Equitas Small Finance Bank Ltd
Chairman Speech
Making a meaningful difference at scale
Dear stakeholders,
The financial year gone by was an eventful one. Advanced economies
grappled with a plethora of challenges including an escalation in geopolitical conflict,
constrained supply chains, historically high inflation, and instability in the banking
system. Although India too encountered high inflation, the India government's focus on
infrastructure- led growth, the balanced policy on import sourcing, and the Central Bank's
proactive stance were the bulwarks. As we course through FY24, the Indian economy remains
stable with improved corporate balance sheets and well-capitalised banks.
During FY23, the environment turned favourable, largely due the rebound
in the economy as the pandemic receded. Our disbursements, collections, asset quality
indicators, deposits, traction for newer products like affordable home loans, new
commercial vehicle loans and user passenger car loans and Brand visibility improved.
Advances grew by 35% YoY to '27,861 crore and deposits by 34% YoY to '25,381 crore. Small
business loans (SBL) continued to grow at a rapid pace, with gross advances crossing
'10,000 crore.
Our asset quality improved significantly, with GNPA at 2.60% (vs. 4.06%
in FY22) and NNPA at 1.14% (vs. 2.37% in FY22), which speaks volumes about the resilience
of our customer segments, as well as our proprietary credit assessment model. We have
always been conservative about provisions, which is reflected in the further improvement
in the provision coverage ratio (PCR) to 56.90% at the end of FY23 from
Equitas SFB's success story is not confined to spreadsheets, and
operational and financial metrics. Our purpose as a bank extends far beyond mere
transactions. That's why, aligned with our core values, we have embraced the 'Beyond
Banking' philosophy with an unwavering commitment to making a lasting impact on the lives
we touch.
42.73% at the end of FY22. The Bank remains well capitalised with total
CRAR at 23.8%, significantly above the 15% regulatory requirement, to fuel the next phase
of its growth journey. We also contained our cost of funds at 6.38%, despite a series of
policy rate hikes by the RBI to rein in inflation.
In the coming years, we plan to build our consumer finance portfolio by
foraying into credit cards and personal loans which will also further help increase
stability through a diversified loan portfolio. Additionally, with the obtaining of the
AD-1 license, we will work on offerings like forex cards, FCNR deposits, remittances,
among others.
Before I delve deeper into our FY23 performance, it's important to
address two key events which, I believe, have significant ramifications for the Bank's
future. First, we completed the reverse merger of Equitas Holdings Limited with Equitas
Small Finance Bank Limited. Apart from ending the anomaly of having two listed Companies
with more or less the same asset base, the merger cleared the decks for Equitas Small
Finance Bank to apply for a Universal Bank Licence once the guidelines for the same are
issued. However, whatever be our nomenclature, our focus towards the unbanked and
underbanked will remain unaltered. Inclusiveness in our view, is of trenchant significance
if Equitas SFB were to remain a profitable and allweather edifice.
Second, recall that, in May 2022,
Mr. P.N. Vasudevan, MD & CEO, had expressed his desire to move on
to engage in philanthropic work. This would have created a discontinuity in leadership and
turbulence in your young and evolving institution. The Board was able to persuade him to
stay on. His tenure has been recently extended by the RBI for another three years,
effective from July 23, 2023 and I firmly believe this augurs well for Equitas SFB.
The prudent investments we have made on people, processes and
technology have started to yield results, and will continue to play a pivotal role in
enriching our customers' journeys in a seamless and efficient manner. As India continues
on its path to realise its ambition of becoming a technology- driven and knowledge-based
developed economy, we believe we are a proxy to the growth levers of inclusive development
and last mile delivery.
Staying true to the founding vision of Equitas, we continued to
dedicate our resources towards the society we serve, to unlock the full potential. Through
Equitas Development Initiatives Trust (EDIT), our focused interventions across our chosen
areas of education, training, rehabilitation, and health care have made a meaningful
difference to the lives and livelihoods of millions to date. I'm also proud to report you
that the work on setting up a hospital for on affordable cancer treatment is progressing
on track, which would have usher in an era of new hope and optimism for many battling the
menace of cancer.
That said, Equitas SFB's success story is not confined to spreadsheets,
and operational and financial metrics. Our purpose as a bank extends far beyond mere
transactions. That's why, aligned with our core values, we have embraced the 'Beyond
Banking' philosophy with an unwavering commitment to making a lasting impact on the lives
we touch. We listen, understand, and walk with our customers on their journeys, offering
guidance and support at every step. We celebrate their triumphs, as if they were our own.
