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DCB Bank Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 5290.31 Cr. P/BV 1.84 Book Value (₹) 92.52
52 Week High/Low (₹) 245/165 FV/ML 10/1 P/E(X) 16.26
Bookclosure 01/06/2019 EPS (₹) 10.49 Div Yield (%) 0.59
Year End :2019-03 

1.1 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 investment 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 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.

1.2 RBI circular DBR.No.BP.BC.113/21.04.048/2017-18 dated June 15, 2018 granted banks an option to spread provisioning for mark to market losses on investments held in AFS and HFT. The circular stated that the provisioning requirement for quarter ending June 30, 2018 may be spread equally over up to four quarters, commencing with the quarter ending June 30, 2018. The Bank had not availed the said option.

2.1 Disclosures on risk exposure in derivatives:

a) Qualitative Disclosures

Management of Risk in Derivatives Trading

The Bank’s market risk unit plays a key role in setting up of the limits and laying down of the risk assessment and monitoring methods. The policies of the Bank include setting limits upon the notional principal value of product specific gaps, maximum tenor, overall outstanding and the setting-up of counter party-wise, tenor-wise limits.

All limits are monitored on a daily basis by the Bank’s Treasury Back Office and Mid Office. Exposure reports are submitted to the Treasurer as well as the Assistant CRO and any limit excesses are brought to the notice of the management immediately for further action. Policies for Hedging Risk

All transactions undertaken by the Bank for trading purposes are classified under the Trading Book. All other transactions are classified as a part of the Banking Book. The Banking Book includes transactions concluded for the purpose of providing structures to customers on a back-to-back basis. It also consists of transactions in the nature of hedges based on identification of supporting trades, with appropriate linkages done for matching amounts and tenor within the approved tolerance limits.

The accounting for all derivative trades is done for the notional amount on the trade date. The valuation of all outstanding trades is done category wise. The valuation for outstanding trades under the Trading portfolio is done on a daily basis and the net marked to market (‘MTM’) is accounted in the Profit and Loss Account. The valuation for outstanding trades under the hedged portfolio is done on a monthly basis and the residual MTM, if any, is accounted in the Profit and Loss Account on a monthly basis. Valuation of the outstanding hedged Forex Options is done on a monthly basis and the net MTM is zero as all customer trades are hedged on identical basis with counter party banks.

The MTM position on all outstanding trades of individual corporate customers is reported on a monthly basis to Credit Risk department for exposure monitoring.


The Bank conforms to the RBI guidelines with regard to provisioning requirements. Overdue receivables representing crystallised positive mark-to-market value of a derivative contract are treated as non-performing assets, if these remain unpaid for 90 days or more. Full provision is made for the entire amount of overdue and future receivables relating to positive marked to market value of non-performing derivative contracts.

3.1 Movement of Technical/Prudential write-offs

Technical/Prudential write-offs is the amount of non-performing loans which are outstanding in the books of the branches, but have been written-off (fully or partially) at the Head Office level.

Movement in Technical/Prudential write-offs is set out below:

3.2 Divergence in the asset classification and provisioning

The divergence observed by RBI for FY 2017-18 in respect of the Bank’s asset classification and provisioning under the extant prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP) was within the threshold as per RBI Circular DBR.BP.BC. No.63/21.04.018/2016-17 dated April 18, 2017 and subsequent circular DBR.BP.BC.No.32/21.04.018/2018-19 dated April 01, 2019 on ‘Divergence in the asset classification and provisioning’ and accordingly no disclosures are required to be given. There was no divergence observed by the RBI for FY 2016-17.

3.3 Disclosures on the scheme for sustainable Structuring of Stressed Assets (S4A), as at March 31, 2019

There were no accounts during the year where S4A has been applied (Previous year: NIL).

3.4 Disclosures on Flexible Structuring of Existing Loans

There were no borrowers taken up for flexibility structuring during the year (Previous year: NIL).

3.5 Disclosures on change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period)

There were no accounts during the year where Bank has decided to effect change in ownership (Previous year: NIL).

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

There were no project loan accounts during the year where Bank has decided to effect change in ownership (Previous year: NIL).

