The South Indian Bank Limited (Rs.SIBRs. or the Rs.BankRs.) was
incorporated on January 29, 1929 at Thrissur as a private limited
company and was later converted into a public limited company on August
11, 1939. SIB has a network of 842 branches in India and provides
retail and corporate banking, Para banking activities such as debit
card, third party product distribution, in addition to Treasury and
Foreign Exchange Business. SIB is governed by Banking Regulation Act,
1949 and other applicable Acts/Regulations. Its shares are listed in
Bombay Stock Exchange and National Stock Exchange. The bank has
de-listed its shares from the Cochin Stock Exchange during the year.
As at As at
March 31, 2015 March 31,2014
SCHEDULE 1 - CONTINGENT LIABILITIES
(Refer Schedule 17(11))
I. Claims against the Bank not acknowledged as debts:
(i) Service Tax disputes 211,117 21,600
(ii) Others 71,606 62,542
II. Liability on account of outstanding Forward
Exchange Contracts1 249,159,994 169,284,431
III. Guarantees given on behalf of
constituents in India 14,795,637 11,746,807
IV Acceptances, endorsements and
other obligations 7,522,969 10,234,262
V. Other items for which the bank is contingently liable:
(i) Capital Commitments 17,580 -
(ii) Transfers to Depositor Education
and Awareness Fund (DEAF) 421,800 -
TOTAL 272,200,703 191,349,642
1 Represents notional amount
The bank uses forward exchange contracts to hedge against its foreign
currency exposures relating to the underlying transactions and firm
commitments. The bank has not entered into any derivative instruments
for trading / speculative purposes either in Foreign Exchange or
domestic treasury operations. Bank does not have any Forward Rate
Agreement or Interest Rate Swaps.
Item (ii) above includes Rs.82.07 crores in respect of sale of certain
non-performing financial assets for which, the Bank has, in terms of
RBI Circular DBOD.BP.BC.No.9/21.04.048/2014-15 on Prudential norms on
income recognition, asset classification and provisioning pertaining to
advances dated July 1, 2014 spread the net short fall in recovery of
net book value of Rs. 8.32 crores included in item (v) above, over a
period of two years. Consequently an amount of Rs. 1.66 crores has been
charged to the profit and loss account during the year ended March 31,
2015 and the unamortized balance as at March 31,2015 amounts to Rs. 6.66
crores. The shortfall in respect of sale of standard financial assets
amounting to Rs. 29.42 crores has been debited to the profit and loss
3. Penalties levied by the Reserve Bank of India
The penalty imposed by RBI during the year ended March 31, 2015 was
Rs.52,550/- (Previous year Rs.47,830/-)
4. Draw Down from Reserves
a) In accordance with the requirements of Schedule II of the Companies
Act, 2013, the Bank has re-assessed the useful lives of the fixed
assets and an amount of Rs.9.38 crores (net of taxes) has been drawn from
the Revenue and Other Reserve in respect of assets whose useful life is
nil as at April 1, 2014.
b) In accordance with Reserve Bank of India guidelines vide circular
No. DBOD. No. BP BC. 77/ 21.04.018/ 2013-14 dated December 20, 2013,
the Bank has created Deferred Tax Liability amounting to Rs.20.49 crore
during the previous year on the Special Reserve under Section 36 (i)
(viii) of Income Tax Act. Out of the total DTL created an amount of
Rs.14.71 crore pertaining to the Special Reserve outstanding as at March
31,2013 has been drawn from the General Reserve as permitted.
c) During the previous year, in accordance with the exemption from the
provisions of Section 13 of Banking Regulation Act, 1949 granted vide
Central Government Notification No. S.O.214 (E) dated January 21,2014,
the bank had appropriated an amount of Rs.4.49 crore from Share Premium
Account towards expenditure incurred in connection with Qualified
Institutional Placement Issue as per the provisions of Section 78 of
the Companies Act, 1956. There is no such transfer in the current year.
B: OTHER DISCLOSURES
1. Fixed Assets
Premises of the Bank were revalued as on March 31, 2011 in accordance
with the policy formulated by the Bank based on RBI guidelines by
professionally qualified independent valuers empanelled by the Bank
using the indices based on current market price. The written down value
of the premises has been increased from Rs.192.31 crore to Rs.326.18 crore
and the resultant appreciation in the value amounting to Rs. 133.87 crore
has been credited to revaluation reserve during 2010-11.
