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DIRECTOR'S REPORT

Federal Bank Ltd.

You can view full text of the latest Director's Report for the company.
Market Cap. (₹) 17490.75 Cr. P/BV 1.30 Book Value (₹) 67.78
52 Week High/Low (₹) 110/78 FV/ML 2/1 P/E(X) 13.29
Bookclosure 25/07/2019 EPS (₹) 6.61 Div Yield (%) 1.59
Year End :2019-03 

DIRECTOR REPORTS

Your Board of Directors has immense pleasure in presenting this 88th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended 31 March, 2019.

Financial Results

(Rs in Crore)

Financial Parameters for the year ended

March 31, 2019

March 31, 2018

Net Interest Income

4,176.35

3,582.81

Fee and Other Income

1,351.02

1,159.12

Net Revenue

5,527.37

4,741.93

Operating Expense

2,764.27

2,450.90

Operating Profit

2,763.10

2,291.03

Net Profit

1,243.89

878.85

Profit brought forward

1,742.49

1,451.27

Total Profit Available for appropriation

2,986.38

2,330.12

Appropriations:

Transfer to Revenue Reserves

143.93

97.07

Transfer to Statutory Reserves

310.97

219.71

Transfer to Capital Reserves

34.48

26.83

Transfer to/ (from) Investment Reserve Account

0.00

-23.57

Transfer to Special Reserve

84.00

57.00

Dividend pertaining to previous year paid during the year

198.01

174.97

Tax on dividend

40.70

35.62

Balance Carried over to Balance Sheet

2,174.29

1,742.49

Financial Position

Deposits

1,34,954.34

1,11,992.49

Advances

1,10,222.95

91,957.47

Total Business (Deposits + Advances)

2,45,177.29

2,03,949.96

Other Borrowings

7,781.32

11,533.50

Investments

31,824.47

30,781.08

Total Assets ( Balance Sheet Size)

1,59,339.99

1,38,313.95

Equity Capital

397.01

394.43

Ratios

Return on Total Assets (%)

0.88

0.75

Return on Equity (%)

9.81

8.39

Earnings Per Share (?)

6.28

4.62

Book value per share (Rs)

66.87

61.28

Operating cost to Income (%)

50.01

51.69

Capital Adequacy Ratio (%) Basel (III)

14.14

14.70

Note:

Previous year figures have been regrouped/ reclassified, where necessary to conform to current year's classification

Highlights of Performance

During the year 2018-19, your Bank has delivered robust growth in all the business segments. Total business of your Bank improved by 20.21% to reach at Rs 245177.29 Cr as on 31 March 2019. 20.50% growth in deposits and 19.86% growth in advances (net) helped your bank to clock this number. Total deposits reached Rs 134954.34 Cr and advances (net) reached Rs 110222.95 Cr and on averages, deposit portfolio of your bank grew by 19.09% to reach Rs 116752.51 Cr and advance portfolio grew by 24.33% to reach Rs 98337.60 Cr.

On the NR side, NRE deposits had a growth rate of 17.66% to reach Rs 50109.16Cr and NRE Savings clocked a growth of 10.40% to reach Rs 13675.63 Cr. The total NR business of your Bank stood at Rs 531 59.37 Cr with a growth of 17.94%.

Growth in Business

On CASA front, Savings deposit touched Rs 35489 Cr with 13% growth and Current deposits stood at Rs 7899 Cr with a growth of 25%. Your Bank registered a healthy CASA growth of 16% to reach Rs 43388 Cr. CASA ratio of your Bank stood at 32.1 5%.

The investment portfolio of your Bank has reached Rs 31824.47 Cr as on 31 March 2019. The average investment as on 31 March 2019 is Rs 30338.06 Cr.

Profitability

The Operating Profit of your Bank increased by 20.61% to Rs 2763.1 Cr and Net Profit of your bank is up by 41.54% to Rs 1243.89 Cr. Healthy traction in core income streams has helped your Bank to have a good momentum in core operating performance. Net Interest Income improved by 16.57% to Rs 4176.35 Cr while the Non-Interest Income rose to Rs 1351.02 Cr, showing a rise of 16.56%. Total income of your Bank during the fiscal year 2019 recorded 17.03% growth to reach Rs 12770.05 Cr. Income from advances increased by 20.57% to reach Rs 9089.62 Cr. The yield on advances stood at 9.24% and the yield on Investments at 7.47 %. The Net Interest Margin for the fiscal year is at 3.14% as against 3.21%, in the previous year.

Return on Average Equity and Return on Average Total Assets stood at 9.81 % and 0.88% respectively. Earnings per Share (face value of Rs 2 each) of the Bank, as on 31 March 2019 were Rs 6.28. Book value per share increased to Rs 66.87 during FY 19.

Expenditure

Higher revenue growth and better cost management resulted in Cost / Income Ratio improving to 50.01 % in 2018-19 as against 51.69% last year. The total expenses of your Bank increased by 16.08%, to reach Rs 10006.95 Cr and by an increase of 17.38%, interest expenses increased to Rs 7242.68 Cr in FY 19. Operating Expenses of the Bank during the fiscal year grew to Rs 2764.27 Cr.

The cost of deposits of the Bank has come down during the year. The cost of deposits of the Bank is 5.78% as on 31 March 2019. The Interest expenses as percentage to total income stood at 56.72%.

Spread

During the fiscal year the Bank's spread on advances (gross) decreased to 3.46% and spread on investments (gross) increased to 1.69%. The Spread (net of provisions) on advance increased to 2.82% from 2.74% of last year.

Asset Quality

The Gross NPA of your Bank as on 31 March 2019 stood at Rs 3260.68 Cr. Gross NPA as a percentage to Gross Advances is 2.92% which is lower than 3.00% as at the end of FY18. The Net NPA stood at Rs 1626.20 Cr and this as a percentage to Net Advances is 1.48%. The Provision Coverage Ratio (including technical write-offs) stood at 67.16%.

Net Worth & Capital Adequacy

The Net Worth of your Bank grew by 9.83% to Rs 13273.04 Cr as against Rs 12084.91 Cr in the previous year. Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 14.14% which is considerably higher than the 9% stipulated by RBI. Of this, Tier 1 CRAR is at 13.38%.

Business Overview

Your Bank continued its consistent performance during FY 2018-19 with the total business of the Bank increasing by 20.21% to Rs 245177.29 Cr.

There is no change in the nature of business of the Bank for the year under review. Further information on the business overview and outlook and state of the affairs of the Bank is discussed in detail in the Management Discussion& Analysis.

Employee Productivity

Business per employee of your Bank during the period stood at Rs 20.1 5 Cr, an improvement of 17.08% for the year and the profit per employee of the Bank stood at Rs 10.22 Lakh during the fiscal.

Expansion of Network

The Bank has 1251 branches and 1669 ATMs and 269 cash recyclers as on 31 March 2019. The Bank also has its Representative Office at Abu Dhabi & Dubai and an IFSC Banking Unit (IBU) in Gujarat International Finance Tec-City (GIFT City).

Share Value

Earnings Per Share (face value Rs 2/- each) of your Bank has improved to 6.28 from 4.62 during the year under review. Return on Equity during the year reached 9.81% in the fiscal year ended 31 March 2019.

Dividend

Continuing the Bank's policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 70% i.e. Rs 1.40 per Equity Share  on face value of Rs 2/- each for the year 2018-19 (previous year 50% i.e Rs 1.00 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders' value has always been a guiding philosophy of the Bank.

Appropriations

(Rs in Thousands)

 

FY 2018-19

FY 2017-18

Transfer to Revenue Reserve

1,439,300

970,732

Transfer to Statutory Reserve

3,109,700

2,197,114

Transfer to Capital Reserve

344,800

268,319

Transfer to/(from) Investment Reserve Account

 

(235,721)

Transfer to Special Reserve

840,000

570,000

Dividend pertaining to previous year paid during the year

1,980,092

1,749,634

Tax on dividend

407,014

356,184

Balance carried over to Balance Sheet

21,742,841

17,424,864

Total

29,863,747

23,301,126

Material changes and commitment affecting financial position of the Bank

There are no material changes affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank to which the financial statements relate and the date of the report.

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status of the company and its future operations

There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future.

Dividend Distribution Policy

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend Distribution Policy and the same is annexed herewith as Annexure VI. The Policy is hosted on the website of the Bank and can be viewed in the following link: https://www.federal-bank. co.in/documents/10180/45777/Dividend +Distribution + Policy/ ea1 bb41 c-64fc-4fb5-bce5-bf96dea3432b Deposits

Being a Banking company, the disclosures required as per Rule 8(5) (v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to the Bank.

Increase of Capital

In FY 2018-19, Paid up Capital of the Bank was increased by an amount of Rs 25811 528 by allotment of 12905764 ESOS shares of Rs 2/- each. The Paid up Capital of the Bank as on 31 March 2019 is Rs 3,970,096,1 56 consisting of 1985050203 equity shares of Rs 2/- each

Investor Education and Protection Fund

As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. On 05th November 2018 the Bank had transferred Rs 8,967,228.00/- to the above Fund, being the unclaimed dividend for the year 2011.

Employee Stock Option Scheme (ESOS)

The Bank has instituted Employee Stock Option Schemes, duly approved by the shareholders of the Bank to enable its employees including Whole Time Directors to participate in the future growth and financial success of the Bank. The Employee Stock Option Schemes are in accordance with the SEBI guidelines, as amended from time to time. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, performance, grades, period of service, Bank's performance and such other parameters as may be decided by the Nomination, Remuneration, Ethics and Compensation Committee of the Board from time to time in its sole discretion.

The Bank's shareholders had approved the Employee Stock Option Scheme 2010 (ESOS 2010) on December 24, 2010 and the Federal Bank Limited Employee Stock Option Scheme 2017 (ESOS 2017) on July 14, 2017.

Under ESOS 2010, the Nomination, Remuneration, Ethics and Compensation Committee granted 34720200 options during the year 2011-12, 24484750 options during the year 2012-13, 26094250 options during the year 2013-14, 11156450 options during 2014-15, 10,25,000 options during the year 2015-16, 9,65,000 options during the year 2016-17 and 1,00,000 options during the year 2017-18. The options granted which are non transferable, with vesting period of 1, 2, 3 & 4 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2019, 56340076 options had been exercised and 24147513 options were in force.

Under ESOS 2017, the Nomination, Remuneration, Ethics and Compensation Committee granted 22318348 options during the year 2017-18 and 37231307 options during the year 2018-19, the options granted which are non transferable, with vesting period of 1,1.25, 2, 2.50, 3 & 3.75 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2019, 2425 options had been exercised and 50336281 options were in force.

Other statutory disclosures as required by the SEBI guidelines/ Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 on ESOP are given in website of the Bank in the link: https://www.federalbank.co.in/web/guest/ shareholder-information

Corporate Social Responsibility

Corporate Social Responsibility (CSR) has been an inherited & inbuilt element of our fundamentals right from the day the Bank was founded. Our founder's values & ethos based on trust got embedded in the Bank's policies& principles. CSR in Federal Bank began with the first act of cultivating banking habits in the agrarian society to effectively utilize idle money for productive purposes.

Overview of some of the major CSR programs undertaken by the Bank during FY 2018-19 are detailed in the Management Discussion and Analysis part of the Annual Report.

CSR Expenditure

The amount to be spent by the Bank towards CSR for FY 2018-19 as per Section 135 of the Companies Act, 2013, comes to Rs 22.47Cr. Amount spent by the Bank this year towards CSR was Rs 17.04 Cr. Through various projects which are aIready sanctioned, your Bank will be thoughtfully spending the CSR funds earmarked for the purpose. The ratio adopted was 80:20, wherein 80% of the CSR funds will be utilized for long term sustainable projects and 20% of the funds will be utilized to meet location specific requests. The Bank had also embarked on some major projects last year in the field of education, Youth engagement, skill development, support to differently abled etc. By choosing long term sustainable projects, Bank has taken an approach which brings steady and long lasting impact on the society.

