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Karur Vysya Bank Directors Report, Karur Vysya Reports by Directors
Karur Vysya Bank
BSE: 590003|NSE: KARURVYSYA|ISIN: INE036D01010|SECTOR: Banks - Private Sector
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Download Annual Report PDF Format 2012 | 2011 | 2010
Directors Report Year End : Mar '13    Mar 12
Dear Shareholders,
 The Directors are pleased to present the 94th Annual Report and the
 audited accounts for the financial year ended March 31, 2013.
 Financial Performance
 The financial performance for the year under review are presented
                                       31.03.2013     31.03.2012
 Particulars                          (Rs. In Cr)    (Rs. In Cr)
 Gross Deposits                          38652.98       32111.59
 Gross Advances                          29705.89       24205.11
 Total Income                             4694.99        3620.52
 Total Expenditure                        3846.16        2894.81
 Operating Profit                          848.83         725.71
 Net Profit                                550.32         501.72 
 Appropriations: Transfer to
 Statutory Reserve                         165.00         150.50
 Capital Reserve                            16.52           3.14
 General Reserve                           123.00         156.80
 Special Reserve                            50.00          35.00
 Investment Reserve                         21.00              -
 Proposed Dividend                         150.05         150.05
 Dividend Tax                               25.50          24.34
 The aggregate business of the Bank reached Rs. 68359 Cr as at 31st
 March 2013 showing an increase of 21.38% on a year-on- year basis
 Deposits grew by 20.37% from Rs. 32111.59 Cr in FY 12 to Rs. 38652.98
 Cr in FY 13. The growth recorded by your bank was higher than the 14.3%
 growth in deposits recorded in the banking system during the fiscal
 under report.
 CASA deposits grew at 20.93% and stood at Rs. 7439.15 Cr as at the end
 of 31.03.2013 as against Rs. 6151.58 Cr as on 31.03.2012.  Term
 deposits were at Rs. 31213.83 Cr as against Rs. 25960.01 Cr as at the
 end of the previous fiscal 2011-12, recording a growth of 20.24%.
 Deposit growth in the banking system has slowed in the recent years
 largely due to households looking at investments in alternate assets
 such as gold, equities, real estate etc expecting higher and inflation
 adjusted returns.
 Credit portfolio
 The gross advances of your bank were at Rs. 29705.89 Cr as at the end
 of the fiscal 2012-13 as against Rs. 24205.11 Cr in the previous fiscal
 2011-12 recording a growth of 22.73% during the year under report when
 compared to 14.1% growth seen in the banking system for 2012-13.
 Priority sector advances of your bank surged from Rs. 7526.92 Cr as at
 the end of March 2012 to Rs. 10196.40 Cr as at the end of March 2013
 and formed 42.04% of the Adjusted Net Bank Credit (ANBC) against the
 mandated target of 40%.
 The total agricultural advances of your bank recorded a growth of
 34.33% over the previous year and rose to Rs. 5194.32 Cr as at
 end-March 2013. Your Bank''s agricultural advances formed 21.42% of ANBC
 as at the end-March 2013 against the mandated target of 18%. Also the
 advances made to weaker sections were at 11.24% against the regulatory
 requirement of 10%.
 Average Credit Deposit Ratio of the Bank during the fiscal was 75.48%.
 Your Bank has put in place strong systems for resolution and recovery
 of non-performing loans besides strengthening its due diligence, credit
 appraisal and post-sanction loan monitoring systems to minimize and
 mitigate the problem of increasing NPAs. Your Bank continues to apply a
 multi pronged strategy for better NPA management viz: Preventive
 actions, Recovery, upgradation, resolution and settlement, initiation
 of legal proceedings including under SARFAESI, besides sale of assets.
 As a result of concerted action the Gross NPAs have declined from Rs.
 320.99 Cr (1.33%) as at 31.03.2012 to Rs. 285.86 Cr (0.96%) as at the
 end of 31.03.2013. The Net NPAs which were at Rs. 78.78 Cr (0.33%)
 during FY 12 have risen marginally to Rs. 108.74 Cr (0.37%). Your Bank
 has a provision coverage ratio of 75.20% as at 31.03.2013.
