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Your Board of Directors has immense pleasure in presenting this 85th Annual Report of The Federal Bank Limited, along with the audited financial statements for the year ended 31 March 2016.
Highlights of Performance Growth in Business
Total business of your Bank reached Rs.1 37261.85 Cr as on 31 March 201 6. Total deposits increased by 11.78% to reach Rs.791 71.71 Cr in FY'16. The total advances of your Bank stood at Rs.58090.14 Cr at the end of the year.
Average deposit portfolio of the Bank had grown by 15.04% to reach Rs. 72871.18 Cr and average advance portfolio had grown by 9.95% to reach Rs. 51 334.42 Cr.
NRE deposits led the path showing a growth rate of 26.83%, by increasing to an amount of Rs. 30732.47 Cr and Retail deposits followed the suit by growing at 14.88 % to reach Rs. 77543.40 Cr. CASA deposits also displayed a growth of 19.28% to reach, Rs.25704.84 Cr.
The Savings deposit of the Bank has touched to Rs. 21422.21 Cr by growing 20.85% over that of the previous fiscal.
The investment portfolio of the Bank has reached Rs. 2221 7.49 Cr as on 31 March 201 6. The average investment as on 31 March 2016 is Rs. 24301.96 Cr.
During the year ended 31 March 2016, your Bank clocked a net profit of Rs. 475.65 Cr. As a result of refinement in asset quality, the Bank could rein in the total provisioning to Rs. 948.13 Cr. An amount of Rs. 244.00 Cr was earmarked for taxes.
Return on Average Equity and Return on Average Total Assets stood at 6.01 % and 0.57 % respectively. Earnings per Share (face value of Rs. 2 each) of the Bank, as on 31March 2016 was Rs. 2.77. Book value per share increased to Rs. 47.07 during FY 1 6.
The Operating Profit of your Bank has reached Rs. 1423.78 Cr for the year ended on 31 March 2016.
The Net Interest Margin of the Bank for the year stood at 3.14 %, despite the interest rate volatility. Net Interest Income of the Bank for the period increased to Rs. 2504.24 Cr making an increase of 5.20%. During the financial year ended 31 March 2016, the total non–interest income of the Bank has reached Rs. 786.38 Cr.
The fiscal year ended 2016 witnessed an increase in the total expenses of the Bank which reached Rs. 7107.29 Cr by an increase of 6.56%. Interest expenses increased to Rs. 5240.44 Cr in FY 16. Operating Expenses of the Bank during the fiscal year grew to Rs. 1866.84 Cr, which was mainly due to increase in salary & allowances.
The cost of deposits of the Bank has come down during the year. The cost of deposits of the Bank is 6.95% as on 31 March 2016. Average Cost of all funds (Deposits + Borrowings + Bonds) recorded a marginal decrease and reached 7.17 % from 7.44 %. The Interest expenses as percentage to total income stood at 61.43 %. The Cost to Income ratio of the Bank stands at 56.73 %.
In the current fiscal, the CASA to total deposits of the Bank has reached 32.47%. The interest expense for FY 1 6 was at Rs. 5240.44 Cr.
Total income of the Bank during the fiscal year 2016 recorded 2.81% growth to reach Rs. 8531.07 Cr. The interest income component grew by 4.38 % Y–o–Y while other income has reached Rs. 786.38 Cr.
Income from advances increased by 4.08 % to reach Rs. 5669.31 Cr. At the same time, income from investments registered a steep rise to reach Rs. 1 759.63 Cr clocking 6.66 % annual growth.
The yield on advances stood at 11.04% and the yield on Investments at 7.25 %. The Net Interest Margin for the fiscal year is at 3.14% as against 3.27 %, in the previous year. The total other income has reached Rs. 786.38 Cr in the current fiscal.
During the fiscal year the Bank's spread on advances (gross) decreased to 4.10% and spread on investments (gross) stood at 0.83% . The Spread (net of provisions) on advance decreased to 3.02% from 3.92% of last year.
