Karur Vysya Bank Directors Report, Karur Vysya Reports by Directors
Karur Vysya Bank
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Directors Report Year End : Mar '15    « Mar 14
To the members
 The Directors are pleased to present the 96th Annual Report of
 business and operations of your Bank together with audited accounts for
 the year ended March 31,2015.
 Particulars                          31.03.2015           31.03.2014
                                       (Rs. in Cr)            (Rs. in Cr)
 Gross Deposits                         44690.27             43757.68
 Gross Advances                         36690.77             34225.98
 Total Income                            5976.71              5680.41
 Total Expenditure                       5033.42              4842.62
 Operating Profit                         943.29               837.79
 Net Profit                               464.28               429.60
 Appropriations: Transfer to
 Statutory Reserve                        120.00               128.00
 Capital Reserve                           12.16                 1.75
 General Reserve                           58.50               157.00
 Special Reserve                           60.00                  NIL
 Investment Reserve                        53.00              (21.00)
 Proposed Dividend                        158.42               139.99
 Dividend Tax                              32.25                23.79
 Total Business
 The total business of the Bank stood at Rs. 81381.04 Cr as on March
 31,2015, against Rs. 77983.66 Cr a year before, growth of 4.36%.
 Gross deposits increased by 2.13% to Rs. 44690.27 Cr against Rs. 43757.68
 Cr last year. Savings Deposits increased by 16.75% to Rs. 6314 Cr. Demand
 Deposits stood at Rs. 3528 Cr. CASA increased from Rs. 8989 Cr as at
 31.03.2014 to Rs. 9842 Cr as on 31.03.2015 recording a y-o-y growth of
 9.49%. CASA deposits constituted 22% of the total deposits.
 Term Deposits increased from Rs. 34768.79 Cr as on 31.03.2014 to Rs.
 34848.10 Cr as at the end of March 31,2015.
 During this fiscal, your Bank recorded a growth of 7.20% in its loan
 book with the advances increasing to Rs. 36690.77 Cr as at 31.03.2015
 from Rs. 34225.98 Cr as at the end of March 31,2014.
 Priority sector advances were at Rs. 14332.70 Cr at the end of March 31,
 2015, representing 41.43% of Bank''s Adjusted Net Bank Credit (ANBC) of
 the previous fiscal. Your Bank has thus achieved its overall priority
 sector lending requirements of 40% of ANBC.
 Your Bank''s agriculture advances as at the end of the fiscal 2014- 15
 were at Rs. 6447.81 Cr, representing 18.72% of the ANBC, as against the
 regulatory prescription of 18%. The Bank has also achieved its weaker
 section advances requirement which stood at 10.20% as against the
 mandatory norm of 10%.
 Your Bank has been focusing on containing the non-performing assets
 through better credit monitoring as well as intensified efforts to
 recover the impaired assets. The Bank took several initiatives to
 contain slippages and speed up recovery from overdue loan accounts.
 These include identification of stressed accounts for
 restructuring/rephasing in time, conduct of lok adalats at Divisional
 office levels, regular follow-up of overdues through call centre and
 However in view of the continued slowdown in the economy and
 delinquencies in the corporate segment, the Bank''s gross NPAs have
 increased from Rs. 279.18 Cr as on 31.03.2014 to Rs. 677.78 Cr as at the
 end of the fiscal 2014-15. The Gross NPA of the Bank stood at 1.85% up
 from 0.82%, a year ago. The Net NPAs of the Bank stood at Rs. 280.97 Cr
 (0.78%) at the end of the fiscal under report as against Rs. 139.91 Cr
 (0.41%) at the end of previous fiscal 2013-14.
 The Bank maintains a provision coverage ratio of 75.20%.
 Share Capital
 As at the end of the FY15, your Bank''s paid up share capital stood at Rs.
 121.63 Cr, consisting of 12,16,29,609 Equity shares of Rs.10/- each fully
 paid up. There has been an increase in the paid up capital to the tune
 of Rs. 14.45 Cr on account of issue and allotment of shares to the
 Qualified Institutional Investors to the extent of Rs. 13.41 Cr during
 August 2014 and allotment of shares consequent to the exercise of
 options under Employees Stock Option Schemes. During the year under
 report, the Net owned funds of your Bank increased from Rs. 3326.34 Cr as
 at the end of FY 14 to Rs. 4246.03 Cr as at the end of FY15, an increase
 of Rs. 919.69 Cr (27.65%).
