THE LAKSHMI VILAS BANK LIMITED - Bombay … · the lakshmi vilas bank limited The Lakshmi Vilas...

Preliminary Placement Document

Not for Circulation

Private and Confidential

Serial No. [●]

THE LAKSHMI VILAS BANK LIMITED The Lakshmi Vilas Bank Limited (“our Bank”) was incorporated on November 3, 1926 under the Indian Companies Act, 1913. Our Bank was licensed under the Banking Regulation Act, 1949 on June 19, 1958 and became a scheduled commercial bank under the Second Schedule of the RBI Act on August 11, 1958. The

registered office of our Bank is located at Salem Road, Kathaparai, P.O. Karur – 639 006, Tamil Nadu. Tel: +91 4324 220051; Fax: +91 4324 223607. The

corporate office of our Bank is located at LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil Nadu. Tel: +91 44 2220 5316; Fax: +91 44 2220 5317; Email: [email protected]; website: www.lvbank.com; Corporate Identification Number of our Bank is L65110TN1926PLC001377. For further

detail, see “General Information” on page 230.

Our Bank is issuing up to [●] equity shares of face value of `10 each (the “Equity Shares”) at a price of ` [●] per Equity Share, including a premium of ` [●]

per Equity Share, aggregating to ` [●] million (the “Issue”), only to Qualified Institutional Buyers (“QIBs”), as defined in the Securities and Exchange Board of

India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended (the “SEBI ICDR Regulations”).

ISSUE IN RELIANCE UPON SECTION 42 OF THE COMPANIES ACT, 2013, AS AMENDED, READ WITH RULES MADE THEREUNDER,

AND CHAPTER VIII OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE

REQUIREMENTS) REGULATIONS, 2009, AS AMENDED (“SEBI ICDR REGULATIONS”).

THIS ISSUE AND THE DISTRIBUTION OF THIS PRELIMINARY PLACEMENT DOCUMENT IS BEING MADE TO QIBs, AS DEFINED IN

SEBI ICDR REGULATIONS IN RELIANCE UPON CHAPTER VIII OF SEBI ICDR REGULATIONS AND SECTION 42 OF THE COMPANIES

ACT, 2013, AS AMENDED, AND RULES MADE THEREUNDER. THIS PRELIMINARY PLACEMENT DOCUMENT IS PERSONAL TO EACH

PROSPECTIVE INVESTOR AND DOES NOT CONSTITUTE AN OFFER OR INVITATION OR SOLICITATION OF AN OFFER TO THE

PUBLIC OR TO ANY OTHER PERSON OR CLASS OF INVESTORS WITHIN OR OUTSIDE INDIA OTHER THAN QIBs. THIS PRELIMINARY

PLACEMENT DOCUMENT WILL BE CIRULATED ONLY TO SUCH QIBs WHOSE NAMES ARE RECORDED BY OUR BANK PRIOR TO

MAKING AN INVITATION TO SUBSCRIBE TO EQUITY SHARES.

Invitation for subscription of the Equity Shares shall only be made pursuant to this Preliminary Placement Document, together with the Application Form and

the Placement Document. For further detail, see “Issue Procedure” on page 187. The distribution of this Preliminary Placement Document or the disclosure of

its contents to any person, other than QIBs and persons retained by QIBs to advise them with respect to their purchase of the Equity Shares, is unauthorized and prohibited. Each prospective investor, by accepting delivery of this Preliminary Placement Document, agrees to observe the foregoing restrictions and to make

no copies of this Preliminary Placement Document or any documents referred to in this Preliminary Placement Document.

A copy of this Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4 under the Companies (Prospectus and Allotment of

Securities) Rules, 2014, as amended) has been delivered to the BSE Limited (the “BSE”) and the National Stock Exchange of India Limited (the “NSE”) (BSE

and NSE collectively referred to as the “Stock Exchanges”). Our Bank shall also make the requisite filings with the Registrar of Companies, Chennai, Tamil Nadu (the “RoC”) and the Securities and Exchange Board of India (the “SEBI”) within the stipulated period as required under the Companies Act, 2013 and the

Companies (Prospectus and Allotment of Securities) Rules, 2014. This Preliminary Placement Document has not been reviewed by the SEBI, the Reserve Bank

of India (the “RBI”), the Stock Exchanges or any other regulatory or listing authority and is intended only for use by QIBs. This Preliminary Placement Document has not been and will not be registered as a prospectus with the RoC, and will not be circulated or distributed to the public in India or any other jurisdiction and

will not constitute a public offer in India or any other jurisdiction. The Issue is meant only for QIBs by way of a private placement and is not an offer to the public

or to any other class of investors.

INVESTMENTS IN THE EQUITY SHARES INVOLVE A HIGH DEGREE OF RISK AND PROSPECTIVE INVESTORS SHOULD NOT INVEST

ANY FUNDS IN THIS ISSUE UNLESS THEY ARE PREPARED TO TAKE THE RISK OF LOSING ALL OR PART OF THEIR INVESTMENTS.

PROSPECTIVE INVESTORS ARE ADVISED TO READ THE SECTION TITLED “RISK FACTORS” ON PAGE 40 CAREFULLY BEFORE

TAKING AN INVESTMENT DECISION IN THIS ISSUE. EACH PROSPECTIVE INVESTOR IS ADVISED TO CONSULT ITS ADVISORS ABOUT

THE PARTICULAR CONSEQUENCES TO IT OF AN INVESTMENT IN THE EQUITY SHARES BEING ISSUED PURSUANT TO THIS

PRELIMINARY PLACEMENT DOCUMENT.

The information on our Bank’s website or any website directly or indirectly linked to our Bank’s website does not form part of this Preliminary Placement Document and prospective investors should not rely on such information contained in, or available through, such websites.

All of our Bank’s outstanding subscribed capital is listed on the Stock Exchanges. In-principle approval under Regulation 28(1) of the Listing Regulations (as defined below) for listing of the Equity Shares has been received from the BSE and from the NSE. Applications to the Stock Exchanges will be made for obtaining

listing and trading approvals for the Equity Shares offered through this Preliminary Placement Document. The Stock Exchanges assume no responsibility for the

correctness of any statements made, opinions expressed or reports contained herein. Admission of the Equity Shares to trading on the Stock Exchanges should not be taken as an indication of the merits of our business or the Equity Shares.

YOU ARE NOT AUTHORIZED TO (1) DELIVER THIS PRELIMINARY PLACEMENT DOCUMENT TO ANY OTHER PERSON; (2)

REPRODUCE THIS PRELIMINARY PLACEMENT DOCUMENT IN ANY MANNER WHATSOEVER; OR (3) RELEASE ANY PUBLIC

ADVERTISEMENTS OR UTILIZE ANY MEDIA, MARKETING OR DISTRIBUTION CHANNELS OR AGENTS TO INFORM THE PUBLIC AT

LARGE ABOUT THE ISSUE. ANY DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS

UNAUTHORIZED. FAILURE TO COMPLY WITH THIS INSTRUCTION MAY RESULT IN A VIOLATION OF APPLICABLE LAWS OF INDIA

AND OTHER JURISDICTIONS.

THIS PRELIMINARY PLACEMENT DOCUMENT HAS BEEN PREPARED BY OUR BANK SOLELY FOR PROVIDING INFORMATION IN

CONNECTION WITH THE PROPOSED ISSUE OF THE EQUITY SHARES DESCRIBED IN THIS PRELIMINARY PLACEMENT DOCUMENT.

The Equity Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), or the laws of any

state of the United States and may not be offered or sold in the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. Accordingly, the Equity Shares are being offered and sold only

outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act (“Regulation S”). For a description of selling

restrictions in certain other jurisdictions, see “Selling Restrictions” on page 199. The Equity Shares are transferable only in accordance with the restrictions described in “Transfer Restrictions” on page 204.

BOOK RUNNING LEAD MANAGER

This Preliminary Placement Document is dated December 28, 2016.

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TABLE OF CONTENTS

NOTICE TO INVESTORS .................................................................................................................................. 1

REPRESENTATIONS BY INVESTORS........................................................................................................... 3

DISCLAIMER CLAUSE OF THE STOCK EXCHANGE .............................................................................. 9

PRESENTATION OF FINANCIAL AND OTHER DATA............................................................................ 10

MARKET AND INDUSTRY DATA ................................................................................................................. 11

FORWARD LOOKING STATEMENTS ........................................................................................................ 12

ENFORCEMENT OF CIVIL LIABILITIES .................................................................................................. 14

EXCHANGE RATES ......................................................................................................................................... 15

DEFINITIONS AND ABBREVIATIONS ........................................................................................................ 16

DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES

ACT, 2013 ............................................................................................................................................................ 22

SUMMARY OF BUSINESS .............................................................................................................................. 25

SUMMARY OF THE ISSUE ............................................................................................................................ 30

SUMMARY FINANCIAL INFORMATION ................................................................................................... 32

RISK FACTORS ................................................................................................................................................ 40

MARKET PRICE INFORMATION ................................................................................................................ 63

USE OF PROCEEDS ......................................................................................................................................... 66

CAPITALISATION ........................................................................................................................................... 67

CAPITAL STRUCTURE ................................................................................................................................... 68

DIVIDEND POLICY ......................................................................................................................................... 72

INDUSTRY OVERVIEW .................................................................................................................................. 73

BUSINESS ........................................................................................................................................................... 86

SELECTED STATISTICAL INFORMATION ............................................................................................. 101

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS ........................................................................................................................ 122

REGULATIONS AND POLICIES ................................................................................................................. 146

BOARD OF DIRECTORS AND SENIOR MANAGEMENT ...................................................................... 158

PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION ............................................................ 171

ISSUE PROCEDURE ...................................................................................................................................... 187

PLACEMENT AGREEMENT ........................................................................................................................ 197

SELLING RESTRICTIONS ........................................................................................................................... 199

TRANSFER RESTRICTIONS ........................................................................................................................ 204

SECURITIES MARKET OF INDIA .............................................................................................................. 205

DESCRIPTION OF EQUITY SHARES ........................................................................................................ 209

INDEPENDENT AUDITORS ......................................................................................................................... 213

STATEMENT OF TAX BENEFITS............................................................................................................... 214

LEGAL PROCEEDINGS ................................................................................................................................ 222

GENERAL INFORMATION .......................................................................................................................... 230

FINANCIAL INFORMATION ....................................................................................................................... 231

DECLARATION .............................................................................................................................................. 232

1

NOTICE TO INVESTORS

Our Bank has furnished and accept full responsibility for the information contained in this Preliminary Placement

Document and confirm that, to the best of its knowledge and belief, having made all reasonable enquiries, the

Preliminary Placement Document contains all information with respect to our Bank and the Equity Shares that is

material in the context of making an investment in this Issue. The statements contained in this Preliminary

Placement Document relating to our Bank and the Equity Shares are, in all material respects, true and accurate

and not misleading. The opinions and intentions expressed in this Preliminary Placement Document with regard

to our Bank and the Equity Shares are honestly held, have been reached after considering all relevant

circumstances, are based on information presently available to our Bank and are based on reasonable assumptions.

There are no other facts in relation to our Bank and the Equity Shares, the omission of which would, in the context

of this Issue, make any statement in this Preliminary Placement Document misleading in any material respect.

Further, all reasonable enquiries have been made by our Bank to ascertain such facts and to verify the accuracy

of all such information and statements.

The Book Running Lead Manager (“BRLM”) has made reasonable enquiries but has not separately verified all

of the information contained in this Preliminary Placement Document (financial, legal or otherwise). Accordingly,

neither the BRLM nor any of its affiliates including any of their respective shareholders, directors, officers,

employees, counsels, representatives, or agents make any express or implied representation, warranty or

undertaking, and no responsibility or liability is accepted by the BRLM or any of its shareholders, directors,

officers, employees, counsels, representatives, or agents as to the accuracy or completeness of the information

contained in this Preliminary Placement Document or any other information supplied in connection with the

Equity Shares. Each person receiving this Preliminary Placement Document acknowledges that such person has

not relied on the BRLM or any of its affiliates including any of their respective shareholders, directors, officers,

employees, counsels, representatives or agents or affiliates in connection with such person’s investigation of the

accuracy of such information or such person’s investment decision, and each such person must rely on its own

examination of our Bank and the merits and risks involved in investing in the Equity Shares. Moreover,

prospective investors should not construe the contents of this Preliminary Placement Document as legal, tax,

accounting or investment advice.

No person is authorized to give any information or to make any representation not contained in this Preliminary

Placement Document and any information or representation not so contained must not be relied upon as having

been authorized by or on behalf of our Bank or the BRLM. The delivery of this Preliminary Placement Document

at any time does not imply that the information contained in it is correct as at any time subsequent to its date.

The Equity Shares have not been approved, disapproved or recommended by any other regulatory

authority in any jurisdiction. No such authority has passed on or endorsed the merits of this Issue or the

accuracy or adequacy of this Preliminary Placement Document. Any representation to the contrary may

be a criminal offence in certain jurisdictions.

No action has been taken by our Bank and the BRLM that would permit the offer or sale of the Equity Shares or

distribution of this Preliminary Placement Document in any jurisdiction, other than India, where action for that

purpose is required. Accordingly, the Equity Shares may not be offered or sold, directly or indirectly, and neither

this Preliminary Placement Document nor any other Issue-related materials may be distributed or published in or

from any country or jurisdiction, except under circumstances that will result in compliance with any applicable

rules and regulations of any such country or jurisdiction.

The Equity Shares have not been and will not be registered under the U.S. Securities Act or the laws of any state

of the United States and may not be offered or sold in the United States, except pursuant to an exemption from,

or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable U.S. state

securities laws. Accordingly, the Equity Shares are being offered and sold only outside the United States in

offshore transactions in reliance on Regulation S. For a description of selling restrictions in certain other

jurisdictions, see “Selling Restrictions” on page 199. The Equity Shares are transferable only in accordance with

the restrictions described in the section titled “Transfer Restrictions” on page 204.

Purchasers of the Equity Shares will be deemed to make the representations, warranties, acknowledgments and

agreements set forth in the sections “Representations by Investors” and “Selling Restrictions” and “Transfer

Restrictions” on pages 3, 199 and 204 respectively.

2

In making an investment decision, prospective investors must rely on their own examination of us and the terms

of this Issue, including the merits and risks involved. Investors should not construe the contents of this Preliminary

Placement Document as legal, tax, accounting or investment advice. Investors should consult their own counsel

and advisors as to business, legal, tax, accounting and related matters concerning the Issue. In addition, neither

our Bank nor the BRLM is making any representation to any offeree or purchaser of the Equity Shares regarding

the legality of an investment in the Equity Shares by such offeree or purchaser under applicable legal, investment

or similar laws or regulations.

Each purchaser of the Equity Shares in this Issue is deemed to have acknowledged, represented and agreed

that it is eligible to invest in India and in the Equity Shares under Indian law, including Chapter VIII of

the SEBI ICDR Regulations and is not prohibited by SEBI or any other statutory authority from buying,

selling or dealing in securities including Equity Shares. Each purchaser of Equity Shares in this Issue also

acknowledges that it has been afforded an opportunity to request from us and has reviewed information

relating to us and the Equity Shares.

The information on the website of our Bank, www.lvbank.com, or any website directly or indirectly linked to this

website or on the website of the BRLM or any of its affiliates or any website directly or indirectly linked to such

websites does not constitute or form a part of this Preliminary Placement Document. Prospective investors should

not rely on the information contained in, or available through, any such websites.

This Preliminary Placement Document contains a summary of some terms of certain documents which are

qualified in their entirety by the terms and conditions of those documents.

.

3

REPRESENTATIONS BY INVESTORS

All references to “you” or “your” in this section are to the prospective investors in this Issue. By bidding for and

subscribing to any of the Equity Shares in this Issue, you are deemed to have represented, warranted,

acknowledged and agreed to our Bank and the BRLM as follows:

(a) you (i) are a QIB as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations and are not excluded

pursuant to Regulation 86(1)(b) of the SEBI ICDR Regulations; (ii) have a valid and existing registration

under applicable laws of India (as applicable); and (iii) undertake to acquire, hold, manage or dispose of

any Equity Shares that are Allocated to you for the purposes of your business in accordance with Chapter

VIII of the SEBI ICDR Regulations and undertake to comply with the SEBI ICDR Regulations, the

Companies Act, 2013, the Companies Act, 1956 to the extent applicable and all other applicable laws,

including in respect of reporting requirements, if any;

(b) if you are not a resident of India, but a QIB, you are (i) an Eligible FPI as defined in this Preliminary

Placement Document including a FII (including a sub-account other than a sub-account which is a foreign

corporate or a foreign individual) and have a valid and existing registration with SEBI under the applicable

laws in India; or (ii) a multilateral or bilateral development financial institution; or (iii) an FVCI and have

a valid and existing registration with SEBI under applicable laws in India. Further, if you are a non-resident

QIB, then the investment amount will be paid out of inward remittance of foreign exchange received

through normal banking channels and as per RBI’s notification no. FEMA 20/2000 - RB dated May 3,

2000, as amended from time to time;

(c) you are eligible to invest in India under applicable laws, including the Foreign Exchange Management

(Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, as amended and any

notification, circulars or clarification issued thereunder, and have not been prohibited by SEBI or any other

regulatory authority from buying, selling or dealing in securities;

(d) you will make all necessary filings with the appropriate regulatory authorities including with the RBI, as

required, pursuant to applicable laws;

(e) if you are Allotted Equity Shares pursuant to this Issue, you shall not, for a period of one year from the date

of Allotment, sell the Equity Shares so acquired except on the recognised Stock Exchanges;

(f) you are aware that this Preliminary Placement Document has not been, and will not be, registered as a

prospectus under the Companies Act, 2013 and the SEBI ICDR Regulations or under any other law in force

in India. You are aware that this Preliminary Placement Document has not been reviewed or affirmed by

SEBI, RBI, Stock Exchanges or any other regulatory or listing authority and is intended for use only by

QIBs. This Preliminary Placement Document has been filed (and the Placement Document will be filed)

with the Stock Exchanges and this Preliminary Placement Document has been displayed (and the Placement

Document will be displayed) on the websites of our Bank and the Stock Exchanges;

(g) you are entitled and have necessary capacity to acquire/subscribe for the Equity Shares under the laws of

all relevant jurisdictions which apply to you and that you have fully observed such laws and obtained all

such governmental and other consents in each case which may be required there under and complied with

all necessary formalities and have obtained all necessary consents and authorities to enable you to commit

to participation in this Issue and to perform your obligations in relation thereto (including, in the case of

any person on whose behalf you are acting, all necessary consents and authorisations to agree to the terms

set out or referred to in this Preliminary Placement Document), and will honour such obligations;

(h) neither our Bank nor the BRLM nor any of their respective shareholders, directors, officers, employees,

counsels, representatives, agents or affiliates is making any recommendation to you or, advising you

regarding the suitability of any transactions it may enter into in connection with this Issue; your

participation in this Issue is on the basis that you are not, and will not, up to Allotment, be a client of the

BRLM and that neither the BRLM nor any of its shareholders, directors, officers, employees, counsels,

representatives, agents or affiliates have any duty or responsibilities to you for providing the protection

afforded to their clients or customers for providing advice in relation to this Issue and are not in any way

acting in any fiduciary capacity;

(i) you confirm that, either: (i) you have not participated in or attended any investor meetings or presentations

4

by our Bank or its agents (“Bank Presentations”) with regard to our Bank or this Issue; or (ii) if you have

participated in or attended any Bank Presentations: (a) you understand and acknowledge that the BRLM

may not have knowledge of the statements that our Bank or its agents may have made at such Bank

Presentations and are therefore unable to determine whether the information provided to you at such Bank

Presentations may have included any material misstatements or omissions, and, accordingly you

acknowledge that the BRLM has advised you not to rely in any way on any information that was provided

to you at such Bank Presentations, and (b) confirm that you have not been provided any material

information that was not publicly available;

(j) you are aware and understand that the Equity Shares are being offered only to QIBs and are not being

offered to the general public and the allotment of the Equity Shares shall be on a discretionary basis at the

discretion of our Bank in consultation with the BRLM;

(k) all statements other than statements of historical fact included in this Preliminary Placement Document,

including, without limitation, those regarding our Bank’s financial position, business strategy, plans and

objectives of management for future operations (including development plans and objectives relating to

our products), are forward-looking statements. Such forward-looking statements involve known and

unknown risks, uncertainties and other important factors that could cause actual results to be materially

different from future results, performance or achievements expressed or implied by such forward-looking

statements. Such forward-looking statements are based on numerous assumptions regarding our present

and future business strategies and environment in which our Bank may operate in the future. You should

not place reliance on forward looking statements, which speak only as at the date of this Preliminary

Placement Document. Our Bank assumes no responsibility to update any of the forward-looking statements

contained in this Preliminary Placement Document;

(l) you have been provided a serially numbered copy of this Preliminary Placement Document and have read

this Preliminary Placement Document in its entirety including, in particular the section titled “Risk

Factors” on page 40;

(m) in making your investment decision (i) you have relied on your own examination of our Bank and the terms

of this Issue, including the merits and risks involved; (ii) you have made your own assessment of our Bank,

the Equity Shares and the terms of this Issue based solely on the information contained in this Preliminary

Placement Document and no other representation by our Bank or any other party; (iii) you have consulted

your own independent advisors (including tax advisors) or otherwise have satisfied yourself concerning,

without limitation, the effects of local laws and taxation matters; (iv) you have relied solely on the

information contained in this Preliminary Placement Document and no other disclosure or representation

by our Bank or the BRLM or any other party; (v) you have received all information that you believe is

necessary or appropriate in order to make an investment decision in the Issue; and (vi) relied upon your

investigation and resources in deciding to invest in this Issue. You are seeking to subscribe to/acquire the

Equity shares in this Issue for your own investment and not with a view to resale or distribution;

(n) you are a sophisticated investor and have such knowledge and experience in financial and business matters

as to be capable of evaluating the merits and risks of the investment in the Equity Shares and you and any

accounts for which you are subscribing to the Equity Shares: (i) are each able to bear the economic risk of

the investment in the Equity Shares; (ii) will not look to our Bank, the BRLM or their respective

shareholders, directors, officers, employees, counsels, representatives, agents or affiliates for all or part of

any such loss or losses that may be suffered including losses arising out of non-performance by our Bank

of any of its obligations or any breach of any representations and warranties by our Bank, whether to you

or otherwise; (iii) are able to sustain a complete loss on the investment in the Equity Shares; (iv) have no

need for liquidity with respect to the investment in the Equity Shares; and (v) have no reason to anticipate

any change in your or their circumstances, financial or otherwise, which may cause or require any sale or

distribution by you or them of all or any part of the Equity Shares;

(o) neither the BRLM nor any of its shareholders, investors, officers, employees, counsels, agents,

representatives or affiliates have provided you with any tax advice or otherwise made any representations

regarding the tax consequences of purchase, ownership or disposal of the Equity Shares (including, but not

limited, to this Issue and the use of the proceeds from the Equity Shares). You will obtain your own

independent tax advice from a reputable service provider and will not rely on the BRLM or any of its

shareholders, investors, officers, employees, counsels, agents, representatives or affiliates when evaluating

the tax consequences of the Equity Shares (including, but not limited to, this Issue and the use of the

5

proceeds from the Equity Shares). You waive and agree not to assert any claim against our Bank, the BRLM

or any of its shareholders, investors, officers, employees, counsels, agents, representatives or affiliates with

respect to the tax aspects of the Equity Shares or as a result of any tax audits by tax authorities, wherever

situated;

(p) where you are acquiring the Equity Shares for one or more managed accounts, you represent and warrant

that you are authorized in writing, by each such managed account to acquire the Equity Shares for each

managed account and to make (and you hereby make) the representations, warranties, acknowledgements

and agreements herein for and on behalf of each such account, reading the reference to “you” to include

such accounts;

(q) you agree and acknowledge that in terms of section 42(7) of the Companies Act, 2013, we shall file the list

of QIBs (to whom this Preliminary Placement Document are circulated) along with other particulars with

the RoC and SEBI within 30 days of circulation of the Preliminary Placement Document and other filings

required under the Companies Act, 2013;

(r) you are not a ‘Promoter’ of our Bank, as defined under section 2(69) of the Companies Act, 2013 and the

SEBI ICDR Regulations, and are not a person related to the Promoter or to group companies of the

Promoter, either directly or indirectly and your Bid does not directly or indirectly represent the Promoter

or Promoter Group or persons related to the Promoter of our Bank or to group companies of the Promoter

of our Bank;

(s) you have no rights under a shareholders’ agreement or voting agreement with the Promoter or persons

related to the Promoter, no veto rights or right to appoint any nominee director on the Board of Directors

of our Bank other than such rights acquired, if any, in the capacity of a lender not holding any Equity Shares

of our Bank, the acquisition of which shall not deem you to be a Promoter, a person related to the Promoter;

(t) you have no right to withdraw your Bid after the Issue Closing Date;

(u) you are eligible to Bid and hold the Equity Shares so Allotted together with any Equity Shares held by you

prior to this Issue. You further confirm that your aggregate holding upon this Issue of the Equity Shares

shall not exceed the level permissible as per any applicable regulations;

(v) You are eligible to apply and hold the Equity Shares Allotted to you together with any Equity Shares held

by you prior to the Issue. Further, you confirm that your aggregate holding after the Allotment of the Equity

Shares shall not exceed the level permissible as per any applicable regulation, including but not limited to

the Banking Regulation Act, 1949, Banking Companies (Acquisition and Transfer of Undertakings) Act,

1970 and in the event of your holding of our Equity Shares reaches any applicable limits as may be

prescribed you will make the appropriate disclosures and obtain the necessary permissions in this regard

form the relevant Authorities/ RBI;

(w) the Bid submitted by you would not eventually result in triggering a tender offer under the Securities and

Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended

(the “Takeover Code”);

(x) your aggregate holding, together with other QIBs participating in this Issue that belong to the same group

or are under common control as you, pursuant to the Allotment under the present Issue, shall not exceed

50% of this Issue. For the purposes of this representation:

i. the expression “belongs to the same group” shall be interpreted by applying the concept of

“companies under the same group” as provided in sub-section (11) of section 372 of the Companies

Act, 1956; and

ii. “Control” shall have the same meaning as is assigned to it under Regulation 2 (i)(e) of the Takeover

Code;

(y) you shall not undertake any trade in the Equity Shares credited to your beneficiary account until such time

that the final listing and trading approval for the Equity Shares is issued by the Stock Exchanges;

(z) you are aware of and acknowledge and represent the following in respect of your shareholding in our Bank:

6

i. if your aggregate holding in the paid-up share capital of our Bank, whether direct or indirect,

beneficial or otherwise held by you, your relatives, associate enterprises and persons acting in

concert exceeds 5.00% of the total paid-up share capital of our Bank or entitles you to exercise

5.00% or more of the total voting rights of our Bank, you shall seek prior approval of the RBI, in

accordance with the terms of the Reserve Bank of India (Prior approval for acquisition of shares or

voting rights in private sector banks) Directions, 2015.

ii. if you are Allotted more than 5.00% of the total number of Equity Shares Allotted in this Issue, we

shall be required to disclose your name, the number of Equity Shares Allotted to you, the pre and

post issue shareholding pattern of our Bank, to the Stock Exchanges and the Stock Exchanges will

make the same available on their website and you consent to such disclosure being made by us.

iii. to the best of your knowledge and belief, your aggregate holding, together with other QIBs in the

Issue that belong to the same group or are under common control as you, pursuant to the Allotment

under this Issue to you shall not exceed 50.00% of the Issue.

For the purposes of this representation, the expression ‘belongs to the same group’ shall be interpreted by

applying the concept of ‘companies under the same group’ as provided in subsection (11) of section 372 of

the Companies Act, 1956; and ‘control’ shall have the same meaning as is assigned to it by clause (e) of

sub- regulation 1 of regulation 2 of the Takeover Regulations;

(aa) you are aware that our Bank shall make necessary filings with the RoC pursuant to the Allotment (which

shall include certain details such as your name, address and number of Equity Shares Allotted) and if the

Allotment of Equity Shares in the Issue results in you being one of the top 10 shareholders of our Bank, we

shall also be required to disclose your name and shareholding details to the RoC within 15 days of

Allotment, and you consent to such disclosure being made by us;

(bb) you are aware that (i) applications for in-principle approval, in terms of Regulation 28 of the Listing

Regulations, for listing and admission of the Equity Shares and for trading on the Stock Exchanges, were

made and an approval has been received from the Stock Exchanges; and (ii) the application for the listing

and trading approval will be made only after Allotment. There can be no assurance that the approvals for

listing and trading in the Equity Shares will be obtained in time or at all. We shall not be responsible for

any delay or non-receipt of such approvals for listing and trading or any loss arising from such delay or

non-receipt;

(cc) you are aware and understand that the BRLM has entered into a placement agreement with our Bank (the

“Placement Agreement”) whereby the BRLM has, subject to the satisfaction of certain conditions set out

therein, undertaken to use its reasonable endeavours to seek to procure subscriptions for the Equity Shares

on the terms and conditions set forth herein;

(dd) the contents of this Preliminary Placement Document are our exclusive responsibility and neither the

BRLM nor any person acting on its behalf, nor any of its respective shareholders, directors, officers,

employees, counsels, advisors, representatives, agents or affiliates have, or shall have, any liability for any

information, representation or statement contained in this Preliminary Placement Document or any

information previously published by or on behalf of our Bank and will not be liable for your decision to

participate in this Issue based on any information, representation or statement contained in this Preliminary

Placement Document or otherwise. By accepting a participation in this Issue, you agree and confirm that

you have neither received nor relied on any other information, representation, warranty or statement made

by or on behalf of either of the BRLM or our Bank or any other person and neither the BRLM, nor our

Bank or our respective directors, officers, employees, counsels, advisors, representatives, agents or

affiliates or any other person will be liable for your decision to participate in this Issue based on any other

information, representation, warranty or statement that you may have obtained or received;

(ee) information regarding our Bank’s business, products and services, including the statements made in the

section titled “Business”, have been reproduced from information available in the public domain.

(ff) the only information you are entitled to rely on, and on which you have relied in committing yourself to

acquire the Equity Shares, is contained in this Preliminary Placement Document, such information being

all that you deem necessary to make an investment decision in respect of the Equity Shares issued in

7

pursuance of this Issue and that you have neither received nor relied on any other information given or

representations, warranties or statements made by BRLM (including any view, statement, opinion or

representation expressed in any research published or distributed by the BRLM or its affiliates or any view,

statement, opinion or representation expressed by any staff (including research staff) of the BRLM or its

affiliates) or our Bank or any of its shareholders, directors, officers, employees, counsels, advisors,

representatives, agents or affiliates and neither the BRLM nor our Bank or any of their respective

shareholders, directors, officers, employees, counsels, advisors, representatives, agents or affiliates will be

liable for your decision to accept an invitation to participate in the Issue based on any other information,

representation, warranty, statement or opinion;

(gg) you understand that neither the BRLM nor its affiliates have any obligation to purchase or acquire all or

any part of the Equity Shares purchased by you in this Issue or to support any losses directly or indirectly

sustained or incurred by you for any reason whatsoever in connection with this Issue, including non-

performance by our Bank of any of its obligations or any breach of any representations or warranties by

our Bank, whether to you or otherwise;

(hh) you agree to indemnify and hold our Bank and the BRLM and its affiliates harmless from any and all costs,

claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any

breach of the representations, warranties, acknowledgements and agreements made by you in this

Preliminary Placement Document. You agree that the indemnity set forth in this section shall survive the

resale of the Equity Shares by, or on behalf of, the managed accounts;

(ii) each of the representations, warranties, acknowledgements and agreements set forth above shall continue

to be true and accurate at all times up to and including the Allotment, listing and trading of the Equity

Shares on the Stock Exchanges;

(jj) our Bank, the BRLM and its respective affiliates and others will rely on the truth and accuracy of the

foregoing representations, warranties, acknowledgements and agreements which are given to the BRLM

on their own behalf and on behalf of our Bank and are irrevocable;

(kk) you are a sophisticated investor who is seeking to purchase the Equity Shares for your own investment and

not with a view to distribution. In particular, you acknowledge that (i) an investment in the Equity Shares

involves a high degree of risk and that the Equity Shares are, therefore, a speculative investment, (ii) you

have sufficient knowledge, sophistication and experience in financial and business matters so as to be

capable of evaluating the merits and risk of the purchase of the Equity Shares, and (iii) you are experienced

in investing in private placement transactions of securities of companies in a similar stage of development

and in similar jurisdictions and have such knowledge and experience in financial, business and investment

matters that you are capable of evaluating the merits and risks of your investment in the Equity Shares;

(ll) any dispute arising in connection with this Issue will be governed by and construed in accordance with the

laws of the Republic of India and the courts at Mumbai, India shall have exclusive jurisdiction to settle any

disputes which may arise out of or in connection with this Preliminary Placement Document and the

Placement Document; and

(mm) you have made, or been deemed to have made, as applicable, the representations, warranties,

acknowledgments and agreements set forth in this section and in the sections titled “Selling Restrictions”

and “Transfer Restrictions” on pages 199 and 204, respectively.

Off-Shore Derivative Instruments (P-Notes)

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of

Regulation 22 of the SEBI (FPI) Regulations, a FPI (other than a Category III foreign portfolio investors and

unregulated broad based funds which are classified as FPI by virtue of their investment manager being

appropriately regulated), including the affiliates of the BRLM, may issue, subscribe or otherwise deal in offshore

derivative instruments as defined under the SEBI (FPI) Regulations as any instrument, by whatever name called,

which is issued overseas by a FPI against securities held by it that are listed or proposed to be listed on any

recognized stock exchange in India, as its underlying security (all such offshore derivative instruments are referred

to herein as “P-Notes”) for which they may receive compensation from the purchasers of such P-Notes, listed or

proposed to be listed on any recognized stock exchange in India only in favour of those entities which are regulated

by any appropriate foreign regulatory authorities in the countries of their incorporation or establishment subject

8

to compliance with “know your client” requirements. A FPI shall also ensure that further issue or transfer of any

instrument referred to above issued by or on behalf of it, is made only to persons who are regulated by appropriate

foreign regulatory authorities. P-Notes have not been and are not being offered or sold pursuant to this Preliminary

Placement Document. This Preliminary Placement Document does not contain any information concerning P-

Notes, including, without limitation, any information regarding any risk factors relating thereto.

Any P-Notes that may be issued are not securities of our Bank and do not constitute any obligations of, claim on,

or interests in our Bank. Our Bank has not participated in any offer of any P-Notes, or in the establishment of the

terms of any P-Notes, or in the preparation of any disclosure related to any P-Notes. Any P-Notes that may be

offered are issued by, and are solely the obligations of, third parties that are unrelated to our Bank. Our Bank and

the BRLM do not make any recommendation as to any investment in P-Notes and do not accept any responsibility

whatsoever in connection with any P-Notes. Any P-Notes that may be issued are not securities of the BRLM and

do not constitute any obligations of, or claims on, the BRLM. FPI affiliates (other than Category III FPI and

unregulated broad based funds which are classified as FPI by virtue of their investment manager being

appropriately regulated) of the BRLM may purchase, to the extent permissible under law, Equity Shares in this

Issue, and may issue P-Notes in respect thereof. Affiliates of the BRLM which are FPIs may purchase, to the

extent permitted by applicable laws, the Equity Shares in the Issue and any P-Notes thereof.

Prospective investors interested in purchasing any P-Notes have the responsibility to obtain adequate

disclosure as to the issuer(s) of such P-Notes and the terms and conditions of any such P-Notes from the

issuer(s) of such P-Notes. Neither SEBI nor any other regulatory authority has reviewed or approved any

P-Notes or any disclosure related thereto. Prospective investors are urged to consult with their own

financial, legal, accounting and tax advisors regarding any contemplated investment in P-Notes, including

whether P-Notes are issued in compliance with applicable laws and regulations.

9

DISCLAIMER CLAUSE OF THE STOCK EXCHANGE

As required, a copy of this Preliminary Placement Document has been submitted to the Stock Exchanges. The

Stock Exchanges do not in any manner:

1. warrant, certify or endorse the correctness or completeness of any of the contents of this Preliminary

Placement Document;

2. warrant that the Equity Shares issued pursuant to this Issue will be listed or will continue to be listed on the

Stock Exchanges; or

3. take any responsibility for the financial or other soundness of this Bank, its management or any scheme or

project of this Bank.

It should not for any reason be deemed or construed to mean that this Preliminary Placement Document has been

cleared or approved by the Stock Exchanges. Every person who desires to apply for or otherwise acquires any

Equity Shares may do so pursuant to an independent inquiry, investigation and analysis and shall not have any

claim against the Stock Exchanges whatsoever by reason of any loss which may be suffered by such person

consequent to, or in connection with, such subscription/acquisition whether by reason of anything stated or omitted

to be stated herein or for any other reason whatsoever.

10

PRESENTATION OF FINANCIAL AND OTHER DATA

In this Preliminary Placement Document, all references to “USD”, US$ and “U.S. Dollars” are to the legal

currency of the United States and references to “`”, “Rs.”, “INR” and “Rupees” are to the legal currency of the

Republic of India.

Financial Data

Our Bank publishes its financial statements in Indian Rupees. Our Bank prepares its financial statements in

accordance with Indian Generally Accepted Accounting Principles (“Indian GAAP”). Indian GAAP differs in

certain respects from International Financial Reporting Standards (“IFRS”). Further we have not yet adopted the

Indian Accounting Standards Rules notified on February 16, 2015, (“Ind AS”). We have not attempted to quantify

the impact of Ind AS or IFRS on the financial data included in this Placement Document, nor do we provide a

reconciliation of our financial statements, to those of Ind AS or IFRS. Ind AS and IFRS differs in significant

respects from Indian GAAP. Accordingly, the degree to which the financial statements prepared in accordance

with Indian GAAP included in this Preliminary Placement Document will provide meaningful information is

entirely dependent on the reader’s level of familiarity with the respective accounting practices. Any reliance by

persons not familiar with Indian accounting practices on the financial disclosures presented in this Preliminary

Placement Document should accordingly be limited and our Bank urges you to consult your own advisors

regarding such differences and their impact on the financial data.

In this Preliminary Placement Document, certain monetary thresholds have been subject to rounding adjustments;

accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which

precede them.

Unless the context requires otherwise, the financial data in this Preliminary Placement Document is derived from

our Bank’s financial statements. Our Financial Year commences on April 1 of each year and ends on March 31

of the succeeding year, so all references to a particular “Fiscal Year”, “Fiscal”, “Financial Year” or “FY” are to

the 12 month period ended on March 31 of that year. Our audited financial statements for the Financial Years

ending March 31, 2014, March 31, 2015 and March 31, 2016 that appear in this Preliminary Placement Document

have been prepared by our Bank in accordance with Indian GAAP. Our financial results for the six months ended

September 30, 2016, which appear in this Preliminary Placement Document, have been subjected to a limited

review in accordance with the Standard on Review Engagement (“SRE”) 2410, Review of Interim Financial

Information Performed by the Independent Auditor of the Entity issued by the ICAI.

All the numbers in this document, other than in sections titled “Financial Information” on page 231, have been

presented in million or in whole numbers where the numbers have been too small to present in million, unless

stated otherwise.

11

MARKET AND INDUSTRY DATA

Information regarding market size, market share, market position, growth rates and other industry data pertaining

to our Bank’s business contained in this Preliminary Placement Document consists of estimates based on data

reports compiled by governmental bodies, professional organisations and analysts and on data from other external

sources, and on our Bank’s knowledge of markets in which it competes.] The statistical information included in

this Preliminary Placement Document relating to the various sectors in which our Bank operates has been

reproduced from various trade, industry and regulatory/government publications and websites, including that of

the RBI.

This data is subject to change and cannot be verified with complete certainty due to limits on the availability and

reliability of the raw data and other limitations and uncertainties inherent in any statistical survey. In many cases,

there is no readily available external information (whether from industry associations, government bodies or other

organisations) to validate market-related analysis and estimates, so our Bank has relied on internally developed

estimates. Industry publications generally state that the information they contain has been obtained from sources

believed to be reliable but that the accuracy and completeness of the information is not guaranteed.

Neither our Bank nor the BRLM has independently verified this data and neither our Bank nor the BRLM make

any representation regarding the accuracy or completeness of such data. Similarly, while we believe our Bank’s

internal estimates to be reasonable, such estimates have not been verified by any independent source and our Bank

cannot assure potential investors as to their accuracy. Similarly, internal estimates and surveys, industry forecasts

and market research, while believed to be reliable, have not been independently verified and neither our Bank nor

the BRLM make any representation as to the accuracy and completeness of information based on trade, industry

and government publications and websites, data reports compiled by government bodies, professional

organisations and analysts, or from other external sources.

The extent to which the market and industry data used in this Preliminary Placement Document is

meaningful depends on the reader’s familiarity with and understanding of the methodologies used in

compiling such data.

12

FORWARD LOOKING STATEMENTS

All statements contained in this Preliminary Placement Document that are not statements of historical fact

constitute “forward-looking statements.” Investors can generally identify forward-looking statements by

terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “can”,

“may”, “objective”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, “will likely

result”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, or other words

or phrases of similar import. Similarly, statements that describe our strategies, objectives, plans or goals are also

forward-looking statements. However, these are not the exclusive means of identifying forward-looking

statements. All statements regarding the expected financial condition and results of operations and business plans

and prospects of our Bank are forward-looking statements. These forward-looking statements include statements

as to the business strategy, planned projects, revenue and profitability (including, without limitation, any financial

or operating projections or forecasts), new business and other matters regarding our Bank discussed in this

Preliminary Placement Document that are not historical facts.

These forward-looking statements and any other projections contained in this Preliminary Placement Document

(whether made by our Bank or any third party) are predictions and involve known and unknown risks,

uncertainties, assumptions and other factors that they may cause the actual results, performance or achievements

of our Bank to be materially different from any future results, performance or achievements expressed or implied

by such forward looking statements or other projections.

Important factors that could cause our actual results, performances and achievements to be materially different

from any of the forward-looking statements include, among others:

volatility in interest rates and other market conditions;

our inability to manage non-performing assets

failure to sustain or achieve growth of our deposit base, including our current and savings account deposit

base;

case of fraud involving the Bank

challenges in developing fee income business;

concentration of loans to and deposits from certain customers;

any inability to manage maturity and interest rate mismatches between our assets and liabilities;

failure to maintain capital adequacy requirements;

any increase in the CRR and the SLR;

regional concentration in southern India

non-availability of funding and increase in funding costs;

our inability to sustain growth of our retail banking business;

changes in the regulatory environment, under which we operate, or our inability to comply with the

regulations;

any change in the tax laws in India.

By their nature, certain of the market risk disclosures are only estimates and could be materially different from

what actually occurs in the future. As a result, actual future gains, losses or impact on revenue or income could

materially differ from those that have been estimated, expressed or implied by such forward-looking statements

or other projections. All forward-looking statements are subject to risks, uncertainties and assumptions about us

that could cause actual results to differ materially from those contemplated by the relevant forward-looking

statement. Additional factors that could cause the actual results, performance or achievements of our Bank to

differ include but are not limited to, those discussed under the sections titled “Risk Factors”, “Business” and

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 40, 86 and

122, respectively.

The forward-looking statements contained in this Preliminary Placement Document are based on the beliefs of

the management of our Bank, as well as the assumptions made by and information currently available to the

management. Our Bank believes that the expectations reflected in such forward-looking statements are reasonable

at this time, our Bank cannot assure investors that such expectations will prove to be correct. Given these

uncertainties, investors are cautioned not to place reliance on such forward-looking statements. In any event, these

statements speak only as of the date of this Preliminary Placement Document or the respective dates indicated in

this Preliminary Placement Document, and our Bank undertakes no obligation to update or revise any of them,

whether as a result of new information, future events or otherwise. If any of these risks and uncertainties

13

materialize, or if any of our Bank’s underlying assumptions prove to be incorrect, the actual results of operations

or financial condition of our Bank could differ materially from that described herein as anticipated, believed,

estimated or expected. All subsequent forward-looking statements attributable to our Bank are expressly qualified

in their entirety by reference to these cautionary statements.

14

ENFORCEMENT OF CIVIL LIABILITIES

Our Bank is incorporated under the laws of India. The Board of Directors of our Bank comprises of 13 (thirteen)

Directors, all of them are Indian citizens. All of our Bank’s key managerial personnel are residents of India and a

substantial portion of the assets of our Bank is located in India. As a result, it may not be possible for investors

outside India to effect service of process upon our Bank or on such persons in India, or to enforce judgments

against them obtained in courts outside India.

India is not a signatory to any international treaty in relation to the recognition or enforcement of foreign

judgments. Recognition and enforcement of foreign judgments is provided for under section 13 and section 44A

of the Code of Civil Procedure, 1908, as amended (“Civil Code”).

Section 13 of the Civil Code provides that a foreign judgment shall be conclusive as to any matter thereby directly

adjudicated upon between the same parties or parties litigating under the same title except:

(a) where it has not been pronounced by a court of competent jurisdiction;

(b) where it has not been given on the merits of the case;

(c) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a

refusal to recognize the law of India in cases where such law is applicable;

(d) where the proceedings in which the judgment was obtained were opposed to natural justice;

(e) where it has been obtained by fraud; or

(f) where it sustains a claim founded on a breach of any law then in force in India.

Section 44A of the Civil Code provides that where a foreign judgment has been rendered by a superior court

(within the meaning of that section) in any country or territory outside India which the Government has by

notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if

the foreign judgment had been rendered by the relevant court in India. Under the Civil Code, a court in India will,

upon the production of any document purporting to be a certified copy of a foreign judgment, presume that the

foreign judgment was pronounced by a court of competent jurisdiction, unless the contrary appears on record but

such presumption may be displaced by proving want of jurisdiction. However, section 44A of the Civil Code is

applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other

charges of alike nature or in respect of a fine or other penalty and is not applicable to arbitration awards.

Each of the United Kingdom, Singapore and Hong Kong has been declared by the Government to be a

reciprocating territory for the purposes of section 44A of the Civil Code but the United States has not been so

declared. A foreign judgment of a court in a jurisdiction which is not a reciprocating territory may be enforced

only by a new suit based upon the foreign judgment and not by proceedings in execution. Such a suit has to be

filed in India within three years from the date of the foreign judgment in the same manner as any other suit filed

to enforce a civil liability in India. Accordingly, a judgment of a court in the United States may be enforced only

by a fresh suit upon the foreign judgment and not by proceedings in execution.

It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought

in India. Furthermore, it is unlikely that an Indian court would enforce a foreign judgment if it viewed the amount

of damages awarded as excessive or inconsistent with public policy, and it is uncertain whether an Indian court

would enforce foreign judgments that would contravene or violate Indian law. A party seeking to enforce a foreign

judgment in India is required to obtain approval from the RBI to repatriate outside India any amount recovered

pursuant to execution, and any such amount may be subject to tax in accordance with applicable laws.

15

EXCHANGE RATES

Fluctuations in the exchange rate between the Rupee and foreign currencies will affect the foreign currency

equivalent of the Rupee price of the Equity Shares on the Stock Exchanges. These fluctuations will also affect the

conversion into foreign currencies of any cash dividends paid in Rupees on the Equity Shares.

The following table sets forth information with respect to the exchange rates between the Rupee and the U.S.

dollar (` per US$), for the periods indicated. The exchange rates are based on the reference rates released by RBI,

which are available on the website of RBI. No representation is made that any Rupee amounts could have been,

or could be, converted into U.S. dollars at any particular rate, the rates stated below, or at all. (` Per US$)

Period end Average(1) High Low

Fiscal:

2014 60.0998 60.4962 68.3611 53.7355

2015 62.5908 61.1471 63.7498 58.426

2016 66.3329 65.4611 68.7775 62.158

Quarter ended:

June 30, 2016 67.6166 66.9332 68.0144 66.2406

September 30, 2016 66.6596 66.9613 67.4972 66.3618 (Source: www.rbi.org.in)

(1) Average of the official rate for each working day of the relevant period.

16

DEFINITIONS AND ABBREVIATIONS

This Preliminary Placement Document uses the definitions and abbreviations set forth below, which you should

consider when reading the information contained herein.

The following list of certain capitalized terms used in this Preliminary Placement Document is intended for the

convenience of the reader/prospective investor only and is not exhaustive.

Unless otherwise specified, the capitalized terms used in this Preliminary Placement Document shall have the

meaning as defined hereunder. Further any references to any statute or regulations or policies shall include

amendments thereto, from time to time.

Bank Related Terms

Term Description

“AGM” Annual General Meeting

“Articles” or “Articles of

Association”

The articles of association of our Bank, as amended from time to time

“AS” Accounting standards notified under the Companies (Accounting Standards)

Rules, 2006

“Associates” With reference to any company, the associate of that company would mean any

other company within the meaning of the Companies Act, 2013

“Auditors” The statutory auditors of our Bank, namely, R. K. Kumar & Co. “Board of Directors” or

“Board”

The Board of Directors of our Bank

“CDSL” Central Depository Services (India) Limited

“CIN” Corporate Identification Number

“Bank” The Lakshmi Vilas Bank Limited

“Companies Act” The Companies Act, 1956 and/or the Companies Act, 2013, as applicable

“Companies Act, 1956” The Companies Act, 1956 (without reference to the provisions thereof that have

ceased to have effect upon the notification of the Notified Sections) and the rules

made thereunder

“Companies Act, 2013” The Companies Act, 2013, to the extent in force pursuant to notification of the

Notified Sections, and the rules made thereunder

“Competition Act” Competition Act, 2002, as amended from time to time

“Corporate Office” The corporate office of our Bank, located at LVB House, No. 4, Sardar Patel

Road, Guindy, Chennai – 600 032, Tamil Nadu.

“CSR” Corporate Social Responsibility

“DIN” Director Identification Number

“Director(s)” Director(s) of our Bank, unless otherwise specified

“EBITDA” Earnings before interest, tax, depreciation and amortisation. It is computed as

profit/(loss) before exceptional items and tax plus finance cost plus depreciation

and amortisation

“ECB” External Commercial Borrowing

“EGM” Extraordinary General Meeting

“FD” Fixed Deposit

“Financial Year” / “Fiscal

Year”/ “Fiscal”/ “FY”

A period of 12 months ending March 31, unless otherwise stated

“GAAP” Generally Accepted Accounting Principles

“GAAR” General anti-avoidance rules

“GoI” or “Government” Government of India, unless otherwise specified

“ICAI” The Institute of Chartered Accountants of India

“IAS Rules” The Companies (Indian Accounting Standards) Rules, 2015 notified by the

MCA on February 16, 2015

“IFRS” International Financial Reporting Standards of the International Accounting

Standards Board

“Income Tax Act” or “IT

Act”

The Income Tax Act, 1961, as amended from time to time

“Ind-AS” Indian Accounting Standards

17

Term Description

“Insider Trading

Regulations”

The Securities and Exchange Board of India (Prohibition of Insider Trading)

Regulations, 2015, as amended

“Interest Coverage Ratio” Aggregate of earnings before taxes, depreciation on Bank’s property and total

interest expended divided by total interest expended for the Fiscal

“MCA” Ministry of Corporate Affairs

“Memorandum” or

“Memorandum of

Association”

The Memorandum of Association of our Bank, as amended from time to time

“MIS” Management information system

“Networth” Paid up share capital plus all reserves and surplus (excluding revaluation

reserves)

“Non-Resident Indian(s) or

NRI”

Non-Resident Indian, as defined under Foreign Exchange Management

(Deposit) Regulations

“Notified Sections” Sections of the Companies Act 2013 that have been notified by the Government

of India

“p.a.” Per annum

“PAT” Profit After Tax

“PAN” Permanent Account Number

“PBT” Profit Before Tax

“Registered Office” Salem Road, Kathaparai, Karur – 639006, Tamil Nadu

“RoC” Registrar of Companies, Chennai

Issue Related Terms

Term Description

“AIF(s)” Alternative investment funds, as defined and registered with SEBI under the

Securities and Exchange Board of India (Alternative Investment Funds)


“Allocated /Allocation” The allocation of Equity Shares, following the determination of the Issue Price,

to Investors on the basis of Application Forms submitted by them, in consultation

with the BRLM and in compliance with Chapter VIII of the SEBI ICDR

Regulations

“Allotment/Allotted” The issue and allotment of Equity Shares pursuant to this Issue

“Allottee(s)” Bidders who are Allotted Equity Shares of our Bank pursuant to this Issue

“Application Form”

The form (including any revisions thereof) pursuant to which a Bidder indicates

its interest to subscribe for the Equity Shares of our Bank pursuant to the Issue

“Book Running Lead

Manager” or “BRLM”

Centrum Capital Limited

“BSE” BSE Limited

“Bid” An indication of interest by a QIB, including all revisions and modifications of

interest, as provided in the Application Form, to subscribe for Equity Shares to

be issued pursuant to this Issue

“Bidders” A QIB who has made a Bid pursuant to the terms of the Preliminary Placement

Document and the Application Form

“Bidding Period”/ “Issue

Period”

The period between the Issue Opening Date and Issue Closing Date inclusive of

both dates during which Bidders can submit their Bids

“CAN/Confirmation of

Allocation Note”

Note or advice or intimation to Bidders confirming the allocation of Equity

Shares to such QIBs after determination of the Issue Price, and requesting

payment for the entire applicable Issue Price for all the Equity Shares Allocated

to such QIBs

“Category III foreign

portfolio

investor(s)”

FPIs who are registered as “Category III foreign portfolio investors” under the

SEBI (FPI) Regulations

“Closing Date” The date on which the Allotment of the Equity Shares offered pursuant to this

Issue shall be made, i.e. on or about [●]

“Cut-off Price” The Issue Price of the Equity Shares to be issued pursuant to the Issue which

shall be finalised by our Bank in consultation with the BRLM

18

Term Description

“Depositories Act” The Depositories Act, 1996, as amended from time to time

“Depository” A body corporate registered under SEBI (Depositories and Participant)


“Designated Date” The date of credit of Equity Shares pursuant to the Issue to the Allottee’s demat

account, as applicable to the relevant Allottee

“DP / Depository

Participant”

A depository participant as defined under the Depositories Act

“Eligible FPIs” FPIs that are eligible to participate in this Issue and do not include Category III

foreign portfolio investors (who are not eligible to participate in the Issue)

“Equity Shares” The equity shares of face value ` 10 each of our Bank

“Escrow Account” The account titled ‘Lakshmi Vilas Bank– QIP Escrow Account’ to be opened

with the Escrow Agent, subject to the terms of the Escrow Agreement, into

which the application monies payable by Bidders in connection with

subscription to Equity Shares pursuant to the Issue shall be deposited

“Escrow Bank”/ “Escrow

Agent”

The Lakshmi Vilas Bank Limited

“Escrow Agreement” The agreement dated December 28, 2016 entered into amongst our Bank, the

Escrow Agent and the BRLM

“FDI” Foreign Direct Investment

“FEMA” Foreign Exchange Management Act, 1999, as amended, and the regulations

framed thereunder

“FIIs” Foreign institutional investors as defined under the SEBI (FPI) Regulations

“Foreign Portfolio

Investor(s)/ FPI(s)”

Foreign portfolio investors as defined under the SEBI (FPI) Regulations and

includes persons who have been registered under the SEBI (FPI) Regulations.

Any foreign institutional investor or qualified foreign investor who holds a valid

certificate of registration shall be deemed to be a Foreign Portfolio Investor until

the expiry of the block of three years for which fees have been paid as per the

SEBI FII Regulations

“Floor Price” The floor price of ` 141.15 per Equity Share, which has been calculated in

accordance with Chapter VIII of the SEBI ICDR Regulations. In terms of the

SEBI ICDR Regulations, the Issue Price cannot be lower than the Floor Price.

Our Bank may offer a discount of 5% on the Floor Price in terms of Regulation

85 of the SEBI ICDR Regulations

“FVCI” Foreign venture capital investors as defined and registered with SEBI under the

Securities and Exchange Board of India (Foreign Venture Capital Investors)


“Issue” The offer and issue of up to [●] Equity Shares each at a price of ` [●] per Equity

Share, including a premium of ` [●] per Equity Share, aggregating ` [●] million

pursuant to chapter VIII of the SEBI ICDR Regulations and the provisions of the

Companies Act, 2013

“Issue Closing Date” [●], the last date up to which the Application Forms shall be accepted by our

Bank (or the BRLM, on behalf of our Bank)

“Issue Opening Date” December 28, 2016, the date on which the acceptance of the Application Forms

shall have commenced by our Bank (or the BRLM, on behalf of our Bank)

“Issue Price” A price per Equity Share of ` [●]

“Issue Size” The aggregate size of the Issue, aggregating to ` [●] million

“Large Corporate

Account” Any account with outstanding advance of more than ` 250 million.

“Listing Regulations” The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

“Mutual Fund” A mutual fund registered with SEBI under the SEBI (Mutual Funds)


“NSDL” National Securities Depository Limited

“NSE” National Stock Exchange of India Limited

“Pay-In Date” Last date specified in the CAN for the payment of application monies by Bidders

in the Issue

“Placement Agreement” The agreement dated December 28, 2016 between our Bank and the BRLM

“Placement Document” The Placement Document to be issued in accordance with Chapter VIII of the

19

Term Description

SEBI ICDR Regulations and section 42 of the Companies Act, 2013 and the

rules thereunder

“Preliminary Placement

Document”

This Preliminary Placement Document dated December 28, 2016 issued in

accordance with Chapter VIII of the SEBI ICDR Regulations

“Promoters” Mr. K. R. Pradeep, Mr. M. P. Shyam, Mr. S. G. Prabhakharan, Mr. N.

Malayalaramamirtham

“Promoter Group” Unless the context requires otherwise, the entities forming part of our promoter

group in accordance with SEBI ICDR Regulations and which are disclosed by

us to the Stock Exchanges from time to time

“QIBs” or “Qualified

Institutional Buyers”

A qualified institutional buyer as defined under Regulation 2(1)(zd) of the SEBI

ICDR Regulations

“Regulation S” Regulation S under the U.S. Securities Act

“Relevant Date” December 28, 2016, which is the date of the meeting wherein the Board of

Directors, or a duly authorised committee, decides to open the Issue

“Rs”, “Rupees”, “`” or

“Indian Rupees”

The legal currency of India

“SEBI” The Securities and Exchange Board of India constituted under the SEBI Act

“SEBI Act” The Securities and Exchange Board of India Act, 1992, as amended from time

to time

“SEBI (FPI) Regulations” Securities and Exchange Board of India (Foreign Portfolio Investors)


“SEBI Delisting

Regulation”

SEBI (Delisting of Equity Shares) (Amendment) Regulations, 2016

“SEBI ICDR Regulations” SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, as

amended, including instructions and clarifications issued by SEBI from time to

time

“SENSEX” An index of 30 constituent stocks traded on BSE representing a sample of large,

liquid and representative companies

“Shareholders” Persons holding Equity Shares of our Bank, unless otherwise specified in the

context thereof

“Stock Exchanges” The BSE and NSE

“STT” Securities Transaction Tax

“Takeover Code” The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011,

as amended from time to time

“U.S.” United States

“U.S. Securities Act” U.S. Securities Act of 1933, as amended

“VCF” Venture Capital Fund

“QIP” Qualified Institutions Placement

Industry Terms

Term Description

“ALM” Asset Liability Management

“ATMs” Automated Teller Machines

“Bps” Basis points

“BR” Base Rate

“Basel I” Recommendations of the Basel Committee on Banking Supervision dated July

1988

“Basel II” Recommendations of the Basel Committee on Banking Supervision dated June

2004

“Basel III” Recommendations of the Basel Committee on Banking Supervision dated

December 2010

“CAIIB” Certified Associate of Indian Institute of Bankers

“CAR” Capital Adequacy Ratio

“CAGR” Compounded Annual Growth Rate

“CBS” Core Banking Solutions

“CBLO” Collateralised Borrowing and Lending Obligation

20

Term Description

“CCI” Competition Commission of India

“CCIL” Clearing Corporation of India Limited

“CIBIL” Credit Information Bureau of India Limited

“CRAR” Capital to Risk Weighted Assets Ratio

“CRR” Cash Reserve Ratio

“CASA” Current and Saving Account Deposits

“DRS” Disaster Recovery Site

“DRT” Debts Recovery Tribunal

“EFT” Electronic Funds Transfer

“EPS” Earnings Per Share

“FBT” Fringe Benefit Tax

“FIPB” Foreign Investment Promotion Board of India

“GDP” Gross Domestic Product

“HTM” Held to Maturity

“IBA” Indian Banks Association

“IT” Information Technology

“KYC” Know Your Customer Norms as stipulated by the Reserve Bank of India

“MCLR” Marginal Cost of funds based Lending Rate

“NAV” Net Asset Value

“NECS” National Electronic Clearing Services

“NIM” Net Interest Margin

“NPA” Non-Performing Asset

“NDS-OM” Negotiated Dealing System-Order Matching

“NRI” Non-Resident Indian

“NSDL – CRA” National Securities and Depository Limited (Central Record Keeping Agency)

“New Banks Licensing

Guidelines”

Guidelines on Licensing of New Banks in the Private Sector issued by the RBI

on February 22, 2013

“PFRDA” Pension Fund Regulatory and Development Authority

“RBI” Reserve Bank of India

“RDB Act” The Recovery of Debts Due to Banks and Financial Institutions Act, 1993

“Repatriation” “Investment on repatriation basis” means an investment the sale proceeds of

which are, net of taxes, eligible to be repatriated out of India, and the expression

‘Investment on non-repatriation basis’, shall be construed accordingly.

“SARFAESI Act

2002/Securitisation Act”

Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002

“SME” Micro, small and medium enterprises as defined by the Micro, Small and

Medium Enterprises Development Act, 2006 in terms of which the definition of

micro, small and medium enterprises is as under:

(a) Enterprises engaged in the manufacture or production, processing or

preservation of goods as specified below:

(i) A micro enterprise is an enterprise where investment in plant and machinery

does not exceed ` 2.50 million;

(ii) A small enterprise is an enterprise where the investment in plant and

machinery is more than ` 2.50 million but does not exceed ` 50.00 million; and

(iii) A medium enterprise is an enterprise where the investment in plant and

machinery is more than ` 50.00 million but does not exceed `100.00 million.

In case of the above enterprises, investment in plant and machinery is the

original cost excluding land and building and the items specified by the Ministry

of Small Scale Industries vide its notification No.S.O.1722(E) dated October 5,

2006.

(b) Enterprises engaged in providing or rendering of services and whose

investment in equipment (original cost excluding land and building and

21

Term Description

furniture, fittings and other items not directly related to the service rendered or

as may be notified under the MSMED Act, 2006 are specified below.

(i) A micro enterprise is an enterprise where the investment in equipment does

not exceed ` one million;

(ii) A small enterprise is an enterprise where the investment in equipment is

more than ` one million but does not exceed ` 20 million; and

(iii) A medium enterprise is an enterprise where the investment in equipment is

more than ` 20 million but does not exceed ` 50 million.

“Tier I Capital” The core capital of a bank, which provides the most permanent and readily

available support against unexpected losses. It comprises paid-up capital and

statutory reserves including other disclosed reserves, if any, capital reserves,

innovative perpetual debt instruments, perpetual non-cumulative preference

shares as reduced by equity investments in subsidiaries, intangible assets, and

losses in the current period and those brought forward from the previous period

“Tier II Capital” The revaluation reserves (at a discount of 55.0%), general provisions and loss

reserves (allowed up to a maximum of 1.25% of risk-weighted assets), hybrid

debt capital instruments, subordinated debt, Innovative perpetual debt

instruments and perpetual non-cumulative preference shares.

“The Banking Regulation

Act”

The Banking Regulation Act, 1949, as amended

22

DISCLOSURE REQUIREMENTS UNDER FORM PAS-4 PRESCRIBED UNDER THE COMPANIES

ACT, 2013

The table below sets out the disclosure requirements as provided in PAS-4 and the relevant pages in this

Preliminary Placement Document where these disclosures, to the extent applicable, have been provided.

Sr.

No.

Disclosure Requirements Relevant Page of this

Preliminary

Placement Document

1. GENERAL INFORMATION

(a) Name, address, website and other contact details of the company indicating

both registered office and corporate office.

Cover page, 230

(b) Date of incorporation of the company. Cover page, 230 (c) Business carried on by the company and its subsidiaries with the details

of branches or units, if any.

86

(d) Brief particulars of the management of the company. 158 (e) Names, addresses, DIN and occupations of the directors. 158 (f) Management's perception of risk factors. 40 (g) Details of default, if any, including therein the amount involved, duration

of default and present status, in repayment of:

229

(i) Statutory dues; 229 (ii) Debentures and interest thereon; 229

(iii) Deposits and interest thereon; and 229 (iv) Loan from any bank or financial institution and interest thereon. 229

(h) Names, designation, address and phone number, email ID of the nodal/

compliance officer of the company, if any, for the private placement offer

process.

Cover page, 196, 230

2. PARTICULARS OF THE OFFER

(a) Date of passing of board resolution. 30, 68, 188, 230 (b) Date of passing of resolution in the general meeting, authorising the offer

of securities.

30, 68, 188, 230

(c) Kinds of securities offered (i.e. whether share or debenture) and class

of security.

Cover page, 30, 68

(d) Price at which the security is being offered including the premium, if any,

along with justification of the price.

Cover page, 30, 68,

187 (e) Name and address of the valuer who performed valuation of the

security offered.

Not Applicable

(f) Amount which the company intends to raise by way of securities. Cover page, 30, 187 (g) Terms of raising of securities: Cover page, 30, 187

(i) Duration, if applicable; Not Applicable (ii) Rate of dividend or rate of interest 72

(iii) Mode of payment Cover page, 30, 187 (iv) Repayment Not Applicable

(h) Proposed time schedule for which the offer letter is valid. Cover page, 30, 187 (i) Purposes and objects of the offer. 66

(j) Contribution being made by the promoters or directors either as part of the

offer or separately in furtherance of such objects.

66

(k) Principle terms of assets charged as security, if applicable. Not Applicable 3. DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS,

LITIGATION ETC.

(i) Any financial or other material interest of the directors, promoters or key

managerial personnel in the offer and the effect of such interest in so far as

it is different from the interests of other persons

165, 169

(ii) Details of any litigation or legal action pending or taken by any Ministry or

Department of the Government or a statutory authority against any promoter

of the offeree company during the last three years immediately preceding

the year of the circulation of the offer letter and any direction issued by such

Ministry or Department or statutory authority upon conclusion of such

litigation or legal action shall be disclosed

229

23

Sr.

No.


Preliminary

Placement Document

(iii) Remuneration of directors (during the current year and last three Financial

Years)

163

(iv) Related party transactions entered during the last three Financial Years

immediately preceding the year of circulation of offer letter including with

regard to loans made or, guarantees given or securities provided

231

(v) Summary of reservations or qualifications or adverse remarks of auditors in

the last five Financial Years immediately preceding the year of circulation

of offer letter and of their impact on the financial statements and financial

position of the company and the corrective steps taken and proposed to be

taken by the company for each of the said reservations or qualifications or

adverse remark

36

(vi) Details of any inquiry, inspections or investigations initiated or conducted

under the Companies Act, 2013 or any previous company law in the last

three years immediately preceding the year of circulation of offer letter in

the case of company and all of its subsidiaries. Also if there were any

prosecutions filed (whether pending or not) fines imposed, compounding of

offences in the last three years immediately preceding the year of the offer

letter and if so, section-wise details thereof for the company and all of its

subsidiaries

228

(vii) Details of acts of material frauds committed against the company in the last

three years, if any, and if so, the action taken by the company

227

4. FINANCIAL POSITION OF THE COMPANY

(a) the capital structure of the company in the following manner in a tabular

form:

68

(i)(a) the authorised, issued, subscribed and paid up capital (number of securities,

description and aggregate nominal value)

68

(b) size of the present offer Cover Page, 30, 68 (c) paid up capital:

A. after the offer

68

B. after conversion of convertible instruments (if applicable) 68 (d) share premium account (before and after the offer) 68

(ii)(a) the details of the existing share capital of the Bank in a tabular form,

indicating therein with regard to each allotment, the date of allotment, the

number of shares allotted, the face value of the shares allotted, the price and

the form of consideration

Provided that the Bank shall also disclose the number and price at which

each of the allotments were made in the last one year preceding the date of

the offer letter separately indicating the allotments made for considerations

other than cash and the details of the consideration in each case

68

(b) Profits of the company, before and after making provision for tax, for the

three Financial Years immediately preceding the date of circulation of offer

letter

231

(c) Dividends declared by the company in respect of the said three Financial

Years; interest coverage ratio for last three years (Cash profit after tax plus

interest paid/interest paid)

72

(d) A summary of the financial position of the company as in the three audited

balance sheets immediately preceding the date of circulation of offer letter

32

(e) Audited Cash Flow Statement for the three years immediately preceding the

date of circulation of offer letter

34, 231

(f) Any change in accounting policies during the last three years and their effect

on the profits and the reserves of the company.

128

5. DECLARATION BY THE DIRECTORS

(a) The Bank has complied with the provisions of the Act and the rules made

thereunder

232, 233

(b) The compliance with the Act and the rules does not imply that payment of 232, 233

24

Sr.

No.


Preliminary

Placement Document

dividend or interest or repayment of debentures, if applicable, is guaranteed

by the Central Government

(c) The monies received under the offer shall be used only for the purposes and

objects indicated in the Offer letter

232, 233

25

SUMMARY OF BUSINESS

We are an old generation private sector bank, with nearly nine-decade history, and over time we have evolved

into a professionally run banking institution. We believe that we have transitioned from a South India focussed

corporate lender to a bank with a national focus, with a diversified portfolio of retail, MSME/ SME, corporate

lending and fee based products. We have a wide presence through a network of 1,393 customer outlets which

includes 460 branches, 926 ATMs and seven extension counters across 16 states and one union territory, as of

September 30, 2016. We have 78 branches in metropolitan cities, 127 branches in urban areas, 148 branches in

semi-urban areas and 107 branches in rural areas, as of September 30, 2016. As of September 30, 2016, we had

a customer accounts of more than 2.83 million banking customers.

We offer a comprehensive range of products and services including savings accounts, current accounts, term

deposits, international debit cards, credit cards, corporate and retail loans, depository services, locker facilities,

mobile and internet banking services, bill payment services, foreign exchange services, payment and remittance

services, repatriation schemes. For further details, see “Business – Product Portfolio” on page 92.

We also offer a number of para-banking products and services, which include distribution of life insurance, general

insurance and health insurance products, for which we have tied up with Max Life Insurance Company Limited,

Future Generali India Insurance Company Limited and Cigna TTK Health Insurance Company Limited,

respectively. We provide money transfer services through branch channels as well as through direct remittance

and we have tied up with Weizmann Forex Limited, UAE Exchange & Financial Services Ltd. We have also tied

up with a number of asset management companies for distribution of various mutual fund schemes. We offer

depository services which allow our customers to open demat accounts at our designated branches and hold

securities in electronic form. We are also registered as a “banker to the issue” with SEBI and can receive ASBA

applications in initial public offerings. For further details, see “Business – Product Portfolio” on page 92.

The treasury operations of our Bank undertakes liquidity management to maintain required liquidity, while

complying with the cash reserve ratio (“CRR”) and the statutory liquidity ratio (“SLR”). Our treasury operations

comprise primarily of statutory reserves management, liquidity management, investment and trading activities

and foreign exchange activities. We are also involved in investing in commercial papers, security receipts, mutual

funds, certificates of deposits and floating rate instruments in order to manage short-term surplus liquidity.

Treasury activities are supported by appropriate technology, information systems and risk management systems.

We have organized our business model around the following five divisions: (i) retail banking, (ii) SME/ MSME

banking, (iii) rural banking, (iv) mid-commercial banking and (iv) wholesale banking. Our income from our retail

banking, SME/ MSME banking, rural banking, mid-commercial banking and whole sale banking operations have

grown at a CAGR of 27.37 %, 24.40 %, 12.65 %, 11.57 % and 28.53 %, from Fiscal 2014 to Fiscal 2016. Retail

banking comprises of loans and advances to individuals, HUFs, trusts and clubs. SME/ MSME banking comprises

of loans and advances made available to micro, small and medium enterprises. Mid-commercial banking division

comprises of loans to sole proprietorships and partnership firms (other than loans to SME/ MSME and rural

banking customers). Rural banking division comprises of the loans made for the purposes of agricultural activities.

Loans to private and public limited companies that do not fall within any of the above divisions are categorized

as loans to wholesale banking division customers. For further details of our business divisions, see “Business –

Our Business Divisions” on page 90.

We have issued and have outstanding subordinated bonds under Basel II and Basel III norms, which have been

assigned the rating of CARE A- (called “Single A Minus”) by CARE. Instruments with this rating are considered

to have adequate degree of safety regarding timely servicing of financial obligations and carry low credit risk.

Brickwork Ratings India Private limited upgraded the rating of our long term bonds from BWR BBB+ to BWR

A-, which indicate adequate degree of safety regarding timely servicing of financial obligations and instruments

with such ratings carry low credit risk.

We have been recognised in India, with certain awards such as “Best Bank for Managing IT Infrastructure amongst

Small Banks” for the year 2014-2015 by the Institute for Development and Research in Banking Technology,

“Excellence in Unified Communications for Business Benefits” for the year 2014-2015 by Dataquest, “Excellence

Performance” in National Automated Clearing House for the year 2013-2014 by National Payments Corporation

of India. We have been felicitated by National Clearing Corporation of India for valuable contribution in cheque

truncation system implementation in Chennai and have been awarded “CIO 100” in the Networking Pioneer

Awards for the year 2012-2013.

26

Our total assets have increased from ` 206,530.57 million as of March 31, 2014 to ` 287,321.63 million as of

March 31, 2016 at a CAGR of 17.95%. Our total deposits have grown from ` 185,728.82 million as of March 31,

2014 to ` 254,309.61 million as of March 31, 2016 at a CAGR of 17.02%. Our CASA deposits increased from ` 26,409.00 million as of March 31, 2014 to ` 44,155.10 million as of March 31, 2016 at a CAGR of 29.30%. Our

net profit increased from ` 597.43 million for the fiscal year ended March 31, 2014 to ` 1,802.35 million for the

fiscal year ended March 31, 2016 at a CAGR of 73.69% and our net profit increased from ` 850.91 million for

the six months ended September 30, 2015 to ` 1,255.30 million for the six months ended September 30, 2016. In

addition, our number of branches have increased from 361 as of March 31, 2014 to 460 as of September 30, 2016

and the number of total customer accounts have increased from 2.73 million as of March 31, 2014 to 2.83 million

as of September 30, 2016. As on September 30, 2016 our total assets, total deposits, and CASA deposits stood at

` 299,678.96 million, ` 266,801.41 million and ` 46,193.04 million respectively.

Our Competitive Strengths

We believe that the following strengths distinguish us in a competitive Indian banking industry:

Strong south India focussed franchise with significant growth potential

We have wide presence in South India with 397 branches out of which 257 branches are in the state of Tamil

Nadu, 47 branches in the state of Karnataka, 48 branches in the state of Andhra Pradesh, 29 branches in Telangana,

12 branches in Kerala and 4 in Puducherry as on September 30, 2016. We believe the South Indian states are rich

in resources and provide higher opportunity for resource mobilization. We believe, the region has good potential

for retail business, alongwith agriculture SME and corporate loans. Additionally, as of September 30, 2016, we

have a wide distribution of 107 branches in the rural areas of the South Indian states which provide us an edge in

our priority sector banking due to its rich agricultural resources and a large catchment area for low cost deposits.

Wide distribution network across India and diverse customer base

We offer a diverse range of retail and mid-commercial products and services across retail banking, wholesale

banking, agricultural lending and SMEs, including short-term and long-term deposits, secured and unsecured

loans, internet banking, mutual fund distribution and life, health and general insurance distribution. Our branch

network allows us to provide banking services to a wide variety of customers, including large and medium to

small corporates, institutions and state-owned enterprises, as well as commercial, agricultural, industrial and retail

customers. As of September 30, 2016, we had 2.83 million customer accounts reflecting our large customer base.

As of September 30, 2016, our operations cover 16 states and one union territory across India, with 1,393 customer

outlets which includes 460 branches and 926 ATMs. As of September 30, 2016, we have 78 branches in

metropolitan cities, 127 branches in urban areas, 148 branches in semi-urban areas and 107 branches in rural areas.

Strong customer relations provide opportunities for cross selling

Over the 90 years of our existence, we have significantly grown our operations from being a regional bank to a

banking institution covering a wide spectrum across several states in India. We further seek to leverage our brand

recall across India. With vast banking experience, we believe we have built strong and long standing relationships

with a large number of customers. We have differentiated our products based on customer segmentation aiming

at wider financial product delivery.

As part of our para-banking activities, we offer distribution of life insurance, general insurance and health

insurance products, money transfer services through branch channels as well as through direct remittance,

promotion of mutual fund schemes, depository services, services as a PAN Service Agent and ASBA services.

Offering para-banking activities to our existing customer base has been one of the drivers of our growth. We

conduct frequent campaigns to market the above products along with our business partners.

Proven business and growth track record

We have nine decades of operating experience and our recent financial growth encapsulates our competitive

strengths. Our total income grew from ` 21,875.42 million in Fiscal 2014 to ` 28,728.31 million in Fiscal 2016,

representing a CAGR of 14.60%. Our deposits grew from ` 185,728.80 million as at March 31, 2014 to `

254,309.62 million as at March 31, 2016 representing a CAGR of 17.02%. Our net advances grew from `

128,891.90 million as at March 31, 2014 to ` 196,437.40 million as at March 31, 2016, representing a CAGR of

27

23.45%. Our net interest income grew from ` 4,860.10 million in Fiscal 2014 to ` 6,453.06 million in Fiscal 2016,

representing a CAGR of 15.23%. As of Sept 30, 2016, our total income, deposits, net advances and net interest

income were ̀ 16,051.69 million, ̀ 266,801.41 million, ` 200,691.64 million and ̀ 3,642.29 million respectively.

Professional and experienced management

We are a professionally run banking institution and our senior management team is led by Mr. Parthasarathi

Mukherjee, Managing Director and CEO. Supporting our Managing Director and CEO is a strong management

team, including Mr. N. S. Venkatesh, our Executive Director and Chief Financial Officer on our Board. Our senior

management team has vast experience in the banking sector. Mr. Mukherjee prior to joining the Bank has been

the group executive, corporate relationships and international business at Axis Bank Limited. Mr. N. S. Venkatesh

was the executive director and chief financial officer of IDBI Bank Limited. For further detail, see “Board of

Directors and Senior Management” on page 158.

All members of our senior management team have in-depth knowledge of banking operations and management

and have a strong focus on continuing to formulate and implement our turnaround and growth strategy as our

business grows and evolves. We have been able to build a team of professionals with relevant experience,

including credit evaluation, risk management, treasury, technology and marketing. Our senior management team

has been responsible for the formulation of our new strategy to emphasise on the restructuring of our balance sheet

and business mix, improving operating efficiency, leveraging on the strengths of our distribution network and

existing resources, deepening customer relationships and improving the brand. As of September 30, 2016, our

total employee strength was 3,929.

Streamlined risk management controls and technology platform

We believe that prudent risk management policies, procedures and controls are critical for the long-term

sustainable development of our business. We have implemented risk management procedures for most of our

credit exposures. The credit risk management consists of internal credit rating methodology, credit scoring method

for retail structured products, risk based pricing methodology, control mechanisms and incorporating external

rating of the borrower as a part of our credit risk assessment. A separate risk management department formulates

and implements credit risk valuation and approves risk management framework and policies, oversees the credit

approval process and periodically reviews the same.

In 2008, we networked all of our branches and offices to facilitate core banking solutions (“CBS”). Through our

technology platform we offer internet banking to our retail and corporate customers, SMS banking, Immediate

Payment Service (“IMPS”), online tax payments and online trading. This also enables us to provide

comprehensive customer data which enables us to (1) cross sell our products and services; (2) generate reports

required for various regulatory filings; and (3) enables the management to access key data on real time basis

through Executive Dashboard. We have also set up primary data centre at Chennai which houses our IT

infrastructure. We have set up a disaster recovery site at Bangalore and a board approved Business Continuity

Plan.

Strategy

Expand the Branch network and Penetration

Pursuant to our initial focus on deepening presence in focus geographies, we seek to leverage our brand recall,

especially in Southern India, and to expand our presence. We intend to increase our branch network with focus in

South India with selective branch expansion in other select locations in India. Working toward this goal, we have

received approval from the Reserve Bank of India, to open 52 branches in Tier I to Tier 6 cities vide letter dated

September 9, 2016. We will continue to focus on improving our technology to support our network of branches,

and build brand for phased expansions in contiguous markets for wider presence. We plan to strengthen our HR

practices and focus on augmenting skills of our employees and make strategic additions to fill any vacancy in our

Bank.

Emphasis on enhancing CASA growth

We seek to increase our CASA deposits and reduce our dependence on bulk deposits in order to reduce cost of

funds. As of September 30, 2016, CASA accounts contributed to 17.31% of our total deposits. In order to increase

our CASA and retail deposits, we have set up an exclusive and dedicated team for liabilities and product

28

development. This team comprises of product specialists to develop new products and also to enhance the features

of existing products in an endeavour to be the trend setter in the market. We have a dedicated sales force for

acquisition of CASA across regions. We plan to enhance the team size and also develop product sales specialists

for acquiring current account and value based business. We plan to focus on increasing CASA share through

branch specific initiatives.

As senior high value customers tend to prefer branch banking, we continue to contribute to our branch expansion

strategy parallel to our growth in online Banking.

The ongoing restructuring process in the organization is aimed at ensuring that the main focus of branches would

be sourcing CASA and selling TPP. In addition, all verticals have been given targets under CASA and TPP which

we expect to lead to a healthy growth of low cost reports.

Focus on retail and MSME banking

A majority of our liability and asset customers are in the retail or the MSME divisions. The retail, SME and

MSME advances constituted 30.05 % of our net advances as on September 30, 2016. We aspire to be a retail,

SME and MSME focussed bank. We intend to continue our focus on retail, SME and MSME banking with the

intention to increase advances to this category of customers and to mobilise low cost CASA deposits from them.

We have adopted granular customer segmentation for focused strategies. Increase in advances to this category of

customers not only helps in increasing our net interest margins, it will also help us in reducing our risk arising

from large loan accounts becoming NPA. Further, we can cross sell our other products to this category of

customers. We have set-up dedicated relationship managers, in every region, to source MSME business. In retail,

our initial focus is on vehicle loan and mortgages which we intend to expand to cover other products in a phased

manner. Our other initiatives including branch expansion plans, setting up a dedicated sales force for CASA

mobilisation, cross selling of other products and our incentive programmes are specifically designed for achieving

growth in this segment.

Increase in fee-based income

In order to increase our fee-based income, we started distributing other financial products (third-party investment

products, such as mutual funds and insurance products, and provide wealth management services) from Fiscal

2003. This was done to improve our penetration and customer reach by diversifying our source of revenues.

We have entered into agreements with well-known providers of life, health and general insurance products to

distribute life, health and general insurance policies, respectively. Fee based income (including commissions on

the sale of insurance products, brokerage on marketing of mutual funds and demat transaction and maintenance

charges) constituted 41.08%, 42.03% and 48.32% of the total non-interest income in Fiscals 2014, 2015 and 2016,

respectively. Our total fee based income grew from ` 836.45 million in Fiscal 2014 to ` 1,471.37 million in Fiscal

2016, representing a CAGR of 32.63%. For the six months ended September 30, 2016 our total fee based income

constituted 31.45% of total non-interest income.

The total fee-based income from TPP, such as, life insurance, general insurance, mutual fund, forex and NPS grew

from ` 34.79 million in Fiscal 2014 to ` 61.66 million in Fiscal 2016. For the six months ended September 30,

2016 our total fee-based income from TPP, such as, life insurance, general insurance, mutual fund, forex and NPS

is ` 35.19 million. For Fiscal 2014, the life insurance products have constituted 52.72% of total fee-based income

from TPP, which increased to 78.67% in Fiscal 2016. For the six months ended September 30, 2016, the life

insurance products have constituted 70.70% of total fee-based income from TPP. For Fiscal 2014, the general

insurance products have constituted 45.16% of the total fee-based income from TPP, which decreased to 19.40%

that included 1.43% of health insurance products, in Fiscal 2016. For the six months ended September 30, 2016,

the general insurance products have constituted 27.00% which included 7.09% of health insurance products of

total fee-based income from TPP. For Fiscal 2014, the mutual funds and NPS have constituted 2.03% and 0.05%,

respectively, of the total fee-based income from TPP, as compared to 1.80%, and 0.13%, respectively, in Fiscal

2016. For the six months ended September 30, 2016, the mutual funds and NPS have constituted 1.32%, and

0.03% of total fee-based income from TPP.

Focused sales teams have been set up for marketing a diversified range of products including Bancassurance (both

life and non-life), mutual funds, three-in-one accounts (depository participant accounts, on-line trading accounting

and CASA account) and other wealth management products. We have tied up with a third party for sourcing of

home loans through sales channels. These products are being offered through “Core Banking Solutions” and other

29

alternate channels such as phone and internet banking. We intend to continue to expand this activity for increasing

our other income.

Relationship Managers have been appointed for taking care of high net worth customers. There is an enhanced

focus on FOREX transactions (both fund based and non-fund based) and increasing revenues from non-fund based

business by way of issuing letter of credit / guarantees (both inland & foreign).

Moreover, from March 31, 2014 to September 30, 2016, the number of our ATM machines have increased from

688 to 926. Such increase in the number of ATMs set up by us allows us to generate fees from other bank

customers who use our ATMs to withdraw money, which provides us with additional growth opportunities.

Further strengthen risk management capabilities and improve efficiencies

We have adopted a prudent risk management strategy and enhance our risk management organisational structure

and processes in order to create an effective risk management system. We aim to continue to enhance our credit

risk management systems and processes in line with growth of business. We intend to continue to strengthen our

credit and risk functions. We believe that our efforts in strengthening risk management may improve our asset

quality.

We have set up a central processing cells at all our regional office centres, which currently possess retail and

MSME assets. We also have a central processing cell for liability product, for opening the account so as to adhere

to KYC / AML requirements. We also intend to have a central processing cell for the wholesale credit facility.

We believe this centralised processing cell will help in reducing the manpower requirement at branch level and

also improve efficiency of operations, thereby reducing operational cost, in addition to strengthening the risk

management framework.

We believe a key to our success is the ability to retain, motivate and develop talented and experienced

professionals. We intend to focus on cultivation of a high-quality and professional workforce through provision

of training and development programs for employees to enhance professional knowledge and capabilities,

resulting in improved efficiencies. We will continue to effect improvements in our technology platform to help us

enhance our product delivery capabilities and achieve efficiencies.

30

SUMMARY OF THE ISSUE

The following is the general summary of the terms of the Issue. The summary should be read in conjunction with, and

is qualified in its entirety by, more detailed terms appearing in this Preliminary Placement Document, including under

the sections titled “Risk Factors”, “Use of Proceeds”, “Issue Procedure” and “Description of Equity Shares”.

Issuer The Lakshmi Vilas Bank Limited

Issue Size Up to [●] Equity Shares aggregating up to ` [●] million.

A minimum of 10% of the Issue Size, or at least [●] Equity Shares, shall be available

for Allocation to Mutual Funds only, and the balance [●] Equity Shares shall be

available for Allocation to all QIBs, including Mutual Funds

In case of under-subscription or no subscription in the portion available for Allocation

only to Mutual Funds, such portion or part thereof may be Allotted to other QIBs

Face Value ` 10 per Equity Share

Issue Price ` [●] per Equity Share

Minimum Offer Size Minimum value of offer or invitation to subscribe to each QIB is ` 20,000 of the face

value of the Equity Shares

Floor Price ` 141.15 per Equity Share. Our Bank may offer a discount of up to 5% on the Floor

Price in terms of Regulation 85 of the SEBI ICDR Regulations. The Floor Price, net of

discount of [●]% is ` [●]

Eligible Investors QIBs as defined in Regulation 2(1)(zd) of the SEBI ICDR Regulations to whom the

Preliminary Placement Document and the Application Form is circulated and who are

eligible to bid and participate in the Issue and QIBs not excluded pursuant to Regulation

86(1)(b) of the SEBI ICDR Regulations. For further details, see “Issue Procedure”,

“Selling Restrictions” and “Transfer Restrictions” on pages 187, 199 and 204,

respectively. The list of QIBs to whom the Preliminary Placement Document and

Application Form is delivered shall be determined by the BRLM in consultation with

our Bank, at its sole discretion

Dividend For details, see “Description of Equity Shares”, “Dividend Policy” and “Statement of

Tax Benefits” on pages 209, 72 and 214 respectively

Indian Taxation For the details of the tax benefits available to our Bank, see “Statement of Tax Benefits”

on page 214

Date of Board Resolution

authorizing the Issue

May 6, 2016 and October 17, 2016

Date of passing of

Shareholders Resolution

authorizing the Issue

June 10, 2016

Equity Shares issued and

outstanding immediately

prior to the Issue

180,969,986 Equity Shares

Equity Shares

subscribed, called-up and

paid-up immediately

prior to the Issue

179,461,609 Equity Shares

Equity Shares issued and

outstanding immediately

after the issue

[] Equity Shares

Listing Our Bank has received in principle approvals dated December 28, 2016 from BSE and

dated December 28, 2016 from NSE, pursuant to Regulation 28 of the Listing

Regulations. Our Bank shall apply to the Stock Exchanges for the final listing and

trading approval after the Allotment and after the credit of Equity Shares to the

beneficiary account with the Depository Participant

Lock-up Please see the sub-section titled “Lock-up” of the section titled “Placement Agreement”

on page 197 for a description of restrictions on our Bank and our Promoters in relation

to Equity Shares

Transferability

Restriction

The Equity Shares being Allotted pursuant to this Issue shall not be sold for a period

of one year from the date of Allotment, except on the Stock Exchanges. For details in

31

relation to other transfer restrictions, see “Transfer Restrictions” on page 204.

Use of Proceeds The net proceeds of the Issue, after deduction of fees, commissions and expenses in

relation to the Issue, are expected to total approximately ` [●] million. Please see “Use

of Proceeds” on page 66 for further information

Risk Factors Please see “Risk Factors” on page 40 for a discussion of risks that you should consider

before participating in the Issue

Closing Date The Allotment is expected to be made on or about [●]

Ranking The Equity Shares being issued pursuant to the Issue shall be subject to the provisions

of the Memorandum and Articles of Association and shall rank pari passu in all

respects with the existing Equity Shares including the rights in respect of dividends

after the closing. The holders of such Equity Shares will be entitled to participate in

dividends and other corporate benefits, if any, declared by our Bank after the Closing

Date, in compliance with the Companies Act, 2013. The holders of such Equity Shares

may attend and vote in shareholders’ meetings in accordance with the provisions of the

Companies Act, 2013. For detail, see the section titled “Description of Equity Shares”

on page 209.

Voting Rights of Share

Holders

For details, see “Description of Equity Shares – Voting Rights” on page 209

Security codes for the

Equity Shares

ISIN: INE694C01018

BSE Code: 534690

NSE Code: LAKSHVILAS

32

SUMMARY FINANCIAL INFORMATION

The following summary financial information as of and for the Fiscals 2014, 2015 and 2016 and as of and for the

six months ended September 30, 2016 and has been derived from our audited and limited reviewed financial

statements, as applicable, included elsewhere in this Preliminary Placement Document. You should read the

following summary financial information in conjunction with our Financial Statements and the related notes and

the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Our audited financial statements for Fiscal Year 2015 and 2016 have been prepared in accordance with Indian

GAAP and have been audited by R. K. Kumar & Co. Our audited financial statements for Fiscal Year 2014 have

been prepared in accordance with Indian GAAP and have been audited by M/s. Sagar & Associates. Our historical

results do not necessarily indicate our results expected for any future periods.

Solely for the convenience of the reader, the selected data set out below are presented in “` In million format”,

which is different from our Financial Statements. Neither the information set forth below nor the format in which

it is presented should be viewed as comparable to information prepared in accordance with Indian GAAP, U.S.

GAAP, IFRS or other accounting principles.

Balance Sheet (` in million)

As at March

31, 2014

As at March

31, 2015

As at March

31, 2016

I. Capital & Liabilities

a. Capital 975.61 1,791.67 1,794.62

b. Reserves & surplus 9,560.39 13,769.76 15,841.32

c. Deposits 185,728.82 219,642.12 254,309.62

d. Borrowings 4,581.00 4,581.00 7,230.08

e. Other liabilities & provisions 5,684.76 7,269.81 8,145.99

Total 206,530.58 247,054.36 287,321.63

II. Assets

a. Cash & Balances with Reserve Bank of India 11,920.83 11,434.40 12,865.02

b. Balances with banks and money at call & short

notice

1,196.04 1,752.81 821.09

c. Investments 56,886.78 60,511.56 65,454.05

d. Advances 128,891.90 163,520.19 196,437.39

e. Fixed Assets 2,005.08 2,434.13 3,669.99

f. Other Assets 5,629.95 7,401.27 8,074.09

Total 206,538.58 247,054.36 287,321.63

Contingent Liabilities 27,635.09 29,031.19 36,870.15

Bills for collection 4,045.21 6,323.77 8,844.31

33

Profit and loss account

(` in million)

Fiscal 2014 Fiscal 2015 Fiscal 2016

I. Income

a. Interest Earned 19,839.50 22,145.31 25,682.99

b. Other Income 2,035.92 2,840.34 3,045.32

Total 21,875.42 24,985.65 28,728.31

II. Expenditure

a. Interest Expended 14,979.40 16,878.77 19,229.93

b. Operating Expenses 3,900.21 4,422.80 5,427.14

c. Provisions & Contingencies 2,399.26 2,361.22 2,268.88

Total 21,278.87 23,662.79 26,925.95

III. Net Profit for The Year 596.55 1,322.86 1,802.36

Profit brought forward 0.89 0.68 0.82

Transfer from Investment Reserve - - 7.27

Total 597.44 1,323.54 1,810.45

IV. Appropriations

a. Transfer to Statutory Reserve 150.00 332.00 452.00

b. Transfer to Capital Reserve 1.12 47.86 60.42

c. Transfer to Other Reserves 240.00 414.00 500.00

d. Investment Reserve 0.00 7.27 0.00

e. Transfer to Special Reserve u/s 36(1)(viii) of the IT

Act, 1961

91.50 91.50 150.00

f. Proposed Dividend 97.56 358.42 538.39

g. Tax on Proposed Dividend 16.58 71.66 109.60

h. Balance carried over to Balance Sheet 0.68 0.82 0.04

Total 597.44 1,323.54 1,810.45

Earnings Per Share - Basic (`) 6.11 9.16 10.05

Earnings Per Share - Diluted (`) - 9.15 10.05

34

Cash Flows (` in million)


Cash flow from operating

activities

Net profit as per profit &

loss account

596.56 1,322.86 1,802.36

Adjustments for:

Provisions & Contingencies 2,493.42 2,361.22 2,268.88

Depreciation 235.83 155.45 377.63

Loss on sale of assets (0.38) 3.23 0.79

Income Tax / TDS paid (285.29) (411.00) (570.00)

Net cash flow before

changes in working

capital

3,040.14 3,431.76 3,879.66

Changes in working

capital

Liabilities:

Increase/Decrease in

Deposits 29,539.04 33,913.30 34,667.49

Refinances (219.00) - 2,248.08

Other Liabilities (2,246.21) (1,082.29) (1,706.93)

27,073.83 32,831.01 35,208.64

Assets: Increase/Decrease

in

Investments 13,641.31 4,207.89 4,942.49

Advances 11,863.94 34,628.29 32,917.20

Other Assets (431.02) 777.22 122.91

(25,074.23) (39,613.40) (37,982.60)

Net cash flow from

operating activities

5,039.74 (3,350.63) 1,105.70

Cash flow from investing

activities

Purchase of Fixed Assets (359.26) (594.79) (678.09)

Sale of Fixed Assets 3.31 7.06 3.25

Net cash flow from

Investing activities

(355.95) (587.73) (674.84)

Cash flow from financing

activities

Share issue including share

premium net of forfeited

shares

2.45 4,105.29 23.47

Proceeds received from

Tier II Bonds

- - 1,401.00

Repayment of Tier II

Bonds

- - (1,000.00)

Dividends paid (288.87) (96.59) (356.43)

Net Cash Flow from

financing activities

(286.42) 4,008.70 68.04

Cash flow for the year 4,397.37 70.34 498.90

Cash & Cash equivalents

at the beginning of the

year

8,719.50 13,116.87 13,187.21

Cash & Cash equivalents

at the year end

13,116.87 13,187.21 13,686.11

35

Summary Balance Sheet and Profit and loss Information for period ended September 30, 2016 (` in million)

Balance sheet As at September

30, 2016

As at September 30,

2015

I. Capital & Liabilities

a. Capital 1,794.62 1,794.62

b. Reserves & Surplus 17,096.63 14,598.00

c. Deposits 266,801.41 234,453.20

d. Borrowings 6,682.00 5,982.00

e. Other Liabilities & Provisions 7,304.30 6,499.55

TOTAL 299,678.96 263,327.37

II. Assets

a. Cash & Balances with Reserve Bank of India 13,752.12 11,886.03

b. Balances with Banks and Money at Call & Short Notice 2,004.04 566.94

c. Investments 72,261.92 66,498.34

d. Advances 200,691.64 174,022.18

e. Fixed Assets 3,725.89 2,572.05

f. Other Assets 7,243.35 7,781.83

TOTAL 299,678.96 263,327.37

Profit and Loss A/c Half year ended

September 30, 2016

Half year ended

September 30, 2015

I. Income

a. Interest Earned 13,840.60 12,482.49

b. Other Income 2,211.09 1,426.89

TOTAL 16,051.69 13,909.38

II. Expenditure

a. Interest Expended 10,198.31 9,427.12

b. Operating Expenses 3,010.82 2,472.59

c. Provisions & Contingencies 1,587.26 1,158.76

TOTAL 14,796.39 13,058.47

III. Net Profit for The Year 1,255.30 850.91

Profit brought forward 0.04 0.82

TOTAL 1,255.34 851.73

36

Reservations, qualifications and adverse remarks in the last five financial years

Period Reservation, qualification and adverse remark and their

impact on the financial statements and financial position

of the Bank

Corrective steps taken and

proposed to be taken by the

Bank

Six

months

ended

September

30, 2016

Emphasis of Matter

a. The auditors have drawn attention to Note No. 3 of the

unaudited financial statements regarding deferment of loss

to the extent of ` 526 million on sale of advances to Asset

Reconstruction Companies. The auditor’s opinion is not

qualified in respect of this matter.

The Note states that RBI vide its circular no.

DBR.No.BP.BC.94/21.048/2014-15 dated May 21, 2015

permitted banks to provide for the net shortfall on

account of sale of assets to reconstruction companies over

a period of two years. Consequently, ` 207.2 million has

been charged to the profit and loss account for the quarter

ended September 30, 2016. The unamortised amount on

this account as on September 30, 2016 is ` 526 million.

b. The auditors have also drawn attention to note Note No. 4

of the unaudited financial statements regarding deferment

of loss to the extent of ` 60.3 million in respect of frauds.

The auditor’s opinion is not qualified in respect of this

matter.

The Note states that as permitted by RBI vide its circular

no. RBI/2014-

2015/535/DBR.No.BP.BC.83/21.04.048/2014-2015 dated

April 1, 2015 the outstanding balance in fraud accounts

relating to advances amounting to ` 80.4 million, is being

provided over a period of four quarters. Consequently, `

20.1 million has been charged to the profit and loss

account for the quarter ended September 30, 2016. The

balance amount to be provided as on quarter ended

September 30, 2016 is ` 60.3 million

The Auditors have qualified the Review Report in respect to

the following:

Pending finality to the show-cause notice issued by the

Reserve Bank of India for certain violations including

delay in reporting of certain fraudulent Bill transactions,

the Bank based on the reply given to RBI explaining that

there is no delay has made the provision in terms of their

Master Direction on frauds-

No.DBS.CO.CFMC.BC.NO.1/23.04.001/2016-17 dated

July 1, 2016, of spreading over a period of 4 quarters.

Accordingly, the bank has provided `187.8 million and

the unamortised amount of provision being carried

forward as at September 30, 2016 is ` 563.5 million. In

the event of an adverse outcome to the show-cause

notice, the net of tax impact on the net profit would be ` 368.5 million.

The amortised amount on this

account as on September 30,

2016 is ` 526 million of

which ` 168.89 million and ` 123.68 million will be

charged to the profit and loss

accounts in December 2016

and March 2017, respectively.

The balance shall be adjusted

to the profit and loss accounts

in the next three quarters of

Fiscal 2017.

The balance amount of ` 60.3

million will be provided as

per the RBI circular no.

RBI/2014-

2015/535/DBR.No.BP.BC.83/

21.04.048/2014-2015 dated

April 1, 2015.

The Bank is awaiting

response from RBI. The Bank

will take appropriate steps in

accordance with the

directions as RBI may

prescribe. The Bank has also

filed a complaint with the

police against the borrower.

Pursuant to the steps taken by

our Bank, certain amounts

have been recovered from the

Parties. Our Bank will

continue with the initiatives to

recover remaining amount.

37



of the Bank



Bank

Year

ended

March 31,

2016

Emphasis of Matter

The auditors have drawn attention to Note No.2.4.4.C of the

financial statements, regarding deferment of loss of ` 956.0

million on sale of advances to Asset Reconstruction

Companies. The auditor’s opinion is not qualified in respect of

this matter.

Note No.2.4.4.C states: RBI vide its circular

no.DBR.No.BP.BC.94/ 21.04.048/2014-15 dated May 21,

2015 has extended permission to banks to provide the net

shortfall on account of sale of assets up to March 31, 2016 to

asset reconstruction company over a period of two years.

Consequently, ` 763.3 million (previous year ` 274.3 million)

has been charged to the profit and loss account for the year

ended March 31, 2016. The unamortized amount on this

account as on March 31, 2016 is ` 956.0 million (previous year

` 729.9 million)

Out of the unamortised amount

of ` 956.0 million as on March

31, 2016, an amount of ` 429.9

million have been charged to

profit and loss account and the

remaining amount of ` 526.0

million is carried forward.

Year

ended

March 31,

2015

Emphasis of Matter

a. The auditors have drawn attention to note No.3.4.4.C of

the financial statements, regarding deferment of loss to the

extent of ` 729.9 million on sale of advances to asset

reconstruction companies. The note states:

“The net shortfall on account of sale of assets to

reconstruction companies amounting to ` 1,004.2 million

is being amortized over a period of 2 years, as per RBI

circular No. RBI/502/DBOD.BP.BC.No.

98/21.04.132/2013-14 dated 26-02-2014. Consequently, `

274.3 million has been charged to profit and loss account

for the year ended March 31, 2015. The unamortized

amount on this account as on March 31, 2015 is ` 729.9

million.”

b. The auditors have also drawn attention to note No.3.4.4.D

of the financial statements, regarding deferment of loss to

the extent of ` 401.8 million in respect frauds in advances.

The note states:

“As permitted by RBI vide its circular RBI/2014-

15/535/DBR.No.BP.BC.83/21.04.048/2014-15 dated

April 1, 2015, the outstanding balance in fraud accounts

relating to advances amounting to ` 535.4 million, is being

provided over a period of four quarters. Consequently, `

133.6 million has been charged to the profit and loss

account for the quarter ended March 31, 2015. The balance

amount to be provided as on March 31, 2015 is ` 401.8

million.”

The auditor’s opinion is not qualified in respect of these

matters.

Out of the unamortised amount

of ` 729.9 million as on March

31, 2015, an amount of ` 684.7

million have been charged to

profit and loss account upto the

period ended September 30,

2016 and the remaining

amount of ` 45.2 million is

carried forward for the quarter

ended December 31, 2016.

The balance amount to be

provided of ` 401.8 million

was charged to profit and loss

account in December, 2015.

Year

ended

March 31,

2014

Without qualifying their opinion, the auditors have drawn

attention to the following:

a. Note No. 3.10 of the Schedule 18 to the financial

statements, regarding deferment of pension liability and


amortised for pension of

38



of the Bank



Bank

gratuity liability of the Bank, pursuant to the exemption

granted by the Reserve Bank of India to the Bank from

application of the provisions of Accounting Standard (AS)

15, Employees Benefits vide circular no.

DBOD.BP.BC/80/21.04.018/2010-11, dated 09-02-2011

on “Re-opening of Pension Option to the employees and

Enhancement in Gratuity Limits - Prudential Regulatory

Treatment.” Accordingly, out of the unamortized amount

of ` 372.4 million as on April 1, 20l3, the Bank has

amortized ` 155.6 million for pension and ` 30.6 million

for gratuity, being proportionate amount for the year ended

March 31, 2014 and balance amount to be amortized in

future periods for pension is ` 155.6 million and for

gratuity is ` 30.6 million.

b. Note No. 3.10 of the Schedule 18 to the financial

statements, which states that, pending receipt of opinion

from the Expert Advisory Committee of the Institute of

Chartered Accountants of India, the provision for pension

liability as on March 31, 2014 has been made based on the

actuarial valuation.

c. Note No. 7 of the Schedule 18 to the financial statements,

which describes creation of Deferred Tax Liability (DTL)

on Special Reserve under section 36 (1) (viii) of the

Income Tax Act, 1961 pursuant to RBI’s Circular No.

DBOD. No. BP.BC. 77 / 21.04.018 / 2013-14 dated

December 20, 2013, whereby the DTL of ` 78.7 million

pertaining to periods up to March 31, 2013 has been

adjusted to the general reserve of the Bank and DTL of `

31.1 million on the special reserve created during the

financial year ended March 31, 2014 has been charged to

the profit and loss account in accordance with the

accounting treatment prescribed by the Reserve Bank of

India.

`155.6 million and for gratuity

of `30.6 million have been

fully amortised in March 2015.

As per opinion dated March 5,

2015 taken from ICAI no

corrective steps are to be

taken.

From March 31, 2014

onwards, every year, DTL has

been created on special reserve

u/s 36(i)(viii) of the Income

Tax Act, 1961, as directed by

RBI.

Year

ended

March 31,

2013

Without qualifying their opinion, the auditors have drawn

attention to the following:

Note No.3.10 of the Schedule 18 to the financial statements,

regarding deferment of pension liability and gratuity liability

of the Bank, pursuant to the exemption granted by the Reserve

Bank of India to the Lakshmi Vilas Bank from application of

the provisions of Accounting Standard (AS) 15, Employees

Benefits vide circular no. DBOD.BP.BC/80/21.04.018/2010-

11, dated 09.02.2011 on “Re-opening of Pension Option to the

employees and Enhancement in Gratuity Limits - Prudential

Regulatory Treatment.” Accordingly, out of the unamortized

amount of ` 558.5 million as on April 1, 2012, the Bank has

amortized ` 155.6 million for Pension and ` 30.6 million for

Gratuity being proportionate amount for the year ended March

31, 2013 and balance amount to be amortized in future period

for pension is ̀ 311.2 million and for gratuity is ` 61.3 million.


amortised for pension of ` 311.20 million and for gratuity

of ` 61.3 million have been

fully amortised in March 2015.

39



of the Bank



Bank

Year

ended

March 31,

2012

The Auditors have qualified the report in respect to the

following:

Note No.1(a) & (b) of schedule 18 to the accounts regarding

the effect of adjustments arising from reconciliation of inter –

branch transactions and tallying of balances in the accounts as

per general ledger with those of subsidiary ledgers, the

quantum of which is not ascertained.

The reconciliation of inter

branch transactions has been

completed up to March 31,

2016 and tallying of balances

is ensured on an ongoing basis.

40

RISK FACTORS

Any investment in equity shares involves a high degree of risk. Prospective investors should carefully consider

these risks relating to our Bank’s business, together with all other information contained in this Preliminary

Placement Document before making a decision to invest in this Issue. These risks and uncertainties are not the

only risks faced by our Bank; additional risks and uncertainties that are not presently known to our Bank, or that

it may currently believe to be immaterial, may also have an adverse effect on its business, results of operations,

financial condition or prospects. If any of the risks contemplated actually materialises, our Bank’s business,

results of operation and financial condition may be adversely affected, the price of the Equity Shares could

consequently decline and you may lose all or part of your investment in this Issue. Unless otherwise stated in the

relevant risk factors set forth below, our Bank is not in a position to specify or quantify the financial or other risks

mentioned herein. To obtain a complete understanding of our Bank’s business, you should read this section in

connection together with the sections titled “Business” and “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” on pages 86 and 122, respectively.

This Preliminary Placement Document also contains certain forward looking statements that also involve risks

and uncertainties. Actual risks could differ materially from those anticipated in these forward looking statements

as a result of certain factors, including considerations described below and in the section titled “Forward Looking

Statements” on page 12. Investors should pay particular attention to the fact that our Bank is an Indian Bank and

is subject to a legal and regulatory regime that may be different from that applicable in other countries. Investors

should consult their own tax, financial and legal advisors about the particular consequences of an investment in

the Issue. Unless otherwise indicated, all financial information included in this section have been derived from

our audited financial statements for Fiscal 2014, 2015 and 2016, included elsewhere in this Preliminary

Placement Document.

RISKS ASSOCIATED WITH OUR BUSINESS

1. Our results of operations largely depend on our net interest income. Volatility in interest rates and other

market conditions could adversely impact our business and results of operations.

Our results of operations largely depend on our net interest income. Net interest income constituted 22.46%

(i.e., ` 6,453.06 million) and 22.69% (i.e., ` 3,642.29 million) of our total income for Fiscal 2016 and for

the six months ended September 30, 2016, respectively.

As of March 31, 2016 and the six months ended September 30, 2016, of our interest-earning assets, 66.68%

(i.e., ` 170,636.54 million) and 66.11% (i.e., ` 171,494.41 million) have floating interest rates, while all of

our interest-bearing liabilities have fixed interest rates. Our net interest margin (“NIM”) declined marginally

from 2.87% as of March 31, 2014 to 2.73% as of March 31, 2015 and improved to 2.78% as of March 31,

2016. Any decrease in the interest rates applicable to our assets, without a corresponding decrease in the

interest rates applicable to our liabilities, will result in a decline in our net interest income and may

consequently reduce our NIM.

In the event of falling interest rates, our borrowers may not be willing to continue to pay correspondingly

higher interest rates on their borrowings and may choose to repay their loans if they are able to switch to

more competitively priced loans offered by other banks. Although in the past, we have passed on the increase

in the interest rates linked to our interest bearing-liabilities to our borrowers, we cannot assure you that we

will continue to pass such increase in our costs to our borrowers.

Any inability to retain customers as a result of changing interest rates may adversely impact our earnings in

future periods.

2. Any increase in Banks portfolio of NPAs or any increase in the defaults by our customers in addition to

changes in the RBI mandated provisioning requirement may adversely affect our financial condition and

results of operations.

As of March 31, 2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016, our

gross NPAs were ` 5,464.65 million, ` 4,546.2 million, ` 3,912.50 million and ` 5,461.07 million,

representing 4.19%, 2.75%, 1.97% and 2.70% of our gross advances, respectively. The NPAs net of

provisions were ` 4,433.91 million, ` 3,024.9 million, ` 2,316.41 million and ` 3,760.68 million,

representing 3.44%, 1.85%, 1.18% and 1.87% of our net advances, respectively. As at March 31, 2016 and

41

for six month ended September 30, 2016, the Bank provided for 68.55% and 59.87% of its total NPAs

(including prudential write-offs) respectively pursuant to applicable regulatory guidelines and the quality of

security available. If there is any deterioration in the quality of the Bank’s security or further aging of the

assets after being classified as non-performing, an increase in provisions will be required. This increase in

provisions may adversely impact our financial performance and affect the market price of the Equity Shares.

There can be no assurance that the percentage of NPAs that we will be able to recover will be similar to our

past experience of recoveries of NPAs.

We restructure assets based upon a borrower’s potential to restore its financial health. However, certain

assets classified as restructured may subsequently be classified as delinquent or non-performing in the event

a borrower fails to restore its financial viability and honor its loan servicing commitments to us. There can

be no assurance that the debt restructuring criteria approved by us will be adequate or successful and that

borrowers will honour these commitments or be able to meet their obligations under restructured loans. Any

resulting increase in delinquency levels may adversely impact our financial performance and the market

price of the Equity Shares. The Bank has a policy of internal rating of the borrowing facilities wherein we

categorise our borrowers into three categories, namely, high risk borrowers, moderate risk borrowers and

low risk borrowers. The internal rating of the borrowers on the basis of obligor ratings ranges from LVB1

to LVB9 (safest to riskiest).

The portfolio classified on the basis of high risk, medium risk and low risk for March 31, 2016 and

September 30, 2016 is furnished below:

(` in million) March 31, 2016 September 30, 2016

Sr.

No.

Risk Intensity Rating Credit

outstanding

% of

Standard

Advances

Credit

outstanding

% of

Standard

Advances

1 Low Risk LVB1, LVB2& LVB3 56,209.73 28.93 48,208.21 24.46

2 Medium Risk LVB4 & LVB5 57,455.34 29.57 58,011.90 29.44

3 High Risk LVB6, LVB7, LVB8

& LVB9

9,248.90 4.76 10,521.16 5.34

4 Sub Total

122,913.97 63.27 116,741.27 59.24

5 Exempted from

Rating1

33,549.42 17.27 39,536.96 20.06

6 Products Withdrawn

0.00 0.00 0.00 0.00

7 Grand Total

156,463.39 80.54 156,278.23 79.30

8 Unrated (9-7)

37,813.40 19.46 40,793.93 20.70

9 Total Standard

Advances*

194,276.79 100.00 197,072.16 100.00

* Percentage is arrived for total standard advances. 1We do not carry out internal rating for some of our borrowers such as loan against fixed deposits, agricultural loans, loans to

employees etc.

Borrowers in the high risk category could be especially vulnerable if economic conditions worsen or

economic growth is slow, which could adversely affect our business, results of operations and financial

condition.

Our ability to continue to reduce or contain the level of our NPAs may be affected by a number of factors

that are beyond our control including, a sharp and sustained rise in interest rates, unemployment, slowdown

in the Indian economy affecting our borrowers, movements in global commodity markets and exchange

rates, global competition, adverse changes in government policies, laws or regulations and performance of

various industry. In addition, the expansion of our business may also cause the level of our NPAs to increase

as we may continue to lend without certainty of borrower being able to repay. Although we constantly

endeavour to improve our collections, we cannot assure you that we will be successful in our efforts or that

the overall quality of our loan portfolio may not deteriorate in the future. In the event of the RBI effecting

any changes to the prudential norms requiring banks to maintain higher provisioning norms for non-

performing assets, such increase in provisioning requirement would adversely impact our profitability. If we

are not able to control and reduce our NPAs, it could adversely affect our business, financial condition and

results of operations.

42

3. A substantial portion of our NPAs are attributable to Large Corporate Accounts and any adverse

performance by such Large Corporate Accounts could have a material adverse impact on our financial

condition and results of operations.

As of March 31, 2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016, our

lending to Large Corporate Accounts (any outstanding of loans of more than ` 250 million) constituted

36.09% (i.e., ` 43,096.88 million), 48.95 % (i.e., ` 64,045.30 million), 46.11% (i.e., ` 76,382.80 million) and

39.40% (i.e., ` 78,199.20 million), respectively, of our adjusted net bank credit. Further, as of March 31,

2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016, of our total Gross

NPAs, 46.72% (i.e., ` 2,552.88 million), 43.43% (i.e., ` 1,974.26 million), 34.10% (i.e., ` 1,333.97 million)

and 40.28% (i.e., ` 2,199.56 million), respectively attributed to Large Corporate Accounts. As on March 31,

2016, our total exposure for top four NPA accounts is 1,583.20 million. In the past, our results of operations

have been impacted by provisioning for certain loans to Large Corporate Accounts which turned into NPAs.

Any adverse performance by these Large Corporate Accounts could significantly increase our NPAs, which

may materially and adversely affect our business, results of operations and financial condition.

4. We have received a show cause notice from the RBI relating to a fraud involving our Bank.

The RBI has issued a show cause notice (“Notice”) dated September 6, 2016 alleging inter alia serious

deficiencies pertaining to bill discounting, KYC updations, delay in reporting fraud, lapses in opening

current account, due diligence, monitoring etc. against the Bank. The annexure to the Notice provides the

details of certain instances of violation of the relevant direction / instruction / guideline of the RBI. The

Notice seeks to impose a penalty of ` 10 million for each violation of the instructions issued under the

Banking Regulations Act, and also a further penalty which may extend to ` 0.1 million for every day during

which the contravention continues.