And then we realise how their stories of positive change seamlessly become the real
metrics of our success.
Before I conclude, I need to mention that my tenure as the Chairman of
the Bank ends in April next year. It has been a pleasant and educative experience for me
right from 2012, when I came in as the Chairman of Equitas Microfinance Company and stayed
on to bask in the warmth of my relationship with Mr. Vasudevan and others in the Bank.
I am grateful to all of you and wish you all every happiness in life
and every satisfaction in work as the future unravels. What Equitas is today has been
possible only because of the faith you have reposed on us. As we move forward, we hope to
reinforce this faith by continuously empowering our customers to realise their full
potential.
Warm regards,
Arun Ramanathan
Part-Time Chairman and NonExecutive Independent Director
  Â
Equitas Small Finance Bank Ltd
Directors Reports
To
The Members
Equitas Small Finance Bank limited
Your Directors have pleasure in presenting the Seventh Annual Report on
the business and operations of the Bank, together with the audited Accounts of the Bank
for the financial year ended March 31, 2023 (FY 2022-23).
1. Summary of Financial Performance
The summary of Bank's financial performance for the FY 2022-23 compared
to the previous financial year 2021-22 is given below:
(' in lakhs)
| Particulars |
For the Year ended March 31, 2023 |
For the Year ended March 31, 2022 |
Y-o-Y % |
| Deposits & Other Borrowings |
28,35,431.58 |
21,56,719.73 |
31.47% |
| Advances |
25,79,855.66 |
19,37,420.60 |
33.16% |
| Total Income |
4,83,146.38 |
3,99,722.58 |
20.87% |
| Operating Profits (Profits before Provision, Depreciation
and Taxation) |
1,26,054.53 |
94,723.00 |
33.08% |
| Less: Depreciation |
8,453.78 |
7,528.31 |
12.29% |
| Less: Provision and contingencies |
40,720.35 |
49,383.69 |
(17.54)% |
| Less: Provision for Taxation |
19,521.35 |
9,737.82 |
100.47% |
| Net Profit |
57,359.05 |
28,073.18 |
104.32% |
| Add: Profit brought forward from previous year |
1,09,679.97 |
89,823.86 |
22.11% |
| Profit and Loss Account balance adjustment on account of
amalgamation |
(87,825.49) |
- |
- |
| Total Profit Available for Appropriation |
79,213.53 |
1,17,897.04 |
(32.81)% |
| Appropriations |
|
|
|
| Transfer to Statutory Reserve |
14,339.76 |
7,018.30 |
104.32% |
| Transfer to Special Reserve |
1,202.11 |
968.43 |
24.13% |
| Transfer to Capital Reserve |
- |
105.63 |
(100.00)% |
| Transfer to Investment Fluctuation Reserve |
3,807.79 |
124.71 |
2953.31% |
| Balance carried over to Balance Sheet |
59,863.87 |
1,09,679.97 |
(45.42)% |
2. Dividend
The Board of Directors at their meeting held on May 05, 2023, has
recommended a dividend of Re.1/- per equity share (i.e., 10%) of face value '10/- each,
subject to the approval of the Members at the ensuing Seventh Annual General Meeting
(AGM). The Dividend, if approved by the Members would be paid to those Members whose name
appears in the Register of Members as on the Record Date mentioned in the Notice convening
the Seventh AGM.
In accordance with Regulation 43A of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 and the RBI guidelines, the Bank has formulated
and adopted a Dividend Distribution Policy and the same is available on the website of the
Bank Click here
3. Transfer to Reserves
As per the requirement of RBI Regulations, the Bank has transferred the
following amounts to various reserves during the year ended March 31, 2023.
| Amount transferred to |
H in lakh |
| Statutory Reserve |
14,339.76 |
| Special Reserve |
1,202.11 |
| Investment Fluctuation Reserve |
3,807.79 |
4. Deposits
Being a Bank, the disclosures relating to deposits as required under
Rule 8(5)(v) and (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and
74 of the Companies Act, 2013, are not applicable. The Bank receives and accepts deposits,
the details of which are enumerated in the financial statements for FY 2022-23.
5. Capital Adequacy
The Capital Adequacy Ratio stood at 23.80% as on March 31, 2023 as
against the minimum requirement of 15% stipulated by the Reserve Bank of India (RBI). The
Net Worth of the Bank as on the said date was '5,15,794.77 Lakhs.
6. Material changes and commitments affecting the Financial Position of
the Bank after the Balance Sheet date as at March 31, 2023
There were no material changes and commitments between the end of
Financial Year 2022-23 and the date of this report, affecting the financial position of
the Bank.