 The Capital Adequacy Ratio stood at 14.63 % as per BASEL II and 14.62%
 under BASEL III norms. The Bank has been consistently maintaining the
 Ratio well above the minimum of 9% stipulated by the Reserve Bank of
 India. The market capitalization of your Bank''s shares at the end of
 March 31,2015 was Rs. 6615.43 Cr.
 Employees Stock Options Scheme
 During the fiscal 2014-15, the employees of the Bank exercised the
 stock options granted to them to the extent of 10,29,775 options. There
 were no unvested options at the end of the fiscal 2014-15. The Bank has
 not granted any stock options during the year under report.
 Credit Rating
 ICRA Limited had rated the Unsecured Redeemable Non- convertible
 Subordinated (Lower Tier II) debt instruments issued during the earlier
 year by re-affirming its A  rating.
 CRISIL has reaffirmed A1   rating (pronounced CRISIL A one plus) for
 Rs.30 bn 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.30 bn.  Both the ratings
 indicate a very strong degree of safety regarding timely payment of
 financial obligations.
 Having regard to the overall performance of the Bank and the positive
 outlook for the current fiscal, the Board of Directors recommended a
 dividend of Rs. 13/- per share (i.e. 130% on the paid up capital same as
 the previous fiscal) for the reporting year, thus maintaining 100%
 dividend or more for the twelfth year in a row since 2004. The total
 dividend outgo including dividend distribution tax will be Rs. 190.67 Cr.
 The aggregate investments of the Bank as on 31st March 2015 was Rs.
 12833.03 Cr with maturity mix of securities consistent with risk
 perceptions and investment policies of the Bank.
 Income earned on investments during the fiscal 2014-15 was at Rs.1177.56
 Cr registering an slight decrease of Rs. 19.82 Cr (i.e. 1.6%) as against
 Rs.1197.38 Cr recorded during the previous fiscal 2013- 14.Profit on sale
 of investments was Rs. 71.03 Cr for the fiscal 2014- 15 as against
 Rs.103.73 Cr recorded in the previous fiscal 2013-14.
 The average yield on investments decreased to 7.50% during the year
 under report over the previous fiscal of 7.61%. Liquidity position of
 the Bank was comfortable throughout the year.
 The Bank has put in place the risk management tools like Duration,
 Modified Duration and Value at Risk for all interest bearing
 Forex Transactions
 The merchant turnover of the Bank grew by 18.49% to reach Rs.18493 Cr as
 against Rs.15607 Cr during the previous fiscal 2013-14. The year on year
 export credit grew at 15%. Your Bank has earned a total income of
 Rs.89.13 Cr on Forex business during the fiscal 2014-15 as against Rs.79.07
 Cr earned during the last fiscal 2013-14 registering an increase of
 12.72%. Of this, Exchange Profit increased from Rs.35.59 Cr to Rs.43.76 Cr
 and other income (commission and others) increased from Rs.43.48 Cr to
 Rs.45.37 Cr with exchange profit recording an increase of 22.95% and
 commission income an increase of 4.34%.
 Distribution Net Work
 During the year your Bank opened 56 branches in 6 States. One Satellite
 branch was upgraded to full fledged branch. Your Bank has added 28
 As at the end of fiscal 2014-15, your Bank has 2274 customer outlets
 comprising of 629 branches and 1645 ATMs, with PAN India presence.
 Debit Cards
 Your Bank has issued 9.81 lakh debit cards during the year taking the
 total number of cards issued viz: ATM card, VISA, Master EMV Chip,
 Maestro, Rupay Debit and Rupay Kissan to 53.63 lakh.
 During FY 15, your bank installed 800 POS terminals across various
 merchant locations, taking the total to 9234 as at 31.03.2015. During
 the year under report 80.76 lakh transactions were made through KVBPOS
 and the gross value of the transactions routed through such terminals
 stood at Rs. 2348.16 cr.