The software capitalized under Fixed Asset (Net of depreciation) was
Rs.13.34 crores. (PY Nil) as at March 31, 2015.
5. Related party disclosure:
a. Key Management Personnel
Sri V. G. Mathew, Managing Director & Chief Executive Officer.
(01.10.2014 to 31.03.2015) Dr. V. A. Joseph, Managing Director & Chief
Executive Officer. (01.04.2014 to 30.09.2014) Sri C. P. Gireesh, Chief
Financial Officer (01.04.2014 to 31.03.2015)
Sri Jimmy Mathew, Company Secretary (01.04.2014 to 31.03.2015)
6. Employee Benefits
a) Retirement Benefits
The bank has recognized the following amounts in the Profit and Loss
account towards employee benefits as under:
The employee benefits on account of pension, gratuity and Leave have
been ascertained on actuarial valuation in accordance with Accounting
Standard - 15 (revised).
During the year ended 31.03.201 1, the Bank had re-opened the pension
option for those employees who had joined the Bank prior to 29th
September 1995 and had not opted for the pension scheme earlier.
Consequently, 2217 employees had exercised their option for the pension
scheme and the bank has incurred an extra liability of Rs.135.13 crore.
Further, during the year ended 31.03.201 1, the limit of gratuity
payable to the employees of the bank was also enhanced from Rs.3.50 Lakhs
to Rs.10.00 Lakhs, pursuant to the amendment to the Payment of Gratuity
Act, 1972. As a result, the gratuity liability of the Bank has
increased by Rs. 21.40 crore. The extra cost of pension and gratuity to
employees works out to Rs.156.53 crore.
In terms of the requirements of the Accounting Standard (AS) 15,
Employee Benefits, the entire amount of Rs.156.53 crore is required to be
charged to the Profit and Loss account for the year ended 31.03.201 1.
However, in accordance with the circular issued by Reserve Bank of
India vide reference number DBOD.BP.BC.80/21.04.018/2010-11 dated
February 9, 2011, and made applicable to our bank vide DBOD No.BP.
BC.15896/21.04.018/2010-11 dated April 8, 2011, the Bank would amortize
the amount of Rs.156.53 crore over a period of five years. During the
current year 2014-15, bank has amortized an amount of Rs.22.49 crore
(Rs.20.41 crore towards pension and Rs.2.08 towards gratuity) to complete
the amortization. Had the above circular been not issued by the RBI,
Net profit of the Bank for the year would have been higher by Rs.14.85
crore pursuant to the application of AS 15.
9. Tier II Bonds
Lower Tier II Bonds outstanding as at March 31,2015 (included under
Schedule 14 Borrowings) is Rs.200.00 crore (Previous Year Rs. 200.00
Amount reckoned for Tier II Capital as per RBI guidelines is Rs.200.00
crore (Previous Year Rs.200.00 crore).
10. Disclosures on Remuneration
a) Information relating to the composition and mandate of the
The remuneration committee of the Board consists of three members of
which one member from Risk Management Committee of the Board facilitate
effective governance of compensation.
The roles and responsibilities of the Compensation & Remuneration
Committee are as follows:
- To oversee the framing, review and implementation of Bank''s overall
compensation structure and related polices on remuneration packages
payable to all employees and the WTDs / MD & CEO including performance
linked incentives, perquisites, stock option scheme etc., with a view
to attract, motivate and retain employees and review compensation
levels vis-a-vis other Banks and the industry in general.
- The CRC works in close coordination with the Risk Management
Committee of the Bank, in order to achieve effective alignment between
remuneration and risks. The CRC also ensures that the cost / income
ratio of the Bank supports the remuneration package consistent with
maintenance of sound capital adequacy ratio.
- With respect to the performance linked incentive schemes, the CRC is
(i) Draw up terms and conditions and approve the changes, if any, to
the performance linked incentive schemes;
(ii) Moderate the scheme on an ongoing basis depending upon the
circumstances and link the same with the recommendations of Audit
(iii) Coordinate the progress of growth of business vis -a- vis the
business parameters laid down by the Board and Audit Committee and
effect such improvements in the scheme as are considered necessary;
(iv) On completion of the year, finalize the criteria of allotment of
marks to ensure objectivity / equity.
