DIRECTORS' REPORT TO THE MEMBERS, The Board of Directors is pleased to place before you, the 88th Annual Report of the Bank along with the Audited Balance Sheet as at March 31, 2015 and the Profit and Loss Account for the year ended on that date. Performance Highlights The salient features of the Bank's performance for the financial year ended March 31, 2015 are: • The total Deposits of the Bank increased from Rs.12133.21 crore as on 31.03.2014 to Rs.12381.68 crore as on 31.03.2015. • The Bank's total advance stood at Rs. 8121.90 crore as on 31.03.2015 as against Rs. 8205.76 crore as on 31.03.2014. • Achieved operating profit of Rs. 16.58 Crore for the financial year 2014-15. • Interest expended reduced by Rs.27.08 Crore during the financial year 2014-15 as compared to previous FY 2013-14. • Net NPA at 3.29% and Gross NPA at 7.00%. • Basel II CRAR at 9.71% and Basel III CRAR at 9.59%. • Book value per share is Rs. 58.47. Capital and Reserves The Bank's Paid up capital and reserves was Rs. 723.85 crore as on 31.03.2015. The capital adequacy ratio as per Basel II and Basel III was 9.71% and 9.59% respectively. During the year the Bank had issued and allotted 5,15,07,000 Equity shares of Rs.10 each for an aggregate amount of Rs. 229.63 crore (including premium) by way of Preferential issue of shares to augment capital funds to further improve our Capital Adequacy Ratio. Total Business The total Business of the Bank as on 31.03.2015 stood at Rs. 20503.58 crore as against Rs. 20338.97 crore as on 31.03.2014 and registered a growth of 0.81%. Deposits The total deposits of the Bank increased to Rs.12381.68 crore from Rs. 12133.21 crore as on March 31, 2014 registering a growth of 2.05%. Advances The Bank's total advance stood at Rs.8121.90 crores as on 31.03.2015 as against Rs. 8205.76 crores as on 31.03.2014. Priority Sector Advances Your Bank continued its prudent approach towards priority sector lending in conformity with the national policies, regulatory expectations and fulfillment of social objectives. The Bank's priority sector advances stood at 35.18% and its agricultural advance reached 18.73% of the adjusted net bank credit. The weaker section advances was at 12.40%, thus surpassing the prescribed norm of 10% Lending under various socioeconomic schemes has shown satisfactory progress. Profitability The bank's operating profit during the year was Rs. 16.58 crore as against Rs. 6.07 crore during the previous year. The bank declared a net loss of Rs. 241.47 crore during the year under report and the same at the previous year was Rs. 251.82 crore. Dividend In view of the net loss recorded by the Bank during the year, regrettably no dividend could be recommended to the shareholders. Non-Performing Assets There has been an increase in non-performing assets during the year under report. During the year, the new slippage to NPA was Rs. 337.18 crore, in comparison with the slippages of Rs. 488.08 crore for the previous year. The total recovery in NPA during the year was Rs. 84.51 crores. The corresponding figure for the previous year was Rs. 212.20 crores excluding the Sale of assets to ARC. The lower recovery for this year is on account of the Corporate NPAs. Bank has resorted to all effective monitoring/recovery measures permitted under Law. This has helped us to restrict further slippages into NPA and make recovery from the existing NPA accounts. By constant monitoring/recovery measures, Bank is optimistic of achieving better results in the next year. Customer Service The Bank attaches the highest importance to the quality of customer service rendered across its branches / offices. It has taken a series of measures during the year through deployment of technology and otherwise for significantly enhancing service quality. A well defined and full-fledged Customer Grievance Redressal Mechanism is put in place in the Bank. The Customer Service Committee of the Board monitors the implementation of customer service measures periodically. Customer Service Committees comprising of Bank personnel as well as our constituents have been formed at the apex level and at branches for monitoring service quality and bringing about improvements in this area on an ongoing basis. The Bank has a 24 x 7 Phone Banking Call Centre at Thrissur as an outsourced model to cater to customer needs across the country. The Bank is a member of Banking Codes & Standards Board of India (BCSBI) and is actively implementing the Code of Commitment to Customers as also the Code for Micro and Small Enterprises formulated by the BCSBI. In the annual Compliance survey conducted by BCSBI on implementation of BCSBI Code, the Bank has achieved "Above Average" rating for compliance amidst total 48 banks (including public sector, private sector and foreign banks) surveyed across the major parameters such as customer centricity, information dissemination, customer feedback and transparency. Also the Bank has been successful in achieving a "High Level" of compliance with regard to the "Grievance Redressal" segment thereby placing us amongst the top five private sector banks on the said parameter. During the financial year 2014-15, the Bank received 4738 complaints as against a total of 6462 complaints received in the previous financial year. The organized structure for handling complaints at Branches, Regional offices, ATM Reconciliation Desk, Call Centre and Corporate Office who are in turn handling all transactions and services for the customers has helped the Bank in better customer service and