Loan Asset Quality
The Bank's Gross NPA and Net NPA stood at 2.84 % and 1.64% respectively as at the end of 31 March 2016. The total provisions held against non–performing advances, expressed as a percentage of gross NPAs amounted to 72.05 % (including technically written off accounts) at the end of FY 201 5–1 6.
As on 31 March 2016, the Bank held a total provision of Rs. 948.13 Cr. Provision coverage for NPAs as at 31 March 2016 stood at 42 %. As per the RBI directive, Banks should hold minimum provision coverage of 70 % including technically written off accounts. As on 31 March 2016, the provision coverage ratio of the Bank, including written off accounts is 72.05 %.
Historically, your Bank has been strong on capital adequacy. CRAR of the Bank calculated in line with Basel III norms stood at 1 3.93% which is considerably higher than the 9 % stipulated by RBI. Of this, Tier 1 CRAR is at 13.36 %.
Earnings Per Share (face value Rs. 2 /– each) of your Bank has decreased from 5.87 to 2.77 during the year under review. Returnon Equity during the year reached 6.01 % in the fiscal year ended 31 March 2016
Your Bank continued its consistent performance during FY 201 5–16 with the total Business of the Bank increasing by 1 2.41% to Rs. 137261.85 Cr.
There is no change in the nature of business of the Bank for the year under review. Further information on the business overview and outlook and state of the affairs of the Bank is discussed in detail in the Management Discussion & Analysis.
Continuing the Bank's policy of striking a fine balance between retained earnings and dividend distribution, the Board of Directors have recommended a dividend of 35% i.e. Rs. 0.70 per equity share on face value of Rs. 2/– each for the year 2015–16 (previous year 11 0% i.e Rs. 2.20 per Equity Share) subject to the approval of the members in the ensuing Annual General Meeting. Protecting shareholders' value has always been a guiding philosophy of the Bank.
There are no material changes affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank to which the financial statements relate and the date of the report.
There are no material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future;
Being a Banking company, the disclosures required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules,2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to your Bank.
Increase of Capital
The Paid Up Capital of the Bank was increased by an amount of Rs. 1 71,58,90,41 2 by allotment of 857945206 bonus shares of Rs. 2/– each and Rs. 86,92,882 by allotment of 43,46,441 ESOS shares of Rs. 2/– each. The Paid up Capital of the Bank as on 31 March 2016 is Rs. 343,78,93,688 consisting of 171,89,46,844 equity shares of Rs. 2/– each.
The shareholders at the last Annual General Meeting of the Bank held on 29 June 201 5 had approved the issue of bonus shares in the ratio of one equity share of the Bank for every one share held having a face value of Rs. 2/– each. The allotment of bonus shares was made on 1 0 July 201 5 to those shareholders of the Bank as on 09 July 201 5 being the record date, fixed for the same. The Bank allotted 85,79,45,206 fully paid up Equity Shares as bonus shares which also includes One Global Depositary share (GDS) issued as bonus for every GDS held to the existing holders as on the record date.
Business per employee of the Bank during the period stood at Rs.12.03 Cr and the profit per employee of the Bank stood at Rs.4.1 9 Lakh during the fiscal.
Employee Stock Option Scheme (ESOS)
The Bank has instituted an Employee Stock Option Scheme, duly approved by the shareholders of the Bank to enable its employees including whole time Directors to participate in the future growth and financial success of the Bank. Under the Scheme 8,28,11,799 options can be granted to the employees. The Employee Stock Option Scheme is in accordance with the Securities and Exchange Board of India (Employee Stock Option and Employee Stock Purchase Scheme) Guidelines, 1999. The eligibility and number of options to be granted to an employee is determined on the basis of various parameters such as scale, designation, work performance, grades, period of service, annual fixed pay, Bank's performance and such other parameters as may be decided by the Compensation Committee from time to time in its sole discretion and is approved by the Board of Directors.
The Bank's shareholders had approved the scheme for issuance of stock options to employees including whole time Directors as on December 24, 2010.
