Utkarsh Small Finance Bank Ltd
Directors Reports
Dear Members,
The Board of Directors of Utkarsh Small Finance Bank Limited (the Bank or USFBL) is
pleased to present the 7th Annual Report and the Audited Financial Statements of
the Bank with immense PRIDE* – our guiding values for the Financial Year ended, March
31, 2023.
Our PRIDE - the guiding principle and values of the Bank, with an able leadership team,
stood us in good stead and helped us tide over these challenges.
FY23 has been year where the Bank had reported highest ever annual profit of >` 400
crore. The Bank's capital plus reserves position crossed milestone of ` 2,000 crore at the
end of FY23 and Bank's loan portfolio and deposits registered healthy business
growth.
Highlights of major achievements of the Bank:
• Total deposits increased by 36.09% to 13,710.14 crore as on March 31, 2023, from
` 10,074.18 crore as on March 31, 2022
• Net Advances increased by 27.77% to 13,068.77 crore as on March 31, 2023, from
`_ 10,228.15 crore as on March 31, 2022
• Bank's operating profit increased by 64% to 838.32 crore for FY23 from _ 511.93
crore in FY22.
• The Bank reported highest ever annual profit of _ ` 404.50 crore during FY23.
• Bank witnessed improvement in asset quality with reduction in Gross NPA &
Net NPAs to 3.23% & 0.39% respectively as of March 31, 2023 vs. 6.10% & 2.31%
respectively at March 31, 2022
• Bank's provision coverage ratio was healthy at 88.29% as on March 31, 2023.
• The capital adequacy ratio of the Bank is 20.64% as on March 31, 2023.
• Bank's capital plus reserves increased to ` 2,000.32 crore as on March 31, 2023
from ` 1,572.30 crore as on March 31, 2022
• There are 830 Branches spread across 22 States and 4 Union Territories as on
March 31, 2023.
• The Bank expanded its presence to four additional States/UTs i.e. Goa, Jammu
& Kashmir, Meghalaya & Puducherry during this year.
As the socio-economic and market scenario were not conducive, the Bank could not
proceed with the initial public offer before the close of the financial year.
FINANCIAL PERFORMANCE
The financial highlights for the year under review are presented below:
|
FY 22-23 |
FY 21-22 |
|
| Particulars |
Audited |
Audited |
Change in % |
| Deposits |
13,710.14 |
10,074.18 |
36.09% |
| Investments |
2,859.42 |
2,347.92 |
21.79% |
| Advances (Net) |
13,068.77 |
10,228.15 |
27.77% |
| Net Worth* |
1,844.82 |
1,420.76 |
29.85% |
| Net Interest Income |
1,529.03 |
1,060.85 |
44.13% |
| Other Income |
299.31 |
184.83 |
61.93% |
| Net Total Income |
1,828.34 |
1,245.68 |
46.77% |
| Operating Expenses |
990.01 |
733.75 |
34.93% |
| Provisions and Contingencies |
433.82 |
450.47 |
(3.70%) |
| Net Profit |
404.50 |
61.46 |
558.14% |
| Gross NPA Ratio |
3.23% |
6.10% |
(2.87%) |
| Net NPA Ratio |
0.39% |
2.31% |
(1.92%) |
| Capital Adequacy Ratio |
20.64% |
21.59% |
(0.95%) |
| Deposits |
13,710.14 |
10,074.18 |
36.09% |
| Business (Deposit plus Net Advance) per employee |
1.74 |
1.61 |
|
| Business Per Branch |
32.26 |
29.60 |
|
|
FY 22-23 |
FY 21-22 |
|
| Particulars |
Audited |
Audited |
Change in % |
| Transfer to Statutory Reserve |
101.13 |
15.37 |
557.97% |
| Transfer to Capital Reserve |
- |
0.23 |
- |
| Transfer to Investment Fluctuation Reserve |
(1.80) |
(11.13) |
(83.83%) |
| Deduction during the year |
(10.52) |
10.52 |
(200.00%) |
| Dividend for the year, Including Tax Thereon |
- |
- |
- |
| Number of Branches |
|
|
|
| General Banking Branches |
251 |
193 |
|
| Micro Banking Branches |
579 |
493 |
|
| No. of Employees |
15424 |
12,617 |
|
BUSINESS UPDATE AND STATE OF BANK'S AFFAIRS
The details on the state of affairs and the business update of the Bank are separately
provided in the Management Discussion and Analysis Report, which forms an integral part of
the Annual Report of the Bank. However, the summary of the Bank's performance has been
covered hereunder:
Liabilities Business
The Liabilities Business of the Bank, garnered through branches and alternate channels
such as internet and mobile banking and ATMs aims to build a sustainable liabilities
franchise with a mix of Retail and Institutional deposits. During FY 2022-23 the Bank
built a diversified deposits portfolio and the aggregate deposits of the Bank at the end
of the year stood at ` _13,710.14 crores. While the total deposits of the Bank grew by
36.09% on YoY basis, the CASA deposit witnessed a growth of 27.09% (YoY). Further the
share of CASA plus Retail Term Deposit (RTD) stood at 61.55% of total deposits.