During August 2018, our state witnessed one of the worst natural calamities of the Century which rendered many homeless and had vast impact on economic condition of the state. Being a responsible organization, we had donated Rs 4.00 Cr. to Chief Ministers Distress Relief Fund and extended support to the affected through our Zonal offices at various places in the State.

The details of the other CSR activities of FY 2018-19 are mentioned in Annexure II to this report.

Risk Management

The Board of Directors oversees the enterprise wide risk management of the Bank. The Risk Management Committee of the Board sets the standards and governs the risk management functions, thereby bringing in a top to down focus on risk management. Integrated Risk Management Department co-ordinates and administers the risk management functions in the Bank. The Department has three divisions for managing the main risk streams, Credit risk, Market risk and Operational risk. Dedicated teams within the Divisions are responsible for assessment, monitoring and reporting of various material risks. Default risk and asset quality of loan portfolio are monitored and managed by the Credit Risk Division. The Bank has established an independent Mid Office as part of Market Risk Division for real time monitoring of Treasury activities. Business Continuity

Management and Information and Cyber Security measures form part of operational risk management. Risk Management policies are approved by the Board of Directors and reviewed from time to time with updated regulatory and internal guidelines. Executive level risk management committees, namely, Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee and Information Security Committee regularly assess the respective risks and direct corrective actions wherever required. The risk management functions are co-ordinated by a senior Executive designated as Chief Risk Officer who reports directly to the Managing Director & CEO. The Executive level committees report to the Risk management Committee of the Board the various risk events and the direction and level of the various risks. All material risks of the Bank emerging in the course of its business are identified, assessed and monitored in the Internal Capital Adequacy Assessment Process (ICAAP). In our view, presently there are no material risks which pose as a threat to the net worth and continuous functioning of the Bank.

Internal control systems and their adequacy

The Bank has through the years developed and stabilized an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit and Inspection Policy of the Bank, duly approved by the Board of Directors. In order to help Bank achieve its mission of adopting the best professional practices prevailing in the industry, while framing the policy, substantial inputs are taken from - RBI guidance note on Risk Based Internal Audit, The internal audit function in banks' published by Basel Committee on Banking Supervision and Model Audit Manual on Internal & Concurrent Audit Systems in Public Sector Banks. Audit and Inspection Policy is reviewed annually. Policy is reviewed considering various guidelines of RBI, Basel Committee recommendations, ICAI guidelines, other statutory / regulatory guidelines, directions of Board / Audit Committee of the Board issued from time to time and periodic internal guidelines / instructions issued by the Bank. At the enterprise level, the Inspection and Audit Department, on a continuous basis, assesses and monitors the effectiveness of the control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank's processes and operations with regulatory guidelines, accounting procedures and Bank's own internal rules and guidelines. A department level group meets on periodical intervals to discuss latest internal / RBI / regulatory guidelines for ensuring that the required changes are implemented for making the audit function updated and dynamic.

The Bank has a robust system towards escalating the audit findings to appropriate levels in the hierarchy of management and discussions in various committees towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section  138 of the Companies Act 2013, has designated the Head of Inspection and Audit Department as Internal Auditor. Audit being an independent function, the Internal Auditor is reporting to the Audit Committee of the Board of Directors. The Bank has various types of audit which inter-alia include Risk Based Internal Audit, Information System Audit, Concurrent Audit, Gold Loan Audit and Management Audit. Branches are risk rated and the frequency of Risk Based Internal Audit is decided based on Risk - Audit Matrix defined in Audit and Inspection Policy. Significant audit findings and observations are presented to Inspection Review Committee of Executives and a report on the meetings of Inspection Review Committee of Executives along with significant audit findings, directions / suggestions of the committee and action taken in such cases are placed to the Audit Committee of the Board for review periodically. Other findings are placed before a department level committee called the 'Inspection Department Review Committee' for review and its observations are placed before Inspection Review Committee of Executives.

As per the requirement of Companies Act 2013, Bank has formulated Internal Financial Controls framework. Risk and Controls associated with each process in the Bank are documented under the Internal Financial Controls Framework. Inspection and Audit Department plays a significant role in testing the control effectiveness for each process under the framework.

The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the Bank's internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management protect the Bank and its reputation.

Vigil Mechanism/Whistle Blower Policy

Based on RBI directions, Bank has put in place a Fraud Risk Management Policy that covers the various controlling, monitoring and surveillance mechanism of the Bank to prevent frauds and to manage the risk of loss in the event of a fraud. Functions of Vigilance Department covers both prevention as well as investigation of frauds. Vigilance Department conducts Preventive Vigilance Workshops and Preventive Vigilance Audits to ensure the effectiveness of fraud prevention mechanism of the Bank. Vigilance Department also issue alerts/ communications on a regular basis that disseminates various modus operand! of frauds in the banking industry, which enable the Branches/ Offices to prevent similar kind of fraudulent attempts. Similar thrust is given by the Bank, in educating customers as well. The customers are made well updated on the various fraudulent activities happening in the Banking Industry, through various means including SMS, E-Mails, posters at Branches, ribbon messages on Bank website, internet banking webpage, etc for prevention of all types of frauds, including Cyber Frauds.

As a part of Detective Vigilance all the cases of frauds reported in the Bank are investigated in detail. Lacunae if any observed during  the course of investigation are plugged and cases where systemic corrections are required, are placed before the Committees concerned for corrective measures/ necessary directions.

Bank has a robust Whistle Blower Policy termed as Protected Disclosure Scheme (PDS) with a view to enhancing public confidence in the Bank and also in compliance of RBI directions in this regard. The policy aims at establishing an efficient vigil mechanism in the Bank to quickly spot aberrations and deal with it at the earliest. It is disseminated among the employees assuring confidentiality and protection to the whistle blower against any personal vindictive actions such as humiliation, harassment or any other form of unfair treatment. Directors and Employees of the Bank, employee representative bodies, customers, stakeholders, non-governmental organizations (NGO) and members of the public can lodge complaints / disclosures under this scheme. A dedicated e-mail ID is provided for sending complains/disclosures under PDS. Vigilance Department conducts investigation of all complaints /information received through the PDS and submits report to MD & CEO. The details of the complaints and findings are also placed before the Audit Committee of the Board on a quarterly basis. The scheme is popularised through various measures such as preventive vigilance classes, internal circulars, alerts etc. No personnel have been denied access for giving any information as envisaged in the Protected Disclosure scheme. The PDS Document is made available in Bank's website and Intranet.

Website link to Bank's Whistle Blower Policy/Vigil Mechanism is https://www.federal bank. co. in/documents/10180/45777/ Whistle+Blower+policy/558aea51-1335-4546-9c9a-28c5030377a1

Subsidiaries of the Bank

As on 31 March 2019, the Bank has one unlisted subsidiary named Fedbank Financial Services Limited and one unlisted fully-owned subsidiary Federal Operations and Services Limited.

Fedbank Financial Services Limited

Fedbank Financial Services Limited is a diversified Non-Deposit-Taking & Systemically Important (ND-SI) NBFC offering multiple loan products such as Loan against Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. It also distributes loan products of The Federal Bank Limited.The Fedbank Financial Services Limited issued 4,00,42,500 number of equity shares of face value of Rs 10/- each to True North Fund VI LLP on private placement basis on November 13, 2018, pursuant which the Bank's shareholding in Fedbank Financial Services Limited decreased from 100% to 82.59%. The total loan portfolio of Fedbank Financial Services Limited as on 31 March 2019 is Rs 1992 Crores as against Rs 1413 Crores as on 31 March 2018. The Profit after tax of the company for the year ended 31 March 2019 increased to Rs 35.08 Crores from Rs 30.80 Crores for the year ended 31 March 2018.

Federal Operations and Services Limited

The Bank floated a wholly owned subsidiary company named Federal Operations and Services Ltd (FedServ) on October 26, 2018 with the main objects of providing banking operational services, technology oriented services and support functions. The total revenue of FedServ for the period ended on 31 March 2019 is Rs 1.28 Crores. The entire revenue pertains to services provided by the company to the Bank only. Company started its operations on 01 December 2018 and this was the first year of operation of the company. The Company had net loss for the period ended 31 March 2019 of Rs 28.59 Lakhs after writing of preliminary expenditure in full.

The Net Worth of FedServ at the beginning of the year was Rs 5 Cr. and closing net worth of FedServ as on 31 March 2019 was Rs 4.71 Cr. During the year, Bank has invested in equity shares of company amounting to Rs 5 Cr.

Associate Companies

As on 31 March 2019, the Bank has two Associate Companies named IDBI Federal Life Insurance Company Limited and Equirus Capital Private Limited.

Joint Venture in Life Insurance Business

The Bank's Joint Venture Life Insurance Company, in association with IDBI Bank Limited and Ageas Insurance International N.V. (Formerly known asFortis), namely IDBI Federal Life Insurance Company Limited (erstwhile IDBI Fortis Life Insurance Company Limited), commenced operations in March 2008. Currently the Bank has a total stake of ? 208 Cr. in the equity of the company holding 26% of the equity capital. The total premium collected by IDBI Federal Life Insurance Company Limited during the period ended 31 March 2019 is Rs 1,933 Cr. The Company has declared a dividend of 10% for the FY 2018-19.

Investment Banking Associate

During the year the Bank had invested in 8.74% equity shares of Equirus Capital Private Limited on July 12, 2018. Pursuant to the right of proportionate representation on Board as well as power to participate in the financial, operational matters like approval of business plan, policies, budgets, managerial remuneration, change in KMP etc., the same has been treated as an associate concern as per AS 23 Accounting for Investments in Associates in Consolidated Financial Statements. The Bank's Associate Equirus Capital Private Limited is a private company domiciled in India and is engaged in the business of Investment banking. Equirus Capital Private Limited has 3 subsidiaries named Equirus Securities Private Limited, Equirus Digital Private Limited and Equirus Wealth Private Limited. The total turnover of Equirus Capital Private Limited on a consolidated basis was Rs 51.46 Crore for FY 2019 as against Rs 34.84 Crore for FY 2018.

Consolidated Financial Statements

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including its subsidiaries Fedbank Financial Services Limited and Federal Operations and Services limited and associates IDBI Federal life Insurance company limited and Equirus capital private limited, which isforming part of this Annual report. The financial position and performance of its subsidiaries / Associates is given in the statement containing salient features of the financial statements of the subsidiaries/Associate Companies / Joint Venture, (Given as Annexure V) which forms part of the consolidated financial statements.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and the consolidated financial statements has been hosted on its website www.federalbank.co.in. Further, as per fourth proviso to the said section, the audited annual accounts of the said subsidiary company of the Bank have also been hosted on the Bank's website www.federalbank.co.in. The said documents have been hosted on the website of the subsidiary company of the Bank also, in compliance with the said section.

The documents / details available on the Bank's website (www. federalbank.co.in) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard (AS') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its subsidiaries and associates for the year ended March 31, 2019 forms part of the Annual Report.

Corporate Governance

Corporate governance is essentially a set of standards, systems, and procedures aimed at effective, honest, transparent, and responsible management of a company within the applicable statutory and regulatory structures. This code represents a set of desirable, corporate governance practices to be adopted by the Bank. The Code takes into account the relevant statutory and SEBI / stock exchange listing requirements and Reserve Bank of India (RBI) directives and other guidelines under the Companies Act 2013. The efficacy of the Code lies in how well it is put into practice. In adopting the Code, the stress is in its substance and spirit rather than on its form.

Good corporate governance practices help support and strengthen corporate actions aimed at achieving the corporate objective. The Bank's principle corporate objective, like that of any corporate business entity, is to perpetuate its business while protecting and enhancing, over the long term, the value of the investments of its shareholders in the Bank.

A copy of the Code of Conduct for the Board of Directors and Management is available on Bank's website.

A separate section on corporate governance standards followed by the Bank and relevant disclosures, as per regulatory requirements forms part of this Annual Report.

Board of Directors

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Agreement") and the Code of Corporate Governance adopted by the Bank. The Board comprises of eleven Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, strategic planning, risk management jnformation technology and Payment and Settlement Systems.

