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.
2. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL)
exceeded by the bank
During the year the bank had sanctioned credit limits, with the
approval of the Board, to the following borrowers which were in excess
of prudential exposure limits as indicated hereunder.
3. Penalties levied by the Reserve Bank of India
The penalty imposed by RBI during the year ended March 31, 2014 was
Rs.47,830 (Previous year Nil)
4. Provisions and Contingencies debited to Profit and Loss Account (Rs.
Break up of ''Provisions and Contingencies'' (Rs. in Crore)
shown under the head Expenditure in Profit
and Loss Account 31.03.2014 31.03.2013
Provision for NPA/NPIs 136.92 131.90
Provision for taxes (Net)* 242.41 182.97
Deferred Tax (Net) (20.97) (29.38)
Provision for Standard Assets 31.09 32.49
Provision for Restructured Advances 9.70 18.63
Provision for depreciation in the value of
investments (28.47) 11.23
Others 6.]6 (1.53)
TOTAL 376.84 346.31
* Includes Wealth Tax Rs.0.03 Crore (Rs.0.02 Crore).
5. Draw Down from Reserves
a) 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 current year on the Special Reserve under Section 36 (1)
(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.
b) In accordance with the exemption from the provisions of Section 13
of Banking Regulation Act, 1949 granted vide Central Government
Notification No. S.0.214 (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 QIP Issue as per the
provisions of Section 78 of the Companies Act, 1956.
B. OTHER DISCLOSURES
1. Fixed Assets
Premises of the Bank were revalued as on 31.03.2011 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.
Note: In FY 2012-13, the Board of Directors of the Bank passed a
resolution to not withdraw any amount in the future from the Special
Reserve created under Section 36(1)(Viii) of the Income Tax Act 1961.
Accordingly, the Bank treated the tax difference arising on account of
the special reserve as a permanent difference and reversed the deferred
tax liability previously created in March 31, 2012 in respect of such
Pursuant to a Notification No. DBOD. No. BP.BC.77 / 21.04.018 / 2013-14
dated December 20, 2013 issued by the Reserve Bank of India, all banks
are now required to create deferred tax liability in respect of the
Special Reserve created under Section 36(1)(Viii) of the Income Tax Act
1961 on a prudent basis. Accordingly, the Bank has created a deferred
tax liability of Rs.20.49 Crores as at March 31, 2014. Out of this
amount, an amount of Rs.14.71 Crores which pertains to periods prior to
March 31, 2013 has been debited to the general reserve and the amount
of Rs.5.78 Crores which pertains to the year ended March 31, 2014 has
been debited to the profit and loss account in accordance with the
accounting treatment prescribed by the Reserve Bank of India through
the above notification. Had the Bank debited the opening deferred tax
liability for financial years up to March 31, 2013 to the profit and
loss account in accordance with accounting principles generally
accepted in India, the profit after tax of the Bank for the year ended
March 31, 2014 would have been lower by Rs.14.71 Crores.
6. Related Party Disclosure:
a. Key Management Personnel
Dr. V. A. Joseph, Managing Director & Chief Executive Officer.
b. Gross Remuneration paid Rs.79.24 Lakhs (Previous year Gross Rs.70.40
Note: The remuneration to the key managerial personnel does not include
the provisions made for gratuity and leave benefits as they are
determined on an actuarial basis for the bank as a whole.
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 31.03.2011, 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 31.03.2011, 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 31.03.2011.
However, in accordance with the Circular issued by Reserve Bank of
India vide reference number DBOD.BPBC.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 2013-14, bank has amortized an amount of Rs.28.23
Crore (Rs.24.72 Crore towards pension and Rs.3.51 Crore towards gratuity)
and balance unamortized amount to be carried forward as on 31.03.2014
is Rs.22.49 Crore. Had the above circular been not issued by the RBI, Net
Profit of the Bank for the year would have been higher by Rs.18.63 Crore
pursuant to the application of AS 15 and the reserve would have been
lower by Rs.22.49 Crore.
h) Compensation for absence on Privilege / Sick / Casual Leave
The charge on account of compensation for privilege / sick / casual
leave has been actuarially determined and a charge of Rs.11.52 Crore
(Previous year Rs.10.97 Crore) has been debited to Profit and Loss
7. The Bank has not received any intimation from Suppliers regarding
their status under the Micro, Small and Medium Enterprises Development
Act, 2006 and hence disclosures, if any, relating to amounts unpaid as
at the year-end together with interest paid / payable as required under
the said Act have not been given.
8. Tier II Bonds
Lower Tier II Bonds outstanding as at March 31, 2014 is Rs.200.00 Crore
(Previous Year Rs.265.00 Crore). Amount reckoned for Tier II Capital as
per RBI guidelines is Rs.200.00 Crore (Previous Year Rs.200.00 Crore).
9. Disclosures on Remuneration
(a) Information relating to the composition and mandate of the
The Board of Directors of Bank through the Compensation and
Remuneration Committee (CRC) of the Board oversee the framing, review
and implementation of compensation policy. The CRC comprise 4
independent directors including the non-executive chairman.
CRC of the Bank as on March 31, 2014 is having the following
- Mr. Amitabha Guha, Chairman
- Mr. Paul Chalissery
- Mr. Mohan E. Alapatt
- Dr. John Joseph Alapatt
The roles and responsibilities of the CRC 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
a) Draw up terms and conditions and approve the changes, if any, to the
performance linked incentive schemes;
b) Moderate the scheme on an ongoing basis depending upon the
circumstances and link the same with the recommendations of Audit
c) 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;
d) 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) specified in the
Companies (Accounting Standards) Rules, 2006.
- 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 dtd. 13/01 /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 (MDSCEO)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 the Section 309 (1) of the Companies Act, 1956.
(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 and
a discussion of the bank''s policy on deferral and vesting of variable
remuneration and a discussion of the bank''s policy and criteria for
adjusting deferred remuneration before vesting and after vesting.
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) 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. Ex-gratia 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.
- 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, malus/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.
10. Credit Default Swaps: NIL.
11. Description of contingent liabilities
Sl. Contingent liability * Brief Description
1. Claims not acknowledged as 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
sub judice. The bank does not
expect the outcome of these proceedings
to have a material adverse
impact on the bank''s financial position.
2. Liability on account of The bank enters into foreign exchange
contracts with inter-bank participants
on its own account
contracts 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 As a part of banking activities, the Bank
issues Letter of Guarantees on behalf of
constituents in India Guarantees generally represent
irrevocable assurances that the
bank will make payments in the
event of customer failing to fulfil
its financial or performance
4. Acceptances, endorsements
and As a part of banking activities, the
Bank issues documentary credit on
behalf of its customers,
other obligations 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 fulfil its financial
5. Other items for which the
bank These include amounts which may
become payable in respect of capital
is contingently liable
* Also refer Schedule - 12
12. Figures of the previous year have been regrouped to confirm to the
current year presentation wherever necessary.
SCHEDULE 13 - CONTINGENT LIABILITIES
I. Claims against the Bank not acknowledged as debts:
(i) Service Tax disputes 21,600 21,600
(ii) Others 62,542 65,830
II. Liability on account of outstanding Forward
Exchange Contracts1 169,284,431 72,584,035
III. Guarantees given on behalf of
constituents in India 11,746,807 25,339,493
IV. Acceptances, endorsements and
other obligations 10,234,262 7,538,973
V. Other items for which the bank is
Capital Commitments - - 283,700
TOTAL 191,349,642 105,833,631