The South Indian Bank Limited (SIB) was incorporated on January 29,
1929 at Trichur as a private limited company and was later converted
into a public limited company on August 11, 1939. SIB has a network of
750 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 leading stock exchanges in
Basis of Preparation
The financial statements have been prepared in accordance with
requirements prescribed under the Third Schedule of the Banking
Regulation Act, 1949. The accounting and reporting policies of SIB used
in the preparation of these financial statements conform to Generally
Accepted Accounting Principles in India (Indian GAAP), the guidelines
issued by Reserve Bank of India (RBI) from time to time, the Accounting
Standards (AS) issued by the Institute of Chartered Accountants of
India (ICAI) and notified by the Companies (Accounting Standards)
Rules, 2006 as amended to the extent applicable and practices generally
prevalent in the banking industry in India. The Bank follows the
accrual method of accounting, and the historical cost convention,
except where otherwise stated.
The preparation of financial statements requires the management to make
estimates and assumptions in the reported amounts of assets and
liabilities (including contingent liabilities) as of the date of the
financial statement and the reported income and expenses during the
reporting period. Management believes that the estimates and
assumptions used in preparation of the financial statements are prudent
and reasonable. Actual results could differ from these estimates.
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 current and previous year the bank had not sanctioned credit
limits which were in excess of prudential exposure limits.
3. Penalties Levied by the Reserve Bank of India
No penalties were levied by the Reserve Bank of India during the
financial years ended March 31, 2013 and March 31, 2012.
1. The provision has been made in accordance with prudential norms on
Income recognition, asset classification and provisioning pertaining to
advances, in respect of non-performing advances and investments and a
special dispensation issued by Reserve Bank of India (RBI) vide their
letter No. DBS (T) No.674/02.05.06/2012-13 dated December 31, 2012, for
an advance of Rs. 150.00 Crore. Accordingly, the bank has recognized a
provision of Rs. 90.00 Crore up to March 31, 2013 in respect of the
above advance and the remaining provision is proposed to be made as
permitted by RBI taking in to account the outcome of ongoing
negotiations for settlement with the borrower.
2. Includes Wealth Tax Rs. 0.02 Crore (Rs.. 0.02 Crore)
3. The bank has adopted a board resolution that it has no intention to
make withdrawal from the special reserve created and maintained under
Section 36(1)(viii) of the Income Tax Act , the special reserve created
and maintained is not capable of being reversed and thus it becomes a
permanent difference. Accordingly the bank does not create any deferred
tax liability on the said reserve and has reversed the deferred tax
liability amounting to Rs. 9.82 Crore created during earlier years.
4. Draw Down from Reserves
In accordance with Reserve Bank of India guidelines, an amount net of
taxes and net of transfer to statutory reserves of Rs. 5.69 Crore
(Previous Year Rs. 7.13 Crore), has been drawn from Investment Reserve
Account and credited to Profit and Loss account to the extent of
provisions made during the year towards depreciation in investments in
AFS and HFT categories.
A. 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.
5. Related Party Disclosure
a. Key Management Personnel
Dr. V A. Joseph, Managing Director & Chief Executive Officer.
b. Gross Remuneration paid Rs. 70.40 Lakhs (Previous year Gross Rs.
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 31.03.201
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 2012-13, bank has amortized an amount of Rs.
33.59 Crore (Rs.. 28.74 Crore towards pension and Rs. 4.85 Crore
towards gratuity) and balance unamortized amount to be carried forward
as on 31.03.2013 is Rs. 50.72 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. 22.69 Crore pursuant to the application of AS 15 and the
reserve would have been lower by Rs. 50.72 Crore.
(i) Discount rate is based on the prevailing market yields of Indian
Government securities as at the balance sheet date for the estimated
term of obligations.
(ii) Expected rate of return on plan assets is based on the average
long term rate of return expected on investments of the funds during
the estimated term of the obligations.
(iii) The estimates of future salary increases, considered in actuarial
valuation, take account the inflation, seniority, promotion and other
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. 10.97 Crore
(Previous year write-back of Rs. 2.55 Crore) has been debited to Profit
and Loss account.
(Note: The above information is as certified by Actuary and relied upon
6. 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.
7. Tier II Bonds
Lower Tier II Bonds outstanding as at March 31, 2013 is Rs. 265.00
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. 213.00 Crore).
8. 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, 2013 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 (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 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.
9. Other Assets includes Rs. 5.12 Crore representing expenses
incurred in relation to the Qualified Institutional Placement (QIP)
issue of equity shares in excess of the amount permissible under
Section 13 of the Banking Regulation Act, 1949. The bank has applied to
the Central Government for necessary approval and pending receipt of
the same has held such amount in Escrow account, not debited/charged
such expense to the share premium account.
10. Figures of the previous year have been regrouped to confirm to the
current year presentation wherever necessary.