Karur Vysya Bank Directors Report, Karur Vysya Reports by Directors

Karur Vysya Bank

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Directors Report Year End : Mar '16    Mar 15
The Directors are immensely pleased to present the 97th Annual Report
 together with the Audited Statement of Accounts for the year ended 31st
 March 2016 and the Auditors'' Report in the Bank''s Centenary Year.
 Performance Highlights
 During the year under report your Bank has been able to achieve
 significant growth in all areas of operation. Performance highlights
 for FY 16 in the key areas of its operation are as under:
                                       31.03.2016      31.03.2015
 Particulars                          (Rs. in Cr)     (Rs. in Cr)
 Deposits                              50078.90        44690.27
 Advances                              39475.70        36690.77
 Investments                           13281.40        12435.18
 Total Income                           6150.21         5976.72
 Total Expenditure                      4914.79         5033.43
 Operating Profit                       1235.42          943.29
 Net Profit                              567.63          464.28
 The total business of the Bank crossed Rs. 89555 cr as on 31st March
 2016, registering an absolute growth of Rs. 8174 cr at a growth rate of
 10.04%, over March 2015 level of Rs. 81381 cr.  Aggregate business was
 driven by 12.06% growth in gross deposits and 7.59% growth in gross
 Total deposits increased by 12.06% from Rs. 44690.27 cr in FY15 to Rs.
 50078.90 cr in FY 16.
 Savings bank deposits registered a good growth of 21.12%, an increase
 from Rs. 6314 cr to Rs. 7648 cr and demand deposits grew 14.14% from
 Rs. 3528 cr to Rs. 4027 cr. CASA deposits recorded a growth rate of
 18.62% to reach Rs.11675 cr from Rs. 9842 cr. Term deposits grew by
 10.20% from Rs. 34848 cr to Rs. 38404 cr.
 Aggregate advances grew from Rs. 36690.77 cr as on 31st March 2015 to
 Rs. 39475.70 cr as on 31st March, 2016, an increase of 7.59%.
 Priority sector advances of the Bank were at Rs. 17082 cr as at the end
 of the fiscal under report. Priority sector lending constituted 46.06%
 of the Adjusted Net Bank Credit (ANBC) as against the RBI stipulation
 of 40%. As against the requirement of 18%, lending to agriculture were
 at Rs. 7867 cr constituting 21.21% of the ANBC. Bank''s advances to
 micro enterprises and weaker sections were at 7.01% and 11%
 respectively. The Bank continues to comply with the regulatory
 guidelines under priority sector, agricultural lending, micro
 enterprises and weaker section advances.
 The investment portfolio of the Bank registered a growth of 6.81% to
 reach Rs.13281.40 cr from Rs.12435.18 cr in the previous fiscal.  The
 investment portfolio composition is consistent with the corporate
 requirement, risk perception and investment policy of the Bank.
 Income earned on investments during FY 16 was at Rs. 1095.78 cr, a dip
 of 5.39% from the previous fiscal FY15 earnings of Rs.1158.17 cr.
 Profit on sale of investments was Rs. 94.41 cr at the end of fiscal
 2015-16 as against Rs. 71.03 cr registered during the previous fiscal
 2014-15, showing a quantum growth of 32.92%.
 Liquidity position was comfortable throughout the fiscal 2015-16.
 The gross interest income component grew by 0.88% y-o-y from Rs.
 5395.88 cr in FY 15 to Rs. 5443.40 cr in FY16. However, the Net
 Interest Income grew by 21.52%, y-o-y from Rs.1465.91 cr to Rs.1781.37
 cr. Non-interest income increased to Rs. 706.81 cr from Rs.580.84 cr, a
 growth of 21.69%.
 The yield on advances decreased from 12.14% to 11.67% and yield on
 investments decreased marginally from 7.50% to 7.49%.
 The interest expenditure fell from Rs. 3929.97 cr to Rs. 3662.03 cr
 showing a decline of 6.82% (Rs. 267.94 cr). Operating expenses
 increased from Rs.1103.46 cr to Rs.1252.76 cr, an increase of 13.53%
 (Rs.149.30 cr).
 Cost of deposits decreased from 7.96% to 7.40%.
