Chennai - 600 032
Tamil Nadu
Tel: +91 44-22205305 / +91 9442552642
Fax: +91 44 2220 5317
Email: [email protected]
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PLACEMENT
Placement Agreement
The BRLM has entered into a placement agreement dated March 7, 2019 with our Bank, pursuant to which, the
BRLM has agreed, subject to certain conditions, to place the Equity Shares of our Bank, on reasonable efforts
basis, pursuant to Chapter VI of the SEBI ICDR Regulations and section 42 of the Companies Act, 2013.
The Placement Agreement contains customary representations and warranties, as well as indemnities from our
Bank, and the Issue is subject to satisfaction of certain conditions and subject to termination in accordance with
the terms contained therein.
Applications shall be made to list the Equity Shares and admit them to trading on the Stock Exchanges. No
assurance can be given as to the liquidity or sustainability of the trading market for the Equity Shares, the ability
of holders of the Equity Shares to sell their Equity Shares or the price at which holders of the Equity Shares will
be able to sell their Equity Shares.
This Preliminary Placement Document has not been, and will not be, registered as a prospectus with the Registrar
of Companies in India. With the exception of QIBs, no Equity Shares will be offered in India or overseas to the
public or any members of the public in India or any other class of investors other than QIBs.
The Equity Shares offered in the Issue have not been and will not be registered under the Securities Act or the
laws of any state of the United States and may not be offered or sold in the United States, except pursuant to an
exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered and sold only outside the
United States in offshore transactions in reliance on Regulation S. For a description of selling restrictions in certain
other jurisdictions, see “Selling Restrictions” on page 201. The Equity Shares are transferable only in accordance
with the restrictions described in the section titled “Transfer Restrictions” on page 206.
In connection with the Issue, the BRLM (or its affiliates) may, for its own accounts, enter into asset swaps, credit
derivatives or other derivative transactions relating to the Equity Shares at the same time as the offer and sale of
the Equity Shares, or in secondary market transactions. As a result of such transactions, the BRLM may hold long
or short positions in such Equity Shares. These transactions may comprise of a substantial portion of the Issue and
no specific disclosure will be made of such positions.
The BRLM and certain of its affiliates have in the past provided, currently provide and may in future provide
investment banking, general financing and banking and advisory services to our Bank and our affiliates for which
it has in the past received, currently receive and may in the future receive, customary fees.
Lock-up
Our Bank has undertaken that it will not for a period of 30 days from the date of Allotment under the Issue, without
the prior written consent of the BRLM, directly or indirectly, (a) offer, issue, contract to issue, issue or offer any
option or contract to purchase, purchase any option or contract to sell, grant any option or right to purchase, or
otherwise transfer or dispose of, any Equity Shares or any securities convertible into or exercisable for Equity
Shares (including, without limitation, securities convertible into or exercisable or exchangeable for Equity Shares
which may be deemed to be beneficially owned), or file any registration statement under the Securities Act, with
respect to any of the foregoing, or (b) enter into any swap or other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, any of the economic consequences associated with the ownership of any
of the Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares (regardless
of whether any of the transactions described in clause (a) or (b) is to be settled by the delivery of Equity Shares
or such other securities, in cash or otherwise), or (c) deposit Equity Shares with any other depositary in connection
with a depositary receipt facility, or (d) publicly announce any intention to enter into any transaction falling within
(a) to (c) above or enter into any transaction (including a transaction involving derivatives) having an economic
effect similar to that of an issue or offer or deposit of Equity Shares in any depositary receipt facility or publicly
announce any intention to enter into any transaction falling within (a) to (c) above. Provided, however, that the
lock-up restrictions will not apply to grant of options under LVB ESOS-2010 and LVB ESOS-2017.
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SELLING RESTRICTIONS
General
The distribution of this Preliminary Placement Document and the offer, sale or delivery of the Equity Shares in
this Issue is restricted by law in certain jurisdictions. Persons who come into possession of this Preliminary
Placement Document or any offering material are advised to take legal advice with regard to any restrictions that
may be applicable to them and to observe such restrictions. This Preliminary Placement Document may not be
used for the purpose of an offer or sale in any circumstances in which such offer or sale is not authorised or
permitted.
Except in India, no action has been taken or will be taken by our Bank or the BRLM that would permit an offering
of the Equity Shares to occur in any jurisdiction, or the possession, circulation or distribution of this Preliminary
Placement Document or any other material relating to our Bank or the Equity Shares in any jurisdiction where
action for such purpose is required. Accordingly, except in India, the Equity Shares may not be offered or sold,
directly or indirectly, and none of this Preliminary Placement Document, any offering materials or any
advertisements in connection with the offering of the Equity Shares issued pursuant to the Issue may be distributed
or published in or from any country or jurisdiction except under circumstances that will result in compliance with
any applicable rules and regulations of any such country or jurisdiction and will not impose any obligations on
our Bank or the BRLM. This Issue will be made in compliance with the applicable regulations issued by the SEBI.
Each purchaser of the Equity Shares in this Issue will be required to make or deemed to have made, as applicable,
the representations, warranties, acknowledgments and agreements as described under the sections
“Representations by Investors” and “Transfer Restrictions” on pages 3 and 206, respectively.
India
This Preliminary Placement Document may not be distributed directly or indirectly in India or to residents of
India and any Equity Shares may not be offered or sold directly or indirectly in India to, or for the account or
benefit of, any resident of India except as permitted by applicable Indian laws and regulations, under which an
offer is strictly on a private and confidential basis and is limited to QIBs and is not an offer to the public. This
Issue is a “private placement” within the meaning of Section 42 of the Companies Act, 2013 since the invitation
or offer is to be made only to QIBs. This Preliminary Placement Document is neither a public issue nor a
prospectus under the Companies Act, 2013 or an advertisement and should not be circulated to any person other
than to whom the offer is made. This Preliminary Placement Document has not been and will not be registered
as a prospectus with the Registrar of Companies in India.
European Economic Area
In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive
(each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive
is or was implemented in that Relevant Member State (the “Relevant Implementation Date”), the Equity Shares
may not be offered or sold to the public in that Relevant Member State prior to the publication of a prospectus in
relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State
or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that
Relevant Member State, all in accordance with the Prospectus Directive (defined below) and the 2010 Amending
Directive (defined below), except that the Equity Shares, with effect from and including the Relevant
Implementation Date, may be offered to the public in that Relevant Member State at any time:
(a) to persons or entities that are “qualified investors” as defined in the Prospectus Directive or, if that
Relevant Member State has implemented the 2010 Amending Directive, as defined in the 2010
Amending Directive;
(b) to (i) fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus
Directive); or (ii) if that Relevant Member State has implemented the 2010 Amending Directive, fewer
than 150 natural or legal persons (other than “qualified investors” as defined in the 2010 Amending
Directive), in each case subject to obtaining the prior consent of the BRLM; and
(c) in any circumstances falling within Article 3(2) of the Prospectus Directive as amended (to the extent
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implemented in that Relevant Member State) by Article 1(3) of the 2010 Amending Directive, provided
that no such offering of Equity Shares shall result in a requirement for the publication by our Bank or the
BRLM of a prospectus pursuant to Article 3 of the Prospectus Directive as amended (to the extent
implemented in that Relevant Member State) by Article 1(3) of the 2010 Amending Directive.
For the purposes of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity
Shares in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to
purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means
Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State and the
expression “2010 Amending Directive” means Directive 2010/73/EU and includes any relevant implementing
measure in each Member State.
Hong Kong
The Preliminary Placement Document has not been reviewed or approved by any regulatory authority in Hong
Kong. In particular, this Preliminary Placement Document has not been, and will not be, registered as a
“prospectus” in Hong Kong under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap
32) (“CO”) nor has it been authorized by the Securities and Futures Commission (“SFC”) in Hong Kong pursuant
to the Securities and Futures Ordinance (Cap 571) (“SFO”). Recipients are advised to exercise caution in relation
to the Issue. If recipients are in any doubt about any of the contents of this Preliminary Placement Document, they
should obtain independent professional advice.
The Preliminary Placement Document does not constitute an offer or invitation to the public in Hong Kong to
acquire any Equity Shares nor an advertisement of the Equity Shares in Hong Kong. The Preliminary Placement
Document must not be issued, circulated or distributed in Hong Kong other than:
(a) to “professional investors” within the meaning of the SFO and any rules made under that ordinance
(“Professional Investors”); or
(b) in other circumstances which do not result in this Preliminary Placement Document being a prospectus
as defined in the CO nor constitute an offer to the public which requires authorization by the SFC under
the SFO.
Unless permitted by the securities laws of Hong Kong, no person may issue or have in its possession for issue,
whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to Issue that is directed
at, or the content of which is likely to be accessed or read by, the public in Hong Kong other than with respect to
the Equity Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to
Professional Investors.
Any offer of the Equity Shares will be personal to the person to whom relevant offer documents are delivered,
and a subscription for the Equity Shares will only be accepted from such person. No person who has received a
copy of this Preliminary Placement Document may issue, circulate or distribute this Preliminary Placement
Document in Hong Kong or make or give a copy of this Preliminary Placement Document to any other person.
No person allotted Equity Shares in the Issue may sell, or offer to sell, such Equity Shares to the public in Hong
Kong within six months following the date of issue of such Equity Shares.
Kuwait
This Preliminary Placement Document is provided on an exclusive basis to the specifically intended recipient
thereof, upon that person’s request and initiative, and for the recipient’s personal use only and is not intended to
be available to the public. The Preliminary Placement Document has not been licensed for offering, promotion,
marketing, advertisement or sale in the State of Kuwait by the Capital Markets Authority or any other relevant
Kuwaiti government agency. The offering, promotion, marketing, advertisement or sale of the Equity Shares in
the State of Kuwait on the basis of a private placement or public offering is, therefore, prohibited in accordance
with Law No. 7 of 2010 and the Executive Bylaws for Law No. 7 of 2010, as amended, which govern the issue,
offer, marketing and sale of securities in the State of Kuwait (“Kuwait Securities Laws”). Therefore, in
accordance with the Kuwait Securities Laws, no private or public offering of the Equity Shares is or will be made
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in the State of Kuwait, no agreement relating to the sale of the Equity Shares will be concluded in the State of
Kuwait and no marketing or solicitation or inducement activities are being used to offer or market the Equity
Shares in the State of Kuwait.
Mauritius
The Equity Shares are not being offered to the public in Mauritius and nothing in the Preliminary Placement
Document or any information contained herein may be treated as a prospectus for the purposes of the Securities
Act 2005 of Mauritius. The Mauritius Financial Services Commission (the “FSC”) has neither reviewed nor
approved the Preliminary Placement Document and our Bank does not hold any licence issued by the FSC.
Accordingly, the Preliminary Placement Document has not been registered with the FSC. The Equity Shares are
being offered by way of a private placement only to the person to whom such offer has been made.
Only persons licensed by the FSC as investment dealers, investment advisers or investment bankers conducting
activities as an investment dealer or investment adviser may market and carry out any form of solicitation in
Mauritius in respect to the offer, distribution or sale of the Equity Shares. Where solicitation does not exist, a
licensee as a distributor of financial products may distribute the Equity Shares. The Equity Shares may not be
offered, distributed or sold, directly or indirectly, in Mauritius, except as permitted by applicable Mauritius law,
including but not limited to the Securities Act 2005 of Mauritius.
Oman
The information contained in this Preliminary Placement Document does not constitute a public offer of securities
in the Sultanate of Oman as contemplated by the Commercial Companies Law of Oman (Royal Decree No. 4 of
1974 as amended) nor does it constitute an offer to sell or the solicitation of any offer to buy the Equity Shares in
the Sultanate of Oman as contemplated by the Executive Regulations of the Capital Market Law of Oman
(Decision Number 1 of 2009). This Preliminary Placement Document must not be distributed in the Sultanate of
Oman and it is not intended to lead to the conclusion of any contract in the Sultanate of Oman. This Preliminary
Placement Document has not been and will not be reviewed or approved by the Capital Market Authority of Oman.
This Preliminary Placement Document is intended for the original recipient only and must not be provided to any
other person.
Qatar (excluding the Qatar Finance Centre)
This Preliminary Placement Document does not, and is not intended to, constitute an invitation or an offer of
Equity Shares in the State of Qatar and accordingly should not be construed as such. The Equity Shares have not
been, and shall not be, offered, sold or delivered at any time, directly or indirectly, in the State of Qatar.
By receiving this Preliminary Placement Document, the person or entity to whom it has been provided to
understands, acknowledges and agrees that: (a) neither this Preliminary Placement Document nor the Equity
Shares have been registered, considered, authorised or approved by the Qatar Central Bank, the Qatar Financial
Markets Authority or any other authority or agency in the State of Qatar; (b) none of our Bank or the BRLM are
authorised or licensed by the Qatar Central Bank, the Qatar Financial Markets Authority or any other authority or
agency in the State of Qatar to market or sell the Equity Shares within the State of Qatar; (c) this Preliminary
Placement Document may not be provided to any person other than the original recipient and is not for general
circulation in the State of Qatar; and (d) no agreement relating to the sale of the Equity Shares shall be
consummated within the State of Qatar.
No marketing of the Equity Shares has been or will be made from within the State of Qatar and no sale of the
Equity Shares may or will be consummated within the State of Qatar. Any applications to purchase the Equity
Shares shall be received from outside of Qatar. This Preliminary Placement Document shall not form the basis of,
or be relied on in connection with, any contract in Qatar. None of our Bank of the BRLM is, by distributing this
Preliminary Placement Document, advising individuals resident in the State of Qatar as to the appropriateness of
purchasing the Equity Shares. Nothing contained in this Preliminary Placement Document is intended to constitute
investment, legal, tax, accounting or other professional advice in, or in respect of, the State of Qatar.
Qatar Financial Centre
This Preliminary Placement Document does not, and is not intended to, constitute an invitation or offer of Equity
Shares from or within the Qatar Financial Centre (“QFC”), and accordingly should not be construed as such. This
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Preliminary Placement Document has not been reviewed or approved by or registered with the Qatar Financial
Centre Authority, the Qatar Financial Centre Regulatory Authority or any other competent legal body in the QFC.
This Preliminary Placement Document is strictly private and confidential, and may not be reproduced or used for
any other purpose, nor provided to any person other than the recipient thereof. Our Bank has not been approved
or licensed by or registered with any licensing authorities within the QFC.
Singapore
This Preliminary Placement Document has not been and will not be registered as a prospectus with the Monetary
Authority of Singapore (“MAS”) under the Securities and Futures Act (Chapter 289) of Singapore (“SFA”).
Accordingly, the Equity Shares may not be offered or sold, or made the subject of an invitation for subscription
or purchase nor may this Preliminary Placement Document or any other document or material in connection with
the offer or sale, or invitation for subscription or purchase of the Equity Shares be circulated or distributed, whether
directly or indirectly, in Singapore other than (i) to an “institutional investor” within the meaning of Section 274
of the SFA and in accordance with the conditions of an exemption invoked under Section 274, (ii) to a relevant
person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the
conditions specified in Section 275, of the SFA, or (iii) other pursuant to, and in accordance with the conditions
of, any other applicable provision of the SFA.
Where the Equity Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which
is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business
of which is to hold investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose
is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares,
debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest
(howsoever described) in that trust shall not be transferred within six months after that corporation or that trust
has acquired the Equity Shares pursuant to an offer made under Section 275 except: (1) to an institutional investor
under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person
pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that
corporation or such rights or interest in that trust are acquired at a consideration of not less than S$200,000 (or its
equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange
of securities or other assets, and further for a corporation, in accordance with the conditions specified in Section
275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by
operation of law.
United Kingdom (in addition to the European Economic Area selling restrictions above)
The Equity Shares cannot be promoted in the United Kingdom to the general public. The contents of this
Preliminary Placement Document have not been approved by an authorised person within the meaning of Financial
Services and Markets Act 2000, as amended (the “FSMA”). The BRLM (a) may only communicate or caused to
be communicated and will only communicate or cause to be communicated an invitation or inducement to engage
in investment activity (within the meaning of Section 21 of the FSMA), to persons who (i) are investment
professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion)
Order 2005, as amended (the “Financial Promotion Order”), or (ii) fall within any of the categories of persons
described in article 49(2)(a) to (d) of the Financial Promotion Order or otherwise in circumstances in which section
21(1) of the FSMA does not apply to our Bank; and (b) has complied and will comply with all applicable provisions
of the FSMA with respect to anything done by it in relation to the offer of the Equity Shares in the Issue, from or
otherwise involving the United Kingdom. Any invitation or inducement to engage in investment activity (within
the meaning of Section 21 of FSMA) in connection with, or relating to, the sale or purchase of any Equity Shares
in the Issue, may only be communicated or caused to be communicated in circumstances in which Section 21(1)
of the FSMA does not apply. It is the responsibility of all persons under whose control or into whose possession
this document comes to inform themselves about and to ensure observance of all applicable provisions of FSMA
in respect of anything done in relation to an investment in Equity Shares in, from or otherwise involving, the
United Kingdom.
United States of America
The Equity Shares offered in the Issue have not been and will not be registered under the Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
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applicable state securities laws. The Equity Shares are not being offered or sold in the United States in the Issue.
The Equity Shares are being offered and sold in the Issue only outside the United States in “offshore transactions”
(as defined in Regulation S) in reliance on Regulation S. To help ensure that the offer and sale of the Equity Shares
in the Issue was made in compliance with Regulation S, each purchaser of Equity Shares in the Issue will be
deemed to have made the representations, warranties, acknowledgements and undertakings set forth in “Transfer
Restrictions” on page 206.
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TRANSFER RESTRICTIONS
Due to the following restrictions, investors are advised to consult legal counsel prior to purchasing Equity
Shares or making any resale, pledge or transfer of the Equity Shares.
Purchasers are not permitted to sell the Equity Shares Allotted pursuant to the Issue, for a period of one year from
the date of Allotment, except on the BSE or the NSE. Allotments made to FVCIs, VCFs and AIFs in the Issue are
subject to the rules and regulations that are applicable to them, including in relation to lock-in requirements.
Additional transfer restrictions applicable to the Equity Shares are listed below.
United States
The Equity Shares offered in the Issue have not been, and will not be, registered under the Securities Act or the
securities laws of any state of the United States and may not be offered or sold in the United States except pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and
applicable state securities laws.
Each purchaser of the Equity Shares, by accepting delivery of this Preliminary Placement Document, will be
deemed to:
• Represent and warrant to our Bank, the BRLM and its affiliates that it was outside the United States (within
the meaning of Regulation S) at the time the offer of the Equity Shares was made to it and it was outside
the United States (within the meaning of Regulation S) when its buy order for the Equity Shares was
originated.
• Represent and warrant to our Bank, the BRLM and its affiliates that it did not purchase the Equity Shares
as a result of any “directed selling efforts” (as defined in Regulation S).
• Acknowledge that the Equity Shares have not been and will not be registered under the Securities Act or
the securities law of any state of the United States and warrant to our Bank, the BRLM and its affiliates
that it will not offer, sell, pledge or otherwise transfer the Equity Shares except in an offshore transaction
complying with Rule 903 or Rule 904 of Regulation S or pursuant to any other available exemption from
registration under the Securities Act and in accordance with all applicable securities laws of the states of
the United States and any other jurisdiction, including India.
• Represent and warrant to our Bank, the BRLM and its affiliates that if it acquired any of the Equity Shares
as fiduciary or agent for one or more investor accounts, it has sole investment discretion with respect to
each such account and that it has full power to make the foregoing acknowledgments, representations and
agreements on behalf of each such account.
• Where it is subscribing to the Equity Shares for one or more managed accounts, it represents and warrants
that it was authorised in writing by each such managed account to subscribe to the Equity Shares for each
managed account and to make (and it hereby makes) the representations, warranties, agreements and
acknowledgements herein for and on behalf of each such account, reading the reference to “it” to include
such accounts.
• Agree to indemnify and hold our Bank, the BRLM and its affiliates harmless from any and all costs, claims,
liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach
of these representations, warranties or agreements. It agrees that the indemnity set forth in this paragraph
shall survive the resale of the Equity Shares.
• Acknowledge that our Bank, the BRLM and its affiliates and others will rely upon the truth and accuracy
of the foregoing acknowledgements, representations, warranties and agreements.
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SECURITIES MARKET OF INDIA
The information in this section has been extracted from documents available on the website of SEBI and the Stock
Exchanges and has not been prepared or independently verified by our Bank or the BRLM or any of its affiliates
or advisors.
The Indian Securities Market
India has a long history of organized securities trading. In 1875, the first stock exchange was established in
Mumbai. The BSE and the NSE are the significant stock exchanges in terms of the number of listed companies,
market capitalisation and trading activity.
Regulation of Indian stock exchanges
Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry
of Finance, Department of Economic Affairs, Capital Markets Division, under the Securities Contracts
(Regulation) Act, 1956 (the “SCRA”) and the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On
June 20, 2012, SEBI, in exercise of its powers under the SCRA and the Securities and Exchange Board of India
Act, 1992, as amended from time to time (the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock
Exchanges and Clearing Corporations) Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia
the recognition, ownership and internal governance of stock exchanges and clearing corporations in India together
with providing for minimum capitalisation requirements for stock exchanges. The SCRA, the SCRR and the SCR
(SECC) Rules along with various rules, bye-laws and regulations of the respective stock exchanges, regulate the
recognition of stock exchanges, the qualifications for membership thereof and the manner, in which contracts are
entered into, settled and enforced between members of the stock exchanges.
The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and
intermediaries in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent
and unfair trade practices. Regulations and guidelines concerning minimum disclosure requirements by public
listed companies, investor protection, insider trading, substantial acquisitions of shares and takeover of companies,
buy-backs of securities, employee stock option schemes and share based benefits, stockbrokers, merchant bankers,
underwriters, mutual funds, FPIs, credit rating agencies and other capital market participants have been notified
by the relevant regulatory authority.
Listing of securities
The listing of securities on a recognised Indian stock exchange is regulated by the applicable Indian laws including
the Companies Act, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by SEBI
and the SEBI Listing Regulations. The SCRA empowers the governing body of each recognised stock exchange
to suspend trading of or withdraw admission to dealings in a listed security for breach of or non-compliance with
any conditions or breach of company’s obligations under the SEBI Listing Regulations or for any reason, subject
to the issuer receiving prior written notice of the intent of the exchange and upon granting of a hearing in the
matter. SEBI also has the power to amend the SEBI Listing Regulations and bye-laws of the stock exchanges in
India, to overrule a stock exchange’s governing body and withdraw recognition of a recognised stock exchange.
Minimum level of public shareholding
Pursuant to an amendment of the SCRR in June 2010 and Regulation 38 of the SEBI Listing Regulations, all listed
companies are required to maintain a minimum public shareholding of 25%. Further, where the public
shareholding in a listed company falls below 25% at any time, such company is required to bring the public
shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed
company may be delisted from the stock exchanges for not complying with the above-mentioned requirement.
Our Bank is in compliance with this minimum public shareholding requirement.
Delisting of securities
SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in
relation to the voluntary and compulsory delisting of equity shares from the stock exchanges which were
significantly amended in 2015. In addition, certain amendments to the SCRR have also been notified in relation
to delisting.
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Disclosures under the SEBI Listing Regulations
Public listed companies are required under the SEBI Listing Regulations to prepare and circulate to their
shareholders audited annual accounts which comply with the disclosure requirements and regulations governing
their manner of presentation and which include sections relating to corporate governance, related party
transactions and management discussion and analysis as required under the SEBI Listing Regulations. In addition,
a listed company is subject to continuing disclosure requirements pursuant to the terms of the SEBI Listing
Regulations.
Index-Based Market-Wide Circuit Breaker System
In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply
daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index based
market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement,
at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity
and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either
the SENSEX of the BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier.
In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price
bands of up to 20% movements either up or down. However, no price bands are applicable on scrips on which
derivative products are available or scrips included in indices on which derivative products are available.
The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.
Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.
BSE
Established in 1875, the BSE is the oldest stock exchange in India. In 1957, it became the first stock exchange in
India to obtain permanent recognition from the Government of India under the SCRA. It has evolved over the
years into its present status as one of the most recognizable stock exchanges of India. Pursuant to the BSE
(Corporatisation and Demutualisation) Scheme 2005, with effect from August 8, 2005, the BSE was incorporated
and is now a company under the Companies Act.
NSE
The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked, screen-
based trading facilities to market-makers and to provide electronic clearing and settlement for securities including
government securities, debentures, public sector bonds and units. The NSE was recognised as a stock exchange
under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994.
The capital market (equities) segment commenced operations in 1994.
Internet-based Securities Trading and Services
Internet trading takes place through order routing systems, which route client orders to exchange trading systems
for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant
stock exchange and also have to comply with certain minimum conditions stipulated under applicable law. The
NSE became the first exchange to grant approval to its members for providing internet based trading services.
Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE. The NSE
became the first exchange to grant approval to its members for providing internet-based trading services. Internet
trading is possible on both the “equities” and the “derivatives” segments of the NSE.
Trading Hours
Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST
(excluding the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m.). The BSE and the NSE are closed on
public holidays. The recognized stock exchanges have been permitted to set their own trading hours (in the cash
and derivatives segments) subject to the condition that (i) the trading hours are between 9.00 a.m. and 5.00 p.m.;
and (ii) the stock exchange has in place a risk management system and infrastructure commensurate to the trading
hours.
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Trading Procedure
In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (or
“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice
nationwide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement
cycles and improving efficiency in back-office work.
The NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or
“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth
in the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.
Takeover Regulations
Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the
Takeover Code, which provides specific regulations in relation to substantial acquisition of shares and takeover.
Once the equity shares of a company are listed on a stock exchange in India, the provisions of the Takeover Code
will apply to any acquisition of the company’s shares/voting rights/control. The Takeover Code prescribe certain
thresholds or trigger points in the shareholding a person or entity has in the listed Indian company, which give
rise to certain obligations on part of the acquirer. Acquisitions up to a certain threshold prescribed under the
Takeover Code mandate specific disclosure requirements, while acquisitions crossing particular thresholds may
result in the acquirer having to make an open offer of the shares of the target company. The Takeover Code also
provides for the possibility of indirect acquisitions, imposing specific obligations on the acquirer in case of such
indirect acquisition.
Insider Trading Regulations
The SEBI Insider Trading Regulations have been notified by SEBI to prohibit insider trading in India. An insider
is, among other things, prohibited from trading either on his own behalf or on behalf of any other person, in the
securities of a listed company or a company proposed to be listed when in possession of unpublished price
sensitive information.
The SEBI Insider Trading Regulations also provide disclosure obligations for promoters, key managerial
personnel, directors and employees, with respect to their shareholding in the company, and the changes therein.
The definition of “insider” includes any person who has received or has had access to unpublished price sensitive
information in relation to securities of a company or any person who has a connection with the company that is
expected to put him in possession of unpublished price sensitive information.
The SEBI Insider Trading Regulations require listed companies and certain other entities that are required to
handle unpublished price sensitive information in the course of business operations to establish an internal code
of practices and procedures for fair disclosure of unpublished price sensitive information and to regulate, monitor
and report trading by insiders. To this end, the SEBI Insider Trading Regulations provide principles of fair
disclosure for purposes of code of practices and procedures for fair disclosure of unpublished price sensitive
information and minimum standards for code of conduct to regulate, monitor and report trading by insiders.
Accordingly, our Bank has implemented a code of practices and procedure for fair disclosure and a code for
prevention of insider trading.
Depositories
The Depositories Act provides a legal framework for the establishment of depositories to record ownership details
and effect transfers in book-entry form. Further, SEBI framed regulations in relation to, among other things, the
formation and registration of such depositories, the registration of participants as well as the rights and obligations
of the depositories, participants, companies and beneficial owners. The depository system has significantly
improved the operation of the Indian securities markets.
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Derivatives (Futures and Options)
Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in
February 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.
Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock
exchange functions as a self-regulatory organisation under the supervision of the SEBI.
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DESCRIPTION OF EQUITY SHARES
The following is information relating to the Equity Shares including a brief summary of the Memorandum of
Association and Articles of Association, and the provisions of the Companies Act, 2013. Prospective investors are
urged to read the Memorandum of Association and Articles of Association carefully, and consult with their
advisers, as the Memorandum of Association and Articles of Association and applicable Indian law, and not this
summary, govern the rights attached to the Equity Shares.
Share Capital
As on date, our Bank’s authorized Share Capital is ₹ 5,000,000,000 divided into 500,000,000 Equity Shares of ₹
10 each. The issued capital of our Bank is ₹ 2,580.90 million divided into 258,090,428 Equity Shares and the
subscribed and paid up share capital is ₹ 2,560.72 million divided into 256,071,902 Equity Shares. The subscribed
and paid up share capital of our Bank does not include 2,018,526 Equity Shares kept in abeyance, or forfeited
shares and lapsed shares. For further details on our Bank’s share capital, see “Capital Structure” on page 65.
Dividends
Under Indian law, a company declares and pays final dividend upon a recommendation by its board of directors
and approval by a majority of the shareholders at the AGM of shareholders held each financial year. Under the
Companies Act, 2013, unless the board of directors of a company recommends the payment of final dividend, the
shareholders at a general meeting have no power to declare any dividend. Subject to certain conditions specified
under Section 123 of the Companies Act, 2013 and the rules made thereunder no dividend can be declared or paid
by a company for any financial year except (a) out of the profits of the company for that year, calculated after
providing for depreciation, in accordance with the provisions of the Companies Act, 2013; or (b) out of the profits
of the company for any previous financial year(s) arrived at in accordance with the Companies Act, 2013 and
remaining undistributed; or (c) out of both; or (d) out of money provided by the Central Government or a state
Government for payment of dividend by our Bank in pursuance of a guarantee given by that Government. Under
our Articles of Association, our shareholders at a general meeting may declare dividends but no dividend shall
exceed the amount recommended by our Board.
The profits of our Bank, subject to provisions of the Articles of Association, shall be divisible among the members
in proportion of the amount of capital paid up on the shares held by them respectively.
The RBI has also placed certain restrictions on the payment of dividends by banks. For further information, see
“Dividend Policy” on page 70.
Capitalization
By ordinary resolution in a general meeting, our Bank may, upon the recommendation of the Board, capitalise
any part of the amount for the time being standing to the credit of any of our Bank’s reserve accounts, or to the
credit of the profit and loss account, or otherwise available for distribution. Such sum may be set free for
distribution amongst the members of our Bank who would have been entitled thereto, if distributed by way of
dividend and in the same proportions in the manner prescribed in the Articles of Association.
The Articles of Association allow a securities premium account and a capital redemption reserve account or any
other permissible reserve account may be applied in the paying up of unissued shares to be issued to members of
our Bank as fully paid bonus shares.
Pre-emptive Rights and Alteration of Share Capital
Subject to the provisions of the Companies Act, 2013, we can increase our share capital by issuing new shares.
Such new shares must be offered to existing shareholders registered on the record date in proportion to the amount
paid-up on those shares on that date. The offer should be made by notice specifying the number of shares offered
and the date within which the offer, if not accepted, will be deemed to have been declined. After such date, the
Board may dispose of the shares offered in respect of which no acceptance has been received in such manner
which is not disadvantageous to the shareholders and us. The offer is deemed to include a right exercisable by the
person concerned to renounce the shares in favour of any other person. However, under the provisions of the
Companies Act, 2013, new shares may be offered to any persons, whether or not those persons include existing
shareholders or employees to whom shares are allotted under a scheme of employees stock options, either for cash
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or for consideration other than cash if the price of such shares is determined by the valuation report of a registered
valuer subject to prescribed conditions, if a special resolution to that effect is passed by the shareholders of the
company in a general meeting. The issue of the Equity Shares pursuant to this Issue has been approved by a special
resolution of our shareholders.
General Meetings of Shareholders
We must hold our AGM each year within fifteen months of the previous AGM and within six months after the
end of each accounting year. The Registrar of Companies may extend this period in special circumstances at our
request. The Board may convene an extraordinary general meeting of shareholders when necessary and shall
convene such a meeting at the request of a shareholder or shareholders holding in the aggregate not less than 10%
of our issued paid-up capital.
Written notices convening a general meeting setting out the date and place of the meeting and its agenda must be
given to members at least 21 clear days prior to the date of the proposed meeting and where any special business
is to be transacted at the meeting, an explanatory statement must be annexed to the notice as required under the
Companies Act, 2013. A general meeting may be called after giving shorter notice if consent is received in writing
or by electronic mode from 95% of the shareholders entitled to vote. Under the Companies Act, 2013, every listed
company is required to provide to its members, the facility to exercise their right to vote at general meetings by
electronic means. Shareholders may exercise their right to vote at general meetings or through postal ballot by
voting through e-voting facilities in accordance with the SEBI Listing Regulations issued by the SEBI and the
Companies Act, 2013. However, compliance with quorum requirements applicable to shareholder meetings under
the Companies Act, 2013, is required.
Any listed public company intending to pass a resolution relating to matters such as, but not limited to, an
amendment in the objects clause of its memorandum of association, a buy-back of shares under the Companies
Act, 2013, and the giving of loans or extending a guarantee in excess of limits prescribed under the Companies
Act is required to pass the resolution by means of a postal ballot instead of transacting the business in the general
meeting of the company.
Voting Rights
At a general meeting upon a show of hands, every member holding shares and entitled to vote and present in
person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or
by proxy are in the same proportion to such shareholder’s share of our paid-up equity capital of our Bank. Ordinary
resolutions may be adopted by simple majority of those present and voting. Special resolutions require that the
votes cast in favour of the resolution must be at least three times the votes cast against the resolution. The
Companies Act, 2013, provides that to amend the articles of association of a company, a special resolution is
required to be adopted in a general meeting.
A shareholder may exercise his voting rights by proxy to be given in the form required by the Articles of
Association. The instrument appointing a proxy is required to be lodged with us at least 48 hours before the time
of the meeting. A shareholder may, by a single power of attorney, grant a general power of representation
regarding several general meetings of shareholders. Any shareholder may appoint a proxy. A corporate
shareholder is also entitled to nominate a representative to attend and vote on its behalf at general meetings. A
proxy may not vote except on a poll and does not have a right to speak at meetings. A shareholder which is a legal
entity may appoint an authorized representative who can vote in all respects as if a member both on a show of
hands and a poll.
Section 12 of the Banking Regulation Act prohibits any person holding shares in a bank from exercising voting
rights in excess of 10% of the total voting rights of all shareholders of the bank, irrespective of the number of
shares held by such person.
Register of Shareholders and Record Dates
We are obliged to keep and maintain a register of shareholders at our Registered Office. We recognize as
shareholders only those persons whose names appear on the register of shareholders and cannot recognize any
person holding any share or part of it upon any express, implied or constructive trust, except as permitted by law.
In the case of shares held in physical form, transfers of shares are registered on the register of shareholders upon
lodgement of the share transfer form duly complete in all respects accompanied by a share certificate or, if there
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is no certificate, the letter of allotment in respect of shares transferred together with duly stamped transfer forms.
In respect of electronic transfers, the depository transfers shares by entering the name of the purchaser in its books
as the beneficial owner of the shares. In turn, the name of the depository is entered into our records as the registered
owner of the shares.
The beneficial owner is entitled to all the rights and benefits as well as the liabilities with respect to the shares
held by a depository.
For the purpose of determining the shareholders for the payment of dividends, the register may, after giving not
less than seven days’ previous notice, be closed for periods not exceeding 45 days in any one year or 30 days at
any one time at such times as the Board may deem expedient in accordance with the provisions of the Companies
Act, 2013. Under the Companies Act, 2013, we are also required to maintain a register of debenture holders.
Annual Report and Financial Results
The annual report must be presented at the AGM. The report includes financial information, a corporate
governance section and management’s discussion and analysis and is sent to the company’s shareholders. Under
the Companies Act, 2013, we must file our balance sheet and profit and loss account with the Registrar of
Companies within thirty days from the date of the AGM. As required under the listing agreements with the Stock
Exchanges, copies are required to be simultaneously sent to the stock exchanges on which the shares are listed.]We
must also publish our financial results within 48 hours of the conclusion of the Board or committee meeting in
which the financial results were approved, in at least one English language daily newspaper circulating in the
whole or substantially the whole of India and in a daily newspaper published in the language of the region of the
Registered Office (i.e. Tamil).
Transfer of Shares
An application for registration of a transfer of the Equity Shares in our Bank may be made either by the transferor
or the transferee. No fee may be charged for registration of transfer of Equity Shares. Shares held through
depositories are transferred in the form of book entries or in electronic form in accordance with the regulations
laid down by SEBI. Our Bank is required to comply with the rules, regulations and requirements of the Stock
Exchanges or the rules made under the Companies Act, 2013 or the rules made under the Securities Contracts
(Regulation) Act, 1956, as amended (“SCRA”), or any other law or rules applicable, relating to the transfer or
transmission of Equity Shares.
Prior approval of RBI is required for the acquisition or transfer of the shares of our Bank, which will take the
aggregate holding (both direct and indirect, beneficial or otherwise) of an individual, his relatives, associate
enterprises and persons acting in concert with him to 5.00% or more of our Bank’s total paid up share capital or
entitles him to exercise 5.00% or more of the total voting rights of our Bank, in accordance with the terms of the
Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions,
2015, dated November 19, 2015.
For further restrictions on the transfer of shares applicable to banking companies, see “Regulations and Policies”
on page 145.
Acquisition by us of our own Equity Shares
A company is prohibited from acquiring its own shares unless the consequent reduction of capital is effected by
an approval of at least 75% of its shareholders, voting on it in accordance with the Companies Act, 2013, and
subject to confirmation by the National Company Law Tribunal. Subject to certain conditions, a company is
prohibited from giving, whether directly or indirectly and whether by means of loan, guarantee, provision of
security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscription
made or to be made by any person for any shares in the company or its holding company. However, a company
has been empowered to purchase its own shares or other specified securities out of its free reserves, the securities
premium account or the proceeds of any fresh issue of shares or other specified securities (other than the kind of
shares or other specified securities proposed to be bought back) subject to certain conditions, including:
1. the buy-back should be authorized by the articles of association of the company;
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2. a special resolution has been adopted in a general meeting authorizing the buy-back (in the case of listed
companies, by means of a postal ballot);
3. the buy-back is limited to 25% or less of the aggregate of the paid-up capital and free reserves;
4. the ratio of the aggregate of secured and unsecured debts owed by the company is not more than twice the
paid-up capital and free reserves after such buy-back; and
5. the buy-back is in accordance with the Securities and Exchange Board of India (Buy-Back of Securities)
Regulations, 1998, as amended.
A board resolution will constitute sufficient corporate authorization for a buy-back that is 10% or less of the total
paid-up equity capital and free reserves of the company. A company buying back its securities is required to
extinguish and physically destroy the securities so bought back within seven days of the last date of completion
of the buy-back. Further, a company buying back its securities is not permitted to buy back any securities for a
period of one year from the buy-back or to issue the same kind of shares or specified securities for six months
subject to certain limited exceptions. Further a company is prohibited from purchasing its own shares or specified
securities if the company is in default in the repayment of deposit or interest, in the redemption of debentures or
preference shares, in payment of dividend to a shareholder, in repayment of any term loan or interest payable
thereon to any financial institution or bank or in the event of non-compliance with certain other provisions of the
Companies Act, 2013.
For a banking company, any buy-back of shares is subject to an RBI approval.
Liquidation Rights
For winding up of our Bank, the provisions contained in the Banking Regulation Act shall apply and those
contained in the Companies Act, 2013, shall apply to the extent to which they are not inconsistent with the Banking
Regulation Act. Subject to the rights of depositors, creditors and employees in the event of our winding up, the
holders of the Equity Shares are entitled to be repaid the amounts of capital paid-up or credited as paid-up on such
shares. All surplus assets after payments due to employees and other creditors belong to the holders of the Equity
Shares in proportion to the amount paid-up or credited as paid-up on such shares respectively at the
commencement of the winding-up.
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STATUTORY AUDITORS
P. Chandrasekar LLP, Chartered Accountants, are independent auditors with respect to our Bank as required by
the Companies Act 2013 and in accordance with the guidelines prescribed by ICAI and have been appointed as
the statutory auditors of our Bank, pursuant to the approval of the shareholders of our Bank at the 91st AGM held
on August 8, 2018. The peer review certificate of P. Chandrasekar LLP, Chartered Accountants, was valid for a
period of five years. P. Chandrasekar LLP, Chartered Accountants, is subject to an ongoing peer review process
by the peer review board of the ICAI and the process for renewal of peer review certificate has been initiated.
Our audited financial statements for the Fiscals 2016, 2017 and 2018 prepared in accordance with Indian GAAP
and the Companies Act, 2013 together with the report issued by our erstwhile statutory auditors, R. K. Kumar &
Co., Chartered Accountants, and our financial results for the nine months ended December 31, 2018, together with
the limited review report issued by P. Chandrasekar LLP, Chartered Accountants, prepared in accordance with
the SRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued
by the ICAI, have been included in this Preliminary Placement Document.
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STATEMENT OF TAX BENEFITS
The information provided below sets out the possible tax benefits available to the shareholders of an Indian
company in a summary manner only and is not a complete analysis or listing of all potential tax consequences of
the subscription, ownership and disposal of equity shares, under the current tax laws presently in force in India.
Several of these tax benefits/consequences are dependent on the Bank or the QIB fulfilling the conditions
prescribed under the relevant tax laws. Hence, the ability of the QIB to derive tax benefits is dependent upon
fulfillment of such conditions, which based on the commercial imperatives the QIB faces in the future the Bank,
may or may not choose to fulfill.
The following overview is only intended to provide general information to the QIB and is neither designed nor
intended to be a substitute for professional tax advice, A potential investor is advised to consult their own tax
consultant with respect to the tax implications of an investment in the Equity shares particularly in view of the
fact that certain recently enacted legislation may not have a first legal precedent or may have a different
interpretation on the benefits which an investor can avail. Reliance on this statement is on the express
understanding that we do not assume responsibility towards the investors who may or may not invest in the
proposed issue relying on this statement.
We do not express any opinion or provide any assurance as to whether the Bank or its shareholders will continue
to obtain these benefits in future. The following overview is not exhaustive or comprehensive and is not intended
to be a substitute for professional advice.
STATEMENT OF TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS OF THE LAKSHMI
VILAS BANK LIMITED, UNDER THE INCOME TAX ACT, 1961, AS AMENDED BY THE FINANCE
ACT, 2018, AND OTHER DIRECT TAX LAWS.
1. This statement sets out below the possible tax benefits available to our shareholders under the Income Tax
Act, 1961 as amended by the Finance Act, 2018 (referred to as IT Act) presently in force in India, subject
to the fulfilment of the relevant conditions.
2. This statement intends to provide general information to the investors and is neither designed nor intended
to be a substitute for a professional tax advice, in view of the individual nature of tax consequences and
the changing tax laws, each investor is advised to consult his or her or their own tax consultant with respect
to the specific tax implications arising out of their participation in the issue.
3. In respect of non-residents, the tax rates and the consequent taxation, mentioned in this section shall be
further subject to any benefits available under the Double Taxation Avoidance Agreement, if any between
India and country in which the non-resident has domicile and
4. The under-mentioned tax benefits will be available only to the sole/first-named holder in case of the Equity
shares are held by joint shareholders.
I. Resident Shareholders:
1. Dividend Distribution tax
Dividend Distribution tax currently at the rate of 20.3576% (including applicable surcharge and health and
education cess) on the total amount distributed or declared or paid as dividend is to be paid. Under Section 10(34)
of the IT Act, income by way of dividends referred to in Section 115-O of the IT Act received on shares is exempt
in the hands of the shareholders. Section 14A of the IT Act restricts claims for deduction of expenses incurred in
relation to exempt income. Thus, any expense incurred to earn the dividend income is not an allowable
expenditure. As per Section 94(7) of the IT Act, losses arising from sale/transfer of shares, where such shares are
purchased within three months prior to the record date and sold within three months from the record date, will be
disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.
As per Section 115BBDA of the IT Act, where the total income of an individual, Hindu undivided family or a
firm, resident in India, includes any income in aggregate exceeding ten lakh rupees, by way of dividends declared,
distributed or paid by a domestic company or companies, the income-tax payable shall be the aggregate of (a) the
amount of income-tax calculated on the income by way of such dividends in aggregate exceeding ten lakh rupees,
at the rate of ten per cent and (b) the amount of income-tax with which the assessee would have been chargeable
had the total income of the assessee been reduced by the amount of income by way of dividends.
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2. Securities Transaction Tax:
Under Section 10(38) of the IT Act, Long Term Capital Gains (“LTCG”) arising to a shareholder on transfer of
equity shares would be exempt from tax where the sale transaction has been entered into on a recognized stock
exchange of India and is chargeable to Securities Transaction Tax.
In terms of Section 36(xv) of the IT Act, the Securities Transaction Tax paid by the shareholder in respect of the
taxable securities transactions entered into in the course of his business of transactions/trading in shares would be
eligible for deduction from the amount of income chargeable under the head “Profits and Gains of Business or
Profession”. As such no deduction will be allowed in computing the income chargeable to tax s capital gains of
such amount paid on account of Securities Transaction Tax (STT)
3. Capital Gain Tax:
Section 48 of the IT Act provides for deduction of cost of acquisition/improvement and expenses incurred wholly
and exclusively in connection with the transfer of capital asset, from the sale consideration to arrive at the amount
of capital gains. In respect of LTCG, i.e. the gains from shares held for a period exceeding twelve months, from
transfer of shares of an Indian Company, the second proviso to Section 48 of the IT Act, permits substitution of
cost of acquisition/improvement with the indexed cost of acquisition/improvement, which adjusts the cost of
acquisition/improvement by a cost inflation index, as prescribed from time to time.
a. Under Section 112 of the IT Act and other relevant provisions of the IT Act, LTCG (other than those
exempt under Section 10(38) of the IT Act) arising of transfer of shares would be subject to tax at the
rate of 20% (plus applicable surcharge and health and education cess) after indexation. The amount of
such tax shall, however be limited to 10% (plus applicable surcharge and health and education cess)
without indexation, at the option of the shareholder in case the shares are listed.
b. As per Finance Act, 2018 a new section 112 A is effective from 01st April 2019, wherein Tax on long-
term capital gains in certain cases.—(1), the tax payable by an assessee on his total income shall be
determined in accordance with the provisions of sub-section (2) the total income includes any income
chargeable under the head "Capital gains"- the capital gains arise from the transfer of a long-term capital
asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust.