- The CRC also functions as the Compensation Committee as prescribed
under the SEBI (Employee Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 and is empowered to formulate
detailed terms and conditions of the scheme, administer, supervise the
same and to allot shares in compliance with the guidelines and other
- To obtain necessary clearances and approvals from regulatory
authorities, appoint merchant bankers and do such other things as may
be necessary in respect of the Employees Stock Option Scheme.
- To oversee the administration of employee benefits, such as,
provident fund, pension fund, gratuity, compensation for absence on
privilege / sick / casual leave etc., which are recognized in
accordance with Accounting Standard 15 (revised) notified under Section
133 of the Companies Act, 2013 read with Rule 7 of Companies (Accounts)
- The CRC may suggest amendments to any stock option plans or incentive
plans, provided that all amendments to such plans shall be subject to
consideration and approval of the Board.
- Any other matters regarding remuneration to WTDs / MD & CEO and other
staffs of the Bank as and when permitted by the Board.
- To conduct the annual review of the Compensation Policy.
- To fulfill such other powers and duties as may be delegated to it by
b) Information relating to the design and structure of remuneration
processes and the key features and objectives of remuneration policy.
The Bank has formed the compensation policy based on the Reserve Bank
of India guidelines vide its Circular No. DBOD.
No.BC.72/29.67.001/2011-12 dt. January 13, 2012.
The fixed remuneration and other allowances including retirement
benefits of all subordinate, clerical and officers up to the rank of
General Manager (Scale VII) is governed by the industry level wage
settlement under Indian Banks Association (IBA) pattern. In respect of
officers above the cadre of General Manager, the fixed remuneration is
fixed by Board / Committee.
Further, the compensation structure for the Whole Time Directors (WTDs)
/ Managing Director & Chief Executive Officers (MD & CEO) of the bank
are subject to approval of Reserve Bank of India in terms of Section 35
B of the Banking Regulation Act, 1949. The payment of compensation also
requires approval of the shareholders of the Bank in the General
Meeting pursuant to clause 95 of Articles of Association of the Bank
read with Section 197 of the Companies Act, 2013.
c) Description of the ways in which current and future risks are taken
into account in the remuneration processes. It should include the
nature and type of the key measures used to take account of these
The Board of Directors through the CRC shall exercise oversight and
effective governance over the framing and implementation of the
Compensation Policy. Human Resource Management under the guidance of MD
& CEO shall administer the compensation and Benefit structure in line
with the best suited practices and statutory requirements as
d) Description of the ways in which the bank seeks to link performance
during a performance measurement period with levels of remuneration.
The factors taken in to account for the annual review and revision in
the variable pay and performance bonus are:
- The performance of the Bank
- The performance of the business unit
- Individual performance of the employee
- Other risk perceptions and economic considerations.
Further, the Bank has not identified any employee as risk taker for
the purpose of variable pay under this compensation policy.
e) A discussion of the bankRs.s policy on deferral and vesting of
variable remuneration and a discussion of the bankRs.s policy and
criteria for adjusting deferred remuneration before vesting and after
- Where the variable pay constitutes a substantial portion of the fixed
pay, i.e., 50% or more, an appropriate portion of the variable pay,
i.e., 40% will be deferred for over a period of 3 years.
- In case of deferral arrangements of variable pay, the deferral period
shall not be less than three years. Compensation payable under deferral
arrangements shall vest no faster than on a pro rata basis.
- The Board may adopt principles similar to that enunciated for WTDs /
CEOs, as appropriate, for variable pay-timing, mRs.alus / clawback,
guaranteed bonus and hedging.
- Employee Stock Option Scheme / Employee Stock Option Plan as may be
framed by the Board from time to time in conformity with relevant
statutory provisions and SEBI guidelines as applicable will be excluded
from the components of variable pay.
f) Description of the different forms of variable remuneration (i.e.,
cash, shares, ESOPs and other forms) that the bank utilizes and the
rationale for using these different forms.
- Variable pay means the compensation as fixed by the Board on
recommendation of the Committee, which is based on the performance
appraisal of an employee in that role, that is, how well they
accomplish their goals. It may be paid as:
I. Performance Linked Incentives to those employees who are eligible
II. Exgratia for other employees who are not eligible for Performance
III. Bonus for those staff members who are eligible for bonus under the
Payment of Bonus Act, 1965
IV. Any other incentives, by whatever name called having the features
similar to the above.