 The reduction in interest expenditure helped Net Interest Margin
 increase from 2.91% in FY 15 to 3.43% in FY 16.
 During the fiscal year the spread on funds increased from 2.27% to
 Your Bank earned an operating profit of Rs. 1235.42 cr for the year
 2015-16 as against Rs. 943.29 cr registered in the previous fiscal
 2014-15. The operating profit posted a high growth of 30.97% on y-o-y
 During the year ended March 31, 2016, the net profit of the Bank
 increased by 22.26% to Rs. 567.63 cr as against Rs. 464.28 cr posted in
 the previous fiscal 2014-15. The net profit was up by Rs.103.35 cr
 during FY 16.
 The net profit of Rs. 567.63 cr which along with a sum of Rs.1.49 cr
 brought forward from the previous year aggregating Rs. 569.12 cr is
 appropriated as under:
 Appropriation                                           Rs. (in cr)
 Transfer to Statutory Reserve                              145.00
 Transfer to Capital Reserve                                  4.61
 Transfer to General Reserve                                181.63
 Investment Reserve                                           0.34
 Transfer to Special Reserve                                 30.00
 Dividend (including tax) (Interim and final dividends)     205.34
 Balance carried to Balance Sheet                             2.20
 There are no material changes affecting the financial position of the
 Bank which have occurred between the end of the financial year of the
 Bank to which the financial statements relate to and the date of the
 There are no material orders passed by the regulators or courts or
 tribunals impacting the going concern status and the Bank''s operations
 in future.
 Asset Quality
 During the fiscal 2015-16, your Bank consolidated its credit processing
 through hub system viz; Central Loan Processing Cells which was
 implemented a few years back. The co-ordinated efforts of Credit
 Monitoring Group and the Stressed Assets Management Department at the
 Central Office and the recovery teams at Divisional Offices ensure that
 fresh slippages were reduced to a large extent.
 Recovery was given major thrust. The strategy consists of (a)
 preventive actions (b) Recovery & Upgradation (c) Resolution &
 settlement and (d) Sale to Asset Reconstruction Companies (ARCs).
 The provisions under SARFAESI Act, 2002 have been effectively leveraged
 to ensure further improvements in recovery performance. The bank has
 vigorously pursued special one time settlement for small accounts which
 has also helped in recovering NPAs. Lok Adalats conducted in various
 Divisions were also utilised to reduce NPAs considerably. Mega auction
 conducted during the last fiscal resulted in big success. The Bank also
 sold many large, consortium based borrowal accounts to ARCs which would
 involve complex processes and would have taken long time for meaningful
 The Gross NPA of the Bank declined to Rs. 511.18 cr as on 31.03.2016
 from Rs. 677.78 cr as at the end of the previous financial year
 31.03.2015. In terms of percentage, Gross NPAs came down to 1.30% as on
 March 2016 from 1.85% in the previous fiscal.
 The Net NPA of the Bank declined from Rs. 280.97 cr as at the end of FY
 15 to Rs. 216.17 cr as at the end of the FY 16. The Net NPA ratio of
 the Bank against the Net Advances decreased from 0.78% as at the end of
 the previous fiscal 31.03.2015 to 0.55% as at the end of the fiscal
 under report.
 The Provision Coverage Ratio (PCR) stood at 82.46% as at the end of the
 fiscal 31.03.2016 as against 75.20% maintained at the end of the
 previous fiscal ended on 31.03.2015. The Bank has been maintaining
 significantly higher PCR over many years now.
 Capital Funds and Capital Adequacy Ratio
 The paid up share capital of the Bank as on 31.03.2016 was at Rs.121.86
 cr comprising of 12,18,64,454 Equity shares of Rs.10/- each fully paid
 up. During the year under report 2,34,845 equity shares were allotted
 on 29.04.2015 consequent to the exercise of ESOS by the employees
 granted options. The Net owned funds of the Bank increased from
 Rs.4246.03 cr to Rs. 4572.95 cr, a rise of Rs. 326.92 cr registering a
 growth rate of 7.70%.
 Capital adequacy ratio stood at 12.17% as per BASEL III norms (12.26%
 under BASEL II). The bank''s capital adequacy ratio is well above the
 statutory limit of 9.625% prescribed by the Reserve Bank of India.
 The market capitalisation of the Bank''s shares as on 31.03.2016 was Rs.
