The Directors of your Bank have great pleasure in presenting this 85th
Annual Report on the business and operations of your Bank together with
the Audited Accounts for the year ended 31st March, 2012 (FY
1. FINANCIAL PERFORMANCE
The highlights of the financial performance of your Bank for the year
ended 31st March, 2012 are as under:
(Rs. in crores)
For the year ended
31st March 2012 31st March 2011
Total Deposits 14,114.14 11,149.51
Total Advances 10,188.68 8,094.42
Investments 4,395.12 3,518.85
Total Income 1,677.18 1,201.85
Operating profit 235.44 273.86
Provisions and contingencies 128.42 172.72
Net Profit 107.02 101.14
Your bank continued to register good growth in business, comparing very
favorably in many respects with the industry. The Bank achieved total
business of Rs. 24302.82 Crores in fY 2011-2012 a growth of 26% over Rs.
19243.96 Crores in FY 2010-2011.
Deposits grew 27%, from Rs. 11149.51 Crores as at 31st March 2011 to Rs.
14114.14 Crores as at 31st March 2012, and total advances expanded by
26%, from Rs. 8094.42 Crores to Rs. 10188.68 Crores in FY 2011-2012. Of
this, lending to priority sector rose from Rs. 2635.22 Crores in the
previous year to Rs. 3525.03 Crores as on 31st March 2012. Agricultural
advances increased to Rs. 2099.42 Crores from Rs. 1199.35 Crores and
advances to weaker section recorded a significant growth from Rs. 736.02
Crores to Rs. 1020.63 Crores.
The Bank''s exposures to sensitive sectors including Real Estate and
Capital Market were maintained well below the regulatory limits.
As at the end of the year under review, the total investments of the
Bank stood at Rs. 4395.12 Cr as against Rs. 3518.85 Cr as on 31st March
Your Bank''s Treasury continues to focus on sound Asset-Liability
Management and on servicing clients with appropriate treasury products,
market risk was managed well in a systematic way in a challenging year
when interest rates were constantly rising.
The Bank posted an operating profit of Rs. 235.44 Crores in FY 2011-2012
against Rs. 273.86 Crores in the previous year FY 2010-2011. The net
profit for the year, after provisions and taxes, rose to Rs. 107.02
Crores as against Rs. 101.14 Crores recorded in 2010-2011 registering a
growth of 6%. This is the second consecutive year when the bank''s
profit grew above Rs. 100 Cr, after continuing investments in I.T, Staff
and Infrastructure. Several branches were refurbished, new products
launched with improved I.T capabilities and staff hiring continued, all
of which will address fundamental issues of productivity and
competitiveness in the ensuing years.
Particulars (Rs. in Crores)
For the year ended
Profit brought forward 0.25 0.16
Amount available for
appropriation 107.37 101.30
Statutory Reserve 28.00 26.00
Capital Reserve 0.85 1.27
Other Reserve 32.25 40.25
Transfer to Special Reserve
U/s 36(1) (viii) of the IT Act, 1961. 6.50 5.00
Proposed Dividend 34.14 24.38
Corporate Dividend Tax 5.54 4.15
Balance of Profit carried forward 0.09 0.25
Your Board of Directors are pleased to recommend a dividend of Rs. 3.50
(35%) per share for the year ended 31st March, 2012 as against Rs. 2.50
(25%) per share for previous year ended 31st March, 2011. The total out
go in the form of dividend, including taxes, amount to Rs. 39.68 Crores
against Rs. 28.53 Cr in the previous year.
5. EPS / BOOK VALUE
Earnings Per Share was sustained at Rs. 10.97 for the year ended 31st
March, 2012 against Rs. 10.37 for the previous year.
Book Value of the share, after reckoning payment of dividend, grew to Rs.
88.43 as on 31st March, 2012 as compared to Rs. 82.38 as on 31st March,
6. NET OWNED FUNDS / CAPITAL ADEQUACY RATIO
Net Owned Funds (NOF) of the Bank increased from Rs. 811.70 Crores as at
the end of FY 2010-2011 to Rs. 879.14. Crores as at the end of FY
2011-2012, reflecting a growth of 8.31%.