The STT has been paid on acquisition and transfer of such capital asset. (2) The tax payable by the
assessee on the total income referred to in sub-section (1) shall be the aggregate of— the amount of
income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per
cent; and the amount of income-tax payable on the total income as reduced by the amount of long-term
capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the
assessee
c. Under Section 54EC of the IT Act, and subject to the conditions and to the extent specified therein,
LTCG (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of our shares
would be exempt from tax if such capital gain is invested within six months after the date of such transfer
in the bonds (long term specified assets) issued by:
(i) National Highway Authority of India constituted under Section 3 of the National Highway Authority
of India Act, 1988
(ii) Rural Electrification Corporation Limited, the company formed and registered under the Companies
Act, 1956.
The investment in the long term specified assets is eligible for such deduction to the extent of five million
during any financial year.
d. If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion
as the cost of long term specified assets bears to the whole of the capital gain. However, in the case of
the long term specified asset is transferred or converted into money within three years from the date of
its acquisition, the amount so exempted shall be chargeable to tax during the year of such transfer or
conversion. For this purpose, if any loan or advances is taken as against such specified securities and
then such person shall be deemed to have converted such specified securities into money. The cost of the
long term specified assets, which has been considered under this Section for calculating capital gain shall
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not be allowed as a deduction from the income tax under Section 80 C and Section 88 of the IT Act, for
any assessment year beginning on or after 1st April 2006.
e. As per Section 111 A of the IT Act, Short Term Capital Gains (“STCG”) i.e. the gain from shares held
for a period not exceeding twelve months, arising on transfer of our equity shares would be taxable at a
rate of 15% (plus applicable surcharge and health and education cess) where such transaction of sale is
entered on a recognized stock exchange in India and is liable to STT. STCG arising from transfer of our
shares, other than those covered by Section 111 A of the IT Act would be subject of tax as calculated
under the normal provisions of the IT Act.
f. As per Section 74 of the IT Act, STCG computed for the given year is allowed to be set off against the
Short Term as well as Long Term Gains computed for the said year. The balance loss, which is not set
off is allowed to be carried forward for subsequent eight assessment years for being allowed to be set off
against the Short Term as well as Long Term Gains. However, the long term loss computed for a given
year is allowed to be set off only against the Long Term Gains. The balance loss which is not set off is
allowed to be carried forward for subsequent eight assessment years to be set off against subsequent long
term gains only.
II. Non-resident shareholders other than Foreign Institutional Investor (“FIIs”) and Foreign Venture
Capital Investors (“FVCI”)
1. Dividend Distribution tax
Dividend Distribution tax currently at the rate of 20.3576% (including applicable surcharge and health and
education cess) on the total amount distributed or declared or paid as dividend is to be paid. Under Section 10(34)
of the IT Act, income by way of dividends referred to in Section 115-O of the IT Act received on shares is exempt
in the hands of the shareholders. Section 14A of the IT Act restricts claims for deduction of expenses incurred in
relation to exempt income. Thus, any expense incurred to earn the dividend income is not an allowable
expenditure. As per Section 94(7) of the IT Act, losses arising from sale/transfer of shares, where such shares are
purchased within three months prior to the record date and sold within three months from the record date, will be
disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.
2. Capital Gains Tax:
a. Under the first proviso to Section 48 of the IT Act, in case of a non-resident Shareholder, while computing
the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange
(as per exchange control regulations) (other than those not covered under Section 115 E of the IT Act)
protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the
original investment was made. However, Indexation of cost of benefits will not be available in such
cases. The capital gains/loss in such a case is computed by converting the cost of acquisition, sale
consideration and expenditure incurred wholly and exclusively in connection with such transfer into the
same foreign currency which was utilized in the purchase of shares.
b. Under Section 10(38) of the IT Act, LTCG arising to a shareholder, being a non- resident on sale of
equity shares would be exempt from tax where the sale transaction has been entered into on a recognized
stock exchange of India and is chargeable to STT.
c. Under Section 112 of the IT Act, and other relevant provisions of the IT Act, LTCG (other than those
exempt under Section 10(38) of the IT Act) arising on transfer of shares would be subjetg to ta at the rate
of 20% (plus applicable surcharge and health and education cess) after indexation. The amount of such
tax should however be limited to 10% (plus applicable surcharge and health and education cess) without
indexation, at the option of the shareholder, in such cases where the shares are listed.
d. As per Finance Act, 2018 a new section 112 A is effective from 01st April 2019, wherein Tax on long-
term capital gains in certain cases.—(1), the tax payable by an assessee on his total income shall be
determined in accordance with the provisions of sub-section (2) the total income includes any income
chargeable under the head "Capital gains"- the capital gains arise from the transfer of a long-term capital
asset being an equity share in a company or a unit of an equity oriented fund or a unit of a business trust.
The STT has been paid on acquisition and transfer of such capital asset. (2) The tax payable by the
assessee on the total income referred to in sub-section (1) shall be the aggregate of— the amount of
219
income-tax calculated on such long-term capital gains exceeding one lakh rupees at the rate of ten per
cent; and the amount of income-tax payable on the total income as reduced by the amount of long-term
capital gains referred to in sub-section (1) as if the total income so reduced were the total income of the
assessee.
e. Under Section 54 EC of the IT Act and subject to the conditions and to the extent specified therein LTCG
(other than those exempt under Section 10(38) of the IT Act) arising on the transfer of our shares would
be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in
bonds (long term specified assets) issued by:
(i) National Highway Authority of India constituted under Section 3 of the National Highway Authority
of India Act, 1988
(ii) Rural Electrification Corporation Limited, the company formed and registered under the Companies
Act, 1956.
The investment in the long term specified assets is eligible for such deduction to the extent of five million
during any financial year. If only part of the capital gain is so reinvested, the exemption available shall
be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain.
However, in the case of long term specified asset is transferred or converted into money within three
years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year
of such transfer or conversion. For this purpose, if any loans or advances is taken against such specified
securities, then such person shall be deemed to have converted such specified securities into money. The
cost of the long term specified assets, which has been considered under this section for calculating capital
gain, shall not be allowed as a deduction in income tax under Section 80C and Section 88 of the IT Act
for any assessment year beginning on or after 1st April 2006.
f. Under Section 111 A of the IT Act, Short Term Capital Gains (“STCG”) i.e. the gain from shares held
for a period not exceeding twelve months, arising on transfer of our equity shares would be taxable at a
rate of 15% (plus applicable surcharge and health and education cess) where such transaction of sale is
entered on a recognized stock exchange in India and is liable to STT. STCG arising from transfer of our
shares, other than those covered by Section 111A of the IT Act would be subject of tax as calculated
under the normal provisions of the IT Act.
g. As per Section 74 of the IT Act, STCG computed for the given year is allowed to be set off against the
Short Term as well as Long Term Gains computed for the said year. The balance loss, which is not set
off is allowed to be carried forward for subsequent eight assessment years for being allowed to be set off
against the short term as well as long term gains. However, the long term loss computed for a given year
is allowed to be set off only against the Long Term Gains. The balance loss which is not set off is allowed
to be carried forward for subsequent eight assessment years to be set off against subsequent long term
gains only.
h. Where shares have been subscribed in convertible foreign exchange by Non Resident Indians (“NRIs”)
the provisions of Chapter XII-A of the IT Act, which inter alia entitles them with the following benefits:
- Under Section 115E of the IT Act, where the total income of the NRI includes any income from
investments or income from capital gain of an asset other than a specified asset such income shall be
taxable at 20% (plus applicable surcharge and health and education cess). Also, where the shares of a
company are subscribed to in convertible foreign exchange by a NRI the LTCG arising to the NRI shall
be taxable at the rate of 10% (plus applicable surcharge and health and education cess). The benefits of
indexation of cost would not be available.
- Under Section 115F of the IT Act, LTCG (in cases not covered under Section 10(38) of the IT Act,
arising to an NRI from the transfer of our shares subscribed to in convertible foreign exchange shall be
exempt from income tax, if the net consideration is reinvested in specified assets or in any savings
certificates referred to in Section 10(4B) within six months of the date of transfer. If only part of the net
consideration is so reinvested, the exemption shall be proportionately reduced. The amount so exempted
shall be chargeable to tax subsequently, if the specified assets are transferred or converted into money
within three years from the date of their acquisition.
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- Under Section 115G of the IT Act, it shall not be necessary for an NRI to furnish his return of income
under Section 139(1) of the IT Act if his income chargeable under the Act consists of only investment
income or LTCG or both, arising out of assets acquired, purchased or subscribed in convertible foreign
exchange and tax deductible at source has been deducted there from as per the provisions of Chapter
XVII-B of the IT Act.
- In accordance with the provisions of Section 115H of the IT Act, where an NRI become assessable as a
resident in India, he/she may furnish a declaration in writing to the assessing officer along with his return
of income for that year under section 139 of the IT Act, to the effect that the provisions of Chapter XII-
A of the IT Act shall continue to apply to them in relation to such investment income derived from the
specified assets (which do not include shares in an Indian Company) for that year and subsequent
assessment years until such assets are converted into money.
- As per the provisions of Section 115-I of the IT Act, an NRI may elect to be governed by the provisions
of Chapter XII-A and compute his total income as per other provisions of the IT Act.
i. In terms of Section 36(xv) of the IT Act, the STT paid by the shareholder in respect of taxable securities
transactions entered into in the course of his business of transactions/ trading in shares would be eligible
for deduction from the amount of income chargeable under the head “Profits and Gains of Business or
Profession’’ arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, of such amount paid on account of STT.
j. In respect of non-residents, the tax rates and consequent taxation mentioned above will be further subject
to any benefits available under Double Taxation Avoidance Agreement (the “DTAA”) between India
and the country of residence of the non-resident/NRI. As per Section 90(2) of the IT Act, provisions of
DTAA would prevail over the provisions of the IT Act, to the extent they are more beneficial to the non-
resident/NRI.
III. Non-Resident shareholders-FIIs
1. Dividend Distribution tax
Dividend Distribution tax currently at the rate of 20.3576% (including applicable surcharge and health and
education cess) on the total amount distributed or declared or paid as dividend is to be paid. Under Section 10(34)
of the IT Act, income by way of dividends referred to in Section 115-O of the IT act received on shares is exempt
in the hands of the shareholders. Section 14A of the IT Act restricts claims for deduction of expenses incurred in
relation to exempt income. Thus, any expense incurred to earn the dividend income is not an allowable
expenditure. As per Section 94(7) of the IT Act, losses arising from sale/transfer of shares, where such shares are
purchased within three months prior to the record date and sold within three months from the record date, will be
disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.
2. Capital Gains Tax
a. The characterization of gains/losses arising from the sale of shares as Capital Gains or Business Loss
would depend on the nature of holding in the hands of such shareholders and various other factors.
b. Under the first proviso to Section 48 of the IT Act, in case of a non resident shareholder, while computing
the capital gains arising from transfer of shares of the company acquired in convertible foreign exchange
( as per exchange control regulations) (other than those not covered under Section 115 E of the IT Act)
protection is provided from fluctuations in the value of rupee in terms of foreign currency in which the
original investment was made. However, indexation of cost of benefits will not be available in such cases.
The capital gains/loss in such a case is computed by converting the cost of acquisition, sale consideration
and expenditure incurred wholly and exclusively in connection with such transfer into the same foreign
currency which was utilized in the purchase of shares.
c. Under Section 10(38) of the IT Act, LTCG arising to a shareholder, being a non- resident on sale of
equity shares would be exempt from tax where the sale transaction has been entered into on a recognized
stock exchange of India and is chargeable to STT.
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d. Under Section 54 EC of the IT Act and subject to the conditions and to the extent specified therein LTCG
(other than those exempt under Section 10(38) of the IT Act) arising on the transfer of our shares would
be exempt from tax if such capital gain is invested within 6 months after the date of such transfer in
bonds (long term specified assets) issued by:
(i) National Highway Authority of India constituted under Section 3 of the National Highway Authority
of India Act, 1988
(ii) Rural Electrification Corporation Limited, the company formed and registered under the Companies
Act, 1956
e. The investment in the long term specified assets is eligible for such deduction to the extent of five million
during any financial year. If only part of the capital gain is so reinvested, the exemption available shall
be in the same proportion as the cost of long term specified assets bears to the whole of the capital gain.
However, in the case of long term specified asset is transferred or converted into money within three
years from the date of its acquisition, the amount so exempted shall be chargeable to tax during the year
of such transfer or conversion. For this purpose, if any loans or advances is taken against such specified
securities, then such person shall be deemed to have converted such specified securities into money. The
cost of the long term specified assets, which has been considered under this section for calculating capital
gain, shall not be allowed as a deduction in income tax under Section 80C and Section 88 of the IT Act
for any assessment year beginning on or after 1st April 2006.
f. Under Section 115AD(1)(ii) of the IT Act, STCG arising to an FII on transfer of shares shall be
chargeable at the rate of 30%. Where such transactions are not subjected to STT, and at the rate of 15%
if such transaction of ale is entered on a recognized stock exchange in India and is chargeable to STT.
The above rate are to be increased by applicable surcharge and health and education cess.
g. Under Section 115 AD(1)(iii) of the It Act income by way of LTCG arising from the transfer of shares
(in cases not covered under Section 10(38) of the IT Act) held in the company will be taxable at the rate
of 10% (plus applicable surcharge and health and education cess). The benefits of indexation of cost and
foreign currency fluctuations are not available to FII.
h. As per Section 90(2) of the IT Act, the provisions of the IT Act, would prevail over the provisions of the
DTAA entered between India and the country of domicile of the non-resident/FIIs if any to the extent
they are more beneficial to the non-resident/FIIs. Thus, they can opt for such provisions which are
beneficial by furnishing a certification of residency to get the benefits under DTAA.
i. Effective from 01/04/2013, the benefits of the DTTA will not be available to a non-resident investor if
the tax department declares that any arrangement to be an impermissible arrangement.
j. In terms of Section 36(xv) of the IT Act, the STT paid by the shareholder in respect of taxable securities
transactions entered into in the course of his business of transactions/ trading in shares would be eligible
for deduction from the amount of income chargeable under the head “Profits and Gains of Business or
Profession’’ arising from taxable securities transactions. As such, no deduction will be allowed in
computing the income chargeable to tax as capital gains, of such amount paid on account of STT.
k. As per Section 196 D of the IT Act, no tax is to be deducted from any income by way of Capital Gains
arising to an FII from the transfer of securities referred to in Section 115AD of the IT Act.
IV. Venture Capital Companies/Funds:
Under Section 10(23FB) of the IT Act, any income of Venture Capital Company registered with SEBI or venture
capital fund registered under the provisions of the Registration Act, 1908 (set up to raise funds for investment in
venture capital undertaking notified in this behalf) would be exempt from income tax, subject to the conditions
specified therein. As per Section 115U of the IT Act, any income derived by a person from his investment in
venture capital company/ venture capital fund would be taxable in the hands of the person making an investment
in the same manner as if it were the income received by such person had the investment been made directly in the
venture capital undertaking.
V. Mutual Funds:
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Under Section 10(23D) of the IT Act, any income of mutual funds registered under SEBI or mutual funds set up
by public sector banks or public financial institutions or authorized by RBI and subject to the conditions specified
therein, is exempt from tax subject to such conditions as the Central Government may notify from time to time in
the official gazette.
VI. Provident Fund or Pension Fund:
Under Section 10(25) of the IT Act, any income received by trustee on behalf of a recognized provident fund and
a recognized superannuation fund is exempt in India.
VII. Multi-Lateral and Bilateral Development Financial Institutions:
Multi-Lateral and Bilateral Development Financial Institutions (namely world Bank, IBRD, IFC etc.) may be
exempt from taxation in India on the capital gains arising on sale of shares of the bank depending on the applicable
statute and Acts passed in India. In case they are not specifically exempt from tax then the provisions as applicable
for capital gains to a non-resident FII would be applicable to them.
VIII. Wealth Tax Act, 1957:
Shares are not treated as wealth under Wealth Tax Act, 1957 and hence the provisions of this Act is not applicable
to the shareholders.
IX. Gift Tax Act, 1958:
Gift Tax is not leviable in respect of any gift made on or after 01/10/1998. Therefore, any gift of shares of the
company will not attract Gift Tax.
X. Tax Deduction at Source:
Income Tax is not deductible at source from income by way of capital gains arising to a resident shareholder under
the present provisions of the IT Act. However as per the provisions pf Section 195 of the IT Act, any income by
way of capital gains payable to non-residents (other than LTCG exempt u/s 10(38)) may be subject to withholding
of tax at the rate under the domestic tax laws or under the tax laws under DTAA, whichever is beneficial to the
assessee unless a lower rate of taxation is obtained from the income tax authorities. Non -resident investor may
have to furnish a certificate of his residency outside India to get the benefit under DTAA and such other documents
as prescribed under section 90(4) of the IT Act. The withholding tax rates are subject to the recipients of income
obtaining and furnishing a permanent account number (“PAN”) to the payer, in the absence of which the
applicable withholding tax rate would be the higher of the applicable rates or 20% under Section 206AA of the
IT Act.
Note:
All the above benefits are as per the current tax law and will be available only to the sole/first name holders in
case the shares are held by joint holders.
In view of the individual nature of the tax consequences, each investor is advised to consult their own tax advisors
with respect to the specific tax consequences of his/her participation in the scheme.
The above statement of possible direct tax benefits set out the provisions of law in a summary manner only and is
not a complete analysis or listing of all potential tax consequence of the purchase, ownership and disposal of
shares.
Limitations:
Our views expressed herein are based on the facts and assumptions indicated above. No assurance is given that
the revenue authorities/courts will concur with the views expressed herein. Our views are based on the existing
provisions of law and its interpretation, which are subject to change from time to time. We do not assume
responsibility to update the views consequent to such change.
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LEGAL PROCEEDINGS
Our Bank is involved in certain legal proceedings in the ordinary course of its business. Except as described below, our Bank is not involved in any legal proceeding and it is not aware of any proceeding that is threatened, which if determined adversely, may have a material adverse effect on the business, properties, financial condition or results of operations of our Bank. Other than as disclosed in this section (i) no other litigation has been treated as material in the opinion of the Board of Directors, (ii) there are no litigation or legal action pending or taken by any Ministry or Department of the Government or a statutory authority against any Promoter during the last three years, (iii) there are no inquiries, inspections or investigations initiated or conducted under the Companies Act, 2013 or the Companies Act, 1956 in the last three years involving our Bank, (iv) there are no defaults in repayment of statutory dues as on date, and (v) there are no material frauds involving amount more than ₹ 10 million committed against us in the last three years.
A summary of certain legal proceedings where the amount involved in an individual case exceeds ₹ 164.30 million
(being 1.00% of the net worth in last completed fiscal, being Fiscal 2018), and certain other litigation which may
be construed as material in accordance with the policy for determining materiality of events that has been
approved by the Board, is set forth below. Unless stated to the contrary, the information provided below is as of
the date of this Preliminary Placement Document. All terms defined in a particular litigation disclosure below
are for that particular litigation only.
Litigation against our Bank
1. Religare Finvest Limited (“RFL”) has filed a suit for declaration and recovery of ₹ 7,914.48 million against
our Bank (“Suit”) before the High Court of Delhi, New Delhi (“High Court”) wherein it is alleged that
our Bank had, without sufficient cause, liquidated certain fixed deposits of RFL aggregating to ₹ 7,914.48
million (“Fixed Deposits”) against loans availed by RHC Holding Private limited and Ranchem Private
Limited (together, the “Defaulting Entities”). RFL has also alleged that it had not at any time, authorised,
permitted or sanctioned the alleged encumbrance on its Fixed Deposits or the liquidation of its Fixed
Deposits. Our Bank in its written statement, has denied the all allegations made in the Suit, and have further
alleged that RFL and the Defaulting Entities were managed/controlled by the same promoter group. Our
Bank has also alleged that they had notified RFL that they had marked lien on the Fixed Deposits. RFL
has prayed that the High Court pass a decree/order directing that (i) the liquidation and misappropriation
of the Fixed Deposits is illegal, void, non-est and bad in law; (ii) our Bank pay the amount of ₹ 7,914.48
million, along with applicable interest; and (iii) our Bank deposit ₹ 7,914.48 million, along with the
applicable interest with the High Court, or provide a bank guarantee for the same amount. The matter is
currently pending.
Additionally, in this regard, (i) SEBI had issued a summons to the Managing Director seeking certain
details in relation to this matter and the materiality policy of our Bank(to which our Bank has submitted a
reply); (ii) the Lok Sabha Secretariat - Estimates Committee Branch, while examining the subject
‘Performance of Public Sector Banks-Mechanism for Recovery of Bad Debts and Debt Recovery Tribunals
pertaining to the Ministry of Finance advised our Bank to furnish details in relation to the suit filed by RFL
against our Bank; (iii) the Consumer Education and Protection Cell, RBI (“CEPC”), issued a notice to our
Bank on May 22, 2018 in relation to the complaint filed by Religare Finvest Limited and our Bank has
submitted a response to the CEPC on July 5, 2018; and (iv) the Ministry of Corporate Affairs has referred
the complaint received from RFL to the Office of Banking Ombudsman, Chennai (“Ombudsman”) to take
necessary action and the complaint was received by the Ombudsman on February 15, 2019 and the same
has been forwarded to our Bank on February 19, 2019.
2. Ponni Agro Industries Private Limited (“Ponni Agro”) filed an application before the National Consumer
Disputes Redressal Commission, New Delhi against Bajaj Allianz (“Bajaj”), a general insurance company
and its officers, and also named our Bank as opposite party along with erstwhile Managing Director and
CEO of our Bank. It is alleged by Ponni Agro that our Bank has an arrangement with Bajaj through which
we offer Bajaj’s general insurance policies to companies that have high turnovers. It is alleged that pursuant
to this arrangement, Ponni Agro acquired a general insurance policy and a second policy with additional
risk coverage under Standard Fire and Special Perils Policy. Also, our Bank had sanctioned term loan and
cash credit advances to Ponni Agro which has hypothecated its machinery and building with our Bank’s
Dharmapuri branch.
On February 10, 2010, there was a fire at Ponni Agro’s mango pulp manufacturing premise, in which the
entire godown, the office building, canteen was burnt. It is alleged that Ponni Agro informed our Bank’s
224
employees of the fire immediately. The state government officials as well as a surveyor hired by Bajaj
inspected the site. Ponni Agro subsequently lodged a complaint at the Kaveripattnam police station and
police investigation deduced that the fire was caused due to electricity leakage. Bajaj hired a surveyor cum
loss assessor licensed by the IRDA. Ponni Agro alleges that the assessor has failed in his duty to make a
proper assessment and has also made allegations of cheating, falsification, bad language, lack of knowledge
and acting in accordance with the instructions of Bajaj against the assessor. It further alleged that it was
our Bank’s duty to get the damages from the insurance company, take necessary steps to safeguard the
hypothecated property, and thereby, our Bank failed to render its services.
Basis this, Ponni Agro sent a legal notice to Bajaj to which they replied denying all the allegations made
by Ponni Agro and stated that Ponni Agro had in fact, not made complete disclosures. Ponni Agro has
prayed a relief of sum of ₹ 1,400.74 million, along with applicable interest. We have submitted that the
allegations levelled against us are wrong and that we have taken utmost care and proper due diligence at
all times and we should not be made a party to the present dispute. We have submitted that it is the duty of
Bajaj to pay the claim and therefore, at the most, our Bank can be made a pro forma defendant. The matter
is currently pending.
3. Strategic Credit Capital Private Limited and Participation Finance & Holdings (India) Private Limited
(collectively, the “Plaintiffs”) have filed a suit before the High Court of Delhi against our Bank and certain
others, in relation to certain loans amounting to ₹ 3,500.00 million (“Sanctioned Loan”) originally
sanctioned to the Plaintiffs by our Bank. Our Bank had, subsequent to the sanction of the said loans to the
Plaintiffs, cancelled the sanction of the Sanctioned Loan on the ground that the Plaintiffs had not met the
necessary sanction conditions. The Plaintiffs as part of the suit have prayed that, inter alia, our Bank be
bound by and to act upon the sanction letters issued in relation to the Sanctioned Loan, and that the letters
issued by our Bank cancelling the sanction of the Sanctioned Loan are illegal and void. Our Bank has
subsequently filed an interlocutory application for the dismissal of the suit on the grounds that the suit does
not disclose any cause of action against our Bank as our Bank had already cancelled the sanction order.
The matter is currently pending.
4. Loancore Servicing Solutions Private Limited (“Loancore”) has filed a suit (“Suit”) before the District
Judge, Patiala House District Court, New Delhi against our Bank, our Managing Director and certain others
(collectively the “Defendants”), in relation to certain agreements and a term sheet (collectively, the “Loan
Documentation”) under which our Bank had allegedly agreed to provide loan facilities to Loancore for an
aggregate amount of ₹ 3,150.00 million, which was not disbursed by our Bank. Loancore as part of the suit
has prayed that the necessary decrees/order/directions be passed declaring, inter alia, that (i) the Defendants
are directly and irrevocably bound by the Loan Documentation; (ii) Loancore has performed its obligation
under the Loan Documentation and that our Bank cannot rescind the financing; (iii) the Defendants are
liable for the expenses and other financial losses incurred by Loancore on account of delay in fulfilling
obligations under the Loan Documentation; (iv) the Defendants are in violation of the RBI guidelines and
norms; (v) the Defendants be refrained from utilising/alienating the proceeds of the rights issue of Equity
Shares by our Bank in December 2017; (vi) the Defendants be restrained from associating with any
person/entity that engages in activities that is in violation of the guidelines laid down by RBI and SEBI;
and (vii) the Defendants be retrained from conducting or participating in enterprises that provide financial
services. The matter is currently pending.
In relation to this matter, our Bank has also received notices dated December 5, 2018 and December 6,
2018 from M/s. GETI AG, Germany (“GETI”) and M/s. La Financieri Finvestia KB, Sweden (“LFFKB”)
for commencement of arbitration proceedings against our Bank, the Government of India, RBI and SEBI
for settlement of disputes placing reliance on certain bilateral investment treaties. Our Bank has responded
to the same vide its interim reply dated December 10, 2018. In this regard, RBI vide its letter dated January
10, 2019 has sought certain details/documents in relation to the matter involving Loancore and Religare
Finvest Limited, to which our Bank has responded on January 24, 2019. Our Bank had subsequently
received a notice to cure and memorandum in support of the notice of intent on January 19, 2019 from
GETI and LFFKB, which our Bank has responded to on February 1, 2019.
Tax matters
1. The Deputy Commissioner of Income Tax (“DCIT”) passed an assessment order dated March 31, 2016
under Section 143(3) of the Income Tax Act (“IT Act”), for the assessment year 2013-14 (“AO Order”)
pursuant to which the DCIT issued a notice of demand to our Bank for ₹ 456.24 million. The DCIT, vide
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the AO order, inter alia, (i) disallowed depreciation of government securities, (ii) disallowed amortization
expenditure to be claimed as a revenue expenditure, (iii) disallowed exemption of 2% under Section 14A
of the IT Act, (iv) disallowed claim of bad debts; (v) levied payment of interest for non-performing assets
under Section 43D of the IT Act, (vi) reduced claim of depreciation on ATMs to 15% as against 60%
claimed by our Bank, and (vii) disallowed loss due to shifting of securities. Aggrieved by the AO order,
our Bank has filed an appeal dated April 30, 2016, before the Commissioner of Income Tax (Appeals). The
matter is currently pending on appeal.
2. The Assistant Commissioner of Income Tax (“ACIT”) passed an assessment order dated April 26, 2018
under Section 143(3) of the Income Tax Act (“IT Act”) for the assessment year 2016 - 17 (“AO Order”)
pursuant to which the ACIT issued a notice of demand to our Bank for ₹ 446.71 million. The ACIT, vide
the AO order, inter alia, (i) disallowed depreciation of investments, (ii) disallowed the expenditure on
exempted income under Section 14A of the IT Act, (iii) disallowance of claim of bad debts and deductions
under Section 36(i)(viia) of the IT Act; (iv) disallowed interest accrued on investments, and (v) income
received in advance. Aggrieved by the AO order, our Bank has filed an appeal dated June 1, 2018, before
the Commissioner of Income Tax (Appeals). The matter is currently pending on appeal.
3. The Deputy Commissioner of Income Tax (“DCIT”) passed an assessment order dated December 10, 2018
under section 143(3) of the Income Tax Act (“IT Act”), for the assessment year 2015 - 16 pursuant to
which the DCIT issued a notice of demand to our Bank for ₹ 594.76 million. The DCIT, pursuant to its
assessment order, inter alia (i) disallowed depreciation on investments, (ii) disallowed the expenditure on
exempted income under section 14A of the IT Act, (iii) disallowed bad debts written off, (iv) disallowed
special reserve created under section 36(i)(viii) of the IT Act; and (v) disallowed provision for bad and
doubtful debts claimed under section 36(i)(viia) of the IT Act. Aggrieved by the assessment order, our
Bank filed an appeal dated January 14, 2019 before the Commissioner of Income Tax (Appeals). The
matter is currently pending.
Additionally, as on the date of the Preliminary Placement Document, our Bank has filed appeals before various
appellate authorities in respect of proceedings involving amounts aggregating to ₹ 601.17 million pertaining to
income tax matters, and ₹ 112.40 million pertaining to service tax matters. These matters are currently pending.
Litigation by our Bank
1. Our Bank has filed an application before the Debt Recovery Tribunal, New Delhi against Surya Vinayak
Industries Limited (“SVIL”) and two of its directors and a corporate guarantor in relation to non-payment
of interest for the secured credit facilities and bill discounting facilities availed by SVIL through a
consortium of lenders led by Punjab National Bank. Our Bank has alleged default on the repayment of the
amount sanctioned to SVIL and has inter alia prayed for the recovery of a sum of ₹ 611.41 million along
with attachment and sale of mortgaged/hypothecated properties and further attachment of personal property
of the defendants in the event the sale proceedings are insufficient to satisfy the outstanding amount. Our
Bank also filed a criminal complaint dated March 27, 2014 (“Complaint”) alleging that the accused
diverted the export loans to their individual accounts and accounts of certain overseas subsidiaries which
amounts to criminal conspiracy, cheating, misappropriation and criminal breach of trust.
Pursuant to the investigation, the Directorate of Enforcement (“ED”) has issued a provisional attachment
order dated March 31, 2016, under Prevention of Money Laundering Act, 2002, (“PMLA Act”) attaching
the properties of SVIL as “proceeds of crime” under PMLA Act, which were mortgaged to the consortium
of secured creditors led by Punjab National Bank (“Consortium”). On May 10, 2016, the Adjudicating
Authority under the PMLA Act (the “Adjudicating Authority”), has served a show cause notice to our
Bank under Section 8 read with Section 5(5) and 5(1) of PMLA Act, calling upon to show cause why the
attached property should not be confirmed as “proceeds of crime”. Our Bank has submitted the reply on
August 22, 2016, before the Adjudicating Authority following which it issued the order dated September
22, 2016 (“Attachment Order”) confirming the provisional attachment of properties by the Deputy
Director, Director of Enforcement, Delhi Zonal Office, Delhi. Pursuant to the Attachment Order, the ED
issued three notices for taking possession of the provisionally attached immovable property, which shall
be at the disposal of the ED till further orders. Punjab National Bank has thereafter filed an appeal before
the Appellate Tribunal, Prevention of Money Laundering, New Delhi. Our Bank has declared SVIL and
both directors as wilful defaulters and the same has been informed to credit information agencies. The
matter is still pending.
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2. Our Bank, alongside 21 other lenders (collectively the “Lenders”) had formed a consortium led by UCO
Bank (“UCO”) that extended credit facilities to REI Agro Limited (“RAL”) aggregating to ₹ 42,500.00
million. Our Bank had granted RAL a sanction limit of ₹ 555.20 million out of which an aggregate amount
of ₹ 536.19 million are outstanding under credit facility and various term loans. The accounts maintained
by RAL with respective Lenders, including our Bank, have been declared NPAs due to failure to operate
the account in conformity with the terms and conditions of the credit facilities granted to it. An Original
Application was filed before the Debts Recovery Tribunal, Kolkata against RAL and others, wherein, our
Bank has inter alia claimed for (i) the recovery of a sum of ₹ 536.19 million inclusive of interest up to
March 31, 2015, together with further interest at 19.80% per annum from April 1, 2015 till realisation; and
(ii) a certificate of sale relating to the mortgaged/hypothecated properties of RAL.
Our Bank has additionally issued a notice dated February 10, 2015 to RAL under provisions of the
SARFAESI Act, 2002, requiring repayment of dues arising from the credit facilities granted to RAL.
Further, on October 26, 2015, UCO filed a case against RAL before the Bank Securities and Fraud Cell,
Central Bureau of Investigation (the “CBI”), alleging that it had cheated 14 Lenders by a sum of ₹
38,717.10 million. Our Bank received a notice from the CBI on July 26, 2016, requiring that funds from
FDR accounts of the directors of RAL not to be released. In this regard, the Directorate of Enforcement,
Delhi Zonal Office II, has passed an order dated July 10, 2017 for the provisional attachment of certain
immovable properties of RAL for a period of 180 days. Meanwhile, RAL has initiated proceedings before
the Board for Industrial and Financial Reconstruction, seeking determination of the sickness of RAL and
measures to be adopted for its rehabilitation. Our Bank has declared RAL and its directors as wilful
defaulters and the same has been informed to credit information agencies. The matters are currently
pending.
3. Our Bank has filed an original application before the Debt Recovery Tribunal, Mumbai against Maa Shree
Lakshmi Exim Private Limited (“MSLEPL”) and guarantors including promoters and directors of
MSLEPL in relation to outstanding payment of various facilities operating as bill discounting facilities,
secured by guarantee and hypothecation. Our Bank has alleged the 62 bills have remained outstanding
despite extension in due dates. Our Bank has inter alia prayed for the recovery of a sum of ₹ 481.08 million
with further interest of 20.25% till realisation of all dues, along with invocation of the hypothecation and
guarantee. Our Bank has also filed a criminal complaint dated September 6, 2011 against MSLEPL
accusing them for cheating our Bank by submitting false mortgage papers of the property, while the original
title deeds are mortgaged with another bank. The final order dated February 23, 2016 (“Final Order”), has
entitled us to recover a sum of ₹ 481.08 million and the demand notice has been served to MSLEPL, and
its promoters and directors. An application before the registrar enumerating the immovable properties of
MSLEPL is to be filed by our Bank. A miscellaneous application has been filed by MSLEPL before the
Debt Recovery Tribunal 1, Mumbai challenging the Final Order in the original application. Pursuant to the
Final Order, our Bank has filed two interim applications before the Debt Recovery Tribunal, Mumbai
against MSLEPL and its guarantors, in respect of (i) disclosure of, and attachment of all personal assets of
MSLEPL and its guarantors, as on the date of the Final Order, and (ii) restrain the guarantors of MSLEPL
from leaving the country without prior permission of the Debt Recovery Tribunal, Mumbai. The matter is
currently pending.
4. Our Bank has filed an application before the Debt Recovery Tribunal, Bangalore against Alupro Building
Systems Private Limited (“Alupro”) and the directors in relation to various secured credit facilities
aggregating to ₹ 700.00 million availed by Alupro. Our Bank has alleged default on the repayment of the
outstanding amount by Alupro and prayed for the recovery of a sum of ₹ 265.17 million with an interest
thereto along with attachment and sale of the secured properties and impounding of passports of the
defendants. Our Bank has also given a notice to Alupro, its directors and guarantors under the SARFAESI
Act due to failure to comply with the terms of the loan, who have objected to the tenability of the notice
under law. Our Bank has clarified vide its reply that there is no bar to issue the statutory notice under
Section 13(2) of the SARFAESI Act. We have also filed a criminal complaint dated February 5, 2015
against Alupro and its directors, due to depletion in the value of stock and receivables of Alupro, indicating
that Alupro may have realized/utilized/sold some of its current assets, routed through other banks without
the permission of our Bank, which amounts to fraud. The matter is currently pending.
5. In June 2006, our Bank sanctioned a goods loan of ₹ 20 crores in favour of M/s RJ Agri Source (“RJAS”),
a partnership firm, which was enhanced to ₹ 400 million in November 2006. With the demise of the two
partners of RJAS (collectively the “Partners”) in December 2006, the business of RJAS came to a
standstill, and payments on the loan granted to it have ceased, with ₹ 37.75 crores remaining outstanding.
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Our Bank filed an original application before the Debts Recovery Tribunal, Bangalore (“DRT”) against
RJAS, the Partners and others, alleging default on the repayment of loans granted to it, inter alia claiming
for (i) the recovery of a sum of ₹ 382.89 million with further interest of 13% from the legal heirs of the
Partners; and (ii) the sale of the properties offered as security for the loan. In terms of its order dated July
11, 2012, the DRT granted the reliefs sought by our Bank and issued a recovery certificate accordingly.
The execution proceedings have been initiated.
As security for the abovementioned loan, the Partners had provided warehouse receipts for procurement of
food grains (the “Receipts”). On December 11, 2006, our Bank was however informed that there was no
wheat in the relevant warehouses, and that the Receipts were forged. Our Bank hence filed a criminal
complaint on January 4, 2007 against the Partners. Further, the suit filed by HMG Ambassador Property
Management Private Limited (“HMG”) against RJAS, the Partners and our Bank before the City Civil
Judge, Bangalore, disputing the title of the Partners over the properties situated in Bangalore, which were
offered as security, was decreed in favour of HMG. Additionally, Cargill India Private limited (“Cargill”)
has filed an inter-pleader suit before the City Civil Judge, Bangalore against our Bank and others seeking
an order inter alia directing our Bank to inter-plead and establish rights in the money payable by Cargill.
The court pursuant to its order dated June 13, 2018, directed our Bank to adjust the fixed deposit.
6. In the matter of fraud in bill discounting and default in payment of the bill amount on the due date by 16
entities, its partners and guarantors (“Parties”), aggregating to the amount of ₹ 751.37 million, our Bank
has filed complaints under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881
before the Metropolitan Magistrate at Egmore against nine entities, who had presented additional security
in the form of post-dated cheque which bounced, for the reason of “insufficient funds”. Further, our Bank
has lodged police complaints against all Parties on October 21, 2016 for commission for fraud, cheating,
forgery, criminal breach of trust and falsification of records. While the aforementioned criminal
proceedings are currently pending, pursuant to the steps taken by our Bank, the entire amount including
incidental amount, has been recovered from the Parties.
7. On January 18, 2012, our Bank granted certain credit facilities to M/s Adigear International (“Adigear”),
aggregating to ₹ 300.00 million, which were further renewed on February 12, 2014. However, the accounts
of Adigear were running defectively, and it committed defaults in making remittance to the account
repeatedly due to which several of its accounts became non-performing assets. On March 18, 2014, our
Bank lodged a criminal complaint against Adigear and others, alleging criminal conspiracy, cheating and
criminal breach of trust. It was alleged that Adigear colluded with its associate entities to defraud our Bank
of a sum of ₹ 162.70 million by depositing high value cheques, and immediately transferring the credited
amount to the accounts of the associate entities before such cheques are cleared, in contravention of bank
norms. We have also filed a complaint under Section 138 read with Section 141 of the Negotiable
Instruments Act, 1881 against one of the associate entities, Metaphor Exports Private Limited.
Further, our Bank filed an Original Application on December 12, 2014 before the Debts Recovery Tribunal,
New Delhi (the “DRT”) against Adigear and others, alleging default on the dues outstanding to our Bank,
inter alia claiming for (i) the recovery of a sum of ₹ 221.72 million and interest thereto; and (ii) the sale of
properties given as security. Additionally, pursuant to the dues arising from a bank guarantee of ₹ 4.00
million executed by Adigear, our Bank has filed a separate original application before the DRT for recovery
of dues. In this regard, our Bank has declared Adigear as a ‘wilful defaulter’ and accordingly reported the
same to the credit information agency. The matters are currently pending.
8. Our Bank, alongside 11 other applicants (collectively the “Working Capital Lenders”) had formed a
consortium led by State Bank of India (“SBI”) that extended working capital facilities to Shakti Bhog
Foods Limited (“SBFL”) aggregating to ₹ 24,500.00 million wherein our Bank had granted SBFL a
working capital limit of ₹ 250.00 million. The accounts maintained by SBFL with respective Working
Capital Lenders, including our Bank, became irregular and were declared NPAs. The Working Capital
Lenders filed an original application before the Debt Recovery Tribunal, Delhi against SBFL and others,
wherein, our Bank inter alia claimed for the recovery of a sum of ₹ 308.60 million together with pendente
lite and future interest inclusive of penal interest till the date of realisation. In addition to the consortium
loan for working capital facilities, a corporate loan was extended to SBFL aggregating to ₹ 3,770.00 million
by nine applicants (“Corporate Loan Lenders”), including our Bank, wherein our Bank had granted
SBFL a corporate loan of ₹ 70.00 million. The accounts maintained by SBFL with respective Corporate
Loan Lenders, including our Bank, became irregular and were declared NPAs. In respect of the corporate
loan, a separate original application has been filed before the Debt Recovery Tribunal, Delhi by Corporate
Loan Lenders against SBFL and others, wherein, our Bank has inter alia claimed for the recovery of a sum
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of ₹ 74.70 million together with pendente lite and future interest till the date of realisation. The matter is
currently pending.
In addition to the above, our Bank had, in its own capacity, sanctioned the financing of the purchase of raw
material by SBFL by discounting/ payment of bills/ invoices raised by various suppliers. Accordingly,
SBFL raised request towards the payment of 37 bills raised by various suppliers amounting to a total of ₹
295.54 million, in respect of which SBFL issued 37 cheques in favour of our Bank, corresponding to each
of the requests raised by them. Upon failure of SBFL to repay the amounts, our Bank presented the cheques
issued by SBFL, which returned unpaid. Accordingly, our Bank filed an original application before the
Debts Recovery Tribunal, Delhi against SBFL and others, wherein, our Bank has inter alia claimed for the
recovery of a sum of ₹ 326.60 million together with pendente lite and future interest inclusive of penal
interest till the date of realisation. Our Bank has also filed a complaint under Section 138 to Section 142
of the Negotiable Instruments Act, 1881 before the Chief Metropolitan Magistrate at New Delhi against
SBFL and others in respect of the cheques issued by SBFL which returned unpaid when presented by our
Bank. The matters are currently pending.
9. Our Bank has filed an application before the Debt Recovery Tribunal, Mumbai against Champalal Motilal
Steel Company Private Limited (“CMS”) and nine others who are the guarantors in relation to secured
credit facilities extended by our Bank to CMS. Our Bank has alleged default on the repayment of the
amount sanctioned and has inter alia prayed for the recovery of a sum of ₹ 572.20 million, with applicable
interest, along with invocation of the hypothecation and mortgage of the properties forming part of the
security for the aforementioned sanctioned facilities. The matter is currently pending.
10. Our Bank has filed an application before the Debt Recovery Tribunal, Hyderabad against New Horizon
India Ventures Private Limited (“NH”) and two others who are the guarantors in relation to secured credit
facilities, extended by our Bank to NH. Our Bank has alleged default on the repayment of the amount
sanctioned and has inter alia prayed for the recovery of a sum of ₹ 359.39 million, along with invocation
of the hypothecation and mortgage of the properties forming part of the security for the aforementioned
sanctioned facilities. The matter is currently pending.
11. Our Bank, alongside Union Bank of India (“Applicants”) have filed an application for the recovery of
debts before the Debt Recovery Tribunal, Mumbai against. Srimauli Infrastructure Private Limited
(“Srimauli”) and others in relation to secured credit facilities extended by our Bank to Srimauli. Our Bank
has alleged default in the payment of the outstanding instalments. The Applicants had formed a consortium
that extended credit facilities to Srimauli for the purpose of meeting part of the construction cost of road
projects. Our Bank, as part of the said consortium, extended credit facilities totaling ₹ 210.00 million to
Srimauli. Subsequently, the Applicants were informed that the contract with Srimauli for the road projects
had been cancelled. Our Bank has inter alia prayed for the recovery of a sum of ₹ 223.32 million along
with the invocation of the hypothecation, which was granted through the recovery certificate dated May
14, 2013. The matter is currently pending.
12. Our Bank has filed an application before the Debt Recovery Tribunal, Mumbai against M/s K & K
Jewellers (“K & K”) and five others who are the guarantors in relation to secured credit facilities,
aggregating to ₹ 200.00 million extended by our Bank to K & K. Our Bank has alleged default on the
repayment of the amount sanctioned and has inter alia prayed for the recovery of a sum of ₹ 188.27 million
along with invocation of the hypothecation and mortgage. Our Bank has also initiated recovery action
under the SARFAESI Act due to the failure to comply with the terms of the loan and default in repayment
of the secured debt. Our Bank has also filed the application under Section 14(1) of the SARFAESI Act for
obtaining physical possession.
13. Our Bank has filed an application for recovery of the amount due of ₹ 272.86 million together with future
interest inclusive of penal interest till the date of realisation, under the consortium arrangement with the
lead bank and other banks forming part of the consortium, against B. S. Limited. A loan of ₹ 350.00 million
was sanctioned by our Bank to B.S. Limited under the said consortium arrangement. Thereafter, the said
account became a non performing asset on May 31, 2017. The matter is currently pending.
14. Our Bank has filed an application for recovery of amount before the Debt Recovery Tribunal, Coimbatore
due of ₹ 238.65 million, against M/s. Jawahar Enterprises. A loan of ₹ 235.00 million was sanctioned to
M/s Jawahar Enterprises. The matter is currently pending.
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15. Our Bank has filed an application before the Debt Recovery Tribunal, Coimbatore, for recovery of an
aggregate of ₹ 164.42 million (along with applicable interest) against M/s Jayanthi Garments and has also
prayed for an order of sale of certain hypothecated assets of M/s Jayanthi Garments. The matter is currently
pending.
16. Our Bank has filed an application before the Debt Recovery Tribunal, Coimbatore, for recovery of an
aggregate of ₹ 161.53 million (along with applicable interest) against Sanghi Polyesters Limited due to
their alleged failure to pay interest in relation to certain facilities availed by them. The matter is currently
pending.
17. Our Bank has filed an application before the Debt Recovery Tribunal - II, Chandigarh, for recovery of an
aggregate of ₹ 228.19 million (along with applicable interest) against Mahesh Timber Private Limited and
certain others, due to their alleged failure to make the necessary repayment in relation to certain facilities
availed by them. Further, our Bank has also prayed for a permanent injunction against the defendants to
not sell, alienate, transfer, gift or otherwise transfer or part with possession of movable and immovable
properties and mortgaged properties. The matter is currently pending.