During the period the Bank strategically focused on building a healthy and granular
deposits profile. To further expand its outreach to a larger customer base, the Bank
opened 58 General Banking (GB) branches during FY 2022-23 including opening of branches in
four New States / UT's i.e. Puducherry, Jammu Kashmir, Meghalaya & Goa thereby
increasing Bank's GB branches presence to 251 locations spread across 22 States and 04
Union Territories as on March 31, 2023. The Bank continued to set-up its GB branches
primarily in metropolitan and urban locations with a potential for sizeable deposits
mobilization. The Bank further expanded presence of its Micro ATMs thereby providing cost
efficient systems of offering basic banking facilities such as cash deposit, cash
withdrawal, green pin generation among others.
In addition to strengthening the branch & ATM networks, the Bank further augmented
its digital banking channels such as net banking, mobile banking, tab banking, digital
onboarding, among others.
Further to scaling up the retail deposits book, the Bank in addition is working towards
broad basing its institutional deposit profile and Wholesale Liabilities in the Government
& Institutional Business (GIB) segment. In FY 22-23 bank has on boarded 208 NTB
Institutional CASA Accounts and also done the empanelment in Maharashtra for Salary &
Pension Accounts and empanelment in Chhattisgarh for Deposits.
Assets Business
As a Small Finance Bank (SFB), the Bank, which is primarily focused on micro banking
products, has diversified its product offerings to its customers viz. retail loans,
unsecured loans, business loans, personal loans, and secured loans such as loans against
property, wholesale lending that includes short term and long-term loan facilities to
small and medium enterprises (SMEs), mid and large corporate and institutional clients and
gold loans. In addition, we offer housing loans with a focus on affordable housing. Our
micro banking and retail loan products are primarily aimed at customers who are not a part
of the formal banking infrastructure.
(A) Micro Banking
Micro banking business is spread across 159 districts covering 12 states and provides a
comprehensive package of financial inclusion products and business development services to
the underprivileged or low-income individuals or groups who have limited access to
financial services. In micro banking the Bank offers ‘Joint Liability Group' (JLG)
loans and business loans alongwith entire gamut of liabilities products through MB
branches. In addition, the Bank provides micro banking loans through Business
Correspondent (BC) partners also. The Bank provides group loans built on the
peer-guarantee loan model (Joint Liability Group), which enables individuals to take loans
without having to provide collateral or security on an individual basis while promoting
credit discipline. This is achieved through mutual support within the group, prudent
financial conduct among the group and prompt repayment of their loans. During FY 2022-23
JLG business through Micro Banking (MB) recorded a growth of 12.83% over the previous
financial year. There were 86 new MB branches were opened in existing states. In order to
meet the increasing fund requirement of customers who have completed multiple loan cycles
and are considered as matured borrowers, the Bank introduced the individual business
loans. The Bank provides individual loans especially to those who have begun their formal
credit under JLG. The total JLG portfolio of Micro Banking including MBBL and PMSvanidhi
stood at _ ` 9,215.58 crore as on March 31, 2023, with a total base of more than 26 lakh
clients consisting of active loans through the branch network. The JLG portfolio through
Business Correspondents reached _ ` 251.18 crores in FY 2022-23. The Bank has Six
(6) Business Correspondents who are operating in Six (6) states covering 54 districts
through 92 branches.
Lia bilities base under MB vertical stood `_ 359.81 crore as of March 2023. at
The Bank has started distributing 3 new Third-Party Product through MB vertical i.e.
1) Daily Hospital Cash Benefits (DHCB) w.e.f. January 2022, the Bank has rolled out a
pilot of DHCB in the states of Bihar & U.P. with 2 partners i.e., Aditya Birla General
Insurance & Kotak General Insurance. Later on, Bank has rolled out this product in
other states also like Rajasthan/Maharashtra/Odisha.
HospiCash (with riders) is a health insurance product wherein the customer is covered
for hospitalization expenses for upto 30 days. This works as wage loss cover as well for
the insurer i.e., income protection for micro banking customers due to hospitalization.
Moreover, the policy covers the customer against unfortunate death or disability due to
accident or illness.
HospiCash provides cash benefit in case an insured gets hospitalized. It is
specifically designed to take care of the incidental expenses in case of hospitalization
and provides fixed benefit for each day of hospitalization irrespective of the actual
medical cost. As on March 23; the Bank has sold 3,34,365 polices (Premium Collected: `_
6.36 crores).
2) Tele-Medicine wef April 22 from Jharkhand state and later on added Madhya Pradesh
& Uttrakhand also. As on March 23; we have enrolled 39,400 subscription with value of
` 1.18 crores.
3) Atal Pension Yojana (APY) is open to all saving bank account holders. The Bank acts
as a point of presence and aggregator and enrolls subscribers through architecture of
National Pension System. The Bank started the pilot in September, 2021. The full-fledge
launch of APY across all branches was done in the month of January 2022.
As on March-2023, the total subscriber base stood at 25,166 with the contribution of `
_42.66 Lakh. The Bank carried out different contests of APY like – Beat the Best (9th
May-30th June,22), Shine & Succeed (1st July-12th August,22), APY Citizen Choice's
(1st August – 30th September, 22), Leadership Pinnacle (2nd January – 14th
March, 23) & APY Big Believers (15th February-31st March, 23).
With the total customer base of Joint Liability Group lending, which is over 26 lakh +
and ~10.5 lakh customers, between the age bracket of 21 to 40 years, the Bank is poised to
offer the APY to all its customers with an inclination to provide social security to this
customer segment.