The Capital Adequacy Ratio (CAR) as on 31st March 2012 is 13.10%. The
bank has been consistently maintaining Capital Adequacy Ratio well
above the regulatory minimum of 9% stipulated by the Reserve Bank of
The Tier-I and Tier-II components of Capital Adequacy Ratio were
comfortable at 8.86% and 4.24% respectively, against 10.78% and 2.41%
respectively as at 31st March 2011. The increase in Tier II bank
follows new issuance of subordinated debt of Rs. 250 Cores in February
7. NON PERFORMING ASSETS (NPA''s)
Your bank continues to address the NPA problem through a combination of
process improvement, technology solutions for early alerts and strict
credit delivery. During FY 2011-12, macro-economic conditions affected
some of our old clients with resultant stress on NPAs, but the bank is
supporting customers where the issues are temporary and not structural,
and is confident that the level of NPAs will come down significantly no
sooner the market conditions revive. There have been no concentration
issues either and stress has been fairly dispersed. Some of our
exposure in infrastructure, textile and real estate sector got affected
during the year under review. Consequently, our bank Gross & Net NPA
increased to 2.98% & 1.74% as on 31st March 2012 as against 1.93% &
0.90% as on 31st March 2011, strong recovery efforts have also yielded
Rs. 133.03 Crores during the year.
The bank has already initiated remedial measures to improve the
performance during FY 2012-13 to arrest slippages and improve recovery,
and is confident that the systemic changes initiated by the Board will
ensure repeat of the success of the previous year with a much stronger
portfolio at the end of FY 2013.
8. BRANCH AND ATM NETWORK
The bank has a network of 290 branches, 1 satellite branch and 10
extension counters, spread over 15 states and the union territory of
Pondicherry. The Bank''s focus is on ensuring faster technology driven
service, as it prepares to meet the challenges of the future, but
whilst to continue to emphasize on personalized contact and service,
its traditional values. Your bank has a strong and wide base in the
State of Tamil Nadu, one of the progressive States in the country,
which has a vibrant industrial environment but is emerging strong in
the states like Andhra Pradesh, Karnataka, Maharashtra and Gujarat
where its traditional presence in strong clusters has contributed
immensely to the economic growth of its customers and the areas it was
present. Your bank has been focusing on retail banking, corporate
banking and banc assurance, by rendering high-tech services.
The Bank has an ATM network of 541, in vital / major locations for
better service to our customers; customers can access over 83000 ATMs
across the country. Bank continues to invest in expanding the network
For better span of control and speed to market, 4 Zonal Offices have
been replaced with 8 Regional Offices.
9. FINANCIAL INCLUSION
Your Bank continues to play an active role in the Financial Inclusion
campaign, extending basic banking services to the unorganized sectors
of the economy, through Business Facilitator and Business Correspondent
model. During FY 2011-12, the bank has implemented the Financial
Inclusion plan in 32 villages besides the 18 villages covered during
last year, thus covering all the 50 villages allotted by SLBC with
population of over 2000 in Tamilnadu. The Bank has opened 25818
no-frill accounts to improve its penetration in rural areas.
10. INTERNATIONAL BUSINESS
The global economic issues have had their impact on India''s exports.
This made it challenging to achieve our stated purpose of expanding the
exports business. During the year the Bank achieved Foreign Exchange
business Turnover of Rs. 4358.73 Crore as against the previous year
Turnover of 4900.58 Crore. Lending to Export Sector however decreased
from Rs. 215.43 Crore to Rs. 175.44 Crore. The financial year 2012-13 will
see a refreshed approach to service clients on the export front and to
substantially increase the Foreign Exchange Volume. The bank is taking
various initiatives including staff training and line of credit, to
address the needs of the export fraternity in the areas it operates and
is confident that this will be a growth area in the next few years.