Mr. K Balakrishnan who was appointed as additional Independent Director on 25 September 2018 and Mr Siddhartha Sengupta and Mr Manoj Fadnis who are appointed as additional Independent Directors as on date of this report will be regularized in this AGM. The Bank also proposes the re-appointment of Mr C Balagopal as an Independent Director of the Bank in this AGM after the completion of his first term of appointment.

The detailed profile of all the directors recommended for appointment/ re-appointment in this AGM are mentioned in the Notice of Annual General Meeting for the benefit of shareholders as required under law.

During the year Mr. Dilip Sadarangani was appointed by the Board as the Chairman of the Bank for which approval from RBI was obtained vide letter DBR. Appt. No.6191/08.38.001/2018-19 dated January 25, 2019.

During the year Mr. Harish Engineer ceased to be the Director on the Board of the Bankw.e.f 01 October 2018, on completion of 70 years of age. Mr. Deepak Maheshwari was appointed as an Additional Independent Director on the Board of the Bank, w.e.f 22 June 2018 and he resigned from the Board w.e.f 01 January 2019 to take up a role as senior executive position in a leading financial organization. Mr. K Balakrishnan was appointed as an Additional Independent Director on the Board of the Bank w.e.f 25 September 2018. Mr. Ganesh Sankaran, Executive Director of the Bank resigned from the Board of the Bank w.e.f 15 February 2019. The Board places on record their appreciation for the commendable contribution made by the Directors, during their tenure in the Bank.

Apart from the above mentioned Directors Mr Siddhartha Sengupta and Mr Manoj Fadnis were appointed as Additional Independent Directors as on date of this report.

Excluding Mr. Shyam Srinivasan, MD & CEO and Mr. Ashutosh Khajuria, Executive Director & Chief Financial Officer, all other members of the Board are Non-Executive and Independent Directors. Necessary declarations were obtained from the Independent Directors as required under the RBI Regulations, SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015 and section 149 (6) of Companies Act, 2013. The remuneration and other benefits paid to MD& CEO of the Bank and Executive Directors during the year are disclosed in the annexure to this Report and in Corporate Governance Report. The Non Executive Independent Directors, except Chairman of the Board, are paid only sitting fees for attending every meeting of the Board / Committees of the Board within the limits as prescribed under the Companies Act, 2013. During the year Mr. Dilip Sadarangani, the Chairman of the Board, as on 31 st March 2019 was paid an amount of Rs 1.50 lakhs per month as remuneration w.e.f 25th January 2019, as approved by the Board and RBI in addition to sitting fee for attending Board / Committee meetings. The Bank has framed a Comprehensive Compensation Policy for Non-Executive Directors of the Bank (Other than Part Time Chairman) which is detailed in the heading Policy on Remuneration to Non-Executive Directors/ Independent Directors.

Mr. Ashutosh Khajuria, Executive Director of the Bank is liable to retire at this AGM in compliance with Section 152 of Companies Act, 2013,as required under the regulations regarding retirement of directors by rotation. The detailed profile of Mr. Ashutosh Khajuria, recommended for reappointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.

Composition of Audit Committee

The Audit Committee consists of four Non Executive, Independent Directors and is chaired by Ms. Grace Koshie, Non-Executive Independent Director. The Committee was reconstituted twice in the financial year 2018-19. The other members of the Committee are Mr. Nilesh Vikamsey, Ms. Shubhalakshmi Panse and Mr. A P Hota who are Non-Executive Independent Directors as on the date of this report.

The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee incorporated in the Bank's Code of Corporate Governance, are in accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Companies Act, 2013 and RBI guidelines, which are detailed in Corporate Governance section of this report.

Independent Directors

In terms of the definition of Independence of Director as prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 201 5 and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures/ declarations received from the Directors, the following Directors are Independent Directors of the Bank as on the date of this report:

1. Mr. Dilip Sadarangani

(DIN -0661 0897)

2. Mr. Nilesh Vikamsey

(DIN -00031213)

3. Ms. Grace Elizabeth Koshie

(DIN -0676521 6)

4. Ms. ShubhalakshmiPanse

(DIN -02599310)

5. Mr. C Balagopal

(DIN - 00430938)

*Appointed as Additional Independent Directors on the Board of the Bank on 13.06.2019

A meeting of Independent Directors for FY 2018-19 was conducted on 26 February 2019 to evaluate the performance of Board as a whole, evaluation of Non-independent Directors and Chairman of the Board and assess the flow of information. The meeting was attended by all the Independent Directors of the Bank.

Women Director

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 17(1)(a) of the SEBI(Listing Obligations and Disclosure Requirements), Regulations 2015 (LODR Regulations) a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.

Bank's policy on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub-section (3) of section 178;

a) Qualifications, Experience and knowledge

1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the Bank's policies, operations, and needs. Not less than fifty-one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperative movement, trade, industry, infrastructure, engineering, and technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small-scale industry. The Bank shall ensure to include in its Board need based representation of skills such as marketing, technology & systems, risk management, strategic planning, treasury operations, credit recovery, Payment and Settlement Systems etc.

2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.

3. The directors shall preferably be in the range of 35-70 years of age.

b) Disqualification / Conflicts of interest

1. The Bank's Directors shall be subject to the disqualifications/ prohibitions contained in the Companies Act 2013 and the Banking Regulation Act 1949 with respect to directorship of companies in general or banking companies in particular.

2. A Director shall not be a director of any other company, or partner or proprietor of a firm, where such directorship, partnership, or proprietorship involves or is likely to involve actual or potential conflicts of interest as a Director of the Bank. A Director shall promptly inform the Board/committee of any actual or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any committee of which he is a member, and shall refrain from participating in a discussion on the matter.

c) Suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include

1. integrity in personal and professional dealings.

2. wisdom and ability to take appropriate decisions.

3. ability to read and understand financial statements

4. ability to deal with others with a sense of responsibility, firmness, and cooperation.

5 refrain from any action that would lead to loss of his independence.

d) Suggested criteria for determining Independence of a director

The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI-LODR Regulations, 201 5.

The independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence.

The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank and a web link thereto is :

https://www.federalbank.co.in/our-commitments

Policy on Board Diversity

Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank as contained in the Banking Regulation Act, 1949 and satisfying the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also take into account factors based on its own business model and specific needs from time to time.

Board Diversity enhances the quality of performance of the Board, usher in independence in the performance of the Board; eradicate the gender bias in the Board; achieves sustainable and balanced performance and development; support the attainment of strategic objectives & also ensures compliance of applicable laws and good corporate practices.

6. Mr. A P Hota

(DIN -02593219)

7. Mr. K Balakrishnan

(DIN -00034031)

8. Mr. Siddhartha Sengupta*

(DIN - 08467648)

9. Mr. Manoj Fadnis*

(DIN -01087055)

The Nomination, Remuneration, Ethics and Compensation Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.

Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments, the requirement as per the Companies Act, 2013 for appointment of atleast one woman director on the Board of the Bank will also be considered.

Policy on Remuneration

Policy on remuneration to Non-Executive Directors/ Independent Directors

The Policy of the Bank for the payment of remuneration to Non-Executive Directors/ Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non Executive Directors / Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: http://www.federalbank.co.in/ shareholder-information

As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non-Executive Part Time Chairman of the Board.

As per the Policy during FY 2018-19, Non-Executive Independent Directors of the Bank are paid only sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board/Committee meetings other than Non-Executive Part Time Chairman, who is paid remuneration in addition to sitting fee for attending Board/Committees meetings and reimbursement of expenses for participation in Board Committee meetings, with the approval of RBI.

Policy on remuneration to MD & CEO, Executive Director, Key Managerial Personnel and other employees

The Compensation / Remuneration Policy of the Bank as approved by the Board contains the policy for payment of remuneration to MD & CEO, Executive Directors, Key Managerial Personnel and for all the other employees of the Bank.

As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:

Core Principles

1. Effective governance of Compensation.

2. Alignment of Compensation with Prudent Risk Taking.

3. Effective Supervisory Oversight and Stakeholder Engagement.

Compensation of Managing Director & CEO, Whole Time Directors and Senior Executives

(Non IBA)

The compensation paid out to the referred functionaries is divided into two components:

1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span. (Approval from RBI to be taken as per section 3BB of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)

2. The variable compensation for Managing Director & CEO and Senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on Performance Scorecard which considers various financial indicators like business growth, revenue earned, cost deployed, profit earned, ROA/ROE, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through score cards for Managing Director & CEO /WTDs. The score card provides a mix of financial and non-financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.

Compensation Package to Executives in Level IV and above

Executives in Level 4 and above are covered under Grander Compensation Package, which was introduced in the Bank from May 2017.

Compensation paid to employees on IBA package

The compensation paid to Award Staff and Officers coming under Scale I to III is fixed based on the periodic industry level settlements with Indian Banks' Association. The scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package has been revised consequent to the 10th Bipartite Settlement.

Key Managerial Personnel who were appointed or have resigned during the year

In compliance with Section 203 of the Companies Act, 2013, no Key Managerial Personnel have been appointed or have resigned during FY 2019.

Management Discussion and Analysis

The Management Discussion and Analysis Report for the year under review as stipulated under the listing agreement with the stock exchanges in India is presented in a separate section forming part of this Annual Report.

Loans, Guarantees or Investments in Securities

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except subsection (1), do not apply to a loan made, guarantee given or security provided or any investment made by a banking company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

Internal Complaints Committees (Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013)

For particulars relating to Internal Complaints Committee (Information under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013) kindly refer the section Corporate Governance report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) and other applicable regulations of the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance and of the directors individually, as well as the evaluation of the working of its various Committees for the year under consideration.

The evaluation process was initiated by putting in place, a structured questionnaire after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning, such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

Thereafter a separate exercise was carried out to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the Non Independent Directors were carried out by the Independent Directors. The Directors expressed their overall satisfaction with the evaluation process.

I) Performance Evaluation of Non-independent Directors (MD & CEO and Executive Director)

Criteria for Evaluation include:

Quantitative Targets:

i) Achievements of performance against targets set

Qualitative Targets :

ii) Appraises the Board regarding the organization's financial position and operational budget so as to enable the Board to make informed financial decisions iii) Provides Leadership in developing strategies and organizational plans with the management and the Board of Directors iv) Ensures that the Board is kept informed about all issues concerning the Bank v) Media interaction and ability to project positive image of the Company vi) Effectively pursue the performance goals in relation to mission and objective of the organization vii) Motivating employees, providing assistance & directions viii) Supervising& Safeguard of confidential information ix) Establishment of internal control processes, monitoring policies and encouraging suggestions x) Cultivates effective Relationship with Industry Forums, Community and business leaders, Regulatory Bodies and Public Officials, xi) Ensures compliance with all legal and regulatory requirements.

Evaluation Outcome

i) The MD & CEO and EDs adequately endeavor to implement Board decisions and are very strong in media interactions and have put in efforts in building and reinforcing the Brand and Image of the Bank ii) The Executives constantly endeavor to enhance internal control processes, monitor execution of policies and are very receptive to suggestions iii) Attendance of MD & CEO and EDs at the Board and Committee meetings was good iv) They present financial reports to the Board on a regular basis and submit an annual budget for Board review, revision and approval v) They regularly appraise the Board on the organization's financial position and operational budgets that aids the Board to make informed financial decisions vi) The MD has adequate qualities of leadership in developing strategy & execution for achieving them vii)The MD / ED has demonstrated a sound knowledge of Board governance procedures and has consistently followed them viii) The MD / ED has accurately communicated his concept, vision, mission, strategies, goals, and directions for the Bank to stakeholders ix) The MD/ED has accurately identified and analyzed problems and issues confronting the Bank.