(B) Retail Loans:
(a) Micro Small & Medium Enterprises (MSME):
The Bank offers a combination of secured and unsecured loans (business and personal
loans) to individuals and non-individual entities, such as micro, small, and medium
enterprises (MSME). The Bank has devised bespoke products with flexible security
requirements to make credit more accessible to the retail and MSME borrowers.
During FY 2022-23, the retail assets loan book grew by 82.62% year-on-year to _ `
1,534.09 crore, from
` 840.04 crore in FY 2021-22. The key drivers for growth in MSME book were addition of
new locations and introduction of new product variants.
(b) Housing Loans (HL):
The Bank offers home loan solutions to customers looking for construction, purchase,
repair and renovation of homes through assessment of our customer's repayment ability and
offer bespoke loan solutions and offerings to customers. As on March 31, 2023, the Bank
offers HL done by Mortgage team through 45 branches with aggregate portfolio of _ ` 519
crore registering year-on-year growth of 45% compared to ` 359 crore as on March 31, 2022.
(c) Wheels
The Wheels business which was launched in Oct'2020 with 2 business i.e., Commercial
Vehicles & Construction Equipment Loans is being offered in Uttar Pradesh, Delhi NCR,
Rajasthan, West Bengal, Jharkhand, Uttarakhand & Chandigarh regions from 15 branch
outlets. The Bank's wheels loan portfolio grew from _ ` 212.16 crore in March 31, 2022 to
` 560.36 crore as on March 31, 2023 with 31 operational branches.
(c) Wholesale Banking Business
The Wholesale lending vertical includes lending, deposits and other banking services
provided to corporate customers of the Bank.
(a) Wholesale Lending
The Bank's BBG wholesale lending book as on March 31, 2023 stood at ` 367.99 crore
compared to_
` 80 crore in March 31, 2022. The Bank also offers both fund based (WC & TL) &
non-fund-based limits in the form of bank guarantee to the customers through BBG Wholesale
Lending vertical.
The Bank's wholesale lending book as on March 31, 2023 stood at _ ` 1,546.81 crore (`
367.99 crore for Non NBFC and ` 1,178.82 crore for NBFC) compared to _ ` 926.12 crore (`
80 crore for non NBFC and
` 846.12 crore for NBFC) in March 31, 2022. The Bank also offers non-fund-based limits
in the form of bank guarantee to the customers through Wholesale Lending vertical.
(d) Business Correspondent (BC)
The strategy of the Bank is to build its Asset portfolio through a combination
approach.
1. Own Branches
2. Partnership Approach.
The partnership approach with a well-entrenched and networked individual/entity will
help it gain significant presence in those markets of business interest. As on March 31,
2023 the Bank had total loan book aggregating to _ ` 372.84 crore compared to _ ` 224.42
crores in March 31, 2022. The portfolio comprised of JLG loans of _
` 251.18 crore and Retail Assets loans of ` _83.91 crore, contributing 67.37% and
22.51% respectively of the total portfolio. This portfolio is being managed by 13 active
BC partners (including 6 BC partners for JLG). The Bank is further focusing on
strengthening and deepening its BC partnerships including fintech partnerships for Retail
Assets loans.
A. FIN ANCIAL DISCLOSURES Capital Raising and Capital Adequacy Ratio
During the FY 22-23, the Bank issued and allotted 3,83,141 Equity Shares (of face value
of ` _10 each) pursuant to exercise of vested ESOPs to employees (including Managing
Director & CEO).
| Ratings Instruments |
Ratings as on March 31, 2023 |
Rating Agency |
Rating Description |
| Certificate of Deposit |
[ICRA] A1+ |
ICRA |
Securities with this rating are considered to have very strong degree of
safety regarding timely payment of financial obligations. Such securities carry lowest
credit risk. |
| Tier 2 NCD (Sub-debt) |
[ICRA] A (Positive); Upgraded to [ICRA]A+ (Stable) in April 2023 |
ICRA |
Securities with this rating are considered to have adequate degree of
safety regarding timely servicing of financial obligations. Such securities carry low
credit risk. |
| Tier 2 NCD (Sub-debt) |
CARE A (Positive) |
CARE |
Instruments with this rating are considered to have adequate degree of
safety regarding timely servicing of financial obligations. Such instruments carry low
credit risk. |
The Bank's certificate of deposits programme is rated, at the highest credit rating
grade, [ICRA] A1+ by ICRA Limited. As on March 31, 2023, the Bank's long term subordinated
bonds were rated at A (Positive) rating by ICRA and CARE Ratings. Subsequent to March 31,
2023, ICRA Limited has upgraded Bank's credit rating for subordinated bonds by one notch
to [ICRA]A+ (Stable) from [ICRA]A (Positive) in April 2023.
Dividend
The Board did not recommend dividend for the financial year ended on March 31, 2023.
Transfer to Reserves
As required under RBI regulations, the Bank had transferred the following amount to
various reserves during the financial year ended March 31, 2023:
| Amount transferred to |
Amount in _ crore |
| Statutory Reserve |
101.13 |
| Investment Fluctuation Reserve |
(1.80) |
| Capital Reserve |
- |
| Deduction due to fraud provision |
(10.52) |
Net Worth
As on March 31, 2023, the Bank's net worth stood at _ ` 1,844.82 crore (computed as per
RBI guidelines). The net worth comprised of paid-up equity capital of `_ 895.90 crore and
free reserves of `_ 1,098.43 crore excluding revaluation reserve, Intangible assets, and
deductions of _ ` 149.52 crore.