 Technology Initiatives
 The application of technology in day to day operations of the Bank has
 been responsible for augmenting and enhancing productivity levels apart
 from simplifying mundane tasks. The Bank''s success could be attributed
 to proper technology plan targeted at introducing customer friendly
 delivery channels providing value added services and facilitating
 improvement in overall internal efficiency and decision making process
 by bringing in an effective Management Information System and complying
 with the regulatory norms. In this direction, the Bank has been lining
 up various IT initiatives that add value to the customer convenience
 apart from enhancing the internal efficiency.
 Technology initiatives launched during the fiscal 2014-15 are given
 - Launching of Mobile POS and Handheld GPRS POS
 In order to give impetus to CASA business, a preferred IT solution viz:
 Mobile POS and Handheld GPRS POS was launched. It guarantees a lot of
 mobility and ease in acquiring card transactions in real time purchase
 scenarios. It is a preferred payment method to replace Cash on Delivery
 Scenario. Wireless and Rechargeable battery gives the equipment the
 extra edge. It promotes the customer acceptance of POS Payment in a big
 - Launching of Multi-Currency Travel Card Multi-Currency Travel Card
 obliterates the need for carrying different currencies during an
 overseas trip. Single card is used to load USD, EURO & SGD. Card can be
 used for ATM operations, POS purchases & E-Commerce transactions.
 Online Access to Travel Card Account is through Password.  The card is
 loaded with all 3 currencies USD / EURO / SGD
 - E-passbook
 An in-house Android Application developed and styled as an E-Book,
 whereby customers of your bank having smart phones can view account
 statements and balance details in the mobile itself using the phone
 number registered with the bank database.
 - Missed call facility
 It provides banking services, if the customers give a missed call from
 his registered mobile to a designated mobile number for this purpose.
 The response is in the form of an SMS . The services offered are
 Balances of Running Accounts up to 5 in number and maximum limit of two
 missed calls a day. It also can provide Account Statement Enquiry for 3
 accounts and a maximum limit of two missed calls per day.
 - Anti-Phishing, Anti-Trojan and Anti-Pharming Services
 Your bank has implemented Anti-phishing, Anti-pharming and Anti-Trojan
 services for preventing any malicious attacks from fraudsters.
 Golden Vision Initiatives
 Members of the Bank are aware that the Bank has embarked upon Golden
 Vision Initiatives during the year 2009 and M/s Boston Consulting
 Group, a global consultancy firm of consultants, has been engaged to
 assist and advise the bank in its journey of ''Golden Vision'' of
 attaining ''125000 Cr business by the centenary year of the Bank in
 2016. Most of their recommendations were put in place since their
 engagement in the year 2009.
 The following initiatives are launched during the fiscal under report.
 1.  Institutional sales force programs (Divisional sales force) to
 target liability (CASA) products from institutional customers (e.g. Mid
 - large Corporates, Trusts, Associations, Govt.  institutions).
 2.  Collections / Receivables & Payment module, to meet out the
 specific requirement of corporate customers.
 3.  Commercial sales force team at the branch level comprising of
 relationship officers - Commercial Banking (RO - CBG). Target of this
 program was to mobilize CA deposits and SME advances.
 4.  Structured third party sales programs (insurance and mutual funds)
 to increase the other income of KVB. In addition, a focused program was
 launched in September last year focusing on the debit card usage of the
 bank to increase interchange income.
 5.  Special drives / campaigns viz., for increasing the usage of
 alternate delivery channel viz., usage of debit cards both on- line and
 in POS terminals and rewarding with loyalty points to the users.
 6.  Deployment of self-service machines, based on user patterns and
 transaction profile of the branches has been carried out.  Your Bank
 has now covered 50% of branch network with Cash Deposit Machines.
 Financial Inclusion
 With the basic objective of bringing the unserved population under the
 banking mainstream, the Bank is striving towards the more inclusive
 growth by making financial products and services available to poor in
 particular. As per the Government of India and Reserve Bank directions
 your Bank has been actively pursuing the agenda of Financial Inclusion
 with key interventions in four groups namely expanding banking
 infrastructure, offering appropriate financial products, making
 extensive and intensive use of technology and through advocacy and
 stakeholder participation.
 Your Bank has covered all the 117 allocated villages under rural
 Financial Inclusion. These 117 villages are spread over Tamilnadu,
 Andhra Pradesh, Telangana and Karnataka States.