11. LISTING AGREEMENT WITH STOCK EXCHANGE
The Equity Shares of the bank are listed on the National Stock Exchange
of India Ltd, Mumbai. The Bank also made necessary arrangement for
listing of our equity shares with Bombay Stock Exchange, Mumbai which
will enhance the liquidity of our shares and investors get additional
forum to purchase or sell the shares through over 13,300 trading
terminals spread across 295 cities and will add visibility to the
global investors through BSE Web Site - the most widely viewed exchange
in the world.
12. ALIGNING TECHNOLOGY WITH BUSINESS OBJECTIVE
Leveraging on the robust technology platform & Core Banking Solution,
your bank has introduced the following Technology Products, Delivery
Channels and Services to serve our wide spectrum of customers, cutting
across geographical location, age etc.
1. Increased the ATM network from 250 to 541.
2. Introduced flexible retail term deposit product (Lakshmi Flexi
Deposit) and Current Account Product (Lakshmi Current Flexi Account)
3. Deployed point of sales devices across various locations.
4. Enabled on line Term Deposit opening in internet banking.
5. Introduced Instant VISA Debit Cards, VISA Gold Cards, Rupay Cards,
Prepaid and Gift Cards.
6. Introduced centralized issue of personalized cheque book.
7. Enabled interbank fund transfer through bank
Acknowledging the progress made in implementation and promotion of
alternate delivery channels and electronic payment systems your bank
has been awarded with Best Bank award among small banks for
''Electronic Payment Systems'' by the Institute for Development and
Research in Banking Technology (IDRBT).
National Payment Corporation of India (NPCI), in recognition of
Bank''s pioneering efforts for implementing Cheque Truncation System
in Chennai, has included your Bank in the list of pilot Banks for
implementation of Cheque Truncation System (CTS) in Bangalore and
Your Bank has embarked on the following strategic initiative in tune
with the business objectives of the Bank.
- Your Bank has decided to implement a comprehensive system for
Business Process Management (BPM) and Document Management System (DMS)
to centralize and manage back office operations like new account
opening process, service request etc. The ultimate objective is to
streamline business processes and to provide the same level of fast,
error-free and quality service across the bank.
- A Human Resource Management System (HRMS) project, which will aid
better manpower planning, on boarding, motivation and monitoring of our
Human Resource is under implementation.
- Enterprise wide General Ledger was implemented to have better
control over fixed assets and Budget Management.
The bank''s aggressive investment behind technology will ensure that
the bank is poised to raise the bar on its products and services
addressing the needs of customers of all ages, comparable to the best
in the industry.
13. WEALTH MANAGEMENT / PARABANKING ACTIVITIES
i. Life Insurance: Bank has entered into a tie up with the Giant in
the Life Insurance sector - LIC of India for soliciting Life Insurance
policies for our customers. All the products of LIC are available
through our branches. It opens up a reliable and trustworthy investment
avenue, making LVB a one stop shop for all financial requirements.
ii. General Insurance: Bank has tie-up with M/s. Bajaj Allianz General
Insurance Company to market the General Insurance products.
iii. Mutual Funds & PMS: The Bank is presently having tie-up with
thirteen leading Asset Management Companies for promoting various
Mutual Fund schemes. In addition, we are promoting Port Folio
Management Services (PMS) through UTI, Reliance and Sundaram Asset
iv. Money Transfer through Branch Channels: Foreign inward remittances
arrangement with M/s. Weizmann Forex Ltd. for extending Western Union
Money Transfer facility, in addition to this, the bank has also tied-up
with M/s. UAE Exchange & Financial Services Ltd., for offering Global
Money Transfer services through Xpress Money and Money gram.
v. Money Transfer through Direct Remittances: Tied up with Times of
Money - Remit 2 India. & Al-ahalia for Inward remittance from Abroad
which enables the NRIs to directly remit the amount to their account /
vi. Investment & Infrastructure Bonds: Bank empanelled with M/s Bajaj
Capital Ltd. for promoting Investment & Infrastructure Bonds.
vii. PAN Card Services: Bank has tied up with M/s. UTI Infrastructure &
Technology Services Ltd., (UTIITSL) as PAN Service Agent (PSA) for
collecting the PAN Application across the country through Branches.
viii. Depository Participant Services: Registered as Depository
Participant with NSDL and with necessary clearances, this product is
offered to our customers.
ix. New Pension System (NPS): Bank has registered with PFRDA and
NSDL-CRA as Point of Presence (PoP) for offering NPS services for all
citizens except Government Employees already covered by NPS.
x. ASBA: As Bankers to the issue, the Bank can now receive
applications under ASBA mode thus enabling the investors to earn
interest till allotment of securities.
xi. POS: The bank is realigning and retraining the branch staff to
focus on a fuller range of services that customers expect and is
improving capabilities to design specific products for specific
category of clients.
