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South Indian Bank

BSE: 532218|NSE: SOUTHBANK|ISIN: INE683A01023|SECTOR: Banks - Private Sector
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Notes to Accounts Year End : Mar '19

Background

The South Indian Bank Limited (''SIB'' or the ''Bank''), incorporated on January 29, 1929 at Thrissur, as a private limited company and was later converted into a public limited company on August 1 1, 1939. SIB has a network of 894 branches/offices in India and provides retail and corporate banking, para banking activities such as debit card, third party financial product distribution, in addition to Treasury and Foreign Exchange Business. SIB is governed by Banking Regulation Act, 1949, The Companies Act, 2013 and other applicable Acts/Regulations for Banks. Its shares are listed in BSE Limited and National Stock Exchange of India Limited.

Basis of Preparation

The financial statements have been prepared in accordance with requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of the bank used in the preparation of these financial statements conform in all material aspects to Generally Accepted Accounting Principles in India (Indian GAAP), the circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time and the Accounting Standards prescribed under Section 133 of the Companies Act, 2013 (as amended) and the relevant provisions of the Companies Act, 2013 (the Act) and current practices prevailing within the banking industry in India. The Bank follows the historical cost convention and accrual method of accounting in the preparation of the financial statements, except where otherwise stated. The accounting policies adopted in the preparation of financial statements are consistent with those followed in the previous year.

Use of estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods.

A: Disclosures as per RBI''s Master Circular on Disclosure in Financial Statements

Amounts in Notes forming part of the financial statements for the year ended March 31, 2019 are denominated in Rupees crore (unless specified otherwise) to conform to extant RBI guidelines.

1. Capital Adequacy Ratio

The Bank computes Capital Adequacy Ratio as per RBI guidelines. As per Basel III guidelines, the Bank is required to maintain a minimum Capital to Risk Weighted Assets Ratio (CRAR) of 9% {10.875% including Capital Conservation Buffer (CCB)}, with minimum Common Equity Tier I (CET1) of 5.50% (7.375% including CCB) as on March 31, 2019. These guidelines on Basel III have been implemented on April 1, 2013 in a phased manner. The Capital adequacy Ratio of the Bank calculated as per Basel III Capital Regulations is set out below.

2. Capital Infusion

During the year ended March 31, 2019, the Bank allotted 8,51,071 Equity Shares (Previous Year: 59,95,121 Equity Shares) aggregating to face value Rs.0.09 crore (Previous Year: Rs.0.60 crore) in respect of stock options exercised.

Accordingly, share capital increased by Rs.0.09 crore (Previous year: Rs.0.60 crore) and share premium increased by Rs.1.71 crore (Previous year: Rs.11.98 crore).

3.1. a) During the financial year 2018-19, the bank has debited to profit and loss account '' 34.38 crore of unamortized mark to market loss on investments in AFS and HFT as at March 31, 2018 as per RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018.

b) In respect of securities held under HTM category premium of Rs.46.44 crore (Previous Year Rs.40.27 crore) has been amortised during the year and debited under interest received on Government securities.

c) Profit on sale of securities from HTM category amounting to Rs.74.53 crore (Previous Year: Rs.60.31 crore) has been taken to Profit and Loss Account. During the year, the Bank had appropriated Rs.36.37 crore (Previous Year Rs.29.88 crore), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

d) During the year, the Bank had appropriated Rs.22.15 crore (Previous Year : '' nil), to Investment Fluctuation Reserve, being an amount of net profit on sale of investments (net of taxes and transfer to Statutory Reserve) to protect against future increase in yield.

1 Amounts reported under Columns 4, 5, 6 and 7 above are not mutually exclusive.

2 Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities and securities acquired by way of conversion of debt in line with extant RBI guidelines.

3 Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities, securities acquired by way of conversion of debt and security receipts in line with extant RBI guidelines.

4 Includes Non-SLR State Government special bonds with Book Value Rs.456.39 crore.

1 Amounts reported under Columns 4, 5, 6 and 7 above are not mutually exclusive.

2 Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities and securities acquired by way of conversion of debt in line with extant RBI guidelines.

3 Excludes investments in equity shares, units of equity oriented mutual funds, Non-SLR State Government securities, securities acquired by way of conversion of debt and security receipts in line with extant RBI guidelines.