 5323 Cr.
 The bank has an uninterrupted track record of profit and dividend
 payment since its inception, a century ago.
 Your Bank is pleased to inform that for the first time the Board of
 Directors has declared an interim dividend of Rs.10/- per share (100%)
 for this fiscal 2015-16. The interim dividend was declared on
 14.03.2016 and already paid during March 2016.
 The Board of Directors have pleasure in recommending a final dividend
 of Rs. 4/- per share for the fiscal under report. The final dividend,
 on approval by the shareholders in the 97th AGM will take the total
 dividend for the year 2015-16 to Rs.14/-per share (previous year
 Rs.13/-per share). The total dividend payment works out to Rs.170.61 cr
 excluding tax. The dividend pay out ratio works out to 30.06% excluding
 dividend tax.
 Earnings per share/Book Value
 The earnings per share (Basic) and the book value per share as on
 31.03.2016 were at Rs. 46.59 and Rs. 375.25 respectively.
 Foreign Exchange Transactions
 The merchant turnover of the Bank grew by 12% to reach Rs.20642 cr in
 FY16 as against Rs.18493 cr in FY 15.
 Export credit stood at Rs.1286 cr as at 31.03.2016 as against Rs.1221
 cr as at 31.03.2015, a growth of 5.32% over the previous fiscal.
 Your Bank earned a total income of Rs. 111.17 cr as on March 31, 2016
 on forex transactions against Rs. 89.13 cr as at March 31, 2015, a
 growth of 24.73%. Of the total income earned to the tune of Rs. 111.17
 cr, exchange profit accounted for Rs. 54.34 cr and Commission and
 others accounted for Rs. 56.83 cr.
 Employees Stock Option Scheme
 The Bank has not granted any stock options during the year under
 Credit Rating
 ICRA Limited who had rated the Unsecured Redeemable Non- convertible
 Subordinated Lower Tier II Bonds issued in the year 2009, have
 reaffirmed the rating at A  (pronounced as ICRA A plus) with stable
 outlook. Investments with such rating are considered to have adequate
 degree of safety regarding timely servicing of financial obligations.
 ICRA Limited has reaffirmed A1  rating (pronounced ICRA A one plus) for
 the Rs.30 bn Certificate of Deposits programme of your Bank.
 CRISIL has reaffirmed its rating for your bank''s Rs.30 bn Certificate
 of Deposits Programme at A1 .
 Both the ratings given by ICRA and CRISIL for the Certificate of
 Deposits Programme of the Bank indicate very strong degree of safety
 regarding timely payment of financial obligations. Such instruments
 carry lowest credit risk.
 Expansion of Network
 Your Bank has 667 branches and 1655 ATMs as on 31.03.2016.  The bank
 had added 38 branches and 10 ATMs during the year to improve its
 footprint throughout the country including un-banked centres in tune
 with RBI guidelines.
 Technology initiatives
 Your bank continued to actively leverage its proven IT initiatives to
 offer a wide array of advanced financial services and products,
 embedded with the latest technology and security features, to cater to
 the needs of its customers and target group and further their banking
 Your Bank introduced a number of significant IT driven initiatives
 during 2015-16 covering various facets of banking system. They are:
 Introduction of General Purpose Re-loadable cards
 A product that suits the Corporate community. Loading & Reloading is
 being done based on the Corporate instructions to the Bank. The General
 Purpose Re-loadable card is equipped with Reloading and ATM Withdrawal
 facility which is very much useful for the end-user. The card, issued
 under RuPay Brand, can be reloaded any number of times subject to the
 ceiling amount.
 Kisan Credit Card
 The Kisan Credit Card has emerged as an innovative credit delivery
 mechanism, to meet the production and credit requirements of the
 farmers, in a timely and hassle-free manner.  The ATM Card made the
 quick delivery or disbursement of credit possible. NPCI has launched an
 Indian Domestic Card in INR branded as RuPay.
 The scheme aims at providing adequate and timely disbursal under credit
 support from the banking system, under a single window to the farmers,
 for their cultivation & other needs like meeting short term credit
 requirements for cultivation of crops, Post harvest expenses, Produce
 Marketing loan, household consumption requirements, working capital for
 maintenance of farm assets and activities allied to agriculture like
 Dairy animals, inland fishery etc.