18. Our Bank (along with eight other applicants) has filed an application before the Debt Recovery Tribunal -
II, Chennai, for recovery of an aggregate of ₹ 1,077.31 million (along with applicable interest) against
Splendid Metals Products Limited and others, due to their alleged failure to make the repayment in relation
to the facilities availed by them. The matter is currently pending.
19. Our Bank has filed an application before the Debt Recovery Tribunal, Coimbatore, for recovery of an
aggregate of ₹ 362.69 million (along with applicable interest) against Saberwal Surguical Company Private
Limited, New Era Health Care Product Private Limited, Saberwal Medicare Equipments Private Limited,
Jupiter Medical Equipments Manufacturer Private Limited and others, due to their alleged failure to make
repayment in relation to certain facilities availed by them. The matter is currently pending.
20. Our Bank has filed an application before the Debt Recovery Tribunal- II, Delhi, for recovery of an
aggregate of ₹ 578.21 million (along with applicable interest) against Metenere Limited, due to their
alleged failure to make the necessary repayment in relation to certain facilities availed by them. The matter
is currently pending
21. Our Bank has filed an application before the Debt Recovery Tribunal- II, Delhi, for recovery of an
aggregate of ₹ 239.44 million (along with applicable interest) against Ramprastha Promoters & Developers
Private Limited and others, due to their alleged failure to make the necessary repayment in relation to
certain facilities availed by them. The matter is currently pending.
22. Our Bank has filed an application before the Debt Recovery Tribunal No. I, Mumbai for recovery of an
aggregate of ₹ 898.35 million (along with applicable interest) against Superways Enterprises Private
Limited and others, due to their alleged failure to make the necessary repayments in relation to the facilities
availed by them. The matter is currently pending.
23. Our Bank has filed an application before the Debt Recovery Tribunal No. I, Mumbai for recovery of an
aggregate of ₹ 665.42 million (along with applicable interest) against Subhakaran & Sons and others due
to their alleged failure to make the necessary repayments in relation to the facilities availed by them. The
matter is currently pending.
24. Our Bank (along with certain other lenders) has filed a joint application before the Debt Recovery Tribunal
No. I, Mumbai for recovery of an aggregate of ₹ 366.05 million (along with applicable interest) against the
official liquidator of Valecha Engineering Limited due to their alleged failure to make the necessary
repayment in relation to the facilities availed by them under the consortium arrangement with the
applicants. The matter is currently pending.
25. Our Bank has filed an application before the Debt Recovery Tribunal, Vishakhapatnam, for recovery of an
aggregate of ₹ 308.47 million (along with applicable interest) against Ceasan Glass Private Limited and
others, due to their alleged failure to make the repayment in relation to certain facilities availed by them.
The matter is currently pending.
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26. Our Bank has filed an application before the Debts Recovery Tribunal – II, Hyderabad, for recovery of an
aggregate of ₹ 339.99 million (along with applicable interest) against BRS Enterprises and Trading Limited
and others due to their alleged failure to make the necessary repayments in relation to certain facilities
availed by them. The matter is currently pending.
27. Our Bank has filed an application before the Debts Recovery Tribunal – II, Hyderabad, for recovery of an
aggregate of ₹ 225.26 million (along with applicable interest) against EBC Bearings (India) Limited and
others due to their alleged failure to make the necessary repayments in relation to certain facilities availed
by them. The matter is currently pending.
28. Our Bank has filed an application before the Debt Recovery Tribunal – 1, Hyderabad, for recovery of an
aggregate of ₹ 280.18 million (along with applicable interest) against Isitva Fasteners Private Limited and
others due to their alleged failure to pay make regular repayments in relation to certain facilities availed by
them. The matter is currently pending.
29. Our Bank has filed an application before the Debt Recovery Tribunal, Hyderabad, for recovery of an
aggregate of ₹ 313.70 million (along with applicable interest) against ACD Communications Private
Limited and others due to their alleged failure to pay make regular repayments in relation to certain
facilities availed by them. The matter is currently pending.
30. Our Bank has filed an application before the Debt Recovery Tribunal - II, Delhi for recovery of an
aggregate of ₹ 220.73 million (along with applicable interest) against Super Property Maintenance Private
Limited and others due to their alleged failure to adhere to terms and conditions of use of the facilities
availed by them and to make regular repayments in relation to the said facilities. The matter is currently
pending.
31. Our Bank has filed an application before the Debt Recovery Tribunal - I, Mumbai for recovery of an
aggregate of ₹ 271.65 million (along with applicable interest) against Supama Trading Private Limited and
others due to their alleged failure to pay make regular repayments in relation to certain facilities availed by
them. The matter is currently pending.
32. Our Bank has filed an application before the Debt Recovery Tribunal - I, Hyderabad for recovery of an
aggregate of ₹ 194.12 million (along with applicable interest) against Arlen Trading Private Limited and
others due to their alleged failure to pay make regular repayments in relation to certain facilities availed by
them. The matter is currently pending.
33. Our Bank, along with seven other lenders (collectively, the “Consortium Members”) has filed an
application before the Debt Recovery Tribunal – I, Chennai against GVR Infra Projects Private Limited
and others for recovery of, among others, an aggregate of ₹ 236.74 million along with applicable interest,
that is due to our Bank, due to their alleged failure to adhere to the terms and conditions of the scheme for
sustainable structuring of stressed assets invoked by the Consortium Members, and to pay make
repayments in relation to facilities availed by them from the Consortium Members . The matter is currently
pending.
34. Our Bank, along with 27 other lenders (collectively, the “Consortium Members”) has filed an application
before the Debt Recovery Tribunal, Mumbai against Gitanjali Gems Limited and others for recovery of,
among others, an aggregate of ₹ 326.89 million along with applicable interest, that is due to our Bank. This
is in light of their alleged failure to repay the facilities availed by them from the Consortium Members,
pursuant to the rights exercised by the Consortium Members in light of the occurrence of an event of
default, which was the fraud reported by Punjab National Bank, a Consortium Member against Gitanjali
Gems Limited. The matter is currently pending.
35. Our Bank has filed an application before the Debt Recovery Tribunal - II, Delhi for recovery of an
aggregate of ₹ 319.21 million (along with applicable interest) against Zillion Infraprojects Private Limited
and others due to their alleged failure to pay make regular repayments in relation to certain facilities availed
by them. The matter is currently pending.
In addition to those disclosed hereinabove, as on date of this Preliminary Placement Document, our Bank
has filed 26 criminal complaints under section 138 of the Negotiable Instruments Act, 1881 in various fora
for dishonour of 29 cheques aggregating to a total amount of ₹ 483.86 million.
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Material Fraud committed against our Bank
Our Bank has a Fraud Monitoring Committee and Review Committee on Non-cooperative borrowers (“Fraud
Monitoring Committee”) which monitors and reviews all frauds against our Bank involving an amount of ₹
10.00 million or more. The terms of reference of Fraud Monitoring Committee includes effective detection of
frauds and ensuring prompt reporting thereof to regulatory and enforcement agencies.
In the last three financial years and the current fiscal, the acts of material frauds, i.e. the act of frauds detected
involving an amount of ₹ 10.00 million or more, against our Bank are as follows:
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
1. One of our employees had created deposit loans and
deposit overdrafts in various customers’ names and
the proceeds were applied to various borrowal
accounts during which, he utilized part of the
proceeds for his personal benefit.
40.57 We have dismissed the employee
involved in the fraud. We have also
initiated recovery from the relevant
borrowers and has filed an insurance
claim for the remainder of the
unrecovered amount involved.
2. One of our borrowers was enjoying an export bill
limit and an FLC/LG limit from a consortium of
banks. The discounted foreign bills were not retired
on the due date and the account was classified as an
NPA.
The leader of the consortium lodged a complaint
with the CBI who on preliminary investigation
concluded that evidence exists that the borrower
has defrauded the consortium lenders. CBI advised
the leader to inform all the lenders that the account
should be declared as “fraud”.
162.94 We declared the account as “fraud”
and reported to the RBI accordingly.
We had also filed an original
application with the Debt Recovery
Tribunal, Kolkata. The consortium
leader had submitted its complaint
against the borrower and its directors,
to the CBI.
Subsequently, the borrower came
forward to settle the amount involved
with our Bank, who agreed to accept
₹ 50.00 million in full settlement of
the debt, which was in addition to the
with insurance claim amount
received.
3. One of our employees committed misappropriation
of cash remittance made to a borrower’s account.
He fabricated the legal opinion of the panel
advocate, the panel valuer and the law officer so
that he could extend credit limits to other
borrowers’ accounts. These credit limits were
sanctioned based on inflated property valuation.
85.97 We have dismissed the employee
who was involved in the fraud. A
police complaint has also been filed.
The amount which was
misappropriated has been remitted
back by him. We have also filed an
insurance claim in this regard, which
is currently under negotiation.
4. The branch head of one of our branches discounted
multiple clean usance bills and did not comply with
the procedures prescribed for documentary clean
bills discounting, thereby, transgressing their
lending powers. The major portion of the bill
proceeds were transferred to a particular account of
a company with a different bank and on
investigating, it was revealed that the Director of
the company and his sons were involved in the
fraud.
751.37 Our Bank has dismissed the
concerned branch head and regional
head for the lapse in observance of
the procedures prescribed for
discounting clean bills. Further, our
Bank has filed complaints under
Section 138 with Section 141 of the
Negotiable Instruments Act, 1881
before the Metropolitan Magistrate at
Egmore against nine borrowers, who
had presented additional security in
the form of post-dated cheque which
bounced, for the reason of
“insufficient funds”. Our Bank has
also lodged police complaints against
the 16 entities involved, for
commission for fraud, cheating,
criminal conspiracy, criminal breach
of trust and falsification of records.
Pursuant to the steps taken by our
Bank, the entire amount including
232
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
incidental amount, has been
recovered from the relevant parties.
5. A certain person holding the power of attorney of
certain non - residents (the “NR Customers” and
the person the “PA Holder”) opened an NRE
savings bank account with our Bank in the name of
NR Customers, in his capacity as the NR
Customers’ power of attorney holder.
Subsequently, the deposits held with other banks in
the name of NR Customers were closed and the said
deposits were credited to the NR Customers’ bank
account that was opened with our Bank. The
balance in the NR Customers’ bank account that
was opened with our Bank, were subsequently used
by the PA Holder. Our Bank was later informed by
the NR Customers they were not aware about the
account that was opened with our Bank in their
name, and that they only became aware of the same
upon enquiry with the banks.
16.80 Our Bank has identified the lapses in
observing prescribed procedures by
our staff members, and has taken
action against the relevant staff
member involved.
6. Certain borrowers were granted credit facilities
based on their financial statements and income tax
and VAT returns. During the investigation, it was
observed that all the above documents were
fabricated by a certain customer of our Bank. It was
allegedly agreed between the borrower and the said
customer that a portion of the loan proceeds were
to be given to him as commission. It has now come
to light that eight borrowal accounts were
sanctioned based on the papers submitted by the
said customer.
168.28 Our Bank has lodged a police
complaint against the borrowers,
guarantors, the relevant customer and
staff members involved, and filed
suits for recovery of the dues with the
Debt Recovery Tribunal.
7. The borrower initially availed working capital
finance against the security of the property.
Subsequently, another firm with the same partners
availed a loan against the security of property.
While availing the credit limits, the borrower
submitted a credit opinion, no objection certificate
and the statement of account. During the
investigation, the above papers were referred to the
concerned banks to confirm its genuineness, who
subsequently confirmed that the said papers were
not issued by them. Accordingly, it was concluded
that the documents were fabricated by the said
borrower.
54.62 Our Bank has filed a police
complaint, and has initiated recovery
proceedings by taking action under
the SARFAESI against the properties
mortgaged to our Bank. Both the
partners were arrested for their
involvement in the fraud of the other
bank involved.
8. A group of 30 borrowers availed loans against
storage receipts issued by a certain collateral
manager. Upon an investigation of the relevant
godowns where the goods were stored, it was found
that the stocks stored is husk instead of dal as
originally claimed.
840.92 Our Bank has filed a police
complaint, which was subsequently
transferred to the CBI. The CBI have
filed a FIR against the said
borrowers. Our Bank also dismissed
the relevant regional head and branch
head and certain other staff members
for the lapses observed.
9. The head of one of our branches colluded with
certain customers in granting certain jewel loans
without jewels and deposit loans without deposits.
21.02 The entire amount involved was
recovered from the concerned
customer/ staff member, who was
subsequently dismissed from the
services. We have also filed a
criminal complaint against the said
staff member.
10. The head of one our branches released certain title
documents that had been accepted as security for
certain working capital facilities extended to a
borrower.
10.76 The entire amount involved was
recovered from the concerned
customer/ staff member, who was
subsequently dismissed from the
services. We have also filed a
233
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
criminal complaint against the said
staff member.
11. An investigation of certain transactions carried out
by card holders of other banks in WINCOR ATM
machines of our Bank. revealed that certain users of
the ATM were interrupting the cash slot, after
taking the cash dispensed from the ATM, which
resulted in the transaction being reported as a failed
transaction. This has allowed multiple perpetrators
to take cash from the said ATM(s) as well as
successfully raise charge back claims.
31.04 We have lodged criminal complaints
against the users of the said ATM and
are currently looking into the same
with the vendor of the ATM and the
respective banks of the relevant card
holders. We have also filed an
insurance claim in this regard.
12. One of our borrowers had availed certain working
capital and term loan facilities. In the course of our
regular inspection, it was observed that the
machineries for which the said borrower had
availed term loans from our Bank, were removed
and the unit was not working. Further, there was
insufficient stock to cover the outstanding balance
in the account.
64.86 Our Bank had initiated procedures
for recovery against the available
security. Subsequently, the
concerned borrower agreed for a one-
time settlement. We have also
initiated the necessary action against
the relevant staff for the said lapses.
13. Goods loans were extended to a certain group of
borrowers against the pledge of stocks and were
further secured backed by the personal guarantee of
the existing borrower. In the course of our regular
inspection, it was observed that the stocks under
pledge in this regard, were not sufficient to cover
the outstanding balances in their accounts.
26.18 Our Bank has initiated the necessary
action with respect to the lapses that
occurred in this regard.
Subsequently, the concerned
borrower agreed for a one-time
settlement.
14. The RBI and CFMC had directed that a certain
account be classified as fraudulent in light of the
FIR against the said borrower. The account of this
borrower account had already been marked as NPA
on December 9, 2014.
109.27 As advised by RBI, we have
classified the account as fraudulent
and reported it to RBI.
15. Certain credit facilities were sanctioned against the
equitable mortgage of landed property to a certain
borrower of our Bank. Subsequently, in the course
of our legal audit, it was observed that the title
documents conferring title to the said borrower is
fake/fabricated. Since the said borrower had also
availed a vehicle loan, its accounts, including the
vehicle loan was classified as fraudulent and
reported to RBI.
Pursuant to the aforementioned legal audit, another
account that was referred to our Bank by the same
consultant was examined. Consequently, it was
observed that the title documents conferring title to
in this case was fake/fabricated as well.
30.86
19.00
Our Bank has initiated the necessary
action with respect to the lapses that
occurred in this regard.
16. A group of four borrowers availed loans from our
Bank against stock of goods stored in a third party
godown. Subsequently, the guarantor for the said
loans broke into the godown and removed the
goods under pledge without any authorisation or the
knowledge of our Bank. The guarantor has
admitted that he had utilised the loan after its
disbursement.
62.98 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
17. One of our borrowers had availed three loans
against the pledge of groundnut bags stored in
certain third party godowns, which was also
pledged to another bank under the custody of the
collateral manager. The guarantor for these loans
subsequently admitted that duplicate keys of the
godown were procured so that the same could be
pledged with multiple banks in collusion with the
officers of the collateral manager.
14.33 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
234
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
18. Two of our borrowers (who were married to each
other) had availed loans against the pledge of
groundnut bags stored in certain third party
godowns, which was also pledged to another bank
under the custody of the collateral manager. The
guarantor for these loans subsequently admitted
that duplicate keys of the godown were procured so
that the same could be pledged with multiple banks
in collusion with the officers of the collateral
manager.
35.08 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
19. One of our borrowers availed a goods loan against
the pledge of stocks stored in a third party godown.
The guarantor of the loan subsequently admitted the
locks of the said godown were broken open to
illegally remove the pledged stocks.
18.14 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
20. One of our borrowers availed a goods loan against
the pledge of stocks stored in a third party godown.
The guarantor of the loan subsequently admitted the
locks of the said godown were broken open to
illegally remove the pledged stocks.
22.17 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
21. One of our borrowers availed a goods loan against
the pledge of stocks stored in a third party godown.
The guarantor of the loan subsequently admitted the
locks of the said godown were broken open to
illegally remove the pledged stocks.
14.59 Our Bank has filed a police
complaint against the borrower and
the guarantors for illegally removing
the goods from the custody of our
Bank. Our Bank has also initiated
action against the staff members
involved.
22. The borrower company arranged for the equitable
mortgage of land owned by a certain third party,
who also extended a guarantee to secure the loan
extended to the said borrower company, for the
working capital facilities enjoyed by them since
2015. In the course of a legal audit on these
facilities, it was confirmed that the property
documents submitted by the guarantor were not
genuine.
30.04 Our Bank is in the process of filing a
police complaint against the
borrower company, its directors and
the guarantor for submission of
fabricated property documents to
secure the facilities of our Bank
enjoyed by them. Our Bank has also
initiated action against the staff
members involved.
23. Two of our borrowers (from the same family)
availed loans against the pledge of paddy/rice and
the godown is under the surveillance of a certain
collateral manager. Our Bank had disbursed the
said loans on the basis of storage receipts issued by
the said collateral manager. Subsequently, the
Department of Food and Supplies of the particular
state seized the stock in the said godown and took
control of the godown.
47.29 Our Bank is in the process of filing a
police complaint against the
borrower company, its directors and
the guarantor for submission of
fabricated property documents to
secure the facilities of our Bank
enjoyed by them. We are also in
contact with the Department of Food
and Supplies to get the necessary
details in order submit the insurance
claim. We have also initiated the
necessary action against the relevant
staff for the said lapses.
24. One of our borrowers availed a cash credit facility
of our Bank amounting to ₹ 30.00 million against
the hypothecation of its tractors and which was
additionally secured by the mortgage of certain
property valued at ₹ 35.00 million. Without
informing our Bank, the borrower changed its
location and business activities (from dealeing in
tractors to trading in onions and other agricultural
and non-agricultural products). Without consulting
our Bank, the owners of the mortgaged property
31.59 Our Bank has filed a police
complaint against the borrower, and
has initiated legal steps for the
recovery of our dues. We have taken
symbolic possession of the
mortgaged properties, placing
reliance on the SARFAESI. Our
Bank has also initiated action against
the staff members involved. We have
also filed an insurance claim in this
regard.
235
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
started constructing 19-20 shops on the said
property.
25. The borrower company had been banking with us
since 1997 availed BPSB facility with a usance
period of 90 days, for the pursues of executing the
contracts received from Civil Supply Corporation
of Andhra Pradesh and Telangana states along with
cash credit facility under consortium arrangement.
When bills discounted became overdue, our Bank
approached the drawee Civil Supply Corporation,
who informed us that they had already paid the bills
through a public-sector bank account. The borrower
company had evidently diverted the funds intended
for liquidation of the supply bills and accordingly,
defrauded our Bank.
219.89 Our bank has filed a complaint with
the Serious Fraud Investigation
Office and the police. Our Bank has
also initiated action against the staff
members involved.
26. The borrower company had been enjoying various
working capital facilities with our Bank initially
outside a consortium arrangement and was
subsequently inducted into a consortium
arrangement. A forensic audit revealed serious
irregularities, wherein the auditors opined that
drawer of bills were not genuine and that fictious
firms were floated just for discounting bills.
658.16 Bank has filed a suit at the relevant
debt recovery tribunal and criminal
complaint at Patiala District court.
Our Bank has also initiated action
against the staff members involved.
27. Certain irregularities were identified by a certain
statutory auditor of a certain sub-standard borrower
company account availing certain working capital
facilities with us under a consortium arrangement
as part of his report. The auditors opined that (i)
delivery challans were not genuine, and not issued
by a IBA approved transport operator, (ii) bill
proceed transactions were accommodative in
nature and (iii) diversion of funds were observed.
291.78 Our Bank has also initiated steps for
the recovery of our dues and study of
staff accountability.
28. The borrower company was permitted one-time
letter of credit secured by a first pari-passu charge
by way of hypothecation of its entire current assets
for the purchase of steel HR coils. The letters of
credit were issued to the borrower with M/s. Harsh
Steel Trade Private Limited as the beneficiary. The
RBI as part of its inspection, remarked that the bills
under the letters of credit were dubious and that the
transport documents were not issued by an IBA
approved transporter.
226.58 Our bank has filed complaint both
with Serious Fraud Investigation
Office and Economic Offence Wing.
We have initiated steps for the
recovery of our dues and study of
staff accountability.
29. One of our borrowers had pledged goods which was
under the custody of a certain collateral manager
and, based on the storage receipt issued by the said
collateral manager, our Bank had extended loans to
the relevant borrower. The borrower thereafter, had
removed the goods under pledge in alleged
collusion with the collateral manager.
13.50 Our Bank has subsequently lodged a
police complaint against the
borrower and the officials of the
collateral manager, and the same is
under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
30. In light of the investigations being conducted by the
CBI against one of our borrowers, we have
classified the relevant facilities extended to the said
borrower (under a consortium arrangement) as
fraud.
317.80 The CBI has initiated investigation
against the relevant group. We have
instructed the leader of the
consortium to take all effective steps
for recovery of the dues to our Bank.
31. One of our borrowers had availed a loan against the
pledge of rice/paddy bags. It was subsequently
observed during course of our regular inspections,
that the stock was removed using duplicate keys of
the godown.
10.81 Our Bank has subsequently lodged a
police complaint against the
borrower and the guarantor, and the
same is under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
32. Three of our borrowers (belonging to the same
family) availed goods loan against the pledge of
40.37 Our Bank has subsequently lodged a
police complaint against the
236
S.
No.
Details of the fraud Amount involved (₹
in million)
Action taken by our Bank
rice/paddy bags. It was subsequently observed
during course of our regular inspections, that the
stock was removed by breaking the lock of the
godown.
borrower and the guarantor, and the
same is under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
33. Two of our borrowers (being brothers) submitted
fake title deeds to the branch, which was cleared by
the empanelled advocate and our legal team.
Subsequently, the legal audit revealed that the title
of the mortgagor may be defective.
10.61 Our Bank has subsequently lodged a
police complaint against the
borrower and the guarantor, and the
same is under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
34. One of our borrowers submitted fake title deeds to
the branch, which was cleared by the empanelled
advocate and our legal team. Subsequently, the
legal audit revealed that the title of the mortgagor
may be defective.
19.20 Our Bank is in the process of lodging
a police complaint against the
borrower and the guarantor, and the
same is under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
35. One of our borrowers had availed a loan against the
pledge of raw cashew bags. Subsequently, the
pledged goods were removed from our Bank’s
custody by the guarantor in alleged collusion with
the godown owner.
10.33 Our Bank has subsequently lodged a
police complaint against the
borrower and the guarantor, and the
same is under investigation. We have
initiated steps for the recovery of our
dues. We have also initiated a study
of staff accountability in this regard.
It may also be noted that while we are currently involved in legal proceedings involving various accounts in our
Bank, we cannot assure you that such accounts will not be classified as fraud or otherwise in the future, based on
further investigation of the same that may be conducted by the Bank or on any observations of the RBI.
Inquiries, inspections or investigations initiated or conducted under the Companies Act, 1956 or the
Companies Act, 2013 against our Bank in the last three years:
Our Bank has received a notice under section 206(1) of the Companies Act, 2013 dated August 23, 2018 from the
Office of the Registrar of Companies, Tamil Nadu, Ministry of Corporate Affairs, Government of India, on
account of a complaint made by RFL wherein they have alleged that our Bank and its officers defrauded RFL
through misrepresentation and manipulation of accounts, unauthorised handling and fraudulent encashment of
certain term deposits aggregating to ₹ 7,914.48 million, among others by our Bank. For further details, see “-
Litigation against our Bank” on page 223. Except as disclosed herein, there have been no inquiries, inspections
or investigations initiated or conducted under the Companies Act, 1956 or the Companies Act, 2013 against our
Bank in the last three years.
Prosecutions filed (whether pending or not) against, fines imposed on, or compounding of offences by our
Bank in the last three years under the Companies Act, 1956 or the Companies Act, 2013:
Nil
Details of default, if any, including therein the amount involved, duration of default and present status, in
repayment of statutory dues, debentures and interest thereon, deposit and interest thereon, loan from any
bank or financial institution and interest thereon.
As of December 31, 2018, there is no outstanding default in payment of statutory dues, repayment of debentures
and interest thereon, repayment of deposits and interest thereon and repayment of loan from any bank or financial
institution and interest thereon.
Other Confirmations
There have been no litigation or legal action pending or taken by any ministry or department of the Government
or a statutory authority in India, against the Promoters of our Bank during the last three years.
237
There has been no default in the annual filing(s) of our Bank under the Companies Act, 2013 or the rules made
thereunder.
There are no significant and material orders passed by the regulators, courts and tribunals impacting the going
concern status of our Bank and its future operations.
238
GENERAL INFORMATION
1. Our Bank was incorporated on November 3, 1926 under the erstwhile Indian Companies Act, 1913. Our
Bank was licensed under the Banking Regulation Act, 1949 on June 19, 1958 and became a scheduled
commercial bank under the Second Schedule of the RBI Act on August 11, 1958.
2. Our registered office is located at Salem Road, Kathaparai P.O., Karur – 639 006, Tamil Nadu, and
corporate office is located at LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil
Nadu.
3. Details of the Company Secretary and Compliance Officer:
N. Ramanathan
Company Secretary and Compliance Officer
The Lakshmi Vilas Bank Limited
Corporate Office, “LVB House”
No.4, Sardar Patel Road,
Guindy, Chennai - 600 032
Tamil Nadu
Tel: +91 44-22205306
Fax: +91 44 2220 5317
Email: [email protected]
4. Our Equity Shares are listed on the BSE and the NSE. The Issue was authorized and approved by the
Board of Directors in its meeting held on June 26, 2018. The Shareholders of our Bank have authorized
the Issue pursuant to a special resolution dated August 8, 2018.
5. Copies of our Memorandum and Articles of Association are available for inspection between 10:00 a.m.
to 5:00 p.m. on any weekday (except Saturdays, Sundays and public holidays) at our Registered Office
or Corporate Office.
6. We have obtained all consents, approvals and authorisations required in connection with this Issue.
7. Our Bank has received in-principle approvals under Regulation 28(1) of the SEBI Listing Regulations to
list the Equity Shares to be issued pursuant to the Issue, both on BSE and NSE on March 7, 2019. Our
Bank will apply for final listing and trading approvals of such Equity Shares on the Stock Exchanges.
8. Except as disclosed in this Preliminary Placement Document, there has been no material change in our
financial position since December 31, 2018, the date of the latest financial results prepared in accordance
with Indian GAAP and included in this Preliminary Placement Document.
9. Except as disclosed in this Preliminary Placement Document, there are no litigation or arbitration
proceedings against or affecting us, or our assets or revenues, nor are we aware of any pending or
threatened legal or arbitration proceedings, which are or might be material in the context of this Issue or
could have a material adverse effect on the position, business, operations, prospects or reputation of our
Bank. For details of litigations, see “Legal Proceedings” on page 223.
10. The Floor Price is ₹ 65.96 per Equity Share, calculated in accordance with the provisions of Chapter VI
of the SEBI ICDR Regulations.
11. Our Bank may offer a discount of not more than 5% on the Floor Price in accordance with and in terms
of Regulation 176 of the SEBI ICDR Regulations.
12. The authorised share capital of our Bank, as on the date of this Preliminary Placement Document,
comprises of 500,000,000 Equity Shares of ₹ 10 each.
13. Our Bank confirms that it is in compliance with the minimum public shareholding requirements as
required under the terms of the SEBI Listing Regulations, Securities Contracts (Regulation) Act, 1956
and the Securities Contracts (Regulation) Rules, 1957.
239
14. Our Bank and the BRLM accept no responsibility for statements made otherwise than in this Preliminary
Placement Document and anyone placing reliance on any other source of information, including our
website, would be doing it at his or her own risk.
240
FINANCIAL INFORMATION
Financial Statements Page No
Auditors report and the audited financial statements for the Fiscal ended March 31, 2016 F - 1 Auditors report and the audited financial statements for the Fiscal ended March 31, 2017 F – 38 Auditors report and the audited financial statements for the Fiscal ended March 31, 2018 F – 76 Limited review report and the financial results for the nine months ended December 31, 2018 F – 118
INDEPENDENT AUDITOR’S REPORT
Report on the Financial Statements
1. We have audited the accompanying financial statements of The Lakshmi Vilas Bank Limited ('the Bank'), which comprise theBalance Sheet as at 31st March 2016, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and asummary of significant accounting policies and other explanatory information. Incorporated in these financial statements are thereturns of 22 branches audited by us, 460 branches audited by branch auditors.
Management’s Responsibility for the Financial Statements
2. The Bank's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') withrespect to the preparation of these financial statements that give a true and fair view of the financial position, financial performanceand cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the AccountingStandards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions ofSection 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India ('RBI') fromtime to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design,implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracyand completeness of the accounting records, relevant to the preparation and presentation of the financial statements that givea true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
3. Our responsibility is to express an opinion on these financial statements based on our audit.
4. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required tobe included in the audit report under the provisions of the Act and the Rules made thereunder.
5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing ('the Standards') specifiedunder section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatements.
6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements.The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financialcontrol relevant to the Bank's preparation of the financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of the accounting estimates made by the Bank's Directors, as well as evaluating theoverall presentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on thefinancial statements.
Opinion
8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statementstogether with the accounting policies and notes thereon give the information required by the Banking Regulation Act, 1949 aswell as the Companies Act, 2013 in the manner so required for banking companies and give a true and fair view in conformitywith accounting principles generally accepted in India:
(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2016;
(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and
(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.
To
The Members of Lakshmi Vilas Bank Limited
F - 1
For R. K. KUMAR & CO.Chartered Accountants
Firm’s Registration No. 001595S
(B.R. ASHOK)Place : Chennai PartnerDate : 27th April, 2016 Membership Number: 023313
Emphasis of Matter
9. We draw attention to Note No.2.4.4.C of the financial statements, regarding deferment of loss of $ 95.60 Crore on sale ofadvances to Asset Reconstruction Companies.
Our opinion is not qualified in respect of this matter.
Report on Other Legal and Regulatory Requirements
10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of theBanking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 and Rule 7 of the Companies (Accounts)Rules, 2014.
11. As required by sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that:
(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe purpose of our audit and have found them to be satisfactory;
(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.
(c) the returns received from the branches of the Bank have been found adequate for the purposes of our audit.
12. Further, as required by section 143(3) of the Act, we report that:
(i) we have sought and obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit;
(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from ourexamination of those books;
(iii) the reports on the accounts of the branches audited by branch auditors of the Bank under section 143(8) of the CompaniesAct, 2013 have been sent to us and have been properly dealt with by us in preparing this report;
(iv) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreementwith the books of account ;
(v) in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 ofthe Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with theaccounting policies prescribed by RBI;
(vi) on the basis of written representations received from the directors and taken on record by the Board of Directors, none ofthe directors is disqualified as on 31st March 2016 from being appointed as a director in terms of Section 164 (2) of the Act;
(vii) with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operatingeffectiveness of such controls, refer to our separate Report in "Annexure A".
(viii) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
a. the Bank has disclosed the impact of pending litigations on its financial position in its financial statements
b. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeablelosses, if any, on long-term contracts including derivative contracts and
c. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and ProtectionFund by the Bank.
F - 2
Annexure A to the independent auditor's report of even date on the financial statements of Lakshmi Vilas Bank Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 20131. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited ('the Bank') as at
31st March 2016 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.
Management's Responsibility for Internal Financial Controls2. The Bank's Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control
over financial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting ('the Guidance Note') issued by the Institute of CharteredAccountants of India ('the ICAI').
These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business, including adherence to Bank's policies, the safeguarding of itsassets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timelypreparation of reliable financial information, as required under the Companies Act, 2013 ('the Act').
Auditor's Responsibility3. Our responsibility is to express an opinion on the Bank's internal financial controls over financial reporting based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial controls Over Financial Reporting('the Guidance Note') and the Standards on Auditing ('the Standards'), both issued by the ICAI and deemed to be prescribed undersection 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established and maintained and if such controls operated effectivelyin all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system overfinancial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtainingan understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected dependon the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due tofraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Bank'sinternal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting6. A bank's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. A bank's internal financial control over financial reporting includes those policies and procedures that:(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the bank;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the bank are being made only inaccordance with authorizations of management and directors of the bank; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thebank's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of anyevaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.
Opinion8. In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over Financial reporting and such
internal financial controls over financial reporting were operating effectively as at 31st March 2016, based on the internal control overfinancial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.
For R. K. KUMAR & CO.Chartered Accountants
Firm’s Registration No. 001595S
(B.R. ASHOK)Place : Chennai PartnerDate : 27th April, 2016 Membership Number: 023313
F - 3
(` 000’s)
As at As atSchedule 31-03-2016 31-03-2015
I. CAPITAL & LIABILITIES
a. Capital 1 179,46,16 179,16,66
b. Reserves & Surplus 2 1584,13,25 1376,97,60
c. Deposits 3 25430,96,15 21964,21,22
d. Borrowings 4 723,00,78 458,10,00
e. Other Liabilities & Provisions 5 814,59,92 726,98,14
TOTAL 28732,16,26 24705,43,62
II. ASSETS
a. Cash & Balances with Reserve Bank of India 6 1286,50,22 1143,44,03
b. Balances with Banks and Money at call & Short Notice 7 82,10,91 175,28,07
c. Investments 8 6545,40,46 6051,15,62
d. Advances 9 19643,73,90 16352,01,90
e. Fixed Assets 10 366,99,87 243,41,30
f. Other Assets 11 807,40,90 740,12,70
TOTAL 28732,16,26 24705,43,62
Contingent Liabilities 12 3687,01,45 2903,11,92
Bills for collection 884,43,12 632,37,73
Significant Accounting Policies 17
Notes on Accounts 18
BALANCE SHEET as on 31st March 2016
Schedules 1 to 12 and 17 to 18 form part of this Balance Sheet.
As per our Report of Date annexed
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
B.R. ASHOKPartnerM. No. 023313
Chennai27th April, 2016
D.L.N. RAO
S.G. PRABHAKHARANS. DATTATHREYAN
Dr. P.A. SHANKAR
N. MALAYALARAMAMIRTHAMPANKAJ VAISH
PRAKASH P. MALLYA
K. BABUJI
SUVENDU PATIDirectors
K.R. PRADEEPChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
M. PALANIAPPANPresident & Chief Financial Officer
N. RAMANATHANCompany Secretary
F - 4
PROFIT AND LOSS ACCOUNT for the year ended 31st March 2016
(` 000’s)
Year ended Year endedSchedule 31-03-2016 31-03-2015
Schedules 13 to 16 and 17 to 18 form part of this Profit & Loss Account.
I. INCOME
a. Interest Earned 13 2568,29,91 2214,53,09
b. Other Income 14 304,53,24 284,03,36
TOTAL 2872,83,15 2498,56,45
II. EXPENDITURE
a. Interest Expended 15 1922,99,34 1687,87,67
b. Operating Expenses 16 542,71,40 442,27,97
c. Provisions & Contingencies 226,88,83 236,12,22
TOTAL 2692,59,57 2366,27,86
III. NET PROFIT FOR THE YEAR 180,23,58 132,28,59
Profit brought forward 8,16 6,78
Transfer from Investment Reserve 72,74 0
TOTAL 181,04,48 132,35,37
IV. APPROPRIATIONS
a. Transfer to Statutory Reserve 45,20,00 33,20,00
b. Transfer to Capital Reserve 6,04,17 4,78,60
c. Transfer to Other Reserves 50,00,00 41,40,00
d. Investment Reserve 0 72,74
e. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 15,00,00 9,15,00
f. Proposed Dividend 53,83,85 35,84,23
g. Tax on Proposed Dividend 10,96,02 7,16,64
h. Balance carried over to Balance Sheet 44 8,16
TOTAL 181,04,48 132,35,37
Earnings Per Share - Basic ($) 10.05 9.16
Earnings Per Share - Diluted ($) 10.05 9.15
As per our Report of Date annexed
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
B.R. ASHOKPartnerM. No. 023313
Chennai27th April, 2016
D.L.N. RAO
S.G. PRABHAKHARANS. DATTATHREYAN
Dr. P.A. SHANKAR
N. MALAYALARAMAMIRTHAMPANKAJ VAISH
PRAKASH P. MALLYA
K. BABUJI
SUVENDU PATIDirectors
K.R. PRADEEPChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
M. PALANIAPPANPresident & Chief Financial Officer
N. RAMANATHANCompany Secretary
F - 5
($ 000’s)
As at As at31-03-2016 31-03-2015
SCHEDULE 1 - CAPITALAUTHORISED CAPITAL(30,00,00,000 equity shares of $ 10/- each) 300,00,00 300,00,00ISSUED CAPITAL(18,09,69,986 equity shares of $ 10/- each)(Previous year 18,06,74,986 equity shares of $ 10/ each)of which 2,95,000 shares issued under “LVB ESOS-2010” 180,97,00 180,67,50Subscribed, Called-up and Paid Up Capitali) 17,94,61,609 equity shares of $ 10/- each 179,46,16 179,16,66
(Previous year 17,91,66,609 shares) 2,95,000 sharesissued under “LVB ESOS-2010”. (Previous year 3,45,000 shares)
ii) 1,26,42,131 Bonus Shares allotted(Previous year 1,26,42,131 shares)
iii) Shares kept in abeyance 15,08,377, inclusive of Forfeited &lapsed shares. (Previous year 15,08,377 shares)
iv) Shares Forfeited and lapsed 23,658 (Previous year 23,658 shares)TOTAL 179,46,16 179,16,66
SCHEULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE
Opening Balance 372,10,46 338,90,46Additions during the year 45,20,00 417,30,46 33,20,00 372,10,46
II. CAPITAL RESERVEOpening Balance 57,06,54 52,27,94Additions during the year 6,04,17 63,10,71 4,78,60 57,06,54
III. SHARE PREMIUMOpening Balance 659,62,54 330,70,23Additions during the year 2,05,16 328,92,31
661,67,70 659,62,54Deductions during the year 4,31,81 657,35,89 659,62,54
IV. REVENUE & OTHER RESERVESOpening Balance 167,46,49 125,35,65Additions during the year 50,71,04 42,10,84
218,17,53 167,46,49Deductions during the year 0 218,17,53 0 167,46,49
V. SPECIAL RESERVE U/S 36(1)(VIII) OF IT ACT, 1961Opening Balance 41,45,00 32,30,00Additions during the year 15,00,00 56,45,00 9,15,00 41,45,00
VI. REVALUATION RESERVEOpening Balance 78,45,67 76,42,79Additions during the year 93,98,59 2,73,72
172,44,26 79,16,51Depreciation on Revalued Asset 71,04 171,73,22 70,84 78,45,67
VII. INVESTMENT RESERVEOpening Balance 72,74 0Additions during the year 0 72,74
72,74 72,74Deductions during the year 72,74 0
0 72,74 72,74VIII. BALANCE IN PROFIT & LOSS ACCOUNT 44 8,16
TOTAL 1584,13,25 1376,97,60
F - 6
SCHEDULE 3 - DEPOSITS
A. I. DEMAND DEPOSITS
1. From Banks 1,37 55,91
2. From Others 163644,79 1636,46,16 1509,30,04 1509,85,95
II. SAVINGS BANK DEPOSITS 2779,06,43 2152,53,67
III. TERM DEPOSITS
1. From Banks 1166,35,55 1144,53,13
2. From Others 19849,08,01 21015,43,56 17157,28,47 18301,81,60
25430,96,15 21964,21,22
B. (I) DEPOSITS OF BRANCHES IN INDIA 25430,96,15 21964,21,22
(II) DEPOSITS OF BRANCHES OUTSIDE INDIA NIL NIL
TOTAL 25430,96,15 21964,21,22
SCHEDULE 4 - BORROWINGS
I. BORROWINGS IN INDIA
1. Reserve Bank of India 0 0
2. Other Banks 0 0
3. Other Institutions & Agencies* 723,00,78 723,00,78 458,10,00 458,10,00
II. BORROWINGS OUTSIDE INDIA 0 0
* Includes unsecured Tier II bonds of ` 498.20 Crs 723,00,78 458,10,00(Previous year ` 458.10 Crs.)
SECURED BORROWINGS INCLUDED IN I & II ABOVE 0 0
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS
I. Bills payable 77,85,74 67,65,20
II. Inter-office adjustments (net) 4,40,37 0
III. Interest accrued 224,52,38 199,46,34
IV. (I) Others - (including Provisions) 373,90,18 385,95,35
(ii) Contingent Provisions against Standard Assets 72,23,00 55,23,00
(iii) Deferred Tax Liabilities 61,68,25 18,68,25
TOTAL 814,59,92 726,98,14
SCHEDULE 6 - CASH AND BALANCES WITHRESERVE BANK OF INDIA
Cash in Hand (including Foreign Currency Notes) 315,90,91 237,26,54
Balances with Reserve Bank of India
I) in current account 970,59,31 906,17,49
II) in other accounts 0 0
TOTAL 1286,50,22 1143,44,03
($ 000’s)
As at As at31-03-2016 31-03-2015
F - 7
(` 000’s)
As at As at31-03-2016 31-03-2015
SCHEDULE 7 - BALANCES WITH BANKS & MONEYAT CALL AND SHORT NOTICE
I. IN INDIA
(i) Balance with Banks
a. in current accounts 20,13,46 35,61,48
b. in other deposit accounts 6,25 6,25
20,19,71 35,67,73
(ii) Money at call and short notice
a. with banks 0 0
b. with other institutions 0 100,00,00
20,19,71 135,67,73
II. OUTSIDE INDIA
(I) Balance with Banks
a. in current accounts 61,91,20 39,60,34
b. in other accounts 0 0
61,91,20 39,60,34
TOTAL 82,10,91 175,28,07
SCHEDULE 8 - INVESTMENTS
I. INVESTMENTS IN INDIA
I. Government Securities [incl. treasury bills, & zero coupon bonds] 5849,42,86 5156,39,21
II. Other approved securities 0 0
III. Shares 79,81,17 41,11,73
IV. Debentures & Bonds 355,24,60 374,12,95
V. Subsidiaries and Joint Ventures 0 0
VI. Others [including Commercial Paper, Mutual Funds,Security Receipt, Units, etc.] 260,91,83 479,51,73
6545,40,46 6051,15,62
GROSS INVESTMENTS IN INDIA 6594,44,56 6092,85,08
LESS: DEPRECIATION 49,04,10 41,69,46
NET INVESTMENTS IN INDIA 6545,40,46 6051,15,62
II. INVESTMENTS OUTSIDE INDIA NIL NIL
TOTAL 6545,40,46 6051,15,62
F - 8
(` 000’s)
As at As at31-03-2016 31-03-2015
SCHEDULE 9 - ADVANCES
A. I. Bills purchased & discounted 1758,19,67 1045,15,57
II. Cash credits, overdrafts & loans repayableon demand 10678,34,05 9727,27,75
III. Term loans 7207,20,18 5579,58,58
19643,73,90 16352,01,90
B. PARTICULARS OF ADVANCES
I. Secured by tangible assets [incl. advancesagainst Book Debts] 18878,59,94 15522,15,56
II. Covered by Bank / Govt. Guarantees 0 59,85,38
III. Unsecured 765,13,96 770,00,96
19643,73,90 16352,01,90
C. SECTORAL CLASSIFICATION OF ADVANCES
I. Priority Sector 7296,42,17 5672,92,68
II. Public Sector 0 12,50,51
III. Banks 0 25,30
IV. Others 12347,31,73 10666,33,41
TOTAL 19643,73,90 16352,01,90
SCHEDULE 10 - FIXED ASSETS
I. PREMISES
At Revaluation Value 145,38,23 140,35,30
Additions during the year 94,97,30 5,02,93
240,35,53 145,38,23
Deductions during the year 0 0
240,35,53 145,38,23
Depreciation to date 14,49,82 225,85,71 13,23,65 132,14,58
II. OTHER FIXED ASSETS(INCLUDING FURNITURE & FIXTURES)
At Cost 303,71,91 251,57,35
Additions during the year 66,82,14 54,44,98
370,54,05 306,02,33
Deductions during the year 1,52,13 2,30,42
369,01,92 303,71,91
Depreciation to date 227,87,76 141,14,16 192,45,19 111,26,72
TOTAL 366,99,87 243,41,30
F - 9
(` 000’s)
As at As at31-03-2016 31-03-2015
SCHEDULE 11 - OTHER ASSETS
I. Inter-Office Adjustments (net) 0 2,89,66
II. Interest Accrued 163,63,88 144,83,70
III. Tax Paid in Advance and Tax Deducted at Source (Net) 116,17,46 51,20,42
IV. Deferred Tax Asset 113,90,41 93,90,41
V. Stationery & Stamps 2,42,11 2,28,22
VI. Non Banking Assets acquired in satisfaction of claims 75,86,38 72,18,13
VII. Others 335,40,66 372,82,16
TOTAL 807,40,90 740,12,70
SCHEDULE 12 - CONTINGENT LIABILITIES
I. Claims against the Bank not acknowledged as debts 240,02,49 210,81,50
II. Liability for partly paid Investments 0 0
III. Liability on account of outstanding forward exchange contracts 1159,08,98 912,29,35
IV. Guarantees given on behalf of constituents
In India 828,57,71 574,32,77
Outside India 189,23,18 97,89,76
V. Acceptances, Endorsements & Other Obligations 1252,36,82 1097,68,58
VI. Other items for which the Bank is contingently liable 17,72,27 10,09,96
TOTAL 3687,01,45 2903,11,92
Year ended Year ended31-03-2016 31-03-2015
SCHEDULE 13 - INTEREST EARNED
I. Interest / discount on advances / bills 2038,26,97 1708,89,66
II. Income on Investments 519,40,04 479,93,80
III. Interest on balance with Reserve Bank of India &other inter-bank Funds 3,26,84 8,23,81
IV Others 7,36,06 17,45,82
TOTAL 2568,29,91 2214,53,09
F - 10
(` 000’s)
Year ended Year ended31-03-2016 31-03-2015
SCHEDULE 14 - OTHER INCOME
I. Commission, Exchange and Brokerage 147,13,66 119,38,73
II. Profit on sale of Investments 56,85,17 51,61,85
Less: Loss on sale of Investments 3,49,40 53,35,77 1,30,97 50,30,88
III. Profit on sale of land, Buildings & Other Assets 6,47 2,66
Less: Loss on sale of land, Buildings & Other Assets 14,39 -7,92 34,99 -32,33
IV. Profit on Exchange Transactions 16,64,58 1,74,015
Less: Loss on Exchange Transactions 0 16,64,58 0 17,40,15
V. Income earned by way of Dividends fromCompanies in India. 2,97,33 2,97,33 95,57 95,57
VI. Miscellaneous Income 84,49,82 96,30,36
TOTAL 304,53,24 284,03,36
SCHEDULE 15 - INTEREST EXPENDED
I. Interest on Deposits 1833,29,25 1626,37,30
II. Interest on Reserve Bank of India /Inter-Bank Borrowings 89,70,09 61,50,37
TOTAL 1922,99,34 1687,87,67
SCHEDULE 16 - OPERATING EXPENSES
I. Payments to and Provision for Employees 275,35,20 238,37,95
II. Rent, Taxes & Lighting 58,34,76 47,06,89
III. Printing & Stationery 5,77,16 4,97,93
IV. Advertisement & Publicity 8,38,43 3,77,96
V. Depreciation on Bank's Property 37,76,28 15,54,48
VI. Director's fees, allowances 1,15,35 78,00
VII. Auditors' fees & Expenses (incl. Branch Auditors) 1,25,05 1,10,15
VIII. Law Charges 1,16,18 1,43,88
IX. Postage, Telegrams, Telephones etc., 13,36,46 11,61,44
X. Repairs & Maintenance 3,41,22 3,61,59
XI. Insurance 23,82,40 19,15,23
XII. Other Expenditure 112,92,91 94,82,47
TOTAL 542,71,40 442,27,97
F - 11
SCHEDULE 17
SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated andconform 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, Accounting Standards (AS) specified underSection 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extentapplicable and current practices prevailing in the banking industry in India.