4 Includes Non-SLR State Government special bonds with Book Value Rs.501.85 crore.

4. Sale and transfers to/from HTM Category

During the years ended March 31, 2019 and March 31, 2018, the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investments held in HTM category at the beginning of the year. The 5% threshold referred to above does not include one-time transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per the extant RBI guidelines, sale of non SLR SL bond under Ujwal Discom Assuarance Yogana (UDAY Scheme), sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

5. Derivatives

The Bank undertakes exchange traded currency future transaction for proprietary trading only. There is functional separation between the front Office, risk and Back Office for undertaking derivative transactions. The currency future transactions are governed by the Foreign Exchange policy of the Bank. Various limits are set up and actual exposure is monitored vis-a-vis the limits allocated. Risk Limits are in place for risk parameters viz. VaR, Stop Los, Dealer Limit, Deal size limit. Actual positions are monitored against these limits on a daily basis and breaches, if any, are reported promptly.

The bank uses forward exchange contracts to hedge against its foreign currency exposures relating to the underlying transactions and firm commitments. Bank does not have any Forward Rate Agreement or Interest Rate Swaps.

The notional principal amount of foreign exchange contracts classified as trading on March 31, 2019 amounted to Rs.1563.53 crore (Previous Year Rs.3928.26 crore). For these trading contracts, on March 31, 2019, marked to market position was asset of Rs.60.06 crore (Previous Year Rs.33.01 crore) and liability of Rs.78.19 crore (Previous Year Rs.24.60 crore). The notional principal amount of foreign exchange contracts classified as hedging on March 31, 2019 amounted to Rs.806.07 crore (Previous Year Rs.2428.93 crore).

Asterisk denotes figure belowRs.1,00,000/-

1. Fresh Restructuring includes fresh sanction/increase in existing accounts : Bank has undertaken restructuring during the FY 2018-19 under the natural calamity restructuring scheme and One Time Restructuring Schemes of RBI and the increase of Rs.192.67 crore is on account of Fresh Restructuring and increase in advances in those accounts restructured in the past.

2. Write off of restructured accounts includes recoveries/closure/Sale in existing accounts : Bank has written off restructured asset of Rs.51.77 crore (Provision Rs.1.59 crore).

3. The bank maintains a provision for diminution in fair value of assets amounting to Rs.4.35 crore (PY Rs.5.56 crore), of which assets holding Rs.3.78 crore (PY Rs.3.97 crore) of such provision, have shown satisfactory performance as per RBI guidelines are not disclosed above.

Asterisk denotes figure below Rs.1,00,000/-

1. Fresh Restructuring includes fresh sanction/increase in existing accounts : Bank has not undertaken any fresh restructuring during the FY 2017-18 and the increase of Rs.22.55 crore is on account of increase in advances in those accounts restructured in the past.

2. Write off of restructured accounts includes recoveries/closure/Sale in existing accounts : Bank has written off restructured asset of Rs.104.52 crore (Provision Rs.4.53 crore). The restructured portfolio have reduced by an amount of Rs.192.36 crore by way of recovery in existing accounts or on account of sale of asset.

3. The bank maintains a provision for diminution in fair value of assets amounting to Rs.5.56 crore (PY Rs.10.25 crore), of which assets holding Rs.3.97 crore (PY Rs.4.12 crore) of such provision, have shown satisfactory performance as per RBI guidelines are not disclosed above.

*RBI circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 permitted banks to continue the exposures to MSME borrowers registered under Goods and Services Tax (GST) to be classified as standard assets where the dues between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates. Accordingly, the bank has continued to classify exposure to eligible MSME borrowers of Rs.130.10 crore (Previous year Rs.109.17 crore) as standard. In accordance with the provisions of the circular the bank had not recognised interest income of Rs.4.94 crore (Previous Year Rs.4.63 crore) and has created a standard asset provision of Rs.6.51 crore (Previous Year Rs.5.46 crore) in respect of such accounts.

**The bank has restructured an amount of Rs.160 crore for eligible borrowers who were affected by floods in the state of Kerala during the financial year 2018-19 based on RBI Master Direction FIDD.CO.FSD.BC No.8/05.10.001/2017-18 dated 03 July, 2017 and as per the scheme formulated by SLBC Kerala.

Classification of assets and liabilities under different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the returns submitted to the RBI, which has been relied upon by the auditors.

Disclosure format of maturity pattern has been revised by RBI vide circular DBR.BP.BC.No.86/21.04.098/2015-16 dated March 23, 2016. Previous year numbers has been reclassified/rearranged accordingly.

6. Details of Single Borrower Limit (SGL), Group Borrower Limit (GBL) exceeded by the Bank

During the years ended March 31, 2019, March 31, 2018 and March 31, 2017, the bank has exceeded the credit exposure to single borrower and group borrowers limit as per prudential exposure limit prescribed by RBI w.r.t. investment of Rs.1,057.15 crore in security receipt issued by M/s. Phoenix ARC. The regulator has instructed the Bank not to take any further exposure to the ARC till the exposure is brought within the prudential limit prescribed under large exposure''s framework.