With respect to the delay in reporting the fraud, the Notice has alleged that the fraud was committed in

March 2016 and were also flagged by the auditors and the RBI; however, the Bank has declared such

transactions as “fraud” only in August 2016 and reported them to RBI thereafter. The Notice also alleges

that the Bank has not even “red flagged” these accounts in the interim. In accordance with the “Fraud

Reporting and Monitoring” notification prescribed by the RBI, frauds of ` 50 million or above were required

to be notified to the RBI, Central Office, Mumbai with a copy to CFMC Bengaluru “within a week of such

frauds coming to the notice of the bank’s head office”. The Bank has on September 21, 2016 in its response

to the Notice stated that the transactions were initially reported as “instances of unauthorized bill discounting

transactions”, to the RBI on May 2, 2016 setting out the facts as applicable on that date.

The Bank has further submitted that certain bills were realized in April, May and June 2016 and accordingly

when no bills were realized since June 2016, fraud investigation was instituted at the Bank by the Law

Department and the Credit Monitoring Department. In light of the above facts and the investigation report

of the Bank dated August 3, 2016 confirmed the said transactions as frauds, the accounts were declared as

fraudulent on August 6, 2016 and the matter was reported to the RBI on August 10, 2016. Pursuant to the

steps taken by the Bank, certain amounts have been recovered. The matter is currently pending.

In accordance with the RBI Master Direction on Frauds No. DBS.CO.CFMC.BC.NO.1/23.04.001/2016-17

dated July 1, 2016, (“RBI Master Directions”) a bank is allowed to provision the impact of a fraud over

four quarters if there is no delay in reporting of the fraud. A delay, for the purposes of the said RBI circular,

would refer to a period of one week from classification of a transaction as a fraud through the red flagged

accounts route or detection/declaration as a fraud ab initio. Pending finality to the Notice, the Bank based

on the reply given to the RBI explaining that there is no delay, has made the provision in terms of the RBI

Master Directions, of spreading over a period of four quarters. Accordingly, the Bank has provided ` 187.84

million and the unamortized amount of provision being carried forward as at September 30, 2016 is ` 563.53

million. In the event of an adverse outcome to the Notice, the net of tax impact on the net profit would be `

368.50 million. For further details, please see, “Legal Proceedings – Litigation by our Bank – DRT Matters”

on page 225.

5. Our inability to improve the share of CASA deposits may result in higher cost of deposits and thereby

affect the profitability of our Bank in future.

In Fiscal 2016, we had total deposits of ` 254,309.62 million. The share of CASA deposits amounted to

17.36% of total deposits in Fiscal 2016 vis-à-vis 16.67% in Fiscal 2015, and is one of the factors for lowering

43

the cost of deposit to 8.17% in Fiscal 2016 from 8.58% in Fiscal 2015. Failure by us to maintain the growth

in CASA deposits at a rate proportionate to the growth of our business may affect the profitability of our

Bank.

6. We face significant risks and challenges in developing fee income business, which may affect our

business and results of operations.

As part of our growth strategy, we have been diversifying and expanding our para-banking activities to offer

distribution of life insurance, general insurance and health insurance products, money transfer services

through branch channels as well as through direct remittance, promotion of mutual fund schemes, depository

services, services as a PAN Service Agent and ASBA services. Such new initiatives and products and

services entail a number of risks and challenges, including but not limited to the following:

Our inability to understand the preferences of our customers or potential customers and thereby provide

customised solution;

inability to attract and retain personnel who are able to implement, supervise and conduct the new

business;

insufficient financial and other resources to support an expanded range of products and services;

failure to obtain additional approvals and licences from regulators, including the RBI, the IRDAI, and

SEBI;

competition from similar offerings or products and services by our competitors in the banking and non-

banking financial services sectors;

lower growth or profitability potential than we anticipate;

failure to identify new segments and offer attractive new products and services in a timely fashion,

putting us at a disadvantage to our competitors;

changes in regulations or Government policies that may restrict or cap the interest rates or fees and

commissions that we may charge customers in any of our new businesses or compel changes to our

business models and viability of our businesses;

any negative publicity arising due to regulatory or other actions against third parties with whom we are

associated and over whom we have no control; and

inability to respond promptly to new technology developments and be in a position to dedicate resources

to upgrade our systems and compete with new players entering the market.

If we are unable to successfully expand and diversify our products and services, our fee income from such

products and services may be less than anticipated, which could have a material adverse effect on our

business and financial results.

7. We have concentrations of loans to and deposits from certain customers, which expose us to risk of credit

losses and premature withdrawal of deposits from these customers that could materially and adversely

affect our business, results of operations and financial condition.

As of March 31, 2014, March 31, 2015, March 31, 2016, and the six months ended September 30, 2016, our

total advances to twenty largest borrowers were ` 20,658.60 million, ` 24,712.80 million, ` 25,258.30

million and ` 26,329.43 million, respectively. The percentage of advances to twenty largest borrowers to

total advances of our Bank accounted for approximately 14.05%, 14.96%, 11.43% and 12.97%, as of March

31, 2014, March 31, 2015, March 31, 2016, and the six months ended September 30, 2016, respectively. We

cannot assure you that these borrowers will continue to honour their commitments and there will be no

defaults in future. We cannot assure you that there will not be any delay in payments of interest and/or

principal from these borrowers.

As of March 31, 2014, March 31, 2015, March 31, 2016, and the six months ended September 30, 2016, our

total deposits of twenty largest depositors were ` 33,312.68 million, ` 36,791.18 million, ` 44,209.70

million, and ` 45,251.87 million, respectively. The percentage of deposits to twenty largest depositors to

total deposits of our Bank accounted for approximately 17.94%, 16.75%, 17.38% and 16.96%, as of March

31, 2014, March 31, 2015, March 31, 2016, and the six months ended September 30, 2016, respectively. We

cannot assure you that there will not be any premature withdrawal or non-renewal of deposits from these

depositors.

44

In the event any of the above risk materialises, our business, results of operations and financial conditions

may be adversely affected.

8. We face maturity mismatches between our assets and liabilities. If we fail to sustain or achieve growth of

our deposit base, including our current and savings account deposit base, our business may be adversely

affected.

We meet our funding requirements through short-term (i.e. maturity up to one year) and long-term (i.e.,

maturity for more than one year) deposits from retail depositors and mid-to-large corporate depositors.

Banks usually face a bucket-wise asset-liability mismatch where, typically, the inflows do not match with

the outflows in that particular bucket, based on residual maturity.

As of September 30, 2016, we have an asset liability mismatch. The bucket-wise negative mismatches are

as under: (` in million)

Maturity period Mismatch to outflow (in %)(a)(b) Mismatch to outflow

Overdue to Day 1 237.21 9,363.49

2-7 Days 43.40 4,227.13

8-14 Days (40.88) (3,962.09)

15-30 Days* (2.01) (144.52)

31 Days to 2 months* (12.47) (1,348.05)

More than 2 months and upto 3 months* (16.08) (2,715.02)

3-6 Months (6.06) (1,480.06)

6 Months- 1 Year (34.20) (16,232.04)

1-3 Years 19.04 19,188.14

3-5 Years 39.94 5,061.58

Over 5 Years (19.30) (12,458.04)

(a) Minus sign indicates negative mismatch percentages

(b) Mismatch to outflow has been arrived at based on the formula: (Assets – Liabilities)/Liabilities*100

* Time brackets are changed as per new guidelines for September 30, 2016

Assumptions for calculating the asset liability mismatch are based on the guidelines of RBI circular on

structural liquidity.

Further, asset liability mismatch results in liquidity risk that reflects the possible mismatch of assets and

liabilities in a particular bucket. The liquidity risk in a bank arises on account of unanticipated withdrawals

of deposits, non-renewal of deposits and delay in anticipated repayment of advances.

We have constituted an Asset Liability Committee (“ALCO”) to address the abovementioned risks. The

ALCO regularly reviews the asset liability mismatch and takes appropriate steps to ensure that we are not

exposed to liquidity risk either, in the short or long-term.

However, if the abovementioned risks materialise, we may face liquidity problem, resulting in an asset

liability mismatch. As a result, we may be required to pay higher rates to attract deposits, which may have

an adverse impact on our business and results of operations.

Any failure on our part to minimize the asset liability mismatch resulting in higher liquidity risk may

adversely affect our business, financial condition and results of operations.

9. Any inability to maintain adequate capital due to change in regulations or lack of access to capital or

otherwise could materially and adversely affect our results of operations and financial condition.

We are subject to regulations relating to capital adequacy of banks, which determines the minimum amount

of capital we must hold as a percentage of the risk-weighted assets on our portfolio, or capital-to-risk asset

ratio (“CRAR”). The RBI has issued on the implementation of the Basel III capital regulation framework in

India, and on July 1, 2014, the RBI issued a master circular on Basel III capital regulations, consolidating

all relevant guidelines on Basel III issued up to June 30, 2014 (together, the “Basel III Guidelines”). The

Basel III Guidelines came into effect on April 1, 2013, and, subject to a series of transitional arrangements

to be phased in over a period of time, will be fully implemented by March 31, 2019.

45

The Basel III Guidelines require, among other things, higher levels of Tier I capital and common equity,

capital conservation buffers, maintenance of a minimum prescribed leverage ratio on a quarterly basis,

higher deductions from common equity and Tier I capital for investments in subsidiaries, changes in the

structure of non-equity instruments eligible for inclusion in Tier I capital and loss absorbency features for

non-equity Tier I and Tier II capital. As of March 31, 2019, banks are required to maintain a common equity

Tier I ratio adequacy ratio of 5.5%, minimum Tier I capital of 7.0%, minimum total capital of 9.0% and a

capital conservation buffer of 2.5%. However, the implementation of the capital conservation buffer

commenced from March 31, 2016.

We are required by the RBI to maintain a minimum capital adequacy ratio of 9.625% (including capital

conservation buffer) in relation to our total risk weighted assets from March 31, 2016. Due to increase of

size of assets and accordingly the risk weighted assets, there is an impact on the CRAR under the Basel III

standards. Although we have been maintaining a CRAR under the Basel III standards, which was 10.67%

as of March 31, 2016 and 10.10% as of September 30, 2016 as compared to the regulatory minimum

requirement of 9.00%, there can be no assurance that we will be able to maintain our CRAR within the

regulatory requirements. Further, any adverse developments could affect our ability to continue to satisfy

the capital adequacy requirements, including deterioration in our asset quality, decline in the values of our

investments or applicable risk weight for different asset classes. In case the CRAR falls below the regulatory

minimum requirement of 9.00%, we may be constrained in further expanding our business.

With the implementation of the Basel III guidelines, we may be required to improve the quality, quantity

and transparency of Tier I capital, which will now have to be predominantly equity shares. In addition, these

changes may result in the incurrence of substantial compliance and monitoring costs. Furthermore, with the

implementation of Basel III guidelines, our ability to support and grow our business could be limited by a

declining capital adequacy ratio, if we are unable to access or face difficulty in accessing the capital or have

difficulty in obtaining capital in any other manner. Further, in relation to the laws applicable to us, see

“Regulations and Policies” on page 146.

If we fail to meet capital adequacy requirements, the RBI may take certain actions, including restricting our

lending and investment activities and the payment of dividends by us. These actions could materially and

adversely affect our reputation, results of operations and financial condition.

10. We are required to maintain cash reserve ratio (“CRR”) and statutory liquidity ratio (“SLR”) and any

increase in these requirements could materially and adversely affect our business, financial condition

and results of operations.

As a result of the statutory reserve requirements stipulated by the RBI, we may be more exposed structurally

to interest rate risk than banks in other countries. Under the RBI regulations, we are subject to a CRR

requirement under which we are currently required to keep 4.00% of our net demand and time liabilities in

current account with the RBI. We do not earn interest on cash reserves maintained with the RBI. The RBI

may further increase the CRR requirement as a monetary policy measure and has done so on numerous

occasions. Increases in the CRR requirement could materially and adversely affect our business, results of

operations and financial condition.

In addition, under the RBI regulations, our liabilities are subject to a SLR requirement, according to which

20.75 of our demand and time liabilities need to be invested in Government securities, state government

securities and other securities approved by the RBI from time to time. In our experience, these securities

generally carry fixed coupons. When the interest rate rises, the value of these fixed coupon securities

depreciates. We cannot assure you that investment in such securities will provide returns better than other

market instruments. Further, any increase in the CRR and the SLR requirements, would reduce the amount

of cash available for lending, which may materially and adversely affect our business, financial condition


11. We have regional concentration in southern India, especially Tamil Nadu. Any adverse change in the

economic condition of Tamil Nadu and other states in southern India can impact our results of

operations.

As of September 30, 2016, out of our 460 branches, 397 branches were located in southern India (including

257 branches which were located in Tamil Nadu) constituting 86.30% of our total branch network. Our

branches located in southern India received deposits of ` 214,587.27 million as of September 30, 2016,

46

including ` 134,568.51 million received by branches located in Tamil Nadu, constituting 80.43% and

50.44%, respectively, of our total deposits as of September 30, 2016.

Our concentration in the southern India, and specifically in Tamil Nadu, exposes us to any adverse economic

or political circumstances in that region as compared to other public and private sector banks that have more

diversified national presence. Any disruption, disturbance or sustained downturn in the economy of Tamil

Nadu and other states in southern India where we have a presence, could adversely affect our business,

financial condition and results of operations.

Additionally, while we continue to expand our operations outside of our traditional areas such as Tamil

Nadu and other states in southern India, we face risks with our operations in geographic areas in which we

do not possess the same level of familiarity with the economic condition, consumer base and commercial

operations. In addition, our competitors may already have established operations in areas outside southern

India and we may find it difficult to attract customers in such new areas. We may not be able to successfully

manage the risks of such an expansion, which could have a material adverse effect on our business, financial


12. Foreign investment in the Equity Shares, and acquisitions or transfers of our Equity Shares resulting in

an aggregate holding of 5% or more are subject to limits specified by the RBI. Further, in relation to our

foreign investment, we are required to comply with the various provisions of the Foreign Exchange

Management Act, 1999 (“FEMA”).

Under Indian laws, the aggregate permissible foreign investment, including FDI and investment by FIIs/FPIs

and NRIs in a private sector bank is limited to an aggregate of 49% of the paid up capital under the automatic

route. Further, the aggregate FIIs/FPIs and NRIs' holding, cannot exceed 24% and 10%, respectively, of the

paid up capital. However, with the approval of the board of directors and the shareholders by way of a special

resolution, the aggregate FII/FPIs and NRI holding in a bank can be increased up to 49% and 24%,

respectively.

Pursuant to the Banking Regulation Act read with Prior Approval for acquisition of shares or voting rights

in Private Sector Banks: Directions, 2015 dated November 19, 2015, any acquisition or transfer of shares in

a private bank which will take the aggregate holding of an individual or a group to 5% or more of the paid-

up capital of a bank requires the prior “approval” of the RBI.

Our foreign shareholding is restricted to 49% of our paid up capital, with the aggregate shareholding of NRI

not exceeding 24% and individual shareholding not exceeding 5%, of our paid up capital, pursuant to

resolution passed by our shareholders in the annual general meeting held on September 26, 2014. As of

September 30, 2016, our aggregate foreign shareholding of FII/FPIs was 9.56% of our paid up capital of

which shareholding by NRIs was 0.88% of our total paid up capital. For further details, see “Principal

Shareholders and other Information” on page 171.

The aforementioned regulatory framework could adversely affect the liquidity, free transferability of the

Equity Shares and in turn have an adverse effect on the price of the Equity Shares.

13. Non-availability of funding and increase in funding costs could adversely affect our business and our

financial condition. In case our depositors do not roll over term deposits or if we fail to increase our term

deposits, our liquidity position may be adversely affected and we may be required to pay higher cost to

attract and/or retain further deposits.

Currently our primary source of funding is deposits which include demand deposits, savings bank deposits

and term deposits, long-term Tier II debt and inter-bank borrowings. As of March 31, 2014, March 31, 2015,

March 31, 2016 and the six months ended September 30, 2016, 97.59% (i.e., ` 185,728.82 million), 97.96%

(i.e., ` 219,642.12 million), 97.24% (i.e., ` 254,309.62 million) and 97.56% (i.e., ` 266,801.41 million),

respectively, of our primary funding consisted of deposits. The cost of funds is sensitive to interest rate

fluctuations. The pricing on our issuances of debt will also be negatively impacted by any downgrade or

potential downgrade in our credit ratings. In addition, attracting customer deposits in the Indian market is

competitive. The rates that we must pay to attract deposits are determined by numerous factors such as the

prevailing interest rate structure, competitive landscape, Indian monetary policy and inflation and some of

these factors are beyond our control.

47

Our depositors may not roll over term deposits on maturity, which may force us to pay higher interest rates

in order to attract and/or retain further deposits. If we fail to sustain or achieve the growth rate of our deposit

base, including our current and savings account deposit base, our business, liquidity position and financial

condition may be adversely affected.

14. We may be unable to sustain the growth rate of our retail banking business, which could adversely impact

our growth prospects.

As a part of our retail growth strategy, we have been expanding our presence through increase in our branch

network to increase our current accounts and saving accounts deposits. Further, we have achieved significant

growth in our retail advances and retail deposits in recent years. Our gross advances under retail banking

business as of March 31, 2014, March 31, 2015 and March 31, 2016 were ` 16,270.20 million, ` 19,773.00

million and ` 26,395.20 million, respectively with an increase of 21.53% from March 31, 2014 to March 31,

2015 and 33.49% from March 31, 2015 to March 31, 2016. Our gross advances at September 30, 2016 were

` 202,533.23 million. Further, our deposits under retail banking business, excluding deposits undertaken on

differential rate of interest scheme as per RBI notifications, as of March 31, 2014, March 31, 2015 and

March 31, 2016 were ` 135,862.79 million, ` 144,302.16 million and ` 164,399.00 million, respectively

with an increase of 6.21% from March 31, 2014 to March 31, 2015 and 13.93% from March 31, 2015 to

March 31, 2016. Our deposits under retail banking business as of September 30, 2016 were ` 181,565.30

million.

We intend to continue our focus on further growth in retail banking business by offering new products and

services and by cross-selling to our customers through marketing. For example, in Fiscal 2016, we launched

the services of “LVB e-lounge” and “LVB Crown Services”. While we anticipate continued demand in the

retail banking business, growth of our retail portfolio is subject to various factors including geographic

location of our proposed branches, availability of funding in such locations, competitiveness at such

locations and approvals from RBI for opening certain branches. We cannot assure you that we will be able

to grow at the rate we have experienced in the past, which could materially and adversely affect our business

and future results of operations.

15. Our aggressive branch expansion plans may have an adverse effect on the capital outlay which in turn

may adversely affect the financial condition and results of operations of the Bank.

Pursuant to the RBI letter dated February 11, 2014, permission of the RBI is required for opening any

branches in the Tier I centers. As on September 30, 2016, we have opened 30 branches in Tier I cities and

30 in Tier II to Tier VI cities, pursuant to RBI approval. Further, we have received RBI Approval for opening

52 branches by September 8, 2017. Our aggressive branch expansion plans may have an adverse effect on

the capital outlay which in turn may adversely affect the financial condition and results of operations of the

Bank.

16. If we are unable to obtain, renew or maintain our statutory and regulatory permits and approvals required

to operate our business, it may have a material and adverse effect on our business, financial condition


We require certain statutory and regulatory permits and approvals to operate our business. Further, under

certain of our contractual arrangements we are required to hold all necessary and applicable approvals and

licenses from authorities such as RBI, SEBI and the Insurance Regulatory and Development Authority. In

the event that such approvals and licenses lapse or are revoked by the granting authorities, we may not be

able to provide such services which could have an adverse effect on our business and financial condition.

Failure by us to renew, maintain or obtain the required permits or approvals, including those set forth above,

may result in the interruption of our operations and may have an adverse effect on our business, financial


17. The Indian banking industry is very competitive and our success will depend on our ability to compete

effectively.

We face competition from public and private sector Indian commercial banks and foreign commercial banks

in all our products and services. Some of such banks are large institutions and may have much larger

customer and deposit bases, larger branch networks and wider capital base extending all over India. Further,

a few banks have experienced higher growth, achieved better profitability and increased their market shares

48

relative to us. We also face competition in some or all of our products and services from NBFCs, mutual

funds and other entities operating in the financial sector.

Liberalisation of the Indian financial sector could also lead to a greater presence or new entries of Indian

and foreign banks offering a wider range of products and services, which could adversely affect our

competitive environment. The New Banks Licensing Guidelines were issued by the RBI in February 2013

specifying that select entities or groups in the private sector, entities in the public sector and non-banking

financial companies with a successful track record of at least 10 years would be eligible to promote banks.

Subsequently, in year 2015 two new private sector banks i.e. IDFC Bank Limited and Bandhan Bank Limited

have been added to Schedule II of RBI Act after getting an in-principle approval in 2014. On August 19,

2015 the RBI granted in-principle approval to 11 applicants to set up payment banks. In September 2015,

the RBI granted in-principle licenses to 10 applicants for small finance banks, most of which are

microfinance non-banking finance companies. The RBI has also released guidelines with respect to a

continuous licensing policy for universal banks in August 2016.

In order to respond to the competitive environment in our industry, we constantly look for opportunities to

venture into areas ancillary to banking business. Currently, we provide services such as money transfer

services, mutual funds and portfolio management service, cross-selling of insurance products including life

insurance and general insurance, PAN card services, depository participant services and new pension system

pursuant to tie-ups with various independent third parties. While providing such services, we are required to

enter into contractual arrangement with such third parties. Salient terms and conditions of such contractual

arrangement, inter-alia, include providing indemnity to the other party, which can be invoked in cases such

as breach of any condition, representation or warranty given by either party. Typically, such indemnity

clause operates in favour of us and the other party, however, in certain cases the obligation to indemnify is

solely on us. In case we are required to indemnify the other party or are unable to collect under the indemnity

we are owed, our business and financial condition may be adversely affected.

Our future success will depend in large part on our ability to respond in an effective and timely manner and

our ability to compete effectively. Increased competitive pressure may have an adverse impact on our

business, financial condition and results of operations.

18. We are involved in certain legal proceedings which if determined against us, could affect our business

and financial condition.

While there are no outstanding material litigations pending by or against the Bank deemed to be ‘material’

in accordance with the materiality policy adopted by our Board, we are involved in a number of civil, tax

and recovery proceedings instituted by us before the debt recovery tribunals from time to time for recovery

of overdue amounts from various borrowers. For further details, see section titled “Legal Proceedings” on

page 222. The majority of these cases arise in the normal course of business and we believe, based on the

judicial pronouncements and legal opinion, that these cases generally do not involve the risk of a material

adverse impact on our financial performance. As on March 31, 2016, the provisions in financial statements

for taxation was made on the basis of the estimated tax liability with adjustment for deferred tax.

No assurances can be given as to whether these proceedings will be settled in our favour or against us. Such

litigation could divert management time and attention, and consume financial resources in their defence or

prosecution. In addition, should any new developments arise, such as changes in Indian law or rulings against

us by the regulators, appellate courts or tribunals, we may need to make provisions in our financial

statements, which could increase our expenses and current liabilities. If we fail to successfully defend our

claims or if our provisions prove to be inadequate, our business, financial condition, reputation and results

of operations could be adversely affected.

19. We are subject to annual financial inspection (“AFI”) by RBI. Non-compliance with the RBI

observations issued during the AFI could adversely affect our business, financial condition or results of

operations.

We were subject to an AFI by RBI under the Banking Regulation Act and from current year RBI has

substituted AFI with risk-based supervision (RBS). Inspection by the RBI is a regular exercise and is carried

out periodically by the RBI for all banks and financial institutions. This includes both offsite review and

onsite inspection. In the past, the RBI has made certain observations during the AFI inter alia regarding our

business and operations, capital adequacy, asset quality, compliance with statutory and regulatory norms,

49

credit administration, NPA analysis, quality of non-SLR portfolio, earnings appraisal, information

technology systems, treasury funds and liquidity management, risk assessment and acquisition of retail

portfolios. RBI has in the last AFI indicated certain observations and suggestions which we have taken note

of and continue to implement to improve our operations. The compliance to the observations and suggestions

was submitted to RBI and they have accepted the same.

While we attempt to be in compliance with all regulatory provisions applicable to us, in the event we are not

able to comply with certain observations made by the RBI, we may be subject to penalties by the RBI which

may have a material adverse effect on our business, reputation, financial condition or results of operations.

20. Deterioration in the performance of any of the industry sectors where we have significant exposure may

adversely impact our business, results of operations and financial condition.

Our total exposure to corporate borrowers is dispersed across various industry sectors, the most significant

of which are infrastructure, basic metal and metal products and textiles which represented 9.54% (i.e., `

21,114.15 million), 5.25% (i.e., ` 11,614.10 million) and 5.19% (i.e., ` 11,489.46 million), respectively, of

our outstanding fund and non-fund based exposures as of March 31, 2016. Further, as of the six months

ended September 30, 2016, our total exposure to above mentioned industries was ` 226,029.18 million which

represented 11.04% (i.e., ̀ 22,366.37 million), 1.61% (i.e., ` 3,268.76 million) and 38.72% (i.e., ` 78,418.11

million), respectively.

Further, it has been our policy to diversify the exposure over different industry sectors. We have fixed

exposure norms (sectoral cap) for major industry sectors. For example, our internal policies set out limit of

our credit exposure to any particular industry depending upon the nature of that industry.

Any significant deterioration in the performance of the industry sector we lend to (including ‘priority

sectors’), driven by events not within our control, such as regulatory action or policy announcements by

Government or State government authorities, would adversely impact the ability of borrowers in that

industry sector to service their debt obligations.

We cannot assure you that we will be able to diversify our exposure over different industry sectors in the

future. Failure to maintain diverse exposure resulting in industry sector concentration may adversely impact

our business, financial condition and results of operation, in case of any significant deterioration in

performance of such industry sector.

21. We operate in a regulated industry and any changes in the regulations or enforcement initiatives may

adversely affect our business, financial condition or results of operation.

Banks in India are subject to detailed supervision and regulation by the RBI. In addition, banks are generally

subject to changes in Indian law, as well as to changes in regulation and government policies and accounting

principles. Since 2012, the RBI has made several changes in regulations applicable to banking companies,

including:

implementation of Basel III capital regulation;

additional capital and provisions for unhedged foreign currency exposure;

additional capital for credit value adjustments;

guidelines on framework for domestic systemically important banks;

guidelines on intra-group exposures;

guidelines to calculate lending rates under marginal cost of funds;

FATCA compliance guidelines;

framework for revitalizing distressed assets.

We are subject to a wide variety of banking and financial services laws and regulations and a large number

50

of regulatory and enforcement authorities in each of the jurisdictions in which we operate. The laws and

regulations or the regulatory or enforcement environment in any of those jurisdictions may change at any

time and that may have an adverse effect on the products or services we offer, the value of our assets or our

business in general. Also, the laws and regulations governing the banking and financial services industry

have become increasingly complex governing a wide variety of issues, including interest rates, liquidity,

capital adequacy, securitisation, investments, ethical issues, money laundering, privacy, record keeping,

marketing and selling practices, with sometimes overlapping jurisdictional or enforcement authorities. Any

change in RBI policy, including directed lending norms, may result in our inability to meet the priority sector

lending requirements as well as require us to increase our lending to relatively riskier segments and may

result in an increase in NPAs in the directed lending portfolio. Future changes in laws and regulations and

failure or the apparent failure to address any regulatory changes or enforcement initiatives could have an

adverse impact on our business, our future financial performance and our shareholders’ funds, harm our

reputation, subject us to penalties, fines, disciplinary actions or suspensions of any kind or increase our

litigation risks and have an adverse effect on the price of our Equity Shares.

There are a number of restrictions under the Banking Regulation Act, which impede our operating flexibility

and affect or restrict investors’ rights. These include the following:

Section 12(2) of the Banking Regulation Act states that “no person holding shares in a banking company

shall exercise voting rights on poll in excess of 10.00% of the total voting rights of all the shareholders

of the banking company”.

Section 15(1) of the Banking Regulation Act states that “no banking company shall pay any dividend

on its shares until all its capitalised expenses (including preliminary expenses, organization expenses,

share-selling commission, brokerage, amounts of losses incurred and any other item of expenditure not

represented by tangible assets) have been completely written off”.

Section 17(1) of the Banking Regulation Act requires every banking company to create a reserve fund

and to transfer out of the balance of the profit of each year as disclosed in the profit and loss account a

sum equivalent to not less than 20.00% (the RBI circular dated September 23, 2000 has fixed this limit

at 25.00%) of such profit before paying any dividend.

Section 19 of the Banking Regulation Act restricts the forming of subsidiaries by banks, which may

prevent us from exploiting emerging business opportunities. Similarly, Section 23 of the Banking

Regulation Act contains certain restrictions on banking companies regarding the opening of new places

of business and transfers of existing places of business, which may affect our operational flexibility.

Section 25 of the Banking Regulation Act requires each banking company to maintain assets in India

equivalent to not less than 75.00% of its demand and time liabilities in India, which in turn may restrict

us from building overseas asset portfolios and exploiting overseas business opportunities.

We are required to obtain approval of RBI for the appointment and remuneration of our part time

chairman and other whole time directors. RBI has powers to remove managerial and other persons from

office, and to appoint additional directors.

We are also required to obtain approval of the RBI for the creation of floating charges on our

borrowings, thereby affecting leverage. The Banking Regulation Act also contains provisions regarding

production of documents and availability of records for inspection.

A compromise or arrangement between us and our creditors or any class of them or between us and our

shareholders or any modification in such arrangement or compromise will not be sanctioned by any

High Court unless such compromise or arrangement or modification, as the case may be, is certified by

RBI in writing as capable of being implemented and as not being detrimental to the interests of our

depositors. Our amalgamation with any other banking company will require the sanction of RBI and

shall be in accordance with the provisions of the Banking Regulation Act. The provisions for winding-

up of banking companies as specified in the Banking Regulation Act are at variance with the provisions

of the Companies Act. Further, RBI can also apply for winding up of a banking company in certain

circumstances and can also be appointed as the liquidator and the GoI could acquire the undertakings

of banking companies in certain cases.

51

The forms of business in which we may engage are specified and regulated by the Banking Regulation Act.

Pursuant to the provisions of section 8 of Banking Regulation Act, we cannot directly or indirectly deal in

the buying, selling or bartering of goods, except in connection with the realisation of security given to us or

held by us, or in connection with bills of exchange received for collection or negotiation, or in connection

with the administration of estates as executor, trustee or otherwise, or in connection with any business

specified under section 6(1)(o) of the Banking Regulation Act. Goods for this purpose means every kind of

movable property, other than actionable claims, stocks, shares, money, bullion and specie and all instruments

referred to in section 6(1)(a) of Banking Regulation Act. Unlike a company incorporated under the

Companies Act, which may amend the objects clause of its Memorandum of Association to commence a

new business activity, banking companies may only carry on business activities permitted by Section 6 of

the Banking Regulation Act or specifically permitted by the Reserve Bank of India. This may restrict our

ability to pursue profitable business opportunities as they arise.

22. Our success depends, in large part, upon our management team and skilled personnel and our ability to

attract and retain such persons. In the event we are not be able to attract talented employees, or are unable

to motivate and retain our existing employees, the future of our business and operations may be affected.

In the process of implementing our growth strategy, we have build a team of professionals with relevant

experience, including credit evaluation, risk management, treasury, technology and marketing. Prior to

joining us, the members of our senior management held key positions at leading Indian private sector and

foreign banks. Our future success is highly dependent on our senior management to maintain our strategic

direction, manage our current operations and risk profile and meet future business challenges, including our

planned branch network expansion.

As banking business is service oriented, our performance and success depends largely on our ability to

nurture and retain the continued service of our management team and skilled personnel. We do not maintain

key man insurance and the loss of, or inability to attract or retain, such persons could adversely affect our

business and results of operations. Our employment agreements with these personnel do not obligate them

to work for us for any specified period, and do not contain non-compete or non-solicitation clauses in the

event of termination of employment. If one or more of these key personnel are unable to continue in their

present positions, we may not be able to replace them with persons of comparable skill and expertise

promptly or at all, and we may not be able to further augment our management team appropriately as we

add newer products and services and expand our business, either of which could have a material adverse

effect on our business, operations and financial results. As we continue to expand our business and introduce

new products including expanding our para-banking activities, experienced personnel are very critical to our

business.

As of September 30, 2016, we had 3,929 employees. With the increase in competition for qualified

personnel, we continue to face challenge to recruit a sufficient number of suitably skilled personnel,

particularly as we continue to grow. In the event we are not able to attract talented employees, or are unable

to motivate and retain our existing employees, the future of our business and operations may be affected.

23. There have been certain observations made by our auditors in their audit report for the year ended March

31, 2012, March 31, 2013, March 31, 2014, March 31, 2015 and March 31, 2016 and in their review

report on review of interim financial results for the half year ended September 30, 2016.

The reports of the auditors for the year ended March 31, 2012, March 31, 2013, March 31, 2014, March 31,

2015 and March 31, 2016 and their review report on review of interim financial results for the half year

ended September 30, 2016, contains matter of emphasis relating to reconciliation of inter-branch transaction,

deferment of pension liability and deferment of loss on sale of advances to asset reconstruction companies.

For further details, see section titled “Summary Financial Information” on page 32.

24. We are subject to various operational and other risks associated with the financial industry which, if

materialised, may have an adverse impact on our business.

The proper functioning of our financial control, risk management, accounting or other data collection and

processing systems, together with the communication networks connecting our various branches and offices

is critical to our operations and ability to compete effectively. We are exposed to many types of operational

risk, including:

52

fraud or other misconduct by employees or outsiders for reasons which not be attributable to us also;

unauthorised transactions by employees and third parties (including violation of regulations for

prevention of corrupt practices, and other regulations governing our business activities);

unauthorised use of debit cards at ATMs;

misplacing of confidential information by our customers;

misreporting or non-reporting with respect to statutory, legal or regulatory reporting and disclosure

obligations;

any breach of network security; and

operational errors, including clerical or record keeping errors or errors resulting from faulty computer

or telecommunications systems.

In the past we have experienced fraud committed by our employees ranging from misuse of discretionary

powers to misappropriation of funds. For further details, see “Legal Proceeding” on page 222. We make

efforts to recover the amounts involved in such cases or take steps to ensure such frauds do not occur in the

future. We cannot assure you that such cases will not happen or we will be able to recover such amount in

the future. Further, we cannot assure you that any such incident will not have an adverse effect on our

reputation.

In addition, we may also be exposed to other different types of risk during our operations, including but not

limited to credit risk, counterparty risk, market risk, liquidity risk and operational risk. For further details,

see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page

122.

In the past, various fraud cases were reported which have been duly noted and acted on by our Bank, based

on our internal procedures. The total number of fraud cases reported during Fiscal 2016 is 24, involving

amount of ` 221.75 million as on March 31, 2016. For further details, see “Legal Proceedings” on page 222.

Further, we provide certain services such as, money transfer, counter payments collection and tax collection

through other agencies. We are exposed to the risk that external vendors or service providers may be unable

to fulfil their contractual obligations to us (or will be subject to the same risk of fraud or operational errors

by their respective employees) and to the risk that its (or its vendors') business continuity and data security

systems prove to be inadequate. Although we maintain a system of controls designed to keep operational

risk at appropriate levels, there can be no assurance that we will not suffer losses from operational risks in

the future which can have an adverse effect on our business, results of operations, financial condition and

the price of the Equity Shares.

25. Due to the limited information regarding loan servicing histories of customers in India, we may be at a

higher risk compared to banks with lending operations in more developed countries. We depend on the

accuracy and completeness of information furnished by the customers and counterparties and any

misrepresentation, errors or incompleteness of such information could cause our business to suffer.

Our principal activity is providing financing to borrowers, including individuals, SMEs and MSMEs. The

credit risk of our borrowers may be higher than in other economies due to the higher uncertainty in our

regulatory, political and economic environment and the inability of our borrowers to adapt to global

technological advances. In addition, India’s system for gathering and publishing statistical information

relating to the Indian economy generally or specific economic sectors within it or corporate or financial

information relating to companies or other economic enterprises is not as comprehensive as those of several

countries with established market economies. Although India has a credit information bureau, adequate

information regarding loan servicing histories, particularly in respect of individuals and small businesses, is

limited. CIBIL does not presently report information from retailers, utility companies and trade creditors

and no other nationwide bureau of this nature presently exists. Further, in the event that the CIBIL report is

not up-to-date, we may not be able to accurately assess the credit-worthiness of our borrower which may

increase our risk of exposure to default by borrower. As our lending operations are primarily limited to India,

53

we may be exposed to a greater potential for loss compared to banks with lending operations in more

developed countries. Inadequate loan servicing histories for borrowers increase the risk of exposure and may

lead to an increase in our NPAs which may adversely affect our business, results of operations and financial

condition.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we

may rely on information furnished to us by or on behalf of our customers and counterparties, including

financial statements and other financial information. We may also rely on certain representations as to the

accuracy and completeness of that information and, with respect to financial statements, on reports of

independent auditors. For example, in deciding whether to extend credit, we may assume that a customer's

audited financial statements conform to generally accepted accounting principles and present fairly, in all

material respects, the financial condition, results of operation and cash flows of the customer.

The difficulties associated with the inability to accurately assess the value of collateral and to enforce rights

in respect of collateral, along with the absence of such accurate statistical, corporate and financial

information, may decrease the accuracy of our assessments of credit risk, thereby increasing the likelihood

of borrower default on our loan and decreasing the likelihood that we would be able to enforce any security

in respect of such a loan or that the relevant collateral will have a value commensurate to such a loan.

Moreover, the availability of accurate and comprehensive credit information on retail customers and small

businesses in India is more limited than for larger corporate customers, which reduces our ability to

accurately assess the credit risk associated with such lending.

Difficulties in assessing credit risks associated with our day-to-day lending operations may lead to an

increase in the level of our non-performing and restructured assets, which could materially and adversely

affect our business, financial condition and results of operations.

26. We may be unable to foreclose on collateral or there may be decreases in the value of collateral which, if

a borrower defaults, may result in failure to recover the expected value of the collateral, exposing us to a

potential loss.

As of March 31, 2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016,

94.10% (i.e., ` 121,283.01 million), 95.29% (i.e., ` 155,820.09 million), 96.10% (i.e., ` 188,785.99 million)

and 97.05% (i.e., ` 200,691.64 million), respectively, of our total advances were secured by charges on

tangible assets, mortgages on immovable property, Bank/ government guarantees and stocks. In certain

cases, we obtain security by way of pledge of shares and assignment of life insurance policies. Any decrease

in the value of collateral at the time of recovery will have an adverse impact on the quantum of recovery.

In India, foreclosure on collateral generally requires a written petition to a court or tribunal. Although special

tribunals have been set up for expeditious recovery of debts due to banks, any proceedings brought may be

subject to delays and administrative requirements that may result, or be accompanied by, a decrease in the

value of the collateral. The SARFAESI Act and the Debt Recovery Tribunal Act, 1993 have strengthened

the ability of lenders to recover NPAs by granting them greater rights to enforce security and recover

amounts owed from secured borrowers. However, there can be no assurance that this legislation will have a

favourable impact on our efforts to recover NPAs as the full effect of such legislation is yet to be determined

in practice. Any failure to recover the expected value of the collateral would expose us to a potential loss.

In addition, the RBI guidelines on corporate debt restructuring specify that for debt amounts of ` 10 million

and above, 50% of the creditors by number and 75% of creditors by value can decide to restructure the debt

and that such a decision would be binding on the remaining creditors. If we own 25% or less of the debt of

a borrower, we could be forced to agree to a corrective action plan or an extended restructuring of debt which

may not act in our interests.

As a result of the foregoing factors, realisation of the full value of collateral may become difficult, which

could have an adverse effect on our business and financial condition.

27. A portion of our advances are unsecured. In case we are unable to recover such advances in a timely

manner or at all, it may adversely affect our business, financial condition and results of operations.

As of March 31, 2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016,

5.90% (i.e., ` 7,608.89 million), 4.71% (i.e., ` 7,700.10 million), 3.90% (i.e., ` 7,651.40 million) and 2.95%

54

(i.e., ` 5,923.11 million), respectively, of our total advances were unsecured.

While we have been selective in our lending policies and strive to satisfy ourselves with the credit worthiness

and repayment capacities of our customers, there can be no assurance that we will be able to recover the

interest and the principal advanced by us in a timely manner or at all. Any failure to recover the unsecured

advances given to our customers would expose us to a potential loss which could adversely affect our

business, financial condition and results of operations.

28. Non-compliance with mandatory AML and KYC policies in opening and/or operating the accounts could

expose us to additional liability and harm our business and reputation.

Banks are mandated to comply with applicable anti-money laundering (“AML”) and know your client

(“KYC”) regulations in India. These laws and regulations require us, among other things, to adopt and

enforce AML and KYC policies and procedures. For further details, see “Regulations and Policies” on page

146. While we have adopted policies and procedures aimed at collecting and maintaining all AML and KYC

related information from our customers in order to detect and prevent the use of our banking networks for

illegal money-laundering activities, there may be instances where we may be used by other parties in

attempts to engage in money-laundering and other illegal or improper activities. For example, in July 2013,

the RBI imposed a penalty of ` 25.00 million on us for non-adherence with certain KYC policies and

procedures for walk-in customers including for sale of third party products. Further, RBI directed our Bank

to review its internal systems to ensure compliance with the KYC-AML guidelines issued by the RBI, and

to fix staff accountability with respect to non-compliance of its directions vide speaking order dated February

24, 2016 in relation to the showcause notice dated November 24, 2015 for contravention of KYC-AML

guidelines with regard to the opening and subsequent monitoring of transactions of the current account of

M/s Divakar Mineral Company.

Although we believe that we have adequate internal policies, processes and controls in place to prevent and

detect AML activity and ensure KYC compliance, and have taken necessary corrective measures, there can

be no assurance that we will be able to fully control instances of any potential or attempted violation by

other parties and may accordingly be subject to regulatory actions including imposition of fines and other

penalties by the relevant government agencies to whom we report, including the FIU-IND. Our business and

reputation could suffer if any such parties use or attempt to use us for money-laundering or illegal or

improper purposes and such attempts are not detected or reported to the appropriate authorities in compliance

with applicable regulatory requirements.

29. Certain of our branches are located on premises that have been taken on lease. Further, some of the

agreements we enter into for the said leases are inadequately stamped and not registered. The termination

of any of these leases or our inability to exercise our rights under the lease agreements may cause

disruption in our operations.

As of September 30, 2016, out of a total of our 460 branches, 445 branches were located at premises taken

on a lease basis. Such lease agreements are generally for a fixed tenure and we endeavor to renew the leases

post their expiry. Our business, financial condition, and operating results could be adversely affected if we

are unable to negotiate favorable lease and renewal terms for our existing branches. In case of non-renewal

of leases for our existing branches, we will be forced to procure alternative space for our existing branches.

Although we procure space that satisfies the safety, operational and financial criteria for our branches, we

cannot assure you that we will be able to identify such space at commercially reasonable terms or at all.

Failure to identify such space can adversely affect our financial condition and results of operation.

Further, any breach of the terms and conditions of these lease agreements, could result in the termination of

the lease agreements and force us to establish operations at another location, which may disrupt our

operations temporarily.

Additionally, some of our lease agreements may not be adequately stamped and some of our immoveable

properties for our offices, which are taken on lease, may have one or more irregularities of title such as

inadequate stamping and/ or non-registration of lease agreements and non-execution of such lease

agreements. Any such irregularity may result in our inability to enforce our rights under such lease

agreements which may disrupt our operations and adversely affect our business, financial condition and

result of operations and may also result in loss of our Bank’s customers.

55

30. Almost all of our ATMs are located on leasehold premises.

Our ATMs are primarily located on leased premises. Any failure to renew lease agreements for these

premises on terms and conditions favourable to the Bank may require it to shift the concerned ATMs to new

premises. This might affect our business operations.

31. As of March 31, 2016, we had certain contingent liabilities. If any of our contingent liabilities materialise,

our liquidity, business, prospects, financial conditions and results of operations could be adversely

affected.

The contingent liabilities as of March 31, 2016 is as follows:

(in ` million.)

Contingent Liabilities March 31, 2016

Amount

Claims against us not acknowledged as debts 2,400.25

Liability on account of outstanding forward exchange contracts 11,590.90

Guarantees given on behalf of constituents

- in India 8,285.77

- outside India 1,892.32

Acceptances, endorsements and other obligations 12,523.68

Other items for which the Bank is contingently liable 177.23

Total 36,870.15

The contingent liabilities have arisen in the normal course of our business and are subject to the prudential

norms as prescribed by RBI. If any of the contingent liabilities specified above materialises, our liquidity,

business prospects, financial conditions and results of operations could be adversely affected.

32. Our ability to pay dividends in the future will depend upon our future earnings, financial condition, cash

flows, working capital requirements, capital expenditures and restrictive covenants in our financing

arrangements inability to declare dividend or declare dividend at a rate lower than past trends may

adversely affect the trading price of our Equity Shares.

Our future ability to pay dividends will depend on our earnings, financial condition and capital requirements.

Our ability to pay dividends could also be restricted under certain financing arrangements that we enter into

from time to time. We cannot assure you that we will generate sufficient income to cover our operating

expenses and pay dividends to our shareholders. The details of dividend paid by our Bank in the last three

years are as follows:

Fiscal Year Dividend Per Share (In `) Dividend Percentage (%)

2016 3.00 30%

2015 2.00 20%

2014 1.00 10%

In addition, dividends that we have paid in the past may not be reflective of the dividends that we may pay

in a future period. The amount of our future dividend payments, if any, will depend upon our future earnings,

financial condition, cash flows, working capital requirements, terms and conditions of our indebtedness,

capital expenditures and regulation. In the event we are unable to declare dividend, for any or all of the

above reasons, or declare dividend at a rate lower than past trends, it may adversely affect the trading price

of our Equity Shares.

33. Our insurance coverage could prove inadequate to satisfy potential claims. If we were to incur a serious

uninsured loss or a loss that significantly exceeds the limits of our insurance policies, it could have a

material adverse effect on our business, results of operations and financial condition.

We have taken out insurance within a range of coverage consistent with industry practice in India to cover

certain risks associated with our business, including money and securities in safe or transit, goods held in

trust, coins/ currency and buildings. We cannot assure you that our current insurance policies will insure us

fully against all risks and losses that may arise in the future. In addition, even if such losses are insured, we

may be required to pay a significant deductible on any claim for recovery of such a loss, or the amount of

56

the loss may exceed our coverage for the loss. In addition, our insurance policies are subject to annual

review, and we cannot assure you that we will be able to renew these policies on similar or otherwise

acceptable terms, if at all. If we were to incur a serious uninsured loss or a loss that significantly exceed the

limits of our insurance policies, it could have a material adverse effect on our business and financial

condition.

34. The Equity Shares Allotted pursuant to the Issue will be listed on the NSE and the BSE and you will not

be able to sell immediately on the NSE and the BSE any of the Equity Shares Allotted.

Our Equity Shares are currently listed and traded on the NSE and BSE and the Equity Shares offered

pursuant to the Issue will be listed and traded on NSE and BSE. Listing and trading of Equity Shares to be

Allotted are subject to the receipt of final approval from the Stock Exchanges. There could be a delay in

obtaining these approvals from the Stock Exchanges, which in turn could delay the listing of the Equity

Shares on the Stock Exchanges. Any failure or delay in listing the Equity Shares on NSE and the BSE would

restrict investors' ability to dispose of their Equity Shares.

35. The Bank may be penalized for not being in compliance with RBI directives and the procedural guidelines

that govern the Bank which could materially and adversely affect its reputation and results of operations

Any failure to comply with RBI directives may adversely affect our business, financial condition and results

of operations. We have been penalized for non-compliance of certain RBI circulars in the past. In July 2013

and October 2012 a penalty amounting to ` 25 million and ` 0.007 million, respectively were imposed on

the Bank for non-compliance of RBI Directives. RBI had issued strong warning to our Bank pursuant to the

speaking order dated November 30, 2015 in relation to the show cause notice for offering higher rate of

interest on incremental non-resident (external) deposits (“NRE Deposit”) post March 1, 2014, in

contravention of interest rate directive on NRE deposits by RBI.

36. A reduction in the credit rating of our Unsecured Redeemable Non-Convertible Subordinated Lower Tier-

II Bonds could materially and adversely affect its business, financial condition and results of operations.

We have issued and have outstanding subordinated bonds under Basel II and Basel III norms, which have

been assigned the rating of “CARE A–”. Instruments with this rating are considered to have adequate degree

of safety regarding timely servicing of financial obligations and carry low credit risk. Brickwork upgraded

the rating of our long term bonds under from BWR BBB+ to BWR A-, which indicate adequate degree of

safety regarding timely servicing of financial obligations and instruments with such ratings carry low credit

risk. A downgrade in credit rating may negatively affect the Bank's ability to obtain funds and increase the

financing costs by increasing the interest rates of its outstanding debt or the interest rates at which the Bank

is able to refinance existing debt or incur new debt, which may adversely affect its business, financial


37. Our risk management policies and procedures may not adequately address unanticipated risks. Inability

to develop and implement effective risk management policies may adversely affect our business, prospects,


We have devoted significant resources to developing our risk management policies and procedures and

expect to continue to do so in the future. Despite this, our policies and procedures to identify, monitor and

manage risks may not be fully effective. Some of our methods of managing risk are based upon the use of

observed historical market behaviour. As a result, these methods may not accurately predict future risk

exposures which could be significantly greater than indicated by the historical measures. As we seek to

expand the scope of our operations, we also face the risk of inability to develop risk management policies

and procedures that are properly designed for those new business areas. Implementation and monitoring may

prove particularly challenging with respect to businesses that we have recently initiated. Inability to develop

and implement effective risk management policies may adversely affect our business, prospects, financial


38. The Government of India (“GoI”) has in the past and may in the future direct us to implement certain

schemes that are aimed at serving the interest of farmers and/or a cross section of the public. Such

schemes may not necessarily be aimed at maximizing our profits and may adversely affect our business,


57

We are implementing Financial Inclusion Plan – Business Correspondence Model (BC Model) since March

2011. RBI circular RPCD No. FSD BC 71/05.04.02/2013-14 dated December 4, 2013 on interest subvention

scheme is applicable to all private sector scheduled commercial banks, including us, for short term crop

loans up to `0.3 million per farmer from FY 2013-14 onwards. Government of India grants interest

subvention of 2% on such loans and the loans are to be granted at a fixed rate of 7%. Effectively the loans

are granted at 9% which is below our base rate, hence grant of such loan will have an adverse impact on our

profits. We also provide special schemes under which credit facilities and loans are extended to persons

belonging to weaker sections, which is aimed at facilitating the Government of India’s initiative. We also

offer loans under the schemes of Pradhan Mantri Mudra Yojana (“PMMY”) to provide funding to the non-

corporate, non-farm sector income generating activities of micro and small enterprises whose credit needs

are below ₹10 Lakh. Historically, NPAs are higher in the priority sector lending compared with non-priority

sector lending and hence grant of such loans provided to members of weaker section could have an adverse

impact on our profitability.

39. We have third-party arrangements with various companies to facilitate para-banking services. We cannot

assure you that these third parties will adhere to their contractual obligation and consequently have an

adverse effect on our business.

We have entered into agreements with third parties to offer a number of para-banking products and services

which include distribution of life insurance, general insurance and health insurance products. We provide

money transfer services through branch channels as well as through direct remittance. We have also tied up

with a number of asset management companies for promotion of various mutual fund schemes. In case of

any dispute, we cannot assure you that the terms of such agreements will not be breached, which may incur

litigation costs. Such additional cost, in addition to the cost of entering into agreement with third parties in

same industry will have an adverse effect on our business.

40. We may face labour disruptions that could interfere with our operations. Any such disruption in future

may have a material adverse effect on our business, financial condition or results of operation.

We are exposed to the risk of strikes and other industrial actions. As of September 30, 2016, we employed

3,929 employees. Most of our employees are part of trade unions. We have also in the past had a few strikes

and stoppages on account of our employees’ unions participating in all India strikes. While we believe that

we have a strong working relationship with the unions / associations, there can be no assurance that our

Bank will continue to have such a relationship in the future. If the employees' union was to call for a work

stoppage or other similar action, we may be forced to suspend all or part of our operations until the dispute

is resolved. If any such work stoppage or disruption was to occur, possibly for a significant period of time,

our business, financial condition or results of operation would be adversely affected.

41. New product/services offered by us may not be successful and we may not grow in any new business area

which may have a material adverse effect on our business, financial condition or results of operation

We introduce new products/services to explore new business opportunities on a regular basis. We cannot

assure you that all our new products/services will gain customer acceptance and this may result in our

incurring pre-operative expenses and launch costs without any assurance that such products will be

successful or may fail market penetration. Further, our inability to grow in any new business areas could

adversely affect our business and financial performance. For further details, see “Business” on page 86.

42. Some of our corporate records relating to certain filings made with the Registrar of Companies in the

past are not traceable.

We are unable to trace copies of certain corporate records and filings in relation to equity shares issued and

allotted by our Bank in the past. In particular, we have been unable to trace: (i) corporate resolutions and

filings with the RoC in relation to changes in our authorised share capital from incorporation till September

9, 2005; (ii) resolutions for the issue and allotments of equity shares from its incorporation on November 3,

1926 till the March 30, 1995; (iii) filings with the RoC in relation to issue and allotment of Equity Shares

from its incorporation on November 3, 1926 till June 27, 2002. While we believe that these forms were duly

filed on a timely basis, we have not been able to obtain copies of these documents, including from the RoC

and have placed reliance on other documents, including board resolutions and their agenda for allotment of

shares, annual reports and audited financial statements for corroborating the share capital history of our Bank

for such periods. We cannot assure you that these form filings and corporate records will be available in the

58

future or that we will not be subject to any penalty imposed by the competent regulatory authority in this

respect.

43. Any future issuance of Equity Shares may dilute your shareholding, and sales of the Equity Shares by

our major shareholders may adversely affect the trading price of our Equity Shares.

Any future equity issuances by our Company may lead to the dilution of the shareholdings in our Company.

In addition, any sales of substantial amounts of the Equity Shares in the public market after the completion

of this Issue, including by our major shareholders, or the perception that such issuance or sales may occur

could adversely affect the trading price of the Equity Shares and could significantly impair our future ability

to raise capital through offerings of the Equity Shares. We cannot predict what effect, if any, market sales

of the Equity Shares held by the major shareholders of our Company or the availability of these Equity

Shares for future sale will have on the market price of our Equity Shares.

Additionally, in view of the Tier I Capital requirements on the Bank based on the current business Plan, the

Board has in its resolution dated October 17, 2016 also stated that it may evaluate suitable options to raise

additional Tier I Capital by way of issue of Equity Shares may not exceeding 35% of the existing paid-up

capital of the Bank as on such date including the Issue. Any such future fund raising plans initiated by the

Bank will be subject to approval of the Board of Directors, Shareholders of the Bank and any regulatory

authority including Reserve Bank of India, as applicable at such time.

44. Our registrar and transfer agent, through a process of corporate restructuring, has demerged its registry

undertaking into a recently incorporated company, Integrated Registry Management Services Private

Limited, which is yet to receive a SEBI registration.

Our registrar and transfer agent, Integrated Enterprises (India) Limited (“RTA”), has proposed to demerge

its registry undertaking pursuant to the scheme of de-merger approved by the High Court of Madras on June

3, 2016 (“Scheme”). Pursuant to the Scheme, the registry business is proposed to be de-merged to recently

incorporated company, Integrated Registry Management Services Private Limited, with no effective change

of ownership or management. RTA has applied to SEBI for approval of change in name, which is yet to be

received.

EXTERNAL RISK FACTORS

45. There could be political, economic or other factors that are beyond our control but may have a material

adverse impact on our business and results of operations should they materialize.

The following external risks may have a material adverse impact on our business and results of operations

should any of them materialize:

Political instability, a change in the Government or a change in the economic and deregulation policies

could adversely affect economic conditions in India in general and our business in particular;

A slowdown in economic growth in India could adversely affect our business and results of operations.

The growth of our business and our performance is linked to the performance of the overall Indian

economy. We are also impacted by consumer spending levels and businesses such as ours would be

particularly affected should Indian consumers in our target segment have reduced access to disposable

income;

Pursuant to the Gazette Notification No. 2652 dated November 8, 2016, the existing series of bank notes

of denomination of ` 500 and ` 1000 ceased to be legal tender with effect from 9th November, 2016.

This could materially and adversely affect the financial markets which could impact our business.

Civil unrest, acts of violence, terrorist attacks, regional conflicts or situations or war involving India or

other countries could materially and adversely affect the financial markets which could impact our

business. Such incidents could impact economic growth or create a perception that investment in Indian

companies involves a higher degree in risk which could reduce the value of our Equity Shares;

Natural disasters in India may disrupt or adversely affect the Indian economy, the health of which our

business depends on;

Any downgrading of India's sovereign rating by international credit rating agencies may negatively

impact our business and access to capital. In such event, our ability to grow our business and operate

profitably would be severely constrained;

Instances of corruption in India have the potential to discourage investors and derail the growth

59

prospects of the Indian economy. Corruption creates economic and regulatory uncertainty and could

have an adverse effect on our business, profitability and results of operations; and

The Indian economy has had sustained periods of high inflation. Should inflation continue to increase

sharply, our profitability and results of operations may be adversely impacted. High rates of inflation in

India could increase our employee costs, decrease the disposable income available to our customers and

decrease our operating margins, which could have an adverse effect on our profitability and results of

operations.

46. Significant differences exist between Indian GAAP used throughout our financial information and other

accounting principles, such as U.S. GAAP or IFRS, with which investors may be more familiar.

Our financial statements are prepared in conformity with Indian GAAP, consistently applied during the

periods stated, except as provided in the related reports, and no attempt has been made to reconcile any of

the information given in this Preliminary Placement Document to any other principles or to base it on any

other standards. Indian GAAP differs from accounting principles and auditing standards with which

prospective investors may be familiar in other countries such as U.S. GAAP and IFRS. The degree to which

financial information in this Preliminary Placement Document will provide meaningful information depends

on your familiarity with Indian GAAP and the Companies Act and therefore, no undue reliance should be

put by persons not familiar with Indian GAAP on the financial disclosures presented in this Preliminary

Placement Document.

47. Investors may not be able to enforce a judgment of a foreign court against us.

The enforcement by investors in the Equity Shares of civil liabilities, including the ability to affect service

of process and to enforce judgments obtained in courts outside of India may be affected adversely by the

fact that we are incorporated under the laws of the Republic of India and almost all of our executive officers

and directors reside in India. Nearly all of our assets and the assets of our executive officers and directors

are also located in India. As a result, it may be difficult to enforce the service of process upon us and any of

these persons outside of India or to enforce outside of India, judgments obtained against us and these persons

in courts outside of India.

48. Terrorist attacks, civil unrest and other acts of violence or war involving India and other countries could

adversely affect our business and the Indian financial markets.

India has from time to time experienced instances of civil unrest and terrorist attacks. These events could

lead to political or economic instability in India and may adversely affect the Indian economy, our business,

and results of operations, financial condition and the trading price of our Equity Shares. India has also

experienced social unrest and communal disturbances in some parts of the country. If such tensions occur in

places where we operate or in other parts of the country, leading to overall political and economic instability,

it could adversely affect our business, results of operations, financial condition and the trading price of our

Equity Shares.

Any major hostilities involving India or other acts of violence, including civil unrest or similar events that

are beyond our control, could have a material adverse effect on India’s economy and our business and may

adversely affect the Indian stock markets where our Equity Shares will trade as well the global equity

markets generally. Such acts could negatively impact business sentiment as well as trade between countries,

which could adversely affect our Bank’s business and profitability. Our insurance policies for assets cover,

among other things, terrorism, fire and earthquakes. However, our insurance policies may not be adequate

to cover the loss arising from these events, which could adversely affect our results of operations and

financial condition.

India has also witnessed civil disturbances in recent years and it is possible that future civil unrest as well as

other adverse social, economic and political events in India could have an adverse impact on us. Regional

or international hostilities, terrorist attacks or other acts of violence of war could have a significant adverse

impact on international or Indian financial markets or economic conditions or on Government policy. Such

incidents could also create a greater perception that investment in Indian companies involves a higher degree

of risk and could have an adverse impact on our business and the price of the Equity Shares.

49. There are restrictions on daily movements in the price of the Equity Shares, which may adversely affect your

ability to sell, or the price at which you can sell, Equity Shares at a particular point in time.

60

We are subject to a daily “circuit breaker” imposed by all Stock Exchanges in India, which does not allow

transactions beyond specified increases or decreases in the price of the Equity Shares. This circuit breaker

operates independently of the index-based market-wide circuit breakers generally imposed by SEBI on

Indian Stock Exchanges. The percentage limit on our circuit breakers is set by the Stock Exchanges based

on the historical volatility in the price and trading volume of our Equity Shares.

The Stock Exchanges do not inform us of the percentage limit of the circuit breaker in effect from time to

time, and may change it without our knowledge. This circuit breaker limits the upward and downward

movements in the price of the Equity Shares. As a result of this circuit breaker, no assurance may be given

regarding your ability to sell your Equity Shares or the price at which you may be able to sell your Equity

Shares at any particular time.

50. You may be subject to Indian taxes arising out of capital gains. Any gain realised on the sale of equity

shares held for more than 12 months to an Indian resident, which are sold other than on a recognised

stock exchange and as result of which no Securities Transaction Tax (STT) has been paid, will be subject

to capital gains tax in India.

Under current Indian tax laws and regulations, capital gains arising from the sale of shares in an Indian

company are generally taxable in India. Any gain realised on the sale of listed equity shares on a stock

exchange held for more than 12 months will not be subject to capital gains tax in India if the STT has been

paid on the transaction. The STT will be levied on and collected by a domestic stock exchange on which

equity shares are sold. Any gain realised on the sale of equity shares held for more than 12 months to an

Indian resident, which are sold other than on a recognised stock exchange and as result of which no STT has

been paid, will be subject to capital gains tax in India. Further, any gain realised on the sale of listed equity

shares held for a period of 12 months or less will be subject to capital gains tax in India.

Capital gains arising from the sale of the Equity Shares will be exempt from tax in India in cases where such

exemption is provided under the tax treaty between India and the country of which the seller is a resident.

Generally, Indian tax treaties do not limit India’s ability to impose tax on capital gains. As a result, residents

of certain countries may be liable for tax in India, as well as in their own jurisdictions on gain upon a sale

of the Equity Shares.

51. Banking is a heavily regulated industry and material changes in the regulations which govern our Bank,

may adversely affect our business.

Banks in India are subject to detailed supervision and regulation by the RBI. In addition, the financial

condition and results of operations of banks are susceptible to material change pursuant to changes in law,

as well as to changes in regulations, government policies and accounting principles. Any such changes may

adversely affect our Bank's business, future financial performance and the price of the Equity Shares.

52. Financial instability in other countries could disrupt our business and cause the price of our Equity

Shares to decrease

The Indian market and the Indian economy are, to a certain extent, influenced by economic and market

conditions in other countries, particularly market conditions in the United States and Europe. Although,

financial turmoil elsewhere in the world in past years has had limited impact on the Indian economy,

investors should be aware that there is a recent history of financial crises and boom-bust cycles in multiple

markets in both the emerging and developed economies which leads to risks for all financial institutions,

including us. Although economic conditions are different in each country, investors’ reactions to

developments in one country can have adverse effects on the securities of companies in other countries,

including India. A loss of investor confidence in the financial systems of India or other markets may cause

volatility in the Indian financial markets and indirectly, in the Indian economy in general. This could

negatively impact the Indian economy, including the movement of exchange rates, interest rates and flow of

funds in India. Any significant financial disruption could have an adverse effect on our business, future

financial condition and the price of our Equity Shares. Although the recent financial crisis has had a limited

direct impact on us, we remain subject to the risks posed by the indirect impact of the global credit crisis on

the economy, some of which cannot be anticipated and the vast majority of which are not in our control. We

also remain subject to counterparty risk to financial institutions that fail or are otherwise unable to meet their

obligations to us.

61

53. We are exposed to fluctuations in foreign exchange rates.

As a financial intermediary, we are exposed to exchange rate risk. We comply with regulatory limits on our

unhedged foreign currency exposure. However, we are exposed to fluctuations in foreign currency rates for

our unhedged exposure adverse movements in foreign exchange rates may impact our borrowers negatively

which may in turn impact the quality of our exposure to these borrowers. Volatility in foreign exchange rates

could adversely affect our future financial performance and the market price of the Equity Shares.

54. We cannot guarantee that the Equity Shares will be listed on the Stock Exchanges in a timely manner, if

at all.

In accordance with Indian law and practice, after our Board or committee passes the resolution to allot the

Equity Shares but prior to crediting such Equity Shares into the Depository Participant accounts of the QIBs,

we are required to apply to the Stock Exchanges for listing and trading approvals. After receiving the listing

and trading approvals from the Stock Exchanges, we will credit the Equity Shares into the Depository

Participant accounts of the respective QIBs and apply for the final listing and trading approvals from the

Stock Exchanges. There could be a delay in obtaining these approvals from the Stock Exchanges, which in

turn could delay the listing of the Equity Shares on the Stock Exchanges. Any delay in obtaining these

approvals would restrict your ability to dispose of your Equity Shares.

55. An investor will not be able to sell any of the Equity Shares other than on a recognized Indian stock

exchange for a period of 12 months from the date of this Issue.

The Equity Shares are subject to restrictions on transfers. Pursuant to the SEBI ICDR Regulations, for a

period of 12 months from the date of the issue of the Equity Shares, QIBs subscribing to the Equity Shares

may only sell their Equity Shares on the Stock Exchanges and may not enter into any off market trading in

respect of these Equity Shares. We cannot be certain that these restrictions will not have an impact on the

price and liquidity of the Equity Shares.

56. Since our Equity Shares are quoted in Indian rupees in India, foreign investors may be subject to potential

losses arising out of exchange rate risk on the Indian rupee and risks associated with the conversion of

Indian rupee proceeds into foreign currency.

Foreign investors are subject to currency fluctuation risk and convertibility risk since our Equity Shares are

quoted in Indian rupees on the Indian Stock Exchanges on which they are listed. Dividends on our Equity

Shares will also be paid in Indian rupees. Investors that seek to convert the Indian rupee proceeds of a sale

of Equity Shares into foreign currency and export the foreign currency will need to obtain the approval of

the RBI for each such transaction. Holders of Indian rupees in India may also generally not purchase foreign

currency without general or special approval from RBI.

57. Public companies in India, including us, will be required to prepare financial statements under Ind-AS.

We have not determined with any degree of certainty the impact of such adoption on our financial

reporting.

India has decided to adopt the “Convergence of its existing standards with IFRS” and has not adopted IFRS.

These “Converged IFRS / synchronised Accounting Standards” are referred to in India as Ind-AS. The

Ministry of Corporate Affairs, Government, has through a notification dated February 16, 2015, set out the

Ind AS and the timelines for their implementation. The Institute of Chartered Accountants of India has issued

Ind-AS (a revised set of accounting standards) which converges the Indian accounting standards with

International Financial Reporting Standards. The Ministry of Corporate Affairs has confirmed the Ind-AS

for adoption.

The Ministry of Corporate Affairs, in its press release dated January 18, 2016, issued a roadmap for

implementation of Ind-AS converged with IFRS for scheduled commercial banks, insurers, insurance

companies and non-banking financial companies. This roadmap requires these institutions to prepare Ind-

AS based financial statements for the accounting periods beginning from April 1, 2018 onwards with

comparatives for the periods ending March 31, 2018. The RBI, by its circular dated February 11, 2016,

requires all scheduled commercial banks to comply with Ind-AS for financial statements for the periods

stated above. The RBI does not permit banks to adopt Ind-AS earlier than the above timeline and the

62

guidelines also state that the RBI shall issue necessary instruction, guidance, and clarification on the relevant

aspects for implementation of the Ind-AS as and when required.

While we are in the process of assessing possible impact of Ind-AS on our financial reporting, the nature

and extent of such impact is still uncertain. Further, the new accounting standards may require change,

among other things, our methodology for estimating allowances for expected loan losses and for classifying

and valuing our investment portfolio and our revenue recognition policy. For estimation of expected loan

losses, the new accounting standards may require us to calculate the present value of the expected future

cash flows realizable from our advances, which may result in us recognizing allowances for expected loan

losses in the future which may be higher or lower than under current Indian GAAP. Further, there is no

significant body of established practice on which to draw in forming judgments regarding the new system’s

implementation and application. Any of these factors relating to compliance of Ind-AS may adversely affect

our financial condition and results of operations.

58. The proposed new taxation system could adversely affect our business and the price of the shares.

The Government has proposed two major reforms in Indian tax laws, namely the goods and services tax

(“GST”) and provisions relating to GAAR. As regards the implementation of GST, the Government has not

specified any timeline for their implementation. GST would replace the indirect taxes on goods and services

such as central excise duty, service tax, customs duty, central sales tax, state VAT, surcharge and excise

currently being collected by the central and state governments. As regards GAAR, the provisions have been

introduced in the Finance Act, 2012 to come into effect from April 1, 2017. If GAAR provisions are invoked,

then the tax authorities have wide powers, including denial of tax benefit. As the taxation system is intended

to undergo the said overhaul, its consequent effects on our Bank cannot be determined at present and there

can be no assurance that such effects would not adversely affect our business, future financial performance

and the trading price of the Equity Shares.

63

MARKET PRICE INFORMATION

The Equity Shares have been listed and are available for trading on the BSE and the NSE.

The following tables set forth the reported high, low and average market prices and the trading volumes of the

Equity Shares on the BSE and the NSE on the dates on which such high and low prices were recorded for financial

years ended March 2014, March 2015 and March 2016:

BSE

Financial

Year

High

(`) Date of

High

Total

Volume on

date of High

(Number of

Equity

Shares

traded on

the date of

high)

Total

Volume of

Equity

shares

traded on

the date of

high (` in million)

Low

(`) Date of

low

Volume on

date of Low

(Number of

Equity

Shares

traded on

the date of

low)

Total

Volume of

Equity

shares

traded on

the on date

of low (` in million)

Average

price

for the

year (`)

2014 88.00 May 6,

2013

211,234 18.51 59.90 February

17, 2014

12,649 0.76 70.82

2015 111.80 July 22,

2014

172,174 19.16 69.55 April 1,

2014

22,273 1.56 88.48

2016 106.60 April 10,

2015

397,822 41.94 72.25 September

7, 2015

78,372 5.64 91.02

(Source: www.bseindia.com)

NSE

Financial

Year

High

(`) Date of

High

Volume on

date of High

(Number of

Equity

Shares

traded on the

date of high)

Total

Volume of

Equity

shares

traded on

the date of

high (` in

million)

Low

(`) Date of

low

Volume on

date of Low

(Number of

Equity

Shares

traded on

the date of

low)

Total

Volume of

Equity

shares

traded on

the on date

of low (`

in million)

Average

price

for the

year (`)

2014 87.85 May 6,

2013

530,920 46.60 59.95 February

17, 2014

101,505 6.09 70.83

2015 111.85 July 22,

2014

1,448,947 161.37 69.55 April 1,

2014

148,719 10.42 88.55

2016 106.65 April 10,

2015

1,519,922 161.09 72.40 September

7, 2015

341,064 24.66 91.10

(Source: www.nseindia.com)

Notes:

1. High, low and average prices are based on the daily closing prices.

2. In case of two days with the same high or low price, the date with the higher volume has been considered.

(i) The following tables set forth the reported high, low and average market prices and the trading volumes of

the Equity Shares on the BSE and the NSE on the dates on which such high and low prices were recorded

during each of the last six months:

BSE

64

Month

Year

High

(`) Date of

High

(Volume

on date of

High)

Number

of Equity

Shares

traded on

the date of

high

Total

Volume of

Equity

shares

traded on

the date of

high

(million)

Low

(`) Date of

low

(Volume

on date

of Low)

Number

of

Equity

Shares

traded

on the

date of

low

Total

Volume of

Equity

shares

traded on

the on date

of low

(million)

Average

price for

the

month

(`)

June,

2016 98.50 June 30,

2016

34,175 3.34 83.75 June 13,

2016

11,979 1.00 89.64

July, 2016 137.60 July 26,

2016

428,618 58.44 101.90 July 1,

2016

107,044 10.78 115.96

August,

2016 146.80 August

19, 2016

83,675 12.38 136.80 August 5,

2016

67,649 9.44 143.19

September,

2016 158.30 September

22, 2016

95,996 15.18 139.90 September

2, 2016

26,518 3.71 150.86

October,

2016

157.95 October

20, 2016

98,933 15.32 149.80 October

18, 2016

143,687 21.7 153.96

November,

2016

156.05 November

7, 2016

39,368 6.07 132.25 November

21, 2016

1,37,267 18.83 147.83

(Source: www.bseindia.com)

NSE

Month

Year

High

(`) Date of

High

(Volume

on date of

High)

Number of

Equity

Shares

traded on

the date of

high

Total

Volume of

Equity

shares

traded on

the date of

high

(million)

Low

(`) Date of low (Volume

on date of

Low)

Number of

Equity

Shares

traded on

the date of

low

Total

Volume of

Equity

shares

traded on

the on

date of

low

(million)

Average

price for

the month

(`)

June,

2016 98.95 June 30,

2016

797,874 78.22 83.30 June 13,

2016

158,588 13.22 89.71

July,

2016 137.80 July 26,

2016

2,071,822 282.76 101.85 July 1,

2016

2,061,456 205.84 116.06

August,

2016 147.10 August

19, 2016

621,955 91.78 137.30 August 5,

2016

595,702 83.10 143.39

September,

2016 158.45 September

22, 2016

1,665,466 263.07 139.90 September

2, 2016

418,669 58.48 150.93

October,

2016

158.20 October

20, 2016

657,716 102.54 149.55 October

18, 2016

1,036,371 156.07 153.99

November,

2016

156.15 November

7, 2016

3,03,636 46.88 131.8 November

21, 2016

13,11,084 181.249 147.89

(Source:www.nseindia.com)

Notes:

1. High, low and average prices are based on the daily closing prices.

2. In case two days with the same high or low price, the date with the higher volume has been considered.

The following table sets forth the market price on the BSE and the NSE on the first working day following the

approval of the Board of Directors for the Issue, i.e. May 9, 2016 as May 07, 2016 was a holiday:

BSE NSE Open High Low Close Number of

Equity

Shares

traded

Turnover

(`million)

Open High Low Close Number of

Equity

Shares

traded

Turnover

(`million)

80.5 81.1 80.05 80.6 25,025 2.02 80.75 81 80.15 80.55 524,155 42.31

65

(Source: www.bseindia.com and www.nseindia.com)

The following table sets forth the market price on the BSE and the NSE on the first working day following the

approval of the Board of Directors for the Issue, i.e., October 18, 2016:

BSE NSE Open High

Low Close Number of

Equity

Shares

traded

Turnover

(`million)

Open High Low Close Number of

Equity

Shares

traded

Turnover

(`million)

153.5 155.6 147.9 149.8 143,687 21.70 152 155.5 147.7 149.55 1,036,371 156.07

(Source: www.bseindia.com and www.nseindia.com)

66

USE OF PROCEEDS

The gross proceeds from the Issue will be approximately ` [●] million (“Gross Proceeds”).

The net proceeds from the Issue, after deducting fees, commissions and expenses of the Issue, will be

approximately ` [●] million (“Net Proceeds”).

We will apply the Net Proceeds primarily to enhance our capital adequacy ratio and increase our capacity to lend

and for general corporate purposes, subject to compliance with applicable laws and regulations.

In accordance with the policies approved by the Board and as permissible under applicable laws and government

policies, our management will have flexibility in deploying the Net Proceeds. Pending utilisation for the purposes

described above, we intend to temporarily invest funds in creditworthy instruments, including money market

Mutual Funds and deposits with banks and corporates. Such investments would be in accordance with the

investment policies as approved by the Board from time to time and all applicable laws and regulations.

Neither our Promoters nor our Directors are making any contribution either as part of the Issue or separately in

furtherance of the use of the proceeds.

67

CAPITALISATION

The following table sets forth the capitalization of our Bank as at September 30, 2016 and as adjusted to give

effect to the Issue. This table should be read in conjunction with the sections titled “Summary Financial

Information”, “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of

Operations” and “Financial Information” on pages 32, 40, 122 and 231 respectively.

(` in million)

As of September 30, 2016

Unadjusted As adjusted for the Issue*

Shareholders’ funds

Capital 1,794.62 [●]

Reserves and surplus 17,096.63 [●]

Total shareholders’ funds (A) 18,891.25 [●]

Deposits (B) 266,801.41 [●]

Borrowings (C) 6,682.00 [●]

Total debt (B+C) 273,483.41 [●]

Total capitalization (A+B+C) 292,374.66 [●] Note:

*Share capital, reserves, surplus (adjusted) and post-issue capitalisation can be determined only on the conclusion of the Issue. The figures

for the respective financial statement line items under post-Issue column are unaudited and derived after considering only the impact of the issue of [●] Equity Shares of ₹ 10 each at a premium of ₹ [●] per Equity Share (aggregating to ₹ [●] million) through the Issue and not

considering any other transactions or movements for such financial statement line items after September 30, 2016. These Equity Shares are

yet to be Allotted. In the post-Issue details, the reserves and surplus amount has not been adjusted for Issue related expenses that will be deducted from the amount of share premium received from the Issue; and the debt amount has not been adjusted for any proceeds/repayment

of loans post September 30, 2016.

68

CAPITAL STRUCTURE

Share capital structure of our Bank as on date is as follows:

(` in million)

Aggregate

nominal value

Authorized Capital

50,00,00,000 Equity Shares of ` 10 each 5,000.00

Issued share capital prior to the Issue


Subscribed and paid-up share capital prior to the Issue*


Present Issue being offered to Qualified Institutional Buyer

Up to [●] Equity Shares at a premium of ` [●] [●]

Paid-up share capital after the Issue

[●] Equity Shares [●]

Securities premium account

Before the Issue 6,573.59

After the Issue [●] * The subscribed and paid up share capital of the Bank does not include 15,08,377 Equity Shares kept in abeyance, inclusive of forfeited and lapsed shares.

As at September 30, 2016, our Promoter and Promoter Group held 9.65% of the paid-up share capital of our Bank.

Our Bank is presently compliant with the provisions relating to minimum public shareholding as required by the

Listing Regulations.

The Issue has been authorized by the Board on May 6, 2016 and October 17, 2016 and by the shareholders pursuant

to a special resolution dated June 10, 2016.

Share capital history of our Bank

The history of the share capital of our Bank since inception is as follows:

Date of

Issue/

Allotment

Number of

Equity

Shares

Face

Value

(`)

Issue

Price

(`)

Cumulative

Number of

Equity Shares

Cumulative

Paid up

capital (`)

Nature of

consideration

Reason for

Allotment

November

3, 1926

7,100 10 10 7,100 71,000 Cash Subscribers to

Memorandum

and Articles of

Association

1926 400 10 10 7,500 75,000 Cash Further

Allotment

1929 2,010 10 10 9,510 95,100 Cash Further

Allotment

1930 440 10 10 9,950 99,500 Cash Further

Allotment

1931 50 10 10 10,000 100,000 Cash Further

Allotment

1947 10,000 10 15 20,000 200,000 Cash Further

Allotment

1953 5,000 10 15 25,000 250,000 Cash Further

Allotment

1957 12,124 10 - 37,124 371,240 Consideration

other than cash

Bonus Issue

1958 114 10 - 37,238 372,380 Consideration

other than cash Allotment of

Equity shares on

release of bonus

shares kept in

abeyance u/s

206A of the

Companies Act,

1956 in the

1959 127 10 - 37,365 373,650 Consideration

other than cash

69

Date of

Issue/

Allotment

Number of

Equity

Shares

Face

Value

(`)

Issue

Price

(`)

Cumulative

Number of

Equity Shares

Cumulative

Paid up

capital (`)

Nature of

consideration

Reason for

Allotment

1957 bonus

issue

1960 12,580 10 20 49,945 499,450 Cash Further

Allotment

1961 25,055 10 20 75,000 750,000 Cash Further

Allotment

1962 727 10 - 75,727 757,270 - Shares to Karur

Mercantile Bank

pursuant to a

share swap

1963 464 10 - 76,191 761,910 - Shares to Karur

Mercantile Bank

pursuant to a

share swap

1964 24 10 - 76,215 762,150 - Shares to Karur

Mercantile Bank

pursuant to a

share swap

1971 37 10 10 76,252 762,520 Cash Further

Allotment

1974 152,504 10 11 228,756 2,287,560 Cash Further

Allotment

1977 20 10 10 228,776 2,287,760 Cash Further

Allotment

1982 114,388 10 10 343,164 3,431,640 Cash Rights issue

1986 343,164 10 10 686,328 6,863,280 Cash Rights Issue

1988 600,000 10 10 1,286,328 12,863,280 Cash Public Issue

1989 643,164 10 10 1,929,492 19,294,920 Cash Rights issue

1993 958,521 10 40 2,888,013 28,880,130 Cash Rights Issue

January 12,

1995

2,874,138 10 - 5,762,151 57,621,510 Consideration

other than cash

Bonus Issue

March 31,

1995

5,737,826 10 35 11,499,977 114,999,770 Cash Rights Issue

August 4,

1995

2,000 10 35 11,501,977 115,019,770 Cash Allotment of

Equity shares on

release of bonus

& rights shares

kept in abeyance

u/s 206A of the

Companies Act,

1956 in 1995

rights issue

August 4,

1995

900 10 - 11,502,877 115,028,770 Consideration

other than cash

(Bonus)

February 20,

1996

5,146 10 35 11,508,023 115,080,230 Cash

August 21,

1996

554 10 35 11,508,577 115,085,770 Cash

December

24, 1997

50 10 - 11,508,627 115,086,270 Cash

November

29, 1999

200 10 35 11,508,827 115,088,270 Cash

June 28,

2002

50 10 35 11,508,877 115,088,770 Cash

June 28,

2002

25 10 - 11,508,902 115,089,020 Consideration

other than cash

(Bonus)

July 16,

2005

8,035,046 10 55 19,543,948 195,439,480 Cash Rights issue

March 20,

2006

(9,379) - - 19,534,569 195,345,690 - Forfeiture

November

25, 2006

9,752,515 10 - 29,287,084 292,870,840 Consideration

other than cash

Bonus issue

February 1,

2007

70 10 55 29,287,154 292,871,540 Cash Allotment of

Equity shares on

release of rights

shares kept in

abeyance

70

Date of

Issue/

Allotment

Number of

Equity

Shares

Face

Value

(`)

Issue

Price

(`)

Cumulative

Number of

Equity Shares

Cumulative

Paid up

capital (`)

Nature of

consideration

Reason for

Allotment

February 10,

2007

19,502,401* 10 50 48,789,555 487,895,550 Cash Rights Issue

June 25,

2008

(14,144) - - 48,775,441 487,754,410 - Forfeiture

January 30,

2008

268 10 50 48,775,679 487,756,790 Cash Allotment of

Equity shares on

release of bonus

and rights shares

kept in abeyance

January 30,

2008

169 10 - 48,775,848 487,758,480 Consideration

other than cash

(Bonus)

November

27, 2008

219 10 50 48,776,067 487,760,670 Cash

November

27, 2008

109 10 - 48,776,176 487,761,760 Consideration

other than cash

(Bonus)

May 14,

2009 2,520 10 47.54 48,778,696 487,786,960 Cash

May 14,

2009 780 10 - 48,779,476 487,794,760 Consideration

other than cash

(Bonus)

December

23, 2009

48,729,320 10 54 97,508,796 975,087,960 Cash Rights issue

October 4,

2010

50 10 - 97,508,846 975,088,460 Consideration

other than cash

(Bonus)

Abeyance

Release

October 4,

2010 100 10 50 97,508,946 975,089,460 Cash

October 4,

2010 14,944 10 54 97,523,890 975,238,900 Cash

February

12, 2011

1,950 10 54 97,525,840 975,258,400 Cash

April 16,

2012

945 10 - 97,526,785 975,267,850 Consideration

other than cash

(Bonus)

April 16,

2012 1,890 10 55 97,528,675 975,286,750 Cash

April 16,

2012 4,590 10 50 97,533,265 975,332,650 Cash

April 16,

2012 7,425 10 54 97,540,690 975,406,900 Cash

August 24,

2013

20,000 10 61.25 97,560,690 975,606,900 Cash ESOS

Allotment

September

2, 2014

81,260,919 10 50 178,821,609 1,788,216,090 Cash Rights issue

December 3,

2014

100,000 10 61.25 178,921,609 1,789,216,090 Cash ESOS

Allotment

January 28,

2015

245,000 10 61.25 179,166,609 1,791,666,090 Cash ESOS

Allotment

April 29,

2015

45,000 10 45.27 179,211,609 1,792,116,090 Cash ESOS

Allotment

May 21,

2015

60,000 10 36.95 179,271,609 1,792,716,090 Cash ESOS

Allotment

September

11, 2015

190,000 10 36.95 179,461,609 1,794,616,090 Cash ESOS

Allotment

Total 179,461,609

* Out of 19,502,401 Equity Shares, 1,13,34,862 Equity Shares were partly paid up at ` 5 per Equity Share on application. Subsequently, the

shares were fully paid up except for 14,144 shares which were forfeited.

Our Bank has not made an allotment of Equity Shares in the last one year.

Employee Stock Option Scheme – 2010 (“LVB ESOS-2010”)

Our Bank instituted LVB ESOS-2010 pursuant to a special resolution dated August 4, 2010 passed by the

71

shareholders of our Bank. Under LVB ESOS-2010, the Bank can grant employee stock options exercisable into

not more than 5,000,000 Equity Shares of ` 10 each. The eligibility and number of options to be granted to an

employee is determined on the basis of criteria laid down in the LVB ESOS-2010 and is approved by the Compensation

Committee of the Board of Directors. The options granted shall be capable of being exercised within a period of 5

years from the date of vesting of the respective options. The LVB ESOS-2010 shall continue to be in force until

(i) its termination by the Board, or (ii) the date on which all of the options available for issuance under the LVB

ESOS-2010 have been issued and exercised, whichever is earlier.

As on September 30, 2016, an aggregate of 3,985,238 options have been granted of which 660,000 options have

been exercised, 1,525,238 options have been cancelled and 1,800,000 options have been granted but not vested.

72

DIVIDEND POLICY

The declaration and payment of dividends by our Bank is governed by the applicable provisions of the Companies

Act, 2013, the Banking Regulation Act and the rules, regulations and guidelines issued by the RBI and our

Memorandum and Articles of Association.

The payment of dividends by banks is subject to restrictions under the Banking Regulation Act. Section 15(1) of

the Banking Regulation Act states that no banking company may pay any dividend on its shares until all its

capitalised expenses (including preliminary expenses, organisation expenses, share-selling commissions,

brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have

been completely written off. In addition, section 17(1) of the Banking Regulation Act requires every banking

company to create a reserve fund and, out of the balance of the profit of each year as disclosed in the profit and

loss account, transfer a sum equivalent to not less than 25% of the net profit before appropriations to the reserve

fund before declaring any dividend. Further, in May 2005, the RBI issued guidelines on “Declaration of Dividends

by Banks”, which prescribed certain conditions for declaration of dividends by banks.

The details of dividend declared in the last three financial years is as follows:

Particulars Fiscal 2014 Fiscal 2015 Fiscal 2016

Face value of Equity Shares (` per share) 10 10 10

Interim Dividend (` in million) - - -

Final Dividend (` in million) 97.56 358.42 538.38

Total Dividend (` in million) 97.56 358.42 538.38

Dividend per share (in `) 1 2 3

Dividend Rate (%) 10% 20% 30%

Dividend Distribution Tax (` in million) 16.58 72.99 109.60

73

INDUSTRY OVERVIEW

The information in this section has been extracted from publicly available documents from various sources,

including officially prepared materials from the Government and its various ministries and the RBI and has not

been prepared or independently verified by us, the BRLM or any of its affiliates or advisors. Industry sources and

publications referred to by us state that the information contained therein has been obtained from sources

generally believed to be reliable, but their accuracy, completeness and underlying assumptions are not

guaranteed and their reliability cannot be assured, and accordingly, investment decisions should not be based on

such information. Statements in this section that are not statements of historical fact constitute “forward looking

statements”. Such forward-looking statements are subject to various risks, assumptions and uncertainties, and

certain factors could cause actual results or outcomes to differ materially.

Indian Economy

The Indian economy consolidated the gains achieved in restoring macroeconomic stability, a process that began

in fiscal year 2015. In fiscal year 2015, the Indian Government introduced a new methodology for estimating the

gross domestic product and also commenced publication of sector data on a gross value added basis. According

to the new methodology, India’s gross domestic product grew by 5.1% in fiscal year 2013, 6.9% in fiscal year

2014, 7.3% in fiscal year 2015 and 7.6% in fiscal year 2016. The agriculture sector accounted for 15.4% of gross

value added, while industry and services accounted for 22.7% and 61.9%, respectively, in fiscal year 2016. While

economic growth has improved, the fiscal and current account deficits have reduced and the Indian Rupee has

stabilized, and the prolonged slowdown in global economic growth and gradual recovery continued to adversely

impact credit growth and the level of non-performing and restructured loans during fiscal year 2015 and during

the nine months ended December 31, 2015. (Source: RBI Annual Report 2014-15and RBI Annual Report 2015-

2016)

As per the Central Statistical Organization’s advance estimates, India’s GDP growth for fiscal year 2017 is

expected to remain stable at 7.6% which was also the GDP growth for fiscal year 2016. (Source: https://www.worldbank.org/en/publication/global-economic-prospects)

Indian Banking Industry

Banks in India may be categorised as scheduled banks and non-scheduled banks, where the former are banks that

are included in the second schedule to the RBI Act, 1934, as amended. These banks comprise scheduled

commercial banks and scheduled cooperative banks. As of June 30, 2016, there were 149 scheduled commercial

banks in the country, including 56 regional rural banks. As of June 30, 2016, scheduled commercial banks had a

nationwide network of 134,014 branches and 64.52% of these branches were located in rural or semi-urban areas

of the country. A large number of these branches belong to the public sector banks.

(Source: RBI Quarterly Report on Bank Group-wise Number of Functioning Offices of Commercial Banks as at

end of the Quarter)

Constituents of the Indian Banking Industry

The Reserve Bank of India

(Source: RBI website: https://www.rbi.org.in/Scripts/AboutusDisplay.aspx)

The RBI is the central regulatory and supervisory authority for the Indian banking sector. It was established on

April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the

Reserve Bank was initially established in Calcutta but was permanently moved to Mumbai in 1937. The Central

Office is where the Governor sits and where policies are formulated.

The main functions of the RBI are as follows:

Monetary Authority: it formulates, implements and monitors the monetary policy with the objective of

maintaining price stability and ensuring adequate flow of credit to productive sectors.

74

Regulator and supervisor of the financial system: Prescribes broad parameters of banking operations

within which the country's banking and financial system functions with the objective of maintaining public

confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange: Manages the Foreign Exchange Management Act, 1999 with the objective

of facilitating external trade and payment and promote orderly development and maintenance of foreign

exchange market in India.

Issuer of currency: Issues and exchanges or destroys currency and coins not fit for circulation to give the

public adequate quantity of supplies of currency notes and coins and in good quality.

Development role: Performs a wide range of promotional functions to support national objectives.

The related functions of the RBI are as follows:

Banker to the Government: performs merchant banking function for the central and the state governments;

also acts as their banker.

Banker to banks: maintains banking accounts of all scheduled banks.

Public Sector Banks

Public sector banks include the SBI and its five associate banks, the IDBI Bank, 19 nationalised banks and 56

regional rural banks. (Source: https://www.rbi.org.in/commonman/English/scripts /banksinindia.aspx). Excluding

the regional rural banks, the remaining public sector banks had 93,246 branches as of June 30, 2016. (Source: RBI

Quarterly Report on Bank Group-wise Number of Functioning Offices of Commercial Banks as at end of the

Quarter)

Regional rural banks were established from 1976 to 1987 by the central Government, state governments and

sponsoring commercial banks jointly, with a view to develop the rural economy. Regional rural banks provide

credit to small farmers, artisans, small entrepreneurs and agricultural labourers. The NABARD is responsible for

regulating and supervising the functions of the regional rural banks. (Source: RBI publication on Evolution of

Banking in India dated September 4, 2008). As of June 30, 2016, there were 21,108 branches of regional rural

banks. (Source: RBI Quarterly Report on Bank Group-wise Number of Functioning Offices of Commercial Banks

as at end of the Quarter).

Private Sector Banks

When the country attained independence, Indian banking was entirely in the private sector. In addition to the

Imperial Bank, there were five big banks, each holding public deposits aggregating `100 crore and

more, viz., Central Bank of India Ltd., Punjab National Bank Ltd., Bank of India Ltd., Bank of Baroda Ltd. and

United Commercial Bank Ltd. All other commercial banks were also in the private sector and had a regional

character; most of them held deposits of less than ` 50 crore. Interestingly, the Reserve Bank was also not

completely State owned until it was nationalised in terms of the Reserve Bank of India (transfer to Public

Ownership) Act, 1948. (Source: RBI publication on Evolution of Banking in India dated September 4, 2008)

The Indian banking sector over the years had become less competitive as no new bank was allowed to be set up

in the private sector after nationalisation of 14 banks in 1969. Although a large number of players existed, there

was no threat of entry of new players. The lack of threat of entry of new players led to inefficiency in the banking

sector. Some other restrictions such as regulation of interest rates and the system of financing working capital

requirements also had an adverse impact on the competitive environment. Banks were also constrained in their

operations due to restrictions on opening or closing of branches on the basis of their commercial judgment. One

of the major objectives of reforms was to bring in greater efficiency by permitting entry of private sector banks,

liberalise licensing of more branches of foreign banks and the entry of new foreign banks and increased operational

flexibility to banks. Keeping these in view, several measures were initiated to infuse competition in the banking

sector, including the RBI allowing the entry of new banks in the private sector. (Source: RBI publication on

Evolution of Banking in India dated September 4, 2008)

75

As of March 31, 2015, private sector banks accounted for approximately 19.7% of aggregate deposits and 20.8%

of gross bank credit outstanding of all scheduled commercial banks in India. (Source: RBI Basic Statistical Returns

of Scheduled Commercial Banks in India, Volume 44) As of June 30, 2016, their network of 23,626 branches

accounted for 17.06% of the total branch network of scheduled commercial banks in the country. (Source: RBI

Banking – Branch Statistics)

Following the budget announcement, the Guidelines on Licensing of New Banks in the Private Sector (“New

Banks Licensing Guidelines”) were issued by the RBI in February 2013 specifying that select entities or groups

in the private sector, entities in the public sector, and non-banking financial companies with a successful track

record of at least ten years would be eligible to promote banks. Further, the RBI has published certain criteria for

ascertaining whether a bank is ‘fit and proper’ for the grant of a license. The new banks can be set up only through

a wholly-owned, non-operative financial holding company registered with the RBI and the initial minimum paid-

up equity voting capital requirement for applicants is ` 5.0 billion, with foreign shareholding not exceeding 49.0%

for the first five years. Applicants were required to submit applications for these licenses to the RBI by July 1,

2013 and 25 applications were reviewed by the RBI. These applications were screened by the RBI before being

forwarded to the RBI’s HLAC for further scrutiny, which submitted its recommendations to the RBI on February

25, 2014.

(Source: RBI guidelines for new bank license, RBI press release dated April 2, 2014)

On April 2, 2014, the RBI granted “in-principle” approval to two applicants, IDFC Limited and Bandhan Financial

Services Private Limited, to set up universal banks under the New Banks Licensing Guidelines and pursuant to

that, those two applicants have established banks. In the future, the RBI intends to issue licenses on an ongoing

basis, subject to the RBI’s qualification criteria. (Source: RBI press release dated April 2, 2014) On May 5, 2016,

the RBI released draft guidelines for “on-tap” licensing of universal banks in the private sector. As these licenses

are on-tap, there is no special window and applicants can apply at any time. While large industrial houses are

barred, entities or groups in the private sector that are “owned and controlled by residents” (as defined in the

FEMA Regulations, as amended from time to time) and have a successful track record for at least ten years are

allowed to be promoted to universal banks, provided that such entity/group has total assets of ` 50 billion or more

and the non-financial business of the group does not account for 40% or more in terms of total assets or gross

income.

(Source: RBI press release on “Draft Guidelines for ‘on tap’ Licensing of Universal Banks in the Private Sector”)

The RBI also issued guidelines in November 2014 on the entry of “Small Finance Banks” and “Payments Banks”

into the private sector in the banking industry, including the eligibility criteria, structure, capital requirements,

shareholding structure and corporate governance practices applicable to such proposed entities. The RBI issued

licenses to two new private sector banks in April 2014, eleven payment banks in August 2015 and ten small

finance banks in September 2015. The RBI has also indicated that it will issue guidelines with respect to a

continuous licensing policy for universal banks.

Foreign Banks

As of June 30, 2016, there were over 45 foreign banks with 335 branches operating in India. (Source: RBI Banking

– Branch Statistics) In 2004, the RBI stipulated that banks, including foreign banks operating in India, should not

acquire any fresh stakes in another bank’s equity shares if by such acquisition, the investing bank’s holding would

exceed 5.0% of the investee bank’s equity capital.

(Source: RBI Prudential Norms on Capital Adequacy –Cross holding of capital among banks/ financial

institutions dated July 6, 2014)

In February 2005, the RBI issued a “Roadmap for Presence of Foreign Banks in India”, announcing the following

measures to be implemented in two phases:

During the first phase (from March 2005 through to March 2009), foreign banks were allowed to establish a

presence by setting up wholly-owned subsidiaries or by converting existing branches into wholly-owned

subsidiaries.

Also during the first phase, foreign banks were allowed to acquire a controlling stake in private sector banks

identified by the RBI for restructuring. This was only to be done in a phased manner.

76

For new and existing foreign banks, proposals were made to go beyond the existing World Trade Organisation

commitment of allowing increases of 12 branches per year. A more liberal policy will be followed for areas

with a small number of banks. (Source: Roadmap for presence of foreign banks in India)

During the second phase (from April 2009 onwards) and after a review of the first phase, foreign banks would

be allowed to acquire up to 74.0% in private sector banks in India.

In April 2009, in light of deteriorating global financial markets, the RBI postponed the second phase until greater

clarity emerged as to recovery and reform of the global regulatory and supervisory architecture. In January 2011,

the RBI released a draft discussion paper on the mode of presence of foreign banks in India. The paper indicated

a preference for a wholly-owned subsidiary model of presence over a branch model. Other recommendations of

the discussion paper included requiring systemically important foreign banks to convert their Indian operations

into wholly-owned subsidiaries, a less restrictive branch expansion policy and the ability to raise Rupee debt

through issuance of non-equity capital instruments for such converted subsidiaries, lower priority sector targets

as compared to domestic banks and unified regulation for both Indian and foreign banks with respect to

investments in subsidiaries and associates.

(Source: RBI discussion paper on mode of presence of foreign banks in India)

In July 2012, the RBI revised priority sector lending norms and mandated foreign banks with 20 branches or more

in India to meet priority lending norms as prescribed for domestic banks within the five-year period commencing

on April 1, 2013. All other foreign banks will continue to be subject to the existing overall target of 32%.

(Source: RBI master circular on priority sector lending – targets and classification dated July 1, 2014)

In November 2013, the RBI issued a scheme for setting up wholly-owned subsidiaries by foreign banks in India.

The scheme envisages that foreign banks that commenced business in India after August 2010, or do so in the

future, would be permitted to do so only through wholly-owned subsidiaries if certain specified criteria applied to

them. These criteria include incorporation in a jurisdiction that gives legal preference to home country depositor

claims in the case of winding-up proceedings, among others.

Further, a foreign bank that has set up operations in India through the branch mode after August 2010 will be

required to convert its operations into a subsidiary if it is considered to be systemically important. A bank would

be considered to be systemically important if the assets on its Indian balance sheet (including credit equivalent of

off balance sheet items) equals 0.25% of the total assets (inclusive of credit equivalents of off balance sheet items)

for all scheduled commercial banks in India as of March 31 of the preceding year. Establishment of a subsidiary

would require approval of the home country regulator or supervisor and the RBI, which would be subject to

various factors including economic and political relations with the country of incorporation of the parent bank and

reciprocity with the home country of the parent bank. The regulatory framework for a subsidiary of a foreign bank

would be substantially similar to that applicable to domestic banks, including with respect to priority sector

lending and branch expansion. Wholly-owned subsidiaries of foreign banks may, after further review, be permitted

to enter into merger and acquisition transactions with Indian private sector banks, subject to adherence to the

foreign ownership limit of 74.00% that is currently applicable to Indian private sector banks.

(Source: RBI guidelines for setting up a wholly owned foreign subsidiary in India)

Cooperative Banks

Cooperative banks cater to the financing needs of agriculture, small industry and self-employed businessmen in

urban, semi-urban and rural areas of India. The state land development banks and the primary land development

banks provide long-term credit for agriculture. The Banking Regulation (Amendment) and Miscellaneous

Provisions Act, 2004, which came into effect from September 24, 2004, specifies that all multi-state cooperative

banks are under the supervision and regulation of the RBI. Accordingly, the RBI is currently responsible for the

supervision and regulation of urban cooperative societies, NABARD, state cooperative banks and district central

cooperative banks. The wide network of co-operative banks, both rural and urban, supplements the commercial

banking network for deepening financial intermediation by bringing a large number of depositors/borrowers under

the formal banking network.

(Source: The Banking Regulation Act, 1949)

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Initiatives for the MSME Sector

In August 2015, banks were advised to review their existing lending policies to the micro and small enterprises

(MSEs) sector and fine - tune them by allowing for standby credit facilities in case of term loans, additional

working capital limits, mid-term review of regular working capital limits and timelines for credit decisions.

Subsequent to the notification of a “Framework for Revival and Rehabilitation of Micro, Small and Medium

Enterprises” by the Government to provide a simpler and faster mechanism for addressing the stress in MSME

accounts, the RBI issued related guidelines along with operating instructions on March 17, 2016. Under this

framework, the revival and rehabilitation of MSME units with loan limits up to ` 250 million will be undertaken.

Banks were also required to put in place board approved policies to operationalise the framework not later than

June 30, 2016.

In a move to boost entrepreneurial sensitivity among banks’ field-level functionaries, the RBI, in collaboration

with the College of Agricultural Banking, Pune, launched the National Mission for Capacity Building of Bankers

for financing the MSME sector (NAMCABS). Since its inception, NAMCABS has imparted training to about

3,000 bankers.

(Source: RBI Annual Report – 2015 – 16)

Credit to the MSME Sector

Reflecting several of the Government’s initiatives for the MSME sector, such as ‘Make in India’, ‘Start-up India’,

‘Ease of Doing Business’ and ‘Udyog Aadhar’, which were reinforced by the Reserve Bank’s initiatives such as

capacity building of field level banking functionaries, addressing life-cycle needs of enterprises and providing

simpler and faster mechanisms to address the stress in MSME accounts, credit to this sector has improved in recent

times, as detailed in the table below:


Priority Sector Lending

The objective of priority sector lending is to ensure that timely and adequate credit is available to vulnerable

sections of society. Priority sector loans include small value loans to farmers for agriculture and allied activities,

MSMEs, loans up to ` 2.5 million for low cost housing and up to ` 1 million to students for education, social

infrastructure and renewable energy and to other low income groups and weaker sections of society. Usually these

categories of people/activities are unable to access credit due to a perceived lack of viability and creditworthiness

even though there are some recent signs of improvement on this front.


Key Banking Industry Trends in India

During fiscal year 2015, risks to global financial stability continued to remain at elevated levels, with global

growth witnessing a fragile and multi-paced pattern of recovery. Meanwhile, global macro-financial risks shifted

from advanced to emerging economies, with the latter facing pressure from weakening prospects of growth, falling

commodity prices and the strengthening of the dollar. Within the emerging world, however, the Indian economy

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appeared quite resilient, given a modest recovery in the economy and steady capital flows that helped in

maintaining the external sector balance.

The performance of the Indian banking sector, mainly public sector banks, remained subdued. Banking sector

experienced a slowdown in balance sheet growth coupled with asset quality woes. Profit was marginally up due

to contained operating expenses rather than increased revenue.

(Source: RBI Report on Trend and Progress of Banking in India 2014-15.)

Commercial Banking Trends

Credit

As of the end of June 2016, the credit-deposit ratio for scheduled commercial banks was 75.9% as compared to

75.8% the previous year. As of June 30, 2016, the aggregate deposits increased by 9.2% while loans and advances

increased by 9.4%. (Source: RBI – Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks:

June 2016.)

For fiscal year 2016, credit to agriculture and allied activities grew by 15.3% as compared to 14.1% in fiscal year

2015. Credit to micro and small enterprises was one of the main sectors that saw a decline in growth in fiscal year

2016. Credit to the services sector increased by 10.9% during fiscal year 2016, higher than the increase of 6.6%

during fiscal year 2015. Personal loans increased by 19.7% during fiscal year 2016 as compared to an increase of

15.7% during fiscal year 2015.

(Source: RBI Data on Sectoral Deployment of Bank Credit –April 2016.)

Interest rates

On December 17, 2015, the RBI released the final guidelines on computing interest rates on advances based on

the marginal cost of funds. The guidelines came into effect on April 1, 2016. The highlights of the guidelines are

as follows:

all Rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 will be priced with

reference to the MCLR which will be the internal benchmark for such purposes;

the MCLR will be a tenor linked internal benchmark;

actual lending rates will be determined by adding the components of spread to the MCLR;

banks will review and publish their MCLR of different maturities every month on a pre-announced date;

banks may specify interest reset dates on their floating rate loans. They will have the option to offer loans

with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of the

MCLR;

a. the periodicity of reset shall be one year or lower;

b. the MCLR prevailing on the day the loan is sanctioned will be applicable until the next reset date,

irrespective of the changes in the benchmark during the interim period;

c. existing loans and credit limits linked to the base rate may continue until repayment or renewal, as the

case may be. Existing borrowers will also have the option to move to the MCLR linked loan on mutually

acceptable terms; and

d. banks will continue to review and publish the Base Rate as hitherto.

As per the guidelines issued by the RBI, banks have to publish the MCLR for various tenors which will be the

internal benchmark lending rates. Based upon this MCLR, interest rates for different types of customers should

be fixed in accordance with their respective risk profiles.

79

The MCLR is to be revised monthly. As per the new guidelines, banks have to set five benchmark rates for

different tenure or time periods ranging from overnight (one day) rates to one year.

The new methodology uses the marginal cost or latest cost conditions reflected in the interest rate given by the

banks for obtaining funds while setting their lending rate.

(Source: RBI Guidelines on interest rates dated December 17, 2015)

Asset quality

The gross NPAs of scheduled commercial banks as a percentage of gross advances increased to 7.6% from 5.1%

between September 2015 and March 2016. The restructured standard advances during the same period declined

from 6.2% to 3.9%, while the stressed advances ratio increased from 11.3% to 11.5%. Public Sector Banks

recorded the highest level of stressed assets at 14.5%, compared to 4.5% in the case of Private Sector Banks. The

net non-performing advances (“NNPAs”) as a percentage of the total net advances for all scheduled commercial

banks increased to 4.6% from 2.8%. At bank group level, the NNPA ratio of public sector banks increased from

3.6% to 6.1% and, in the case of private sector banks, it increased from 0.9% to 1.3%.

Among major sectors, the industrial sector showed a decline in the stressed advances ratio from 19.9% to 19.4%

between September 2015 and March 2016, while the GNPA ratio of the sector increased sharply to 11.9% from

7.3%. Retail loans continued to witness the least stress. (Source: Financial Stability Report, June 2016)

Five sub-sectors, namely mining, iron and steel, textiles, infrastructure and aviation, which together constituted

24.2% of the total advances of scheduled commercial banks, had a much larger share of 53% in the total stressed

advances. Stressed advances of the infrastructure sector increased from 22.9% to 24.0%. (Source: Financial

Stability Report 2015 dated December 23, 2015.)

Income and profitability

Profit after tax of scheduled commercial banks declined by 4.4% during the first half of the fiscal year 2015-16,

due to lower growth in earnings before provisions and taxes, higher provisions and write-offs. Among the bank

groups, profit after tax declined by 22.7% for public sector banks, whereas it increased by 11.5% for private sector

banks and 4.6% for foreign banks during the same period. The return on assets was 0.7% and the return on equity

was 8.5% for all scheduled commercial banks as at September 30, 2015 compared to 0.8% and 9.3% as at March

31, 2015 respectively. (Source: Financial Stability Report 2015 dated December 23, 2015.)

Non-performing assets

(Source: Annual Report of the Ministry of Finance 2015 – 2016)

As per the data available, the GNPA ratio of PSBs steadily declined from 13.11% in 2000-01 to 2.10% in 2008-

09 and GNPA ratio of Scheduled Commercial Banks (SCBs) steadily declined from 12.04 per cent to 2.45 percent.

This reduction is on account of good economic conditions, establishment of DRTs and enactment of SARFAESI

Act. The following table depicts the trend of GNPA of PSBs/SCBs during last two years:

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Main reasons for increase in NPAs of banks are due to sluggishness in the domestic growth during the recent past,

slowdown in recovery in the global economy and continuing uncertainty in the global markets leading to lower

exports of various products like textiles, engineering goods, leather, gems, external factors including the ban in

mining projects, delay in clearance affecting power, iron & steel sector, volatility in prices of raw material and

the shortage in availability of Power have impacted the operations in the textiles, iron & steel, Infrastructure

sectors, delay in collection of receivables causing a strain on various Infrastructure projects, aggressive lending

by banks in past. Infrastructure loan requirements are such that only the big public sector banks could assume the

exposure under consortium arrangements.

(Source: Annual Report of the Ministry of Finance 2015 – 2016)

Recent Developments in the Indian Banking Industry

Fiscal Year 2016

The RBI has liberalized the licensing regime and intends to issue licenses on an ongoing basis, subject to the

RBI’s qualification criteria. The RBI has issued licenses to two new private sector banks, eleven payment

banks and ten small finance banks in fiscal year 2016. On May 5, 2016, the RBI published the Draft Guidelines

for ‘on tap’ licensing of Universal Banks in the Private Sector. As these licenses are on-tap, there is no special

window and applicants can apply at any time. While large industrial houses are barred, entities or groups in

the private sector that are “owned and controlled by residents” (as defined in the FEMA Regulations, as

amended from time to time) and have a successful track record for at least ten years are allowed to promote

universal banks, provided that such entity/group has total assets of ` 50 billion or more, the non-financial

business of the group does not account for 40% or more in terms of total assets or gross income.

The MCLR was introduced by the RBI to ensure better transmission of policy rates and it replaced the existing

base rate regime from April 1, 2016.

(Source: RBI Circular on Interest Rates on Advances dated December 17, 2015)

Credit Policy Measures

The RBI issues an annual policy statement setting out its monetary policy stance and announcing various

regulatory measures. The RBI issues a review of the annual policy statement on a bi-monthly basis.

Monetary Policy Report, October 2016

Amendments to the Reserve Bank of India Act, which came into force on June 27, 2016 will empower the conduct

of monetary policy in India. For the first time in its history, the RBI has been explicitly provided the legislative

mandate to operate the monetary policy framework of the country. The primary objective of monetary policy has

also been defined explicitly for the first time – “to maintain price stability while keeping in mind the objective of

growth.” The amendments also provide for the constitution of a monetary policy committee (MPC) that shall

determine the policy rate required to achieve the inflation target, another landmark in India’s monetary history.

The composition of the MPC, terms of appointment, information flows and other procedural requirements such

as implementation of and publication of its decisions, and failure to maintain the inflation target as well as remedial

actions have been specified and subsequently gazette.

Monetary Policy for Fiscal Year 2016

First Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on April 7, 2015

Monetary and Liquidity Measures

The policy repo rate under the LAF remained unchanged at 7.50%.

The MSF rate remained unchanged at 8.50%, the Bank Rate at 8.50% and the reverse repo rate under the LAF

at 6.50%.

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The liquidity provided under term repos of 7-day and 14-day tenor remained unchanged at 0.75% of NDTL of

the banking system while liquidity provided under overnight repos remained unchanged at 0.25% of bank-

wise NDTL.

Announced intent to allow Indian exporters/importers to write covered options.

Banks encouraged to move to marginal cost of funds methodology for base rate computation.

Indian corporates allowed to raise INR bonds overseas.

Second Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on June 2, 2015


The policy repo rate under the LAF reduced 25 bps to 7.25%.

The MSF rate, Bank Rate and reverse repo rate under the LAF lowered 25 bps each to 8.25%, 8.25% and

6.25% respectively.



wise NDTL.

Third Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on August 4, 2015


The policy repo rate under the LAF remained unchanged at 7.25%.

The MSF rate remained unchanged at 8.25%, the Bank Rate at 8.25% and the reverse repo rate under the LAF

at 6.25%.



wise NDTL.

Fourth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on September 29, 2015


Reduce the policy repo rate under the liquidity adjustment facility by 50 bps from 7.25% to 6.75% with

immediate effect.

Cash reserve ratio of scheduled banks unchanged at 4.0% of NDTL.

Continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and

liquidity under 14-day term repos as well as longer term repos of up to 0.75% of NDTL of the banking system

through auctions.

Continue with daily variable rate repos and reverse repos to smooth liquidity.

The reverse repo rate under the LAF stands adjusted to 5.75%, and the marginal standing facility rate and the

Bank Rate to 7.75%.

Fifth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on December 1, 2015


Policy repo rate under the LAF unchanged at 6.75%.

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CRR of scheduled banks unchanged at 4.0% of NDTL.

Continue to provide liquidity under overnight repos at 0.25 % of bank-wise NDTL at the LAF repo rate and


through auctions.


The reverse repo rate under the LAF will remain unchanged at 5.75%, and the MSF rate and the Bank Rate at

7.75%.

Sixth Bi-Monthly Monetary Policy Statement for Fiscal Year 2016 held on February 2, 2016


Policy repo rate under the LAF unchanged at 6.75%.


Continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and


through auctions.


The reverse repo rate under the LAF will remain unchanged at 5.75%, and the MSF rate and the Bank Rate at

7.75%.

Monetary Policy for Fiscal Year 2017

First Bi-Monthly Monetary Policy Statement for Fiscal Year 2017 held on April 5, 2016


Policy repo rate under the LAF reduced from 6.75% to 6.5%.


Reduce minimum daily maintenance of the CRR from 95% of the requirement to 90% with effect from April

16, 2016.

Narrow the policy rate corridor from +/-100 bps to +/- 50 bps by reducing the MSF rate by 75 bps and

increasing the reverse repo rate by 25 bps, with a view to ensuring finer alignment of the weighted average

call rate with the repo rate.

Consequently, the reverse repo rate under the LAF stands adjusted to 6.0%, and the MSF rate to 7.0%. The Bank

Rate which is aligned to the MSF rate also stands adjusted to 7.0%.

(Source: RBI’s First Bi-Monthly Monetary Policy Statement, 2016-17)

Dynamic Provisioning Guidelines

At present, banks generally make two types of provisions: general provisions on standard assets and specific

provisions on NPAs. Since the level of NPAs varies through the economic cycle, the resultant level of specific

provisions also behaves cyclically. Consequently, lower provisions during upturns and higher provisions during

downturns have a pro-cyclical effect on the real economy.

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To address the pro-cyclicality of capital and provisioning, efforts at an international level are being made to

introduce countercyclical capital and provisioning buffers. The RBI has prepared a discussion paper on a

countercyclical (dynamic) provisioning (“DP”) framework.

The DP framework is based on the concept of expected loss (“EL”), which is the average level of losses a bank

can reasonably expect to experience, and is considered the cost of doing business. It is generally covered by

provisioning and pricing. The objective of DP is to soften the impact of incurred losses on the results of operations

through the economic cycle, and not to provide a general provisioning cushion for EL. More specifically, the DP

created during a year will be the difference between the long-run average EL of the portfolio for one year and the

incremental specific provisions made during the year. The parameters of the model suggested in the discussion

paper are calibrated based on data of Indian banks. Banks that have the capability to calibrate their own parameters

may, with the prior approval of the RBI, introduce a DP framework using the theoretical model indicated by the

RBI. Other banks will have to use the standardised calibration provided by the RBI. (Source: RBI Annual Report

2011-2012)

Financial Sector Legislative Reforms Commission (FSLRC)

The FSLRC was constituted on March 24, 2011 to redraft and harmonize legislation related to the financial sector.