7. Information about Financial Performance / Financial Position of the
Subsidiaries, Associates and Joint Venture Companies
The Bank does not have any Subsidiaries, Associates and Joint Venture
Companies.
8. Operational highlights and state of the Bank's affairs
The details of operations and state of affairs are given in the
Management Discussion and Analysis [MD&A] Report.
10. Management Discussion and Analysis, Report on Corporate Governance
and Business Responsibility and Sustainability Report
The Management Discussion and Analysis Report as stipulated under
Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015, Report on Corporate Governance for FY 2022-23 along with General
Shareholder Information and the Business Responsibility and Sustainability Report forms
part of this annual report.
11. Corporate Social Responsibility (CSR)
The Bank has laid down a Corporate Social Responsibility (CSR) Policy,
which is available on our website. click here
The Bank contributes the higher of 5% of its previous year net profits
or 2% of average net profits made during the preceding three financial years to Equitas
Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF), registered
Public Charitable Trusts for carrying out CSR activities on its behalf. A report is
enclosed as Annexure A.
The Bank has constituted a CSR Committee, which:
a) Recommends to the Board an annual activity plan in line with the CSR
policy and CSR contribution of the Bank for the year.
b) Monitors the implementation of the plan as approved.
c) Reviews and recommends changes to the policy from time to time.
12. Scheme of Amalgamation between Equitas Holdings Limited and Equitas
Small Finance Bank Limited
The Board of Directors of Equitas Small Finance Bank Limited (ESFBL)
and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021
approved a Scheme of Amalgamation between EHL, ESFBL and their respective Shareholders,
contemplating amalgamation of EHL with ESFBL under applicable provisions of the Companies
Act, 2013. The Scheme was designed to achieve the RBI licensing requirement of dilution of
promoter shareholding in the Bank and Minimum Public Shareholding (MPS) requirements
prescribed by SEBI Regulations, in a manner that is in the best interests
and without being prejudicial to EHL, ESFBL, their respective
Shareholders or any other stakeholders.
Subsequently, ESFBL achieved the MPS through a Qualified Institutions
Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals.
QIP comprised issue of 10,26,31,087 equity shares of '10/- each at premium of '43.59 per
share, aggregating to a fund raise of '550 crores which was utilized 100% for augmenting
the Tier 1 capital of the Bank during the year. As a result of this QIP, the public
shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with the
Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations.
Consequently, the aforesaid Scheme was revised to include the change in
capital structure arising from QIP as well as the necessary change in objects of the
Scheme. The Scheme, so revised was approved by the Boards of EHL and ESFBL in their
respective Meetings held on March 21, 2022. The Scheme was filed with the Stock Exchanges
and RBI for necessary approvals/ sanctions. The RBI vide its letter dated May 6, 2022
granted its conditional NOC to the Scheme and the No Observation letters towards the
aforesaid scheme were received from the National Stock Exchange of India Limited (NSE Ltd)
and BSE Limited on June 10, 2022.
Further, a joint application was filed by EHL and ESFBL with Hon'ble
National Company Law Tribunal, Division Bench-II, (Chennai NCLT) on June 18, 2022 and the
meetings of the equity shareholders and unsecured Creditors of EHL and the Bank and
Depositors of the Bank holding deposits above ' 3 lakhs were convened on September 06,
2022 and September 07, 2022 respectively, in adherence with the Order passed by the
Hon'ble National Company Law Tribunal on July 22, 2022.
Followed by the approval of the shareholders, creditors and depositors
in the meetings as mentioned above, a joint petition was filed with the Chennai NCLT,
wherein the NCLT had accorded its approval for the aforesaid Scheme vide its Order dated
January 12, 2023. The Scheme became effective from February 02, 2023, upon filing the
certified true copy of the NCLT order with Registrar of Companies, Chennai as ordered by
NCLT.
Upon the effectiveness of the Scheme, EHL was dissolved without winding
up and the Board of Directors of the Bank at its meeting held on February 08, 2023
approved the extinguishment of shares held by EHL and allotted equity shares to the EHL
shareholders as on record date as consideration for
the transfer and vesting of undertaking in the Bank as per the terms of
the Scheme.
The fractional entitlements arising out of the aforesaid allotment were
dealt as per the terms of the scheme and the sale proceeds were distributed to the
shareholders on March 21, 2023 and the report of Committee of Independent Directors and
Audit Committee were filed with SEBI.