II) Performance Evaluation of Independent Directors including Chairman

Criteria for evaluation include:

i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depth prior to meeting and active participation at the meeting iii) Contributes to discussions on strategy as opposed to focus only on agenda iv) Participate constructively and actively in the Committee of the Board in which they are chairpersons or members v) Exercises his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board vi) The Director remains abreast of developments affecting the company and external environment in which it operates independent of his being appraised at meetings vii) Knowledgeand Competency: a) How the person fares across different competencies as identified for effective functioning of the entity and the Board b) Whether the person has sufficient understanding and knowledge of the entity and the sector in which it operates viii) Whether the person demonstrates highest level of integrity, including conflict of interest disclosures, maintenance of confidentiality, etc

Evaluation Outcome

i)The Board directors considered the Chairman's evaluation and noted positive comments about his leadership qualities ii) The Chairman has promoted constructive debate and effective decision making at the board iii) The Chairman has managed the meetings effectively and has promoted a sense of participation in all the Board meetings.

The evaluation done of Independent Directors, broughtout the fact that good attendance of Independent Directors was there in the Board and committee meetings. They are knowledgeable, ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as Independent directors. The Independent Directors also demonstrate highest level of integrity, including conflict of interest, disclosures and maintenance of confidentiality. It was also noted that the Independent Directors exercise his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board and also the Directors remains abreast of developments affecting the company and external environment in which it operates.

III) Performance Evaluation of Board and Committees

A. Criteria for Evaluation of Board include:

i) If Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank's success, representing sectors laid down by the regulators, given its current and future position ii) New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization's activities, the Board encourages a culture that promotes candid communication iii) The Board oversees management's procedures for enforcing the organization's code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board iv) The Board oversees risk management through in puts from the Risk Management Committee v) The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures vi) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank vii) The Board oversees the compliance processes viii) The Board views the organization's performance from the competitive perspective - industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc. ix) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Company, x) The Board has defined an effective Code of Conduct for the Board and Senior Management, xi) Whether the Board monitors and manages potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions.

B. Criteria for Evaluation of Committees include:

i) The Committee's Terms of Reference and composition is reviewed annually and is found to be constituting of Directors representing sectors laid down by the regulator and continue to be appropriate ii) Committee meetings are organized properly in number, timing and location iii) The Committee allocates the right amount of time for its work etc iv) The Committee is effective in carrying out its mandate v) Whether adequate independence of the Committee is ensured from the Board vi) Whether the Committee has fulfilled its functions as assigned by the Board and laws as may be applicable.

Evaluation Outcome of Board/Committee

The Board has performed on all the parameters and the Board of the Bank is well balanced in terms of diversity of experience and skill sets to meet the requirements of the Bank and also confirm to the Regulatory requirements.

The Directors had an elaborate discussion on the subject including the criteria for evaluation of Board. The assessment covered various components relating to aspects like the Structure and Composition of Board, its culture, processes and procedures, effectiveness, Financial Reporting and Internal Controls, Conflict of Interest and Compliance and Regulations. Almost all members gave the highest rating as " Good".

In almost all the committees the directors have rated on various parameters as good.

IV) Assessment of flow of information Criteria for Evaluation include:

The agenda and related information are circulated in advance of meetings to allow board members sufficient time to study and understand the information, Information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board, periodically etc. Update on the compliance with the regulatory, statutory or listing requirements are placed before the Board.

Evaluation Outcome

The assessment of the Members about the flow of information to the Board and its committees revealed that almost all members rated the flow under various dimensions as "Good".

Evaluation of Senior Management Personnel in the Bank

The compensation paid out to KMP is divided into two components. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span.

The variable compensation for Managing Director & CEO and Senior Executives (Non-Grander Compensation Package) is to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay will be paid purely based on performance and is measured through Score Cards for Managing Director & CEO / WTDs. Key Performance Indicators (KPAs) to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs.

An ED level Committee comprising of ED and Heads of Risk Division and HR Department ensures alignment of risk and financial control in Compensation in respect of employees.

• The Committee shall review the Compensation paid vis-a-vis risk taking by the Executives to ensure that prudent risk taking is recognized in the compensation framework

• The Committee shall analyse the risk reward correlation and ensures that excess risk taking is not encouraged

• The Committee shall review the performance based variable compensation paid every year and ensures that an optimum risk reward balance is maintained.

Meetings

During the year nine Board meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per the Listing Regulations.

Related Party Transactions

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Bank and were on arm's length basis. There were no materially significant related party transactions entered by the Bank with Related parties which may have a potential conflict with the interest of the Bank. All Related Party Transactions were placed before the Audit Committee of the Board for approval. Prior omnibus approval for transactions which are of repetitive nature is obtained from the Audit Committee and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.

The policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Bank and the link for the same is http://www.federalbank.co.in/ our-commitments

Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm's length basis, disclosures as per Form AOC-2 is not applicable to the Bank. There  were also no material contracts or arrangement or transactions at arm's length basis during the period.

Business Responsibility Report

As stipulated in the Listing Regulations the Business Responsibility Report describing the initiatives taken by the Bank from environmental, social and governance perspective forms part of the Annual Report.

Business Responsibility Report as stipulated under Regulation 34 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 has been hosted on the website of the Bank (https://www.federalbank.co.in/shareholder-information). Any Member interested in obtaining a physical copy of the same may write to the Company Secretary at the Registered Office of the Bank.

Technology and digital updates and measures taken in IT Governance, Information Security, IT Audit, IT Operations, IT Services outsourcing

Technology and Digital updates:

During the financial year 2018-19 your Bank focused extensively on Digital Banking. The Management Discussion and Analysis provides more details about the technical and digital updates of the bank during FY 2018-19

Information Technology (IT) Governance:

IT provides the strong foundation that enables your Bank to grow extensively and gain market share. In the following paragraphs, we provide more details of the entire governance structure over IT, with focus on information security.

IT governance is the processes that ensure the effective and efficient use of IT in enabling our organization to achieve its goals. It is an integral part of corporate governance and consists of the organizational structures, leadership and process that ensure IT sustains and extends the organization's strategy and objectives.

The governance of IT is effectively supervised by the Board of Directors through the IT & Operations Sub-Committee of the Board. The IT & Operations Committee, that meets on a quarterly basis, is chaired by an independent Non-Executive Director and has 2 Non-Executive Directors as members, along with the MD & CEO. All members of the Committee have extensive experience in IT & Operations and are able to provide effective guidance and direction to the management team.

Executive level committee which oversee the IT governance function include the Operations Risk Management Committee (ORMC), the Information Security Committee (ISC) and the Project Steering Committee (PSC). Implementation of large projects is overseen by dedicated Project Steering Committees.

Your Bank has a well-defined Information System Security Policy and a Cyber Security Policy. The effective implementation of these policies is supervised by the Information Security Committee and by the IT &

Operations Committee of the Board.

In recognition of the need for enhanced systems security, your Bank conducts a wide range of system audits, using internal and external auditors. These range from the quarterly Vulnerability Assessments (VA) and Penetration Testing (PT) to concurrent audits to an annual end to end audit of IT infrastructure. All the applications, both web based and mobile based apps exposed to internet are subjected to external penetration testing (PT) before releasing to use.

Bank has deployed best in the class infrastructure to provide availability of service to users and customers without fail. The installed infrastructure is tested for its reliability and robustness by periodic audits. In addition, periodic Disaster Recovery Tests are conducted to ensure the ability to move to the Disaster Recovery Infrastructure in the event of down time in the main production capability.

The Bank is conducting employee and customer awareness on cyber frauds, vishing/phishing attacks etc through SMS, E-Mails and popup messages in Banks' website and mobile banking applications. Bank has done separate awareness workshops for Directors on the cyber frauds and its impacts. As a measure to assess the effectiveness of awareness among employees Bank is conducting 'Redteam' exercises on a quarterly basis. Bank has implemented most of the Gopalakrishna Committee recommendations on Information Security, Electronic Banking, Technology Risk and Cyber Fraud. The progress of pending items for implementations are followed up for completion in a time bound manner.

Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo

The Bank has undertaken various initiatives for energy conservation at its premises, further details are given under Principle 6 of Section E of the Business Responsibility Report. The Bank prides itself on continuous investment in technology upgrades that are designed to deliver cost effective best in class customer service. The Bank has taken measures to improve the operational efficiency by adopting Robotic Process Automation technology that can enable a virtual workforce that works around the clock and can handle higher volumes with accuracy. Bank has made investments in blockchain technology and has gone live with remittance arrangement with one of the leading exchange houses in GCC. Bank has setup a Testing Center of Excellence (TCoE), an independent test organization within the Bank, to ensure quality of the bank applications and products. The Bank has used information technology extensively in its operations, for more details please refer the section on Technology and Digital Updates portion forming part of Management Discussion and Analysis. Through its export-financing operations, the Bank supports and encourages the country's export efforts.

Compliance with the ICSI Secretarial Standards

The Bank has complied with relevant Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) related to the Board Meetings and General Meeting during the year. Requirement for Maintenance of Cost Records

The Bank is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

Awards and Accolades

Your Bank has won various awards and accolades in the Financial Year 2018-19 also. These awards are actually a testimony of Bank's commitment on digital front with various initiatives which brought in acclaim from both customers and stakeholders.

Your Bank has won the best bank of year award at the Dhanam Banking and Finance Summit. Your Bank is one of front runners in adopting this technology. Your Bank's Cross Border Remittance Solution using blockchain technology was declared as Winner under the category "Emerging blockchain technology solution of the year" for BFSI innovative technology awards 2018. Bank was also adjudged winner of "best use of blockchain technology" at drivers of digital awards 2018. Your Bank won 1st prize in Best Technology Bank Award 2019 instituted by Indian Banks Association. NPCI National Payment Excellence award 2018 was awarded to your Bank.

Auditors

Statutory Audit

M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, carried out the statutory central audit of the Bank during Financial Year 2018-19. Additionally 1234 number of branches/ offices were subjected to branch statutory audit by various branch auditors appointed by the Bank. The statutory central/branch auditors audited all the branches and other offices of the Bank. The resolution for the appointment of M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, together with M/s M M Nissim & Co, Chartered Accountants, Mumbai, as the Joint Central Statutory Auditors of the Bank from the conclusion of the 88th Annual General Meeting till the conclusion of 89th Annual General Meeting is placed in the Notice to shareholders for AGM.

Secretarial Audit

The Board had in its meeting dated 13 March 2019, appointed M/s. SVJS & Associates, practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Financial Year ended 31 March 2019,in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report is annexed herewith as "Annexure III". With regard to Secretarial Auditors noting regarding delay of two days in filing Statement of Investor Complaints under Regulation 13(3), it was explained that the exchange (BSE) has taken on record the submission made by the Bank on the delayed filings.

Extract of Annual Return

Pursuant to Section 134 (2) (a) and Section 92 (3) of the Companies Act, 2013, the extract of the Annual Return in the prescribed format (MGT-9) is annexed as Annexure I to this Report. Further, the Annual Return of the Bank in the prescribed Form MGT-7 is available on the website of the Bank at the link: www.federalbank.co.in

Particulars of Employees

The statement containing particulars of employees as required under Section 197(12) of CA 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is available on the website: https://www.federalbank.co.in/ shareholder-information.

The ratio of the remuneration of each Director to the median remuneration of the employees of the Bank and other details in terms of Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure IV.

Stock Exchange Information

The Bank's Equity Shares are listed on:

1. BSE Limited, Phiroze Jeejeebhoy Towers.Dalal Street, Mumbai -400 001

2. National Stock Exchange Ltd. "Exchange Plaza", Bandra - Kurla Complex Bandra East, Mumbai - 400 051.

3. The GDRs issued by the Bank are listed on the London Stock Exchange.

The annual listing fees have been paid to all the Stock Exchanges mentioned above.

Director's Responsibility Statement

To the best of our knowledge and belief and according to the information and explanations obtained to us, the Directors make the following statements in terms of Section 134(3) (c) of the Companies Act, 2013:

a) that in the preparation of the annual financial statements for the year ended March 31, 2019, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2019 and of the profit of the Bank for the year ended on that date.

c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d) that the annual financial statements have been prepared on a going concern basis;

e) that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Your bank exhibited resilience during the unprecedented Kerala floods. The support given by your bank to the employees which in turn reciprocated by each employee to the customers, made your bank stand tall and proud, yet humble, during the most needy hour. We remember with gratitude the monumental support exhibited by various stakeholders of your bank in maintaining the business continuity.