(Source: RBI Report on Trend and Progress of Banking in India 2011-12)

In its approach paper released on October 1, 2012, the FSLRC has proposed a two-agency regulatory model: the

RBI as the monetary authority, banking regulator and payment systems regulator, and a single regulator for the

rest of the financial sector. This approach paper is currently in draft form. (Source: FSLRC, Ministry of Finance,

Approach Paper dated October 2012)

Bank Holding Company (BHC) or Financial Holding Company (FHC)

In June 2010, the RBI set up a working group to examine the different holding company structures prevalent

internationally in the financial sector and to examine the feasibility of introducing an FHC structure in India.

FHCs are companies that own or control one or more banks or NBFCs. Currently, banks in India are organized

under a bank-subsidiary model (“BSM”), in which the bank is the parent of all the subsidiaries of the group. In

May, 2011, the RBI released the working group’s recommendations that included, among others, that the FHC

model should be pursued as a preferred model for the financial sector in India and that the RBI should be

designated as the regulator for FHCs. The recommendations have currently not been implemented. (Source: RBI

Report of the Working Group on Introduction of Financial Holding Company Structure in India dated May 23,

2011)

Sale of Stressed Assets by Banks

(Source: Guidelines on Sale of Stressed Assets by Banks dated September 1, 2016)

The RBI, to further strengthen banks’ ability to resolve their stressed assets effectively, on September 1, 2016,

has put in place an improved Framework for Revitalising Distressed Assets in the Economy, governing sale of

such assets by banks to Securitisation Companies (SCs)/ Reconstruction Companies (RCs) (created under the

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) /other

banks/Non-Banking Financial Companies /Financial Institutions.

In order to enhance transparency in the entire process of sale of stressed assets, the Reserve Bank has decided as

under:

Identification of stressed assets beyond a specified value, as may be determined by bank’s policy, for sale

shall be top-down that is, the head office/corporate office of the bank shall be actively involved in

identification of stressed assets, including assets which are classified as Special Mention Account, to be put

on sale. Early identification will help in low vintage and better price realisation for banks;

At least once in a year, preferably at the beginning of the year, banks shall, with the approval of their Board,

identify and list internally the specific financial assets identified for sale to other institutions, including

SCs/RCs;

84

At a minimum, all assets classified as ‘doubtful asset’ above a threshold amount should be reviewed by the

board/board committee on periodic basis and a view, with documented rationale, is to be taken on exit or

otherwise. The assets identified for exit shall be listed for the purpose of sale;

Prospective buyers need not be restricted to SCs/RCs. Banks may also offer the assets to other

banks/NBFCs/FIs, who have the necessary capital and expertise in resolving stressed assets. Participation of

more buyers will result in better price discovery;

In order to attract a wide variety of buyers, the invitation for bids should preferably be publicly solicited so

as to enable participation of as many prospective buyers as possible. In such cases, it would be desirable to

use e-auction platforms. An open auction process, apart from attracting a larger set of borrowers, is expected

to result in better price discovery. Banks should lay down a Board approved policy in this regard;

Banks must provide adequate time for due diligence by prospective buyers which may vary as per the size of

the assets, with a floor of two weeks;

Banks should have clear policies with regard to valuation of assets proposed to be sold. In particular, it must

be clearly specified as to in which cases internal valuation would be accepted and where external valuation

would be needed. However, in case of exposures beyond ` 50 crore, banks shall obtain two external valuation

reports;

The cost of valuation exercise shall be borne by the bank, to ensure that the bank’s interests are protected;

The discount rate used by banks in the valuation exercise shall be spelt out in the policy. This may be either

cost of equity or average cost of funds or opportunity cost or some other relevant rate, subject to a floor of

the contracted interest rate and penalty, if any.

As per the improved Framework, banks shall review the efficacy of their extant policies on sale of non-performing

assets (NPAs), with focus on valuation of stressed assets, and rework their policies by appropriately adopting the

above principles.

Prospects: 2016 – 2017

(Source: RBI Annual Report – 2015-16)

After of the Brexit referendum, the outlook for the global economy has weakened, as reflected in downgrades of

projections by multilateral agencies. Although the extreme financial market reactions to its announcement have

subsided and financial asset prices have regained lost ground, high uncertainty regarding its evolution may shadow

the course of a fragile and slowing global recovery in the year ahead and possibly even beyond.

So far, the effects of Brexit on the Indian economy have been relatively muted, including the immediate impact

on equity and foreign exchange markets. Yet, in view of the linkages to the UK and the euro area, spill overs

through trade, finance and expectations channels cannot be ruled out as events unfold. Abstracting from these

external shocks, the near-term domestic outlook appears somewhat brighter than the outcome for 2015- 16. While

a durable pick-up in investment activity remains elusive, consumption will continue to provide the main support

to aggregate demand and may receive a boost from the revival of rural demand in response to the above-normal

and spatially well-distributed southwest monsoon as well as from the seventh pay commission’s award. Notably,

the impact of the fifth and sixth pay commissions’ awards on growth was also positive. Agricultural and allied

activities are expected to benefit substantially from the distinct improvement in moisture conditions.

The commitment of the central government to the path of fiscal consolidation in 2016-17 has enhanced the

credibility of fiscal policy, which will, in turn, help in anchoring inflation expectations and in improving the

business environment, including by fostering credibility among international investors. A conducive environment

has also been created through appropriate incentives/penalties for states to renew their fiscal consolidation. The

passage of the Goods and Services Tax (GST) Bill marks a new era in co-operative fiscal federalism and a growing

political consensus for economic reforms. The implementation of the GST would boost trade, investment and

growth by reducing supply chain rigidities, encouraging scale economies, cutting down transportation and

transaction costs, as also promoting efficiency gains. By eliminating the cascading impact of taxes on production

and distribution costs, the GST would also improve the overall competitiveness of the economy. The impact of

GST on CPI inflation would largely depend on the standard rate that would be decided by the GST council;

85

however, the impact is likely to be low, with around 54% of the CPI basket exempt from the GST. As regards

public finances, the GST is expected to widen the tax base, result in better tax compliance and reduce the cost of

tax collection.

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BUSINESS

Overview




















































87











Our Competitive Strengths

We believe that the following strengths distinguish us in a competitive Indian banking industry:

Strong south India focussed franchise with significant growth potential

We have wide presence in South India with 397 branches out of which 257 branches are in the state of Tamil

Nadu, 47 branches in the state of Karnataka, 48 branches in the state of Andhra Pradesh, 29 branches in Telangana,

12 branches in Kerala and 4 in Puducherry as on September 30, 2016. We believe the South Indian states are rich

in resources and provide higher opportunity for resource mobilization. We believe, the region has good potential

for retail business, alongwith agriculture SME and corporate loans. Additionally, as of September 30, 2016, we

have a wide distribution of 107 branches in the rural areas of the South Indian states which provide us an edge in

our priority sector banking due to its rich agricultural resources and a large catchment area for low cost deposits.

Wide distribution network across India and diverse customer base

We offer a diverse range of retail and mid-commercial products and services across retail banking, wholesale

banking, agricultural lending and SMEs, including short-term and long-term deposits, secured and unsecured

loans, internet banking, mutual fund distribution and life, health and general insurance distribution. Our branch

network allows us to provide banking services to a wide variety of customers, including large and medium to

small corporates, institutions and state-owned enterprises, as well as commercial, agricultural, industrial and retail

customers. As of September 30, 2016, we had 2.83 million customer accounts reflecting our large customer base.

As of September 30, 2016, our operations cover 16 states and one union territory across India, with 1,393 customer

outlets which includes 460 branches and 926 ATMs. As of September 30, 2016, we have 78 branches in

metropolitan cities, 127 branches in urban areas, 148 branches in semi-urban areas and 107 branches in rural areas.

Strong customer relations provide opportunities for cross selling

Over the 90 years of our existence, we have significantly grown our operations from being a regional bank to a

banking institution covering a wide spectrum across several states in India. We further seek to leverage our brand

recall across India. With vast banking experience, we believe we have built strong and long standing relationships

with a large number of customers. We have differentiated our products based on customer segmentation aiming

at wider financial product delivery.

As part of our para-banking activities, we offer distribution of life insurance, general insurance and health

insurance products, money transfer services through branch channels as well as through direct remittance,

promotion of mutual fund schemes, depository services, services as a PAN Service Agent and ASBA services.

Offering para-banking activities to our existing customer base has been one of the drivers of our growth. We

conduct frequent campaigns to market the above products along with our business partners.

Proven business and growth track record

We have nine decades of operating experience and our recent financial growth encapsulates our competitive

strengths. Our total income grew from ` 21,875.42 million in Fiscal 2014 to ` 28,728.31 million in Fiscal 2016,

representing a CAGR of 14.60%. Our deposits grew from ` 185,728.80 million as at March 31, 2014 to `

254,309.62 million as at March 31, 2016 representing a CAGR of 17.02%. Our net advances grew from `

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128,891.90 million as at March 31, 2014 to ` 196,437.40 million as at March 31, 2016, representing a CAGR of

23.45%. Our net interest income grew from ` 4,860.10 million in Fiscal 2014 to ` 6,453.06 million in Fiscal 2016,

representing a CAGR of 15.23%. As of Sept 30, 2016, our total income, deposits, net advances and net interest

income were ̀ 16,051.69 million, ̀ 266,801.41 million, ̀ 200,691.64 million and ̀ 3,642.29 million respectively.

Professional and experienced management

We are a professionally run banking institution and our senior management team is led by Mr. Parthasarathi

Mukherjee, Managing Director and CEO. Supporting our Managing Director and CEO is a strong management

team, including Mr. N. S. Venkatesh, our Executive Director and Chief Financial Officer on our Board. Our senior

management team has vast experience in the banking sector. Mr. Mukherjee prior to joining the Bank has been

the group executive, corporate relationships and international business at Axis Bank Limited. Mr. N. S. Venkatesh

was the executive director and chief financial officer of IDBI Bank Limited. For further detail, see “Board of

Directors and Senior Management” on page 158.

All members of our senior management team have in-depth knowledge of banking operations and management

and have a strong focus on continuing to formulate and implement our turnaround and growth strategy as our

business grows and evolves. We have been able to build a team of professionals with relevant experience,

including credit evaluation, risk management, treasury, technology and marketing. Our senior management team

has been responsible for the formulation of our new strategy to emphasise on the restructuring of our balance sheet

and business mix, improving operating efficiency, leveraging on the strengths of our distribution network and

existing resources, deepening customer relationships and improving the brand. As of September 30, 2016, our

total employee strength was 3,929.

Streamlined risk management controls and technology platform

We believe that prudent risk management policies, procedures and controls are critical for the long-term

sustainable development of our business. We have implemented risk management procedures for most of our

credit exposures. The credit risk management consists of internal credit rating methodology, credit scoring method

for retail structured products, risk based pricing methodology, control mechanisms and incorporating external

rating of the borrower as a part of our credit risk assessment. A separate risk management department formulates

and implements credit risk valuation and approves risk management framework and policies, oversees the credit

approval process and periodically reviews the same.

In 2008, we networked all of our branches and offices to facilitate core banking solutions (“CBS”). Through our

technology platform we offer internet banking to our retail and corporate customers, SMS banking, Immediate

Payment Service (“IMPS”), online tax payments and online trading. This also enables us to provide

comprehensive customer data which enables us to (1) cross sell our products and services; (2) generate reports

required for various regulatory filings; and (3) enables the management to access key data on real time basis

through Executive Dashboard. We have also set up primary data centre at Chennai which houses our IT

infrastructure. We have set up a disaster recovery site at Bangalore and a board approved Business Continuity

Plan.

Strategy

Expand the Branch network and Penetration

Pursuant to our initial focus on deepening presence in focus geographies, we seek to leverage our brand recall,

especially in Southern India, and to expand our presence. We intend to increase our branch network with focus in

South India with selective branch expansion in other select locations in India. Working toward this goal, we have

received approval from the Reserve Bank of India, to open 52 branches in Tier I to Tier 6 cities vide letter dated

September 9, 2016. We will continue to focus on improving our technology to support our network of branches,

and build brand for phased expansions in contiguous markets for wider presence. We plan to strengthen our HR

practices and focus on augmenting skills of our employees and make strategic additions to fill any vacancy in our

Bank.

Emphasis on enhancing CASA growth

We seek to increase our CASA deposits and reduce our dependence on bulk deposits in order to reduce cost of

funds. As of September 30, 2016, CASA accounts contributed to 17.31% of our total deposits. In order to increase

89

our CASA and retail deposits, we have set up an exclusive and dedicated team for liabilities and product

development. This team comprises of product specialists to develop new products and also to enhance the features

of existing products in an endeavour to be the trend setter in the market. We have a dedicated sales force for

acquisition of CASA across regions. We plan to enhance the team size and also develop product sales specialists

for acquiring current account and value based business. We plan to focus on increasing CASA share through

branch specific initiatives.

As senior high value customers tend to prefer branch banking, we continue to contribute to our branch expansion

strategy parallel to our growth in online Banking.

The ongoing restructuring process in the organization is aimed at ensuring that the main focus of branches would

be sourcing CASA and selling TPP. In addition, all verticals have been given targets under CASA and TPP which

we expect to lead to a healthy growth of low cost reports.

Focus on retail and MSME banking

A majority of our liability and asset customers are in the retail or the MSME divisions. The retail, SME and

MSME advances constituted 30.05 % of our net advances as on September 30, 2016. We aspire to be a retail,

SME and MSME focussed bank. We intend to continue our focus on retail, SME and MSME banking with the

intention to increase advances to this category of customers and to mobilise low cost CASA deposits from them.

We have adopted granular customer segmentation for focused strategies. Increase in advances to this category of

customers not only helps in increasing our net interest margins, it will also help us in reducing our risk arising

from large loan accounts becoming NPA. Further, we can cross sell our other products to this category of

customers. We have set-up dedicated relationship managers, in every region, to source MSME business. In retail,

our initial focus is on vehicle loan and mortgages which we intend to expand to cover other products in a phased

manner. Our other initiatives including branch expansion plans, setting up a dedicated sales force for CASA

mobilisation, cross selling of other products and our incentive programmes are specifically designed for achieving

growth in this segment.

Increase in fee-based income

In order to increase our fee-based income, we started distributing other financial products (third-party investment

products, such as mutual funds and insurance products, and provide wealth management services) from Fiscal

2003. This was done to improve our penetration and customer reach by diversifying our source of revenues.

We have entered into agreements with well-known providers of life, health and general insurance products to

distribute life, health and general insurance policies, respectively. Fee based income (including commissions on

the sale of insurance products, brokerage on marketing of mutual funds and demat transaction and maintenance

charges) constituted 41.08%, 42.03% and 48.32% of the total non-interest income in Fiscals 2014, 2015 and 2016,

respectively. Our total fee based income grew from ` 836.45 million in Fiscal 2014 to ` 1,471.37 million in Fiscal

2016, representing a CAGR of 32.63%. For the six months ended September 30, 2016 our total fee based income

constituted 31.45% of total non-interest income.

The total fee-based income from TPP, such as, life insurance, general insurance, mutual fund, forex and NPS grew

from ` 34.79 million in Fiscal 2014 to ` 61.66 million in Fiscal 2016. For the six months ended September 30,

2016 our total fee-based income from TPP, such as, life insurance, general insurance, mutual fund, forex and NPS

is ` 35.19 million. For Fiscal 2014, the life insurance products have constituted 52.72% of total fee-based income

from TPP, which increased to 78.67% in Fiscal 2016. For the six months ended September 30, 2016, the life

insurance products have constituted 70.70% of total fee-based income from TPP. For Fiscal 2014, the general

insurance products have constituted 45.16% of the total fee-based income from TPP, which decreased to 19.40%

that included 1.43% of health insurance products, in Fiscal 2016. For the six months ended September 30, 2016,

the general insurance products have constituted 27.00% which included 7.09% of health insurance products of

total fee-based income from TPP. For Fiscal 2014, the mutual funds and NPS have constituted 2.03% and 0.05%,

respectively, of the total fee-based income from TPP, as compared to 1.80%, and 0.13%, respectively, in Fiscal

2016. For the six months ended September 30, 2016, the mutual funds and NPS have constituted 1.32%, and

0.03% of total fee-based income from TPP.

Focused sales teams have been set up for marketing a diversified range of products including Bancassurance (both

life and non-life), mutual funds, three-in-one accounts (depository participant accounts, on-line trading accounting

and CASA account) and other wealth management products. We have tied up with a third party for sourcing of

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home loans through sales channels. These products are being offered through “Core Banking Solutions” and other

alternate channels such as phone and internet banking. We intend to continue to expand this activity for increasing

our other income.

Relationship Managers have been appointed for taking care of high net worth customers. There is an enhanced

focus on FOREX transactions (both fund based and non-fund based) and increasing revenues from non-fund based

business by way of issuing letter of credit / guarantees (both inland & foreign).

Moreover, from March 31, 2014 to September 30, 2016, the number of our ATM machines have increased from

688 to 926. Such increase in the number of ATMs set up by us allows us to generate fees from other bank

customers who use our ATMs to withdraw money, which provides us with additional growth opportunities.

Further strengthen risk management capabilities and improve efficiencies

We have adopted a prudent risk management strategy and enhance our risk management organisational structure

and processes in order to create an effective risk management system. We aim to continue to enhance our credit

risk management systems and processes in line with growth of business. We intend to continue to strengthen our

credit and risk functions. We believe that our efforts in strengthening risk management may improve our asset

quality.

We have set up a central processing cells at all our regional office centres, which currently possess retail and

MSME assets. We also have a central processing cell for liability product, for opening the account so as to adhere

to KYC / AML requirements. We also intend to have a central processing cell for the wholesale credit facility.

We believe this centralised processing cell will help in reducing the manpower requirement at branch level and

also improve efficiency of operations, thereby reducing operational cost, in addition to strengthening the risk

management framework.

We believe a key to our success is the ability to retain, motivate and develop talented and experienced

professionals. We intend to focus on cultivation of a high-quality and professional workforce through provision

of training and development programs for employees to enhance professional knowledge and capabilities,

resulting in improved efficiencies. We will continue to effect improvements in our technology platform to help us

enhance our product delivery capabilities and achieve efficiencies.

Major events in our corporate history

Year Event

1926 Incorporation of the Bank

1958 License from the RBI under the Banking Regulation Act and became a Scheduled Commercial

Bank

1974 Opening of a branch in Karnataka, the first branch outside Tamil Nadu

1976 License to deal in foreign exchange

1988 Initial Public Offering

2002 Initiated Bancassurance tie-ups

2009 Launched 4 Savings Bank products - Lakshmi Savings Gold, Lakshmi Savings Star Gold,

Lakshmi Savings Youth Power & Lakshmi Savings Balance Free Account

2010 Tie up with International VISA Debit Card

2011 Launched digital initiatives - SMS alert, mobile banking services

2013 Obtained RBI approval for opening 71 branches

Our Business Divisions

Our business divisions consist of (i) retail banking, (ii) SME/ MSME banking, (iii) rural banking, (iv) mid-

commercial banking and (v) wholesale banking divisions.

The table below sets forth the composition of our loan assets by business divisions as of March 31, 2014, March

31, 2015 and March 31, 2016 and September 30, 2016.

(Amount in ` million except for percentages)

91

Business

Divisions

As of March 31, As of September 30,

2016 2014 2015 2016

Advances % Advances % Advances % Advances %

Retail banking 16,270.20 12.48 19,773.00 11.97 26,395.20 13.32 20,658.60 10.20

SME/ MSME

banking

26,950.10 20.67 34,354.40 20.80 41,705.90 21.04 40,197.70 19.85

Rural banking 24,159.60 18.53 24,125.60 14.61 30,655.90 15.47 35,563.00 17.56

Mid-commercial

banking

11,391.70 8.74 13,002.50 7.87 14,180.30 7.15 15,609.80 7.70

Wholesale

banking

51,605.40 39.58 73,872.90 44.75 85,252.00 43.02 90,504.20 44.69

130377.00 100.00 165128.40 100.00 198189.30 100.00 202,533.30 100.00

Retail Banking

Retail banking comprises of loans and advances to individuals, HUFs, trusts and clubs, irrespective of the value

of the loan. For the year ended March 31, 2016, total loans to retail banking customers was ` 26,395.20 million,

which was 13.32% of our total loan and advances during this period and for the six months ended September 30,

2016, total loans to retail banking customers was ` 20,658.60 million, which was 10.20% of our total loan and

advances during this period. Our retail banking division has grown at a CAGR of 27.37% over the last three

completed financial years.

SME/ MSME Banking

SME/ MSME banking comprises of loans and advances made available for investment in plant and machinery of

micro, small and medium enterprises, irrespective of the value of the loan. For the year ended March 31, 2016,

total loans to SME/ MSME banking customers was ` 41,705.90 million, which was 21.04% of our total loan and

advances during this period and for the six months ended September 30, 2016, total loans to SME/ MSME banking

customers was ` 40,197.70 million, which was 19.85% of our total loan and advances during this period. Our

SME/ MSME banking division has grown at a CAGR of 24.40% over the last three completed financial years.

Rural Banking

Rural banking division comprises of the loans made for the purposes of agricultural activities, irrespective of the

value of the loan. For the year ended March 31, 2016, total loans to rural banking customers was ` 30,655.90

million, which was 15.47% of our total loan and advances during this period and for the six months ended

September 30, 2016, total loans to rural banking customers was ` 35,563.00 million, which was 17.56% of our

total loan and advances during this period. Our rural banking division has grown at a CAGR of 12.65% over the

last three completed financial years.

Mid-commercial Banking

Mid-commercial banking division comprises of loans to sole proprietorships and partnership firms (other than

loans to SME/ MSME and rural banking customers), irrespective of the value of the loan. For the year ended

March 31, 2016, total loans to mid-commercial banking customers was ` 14,180.30 million, which was 7.15 % of

our total loan and advances during this period and for the six months ended September 30, 2016, total loans to

mid-commercial banking customers was ` 15,609.80 million, which was 7.70% of our total loan and advances

during this period. Our mid-commercial banking division has grown at a CAGR of 11.57 % over the last three

completed financial years.

Wholesale Banking


as loans to wholesale banking division customers, irrespective of the value of the loan. For the year ended March

31, 2016, total loans to wholesale banking customers was ` 85,252.00 million, which was 43.02 % of our total

loan and advances during this period and for the six months ended September 30, 2016, total loans to wholesale

banking customers was ` 90,504.20 million, which was 44.69 % of our total loan and advances during this period.

Our wholesale banking division has grown at a CAGR of 28.53% over the last three completed financial years.

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Product portfolio

Our product portfolio is being expanded to suit the needs of our customers across age groups and segments. We

offer varied options under savings bank accounts for different categories of customers. Such options include a

basic bank account, an account aimed at non-profit motive organizations such as trusts, associations, societies,

clubs, etc. with comprehensive banking services, a “Titanium”, “Gold” and “Star Gold” account for high networth

individuals, corporate salary accounts and bank accounts customized for children and youth.

Our current account services offer a wide range of products that seeks to cater to the requirements of small business

to large corporate houses. We also offer debit cards for partnerships and private entities who hold current accounts

with our Bank.

We also provide fixed deposit services and a number of schemes that allows customers to choose the nature,

quantum and the term of deposits they wish to place with our Bank.

Product portfolio includes products and services that suit the needs of our customers and which includes the

following:

Deposits

We have a range of options under savings bank accounts to suit the needs of customers across age groups and

profiles. Starting from basic bank account, youth power for students, working women, salary accounts, non-

resident customers, accounts for non-profit organizations such as trusts, associations, societies, clubs, etc. we

provide a gamut of comprehensive banking services.

For the more affluent customers, we had introduced a high value savings account last year “LVB Crown Services”

with an average balance requirement of ` 0.20 million or a total relationship value of ` 1 million (with a minimum

saving account balance of ̀ 0.10 million). LVB Crown Service account holders are offered a free personal accident

insurance cover of ` 2.5 million. We also propose to extend this product to non-resident customers, and

subsequently, increase our client base for cross-selling of TPP.

Our current account services offer a wide range of products that cater to the requirements of every business, small

or large corporate houses. Considering the wide range of transactions and varied business requirements of mid-

sized and large corporates, we have appointed relationship managers to ensure seamless service, convenience and

for ease of transacting. For current account holders, we offer customized solutions including cash management

services. We also provide fixed deposit services and a number of schemes that allow customers to choose the

nature, quantum and the term of deposits they wish to place with us.

Our current and savings account deposits and the corresponding percentage to total deposits as of March 31, 2014,

2015, 2016 and as of September 30, 2016 are set out in the table below:

(` In million, except percentages)

Deposits As of March 31 As of September 30,

2016 2014 2015 2016

Amount % of

total

Amount % of

total

Amount % of

total

Amount % of

total

Current

account

9,111.63 4.91% 15,093.00 6.87% 16,364.48 6.44% 15,207.83 5.70

Saving

account

17,297.33 9.31% 21,525.37 9.80% 27,790.64 10.93% 30,985.20 11.61

CASA Strategy

With the increase in household income levels in India and the consequent need for diversified financial services,

the retail sector has emerged as a rapidly growing opportunity for banks with the skills and infrastructure to

adequately service this market. Deposits from retail customers represent a significant, low-cost source of funding.

We have in the past three Fiscals focused our efforts on growing our CASA.

93

We have a tiered pricing on savings bank deposits, with interest rates starting at 4% for balances up to ` 0.1

million, 5% for balances above ` 0.1 million to ` 0.5 million and 6% for balances above ` 0.5 million. We have

recently introduced a new interest rate slab of 7% for balances of ` 50 million and above.

We utilize technology with the aim to enhance customer experience through secure transactions online, including

on mobile phones. We launched our mobile phone application in 2016, through which we intend to capitalize on

cross-sell opportunity to existing and new customers. We have dedicated internal and external teams constantly

working to improve both the quality and quantum of services offered through digital channels. We have launched

door step banking services through which we provide add-on service such as cash pick-up service for our savings

bank account holders, current account holders, cash credit account holders and customers availing overdraft

services.

Our CASA increased from ` 26,408.96 million as of March 31, 2014 to ` 36,618.37 million as of March 31, 2015

to ` 44,155.12 million as of March 31, 2016 and to ` 46,193.03 million as on September 30, 2016. This growth

has been achieved by the contribution of both new as well as existing branches.

Our marketing efforts are fine-tuned to reach existing and prospective customers through advertising and presence

in print, television, radio, and social media.

Loans

We offer a number of loan products such as loan against property, loan against securities, business credit loans,

loans for subscribing in initial public offers, personal vehicle loans and commercial vehicle loans, educational

loans, loans to MSMEs, agriculture credit products, etc. The details of our products are as follows:

Sl.

No.

Product Name Details

1. Cash credit/

overdraft facilities

Under the cash credit facility, a line of credit is provided to the borrower, up to a

pre-established amount based on the borrower’s projected level of inventories,

receivables and cash deficits.

2. Term loans Our term loan products primarily comprise of financing for fixed asset purchases,

including construction of factory, building and acquisition of machinery. These

loans repayment are subject to the cash flows generated from the projects for

which the loans are taken.

3. Export credits We provide export finance to customers for working capital requirements by way

of pre-shipment and post-shipment facilities. This facility is offered against firm

orders and letter of credit from overseas buyers.

4. Bill purchase and

discounting

We provide bill purchase and discounting facilities to customers. Genuine trade

bills and instruments are purchased or discounted. These are self-liquidating type

of facilities, as the repayment is by way of proceeds of the instrument or through

letters of credit issued by other banks.

5. The Lakshmi

Business Credit

scheme (“LBC”)

LBC is a special scheme by which working capital requirement of a borrower is

met with liberalized terms and conditions. Under this scheme, business

enterprises engaged in trading, manufacturing or services activity are financed to

cater to their genuine working capital requirements. The borrower may be an

individual, a proprietorship concern, partnership firm, HUF or a body corporate.

6. Lakshmi

Commodity Power

(“LCP”)

LCP is a type of working capital loan by way of demand loan financing against

select agricultural commodities. This loan will be extended against the pledge of

produce stored in warehouses managed by collateral managers, with whom we

have tie-ups. This will facilitate to improve our agricultural sector lending.

7. Lakshmi Loan

Against Shares

(“LLAS”) Scheme

for financing

against securities

LLAS was introduced in continuation of our initiatives to cater to the credit

requirements of existing customers, who have exposure to capital market and to

attract new customers with the objectives of increasing our credit portfolio as

well as CASA.

8. Lakshmi Loan

against properties

(“LLAP”)

LLAP allows customers can unlock the potential of their property for genuine

financial requirement.

9. Lakshmi Home

Loan (“LHL”)

LHL is extended for construction and repair of homes.

94

Sl.

No.

Product Name Details

10. Lakshmi

Commercial

Vehicle Loans

(“LCVL”)

LCVL is extended for the purchase of new commercial vehicles.

11. Lakshmi Personal

Vehicle Loans

(“LPVL”)

LPVL is extended for the purchase of vehicles for personal use.

12. Lakshmi Kisan

Credit Card

(“LKCC”)

LKCC is an agricultural loan product designed for meeting the short term credit

(crop loan) requirement including purchases of inputs, investment credit

requirements including purchase of farm equipment & machinery and

maintenance expenses for crops /farm and non-farm credit needs of farmers.

13. Lakshmi Rental

Loan (“LRL”)

Owners of commercial and residential properties and who receive rental income

thereon are eligible to avail our LRL facility.

14. Vidya Lakshmi

Loans (“VLL”)

VLL is extended for students for finance educational costs

15. Non Fund Based

facilities

Guarantees: We issue guarantees on behalf of our borrowers in favour of

corporations and government authorities. This facility is generally secured by

collateral.

Letter of Credit (LC): We issue letter of credit on behalf of our customers for the

import of raw material or capital goods on secured terms.

Our current exposure limit for a single borrower is 15 % of total capital and for a group of borrowers is 40% of

total capital. At present, the following prudential exposure limits & ceilings are adopted by us for single borrower

& borrowers belonging to a group:

Sl.

No.

Description Limit/ceiling

1. Prudential credit

exposure limit to

single borrower

15% of the Bank’s capital funds.

An additional 5% exposure (i.e. up to 20%) provided the additional credit

exposure is on account of funding for specific infrastructure projects.

In addition to the above, the Bank may, in exceptional circumstances and with the

approval of the Board, consider enhancement of the exposure to a borrower up to

a further 5% of capital funds, subject to the conditions prescribed in this regard by

RBI.

2. Prudential credit

exposure limit to

borrowers belonging

to a group.

40% of the Bank’s capital funds.

An additional 10% exposure (i.e. up to 50%) provided the additional credit

exposure is on account of extension of credit to infrastructure projects.

In addition to the above, the Bank may, in exceptional circumstances and with the

approval of the Board, consider enhancement of the exposure to a borrower up to

a further 5% of capital funds, subject to the conditions prescribed in this regard by

RBI.

Wealth Management and para-banking Activities

The Bank offers the following wealth management and para-banking activities:

Insurance

We distribute insurance policies as an agent for third-party insurance companies and offer life insurance, general

insurance and health insurance products. We have tied-up with Max Life Insurance Company Limited for

providing life insurance products to our customers and with Future Generali India Insurance Company Limited

for general insurance business distribution. For offering health insurance products, we have tied up with Cigna

TTK Health Insurance Company Limited. As of March 31, 2016 and September 30, 2016, 2.02% and 1.59% of

our other income, respectively, was attributable to our insurance business.

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Money Transfer Services

Money Transfer through Branch Channels: We have entered into foreign inward remittances arrangements with

Weizmann Forex Limited for extending the Western Union Money Transfer facility to our customers. We have

also tied-up with UAE Exchange & Financial Services Ltd., allowing us to offer global money transfer services

through Xpress Money and Moneygram.

Money Transfer through Direct Remittances: Tied up with Times of Money - Remit 2 India for inward remittance

from abroad, this enables the NRIs to directly remit the amount to their account / residents.

Mutual Funds and Portfolio Management Services

Our Bank has tied-up with multiple asset management companies for promoting various mutual fund schemes. In

addition, we are promoting portfolio management services through UTI, Reliance and Sundaram Asset

Management Company.

Forex travel cards

Our bank has tied up with third parties for foreign exchange travel cards which is a high growth, high margin

exchange rate driven product, irrespective of amounts remitted.

Depository Participant Services

We offer depository services to our customers and in order to allow us to provide such services, we are registered

as depository participant with the NSDL. Our customers can open demat accounts at our designated branches and

hold securities in electronic form with the NSDL.

Online Trading Services

We have tied-up with Way2Wealth Brokers Private Limited and IDBI Capital Market Services Limited for the

purposes of offering online trading services. Our customers can open online trading accounts through our

designated branches and can trade in equity and futures & options on the Stock Exchanges.

Other services

Our Bank has been registered with the PFRDA and NSDL for NPS and has enabled the eNPS facility for

subscribers. Our Bank is registered as a “banker to the issue” with SEBI and can receive ASBA applications. It

has also adopted the Prime Minister Jeevanjyoti Bima Yojana, Prime Minister Suraksha Bima Yojana and Atal

Pension Yojana.

Risk management and asset quality

We have revised our lending policy and demarcated operations between various business lending. Retail lending

is undertaken by a retail lending group which is led by a head of consumer lending and retail banking while

wholesale lending has been centralized to the corporate office. The branches shall be excluded from taking lending

decisions and such decisions would be undertaken by “MSME centres” which will cater to rural, commercial

credit and retail lending. We plan to authorise the branches to continue handling only loans against deposits, LAS,

JDLs and government sponsored schemes.

We aim to continue to enhance our credit risk management systems and processes in line with growth of business.

We believe that our efforts in strengthening risk management have improved our asset quality. For instance, in

accordance with our lending policy, for advances of ` 50.00 million and more, we undertake mandatory checks

with records of the RBI. The due diligence exercise also involves reviewing the “Defaulters and Caution Lists”

circulated by CIBIL/Equifax, RBI, ECGC and IBA, as well as obtaining the Credit Information Report (“CIR”)

from CIBIL, if available, or the CIR from other credit information companies approved by the RBI. Our gross

NPAs to Gross Advances decreased from 4.19% as of March 31, 2014 to 1.97% as of March 31, 2016. As on

September 30, 2016 our gross NPAs to Gross Advances stood at 2.70%.

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The Bank is in constant endeavor to reduce the GNPAs. Over the last 3 Fiscals, our GNPAs across our business

divisions have reduced:

(` in million, except the percentages)

Business Divisions As of March 31,

2014 2015 2016

GNPA % GNPA % GNPA %

Retail banking 207.05 3.79% 191.28 4.21% 155.62 3.98%

SME/ MSME banking 1,099.23 20.12% 791.70 17.41% 731.87 18.71%

Rural banking 128.57 2.35% 123.75 2.72% 145.45 3.72%

Commercial banking 178.27 3.26% 323.49 7.12% 622.30 15.91%

Wholesale banking 3,851.53 70.48% 3,115.97 68.54% 2,257.26 57.69%

Total 5,464.65 100.00% 4,546.19 100.00% 3,912.50 100.00%

Further, as on Sept 30, 2016 our GNPAs stand at ` 5,461.07 million, of which retail, SME/ MSME, rural, mid-

commercial and wholesale GNPAs are ` 213.08 million, ` 1,142.66 million, ` 120.19 million, ` 710.17 million

and ` 3,274.96 million respectively. We intend to continue to improve upon and refine our risk management tools

and systems.

Branch Network

As of September 30, 2016, we have 460 branches across 16 states and one union territory in India. A summary of

our branches as categorized by region and by the type of branch as of September 30, 2016 is set out below.

Demographic network of branches


Type of Branch Number of Branches Metropolitan 78 Urban 127 Semi-urban 148 Rural 107

Total 460

State Wise Distribution of Branches


State/Union Territory Number of Branches

Tamil Nadu 257

Andhra Pradesh 48

Karnataka 47

Maharashtra 19

Gujarat 12

Kerala 12

Delhi 8

Haryana 4

Puducherry 4

Uttar Pradesh 2

West Bengal 3

Chhattisgarh 4

Jharkhand 2

Madhya Pradesh 4

Orissa 3

Rajasthan 2

Telangana 29

Total 460

Sales, Marketing and Branding

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Brand promotion is integral for brand driven businesses to increase brand recall in customers. We believe that

product differentiation and marketing efforts help reach out to new customer segments. We have increased our

offline and online advertising efforts.

We have also undertaken a number of marketing initiatives, which we believe will increase brand recall. We have

created an official “Facebook” page, allowing us to have a presence on the social networking platform and to

channelize customer interaction.

Capital adequacy

Indian banks have to comply with the regulatory limits and requirements as prescribed under the RBI Basel III

Capital Regulations, on an ongoing basis, with full implementation of such regulations by March 31, 2019. As of

September 30, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 10.10% and our

Tier I capital adequacy ratio was 8.21% and our Common Equity Tier 1 (“CET1”) capital adequacy ratio was

8.21%. As of March 31, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 10.67%.

In particular, our Tier I capital adequacy ratio was 8.69% and our CET I capital adequacy ratio was 8.69%.

The following table sets out our capital adequacy ratios:

Sr.

No.

Ratio As at March 31 As at September

30, 2016 2014 2015 2016

1. Tier I capital adequacy ratio (%) 7.87 9.33 8.69 8.21

2. Common Equity Tier 1 capital

adequacy ratio (%)

7.87 9.33 8.69 8.21

3. Capital adequacy ratio under the RBI

Basel III (%)

10.90 11.34 10.67 10.10

Priority sector lending

Commercial banks in India are required by the RBI to lend, through advances or investments, 40.00% of their

ANBC or credit equivalent amount of off-balance sheet exposures, whichever is higher, to specified sectors known

as “priority sectors”, subject to certain exemptions permitted by RBI from time to time. Priority sector advances

include advances to the agriculture sector, micro and small enterprises, vulnerable groups in society, housing and

education finance. Any shortfall in the amount required to be lent to the priority sectors may be required to be

deposited with the Rural Infrastructure Development Fund established by NABARD or funds with other financial

institutions as specified by the RBI.

As of March 31, 2016, our gross lending to Priority Sectors was ` 73,498.08 million, which constituted 44.37%

of our ANBC of ` 165,654.71 million.

The following table sets out a breakdown of our priority sector lending in the form of advances for the periods

indicated:

(` in million, except the percentages)

Priority Sector

Advances


2016 2014 2015 2016

Advances % of

Total

PSL

Advances % of

Total

PSL

Advances % of

Total

PSL

Advances % of

total

PSL

Agricultural

Advances

24,619.98 47.20%

24,571.77 42.00% 30,861.46 41.99% 33,774.58 43.80%

Manufacturing

Enterprises

11,441.10 21.93% 14,841.29 25.37% 14,406.52

19.60% 14,183.34 18.40%

Services

Enterprises

12,592.82 24.14% 16,330.24 27.92% 23,683.96

32.22% 24,569.57 31.87%

Other advances

like Housing,

Education,

3,511.26 6.73% 2,755.64 4.71% 4,546.14 6.19% 4,574.95 5.93%

98

Priority Sector

Advances


2016 2014 2015 2016

Advances % of

Total

PSL

Advances % of

Total

PSL

Advances % of

Total

PSL

Advances % of

total

PSL

Microcredit &

etc.

Total Priority

Sector Lending

52,165.16 100.00% 58,498.94 100.00% 73,498.08 100.00% 77,102.44 100.00%

In March 2016, we have availed of a refinance of our advances to the priority sector from NABARD. The value

of the refinance is ` 2,000 million at an interest rate 9.10 % with bullet repayment at the end of 18 months.

Non-performing assets and provisioning

The following table set out the gross NPAs in each sector as of March 31, 2014, 2015 and 2016 and as of

September 30, 2016:

(` in million) INDUSTRY NAME March 31, March 31, March 31, September 30,

2014 2015 2016 2016

Amount % Amount % Amount % Amount %

Other Textiles 1,264.48 23.14% 903.82 19.88% 118.71 3.03% 168.01 3.08%

All Engineering 388.03 7.10% 71.16 1.57% 5.69 0.15% 45.15 0.83%

Infrastructure 1,313.01 24.03% 120.81 2.66% 61.50 1.57% 65.78 1.20%

Chemicals, dyes, paints etc. 112.31 2.06% 109.95 2.42% 298.91 7.64% 280.18 5.13%

Trading 93.53 1.71% 518.72 11.41% 843.46 21.56% 846.65 15.50%

Iron & Steel 771.77 14.12% 547.90 12.05% 608.70 15.56% 569.71 10.43%

Cotton Textiles 64.80 1.19% 0.94 0.02% 15.29 0.39% 33.28 0.61%

Gems & Jewellery 86.53 1.58% 247.45 5.44% 76.62 1.96% 76.16 1.39%

Construction 17.32 0.32% 17.32 0.38% 0.00 0.00% 0.00 0.00%

Food Processing 39.24 0.72% 529.66 11.65% 521.53 13.33% 1,134.67 20.78%

Vegetable oils & Vanaspati 10.35 0.19% 6.52 0.14% 0.00 0.00% 0.00 0.00%

Mining 5.25 0.10% 0.00 0.00% 499.08 12.76% 448.97 8.22%

Rubber & Rubber Products 72.88 1.33% 83.34 1.83% 15.92 0.41% 16.11 0.30%

Leather & Leather Products 0.86 0.02% 0.86 0.02% 0.31 0.01% 5.73 0.10%

Automobiles include trucks 5.34 0.10% 5.49 0.12% 3.19 0.08% 2.83 0.05%

Other Metal & Products 0.70 0.01% 5.84 0.13% 5.95 0.15% 4.76 0.09%

Cements 4.77 0.09% 5.22 0.11% 3.00 0.08% 3.39 0.06%

Jute Textiles 0.18 0.00% 2.69 0.06% 1.98 0.05% 1.52 0.03%

Electricity 0.00 0.00% 0.00 0.00% 0.00 0.00% 0.00 0.00%

Tea 0.00 0.00% 0.00 0.00% 0.00 0.00% 0.00 0.00%

Tobacco & Tobacco Products 0.00 0.00% 0.00 0.00% 0.00 0.00% 0.00 0.00%

Petroleum 0.00 0.00% 0.00 0.00% 0.00 0.00% 0.00 0.00%

Computer software 19.59 0.36% 0.00 0.00% 0.00 0.00% 0.00 0.00%

Other industries 419.78 7.67% 238.97 5.26% 101.90 2.60% 862.59 15.80%

Residual 670.31 12.26% 1030.42 22.67% 620.79 15.87% 871.07 15.95%

Total gross NPA 5,464.65 100.00% 4,546.20 100.00% 3,912.50 100.00% 5,461.08 100.00%

The following table set out the provisioning in each sector as of March 31, 2014, 2015 and 2016 and as of

September 30, 2016:

(` in million)

Industry Name March 31,

2014

March 31,

2015

March 31,

2016

September 30,

2016

Other Textiles 184.42 260.44 13.71 13.47

All Engineering 44.65 2.24 1.35 6.90

Infrastructure 61.76 111.32 11.55 0.94

Chemicals, dyes, paints etc. 3.63 17.78 49.48 41.24

Trading 11.24 99.69 198.90 69.65

Iron & Steel 49.22 100.09 88.81 54.23

Cotton Textiles 0.27 0.37 2.40 4.44

Gems & Jewellery 0.08 75.22 0.12 0.00

99

Industry Name March 31,

2014

March 31,

2015

March 31,

2016

September 30,

2016

Construction 0.00 2.15 0.00 0.00

Food Processing 3.27 131.75 521.53 667.81

Paper & Paper Products 14.35 31.77 39.86 1.51

Vegetable oils & Vanaspati 0.31 0.07 0.00 0.00

Mining 0.71 0.00 74.86 67.31

Rubber & Rubber Products 10.11 50.90 2.61 0.67

Leather & Leather Products 0.00 0.00 0.05 0.84

Automobiles include trucks 0.69 1.01 0.78 0.23

Other Metal & Products 0.00 0.89 1.13 0.56

Cements 0.52 1.28 0.45 0.45

Jute Textiles 0.00 0.51 0.41 0.00

Electricity 0.00 0.00 0.00 0.00

Tea 0.00 0.00 0.00 0.00

Tobacco & Tobacco Products 0.00 0.00 0.00 0.00

Petroleum 0.00 0.00 0.00 0.00

Computer software 2.94 0.00 0.00 0.00

Other industries 36.62 39.05 5.54 192.60

Residual 107.52 236.98 121.14 110.26

Total 532.31 1,163.51 1,134.68 1,233.11

For further information on our management of our NPAs, see “Selected Statistical Information” and

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 101 and

122.

Recovery strategies adopted by our Bank

Our Bank reviews fresh NPA accounts on the day of the slippage and ascertains the reasons. Our branches are

advised to explore the possibility of closure of long-pending NPA accounts through a one-time settlement, within

the corporate compromise policy guidelines. We have appointed a separate entity as a recovery agent to expedite

recoveries in accordance with the SARFAESI Act, 2002. We also conduct region wise review meetings on a

monthly basis to review all NPA accounts and suitable directions are given to them for speedy resolution of

recovery.

Information Technology

We have adopted modern technology towards automation and enhanced customer experience by implementing

large scale technological reforms for long term sustainability. The objective of our IT strategy is to streamline the

transaction lifecycle, from sourcing to processing to servicing.

We have introduced our mobile banking app “LVB Mobile” in the major operating systems and have commenced

the project for “Loan Originating System” to drive operational efficiency as well as focus on customer needs.

Objective of our Loan Originating System is to transform the whole loan origination process in order to achieve

the objective of eliminating delays, errors, costs of paper and manual processes. Additionally, our Bank has

introduced “Welcome kit” to facilitate the customer to commence using our services as soon as the savings account

is opened and to reduce turn-around time for on-boarding customers.

We have received a number of awards in recent years for our innovations, such as the “CIO100” from M/s. IDG

Media Private limited, for the implementation of private cloud which has successfully reduced the time for

creating the necessary infrastructure to host the application for meeting business needs, and “Excellence in

Banking Technology for Managing IT Infrastructure among small banks” from Institute of Development and

Research in Banking Technology, Hyderabad for the Fiscal 2015.

Human Resources

We place importance in developing our human resources. For financial year ended March 31, 2014, March 31,

2015 and March 31, 2016, the total number of employees were 3,292, 3,459 and 3,565 respectively. As on

September 30, 2016, we had 3,929 employees, of whom 1,521 employees were professionals in business

100

management, accountancy, engineering, law, computer science or economics. As of March 31, 2014, March 31,

2015 and March 31, 2016, business per employee (i.e. the sum of advances and deposits divided by the number

of employees) amounted to ` 81.54 million, ` 94.97 million and ` 109.91 million, respectively. We intend to

conduct online tests to educate our employees about various products and offer them incentives to market CASA

products.

Competition

We face strong competition in all our principal lines of business from other commercial banks and other financial

institutions in India. Our primary competitors are government-controlled public sector banks, major private sector

banks, foreign banks with operations in India and, for certain products, non-banking financial institutions. Our

competition with other commercial banks and financial institutions primarily focuses on the variety, pricing and

quality of products and services, convenience of banking facilities, reach of distribution network and brand

recognition, as well as information technology capabilities. The extensive geographic reach of many of these

institutions enables product delivery in remote parts of the country.

Properties

Our registered office is located at Salem Road, Kathaparai, P.O. Karur – 639006, Tamil Nadu and the corporate

office is located LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600032, Tamil Nadu. As of September

30, 2016, 15 of our branches are situated on properties owned by our Bank and 445 branches are under lease. Our

ATMs are primarily located on leased premises.

Intellectual Property

We utilise a number of different forms of intellectual property in our business including our “Lakshmi Vilas”

brand and the names of the various products we provide to our customers.

101

SELECTED STATISTICAL INFORMATION

The following unaudited information should be read together with our financial statements included in this Preliminary Placement Document and the section “Management’s Discussion

and Analysis of Financial Condition and Results of Operations”. Our financial statements have been prepared in accordance with Indian GAAP. Footnotes appear at the end of each

related section of tables. Certain information included in this section has been derived from the periodic returns filed with the RBI which are based on our books of account and

underlying records

Average Balance Sheet

The table below present the average balances for interest-earning assets and interest-bearing liabilities together with the related interest revenue and expense amounts, resulting

in the presentation of the average yields and cost for each period. The average balance is the average of fortnightly balances outstanding, which we are reporting to RBI on

each reporting Friday. The average yield on average interest-earning assets is the ratio of interest revenue to average interest-earning assets (except that investments include

equity investments and interest revenue with respect to investments including dividends on such equity investments). The average cost on interest-bearing liabilities is the ratio

of interest expense to average interest-bearing liabilities. The average balances of advances include NPAs.

(` in million, except percentages) Year ended March 31 2014 2015 2016

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Interest earning assets:

Advances 120,512.07 15,916.12 13.21% 133,886.52 17,088.97 12.76% 166,921.17 20,382.70 12.21%

Investments 46,588.52 3,789.92 8.13% 58,542.87 4,764.31 8.14% 62,098.71 5,194.00 8.36%

Others 891.41 1,286.05 717.17

Total interest earning assets 167,992.00 19,706.04 193,715.44 21,853.28 229,737.05 25,576.70

Non-interest earning assets:

Cash & Bank balance 9,138.86 10,289.99 11,506.30

Fixed assets 1,899.70 2,110.19 2,588.03

Other assets 9,111.56 11,261.37 14,442.73

Total non- interest earning assets 20,150.12 23,661.55 28,537.06

Total assets 188,142.12 217,376.99 258,274.11

Interest-bearing liabilities:

Deposits 163,744.49 14,314.38 8.74% 189,616.41 16,263.73 8.58% 224,427.92 18,332.92 8.17%

Borrowings 5,139.20 665.02 12.94% 4,924.11 615.04 12.49% 6,596.18 897.01 13.60%

Total interest bearing liabilities 168,883.69 14,979.40 194,540.52 16,878.77 231,024.10 19,229.93

Non-interest bearing liabilities:

102

Year ended March 31 2014 2015 2016

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Capital and reserves 10,914.34 13,668.47 16,508.72

Other liabilities 8,344.09 9,168.01 10,741.29

Total non-interest bearing liabilities 19,258.43 - 22,836.48 - 27,250.01 -

Total liabilities 188,142.12 217,376.99 258,274.11

(` in million, except percentages)

Six months ended September 30, 2015 Six months ended September 30, 2016

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Average

Balance

Interest

Income /

Expense

Average

Yield / Cost

(%)

Interest-earning assets:

Advances 159,995.10 9,867.50 12.33% 195,861.99 11,233.01 11.47%

Investments 60,826.36 2,576.64 8.47% 65,530.93 2,562.13 7.82%

Others 651.53 1,016.71

Total interest earning assets 221,472.99 12,444.14 262,409.62 13,795.14

Non-interest earning assets:

Cash & Bank Balance 11,092.38 13,253.83

Fixed assets 2,531.30 3,552.97

Other assets 13,588.64 15,920.68

Total non-interest earning assets 27,212.32 32,727.48

Total assets 248,685.31 - 295,137.11

Interest-bearing liabilities:

Deposits 216,198.50 8,992.16 8.32% 256,986.79 9,743.79 7.58%

Borrowings 5,865.69 434.97 14.83% 8,065.20 454.52 11.27%

Total interest bearing liabilities 222,064.19 9,427.12 265,051.99 10,198.31

Non-interest bearing liabilities:

Capital and reserves 16,252.66 18,267.74

Other liabilities 10,368.46 11,817.38

Total non-interest bearing liabilities 26,621.12 - 30,085.12

Total liabilities 248,685.31 - 295,137.11

103

Financial Ratios and other Financial Information

Key Accounting Ratios

For the Period/year ended March 31, 2014 March 31, 2015 March 31, 2016 Six months ended

September 30, 2016

Earnings per Share (EPS) (`) 6.11 9.16 10.05 6.99

Cash Earnings per Share (`) 8.53 8.25 12.15 8.14

Book Value per Share/ Net Asset value per share (`) 100.16 82.48 88.7 95.7

Return on Net worth (%) 6.61 12.04 13.3 8.44

OTHER RATIOS

Net NPA to Net Advances Ratio (%) 3.44 1.85 1.18 1.87

Interest Income/ Working Funds (%) 10.46 10.16 9.89 9.38

Non-Interest Income/ Working Funds (%) 1.15 1.30% 1.17 1.50

Return on Average Assets (%) 0.32 0.61% 0.69% 0.85

Operating Expenses/ Average Assets (%) 2.10% 2.05% 2.10% 2.04

Provision / Average Asset (%) 1.32% 1.09% 0.88% 1.08

Provision Coverage Ratio (%) 53.16 60.84% 68.55% 59.87

Return on equity (%) 6.17% 10.78% 11.74% 15.17

Capital Adequacy Ratio (%) (Basel-III) 10.90 11.34% 10.67% 10.10

Tier I (%) 7.87 9.33% 8.69% 8.21

Tier II (%) 3.03 2.01% 1.98% 1.89

Credit/ Deposit Ratio (%) (net) 69.40 75.18% 77.93% 75.91

Operating Profit/ Average Working Funds (%) 1.63 1.71% 1.58% 1.93

Cost to Income Ratio (%) 55.19 54.56% 57.14% 51.44

Yield on Advances (%) 13.21 12.76% 12.21% 11.47

Yield on Investments (%) 7.98 8.55% 8.31% 7.82%

Cost of Deposits (%) 8.74 8.58% 8.17% 7.58

Business per Employee (` in million)* 81.54 94.97 109.91 103.80

Gross Profit per Employee (` in million)* 0.80 0.94 1.02 0.65

Net Profit per Employee (` in million)* 0.16 0.34 0.45 0.28

104

For the Period/year ended March 31, 2014 March 31, 2015 March 31, 2016 Six months ended

September 30, 2016

Business Per Branch (` in million) 875.64 961.93 983.69 1,073.32

Profit Per Branch (` in million) 1.65 3.31 3.92 2.95

* For the purpose of calculation, employee includes sales executives.

Definitions of Key Ratios:

Earnings per Share (EPS) (`) Profit After Tax/No. of Equity Shares

Cash Earnings per Share (`) (Profit After Tax + Depreciation)/ No. of Equity Shares

Cost to Income Ratio Operating Costs / Net Interest Income

Book Value per Share/ Net Asset value per share (`) Networth at year end/ No. of Equity Shares

Return on Net worth (%) Net Profit/ Average Networth

Net NPA to Net Advances Ratio (%) Net NPAs/ Net Advances

Interest Income/ Working Funds (%) Interest Income/ Average Working Funds (Total Average of monthly total assets as per Form X)

Non-Interest Income/ Working Funds (%) Non-Interest Income/ Average Working Funds (Total Average of monthly total assets as per

Form X)

Return on Assets (%) Net Profit/ Average Total Assets

Return on equity (%) Net Income/ Shareholders’ Equity

Business per Employee (`in million) (Deposit + Advances)/ No. of Employees

Net Profit per Employee (`in million) Net Profit/No. of Employees

Capital Adequacy Ratio (%)

Tier I Tier I Capital/ Risk Weighted Assets

Tier II Tier II Capital/ Risk Weighted Assets

State Wise Distribution of Branches

Geographical distribution of the branches of the Bank for the period mentioned under:

March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

State/Union

Territory

No. of

Branches

No. of ECs % share of

Total

No. of

Branches

No. of

extension

counters

% share of

total

No. of

Branches

No. of

ECs

% share

of Total

No. of

Branches

No. of

ECs

% share

of Total

Tamil Nadu 221 4 61.15% 234 4 58.48% 257 4 55.89% 257 4 55.89%

Andhra Pradesh 52 2 14.67% 40 2 10.32% 48 2 10.71% 48 2 10.71%

Karnataka 36 1 10.05% 38 1 9.58% 47 1 10.28% 47 1 10.28%

105

Kerala 8 0 2.17% 9 0 2.21% 12 0 2.57% 12 0 2.57%

Telangana 0 0 0.00% 23 - 0.00% 29 - 0.00% 29 - 0.00%

Puducherry 3 0 0.82% 3 0 0.74% 4 0 0.86% 4 0 0.86%

Total Southern

India 320 7 88.86% 347 7 86.98% 397 7 86.51% 397 7 86.51%

Other States

Maharashtra 13 0 3.53% 15 0 3.69% 19 0 4.07% 19 0 4.07%

Gujarat 10 0 2.72% 10 0 2.46% 12 0 2.57% 12 0 2.57%

Delhi 5 0 1.36% 6 0 1.47% 8 0 1.71% 8 0 1.71%

Haryana 3 0 0.82% 4 0 0.98% 4 0 0.86% 4 0 0.86%

Uttar Pradesh 2 0 0.54% 2 0 0.49% 2 0 0.43% 2 0 0.43%

West Bengal 3 0 0.82% 3 0 0.74% 3 0 0.64% 3 0 0.64%

Chhattisgarh 1 0 0.27% 3 0 0.74% 4 0 0.86% 4 0 0.86%

Jharkhand 1 0 0.27% 2 0 0.49% 2 0 0.43% 2 0 0.43%

Madhya Pradesh 1 0 0.27% 4 0 0.98% 4 0 0.86% 4 0 0.86%

Orissa 1 0 0.27% 2 0 0.49% 3 0 0.64% 3 0 0.64%

Rajasthan 1 0 0.27% 2 0 0.49% 2 0 0.43% 2 0 0.43%

Total Others 41 0 11.14% 53 0 13.02% 63 0 13.49% 63 0 13.49%

Grand Total 361 7 100.00% 400 7 100.00% 460 7 100.00% 460 7 100.00%

Demographic Network of Branches

Demographic network of branches for the last four quarters, i.e. quarters ended December 31, 2015, March 31, 2016, June 30, 2016 and September 30, 2016 are stated as

under:

Type No. of Branches

December 31, 2015 March 31, 2016 June 30, 2016 September 30, 2016

Metro 70 78 78 78

Rural 121 107 107 107

Semi Urban 143 148 148 148

Urban 103 127 127 127

Total 437 460 460 460

Demographic Break up of Customers

106

Division-wise Break up of Customers

The details of the increases in the number of our customers over the last three Fiscals and the six months ended September 30, 2016 are as follows:

Particulars Fiscal 2014 Fiscal 2015 Fiscal 2016 Six months ended September 30,

2016

Retail Banking 43,990 36,445 38,233 137,256

SME / MSME Banking 25,043 19,131 18,428 17,949

Rural Banking 135,422 136,258 135,354 4,330

Mid-Commercial Banking 2,752 2,643 2,352 36,241

Whole sale Banking 512 509 630 640

Total Gross Advances 130,377.01 165,128.45 198,189.29 202,533.23

State Wise Distribution of Business (Deposit + Advances)

The state wise distribution of business (deposit + advances) is as given below:

(` in million)

Particulars March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Tamil Nadu 158,255.17 186,265.81 219,997.81 222,631.62

Karnataka 42,777.65 57,591.67 65,919.85 73,106.90

Andhra Pradesh 34,373.99 22,001.99 26,171.93 29,237.38

Telangana - 20,421.91 24,868.60 24,533.94

Kerala 6,620.57 8,214.10 14,467.01 15,893.33

Puducherry 2,157.89 2,125.20 2,262.57 2,495.44

Total Southern India 244,185.27 296,620.68 353,687.77 367,898.61

Other States

Maharashtra 4,545.01 6,747.05 7,654.70 8,016.25

Delhi 3,507.74 2,823.58 4,671.46 5,113.08

Gujarat 1,756.23 1,687.55 1,335.78 1,614.15

West Bengal 44,176.40 52,936.06 58,375.69 57,708.34

Orissa 3,054.75 1,666.65 1,671.61 1,917.21

Rajasthan 3,103.44 5,959.25 5,318.90 4,537.86

Madhya Pradesh 271.47 355.99 504.12 570.66

Haryana 952.60 1,498.19 1,448.07 1,542.08

107


Uttar Pradesh 525.41 633.72 808.37 861.80

Jharkhand 337.67 1,267.32 636.83 727.95

Chhattisgarh 9,689.86 12,574.53 16,385.61 18,826.64

Total Others 71,920.58 88,149.89 98,811.14 101,436.02

Grand Total Business 316,105.85 384,770.57 452,498.91 469,334.63

Deposits

State wise distribution of deposits is as given below:

(` in million)


Tamil Nadu 90,847.93 108,431.48 129,313.83 134,568.51

Karnataka 28,916.07 36,215.01 35,483.78 39,197.35

Andhra Pradesh 18,625.19 11,246.83 13,126.24 13,947.31

Telangana - 10,202.72 11,288.12 11,966.74

Kerala 5,397.32 6,257.23 10,659.44 13,300.98

Puducherry 1,281.07 1,328.86 1,437.23 1,606.38


Other States

Maharashtra 3,015.92 3,923.04 4,192.45 4,081.35

Delhi 1,933.88 1,390.05 1,759.57 1,661.48

Gujarat 1,687.41 1,385.83 953.11 1,192.01

West Bengal 21,375.69 23,469.91 31,083.98 29,830.20

Orissa 2,758.41 1,412.29 1,237.59 1,033.86

Rajasthan 3,050.82 5,891.98 5,219.89 4,433.26

Madhya Pradesh 218.79 258.93 316.71 325.47

Haryana 819.04 1,367.29 1,123.72 1,126.62

Uttar Pradesh 487.61 567.37 646.31 702.35

Jharkhand 326.20 1,201.22 449.80 468.62

Chhattisgarh 4,987.47 5,092.10 6,017.85 7,358.91

Total Others 40,661.24 45,960.01 53,000.98 52,214.13

Grand Total Deposits 185,728.82 219,642.14 254,309.62 266,801.40

108

Break-up of Deposits

Break-up of Deposits of the Bank for the last three Fiscals and six months ended September 30, 2016, is as under.

(` in million)


Demand Deposits (Including Demand Deposit from Banks) 9,125.12 15,098.60 16,364.32 15,207.84

Saving Bank Deposits 17,297.33 21,525.37 27,790.64 30,985.20

Term Deposits 159,306.37 183,018.16 210,154.36 220,608.37

Bulk (accepted under DRI – Other than Card Rate) 23,443.58 38,716.00 45,755.36 39,043.07

Retail 135,862.79 144,302.16 164,399.00 181,565.30

As of March 31, 2014, the demand deposits, savings deposits and term deposits were 4.91%, 9.31% and 85.77% of the total deposits mix. As of September 30, 2016, the

demand deposits, savings deposits and term deposits were 5.70%, 11.61% and 82.69% of the total deposits mix.

Average Cost of Deposit

Details of average cost of deposits for last three Fiscals and six months ended September 30, 2016, is as under:

(` in million)

For the period/year ended March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Saving Bank Deposits 4.02% 4.42% 4.65% 5.13%

Term Deposits 9.71% 9.50% 8.37% 8.32%

Maturity Profile of Deposits

Maturity profile of deposits at the end of last three Fiscals is as under:

(` in million)

Year ended March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Amount % Amount % Amount % Amount %

Upto 1 year 103,242.34 55.19 113,254.01 51.56 114,279.38 44.94 119,537.41 44.80

1 year to 3 years 49,787.43 26.81 61,724.82 28.10 82,527.26 32.45 91,933.44 34.46

3 years to 5 years 9,809.75 5.28 12,448.67 5.67 17,402.78 6.84 12,618.24 4.73

Over 5 years 22,889.30 12.31 32,214.63 14.67 40,100.20 15.77 42,712.32 16.01

Total 185,728.82 100.00 219,642.12 100.00 254,309.62 100.00 266,801.41 100.00

Term Deposits

109

Category wise break-up of term deposits as on March 31, 2016 and September 30, 2016 is as under:

(` in million)

CASA Details

CASA Breakup into Current Account & Savings Bank Account is stated as under:

(` in million, unless otherwise specified)


Savings 17,297.33 21,525.37 27,790.64 30,985.20

Current 9,111.63 15,093.00 16,364.48 15,207.84

Total CASA 26,408.96 36,618.37 44,155.12 46,193.04

CASA as a percentage of total (%) 14.22% 16.67% 17.36% 17.31%

Advances

Gross & Net Advances as on the end of the last three Fiscals and as at September 30, 2016, is as given under:

March 31, 2016 September 30, 2016

Maturity Retail Wholesale Total Retail Wholesale Total

1-14 days 4,195.71 7,508.83 11,704.54 1-14 days 4,221.71 11,761.16 15,982.86

15-28 days 4,493.88 3,688.99 8,182.87 15-30 days 4,728.70 3,820.50 8,549.20

29 days to 3

months

19,507.92 19,521.75 39,029.67 31 days & upto 2

months

8,713.13 5,104.93 13,818.05

More than 2 months

& upto 3 months

9,018.74 11,129.57 20,148.32

3 – 6

months

23,091.42 13,931.02 37,022.44 3 – 6 months 18,632.86 13,938.17 32,571.03

6 – 12

months

38,186.59 26,085.52 64,272.11 6 – 12 months 47,438.79 24,767.16 72,205.96

1 – 3 years 32,530.87 8,350.84 40,881.72 1 – 3 years 36,354.00 10,753.68 47,107.68

3 – 5 years 4,692.21 2,055.64 6,747.86 3 – 5 years 5,384.70 2,252.90 7,637.60

Over 5

years

1,931.29 381.86 2,313.15 Over 5 years 2,106.04 481.63 2,587.67

Total 128,629.90 81,524.46 210,154.36 Total 136,598.67 84,009.69 220,608.37

110

(` in million)

As at March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Gross Advances 130,377.01 165,128.45 198,189.29 202,533.23

Net Advances 128,891.90 163,520.19 196,437.39 200,691.64

Total net advances at the end of the last three Fiscals and as at September 30, 2016, is as given under:

(` in million)

Particulars As at March 31, 2014 As at March 31, 2015 As at March 31, 2016 As at September 30, 2016

Secured Advances 121,283.01 155,820.09 188,785.99 194,768.53

Unsecured Advances 7,608.89 7,700.10 7,651.40 5,923.11

Total net Advances 128,891.90 163,520.19 196,437.39 200,691.64

State-wise distribution of advances:

State-wise distribution of advances as on the end of the last three Fiscals and as at September 30, 2016:

(` in million)


Tamil Nadu 67,407.24 77,834.33 90,683.98 88,063.11

Karnataka 13,861.58 21,376.66 30,436.07 33,909.55

Andhra Pradesh 15,748.80 10,755.16 13,045.69 15,290.07

Telangana - 10,219.19 13,580.48 12,567.20

Kerala 1,223.25 1,956.87 3,807.57 2,592.35

Puducherry 876.82 796.34 825.34 889.06


Other States

Maharashtra 1,529.09 2,824.01 3,462.25 3,934.90

Delhi 1,573.86 1,433.53 2,911.89 3,451.60

Gujarat 68.82 301.72 382.67 422.14

West Bengal 22,800.71 29,466.15 27,291.71 27,878.14

Orissa 296.34 254.36 434.02 883.35

Rajasthan 52.62 67.27 99.01 104.60

Madhya Pradesh 52.68 97.06 187.41 245.19

Haryana 133.56 130.90 324.35 415.46

Uttar Pradesh 37.80 66.35 162.06 159.45

Jharkhand 11.47 66.10 187.03 259.33

111


Chhattisgarh 4,702.39 7,482.43 10,367.76 11,467.73

Total Others 31,259.34 42,189.88 45,810.16 49,221.89

Grand Total Deposits 130,377.03 165,128.43 198,189.29 202,533.23

Break-up of Advances:

A. Details of Advances

(` in million)

Particulars Fiscal 2014 Fiscal 2015 Fiscal 2016 Six months ended September 30,

2016

Retail Banking 16,270.20 19,773.00 26,395.20 20,659

SME / MSME Banking 26,950.10 34,354.40 41,705.90 40,198

Rural Banking 24,159.60 24,125.60 30,655.90 35,563

Mid-Commercial Banking 11,391.70 13,002.50 14,180.30 15,609

Whole sale Banking 51,605.41 73,872.95 85,251.99 90,504

Total Gross Advances 130,377.01 165,128.45 198,189.29 202,533

B. Breakup of advances into Term loans and Working Capital advances

(` in million)

As at

March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Term Loans 38,511.14 55,795.86 72,072.02 76,604

Working Capital 90,380.76 107,724.33 124,365.37 124,087

Total Advances 128,891.90 163,520.19 196,437.39 200,691

C. Total Advances Breakup - Industry-wise –

Si No Industry Fund Based Non -Fund Based % Outstanding

March2016

% Outstanding

September 2016

% Outstanding

March2016

% Outstanding

September2016

1 All Engineering 2.03% 2.44% 9.09% 7.48%

2 Basic Metal and Metal Products 9.98% 12.32% 14.91% 13.04%

3 Beverages 2.31% 2.78% 0.04% 2.50%

4 Cement and Cement Products 1.77% 1.75% 0.00% 0.00%

112

Si No Industry Fund Based Non -Fund Based % Outstanding

March2016

% Outstanding

September 2016

% Outstanding

March2016

% Outstanding

September2016

5 Chemical and Chemical Products 2.82% 2.18% 10.88% 10.71%

6 Construction 0.12% 0.12% 0.62% 0.81%

7 Food Processing 2.79% 2.88% 5.37% 4.58%

8 Gems and Jewellery 1.16% 1.30% 0.60% 0.23%

9 Glass & Glassware 0.30% 0.29% 0.00% 0.00%

10 Roads, Ports Construction 3.90% 4.62% 16.85% 14.28%

11 Other Infrastructure 2.69% 3.62% 18.48% 19.83%

12 Tech and Vocational Education 2.26% 2.02% 0.00% 0.00%

13 Electricity, Hydro Electric, Co 3.58% 3.42% 1.83% 0.52%

14 Power - construction/erection 0.69% 0.72% 0.00% 0.12%

15 Higher Education 0.68% 0.10% 0.00% 0.00%

16 Primary and Secondary Educational 0.18% 0.16% 0.36% 0.00%

17 Distrib Solar, Wind Energy 1.63% 2.43% 0.00% 0.00%

18 Leather and Leather products 0.06% 0.05% 0.00% 0.00%

19 Mining and Quarrying 2.22% 2.18% 0.11% 0.28%

20 Others 12.20% 11.28% 4.02% 6.86%

21 Other Retail Trade 26.12% 22.59% 2.04% 1.84%

22 Hotels-Motels-Resorts 0.99% 1.47% 0.00% 0.00%

23 Transport Agencies 3.57% 3.41% 0.00% 0.00%

24 Sea, Coastal Water Transport 0.00% 0.00% 0.00% 0.00%

25 Extraction of Crude Petroleum 0.62% 0.59% 0.00% 0.00%

26 Basic Telecom Services 0.00% 0.00% 0.00% 0.00%

27 R and D Natural Science. Eng. 0.00% 0.00% 0.00% 0.00%

28 Ceramic Ware Mfr 0.30% 0.26% 0.08% 0.08%

29 NBFCs-General Purposes Loans 0.05% 0.33% 0.00% 0.00%

30 Paper and Paper Products 1.19% 1.04% 0.46% 0.34%

31 Petroleum (non-infra), Coal Products (non-mining) and Nuclear Fuels 0.12% 0.11% 0.19% 0.35%

32 Rubber, Plastic and their Products 0.78% 1.70% 0.67% 0.49%

33 Textiles 10.52% 10.01% 5.56% 8.33%

34 Vehicles, Vehicle Parts and Transport Equipment 0.61% 0.61% 0.01% 0.01%

35 Wood and Wood Products 1.77% 1.23% 7.80% 7.32%

100.00% 100.00% 100.00% 100.00%

Exposure to the Top 10 borrower companies as of six months ended September 30, 2016:

113

Account Name Industry of the Borrower Outstanding

amount of the

Borrower (` In

Mn)

Outstanding

amount of the

Industry (` In Mn)

Outstanding to

the Borrower as a

% of Gross

advances

Outstanding to the

Borrower as a % of the

Outstanding amount of the

Industry

Asset

Quality

Borrower 1 Real Estate Activities 2,371.30 10,281.18 1.20% 5.19% Standard

Borrower 2 Roads, Ports Construction 1,204.53 4,345.16 0.61% 2.19% Standard

Borrower 3 Roads, Ports Construction 1,150.94 4,345.16 0.58% 2.19% Standard

Borrower 4 General Non-Residential Construction 1,569.01 2,797.64 0.79% 1.41% Standard

Borrower 5 Transport Agencies 1,500.36 3,207.94 0.76% 1.62% Standard

Borrower 6 Electricity, Hydro Electric Company 1,350.00 3,214.45 0.68% 1.62% Standard

Borrower 7 Cement-Lime-Plaster Manufacturer 1,363.36 1,450.00 0.69% 0.73% Standard

Borrower 8 Other Electric Equipment Manufacturer 842.58 1,009.42 0.43% 0.51% Standard

Borrower 9 Electricity, Hydro Electric Company 822.25 3,214.45 0.41% 1.62% Standard

Borrower 10 Wholesale of metals, ores 1,251.82 1,613.51 0.63% 0.81% Standard

As of September 30, 2016, the total exposure to the top 20 borrowers based on fund-based exposure is 13.00% and total exposure to the top 50 borrowers based on fund-based

exposure is 23.00%.

Export Credit

The following table provides a summary of the total export credit for the last three Fiscals and the six months ended September 30, 2016:

Year Ended March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Export Credit (` in Mn) 2,503.61 2,750.20 2,924.30 2,536.70

% of the Export Credit to Adjusted Net Bank Credit 2.10% 2.10% 1.77% 1.44%

Interest Coverage Ratio

(` in million)

Particulars As of March 31,

2014 2015 2016

(A) Earnings before taxes (EBT) 404.05 1,882.06 2,302.36

(B) Depreciation on Bank’s property 235.83 155.45 377.63

(C) Interest expended 14,979.40 16,878.77 19,229.93

(D) Total (A) + (B) + (C) 15,619.28 18,916.28 21,909.92

Interest coverage ratio = (D) / (C) 104.27 112.07 113.94

Asset Liability Management

The following table sets forth our asset-liability gap position as of September 30, 2016, which was the last reporting Friday in the six months ended September 30, 2016:

(` in millions)

114

Out Flows

Next Day 2 days to 7

days

8 days to 14

days 15-30 Days

31 days &

upto 2

months

More than 2

months &

upto 3

months

Over 3

months &

up to 6

months

Over 6

months &

up to 1 year

Over 1 year

& up to 3

years

Over 3 years

& up to 5

years

Over 5 years Total

OUTFLOWS

Capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1,794.62 1,794.62

Reserves &

Surplus 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 17,096.63 17,096.63

Deposits 2,902.03 7,855.84 9,427.85 6,091.62 9,593.28 12,297.36 2,1235.58 38,034.77 91,933.44 12,618.24 42,712.32 254,702.32

Interbank

deposits 0.00 49.00 0.00 549.00 106.20 3,471.15 1,490.00 6,433.74 0.00 0.00 0.00 12,099.09

Borrowings 0.00 1,560.00 0.00 0.00 0.00 0.00 0.00 2,000.00 0.00 0.00 0.00 3,560.00

Other

Liabilities 1,022.17 136.31 102.59 180.91 415.77 415.77 1,195.51 0.00 8,838.47 53.55 2,948.18 15,309.24

Off Balance

Sheet 23.21 139.24 162.45 371.31 696.21 696.21 488.64 999.00 0.00 0.00 0.00 3,576.28

A. TOTAL

OUTFLOWS 3,947.41 9,740.39 9,692.89 7,192.84 10,811.46 16,880.49 24,409.73 47,467.50 100,771.91 12,671.79 64,551.75 308,138.17

IN FLOWS

Cash 3,093.69 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,093.69

Balances with

RBI 158.55 323.07 385.26 253.56 404.60 513.91 905.48 1,537.51 3,818.47 512.24 1,845.77 10,658.44

Balances with

other Banks 478.34 0.00 0.00 0.00 0.00 0.00 0.00 0.13 6.00 0.50 0.00 484.97

Investments 6,956.84 2,193.71 2,691.69 3,065.95 2,103.19 2,902.12 5,080.67 8,211.50 21,844.47 4,388.88 10,224.09 69,663.13

Advances 2,095.37 6,151.20 2,612.46 3,646.14 6,772.39 10,566.21 15,811.50 19,210.05 86,367.08 12,831.75 34,636.95 200,701.08

Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3,725.89 3,725.89

Other Assets 528.12 5,299.54 41.39 82.68 183.23 183.23 532.02 0.00 7,224.02 0.00 1,661.00 15,735.23

Off Balance

Sheet 0.00 0.00 0.00 0.00 0.00 0.00 600.00 2,276.28 700.00 0.00 0.00 3,576.28

B. TOTAL

INFLOWS 13,310.90 13,967.52 5,730.80 7,048.33 9,463.42 14,165.48 22,929.68 31,235.46 119,960.04 17,733.37 52,093.70 307,638.70

C = GAP(B-

A) 9,363.49 4,227.13 -3,962.09 -144.52 -1,348.05 -2,715.02 -1,480.06 -16,232.04 19,188.14 5,061.58 -12,458.04 -499.47

115

Priority Sector Lending

As stipulated by RBI, commercial banks in India are required to lend 40% of their adjusted net bank credit to specified sectors known as “priority sectors”, subject to certain

exemptions permitted by RBI from time to time. Priority sector advances include loans to agriculture, small-scale industry and services and loans to weaker section, housing

and education finance up to certain ceilings, lending for specific infrastructure projects and also investments in instruments issued by notified institutions. We are required to

comply with the priority sector lending requirements as of March 31 in each Fiscal. Any shortfall in the amount required to be lent to the agricultural sector may be required to

be deposited with government sponsored Indian developmental banks such as NABARD.

Details of sector-wise distribution of Gross Priority Sector advances for the last three Fiscals and the six months ended September 30, 2016 are given below:

(` in million)

Reporting date March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Total Priority Sector Advances 52,165.16 58,498.94 73,498.08 77,102.44

Total Agricultural Advances 24,619.98 24,571.77 30,861.46 33,774.58

Weaker Section Advances 17,307.07 17,127.69 17,720.16 19,293.80

Asset Classification of Performing and Non-Performing Assets

Recognition of Non-Performing Assets

Asset Classification of Performing and Non-Performing Assets for the last three Fiscals and six months ended September 30, 2016 is given below:

(` in million)

Classification of assets as on March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Standard Assets 124,912.37 160,582.26 194,276.80 197,072.16

Sub Standard Assets 3,290.52 1,287.88 2,138.21 2,975.45

Doubtful Assets 1 1,104.52 1,508.85 415.33 447.69

Doubtful Assets 2 975.19 960.04 672.96 519.46

Doubtful Assets 3 10.37 144.29 2.93 3.87

Loss Assets 84.05 645.13 683.06 1,514.60

Gross NPAs 5,464.65 4,546.20 3,912.50 5,461.08

Gross Advances 130,377.01 165,128.45 198,189.29 202,533.23

Policy for making provisions for non-performing assets

Substandard assets A general provision of 15% on total outstanding should be made without making any allowance for DICGC/ECGC guarantee cover and securities

available. The 'unsecured exposures' which are identified as 'sub-standard' would attract additional provision of 10%, i.e., a total of 25% on the

outstanding balance. However, unsecured exposures in respect of Infrastructure loan accounts classified as Sub-standard, in case of which certain

safeguards such as escrow accounts are available, it will attract an additional provision of 5% only i.e., a total of 20%.

116

Doubtful assets Doubtful-I — 100 % of the unsecured portion and 25 % of the secured portion

Doubtful-II — 100 % of the unsecured portion and 40 % of the secured portion

Doubtful-III — 100 % of the unsecured portion and 100 % of the secured portion

Loss assets 100 % to be provided or written-off.

Standard Assets provisions and Floating provisions

As of September 30, 2016 the Bank holds provision for standard assets of ` 737.50 million as required under RBI guidelines. As of the same date, the Bank holds nil floating

provision as per our Board approved policy.

Further, the Bank is also required, as per recent regulatory guidelines, to provide for likely losses on lending to borrowers who have unhedged foreign currency exposure in

their portfolio. Such provision is computed based on certain directions and computation methodology given in such guidelines. The provision so held by the Bank as of

September 30, 2016 amounted to ` 19.02 million.

Non-accrual Policy

In order to bring uniformity in accounting interest application in the NPA accounts, banks have been directed by the RBI to adhere to accounting procedure. As per the

accounting procedure, when an account turns into NPA, banks should reverse the interest already charged and not collected by debiting profit and loss account.

Thereafter, banks are permitted to apply applicable interest in the loan account, however the interest so accrued shall not be credited to the profit and loss account and instead

shall be taken to the interest suspense account. As and when recovery comes in the account, bank shall reverse proportionate amount from interest suspense account to the

credit of profit and loss account till the accrued interest get nullified.

Details of NPAs and GNPAs

(` in million, except as otherwise provided)

Particulars

As on March 31

2014 2015 2016 Six months ended

September 30, 2016

Gross NPA at the beginning of the year 4,599.08 5,464.60 4,546.20 3,912.50

Addition during the year 6,686.88 2,563.00 1,969.00 2,357.40

Reduction during the year 5,821.32 3,481.40 2,602.70 808.82

Up gradation 1,880.06 1,144.80 212.00 151.95

Cash Recovery 1,180.20 1,791.80 1,698.10 146.98

Compromise / Write-off 2,314.61 149.20 688.80 509.89

Sale of Assets/purchases of non-banking assets 446.45 395.60 3.80 0.00

Gross NPA at the end of the year 5,464.65 4,546.20 3,912.50 5,461.08

Provision 532.31 1,163.51 1,134.68 1,233.11

Interest Suspense 0.00 5.58 13.01 13.29

117

Particulars

As on March 31

2014 2015 2016 Six months ended

September 30, 2016

DICGC & ECGC Balance 122.96 142.49 214.10 214.00

Net NPA at the end of the year 4,433.92 3,024.85 2,316.41 3,760.67

Gross Advances 130,377.01 165,128.45 198,189.29 202,533.20

Gross NPAs 5,464.65 4,546.20 3,912.50 5,461.08

Gross NPAs to Gross Advances (%) 4.19% 2.75% 1.97% 2.70%

Net Advances 128,891.90 163,520.19 196,437.39 200,691.64

Net NPAs 4,433.92 3,024.85 2,316.41 3,760.67

Net NPA to Net Advances (%) 3.44% 1.85% 1.18% 1.87%

The Recovery/ ARC sale as of fiscal year ended March 31, 2015, March 31, 2016 and six months ended September 30, 2016 is ` 2,187.00 million, ` 1,702.00 million and ` 146.98 million, respectively.

Gross NPA (GNPA) as a % of Total Advances

Particulars Fiscal 2014 Fiscal 2015 Fiscal 2016 Six months ended

September 30, 2016

Retail GNPA as % of Retail advances 1.27% 0.97% 0.59% 1.03%

SME / MSME GNPA as % of SME / MSME advances 4.08% 2.30% 1.75% 2.84%

Wholesale GNPA as % of Wholesale advances 7.46% 4.22% 2.65% 3.62%

Rural GNPA as % of Rural advances 0.53% 0.51% 0.47% 0.34%

Mid-Commercial GNPA as % of Mid-Commercial advances 1.57% 2.49% 4.39% 4.55%

Sector / Industry analysis of Gross Non-Performing Assets

An industry-wise analysis of gross Non-Performing Assets for six months ended September 30, 2016 is shown below:

(` in million)

INDUSTRY NAME September 30, 2016

Amount %

Food Processing 1,134.67 20.78%

Wood and Wood Products 751.37 13.76%

Basic Metal and Metal Products 574.48 10.52%

Mining and Quarrying 448.97 8.22%

Chemicals and Chemical Products (Dyes, Paints, etc.) 280.18 5.13%

118

INDUSTRY NAME September 30, 2016

Textiles 203.25 3.72%

Other Industries 108.28 1.98%

Gems and Jewellery 76.16 1.39%

Infrastructure 65.78 1.20%

All Engineering 45.15 0.83%

Other Industries 1,772.80 32.46

Total gross NPA 5,461.08 100.00%

Fresh Slippages:

(` in million)

Particulars Fiscal 2014 Fiscal 2015 Fiscal 2016 Six months ended

September 2016

No of Accounts 2,466 2,701 2,142 1,229

Amount 6,686.88 2,563.02 1,968.99 2,357.40

Restructuring of Debt

In respect of restructured or rescheduled accounts, we make provisions for the erosion in fair value of restructured advances in accordance with the general framework of the

restructuring of advances as per the Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning Pertaining to Advances dated July 1,

2015 issued by the RBI. The erosion in fair value of advances is computed as the difference between the fair values before and after restructuring.

The fair value before restructuring is computed as the present value of cash flows representing the interest at the existing rate charged on the advance before restructuring and

the principal, discounted at a rate equal to our BPLR or base rate, whichever is applicable to the borrower, as of the date of restructuring plus the appropriate term premium and

credit risk premium for the borrower category on the date of the restructuring.

Restructured Assets

The RBI has issued prudential guidelines on the restructuring of assets by banks. The guidelines essentially deal with the norms/conditions, the fulfilment of which is required

to maintain the category of the restructured account as a ‘standard asset’. Similar guidelines apply to assets categorized as substandard. Substandard accounts which have been

subjected to restructuring, whether in respect of principal instalment or interest amount, are eligible to be upgraded to the standard category only after the specified period, i.e.

a period of one year after the date when the first payment of interest or principal, whichever is earlier, falls due, subject to satisfactory performance during the period. If there

is a failure to meet payment or other terms of a restructured loan, it may be considered a failed restructuring, in which case it is no longer classified as a restructured loan. We

restructure assets on a case-by-case basis after our management has determined that restructuring is the best means of maximizing realization of the asset.

Details of Restructured Book:

(` in million)

119


Total Restructured Book 8,848.00 13,146.90 9,912.40 11,221.12

Industry wise restructured book:

(` in million)

Name of the Industry September 30, 2016

1 Iron 2,903.90

2 Infrastructure 1,855.45

3 Metals & Minerals 995.83

4 Power 822.25

5 Communication 800.02

6 Engineering & Contractor 604.32

7 Food processing 521.53

8 Shipyard 454.10

9 Aluminium 448.74

10 Pharma 348.95

11 Others 1,466.03

Total 11,221.12

As of September 30, 2016, the concentration of restructured asset between industries such as iron, infrastructure, metals and minerals, power, communication and others are

26%, 17%, 9%, 7%, 7% and 34% respectively.

Restructured Standard Assets:

(` in million)

Particulars Fiscal 2015 Fiscal 2016 Six months ended September 30, 2016

Retail Banking 383.48 350.02 326.22

SME / MSME Banking 255.48 265.16 272.74

Rural Banking 0 0 0

Mid-Commercial Banking 460.95 0 0

Whole sale Banking 10,233.44 6,877.85 8,133.98

Total Gross Advances 165,128.45 198,189.29 202,533.23

Restructured Standard Assets top 20 borrowers:

(` in million)

120

Sr.

No.

Borrower September 30, 2016 % of Total

1 Top 5 4,448.61 50.94

2 6 to 10 2,537.42 29.06

3 11 to 15 1,246.82 14.28

4 16 to 20 462.26 5.29

5 Others 37.55 0.43

Total 8,732.66 100.00

Restructured NPAs top 20 borrowers:

(` in million)

Sr.

No. Borrower September 30, 2016

% of Total

1 Top 5 1,793.14 72.05

2 6 to 10 590.71 23.74

3 11 to 15 103.98 4.18

4 16 to 20 0.43 0.02

5 Others 0.20 0.01

Total 2,488.46 100.00

Capital Adequacy Position of the Bank

The Capital Adequacy Ratio (“CAR”) of the Bank, as per Basel III, as on March 31, 2016 was 10.67% as against the RBI stipulation of 9.625%. CAR of the Bank, as per Basel

III, as on September 30, 2016 was 10.10% as against the RBI stipulation of 9.625%. Details of capital vis-à-vis risk weighted assets are as under:

(` in million, unless otherwise specified)

As on March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Capital Funds 12,115.19 15,675.29 19,253.95 19,652.00

Tier I Capital:

Paid up Equity Capital 975.61 1,791.67 1,794.62 1,794.62

Less: Investment in Subsidiary 0.00 - - 0.00

Reserves & Surplus (net of DTA/DTL) 7,769.65 11,099.90 13,890.37 14,824.30

Total Tier I Capital 8,745.26 12,891.57 15,684.99 15,967.11

Tier II Capital:

Revaluation Reserve 343.93 353.06 - -

General Provisions 615.00 678.66 874.96 739.08

Subordinated Debt 2,411.00 1,752.00 2,694.00 2,694.00

121

As on March 31, 2014 March 31, 2015 March 31, 2016 September 30, 2016

Total Tier II Capital 3,369.93 2,783.72 3,568.96 3,684.88

Total Capital Fund 12,115.19 15,675.29 19,253.95 19,652.00

Risk Weighted Assets 111,161.28 138,209.52 180,457.18 194,641.68

Capital Adequacy Ratio (%) 10.90% 11.34% 10.67% 10.10

122

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS

The following discussion and analysis of our financial condition is based on our audited financial statements as

at and for the years ended March 31, 2014, March 31, 2015 and March 31, 2016 including the schedules and

notes thereto and the reports thereon included in this Preliminary Placement Document (“Financial Statement”)

and our unaudited financial information as of and for the six months ended September 30, 2016. You should read

this discussion together with the sections titled “Selected Statistical Information”, “Business” and “Financial

Statements” on pages 101, 86 and 231. You should also read “Risk Factors” and “Forward Looking Statements”

on pages 40 and 12, both of which discuss a number of factors and contingencies that could affect our financial

condition, results of operations and cash flows.

Our Financial Statements included in this Preliminary Placement Document are prepared in accordance with

Indian GAAP, which differs in certain material respects from IFRS and U.S. GAAP. Accordingly, the degree to

which the Financial Statements included in this Preliminary Placement Document will provide meaningful

information to a prospective investor in countries other than India is entirely dependent on that reader’s level of

familiarity with Indian accounting processes.

All references to a particular financial year are to the 12 months ended March 31 of that year. All financial data

in this section are on a standalone basis as we do not and did not have any subsidiaries or associates during the

period under review.

Overview

































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Significant factors affecting our results of operations

A majority of our income comprises of interest earned on advances and bill discounting, income generated from

investments, interest income earned from balances maintained with the RBI and other inter-bank. Our major

expenses comprise interest expense on deposits and short-term borrowings and loans from banks and financial

institutions, operating expenses and provisions and contingencies.

The following is a discussion of certain factors that have had, and we expect will continue to have, a significant

effect on our financial results.

Interest rates and growth of net interest income

Our results of operations largely depend on our net interest income. Net interest income represents the excess of

interest earned from interest-earning assets (performing assets and investments) over the interest paid on interest-

bearing customer deposits and borrowings. Net interest income constituted 22.22%, 21.08%, 22.46% and 22.69%

of total income for Fiscals 2014, 2015 and 2016 and the six months ended September 30, 2016, respectively. Net

Interest income is dependent on the interest rates we charge on our interest-earning assets and that we pay on our

interest-bearing liabilities. Such interest rates are highly sensitive to many external factors beyond our control,

including growth rates in the economy, inflation, money supply, RBI’s monetary policies, deregulation of the

financial sector in India, domestic and international economic and political conditions and other factors.

Any decrease in the interest rates applicable to our assets, without a corresponding decrease in the interest rates

applicable to our liabilities, will result in a decline in our net interest income and may consequently reduce our

net interest margin. In the event of decreasing interest rates, our borrowers may not be willing to continue to pay

correspondingly higher interest rates on their borrowings and may choose to repay their loans if they are able to

switch to more competitively priced loans offered by other banks. Although in the past, we have passed on the

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increase in the interest rates linked to our interest bearing-liabilities to our borrowers, we cannot assure you that

we will continue to pass such increase in our costs to our borrowers. Moreover, changes in interest rates could

also adversely affect demand for our loan products.

Ability to increase non-interest income

Our ability to improve profitability will depend, among other factors, on our success in increasing fee income

from existing and new customers of our para-banking activities. Para-banking activities undertaken by us include

distribution of third party insurance products such as life insurance, general insurance and health insurance, money

transfer activities, mutual funds and portfolio management services, online trading services, depository participant

services, etc. For further details, please see “Business – Product Portfolio” on page 92. In order to provide such

services, we have entered into agreements with various third parties. Our increasingly diversified product and

service portfolio aid the improvement of the non-interest income generated by us.

Our other income (which includes income from commission, exchange and brokerage, profit on sale of

investments, profit on sale of land building and other assets, profit on exchange transactions, income by way of

dividend on companies in India etc.) constituted 9.31%, 11.37%, 10.60% and 13.77% of our total income for

Fiscals 2014, 2015 and 2016 and the six months ended September 30, 2016, respectively. We intend to continue

to introduce products to the market which will supplement our interest income and continue to improve cross-

selling efforts in order to enhance our non-interest income. To do so, we will need to continue to hire and train a

dedicated sales force and to create incentives for customers to purchase products from us thereby enabling us to

derive fee and commission-based income. However, the increasing sophistication of our customers, offerings of

similar and more diverse range of products and services by our competitors and changes in the regulatory

environment could adversely impact our ability to grow our non-interest income.

Capital adequacy and liquidity requirements

The RBI has issued guidelines for implementation of Basel III from April 1, 2013 in a phased manner wherein

Indian banks are required to improve the quality and consistency of their capital base, enhance risk coverage and

supplement the risk - based capital requirement with a leverage ratio. The RBI may increase the applicable risk

weightage for different classes of asset from time to time. Any incremental capital adequacy requirement may

impact our ability to grow our business. Implementation of Basel III in a phased manner or other capital adequacy

requirements imposed by RBI may result in incurrence of substantial compliance and monitoring costs by the

Bank. The capital adequacy requirements prescribed by Basel III guidelines are more stringent than the

requirements prescribed by the earlier guidelines and compliance with such requirements will have an impact on

our financial results, including certain key indicators of financial performance, such as the return on equity, gross

profit margin etc.

RBI, as part of Basel III Liquidity framework, has issued and will continue to issue guidelines on liquidity

management applicable to banks. Additionally, there are specific guidelines on liquidity, ALM and interest rate

sensitivity issued by the RBI from time to time which we are required to comply with. The various liquidity

requirements deal with Liquidity Coverage Ratio (LCR), Liquidity Monitoring tools, Stress Testing, and other

Liquidity Ratios. LCR became effective on September 30, 2014, and Intra Day Liquidity Monitoring became

effective on January 1, 2015, whereas the Net Stability Funding Ratio, with respect to which draft guidelines have

been issued by the RBI, will become applicable from January 1, 2018.

Ability to manage NPA levels

As of March 31, 2014, March 31, 2015, March 31, 2016 and the six months ended September 30, 2016, our gross

NPAs represented 4.19%, 2.75%, 1.97% and 2.70% of our gross advances during the respective periods. The

NPAs net of provisions were ` 4,433.92 million, ` 3,024.87 million, ` 2,316.41 million and ` 3,760.68 million,

representing 3.44%, 1.85%, 1.18% and 1.87% of our net advances as of March 31, 2014, March 31, 2015, March

31, 2016 and the six months ended September 30, 2016, respectively. If there is any deterioration in the quality of

our security or further aging of the assets after being classified as non-performing, we may be required to increase

our provisions. Moreover, our ability to manage NPA levels will depend on our ability to recover NPAs in a

manner consistent with past abilities and further improve our internal controls and processes. Our ability to

continue to reduce or contain the level of our NPAs may also be affected by a number of factors that are beyond

our control including, a sharp and sustained rise in interest rates, unemployment, slowdown in the Indian economy,

movements in global commodity markets and exchange rates, global competition, adverse changes in government

policies, laws or regulations and performance of various industries.

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Our ability to control costs and to achieve operating efficiencies

We use several methods to achieve operating efficiencies, such as centralizing our processing (including with

respect to account-opening for current, savings and customer maintenance transactions, including reducing the

time taken for the issue of cheque books and updating customer records), upgrading and rationalizing

infrastructure and technology, adopting continuous process and system improvement measures. On the other hand,

our operating costs continue to rise owing to our growth strategy as we significantly widen our branch network

and hire more employees. Our ability to sustain our growth strategy and increase the yield on our investments will

depend on our continued success at achieving reductions in these costs and achieving operating efficiencies.

The Indian economy and the credit environment

As a bank with businesses operating principally in the domestic Indian market, our financial condition and results

of operations are influenced by the general economic conditions prevailing in India. A slowdown in the Indian

economy could adversely affect our business and our borrowers and contractual counterparties, especially if such

a slowdown were to be continued and prolonged. India’s gross domestic product grew by 5.1% in Fiscal 2013,

6.9% in Fiscal 2014 and 7.3% in Fiscal 2015 (Source: RBI Annual Report 2014-15) and is expected to be grow

by 7.6% in Fiscal 2016 (Source: http://pib.nic.in/newsite/PrintRelease.aspx?relid=136214).

Regulations and policies for Indian banks

Our operations are regulated by the RBI and are subject to detailed supervision of RBI. The Government, through

the RBI, is actively involved in the management of the Indian economy and in implementing their social policies.

Accordingly, we are subject to changes in regulations and government policies and accounting principles relevant

to the banking industry. Any changes in the laws, rules, regulations, guidelines or norms applicable to the banking

industry, whether favourable or unfavourable to us, could materially impact our business, results of operations

and financial condition. For example, the reserve requirements (designed to maintain the strength of the Indian

banking sector but also to reduce liquidity and therefore the availability of credit) and requirements to lend to

certain priority sectors and requirements discouraging lending in certain specified sectors, such as real estate,

commodities and capital markets, etc. would affect the composition of our asset portfolio and our profitability.

We are also subject to periodic inspection by the RBI. See the section “Regulations and Policies” on page 146 for

details.

Sources and Cost of Funding

Recent macroeconomic conditions have restricted the ability of banks and financial institutions to raise funding

amid tight liquidity conditions, resulting in a renewed emphasis on customer deposits as a source of funding. Our

primary interest-bearing liability is our deposit base.

To continue to source low-cost funding through customer deposits, we must, among other things, further develop

our rapidly expanding branch network, increase brand recall and develop products and services to distinguish

ourselves in an increasingly competitive industry. However, increasing customer sophistication, competition for

funding, any sharp increase in prevailing interest rates and changes to the RBI’s liquidity and reserve requirements

may increase the rates that we pay on our deposits.

In addition, we have issued, and may continue to issue, subordinated debt to further enhance our capital adequacy

ratios and build long-term stable funding. As of March 31, 2016, we had `4,982.00 millions of Tier II debt

outstanding, which constituted 1.73% of our total liabilities as of that date and as of September 30, 2016, we had

`4,746.30 millions of Tier II debt outstanding, which constituted 1.58% of our total liabilities as of that date.

Significant Accounting Policies

A. Basis of Accounting:

The financial statements are prepared following the going concern concept, on historical cost basis unless

otherwise stated and conform to the Generally Accepted Accounting Principles, (GAAP) in India which

encompasses applicable statutory provisions, regulatory norms prescribed by the Reserve Bank of India (RBI)

from time to time, Accounting Standards (AS) specified under Section 133 of the Companies Act, 2013 read with

Rule 7 of the Companies (Accounts) Rules, 2014 to the extent applicable and current practices prevailing in the

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banking industry in India.

B. Use of Estimates:

The preparation of the financial statements require management to make estimates and assumptions that affect the

reported amounts of assets and liabilities including contingent liabilities as of the date of the financial statements

and the reported income and expenses during the reported period. The Management believes that the estimates

and assumptions used in the preparation of the financial statements are prudent and reasonable. Actual results

could differ from these estimates. The differences, if any between estimates and actual will be dealt appropriately

in future periods.

C. Principal Accounting Policies

1. Transactions Involving Foreign Exchange:

(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the

year as per the guidelines issued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date

of the respective transaction.

(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the

corresponding forward rates for the residual maturity of the contract, in accordance with the guidelines

of FEDAI and the provisions of AS-11. The difference between revalued amount and the contracted

amount is recognized as profit or loss, as the case may be.

(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the

rates prevailing on the Balance Sheet date.

2. Investments:

(a) Investments are categorized under the heads ‘Held to Maturity’, Available for Sale, and ‘Held for

Trading’ and are valued in accordance with the guidelines of the Reserve Bank of India.

(b) Brokerage / commission etc., paid in connection with the acquisition of investments is charged to revenue

and not included in cost.

(c) Broken period interest paid / received on debt instruments is treated as interest expended / income.

(d) Security receipts are valued at NAV as declared by Securitisation Companies.

(e) The excess of acquisition cost over the face value of securities under “Held to Maturity” category is

amortised over the remaining period to maturity.

3. Advances:

3.1 In accordance with the prudential norms issued by RBI:

(a) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;

(b) Provisions are made for loan losses, and

(c) General provision for standard advances is made.

3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part

recovery towards NPA accounts receipts held under sundries, and provision made for sacrifice of interest

/ diminution in the value of restructured advances measured in present value terms as per RBI guidelines.

4. Fixed Assets and Depreciation:

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(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted

at their revalued cost.

(b) Software is capitalised along with computer hardware and included under Other Fixed Assets.

(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the

useful life specified in Schedule II to the Companies Act, 2013 except for hand held communication

devices which are depreciated in full considering the fast changing technology and obsolescence.

(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33%

as per the guidelines issued by the Reserve Bank of India.

(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately,

is provided on the total cost.

5. Employee Benefits:

(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision

for Leave Encashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as

per Accounting Standard 15. Contribution made by us to Provident Fund and Contributory Pension

Scheme are charged to profit & loss account.

(b) We follow the intrinsic value method to account for our employee compensation costs arising from grant

of employee stock options.

6. Provision for Taxation:

Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial

pronouncements and legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22

(Accounting for Taxes on Income).

7. Revenue Recognition:

(a) Income is accounted for on accrual basis.

(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to

the significant uncertainty in collection thereof:

(c) Interest on tax refund from Income Tax Department is accounted based on assessment orders received.

(d) Dividend Income on Investments is accounted based on declaration basis.

8. Segment Reporting:

(a) We recognise the business segment as the primary reporting segment and geographical segment as the

secondary reporting segment, in accordance with the RBI guidelines and in compliance with the

Accounting Standard 17.

(b) Business Segment is classified into (i) Treasury (ii) Corporate and Wholesale Banking, (iii) Retail

Banking and (iv) Other Banking Operations.

(c) Geographical Segment consists only of the Domestic Segment since we do not have any foreign

branches.

9. Earning Per Share:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20

“Earnings per share”. Basic earnings per equity share are computed by dividing net profit by the weighted

average number of equity shares outstanding for the year. Diluted earnings per equity share are computed

using the weighted average number of equity shares and dilutive potential equity shares outstanding during

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the period.

10. Impairment of Assets:

We assess, at each balance sheet date, whether there is any indication that an asset may be impaired.

Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets

exceeds their estimated recoverable amount.

11. Provisions, Contingent Liabilities and Contingent Assets:

(a) As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets”, we

recognize provisions only when it has a present obligation as a result of a past event and it is probable

that an outflow of resources embodying economic benefits will be required to settle the obligation and

when a reliable estimate of the amount of the obligation can be made.

(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition

of income that may never be realised.

12. Net Profit:

The net profit as per the Profit & Loss account is arrived at after necessary provisions towards:

(a) Taxation.

(b) Advances and other assets.

(c) Shortfall in the value of investments

(d) Staff Retirement benefits.

(e) Other usual and necessary provisions.

13. Cash and Cash Equivalents:

Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at

Call and Short Notice.

Changes in the accounting policy if any in the last three years and their effect on our profits and reserves

During the Fiscal 2015, our Bank has changed its method of accounting for depreciation on fixed assets from

“Written Down value” method to “Straight Line” method after considering the useful life of the asset, in

compliance with Schedule II of the Companies Act, 2013. As a result of this change the net profit for the Fiscal

2015 is higher by `107.20 million.

Other than as discussed above, there are no changes in the accounting policy if any in the last three years.

Results of Operations

The table below sets forth a summary of our financial results containing significant items of our income and

expenditure for Fiscal 2014, Fiscal 2015 and Fiscal 2016.

(` in million)


Amount % of total

income

Amount % of total

income

Amount % of total

income

Income

a. Interest Earned 19,839.50 90.69 22,145.31 88.63 25,682.99 89.40

b. Other Income 2,035.92 9.31 2,840.34 11.37 3,045.32 10.60

Total 21,875.42 100.00 24,985.65 100.00 28,728.31 100.00

Expenditure

Interest Expended 14,979.40 68.48 16,878.77 67.55 19,229.93 66.94

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Amount % of total

income

Amount % of total

income

Amount % of total

income

Operating Expenses 3,900.21 17.83 4,422.80 17.70 5,427.14 18.89

Provisions & Contingencies 2,399.26 10.96 2,361.22 9.45 2,268.88 7.90

Total 21,278.87 97.27 23,662.79 94.71 26,925.95 93.73

Net Profit for The Year 596.55 2.73 1,322.86 5.29 1,802.36 6.27

Segment Reporting

Business Segment

We have four primary business segments, in accordance with Accounting Standard 17 and RBI circular Ref.

DBOD.No. BP.BC.81/21.04.018/2006-07 dated April 18, 2007 read with DBOD.BP.BC No.16/21.04.018/2011-

12 dated July 1, 2011 and amendments thereto, which are (a) Treasury Operations, (b) Corporate/ Wholesale

Banking Operations, (c) Retail Banking Operations, and (d) Other Banking Operations. These segments have been

categorised in accordance with applicable law.

The following table sets out the segment revenue and result across our primary reportable segment:

(` in million)

Particulars Year ended March 31

2014 2015 2016

1. Segment Revenue

a. Treasury Operations 4,216.51 5,533.35 5,956.46

b. Corporate / wholesale banking operations 4,485.90 5,791.97 8,601.91

c. Retail banking operations 1,3085.32 13,432.16 14,034.69

d. Other banking operations 87.69 228.17 135.26

Total 21,875.42 24,985.65 28,728.32

2. Segment Results (Operating Profit):

a. Treasury Operations 353.57 807.04 1,018.89

b. Corporate / wholesale banking operations 657.21 805.25 1,154.82

c. Retail banking operations 1,917.08 1,867.46 1,789.80

d. Other banking operations 67.96 204.33 107.73

Total 2,995.82 3,684.08 4,071.24

Operating Profit (including exceptional items) 2,995.82 3,684.08 4,071.24

Provisions Other Than Tax 2,591.77 1,802.02 1,768.88

Profit Before Tax 404.05 1,882.06 2,302.36

Less: Tax expenses (192.50) 559.20 500.00

Net Profit 596.55 1,322.86 1,802.36

Geographical Segment

We make no reporting under “Geographical Segments” as all our operations are in India.

Components of Income and Expenditure

Income

Our income comprises of income from interest earned and other income.

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Income from interest earned

Income from interest earned comprises of interest on advances and discounts on bills, income from investments,

interest received from balances maintained with the RBI and other inter-bank funds and other interest income.

Income from investments consists of interest on securities and other investments. Our securities portfolio consists

primarily of Government securities and we meet our SLR requirements through these investments. We also hold

debentures and bonds issued by public sector undertakings and other corporations, commercial paper, certificate

of deposits, equity shares, preference shares, mutual fund units and security receipts.

Other Income

Other income consists of income from non-interest bearing sources including income from commission, exchange

and brokerage which include fees from opening Letter of credit and negotiating bills under Letter of credit,

issuance of all types of Guarantees, Loan processing fees etc., profit on sale of investments, profit on exchange

transactions, income earned by way of dividends from companies in India and miscellaneous income.

Miscellaneous income primarily includes commission received from the sales of third party products, mutual fund

products and fees collected from customers like folio charges, commitment charges etc.

Expenditure

Interest Expended

Our interest expended consists of interest on deposits and interest on borrowing from the RBI and inter-bank

borrowing, call money, interest on Tier II borrowings and interest on other borrowings. Both our interest income

and expenditure are affected by fluctuations in interest rates as well as the volume of activity. Our interest

expenditure is also affected to the extent we fund our activities with low interest or non interest deposits (CASA),

and to the extent to which we rely on other borrowings.

Operating Expenses

Our operating expenses consist principally of employee expenses, rent, taxes and lighting expenses, printing and

stationery expenses, advertisement and publicity expenses, depreciation on our Bank's property, Director's fees,

allowances, expenses of Auditors’ fees including branch auditors, law charges, postage, telegrams, telephones

expenses, repairs & maintenance, insurance expenses and other expenditure.

Provisions and Contingencies

Our provisions and contingencies predominantly comprises of provision towards standard assets, provision

towards non-performing assets, provision for MAT credit, provision for gratuity, provision for pension, provision

for restructured advances, provision for depreciation in market value of investments, provision for foreign

currency unhedged, provision for other assets and provision for income tax.

Half year ended September 30, 2016 compared to half year ended September 30, 2015

Summary of Profit and Loss Account

(in ` million, except percentages)

Half year ended September 30 % change

2015 2016

Net Interest Income 3,055.37 3,642.29 19.21

Other Income 1,426.89 2,211.09 54.96

Operating Expense (2,472.59) (3,010.82) 21.77

Provisions and Contingencies (1,158.76) (1587.26) 36.98

Net Profit 850.91 1,255.30 47.52

Net Interest Income

Our net interest income increased by 19.21% from ` 3,055.37 million in the half year ended September 30, 2015

to ` 3,642.29 million in the half year ended September 30, 2016. The following table sets forth the components

of our net interest income.

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(in ` million, except percentages) Half year ended September 30 % change

2015 2016

Interest / discount on advances / bills 9,867.50 11,233.01 13.84

Income on Investments 2,576.59 2,562.13 (0.56)

Interest on balance with RBI and other inter-bank funds 21.70 36.87 69.91

Others 16.70 8.58 (48.62)

Interest Income 12,482.49 13,840.60 10.88

Interest Expended 9,427.12 10,198.31 8.18

Net Interest Income* 3,055.37 3,642.29 19.21

*Net interest income represents the excess of interest earned from interest-earning assets (performing assets and

investments) over the interest paid on interest-bearing customer deposits and borrowings.

The increase in net interest income is primarily due to an increase in our interest bearing assets.

Interest Income

Our total interest income increased by 10.88%, from ` 12,482.49 million in the half year ended to September 30,

2015 to ` 13,840.60 million in the half year ended to September 30, 2016. The increase in interest income was

due to increase in interest income on advances and discounts on bills by 13.84% and due to increase in our interest

on balance with RBI and other inter-bank funds by 69.91%. This increase was marginally offset by decrease in

interest income on investments by 0.56% year on year.

Interest Expended

Our total interest expense increased by 8.18%, from ` 9,427.12 million in the half year ended to September 30,

2015 to ` 10,198.31 million in the half year ended to September 30, 2016. The increase in interest expense was

due to increase in average deposits ` 40,788.29 million.

Other income

Our other income increased by 54.96% from ` 1,426.89 million in the half year ended to September 30, 2015 to

` 2,211.09 million in the half year ended to September 30, 2016. This increase was primarily due to an increase

in profit on the sale of investments by ` 728.20 million and processing charges by ` 71.90 million.

Operating Expense

Our operating expenses increased by 21.77% from ` 2,472.59 million in the half year ended to September 30,

2015 to ` 3,010.82 million in the half year ended to September 30, 2016. The increase in operating expense was

due to an increase in payments made to employees by 27.44% from ` 1,240.41 million in the half year ended to

September 30, 2015 to ` 1,580.80 million in the half year ended to September 30, 2016. Such increase was due to

salary revisions as well as an increase in the number of our employees by 497. Other operating expenses also

increased by 16.06% from ` 1,232.18 million in the half year ended to September 30, 2015 to ` 1,430.02 million

in the half year ended to September 30, 2016 due to increase in rent and lighting expenses due increase in number

of branches and ATMs operated by us after the half year ended to September 30, 2015. Other significant reasons

for increase in operating expenses were advertisements, ATM outsourcing expenses, DICGC premium paid,

security expenses, etc.

Provisions and contingencies

Our provisions and contingencies increased by 36.98% from ` 1,158.76 million in the half year ended to

September 30, 2015 to ` 1,587.26 million in the half year ended to September 30, 2016, primarily due to an

increase in provision for NPA and provision for taxation.

Net Profit

Due to the reasons mentioned above, our net profit increased by 47.52% from ` 850.91 million in the half year

ended to September 30, 2015 to ` 1,255.30 million in the half year ended to September 30, 2016.

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Fiscal 2016 compared to Fiscal 2015

Summary of profit and loss account during this period


Fiscal

2015 2016 % change


Other Income 2,840.34 3,045.32 7.22

Operating Expenses (4,422.80) (5,427.14) 22.71

Provisions and Contingencies (2,361.22) (2,268.88) (3.91)

Net Profit 1,322.86 1,802.36 36.25

Net Interest Income

Our net interest income increased by 22.53% from ` 5,266.54 million in Fiscal 2015 to ` 6,453.06 million in

Fiscal 2016. The following table sets forth the components of our net interest income:


Fiscal

2015 2016 % change


Income on Investments 4,764.31 5,194.00 9.02

Interest on balance with RBI and other inter-

bank funds

82.38 32.68 (60.33)

Others 209.65 73.61 (64.89)

Interest Income 22,145.31 25,682.99 15.97

Interest on deposits 16,263.73 18,332.92 12.72

Interest on RBI / Inter-Bank Borrowings 615.04 897.01 45.85





The increase in net interest income is primarily due to the following reasons:

Interest Income

Our total interest income increased by 15.97%, from ` 22,145.31 million in Fiscal 2015 to ` 25,682.99 million in

the Fiscal 2016. The increase in interest income was due to the following reasons:

our interest income on advances and discounts on bills increased by 19.27%. This increase was primarily due

to an increase in the average gross advances by ` 33,034.65 million year on year, despite of a reduction of

our base rate by 0.70% in aggregate during the year. Average gross advances is the average of advances given

by us on a fortnightly basis.

our interest income on investments increased by 9.02%. This increase was primarily due to an increase in the

yield on interest bearing investments.

Our interest on balance with RBI and other inter-bank funds has decreased by 60.33%. This decrease was

primarily due to reduction in inter-bank lending during the year.

Other interest income has decreased by 64.89%. This decrease is primarily on account of lower interest

received due to a decrease in income tax refunds during the year as compared to the previous year.

Interest Expended

Our total interest expense increased by 13.93%, from ` 16,878.77 million in Fiscal 2015 to ` 19,229.93 million

in Fiscal 2016. The increase in interest expense was due to the following reasons:

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Our interest on deposits increased by 12.72%. This increase was primarily due to an increase in deposits and

an increase in CASA; and

Our interest expense on borrowing from RBI and inter-bank borrowings increased by 45.85%. This increase

was primarily due to increase in subordinated debt and REPO borrowings.

Other income

The components of our other income are as follows:


Fiscal % change

2015 2016

Commission, exchange and brokerage 1,193.87 1,471.37 23.24

Profit on sale of investments 503.09 533.57 6.06

Profit/ (loss) on sale of land, buildings and other assets (3.23) (0.79) (75.54)

Profit on exchange transactions 174.02 166.46 (4.34)

Income earned by way of dividends from companies in

India

9.55 29.73 211.31

Miscellaneous income 963.04 844.98 (12.26)

Total 2,840.34 3,045.32 7.22

Commission, exchange and brokerage income increased primarily due to an increase in processing fees received

and increase in commission on insurance and mutual funds. Other miscellaneous income has decreased primarily

due to a decrease in the recovery of bad debts, which was marginally offset by an increase in income from ATM

transactions. Income from ATM transactions is the income we receive when other bank debit card holders use our

ATM machines.

Operating Expense

The components of our operating expenses are as follows:


Fiscal

% change 2015 2016

Payments to and provision for employees 2,383.80 2,753.52 15.51

Rent, taxes and lighting 470.69 583.48 23.96

Printing and stationery 49.79 57.72 15.93

Advertisement and publicity 37.80 83.84 121.80

Depreciation on bank’s property 155.45 377.63 142.93

Director's fees, allowances 7.80 11.53 47.82

Auditors’ fees & expenses (including the branch auditors) 11.01 12.50 13.53

Law charges 14.39 11.62 (19.25)

Postage, telegrams, telephones, etc., 116.14 133.65 15.08

Repairs and maintenance 36.16 34.12 (5.64)

Insurance 191.52 238.24 24.39

Other expenditure 948.25 1,129.29 19.09

Total 4,422.80 5,427.14 22.71

Our operating expenses increased by 22.71% from ` 4,422.80 million in Fiscal 2015 to ` 5,427.14 million in

Fiscal 2016. This increase was primarily due to:

a. an increase in payments made to employees. Such increase was due to salary revisions as well as an increase

in the number of our employees.

b. increase in rent and lighting expenses due increase in number of branches and ATMs operated by us in the

Fiscal 2016.

c. an increase in depreciation. In the Fiscal 2015, excess depreciation was reversed due to the change in the

method of charging depreciation (from the diminishing balance method to the straight line method). An

134

increase in depreciation was also due to an increase in fixed assets.

d. increase in advertisement cost due to launch of mobile banking application and other financial products.