The option conversion price was set to be the closing price on the day previous to the grant date. The compensation committee granted 3,47,20,200 options during the year 2011–12, 2,44,84,750 options during the year 2012–13, 2,60,94,250 options during the year 2013–14, 1,11,56,450 options during 2014–15 and 10,25,000 options during the year 2015–16. The options granted which are non transferable, with vesting period of 1,2,3 & 4 years subject to standard vesting conditions, must be exercised within five years from the date of vesting. As on 31 March 2016, 84,65,834 options had been exercised and 7,61,87,146 options were in force.
Other statutory disclosures as required by the SEBI guidelines/ Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 on ESOP are given in Annexure II to this report.
Investor Education and Protection Fund
As per the Companies Act 2013, dividend unclaimed for more than seven years from the date of declaration is to be transferred to Investor Education and Protection Fund. On 21 August 2015 the Bank had transferred Rs. 49,62,236/– to the above Fund, being the unclaimed dividend for the year 2008.
Expansion of Network
Your Bank has 1252 branches and 1516 ATMs as on 31 March 2016. Your Bank was having 1247 branches and 1485 ATMs as on 31 March 2015. The Bank had opened additional branches and ATMs during the year to improve its footprint throughout the country including un–banked centers as per RBI's guidelines. The Bank had opened maximum number of branches in the chosen states of Andhra Pradesh and Kerala.
Corporate Social Responsibility CSR Policy
In Federal Bank, we believe that in order to bring about a sustainable development, communities must be socially, culturally and economically empowered. The legacy passed down by our founder Shri K P Hormis holds this vision which is still followed by every Federal in thoughts and deeds. The Corporate Social Responsibility Policy of the Bank is to include social, economical and environmental consideration as part of the business processes and thereby create a sustainable future for the coming generations. The focus areas on CSR of the Bank are aligned to the Schedule VII of the Companies Act, 2013 which include; promotion of education, environmental sustainability, enhancing vocational skills, eradication of hunger and poverty, health, safety and sanitation, rural development and other activities permitted, all aimed at creating meaningful socio–economic impact in the lives of the underprivileged and the vulnerable sections of the society.
• To associate with projects that help to uplift the downtrodden and the needy sections in the society
• To impart marked difference in the lives of elderly people and people who are differently abled.
• To take up projects that imparts education and skill building in youth, women and children with an aim at creating significant difference in the overall socio–economic development.
• To support environment sustainability projects and projects on sanitation and hygiene.
• To passionately involve in such activities that bring about obvious positive change in the society that will nurture and nourish the future generations.
Reach and Coverage of Projects
With the launch of sustainable long term projects during the previous years, plans are set to further deepen the impact of the projects in the society. Further to support the central and state governmental long term plans to Skill India, Support Start ups and thereby aligning our CSR spending with the national objectives. With pan India presence, Bank is extending its CSR activities across all geographies. With the launch of sustainable long term projects during the year, a platform has been set to further deepen the impact of the project in the society as well as to build a social branding through continuous investment in the projects identified.
A few focal projects undertaken during FY 16 are :
Federal Skill Academy
As part of the Corporate Social Responsibility initiatives, Bank started the Federal Skill Academy on Founder's Day to impart quality technical education to merit oriented candidates coming from economically underprivileged background. Placement assistance was also provided and candidates who came out successful in the interviews have been shortlisted for offers at leading organizations like ESSENCO, Bluestar, Bosch, Santrupti Engineers Pvt Ltd etc. The students during the three month certification course underwent a rigorous training program in soft skills improvement and technical skills along with industry exposure to attain the IAPMO Certification which is recognized worldwide. A total of Rs. 7.58 Crores was spent towards various projects with focus on education and skill building during FY 16.