B. USE OF ESTIMATES:
The preparation of the financial statements require management to make estimates and assumptions that affect the reportedamounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reportedincome and expenses during the reported period. The Management believes that the estimates and assumptions used in thepreparation 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.
C. PRINCIPAL ACCOUNTING POLICIES
1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as perthe guidelines issued by FEDAI. The resultant profit or loss is accounted for.
(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of the respectivetransaction.
(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the correspondingforward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisionsof AS-11. The difference between revalued amount and the contracted amount is recognized as profit or loss, as thecase may be.
(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailingon the Balance Sheet date.
2. INVESTMENTS:
(a) Investments are categorized under the heads ‘Held to Maturity’, Available for Sale, and ‘Held for Trading’ and arevalued in accordance with the guidelines of the Reserve Bank of India.
(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and notincluded in cost.
(c) Broken period interest paid / received on debt instruments is treated as interest expended / income.
(d) Security receipts are valued at NAV as declared by Securitisation Companies.
(e) The excess of acquisition cost over the face value of securities under “Held to Maturity” category is amortised over theremaining period to maturity.
3. ADVANCES:
3.1 In accordance with the prudential norms issued by RBI:
(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;
(b) Provisions are made for loan losses, and
(c) General provision for standard advances is made.
3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towardsNPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value of restructuredadvances measured in present value terms as per RBI guidelines.
4. FIXED ASSETS AND DEPRECIATION:
(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted at theirrevalued cost.
F - 12
(b) Software is capitalised along with computer hardware and included under Other Fixed Assets.
(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful lifespecified in Schedule II to the Companies Act, 2013 except for hand held communication devices which are depreciatedin full considering the fast changing technology and obsolescence.
(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per theguidelines issued by the Reserve Bank of India.
(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is providedon the total cost.
5. EMPLOYEE BENEFITS:
(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision for LeaveEncashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as per AccountingStandard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged toProfit & Loss account.
(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant ofEmployee Stock Options.
6. PROVISION FOR TAXATION:
Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial pronouncementsand legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accounting for Taxes onIncome).
7. REVENUE RECOGNITION:
(a) Income is accounted for on accrual basis.
(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significantuncertainty in collection thereof:
(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.
(d) Dividend Income on Investments is accounted based on declaration basis.
8. SEGMENT REPORTING:
(a) The Bank recognises the Business Segment as the Primary Reporting Segment and Geographical Segment as theSecondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the AccountingStandard 17.
(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations.
(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.
9. EARNING PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 “Earnings pershare”. Basic earnings per equity share are computed by dividing net profit by the weighted average number of equityshares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number ofequity shares and dilutive potential equity shares outstanding during the period.
10. IMPAIRMENT OF ASSETS
The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairmentloss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimatedrecoverable amount.
11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:
(a) As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets”, the Bank recognisesprovisions only when it has a present obligation as a result of a past event and it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and when a reliable estimate of theamount of the obligation can be made.
(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition of incomethat may never be realised.
F - 13
2.1 Capital (` in crore)
Items 2015-16 2014-15
i) Common Equity Tier 1 Capital Ratio (%) - (Basel-III) 8.69 9.33
ii) Tier 1 Capital Ratio (%) 8.69 9.33
iii) Tier 2 Capital Ratio (%) 1.98 2.01
iv) Total Capital Ratio (CRAR) (%) 10.67 11.34
v) Percentage of the shareholding of the Government of India in public sector bank NA NA
vi) Amount of equity capital raised 0.29 81.61
vii) Amount of Additional Tier 1 capital raised, of which
PNCPS :
PDI : NIL NIL
viii) Amount of Tier II Capital raised, of which
Debt capital instruments 140.10 NIL
Preference Share Capital instruments NIL NIL
2.1.1 In respect of securities held under HTM category, premium paid of $ 8.64 Crore (previous year $ 8.45 Crore) has beenamortized during the year and debited under "Interest received on Investments".
12. NET PROFIT:The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: –
a) Taxation.
b) Advances and other assets.
c) Shortfall in the value of investments
d) Staff Retirement benefits.
e) Other usual and necessary provisions.
13. CASH AND CASH EQUIVALENTS:Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at Call and ShortNotice.
SCHEDULE 18
NOTES ON ACCOUNTS
1. The reconciliation of inter branch transactions has been completed up to 31.03.2016 and tallying of balances is ensured onan ongoing basis.
2. DISCLOSURE REQUIREMENTS
2.2 INVESTMENTS (` in crore)
Particulars 2015-16 2014-15
(1) Value of Investments
(i) Gross Value of Investments
(a) In India 6,594.44 6,145.48
(b) Outside India NIL NIL
(ii) Provisions for Depreciation
(a) In India 49.04 41.69
(b) Outside India NIL NIL
(iii) Net Value of Investments
(a) In India 6,545.40 6,103.79
(b) Outside India. NIL NIL
F - 14
(2) Movement of provisions held towards Depreciation on investments.
(i) Opening balance 41.69 43.28
(ii) Add: Provisions made during the year 8.65 19.92
(iii) Less: Write-off / write-back of excess provisions during the year 1.30 21.51
(iv) Closing Balance 49.04 41.69
2.2 INVESTMENTS (Contd.) (` in crore)
Particulars 2015-16 2014-15
2.2.1 Repo Transactions (in face value terms) (` in crore)
Minimum Maximum Daily Average Outstandingoutstanding outstanding outstanding As on
during during during March 31, the year the year the year 2016
Securities sold under repo
I. Government Securities 10.40 676.00 295.83 312.00(18.72) (447.20) (79.98) (254.80)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
Securities purchased under reverse repo
I. Government Securities 10.40 234.00 27.67 234.00(10.40) (208.00) (38.22) (114.40)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
(Figures in bracket indicates in previous year)
2.2.2 Non-SLR Investment Portfolio
i) Issuer composition of Non SLR investments: (` in crore)
No. Issuer Amount Extent of Extent of Extent of Extent ofPrivate ‘Below ‘Unrated’ ‘Unlisted’
Placement Investment Securities SecuritiesGrade’
Securities
(1) (2) (3) (4) (5) (6) (7)
1 PSUs 137.79 85.84 0 0 0
2 FIs 51.54 21.00 0 0 0
3 Banks 45.54 28.00 0 0 0
4 Private Corporate 230.37 187.30 15.88 15.88 35.88
5 Subsidiaries / Joint Ventures 0 0 0 0 0
6 Others 279.78 273.62 0 0 0
7 Less: Provision held towardsdepreciation -49.04 xxx xxx xxx xxx
Total 695.98 595.76 15.88 15.88 35.88
Amounts reported under Columns 4,5,6 and 7 above may not be mutually exclusive.
F - 15
Particulars 2015-16 2014-15
Opening balance 10.78 8.74
Additions during the year since 1st April 1.27 2.04
Reductions during the above period 2.00 0.00
Closing balance 10.05 10.78
Total Provisions held (*) 9.11 9.14
(*) An amount of $ 0.94 Crore (PY $ 1.64 Crore) received towards part settlement is parked under sundries account.
ii) Non-performing Non-SLR investments : (` in crore)
2.2.3 Sale and transfers to / from HTM category:
During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTMcategory as at the beginning of the year. The details of HTM category as on 31.03.2016 are furnished hereunder:
(` in crore)
Particulars 2015-16 2014-15
i) The notional principal of swap agreements NIL NIL
ii) Losses which would be incurred if counter parties failed to fulfillobligations under the agreements NIL NIL
iii) Collateral required by the bank upon entering into swaps NIL NIL
iv) Concentration of credit risk arising from the swaps NIL NIL
v) The fair value of the swap book NIL NIL
2.3.2 Exchange Traded Interest Rate Derivatives: (` in crore)
S.No. Particulars 2015-16 2014-15
(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NIL NIL
(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2016 (instrument-wise) NIL NIL
(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
(iv) Mark-to-market value of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
2.3.3 Disclosures on risk exposure in derivatives
Qualitative Disclosure:
The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used tohedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.
To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribed in theTreasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthly basis for ForeignExchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.
2.3 Derivatives
2.3.1 Forward Rate Agreement / Interest Rate Swap: (` in crore)
Market Value 4,361.78
Book value 4,336.76
Excess of book value over market value for which Provision is not made NIL
F - 16
Sl.Particular
Currency Derivatives Interest rate Derivatives
No. 2015-16 2014-15 2015-16 2014-15
(i) Derivatives (Notional Principal Amount) NA NA NA NAa) For hedging NA NA NA NAb) For trading NA NA NA NA
(ii) Marked to Market Positions NA NA NA NAa) Asset (+) NA NA NA NAb) Liability (-) NA NA NA NA
(iii) Credit Exposure NA NA NA NA
(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NA NA NAa) On hedging derivatives NA NA NA NAb) On trading derivatives NA NA NA NA
(v) Maximum and Minimum of 100*PV01 observed during the year NA NA NA NAa) On hedging NA NA NA NAb) On trading NA NA NA NA
2.3.4 Shifting of securities:
For the year ended 31.03.2016, Bank has shifted securities of the face value of $ 639.28 Crore (previous year $ 95.00 Crore) fromHTM to AFS category and no loss (previous year loss of $ 0.12 Crore) arose on such transfers.
2.3.5 SLR Securities: ($ in crore)
As at 31.03.2016 As at 31.03.2015
ParticularsBook Market Book MarketValue Value Value Value
Government Securities * SLR (CG, SG,TB) 5,849.43 5,877.23 5,156.84 5,191.82
Approved securities - SLR 0.00 0.00 0.00 0.00
* Net of securities pledged under REPO ` 78.00 Crore (PY ` 140.40 Crore).
2.4 Asset Quality
2.4.1 Non-Performing Assets: (` in crore)
Particulars 2015-16 2014-15
(i) Net NPAs to Net Advances (%) 1.18% 1.85%
(ii) Movement of NPAs (Gross)(a) Opening balance 454.62 546.46(b) Additions during the year 196.90 256.30(c) Reductions during the year 260.27 348.14(d) Closing balance 391.25 454.62
(iii) Movement of Net NPAs(a) Opening balance 302.49 443.39(b) Additions during the year 166.32 229.97(c) Reductions during the year 237.17 370.87(d) Closing balance 231.64 302.49
(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 116.35 53.23(b) Provisions made during the year 94.95 138.35(c) Write-off/ write-back of excess provisions 97.83 75.23(d) Closing balance 113.47 116.35
Quantitative Disclosures: (` in crore)
F - 17
2.4.
2 P
arti
cula
rs o
f A
cco
un
ts R
estr
uct
ure
d:
Dis
clo
sure
of
Res
tru
ctu
red
Acc
ou
nts
Type
of
Res
truc
turi
ngU
nder
CD
R M
echa
nism
Und
er S
ME
Deb
tR
estr
uctu
ring
Mec
hani
smO
ther
sTo
tal
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
No.
of
borr
ower
s
Am
ount
outs
tand
ing
Pro
visi
onth
ereo
n
140
00
141
00
01
443
196
7259
319
687
666.
380.
000.
000.
0066
6.38
4.42
0.00
0.00
0.00
4.42
462.
5445
.61
79.6
956
.05
643.
8911
33.3
445
.61
79.6
956
.05
1314
.69
6.44
0.00
0.00
0.00
6.44
0.00
0.00
0.00
0.00
0.00
2.25
0.00
0.65
0.00
2.90
8.69
0.00
0.65
0.00
9.34
No.
of
borr
ower
s
Am
ount
outs
tand
ing
Pro
visi
onth
ereo
n
00
00
03
00
03
20
00
25
00
05
35.3
70.
000.
000.
0035
.37
3.83
0.00
0.00
0.00
3.83
87.7
50.
000.
000.
0087
.75
126.
950.
000.
000.
0012
6.95
0.00
0.00
0.00
0.00
0.00
0.03
0.00
0.00
0.00
0.03
0.00
10.
000.
000.
000.
000.
030.
000.
000.
000.
03
No.
of
borr
ower
s
Am
ount
outs
tand
ing
00
00
00
00
00
00
00
00
00
00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Res
truc
ture
dA
ccou
nts
as o
n A
pril
1 of
the
FY
(ope
ning
figur
es)
Fres
hre
stru
ctur
ing/
Add
ition
alfa
cilit
ies
duri
ng t
heye
ar *
Upg
rada
tions
to rest
ruct
ured
stan
dard
cate
gory
duri
ng t
heF
Y
Doubtful
Loss
Total
Pro
visi
onth
ereo
n
No.
of
borr
ower
s
Am
ount
outs
tand
ing
20
00
21
00
01
150
00
1518
00
018
115.
430.
000.
000.
0011
5.43
3.55
0.00
0.00
0.00
3.55
31.4
60.
000.
000.
0031
.46
150.
440.
000.
000.
0015
0.44
1.59
0.00
0.00
0.00
1.59
0.03
0.00
0.00
0.00
0.03
1.80
0.00
0.00
0.00
1.80
3.42
0.00
0.00
0.00
3.42
Pro
visi
onth
ereo
n
Res
truc
ture
dst
anda
rdad
vanc
esw
hich
ceas
e to
attr
act
high
erpr
ovis
ioni
ngan
d /
orad
ditio
nal
risk
wei
ght
at t
he e
ndof
the
FY
and
henc
ene
ed n
ot b
esh
own
asre
stru
ctur
edst
anda
rdad
vanc
es a
tth
ebe
ginn
ing
of t
he n
ext
FY
(` in
cro
re)
Sub-Standard
Ass
et C
lass
ifica
tion
Det
ails
Sl.
No. 1. 2. 3. 4.
F - 18
Dis
clo
sure
of
Res
tru
ctu
red
Acc
ou
nts
(C
on
td.)
(` in
cro
re)
Type
of
Res
truc
turi
ngU
nder
CD
R M
echa
nism
Und
er S
ME
Deb
tR
estr
uctu
ring
Mec
hani
smO
ther
sTo
tal
Det
ails
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
No.
of
borr
ower
s
Am
ount
outs
tand
ing
00
00
00
00
00
-20
-10
120
-20
-10
120
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-60.
6549
.47
11.0
90.
090.
00-6
0.65
49.4
711
.09
0.09
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-1.3
01.
300.
000.
000.
00-1
.30
1.30
0.00
0.00
0.00
Pro
visi
onth
ereo
n
No.
of
borr
ower
s
Am
ount
outs
tand
ing
20
00
20
00
00
160
01
1718
00
119
68.8
90.
000.
000.
0068
.89
0.87
0.00
0.00
0.00
0.87
230.
13-1
.94
2.00
0.00
523
0.20
299.
89-1
.94
2.00
0.01
299.
96
No.
of
borr
ower
s
Am
ount
outs
tand
ing
100
00
103
00
03
133
917
4226
39
1755
517.
430.
000.
000.
0051
7.43
3.83
0.00
0.00
0.00
3.83
228.
0597
.02
88.7
856
.13
469.
9874
9.31
97.0
288
.78
56.1
399
1.24
11.7
90.
000.
000.
0011
.79
0.03
0.00
0.00
0.00
0.03
0.35
1.30
0.09
0.00
1.74
12.1
71.
300.
090.
0013
.56
Pro
visi
onth
ereo
n
Pro
visi
on t
here
on d
oes
not
incl
ude
Sta
ndar
d A
ccou
nt a
dditi
onal
pro
visi
on o
f $ 33
.73
Cro
res
(incl
udin
g in
vest
men
t un
der
CD
R p
acka
ge)
and
FIT
L pr
ovis
ion
of $
55
.09
cror
es.
*O
ut o
f $ 12
6.95
cro
res,
$ 81
.41
cror
es r
elat
es t
o 5
fres
h re
stru
ctur
ed a
ccou
nts
and
$ 45
.54
cror
es r
elat
es t
o ad
ditio
nal f
acili
ties/
limits
san
ctio
ned
to t
he e
xist
ing
rest
ruct
ured
acco
unts
dur
ing
the
year
.
**O
ut o
f $ 29
9.96
cro
res,
$ 28
1.82
cro
res
by
way
of r
ecov
ery/
sale
(18
acc
ount
by
way
of c
ash
reco
very
& 1
acc
ount
by
way
of s
ale
and
prov
isio
n of
$ 0.
0028
cro
res)
and
$ 18
.14
cror
es r
elat
es t
o pa
rtia
l rec
over
y in
exi
stin
g re
stru
ctur
ed a
ccou
nts.
***
Exc
ludi
ng t
he f
igur
es o
f S
tand
ard
Res
truc
ture
d A
dvan
ces
whi
ch d
o no
t at
trac
t hi
gher
pro
visi
onin
g or
ris
k w
eigh
t.
Doubtful
Loss
Ass
etC
lass
ifi-
catio
n
Sl.
No.
Dow
ngr
adat
ions
of rest
ruct
ured
acco
unts
duri
ng t
heF
Y
5.
Wri
te-o
ffs/
reco
very
of rest
ruct
ured
acco
unts
duri
ng t
heF
Y *
*
6.
Res
truct
ured
Acc
ount
sas
on
Mar
ch 3
1of
the
FY
(clo
sing
figur
es**
*)
7.
Total
F - 19
2.4.3 Details of financial assets sold to Securitization / Reconstruction Company for Asset Reconstruction
(A) Details of Sales: (` in crore)
Particulars 2015-16 2014-15
(i) No. of accounts 13 1517
(ii) Aggregate value (net of provisions) of accounts sold to SC/RC 166.25 242.48
(iii) Aggregate consideration 67.53 119.38
(iv) Additional consideration realized in respect of accounts transferred in earlier years 0.00 0.00
(v) Aggregate profit / (loss) over net book value. (98.72) (123.10)
(B) NPA Assets Sold to ARC: (` in crore)
Backed by NPAs sold by theBacked by NPAs sold by other banks /
Particulars bank as underlyingfinancial institutions / non-banking Totalfinancial companies as underlying
2015-16 2014-15 2015-16 2014-15 2015-16 2014-15
Book value of 279.20 178.00 8.08 8.08 287.28 186.08investments insecurity Receiptsas at 31st March
2.4.4 Details of non-performing financial assets purchased / sold:
A. Details of non-performing financial assets purchased: (` in crore)
Particulars 2015-16 2014-15
1 (a) No. of accounts purchased during the year NIL NIL
(b) Aggregate outstanding NIL NIL
2 (a) Of these, number of accounts restructured during the year NIL NIL
(b) Aggregate outstanding NIL NIL
B. Details of non-performing financial assets sold: (` in crore)
Particulars 2015-16 2014-15
1. No. of accounts sold NIL NIL
2. Aggregate outstanding NIL NIL
3. Aggregate consideration received NIL NIL
C. Disclosure regarding amortization of Loss on sale of assets to ARCs
RBI vide its circular no.DBR.No.BP.BC.94/ 21.04.048/2014-15 dated 21.05.2015 has extended permission to Banks to provide the netshortfall on account of sale of assets up to 31.03.2016 to Asset Reconstruction Company over a period of two years. Consequently,` 76.33 Crore (previous year ` 27.43 Crore) has been charged to Profit & Loss account for the year ended 31st March 2016.The unamortized amount on this account as on 31st March 2016 is ` 95.60 Crore (previous year ` 72.99 Crore)
2.4.5 Provisions on Standard Assets: (` in crore)
Particulars 2015-16 2014-15
Provisions towards Standard Assets 72.23 55.23
F - 20
2.6 Asset Liability Management:
Maturity pattern of certain items of assets and liabilities (` in crore)
1 Day 2 to 7 8 to 14 15 to 28 29 days Over 3 Over 6 Over 1 year & Over 3 Over 5 TotalItems days days days to 3 months months & months & upto 3 years years & upto years
upto 6 months upto 1 year 5 years
Deposits 280.17 525.09 793.08 579.69 2843.73 2342.24 4063.93 8252.73 1740.28 4010.02 25430.96
(241.69) (423.42) (769.57) (687.62) (2605.76) (2400.11) (4197.23) (6172.48) (1244.87) (3221.46) (21964.21)
Advances (Net) 230.48 461.11 262.48 629.64 1879.01 1195.63 3212.66 7465.78 1292.61 3014.34 19643.74
(189.48) (407.76) (399.76) (694.79) (3435.33) (937.05) (1850.89) (6444.97) (699.34) (1292.66) (16352.02)
Investments (Net) 82.71 68.81 74.61 74.50 100.07 30.01 14.59 482.57 519.14 5098.40 6545.41
(165.70) (78.84) (0.00) (115.99) (247.22) (166.02) (127.39) (532.28) (643.10) (4027.26) (6103.78)
Borrowings 0.00 24.81 0.00 0.00 30.00 0.00 0.00 399.50 0.00 268.70 723.01
(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (100.00) (229.50) (0.00) (128.60) (458.10)
Foreign Currency 90.57 0.13 5.41 7.24 26.25 16.41 11.41 0.00 0.00 0.00 157.42
Assets (69.68) (0.22) (0.00) (1.09) (16.99) (24.43) (13.72) (0.00) (0.00) (0.00) (126.13)
Foreign Currency 31.27 0.00 0.00 0.10 6.94 6.63 13.17 12.96 25.09 0.00 96.16
Liabilities (25.74) (0.25) (0.00) (0.10) (0.54) (1.29) (14.39) (8.45) (7.97) (0.00) (58.73)
(Figures in brackets indicates in previous year).
The above data has been compiled by the management on the basis of the guidelines of RBI which have been relied upon by Auditors.
2.5 Business Ratios:
Particulars 2015-16 2014-15
(i) Interest Income as a percentage to Working Funds 9.89 10.16
(ii) Non-interest income as a percentage to Working Funds 1.17 1.30
(iii) Operating Profit as a percentage to Working Funds 1.57 1.73
(iv) Return on Assets 0.69 0.61
(v) Business (Deposits plus advances) per employee (` in crore) 10.99 9.55
(vi) Profit per employee (` in crore) 0.04 0.03
2.7 Exposures
2.7.1 Exposure to Real Estate Sector: (` in crore)
Category 2015-16 2014-15
a) Direct exposure
(i) Residential Mortgages – 410.93 325.85
Lending fully secured by mortgages on residential property that is or will be occupiedby the borrower or that is rented; (Individual housing loans eligible for inclusion inpriority sector advances may be shown separately).
(ii) Commercial Real Estate – 1476.78 819.14
Lending secured by mortgages on commercial real estates (office buildings,retail space, multi-purpose commercial premises, multi-family residential buildings,multi-tenanted commercial premises, industrial or warehouse space, hotels,land acquisition, development and construction, etc.). Exposure would also includenon-fund based (NFB) limits;
F - 21
2.7.2 Exposure to Capital Market: (` in crore)
Particulars 2015-16 2014-15
(i) Direct investment in equity shares, convertible bonds, convertible debentures and unitsof equity-oriented mutual funds the corpus of which is not exclusively invested incorporate debt; 69.97 30.13
(ii) Advances against shares / bonds / debentures or other securities or on clean basis toindividuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; NIL 2.26
(iii) Advances for any other purposes where shares or convertible bonds or convertibledebentures or units of equity oriented mutual funds are taken as primary security; 5.88 0.31
(iv) Advances for any other purposes to the extent secured by the collateral security of sharesor convertible bonds or convertible debentures or units of equity oriented mutual funds i.e.where the primary security other than shares / convertible bonds/convertible debentures /units of equity oriented mutual funds does not fully cover the advances; NIL NIL
(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf ofstockbrokers and market makers; 10.00 10.62
(vi) Loans sanctioned to corporates against the security of shares / bonds/debentures orother securities or on clean basis for meeting promoter's contribution to the equity ofnew companies in anticipation of raising resources; NIL NIL
(vii) Bridge loans to companies against expected equity flows / issues; NIL NIL
(viii) Underwriting commitments taken up by the banks in respect of primary issue of shares orconvertible bonds or convertible debentures or units of equity oriented mutual funds; NIL NIL
(ix) Financing to stockbrokers for margin trading; NIL NIL
(x) All exposures to Venture Capital Funds (both registered and unregistered) NIL NIL
Total Exposure to Capital Market 85.85 43.32
2.7.1 Exposure to Real Estate Sector (Contd.) (` in crore)
Category 2015-16 2014-15
(iii) Investments in Mortgage Backed Securities (MBS) and other securitisedexposures -
(a) Residential 0.00 0.00
(b) Commercial Real Estate 0.00 0.00
b) Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB) andHousing Finance Companies (HFCs). 47.95 36.53
Total Exposure to Real Estate Sector 1935.66 1181.52
F - 22
2.7.4 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.
A. SBL exceeded by the Bank for the period 01/04/2015 to 31/03/2016 .......... NIL (PY NIL)
B. GBL exceeded by the Bank for the period 01/04/2015 to 31/03/2016 .......... NIL (PY NIL)
2.7.5 Unsecured Advances (Amount of Advances for which, intangible securities has been taken): (` in crore)
As on As onParticulars 31-3-2016 31-3-2015
The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority etc. has been taken. 26.72 33.64
Estimated value of such intangible collaterals 81.47 104.50
2.8 Miscellaneous
2.8.1 Disclosure of Penalties imposed by RBI:
RBI has imposed a total penalty of $ 9300 on account of Counterfeit Notes detection.
3. Disclosure in terms of Accounting Standards:
3.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:
There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as perAccounting Standard 5
There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2016 as compared to those inthe preceeding financial year ended 31.03.2015.
3.2 Accounting Standard 9: Revenue Recognition:
Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9.
3.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):
In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the year by thebank using the services of Banks approved empanelled Independent valuers. Appreciation arising out of such revaluation was accountedwith corresponding credit to Revaluation Reserves. The details are as under;
(` in crore)
Original Cost of Premises 60.84
Incremental Value on account of revaluation made in 2011 - ` 81.51
Incremental Value on account of revaluation made in 2016 - ` 93.99 175.50
Depreciation on Original Cost - ` 6.72
Depreciation on Revalued Cost - ` 3.76 -10.48
Written Down Value of such revalued assets 225.86
2.7.3 Risk Category wise Country Exposure (As compiled by Management): (` in crore)
Risk Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2016 31.3.2016 31.3.2015 31.3.2015
Insignificant 140.87 NIL 111.30 NIL
Low 72.59 NIL 73.67 NIL
Moderate 3.52 NIL 3.76 NIL
High 0.00 NIL 0.15 NIL
Very High 0.00 NIL 0.00 NIL
Restricted 0.00 NIL 0.00 NIL
Off-credit 0.00 NIL 0.00 NIL
Total 216.98 NIL 188.88 NIL
As the bank's exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than 1%of total assets of the bank, no provision is considered necessary.
F - 23
3.4 Accounting Standard 15 - Employee Benefits:
3.4.1 The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:
(1) In respect of contributory plans viz.- Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at pre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixedcontribution.
(2) In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made basedon actuarial valuation as per the guidelines.
(3) The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss accountand balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:
I. Principal Actuarial Assumptions at the Balance Sheet Date:(Expressed as weighted Averages)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Discount Rate 8.0% 8.0% 8.0%
Expected Rate of return on Plan Assets 9.5% 8.0% 0.0%
II. Change in the Present value of obligations: (` in crore)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Present Value of obligations as at the beginning of the year 68.89 238.48 38.04
Interest Cost 5.15 17.18 2.84
Current Service Cost 3.95 72.19 3.20
Past service cost (non-vested benefits) 0.00 0.00 0.00
Past service cost (vested benefits) 0.00 0.00 0.00
Benefits Paid 9.05 47.36 5.20
Actuarial loss / (gain) on obligation (balancing figure) -2.92 -10.81 2.77
Present Value of obligations as at the year end 66.02 269.68 41.65
III. Change in Fair Value of Plan Asset: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Fair value of Plan Assets at the beginning of the year 68.89 238.48 0.00
Expected return on Plan Assets 6.54 19.08 0.00
Employer's Contribution 4.61 18.45 0.00
Benefits Paid 9.05 47.36 0.00
Actuarial loss/(gain) on plan assets (balancing figure) -0.33 15.17 0.00
Fair Value of Plan Asset at the end of the year 70.66 243.82 0.00
IV. Actual Return on Plan Assets: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Expected return on plan assets 6.54 19.08 0.00
Actuarial gain / (loss) on plan assets -0.33 15.17 0.00
Actual return on plan assets 6.21 34.25 0.00
F - 24
V. Actuarial Gain / Loss recognized: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Actuarial gain/(loss) for the Period - Obligation -2.91 -10.81 2.77
Actuarial gain/(loss) for the Period - Plan Assets -0.33 15.17 0.00
Total (gain)/loss for the period -2.58 -25.98 2.77
Actuarial (gain)/loss recognized in the period -2.58 -25.98 2.77
Unrecognized actuarial (gain)/loss at the end of the year 0.00 0.00 0.00
VI. Amount recognized in Balance Sheet: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of the Obligation 66.02 269.68 41.65
Fair value of plan assets 70.66 243.82 0.00
Difference -4.64 25.86 41.65
Unrecognized Transitional liability 0.00 0.00 0.00
Unrecognized past service cost (non vested benefits) 0.00 0.00 0.00
Liability recognized in the Balance Sheet -4.64 25.86 41.65
VII. Expenses Recognized in Profit & Loss Account: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Current Service Cost 3.95 72.19 3.20
Interest Cost 5.15 17.18 2.84
Expected return on Plan assets 6.54 19.08 0.00
Net actuarial (gain) / loss recognized in the year -2.58 -25.98 2.77
Transitional Liability recognized in the year 0.00 0.00 0.00
Past service cost (non-vested benefits) 0.00 0.00 0.00
Past service cost (vested benefits) 0.00 0.00 0.00
Expenses Recognized in Profit & Loss Account -0.02 44.31 8.81
VIII. Movements in the Liability Recognized in the balance Sheet (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Opening net Liability 0.00 0.00 38.04
Opening amount determined under para 55 of AS15R 0.00 0.00 0.00
Expense as Above -0.02 44.31 8.81
Contribution/ Benefits paid 4.61 18.45 5.20
Closing Net Liability -4.63 25.86 41.65
F - 25
IX. Amount for the Current Period: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of Obligation 66.02 269.68 41.65
Plan Assets 70.66 243.82 0.00
Surplus / (Deficit) -4.64 25.86 41.65
Experience adjustments on Plan Liabilities - (loss) / gain 0.00 0.00 0.00
Experience adjustments on Plan Assets - (loss) / gain 0.00 0.00 0.00
X. Major categories of Plan Assets: (As % of Total Plan Assets)
Particulars Gratuity Pension(Funded) (Funded)
Government of India Securities 12.28 5.30
State Government Securities 50.77 32.57
High Quality Corporate Bonds 27.48 23.09
Equity Share of listed companies 0.00 0.00
Property 0.00 0.00
Special Deposit Scheme 1.52 0.00
Balance with Bank Account 5.51 0.85
Balance held at LIC India's Running account 0.00 7.00
Annuity under Return of Purchase Price 0.00 19.35
Amount Receivable from Bank 0.00 9.40
Others (Amount receivable from Bank) 2.44 2.44
Total 100.00 100.00
XI. Enterprises Best Estimate: (` in crore)
Particulars Gratuity Pension Leave Encashment
Enterprise’s Best Estimate of Contribution during next year 6.23 36.26 5.88
3.5 Employee Stock Option Scheme:
As on 31.03.2015, options in force were 545000, of which 295000 shares were exercised during 2015-16 and the remaining optionsexpired. Thus as on 31.03.2016, the options in force are NIL
F - 26
3.6 Accounting Standard 17 - Segment Reporting:
PART A : BUSINESS SEGMENTS (` in crore)
Year ended Year endedParticulars 31-3-2016 31-3-2015
(Audited) (Audited)
1. SEGMENT REVENUE :
a. Treasury operations 595.64 553.33
b. Corporate / wholesale banking operations 860.19 579.20
c. Retail banking operations 1403.47 1343.21
d. Other banking operations 13.53 22.82
TOTAL 2872.83 2498.56
2. SEGMENT RESULTS (Operating Profit):
a. Treasury operations 101.89 80.70
b. Corporate / wholesale Banking operations 115.48 80.53
c. Retail banking operations 178.98 186.75
d. Other banking operations 10.77 20.43
TOTAL 407.12 368.41
OPERATING PROFIT (including exceptional items) 407.12 368.41
PROVISIONS OTHER THAN TAX 176.89 180.20
PROFIT BEFORE TAX 230.24 188.21
Less : Tax expenses 50.00 55.92
NET PROFIT 180.24 132.29
3. CAPITAL EMPLOYED :
a. Treasury operations 534.61 469.55
b. Corporate / wholesale banking operations 217.09 213.24
c. Retail banking operations 514.68 494.52
d. Unallocated Assets 497.21 378.84
TOTAL 1763.59 1556.14
PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is made underinternational segment.
Previous period's figures have been regrouped, wherever necessary to conform to the current period's classification.
F - 27
3.7 Accounting Standard 18 - Related Party Disclosures:
Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from01/04/2015 to 31/03/2016, as detailed below:
S. No. Name Designation
1 Mr. Rakesh Sharma Managing Director & CEO(01.04.2015 to 09.09.2015)
2 Mr. Parthasarathi Mukherjee Managing Director & CEO(From 25.01.2016)
3. Mr. M. Palaniappan President & CFO
3 Mr. N. Ramanathan Company Secretary
(` in crore)
Items / Related Party Parent (as per Subsidiaries Associates / Key Relatives of Totalownership Joint Management Key Manage-or control) Ventures Personnel ment Personnel
Borrowings NIL NIL NIL NIL NIL NIL
Deposits NIL NIL NIL NIL NIL NIL
Placement of Deposits NIL NIL NIL NIL NIL NIL
Advances NIL NIL NIL NIL NIL NIL
Investments NIL NIL NIL NIL NIL NIL
Non-Funded Commitments NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsprovided NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsavailed NIL NIL NIL NIL NIL NIL
Purchase of Fixed Assets NIL NIL NIL NIL NIL NIL
Sale of Fixed Assets NIL NIL NIL NIL NIL NIL
Interest Paid NIL NIL NIL NIL NIL NIL
Interest Received NIL NIL NIL NIL NIL NIL
Rendering of Services NIL NIL NIL NIL NIL NIL
Receiving of Services NIL NIL NIL 2.61 NIL 2.61
Management Contracts NIL NIL NIL NIL NIL NIL
3.8 Accounting Standard 20 - Earnings per Share (EPS):
EPS calculation in accordance with the AS-20 issued by the ICAI is as under:
Particulars 2015-16 2014-15
Net profit after Tax (` In Crore) 180.24 132.29
Weighted Average - No. of Equity shares 179,364,546 144,387,493
Weighted Average - No. of Diluted Equity shares 179,364,546 144,615,899
Earnings per share - Basic (`) 10.05 9.16
Earnings per share - Diluted (`) 10.05 9.15
F - 28
3.9 Accounting Standard 22 - Accounting for Taxes on Income:
The bank has accounted for Income Tax in compliance with AS 22. Accordingly, Deferred Tax Assets & Liabilities are recognized.The major components of DTA / DTL are furnished as under:
(` in crore)
Particularsonents Deferred Tax Assets Deferred Tax Liabilities
Deferred Tax Components 2015-16 2014-15 2015-16 2014-15
Provision for leave encashment 14.41 13.60 0.00 0.00
Depreciation on fixed assets 0.00 0.00 8.95 4.60
Provision for wage arrears 0.00 9.97 0.00 0.00
Provision for other assets 19.88 5.72 0.00 0.00
Provision for advances 79.02 58.94 0.00 0.00
Special Reserve u/s 36(i)(viii) 0.00 0.00 19.54 14.09
Others 0.59 5.67 33.19 0.00
CLOSING BALANCE 113.90 93.90 61.68 18.69
Net DTA 52.22 75.21
3.10 Intangible Assets AS 26:
The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.
3.11 Accounting Standard 28 - Impairment of Assets:
A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In theopinion of the bank management, there is no impairment of other assets as at 31st March 2016 requiring recognition in terms of thesaid standard.
3.12 Details of movement in provisions in accordance with Accounting Standard 29: (` in Crore)
Opening Provision Provision ClosingParticulars as on made during reversed / as on
01.04.2015 the year adjusted 31.03.2016
Prov. for Standard Assets 55.23 17.00 0.00 72.23
Prov. for Bad and Doubtful debts 116.35 176.76 179.64 113.47
Prov. for Income Tax (net of deferred tax) 206.85 50.00 17.00 239.85
Prov. for depreciation in market value of Investments 41.69 8.65 1.30 49.04
Prov. for Other assets 3.45 0.46 0.00 3.91
Counter cyclical buffer 14.71 0.00 0.00 14.71
Prov. for Interest Tax 0.10 0.00 0.00 0.10
Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90
Prov. for Dividend (incl. Div. Tax) 43.01 64.80 43.01 64.80
Prov. for Restructured Advances & FITL 118.18 0.00 7.38 110.80
Provision for Foreign Currency Unhedged 1.30 0.40 0.00 1.70
F - 29
4. Additional Disclosures:
4.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head Expenditure in Profit &Loss Account:
(` in crore)
Particulars 2015-16 2014-15
Provision towards Standard Asset 17.00 10.52
Provision towards NPA 176.76 109.72
Provision for MAT Credit (19.00) 0.00
Provision for depreciation in market value of Investments 8.65 (1.47)
Provision for Gratuity (Amortised) 0.00 3.06
Provision for Pension (Amortised) 0.00 15.56
Provision for Restructured Advances (Economic sacrifice) & FITL (7.38) 41.51
Provision for Foreign Currency Unhedged 0.40 1.30
Provision for Other Assets 0.46 0.00
Sub Total 176.89 180.20
Provision for Income Tax 50.00 55.92
Total 226.89 236.12
4.2 Movement of Counter Cyclical Provisioning Buffer: (` in crore)
Particulars 2015-16 2014-15
(a) Opening balance in the account 14.71 29.43
(b) Provision made in the accounting year 0.00 0.00
(c) Amount of drawdown made during the accounting year 0.00 14.72
(d) Closing balance in the account 14.71 14.71
4.3 Draw Down from Reserves:
During the year under review, a sum of ` 4.32 Crore being the Rights issue expenditure incurred in Financial year 2014-15 anddebited to Sundry Assets accounts, on approval, was appropriated to Share Premium account.
As permitted by RBI, the entire balance of ̀ 0.73 Crore in Investment Reserve account was transferred to Profit and Loss Appropriationaccount towards depreciation on Investment in AFS and HFT categories.
The bank has transferred a sum of ` 0.71 Crore being the depreciation on revalued portion of premises directly to General Reserve.
4.4 Disclosure of complaints (As compiled by Management):
A. Customer Complaints:
(a) No. of complaints pending at the beginning of the year 0
(b) No. of complaints received during the year 562
(c) No. of complaints redressed during the year 560
(d) No. of complaints pending at the end of the year 2
ATM complaints through Dispute Management Systems (DMS)- NPCI
(a) No. of complaints pending at the beginning of the year 12
(b) No. of complaints received during the year 1004
(c) No. of complaints redressed during the year 990
(d) No. of complaints pending at the end of the year 26
F - 30
B. Awards passed by the Banking Ombudsman:
(a) No. of unimplemented Awards at the beginning of the year 0
(b) No. of Awards Passed by the Banking Ombudsmen during the year 0
(c) No. of Awards implemented during the year 0
(d) No. of unimplemented Awards at the end of the year 0
4.5 Disclosure of Letters of Comfort (LOCs) issued by Banks: (` in crore)
Particulars Amount
Letters of comfort issued in earlier years and outstanding as on 01-04-2015 8.88
Add: Letters of Comfort issued during FY 2015-16 15.44
Less: Letters of Comfort expired during FY 2015-16 7.38
Letters of Comforts Outstanding as on 31-03-2016 16.94
4.6 Provisioning Coverage ratio:
The provision coverage ratio of the Bank as on 31.03.2016 is 68.55%.
4.7 Bancassurance Business:
Fees, remuneration received from Bancassurance business:
For the year ended 31.03.2016, the bank received Gross Commission income of $ 6.05 Crore from Bancassurance business,of which $ 4.85 Crore from life insurance segment and $ 1.20 Crore from general insurance segment.
4.8 Concentration of Deposits, Advances, Exposures and NPAs:
4.8.1 Concentration of Deposits: ($ in crore)
Total Deposits of twenty largest depositors 4,420.97
Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 17.38%
4.8.2 Concentration of Advances: ($ in crore)
Total Advances to twenty largest borrowers 2,525.83
Percentage of Advances to twenty largest borrowers to Total Advances of the bank 11.43%
4.8.3 Concentration of Exposures: ($ in crore)
Total Exposure to twenty largest borrowers/customers 2,902.26
Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank onborrowers /customers 12.86%
4.8.4 Concentration of NPAs: ($ in crore)
Total Exposure to top four NPA accounts 158.32
F - 31
4.9 Sector-wise Advances (As compiled by Management): (` in crore)
Sl.Sector
2015-2016 2014-2015
No.O/s Total Gross % of Gross NPAs O/s Total Gross % of Gross NPAs
Advances NPA to Total Advances Advances NPA to Total Advancesin that Sector in that Sector
(A) Priority Sector
1. Agriculture and allied activities 3065.60 14.54 0.47% 2417.14 12.39 0.51%
2. Industries 1440.65 35.62 2.47% 1484.13 40.22 2.71%
3. Services 2368.40 31.82 1.34% 1633.02 28.75 1.76%
4. Personal Loans 448.08 8.85 1.98% 275.56 11.31 4.10%
Sub Total (A) 7322.73 90.83 1.24% 5809.86 92.66 1.59%
(B) Non Priority Sector
1. Agriculture and allied activities 0.00 0.00 0.00% 0.00 0.00 0.00%
2. Industries 3463.91 206.74 5.97% 3581.16 257.65 7.13%
3. Services 4827.79 65.14 1.35% 3977.16 93.87 2.36%
4. Personal Loans 2172.17 4.93 0.23% 1667.61 6.21 0.37%
5. Others 2032.33 23.61 1.16% 1477.05 4.22 0.29%
Sub Total (B) 12496.20 300.42 2.40% 10702.98 361.95 3.37%
Total (A+B) 19818.93 391.25 1.97% 16512.84 454.62 2.75%
4.10 Movement of NPAs (As compiled by Management): (` in crore)
Particulars 2015-2016 2014-2015
Gross NPAs as on 1st April (Opening Balance) 454.62 546.46
Additions (Fresh NPAs) during the year 196.90 256.30
Sub-total (A) 651.52 802.76
Less:-
(i) Upgradations 21.20 114.48
(ii) Recoveries (excluding recoveries made from upgraded accounts) 169.81 179.18
(iii) Technical / Prudential write offs 68.88 14.92
(iv) Write-offs other than those under (iii) above 0.38 39.56
Sub-total (B) 260.27 348.14
Gross NPAs as on 31st March (closing balance) (A-B) 391.25 454.62
4.10.1 Details of Technical write-offs and recoveries made: (` in crore)
Particulars 2015-2016 2014-2015
Opening balance of Technical / Prudential written off accounts as at 1st April 317.84 385.85
Add: Technical / Prudential write offs during the year 68.88 14.92
Sub Total (A) 386.72 400.77
Less: Recoveries / reduction made from previously technical / prudential written - off accountsduring the year (B) 41.33 82.93
Closing balance as on 31st March (A-B) 345.39 317.84
4.11 Regrouping of Deposits placed with NABARD/SIDBI/NHB for meeting shortfall in Priority Sector Lending
Pursuant to RBI Cir.DBR.BP.BC.No.31/21.04.018/2015-16 dated 16.07.2015 the Bank has included its deposits placed with NABARD/SIDBI/NHB on account of shortfall in priority sector targets under Schedule 11-Other Assets'. Previously, the same has been accountedunder the head 'Investment'. Interest income on these deposits has been included under 'Interest Earned- Others'. Previously, suchinterest income was included under 'Interest Earned'-Income on Investments'.
F - 32
4.13 Off-balance Sheet SPVs sponsored :Name of the SPV sponsored
Domestic Overseas
NA NA
4. 14 Disclosure on Remuneration:
a. Qualitative disclosures:
(a) Information relating to the composition and mandate of theRemuneration Committee.
(b) Information relating to the design and structure of remunerationprocesses and the key features and objectives of remunerationpolicy.