Provisions and contingencies decreased by 3.91% from ` 2,361.22 million in Fiscal 2015 to ` 2,268.88 million in

Fiscal 2016 primarily due to decrease in provisioning for MAT Credit and restructured advances. Our provisioning

towards standard assets increased from ` 105.20 million for the Fiscal 2015 to ` 170.00 million for the Fiscal

2016. Our provisioning towards NPA increased from ` 1,097.21 million in the Fiscal 2015 to ` 1,767.65 million

in the Fiscal 2016. Our NPA provisioning coverage was 68.55% as of March 31, 2016 and our gross and net NPAs

were 1.97% and 1.18% of our gross advances and net advances, respectively.

Our provision for taxation decreased by 10.59% from ` 559.20 million in the Fiscal 2015 to ` 500.00 million in

the Fiscal 2016, primarily due to bad debts written off and wage arrears paid.

Net Profit

Due to the reasons mentioned above, our net profit increased by 36.25% from ` 1,322.86 million in Fiscal 2015

to ` 1,802.36 million in Fiscal 2016.

Fiscal 2015 compared to Fiscal 2014

Summary of profit and loss account during this period


Fiscal % change

2014 2015


Other Income 2035.92 2,840.34 39.51

Operating Expenses (3,900.21) (4,422.80) 13.40

Provisions and Contingencies (2,399.26) (2,361.22) (1.59)

Net Profit 596.55 1,322.86 121.75

Net Interest Income

Our net interest income increased by 8.36% from ` 4,860.11 million in Fiscal 2014 to ` 5,266.54 million in Fiscal

2015. The following table sets forth the components of our net interest income:


Fiscal % change

2014 2015


Income on Investments 3,789.92 4,764.31 25.71

Interest on balance with RBI and other

inter-bank funds

36.58 82.38 125.21

Others 60.12 209.65 116.40

Interest Income 19,839.50 22,145.31 11.62

Interest on Deposits 14,314.38 16,263.73 13.62

Interest on RBI / Inter-Bank

Borrowings

665.02 615.04 (7.52)





The increase in net interest income is primarily due to the following reasons:

Interest Income

135

Our total interest income increased by 11.62%, from ` 19,839.50 million in Fiscal 2014 to ` 22,145.31 million in

the Fiscal 2015. The increase in interest income was due to the following reasons:

our interest income on advances and discounts on bills increased by 7.37%. This increase was primarily due

to increase in gross advances by ̀ 34,751.43 million, despite of a decrease in the yield on advances on account

of increase in restructured advances;

our interest income on investments increased by 25.71%. This increase was primarily due to a higher yield

on interest earning investments.

our interest on balance with RBI and other inter-bank funds increased by 125.21%. This increase was

primarily due to higher inter banking lending.

our other interest income increased by 116.40%. This increase was primarily due to the interest received on

income tax refund.

Interest Expended

Our total interest expense increased by 12.68%, from ` 14,979.40 million in Fiscal 2014 to ` 16,878.77 million

in Fiscal 2015. The increase in interest expense was due to the following reasons:

our interest on deposits increased by 13.62%. This increase was primarily due to growth in CASA and an

increase in deposits.

our interest expense on borrowing from RBI and inter-bank borrowings decreased by 7.52%. This decrease

was primarily due to lower export credit refinance availed in Fiscal 2015 and lower borrowing under the

collateralized borrowing and lending obligation /repo/call segments.

Other income


Fiscal % change

2014 2015

Commission, exchange and brokerage 836.45 1,193.87 42.73

Profit/ (loss) on sale of investments 205.44 503.09 144.88

Profit/ (loss) on sale of land, buildings and

other assets

0.38 (3.23) (950%)

Profit/ (loss) on exchange transactions 143.43 174.02 21.33

Income earned by way of dividends from

companies in India.

4.39 9.55 117.54

Miscellaneous income 845.83 963.04 13.86

Total 2,035.92 2,840.34 39.51

Commission, exchange and brokerage increased due to increase in processing fee and the profit on sale of

investments increased due to increase in trading profit. Miscellaneous income increased primarily due to increase

in income from recovery of bad debt.

Operating Expense

The components of our operating expenses are as follows:


Fiscal % change

2014 2015

Payments to and provision for employees 1,972.92 2,383.80 20.83

Rent, taxes and lighting 388.73 470.69 21.08

Printing and stationery 47.43 49.79 4.98

Advertisement and publicity 19.73 37.80 91.59

Depreciation on bank's property 235.83 155.45 (34.08)

Director's fees, allowances 6.28 7.80 24.20

136

Fiscal % change

2014 2015

Auditors' fees and expenses (including branch

auditors)

9.22 11.01 19.41

Law charges 17.43 14.39 (17.44)

Postage, telegrams, telephones, etc., 82.96 116.14 40.00

Repairs & maintenance 24.59 36.16 47.05

Insurance 162.10 191.52 18.15

Other expenditure 932.99 948.25 1.64

Total 3,900.21 4,422.80 13.40

Our operating expenses increased by 13.40% from ` 3,900.21 million in Fiscal 2014 to ` 4,422.80 million in

Fiscal 2015. This increase was primarily:

a. due to an increase in employee expenses due to increase in the number of our employees along with an increase

in basic pay and allowances.

b. pursuant to the exercise of stock options, the difference in the market price of the Equity Shares and the

exercise price of the options was provided in the books of accounts

c. due to an increase in Deposit Insurance and Credit Guarantee Corporation premium paid with the increase in

deposits.

d. due to increase in rent and lighting expenses due to new branches and ATMs opened by us in Fiscal 2015.

Such increase was marginally offset by a decrease in ATM outsourcing expenses. We had also paid a penalty of

` 25 million to the RBI for non-compliance of KYC Norms in Fiscal 2014


Provisions and contingencies decreased by 1.59% from ` 2,399.26 million in Fiscal 2014 to ` 2,361.22 in Fiscal

2015 primarily due to decrease in provisioning towards NPA and for depreciation in market value of Investments.

Our provisioning towards standard assets increased from ` 447.10 million for the Fiscal 2014 to ` 552.30 million

for the Fiscal 2015. Our NPA provisions decreased from ` 1,783.21 million in the Fiscal 2014 to ` 1,097.21

million in the Fiscal 2015. Our NPA provisioning coverage was 60.84% as of March 31, 2015 and our gross and

net NPAs were 2.75% and 1.85% of our gross advances and net advances, respectively.

Our provision for taxation increased from ` (192.50) million in the Fiscal 2014 to ` 559.20 million in the Fiscal

2015, primarily due to benefits accrued in Fiscal 2014 viz., investment depreciation and bad debts written off.

Net Profit

As a result of the above reasons, our net profit increased by 121.75% from ` 596.55 million in Fiscal 2014 to `

1,322.86 million in Fiscal 2015.

Discussion on our assets and liabilities

Assets

The following table sets forth the principal components of our assets as of March 31, 2014, March 31, 2015 and

March 31, 2016 and as of September 30, 2016.


As at March 31 As at

September

30, 2016 2014 % change

year on

year

2015 % change

year on

year

2016

Cash & Balances with

RBI

11,920.83 (4.08) 11,434.40 12.51 12,865.02 13,752.12

Balances with banks 1,196.04 46.55 1,752.81 (53.16) 821.09 2,004.04

137

and money at call and

short notice

Investments 56,886.78 6.37 60,511.56 8.17 65,454.05 72,261.92

Advances 128,891.90 26.87 163,520.19 20.13 196,437.39 200,691.64

Fixed Assets 2,005.08 21.40 2,434.13 50.77 3,669.99 3,725.89

Other Assets 5,629.95 31.46 7,401.27 9.09 8,074.09 7,243.35

Total Assets 206,530.58 19.62 247,054.36 16.30 287,321.63 299,678.96

Our total assets have increased by 4.30% from ` 287,321.63 million as at March 31, 2016 to ` 299,678.96 million

as at September 30, 2016 primarily due to the following reasons:

a. Cash & Balances with RBI: Cash in hand, including foreign currency notes and balances with the RBI, in

current account, has increased by 6.90% from ` 12,865.02 million as at March 31, 2016 to ̀ 13,752.12 million

as at September 30, 2016.

b. Balances with banks and money at call and short notice: Balances with banks, in current accounts in India

and money at call and short notice has increased by 144.07% from ` 821.09 million as at March 31, 2016 to

` 2,004.04 million as at September 30, 2016.

c. Investments: We have increased our investments in government securities, the shares of other companies,

commercial papers, mutual funds, security receipts, units, etc., by 10.40% from ` 65,454.05 million as at

March 31, 2016 to ` 72,261.92 million as at September 30, 2016.

d. Advances: We have increased the Advances made by 2.17% from ` 196,437.39 million as at March 31, 2016

to ` 200,691.64 million as at September 30, 2016.

e. Fixed Assets: Bank’s fixed assets have increased by 1.52% due to addition in new premises alongwith

furniture and fixtures added during six months as at September 30, 2016. Other assets have decreased by

10.29% from March 31, 2016 to September 30, 2016 predominantly due to reduction in unamortised amount

in sundry assets related to sale of assets to ARC and reduction in pending allotment of securities.

Our total assets have increased by 16.30% from ` 247,054.36 million as at March 31, 2015 to ` 287,321.63 million

as at March 31, 2016 primarily due to the following reasons:

a. Cash & Balances with RBI: Cash in hand, including foreign currency notes, has increased by 33.15% from `

2,372.65 million as at March 31, 2015 to ` 3,159.09 million as at March 31, 2016. Balances with the RBI, in

current account, has also increased by 7.11% from ` 9,061.75 million as at March 31, 2015 to ` 9,705.93

million as at March 31, 2016.

b. Balances with banks and money at call and short notice:

Balances with banks, in current accounts in India, has decreased by 43.46% from ` 356.15 million as at

March 31, 2015 to ̀ 201.35 million as at March 31, 2016 due to reduced surplus cash held for the purposes

of customer remittances and withdrawal. Balances with banks, in current accounts outside India, has

increased by 56.33% from ` 396.04 million as at March 31, 2015 to ` 619.12 million as at March 31, 2016

due to increased export transactions of our customers.

At as March 31, 2016, we did not hold any money at call and short notice with other institutions as

compared to ` 1,000 million as at March 31, 2015.

c. Investments: We have increased our investments in government securities by 13.44% from` 51,563.92

million as at March 31, 2015 to ` 58,494.29 million as at March 31, 2016. We have also increased our

investment in the shares of other companies by 94.11% from ` 411.17 million as at March 31, 2015 to `

798.12 million as at March 31, 2016. We have reduced our other investments, such investments in commercial

papers, mutual funds, security receipts, units, etc., by 45.59% from ` 4,795.17 million as at March 31, 2015

to ` 2,609.18 million as at March 31, 2016.

d. Advances: Advances have increased due to an increase in bills purchased and discounted by 68.22% from `

10,451.56 million as at March 31, 2015 to ` 17,581.97 million as at March 31, 2016. Term loans given by us

138

have increased by 29.17% from ` 55,795.86 million as at March 31, 2015 to ` 72,072.02 million as at March

31, 2016.

e. Fixed Assets: Bank’s fixed assets have increased due to addition in new premises of worth ` 949.73 million

during Fiscal 2016. Furniture and fixtures of ` 668.22 million have been added during Fiscal 2016. Other

assets have increased by 9.09% from March 31, 2015 to March 31, 2016 predominantly due to increase in

accrued interest, increase in advance tax paid and increased deferred tax assets.

Our total assets have increased by 19.62 % from ` 206,530.58 million as at March 31, 2014 to ` 247,054.36

million as at March 31, 2015 primarily due to the following reasons:

a. Cash and Balances with RBI: Cash in hand, including foreign currency notes, has increased by 4.75% from

` 2,265.10 million as at March 31, 2014 to` 2,372.65 million as at March 31, 2015. Balances with the RBI,

in current account, decreased by 6.15% from ` 9,655.73 million as at March 31, 2014 to ` 9,061.75 million

as at March 31, 2015.

b. Balances with banks and money at call and short notice:

Balances with banks, in current accounts in India, has increased by 44.02% from ` 247.29 million as at

March 31, 2014 to ̀ 356.15 million as at March 31, 2015. Balances with banks, in current accounts outside

India, has increased by 165.92% from ` 148.93 million as at March 31, 2014 to ` 396.04 million as at

March 31, 2015.

Money at call and short notice held with other institutions increased by 25.13% from ` 799.20 million as

at March 31, 2014 to ` 1,000 million as at March 31, 2015.

c. Investments: We have increased our investments in government securities by 8.01% from ` 47,740.97 million

as at March 31, 2014 to ` 51,563.92 million as at March 31, 2015. We have also increased our investment in

the shares of other companies by 5.97% from ` 388.01 million as at March 31, 2014 to ` 411.17 million as

at March 31, 2015. We have increased our investments in debentures and bonds of other companies by

40.99% from ` 2,653.56 million as at March 31, 2014 to ` 3,741.30 million as at March 31, 2015. We have

reduced our other investments, such investments in commercial papers, mutual funds, security receipts, units,

etc., by 21.45% from ` 6,104.24 million as at March 31, 2014 to ` 4,795.17 million as at March 31, 2015.

d. Advances: Advances have increased due to an increase in bills purchased and discounted by 21.28% from `

8,617.82 million as at March 31, 2014 to ` 10,451.56 million as at March 31, 2015. Term loans given by us

have increased by 44.88% from ` 38,511.14 million as at March 31, 2014 to ` 55,795.86 million as at March

31, 2015. Cash credit, overdrafts and loans that are repayable on demand have also increased by 18.97% from

` 81,762.94 million as at March 31, 2014 to ` 97,272.77 million as at March 31, 2015.

e. Fixed Assets: Bank’s fixed assets have increased due to addition in new premises of worth ` 50.29 million

during Fiscal 2015. Other fixed assets including furniture and fixtures of ` 544.50 million have been added

during Fiscal 2015. Other assets have increased by 31.46% from March 31, 2014 to March 31, 2015

predominantly due to increase in accrued interest, increase in non-banking assets acquired in satisfaction of

claims and other assets.

Liabilities and Shareholders’ Funds

The following table sets forth the principal components of our liabilities and shareholders’ funds as of March 31,

2014, March 31, 2015 and March 31, 2016.


As of March 31, As at

September

30, 2016 2014 % change

year on

year

2015 % change

year on

year

2016

Capital 975.61 83.65 1,791.67 0.16 1,794.62 1,794.62

Reserve and Surplus 9,560.39 44.03 13,769.76 15.04 15,841.32 17,096.63

Total shareholders’

funds

10,536.00 47.70 15,561.43 13.33 17,635.94 18,891.25

139

As of March 31, As at

September

30, 2016 2014 % change

year on

year

2015 % change

year on

year

2016

Deposits 185,728.82 18.26 219,642.12 15.78 254,309.62 266,801.41

Borrowings 4,581.00 0.00 4,581.00 57.83 7,230.08 6,682.00

Other liabilities and

provisions

5,684.76 27.88 7,269.81 12.05 8,145.99 7,304.30

Total liabilities and

shareholders’ funds

206,530.58 19.62 247,054.36 16.30 287,321.63 299,678.96

Our total liabilities and shareholders’ funds increased by 4.30% from ` 287,321.63 million as of March 31, 2016

to ` 299,678.96 million as of September 30, 2016, primarily due to the following reasons:

a. Capital and reserve and surplus: As there were no Equity issuances in the six months ended September 30,

2016, there was no change in capital. Further the Reserve and Surplus increased by 7.92% from ` 15,841.32

million as of March 31, 2016 to ` 17,096.63 million as of September 30, 2016 due to addition of profits for

six months ended September 30, 2016.

b. Deposits: Deposits have increased by 4.91% during this period primarily due to increase CASA deposits and

term bank deposits.

c. Borrowings: Borrowings decreased by 7.58% from ̀ 7,230.08 million as of March 31,2016 to ` 6,682 million

as of September 30, 2016, due to redemption in Tier II subordinated bonds and repayment of CBLO

borrowings.

d. Other liabilities and provisions: Other liabilities and provisions decreased by 10.33% from ` 8,145.99 million

as of March 31, 2016 to ` 7,304.30 million as of September 30, 2016, due to payment of dividend for 2015-

16.


to ` 287,321.63 million as of March 31, 2016, primarily due to the following reasons:

a. Capital: Our capital marginally increased by 0.16% from` 1,791.67 million as of March 31, 2015 to `

1,794.62 million as of March 31, 2016 due to Equity Shares issued pursuant to exercise of stock options.

b. Reserve and surplus: Reserves and surplus increased due to an increase in revaluation reserve by 118.89%

from ` 784.57 million as of March 31, 2015 to ` 1,717.32 million as of March 31, 2016. This increase was

primarily due to revaluation of premises in the fixed assets portfolio carried out during the year. The special

reserve under section 36(1)(viii) of the Income Tax Act, 1961 increased by 36.19% from ` 414.50 million as

of March 31, 2015 to ` 564.50 million as of March 31, 2016 due to increase in profits. Revenue and other

reserves increased by 30.28% from ` 1,674.65 million as of March 31, 2015 to ̀ 2,181.75 million as of March

31, 2016. The statutory reserve and capital reserve increased by 12.15% and 10.59%, respectively.

c. Deposits: Deposits have increased by 15.78% during this period primarily due to increase in saving bank

deposits and term bank deposits.

d. Borrowings: Borrowings increased by 57.83% from ` 4,581.00 million as of March 31,2015 to ` 7,230.08

million as of March 31,2016, due to refinancing of our priority sector lending from NABARD and outstanding

unsecured Tier II Bonds.

e. Other liabilities and provisions: Deferred tax liabilities increased by 230.17% from ` 186.82 million as of

March 31, 2015 to ` 616.82 million as of March 31, 2016, due to accounting for taxes on income in

compliance with AS22. Further, the contingent provisions against the standard assets of our Bank increased

by 30.78% from ` 552.30 million as of March 31, 2015 to ` 722.30 million as of March 31, 2016. The amount

towards bills payable increased by 15.08% from ` 676.52million as of March 31, 2015 to ` 778.57 million as

of March 31, 2016 and interest accrued on deposits and borrowings increased by 12.56% from ` 1,994.63

million as of March 31, 2015 to ` 2,245.24 million as of March 31, 2016.

140


to ` 247,054.36million as of March 31, 2015, primarily due to the following reasons:

a. Capital: Our capital increased by 83.65% from` 975.61 million as of March 31, 2014 to ` 1,791.67million as

of March 31, 2015 due to (i) issue of 81,957,422 Equity Shares issued through a rights issue and (ii) issue of

345,000 Equity Shares issued pursuant to exercise of stock options under the LVB ESOS-2010.

b. Reserve and surplus: The investment reserve was constituted in Fiscal 2015 amounting to ` 7.27 million as

of March 31, 2015. The share premium account increased by 99.46% from` 3,307.02 million as of March 31,

2014 to ` 6,596.25 million as of March 31, 2015 due to issue of shares on rights basis at ` 50 per share which

includes share premium of ` 40 per share. Revenue and other reserves increased by 33.59% from ` 1,253.57

million as of March 31, 2014 to ` 1,674.65 million as of March 31, 2015. The special reserve under section

36(1)(viii) of the Income Tax Act, 1961 increased by 28.33% from ` 323.00 million as of March 31, 2014 to

` 414.50 million as of March 31, 2015 due to Increase in profits. The statutory reserve, capital reserve and

revaluation reserve increased by 9.80%, 9.15% and 2.65% respectively.

c. Deposits: Deposits have increased by 18.26% during this period primarily due to increase in demand deposits

and saving bank deposit.

d. Borrowings: As of March 31, 2014, our borrowings amounted to ` 4,581.00 million due to the outstanding

unsecured Tier II Bonds which remained unchanged as of March 31, 2015.

e. Other liabilities and provisions: Provisions increased by 65.12% from ` 2,337.47 million as of March 31,

2014 to ̀ 3,859.54 million as of March 31, 2015, due to incremental provisions made for payment of dividend,

wage arrears under 10th bi-partite settlement and leave encashment. Further, the contingent provisions against

the standard assets of our Bank increased by 23.53% from ` 447.10million as of March 31, 2014 to ` 552.30

million as of March 31, 2015. The interest accrued on deposits and borrowings marginally increased by 4.81%

from ` 1,903.04 million as of March 31, 2014 to ` 1,994.63 million as of March 31, 2015.

Liquidity and Capital Resources

Capital Adequacy

The following table sets out our capital adequacy ratios as of March 31, 2014, March 31, 2015 and March 31,

2016, calculated according to RBI guidelines.

(` in million)

As of March 31,

2014 2015 2016

Common Equity Tier I 8,745.26 12,891.57 15,684.99

Additional Tier I - - -

Tier I Capital 8,745.26 12,891.57 15,684.99

Tier II Capital 3,369.93 2,783.72 3,568.96

Total Capital 12,115.19 15,675.29 19,253.95

Credit Risk – RWA 95,875.44 118,469.74 153,125.03

Market Risk – RWA 6,875.41 9,965.39 14,850.21

Operational Risk – RWA 8,410.43 9,774.39 12,481.94

Total Risk weighted assets 111,161.28 138,209.52 180,457.18

Common Equity Capital (CET I) Adequacy Ratio (BASEL III) 7.87 9.33 8.69

Capital Adequacy Ratio – Tier I Capital (BASEL III) 7.87 9.33 8.69

Capital Adequacy Ratio – Tier II Capital (BASEL III) 3.03 2.01 1.98

Total Capital Adequacy Ratio (BASEL III) 10.90 11.34 10.67

We have adopted a Board-approved policy on our internal capital adequacy and assessment process, which defines

and sets processes to review and improve the techniques used for identification, measurement and assessment of

all material risks and resultant capital requirements.

Tier I capital consists of equity capital, statutory reserves, other disclosed free reserves, capital reserves and

innovative perpetual debt instruments eligible for inclusion in Tier I capital. The Tier II capital consists of general

provision and loss reserves, upper Tier II instruments and subordinate debt instruments eligible for inclusion in

141

Tier II capital.

RBI requires us to maintain a minimum CRAR of 9.625% (including capital conservation buffer). We moved to

RBI Basel III Capital Regulations as implemented by RBI from April 1, 2013. Indian banks have to comply with

the regulatory limits and requirements as prescribed under RBI Basel III Capital Regulations, on an ongoing basis,

with full implementation of such regulations by March 31, 2019. As per capital adequacy guidelines under Basel

III, by March 31, 2019 we are required to maintain a minimum capital adequacy ratio of 9.0% (excluding the

Capital conservation buffer), with minimum Common Equity Tier I (CET I) capital adequacy ratio of 5.50%. For

a description of the RBI’s capital adequacy guidelines, see section titled “Regulation and Policies” on page 146.

As of September 30, 2016, our capital adequacy ratio under the RBI Basel III Capital Regulations was 10.10%.

Our current sources of funding (other than equity capital) are deposits and borrowings (which include the

unsecured Tier II bonds). The cost of funds obtained is sensitive to interest rate fluctuations, which expose us to

the risk that increasing interest rates will reduce our margins, if we are unable to pass on the increased rates to our

customers.

Cash Flows

(` in million)

Fiscal

2014 2015 2016

Net cash flow from (used in) operating activities 5,039.74 (3,350.63) 1,105.70

Net cash flow from (used in) investing activities (355.95) (587.73) (674.84)

Net cash flow from (used in) financing activities (286.42) 4,008.70 68.04

Net increase/ decrease in cash and cash equivalent 4,397.37 70.34 498.90

Cash and cash equivalents at the beginning of the year 8,719.50 13,116.87 13,187.21

Cash and cash equivalents at the end of the year 13,116.87 13,187.21 13,686.11

Pursuant to the RBI circular dated July 16, 2015, we have included our deposits placed with

NABARD/SIDBI/NHB on account of shortfall in priority sector targets under “Other Assets”. Previously, this

was accounted under “Investments”. Interest income on these deposits have been included under “Interest Earned

– Others”. Previously, such interest income was included under “Interest Earned – Income on Investments”.

Accordingly, prior period numbers were regrouped/ reclassified.

Cash Flows from (used in) Operating Activities

Net cash generated from operations in Fiscal 2016 was ` 1,105.70 million. Our net profit before taxes was `

2,372.36 million, which was adjusted primarily for increase in deposits by ` 34,667.49 million, provision and

contingencies of ` 2,268.88 million, refinances of ` 2,248.08 million and depreciation of ` 377.63 million. This

was offset by an increase in advances given of ` 32,917.20 million, an increase in investments made of ` 4,942.49

million, decrease in other liabilities of ` 1,706.93 million and increase in other assets purchased by ` 122.91

million.

Net cash used in operations in Fiscal 2015 was ` 3,350.63 million. Our net profit before taxes was ` 1,733.86

million, which was adjusted primarily for provision and contingencies of ` 2,361.22 million, depreciation of `

155.45 million and increase in deposits by ` 33,913.30 million. This was offset by an increase in investments

madeof ` 4,207.89 million, an increase in advances given of ` 34,628.29 million, decrease in other liabilities of `

1,082.29 million and increase in other assets purchased by ` 777.22 million.

Net cash generated from operations in Fiscal 2014 was ` 5,039.74 million. Our net profit before taxes was `

881.85 million, which was adjusted primarily for increase in deposits by ` 29,539.04 million, provision and

contingencies of ` 2,493.42 million, sale of other assets aggregating to ` 431.02 million and depreciation of `

235.83 million. This was offset by an increase in investments made of ` 13,641.31 million, decrease in refinance

cost of ̀ 219.00 million and other liabilities of ̀ 2,246.21 million and an increase in advances given of ̀ 11,863.94

million.

Cash Flows from (used in) Investing Activities

Net cash used in investing activities was ` 674.84 millionin Fiscal 2016, primarily due to purchase of fixed assets

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of ` 678.09 million, which was partially offset by sale of fixed assets of ` 3.25 million.

Net cash used in investing activities was ` 587.73 million in Fiscal 2015, primarily due to purchase of fixed assets

of ` 594.79 million, which was primarily offset by sale of fixed assets of ` 7.06 million.

Net cash used in investing activities was ` 355.95 million in Fiscal 2014, primarily due to purchase of fixed assets

of ` 359.26 million, which were primarily offset by sale of fixed asset to the amount of ` 3.31 million.

Cash Flows from (used in) Financing Activities

Net cash generated from financing activities was ` 68.04 million in Fiscal 2016, primarily due to cash generated

from proceeds received from Tier II Bonds of ` 1,401.00 million and pursuant to exercise of stock options under

the LVB ESOS-2010 (including share premium net of forfeited shares) of ` 23.47 million. This was partially

offset by repayment of Tier II Bonds aggregating to ` 1,000.00 million and dividend and tax paid on dividend of

` 356.43 million.

Net cash generated from financing activities was ` 4,008.70 million in Fiscal 2015, primarily due to issue of shares

by way of rights issue and issue of shares pursuant to exercise of stock options under the LVB ESOS-2010

(including share premium net of forfeited shares), of ` 4,105.29 million. This was partially offset by dividend and

tax paid on dividend of ` 96.59 million.

Net cash used in financing activities was ` 286.42 million in Fiscal 2014, primarily due to dividend and tax paid

on dividend of ` 288.87 million, which was partially offset by issue of shares pursuant to exercise of stock options

under the LVB ESOS-2010 (including share premium net of forfeited shares) of ` 2.45 million.

Financial Instruments and Off-balance sheet items

Contingent Liabilities

(` in million)

Fiscal 2016

Claims against us not acknowledged as debts 2,400.25

Liability on account of outstanding forward exchange contracts 11,590.90

Guarantees given on behalf of constituents

In India 8,285.77

Outside India 1,892.32

Acceptances, Endorsements & Other Obligations 12,523.68

Other items for which we are contingently liable 177.23

Total 36,870.15

As of March 31, 2016, our contingent liabilities were ` 36,870.15 million, which comprised of the claims against

us which is not acknowledged as debt such as legal proceedings in the normal course of business, the outcome of

which the bank does not expect to have adverse effect on its financials, outstanding foreign exchange contracts,

outstanding guarantees, outstanding obligations, acceptances and endorsements and others. For further details, see

“Financial Statements” on page 231.

Qualitative disclosure about risks and risk management

The risks associated with our business can be broadly classified into three major categories namely, credit risk,

operational risk and market risk. We have developed our risk management systems to ensure that there is an

appropriate balance between risk and return and we have implemented comprehensive policies and procedures to

identify, measure, monitor and control risk throughout our organization. Our risk management strategy is based

on understanding the various types of risk, assessment of the risk and continuous monitoring of the risk. For

further details about the types of risks we manage and our risk management policies and structures see sub-section

titled “—Risk Management” below.

Risk Management

Credit risk

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The credit risk policy supports and is aligned with our priority of achieving growth and at the same time

maintaining asset quality to ensure long term sustainable profitability over business cycles. It encompasses credit

approval processes for all business segments, along with the guidelines for monitoring and mitigating the risks

associated with them. We also undertake the exercise of measuring the credit risks involved in the composition of

our present portfolio and realigning them to have a better risk-reward composition. We endeavour to continuously

enhance our internal risk assessment capabilities. We currently have three committees for approving credits.

Interest rate risk

Our balance sheet consists predominantly of Rupee assets and liabilities, movements in Indian interest rates

constitute the main source of interest rate risk. The short and intermediate impact of changes in interest rates is on

our net interest income. In the longer term, changes in interest rates impact cash flows on assets, liabilities and off

balance sheet items, creating a risk to our net worth as a result of re-pricing “mismatches” and other interest rate

sensitive positions.

We measure exposure to fluctuations in interest rates primarily by way of gap analysis, providing a static view of

the maturity and re-pricing characteristics of balance sheet positions. We prepare an interest rate gap report by

classifying all assets and liabilities into various time period categories according to contracted maturities or

anticipated re-pricing dates. The difference in the amount of assets and liabilities maturing or being re-priced in

any time period category would then give us an indication of the extent of exposure to the risk of potential changes

in the margins on new or re-priced assets and liabilities.

Liquidity risk

Liquidity risk arises from the absence of liquid resources, when funding loans, and repaying deposits and

borrowings. This could be due to a decline in the expected collection, or our inability to raise adequate resources

at an appropriate price. This risk is minimized through a mix of strategies, including increasing current account

and savings deposits and following a forward-looking borrowing programme based on projected loans and

maturing obligations.

We monitor liquidity risk through our asset liability management function aided by liquidity gap reports. This

involves the categorization of all assets and liabilities in different maturity profiles, and evaluating them for any

mismatches in any particular maturities, especially in the short term. The asset liability management policy is

based on RBI guidelines and our asset liability management committee’s guidelines and establishes the maximum

allowed mismatches in the various maturities. We undertake behavioral analysis of the non-maturity products,

namely CASA, Cash Credit and Overdraft accounts on a periodic basis to ascertain the volatility of balances in

these accounts.

Our asset liability management policy defines the gap limits for the structural liquidity and the liquidity profile is

analyzed on both static and dynamic basis by tracking cash inflow and outflow in the maturity ladder based on

the expected occurrence of cash flow. As part of the liquidity management and contingency planning, we assesse

potential trends, demands, events and uncertainties that could result in adverse liquidity conditions. The liquidity

profile is estimated on an active basis by considering the growth in deposits, advances and investment obligations.

The concentration of large deposits is monitored on a periodic basis. Emphasis has been placed on growing Retail

deposits and avoiding as far as possible bulk deposits. We periodically conduct liquidity stress testing.

Exchange rate risk

Exchange rate risk is the risk that we may suffer losses as a result of adverse exchange rate movements during a

period in which we have an open position in an individual foreign currency. To evaluate the extent of our exchange

rate risk, a liquidity gap report for each currency is prepared. Gaps or mismatch of maturities can arise either

because of proprietary trading positions or due to a customer transaction resulting in a long or short position for

us.

We engage in trading activities in the foreign currency markets that expose us to exchange rate risks. In addition,

our foreign exchange business exposes us to foreign currency interest rate risks that arise from maturity

mismatches of foreign currency positions, and settlement risk, which is the risk of default by counterparties. We

mitigate these foreign exchange risks by setting counterparty limits and subjecting the overall foreign currency

positions to an overnight open exchange position limit that has been approved by the RBI. We also offer foreign

currency advances and deposits and foreign currency hedge instruments such as swaps, forwards, and currency

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options to customers, which are primarily banks and corporate customers, and we actively hedge exchange risks

arising out of these customer positions.

Operational risk

Operational risk is the risk of loss resulting from inadequate or failed internal processes, people or systems, or

external events. In general, some major sources of operational risk are process reliability, IT security, outsourcing

operations, dependence on key suppliers, fraud, error, regulatory compliance, and recruiting, training and

maintaining staff.

Our operational risk management framework is defined in the operational risk management policy approved by

the Board of Directors. To understand our operational risk exposure, we identify, assess and document the

operational risks inherent in all our material products, activities and process events. The framework comprises

identification, assessment, management and mitigation of risks through tools like incident reporting, loss

reporting, key operational risk indicators, risk and control self-assessment, and periodic risk identification and

controls evaluation. We have put in place a structure of well-defined policies, processes and procedures that are

designed to mitigate material operational risks.

Brief details of the Tier II bonds

Instruments Series -VII (A) Series - VII (B) Series - VIII Series - IX

Date of Allotment February 10, 2012 February 10, 2012 March 24, 2014 September 30, 2015

Date of Redemption February 10, 2018 February 10, 2022 March 24, 2024 September 30, 2025

Rate of Interest 11.40% 11.40% 11.80% 11.50%

Nature of Instrument Unsecured Redeemable Non-Convertible Subordinated Lower Tier II bonds

(“Tier II Bonds”)

Amount Subscribed

(` in million)

1,995 505 781 1,401

Face Value of the

Bond (` in million)

1 1 1 0.5

Optional call date

contingent call dates

and redemption

amount

The Bank has not reserved any call option to redeem these bonds prior to their maturity.

These bonds are redeemable at par.

Issuance, Trading

and Listing on

NSE

Credit Ratings


assigned the rating of “Single A Minus” by CARE. Instruments with this rating are considered to have adequate

degree of safety regarding timely servicing of financial obligations and carry low credit risk. Brickwork Ratings

India Private limited upgraded the rating of our unsecured redeemable Non-Convertible Subordinated Lower Tier

II bonds from BWR BBB+ (Triple B plus) to BWR A- (Single A minus), which indicate adequate degree of safety

regarding timely servicing of financial obligations and instruments with such ratings carry low credit risk.

Implementation of Indian Accounting Standards (“Ind AS”)

MCA notified the Companies (Indian Accounting Standards) Rules, 2015 on February 16, 2015, pursuant to which

the banking companies were exempted to comply with Ind AS for preparation of financial statements. However,

in terms of the MCA press release dated January 18, 2016, the scheduled commercial banks are required to prepare

Ind AS based financial statements on consolidated and standalone basis in relation to accounting period beginning

from April 1, 2018 onwards, with comparatives for the period ending March 31, 2018 or thereafter and not even

voluntarily before that. Further, pursuant to the notification dated February 11, 2016, RBI has advised scheduled

commercial banks to inter alia, set up a Steering Committee headed by an official of the rank of an Executive

Director (or equivalent) comprising members from cross-functional areas of the bank to immediately initiate the

Ind AS implementation process.

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Material Developments post September 30, 2016

Through notifications dated November 8, 2016 issued by the Ministry of Finance, GoI and the RBI, ₹ 500 and ₹

1,000 denominations of bank notes of then existing series issued by the RBI have ceased to be legal tender.

Pursuant to this currency demonetisation, these high denomination notes have no value and cannot be used for

transactions or exchange purposes with effect from November 9, 2016. These notes are currently being replaced

with a new series of bank notes. In an effort to monitor replacement of demonetised notes, the GoI has presently

specified restrictive limits for exchange and withdrawal of currency all over India. The process of demonetisation

and replacement of these high denomination notes may for the time being reduce the liquidity in the Indian

economy which has significant reliance on cash.

Owing to the de-monetisation our customers may have been transacting extensively with us since the

announcement. Such transactions may among others also include making deposits into the accounts maintained

by our customers.

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REGULATIONS AND POLICIES

The following is an overview of certain sector-specific Indian laws and regulations which are relevant to our

Bank’s business. Taxation statutes such as the Income Tax Act, labor laws such as Contract Labor (Regulation

and Abolition) Act, 1970 and other miscellaneous regulations and statutes such as the Trade Marks Act, 1999,

apply to us as they do to any other Indian company.

The description of laws and regulations set out below is not exhaustive, and is only intended to provide general

information to investors and is neither designed nor intended to be a substitute for professional legal advice. The

statements below are based on the current provisions of Indian law, and the judicial and administrative

interpretations thereof, which are subject to change or modification by subsequent legislative, regulatory,

administrative or judicial decisions.

The main legislation governing commercial banks in India is the Banking Regulation Act. Other important laws

include the Reserve Bank of India Act, the Negotiable Instruments Act, the SARFAESI Act and the Banker's Books

Evidence Act. Additionally, the RBI, from time to time, issues guidelines to be followed by banks. Banking

companies are also subject to the purview of the Companies Act, 2013 to the extent applicable, and Banks whose

equity shares are listed on the Stock Exchanges (such as ourselves), then various regulations of the SEBI would

additionally apply to such companies, including the Listing Regulations.

Reserve Bank of India Act, 1934

RBI may, subject to certain conditions, direct the inclusion or exclusion of any bank from the second schedule of

the RBI Act. Scheduled banks are required to maintain cash reserves with the RBI. In this regard, RBI may

stipulate an average daily balance requirement to be complied with by such banks and may direct that such banks

regard a transaction or class of transactions as a liability. Further, RBI may direct any banking company to submit

returns for the collection of credit information and may also furnish such information to a banking company upon

an application by such company. RBI has the power to impose penalties against any person for inter-alia failure

to produce any book, account or other document or furnish any statement, information or particulars which such

person is duty-bound to produce or furnish under the RBI Act, or any order, regulation or direction thereunder.

Banking Regulation Act, 1949

Commercial banks in India are required to obtain a license from the RBI to carry on banking business in India.

Such license is granted to the bank subject to compliance with certain conditions some of which include: (i) that

the bank has the ability to pay its present and future depositors in full as their claims accrue; (ii) that the affairs of

the bank will not be or are not likely to be conducted in a manner detrimental to the interests of present or future

depositors; (iii) that the bank has adequate capital structure and earnings prospects; and (iv) that public interest

will be served if such license is granted to the bank. The RBI has the power to cancel the license if a bank fails to

meet the conditions or if the bank ceases to carry on banking operations in India. Additionally, the RBI has issued

various reporting and record-keeping requirements for such commercial banks. The appointment of the auditors

of the banks is subject to the approval of the RBI. The RBI can direct a special audit in public interest, or in the

interest of the banking company, or in the interest of its depositors. It also sets out the provisions in relation to the

loan granting activities of a banking company. The Banking Regulation Act specifies the business activities in

which a bank may engage. Banks are prohibited from engaging in business activities other than the specified

activities. No shareholder in a bank can exercise voting rights on poll in excess of 10% of total voting rights of all

the shareholders of the bank. Pursuant to amendments to the Banking Regulation Act in January 2013, private

sector banks are permitted, subject to the guidelines framed by the RBI, to issue perpetual, redeemable or

irredeemable preference shares in addition to ordinary equity shares.

Further, the Banking Regulation Act, as amended, requires any person to seek prior approval of the RBI, to acquire

or agree to acquire, directly or indirectly, shares or voting rights of a bank, by himself or with persons acting in

concert, wherein such acquisition (taken together with shares or voting rights held by him or his relative or

associate enterprise or persons acting in concert with him) results in aggregate shareholding of such person to be

5% or more of the paid up capital of a bank or entitles him to exercise 5% or more of the voting rights in a bank.

Further, the RBI may, by passing an order, restrict any person holding more than 5% of the total voting rights of

all the shareholders of the banking company from exercising voting rights on poll in excess of the said 5%, if such

person is deemed to be not fit and proper by the RBI.

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Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 25% of the net

profit before appropriations. If there is an appropriation from this account, the bank is required to report the same

to the RBI within 21 days, explaining the circumstances leading to such appropriation.

Certain amendments also permit the RBI to establish a ‘Depositor Education and Awareness Fund’, which will

take over the bank’s deposit accounts that have not been claimed or operated for a period of 10 years or more. The amendments also confer power on the RBI (in consultation with the central government) to supersede the

board of directors of a banking company for a period not exceeding a total period of 12 months, in public interest

or for preventing the affairs of the bank from being conducted in a manner detrimental to the interest of the

depositors or any banking company or for securing the proper management of any banking company.

The appointment, re-appointment, or termination of the appointment of a chairman, managing director or whole-

time director, chief executive officer of a bank shall have effect only if it made with the previous approval of the

RBI. Further, no amendment in relation to the remuneration of the chairman, managing director, whole-time

director or any other director, chief executive officer shall have effect unless approved by the RBI. RBI is also

empowered to remove a chairman, managing director and whole-time directors from office on the grounds of

public interest, interest of depositors, securing the proper management. Moreover, RBI may order meetings of the

board of directors to discuss any matter in relation to the bank, appoint observers to such meetings, make such

changes to the management as it may deem necessary, and may also order the convening of a general meeting of

the bank’s shareholders to elect new directors.

The RBI may impose penalties on banks, directors and its employees in case of infringement of regulations under

the Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in the

contravention. The penalty may also include imprisonment. Banks are also required to disclose the penalty in their

annual report. Regulatory reporting and examination procedures

The RBI is empowered under the Banking Regulation Act to inspect a bank. The RBI monitors prudential

parameters at regular intervals. To this end and to enable off-site monitoring and surveillance by the RBI, banks

are required to report to the RBI on various aspects. The RBI conducts periodical on-site inspections on matters

relating to the bank's portfolio, risk management systems, internal controls, credit allocation and regulatory

compliance, at regular intervals. Further, the RBI also conducts on-site supervision of selected branches with

respect to their general operations and foreign exchange related transactions.

Maintenance of records

The Banking Regulation Act specifically requires banks to maintain books and records in a particular manner and

file the same with the Registrar of Companies on a periodic basis. The provisions for production of documents

and availability of records for inspection by shareholders as stipulated under the Companies Act and the rules

thereunder would apply to our Bank as in the case of any company. The master circular on “Know Your Customer

(KYC) norms/ Anti-Money Laundering (AML) Standards/ Combating of Financing of Terrorism (CFT)/

Obligation of banks under PMLA, 2002” issued by the RBI on July 1, 2014 also provides for transactional and

identification records to be maintained for a minimum period of ten years from date of transaction and ten years

from the cessation of relationship with the client respectively.

Regulations relating to the opening of branches

As per the “Relaxations in Branch Authorization Policy” dated August 6, 2015 read with circulars dated

September 19, 2013 and October 21, 2013, domestic scheduled commercial banks may open branches in Tier 1

to Tier 6 centres without permission from the RBI, subject to certain conditions. Prior approval from RBI is not

required to shift a branch to any location within the city, town or village. Permission of the RBI is not required

for installation of on-site ATMs. Since June 2009 the RBI has permitted installation of off-site ATMs at centres

identified by scheduled commercial banks, without the need for permission from the RBI in each case, provided

certain stipulated conditions are met. This is also subject to any direction which the RBI may issue, including for

closure/shifting of any such off-site/ mobile ATMs, wherever so considered necessary by it. Banks are required

to report full details of the off-site ATMs so installed. Further, private sector banks are required to ensure that at

least 25% of their total branches are in unbanked rural centres in Tier 5 and Tier 6 centres which do not have a

brick and mortar structure of any scheduled commercial bank for customer based banking transactions.

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Furthermore, the total number of branches opened in Tier 1 centres during the financial year cannot exceed the

total number of branches opened in Tier 2 to Tier 6 centres and all centres in the north eastern states and Sikkim.

Capital adequacy requirements

The RBI has set out the minimum capital adequacy standards for banks based on the guidelines of the Basel

Committee on Banking Supervision. Under the “Master Circular on Prudential Guidelines on Capital Adequacy

and Market Discipline- New Capital Adequacy Framework” dated July 1, 2015, a bank is required to maintain a

minimum total Capital to Risk Asset Ratio (“CRAR”) of 9% and Tier 1 CRAR of 7%.

Further, under “Guidelines on Implementation of Basel III Capital Regulations in India”, RBI has permitted Banks

to raise Additional Tier 1 (“AT1”) capital which may include inter-alia perpetual non-cumulative preference

shares that comply with regulatory requirements, debt capital instruments eligible for inclusion in AT1 capital and

that comply with regulatory requirements. One of the important criteria for AT1 instruments is that they should

have principal loss absorption through either (i) conversion into common shares at an objective pre-specified

trigger point or (ii) a write-down mechanism which allocates losses to the instrument at a pre-specified trigger

point.

The RBI also permits banks to raise Basel III compliant Tier II capital in the form of (i) debt capital instruments;

(ii) preference share capital instruments that could be perpetual cumulative preference shares, redeemable non-

cumulative preference shares (RNCPS), redeemable cumulative preference shares. These instruments also need

to have certain loss absorption features.

To further ensure compliance with the guidelines of Basel II, the RBI has set out compliance periods for banks to

transition into the Internal Ratings Based and Advanced Measurement Approach methods of risk assessment.

Under the RBI’s guidelines, banks were to submit their revised methodologies by April 1, 2012 and RBI was to

submit their revised roadmap for transition to these methodologies.

The RBI Basel III guidelines were introduced in May 2012 and become effective from April 1, 2013 in a phased

manner. In March 2013, the RBI deferred the implementation of credit valuation adjustment risk capital charges

to January 1, 2014 due to certain issues related to introduction of mandatory forex forward guaranteed settlement

through a central counterparty. On December 31, 2013, RBI further extended the abovementioned implementation

timeline to April 1, 2014. Basel III capital regulations will be fully implemented by March 31, 2018.

Liquidity coverage ratio

The Basel III Framework on Liquidity Standards introduced two liquidity ratios i.e. Liquidity Coverage Ratio

(“LCR”) and Net Stable Funding Ratio (“NSFR”) as well as liquidity risk monitoring tools. In June 2014, the

RBI issued guidelines in relation to LCR, liquidity risk monitoring tools and LCR disclosure standards pursuant

to the publication of the ‘Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools’ in January

2013 and the ‘Liquidity Coverage Ratio Disclosure Standards’ in January 2014 by the Basel Committee On

Banking Supervision, which provided enhanced guidance on liquidity, risk governance, measurement, monitoring

and reporting to the RBI on liquidity positions. The guidelines stipulate that banks are to ensure a LCR of 60%

for the calendar year 2015 with effect from January 1, 2015 and will be expected to transition to a LCR of 100%

in January 2019. The Basel Committee on Banking Supervision issued the final rules on ‘Net Stable Funding

Ratio’ in October 2014. RBI has issued draft guidelines on NFSR on May 28, 2015. RBI proposes to make NSFR

applicable to banks in India from January 1, 2018.

Prudential norms on income recognition, asset classification and provisioning pertaining to advances

(“Prudential Norms”)

The RBI, pursuant to its Master Circular on Prudential Norms issued on July 1, 2015, classifies NPAs into (i) sub-

standard assets; (ii) doubtful assets; and (iii) loss assets. These guidelines specify provisioning requirements

specific to the classification of the assets.

In July 2005, the RBI issued guidelines on sales and purchases of NPAs between banks, financial institutions and

NBFCs. These guidelines require that the board of directors of a bank must establish a policy for purchases and

sales of NPAs. An asset must have been classified as non-performing for at least two years by the seller bank to

be eligible for sale. In October 2007, the RBI issued guidelines regarding valuation of NPAs being put up for sale.

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Further, the RBI pursuant to the circular on Prudential Norms has decided that banks should maintain provisioning

coverage ratio, including floating provisions, of at least 70.00%.

The RBI revised the “Prudential Guidelines on Restructuring of Advances by Banks and Financial Institutions”

on May 30, 2013. Pursuant to those guidelines, from April 1, 2015 advances that are restructured would be

immediately classified as sub-standard on restructuring and the nonperforming assets, upon restructuring, would

continue to have the same asset classification as prior to restructuring and slip into further lower asset classification

categories as per the extant asset classification norms with reference to the pre-restructuring repayment schedule.

The general provision required on restructured standard accounts would be increased as following:

(a) 3.50% with effect from March 31, 2014 (spread over the four quarters of 2013-2014);

(b) 4.25% with effect from March 31, 2015 (spread over the four quarters of 2014-2015); and

(c) 5% with effect from March 31, 2016 (spread over the four quarters of 2015-2016).

Corporate debt restructuring mechanism (“CDR system”)

The institutional mechanism for restructuring has been set up through establishment of the CDR system in 2001.

It is a joint forum of all banks and financial institutions and operates as a non-judicial body. The CDR system

operates on the principle of super-majority amongst the participating banks and financial institutions for a

particular advance. The Prudential Norms as mentioned above equally apply to the accounts restructured under

the CDR system.

Scheme for Sustainable Structuring of Stressed Assets (“Scheme for Stressed Assets”)

The RBI has formulated the Scheme for Stressed Assets as an optional framework for the resolution of large

stressed accounts. The Scheme for Stressed Assets envisages determination of the sustainable debt level for a

stressed borrower, and bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity

instruments.

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“RDDBFI Act”) The RDDBFI Act was enacted for adjudication of disputes pertaining to debts due to banks and financial

institutions exceeding ` 1 million. The RDDBFI Act provides for the constitution of debt recovery tribunals,

before which banks and financial institutions may file applications for recovery of debts. Further, no court or other

authority, except the Supreme Court or a High Court exercising jurisdiction under Articles 226 and 227 of the

Constitution of India, shall have, or is entitled to exercise, any jurisdiction, powers or authority in relation to the

aforementioned matter. The tribunals may pass orders for directions including inter- alia recovery of such dues by

the bank as may be deemed fit along with a recovery certificate to such effect from the presiding officer of the

respective tribunal; attachment of the secured properties towards the dues to the bank: injunctive orders restraining

the debtors from alienating, transferring or disposing of such secured properties; appointment of receivers and/or

local commissioners with respect to such secured properties and distribution of proceeds from sale of such secured

properties towards dues. Pursuant to the recovery certificate being issued, the recovery officer of the respective

debt recovery tribunal shall effectuate the final orders of the debt recovery tribunal in the application. Unless such

final orders of the debt recovery tribunal have been passed with the consent of the parties to an application, an

appeal may be filed against such final orders of the debt recovery tribunal before the debt recovery appellate

tribunal, which is the appellate authority constituted under the RDDBFI Act.

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

(“SARFAESI Act”)

The SARFAESI Act provides for sale of financial assets by banks and financial institutions to asset reconstruction

companies. The Act enables the enforcement of security interest created in favour of a secured creditor, without

the intervention of court or tribunal. Further, a secured creditor may, under certain conditions, also take over the

management of the business of the borrower including the right to transfer by way of lease, assignment or sale for

realising the secured asset. The Prudential Norms issued by the RBI describe the process to be followed for sale

of financial assets to asset reconstruction companies. The banks may not sell financial assets at a contingent price

with an agreement to bear a part of the shortfall on ultimate realisation. However, banks may sell specific financial

assets with an agreement to share in any surplus realised by the asset reconstruction company in the future.

Consideration for the sale may be in the form of cash, bonds or debentures or security receipts or pass-through-

certificates issued by the asset reconstruction company or trusts set up by it to acquire the financial assets.

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Pursuant to the amendment of the SARFAESI Act in January 2013, means for recovery of assets available to

banks and financial institutions have been strengthened. Further, banks and financial institutions have been

empowered to bid and purchase immovable property in full or partial satisfaction of the bank’s claim against the

defaulting borrower at any subsequent sale, if they cannot find a buyer for the securities. The amendment also

enables banks and financial institutions to enter into a settlement or compromise with the borrower and empowers

DRTs to pass an order acknowledging any such settlement or compromise. Priority sector lending

The RBI circular on “Priority Sector Lending- Targets and Classification” dated July 7, 2016 sets out the broad

policy in relation to priority sector lending. In accordance with this circular, the priority sectors for all scheduled

banks include (i) agriculture; (ii) micro, small and medium enterprises (“MSMEs”); (iii) education; (iv) housing,

(v) social infrastructure; (vi) export credit; and (vii) renewable energy. Under the RBI guidelines, the priority

sector lending targets are linked to Adjusted Net Bank Credit (“ANBC”) (outstanding bank credit minus bills

rediscounted with RBI and other approved Financial Institutions plus permitted non SLR bonds/debentures under

Held to Maturity category plus other investments eligible to be treated as part of priority sector lending (e.g.

investments in securitised assets)) or credit equivalent amount of off-balance sheet exposure, whichever is higher,

as on March 31 of the previous year. Currently, the total priority sector lending target for domestic banks is 40%

of ANBC or credit equivalent amount of off-balance sheet exposure, whichever is higher.

Exposure norms

As a prudent measure aimed at better risk management and avoidance of concentration of credit risk, the RBI has

prescribed credit exposure limits for banks and long-term lending institutions in respect of their lending to

individual borrowers and to all companies in a single group (or sponsor group). The RBI has prescribed exposure

ceiling for a single borrower as 15% of capital funds and group exposure limit as 40% of capital funds. Relaxations

are permitted in exceptional circumstances and if lending to the infrastructure sector. The total exposure to a single

NBFC has been limited to 10% of the bank’s capital funds while exposure to non-banking asset finance company

has been restricted to 15% of the bank’s capital funds. The limit may be increased to 15% and 20%, respectively,

provided that the excess exposure is on account of funds lent by the NBFC to the infrastructure sector.

The aggregate exposure of a bank to the capital markets in all forms (both fund based and non-fund based) should

not exceed 40% of its net worth, on both standalone and consolidated basis as on March 31 of the previous year.

Short-selling of Government securities

As per the “Master Circular on Prudential Norms for Classification, Valuation and Operation of Investment

Portfolio by Banks” dated July 1, 2015, banks and primary dealers are allowed to undertake short sale of

government dated securities, subject to the short position being covered within a maximum period of three months,

including the day of trade. Further, such short positions shall be covered only by outright purchase of an equivalent

amount of the same security or through a long position in the ‘when issued market’ or allotment in primary auction.

Regulations relating to interest rates on Rupee deposits held in domestic, Ordinary Non-Resident (“NRO”) and

Non-Resident (External) (“NRE”) accounts

As per the master circular on “Interest Rates on Rupee Deposits held in Domestic, Ordinary Non-Resident (NRO)

and Non-Resident (External) (NRE) Accounts”, dated July 1, 2014, the RBI has permitted banks to independently

determine their interest rates on savings and term deposits (minimum period of 7 days) under domestic/NRO

accounts. Banks are also free to determine interest rates for savings deposits and term deposits of maturity of one

year and above under NRE deposit accounts. However, interest rates offered by banks on NRO and NRE deposits

cannot be higher than those offered by them on comparable domestic rupee deposits.

Deposit insurance

Demand and time deposits of up to ` 100,000 accepted by Indian banks (other than primary co-operative societies)

have to be mandatorily insured with the Deposit Insurance and Credit Guarantee Corporation, a wholly-owned

subsidiary of the RBI. Banks are required to pay the insurance premium for the eligible amount to the Deposit

Insurance and Credit Guarantee Corporation on a half yearly basis. The cost of the insurance premium cannot be

passed on to the customer.

151

Prevention of Money Laundering Act, 2002

In order to prevent money laundering activities the PMLA was enacted which seeks to prevent money laundering

and to provide for confiscation of property derived from, or involved in money laundering, and for incidental

matters connected therewith. Section 12 of the PMLA casts certain obligations on, inter alia, banking companies

in relation to preservation and reporting of customer account information. The RBI has advised all banks to go

through the provisions of the PMLA and the rules notified thereunder and to take all steps considered necessary

to ensure compliance with the requirements of section 12 of the PMLA.

Regulations relating to KYC and anti-money laundering

The RBI issued the “Reserve Bank of India (Know Your Customer (KYC) Directions, 2016” on February 25,

2016 consolidating the guidelines for KYC and anti-money laundering procedures. Banks are not permitted to

make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are

presented beyond the period of three months from the date of such instrument. Further, banks are required to

frame their KYC policies incorporating (i) customer acceptance policy, (ii) customer identification procedures,

(iii) monitoring of transactions and (iv) risk management.

Regulations relating to maintenance of statutory reserves

A bank is required to maintain, on a daily basis, CRR, which is a specified percentage of its DTL, excluding

interbank deposits, by way of a balance in a current account with the RBI. At present the required CRR is 4%.

The RBI does not pay any interest on CRR balances. The CRR has to be maintained on an average basis for a

fortnightly period and the minimum daily maintenance of CRR should be 90% effective from fortnight beginning

April 16, 2016. The RBI may impose penal interest at the rate of 3% above the bank rate on the amount by which

the reserve falls short of the CRR required to be maintained on a particular day. If the shortfall continues further

the penal interest charged shall be increased to a rate of 5% above the bank rate in respect of each subsequent day

during which the default continues.

In addition to the CRR, a bank is required to maintain SLR, a specified percentage of its NDTL by way of liquid

assets like cash, gold or approved unencumbered securities. The percentage of this liquidity ratio is fixed by the

RBI from time to time, pursuant to Section 24 of the Banking Regulation Act. At present, the RBI requires banks

to maintain SLR of 21.5%. Further, the RBI has permitted banks to avail funds from the RBI on an overnight

basis, under the marginal standing facility, against their excess SLR holdings. Additionally, they can also avail

themselves of funds, on an overnight basis below the stipulated SLR, up to 2% of their respective NDTL

outstanding at the end of the second preceding fortnight.

As per RBI Circular RBI/2015-16/262-DBR No Ref BC.64/12.01.001/2015-16 dated December 10, 2015, as

announced in the Fourth Bi- Monthly Monetary Policy statement 2015-16 by the RBI on September 29, 2015, it

has been decided to reduce the SLR from 21.5 % of their Net Demand and Time Liabilities (NDTL) to 21.25%

from April 2, 2016, 21.0% from July 9, 2016, 20.75% from October 1, 2016 and 20.50% from January 7, 2017.

Regulations relating to authorised dealers for foreign exchange and cross-border business transactions

The foreign exchange and cross border transactions undertaken by banks are subject to the provisions of the

Foreign Exchange Management Act. All branches should monitor all non-resident accounts to prevent money

laundering. The RBI master circular on “External Commercial Borrowings and Trade Credits”, dated January 1,

2016, states that no financial intermediary, including banks, will be permitted to raise external commercial

borrowings or provide guarantees in favour of overseas lenders for external commercial borrowings.

The RBI master circular on “Risk Management and Interbank Dealings”, dated July 5, 2016, states that all

categories of overseas foreign currency borrowings of banks, including existing external commercial borrowings

and loans or overdrafts from their head office, overseas branches and correspondents and overdrafts in nostro

accounts (not adjusted within five days), shall not exceed 100% of their unimpaired Tier I capital or USD $ 10

million (or its equivalent), whichever is higher. Overseas borrowings for the purpose of financing export credit,

subordinated debt placed by head offices of foreign banks with their branches in India as Tier II capital, capital

funds raised/ augmented by the issue of innovative perpetual debt instruments and any other overseas borrowings

with the specific approval of the RBI would continue to be outside the limit of 100%.

152

Secrecy obligations

A bank’s obligations relating to maintaining secrecy arise out of Section 13 of the Banking Companies

(Acquisition and Transfer of Undertakings) Act, 1980 (for public sector banks specifically) and common law

principles governing its relationship with its customers. Further, according to the Master Circular on Customer

Service dated July 1, 2013, wherever banks desire to collect information for purposes other than KYC

requirements, it should not form part of the account opening form. Subject to certain exceptions, a bank cannot

disclose any information to third parties. Further, the RBI may, in the public interest, publish the information

obtained from the bank.

Foreign ownership restrictions

The total foreign ownership in an Indian private sector bank cannot exceed 74.00% (49.00% under the automatic

route and beyond 49.00% and up to 74.00% under the approval route) of the paid-up capital subject to guidelines

for setting up branches or subsidiaries of foreign banks issued by the RBI. Section 12 of the Banking Regulation

Act prohibits any shareholder of the bank from exercising voting rights on poll in excess of 10.00% of total voting

rights of all the shareholders of the bank. However, the RBI may increase this ceiling to 26.00% in a phased

manner.

The “Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016” (“Directions on Ownership”)

dated May 12, 2016, envisages diversified shareholding in private sector banks by a single entity/corporate

entity/group of related entities. Pursuant to the Directions on Ownership, ownership limits for all shareholders in

the private sector bank in the long run shall be stipulated under two broad categories: (i) natural persons

(individuals) and (ii) legal persons (entities/institutions). Further, separate limits are now stipulated for (i) non-

financial and (ii) financial institutions; and among financial institutions, for diversified and non-diversified

financial institutions. The voting rights are capped at 15.00% or as notified by the Reserve Bank from time to

time.

The approval of RBI is required for the acquisition or transfer of the shares of our private sector banks, which take

the aggregate holding (direct and indirect, beneficial or otherwise) of an individual, his relatives, associate

enterprises and persons acting in concert with him to 5.00% or more of the bank’s total paid up share capital or

entitles him to exercise 5.00% or more of the total voting rights of the bank, in accordance with the terms of the

“Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)

Directions, 2015”.

Issue of shares by private sector banks

The “Reserve Bank of India (Issue and Pricing of Shares by Private Sector Banks) Directions, 2016” provides

general permission for issue of shares by private sector banks through the routes mentioned therein subject to

certain conditions, inter alia: the issue of shares is required to be in compliance with the Companies Act, 2013

and SEBI regulations; the issue of shares has the approval from the bank’s board or shareholders, as may be

required under the Companies Act 2013 or applicable SEBI regulations.

Downstream investment by banks

In accordance with the Consolidated Foreign Direct Investment Policy effective from June 7, 2016, issued by the

Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India,

downstream investments made by a banking company, as defined in section 5 (C) of the Banking Regulation Act,

incorporated in India, which is owned or controlled by non-residents/ non-resident entity under corporate debt

restructuring, or other loan restructuring mechanism, or in trading books, or for acquisition of shares due to

defaults in loans, shall not count towards indirect foreign investment.

Regulation of financial services provided by banks

The “Reserve Bank of India (Financial Services provided by Banks) Directions, 2016” dated May 26, 2016 require

banks to comply with certain restrictions while undertaking financial services including in relation to risk

mitigation measures, limits on investment that can be made by banks in companies undertaking financial services.

The directions also provide for specific regulations for certain financial services such as, inter alia, setting of an

infrastructure debt fund, underwriting activities, mutual fund business, insurance.

153

Guidelines for merger and amalgamation of private sector banks

The “Reserve Bank of India (Amalgamation of Private Sector Banks) Directions, 2016” dated April 21, 2016

relate to: (i) an amalgamation of two banking companies; and (ii) an amalgamation of a NBFC with a banking

company. In the case of an amalgamation of two banking companies, the draft scheme of amalgamation must be

approved by the board and majority of the shareholders of each of the banking companies. Additionally, such

approved draft scheme must also be submitted to the RBI for sanction.

Where a NBFC is proposed to be amalgamated into a banking company, the banking company should obtain the

approval of the board and the RBI before it is submitted to the relevant high court for approval.

Guidelines on management of intra-group transactions and exposures

The RBI issued the “Guidelines on Management of Intra-Group Transactions and Exposures” on February 11,

2014. Pursuant to the said guidelines, RBI has prescribed quantitative limits on financial intra-group transactions

and exposures and prudential measures for the non-financial intra-group transactions and exposures. The objective

of these guidelines is to ensure that banks engage in intra-group transactions and exposures in safe and sound

manner in order to contain concentration and contagion risks arising out of such transactions.

Capital and provisioning requirements for exposures to entities with unhedged foreign currency exposure

RBI issued a circular relating to “Capital and Provisioning Requirements for Exposures to entities with Unhedged

Foreign Currency Exposure” on January 15, 2014. Pursuant to these guidelines, RBI has introduced incremental

provisioning and capital requirements for bank exposures to entities with unhedged foreign currency exposures.

The circular also lays down the method of calculating the incremental provisioning and capital requirements. The

banks will be required to calculate the incremental provisioning and capital requirements at least on a quarterly

basis. This framework became fully effective from April 1, 2014.

Framework for revitalising distressed assets in the economy

RBI issued the framework for revitalising distressed assets in the economy on January 30, 2014 which lays down

the corrective action plan that will incentivise early identification of problem cases, timely restructuring of

accounts which are considered to be viable, and taking prompt steps by banks for recovery or sale of unviable

accounts. The salient features of this framework include, inter alia, (a) early formation of a lenders’ committee

with timelines to agree to a plan for resolution, (b) incentives for lenders to agree collectively and quickly to a

plan - better regulatory treatment of stressed assets if a resolution plan is underway, accelerated provisioning if

no agreement can be reached, and (c) independent evaluation of large value restructurings mandated, with a focus

on viable plans and a fair sharing of losses (and future possible upside) between promoters and creditors. This

framework became fully effective on April 1, 2014.

Guidelines on the reporting requirement under Foreign Account Tax Compliance Act (“FATCA”) and

Common Reporting Standards (“CRS”)

In 2010, USA enacted a law known as Foreign Account Tax Compliance Act (“FATCA”) with the objective of

tackling tax evasion through obtaining information in respect of offshore financial accounts maintained by USA

residents and citizens. The provisions of FATCA essentially provide for 30% withholding tax on US source

payments made to Foreign Financial Institutions unless they enter into an agreement with the Internal Revenue

Service to provide information about accounts held with them by USA persons or entities controlled by USA

persons. India has signed the Inter-Governmental Agreement (“IGA”) with the USA on July 9, 2015, for

improving international tax compliance and implementing the FATCA.

The Reserve Bank of India issued “Reporting requirement under Foreign Account Tax Compliance Act (FATCA)

and Common Reporting Standards (CRS)” dated August 28, 2015. This reporting requirement has to be read with

the amendment to the Income Tax Rules, 1962 (“Rules”) vide notification dated August 7, 2015 issued by the

Central Board of Direct Taxes which have added Rule 114F (definitions), 114G (Information to be maintained

and reported) and 114H (due diligence requirement) to the Rules for operationalisation of IGA and CRS. All the

concerned financial institutions (as defined under the Rules) should refer to the amended Rules and take steps for

complying with the reporting requirements.

Framework for dealing with Domestic Systemically Important Banks

154

The Reserve Bank had issued the Framework for dealing with Domestic Systemically Important Banks (“D-

SIBs”) on July 22, 2014. The D-SIB Framework requires the Reserve Bank to disclose the names of banks

designated as D-SIBs every year in August starting from August 2015. The Framework also requires that D-SIBs

may be placed in four buckets depending upon their Systemic Importance Scores (“SISs”). Based on the bucket

in which a D-SIB is placed, an additional common equity requirement has to be applied to it, as mentioned in the

D-SIB Framework. The D-SIB Framework specifies a two-step process of identification of D-SIBs. In the first

step, the sample of banks to be assessed for systemic importance has to be decided. The selection of banks in the

sample for computation of SIS is based on analysis of their size as a percentage of annual GDP. he additional

Common Equity Tier 1 requirements applicable to D-SIBs will be applicable from April 1, 2016 in a phased

manner and would become fully effective from April 1, 2019.

The Banking Ombudsman Scheme, 2006

The Banking Ombudsman Scheme, 2006 provides the extent and scope of the authority and functions of the

Banking Ombudsman for redressal of grievances against deficiency in banking services, concerning loans and

advances and other specified matters. On February 3, 2009, the said scheme was amended to provide for revised

procedures for redressal of grievances by a complainant under the scheme.

Declaration of dividend by banks

The payment of dividends by banks is subject to restrictions under the Banking Regulation Act. Section 15(1) of

the Banking Regulation Act states that no banking company may pay any dividend on its shares until all its

capitalised expenses (including preliminary expenses, organisation expenses, share-selling commissions,

brokerage, amounts of losses incurred and any other item of expenditure not represented by tangible assets) have

been completely written off. In addition, Section 17(1) of the Banking Regulation Act requires every banking

company to create a reserve fund and, out of the balance of the profit of each year as disclosed in the profit and

loss account, transfer a sum equivalent to not less than 20.00% of such profit to the reserve fund before declaring

any dividend. Further, in May 2005, the RBI issued guidelines on Declaration of Dividends by Banks, which

prescribed certain conditions for declaration of dividends by banks.

Consolidated Supervision Guidelines

In 2003, the RBI issued guidelines for consolidated accounting and consolidated supervision for banks. These

guidelines became effective on August 1, 2003. The principal features of these guidelines are:

Consolidated financial statements: Banks are required to annually prepare consolidated financial statements

intended for public disclosure.

Consolidated prudential returns: Banks are required to submit to the RBI, at periodic intervals, consolidated

prudential returns reporting their compliance with various prudential norms on a consolidated basis, excluding

insurance subsidiaries.

Marginal Cost of Funds based Lending Rate (“MCLR”)

Pursuant to the notification issued by RBI dated December 17, 2015, all rupee loans sanctioned and credit limits

renewed with effect from April 1, 2016 are to be priced with reference to the MCLR which is the internal

benchmark for such purposes. MCLR comprise of: (a) marginal cost of funds; (b) negative carry on account of

CRR; (c) operating costs and; (d) tenor premium. In terms of the notification, the board of directors of the banks

are required to adopt a policy delineating the components of spread charged to a customer. Actual lending rates

are to be determined by adding the components of spread to the MCLR. Further, no lending below the MCLR of

a particular maturity for all loans linked to that benchmark is permitted. The aforementioned notification provides

exemption to certain loans from being linked to MCLR as the benchmark for determining interest rate. Further,

the aforementioned notification also provides for review of MCLR, reset of interest rates, treatment of interest

rates linked to base rate charged to existing borrowers and mandates all the banks to move to the MCLR based

pricing from April 1, 2016.

Regulations relating to making loans and advances

155

The provisions of the Banking Regulation Act govern the making of loans by banks in India. In addition, the RBI

also issues directions in relation to the loan activities of banks. Some of the major requirements that banks are to

observe are as follows:

The RBI has prescribed norms for banks lending to non-bank financial companies and the financing of public

sector disinvestment.

RBI introduced the “MCLR” in the place of “Base Rate” with effect from April 1, 2016 for all loans and

advances. However, those advances sanctioned up to March 31, 2016 which come for renewal subsequently

i.e. from April 1, 2016, MCLR will be applicable. Pursuant to the notification issued by RBI dated December

17, 2015, all rupee loans sanctioned and credit limits renewed with effect from April 1, 2016 are to be priced

with reference to the MCLR which is the internal benchmark for such purposes. MCLR comprises of: (a)

marginal cost of funds; (b) negative carry on account of CRR; (c) operating costs and; (d) tenor premium.

The Notification mandates that, the board of directors of the banks shall adopt a policy delineating the

components of spread charged to a customer. Actual lending rates are to be determined by adding the

components of spread to the MCLR. Further, no lending below the MCLR of a particular maturity for all

loans linked to that benchmark is permitted. The aforementioned notification provides exemption to certain

loans from being linked to MCLR as the benchmark for determining interest rate. Further, the Notification

also provides for review of MCLR, reset of interest rates, treatment of interest rates linked to base rate

charged to existing borrowers and mandates all the banks to move to the MCLR based pricing from April 1,

2016.

Section 21A of the Banking Regulation Act provides that the rate of interest charged by a bank shall not be

reopened by any court on the ground that the rate of interest charged by a bank is excessive. The Banking

Regulation Act provides for protection to banks for interest rates charged by them.

Section 20 of the Banking Regulation Act provides that banks shall not grant loans on the security of their

own shares. Further, banks cannot grant loans or advances to or on behalf of their directors.

Classification and Reporting of Fraud Cases

The RBI issued a master circular on July 1, 2016 in relation to the classification and reporting of fraud cases. The

circular classifies fraud cases into: (i) misappropriation and criminal breach of trust; (ii) fraudulent encashment

through forged instruments, manipulation of books of account or through fictitious accounts and conversion of

property; (iii) unauthorized credit facilities extended for reward or for illegal gratification; (iv) negligence and

cash shortages; (v) cheating and forgery; (vi) irregularities in foreign exchange transactions and; (vii) any other

type of fraud not coming under the specific heads as above. Information relating to frauds for the quarters ending

June, September and December may be placed before the audit committee of the board of directors during the

month following the quarter to which it pertains, irrespective of whether or not these are required to be placed

before the board/management committee in terms of the calendar of reviews prescribed by the RBI. Banks are

also required to conduct an annual review of the frauds and place a note before the board of directors for

information. The reviews for the year-ended March may be put up to the Board before the end of the next quarter

i.e. for the quarter ended June 30 and such reviews need not be sent to RBI. These may be preserved for verification

by the Reserve Bank’s inspecting officers. Further, the circular requires all banks to constitute a special committee

for monitoring and follow up of cases of frauds involving amounts of `10 million and above exclusively, while

the audit committee may continue to monitor all cases of fraud in general. The special committee is required to

review such fraud cases as and when they come to light. The special committee in case of private sector banks

should consist of two members of the audit committee of the board and two members from the Board excluding

the RBI nominee.

Liquidity Adjustment Facility

Liquidity Adjustment Facility (“LAF”) is a facility extended by RBI to scheduled commercial banks (excluding

Regional Rural Banks) and primary dealers to avail of liquidity in case of requirement or park excess funds with

the RBI in case of excess liquidity on an overnight basis against government securities as collateral. Therefore,

LAF enables liquidity management on a day to day basis and enables RBI to transmit interest rate signals to the

market. The operations of LAF are conducted by way of repurchase agreements with RBI being the counter-party

to all the transactions. The interest rate in LAF is fixed by the RBI from time to time. LAF is an important tool of

monetary policy.

156

Collateralised Borrowing and Lending Obligation

Collateralised Borrowing and Lending Obligation (“CBLO”) is a money market instrument operated by the

Clearing Corporation of India Limited (“CCIL”), for entities that either have no access to inter-bank call money

market or have restricted access due to ceilings on call borrowing and lending transactions. By participating in the

CBLO market, CCIL members can borrow or lend funds against the collateral of eligible securities. Eligible

securities include central government securities including treasury bills, and such other securities as specified by

CCIL from time to time. Borrowers under CBLO have to deposit the required amount of eligible securities with

the CCIL based on which CCIL fixes the borrowing limits. CCIL matches the borrowing and lending orders

submitted by the members and notifies them. While the securities held as collateral are in custody of the CCIL,

the beneficial interest of the lender on the securities is recognized through proper documentation.

Moratorium, reconstruction and amalgamation of banks

A high court may, upon the application by a banking company which is temporarily unable to meet its obligations,

make an order staying the commencement or continuance of all actions and proceedings against a bank for a fixed

period of time on such terms and conditions as it shall think fit and proper, and may from time to time extend it

for a total moratorium period not exceeding six months. The said application is required to be accompanied by a

report by the RBI that, in its opinion, the said banking company will be able to pay its debts if the application is

granted. Further, the RBI may also make an application to the central government for an order of moratorium.

During the said moratorium, the RBI may prepare a scheme for the reconstruction of a banking company or for

the amalgamation of the banking company with any other banking institution if it is satisfied that it is necessary:

a) in public interest, b) in interests of depositors, c) to secure the proper management of the banking company, d)

in interests of the banking system of the country as a whole. The RBI may make modifications to the draft scheme

pursuant to receipt of suggestions and objections from the banking company, the transferee bank or any other

banking company concerned in the amalgamation, and from any members, depositors or other creditors of each

of the banks concerned. The central government may sanction the scheme with or without such modifications.

IRDA (Registration of Corporate Agents) Regulations, 2015 (“RCA Regulations”)

The RCA Regulations define applicant widely to include companies, LLPs, co-operative societies, banking

companies, NGOs and any other person recognized by the IRDAI to act as a corporate agent. There are different

categories of corporate agents envisaged by the RCA Regulations such as life, general, health and composite. The

RCA Regulations cover registration of applicants who are registered as corporate agents for the purpose of

soliciting, procuring and servicing of insurance business of life insurers, general insurers and health insurers

during the validity of their certificate of registration. It lays down the forms and fees that are required to be

filled/paid by the applicant for registration and renewal. While considering the application, the IRDAI shall take

into account whether the applicant is suffering from any disqualifications under the Insurance Act, 1938, whether

he has the necessary infrastructure, whether any person directly/indirectly connected with the applicant has been

refused a license, whether the applicant has fulfilled the required academic qualifications and hours of theoretical

and practical training along with other conditions. Once the registration is issued, it shall be valid for a period of

three years from the date of issue. The RCA Regulations also lay down several conditions in accordance to which

the corporate agent has to operate.

Submission of credit information

According to the Credit Information (Companies) Regulation Act, 2005 (“CICRA”), a “credit institution” means

a banking company and every credit institution shall become a member of at least one Credit Information

Company (“CIC”). A CIC, may, by notice in writing, require its members to furnish such credit information as it

may deem necessary. Further, RBI, through its notification dated January 15, 2015, has directed that: a) all credit

institutions shall become members of all CICs and submit data, including historical data, to them, b) credit

institutions shall keep the credit information collected/ maintained by them, updated regularly on a monthly basis

or at such shorter intervals as may be mutually agreed upon between the credit institution and the CIC under the

CICRA.

Implementation of Indian Accounting Standards (“Ind AS”)

As per RBI circular DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016, banks have been directed to

be in preparedness to submit proforma Ind AS financial statements to RBI from the half-year ended September

157

30, 2016. Further, RBI vide its circular DBR.BP.BC.No 106/21.07.001/2015-16 dated June 23, 2016 furnished

the formats for balance sheet, profit and loss account and notes.

158

BOARD OF DIRECTORS AND SENIOR MANAGEMENT

Board of Directors

The composition of our Board is governed by the provisions of the Companies Act, the Banking Regulation Act,

and our Articles of Association. As per the provisions of our Articles of Association, the Board shall comprise of

not less than 3 Directors and not more than 15 Directors. The Directors appointed by Reserve Bank of India will

not be counted for determining the maximum strength of the Board as per Section 36AB of the Banking Regulation

Act, 1949 and hence their number will be excluded for determining the maximum number of Directors on the

Board of our Bank and for the purposes of compliance with corporate governance requirements. We currently

have 13 Directors on our Board, of which 2 Directors are Executive Directors, 3 Directors are Non-executive and

Non-Independent Director, 6 Directors are Independent Directors. Further, 2 Directors are RBI Nominees.

Further, not less than 51% of the total number of Directors shall be persons who satisfy the conditions laid down

in Section 10A of the Banking Regulation Act, 1949. Out of the aforesaid number of Directors, not less than two

Directors are required to have specialized knowledge or practical experience in agriculture and rural economy,

cooperation or small-scale industry. Also, not less than 51% of the Directors, shall be persons who do not have

substantial interest in, or be connected with, whether as an employee, manager or managing agent, of any company

(not being a company registered under Section 25 of the Companies Act, 1956 or Section 8 of the Companies Act,

2013) or firm which carries on any trade, commerce or industry which is not a small scale industrial concern, or

be proprietors of any trading, commercial or industrial concern which is not a small scale industrial concern.

Under the Banking Regulation Act, the appointment or re-appointment of part-time Chairman and whole-time

Directors requires the approval of the RBI. The RBI has also prescribed “fit and proper” criteria to be considered

when appointing or re-appointing directors of banks, with the Bank’s Directors being required to make

declarations confirming their on-going compliance with such criteria. As on date of this Placement Document, the

Board of Directors of our Bank is in compliance with the above mentioned conditions.

The following table sets forth details of our board of directors at the date of this Preliminary Placement Document:

Sr.

No.

Name, Address, Age and Term

DIN Occupation Designation

1. Mr. Parthasarathi Mukherjee

Address: The Lakshmi Vilas Bank Limited

Corporate Office,

“LVB HOUSE” No.4, Sardar Patel Road,

Guindy, Chennai - 600032

Age: 56

Term: For a period of three years from

January 25, 2016

02446180 Service Managing Director &

Chief Executive Officer

2. Mr. N. S. Venkatesh

Address: The Lakshmi Vilas Bank Limited

Corporate Office,

“LVB HOUSE” No.4, Sardar Patel Road,

Guindy, Chennai - 600032

Age: 59

Term: For a period of three years from July

1, 2016

01893686 Service Executive Director and

Chief Financial Officer

(Whole-time Director)

3. Mr. K.R. Pradeep

Address:

20, “Eden Park”, 101, 1st Floor,

00153097 Profession Non-Executive and Non-

Independent Director

159

Sr.

No.



Vittal Mallya Road,

Bengaluru – 560 001,

Karnataka, India

Age: 56

Term#: Appointed on February 27, 2009

Liable to retire by rotation

4. Mr. S. G. Prabhakharan

Address: “Pebble Green”,

No.14, Sterling Avenue,

Sakthi Nagar, Porur,

Chennai – 600 116,

Tamil Nadu, India

Age: 61

Term#: Appointed on June 23, 2009 Liable

to retire by rotation

00005140 Business Non-Executive and Non-


5. Mr. N. Malayalaramamirtham

Address: No. 48, Vasavi Nagar,

L.N.S. Post,

Karur – 639 002,

Tamil Nadu, India

Age: 67

Term#: Appointed on March 7, 2014 Liable

to retire by rotation

06846587 Business Non-Executive and Non-


6. Mr. S. Dattathreyan

Address: No.49, BharathiUla Road,

Race Course,

Madurai – 625 002

Tamil Nadu, India

Age: 54

Term#: Appointed on March 8, 2010

00724456 Business Independent and Non-

Executive Director

7. Mr. Pankaj Vaish

Address: 001, Embassy Eros,

7, Ulsoor Road,


Karnataka, India

Age: 54

Term#: Appointed on September 27, 2016

00367424 Retired

Additional Director -

Independent and Non-

Executive Director

8. Mr. Prakash P. Mallya

Address:

02412404 Retired Additional Director -


Executive Director

160

Sr.

No.



“PRATOSH” 46, 2nd Cross,

Panduranga Nagar,

Bannerghatta Road,

Bengaluru – 560 076

Karnataka, India

Age: 68

Term#: Appointed on September 27, 2016

9. Ms. E V. Sumithasri

Address:

27/8, Cubbon Road,

Union Street Cross,


Karnataka, India

Age: 44

Term#: Appointed on March 10, 2015

07087197 Service Independent and Non-

Executive Director

10. Mr. Y N Lakshminarayana Murthy

Address:

No 187, 12th Main, Nagendra Block,

Banashankari 3rd Stage,

Bengaluru - 560050,

Karnataka, India

Age: 63

Term#: Appointed on June 10, 2016

07534836 Retired Additional Director -


Executive Director

11. Mr. Kusuma R Muniraju

Address:

20 “Eden Park”

Flat No. 101, 1st Floor,

Vittal Mallya Road,


Karnataka, India

Age: 67

Term#: Appointed on July 1, 2016

02111974 Profession Additional Director -


Executive Director

12. Mr. Suvendu Pati

Address:

Reserve Bank of India,

Regional Office,

6-1-56 Secretariate Road,

Saifabad, P.B.No.1,

Hyderabad – 500 004

Age: 47

Term##: Appointed for a period of two years

from February 12, 2016 to February 11,

2018, or till further orders whichever is

earlier

07452701 Service RBI Nominee

(Additional Director)

161

Sr.

No.



13. Mr. Vivek Srivastava

Address:

Reserve Bank of India

Regional Office,

10/3/8, Nrupthunga Road,

Bengaluru – 560 001

Karnataka, India

Age: 49

Term###: Appointed for a period of two

years with effect from May 13, 2016 to May

12, 2018 or till further orders, whichever is

earlier

07532303 Service RBI Nominee

(Additional Director)

# Subject to Section 10A(2A) of the Banking Regulation Act pursuant to which no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years

## Appointed by RBI pursuant to its Order No. 10152/16.05.013/2015-16 dated February 12, 2016 in exercise of the power conferred by sub-section (1) of Section 36AB of the Banking Regulation Act, 1949, in public interest for a period of two years from February 12, 2016 or until further

order, whichever is earlier. As per sub-section (2) of Section 36AB and Section 36 AC of the Banking Regulation Act, the appointment of such directors is effective notwithstanding anything contained in the Memorandum of Association and Articles of Association of the Bank.

### Appointed by RBI pursuant to its Order No. 14286/16.05.013/2015-16 dated May 13, 2016 in exercise of the power conferred by sub-section

(1) of Section 36AB of the Banking Regulation Act, 1949, in public interest for a period of two years from May 13, 2016 or until further order, whichever is earlier. As per sub-section (2) of Section 36AB and Section 36 AC of the Banking Regulation Act, the appointment of such directors

is effective notwithstanding anything contained in the Memorandum of Association and Articles of Association of the Bank.

Brief Biographies of the Directors

Parthasarathi Mukherjee

Mr. Parthasarathi Mukherjee is the Managing Director and Chief Executive Officer of our Bank. He has been

associated as Managing Director and Chief Executive Officer with our Bank from January 25, 2016. He holds a

bachelor degree in science from University of Calcutta. Before joining our Bank, he was the group executive of

corporate relationships group and international business at Axis Bank.

N. S. Venkatesh

Mr. N. S. Venkatesh is the Executive Director and Chief Financial Officer of our Bank. He has been associated

with our Bank from July 1, 2016. He holds a bachelor degree in science from University of Kerala and is a certified

associate of the Indian Institute of Bankers. He also holds a diploma in financial services from the Indian Institute

of Bankers. He is also a qualified chartered accountant. He has served as an executive director & chief financial

officer of the Industrial Development Bank of India.

K. R. Pradeep

Mr. K. R. Pradeep is one of the promoter directors of the Bank and is a Non-Executive and Non-Independent

Director on our Board. He has been associated with the Bank since February 27, 2009. He is a Chartered

Accountant.

S. G. Prabhakharan

Mr. S. G. Prabhakharan is one of the promoter directors of the Bank and is a Non-Executive and Non-Independent

Director on our Board. He holds a bachelor degree in commerce and in law from University of Madras. He is also

an associate member of the Institute of Company Secretaries of India.

N. Malayalaramamirtham

Mr. N. Malayalaramamirtham is one of the promoter directors of the Bank and is a Non-Executive and Non-

Independent Director on our Board. He holds a bachelor degree in commerce from University of Madras.

162

S. Dattathreyan

Mr. S. Dattathreyan is an Independent Director on our Board. He has been associated with the Bank since March

8, 2010.

Pankaj Vaish

Mr. Pankaj Vaish is an Independent Director on our Board. He has been associated with the Bank since August

23, 2014. After the end of his term, he has been appointed as an Additional Director from September 27, 2016.

He holds bachelor of technology degree in mechanical engineering from Banaras Hindu University and master

degree in business administration from the University of Minnesota, USA.

Prakash P. Mallya

Mr. Prakash P. Mallya is an Independent Director on our Board. He has been associated with the Bank since

August 23, 2014. After the end of his term, he has been appointed as an Additional Director from September 27,

2016. He holds a bachelor degree in arts and master degree in economics from Karnatak University. He was the

chairman and managing director of Vijaya Bank.

E.V. Sumithasri

Ms. E.V. Sumithasri is an Independent Director on our Board. She has been associated with the Bank since March

10, 2015. She holds a bachelor degree in computer science engineering from Bangalore University. She holds a

master degree in computer science and engineering from the University of Connecticut.

Y. N. Lakshminarayana Murthy

Dr. Y. N. Lakshminarayana Murthy is an Independent Director on our Board. He has been associated with the

Bank since June 10, 2016. He holds a master degree in science (agriculture) in soil science and a PhD in soil

science and agricultural chemistry from University of Agricultural Sciences, Bangalore.

Kusuma R. Muniraju

Mr. Kusuma R. Muniraju is an independent director on our Board and has been so appointed with effect from July

1, 2016. He holds a bachelor degree in science from University of Mysore and LL.B. degree from University of

Bangalore. He has been enrolled as an advocate with Mysore State Bar Council since 1971.

Suvendu Pati

Mr. Suvendu Pati is the RBI nominee director on our Board. He is a General Manager with the Reserve Bank of

India at its Regional Office in Hyderabad.

Vivek Srivastava

Mr. Vivek Srivastava is the RBI nominee director on our Board. He is a General Manager with the Reserve Bank

of India at its Regional Office in Bengaluru.

Compensation of Directors

The Nomination, Remuneration and Compensation Committee determines and recommends to the Board the

compensation proposed to be paid to the Executive Directors. Presently, the Non-Executive Directors are paid

only the sitting fees for the Board and Committee Meetings they participate and are not eligible for any other

remuneration.

The table below sets forth the details of the remuneration (including sitting fees, salaries and perquisites) paid to

the existing Directors for the current financial period and the last three Fiscals:

(in `)

163

Name of the Director Eight months ended

November 30, 2016

Year ended

March 31, 2016

Year ended

March 31, 2015

Year ended

March 31, 2014

Parthasarathi

Mukherjee^

4,461,041.98 1,118,676.02 NA NA

N S Venkatesh^^ 2,320,135.74 NA NA NA

K R Pradeep 1,400,000.00 1,925,000.00 1,320,000.00 1,185,000.00

S.G. Prabhakharan 630,000.00 1,040,000.00 840,000.00 345,000.00

N Malayalaramamirtham 1,120,000.00 1,260,000.00 600,000.00 15,000.00

S Dattathreyan 1,120,000.00 1,130,000.00 680,000.00 735,000.00

Pankaj Vaish 735,000.00 1,100,000.00 400,000.00 NA

Prakash P Mallya 1,015,000.00 1,840,000.00 700,000.00 NA

E V Sumithasri 805,000.00 845,000.00 40,000.00 NA

Y N Lakshminarayana

Murthy*

105,000.00 NA NA NA

Kusuma R Muniraju** 385,000.00 NA NA 330,000.00

Suvendu Pati@ NA NA NA NA

Vivek Srivastava@@ NA NA NA NA Note: ^ Appointed w.e.f. January 25, 2016

^^ Appointed w.e.f. July 1, 2016

* Appointed w.e.f. June 10, 2016 ** Resigned from the Board on September 20, 2013 and appointed as an Additional Director w.e.f. July 1, 2016

@ Appointed w.e.f February 12, 2016 @@ Appointed w.e.f May 13, 2016

Terms and Conditions of employment of Executive Directors:

Parthasarathi Mukherjee

In terms of Section 35B of the Banking Regulation Act, the RBI has conveyed its approval for appointment of

Parthasarathi Mukherjee as the Managing Director and Chief Executive Officer of the Bank for a period of three

years from the date of his taking charge. Pursuant to the approval, Parthasarathi Mukherjee has taken charge as

the Managing Director and Chief Executive Officer of the Bank from January 25, 2016. The terms and conditions

for his remuneration, as approved by the RBI is as mentioned below:

S. No Particulars Details

Remuneration

1. Salary `4,800,000 per annum

2. Dearness Allowance Not Applicable

3. House Rent Allowance Not Applicable

4. Conveyance Allowance Not Applicable

5. Entertainment Allowance Reimbursement of actual

6. Other Allowances Share/Stock Options

With prior approval of RBI*.

Performance Bonus

As may be approved by Board, subject to RBI approval.

Perquisites

1. Free Furnished house Free furnished residential accommodation.

2. Free use of bank's car for

- official purpose

- private purpose on

compensating the bank with

suitable amount.

Bank’s Car with chauffeur with fuel at Bank’s cost.

3. Provident Fund/Gratuity

PF - 10% on salary / pay on contributory basis.

Gratuity - 1 month’s salary and pay for every completed year of

service – payable on completion of tenure approved by RBI

4. Travelling, Lodging and Halting

Allowance

As applicable to CMD of Public sector banks.

164

*Share/Stock Option: As approved by the Compensation Committee of the Board and the Board of Directors,

the RBI vide its letter dated June 28, 2016 gave its approval for grant of 1.2 million Equity Shares to Mr.

Parthasarathi Mukherjee at a price of ` 55.00 per option to be vested over a period of three years.

N. S. Venkatesh

In terms of Section 35B of the Banking Regulation Act, the RBI has conveyed its approval for appointment of N.

S. Venkatesh as the Whole-time Director of the Bank for a period of three years from the date of his taking charge.

Pursuant to the approval, N. S. Venkatesh has been appointed as the Whole-time Director of the Bank from July

1, 2016. The terms and conditions for his remuneration, as approved by the RBI is as mentioned below:

*Share/Stock Option: On the basis of the grant permitted by Compensation Committee of the Board & the Board,

the Bank has requested RBI for approval, which is awaited.

Relationship with other Directors

None of the Directors on the Board are related to each other.

5. Medical benefits Actual for self and dependent family members for hospitalized

treatment in India.

6. Other benefits a. Communicative Modes – free use

b. Insurance Coverage

- ` 2.50 million for travel by air/train/road

- ` 5.00 million for life insurance

c. Sitting fees – Not Eligible

d. Membership in club – subscription to two service clubs

e. Child Education: ` 0.50 million per annum on aggregate

f. Relocation Expenses: A one-time relocation expense upto a

maximum of ` 1.00 million

7. Leave Fare Concession Once in a year to any place in India for self and family. Single

return fare by the highest available class including incidentals.

Sr.

No.

Particulars Amount in `

Remuneration 1. Salary/Pay ` 3,900,000 per annum payable proportionate on a monthly

basis

2. Share/Stock Options/Performance

Bonus

Share / Stock Options:

With prior approval of RBI *.

Performance Bonus:

As may be approved by Board subject to RBI Approval.

Perquisites

1. Free Furnished House Free furnished residential accommodation, to the maximum

extent of ` 0.16 million per month.

2. Free use of bank’s car for – Official

purpose & private purpose.

Bank’s car with chauffeur with fuel at bank’s cost.

3. Provident Fund/Gratuity PF – 10% on salary/pay on contributory basis.

Gratuity – 1 month’s salary/pay for every completed year of

service – payable on completion of tenure approved by RBI.

4. Travelling, Lodging and Halting

Allowance

May be guided by RBI Circular No. BC.54/08.95.004/98 dated

June 10, 1998.

5. Medical Benefits As per bank’s Health Insurance Policy

6. Other Benefits a. Communicative Modes – Free Use

b. Insurance Coverage - ` 2.50 million for travel by air/ train/

road

c. Sitting fees – Not Eligible

d. Membership in Club – Subscription to service club to the

maximum of two clubs

7. Leave fare Concession Once in a year to any place in India for self and family. Single

return fare by the highest available class.

165

Interest of Directors

All of the Directors may be deemed to be interested to the extent of fees payable to them for attending Board or

Board committee meetings and reimbursement of expenses payable to them. Our Directors may also be regarded

as interested in the Equity Shares that may be subscribed by or allotted to their relatives or the companies, firms

or trusts, in which they are interested as directors, members, partners, trustees or promoters. Our Directors may

also be deemed to be interested to the extent of any dividend that may be payable to them and other distributions

that may be provided to them in respect of the said Equity Shares.

Except as disclosed in this Preliminary Placement Document, our Directors do not have any financial or other

material interest in the Issue and there is no effect of such interest in so far as it is different from the interests of

other persons. Further, there were no outstanding transactions by our Bank in which the Directors were interested

parties.

Except as otherwise stated in this Preliminary Placement Document, our Bank has not entered into any contract,

agreement or arrangement in which any of the Directors are interested, directly or indirectly, and no payments

have been made to them in respect of any such contracts, agreements, arrangements which are proposed to be

made with them. Further, no Director has taken any loans from our Bank, other than those which are permitted by

the RBI in ordinary course of business.

Shareholding of Directors

As at September 30, 2016, our Directors held the following number of the Equity Shares and Employee Stock

Options:

Name of Directors Number of Equity

Shares held

Number of Employee Stock Option held

Parthasarathi Mukherjee Nil 12,00,000 options granted and yet to be vested

N S Venkatesh Nil 3,00,000 options granted and yet to be vested#

K. R. Pradeep 4,215,285 Nil

S.G. Prabhakharan 4,004 Nil

N Malayalaramamirtham 81,628 Nil

S Dattathreyan 125,998 Nil

Pankaj Vaish 100 Nil

Prakash P Mallya 100 Nil

E V Sumithasri 100 Nil

Y N Lakshminarayana Murthy Nil Nil

Kusuma R Muniraju 432,583 Nil

Suvendu Pati Nil Nil

Vivek Srivastava Nil Nil # Awaiting RBI approval

Corporate Governance

Our Bank has in place processes and systems whereby it complies with the requirements to the corporate

governance as required by the Companies Act, 2013 and the Listing Regulations. The corporate governance

framework is based on an effective independent Board, separation of the supervisory role of the Board from the

executive management team and constitution of the committees of the Board, as required under applicable law.

The Board functions either as a full Board or through various committees constituted to oversee specific

operational areas.

Committees of Board of Directors

1. Audit Committee

Audit Committee was last reconstituted on September 1, 2016. The Audit Committee comprises of 8 (eight)

members: Mr. Prakash P Mallya, Mr. N.S. Venkatesh, Mr. S.G. Prabhakharan, Mr. S. Dattathreyan, Mr. Pankaj

166

Vaish, Mr. Kusuma R Muniraju, Mr. Suvendu Pati and Mr. Vivek Srivastava. Mr. Prakash P Mallya is the Chairman

of the Audit Committee.

2. Stakeholders’ Relationship Committee (“SRC”)

Stakeholders Relationship Committee was last reconstituted on September 1, 2016. The SRC comprises of 4

(four) members: Mr. S. Dattathreyan, Mr. K.R. Pradeep, Mr. N. Malayalaramamirtham and Ms. E. V. Sumithasri.

Mr. S. Dattathreyan is the Chairman of the SRC.

3. Nomination, Remuneration and Compensation Committee (“NRCC”)

Nomination, Remuneration and Compensation Committee was last reconstituted on September 1, 2016. The

NRCC comprises of 5 (five) members: Mr. Kusuma R Muniraju, Mr. K.R. Pradeep, Mr. S. Dattathreyan, Mr.

Prakash P Mallya and Mr. Y. N. Lakshminarayana Murthy. Mr. Kusuma R Muniraju is the Chairman of the NRCC.

4. Corporate Social Responsibility Committee (“CSRC”)

Corporate Social Responsibility Committee was last reconstituted on September 1, 2016. CSRC comprises of

5 (five) members: Mr. S. G. Prabhakharan, Mr. Parthasarathi Mukherjee, Mr. N. S. Venkatesh, Mr. K. R. Pradeep

and Ms. E. V. Sumithasri. Mr. S. G. Prabhakharan is the Chairman of CSRC.

In addition to the above mentioned committees, pursuant to the directions of the RBI and as per the requirements

of the Bank, additional committees such as Integrated Risk Management Committee, Fraud Monitoring

Committee and Review Committee on Non-cooperative borrowers, Infrastructure Development Committee,

Management Committee, IT Strategy Committee, HR Committee, Customer Service Committee and Committee

of Directors for Capital Raising are constituted consisting of the members of the Board.

Management Organisation Chart of our Bank

Key Managerial Personnel of our Bank

In addition to our Managing Director and Chief Executive Officer and our Executive Director and Chief Financial

Officer, the Key Managerial Personnel of our Bank include Mr. N. Ramanathan, Company Secretary and

Compliance Officer:

N. Ramanathan, Company Secretary and Compliance Officer

N. Ramanathan, is the Company Secretary and Compliance Officer of the Bank. He graduated from the

Government Law College, Coimbatore, Bharathiyar University with a bachelor of law degree. He is also an

associate member of the Institute of Company Secretaries of India.

Our operations are also supervised by the following senior management personnel (“Senior Management

Personnel”):

MD & CEO

Executive Director

and Chief Financial

Officer

Head

Wholesale

Banking

Head

Retail

Banking

Head,

Human

Resource

Chief

Customer

Service

Officer

Head

Strategy

Chief Risk

Officer

Company

Secretary

Senior

Manager and

Secretary

167

Mr. Meenakshi Sundaram R.M

Mr. Meenakshi Sundaram R.M is the President, wholesale banking. His portfolio in the Bank includes corporate

advances - relationship management, credit processing, credit monitoring and stressed accounts.

Mr. Akkidas Jacob Vidya Sagar

Mr. Akkidas Jacob Vidya Sagar is the President, retail banking. His portfolio in the Bank includes retail liabilities,

MSME & retail credit, third party products and branch banking.

Mr. R.V.S.Sridhar

Mr. R.V.S.Sridhar is the President and Chief Risk Officer. His responsibilities in the Bank include risk

management including operation risk, credit risk and market risk.

Mr. Kumarappan RM

Mr. Kumarappan RM is the Senior Vice President – stressed asset and wholesale banking. His responsibilities in

the Bank include credit monitoring and stressed accounts.

Mr. Kamalasekaran R

Mr. Kamalasekaran R is the Senior Vice President – credit and wholesale banking group. His responsibilities in

the Bank include corporate advances - credit processing.

Mr. Gurumurthy R.K

Mr. Gurumurthy R.K is the Senior Vice President – treasury. His responsibilities in the Bank include integrated

treasury operations.

Mr. Shankar A

Mr. Shankar A is the Senior Vice President – SME, rural banking and retail lending. His responsibilities in the

Bank include MSME credit, non-corporate advances and rural banking.

Mr. Padmanabhan Premkumar

Mr. Padmanabhan Premkumar is the Senior Vice President – branch banking. His responsibilities in the Bank

include branch banking.

Mr. Sudhir Kaushik

Mr. Sudhir Kaushik is the Senior Vice President and regional head, Mumbai.

Mr. Nedumaran B

Mr. Nedumaran B is the Senior Vice President – human resources.

Mr. Peeush Jain

Mr. Peeush Jain is the Senior Vice President – third party products (“TPP”), transformation and retail banking.

His responsibilities in the Bank include cross selling (TPP), business Development in Karnataka region and

undertaking new initiatives.

Mr. Madhusudhana Rao.V

Mr. Madhusudhana Rao.V is the Senior Vice President and Chief Customer Service officer. His responsibilities

in the Bank include addressing customer grievances and internal ombudsman. He is also responsible for new

technology initiatives.

168

Mr. S.Venkatesh

Mr. S.Venkatesh is the Senior Vice President and Head – relationship management. His responsibilities in the

Bank include corporate advances - relationship management.

Mr. Manmadha Rao Boyina

Mr. Manmadha Rao Boyina is the Senior Vice President and Head – transaction banking. His responsibilities in

the Bank include transaction banking.

Mr. Sathyananda Prabhu

Mr. Sathyananda Prabhu is the Vice President – audit and inspection department. His responsibilities in the Bank

include internal audit and inspection and internal vigilance.

Mr. Raghunathan N

Mr. Raghunathan N is the Vice President – electronic banking.

Mr. Prabakaran S

Mr. Prabakaran S is the Vice President and Chief Compliance Officer.

Mr. Rajendran A

Mr. Rajendran A is the Vice President – strategy. His responsibilities in the Bank include business strategy,

business intelligence and management information system.

Mr. Ravindra Kumar G

Mr. Ravindra Kumar G is the Vice President – law.

Mr. Manikandan M

Mr. Manikandan M is the Vice President and Chief Information Officer. His responsibilities in the Bank include

technology banking, core banking solutions and all initiatives regarding information technology and information

technology enabled services.

Ms. Neena Anand

Ms. Neena Anand is the Vice President – liabilities retail banking. Her responsibilities in the Bank include CASA

book growth, CRM implementation and new product development.

Mr. Sundaram.V

Mr. Sundaram.V is the Vice President – human resource development. His responsibilities in the Bank include

industrial relations and terminal benefits.

Mr. Ramesh S

Mr. Ramesh S is the Vice President – administration. His responsibilities in the Bank include estate management

and infrastructure management.

Ms. Devyani Baidya

Ms. Devyani Baidya is Vice President and Head – saving account. Her responsibilities in the Bank include savings

portfolio, NRI business and Crown relationships.

Mr. Govind Ravindran

169

Mr. Govind Ravindran is the Vice President – consumer lending and retail banking. His responsibilities in the

Bank include housing loan portfolio, commercial loan and loan against properties.

Mr. Nandakumar S D

Mr. Nandakumar S D is the Vice President and Head – current account. His responsibilities in the Bank include

current account portfolio and current account retail.

Mr. Srinath M

Mr. Srinath M is the Vice President and Head - operational risk.

Mr. Sushanta Roy

Mr. Sushanta Roy is the Vice President and Head – branch operations.

Mr. Arun Janardhana

Mr. Arun Janardhana is the Assistant Vice Preseident – third party product channel. His responsibilities in the

Bank include third party products, CSR and corporate communications.

Mr. Elanthirayan M

Mr. Elanthirayan M is the Assistant Vice Preseident – planning department. His responsibilities in the Bank

include business, cost and profitability planning and development.

Compensation of our Key Managerial Personnel

Our Bank paid as aggregate remuneration of ` 26.18 million to its employees, who were key managerial personnel

during Fiscal 2016.

Bonus or profit sharing plan of the Key Managerial Personnel and Senior Management

The Key Managerial Personnel and Senior Management may receive bonuses as part of their remuneration and

terms of their employment. We have not formulated a bonus or profit sharing plan.

Interest of Key Managerial Personnel and Senior Management

The Key Managerial Personnel and Senior Management of our Bank do not have any interest in our Bank other

than (a) their shareholding in our Bank; (b) the options under the LVB ESOS-2010 held by them; (c) their

remuneration and benefits to which they are entitled to as per their terms of appointment; and (d) reimbursement

of expenses incurred by them during the ordinary course of business.

Payment or Benefit to Officers of our Bank

Except statutory benefits upon termination of their employment in our Bank or superannuation, no officer of our

Bank is entitled to any other benefit upon termination of his/her employment in our Bank.

Shareholding of our Key Managerial Personnel

As at September 30, 2016, the Key Managerial Personnel of the Bank (apart from our Executive Directors) hold

nil Equity Shares and Employee Stock Option Scheme.

Other Confirmations

Except to the extent of shareholding of the Promoters in the Bank, none of the Promoters of our Bank has any

financial or other material interest in the Issue and there is no effect of such interest in so far as it is different from

the interests of other persons.

170

Neither our Bank, nor Promoters, nor its Directors have been identified as wilful defaulters, as defined in the SEBI

ICDR Regulations.

171

PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION

The following table presents information regarding the ownership of Equity Shares by the Shareholders as of September 30, 2016:

Table I - Summary Statement holding of specified securities:

Ca

teg

or

y

(I)

Category

of

sharehol

der

(II)

Nos.

of

share

holde

rs

(III)

No. of fully

paid up

equity

shares held

(IV)

Pa

rtl

y

pa

id-

up

eq

uit

y

sh

ar

es

he

ld

(V

)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI

)

Total nos.

shares held

(VII) =

(IV)+(V)+

(VI)

Share

holdin

g as a

% of

total

no. of

shares

(calcu

lated

as per

SCRR

,

1957)

(VIII)

As a

% of

(A+B

+C2)

Number of Voting Rights held in each

class of securities

(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Shareholdi

ng , as a %

assuming

full

conversion

of

convertibl

e securities

( as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Number of

equity shares

held in

dematerializ

ed form

(XIV)

No. of Voting Rights Total

as a

% of

(A+B

+C)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class eg: X Class

eg: Y

Total

(A

)

Promoter

&

Promoter

Group

29 17,325,148 0 0 17,325,148 9.65 17,325,148 0 17,325,148 9.65 0 9.65 0 0 6,181,7

58

35.6

8 17,325,148

(B) Public 64,15

7

162,136,461

0 0 162,136,461

90.35 162,136,461

0 162,136,461

90.35 0 90.35 0 0 NA 151,965,831

(C) Non

Promoter-

Non

Public

0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

(C

1)

Shares

Underlyin

g DRs

0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

(C

2)

Shares

held by

Employee

Trusts

0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

172

Total

64,18

6

179,461,609 0 0 179,461,609 100.0

0

179,461,609 0 179,461,609 100.0

0

0 100.00 0 0 6,181,7

58

3.44 169,290,979

Table II - Statement showing shareholding pattern of the Promoter and Promoter Group:

Category and Name of

the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)

Number of Voting Rights held in

each class of securities

(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

(1) Indian

a Individual/Hindu

Undivided Family

22 4,997,

016

0 0 4,997,

016

2.78 4,997,

016

0 4,997,

016

2.78 NA 2.78 NA NA 8370

0

1.67 49970

16

Name

K R Pradeep AALPP7910

M

4,215,

285

0 0 4,215,

285

2.35 4,215,

285

0 4,215,

285

2.35 NA 2.35 NA NA 0 0.00 4215,2

85

Anuradha Pradeep AALPP7909

A

6,216 0 0 6,216 0.00 6,216 0 6,216 0.00 NA 0.00 NA NA 0 0.00 6,216

M P Shyam AFAPS4343

H

135,62

2

0 0 135,62

2

0.08 135,62

2

0 135,62

2

0.08 NA 0.08 NA NA 0 0.00 135,62

2

M S Sharmila AKWPS861

3D

119,87

0

0 0 119,87

0

0.07 119,87

0

0 119,87

0

0.07 NA 0.07 NA NA 0 0.00 119,87

0

M K Panduranga Setty ACIPP7049J 2,071 0 0 2,071 0.00 2,071 0 2,071 0.00 NA 0.00 NA NA 0 0.00 2,071

173


the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)



(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

M.P. Vikram Setty ADIPV3751

G

1,202 0 0 1,202 0.00 1,202 0 1,202 0.00 NA 0.00 NA NA 0 0.00 1,202

P Vasantha AASPV4548

E

17,930 0 0 17,930 0.01 17,930 0 17,930 0.01 NA 0.01 NA NA 0 0.00 17,930

M S Nivedita AHMPN458

9N

10,000 0 0 10,000 0.01 10,000 0 10,000 0.01 NA 0.01 NA NA 0 0.00 10,000

S G Prabhakharan AAHPP4774

F

4,004 0 0 4,004 0.00 4,004 0 4,004 0.00 NA 0.00 NA NA 0 0.00 4,004

Usha R Prabakaran AAAPU1920

B

115,25

6

0 0 115,25

6

0.06 115,25

6

0 115,25

6

0.06 NA 0.06 NA NA 0 0.00 115,25

6

Sasikaladhevi M R. ASXPS1973

K

1,500 0 0 1,500 0.00 1,500 0 1,500 0.00 NA 0.00 NA NA 0 0.00 1,500

G P Prajnesh AWGPP508

3N

14,200 0 0 14,200 0.01 14,200 0 14,200 0.01 NA 0.01 NA NA 0 0.00 14,200

G Sudhakara Gupta AAEPG3217

F

2,000 0 0 2,000 0.00 2,000 0 2,000 0.00 NA 0.00 NA NA 0 0.00 2,000

N

Malayalaramamirtham

AKHPM660

7N

81,628 0 0 81,628 0.05 81,628 0 81,628 0.05 NA 0.05 NA NA 30,0

00

36.7

5

81,628

N Saiprasad ABBPS6585

L

143,30

2

0 0 143,30

2

0.08 143,30

2

0 143,30

2

0.08 NA 0.08 NA NA 23,0

00

16.0

5

143,30

2

174


the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)



(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

N Sivakumar ABBPS6599

J

56,985 0 0 56,985 0.03 56,985 0 56,985 0.03 NA 0.03 NA NA 10,7

00

18.7

8

56,985

M Balasubramanian AGQPB1246

H

6,531 0 0 6,531 0.00 6,531 0 6,531 0.00 NA 0.00 NA NA 2,00

0

30.6

2

6,531

N Dwarakanathan AHLPD1263

C

717 0 0 717 0.00 717 0 717 0.00 NA 0.00 NA NA 0 0.00 717

M Geetha AHWPG929

0M

19,142 0 0 19,142 0.01 19,142 0 19,142 0.01 NA 0.01 NA NA 8,00

0

41.7

9

19,142

N Susila ALJPS1369J 11,965 0 0 11,965 0.01 11,965 0 11,965 0.01 NA 0.01 NA NA 0 0.00 11,965

M Shalini BHDPS7018

D

12,225 0 0 12,225 0.01 12,225 0 12,225 0.01 NA 0.01 NA NA 0 0.00 12,225

V N Jayaprakash AAHPJ6354

P

19,365 0 0 19,365 0.01 19,365 0 19,365 0.01 NA 0.01 NA NA 10,0

00

51.6

4

19,365

b Central Government/

State Governments

Name

c Financial Institutions /

Banks

Name

175


the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)



(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

d Any other (Specify) 7 12,328,

132

0 0 12,328,

132

6.87 12,328,

132

0 12,328,

132

6.87 NA 6.87 NA NA 6,098,

058

49.4

6

12,328,

132

Name

Kare Electronics and

Development Private

Limited

AABCK767

9R

1,259,

569

0 0 1,259,

569

0.70 1,259,

569

0 1,259,

569

0.70 NA 0.70 NA NA 0 0.00 1,259,

569

Pranava Electronics

Private Limited

AADCP2196

C

3,412,

464

0 0 3,412,

464

1.90 3,412,

464

0 3,412,

464

1.90 NA 1.90 NA NA 0 0.00 3,412,

464

Cauvery Motors Private

Limited

AAACC592

4A

1,009,

759

0 0 1,009,

759

0.56 1,009,

759

0 1,009,

759

0.56 NA 0.56 NA NA 1,00

0,00

0

99.0

3

1,009,

759

Advaith Motors Private

Limited

AADCA239

9A

1,972,

515

0 0 1,972,

515

1.10 1,972,

515

0 1,972,

515

1.10 NA 1.10 NA NA 1,97

2,00

0

99.9

7

1,972,

515

XS Real Properties

Private Limited

AAACX003

0G

14,008 0 0 14,008 0.01 14,008 0 14,008 0.01 NA 0.01 NA NA 0 0.00 14,008

Ariston Capital Asset

Holdings Private

Limited

AAGCA851

1M

1,847,

559

0 0 1,847,

559

1.03 1,847,

559

0 1,847,

559

1.03 NA 1.03 NA NA 313,80

0

16.9

8

1,847,

559

Tangerine Capital Asset

Holdings LLP

AAHFT8682

L

2,812,

258

0 0 2,812,

258

1.57 2,812,

258

0 2,812,

258

1.57 NA 1.57 NA NA 2,812,

258

100.0

0

2,812,

258

176


the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)



(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

Sub Total A(1) 29 17,325,

148

0 0 17,325,

148

9.65 17,325,

148

0 17,325,

148

9.65 0 9.65 0 0 6,181,

758

35.6

8

17,325,

148

(2) Foreign

a Individual (Non-

resident Individuals /

Foreign individuals)

Name

b Government Name

c Institutions Name

d Foreign Portfolio

Investor

Name

e Any other (Specify)

Name

Sub Total A(2) 0 0 0 0 0 0.00 0 0 0 0 0 0 0 0 0 0 0

Total shareholding of

Promoter and

29 17,325,

148

0 0 17,325,

148

9.65 17,325,

148

0 17,325,

148

9.65 0 9.65 0 0 6,181,

758

35.6

8

17,325,

148

177


the Shareholders

(I)

PAN

(II)

Nos

. of

sha

reh

olde

rs

(III)

No. of

fully

paid

up

equity

shares

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII)

=

(IV)+(

V)+

(VI)

Shareho

lding %

of total

no. of

shares

(calculat

ed as

per

SCRR,

1957)

As a %

of

(A+B+C

2)

(VIII)



(IX)

No.

of

Shar

es

Unde

rlyin

g

Outs

tandi

ng

conv

ertib

le

secur

ities

(incl

udin

g

War

rants

)

(X)

Shareho

lding, as

a %

assumin

g full

conversi

on of

converti

ble

securitie

s (as a

percenta

ge of

diluted

share

capital)

(XI)=

(VII)+(X

) As a %

of

(A+B+C

2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbere

d

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


as a %

of

Total

Voting

Rights

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

Class

X

Cla

ss Y

Total

Promoter Group (A)=

(A)(1) +(A)(2)

Table III - Statement showing shareholding pattern of the Public shareholder:

178

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)

Number of Voting Rights held

in each class of securities

(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)

No. of Voting Rights Tot

al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

(1) Institutions

a Mutual Funds/UTI 2 164,000 0 0 164,000 0.09 164,0

00

0 164,000 0.09 NA 0.09 NA NA NA 164,00

0

Name

b Venture capital

Funds

NA

Name

c Alternate

Investment Funds

NA

Name

d Foreign Venture

Capital Investors

NA

Name

179

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

e Foreign Portfolio

Investors

32 5,450,3

40

0 0 5,450,34

0

3.04 5,450,

340

0 5,450,34

0

3.04 NA 3.04 NA NA NA 5,450,

340

Name

f Financial

Institutions /

Banks

8 5,341,9

59

0 0 5,341,95

9

2.98 5,341,

959

0 5,341,95

9

2.98 NA 2.98 NA NA NA 5,339,

709

Name

Indian bank AAACI160

7G

1,990,6

49

0 0 1,990,64

9

1.11 1,990,

649

0 1,990,64

9

1.11 NA 1.11 NA NA NA 1,990,

649

The Karur Vysya

Bank Limited

AAACT33

73J

1,801,5

00

0 0 1,801,50

0

1.00 1,801,

500

0 1,801,50

0

1.00 NA 1.00 NA NA NA 1,801,

500

g Insurance

Companies

3 462,678 462,678 0.26 462,6

78

0 462,678 0.26 NA 0.26 NA NA NA 462,67

8

Name

h Provident Funds /

Pension Funds

NA

180

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

Name

i Any other

(Specify) - Foreign

Banks

NA

Name

Sub Total B(1) 45 11,418,

977

0 0 11,418,9

77

6.36 11,41

8,977

0 11,418,9

77

6.36 0 6.36 0 0 NA 11,416

,727

(2) Central

Government /

State Government

/ President of India

0 0 0 0 0 0.00 0 0 0 0.00 NA 0.00 0 0 NA 0

Name 0.00

Sub Total B(2) 0 0 0 0 0 0.00 0 0 0 0.00 NA 0.00 0 0 NA 0

(3) Non-Institutions

a Individuals

181

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

i Individual

Shareholders

holding Nominal

Share Capital upto

`2 Lakhs

6271

7

47,222,

476

0 0 47,222,4

76

26.3

1

47,222,

476

0 47,222,4

76

26.3

1

NA 26.31 NA NA NA 37,383

,817

ii Individual

Shareholders

holding Nominal

Share Capital in

excess of ` 2 Lakhs

329 36,976,

795

0 0 36,976,7

95

20.6

0

36,976,

795

0 36,976,7

95

20.6

0

NA 20.60 NA NA NA 36,676

,291

Name

Yunus Zia AAAPZ38

52F

2,348,2

42

0 0 2,348,24

2

1.31 2,348,

242

0 2348,24

2

1.31 NA 1.31 NA NA NA 2,348,

242

Mariannan Arokia

Swamy

AAEPC439

9Q

2,644,6

56

0 0 2,644,65

6

1.47 2,644,

656

0 2,644,65

6

1.47 NA 1.47 NA NA NA 2,644,

656

182

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

Mukul

Mahavirprasad

Agrawal

AAFPA485

9G

2,300,0

00

0 0 2,300,00

0

1.28 2,300,

000

0 2,300,00

0

1.28 NA 1.28 NA NA NA 2,300,

000

Kedar Shivanand

Mankekar

AFMPM496

5K

3,780,0

00

0 0 3,780,00

0

2.11 3,780,

000

0 3,780,00

0

2.11 NA 2.11 NA NA NA 3,780,

000

Maninder Singh AAXPS158

7M

1,928,8

73

0 0 1,928,87

3

1.07 1,928,

873

0 1,928,87

3

1.07 NA 1.07 NA NA NA 1,928,

873

b NBFCs Registered

with RBI

7 56,673 0 0 56,673 0.03 56,67

3

0 56,673 0.03 NA 0.03 NA NA NA 56,673

Name

c Employee Trusts NA

Name

d Overseas

Depositories

(holding D`)

(balancing figure)

NA

183

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

Name

e Any other *** 1,059 66,461,

540

0 0 66,461,5

40

37.0

3

66,461,

540

0 66,461,5

40

37.0

3

NA 37.03 NA NA NA 66,432

,323

Name

Birla Sun Life

Insurance Company

Limited

AABCB46

23J

5,691,3

99

0 0 5,691,39

9

3.17 5,691,

399

5,691,39

9

3.17 NA 3.17 NA NA NA 5,691,

399

Aviva Life

Insurance Company

India Limited

AABCD64

10D

1,819,8

64

0 0 1,819,86

4

1.01 1,819,

864

1,819,86

4

1.01 NA 1.01 NA NA NA 1,819,

864

India Infoline

Finance Limited

AABCI291

5C

3,609,7

20

0 0 3,609,72

0

2.01 3,609,

720

0 3,609,72

0

2.01 NA 2.01 NA NA NA 3,609,

720

India Deep Value

Fund

AABCI786

8N

2,699,5

23

0 0 2,699,52

3

1.50 2,699,

523

0 2,699,52

3

1.50 NA 1.50 NA NA NA 2,699,

523

Jupiter Capital

Private Limited

AABCJ566

6R

2,834,5

65

0 0 2,834,56

5

1.58 2,834,

565

2,834,56

5

1.58 NA 1.58 NA NA NA 2,834,

565

184

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

M N Dastur and Co

Private Limited

AABCM213

6M

6,969,4

82

0 0 6,969,48

2

3.88 6,969,

482

0 6,969,48

2

3.88 NA 3.88 NA NA NA 6,969,

482

National

Westminster Bank

Plc As Trustee Of

The Jupiter India

Fund

AABTT48

62E

2,933,3

33

0 0 2,933,33

3

1.63 2,933,

333

0 2,933,33

3

1.63 NA 1.63 NA NA NA 2,933,

333

Max Life Insurance

Co Ltd A/C

Participating Fund

AACCM32

01E

8,309,0

60

0 0 8,309,06

0

4.63 8,309,

060

0 8,309,06

0

4.63 NA 4.63 NA NA NA 8,309,

060

Plaza Agencies

Private Limited

AACCP05

89Q

4,000,0

00

0 0 4,000,00

0

2.23 4,000,

000

0 4,000,00

0

2.23 NA 2.23 NA NA NA 4,000,

000

Sivan Securities

Private Limited

AACCS51

38G

2,550,0

00

0 0 2,550,00

0

1.42 2,550,

000

0 2,550,00

0

1.42 NA 1.42 NA NA NA 2,550,

000

Nomura Singapore

Limited

AADCN27

50N

2,969,4

12

2,969,41

2

1.65 2,969,

412

2,969,41

2

1.65 NA 1.65 NA NA NA 2,969,

412

185

Category and

Name of the

Shareholders

(I)

PAN

(II)

Nos.

of

shar

ehol

ders

(III)

No. of

fully

paid up

equity

shares

held

(IV)

Par

tly

pai

d-

up

equ

ity

sha

res

hel

d

(V)

No.

of

sha

res

und

erly

ing

Dep

osit

ory

Rec

eipt

s

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(V

)+ (VI)

Sha

reho

ldin

g %

of

total

no.

of

shar

es

(calc

ulat

ed

as

per

SCR

R,

1957

)

As a

%

of

(A+

B+C

2)

(VII

I)



(IX)

No. of

Share

s

Under

lying

Outst

andin

g

conve

rtible

securi

ties

(inclu

ding

Warr

ants)

(X)

Total

Shareholdi

ng , as a %

assuming

full

conversion

of

convertible

securities (

as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number of

Locked in

shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Numb

er of

equity

shares

held

in

demat

erializ

ed

form

(XIV)


al

as a

%

of

Tot

al

Vot

ing

Rig

hts

No.