3.7 Details of financial assets (including written off accounts) sold to Securitisation / Reconstruction Company for Asset


The Bank has sold certain assets to an asset reconstruction company (ARC) in terms of the guidelines issued by the RBI. For the purpose of the valuation of the underlying security receipts issued by the underlying trusts managed by ARC, the security receipts are valued at their respective NAVs as advised by the ARC. The details of the assets sold are given in the table below:

(B) Qualitative Disclosures

The Bank maintains Liquidity Coverage Ratio (LCR) which is a ratio of High Quality Liquid Assets (HQLA) to Expected Net Cash Outflow over the next 30 calendar days, as per the RBI guidelines. Banks were required to meet the minimum required level of 100% LCR with effect from January 1, 2019 with transition provisions which permitted banks to start with minimum LCR of 60% with effect from January 1, 2015 incremented by 10% thereafter at every January 1. For the period January 1, 2018 to December 31, 2018 the required minimum was 90% and for the period beginning January 1, 2019 the minimum LCR is 100%.

The Liquidity Coverage Ratio (LCR) as on March 31, 2019 was 105.81%. (80.31% as on December 31, 2018). In the past quarters till September 30, 2018, the Bank had been consistently classifying certain deposits in a particular manner for the purpose of computing LCR. This was based on specific terms and conditions contained in the deposit receipts issued to customers at the time of such deposits. During Q3 FY2018-19, the Bank received instructions from RBI to re-classify the deposits referred above to a higher outflow category for the purpose of computing daily average LCR. Therefore, the LCR for Q3 2018-19 and for Q4 2018-19 is lower compared to previous quarters. As on March 31, 2019 the Bank has achieved the minimum stipulated LCR of 100% and expects to improve and sustain this ratio further in the coming months.

The LCR is being computed and monitored on daily average basis. The objective of the LCR is to ensure that the Bank maintains an adequate level of unencumbered 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 specified by supervisors. Further 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.

The numerator, High Quality Liquid Assets comprises mainly of excess SLR securities, cash, excess CRR balances, Marginal Standing Facility (‘MSF’) to the extent of 2 per cent of Net Demand and Time Liabilities (‘NDTL’) and government securities up to another 13 per cent of NDTL while the denominator i.e. cash outflow over next 30 days comprises mainly of the deposit maturities in next 30 day period and other cash outflows net of cash inflows in next 30 day period. As a part of its strategy to manage the liquidity requirements, the Bank has been consistently investing in SLR securities of about 2% to 5% of its NDTL, over and above the regulatory SLR requirement. HQLA of the Bank comprises of mainly Level-1 assets as per the RBI guidelines i.e. government securities apart from cash and excess CRR.

The major source of funding for the Bank is deposits from customers. The Bank does not rely significantly on interbank borrowings. However, long term refinance from SIDBI, NABARD and NHB is occasionally availed against eligible assets. Further, the Bank has committed lines of credit from a select public and private sector banks.

The Bank does not have any derivative exposure other than the forward contracts entered by the Bank which does not affect LCR of the Bank significantly.

Apart from computing the LCR in the domestic currency, the Bank is also required to compute LCR in the currency in which aggregate liabilities denominated in that currency amount to 5 per cent or more of the Bank’s total liabilities. To comply with the said requirement, the Bank computes the LCR in USD as the dollar denominated liabilities are more than 5% of the Bank’s total liabilities. During the financial year 2018-19 and 2017-18, the cash inflows in next 30 days denominated in the USD were usually higher than the cash outflows in next 30 days denominated in USD.

The liquidity management of the Bank is centralised at Treasury. Treasury Front Office shall, depending upon the expected outflows and inflows for the day, decide to borrow or lend to maintain optimal liquidity. Treasury Back Office monitors the expected inflows and outflows by way of maintaining a register which records the expected outflows and inflows that are informed in advance by the branches as well as by Treasury Front Office before making any investment. For this purpose, branches are required to inform the Treasury Back Office in advance of any expected large flows above Rs. 5 crore. Also, Treasury Back Office takes into account the deposits that are scheduled to mature in order to arrive at the expected cash outflows for that particular day. As a part of effective liquidity management, the Bank always maintains excess SLR securities which can be pledged to meet the shortfall in the intraday liquidity, if any.

Note: Advances reported above include both funded and non-funded loan exposure with limits or outstanding whichever is higher, for other than fully drawn term loans and NPAs. In case of fully drawn term loans and NPAs, the outstanding amount has been considered for this purpose. The Advances figure above also includes non-inter bank credit exposure on derivatives including forward exchange contracts.

Note: Exposures reported above include both funded and non-funded exposures [including advances and investments (other than SLR Investments)] with limits or outstanding whichever is higher, for other than fully drawn term loans and NPAs. In case of fully drawn term loan and NPAs, the outstanding amount has been considered for this purpose. The exposure figure above also includes non-inter bank credit exposure on derivatives including forward exchange contracts.