(c) Description of the ways in which current and future risks are takeninto account in the remuneration processes. It should include thenature and type of the key measures used to take account ofthese risks.
(d) Description of the ways in which the bank seeks to linkperformance during a performance measurement period with level of remuneration.
(e) A discussion of the bank’s policy on deferral and vesting of variableremuneration and a discussion of the bank’s policy and criteria foradjusting deferred remuneration before vesting and after vesting
(f) Description of the different forms of variable remuneration(i.e. cash, shares, ESOPs and other forms) that the bank utilizesand the rationale for using these different forms.
The latest amendment to the policy was approvedby the HR Committee of the Board on 14.10.2015.
Performance is evaluated based on KeyPerformance indicators as approved by the Board.
ESOS and Performance incentives are thecomponents of variable remuneration
The members of the Nomination and Remunerationcommittee as on 31st March 2016 are 4.
(g) Number of meeting held by the remunerationcommittee during the financial year and remunerationpaid its members
Meeting of the Nomination andRemuneration Committee of theBoard (NRCB) was held 5 timesduring FY 2015-16 and the totalremuneration paid to thecommittee members is $ 5.45lacs.
One meeting of theCompensation & RemunerationCommittee of the Board(CRCB) having 5 members washeld. Remuneration paid tocommittee members is $ 0.60lacs; Two meetings of theNomination and RemunerationCommittee of the Board(NRCB) having 5 members washeld and the Remunerationpaid to the committee membersis $ 1.80 lacs
4.12 Overseas Assets, NPAs and Revenue:
Particulars (` in crore)
Total Assets NIL
Total NPAs NIL
Total Revenue NIL
b. Quantitative disclosures:
Particulars 2015-16 2014-15
F - 33
Particulars 2015-16 2014-15
(h) (i) Number of employees having received a variable remuneration award during the financial year. NIL NIL
(ii) Number and total amount sign-on awards made during the financial year. NIL NIL
(iii) a) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL
b) Details of performance Bonus / Allowance $ 35,00,000/- (2 persons) $ 42,00,000/- (3 persons)(iv) Details of severance pay, in addition to accrued benefits, Notice period pay
if any. NIL $ 5,65,626/-(3 persons)
(i) (i) Total amount of outstanding deferred remuneration, split into Grant of 12 lacs shares to NILcash, shares and shares - linked instruments and other forms. MD & CEO under ESOS
subject to approval of RBI
(ii) Total amount of deferred remuneration paid out in the $ 1.22 Crore NILfinancial year.
(j) Breakdown of amount remuneration awards for the financial yearto show fixed and variable, deferred and non-deferred.
(k) (i) Total amount of outstanding deferred remuneration and retainedremuneration exposed to ex-post explicit and/or implicit adjustments. NIL NIL
(ii) Total amount of reductions during the financial year due to ex-postexplicit adjustments. NIL NIL
(iii) Total amount of reductions during the financial year due to ex-postimplicit adjustments. NIL NIL
No Risk Takers were paidVariable Pay
No deferred and Non-deferred remuneration
No Risk Takers were paidVariable Pay
No deferred and Non-deferred remuneration
b. Quantitative disclosures: (Contd.)
4.15 Disclosures relating to securitization: NA
4.16 Credit Default Swaps: NIL
4.17 Intra – Group Exposure: (` in crore)
Particulars FY2015-16
(a) Total amount of intra-group exposures
(b) Total amount of top-20 intra-group exposures NIL
(c) Percentage of intra-group exposures to total exposure of the bank on borrowers / customers
(d) Details of breach of limits on intra-group exposures and regulatory action thereon, if any.
4.18 Transfer to Depositors Education and Awareness Fund (DEAF): (` in crore)
Particulars FY2015-16 FY2014-15
Opening balance of amounts transferred to DEAF 10.10 NIL
Add: Amounts Transferred to DEAF during the year 7.66 10.10
Less: Amounts reimbursed by DEAF towards claims 0.04 NIL
Closing balance of amounts transferred to DEAF 17.72 10.10
4.19 Unhedged Foreign Currency Exposure:
Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged ForeignCurrency Exposure (UFCE) of their constituents in terms of RBI Circular No. BDOD.NO.BP.BC.85/21.06.200/2013-14 dated15th January 2014 and the total provision held as of 31st March 2016 is ` 1.70 Crore.
F - 34
5.1 Liquidity Coverage Ratio: (` in Crores)
2015-20162014-2015
(Quarter entered 31.03.2015 only)
Total Unweighted Total Weighted Total Unweighted Total WeightedValue (Average) Value (Average) Value (Average) Value (Average)
High Quality Liquid Assets
1. Total High Quality Liquid Assets (HQLA) – 797.68 – 834.06
Cash Outflows
2 Retail deposits and deposits from smallbusiness customers, of which 949.94 81.59 719.32 59.99
(i) Stable Deposits 268.04 13.40 238.73 11.94
(ii) Less stable Deposits 681.90 68.19 480.59 48.05
3 Unsecured wholesale funding, of which: 818.00 92.54 704.71 78.48
(i) Operational deposits(all counterparties) 74.66 18.66 56.57 14.14
(ii) Non-operational deposits(all counterparties) 743.34 73.88 648.14 64.34
(iii) Unsecured debt 0.00 0.00 0.00 0.00
4 Secured Wholesale funding 441.49 0.00 278.72 0.00
5. Additional requirements, of which 3216.03 282.63 2894.97 363.25
(i) Outflows related to derivative exposuresand other collateral requirements 7.66 7.66 10.26 10.26
(ii) Outflows related to loss of funding ondebt products 0.00 0.00 0.00 0.00
(iii) Credit and Liquidity facilities 1120.83 99.84 1027.03 195.27
6 Other contractual funding obligations 82.22 82.22 68.25 68.25
7 Other contingent funding obligations 2005.33 92.91 1789.43 89.47
8 Total Cash Outflows 5425.46 456.76 4597.72 501.72
Cash Inflows
9 Secured lending (e.g. reverse repos) 59.31 0.00 46.80 0.00
10 Inflows from fully performing exposures 2170.40 1085.20 1722.75 1188.24
11 Other cash inflows 83.21 66.54 87.09 87.09
12 Total Cash Inflows 2312.91 1151.74 1856.64 1275.33
Total Adjusted Total Adjusted5 Value Value
13 TOTAL HQLA 797.68 – 834.06
14 Total Net Cash Outflows 114.19 – 125.44
15 Liquidity Coverage Ratio (%) 698.56 – 664.91
4.20 Details of Frauds occurred and Provision made during the year:
As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:
(a) Number of Fraud cases reported during the year 24
(b) Amount involved (` In Crore) 22.17
(c) Quantum of Provision made, net of recoveries of ` 11.65 Crore 9.99
(d) Quantum of unamortized Provision debited from 'Other Reserves' (` In Crore) NIL
F - 35
5.2 Qualitative disclosure around LCR:
Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing theLiquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets(HQLA) into Level 1 and Level 2A/2B. As on 31.03.2016, the Bank has ` 971.55 Crore of HQLAs, of which, the main contribution isfrom Level - 1 type of assets with ` 871.73 Crore. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR andCash in Hand.
As on 31.03.2016, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of` 427.33 Crore of cash outflows and ` 4030.78 Crore of cash inflows over the next 30 days period. Of this total amount of` 427.33 Crore of cash outflows, the major component is in the form of unsecured wholesale funding and of the total ` 4030.78 Croreof cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.
6. a) The disputed Income Tax demand outstanding as on 31.03.2016 amounts to ` 60.12 Crore (previous year ` 52.61 Crore) andis included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of thedisputed liabilities in view of favourable decisions by various appellate authorities on similar issues.
b) The Bank has recognized the Income Tax Liability of ` 50 Crore on its Book Profits in terms of section 115JB of the IncomeTax Act, 1961 and after considering the normal tax, a sum of ` 19 Crore being MAT credit entitlement under section 115 JAAof the Income Tax act, 1961 has been recognized and treated as an Asset.
7. During the year, the Bank has raised unsecured non-convertible, redeemable fully paid Basel III complaint Tier II bonds in thenature of debenture amounting to ` 140.10 Crore.
8. Previous year's figures have been regrouped / reclassified wherever considered necessary to conform to the currentyear's classification
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
B.R. ASHOKPartnerM. No. 023313
Chennai27th April, 2016
D.L.N. RAO
S.G. PRABHAKHARANS. DATTATHREYAN
Dr. P.A. SHANKAR
N. MALAYALARAMAMIRTHAMPANKAJ VAISH
PRAKASH P. MALLYA
K. BABUJI
SUVENDU PATIDirectors
K.R. PRADEEPChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
M. PALANIAPPANPresident & Chief Financial Officer
N. RAMANATHANCompany Secretary
F - 36
CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 180,23,58 132,28,59
ADJUSTMENTS FOR:
Provisions & Contingencies 226,88,83 236,12,22
Depreciation 37,76,28 15,54,48
Loss on sale of assets 7,92 32,33
Income Tax / T D S paid -57,00,00 -41,10,00
Net cash flow before changes in Working Capital 387,96,61 343,17,62
CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in
Deposits 3466,74,93 3391,33,01
Refinances 224,80,78 0
Other Liabilities -170,69,28 -108,22,89
3520,86,43 3283,10,12
ASSETS : Increase/Decrease in
Investments 494,24,86 420,78,85
Advances 3291,71,98 3462,82,94
Other Assets 12,29,14 77,72,24
-3798,25,98 -3961,34,03
Net Cash Flow from operating activities 110,57,06 -335,06,29
CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets -67,80,86 -59,47,91
Sale of Fixed Assets 32,45 70,62
Net Cash Flow from Investing activities -67,48,41 -58,77,29
CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium net of forfeited shares 2,34,66 410,52,90
Proceeds received from Tier II Bonds 140,10,00 0
Repayment of Tier II Bonds -100,00,00 0
Dividends paid -35,64,28 -9,65,92
Net Cash Flow from financing activities 6,80,38 400,86,98
Cash flow for the year 49,89,03 7,03,41
Cash & Cash equivalents at the beginning of the year 1318,72,10 1311,68,69
Cash & Cash equivalents at the year end 1368,61,13 1318,72,10
CASH FLOW STATEMENT for the year ended 31st March 2016
(` in 000’s)
31.03.2016 31.03.2015
As per our Report of Date annexed
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
B.R. ASHOKPartnerM. No. 023313
Chennai27th April, 2016
D.L.N. RAO
S.G. PRABHAKHARAN
S. DATTATHREYANDr. P.A. SHANKAR
N. MALAYALARAMAMIRTHAM
PANKAJ VAISH
PRAKASH P. MALLYAK. BABUJI
SUVENDU PATI
Directors
K.R. PRADEEPChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
M. PALANIAPPANPresident & Chief Financial Officer
N. RAMANATHANCompany Secretary
F - 37
INDEPENDENT AUDITOR’S REPORT
Report on the Standalone Financial Statements
1. We have audited the accompanying standalone financial statements of The Lakshmi Vilas Bank Limited ('the Bank'), whichcomprise the Balance Sheet as at 31 March 2017, the Profit and Loss Account, the Cash Flow Statement for the year thenended, and a summary of significant accounting policies and other explanatory information. Incorporated in these financialstatements are the returns for the year ended on that date of 25 branches/offices audited by us and 474 branches audited bybranch auditors.
Management's Responsibility for the Standalone Financial Statements
2. The Bank's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act,2013 ('the Act') withrespect to the preparation of these standalone financial statements that give a true and fair view of the financial position,financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India,including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules,2014 and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bankof India ('RBI') from time to time. This responsibility also includes maintenance of adequate accounting records in accordancewith the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonableand prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of thefinancial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
3. Our responsibility is to express an opinion on these standalone financial statements based on our audit.
4. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required tobe included in the audit report under the provisions of the Act and the Rules made thereunder.
5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing ('the Standards') specifiedunder Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatements.
6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements.The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financialcontrol relevant to the Bank's preparation of the financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of the accounting estimates made by the Bank's Directors, as well as evaluating theoverall presentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on thestandalone financial statements.
Opinion
8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalonefinancial statements give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013 inthe manner so required for banking companies and give a true and fair view in conformity with accounting principles generallyaccepted in India of the state of affairs of the Bank, as at 31st March 2017 and its profit and its cash flows for the year then ended.
Emphasis of Matter
9. We draw attention to
(i) Note No.2.4.4.C of the financial statements, regarding deferment of charging off to Profit and Loss account, the loss of$.31.29 Crore on sale of advances to Asset Reconstruction Companies;
To
The Members of The Lakshmi Vilas Bank Limited
F - 38
For M//s. R. K. KUMAR & CO.Chartered Accountants
FRN - 001595S
(G. NAGANATHAN)Place : Chennai PartnerDate : 26th April, 2017 M.No. 022456
(ii) Note No. 4.27 of the financial statements, regarding deferment of charging off to Profit and Loss account, the loss ofRs.19.15 Crore relating to advance accounts reported as fraud;
Our opinion is not qualified in respect of these matters.
Report on Other Legal and Regulatory Requirements
10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of theBanking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts)Rules, 2014.
11. As required by sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that:
(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe purpose of our audit and have found them to be satisfactory;
(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.
(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.
12. Further, as required by Section 143(3) of the Act, we report that:
(i) we have sought and obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit;
(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from ourexamination of those books and proper returns adequate for the purposes of our audit have been received from branchesnot visited by us;
(iii) the reports on the accounts of the branches audited by branch auditors of the Bank under section 143(8) of the CompaniesAct, 2013 have been sent to us and have been properly dealt with by us in preparing this report;
(iv) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreementwith the books of account and with the returns received from the branches not visited by us;
(v) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified underSection 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistentwith the accounting policies prescribed by RBI;
(vi) on the basis of written representations received from the directors as on 31st March 2017 taken on record by the Board ofDirectors, none of the directors is disqualified as on 31st March 2017 from being appointed as a director in terms ofSection 164 (2) of the Act;
(vii) with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operatingeffectiveness of such controls, refer to our separate Report in "Annexure A"; and
(viii) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
a. the Bank has disclosed the impact of pending litigations on its financial position in its financial statements - ReferSchedule 18 - Note No. 6. (a) to the financial statements;
b. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeablelosses, if any, on long-term contracts including derivative contracts - Refer Schedule 18 - Note No. 3.12 to the financialstatements;
c. there has been no delay in transferring amounts required to be transferred to the Investor Education and ProtectionFund by the Bank; and
d. The disclosure requirement as envisaged in Notification G.S.R 308(E) dated 30th March 2017 is not applicable to theCompany - Refer Schedule 18 - Note No. 6 (b) to the financial statements;
F - 39
Annexure A to the independent auditor's report of even date on the standalone financial statements of The Lakshmi Vilas Bank Limited
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 20131. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited ('the Bank') as at
31st March 2017 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date.
Management's Responsibility for Internal Financial Controls2. The Bank's Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control
over financial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting ('the Guidance Note') issued by the Institute of CharteredAccountants of India ('the ICAI')".These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business, including adherence to Bank's policies, the safeguarding of itsassets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timelypreparation of reliable financial information, as required under the Companies Act, 2013 ('the Act').
Auditor's Responsibility3. Our responsibility is to express an opinion on the Bank's internal financial controls over financial reporting based on our audit.
We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting('the Guidance Note') and the Standards on Auditing ('the Standards'), both issued by the ICAI and deemed to be prescribed underSection 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established and maintained and if such controls operated effectivelyin all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system overfinancial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtainingan understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected dependon the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due tofraud or error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Bank'sinternal financial controls system over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting6. A bank's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. A bank's internal financial control over financial reporting includes those policies and procedures that:(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of
the assets of the bank;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditure of the bank are being made only inaccordance with authorizations of management and directors of the bank; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thebank's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of anyevaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.
Opinion8. In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such
internal financial controls over financial reporting were operating effectively as at 31st March 2017, based on the internal control overfinancial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.
For M//s. R. K. KUMAR & CO.Chartered Accountants
FRN - 001595S
(G. NAGANATHAN)Place : Chennai PartnerDate : 26th April, 2017 M.No. 022456
F - 40
(` 000’s)
As at As atSchedule 31-03-2017 31-03-2016
I. CAPITAL & LIABILITIES
a. Capital 1 191,44,67 179,46,16
b. Reserves & Surplus 2 1944,89,50 1584,13,25
c. Deposits 3 30553,35,35 25430,96,15
d. Borrowings 4 1773,13,21 723,00,78
e. Other Liabilities & Provisions 5 781,89,32 752,91,67
TOTAL 35244,72,05 28670,48,01
II. ASSETS
a. Cash & Balances with Reserve Bank of India 6 1454,80,48 1286,50,22
b. Balances with Banks and Money at call & Short Notice 7 169,07,17 82,10,91
c. Investments 8 8651,73,03 6545,40,46
d. Advances 9 23728,91,14 19643,73,90
e. Fixed Assets 10 359,11,90 366,99,87
f. Other Assets 11 881,08,33 745,72,65
TOTAL 35244,72,05 28670,48,01
Contingent Liabilities 12 3199,65,05 3687,01,45
Bills for collection 878,44,88 884,43,12
Significant Accounting Policies 17
Notes on Accounts 18
BALANCE SHEET as on 31st March 2017
Schedules 1 to 12 and 17 to 18 form part of this Balance Sheet.
KUSUMA R MUNIRAJUChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
N.S.VENKATESHExecutive Director & Chief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even Date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai26th April, 2017
S.G. PRABHAKHARANN. MALAYALARAMAMIRTHAME.V. SUMITHASRIY.N. LAKSHMINARAYANA MURTHYPANKAJ VAISHPRAKASH P MALLYAANURADHA PRADEEPSUVENDU PATIDirectors
F - 41
PROFIT AND LOSS ACCOUNT for the year ended 31st March 2017
(` 000’s)
Year ended Year endedSchedule 31-03-2017 31-03-2016
Schedules 13 to 16 and 17 to 18 form part of this Profit & Loss Account.
I. INCOME
a. Interest Earned 13 2846,65,75 2568,29,91
b. Other Income 14 502,76,78 304,53,24
TOTAL 3349,42,53 2872,83,15
II. EXPENDITURE
a. Interest Expended 15 2064,00,36 1922,99,34
b. Operating Expenses 16 651,36,59 542,71,40
c. Provisions & Contingencies 377,98,37 226,88,83
TOTAL 3093,35,32 2692,59,57
III. NET PROFIT FOR THE YEAR 256,07,21 180,23,58
Profit brought forward 44 8,16
Transfer from Investment Reserve 0 72,74
TOTAL 256,07,65 181,04,48
IV. APPROPRIATIONS
a. Transfer to Statutory Reserve 64,10,00 45,20,00
b. Transfer to Capital Reserve 77,16,23 6,04,17
c. Transfer to Other Reserves 46,55,00 50,00,00
d. Investment Reserve 0 0
e. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 6,00,00 15,00,00
f. Proposed Dividend 0 53,83,85
g. Tax on Proposed Dividend 0 10,96,02
h. Balance carried over to Balance Sheet 62,26,43 44
TOTAL 256,07,65 181,04,48
Earnings Per Share - Basic ($) 14.07 10.05
Earnings Per Share - Diluted ($) 13.95 10.05
KUSUMA R MUNIRAJUChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
N.S.VENKATESHExecutive Director & Chief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even Date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai26th April, 2017
S.G. PRABHAKHARANN. MALAYALARAMAMIRTHAME.V. SUMITHASRIY.N. LAKSHMINARAYANA MURTHYPANKAJ VAISHPRAKASH P MALLYAANURADHA PRADEEPSUVENDU PATIDirectors
F - 42
CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 256,07,22 180,23,58
ADJUSTMENTS FOR:
Provisions & Contingencies 377,98,37 226,88,83
Depreciation 48,05,54 37,76,28
Loss on sale of assets -26,45 7,92
Income Tax / T D S paid -125,00,00 -57,00,00
Net cash flow before changes in Working Capital 556,84,68 387,96,61
CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in
Deposits 5122,39,19 3466,74,93
Refinances 1080,12,43 224,80,78
Other Liabilities -330,49,29 -170,69,28
5872,02,33 3520,86,43
ASSETS : Increase/Decrease in
Investments 2106,32,57 494,24,86
Advances 4085,17,23 3291,71,98
Other Assets 10,30,67 12,29,14
-6201,80,47 -3798,25,98
Net Cash Flow from operating activities 227,06,54 110,57,06
CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets -40,62,09 -67,80,86
Sale of Fixed Assets 65,95 32,45
Net Cash Flow from Investing activities -39,96,14 -67,48,41
CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium 162,60,76 2,34,66
Proceeds received from Tier II Bonds 0 140,10,00
Repayment of Tier II Bonds -30,00,00 -100,00,00
Dividends paid -64,44,64 -35,64,28
Net Cash Flow from financing activities 68,16,12 6,80,38
Cash flow for the year 255,26,53 49,89,03
Cash & Cash equivalents at the beginning of the year 1368,61,13 1318,72,10
Cash & Cash equivalents at the year end 1623,87,65 1368,61,13
CASH FLOW STATEMENT for the year ended 31st March 2017
(` in 000’s)
31-03-2017 31-03-2016
KUSUMA R MUNIRAJUChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
N.S.VENKATESHExecutive Director & Chief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even Date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai26th April, 2017
S.G. PRABHAKHARANN. MALAYALARAMAMIRTHAME.V. SUMITHASRIY.N. LAKSHMINARAYANA MURTHYPANKAJ VAISHPRAKASH P MALLYAANURADHA PRADEEPSUVENDU PATIDirectors
F - 43
($ 000’s)
As at As at31-03-2017 31-03-2016
SCHEDULE 1 - CAPITALAUTHORISED CAPITAL(50,00,00,000 equity shares of $ 10/- each)(Previous year 30,00,00,000 equity shares of $ 10/ each) 500,00,00 300,00,00ISSUED CAPITAL(19,29,55,124 equity shares of $ 10/- each)(Previous year 18,09,69,986 equity shares of $ 10/- each)of which 1,19,85,138 shares issued through QIP Issue) 192,95,51 180,97,00Subscribed, Called-up and Paid Up Capitali) 19,14,46,747 equity shares of $ 10/- each 191,44,67 179,46,16
(Previous year 17,94,61,609 shares of $ 10/- each).(1,19,85,138 shares were allotted to QIB).
ii) 1,26,42,131 Bonus Shares allotted(Previous year 1,26,42,131 shares)
iii) Shares kept in abeyance 15,08,377,inclusive of Forfeited &lapsed shares.(Previous year 15,08,377 shares)
iv) Shares Forfeited and lapsed 23,658 (Previous year 23,658 shares)TOTAL 191,44,67 179,46,16
SCHEULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE
Opening Balance 417,30,46 372,10,46Additions during the year 64,10,00 481,40,46 45,20,00 417,30,46
II. CAPITAL RESERVEOpening Balance 63,10,71 57,06,54Additions during the year 77,16,23 140,26,94 6,04,17 63,10,71
III. SHARE PREMIUMOpening Balance 657,35,89 659,62,54Additions during the year 155,80,68 2,05,16
813,16,57 661,67,70Deductions during the year 5,18,43 807,98,14 4,31,81 657,35,89
IV. REVENUE & OTHER RESERVESOpening Balance 218,17,53 167,46,49Additions during the year 48,78,90 50,71,04
266,96,43 218,17,53Deductions during the year 50,43,71 216,52,72 0 218,17,53
V. EMPLOYEE STOCK OPTION OUTSTANDINGOpening Balance 0 20304Additions during the year 4,50,49 0
4,50,49 20304Deductions during the year 0 20304
4,50,49 0VI. SPECIAL RESERVE U/S 36(1)(VIII) OF IT ACT, 1961
Opening Balance 56,45,00 41,45,00Additions during the year 6,00,00 62,45,00 15,00,00 56,45,00
VII. REVALUATION RESERVEOpening Balance 171,73,22 78,45,67Additions during the year 0 93,98,59
171,73,22 172,44,26Depreciation on Revalued Asset 2,23,90 169,49,32 71,04 171,73,22
VIII. INVESTMENT RESERVEOpening Balance 0 72,74Additions during the year 0 0
0 72,74Deductions during the year 0 72,74
0 0IX. BALANCE IN PROFIT & LOSS ACCOUNT 62,26,43 44
TOTAL 1944,89,50 1584,13,25
F - 44
SCHEDULE 3 - DEPOSITS
A. I. DEMAND DEPOSITS
1. From Banks 5,37,09 1,37
2. From Others 1839,37,21 1844,74,30 1636,44,79 1636,46,16
II. SAVINGS BANK DEPOSITS 3999,60,89 2779,06,43
III. TERM DEPOSITS
1. From Banks 2141,82,11 1166,35,55
2. From Others 22567,18,05 24709,00,16 19849,08,01 21015,43,56
30553,35,35 25430,96,15
B. (I) DEPOSITS OF BRANCHES IN INDIA 30553,35,35 25430,96,15
(II) DEPOSITS OF BRANCHES OUTSIDE INDIA NIL NIL
TOTAL 30553,35,35 25430,96,15
SCHEDULE 4 - BORROWINGS
I. BORROWINGS IN INDIA
1. Reserve Bank of India 65,00,00 0
2. Other Banks 250,00,00 0
3. Other Institutions & Agencies* 1458,13,21 1773,13,21 723,00,78 723,00,78
II. BORROWINGS OUTSIDE INDIA 0 0
* Includes unsecured Tier II bonds of ` 468.20 Crs 1773,13,21 723,00,78(Previous year ` 498.20 Crs.)
SECURED BORROWINGS INCLUDED IN I & II ABOVE 0 0
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS
I. Bills payable 66,23,14 77,85,74
II. Inter-office adjustments (net) 48,06,44 4,40,37
III. Interest accrued 210,56,90 224,52,38
IV. (I) Others - (including Provisions) 369,62,84 373,90,18
(ii) Contingent Provisions against Standard Assets 87,40,00 72,23,00
(iii) Deferred Tax Liabilities 0 0
TOTAL 781,89,32 752,91,67
SCHEDULE 6 - CASH AND BALANCES WITHRESERVE BANK OF INDIA
Cash in Hand (including Foreign Currency Notes) 341,26,46 315,90,91
Balances with Reserve Bank of India
I) in current account 1113,54,02 970,59,31
II) in other accounts 0 0
TOTAL 1454,80,48 1286,50,22
($ 000’s)
As at As at31-03-2017 31-03-2016
F - 45
(` 000’s)
As at As at31-03-2017 31-03-2016
SCHEDULE 7 - BALANCES WITH BANKS & MONEYAT CALL AND SHORT NOTICE
I. IN INDIA
(i) Balance with Banks
a. in current accounts 19,78,04 20,13,46
b. in other deposit accounts 6,25 6,25
19,84,29 20,19,71
(ii) Money at call and short notice
a. with banks 0 0
b. with other institutions 110,00,00 0
129,84,29 20,19,71
II. OUTSIDE INDIA
(I) Balance with Banks
a. in current accounts 39,22,88 61,91,20
b. in other accounts 0 0
39,22,88 61,91,20
TOTAL 169,07,17 82,10,91
SCHEDULE 8 - INVESTMENTS
I. INVESTMENTS IN INDIA
I. Government Securities [incl. treasury bills, & zero coupon bonds] 7910,70,21 5849,42,86
II. Other approved securities 0 0
III. Shares 134,98,32 79,81,17
IV. Debentures & Bonds 282,32,63 355,24,60
V. Subsidiaries and Joint Ventures 0 0
VI. Others [including Commercial Paper, Mutual Funds,Security Receipt, Units, etc.] 323,71,87 260,91,83
8651,73,03 6545,40,46
GROSS INVESTMENTS IN INDIA 8703,12,63 6594,44,56
LESS: DEPRECIATION 51,39,60 49,04,10
NET INVESTMENTS IN INDIA 8651,73,03 6545,40,46
II. INVESTMENTS OUTSIDE INDIA NIL NIL
TOTAL 8651,73,03 6545,40,46
F - 46
(` 000’s)
As at As at31-03-2017 31-03-2016
SCHEDULE 9 - ADVANCES
A. I. Bills purchased & discounted 863,82,09 1758,19,67
II. Cash credits, overdrafts & loans repayableon demand 12796,49,91 10678,34,05
III. Term loans 10068,59,14 7207,20,18
23728,91,14 19643,73,90
B. PARTICULARS OF ADVANCES
I. Secured by tangible assets [incl. advancesagainst Book Debts] 23314,59,93 18878,59,94
II. Covered by Bank / Govt. Guarantees 0 0
III. Unsecured 414,31,21 765,13,96
23728,91,14 19643,73,90
C. SECTORAL CLASSIFICATION OF ADVANCES
I. Priority Sector 8195,07,30 7296,42,17
II. Public Sector 0 0
III. Banks 0 0
IV. Others 15533,83,84 12347,31,73
TOTAL 23728,91,14 19643,73,90
SCHEDULE 10 - FIXED ASSETS
I. PREMISES
At cost 64,86,41 63,87,70
Addition due to Revaluvation 175,49,12 175,49,12
Additions during the year 18,62 98,71
240,54,15 240,35,53
Deductions during the year 0 0
240,54,15 240,35,53
Depreciation to date 17,29,28 223,24,87 14,49,82 225,85,71
II. OTHER FIXED ASSETS(INCLUDING FURNITURE & FIXTURES)
At Cost 369,01,92 303,71,91
Additions during the year 40,43,47 66,82,14
409,45,39 370,54,05
Deductions during the year 6,98,27 1,52,13
402,47,12 369,01,92
Depreciation to date 266,60,08 135,87,03 227,87,76 141,14,16
TOTAL 359,11,90 366,99,87
F - 47
(` 000’s)
As at As at31-03-2017 31-03-2016
SCHEDULE 11 - OTHER ASSETS
I. Inter-Office Adjustments (net) 0 0
II. Interest Accrued 197,35,22 163,63,88
III. Tax Paid in Advance and Tax Deducted at Source (Net) 133,72,89 116,17,46
IV. Deferred Tax Asset (net) 65,22,16 52,22,16
V. Stationery & Stamps 2,55,85 2,42,11
VI. Non Banking Assets acquired in satisfaction of claims 78,25,71 75,86,38
VII. Others 403,96,50 335,40,66
TOTAL 881,08,33 745,72,65
SCHEDULE 12 - CONTINGENT LIABILITIES
I. Claims against the Bank not acknowledged as debts 135,50,71 240,02,49
II. Liability for partly paid Investments 0 0
III. Liability on account of outstanding forward exchange contracts 838,04,22 1159,08,98
IV. Guarantees given on behalf of constituents
In India 948,97,32 828,57,71
Outside India 162,92,39 189,23,18
V. Acceptances, Endorsements & Other Obligations 1091,06,31 1252,36,82
VI. Other items for which the Bank is contingently liable 23,14,10 17,72,27
TOTAL 3199,65,05 3687,01,45
Year ended Year ended31-03-2017 31-03-2016
SCHEDULE 13 - INTEREST EARNED
I. Interest / discount on advances / bills 2239,71,04 2038,26,97
II. Income on Investments 577,59,37 519,40,04
III. Interest on balance with Reserve Bank of India& other inter-bank Funds 12,28,33 3,26,84
IV Others 17,07,01 7,36,06
TOTAL 2846,65,75 2568,29,91
F - 48
(` 000’s)
Year ended Year ended31-03-2017 31-03-2016
SCHEDULE 14 - OTHER INCOME
I. Commission, Exchange and Brokerage 134,06,85 147,13,66
II. Profit on sale of Investments 350,52,75 56,85,17
Less: Loss on sale of Investments 90,56,83 259,95,92 3,49,40 53,35,77
III Profit on sale of land, Buildings & Other Assets 37,24 6,47
Less: Loss on sale of land, Buildings & Other Assets 10,79 26,45 14,39 -7,92
IV. Profit on Exchange Transactions 13,30,28 16,64,58
Less: Loss on Exchange Transactions 0 13,30,28 0 16,64,58
V. Income earned by way of Dividendsfrom Companies in India. 3,17,52 3,17,52 2,97,33 2,97,33
VI. Miscellaneous Income 91,99,76 84,49,82
TOTAL 502,76,78 304,53,24
SCHEDULE 15 - INTEREST EXPENDED
I. Interest on Deposits 1938,16,06 1833,29,25
II. Interest on Reserve Bank of India / Inter-BankBorrowings 125,84,30 89,70,09
TOTAL 2064,00,36 1922,99,34
SCHEDULE 16 - OPERATING EXPENSES
I. Payments to and Provision for Employees 334,70,89 275,35,20
II. Rent, Taxes & Lighting 63,49,84 58,34,76
III. Printing & Stationery 6,62,31 5,77,16
IV. Advertisement & Publicity 9,64,65 8,38,43
V. Depreciation on Bank's Property 48,05,54 37,76,28
VI. Director's fees, allowances 1,40,00 1,15,35
VII. Auditors' fees & Expenses (incl. Branch Auditors) 1,38,65 1,25,05
VIII. Law Charges 2,04,35 1,16,18
IX. Postage, Telegrams, Telephones, etc., 12,79,85 13,36,46
X. Repairs & Maintenance 4,36,72 3,41,22
XI. Insurance 26,58,67 23,82,40
XII. Other Expenditure 140,25,12 112,92,91
TOTAL 651,36,59 542,71,40
F - 49
SCHEDULE 17
SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated andconform 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, Accounting Standards (AS) specified underSection 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicableand current practices prevailing in the banking industry in India.
B. USE OF ESTIMATES:The preparation of the financial statements require management to make estimates and assumptions that affect the reportedamounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reportedincome and expenses during the reported period. The Management believes that the estimates and assumptions used in thepreparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Thedifferences, if any between estimates and actual will be dealt appropriately in future periods.
C. PRINCIPAL ACCOUNTING POLICIES1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as perthe guidelines issued by FEDAI. The resultant profit or loss is accounted for.
(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of the respectivetransaction.
(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the correspondingforward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisionsof AS-11. The difference between revalued amount and the contracted amount is recognized as profit or loss, as thecase may be.
(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailingon the Balance Sheet date.
2. INVESTMENTS:(a) Investments are categorized under the heads 'Held to Maturity', Available for Sale, and 'Held for Trading' and are
valued in accordance with the guidelines of the Reserve Bank of India
(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and notincluded in cost.
(c) Broken period interest paid / received on debt instruments is treated as interest expense / income.
(d) Security receipts are valued at NAV as declared by Securitisation Companies
(e) The excess of acquisition cost over the face value of securities under "Held to Maturity" category is amortised overthe remaining period to maturity.
(f) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged tothe profit and loss account. Cost of investments is computed based on the Weighted Average Rate method.
(g) Profit / loss on sale of investments in the 'Held to Maturity' category is recognized in the profit and loss account andprofit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to capital reserve.Profit / loss on sale of investments in 'Available for Sale' and 'Held for Trading' categories is recognised in the profitand loss account.
(h) All Repo and Reverse Repo transactions are accounted for as borrowing and lending transactions respectively inaccordance with the extant RBI guidelines.
3. ADVANCES:3.1 In accordance with the prudential norms issued by RBI:
(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;
(b) Provisions are made for loan losses, and
(c) General provision for standard advances is made.
3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towardsNPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value of restructuredadvances measured in present value terms as per RBI guidelines.
F - 50
4. FIXED ASSETS AND DEPRECIATION:(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted at their
revalued cost.
(b) Software is capitalised along with computer hardware and included under Other Fixed Assets.
(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful lifespecified in Schedule II to the Companies Act, 2013 except for hand held communication devices(other than Tablets)which are depreciated in full considering the fast changing technology and obsolescence.
(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per theguidelines issued by the Reserve Bank of India.
(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is providedon the total cost.
5. EMPLOYEE BENEFITS:(a) Annual contributions to the approved Employees' Gratuity Fund, Approved Pension Fund and Provision for Leave
Encashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as per AccountingStandard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged toProfit & Loss account.
(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant ofEmployee Stock Options.
6. PROVISION FOR TAXATION:Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial pronouncementsand legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accounting for Taxes onIncome).
7. REVENUE RECOGNITION:(a) Income is accounted for on accrual basis.
(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significantuncertainty in collection thereof:
(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.
(d) Dividend Income on Investments is accounted based on declaration basis.
8. SEGMENT REPORTING:(a) The Bank recognises the Business Segment as the Primary Reporting Segment and Geographical Segment
as the Secondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the AccountingStandard 17.
(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations.
(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.
9. EARNINGS PER SHARE:Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 "Earnings pershare". Basic earnings per equity share are computed by dividing net profit by the weighted average number of equityshares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number ofequity shares and dilutive potential equity shares outstanding during the period.
10. IMPAIRMENT OF ASSETSThe Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairmentloss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimatedrecoverable amount.
11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:(a) As per the Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Assets", the Bank recognises
provisions only when it has a present obligation as a result of a past event and it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and when a reliable estimate of theamount of the obligation can be made.
(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition of incomethat may never be realised.
F - 51
2.1 CAPITAL (` in crore)
Items 2016-17 2015-16
i) Common Equity Tier 1 Capital Ratio (%) - (Basel-III) 8.75 8.69
ii) Tier 1 Capital Ratio (%) 8.75 8.69
iii) Tier 2 Capital Ratio (%) 1.63 1.98
iv) Total Capital Ratio (CRAR) (%) 10.38 10.67
v) Percentage of the shareholding of the Government of India in public sector bank NA NA
vi) Amount of equity capital raised 167.79 0.29
vii) Amount of Additional Tier 1 capital raised, of which
PNCPS :
PDI : NIL NIL
viii) Amount of Tier II Capital raised, of which
Debt capital instruments NIL 140.10
Preference Share Capital instruments NIL NIL
CAPITAL RAISED THROUGH QIP ISSUEDuring the year 2016-17, the Bank has allotted 1,19,85,138 equity shares of face value of $ 10/- each at a premium of $ 130/ per shareaggregating to $ 167.79 crore to Qualified Institutional Buyers.
2.1.1 In respect of securities held under HTM category, premium paid of $ 13.72 Crore (previous year $ 8.64 Crore) has beenamortized during the year and debited under "Interest received on Investments".
12. NET PROFIT:The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: -
a) Taxation.
b) Advances and other assets.
c) Shortfall in the value of investments
d) Staff Retirement benefits.
e) Other usual and necessary provisions.
13. CASH AND CASH EQUIVALENTS:Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at Call and ShortNotice.
SCHEDULE 18
NOTES ON ACCOUNTS1. The reconciliation of inter branch transactions has been completed up to 31.03.2017 and tallying of balances is ensured on
an ongoing basis.
2. DISCLOSURE REQUIREMENTS
2.2 INVESTMENTS (` in crore)
Particulars 2016-17 2015-16
(1) Value of Investments
(i) Gross Value of Investments
(a) In India 8,703.13 6,594.44
(b) Outside India NIL NIL
(ii) Provisions for Depreciation
(a) In India 51.40 49.04
(b) Outside India NIL NIL
(iii) Net Value of Investments
(a) In India 8,651.73 6,545.40
(b) Outside India. NIL NIL
F - 52
(2) Movement of provisions held towards Depreciation on investments.
(i) Opening balance 49.04 41.69
(ii) Add: Provisions made during the year 2.36 8.65
(iii) Less: Write-off / write-back of excess provisions during the year 0.00 1.30
(iv) Closing Balance 51.40 49.04
2.2 INVESTMENTS (Contd.) (` in crore)
Particulars 2016-17 2015-16
2.2.1 Repo Transactions (in face value terms) (` in crore)
Minimum Maximum Daily Average Outstandingoutstanding outstanding outstanding As on
during during during March 31, the year the year the year 2017
Securities sold under repo
I. Government Securities 0.00 3085.69 521.86 321.87(10.40) (676.00) (295.83) (312.00)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
Securities purchased under reverse repo
I. Government Securities 0.00 1580.80 175.62 110.00(10.40) (234.00) (27.67) (234.00)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
(Figures in bracket indicates in previous year)
2.2.2 Non-SLR Investment Portfolio
i) Issuer composition of Non SLR investments: (` in crore)
No. Issuer Amount Extent of Extent of Extent of Extent ofPrivate ‘Below ‘Unrated’ ‘Unlisted’
Placement Investment Securities SecuritiesGrade’
Securities
(1) (2) (3) (4) (5) (6) (7)
1 PSUs 27.14 25.67 0.00 0.00 0.00
2 FIs 51.82 6.00 0.00 0.00 0.00
3 Banks 40.95 28.00 0.00 0.00 0.00
4 Private Corporates 336.28 238.06 11.93 11.93 31.93
5 Subsidiaries/ Joint Ventures 0.00 0.00 0.00 0.00 0.00
6 Others 336.24 266.08 0.00 0.00 0.00
7 Less: Provision held towardsdepreciation -51.40 – – – –
Total 741.03 563.81 11.93 11.93 31.93
Amounts reported under Columns 4, 5, 6 and 7 above may not be mutually exclusive.
F - 53
Particulars 2016-17 2015-16
Opening balance 10.05 10.78
Additions during the year since 1st April 20.83 1.27
Reductions during the above period 3.12 2.00
Closing balance 27.76 10.05
Total Provisions held (*) 14.07 9.11
(*) An amount of $ 0.94 Crore (PY $ 0.94 Crore) received towards part settlement is parked under sundries account.
ii) Non-performing Non-SLR investments : (` in crore)
2.2.3 Sale and transfers to / from HTM category:
During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTMcategory as at the beginning of the year. The details of HTM category as on 31.03.2017 are furnished hereunder:
(` in crore)
Particulars 2016-17 2015-16
i) The notional principal of swap agreements NIL NIL
ii) Losses which would be incurred if counter parties failed to fulfillobligations under the agreements NIL NIL
iii) Collateral required by the bank upon entering into swaps NIL NIL
iv) Concentration of credit risk arising from the swaps NIL NIL
v) The fair value of the swap book NIL NIL
2.3.2 Exchange Traded Interest Rate Derivatives: (` in crore)
S.No. Particulars 2016-17 2015-16
(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NIL NIL
(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2017 (instrument-wise) NIL NIL
(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
(iv) Mark-to-market value of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
2.3.3 Disclosures on risk exposure in derivatives
Qualitative Disclosure:
The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used tohedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.
To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribed in theTreasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthly basis for ForeignExchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.
2.3 Derivatives
2.3.1 Forward Rate Agreement / Interest Rate Swap: (` in crore)
Market Value 5,118.61
Book value 5,139.53
Excess of book value over market value for which Provision is not made 20.92
F - 54
Sl.Particular
Currency Derivatives Interest rate Derivatives
No. 2016-17 2015-16 2016-17 2015-16
(i) Derivatives (Notional Principal Amount) NA NA NA NAa) For hedging NA NA NA NAb) For trading NA NA NA NA
(ii) Marked to Market Positions NA NA NA NAa) Asset (+) NA NA NA NAb) Liability (-) NA NA NA NA
(iii) Credit Exposure NA NA NA NA
(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NA NA NAa) On hedging derivatives NA NA NA NAb) On trading derivatives NA NA NA NA
(v) Maximum and Minimum of 100*PV01 observed during the year NA NA NA NAa) On hedging NA NA NA NAb) On trading NA NA NA NA
2.3.4 Shifting of securities:
For the year ended 31.03.2017, Bank has shifted securities amounting to $ 903 Crore (Face Value) (Previous year $ 639.28 CroreFace Value) from HTM to AFS category and no loss arose on such transfer (Previous year - no loss).
2.3.5 SLR Securities: ($ in crore)
As at 31.03.2017 As at 31.03.2016
ParticularsBook Market Book MarketValue Value Value Value
Government Securities SLR (CG, SG,TB) 7,910.70 7,891.67 5,849.43 5,877.23
Approved securities - SLR 0.00 0.00 0.00 0.00
2.4 Asset Quality
2.4.1 Non-Performing Assets: (` in crore)
Particulars 2016-17 2015-16
(i) Net NPAs to Net Advances (%) 1.76% 1.18%
(ii) Movement of NPAs (Gross)(a) Opening balance 391.25 454.62(b) Additions during the year 597.20 196.90(c) Reductions during the year 348.26 260.27(d) Closing balance 640.19 391.25
(iii) Movement of Net NPAs(a) Opening balance 231.64 302.49(b) Additions during the year 500.04 166.32(c) Reductions during the year 313.26 237.17(d) Closing balance 418.42 231.64
(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 113.47 116.35(b) Provisions made during the year 194.55 94.95(c) Write-off/ write-back of excess provisions 137.59 97.83(d) Closing balance 170.43 113.47
Quantitative Disclosures: (` in crore)
F - 55
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0.03
0.00
0.00
0.00
0.03
0.35
1.30
0.09
0.00
1.74
10.4
21.
300.
090.
0011
.81
No.
of
borr
ower
s
Am
ount
outs
tand
ing
Pro
visi
onth
ereo
n
00
00
01
00
01
00
00
01
00
01
25.9
00.
000.
000.
0025
.90
0.12
0.00
0.00
0.00
0.12
25.3
40.
000.
000.
0025
.34
51.3
60.
000.
000.
0051
.36
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
No.
of
borr
ower
s
Am
ount
outs
tand
ing
00
00
00
00
00
00
00
00
00
00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Res
truc
ture
dA
ccou
nts
as o
n A
pril
1 of
the
FY
(ope
ning
figur
es)
Fres
hre
stru
ctur
ing/
Add
ition
alfa
cilit
ies
duri
ng t
heye
ar *
Upg
rada
tions
to rest
ruct
ured
stan
dard
cate
gory
duri
ng t
heF
Y
Doubtful
Loss
Total
Pro
visi
onth
ereo
n
No.
of
borr
ower
s
Am
ount
outs
tand
ing
10
00
10
00
00
30
00
34
00
04
32.5
50.
000.
000.
0032
.55
0.00
0.00
0.00
0.00
0.00
31.2
20.
000.
000.
0031
.22
63.7
70.
000.
000.
0063
.77
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.30
0.00
0.00
0.00
0.30
0.30
0.00
0.00
0.00
0.30
Pro
visi
onth
ereo
n
Res
truc
ture
dst
anda
rdad
vanc
esw
hich
ceas
e to
attr
act
high
erpr
ovis
ioni
ngan
d /
orad
ditio
nal
risk
wei
ght
at t
he e
ndof
the
FY
and
henc
ene
ed n
ot b
esh
own
asre
stru
ctur
edst
anda
rdad
vanc
es a
tth
ebe
ginn
ing
of t
he n
ext
FY
(` in
cro
re)
Sub-Standard
Ass
et C
lass
ifica
tion
Det
ails
Sl.