Acknowledgement

The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, Rating Agencies and Stock Exchanges for their wholehearted support.

The Directors record their sincere gratitude to the Bank's shareholders, esteemed customers and all other well-wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.

 

For and on behalf of the Board of Directors

 

 

Aluva

Mr. Dilip Sadarangani (DIN- 06610897)

Date: 13 June 2019

Chairman of the Board

Annexures

Annexure I

Extract of Annual Return as on the financial year ended 31.03.2019

[Pursuant to Section 92(3) of the Companies Act, 2013, and Rule 12(1) of the Companies (Management and Administration) Rules, 2014]

FORM NO. MGT - 9

1. Registration and Other Details

CIN

L65191KL1931PLC000368

Registration Date

23 April 1931

Name of the Company

THE FEDERAL BANK LIMITED

Category/Sub-category of the Company

Company having Share Capital Non-Government Company

Address of the Registered Office and contact details

Federal Towers, P B NO 103, Aluva, Ernakulam - 683 101, Tel-0484 2630996 Email: secretarial@federalbank.co.in

Whether Listed company

Yes

Name address and contact details of Registrar and Transfer Agent

M/s. Integrated Registry Management Services Private Limited, 2nd Floor, Kences Towers,

No.1,Ramakrishna Street,

Off: North Usman Road.T Nagar, Chennai-600017,

Phone No: 044-28140801-03,

Email: csdstd@integratedindia.in

II. PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10% or more of the total turnover of the company shall be stated:-

SI. No

Name and Description of main products /services

NIC Code of the Product/ Service

% to total turnover of the Bank

1

Banking services and Financial Services

64191

100%

I. PARTICULARS OF SUBSIDIARY AND ASSOCIATE COMPANIES -

SI. No

Name and address of the Company

CIN/GLN

Holding /subsidiary/ associate

% of Shares held

Applicable Section

1.

Fed bank Financial Services Limited

U65910KL 1995PLC008910

Subsidiary

82.59%

2(87)

2.

Federal Operations and Services Limited

U74999KL 2018PLC055298

Subsidiary

100%

2(87)

3

IDBI Federal Life Insurance Company Limited

U66010MH 2007PLC167164

Associate

26%

2(6)

4

Equirus Capital Private Limited

U65910MH 2007PTC1 72599

Associate

8.74%

2(6)

IV. SHAREHOLDING PATTERN

 (Equity Share Capital Break up as percentage of Total Equity) (i) Category-wise Shareholding

Category of Shareholder

No. of shares held at the beginning of the year (as on 01.04.2018)

No. of shares held at the end of the year (as on 31.03.2019)

% Change during the year

Demat

Physical

Total

% of Total Shares

Demat

Physical

Total

% of Total Shares

A

SHAREHOLDING OF PROMOTER AND PROMOTER GROUP

 

 

 

 

 

 

 

 

 

(1)

Indian

 

 

 

 

 

 

 

 

 

a

Individual/Hindu Undivided Family

0

0

0

 

0

0

0

 

 

b

Central Government/State Government(s)

0

0

0

 

0

0

0

 

 

c

Bodies Corporate

0

0

0

 

0

0

0

 

 

d

Financial Institutions/Banks

0

0

0

 

0

0

0

 

 

e

Any other(specify)

0

0

0

 

0

0

0

 

 

 

SUB TOTAL A(1)

0

0

0

0.000

0

0

0

0.000

 

(2)

Foreign

 

 

 

 

 

 

 

 

 

a

lndividual(Non Resident/ Foreign Individuals)

0

0

0

 

0

0

0

 

 

b

Bodies corporate

0

0

0

 

0

0

0

 

 

c

Institutions

0

0

0

 

0

0

0

 

 

d

Any other(specify)

0

0

0

 

0

0

0

 

 

 

SUB TOTAL A(2)

0

0

0

0.000

0

0

0

0.000

 

 

Total Shareholding of promoter and Promoter Group(A)=A(1)+A(2)

0

0

0

 

0

0

0

 

 

B

Public Shareholding

 

 

 

 

 

 

 

 

 

(1)

Institutions

 

 

 

 

 

 

 

 

 

a

Mutual Funds/UTI

471569965

68750

471638715

23.920

439017853

74750

439092603

22.120

 

b

Financial Institutions/Banks (Including Foreign Banks)

47955939

95500

48051439

2.440

57399630

95500

57495130

2.900

 

c

Central Government/State Government(s)

10

0

10

0.000

10

0

10

0.000

 

d

Venture Capital Funds

 

 

 

 

 

 

 

 

 

e

Insurance Companies

36910880

0

36910880

1.870

32566530

0

32566530

1.640

 

f

Foreign Institutional Inves tors

766556319

203500

766759819

38.880

753544738

203500

753748238

37.970

 

g

Foreign Venture Capital Investors

 

 

 

 

 

 

 

 

 

h

Any other(specify)

 

 

 

 

 

 

 

 

 

 

Alternative Investments

16024921

0

16024921

0.810

7829371

0

7829371

0.390

 

 

SUB TOTAL B(1)

1339018034

367750

1339385784

67.920

1290358132

373750

1290731882

65.020

-2.900

(2)

Non-Institutions

 

 

 

 

 

 

 

 

 

a

Bodies Corporate (Including NBFCs)

60610301

378320

60988621

3.090

86157438

289320

86446758

4.350

 

b

lndividuals(ResidenVNRI/ Foreign National)

0

0

0

 

 

 

 

 

 

(i)

Individual shareholders holding Nominal share Capital upto Rs 1 Lakh

265605241

25986679

291591920

14.790

286304046

21330869

307634915

15.500

 

(ii)

Individual shareholders holding Nominal share Capital above Rs1 Lakh

197845380

3133350

200978730

10.190

232064700

1833020

233897720

11.780

 

c

Any other(specify)

 

 

 

 

 

 

 

 

 

a

Limited Liability Partnership

3366838

0

3366838

0.170

4388427

0

4388427

0.220

 

b

Trust

12111248

58800

12170048

0.620

8094021

58800

8152821

0.410

 

c

Overseas Corporate Bodies

0

6000

6000

0.000

0

0

0

 

 

d

Investor Education and Protection Fund

5056858

0

5056858

0.260

5680842

0

5680842

0.290

 

e

Foreign Body Corporate

3367241

0

3367241

0.170

0

0

0

 

 

f

Clearing Member

17183809

0

17183809

0.870

10269951

0

10269951

0.520

 

g

Directors

5123000

0

5123000

0.260

8568595

0

8568595

0.430

 

h

Foreign National/ QFI

0

0

0

0.000

4617

0

4617

0.000

 

 

SUB TOTAL B(2)

570269916

29563149

599833065

30.420

641532637

23512009

665044646

33.500

3.080

 

Total Public Share Holding (B) = B(1) + B(2)

1909287950

29930899

1939218849

98.330

1931890769

23885759

1955776528

98.530

0.200

 

TOTAL(A) + (B)

1909287950

29930899

1939218849

98.330

1931890769

23885759

1955776528

98.530

 

C

Shares held by Custodians for GDRs and ADRs

32925590

0

32925590

1.670

29273675

0

29273675

1.470

 

 

Grand Total (A)+(B)+(C)

1942213540

29930899

1972144439

100.000

1961164444

23885759

1985050203

100.000

0.000

 

(ii) Shareholding of Promoters

SI No.

Shareholders Name

Shareholding at the beginning of the year

Shareholding at the end of the year

% change in shareholding during the year

No. of shares

% of total shares of the company

% of shares pledged/ encumbered to total shares

No. of shares

% of total shares of the company

% of shares pledged /encumbered to total shares

 

 

 

NIL

 

 

 

 

 

 

(iii) Change in Promoters Shareholding

SI No.

 

Shareholding at the beginning of the year

Cumulative Shareholding during the year

No. of shares

% of total shares of the company

No. of shares

% of total shares of the company

 

At the beginning of the year

 

 

 

 

 

Date wise Increase/ Decrease in Shareholding during the year specifying the reasons for increase /decrease (e.g. allotment /transfer/ bonus/ sweat equity etc):

 

NIL

 

 

 

At the End of the year

 

 

 

 

(iv) Shareholding Pattern of top ten shareholders (other than Directors, Promoters and Holders of GDRs and ADRs)

SI No.

For Each of the Top 10 Shareholders

Shareholding at the beginning of the year (1 April, 2018)

Shareholding at the end of the year (31 March,2019)

No. of shares

% of total shares of the company

No. of shares

% of total shares of the company

1

ICICI Prudential

65699449

3.33

80051471

4.03

2

Yusuffali Musaliam Veettil Abdul Kader

74828640

3.79

74828640

3.77

3

Reliance Capital Trustee Co Ltd

42660864

2.16

70083976

3.53

4

HDFC Trustee Company Ltd

71340720

3.62

57758817

2.91

5

East Bridge Capital Master Fund Limited

48345447

2.45

48345447

2.44

6

Amansa Holdings Private Limited

58001055

2.94

47161424

2.38

7

Life Insurance Corporation of India

40344910

2.05

45799910

2.31

8

Rakesh Jhunjhunwala

34771060

1.76

44721060

2.25

9

East Bridge Capital Master Fund I Ltd

Nil

0.00

37729342

1.90

10

Aditya Birla Sun Life Trustee Private Limited

41943687

2.13

35224187

1.77

11

Fidelity Investment Trust

29526202

1.50

34320594

1.73

12

Bank Muscat India Fund

33351210

1.69

33351210

1.68

Note:

1. The shares of the Bank are substantially held in dematerialized form, and are traded on a daily basis and hence the date wise increase/decrease in shareholding is not indicated.

2. The top ten shareholders after consolidation of shares held by the institutions/individuals based on the PAN, as on 31st March 2019 is considered for the above purpose.

V.Shareholding of Directors and Key Managerial Personnel

For Each of the Directors and KMP

Shareholding at the beginning of the year

Cumulative Shareholding during the year

No. of shares

% of total shares of the company

No. of shares

% of total shares of the company

Mr. Shyam Srinivasan, MD & CEO

 

 

 

 

Shareholding at the beginning of the year (as on 01.04.2018)

48,81,000

0.25

48,81,000

0.25

lncrease(purchase of ESOS shares on 07.06.2018)*

35,27,570

0.18

84,08,570

0.42

Decrease(Sale of shares on 12.09.2018)

2,00,000

0.01

82,08,570

0.41

Increase (purchase of shares on 16.11.2018)*

25

0.00

82,08,595

0.41

Shareholding at the end of the year (as on 31.03.2019)

82,08,595

0.41

82,08,595

0.41

Mr. Ashutosh Khajuria, ED & CFO

 

 

 

 

Shareholding at the beginning of the year (as on 01.04.2018)

2,42,000

0.01

2,42,000

0.01

lncrease(purchase of ESOS shares on 29.05.2018)

1,00,000

0.01

3,42,000

0.02

Decrease (Sale of shares on 27.07.2018)

1,30,000

0.01

2,12,000

0.01

Decrease (Sale of shares on 24.10.2018)

1,00,000

0.01

1,12,000

0.01

Decrease (Sale of shares on 02.11.2018)

50,000

0.00

62,000

0.00

lncrease(purchaseof ESOS shares on 3.12.2018)

1,60,000

0.01

2,22,000

0.01

Decrease (Sale of shares on 12.02.2019)

1,00,000

0.01

1,22,000

0.01

lncrease(purchase of ESOS shares on 28.02.2019)

2,00,000

0.01

3,22,000

0.02

Shareholding at the end of the year (as on 31.03.2019)

3,22,000

0.02

3,22,000

0.02

Mr. Girish Kumar G, Company Secretary

 

 

 

 

Shareholding at the beginning of the year (as on 01.04.2018)

16,290

0.00

16,290

0.00

lncrease(purchase of ESOS shares on 01.08.2018)

7,000

0.00

23,290

0.00

Decrease (Sale of shares on 07.08.2018)

3,400

0.00

19,890

0.00

Increase (purchase of ESOS shares on 14.09.2018)

7,500

0.00

27,390

0.00

Decrease (Sale of shares on 30.10.2018)

3,000

0.00

24,390

0.00

Decrease (Sale of shares on 29.11.2018)

1,200

0.00

23,190

0.00

Decrease (Sale of shares on 03.12.2018)

500

0.00

22,690

0.00

Decrease (Sale of shares on 14.12.2018)

2,200

0.00

20,490

0.00

Decrease (Sale of shares on 19.12.2018)

1,800

0.00

18,690

0.00

Decrease (Sale of shares on 24.12.2018)

700

0.00

17,990

0.00

Increase (purchase of ESOS shares on 02.01.2018)

3,000

0.00

20,990

0.00

Decrease (Sale of shares on 01.02.2018)

4,100

0.00

16,890

0.00

Increase (purchase of ESOS shares on 07.03.2018)

5,500

0.00

22,390

0.00

Decrease (Sale of shares on 29.03.2018)

500

0.00

21,890

0.00

Shareholding at the end of the year (as on 31.03.2019)

21,890

0.00

21,890

0.00

Mr. K Balakrishnan, Director

 

 

 

 

Shareholding at the beginning of the year (as on 01.04.2018)

0

0.00

0

0.00

Increase (purchase of shares on 13.04.2018)

32,000

0.00

32,000

0.00

Increase (purchase of shares on 7.9.2018)

6,000

0.00

38,000

0.00

Shareholding at the end of the year (as on 31.03.2019)

38,000

0.00

38,000

0.00

NOTE: 1. None of the Non-Executive Independent Directors of the Bank hold shares of the Bank as at beginning and at end of the year except Mr K Balakrishnan who holds 38,000 shares as on 31st March 2019.