The aforesaid allotment in pursuance of the Scheme was made in demat
form only, as per SEBI directives. The said allotment also comprised allotment of 2,99,336
fully paid-up equity shares of ESFBL to a suspense demat account, being held on behalf of
the shareholders of EHL holding shares in physical form, as on the record date.
The Board of directors approved the balance sheet of the merged entity
as on January 01st, 2023 (Appointed date) on February 23, 2023.
Share Capital
During the year, there has been no change in the Authorized share
capital of the Bank.
The Bank has allotted in aggregate 29,38,696 equity shares to employees
of the Bank under the ESFB Employees Stock Option Scheme, 2019.
Extinguishment of Equity Shares held by Equitas Holdings Limited (EHL)
in the Bank
Upon the effectiveness of the Scheme, EHL was dissolved without winding
up and 93,39,43,363 (Ninety three Crores thirty nine lakhs forty three thousand three
sixty three only) equity shares held by EHL in the Bank (erstwhile Promoter of the Bank)
were cancelled and extinguished.
Allotment of Equity Shares to the eligible record date Shareholders of
Equitas Holdings Limited
Pursuant to the effect of the scheme, 78,95,35,166 (Seventy eight
crores ninety five lakhs thirty five thousand one hundred and sixty six only) fully paid
equity shares of '10/- each were allotted to the eligible Equity shareholders of EHL as on
the Record date i.e., February 03,2023 as per the share exchange ratio envisaged in the
approved scheme i.e.,231 equity shares of '10 each of ESFBL in respect of every 100 equity
shares of '10 each fully paid up held by them in EHL as consideration for transfer and
vesting of undertaking of EHL in ESFBL in terms of the Scheme.
Consequently, the total issued and paid-up share capital of the Bank
decreased to '1,110,55,81,540 (One thousand one hundred ten crores fifty five lakhs eighty
one thousand five hundred and forty rupees only) comprising of 111,05,58,154 (One hundred
and eleven crore five lakhs fifty eight thousand one hundred and fifty four only) equity
shares with face value of '10 each.
Apart from the above, the Bank did not raise any additional equity
share capital during the year.
13. Meetings of the Board
During the FY 2022-23, our Board met thirteen (13) times. The details
of Meetings are given in the report on Corporate Governance. The maximum interval between
any two Meetings did not exceed 120 days, as prescribed in the Companies Act 2013 &
the relevant Rules made thereunder and the applicable SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015.
Board Committees
The details pertaining to the Audit Committee and other Committees of
the Board are provided in the Corporate Governance section forming part of this report.
All the recommendations made by the Audit Committee during the year were accepted and
implemented by the Board. During the year under review, there was no change in the
composition of any of the committees.
14. Directors and Key Managerial Personnel (KMP)
As on the date of this Report, the Bank has ten Directors, out of
which, there are nine Independent Directors including a Woman Independent Director.
Change in Directors & KMP
During the year, the appointment of Prof. Samir Kumar Barua (DIN:
00211077) and Ms. Geeta Dutta Goel (DIN: 02277155) as Independent Directors for a period
of 5 years with effect from 27th December, 2021 was approved by the Members at
the Sixth Annual General Meeting held on 19th July, 2022. Further, the
re-appointment of Mr. Vasudevan P N (DIN: 01550885) as Managing Director & CEO for a
period of 3 years with effect from 23rd July, 2023 was approved at the Board
meeting held on December 23, 2022, and approved by RBI vide its letter dated June 15,
2023, which is subject to the approval of Members.
The Members had approved the appointment of Mr. Murali Vaidyanathan
(DIN: 09594986), Sr President & Country Head-Branch Banking-Liabilities and Mr. Rohit
Gangadharrao Phadke (DIN: 07293524), Sr President-Retails Assets as Whole Time Directors
of the Bank to be designated as Executive Directors to hold the office for a period of
three years from date of approval from RBI or from such date and period as may be approved
by RBI.
However, RBI vide its letter dated 11th August, 2022 had
agreed to the appointment of one Executive Director position although the Bank had
requested for appointment of two Executive Directors for which the Members of the Bank had
also accorded their approval. Considering the RBI's advice for one position, the Bank had
decided to defer the matter for the present and consider the same at an appropriate time.
Directors liable to retire by rotation
Section 152 of the Companies Act, 2013 provides that two-thirds of the
total number of Directors are liable to retire by rotation out of which one- third shall
retire from office at every AGM. In terms of Section 149(13) of the Companies Act, 2013,
the provisions of retirement of Directors by rotation shall not be applicable to
Independent Directors and an Independent Director shall not be included in the total
number of Directors liable to retire by rotation.