reduction in number of complaints. Branch Expansion The Bank's customer outlets stood at 678 as on 31.03.2015, comprising 266 branches, 398 ATMs and 12 processing centres. The Bank had opened two new ATM's during the year. We have concentrated on consolidating our operations across the country and thereby aiming at utilizing our branches to their fullest potential. Damodaran Committee on Customer Service The Reserve Bank of India had constituted a Committee under the Chairmanship of Shri M. Damodaran, former Chairman, SEBI to interalia: • Examine the functioning of Banking Ombudsman Scheme-its structure, legal framework and recommend steps to make it more effective and responsive. • Review the role of Board of Directors of banks and the role of Regulators in customer service matters. • Evaluate the existing system of grievance redressal mechanism prevalent in banks, its structure and efficacy and recommend measures for expeditious resolution of complaints. The committee may also lay down a suitable time frame for disposal of complaints including last escalation point within that time frame. • Examine the possible methods of leveraging technology for better customer service with proper safeguards including legal aspects in the light of increasing use of Internet and IT for bank products and services and recommend measures to enhance consumer protection. • Review the existing system of attending to customer service in banks -approach, attitude and fair treatment to customers from retail, small and pensioners segments. We have received a total of 107 recommendations from the Committee since inception. Out of the 100 recommendations applicable to your bank, we have implemented 85 recommendations and the implementation of remaining items is in process The following important products and services were introduced during the year for the benefit of the customers: • During the last FY, your Bank had introduced the facility where by the account balances are sent to the customers' mobile number as SMS within 8 seconds. Consequent to the warm acceptance of this facility, we have extended the missed call facility for E-Statement of Accounts, One Day Statement, Connect with our Call centre and Instant A/c Balance SMS on an Unsuccessful ATM Transaction. • Acceptance of the NEFT/RTGS payment via Virtual Accounts - Bank has introduced a new collection facility to accept inward NEFT/RTGS payments of student fees, chits & loan installments from the students, chittalans and loanee of educational institutions, chitty companies and lenders who are Bank's customers. Through this, institutions can initiate various collections from their clients who are not holding an account with our Bank using a unique identifier of their clients as account number (virtual) to recognize the payments individually. This virtual account number can be used by the students, chittalans, loanee to carry out any NEFT/RTGS transactions. • Launch of Upgraded Version of Mobile Banking Platform - Bank's Mobile Banking platform has been revamped and as a part of it, we have launched a native application for the Android Mobile OS which has been widely accepted for its aesthetics, user friendliness and intuitive screens. • Additional security for Online Net Banking transactions - One such initiative the Bank has started is ending SMS and Email alert on every successful Retail Net Banking logins to warn/caution the customers during the event of any unauthorized Internet Banking access. Further, Bank also introduced additional securities like velocity check there by alerting the customer on a bunch of transactions where the total amount involved or the number of transactions per day for the scenarios such as NEFT Transaction (1 lac. and above) and 1RTGS Transactions (3 lac. and above). • The committee appointed by Hon. Supreme court of India has nominated your Bank to take care of the entire Hundi collection of the famous Sri Padmanabha Swami Temple, Thiruvananthapuram Provided sandwich posters containing information on the Bank's various products and services for displaying in all branches/ATMs to make aware of the customers and general public about facilities offered by the Bank. • Special Banking services at Sabarimala like last year with additional facilities such as Facility of online advance booking of Pooja and Prasadam through payment gateway provided by the Bank. All pilgrims booking Pooja/Prasadam were serviced at exclusive counters opened for the purpose by the Bank at Sannidhanam. Newly introduced Prasadam Kits containing Appam, Aravana, Manjal, Kunkumam and Vibhuthi were distributed through Bank counters at Sannidhanam. • Bank has introduced new savings account- Dhanam Vanitha Savings account which exclusively caters to the needs for woman segment with special features like Sweep in/out facility and nominal minimum balance requirement. Investor Education and Protection Fund • During the year there is no amount required to be transferred to the investor Education and Protection Fund (IEPF) constituted under Section 125 of the Companies Act, 2013. Listing on Stock Exchanges • The Equity shares of the Bank continue to be listed on the BSE Ltd., and National Stock Exchange of India Ltd. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2015-16. • The Cochin Stock Exchange Ltd. where the shares of the Bank were listed, had been exited from the Equity Trading Business w.e.f. 23rd December, 2014 vide SEBI order No. WTM/RKA/MRD/163/2014 dated 23rd December, 2014. Particulars regarding conservation of energy, Technology Absorption and Foreign Exchange Earnings and outgo The Bank has undertaken various initiatives for energy conservation at its premises. Further, the Bank has used information technology extensively in its operation and consistently pursuing its goal of technological up-gradation in a cost effective manner for delivering quality customer service. The Company, being a banking company and an Authorised Dealer in Foreign Exchange, has taken all possible steps to encourage export credit. Number of cases filed, if any, and their disposal under Section 22 of the Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act, 2013 The Bank has zero tolerance approach towards any action on the part of any executive/employee which may fall under the ambit of "Sexual Harassment" at work place, and is fully committed to uphold and maintain the dignity of woman staff working in the Bank. The policy provides for protection against sexual harassment of women at work place and for prevention and redressal of such complaints. All the employees (permanent, contractual, temporary, trainees) are covered under this policy. Number of complaints pending as on the beginning of the financial year - Nil Number of complaints filed during the financial year - Nil Number of complaints pending as on the end of the financial year - Nil Particulars of employees There are no such employees whose particulars are required to be given in terms of Section 134 of the Companies Act, 2013 read with the Companies (Particulars of Employees) Rules 1975 as amended vide GSR 289(E) dated March 31, 2011 [Companies (Particulars of employees) Amendment Rules 2011]. The ratio of the remuneration of each director to the median employees' remuneration and other details in terms of Sub section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexed to this report. Green Initiatives in Corporate Governance As a responsible corporate citizen, the Bank supports and pursues the 'Green Initiative' of the Ministry of Corporate Affairs ("MCA"). In conformance with such initiatives, the Bank will affect electronic delivery of documents including the notice and explanatory statement of Annual General Meeting, Audited Financial Statements, Directors' Report, Auditors' Report etc., for the year ended March 31, 2015, to the email address which the shareholders have previously registered with their Depository Participant (DP) as their valid e mail address. Investors desirous of refreshing/updating their e mail addresses are requested to do so immediately in their respective DP accounts. The e-mail addresses indicated in respective DP accounts which will be periodically downloaded from NSDL/CSDL will be deemed to be their registered e mail address for serving notices/documents including those covered under Section 219 of the Companies Act, 1956. Shareholders holding shares in physical form desirous of availing electronic form of delivery of documents are requested to update their e mail addresses with Bank's Registrar and Transfer Agents by a written request if they wish to avail this facility. A request format for registering e-mail ids with the Registrar is enclosed. Shareholders holding shares in demat segment are requested to inform their e-mail ids to their respective DPs. ANTI-MONEY LAUNDERING (AML) Transactions processed through the Core Banking Solution is monitored for detecting suspicious transaction using Infrasoft Technologies - AML application, to discharge the obligation cast on the Bank under Prevention of Money Laundering Act. The Offsite Monitoring Teams set up for post facto verification of KYC Compliance while establishing new customer relationships by the branches are stabilized fully now. The Bank has attached great importance to compliance of KYC/ AML/CFT norms by the customers as per the Reserve Bank of India directive, in the interest of nation. Directors Mr. K. Srikanth Reddy (DIN - 01433626) appointed as an independent Director of the Bank for the purpose of Section 149(2) of the Companies Act, 2013 w.e.f. 01.04.2014 resigned on 15.11.2014 and ceased to be a member of the Board w.e.f. the said date. Mr. K. Vijayaraghavan (DIN - 06419305) ceased to hold office of Director w.e.f. 20.09.2014. The Board places on record its appreciation for the invaluable services rendered by them during their tenure as Directors. Mr. P. Mohanan (DIN - 01463603), Mr. Chella K. Srinivasan (DIN - 01460198) and Mr. K. Jayakumar (DIN - 01955260) were appointed as Independent Directors of the Bank for the purpose of Section 149(2) of the Companies Act, 2013 w.e.f. 01.04.2014 for a period upto 30.09.2015. Dr. K.R. Lakshmy Devi (DIN - 07003258) was appointed as an Additional Director of the Bank w.e.f. 11.11.2014 pursuant to Clause 49 of the Listing Agreement and Section 149 and 161(1) of the Companies Act, 2013. Mr. Harihar Mishra was appointed by Reserve Bank of India as Additional Director w.e.f. 09.12.2014 in place of Mr. Raja Selvaraj and he held office till 13.02.2015. Mr. Rohit Jain was appointed by Reserve Bank of India as Additional Director w.e.f. 13.02.2015 in place of Mr. Harihar Mishra. Further Mr. Susobhan Sinha was appointed by Reserve Bank of India as second Additional Director w.e.f. 02.03.2015. The Board represents various domain skill and also addresses the issue of diversity. Auditors The present Statutory Central Auditors M/s Sagar and Associates, Chartered Accountants, Hyderabad, vacate office at this Annual General Meeting and are not seeking reappointment. The following