4.1 Credit Default Swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2019 (Previous year: NIL).

4.2 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank

As per regulatory guidelines, the Bank should restrict its exposure to 15% of its capital funds to any Single Borrower, defined as Single Borrower Limit and 40% as Group Borrower Limit. Additionally, the Bank can lend 5% to infrastructure projects and a further 5% with the specific approval of its Board.

During the years ended March 31, 2019 and March 31, 2018, the Bank has not exceeded the prudential exposure limits as laid down by the RBI guidelines for the Single Borrower Limit (SBL) and Group Borrower Limit (GBL).

5.1 Unsecured Advances

Details of advances included in Schedule 9 where intangibles like rights, licenses, authorisations, etc. are charged to the Bank as collateral:


6.1 Employee Benefits (Accounting Standard 15)

The contribution to Employees’ Provident Fund included under ‘“Payments to and Provisions for Employees” in Schedule 16 amounted to Rs. 12.81 crore for the year ended March 31, 2019 (Previous year Rs. 11.19 crore).

During the year, the Bank has contributed Rs. 0.72 crores (previous year Rs. 0.68 crores) to the National Pension Scheme for employees who had opted for the scheme.

The Bank has a gratuity trust approved by Income Tax Department namely “DCB Bank Limited Staff Gratuity Fund”. Every employee who has completed 5 years or more of service gets gratuity on separation at half month’s last drawn salary for each completed year of service, subject to a cap of Rs. 20.00 lakhs for employees who joined after April 1, 2006 and without any such limit for other employees.

All the plan assets are invested by the gratuity trust namely “DCB Bank Limited Staff Gratuity Fund” in Government securities (CY about 51%, PY about 50%), high rated corporate bonds (CY about 33%, PY about 34%), units of mutual funds/ insurance companies (CY about 12%, PY about 12%) and others (CY about 4%, PY about 4%) set up as dedicated funds for management of gratuity funds.

Estimated rate of return on plan assets is based on the Bank’s expectation of the average long-term rate of return expected on investments of the Fund during the estimated term of the obligations.

The contribution expected to be paid to the plan during the annual period beginning after the Balance Sheet date is Rs. 7.41 crore (Previous year: Rs. 6.62 crore).

The estimates of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

In computing the above information, certain estimates have been made by the Bank’s management which have been relied upon by the auditors.

6.2 Earnings Per Share (‘EPS’)

The Bank reports basic and diluted earnings per equity share in accordance with AS-20, “Earnings per Share”. The dilutive impact is due to stock options granted to employees by the Bank.

6.3 Employees’ Stock Option Plan

The Shareholders of the Bank had approved an ESOP plan Phase I in November 2005, enabling the Board and /or the Nomination Committee to grant such number of equity shares and/or equity linked instruments, including options of the Bank not exceeding 4% of the Issued Capital or 60,00,000 Equity Shares of the Bank. The Shareholders, at the Annual General Meeting held on September 11, 2006 had approved an additional 3% of the Issued Capital, aggregating the total Equity Share Capital reserved for all ESOPs to 7% of the Issued Capital from time to time. As the shares of the Bank were subsequently listed, confirmation of shareholders was obtained at the Extraordinary General Meeting held on December 15, 2006 in line with the guidelines of the Securities & Exchange Board of India. Pursuant thereto, during the year the Nomination and Remuneration Committee of the Board granted the following options.

Method used for accounting for ESOP

The Bank has applied the intrinsic value method to account for the compensation cost of ESOP to the employees of the Bank. Intrinsic value is the amount by which the quoted market price of the underlying share exceeds the exercise price of the options.

Activity in options outstanding under Employees Stock Option Plan

Fair value Methodology

The fair value of options used to compute proforma net income and earnings per equity share have been estimated using the binomial option-pricing model. The Bank estimated the volatility based on the historical share prices.

The expected volatility was determined based on historical volatility data; historical volatility includes data since listing.

The weighted average fair value of options granted during the year ended March 31, 2019 is Rs. 62.86 (Previous year Rs. 48.39).

In computing the above information, certain estimates/assumptions have been made by the Bank’s management which have been relied upon by the auditors.