 BNA Recyclers
 Cash Deposit Machines are migrated as Re-cyclers with Cash Withdrawal
 facility for customers. In re-cyclers, both cash deposit and withdrawal
 can be made in the same machine and the cash deposited by the customers
 can be re-cycled for withdrawals.
 Your Bank migrated 202 out of 353 cash deposit machines as re-cyclers.
 Automatic Pass Book KIOSK
 Customers can use this Automatic Pass book kiosk for getting their
 passbooks printed automatically and immediately. The customer on
 inserting their passbook into the printer, the printer will
 automatically print the passbook by turning pages without any hassles
 to the customers.
 The pass book kiosks are deployed in 56 branches of your Bank and the
 Bank proposes to roll out the same in more branches in FY 17.
 Launch of e-Book with additional features for customers - enhancements
 version by version E-Book, launched during December 2014, has been
 upgraded with multiple features, is being enhanced during every
 version.  The bank is constantly re-visiting the application and
 providing improved options with innovative features to keep the
 customers delighted.
 Issuance of Chip based Multi-Currency Travel Cards and Addition of 5
 more currencies in Travel Card
 Your Bank issues Chip based Travel cards for Security purpose with
 three currencies viz: USD, EURO and SGD. This card carries the feature
 of having multiple wallets in a single card. We have introduced five
 additional currencies in the existing multi currency travel cards
 namely, Canadian Dollar CAD, British Pounds GBP, Japanese Yen JPY,
 Swiss Francs CHF, Swedish Kroner SEK.  Customers can load the
 respective currencies and make use of them to avoid the cross-currency
 conversion charges.
 Implementation of NACH (National Automated Clearing House)
 Electronic Clearing Service (ECS) has been replaced with NACH by NPCI
 and the bank has enabled the services to the customers.
 Foreign Inward Remittance through IMPS
 NRIs can transfer funds to person in India through the Correspondent
 bank on IMPS. The customer''s account will be credited instantaneously,
 once sent by the correspondent bank.
 Introduction of IMPS facility for Corporate Customers in Internet
 Your Bank has implemented IMPS in the Internet Banking for the Retail
 and Corporate Customers to transfer funds instantaneously to their
 clients/ staff etc. The facility has been provided with an enhanced
 limit to cater the needs of the customer.
 Access to Income Tax e-Filing portal through Internet Banking
 The Net Banking user will be mandated to select one of the account
 numbers and proceed by clicking the Initiate button on the screen,
 which will redirect the user to his respective ''user access area'' in
 the Income Tax e-filing portal.
 Release of EMV Chip Debit cards
 The Bank issues EMV chip enabled debit cards, issued under VISA, MASTER
 & RuPay brands to the customers. Introduced since 01.02.2016, the card
 complies with the RBI Guidelines on Security and Risk Mitigation
 measures for Electronic Payment Transactions.
 Rollout of KVB mPay Application - new version
 Your bank has rolled out new version of mPay application, with new look
 & feel and additional features. The customer can do instant user
 registration in the application.
 Introduction to Direct Menu short codes in NUUP (National Unified
 Unstructured Supplementary Service Data Platform)
 Your Bank Customers can do transactions through NUUP services offered
 by NPCI. The customer can dial *99*75# to get the NUUP Menu. The per
 day limit is Rs. 5,000/-. The NUUP can be used for Balance Enquiry,
 Mini Statement, Funds Transfer with MMID, Funds Transfer with Account
 Number, know your MMID, Change MPIN and Generate OTP. NPCI has
 introduced the menu options in many of the regional languages wherein
 the customer can select the respective language and make use of the
 Financial Inclusion - Rollout of Aadhaar Enabled Payment System (AEPS)
 and Pin Based Authentication in Micro ATMs
 KVB has implemented AEPS (Aadhaar Enabled Payment System) transaction
 using Aadhaar Based authentication in all its Micro ATMs. In an AEPS
 transaction, an account holder can authenticate himself using his
 Aadhaar number and biometric fingerprints to prove his identity.
 Aadhaar enabled RuPay card
 This card is used in the Micro ATMs. The Aadhaar number is available in
 the magnetic stripe of RuPay card. The Aadhaar number will be
 fetched/used and the customer''s bio-metric will be captured to
 authenticate the transaction.