(a)

As a

% of

total

Shar

es

held

(b)

No.

(Not

Appli

cable)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

Sub Total B(3) 6,411

2

150,717,4

84

0 0 150,717,

484

83.9

8

150,717,

484

0 150,717,

484

83.9

8

0 83.98 0 0 NA 140,549,

104

Total Public

Shareholding (B)=

(B)(1)+(B)(2)

+(B)(3)

6,415

7

162,136,4

61

0 0 162,136,

461

90.3

5

162,136,

461

0 162,136,

461

90.3

5

0 90.35 0 0 NA 151,965,

831

Serial No. Name of the PAC PAN No. Number of shares Percentage of shareholding by PAC ID

NIL

Details of Shares which remain unclaimed may be given here along with details such as number of shareholders, outstanding shares held in demat/ unclaimed suspense account, voting rights which are frozen etc.

No. of Shareholders No of Shares held

NIL

186

Table IV - Statement showing shareholding pattern of the Non Promoter- Non Public shareholder

Category and Name

of the Shareholders

(I)

P

A

N

(II

)

No

s.

of

sh

ar

eh

ol

de

rs

(II

I)

No.

of

fully

paid

up

equit

y

shar

es

held

(IV)

Partl

y

paid-

up

equit

y

shar

es

held

(V)

No.

of

shar

es

unde

rlyin

g

Depo

sitor

y

Rece

ipts

(VI)

Total

nos.

shares

held

(VII) =

(IV)+(

V)+

(VI)

Shareholdi

ng %

calculated

as per

SCRR,

1957

As a % of

(A+B+C2)

(VIII)



(IX)

No. of

Shares

Underlyin

g

Outstandi

ng

convertible

securities

(including

Warrants)

(X)

Total

Shareholdin

g, as a %

assuming

full

conversion

of

convertible

securities

(as a

percentage

of diluted

share

capital)

(XI)=

(VII)+(X)

As a % of

(A+B+C2)

Number

of Locked

in shares

(XII)

Number of

Shares

pledged or

otherwise

encumbered

(XIII)

Num

ber

of

equit

y

shar

es

held

in

dem

ateri

alize

d

form

(XIV

)

No. of Voting Rights Total as

a % of

Total

Voting

Rights

No

.

(a)

As

a %

of

tota

l

Sha

res

hel

d

(b)

No.

(No

t

Ap

plic

able

)

(a)

As a

% of

total

Shar

es

held

(Not

Appl

icabl

e)

(b)

Class

X

Class

Y

Total

(1) Custodian / DR

Holder (c) (1)

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

Name of DR Holder if

available

NA

(2) Employee Benefit

Trust (under SEBI

(Share Based

Employee Benefit)

Regulations, 2014) (c

) (2)

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

Total Non-Promoter

- Non Public

Shareholding (C)=

(C) (1) +(C) (2)

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 NA 0

187

ISSUE PROCEDURE

Below is a summary intended to present a general outline of the procedure relating to the bidding, payment,

Allocation and Allotment of the Equity Shares. The procedure followed in this Issue may differ from the one

mentioned below and the prospective investors are assumed to have appraised themselves of the same from our

Bank or the BRLM.

The prospective investors are advised to inform themselves of any restrictions or limitations that may be

applicable to them. Investors that apply in the Issue will be required to confirm and will be deemed to have

represented to our Bank, the BRLM and their respective directors, officers, agents, affiliates and representatives

that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire the Equity

Shares. Our Bank and the BRLM and their respective directors, officers, agents, affiliates and representatives

accept no responsibility or liability for advising any investor on whether such investor is eligible to acquire the

Equity Shares. For further details, see “Selling Restrictions” and “Transfer Restrictions” on pages 199 and 204,

respectively.

Qualified Institutions Placements

This Issue is being made to QIBs in reliance upon Chapter VIII of the SEBI ICDR Regulations and section 42 of

the Companies Act, 2013 read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules,

2014, through the mechanism of Qualified Institutions Placements (“QIP”) wherein a listed company in India

may issue and allot equity shares to QIBs on a private placement basis, provided that:

a special resolution approving the QIP has been passed by its shareholders. Such special resolution must

specify (a) that the allotment of equity shares is proposed to be pursuant to a QIP and (b) the relevant date;

equity shares of the same class of such company which are proposed to be allotted through the QIP are listed

on a stock exchange in India that has nation-wide trading terminals for a period of at least one year prior to

the date of issuance of notice to its shareholders for convening the meeting to pass the special resolution;

the aggregate of the proposed issue and all previous QIP made by the issuer in the same financial year does

not exceed five times the net worth (as defined in the SEBI ICDR Regulations) of the issuer as per the

audited balance sheet of the previous financial year

such company complies with the minimum public shareholding requirements set out in the Securities

Contract Regulation Rules, 1957 (“SCRR”);

Prior to circulating the preliminary placement document the issuer must prepare and record a list of QIBs to

whom the offer will be made. The offer must be made only to such persons whose names are recorded by

the issuer prior to the invitation to subscribe;

the issuer shall have completed allotments with respect to any offer or invitation made earlier by the issuer

or shall have withdrawn or abandoned any invitation or offer made earlier by the issuer;

the issuer shall offer to each allottee at least such number of securities in the issue which would aggregate

to ` 20,000 at the face value of the equity shares;

the payment to be made for subscription to the equity shares shall be made from the bank account of the

person subscribing to such securities and in case of securities to be held by joint holders, the payment for

subscription to the securities shall be paid from the bank account of the person whose name appears first in

the application;

at least 10% of equity shares issued to QIB’s must be allotted to mutual funds, provided that, if this portion

or any part thereof to be allotted to mutual funds remains unsubscribed, it may be allotted to other QIBs;

and

bidders are not allowed to withdraw their bids after the closure of the issue.

Additionally, there is a minimum pricing requirement for pricing equity shares, offered in a QIP, under the SEBI

ICDR Regulations. The Floor Price of the equity shares shall not be less than the average of the weekly high and

low of the closing prices of the equity shares of the same class quoted on the Stock Exchange during the two

weeks preceding the Relevant Date. Further, a discount of not more than 5% of the Floor Price is permitted.

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The “relevant date” referred to above means the date of the meeting in which the board of directors or the

committee of directors, duly authorized by the board of directors, decides to open the proposed issue; and the

“stock exchange” means any of the recognized stock exchanges in India on which the equity shares of the issuer

of the same class are listed and on which the highest trading volume in such equity shares has been recorded

during two weeks immediately preceding the relevant date.

Equity shares must be allotted within 12 months from the date of the shareholders resolution approving the QIP

and also within 60 days from the date of receipt of application money from the relevant QIBs. The equity shares

issued pursuant to the QIP must be issued on the basis of a placement document that shall include the information

specified in Schedule XVIII of the SEBI ICDR Regulations and Form PAS- 4 as prescribed under Rule 14 of the

Companies (Prospectus and Allotment of Securities) Rules, 2014.

The placement document is a private document provided to only QIBs interested in applying in the issue, through

serially numbered copies and is required to be placed on the website of the stock exchange and of the issuer with

a disclaimer to the effect that it is in connection with an issue to QIBs and no offer is being made to the public or

to any category of investors.

Securities allotted to a QIB pursuant to a QIP shall not be sold for a period of one year from the date of allotment

except on a recognized stock exchange in India.

The minimum number of allottees for each QIP shall not be less than:

Two, where the issue size is less than or equal to ` 250.00 million; and

Five, where the issue size is greater than ` 250.00 million lacs.

No single allottee shall be allotted more than 50% of the issue size or less than ` 20,000.00 of face value of Equity

Shares. QIBs that belong to the same group or that are under common control shall be deemed to be a single

allottee for this purpose.

The issuer is required to furnish a copy of the placement document to each stock exchange on which its equity

shares are listed. Accordingly, our Bank shall file a copy of this Preliminary Placement Document, and

subsequently file a copy of the Placement Document with Stock Exchanges.

The issuer shall also make the requisite filings with the RoC and the Stock Exchanges within the stipulated period

as required under the Companies Act, 2013 and the Companies (Prospectus and Allotment of Securities) Rules,

2014.

The aggregate of the proposed QIP and all previous QIPs made in the same financial year shall not exceed five

times the net worth of the issuer as per its audited balance sheet of the previous financial year.

Our Bank has received the in-principle approval from BSE dated December 28, 2016 and from the NSE dated

December 28, 2016 under Regulation 28 of the Listing Regulations for the Issue. The Board of directors has

authorized the Issue pursuant to a resolution passed at its meeting held on May 6, 2016 and October 17, 2016. The

shareholders of our Bank have authorised the Issue pursuant to a special resolution dated June 10, 2016.







the restrictions described in the section titled “Transfer Restrictions” on page 204.

Issue Procedure

1. Our Bank and the BRLM shall circulate serially numbered copies of this Preliminary Placement Document

and the serially numbered Application Form, either in electronic form or physical form, to QIBs and the

Application Form shall be specifically addressed to such QIBs. Pursuant to section 42(7) of the Companies

Act, 2013, our Bank shall maintain complete record of the QIBs to whom the Preliminary Placement

Document and the serially numbered Application Form have been dispatched. Our Bank will make the

requisite filings with the RoC within the stipulated time period as required under the Companies Act, 2013

and the rules made thereunder.

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2. The list of QIBs to whom the Application Form is delivered shall be determined by the BRLM at its sole

discretion. Unless a serially numbered Preliminary Placement Document along with the Application

Form is addressed to a particular QIB, no invitation to subscribe shall be deemed to have been made

to such QIB. Even if such documentation were to come into the possession of any person other than the

intended recipient, no offer or invitation to offer shall be deemed to have been made to such other person and

any application that does not comply with this requirement shall be treated as invalid.

3. QIBs may submit the Application Form, including any revisions thereof, during the Bidding Period to the

BRLM.

4. Bidders shall submit Bids for, and our Bank shall issue and allot to each successful Allottee at least such

number of Equity Shares in the Issue which would aggregate to ` 20,000 calculated at the face value of the

Equity Shares.

5. QIBs will be required to indicate the following in the Application Form:

(a) Full name of the QIB to whom Equity Shares are to be Allotted;

(b) number of Equity Shares Bid for;

(c) price at which they offer to apply for the Equity Shares provided that QIBs may also indicate that they

are agreeable to submit a bid at “Cut-off Price” which shall be any price as may be determined by our

Bank in consultation with the BRLM at or above the Floor Price, net of such discount as approved in

accordance with SEBI ICDR Regulations and decided by the Board. The Bank may offer a discount up

to 5% to the Floor Price in accordance with the proviso of Regulation 85(1) of the SEBI ICDR

Regulations;

(d) a representation that it is outside the United States and is acquiring the Equity Shares in an offshore

transaction in reliance on Regulation S and it has agreed to certain other representations set forth in the

Application Form;

(e) if you are not a resident of India, then the investment amount will be paid out of inward remittance of

foreign exchange received through normal banking channels and as per RBI’s notification no. FEMA

20/2000 – RB dated May 3, 2000, as amended from time to time; and

(f) the details of the depository account(s) to which the Equity Shares should be credited.

Note: Each sub-account of an FII other than a sub-account which is a foreign corporate or a foreign

individual will be considered as an individual QIB and separate Application Forms would be required

from each such sub – account for submitting Bids.

6. Once a duly filled in Application Form is submitted by the QIB, such Application Form constitutes an

irrevocable offer and the same cannot be withdrawn after the Issue Closing Date.

7. The Issue Closing Date shall be notified to the Stock Exchanges and the QIBs shall be deemed to have been

given notice of such date after the receipt of the Application Form.

8. The Bids made by asset management companies or custodians of mutual funds shall specifically state the

names of the concerned schemes for which the Bids are made. In case of a mutual fund, a separate Bid can

be made in respect of each scheme of the mutual fund registered with SEBI. All such bids/applications by or

on behalf of various schemes of a mutual fund shall be treated as a single application.

9. Upon the receipt of the Application Form, our Bank in consultation with the BRLM shall decide both the

Issue Price and the number of Equity Shares to be issued. On determination of the Issue Price, the BRLM

will send the Confirmation of Allocation Note (“CAN”) to the QIBs who have been Allocated Equity Shares

along with serially numbered Placement Documents. The dispatch of the CANs shall be deemed a valid,

binding and irrevocable contract for the QIBs to pay the entire Issue Price for all the Equity Shares Allocated

to such QIB. The CAN shall contain details like the number of Equity Shares Allocated to the QIB and

payment instructions including the details of the amounts payable by the QIB for Allotment of the Equity

Shares in its name and the Pay-In Date as applicable to the respective QIBs.

Pursuant to receiving the CAN, the QIBs would have to make the payment of the entire application monies

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for the Equity Shares indicated in the CAN at the Issue Price through electronic transfer to the Escrow

Account by the Pay-In Date as specified in the CAN sent to the respective QIB. Please note that the

allocation shall be at the absolute discretion of our Bank and will be based on the recommendation of

the BRLM.

10. No payment shall be made by QIBs in cash. Please note that any payment of application monies for the Equity

Shares shall be made from the bank accounts of the relevant QIBs applying for the Equity Shares. Monies

payable on Equity Shares to be held by joint holders shall be paid from the bank account of the person whose

name appears first in the application. Pending allotment, all monies received for subscription of the Equity

Shares shall be kept by our Bank in a separate bank account with a scheduled bank and shall be utilized only

for the purposes permitted under the Companies Act, 2013.

11. Upon receipt of the application monies from the QIBs, our Bank shall issue and allot Equity Shares as per the

details in the CAN to the QIBs. Our Bank will intimate the details of the Allotment to the Stock Exchanges.

12. After passing the resolution for Allotment and prior to crediting the Equity Shares into the depository

participant accounts of the successful Bidders, our Bank shall apply to the Stock Exchanges for listing.

13. After receipt of the listing approval from the Stock Exchanges, our Bank shall credit the Equity Shares into

the Depository Participant accounts of the respective QIB.

14. Our Bank shall then apply to the Stock Exchanges for the final trading and listing permission.

15. The Equity Shares that have been credited to the beneficiary account with the Depository Participant of the

QIBs shall be eligible for trading on the Stock Exchanges only upon the receipt of final listing and trading

approval from the Stock Exchanges.

16. Upon receipt of intimation of final listing and trading approval from the Stock Exchanges, our Bank may

inform the QIBs who have received an Allotment of the receipt of such approval. Our Bank and the BRLM

shall not be responsible for any delay or non-receipt of the communication of the final listing and trading

permission from the Stock Exchanges or any loss arising from such delay or non-receipt. Final listing and

trading approval granted by the Stock Exchanges is also placed on their websites. QIBs are advised to apprise

themselves of the status of the receipt of the permissions from the Stock Exchanges or our Bank.

Qualified Institutional Buyers

Only QIBs as defined in Regulation 2(1) (zd) of the SEBI ICDR Regulations and not otherwise excluded pursuant

to Regulation 86(1)(b) of Chapter VIII of the SEBI ICDR Regulations are eligible to invest. Under Regulation

86(1)(b) of the SEBI ICDR Regulations, no Allotment shall be made, either directly or indirectly, to any QIB who

is a Promoter or any person related to the Promoters. Currently QIBs include:

Alternate investment funds registered with SEBI;

Eligible FPIs;

Foreign venture capital investors registered with SEBI;

Insurance companies registered with Insurance Regulatory and Development Authority;

Insurance funds set up and managed by the army, navy, or air force of the Union of India;

Insurance funds set up and managed by the Department of Posts, India;

Multilateral and bilateral development financial institutions;

Mutual funds registered with SEBI;

Pension Funds with minimum corpus of ` 25.00 million;

Provident Funds with minimum corpus of ` 25.00 million;

Public financial institutions as defined in section 2(72) of the Companies Act, 2013;

Scheduled commercial banks;

State industrial development corporations;

National Investment Fund set up by resolution no. F. No. 2/3/2005-DDII dated November 23, 2005 of

Government of India published in the Gazette of India; and

Venture capital funds registered with SEBI;

FIIs (other than a sub-account which is a foreign corporate or a foreign individual) and Eligible FPIs shall

participate in this Issue under Schedule 2 and Schedule 2A of FEMA, respectively. FIIs and Eligible FPIs

are permitted to participate in the Issue subject to compliance with all applicable laws and such that the

shareholding of the FPIs and FIIs does not exceed specified limits as prescribed under applicable laws in

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this regard. Other eligible non-resident QIBs shall participate in the Issue under Schedule 1 of the FEMA

and shall make the payment of application money through the foreign currency non-resident (FCNR)

account and not through the special non-resident rupee (SNRR) account. All non-resident QIBs shall

ensure that the investment amount is paid out of inward remittance of foreign exchange received through

normal banking channels and as per RBI’s notification no. FEMA 20/2000 – RB dated May 3, 2000, as

amended from time to time.

In terms of the SEBI FPI Regulations, the issue of Equity Shares to a single FPI or an investor group (which means

the same set of ultimate beneficial owner(s) investing through multiple entities) is not permitted to be 10.00% or

above of our post-Issue Equity Share capital. Further, in terms of the FEMA, the total holding by each FPI shall

be below 10.00% of our total paid-up Equity Share capital and the total holdings of all FPIs put together shall not

exceed 24.00% of our paid-up Equity Share capital. The aggregate limit of 24.00% has been increased up to the

sectoral cap of 49% by way of a resolution passed by the Board of Directors followed by a special resolution

passed by the shareholders of our Bank on September 26, 2014.

Also, prior approval of RBI is required for the acquisition or transfer of the shares of our Bank, which will take

the aggregate holding (both direct and indirect, beneficial or otherwise) of an individual, his relatives, associate

enterprises and persons acting in concert with him to 5.00% or more of our Bank’s total paid up share capital or

entitles him to exercise 5.00% or more of the total voting rights of our Bank, in accordance with the terms of the

Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions,

2015.

Eligible FPIs are permitted to participate in the Issue subject to compliance with conditions and restrictions which

may be specified by the Government from time to time.

An FII who holds a valid certificate of registration from SEBI shall be deemed to be an FPI until the expiry of the

block of three years for which fees have been paid as per the SEBI FII Regulations. Subject to trailing condition,

an FII or sub-account of an FII may participate in the Issue until the expiry of its registration as a FII or sub-

account or until it obtains a certificate of registration as FPI, whichever is earlier. An FII or sub-account shall not

be eligible to invest as an FII after registering as an FPI under the SEBI FPI Regulations.

In terms of FEMA, for calculating the aggregate holding of FPIs in a company, holding of all registered FPIs as

well as holding of FIIs (being deemed FPIs) shall be included.

Under Regulation 86(1)(b) of the SEBI ICDR Regulations, no allotment shall be made pursuant to this Issue,

either directly or indirectly, to any QIB being our Promoter or any person related to our Promoters. QIBs which

have all or any of the following rights shall be deemed to be persons related to our Promoters:

(i) Rights under a shareholders’ agreement or voting agreement entered into with our Promoter or persons

related to our Promoter;

(ii) Veto rights; or

(iii) A right to appoint any nominee director on the Board

Provided, however, that a QIB which does not hold any Equity Shares in our Bank and who has acquired the

aforesaid rights in the capacity of a lender shall not be deemed to be a person related to the Promoter.

Our Bank and the BRLM and any of their respective directors, officers, counsel, advisors, representatives,

agents or affiliates are not liable for any amendments or modification or changes in applicable laws or

regulations, which may occur after the date of this Preliminary Placement Document. QIBs are advised to

make their independent investigations and satisfy themselves that they are eligible to apply. QIBs are

advised to ensure that any single Application Form from them does not exceed the investment limits or

maximum number of Equity Shares that can be held by them under applicable law or regulation or as

specified in this Preliminary Placement Document. Further, QIBs are required to satisfy themselves that

any requisite compliance pursuant to this Allotment such as public disclosures under applicable laws is

complied with. QIBs are advised to consult their advisers in this regard. Furthermore, QIBs are required

to satisfy themselves that their Application Form would not eventually result in triggering a tender offer

under the Takeover Code.

Note: Affiliates or associates of the BRLM who are QIBs may participate in this Issue subject to compliance with

applicable laws.

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Allotments made to FVCIs, VCFs and AIFs in the Issue are subject to the rules and regulations that are applicable

to each of them respectively, including in relation to lock-in requirements.

A minimum of 10% of the Equity Shares offered in the Issue shall be Allotted to Mutual Funds. If no Mutual Fund

is agreeable to take up the minimum portion as specified above, such minimum portion or part thereof may be

Allotted to other QIBs.

Bid Process

Application Form

QIBs are permitted to only use the serially numbered Application Forms (which is addressed to the QIB) supplied

by the BRLM in either electronic form or by physical delivery for the purpose of making a Bid (including any

revision of a Bid) in terms of this Preliminary Placement Document and the Placement Document.

By making a Bid (including revisions thereof) for Equity Shares pursuant to the terms of this Preliminary

Placement Document, each QIB will be deemed to have made the following representations and warranties, and

the representations, warranties, acknowledgements and agreements made under “Representations by Investors”,

including:

1. The QIB confirms that it is a QIB in terms of Regulation 2(1)(zd) of the SEBI ICDR Regulations and has a

valid and existing registration under the applicable laws of India and is eligible to participate in this Issue

and is not excluded under Regulation 86 of the SEBI ICDR Regulations;

2. The QIB confirms that it is not a promoter of the Bank and is not a person related to the promoter of the

Bank, either directly or indirectly and its Application does not directly or indirectly represent the Promoter

or Promoter Group or a person related to the Promoter of our Bank;

3. The QIB confirms that it has no rights under a shareholders’ agreement or voting agreement with the

Promoter or persons related to the Promoter, no veto rights or right to appoint any nominee director on the

Board of the Bank other than such rights acquired in the capacity of a lender (not holding any Equity Shares)

which shall not be deemed to be a person related to the Promoter;

4. The QIB has no right to withdraw its Bid after the Issue Closing Date;

5. The QIB confirms that if Equity Shares are Allotted pursuant to this Issue, it shall not, for a period of one

year from Allotment, sell such Equity Shares otherwise than on the floor of the Stock Exchange;

6. The QIB confirms that the QIB is eligible to Bid and hold Equity Shares so Allotted and together with any

Equity Shares held by the QIB prior to this Issue. The QIB further confirms that its holding of the Equity

Shares does not, and shall not, exceed the level permissible as per any applicable regulations applicable to

the QIB;

7. The QIB confirms that the Bids will not eventually result in triggering an open offer under the Takeover

Code;

8. The QIB confirms that, to the best of its knowledge and belief, together with other QIBs in this Issuethat

belongs to the same group or are under common control, the Allotment to the QIB shall not exceed 50% of

the Issue Size. For the purposes of this statement:

(a) The expression “belongs to the same group” shall derive meaning from the concept of “companies under

the same group” as provided in sub-section (11) of section 372 of the Companies Act, 1956; and

(b) “Control” shall have the same meaning as is assigned to it by sub-clause (e) of clause 1 of Regulation 2

of the Takeover Code;

9. The QIBs shall not undertake any trade in the Equity Shares credited to its Depository Participant account

until such time that the final listing and trading approval for the Equity Shares is issued by the Stock

Exchanges; and

10. The QIB represents that it is outside the United States and is acquiring the Equity Shares in an offshore

transaction in reliance on Regulation S and it has agreed to certain other representations set forth in the

Application Form.

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11. The QIBs are aware of, acknowledge, represent and agree to the following in respect of their shareholding

in our Bank that if their aggregate holding in the paid-up share capital of our Bank, whether direct or indirect,

beneficial or otherwise held by them, their relatives, associate enterprises and persons acting in concert

exceeds 5.00% of the total paid-up share capital of our Bank or entitles them to exercise 5.00% or more of

the total voting rights of our Bank, they shall seek prior approval of the RBI, in accordance with the terms

of the Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks)

Directions, 2015.

QIBs MUST PROVIDE THEIR DEPOSITORY ACCOUNT DETAILS, THEIR DEPOSITORY

PARTICIPANT’S NAME, DEPOSITORY PARTICIPANT IDENTIFICATION NUMBER AND

BENEFICIARY ACCOUNT NUMBER IN THE APPLICATION FORM.QIBs MUST ENSURE THAT

THE NAME GIVEN IN THE APPLICATION FORM IS EXACTLY THE SAME AS THE NAME IN

WHICH THE DEPOSITORY ACCOUNT IS HELD. FOR THIS PURPOSE, ELIGIBLE SUB-

ACCOUNTs OF AN FII WOULD BE CONSIDERED AS AN INDEPENDENT QIB.

IF SO REQUIRED BY THE BRLM, THE QIB SUBMITTING A BID, ALONG WITH THE

APPLICATION FORM, WILL ALSO HAVE TO SUBMIT REQUISITE DOCUMENT(S) TO THE

BRLM TO EVIDENCE THEIR STATUS AS A “QIB” AS DEFINED HEREINABOVE.

Demographic details such as an address and a bank account will be obtained from the Depositories as per the

Depository Participant account details given above.

The submission of an Application Form by the QIB shall be deemed a valid, binding and irrevocable offer for the

QIB to pay the entire Issue Price for its share of Allotment (as indicated by the CAN) and becomes a binding

contract on the QIB, upon issuance of the CAN by the Bank in favour of the QIB.

Submission of Application Form

All Application Forms shall be required to be duly completed with information including the name of the QIB,

the price and the number of Equity Shares applied. The Application Form shall be submitted to the BRLM either

through electronic form or through physical delivery at the following addresses:

Name of

the

BRLM

Address Contact

Person

Email Phone

Centrum

Capital

Limited

Centrum House,

C.S.T. Road,

Vidyanagari Marg,

Kalina,

Santacruz (East),

Mumbai - 400 098,

Maharashtra, India

Sugandha

Kaushik [email protected] Tel: +91 22 4215 9000

Fax: +91 22 4215 9444

The BRLM shall not be required to provide any written acknowledgement of the same.

Permanent Account Number or PAN

Each QIB should mention its Permanent Account Number (“PAN”) allotted under the IT Act. The copy of the

PAN card or PAN allotment letter is required to be submitted with the Application Form. Bids without this

information will be considered incomplete and is liable to be rejected. It is to be specifically noted that applicant

should not submit the GIR number instead of the PAN as the Application Form is liable to be rejected on this

ground.

Pricing and Allocation

Build-up of the book

The QIBs shall submit their Bids (including the revision thereof) through the Application Form within the Bidding

Period to the BRLM. The book shall be maintained by the BRLM.

Price discovery and Allocation

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Our Bank, in consultation with the BRLM, shall finalize the Issue Price for the Equity Shares, which shall be at

or above the Floor Price. The Bank may offer a discount of not more than 5% on the Floor Price in terms of

Regulation 85 of the ICDR Regulations. After finalisation of the Issue Price, our Bank shall update this

Preliminary Placement Document with the details of the Issue and file the Placement Document with the Stock

Exchange.

Method of Allocation

Our Bank shall determine the Allocation, in consultation with the BRLM, on a discretionary basis and in

compliance with Chapter VIII of the SEBI ICDR Regulations.

Application Forms received from the QIBs at or above the Issue Price shall be grouped together to determine the

total demand. The Allocation to all such QIBs will be made at the Issue Price. Allocation to Mutual Funds for up

to a minimum of 10% of the Issue Size shall be undertaken subject to valid Application Form being received at

or above the Issue Price.

THE DECISION OF OUR BANK, IN CONSULTATION WITH THE BRLM, IN RESPECT OF

ALLOCATION SHALL BE FINAL AND BINDING ON ALL QIBs. QIBs MAY NOTE THAT

ALLOCATION OF EQUITY SHARES IS AT THE SOLE AND ABSOLUTE DISCRETION OF OUR

BANK, IN CONSULTATION WITH THE BRLM, AND QIBs MAY NOT RECEIVE ANY

ALLOCATION EVEN IF THEY HAVE SUBMITTED VALID APPLICATION FORMS AT OR ABOVE

THE ISSUE PRICE. NEITHER OUR BANK NOR THE BRLM IS OBLIGED TO ASSIGN ANY

REASONS FOR SUCH NON-ALLOCATION.

CAN

Based on the Application Forms received, our Bank, in consultation with the BRLM, will, in its sole and absolute

discretion, decide the list of QIBs to whom the serially numbered CAN shall be sent, pursuant to which the details

of the Equity Shares Allocated to them and the details of the amounts payable for Allotment of the same in their

respective names shall be notified to such QIBs. Additionally, the CAN would include details of Escrow Account

into which such payments would need to be made, Pay-In Date as well as the probable designated date

(“Designated Date”), being the date of credit of the Equity Shares to the QIB’s account, as applicable to the

respective QIBs.

The QIBs would also be sent a serially numbered Placement Document either in electronic form or by physical

delivery along with the serially numbered CAN.

The dispatch of the serially numbered Placement Document and the CAN to the QIB shall be deemed a valid,

binding and irrevocable contract for the QIB to furnish all details that may be required by the BRLM and our

Bank and to pay the entire Issue Price for all the Equity Shares Allocated to such QIB.

QIBs ARE ADVISED TO INSTRUCT THEIR DEPOSITORY PARTICIPANT TO ACCEPT THE

EQUITY SHARES THAT MAY BE ALLOCATED / ALLOTTED TO THEM PURSUANT TO THE

ISSUE.

Bank Account for the Payment of Bid Money

Our Bank has opened an escrow account titled “Lakshmi Vilas Bank–QIP Escrow Account” (the “Escrow

Account”) with the Escrow Bank in terms of the arrangements between our Bank, the BRLM and The Lakshmi

Vilas Bank Limited (acting as the Escrow Bank). The QIBs will be required to deposit the entire amount payable

for the Equity Shares Allocated to it by the Pay-In Date as mentioned in their respective CAN.

Payments are to be made only through electronic fund transfer.

Note: Payments through cheques are liable to be rejected.

If the payment is not made favouring the Escrow Account within the time stipulated in the CAN, the Application

Form and the CAN of the QIB are liable to be cancelled.

In case of cancellations or default by the QIBs, our Bank and the BRLM have the right to re-allocate the Equity

Shares at the Issue Price among existing or new QIBs at their sole and absolute discretion, subject to the

compliance with the requirements of the Companies Act, 2013 and the SEBI ICDR Regulations.

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Our Bank undertakes to utilize the amount in the Escrow Account only for the purposes of: (i) adjustments against

Allotment of Equity Shares in the Issue; or (ii) repayment of application money if our Bank is not able to Allot

Equity Shares in the Issue.

Designated Date and Allotment of Equity Shares

1. The Equity Shares will not be Allotted unless the QIBs pay the Issue Price to the Escrow Account as stated

above.

2. Subject to the satisfaction of the terms and conditions of the Placement Agreement, our Bank will ensure that

the Allotment of the Equity Shares is completed by the Designated Date provided in the CAN for the QIBs

who have paid the aggregate subscription amounts as stipulated in the CAN.

3. In accordance with the SEBI ICDR Regulations, Equity Shares will be issued and Allotment shall be made

only in the dematerialized form to the Allottees. Allottees will have the option to re-materialize the Equity

Shares, if they so desire, as per the provisions of the Companies Act, 2013 and the Depositories Act.

4. Our Bank reserves the right to cancel this Issue at any time up to Allotment without assigning any reasons

whatsoever.

5. Post receipt of the listing approval of the Stock Exchanges, our Bank shall credit the Equity Shares into the

Depository Participant account of the QIBs.

6. Following the Allotment and credit of Equity Shares into the QIBs Depository Participant account, our Bank

will apply for final listing and trading approval for trading on the Stock Exchanges.

7. In the event that we are unable to issue and Allot the Equity Shares offered in the Issue or on cancellation of

the Issue, within 60 days from the date of receipt of application money, in accordance with section 42 of the

Companies Act, 2013 we shall repay the application money within 15 days from expiry of 60 days, failing

which we shall repay that money with interest at the rate of 12% per annum from expiry of the 60 th day. The

application money to be refunded by us shall be refunded to the same bank account from which application

money was remitted by the QIBs.

8. The Escrow Bank shall release the monies lying to the credit of the Escrow Bank Account to our Bank after

the receipt of the final listing and trading approval from the Stock Exchanges.

9. In case of QIBs who have been Allotted more than 5% of the Equity Shares in the Issue, our Bank shall

disclose the name and the number of the Equity Shares Allotted to such QIB to the Stock Exchanges and the

Stock Exchanges shall make the same available on their website.

Other Instructions

Our Right to Reject Bids

Our Bank, in consultation with the BRLM, may reject Bids, in part or in full, without assigning any reasons

whatsoever. The decision of our Bank and the BRLM, in relation to the rejection of Bids, shall be final and

binding.

Equity Shares in dematerialized form with NSDL or CDSL

1. The Allotment of the Equity Shares in this Issue shall be only in dematerialized form, (i.e., not in the form of

physical certificates but be fungible and be represented by the statement issued through the electronic mode).

2. A QIB applying for Equity Shares must have at least one beneficiary account with a Depository Participant

of either NSDL or CDSL prior to making the Bid.

3. Allotment to a successful QIB will be credited in electronic form directly to the beneficiary account (with the

Depository Participant) of the QIB.

4. Equity Shares in electronic form can be traded only on the stock exchanges having electronic connectivity

with NSDL and CDSL. The Stock Exchanges has electronic connectivity with NSDL and CDSL.

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5. The trading of the Equity Shares would be in dematerialized form only for all QIBs in the demat segment of

the Stock Exchanges.

6. Our Bank will not be responsible or liable for the delay in the credit of the Equity Shares due to errors in the

Application Forms or on part of the QIBs.

Compliance officer

N. Ramanathan

Company Secretary and Compliance Officer

Lakshmi Vilas Bank Limited

Corporate Office, “LVB House”

No.4, Sardar Patel Road,

Guindy, Chennai - 600 032

Tamil Nadu

Tel: +91 44-22205305 / +91 9442552642

Fax: +91 44 2220 5317

Email: [email protected]

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PLACEMENT AGREEMENT

Placement Agreement

The BRLM has entered into a Placement Agreement dated December 28, 2016 with our Bank, pursuant to which,

the BRLM has agreed, subject to certain conditions, to place the Equity Shares of our Bank, on reasonable efforts

basis, pursuant to Chapter VIII of the SEBI ICDR Regulations and section 42 of the Companies Act, 2013.

The Placement Agreement contains customary representations and warranties, as well as indemnities from our

Bank, the Issue is subject to satisfaction of certain conditions and subject to termination in accordance with the

terms contained therein.

Applications shall be made to list the Equity Shares and admit them to trading on the Stock Exchanges. No

assurance can be given as to the liquidity or sustainability of the trading market for the Equity Shares, the ability

of holders of the Equity Shares to sell their Equity Shares or the price at which holders of the Equity Shares will

be able to sell their Equity Shares.

This Preliminary Placement Document has not been, and will not be, registered as a prospectus with a Registrar

of Companies in India. With the exception of QIBs, no Equity Shares will be offered in India or overseas to the

public or any members of the public in India or any other class of investors other than QIBs.







the restrictions described in the section titled “Transfer Restrictions” on page 204. All purchasers are required to

make the representations set forth in “Representations by Investors” on page 3.

In connection with the Issue, the BRLM (or its affiliates) may, for their own accounts, enter into asset swaps,

credit derivatives or other derivative transactions relating to the Equity Shares at the same time as the offer and

sale of the Equity Shares, or in secondary market transactions. As a result of such transactions, the BRLM may

hold long or short positions in such Equity Shares. These transactions may comprise of a substantial portion of

the Issue and no specific disclosure will be made of such positions.

The BRLM and certain of its affiliates have in the past provided, currently provide and may in future provide

investment banking, general financing and banking and advisory services to our Bank and our affiliates for which

it has in the past received, currently receive and may in the future receive, customary fees.

Lock-up

Our Bank has undertaken that it will not for a period of 30 days from the date of Allotment under the Issue, without

the prior written consent of the BRLM, directly or indirectly, (a) offer, issue, contract to issue, issue or offer any

option or contract to purchase, purchase any option or contract to sell, grant any option or right to purchase, or

otherwise transfer or dispose of, any Equity Shares or any securities convertible into or exercisable for Equity

Shares (including, without limitation, securities convertible into or exercisable or exchangeable for Equity Shares

which may be deemed to be beneficially owned), or file any registration statement under the U.S. Securities Act,

with respect to any of the foregoing, or (b) enter into any swap or other agreement or any transaction that transfers,

in whole or in part, directly or indirectly, any of the economic consequences associated with the ownership of any

of the Equity Shares or any securities convertible into or exercisable or exchangeable for Equity Shares (regardless

of whether any of the transactions described in clause (a) or (b) is to be settled by the delivery of Equity Shares

or such other securities, in cash or otherwise), or (c) deposit Equity Shares with any other depositary in connection

with a depositary receipt facility, or (d) publicly announce any intention to enter into any transaction falling within

(a) to (c) above or enter into any transaction (including a transaction involving derivatives) having an economic

effect similar to that of an issue or offer or deposit of Equity Shares in any depositary receipt facility or publicly

announce any intention to enter into any transaction falling within (a) to (c) above. Provided, however, that the

lock-up restrictions will not apply to grant of option under LVB ESOS-2010.

In view of the Tier I Capital requirements on the Bank based on the current business Plan, the Board has in its

resolution dated October 17, 2016 also stated that it may evaluate suitable options to raise additional Tier I Capital

by way of issue of Equity Shares may not exceeding 35% of the existing paid-up capital of the Bank as on such

date including the Issue, and the lock-up restrictions shall not apply to that extent. Any such future fund raising

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plans initiated by the Bank will be subject to approval of the Board of Directors, Shareholders of the Bank and

any regulatory authority including Reserve Bank of India, as applicable at such time.

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SELLING RESTRICTIONS

The distribution of this Preliminary Placement Document and the offer, sale or delivery of the Equity Shares in

this Issue is restricted by law in certain jurisdictions. Persons who come into possession of this Preliminary

Placement Document or any offering material are advised to take legal advice with regard to any restrictions

that may be applicable to them and to observe such restrictions. This Preliminary Placement Document may not

be used for the purpose of an offer or sale in any circumstances in which such offer or sale is not authorised or

permitted.

General

No action has been taken or will be taken by our Bank or the BRLM that would permit an offering of the Equity

Shares to occur in any jurisdiction, or the possession, circulation or distribution of this Preliminary Placement

Document or any other material relating to our Bank or the Equity Shares in any jurisdiction, except India where

action for such purpose is required. Accordingly, except in India, the Equity Shares may not be offered or sold,

directly or indirectly, and none of this Preliminary Placement Document, any offering materials or any

advertisements in connection with the offering of the Equity Shares issued pursuant to the Issue may be distributed

or published in or from any country or jurisdiction except under circumstances that will result in compliance with

any applicable rules and regulations of any such country or jurisdiction and will not impose any obligations on

our Bank or the BRLM. This Issue will be made in compliance with the applicable regulations issued by the SEBI.

Each purchaser of the Equity Shares in this Issue will be required to make or deemed to have made, as applicable,

the representations, warranties, acknowledgments and agreements as described under the sections

“Representations by Investors” and “Transfer Restrictions” on pages 3 and 204 respectively.

India

This Preliminary Placement Document may not be distributed directly or indirectly in India or to residents of

India and any Equity Shares may not be offered or sold directly or indirectly in India to, or for the account or

benefit of, any resident of India except as permitted by applicable Indian laws and regulations, under which an

offer is strictly on a private and confidential basis and is limited to QIBs and is not an offer to the public. This

Issue is a “private placement” within the meaning of Section 42 of the Companies Act, 2013 since the invitation

or offer is to be made only to QIBs. This Preliminary Placement Document is neither a public issue nor a

prospectus under the Companies Act, 2013 or an advertisement and should not be circulated to any person other

than to whom the offer is made. This Preliminary Placement Document has not been and will not be registered

as a prospectus with the Registrar of Companies in India.

Dubai International Financial Centre

This Preliminary Placement Document relates to an exempt offer in the Dubai International Financial Centre (the

“DIFC”) in accordance with the Markets Rules (MKT) (“Markets Rules”) adopted by the Dubai Financial

Services Authority (the “DFSA”) pursuant to Markets Law DIFC Law No. 1 of 2012. The Equity Shares may

only be offered in the Issue to Professional Clients other than natural Persons and this Preliminary Placement

Document may not be delivered to, or relied on by, any other person.

The DFSA has not approved this Preliminary Placement Document nor taken steps to verify the information set

out in it and has no responsibility for it.

Capitalized terms not defined in this sub-section have the meaning given to those terms in the Markets Rules.

European Economic Area

In relation to each Member State of the European Economic Area that has implemented the Prospectus Directive

(each, a “Relevant Member State”), with effect from and including the date on which the Prospectus Directive

is or was implemented in that Relevant Member State (the “Relevant Implementation Date”), the Equity Shares

may not be offered or sold to the public in that Relevant Member State prior to the publication of a prospectus in

relation to the Equity Shares which has been approved by the competent authority in that Relevant Member State

or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that

Relevant Member State, all in accordance with the Prospectus Directive (defined below) and the 2010 Amending

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Directive (defined below), except that the Equity Shares, with effect from and including the Relevant

Implementation Date, may be offered to the public in that Relevant Member State at any time:

(a) to persons or entities that are “qualified investors” as defined in the Prospectus Directive or, if that Relevant

Member State has implemented the 2010 Amending Directive, as defined in the 2010 Amending Directive;

(b) to (i) fewer than 100 natural or legal persons (other than “qualified investors” as defined in the Prospectus

Directive); or (ii) if that Relevant Member State has implemented the 2010 Amending Directive, fewer than

150 natural or legal persons (other than “qualified investors” as defined in the 2010 Amending Directive), in

each case subject to obtaining the prior consent of the BRLM; and

(c) in any circumstances falling within Article 3(2) of the Prospectus Directive as amended (to the extent

implemented in that Relevant Member State) by Article 1(3) of the 2010 Amending Directive, provided that

no such offering of Equity Shares shall result in a requirement for the publication by our Bank or the BRLM

of a prospectus pursuant to Article 3 of the Prospectus Directive as amended (to the extent implemented in

that Relevant Member State) by Article 1(3) of the 2010 Amending Directive.

For the purposes of this provision, the expression an “offer of Equity Shares to the public” in relation to any Equity

Shares in any Relevant Member State means the communication in any form and by any means of sufficient

information on the terms of the offer and the Equity Shares to be offered so as to enable an investor to decide to

purchase or subscribe for the Equity Shares, as the same may be varied in that Member State by any measure

implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means

Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State and the

expression “2010 Amending Directive” means Directive 2010/73/EU and includes any relevant implementing

measure in each Member State.

Neither our Bank nor the BRLM has authorised, nor do they authorise, the making of any offer of Equity Shares

through any financial intermediary on their behalf, other than offers made by our Bank or the BRLM.

Hong Kong

The Preliminary Placement Document has not been reviewed or approved by any regulatory authority in Hong

Kong. In particular, this Preliminary Placement Document has not been, and will not be, registered as a

“prospectus” in Hong Kong under the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap

32) (“CO”) nor has it been authorized by the Securities and Futures Commission (“SFC”) in Hong Kong pursuant

to the Securities and Futures Ordinance (Cap 571) (“SFO”). Recipients are advised to exercise caution in relation

to the Offer. If recipients are in any doubt about any of the contents of this Preliminary Placement Document, they

should obtain independent professional advice.

The Preliminary Placement Document does not constitute an offer or invitation to the public in Hong Kong to

acquire any Equity Shares nor an advertisement of the Equity Shares in Hong Kong. The Preliminary Placement

Document must not be issued, circulated or distributed in Hong Kong other than:

to “professional investors” within the meaning of the SFO and any rules made under that ordinance

(“Professional Investors”); or

in other circumstances which do not result in this Preliminary Placement Document being a prospectus as

defined in the CO nor constitute an offer to the public which requires authorization by the SFC under the

SFO.

Unless permitted by the securities laws of Hong Kong, no person may issue or have in its possession for issue,

whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Equity Shares,

which is directed at, or the content of which is likely to be accessed or read by, the public of Hong Kong other

than with respect to the Equity Shares which are or are intended to be disposed of only to persons outside Hong

Kong or only to Professional Investors.

Any offer of the Equity Shares will be personal to the person to whom relevant offer documents are delivered,

and a subscription for the Equity Shares will only be accepted from such person. No person who has received a

copy of this Preliminary Placement Document may issue, circulate or distribute this Preliminary Placement

Document in Hong Kong or make or give a copy of this Preliminary Placement Document to any other person.

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No person allotted Equity Shares may sell, or offer to sell, such Shares to the public in Hong Kong within six

months following the date of issue of such Equity Shares.

Kuwait

This Preliminary Placement Document has not been and will not be filed with Kuwait Capital Market Authority

(the “Authority”) and as such has not been and will not be approved as a prospectus by the Authority. In order

comply with Article 5.5 of Chapter 5 of the Executive Byelaws - Module 11 issued by the Authority, invitations

to purchase the Equity Shares may not be to made more than 50 persons in Kuwait.

Oman

This Preliminary Placement Document and the Equity Shares offered under it are issued and governed by the laws

of India.

No offer or marketing of the Equity Shares has been or will be made by our Bank from within the Sultanate of

Oman and no subscription for Equity Shares may or will be effected or undertaken within the Sultanate of Oman.

Our Bank does not have a presence or representation in the Sultanate of Oman and any purchase of the Equity

Shares will be deemed to be made in and under the laws of India.

By receiving this Preliminary Placement Document, the person or entity to whom it has been issued understands,

acknowledges and agrees that this Preliminary Placement Document has not been registered or approved by the

Central Bank of Oman, the Oman Ministry of Commerce and Industry, the Oman Capital Market Authority or any

other authority in the Sultanate of Oman, and neither our Bank nor the BRLM is authorised or licensed by the

Central Bank of Oman, the Oman Ministry of Commerce and Industry, the Oman Capital Market Authority or any

other authority in the Sultanate of Oman, to market or sell the Equity Shares within the Sultanate of Oman.

The Equity Shares offered under this Preliminary Placement Document have not and will not be listed on any

stock exchange in the Sultanate of Oman.

Mauritius

In accordance with The Securities Act 2005 of Mauritius, no offer of the Equity Shares may be made to the public

in Mauritius without, amongst other things, the prior approval of the Mauritius Financial Services Commission.

Accordingly, this Placement Document does not constitute a public offering. This Placement Document has not

been approved or registered by the Mauritius Financial Services Commission, is for the exclusive use of the person

to whom it is addressed and is a private concern between the sender and the addressee. This Placement Document

is confidential and should not be disclosed or distributed in any way without the express written permission of our

Bank.

Qatar

This Preliminary Placement Document does not, and is not intended to, constitute an invitation or an offer of

securities in the State of Qatar (including the Qatar Financial Centre) and accordingly should not be construed as

such. The Equity Shares have not been, and shall not be, offered, sold or delivered at any time, directly or

indirectly, in the State of Qatar. Any offering of the Equity Shares shall not constitute a public offer of securities

in the State of Qatar.

By receiving this Preliminary Placement Document, the person or entity to whom it has been provided to

understands, acknowledges and agrees that: (a) neither this Preliminary Placement Document nor the Equity

Shares have been registered, considered, authorised or approved by the Qatar Central Bank, the Qatar Financial

Markets Authority, the Qatar Financial Centre Regulatory Authority or any other authority or agency in the State

of Qatar; (b) neither our Bank nor the BRLM is authorised or licensed by the Qatar Central Bank, the Qatar

Financial Markets Authority, the Qatar Financial Centre Regulatory Authority, or any other authority or agency

in the State of Qatar, to market or sell the Equity Shares within the State of Qatar; (c) this Preliminary Placement

Document may not be provided to any person other than the original recipient and is not for general circulation in

the State of Qatar; and (d) no agreement relating to the sale of the Equity Shares shall be consummated within the

State of Qatar.

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No marketing of the Equity Shares has been or will be made from within the State of Qatar and no subscription

to the Equity Shares may or will be consummated within the State of Qatar. Any applications to invest in the

Equity Shares shall be received from outside of the State of Qatar. This Preliminary Placement Document shall

not form the basis of, or be relied on in connection with, any contract in the State of Qatar. Neither our Bank nor

the BRLM is, by distributing this Preliminary Placement Document, advising individuals resident in the State of

Qatar as to the appropriateness of purchasing the Equity Shares. Nothing contained in this Preliminary Placement

Document is intended to constitute investment, legal, tax, accounting or other professional advice in, or in respect

of, the State of Qatar.

Singapore

The Preliminary Placement Document has not been and will not be registered as a prospectus with the Monetary

Authority of Singapore (“MAS”) under the Securities and Futures Act (Chapter 289) of Singapore (“SFA”).

Accordingly, the Equity Shares may not be offered or sold, or made the subject of an invitation for subscription

or purchase nor may this Preliminary Placement Document or any other document or material in connection with

the offer or sale, or invitation for subscription or purchase of the Equity Shares be circulated or distributed, whether

directly or indirectly, in Singapore other than (i) to an “institutional investor” within the meaning of Section 274

of the SFA and in accordance with the conditions of an exemption invoked under Section 274, (ii) to a relevant

person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the

conditions specified in Section 275, of the SFA, or (iii) other pursuant to, and in accordance with the conditions

of, any other applicable provision of the SFA.

Where the Equity Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which

is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business

of which is to hold investments and the entire share capital of which is owned by one or more individuals, each

of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose

is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, shares,

debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest

(howsoever described) in that trust shall not be transferred within six months after that corporation or that trust

has acquired the Equity Shares pursuant to an offer made under Section 275 except: (1) to an institutional investor

under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person

pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that

corporation or such rights or interest in that trust are acquired at a consideration of not less than S$200,000 (or its

equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange

of securities or other assets, and further for a corporation, in accordance with the conditions specified in Section

275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by

operation of law.

United Arab Emirates (excluding the Dubai Financial Centre)

The Equity Shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United

Arab Emirates (“U.A.E.”) other than in compliance with the laws of the U.A.E. The information contained in this

Preliminary Placement Document does not constitute a public offer of securities in the U.A.E. in accordance with

the Federal Law No. 2 of 2015 on Commercial Companies, as amended, or otherwise and is not intended to be a

public offer. Our Bank and the Equity Shares have not been approved or licensed by or registered with the Central

Bank of the United Arab Emirates, the Emirates Securities and Commodities Authority or any other relevant

licensing authorities or governmental agencies in the U.A.E. This Preliminary Placement Document has not been

approved by or filed with the Central Bank of the United Arab Emirates, the Emirates Securities and Commodities

Authority or the Dubai Financial Services Authority. This Preliminary Placement Document is being issued to a

limited number of selected institutional and sophisticated investors, is not for general circulation in the U.A.E.

and may not be provided to any person other than the original recipient or reproduced or used for any other

purpose. If you do not understand the contents of this Preliminary Placement Document, you should consult an

authorised financial adviser. This Preliminary Placement Document is provided for the benefit of the original

recipient only, and should not be delivered to, or relied on by, any other person.

United Kingdom (in addition to the European Economic Area selling restrictions above)

The Equity Shares offered in the Issue cannot be promoted in the United Kingdom to the general public. The

contents of this Preliminary Placement Document have not been approved by an authorised person within the

meaning of Financial Services and Markets Act 2000, as amended (the “FSMA”). The BRLM (a) may only

203

communicate or caused to be communicated and will only communicate or cause to be communicated an

invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA), to

persons who (i) are investment professionals falling within Article 19(5) of the Financial Services and Markets

Act 2000 (Financial Promotion) Order 2005, as amended (the “Financial Promotion Order”), or (ii) fall within

any of the categories of persons described in article 49(2)(a) to (d) of the Financial Promotion Order or otherwise

in circumstances in which section 21(1) of the FSMA does not apply to our Bank; and (b) have complied and will

comply with all applicable provisions of the FSMA with respect to anything done by them in relation to the Equity

Shares in, from or otherwise involving the United Kingdom. Any invitation or inducement to engage in investment

activity (within the meaning of Section 21 of FSMA) in connection with, or relating to, the sale or purchase of

any Equity Shares, may only be communicated or caused to be communicated in circumstances in which Section

21(1) of the FSMA does not apply. It is the responsibility of all persons under whose control or into whose

possession this document comes to inform themselves about and to ensure observance of all applicable provisions

of FSMA in respect of anything done in relation to an investment in Equity Shares in, from or otherwise involving,

the United Kingdom.

United States of America

The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act or

the securities laws of any state of the United States and may not be offered or sold in the United States except

pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S.

Securities Act and applicable state securities laws. The Equity Shares are not being offered or sold in the United

States in the Issue. The Equity Shares are being offered and sold in the Issue only outside the United States in

“offshore transactions” (as defined in Regulation S) in reliance on Regulation S. To help ensure that the offer and

sale of the Equity Shares in the Issue was made in compliance with Regulation S, each purchaser of Equity Shares

in the Issue will be deemed to have made the representations, warranties, acknowledgements and undertakings set

forth in “Transfer Restrictions” on page 204.

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TRANSFER RESTRICTIONS

Pursuant to Chapter VIII of the SEBI ICDR Regulations, any resale of Equity Shares, except on the Stock

Exchanges, is not permitted for a period of one year from the date of Allotment. In addition to the above, allotments

made to QIBs, including FVCIs, VCFs and AIFs, in this Issue may be subject to lock-in requirements, if any, under

the rules and regulations that are applicable to them. Investors are advised to consult legal counsel prior to

making any resale, pledge or transfer of the Equity Shares.

United States of America

The Equity Shares offered in the Issue have not been and will not be registered under the U.S. Securities Act or

the securities laws of any state of the United States and may not be offered or sold in the United States except

pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S.

Securities Act and applicable state securities laws.

Each purchaser of the Equity Shares, by accepting delivery of this Preliminary Placement Document, will be

deemed to:

Represent and warrant to our Bank, the BRLM and its affiliates that the offer and sale of the Equity Shares

to it is in compliance with all applicable laws and regulations.

Represent and warrant to our Bank, the BRLM and its affiliates that it was outside the United States (within

the meaning of Regulation S) at the time the offer of the Equity Shares was made to it and it was outside the

United States (within the meaning of Regulation S) when its buy order for the Equity Shares was originated.

Represent and warrant to our Bank, the BRLM and its affiliates that it did not purchase the Equity Shares as

a result of any “directed selling efforts” (as defined in Regulation S).

Acknowledge that the Equity Shares have not been and will not be registered under the U.S. Securities Act

or the securities law of any state of the United States and warrant to our Bank, the BRLM and its affiliates

that it will not offer, sell, pledge or otherwise transfer the Equity Shares except in an offshore transaction

complying with Rule 903 or Rule 904 of Regulation S or pursuant to any other available exemption from

registration under the U.S. Securities Act and in accordance with all applicable securities laws of the states

of the United States and any other jurisdiction, including India.

Represent and warrant to our Bank, the BRLM and its affiliates that if it acquired any of the Equity Shares

as fiduciary or agent for one or more investor accounts, it has sole investment discretion with respect to each

such account and that it has full power to make the foregoing acknowledgments, representations and

agreements on behalf of each such account.

Acknowledge that our Bank, the BRLM and its affiliates, and others will rely upon the truth and accuracy

of the foregoing acknowledgements, representations and warranties.

Any resale or other transfer, or attempted resale or other transfer, of the Equity Shares made other than in

compliance with the above-stated restrictions will not be recognized by our Bank.

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SECURITIES MARKET OF INDIA

The information in this section has been extracted from documents available on the website of SEBI and the Stock

Exchange and has not been prepared or independently verified by our Bank or the BRLM or any of their respective

affiliates or advisors.

The Indian securities market

India has a long history of organized securities trading. In 1875, the first stock exchange was established in

Mumbai.

Indian Stock Exchanges

Indian stock exchanges are regulated primarily by SEBI, as well as by the Government acting through the Ministry

of Finance, Capital Markets Division, under the Securities Contracts (Regulation) Act, 1956 (the “SCRA”) and

the Securities Contracts (Regulation) Rules, 1957 (the “SCRR”). On June 20, 2012, SEBI, in exercise of its

powers under the SCRA and the Securities and Exchange Board of India Act, 1992, as amended from time to time

(the “SEBI Act”), notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)

Regulations, 2012 (the “SCR (SECC) Rules”), which regulate inter alia the recognition, ownership and internal

governance of stock exchanges and clearing corporations in India together with providing for minimum

capitalisation requirements for stock exchanges. The SCRA, the SCRR and the SCR (SECC) Rules along with

various rules, bye-laws and regulations of the respective stock exchanges, regulate the recognition of stock

exchanges, the qualifications for membership thereof and the manner, in which contracts are entered into, settled

and enforced between members of the stock exchanges.

The SEBI Act empowers SEBI to regulate the Indian securities markets, including stock exchanges and

intermediaries in the capital markets, promote and monitor self-regulatory organisations and prohibit fraudulent

and unfair trade practices. Regulations and guidelines concerning minimum disclosure requirements by public

companies, investor protection, insider trading, substantial acquisitions of shares and takeover of companies, buy-

backs of securities, employee stock option schemes, stockbrokers, merchant bankers, underwriters, mutual funds,

FIIs, FPIs, credit rating agencies and other capital market participants have been notified by the relevant regulatory

authority.

Listing of Securities

The listing of securities on a recognized Indian stock exchange is regulated by the applicable Indian laws including

the Companies Act, 2013, the SCRA, the SCRR, the SEBI Act and various guidelines and regulations issued by

SEBI and the Listing Regulations. The SCRA empowers the governing body of each recognized stock exchange

to suspend trading of or withdraw admission to dealings in a listed security for breach of or non-compliance with

any conditions or breach of company’s obligations under the Listing Regulations or for any reason, subject to the

issuer receiving prior written notice of the intent of the exchange and upon granting of a hearing in the matter.

SEBI also has the power to amend the Listing Regulations and bye-laws of the stock exchanges in India, to

overrule a stock exchange’s governing body and withdraw recognition of a recognized stock exchange.

All listed companies are required to ensure a minimum public shareholding at 25%. Further, where the public

shareholding in a listed company falls below 25% at any time, such company is required to bring the public

shareholding to 25% within a maximum period of 12 months from the date of such fall. Consequently, a listed

company may be delisted from the stock exchanges for not complying with the above-mentioned requirement.

Our Bank is in compliance with this minimum public shareholding requirement.

Delisting

SEBI has notified the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009 in

relation to the voluntary and compulsory delisting of equity shares from the stock exchanges which were

significantly modified in 2015. In addition, certain amendments to the SCRR have also been notified in relation

to delisting.

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Index-Based Market-Wide Circuit Breaker System

In order to restrict abnormal price volatility in any particular stock, SEBI has instructed stock exchanges to apply

daily circuit breakers which do not allow transactions beyond a certain level of price volatility. The index based

market-wide circuit breaker system (equity and equity derivatives) applies at three stages of the index movement,

at 10%, 15% and 20%. These circuit breakers, when triggered, bring about a co-ordinated trading halt in all equity

and equity derivative markets nationwide. The market-wide circuit breakers are triggered by movement of either

the SENSEX of the BSE or the S&P CNX NIFTY of the NSE, whichever is breached earlier.

In addition to the market-wide index-based circuit breakers, there are currently in place individual scrip-wise price

bands of up to 20% movements either up or down. However, no price bands are applicable on scrips on which

derivative products are available or scrips included in indices on which derivative products are available.

The stock exchanges in India can also exercise the power to suspend trading during periods of market volatility.

Margin requirements are imposed by stock exchanges that are required to be paid by the stockbrokers.

BSE

Established in 1875, the BSE is the oldest stock exchange in India. In 1956, it became the first stock exchange in

India to obtain permanent recognition from the Government under the SCRA.

NSE

The NSE was established by financial institutions and banks to provide nationwide online, satellite-linked, screen-

based trading facilities with market-makers and electronic clearing and settlement for securities including

government securities, debentures, public sector bonds and units. The NSE was recognized as a stock exchange

under the SCRA in April 1993 and commenced operations in the wholesale debt market segment in June 1994.

The capital market (equities) segment commenced operations in November 1994 and operations in the derivatives

segment commenced in June 2000. The NSE launched the NSE 50 Index, now known as S&P CNX NIFTY, on

April 22, 1996 and the Mid-cap Index on January 1, 1996. The securities in the NSE 50 Index are highly liquid.

Internet-based Securities Trading and Services

Internet trading takes place through order routing systems, which route client orders to exchange trading systems

for execution. Stockbrokers interested in providing this service are required to apply for permission to the relevant

stock exchange and also have to comply with certain minimum conditions stipulated under applicable law. The

NSE became the first exchange to grant approval to its members for providing internet based trading services.

Internet trading is possible on both the “equities” as well as the “derivatives” segments of the NSE. The NSE

became the first exchange to grant approval to its members for providing internet-based trading services. Internet

trading is possible on both the “equities” and the “derivatives” segments of the NSE.

Trading Hours

Trading on both the NSE and the BSE occurs from Monday to Friday, between 9:15 a.m. and 3:30 p.m. IST

(excluding the 15 minutes pre-open session from 9:00 a.m. to 9:15 a.m.). The BSE and the NSE are closed on

public holidays. The recognized stock exchanges have been permitted to set their own trading hours (in the cash

and derivatives segments) subject to the condition that (i) the trading hours are between 9.00 a.m. and 5.00 p.m.;

and (ii) the stock exchange has in place a risk management system and infrastructure commensurate to the trading

hours.

Trading Procedure

In order to facilitate smooth transactions, the BSE replaced its open outcry system with BSE On-line Trading (or

“BOLT”) facility in 1995. This totally automated screen based trading in securities was put into practice

nationwide. This has enhanced transparency in dealings and has assisted considerably in smoothening settlement

cycles and improving efficiency in back-office work.

The NSE has introduced a fully automated trading system called National Exchange for Automated Trading (or

“NEAT”), which operates on strict time/price priority besides enabling efficient trade. NEAT has provided depth

in the market by enabling large number of members all over India to trade simultaneously, narrowing the spreads.

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Takeover Regulations

Disclosure and mandatory bid obligations for listed Indian companies under Indian law are governed by the

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

amended (“Takeover Regulations”), which provides specific regulations in relation to substantial acquisition of

shares and takeover. The Takeover Regulations came into effect on October 22, 2011 and replaced the Securities

and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (“Takeover

Code 1997”). Once the equity shares of a company are listed on a stock exchange in India, the provisions of the

Takeover Regulations will apply to any acquisition of the company’s shares/voting rights/control. The Takeover

Regulations prescribe certain thresholds or trigger points in the shareholding a person or entity has in the listed

Indian company, which give rise to certain obligations on part of the acquirer. Acquisitions up to a certain

threshold prescribed under the Takeover Regulations mandate specific disclosure requirements, while acquisitions

crossing particular thresholds may result in the acquirer having to make an open offer of the shares of the target

company. The Takeover Regulations also provides for the possibility of indirect acquisitions, imposing specific

obligations on the acquirer in case of such indirect acquisition.

The key changes from the Takeover Code 1997 under the Takeover Code include:

the trigger for making a public offer upon acquisition of shares or voting rights has been increased from 15%

to 25%;

every public offer has to be made for at least 26% of all the shares held by other shareholders;

creeping acquisition of up to 5% is permitted up to a limit of 75% of the shares or voting rights of a company;

acquisition of control in a target company triggers the requirement to make a public offer regardless of the

level of shareholding and the acquisition of shares; and

if the indirect acquisition of a target company is a predominant part of the business or entity being acquired,

it would be treated as a direct acquisition.

Insider Trading Regulations

The Insider Trading Regulations 1992 have been notified by SEBI to prohibit and penalize insider trading in India.

An insider is, among other things, prohibited from dealing either on his own behalf or on behalf of any other

person, in the securities of a listed company when in possession of unpublished price sensitive information. The

Insider Trading Regulations also provide disclosure obligations for shareholders holding more than a pre-defined

percentage, and directors and officers, with respect to their shareholding in the company, and the changes therein.

The Insider Trading Regulations 2015 came into force on May 15, 2015 and from such date the Insider Trading

Regulations 1992 stood repealed. Under the Insider Trading Regulations 2015, any person who is a connected

person or is in possession of or having access to unpublished price sensitive information is not permitted to (i)

communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or

securities listed or proposed to be listed, to any person including other insiders except where such communication

is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations; (ii) trade in

securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price

sensitive information subject to certain exceptions.

The Insider Trading Regulations 2015 has also mandated disclosures, both initial and continual disclosures, with

regard to the holdings in securities and trades carried out by the Promoter, employee, director and their immediate

relatives. Our Bank at its discretion may also require any other connected person or class of connected persons to

make similar disclosures.

Further, the Insider Trading Regulations 2015 has envisaged a mechanism of trading window to monitor the trades

carried out by employees of the Bank, who pursuant to their role and function have access to unpublished price

sensitive information (designated person). The trading window shall remain closed when the compliance officer

of the company determines that a designated person can reasonably be expected to have possession of unpublished

price sensitive information and no trading can be carried out during this period. The Insider Trading Regulations

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2015, has also mandated preclearance of trades executed by designated persons and the immediate relatives

exceeding a certain value as prescribed by the Bank in its code of conduct to regulate, monitor and report trading.

Further, under section 195 of the Companies Act, 2013, no person, including any director or key managerial

personnel of a company shall enter into insider trading.

Depositories

The Depositories Act provides a legal framework for the establishment of depositories to record ownership details

and effect transfers in book-entry form. Further, SEBI framed regulations in relation to, among other things, the

formation and registration of such depositories, the registration of participants as well as the rights and obligations

of the depositories, participants, companies and beneficial owners. The depository system has significantly

improved the operation of the Indian securities markets.

Derivatives (Futures and Options)

Trading in derivatives is governed by the SCRA, the SCRR and the SEBI Act. The SCRA was amended in

February 2000 and derivatives contracts were included within the term “securities”, as defined by the SCRA.

Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a

separate segment of an existing stock exchange. The derivatives exchange or derivatives segment of a stock

exchange functions as a self-regulatory organisation under the supervision of the SEBI.

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DESCRIPTION OF EQUITY SHARES

The following is information relating to the Equity Shares including a brief summary of the Memorandum of

Association and Articles of Association, and the provisions of the Companies Act, 2013. Prospective investors are

urged to read the Memorandum of Association and Articles of Association carefully, and consult with their

advisers, as the Memorandum of Association and Articles of Association and applicable Indian law, and not this

summary, govern the rights attached to the Equity Shares.

Share Capital

As on date, our Bank’s authorized Share Capital is ` 5,000,000,000 divided into 500,000,000 Equity Shares of ` 10 each. The issued capital of the Bank is ` 1,809,699,860 divided into 180,969,986 Equity Shares and the

subscribed and paid up share capital is ` 1,794,616,090 divided into 179,461,609 Equity Shares. The subscribed

and paid up share capital of the Bank does not include 1,508,377 Equity Shares kept in abeyance, inclusive of

forfeited and lapsed shares. For further details on our Bank’s share capital, see “Capital Structure” on page 68.

Dividends

Under Indian law, a company pays final dividend upon a recommendation by its board of directors and approval

by a majority of the shareholders at the AGM of shareholders held each financial year. Under the Companies Act,

2013, unless the board of directors of a company recommends the payment of final dividend, the shareholders at

a general meeting have no power to declare any dividend. Subject to certain conditions specified under Section

123 of the Companies Act, 2013 and the rules made thereunder no dividend can be declared or paid by a company

for any financial year except (a) out of the profits of the company for that year, calculated in accordance with the

provisions of the Companies Act, 2013; or (b) out of the profits of the company for any previous financial year(s)

arrived at in accordance with the Companies Act, 2013 and remaining undistributed; or (c) out of both; or (d) out

of money provided by the Central Government or a state Government for payment of dividend by the Bank in

pursuance of a guarantee given by that Government. Under our Articles of Association, our shareholders at a

general meeting may declare a lower, but not higher, dividend than that recommended by our Board.

The profits of our Bank, subject to provisions of the Articles of Association, shall be divisible among the members

in proportion of the amount of capital paid up on the shares held by them respectively.

The RBI has also placed certain restrictions on the payment of dividends by banks. For further information, see

“Dividend Policy” on page 72.

Capitalization

By ordinary resolution in a general meeting, the Bank may, upon the recommendation of the Board, capitalise any

part of the amount for the time being standing to the credit of any of the Bank’s reserve accounts, or to the credit

of the profit and loss account, or otherwise available for distribution. Such sum may be set free for distribution

amongst the members of the Bank who would have been entitled thereto, if distributed by way of dividend and in

the same proportions.

The Articles of Association allow a securities premium account and a capital redemption reserve account or any

other permissible reserve account may be applied in the paying up of unissued shares to be issued to members of

the Bank as fully paid bonus shares.

Pre-emptive Rights and Alteration of Share Capital

Subject to the provisions of the Companies Act, we can increase our share capital by issuing new shares. Such

new shares must be offered to existing shareholders registered on the record date in proportion to the amount paid-

up on those shares on that date. The offer should be made by notice specifying the number of shares offered and

the date after which the offer, if not accepted, will be deemed to have been declined. After such date, the Board

may dispose of the shares offered in respect of which no acceptance has been received in such manner as they

think is not disadvantageous to the shareholders and us. The offer is deemed to include a right exercisable by the

person concerned to renounce the shares in favour of any other person. However, under the provisions of the

Companies Act, new shares may be offered to any persons, whether or not those persons include existing

shareholders or employees to whom shares are allotted under a scheme of employees stock options, either for cash

or for consideration other than cash if the price of such shares is determined by the valuation report of a registered

210

valuer subject to prescribed conditions, if a special resolution to that effect is passed by the shareholders of the

company in a general meeting. The issue of the Equity Shares pursuant to this Issue has been approved by a special

resolution of our shareholders.

General Meetings of Shareholders

We must hold our AGM each year within fifteen months of the previous AGM and within six months after the

end of each accounting year. The Registrar of Companies may extend this period in special circumstances at our

request. The Board may convene an extraordinary general meeting of shareholders when necessary and shall

convene such a meeting at the request of a shareholder or shareholders holding in the aggregate not less than 10%

of our issued paid-up capital.

Written notices convening a meeting setting out the date and place of the meeting and its agenda must be given to

members at least 21 days prior to the date of the proposed meeting and where any special business is to be

transacted at the meeting, an explanatory statement must be annexed to the notice as required under the Companies

Act. A general meeting may be called after giving shorter notice if consent is received in writing or by electronic

mode from all shareholders in the case of an AGM and from shareholders holding not less than 95% of our paid-

up capital in the case of any other general meeting. Under the Companies Act, 2013, every listed company is

required to provide to its members, the facility to exercise their right to vote at general meetings by electronic

means. Shareholders may exercise their right to vote at general meetings or through postal ballot by voting through

e-voting facilities in accordance with the SEBI LODR Regulations issued by the SEBI and the Companies Act,

2013. However, compliance with quorum requirements applicable to shareholder meetings under the Companies

Act is required.

Any listed public company intending to pass a resolution relating to matters such as, but not limited to, an

amendment in the objects clause of its memorandum of association, a buy-back of shares under the Companies

Act and the giving of loans or extending a guarantee in excess of limits prescribed under the Companies Act is

required to pass the resolution by means of a postal ballot instead of transacting the business in the general meeting

of the company.

Voting Rights

At a general meeting upon a show of hands, every member holding shares and entitled to vote and present in

person has one vote. Upon a poll, the voting rights of each shareholder entitled to vote and present in person or

by proxy are in the same proportion to such shareholder’s share of our paid-up equity capital. Ordinary resolutions

may be adopted by simple majority of those present and voting. Special resolutions require that the votes cast in

favour of the resolution must be at least three times the votes cast against the resolution. The Companies Act

provides that to amend the articles of association of a company, a special resolution is required to be adopted in a

general meeting.

A shareholder may exercise his voting rights by proxy to be given in the form required by the Articles of

Association. The instrument appointing a proxy is required to be lodged with us at least 48 hours before the time

of the meeting. A shareholder may, by a single power of attorney, grant a general power of representation

regarding several general meetings of shareholders. Any shareholder may appoint a proxy. A corporate

shareholder is also entitled to nominate a representative to attend and vote on its behalf at general meetings. A

proxy may not vote except on a poll and does not have a right to speak at meetings. A shareholder which is a legal

entity may appoint an authorized representative who can vote in all respects as if a member both on a show of

hands and a poll.

Section 12 of the Banking Regulation Act prohibits any person holding shares in a bank from exercising voting

rights in excess of 10% of the total voting rights of all shareholders of the bank, irrespective of the number of

shares held by such person.

Register of Shareholders and Record Dates

We are obliged to maintain a register of shareholders at our Registered Office. We recognize as shareholders only

those persons whose names appear on the register of shareholders and cannot recognize any person holding any

share or part of it upon any express, implied or constructive trust, except as permitted by law. In the case of shares

held in physical form, transfers of shares are registered on the register of shareholders upon lodgement of the share

transfer form duly complete in all respects accompanied by a share certificate or, if there is no certificate, the letter

211

of allotment in respect of shares transferred together with duly stamped transfer forms. In respect of electronic

transfers, the depository transfers shares by entering the name of the purchaser in its books as the beneficial owner

of the shares. In turn, the name of the depository is entered into our records as the registered owner of the shares.

The beneficial owner is entitled to all the rights and benefits as well as the liabilities with respect to the shares

held by a depository.

For the purpose of determining the shareholders for the payment of dividends, the register may, after giving not

less than seven days’ previous notice, be closed for periods not exceeding 45 days in any one year or 30 days at

any one time at such times as the Board may deem expedient in accordance with the provisions of the Companies

Act. Under the Companies Act, we are also required to maintain a register of debenture holders.

Annual Report and Financial Results

The annual report must be presented at the AGM. The report includes financial information, a corporate

governance section and management’s discussion and analysis and is sent to the company’s shareholders. Under

the Companies Act, we must file our balance sheet and profit and loss account with the Registrar of Companies

within thirty days from the date of the AGM. As required under the listing agreements with the Stock Exchanges,

copies are required to be simultaneously sent to the stock exchanges on which the shares are listed. We must also

publish our financial results within 48 hours of the conclusion of the Board or committee meeting in which the

financial results were approved in at least one English language daily newspaper circulating in the whole or

substantially the whole of India and also in a daily newspaper published in the language of the region of the

Registered Office (i.e. Tamil).

Transfer of Shares

An application for registration of a transfer of the Equity Shares in our Bank may be made either by the transferor

or the transferee. No fee may be charged for registration of transfer of Equity Shares. Shares held through

depositories are transferred in the form of book entries or in electronic form in accordance with the regulations

laid down by SEBI. Our Bank is required to comply with the rules, regulations and requirements of the Stock

Exchanges or the rules made under the Companies Act, 2013 or the rules made under the Securities Contracts

(Regulation) Act, 1956, as amended (“SCRA”), or any other law or rules applicable, relating to the transfer or

transmission of Equity Shares.

Prior approval of RBI is required for the acquisition or transfer of the shares of our Bank, which will take the

aggregate holding (both direct and indirect, beneficial or otherwise) of an individual, his relatives, associate

enterprises and persons acting in concert with him to 5.00% or more of our Bank’s total paid up share capital or

entitles him to exercise 5.00% or more of the total voting rights of our Bank, in accordance with the terms of the

Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) Directions,

2015.

For further restrictions on the transfer of shares applicable to banking companies, see “Regulations and Policies”

on page 146.

Acquisition by us of our own Equity Shares

A company is prohibited from acquiring its own shares unless the consequent reduction of capital is effected by

an approval of at least 75% of its shareholders, voting on it in accordance with the Companies Act and subject to

confirmation by the National Company Law Tribunal. Subject to certain conditions, a company is prohibited from

giving, whether directly or indirectly and whether by means of loan, guarantee, provision of security or otherwise,

any financial assistance for the purpose of or in connection with a purchase or subscription made or to be made

by any person for any shares in the company or its holding company. However, a company has been empowered

to purchase its own shares or other specified securities out of its free reserves, the securities premium account or

the proceeds of any fresh issue of shares or other specified securities (other than the kind of shares or other

specified securities proposed to be bought back) subject to certain conditions, including:

1. the buy-back should be authorized by the articles of association of the company;

2. a special resolution has been adopted in a general meeting authorizing the buy-back (in the case of listed

companies, by means of a postal ballot);

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3. the buy-back is limited to 25% or less of the total paid-up capital and free reserves;

4. the ratio of the aggregate of secured and unsecured debts owed by the company is not more than twice the

capital and free reserves after such buy-back; and

5. the buy-back is in accordance with the Securities and Exchange Board of India (Buy-Back of Securities)

Regulations, 1998, as amended.

A board resolution will constitute sufficient corporate authorization for a buy-back that is 10% or less of the total

paid-up equity capital and free reserves of the company. A company buying back its securities is required to

extinguish and physically destroy the securities so bought back within seven days of the last date of completion

of the buy-back. Further, a company buying back its securities is not permitted to buy back any securities for a

period of one year from the buy-back or to issue the same kind of shares or specified securities for six months

subject to certain limited exceptions. Further a company is prohibited from purchasing its own shares or specified

securities if the company is in default in the repayment of deposit or interest, in the redemption of debentures or

preference shares, in payment of dividend to a shareholder, in repayment of any term loan or interest payable

thereon to any financial institution or bank or in the event of non-compliance with certain other provisions of the

Companies Act.

For a banking company, any buy-back of shares is subject to an RBI approval.

Liquidation Rights

For winding up of the Bank the provisions contained in the Banking Regulation Act shall apply and those

contained in the Companies Act, 2013, shall apply to the extent to which they are not inconsistent with the Banking

Regulation Act. Subject to the rights of depositors, creditors and employees in the event of our winding up, the

holders of the Equity Shares are entitled to be repaid the amounts of capital paid-up or credited as paid-up on such

shares. All surplus assets after payments due to employees and other creditors belong to the holders of the Equity

Shares in proportion to the amount paid-up or credited as paid-up on such shares respectively at the

commencement of the winding-up.

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INDEPENDENT AUDITORS

R. K. Kumar & Co., our Statutory Auditors, have audited our financial statements for Fiscals 2015, 2016 and have

also reviewed our financial results for the six months ended September 30, 2016, in accordance with the SRE

2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the

ICAI, included in this Preliminary Placement Document. M/s. Sagar & Associates, Chartered Accountants, have

audited our financial statement for Fiscal 2014, included in this Preliminary Placement Document.

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STATEMENT OF TAX BENEFITS

STATEMENT OF POSSIBLE TAX BENEFITS AVAILABLE TO OUR SHAREHOLDERS UNDER

THE INCOME TAX ACT, 1961, (“IT ACT”) AND OTHER DIRECT TAX LAWS PRESENTLY IN

FORCE IN INDIA

1. This statement sets out below the possible tax benefits available to our shareholders under the current tax laws

presently in force in India. Several of these benefits are dependent on such shareholders fulfilling the

conditions prescribed under the relevant tax laws. Hence, the ability of our shareholders to derive the tax

benefits is dependent upon fulfilling such conditions, which based on the business imperatives, the

shareholders may or may not choose to fulfil;

2. This statement sets out below the provisions of law in a summary manner only and is not a complete analysis or

listing of all potential tax consequences of the subscription, ownership and disposal of Shares. This statement is

only intended to provide general information to the investors and is neither designed nor intended to be a substitute

for a professional tax advice. In view of the individual nature of tax consequences and the changing tax laws, each

investor is advised to consult his or her or their own tax consultant with respect to the specific tax implications

arising out of their participation in the issue.;

3. In respect of non-residents, the tax rates and the consequent taxation, mentioned in this section shall

be further subject to any benefits available under the Double Taxation Avoidance Agreement, if any,

between India and the country in which the non-resident has fiscal domicile; and

4. The under-mentioned tax benefits will be available only to the sole/first-named holder in case the

Equity Shares are held by joint shareholders.

The law stated below is as per the Income-tax Act, 1961 as amended by time to time.

I. RESIDENT SHAREHOLDERS:

1. We are required to pay a Dividend Distribution Tax currently at the rate of 20.358% (including

applicable surcharge and education cess) on the total amount distributed or declared or paid as dividend.

Under Section 10(34) of the IT Act, income by way of dividends referred to in Section 115 - O of IT Act

received on our shares is exempt from income tax in the hands of shareholders. However, as per Section

115BBDA of the IT Act, in case of an Individual, Hindu Undivided Family (“HUF”) or a firm, resident in

India, if aggregate of dividend income during the year is in excess of ten lakh rupees, then such dividend shall

be chargeable to tax at the rate of 10% (plus applicable surcharge and education cess).

However, it is pertinent to note that Section 14A of the IT Act restricts claims for deduction of expenses

incurred in relation to exempt income. Thus, any expense incurred to earn the dividend income is not

allowable expenditure.

As per section 94(7) of the IT Act, losses arising from sale/transfer of shares, where such shares are

purchased within three months prior to the record date and sold within three months from the record date,

will be disallowed to the extent such loss does not exceed the amount of dividend claimed exempt.

2. The characterization of gains/losses, arising from sale of shares, as Capital Gains or Business Income would

depend on the nature of holding in the hands of the shareholder and various other factors.

3. Section 48 of the IT Act, which prescribes the mode of computation of capital gains, provides for

deduction of cost of acquisition/improvement and expenses incurred wholly and exclusively in connection

with the transfer of a capital asset, from the sale consideration to arrive at the amount of capital gains.

However, in respect of Long Term Capital Gains, (“LTCG”) i.e. gains from our shares being transfer of

shares of Indian company held for a period exceeding twelve months, the second proviso to Section 48 of

the IT Act, permits substitution of cost of acquisition/improvement with the indexed cost of

acquisition/improvement, which adjusts the cost of acquisition/improvement by a cost inflation index, as

prescribed from time to time.

4. Under Section 10(38) of the IT Act, LTCG arising to a shareholder on transfer of equity shares would be

215

exempt from tax where the sale transaction has been entered into on a recognised stock exchange of India

and is chargeable to Securities Transaction Tax (“STT”).

5. Under Section 112 of the IT Act and other relevant provisions of the IT Act, LTCG, (other than those

exempt under Section 10(38) of the IT Act) arising on transfer of our shares would be subject to tax at the

rate of 20% (plus applicable surcharge and education cess) after indexation. The amount of such tax shall,

however, be limited to 10% (plus applicable surcharge and education cess) without indexation, at the option of

the shareholder in case the shares are listed.

6. Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein, long-

term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of

our shares would be exempt from tax if such capital gain is invested within 6 months after the date of such

transfer in the bonds (long term specified assets) issued by:

(a) National Highway Authority of India constituted under Section 3 of The National Highway Authority

of India Act, 1988;

(b) Rural Electrification Corporation Limited, the company formed and registered under the Companies

Act, 1956.

The investment in the long term specified assets is eligible for such deduction to the extent of Rs. 5 million

whether invested during the financial year in which the asset is transferred or subsequent financial year.

If only part of the capital gain is so reinvested, the exemption available shall be in the same proportion as

the cost of long term specified assets bears to the whole of the capital gain. However, in case the long term

specified asset is transferred or converted into money within three years from the date of its acquisition, the

amount of capital gains so exempted shall be chargeable to tax as LTCG during the year of such transfer or

conversion. For this purpose, if any loans or advance is taken as against such specified securities, than

such person shall be deemed to have converted such specified securities into money. The cost of the long

term specified assets, which has been considered under Section 54EC for calculating capital gain, shall not

be allowed as a deduction from the income under Section 80C of the IT Act.

7. As per Section 111A of the IT Act, Short Term Capital Gains (“STCG”), i.e., gains from shares held for a

period not exceeding twelve months) arising on transfer of our equity share would be taxable at a rate of

15% (plus applicable surcharge and education cess) where such transaction of sale is entered on a

recognised stock exchange in India and is liable to STT. STCG arising from transfer of our shares,

other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the

normal provisions of the IT Act.

8. As per Section 74 of the IT Act, Short Term Capital Loss computed for the given year is allowed to be set

off against Short Term as well as Long Term Gains computed for the said year. The balance loss, which is

not set off, is allowed to be carried forward for subsequent eight assessment years for being set off against

subsequent years’ Short Term as well as Long Term Gains. However, the Long Term Capital Loss

computed for a given year is allowed to be set off only against the LTCG. The balance loss, which is not set

off, is allowed to be carried forward for subsequent eight assessment years for being set off only

against subsequent years’ LTCG.

10. In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable

securities transactions entered into in the course of his business of transactions/trading in shares would be

eligible for deduction from the amount of income chargeable under the head “Profit and gains of

business or profession” if the income arising from taxable securities transaction is included in such income.

As such, no deduction will be allowed in computing the income chargeable to tax as capital gains of such

amount paid on account of STT.

II. NON-RESIDENT SHAREHOLDERS OTHER THAN FOREIGN INSTITUTIONAL INVESTOR

(“FIIs”):



Under Section 10(34) of the IT Act, income by way of dividends (whether interim or final) referred

216

to in Section 115-O of the IT Act, received on our shares is exempt from income tax in the hands of

shareholders. However, it is pertinent to note that Section 14A of the IT Act restricts claims for deduction of

expenses incurred in relation to exempt income. Thus, any expense incurred to earn the dividend income is

not allowable expenditure. As per section 94(7) of the IT Act, losses arising from sale/transfer of shares,

where such shares are purchased within three months prior to the record date and sold within three months

from the record date, will be disallowed to the extent such loss does not exceed the amount of dividend

claimed exempt.

2. The characterisation of gains/losses, arising from sale of shares, as Capital Gains or Business Income would

depend on the nature of holding in the hands of the shareholder and various other factors.

3. Under the first proviso to Section 48 of the IT Act, in case of a non-resident shareholder, in computing the

capital gains arising from transfer of shares of our company acquired in convertible foreign exchange

(as per exchange control regulations) (in cases not covered by Section 115E of the IT Act, discussed

hereunder), protection is provided from fluctuations in the value of rupee in terms of foreign currency in

which the original investment was made. Cost indexation benefits will not be available in such a case. The

capital gains/loss in such a case is computed by converting the cost of acquisition, sales consideration and

expenditure incurred wholly and exclusively in connection with such transfer into the same foreign

currency which was utilised in the purchase of the shares.

4. Under Section 10(38) of the IT Act, LTCG arising to a shareholder, being a non-resident, on sale of

equity shares would be exempt from tax where the sale transaction has been entered into on a recognised

stock exchange of India and is chargeable to STT.

5. Under Section 112 of the IT Act and other relevant provisions of the IT Act, LTCG, (other than those

exempt under Section 10(38) of the IT Act) arising on transfer of our shares not being subject to STT,

would be subject to tax at a rate of 20% (plus applicable surcharge and education cess).

6. As per section 115JB of the Act, income received by way of dividend (whether interim of final) which is

exempt u/s. 10(34) of the IT Act, by a foreign company to which section 115JB is applicable, will be reduced

while computing book profits. Further, any LTCG exempt u/s. 10(38) will be subject to book profits.

7. Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein, long-

term capital gains (other than those exempt under Section 10(38) of the IT Act) arising on the transfer

of our shares would be exempt from tax if such capital gain is invested within 6 months after the date of such

transfer in the bonds (long term specified assets) issued by:

i. National Highway Authority of India constituted under Section 3 of the National Highway Authority

of India Act, 1988;

ii. Rural Electrification Corporation Limited, the company formed and registered under the Companies

Act, 1956.






amount so exempted shall be chargeable to tax during the year such transfer or conversion. For this

purpose, if any loans or advance is taken as against such specified securities, then such person shall be

deemed to have converted such specified securities into money. The cost of the long term specified assets,

which has been considered under this Section for calculating capital gain, shall not be allowed as a

deduction from the income under Section 80C of the IT Act.

8. Under Section 111A of the IT Act and other relevant provisions of the IT Act, STCG (i.e., if shares are held

for a period not exceeding 12 months) arising on transfer of our equity share would be taxable at a rate of

15% (plus applicable surcharge and education cess) where such transaction of sale is entered on a

recognised stock exchange in India and is chargeable to STT. STCG arising from transfer of our shares,

other than those covered by Section 111A of the IT Act, would be subject to tax as calculated under the

217

normal provisions of the IT Act.

9. As per Section 74 of the IT Act, Short Term Capital Loss computed for the given year is allowed to be set

off against Short Term as well as Long Term Gains computed for the said year. The balance loss, which is

not set off, is allowed to be carried forward for subsequent eight assessment years for being set off against

subsequent years’ Short Term as well as Long Term Gains. However, the Long Term Capital Loss

computed for a given year is allowed to be set off only against the LTCG. The balance loss, which is not set

off, is allowed to be carried forward for subsequent eight assessment years for being set off only

against subsequent years’ LTCG.

10. Where our shares have been subscribed in convertible foreign exchange, Non Resident Indians

(“NRI”), i.e. an individual being a citizen of India or person of Indian origin who is not a resident, have the

option of being governed by the provisions of Chapter XII-A of the IT Act, which inter alia entitles them to

the following benefits:

i. Under section 115E of the IT Act, where shares of the company are subscribed to in convertible foreign

exchange by a NRI, the LTCG arising to the NRI shall be taxable at the rate of 10% (plus applicable

surcharge and education cess). The benefit of indexation of cost would not be available.

ii. Under Section 115F of the IT Act, LTCG (in cases not covered under Section 10(38) of the IT Act)

arising to an NRI from the transfer of our shares subscribed to in convertible foreign exchange shall

be exempt from Income tax, if the net consideration is reinvested in specified assets within six months

of the date of transfer. If only part of the net consideration is so reinvested, the exemption shall be

proportionately reduced. The amount so exempted shall be chargeable to tax subsequently, if the

specified assets are transferred or converted into money within three years from the date of their

acquisition.

iii. Under Section 115G of the IT Act, it shall not be necessary for an NRI to furnish his/her return of

income under Section 139(1) of the IT Act if his income chargeable under the IT Act consists

of only investment income or LTCG or both; arising out of assets acquired, purchased or subscribed in

convertible foreign exchange and tax deductible at source has been deducted there from as per the

provisions of Chapter XVII-B of the IT Act.

iv. In accordance with the provisions of Section 115H of the IT Act, where an NRI becomes assessable

as a resident in India, he/she may furnish a declaration in writing to the Assessing Officer along

with his/her return of income for that year under Section 139 of the IT Act to the effect that the

provisions of Chapter XII-A of the IT Act shall continue to apply to him/her in relation to such

investment income derived from the specified assets (which do not include shares in an Indian company)

for that year and subsequent assessment years until such assets are converted into money.

v. As per provisions of Section 115-I of the IT Act, an NRI may elect not to be governed by

provisions of Chapter XII-A and compute his/her total income as per other provisions of the IT Act.

11. In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable securities

transactions entered into in the course of his business of transactions/trading in shares would be eligible for

deduction from the amount of income chargeable under the head “Profit and gains of business or

profession” if income arising from taxable securities transaction.is included in such income. As such,

no deduction will be allowed in computing the income chargeable to tax as capital gains, such amount paid

on account of STT.

12. As per section 90(2) of the IT Act, the provisions of the IT Act would prevail over the provisions of the

Double Tax Avoidance Agreement (“DTAA”) entered between India and the country of fiscal domicile

of the non-resident, if any, to the extent they are more beneficial to the non-resident. Thus, a non-resident

(including NRIs) can opt to be governed by the provisions of the IT Act or the applicable tax treaty,

whichever is more beneficial. However, the non-resident investor will have to furnish a certificate of he/she

being a resident in a country outside India, to get the benefit of the applicable DTAA and such other

document as may be prescribed as per the provision of section 90(4) of IT Act.

13. With effect from April 1, 2017, the benefit of the DTAA will not be available to a non-resident investor if

the Tax department declares any arrangement to be an impermissible avoidance arrangement

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III. NON-RESIDENT SHAREHOLDERS – FIIS:



Under Section 10(34) of the IT Act, income by way of dividends (whether interim or final) referred to in

Section 115-O of the IT Act received on our shares is exempt from income tax in the hands of

shareholders. However, it is pertinent to note that Section 14A of the IT Act restricts claims for deduction of

expenses incurred in relation to exempt income. Thus, any expense incurred to earn the dividend income is

not allowable expenditure. As per section 94(7) of the IT Act, losses arising from sale/transfer of shares,

where such shares are purchased within three months prior to the record date and sold within three months

from the record date, will be disallowed to the extent such loss does not exceed the amount of dividend

claimed exempt.

2. Section 2(14) of IT Act defining capital asset, specifically includes any securities held by an FII

which has invested in such securities in accordance with the SEBI Regulations.

3. Under the first proviso to Section 48 of the IT Act, in case of a non-resident shareholder, in computing the

capital gains arising from transfer of shares of the company acquired in convertible foreign exchange

(as per exchange control regulations), protection is provided from fluctuations in the value of rupee in terms

of foreign currency in which the original investment was made. Cost indexation benefits will not be available

in such a case. The capital gains/loss in such a case is computed by converting the cost of acquisition, sales

consideration and expenditure incurred wholly and exclusively in connection with such transfer into the

same foreign currency which was utilised in the purchase of the shares.

4. Under Section 10(38) of the IT Act, Long Term Capital Gains arising to a shareholder on transfer of

equity shares would be exempt from tax where the sale transaction has been entered into on a recognised

stock exchange of India and is liable to STT.

5. As per section 115JB of the Act, income received by way of dividend (whether interim of final) which is

exempt u/s. 10(34) of the IT Act, by a foreign company to which section 115JB is applicable, will be

reduced while computing book profits. Further, any LTCG exempt u/s. 10(38) will be subject to book profits.

6. Under Section 54EC of the IT Act and subject to the conditions and to the extent specified therein,

LTCG (other than those exempt under Section 10(38) of the IT Act) arising on the transfer of our shares

would be exempt from tax if such capital gain is invested within six months after the date of such transfer in

the bonds (long term specified assets) issued by:

i. National Highway Authority of India constituted under Section 3 of the National Highway Authority

of India Act, 1988;

ii. Rural Electrification Corporation Limited, the company formed and registered under the Companies Act,

1956.






amount of LTCG so exempted shall be chargeable to tax during the year such transfer or conversion. For this

purpose, if any loans or advance is taken as against such specified securities, than such person shall be

deemed to have converted such specified securities into money.

7. Under Section 115AD (1)(ii) of the IT Act STCG arising to an FII on transfer of shares shall be

chargeable at a rate of 30%, where such transactions are not subjected to STT, and at the rate of 15%

if such transaction of sale is entered on a recognised stock exchange in India and is chargeable to STT. The

above rates are to be increased by applicable surcharge and education cess.

Under Section 115AD (1)(iii) of the IT Act income by way of LTCG arising from the transfer of shares (in

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cases not covered under Section 10(38) of the IT Act) held in the company will be taxable at the rate of

10% (plus applicable surcharge and education cess). The benefits of indexation of cost and of foreign

currency fluctuations are not available to FIIs.

8. As per section 90(2) of the IT Act, the provisions of the IT Act would prevail over the provisions of the

DTAA entered between India and the country of fiscal domicile of the non-resident, if any, to the

extent they are more beneficial to the non-resident. Thus, a non-resident (including NRIs) can opt to be

governed by the provisions of the IT Act or the applicable tax treaty, whichever is more beneficial.

However, the non-resident investor will have to furnish a certificate of his being a resident in a country

outside India, to get the benefit of the applicable DTAA and such other document as may be prescribed as

per the provision of section 90(4) of IT Act.

9. In terms of Section 36(1)(xv) of the IT Act, the STT paid by the shareholder in respect of the taxable

securities transactions entered into in the course of their business of transactions/trading in shares would be

eligible for deduction from the amount of income chargeable under the head “Profit and gains of business

or profession” arising from taxable securities transactions. As such, no deduction will be allowed in

computing the income chargeable to tax as capital gains, such amount paid on account of STT.

10. With effect from April 1, 2017, the benefit of the DTAA will not be available to a non-resident investor if

the Tax department declares any arrangement to be an impermissible avoidance arrangement

11. As per Section 196D of IT Act, no tax is to be deducted from any income, by way of Capital Gains arising

to an FII from the transfer of securities referred to in section 115AD of the IT Act.

IV. INVESTMENT FUNDS:

1. Under section 10(23FBA) of the IT Act, any income of an Investment Fund, other than the income

chargeable under the head “Profits and gains of business or profession” would be exempt from income tax. For

this purpose, an “Investment Fund” means a fund registered as Category I or Category II Alternative

Investment Fund under the Securities and Exchange Board of India (Alternate Investment Fund)

Regulations, 2012.

2. As per Section 115UB (1) of the IT Act, any income accruing/arising/received by a person from his/her

investment in Investment Fund would be taxable in the hands of the person making an investment in the same

manner as if it were the income accruing/arising/received by such person had the investments been made

directly in the venture capital undertaking.

3. Under section 115UB (4), the total income of an Investment Fund would be charged at the rate or rates as

specified in the Finance Act of the relevant year where the Investment Fund is a company or a firm and at

maximum marginal rate in any other case.

4. Further, as per Section 115UB (6) of the IT Act, the income accruing or arising to or received by the

Investment Fund if not paid or credited to a person (who has made investments in an Investment Fund) shall be

deemed to have been credited to the account of the said person on the last day of the previous year in the same

proportion in which such person would have been entitled to receive the income had it been paid in the previous

year.

V. MUTUAL FUNDS:

Under Section 10(23D) of the IT Act, any income of mutual funds registered under SEBI or Regulations made

thereunder or mutual funds set up by public sector banks or public financial institutions or mutual funds authorised

by the RBI and subject to the conditions specified therein, is exempt from tax subject to such conditions as the

Central Government may by notification in the Official Gazette, specify in this behalf.

VI. PROVIDENT FUND AND PENSION FUND:

Under section 10(25) of the IT Act, any income received by trustees on behalf of a recognized provident

fund and a recognized superannuation fund is exempt from tax.

VII. MULTI-LATERAL AND BILATERAL DEVELOPMENT FINANCIAL INSTITUTIONS:

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Generally, Multilateral and bilateral development financial institutions may be exempt from taxation in India

on the capital gains arising on the sale of shares of the bank depending on the applicable Statute and Acts

passed in India. For e.g., World Bank, IBRD, IFC, etc. In case they are not specifically exempt from tax then

the provisions as applicable for capital gains to a non-resident FII as they should be registered as FII should apply

to these institutions.

VIII. BENEFITS AVAILABLE UNDER THE WEALTH TAX ACT, 1957:

Wealth tax is not leviable in respect of any Assessment Year on or after April 1, 2016.

IX. BENEFITS AVAILABLE UNDER THE GIFT TAX ACT, 1958:

Gift tax is not leviable in respect of any gift made on or after October 1, 1998. Therefore, an y gift of share of a

company will not attract gift tax.

X. INCOME TAX ON GIFTS

Under Section 56(2)(vii) of the IT Act and subject to exception provided in second proviso therein, where an

individual or a HUF receives from any person any property, including, inter alia, shares of a company without

consideration or for a consideration lower than the fair market value, and the value of such benefit exceeds `

50,000, such benefit is taxable in the hands of the recipient as deemed income includible in computing his taxable

income. The section, however, provides for some exclusions like gifts between relatives, receipt under a will or

inheritance, gift on occasion of marriage etc.

XI TAX DEDUCTION AT SOURCE:

No income tax is deductible at source from income by way of capital gains arising to a resident shareholder under

the present provisions of the IT Act. However, as per the provisions of Section 195 of the IT Act, any income by

way of capital gains payable to non-residents (other than LTCG exempt u/s 10(38)) may be subject to withholding

of tax at the rate under the domestic tax laws or under the tax laws or under the DTAA, whichever is beneficial

to the assessee unless a lower withholding tax certificate is obtained from the tax authorities. However, the non-

resident investor will have to furnish a certificate of his/her being a resident in a country outside India, to get the

benefit of the applicable DTAA and such other document as may be prescribed as per the provision of section

90(4) of IT Act. The withholding tax rates are subject to the recipients of income obtaining and furnishing a

permanent account number (PAN) to the payer, in the absence of which the applicable withholding tax rate would

be the higher of the applicable rates or 20%, under section 206AA of the IT Act. The provisions of section 206AA

will not apply if the non- resident shareholder furnishes the prescribed documents to the payer.

Notes:

1. The above benefits are as per the current tax law as amended by time to time.

2. As per amended IT Act, surcharge is to be levied as under –

Investor Rate of Surcharge

Individual or HUF or AOP or body of individuals or artificial

juridical person

- Total income exceeds Rs. 1 crore

15%

Firm or Co-operative society or local authority


12%

Domestic Company



7%

12%

Foreign Company



2%

5%

3. A 2% education cess and 1% secondary and higher education cess on the total income is payable by all

categories of taxpayers.

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4. The above statement of possible direct tax benefits sets out the provisions of law in a summary manner only

and is not a complete analysis or listing of all potential tax consequences of the purchase, ownership and

disposal of Shares.

5. The stated benefits will be available only to the sole/first named holder in case the shares are held by the

joint holders.

6. In respect of Non-residents, the tax rates and the consequent taxation mentioned above shall be further

subject to any benefits available under the DTAA, if any, between India and the country in which the Non-

resident has fiscal domicile.

7. This statement is intended only to provide general information to the investors and is neither designed nor

intended to be substituted for professional tax advice. In view of the individual nature of tax consequences,

each investor is advised to consult his/her own tax advisor with respect to specific tax consequences of

his/her participation in the scheme.

8. No assurance is given that the revenue authorities/courts will concur with the views expressed herein. Our

views are based on the existing provisions of law and its interpretation, which are subject to changes from

time to time. We do not assume responsibility to update the views consequent to such changes.

9. This statement of Possible Direct Tax Benefits enumerated above is as per the IT Act as amended time to

time.

10. The above statement of possible Direct-tax Benefits sets out the possible tax benefits available to the

company and its shareholders under the current tax laws presently in force in India. Several of these benefits

available are dependent on the Company or its shareholders fulfilling the conditions prescribed under the

relevant tax laws. benefits available are dependent on the Company or its shareholders fulfilling the

conditions prescribed under the relevant tax laws.

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LEGAL PROCEEDINGS

Our Bank is, involved in certain legal proceedings in the ordinary course of its business. Except as described below, our Bank is not involved in any legal proceeding and it is not aware of any proceeding that is threatened, which if determined adversely, may have a material adverse effect on the business, properties, financial condition or results of operations of our Bank. Other than as disclosed in this section (i) no other litigation has been treated as material in the opinion of the Board of Directors (ii) there are no litigation or legal action pending or taken by any Ministry or Department of the Government or a statutory authority against any Promoter during the last three years (iii) there are no inquiries, inspections or investigations initiated or conducted under the Companies Act, 2013 or the Companies Act, 1956 in the last three years involving our Bank (iii) there are no default in repayment of statutory dues as of December 26, 2016 and (iv) there are no material frauds involving amount more than 10 million committed against us in the last three years.

A summary of certain legal proceedings where the amount involved exceeds ` 180.00 million, being 10.00% of

our profit after tax in Fiscal 2016, and certain other litigation which may be construed as material is set forth

below.

Litigation against our Bank

Consumer cases

1. M/s Ponni Agro Industries Private Limited (“Ponni Agro”) has filed an application before the National

Consumer Disputes Redressal Commission, New Delhi against Bajaj Allianz, a general insurance company

and its officers, and has also named our Bank as opposite party along with erstwhile Managing Director and

CEO of our Bank. It is alleged by Ponni Agro that our Bank has an arrangement with Bajaj through which

we offer Bajaj’s general insurance policies to companies that have high turnovers. It is alleged that pursuant

to this arrangement, Ponni Agro acquired a general insurance policy and a second policy with additional risk

coverage under Standard Fire and Special Perils Policy. Also, our Bank had sanctioned term loan and cash

credit advances to Ponni Agro who has hypothecated its machinery and building with our Bank’s Dharmapuri

branch.

On February 10, 2010, there was a fire at Ponni Agro’s mango pulp manufacturing premise, in which the

entire godown, the office building, canteen was burnt. It is alleged that Ponni Agro informed our Bank’s

employees of the fire immediately. The state government officials as well as a surveyor hired by Bajaj

inspected the site. Ponni Agro subsequently lodged a complaint at the Kaveripattnam police station and police

investigation deduced that the fire was caused due to electricity leakage. Bajaj hired a surveyor cum loss

assessor licensed by the IRDA. Ponni Agro alleges that the assessor has failed in his duty to make a proper

assessment and has also made allegations of cheating, falsification, bad language, lack of knowledge and

acting in accordance with the instructions of Bajaj against the assessor. It further alleges that it is the Bank’s

duty to get the damages from the insurance company, take necessary steps to safeguard the hypothecated

property, and thereby, the Bank has failed to render its services.

Basis this, Ponni Agro sent a legal notice to Bajaj to which they replied denying all the allegations made by

Ponni Agro and stated that Ponni Agro had in fact, not made complete disclosures. Ponni Agro has prayed a

relief of sum of ` 1,400.74 million. We have submitted that the allegations levelled against us are wrong and

that we have taken utmost care and proper due diligence at all times and we should not be made a party to the

present dispute. We have submitted that it is the duty of Bajaj to pay the claim and therefore, at the most, our

Bank can be made a pro forma defendant.

Tax matters

1. The Deputy Commissioner of Income Tax (“DCIT”) passed an assessment order dated March 31, 2016 under

Section 143(3) of the Income Tax Act (“IT Act”) assessing the gross tax liability of our Bank to ` 456.23

million, for the assessment year 2013-14 (“AO Order”). The DCIT, vide the AO order, inter alia, (i)

disallowed depreciation of government securities, (ii) disallowed amortization expenditure to be claimed as

a capital expenditure, (iii) disallowed exemption to the tune of 2% under Section 14A of the IT Act, (iv)

disallowed claim of bad debts; and (v) levied payment of interest for non-performing assets under Section

43D of the IT Act. Aggrieved by the AO order, our Bank has filed an appeal dated April 30, 2016, before the

Commissioner of Income Tax (Appeals), on the grounds that, inter alia, our Bank was entitled to a deduction

under Section 31(i)(viia) of the IT Act, and relied on previous orders from the income tax tribunal wherein

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interest accrued on non-performing assets was allowed to be deducted. The matter is currently pending on

appeal.

Litigation by our Bank

DRT Matters

1. Our Bank has filed an application before the Debt Recovery Tribunal, New Delhi against M/s Surya Vinayak

Industries Ltd (“SVIL”) and two of its directors and a corporate guarantor in relation to non-payment of

interest for the secured credit facilities and bill discounting facilities availed by SVIL through a consortium

of lenders led by Punjab National Bank. Our Bank has alleged default on the repayment of the amount

sanctioned to SVIL and has inter alia prayed for the recovery of a sum of ` 611.41 million along with

attachment and sale of mortgaged properties. Our Bank also filed a criminal complaint dated March 27, 2014

(“Complaint”) alleging that the accused diverted the export loans to overseas subsidiaries which amounts to

criminal conspiracy, cheating, misappropriation and criminal breach of trust.

Pursuant to the investigation, the Directorate of Enforcement (“ED”) has issued a provisional attachment

order dated March 31, 2016, under Prevention of Money Laundering Act, 2002, (“PMLA Act”) attaching the

properties of SVIL as “proceeds of crime” under PMLA Act, which were mortgaged to the consortium of

secured creditors led by Punjab National Bank (“Consortium”). On May 10, 2016, ED has served a show

cause notice to the Bank under Section 8 read with Section 5(5) and 5(1) of PMLA Act, calling upon to show

cause why the attached property should not be confirmed as “proceeds of crime”. Our Bank has submitted

the reply on August 22, 2016, before the Adjudicating Authority contending that the rights of the secured

creditors to recover the outstanding amount would be prejudiced if the provisional attachment order in respect

of the properties mortgaged was confirmed for attachment. An ED order dated September 22, 2016 confirmed

the provisional attachment order (“Attachment Order”). Pursuant to the Attachment Order, the ED issued

three notices for taking possession of the provisionally attached immovable property, which shall be at the

disposal of the ED till further orders. The matter is still pending.

2. Our Bank, alongside 18 other applicants (collectively the “Applicants”) had formed a consortium led by

UCO Bank (“UCO”) that extended credit facilities to M/s REI Agro Limited (“RAL”) aggregating to `

42,500.00 million. Our Bank had granted RAL a sanction limit of ` 555.2 million out of which an aggregate

amount of 536.20 million are outstanding under credit facility and various term loans. The accounts

maintained by RAL with respective Applicants, including our Bank, have been declared NPAs due to failure

to operate the account in conformity with the terms and conditions of the credit facilities granted to it. The

Applicants filed an Original Application before the Debts Recovery Tribunal, Kolkata against RAL and

others, wherein, our Bank has inter alia claimed for (i) the recovery of a sum of ` 536.19 million inclusive

of interest upto March 31, 2015; and (ii) a certificate of sale relating to the hypothecated properties of RAL.

Our Bank has additionally issued a Notice dated February 10, 2015 to RAL under provisions of the

SARFAESI Act, 2002, requiring repayment of dues arising from the credit facilities granted to RAL. Further,

on October 26, 2015, UCO filed a case against RAL before the Bank Securities and Fraud Cell, Central

Bureau of Investigation (the “CBI”), alleging that it had cheated the Applicants by a sum of ` 38,717.1

million. Our Bank received a Notice from the CBI on July 26, 2016, requiring that funds from FDR accounts

of the directors of RAL not to be released. Meanwhile, RAL has initiated proceedings before the Board for

Industrial and Financial Reconstruction, seeking determination of the sickness of RAL and measures to be

adopted for its rehabilitation. The matters are currently pending.

3. Our Bank has filed an application before the Debt Recovery Tribunal, Mumbai against Maa Shree Lakshmi

Exim Private Limited (“MSLEPL”) and guarantors including promoters and directors of MSLEPL in relation

to outstanding payment of various facilities operating as bill discounting facilities, secured by guarantee and

hypothecation. Our Bank has alleged the 65 bills have remained outstanding despite extension in due dates.