The Bank has only one Director viz., Mr. Vasudevan P N, MD & CEO
liable to retire by rotation. Mr. Vasudevan P N will retire at the ensuing AGM of the Bank
and being eligible, offers himself for re-appointment. The Nomination and Remuneration
Committee and the Board of Directors recommend his re-appointment and the same has been
placed for approval of the Members at the ensuing Annual General Meeting.
Familiarisation Programme
The Bank has familiarised the Independent Directors of the Bank of
their roles and responsibilities in the Bank, nature of industry in which the Bank
operates, business model of the Bank, etc. The details of the familiarisation programme
imparted to Independent Directors are available on the website of the Bank click here
Key Managerial Personnel (KMP)
In terms of Section 203(1) read with Section 2(51) of the Act and Rule
8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the
Bank had the following KMPs as on March 31, 2023:
| S. Name of the Key No. Managerial Person |
Designation |
| 1 Mr Vasudevan P N |
MD & CEO |
| 2 Mr Sridharan N |
Chief Financial Officer (CFO) |
| 3 Mr Ramanathan N |
Company Secretary (CS) |
During the year, the Board at its meeting held on June 30, 2022, on the
recommendation of the Nomination and Remuneration Committee had approved the appointment
of Mr. Ramanathan N (Membership Number: A28366) as the Company Secretary and Compliance
Officer of the Bank w.e.f July 1, 2022. Mr Sampathkumar KR, the erstwhile Company
Secretary of the Bank had moved to another control function within the Bank by way of job
rotation with effect from July 01, 2022.
15. Declaration from Independent Directors
The Board has received declarations from the Independent Directors as
required under Section 149(7) of the Companies Act, 2013 and the Board is satisfied that
the Independent Directors meet the criteria of independence as mentioned in Section 149(6)
of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015. The Independent Directors have complied with
the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013
Independent Directors have confirmed that they are not aware of any
circumstance or situation, which exists or may be reasonably anticipated, that could
impair or impact their ability to discharge their duties with an objective independent
judgement and without any external influence. The Board has assessed the confirmations
submitted by the Independent Directors and had taken the same on record. In the opinion of
the Board, all the Independent Directors are independent of the Management.
16. Evaluation of performance of the Board and its committees
The performance of the Board, Committees of the Board, Chairman,
Individual Directors & Key Managerial Personnel were evaluated on the basis of
criteria as approved by the Board. All the Directors were provided the criteria for
evaluation and forms, which were duly filled. The feedback from the Directors was
consolidated and those relating to the Directors were shared with the respective Directors
and feedback relating to the Committees and the Board were discussed with the respective
Committees & Board.
17. Policy on Directors' appointment, remuneration and other details
Pursuant to the provisions of Section 178 of the Companies Act, 2013,
the Bank has formulated and adopted Policy on selection of Directors and remuneration
Policy, which is available in our website at click here
18. Directors' Responsibility Statement
The Board of Directors of the Bank, to the best of their knowledge and
belief confirm that:
i) I n the preparation of the annual accounts for the year ended March
31, 2023, the applicable accounting standards have been followed along
with proper explanation relating to material departures,
ii) such accounting policies as specified in Schedule 17 to the
Financial Statements have been selected and applied consistently and judgments and
estimates have been made that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Bank as at March 31, 2023 and of the profit of the
Bank for the year ended on that date,
i ii) proper and sufficient care has been taken for maintenance of
adequate accounting records in accordance with the provisions of the Companies Act, 2013
for safeguarding the assets of the Bank and for preventing and detecting frauds and other
irregularities,
iv) annual accounts have been prepared on a going concern basis,
v) internal financial controls to be followed by the Bank were laid
down and that the same were adequate and were operating effectively, and
vi) proper systems to ensure compliance with the provisions of all
applicable laws was in place and the same were adequate and operating effectively.