Impact of Fair Value Method on Net Profit and EPS

Had the compensation cost for the Bank’s stock option plans outstanding been determined based on the fair value approach, the Bank’s net profit and earnings per share would have been as per the proforma amounts indicated below:

1. Revenue i.e. Total Revenue includes inter segment revenue of Rs. 773.39 crore in FY 2018-19 (Previous year Rs. 621.92 crore). Intersegment revenue represents the transfer price received from and paid to the treasury unit respectively. Excluding this, the revenue for the Bank is Rs. 3,391.65 crore in FY 2018-19 (Previous year: Rs. 2,723.26 crore)

2. Includes Capital and Reserves.

3. Excluding depreciation and provision for taxes

4. Income, expense, assets and liabilities have been either specifically identified with individual segment or allocated to segments on a systematic basis or classified as unallocated.

5. Inter-segment transactions have been generally based on transfer pricing measures as determined by the Management.

Part B: Geographic Segments

The Bank does not have overseas branches and the operations are entirely domestic. Therefore, no separate reporting is done based on geographic segments.

6.4 Related Party Transactions

Related Parties in terms of AS-18 on “Related Party Disclosures” are disclosed below:

Mr. Murali M. Natrajan : Key Management Personnel

The details of transactions entered into with the Key Management Personnel of the Bank are as under:

6.5 Deferred Tax

a. At each Balance Sheet date, the Bank re-assesses unrecognised Deferred Tax Assets. The Bank recognises previously unrecognised Deferred Tax Assets to the extent that it has become reasonably certain that sufficient future taxable income will be available against which such Deferred Tax Assets can be realised.

b. The composition of Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) is as under:

The lease rents are paid by the Bank for premises leased for its business operations. The above contingent rents have been determined based on terms of individual lease agreements over the lease period. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

6.6 Revaluation of Fixed Assets

The Bank revalued its owned premises as at December 31, 2016 which resulted in a revaluation gain of Rs. 208.69 crore which has been credited to Revaluation Reserve as at that date. The Bank computes depreciation on such revalued premises over its estimated remaining useful life.

During the financial year 2018-19 an amount of Rs. 6.06 crore (Previous year: Rs. 6.07 crore) has been charged to the Profit and Loss Account in line with requirements of the Guidance Note on Accounting for Depreciation in Companies in the Context of Schedule II to the Companies Act, 2013 issued by the Institute of Chartered Accountants of India and this amount has been transferred from Revaluation Reserve to “Balance in Profit and Loss Account”.

6.7 Change in accounting estimates

As per the requirements of Accounting Standard (AS) 10 — Property, Plant and Equipment, the Bank has reviewed useful life of all its fixed assets. Based on the review, the Bank has identified certain class of assets, wherein based on the experience of the Bank, the useful life of the assets is higher than those estimated in earlier periods and vice versa, accordingly the Bank has revised useful life of certain identified class of assets, due to which depreciation charge for the financial year 2018-19 is lower by Rs. 13.71 crore.

7.1 Floating Provisions

The Bank has put in place a Board approved Floating Provision policy in accordance with the RBI guidelines. Movement in floating provision is set out below:

7.2 Provisioning Coverage Ratio

In accordance with the RBI guidelines, the Bank’s Provisioning Coverage Ratio at March 31, 2019 is 78.77% (Previous year: 75.72%).

7.3 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 deposit or any amount remaining unclaimed for more than ten years to the DEAF.

Details of amounts transferred to DEAF are set out below:

7.4 Unhedged Foreign Currency Exposure(UFCE)

In accordance with the RBI guidelines on banks’ exposures to entities with Unhedged Foreign Currency Exposure (‘UFCE’), the Bank has put in place a mechanism to seek information from its borrowers and to evaluate the currency induced credit risk. In the case of listed entities, the Bank obtains information relating to unhedged positions based on the latest available audited / reviewed financial statements; whilst in the case of unlisted / private companies, the Bank obtains the aforesaid information based on the latest available audited financial statements (not exceeding a financial year) so as to estimate the extent of likely loss and to provide for incremental capital or to recognise incremental provision in accordance with the aforesaid guidelines. Further, as per the above-mentioned guidelines, the Bank obtains audited and certified UFCE information from the statutory auditors of the borrowers on an annual basis. In the case of smaller entities i.e. entities with exposure to banking industry of less than Rs. 25 crore and as identified by the Bank as having any foreign exchange exposure, the Bank recognises an incremental provision at 10 basis points on all such exposures.

7.5 Letters Of Comfort (LoC) / Letters of Undertaking (LoU)

The Bank has stopped issuing any fresh LoU in line with the RBI guidelines dated March 13, 2018 in this regard. Outstanding LoU as on March 31, 2019 was NIL (Previous year: Rs. 105.88 crore).