 Share Capital
 The paid up capital of the Bank stood at Rs. 107.18 Cr as at 31st March
 2013. During the year under report, the Bank made an allotment of 700
 shares which was kept under abeyance category.
 Your Bank''s net owned funds as at 31st March 2013 was Rs. 3085.19 Cr
 comprising paid up equity capital of Rs. 107.18 Cr and reserves of Rs.
 2978.01 Cr.
 Your Bank''s Capital Adequacy Ratio (CAR) was comfortable at 14.41%
 under Basel II as on 31.03.2013. The Bank has been maintaining a higher
 Capital Adequacy Ratio consistently over and above the regulatory
 prescription of 9%.
 The market capitalization of your shares as at the end of fiscal
 2012-13 was Rs. 4827.43 Cr. In terms of market capitalization, your
 Bank was at 187th rank in the country.
 Employee Stock Options Scheme
 Out of the 10 lakh Stock options available under KVBESOS 2008, 9,78,454
 options were granted, exercised and allotted earlier.  21,546 options
 which were remaining under the said Scheme were granted to the
 employees on 01.03.2013.
 Your Bank has framed KVBESOS 2011 pursuant to the 40 lakh options
 approved by the shareholders in the Annual General Meeting held on
 27.07.2011. Out of the said 40 lakh options, 14,71,656 lakh options
 were granted on 01.03.2013.
 Particulars pursuant to Clause 12 of the SEBI (Employee Stock Option
 Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are annexed
 to this report and form part of this report.
 Credit Rating
 CRISIL has re-affirmed A1  rating (pronounced CRISIL- A one plus)
 for Rs. 20 billion Certificate of Deposits programme of your Bank. ICRA
 Limited has confirmed ICRA A1  (pronounced ICRA-A one plus)
 rating to the Bank''s Certificate of Deposits Programme for Rs. 2000 Cr.
 Both the ratings indicate a very strong degree of safety regarding
 timely payment of financial obligations.
 Inspite of the tough economic environment, keeping in tune with the
 good financial performance of the Bank, your Directors are pleased to
 recommend a dividend of Rs. 14/- per equity share of face value of Rs.
 10/- each for the year ended 31.03.2013, amounting to Rs. 175.55 Cr
 (inclusive of tax of Rs. 25.50 Cr). The dividend will be paid to the
 members whose names appear in the Register of Members as on 19.07.2013;
 in respect of shares held in dematerialised form, it will be paid to
 members whose names are furnished by National Securities Depository
 Limited and Central Depository Services (India) Limited, as beneficial
 It may be noted that it is now for a decade (since 2003-04), that your
 bank has been paying 100% or more to its shareholders.
 The dividend payout for the year under review has been formulated in
 accordance with the Bank''s policy to pay sustainable dividend linked to
 long term growth objectives of the Bank to be met by internal accruals
 and to meet the shareholders'' aspirations.
 The gross domestic investments of your Bank stood at Rs. 13868.85 Cr as
 at 31.03.2013 as against Rs. 10581.27 Cr as on 31.03.2012, thus
 recording an increase of 31.07% during the fiscal 2012-13. Net
 investments registered an increase of Rs. 3331.16 Cr during the year to
 reach Rs. 13837.26 Cr as at the end of the fiscal 31.03.2013 from Rs.
 10506.10 Cr as at 31.03.2012.
 Income on investments stood at Rs. 950.35 Cr as at 31.03.2013,
 registering a rise of Rs. 234.11 Cr (32.68%) when compared to the
 previous fiscal income of Rs. 716.24 Cr. The profit on sale of
 investments was at Rs. 88.34 Cr for the fiscal 2012-13 as against Rs.
 26.20 Cr recorded in the previous fiscal 2011-12.
 The average yield on investments improved to 7.67% during the year
 under report over the previous fiscal of 7.49%.  Liquidity position of
 the Bank was comfortable throughout the year.