19. Overall Remuneration
Details of all elements of remuneration of Directors are given in the
Corporate Governance Report. The Independent Directors of the Bank are not entitled to
stock options. Details of remuneration as required under Section 197 (12) of the Companies
Act, 2013 read with Rule 5 of Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 are given below.
| (i) Ratio of remuneration of each director with median
employee remuneration. |
The ratio of remuneration of each Director to median
employee remuneration is as below: |
|
|
Mr. Arun Ramanathan, Chairman |
6.47:1 |
|
Mr. Arun Kumar Verma, Chairman, Audit Committee |
4.85:1 |
|
Mr. P N Vasudevan, MD & CEO |
60.51:1 |
|
Mr. Vinod Kumar Sharma, Independent Director |
3.24:1 |
|
Prof. Balakrishnan N, Independent Director |
3.24:1 |
|
Mr. Srinivasan N, Independent Director |
3.24:1 |
|
Mr. Navin Puri, Independent Director |
3.24:1 |
|
Mr. Ramesh Rangan, Independent Director |
3.24:1 |
|
Prof. Samir Kumar Barua, Independent Director |
3.24:1 |
|
Ms. Geeta Dutta Goel, Independent Director |
NA |
| (ii) the percentage increase in remuneration of each
Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager,
if any, in the financial year |
The percentage increase in the remuneration of all the
Independent Directors except for Ms. Geeta Dutta Goel is 60%. Ms. Geeta Dutta Goel has
waived her right to receive the remuneration. The remuneration to Directors does not
include sitting fees. The increase in remuneration of Key Managerial Personnel is provided
below: Chief Executive Officer - 6% |
|
|
Chief Financial Officer - 17%** Company Secretary -
Mr. Sampath Kumar K R-27%$ Mr. Ramanathan N -NA |
|
|
$ Mr. Ramanathan N was appointed as the Company Secretary
and Compliance Officer of the Bank w.e.f July 1, 2022 so % increase in remuneration is not
applicable. |
|
|
**does not include perquisite value |
|
| (iii) the percentage increase in the median remuneration
of employees in the financial year |
6% |
|
| (iv) the number of permanent employees on the rolls of the
Bank as on March 31, 2023 |
20,563 |
|
| (v) Average percentage increase already made
in the salaries of employees other than the managerial personnel in the last financial
year and its comparison with the percentile increase in the managerial remuneration and
justification thereof and point out if there are any exceptional circumstances for
increase in the managerial Remuneration. |
The average percentage increase in salaries
of employees other than the managerial personnel in the last financial year was 6% and for
KMP the increase was in the varying range of 6% to 27% for the financial year 2022-2023.
The increase during the year is based on remuneration policy of the Bank and reflects
the Bank's reward philosophy as well as the results of the salary benchmarking exercise. |
| (vi) Affirmation that the remuneration is
as per the remuneration policy of the Bank. |
The Management affirms that the
remuneration is as per the remuneration policy of the Bank |
i n accordance with Section 136 of the Companies Act, 2013, the report
and accounts are being sent to the Members and others entitled thereto, excluding the
statement prescribed under Rule 5(2) and 5(3) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014. The aforesaid information is available
for inspection at the Registered office of the Bank during the business hours on working
days of the Bank. If any member is interested in obtaining a copy, such Member may write
to the Company Secretary in this regard.
21. Whistle Blower Policy/ Vigil Mechanism
The Bank has adopted a Whistle Blower Policy and Vigil Mechanism in
compliance with the relevant provisions of Companies Act, 2013 and Rules thereunder and
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This Policy
provides an opportunity to address concerns of employees & Directors relating to
fraud, malpractice or any other activity or event which is against the interest of the
Bank or society as a whole. The Policy is available in the Bank's website, click here
During the year under review, the Bank received 'Five' complaints under
the Whistle Blower Policy of the Bank. The functioning of the mechanism is reviewed by the
Audit Committee from time to time. No personnel of the Bank has been denied access to the
Audit Committee.
22. Ratings of Debt Instruments
The Bank had redeemed the debt instruments during the FY and the
details of the same along with the ratings applicable for those debt instruments are
disclosed in the Corporate Governance Report, which forms part of this Annual Report.
23 Auditors & their Report
Reserve Bank of India ("RBI") has on April 27, 2021, issued
the Guidelines for Appointment of Statutory Central Auditors/Statutory Auditors of
Commercial banks which are applicable from the FY 2021-22 ("RBI Guidelines").
The RBI Guidelines has capped the term of Statutory Auditors at three years, replacing the
earlier cap of four years.
The Board of Directors of the Bank in their Meetings held on April 29,
2021 and June 01, 2021 had appointed M/s T R Chadha & Co LLP (TRC), Chartered
Accountants and M/s Varma and Varma, Chartered Accountants, respectively as the Joint
Statutory Auditors of the Bank. The said appointments were approved by the Members at the
Fifth AGM held on August 12, 2021. The appointment was approved by RBI for FY 2021-22 vide
its letter dated July 13, 2021. The tenure of M/s T R Chadha & Co LLP (TRC), Chartered
Accountants, (Firm Registration No: 006711N/N500028) shall end at the conclusion of the
ensuing Seventh AGM of the Bank.