7.6 Small and Micro 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. The above is based on the information available with the Bank which has been relied upon by the auditors.


1 Out of 128 frauds as at March 31, 2019, there were 102 cases pertaining to card transactions of the Bank’s customers.

2 During the financial year 2018-19, the Bank incurred frauds amounting to Rs. 24.73 crore in its loan portfolio in respect of certain borrowers, which has been fully provided for, net of recoveries.


8.1 Disclosure of penalties imposed by RBI

RBI, vide its Order dated February 25, 2019 had directed the Bank to pay a penalty of Rs. 2 crore in terms of Section 35, 35A, 46 and 47A of the Banking Regulation Act, 1949, for contravention of regulatory guidelines issued by RBI on Time bound implementation and strengthening of SWIFT related operational controls. The Bank paid the penalty on March 11, 2019.

No penalties were imposed by RBI on the Bank during the financial year ended March 31, 2018.

8.2 Corporate Social Responsibility (CSR)

The Bank was required to spend Rs. 6.34 crore (Previous year: Rs. 4.91 crore) during the financial year 2018-19 towards Corporate Social Responsibility (CSR), in accordance with Companies Act, 2013.

The Bank has spent an amount of Rs. 3.87 crore (Previous year: Rs. 1.77 crore) in respect of CSR activities across the country.

None of the CSR expenditure incurred by the Bank is to entities controlled by related parties identified by the Bank as per Accounting Standard 18, Related Party Disclosures.

CSR projects and programmes undertaken by the Bank

CSR projects and programmes focused on water and the protection of sources of water; recycling; waste management; renewable energy and measures to offset the impact of climate change through tree plantation and watershed development. On the ground activities namely were: watershed development and rejuvenation of semi-arid and degraded land, installation of waterless urinals to arrest wastage of clean water and prevent discharge of polluting detergents and cleaning chemicals into the waste water, roof-top rain water harvesting and installation of non-electric bio-sand water filters in village schools at locations starved of potable water, tree plantation to rejuvenate buffer areas around forests; sanctuaries and streams, desilting and rejuvenation of tanks for the benefit of village communities and tribal hamlets. In all watershed development projects, community mobilization and their contribution by way of ‘shram-daan’ (voluntary contribution by way of physical labour) by the project beneficiaries has been a notable feature. The communities and DCB Bank have collaborated in the creation of water trenches, ponds, percolation tanks, bunds in drought prone water starved villages. Other activities include climate change mitigation and improving the micro-climate, promotion of renewable energy with the installation of solar street lights in remote tribal village communities lacking in electric grid supply, propagation of best practices such as alternatives to plastic bags and reducing the use of plastic products, dissemination and communication about climate change mitigation and sustainability projects through audio visuals and a record setting solo motorcycle ride to the four corners of India. The Bank’s message of saving water and promoting the use of eco-friendly alternatives to harmful plastic. The solo ride set an India record for the fastest solo woman motorcycle rider to cover all four corners of India — a journey of 15,219 kilometers completed in 29 days.

Employee volunteering under the banner of ‘DCB Social’, had participants spearhead CSR activities such as cleanup of lakes, locality focused waste management, restoration of natural habitat and green cover and the creation of nature parks. Tree plantation, tree count, promotion of economically valuable fruit trees were amongst the activities driven by employees. 729 DCB Bank employee volunteers contributed to CSR activities. In essence, the Bank’s CSR projects involve the communities to bring about sustainable development and mitigation of climate change, because as a nation we are in an extreme water stress situation, in need of immediate and urgent attention. The above details of CSR projects and programmes have been compiled by the Management and relied upon by the auditors.

8.3 Remuneration

a) Qualitative disclosures

Nomination and Remuneration Committee (NRC)

The Nomination and Remuneration Committee of the Board consists of Independent Directors with one member from the Risk Management Committee of the Board.

The main objectives of the Nomination & Remuneration Committee of the Board are:

- Deciding the size and composition of the Board and appointment of persons for the same.

- Recommending to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees.

- Evaluation of every director’s performance and making recommendations for remuneration for Non-Executive Directors and the Key Managerial Personnel.

- Approving the ESOP and creation, subscription and allotment of shares to the eligible employees under this approved ESOP.

- Review appointments, promotions, demotions, terminations and review performance appraisals of CEO and direct reportees.

- Review and approve succession plans for CEO, CFO and Company Secretary and CEO’s direct senior management reportees.