Internal Control and Compliance
The Bank's internal controls, policies and procedures are adequate and are reviewed
periodically by the Internal Audit Department for all its business units. The Audit
Committee and Board reviews the effectiveness of the control as per the regulatory
requirements from time to time / regular intervals.
CORPORATE GOVERNANCE
Banks Philosophy
Corporate Governance report forming part of the Board's report for the year under
review is attached separately as Annexure A.
Constitution of the Board of Directors
The Board of Directors of the Bank are constituted in accordance with the provisions of
the Companies Act, 2013 (Act), Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations 2015, the Banking Regulation Act, 1949 (the BR
Act, 1949) and the Articles of Association. The Board consists of eminent persons with
considerable professional expertise in business administration, audit, banking, payment
& settlement, compliance, account, finance, human resource, risk, strategy,
information technology and other related fields. Their experience and professional
credentials helped the Bank to gain insights for strategy formulation, monitoring control
framework and direction, and adding value to set a strong foundation, enabling the overall
growth objectives.
As on March 31, 2023, the Board comprises of Eight (8) Directors consisting of - Seven
(7) Non-Executive Directors, of which Five (5) are Independent Directors (including 1
woman Director), two (2) are Non-Executive Non-Independent Directors out of which one (1)
is a Nominee Director; and one (1) Managing Director and Chief Executive Officer.
Further, in terms of Section 152 of the Companies Act, 2013, Mr. Chandra Shekhar
Thanvi, Nominee Director (Non-Executive) who retires by rotation this year, meets the fit
and proper criteria as provided for under the RBI directions and as amended from time to
time and being eligible offers himself for re-appointment at the 7th Annual General
Meeting (AGM).
Statement on Declaration from Independent Directors:
A declaration under section 149(6) & (7) of the Companies Act, 2013 has been
obtained from each of the Independent Directors.
There was no change in the Board of Directors during FY 22-23. However, the following
changes took place in the Key Managerial Personnel during FY 22-23 as given below:
| Sr. No. |
Name of the Director / KMP |
Designation |
Date of Appointment |
Date of Cessation |
Reason for cessation |
| 1. |
Mr. Mukund Barsagade |
Chief Financial Officer |
11.06.2018 |
22.09.2022 |
Better Prospects |
| 2. |
Mr. Sarjukumar Pravin Simaria |
Chief Financial Officer |
31.10.2022* |
- |
- |
* Mr. Sarju Simaria joined the Bank w.e.f. September 30, 2022. He was appointed as
Chief Financial Officer by the Board of Directors at their meeting held on October 31,
2022.
Committees of the Board of Directors
For effective decision-making, the Board acts through various Committees, which oversee
specific operational or strategic matters falling within the ambit of the specific terms
of reference of that Committee. The Board has constituted 13 such Committees. All the
Board Committees have a specific charter, and these Committees monitor activities
falling within their terms of reference. Additional details of the Board Committees, its
composition, attendance, meetings held during the FY 22-23 etc. have been provided
separately in Corporate Governance Report.
Board Evaluation:
In accordance with the Companies Act, 2013 (Act) and the framework for Board
evaluation, the Nomination and Remuneration Committee and the Board of Directors had
carried out, annual performance evaluation of the Board, its Committees and Directors
individually. Further, a meeting of Independent Directors was held in accordance with the
provisions of the Act.
A questionnaire was prepared for evaluation based on criteria which included providing
strategic perspective, attendance, time devoted and preparedness for meeting, quality,
quantity and timeliness of flow of information between the members of the Management,
contributions at the meetings, effective decision - making ability, role and effectiveness
of the Committee. The Directors completed the questionnaire and provided feedback on the
functioning of the Board, its Committees and Directors individually and the same noted in
the meetings of the Board of Directors.
STATUTORY DISCLOSURE
Annual Return
As required under the provisions of Sections 92(3) and 134(3)(a) of the Companies Act,
2013 read with the rules framed thereunder, the Annual Return of the Bank in the
prescribed Form MGT-7 for the year under review is available on the website of the Bank at
the following link: https://www.utkarsh.bank/investors
Conservation of Energy and Technology Absorption
The particulars to be disclosed under Section 134(3)(m) of the Companies Act, 2013,
relating to conservation of energy and technology absorption does not apply to the Bank.
The Bank is constantly pursuing its goal in upgrading technology to deliver quality
service to its customers in a cost-effective manner.
Foreign Exchange Earnings / Outgo
The Bank has foreign exchange earnings of _ ` 0.68 crore during the financial year
under review which includes cross border settlements._There was no foreign exchange outgo
during the financial year.
Whistle Blower Policy (Vigil Mechanism)
The Bank, as a part of its prudent practice, has established a Vigilance Department to
develop and execute a comprehensive strategy to deal with instances of fraud and
mismanagement, if any, and as a preventive mechanism with active oversight, ensure
holistic and smooth operations of the Bank on an ongoing basis. The Department is
adequately staffed and conducts investigations on matters related to frauds committed and
references received through whistle blower complaints.