As per the RBI guidelines, the appointment of Joint Statutory Auditors
should be subject to annual approval from Reserve Bank of India. The Audit Committee of
the Board had reviewed the performance of the Auditors during the financial year 2022-23
and their independence by taking note of the eligibility letters received from the
Auditors stating that they continue to satisfy the criteria provided in Section 141 of the
Companies Act, 2013 and RBI Regulations and their continuance, if approved, will be in
accordance with the conditions prescribed under the Companies Act, 2013 and Rules
thereunder as well as the applicable RBI Regulations and had accordingly recommended their
continuance to the Board.
The Board of Directors of the Bank at its Meeting held on June 14, 2023
considered the recommendation of Audit Committee and approved the re-appointment of M/s
Varma and Varma, Chartered Accountants, as one of the Joint Statutory Auditors for the FY
2023-24 as they continue to satisfy the eligibility Norms as per the RBI guidelines.
Further, the Board of Directors at the aforesaid meeting, on the recommendation of the
Audit Committee, considered and approved the appointment of M/s A S A & Associates
LLP, Chartered Accountants, (Firm Registration No: 009571N/ N500006 as one of the Joint
Statutory Auditor for the period from FY 2023-24 to FY 2025-2026 subject to approval of
the Members at the ensuing Annual General Meeting. RBI has approved the aforesaid
appointment vide letter dated July 07, 2023.
Auditors' Report:
There are no qualifications, reservations or adverse remarks made by
the Joint Statutory Auditors of the
Bank, M/s. Varma & Varma, Chartered Accountants and M/s. T R Chadha
& Co LLP, Chartered Accountants in their report on the financial statements for the FY
2022-23. Further, pursuant to Section 143(12) of the Companies Act, 2013, the Joint
Statutory Auditors of the Bank have not reported any instances of frauds committed in the
Bank by its officers or employees.
24. Details of Employee Stock Options Scheme (ESOS)
The Bank, pursuant to the resolutions passed by the Board and the
Shareholders of the Bank on January 31, 2019, adopted the ESFB Employee Stock Option
Scheme (ESOS), 2019 ("ESFB ESOP 2019"). The Bank has amended the ESFB ESOP 2019
pursuant to the resolutions of the Board and Shareholders of the Bank dated November 7,
2019 & November 22, 2019 respectively.
Post listing of Equity shares of the Bank, the ESFB ESOP 2019 was
ratified by the Shareholders by way of special resolution dated February 08, 2021 as
required by Regulation 12 of erstwhile SEBI (Share Based Employee Benefits) Regulations,
2014. Further, as recommended by the Nomination and Remuneration Committee of the Board,
the Board of Directors at its Meeting held on January 28, 2022 had approved modifications
to the ESFB ESOP 2019 aligning the scheme as per the SEBI (Share Based Employee Benefits
and Sweat Equity) Regulations, 2021.
As per the scheme approved, the Bank is entitled to grant an aggregate
number of up to 11,00,00,000 options under ESFB ESOP 2019. The objective is to enable the
Bank to attract and retain the best available talent to contribute and share in the growth
of the Bank.
The Scheme is administered by the Nomination and Remuneration Committee
constituted by the Board of Directors of the Bank. There were no material changes in the
Employee Stock Option Scheme and the Scheme is in compliance with the SEBI (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021. A certificate from CS Dr. B Ravi,
Managing
Partner, M/s B Ravi & Associates, Practicing Company Secretaries
and the Secretarial Auditor of the Bank, that the Employee Stock Option Scheme has been
implemented in accordance with SEBI (Share Based Employee Benefits and Sweat Equity)
Regulations, 2021 and is in accordance with the resolutions passed by the Members of the
Bank is enclosed as Annexure B.
The disclosures as mandated under the provisions of Regulation 14 of
the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, is available
in our website click here
The Scheme is administered by the Nomination and Remuneration Committee
constituted by the Board of Directors of the Bank.