12. Credit Default Swaps: The bank has not taken any credit default
swaps during the year and the balance outstanding as at March 31, 2015
NO Contingent liability Brief Description
1 Claims not acknowledged as debts This includes liability on account
of Service tax, and other legal cases filed against the bank. The bank
is a party to various legal proceedings in the ordinary course of
business and these are contested by the Bank and are therefore
subjudice. The bank does not expect the outcome of these proceedings to
have a material adverse impact on the bankRs.s financial position.
2 Liability on account of outstanding The bank enters into foreign
exchange contracts with interbank participants on its own forward
contracts account and for its customers. Forward exchange contracts are
commitments to buy or sell foreign currency at a future date at the
3 Guarantees on behalf of constituents As a part of banking activities,
the Bank issues Letter of Guarantees on behalf of its in India
customers. Guarantees generally represent irrevocable assurances that
the bank will make payments in the event of customer failing to fulfill
its financial or performance obligations.
4 Acceptances, endorsements and As a part of banking activities, the
Bank issues documentary credit on behalf of its other obligations
customers. Documentary credits such as letters of obligations,
enhancing the credit standing of the customers of the bank which
generally represent irrevocable assurances that the bank will make
payments in the event of customer failing to fulfill its financial
5 Other items for which the bank is These include amounts which may
become payable in respect of capital commitments. contingently liable
* Also refer schedule - 12
17. Unhedged Foreign Currency Exposure :
The Bank has in place a policy on managing credit risk arising out of
unhedged foreign currency exposures of its borrowers. The objective of
this policy is to maximize the hedging on foreign currency exposures of
borrowers by reviewing their foreign currency product portfolio and
encouraging them to hedge the unhedged portion. In line with the
policy, assessment of unhedged foreign currency exposure is a part of
assessment of borrowers and is undertaken while proposing limits or at
the review stage.
Further, the Bank reviews the unhedged foreign currency exposure across
its portfolio on a periodic basis. The Bank also maintains incremental
provision towards the unhedged foreign currency exposures of its
borrowers in line with the extant RBI guidelines. The Bank has
maintained provision of Rs.15.12crores (PY Nil) and additional capital of
Rs.17.10 crores (PY Nil) on account of Unhedged Foreign Currency Exposure
of its borrowers as at March 31,2015.
19. Qualitative Disclosure around LCR
The Bank measures and monitors the LCR in line with the Reserve Bank of
IndiaRs.s circular dated June 9, 2014 on Basel III Framework on
Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk
Monitoring Tools and LCR Disclosure Standards. The LCR guidelines aim
to ensure that a bank maintains an adequate level of unencumbered High
Quality Liquid Assets (HQLAs) that can be converted into cash to meet
its liquidity needs for a 30 calendar day time horizon under a
significantly severe liquidity stress scenario. At a minimum, the stock
of liquid assets should enable the bank to survive until day 30 of the
stress scenario, by which time it is assumed that appropriate
corrective actions can be taken. Banks are required to maintain High
Quality Liquid Assets of a minimum of 100% of its Net Cash Outflows by
January 1, 2019. However, with a view to provide transition time, the
guidelines mandate a minimum requirement of 60% w.e.f. January 1, 2015
and a step up of 10% every year to reach the minimum requirement of
100% by January 1, 2019. The adequacy in the LCR maintenance is an
outcome of a conscious strategy of the Bank towards complying with LCR
mandate ahead of the stipulated time lines. The monthly average LCR of
the bank for the quarter ended March 2015 is 107.06%.
The Bank has been maintaining HQLA primarily in the form of SLR
investments over and above mandatory requirement, regulatory
dispensation allowed upto 2% of NDTL in the form of borrowing limit
available through Marginal Standing Facility (MSF) and 5% of NDTL as
Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR).
Level 1 asset contributes to 98.27% of the total high quality liquid
assets of the bank of which the major contribution is from the
The principal components of the estimated cash out flows which could
arise in next 30 days are retail deposits (47.15%) and unsecured
wholesale funding (28.84%). The bank intends to fund the short term
cash outflows from extremely liquid Government securities and funding
for estimated cash outflows considered in LCR computation substantially
flows from this source.
Bank has only forward contract as derivative exposure. The bank is
managing its liquidity from the centralized fund management cell
attached to Treasury Department, Mumbai.
20. Figures of the previous year have been regrouped to confirm to the
current year presentation wherever necessary.