Pursuant to the provisions of Section 177(9) of the Companies Act, 2013 read with rules
made thereunder and RBI Guidelines and other applicable laws, the Bank has established the
Vigil Mechanism as part of the Whistle Blower Policy. This empowers the Directors and
employees to report concerns about unethical behaviour, actual or suspected fraud or
instances of leakage of Unpublished Price Sensitive Information (UPSI), misappropriation
of assets or violation of the Bank's Code of Conduct. Additionally, the Bank places zero
tolerance for any incidents of doubtful integrity and corruption by employees. Towards
this end, all employees are trained to maintain high standards of integrity in their work
area. The Whistle Blower policy is aimed at enabling the staff to escalate instances of
doubtful integrity, mismanagement, abuse/misuse of power, undue influence/coercion
exercised for indulging in undesirable practices, violation of the Bank's Code of Conduct,
ethics, and corruption. It also provides adequate safeguards against probable
victimization of directors/ employees who avail of this mechanism and allows direct access
to the Chairperson of the Audit Committee of the Board, in appropriate or exceptional
cases.
The Audit Committee of the Board (ACB) reviews the details of Whistle Blower complaints
received, the subsequent action taken, and the functioning of the Whistle Blower mechanism
periodically.
The Audit Committee of the Board oversees the Vigil Mechanism as well.
The Whistle Blower Policy is periodically communicated to the employees and the key
highlights of the Policy are available on the Bank's website at the following link:
https://www.utkarsh.bank/uploads/template_forty_pdf/
Whistle_Blower_Policy_Revised_13_12_2022.pdf wherein the email and contact details of the
Chairperson of Audit Committee of the Board are provided to enable complainants to reach
out with their complaints under the Whistle Blower Policy.
In addition to the above, the Bank has formulated a Vigilance Policy for effectively
managing the risks arising on account of possible corruption, malpractices, and frauds.
Vigilance & Security
The Bank has a Vigilance & Security Department for investigating frauds, bribery
cases, and complaints, including complaints received under the whistle-blower policy of
the Bank Vigilance & Security Department makes concerted efforts to reduce fraud,
forgery, and burglary incidents in the Bank with the help of new ideas, technology,
previous experiences, and adopting preventive vigilance measures with appropriate tools.
Statutory Auditors
RBI, on April 27 2021, had issued guidelines for appointment of Statutory Central
Auditors/Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs
(including HFCs). As per the said guidelines statutory audit of entities with asset size
of _15,000 crore and above as at the end of previous year, should be conducted under joint
audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory
Auditors (SA) of the Bank for a continuous period of 3 years only and thereafter,
reappointment in the same entity will be possible only after a cooling period of six
years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual
basis is required in terms of the above guidelines.
Based on recommendation of Audit Committee of the Bank, the Board of Directors at its
meeting dated March 20, 2023, had proposed the re-appointment of M/s. Deloitte Haskins and
Sells, Chartered Accountants and M/s. Kirtane & Pandit LLP, Chartered Accountants as
Joint Statutory Auditors of the Bank subject to approval of the Shareholders of the Bank
and prior approval of the Reserve Bank of India (RBI). RBI vide their letter reference no.
DOS.CO.RPD.No.S494/08.60.005/2023-24 dated April 21, 2023 approved the appointment of M/s
Deloitte Haskins & Sells, Chartered Accountants (FRN 117365W) and M/s. Kirtane &
Pandit, LLP, Chartered Accountants (FRN 105215W) as the Joint Statutory Auditors for FY
23-24 subject to the firms fulfilling the eligibility criteria as prescribed by RBI.
Accordingly, the proposal for their appointment would be placed in the ensuing 7th Annual
General Meeting.
Employees Stock Option Plan (ESOP)
The Shareholders of the Bank had approved:
USFBL MD & CEO Employee Stock Option Plan 2020 (MD & CEO ESOP Plan)
USFBL Employee Stock Option Plan 2020 (ESOP Plan 2020) The Bank may grant upto
6,07,41,778 options under the ESOP Plan 2020.
Being a Banking Company, the disclosures required as per Rule 8(5)(v) & (vi) of the
Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013
are not applicable.
Awards & Recognition
Re cognised as "Paragon of Branding Excellence" and awarded for "Brand
of the Year 2022" by Team Marksmen Daily and media partner India Today
Ranked 46 under "The Next 500 Companies 2022" by Fortune India
Re cognition as one of the ‘Promising Brands 2022' by Economic Times
The Bank has received award from PFRDA for qualifying the contest "Beat the Best
& Be the Best (9th May, 22 to 30th June,22)" under APY
The Bank received an award under special category from IBA for the Best ‘IT Risk
Management'.
GRIHA Award was bestowed upon the Bank for the Integrated Water Management at Utkarsh
Tower
Ranked No .2 under the Small Finance Bank category by BT-KPMG Survey
Particulars of Employees
The ratio of the remuneration of each Director to the employees' median remuneration
and other details in terms of sub-section 12 of Section 197 of Companies Act 2013 read
with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014, are given below: -
(i) the ratio of the remuneration of each Director to the median remuneration of the
employees of the Bank for the FY 22-23:-
| Name of Director |
Designation |
Ratio |
| Mr. Parveen Kumar Gupta |
Part time Non-Executive Chairman of the Board |
5.1:1 |
| Mr. Govind Singh |
Managing Director and Chief Executive Officer |
102.0:1 |
Apart from sitting fees, the Bank does not pay any remuneration to any Non-Executive
Directors. The part time Non-Executive Chairman of the Board is entitled to a monthly
remuneration, as approved by the RBI and the Shareholders of the Bank.