14. RISK MANAGEMENT
Risk and Return are two sides of the same coin in the activities of any
bank. Risk Management is critical in the way modern business is
operational because of dynamic business environment to which business
is exposed. It is not only a requirement under several voluntary codes
and statutes but also make business sense to identify the probability
of not achieving strategic and business goals. Risk Management has to
be embedded in business processes to ensure that it is being practiced
and made part of the culture of the organization. With this in mind,
the bank has established systems and policies ensuring an ongoing
assessment of relevant risk types on an individual basis and in the
aggregate as well.
The Board of Directors effectively monitors the risk management. A
Board Level Committee oversees the implementation of Credit risk,
Market Risk and Operational Risk policy prescriptions. The Asset
Liability Management Committee (ALCO) looks into the management of
Liquidity and Market risks and ensure adherence to prudential limits.
At Executive Level also a committee consisting of Top Executives
reviews periodically Liquidity Risk, Credit Risk & Market risk to take
stock of the current situation. At the organization level an Integrated
Risk Management Department functions specifically to identify measure,
monitor and reduce risk; optimize returns and assess the required
capital level. Bank has already automated the process of capital
calculation and Base rate as per RBI Guidelines. Bank has a robust
credit risk assessment system to ascribe borrower risk grades. This
facilitates data collection and analysis for moving towards Advanced
Approaches. Bank has in place a well-defined frame work for managing
market Risk .Basic Indicator Approach has been adopted for computation
of capital charge for Operational Risk.
The Bank has since, migrated to Basel II -New Capital Adequacy
Framework (NCAP) - from March 2009 and is preparing ICAAP document to
assess its inherent risk and capital requirements. Bank uses Stress
Testing and scenario Analysis in various risks as required under Pillar
II for enhancing risk assessment and to provide the bank a better
understanding of the likely impact even in extreme circumstances.
Technology is extensively used in measuring and discussing market risk
using statistical tools including stress testing.
15. INTERNAL CONTROL SYSTEMS
The Bank has put in place well articulated internal control measures in
tune with the complexity of business operations, organization''s size
and supervisory compliance standards. There is continuous review of the
efficacy of the systems. and the following Audit & Inspections are
- Regular comprehensive transaction based inspection by trained
internal inspector of branches.
- Risk Based internal Audit to measure the risk in branches and work
out the mitigating techniques.
- Pre-disbursement credit audit.
- Concurrent Audit by Empanelled Chartered Accountant Firms.
- Information System Audit by Specialized and trained inspectors.
- Statutory Audit of branches and Controlling offices by Chartered
Accountant Firms in terms of the guidelines of the Reserve Bank of
The Inspection Committee of the Executives review the inspection of
branches carried out by the internal inspectors. The Audit Committee
of the Board (ACB) is supervising the entire audit functions of the
Bank and the compliance thereof. Budgets are agreed on various
parameters including Revenue and Costs, and progress measured for
appropriate mid-term corrective measures at the Board Level.
16. HUMAN RESOURCES
Staff strength of the Bank was augmented during the year 2011-12 with
recruitment of 6 Executives, 64 Officers, 430 Clerks, 82 Sub Staff and
246 Sales personnel, a significant scale-up. Promotion to higher scale
and cadre rolled out and 371 staff got promoted. Total number of
employees as on 31.03.2012 was 3054 as against 2626 as on 31.03.2011.
Business per employee had gone up from Rs. 7.19 crores as on 31.03.2011
to Rs. 7.99 crores as on 31.03.2012, notwithstanding an increase in Human
Resources during the financial year 2011-12.