 Pin Based Authentication in Micro ATMs
 All ATM cards (Visa, Maestro and RuPay brands) can be used on a Micro
 ATM as if it is used in a ATM by using the PIN authentication. PIN
 based authentication at present can be used for ''Cash Withdrawal'' and
 ''Balance Inquiry'' in Micro ATMs.
 Golden Vision Initiatives
 You are aware that the Bank, in the year 2009 recognised the need to
 embrace emerging best practices in banking, identify new avenues for
 growth, re-engineer its processes to improve business effectiveness and
 to build new capabilities that will develop growth platform for the
 future. Your bank decided to embark upon a structured long-term
 transformation program captioned as Golden Vision. Your Bank
 appointed The Boston Consulting Group (BCG), as Consultants for the
 Golden Vision Program. BCG''s overall engagement spanned across three
 phases viz: Phase 1: November 2009 to November 2011, Phase 2: December
 2011 to May 2013 and Phase 3: May 2013 till May 2016. The engagement of
 BCG came to a close on 14.05.2016 and they have played a key role in
 the Bank realising its objectives through various initiatives
 implemented during the period. Your Bank needs to sustain the
 implementation and scale up the initiatives with a lot of focus. The
 Bank has put in place a structure to govern the sustained
 implementation of the program.
 Your Bank places on record its sincere appreciation to BCG for being a
 strategic partner throughout the period of the transformation journey.
 Financial Inclusion
 As per RBI Financial Inclusion Plan, the Bank was required to cover 117
 villages and two urban locations through Business Correspondents upto
 March 2016 spread over Tamil Nadu, Andhra Pradesh, Telengana and
 Karnataka States. Your Bank has covered all the 117 villages & two
 urban locations allocated to it.
 The Bank has 42 Ultra Small Branches as at 31.03.2016.
 Financial literacy has been identified as a pre-requisite for effective
 financial inclusion and an integral part of Pradhan Mantri Jan-Dhan
 Yojana in order to let the beneficiaries make best use of the financial
 services being made available to them. Your Bank has conducted 109
 financial literacy camps in rural/unbanked rural branches. Your bank
 has also conducted 50 Financial Literacy Credit Camps through urban,
 metro/semi-urban branches.
 Pradhan Mantri Jan-Dhan Yojana (PMJDY)
 Your Bank offers Pradhan Mantri Jan-Dhan Yojana accounts to the general
 public, a National Mission on Financial inclusion encompassing an
 integrated approach to bring about comprehensive financial inclusion of
 all the households (specifically weaker sections and low income
 household groups) in the country. KVB introduced a separate Savings
 Bank Product for PMJDY, through which the bank opened 144038 accounts
 with an outstanding balance of Rs.12.32 cr as at 31.03.2016. In
 addition the beneficiaries under the Scheme were issued RuPay debit
 cards with inbuilt accident insurance cover of Rs. 1 lakh and life
 insurance cover of Rs. 30,000/-.
 Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan
 Jyoti Bima Yojana (PMJJBY) and Atal Pension Yojana (APY)
 The Bank successfully reached to unbanked and economically weaker
 population through PMSBY, PMJJBY and APY programs that are designated
 to bring social security. In FY 16, your Bank enrolled 141155 customers
 under PMSBY, 96897 customers under PMJJBY and 2743 customers in APY.
 Performance under Sovereign Gold Bond Scheme, 2015
 With a view to reduce country''s demand for physical gold, Government of
 India started the Sovereign Gold Bond Scheme, 2015. Your Bank
 operationalized the Sovereign Gold Bond Scheme in all the branches to
 canvass maximum applications.  Your Bank could mobilise total
 subscription denominated in units of gold was 49709 grams amounting to
 Rs.13.31 cr in three tranches. It is pertinent to note that your Bank
 is one of the top ten banks in terms of subscription amount.
 Management Discussion and Analysis
 The Management Discussion and Analysis Report for the year under review
 as stipulated in SEBI (Listing Obligations and
 Disclosure Requirements) Regulations, 2015, is presented in a separate
 section forming part of this Annual Report.