 Forex Transactions
 The merchant turnover of the Bank was up by 8.36% during the fiscal
 2012-13 to reach Rs. 10109 Cr as against Rs. 9329 Cr during the
 previous fiscal 2011-12. The Bank has earned a profit on exchange of
 Rs. 23.16 Cr and other income (commission and others) of Rs. 31.35 Cr
 during the fiscal 2012-13.
 Branch Net work
 During the year 2012-13, for the first time in the history of your
 bank, 100 new branches were opened across India, taking the number of
 branches from 451 to 551.
 In terms of the mix of the branches, the branch net work is fairly
 spread across all the population groups with Metro 16 %, Urban 26%,
 Semi-Urban 40% and Rural 18%.
 Delivery Channels ATMs
 Your Bank operationalised 465 ATMs across the country during the FY 13.
 Of the 465 ATMs, 124 are on-site and 341 are offsite.  The total ATM
 population of your bank comes to 1277 as at the end of the fiscal
 Taking into account the branches as well as the ATMs installed, the
 total customer outlets of the bank rose to 1826 as at 31.03.2013 from
 1276 as at the end of the previous fiscal 2011-12.
 Debit Cards
 As at the end of fiscal 2012-13, the total number of cards issued by
 the Bank were at 3.54 million, of which 710365 cards were issued during
 the fiscal 2012-13.
 During the year under report, your Bank installed 3142 POS terminals
 across various merchant locations, taking the total to 5844 numbers as
 at 31.03.2013.
 The gross value of transactions routed through such terminals stood at
 Rs. 422.58 Cr till 31.03.2013.
 Technology Initiatives
 Information technology continued to be the thrust area for the Bank as
 in the past. During the fiscal your Bank introduced/ developed various
 IT initiatives that are aimed at enhancing customer convenience and
 internal efficiency and decision making process through effective
 Management Information Systems.
 State of the art Disaster Recovery (DR) Data Centre was built and your
 Bank deployed all latest technology in the Data Centre complying with
 robust and best in class technology infrastructure.
 The following new initiatives were introduced to add value to the
 customer convenience:
 - Installed 88 cash deposit machines to accept cash from customers
 for directly crediting to their own account or to third party account
 at select branches. The system can sort the cash, identify suspicious
 notes, accepts only good notes and provide receipt with denomination.
 - Implementation of Interbank Mobile Payment System (IMPS) through
 net banking. This facility will enable the customer to make funds
 transfers to others (including accounts maintained in other banks) as
 an alternate channel. It will instantaneously remit the funds like RTGS
 and works on 24x7 basis.
 - KVB has built its own captive Contact Centre at Tidel Park with 50
 seater capacity and with Interactive Voice Response System (IVRS) for
 customers to do phone banking including funds transfer and also can
 avail customer support from the agents on multi-languages on 24x7 basis
 using proclaimed application.
 - Implementation of mobile wallet: It is a pre-paid virtual card
 available on the mobile. No need for customers to carry cash or cards
 for purchases.
 As the technology landscape is undergoing significant changes your Bank
 will continue to introduce systems in line with the new trends in the
 industry which delivers value to our customers.
 Golden Vision initiatives
 Members of the bank are aware that the bank has engaged the services of
 Boston Consulting Group (BCG) with the mandate to assist the bank in
 all spheres with particular reference to reaching the targeted business
 of Rs. 125000 Cr by the Centenary year 2016.
 Their services are being continued and the bank has been implementing
 the recommendations of BCG. Organisational setup has been reoriented
 with a customer centric focus.
 The Bank is in the process of putting in place a robust branch
 operating model capable of supporting the growing volumes of business.
 Your Bank has been focusing on improving the in-branch experience of
 the customers by redesigning the branches to create the best-in-class
 lay-out and ambience at its high footfall branches.
 In order to reduce the waiting time for transaction processing, the
 bank has rolled out Single Window System of banking services in 75
 Financial Inclusion
 Your Bank was allotted 117 villages through SLBC for providing basic
 banking services under the Financial Inclusion Plan. The Bank has
 covered all the 117 villages by adopting Business Correspondent model.