7. Penalties levied by the Reserve Bank of India

The penalty imposed by RBI during the year ended March 31, 2019 was Rs.5,00,75,900/- (Previous year Rs.2,52,450/-).

In exercise of powers vested in RBI under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949, RBI vide letter dated May 15, 2018 had imposed a monetary penalty of Rs.5 crore on the bank for violation of regulatory guidelines observed during statutory inspection with respect to financial position as on March 31, 2016 and March 31, 2017 as detailed in RBI''s press release and the Banks intimation to the Stock Exchanges dated May 18, 2018.

8. Disclosure on Divergence in Asset Classification and Provisioning for NPAs: as per RBI Circular vide DBR.BPBC. No.63/21.04.018/2016-17 dated 18th April, 2017.

In terms of RBI Circular No. DBR.BP.BC.No.32/21.04.018/2018-19 dated April 1, 2019 banks are required to disclose the divergence in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statement if such divergence exceed the threshold prescribed by the RBI. The divergences identified by RBI for the Financial Year ended March 31, 2018 are less than the prescribed thresholds for the year ended March 31, 2018.

9. Overseas Assets, NPAs and Revenue - Nil

10. Off-balance Sheet SPVs sponsored - Nil

11. Drawn Down from Reserves

The Bank has not undertaken any drawdown from reserves during the years ended March 31, 2019 and March 31, 2018, except:

a) Rs.33.00 crore (Previous Year: Nil) from Revenue and Other Reserves being unamortized balance of additional provision on Debt Asset Swap transaction, as permitted by RBI vide letter: DBS (T).No./424/02.02.006/2018-19 dated May 02, 2019.

b) As a onetime measure, an amount of Rs.50.00 crores and Rs.42.78 crores pertaining to profits for FY 2015-16 and FY 2016-17, respectively, has been transferred from Revenue and Other Reserves and Rs.11.19 crore pertaining to profits for FY 2015-16 from Balance in Profit and Loss Account (Previous Year Rs.13.50 crores pertaining to profits for FY 2014-15) to Special Reserve u/s 36 (1) (viii) of Income Tax Act, 1961, to make good the shortfall in the special reserve created for the respective years. Out of the total Deferred Tax Liability created, Rs.21.18 crores and Rs.14.80 crores pertaining to amounts transferred for FY 2015-16 and 2016-17, respectively, has been drawn down from the Balance in Profit and Loss Account.

Credit to Reserve

- During FY 17-18 the Bank credited back Rs.76.05 crore drawn down from revenue and other reserves relating to unamortised balance of loss pertaining to advances sold to ARC as per RBI Circular: DBR.No.BP.BC.102/21.04.048/2015-16 dated June 13, 2016.

i) The Bank had acquired certain land parcels under a partial Debt Asset Swap transaction (DAS) in earlier years aggregating Rs.110 crores and classified them as Non-Banking Assets acquired in satisfaction of claims in the Balance Sheet up to March 31, 2018. The Reserve Bank of India vide their letter dated May 2, 2019 ref DBS (T) No./424/02.02.006/2018-19 to the bank prescribed provisioning norms for DAS transactions in respect of assets acquired under DAS from a particular borrower pursuant to which the Bank has provided an amount of Rs.11 crores for the year ended March 31, 2019 and the balance of Rs.33 crores is debited against other reserves and will be amortized in the profit and loss account by proportionately reserving the debit to the other reserves over the three subsequent quarters.

12. Disclosures on Remuneration

a) Information relating to the composition and mandate of the Nomination & Remuneration Committee.

Composition:

The Nomination & 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 Nomination & Remuneration Committee inter-alia includes the following:

- Scrutinize the declarations received from persons to be appointed as Directors as well as from the existing Directors seeking re-appointment and make references to the appropriate authority/persons to ensure compliance with the requirements indicated by Reserve Bank of India vide their directive dated May 23, 2011 on Fit & Proper Criteria of the Banks.

- To devise a Succession Planning Policy for the Board and Senior Management.

- To formulate a Nomination policy of the Board to guide the Board in relation to appointment/re-appointment/removal of Directors.

- To identify persons who are qualified to become Directors/KMPs and who may be appointed in senior management as defined in the Succession Policy in accordance with the criteria laid down and to recommend to the Board their appointment and/or removal.

- To formulate the criteria for evaluation of Independent Directors and the Board/Committees.