I nformation as required under Section 62 of the Companies Act, 2013
and Rule 12 of the Companies (Share Based Employee Benefits) and the (SEBI SBEB & SE)
Regulations 2021:
| Particulars |
Total |
| Number of options granted during the year |
2,04,10,628 |
| Number of options forfeited / lapsed during the year |
65,96,673 |
| Number of options vested during the year |
65,47,866 |
| Number of options exercised during the year |
29,38,696 |
| Number of shares arising as a result of exercise of
options |
29,38,696 |
| Money realized by exercise of options (INR), if scheme is
implemented directly by the company |
10,36,71,878.50 |
| Loan repaid by the Trust during the year from exercise
price received |
Not applicable |
| Option Granted but not vested |
1,99,62,337 |
| Options Vested but not exercised |
2,86,52,409 |
| Options Available for Grant |
4,73,00,076 |
Employee Wise details of the options granted to A) Key Managerial
Personnel
| N0 Name of Employee |
Designation |
No of options granted |
Exercise Price |
% of options granted |
| 1 Mr.Vasudevan P N |
MD & CEO |
10,78,431 |
57.20 |
5.28% |
| 2 Mr. Sridharan N |
CFO |
63,140 |
43.60 |
0.31% |
| 3 Mr.Ramanathan N |
Company Secretary |
Nil |
NA |
NA |
B) any other employee who receives a Grant of options in any one year,
of options amounting to 5% or more of options granted during that year - NIL
C) identified employees who were granted option, during any one year,
equal to or exceeding 1%of the issued capital (excluding outstanding warrants and
Conversions) of the Company at the time of Grant. - NIL
25. Secretarial Auditors
The Secretarial Audit Report issued by CS Dr. B Ravi, Managing Partner,
M/s B Ravi & Associates (C.P. 3318) is enclosed as Annexure C. The Bank has complied
with the applicable Secretarial Standards relating to 'Meetings of the Board of Directors'
and 'General Meetings' during the year. There are no qualifications, reservations, adverse
remarks or disclaimers made by the Secretarial Auditors.
26. I nformation as per Section 134 (3) (q) of the Companies Act, 2013
read with Rule 8 of the Companies (Accounts) Rules, 2014
26.1 During FY 2022-23, the Bank had no activity relating to
Conservation of energy or technology absorption.
26.2 During FY 2022-2023, the total foreign exchange earned by the Bank
was Nil and the total foreign exchange outgo was '375.32 lakhs.
27. Particulars of contracts or arrangements with Related Parties
All contracts / arrangements / transactions entered by the Bank during
the Financial Year 2022-2023 with related parties were in its ordinary course of business
and on an arm's length basis. During the year, the Bank had not entered into any contract
/ arrangement / transaction with related parties which could be considered material in
accordance with the policy of the Bank on materiality of related party transactions or
which is required to be reported as per Section 188 and other applicable provisions, if
any, of the Act read with the Rules made thereunder. The Policy on Related Party
Transactions is available on the website of the Bank at click here
28. Risk Management
The Bank has formulated and adopted a robust Risk Management framework.
The Bank has also constituted Risk Management Committee of the Board, which periodically
reviews the risks faced by the Bank and the practices/ processes followed to manage them.
Details of the same are covered in the MD&A report.
29. Internal Financial Controls
The Bank has clear delegation of authority and standard operating
procedures, which are are in accordance with the approved policies of the Bank. These
measures help in ensuring adequacy of internal financial controls commensurate with the
nature and size of operations of the Bank. The Board also reviews the adequacy and
effectiveness of the Bank's internal financial controls with reference to the financial
statements. The procedures and internal controls provide reasonable assurance on the
preparation of financial statements and the reliability of financial reporting. The Bank
also ensures that the internal controls are operating effectively.
30. IND AS Implementation
I n January 2016, the Ministry of Corporate Affairs issued the roadmap
for implementation of new Indian Accounting Standards (Ind AS), converged with
International Financial Reporting Standards (IFRS), for scheduled commercial banks,
insurance companies and Non-Banking Financial Companies (NBFCs). However, currently the
implementation of Ind AS for banks has been deferred by RBI till further notice pending
the consideration of some recommended legislative amendments by the Government of India.
The Bank is in an advanced stage of preparedness for implementation of Ind AS, as and when
these are made applicable to the Indian banks
As required by the RBI guidelines, the accounts of the Bank are
converted into Ind AS format and submitted to the RBI at periodic intervals. The Bank has
put in place Board approved policy on Expected Credit Loss (ECL) as per Indian Accounting
Standards. The Bank carries out the Expected loss provisioning using Probability of
Default (PD) and Loss Given Default (LGD) framework by considering historical data. The
Bank has identified an IT solution for Ind AS reporting and is currently in the process of
implementing the solution.
31. Loans / Guarantees / Investments
Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions
of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan
made, guarantee given or security provided by a Banking Company in the ordinary course of
business. The particulars of investments made by the Bank are disclosed in Schedule 8 of
the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.
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