Objectives of Compensation Policy

The Bank has put in place a Board approved Compensation Policy.

An important objective of the Compensation Policy is to provide all relevant internal and external parties with appropriate information and transparency thereby promoting a thorough understanding of the Bank’s compensation practices.

The Bank’s objective is to maintain a Compensation Policy that:-

- Is able to attract, retain talent and motivate them to perform at high standards.

- Facilitates a performance culture in the Bank by balancing a mix of fixed pay with variable pay.

- Supports the Bank’s risk management practices and takes into account long-term performance of the Bank.

- Is compliant with regulatory requirements and is approved by the Board’s Nomination and Remuneration Committee.

Risk adjustments in remuneration

The methodologies for adjusting remuneration to risk and performance are consistent with the general risk management and corporate governance framework. Risk adjustments take into account the nature of the risks involved and the time horizons over which they could emerge. The Bank is adhering to the guidelines mentioned in the Basel Committee on Banking Supervision report on Range of Methodologies for Risk and Performance Alignment of Remuneration and Financial Stability Board (FSB) Implementation standards on sound compensation practices.

The Bank ensures that there is proper risk alignment with the compensation of MD & CEO and other Whole Time Directors such that no undue risks are being taken against the interest of the Bank. In general, the review of Risk Management framework is the integral part of the annual performance review applicable to all employees.

The Risk Management Committee of the Bank through its representative on the NRC shall independently provide inputs for assessment under risk alignment.

Performance linked variable compensation

An annual Rewards Exercise (Compensation Revision) is done for alignment of compensation structure across levels keeping the following considerations, namely; performance of the bank, alignment of risks with the rewards, encouraging rewards based on the long term contributions to the bank, cost/ income ratio of the bank, employee turnover on account of increased demand of talent in the industry and other related factors. Annually, the NRC reviews and approves the reward approach presented by the Management.

Variable pay for all Whole Time Directors (WTD’) / Managing Director ('MD’) & Chief Executive Officer ('CEO’) and other employees shall not exceed 70% of fixed pay, The variable pay offered will be linked to the Bank’s performance and could be reduced in whole/part during a year of poor performance. Where Variable Pay exceeds 50% (substantial pay) of the fixed pay, 60% of the entire variable pay for the respective year will be paid upfront and vesting of remaining 40% will be deferred over the next 3 years in equal proportions.

For all employees including WTD and MD & CEO, in the event of negative contributions of the Bank and/ or the relevant line of business in any year, the unvested deferred Variable Pay (performance bonus/ performance payout) shall be subjected to malus/ clawback arrangements in part /full amount.

8.4 Disclosure on remuneration to Non-Executive Directors

The Non-Executive Directors are paid remuneration by way of sitting fees for attending meetings of the Board and its committees. An amount of Rs. 1.20 crore (Previous year: Rs. 0.76 crore) was paid as sitting fees to the Non-Executive Directors during the year.

8.5 Proposed Dividend

The Board of Directors have recommended a dividend of Rs. 1.00 per share (10%) for the year ended March 31, 2019 subject to approval of the shareholders in the ensuing Annual General Meeting.

According to the revised AS 4 - ‘Contingencies and events occurring after the balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not accounted proposed dividend (including tax) as a liability for the year ended March 31, 2019. However, the Bank has reckoned proposed dividend in determining capital funds in computing capital adequacy ratio at March 31, 2019.

Dividend paid during the year, represents dividend (Rs. 0.75 per equity share) for the year ended March 31, 2018 paid pursuant to approval of shareholders at Annual General Meeting held on June 02, 2018.


The Bank has drawn down Rs. 1.02 crore from Investment Reserve Account towards depreciation on investment in AFS and HFT categories in terms of RBI guidelines during the financial year 2018-19 (Previous year: Rs. 2.91 crore ).

10 Net overnight open position outstanding as on March 31, 2019 was Rs. 1.01 crore (Previous year: Rs. 0.80 crore).

11 The Bank’s pending litigations comprise of claims against the Bank by the clients and proceedings pending with Income 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 where applicable, in its financial statements. The Management believes that the possibility of an 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. Refer note 11.9 for details on contingent liabilities.

12 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 ensured that adequate provision as required under any law / accounting standards for material foreseeable losses on such long-term contracts (including derivative contracts) has been made in the books of account.

13 Previous year’s figures have been regrouped / reclassified, wherever considered necessary, in order to make them comparable with figures for the current year.

14 These are the notes appended to and forming part of the financial statements for the year ended March 31, 2019.

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