 Statutory Auditors
 M/s Abarna & Ananthan, Chartered Accountants, Bangalore will retire at
 the conclusion of the forthcoming Annual General Meeting and are
 eligible for re-appointment. They have completed two years as Statutory
 Auditors of the Bank. In terms of the extant guidelines of RBI they
 have remaining two year term. In terms of Sec 139 of the Companies Act,
 2013 read with Companies (Audit & Auditors) Rules, 2014, the Board of
 Directors has recommended the re-appointment of M/s Abarna & Ananthan,
 Chartered Accountants, Bangalore as Statutory Auditors for a period of
 two years subject to the approval of the Reserve Bank of India to hold
 office from the conclusion of the 97th AGM till the conclusion of the
 99th AGM on remuneration to be decided by the Board based on the
 recommendation of Audit Committee of the Board.
 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 there under. The shareholders are requested to consider
 and approve the appointment of the Statutory Auditors of the Bank.
 Secretarial Auditor and Secretarial Audit Report
 Pursuant to Sec 204 of the Companies Act, 2013, your Bank had appointed
 Shri CS S. Solaiyappan, Practicing Company Secretary, Salem to conduct
 the Secretarial Audit of the Bank for the financial year 2015-16. The
 Report of Secretarial Auditor for the year 2015-16 is annexed to this
 report as Annexure 1
 There is no Audit Qualifications in the Statutory Auditors'' Report and
 in the Secretarial Audit Report as annexed elsewhere in this Annual
 Statutory Disclosures
 The Disclosures to be made under sub-section (3) (m) of Sec 134 of the
 Companies Act, 2013 read with Rule (8) (3) of the Companies (Accounts)
 Rules, 2014 by your Bank are explained as under:
 Conservation of Energy, Technology Absorption, Foreign Exchange
 Earnings and Outgo
 Conservation of Energy
 The Bank has undertaken various initiatives for energy conservation at
 its premises.
 Your Bank owns 850 KW Wind Turbine Generator at Govindapuram village,
 Theni District in Tamil Nadu. Installed in the year 2011, the Bank is
 utilising the wind power generated for its Registered & Central Office
 at Karur and also at its Divisional Office, Chennai premises. 10,32,050
 units were generated during the fiscal under reports by the wind mill.
 One floor at the Central Office complex and some critical centres
 /offices were equipped with energy efficient LED lights, motion
 detector sensors.
 Technology Absorption
 The Bank has been making extensive use of information technology in all
 the operations. Bank is also constantly pursuing its goal of
 technological upgradation in a cost-effective manner for delivering
 quality customer service.
 Technology is a key enabler and core facilitator to the goals of your
 Bank and is identified as one of the strategic pillars of the Bank.
 Your Bank has been at the forefront of leveraging technology to provide
 better products and services to its customers. Ever since the banking
 industry in the country entered into technology, your Bank has a
 state-of-the-art technology. All departments within the Bank use IT to
 deliver superior products and services to the customers.
 Your Bank has adopted modern technology and applies best banking
 practices in the field of governance frameworks - to ensure that it
 renders the high standards of service quality and operational
 excellence and convenience to the customers. Your Bank has deployed
 ''Technology'' as a Strategic Business enabler - to build a distinct
 competitive advantage and to achieve superior standards of Customer
 Service. The technology architecture and the IT Outsourcing structure
 has enabled your Bank to achieve best standards of Customer Service at
 comparatively lower cost structures.
 KVB is moving towards service oriented architecture by implementing
 Enterprise Service Bus (ESB), which is a Web- services capable
 infrastructure that supports intelligently directed communication and
 mediated relationships among loosely coupled and decoupled business
 components. The service oriented architecture will help your Bank''s
 large and e-commerce firms who are technology-driven or require time
 sensitive processing to consume your Bank''s ESB Services for their
 payment and receivables.
 With a view to support new and innovative methods for ensuring customer
 delight, your Bank has been upgrading various systems which are already
 in place as also implemented new systems and platforms. Your Bank has
 augmented direct channels infrastructure and further embarked on
 upgrading its core banking systems. To ensure highly resilient IT
 infrastructure and its optimum utilization, the Bank has implemented
 virtualization in its data centres which has reduced its carbon
 Foreign Exchange earnings and outgo
 Foreign exchange earnings and outgo are part of the normal banking
 operations. Through its export financing operations, the Bank supports
 and encourages the country''s export efforts.