Assistive Technology Center – NISH (National Institute of Speech and Hearing)
Federal Bank has partnered with National Institute of Speech and Hearing (NISH)–Thiruvananthapuram to set up an Assistive Technology Center at NISH for people having difficulties in speech and hearing. The Centre for Assistive Technology and Innovation (CATI) at NISH strives to meet the Assistive Technology needs of persons with disability, especially the accommodation and accessibility needs of students and clients of NISH. NISH–CATI envisages creating a full–fledged NISH Assistive Technology Program (NATP) comprising need assessment, device demo, lending, training, financing, reutilisation, service, and research, to provide AT solutions for the education, employment, and independent living of persons with disability. This centre will be developed on the lines of such centres in US universities and AT provider facilities.
Assistance to Autistic Youth – Ensuring Self Sufficiency
Federal Bank is providing financial assistance to Shraddha Charitable Trust, Mumbai which is a registered non–profit vocational workshop founded in 1998,that empowers and rehabilitates severely autistic and mentally challenged young adults and enables them to earn a living. Shraddha adopts a pioneering and creative approach where young adults with autism and developmental delay are encouraged and assisted to take small steps towards self–sufficiency. By handcrafting and selling tastefully designed and internationally appreciated eco–friendly products, Shraddha provides a means of livelihood and support for those that are often assumed to lead a dependent life. Through various projects Bank has expended Rs.1.69 Crores towards health care and allied activities during FY 16.
Bandhan – Adoption of Schools
Through Bandhan, Bank could adopt and associate with more than 1 200 needy schools where in the first phase were supplied with drinking water facility as a CSR initiative. Later many projects were launched to improve sanitation, infrastructure and other facilities to the adopted schools. Last year we had constructed/ renovated close to 60 toilets as well as provided clean drinking water to the adopted schools. The project was done in alignment with the Swacch Bharat/Vidyalaya mission of the Government. The activity would be continued this year as well to build more toilets/parks/ setting up computer labs/ libraries/provide clean drinking water to the adopted schools those lack primary facilities. Rs. 60 Lakh was expended during the first phase of the Bandhan project for supply of water purifiers while Rs. 76 Lakh was expended during the second phase for various developmental activities in the adopted schools.
Towards Environment Sustainability – Partnering with SEED & Palathulli
To build awareness amongst student fraternity to conserve the natural resources, Federal Bank along with Mathrubhumi launched the SEED Programme. SEED (Student Empowerment for Environmental Development) is an initiative aimed at spreading the message of ecological conservation. Schools carry out simple but effective steps in environment protection like Planting & Protection of saplings, Agricultural Activities, Bio–diversity conservation, Energy Conservation, Conservation of Water bodies, Cleanliness & protection of public health, Reduce, Reuse and Recyle Plastic waste and intervention in local area environmental issues through SEED Police. Bank is supporting this noble cause for the last four years. Environment conservation is one of the priority areas where your Bank has invested its CSR funds and Palathulli is a unique endeavor aimed at improving ground water levels through innovative means. The project in which we have partnered with leading media house Malayala Manorama aims to address drought related issues through systematically allowing rain water to seep in to the soil to improve water table. The project was implemented through a holistic partnership consisting of different communities in the public, private and education sector. A total of Rs. 55.82 Lakh was expended towards environment conservation and sustainable development activities during the financial year.
Federal Bank Speak for Kerala 2015–16
Bank has launched a state–wide student debating competition in Kerala called Federal Bank – Speak for Kerala, under the auspices of Federal Bank Hormis Memorial Foundation Trust in the year 2014–15. This youth engagement initiative, which lasted for four months, provided platform for the college students in Kerala, right from the block level upwards, to showcase their reasoning talents that take them forward in the path of self development. The winner of the Grand Finale was awarded with the "Federal Bank – Kerala Youth of the Year 201 5–1 6' Trophy, Scholarship worth Rs.1 Lakh and cash prize of Rs.1 Lakh. The Runner up got Cash Prize of Rs. 1 Lakh. The colleges of both the Winner and Runner Up were awarded with Rs. 50,000 each.