The bank''s focus on training the internal resources on a continual
basis gained momentum with introduction of online e-learning duly
leveraging technology. Bank has trained considerable number of
resources in offsite training programmes in reputed institutions such
as ISB (Hyd), COD, ASCI, CAB, SIBTC, IDRBT, NIBM & FEDAI.
Industrial Relations were cordial during the year.
17. SOCIAL INITIATIVES
Your bank continues its tradition of being active in supporting worthy
social causes. In FY 2011-12, your bank has contributed to the
following social causes:
i) Assisted Government Higher Secondary Schools at Uppidamangalam and
Velliyanai for Construction and Renovating of toilets through M/s.
Rotary Club of Karur Angels.
ii) Contributed for Purchase of New Ambulance to Inner Wheel Club,
iii) Donated a new PC to Madurai Jesuit Province, Dindigul.
iv) Funded to Nanjundeswara Seva Trust, Bangalore to carry out various
v) Donated used furniture and photo copier to Govt. Higher Secondary
vi) Donated to Naradha Gana Sabha, Karur for constructing and
renovating Sabha Auditorium in order to conduct cultural performances
to motivate the youngsters.
vii) Donated to Karnataka Arya Vysya Charitable Trust for scholarships
for students to pursue their education.
viii) Your bank continues to support the Rotary Medical Centre, a
Platinum Jubillee initiative of the bank, managed by the Rotary Club of
18. ISSUE OF TIER II CAPITAL
The Bank issued 11.4% Unsecured Redeemable Non-Convertible Subordinated
Tier II Bonds Series VII in the year 2011-2012 for Rs. 250 Crores. The
issue was fully subscribed. The issue was rated ''BWR A'' by
Brickwork Ratings India Pvt Ltd and ''A-'' (Single A-) by Credit
Analysis and Research Ltd (CARE). The issue opened on 03rd January 2012
and closed on 03rd February 2012 successfully. This is the first large
issue your bank has made and the wider participation of banks and
insurance companies as investors reflected the confidence the market
has reposed on your bank''s long term success.
19. CORPORATE GOVERNANCE
Corporate Governance of the Bank continues to rest on the fundamental
pillar of high ethical values, designed to enhance and protect the
interest of all the stakeholders. The Bank has complied with the code
of corporate governance as enumerated in Clause 49 of the Listing
Agreement. All the Directors on the Board have executed deed of
covenant and undertaking individually in line with the recommendations
of Dr. Ganguly Committee Report.
Pursuant to Clause 49 of the Listing Agreement, a Management Discussion
and Analysis is presented in Annexure-A, Report on Board Committees is
furnished in Annexure-B. Composition of the Board of Directors together
with the attendance of Directors at various meetings of the Board, its
Committees and Annual General Meeting and the number of directorships
held by them along with the details of Audit Committee and Share
Transfer & Investors'' Grievances Committee are furnished in
Annexure-C. General Shareholders'' information is furnished in
20. CHANGES IN THE BOARD OF DIRECTORS
Mr. S.G. Prabhakaran, Mr. S. Dattathreyan and Mr. K. Ravindrakumar are
the directors retiring by rotation at the ensuing Annual General
Meeting and being eligible, offer themselves for reappointment.
Mr. R. Sharan and Mr. A. Satish Kumar were appointed as Additional
Directors on the Board with effect from 30.05.2012 pursuant to the
provisions of Section 260 of the Companies Act, 1956.
21. DIRECTORS'' RESPONSIBILITY STATEMENT PURSUANT TO SEC 217 (2AA) OF
THE COMPANIES ACT, 1956
The Board of Directors of your Bank confirms that in the preparation of
the annual accounts for the year ended March 31, 2012:
- The applicable accounting standards have been followed along with
proper explanation relating to material departures, if any.
- The accounting policies framed in accordance with the guidelines of
the Reserve Bank of India were applied consistently.
- Reasonable and prudent judgment and estimates were made wherever
required so as to present a true and fair view of the state of affairs
of the Bank as at the end of the financial year and the profit of the
Bank for the year ended on March 31, 2012.