No. 1. 2. 3. 4.
F - 56
Dis
clo
sure
of
Res
tru
ctu
red
Acc
ou
nts
(C
on
td.)
(` in
cro
re)
Type
of
Res
truc
turi
ngU
nder
CD
R M
echa
nism
Und
er S
ME
Deb
tR
estr
uctu
ring
Mec
hani
smO
ther
sTo
tal
Det
ails
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
Doubtful
Loss
Total
Sub-Standard
Standard
No.
of
borr
ower
s
Am
ount
outs
tand
ing
-10
10
0-1
10
00
-31
20
0-5
23
00
-45.
650.
0045
.65
0.00
0.00
-0.9
70.
970.
000.
000.
00-4
4.28
-36.
9681
.24
0.00
0.00
-90.
90-3
5.99
126.
890.
000
-0.8
80.
000.
880.
000.
00-0
.01
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
-0.8
90.
010.
880.
000
Pro
visi
onth
ereo
n
No.
of
borr
ower
s
Am
ount
outs
tand
ing
00
00
01
00
01
11
310
152
13
1016
48.3
30.
000.
000.
0048
.33
2.28
0.01
0.00
0.00
2.29
10.3
815
.77
39.6
20.
0265
.860
.99
15.7
839
.62
0.02
116.
41
No.
of
borr
ower
s
Am
ount
outs
tand
ing
60
10
72
10
03
63
87
2414
49
734
328.
000.
0045
.65
0.00
373.
650.
700.
960.
000.
001.
6616
7.55
44.2
813
0.40
56.1
139
8.34
496.
2545
.24
176.
0556
.11
773.
65
3.50
0.00
0.88
0.00
4.38
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.86
0.00
0.86
3.50
0.01
1.74
0.00
5.25
Pro
visi
onth
ereo
n
Pro
visi
on t
here
on d
oes
not
incl
ude
Sta
ndar
d A
ccou
nt a
dditi
onal
pro
visi
on o
f $ 19
.26
cror
e (in
clud
ing
inve
stm
ent
unde
r C
DR
pac
kage
) an
d F
ITL
prov
isio
n of
$ 33
.25
cror
e.
*2
acco
unts
un
der
SD
R
amou
ntin
g to
$ 88
.77
cror
es
has
been
exc
lude
d in
ope
ning
bal
ance
and
re
port
ed in
a s
epar
ate
dis
clos
ure
is f
urni
shed
*E
xclu
ding
the
fig
ures
of
Sta
ndar
d R
estr
uctu
red
Adv
ance
s w
hich
do
not
attr
act
high
er p
rovi
sion
ing
or r
isk
wei
ght
(if a
pplic
able
).
**O
ut o
f $ 51
.36
Cro
re, $
0.
12 C
rore
rel
ates
to 1
fres
h re
stru
ctur
ed a
ccou
nt a
nd $
51
.24
cror
e r
elat
es to
add
ition
al fa
cilit
ies
/lim
its /i
ncre
ase
to th
e ex
istin
g re
stru
ctur
ed a
ccou
nts
duri
ng t
he y
ear.
***
Out
of $
11
6.41
Cro
re, $
63
.72
Cro
re b
y w
ay o
f rec
over
y / s
ale
of a
sset
s &
writ
e-of
fs (
5 ac
coun
ts b
y w
ay o
f rec
over
y / s
ale
am
ount
ing
to $
63
.70
cror
e &
11
acco
unts
by
way
of w
rite
-offs
am
ount
ing
to $
0.
02 c
rore
)
and
$ 52
.69
cror
e re
late
s to
par
tial r
ecov
ery
in e
xist
ing
rest
ruct
ured
acc
ount
s.
Doubtful
Loss
Ass
etC
lass
ifi-
catio
n
Sl.
No.
Dow
ngr
adat
ions
of rest
ruct
ured
acco
unts
duri
ng t
heF
Y
5.
Wri
te-o
ffs/
reco
very
of rest
ruct
ured
acco
unts
duri
ng t
heF
Y *
*
6.
Res
truct
ured
Acc
ount
sas
on
Mar
ch 3
1of
the
FY
(clo
sing
figur
es**
*)
7.
Total
F - 57
2.4.3 Details of financial assets sold to Securitization / Reconstruction Company for Asset Reconstruction
(A) Details of Sales: (` in crore)
Particulars 2016-17 2015-16
(i) No. of accounts 1390 13
(ii) Aggregate value (net of provisions) of accounts sold to SC/RC 106.22 166.25
(iii) Aggregate consideration 95.64 67.53
(iv) Additional consideration realized in respect of accounts transferred in earlier years 0.00 0.00
(v) Aggregate profit / (loss) over net book value. (10.58) (98.72)
(B) NPA Assets Sold to ARC: (` in crore)
Backed by NPAs sold by theBacked by NPAs sold by other banks /
Particulars bank as underlyingfinancial institutions / non-banking Totalfinancial companies as underlying
2016-17 2015-16 2016-17 2015-16 2016-17 2015-16
Book value of 343.41 279.20 6.01 8.08 349.42 287.28investments insecurity Receiptsas at 31st March
2.4.4 Details of non-performing financial assets purchased / sold:
A. Details of non-performing financial assets purchased: (` in crore)
Particulars 2016-17 2015-16
1 (a) No. of accounts purchased during the year NIL NIL
(b) Aggregate outstanding NIL NIL
2 (a) Of these, number of accounts restructured during the year NIL NIL
(b) Aggregate outstanding NIL NIL
B. Details of non-performing financial assets sold: (` in crore)
Particulars 2016-17 2015-16
1. No. of accounts sold NIL NIL
2. Aggregate outstanding NIL NIL
3. Aggregate consideration received NIL NIL
C. Disclosure regarding amortization of Loss on sale of assets to ARCs
As permitted by RBI, the bank has opted to provide for the net shortfall on account of sale of assets to Reconstruction Companies overa period of eight / four quarters. Consequently, ` 74.90 Crore has been charged to the Profit & Loss account for the year ended31st March 2017. The unamortised amount on this account as on 31st March 2017 is ` 31.29 crore and is debited to 'Other Reserves"and credited to 'Other Provisions', as per RBI guidelines vide no.DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016.
2.4.5 Provisions on Standard Assets: (` in crore)
Particulars 2016-17 2015-16
Provisions towards Standard Assets 87.40 72.23
F - 58
2.6 Asset Liability Management:
Maturity pattern of certain items of assets and liabilities (` in crore)
1 Day 2 to 7 8 to 14 15 to 28 29 days Over 3 Over 6 Over 1 year & Over 3 Over 5 TotalItems days days days to 3 months months & months & upto 3 years years & upto years
upto 6 months upto 1 year 5 years
Deposits 314.08 993.81 1331.99 897.29 4265.39 2874.70 4143.65 9055.68 1256.40 5420.36 30553.35
(280.17) (525.09) (793.08) (579.69) (2843.73) (2342.24) (4063.93) (8252.73) (1740.28) (4010.02) (25430.96)
Advances (Net) 333.26 478.90 973.86 495.46 3663.32 862.32 2128.78 10159.41 1416.15 3217.44 23728.91
(230.48) (461.11) (262.48) (629.64) (1879.01) (1195.63) (3212.66) (7465.78) (1292.61) (3014.34) (19643.74)
Investments (Net) 80.66 130.62 0.13 0.00 116.91 109.40 116.10 310.64 426.28 7360.99 8651.73
(82.71) (68.81) (74.61) (74.50) (100.07) (30.01) (14.59) (482.57) (519.14) (5098.40) (6545.41)
Borrowings 250.00 921.60 0.00 0.00 0.00 0.00 332.83 0.00 50.50 218.20 1773.13
(0.00) (24.81) (0.00) (0.00) (30.00) (0.00) (0.00) (399.50) (0.00) (268.70) (723.01)
Foreign Currency 59.42 0.85 6.43 10.60 22.68 7.30 6.61 0.00 0.00 0.00 113.89
Assets (90.57) (0.13) (5.41) (7.24) (26.25) (16.41) (11.41) (0.00) (0.00) (0.00) (157.42)
Foreign Currency 23.69 1.37 0.11 0.28 1.94 3.39 6.54 20.64 21.95 0.00 79.89
Liabilities (31.27) (0.00) (0.00) (0.10) (6.94) (6.63) (13.17) (12.96) (25.09) (0.00) (96.16)
(Figures in brackets indicates in previous year).
The above data has been compiled by the management on the basis of the guidelines of RBI which have been relied upon by Auditors
2.5 Business Ratios:
Particulars 2016-17 2015-16
(i) Interest Income as a percentage to Working Funds 9.17 9.89
(ii) Non-interest income as a percentage to Working Funds 1.62 1.17
(iii) Operating Profit as a percentage to Working Funds 2.04 1.57
(iv) Return on Assets 0.83 0.69
(v) Business (Deposits plus advances) per employee (` in crore) 11.46 10.99
(vi) Profit per employee (` in crore) 0.06 0.04
2.7 Exposures
2.7.1 Exposure to Real Estate Sector: (` in crore)
Category 2016-17 2015-16
a) Direct exposure
(i) Residential Mortgages – 499.97 410.93
Lending fully secured by mortgages on residential property that is or will be occupiedby the borrower or that is rented; (Individual housing loans eligible for inclusion inpriority sector advances may be shown separately).
(ii) Commercial Real Estate – 1540.75 1476.78
Lending secured by mortgages on commercial real estates (office buildings, retailspace, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition,development and construction, etc.). Exposure would also include non-fund based(NFB) limits;
F - 59
2.7.2 Exposure to Capital Market: (` in crore)
Particulars 2016-17 2015-16
(i) Direct investment in equity shares, convertible bonds, convertible debentures and unitsof equity-oriented mutual funds the corpus of which is not exclusively invested incorporate debt; 131.78 69.97
(ii) Advances against shares / bonds / debentures or other securities or on clean basis toindividuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; NIL NIL
(iii) Advances for any other purposes where shares or convertible bonds or convertibledebentures or units of equity oriented mutual funds are taken as primary security; 107.25 5.88
(iv) Advances for any other purposes to the extent secured by the collateral security of sharesor convertible bonds or convertible debentures or units of equity oriented mutual funds i.e.where the primary security other than shares / convertible bonds/convertible debentures /units of equity oriented mutual funds does not fully cover the advances; NIL NIL
(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf ofstockbrokers and market makers; 30.00 10.00
(vi) Loans sanctioned to corporates against the security of shares / bonds/debentures orother securities or on clean basis for meeting promoter's contribution to the equity ofnew companies in anticipation of raising resources; NIL NIL
(vii) Bridge loans to companies against expected equity flows / issues; NIL NIL
(viii) Underwriting commitments taken up by the banks in respect of primary issue of shares orconvertible bonds or convertible debentures or units of equity oriented mutual funds; NIL NIL
(ix) Financing to stockbrokers for margin trading; NIL NIL
(x) All exposures to Venture Capital Funds (both registered and unregistered) NIL NIL
Total Exposure to Capital Market 269.03 85.85
2.7.1 Exposure to Real Estate Sector (Contd.) (` in crore)
Category 2016-17 2015-16
(iii) Investments in Mortgage Backed Securities (MBS) and other securitisedexposures -
(a) Residential 0.00 0.00
(b) Commercial Real Estate 0.00 0.00
b) Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB) andHousing Finance Companies (HFCs). 129.21 47.95
Total Exposure to Real Estate Sector 2169.93 1935.66
F - 60
2.7.4 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.
A. SBL exceeded by the Bank for the period 01/04/2016 to 31/03/2017 ----- NIL (PY NIL)
B. GBL exceeded by the Bank for the period 01/04/2016 to 31/03/2017 ----- NIL (PY NIL)
2.7.5 Unsecured Advances (Amount of Advances for which, intangible securities has been taken): (` in crore)
As on As onParticulars 31-3-2017 31-3-2016
The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority etc. has been taken. 21.91 26.72
Estimated value of such intangible collaterals 66.80 81.47
2.8 Miscellaneous
2.8.1 Disclosure of Penalties imposed by RBI:During the year, Reserve Bank of India has imposed a monetary penalty of $ 3.00 crore for contravention of instructions relating toextending bill discounting facilities to non constituents and walk in customers, opening and operation of current accounts and nonadherence of KYC norms.RBI has imposed a total penalty of $ 7600 on account of Counterfeit Notes detected in currency chest transactions.
3. Disclosure in terms of Accounting Standards:
3.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as perAccounting Standard 5There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2017 as compared to those inthe preceding financial year ended 31.03.2016.
3.2 Accounting Standard 9: Revenue Recognition:Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9
3.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the years2010-11 & 2015-16 by the bank using the services of Banks approved empanelled Independent valuers. Appreciation arising out ofsuch revaluation was accounted with corresponding credit to Revaluation Reserves. The details are as under
(` in crore)
Original Cost of Premises 65.05
Incremental Value on account of revaluation made in 2011 - ` 81.51Incremental Value on account of revaluation made in 2016 - ` 93.98 175.49
Depreciation on Original Cost - ` 11.29Depreciation on Revalued Cost - ` 6.00 17.29
Written Down Value of such revalued assets 223.25
2.7.3 Risk Category wise Country Exposure: (` in crore)
Risk Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2017 31.3.2017 31.3.2016 31.3.2016
Insignificant 79.73 NIL 140.87 NIL
Low 26.29 NIL 72.59 NIL
Moderate 12.06 NIL 3.52 NIL
High 0.00 NIL 0.00 NIL
Very High 0.00 NIL 0.00 NIL
Restricted 0.00 NIL 0.00 NIL
Off-credit 0.00 NIL 0.00 NIL
Total 118.08 NIL 216.98 NIL
As the bank's exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than 1%of total assets of the bank, no provision is considered necessary.
F - 61
3.4 Accounting Standard 15 - Employee Benefits:
3.4.1 The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:
In respect of contributory plans viz.- Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at pre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixedcontribution.
In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made basedon actuarial valuation as per the guidelines.
The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss accountand balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:
I. Principal Actuarial Assumptions at the Balance Sheet Date:(Expressed as weighted Averages)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Discount Rate 7.50% 7.50% 7.50%
Expected Rate of return on Plan Assets 8.84% 8.00% NA
II. Change in the Present value of obligations: (` in crore)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Present Value of obligations as at the beginning of the year 66.02 269.68 41.65
Interest Cost 4.60 18.59 2.93
Current Service Cost 5.16 86.60 6.72
Past service cost (non-vested benefits) 0.00 0.00 0.00
Past service cost (vested benefits) 0.00 0.00 0.00
Benefits Paid 9.40 43.73 5.12
Actuarial loss/(gain) on obligation (balancing figure) 5.43 (36.29) 0.63
Present Value of obligations as at the year end 71.81 294.85 46.82
III. Change in Fair Value of Plan Asset: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Fair value of Plan Assets at the beginning of the year 70.66 243.82 0.00
Expected return on Plan Assets 6.25 19.51 0.00
Employer's Contribution 0.00 70.33 0.00
Benefits Paid 9.40 43.73 5.12
Actuarial loss / (gain) on plan assets (balancing figure) (0.09) (0.06) 0.00
Fair Value of Plan Asset at the end of the year 67.41 289.86 0.00
IV. Actual Return on Plan Assets: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Expected return on plan assets 6.25 19.51 0.00
Actuarial gain / (loss) on plan assets (0.09) (0.06) 0.00
Actual return on plan assets 6.15 19.44 0.00
F - 62
V. Actuarial Gain / Loss recognized: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Actuarial gain / (loss) for the Period - Obligation 5.43 (36.29) 0.63
Actuarial gain / (loss) for the Period - Plan Assets (0.09) (0.06) 0.00
Total (gain) / loss for the period 5.33 (36.35) 0.63
Actuarial (gain) / loss recognized in the period 5.52 (36.23) 0.63
Unrecognized actuarial (gain) / loss at the end of the year 0.00 0.00 0.00
VI. Amount recognized in Balance Sheet: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of the Obligation 71.81 294.85 46.82
Fair value of plan assets 67.41 289.86 –
Difference (4.40) (4.99) 46.82
Unrecognized Transitional liability 0.00 0.00 0.00
Unrecognized past service cost (non vested benefits) 0.00 0.00 0.00
Liability recognized in the Balance Sheet (4.40) (4.99) 46.82
VII. Expenses Recognized in Profit & Loss Account: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Current Service Cost 5.16 86.60 6.72
Interest Cost 4.60 18.59 2.93
Expected return on Plan assets 6.25 19.51 –
Net actuarial (gain)/loss recognised in the year 5.52 (36.23) 0.63
Transitional Liability recognized in the year – – –
Past service cost (non-vested benefits) – – –
Past service cost (vested benefits) – – –
Expenses Recognized in Profit & Loss Account 9.04 49.45 10.29
VIII. Movements in the Liability Recognized in the balance Sheet (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Opening net Liability (4.63) 25.86 41.65
Opening amount determined under para 55 of AS15R – – –
Expense as Above 9.04 49.45 10.29
Contribution paid – 70.33 –
Closing Net Liability 4.40 4.99 10.29
F - 63
IX. Amount for the Current Period: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of Obligation 71.81 294.85 46.82
Plan Assets 67.41 289.86 –
Surplus / (Deficit) (4.40) (4.99) 46.82
Experience adjustments on Plan Liabilities - (loss) / gain 0.00 0.00 0.00
Experience adjustments on Plan Assets - (loss) / gain 0.00 0.00 0.00
X. Major categories of Plan Assets: (As % of Total Plan Assets)
Particulars Gratuity Pension(Funded) (Funded)
Government of India Securities 64.71 34.91
High Quality Corporate Bonds 22.40 19.92
Equity Share of listed companies 0.00 0.00
Property 0.00 0.00
Special Deposit Scheme 1.43 0.00
Equity Mutual fund 0.65 0.00
Balance with Bank Account 3.26 0.56
Balance held at LIC India's Running account 0.00 23.58
Annuity under Return of Purchase Price 0.00 18.06
Amount Receivable from Bank 5.89 1.64
Others (Interest Receivables) 1.66 1.33
Total 100.00 100.00
XI. Enterprises Best Estimate: (` in crore)
Particulars Gratuity Pension Leave Encashment
Enterprise’s Best Estimate of Contribution during next year 6.71 18.96 0.00
3.5 Employee Stock Option Scheme:
As on 31.03.2016, number of options in force are nil. The Compensation Committee of the Board of Directors has granted inaggregate 3210190 stock options on various dates to employees including top Executives of the Bank under the Lakshmi Vilas BankEmployees Stock Option Scheme 2010 - LVB ESOS 2010. As on 31st March, 2017, the options in force are 3099708. These optionswould vest over a period of 2 to 3 years and the Bank has provided a sum of $ 4.50 crore towards proportionate compensationexpenses for the year ended 31st March 2017.
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3.6 Accounting Standard 17 - Segment Reporting:
PART A : BUSINESS SEGMENTS (` in crore)
Year ended Year endedParticulars 31-3-2017 31-3-2016
(Audited) (Audited)
1. SEGMENT REVENUE :
a. Treasury operations 866.31 595.64
b. Corporate / wholesale banking operations 933.22 860.19
c. Retail banking operations 1522.62 1403.47
d. Other banking operations 27.27 13.53
TOTAL 3349.42 2872.83
2. SEGMENT RESULTS (Operating Profit):
a. Treasury operations 310.42 101.89
b. Corporate / wholesale Banking operations 129.04 115.48
c. Retail banking operations 170.68 178.98
d. Other banking operations 23.92 10.77
TOTAL 634.06 407.12
OPERATING PROFIT 634.06 407.12
PROVISIONS OTHER THAN TAX 253.98 176.89
PROFIT BEFORE TAX 380.07 230.24
Less : Tax expenses 124.00 50.00
NET PROFIT 256.07 180.24
3. CAPITAL EMPLOYED :
a. Treasury operations 103.31 534.61
b. Corporate/wholesale banking operations 315.47 217.09
c. Retail banking operations 1179.80 514.68
d. Unallocated Assets 537.76 497.21
TOTAL 2136.34 1763.59
PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is made underinternational segment.
Previous period's figures have been regrouped, wherever necessary to conform to the current period's classification.
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3.7 Accounting Standard 18 - Related Party Disclosures:
Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from01/04/2016 to 31/03/2017, as detailed below:
S. No. Name Designation
1 Mr. Parthasarathi Mukherjee Managing Director
2 Mr. N.S. Venkatesh(from 01.07.2016 onwards) Executive Director & CFO
3. Mr. M. Palaniappan(01.04.2016 to 31.10.2016) Chief Financial Officer
4 Mr. N. Ramanathan Company Secretary
(` in crore)
Items / Related Party Parent (as per Subsidiaries Associates / Key Relatives of Totalownership Joint Management Key Manage-or control) Ventures Personnel ment Personnel
Borrowings NIL NIL NIL NIL NIL NIL
Deposits NIL NIL NIL NIL NIL NIL
Placement of Deposits NIL NIL NIL NIL NIL NIL
Advances NIL NIL NIL NIL NIL NIL
Investments NIL NIL NIL NIL NIL NIL
Non-Funded Commitments NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsprovided NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsavailed NIL NIL NIL NIL NIL NIL
Purchase of Fixed Assets NIL NIL NIL NIL NIL NIL
Sale of Fixed Assets NIL NIL NIL NIL NIL NIL
Interest Paid NIL NIL NIL NIL NIL NIL
Interest Received NIL NIL NIL NIL NIL NIL
Rendering of Services NIL NIL NIL NIL NIL NIL
Receiving of Services NIL NIL NIL 1.70 NIL 1.70
Management Contracts NIL NIL NIL NIL NIL NIL
3.8 Accounting Standard 20 - Earnings per Share (EPS):
EPS calculation in accordance with the AS-20 issued by the ICAI is as under:
Particulars 2016-17 2015-16
Net profit after Tax (` In Crore) 256.07 180.24
Weighted Average - No. of Equity shares 181,992,723 179,364,546
Weighted Average - No. of Diluted Equity shares 183,513,537 179,364,546
Earnings per share - Basic (`) 14.07 10.05
Earnings per share - Diluted (`) 13.95 10.05
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3.9 Accounting Standard 22 - Accounting for Taxes on Income:
The bank has accounted for Income Tax in compliance with AS 22. Accordingly, Deferred Tax Assets & Liabilities are recognized.The major components of DTA / DTL are furnished as under:
(` in crore)
Particularsonents Deferred Tax Assets Deferred Tax Liabilities
Deferred Tax Components 2016-17 2015-16 2016-17 2015-16
Provision for leave encashment 16.20 14.41 0.00 0.00
Depreciation on fixed assets 0.00 0.00 7.72 8.95
Provision for other assets 24.23 19.88 0.00 0.00
Provision for advances 97.66 79.02 0.00 0.00
Special Reserve u/s 36(i)(viii) 0.00 0.00 21.61 19.54
Depreciation in market value of investments 0.00 0.00 33.49 0.00
Others 0.81 0.59 10.86 33.19
CLOSING BALANCE 138.90 113.90 73.68 61.68
Net DTA 65.22 52.22
3.10 Intangible Assets AS 26:
The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.
3.11 Accounting Standard 28 - Impairment of Assets:
A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable.In the opinion of the bank management, there is no impairment of other assets as at 31st March 2017 requiring recognition in termsof the said standard.
3.12 Details of movement in provisions in accordance with Accounting Standard 29: (` in Crore)
Opening Provision Provision ClosingParticulars as on made during reversed / as on
01.04.2016 the year adjusted 31.03.2017
Prov. for Standard Assets 72.23 15.17 0.00 87.40
Prov. for Bad and Doubtful debts 113.47 194.55 137.59 170.43
Prov. for Income Tax 233.85 137.00 0.00 370.85
Prov. for depreciation in market value of Investments 49.04 2.36 0.00 51.40
Prov. for Other assets 3.91 0.06 0.19 3.78
Counter cyclical buffer 14.71 0.00 0.00 14.71
Prov. for Interest Tax 0.10 0.00 0.00 0.10
Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90
Prov. for Dividend (incl. Div. Tax) 64.80 0.00 64.80 0.00
Prov. for Restructured Advances & FITL 105.28 0.33 0.00 105.61
Provision for Foreign Currency Unhedged 1.70 0.57 0.00 2.27
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4. Additional Disclosures:
4.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head Expenditure in Profit & LossAccount
(` in crore)
Particulars 2016-17 2015-16
Provision towards Standard Asset 15.17 17.00
Provision towards NPA 235.49 176.76
Provision for MAT Credit 0.00 -19.00
Provision for depreciation in market value of Investments 2.36 8.65
Provision for Restructured Advances (Economic sacrifice) & FITL 0.33 -7.38
Provision for Foreign Currency Unhedged 0.57 0.40
Provision for Other Assets 0.06 0.46
Sub Total 253.98 176.89
Provision for Income Tax (Net of deferred tax) 124.00 50.00
Total 377.98 226.89
4.2 Movement of Counter Cyclical Provisioning Buffer: (` in crore)
Particulars 2016-17 2015-16
(a) Opening balance in the account 14.71 14.71
(b) Provision made in the accounting year 0.00 0.00
(c) Amount of drawdown made during the accounting year 0.00 0.00
(d) Closing balance in the account 14.71 14.71
4.3 Draw Down from Reserves:
The QIP issue expenses of ` 5.18 crore have been amortized against share premium received. The net proceeds was utilized tolend, for general corporate purposes and to enhance bank's capital adequacy ratio.
The bank has transferred a sum of ` 2.24 Crore being the depreciation on revalued portion of premises directly to General Reserve.
A sum of ` 31.29 crore and ` 19.15 crore, being the unamortized amount of loss on sale of advances to asset reconstructioncompany and loss on frauds in advances account respectively, have been debited to other reserves as per RBI guideline videno.DBR.NO.BP.BC.102/21.04.048/2015-16 dated 13.06.2016.
4.4 Disclosure of complaints (As compiled by Management):
A. Customer Complaints:
(a) No. of complaints pending at the beginning of the year 2
(b) No. of complaints received during the year 370
(c) No. of complaints redressed during the year 372
(d) No. of complaints pending at the end of the year 0
ATM complaints through Dispute Management Systems (DMS)- NPCI
(a) No. of complaints pending at the beginning of the year 26
(b) No. of complaints received during the year 1248
(c) No. of complaints redressed during the year 1265
(d) No. of complaints pending at the end of the year 9
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B. Awards passed by the Banking Ombudsman:
(a) No. of unimplemented Awards at the beginning of the year 0
(b) No. of Awards Passed by the Banking Ombudsmen during the year 0
(c) No. of Awards implemented during the year 0
(d) No. of unimplemented Awards at the end of the year 0
4.5 Disclosure of Letters of Comfort (LOCs) issued by Banks: (` in crore)
Particulars Amount
Letters of comfort issued in earlier years and outstanding as on 01-04-2016 16.94
Add; Letters of Comfort issued during FY 2016-17 0.00
Less: Letters of Comfort expired during FY 2016-17 5.37
Letters of Comfort Outstanding as on 31-03-2017 11.57
4.6 Provisioning Coverage ratio:
The provision coverage ratio of the Bank as on 31.03.2017 is 59.51%.
4.7 Bancassurance Business:
Fees, remuneration received from Bancassurance business:
For the year ended 31.03.2017, the bank received Gross Commission income of $ 9.77 Crore from Bancassurance business, ofwhich $ 7.53 Crore from life insurance segment and $ 2.24 Crore from general insurance segment.
4.8 Concentration of Deposits, Advances, Exposures and NPAs:
4.8.1 Concentration of Deposits: ($ in crore)
Total Deposits of twenty largest depositors 5,430.12
Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 17.77%
4.8.2 Concentration of Advances: ($ in crore)
Total Advances to twenty largest borrowers 2,966.50
Percentage of Advances to twenty largest borrowers to Total Advances of the bank 11.34%
4.8.3 Concentration of Exposures: ($ in crore)
Total Exposure to twenty largest borrowers/customers 3,155.31
Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank onborrowers /customers 11.71%
4.8.4 Concentration of NPAs: ($ in crore)
Total Exposure to top four NPA accounts 258.76
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4.9 Sector-wise Advances (As compiled by Management): (` in crore)
Sl.Sector
2016-2017 2015-2016
No.O/s Total Gross % of Gross NPAs O/s Total Gross % of Gross NPAs
Advances NPA to Total Advances Advances NPA to Total Advancesin that Sector in that Sector
(A) Priority Sector
1. Agriculture and allied activities 3553.27 20.49 0.58% 3065.60 14.54 0.47%
2. Industries 1347.69 67.01 4.97% 1440.65 35.62 2.47%
3. Services 2707.25 60.65 2.24% 2368.40 31.82 1.34%
4. Personal Loans 558.35 2.31 0.41% 448.08 8.85 1.98%
Sub Total (A) 8166.56 150.46 1.84% 7322.73 90.83 1.24%
(B) Non Priority Sector
1. Agriculture and allied activities 227.81 0.00 0.00 0.00 0.00 0.00
2. Industries 4001.24 287.80 7.19% 3463.91 206.74 5.97%
3. Services 4729.35 63.04 1.33% 4827.79 65.14 1.35%
4. Personal Loans 3067.36 38.79 1.26% 2172.17 4.93 0.23%
5. Others 3766.14 100.11 2.63% 2032.33 23.61 1.16%
Sub Total (B) 15791.90 489.74 3.10% 12496.20 300.42 2.40%
Total (A+B) 23958.46 640.19 2.67% 19818.93 391.25 1.97%
4.10 Movement of NPAs (As compiled by Management): (` in crore)
Particulars 2016-2017 2015-2016Gross NPAs as on 1st April (Opening Balance) 391.25 454.62Additions (Fresh NPAs) during the year 597.20 196.90
Sub-total (A) 988.45 651.52Less:- (i) Upgradations 26.48 21.20
(ii) Recoveries (excluding recoveries made from upgraded accounts) 230.27 169.81
(iii) Technical / Prudential write offs 88.55 68.88(iv) Write-offs other than those under (iii) above 2.95 0.38
Sub-total (B) 348.26 260.27Gross NPAs as on 31st March (closing balance) (A-B) 640.19 391.25
4.10.1 Details of Technical write-offs and recoveries made: (` in crore)
Particulars 2016-2017 2015-2016
Opening balance of Technical / Prudential written off accounts as at 1st April 345.39 317.84
Add: Technical / Prudential write offs during the year 88.55 68.88
Sub Total (A) 433.94 386.72
Less: Recoveries / reduction made from previously technical / prudential written - off accountsduring the year (B) 40.82 41.33
Closing balance as on 31st March (A-B) 393.12 345.39
4.11 REGROUPING OF REPO / REVERSE REPO TRANSACTIONS
Pursuant to RBI circular FMRD. DIRD. 10/14.03.002/2015-16 dated 19th May 2016, the bank, has with effect from 3rd October 2016,considered its Repo / Reverse Repo transactions under Liquidity Adjustment Facility (LAF) and Marginal Standing facility (MSF) ofRBI as borrowings / Lending, as the case may be. Consequently, interest expended on repo borrowing with RBI is included under"Interest Expended" and interest earned on reverse repo with RBI under "interest Earned - Interest on Balances with Reserve bankof India and other inter-bank funds". Hitherto, the repo/ reverse repo transactions were included under "Investments" and interestthereon was included under " Interest Earned - Income on Investments". Figures for the previous periods have been regrouped /reclassified to conform to current period's classification. The above regrouping/ reclassification has no impact on the profit of thebank for the quarter/ year ended 31st March 2017 or the previous periods.
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4.12 Disclosures on Flexible Structuring of Existing Loans
Period No. of borrowers Amount of loans taken up Exposure weighted average duration oftaken up for for flexible structuring loans taken up for flexible structuring
flexible Classified as Classified as Before applying After applyingstructuring Standard NPA flexible structuring flexible structuring
2016-17 2 159.80 0.00 4.33 years 21.16 years
2015-16 Nil Nil Nil
4.13 Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period): (` in crore)
No. of accounts Amount outstanding as Amount outstandng as on the Amount outstandng as on thewhere SDR on the reporting date reporting date with respect to reporting date with respect tohas been 31.03.2017 accounts where conversion of accounts where conversion ofinvoked debt to equity is pending debt to equity has taken place
Classified as Classified as Classified as Classified as Classified as Classified asStandard NPA Standard NPA Standard NPA
5 283.03 0.00 Nil Nil 283.03 0.0
4.14 Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-stillperiod): (` in crore)
No. of Amount Amount outstanding as Amount outstanding as Amount outstanding asaccounts outstanding as on on the reporting date with on the reporting date with on the reporting date with
where the reporting respect to accounts where respect to accounts where respect to accounts wherebanks have 31.03.2017 conversion of debt to conversion of debt to change in ownership isdecided to equity / invocation of equity / invocation of envisaged by issuance of
effect change pledge of equity shares pledge of equity shares fresh shares or sale ofin ownership is pending has taken place promoters equity
Classified as Classified as Classified as Classified as Classified as Classified as Classified as Classified asStandard NPA Standard NPA Standard NPA Standard NPA
Nil
4.15 Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under thestand-still period): (` in crore)
No. of project loan accounts Amount outstanding as on the reporting date
where banks have decided Classified as Classified as Classified asto effect change in ownership standard standard restructured NPA
Nil
4.16 Disclosures on the scheme for Sustainable Structuring of Stressed assets (S4A), as on 31.3.2017. (` in crore)
No .of accounts where Aggregate amount Amount outstanding ProvisionS4A has been applied outstanding Part A Part B Held
Classified as Standard 25.47 13.81 11.66 5.09
Classified as NPA Nil Nil Nil Nil
4.17 Disclosure in the "Notes to Accounts" to the Financial Statements- Divergence in the asset classification and provisioningThe additional provisioning requirement due to divergence observed by RBI for the financial year 2015-16 in respect of bank's asset classificationand provisioning under extant prudential norms on income recognition, asset classification and provisioning (IRACP), is within the limit of15%. Hence, no disclosure is required to be made under DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017.
4.18 Prudential Norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances - Spread Overof Shortfall on Sale of NPAs to SCs/RCs
As permitted by RBI, the bank has opted to provide for the net shortfall on account of sale of assets to Reconstruction Companies over aperiod of eight / four quarters. Consequently, $ 74.90 Crore has been charged to the Profit & Loss account for the year ended31st March 2017. The unamortised amount on this account as on 31st March 2017 is $ 31.29 crore and is debited to 'Other Reserves' andcredited to 'Other Provisions', as per RBI guidelines vide no.DBR.No.BP.BC.102/21.04.048/2015-16 dated 13.06.2016
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4.20 Off-balance Sheet SPVs sponsored :Name of the SPV sponsored
Domestic Overseas
NIL NIL
4. 21 Disclosure on Remuneration:
a. Qualitative disclosures:
(a) Information relating to the composition and mandate of theRemuneration Committee.
(b) Information relating to the design and structure of remunerationprocesses and the key features and objectives of remunerationpolicy.
(c) Description of the ways in which current and future risks are takeninto account in the remuneration processes. It should include thenature and type of the key measures used to take account ofthese risks.
(d) Description of the ways in which the bank seeks to linkperformance during a performance measurement period with level of remuneration.
(e) A discussion of the bank’s policy on deferral and vesting of variableremuneration and a discussion of the bank’s policy and criteria foradjusting deferred remuneration before vesting and after vesting
(f) Description of the different forms of variable remuneration(i.e. cash, shares, ESOPs and other forms) that the bank utilizesand the rationale for using these different forms.
The latest amendment to the policy was approvedby the HR Committee of the Board on 14th October2015.
Performance is evaluated based on KeyPerformance indicators as approved by the Board.
ESOS and Performance incentives are thecomponents of variable remuneration
The members of the Nomination and Remunerationcommittee as on 31st March 2017 are 5.
(g) Number of meeting held by the remunerationcommittee during the financial year and remunerationpaid its members
Meeting of the Nomination,Remuneration and CompensationCommittee of the Board (NRCCB)was held 6 times during FY 2016-17 and the total remuneration paidto the committee members in theform of sitting fees is $ 0.08 crore.
Meeting of the Nomination andRemuneration Committee ofthe Board (NRCB) was held 5times during FY 2015-16 andthe total remuneration paid tothe committee members is$ 0.05 crore.
4.19 Overseas Assets, NPAs and Revenue
Particulars (` in crore)
Total Assets NIL
Total NPAs NIL
Total Revenue NIL
b. Quantitative disclosures:
Particulars 2016-17 2015-16
F - 72
Particulars 2016-17 2015-16
(h) (i) Number of employees having received a variable remuneration award during the financial year. NIL NIL
(ii) Number and total amount sign-on awards made during the financial year. NIL NIL
(iii) a) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL
b) Details of performance Bonus / Allowance $ 0.12 crore (1 person) $ 0.35 crore (2 persons)(iv) Details of severance pay, in addition to accrued benefits, if any. NIL NIL
(i) (i) Total amount of outstanding deferred remuneration, split into Grant of 3,10,000 shares Grant of 12,00,000cash, shares and shares - linked instruments and other forms. to Executive Director & shares to MD & CEO
CFO and Company under ESOS subject toSecretary respectively approval of RBI.
under ESOS.
(ii) Total amount of deferred remuneration paid out in the NIL $ 1.22 Crorefinancial year.
(j) Breakdown of amount remuneration awards for the financial yearto show fixed and variable, deferred and non-deferred.
(k) (i) Total amount of outstanding deferred remuneration and retainedremuneration exposed to ex-post explicit and/or implicit adjustments. NIL NIL
(ii) Total amount of reductions during the financial year due to ex-postexplicit adjustments. NIL NIL
(iii) Total amount of reductions during the financial year due to ex-postimplicit adjustments. NIL NIL
No Risk Takers were paidVariable Pay
No deferred and Non-deferred remuneration
No Risk Takers were paidVariable Pay
No deferred and Non-deferred remuneration
b. Quantitative disclosures: (Contd.)
4.22 Disclosures relating to securitization: NA
4.23 Credit Default Swaps: NIL
4.24 Intra – Group Exposure: (` in crore)
Particulars FY 2016-17
(a) Total amount of intra-group exposures
(b) Total amount of top-20 intra-group exposures NIL
(c) Percentage of intra-group exposures to total exposure of the bank on borrowers / customers
(d) Details of breach of limits on intra-group exposures and regulatory action thereon, if any.
4.25 Transfer to Depositors Education and Awareness Fund (DEAF): (` in crore)
Particulars FY 2016-17 FY 2015-16
Opening balance of amounts transferred to DEAF 17.72 10.10
Add: Amounts Transferred to DEAF during the year 5.53 7.66
Less: Amounts reimbursed by DEAF towards claims 0.11 0.04
Closing balance of amounts transferred to DEAF 23.14 17.72
4.26 Unhedged Foreign Currency Exposure:
Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged ForeignCurrency Exposure (UFCE) of their constituents in terms of RBI Circular No. DBOD.NO.BP.BC.85/21.06.200/2013-14 dated 15th
January 2014 and the total provision held as of 31st March 2017 is ` 2.28 Crore.
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5.1 Liquidity Coverage Ratio: (` in Crore)
2016-2017 2015-2016
Total Unweighted Total Weighted Total Unweighted Total WeightedValue (Average) Value (Average) Value (Average) Value (Average)
High Quality Liquid Assets
1. Total High Quality Liquid Assets (HQLA) – 1189.87 – 797.68
Cash Outflows
2 Retail deposits and deposits from smallbusiness customers, of which 3097.65 258.07 949.94 81.59
(i) Stable Deposits 1033.93 51.70 268.04 13.40
(ii) Less stable Deposits 2063.72 206.37 681.90 68.19
3 Unsecured wholesale funding, of which: 1268.81 245.42 818.00 92.54
(i) Operational deposits(all counterparties) 70.63 17.66 74.66 18.66
(ii) Non-operational deposits(all counterparties) 1006.50 95.49 743.34 73.88
(iii) Unsecured debt 0.00 0.00 0.00 0.00
4 Secured Wholesale funding 730.17 0.00 441.49 0.00
5 Additional requirements, of which 4300.31 433.04 3216.03 282.63
(i) Outflows related to derivative exposuresand other collateral requirements 10.22 10.22 7.66 7.66
(ii) Outflows related to loss of funding ondebt products 0.00 0.00 0.00 0.00
(iii) Credit and Liquidity facilities 1775.90 152.98 1120.83 99.84
6 Other contractual funding obligations 185.15 185.15 82.22 82.22
7 Other contingent funding obligations 2309.37 69.28 2005.33 92.91
8 Total Cash Outflows 9396.93 936.53 5425.46 456.76
Cash Inflows
9 Secured lending (e.g. reverse repos) 279.52 0.00 59.31 0.00
10 Inflows from fully performing exposures 4736.26 2368.13 2170.40 1085.20
11 Other cash inflows 312.47 112.47 83.21 66.54
12 Total Cash Inflows 5328.25 2480.60 2312.91 1151.74
Total Adjusted Total Adjusted5 Value 5 Value
13 TOTAL HQLA – 1189.87 – 797.68
14 Total Net Cash Outflows – 369.68 – 114.19
15 Liquidity Coverage Ratio (%) – 321.86 – 698.56
4.27 Details of Frauds occurred and Provision made during the year:
As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:
(a) Number of Fraud cases reported during the year 15
(b) Amount involved (` In Crore) 110.00
(c) Quantum of Provision made, net of recoveries of ` 75.93 Crore 11.63
(d) Quantum of unamortized Provision debited from 'Other Reserves' (` In Crore) 19.15
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5.2 Qualitative disclosure around LCR:
Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing theLiquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets(HQLA) into Level 1 and Level 2A/2B. As on 31.03.2017, the Bank has ` 1253.53 Cr of HQLAs, of which, the main contribution is fromLevel - 1 type of assets with ` 1206.08 Cr. The Level-1 assets are in the form of surplus SLR investments / Excess CRR and Cashin Hand.
As on 31.03.2017, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of` 1533.72 Cr of cash outflows and ` 1189.34Cr of cash inflows over the next 30 days period. Of this total amount of ` 1533.72 Cr ofcash outflows, the major component is in the form of unsecured wholesale funding and of the total ` 1189.34 Cr of cash inflows, themajor cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.
6. a) The disputed Income Tax demand outstanding as on 31.03.2017 amounts to ` 100.43 Crore (previous year ` 60.11 Crore)and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of thedisputed liabilities in view of favorable decisions by various appellate authorities on similar issues.
b) The disclosure requirement on Specified Bank Notes (SBN) as envisaged notification no. GSR.308 (E) dated 30.03.2017 isnot applicable to the bank since its financial statements are not presented as per schedule III of The Companies Act, 2013.
c) The Board of Directors has recommended a dividend of ` 2.70 per share (27%) for the year ended 31st March 2017 (previousyear ` 3 Per share (30%)), subject to approval of the shareholders at the ensuing Annual General Meeting. In accordancewith revised Accounting Standards (AS) 4-Contingencies & Events occurring after the balance sheet date notified by theMCA on March 30, 2016, the proposed dividend including corporate dividend tax amounting to ` 62.21 crore has not beenshown as an appropriation from the profit & loss appropriation account as of March 31, 2017 and consequently not reportedthe same under Other liabilities and Provisions as of March 31, 2017. For computation of capital adequacy ratio as ofMarch 31, 2017, Bank has adjusted the proposed dividend for determining capital funds.
7. Previous year's figures have been regrouped / reclassified wherever considered necessary to conform to the currentyear's classification.
KUSUMA R MUNIRAJUChairman of the Meeting
PARTHASARATHI MUKHERJEEManaging Director & CEO
N.S.VENKATESHExecutive Director & Chief Financial Officer
N. RAMANATHANCompany Secretary
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai26th April, 2017
S.G. PRABHAKHARANN. MALAYALARAMAMIRTHAME.V. SUMITHASRIY.N. LAKSHMINARAYANA MURTHYPANKAJ VAISHPRAKASH P MALLYAANURADHA PRADEEPSUVENDU PATIDirectors
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INDEPENDENT AUDITOR’S REPORT
To
The Members of The Lakshmi Vilas Bank Limited
Report on the Financial Statements
1. We have audited the accompanying financial statements of The Lakshmi Bank Limited ('the Bank'), which comprise the Balance
Sheet as at 31 March 2018, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and a summary of
significant accounting policies and other explanatory information. Incorporated in these financial statements are the returns for
the year ended on that date of 21 branches/offices audited by us and 545 branches/offices audited by statutory branch auditors.
Management's Responsibility for the Financial Statements
2. The Bank's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') with
respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance
and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting
Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions of
Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India ('RBI') from
time to time.
This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for
safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application
of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation
and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness
of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view
and are free from material mis-statement, whether due to fraud or error.
Auditor’s Responsibility
3. Our responsibility is to express an opinion on these financial statements based on our audit.
4. In conducting our audit we have taken into account the provisions of the Act, the accounting and auditing standards and matters
which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
5. We conducted our audit of the financial statements in accordance with Standards on Auditing ('the Standards') specified under
section 143(10) of the Companies Act. Those Standards require that we comply with ethical requirements and plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material mis-statements.
6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial
control relevant to the Bank's preparation of the financial statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting estimates made by the Bank's Directors, as well as evaluating the
overall presentation of the financial statements.
7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit
opinion.
Basis for Qualified Opinion
8. The financial statements of the bank include Advances (net of provisions) of $ 25,768 Crore after adjustment of third party
deposits amounting to $ 794 Crore, duly supported by legal opinions. The said adjustment is being questioned by the deposit
holder. Pending resolution of the same, we are unable to comment on the impact, if any on the financial statements and legal/
regulatory consequences.
F - 76
9. The series of transactions leading to the above adjustment has resulted in shortfall in CRR maintenance. Penal consequencesif any, thereon is not ascertainable.
Qualified Opinion
10. In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects ofthe matter described in the 'Basis for Qualified Opinion' paragraph, the financial statements give the information required by the
Banking Regulation Act, 1949 as well as the Companies Act, 2013 in the manner so required for banking companies and give atrue and fair view in conformity with accounting principles generally accepted in India of the state of affairs of the Bank, as at31st March 2018 and its loss and its cash flows for the year then ended.
Emphasis of Matter
11. We draw attention to
(i) Note No. 3.3.6 of the financial statements, regarding deferment of provision for Mark to Market (MTM) losses on Investments
of $ 98.29 Crore; and
(ii) Note No. 4.4.2 of the financial statements, regarding deferment of Gratuity provision of $ 11.27 Crore;
Our opinion is not qualified in respect of these matters.