 Ultra Small Branches (USBs)
 During the Fiscal under report, the Bank opened 14 USBs, taking the
 count of USBs to 42 as on March 31,2015.
 We have conducted 140 Financial Literacy Campaigns through our 98
 rural/unbanked branches. We have also conducted 914 Financial Literacy
 Campaigns through our metro, urban and semi- urban branches.
 Pradhan Mantri Jan-Dhan Yojana (PMJDY)
 As per the directions of Department of Financial Services, Government
 of India your Bank started implementing Pradhan Mantri Jan-Dhan
 Yojana which focuses on coverage of households in urban areas also as
 against the earlier plan which focused on coverage of villages. The
 PMJDY will ensure that all households in the country, both rural and
 urban, will get access to the financial services, like bank account
 with Rupay debit card, access to credit, remittance, insurance and
 pension. Under the PMJDY scheme our Bank has been allotted with 409
 wards in semi urban and urban areas, apart from the 117 villages
 already allotted under rural financial inclusion scheme. Your Bank
 conducted survey of all 1,99,242 households in all these 409 wards and
 opened 108502 Basic Savings Bank Deposit Accounts and 104889 Rupay
 cards were issued under PMJDY Scheme. All the households bank accounts
 are now with either our bank or other bank/s.
 Statutory Audit
 M/s. Abarna & Ananthan, Chartered Accountants, Bangalore will retire at
 the conclusion of the forthcoming Annual General Meeting and are
 eligible for re-appointment, subject to the approval of the Reserve
 Bank of India. The Bank has received consent from the Auditors and
 confirmation to the effect that they are not disqualified to be
 appointed as the Auditors of the Bank in terms of the provisions of the
 Companies Act, 2013 and the rules made thereunder. Accordingly, the
 Board of Directors has recommended to the shareholders for approval the
 re- appointment of M/s. Abarna & Ananthan, Chartered Accountants,
 Bangalore, as the Statutory Auditors of the Bank to hold office from
 the ensuing AGM till the conclusion of the next AGM on a remuneration
 to be decided by the Board or Committee thereof.
 Secretarial Audit
 Pursuant to the provisions of Sec 204 of the Companies Act, 2013 and
 the Companies (Appointment and Remuneration of Managerial Personnel)
 Rules, 2014, the Bank, with the approval of its Board appointed Shri S
 Solaiyappan, Practicing Company Secretary to undertake the Secretarial
 Audit of the Bank for the financial year ended 31.03.2015. The
 Secretarial Audit Report is annexed herewith as Annexure 1.
 Statutory Disclosures
 The Disclosures to be made under sub-section (3) (m) of Section 134 of
 the Companies Act, 2013 read with Rule (8) (3) of the Companies
 (Accounts) Rules, 2014 by your Bank are explained as under:
 Considering the nature of activities of the Bank, the provisions of
 Section 134 of the Companies Act, 2013 relating to conservation of
 energy and technology absorption do not apply to the Bank.
 However the bank has adopted the following in the areas of conservation
 of energy, technology absorption:
 The Bank has installed one 850 KW Wind Turbine Generator at
 Govindanagaram Village, Theni District, Tamil Nadu in 2011 and has been
 utilizing the wind power generated for the Registered and Central
 Office at Karur and the Divisonal Office premises at Chennai. 14,57,545
 units were generated during the fiscal under report by the windmill.
 One floor at the Central Office complex and some select branches were
 equipped with energy efficient LED lights. Motion detector sensors were
 installed in some select branches of the Bank.
 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.
 The statement containing particulars of employees as required under Sec
 197(12) of the Companies Act, 2013, read with Rule 5(2) of the
 Companies (Appointment & Remuneration of Managerial Personnel) Rules,
 2014 forms part of this report.
 The ratio of remuneration of each director to the median employee''s
 remuneration and other details in terms of sub-section 12 of Sec 197 of
 the Companies Act, 2013 read with Rule 5 (1) of the Companies
 (Appointment & Remuneration of Managerial Personnel) Rules, 2014 are
 forming part of this report as Annexure 2.
 It is hereby confirmed that the bank has proper systems in place to
 ensure compliance of all laws applicable to the Bank.
 Extract of Annual Return
 Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of
 Section 92 of the Companies Act 2013, read with Rule 12 of the
 Companies (Management and Administration) Rules, 2014 extract of the
 Annual Return as at March 31, 2015 forms part of this report as
 Annexure 3.