- Proper and sufficient care was taken for the maintenance of
adequate accounting records in accordance with the provisions of
applicable laws governing banks in India for safeguarding the assets of
the bank and for preventing and detecting fraud and other
- Accounts have been prepared on a ''going concern'' basis.
22. EMPLOYEES STOCK OPTION SCHEME
In the year 2010, the shareholders of the Bank have approved the issue
of shares through Stock Option Scheme. The necessary statutory
disclosures regarding ESOS as per Clause 12 and Certificate from
Auditors as per Clause 14 of Securities and Exchange Board of India
(Employees Stock Option Scheme and Employees Stock Purchase Scheme)
Guidelines, 1999 has been furnished as part of this report.
23. STATUTORY DISCLOSURE
1. The provisions of Section 217(1) (e) of the Companies Act, 1956
relating to conservation of energy and technology absorption do not
apply to your Bank. The Bank has, however, used Information Technology
extensively in its operations.
2. The Bank continued to encourage the country''s exports and will
endeavor to enlarge its export financing.
3. The information required under Section 217(2A) of the Companies
Act, 1956 and the rules made there under, is annexed elsewhere in this
4. The report on the Corporate Governance is annexed and forms part of
24. FY 2012-13 - AN OUTLOOK
The Union Budget 2012-13 indicates a subdued yet favorable
macroeconomic outlook in terms of real GDP growth (7.6 per cent),
inflation scenario (6.4 per cent) and expected moderation in current
account deficit. The budgetary estimates for 2012-13 indicate the
commitment to carry forward fiscal consolidation. The RD, as a ratio to
GDP, is budgeted to decline by 1 percentage point to 3.4 per cent of
GDP in 2012-13. Similarly, the GFD-GDP ratio is budgeted to decline to
5.1 per cent in 2012-13 from the level of 5.9 per cent in the previous
The macro conditions will continue to be relatively challenging and in
this context, your bank''s focus will continue to be on consistent
profitable growth, whilst investing behind network of new branches and
upscaling talent and productivity. The bank is focused on sustainable
growth, influencing employee productivity up to match competition and
to strengthen the credit portfolio in a manner that fundamentally
addresses near term challenges and long term strategy. We will continue
to expand the branch network and technology investments addressing
products and processes will continue aggressively. System-based
identification of NPAs will be introduced and process centralization
will be carried out, leaving branches to focus more on marketing and
client service. Retail credit will drive growth in advances. The
strategy is to continue the trend of growth in business, strengthen
portfolio, drive employee productivity, invest behind I.T and yet
maintain growth in profit. FY 2013 should enable the bank to
consolidate the efforts of transformation and mark a sharp change
towards a higher trajectory of growth. To this end, the Bank will also
explore raising additional capital under TIER I or TIER II with
appropriate approvals of the shareholders and regulators.
The Statutory audit of the Bank was carried out by M/s. Sagar &
Associates, Chartered Accountants, Hyderabad whose report is annexed.
M/s. Sagar & Associates, Chartered Accountants, Statutory Auditors of
the Bank will retire on the conclusion of this Annual General Meeting
and are eligible for re-appointment, subject to the approval of Reserve
Bank of India and the shareholders. Resolution for their re-appointment
is placed before the shareholders for approval.
As regards the auditor''s qualification on reconciliation of accounts
with other banks in Note No.1 in Schedule 18 to the annual accounts,
reconciliation of some of these accounts is in progress and the impact,
if any on the financial results is not material.
Your Directors wish to place on record their earnest appreciation of
the support and guidance of all the shareholders, investors and
customers, the Reserve Bank of India, SEBI, NSE, Department of Income
tax and other regulatory agencies.
Your Directors would also like to express their sincere appreciation of
the contribution made by the Management and Staffs including the
Employees Union and Officers'' Association and look forward to a more
evolved relationship as steps are being taken to re-orient the bank for
For and on behalf of the Board of Directors
Place : Chennai (K.R. PRADEEP)
Date : 31.07.2012 Chairman of the Meeting