Our Bank has inter alia prayed for the recovery of a sum of ` 481.08 million with further interest of 20.25%

till realisation of all dues, along with invocation of the hypothecation and guarantee. Our Bank has also filed

a criminal complaint dated September 6, 2011 against MSLEPL accusing them for cheating the Bank by

submitting false mortgage papers of the property, while the original title deeds of are mortgaged with another

bank. The final order dated February 2, 2016, has entitled us to recover a sum of ` 481.08 million and the

224

demand notice has been served to MSLEPL, and its promoters and directors. An application before the

registrar enumerating the immovable properties of MSLEPL is to be filed by our Bank. The matter is currently

pending.

4. In June 2006, our Bank sanctioned a goods loan of ` 200 million in favour of M/s RJ Agri Source (“RJAS”),

a partnership firm, which was enhanced to ` 400 million in November 2006. With the demise of the two

partners of RJAS (collectively the “Partners”) in December, 2006, the business of RJAS came to a standstill,

and payments on the loan granted to it have ceased, with ` 377.54 million remaining outstanding. Our Bank

filed an original application before the Debts Recovery Tribunal, Bangalore (“DRT”) against RJAS, the

Partners and others, alleging default on the repayment of loans granted to it, inter alia claiming for (i) the

recovery of a sum of ` 382.89 million with further interest of 13% from the legal heirs of the Partners; and

(ii) the sale of the properties offered as security for the loan In terms of its order dated July 11, 2012, the DRT

granted the reliefs sought by our Bank and issued a recovery certificate accordingly. The execution

proceedings have been initiated.

As security for the abovementioned loan, the Partners had provided warehouse receipts for procurement of

food grains (the “Receipts”). On December 11, 2006, our Bank was however informed that there was no

wheat in the relevant warehouses, and that the Receipts were forged. Our Bank hence filed a criminal

complaint on January 4, 2007 against the Partners. Further, HMG Ambassador Property Management Private

Limited (“HMG”) filed a suit against RJAS, the Partners and our Bank before the City Civil Judge,

Bangalore, disputing the title of the Partners over the properties situated in Bangalore, which were offered as

security. Additionally, Cargill India Private limited (“Cargill”) has filed an inter-pleader suit before the City

Civil Judge, Bangalore against our Bank and others seeking an order inter alia directing our Bank to inter-

pleas and establish rights in the money payable by Cargill. We have filed application for appropriating the

amount deposited in the court by Cargill, against the loan account. The matter is currently pending.

5. On November 11, 2009, our Bank had granted Swastik Steels (Hospet) Private Limited (“Swastik”) certain

credit facilities aggregating to ` 270 million, which were renewed and restructured in March 8, 2012, granting

Swastik credit and term loan facilities aggregating to ` 340.1 million. Swastik failed to regularise the account

and pay our Bank the monthly instalments stipulated, despite repeated requests by our Bank. On August 22,

2013, our Bank issued a Demand Notice to Swastik under provisions of SARFAESI Act, requiring repayment

of dues arising from the loan of ` 200 million granted to it, aggregating to ` 290.47 million. Swastik failed

to repay the said amount, and accordingly, our Company filed an application dated June 4, 2014 to take

possession of the properties given as security before the District Magistrate. In terms of its order dated August

28, 2014 (the “Order”), the District Magistrate granted to our Bank the possession of said properties, and

authorised the Tehsildar, Hospet to take possession of the same.

Subsequent to the Order, several persons (collectively the “Petitioners”) have filed Writ Petitions before the

High Court of Karnataka challenging the Order, each claiming that they had taken on lease from various

directors of Swastik, (collectively the “Directors”), several of the properties given as security for the

abovementioned credit facilities (collectively the “Properties”). It is claimed that the Properties were leased

to the Petitioners by the Directors. However, in terms of the Order, government officials have taken

possession of the Property without notice being given to the Petitioners.

Our Bank had filed an Original Application on February 26, 2014 before the Debts Recovery Tribunal,

Bangalore (“DRT”) against Swastik and its Directors, alleging default on the dues outstanding to our Bank,

claiming inter alia for (i) the recovery of a sum of ` 320.05 million with interest thereto; and (ii) the sale of

hypothecated and mortgaged properties, the DRT granted the reliefs sought by our Bank and issued a recovery

certificate dated July 24, 2015. A Demand Notice was issued by the DRT on September 21, 2015, requiring

Swastik to make such payment. Swastik failed to do so, and the DRT accordingly passed a Sale Proclamation

dated July 8, 2016, ordering the auction of the mortgaged and hypothecated properties of Swastik.

Meanwhile, our Bank has received a Notice from the Tax Recovery Officer, Bangalore dated February 2,

2015, stating that an asset proposed to be auctioned for recovery of the outstanding dues has been attached

for recovery of arrears of income tax amounting to ` 755.2 million due from a director of Swastik, and

directing our bank to remit sale proceeds arising therefrom towards arrears of Income Tax. We have made

various communications to the Principle Commissioner of Income Tax, noting inter alia that secured creditors

such as our Bank have a priority over Income Tax dues. The matters are currently pending.

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6. Our Bank has filed an application before the Debt Recovery Tribunal, Bangalore against M/s Alupro Building

Systems Private Limited (“Alupro”) and the directors in relation to various secured credit facilities

aggregating to ` 700 million availed by Alupro. Our Bank has alleged default on the repayment of the

outstanding amount to Alupro and prayed for the recovery of a sum of ` 265.17 million with an interest

thereto along with attachment and sale of the secured properties. Our Bank has also given a notice to Alupro,

its directors and guarantors under the SARFAESI Act due failure to comply with the terms of the loan, who

have objected the tenability of the notice under law. Our Bank has clarified vide reply notice that there is no

bar to issue the statutory notice under Section 13(2) of the SARFAESI Act. We have also filed a criminal

complaint dated November 11, 2015 against Alupro and its directors, due to depletion in the value of stock

and receivables of Alupro, indicating that Alupro may have realized/utilized/sold some of its current assets,

routed through other banks without the permission of our Bank, which amounts to fraud. The matter is

currently pending.

7. Our Bank, alongside Union Bank of India (“Applicants”) have filed an application for the recovery of debts

before the Debt Recovery Tribunal, Mumbai against M/s. Srimauli Infrastructure Private limited

(“Srimauli”) and others in relation to secured credit facilities extended by our Bank to Srimauli. Our Bank

has alleged default in the payment of the outstanding instalments. The Applicants had formed a consortium

that extended credit facilities to Srimauli for the purpose of meeting part of the construction cost of road

projects. Union Bank of India extended credit facilities totalling ` 235 million and our Bank extended credit

facilities totaling ` 210 million to Srimauli. Subsequently, the Applicants were informed that the contract

with Srimauli for the road projects had been cancelled. Our Bank has inter alia prayed for the recovery of a

sum of ` 223.51 million along with the invocation of the hypothecation, which was granted through the

recovery certificate dated May 14, 2013. The matter is currently pending.

8. On January 18, 2012, our Bank granted certain credit facilities to M/s Adigear International (“Adigear”),

aggregating to ` 300 million, which were further renewed on February 12, 2014. However, the accounts of

Adigear were running defectively, and it committed defaults in making remittance to the account repeatedly

due to which several of its accounts became non-performing assets. On March 18, 2014, our Bank lodged a

criminal complaint against Adigear and others, alleging criminal conspiracy, cheating and criminal breach of

trust. It was alleged that Adigear colluded with its associate entities to defraud our Bank of a sum of ` 162.66

million by depositing high value cheques, and immediately transferring the credited amount to the accounts

of the associate entities before such cheques are cleared, in contravention of bank norms. We have also filed

a complaint under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 against one of

the associate entities, M/s. Metaphor Exports Private Limited.

Further, our Bank filed an Original Application on December 12, 2014 before the Debts Recovery Tribunal,

New Delhi (the “DRT”) against Adigear and others, alleging default on the dues outstanding to our Bank,

inter alia claiming for (i) the recovery of a sum of ` 221.73 million and interest thereto; and (ii) the sale of

properties given as security. Additionally, pursuant to the dues arising from a bank guarantee of ` 3.95 million

executed by Adigear, our Bank has filed a separate original application before the DRT against for recovery

of dues. The matters are currently pending.

9. Our Bank had granted several credit facilities aggregating to ` 1,050 million to Shree Ganesh Jewellery House

(I) Limited (“Shree Ganesh”). On May 25, 2013, 24 banks including our Bank executed a working capital

consortium agreement led by the State Bank of India (“SBI”) (collectively the “Consortium”) that had

provided credit to Shree Ganesh. The Consortium extended credit facilities aggregating to ` 18,990 million

to Shree Ganesh, of which, the share of our Bank was ` 620 million, comprising ` 250 million under a fund

based limit, in the manner of a Foreign Bill Discounting facility and ` 370 million under a non-fund based

limit. Subsequently, these limits were reviewed on May 14, 2014 to ` 163 million under a fund based limit

and ` 326 million under a non-fund based limit. Subsequent to the formation of the consortium, the overall

limit sanctioned by the consortium was enhanced to ` 37,240 million. However, Shree Ganesh defaulted in

its payments to several members of the Consortium. In a joint meeting of the Consortium held on March 13,

2015, it was decided that each of the banks shall separately take legal action against Shree Ganesh for their

respective dues.

226

On July 23, 2015, SBI lodged a complaint against Shree Ganesh before the Banking Security and Fraud Cell,

Central Bureau of Investigation (the “CBI”). An audit report sanctioned by the Consortium had noted several

irregularities in the trade of diamonds and gold bullion by Shree Ganesh. Relying on this, SBI alleged that

Shree Ganesh had colluded with several overseas merchants to defraud lenders. The CBI accordingly filed a

case against Shree Ganesh, and initiated investigations. The CBI approached our Bank, vide letter dated

September 1, 2016, requesting several documents in this regard, which we have supplied in our

communication dated September 14, 2016.

At the request of Shree Ganesh, our Bank discounted certain foreign bills drawn by Shree Ganesh, aggregating

to a total of ` 249.69 million. The overseas buyers however failed to honour said bills, claiming that they had

supplied certain items to Shree Ganesh and were to receive payments from them. As per terms of the sanction

given to Shree Ganesh, it was to make payments to our Bank if payments were not made by the overseas

buyers. However, Shree Ganesh failed to make the payments when called to do so. The post-dated cheque

was dishonoured on July 5, 2014 for the reason of insufficient funds. Due to the non-payment of the

discounted bills by overseas buyers, the fund based credit facility of Shree Ganesh was classified as a non-

performing asset.

Our Bank issued a Demand Notice on July 15, 2014 to Shree Ganesh and its directors under Section 138 of

the Negotiable Instruments Act, 1881 (the “NI Act”), requiring the payment of a sum of `163 million in lieu

of the Cheque within the period of 15 days. No payment was received, and our Bank has hence filed a criminal

case before the Chief Metropolitan Magistrate, Calcutta on August 14, 2014, seeking that Shree Ganesh and

its directors are punished under Section 138 of the NI Act. Our Bank has filed an application on November

27, 2015 for before the DRT against Shree Ganesh and others, inter alia claiming for (i) the recovery of a

sum of ` 208.78 million with further interest thereto; (ii) the enforcement of securities for realisation of the

outstanding amount; (iii) the appointment of a Receiver to take inventory of the various properties of Shree

Ganesh, and (iv) the sale of the properties of Shree Ganesh, including those hypothecated or mortgaged in

favour of the Consortium, the proceeds of which shall be used for the recovery of dues of our Bank.

Additionally, our Bank has filed an application before the DRT, claiming that the properties mortgaged and

hypothecated in favour of our Bank are insufficient to discharge the dues owed to our Bank. Our Bank

therefore seeks an order inter alia that in the interim (i) additional security is furnished against the debts due

to our Bank, or in the alternative (ii) the uncharged properties of Shree Ganesh and its directors be placed at

the disposal of the DRT and are attached; and (iii) the passports of the directors of Shree Ganesh are deposited

with the registrar of the DRT. The matters are currently pending.

10. Our Bank has filed an application before the Debt Recovery Tribunal, Mumbai against M/s K & K Jewelers

(“K & K”) and five others who are the guarantors in relation to secured credit facilities, aggregating to ` 200

million extended by our Bank to K & K. Our Bank has alleged default on the repayment of the amount

sanctioned and has inter alia prayed for the recovery of a sum of ` 188.27 million along with invocation of

the hypothecation and mortgage. Our Bank has also initiated recovery action under the SARFAESI Act due

to the failure to comply with the terms of the loan and default in repayment of the secured debt. Our Bank

has also filed the application under Section 14(1) of the SARFAESI Act for obtaining physical possession.

The matter is currently pending.

11. Our Bank has filed recovery applications before the Debt Recovery Tribunal, Chennai, against 16 entities, its

partners and guarantors (“Parties”) alleging fraud in bill discounting and default in payment of the bill

amount on the due date, aggregating to the amount of ` 751.37 million. Our Bank has filed complaints under

Section 138 with Section 141 of the Negotiable Instruments Act, 1881 before the Metropolitan Magistrate at

Egmore against nine borrowers, who had presented additional security in the form of post-dated cheque which

bounced, for the reason of “insufficient funds”. Further, our Bank has lodged police complaints against all

Parties on October 21, 2016 for commission for fraud, cheating, forgery, criminal breach of trust and

falsification of records. Pursuant to the steps taken by our Bank, certain amounts have been recovered from

the Parties. The matter is still pending. For further details, see “Risk Factor – Risk associated with our

Business – We have received a show cause notice from the RBI relating to a fraud involving our Bank” on

page 42.

12. Our Bank has filed an application before the Debt Recovery Tribunal, Hyderabad against M/s. DRK Infratech

Private Limited (“DRK Infratech”) and two of its directors in relation to default in the secured credit facilities

227

extended by our Bank, aggregating to ` 181.5 million (“outstanding amount”). Our Bank has alleged default

on the repayment of the amount sanctioned and has inter alia prayed for the recovery of the outstanding

amount along with invocation of the hypothecation and mortgage. Our Bank has also initiated recovery action

under the SARFAESI Act due to the failure to comply with the terms of the loan and default in repayment of

the secured debt. The matter is currently pending.

Material Fraud committed against our Bank

Our Bank has a Fraud Monitoring Committee and Review Committee on Non-cooperative borrowers (“Fraud

Monitoring Committee”) which monitors and reviews all frauds against our Bank involving an amount of ` 10.00

million or more. The terms of reference of Fraud Monitoring Committee includes effective detection of frauds

and ensuring prompt reporting thereof to regulatory and enforcement agencies.

In the last three years, the acts of material frauds, i.e. the act of frauds detected involving an amount of ` 10.00

million or more, against our Bank are as follows:

S.

No.

Details of the fraud Amount involved

(` in million)

Action taken by the bank

1 Two of our borrowers availed instant credit

facilities from our Bank. Cheques were

allowed for crores of rupees on a day to day

basis without any authority. On a few

occasions, cheques were returned and adjusted

out if the RTGS received from the drawer of

the cheques or out of the further instant credit

allowed. Pursuant to the inputs of the RO

Gurgaon, an investigation was conducted

which brought the fraud to light.

162.66 We have filed a criminal

complaint with Barakhamba

Police Station on March 19, 2014

and recovery applications have

been filed with the Debt

Recovery Tribunal. We have

dismissed the staff members who

were involved in the fraud.

2 One of our borrowers, a company in the

business of manufacturing oils and

perfumeries, was availing credit limits on

consortium basis. The limit was renewed

several times. However, the operations of the

account were not commensurate with the limit

sanctioned and it was classified as an NPA.

RBI advised our Bank to classify the account

as fraud.

530.75 The consortium leader is in the

process of appointing detective

agencies to locate the assets.

Steps are being taken to declare

the borrower as a wilful defaulter.

One of the member banks of the

consortium filed a petition

against the company for

appointing an official liquidator.

Nationalized banks filed a

criminal complaint against the

borrower with the CBI. ED has

initiated separate investigation as

to transfer of funds to UK and

Dubai.

3 One of our employees, a branch manager, used

to discount UBD bills against LC transaction

in the system by using the passwords of other

employees. On comparison of various

abstracts, obtained by the AGM during his

visit to the branch led to the detection of fraud.

He discounted several bills against non-

existing LCs, the proceeds of which were

credited to several current accounts

maintained at the branch. After that, the

amounts were sent through RTGS/NEFT to

his associates’ account which were then

withdrawn and misappropriated.

12.00 We have dismissed the staff

members who were involved in

the fraud. We have also

undertaken recovery steps.

SARFESI action has been

initiated against the property of

the branch manager. He has also

been arrested.

4 One of our borrowers was enjoying working

capital credit limit from a consortium of 18

banks, including our Bank. Various bill

discounting facilities were sanctioned to the

526.80 We have dismissed the staff

member who was involved in the

fraud.

228

S.

No.

Details of the fraud Amount involved

(` in million)

Action taken by the bank

borrower, with the condition of additional

security. The borrower failed to operate the

account in conformity with the terms and

conditions of the credit facilities. In view of

the reported diversion of funds and other

irregularities, the RBI sent a letter to us stating

that that the account should be declared as

“fraud”.

The consortium leader has lodged

a complaint with the CBI and has

also filed a joint recovery

application before the DRT,

Kolkata.

We have served a recall notice

under SARFESI to the borrower.

5 One of our employees created deposit loans

and deposit overdrafts in various customers’

names and the proceeds were applied to

various borrowal accounts. In the process, he

utilized part of such proceeds for his personal

benefit.

40.57 We have dismissed the employee

who was involved in the fraud.

We have also started the recovery

process from the respective

borrowers. The entire amount

should be recovered by

November 2016.

6 One of our borrowers was enjoying an export

bill limit and an FLC/LG limit from a

consortium of banks. The discounted foreign

bills were not retired on the due date and the

account was classified as an NPA.

The leader of the consortium lodged a

complaint with the CBI who on preliminary

investigation concluded that evidence exists

that the borrower has defrauded the

consortium lenders. CBI advised the leader to

inform all the lenders that the account should

be declared as “fraud”.

162.94 We declared the account as

“fraud” and reported to the RBI

accordingly. We filed an OA with

the Debt Recovery Tribunal,

Kolkata.

The consortium leader will

submit its complaint to the CBI

once all the member banks

declare the borrower’s account as

fraud.

7 One of our employees committed

misappropriation of cash remittance made to a

borrower’s account. He fabricated the legal

opinion of the panel advocate, the panel valuer

and the law officer so that he could extend

credit limits to other borrowers’ accounts.

These credit limits were sanctioned based on

inflated property valuation.

85.97 We have dismissed the employee

who was involved in the fraud. A

police complaint has also been

filed. The amount which was

misappropriated has been

remitted back by him.

8 Branch Head of one of our branches

discounted multiple clean usance bills and did

not comply with the procedures prescribed for

documentary clean bills discounting, thereby,

transgressing their lending powers. The major

portion of the bill proceeds were transferred to

a particular account of a company with a

different bank and on investigating, it was

revealed that the Director of the company and

his sons were involved in the fraud.

751.37 Bank has suspended the

concerned Branch Head who is

involved in this fraud. Further,

our Bank has filed complaints

under Section 138 with Section

141 of the Negotiable

Instruments Act, 1881 before the

Metropolitan Magistrate at

Egmore against nine borrowers,

who had presented additional

security in the form of post-dated

cheque which bounced, for the

reason of “insufficient funds”.

Further, our Bank has lodged

police complaints against all 16

entities for commission for fraud,

cheating, and forgery, criminal

breach of trust and falsification of

records.

Inquiries, inspections or investigations initiated or conducted under the Companies Act, 1956 or the Companies

Act, 2013 against the Bank in the last three years:

229

Nil

Prosecutions filed (whether pending or not) against, fines imposed on, or compounding of offences by the Bank

in the last three years under the Companies Act, 1956 or the Companies Act, 2013:

Nil

Details of default, if any, including therein the amount involved, duration of default and present status, in

repayment of statutory dues, debentures and interest thereon, deposit and interest thereon, loan from any

bank or financial institution and interest thereon.

As of December 26, 2016, there is no outstanding default in payment of statutory dues, repayment of debentures

and interest thereon, repayment of deposits and interest thereon and repayment of loan from any bank or financial

institution and interest thereon, except as given below:

S.

No.

Nature of Statutory Payment* Amount (` in Million)

1. Tax Deducted at Source (TDS) defaults relating to Financial years

2007-08 to FY 2016-17

46.66

2. Defaults in deduction of tax at source reported by various branch

auditors for the financial year ended 31st March 2016

0.10

Total Defaults in Statutory Dues 46.76

*Other than noted above, there are disputed service tax liabilities aggregating to ` 66.99 million which is under adjudication before higher

authorities

Other Confirmations

There have been no litigation or legal action pending or taken by any ministry or department of the Government

or a statutory authority in India, against the Promoters of our Bank during the last three years.

230

GENERAL INFORMATION

1. Our Bank was incorporated on November 3, 1926 under the Indian Companies Act, 1913. The Bank was

licensed under the Banking Regulation Act, 1949 on June 19, 1958 and became a scheduled commercial

bank under the Second Schedule of the RBI Act on August 11, 1958.

2. Our registered office is located at Salem Road, Kathaparai, P.O. Karur – 639006, Tamil Nadu, and

corporate office is located at LVB House, No. 4, Sardar Patel Road, Guindy, Chennai – 600 032, Tamil

Nadu.

3. Details of the Company Secretary and Compliance Officer:

N. Ramanathan


Lakshmi Vilas Bank Limited

Corporate Office, “LVB House”

No.4, Sardar Patel Road,

Guindy, Chennai - 600 032

Tamil Nadu

Tel: +91 44-22205305 / +91 9442552642

Fax: +91 44 2220 5317


4. Our Equity Shares are listed on the BSE and the NSE. The Issue was authorized and approved by the

Board of Directors on May 6, 2016 and October 17, 2016. The Shareholders of our Bank have authorized

the Issue pursuant to a special resolution dated June 10, 2016.

5. Copies of our Memorandum and Articles of Association are available for inspection between 10:00 a.m.

to 5:00 p.m. on any weekday (except Saturdays and public holidays) at our Registered Office.

6. We have obtained all consents, approvals and authorisations required in connection with this Issue.

7. Except as disclosed in this Preliminary Placement Document, there has been no material change in our

financial or trading position since September 30, 2016, the date of the latest financial statements prepared

in accordance with Indian GAAP included in this Preliminary Placement Document.

8. R. K. Kumar & Co., our Statutory Auditors, have audited our financial statements for Fiscals 2015, 2016

and have also reviewed our financial results for the six months ended September 30, 2016, in accordance

with the SRE 2410, Review of Interim Financial Information Performed by the Independent Auditor of

the Entity issued by the ICAI, included in this Preliminary Placement Document. M/s Sagar & Associates

has audited our financial statement for Fiscal 2014, included in this Preliminary Placement Document.

9. Except as disclosed in this Preliminary Placement Document, there are no litigation or arbitration

proceedings against or affecting us, or our assets or revenues, nor are we aware of any pending or

threatened litigation or arbitration proceedings, which are or might be material in the context of this Issue.

For details of litigations, see “Legal Proceedings” on page 222.

10. The Floor Price is ` 141.15 per Equity Share, calculated in accordance with the provisions of Chapter

VIII of the SEBI ICDR Regulations.

11. Our Bank may offer a discount of not more than 5% on the Floor Price in accordance with and in terms

of Regulation 85 of the SEBI ICDR Regulations.

12. Our Bank confirms that it is in compliance with the minimum public shareholding requirements as

required under the terms of the Listing Regulations, Securities Contracts (Regulation) Act, 1956 and the

Securities Contracts (Regulation) Rules, 1957.

231

FINANCIAL INFORMATION

Financial Statements Page No

Auditors Report and the audited financial statements for the Fiscal ended March 31, 2014 F-1



Limited Review Report and the financial results for the six months ended September 30, 2016 F-181

REPORT OF AUDITORS TO THE MEMBERSOF

THE LAKSHMI VILAS BANK LIMITED, KARUR

Report on the Financial Statements1. We have audited the accompanying financial statements of THE LAKSHMI VILAS BANK LTD, KARUR as at

31st March, 2014, which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss andthe Cash Flow Statement for the year then ended and a summary of significant Accounting Policies and otherexplanatory information. Incorporated in these financial statements are the returns of 17 Branches, 8 RegionalOffices and other support service units audited by us as well as the remaining 344 Branches and 6 Service Branchesaudited by other branch auditors. The branches audited by us and those audited by other auditors have beenselected by Bank in accordance with the guidelines issued by the Reserve Bank of India.

Management’s Responsibility for the Financial Statements2. Management of the Bank is responsible for the preparation of these financial statements that give true and fair view

of the financial position and financial performance of the Bank in accordance with Banking Regulation Act, 1949 andcomplying with Reserve Bank of India Guidelines issued from time to time. This responsibility includes the design,implementation and maintenance of internal control relevant to the preparation and presentation of the financialstatements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit

in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. ThoseStandards require that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the Bank’s preparation and fair presentation of the financial statementsin order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of the accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.

5. The financial information as at and for the year ended 31st March 2014 of 344 Branches and 6 Service Brancheshave been audited by other auditors whose reports have been furnished to us and our opinion is based solely on thereports of such other auditors.

6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.

Opinion7. Without qualifying our opinion, we draw attention to

(a) Note No. 3.10 of the Schedule 18 to the financial statements, regarding deferment of pension liability and gratuityliability of the Bank, pursuant to the exemption granted by the Reserve Bank of India to the Lakshmi Vilas Bankfrom application of the provisions of Accounting Standard (AS) 15, Employees Benefits vide circular no.DBOD.BP.BC/80/21.04.018/2010-11, dated 09-02-2011 on “Re-opening of Pension Option to the employeesand Enhancement in Gratuity Limits- Prudential Regulatory Treatment.” Accordingly, out of the unamortizedamount of ̀ 37.24 crore as on 01/04/20l3, the Bank has amortized ̀ 15.56 crore for Pension and ̀ 3.06 crore forGratuity being proportionate amount for the year ended March 31, 2014 and balance amount to be amortized infuture periods for Pension is ` 15.56 crore and for Gratuity is ` 3.06 crore.

(b) Note No. 3.10 of the Schedule 18 to the financial statements, which states that, pending receipt of opinion fromthe Expert Advisory Committee of the Institute of Chartered Accountants of India, the provision for pensionliability as on 31st March 2014 has been made based on the actuarial valuation.

FINAL LVB ar 2014.pmd 24/08/2014, 10:51 AM14

F-1

For SAGAR & ASSOCIATESChartered Accountants

FR No. 003510S

(V. VIDYASAGAR BABU)Place : Bangalore PartnerDate : 14th May 2014 Membership No. 027357

(c) Note No. 7 of the Schedule 18 to the financial statements, which describes creation of Deferred Tax Liability(DTL) on Special Reserve under section 36 (1) (viii) of the Income Tax Act, 1961 pursuant to RBI’s Circular No.DBOD. No. BP.BC. 77 / 21.04.018 / 2013-14 dated December 20, 2013, whereby the DTL of ` 7.87 crorepertaining to periods upto March 31, 2013 has been adjusted to the general reserve of the Bank and DTL of` 3.11 crore on the Special reserve created during the financial year ended March 31, 2014 has been chargedto the profit and loss account in accordance with the accounting treatment prescribed by the Reserve Bank ofIndia.

8. In our opinion and to the best of our information and according to the explanations given to us, the said accountstogether with the notes thereon give the information required by the Banking Regulation Act, 1949 as well as theCompanies Act, 1956 in the manner so required for the banking companies and give a true and fair view in conformitywith the accounting principles generally accepted in India:

i. in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2014;

ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Report on Other Legal and Regulatory Matters9. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of

Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956.

10. Subject to the limitations of the audit indicated in paragraphs 1 to 6 above and as required by the Banking Companies(Acquisition & Transfer of Undertakings) Act, 1970 and subject also to the limitations of disclosure required therein,we report that;

(a) We have obtained all the information and explanations which to the best of our knowledge and belief, werenecessary for the purpose of our audit and have found them to be satisfactory.

(b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

(c) The returns received from the Offices and Branches of the Bank, as supplemented with the information furnishedby the Management, have been found adequate for the purposes of our audit.

11. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the applicableAccounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

12. We further report that:

i. The Balance Sheet and Profit and Loss Account dealt with by this report, are in agreement with the books ofaccount and the returns.

ii. In our opinion, proper books of account as required by law have been kept by the Bank so far as appears fromour examination of those books.

iii. The reports on the accounts of the branches have been dealt with in preparing our report in the manner considerednecessary by us.

iv. As per information and explanation given to us, the Central Government has, till date, not prescribed any cesspayable under section 441A of the Companies Act, 1956,

v. On the basis of the written representation received from the directors and taken on record by the Board ofDirectors, none of the directors is disqualified as on 31st March 2014 from being appointed as a director in termsof clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.


F-2

(` 000’s)

As at As atSchedule 31-03-2014 31-03-2013

I. CAPITAL & LIABILITIES

a. Capital 1 97,56,07 97,54,07

b. Reserves & Surplus 2 956,03,85 916,80,38

c. Deposits 3 18572,88,21 15618,97,79

d. Borrowings 4 458,10,00 480,00,00

e. Other Liabilities & Provisions 5 568,47,59 553,35,79

TOTAL 20653,05,72 17666,68,03

II. ASSETS

a. Cash & Balances with Reserve Bank of India 6 1192,08,25 728,15,07

b. Balances with Banks and Money at Call & Short Notice 7 119,60,44 143,79,91

c. Investments 8 5688,67,76 4324,54,68

d. Advances 9 12889,18,96 11702,79,56

e. Fixed Assets 10 200,50,82 189,82,02

f. Other Assets 11 562,99,49 577,56,79

TOTAL 20653,05,72 17666,68,03

Contingent Liabilities 12 2763,50,89 2846,75,67

Bills for collection 404,52,09 376,60,40

Significant Accounting Policies 17

Notes on Accounts 18

BALANCE SHEET as on 31st March 2014

Schedules 1 to 12 and 17 to 18 form part of this Balance Sheet.

As per our Report of Date annexed

For M/s. SAGAR & ASSOCIATES RAGHURAJ GUJJARChartered Accountants ChairmanFRN. 003510S

V. VIDYASAGAR BABU RAKESH SHARMAPartner Managing Director & CEOM. No. 027357

Bangalore M. PALANIAPPAN14th May 2014 Chief Financial Officer

B.K. MANJUNATHK.R. PRADEEPS.G. PRABHAKHARANS. DATTATHREYANR. SHARANA. SATISHKUMARDr. P.A. SHANKARN. MALAYALARAMAMIRTHAMR. RAVIKUMARDirectors


F-3

PROFIT AND LOSS ACCOUNT for the year ended 31st March 2014

I. INCOMEa. Interest Earned 13 1983,95,00 1760,54,81

b. Other Income 14 217,99,21 197,06,63

TOTAL 2201,94,21 1957,61,44

II. EXPENDITUREa. Interest Expended 15 1497,93,95 1368,54,98

b. Operating Expenses 16 395,00,54 337,91,77

c. Provisions & Contingencies 249,34,17 159,57,24

TOTAL 2142,28,66 1866,03,99

III. NET PROFIT FOR THE YEAR 59,65,55 91,57,45

a. Excess Dividend Provided - Reversed 0 0

b. Profit brought forward 8,83 8,84

TOTAL 59,74,38 91,66,29

IV. APPROPRIATIONSa. Transfer to Statutory Reserve 15,00,00 29,00,00

b. Transfer to Capital Reserve 11,19 3,43,93

c. Transfer to Other Reserves 24,00,00 16,40,00

d. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 9,15,00 8,50,00

e. Proposed Dividend 9,75,61 29,26,22

f. Tax on Proposed Dividend 1,65,80 4,97,31

g. Balance carried over to Balance Sheet 6,78 8,83

TOTAL 597438 91,66,29

Previous year figures are regrouped wherever necessary

Earnings Per Share - Basic (`) 6.11 9.39

(` 000’s)

Year ended Year endedSchedule 31-03-2014 31-03-2013

Schedules 13 to 16 and 17 to 18 form part of this Profit & Loss Account.







F-4

(` 000’s)

As at As at31-03-2014 31-03-2013

SCHEDULE 1 - CAPITALAUTHORISED CAPITAL(30,00,00,000 equity shares of ` 10/- each) 300,00,00 150,00,00

ISSUED CAPITAL(9,83,72,564 equity shares of ` 10/- each)(20,000 shares issued through “LVB ESOS-2010” 98,37,26 98,35,25

Subscribed, Called-up and Paid Up Capital(9,75,60,690 equity shares of ` 10/- each) 97,56,07 97,54,07i) 9,75,60,690 Paid-up Capital (Previous year 9,75,40,690

shares 20,000 shares issued under “LVB ESOS-2010”)ii) 1,26,42,131 Bonus Shares allotted (Previous year

1,26,42,131 shares)iii) 20,000 shares issued under “LVB ESOS -2010”

(Previous year NIL)iv) Shares kept in abeyance 7,88,216 (Previous year

7,88,216 shares)v) Shares Forfeited and lapsed 23,658 (Previous year

23,658 shares)TOTAL 97,56,07 97,54,07

SCHEDULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE

Opening Balance 323,90,46 294,90,46Additions during the yearTransfer from current year’s Profit 15,00,00 338,90,46 29,00,00 323,90,46

II. CAPITAL RESERVEOpening Balance 52,16,75 48,72,82Additions during the year 11,19 52,27,94 3,43,93 52,16,75

III. SHARE PREMIUMOpening Balance 330,47,74 330,47,74Additions during the year 2249 0

330,70,23 330,47,74Deductions during the year 0 330,70,23 0 330,47,74

IV. REVENUE & OTHER RESERVESOpening Balance 109,22,65 92,82,65Additions during the year 24,00,00 16,40,00

133,22,65 109,22,65Deductions during the year 7,87,00 125,35,65 0 109,22,65

V. Special Reserve u/s 36(1)(viii) of IT Act, 1961Opening Balance 23,15,00 14,65,00Additions during the year 9,15,00 32,30,00 8,50,00 23,15,00

VI. REVALUATION RESERVEOpening Balance 81,50,52 81,50,52Additions during the year 0 0

81,50,52 81,50,52Depreciation on Revalued Asset 5,07,73 76,42,79 3,71,57 77,78,95

VII. BALANCE IN PROFIT & LOSS ACCOUNT 6,78 8,83TOTAL 956,03,85 916,80,38


F-5

SCHEDULE 3 - DEPOSITS

A. I. DEMAND DEPOSITS1. From Banks 1,34,90 83,28

2. From Others 911,16,33 912,51,23 737,66,59 738,49,87

II. SAVINGS BANK DEPOSITS 1729,73,26 1524,07,44

III. TERM DEPOSITS1. From Banks 1220,40,56 326,61,53

2. From Others 14710,23,16 15930,63,72 13029,78,95 13356,40,48

18572,88,21 15618,97,79

B. (I) DEPOSITS OF BRANCHES IN INDIA 18572,88,21 15618,97,79

(II) DEPOSITS OF BRANCHES OUTSIDE INDIA NIL NIL

TOTAL 18572,88,21 15618,97,79

SCHEDULE 4 - BORROWINGS I. BORROWINGS IN INDIA

1. Reserve Bank of India 0 02. Other Banks 0 03. Other Institutions & Agencies* 458,10,00 458,10,00 480,00,00 480,00,00

II. BORROWINGS OUTSIDE INDIA 0 0* Includes unsecured Tier II bonds of ` 458.10 Crs(Previous year ` 380.00 Crs) 458,10,00 480,00,00SECURED BORROWINGSINCLUDED IN I & II ABOVE 0 0

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONSI. Bills payable 70,82,92 62,15,92II. Inter-office adjustments (net) 8,68,31 0III. Interest accrued 190,30,44 170,02,21IV. (i) Others - (including Provisions) 233,74,67 265,22,41

(ii) Contingent Provisions against StandardAssets 44,71,00 38,84,00

(iii) Deferred Tax Liabilities 20,20,25 17,11,25TOTAL 568,47,59 553,35,79

SCHEDULE 6 - CASH AND BALANCES WITH RESERVEBANK OF INDIACash in Hand (including foreign Currency Notes) 226,50,96 184,60,10Balances with Reserve Bank of IndiaI) in current account 965,57,29 543,54,97II) in other accounts 0 0

TOTAL 1192,08,25 728,15,07

(` 000’s)

As at As at31-03-2014 31-03-2013


F-6

SCHEDULE 7 - BALANCES WITH BANKS & MONEYAT CALL AND SHORT NOTICE

I. IN INDIA

(i) Balance with Banks

a. in current accounts 24,72,86 26,57,15

b. in other deposit accounts 6,25 100,25,24

24,79,11 126,82,39

(ii) Money at call and short notice

a. with banks 0 0

b. with other institutions 79,92,03 0

104,71,14 126,82,39

II. OUTSIDE INDIA



b. in other accounts 0 0

14,89,30 16,97,52

TOTAL 119,60,44 143,79,91

SCHEDULE 8 - INVESTMENTS

I. INVESTMENTS IN INDIA

I. Government Securities (incl. treasury bills &zero coupon bonds) 4774,09,73 3801,32,98

II. Other approved securities 0 0

III. Shares 38,80,05 27,14,87

IV. Debentures & Bonds 265,35,60 133,13,44

V. Subsidiaries and Joint Ventures 0 0

VI Others (including Commercial Paper, Mutual Funds,NSC, Security Receipt, Units, etc.) 610,42,38 362,93,39

5688,67,76 4324,54,68

GROSS INVESTMENTS IN INDIA 5731,95,67 4347,93,23

LESS: DEPRECIATION 43,27,91 23,38,55

NET INVESTMENTS IN INDIA 5688,67,76 4324,54,68

II. INVESTMENTS OUTSIDE INDIA NIL NIL

TOTAL 5688,67,76 4324,54,68

(` 000’s)

As at As at31-03-2014 31-03-2013


F-7

SCHEDULE 9 - ADVANCES

A. I. Bills purchased & discounted 861,78,20 470,11,36

II. Cash credits, overdrafts & loans repayableon demand 8176,29,33 7753,31,80

III. Term loans 3851,11,43 3479,36,40

12889,18,96 11702,79,56

B. PARTICULARS OF ADVANCES

I. Secured by tangible assets [incl. advancesagainst Book Debts] 12108,26,17 10712,76,50

II. Covered by Bank / Govt. Guarantees 20,03,91 44,11,33

III. Unsecured 760,88,88 945,91,73

12889,18,96 11702,79,56

C. SECTORAL CLASSIFICATION OF ADVANCES

I. Priority Sector 5254,86,93 4450,96,25

II. Public Sector 1,02,80 15,37,34

III. Banks 10,25,41 11,79

IV. Others 7623,03,82 7236,34,18

TOTAL 12889,18,96 11702,79,56

SCHEDULE 10 - FIXED ASSETS

I. PREMISESAt Revaluation Value 138,67,31 138,67,31

Additions during the year 1,67,99 0

140,35,30 138,67,31

Deductions during the year 0 0

140,35,30 138,67,31

Depreciation to date 18,25,96 122,09,34 15,90,25 122,77,06

II. OTHER FIXED ASSETS (INCLUDINGFURNITURE & FIXTURES)At Cost 219,75,84 193,35,75

Additions during the year 34,24,57 27,75,14

254,00,41 221,10,89

Deductions during the year 2,43,06 1,35,05

251,57,35 219,75,84


TOTAL 200,50,82 189,82,02

(` 000’s)

As at As at31-03-2014 31-03-2013


F-8

SCHEDULE 11 - OTHER ASSETS

I. Inter-Office Adjustments (Net) 0 10,26,20

II. Interest Accrued 124,40,54 88,90,31

III. Tax Paid in Advance and Tax Deducted at Source (Net) 155,45,20 147,42,80

IV. Deferred Tax Asset 81,32,41 43,92,41

V. Stationery & Stamps 2,57,59 1,91,12

VI. Non Banking Assets acquired in satisfaction of claims 66,93,55 4,58,25

VII. Others 132,30,20 280,55,70

TOTAL 562,99,49 577,56,79

SCHEDULE 12 - CONTINGENT LIABILITIES

I. Claims against the Bank not acknowledged as debts 126,81,98 153,74,90

II. Liability for partly paid Investments 0 0

III. Liability on account of outstanding forward exchangecontracts 968,91,18 1185,74,33

IV. Guarantees given on behalf of constituents

in India 484,09,41 495,63,95

outside India 112,77,88 81,88,96

V. Acceptances, Endorsements & Other Obligations 1070,90,44 929,73,53

VI. Other items for which the Bank is contingently liable 0 0

TOTAL 2763,50,89 2846,75,67

Year ended Year ended31-03-2014 31-03-2013

SCHEDULE 13 - INTEREST EARNED

I. Interest / discount on advances / bills 1591,61,24 1393,45,44

II. Income on Investments 382,66,81 340,78,20

III. Interest on balance with Reserve Bank of India &other inter-bank Funds 3,65,78 78,48

IV Others 6,01,17 25,52,69

TOTAL 1983,95,00 1760,54,81

(` 000’s)

As at As at31-03-2014 31-03-2013


F-9

SCHEDULE 14 - OTHER INCOME

I. Commission, Exchange and Brokerage 98,04,47 79,75,02

II. Profit on sale of Investments 35,68,76 31,10,10

Less: Loss on sale of Investments 15,14,37 20,54,39 5,91,51 25,18,59

III. Profit on sale of land, Buildings & Other Assets 11,31 12,65

Less: Loss on sale of land, Buildings &Other Assets 7,49 3,82 10,42 2,23

IV. Profit on Exchange Transactions 14,34,33 10,65,55

Less: Loss on Exchange Transactions 0 14,34,33 0 10,65,55

V. Income earned by way of Dividends fromCompanies in India. 43,87 43,87 38,13 38,13

VI. Miscellaneous Income 84,58,33 81,07,11

TOTAL 217,99,21 197,06,63

SCHEDULE 15 - INTEREST EXPENDED

I. Interest on Deposits 1431,43,78 1299,13,31

II. Interest on Reserve Bank of India /Inter-Bank Borrowings 66,50,17 69,41,67

TOTA L 1497,93,95 1368,54,98

SCHEDULE 16 - OPERATING EXPENSES

I. Payments to and Provision for Employees 187,87,65 157,61,95

II. Rent, Taxes & Lighting 38,87,25 38,30,35

III. Printing & Stationery 4,74,26 3,29,09

IV. Advertisement & Publicity 1,97,31 4,30,57

V. Depreciation on Bank's Property 23,58,34 25,44,48

VI. Director’s fees, allowances 62,85 59,40

VII. Auditors’ fees & Expenses (incl. BranchAuditors) 92,24 80,71

VIII. Law Charges 1,74,32 1,01,20

IX. Postage, Telegrams, Telephones, etc. 8,29,55 7,44,67

X. Repairs & Maintenance 2,45,85 2,19,04

XI. Insurance 16,21,01 14,76,37

XII. Other Expenditure 107,69,91 82,13,94

TOTAL 395,00,54 337,91,77

(` 000’s)



F-10

SCHEDULE 17

SIGNIFICANT ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING:The financial statements have been prepared in accordance with the historical cost convention exceptwhere otherwise stated and conform to the statutory provisions and practices prevailing within the bankingindustry in India and the guidelines / instructions of Reserve Bank of India issued from time to time.

2. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:(a) Foreign Currency Assets and Liabilities have been translated at the exchange rates prevailing at the

close of the year as per the guidelines issued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on thedate of the respective transaction.

(c) Forward Exchange Contracts:

In accordance with the guidelines of FEDAI and the provisions of AS-11, outstanding forward exchangecontracts in each currency are revalued at the Balance Sheet date at the corresponding forwardrates for the residual maturity of the contract. The difference between revalued amount and thecontracted amount is recognized as profit or loss, as the case may be.

(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reportedat the rates prevailing on the Balance Sheet date.

3. INVESTMENTS:Investments are categorized under the heads ‘Held to Maturity’, Available for Sale, and ‘Held for Trading’and are valued category wise, in accordance with the guidelines of the Reserve Bank of India.

(i) Brokerage / commission etc, paid in connection with the acquisition of investments is charged torevenue and not included in cost.

(ii) Broken period interest paid / received on debt instruments is treated as interest expended / income.

(iii) Security receipts are valued at NAV as declared by Securitisation Companies.

4. ADVANCES:4.1 In accordance with the prudential norms issued by RBI:

(i) Advances are classified into standard, sub-standard, doubtful and loss assets borrower-wise;

(ii) Provisions are made for loan losses, and

(iii) General provision for standard advances is made.

4.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, partrecovery towards NPA accounts receipts held under sundries, and provision made for sacrifice of interest/diminution in the value of restructured advances measured in present value terms as per RBI guidelines.

5. FIXED ASSETS AND DEPRECIATION:(a) Fixed assets (Premises portfolio) have been accounted for at their revalued cost. Fixed assets other

than premises portfolio have been accounted for at their historical cost.

(b) Depreciation on assets other than computers has been provided for on the diminishing balancemethod at the rates specified in Schedule XIV to the Companies Act, 1956.

(c) Depreciation on computers has been provided for on straight-line method at the rate of 33.33% asper the guidelines issued by the Reserve Bank of India.

(d) In view of fast changing technology and obsolescence, iPad communication device is depreciated in full.

(e) Operating Software, which is an integral part of hardware, is capitalized and depreciation is providedfor at the rate of 33.33% on straight-line method.

(f) For premises, in which land cost and construction cost could not be ascertained separately,depreciation is provided for on the total cost.


F-11

6. EMPLOYEE BENEFITS:(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision

for Leave Encashment benefits have been made on actuarial basis. Contribution to Provident Fund isaccounted for on actual basis.

(b) Consequent to reopening of pension option to Employees and enhancement in Gratuity limits, theadditional liability have been amortised over a period of 5 years and 1/5th of the additional liabilityhave been charged to the current year Profit & loss account vide RBI circular DBOD. No. BP.BC.15896/21.04.018/2010-11 dated 08.04.2011.

(c) The Employee Stock Option Scheme provides for grant of equity stock options to top executives ofthe bank that vest in a graded manner. The Bank follows the intrinsic value method to account for itsemployee compensation costs arising from grant of such options. The excess of fair market price overthe exercise price shall be accounted as employee compensation cost over the respective period ofvesting. The fair market price is the latest closing price of the shares on the stock exchanges in whichshares of the bank are largely traded immediately prior to the date of meeting of the compensationcommittee in which the options are granted.

7. PROVISION FOR TAXATION:Provision for taxation is made on the basis of the estimated tax liability with adjustment for deferred tax interms of the Accounting Standard 22 (Accounting for Taxes on Income) formulated by the Institute ofChartered Accountants of India.

8. REVENUE RECOGNITION:(a) Income and expenditure are accounted for on accrual basis.

(b) The following items of income are recognized on realization basis, owing to the significant uncertaintyin collection thereof:

(i) Interest on non-performing advances, including overdue bills.

(ii) Interest on non-performing investments.

(c) Interest on tax refund from Income Tax Department based on assessment orders received.

(d) Dividend Income on Investments on declaration basis.

9. NET PROFIT:The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: –

a) Taxation.

b) Advances and other assets.

c) Shortfall in the value of investments.

d) Staff Retirement benefits.

e) Other usual and necessary provisions.

10. ACCOUNTING STANDARDS:Accounting Standards as specified in section 211(3C) of the Companies Act 1956, to the extent they areapplicable to Banking Companies and as per directions issued by the RBI from time to time, have beenfollowed.

11. SEGMENT INFORMATION:The reportable business segments have been classified in accordance with the guidelines issued by ReserveBank of India. The directly attributable income and assets are considered under respective segmentsand other income, expenses, other assets & liabilities are considered on appropriate basis.


F-12

12. EARNING PER SHARE:Basic and Diluted earnings per equity share are reported in accordance with the AccountingStandard 20 “Earnings per share” issued by the Institute of Chartered Accountants of India. Basic earningsper equity share are computed by dividing net profit by the weighted average number of equity sharesoutstanding for the period. Diluted earnings per equity share are computed using the weighted averagenumber of equity shares and dilutive potential equity shares outstanding during the period.

13. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets” issued byThe Institute of Chartered Accountants of India, the Bank recognises provisions only when it has a presentobligation as a result of a past event and it is probable that an outflow of resources embodying economicbenefits will be required to settle the obligation and when a reliable estimate of the amount of theobligation can be made.

Contingent Assets are not recognized in the financial statements since this may result in the recognition ofincome that may never be realised.

SCHEDULE 18NOTES ON ACCOUNTS1. The reconciliation of inter branch transactions has been completed upto 31.03.2014 and tallying of

balances is ensured on an ongoing basis.

2. (a) Provision for income tax for the year is arrived at after due consideration of the various favourablejudicial decisions on disputed issues.

(b) The disputed Income Tax demand outstanding as on 31.03.2014 amounts to ` 109.91 crore (previousyear ` 138.10 crore) and is included under Item I of Schedule 12 (Contingent Liabilities). No provisionis considered necessary in respect of the disputed liabilities in view of favourable decisions by variousappellate authorities on similar issues.

(c) In the current year, ` 6.01 crore being the interest on Income Tax refund is accounted based onassessment orders received.

3. DISCLOSURE REQUIREMENTS3.1 Capital (` in crore)

Items 2013-14 2012-13

i) CRAR (%)

(Basel II) 10.93 12.32

(Basel III) 10.90 NA

ii) CRAR - Tier I Capital (%)

(Basel II) 7.94 9.15

(Basel III) 7.87 NA

iii) CRAR - Tier II Capital (%)

(Basel II) 2.99 3.17

(Basel III) 3.03 NA

iv) Percentage of the shareholding of the Government of India in nationalized banks NA NA

v) Amount raised by issue of IPDI NA NA

vi) Amount raised by issue of Tier II Instruments during the year 78.10 NIL


F-13

(` in crore)

Raised during Nature Amount Reckoned for the purposethe year of CRAR computation

(as per RBI guidelines)

2006-07 Lower Tier II 30.00 12.00

2009-10 Lower Tier II 100.00 20.00

2011-12 Lower Tier II 250.00 131.00

2013-14 Lower Tier II* 78.10 78.10

* Basel III compliant.

3.2.1 In respect of securities held under HTM category premium of ` 7.55 crore (previous year ` 3.81 crore) hasbeen amortized during the year and debited under interest received on Government Securities.

3.2.2 Investments (` In crore)

Particulars 2013-14 2012-13

(1) Value of Investments(i) Gross Value of Investments

(a) In India 5731.96 4347.93(b) Outside India NIL NIL

(ii) Provisions for Depreciation(a) In India 43.28 23.39(b) Outside India NIL NIL

(iii) Net Value of Investments(a) In India 5688.68 4324.54(b) Outside India. NIL NIL

(2) Movement of provisions held towards Depreciation on investments(i) Opening balance 23.39 15.39(ii) Add: Provisions made during the year 27.46 9.24(iii) Less: Write-off / write-back of excess provisions during the year 7.57 1.24(iv) Closing balance 43.28 23.39

RBI vide its circular No.DBOD.BP.BC.No.41/21.04.141/2013-14 dated 23.08.2013 has allowed banks to distributethe net depreciation on the entire AFS and HFT portfolio on the valuation date over the current financial yearin equal instalments. The Bank had amortised such depreciation during the quarters ended September 2013and December 2013. Bank has provided ` 10.37 crore in the current quarter and thus the depreciation on theentire AFS and HFT portfolio is fully recognised as at 31.03.2014.3.2.3 Repo Transactions (In face value terms) (` In crore)

Minimum Maximum Daily Average Outstandingoutstanding outstanding outstanding As on

during during during March 31, the year the year the year 2014

Securities sold under repoI. Government Securities 5.00 250.00 109.70 38.48

(10.00) (225.00) (41.78) (150.00)II. Corporate debt Securities Nil Nil Nil NilSecurities purchased under reverse repoI. Government Securities 5.00 100.00 3.25 Nil

(10.00) (150.00) (0.96) NilII. Corporate debt Securities Nil Nil Nil Nil

(Figures in bracket indicates in previous year)


F-14

3.2.4. Non-SLR Investment Portfolioi) Issuer composition of Non-SLR investments : (` In crore)

No. Issuer Amount Extent of Extent of Extent of Extent ofPrivate ‘Below ‘Unrated’ ‘Unlisted’

Placement Investment Securities SecuritiesGrade’

Securities

(1) (2) (3) (4) (5) (6) (7)

1 PSUs 26.23 26.17 – – –

2 FIs 60.12 11.00 – – –

3 Banks 461.23 31.99 – – –

4 Private Corporate 186.42 116.18 18.64 18.64 18.64

5 Subsidiaries / Joint Ventures 0.00 0.00 – – –

6 Others** 209.43 148.01 – – –

7 Less: Provision held towardsdepreciation 28.86 – – – –

Total 914.58 333.35 18.64 18.64 18.64

** Others include RIDF investments of ` 58.31 crore, Mutual Fund of ` 3.11 crore and ARCs security receipts of` 148.01 crore.

ii) Non-performing Non-SLR investments : (` In crore)

Particulars 2013-14

(i) Net NPIs to Net Investment (%) –

(ii) Movement of NPIs (Gross)

Opening balance 7.82

Additions during the year since 1st April 2013 0.92

Reductions during the above period –

Closing balance 8.74

(iii) Movement of Net NPIs

Opening balance –

Additions during the year since 1st April 2013 –


Closing balance –

(iv) Movement of provision for NPIs


Additions during the year since 1st April 2013 0.92


Closing balance 7.10*

* An amount of ` 1.64 crore received towards part settlement is parked under sundries account.


F-15

3.2.5 Sale and transfers to / from HTM categoryDuring the year, the value of sales and transfers of securities to / from HTM category has not exceeded 5% ofbook value of the investment held in HTM category at the beginning of the year.

3.3 Derivatives :3.3.1 Forward Rate Agreement / Interest Rate Swap (` in crore)


i) The notional principle of swap agreements NIL NIL

ii) Losses which would be incurred if counter parties failed to fulfillobligations under the agreements NIL NIL

iii) Collateral required by the bank upon entering into swaps NIL NIL

iv) Concentration of credit risk arising from the swaps NIL NIL

v) The fair value of the swap book NIL NIL

3.3.2 Exchange Traded Interest Rate Derivatives : (` in crore)

S.No. Particulars 2013-14

(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NA

(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2014 (instrument-wise) NA

(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not “highly effective” (instrument-wise) NA

(iv) Mark-to-market value of exchange traded interest rate derivatives outstanding andnot “highly effective” (instrument-wise) NA

3.3.3 Disclosures on risk exposure in derivatives

Qualitative Disclosure

The structure and organization for management of risk in derivatives trading:

The Bank deals with the primary level of currency derivatives in the form of basic forward contracts/swaps.These forward contracts are OTC traded through CCIL and they are for the Export oriented or Import orientedclients and subsequently hedged with other banks. The monitoring of foreign currency derivatives trading ismonitored by Bank’s mid - office reporting to the IRMD. The trading and dealing foreign currency derivativesare part of the foreign exchange risk management policy, as per RBI guidelines and that is approved byBoard. Some of the risk management methods are:

i. Setting limits for various types of activities in forex operations, depending upon the business requirements,setting stop limits for each deal, maintaining single deal size, measuring individual and aggregate gap limitsfor each currency etc.,

ii. Bank also measures the counterparty credit exposures for each counterparty on the basis of MTM valuesand potential future exposure values.


F-16

3.3.4 Shifting of securities:For the year ended 31.03.2014, Bank has shifted securities amounting to ` 642.76 crore (face value) (previousyear ` 190.58 crore) from HTM to AFS category and loss arose on such transfer amounting to ` 0.48 crore hasbeen provided during the year. Further, Bank has shifted securities amounting to ` 569.21 crore (Face Value)(Previous year ` 169.64 crore) from AFS to HTM category and loss which arose on such transfer amounting to` 7.09 crore has been provided during the year (previous year ` 1.24 crore). Total loss on account of shifting ofsecurities is ` 7.57 crore during the year.3.3.5 SLR Securities (` in crore)

As at 31.03.2014 As at 31.03.2013

Particulars Book Market Book MarketValue Value Value Value

Government Securities SLR (CG, SG, TB) 4788.52 4453.14 3801.33* 3771.18*

Approved securities - SLR 0.00 0.00 0.00 0.00

* Net of securities pledged under REPO ` 38.48 crore (PY ` 157.50 crore).

3.4 Asset Quality3.4.1 Non-Performing Asset (` in crore)


(i) Net NPAs to Net Advances (%) 3.44% 2.43%(ii) Movement of NPAs (Gross)

(a) Opening balance 459.91 307.73(b) Additions during the year 668.69 400.15(c) Reductions during the year 582.14 247.97(d) Closing balance 546.46 459.91

(iii) Movement of Net NPAs(a) Opening balance 283.81 177.09(b) Additions during the year 322.43 277.53(c) Reductions during the year 162.85 170.81(d) Closing balance 443.39 283.81

(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 100.30 67.71(b) Provisions made during the year 247.92 76.14(c) Write-off / write-back of excess provisions 294.99 43.55(d) Closing balance 53.23 100.30

The provision coverage ratio of the Bank as on 31.03.2014 is 53.16%.In respect of certain non-performing advances related to the previous year, bank has obtained dispensation fromReserve Bank of India vide RBI letter DBS.CO.PvtSBMD.No.2116/15.01.067/2013-14 dated 08.08.2013 and accordinglythe bank has provided ` 81.45 crore during the year in respect of such advances, as permitted by RBI.

Quantitative Disclosures (` in crore)

Sl.No. Particular Currency Interest rateDerivatives Derivatives

(i) Derivatives (Notional Principal Amount) NA NAa) For hedging NA NAb) For trading NA NA

(ii) Marked to Market Positions [1] NA NAa) Asset (+) NA NAb) Liability (-) NA NA

(iii) Credit Exposure [2] NA NA(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NA

a) On hedging derivatives NA NAb) On trading derivatives NA NA

(v) Maximum and Minimum of 100*PV01 observed during the year NA NAa) On hedging NA NAb) On trading NA NA


F-17

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F-18

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F-19

3.4.3 Details of financial assets sold to Securitization / Reconstruction Company for Asset Reconstruction

(` in crore)


(i) No. of accounts* 7 14

(ii) Aggregate value (net of provisions) of accounts sold to SC/RC 34.17 16.32

(iii) Aggregate consideration 45.59 19.52

(iv) Additional consideration realized in respect of accounts transferred in earlier years 0.00 0.00

(v) Aggregate profit/(loss) over net book value. 11.42 3.20

* NPA accounts only.

3.4.4. Details of non-performing financial assets purchased / soldA. Details of non-performing financial assets purchased: (` in crore)


1 (a) No. of accounts purchased during the year NIL NIL

(b) Aggregate outstanding NIL NIL

2 (a) Of these, number of accounts restructured during the year NIL NIL


B. Details of non-performing financial assets sold: (` in crore)


1. No. of accounts sold 7 14

2. Aggregate outstanding 44.13 22.73

3. Aggregate consideration received 45.59 19.52

3.4.5 Provisions on Standard Assets (` in crore)


Provisions towards Standard Assets 44.71 38.84

3.5. Business Ratios


(i) Interest Income as a percentage to Working Funds 10.46 10.41

(ii) Non-interest income as a percentage to Working Funds 1.15 1.16

(iii) Operating Profit as a percentage to Working Funds 1.63 1.48

(iv) Return on Assets 0.32 0.54

(v) Business (Deposits plus advances) per employee (` in crore) 9.23 8.63

(vi) Profit per employee (` in lakhs) 1.81 2.91


F-20

3.6 Asset Liability Management

Maturity pattern of certain items of assets and liabilities (` in crore)

1 Day 2 to 7 8 to 14 15 to 28 29 days Over 3 Over 6 Over 1 year & Over 3 Over 5 TotalItems days days days to 3 months months & months & upto 3 years years & upto years

upto 6 months upto 1 year 5 years

Deposits 154.36 351.18 325.88 664.93 2192.47 2718.56 3916.85 4978.74 980.98 2288.93 18572.88

(132.39) (225.29) (251.41) (247.99) (1205.85) (1808.86) (3705.49) (5297.24) (781.08) (1963.38) (15618.98)

Advances (Net) 161.19 367.71 392.46 666.95 2469.82 655.56 1649.95 5083.78 605.96 835.80 12889.19

(127.95) (291.80) (292.72) (537.14) (1930.97) (717.03) (2076.75) (4456.67) (610.44) (661.33) (11702.80)

Investments (Net) 9.97 180.97 0.00 152.64 92.17 48.19 95.63 314.64 720.55 4073.92 5688.68

(15.55) (77.35) (49.79) (74.37) (29.82) (39.57) (56.00) (267.29) (464.29) (3250.51) (4324.54)

Borrowings 0.00 0.00 0.00 0.00 0.00 0.00 0.00 130.00 199.50 128.60 458.10

(0.00) (0.00) (0.00) (0.00) (100.00) (0.00) (0.00) (100.00) (229.50) (50.50) (480.00)

Foreign Currency 35.85 0.00 0.00 1.03 28.15 24.96 5.79 0.00 0.00 0.00 95.78

Assets (26.99) (0.00) (0.46) (2.28) (12.90) (6.83) (9.04) (0.00) (0.00) (0.00) (58.50)


Liabilities (17.09) (0.00) (0.00) (0.13) (1.94) (2.52) (7.57) (2.17) (0.63) (0.00) (32.05)

(Figures in brackets indicates in previous year).

The above data has been compiled on the basis of the guidelines of RBI which have been relied upon by Auditors.

3.7 Exposures3.7.1 Exposure to Real Estate Sector (` in crore)

Category 2013-14 2012-13

a) Direct exposure

(i) Residential Mortgages – 284.00 263.33

Lending fully secured by mortgages on residential property that is or will beoccupied by the borrower or that is rented; (Individual housing loans eligiblefor inclusion in priority sector advances may be shown separately).

(ii) Commercial Real Estate – 312.35 161.94

Lending secured by mortgages on commercial real estates (office buildings,retail space, multi-purpose commercial premises, multi-family residentialbuildings, multi-tenanted commercial premises, industrial or warehouse space,hotels, land acquisition, development and construction, etc.). Exposurewould also include non-fund based (NFB) limits;

(iii) Investments in Mortgage Backed Securities (MBS) and other securitisedexposures -

(a) Residential 0.00 0.00

(b) Commercial Real Estate 0.00 0.00

b) Indirect Exposure

Fund based and non-fund based exposures on National Housing Bank (NHB) andHousing Finance Companies (HFCs). 3.56 4.54

Total Exposure to Real Estate Sector 599.91 429.81


F-21

3.7.2 Exposure to Capital Market (` in crore)


(i) Direct investment in equity shares, convertible bonds, convertible debentures andunits of equity-oriented mutual funds the corpus of which is not exclusively investedin corporate debt; 33.94 32.84

(ii) Advances against shares / bonds / debentures or other securities or on clean basisto individuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; 2.41 3.29

(iii) Advances for any other purposes where shares or convertible bonds or convertibledebentures or units of equity oriented mutual funds are taken as primary security; 0.51 0.59

(iv) Advances for any other purposes to the extent secured by the collateral securityof shares or convertible bonds or convertible debentures or units of equity orientedmutual funds i.e. where the primary security other than shares/convertible bonds/convertible debentures/units of equity oriented mutual funds `does not fully coverthe advances; NIL NIL

(v) Secured and unsecured advances to stockbrokers and guarantees issued onbehalf of stockbrokers and market makers; 5.60 81.47

(vi) Loans sanctioned to corporates against the security of shares / bonds/debenturesor other securities or on clean basis for meeting promoter's contribution to theequity of new companies in anticipation of raising resources; NIL NIL

(vii) Bridge loans to companies against expected equity flows / issues; NIL NIL

(viii) Underwriting commitments taken up by the banks in respect of primary issue ofshares or convertible bonds or convertible debentures or units of equity orientedmutual funds; NIL NIL

(ix) Financing to stockbrokers for margin trading; NIL NIL

(x) All exposures to Venture Capital Funds (both registered and unregistered) NIL NIL

Total Exposure to Capital Market 42.46 118.19

The exposure to capital market of ` 42.46 crore is within the limit of ` 362.38 crore (i.e. 40% of Bank’s Net Worth` 905.94 crore as on 31.03.2013). The direct exposure to capital market is ` 33.94 crore and is within 20% ofbank’s Net Worth amounting to ` 181.19 crore (i.e. 20% of Banks Net worth ` 905.94 crore as on 31.03.2013).

3.7.3 Risk Category wise Country Exposure (As compiled by Management) (` in crore)

Risk Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2014 31.3.2014 31.3.2013 31.3.2013

Insignificant 83.70 NIL 43.89 NIL

Low 61.94 NIL 69.04 NIL

Moderate 19.09 NIL 7.52 NIL

High 1.03 NIL 8.31 NIL

Very High 1.05 NIL – NIL

Restricted 1.48 NIL – NIL

Off-credit 0.00 NIL – NIL

Total 168.29 NIL 128.76 NIL

As the bank’s exposure for the year in respect of risk category wise country exposure (Foreign exchangetransactions) is less than 1% of total assets of the bank, no provision is considered necessary.


F-22

3.7.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the bank.(As compiled by management)A. SBL exceeded by the Bank for the period 01.04.2013 to 31.03.2014 . ......................................... NIL

B. GBL exceeded by the Bank for the period from 01.04.2013 to 31.03.2014 . ............................... NIL

3.7.5. Unsecured Advances (Amount of advances for which, intangible securities has been taken) (` In crore)

As on As onParticulars 31-3-2014 31-3-2013

The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority, etc. has been taken. 47.96 54.69

Estimated value of such intangible collaterals 123.86 141.08

3.7.6 Letter of Comforts issued by the bank (As compiled by management)Particulars (` In crore)

Letter of comfort issued in earlier years and outstanding as on 01.04.2013 118.32

Add: Letter of comfort issued during the FY 2013-14 368.13

Less: Letter of comfort expired during the FY 2013-14 418.04

Letter of comforts outstanding as on 31/03/2014 68.41

3.8 Miscellaneous3.8.1 Amount of Provisions made for Income-tax during the year: (` In crore)


Provision for Income Tax 22.93 58.43

Provision for Deferred Tax (net) (42.18) (12.23)

Current tax provision is made as applicable under Minimum Alternate Tax (MAT). Credit entitlement u/s 115JAAof the Income Tax Act 1961 is availed and considered as other asset.

3.8.2 Disclosure of Penalties imposed by RBIPenalty charges of ` 2.50 crore was imposed by RBI during the year for non-compliance of RBI instructions onKYC/AML systems.

3.9. Disclosure in terms of Accounting Standards:Accounting Standard 15 - Employee BenefitsPayments to and provision for employees include provision made during the year towards pension, gratuityand leave encashment etc., in accordance with Revised Accounting Standard AS-15.

Retirement benefits to employeesa) The summarized position of Post employment benefits and long term employee benefits recognized in the

profit and loss account and balance sheet as required in accordance with the Accounting Standard -15(Revised) are as under.

I) Principal Actuarial Assumptions at the Balance Sheet Date

Particulars Gratuity Pension Privilege Leave

Discount Rate 9.10% 9.10% 9.10%

Expected return on assets 9.50% 9.50% 0.00%

Salary Escalation Rate 5.00% 5.00% 5.00%

Attrition Rate 4.00% 4.00% 4.00%


F-23

II. Change in Defined Benefit Obligation (` in lacs)


DBO at beginning of the period 5910.00 18626.00 2712.00

Service Cost 578.89 1116.11 321.98

Interest Cost 507.83 1540.54 234.33

Curtailment Cost / (Credit) - - -

Settlement Cost / (Credit) - - -

Plan Amendments - - -

Acquisitions - - -

Actuarial Losses / (Gains) 235.35 5016.45 385.62

Benefit Payments (659.00) (3394.00) (274.00)

DBO at end of the period 6573.07 22905.10 3379.92

III. Change in Fair Value of Plan Asset (` in lacs)


Fair Value of Plan Assets at beginning of the period 5528.00 17291.00 -

Acquisition adjustment - - -

Expected return on plan assets 538.51 1781.77 -

Actual Company contributions 430.00 2101.00 274.00

Actuarial Gain / (Loss) (28.51) 2440.23 -

Benefits payments (659.00) (3394.00) (274.00)

Fair Value of Plan assets at the end of period 5809.00 20220.00 -

IV. Actual Return on Plan Assets (` in lacs)


Expected return on plan assets 538.51 1781.77 -

Actuarial gain/(loss) on plan assets (28.51) 2440.23 -

Actual return on plan assets 510.00 4222.00 -

V. Actuarial Gain / Loss recognized (` in lacs)


Actuarial gain/(loss) for the Period - Obligation (235.35) (5016.15) (385.62)

Actuarial gain/(loss) for the Period - Plan Assets (28.51) 2440.23 -

Total gain/(loss) for the period (263.86) (2576.22) (385.62)

Actuarial gain/(loss) recognized in the period (263.86) (2576.22) (385.62)

Unrecognized actuarial (gain)/loss at the end of the year - - -


F-24

VI. Net asset / liability recognized in Balance Sheet (` in lacs)


Present value of Defined Benefit Obligation 6573.07 22905.10 3379.92

Fair Value of Plan Assets (5809.00) (20220.00) 0.00

Funded status [Surplus/(Deficit)] 764.07 2685.10 3379.92

Unrecognized Transition Liability - - -

Unrecognized Past Service Costs 307.00 1555.00 0.00

Net Asset / (Liability) recognized in the Balance Sheet 1071.07 4240.10 3379.92

VII. Expenses recognized in P&L account: (` in lacs)


Current Service cost (including risk premiums for fullyinsured benefits) 578.89 1116.11 321.98

Interest Cost 507.83 1540.54 234.33

Expected Return on Plan Assets (538.51) (1781.77) -

Curtailment Cost / (Credit) - - -

Settlement Cost / (Credit) - - -

Past Service Cost 457.00 1115.00 -

Transition Liability - - -

Actuarial Losses / (Gains) 263.86 2579.22 385.62

Total employer expense recognized in P&L 1269.07 4566.10 941.92

VIII. Reconciliation of Net Asset / Liability Recognized in the balance Sheet (` in lacs)


Net Asset / (Liability) at beginning of period 232.00 1776.00 2712.00

Employer Expense 1269.07 4566.10 941.92

Employer Contributions (430.00) (2101.00) (274.00)

Acquisitions / Business Combinations - - -

Net Asset / (Liability) at end of period 1071.07 4241.10 3379.92

IX. Experience History (` in lacs)


Defined Benefit Obligation at end of the period 6573.07 22905.10 3379.92

Plan Assets at end of the period 5809.00 20220.00 -

Balance Sheet liability / (Assets) 1071.07 4240.10 3379.92

P&L - (Income)/ Expenses 1269.07 4566.10 941.92

Experience adjustments on plan liabilities 192.24 3891.26 184.30

Experience adjustments on plan assets (28.51) 2440.23 -


F-25

X. Major categories of Plan Assets

Particulars Gratuity Pension

Government of India Securities 9.89% 7.56%

State Government Securities 41.55% 30.50%

Other Securities 29.02% 23.15%

Special Deposits 1.62% 0.00%

Balance with Bank Accounts 3.36% 0.98%

Balance in LIC running accounts 0.00% 3.14%

Annuity under Return of purchase price 0.00% 20.99%

Amount receivable from Bank 12.09% 12.01%

Others (Interest Receivables) 2.47% 1.67%

Total 100.00% 100.00%

XI. Enterprises Best Estimate (` in lacs)


Enterprise’s Best Estimate of Contribution during next year 600.00 2200.00 450.00

3.10 Prudential regulatory treatment prescribed by RBI in respect of pension and Gratuity liability.Reserve Bank of India issued guidelines vide their Circular No. DBOD.BP.BC.80 / 21.04.018/2010-11 dated09.02.2011 and letter DBOD. No. BP.BC. 15896 / 21.04.018 / 2010-11 dated 08.04.2011. Accordingly, the liabilityon account of employee benefits of ` 93.11 crore (towards Pension ` 77.79 crore and towards gratuity` 15.32 crore) is amortised over a period of 5 years from FY 2010-11. Accordingly, Bank has charged to Profit& Loss Account a sum of ` 18.62 crore, (representing 1/5th of the total amount) during the FY 2013-14.Unamortized amount of ` 15.56 crore in respect of pension liability and ` 3.06 crore, in respect of gratuityliability, are carried forward to be charged to P&L account in FY 2014-15.

Pending receipt of opinion from Expert Advisory Committee of Institute of Chartered Accountants of India asadvised by RBI vide their letter dated 28.04.2014, The Lakshmi Vilas Bank Limited (Employees’) Pension Fundhas valued at cost annuities purchased from LIC under Return of Capital (ROC) scheme for certain pensionersbased on an expert opinion obtained as against the valuation made at Net Present Value (NPV) during theprevious year. Bank has provided for the pension liability as per actuarial valuation accordingly.

3.11 Employee Stock Option SchemeThe Compensation Committee of the Board of Directors has granted in aggregate 1685238 stock options,grant date being 21.07.2011 to top Executives of the Bank under the Lakshmi Vilas Bank Employees StockOption Scheme 2010 - LVB ESOS 2010 at an exercise price of ` 61.25 per share. As on 31st March, 2014, theoptions in force are 390000. These options would vest over a period of 2 to 3 years and the Bank has provided` 2.50 crore being the proportionate compensation expenses for the period upto 31st March 2014.


F-26

4. Accounting Standard 17 - Segment ReportingPART A : BUSINESS SEGMENTS (` in crore)

Quarter Quarter Quarter Year Yearended ended ended ended ended

31-3-2014 31-12-2013 31-3-2013 31-3-2014 31-3-2013(Audited) (Reviewed) (Audited) (Audited) (Audited)

1. SEGMENT REVENUE : a. Treasury operations 104.62 98.28 94.14 403.65 366.35b. Corporate/wholesale banking

operations 182.44 177.40 186.20 715.29 690.08c. Retail banking operations 287.06 278.69 224.63 1074.23 873.04d. Other banking operations 1.35 2.89 15.84 8.77 28.14TOTAL 575.47 557.25 520.81 2201.94 1957.61

2. SEGMENT RESULTS (Profit/lossbefore Tax)a. Treasury operations (7.63) (9.64) 3.71 (9.17) 20.39b. Corporate/wholesale Banking

operations 0.85 5.46 4.66 7.33 38.82c. Retail banking operations 8.46 10.18 10.47 38.13 53.42d. Other banking operations 0.10 1.43 14.46 4.11 25.14TOTAL 1.78 7.43 33.30 40.41 137.77PROFIT BEFORE TAX 1.78 7.43 33.30 40.41 137.77Less : Tax expenses (19.25) 0.00 16.20 (19.25) 46.20NET PROFIT 21.03 7.43 17.10 59.66 91.57

3. SEGMENT ASSETS : a. Treasury operations 5814.38 5064.11 4414.14 5814.38 4414.14b. Corporate/wholesale banking

operations 5286.10 5012.58 5512.07 5286.10 5512.07c. Retail banking operations 8486.06 8213.65 6709.21 8486.06 6709.21d. Other banking operations 1066.52 1243.47 1031.26 1066.52 1031.26TOTAL 20653.06 19533.81 17666.68 20653.06 17666.68

4. SEGMENT LIABILITIES: a. Treasury operations 24.46 20.35 20.35 24.46 20.35b. Corporate/wholesale banking

operations 5982.87 4819.18 3570.94 5982.87 3570.94c. Retail banking operations 13178.22 13177.22 12630.17 13178.22 12630.17d. Other banking operations 413.90 463.85 430.88 413.90 430.88TOTAL 19599.46 18480.60 16652.34 19599.46 16652.34CAPITAL AND RESERVES 1053.60 1053.21 1014.34 1053.60 1014.34TOTAL 20653.06 19533.81 17666.68 20653.06 17666.68

PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is madeunder international segment.

Particulars


F-27

5. Accounting Standard 18 - Related Party Disclosures

Payment to and Provision for Employees’ includes remuneration paid to Managing Director and CEO of theBank as detailed below:

Managing Director & CEO Managing Director & CEOK.S.R. Anjaneyulu Rakesh Sharma

(01.04.2013 to 06.03.2014) (07.03.2014 to 31.03.2014)

Consolidated Pay 5149032.25 322580.65

Employers’ contribution to Provident Fund 335806.00 32258.00

Drivers Salary, petrol & Office expenses 156286.75 8740.57

Others 1802227.00 606654.00

Total 7443352.00 970233.22

6. Accounting Standard 20 - Earnings per Share (EPS):EPS calculation in accordance with the AS-20 issued by the ICAI is as under: (` in lacs)


Net profit after Tax 5965.55 9157.45

Weighted Average No. of Equity shares 97560690 97540690

Weighted Average No. of Diluted Equity shares 97404902 97525768

Earnings per share - Basic (`) 6.11 9.39

Earnings per share - Diluted (`) 6.12 9.39

7. Accounting Standard 22 - Accounting for Taxes on IncomeThe bank has accounted for Income Tax in compliance with AS 22. Accordingly, Deferred Tax Assets &Liabilities are recognized. The major components of DTA / DTL are furnished as under: (` in crore)

Components Deferred Tax Assets Deferred Tax Liabilities

2013-14 2012-13 2013-14 2012-13

Provision for leave encashment 11.48 7.03 0.00 0.00

Provision for other assets 1.17 1.17 0.00 0.00

Provision for advances (incl. restructured) 41.26 25.85 0.00 0.00

Employee benefits 0.00 0.00 0.00 0.30

Special Reserve u/s 36(i)(viii) - CY 0.00 0.00 3.11 0.00

Carried forward loss 27.08 0.00 0.00 0.00

Others 0.33 9.87 9.23 16.81

Sub Total 81.32 43.92 12.34 17.11

Special Reserve u/s 36(i)(viii) - withdrawalfrom reserve 0.00 0.00 7.87 0.00

CLOSING BALANCE 81.32 43.92 20.21 17.11

Net DTA 61.11 26.81

Particulars


F-28

The income tax expense comprises current tax and deferred tax. Current tax is measured at the amountexpected to be paid in respect of taxable income for the year in accordance with the Income Tax Act.Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences beingthe difference between the taxable income and the accounting income that originate in one period andare capable of reversal in one or more subsequent periods. Deferred tax asset is recognized subject to prudenceand judgment that realization is more likely than not. Deferred tax assets and liabilities are measured using taxrates and tax laws that have been enacted or substantially enacted before the balance sheet date. Changesin deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the profitand loss account in the period of the change.

The computation of income as per provisions of the Income Tax Act, 1961 results in a loss for the year underconsideration. In this computation, the bank has considered certain deductions based on judicialpronouncements and legal opinion. Hence, while no provision for taxation is considered necessary, a deferredtax asset of ` 42.18 crore has been recognized by credit to P&L account to comply with the provisions ofAccounting Standards 22 issued by Institute of Chartered Accountants of India. The management is of theopinion that it is in order in recognizing the Deferred Tax Asset as above.

Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961:Pursuant to RBI circular no. DBOD.No.BP.BC.77/21.04.018/ 2013-14 dated 20.12.2013, bank has created DeferredTax Liability (DTL) of ` 7.87 crore on special reserve created u/s 36(1)(viii) of the Income Tax Act, 1961, not fullycharged to profit and loss account in earlier years, has now been adjusted directly from general reserve.

Had this amount been charged to the profit and loss account in accordance with Generally AcceptedAccounting Principles (GAAP), the amount of profit for the year would have been lower by such amount.Further, as required by aforesaid RBI circular, the bank has created a DTL of ` 3.11 crore in respect of theamount transferred to special reserve for the year ended March 31, 2014, and the same is charged to profitand loss account for the year.

Had the bank continued with its policy of not creating a DTL on such special reserve, the reserves and theprofit of the Bank as at/for the year ended 31/03/2014 would have been higher by ` 7.87 crore and ` 3.11crore respectively.

8. Intangible Assets AS 26:The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in thisregard.

9. Accounting Standard 28 - Impairment of Assets:A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is notapplicable. In the opinion of the bank, there is no impairment of other assets to any material extent as at31st March 2014 requiring recognition in terms of the said standard.


F-29

10. Additional Disclosures10.1 Provisions and Contingencies: Break up of ‘Provisions & Contingencies’ shown under the head in Profit &Loss Account:

(` in crore)


Provision towards Standard Asset 5.87 1.85

Provision towards NPA 178.32 64.52

Provision for MAT Credit (22.93) 0.00

Provisions for depreciation in market value of Investments 27.46 9.24

Provision for Sick Leave 0.00 (15.92)

Provision for leave encashment 9.41 3.27

Provision for Gratuity (Amortised) 3.06 3.06

Provision for Pension (Amortised) 15.56 15.56

Provision for wage arrears 0.00 5.30

Provision for superannuation fund 15.00 0.00

Provision for Restructured Advances (Economic sacrifice) 36.83 26.49

Sub Total 268.59 113.37

Provision for Income Tax - Current Tax 22.93 58.43

- Deferred Tax (42.18) (12.23)

TOTAL 249.34 159.57

Adhoc Provision for wage revision pending settlement:9th Bi-partite settlement ended with October 2012 and next wage revision has fallen due from Nov 2012. In theprevious year ended 31.03.2013, bank has made a provision of ` 5.30 crore on adhoc basis for the proposedrevision in pay. As on 31.03.2014, provision for the proposed wage revision with 10% load, is estimated at` 18.32 crore and the same has been either paid/ provided. Of the ̀ 18.32 crore, Bank has paid ̀ 3.60 crore asadhoc payment during July ’13 - Oct ’13 and additional provision of ` 9.42 crore is made besides ` 5.30 croreof provision made in the previous year.


F-30

10.2 Details of movement in provisions in accordance with Accounting Standard 29: (` in crore)

Opening Provision Provision Closingas on made during reversed / as on

01.04.2013 the year adjusted 31.03.2014

Prov. for Standard Assets 38.84 5.87 0.00 44.71

Prov. for Bad and Doubtful debts 100.30 178.32 225.39 53.23

Prov. for Income Tax (net of deferred tax) 137.31 22.93 1.31 158.93

Prov. for depreciation in market value ofInvestments 23.39 27.46 7.57 43.28

Prov. for Leave encashment (includingTransitional Liability) 27.12 9.41 2.73 33.80

Prov. for Other assets 3.50 4.38 4.43 3.45

Prov. For Other Liabilities (NLD agents gratuity) 0.49 0.00 0.00 0.49

Counter cyclical buffer 43.92 0.00 14.49 29.43

Prov. for Interest Tax 0.10 0.00 0.00 0.10

Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90

Prov. for Dividend (incl. Div. Tax) 34.24 11.41 34.24 11.41

Prov. for Restructured Advances & FITL 39.85 41.92 5.09 76.68

Others:

Prov. For Bonus. 0.18 0.28 0.20 0.26

Prov. For pension. (including Transitional Liability) 15.89 27.61 15.89 27.61

Prov. For Gratuity. (including Transitional Liability) 4.30 7.99 4.30 7.99

Prov. For Contingency /

Wage arrears 5.30 9.42 0.00 14.72

10.3 Movement of Counter Cyclical Provisioning Buffer (` in crore)


(a) Opening balance in the account 43.92 43.92

(b) Provisions made in the accounting year 0.00 0.00

(c) Amount of drawdown made during the accounting year 14.49 0.00

(d) Closing balance in the account 29.43 43.92

Utilization of Floating provision / Counter Cyclical Provisioning Buffer:RBI vide circular DBOD. No. BP.95/21.04.048/2013-14 dated 07.02.2014 has permitted the banks to utilize upto33% of countercyclical provisioning buffer/floating provisions held by them as on March 31, 2013 during periodsof system wide downturn, for making specific provisions for non-performing assets, as per the policy approvedby their Board of Directors. Taking into account the present economic downturn causing a huge rise in theNPA position, out of the total provision of ` 43.92 crore held by the bank as on 31.03.2013, a sum of ` 14.49crore being 33% of the provision held was utilized in the quarter ended December 2013 for making specificprovision for non-performing assets.

Particulars


F-31

11. Disclosure of complaints (As compiled by Management)A. Customer Complaints:

(a) No. of complaints pending at the Beginning of the year 4

(b) No. of complaints received during the year 177

(c) No. of complaints redressed during the year 170

(d) No. of complaints pending at the end of the year 11

(ATM complaints are also included in the above data)

B. Awards passed by the Banking Ombudsman:

(a) No. of unimplemented Awards at the beginning of the year 0

(b) No. of Awards Passed by the Banking Ombudsmen during the year 0

(c) No. of Awards implemented during the year 0

(d) No. of unimplemented Awards at the end of the year 0

12. Concentration of Deposits, Advances, Exposures and NPAs12.1 Concentration of Deposits (` in crore)

Total Deposits of twenty largest depositors 3331.27

Percentage of Deposits of twenty largest depositors to Total Deposits of the bank 17.94%

12.2 Concentration of Advances (` in crore)

Total Advances to twenty largest borrowers 2065.86

Percentage of Advances to twenty largest borrowers to Total Advances of the bank 14.05%

12.3 Concentration of Exposures (` in crore)

Total Exposure to twenty largest borrowers/customers 2163.61

Percentage of Exposures to twenty largest borrowers/customers toTotal Exposure of the bank on borrowers/customers 13.83%

12.4 Concentration of NPAs (As compiled by Management) (` in crore)

Total Exposure to top four NPA accounts 194.98

12.5 Sector-wise NPAs (As compiled by Management)

Sl.No. Sector Percentage of NPAs toTotal Advances in that sector

1 Agriculture & allied activities 0.53

2 Industry (Micro & small, Medium and Large) 8.76

3 Services 3.84

4 Personal Loans 1.55


F-32

12.6 Movement of NPAs (As compiled by Management)

Particulars (` in crore)

Gross NPAs as on 1st April of particular year (Opening Balance) 459.91

Additions (Fresh NPAs) during the year 668.69

Sub-total (A) 1128.60

Less:-

(i) Up gradations 188.01

(ii) Recoveries (excluding recoveries made from upgraded accounts) 162.67

(iii) Technical / Prudential write offs 229.76

(iv) Write-offs other than those under (iii) above 1.70

Sub-total (B) 582.14

Gross NPAs as on 31st March of following year (closing balance) (A-B) 546.46

Details of Technical write -offs and recoveries made:


Opening balance of Technical / Prudential written off accounts as atApril 1, 2013 163.64 149.48

Add: Technical / Prudential write offs during the FY2013-14 229.76 25.18

Sub Total (A) 393.40 174.66

Less: Recoveries made from previously technical / prudential written - offaccounts during the FY 2013-14 (B) 7.55 11.01

Closing balance as at March 31, 2014 (A-B) 385.85 163.65

12.7 Overseas Assets, NPAs and Revenue


Total Assets NIL

Total NPAs NIL

Total Revenue NIL

12.8 Off-balance Sheet SPVs sponsored

Name of the SPV sponsored

Domestic Overseas

NA NA

13. Bancassurance Business:Fees, remuneration received from Bancassurance business:For the year ended 31.03.2014, the bank received income of ` 3.41 crore (Gross commission) fromBancassurance business, of which ` 1.84 crore from life insurance segment and ` 1.57 crore from generalinsurance segment.


F-33

14. Disclosure on Remuneration:a. Qualitative disclosures:

(a) Information relating to the composition and mandateof the Remuneration Committee.

(b) Information relating to the design and structure ofremuneration processes and the key features andobjectives of remuneration policy.

(c) Description of the ways in which current and futurerisks are taken into account in the remunerationprocesses. It should include the nature and type of thekey measures used to take account of these risks.

(d) Description of the ways in which the bank seeks to linkperformance during a performance measurementperiod with level of remuneration.

(e) A discussion of the bank’s policy on deferral and vestingof variable remuneration and a discussion of the bank’spolicy and criteria for adjusting deferred remunerationbefore vesting and after vesting

(f) Description of the different forms of variableremuneration (i.e. cash, shares, ESOPs and other forms)that the bank utilizes and the rationale for using thesedifferent forms.

b. Quantitative disclosures:

Compensation Policy on the guidelinesof Reserve Bank of India approved byBoard on 03.03.2012.

ESOS options granted during the financialyear ` Nil.

The members of the said committee ason 31st March 2014 are 5.

Subsequent amendments were alsoapproved by the Board in the meetingheld on 20.09.2013 & 13.11.2013.


(g) Number of meeting held by the remunerationcommittee during the financial year and remunerationpaid its members.

(h) (i) Number of employees having received a variableremuneration award during the financial year. 4 1

(ii) Number and total amount sign-on awards madeduring the financial year. NIL NIL

(iii) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL

(iv) Details of severance pay, in addition to accruedbenefits, if any. NIL NIL

(i) (i) Total amount of outstanding deferred remuneration,split into cash, shares and shares - linked instrumentsand other forms. NIL NIL

(ii) Total amount of deferred remuneration paid out in thefinancial year.

(j) Breakdown of amount remuneration awards for thefinancial year to show fixed and variable, deferred andnon-deferred.

(k) (i) Total amount of outstanding deferred remunerationand retained remuneration exposed to ex-postexplicit and/or implicit adjustments. NIL NIL

(ii) Total amount of reductions during the financial yeardue to ex-post explicit adjustments. NIL NIL

(iii) Total amount of reductions during the financial yeardue to ex-post implicit adjustments. NIL NIL

CRCB having 5members Meetings

held is 6 andRemuneration paid

` 1.35 lacs.

CCB having 3Members Meetings

held - 2 andRemuneration paid

` 1.05 lacs.

Variable pay ` 8.57lacs (4 members)No deferred and

non-deferredremuneration.

Variable pay` 1.50 lacs

No deferred andnon-deferredremuneration.


F-34

15. Disclosures relating to securitization: NA

16. Credit Default Swaps: NIL

17. Previous year’s figures have been regrouped / reclassified wherever considered necessary to conform tothe current year’s classification.






F-35

DISCLOSURE UNDER PILLAR III OF BASEL III NORMS AS ON 31.03.2014I. SCOPE OF APPLICATION AND CAPITAL ADEQUACY

Table DF - 1

Scope of application

The Lakshmi Vilas Bank Ltd, an old private sector bank incorporated in 1926 at Karur. Since the bank doesn’thave any subsidiaries under its Management. Hence the CRAR is computed in standalone basis.

(i) Qualitative Disclosures:a. List of group entities considered for consolidation.b. List of group entities not considered for consolidation both under the accounting and regulatory scope

of consolidation.No group affiliation

(ii) Quantitative Disclosures:c. List of group entities considered for consolidation.

Not applicabled. The aggregate amount of capital deficiencies in all subsidiaries which are not included in the regulatory

scope of consolidation i.e. that are deducted:Not applicable

e. The aggregate amounts (e.g.current book value) of the bank’s total interests in insurance entities, whichare risk-weighted:

Not applicablef. Any restrictions or impediments on transfer of funds or regulatory capital within the banking group:

Not applicable

Table DF - 2

Capital AdequacyQualitative Disclosuresa) A summary discussion of the bank’s approach for assessing the adequacy of its capital to support current

and future activities.The Bank is exposed to Credit risk, market risk, Operational risk and other Pillar II risks. Based on the scale ofbusiness operations approaches have been put in place to compute the required capital of the bank andcontrols that are commensurate the risk profile of the bank. The bank has adopted the following approachesfor the computing the capital charge.Credit Risk – Standardized ApproachMarket Risk – Standardized duration ApproachOperational Risk – Basic Indicator Approach

• The Business projections, capital requirement, Assessment methodology, controlling mechanism, etc., havebeen discussed in ICAAP document and it has been reviewed on yearly basis.

• CRAR has been computed based on the Basel III guidelines and it is well above the regulatory minimumlevel of 9% (other than capital conservation buffer and Countercyclical Capital buffer etc.)

Quantitative Disclosures:Capital Requirements: (Amount in `)

Particulars No of Equity Shares Face Value Per share Amount

Authorized Capital 150000000 10 1500000000

Issued Capital 98372564 10 983725640

Subscribed Capital 97560690 10 975606900

Called up/paid up Capital 97560690 10 975606900


F-36

The Bank’s shares are listed on the National Stock Exchange Limited and Bombay Stock Exchange Limited.

As on March 31, 2014 the bank does not have Additional Tier I Capital.

Tier 1 capital includes Equity share capital, Reserves comprising of statutory reserves, capital and other revenuereserves, share premium and Balance in profit and loss account and less intangible assets

Tier 2 Capital consists of the general provisions, Tier II bonds – subordinated Debt (Discounted value), andRevaluation reserves as on 31.03.2014.

a) Break up of capital funds:The Tier I Capital of the Bank comprises of (` in lacs)

Paid up capital 9756.07

Reserves & surplus 87236.06

Less: Intangible Assets 9539.56

Total 87452.57

The Tier II Capital of the Bank comprises of (` in lacs)

General Provisions and Loss Reserve 6150.03

Subordinated debts 24110.00

Revaluation Reserves 3439.26

Total 33699.29

The Total Capital comprises of (` in lacs)

Tier I Capital 87452.57

Tier II Capital 33699.29

Risk Type

b) Capital requirements for Credit Risk (` In lacs)

Portfolios subject to standardized approach 86287.89

Cash & Bank 255.50

Loans and Advances 82144.31

Fixed Assets 1676.39

Other Assets 2211.69

Securitization exposures -

c) Capital requirements for Market Risk 6187.87

Standardized Duration approach

Interest Rate Risk 5219.97

Foreign Exchange Risk (including gold) 131.79

Equity Risk 836.11

d) Capital requirements for Operational Risk 7569.39

Basic Indicator approach 7569.39

Total Risk weight Assets (b+c+d)*100/9 1111612.77

Total Capital funds 121151.86

CRAR (Basel III) 10.90%


F-37

e) Common Equity Tier 1, Tier I and Total Capital ratios:For the top consolidated group; and for significant bank subsidiaries (stand alone or sub-consolidateddepending on how the framework is applied)

Not applicable

II. Risk Exposure and Assessment

General Qualitative Disclosure requirement:

Credit Risk:

The objectives of Credit risk management practices in the bank are the following:

To ensure business continuity with growth and stability.

To ensure that the bank holds adequate capital in alignment with risks undertaken as well as the regulatoryrequirements from time to time.

To optimize risk-return profile by providing a framework for risk-based pricing.

To provide decision support for entry / exit strategies.

To provide a framework for monitoring risk profile of the bank through structured reports.

To facilitate the identification of risks in various activities undertaken by the bank through its operatingunits.

To provide guidance on measurement of risks and their quantification for assessing the level of risk underportfolio management.

To provide guidance on risk mitigation for ensuring customer retention while promoting risk-rewardconsciousness at all levels of operation.

To set / monitor prudential risk limits in tune with the business strategy, capital adequacy and regulatoryprescriptions.

To ensure the adherence to these risk limits through defining the reporting structures and systems.

To ensure compliance with other regulatory prescriptions.

The bank proposes to keep its overall risk profile as moderate and stable for the medium term.

Risk appetite and risk-return profile, credit risk strategy shall also include a statement of the banks willingnessto grant credit based on:

• exposure type (for example, commercial, consumer, real estate, etc.),

• economic sector (e.g. textile, iron etc.),

• geographical location,

• currency,

• maturity,

• anticipated profitability,

• identification of target markets / business sectors (like priority sector lending) and

• the overall credit portfolio composition

• preferred levels of diversification & concentration tolerances.

Credit risk strategy of the bank shall provide continuity in approach considering cyclical approach of theeconomy and the resulting shifts in the composition and quality of the overall credit portfolio.

Strategy is being reviewed yearly in CRM policy.


F-38

Organization Structure:

Comprehensive Risk Management Policy put in place and the same has been approved by Board. Thehierarchy of the IRMD starts from Board of Directors. Board is responsible for approving & reviewing on aperiodical basis credit risk related policies, strategy & limits. Further Board has sub level committee (IRMCB) toreview the risk limits, monitor the functioning of the IRMC-E and issue necessary directions if require.

The Scope and nature of risk reporting and / or measurement systems.

Risk-rating model is an important tool and is an integral part of the Credit Risk Management. The benefits of arobust system based rating model.

Serves as a single point indicator of diverse risks of a borrower

Enables banks to take informed credit decisions in a consistent manner.

Facilitates adoption of risk-based pricing.

Arriving at Facility Risk rating for the particular facility/product based on the comforts of securities/guarantors.

Internal credit rating models / systems are an important tool in monitoring the quality of individual credits, aswell as the total portfolio. A well-structured internal risk rating system is a good means of differentiating thedegree of credit risk in the different credit exposures of the bank. This will allow more accurate determinationof the overall characteristics of the credit portfolio, concentrations, problem credits, and the adequacy ofloan loss reserves.

Internal credit rating framework enables the Bank to standardize and uniformly communicate the “judgment”in credit selection procedures but is not a substitute to the vast lending experience accumulated by thebank’s professional staff.

In order to make the credit risk assessment more consistent and effective, a two dimensional approach tomeasure risk comprising borrower risk (Obligor Rating) and transaction risk (Facility Rating) has beenimplemented.

Board of Directors

Integrated Risk Mgt. Committee -Board

Integrated Risk Mgt. Committee -Executives(Credit Risk Mgt. Committee / ALCO /

Operational Risk Mgt. Committee)

Integrated Risk Mgt. Deptt. (IRMD)

Credit Risk Mgt. Deptt. Operational Risk Mgt. Deptt.

Market Risk Mgt. / Asset Liability Mgt. Deptt.

Internal Audit

Independent Evaluation

Business Units

Organization Structure IRMD-Credit Risk Management


F-39

Use of Risk Rating Models / Systems• Individual credit selection, wherein a borrower or a particular exposure/ facility is rated.

• Pricing of the facility / loan

• Deciding the limits & tenure of the proposed credit assistance.

• Portfolio-level analysis and portfolio management

• Frequency and intensity of monitoring of the exposures.

• Internal MIS

• General provision “reasonable over provisioning” in addition to statutory prescribed provision.

• Assessing the aggregate risk profile of bank.

The Bank has a multi-tier structure for sanction of credit proposals, with proper delegation of lending powersat various levels of officers & executives, duly approved by Board.

The powers vested at each level depend on the quantum and type of the loan facility and the overallexposure to the borrower/group.

The Bank has a system under which the lending powers exercised by delegated authority are reported to andreviewed by a higher authority under the Internal Loan Review Mechanism.

A two dimensional approach to measure risk comprising borrower risk (Obligor Rating) and transaction risk(Facility Rating) has been implemented. The Credit Risk Assessment System (CRAS) operated through the riskrating models shall form the fulcrum of credit risk management.

Policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuingeffectiveness of hedges/mitigantsAs per the RBI guidelines, eligible financial collaterals have been taken into account for Risk mitigation purpose.

Bank is having a system in place to monitor compliance with country exposure limits. Exceptions are reported,approved and rectified as per laid down procedures.

Bank is having an effective system in place to generate management reports which are detailed enough forthe senior management review and to identify exceptions in a timely manner.

Market Risk:Strategies and processesThe Bank has policies like Asset Liability Management Policy, Investment & Forex Risk Policy to address theliquidity risk and market risk respectively arising out of its banking book and trading book of investmentportfolio.

Mid office is functioning independent of treasury and it monitors limits, trigger of investments, cut (stop) losslimit, Open position limit etc., Further it assess various limits set out by RBI and as stipulated in Investment/trading book Policy, and keeps track on rating migration of rated securities on a daily basis. It fixes the overallcounter-party exposure limits (Banks & FIs).

The structure and organization of the relevant risk management functionThe Asset Liability Committee (ALCO) is responsible for

Managing Interest Rate Risk and Liquidity Risk of the Banking Books.

Pricing of Assets and Liabilities.

Monitor and control the quality of the Balance Sheet


F-40

Review and control of limits, procedures, reports, ratios & market trends, which impact bank’s BalanceSheet.

Review the treasury operations including trading.

Differential pricing of wholesale deposits be delegated to Planning & Development

The scope and nature of risk reporting and/or measurement systemsThe ALM Policy will be operated through the Integrated Risk Management Department (IRMD) which isresponsible for evolving appropriate systems & procedures for ongoing identification & analysis of BalanceSheet risks and laying down parameters for management of these risks. IRMD will, therefore, have theresponsibilities of periodic monitoring and control of the risks and the same has been reported to IRMC-E &IRMC-B.

Policies for hedging and/or mitigating and strategies and processes for monitoring the continuing effectivenessof hedges/mitigants.Board approved Investment and Forex policy put in place. Policies for hedging/ mitigating risk and strategiesand processes for monitoring the continuing effectiveness of hedges / mitigants are discussed in ALCO.

The Structural liquidity statement is prepared on a daily basis to analyze the liquidity profile of the bank in astatic manner. Exchange risk is managed by fixing limits on position limits – Day light and Overnight limits,single deal limit, stop loss limit and Overall Overnight Open Exchange position limit. Additional liquidity ratiosreviewed on a quarterly basis against the limits set under stock approach.

Interest rate risk is analyzed from earnings perspective using Traditional Gap analysis and Economic valueperspective using Duration Gap analysis on a Quaterly basis. Further stress testing process conducted underscenario as well as stock approach to estimate the impact on various conditions.

Operational RiskStrategies and processesThe strategy for the overall management of operational risk is in alignment with the business objectives & riskappetite of the bank considering the size, nature and complexities of the bank’s activities.

The strategy towards operational risk management shall focus on:

The Structure and organization of the relevant risk management functionOperational Risk Management is organized within the IRMD and will report to the head of the risk. The hierarchyof ORM within the organizational chart for governance purposes is presented below. These roles andresponsibilities relate only to the activities relating to operational risk management.ent Department

Integrated Risk Mgt. Committee-E

CFO (Chief Financial Officer)

Operational Risk Management Department

Audit Committee of Board

Business Head Audit Department

Operational Risk Coordinators from Business/Support Line

Board of Directors


F-41

A well defined Operational risk Management policy is put in place. The role of Board vests in setting businessstrategy, risk appetite, policies, governance, management framework, methodology of measurement andassessment, internal audit, report to stakeholders on risk management, etc.

The Scope and nature of risk reporting and/or measurement systemsThe scope of risk reporting is to establish an explicit operational risk management process that results in theidentification, evaluation, assessment, measurement, analysis, monitoring, control, mitigation and reportingof operational risks. This process also includes independent evaluation of operational risk management functionby the Internal Audit Department and to report its findings to the Board / Senior Management as an assurancefor the effective discharge of responsibilities with respect to management of operational risk.

Policies for hedging and/or mitigating and strategies and processes for monitoring the continuing effectivenessof hedges/mitigantsPolicies and procedures are put in place for control / mitigate material operational risks to adjust the riskappetite / tolerance level based on its risk control and mitigation strategies. For those risks that cannot becontrolled, the bank decides whether to accept these risks, reduce the level of business activity involved, orwithdraw from this activity completely. Some major control/mitigation techniques like sound internal controlsystem, Insurance, Standards for Insurance Recognition, retention/self insurance, Business Continuity andDisaster Recovery Plan, Outsourcing of financial services, Information Technology security, Internal Audit,External Audit, Reporting are deployed in the framework.

Interest Rate Risk in Banking BookStrategies and ProcessesInterest Rate Risk is measured in two different ways. Earnings perspective using Traditional Gap Analysis is toassess the impact of adverse movement in interest rate on the Net Interest Income (Earnings at Risk) andeconomic value perspective using Duration Gap Analysis to assess the impact of adverse movement in interestrate on the market value of Bank’s equity.

Structure and Organization of Risk Management FunctionALM policy will manage and monitor the limits / guidance values/target set on interest rate risk of the BankingBook. IRMC-B and ALCO at the executive level are responsible for efficient and effective management ofInterest rate risk in Banks business.

Scope and nature of risk reporting / measurement systemsThe Duration/ Modified duration mainly depends on coupon, maturity and periodicity of payment ofinstallments. Since the modified duration of the liabilities is less compared to the modified duration of assets,there is fall in the equity value under major stress. Modified duration of Equity is calculated on a quarterlybasis. The capital charge for Interest rate risk in banking book is assessed based on drop in the Market valueof equity under 200 bps changes in interest rate. The results of Traditional Gap analysis and Duration Gapanalysis including the adherence to tolerance limit set in this regard is monitored and the same has beenplaced before ALCO/IRMC-B level.

Policies for hedging / mitigating risk and strategies and processes for monitoring the continuing effectivenessof hedges / mitigantsInvestment policy, Forex policy, ALM policy, Stress testing policy, Credit Risk Management Policy are put inplace to measure, mitigate / hedge the various risks.


F-42

Table DF - 3 Credit Risk

Credit Risk: General Disclosures For All Banks

Qualitative Disclosures:a) The general Qualitative disclosure requirement with respect to credit risk, Includes the definitions of Past

Due, NPA of a loan or a advance and impaired assets (For Accounting Purposes), Out of order and Overdue.These definitions are as per the extant guidelines of Reserve Bank of India.

Credit RiskCredit risk in simple terms is the potential that bank’s borrower or counterparty will fail to meet its obligationsin accordance with agreed terms.Credit risk is defined as the possibility of losses associated with default in repayment or diminution in thecredit quality of borrowers or counterparties or diminution in the value of primary and/or collateral assets.In a bank’s portfolio, losses stem from outright default due to inability or unwillingness of a customer orcounterparty to meet commitments in relation to lending, trading, settlement and other financialtransactions.

Discussion Of the Bank’s Credit risk management policyThe Board level approved Credit Risk Management Policy is put in place. The goal of the policy is to ensurethat it is within the acceptable risk appetite and tolerance limit set by the bank. It manages the credit riskinherent in the entire portfolio as well as the risk in individual credits or transactions and it encompassesidentification, measurement, monitoring and control of the credit risk exposures. Further it deals the structure,governance, framework, processes for effective and efficient management of the Credit risk.

Quantitative Disclosures:b) Total gross credit risk exposures, Fund based and Non-fund based separately.

Credit Risk Exposures (` in lacs)

Fund Based* 1906883.51

Non Fund Based 166779.98

Total Fund & Non Fund Based 2073663.49

* It includes loans/advances; fixed assets, other assets, cash, bank balances, balance with RBI and investments.

c) Geographic distribution of exposures, Fund based and Non-fund based separately (` in lacs)

STATE NAME FUNDED NON-FUNDED TOTALTAMIL NADU 674072.42 51680.54 725752.96MAHARASHTRA 228007.13 49278.11 277285.24ANDHRA PRADESH 157487.94 40830.05 198317.99KARNATAKA 138615.82 4910.63 143526.45GUJARAT 15290.85 604.86 15895.71CHATTISGARH 526.77 0.00 526.77DELHI 47023.87 12843.52 59867.39HARYANA 1335.64 372.98 1708.62JHARKHAND 114.66 0.00 114.66KERALA 12232.52 51.87 12284.39MADHYA PRADESH 688.23 120.63 808.86ORISSA 526.15 10.48 536.63PUDUCHERRY 8768.16 335.24 9103.4RAJASTHAN 2963.43 5.00 2968.43UTTAR PRADESH 377.99 7.00 384.99WEST BENGAL 15738.57 5726.82 21465.39GRAND TOTAL 1303770.15 166777.73 1470547.88


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d) Industry Wise distribution of Exposures, Fund based and Non fund based (` In lacs)

S. Industry Name Funded Non-funded Total % grossNo. credit1 Mining and Quarrying 19186.86 124.06 19310.92 1.31

2 Food Processing 40906.76 10384.08 51290.84 3.49

3 Beverages (excluding Tea & Coffee)and Tobacco 4021.21 125.38 4146.59 0.28

4 Textiles 80479.31 6700.77 87180.08 5.93

5 Leather and Leather products 1033.00 27.13 1060.13 0.07

6 Wood and Wood Products 7960.34 14025.74 21986.08 1.50

7 Paper and Paper Products 7812.49 747.05 8559.54 0.58

8 Petroleum (non-infra), Coal Products(non-mining) and Nuclear Fuels 41.12 0.00 41.12 0.00

9 Chemicals and Chemical Products(Dyes, Paints, etc.) 20082.45 15552.16 35634.61 2.42

10 Rubber, Plastic and their Products 5207.99 178.85 5386.84 0.37

11 Glass & Glassware 2229.86 0.00 2229.86 0.15

12 Cement and Cement Products 15750.82 1.00 15751.82 1.07

13 Basic Metal and Metal Products 66487.79 35627.97 102115.76 6.94

14 All Engineering 22442.35 8683.78 31126.13 2.12

15 Vehicles, Vehicle Parts and TransportEquipments 6016.00 8.06 6024.06 0.41

16 Gems and Jwellery 9571.65 780.00 10351.65 0.70

17 Construction 1684.24 1013.30 2697.54 0.18

18 Infrastructure 116842.57 21985.73 138828.3 9.44

Other Industries 876013.34 50812.67 926828.26 63.03

Total Loans and Advances 1303770.15 166777.73 1470547.88Note: The industries break-up given on the same lines as prescribed for DSB returns. Residual advances areeducational loans, aviation sector, Housing loans, Gold loans, Loan against deposits, Personnel loan, staffloan, consumer loans, vehicle loans, etc. The Industries which has crossed 5% of gross credit exposure.a) Textiles – 5.93%b) Basic Metal and Metal Products – 6.94%c) Infrastructure – 9.44%e) Residual Contractual maturity breakdown of assets (` in lacs)

Cash Balance Balance Invest- Call Advances Fixed Otherwith RBI with other ments Money Assets Assets

Banks PlacementsOverdue to1 Day 22650.96 1136.68 2034.43 9275.79 7992.04 16036.50 0.00 1790.082-7 Days 0.00 1783.10 0.00 19691.98 0.00 36846.56 0.00 317.268-14 Days 0.00 1267.15 0.00 5811.89 0.00 39332.73 0.00 369.5015-28 Days 0.00 3412.87 0.00 28063.87 0.00 66883.28 0.00 738.0529 Days to 3 Months 0.00 10954.66 0.00 56978.61 0.00 247325.92 0.00 3271.363-6 Months 0.00 14132.54 0.00 69639.11 0.00 66165.02 0.00 4749.376 Months-1 Year 0.00 19641.52 0.00 99650.35 0.00 167050.90 0.00 0.001-3 Years 0.00 26070.49 444.03 133789.89 0.00 508496.34 0.00 59492.743-5 Years 0.00 6025.72 0.00 44330.09 0.00 59018.13 0.00 4.94Over 5 Years 0.00 12132.57 0.00 107437.94 0.00 81927.92 20050.82 3147.73Total 22650.96 96557.29 2478.47 574669.51 7992.04 1289083.30 20050.82 73881.03


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Asset Quality

f) Amount of NPAs (Gross) (` in lacs)

Substandard 32905.19

Doubtful 1 11045.25

Doubtful 2 9751.86

Doubtful 3 103.69

Loss 840.46

Total 54646.45

g) Net NPAs ` 44339.15 Lacs

h) NPA Ratios:

Gross NPAs to gross advances 4.19%

Net NPAs to net advances 3.44%

i) Movement of NPAs (Gross) (` in. lacs)


Additions 66868.84

Reductions 58213.17


j) Movement of provisions for NPAs (` in. lacs)


Provisions made during the period 24792.00

Write-back/Write -Off of excess provisions 29499.06


k) Amount of Non-performing investments ` 874.55 lacs

l) Amount of provisions held for non-performing investments ` 710.55 lacs

m)Movement of provisions for depreciation on investments (` in. lacs)


Provisions made during the period 2746.07

Write-off/ Write-back of excess provisions 756.72



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Table DF - 4

Credit Risk: Disclosures for portfolios subject to the standardized approach

Quantitative Disclosuresa) For exposure amounts after risk mitigation subject to the standardized approach, amount of a bank’s

outstanding (rated and unrated) in the following three major risk buckets as well as those that are deducted:

Particulars Below 100% 100% Risk More than 100% Grand TotalRisk Weight Weight Risk Weight

BV** RWA** BV RWA BV RWA BV RWA

Fund Based

Loans & Advances 824495.47 284575.20 265486.92 262316.28 213790.25 305673.68 1303772.64 852565.16

Investments 387372.28 0.00 0.00 0.00 0.00 0.00 387372.28 0.00

Other Assets* 195546.89 27441.92 20191.70 18626.20 0.00 0.00 215738.59 46068.12

Loans & AdvancesDeducted (Taken forMitigation purpose) 378642.35 0.00 4735.74 0.00 0.00 0.00 381812.99 0.00

Total Fund Based 1407414.64 312017.12 285678.62 280942.88 213790.25 305673.68 1906883.51 898633.68

Non Fund Based inc.Contingent credit 43617.83 10557.78 56871.41 16875.54 66290.78 32687.57 166780.02 60120.89

Total Credit RiskExposures 1451032.47 322574.9 342550.03 297818.42 280081.03 338361.25 2073663.53 958754.57

* Other assets includes cash, balance with RBI, balance with other banks, fixed assets and others.

** BV : Book Value; RWA : Risk Weighted Assets.


F-46

Table DF - 5

Credit Risk Mitigation: Disclosures for Standardized Approaches

Quantitative Disclosuresa) The general qualitative disclosure requirement with respect to credit risk mitigation including

Policies and process for and an indication of the extent to which the bank makes use of, on and off balancesheet netting;

• Policies and processes for collateral valuation and management

Bank has a policy and procedure for the management of collateral and guarantees.

Valuation should be based on the current market value of the collateral and should not be biased in orderto enable the bank, to grant a higher credit limit to the borrower or improve its internal credit rating, makea smaller amount of provision or continue interest accrual for a problem credit.

Collateral should be revalued on a regular basis, though the frequency may vary with the type of collateralinvolved and the nature & the internal credit rating of the underlying credit e.g. frequency for shares andproperties as collateral would be different.

Collaterals & guarantees are properly evaluated with respect to legal validity, enforceability in all relevantjurisdictions, etc., for the purpose of netting as credit risk mitigants as per the policy.

A more conservative approach should be adopted for valuing the collateral of problem credits becausethe forced-sale value, rather than the open market value, is likely to be closer to what eventually may berealized from an asset sale when the market conditions are un-favorable. Therefore, a discount to theestimated market value should be applied where appropriate.

• Description of the main types of collateral taken by the bank

Under Standardized approach, the following collateral instruments used as risk mitigants for the capitalcomputation.

1. Cash and fixed deposits of the Borrower with the Bank.

2. Gold ( The value of the gold arrived after notionally converting into 99.99% purity)

3. Securities issued by Central and State Governments.

4. Kisan Vikas Patra and National Savings Certificates (with no lock-in period)

5. Life insurance policies with a declared surrender value of an insurance company which is regulated byan insurance sector regulator.

6. Debt Securities issued by Public Sector Entities and other entities (including banks and other primarydealers) rated by chosen rating agency attracting 100% risk weight or lesser risk weight. (i.e. rated atleastBBB(-) or A3 for short-term debt instruments)

7. Debt Securities not rated by a chosen Credit Rating Agency in respect of which banks should be sufficientlyconfident about the market liquidity where these are

a) Issued by a bank

b) Listed on a recognized stock exchange,

c) Classified as senior debt and

d) All the rated issues of the same senior by the issuing bank are rated atleast BBB (-) or A3 by a chosenCredit Rating Agency.

e) The bank has no information to suggest that the issue justifies a rating below BBB (-) or A3 by a chosenCredit Rating Agency


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8. Units of Mutual Funds regulated by the securities regulator of the jurisdiction of the Bank's operation andmutual funds where

a. A price for the units is publicly quoted daily i.e. where the daily NAV is available in public domain.

b. Mutual fund is limited to investing in the permitted instruments listed.

• The main types of guarantor counterparty and their credit worthiness;

The guarantees are direct, explicit, irrevocable and unconditional. These types of collateral used forcredit protection as well as capital protection.

The guarantors counterparties are

a) Sovereign, sovereign entities like ECGC, CGTSI & CRGFTLIH, banks and primary dealers with a lowerrisk weight than the counterparty.

b) Other entities externally rated as BBB(-) or A(-) or better. This would include credit protection providedby parent, subsidiary and affiliate companies when they have a lower risk weight than the obligor.

• Information about (market or credit ) risk concentrations within the mitigation taken

Majority of the exposures are retail exposures and insulated with adequate liquid collateral by way ofcash margin, KVP, fixed deposits, National Savings Certificate, Life Insurance Policies etc for reducingthe capital buffer after applying applicable haircuts in the respective securities.

Quantitative Disclosuresc) For each separately disclosed credit risk portfolio the total exposure (after, where applicable, on -or off

balance sheet netting) that is covered by eligible financial collateral after the application of haircuts.