2. *as per the value approved by the Nomination, Remuneration, Ethics and Compensation Committee of the Board and paid by MD &CEO. 3. For purchase of ESOS the date of allotment has been taken and mentioned.

VI. INDEBTEDNESS

Indebtedness of the Company including interest outstanding / accrued but not due for payment

(Rs in Crore)

 

Secured Loans excluding deposits

Unsecured Loans

Total Indebtedness

Indebtedness at the beginning of the financial year

 

 

 

i) Principal Amount

2,603.33

6,245.88

8,849.22

ii) Interest due but not paid

-

-

-

iii) Interest accrued but not due

7.93

64.61

72.54

Total (i+ ii+ iii)

2,611.26

6,310.49

8,921.76

Change in Indebtedness during the financial year

 

 

 

• Addition

2,04,498.68

65,270.65

2,69,769.33

• Reduction

206,495.42

66,487.31

2,72,982.74

Net Change

-1,996.74

-1,216.66

-3,213.40

Indebtedness at the end of the financial year

 

 

 

i) Principal Amount

613.34

5,052.00

5,665.34

ii) Interest due but not paid

 

 

 

iii) Interest accrued but not due

1.18

41.83

43.01

Total (i+ii + iii)

614.52

5,093.83

5,708.35

VII. REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

A.Remuneration to Managing Director, Whole -time Directors and/or Manager:

SI. No

Particulars of Remuneration

Name of MD/WTD/Manager

Total Amount (in Rs)

Mr.Shyam Srinivasan (MD & CEO)

Mr. Ashutosh Khajuria(ED & CFO)

Mr. Ganesh Sankaran %

1.

Gross salary

 

 

 

 

(a)

Salary as per provisions contained in section 17(1) of the Income- tax Act, 1961

1,20,00,000.00

22,00,008.00

18,79,935.72

1,60,79,943.72

(b)

Value of perquisites u/s 17(2) Income-tax Act, 1961

14,39,608.00

10,99,948.00

87,732.00

26,27,288.00

(c)

Profits in lieu of salary under section 17(3) Income-tax Act, 1961

 

 

 

 

2.

Stock Option *** (perquisite value of ESOS)

14,57,54,251.25

1,96,24,700.00

NIL

16,53,78,951.25

3.

Sweat Equity

NIL

NIL

NIL

NIL

4.

Commission As % of profit Others, specify...

NIL

NIL

NIL

NIL

5.

Others, please specify

 

 

 

 

i)

Leave encashment

33,333.00

5,66,667.00

13,38,889.00

19,38,889.00

ii)

Leave travel concession

NIL

4,00,000.00

NIL

4,00,000.00

iii)

Performance Linked Incentive

NIL

NIL

NIL

NIL

IV)

House Rent Allowance

-

-

14,77,132.00

14,77,132.00

v)

Personal Fixed Pay

-

45,99,999.96

40,39,284.00

86,39,283.96

 

Total**

13472941.00

8866622.96

88,22,972.72

3,11,62,536.38

 

Ceiling as per the Act

NA

NA

NA

 

** Does not include the value of stock options exercised during the year, if any

*** This includes stock options granted and vested in previous years, and exercised during the last financial year % Resinged from the Board of the Bank w.e.f 15.02.2019

Note: 1. In addition to above, Provident Fund of Rs1200000.00 was made in respect of Mr. Shyam Srinivasan, MD & CEO, Rs 2,20,001.00 was made in respect of Mr. Ashutosh Khajuria, Executive Director & CFO and Rs 1,87,994.00 to Mr. Ganesh Sankaran, erstwhile Executive Director during FY 2018-19. 1.During FY 2018-19, MD & CEO relinquished his entire ESOS eligibility and offered his grant to the ESOS pool.

2. The options relating to ESOS 2010 Scheme were availed by MD & CEO and ED before it lapsed, in accordance with terms of the scheme. External financing was availed by them for exercising the ESOS options. Perquisite tax has been paid by MD & CEO, Mr. Shyam Srinivasan and Executive Director Mr. Ashutosh Khajuria, on an amount of 14,57,54,251.25 and 1,96,24,700.00 respectively relating to perquisite for ESOS.

B. Remuneration to other directors:

SI. No

Particulars of Remuneration

Name of Directors

Total Amount (in Rs)

Mr. Dilip Sadarangani

CA. Nilesh Vikamsey

Mr. Harish Engineer"

Ms. Grace Koshie

Ms. Shub-halakshmi Panse

Mr. C Balagopal

Mr. A P Hota

Mr. Deepak Mahesh-wari %%

Mr. K Bal-akrishnan%

1

Independent Directors

 

 

 

 

 

 

 

 

 

 

 

• Fee for attending board and committee meetings

1,993,871®

1,820,000

525,000

2,090,000

2,180,000

1,100,000

1,685,000

625,000

690,000

12,708,871

 

• Commission

 

 

 

 

 

 

 

 

 

 

 

• Others, please specify (Remuneration with RBI approval)

 

 

 

 

 

 

 

 

 

 

 

Total (1)

1,993,871®

1,820,000

525,000

2,090,000

2,180,000

1,100,000

1,685,000

625,000

690,000

12,708,871

 

Sweat Equity

 

 

 

 

 

 

 

 

 

 

2

Other Non - Executive Directors

 

 

 

 

 

 

 

 

 

 

 

• Fee for attend ing board committee meetings

 

 

 

 

 

 

 

 

 

 

 

• Commission

 

 

 

 

 

 

 

 

 

 

 

• Others , please specify

 

 

 

 

 

 

 

 

 

 

 

Total (2)

 

 

 

 

 

 

 

 

 

 

 

Total (B) = (1+2)

1,993,871®

1,820,000

525,000

2,090,000

2,180,000

1,100,000

1,685,000

625,000

690,000

12,708,871

 

Total Managerial Remuneration

 

 

 

 

 

 

 

 

 

 

 

Overall Ceil ing as per the Act^

 

 

 

 

 

 

 

 

 

 

Note:® Includes an amount of Rs 333871 paid as remuneration with the approval of Board and RBI during the year to Mr. Dilip Sadarangani, who is the Chairman of the Board of the Bankw.e.f 25 January 2019.

% - Mr K Balakrishnan joined as Independent Director on the Board of the Bank w.e.f 25 September 2018.

%%- Mr Deepak Maheshwari resigned from the Board of the Bank w.e.f 01 January 2019

# #- Mr. Harish Engineer retired from the Board of the Bank w.e.f 01st October 2018.

Section 197 of the Companies Act, 2013 does not by virtue of section 35B (2A) of the Banking Regulation Act, 1949, apply to Banking companies

C. Remuneration To Key Managerial Personnel Other Than MD/ MANAGER/WTD

SI. No

Particulars of Remuneration

Name of Key Managerial Personnel

Total Amount

 

 

Girish Kumar Ganapathy(SVP CUM COMPANY SECRETARY)

 

1.

Gross salary

 

 

 

a) Salary as per provisions contained in section 17(1) of the Income-tax Act, 1961

28,98,787.83

28,98,787.83

 

b) Value of perquisites u/s 17(2) Income-tax Act, 1961

32,400.00

32,400.00

 

c) Profits in lieu of salary under section 17(3) Income-tax Act, 1961

 

 

2.

Stock Option *** (perquisite value of ESOS)

6,40,450.00

6,40,450.00

3.

Sweat Equity

 

 

4.

Commission

 

 

 

As % of profit

-

-

5.

Others , please specify Performance Linked Incentive

2,80,000.00

2,80,000.00

 

Total**

3211187.83

3211187.83

** Does not include the value of stock options exercised during the year, if any

*** This includes stock options granted and vested over several previous years, but exercised during the last financial year.

VIII. Penalties / Punishment / Compounding of offences:

Type

Section of the Companies Act

Brief description

Details of penalties / punishment/ compounding fees imposed

Authority (RD/NCLT/ Court)

Appeal made, if any (give details)

A. COMPANY

Penalty

 

 

 

 

 

Punishment

 

 

None

 

 

Compounding

 

 

 

 

 

B. DIRECTORS

Penalty

 

 

 

 

 

Punishment

 

 

None

 

 

Compounding

 

 

 

 

 

C. OTHER OFFICERS IN DEFAULT

Penalty

 

 

 

 

 

Punishment

 

 

None

 

 

Compounding

 

 

 

 

 

Penalty has been levied by RBI aggregating to an amount of Rs 500.28 lakhs (aggregate amount of Rs 4.74 lakhs for Year FY 2017-18) for various regulatory issues such as penalty on currency chest, penalty relating imposed for violations of RBI guidelines, directions etc. observed during statutory inspection of the Bank with reference to financial position as on March 31, 2017 paid during FY 2018-19.

Annexure II

1 .Composition of the CSR Committee

CSR Committee of the Board

Every company having net worth of rupees five hundred crore or more, or turnover of Rupees One Thousand Crore or more or a net profit of Rupees Five Crore or more during any financial year shall constitute a Corporate Social Responsibility Committee of the Board, consisting of three or more directors, out of which at least one director shall be an independent director. CSR Committee of the Board consists of three independent directors, MD & CEO and Executive Director of the Bank. As on 31 March 2019 the Committee consists of:

Mr. A. P Hota (Chairman)

• Mr. K Balakrishnan (Director)

• Mr. Shyam Srinivasan (MD & CEO)

• Mr. Ashutosh Khajuria (Executive Director)

2. A brief outline of the company's CSR policy, including overview of projects or programs undertaken and a reference to the web-link to the CSR Policy and Projects or Programs.

For us in Federal Bank, reaching out to people who needs assistance is part of the values passed by our founder. The objectives we intend to achieve through CSR programs aims at developing communities and environment sustainability to create a protected future for the generations to come. The Corporate Social Responsibility activities of the Bank touches a wider footprint through areas like Health, Education, Women empowerment, Environment Sustainability and other activities permitted by the Schedule VII of the Companies Act, 2013.

Objectives of CSR

• To make meaningful contribution for the improvement of those lying at the bottom of social pyramid and thereby act as socially conscious, well governed and successful corporate citizen of the country.

• To ensure that the activities undertaken will bring maximum relief to the intended beneficiaries and thereby contribute to the long term development of the society, by providing socially and environmentally sustainable benefits, measurable in economic terms, demonstrating the social commitment of the Bank in the same manner it services the customers, employees and shareholders.