- To devise a policy on Board diversity.

- To carry out any other function as is mandated by the Board from time to time and/or enforced by any statutory notification, amendment or modification, as may be applicable.

- To perform such other functions as may be necessary or appropriate for the performance of its duties.

- To oversee the framing, review and implementation of Bank''s overall compensation structure and related policies on remuneration packages payable to the WTDs/MD & CEO and other staff including performance linked incentives, perquisites, Stock option scheme etc. with a view to attracting, motivating and retaining employees and review compensation levels vis-a-vis other Banks and the industry in general.

- The Committee shall work in close co-ordination with the Risk Management Committee of the Bank, in order to achieve effective alignment between remuneration and risks. The Committee will also ensure 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 Committee is empowered to:

(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 Committee;

(iii) Co-ordinate 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 considered necessary;

(iv) On completion of the year, finalize the criteria of allotment of marks to ensure objectivity/equity.

- The Committee shall also function as the Compensation Committee as prescribed under the SEBI (Share Based Employee Benefits) Regulations, 2014 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 applicable laws.

- 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 recognised in accordance with Accounting Standard-15 (revised) specified in the Companies (Accounting Standards) Rules, 2006 (as amended).

- The Committee 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 review HR Strategy aligning with business strategy of the Bank.

- To review the skill gaps and talent pool creation.

- To fulfill such other powers and duties as may be delegated to it by the Board.

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 dated 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 remuneration is fixed by Board/Committee. Further, the compensation structure for the Whole Time Directors (WTDs)/Managing Director & Chief Executive Officer (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 and Section 35B (1) of Banking Regulation Act, 1949.

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 risks.

The Board of Directors through the NRC 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 applicable.

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 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.

- 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, m''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 for incentives.

(ii) Ex-gratia for other employees who are not eligible for Performance linked Incentives.

(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.

13. Securitisation Transactions

The Bank has not undertaken any securitisation transactions during the year ended March 31, 2019 and March 31, 2018.

14. Credit Default Swaps

The bank has not undertaken any transactions in credit default swaps during the year ended March 31, 2019 and March 31, 2018.

15. Letter of Comfort (LoCs) issued by Banks

The Bank has not issued any reportable Letter of Comfort on behalf of subsidiaries during the year ended March 31, 2019 and March 31, 2018 respectively.

16. 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.13.06 crore (Previous Year Rs.11.96 crore) and additional capital of Rs.12.90 crore (Previous Year Rs.10.04 crore) on account of Unhedged Foreign Currency Exposure of its borrowers as at March 31, 2019.

17. Qualitative Disclosure around LCR

The Bank measures and monitors the LCR in line with the Reserve Bank of India''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 from 1st January, 2019. The daily average LCR of the bank for the quarter ended March 2019 is 234.10%.

The Bank has been maintaining HQLA primarily in the form of SLR investments over and above mandatory requirement, regulatory dispensation allowed up to 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). From February 2016 onwards, RBI has allowed Banks to reckon an additional 3% of NDTL as FALLCR. This has been further increased by 2% from July 2016, 2% from June 2018 and another 2% from October 2018, onwards. As on 31st March 2019, Banks are allowed to consider 13% of NDTL as FALLCR. Further, towards harmonisation of the effective liquidity requirements of banks with the LCR, RBI has permitted banks to recon an additional 2% of Government securities within the mandatory SLR requirement as FALLCR in a phased manner from 4th April, 2019.

The principal components of the estimated cash out flows which could arise in next 30 days are retail deposits (53.45%) and unsecured wholesale funding (39.27%) which are maturing in the period. 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. The Bank is managing its liquidity from the centralized fund management cell attached to Treasury Department, Mumbai.

18. Transfers to Depositor Education and Awareness Fund (DEAF):

In accordance with the guidelines issued by the RBI, the Bank transfers the amount to the credit of any account which has not been operated upon for a period of ten years or any deposits or any amount remaining unclaimed for more than ten years to DEAF.

19. Intra-Group Exposure - Nil.

20. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of March 31, 2019 was Rs.508.33 crore (Previous Year: Rs.1200 crore).

21. Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period)1-2

There are no accounts under SDR Scheme and which are currently under stand-still period (Previous Year: Rs. Nil).

22. Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to affect the change of ownership outside SDR Scheme and which are currently under stand-still period (Previous Year: Rs.Nil).

23. Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period)

There are no accounts where the bank has decided to effect the change of ownership of projects under implementation (Previous Year: Nil).

24. Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on 31 March, 2019

There were no accounts during the year where S4A has been applied.