 Board of Directors
 In accordance with the provisions of Companies Act, 2013 and the
 Articles of Association of the Bank, Director Shri G Rajasekaran,
 retires by rotation and being eligible, offered himself for re-
 Shri. M K Venkatesan, Shri A K Praburaj and Smt K L Vijayalakshmi were
 appointed as Additional Directors of the Bank during the year under
 report in terms of the provisions of Section161 of the Companies Act,
 2013 and Article 27 of the Articles of Association of the Bank. They
 hold office upto the date of the ensuing Annual General Meeting of the
 Bank. Bank has received notices from them individually signifying their
 candidature for the office of Director of the Bank, along with deposit
 prescribed under provision of Section 160 of Companies Act, 2013.
 The brief resume and details of directors who are to be re-
 appointed/appointed are furnished in the Corporate Governance Report
 Director Shri S Ganapathi Subramanian would be continuing upto the date
 of this AGM consequent upon attainment of maximum age criteria
 prescribed under the extant guidelines. Board places on record its
 sincere appreciation of the services rendered by him during his tenure
 as Director.
 Directors'' Responsibility Statement
 Pursuant to the requirement under Section 134 (5) of the Companies Act,
 2013 with respect to the Directors'' Responsibility Statement, it is
 hereby confirmed that
 (a) In the preparation of the annual accounts, the applicable
 accounting standards had been followed along with proper explanation
 relating to material departures;
 (b) The directors had selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the Bank at the end of the financial year and of the profit and loss
 of the Bank for that period;
 (c) The directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of this Act for safeguarding the assets of the Bank and for
 preventing and detecting fraud and other irregularities;
 (d) The directors had prepared the annual accounts on a going concern
 (e) The directors had laid down internal financial controls to be
 followed by the Bank and that such internal financial controls are
 adequate and were operating effectively; and
 (f) The directors had devised proper systems to ensure compliance with
 the provisions of all applicable laws and that such systems were
 adequate and operating effectively.
 Awards and Accolades
 Your Bank has received the following awards and recognition during the 
 year 2014-15.
 1.  Master Card payments Strategy Workshop, Goa 2014 - Karur Vysya Bank
 received the Innovation Award for implementation of RFID enabled Debit
 Card Program.
 2.  Best Bank Award for Business Intelligence Initiatives among Small
 Banks instituted by The Institute for Development and Research in
 Banking Technology (IDRBT) in the IDRBT- Banking Technology Excellence
 Awards 2013-14 from the Hon''ble RBI Governor Shri. Raghuram Rajan. Your
 Bank has bagged the said Information Technology Award from IDRBT
 consecutively for the sixth time.
 3.  EDGE 2014 Award for managing IT Security by Information Week
 magazine for the use of IT for maximizing business impact.
 4.  National Payments Excellence Awards 2014 - Runner Up in Mid Sized
 Banks Category in recognition of excellent performance in National
 Financial Switch (NFS) ATM Network.  The award was sponsored by NPCI.
 5.  State Forum of Bankers'' Clubs (Kerala) in their 6th Banking
 Excellence Award 2014, adjudged KVB as the Second Best Bank in the
 Private Sector Category at National level and presented the award.
 6.  RUNNER UP AWARD in the old private sector bank category in FY
 2012-13, Financial Express Best Banks Award.
 7.  Received BEST TECH SAAVY BANK- Runner Up award in MSME Banking
 Excellence Awards- 2014 constituted by Chamber of Indian Micro Small &
 Medium Enterprises (cimsme).
 Your Bank is grateful to the RBI, Government of India, SEBI and other
 authorities and agencies, Financial Institutions and correspondent
 banks for their valuable support and guidance.
 The Directors also express their deep sense of appreciation to all
 staff members of the bank for their dedicated service and commitment
 towards bank''s vision for sustainable growth. Finally, the Board wishes
 to sincerely thank all the customers, shareholders, other stake holders
 for their valuable support and look forward to their continued support
 in the years to come.
                           For and on behalf of the Board of Directors,
 Place: Karur                                                K P Kumar
 Date : 28.05.2015                                            Chairman
Source : Dion Global Solutions Limited
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