CSR Initiatives covered by the policy include:

1. Poverty alleviation

2. Education and skill development

3. Gender equality and welfare of senior citizen

4. Ensuring environmental sustainability and ecological balance

5. Protection of National Heritage

6. Benefit of Armed Force veterans

7. Promote rural, nationally recognized Paralympicsand Olympic sports

8. Contribution to Prime Minister's National Relief Fund or any other fundsset up by the Central Government.

9. Providing financial assistance to technology incubators

10. Development projects for rural and slum areas

11. Prevention of Child Abuse & Child labor

12. Support to Swatch Bharat

13. Promotion of Digitization

The above objectives are broad based, and will be construed in a liberal manner within the framework of the Act.

Core CSR activities for the Financial Year 2018-19

Existing

New Additions

Youth engagement

Women empowerment

Education

Digitization

Promoting Vocational Skills

Support to Swatch Bharat Mission

Healthcare

 

The detailed policy on CSR of the Bank and projects or programs is published in the Bank's website and the web link to it is: http//www. federalbank.co.in/our-commitments.

3. Net Profit before Tax of the Company for the last three financial years

Year

Net Profit(Before Tax)

2016

Rs 719.65 Cr.

2017

Rs 1306.50 Cr.

2018

Rs 1343.86 Cr.

4. Prescribed CSR Expenditure (two per cent of the amount as in Item 3 above)

Average Net Profit calculated for three preceding financial years is Rs 1123.34 Cr. Out of this 2% of Average Net Profit for three preceding financial years comes to Rs 22.47 Cr.

Details of CSR spent during the financial year

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

SI.No

CSR project or activity identified

Sector in which the project is covered

Projects or programs (1) Local area or other (2) Specify the State and district where projects or programs was undertaken

Amount outlay (budget) project or program wise (in lakhs)

Amount spent on the projects or programs Sub heads: (1) Direct expenditure on projects or programs (2) Overheads (in lakhs)

Cumulative expenditure up to the reporting period (in lakhs)

Amount Spent direct or through implementing agency (in lakhs)

1

Education, & Skill Building

Promoting Education, Vocational Skills, Youth Engagement

Pan India

1531.79

1167.19

3809.73

Directly by the Bank . As given in column (6)

2

Scholarships through Federal Bank Hormis Me morial Foundation

Promoting Education

Kerala, Tamilnadu, Maharashtra, Gujarat

202.00

137.07

653.82

Directly by the Bank . As given in column (6)

3

Health Care & Safety

Healthcare, Preventive Healthcare,

Pan India

200.00

67.82

378.74

Directly by the Bank As given in column (6)

4

Welfare, Poverty Alleviation & Women empowerment

Eradicating hunger, poverty, setting up homes

Pan India

120.00

288.19

154.30

Directly by the Bank As given in column (6)

5

Environment Sus-tainability/Swachh Bharat

Environment Conservation Swachh Bharat

Pan India

122.00

24.4

220.61

Directly by the Bank As given in column (6)

6

Rural Development

Rural & Social Development, welfare of SC/ST

Pan India

120.00

9.47

337.24

Directly by the Bank As given in column (6)

7

Miscellaneous (Overheads)

 

 

10.00

10.01

19,96

 

 

Total

 

 

2305.79

1704.15

5574.40

 

Corporate Social Responsibility is an area that can help, build value system among employees and make them feel part of social change. With this objective, the Bank had decided to involve staff members as part of our employee social responsibility initiatives. As part of this, welfare projects were successfully completed with the active participation of employees pan India on Founder's Day. Many other projects were successfully completed with the active participation of employees across the country like Digitizing the Nilavarapatti Village, and undertaking many infrastructural developmental activities at the village. To meet the location specific requests emanating from the field, 20% of the total CSR budget would be earmarked. Several major projects that can have long term impact were selected during the year; some of the major initiatives rolled out during the year were Speak for India Season 4 that touched more than 122000 students in Kerala, Karnataka, Maharashtra& Tamilnadu and gave a platform for many students to develop their communication skills and confidence levels. Bank started the Federal Skill Academy at Ernakulam and Coimbatore aimed at up skilling hundreds of youth in alignment with the Skill India Mission of the Government. This Financial Year we have opened two more Skill Academies at Kolhapur & Karnal to extend our Skill Development activities to the states Maharashtra & Haryana. In line with our commitment to conserve environment and natural resources we partnered with Mathrubhumi for the SEED project. Apart from this we also supported several organizations across India who are engaged in Philanthropic/social activities. Our objective remains to associate with projects that help to uplift the downtrodden and the needy sections in the society and to passionately involve in such activities that bring about obvious positive change in the society that will nurture and nourish the future generations and aim at creating significant difference in the overall socio-economic development and environment sustainability. Having spent 75.86% (amount spent Rs 17.04 Cr.) this year towards CSR as per section 135 of the Companies Act 2013, your Bank is committed to increase its CSR impact by selecting projects that have long term sustainability.

The Bank has budgeted for an amount of Rs 23.06 Cr. (Allocated funds Rs 22.47 Cr.). But could spend only Rs 17.04 Cr. Even though the Bank had planned for digitization & Village adopt ion of four villages, we could complete only one village in FY 2018-19 due to the natural calamities affected Kerala during August 2018 which resulted in shifting our focus to rehabilitate the affected people. We are continuing with Adoption & Digitization of more villages in FY 2019-20. We could not spent allocated amount as Scholarship since most of the students selected were studying at Govt Institutions which has comparatively lower fee structure. In the healthcare sector, our long term project partners postponed their fund requirements in FY 2018-19 due to Kerala Flood and these funds will be released in FY 2019-20. Bank has already sanctioned various CSR projects which are devised to give sustained support. Our objective through corporate social initiatives is to bring out marked difference in the upliftment of the society and the world we live in. Your Bank is passionately involved in such activities that create obvious positive change in the society and will nurture and nourish the future generations.

The CSR Committee confirms that the implementation and monitoring of CSR Policy is in compliance with CSR objectives and Policy of the Bank

Sd/-

Sd/-

Mr. Shyam Srinivasan

Mr A P Hota

(Managing Director & Chief Executive Officer)

(Chairman CSR Committee)

Annexure

Form No. MR-3

SECRETARIAL AUDIT REPORT

FOR THE FINANCIAL YEAR ENDED 31.03.2019

[Pursuant to Section 204 (1) of the Companies Act, 2013 and Rule No.9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]

To

The Members,

The Federal Bank Ltd.

Federal Towers, P.B. No. 103 Alwaye-683101

We, SVJS & Associates, Company Secretaries, have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by The Federal Bank Ltd. [ON: L6B191KL1931PLC000368] (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/ statutory compliances and expressing our opinion thereon.

Based on our verification of the books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, We hereby report that in our opinion, the Company has, during the audit period covering the financial year ended on 31.03.2019, complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books.forms and returns filed and other records maintained by The Federal Bank Ltd. ("the Company") for the financial year ended on 31.03.2019 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under;

(ii) The Securities Contracts (Regulation) Act, 1956 ('SCRA) and the rules made thereunder;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed thereunder;

(iv) Foreign Exchange Management Act, 1999 and the rules and regulations made thereunder to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 ('SEBI Act'):-

a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015

c) The Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014

d) The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008

e) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act and dealing with client;

f) The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015;

g) The Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 and The Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to the extent applicable.

(vi) As informed to us, the following other laws are specifically applicable to the Company.

1. The Banking Regulation Act, 1949 and Banking Regulation (Companies) Rules, 1949

2. Reserve Bank of India Act, 1934

3. The Banking Ombudsman Scheme, 2006

4. The Bankers' Books Evidence Act, 1891

5. The Banking Companies (Period of Preservation of Records) Rules, 1985

6. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and The Security Interest (Enforcement) Rules, 2002

7. The Prevention of Money-Laundering Act, 2002 and The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005

8. The Industrial Disputes (Banking and Insurance Companies) Act, 1949

9. The Deposit Insurance and Credit Guarantee Corporation Act,1961 and The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961

10. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and

11. Credit Information Companies (Regulation) Act, 2005

We have also examined compliance with the applicable clauses of the following:

(i) Secretarial Standards land 2 issued by The Institute of Company Secretaries of India;

(ii) The Listing Agreements entered into by the Company with Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

During the period under review, the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above. There has been delay of two days in filing statement on investor complaints under Regulation 13 (3) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015. The Exchange (BSE) has taken on record the submission made by the listed entity on the delayed filing.

We further report that the Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act.

Adequate notice is given to all directors to schedule the Board Meetings, agenda and detailed notes on agenda were sent at least seven days in advance.and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

All decisions of the board were unanimous and the same was captured and recorded as part of the minutes.

We further report that there are adequate systems and processes in the Company commensurate with its size and operations of the Company to monitor and ensure compliance with applicable laws, rules, regulations and guidelines.

We further report that during the audit period there were no instances of:

i. Public/Right/Preferential issue of shares/debentures/sweat equity;

ii. Redemption/Buy-back of securities;

iii. Merger/amalgamation/ reconstruction;

iv. Foreign technical collaborations.

During the period, the following issues have taken place:-

SI. No.

Method of Issue

Mode of Approval

Date of Approval

Number of shares issued/Amount

1

Issue of Debt Securities

Shareholders' approval by way of special resolution at Annual General Meeting

10.08.2018

Shareholders' approval obtained for borrowing/raising funds in Indian currency by way of issue of debt instruments upto Rs 8000 Crore.

During the aforesaid period, a resolution was passed under Section 180 (1) (c) of the Companies Act, 2013, at the Annual General Meeting held on 10.08.2018 increasing the borrowing powers to Rs 12,000 Crore over and above the paid up capital and free reserves including securities premium.

This report is to be read with Annexure A of even date and the same forms an integral part of this report.

 

For SVJS & Associates

 

Company Secretaries

 

CS Vincent P.O.

Kochi

Managing Partner

13.06.2019

CP No.: 7940, FCS: 3067

Annexure A

ANNEXURE TO THE SECRETARIAL AUDIT REPORT OF EVEN DATE

To

The Members

The Federal Bank Ltd.

Federal Towers, P.B. No. 103 Alwaye-683101

Our Secretarial Audit Report of even date is to be read along with this letter.

1. Maintenance of the secretarial records is the responsibility of the management of the Company. Our responsibility as Secretarial Auditors is to express an opinion on these records, based on our audit.

2. During the audit, we have followed the practices and processes as were appropriate, to obtain reasonable assurance about the correctness of the contents of the secretarial records. We believe that the process and practices we followed provide a reasonable basis for our report.

3. The correctness and appropriateness of financial records and Books of Accounts of the Company have not been verified.

4. We have obtained the Management Representation about the compliance of laws, rules and regulations and happening of events etc., wherever required.

5. The compliance of the provisions of corporate and other applicable laws, rules, regulations, standards etc. is the responsibility of management. Our examination was limited to the verification of the procedures and compliances on test basis.

6. While forming an opinion on compliance and issuing the Secretarial Audit Report, we have also taken into consideration the compliance related actions taken by the Company after 31st March 2019 but before issue of the Report.

7. We have considered actions carried out by the Company based on independent legal/professional opinion as being in compliance with law, wherever there was scope for multiple interpretations.

 

For SVJS & Associates

 

Company Secretaries

Kochi

CS Vincent P.O.

13.06.2019

Managing Partner

 

CP No.: 7940, FCS: 3067

Annexure IV

The ratio of the remuneration of each director to the median employee's 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

Sr. No

Requirements

Disclosure

1.

The Ratio of Remuneration of each Director to the Median Remuneration of Employees for the Financial Year®

Mr. Shyam Srinivasan, MD & CEO : 18.42

Mr. Ashutosh Khajuria, ED & CFO: 12.12

Mr. Ganesh Sankaran, ED : 12.06

2.

The percentage increase in remuneration of each director(MD/ED), Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year

Mr. Shyam Srinivasan, MD & CEO: 0.25%

Mr. Ashutosh Khajuria, ED & CFO : 5.47%

Mr. Ganesh Sankaran, ED :1.35%

Mr. Girish Kumar Ganapathy, CS : 7.50%

3.

The percentage increase* in the median remuneration of employees in The financial year

4.21%

4.