Report on Other Legal and Regulatory Requirements
12. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of theBanking Regulation Act, 1949 and Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts)
Rules, 2014.
13. As required by sub section (3) of Section 30 of the Banking Regulation Act, 1949, we report that:
(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe purpose of our audit except for the matter described in the 'Basis for Qualified Opinion' paragraph and have foundthem to be satisfactory;
(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank;
(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.
14. Further, as required by Section 143(3) of the Act, we report that:
(i) we have sought and obtained all the information and explanations which to the best of our knowledge and belief were
necessary for the purpose of our audit except for the matter described in the 'Basis for Qualified Opinion' paragraph;
(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from ourexamination of those books and proper returns adequate for the purposes of our audit have been received from branches
not visited by us;
(iii) the reports on the accounts of the branches audited by branch auditors of the Bank under Section 143(8) of the CompaniesAct 2013 have been sent to us and have been properly dealt with by us in preparing this report;
(iv) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreementwith the books of account and with the returns received from the branches not visited by us;
(v) Except for the possible effects of matter described in the 'Basis for Qualified Opinion' paragraph, in our opinion, the
financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of theCompanies (Accounts) Rules, 2014, to the extent they are not inconsistent with the accounting policies prescribed by RBI;
(vi) on the basis of written representations received from the directors as on 31st March 2018 taken on record by the Board of
Directors, none of the directors is disqualified as on 31st March 2018 from being appointed as a director in terms of Section164 (2) of the Act;
(vii) with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operatingeffectiveness of such controls, refer to our separate Report in "Annexure A"; and
F - 77
Annexure A to the independent auditors' report of even date on the financial statements of The Lakshmi Vilas Bank Limited
Report on the Internal Financial Controls over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013
1. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited ('the Bank') as at
31st March 2018 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.
Management's Responsibility for Internal Financial Controls over Financial Reporting
2. The Bank's Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control over financial
reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal
Financial Controls Over Financial Reporting ('the Guidance Note') issued by the Institute of Chartered Accountants of India ('the ICAI')".
These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for
ensuring the orderly and efficient conduct of its business, including adherence to Bank's policies, the safeguarding of its assets, the prevention and
detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information,
as required under the Companies Act, 2013 ('the Act').
Auditor's Responsibility
3. Our responsibility is to express an opinion on the Bank's internal financial controls over financial reporting based on our audit. We conducted
our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting ('the Guidance Note') issued
by the ICAI and the Standards on Auditing ('the Standards'), prescribed under Section 143(10) of the Companies Act, 2013 to the extent
applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting
was established and maintained and if such controls operated effectively in all material respects.
4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to
financial statements and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an
understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the
auditor's judgement, including the assessment of the risks of material mis-statement of the financial statements, whether due to fraud or
error.
5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Bank's
internal financial controls with reference to financial Statements.
(viii) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:
a. the Bank has disclosed the impact of pending litigations on its financial position in its financial statements - ReferSchedule 18 - Note No. 7 to the financial statements;
b. the Bank does not have any long term contracts including derivative contracts - Refer Schedule 18 - Note No. 3.3 to
the financial statements; and
c. there has been no delay in transferring amounts required to be transferred to the Investor Education and ProtectionFund by the Bank.
For M/s. R. K. KUMAR & CO.Chartered Accountants
FRN - 001595S
(G. NAGANATHAN)Place : Chennai PartnerDate : 25th May, 2018 M.No. 022456
F - 78
Meaning of Internal Financial Controls Over Financial Reporting
6. A bank's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A bank's
internal financial control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
bank;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditure of the bank are being made only in accordance with authorizations
of management and directors of the bank; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the bank's assets that
could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management
override of controls, material mis-statements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal
financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
8. In our opinion, the Bank has, in all material respects, adequate internal financial controls with reference to financial statements and such internal
financial controls with reference to financial statements were operating effectively as at 31st March 2018, based on the internal controls criteria
established by the Bank considering the essential components of internal control stated in the Guidance Note issued by the ICAI.
For M/s. R. K. KUMAR & CO.Chartered Accountants
FRN - 001595S
(G. NAGANATHAN)Place : Chennai PartnerDate : 25th May, 2018 M.No. 022456
F - 79
B.K. MANJUNATHChairman
PARTHASARATHI MUKHERJEEManaging Director & CEO
S. SUNDARChief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai25th May, 2018
N. MALAYALARAMAMIRTHAMY.N. LAKSHMINARAYANA MURTHYKUSUMA R MUNIRAJUANURADHA PRADEEPHEMANT KAULG. SUDHAKARA GUPTAH.S. UPENDRA KAMATHSUVENDU PATIRAJNISH KUMARDirectors
(` 000’s)
As at As atSchedule 31-03-2018 31-03-2017
I. CAPITAL & LIABILITIES
a. Capital 1 255,99,38 191,44,67
b. Reserves & Surplus 2 2071,67,45 1944,89,50
c. Deposits 3 33309,48,29 30553,35,35
d. Borrowings 4 4012,78,03 1773,13,21
e. Other Liabilities & Provisions 5 779,29,45 781,89,32
TOTAL 40429,22,60 35244,72,05
II. ASSETS
a. Cash & Balances with Reserve Bank of India 6 1698,16,94 1454,80,48
b. Balances with Banks and Money at call & Short Notice 7 316,79,42 169,07,17
c. Investments 8 10767,74,83 8651,73,03
d. Advances 9 25768,20,17 23728,91,14
e. Fixed Assets 10 402,45,35 359,11,90
f. Other Assets 11 1475,85,89 881,08,33
TOTAL 40429,22,60 35244,72,05
Contingent Liabilities 12 4872,30,39 3199,65,05
Bills for collection 1277,33,20 878,44,88
Significant Accounting Policies 17
Notes on Accounts 18
BALANCE SHEET as on 31st March 2018
Schedules 1 to 12 and 17 to 18 form part of this Balance Sheet.
F - 80
B.K. MANJUNATHChairman
PARTHASARATHI MUKHERJEEManaging Director & CEO
S. SUNDARChief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai25th May, 2018
N. MALAYALARAMAMIRTHAMY.N. LAKSHMINARAYANA MURTHYKUSUMA R MUNIRAJUANURADHA PRADEEPHEMANT KAULG. SUDHAKARA GUPTAH.S. UPENDRA KAMATHSUVENDU PATIRAJNISH KUMARDirectors
PROFIT AND LOSS ACCOUNT for the year ended 31st March 2018
(` 000’s)
Year ended Year endedSchedule 31-03-2018 31-03-2017
Schedules 13 to 16 and 17 to 18 form part of this Profit & Loss Account.
I. INCOME
a. Interest Earned 13 3041,62,17 2846,65,75
b. Other Income 14 346,80,78 502,76,78
TOTAL 3388,42,95 3349,42,53
II. EXPENDITURE
a. Interest Expended 15 2251,02,10 2064,00,36
b. Operating Expenses 16 782,02,97 651,36,59
c. Provisions & Contingencies 940,24,49 377,98,37
TOTAL 3973,29,56 3093,35,32
III. NET PROFIT FOR THE YEAR -584,86 61 256,07,21
Profit brought forward 62,26,43 44
TOTAL -522,60,18 256,07,65
IV. APPROPRIATIONS
a. Transfer to Statutory Reserve 0 64,10,00
b. Transfer to Capital Reserve 86,25,86 77,16,22
c. Transfer to Other Reserves 0 46,55,00
d. Investment Reserve 0 0
e. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 0 6,00,00
f. Dividend Paid for FY 16-17 51,78,78 0
g. Tax on Dividend 10,47,65 0
h. Balance carried over to Balance Sheet -671,12,47 62,26,43
TOTAL -522,60,18 256,07,65
Earnings Per Share - Basic ($) -28.29 14.07
Earnings Per Share - Diluted ($) -28.11 13.95
F - 81
CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account -584 86 61 256 07 22
ADJUSTMENTS FOR:
Provisions & Contingencies 940 24 49 377 98 37
Depreciation on Fixed Assets 58 84 16 48 05 54
Loss on sale of assets 18 35 - 26 45
Income Tax / T D S paid -68 00 00 -125 00 00
Net cash flow before changes in Working Capital 346 40 39 556 84 68
CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in
Deposits 2756 12 95 5122 39 19
Refinances 2339 14 82 1080 12 43
Other Liabilities -842 04 59 -330 49 29
4253 23 18 5872 02 33
ASSETS : Increase/Decrease in
Investments 2165 07 30 2106 32 57
Advances 2039 29 04 4085 17 23
Other Assets 526 77 56 10 30 67
-4731 13 90 -6201 80 47
Net Cash Flow from operating activities -131 50 32 227 06 54
CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets -103 52 16 -40 62 09
Sale of Fixed Assets 1 16 20 65 95
Net Cash Flow from Investing activities -102 35 96 -39 96 14
CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium net of forfeited shares 786 32 18 162 60 76
Proceeds received from Tier II Bonds 100 00 00 –
Repayment of Tier II Bonds -199 50 00 -30 00 00
Dividends paid -61 87 19 -64 44 64
Net Cash Flow from financing activities 624 94 99 68 16 12
Cash flow for the year 391 08 71 255 26 53
Cash & Cash equivalents at the beginning of the year 1623 87 66 1368 61 13
Cash & Cash equivalents at the year end (refer Schedule 6 &7) 2014 96 36 1623 87 66
CASH FLOW STATEMENT for the year ended 31st March 2018
(` in 000’s)
31-03-2018 31-03-2017
B.K. MANJUNATHChairman
PARTHASARATHI MUKHERJEEManaging Director & CEO
S. SUNDARChief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai25th May, 2018
N. MALAYALARAMAMIRTHAMY.N. LAKSHMINARAYANA MURTHYKUSUMA R MUNIRAJUANURADHA PRADEEPHEMANT KAULG. SUDHAKARA GUPTAH.S. UPENDRA KAMATHSUVENDU PATIRAJNISH KUMARDirectors
F - 82
($ 000’s)
As at As at31-03-2018 31-03-2017
SCHEDULE 1 - CAPITAL
AUTHORISED CAPITAL(50,00,00,000 equity shares of $ 10/- each) 500,00,00 500,00,00
ISSUED CAPITAL(25,80,12,279 equity shares of $ 10/- each)(Previous year 19,29,55,124 equity of $ 10/- each) of which6,44,97,155 shares issued through Rights Basis and5,60,000 shares issued under “LVB ESOS-2010”. 258,01,23 192,95,51
Subscribed, Called-up and Paid Up Capitali) 25,59,93,753 equity shares of $ 10/- each. 255,99,38 191,44,67
(Previous year 19,14,46,747 shares of $ 10/- each)(6,39,87,006 shares issued under Rights Basis and5,60,000 shares issued under “LVB ESOS-2010”.)
ii) 1,26,42,131 Bonus Shares allotted(Previous year 1,26,42,131 shares)
iii) Shares kept in abeyance 20,18,526,inclusive of Forfeited &lapsed shares.(Previous year 15,08,377 shares)
iv) Shares Forfeited and lapsed 23,658 (Previous year 23,658 shares)
TOTAL 255,99,38 191,44,67
SCHEULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE
Opening Balance 481,40,46 417,30,46Additions during the year 0 481,40,46 64,10,00 481,40,46
II. CAPITAL RESERVEOpening Balance 140,26,94 63,10,72Additions during the year 86,25,86 226,52,80 77,16,22 140,26,94
III. SHARE PREMIUMOpening Balance 807,98,14 657,35,89Additions during the year 721,77,47 155,80,68
1529,75,61 813,16,57Deductions during the year 0 1529,75,61 5,18,43 807,98,14
IV. REVENUE & OTHER RESERVESOpening Balance 216,52,72 218,17,53Additions during the year 52,67,59 48,78,90
269,20,31 266,96,43Deductions during the year 0 269,20,31 50,43,71 216,52,72
V. EMPLOYEE STOCK OPTION OUTSTANDINGOpening Balance 4,50,49 0Additions during the year 3,79,85 4,50,49
8,30,34 4,50,49Deductions during the year 2,10,02 0Less: Transferred to General Reserve 0 6,20,32 0 4,50,49
VI. SPECIAL RESERVE U/S 36(1)(VIII) OF IT ACT, 1961Opening Balance 62,45,00 56,45,00Additions during the year 0 62,45,00 6,00,00 62,45,00
VII. REVALUATION RESERVEOpening Balance 169,49,32 171,73,22Additions during the year 0 0
169,49,32 171,73,22Depreciation on Revalued Asset 2,23,90 167,25,42 2,23,90 169,49,32
0 0VIII. BALANCE IN PROFIT & LOSS ACCOUNT -671,12,47 62,26,43
TOTAL 2071,67,45 1944,89,50
F - 83
SCHEDULE 3 - DEPOSITS
A. I. DEMAND DEPOSITS
1. From Banks 1,09,82 5,37,09
2. From Others 2090,16,56 2091,26,38 1839,37,21 1844,74,30
II. SAVINGS BANK DEPOSITS 4924,86,79 3999,60,89
III. TERM DEPOSITS
1. From Banks 2378,89,03 2141,82,11
2. From Others 23914,46,09 26293,35,12 22567,18,05 24709,00,16
33309,48,29 30553,35,35
B. (I) DEPOSITS OF BRANCHES IN INDIA 33309,48,29 30553,35,35
(II) DEPOSITS OF BRANCHES OUTSIDE INDIA NIL NIL
TOTAL 33309,48,29 30553,35,35
SCHEDULE 4 - BORROWINGS
I. BORROWINGS IN INDIA
1. Reserve Bank of India 2070,00,00 65,00,00
2. Other Banks 275,00,00 250,00,00
3. Other Institutions & Agencies* 1667,78,03 4012,78,03 1458,13,21 1773,13,21
II. BORROWINGS OUTSIDE INDIA 0 0
* Includes unsecured Tier II bonds of ` 368.70 Crs 4012,78,03 1773,13,21(PY ` 468.20 Crs.)
SECURED BORROWINGS INCLUDED IN I & II ABOVE 0 0
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS
I. Bills payable 84,48,76 66,23,14
II. Inter-office adjustments (net) 11,51,70 48,06,44
III. Interest accrued 225,70,07 210,56,90
IV. (I) Others - (including Provisions) 359,27,92 369,62,84
(ii) Contingent Provisions against Standard Assets 98,31,00 87,40,00
TOTAL 779,29,45 781,89,32
SCHEDULE 6 - CASH AND BALANCES WITHRESERVE BANK OF INDIA
Cash in Hand (including Foreign Currency Notes) 344,15,68 341,26,46
Balances with Reserve Bank of India
I) in current account 1354,01,26 1113,54,02
II) in other accounts 0 0
TOTAL 1698,16,94 1454,80,48
($ 000’s)
As at As at31-03-2018 31-03-2017
F - 84
(` 000’s)
As at As at31-03-2018 31-03-2017
SCHEDULE 7 - BALANCES WITH BANKS & MONEYAT CALL AND SHORT NOTICE
I. IN INDIA
(i) Balance with Banks
a. in current accounts 41,22,36 19,78,04
b. in other deposit accounts 30,00 6,25
41,52,36 19,84,29
(ii) Money at call and short notice
a. with banks 0 0
b. with RBI in reverse repo 270,00,00 110,00,00
c. with other institutions 0 0
270,00,00 110,00,00
311,52,36 129,84,29
II. OUTSIDE INDIA
(I) Balance with Banks
a. in current accounts 5,27,06 39,22,88
b. in other accounts 0 0
5,27,06 39,22,88
TOTAL 316,79,42 169,07,17
SCHEDULE 8 - INVESTMENTS
I. INVESTMENTS IN INDIA
I. Government Securities [incl. treasury bills, & zero coupon bonds] 9625,15,52 7910,70,21
II. Other approved securities 0 0
III. Shares 182,16,74 134,98,32
IV. Debentures & Bonds 606,68,49 282,32,63
V. Subsidiaries and Joint Ventures 0 0
VI. Others [including Commercial Paper, Mutual Funds,Security Receipt, Units, etc.] 353,74,08 323,71,87
10767,74,83 8651,73,03
GROSS INVESTMENTS IN INDIA 10868,19,94 8703,12,63
LESS: DEPRECIATION 100,45,11 51,39,60
NET INVESTMENTS IN INDIA 10767,74,83 8651,73,03
II. INVESTMENTS OUTSIDE INDIA NIL NIL
TOTAL 1076,74,83 8651,73,03
F - 85
(` 000’s)
As at As at31-03-2018 31-03-2017
SCHEDULE 9 - ADVANCES
A. I. Bills purchased & discounted 421,44,32 863,82,09
II. Cash credits, overdrafts & loans repayable on demand 15434,63,77 15128,44,22
III. Term loans 9912,12,08 7736,64,83
25768,20,17 23728,91,14
B. PARTICULARS OF ADVANCES
I. Secured by tangible assets 25371,63,92 23314,59,93[incl. advances against Book Debts]
II. Covered by Bank / Govt. Guarantees 0 0
III. Unsecured 396,56,25 414,31,21
25768,20,17 23728,91,14
C. SECTORAL CLASSIFICATION OF ADVANCES
I. Priority Sector 9465,45,81 8195,07,30
II. Public Sector 0 0
III. Banks 0 0
IV. Others 16302,74,36 15533,83,84
TOTAL 25768,20,17 23728,91,14
SCHEDULE 10 - FIXED ASSETS
I. PREMISES
At cost 240,54,15 64,86,41
Addition due to Revaluvation 0 175,49,12
Additions during the year 19,15 18,62
240,73,30 240,54,15
Deductions during the year 0 0
240,73,30 240,54,15Less: Depreciation to date 20,08,84 220,64,46 17,29,28 223,24,87
II. OTHER FIXED ASSETS(INCLUDING FURNITURE & FIXTURES)
At Cost 402,47,12 369,01,92
Additions during the year 103,33,00 40,43,47
505,80,12 409,45,39
Deductions during the year 4,99,23 6,98,27
500,80,89 402,47,12
Less: Depreciation to date 319,00,00 181,80,89 266,60,09 135,87,03
TOTAL 402,45,35 359,11,90
F - 86
(` 000’s)
As at As at31-03-2018 31-03-2017
SCHEDULE 11 - OTHER ASSETS
I. Inter-Office Adjustments (net) 0 0
II. Interest Accrued 264,80,83 197,35,22
III. Tax Paid in Advance and Tax Deducted at Source (Net) 179,37,40 133,72,89
IV. Deferred Tax Asset / Liabilities (net) 464,95,16 65,22,16
V. Stationery & Stamps 2,55,24 2,55,85
VI. Non Banking Assets acquired in satisfaction of claims 78,25,71 78,25,71
VII. Others 485,91,55 403,96,50
TOTAL 1475,85,89 881,08,33
SCHEDULE 12 - CONTINGENT LIABILITIES
I. Claims against the Bank not acknowledged as debts 135,85,40 135,50,71
II. Liability for partly paid Investments 0 0
III. Liability on account of outstanding forward exchange contracts 2339,04,82 838,04,22
IV. Guarantees given on behalf of constituents
In India 1085,54,64 948,97,32
Outside India 98,81,72 162,92,39
V. Acceptances, Endorsements & Other Obligations 1170,42,24 1091,06,31
VI. Other items for which the Bank is contingently liable 42,61,57 23,14,10
4872,30,39 3199,65,05
Year ended Year ended31-03-2018 31-03-2017
SCHEDULE 13 - INTEREST EARNED
I. Interest / discount on advances / bills 2331,47,02 2239,71,04
II. Income on Investments 693,05,43 577,59,37
III. Interest on balance with Reserve Bank of India& other inter-bank Funds 7,02,93 12,28,33
IV Others 10,06,79 17,07,01
TOTAL 3041,62,17 2846,65,75
F - 87
(` 000’s)
Year ended Year ended31-03-2018 31-03-2017
SCHEDULE 14 - OTHER INCOME
I. Commission, Exchange and Brokerage 121,76,42 134,06,85
II. Profit on sale of Investments 185,44,08 350,52,75
Less: Loss on sale of Investments 121,03,91 64,40,17 90,56,83 259,95,92
III Profit on sale of land, Buildings & Other Assets 0 37,24
Less: Loss on sale of land, Buildings & Other Assets 18,35 -18,35 10,79 26,45
IV. Profit on Exchange Transactions 12,18,02 13,30,28
Less: Loss on Exchange Transactions 0 12,18,02 0 13,30,28
V. Income earned by way of Dividends fromCompanies in India. 3,29,88 3,29,88 3,17,52 3,17,52
VI. Miscellaneous Income 145,34,64 91,99,76
TOTAL 346 80,78 502,76,78
SCHEDULE 15 - INTEREST EXPENDED
I. Interest on Deposits 1987,99,37 1938,16,06
II. Interest on Reserve Bank of India / Inter-BankBorrowings 263,02,73 125,84,30
TOTAL 2251,02,10 2064,00,36
SCHEDULE 16 - OPERATING EXPENSES
I. Payments to and Provision for Employees 392,13,36 334,70,89
II. Rent, Taxes & Lighting 76,52,73 63,49,84
III. Printing & Stationery 7,42,41 6,62,31
IV. Advertisement & Publicity 9,44,23 9,64,65
V. Depreciation on Bank's Property 58,84,16 48,05,54
VI. Director's fees, allowances 1,17,25 1,40,00
VII. Auditors' fees & Expenses (incl. Branch Auditors) 1,82,40 1,38,65
VIII. Law Charges 2,34,57 2,04,35
IX. Postage, Telegrams, Telephones, etc., 14,36,98 12,79,85
X. Repairs & Maintenance 7,13,74 4,36,72
XI. Insurance 33,35,79 26,58,67
XII. Other Expenditure 177,45,35 140,25,12
TOTAL 782,02,97 651,36,59
F - 88
SCHEDULE 17
SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF ACCOUNTING:
The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated andconform 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, Accounting Standards (AS) specified underSection 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicableand current practices prevailing in the banking industry in India.
B. USE OF ESTIMATES:
The preparation of the financial statements require management to make estimates and assumptions that affect the reportedamounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reportedincome and expenses during the reported period. The Management believes that the estimates and assumptions used in thepreparation 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.
C. PRINCIPAL ACCOUNTING POLICIES
1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:
(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as perthe guidelines issued by FEDAI. The resultant profit or loss is accounted for.
(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of the respectivetransaction.
(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the correspondingforward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisionsof AS-11. The difference between revalued amount and the contracted amount is recognized as profit or loss, as thecase may be.
(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailingon the Balance Sheet date.
2. INVESTMENTS:
(a) Investments are categorized under the heads 'Held to Maturity', Available for Sale, and 'Held for Trading' and arevalued in accordance with the guidelines of the Reserve Bank of India
(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and notincluded in cost.
(c) Broken period interest paid / received on debt instruments is treated as interest expense / income.
(d) Security receipts are valued at NAV as declared by Securitisation Companies
(e) The excess of acquisition cost over the face value of securities under "Held to Maturity" category is amortised overthe remaining period to maturity.
(f) Costs including brokerage and commission pertaining to investments, paid at the time of acquisition, are charged tothe profit and loss account. Cost of investments is computed based on the Weighted Average Rate method.
(g) Profit / loss on sale of investments in the 'Held to Maturity' category is recognized in the profit and loss account andprofit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to capital reserve.Profit / loss on sale of investments in 'Available for Sale' and 'Held for Trading' categories is recognised in the profitand loss account.
(h) All Repo and Reverse Repo transactions are accounted for as borrowing and lending transactions respectively inaccordance with the extant RBI guidelines.
3. ADVANCES:
3.1 In accordance with the prudential norms issued by RBI:
(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;
F - 89
(b) Provisions are made for loan losses, and
(c) General provision for standard advances is made.
3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towardsNPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value of restructuredadvances measured in present value terms as per RBI guidelines.
4. FIXED ASSETS AND DEPRECIATION:
(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted at theirrevalued cost.
(b) Software is capitalised along with computer hardware and included under Other Fixed Assets.
(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful lifespecified in Schedule II to the Companies Act, 2013 except for hand held communication devices(other than Tablets)which are depreciated in full considering the fast changing technology and obsolescence.
(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per theguidelines issued by the Reserve Bank of India.
(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is providedon the total cost.
5. EMPLOYEE BENEFITS:
(a) Annual contributions to the approved Employees' Gratuity Fund, Approved Pension Fund and Provision for LeaveEncashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as per AccountingStandard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged toProfit & Loss account.
(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant ofEmployee Stock Options.
6. PROVISION FOR TAXATION:
Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial pronouncementsand legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accounting for Taxes onIncome).
7. REVENUE RECOGNITION:
(a) Income is accounted for on accrual basis.
(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significantuncertainty in collection thereof:
(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.
(d) Dividend Income on Investments is accounted based on declaration basis.
8. SEGMENT REPORTING:
(a) The Bank recognises the Business Segment as the Primary Reporting Segment and Geographical Segment as theSecondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the AccountingStandard 17.
(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations.
(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.
9. EARNINGS PER SHARE:
Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 "Earnings pershare". Basic earnings per equity share are computed by dividing net profit by the weighted average number of equityshares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number ofequity shares and dilutive potential equity shares outstanding during the period.
10. IMPAIRMENT OF ASSETS
The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairmentloss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimatedrecoverable amount.
F - 90
11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:
(a) As per the Accounting Standard 29 "Provisions, Contingent Liabilities and Contingent Assets", the Bank recognisesprovisions only when it has a present obligation as a result of a past event and it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and when a reliable estimate of theamount of the obligation can be made.
(b) Contingent Liability is recognised and disclosed only when a legal dispute is pending before a court of law / forum /Banking Ombudsman.
(c) Contingent Assets are not recognized in the financial statements since this may result in the recognition of incomethat may never be realised.
12. NET PROFIT:The net profit as per the Profit & Loss account is arrived at after necessary provisions towards:
a) Taxation.
b) Advances and other assets.
c) Shortfall in the value of investments
d) Staff Retirement benefits.
e) Other usual and necessary provisions.
13. CASH AND CASH EQUIVALENTS:Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at Call and ShortNotice.
Cash flows are reported using indirect method, whereby Profit (Loss) before tax is adjusted for the effects of transactions ofa non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income orexpenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activitiesof the bank are segregated.
SCHEDULE 18
NOTES ON ACCOUNTS
1. The reconciliation of inter branch transactions has been completed up to 31.03.2018 and tallying of balances is ensured onan ongoing basis.
2. Issue of Shares - Right Issue:
6,39,87,006 equity shares of face value of $ 10 each fully paid up were issued on rights basis for a price of $ 122 per equityshare, including share premium of $ 112 per equity share in all aggregating to $ 780.64 crore on rights basis and 5,10,149equity shares not allotted kept in abeyance during this rights issue.
3. DISCLOSURE REQUIREMENTS
3.1 CAPITAL (` in crore)
Items 2017-18 2016-17
i) Common Equity Tier 1 Capital Ratio (%) - (Basel-III) 8.05 8.75
ii) Tier 1 Capital Ratio (%) 8.05 8.75
iii) Tier 2 Capital Ratio (%) 1.76 1.63
iv) Total Capital Ratio (CRAR) (%) 9.81 10.38
v) Percentage of the shareholding of the Government of India in public sector bank NA NA
vi) Amount of equity capital raised 786.32 167.79
vii) Amount of Additional Tier 1 capital raised, of whichPNCPS :PDI : NIL NIL
viii) Amount of Tier II Capital raised, of whichDebt capital instruments 100.00 NILPreference Share Capital instruments NIL NIL
F - 91
3.2 INVESTMENTS (` in crore)
Particulars 2017-18 2016-17
(1) Value of Investments
(i) Gross Value of Investments
(a) In India 10,868.20 8,703.13
(b) Outside India NIL NIL
(ii) Provisions for Depreciation
(a) In India 100.45 51.40
(b) Outside India NIL NIL
(iii) Net Value of Investments
(a) In India 10,767.75 8,651.73
(b) Outside India. NIL NIL
(2) Movement of provisions held towards Depreciation on investments.
(i) Opening balance 51.40 49.04
(ii) Add: Provisions made during the year 53.33 2.36
(iii) Less: Write-off / write-back of excess provisions during the year 4.28 0.00
(iv) Closing Balance 100.45 51.40
3.2.1 In respect of securities held under HTM category, premium paid of $ 30.90 crore (previous year $ 13.72 crore) has been
amortized during the year and debited under "Interest received on Investments".
3.2.2 Repo Transactions (in face value terms) (` in crore)
Minimum Maximum Daily Average Outstandingoutstanding outstanding outstanding As on
during during during March 31, the year the year the year 2018
Securities sold under repo
I. Government Securities 0.00 2470.00 1016.28 2070.00(0.00) (3085.69) (521.86) (321.87)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
Securities purchased under reverse repo
I. Government Securities 0.00 2430.00 97.63 270.00(0.00) (1580.80) (175.62) (110.00)
II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)
(Figures in bracket indicates in previous year)
F - 92
3.2.3 Non-SLR Investment Portfolio
i) Issuer composition of Non SLR investments: (` in crore)
No. Issuer Amount Extent of Extent of Extent of Extent ofPrivate ‘Below ‘Unrated’ ‘Unlisted’
Placement Investment Securities SecuritiesGrade’
Securities
(1) (2) (3) (4) (5) (6) (7)
1 PSUs 259.42 65.50 – – –
2 FIs 25.75 6.00 – – –
3 Banks 48.27 23.00 – – –
4 Private Corporates 547.08 443.87 11.93 103.55 128.55
5 Subsidiaries / Joint Ventures – – – – –
6 Others 346.75 341.59 – – –
7 Less: Provision held towardsdepreciation -84.67 – – – –
Total 1142.59 879.97 11.93 103.55 128.55
Amounts reported under Columns 4, 5, 6 and 7 above may not be mutually exclusive.
Particulars 2017-18 2016-17
Opening balance 27.76 10.05
Additions during the year since 1st April 24.82 20.83
Reductions during the above period 0.00 3.12
Closing balance 52.58 27.76
Total Provisions held (*) 36.26 14.07
(*) An amount of $ 0.94 Crore (PY $ 0.94 Crore) received towards part settlement is parked under sundries account.
ii) Non-performing Non-SLR investments : (` in crore)
3.2.4 Sale and transfers to / from HTM category:
During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTMcategory as at the beginning of the year. The details of HTM category as on 31.03.2018 are furnished hereunder:
(` in crore)
Particulars 2017-18 2016-17
i) The notional principal of swap agreements NIL NIL
ii) Losses which would be incurred if counter parties failed to fulfill theirobligations under the agreements NIL NIL
iii) Collateral required by the bank upon entering into swaps NIL NIL
iv) Concentration of credit risk arising from the swaps NIL NIL
v) The fair value of the swap book NIL NIL
3.3 Derivatives
3.3.1 Forward Rate Agreement / Interest Rate Swap: (` in crore)
Market Value 6,287.37
Book value 6,571.05
Excess of book value over market value for which Provision is not made (283.68)
F - 93
3.3.2 Exchange Traded Interest Rate Derivatives: (` in crore)
S.No. Particulars 2017-18 2016-17
(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NIL NIL
(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2018 (instrument-wise) NIL NIL
(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
(iv) Mark-to-market value of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL
3.3.3 Disclosures on risk exposure in derivatives
Qualitative Disclosure:
The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used tohedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.
a. To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribedin the Treasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthlybasis for Foreign Exchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBIfrom time to time.
Sl.Particular
Currency Derivatives Interest rate Derivatives
No. 2017-18 2016-17 2017-18 2016-17
(i) Derivatives (Notional Principal Amount) NA NA NA NAa) For hedging NA NA NA NAb) For trading NA NA NA NA
(ii) Marked to Market Positions NA NA NA NAa) Asset (+) NA NA NA NAb) Liability (-) NA NA NA NA
(iii) Credit Exposure NA NA NA NA
(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NA NA NAa) On hedging derivatives NA NA NA NAb) On trading derivatives NA NA NA NA
(v) Maximum and Minimum of 100*PV01 observed during the year NA NA NA NAa) On hedging NA NA NA NAb) On trading NA NA NA NA
Quantitative Disclosures: (` in crore)
3.3.4 Shifting of securities:
For the year ended 31.03.2018, Bank has shifted securities amounting to $ 322.09 crore (Face Value) (Previous year $ 903 croreFace Value) from HTM to AFS category and no loss arose on such transfer (Previous year - no loss). Further, Bank has shiftedsecurities amounting to $ 590 crore (Face Value)(Previous year $ NIL crore Face Value) from AFS to HTM category and loss whicharose on such transfer amounting to $ 4.28 crore (Previous Year - No loss) has been provided during the year. Total loss during theyear on account of shifting of securities is $ 4.28 crore (Previous Year - No loss).
3.3.5 SLR Securities: ($ in crore)
As at 31.03.2018 As at 31.03.2017
ParticularsBook Market Book MarketValue Value Value Value
Government Securities SLR (CG, SG,TB) 9,640.94 9,334.84 7,910.70 7,891.67
Approved securities - SLR 0.00 0.00 0.00 0.00
F - 94
3.4 Asset Quality
3.4.1 Non-Performing Assets: (` in crore)
Particulars 2017-18 2016-17
(i) Net NPAs to Net Advances (%) 5.66% 1.76%
(ii) Movement of NPAs (Gross)(a) Opening balance 640.19 391.25(b) Additions during the year 2916.02 597.20(c) Reductions during the year 862.00 348.26(d) Closing balance 2694.21 640.19
(iii) Movement of Net NPAs(a) Opening balance 418.42 231.64(b) Additions during the year 1901.12 500.04(c) Reductions during the year 861.65 313.26(d) Closing balance 1457.89 418.42
(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 170.43 113.47(b) Provisions made during the year 1343.16 194.55(c) Write-off / write-back of excess provisions 344.54 137.59(d) Closing balance 1169.05 170.43
3.3.6 Spreading of mark to market losses on Investments:
RBI vide circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 has permitted banks to spread the provisioning formark to market (MTM) losses on investments held in AFS and HFT for the quarters ended December 31, 2017 and March 31, 2018equally over four quarters respectively (commencing with the quarter in which the loss is incurred). Accordingly, Bank has provided` 32.76 crore for depreciation of the investment portfolio for the quarter ended Mar 2018. The balance amounting to ` 98.29 crore willbe provided in the ensuing three quarters.
3.4.2 Divergence in the asset classification and provisioning:
In terms of the RBI Circular DBR.BP.BC.No. 63/21.04.018/2016-17 dated 18th April 2017, banks are required to disclose the divergencesin asset classification and provisioning consequent to RBI's annual supervisory process in their notes to accounts wherever eithera) the additional provisioning requirements assessed by RBI exceed 15% of the published net profits after tax for the referenceperiod or b) the additional Gross NPAs identified by RBI exceed 15% of the published incremental Gross NPAs for the referenceperiod, or both. Accordingly, divergence in Asset Classification and Provisioning for NPAs in compliance to Risk Assessment Report(RAR) of RBI for the financial year 2016-17 is reported hereunder.
(` in crore)
S No. Particulars Amount
1. Gross NPAs as on March 31, 2017 as reported by the bank 640.19
2. Gross NPAs as on March 31, 2017 as reported by RBI 809.69
3. Divergence in Gross NPAs (2-1) 169.50
4. Net NPAs as on March 31, 2017 as reported by the bank 418.42
5. Net NPAs as on March 31, 2017 as reported by RBI 497.62
6. Divergence in Net NPAs (5-4) 79.20
7. Provisions for NPAs as on March 31, 2017 as reported by the bank 170.43
8. Provisions NPAs as on March 31, 2017 as reported by RBI 260.73
9. Divergence in Provisioning (8-7) 90.30
10. Reported Net Profit after Tax (PAT) for the year ended March 31, 2017 256.07
11. Adjusted (notional) Net Profit after Tax (PAT) for the year ended March 31, 2017after taking into account the divergence in provisioning 165.77
(Resultant impact of the RBI divergence has been duly considered and given effect to as of 31.03.2018)
F - 95
3.4.
3 P
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F - 96
3.4.
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31
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0.00
0.00
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.02
0.12
0.43
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0.00
0.55
5.35
0.39
36.3
752
.16
94.2
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470.
8279
.39
52.1
613
7.83
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7.
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1 1
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0.58
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0.54
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5.44
0.00
647.
72
0.00
0.00
2.37
0.00
2.37
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.56
0.00
0.56
0.00
0.00
2.93
0.00
2.93
F - 97
3.4.4 Details of financial assets sold to Securitization / Reconstruction Company for Asset Reconstruction
(A) Details of Sales: (` in crore)
Particulars 2017-18 2016-17
(i) No. of accounts 2 1390
(ii) Aggregate value (net of provisions) of accounts sold to SC / RC 90.99 106.22
(iii) Aggregate consideration 91.42 95.64
(iv) Additional consideration realized in respect of accounts transferred in earlier years 0.00 0.00
(v) Aggregate profit / (loss) over net book value. 0.42 (10.58)
(B) NPA Assets Sold to ARC: (` in crore)
Backed by NPAs sold by theBacked by NPAs sold by other banks /
Particulars bank as underlyingfinancial institutions / non-banking Totalfinancial companies as underlying
2017-18 2016-17 2017-18 2016-17 2017-18 2016-17
Book value of investments in security 338.78 343.41 2.81 6.01 341.59 349.42Receipts as at 31st March
(C) Disclosures of investment in Security Receipts: (` in crore)
Particulars SRs issued within SRs issued morethan 5 years ago SRs issued morethanpast 5 years but within past 8 years 8 years ago
(i) Book value of SRs backed by NPAs sold by the bank as underlying 248.86 89.92 0.00
Provision held against (i) 7.29 39.94 0.00
(ii) Book value of SRs backed by NPAs sold byother banks / financial institutions / non-banking financial companies as underlying 0.00 2.81 0.00
Provision held against (ii) 0.00 0.70 0.00
Total (i) + (ii) 248.86 92.73 0.00
3.4.5 Details of non-performing financial assets purchased / sold:
A. Details of non-performing financial assets purchased: (` in crore)
Particulars 2017-18 2016-17
1 (a) No. of accounts purchased during the year NIL NIL
(b) Aggregate outstanding NIL NIL
2 (a) Of these, number of accounts restructured during the year NIL NIL
(b) Aggregate outstanding NIL NIL
B. Details of non-performing financial assets sold: (` in crore)
Particulars 2017-18 2016-17
1. No. of accounts sold NIL NIL
2. Aggregate outstanding NIL NIL
3. Aggregate consideration received NIL NIL
C. Disclosure regarding amortization of Loss on sale of assets to ARCs
In terms of RBI guidelines, the Bank had opted to spread the net shortfall on account of sale of assets to Reconstruction companiesduring the financial year 2015-16 and 2016-17 over a period of 8/ 4 quarters and consequently the Bank has fully absorbed a sum of` 31.29 Crore during the year ended 31st March, 2018 (by corresponding reversal of the proportionate debit made earlier to Revenueand Other Reserves). The unamortized amount as at 31st March, 2018 is Nil.
F - 98
3.4.6 Provisions on Standard Assets: (` in crore)
Particulars 2017-18 2016-17
Provisions towards Standard Assets 98.31 87.40
3.6 Asset Liability Management:
Maturity pattern of certain items of assets and liabilities (` in crore)
1 Day 2 to 7 8 to 14 15 to 28 29 days Over 3 Over 6 Over 1 year & Over 3 Over 5 TotalItems days days days to 3 months months & months & upto 3 years years & upto years
upto 6 months upto 1 year 5 years
Deposits 359.64 831.86 539.16 943.90 3488.14 3158.11 6323.82 10161.05 934.14 6569.66 33309.48(314.08) (993.81) (1331.99) (897.29) (4265.39) (2874.70) (4143.65) (9055.68) (1256.40) (5420.36) (30553.35)
Advances (Net) 246.04 489.99 526.89 2303.97 1814.82 2641.65 1041.43 9909.34 3099.45 3694.63 25768.20(333.26) (478.90) (973.86) (495.46) (3663.32) (862.32) (2128.78) (10159.41) (1416.15) (3217.44) (23728.91)
Investments (Net) 15.93 221.40 0.00 0.00 18.05 53.45 1961.20 566.29 383.80 7547.63 10767.75(80.66) (130.62) (0.13) (0.00) (116.91) (109.40) (116.10) (310.64) (426.28) (7360.99) (8651.73)
Borrowings 0.00 2569.08 500.00 100.00 50.00 00.00 125.00 300.00 50.50 318.20 4012.78(250.00) (921.60) (0.00) (0.00) (0.00) (0.00) (332.83) (0.00) (50.50) (218.20) (1773.13)
Foreign Currency 19.86 0.16 1.92 3.53 24.74 27.47 0.00 0.00 0.00 0.00 77.67Assets (59.42) (0.85) (6.43) (10.60) (22.68) (7.30) (6.61) (0.00) (0.00) (0.00) (113.89)
Foreign Currency 29.10 0.00 0.00 0.11 2.17 7.74 16.82 34.35 14.66 0.00 104.95Liabilities (23.69) (1.37) (0.11) (0.28) (1.94) (3.39) (6.54) (20.64) (21.95) (0.00) (79.89)
(Figures in brackets indicates in previous year).The above data has been compiled by the management on the basis of the guidelines of RBI which have been relied upon by Auditors
3.5 Business Ratios:
Particulars 2017-18 2016-17
(i) Interest Income as a percentage to Working Funds 8.15 9.17
(ii) Non-interest income as a percentage to Working Funds 0.93 1.62
(iii) Operating Profit as a percentage to Working Funds 0.95 2.04
(iv) Return on Assets -1.57 0.83
(v) Business (Deposits plus advances) per employee (` in crore) 11.30 11.46
(vi) Profit per employee (` in crore) -0.11 0.06
3.7 Exposures
3.7.1 Exposure to Real Estate Sector: (` in crore)
Category 2017-18 2016-17
a) Direct exposure
(i) Residential Mortgages – 1994.55 499.97
Lending fully secured by mortgages on residential propertythat is or will be occupied by the borrower or that is rented;
(ii) Commercial Real Estate – 2183.88 1540.75
Lending secured by mortgages on commercial real estates (office buildings,retail space, multi-purpose commercial premises, multi-family residential buildings,multi-tenanted commercial premises, industrial or warehouse space, hotels,land acquisition, development and construction, etc.).Exposure would also include non-fund based (NFB) limits;
F - 99
3.7.2 Exposure to Capital Market: (` in crore)
Particulars 2017-18 2016-17
(i) Direct investment in equity shares, convertible bonds, convertible debentures and unitsof equity-oriented mutual funds the corpus of which is not exclusively invested incorporate debt; 194.74 131.78
(ii) Advances against shares / bonds / debentures or other securities or on clean basis toindividuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; NIL NIL
(iii) Advances for any other purposes where shares or convertible bonds or convertibledebentures or units of equity oriented mutual funds are taken as primary security; 7.22 107.25
(iv) Advances for any other purposes to the extent secured by the collateral security of sharesor convertible bonds or convertible debentures or units of equity oriented mutual funds i.e.where the primary security other than shares / convertible bonds/convertible debentures /units of equity oriented mutual funds does not fully cover the advances; NIL NIL
(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf ofstockbrokers and market makers; 170.00 30.00
(vi) Loans sanctioned to corporates against the security of shares / bonds/debentures orother securities or on clean basis for meeting promoter's contribution to the equity ofnew companies in anticipation of raising resources; NIL NIL
(vii) Bridge loans to companies against expected equity flows / issues; NIL NIL
(viii) Underwriting commitments taken up by the banks in respect of primary issue of shares orconvertible bonds or convertible debentures or units of equity oriented mutual funds; NIL NIL
(ix) Financing to stockbrokers for margin trading; NIL NIL
(x) All exposures to Venture Capital Funds (both registered and unregistered) NIL NIL
Total Exposure to Capital Market 371.96 269.03
3.7.1 Exposure to Real Estate Sector (Contd.) (` in crore)
Category 2017-18 2016-17
(iii) Investments in Mortgage Backed Securities (MBS) and other securitisedexposures -
(a) Residential 0.00 0.00
(b) Commercial Real Estate 0.00 0.00
b) Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB) andHousing Finance Companies (HFCs). 703.99 129.21
Total Exposure to Real Estate Sector 4882.42 2169.93
F - 100
3.7.4 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.
A. SBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)
B. GBL exceeded by the Bank for the period 01/04/2017 to 31/03/2018 NIL (PY NIL)
3.7.5 Unsecured Advances (Amount of Advances for which, intangible securities has been taken): (` in crore)
As on As onParticulars 31-3-2018 31-3-2017
The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority etc. has been taken. NIL 21.91
Estimated value of such intangible collaterals NIL 66.80
3.8 Miscellaneous
3.8.1 Disclosure of Penalties imposed by RBI:A penalty of $ 1,63,500/- has been imposed on account of Counterfeit Notes detected in currency chest transactions and a sum of$ 13,830/- by CCIL for shortfall in maintenance of margin in SGF deals.
4. Disclosure in terms of Accounting Standards:
4.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as perAccounting Standard 5There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2018 as compared to those inthe preceding financial year ended 31.03.2017.
4.2 Accounting Standard 9: Revenue Recognition:Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9
4.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the years2010-11 & 2015-16 by the bank using the services of Banks approved empanelled Independent valuers. Appreciation arising out ofsuch revaluation was accounted with corresponding credit to Revaluation Reserves. The details are as under
(` in crore)
Original Cost of Premises 65.24
Incremental Value on account of revaluation made in 2011 - ` 81.51
Incremental Value on account of revaluation made in 2016 - ` 93.98 175.49
Depreciation on Original Cost - ` 11.85
Depreciation on Revalued Cost - ` 8.24 20.09
Written Down Value of such revalued assets 220.64
3.7.3 Risk Category wise Country Exposure: (` in crore)
Risk Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2018 31.3.2018 31.3.2017 31.3.2017
Insignificant 54.85 NIL 79.73 NIL
Low 44.22 NIL 26.29 NIL
Moderate 0.73 NIL 12.06 NIL
High 0.00 NIL 0.00 NIL
Very High 0.00 NIL 0.00 NIL
Restricted 0.00 NIL 0.00 NIL
Off-credit 0.00 NIL 0.00 NIL
Total 99.80 NIL 118.08NIL
As the bank's exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than1% of total assets of the bank, no provision is considered necessary.
F - 101
4.4 Accounting Standard 15 - Employee Benefits:
4.4.1 The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:
In respect of contributory plans viz. - Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at pre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixedcontribution.
In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made basedon actuarial valuation as per the guidelines.