 Corporate Social Responsibility (CSR)
 Your Bank always desired to play a proactive role in societal
 development with an intention to bring positive change in the lives of
 many. As a responsible Corporate Citizen, your Bank has been supporting
 various philanthropic activities by making donations to such
 initiatives. Your Bank made contribution in areas of education, sports,
 healthcare and community welfare etc.
 Statutory disclosures with respect to the CSR Committee and an Annual
 Report on CSR Activities forms part of this report as Annexure 2.
 Your Bank donated a sum of Rs. 2 cr to the Tamil Nadu Chief Minister''s
 Relief Fund when Chennai, Kancheepuram and Cuddalore districts of Tamil
 Nadu were flooded during the heavy rains in November - December 2015.
 The donation was handed over in person to the Hon''ble Chief Minister of
 Tamil Nadu by MD & CEO on behalf of the Bank.
 Extract of Annual Return
 Extract of Annual Return as at March 31, 2016 in Form MGT 9 pursuant to
 sub-section 3 (a) of Sec 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 is annexed as Annexure 3 to this report.
 Board of Directors
 In terms of Sec 152 of the Companies Act, 2013, Non-Executive
 Non-Independent Directors Shri A J Suriyanarayana and Shri M K
 Venkatesan, retire by rotation and being eligible offer themselves for
 re-election at the ensuing Annual General Meeting (AGM).
 Shri B Swaminathan, Director of the Bank was appointed as the Part-time
 Chairman of the Bank in the Board meeting held on 23.11.2015. RBI has
 accorded approval for the appointment for a period three years
 effective from the date of his taking charge as the Part-time Chairman.
 Shri B Swaminathan took charge as the Chairman of the Bank on
 20.01.2016. The appointment of the Chairman is placed as an agenda item
 in the notice of the ensuing AGM.
 During the year under report Shri M V Srinivasamoorthi was appointed as
 an Additional Director of the Bank with effect from 27.08.2015 to hold
 office as Non-Executive Non-Independent Director. Shri M V
 Srinivasamoorthi, will hold office as Additional Director upto the date
 of ensuing AGM. He has expressed his willingness to seek election as
 Non-Executive Non-Independent Director at the ensuing AGM.
 Smt CA K L Vijayalakshmi, Director was appointed as a Non- Executive
 Non-Independent Director at the 96th AGM held on 22.07.2015. Board in
 the meeting held on 26th May, 2016, re- classified her as a
 Non-Executive Independent Director after obtaining confirmation from
 her under Sec 149 (6) of the Companies Act, 2013 and SEBI (Listing
 Obligations and Disclosure Requirements) Regulations, 2015, confirming
 that she meets the criteria of independence. It is proposed to appoint
 Smt CA K L Vijyalakshmi as an Independent Director for a period of
 three years. Your Bank has received a letter from her indicating her
 willingness to seek election as Non-Executive Independent Director at
 the ensuing AGM.
 Dr. K S Ravichandran, was co-opted as an Additional Director in the
 Board Meeting held on 26th May 2016. He will hold office as Additional
 Director upto the date of the ensuing AGM. In terms of Section 149 of
 the Companies Act, 2013 and the Listing Regulations, a Declaration has
 been obtained from him stating that he meets the criteria of
 independence. He has signified his willingness to seek election as
 Non-Executive Independent Director at the ensuing AGM. It is proposed
 to appoint Dr. K S Ravichandran as an Independent Director for a period
 of three years.
 The relevant details including profile of the Directors and Additional
 Directors who are seeking election / re-election at this Annual General
 Meeting are furnished separately in the Notice of the AGM.
 Shri K P Kumar, Part - time Chairman of the Bank demitted office
 consequent to the completion of his two year tenure ended on
 Board places on record its appreciation for the valuable services
 rendered by Shri K P Kumar during his tenure.
 Declaration by Independent Directors
 The Bank has received necessary declaration from each Independent
 Director under Sec 149 (7) of the Companies Act, 2013 and SEBI (Listing
 Obligations and Disclosure Requirements) Regulations, 2015 (Listing
 Regulations) that they meet the criteria of independence laid down in
 the Companies Act, 2013 and Listing Regulations.