 The Bank has opened 26278 basic savings accounts (no frill accounts)
 with Bio-Metric smart cards under Financial Inclusion Scheme. In order
 to take it forward further the Bank is in the process of opening Ultra
 Small Branches/Brick & Mortar branches in the allotted villages
 wherever feasible.
 Special Reserve
 In accordance with the provisions of Section 36 (1) (viii) of the
 Income Tax Act, 1961 (as amended), a deduction is available to a
 company for any Special Reserve created or maintained to the extent of
 20% of the profit derived from the business for providing long term
 finance for industrial or agricultural development or development of
 infrastructure facility or housing in India. As your Bank has extended
 credit facility by way of term loans for housing, power, roads and
 other segments of infrastructure during last fiscal, it was decided to
 avail the said benefit. Your Bank has created special reserve to the
 extent of Rs. 50 Cr for the said purpose in 31.03.2013.
 During the last four fiscal years commencing from 2009-10, your bank
 has created an aggregate amount of Rs. 145 Cr towards the Special
 Statutory Audit
 The Statutory audit was carried out by M/s R K Kumar & Co, Chartered
 Accountants, Chennai. Their report is being annexed and forms part of
 this report.
 The statutory auditors will retire at the ensuing Annual General
 Meeting. Their re-appointment is being placed before the shareholders
 for approval. The Bank has received a certificate from the Auditors
 confirming that their appointment, if made, would be within the
 prescribed limits specified under Sec 224 (1B) of the Companies Act,
 1956 as also the extant guidelines issued by RBI. The auditors have
 also submitted the Peer Review certificate issued to them by the
 Institute of Chartered Accountants of India (ICAI).
 Statutory Disclosures
 Considering the nature of activities of the Bank, the provisions of
 Section 217(1) (e) of the Companies Act, 1956 relating to conservation
 of energy and technology absorption do not apply to the Bank. However
 the Bank is making extensive use of technology in all its operations
 and is also constantly pursuing its goal of technological upgradation
 in a cost effective manner to provide quality customer service.
 The Bank supports and encourages the country''s export efforts through
 its export financing operations.
 As required under the provisions of Sec 217(2A) of the Companies Act,
 1956, read with Companies (Particulars of Employees) Rules, 1975, as
 amended, your Directors report that during the fiscal 2012-13, none of
 the employees were in receipt of remuneration requiring disclosure.
 It is hereby confirmed that the bank has proper systems in place to
 ensure compliance of all laws applicable to the Bank.
 Board of Directors
 Messrs K Parameshwara Rao, V Santhanaraman and Hemant Kaul have
 resigned as Directors during the year under report. The Board places on
 record its gratitude for the valuable contribution rendered by them
 during their tenure as Directors on the Board.
 Shri N S Srinath was co-opted as an Additional Director of the Bank in
 the Board meeting held on 29.06.2012. He was elected as a Director of
 the Bank at the 93rd Annual General Meeting held on 30.07.2012.
 Shri B Swaminathan was co-opted as an Additional Director by the Board
 effective 31st January 2013, to hold office till the 94th Annual
 General Meeting. Notice as required under Sec 257 of the Companies Act,
 1956 has been received in respect of his appointment as Director of the
 Bank. Proposal to appoint him as Director, liable to retire by
 rotation, is being placed before the shareholders at the ensuing Annual
 General Meeting.
 Directors Messrs MGS Ramesh Babu and S Ganapathi Subramanian are
 retiring by rotation at the forthcoming Annual General Meeting and are
 eligible for re-appointment. They have offered themselves for
 As per Clause 49 of the Listing Agreement, brief resume of the
 Directors who are seeking re-appointment and the Additional Director
 seeking appointment as Director are furnished in the Corporate
 Governance Report attached to this Directors'' Report.