(ii) The percentage increase in remuneration of each Director, Chief Executive Officer,
Chief Financial Officer, Company Secretary for FY 22-23 are as follows:
| Name of Director/KMP |
Designation |
Percentage (%) Increase |
| Mr. Parveen Kumar Gupta |
Part time Non-Executive Chairman |
No increment |
| Mr. Govind Singh |
Managing Director and |
No increment |
|
Chief Executive Officer |
|
| Mr. Mukund Barsagade |
Chief Financial Officer |
No increment |
| Mr. Sarjukumar Pravin Simaria |
Chief Financial Officer |
No increment |
| Mr. Muthiah Ganapathy |
Company Secretary & Compliance Officer |
No increment |
(iii) The number of permanent employees on the rolls of the Bank, as on March 31, 2023
was 15,424 (includes 13,130 male employees and 2,294 female employees).
(iv) Average percentile increase already made in the remuneration of employees other
than the managerial personnel in the last financial year and its comparison with the
percentile increase in the managerial remuneration. (v) Average increase in remuneration
is 7.27% for employees other than managerial personnel and 0% for managerial personnel
(Executive Directors including Managing Director and Chief Executive Officer, Chief
Financial Officer, and Company Secretary).
(vi) The key parameters for any variable component of remuneration availed by the
Directors are as specified in the Remuneration Policy.
(vii) Affirmation that the remuneration is as per the remuneration policy of the Bank.
The Bank is in compliance with its Remuneration Policy.
The statement containing particulars of employees as required under Section 197(12) of
Companies Act 2013 read with Rule 5(2) and (3) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of
Section 136 of Companies Act 2013, the Annual Reports are being sent to the members,
excluding the information as required under Rule 5(2) as mentioned aforesaid and the same
is open for inspection at the Registered Office of the Bank. A copy of this statement may
be obtained by the members by writing to the Company Secretary of the Bank at
secretarial.usfb@utkarsh.bank.
Remuneration Policy
Remuneration Policy for Directors
In terms of the provisions of Companies Act 2013, Listing Regulations and applicable
provisions of the Banking Regulation Act, 1949, the Board on the recommendation of the
Nomination & Remuneration Committee (NRC), formulated Remuneration Policy for the
remuneration of Directors, Key Managerial Personnel (KMPs) & Senior Management
Officials. The Nomination and Remuneration Policy is available on the website of the Bank
at the following link: https://www.utkarsh.bank/uploads/template_forty_pdf/NRC_Policy.pdf
Remuneration of Executive Directors
The Board considered the recommendation of NRC, and approved the remuneration of
Managing Director and Chief Executive Officer, with or without modifications, subject to
members and regulatory approvals.
The remuneration payable to Managing Director and Chief Executive Officer is subject to
prior approval of the RBI. Therefore, the remuneration or any revision in the
remuneration is payable only after receipt of approval from RBI.
Remuneration of part time Non-Executive Chairman
The remuneration payable to the part time Non-Executive Chairman is subject to prior
approval of RBI. Therefore, the remuneration or any revision in remuneration of the part
time Non-Executive Chairman is payable only after receipt of approval from RBI.
Remuneration of Non-Executive Directors (NEDs)
The NEDs (excluding Nominee Directors of the Bank) are paid sitting fees for attending
each meeting of the Board of Directors or any Committee thereof. The NEDs are also
entitled to reimbursement of expenses for participation in the meetings of the Board and
Committees thereof.
RBI vide Circular No. DBR. No.BC.97/29.67.001/2014-15 dated June 1, 2015, issued
Guidelines on Compensation of Non-Executive Directors of Private Sector Banks emphasizing
that in order to enable banks to attract and retain professional Directors, it is
essential that such Directors are appropriately compensated.
Pursuant to the aforesaid RBI Circular, the maximum amount that can be paid as
commission was capped at
` 20 Lakh per Director, per annum. Also, Section 197 of Companies Act 2013 permits
payment of profit-based commission to the Directors who are neither managing directors nor
whole-time directors, not exceeding one percent (1%) of the net profits of the Bank, if
there is a managing or whole-time director or manager; in any other case three per cent
(3%) of the net profits.
During FY 22-23, the Bank has not paid any commission on profit or granted any stock
options to NEDs.
Other Statutory Disclosures:
The Bank has not changed its nature of business during FY 22-23.
Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or
securities provided or acquisition of securities by a banking company in the
ordinary course of its business are exempted from disclosure in the Annual Report.
All related party transactions that were entered into during FY 22-23 were on an arm's
length basis and in the ordinary course of business and accordingly, AOC - 2 is not
applicable to the Bank. There are no materially significant related party transactions
entered into by the Bank with Directors, KMP or other designated persons, which may have a
potential conflict with the interest of the Bank at large. The Bank has a Related Party
Transactions Policy in place for identification and monitoring of any potential related
party transactions;
There were no significant/material orders passed by the Regulators / a Court / Tribunal
etc. during FY 22-23, which would impact the going concern status of the Bank and
its future operations.
The re was no application made or any proceeding pending under the Insolvency and
Bankruptcy Code, 2016 (31 of 2016) during the year under review.
The details of Risk Management Policy & its framework are separately provided in
the Management Discussion and Analysis Report.
The Bank is a subsidiary company of Utkarsh CoreInvest Limited (erstwhile Utkarsh Micro
Finance Limited). The Bank does not have subsidiary or associate company. Hence the
details of sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules,
2014 are not applicable to the Bank;
The provisions for maintenance of cost records as specified by the Central Government
under sub-section (1) of section 148 of the Companies Act, 2013 are not applicable to the
Bank.