 As required by the provisions of Sec 197 (12) of the Companies Act,
 2013, read with Rule 5 (2) of the Companies (Appointment & Remuneration
 of Managerial Personnel) Rules, 2014, the names and other particulars
 of the employees who were in receipt of remuneration not less than
 sixty lakhs rupees for FY16 are set out in this report.
 The ratio of remuneration of each director to the median employees
 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 4.
 Confirmation as to Compliance of applicable laws
 It is hereby confirmed that the Bank has proper systems in place to
 ensure compliance of all laws applicable to the Bank.
 Corporate Governance
 A separate section on Corporate Governance standards followed by your
 Bank and the relevant disclosures as stipulated under SEBI (Listing
 Obligations and Disclosure Requirements) Regulations, 2015 and
 Companies Act, 2013 and the rules made thereunder is enclosed as an
 annexure to this report.
 A certificate from Shri CS S. Solaiyappan, Practicing Company
 Secretary, confirming compliance to the conditions of Corporate
 Governance as stipulated under SEBI (Listing Obligations and Disclosure
 Requirements) Regulations, 2015, is annexed to this report.
 Directors'' Responsibility Statement
 Pursuant to Sec 134(5) of the Companies Act, 2013 with respect to the
 Directors'' Responsibility Statement, it is hereby confirmed that
 (a) In the preparation of the annual accounts, the applicable
 accounting standards had been followed along with proper explanation
 relating to material departures;
 (b) The directors had selected such accounting policies and applied
 them consistently and made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the bank at the end of the financial year and of the profit and loss
 of the bank for that period;
 (c) The directors had taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 2013 for safeguarding the assets of
 the bank and for preventing and detecting fraud and other
 (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.
 (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 received by the Bank in 2015-16
 1.  KVB received Best Bank Award for Electronic Payment Systems among
 Small Bank for the year 2014-15 by The Institute for Development and
 Research in Banking Technology, Hyderabad (IDRBT). The award was
 received from the hands of Hon''ble RBI Governor Shri. Raghuram Rajan,
 on 23rd October 2015 in the IDRBT- Banking Technology Excellence Awards
 function held at Hyderabad.  Your Bank is receiving the IDRBT award for
 the seventh consecutive year.
 2.  Your Bank received the ABP News BFSI Best Bank (Private Sector)
 3.  KVB was awarded Best Contactless Payments award by Elets
 Technomedia Pvt Ltd. in the Financial Inclusion & Payments Systems
 4.  KVB received Best MSME Bank award under Emerging Banks category
 in the MSME Banking Excellence Awards 2015 by the CIMSME (Chamber of
 Indian Micro Small and Medium Enterprise).
 5.  KVB was awarded  ATM Net work- Runner up under Small Banks award
 by National Payment Corporation of India.
 6.  KVB bagged twin awards - the Best Contactless Innovation of the
 Year 2016 for Smart City Cards and also Best Innovative End-to-End POS
 Technology Solution for the KVB Green POS in the End-to-End POS
 Technology Solution category at the Kamikaze B2B Awards and Customer
 Fest 2016.
 7.  KVB received Best Contactless Payments award in the Finoviti 2016
 Conference and Awards conducted by Banking Frontiers.
 The Board of Directors places on record its sincere thanks to the
 Government of India, Reserve Bank of India, various State Governments
 and regulatory authorities in India for their valuable guidance,
 support and co-operation. The Board also acknowledges with gratitude
 the co-operation and support received from various State Governments,
 Stock Exchanges, rating agencies and other banking/financial
 The Board takes this opportunity to place on record its deep sense of
 gratitude to its loyal shareholders for extending their support during
 the year and looks forward to their continued association in the years
 The Board thanks the valued customers for their goodwill, patronage and
 continued support and looks forward to their continued patronage in
 scaling greater heights.
 During the fiscal the Bank has received various recognitions and
 accolades for its excellence in the Banking domain. The Board is
 thankful to all such organisations and agencies for formally
 recognising the Bank''s efforts.
 The Board appreciates the sincere and dedicated services displayed by
 its entire staff and highly values their commitment in improving the
 Bank''s performance.
                        For and on behalf of the Board of Directors, 
 Place: Karur                                        B. Swaminathan
 Date : 09.06.2016                                         Chairman
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