25. Employee Benefits

a) Provident Fund:

Employees, who have not opted for pension plan are eligible to get benefits from provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon are paid on retirement, death, incapacitation or termination of employment. Both the employee and the Bank contribute a specified percentage of the salary to the South Indian Bank Employees'' Provident Fund. The Bank has no obligation other than the monthly contribution.

The Bank recognized Rs.0.21 crore (Previous Year: Rs.0.21 crore) for provident fund contribution in the Profit and Loss Account.

b) New Pension Scheme:

As per the industry level settlement dated April 27, 2010, employees who joined the services of the Bank on or after 1st April, 2010 are not eligible for the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Basic Pay and Dearness Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate Provident Fund for employees joining on or after April 1, 2010.

The Bank recognized Rs.21.49 crore (Previous Year: Rs.17.59 crore) for DCPS contribution in the Profit and Loss Account.

The employee benefits on account of pension, gratuity and Leave have been ascertained on actuarial valuation in accordance with Accounting Standard - 15 prescribed under Section 133 of the Companies Act, 2013.

The following table as furnished by Actuary sets out the funded status of gratuity/pension plan and the amount recognised in the Bank''s financial statements as at March 31, 2019.

Notes:

(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, taken in to account the inflation, seniority, promotion and other relevant factors.

j) Compensation for absence on Privilege/Sick/Casual Leave

The charge on account of compensation for privilege/sick/casual leave has been actuarially determined and an amount of Rs.20.69 crore (Previous year Rs.27.41 crore) has been debited to Profit and Loss account.

The above information is as certified by actuary and relied upon by the auditor.

k) During the Financial Year 2018-19, the Bank has debited to Profit and Loss Account Amount Rs.20.45 crore (Previous Year: Nil) of unamortised gratuity expenditure as at March 31, 2018 as per RBI Circular DBR. BP.9730/21.04.018/2017-18 dated April 27, 2018.

26. Micro Small and Medium Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006, certain disclosures are required to be made relating to Micro, Small and Medium Enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments.

27. Segment reporting

Business Segments have been identified and reported taking into account, the target customer profile, the nature of product and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;

a) Treasury:

The treasury segment primarily consists of interest earnings on investments portfolio of the bank, gains or losses on investment operations and earnings from foreign exchange business. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

b) Corporate/Whole sale Banking:

The Corporate/Whole sale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

c) Retail banking:

The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on Loans made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense on funds borrowed and other expenses.

d) Other Banking Operations:

This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly this is considered as the only secondary segment.

The Bank''s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income Tax authorities/Service Tax Authorities. The Bank has reviewed all its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities wherever applicable, in its financial statements. The Management believes that the possibility of outflow of resources embodying economic benefits in these cases is possible but not probable and hence no provision is required in these cases. However, a contingent liability has been disclosed with respect to these cases.

28. Provision for long term contracts

The Bank has a process whereby periodically all long-term contracts (including derivative contracts) are assessed for material foreseeable losses. At the year end, the bank has reviewed and recorded adequate provision as required under any Law/ Accounting Standards for material foreseeable losses on such long-term contracts (including derivative contracts) in the books of account and disclosed the same under the relevant notes in the financial statements.

29. Corporate social responsibility

Operating expenses include Rs.12.22 crore (Previous Year Rs.7.28 crore) for the year ended March 31, 2019 towards Corporate Social Responsibility (CSR), in accordance with the Companies Act, 2013.

The Bank has spent 1.84% of its average net profit for the last three financial years as part of its CSR for the year ended March 31, 2019.The Bank is currently in the process of evaluating strategic avenues for CSR expenditure in order to deliver maximum impact

30. Investor education and protection fund

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank.

31. Provisioning pertaining to fraud accounts

The Bank has reported 120 cases as fraud during the Financial Year ended March 31, 2019 amounting to Rs.34.41 crore and has provided for the same in full.

32. Proposed Dividend:

The Board of Directors has proposed a dividend of Rs.0.25 per Equity share (25%) [(Previous year Rs.0.40 per Equity Share) (40%)] for the year ended March 31, 2019, subject to the approval of the shareholders at the ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after Balance Sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, dated March 30, 2016, proposed dividend including dividend distribution tax of Rs.54.54 crore is not recognized as liability as on March 31, 2019. Accordingly, the liability has not been reckoned in capital funds for computing capital adequacy ratio as at March 31, 2019. Capital adequacy ratio after considering the impact of proposed dividend is 12.50% as at March 31, 2019.

33. Figures of the previous year have been regrouped to conform to the current year presentation wherever necessary.

Source : Dion Global Solutions Limited
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