There are no adverse observations/qualifications in the Statutory Auditors' Report.
Further, pursuant to Section 143(12) of the Companies Act, 2013, the Statutory Auditors of
the Bank have not reported any instances of frauds committed in the Bank by its officers
or employees.
All recommendations of the Audit Committee were approved by the Board.
Pro per internal financial controls are in place, and that the financial controls have
been adequate and operating effectively.
The re are no material changes and commitments, affecting the financial position of the
Bank that have occurred between the end of the financial year of the Bank i.e. FY 22-23
and the date of the Boards' Report.
C. O THER DISCLOSURES
Code of Conduct
For a financial institution, transparency and the highest standards of corporate
governance are important prerequisites for establishing a compliance-oriented bank.
Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned
with the highest standards of personal and professional integrity and the highest level of
ethical conduct. The Bank has adopted a Code of Conduct and norms for the avoidance of
conflict of interest, all the Senior Management officials, KMPs, Employees with loan
sanctioning authority, employees directly related with sourcing/servicing corporate or
wholesale banking relationships and employees directly involved in the procurement of
goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the
areas that have been covered by the Code of Conduct are: fairness of employment practices,
protection of intellectual property, integrity, customer confidentiality and conflict of
interest. The Bank's Code of Conduct for Directors and Senior Management is hosted on the
website of the Bank at https://www.utkarsh.
bank/uploads/template_forty_pdf/CODE_OF_CONDUCT_FOR_THE_BOARD_OF_DIRECTOR S_AND_SENIOR_
MANAGEMENT_PERSONNEL.pdf.
Corporate Social Responsibility (CSR)
In accordance with Section 135 of the Act, the Board of Directors on the recommendation
of CSR Committee had approved the CSR Policy which provided for the activities to be
carried out.
The CSR Policy is available on the Company's website
https://www.utkarsh.bank/uploads/template_forty_pdf/
Corporate_Social_Responsibility_Policy.pdf.
In line with the statutory requirements under the Companies Act, 2013 and it's CSR
Policy, the Company had undertaken projects in the areas of financial literacy, health
initiatives, skill and entrepreneurship development programmes and other philanthropic
initiatives (supporting orphanages and care centres for the elderly).
During the year under review, the Company spent /contributed _ ` 3.24 crore towards
aforesaid CSR projects.
The required disclosure as per Rule 8 of Companies (Corporate Social Responsibility
Policy) Rules 2014 is attached as Annexure B to this Report.
Know Your Customer (KYC) / Anti-Money Laundering (AML)
The Bank adheres to the RBI's KYC / AML Guidelines issued from time to time. The Bank's
KYC / AML Policy has been prepared in accordance with the Prevention of Money Laundering
Act, 2002 (PMLA) and RBI / Indian Banks' Association (IBA) guidelines, amended from time
to time. The Bank complies with, various regulatory reporting requirements, as set out by
the Financial Intelligence Unit (FIU) of the Government of India. The Bank has a
transaction monitoring mechanism in line with regulatory requirements with an automated
system solution, closely monitored by a centralised AML team. The Bank's employees are
imparted training on KYC / AML aspects regularly. Executives of the Bank also attend
periodic workshops/seminars organised by FIU - IND, RBI, IBA and National Institute of
Bank Management (NIBM) to enhance their awareness in these aspects. Recent changes as
contained in the PMLA notifications and RBI guidelines have been followed and embedded in
the customer acquisition processes of the Bank. The Bank's KYC/AML Policy is duly reviewed
by the Board on annual basis taking into account the various amendments to guidelines /
regulations.
Prevention of Sexual Harassment
The Bank is committed to create a safe environment where all employees are treated with
respect and dignity. The Bank takes a strong stand and has zero-tolerance policy on the
issue of sexual harassment at workplace. We follow all the guidelines prescribed under the
Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
and seeks to protect women from sexual harassment at the place of work.
The Prevention of Sexual Harassment Policy (POSH Policy) at Utkarsh Small Finance Bank
is gender neutral and is implemented for all employees and other stakeholders/ partners.
Any complaint of sexual harassment made against any individual working within the Bank's
premises, including third-party vendors, is investigated in line with this POSH Policy.
The Internal Complaints Committee (ICC) of the Bank deals with all complaints relating
to sexual harassment and has laid down the processes and guidelines pertaining to
sexual harassment related complaints. The Bank does not tolerate any form of sexual
harassment and all individuals of the Bank are responsible to ensure a workplace free of
harassment.
POSH Policy is applicable to all employees (permanent/ fixed term/ on contract) of the
Bank across the Board and is equally applicable to all genders, grades, and stakeholders
of the groups.
The POSH Policy is periodically communicated to all employees and is available on the
Bank's website for information and compliance thereof.
https://www.utkarsh.bank/uploads/pdf/our-policy/template_ten/Prevention_of_Sexual_Harassment_Policy.pdf
For FY 22-23, total of 13 cases were reported under POSH. Out of 13 cases, 11 cases
have been resolved and 2 cases are under investigation.
Human Resources
The Bank's Human Resources Policy (HR Policy) is aligned for the achievement of the
Bank's vision and mission and constant efforts are made to motivate its employees for
excellence in performance and at the same time endeavors to provide a better work-life
balance through various employee welfare activities.