 Directors'' Responsibility Statement
 Pursuant to Section 217 (2AA) of the Companies Act, 1956 as amended,
 your Directors hereby report:
 (a) In the preparation of the annual accounts, the applicable
 accounting standards have been followed along with proper explanation
 relating to material departures;
 (b) The Directors have selected such accounting policies and applied
 them consistently and made judgements and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Bank at the end of the financial year and of the profit of the
 Bank for that period;
 (c) The Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Bank and for
 preventing and detecting fraud and other irregularities; and
 (d) The Directors have prepared the annual accounts on a going concern
 Awards and Accolades
 Your Bank received several awards during FY13 for its consistent and
 all round performance. Given below are the awards won/ accolades
 received during the year 2012-13.
 Financial Express-Best Old Private Sector Bank, 2012 (Runner up)
 - Best Private Sector Bank award from Bloomberg UTV Financial
 Leadership Awards 2012
 - Best Small Bank award from Business World - Price Waterhouse
 Coopers Awards 2012
 - Award for Consistent Performance in growth and profits under Small
 Bank Category 2012 presented by CNBC TV 18.
 - IPE BFSI Best Employer Brand Award 2012 given by Institute of
 Public Enterprises, Hyderabad.
 - IPE Corporate Excellence Awards (CEO''s) Banking & Finance, 2012
 presented by Institute of Public Enterprises, Hyderabad.
 - Business Leadership Award Category given by Institute of Public
 Enterprises under Global HR Excellence Awards (CEO''s).
 - ''Outstanding contribution to Brand building award'' presented by
 Indira group of Institutes, Pune in their 12th Indira Awards for
 Marketing Excellence.
 Apart from the above, the Institute for Development and Research in
 Banking Technology (IDRBT) for its Annual Technology Excellence Awards
 2011 selected KVB in respect of the following categories:
 (a) Best IT Implementation and Management and
 (b) Managing IT Risk Corporate Social Responsibility
 Your Bank''s commitment, work ethics and business processes encourage
 all its employees and other participants to ensure positive impact and
 its commitment towards corporate social responsibility.
 Your Bank has been extending its patronage by way of donations and
 sponsorship for various humanitarian activities in the field of
 education, health and other social causes as a part of its commitment
 towards Corporate Social Responsibility.
 The Bank extended donations towards funding the following activities.
 Health care
 (a) Contributed a sum of Rs. 3.24 lakh to Rotary Texcity, Karur to
 conduct Medical Centre for one year
 (b) Contributed a sum of Rs. 5 lakh to Sri Sathya Sai Trust, Mumbai
 towards free heart check up camp and surgery conducted by them for the
 benefit of economically weaker sections of the public
 (c) A sum of Rs. 2 lakh was donated towards support to severly
 underweight children in Karur District programme organized by the
 District Collector, Karur- a mission initiative of District
 Administration to fight malnutrition among children in the age group of
 6 months to 5 years.
 (a) Reimbursement of school fees to some children for Rs. 1.19 lakh
 (b) Contributed to Rashtrotthana Parishat, Bangalore for running PARV
 School at Kolar District, Karnataka
 (c) Donation of Rs. 3.60 lakh towards the Single Teacher School
 initiative of Swami Vivekananda Rural Development Society, Chennai
 (d) Provision of 1000 numbers of ceiling fans to select schools in
 Tamil Nadu and Andhra Pradesh at a cost of Rs. 12.90 lakh.
 Apart from the above your Bank has also contributed to the Anandam
 Charitable Trust, Chennai a home for destitute senior citizens in the
 age group of 63 to 93 years for their development activities.
 Management Discussion and Analysis Report for the year under report and
 Report on Corporate Governance as stipulated under Clause 49 of the
 Listing Agreement are provided in separate sections forming part of the
 Annual Report.
 Your Directors place on record their gratitude for the guidance and
 cooperation received from the Reserve Bank of India, Government of
 India, State Governments and other regulatory bodies. The Directors
 also place on record their appreciation of the encouragement and
 patronage received from valued customers and other stake holders and
 look forward to their continued support. The Directors also take this
 opportunity to express their appreciation for the hard work, dedication
 and efforts put in by the employees of the Bank.
                            For and on behalf of the Board of Directors
 Karur                                                       K P Kumar
 24.05.2013                                                   Chairman
Source : Dion Global Solutions Limited
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