Federal Bank Speak for Karnataka
Bank has launched a state–wide student debating competition in Karnataka this year called Federal Bank – Speak for Karnataka. The inter–college debate competition had turned out to be one of the most prestigious platforms for college students to showcase their oratory skills. The event gave a unique opportunity to college students to prove their mettle and nurture their debating, communication skills and thereby increase their self confidence. This youth engagement initiative, which lasted for four months, provided platform for the college students in Karnataka, right from the block level upwards, to show case their reasoning talents that take them forward in the path of self development. The winner of the Grand Finale was awarded with the "Federal Bank – Karnataka Youth of the Year 201 5–1 6" Trophy, Scholarship worth Rs.1,50,000 Lakh and cash prize of Rs. 1,00,000. The Runner up got Cash Prize of Rs.1,00,000. The colleges of both winner and runner up had been awarded with Rs. 50,000 each.
Federal Bank Hormis Memorial Foundation Scholarships & Commemorative Lecture
Federal Bank Hormis Memorial Foundation Trust provides scholarships to needy students for pursuing professional courses for the last many years. During the year 201 5–16 the trust offered assistance to 100 meritorious students, 20 students each in the categories – Medicine, Engineering, BSc (Agri), BSc. (Nursing) & MBA. An amount of Rs.1.37 Crore was expended during the FY 16. The Foundation Trust under the patronage of Federal Bank hosts a popular series of annual lecture by eminent personalities on contemporary issues of relevance for general enlightenment and edification of the masses. During the year 201 5–1 6, 14th Annual lecture was delivered by Shri. Raghuram Rajan, Hon. Governor, Reserve Bank of India on the topic 'Financial Sector Reforms in India: The Past and the Future'.
The amount to be spent by the Bank towards CSR for FY 2016 as per Section 135 of the Companies Act, 2013, comes to Rs.26.18 Crores. Amount spent by the Bank this year towards CSR was Rs.12.30 Crores. Through various projects which are already sanctioned, your Bank will be thoughtfully spending the CSR funds earmarked for the purpose. Bank is committed to increase the CSR impact including the balance amount of Rs.13.88 Crore for FY 2017,on ascertaining projects which are viable in long run. The ratio adopted was 80:20, wherein 80 % of the CSR funds will be utilized for long term sustainable projects and 20 % of the funds will be utilized to meet location specific requests. The Bank had also embarked on some major projects last year in the field of education, skill development, disability etc. By choosing long term sustainable projects, Bank has taken an approach which brings steady and long lasting implications in the society.
The details of the CSR activities are mentioned in Annexure IV to this report.
The Board of Directors oversees the enterprise wide risk management functions of the Bank. A separate Risk Management Committee of the Board is in place for bringing in a top to down focus on risk management. Risk Management is coordinated and administered by the Integrated Risk Management Department. The Department has three dedicated divisions for Credit risk, Market risk and Operational risk management. Treasury activities are separately monitored by the Mid office, which is a part of Integrated Risk Management Department. Business Continuity Plans & Information Security Plans also form part of risk management functions in the Bank. A Transactions Monitoring Cell is functioning to provide 360 degree surveillance coverage of the operations of the Bank. Risk Management policies are approved by Board of Directors, and reviewed from time to time. Executive level risk management committees, such as Credit Risk Management Committee, Asset Liability Management Committee, Operational Risk Management Committee, Business Continuity Management Committee, Information Security Committee, regularly assess the functional efficiency of the Bank in risk management and refine the policies & processes. Responsibility for identification, measurement and controlling of risk in various spheres of activities of the Bank is vested with a Senior Executive at the level of Chief General Manager, who functions as the Chief Risk Officer of the Bank, reporting to the Managing Director & CEO. All material risk of the Bank emerging in the course of its business are identified, assessed and monitored and in our opinion presently there is no material risk which threatens the current functioning of the Bank.
Internal Control Systems and their adequacy
The Bank has through the years developed and stabilized an effective internal control system calibrated to the risk appetite of the Bank and aligned to the scale, size and complexity of its operations. The scope and authority of the internal audit function is defined in the Audit Policy of the Bank, duly approved by the Audit Committee of the Board. The Policy has been finalized and reviewed at yearly intervals aligning its fundamental principles with that in Basel III. At the enterprise level, the Inspection and Audit Department, on a continuous basis, assesses and monitors the effectiveness of these control systems and its adequacy to meet the growing complexities. The audit function essentially validates the compliance of Bank's processes and operations with regulatory guidelines, accounting procedures and Bank's own internal rules and instructions.