(` in Lacs)

Collateral Type Exposure Financial Net ExposureCollateral

Amount

Deposits 108319.07 108319.07 0.00

Gold 256358.41 301598.13 0.00

Securities 0.00 0.00 0.00

KVP / NSC 313.27 641.46 0.00

Life Insurance Policies 362.17 391.81 0.00

Debt Securities 0.00 0.00 0.00

Mutual Funds 0.00 0.00 0.00

Cash Margin - Term Deposit 18518.49 18518.49 0.00

d) For each separately disclosed portfolio the total exposure (after, where applicable, on- or off-balance

sheet netting) that is covered by guarantees/credit derivatives (whenever specifically permitted by RBI) :

NIL.


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Table DF - 6

Credit Risk Mitigation: Securitization Exposures: Disclosure for Standardised

Quantitative Disclosuresa) The general qualitative disclosure requirement with respect to securitisation including a discussion of:

the bank’s objectives in relation to securitisation activity, including the extent to which these activitiestransfer credit risk of the underlying securitised exposures away from the bank to other entities.

the nature of other risks (e.g. liquidity risk) inherent in securitised assets;

the various roles played by the bank in the securitization process (For example: originator, investor,servicer, provider of credit enhancement, liquidity provider, swap provider@, protection provider#) andan indication processes in place to monitor changes in the credit and market risk of securitizationexposures (for example, how the behavior of the underlying assets impacts securitization exposures asdefined in paragraph 5.16.1 of Basel III Capital Regulations).

A description of the bank’s policy governing the use of credit risk mitigation to mitigate the risks retainedthrough securitization exposures;@ A bank may have provided support to a securitization structure in the form of an interest rate swap orcurrency swap to mitigate the interest rate/currency risk of the underlying assets, if permitted as perregulatory rules.

# A bank may provide credit protection to a securitization transaction through guarantees, creditderivatives or any other similar product, if permitted as per regulatory rules of the extent of the bank’sinvolvement in each of them;

Not applicable

b) Summary of the bank’s accounting policies for securitisation activities, including:Whether the transactions are treated as sales or financings;

methods and key assumptions (including inputs) applied in valuing positions retained or purchased

changes in methods and key assumptions from the previous period and impact of the changes;

policies for recognising liabilities on the balance sheet for arrangements that could require the bank toprovide financial support for securitised assets;

c) In the banking book, the names of ECAIs used for securitisations and the types of securitisation exposure forwhich each agency is used.

Not applicable

Quantitative Disclosures-Banking Bookd) The total amount of exposures securitised by the bank.

e) For exposures securitised losses recognised by the bank during the current period broken by the exposuretype (e.g. Credit cards, housing loans, auto loans etc. detailed by underlying security)

f) Amount of assets intended to be securitised within a year

g) Of (f), amount of assets originated within a year before securitisation

h) The total amount of exposures securitised (by exposure type) and unrecognised gain or losses on sale byexposure type.

i) Aggregate amount of:

• on-balance sheet securitization exposures retained or purchased broken down by exposure type and

• off-balance sheet securitization exposures broken down by exposure type

j) Aggregate amount of securitization exposures retained or purchased and the associated capital charges,broken down between exposures and further broken down into different risk weight bands for each regulatorycapital approach


F-49

Exposures that have been deducted entirely from Tier 1 capital, credit enhancing I/Os deducted from totalcapital, and other exposures deducted from total capital (by exposure type).

Not applicable

Quantitative Disclosures: Trading book

k) Aggregate amount of exposures securitized by the bank for which the bank has retained some exposuresand which is subject to the market risk approach, by exposure type.

m)Aggregate amount of securitization exposures retained or purchased separately for:

• securitization exposures retained or purchased subject to Comprehensive Risk Measure for specific risk;and

• securitization exposures subject to the securitization framework for specific risk into different risk weightbands.

n) Aggregate amount of:

• the capital requirements for the securitization exposures, subject to the securitization framework brokendown into different risk weight bands.

• securitisation exposures that are deducted entirely from Tier 1 capital, credit enhancing I/Os deductedfrom total capital, and other exposures deducted from total capital(by exposure type).

Not applicable

Table DF - 7

Market risk in Trading Book

Qualitative disclosuresa) Approach for Computation of Capital charge for Market Risk

Standardized Duration Approach is used for calculating Capital charge for Market Risk. Components underMarket risk are

a) Specific Risk – Capital Charge for market risk is computed based on risk weights prescribed by theregulator.

b) General Market Risk is calculated for

Securities under HFT category

Securities under AFS category

Open foreign exchange position limits

Trading Positions in Derivatives

The total Capital charge for market risk is equal to greater of Specific Capital charge plus GeneralMarket Risk Capital Charge or Alternative total capital charge.

Quantitative Disclosuresa) The capital requirements for:·

• Interest rate risk ` 5219.97 Lacs

• Equity position risk ` 836.11 Lacs

• Foreign exchange risk ` 131.79 Lacs


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Table DF - 8Operational Risk

The Bank has put in place important policies like Operational Risk Management, Information System Security,Know your Customer (KYC) and Anti Money Laundering (AML), Business Continuity and Disaster RecoveryManagement. The updated manuals on all important functional areas have been circulated to the branches.Risk Based Internal Audit is introduced in all branches in our Bank.

The Operational Risk Management Policy outlines the Organisation structure and covers the process ofidentification, assessment / measurement and control of various operational risks. Internal control mechanismis in place to control and minimize the operational risks.

Capital charge for operational risk is computed as per the Basic Indicator Approach. The average of thegross income, as defined in the New Capital Adequacy Framework guidelines, for the previous 3 years i.e2012-13, 2011-12, 2010-11 is considered for computing the capital charge. The required capital is ` 7569.39Lacs.

Table DF - 9Interest Rate Risk in the Banking Book (IRRBB)

Interest Rate Risk in Banking Book (IRRBB) refers to the risk of loss in earnings and economic value of the Bank’sBanking Book as a consequence of movement in interest rates. The Bank has significant portion of its assetsand liabilities portfolio not marked to market and is carried on the books of the Bank at historical values. Thus,the economic value of such assets and liabilities is generally not ascertained on a regular basis and can be asignificant source of risk if the asset or liability is not held till maturity.

IRRBB Earnings PerspectiveThe immediate impact of changes in interest rates in the market is on bank’s earnings by changing the NetInterest Income (NII). The interest rate risk when viewed from this perspective is known as ‘Earnings Perspective’.

The asset liability profile up to 6 months is ‘asset sensitive’. The positive mismatches in the near term timebuckets (up to 6 months) will be beneficial to the bank if the interest rates increases in the economy.

Considering the impact of cost of reserves, sizable share of deposits with differential interest rates and thesignificant share of fixed interest rate instruments (mainly SLR investments), any adjustment to BPLR/Base Rateis to be made without much delay from the changes made for term deposits interest rates.

Interest Rate Risk - Economic Value PerspectiveThe long-term impact of changes in interest rates in the economy will be on bank’s Market Value of Equity(MVE) since the economic value of the bank’s assets, liabilities and off-balance sheet positions get affecteddue to variations in market interest rates.

Duration Gap Analysis (DGA) for IRR management is a simple approach to measure the volatility of marketvalue of equity (MVE) in response to the changes in interest rates in the economy.

Since the modified duration of the liabilities are less compared to the modified duration of assets, there wasfall in the equity value under major stress. In order to bring down the percentage of fall in market value ofequity and earnings at risk under major stress, we have to mobilize term deposits with longer tenure i.e., 3-5years and over 5 years. As longer the tenure of liabilities, higher will be the modified duration.

The level of IRRBB (Earnings Perspective & Economic Value Perspective) is being measured and monitored ona quarterly basis aiming at managing it within the limit over a period and minimizes the impact of interest ratemovement on near term profitability.

Quantitative DisclosuresLimits have been fixed for changes in Earnings at Risk and Market Value of Equity for 200bps shock in theinterest rates. The impact in EaR and MVE is assessed in the following six different scenarios.


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Impact on Stress test Scenarios: (` In lacs)

Stress Test Scenario Impact on Profit Impact on Equity

Scenario 1 276.23 -3,318.03

Scenario 2 -6,151.58 7,829.27

Scenario 3 1,778.38 -87.08

Scenario 4 4,936.42 -18,153.65

Scenario 5 -9,389.43 30,500.74

Scenario 6 552.46 -6,636.06

For a parallel shift of 200 bps, rise of NII is at ` 552.46 lakhs and fall of EVE by ` 6636.06 lakhs.

Scenario 1 Assets 1% 1% 1% 1% 1% 1% 1%

Liabilities 1% 1% 1% 1% 1% 1% 1%

Scenario 2 Assets 1% 1% 1% 1% -1% -1% -1%

Liabilities 1% 1% 1% 1% -1% -1% -1%

Scenario 3 Assets 2% 2% 2% -1% -1% -1% -1%

Liabilities 2% 2% 2% -1% -1% -1% -1%

Scenario 4 Assets 1% 1% 1% 1% 1% 1% 1%

Liabilities 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

Scenario 5 Assets -0.25% -0.25% -0.25% -0.25% -0.25% -0.25% -0.25%

Liabilities 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%

Scenario 6 Assets 2% 2% 2% 2% 2% 2% 2%

Liabilities 2% 2% 2% 2% 2% 2% 2%

Stress Scenarios - Change in Rate of Interest

Bucket 8Bucket 7Bucket 6Bucket 5Bucket 4Bucket 3Bucket 1> 5 years>3 to 5

years>1 to 3years

>6 monthsto 1 yearmonths

>3 to 629 days -3 months

Upto 1Month

Stress TestScenario

Assets /Liabilities

Table DF - 10General Disclosure for Exposures related to Counterparty Credit Risk

Counterparty exposures for other entities are assessed subject to exposure ceilings as per the policy of thebank. Capital for Counterparty Credit Risk exposure is assessed based on the Standardized approach.

Bank does not have bilateral netting. The Credit equivalent amount of the derivative exposure is assessedbased on the Current Exposure method.

Credit Exposure as on 31.03.2014 (` in lacs)

Notional Gross Positive Potential Future Total CreditAmount fair value of Exposure Exposure

contracts

Forward Contracts 96891.18 1815.53 1937.82 3753.35


F-52

Table DF - 11Composition of Capital (` in lacs)

1 Directly issued qualifying common share capital plus related stock surplus (sharepremium) 42826.30

2 Retained earnings 54165.83

3 Accumulated other comprehensive income (and other reserves)

4 Directly issued capital subject to phase out from CET1 (only applicable to non-jointstock companies)

Public sector capital injections grandfathered until January 1, 20185 Common share capital issued by subsidiaries and held by third parties (amount

allowed in group CET1)

6 Common Equity Tier 1 capital before regulatory adjustments 96992.13

Common Equity Tier 1 capital: regulatory adjustments7 Prudential valuation adjustments

8 Goodwill (net of related tax liability)

9 Intangibles other than mortgage-servicing rights (net of related tax liability) 1565.10

10 Deferred tax assets 6112.16

11 Cash-flow hedge reserve

12 Shortfall of provisions to expected losses

13 Securitisation gain on sale

14 Gains and losses due to changes in own credit risk on fair valued liabilities

15 Defined-benefit pension fund net assets 1862.30

16 Investments in own shares (if not already netted off paid-in capital on reported balance sheet)

17 Reciprocal cross-holdings in common equity

18 Investments in the capital of banking, financial and insurance entities that areoutside the cope of regulatory consolidation, net of eligible short positions,where the bank does not own more than 10% of the issued share capital (amountabove 10% threshold)

19 Significant investments in the common stock of banking, financial and insuranceentities that are outside the scope of regulatory consolidation, net of eligible shortpositions (amount above 10% threshold)

20 Mortgage servicing rights (amount above 10% threshold)

21 Deferred tax assets arising from temporary differences (amount above 10%threshold, net of related tax liability)

22 Amount exceeding the 15% threshold

23 of which: significant investments in the common stock of financial entities

24 of which: mortgage servicing rights

25 of which: deferred tax assets arising from temporary differences

26 National specific regulatory adjustments (26a+26b+26c+26d)

26 a of which: Investments in the equity capital of the unconsolidated insurancesubsidiaries

Basel III common disclosure template to be used during the transition of regulatory adjustments(i.e. from April 1, 2013 to December 31, 2017)

Common Equity Tier 1 capital: instruments and reserves


F-53

26 b of which: Investments in the equity capital of unconsolidated non-financialsubsidiaries

26 c of which: Shortfall in the equity capital of majority owned financial entities whichhave not been consolidated with the bank

26 d of which: Unamortized pension funds expenditures

Regulatory Adjustments Applied to Common Equity Tier 1 in respect of AmountsSubject to Pre-Basel III Treatment

of which: [INSERT TYPE OF ADJUSTMENT]

For example: filtering out of unrealized losses on AFS debt

securities (not relevant in Indian context)



27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficientAdditional Tier 1 and Tier 2 to cover deductions

28 Total regulatory adjustments to Common equity Tier 1 9539.56

29 Common Equity Tier 1 capital (CET1) 87452.56

Additional Tier 1 Capital : Instruments 0.00

30 Directly issued qualifying Additional Tier 1 instruments plus related stocksurplus (31+32)

31 of which: classified as equity under applicable accounting standards (PerpetualNon-Cumulative Preference Shares)

32 of which: classified as liabilities under applicable accounting standards(Perpetual debt Instruments)

33 Directly issued capital instruments subject to phase out from Additional Tier 1

34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued bysubsidiaries and held by third parties (amount allowed in group AT1)

35 of which: instruments issued by subsidiaries subject to phase out

36 Additional Tier 1 capital before regulatory adjustmentsAdditional Tier 1 Capital: regulatory adjustments

37 Investments in own Additional Tier 1 instruments

38 Reciprocal cross-holdings in Additional Tier 1 instruments

39 Investments in the capital of banking, financial and insurance entities that areoutside the scope of regulatory consolidation, net of eligible short positions, wherethe bank does not own more than 10% of the issued common share capital of theentity (amount above 10% threshold)

40 Significant investments in the capital of banking, financial and insurance entities thatare outside the scope of regulatory consolidation (net of eligible short positions)

41 National specific regulatory adjustments (41a+41b)

41 a Investments in the Additional Tier 1 capital of unconsolidated insurance subsidiaries

41 b Shortfall in the Additional Tier 1 capital of majority owned financial entities whichhave not been consolidated with the bank

Regulatory Adjustments Applied to Additional Tier 1 in respect of Amounts Subject toPre-Basel III Treatment

of which: [INSERT TYPE OF ADJUSTMENT e.g. DTAs]

of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which are deductedfrom Tier 1 at 50%]


F-54


42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 tocover deductions

43 Total regulatory adjustments to Additional Tier 1 capital44 Additional Tier 1 Capital (AT1)44 a Additional Tier 1 capital reckoned for capital adequacy45 Tier 1 capital (T1 = CET1 + AT1) (29 + 44a) 87452.56

Tier 2 Capital : Instruments and provisions46 Directly issued qualifying Tier 2 instruments plus related stock surplus 24110.00

47 Directly issued capital instruments subject to phase out from Tier 2

48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issuedby subsidiaries and held by third parties (amount allowed in group Tier 2)


50 Provisions 9589.29

51 Tier 2 capital before regulatory adjustments 33699.29

Tier 2 Capital : regulatory adjustments52 Investments in own Tier 2 instruments 0.00

53 Reciprocal cross-holdings in Tier 2 instruments

54 Investments in the capital of banking, financial and insurance entities that areoutside the scope of regulatory consolidation, net of eligible short positions, wherethe bank does not own more than 10% of the issued common share capital of theentity (amount above the 10% threshold)

55 Significant investments13 in the capital banking, financial and insurance entitiesthat are outside the scope of regulatory consolidation (net of eligible short positions)


56 a of which: Investments in the Tier 2 capital of unconsolidated subsidiaries

56 b of which: Shortfall in the Tier 2 capital of majority owned financial entities whichhave not been consolidated with the bank

Regulatory Adjustments Applied To Tier 2 in respect of Amounts Subject toPre-Basel III Treatment

of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which arededucted from Tier 2 at 50%]

of which: [INSERT TYPE OF ADJUSTMENT

57 Total regulatory adjustments to Tier 2 capital58 Tier 2 capital (T2)58 a Tier 2 capital reckoned for capital adequacy 33699.29

58 b Excess Additional Tier 1 capital reckoned as Tier 2 capital58 c Total Tier 2 capital admissible for capital adequacy (58a+58b)59 Total capital (TC=T1+T2) (45+58C) 121151.85

Risk Weighted Assets in respect of Amounts Subject to Pre-Basel III Treatment


of which: ...

60 Total risk weighted assets (60a+60b+60c)60 a of which: total credit risk weighted assets 958754.38


F-55

60 b of which: total market risk weighted assets 68754.14

60 c of which: total operational risk weighted assets 84104.28

Capital ratios61 Common Equity Tier 1 (as a percentage of risk weighted assets)

62 Tier 1 (as a percentage of risk weighted assets) 7.87

63 Total capital (as a percentage of risk weighted assets) 3.03

64 Institution specific buffer requirement (minimum CET1requirement plus capitalconservation and countercyclical buffer requirements, expressed as a percentageof risk weighted assets)

65 of which: capital conservation buffer requirement

66 of which: bank specific countercyclical buffer requirement

67 of which: G-SIB buffer requirement

68 Common Equity Tier 1 available to meet buffers (as a percentage of riskweighted Assets)

National minima (if different from Basel III)69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 5.50

70 National Tier 1 minimum ratio (if different from Basel III minimum) 7.00

71 National total capital minimum ratio (if different from Basel III minimum) 9.00

Amounts below the thresholds for deduction (before risk weighting)72 Non-significant investments in the capital of other financial entities

73 Significant investments in the common stock of financial entities

74 Mortgage servicing rights (net of related tax liability)

75 Deferred tax assets arising from temporary differences (net of related tax liability)

Applicable caps on the inclusion of provisions in Tier 276 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to

standardized approach (prior to application of cap) 4305.87

77 Cap on inclusion of provisions in Tier 2 under standardized approach 1281.73

78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internalratings-based approach (prior to application of cap)

79 Cap for inclusion of provisions in Tier 2 under internal ratings-based approach

Capital instruments subject to phase-out arrangements (only applicable betweenMarch 31, 2017 and March 31, 2022)

80 Current cap on CET1 instruments subject to phase out arrangements

81 Amount excluded from CET1 due to cap (excess over cap after redemptions andmaturities)

82 Current cap on AT1 instruments subject to phase out arrangements

83 Amount excluded from AT1 due to cap (excess over cap after redemptions andmaturities

84 Current cap on T2 instruments subject to phase out arrangements

85 Amount excluded from T2 due to cap (excess over cap after redemptions andmaturities)


F-56

Row No.of the Particular ` in lacs

template

10 Deferred tax assets associated with accumulated losses

Deferred tax assets (excluding those associated with accumulated losses) netof Deferred tax liability 6112.16

Total as indicated in row 10 6112.16

19 If investments in insurance subsidiaries are not deducted fully from capital andinstead considered under 10% threshold for deduction, the resultant increase inthe capital of bank

of which: Increase in Common Equity Tier I Capital

of which: Increase in Additional Tier I Capital

of which: Increase in Tier 2 Capital

26b If investments in the equity capital of unconsolidated non-financial subsidiariesare not deducted and hence, risk weighted then:

(i) Increase in Common Equity Tier I Capital

(ii) Increase in risk weighted assets

44a Excess Additional Tier I capital not reckoned for capital adequacy (differencebetween Additional Tier I capital as reported in row 44 and admissibleAdditional Tier I capital as reported in 44a)

of which: Excess Additional Tier I capital which is considered as Tier 2 capitalunder row 58b

50 Eligible Provisions included in Tier 2 capital 6150.03

Eligible Revaluation Reserves included in Tier 2 capital 3439.26

Total of row 50

58a Excess Tier 2 capital not reckoned for capital adequacy (difference betweenTier 2 capital as reported in row 58 and T2 as reported in 58a)

Notes to the Template


F-57

Tab

le D

F- 1

3M

ain

Fe

atu

res

of

Reg

ula

tory

Ca

pita

l Ins

trum

ent

s

1Iss

uer

LVB

LVB

LVB

LVB

LVB

LVB

2Un

ique

iden

tifie

r (e.

g.IN

E694

C01

018

INE6

94C

0906

0IN

E694

C08

021

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94C

0803

9IN

E694

C08

047

INE6

94C

0805

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USIP,

ISIN

or B

loom

berg

iden

tifie

r for

priv

ate

plac

emen

t)

3G

over

ning

law

(s) o

fth

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stru

men

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Regu

lato

ry tr

eatm

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4Tra

nsiti

onal

Bas

el II

I rul

esC

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quity

Tier -

IITie

r - II

Tier -

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Tier -

IITie

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5Po

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el II

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on E

quity

Elig

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stru

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r val

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trum

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` 10

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lacs

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lacs

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coun

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r re

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III


F-58

11O

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of–

30.0

9.20

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2009

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24.0

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14Iss

uer c

all s

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––

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prio

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appr

oval

15O

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all d

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cont

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nt c

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and

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16Su

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%10

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11.4

0%11

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11.8

0%re

late

d in

dex

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f a d

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24If

conv

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ully

or–

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ly

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tefo

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ISe

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I (B)

Serie

s -V

III


F-59

26If

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peci

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tible

into

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uer o

f ins

trum

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tco

nver

ts in

to

30W

rite-

dow

n fe

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e–

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31If

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e-do

wn,

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e-do

wn

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trigg

er(s

)

32If

writ

e-do

wn,

full

or–

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rtial

33If

writ

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wn,

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perm

anen

t or t

empo

rary

34If

tem

pora

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rite-

dow

n,–

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scrip

tion

of w

rite-

upm

echa

nism

35Po

sitio

n in

sub

ordi

natio

n–

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–hi

erar

chy

in li

quid

atio

n(s

peci

fy in

stru

men

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eim

med

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ly se

nior

toin

stru

men

t)

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ition

ed fe

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yes,

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ify n

on-

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com

plia

nt fe

atur

es

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o.D

isc

losu

re t

em

pla

tefo

r m

ain

fe

atu

res

of

reg

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tory

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pita

lin

stru

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nts

Equi

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ries

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s -V

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ISe

ires

- VI

I (B)

Serie

s -V

III


F-60

Table DF - 14

Full Terms and Conditions of Regulatory Capital Instruments

Instruments Series-V Series - VI Series -VII (A) Series - VII (B) Series-VIII

Date of Allotment 30.09.2006 25.11.2009 10.02.2012 10.02.2012 24.03.2014

Date of Redemption 30.04.2016 25.11.2015 10.02.2018 10.02.2022 24.03.2024

Rate of Interest 9.95% 10.80% 11.40% 11.40% 11.80%

Amount 3000.00 lacs 10000.00 lacs 19950.00 lacs 5050.00 lacs 7810.00 lacs

Nature of Instrument Bonds in nature Bonds in nature Bonds in nature Bonds in nature Bonds in natureof Debentures / of Debentures / of Debentures / of Debentures / of Debentures /promisory Bonds promisory Bonds promisory Bonds promisory Bonds promisory Bonds

Amount Subscribed 3000.00 lacs 10000.00 lacs 19950.00 lacs 5050.00 lacs 7810.00 lacs

Face Value of the Bond 10.00 lacs 10.00 lacs 10.00 lacs 10.00 lacs 10.00 lacs

Issuance, Trading and NSE NSE NSE NSE NSEListing

Details of Tier II Capital (Banks - Regulatory Capital instruments) raised by the Bankand the position as on 31.03.2014


F-61

CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 596555 915745ADJUSTMENTS FOR:

Provisions & Contingencies 2493417 1595725Depreciation 235834 254448Loss on sale of assets (382) (223)Income Tax / T D S paid (285291) (490000)

Net cash flow before changes in Working Capital 3040133 2275695CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in

Deposits 29539042 15048380Refinances (219000) (1000000)Other Liabilities (2246209) (354908)

27073833 13693472ASSETS : Increase/Decrease in

Investments 13641308 (705711)Advances 11863940 15141159Leased-out Assets 0 0Other Assets (431022) 671628

(25074226) (15107076)CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets (359256) (277514)Sale of Fixed Assets 3307 (355949) 2282 (275232)

CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium net offorfeited shares 2449 149Tier II Bonds 0 0Dividends paid (288869) (286420) (334950) (334801)

Cash flow for the year 4397371 252058Cash & Cash equivalents at the beginning of the year 8719498 8467440Cash & Cash equivalents at the year of end 13116869 8719498

Note: Cash, Balances with Other Banks, Balances with R B I, and Money at Call and Short Notice have beenconsidered as cash and cash equivalents.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2014(` in 000’s)

For SAGAR & ASSOCIATES,Chartered AccountantsFRN: 003510S

(V. VIDYASAGAR BABU)PartnerMembership No. : 027357

Place : BangaloreDate : 14th May, 2014

31.03.2014 31.03.2013

AUDITORS’ CERTIFICATEWe have verified the Cash Flow Statement of The Lakshmi Vilas Bank Limited, Karur for the year ended March31,2014. This cash flow statement is the responsibility of the Management of the Bank in accordance withclause 32 of the listing agreement entered into with the Stock Exchange and is in agreement with the BalanceSheet as at March 31, 2014 and the Profit & Loss Account for the year ended March 31, 2014 dealt with in ourreport dated 14.05.2014 to the members of The Lakshmi Vilas Bank Limited.


F-62

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

1. We have audited the accompanying financial statements of The Lakshmi Vilas Bank Limited (hereinafter referred to as “theBank”), which comprise the Balance Sheet as at 31st March, 2015 and the Profit and Loss Account and the Cash Flow statementfor the year then ended and a summary of significant accounting policies and other explanatory information. Incorporated inthese financial statements are the returns of 21 branches/offices audited by us, 400 branches/offices audited by branch auditors.

Management’s Responsibility for the Financial Statements

2. The Bank’s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (“the Act”)with respect to preparation of these financial statements that give a true and fair view of the financial position, financial performanceand cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the AccountingStandards specified under section 133 of the Act read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibilityalso includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of theassets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriateaccounting policies, making judgments and estimates that are reasonable and prudent; and design, implementation andmaintenance of internal financial controls, that were operating effectively for ensuring the accuracy and completeness of theaccounting records, relevant to the preparation of the financial statements that give a true and fair view and are free frommaterial misstatement, whether due to fraud or error.

Auditor’s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit.

4. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required tobe included in the audit report under the provisions of the Act and the Rules made thereunder.

5. We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. ThoseStandards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the Bank’s preparation of the financial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has inplace an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accountingestimates made by the Bank’s Directors, as well as evaluating the overall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statementstogether with the accounting policies and notes thereon give the information required by the Banking Regulation Act, 1949 aswell as the Companies Act, 2013, in the manner so required for the banking companies and give a true and fair view, inconformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2015;

(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

To

The Members of Lakshmi Vilas Bank Limited

F-63

For R. K. KUMAR & CO.Chartered Accountants

Firm’s Registration No. 001595S

(G. NAGANATHAN)Place : Bangalore PartnerDate : 29th April, 2015 Membership Number: 022456

Emphasis of Matter

9. Without qualifying our opinion, we draw attention to:

(i) Note No.3.4.4.C of the financial statements, regarding deferment of loss to the extent of Rs.72.99 Crore on sale of advancesto Asset Reconstruction Companies;

(ii) Note No.3.4.4.D of the financial statements, regarding deferment of loss to the extent of Rs.40.18 Crore in respect fraudsin advances.

Report on Other Legal and Regulatory Matters

10. The Balance Sheet and the Statement of Profit and Loss have been drawn up in accordance with the provisions of Section 29of the Banking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 and Rule 7 of the Companies (Accounts)Rules, 2014.

11. As required by sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe purpose of our audit and have found them to be satisfactory.

(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

(c) the returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

12. Further, as required by section 143(3) of the Companies Act, 2013, we report that:

(i) We have sought and obtained all the information and explanation which to the best of our knowledge and belief werenecessary for the purpose of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from ourexamination of those books.

(iii) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 143(8) of theCompanies Act 2013 have been sent to us and have been properly dealt with by us in preparing this report.

(iv) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by us in the Report are in agreementwith the books of account.

(v) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of theAct, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(vi) On the basis of the written representations received from the directors as on 31st March, 2015 taken on record by the Boardof Directors, none of the directors is disqualified as on 31st March, 2015 from being appointed as a director in terms ofSection 164 (2) of the Act.

(vii) With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

(a) The Company has disclosed the impact of pending litigations on its financial position in its financial statements – ReferClause (i) of Schedule 12 of the financial statements;

(b) The Company has made provision, as required under the applicable law or accounting standards, for material foreseeablelosses, if any, on long-term contracts including derivative contracts;

(c) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and ProtectionFund by the Company.

F-64

(` 000’s)



a. Capital 1 179,16,66 97,56,07


c. Deposits 3 21964,21,22 18572,88,21

d. Borrowings 4 458,10,00 458,10,00


TOTAL 24705,43,62 20653,05,72

II. ASSETS


b. Balances with Banks and Money at call & Short Notice 7 175,28,07 119,60,44

c. Investments 8 6103,78,23 5688,67,76

d. Advances 9 16352,01,90 12889,18,96

e. Fixed Assets 10 243,41,30 200,50,82

f. Other Assets 11 687,50,09 562,99,49

TOTAL 24705,43,62 20653,05,72





BALANCE SHEET as on 31 st March 2015



For M/s. R.K. KUMAR & COChartered AccountantsFRN - 001595S

G. NAGANATHANPartnerM. No. 022456

Bangalore29th April, 2015

D.L.N. RAO

S.G. PRABHAKHARAN

S. DATTATHREYAN

N. MALAYALARAMAMIRTHAM

PANKAJ VAISH

E.V. SUMITHASRI

VIVEK DEEP

R. RAVIKUMAR

Directors

K.R. PRADEEPChairman of the Meeting

RAKESH SHARMAManaging Director & CEO

M. PALANIAPPANChief Financial Officer

N. RAMANATHANCompany Secretary

F-65


(` 000’s)



I. INCOME

a. Interest Earned 13 2214,53,09 1983,95,00

b. Other Income 14 284,03,36 203,59,23

TOTAL 2498,56,45 2187,54,23

II. EXPENDITURE

a. Interest Expended 15 1687,87,67 1497,93,95



TOTAL 2366,27,86 2127,88,68


Profit brought forward 6,78 8,83

TOTAL 132,35,37 59,74,38

IV. APPROPRIATIONS

a. Transfer to Statutory Reserve 33,20,00 15,00,00

b. Transfer to Capital Reserve 4,78,60 11,19


d. Investment Reserve 72,74 0

e. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 9,15,00 9,15,00

f. Proposed Dividend 35,84,23 9,75,61

g. Tax on Proposed Dividend 7,16,64 1,65,80

h. Balance carried over to Balance Sheet 8,16 6,78

TOTAL 132,35,37 59,74,38

Earnings Per Share - Basic (`) 9.16 6.11





D.L.N. RAO

S.G. PRABHAKHARAN

S. DATTATHREYAN


PANKAJ VAISH

E.V. SUMITHASRI

VIVEK DEEP

R. RAVIKUMAR

Directors





F-66

(` 000’s)

As at As at31-03-2015 31-03-2014

SCHEDULE 1 - CAPITALAUTHORISED CAPITAL(30,00,00,000 equity shares of Rs.10/- each) 300,00,00 300,00,00ISSUED CAPITAL(18,06,74,986 equity shares of Rs.10/- each)(Previous year 9,83,72,564 equity shares of Rs.10/ each)8,19,57,422 shares issued through Rights Basis and 3,45,000 sharesissued under “LVB ESOS-2010” during the year. 180,67,50 98,37,26Subscribed, Called-up and Paid Up Capital(179166609 equity shares of Rs.10/- each) 179,16,66 97,56,07i) 17,91,66,609 Paid-up Capital (Previous year 9,75,60,690 shares)

8,12,60,919 shares issued through Rights Basis and 3,45,000shares issued under “LVB ESOS-2010” during the year.

ii) 1,26,42,131 Bonus Shares allotted (Previous year 1,26,42,131shares)

iii) Shares kept in abeyance 15,08,377,inclusive of Forfeited &lapsed shares. (Previous year 7,88,216 shares. Further 6,96,503shares kept in abeyance of Right issue 2014)

iv) Shares Forfeited and lapsed 23,658 (Previous year 23,658 shares)TOTAL 179,16,66 97,56,07

SCHEULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE

Opening Balance 338,90,46 323,90,46Additions during the yearTransfer from current year’s Profit 33,20,00 372,10,46 15,00,00 338,90,46

II. CAPITAL RESERVEOpening Balance 52,27,94 52,16,75Additions during the year 4,78,60 57,06,54 11,19 52,27,94

III. SHARE PREMIUMOpening Balance 330,70,23 330,47,74Additions during the year 328,92,31 22,49



167,46,49 133,22,65Deductions during the year 0 167,46,49 7,87,00 125,35,65

V. SPECIAL RESERVE U/S 36(1)(VIII) OF IT ACT, 1961Opening Balance 32,30,00 23,15,00Additions during the year 9,15,00 41,45,00 9,15,00 32,30,00

VI. REVALUATION RESERVEOpening Balance 76,42,79 77,78,95Additions during the year 2,73,72 0

79,16,51 77,78,95Depreciation on Revalued Asset 70,84 78,45,67 1,36,16 76,42,79

VII. INVESTMENT RESERVEOpening Balance 0 0Additions during the year 72,74 0

72,74 0Deductions during the year 0 0 0

72,74 72,74VIII. BALANCE IN PROFIT & LOSS ACCOUNT 8,16 6,78

TOTAL 1376,97,60 956,03,85

F-67


A. I. DEMAND DEPOSITS

1. From Banks 55,91 1,34,90

2. From Others 1509,30,04 1509,85,95 911,16,33 912,51,23


III. TERM DEPOSITS

1. From Banks 1144,53,13 1220,40,56

2. From Others 17157,28,47 18301,81,60 14710,23,16 15930,63,72

21964,21,22 18572,88,21



TOTAL 21964,21,22 18572,88,21

SCHEDULE 4 - BORROWINGS

I. BORROWINGS IN INDIA

1. Reserve Bank of India 0 0

2. Other Banks 0 0

3. Other Institutions & Agencies* 458,10,00 458,10,00 458,10,00 458,10,00

II. BORROWINGS OUTSIDE INDIA 0 0

* Includes unsecured Tier II bonds of ` 458.10 Crs 458,10,00 458,10,00(Previous year ` 458.10 Crs.)

SECURED BORROWINGS

INCLUDED IN I & II ABOVE 0 0

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

I. Bills payable 67,65,20 70,82,92

II. Inter-office adjustments (net) 0 8,68,31

III. Interest accrued 199,46,34 190,30,44

IV. (I) Others - (including Provisions) 385,95,35 233,74,67

(ii) Contingent Provisions against Standard Assets 55,23,00 44,71,00

(iii) Deferred Tax Liabilities 18,68,25 20,20,25

TOTAL 726,98,14 568,47,59

SCHEDULE 6 - CASH AND BALANCES WITH RESERVEBANK OF INDIA

Cash in Hand (including Foreign Currency Notes) 237,26,54 226,50,96

Balances with Reserve Bank of India

I) in current account 906,17,49 965,57,29

II) in other accounts 0 0

TOTAL 1143,44,03 1192,08,25

(` 000’s)

As at As at31-03-2015 31-03-2014

F-68

(` 000’s)

As at As at31-03-2015 31-03-2014


I. IN INDIA



b. in other deposit accounts 6,25 6,25

35,67,73 24,79,11


a. with banks 0 0

b. with other institutions 100,00,00 79,92,03

135,67,73 104,71,14

II. OUTSIDE INDIA

(I) Balance with Banks



39,60,34 14,89,30

TOTAL 175,28,07 119,60,44



I. Government Securities [incl. treasury bills, & zero coupon bonds] 5156,39,21 4774,09,73


III. Shares 41,11,73 38,80,05



VI. Others [including Commercial Paper, Mutual Funds, NSC,Security Receipt, Units, etc.] 532,14,34 610,42,38

6103,78,23 5688,67,76





TOTAL 6103,78,23 5688,67,76

F-69

(` 000’s)

As at As at31-03-2015 31-03-2014




III. Term loans 5579,58,58 3851,11,43

16352,01,90 12889,18,96



II. Covered by Bank / Govt. Guarantees 59,85,38 20,03,91

III. Unsecured 770,00,96 760,88,88

16352,01,90 12889,18,96



II. Public Sector 12,50,51 1,02,80

III. Banks 25,30 10,25,41

IV. Others 10666,33,41 7623,03,82

TOTAL 16352,01,90 12889,18,96


I. PREMISES

At Revaluation Value 140,35,30 138,67,31


145,38,23 140,35,30


145,38,23 140,35,30


II. OTHER FIXED ASSETS (INCLUDINGFURNITURE & FIXTURES)

At Cost 251,57,35 219,75,84


306,02,33 254,00,41


303,71,91 251,57,35


TOTAL 243,41,30 200,50,82

F-70

(` 000’s)

As at As at31-03-2015 31-03-2014


I. Inter-Office Adjustments (net) 2,89,66 0






VII. Others 320,19,55 132,30,20

TOTAL 687,50,09 562,99,49




III. Liability on account of outstanding forward exchange contracts 912,29,35 968,91,18


In India 574,32,77 484,09,41

Outside India 97,89,76 112,77,88


VI. Other items for which the Bank is contingently liable 10,09,96 0

TOTAL 2903,11,92 2763,50,89





III. Interest on balance with Reserve Bank of India &other inter-bank Funds 8,23,81 3,65,78

IV Others 17,45,82 6,01,17

TOTAL 2214,53,09 1983,95,00

F-71

(` 000’s)







Less: Loss on sale of land, Buildings & Other Assets 34,99 -32,33 7,49 3,82



V. Income earned by way of Dividends fromCompanies in India. 95,57 95,57 43,87 43,87


TOTAL 284,03,36 203,59,23




TOTAL 1687,87,67 1497,93,95







VI. Directors’ fees, allowances 78,00 62,85

VII. Auditors' fees & Expenses (incl. Branch Auditors) 1,10,15 92,24


IX. Postage, Telegrams, Telephones, etc., 11,61,44 8,29,55


XI. Insurance 19,15,23 16,21,01


TOTAL 434,25,03 380,60,56

F-72

SCHEDULE 17


A. BASIS OF ACCOUNTING:

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise statedand conform to the Generally Accepted Accounting Principles, (GAAP) in India which encompasses applicable statutoryprovisions, regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, Accounting Standards (AS)specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 tothe extent applicable and current practices prevailing in the banking industry in India.

B. USE OF ESTIMATES:

The preparation of the financial statements require management to make estimates and assumptions that affect the reportedamounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reportedincome and expenses during the reported period. The Management believes that the estimates and assumptions used in thepreparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. Thedifferences, if any between estimates and actual will be dealt appropriately in future periods.

C. PRINCIPAL ACCOUNTING POLICIES

1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as perthe guidelines issued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of therespective transaction.

(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the correspondingforward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisionsof AS-11, The difference between revalued amount and the contracted amount is recognized as profit or loss, as thecase may be.

(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailingon the Balance Sheet date.

2. INVESTMENTS:

(a) Investments are categorized under the heads ‘Held to Maturity’, Available for Sale, and ‘Held for Trading’ and arevalued in accordance with the guidelines of the Reserve Bank of India.

(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and notincluded in cost.



(e) The excess of acquisition cost over the face value of securities under “Held to Maturity” category is amortised overthe remaining period to maturity.

3. ADVANCES:





3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towardsNPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value ofrestructured advances measured in present value terms as per RBI guidelines.

4. FIXED ASSETS AND DEPRECIATION:

(a) Fixed assets are accounted for at their historical cost except for Land and Building revalued in 2011 which areaccounted at their revalued cost.

F-73


(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful lifespecified in Schedule II to the Companies Act, 2013 except for hand held communication devices which are depreciatedin full considering the fast changing technology and obsolescence.

(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per theguidelines issued by the Reserve Bank of India.

(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is providedon the total cost.

5. EMPLOYEE BENEFITS:

(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision for LeaveEncashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as per AccountingStandard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged toProfit & Loss account.

(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant ofEmployee Stock Options.

6. PROVISION FOR TAXATION:

Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicialpronouncements and legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accountingfor Taxes on Income).

7. REVENUE RECOGNITION:


(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significantuncertainty in collection thereof:



8. SEGMENT REPORTING:

(a) The Bank recognises the Business Segment as the Primary Reporting Segment and Geographical Segment as theSecondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the AccountingStandard 17.

(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations.

(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.

9. EARNING PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 “Earnings pershare”. Basic earnings per equity share are computed by dividing net profit by the weighted average number of equityshares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number ofequity shares and dilutive potential equity shares outstanding during the period.

10. IMPAIRMENT OF ASSETS

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairmentloss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimatedrecoverable amount.

11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

(a) As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets”, the Bank recognisesprovisions only when it has a present obligation as a result of a past event and it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and when a reliable estimate of theamount of the obligation can be made.

(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition of incomethat may never be realised.

F-74

3.1 Capital (` in crore)

Items 2014-15 2013-14

i) Common Equity Tier 1 Capital Ratio (%) - (Basel-III) 9.33 7.87

ii) Tier 1 Capital Ratio (%) 9.33 7.87

iii) Tier 2 Capital Ratio (%) 2.01 3.03

iv) Total Capital Ratio (CRAR) (%) 11.34 10.90

v) Percentage of the shareholding of the Government of India in public sector bank NA NA

vi) Amount of equity capital raised 81.61 NA

vii) Amount of Additional Tier 1 capital raised, of which

PNCPS :

PDI : NIL NIL

viii) Amount of Tier II Capital raised, of which Debt capital instrumentsPreference Share Capital instruments NIL 78.10

3.2.1 In respect of securities held under HTM category, premium paid of ` 8.45 Crore (previous year ` 7.55 Crore) has beenamortized during the year and debited under interest received on Government Securities.

12. NET PROFIT:

The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: –

a) Taxation.


c) Shortfall in the value of investments



SCHEDULE 18

NOTES ON ACCOUNTS

1. The reconciliation of inter branch transactions has been completed upto 31.03.2015 and tallying of balances is ensured onan ongoing basis.

2. Issue of Shares - Right Issue:

8,19,57,422 equity shares of face value of ` 10 each fully paid up were issued on rights basis for a price of ` 50 per equityshare, including share premium of ` 40 per equity share in all aggregating to ` 406.30 Crore.

3. DISCLOSURE REQUIREMENTS

3.2.2 INVESTMENTS (` in crore)


(1) Value of Investments

(i) Gross Value of Investments

(a) In India 6145.48 5731.96

(b) Outside India. NIL NIL

(ii) Provisions for Depreciation

(a) In India 41.69 43.28

(b) Outside India NIL NIL

(iii) Net Value of Investments

(a) In India 6103.79 5688.68


F-75

(2) Movement of provisions held towards Depreciation on investments.

(i) Opening balance 43.28 23.39

(ii) Add: Provisions made during the year 19.92 27.46

(iii) Less: Write-off / write-back of excess provisions during the year 21.51 7.57

(iv) Closing Balance 41.69 43.28

3.2.2 INVESTMENTS (Contd.) (` in crore)


3.2.3 Repo Transactions (in face value terms) (` in crore)



Securities sold under repo

I. Government Securities 18.72 447.20 79.98 254.80(5.00) (250.00) (109.70) (38.48)

II. Corporate debt Securities Nil Nil Nil Nil

Securities purchased under reverse repo

I. Government Securities 10.40 208.00 38.22 114.40(5.00) (100.00) (3.25) (Nil)

II. Corporate debt Securities Nil Nil Nil Nil


3.2.4 Non-SLR Investment Portfolio

i) Issuer composition of Non SLR investments: (` in crore)



Securities

(1) (2) (3) (4) (5) (6) (7)

1 PSUs 122.10 86.00 – – –

2 FIs 56.50 36.00 – – –

3 Banks 238.53 31.99 – – –


5 Subsidiaries / Joint Ventures 0 – – – –

6 Others** 297.02 222.24 – – –

7 Less: Provision held towardsdepreciation 41.25 – – – –

Total 947.39 575.59 18.79 18.79 18.79

** Others include RIDF investments of ` 52.62 Crore, Mutual Fund of ` 22.16 Crore and ARCs security receipts of ` 222.24 Crore.

F-76


i) Net NPIs to Net Investment (%) – –ii) Movement of NPIs (Gross)

Opening balance 8.74 7.82Additions during the year 2.04 0.92Reductions during the above period 0.00 0.00Closing balance 10.78 8.74

iii) Movement of Net NPIsOpening balance – –Additions during the year – –Reductions during the above period – –Closing balance – –

iv) Movement of provision for NPIs 0.00Opening balance 7.10 6.18Additions during the year 2.04 0.92Reductions during the above period 0.00 0.00Closing balance (*) 9.14 7.10

(*) An amount of ` 1.64 crore received towards part settlement is parked under sundries account.

ii) Non-performing Non-SLR investments : (` In crore)

3.2.5 Sale and transfers to / from HTM category:

During the year, the value of sales and transfers of securities to / from HTM category has not exceeded 5% of book value of theinvestment held in HTM category at the beginning of the year.

3.3 Derivatives

3.3.1 Forward Rate Agreement/ Interest Rate Swap: (` In crore)


i) The notional principal of swap agreements NIL NIL





3.3.2 Exchange Traded Interest Rate Derivatives: (` In crore)

S.No. Particulars 2014-15 2013-14

(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NIL NIL

(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2015 (instrument-wise) NIL NIL

(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not “highly effective” (instrument-wise) NIL NIL

(iv) Mark-to-market value of exchange traded interest rate derivatives outstanding andnot “highly effective” (instrument-wise) NIL NIL


Qualitative Disclosure:

The only derivative dealt by the bank in the Foreign exchange market is Forward contract. Forward contracts are being used tohedge/cover the exposure in the foreign exchange arising out of merchant transaction and trading positions.

F-77

Sl.Particular

Currency Interest rateNo. Derivatives Derivatives

(i) Derivatives (Notional Principal Amount) NA NAa) For hedging NA NAb) For trading NA NA

(ii) Marked to Market Positions NA NAa) Asset (+) NA NAb) Liability (-) NA NA

(iii) Credit Exposure NA NA

(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NAa) On hedging derivatives NA NAb) On trading derivatives NA NA

(v) Maximum and Minimum of 100*PV01 observed during the year NA NAa) On hedging NA NAb) On trading NA NA

3.3.4 Shifting of securities:

For the year ended 31.03.2015, Bank has shifted securities amounting to ` 95.00 Crore (face value) (previous year ` 642.76 Crore)from HTM to AFS category and loss amounting to ` 0.12 Crore, which arose on such transfer has been provided during the year.

3.3.5 SLR Securities: (` in crore)As at 31.03.2015 As at 31.03.2014

ParticularsBook Market Book MarketValue Value Value Value

Government Securities * SLR (CG, SG,TB) 5156.84 5191.82 4788.52 4453.14


* Net of securities pledged under REPO ` 140.40 Crore (PY ` 38.48 Crore).

3.4 Asset Quality3.4.1 Non-Performing Assets: (`̀̀ in crore)


(i) Net NPAs to Net Advances (%) 1.85% 3.44%

(ii) Movement of NPAs (Gross)(a) Opening balance 546.46 459.91(b) Additions during the year 256.30 668.69(c) Reductions during the year 348.14 582.14(d) Closing balance 454.62 546.46


(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 53.23 100.30(b) Provisions made during the year 138.35 247.92(c) Write-off/ write-back of excess provisions 75.23 294.99(d) Closing balance 116.35 53.23

To cover the risk arising out of the above derivatives, various limits like AGL, IGL and Stop Loss Limits have been prescribed in theTreasury Policy of the bank, which are monitored by mid office. The Mark-to Market values are monitored on monthly basis forForeign Exchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time totime.

Quantitative Disclosures : (` in crore)

F-78

3.4.

2. P

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Acc

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Doubtful

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Sub-Standard

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Total

Sub-Standard

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Total

Sub-Standard

Standard

No.

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Pro

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102

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0.00

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3.50

1.68

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5.64

24.9

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2.04

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0.00

0.00

0.00

0.00

0.48

0.00

0.65

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1.13

2.52

0.00

0.65

0.00

3.17

No.

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10

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0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

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F-79

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Total

Sub-Standard

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Doubtful

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Total

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No.

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0.00

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0.00

0.00

0.00

0.05

7.28

0.01

7.34

0.00

0.05

7.28

0.01

7.34

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

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108.

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2.20

77.4

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1.66

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140

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141

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443

196

7259

319

687

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4.42

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0.00

0.00

4.42

462.

5445

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79.6

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643.

8911

33.3

445

.61

79.6

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.05

1314

.69

6.44

0.00

0.00

0.00

6.44

0.00

0.00

0.00

0.00

0.00

2.25

0.00

0.65

0.00

2.90

8.69

0.00

0.65

0.00

9.34

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(incl

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7.

F-80

ParticularsBacked by NPAs sold by the

bank as underlying

Backed by NPAs sold by other banks / financial institutions

/ non-banking financial companies as underlying

Total

2014-15 2013-14 2014-15 2013-14 2014-15 2013-14Book value of investments in security Receipts

178.00 134.56 0.00 0.00 178.00 134.56

3.4.6 NPA Assets Sold to ARC: (` in crore)


(` in crore)


(i) No. of accounts 1517 7




(v) Aggregate profit/ (loss) loss over net book value. (123.10) 11.42

3.4.4. Details of non-performing financial assets purchased / sold:

A. Details of non-performing financial assets purchased: (` in crore)








1. No. of accounts sold NIL NIL

2. Aggregate outstanding NIL NIL

3. Aggregate consideration received NIL NIL

C. Disclosure regarding amortization of Loss on sale of assets to ARCs:

The net shortfall on account of sale of assets to reconstruction companies amounting to ` 100.42 crore is being amortized over aperiod of 2 years, as per RBI circular No. RBI/502/DBOD.BP.BC.No. 98/21.04.132/2013-14 dated 26-02-2014. Consequently, ̀ 27.43Crore has been charged to Profit & Loss account for the year ended 31st March 2015. The unamortized amount on this account as on31st March 2015 is ` 72.99 Crore.

D. Disclosure regarding amortization of fraud related advances:

As permitted by RBI vide its circular RBI/2014-15/535/DBR.No.BP.BC.83/21.04.048/2014-15 dated 01.04.2015, the outstanding balancein fraud accounts relating to advances amounting to ` 53.54 crore, is being provided over a period of four quarters. Consequently,` 13.36 crore has been charged to profit & Loss account for the quarter ended 31st March 2015. The balance amount to be providedas on 31st March 2015 is ` 40.18 crore.

3.4.5 Provisions on Standard Assets: (` in crore)



F-81

3.6 Asset Liability Management:




Deposits 241.69 423.42 769.57 687.62 2605.76 2400.11 4197.23 6172.48 1244.87 3221.46 21964.21

(154.36) (351.18) (325.88) (664.93) (2192.47) (2718.56) (3916.85) (4978.74) (980.98) (2288.93) (18572.88)

Advances (Net) 189.48 407.76 399.76 694.79 3435.33 937.05 1850.89 6444.97 699.34 1292.66 16352.02

(161.19) (367.71) (392.46) (666.95) (2469.82) (655.56) (1649.95) (5083.78) (605.96) (835.80) (12889.19)

Investments (Net) 165.70 78.84 0.00 115.99 247.22 166.02 127.39 532.28 643.10 4027.26 6103.78

(9.97) (180.97) (0.00) (152.64) (92.17) (48.19) (95.63) (314.64) (720.55) (4073.92) (5688.68)

Borrowings 0.00 0.00 0.00 0.00 0.00 0.00 100.00 229.50 0.00 128.60 458.10

(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (130.00) (199.50) (128.60) (458.10)


Assets (35.85) (0.00) (0.00) (1.03) (28.15) (24.96) (5.79) (0.00) (0.00) (0.00) (95.78)


Liabilities (19.86) (0.00) (0.13) (0.35) (0.44) (1.60) (9.70) (3.51) (4.95) (0.00) (40.54)


The above data has been compiled by the management on the basis of the guidelines of RBI which have been relied upon by Auditors.

3.5. Business Ratios:







(vi) Profit per employee (` in lakhs) 3.82 1.81

3.7 Exposures

3.7.1 Exposure to Real Estate Sector: (` in crore)

Category 2014-15 2013-14

a) Direct exposure


Lending fully secured by mortgages on residential property that is or will be occupiedby the borrower or that is rented; (Individual housing loans eligible for inclusion inpriority sector advances may be shown separately).


Lending secured by mortgages on commercial real estates (office buildings, retailspace, multi-purpose commercial premises, multi-family residential buildings,multi-tenanted commercial premises, industrial or warehouse space, hotels, landacquisition, development and construction etc.). Exposure would also includenon-fund based (NFB) limits;

F-82

3.7.2 Exposure to Capital Market: (` in crore)


(i) Direct investment in equity shares, convertible bonds, convertible debentures and unitsof equity-oriented mutual funds the corpus of which is not exclusively invested incorporate debt; 30.13 33.94

(ii) Advances against shares / bonds / debentures or other securities or on clean basis toindividuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; 2.26 2.41


(iv) Advances for any other purposes to the extent secured by the collateral security of sharesor convertible bonds or convertible debentures or units of equity oriented mutual funds i.e.,where the primary security other than shares/convertible bonds/convertible debentures /units of equity oriented mutual funds does not fully cover the advances; NIL NIL

(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf ofstockbrokers and market makers; 10.62 5.60

(vi) Loans sanctioned to corporates against the security of shares / bonds/debentures or othersecurities or on clean basis for meeting promoter's contribution to the equity of newcompanies in anticipation of raising resources; NIL NIL


(viii) Underwriting commitments taken up by the banks in respect of primary issue of shares orconvertible bonds or convertible debentures or units of equity oriented mutual funds; NIL NIL




The exposure to capital market of ` 43.32 Crore is within the limit of ` 360.16 crore (i.e. 40% of Bank's Net Worth ` 900.40 Crore ason 31.03.2014). The direct exposure to capital market is ` 30.13 Crore and is within 20% of bank's Net Worth amounting to ` 180.08crore (i.e. 20% of Banks Net worth ` 900.40 Crore as on 31.03.2014).

3.7.1 Exposure to Real Estate Sector (Contd.) (` in crore)

Category 2014-15 2013-14







F-83

3.7.4 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the bank.(As compiled by management)

A. SBL exceeded by the Bank for the period 01.04.2014 to 31.03.2015 ........................................... NIL (PY NIL)

B. GBL exceeded by the Bank for the period from 01.04.2014 to 31.03.2015 ................................. NIL (PY NIL)

3.7.5. Unsecured Advances (Amount of Advances for which, intangible securities has been taken) : (` In crore)


The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority etc. has been taken. 33.64 47.96


3.8 Miscellaneous

3.8.1 Disclosure of Penalties imposed by RBI:

No penalties were imposed by Reserve Bank of India during the year.

4. Disclosure in terms of Accounting Standards:

4.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as perAccounting Standard 5.

4.2 Accounting Standard 9: Revenue Recognition:

Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9.

4.3 Accounting Standard 15 - Employee Benefits

4.3.1 The bank is following Accounting Standard 15 (Revised 2005) “Employee Benefits” as under:

(1) In respect of contributory plans namely - Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution atpre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixedcontribution.

(2) In respect of Defined Benefit Plans, viz. Gratuity and Pension as well as for Leave Encashment, provision has been made basedon actuarial valuation as per the guidelines.

Retirement benefits to employees:

a) The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss accountand balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:

3.7.3 Risk Category wise Country Exposure (As compiled by Management): (` in crore)

Risk Category* Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2015 31.3.2015 31.3.2014 31.3.2014


Low 73.68 NIL 61.94 NIL



Very High 0.00 NIL 1.05 NIL

Restricted 0.00 NIL 1.48 NIL

Off-credit 0.00 NIL 0.00 NIL


* As the bank's exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than1% of total assets of the bank, no provision is considered necessary.

F-84

I. Principal Actuarial Assumptions at the Balance Sheet Date:

(Expressed as weighted Averages)

ParticularsGratuity Pension Leave Encashment

(Funded) (Funded) (Unfunded)

Discount Rate 7.90% 7.90% 7.90%

Salary Escalation Rate 5.50% 5.50% 5.50%

Attrition Rate 4.00% 4.00% 4.00%

Expected Rate of return on Plan Assets 9.50% 9.50% NA

II. Change in the Present Value of Obligations: (` in crore)



Present Value of obligations as at the beginning of the year 65.73 229.05 33.80

Interest Cost 5.58 16.65 2.52

Current Service Cost 5.68 10.44 4.52

Past service cost (non-vested benefits) 0.00 0.00 0.00

Past service cost (vested benefits) 0.00 0.00 0.00

Benefits Paid -8.72 -36.70 -3.79

Actuarial loss / (gain) on obligation (balancing figure) 0.62 19.04 0.99

Present Value of obligations as at the year end 68.89 238.48 38.04

III. Change in Fair Value of Plan Asset: (` in crore)

Particulars Gratuity Pension Leave Encashment(Funded) (Funded) (Unfunded)

Fair value of Plan Assets at the beginning of the year 58.09 202.20

Expected return on Plan Assets 5.65 20.87

Employer's Contribution 5.76 55.03 3.79

Benefits Paid -8.72 -36.70 -3.79

Actuarial loss/(gain) on plan assets (balancing figure) 0.11 -4.18

Fair Value of Plan Asset at the end of the year 60.89 237.22

IV. Actual Return on Plan Assets: (` in crore)


Expected return on plan assets 5.65 20.87 –

Actuarial gain/(loss) on plan assets 0.11 -4.18 –

Actual return on plan assets 5.76 16.69 –

F-85

V. Actuarial Gain / Loss recognized: (` in crore)


Actuarial gain/(loss) for the Period - Obligation 0.62 19.05 0.99

Actuarial gain/(loss) for the Period - Plan Assets 0.11 -4.18 –

Total (gain)/loss for the period 0.51 23.23 0.99

Actuarial (gain)/loss recognized in the period 0.51 23.23 0.99

Unrecognized actuarial (gain)/loss at the end of the year 0.00 0.00 0.00

VI. Amount recognized in Balance Sheet: (` in crore)


Present value of the Obligation 68.89 238.48 38.04

Fair value of plan assets -60.89 -237.22 0.00

Difference 8.00 1.26 38.04

Unrecognized Transitional liability 0.00 0.00 0.00

Unrecognized past service cost (non vested benefits) 0.00 0.00 0.00

Liability recognized in the Balance Sheet 8.00 1.26 38.04

VII. Expenses Recognized in Profit & Loss Account: (` in crore)




Expected return on Plan assets -5.65 -20.87 0.00

Net actuarial (gain)/loss recognized in the year 0.51 23.23 0.99

Transitional Liability recognized in the year 0.00 0.00 0.00



Expenses Recognized in Profit & Loss Account 6.12 29.45 8.03

VIII. Movements in the Liability Recognized in the balance Sheet (` in crore)


Opening net Liability 7.64 26.85 33.80

Opening amount determined under para 55 of AS15R 0.00 0.00 0.00

Expense as Above 6.12 29.44 8.03

Contribution paid -5.76 -55.03 -3.79

Closing Net Liability 8.00 1.26 38.04

F-86

IX. Amount for the Current Period: (` in crore)


Present value of Obligation 68.89 238.48 38.04

Plan Assets 60.89 237.22 0.00

Surplus/(Deficit) 8.00 1.26 38.04

Experience adjustments on Plan Liabilities - (loss)/gain -3.47 3.71 -1.97

Experience adjustments on Plan Assets - (loss)/gain 0.11 -4.18 -

X. Major categories of Plan Assets: (As % of Total Plan Assets)

Particulars Gratuity Pension(Funded) (Funded)

Government of India Securities 11.44 7.07

State Government Securities 52.16 37.59

High Quality Corporate Bonds 25.12 25.38

Equity Share of listed companies 0.00 0.00

Property 0.00 0.00

Special Deposit Scheme 1.50 0.00

Balance with Bank Account 1.64 1.13

Balance held at LIC India's Running account 0.00 5.61

Annuity under Return of Purchase Price 0.00 20.65

Others (Amount receivable from Bank) 8.14 2.57

Total 100.00 100.00

XI. Enterprises Best Estimate: (` in crore)


Enterprise’s Best Estimate of Contribution during next year 10.52 36.42 –

4.3.2 Employee Stock Option Scheme:

During the year, the Compensation Committee of the Board of Directors in its meeting on 14.05.2014 has granted 5,00,000 stockoptions, grant date being 12.05.2014, to MD & CEO of the Bank under LVB ESOS 2010 at an exercise price of ` 36.95 per option.These options would vest over a period of 1 to 2 years.

As on 31st March, 2015, the options in force are 5,45,000. The Bank has provided ̀ 3.79 Crore being the proportionate compensationexpenses for the period upto 31st March 2015.

F-87

4.4. Accounting Standard 17 - Segment Reporting:

PART A : BUSINESS SEGMENTS (` in crore)

Year ended Year endedParticulars 31-3-2015 31-3-2014

(Audited) (Audited)

1. SEGMENT REVENUE :

a. Treasury operations 556.84 421.65

b. Corporate/wholesale banking operations 579.20 448.59

c. Retail banking operations 1343.22 1308.53

d. Other banking operations 19.31 8.77

TOTAL 2498.57 2187.54

2. SEGMENT RESULTS (Operating Profit)*:


b. Corporate/wholesale Banking operations 82.90 78.08



TOTAL 376.44 309.00

OPERATING PROFIT 376.44 309.00

PROVISIONS OTHER THAN TAX 188.23 268.59

PROFIT BEFORE TAX 188.21 40.41

Less : Tax expenses 55.92 -19.25

NET PROFIT 132.29 59.66

3. SEGMENT ASSETS :




d. Unallocated Assets 786.08 639.10

TOTAL 24705.44 20653.06

4. SEGMENT LIABILITIES:




d. Unallocated liabilities 459.87 307.34

TOTAL 23149.29 19599.46

CAPITAL AND RESERVES 1556.14 1053.60

TOTAL 24705.44 20653.06

PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is made underinternational segment.

Previous period's figures have been regrouped, wherever necessary to conform to the current period's classification.

* Segment results have been drawn up considering provision for non-performing assets as unallocated this year. Last year it wasallocated among corporate & retail advances.

F-88

4.5. Accounting Standard 18 - Related Party Disclosures:

Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from 01/04/2014 to 31/03/2015, as detailed below:

S. No. Name Designation

1 Mr. Rakesh Sharma Managing Director & CEO

2 Mr. M. Palaniappan Chief Financial Officer

3 Mr. N. Ramanathan Company Secretary

(` in crore)

Items / Related Party Parent (as per Subsidiaries Associates / Key Relatives of Totalownership Joint Management Key Manage-or control) Ventures Personnel ment Personnel

Borrowings NIL NIL NIL NIL NIL NIL

Deposits NIL NIL NIL NIL NIL NIL

Placement of Deposits NIL NIL NIL NIL NIL NIL

Advances NIL NIL NIL NIL NIL NIL

Investments NIL NIL NIL NIL NIL NIL

Non-Funded Commitments NIL NIL NIL NIL NIL NIL

Leasing/HP arrangementsprovided NIL NIL NIL NIL NIL NIL

Leasing/HP arrangementsavailed NIL NIL NIL NIL NIL NIL

Purchase of Fixed Assets NIL NIL NIL NIL NIL NIL

Sale of Fixed Assets NIL NIL NIL NIL NIL NIL

Interest Paid NIL NIL NIL NIL NIL NIL

Interest Received NIL NIL NIL NIL NIL NIL

Rendering of Services NIL NIL NIL NIL NIL NIL

Receiving of Services NIL NIL NIL 1.59 NIL 1.59

Management Contracts NIL NIL NIL NIL NIL NIL

4.6. Accounting Standard 20 - Earnings per Share (EPS):

EPS calculation in accordance with the AS-20 issued by the ICAI is as under:


Net profit after Tax (` In Crore) 132.29 59.65

Weighted Average - No. of Equity shares 144,387,493 9,75,60,690

Weighted Average - No. of Diluted Equity shares 144,615,899 9,74,04,902



F-89

4.7. Accounting Standard 22 - Accounting for Taxes on Income:

The bank has accounted for Income Tax in compliance with AS 22. Accordingly, Deferred Tax Assets & Liabilities are recognized.The major components of DTA / DTL are furnished as under:

(` in crore)

Particulars onents Deferred Tax Assets Deferred Tax Liabilities

Deferred Tax Components 2014-15 2013-14 2014-15 2013-14


Depreciation on fixed assets 0.00 0.33 4.60 0.00

Provision for wage arrears 9.97 0.00 0.00 0.00


Provision for advances 58.94 41.26 0.00 0.00

Carried forward loss 0.00 27.08 0.00 0.00

Special Reserve u/s 36(i)(viii) 0.00 0.00 14.09 10.98

Others 5.67 0.00 0.00 9.23

CLOSING BALANCE 93.90 81.32 18.69 20.21

Net DTA 75.21 61.11

4.8. Intangible Assets AS 26:

The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.

4.9. Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In theopinion of the bank management, there is no impairment of other assets to any material extent as at 31st March 2015 requiringrecognition in terms of the said standard.

4.10 Details of movement in provisions in accordance with Accounting Standard 29: (` in Crore)

Opening Provision Provision ClosingParticulars as on made during reversed / as on


Prov. for Standard Assets 44.71 10.52 0.00 55.23Prov. for Bad and Doubtful debts 53.23 138.35 75.23 116.35Prov. for Income Tax (net of deferred tax) 158.93 70.02 22.10 206.85Prov. for depreciation in market value of Investments 43.28 19.92 21.51 41.69Prov. for Leave encashment (including Transitional Liability) 33.80 10.55 6.31 38.04Prov. for Other assets 3.45 0.00 0.00 3.45Prov. for Other Liabilities (NLD agents gratuity) 0.49 0.00 0.00 0.49Counter cyclical buffer 29.43 0.00 14.72 14.71Prov. for Interest Tax 0.10 0.00 0.00 0.10Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90Prov. for Dividend (incl. Div. Tax) 11.41 43.01 11.41 43.01Prov. for Restructured Advances & FITL 76.68 65.32 23.82 118.18Provision for Foreign Currency Unhedged 0.00 1.30 0.00 1.30Others:Prov. for Bonus. 0.26 0.24 0.21 0.29Prov. for Pension (including Transitional Liability) 27.61 24.59 50.11 2.09Prov. for Gratuity (including Transitional Liability) 7.99 6.15 9.49 4.65

Prov. for Wage arrears 14.72 18.79 4.19 29.32

F-90

5. Additional Disclosures:

5.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head Expenditure in Profit& Loss Account:

(` in crore)




Provision for MAT Credit 0.00 (22.93)

Provisions for depreciation in market value of Investments (1.47) 27.46

Provision for leave encashment 8.03 9.41



Provision for superannuation fund 0.00 15.00

Provision for Restructured Advances (Economic sacrifice) & FITL 41.51 36.83

Provision for Foreign Currency Unhedged 1.30 0.00

Sub Total 188.23 268.59

Provision for Income Tax 55.92 (19.25)

Total 244.15 249.34

Ad-hoc Provision for wage revision pending settlement:

9th Bi-partite settlement ended with October 2012 and next wage revision has fallen due from Nov 2012. As on 31.03.2015,provision for the proposed wage revision with 15% load, is estimated at ̀ 46.84 crore and the same has been either paid / provided.Of the ` 46.84 crore, Bank has paid ` 17.52 crore as adhoc payment during July '13 - Mar '15 and provision for the balance amountof ` 29.32 crore is held as on 31.03.2015.

5.2 Movement of Counter Cyclical Provisioning Buffer: (` in crore)



(b) Provisions made in the accounting year 0.00 0.00



Utilization of Floating provision / Counter Cyclical Provisioning Buffer:

As a counter cyclical measure, RBI vide circular RBI / 2014-15 / 522 / DBR. No. BP.BC.79 / 21.04.048 / 2014-15 dated 30.03.2015has permitted the banks to utilize up to 50% of countercyclical provisioning buffer/floating provisions held by them as at the end ofDecember 31, 2014 for making specific provisions for non-performing assets, as per the policy approved by their Board of Directors.Taking into account the present economic downturn, out of the total provision of ` 29.43 crore held by the bank as at 31.12.2014,a sum of ` 14.72 crore being 50% of the provision held was utilized in the quarter ended March 2015 for making specific provisionfor non-performing assets.

5.3 Draw Down from Reserves:

The bank has not utilized/drawn any amount from any of the reserves during the year under review.

5.4. Disclosure of complaints (As complied by Management):

A. Customer Complaints:

(a) No. of complaints pending at the beginning of the year 11




(ATM complaints are also included in the above data)

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5.5 Disclosure of Letters of Comfort (LOCs) issued by Banks: (` in crore)

Particulars Amount

Letter of comfort issued in earlier years and outstanding as on 01-04-2014 31.43

Add: Letters of Comfort issued during FY 2014-15 6.38

Less: Letters of Comfort expired during the FY 2014-15 28.93

Letter of Comforts Outstanding as on 31-03-2015 8.88

5.6 Provisioning Coverage ratio:

The provision coverage ratio of the Bank as on 31.03.2015 is 60.84%.

5.7 Bancassurance Business:

Fees, remuneration received from Bancassurance business:

For the year ended 31.03.2015, the bank received income of ` 2.68 Crore (Gross commission) from Bancassurance business, ofwhich ` 1.20 Crore from life insurance segment and ` 1.48 Crore from general insurance segment.

5.8. Concentration of Deposits, Advances, Exposures and NPAs:

5.8.1 Concentration of Deposits: (` in crore)

Total Deposits of twenty largest depositors 3679.20


5.8.2 Concentration of Advances: (` in crore)

Total Advances to twenty largest borrowers 2471.28


5.8.3 Concentration of Exposures: (` in crore)

Total Exposure to twenty largest borrowers/customers 2546.68

Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank onborrowers /customers 13.21%

5.8.4 Concentration of NPAs (As compiled by Management): (` in crore)


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Sl. No.

Sector 2014-2015 2013-2014O/s. Total Advances

Gross NPA

% of Gross NPAs to Total Advances

in that Sector

O/s. Total Advances

Gross NPA

% of Gross NPAs to Total Advances

in that Sector(A) Priority Sector1. Agriculture and allied activities 2417.14 12.39 0.51% 2415.96 12.86 0.53%2. Industries 1484.13 40.22 2.71% 1196.63 62.04 5.18%3. Services 1633.03 28.75 1.76% 1294.16 24.89 1.92%4. Personal Loans 275.56 11.31 4.10% 263.73 16.87 6.40%

Sub Total (A) 5809.86 92.67 1.59% 5170.48 116.66 2.26%(B) Non Priority Sector1. Agriculture and allied activities 0.00 0.00 0.00% 0.00 0.00 0.00%2. Industries 3581.16 257.65 7.13% 2722.49 280.60 10.31%3. Services 3977.16 93.87 2.36% 2704.36 106.11 3.92%4. Personal Loans 1667.61 6.21 0.37% 1092.79 8.28 0.76%5. Others 1477.05 4.22 0.29% 1352.25 34.81 2.57%

Sub Total (B) 10702.98 361.95 3.37% 7871.89 429.80 5.46%Total (A+B) 16512.84 454.62 2.75% 13042.37 546.46 4.19%

5.9 Sector-wise Advances (As compiled by Management): (` in crore)

5.10 Movement of NPAs (As compiled by Management): (` in crore)


Gross NPAs as on 1st April (Opening Balance) 546.46 459.91

Additions (Fresh NPAs) during the year 256.30 668.69

Sub-total (A) 802.76 1128.60

Less:-

(i) Up gradations 114.48 188.01

(ii) Recoveries (excluding recoveries made from upgraded accounts) 179.18 162.67

(iii) Technical / Prudential write offs 14.92 229.76

(iv) Write-offs other than those under (iii) above 39.56 1.70

Sub-total (B) 348.14 582.14

Gross NPAs as on 31st March (closing balance) (A-B) 454.62 546.46

Details of Technical write -offs and recoveries made: (` in crore)


Opening balance of Technical / Prudential written off accounts as at 1st April 385.85 163.64

Add: Technical / Prudential write offs during the year 14.92 229.76

Sub Total (A) 400.77 393.40

Less: Recoveries made from previously technical / prudential written - off accountsduring the year (B) 82.93 7.55

Closing balance as on 31st March (A-B) 317.84 385.85

5.11 Overseas Assets, NPAs and Revenue:


Total Assets NIL

Total NPAs NIL

Total Revenue NIL

F-93

5.12 Off-balance Sheet SPVs sponsored :

Name of the SPV sponsored

Domestic Overseas

NA NA

5.13 Prudential Regulatory treatment prescribed by RBI in respect of pension and gratuity:

In accordance with the Reserve Bank of India Circular under Ref No. DBOD.BP.BC.80 / 21.04.018 / 2010-11 dated 09-02-2011, theliability on account of employee benefits of ` 93.11 crore (towards pension ` 77.79 crore and towards Gratuity ` 15.32 crore) isamortized over a period of 5 years from FY 2010-11. The bank has charged to Profit & Loss Account a sum of ` 18.62 crorerepresenting 1/5th of the said aggregate amount of ` 93.11 crore and the balance amount to be amortized as of 31st March 2015is NIL.

5. 14 Disclosure on Remuneration:

a. Qualitative disclosures:

(a) Information relating to the composition and mandateof the Remuneration Committee.

(b) Information relating to the design and structure of remunerationprocesses and the key features and objectives of remunerationpolicy.

(c) Description of the ways in which current and future risks are takeninto account in the remuneration processes. It should include thenature and type of the key measures used to take account ofthese risks.

(d) Description of the ways in which the bank seeks to linkperformance during a performance measurement period with level of remuneration.

(e) A discussion of the bank’s policy on deferral and vesting of variableremuneration and a discussion of the bank’s policy and criteria foradjusting deferred remuneration before vesting and after vesting

(f) Description of the different forms of variable remuneration(i.e. cash, shares, ESOPs and other forms) that the bank utilizesand the rationale for using these different forms.


Compensation Policy drawn up on the guidelinesof the Reserve Bank of India was approved byBoard on 03.03.2012.

5,00,000 Equity shares have been granted to Mr.Rakesh Sharma (MD & CEO) under ESOS.

The members of the said committee as on31st March 2015 are 5.

Performance is evaluated based on KeyPerformance indicators as approved by theBank.


(g) Number of meeting held by the remunerationcommittee during the financial year and remunerationpaid its members

1 Meeting of the Compensation& Remuneration Committee ofthe Board (CRCB) having 5members was held.Remuneration paid tocommittee members is` 0.60 lacs; 2 Meetings of theNomination and RemunerationCommittee of the Board(NRCB) having 5 members washeld and the Remunerationpaid to the committee membersis ` 1.80 lacs

6 meetings of theCompensation &Remuneration Committee ofthe Board (CRCB) having 5members was held.Remuneration paid tocommittee members is` 1.35 lacs;

F-94


(h) (i) Number of employees having received a variable remuneration award during the financial year. NIL NIL

(ii) Number and total amount sign-on awards madeduring the financial year. NIL NIL

(iii) a) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL

b) Details of performance Bonus / Allowance ` 42,00,000/- ` 37,00,000/-(3 persons) (2 persons)

(iv) Details of severance pay, in addition to accrued Notice period pay NILbenefits, if any. ` 5,65,626/-

(3 persons)

(i) (i) Total amount of outstanding deferred remuneration, split into NIL NILcash, shares and shares - linked instruments and other forms.

(ii) Total amount of deferred remuneration paid out in the NIL NILfinancial year.

(j) Breakdown of amount remuneration awards for thefinancial year to show fixed and variable, deferred andnon-deferred.

(k) (i) Total amount of outstanding deferred remunerationand retained remuneration exposed to ex-postexplicit and/or implicit adjustments. NIL NIL

(ii) Total amount of reductions during the financial yeardue to ex-post explicit adjustments. NIL NIL

(iii) Total amount of reductions during the financial yeardue to ex-post implicit adjustments. NIL NIL

No Risk Takers werepaid Variable Pay

No Risk Takers werepaid Variable Pay

b. Quantitative disclosures: (Contd.)

5.15 Disclosures relating to securitization: NA

5.16 Credit Default Swaps: NIL

5.17 Intra – Group Exposure: (` In crore)

Particulars FY2014-15

(a) Total amount of intra-group exposures

(b) Total amount of top-20 intra-group exposures NIL

(c) Percentage of intra-group exposures to total exposure of the bank on borrowers / customers

(d) Details of breach of limits on intra-group exposures and regulatory action thereon, if any.

5.18 Transfer to Depositors Education and Awareness Fund (DEAF): (` In crore)

Particulars FY2014-15 FY2013-14

Opening balance of amounts transferred to DEAF NIL NIL

Add: Amounts Transferred to DEAF during the year 10.10 NIL

Less: Amounts reimbursed by DEAF towards claims NIL NIL

Closing balance of amounts transferred to DEAF 10.10 NIL

5.19 Unhedged Foreign Currency Exposure :

Based on the available data, available financial statements and the declaration received from borrowers, the bank has estimatedand provided ` 1.30 crore towards the liability for Unhedged Foreign Currency Exposure (UFCE) of their constituents in terms ofRBI Circular No. DBOD.NO.BP.BC.85 / 21.06.200 / 2013-14 dated 15th January 2014.

F-95

2014-2015 2013-2014

Total Unweighted Value

(Average)

Total Weighted Value (Average)

Total Unweighted Value

(Average)

Total Weighted Value (Average)

High Quality Liquid Assets

1. Total High Quality Liquid Assets (HQLA) - 834.06 NA NA

Cash Outflows

2 Retail deposits and deposits from small business customers, of which

719.32 59.99 NA NA

(i) Stable Deposits 238.73 11.94 NA NA

(ii) Less stable Deposits 480.59 48.05 NA NA

3 Unsecured wholesale funding, of which: 704.71 78.48 NA NA

(i) Operational deposits (all counterparties) 56.57 14.14 NA NA

(ii) Non-operational deposits (all counterparties)

648.14 64.34 NA NA

(iii) Unsecured debt 0.00 0.00 NA NA

4 Secured Wholesale funding 278.72 0.00 NA NA

5. Additional requirements, of which 2894.97 363.25 NA NA

(i) Outflows related to derivative exposures and other collateral requirements

10.26 10.26 NA NA

(ii) Outflows related to loss of funding on debt products

0.00 0.00 NA NA

(iii) Credit and Liquidity facilities 1027.03 195.27 NA NA

6 Other contractual funding obligations 68.25 68.25 NA NA

7 Other contingent funding obligations 1789.43 89.47 NA NA

8 Total Cash Outflows 4597.72 501.72 NA NA

Cash Inflows

9 Secured lending (e.g. reverse repos) 46.80 0.00 NA NA

10 Inflows from fully performing exposures 1722.75 1188.24 NA NA

11 Other cash inflows 87.09 87.09 NA NA

12 Total Cash Inflows 1856.64 1275.33 NA NA

Total Adjusted Value

Total Adjusted Value

13 TOTAL HQLA - 834.06 NA NA

14 Total Net Cash Outflows - 125.44 NA NA

15 Liquidity Coverage Ratio (%) - 668 NA NA

6.1 Liquidity Coverage Ratio: (` In Crores)

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6.2 Qualitative disclosure around LCR:

Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computingthe Liquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets(HQLA) into Level 1 and Level 2A/2B. As on 31.03.2015, the Bank has ` 983.03 Crore of HQLAs, of which, the main contribution isfrom Level – 1 type of assets with ̀ 924.01 Crore. The Level – 1 asset are in the form of surplus SLR investments / Excess CRR andCash in Hand.

As on 31.03.2015, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of` 479.95 Crore of cash outflows and ` 929.20 Crores of cash inflows over the next 30 days period. Of this total amount of ` 479.95Crores of cash outflows, the major component is in the form of unsecured wholesale funding and of the total ̀ 929.20 Crore of cashinflows, the major cash inflows are in the form of amounts to be received from Non – Financial wholesale counterparties.

6.3 The disputed Income Tax demand outstanding as on 31.03.2015 amounts to ` 52.61 Crore (previous year ` 109.91 Crore) andis included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of the disputedliabilities in view of favourable decisions by various appellate authorities on similar issues.

7. Previous year’s figures have been regrouped / reclassified wherever considered necessary to conform to the currentyear’s classification.




D.L.N. RAO

S.G. PRABHAKHARAN

S. DATTATHREYAN


PANKAJ VAISH

E.V. SUMITHASRI

VIVEK DEEP

R. RAVIKUMAR

Directors





F-97


Table DF - 1


Lakshmi Vilas Bank is a private sector bank incorporated in 1926 at Karur. Since the bank doesn't have any subsidiaries under itsManagement. Hence the CRAR is computed in standalone basis.

(i) Qualitative Disclosures:

List of group entities considered for consolidation.

List of group entities not considered for consolidation both under the accounting and regulatory scope of consolidation.No group affiliation

(ii) Quantitative Disclosures:


Not applicable

The aggregate amount of capital deficiencies in all subsidiaries which are not included in the regulatory scope of consolidationi.e. that are deducted:

Not applicable

The aggregate amounts (e.g. current book value) of the bank's total interests in insurance entities, which are risk-weighted:Not applicable

Any restrictions or impediments on transfer of funds or regulatory capital within the banking group:Not applicable

Table DF - 2

Capital AdequacyQualitative Disclosures:

A summary discussion of the bank's approach for assessing the adequacy of its capital to support current and futureactivities.

The Bank is exposed to Credit risk, Market risk, Operational risk and other Pillar II risks. Based on the scale of business operationsapproaches have been put in place to compute the required capital of the bank and controls that are commensurate the risk profileof the bank. The capital requirement for the estimated future business levels are assessed in periodic intervals. The bank hasadopted the following approaches for computing the capital charge.

Credit Risk – Standardized Approach

Market Risk – Standardized Duration Approach

Operational Risk – Basic Indicator Approach

• The Business projections, Capital requirement, Assessment methodology, controlling mechanism, etc., have been discussed inICAAP document and it has been reviewed on yearly basis.

• CRAR has been computed based on the Basel III guidelines and it is well above the regulatory minimum level of 9% (other thancapital conservation buffer and Countercyclical Capital buffer etc.).

Quantitative Disclosures: (` in lacs)


Authorized Capital 3000.00 10.00 30000.00

Issued Capital 1806.75 10.00 18067.50

Subscribed Capital 1791.67 10.00 17916.70

Called up/paid up Capital 1791.67 10.00 17916.70

The Bank's shares are listed on the National Stock Exchange Limited and Bombay Stock Exchange Limited.

As on 31.03.2015, the bank does not have capital in the form of Additional Tier-I.

Tier 1 capital includes Equity share capital, Reserves comprising of Statutory reserves, Capital and Other Revenue reserves,Share premium and Balance in Profit and Loss account and less intangible assets.

F-98

Tier 2 Capital consists of the general provision on Standard assets, Loan loss reserve, Provision on NPA assets sold, Revaluationreserve, Investment fluctuation reserve and Subordinated Bonds (discounted value).

Break up of capital funds: (` In lacs)

A. Tier I Capital Elements

1. Paid up capital 17916.66

2. Reserves and surplus 129054.20

3. Gross Tier I Capital 146970.86

4. Less (Intangible Assets) 18055.16

5. Net Tier I Capital 128915.70

B. Tier II Capital Elements

1. General Provisions and Loan loss Reserve 5538.79

2. Subordinated Debt (Lower Tier II bonds) 17520.00

3. Provision for restructured advances 3974.13

4. Revaluation Reserve 3530.54

5. Investment Fluctuation Reserve 72.74

6. Gross Tier II capital 30636.20

7. Less (Cross holdings) 2799.00

8. Net Tier II Capital 27837.20

Break up of Capital Requirements: (` In lacs)

Risk Type

b) Capital requirements for Credit Risk 106622.77

Portfolios subject to standardized approach

Cash & Bank 422.43

Investments (Under HTM - RIDF) 94.80




Off Balance sheet Exposure 5438.25





Equity Risk 1278.08



Total Risk weighted Assets (b+c+d)*100/9 1382095.20

Total Capital funds 156752.90


e) Common Equity Tier 1, Tier I and Total Capital ratios:

For the top consolidated group; and for significant bank subsidiaries (stand alone or sub-consolidated depending on how theframework is applied).

Not applicable

F-99



Credit Risk:


To ensure business continuity with growth and stability.

To ensure that the bank holds adequate capital in alignment with risks undertaken as well as the regulatory requirements fromtime to time.

To optimize risk-return profile by providing a framework for risk-based pricing.

To provide decision support for entry / exit strategies.

To provide a framework for monitoring risk profile of the bank through structured reports.

To facilitate the identification of risks in various activities undertaken by the bank through its operating units.

To provide guidance on measurement of risks and their quantification for assessing the level of risk under portfolio management.

To provide guidance on risk mitigation for ensuring customer retention while promoting risk-reward consciousness at all levelsof operation.

To set / monitor prudential risk limits in tune with the business strategy, capital adequacy and regulatory prescriptions.

To ensure the adherence to these risk limits through defining the reporting structures and systems.

To ensure compliance with other regulatory prescriptions.

The bank proposes to keep its overall risk profile as moderate and stable for the medium term.

Risk appetite and risk-return profile, credit risk strategy shall also include a statement of the banks willingness to grant credit basedon:

• exposure type (for example, commercial, consumer, real estate,etc.,),

• economic sector (e.g. textile, iron etc.),

• geographical location,

• currency,

• maturity,

• anticipated profitability,

• identification of target markets / business sectors (like priority sector lending),

• the overall credit portfolio composition, and

• preferred levels of diversification & concentration tolerances.

Credit risk strategy of the bank shall provide continuity in approach considering cyclical approach of the economy and the resultingshifts in the composition and quality of the overall credit portfolio.


F-100


Comprehensive Risk Management Policy is put in place and the same has been approved by the Board. The hierarchy of the IRMDstarts from Board of Directors. Board is responsible for approving & reviewing on a periodical basis credit risk related policies,strategy & limits. Further Board has sub level committee (IRMCB) to review the risk limits, monitor the functioning of the IRMC-Eand issue necessary directions if require.

The Scope and nature of risk reporting and / or measurement systems

Risk-rating model is an important tool and is an integral part of the Credit Risk Management. The benefits of a robust system basedrating model.

Serves as a single point indicator of diverse risks of a borrower.Enables banks to take informed credit decisions in a consistent manner.Facilitates adoption of risk-based pricing .Arriving at Facility Risk rating for the particular facility / product based on the comforts of securities / guarantors.

IInternal credit rating models / systems are an important tool in monitoring the quality of individual credits, as well as the totalportfolio. A well-structured internal risk rating system is a good means of differentiating the degree of credit risk in the differentcredit exposures of the bank. This will allow more accurate determination of the overall characteristics of the credit portfolio,concentrations, problem credits, and the adequacy of loan loss reserves.

Internal credit rating framework enables the Bank to standardize and uniformly communicate the "judgement" in credit selectionprocedures but is not a substitute to the vast lending experience accumulated by the bank's professional staff.

In order to make the credit risk assessment more consistent and effective, a two dimensional approaches to measure risk comprisingborrower risk (Obligor Rating) and transaction risk (Facility Rating) has been implemented.

Use of Risk Rating Models / Systems

• Individual credit selection, wherein a borrower or a particular exposure/ facility is rated.• Pricing of the facility / loan.• Deciding the limits & tenure of the proposed credit assistance.• Portfolio-level analysis and portfolio management.• Frequency and intensity of monitoring of the exposures.• Internal MIS.• General provision "reasonable over provisioning" in addition to statutory prescribed provision.• Assessing the aggregate risk profile of bank.

Board of Directors

Integrated Risk Mgt. Committee -Board

Integrated Risk Mgt. Committee -Executives(Credit Risk Mgt. Committee / ALCO /


Integrated Risk Mgt. Deptt. (IRMD)

Credit Risk Mgt. Deptt. Operational Risk Mgt. Deptt.

Market Risk Mgt. / Asset Liability Mgt. Deptt.

Internal Audit


Business Units

Organization Structure IRMD-Credit Risk Management

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The Bank has a multi-tier structure for sanction of credit proposals, with proper delegation of lending powers at various levels ofofficers & executives, duly approved by Board.

The powers vested at each level depend on the quantum and type of the loan facility and the overall exposure to the borrower/group.

The Bank has a system under which the lending powers exercised by delegated authority are reported to and reviewed by a higherauthority under the Internal Loan Review Mechanism.

A two dimensional approach to measure risk comprising borrower risk (Obligor Rating) and transaction risk (Facility Rating) hasbeen implemented. The Credit Risk Assessment System (CRAS) operated through the risk rating models shall form the fulcrum ofcredit risk management.

Policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness ofhedges / mitigants

As per the RBI guidelines, eligible financial collaterals have been taken into account for risk mitigation purpose.

Bank is having a system in place to monitor compliance with country exposure limits. Exceptions are reported, approved andrectified as per laid down procedures.

Bank is having an effective system in place to generate management reports which are detailed enough for the senior managementreview and to identify exceptions in a timely manner.

Market Risk:

Strategies and processes

The Bank has policies like Asset Liability Management Policy, Investment & Forex Risk Management Policy to address the liquidityrisk and market risk respectively arising out of its banking book and trading book of investment portfolio.

Mid office is functioning independent of treasury and it monitors limits, trigger of investments, Cut (stop) loss limit, Open positionlimit etc., Further it assess various limits set out by RBI and as stipulated in Investment/ trading book Policy, and keeps track onrating migration of rated securities on a daily basis. It fixes the overall counter-party exposure limits (Banks & FIs).

The structure and organization of the relevant risk management function

The Asset Liability Committee (ALCO) is responsible for

Managing Interest Rate Risk and Liquidity Risk of the Banking Books.

Pricing of Assets and Liabilities.

Monitor and control the quality of the Balance Sheet.

Review and control of limits, procedures, reports, ratios & market trends, which impact bank's Balance Sheet.

Review the treasury operations including trading.

Differential pricing of wholesale deposits be delegated to Planning & Development.

The scope and nature of risk reporting and / or measurement systems

The ALM Policy will be operated through the Integrated Risk Management Department (IRMD) which is responsible for evolvingappropriate systems & procedures for ongoing identification & analysis of Balance Sheet risks and laying down parameters formanagement of these risks. IRMD will, therefore, have the responsibilities of periodic monitoring and control of the risks and thesame has been reported to IRMC-E & IRMC-B.

Policies for hedging and/or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants.

Board approved Investment and Forex policy are put in place. Policies for hedging/ mitigating risk and strategies and processes formonitoring the continuing effectiveness of hedges / mitigants are discussed in ALCO.

The Structural liquidity statement is prepared on a daily basis to analyze the liquidity profile of the bank in a static manner. Exchangerisk is managed by fixing limits on position limits - Day light and Overnight limits, Single Deal limit, Stop Loss limit and OverallOvernight Open Exchange position limit. Additional liquidity ratios reviewed on a quarterly basis against the limits set under stockapproach.

Interest rate risk is analyzed from earnings perspective using Traditional Gap analysis and Economic value perspective usingDuration Gap analysis on a Quarterly basis. Further stress testing process conducted under scenario as well as stock approach toestimate the impact on various conditions.

F-102

Operational Risk


The strategy for the overall management of operational risk is in alignment with the business objectives & risk appetite of the bankconsidering the size, nature and complexities of the bank activities.


The Structure and organization of the relevant risk management function

Operational Risk Management is organized within the IRMD and will report to the head of the risk. The hierarchy of ORM within theorganizational chart for governance purposes is presented below. These roles and responsibilities relate only to the activitiesrelating to operational risk management.Department

A well defined Operational risk Management policy is put in place. The role of Board vests in setting business strategy, riskappetite, policies, governance, management framework, methodology of measurement and assessment, internal audit, report tostakeholders on risk management, etc.

The Scope and nature of risk reporting and/or measurement systems

The scope of risk reporting is to establish an explicit operational risk management process that results in the identification, evaluation,assessment, measurement, analysis, monitoring, control, mitigation and reporting of operational risks. This process also includesindependent evaluation of operational risk management function by the Internal Audit Department and to report its findings to theBoard / Senior Management as an assurance for the effective discharge of responsibilities with respect to management of operationalrisk.

Policies and procedures are put in place for control / mitigate material operational risks to adjust the risk appetite / tolerance levelbased on its risk control and mitigation strategies. For those risks that cannot be controlled, the bank decides whether to acceptthese risks, reduce the level of business activity involved, or withdraw from this activity completely. Some major control/mitigationtechniques like Sound Internal Control System, Insurance, Standards for Insurance Recognition, Retention/Self Insurance, BusinessContinuity and Disaster Recovery Plan, Outsourcing of financial services, Information Technology security, Internal Audit, ExternalAudit, Reporting are deployed in the framework.

Interest Rate Risk in Banking Book

Strategies and Processes

Interest Rate Risk is measured in two different ways. Earnings perspective using Traditional Gap Analysis is to assess the impactof adverse movement in interest rate on the Net Interest Income (Earnings at Risk) and economic value perspective using DurationGap Analysis to assess the impact of adverse movement in interest rate on the market value of Bank's equity.

Structure and Organization of Risk Management Function

ALM policy will manage and monitor the limits / guidance values / target set on interest rate risk of the Banking Book. IRMC-B andALCO at the executive level are responsible for efficient and effective management of Interest rate risk in Bank’s business.

Integrated Risk Mgt. Committee-E

CFO (Chief Financial Officer)

Operational Risk Management Department

Audit Committee of Board


Operational Risk Coordinators from Business/Support Line

Board of Directors

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Scope and nature of risk reporting / measurement systems

The Duration/ Modified duration mainly depends on coupon, maturity and periodicity of payment of installments. Since the modifiedduration of the liabilities is less compared to the modified duration of assets, there would be fall in the equity value under majorstress. Modified duration of Equity is calculated on a quarterly basis. The capital charge for Interest rate risk in banking book isassessed based on drop in the Market value of equity under 200 bps changes in interest rate. The results of Traditional Gapanalysis and Duration Gap analysis including the adherence to tolerance limit set in this regard are monitored and the same hasbeen placed before ALCO/IRMC-B level.

Policies for hedging / mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants

Investment policy, Forex policy, ALM policy, Stress testing policy, Credit Risk Management policy are put in place to measure,mitigate / hedge the various risks.

Table DF - 3

Credit Risk

Credit Risk: General Disclosures

Qualitative Disclosures:The general qualitative disclosure requirement with respect to credit risk, includes the definitions of Past Due, NPA of a loan or aadvance and impaired assets (for Accounting Purposes), Out of order and Overdue. These definitions are as per the extant guidelinesof Reserve Bank of India.

Credit Risk

Credit risk in simple terms is the potential that bank's borrower or counterparty will fail to meet its obligations in accordance withagreed terms.

Credit risk is defined as the possibility of losses associated with default in repayment or diminution in the credit quality of borrowersor counterparties or diminution in the value of primary and/or collateral assets. In a bank's portfolio, losses stem from outrightdefault due to inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, settlementand other financial transactions.

Discussion of the Bank’s Credit Risk Management PolicyThe Board level approved Credit Risk Management Policy is put in place. The goal of the policy is to ensure that it is within theacceptable risk appetite and tolerance limit set by the bank. It manages the credit risk inherent in the entire portfolio as well as therisk in individual credits or transactions and it encompasses identification, measurement, monitoring and control of the credit riskexposures. Further it deals the structure, governance, framework, processes for effective and efficient management of the Creditrisk.

Quantitative Disclosures:


Fund Based * 2283222.95



* It includes loans/advances, fixed assets, other assets, cash, bank balances, balance with RBI and investments.

F-104

Geographic wise Distribution of Exposures: (` in lacs)

STATE NAME FUNDED NON-FUNDED TOTAL ExANDHRA PRADESH 106702.57 15580.33 122282.90CHATTISGARH 1019.48 40.33 1059.81GUJARAT 27657.39 1027.31 28684.70HARYANA 1287.22 1400.53 2687.75JHARKHAND 660.98 23.00 683.98KARNATAKA 207142.27 3446.35 210588.62KERALA 19404.11 71.03 19475.14MADHYA PRADESH 2987.32 124.13 3111.45MAHARASHTRA 287289.64 42645.33 329934.97NEW DELHI 63329.63 21820.32 85149.95ODISHA 284.19 3.95 288.14PUDUCHERRY 7939.27 546.51 8485.78RAJASTHAN 2543.58 5.00 2548.58TAMIL NADU 807692.32 58005.84 865698.16TELANGANA 100488.32 31664.60 132152.92UTTAR PRADESH 661.58 7.00 668.58WEST BENGAL 14194.59 579.56 14774.15Total 1651284.46 176991.12 1828275.58

Industry Wise distribution of Exposures: (` in lacs)

S. Industry Name Funded Non-funded Total % grossNo. credit1 Mining and Quarrying 21901.19 287.73 22188.92 1.212 Food Processing 58804.82 9453.56 68258.38 3.733 Beverages (excluding Tea & Coffee) and Tobacco 13171.73 91.51 13263.24 0.734 Textiles 91877.79 8905.39 100783.18 5.515 Leather and Leather products 495.69 4.00 499.69 0.036 Wood and Wood Products 9677.31 12631.03 22308.34 1.227 Paper and Paper Products 12188.88 199.04 12387.92 0.688 Petroleum (non-infra), Coal Products (non-mining) and

Nuclear Fuels 518.20 0.00 518.20 0.039 Chemicals and Chemical Products (Dyes, Paints, etc.) 29539.96 19803.91 49343.87 2.7010 Rubber, Plastic and their Products 6529.69 1053.76 7583.45 0.4111 Glass & Glassware 2684.60 5.67 2690.27 0.1512 Cement and Cement Products 15821.46 70.31 15891.77 0.8713 Basic Metal and Metal Products 83802.32 19826.56 103628.87 5.6714 All Engineering 20138.46 11320.95 31459.41 1.7215 Vehicles, Vehicle Parts and Transport Equipments 5835.30 77.74 5913.04 0.3216 Gems and Jwellery 10574.83 590.00 11164.83 0.6117 Construction 173.17 0.00 173.17 0.0118 Infrastructure 143758.09 24423.59 168181.68 9.20

Residual Advance 30003.38 560.12 30563.50 63.52Other Industries 1093787.59 67686.25 1161473.84 1.67Total 1651284.46 176991.12 1828275.58 100.00

Note: The industries break-up given on the same lines as prescribed for DSB returns. Residual advances are educational loans,Aviation sector, Housing loans, Gold loans, Loan against deposits, Personnel loan, Staff loan, Consumer loans, Vehicle loans, etc.The Industries which has crossed 5% of gross credit exposure are:

a) Infrastructure - 9.20%

b) Basic Metal and Metal Products - 5.67%

c) Textiles - 5.51%

F-105

Cash Balance With RBI

Balance With Other

Banks

Investments Repo - Assets

Call Money Placements

Advances Fixed Assets

Other Assets

Overdue to 1 Day 23726.54 3761.89 3030.33 11596.75 0.00 0.00 18947.99 0.00 4428.142-7 Days 0.00 1633.33 0.00 15264.25 11440.00 10000.00 40776.31 0.00 361.178-14 Days 0.00 2997.91 0.00 16200.73 0.00 0.00 39975.95 0.00 420.6515-28 Days 0.00 2001.91 0.00 17556.94 0.00 0.00 69478.95 0.00 840.2229 Days to 3 Months 0.00 9296.36 0.00 60160.95 0.00 0.00 343532.75 0.00 3724.213-6 Months 0.00 10456.25 0.00 81551.49 0.00 0.00 93705.48 0.00 5406.806 Months-1 Year 0.00 17557.86 0.00 104535.97 0.00 0.00 185088.62 0.00 0.001-3 Years 0.00 24878.43 541.02 152166.40 0.00 0.00 644496.57 0.00 74695.073-5 Years 0.00 4997.45 0.00 61894.07 0.00 0.00 69934.33 0.00 47.55Over 5 Years 0.00 13036.10 0.00 105501.22 0.00 0.00 129265.52 24341.30 3834.57Total 23726.54 90617.49 3571.35 626428.77 11440.00 10000.00 1635202.47 24341.30 93758.38

Asset Quality

Amount of NPAs (Gross) (` in lacs)

SUBSTANDARD 12878.81

DOUBTFUL 1 15088.49

DOUBTFUL 2 9600.39

DOUBTFUL 3 1442.91

LOSS 6451.34

TOTAL 45461.94

NET NPAS `̀̀ 30248.70 lacs

NPA RATIOS:

GROSS NPAS TO GROSS ADVANCES - 2.75%

NET NPAS TO NET ADVANCES - 1.85%

MOVEMENT OF NPAS (GROSS) (` in lacs)

OPENING BALANCE 54646.45

ADDITIONS 25630.24

REDUCTIONS 34814.75

CLOSING BALANCE 45461.94

MOVEMENT OF PROVISIONS FOR NPAS (` in lacs)


PROVISIONS MADE DURING THE PERIOD 13835.21

WRITE-BACK/WRITE -OFF OF EXCESS PROVISIONS 7523.17


AMOUNT OF NON-PERFORMING INVESTMENTS ` 1077.66 lacs

AMOUNT OF PROVISIONS HELD FOR NON-PERFORMING INVESTMENTS ` 913.67 lacs

Residual Contractual maturity breakdown of assets (` in lacs)

F-106

MOVEMENT OF PROVISIONS FOR DEPRECIATION ON INVESTMENTS (` in. lacs)


PROVISIONS MADE DURING THE PERIOD 203.12

WRITE-OFF/ WRITE-BACK OF EXCESS PROVISIONS 0.00


Table DF - 4

Credit Risk: Disclosures for portfolios subject to the Standardized Approach

a) For exposure amounts after risk mitigation subject to the standardized approach, amount of a bank's outstanding (rated andunrated) in the following three major risk buckets as well as those that are deducted: (` in. lacs)



Fund Based

Loans & Advances 992797.40 350480.47 506418.41 495335.57 152068.65 213923.60 1651284.46 1059739.64

Investments 394193.01 1053.32 0.00 0.00 0.00 0.00 394193.01 1053.32

Other Assets* 176318.54 4693.72 61426.94 58785.77 0.00 0.00 237745.48 63479.49

Loans & Advances Deducted(Taken for Mitigation purpose) 408383.97 0.00 13724.01 0.00 0.00 0.00 422107.98 0.00

Total Fund Based 1563308.95 356227.51 567845.35 554121.34 152068.65 213923.60 2283222.95 1124272.45

Non Fund Based inc.Contingent credit 27859.96 5218.27 108726.35 37742.15 40404.81 17464.51 176991.12 60424.93

Total Credit Risk Exposures 1591168.91 361445.78 676571.70 591863.49 192473.46 31388.11 2460214.07 1184697.38

* Other assets includes cash, balance with RBI, balance with other banks, fixed assets and others

** BV: Book Value; RWA: Risk Weighted Assets.

Table DF - 5


Quantitative Disclosures

a) The general qualitative disclosure requirement with respect to credit risk mitigation including

Policies and process for and an indication of the extent to which the bank makes use of, on and off balance sheetnetting;



Valuation should be based on the current market value of the collateral and should not be biased in order to enable the bank, togrant a higher credit limit to the borrower or improve its internal credit rating, make a smaller amount of provision or continueinterest accrual for a problem credit.

Collateral should be revalued on a regular basis, though the frequency may vary with the type of collateral involved and the nature& the internal credit rating of the underlying credit e.g. frequency for shares and properties as collateral would be different.

Collaterals & guarantees are properly evaluated with respect to legal validity, enforceability in all relevant jurisdictions, etc., for thepurpose of netting as credit risk mitigants as per the policy.

A more conservative approach should be adopted for valuing the collateral of problem credits because the forced-sale value,rather than the open market value, is likely to be closer to what eventually may be realized from an asset sale when the marketconditions are un-favorable. Therefore, a discount to the estimated market value should be applied where appropriate.

F-107

Type of Exposure Notional Exposure ( After CCF)

Eligible Financial Collaterals

Net Exposure

On Balance Sheet 386329.14 426958.14Off Balance Sheet 80573.23 22279.90 58293.33Total 466902.37 449238.04 58293.33


Under Standardized approach, the following collateral instruments used as risk mitigants for the capital computation.


2. Gold ( The value of the gold arrived after notionally converting into 99.99% purity).


4. Kisan Vikas Patra and National Savings Certificates (with no lock-in period).

5. Life insurance policies with a declared surrender value of an insurance company which is regulated by an insurance sectorregulator.

6. Debt Securities issued by Public Sector Entities and other entities (including banks and other primary dealers) rated by chosenrating agency attracting 100% risk weight or lesser risk weight.( i.e. rated atleast BBB(-) or A3 for short-term debt instruments).

7. Debt Securities not rated by a chosen Credit Rating Agency in respect of which banks should be sufficiently confident aboutthe market liquidity where these are

a) Issued by a bank,


c) Classified as senior debt,

d) all the rated issues of the same senior by the issuing bank are rated atleast BBB (-) or A3 by a chosen Credit RatingAgency, and

e) The bank has no information to suggest that the issue justifies a rating below BBB (-) or A3 by a chosen Credit RatingAgency.

8. Units of Mutual Funds regulated by the securities regulator of the jurisdiction of the Bank's operation and mutual funds where

a. A price for the units is publicly quoted daily i.e. where the daily NAV is available in public domain.

b. Mutual fund is limited to investing in the permitted instruments listed.

• Information about (market or credit ) risk concentrations within the mitigation taken

Majority of the exposures are retail exposures and insulated with adequate liquid collateral by way of cash margin, KVP, fixeddeposits, National Savings Certificate, Life Insurance Policies etc for reducing the capital buffer after applying applicablehaircuts in the respective securities.


a) For each separately disclosed credit risk portfolio the total exposure (after, where applicable, on or off balance sheet netting) thatis covered by eligible financial collateral after the application of haircuts.

Credit Risk exposure covered by Eligible Financial Collaterals (` in lacs)

b) For each separately disclosed portfolio the total exposure (after, where applicable, on or off-balance sheet netting) that is coveredby guarantees/credit derivatives (whenever specifically permitted by RBI).

NIL

F-108

Table DF - 6

Securitization Exposure- Disclosure for Standardized Approach

Qualitative disclosures

General Disclosures on securitization exposures of the Bank

Objectives of Securitization activities of the Bank

Presently bank having limited exposure towards securitization. Further explore the possibilities of expanding the scope of lendingactivities through securitization process and with the objective of managing the portfolio risk, credit risk, interest rate risk, liquidityrisk and capital adequacy.

Securitization Process

Bank has a AAA rated securitization exposure in banking book. Before entering into the securitization transaction, the bank willcollect the information, which is nature from the originator. Further the information is historical in nature and such information willbe useful to understand the repayment schedule, cash flows, principle and other charges, credit risk on underlying assets, etc.,

Monitoring Mechanism

Monitoring of the pooled assets effectively carried out by the Regional Office Level. Further the existence of assets or unit inspectionfor the loans under the securitization pool is verified on random basis before disbursement.

Bank’s Policy on Securitization

Bank will not enter into a securitization transaction with originator whose External rating not below than A category. Further bankconsider the external rating of the Originator as well as Securitized portfolio which is carried out by a third party with a view toassess credit quality of the pool.

Quantitative Disclosure – Banking Book

Total Amount of exposures securitized by the Bank ` 3587.18 lacs

Losses recognized towards the exposure during the current period –

Amount of Assets intended to be securitized within a year –

Of which above, amount of assets originated within a year before securitization –

The securitized exposures in banking book are vehicle loans. The underlying assets are vehicles and further capital charges arecomputed by applying risk weight of 75% on the exposure (due to regulatory retail).

Table DF - 7



a) Approach for Computation of Capital charge for Market RiskStandardized Duration Approach is used for calculating Capital charge for Market Risk. Components under Market risk are:(i) Specific Risk – Capital Charge for market risk is computed based on risk weights prescribed by the regulator.

(ii) General Market Risk is calculated forSecurities under HFT categorySecurities under AFS categoryOpen foreign exchange position limitsTrading Positions in Derivatives

(iii) Alternative Risk

The total Capital charge for market risk is equal to greater of Specific Capital charge plus General Market Risk Capital Chargeor Alternative total capital charge.


Interest rate risk ` 7551.69 lacs

Equity position risk ` 1278.09 lacs

Foreign exchange risk ` 139.08 lacs

F-109

Table DF - 8

Operational Risk

The Bank has put in place important policies like Operational Risk Management, Information System Security, Know your Customer(KYC) and Anti Money Laundering (AML), Business Continuity and Disaster Recovery Management. The updated manuals on allimportant functional areas have been circulated to the branches. Risk Based Internal Audit is introduced in all branches in ourBank.The Operational Risk Management Policy outlines the Organisation structure and covers the process of identification,assessment / measurement and control of various operational risks. Internal control mechanism is in place to control and minimizethe operational risks.Capital charge for operational risk is computed as per the Basic Indicator Approach. The average of the grossincome, as defined in the New Capital Adequacy Framework guidelines, for the previous 3 years i.e 2013-14, 2012-13, 2011-12 isconsidered for computing the capital charge. The required capital is `̀̀ 8796.95 Lacs

Table DF - 9

Interest Rate Risk in the Banking Book (IRRBB)

Interest Rate Risk in Banking Book (IRRBB) refers to the risk of loss in earnings and economic value of the Bank’s Banking Bookas a consequence of movement in interest rates. The Bank has significant portion of its assets and liabilities portfolio not marked tomarket and is carried on the books of the Bank at historical values. Thus, the economic value of such assets and liabilities isgenerally not ascertained on a regular basis and can be a significant source of risk if the asset or liability is not held till maturity.

IRRBB Earnings Perspective

The immediate impact of changes in interest rates in the market is on bank’s earnings by changing the Net Interest Income (NII).The interest rate risk when viewed from this perspective is known as ‘Earnings Perspective’ .

The asset liability profile up to 6 months is ‘asset sensitive’. The positive mismatches in the near term time buckets (up to 6 months)will be beneficial to the bank if the interest rates increases in the economy.

Interest Rate Risk – Economic Value Perspective

The long-term impact of changes in interest rates in the economy will be on bank’s Market Value of Equity (MVE) since theeconomic value of the bank’s assets, liabilities and off-balance sheet positions get affected due to variations in market interestrates.

Duration Gap Analysis (DGA) for IRR management is a simple approach to measure the volatility of market value of equity (MVE)in response to the changes in interest rates in the economy.

Since the modified duration of the liabilities are less compared to the modified duration of assets, there would be a fall in the equityvalue under major stress. In order to bring down the percentage of fall in market value of equity and earnings at risk under majorstress, we have been mobilizing term deposits with longer tenure i.e., 3-5 years and over 5 years. As longer the tenure of liabilities,higher will be the modified duration.

The level of IRRBB (Earnings Perspective & Economic Value Perspective) is being measured and monitored on a quarterly basisaiming at managing it within the limit over a period and minimizes the impact of interest rate movement on near term profitability.


Limits have been fixed for changes in Earnings at Risk and Market Value of Equity for 200bps shock in the interest rates. Theimpact in EaR and MVE is assessed in the following six different scenarios.

F-110

Scenario 1 Assets 1% 1% 1% 1% 1% 1% 1%

Liabilities 1% 1% 1% 1% 1% 1% 1%

Scenario 2 Assets 1% 1% 1% 1% -1% -1% -1%

Liabilities 1% 1% 1% 1% -1% -1% -1%

Scenario 3 Assets 2% 2% 2% -1% -1% -1% -1%

Liabilities 2% 2% 2% -1% -1% -1% -1%

Scenario 4 Assets 1% 1% 1% 1% 1% 1% 1%

Liabilities 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%

Scenario 5 Assets -0.25% -0.25% -0.25% -0.25% -0.25% -0.25% -0.25%

Liabilities 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%

Scenario 6 Assets 2% 2% 2% 2% 2% 2% 2%

Liabilities 2% 2% 2% 2% 2% 2% 2%

Stress Scenarios - Change in Rate of Interest

Bucket 7Bucket 6Bucket 5Bucket 4Bucket 3Bucket 2Bucket 1

> 5 years>3 to 5 years>1 to 3 years>6 monthsto 1 year

>3 to 6months

29 days -3 months

Upto 1Month

Stress TestScenario

Assets /Liabilities

Impact on Stress test Scenarios: (` In lacs)

Stress Test Scenario Impact on Impact onProfit Equity

Scenario 1 -221.62 5689.24

Scenario 2 -4415.46 -2553.03

Scenario 3 4961.95 -11957.78

Scenario 4 5432.64 -13970.77

Scenario 5 -11253.11 37897.71

Scenario 6 -443.23 11378.47

For a parallel shift of 200 bps, fall of NII is at ` 443.23 lacs and there would be increase of EVE by ` 11378.47 lacs.

Table DF - 10

General Disclosure for Exposures related to Counterparty Credit Risk

Counterparty exposures for other entities are assessed subject to exposure ceilings as per the policy of the bank. Capital forCounterparty Credit Risk exposure is assessed based on the Standardized approach.

Bank does not have bilateral netting. The Credit equivalent amount of the derivative exposure is assessed based on the CurrentExposure method.

Credit Exposure as on 31.03.2015 (` In lacs)

Notional Amount Gross Positive Potential Future Total Creditfair value of contracts Exposure Exposure


F-111

Basel III common disclosure template to be used during the transition of regulatory adjustments (i.e. from April 1, 2013 to December 31, 2017)


1 Directly issued qualifying common share capital plus related stock surplus (share premium) 83295.69



4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies)

Public sector capital injections grandfathered until January 1, 2018

5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)


Common Equity Tier 1 capital: regulatory adjustments

7 Prudential valuation adjustments



10 Deferred tax assets 7522.16





15 Defined-benefit pension fund net assets


17 Reciprocal cross-holdings in common equity 11.09

18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued share capital (amount above 10% threshold)

19 Significant investments in the common stock of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)


21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related tax liability)






26a of which: Investments in the equity capital of the unconsolidated insurance subsidiaries

26b of which: Investments in the equity capital of unconsolidated non-financial subsidiaries

26c of which: Shortfall in the equity capital of majority owned financial entities which have not been consolidated with the bank

26d of which: Unamortized pension funds expenditures

Regulatory Adjustments Applied to Common Equity Tier 1 in respect of Amounts Subject to Pre-Basel III Treatment

Table DF - 11

Composition of Capital

(` In lacs)

F-112






27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 to cover deductions



Additional Tier 1 Capital : Instruments 0.00

30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus (31+32)

31 of which: classified as equity under applicable accounting standards (Perpetual Non-Cumulative Preference Shares)

32 of which: classified as liabilities under applicable accounting standards (Perpetual debt Instruments)


34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and held by third parties (amount allowed in group AT1)


36 Additional Tier 1 capital before regulatory adjustments

Additional Tier 1 Capital: regulatory adjustments



39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common share capital of the entity (amount above 10% threshold)

40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)


41a Investments in the Additional Tier 1 capital of unconsolidated insurance subsidiaries

41b Shortfall in the Additional Tier 1 capital of majority owned financial entities which have not been consolidated with the bank

Regulatory Adjustments Applied to Additional Tier 1 in respect of Amounts Subject to Pre-Basel III Treatment


of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which are deducted from Tier 1 at 50%]


42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions

43 Total regulatory adjustments to Additional Tier 1 capital

44 Additional Tier 1 Capital (AT1)

44a Additional Tier 1 capital reckoned for capital adequacy

45 Tier 1 capital (T1 = CET1 + AT1) (29 + 44a) 128915.70

Tier 2 Capital : Instruments and provisions

46 Directly issued qualifying Tier 2 instruments plus related stock surplus 17520.00


F-113

48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties (amount allowed in group Tier 2)




Tier 2 Capital : regulatory adjustments

52 Investments in own Tier 2 instruments

53 Reciprocal cross-holdings in Tier 2 instruments 2799.00

54 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatory consolidation, net of eligible short positions, where the bank does not own more than 10% of the issued common share capital of the entity (amount above the 10% threshold)

55 Significant investments13 in the capital banking, financial and insurance entities that are outside the scope of regulatory consolidation (net of eligible short positions)


56a of which: Investments in the Tier 2 capital of unconsolidated subsidiaries

56b of which: Shortfall in the Tier 2 capital of majority owned financial entities which have not been consolidated with the bank

Regulatory Adjustments Applied To Tier 2 in respect of Amounts Subject to Pre-Basel III Treatment

of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which are deducted from Tier 2 at 50%]


57 Total regulatory adjustments to Tier 2 capital

58 Tier 2 capital (T2)

58a Tier 2 capital reckoned for capital adequacy 27837.20

58b Excess Additional Tier 1 capital reckoned as Tier 2 capital

58c Total Tier 2 capital admissible for capital adequacy (58a+58b)

59 Total capital (TC=T1+T2) (45+58C) 156752.90



of which: ...