In its constant endeavor to promote learning and capacity building of all its
employees, the Bank utilized its "Learning Management System (Utkarsh U-Learn)"
to engage its employees through continuous educational programs delivered via e-modules
and virtual classrooms.
Technology
Information Technology is an important driver for improving the efficiency &
productivity of the organization. This is a major differentiator for the bank and
constantly working on enhancement of existing technology solutions and engaging with new
technology / technology partners to achieve business growth.
While continuing, digitization and automation journey, Bank has successfully
implemented "UPI Lite" payment system. The Bank is the first Small Finance bank
to implement this in Indian Banking domain. Cash-less collection through QR Code has been
added to digitization journey further i.e., this is an addition to cash-less disbursement
of Joint Liability Group Loans. To make secured Mobile Banking Transactions of our
customer, the Bank added feature of device binding in-line with regulator guidance. The
feature of e-signature added to our mission toward go-green i.e., paperless transaction.
We have enhanced our business applications like CBS, LMS, LOS, etc. with added features
during the year to improve efficiency of end users along with new product features. Bank
already started using Robotic Process Automation (RPA) for processes where manual
duplicate work shall be automated with the help of software robot.
The feature of Microsoft Team / office 365 is being used extensively within
organizations to improve internal communication & processes. Along with Data Center
(DC) & Disaster Recovery (DR) center, the bank has operationalize Near Data Recovery
(NDR) center to ensure quick availability of systems in case of any disaster. Data Lake
platform are being integrated with CBS & other channels to centrally collate data from
different applications and enable Data Analytic output.
Bank has engaged with external consultant and conducted entire Business Technology
Transformation study to review existing product & technology and emerging technology
in banking space. Bank had already prepared a blueprint of the transformation journey.
Now, the bank is working on "Design" phase of the business processes and
technology modernization.
Secretarial Auditor, and Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s S. N.
Ananthasubramanian & Co., Practicing Company Secretaries conducted the secretarial
audit of the Company for FY 22-23.
The Secretarial Auditor's Report for the FY 22-23 does not contain any qualification,
reservation, or adverse remark. Report of the Secretarial Auditor for the FY 22-23 in Form
MR-3 is annexed to this report as Annexure C.
Compliance with Secretarial Standards
The Bank has complied with the provisions of Secretarial Standards specified by the
Institute of Company Secretaries of India and notified by the Ministry of Corporate
Affairs under Section 118(10) of the Companies Act, 2013.
Basel III (Pillar 3) Disclosures:
RBI Master Circular DBR.No.BP.BC.4/21.06.001/2015-16 dated July 01, 2015, on
‘Prudential guideline on Capital Adequacy and Market Discipline – New Capital
Adequacy Framework (NCAF)' requires banks to make Pillar 3 disclosures, as applicable.
These disclosures have not been subjected to audit or limited review. These disclosures
are available on the Bank's website at https://www.utkarsh.bank/.
Prospects
FY23 has been excellent year from financial performance perspective for the Bank. The
Bank had reported highest ever annual profit of >`400 crore in FY23. Bank's loan
portfolio and deposits registered healthy business growth. The Directors are of the view
that there is immense opportunity to cater to the unserved and underserved sections of
client base in the country, particularly the area in which the Bank is currently
operating.
Directors' Responsibility Statement
As per the requirements of Section 134(3)(c) of the Companies Act, 2013, the Directors
hereby confirm and declare that:
In the preparation of the annual accounts for the financial year ended March 31,
2023, the applicable accounting standards have been followed, and there is no material
departure from the same;
The Directors have selected such accounting policies and applied them consistently and
made judgments and estimates that are reasonable and prudent so as to give a true
and fair view of the state of affairs of the Bank as on March 31, 2023, and of the profit
of the Bank for the year ended March 31, 2023;
The Directors have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Companies Act, 2013 for
safeguarding the assets of the Bank and for preventing and detecting fraud and other
irregularities.
The Directors have prepared the annual accounts for the financial year ended March 31,
2023 on a going concern basis.
The Directors had laid down internal financial controls to be followed by the Bank and
that such internal financial controls are adequate and operating effectively.
The Directors had devised proper systems to ensure compliance with the provisions of
all applicable laws, and that such systems were adequate and operating effectively.
Acknowledgement
The Board expresses its gratitude to the Central and State Governments, Reserve Bank of
India, Ministry of Corporate Affairs, SEBI, NABARD, SIDBI, MUDRA, NHB and all other
Regulatory Authorities including Local Governing Bodies for the continuous support and
guidance provided to the Bank.
The Board appreciates the precious support provided by the Auditors, Lawyers and
Consultants. We place on record our appreciation for the contribution made by our
employees at all levels. Our consistent growth has been made possible by their hard work,
solidarity, cooperation, and support.
The Directors wish to place on record their gratitude to Shareholders of the Bank for
the confidence reposed by them and thank all the clients, dealers, and other business
associates for their contribution to the Bank's growth and for extending their assistance
and co-operation.
The Directors also express their gratitude to all stakeholders and partners for
extending their support.
| For and on behalf of the Board of Directors |
|
|
Sd/- |
Sd/- |
| Place: Mumbai |
Parveen Kumar Gupta |
Govind Singh |
| Date: April 28, 2023 |
Director |
Managing Director & CEO |
|
DIN – 02895343 |
DIN – 02470880 |
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