The Bank has a robust system towards escalating the audit findings to appropriate level in the hierarchy of management and discussions in various committees towards suggesting corrective action and its follow up. The Bank in compliance of the requirements of Section 1 38 of the Companies Act 2013, has designated the Head of Inspection and Audit Department as Internal Auditor. Audit being an independent function, the Internal Auditor is reporting to the Audit Committee of the Board of Directors. The Bank has various types of audit which inter–alia include Risk Based Internal Audit, Concurrent Audit and Management Audit. The Risk Based Internal Audit provide for Risk Rating of Branches. Serious findings and observations of all types are presented to Inspection Review Committee of Executives and reviewed by the Audit Committee of the Board. The Bank has also started leveraging off–site audit as a viable, forward looking cost effective tool of internal control system.
Vigil Mechanism/Whistle Blower Policy
Bank has a comprehensive "Fraud Risk Management Policy" and "Whistle Blower Policy" which are reviewed and updated from time to time. The Fraud Risk Management policy covers the control systems and monitoring, surveillance and oversight mechanism, for fraud prevention and control, aimed at managing the risk of loss on account of frauds. Vigilance Department of the Bank has the twin roles of investigation of frauds and prevention of frauds. Preventive measures taken for enhancing awareness of fraud risk and for promoting a culture of compliance among the employees include preventive vigilance audits, vigilance workshops, circulation of modus operandi of frauds occurred in banking industry etc. Bank is also promoting customer awareness on frauds especially cyber frauds through different communication channels, as an effective tool in prevention of frauds. The Whistle Blower Policy of the Bank is available in Bank's website and Bank's intranet site. As per the Whistle Blower Policy, directors and employees of the Bank, customers, stakeholders, non governmental organizations (NGO) and members of general public can lodge complaints/disclosures under the scheme. No personnel have been denied access for giving any information as envisaged in the Whistle Blower Policy.
Website link to Bank's Whistle Blower Policy/ Vigil Mechanism is <http://www.federalbank.co.in/customer> relations/codes,polices &disclosures/whistle blower policy
Subsidiary and Audited Financial Statements of the Bank's Subsidiaries
As on 31 March 2016, the Bank has one unlisted fully–owned subsidiary named Fedbank Financial Services Limited. Fedbank Financial Services Limited is a diversified Non–Deposit–Taking & Systemically Important (ND–SI) NBFC offering multiple loan products such as Loan against Property (LAP), Structured Finance and Loan against pledge of Gold ornaments. It also distributes loan products of The Federal Bank Limited.
The total business figure of Fedbank Financial Services Limited as on 31 March 2016 is Rs. 611 Cr.
Consolidated Financial Statements (Financial Statements of Subsidiaries and Associates)
In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared its consolidated financial statement including its subsidiary, which is forming part of this report. The financial position and performance of its subsidiary/ Associate is given in the statement containing salient features of the financial statements of the subsidiaries/Associate Companies/ Joint Venture, (Given as Annexure VII) which forms part of the consolidated financial statements.
In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its standalone and the consolidated financial statements has been hosted on its website www.federalbank.co.in . Further, as per fourth proviso to the said section, the audited annual accounts of the said subsidiary company of the Bank have also been hosted on the Bank's website www.federalbank.co.in. The said documents have been hosted on the website of the subsidiary company of the Bank also, in compliance with the said section.
Joint Venture in Life Insurance Business
The Bank's Joint Venture Life Insurance Company, in association
with IDBI Bank Limited and Fortis Insurance International N.V. (now Aegeas), namely IDBI Federal Life Insurance Company Limited(erstwhile IDBI Fortis Life Insurance Company Limited), commenced operations in March 2008. Currently the Bank has a total stake of Rs. 208 Cr. in the equity of the company holding 26% of the equity capital. The total premium collected by IDBI Federal Life Insurance Company Limited during the period ended 31 March 2016 is Rs. 1239.70 Cr.