60 Total risk weighted assets (60a+60b+60c) 1382095.19

60a of which: total credit risk weighted assets 1184697.38

60b of which: total market risk weighted assets 99653.92

60c of which: total operational risk weighted assets 97743.89

Capital ratios

61 Common Equity Tier 1 (as a percentage of risk weighted assets)

62 Tier 1 (as a percentage of risk weighted assets) 9.33

63 Total capital (as a percentage of risk weighted assets) 11.34

64 Institution specific buffer requirement (minimum CET1requirement plus capital conservation and countercyclical buffer requirements, expressed as a percentage of risk weighted assets)

65 of which: capital conservation buffer requirement



68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted Assets)

F-114

National minima (if different from Basel III)

69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 5.50

70 National Tier 1 minimum ratio (if different from Basel III minimum) 7.00

71 National total capital minimum ratio (if different from Basel III minimum) 9.00

Amounts below the thresholds for deduction (before risk weighting)

72 Non-significant investments in the capital of other financial entities




Applicable caps on the inclusion of provisions in Tier 2

76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior to application of cap)

9512.92


78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach (prior to application of cap)


Capital instruments subject to phase-out arrangements (only applicable between March 31, 2017 and March 31, 2022)


81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)


83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities


85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

F-115

Row No.of the template

Particular ` in lacs


Deferred tax assets (excluding those associated with accumulated losses) net of Deferred tax liability

7522.16

Total as indicated in row 10 7522.16

19 If investments in insurance subsidiaries are not deducted fully from capital and instead considered under 10% threshold for deduction, the resultant increase in the capital of bank




26b If investments in the equity capital of unconsolidated non-financial subsidiaries are not deducted and hence, risk weighted then:



44a Excess Additional Tier I capital not reckoned for capital adequacy (difference between Additional Tier I capital as reported in row 44 and admissible Additional Tier I capital as reported in 44a)

of which: Excess Additional Tier I capital which is considered as Tier 2 capital under row 58b



Total of row 50 13116.21

58a Excess Tier 2 capital not reckoned for capital adequacy (difference between Tier 2 capital as reported in row 58 and T2 as reported in 58a)


F-116

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re o

f D

eben

ture

s (

“Bon

ds’)(

Ser

ies

VII)

Uns

ecur

ed

Red

eem

able

N

on C

onve

rtib

le

Sub

ordi

nate

d (

Tie

r- II

) B

onds

in

the

natu

re o

f D

eben

ture

s (

“Bon

ds’)(

Ser

ies

VII)

Uns

ecur

ed N

on

Con

vert

ible

R

edee

mab

le B

asel

III

Com

plia

nt (

Tie

r-

II) B

onds

in th

e na

ture

of D

eben

ture

s (

Ser

ies

VIII

)

8A

mou

nt r

ecog

nize

d in

re

gula

tory

cap

ital

1752

0 la

cs60

0 la

cs0.

00 la

cs79

80 la

cs11

30 la

cs78

10 la

cs

9P

ar v

alue

of i

nstr

umen

t (in

R

s.)

Rs.

10 p

er s

hare

10.0

0 la

cs10

.00

lacs

10.0

0 la

cs10

.00

lacs

10.0

0lac

s

Tab

le D

F -

13

Mai

n F

eatu

res

of R

egul

ator

y C

apita

l Ins

trum

ents

F-117

10A

ccou

ntin

g cl

assi

fi cat

ion

Sha

reho

lder

s E

quity

Liab

ility

Liab

ility

Liab

ility

Liab

ility

Liab

ility

11O

rigin

al d

ate

of is

suan

ceV

ario

us D

ates

30.0

9.20

0625

.11.

2009

10.0

2.20

1210

.02.

2012

24.0

3.20

14

12P

erpe

tual

or

date

dP

erpe

tual

Dat

edD

ated

Dat

edD

ated

Dat

ed

13O

rigin

al m

atur

ity d

ate

No

Mat

urity

30.0

4.20

1625

.11.

2015

10.0

2.20

1810

.02.

2022

24.0

3.20

24

14Is

suer

cal

l sub

ject

to p

rior

supe

rvis

ory

appr

oval

No

--

--

-

15O

ptio

nal c

all d

ate,

co

ntin

gent

cal

l dat

es a

nd

rede

mpt

ion

amou

nt

NA

--

-C

all o

ptio

n ex

erci

sabl

e on

ly if

th

e in

stru

men

t has

ru

n fo

r 10

yea

rs;

fi rst

cal

l dat

e is

11.

02.2

022.

F

urth

er c

all o

ptio

n ex

erci

sed

only

w

ith th

e pr

ior

appr

oval

of R

BI.

The

se b

onds

are

re

deem

able

at p

ar.

Cal

l opt

ion

exer

cisa

ble

only

if

the

inst

rum

ent h

as

run

for

10 y

ears

; fi r

st c

all d

ate

is

25.0

3.20

24. F

urth

er

call

optio

n ex

erci

sed

only

with

the

prio

r ap

prov

al o

f RB

I. T

hese

bon

ds a

re

rede

emab

le a

t par

.

16S

ubse

quen

t cal

l dat

es, i

f ap

plic

able

--

--

-

Cou

pons

/ di

vide

nds

--

--

-

17F

ixed

or

fl oat

ing

divi

dend

/co

upon

Fix

edF

ixed

Fix

edF

ixed

Fix

ed

18C

oupo

n ra

te a

nd a

ny r

elat

ed

inde

x9.

95%

10.8

0%11

.40%

11.4

0%11

.80%

19E

xist

ence

of a

div

iden

d st

oppe

rN

AN

oN

oN

oN

oN

o

20F

ully

dis

cret

iona

ry, p

artia

lly

disc

retio

nary

or

man

dato

ryF

ully

Dis

cret

iona

ryM

anda

tory

Man

dato

ryM

anda

tory

Man

dato

ryM

anda

tory

21E

xist

ence

of s

tep

up o

r ot

her

ince

ntiv

e to

red

eem

No

No

No

No

No

No

22N

oncu

mul

ativ

e or

cum

ulat

ive

Non

-cum

ulat

ive

Cum

ulat

ive

Cum

ulat

ive

Cum

ulat

ive

Cum

ulat

ive

Cum

ulat

ive

23C

onve

rtib

le o

r no

n-co

nver

tible

NA

Non

- co

nver

tible

Non

-

co

nver

tible

Non

-con

vert

ible

Non

-con

vert

ible

Non

-con

vert

ible

S.

No.

Dis

clos

ure

tem

plat

e fo

r m

ain

feat

ures

of

regu

lato

ry c

apita

l in

stru

men

ts

Equ

ity S

hare

sS

erie

s -

VS

erie

s -V

IS

erie

s -

VII

(A)

Ser

ies

- V

II (B

)S

erie

s -V

III

F-118

24If

conv

ertib

le, c

onve

rsio

n tr

igge

r(s)

NA

NA

NA

NA

NA

NA

25If

conv

ertib

le, f

ully

or

part

ially

NA

NA

NA

NA

NA

NA

26If

conv

ertib

le, c

onve

rsio

n ra

teN

AN

AN

AN

AN

AN

A

27If

conv

ertib

le, m

anda

tory

or

optio

nal c

onve

rsio

nN

AN

AN

AN

AN

AN

A

28If

conv

ertib

le, s

peci

fy

inst

rum

ent t

ype

conv

ertib

le

into

NA

NA

NA

NA

NA

NA

29If

conv

ertib

le, s

peci

fy is

suer

of

inst

rum

ent i

t con

vert

s in

toN

AN

AN

AN

AN

AN

A

30W

rite-

dow

n fe

atur

eN

oN

oN

oN

oN

oN

o

31If

writ

e-do

wn,

writ

e-do

wn

trig

ger(

s)N

AN

AN

AN

AN

AN

A

32If

writ

e-do

wn,

full

or p

artia

lN

AN

AN

AN

AN

AN

A

33If

writ

e-do

wn,

per

man

ent o

r te

mpo

rary

NA

NA

NA

NA

NA

NA

34If

tem

pora

ry w

rite-

dow

n,

desc

riptio

n of

writ

e-up

m

echa

nism

NA

NA

NA

NA

NA

NA

35P

ositi

on in

sub

ordi

natio

n hi

erar

chy

in li

quid

atio

n (s

peci

fy in

stru

men

t typ

e im

med

iate

ly s

enio

r to

in

stru

men

t)

NA

All

Dep

osito

rs

and

othe

r C

redi

tors

of t

he

Ban

k

All

Dep

osito

rs

and

othe

r C

redi

tors

of t

he

Ban

k

All

Dep

osito

rs

and

othe

r C

redi

tors

of t

he

Ban

k

All

Dep

osito

rs a

nd

othe

r C

redi

tors

of

the

Ban

k

All

Dep

osito

rs a

nd

othe

r C

redi

tors

of t

he

Ban

k

36N

on-c

ompl

iant

tran

sitio

ned

feat

ures

--

--

--

37If

yes,

spe

cify

non

-com

plia

nt

feat

ures

--

--

--

S.

No.

Dis

clos

ure

tem

plat

e fo

r m

ain

feat

ures

of

regu

lato

ry c

apita

l in

stru

men

ts

Equ

ity S

hare

sS

erie

s -

VS

erie

s -V

IS

erie

s -

VII

(A)

Ser

ies

- V

II (B

)S

erie

s -V

III

F-119

Table DF - 14


Instruments Series-V Series - VI Series -VII (A) Series - VII (B) Series-VIII



Rate of Interest 9.95% 10.80% 11.40% 11.40% 11.80%

Amount 3000.00 10000.00 19950.00 5050.00 7810.00Lacs Lacs Lacs Lacs Lacs

Nature of Instrument Bonds in nature of Bonds in nature of Bonds in nature of Bonds in nature of Bonds in nature ofDebentures / Debentures/ Debentures/ Debentures / Debentures /

promisory Bonds promisory Bonds promisory Bonds promisory Bonds promisory Bonds

Amount Subscribed 3000.00 10000.00 19950.00 5050.00 7810.00Lacs Lacs Lacs Lacs Lacs

Face Value of the Bond 10.00 lacs 10.00 lacs 10.00 lacs 10.00 lacs 10.00lacs

Issuance, Trading andListing N S E N S E N S E N S E N S E

Details of Tier II Capital (Banks - Regulatory Capital instruments)

raised by the Bank and the position as on 31.03.2015

F-120

CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 1322859 596555ADJUSTMENTS FOR:

Provisions & Contingencies 2441516 2493417Depreciation 155448 235834Loss on sale of assets 3233 -382Income Tax / T D S paid -411000 -285291

Net cash flow before changes in Working Capital 3512056 3040133CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in

Deposits 33913301 29539042Refinances 0 -219000Other Liabilities -1162583 -2246209

32750718 27073833ASSETS : Increase/Decrease in

Investments 4151046 13641308Advances 34628294 11863940Leased-out Assets 0 0Other Assets 834063 -431022

-39613403 -25074226CASH FLOW FROM INVESTING ACTIVITIES :

Purchase of Fixed Assets -594791 -359256Sale of Fixed Assets 7062 -587729 3307 -355949

CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium net of forfeited shares 4105290 2449Tier II Bonds 0 0Dividends paid -96592 4008698 -288869 -286420

Cash flow for the year 70341 4397371Cash & Cash equivalents at the beginning of the year 13116869 8719498Cash & Cash equivalents at the year end 13187210 13116869

Note: Cash, Balances with Other Banks, Balances with R B I, and Money at Call and Short Notice have been considered as cashand cash equivalents.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2015(` in 000’s)

For R.K. KUMAR & CO.,Chartered AccountantsFRN: 001595S

(G. NAGANATHAN)PartnerMembership No. : 022456

Place : BangaloreDate : 29th April, 2015

31.03.2015 31.03.2014

AUDITORS’ CERTIFICATEWe have verified the Cash Flow Statement of The Lakshmi Vilas Bank Limited, Karur for the year ended March 31, 2015. This cashflow statement is the responsibility of the Management of the Bank in accordance with clause 32 of the listing agreement enteredinto with the Stock Exchange and is in agreement with the Balance Sheet as at March 31, 2015 and the Profit & Loss Account forthe year ended March 31, 2015 dealt with in our report dated 29.04.2015 to the members of The Lakshmi Vilas Bank Limited.

F-121

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

1. We have audited the accompanying financial statements of The Lakshmi Vilas Bank Limited ('the Bank'), which comprise theBalance Sheet as at 31st March 2016, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and asummary of significant accounting policies and other explanatory information. Incorporated in these financial statements are thereturns of 22 branches audited by us, 460 branches audited by branch auditors.

Management’s Responsibility for the Financial Statements

2. The Bank's Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ('the Act') withrespect to the preparation of these financial statements that give a true and fair view of the financial position, financial performanceand cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the AccountingStandards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions ofSection 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India ('RBI') fromtime to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design,implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracyand completeness of the accounting records, relevant to the preparation and presentation of the financial statements that givea true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit.

4. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required tobe included in the audit report under the provisions of the Act and the Rules made thereunder.

5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing ('the Standards') specifiedunder section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether the financial statements are free of material misstatements.

6. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements.The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement ofthe financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financialcontrol relevant to the Bank's preparation of the financial statements that give a true and fair view in order to design auditprocedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of the accounting estimates made by the Bank's Directors, as well as evaluating theoverall presentation of the financial statements.

7. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on thefinancial statements.

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statementstogether with the accounting policies and notes thereon give the information required by the Banking Regulation Act, 1949 aswell as the Companies Act, 2013 in the manner so required for banking companies and give a true and fair view in conformitywith accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2016;

(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

To

The Members of Lakshmi Vilas Bank Limited

LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM13

F-122



(B.R. ASHOK)Place : Chennai PartnerDate : 27th April, 2016 Membership Number: 023313

Emphasis of Matter

9. We draw attention to Note No.2.4.4.C of the financial statements, regarding deferment of loss of $ 95.60 Crore on sale ofadvances to Asset Reconstruction Companies.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of theBanking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 and Rule 7 of the Companies (Accounts)Rules, 2014.

11. As required by sub section (3) of section 30 of the Banking Regulation Act, 1949, we report that:

(a) we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary forthe purpose of our audit and have found them to be satisfactory;

(b) the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

(c) the returns received from the branches of the Bank have been found adequate for the purposes of our audit.

12. Further, as required by section 143(3) of the Act, we report that:

(i) we have sought and obtained all the information and explanations which to the best of our knowledge and belief werenecessary for the purpose of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from ourexamination of those books;

(iii) the reports on the accounts of the branches audited by branch auditors of the Bank under section 143(8) of the CompaniesAct, 2013 have been sent to us and have been properly dealt with by us in preparing this report;

(iv) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreementwith the books of account ;

(v) in our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 ofthe Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with theaccounting policies prescribed by RBI;

(vi) on the basis of written representations received from the directors and taken on record by the Board of Directors, none ofthe directors is disqualified as on 31st March 2016 from being appointed as a director in terms of Section 164 (2) of the Act;

(vii) with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operatingeffectiveness of such controls, refer to our separate Report in "Annexure A".

(viii) with respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Auditand Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

a. the Bank has disclosed the impact of pending litigations on its financial position in its financial statements

b. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeablelosses, if any, on long-term contracts including derivative contracts and

c. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and ProtectionFund by the Bank.

LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM14

F-123

Annexure A to the independent auditor's report of even date on the financial statements of Lakshmi Vilas Bank Limited

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 20131. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited ('the Bank') as at

31st March 2016 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.

Management's Responsibility for Internal Financial Controls2. The Bank's Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control

over financial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote on Audit of Internal Financial Controls Over Financial Reporting ('the Guidance Note') issued by the Institute of CharteredAccountants of India ('the ICAI').

These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business, including adherence to Bank's policies, the safeguarding of itsassets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timelypreparation of reliable financial information, as required under the Companies Act, 2013 ('the Act').

Auditor's Responsibility3. Our responsibility is to express an opinion on the Bank's internal financial controls over financial reporting based on our audit.

We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial controls Over Financial Reporting('the Guidance Note') and the Standards on Auditing ('the Standards'), both issued by the ICAI and deemed to be prescribed undersection 143(10) of the Act, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established and maintained and if such controls operated effectivelyin all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system overfinancial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtainingan understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected dependon the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due tofraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Bank'sinternal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting6. A bank's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles. A bank's internal financial control over financial reporting includes those policies and procedures that:(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of

the assets of the bank;(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts and expenditures of the bank are being made only inaccordance with authorizations of management and directors of the bank; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thebank's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper

management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of anyevaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financialcontrol over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

Opinion8. In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over Financial reporting and such

internal financial controls over financial reporting were operating effectively as at 31st March 2016, based on the internal control overfinancial reporting criteria established by the Bank considering the essential components of internal control stated in the GuidanceNote issued by the ICAI.



(B.R. ASHOK)Place : Chennai PartnerDate : 27th April, 2016 Membership Number: 023313

LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM15

F-124

(` 000’s)



a. Capital 1 179,46,16 179,16,66


c. Deposits 3 25430,96,15 21964,21,22

d. Borrowings 4 723,00,78 458,10,00


TOTAL 28732,16,26 24705,43,62

II. ASSETS


b. Balances with Banks and Money at call & Short Notice 7 82,10,91 175,28,07

c. Investments 8 6545,40,46 6051,15,62

d. Advances 9 19643,73,90 16352,01,90

e. Fixed Assets 10 366,99,87 243,41,30

f. Other Assets 11 807,40,90 740,12,70

TOTAL 28732,16,26 24705,43,62





BALANCE SHEET as on 31 st March 2016




B.R. ASHOKPartnerM. No. 023313

Chennai27th April, 2016

D.L.N. RAO

S.G. PRABHAKHARANS. DATTATHREYAN

Dr. P.A. SHANKAR

N. MALAYALARAMAMIRTHAMPANKAJ VAISH

PRAKASH P. MALLYA

K. BABUJI

SUVENDU PATIDirectors


PARTHASARATHI MUKHERJEEManaging Director & CEO

M. PALANIAPPANPresident & Chief Financial Officer


LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM16

F-125


(` 000’s)



I. INCOME

a. Interest Earned 13 2568,29,91 2214,53,09

b. Other Income 14 304,53,24 284,03,36

TOTAL 2872,83,15 2498,56,45

II. EXPENDITURE

a. Interest Expended 15 1922,99,34 1687,87,67



TOTAL 2692,59,57 2366,27,86


Profit brought forward 8,16 6,78

Transfer from Investment Reserve 72,74 0

TOTAL 181,04,48 132,35,37

IV. APPROPRIATIONS

a. Transfer to Statutory Reserve 45,20,00 33,20,00

b. Transfer to Capital Reserve 6,04,17 4,78,60


d. Investment Reserve 0 72,74

e. Transfer to Special Reserve u/s 36(1)(viii) of the IT Act, 1961 15,00,00 9,15,00

f. Proposed Dividend 53,83,85 35,84,23

g. Tax on Proposed Dividend 10,96,02 7,16,64

h. Balance carried over to Balance Sheet 44 8,16

TOTAL 181,04,48 132,35,37

Earnings Per Share - Basic ($) 10.05 9.16

Earnings Per Share - Diluted ($) 10.05 9.15





D.L.N. RAO


Dr. P.A. SHANKAR


PRAKASH P. MALLYA

K. BABUJI






LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM17

F-126

($ 000’s)

As at As at31-03-2016 31-03-2015

SCHEDULE 1 - CAPITALAUTHORISED CAPITAL(30,00,00,000 equity shares of $ 10/- each) 300,00,00 300,00,00ISSUED CAPITAL(18,09,69,986 equity shares of $ 10/- each)(Previous year 18,06,74,986 equity shares of $ 10/ each)of which 2,95,000 shares issued under “LVB ESOS-2010” 180,97,00 180,67,50Subscribed, Called-up and Paid Up Capitali) 17,94,61,609 equity shares of $ 10/- each 179,46,16 179,16,66

(Previous year 17,91,66,609 shares) 2,95,000 sharesissued under “LVB ESOS-2010”. (Previous year 3,45,000 shares)

ii) 1,26,42,131 Bonus Shares allotted(Previous year 1,26,42,131 shares)

iii) Shares kept in abeyance 15,08,377, inclusive of Forfeited &lapsed shares. (Previous year 15,08,377 shares)

iv) Shares Forfeited and lapsed 23,658 (Previous year 23,658 shares)TOTAL 179,46,16 179,16,66

SCHEULE 2 - RESERVES & SURPLUSI. STATUTORY RESERVE

Opening Balance 372,10,46 338,90,46Additions during the year 45,20,00 417,30,46 33,20,00 372,10,46

II. CAPITAL RESERVEOpening Balance 57,06,54 52,27,94Additions during the year 6,04,17 63,10,71 4,78,60 57,06,54

III. SHARE PREMIUMOpening Balance 659,62,54 330,70,23Additions during the year 2,05,16 328,92,31

661,67,70 659,62,54Deductions during the year 4,31,81 657,35,89 659,62,54



V. SPECIAL RESERVE U/S 36(1)(VIII) OF IT ACT, 1961Opening Balance 41,45,00 32,30,00Additions during the year 15,00,00 56,45,00 9,15,00 41,45,00

VI. REVALUATION RESERVEOpening Balance 78,45,67 76,42,79Additions during the year 93,98,59 2,73,72

172,44,26 79,16,51Depreciation on Revalued Asset 71,04 171,73,22 70,84 78,45,67

VII. INVESTMENT RESERVEOpening Balance 72,74 0Additions during the year 0 72,74

72,74 72,74Deductions during the year 72,74 0

0 72,74 72,74VIII. BALANCE IN PROFIT & LOSS ACCOUNT 44 8,16

TOTAL 1584,13,25 1376,97,60

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A. I. DEMAND DEPOSITS

1. From Banks 1,37 55,91

2. From Others 163644,79 1636,46,16 1509,30,04 1509,85,95


III. TERM DEPOSITS

1. From Banks 1166,35,55 1144,53,13

2. From Others 19849,08,01 21015,43,56 17157,28,47 18301,81,60

25430,96,15 21964,21,22



TOTAL 25430,96,15 21964,21,22

SCHEDULE 4 - BORROWINGS

I. BORROWINGS IN INDIA

1. Reserve Bank of India 0 0

2. Other Banks 0 0

3. Other Institutions & Agencies* 723,00,78 723,00,78 458,10,00 458,10,00

II. BORROWINGS OUTSIDE INDIA 0 0

* Includes unsecured Tier II bonds of ` 498.20 Crs 723,00,78 458,10,00(Previous year ` 458.10 Crs.)

SECURED BORROWINGS INCLUDED IN I & II ABOVE 0 0

SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS

I. Bills payable 77,85,74 67,65,20

II. Inter-office adjustments (net) 4,40,37 0

III. Interest accrued 224,52,38 199,46,34

IV. (I) Others - (including Provisions) 373,90,18 385,95,35

(ii) Contingent Provisions against Standard Assets 72,23,00 55,23,00

(iii) Deferred Tax Liabilities 61,68,25 18,68,25

TOTAL 814,59,92 726,98,14

SCHEDULE 6 - CASH AND BALANCES WITHRESERVE BANK OF INDIA

Cash in Hand (including Foreign Currency Notes) 315,90,91 237,26,54

Balances with Reserve Bank of India

I) in current account 970,59,31 906,17,49

II) in other accounts 0 0

TOTAL 1286,50,22 1143,44,03

($ 000’s)

As at As at31-03-2016 31-03-2015

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(` 000’s)

As at As at31-03-2016 31-03-2015


I. IN INDIA



b. in other deposit accounts 6,25 6,25

20,19,71 35,67,73


a. with banks 0 0

b. with other institutions 0 100,00,00

20,19,71 135,67,73

II. OUTSIDE INDIA

(I) Balance with Banks



61,91,20 39,60,34

TOTAL 82,10,91 175,28,07



I. Government Securities [incl. treasury bills, & zero coupon bonds] 5849,42,86 5156,39,21


III. Shares 79,81,17 41,11,73



VI. Others [including Commercial Paper, Mutual Funds,Security Receipt, Units, etc.] 260,91,83 479,51,73

6545,40,46 6051,15,62





TOTAL 6545,40,46 6051,15,62

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ANNUAL REPORT 2015 - 2016

(` 000’s)

As at As at31-03-2016 31-03-2015




III. Term loans 7207,20,18 5579,58,58

19643,73,90 16352,01,90



II. Covered by Bank / Govt. Guarantees 0 59,85,38

III. Unsecured 765,13,96 770,00,96

19643,73,90 16352,01,90



II. Public Sector 0 12,50,51

III. Banks 0 25,30

IV. Others 12347,31,73 10666,33,41

TOTAL 19643,73,90 16352,01,90


I. PREMISES

At Revaluation Value 145,38,23 140,35,30


240,35,53 145,38,23


240,35,53 145,38,23


II. OTHER FIXED ASSETS(INCLUDING FURNITURE & FIXTURES)

At Cost 303,71,91 251,57,35


370,54,05 306,02,33


369,01,92 303,71,91


TOTAL 366,99,87 243,41,30

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(` 000’s)

As at As at31-03-2016 31-03-2015


I. Inter-Office Adjustments (net) 0 2,89,66






VII. Others 335,40,66 372,82,16

TOTAL 807,40,90 740,12,70




III. Liability on account of outstanding forward exchange contracts 1159,08,98 912,29,35


In India 828,57,71 574,32,77

Outside India 189,23,18 97,89,76


VI. Other items for which the Bank is contingently liable 17,72,27 10,09,96

TOTAL 3687,01,45 2903,11,92





III. Interest on balance with Reserve Bank of India &other inter-bank Funds 3,26,84 8,23,81

IV Others 7,36,06 17,45,82

TOTAL 2568,29,91 2214,53,09

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(` 000’s)







Less: Loss on sale of land, Buildings & Other Assets 14,39 -7,92 34,99 -32,33



V. Income earned by way of Dividends fromCompanies in India. 2,97,33 2,97,33 95,57 95,57


TOTAL 304,53,24 284,03,36




TOTAL 1922,99,34 1687,87,67







VI. Director's fees, allowances 1,15,35 78,00

VII. Auditors' fees & Expenses (incl. Branch Auditors) 1,25,05 1,10,15


IX. Postage, Telegrams, Telephones etc., 13,36,46 11,61,44


XI. Insurance 23,82,40 19,15,23


TOTAL 542,71,40 442,27,97

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SCHEDULE 17


A. BASIS OF ACCOUNTING:

The financial statements are prepared following the going concern concept, on historical cost basis unless otherwise stated andconform to the Generally Accepted Accounting Principles, (GAAP) in India which encompasses applicable statutory provisions,regulatory norms prescribed by the Reserve Bank of India (RBI) from time to time, Accounting Standards (AS) specified underSection 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 to the extentapplicable and current practices prevailing in the banking industry in India.

B. USE OF ESTIMATES:

The preparation of the financial statements require management to make estimates and assumptions that affect the reportedamounts of assets and liabilities including contingent liabilities as of the date of the financial statements and the reportedincome and expenses during the reported period. The Management believes that the estimates and assumptions used in thepreparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates.The differences, if any between estimates and actual will be dealt appropriately in future periods.

C. PRINCIPAL ACCOUNTING POLICIES

1. TRANSACTIONS INVOLVING FOREIGN EXCHANGE:

(a) Foreign Currency Assets and Liabilities are evaluated at the exchange rates prevailing at the close of the year as perthe guidelines issued by FEDAI. The resultant profit or loss is accounted for.

(b) Income and Expenditure in foreign currency are translated at the exchange rates prevailing on the date of the respectivetransaction.

(c) Outstanding forward exchange contracts in each currency are revalued at the Balance Sheet date at the correspondingforward rates for the residual maturity of the contract, in accordance with the guidelines of FEDAI and the provisionsof AS-11. The difference between revalued amount and the contracted amount is recognized as profit or loss, as thecase may be.

(d) Contingent liabilities on guarantees, letters of credit, acceptances and endorsements are reported at the rates prevailingon the Balance Sheet date.

2. INVESTMENTS:

(a) Investments are categorized under the heads ‘Held to Maturity’, Available for Sale, and ‘Held for Trading’ and arevalued in accordance with the guidelines of the Reserve Bank of India.

(b) Brokerage / commission etc, paid in connection with the acquisition of investments is charged to revenue and notincluded in cost.



(e) The excess of acquisition cost over the face value of securities under “Held to Maturity” category is amortised over theremaining period to maturity.

3. ADVANCES:





3.2 Advances disclosed are net of provisions made for non-performing assets, ECGC claims settled, part recovery towardsNPA accounts receipts held under sundries, and provision made for sacrifice of interest / diminution in the value of restructuredadvances measured in present value terms as per RBI guidelines.

4. FIXED ASSETS AND DEPRECIATION:

(a) Fixed assets are accounted for at their historical cost except for Land and Building which are accounted at theirrevalued cost.

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(c) Depreciation on assets other than computers are provided on Straight Line Method after considering the useful lifespecified in Schedule II to the Companies Act, 2013 except for hand held communication devices which are depreciatedin full considering the fast changing technology and obsolescence.

(d) Depreciation on computers and Software are provided for on straight-line method at the rate of 33.33% as per theguidelines issued by the Reserve Bank of India.

(e) Depreciation for premises, in which land cost and construction cost could not be ascertained separately, is providedon the total cost.

5. EMPLOYEE BENEFITS:

(a) Annual contributions to the approved Employees’ Gratuity Fund, Approved Pension Fund and Provision for LeaveEncashment benefits are made on actuarial basis and net actuarial gain/loss are recognised as per AccountingStandard 15. Contribution made by the bank to Provident Fund and Contributory Pension Scheme are charged toProfit & Loss account.

(b) The Bank follows the intrinsic value method to account for its employee compensation costs arising from grant ofEmployee Stock Options.

6. PROVISION FOR TAXATION:

Provision for taxation is made on the basis of the estimated tax liability, after due consideration of the judicial pronouncementsand legal opinion, with adjustment for deferred tax in terms of the Accounting Standard 22 (Accounting for Taxes onIncome).

7. REVENUE RECOGNITION:


(b) Interest income on non-performing advances/investments are recognized on realization basis, owing to the significantuncertainty in collection thereof:



8. SEGMENT REPORTING:

(a) The Bank recognises the Business Segment as the Primary Reporting Segment and Geographical Segment as theSecondary Reporting Segment, in accordance with the RBI guidelines and in compliance with the AccountingStandard 17.

(b) Business Segment is classified into (a) Treasury (b) Corporate and Wholesale Banking, (c) Retail Banking and (d)Other Banking Operations.

(c) Geographical Segment consists only of the Domestic Segment since the Bank does not have any foreign branches.

9. EARNING PER SHARE:

Basic and Diluted earnings per equity share are reported in accordance with the Accounting Standard 20 “Earnings pershare”. Basic earnings per equity share are computed by dividing net profit by the weighted average number of equityshares outstanding for the year. Diluted earnings per equity share are computed using the weighted average number ofequity shares and dilutive potential equity shares outstanding during the period.

10. IMPAIRMENT OF ASSETS

The Bank assesses at each balance sheet date whether there is any indication that an asset may be impaired. Impairmentloss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimatedrecoverable amount.

11. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

(a) As per the Accounting Standard 29 “Provisions, Contingent Liabilities and Contingent Assets”, the Bank recognisesprovisions only when it has a present obligation as a result of a past event and it is probable that an outflow ofresources embodying economic benefits will be required to settle the obligation and when a reliable estimate of theamount of the obligation can be made.

(b) Contingent Assets are not recognized in the financial statements since this may result in the recognition of incomethat may never be realised.

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2.1 Capital (` in crore)

Items 2015-16 2014-15

i) Common Equity Tier 1 Capital Ratio (%) - (Basel-III) 8.69 9.33

ii) Tier 1 Capital Ratio (%) 8.69 9.33

iii) Tier 2 Capital Ratio (%) 1.98 2.01

iv) Total Capital Ratio (CRAR) (%) 10.67 11.34

v) Percentage of the shareholding of the Government of India in public sector bank NA NA

vi) Amount of equity capital raised 0.29 81.61

vii) Amount of Additional Tier 1 capital raised, of which

PNCPS :

PDI : NIL NIL

viii) Amount of Tier II Capital raised, of which

Debt capital instruments 140.10 NIL

Preference Share Capital instruments NIL NIL

2.1.1 In respect of securities held under HTM category, premium paid of $ 8.64 Crore (previous year $ 8.45 Crore) has beenamortized during the year and debited under "Interest received on Investments".

12. NET PROFIT:The net profit as per the Profit & Loss account is arrived at after necessary provisions towards: –

a) Taxation.


c) Shortfall in the value of investments



13. CASH AND CASH EQUIVALENTS:Cash and cash equivalents include cash in hand, Balance with RBI, Balance with other Banks and money at Call and ShortNotice.

SCHEDULE 18

NOTES ON ACCOUNTS

1. The reconciliation of inter branch transactions has been completed up to 31.03.2016 and tallying of balances is ensured onan ongoing basis.

2. DISCLOSURE REQUIREMENTS

2.2 INVESTMENTS (` in crore)


(1) Value of Investments

(i) Gross Value of Investments

(a) In India 6,594.44 6,145.48


(ii) Provisions for Depreciation

(a) In India 49.04 41.69


(iii) Net Value of Investments

(a) In India 6,545.40 6,103.79


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(2) Movement of provisions held towards Depreciation on investments.

(i) Opening balance 41.69 43.28

(ii) Add: Provisions made during the year 8.65 19.92

(iii) Less: Write-off / write-back of excess provisions during the year 1.30 21.51

(iv) Closing Balance 49.04 41.69

2.2 INVESTMENTS (Contd.) (` in crore)


2.2.1 Repo Transactions (in face value terms) (` in crore)



Securities sold under repo


II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)

Securities purchased under reverse repo


II. Corporate debt Securities Nil Nil Nil Nil(Nil) (Nil) (Nil) (Nil)


2.2.2 Non-SLR Investment Portfolio

i) Issuer composition of Non SLR investments: (` in crore)



Securities

(1) (2) (3) (4) (5) (6) (7)

1 PSUs 137.79 85.84 0 0 0

2 FIs 51.54 21.00 0 0 0

3 Banks 45.54 28.00 0 0 0


5 Subsidiaries / Joint Ventures 0 0 0 0 0

6 Others 279.78 273.62 0 0 0

7 Less: Provision held towardsdepreciation -49.04 xxx xxx xxx xxx

Total 695.98 595.76 15.88 15.88 35.88

Amounts reported under Columns 4,5,6 and 7 above may not be mutually exclusive.

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Opening balance 10.78 8.74

Additions during the year since 1st April 1.27 2.04

Reductions during the above period 2.00 0.00

Closing balance 10.05 10.78

Total Provisions held (*) 9.11 9.14

(*) An amount of $ 0.94 Crore (PY $ 1.64 Crore) received towards part settlement is parked under sundries account.

ii) Non-performing Non-SLR investments : (` in crore)

2.2.3 Sale and transfers to / from HTM category:

During the year the book value of securities sold under HTM category exceeds 5% of the book value of investments held in HTMcategory as at the beginning of the year. The details of HTM category as on 31.03.2016 are furnished hereunder:

(` in crore)


i) The notional principal of swap agreements NIL NIL





2.3.2 Exchange Traded Interest Rate Derivatives: (` in crore)

S.No. Particulars 2015-16 2014-15

(i) Notional principal amount of exchange traded interest rate derivatives undertakenduring the year (instrument-wise) NIL NIL

(ii) Notional principal amount of exchange traded interest rate derivatives outstandingas on 31st March 2016 (instrument-wise) NIL NIL

(iii) Notional principal amount of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL

(iv) Mark-to-market value of exchange traded interest rate derivatives outstandingand not "highly effective" (instrument-wise) NIL NIL


Qualitative Disc losure:

The only derivatives dealt by the bank in the foreign exchange market is Forward Contracts. Forward contracts are being used tohedge / cover the exposure in foreign exchange arising out of merchant transaction and trading positions.

To cover the risk arising out of the above derivatives, various limits like IGL, AGL and Stop Loss Limits have been prescribed in theTreasury Policy of the Bank, which are monitored by mid-office. The mark-to-market values are monitored on monthly basis for ForeignExchange Forward Contracts. The operations are conducted in terms of the policy guidelines issued by RBI from time to time.

2.3 Derivatives

2.3.1 Forward Rate Agreement / Interest Rate Swap: (` in crore)

Market Value 4,361.78

Book value 4,336.76

Excess of book value over market value for which Provision is not made NIL

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Sl.Particular

Currency Derivatives Interest rate Derivatives

No. 2015-16 2014-15 2015-16 2014-15

(i) Derivatives (Notional Principal Amount) NA NA NA NAa) For hedging NA NA NA NAb) For trading NA NA NA NA

(ii) Marked to Market Positions NA NA NA NAa) Asset (+) NA NA NA NAb) Liability (-) NA NA NA NA

(iii) Credit Exposure NA NA NA NA

(iv) Likely impact of one percentage change in interest rate (100*PV01) NA NA NA NAa) On hedging derivatives NA NA NA NAb) On trading derivatives NA NA NA NA

(v) Maximum and Minimum of 100*PV01 observed during the year NA NA NA NAa) On hedging NA NA NA NAb) On trading NA NA NA NA

2.3.4 Shifting of securities:

For the year ended 31.03.2016, Bank has shifted securities of the face value of $ 639.28 Crore (previous year $ 95.00 Crore) fromHTM to AFS category and no loss (previous year loss of $ 0.12 Crore) arose on such transfers.

2.3.5 SLR Securities: ($ in crore)

As at 31.03.2016 As at 31.03.2015

ParticularsBook Market Book MarketValue Value Value Value

Government Securities * SLR (CG, SG,TB) 5,849.43 5,877.23 5,156.84 5,191.82


* Net of securities pledged under REPO ` 78.00 Crore (PY ` 140.40 Crore).

2.4 Asset Quality

2.4.1 Non-Performing Assets: (` in crore)


(i) Net NPAs to Net Advances (%) 1.18% 1.85%

(ii) Movement of NPAs (Gross)(a) Opening balance 454.62 546.46(b) Additions during the year 196.90 256.30(c) Reductions during the year 260.27 348.14(d) Closing balance 391.25 454.62


(iv) Movement of provisions for NPAs (excluding provisions on standard assets)(a) Opening balance 116.35 53.23(b) Provisions made during the year 94.95 138.35(c) Write-off/ write-back of excess provisions 97.83 75.23(d) Closing balance 113.47 116.35

Quantitative Disc losures : (` in crore)

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2.4.

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LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM30

F-139

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(A) Details of Sales: (` in crore)


(i) No. of accounts 13 1517




(v) Aggregate profit / (loss) over net book value. (98.72) (123.10)

(B) NPA Assets Sold to ARC: (` in crore)

Backed by NPAs sold by theBacked by NPAs sold by other banks /

Particulars bank as underlyingfinancial institutions / non-banking Totalfinancial companies as underlying

2015-16 2014-15 2015-16 2014-15 2015-16 2014-15

Book value of 279.20 178.00 8.08 8.08 287.28 186.08investments insecurity Receiptsas at 31st March

2.4.4 Details of non-performing financial assets purchased / sold:

A. Details of non-performing financial assets purchased: (` in crore)








1. No. of accounts sold NIL NIL

2. Aggregate outstanding NIL NIL

3. Aggregate consideration received NIL NIL

C. Disclosure regarding amortization of Loss on sale of assets to ARCs

RBI vide its circular no.DBR.No.BP.BC.94/ 21.04.048/2014-15 dated 21.05.2015 has extended permission to Banks to provide the netshortfall on account of sale of assets up to 31.03.2016 to Asset Reconstruction Company over a period of two years. Consequently,` 76.33 Crore (previous year ` 27.43 Crore) has been charged to Profit & Loss account for the year ended 31st March 2016.The unamortized amount on this account as on 31st March 2016 is ` 95.60 Crore (previous year ` 72.99 Crore)

2.4.5 Provisions on Standard Assets: (` in crore)



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2.6 Asset Liability Management:




Deposits 280.17 525.09 793.08 579.69 2843.73 2342.24 4063.93 8252.73 1740.28 4010.02 25430.96

(241.69) (423.42) (769.57) (687.62) (2605.76) (2400.11) (4197.23) (6172.48) (1244.87) (3221.46) (21964.21)

Advances (Net) 230.48 461.11 262.48 629.64 1879.01 1195.63 3212.66 7465.78 1292.61 3014.34 19643.74

(189.48) (407.76) (399.76) (694.79) (3435.33) (937.05) (1850.89) (6444.97) (699.34) (1292.66) (16352.02)

Investments (Net) 82.71 68.81 74.61 74.50 100.07 30.01 14.59 482.57 519.14 5098.40 6545.41

(165.70) (78.84) (0.00) (115.99) (247.22) (166.02) (127.39) (532.28) (643.10) (4027.26) (6103.78)

Borrowings 0.00 24.81 0.00 0.00 30.00 0.00 0.00 399.50 0.00 268.70 723.01

(0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (100.00) (229.50) (0.00) (128.60) (458.10)


Assets (69.68) (0.22) (0.00) (1.09) (16.99) (24.43) (13.72) (0.00) (0.00) (0.00) (126.13)


Liabilities (25.74) (0.25) (0.00) (0.10) (0.54) (1.29) (14.39) (8.45) (7.97) (0.00) (58.73)


The above data has been compiled by the management on the basis of the guidelines of RBI which have been relied upon by Auditors.

2.5 Business Ratios:







(vi) Profit per employee (` in crore) 0.04 0.03

2.7 Exposures

2.7.1 Exposure to Real Estate Sector: (` in crore)

Category 2015-16 2014-15

a) Direct exposure


Lending fully secured by mortgages on residential property that is or will be occupiedby the borrower or that is rented; (Individual housing loans eligible for inclusion inpriority sector advances may be shown separately).


Lending secured by mortgages on commercial real estates (office buildings,retail space, multi-purpose commercial premises, multi-family residential buildings,multi-tenanted commercial premises, industrial or warehouse space, hotels,land acquisition, development and construction, etc.). Exposure would also includenon-fund based (NFB) limits;

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2.7.2 Exposure to Capital Market: (` in crore)


(i) Direct investment in equity shares, convertible bonds, convertible debentures and unitsof equity-oriented mutual funds the corpus of which is not exclusively invested incorporate debt; 69.97 30.13

(ii) Advances against shares / bonds / debentures or other securities or on clean basis toindividuals for investment in shares (including IPOs / ESOPs), convertible bonds,convertible debentures, and units of equity-oriented mutual funds; NIL 2.26


(iv) Advances for any other purposes to the extent secured by the collateral security of sharesor convertible bonds or convertible debentures or units of equity oriented mutual funds i.e.where the primary security other than shares / convertible bonds/convertible debentures /units of equity oriented mutual funds does not fully cover the advances; NIL NIL

(v) Secured and unsecured advances to stockbrokers and guarantees issued on behalf ofstockbrokers and market makers; 10.00 10.62

(vi) Loans sanctioned to corporates against the security of shares / bonds/debentures orother securities or on clean basis for meeting promoter's contribution to the equity ofnew companies in anticipation of raising resources; NIL NIL


(viii) Underwriting commitments taken up by the banks in respect of primary issue of shares orconvertible bonds or convertible debentures or units of equity oriented mutual funds; NIL NIL




2.7.1 Exposure to Real Estate Sector (Contd.) (` in crore)

Category 2015-16 2014-15







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2.7.4 Details of Single Borrower Limit (SBL)/ Group Borrower Limit (GBL) exceeded by the bank.

A. SBL exceeded by the Bank for the period 01/04/2015 to 31/03/2016 . ........ NIL (PY NIL)

B. GBL exceeded by the Bank for the period 01/04/2015 to 31/03/2016 . ........ NIL (PY NIL)

2.7.5 Unsecured Advances (Amount of Advances for which, intangible securities has been taken): (` in crore)


The total amount of Advances for which intangible Securities such as chargeover the rights, licenses, Authority etc. has been taken. 26.72 33.64


2.8 Miscellaneous

2.8.1 Disclosure of Penalties imposed by RBI:

RBI has imposed a total penalty of $ 9300 on account of Counterfeit Notes detection.

3. Disclosure in terms of Accounting Standards:

3.1 Accounting Standard 5: Net Profit or Loss for the period, prior period items and changes in Accounting Policies:

There are no material prior period income and expenditure included in the Profit & Loss account, which requires a disclosure as perAccounting Standard 5

There has been no change in the Accounting policies followed by the bank during the year ended 31.03.2016 as compared to those inthe preceeding financial year ended 31.03.2015.

3.2 Accounting Standard 9: Revenue Recognition:

Bank is following accrual method of accounting and hence no disclosure is warranted under Accounting Standard 9.

3.3 Disclosure in terms of AS 10 - Fixed Assets (Revaluation of Premises):

In accordance with banks stated policy, revaluation of the premises in its fixed assets portfolio was carried out during the year by thebank using the services of Banks approved empanelled Independent valuers. Appreciation arising out of such revaluation was accountedwith corresponding credit to Revaluation Reserves. The details are as under;

(` in crore)

Original Cost of Premises 60.84

Incremental Value on account of revaluation made in 2011 - ` 81.51

Incremental Value on account of revaluation made in 2016 - ` 93.99 175.50

Depreciation on Original Cost - ` 6.72

Depreciation on Revalued Cost - ` 3.76 -10.48

Written Down Value of such revalued assets 225.86

2.7.3 Risk Category wise Country Exposure (As compiled by Management): (` in crore)

Risk Category Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at31.3.2016 31.3.2016 31.3.2015 31.3.2015


Low 72.59 NIL 73.67 NIL



Very High 0.00 NIL 0.00 NIL

Restricted 0.00 NIL 0.00 NIL

Off-credit 0.00 NIL 0.00 NIL


As the bank's exposure for the year in respect of risk category wise country exposure (Foreign exchange transactions) is less than 1%of total assets of the bank, no provision is considered necessary.

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3.4 Accounting Standard 15 - Employee Benefits:

3.4.1 The bank is following Accounting Standard 15 (Revised 2005) "Employee Benefits" as under:

(1) In respect of contributory plans viz.- Provident Fund and Contributory Pension Scheme, the bank pays fixed contribution at pre-determined rates to a separate entity, which invests in permitted securities. The obligation of the bank is limited to such fixedcontribution.

(2) In respect of Defined Benefit Plans, viz. Gratuity and pension as well as for leave encashment, provision has been made basedon actuarial valuation as per the guidelines.

(3) The summarized position of Post-employment benefits and long term employee benefits recognized in the profit and loss accountand balance sheet as required in accordance with the Accounting Standard -15 (Revised) are as under:

I. Principal Actuarial Assumptions at the Balance Sheet Date:(Expressed as weighted Averages)



Discount Rate 8.0% 8.0% 8.0%

Expected Rate of return on Plan Assets 9.5% 8.0% 0.0%

II. Change in the Present value of obligations: (` in crore)



Present Value of obligations as at the beginning of the year 68.89 238.48 38.04





Benefits Paid 9.05 47.36 5.20

Actuarial loss / (gain) on obligation (balancing figure) -2.92 -10.81 2.77

Present Value of obligations as at the year end 66.02 269.68 41.65

III. Change in Fair Value of Plan Asset: (` in crore)


Fair value of Plan Assets at the beginning of the year 68.89 238.48 0.00

Expected return on Plan Assets 6.54 19.08 0.00

Employer's Contribution 4.61 18.45 0.00

Benefits Paid 9.05 47.36 0.00

Actuarial loss/(gain) on plan assets (balancing figure) -0.33 15.17 0.00

Fair Value of Plan Asset at the end of the year 70.66 243.82 0.00

IV. Actual Return on Plan Assets: (` in crore)


Expected return on plan assets 6.54 19.08 0.00

Actuarial gain / (loss) on plan assets -0.33 15.17 0.00

Actual return on plan assets 6.21 34.25 0.00

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V. Actuarial Gain / Loss recognized: (` in crore)


Actuarial gain/(loss) for the Period - Obligation -2.91 -10.81 2.77

Actuarial gain/(loss) for the Period - Plan Assets -0.33 15.17 0.00

Total (gain)/loss for the period -2.58 -25.98 2.77

Actuarial (gain)/loss recognized in the period -2.58 -25.98 2.77

Unrecognized actuarial (gain)/loss at the end of the year 0.00 0.00 0.00

VI. Amount recognized in Balance Sheet: (` in crore)


Present value of the Obligation 66.02 269.68 41.65

Fair value of plan assets 70.66 243.82 0.00

Difference -4.64 25.86 41.65

Unrecognized Transitional liability 0.00 0.00 0.00

Unrecognized past service cost (non vested benefits) 0.00 0.00 0.00

Liability recognized in the Balance Sheet -4.64 25.86 41.65

VII. Expenses Recognized in Profit & Loss Account: (` in crore)




Expected return on Plan assets 6.54 19.08 0.00

Net actuarial (gain) / loss recognized in the year -2.58 -25.98 2.77

Transitional Liability recognized in the year 0.00 0.00 0.00



Expenses Recognized in Profit & Loss Account -0.02 44.31 8.81

VIII. Movements in the Liability Recognized in the balance Sheet (` in crore)


Opening net Liability 0.00 0.00 38.04

Opening amount determined under para 55 of AS15R 0.00 0.00 0.00

Expense as Above -0.02 44.31 8.81

Contribution/ Benefits paid 4.61 18.45 5.20

Closing Net Liability -4.63 25.86 41.65

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IX. Amount for the Current Period: (` in crore)


Present value of Obligation 66.02 269.68 41.65

Plan Assets 70.66 243.82 0.00

Surplus / (Deficit) -4.64 25.86 41.65

Experience adjustments on Plan Liabilities - (loss) / gain 0.00 0.00 0.00

Experience adjustments on Plan Assets - (loss) / gain 0.00 0.00 0.00

X. Major categories of Plan Assets: (As % of Total Plan Assets)

Particulars Gratuity Pension(Funded) (Funded)

Government of India Securities 12.28 5.30

State Government Securities 50.77 32.57

High Quality Corporate Bonds 27.48 23.09

Equity Share of listed companies 0.00 0.00

Property 0.00 0.00

Special Deposit Scheme 1.52 0.00

Balance with Bank Account 5.51 0.85

Balance held at LIC India's Running account 0.00 7.00

Annuity under Return of Purchase Price 0.00 19.35

Amount Receivable from Bank 0.00 9.40

Others (Amount receivable from Bank) 2.44 2.44

Total 100.00 100.00

XI. Enterprises Best Estimate: (` in crore)

Particulars Gratuity Pension Leave Encashment

Enterprise’s Best Estimate of Contribution during next year 6.23 36.26 5.88

3.5 Employee Stock Option Scheme:

As on 31.03.2015, options in force were 545000, of which 295000 shares were exercised during 2015-16 and the remaining optionsexpired. Thus as on 31.03.2016, the options in force are NIL

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3.6 Accounting Standard 17 - Segment Reporting:

PART A : BUSINESS SEGMENTS (` in crore)

Year ended Year endedParticulars 31-3-2016 31-3-2015

(Audited) (Audited)

1. SEGMENT REVENUE :


b. Corporate / wholesale banking operations 860.19 579.20



TOTAL 2872.83 2498.56

2. SEGMENT RESULTS (Operating Profit):


b. Corporate / wholesale Banking operations 115.48 80.53



TOTAL 407.12 368.41

OPERATING PROFIT (including exceptional items) 407.12 368.41

PROVISIONS OTHER THAN TAX 176.89 180.20

PROFIT BEFORE TAX 230.24 188.21

Less : Tax expenses 50.00 55.92

NET PROFIT 180.24 132.29

3. CAPITAL EMPLOYED :


b. Corporate / wholesale banking operations 217.09 213.24


d. Unallocated Assets 497.21 378.84

TOTAL 1763.59 1556.14

PART B - GEOGRAPHICAL SEGMENTS : Since the Bank is having domestic operations only, no reporting is made underinternational segment.

Previous period's figures have been regrouped, wherever necessary to conform to the current period's classification.

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3.7 Accounting Standard 18 - Related Party Disclosures:

Payment to and Provision for Employees includes remuneration paid to Key Managerial Persons of the Bank for the period from01/04/2015 to 31/03/2016, as detailed below:

S. No. Name Designation

1 Mr. Rakesh Sharma Managing Director & CEO(01.04.2015 to 09.09.2015)

2 Mr. Parthasarathi Mukherjee Managing Director & CEO(From 25.01.2016)

3. Mr. M. Palaniappan President & CFO

3 Mr. N. Ramanathan Company Secretary

(` in crore)

Items / Related Party Parent (as per Subsidiaries Associates / Key Relatives of Totalownership Joint Management Key Manage-or control) Ventures Personnel ment Personnel

Borrowings NIL NIL NIL NIL NIL NIL

Deposits NIL NIL NIL NIL NIL NIL

Placement of Deposits NIL NIL NIL NIL NIL NIL

Advances NIL NIL NIL NIL NIL NIL

Investments NIL NIL NIL NIL NIL NIL

Non-Funded Commitments NIL NIL NIL NIL NIL NIL

Leasing / HP arrangementsprovided NIL NIL NIL NIL NIL NIL

Leasing / HP arrangementsavailed NIL NIL NIL NIL NIL NIL

Purchase of Fixed Assets NIL NIL NIL NIL NIL NIL

Sale of Fixed Assets NIL NIL NIL NIL NIL NIL

Interest Paid NIL NIL NIL NIL NIL NIL

Interest Received NIL NIL NIL NIL NIL NIL

Rendering of Services NIL NIL NIL NIL NIL NIL

Receiving of Services NIL NIL NIL 2.61 NIL 2.61

Management Contracts NIL NIL NIL NIL NIL NIL

3.8 Accounting Standard 20 - Earnings per Share (EPS):

EPS calculation in accordance with the AS-20 issued by the ICAI is as under:


Net profit after Tax (` In Crore) 180.24 132.29

Weighted Average - No. of Equity shares 179,364,546 144,387,493

Weighted Average - No. of Diluted Equity shares 179,364,546 144,615,899



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3.9 Accounting Standard 22 - Accounting for Taxes on Income:

The bank has accounted for Income Tax in compliance with AS 22. Accordingly, Deferred Tax Assets & Liabilities are recognized.The major components of DTA / DTL are furnished as under:

(` in crore)

Particulars onents Deferred Tax Assets Deferred Tax Liabilities

Deferred Tax Components 2015-16 2014-15 2015-16 2014-15


Depreciation on fixed assets 0.00 0.00 8.95 4.60

Provision for wage arrears 0.00 9.97 0.00 0.00


Provision for advances 79.02 58.94 0.00 0.00

Special Reserve u/s 36(i)(viii) 0.00 0.00 19.54 14.09

Others 0.59 5.67 33.19 0.00

CLOSING BALANCE 113.90 93.90 61.68 18.69

Net DTA 52.22 75.21

3.10 Intangible Assets AS 26:

The Bank has followed AS 26 - Intangible asset issued by ICAI and the guidelines issued by the RBI in this regard.

3.11 Accounting Standard 28 - Impairment of Assets:

A substantial portion of the bank's assets comprises financial assets to which Accounting Standard 28 is not applicable. In theopinion of the bank management, there is no impairment of other assets as at 31st March 2016 requiring recognition in terms of thesaid standard.

3.12 Details of movement in provisions in accordance with Accounting Standard 29: (` in Crore)

Opening Provision Provision ClosingParticulars as on made during reversed / as on


Prov. for Standard Assets 55.23 17.00 0.00 72.23

Prov. for Bad and Doubtful debts 116.35 176.76 179.64 113.47

Prov. for Income Tax (net of deferred tax) 206.85 50.00 17.00 239.85

Prov. for depreciation in market value of Investments 41.69 8.65 1.30 49.04

Prov. for Other assets 3.45 0.46 0.00 3.91

Counter cyclical buffer 14.71 0.00 0.00 14.71

Prov. for Interest Tax 0.10 0.00 0.00 0.10

Prov. for Fringe Benefit Tax 1.90 0.00 0.00 1.90

Prov. for Dividend (incl. Div. Tax) 43.01 64.80 43.01 64.80

Prov. for Restructured Advances & FITL 118.18 0.00 7.38 110.80

Provision for Foreign Currency Unhedged 1.30 0.40 0.00 1.70

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4. Additional Disclosures:

4.1 Provisions and Contingencies: Break up of 'Provisions & Contingencies' shown under the head Expenditure in Profit &Loss Account:

(` in crore)




Provision for MAT Credit (19.00) 0.00

Provision for depreciation in market value of Investments 8.65 (1.47)



Provision for Restructured Advances (Economic sacrifice) & FITL (7.38) 41.51

Provision for Foreign Currency Unhedged 0.40 1.30

Provision for Other Assets 0.46 0.00

Sub Total 176.89 180.20

Provision for Income Tax 50.00 55.92

Total 226.89 236.12

4.2 Movement of Counter Cyclical Provisioning Buffer: (` in crore)



(b) Provision made in the accounting year 0.00 0.00



4.3 Draw Down from Reserves:

During the year under review, a sum of ` 4.32 Crore being the Rights issue expenditure incurred in Financial year 2014-15 anddebited to Sundry Assets accounts, on approval, was appropriated to Share Premium account.

As permitted by RBI, the entire balance of ̀ 0.73 Crore in Investment Reserve account was transferred to Profit and Loss Appropriationaccount towards depreciation on Investment in AFS and HFT categories.

The bank has transferred a sum of ` 0.71 Crore being the depreciation on revalued portion of premises directly to General Reserve.

4.4 Disclosure of complaints (As compiled by Management):

A. Customer Complaints:





ATM complaints through Dispute Management Systems (DMS)- NPCI





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4.5 Disclosure of Letters of Comfort (LOCs) issued by Banks: (` in crore)

Particulars Amount

Letters of comfort issued in earlier years and outstanding as on 01-04-2015 8.88

Add: Letters of Comfort issued during FY 2015-16 15.44

Less: Letters of Comfort expired during FY 2015-16 7.38

Letters of Comforts Outstanding as on 31-03-2016 16.94

4.6 Provisioning Coverage ratio:

The provision coverage ratio of the Bank as on 31.03.2016 is 68.55%.

4.7 Bancassurance Business:

Fees, remuneration received from Bancassurance business:

For the year ended 31.03.2016, the bank received Gross Commission income of $ 6.05 Crore from Bancassurance business,of which $ 4.85 Crore from life insurance segment and $ 1.20 Crore from general insurance segment.

4.8 Concentration of Deposits, Advances, Exposures and NPAs:

4.8.1 Concentration of Deposits: ($ in crore)

Total Deposits of twenty largest depositors 4,420.97


4.8.2 Concentration of Advances: ($ in crore)

Total Advances to twenty largest borrowers 2,525.83


4.8.3 Concentration of Exposures: ($ in crore)

Total Exposure to twenty largest borrowers/customers 2,902.26

Percentage of Exposures to twenty largest borrowers/customers to Total Exposure of the bank onborrowers /customers 12.86%

4.8.4 Concentration of NPAs: ($ in crore)


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4.9 Sector-wise Advances (As compiled by Management): (` in crore)

Sl.Sector

2015-2016 2014-2015

No.O/s Total Gross % of Gross NPAs O/s Total Gross % of Gross NPAs

Advances NPA to Total Advances Advances NPA to Total Advancesin that Sector in that Sector

(A) Priority Sector

1. Agriculture and allied activities 3065.60 14.54 0.47% 2417.14 12.39 0.51%

2. Industries 1440.65 35.62 2.47% 1484.13 40.22 2.71%

3. Services 2368.40 31.82 1.34% 1633.02 28.75 1.76%

4. Personal Loans 448.08 8.85 1.98% 275.56 11.31 4.10%

Sub Total (A) 7322.73 90.83 1.24% 5809.86 92.66 1.59%

(B) Non Priority Sector

1. Agriculture and allied activities 0.00 0.00 0.00% 0.00 0.00 0.00%

2. Industries 3463.91 206.74 5.97% 3581.16 257.65 7.13%

3. Services 4827.79 65.14 1.35% 3977.16 93.87 2.36%

4. Personal Loans 2172.17 4.93 0.23% 1667.61 6.21 0.37%

5. Others 2032.33 23.61 1.16% 1477.05 4.22 0.29%

Sub Total (B) 12496.20 300.42 2.40% 10702.98 361.95 3.37%

Total (A+B) 19818.93 391.25 1.97% 16512.84 454.62 2.75%

4.10 Movement of NPAs (As compiled by Management): (` in crore)

Particulars 2015-2016 2014-2015

Gross NPAs as on 1st April (Opening Balance) 454.62 546.46

Additions (Fresh NPAs) during the year 196.90 256.30

Sub-total (A) 651.52 802.76

Less:-

(i) Upgradations 21.20 114.48

(ii) Recoveries (excluding recoveries made from upgraded accounts) 169.81 179.18

(iii) Technical / Prudential write offs 68.88 14.92

(iv) Write-offs other than those under (iii) above 0.38 39.56

Sub-total (B) 260.27 348.14

Gross NPAs as on 31st March (closing balance) (A-B) 391.25 454.62

4.10.1 Details of Technical write-offs and recoveries made: (` in crore)

Particulars 2015-2016 2014-2015

Opening balance of Technical / Prudential written off accounts as at 1st April 317.84 385.85

Add: Technical / Prudential write offs during the year 68.88 14.92

Sub Total (A) 386.72 400.77

Less: Recoveries / reduction made from previously technical / prudential written - off accountsduring the year (B) 41.33 82.93

Closing balance as on 31st March (A-B) 345.39 317.84

4.11 Regrouping of Deposits placed with NABARD/SIDBI/NHB for meeting shortfall in Priority Sector Lending

Pursuant to RBI Cir.DBR.BP.BC.No.31/21.04.018/2015-16 dated 16.07.2015 the Bank has included its deposits placed with NABARD/SIDBI/NHB on account of shortfall in priority sector targets under Schedule 11-Other Assets'. Previously, the same has been accountedunder the head 'Investment'. Interest income on these deposits has been included under 'Interest Earned- Others'. Previously, suchinterest income was included under 'Interest Earned'-Income on Investments'.

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4.13 Off-balance Sheet SPVs sponsored :Name of the SPV sponsored

Domestic Overseas

NA NA

4. 14 Disclosure on Remuneration:

a. Qualitative disclosures:

(a) Information relating to the composition and mandate of theRemuneration Committee.

(b) Information relating to the design and structure of remunerationprocesses and the key features and objectives of remunerationpolicy.

(c) Description of the ways in which current and future risks are takeninto account in the remuneration processes. It should include thenature and type of the key measures used to take account ofthese risks.

(d) Description of the ways in which the bank seeks to linkperformance during a performance measurement period with level of remuneration.

(e) A discussion of the bank’s policy on deferral and vesting of variableremuneration and a discussion of the bank’s policy and criteria foradjusting deferred remuneration before vesting and after vesting

(f) Description of the different forms of variable remuneration(i.e. cash, shares, ESOPs and other forms) that the bank utilizesand the rationale for using these different forms.

The latest amendment to the policy was approvedby the HR Committee of the Board on 14.10.2015.

Performance is evaluated based on KeyPerformance indicators as approved by the Board.

ESOS and Performance incentives are thecomponents of variable remuneration

The members of the Nomination and Remunerationcommittee as on 31st March 2016 are 4.

(g) Number of meeting held by the remunerationcommittee during the financial year and remunerationpaid its members

Meeting of the Nomination andRemuneration Committee of theBoard (NRCB) was held 5 timesduring FY 2015-16 and the totalremuneration paid to thecommittee members is $ 5.45lacs.

One meeting of theCompensation & RemunerationCommittee of the Board(CRCB) having 5 members washeld. Remuneration paid tocommittee members is $ 0.60lacs; Two meetings of theNomination and RemunerationCommittee of the Board(NRCB) having 5 members washeld and the Remunerationpaid to the committee membersis $ 1.80 lacs

4.12 Overseas Assets, NPAs and Revenue:


Total Assets NIL

Total NPAs NIL

Total Revenue NIL



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(h) (i) Number of employees having received a variable remuneration award during the financial year. NIL NIL

(ii) Number and total amount sign-on awards made during the financial year. NIL NIL

(iii) a) Details of guaranteed bonus, if any, paid asjoining / Sign on bonus. NIL NIL

b) Details of performance Bonus / Allowance $ 35,00,000/- (2 persons) $ 42,00,000/- (3 persons)(iv) Details of severance pay, in addition to accrued benefits, Notice period pay

if any. NIL $ 5,65,626/-(3 persons)

(i) (i) Total amount of outstanding deferred remuneration, split into Grant of 12 lacs shares to NILcash, shares and shares - linked instruments and other forms. MD & CEO under ESOS

subject to approval of RBI

(ii) Total amount of deferred remuneration paid out in the $ 1.22 Crore NILfinancial year.

(j) Breakdown of amount remuneration awards for the financial yearto show fixed and variable, deferred and non-deferred.

(k) (i) Total amount of outstanding deferred remuneration and retainedremuneration exposed to ex-post explicit and/or implicit adjustments. NIL NIL

(ii) Total amount of reductions during the financial year due to ex-postexplicit adjustments. NIL NIL

(iii) Total amount of reductions during the financial year due to ex-postimplicit adjustments. NIL NIL

No Risk Takers were paidVariable Pay

No deferred and Non-deferred remuneration

No Risk Takers were paidVariable Pay

No deferred and Non-deferred remuneration

b. Quantitative disclosures: (Contd.)

4.15 Disclosures relating to securitization: NA

4.16 Credit Default Swaps: NIL

4.17 Intra – Group Exposure: (` in crore)

Particulars FY2015-16

(a) Total amount of intra-group exposures

(b) Total amount of top-20 intra-group exposures NIL

(c) Percentage of intra-group exposures to total exposure of the bank on borrowers / customers

(d) Details of breach of limits on intra-group exposures and regulatory action thereon, if any.

4.18 Transfer to Depositors Education and Awareness Fund (DEAF): (` in crore)

Particulars FY2015-16 FY2014-15

Opening balance of amounts transferred to DEAF 10.10 NIL

Add: Amounts Transferred to DEAF during the year 7.66 10.10

Less: Amounts reimbursed by DEAF towards claims 0.04 NIL

Closing balance of amounts transferred to DEAF 17.72 10.10

4.19 Unhedged Foreign Currency Exposure :

Based on the declaration received from borrowers, the bank has estimated and provided towards the liability for Unhedged ForeignCurrency Exposure (UFCE) of their constituents in terms of RBI Circular No. BDOD.NO.BP.BC.85/21.06.200/2013-14 dated15th January 2014 and the total provision held as of 31st March 2016 is ` 1.70 Crore.

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5.1 Liquidity Coverage Ratio: (` in Crores)

2015-20162014-2015

(Quarter entered 31.03.2015 only)

Total Unweighted Total Weighted Total Unweighted Total WeightedValue (Average) Value (Average) Value (Average) Value (Average)

High Quality Liquid Assets

1. Total High Quality Liquid Assets (HQLA) – 797.68 – 834.06

Cash Outflows

2 Retail deposits and deposits from smallbusiness customers, of which 949.94 81.59 719.32 59.99

(i) Stable Deposits 268.04 13.40 238.73 11.94

(ii) Less stable Deposits 681.90 68.19 480.59 48.05

3 Unsecured wholesale funding, of which: 818.00 92.54 704.71 78.48

(i) Operational deposits(all counterparties) 74.66 18.66 56.57 14.14

(ii) Non-operational deposits(all counterparties) 743.34 73.88 648.14 64.34

(iii) Unsecured debt 0.00 0.00 0.00 0.00

4 Secured Wholesale funding 441.49 0.00 278.72 0.00

5. Additional requirements, of which 3216.03 282.63 2894.97 363.25

(i) Outflows related to derivative exposuresand other collateral requirements 7.66 7.66 10.26 10.26

(ii) Outflows related to loss of funding ondebt products 0.00 0.00 0.00 0.00

(iii) Credit and Liquidity facilities 1120.83 99.84 1027.03 195.27

6 Other contractual funding obligations 82.22 82.22 68.25 68.25

7 Other contingent funding obligations 2005.33 92.91 1789.43 89.47

8 Total Cash Outflows 5425.46 456.76 4597.72 501.72

Cash Inflows

9 Secured lending (e.g. reverse repos) 59.31 0.00 46.80 0.00

10 Inflows from fully performing exposures 2170.40 1085.20 1722.75 1188.24

11 Other cash inflows 83.21 66.54 87.09 87.09

12 Total Cash Inflows 2312.91 1151.74 1856.64 1275.33

Total Adjusted Total Adjusted5 Value Value

13 TOTAL HQLA 797.68 – 834.06

14 Total Net Cash Outflows 114.19 – 125.44

15 Liquidity Coverage Ratio (%) 698.56 – 664.91

4.20 Details of Frauds occurred and Provision made during the year:

As per RBI Circular No.DBR. No. BP.BC.92/21.04.048/2015-16 dated April 18, 2016 required details are furnished:

(a) Number of Fraud cases reported during the year 24

(b) Amount involved (` In Crore) 22.17

(c) Quantum of Provision made, net of recoveries of ` 11.65 Crore 9.99

(d) Quantum of unamortized Provision debited from 'Other Reserves' (` In Crore) NIL

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5.2 Qualitative disclosure around LCR:

Based on RBI guidelines issued during June, 2014 and also other circulars subsequently thereon, the Bank has been computing theLiquidity Coverage Ratio with effective from 01st January, 2015. As per these guidelines, the Bank has high quality liquid assets(HQLA) into Level 1 and Level 2A/2B. As on 31.03.2016, the Bank has ` 971.55 Crore of HQLAs, of which, the main contribution isfrom Level - 1 type of assets with ` 871.73 Crore. The Level - 1 asset are in the form of surplus SLR investments / Excess CRR andCash in Hand.

As on 31.03.2016, after applying the respective haircuts as mentioned by RBI guidelines on LCR, the Bank has total amount of` 427.33 Crore of cash outflows and ` 4030.78 Crore of cash inflows over the next 30 days period. Of this total amount of` 427.33 Crore of cash outflows, the major component is in the form of unsecured wholesale funding and of the total ` 4030.78 Croreof cash inflows, the major cash inflows are in the form of amounts to be received from Non - Financial wholesale counterparties.

6. a) The disputed Income Tax demand outstanding as on 31.03.2016 amounts to ` 60.12 Crore (previous year ` 52.61 Crore) andis included under Item I of Schedule 12 (Contingent Liabilities). No provision is considered necessary in respect of thedisputed liabilities in view of favourable decisions by various appellate authorities on similar issues.

b) The Bank has recognized the Income Tax Liability of ` 50 Crore on its Book Profits in terms of section 115JB of the IncomeTax Act, 1961 and after considering the normal tax, a sum of ` 19 Crore being MAT credit entitlement under section 115 JAAof the Income Tax act, 1961 has been recognized and treated as an Asset.

7. During the year, the Bank has raised unsecured non-convertible, redeemable fully paid Basel III complaint Tier II bonds in thenature of debenture amounting to ` 140.10 Crore.

8. Previous year's figures have been regrouped / reclassified wherever considered necessary to conform to the currentyear's classification




D.L.N. RAO


Dr. P.A. SHANKAR


PRAKASH P. MALLYA

K. BABUJI






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Table DF - 1


Lakshmi Vilas Bank is a private sector bank incorporated in 1926 at Karur. The bank doesn't have any subsidiaries under itsManagement. Hence the CRAR is computed on standalone basis only.

(i) Qualitative Disclosures:


List of group entities not considered for consolidation both under the accounting and regulatory scope of consolidation.No group affiliation

(ii) Quantitative Disclosures:


Not applicable

The aggregate amount of capital deficiencies in all subsidiaries which are not included in the regulatory scope of consolidationi.e. that are deducted:

Not applicable

The aggregate amounts (e.g. current book value) of the bank's total interests in insurance entities, which are risk-weighted:Not applicable

Any restrictions or impediments on transfer of funds or regulatory capital within the banking group:Not applicable

Table DF - 2

Capital AdequacyQualitative Disclosures:

A summary discussion of the bank's approach for assessing the adequacy of its capital to support current and futureactivities.

The Bank is exposed to Credit risk, Market risk, Operational risk and other Pillar II risks. Based on the scale of business operations,the bank has put in place respective regulatory approaches to compute the required capital of the bank and also the controls thatcommensurate with the risk profile of the bank. The capital requirement for the estimated future business levels are assessed atperiodic intervals. The bank has adopted the following approaches for computing the capital charge.

Credit Risk – Standardized Approach

Market Risk – Standardized Duration Approach

Operational Risk – Basic Indicator Approach

• The Business projections, capital requirement, assessment methodology, controlling mechanism, etc., have been discussed inICAAP document and it has been reviewed on yearly basis.

• CRAR has been computed based on the Basel III guidelines and it is well above the regulatory minimum level of 9.625% whichincludes the capital conservation buffer.

Quantitative Disclosures: (` in lacs)


Authorized Capital 300000000 10 30000.00

Issued Capital 180969986 10 18097.00

Subscribed Capital 179461609 10 17946.16

Called up/paid up Capital 179461609 10 17946.16

The Bank's shares are listed on the National Stock Exchange Limited and Bombay Stock Exchange Limited.

As on 31.03.2016, the bank has not raised Capital in the form of additional Tier-I.

Tier 1 capital includes Equity share capital, Reserves comprising of statutory reserves, capital & other revenue reserves, sharepremium, Balance in profit & loss account, Revaluation reserves at a discount of 55% and Deferred tax assets to the extent permittedby RBI and less other intangible assets.

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Tier 2 Capital consists of the general provision on standard assets, loan loss reserve, provision on NPA assets sold, investmentfluctuation Reserve and Subordinated Bonds (discounted value)

Break up of capital funds: (` In lacs)

A. Tier I Capital Elements

1. Paid up capital 17946.16

2. Reserves and surplus 148242.98

3. Gross Tier I Capital 166189.14

4. Less (Intangible Assets) 9339.24

5. Net Tier I Capital 156849.9

B. Tier II Capital Elements

1. General Provisions and Loan loss Reserve 7255.79

2. Subordinated Debt (Lower Tier II bonds) 26940.00

3. Provision for restructured advances 3322.60

4. Provision for unhedged foreign currency exposure 170.19

5. Gross Tier II capital 37688.58

6. Less (Cross holdings) 1999.00

7. Net Tier II Capital 35689.58

Break up of Capital Requirements: (` In lacs)

Risk Type

b) Capital requirements for Credit Risk 147382.85

Portfolios subject to standardized approach

Cash & Bank 336.83




Off Balance sheet Exposure 10816.25





Equity Risk 2038.05



Total Risk weight Assets (b+c+d)*100/9.625% 1804571.80

Total Eligible Capital Funds for CRAR 192539.48


e) Common Equity Tier 1, Tier I and Total Capital ratios:

For the top consolidated group; and for significant bank subsidiaries (stand alone or sub-consolidated depending on how theframework is applied).

Not applicable

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Credit Risk:


� To ensure business continuity with growth and stability.

� To ensure that the bank holds adequate capital in alignment with risks undertaken as well as the regulatory requirements fromtime to time.

� To optimize risk-return profile by providing a framework for risk-based pricing.

� To provide decision support for entry / exit strategies.

� To provide a framework for monitoring risk profile of the bank through structured reports.

� To facilitate the identification of risks in various activities undertaken by the bank through its operating units.

� To provide guidance on measurement of risks and their quantification for assessing the level of risk under portfolio management.

� To provide guidance on risk mitigation for ensuring customer retention while promoting risk-reward consciousness at all levels ofoperation.

� To set / monitor prudential risk limits in tune with the business strategy, capital adequacy and regulatory prescriptions.

� To ensure the adherence to these risk limits through defining the reporting structures and systems.

� To ensure compliance with other regulatory prescriptions.

� The bank proposes to keep its overall risk profile as moderate and stable for the medium term.

Risk appetite and risk-return profile, credit risk strategy shall also include a statement of the banks willingness to grant credit basedon:

� exposure type (for example, commercial, consumer, real estate,etc.,),

� economic sector (e.g. textile, iron etc.),

� geographical location,

� currency,

� maturity,

� anticipated profitability,

� identification of target markets / business sectors (like priority sector lending) and

� the overall credit portfolio composition

� preferred levels of diversification & concentration tolerances.

Credit risk strategy of the bank shall provide continuity in approach considering cyclical approach of the economy and the resultingshifts in the composition and quality of the overall credit portfolio.


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Comprehensive Risk Management Policy put in place and the same has been approved by Board. The hierarchy of the IRMD startsfrom Board of Directors. Board is responsible for approving & reviewing on a periodical basis credit risk related policies, strategy &limits. Further Board has sub level committee (IRMCB) to review the risk limits, monitor the functioning of the IRMC-E and issuenecessary directions if require.

The Scope and nature of risk reporting and / or measurement systems

Risk-rating model is an important tool and is an integral part of the Credit Risk Management. The benefits of a robust system basedrating model

� Serves as a single point indicator of diverse risks of a borrower

� Enables banks to take informed credit decisions in a consistent manner.

� Facilitates adoption of risk-based pricing .

� Arriving at Facility Risk rating for the particular facility/product based on the comforts of securities/guarantors.

Internal credit rating models / systems are an important tool in monitoring the quality of individual credits, as well as the totalportfolio. Bank has well-structured internal risk rating system which acts as a good means of differentiating the degree of credit riskin the different credit exposures of the bank. This will allow more accurate determination of the overall characteristics of the creditportfolio, concentrations, problem credits, and the adequacy of loan loss reserves.

Internal credit rating framework enables the Bank to standardize and uniformly communicate the "judgment" in credit selectionprocedures but is not a substitute to the vast lending experience accumulated by the bank's professional staff.

In order to make the credit risk assessment more consistent and effective, a two dimensional approaches to measure risk comprisingborrower risk (Obligor Rating) and transaction risk (Facility Rating) has been implemented.

Use of Risk Rating Models / Systems• Individual credit selection, wherein a borrower or a particular exposure/ facility is rated.• Pricing of the facility / loan• Deciding the limits & tenure of the proposed credit assistance.• Portfolio-level analysis and portfolio management• Frequency and intensity of monitoring of the exposures.• Internal MIS• General provision "reasonable over provisioning" in addition to statutory prescribed provision.• Assessing the aggregate risk profile of bank.


Organization StructureIRMD-Credit Risk Management

Board of Directors

Integrated Risk Mgt. Committee- Board

Integrated Risk Mgt. Committee - Executives(Credit Risk Mgt. Committee / ALCO /


Business Units Internal Audit

Integrated Risk Mgt. Deptt.(IRMD)

Market Risk Mgt. / AssetLiability Mgt. Dept.

Credit RiskMgt. Deptt.

Operational Risk Mgt.Deptt.


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The Bank has a multi-tier structure for sanction of credit proposals, with proper delegation of lending powers at various levels ofofficers & executives, duly approved by Board.

The powers vested at each level depend on the quantum and type of the loan facility and the overall exposure to the borrower/group.

The Bank has a system under which the lending powers exercised by delegated authority are reported to and reviewed by a higherauthority under the Internal Loan Review Mechanism.

A two dimensional approach to measure risk comprising borrower risk (Obligor Rating) and transaction risk (Facility Rating) hasbeen implemented. The Credit Risk Assessment System (CRAS) operated through the risk rating models shall form the fulcrum ofcredit risk management.

Policies for hedging and / or mitigating risk and strategies and processes for monitoring the continuing effectiveness ofhedges / mitigants

As per the RBI guidelines, eligible financial collaterals have been taken into account for risk mitigation purpose.

Bank is having a system in place to monitor compliance with country exposure limits. Exceptions are reported, approved andrectified as per laid down procedures.

Bank is having an effective system in place to generate management reports which are detailed enough for the senior managementreview and to identify exceptions in a timely manner.

Market Risk:


The Bank has policies like Asset Liability Management Policy, Investment & Forex Risk Management Policy to address the liquidityrisk and market risk respectively arising out of its banking book and trading book of investment portfolio.

Mid office is functioning independent of treasury and it monitors limits, trigger of investments, cut (stop) loss limit, Open position limitetc., Further it assess various limits set out by RBI and as stipulated in Investment/ trading book Policy, and keeps track on ratingmigration of rated securities on a daily basis. It fixes the overall counter-party exposure limits (Banks & FIs)

The structure and organization of the relevant risk management function

The Asset Liability Committee (ALCO) is responsible for

� Managing Interest Rate Risk and Liquidity Risk of the Banking Books.

� Pricing of Assets and Liabilities.

� Monitor and control the quality of the Balance Sheet

� Review and control of limits, procedures, reports, ratios & market trends, which impact bank's Balance Sheet.

� Review the treasury operations including trading.

� Differential pricing of wholesale deposits be delegated to Planning & Development

The scope and nature of risk reporting and/or measurement systems

The ALM Policy will be operated through the Integrated Risk Management Department (IRMD) which is responsible for evolvingappropriate systems & procedures for ongoing identification & analysis of Balance Sheet risks and laying down parameters formanagement of these risks. IRMD will, therefore, have the responsibilities of periodic monitoring and control of the risks and thesame has been reported to IRMC-E & IRMC-B.

Policies for hedging and / or mitigating and strategies and processes for monitoring the continuing effectiveness of hedges /mitigants.

Board approved Investment and Forex policy are put in place. Policies for hedging/ mitigating risk and strategies and processes formonitoring the continuing effectiveness of hedges / mitigants are discussed in ALCO.

The Structural liquidity statement is prepared on a daily basis to analyze the liquidity profile of the bank in a static manner. Exchangerisk is managed by fixing limits on position limits - Day light and Overnight limits, single deal limit, stop loss limit and OverallOvernight Open Exchange position limit. Additional liquidity ratios reviewed on a quarterly basis against the limits set under stockapproach.

Interest rate risk is analyzed from earnings perspective using Traditional Gap analysis and Economic value perspective using DurationGap analysis on a Quarterly basis. Further stress testing process conducted under scenario as well as stock approach to estimatethe impact on various conditions.

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Operational Risk


The strategy for the overall management of operational risk is in alignment with the business objectives & risk appetite of the bankconsidering the size, nature and complexities of the bank activities.


The Structure and organization of the relevant risk management function

Operational Risk Management is organized within the IRMD and will report to the head of the risk. The hierarchy of ORM within theorganizational chart for governance purposes is presented below. These roles and responsibilities relate only to the activities relatingto operational risk management.partment

A well-defined Operational risk Management policy is put in place. The role of Board vests in setting business strategy, risk appetite,policies, governance, management framework, methodology of measurement and assessment, internal audit, report to stakeholderson risk management, etc.,

The Scope and nature of risk reporting and/or measurement systems

The scope of risk reporting is to establish an explicit operational risk management process that results in the identification, evaluation,assessment, measurement, analysis, monitoring, control, mitigation and reporting of operational risks. This process also includesindependent evaluation of operational risk management function by the Internal Audit Department and to report its findings to theBoard / Senior Management as an assurance for the effective discharge of responsibilities with respect to management of operationalrisk.

Policies and procedures are put in place for control / mitigate material operational risks to adjust the risk appetite / tolerance levelbased on its risk control and mitigation strategies. For those risks that cannot be controlled, the bank decides whether to acceptthese risks, reduce the level of business activity involved, or withdraw from this activity completely. Some major control/mitigationtechniques like sound internal control system, Insurance, Standards for Insurance Recognition, retention/self insurance, BusinessContinuity and Disaster Recovery Plan, Outsourcing of financial services, Information Technology security, Internal Audit, ExternalAudit, Reporting are deployed in the framework.

Interest Rate Risk in Banking Book

Strategies and Processes

Interest Rate Risk is measured in two different ways. Earnings perspective using Traditional Gap Analysis is to assess the impact ofadverse movement in interest rate on the Net Interest Income (Earnings at Risk) and economic value perspective using DurationGap Analysis to assess the impact of adverse movement in interest rate on the market value of Bank's equity.

Structure and Organization of Risk Management Function

ALM policy will manage and monitor the limits / guidance values / target set on interest rate risk of the Banking Book. IRMC-B andALCO at the executive level are responsible for efficient and effective management of Interest rate risk in Banks business.

Board of Directors

Integrated Risk Mgt. Committee - E

CFO(Chief Financial Officer)

Operational Risk ManagementDepartment

Operational Risk Coordinatorsfrom Business / Support Line


Audit Committeeof Board

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Scope and nature of risk reporting / measurement systems

The Duration/ Modified duration mainly depends on coupon, maturity and periodicity of payment of installments. Since the modifiedduration of the liabilities is less compared to the modified duration of assets, there would be fall in the equity value under majorstress. Modified duration of Equity is calculated on a quarterly basis. The capital charge for Interest rate risk in banking book isassessed based on drop in the Market value of equity under 200 bps changes in interest rate. The results of Traditional Gap analysisand Duration Gap analysis including the adherence to tolerance limit set in this regard are monitored and the same has been placedbefore ALCO/IRMC-B level.

Policies for hedging / mitigating risk and strategies and processes for monitoring the continuing effectiveness of hedges/mitigants

Investment policy, Forex policy, ALM policy, Stress testing policy, Credit Risk Management Policy are put in place to measure,mitigate / hedge the various risks.

Table DF - 3

Credit Risk

Credit Risk: General Disclosures

Qualitative Disclosures:The general qualitative disclosure requirement with respect to credit risk, Includes the definitions of Past Due, NPA of a loan or aadvance and impaired assets (For Accounting Purposes), Out of order and Overdue. These definitions are as per the extant guidelinesof Reserve Bank of India.

Credit Risk

Credit risk in simple terms is the potential that bank's borrower or counterparty will fail to meet its obligations in accordance withagreed terms.

Credit risk is defined as the possibility of losses associated with default in repayment or diminution in the credit quality of borrowersor counterparties or diminution in the value of primary and/or collateral assets. In a bank's portfolio, losses stem from outright defaultdue to inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, settlement andother financial transactions.

Discussion of the Bank’s Credit Risk Management PolicyThe Board level approved Credit Risk Management Policy is put in place. The goal of the policy is to ensure that it is within theacceptable risk appetite and tolerance limit set by the bank. It manages the credit risk inherent in the entire portfolio as well as therisk in individual credits or transactions and it encompasses identification, measurement, monitoring and control of the credit riskexposures. Further it deals the structure, governance, framework, and processes for effective and efficient management of theCredit risk.

Quantitative Disclosures:


Fund Based * 2666317.85



* It includes loans/advances; fixed assets, other assets, cash, bank balances, balance with RBI and investments under HTM category.

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State Name Funded Exposure Non-Funded Exposure Total ExposureAndhra Pradesh 137093.71 14654.84 151748.55Chhattisgarh 1907.41 54.07 1961.48Gujarat 41396.45 2074.34 43470.79Haryana 3497.63 1424.81 4922.44Jharkhand 1847.61 25.00 1872.61Karanataka 218915.87 3105.06 222020.93Kerala 42616.72 103.38 42720.10Madhya Pradesh 4135.47 9.05 4144.52Maharashthra 272416.62 55372.64 327789.26New Delhi 100676.34 36150.56 136826.90Odisha 379.82 19.68 399.50Puducherry 8314.43 664.36 8978.79Rajasthan 4331.79 32.51 4364.30Tamilnadu 973385.72 71119.24 1044504.96Telangana 143520.28 39983.63 183503.91Uttar Pradesh 1358.48 24.45 1382.93West Bengal 27927.68 4658.24 32585.92Total 1983722.03 229475.86 2213197.89

Industry Wise distribution of Exposures: (` in lacs)

S. Industry Name Funded Non-funded Total % grossNo. credit1 Mining and Quarrying 20385.21 173.46 20558.67 0.932 Food Processing 25462.90 8434.50 33897.40 1.533 Beverages (excluding Tea & Coffee) and Tobacco 21434.64 63.31 21497.95 0.974 Textiles 106173.47 8721.09 114894.56 5.195 Leather and Leather products 627.41 4.00 631.41 0.036 Wood and Wood Products 16979.02 12249.82 29228.84 1.327 Paper and Paper Products 12560.53 712.73 13273.26 0.608 Petroleum (non-infra), Coal Products (non-mining) and

Nuclear Fuels 1075.25 303.49 1378.74 0.069 Chemicals and Chemical Products (Dyes, Paints, etc.) 27190.97 16987.04 44178.01 2.0010 Rubber, Plastic and their Products 7715.23 1054.92 8770.15 0.4011 Glass & Glassware 2714.62 5.67 2720.29 0.1212 Cement and Cement Products 16177.97 0.00 16177.97 0.7313 Basic Metal and Metal Products 92722.68 23418.33 116141.01 5.2514 All Engineering 21202.28 14373.63 35575.91 1.6115 Vehicles, Vehicle Parts and Transport Equipments 5598.87 11.50 5610.37 0.2516 Gems and Jewellery 11181.89 940.00 12121.89 0.5517 Construction 0.00 0.00 0.00 0.0018 Infrastructure 152130.07 59011.47 211141.54 9.54

Other Industries 30446.49 609.20 31055.69 1.40Residual Advance 1411942.53 82401.70 1494344.23 67.52Total 1983722.03 229475.86 2213197.89

Note: The industries break-up given on the same lines as prescribed for DSB returns. Residual advances are educational loans,Housing loans, Gold loans, Loan against deposits, Personal loan, staff loan, consumer loans, vehicle loans, etc., The Industrieswhich has crossed 5% of gross credit exposure are:

a) Infrastructure - 9.54%

b) Basic Metal and Metal Products - 5.25%

c) Textiles - 5.19%

Geographic wise Distribution of Exposures: (` in lacs)

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F-165

Residual Contractual maturity breakdown of assets (` in lacs)Cash Balance Balance Investments Call Money Repo- Advances Fixed Other

With RBI with Other Placements Asset Assets AssetsBanks

Overdue to 1 Day 31590.91 1450.44 1953.45 42216.63 0.00 0.00 23048.20 0.00 6306.82

2-7 Days 0.00 1896.05 0.00 14019.19 0.00 23400.00 46110.78 0.00 390.42

8-14 Days 0.00 2691.07 0.00 15014.28 0.00 0.00 26248.06 0.00 454.71

15-28 Days 0.00 1665.24 0.00 21719.43 0.00 0.00 62963.54 0.00 908.24

29 Days to 3 Months 0.00 8917.58 0.00 62243.33 0.00 0.00 187901.14 0.00 4025.73

3-6 Months 0.00 8837.23 0.00 51875.33 0.00 0.00 119563.18 0.00 5844.55

6 Months-1 Year 0.00 15483.64 0.00 88307.24 0.00 0.00 321265.80 0.00 0.00

1-3 Years 0.00 32793.63 61.25 204574.90 0.00 0.00 746577.48 0.00 73811.70

3-5 Years 0.00 6706.22 5.00 64715.51 0.00 0.00 129261.14 0.00 0.00

Over 5 Years 0.00 16618.21 0.00 100996.60 0.00 0.00 301529.12 36699.87 16066.86

Total 31590.91 97059.32 2019.70 665682.43 0.00 23400.00 1964468.42 36699.87 107809.02

Asset Quality (` in lacs)

Amount of Non-Performing Assets (Gross) 39124.99

Substandard 21382.14

Doubtful - 1 4153.33

Doubtful - 2 6729.64

Doubtful - 3 29.28

Loss 6830.60

Net NPA 23164.13

Gross NPA to gross advances (%) 1.97%

Net NPAs to Net advances (%) 1.18%

Movement of NPAs (Gross)

Opening Balance 33157.31

Additions during the period 14037.56

Reductions 8069.88

Closing Balance 39124.99

Movement of Provisions (` in lacs)

Specific GeneralProvision Provision

Opening Balance 14164.18 10625.14

Provisions made during the period 2426.18 107.65

Write off 0.00 0.00

Write back of excess provisions 5243.55 0.00

Any other adjustments, including transfers between provisions 0.00 0.00

Closing balance 11346.81 10732.79

Details of write offs and recoveries that have been booked directly to the Income statement

Write offs that have been booked directly to the income statement 338.92

Recoveries that have been booked directly to the income statement 443.17

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Table DF - 4

Credit Risk: Disclosures for portfolios subject to the Standardized Approach

a) For exposure amounts after risk mitigation subject to the standardized approach, amount of a bank's outstanding (rated andunrated) in the following three major risk buckets as well as those that are deducted

(` in. lacs)



Fund Based

Loans & Advances 1197606.46 463424.87 585139.66 576976.31 199146.76 295788.18 1981892.88 1336189.36

Investments 428378.09 0.00 0.00 0.00 0.00 0.00 428378.09 0.00

Other Assets* 185306.62 4041.71 60380.40 57315.85 8530.72 21326.80 254217.74 82684.36

Exposure under mitigation 448765.45 0.00 29015.88 0.00 4697.03 0.00 482478.36 0.00

Total Fund Based 1811291.17 467466.58 645520.06 634292.16 207677.48 317114.98 2664488.71 1418873.72

Non Fund Based inc. 43785.89 9861.43 134941.37 49556.92 48290.47 28955.77 227017.73 88374.12Contingent credit

Total Credit Risk Exposures 1855077.06 477328.01 780461.43 683849.08 255967.95 346070.75 2891506.44 1507247.84

* Other assets includes cash, balance with RBI, balance with other banks, fixed assets and others.

** BV: Book Value; RWA: Risk Weighted Assets.

Investments (` in lacs)

Amount of Non Performing Investments 1005.16

Amount of provisions held for non-performing investments 910.65

Movement of provisions for depreciation on Investments

Opening Balance 5746.63

Provisions made during the period (January 2016 to March 2016) 0.00

Write-off/Write - back of excess provisions 842.53

Closing Balance 4904.10

Major Industry break up of NPA (` in lacs)

Industry Gross NPA Specific Provision

Food Processing 5215.27 5215.27

Basic Metal and Metal Products 6146.52 899.49

Mining and Quarrying 4990.78 748.62

Chemical and Chemical Products 2989.14 494.84

Paper and Paper Products 1099.66 398.57

Textiles 1365.43 165.69

Infrastructure 615.01 115.54

Geographic wise Distribution of NPA and Provision (` in lacs)

Geography Gross NPA Specific Provision General Provision

Domestic 39124.99 11346.81 10732.79

Overseas 0.00 0.00 0.00

Total 39124.99 11346.81 10732.79

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F-167

Table DF - 5



a) The general qualitative disclosure requirement with respect to credit risk mitigation including

Policies and process for and an indication of the extent to which the bank makes use of, on and off balance sheet netting;



Valuation should be based on the current market value of the collateral and should not be biased in order to enable the bank, togrant a higher credit limit to the borrower or improve its internal credit rating, make a smaller amount of provision or continue interestaccrual for a problem credit.

Collateral should be revalued on a regular basis, though the frequency may vary with the type of collateral involved and the nature& the internal credit rating of the underlying credit e.g. frequency for shares and properties as collateral would be different.

Collaterals & guarantees are properly evaluated with respect to legal validity, enforceability in all relevant jurisdictions, etc., for thepurpose of netting as credit risk mitigants as per the policy.

A more conservative approach should be adopted for valuing the collateral of problem credits because the forced-sale value, ratherthan the open market value, is likely to be closer to what eventually may be realized from an asset sale when the market conditionsare un-favorable. Therefore, a discount to the estimated market value should be applied where appropriate.


Under Standardized approach, the following collateral instruments used as risk mitigants for the capital computation.


2. Gold ( The value of the gold arrived after notionally converting into 99.99% purity)


4. Kisan Vikas Patra and National Savings Certificates (with no lock-in period)

5. Life insurance policies with a declared surrender value of an insurance company which is regulated by an insurance sectorregulator.

6. Debt Securities issued by Public Sector Entities and other entities (including banks and other primary dealers) rated by chosenrating agency attracting 100% risk weight or lesser risk weight.( i.e. rated atleast BBB(-) or A3 for short-term debt instruments)

7. Debt Securities not rated by a chosen Credit Rating Agency in respect of which banks should be sufficiently confident about themarket liquidity where these are

a) Issued by a bank


c) Classified as senior debt and

d) all the rated issues of the same senior by the issuing bank are rated atleast BBB (-) or A3 by a chosen Credit Rating Agency.

e) The bank has no information to suggest that the issue justifies a rating below BBB (-) or A3 by a chosen Credit RatingAgency.

8. Units of Mutual Funds regulated by the securities regulator of the jurisdiction of the Bank's operation and mutual funds where

a) A price for the units is publicly quoted daily i.e. where the daily NAV is available in public domain

b) Mutual fund is limited to investing in the permitted instruments listed.

• Information about (market or credit) risk concentrations within the mitigation taken

Majority of the exposures are retail exposures and insulated with adequate liquid collateral by way of cash margin, KVP, fixeddeposits, National Savings Certificate, Life Insurance Policies etc for reducing the capital buffer after applying applicable hair-cuts in the respective securities.

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F-168


General Disclosures on securitization exposures of the Bank

Objectives of Securitization activities of the Bank

Presently bank is having limited exposure towards securitization. Further bank will explore the possibilities of expanding the scopeof lending activities through securitization process and with the objective of managing the portfolio risk, credit risk, interest rate risk,liquidity risk and capital adequacy.

Securitization Process

Bank has a AAA rated securitization exposure in banking book. Before entering into the securitization transaction, the bank willcollect the information, which is nature from the originator. Further the information is historical in nature and such information will beuseful to understand the repayment schedule, cash flows, principle and other charges, credit risk on underlying assets, etc.,

Monitoring Mechanism

Monitoring of the pooled assets effectively carried out by the Regional Office Level. Further the existence of assets or unit inspectionfor the loans under the securitization pool is verified on random basis before disbursement.

Bank’s Policy on Securitization

Bank will not enter into a securitization transaction with originator whose External rating is not below than A category. Further bankconsiders the external rating of the Originator as well as Securitized portfolio which is carried out by a third party with a view toassess credit quality of the pool.

Quantitative Disclosure – Banking Book

Total Amount of exposures securitized by the Bank ` 1290.48 lacs

Losses recognized towards the exposure during the current period –

Amount of Assets intended to be securitized within a year –

Of which above, amount of assets originated within a year before securitization –

The securitized exposures in banking book are vehicle loans. The underlying assets are vehicles and further capital charges arecomputed by applying risk weight of 125% on the exposure (due to consumer loans).


a) For each separately disclosed credit risk portfolio the total exposure (after, where applicable, on -or off balance sheet netting) thatis covered by eligible financial collateral after the application of haircuts.

Credit Risk exposure covered by Eligible Financial Collaterals(` in lacs)

Type of Exposure Notional Exposure Eligible Financial Net Exposure(After CCF) Collaterals

On Balance Sheet 383388.76 420773.87 0.00

Off Balance Sheet 116635.93 31415.57 85220.36

Total 500024.69 452189.44 85220..36

b) For each separately disclosed portfolio the total exposure (after, where applicable, on- or off-balance sheet netting) that is coveredby guarantees/credit derivatives (whenever specifically permitted by RBI)

NIL

Table DF - 6

Securitization Exposure - Disclosure for Standardized Approach

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F-169

Table DF - 7



a) Approach for Computation of Capital charge for Market RiskStandardized Duration Approach is used for calculating Capital charge for Market Risk. Components under Market risk are:(i) Specific Risk – Capital Charge for market risk is computed based on risk weights prescribed by the regulator.

(ii) General Market Risk is calculated forSecurities under HFT categorySecurities under AFS categoryOpen foreign exchange position limitsTrading Positions in Derivatives

The total Capital charge for market risk is equal to greater of Specific Capital charge plus General Market Risk Capital Charge orAlternative total capital charge.


Interest rate risk ` 12064.49 lacs

Equity position risk ` 2038.05 lacs

Foreign exchange risk ` 190.79 lacs

Table DF - 8

Operational Risk

The Bank has put in place important policies like Operational Risk Management, Information System Security, Know your Customer(KYC) and Anti Money Laundering (AML), Business Continuity and Disaster Recovery Management. The updated manuals on allimportant functional areas have been circulated to the branches. Risk Based Internal Audit is introduced in all branches in our Bank.

The Operational Risk Management Policy outlines the Organisation structure and covers the process of identification, assessment/ measurement and control of various operational risks. Internal control mechanism is in place to control and minimize the operationalrisks.

Capital charge for operational risk is computed as per the Basic Indicator Approach. The average of the gross income, as defined inthe New Capital Adequacy Framework guidelines, for the previous 3 years i.e., 2014-15, 2013-14, 2012-13 is considered for computingthe capital charge. The required capital is ` 12013.86 lakhs.

Table DF - 9

Interest Rate Risk in the Banking Book (IRRBB)

Interest Rate Risk in Banking Book (IRRBB) refers to the risk of loss in earnings and economic value of the Bank's Banking Book asa consequence of movement in interest rates. The Bank has significant portion of its assets and liabilities portfolio not marked tomarket and is carried on the books of the Bank at historical values. Thus, the economic value of such assets and liabilities isgenerally not ascertained on a regular basis and can be a significant source of risk if the asset or liability is not held till maturity.

IRRBB Earnings Perspective

The immediate impact of changes in interest rates in the market is on bank's earnings by changing the Net Interest Income (NII).The interest rate risk when viewed from this perspective is known as 'Earnings Perspective' .

The asset liability profile up to 6 months is 'asset sensitive'. The positive mismatches in the near term time buckets (up to 6 months)

will be beneficial to the bank if the interest rates increases in the economy.

Interest Rate Risk – Economic Value Perspective

The long-term impact of changes in interest rates in the economy will be on bank's Market Value of Equity (MVE) since the economicvalue of the bank's assets, liabilities and off-balance sheet positions get affected due to variations in market interest rates.

Duration Gap Analysis (DGA) for IRR management is a simple approach to measure the volatility of market value of equity (MVE)in response to the changes in interest rates in the economy.

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Notional Amount Gross Positive Potential Future Total Creditfair value of contracts Exposure Exposure


Since the modified duration of the liabilities are less compared to the modified duration of assets, there would be a fall in the equityvalue under major stress. In order to bring down the percentage of fall in market value of equity and earnings at risk under majorstress, we have been mobilizing term deposits with longer tenure i.e., 3-5 years and over 5 years. As longer the tenure of liabilities,higher will be the modified duration.

The level of IRRBB (Earnings Perspective & Economic Value Perspective) is being measured and monitored on a quarterly basisaiming at managing it within the limit over a period and minimizes the impact of interest rate movement on near term profitability.


The impact is calculated for a parallel shift of 200 bps across all the time buckets. The increase in NII is at ` 2089.80 lakhs and therewould be fall of EVE by ` 16412.48 lakhs.

Table DF - 10

General Disclosure for Exposures related to Counterparty Credit Risk

Counterparty exposures for other entities are assessed subject to exposure ceilings as per the policy of the bank. Capital forCounterparty Credit Risk exposure is assessed based on the Standardized approach.

Bank does not have bilateral netting. The Credit equivalent amount of the derivative exposure is assessed based on the CurrentExposure method.

Credit Exposure as on 31.03.2016 (` in lacs)

Table DF - 11

Composition of Capital(` in lacs)

Basel III common disclosure template to be used during the transition of regulatory adjustments(i.e. from April 1, 2013 to December 31, 2017)


1 Directly issued qualifying common share capital plus related stock surplus (share premium) 83682.05



4 Directly issued capital subject to phase out from CET1 (only applicable to non-joint stock companies)

Public sector capital injections grandfathered until January 1, 2018

5 Common share capital issued by subsidiaries and held by third parties (amount allowed in group CET1)


Common Equity Tier 1 capital: regulatory adjustments

7 Prudential valuation adjustments



10 Deferred tax assets





15 Defined-benefit pension fund net assets


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17 Reciprocal cross-holdings in common equity 13.86

18 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatoryconsolidation, net of eligible short positions, where the bank does not own more than 10% of the issued sharecapital (amount above 10% threshold)

19 Significant investments in the common stock of banking, financial and insurance entities that are outside thescope of regulatory consolidation, net of eligible short positions (amount above 10% threshold)


21 Deferred tax assets arising from temporary differences (amount above 10% threshold, net of related taxliability)






26a of which: Investments in the equity capital of the unconsolidated insurance subsidiaries

26b of which: Investments in the equity capital of unconsolidated non-financial subsidiaries

26c of which: Shortfall in the equity capital of majority owned financial entities which have not been consolidatedwith the bank

26d of which: Unamortized pension funds expenditures

Regulatory Adjustments Applied to Common Equity Tier 1 in respect of Amounts Subject to Pre-Basel IIITreatment






27 Regulatory adjustments applied to Common Equity Tier 1 due to insufficient Additional Tier 1 and Tier 2 tocover deductions 9.30



Additional Tier 1 Capital : Instruments

30 Directly issued qualifying Additional Tier 1 instruments plus related stock surplus (31+32)

31 of which: classified as equity under applicable accounting standards (Perpetual Non-Cumulative PreferenceShares)

32 of which: classified as liabilities under applicable accounting standards (Perpetual debt Instruments)


34 Additional Tier 1 instruments (and CET1 instruments not included in row 5) issued by subsidiaries and heldby third parties (amount allowed in group AT1)


36 Additional Tier 1 capital before regulatory adjustments

Additional Tier 1 Capital: regulatory adjustments



39 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatoryconsolidation, net of eligible short positions, where the bank does not own more than 10% of the issuedcommon share capital of the entity (amount above 10% threshold)

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40 Significant investments in the capital of banking, financial and insurance entities that are outside the scope ofregulatory consolidation (net of eligible short positions)


41a Investments in the Additional Tier 1 capital of unconsolidated insurance subsidiaries

41b Shortfall in the Additional Tier 1 capital of majority owned financial entities which have not been consolidatedwith the bank

Regulatory Adjustments Applied to Additional Tier 1 in respect of Amounts Subject to Pre-Basel III Treatment


of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which are deducted from Tier 1 at50%]


42 Regulatory adjustments applied to Additional Tier 1 due to insufficient Tier 2 to cover deductions

43 Total regulatory adjustments to Additional Tier 1 capital

44 Additional Tier 1 Capital (AT1)

44a Additional Tier 1 capital reckoned for capital adequacy

45 Tier 1 capital (T1 = CET1 + AT1) (29 + 44a) 156849.90

Tier 2 Capital : Instruments and provisions

46 Directly issued qualifying Tier 2 instruments plus related stock surplus 26940.00


48 Tier 2 instruments (and CET1 and AT1 instruments not included in rows 5 or 34) issued by subsidiaries andheld by third parties (amount allowed in group Tier 2)




Tier 2 Capital : regulatory adjustments

52 Investments in own Tier 2 instruments

53 Reciprocal cross-holdings in Tier 2 instruments 1999.00

54 Investments in the capital of banking, financial and insurance entities that are outside the scope of regulatoryconsolidation, net of eligible short positions, where the bank does not own more than 10% of the issuedcommon share capital of the entity (amount above the 10% threshold)

55 Significant investments13 in the capital banking, financial and insurance entities that are outside the scope ofregulatory consolidation (net of eligible short positions)


56a of which: Investments in the Tier 2 capital of unconsolidated subsidiaries

56b of which: Shortfall in the Tier 2 capital of majority owned financial entities which have not been consolidatedwith the bank

Regulatory Adjustments Applied To Tier 2 in respect of Amounts Subject to Pre-Basel III Treatment

of which: [INSERT TYPE OF ADJUSTMENT e.g. existing adjustments which are deducted from Tier 2 at50%]


57 Total regulatory adjustments to Tier 2 capital 1999.00

58 Tier 2 capital (T2) 35689.58

58a Tier 2 capital reckoned for capital adequacy 35689.58

58b Excess Additional Tier 1 capital reckoned as Tier 2 capital

58c Total Tier 2 capital admissible for capital adequacy (58a+58b)

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F-173

59 Total capital (TC=T1+T2) (45+58C) 192539.48



of which: ...

60 Total risk weighted assets (60a+60b+60c) 1804571.80

60a of which: total credit risk weighted assets 1531250.33

60b of which: total market risk weighted assets 148502.09

60c of which: total operational risk weighted assets 124819.38

Capital ratios

61 Common Equity Tier 1 (as a percentage of risk weighted assets) 8.69%

62 Tier 1 (as a percentage of risk weighted assets) 8.69%

63 Total capital (as a percentage of risk weighted assets) 10.67%

64 Institution specific buffer requirement (minimum CET1requirement plus capital conservation andcountercyclical buffer requirements, expressed as a percentage of risk weighted assets) 6.125%

65 of which: capital conservation buffer requirement 0.625%



68 Common Equity Tier 1 available to meet buffers (as a percentage of risk weighted Assets) 3.19%

National minima (if different from Basel III)

69 National Common Equity Tier 1 minimum ratio (if different from Basel III minimum) 5.50%

70 National Tier 1 minimum ratio (if different from Basel III minimum) 7.00%

71 National total capital minimum ratio (if different from Basel III minimum) * 9.00%

Amounts below the thresholds for deduction (before risk weighting)

72 Non-significant investments in the capital of other financial entities




Applicable caps on the inclusion of provisions in Tier 2

76 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to standardized approach (prior toapplication of cap) 10748.58


78 Provisions eligible for inclusion in Tier 2 in respect of exposures subject to internal ratings-based approach(prior to application of cap)


Capital instruments subject to phase-out arrangements(only applicable between March 31, 2017 and March 31, 2022)


81 Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)


83 Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities


85 Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

* excluding capital conservation buffer

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F-174


Row No. ofParticular ` in lakhs

the template


Deferred tax assets (excluding those associated with accumulated losses) net of Deferred tax liability

Total as indicated in row 10

19 If investments in insurance subsidiaries are not deducted fully from capital and instead consideredunder 10% threshold for deduction, the resultant increase in the capital of bank




26b If investments in the equity capital of unconsolidated non-financial subsidiaries are not deducted andhence, risk weighted then:



44a Excess Additional Tier I capital not reckoned for capital adequacy (difference between Additional TierI capital as reported in row 44 and admissible Additional Tier I capital as reported in 44a)

of which: Excess Additional Tier I capital which is considered as Tier 2 capital under row 58b



Total of row 50 10748.58

58a Excess Tier 2 capital not reckoned for capital adequacy (difference between Tier 2 capital as reportedin row 58 and T2 as reported in 58a)

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F-175

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LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM67

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LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM68

F-177

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LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM69

F-178

Table DF - 14


Instruments Series - V Series -VII (A) Series - VII (B) Series - VIII Series - IX



Rate of Interest 9.95% 11.40% 11.40% 11.80% 11.50%

Amount 3000.00 19950.00 5050.00 7810.00 14010.00Lacs Lacs Lacs Lacs Lacs

Nature of Instrument Bonds in nature of Bonds in nature of Bonds in nature of Bonds in nature of Bonds in nature ofDebentures / Debentures/ Debentures/ Debentures / Debentures /

(Bonds) (Bonds) (Bonds) (Bonds) (Bonds)

Amount Subscribed 3000.00 19950.00 5050.00 7810.00 14010.00Lacs Lacs Lacs Lacs Lacs

Face Value of the Bond 10.00 lacs 10.00 lacs 10.00 lacs 10.00 lacs 5.00lacs

Issuance, Trading andListing N S E N S E N S E N S E N S E

Details of Tier II Capital (Banks - Regulatory Capital instruments)

raised by the Bank and the position as on 31.03.2016

Leverage Ratio (Solo) (` in lacs)

Tier I Capital 156849.90

Total Exposure 3003589.44

Leverage ratio 5.22

LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM70

F-179

CASH FLOW FROM OPERATING ACTIVITIES:Net Profit as per Profit & Loss Account 180,23,58 132,28,59

ADJUSTMENTS FOR:

Provisions & Contingencies 226,88,83 236,12,22

Depreciation 37,76,28 15,54,48

Loss on sale of assets 7,92 32,33

Income Tax / T D S paid -57,00,00 -41,10,00

Net cash flow before changes in Working Capital 387,96,61 343,17,62

CHANGES IN WORKING CAPITAL :LIABILITIES : Increase/Decrease in

Deposits 3466,74,93 3391,33,01

Refinances 224,80,78 0

Other Liabilities -170,69,28 -108,22,89

3520,86,43 3283,10,12

ASSETS : Increase/Decrease in

Investments 494,24,86 420,78,85

Advances 3291,71,98 3462,82,94

Other Assets 12,29,14 77,72,24

-3798,25,98 -3961,34,03

Net Cash Flow from operating activities 110,57,06 -335,06,29

CASH FLOW FROM INVESTING ACTIVITIES :Purchase of Fixed Assets -67,80,86 -59,47,91

Sale of Fixed Assets 32,45 70,62

Net Cash Flow from Investing activities -67,48,41 -58,77,29

CASH FLOW FROM FINANCING ACTIVITIES:Share issue including share premium net of forfeited shares 2,34,66 410,52,90

Proceeds received from Tier II Bonds 140,10,00 0

Repayment of Tier II Bonds -100,00,00 0

Dividends paid -35,64,28 -9,65,92

Net Cash Flow from financing activities 6,80,38 400,86,98

Cash flow for the year 49,89,03 7,03,41

Cash & Cash equivalents at the beginning of the year 1318,72,10 1311,68,69

Cash & Cash equivalents at the year end 1368,61,13 1318,72,10

CASH FLOW STATEMENT for the year ended 31 st March 2016

(` in 000’s)

31.03.2016 31.03.2015





D.L.N. RAO

S.G. PRABHAKHARAN

S. DATTATHREYANDr. P.A. SHANKAR


PANKAJ VAISH

PRAKASH P. MALLYAK. BABUJI

SUVENDU PATI

Directors





LVB ar 2016 Page 1 to 72.p65 07/05/2016, 1:04 PM71

F-180

232

DECLARATION

Our Bank certifies that all relevant provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR Regulations

have been complied with and no statement made in this Preliminary Placement Document is contrary to the

provisions of Chapter VIII and Schedule XVIII of the SEBI ICDR Regulations and that all approvals and

permissions required to carry on our Bank’s business have been obtained, are currently valid and have been

complied with. Our Bank further certifies that all the statements in this Preliminary Placement Document are true

and correct.

Signed by:

________________________

N. S. Venkatesh Executive Director and Chief Financial Officer

Place: Chennai

Date: December 28, 2016

233

DECLARATION

We, the Directors of the Bank, certify that:

(i) the Bank has complied with the provisions of the Companies Act, 2013 and the rules made thereunder;

(ii) the compliance with the Companies Act, 2013 and the rules does not imply that payment of dividend or

interest or repayment of debentures, if applicable, is guaranteed by the Central Government; and

(iii) the monies received under the offer shall be used only for the purposes and objects indicated in the

Preliminary Placement Document (which includes disclosures prescribed under Form PAS-4).

Signed by:


Place: Chennai


I am authorized by the Capital Raising Committee of the Board of Directors of the Bank, vide resolution dated

December 28, 2016 to sign this form and declare that all the requirements of Companies Act, 2013 and the rules

made thereunder in respect of the subject matter of this form and matters incidental thereto have been complied

with. Whatever is stated in this form and in the attachments thereto is true, correct and complete and no

information material to the subject matter of this form has been suppressed or concealed and is as per the original

records maintained by the Bank.

It is further declared and verified that all the required attachments have been completely, correctly and legibly

attached to this form.

Signed by:


Place: Chennai


234

ISSUER

The Lakshmi Vilas Bank Limited Salem Road, Kathaparai,

P.O. Karur – 639 006, Tamil Nadu, India

Tel: +91 44 2220 5316 / +91 44 2220 5317; Fax: +91 4324 223607

CIN: L65110TN1926PLC001377

Corporate Office of our Bank

LVB House, No. 4, Sardar Patel Road, Guindy,

Chennai – 600 032, Tamil Nadu, India.

Tel: +91 44 2220 5316; Fax: +91 44 2220 5317

Contact Person: N. Ramanathan, Company Secretary and Compliance Officer

Details of Compliance Officer

N. Ramanathan


LVB House, No. 4, Sardar Patel Road, Guindy,

Chennai – 600 032, Tamil Nadu, India.

Tel: +91 44-22205305 / +91 9442552642

Fax: +91 44 2220 5317


BOOK RUNNING LEAD MANAGER

Centrum Capital Limited

Centrum House,

C.S.T. Road, Vidyanagari Marg, Kalina, Santacruz (East),

Mumbai – 400 098, Maharashtra, India

INDIAN LEGAL COUNSEL TO THE ISSUE

Khaitan & Co

One Indiabulls Center, 13th Floor, Tower 1,

841 Senapati Bapat Marg,

Mumbai – 400 013, Maharashtra, India

SPECIAL INTERNATIONAL LEGAL COUNSEL TO THE BOOK RUNNING LEAD MANAGER

Duane Morris & Selvam LLP 16 Collyer Quay #17-00

Singapore – 049 318

STATUTORY AUDITORS TO OUR BANK

R.K. Kumar & Co Room no. 101-106, 2nd Floor, Congress Building,

543, Anna Salai,

Chennai – 600 006, Tamil Nadu, India

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