The number of permanent employees on the rolls of company

12227

5.

Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration

The average percentage increase made in the Salary of total employees other than the KMP for the financial year is around 4.21 %, while the average increase in the remuneration of KMP's are as follows MD & CEO : 0.25% ED & CFO : 5.47% ED: 1.35%

6.

The key parameters for any variable component of remuneration availed by the directors

The variable compensation for Managing Directors CEO and Senior Executives (Non - IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the Revenue Point Index/ Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay will be paid purely based on performance and is measured through Score Cards for Managing Director & CEO / WTDs. The Score Card provides a mix of financial and Non Financial, Quantitative and Qualitative Metrics. KPAs to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs.

7.

Affirmation that the remuneration is as per the remuneration policy of the Bank

Yes, it is confirmed.

Note:

1. Have considered the Fixed Pay for the computation of ratios.

2. Fixed Pay includes Basic Salary, Allowances and value of Perquisites computed as per Income Tax rules but excludes Gratuity, PF and Perquisite values on ESOP.

@ - The sitting fees paid to other directors are not considered for this calculation.

Annexure V

Form AOC 1

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES AND ASSOCIATES/JOINT VENTURES OF THE BANK AS ON MARCH 31, 2019

PURSUANT TO FIRST PROVISION TO SUB-SECTION (3) OF SECTION 129 READ WITH RULE 5 OF COMPANIES (ACCOUNTS) RULES, 2014)

STATEMENT CONTAINING SALIENT FEATURES OF THE FINANCIAL STATEMENT OF SUBSIDIARIES / ASSOCIATE COMPANIES / JOINT VENTURES

PART "A": SUBSIDIARIES

1.

SI. No.

1

2

2.

Name of the subsidiary:

Fedbank Financial Services Limited

Federal Operations and Services Limited

3.

The date since when subsidiary was acquired

17/04/1995

26/10/2018

4.

Reporting period for the subsidiary concerned, if different from the holding company's reporting period.

NA

NA

5.

Reporting currency and Exchange rate as on the last date of the relevant Financial year in the case of foreign subsidiaries.

NA

NA

6.

Share Capital

2,300,425

50,000

7.

Reserves & surplus

2,321,957

(2859)

8.

Total assets

21,285,345

56,968

9.

Total Liabilities

16,662,963

9,827

10.

Investments

125,050

 

11.

Turnover

2,589,181

12,875

12.

Profit before taxation

493,474

(3354)

13.

Provision for taxation

14,2656

(495)

14.

Profit after taxation

350,818

(2859)

15.

Proposed Dividend

NIL

NIL

16.

Extent of shareholding (in%)

82.59

100

Notes:

1. Names of subsidiaries which are yet to commence operations - NIL

2. Names of subsidiaries which have been liquidated or sold during the year. - NIL

PART "B": ASSOCIATES AND JOINT VENTURES

STATEMENT PURSUANT TO SECTION 129 (3) OF THE COMPANIES ACT, 2013 RELATED TO ASSOCIATE COMPANIES AND JOINT VENTURES

SI. No.

Name of Associates/Joint Ventures

IDBI Federal Life Insurance Company Limited

Equirus Capital Private Limited

1

Latest audited Balance Sheet

31/03/2019

31/03/2019

2

Date on which the Associate or Joint Venture was associated or acquired

23/11/2006

12/07/2018

3

Shares of Associate/Joint Ventures held by the company on the year end

 

 

 

Number of shares held

208,000,000

3,600,000

 

Amount of Investment in Associates/Joint Venture (Rs '000)

2,080,000

68,490

 

Extent of Holding (in%)

26%

8.74%

4

Description of how there is significant influence

Investment more than 20%

Right of proportionate representation in the Board as well as power to participate in the financial/ operational matters like approval of business plan, policies, budgets, managerial remuneration, change in KMP etc

5

Reason why the associate/joint venture is not consolidated

NA

NA

6

Networth attributable to Shareholding as per latest audited Balance Sheet (Rs '000)

2,373,419

37,488

7

Profit/ Loss for the year 2018-19 (Rs '000)

 

 

 

i. Considered in Consolidation

350,238

5,386

 

ii. Not Considered in Consolidation

977,486

35,614

1. Names of associates or joint ventures which are yet to commence operations - NIL

2. Names of associates or joint ventures which have been liquidated or sold during the year - NIL.

 

For and on behalf of the Board of Directors

Krishnakumar K Girish Kumar Ganapathy

Ashutosh Khajuria

Shyam Srinivasan

Senior Vice President Company Secretary

Executive Director & CFO

Managing Director & CEO

 

(DIN:051 54975)

(DIN: 02274773)

Dilip G Sadarangani

 

 

Chairman

 

 

(DIN: 06610897)

 

 

Directors:

 

 

Nilesh S Vikamsey (DIN: 00031213)

Grace Elizabeth Koshie (DIN: 06765216)

Shubhalakshmi Panse (DIN: 02599310)

C Balagopal I

[DIN: 00430938)

A P Hota (DIN: 02593219)

K Balakrishnan I

[DIN: 00034031)

Place: Mumbai

 

 

Date: 4 May, 2019

 

 

Annexure VI

DIVIDEND DISTRIBUTION POLICY

I. OBJECTIVE:

Securities and Exchange Board of India (SEBI) has, on July 08, 2016, notified the SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2016. Through this notification, SEBI has inserted Regulation 43A after Regulation 43 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 {SEBI (LODR) Regulations}. As per the regulation, the top five hundred listed entities based on market capitalization, as on March 31 of every financial year, are required to formulate a Dividend Distribution Policy which should be disclosed in their annual reports and on their website.

In terms of Regulation 43A of SEBI (LODR) Regulations, it is mandatory for the Bank to frame the Dividend Distribution Policy, as it falls within the top BOO listed entities as on March 31, 2018 in terms of market capitalization. Accordingly, the following 'Dividend Distribution Policy' has been framed, approved and adopted by the Board of Directors of the Bank.

II. POLICY:

1. The Policy will be called as " Federal Bank Dividend Distribution Policy'.

2. General Principles of the Bank regarding distribution of dividend

The intent of the Bank is to reward the shareholders of the Bank by sharing a portion of the profits, whilst also ensuring that sufficient funds are retained for growth of the Bank. The dividend for each year would be recommended by the Board at its discretion within the set guidelines of Government and Reserve Bank of India and after taking into account the financial performance of the Bank, its future plans, internal and external factors, compliance with Companies Act 2013 and its rules, statutory restrictions, etc, for approval by the shareholders in General Meeting.

3. Eligibility criteria for declaration of dividend

As per the guidelines (DBOD.NO.BP.BC.88/ 21.02.067/2004-05 dated May 04, 2005), issued by Reserve Bank of India, Bank will be eligible to declare dividends only when it complies with the following minimum prudential requirements: The bank should have:

• CRAR of at least 9% for preceding two completed years and the accounting year for which it proposes to declare dividend.

• Net NPA less than 7%.

In case any bank does not meet the above CRAR norm, but is having a CRAR of at least 9 % for the accounting year for which it proposes to declare dividend, would be eligible to declare dividend provided its Net NPA ratio is less than 5%.

i) The Bank should comply with the provisions of Sections 1 5 and 17 of the Banking Regulation Act, 1949.

ii) The Bank should comply with the prevailing regulations/ guidelines issued by RBI, including creating adequate provisions for impair ment of assets and staff retirement benefits, transfer of profits to Statutory Reserves etc.

iii) The proposed dividend should be payable out of the current year's profit.

iv) The Reserve Bank has not placed any explicit restrictions on the Bank for declaration of dividends.

4. Quantum of dividend payable:

The Bank, if it fulfils the eligibility criteria set out at paragraph No.3 above, may declare and pay dividends subject to the following:

i) The dividend payout ratio shall not exceed 40 % and shall be as per the matrix furnished in Annexure.

[Dividend payout ratio shall be calculated as a percentage of 'dividend payable in a year' (excluding dividend tax) to 'net profit during the year'.]

ii) In case the profit for the relevant period includes any extra-ordinary profits/ income, the payout ratio shall be computed after excluding such extra-ordinary items for reckoning compliance with the prudential payout ratio.

iii) The financial statements pertaining to the financial year for which the bank is declaring a dividend should be free of any qualifications by the statutory auditors, which have an adverse bearing on the profit during that year. In case of any qualification to that effect, the net profit should be suitably adjusted while computing the dividend payout ratio.

5. Board oversight

The interests of all stakeholders and the following aspects shall be taken into account while deciding on the proposals for declaring dividend:

a) The interim dividend paid, if any;

b) The Risk Based Supervision findings of Reserve Bank of India with regard to divergence in identification of NPAs, shortfall in provisioning;

c) The auditors' qualification pertaining to the statement of accounts;

d) The Basel III capital requirements; and

e) The Bank's long term growth plans.

6. Other parameters in terms of Regulation 43A of SEBI (LODR) Regulations:

a) The circumstances under which the shareholders of the listed entities may or may not expect dividend

The Board of the Bank may not recommend any dividend in the event of inadequacy of profits or whenever the Bank has incurred losses or

if the eligibility criteria for recommendation of dividend has not been met by the Bank, including any regulatory restriction placed on the Bank on declaration of dividend or if the Board strongly believes the need to conserve capital for growth or for other exigencies.

b) The financial parameters that shall be considered while declaring dividend

The Board of Directors of the Company would consider the following financial parameters before declaring or recommending dividend to shareholders:

• Any interim dividend paid

• Internal capital planning framework/ policy

• Dividend payout trends (the dividend payout ratio will be calculated as a percentage of dividend (excluding dividend tax) recommended for the year to the net profit for that year)

• Tax implications if any, on distribution of dividends

• Cost of raising funds from alternate sources of capital

• Such other factors and/or material events which the Bank's

Board may consider relevant.

c) Internal and external factors that shall be considered for declaration of dividend

Board will take into account various internal factors, such as business growth plans/future capital requirements etc. The decision of the Board regarding dividend shall be final.

The dividend payout decision of the Bank will also depend on certain external factors such as the state of the economy of the country, compliance with Companies Act 2013 and its rules, other statutory and regulatory provisions, share holder expectations including individual shareholders, tax regulations including the treatment of deferred tax assets etc. as may be applicable at the time of declaration of the dividend.

d) Policy as to how the retained earnings shall be utilized

The retained earnings will mainly be utilized for the purpose of the Bank's growth plans, improvement in CRAR and such other purposes as per the guidelines issued by RBI and Government of India from time to time.

e) Parameters that shall be adopted with regard to various classes of shares:

Presently authorized share capital of the Bank comprises of Equity Shares only. As and when the Bank issues other kind of shares, the Board of Directors may suitably amend this Policy.

7. Review of Policy

The Board of Directors of the Bank will review the policy annually. If the Board proposes to declare dividend on the basis of criteria in addition to those specified in the policy, or proposes to modify the criteria, it shall disclose such changes along with the rationale for the same on the Bank's website and in the Annual Report.

8. Disclosure of Policy

The policy will be available on the Bank's website and will also be disclosed in the Bank's Annual Report.

Annexure

Matrix of Criteria as laid out by RBI for maximum permissible range of Dividend Payout Ratio

(As per RBI Circular No. RBI/2004-05/451; DBOD.NO.BP.BC. 88/21.02.067/2004-05 dated May 04, 2005)

Category

CRAR

Net NPA Ratio

Zero

More than zero but less than 3%

From 3% to less than 5%

From 5% to less than 7%

 

 

Range of Dividend Payout Ratio

A

11% or more for each of the last 3 years

Up to 40

Up to 35

Up to 25

Up to 1 5

B

10% or more for each of the last 3 years

Up to 35

Up to 30

Up to 20

Up to 10

C

9% or more for each of the lasts years

Up to 30

Up to 25

Up to 15

Up to 5

D

9% or more in the Current year

Up to 10

Up to 5

Nil

 

 

For and on behalf of the Board of Directors

 

 

Aluva

Mr. Dilip Sadarangani (DIN- 06610897)

Date: 13 June 2019

Chairman of the Board

 

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