Corporate governance is essentially a set of standards, systems, and procedures aimed at effective, honest, transparent, and responsible management of a company within the applicable statutory and regulatory structures. This Code represents a set of desirable, corporate governance practices to be adopted by the Bank. The Code takes into account the relevant statutory and SEBI/stock exchange listing requirements and Reserve Bank of India (RBI) directives and other guidelines under the Companies Act 2013. The efficacy of the Code lies in how well it is put into practice. In adopting the Code, the stress is its substance and spirit rather than on its form.
Good corporate governance practices help support and strengthen corporate actions aimed at achieving the corporate objective. The Bank's principle corporate objective, like that of any corporate business entity, is to perpetuate its business while protecting and enhancing, over the long term, the value of the investments of its shareholders in the Bank. A copy of the Code of Conduct for the Board of Directors and Management is available on Bank's website.
Board of Directors
The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act,2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations,201 5 ("Listing Agreement") and the Code of Corporate Governance adopted by the Bank. The Board comprises of ten Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including banking, accountancy, MSME, finance, small scale industry, agriculture, strategic planning, risk management and information technology.
Mr. C Balagopal was appointed as Additional Independent Director by the Board of the Bank w.e.f 29 June 2015, and is being recommended for appointment as Independent Director in the Eighty Fifth Annual General Meeting (AGM), as per the requirement of Companies Act,2013.
Mr. Ashutosh Khajuria was appointed as Executive Director witha seat on the Board of the Bank, at the Board meeting held on 29 June 2015, for a period of two years, for which approval from Reserve Bank of India was obtained vide letter DBR. Appt No.9426/08.38.001/2015–16 dated 28 January 2016. His appointment is also being recommended for the Eighty Fifth Annual General Meeting to be appointed as Executive Director and CFO of the Bank.
The detailed profile of all the directors recommended for appointment/ re–appointment in this AGM are mentioned in the Notice of Annual General Meeting for the benefit of shareholders as required under law.
During the year Prof. Abraham Koshy, who was acting as the Part Time Chairman of the Bank ceased to be a director of the Bank w.e.f. 18 May 2015, on completing eight years of service in the Bank as Director of the Bank. The Board places on record his valuable contribution to the overall performance of the Bank.
Mr. Abraham Chacko, Executive Director of the Bank retired as Director from the Board of the Bank w.e.f 01 May 2015 on completion of his term of office. The Board places on record their appreciation for the commendable contribution made by Mr. Abraham Chacko, as Executive Director during his tenure in the Bank.
Excluding the MD & CEO and Executive Director, Mr. Ashutosh Khajuria, all other members of the Board are Non–Executive and Independent Directors. Necessary declarations were obtained from the Independent Directors as required under the RBI Regulations, Listing Agreement and Companies Act. The remuneration and other benefits paid to MD & CEO of the Bank and Executive Director during the year are disclosed in Annexure I to this Report and in Corporate Governance Report. The Non Executive Independent Directors apart from Mr. Nilesh S Vikamsey, are paid only sitting fees for attending every meeting of the Board/ Committees of the Board within the limits as prescribed under the Companies Act, 2013. Mr. Nilesh S Vikamsey, Chairman of the Board is paid sitting fee for attending Board / Committee meetings in addition an amount of Rs.1.25 lakhs per month (Rs. 15,00,000/– per annum) as remuneration, as approved by the Board and RBI. The Bank has framed a Comprehensive Compensation Policy for Non–Executive Directors of the Bank(Other than Part Time Chairman) which is detailed in the heading Policy on Remuneration to Non–Executive Directors/Independent Directors.
Mr. Shyam Srinivasan, Managing Director & Chief Executive Officer of the Bank is liable to retire at this AGM in compliance with Section 152 of Companies Act, 2013,as required under the regulations regarding retirement of directors by rotation. The detailed profile of Mr. Shyam Srinivasan, recommended for re–appointment in this AGM is mentioned in the Notice for the Annual General Meeting of the Bank.