three firms of Chartered Accountants have submitted their application for appointment as Statutory Central Auditors of the Bank: (i) M/s K. Venkatachalam Aiyer & Co., Chartered Accountants, Kochi (ii) M/s Sankar & Moorthy, Chartered Accountants, Calicut (iii) M/s Sridhar & Co., Chartered Accountants, Thiruvananthapuram The Bank has sought approval from Reserve Bank of India for appointment of any one of the above firms as the Statutory Central Auditors of the Bank for the period commencing from the conclusion of this Annual General Meeting until the conclusion of the next Annual general Meeting on such remuneration as shall be decided by the Board of Directors. Explanation for Auditors' comments in the Report (a) The Auditors' report for the year 2014-15 contains the following qualifications: We draw attention to Note No. 30 of the financial statements, regarding funds of Rs. 7938 Lakhs not provided to pension trust for purchase of annuities for payment of pension/increase in dearness allowance. Had this provision been made in the accounts, operating expenses and loss would have increased by Rs. 7938 Lakhs. Explanation In respect of 259 employees who had opted for VRS in 2000 & 2004 and 424 retired employees, the Bank has not provided to the Pension Trust, funds required amounting to around Rs.7938 Lakhs for purchase of annuities for payment of pension/increase in Dearness Allowance respectively. However, pension/increase in dearness allowance is paid by the Bank by debiting Profit and Loss account. (b) The following are the matters of expressions in the Auditor's report: Without qualifying we draw attention to (a) Note No. 29(a) of the financial statements, in terms of RBI guidelines, banks are required to provide, in case of fraud, the entire amount due to the Bank over a period not exceeding four quarters commencing from the quarter in which the fraud has been detected. However, as a prudent measure, the Bank has provided the entire amount during the year, thereby; the loss reported by the Bank is overstated by Rs. 4944 Lakhs. (b) Note No. 29(b) of the financial statements, though a special dispensation is given by RBI for providing the amount due to the Bank over a period of three quarters commencing from March, 2015 in respect of a borrowal account, the Bank, as a prudent measure, has provided for the entire amount during the year, thereby the loss reported by the Bank is overstated by Rs. 4524 Lakhs. (c) Note No. 25 of the financial statement regarding reconciliation of rent advance/security deposit for premises occupied by branches/offices, etc. (as per Schedule No. 11), and physical verification of fixed assets (Schedule No. 10) is in progress. Since the above comments are self explanatory, no explanation is offered in this regard. Secretarial Auditors and Secretarial Audit Report Pursuant to Section 204 of the Companies Act, 2013 the Bank has appointed M/s KSR & Co, Company Secretaries, LLP! Practicing Company Secretaries, Coimbatore as its Secretarial Auditors to conduct the secretarial audit of the Bank for the FY 2014-15. The Bank provided all assistance and facilities to the Secretarial Auditor for conducting their audit. The report of Secretarial Auditor for the FY 2014-15 is annexed to this report. Corporate Governance A separate report profiling Corporate Governance as required under clause 49 of the Listing Agreement with Stock Exchanges and a certificate from M/s Sagar and Associates, Chartered Accountants, Statutory Central Auditors of the Bank, are annexed to this report. Extracts of Annual Return Pursuant to sub section 3(a) of Section 134 and sub-section (3) of Section 92 of the Companies Act, 2013 read with rule 12 of the Companies (Management and Administration) Rules 2014, the extracts of the Annual Return as at March 31, 2015 is annexed to this report. Subsidiary Companies The Bank does not have any subsidiary companies. Strictures and Penalties During the last three years, there were no penalties or strictures imposed on the Bank by the Stock exchanges(s) and/or SEBI and/ or any other statutory authorities on matters relating to capital market. Management Discussion and Analysis Report This has been dealt with in a separate section in the Annual Report. Directors' Responsibility Statement Pursuant to the requirement under Section 134(5) of the Companies Act, 2013 with respect to the Directors' Responsibility Statement, it is hereby confirmed that a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b) The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; d) The directors had prepared the annual accounts on a going concern basis; and e) The directors, in case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Acknowledgements The Board of Directors places on record its gratitude to the Government of India, Reserve Bank of India, State Governments, Securities and Exchange Board of India and other Regulatory bodies including stock exchanges where the Bank's shares are listed for their support and guidance. The Board also places on record its gratitude to the bank's customers, shareholders, other stakeholders and well wishers for their valued patronage. The Board further places on record its appreciation for the valuable services rendered by M/s Sagar and Associates, Statutory Central Auditors. The Board expresses its sincere appreciation for the dedicated services rendered by officers and employees of the bank at all levels. By Order of the Board Sd/ (Tekkar Yashwanth Prabhu) Chairman Date : 12.08.2015 Place : Thrissur |