The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and lossaccount and balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:
I. Principal Actuarial Assumptions at the Balance Sheet Date: (Expressed as weighted Averages)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Discount Rate 7.71% 7.71% 7.71%
Salary Escalation Rate 5.00% 5.00% 5.00%
Attrition Rate 4.00% 4.00% 4.00%
Expected Rate of return on Plan Assets 8.50% 7.03% –
II. Change in the Present value of obligations: (` in crore)
ParticularsGratuity Pension Leave Encashment
(Funded) (Funded) (Unfunded)
Present Value of obligations as at the beginning of the year 71.81 294.85 46.82
Interest Cost 5.25 21.08 3.41
Current Service Cost 5.94 48.94 3.89
Past service cost (non-vested benefits) 0.00 0.00 0.00
Past service cost (vested benefits) 0.00 0.00 0.00
Benefits Paid 7.34 43.00 5.12
Actuarial loss / (gain) on obligation (balancing figure) -3.56 11.46 7.03
Present Value of obligations as at the year end 87.12 333.33 56.04
III. Change in Fair Value of Plan Asset: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Fair value of Plan Assets at the beginning of the year 67.41 289.86 0.00
Expected return on Plan Assets 5.73 20.38 0.00
Employer's Contribution 11.30 38.20 0.00
Benefits Paid 7.34 43.00 0.00
Actuarial loss / (gain) on plan assets (balancing figure) 11.88 32.97 0.00
Fair Value of Plan Asset at the end of the year 88.98 338.41 0.00
IV. Actual Return on Plan Assets: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Expected return on plan assets 5.73 20.38 0.00
Actuarial gain / (loss) on plan assets 11.88 32.97 0.00
Actual return on plan assets 17.61 53.35 0.00
F - 102
V. Actuarial Gain / Loss recognized: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Actuarial gain / (loss) for the Period - Obligation -3.56 11.46 7.03
Actuarial gain / (loss) for the Period - Plan Assets 11.88 32.97 0.00
Total (gain) / loss for the period 8.32 44.43 7.03
Actuarial (gain) / loss recognized in the period -15.44 -21.51 7.03
Unrecognized actuarial (gain) / loss at the end of the year 0.00 0.00 0.00
VI. Amount recognized in Balance Sheet: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of the Obligation 87.12 333.33 56.04
Fair value of plan assets 88.98 338.41 0.00
Difference 1.86 5.09 56.04
Unrecognized Transitional liability 0.00 0.00 0.00
Unrecognized past service cost (non vested benefits) 0.00 0.00 0.00
Liability recognized in the Balance Sheet 1.86 5.09 56.04
VII. Expenses Recognized in Profit & Loss Account: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Current Service Cost 5.94 48.94 3.89
Interest Cost 5.25 21.08 3.41
Expected return on Plan assets 5.73 20.38 0.00
Net actuarial (gain) / loss recognised in the year -15.44 -21.51 7.03
Transitional Liability recognized in the year 0.00 0.00 0.00
Past service cost (non-vested benefits) 0.00 0.00 0.00
Past service cost (vested benefits) 0.00 0.00 0.00
Expenses Recognized in Profit & Loss Account 5.04 28.13 14.34
VIII. Movements in the Liability Recognized in the balance Sheet (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Opening net Liability* 4.40 4.99 0.00
Opening amount determined under para 55 of AS15R 0.00 0.00 0.00
Expense as Above 5.04 28.13 14.34
Contribution paid 11.30 38.20 0.00
Closing Net Liability* -1.86 -5.09 14.34
* Net liability = obligation minus funded / provisions.
F - 103
(` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Opening balance 71.81 294.85 46.82
Closing balance 87.12 333.32 56.04
IX. Amount for the Current Period: (` in crore)
Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)
Present value of Obligation 87.12 333.33 56.04
Plan Assets 88.98 338.41 0.00
Surplus / (Deficit) 1.86 5.09 56.04
X. Major categories of Plan Assets: (As % of Total Plan Assets)
Particulars Gratuity Pension(Funded) (Funded)
Government of India Securities 57.74 22.19
High Quality Corporate Bonds 23.02 15.08
Equity Share of listed companies 0.00 0.00
Property 0.00 0.00
Special Deposit Scheme 1.21 0.00
Equity Mutual fund 1.60 0.00
Balance with Bank Account 4.57 0.70
Balance held at LIC India's Running account 0.00 36.95
Annuity under Return of Purchase Price 0.00 17.04
Amount Receivable from Bank 10.20 6.98
Others (Interest Receivables) 1.66 1.06
Total 100.00 100.00
XI. Enterprises Best Estimate: (` in crore)
Particulars Gratuity Pension Leave Encashment
Enterprise’s Best Estimate of Contribution during next year 6.99 22.34 0.00
4.4.2 Enhancement in Gratuity Limits:
Ministry of Labour and Employment, Government of India on 29th March, 2018 enhanced the gratuity payable to an employee underPayment of Gratuity Act, 1972 to not exceed ` 20 lakh from earlier limit of ` 10 lakh. Employee cost for the quarter ended 31st March,2018 recognises the 1/4th of impact of this change amounting to ` 3.75 crore. The unamortised amount on this account stood at` 11.27 crore as on 31.03.2018 and will be spread over the next three quarters, as permitted by RBI vide DBR.BP.9730/21.04.018/2017-18 dated 27.04.2018.
4.5 Employee Stock Option Scheme:
As on 31.03.2017, number of options in force were 30,99,708. The Compensation Committee of the Board of Directors granted32500 stock options on 22.02.2018 to top Executives of the Bank under the Lakshmi Vilas Bank Employees Stock Option Scheme2010 - LVB ESOS 2010. As on 31st March, 2018, the options in force are 22,19,431. The Bank has provided a sum of ` 3.80 croretowards proportionate compensation expenses for the year ended 31st March 2018.
F - 104
4.6 Accounting Standard 17 - Segment Reporting:
SEGMENT REPORTING - MARCH 2018
PART A : BUSINESS SEGMENTS (` in crore)
Year ended Year endedParticulars 31-3-2018 31-3-2017
(Audited) (Audited)
1. SEGMENT REVENUE :
a. Treasury operations 779.96 866.31
b. Corporate / wholesale banking operations 776.30 933.22
c. Retail banking operations 1811.37 1522.62
d. Other banking operations 20.80 27.27
TOTAL 3388.43 3349.42
2. SEGMENT RESULTS (Operating Profit):
a. Treasury operations 143.21 310.42
b. Corporate / wholesale Banking operations 58.59 129.04
c. Retail banking operations 136.70 170.68
d. Other banking operations 16.88 23.92
TOTAL 355.38 634.06
OPERATING PROFIT 355.38 634.06
PROVISIONS OTHER THAN TAX 1306.15 253.98
PROFIT BEFORE TAX -950.78 380.07
Less : Tax expenses -365.91 124.00
NET PROFIT -584.87 256.07
3. CAPITAL EMPLOYED :
a. Treasury operations 605.04 103.31
b. Corporate/wholesale banking operations 188.55 315.47
c. Retail banking operations 389.68 1179.80
d. Unallocated Assets 1144.40 537.76
TOTAL 2327.67 2136.34
PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only no reporting is made underinternational segment.
F - 105
4.7 Accounting Standard 18 - Related Party Disclosures:
Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from01/04/2017 to 31/03/2018, as detailed below:
S. No. Name Designation
1 Mr. Parthasarathi Mukherjee Managing Director
2 Mr. N.S. Venkatesh(up to 21.10.17) Executive Director & CFO
3 Mr. N. Ramanathan Company Secretary
(` in crore)
Items / Related Party Parent (as per Subsidiaries Associates / Key Relatives of Totalownership Joint Management Key Manage-or control) Ventures Personnel ment Personnel
Borrowings NIL NIL NIL NIL NIL NIL
Deposits NIL NIL NIL NIL NIL NIL
Placement of Deposits NIL NIL NIL NIL NIL NIL
Advances NIL NIL NIL NIL NIL NIL
Investments NIL NIL NIL NIL NIL NIL
Non-Funded Commitments NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsprovided NIL NIL NIL NIL NIL NIL
Leasing / HP arrangementsavailed NIL NIL NIL NIL NIL NIL
Purchase of Fixed Assets NIL NIL NIL NIL NIL NIL
Sale of Fixed Assets NIL NIL NIL NIL NIL NIL
Interest Paid NIL NIL NIL NIL NIL NIL
Interest Received NIL NIL NIL NIL NIL NIL
Rendering of Services NIL NIL NIL NIL NIL NIL
Receiving of Services NIL NIL NIL 6.47* NIL 6.47
Management Contracts NIL NIL NIL NIL NIL NIL
*Salary for MD pertaining to February 2018 & March 2018 has been waived.
4.8 Accounting Standard 20 - Earnings per Share (EPS):
EPS calculation in accordance with the AS-20 issued by the ICAI is as under:
Particulars 2017-18 2016-17
Net profit after Tax (` In Crore) -584.87 256.07
Weighted Average - No. of Equity shares 206,752,598 181,992,723
Weighted Average - No. of Diluted Equity shares 208,046,949 183,513,537
Earnings per share - Basic (`) -28.29 14.07
Earnings per share - Diluted (`) -28.11 13.95
F - 106
4.9 Accounting Standard 22 - Accounting for Taxes on Income:
The Bank has recognized net Deferred Tax Assets as on 31st March, 2018 aggregating to ` 464.95 crore (PY ` 65.22 crore) ontiming differences pertaining to surplus provision for doubtful advances, Provision for Standard Advances, Leave Encashment,Special Reserve etc in accordance with Accounting Standard - 22 on "Taxes and income" issued by the Institute of CharteredAccountants of India. The major components of DTA / DTL are furnished as under:
(` in crore)
Particularsonents Deferred Tax Assets Deferred Tax Liabilities
Deferred Tax Components 2017-18 2016-17 2017-18 2016-17
Provision for leave encashment 18.32 16.20 0.00 0.00
Depreciation on fixed assets 0.00 0.00 11.84 7.72
Provision for wage arrears 3.81 0.00 0.00 0.00
Provision for other assets 2.97 24.23 0.00 0.00
Provision for advances 472.80 97.66 0.00 0.00
Special Reserve u/s 36(i)(viii) 0.00 0.00 21.82 21.61
Depreciation in market value of investments 0.00 0.00 0.00 33.49
Others 0.71 0.81 0.00 10.86
CLOSING BALANCE 498.61 138.90 33.66 73.68
Net DTA 464.95 65.22
4.10 Intangible Assets AS 26:
The Bank has followed AS 26 - Intangible asset and the guidelines issued by the RBI in this regard.
4.11 Accounting Standard 28 - Impairment of Assets:
A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In theopinion of the bank management, there is no impairment of other assets as at 31st March 2018 requiring recognition in terms of thesaid standard.
4.12 Details of movement in provisions in accordance with Accounting Standard 29: (` in Crore)
Opening Provision Provision ClosingParticulars as on made during reversed / as on
01.04.2017 the year adjusted 31.03.2018
Prov. for Standard Assets 87.40 10.91 0.00 98.31
Prov. for Bad and Doubtful debts 170.43 1302.13 303.51 1,169.05
Prov. for Income Tax 370.85 33.82 0.00 404.67
Prov. for depreciation in market value of Investments 51.40 53.33 4.28 100.45
Prov. for Other assets 3.78 4.71 0.00 8.49
Counter cyclical buffer 14.71 0.00 0.00 14.71
Prov. for Interest Tax 0.10 0.00 0.00 0.10
Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90
Prov. for Dividend (incl. Div. Tax) 0.00 0.00 0.00 0.00
Prov. for Restructured Advances & FITL 105.61 0.00 65.36 40.25
Provision for Foreign Currency Unhedged 2.27 0.00 0.24 2.03
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5. Additional Disclosures:
5.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head Expenditure in Profit &Loss Account
(` in crore)
Particulars 2017-18 2016-17
Provision towards Standard Asset 10.91 15.17
Provision towards NPA 1302.13 235.49
Provision for depreciation in market value of Investments 53.33 2.36
Provision for Restructured Advances (Economic sacrifice) & FITL -64.68 0.33
Provision for Foreign Currency Unhedged -0.25 0.57
Provision for Other Assets 4.71 0.06
Sub Total 1306.15 253.98
Provision for Income Tax (Net of deferred tax) -365.91 124.00
Total 940.24 377.98
5.2 Movement of Counter Cyclical Provisioning Buffer: (` in crore)
Particulars 2017-18 2016-17
(a) Opening balance in the account 14.71 14.71
(b) Provision made in the accounting year 0.00 0.00
(c) Amount of drawdown made during the accounting year 0.00 0.00
(d) Closing balance in the account 14.71 14.71
5.3 Draw Down from Reserves: NIL
5.4 Disclosure of complaints
A. Customer Complaints:
(a) No. of complaints pending at the beginning of the year 0
(b) No. of complaints received during the year 358
(c) No. of complaints redressed during the year 357
(d) No. of complaints pending at the end of the year 1
ATM complaints through Dispute Management Systems (DMS)- NPCI
(a) No. of complaints pending at the beginning of the year 9
(b) No. of complaints received during the year 2783
(c) No. of complaints redressed during the year 2770
(d) No. of complaints pending at the end of the year 22
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B. Awards passed by the Banking Ombudsman:
(a) No. of unimplemented Awards at the beginning of the year 0
(b) No. of Awards Passed by the Banking Ombudsmen during the year 0
(c) No. of Awards implemented during the year 0
(d) No. of unimplemented Awards at the end of the year 0
5.5 Disclosure of Letters of Comfort (LOCs) issued by Banks: (` in crore)
Particulars Amount
Letters of comfort issued in earlier years and outstanding as on 01-04-2017 11.57
Add; Letters of Comfort issued during FY 2017-18 50.92
Less: Letters of Comfort expired during FY 2017-18 0.76
Letters of Comfort Outstanding as on 31-03-2018 61.73
5.6 Provisioning Coverage ratio:
The provision coverage ratio of the Bank as on 31.03.2018 is 55.07%.
5.7 Bancassurance Business:
Fees, remuneration received from Bancassurance business:
For the year ended 31.03.2018, the bank received Gross Commission income of $ 10.73 crore from Bancassurance business, ofwhich $ 7.81 crore was from life insurance segment and $ 2.91 crore was from general insurance segment.
5.8 Concentration of Deposits, Advances, Exposures and NPAs:
5.8.1 Concentration of Deposits: ($ in crore)
Total Deposits of twenty largest depositors 5,692.98
Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 17.09
5.8.2 Concentration of Advances: ($ in crore)
Total Advances to twenty largest borrowers 3,609.81
Percentage of Advances to twenty largest borrowers to Total Advances of the bank 12.30
5.8.3 Concentration of Exposures: ($ in crore)
Total Exposure to twenty largest borrowers/customers 3,986.94
Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank onborrowers /customers 13.03
5.8.4 Concentration of NPAs: ($ in crore)
Total Exposure to top four NPA accounts 524.21
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5.9 Sector-wise Advances (As compiled by Management): (` in crore)
Sl.Sector
2017-18 2016-17
No.O/s Total Gross % of Gross NPAs O/s Total Gross % of Gross NPAsAdvances NPA to Total Advances Advances NPA to Total Advances
in that Sector in that Sector
(A) Priority Sector
1. Agriculture and allied activities 3885.75 57.50 1.48% 3553.27 20.49 0.58%
2. Industries 1451.89 152.42 10.50% 1347.69 67.01 4.97%
3. Services 3348.24 226.47 6.76% 2707.25 60.65 2.24%
4. Personal Loans 927.40 11.58 1.25% 558.35 2.31 0.41%
Sub Total (A) 9613.28 447.97 4.66% 8166.56 150.46 1.84%
(B) Non Priority Sector
1. Agriculture and allied activities 322.39 60.21 18.67% 227.81 0.00 0.00
2. Industries 3986.19 1459.54 36.62% 4001.24 287.80 7.19%
3. Services 4575.49 461.02 10.08% 4729.35 63.04 1.33%
4. Personal Loans 2412.02 34.50 1.43% 3067.36 38.79 1.26%
5. Others 6095.16 230.97 3.79% 3766.14 100.11 2.63%
Sub Total (B) 17391.25 2246.24 12.92% 15791.90 489.74 3.10%
Total (A+B) 27004.53 2694.21 9.98% 23958.46 640.19 2.67%
5.10 Movement of NPAs (` in crore)
Particulars 2017-18 2016-17
Gross NPAs as on 1st April (Opening Balance) 640.19 391.25
Additions (Fresh NPAs) during the year 2916.02 597.20
Sub-total (A) 3556.21 988.45
Less:- (i) Upgradations 258.53 26.48
(ii) Recoveries (excluding recoveries made from upgraded accounts) 331.46 230.27
(iii) Technical / Prudential write offs 212.17 88.55
(iv) Write-offs other than those under (iii) above 59.84 2.95
Sub-total (B) 862.00 348.26
Gross NPAs as on 31st March (closing balance) (A-B) 2694.21 640.19
5.9.1 Priority Sector Lending Certificates (PSLCs):
The amount of PSLCs sold/purchased during the year (category-wise) is required to be disclosed as per RBI/2015-16/366FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated: April 7, 2016.
During the year 2017-18, Bank has only purchased Priority Sector Lending Certificates (PSLCs) as detailed below:($ in crore)
SI. No. Category of PSLC O/S as on 31.03.2018
1 PSLC-Agriculture 400
2 PSLC-SF/MF Nil
3 PSLC-Micro Enterprises Nil
4 PSLC-General Nil
Total PSLC 400
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5.10.1 Details of Technical write-offs and recoveries made: (` in crore)
Particulars 2017-18 2016-17
Opening balance of Technical / Prudential written off accounts as at 1st April 393.13 345.39
Add: Technical / Prudential write offs during the year 212.17 88.55
Sub Total (A) 605.30 433.94
Less: Recoveries / reduction made from previously technical / prudential written - off accountsduring the year (B) 54.59 40.82
Closing balance as on 31st March (A-B) 550.71 393.12
5.12 Off-balance Sheet SPVs sponsored :Name of the SPV sponsored
Domestic Overseas
NIL NIL
5.11 Overseas Assets, NPAs and Revenue
Particulars (` in crore)
Total Assets NIL
Total NPAs NIL
Total Revenue NIL
5.13 Resolution Plan implemented for Stressed Asset:
The Banks are required to disclose resolution plan implemented for stressed assets as per the RBI Circular RBI/2017-18/131, DBRNo.BP.BC.1010/21.04.048/2017-18 dated 12th February 2018 and is furnished as under:
(` in crore)
Particulars No. of cases Amount
Resolution Plan implemented @ Nil Nil
Of which, Restructure approved cases Nil Nil
Of which, number of Cases with aggregate exposure of lenders is $ 1 Billion and abovewhere Independent Credit evaluation ( ICE) of the Residual debt is required by Credit RatingAgencies (CRA) Nil Nil
Of which, Number of cases with exposure Rs 5 Billion and above where 2 such IndependentCredit evaluation ( ICE) is required by CRA Nil Nil
@ The details furnished above excludes the borrower entities in respect of which specific instructions have already been issued byReserve Bank of India to the banks for reference under IBC
5.13.1 Acquisition of Non-SLR securities due to conversion of debt during Restructuring process:
As per RBI Circular RBI/2017-18/131, DBR No.BP.BC.1010/21.04.048/2017-18 dated 12th February 2018, disclosure is made asunder:-
Bank has acquired and held shares for an amount of $ 116.16 crore by way of conversion of debt to equity during various restructuringprocess implemented by the bank. This amount is not considered for the calculation of regulatory ceilings / restrictions on CapitalMarket Exposures, Investment in Para Banking activities and intra-Group exposure. However, there is no implication on complianceof the provisions of Section 19(2) of the Banking Regulation Act.1949.
5.13.2 Revised framework for resolution of stressed assets
The Reserve Bank of India vide its circular dated February 12, 2018 issued a revised framework for resolution of stressed assets,which superseded the existing guidelines on SDR, S4A etc., with immediate effect. Accordingly, the Bank has revoked the stand-stillbenefits for accounts where any of these schemes had been invoked but not yet implemented and classified them as per the extantRBI Guidelines on Income Recognition and Asset Classification, as given here below
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5.13.3 Disclosures on Flexible Structuring of Existing Loans (` in crore)
Period No. of borrowers Amount of loans taken up Exposure weighted average duration oftaken up for for flexible structuring loans taken up for flexible structuring
flexible Classified as Classified as Before applying After applyingstructuring Standard NPA flexible structuring flexible structuring
2017-18 1 Nil 36.00 5 years 25 years
2016-17 2 159.80 0.00 4.33 years 21.16 years
5.13.4 Disclosures on Strategic Debt Restructuring Scheme: (` in crore)
Period No. of accounts Amount outstanding as Amount outstandng as on the Amount outstandng as on thewhere SDR on the reporting date reporting date with respect to reporting date with respect tohas been 31.03.2017 accounts where conversion of accounts where conversion ofinvoked debt to equity is pending debt to equity has taken place
Classified as Classified as Classified as Classified as Classified as Classified asStandard NPA Standard NPA Standard NPA
2017-18 5 Nil 261.50 Nil Nil Nil 261.502016-17 5 283.03 0.00 Nil Nil 283.03 0.00
5.13.5 Disclosures on Change in Ownership outside SDR Scheme: (` in crore)
No. of Amount Amount outstanding as Amount outstanding as Amount outstanding asaccounts outstanding as on on the reporting date with on the reporting date with on the reporting date with
where the reporting date respect to accounts where respect to accounts where respect to accounts wherebanks have 31.03.2018 conversion of debt to conversion of debt to change in ownership isdecided to equity / invocation of equity / invocation of envisaged by issuance of
effect change pledge of equity shares pledge of equity shares fresh shares or sale ofin ownership is pending has taken place promoters equity
Classified as Classified as Classified as Classified as Classified as Classified as Classified as Classified asStandard NPA Standard NPA Standard NPA Standard NPA
Nil
5.13.6 Disclosures on Change in Ownership of Projects Under Implementation:
No. of project loan accounts Amount outstanding as on the reporting date
where banks have decided Classified as Classified as Classified asto effect change in ownership standard standard restructured NPA
Nil
5.13.7 Disclosures on the scheme for Sustainable Structuring of Stressed assets (S4A) (` in crore)
Period No .of accounts where Aggregate amount Amount outstanding ProvisionS4A has been applied outstanding Part A Part B Held
2017-18 Classified as Standard 25.70 14.04 11.66 5.14
Classified as NPA NIL NIL NIL NIL
2016-17 Classified as Standard 25.47 13.81 11.66 5.09
Classified as NPA NIL NIL NIL NIL
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5.14 Disclosure on Remuneration:
a. Qualitative disclosures:
(a) Information relating to the composition and mandate of theRemuneration Committee.
(b) Information relating to the design and structure of remunerationprocesses and the key features and objectives of remuneration policy.
(c) Description of the ways in which current and future risks are takeninto account in the remuneration processes. It should include thenature and type of the key measures used to take account of theserisks.
(d) Description of the ways in which the bank seeks to link performanceduring a performance measurement period with level of remuneration.
(e) A discussion of the bank's policy on deferral and vesting of variableremuneration and a discussion of the bank's policy and criteria foradjusting deferred remuneration before vesting and after vesting
(f) Description of the different forms of variable remuneration (i.e. cash,shares, ESOPs and other forms) that the bank utilizes and therationale for using these different forms.
The latest amendment to the policy was approvedby the HR Committee of the Board on 14th October2015.
Performance is evaluated based on KeyPerformance Indicators as approved by the Board.
ESOS and Performance Incentives are thecomponents of variable remuneration.
The composition of the Nomination Remunerationand Compensation Committee of the Board as on31st March 2018 is 4. The Committee is constitutedas per regulatory requirements
(g) Number of meeting held by the remuneration committeeduring the financial year and remuneration paid to itsmembers
Meeting of the Nomination,Remuneration andCompensation Committee of theBoard (NRCCB) was held 6 timesduring FY 2017-18 and the totalremuneration paid to thecommittee members in the formof sitting fees is $ 0.08 crore.
Meeting of the Nomination,Remuneration andCompensation Committee ofthe Board (NRCCB) was held6 times during FY 2016-17and the total remunerationpaid to the committeemembers in the form of sittingfees is $ 0.08 crore
b. Quantitative disclosures:
Particulars 2017-18 2016-17
(h) (i) Number of employees having received a variable $ 0.12 crore (1 person) remuneration award during the financial year. NIL
(ii) Number and total amount sign-on awards madeduring the financial year. NIL NIL
(iii) a) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL
b) Details of performance Bonus / Allowance NIL $ 0.12 crore (1 person)
(iv) Details of severance pay, in addition to accruedbenefits, if any. NIL NIL
(i) (i) Total amount of outstanding deferred remuneration, Grant of 3,10,000 sharessplit into cash, shares and shares - linked instruments to Executive Director &and other forms. NIL CFO and Company
Secretary respectivelyunder ESOS.
(ii) Total amount of deferred remuneration paid out in thefinancial year NIL NIL
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b. Quantitative disclosures: (contd.)
Particulars 2017-18 2016-17
(j) Breakdown of amount of remuneration awards for the financial yearto show fixed and variable, deferred and non-deferred.
to one person
(k) (i) Total amount of outstanding deferred remuneration and retainedremuneration exposed to ex-post explicit and/or implicit adjustments. NIL NIL
(ii) Total amount of reductions during the financial year due to ex-postexplicit adjustments. NIL NIL
(iii) Total amount of reductions during the financial year due to ex-postimplicit adjustments. NIL NIL
No Risk Takers werepaid Variable Pay
No deferred and Non-deferred remuneration
5.15 Disclosures relating to securitization: NA
5.16 Credit Default Swaps: NIL
5.17 Intra – Group Exposure: (` in crore)
Particulars FY 2017-18
(a) Total amount of intra-group exposures
(b) Total amount of top-20 intra-group exposures NIL
(c) Percentage of intra-group exposures to total exposure of the bank on borrowers / customers
(d) Details of breach of limits on intra-group exposures and regulatory action thereon, if any.
5.18 Transfer to Depositors Education and Awareness Fund (DEAF): (` in crore)
Particulars FY 2017-18 FY 2016-17
Opening balance of amounts transferred to DEAF 23.14 17.72
Add: Amounts Transferred to DEAF during the year 20.83 5.53
Less: Amounts reimbursed by DEAF towards claims 1.35 0.11
Closing balance of amounts transferred to DEAF 42.62 23.14
5.19 Unhedged Foreign Currency Exposure:
Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged ForeignCurrency Exposure (UFCE) of their constituents in terms of RBI Circular No. DBOD.NO.BP.BC.85/21.06.200/2013-14 dated15th January 2014 and the total provision held as of 31st March 2018 is ` 2.03 crore.
5.20 Details of Frauds occurred and Provision made during the year:
As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:
(a) Number of Fraud cases reported during the year 72
(b) Amount involved (` In Crore) 157.97
(c) Quantum of Provision made, net of recoveries of ` 5.29 Crore 146.92
(d) Quantum of unamortized Provision debited from 'Other Reserves' (` In Crore) NIL
In terms of RBI guidelines, the bank had opted to spread the provision required for the outstanding balances in advance related fraudaccounts over a period of four quarters and consequently bank has fully absorbed the unamortised amount of ` 49.21 crore duringthe quarter ended 31st March 2018 (by corresponding reversal of the proportionate debit made earlier to Revenue and OtherReserves). The unamortized amount as at 31st March, 2018 is Nil.
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6.1 Liquidity Coverage Ratio: (` in Crore)
2017-18 2016-17
Total Unweighted Total Weighted Total Unweighted Total WeightedValue (Average) Value (Average) Value (Average) Value (Average)
High Quality Liquid Assets
1. Total High Quality Liquid Assets (HQLA) – 3995.87 – 1189.87
Cash Outflows
2 Retail deposits and deposits from smallbusiness customers, of which 4950.85 402.11 3097.65 258.07
(i) Stable Deposits 1859.57 92.98 1033.93 51.70
(ii) Less stable Deposits 3091.28 309.13 2063.72 206.37
3 Unsecured wholesale funding, of which: 2757.18 664.00 1268.81 245.42
(i) Operational deposits(all counterparties) 14.68 3.67 70.63 17.66
(ii) Non-operational deposits(all counterparties) 2742.51 660.33 1006.50 95.49
(iii) Unsecured debt 0.00 0.00 0.00 0.00
4 Secured Wholesale funding 2796.41 0.00 730.17 0.00
5. Additional requirements, of which 19825.36 1239.72 4300.31 433.04
(i) Outflows related to derivativeexposures and other collateralrequirements 6.38 6.38 10.22 10.22
(ii) Outflows related to loss of fundingon debt products 0.00 0.00 0.00 0.00
(iii) Credit and Liquidity facilities 720.16 130.84 1775.90 152.98
6 Other contractual funding obligations 200.87 200.87 185.15 185.15
7 Other contingent funding obligations 18897.95 901.62 2309.37 69.28
8 Total Cash Outflows 30329.81 2305.83 9396.93 936.53
Cash Inflows
9 Secured lending (e.g. reverse repos) 57.94 0.00 279.52 0.00
10 Inflows from fully performing exposures 1713.00 856.50 4736.26 2368.13
11 Other cash inflows 76.99 41.70 312.47 112.47
12 Total Cash Inflows 1847.93 898.20 5328.25 2480.60
Total AdjustedValue
21 TOTAL HQLA 3995.87 1189.87
22 Total Net Cash Outflows 1495.90 369.68
23 Liquidity Coverage Ratio (%) 267.12 321.86
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6.2 Qualitative disclosure around LCR
Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing theLiquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets(HQLA) into Level 1 and Level 2A/2B. As on 31.03.2018, the Bank has $ 4554.10 Cr of HQLAs, of which, the main contribution is
from Level - 1 type of assets with $ 4329.07 Cr. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR andCash in Hand.
As on 31.03.2018, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of
$ 2668.90 Cr of cash outflows and $ 1224.67 Cr of cash inflows over the next 30 days period. Of this total amount of $ 2668.90 Crof cash outflows, the major component is in the form of contingent funding liabilities and of the total $ 1224.67 Cr of cash inflows, themajor cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.
7. The disputed Income Tax demand outstanding as on 31.03.2018 amounts to $ 94.61 crore (previous year $ 100.43 crore)
and is included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of thedisputed liabilities in view of favorable decisions by various appellate authorities on similar issues.
8. The financial statement of the Bank includes Advances (net of provisions) of $ 25768 crore after adjustment of third party
deposits amounting to $ 794 crore. The Bank has received legal notice questioning the said adjustment. As per legal opinionreceived by the Bank, the adjustment of deposits against loan is lawful.
In the process of adjustment of the deposits as mentioned above, there was a resultant shortfall in the maintenance of CRRfor a short period. The Bank has already notified RBI of the same.
No legal or regulatory proceedings are pending against the Bank on account of the above.
9. Previous year’s figures have been regrouped / reclassified wherever considered necessary to confirm to the currentyear’s classification.
B.K. MANJUNATHChairman
PARTHASARATHI MUKHERJEEManaging Director & CEO
S. SUNDARChief Financial Officer
N. RAMANATHANCompany Secretary
As per our report of even date attached
For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S
G.NAGANATHANPartnerM. No. 022456
Chennai25th May, 2018
N. MALAYALARAMAMIRTHAMY.N. LAKSHMINARAYANA MURTHYKUSUMA R MUNIRAJUANURADHA PRADEEPHEMANT KAULG. SUDHAKARA GUPTAH.S. UPENDRA KAMATHSUVENDU PATIRAJNISH KUMARDirectors
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243
APPLICATION FORM
THE LAKSHMI VILAS BANK LIMITED (Incorporated on November 3, 1926 under the Indian Companies Act, 1913. Our Bank was licensed under the Banking Regulation Act, 1949
on June 19, 1958 and became a scheduled commercial bank under the Second Schedule of the RBI Act on August 11, 1958)
Registered Office: Salem Road, Kathaparai, P.O. Karur – 639006, Tamil Nadu;
Corporate Office: LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil Nadu;
Email: [email protected]; Tel: +91 44 2220 5306; Fax: +91 44 2220 5317; Corporate Identification Number:
L65110TN1926PLC001377
Form No. ________
Date: March 7, 2019
QUALIFIED INSTITUTIONS PLACEMENT OF EQUITY SHARES OF FACE VALUE ₹ 10 EACH (“EQUITY SHARES”) UNDER CHAPTER VIII OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2018, AS AMENDED (THE “SEBI ICDR REGULATIONS”) AND
SECTION 42 OF THE COMPANIES ACT, 2013 AS AMENDED (THE “COMPANIES ACT”) AND THE RULES MADE THEREUNDER (THE “ISSUE”) BY THE LAKSHMI VILAS
BANK LIMITED (“THE BANK”)
Only “Qualified Institutional Buyers” (“QIBs”) as defined under Regulation 2(1)(ss) of the SEBI ICDR Regulations and not otherwise excluded pursuant to Regulation 179(2) (b) of the SEBI
ICDR Regulations can submit this Application Form. The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”),
and may not be offered or sold in the United States (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and applicable state laws. Accordingly, the Equity Shares are being offered and sold only outside the United States in reliance on Regulation S
under the Securities Act. QIBs should note and observe the selling and transfer restrictions contained in the chapters of the preliminary placement document titled “Selling Restrictions” and
“Transfer Restrictions”.
To,
The Board of Directors
The Lakshmi Vilas Bank Limited
Salem Road, Kathaparai,
P.O. Karur – 639006, Tamil Nadu
Dear Sirs,
On the basis of the serially numbered Preliminary Placement Document of the Bank, and subject to the terms and conditions mentioned therein and in this Application Form, we
hereby submit our Application Form for the Allotment of the Equity Shares at the terms and
at price indicated below. We confirm that we are a QIB in terms of Regulation 2(1)(ss) of the
SEBI ICDR Regulations and not otherwise excluded pursuant to Regulation 179(1)(b) of the SEBI ICDR Regulations. Further, we confirm that we do not have any right under a
shareholders’ agreement or voting agreement entered into, veto rights or right to appoint any
nominee director on the board of directors of the Bank. We confirm that the application size / aggregate number of Equity Shares applied for by us does not exceed the relevant regulatory
or approved limits, applicable to us and we are eligible to invest in the Equity Shares under
applicable laws and further confirm that our Bid will not result in triggering an open offer
under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended. We further confirm that we have agreed that our
names and contact details may be submitted with the Registrar of Companies, Tamil Nadu at
Chennai and the Securities and Exchange Board of India, as may be required by the Companies Act or other applicable laws or regulations.
We confirm that each foreign portfolio investor (“FPI”) (other than qualified foreign investors and category III FPIs both of which are ineligible to apply/invest in the Issue) as defined under the Securities
and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, as amended (“FPI Regulations”), and including persons who have been registered under these regulations (such FPIs, “Eligible
FPIs”) have submitted a separate Application Form and asset management companies of mutual funds would have specified the details of each scheme for which the application is being made along with
the price and amount to be Allotted under each fund. We undertake that we will sign all such documents, provide such documents and do all such acts, if any, necessary on our part to enable us to be registered
as the holders of the Equity Shares which may be Allotted to us. We confirm that the signatory is authorized to apply on behalf of the applicant and the applicant has all the relevant approvals. We authorize you to place our name in the register of members of the Bank as holders of the Equity Shares that may be Allotted to us. Further, we acknowledge that we shall not have the right to revise or withdraw our
Bid after the Bid Closing Date. We note that the Bank is entitled, in its absolute discretion to accept or reject this Application Form without assigning any reason thereof.
We hereby agree to accept the Equity Shares applied for, or such lesser sum as may be Allocated to us subject to the provisions of the memorandum of association and articles of association of the Bank,
applicable laws and regulations and the terms of the Preliminary Placement Document and request you to credit the same to our beneficiary account as per the details given below. We are aware that we will
not be allotted more than 50% of Issue size. We are aware that if we, together with any other QIBs belonging to the same group or under common control, are Allotted more than 5% of the Equity Shares in this Issue, the Bank shall be required to disclose our name, along with the name of such other Allottees and the number of Equity Shares Allotted to us and to such other Allottees, on the website of the Stock
Exchange, and we consent to such disclosure. We also acknowledge that we are not a promoter of the Bank or any person related to the promoters of the Bank in accordance with Regulation 179 of the SEBI
ICDR Regulations. Further, we agree to comply with the rules and regulations that are applicable to us, including in relation to the lock-in requirements. In this regard, we authorize the Bank to issue
instructions to the depositories for such lock-in requirements, as may be applicable to us. Further, we agree to comply with the rules and regulations that are applicable to us, including restriction on transferability. In this regard, we authorise the Bank to issue instructions to the depositories for such restriction on transferability, as may be applicable to us.
By signing and submitting this Application Form, we hereby confirm and agree (i) that the representations, warranties and undertakings as provided in the “Notice to Investors”, “Representations by Investors”, “Issue Procedure”, “Selling Restrictions” and “Transfer Restrictions” sections and other applicable sections of the Preliminary Placement Document, including, without limitation, (a) that we are
purchasing the Equity Shares outside the United States in accordance with Regulation S under the Securities Act and (b) that if Equity Shares are Allotted to us pursuant to the Issue, we shall not sell the
Equity Shares for a period of one year from the date of Allotment otherwise than on the floor of a recognized stock exchange, are true and correct and acknowledge and agree that these representations, warranties and undertakings are given by us for the benefit of the Bank and Srei Capital Markets Limited (the “BRLM’’) and they are entitled to rely and are relying on these representations, warranties and
undertakings in consummating the Issue, (ii) that we have been provided a serially numbered copy of the Preliminary Placement Document and have read it in its entirety and in making our investment
decision we have relied only on the information contained in the Preliminary Placement Document and not on any other information obtained by us from the Bank, the BRLM or from any other source, including publicly available information, and (iii) to abide by the Preliminary Placement Document and the Placement Document (when issued), this Application Form, the confirmation of allocation note
(the “CAN”), when issued, and the terms, conditions and agreements contained therein are true and correct. By submitting this Application Form we (i) acknowledge that we are aware that after the
completion of the Allotment process, the Bank shall apply for a post facto approval from the RBI in respect of the Issue, and that in the event that RBI does not grant the post facto approval in respect of
Allotment of Equity Shares to us, we shall comply with the instructions received from the RBI in this regard and (ii) further acknowledge, represent and agree that our total interest in the paid-up share capital of the Bank, whether direct or indirect, beneficial or otherwise (any such interest, our “Holding”), when aggregated together with any existing Holding and/or Holding of any of our “associated
enterprises” (as defined under Section 92A of the Indian Income Tax Act, 1961), does not exceed 5% of the total paid-up share capital of the Bank, unless we are an existing shareholder who already holds
5% or more of the underlying paid up share capital of the Bank pursuant to the acknowledgment of the RBI, provided that our Holding does not, without the further acknowledgment of the RBI, exceed our existing Holding after Allotment.
The Bid Amount payable by us for the Equity Shares to be allotted in the Issue will be remitted to the designated bank account, only through electronic mode pursuant to duly completed Application Form. We acknowledge and agree that we shall not make any payment in cash or cheque. We also agree that the amount payable for the Equity Shares in the Issue is being (shall be) made from the bank account
maintained in our name and the Bid Amount (or the excess Bid Amount, as applicable) may be refunded to the same bank account in the event we are not Allocated Equity Shares, for any reasons, for all or
part of the Bid Amount submitted by us, or if we withdraw the Bid before the Issue Closing Date, or in case we have deposited Bid Amount higher than the Issue Price. By making this application, we further
represent, warrant and agree that we have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of the prospective investment in the Equity Shares and we understand the risks involved in making an investment in the Equity Shares. No action has been taken by us to permit a public offering of the Equity Shares in any jurisdiction. We satisfy any
and all relevant suitability standards for investors in the Equity Shares, have the ability to bear the economic risk of our investment in the Equity Shares, have adequate means of providing for our current
and contingent needs, have no need for liquidity with respect to our investment in the Equity Shares, and are able to sustain a complete loss of our investment in the Equity Shares.
We undertake not to trade in the Equity Shares credited to our beneficiary account maintained with the Depository Participant until such time that the final listing and trading approvals for the Equity Shares
are issued by the Stock Exchanges.
We acknowledge that the Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or the laws of any state of the
United States and may not be offered or sold in the United States (as defined in Regulation S under the Securities Act (“Regulation S”)), except pursuant to an exemption from, or in a transaction not subject
to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. The Equity Shares are being offered and sold only outside the United States in offshore transactions in reliance on Regulation S.
BANK ACCOUNT DETAILS FOR PAYMENT OF AMOUNT
Name of the Account Lakshmi Vilas Bank Limited – QIP 2019 Escrow Account
Name of the Bank The Lakshmi Vilas Bank Limited
Address of the Branch of the Bank Mumbai Fort, 104, Mumbai Samachar Marg, Fort, Mumbai – 400 001, Maharashtra
Account Type Escrow
Account Number 0174353000000384
IFSC code LAVB0000174
MICR Code 400056002
Tel No. +91 22 2264 0045 / +91 22 2267 2255
STATUS (Please ✓)
FI Banks & Financial
Institutions IC Insurance Companies
FVCI Foreign Venture Capital
Funds VCF Venture Capital Funds
MF Mutual Funds AIF - VC
Alternative Investment Fund
Category I – Venture Capital
Fund
SI-NBFC Systemically Important
NBFC AIF
Alternative Investment Fund
other than AIF-VC
FPI
Eligible Foreign Portfolio
Investors* OTH Others (Please Specify)
DECLARATION OF SHAREHOLDING- as on the date of
Application Form (Please round-off to two decimal places)
Total shares currently held by QIB or QIBs belonging to the same group or those
who are under common control. For details of what constitutes “same group” or
“common control”, please see the sub-section titled “Application Form” under
Issue Procedure section of the Preliminary Placement Document.
*Foreign portfolio investors as defined under the Securities and Exchange Board of India (Foreign Portfolio
Investors) Regulations, 2014 excluding qualified foreign investors and Category III Foreign Portfolio Investors
who are not allowed to participate in the Issue
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Fax No. +91 22 2267 0267
E-mail ID [email protected]
The Bid Amount should be transferred pursuant to the Preliminary Placement Document. All payments must be made only by way of electronic funds transfer, in favour of “Lakshmi Vilas Bank Limited –
QIP 2019 Escrow Account”. The payment for subscription to the Equity Shares Allotted in the Issue shall be made only from the bank account of the person subscribing to the Equity Shares and in case of
joint holders, from the bank account of the person whose name appears first in the Application Form.
APPLICANT DETAILS (In Block Letters)
NAME OF BIDDER*
ADDRESS
COUNTRY
PHONE NO. FAX NO.
FOR FPIs SEBI FPI REGISTRATION NO. ______________
For AIFs / MFs / VCFs / FVCIs
/ SINBFCs REGISTRATION NO. ______________
* Name should exactly match with the name in which the beneficiary account is held. Any discrepancy in the name as mentioned in this Application Form with the depository records would render the application invalid
and liable to be rejected at the sole discretion of the Issuer and the BRLM.. Mutual Fund Bidders are requested to provide details of the Bids made by each Scheme of the Mutual Fund.
DEPOSITORY ACCOUNT DETAILS
Depository Name National Security Depository Limited Central Depository Services (India) Limited
Depository Participant Name
DP – ID I N
Beneficiary Account Number/Client
ID
(16 digit beneficiary account. No. to be mentioned above)
The Demographic details like address, bank account details etc. will be obtained from the Depositories as per the beneficiary account given above. However, for the purpose of refund, if any, only the bank details as
mentioned below, from which remittance towards subscription has been made, will be considered.
RUPEE BANK ACCOUNT DETAILS (FOR REMITTANCE)
Bank Account
No:
Bank Name:
IFSC Code
Bank Branch
Address:
__________________________________________________________________________________________________________________
NO. OF EQUITY SHARES BID PRICE PER EQUITY SHARE (RUPEES)
(In Figures) (In words) (In Figures) (In Words)
DETAILS OF CONTACT PERSON
NAME
ADDRESS
PHONE NO. FAX NO.
OTHER DETAILS ENCLOSURES ATTACHED
PAN** Attested/ certified true copy of the following:
Copy of PAN Card or PAN
allotment letter
Copy of FPI Registration
Certificate / Mutual Fund
Registration certificate/ SEBI
certificate of registration for
AIFs
Certificate of registration for
FVCI / VCF / SI-NBFC / FI /
AIF-VC
FIRC
Copy of IRDA registration
certificate
Certified true copy of Power of
Attorney
Other
DATE OF APPLICATION
Signature of Authorised Signatory
Procured by
**It is to be specifically noted that the applicant should not submit the GIR number or any other identification number instead of the PAN as the applications are liable to be rejected on this ground.
Note: Capitalised terms used but not defined herein shall have the same meaning as ascribed to them in the Preliminary Placement Document, unless specifically defined herein.
The application form is liable to be rejected if any information provided is incomplete or inadequate.
245
ISSUER
The Lakshmi Vilas Bank Limited
Salem Road, Kathaparai P. O.,
Karur – 639 006, Tamil Nadu, India
Tel: +91 4324 258 501; Fax: +91 4324 223 607
CIN: L65110TN1926PLC001377
Corporate Office of our Bank
LVB House, No. 4, Sardar Patel Road, Guindy,
Chennai – 600 032, Tamil Nadu, India.
Tel: +91 44 2220 5306
Contact Person: N. Ramanathan, Company Secretary and Compliance Officer
Details of Compliance Officer
N. Ramanathan
Company Secretary and Compliance Officer
LVB House, No. 4, Sardar Patel Road, Guindy,
Chennai – 600 032, Tamil Nadu, India.
Tel: +91 44-22205306
Fax: +91 44 2220 5317
Email: [email protected]
BOOK RUNNING LEAD MANAGER
Srei Capital Markets Limited
‘Vishwakarma’, 86C, Topsia Road (South),
Kolkata – 700 046, West Bengal, India
INDIAN LEGAL COUNSEL TO THE ISSUE
Khaitan & Co
12th Floor, Ashoka Estate
24, Barakhamba Road
New Delhi – 110 001, India
SPECIAL INTERNATIONAL LEGAL COUNSEL TO THE BOOK RUNNING LEAD MANAGER
Duane Morris & Selvam LLP
16 Collyer Quay #17-00
Singapore – 049 318
STATUTORY AUDITORS TO OUR BANK
P. Chandrasekar LLP
S-512-514,
Manipal Centre (South Block), 47, Dickenson Road,
Bangalore – 560 042, Karnataka, India