Composition of Audit Committee
The Audit Committee consists of four Non– Executive, Independent Directors, chaired by Ms. Grace Koshie, a Non–Executive Independent Director. The Committee was re–constituted once in the financial year 201 5–1 6. The members of the Committee are Ms. Grace Koshie, Mr. Nilesh S Vikamsey, Mr Dilip G Sadarangani, and Ms. Shubhalakshmi Panse who are Non–Executive Independent Directors.
The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee incorporated in the Bank's Code of Corporate Governance, are in accordance with the listing agreements entered into by the Bank with Stock Exchanges where the Bank's shares are listed, Companies Act, 2013 and RBI guidelines, which are detailed in Corporate Governance section of this report.
In terms of the definition of Independence of Director as prescribed under the Listing Agreement entered with Stock Exchanges and Section 149(6) of Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Directors are Independent Directors of the Bank as on the date of this report:
1. Mr. Nilesh S Vikamsey
2. Mr. Sudhir M Joshi
3. Mr. K M Chandrasekhar
4. Mr.Dilip G Sadarangani
5. Mr. Harish H Engineer
6. Ms. Grace Elizabeth Koshie
7. Ms. Shubhalakshmi Panse
8. Mr. C Balagopal
During the year a meeting of Independent Directors was conducted on 10 March 2016 to evaluate the performance of Board as a whole, evaluation of Non–Independent Directors and Chairman of the Board and assess the flow of information. The meeting was attended by all the Independent Directors of the Bank.
In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 17(1)(a) of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (LODR Regulations) a company shall have at least one Woman Director on the Board of the company. Your Bank has Ms. Grace Elizabeth Koshie and Ms. Shubhalakshmi Panse as Directors on the Board of the Bank.
Bank's policy on directors' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under sub–section (3) of section 178;
A) Qualifications, Experience and knowledge
1. The Board should bring to their tasks a balanced mix of knowledge, skills, experience, and judgment relevant to the Bank's policies, operations, and needs. Not less than fifty–one percent of the total number of Directors shall be persons having special knowledge, skills, or valuable experience in one or more fields, such as banking, finance, management, economics, law, accountancy, agriculture and rural economics, cooperation, industry, SSI and Information technology. At least two Directors shall be persons having special knowledge or practical experience in agriculture and rural economy, cooperation, or small–scale industry. This criteria is fulfilled by the Board of the Bank. The Bank shall ensure to include in its Board need based representation of skills such as marketing, risk management, strategic planning, treasury operations, credit recovery etc.
2. The directors should be able to devote sufficient time and attention to the discharge of their duties to the Bank.
3. The directors shall preferably be in the range of 35–70 years
B) Disqualification/Conflicts of interest
1. The Bank's Directors shall be subject to disqualifications/ prohibitions contained in the Companies Act, 2013 and the Banking Regulation Act, 1949 with respect to directorship of companies in general or banking companies in particular.
2. A Director shall not be a director of any other company, or partner or proprietor of a firm, where such directorship, partnership, or proprietorship involves or is likely to involve actual or potential conflicts of interest as a Director of the Bank. A Director shall promptly inform the Board of any actual or potential conflicts of interest with respect to any matter that may come up for the consideration of the Board or of any Committee of which he is a member, and shall refrain from participating in a discussion on the matter.
C) suggested criteria for determining attributes of a director as required to be specified under Companies Act, 2013 include
1. integrity in personal and professional dealings.
2. wisdom and ability to take appropriate decisions.
3. ability to read and understand financial statements
4. ability to deal with others with a sense of responsibility, firmness, and cooperation.
5. refrain from any action that would lead to loss of his independence.
D) suggested criteria for determining Independence of a director
The criteria of independence of a director are determined based on the conditions specified in Section 149 (6) of the Companies Act, 2013 and SEBI–LODR Regulations, 2015.
The independent director shall at the first meeting of the Board in which he participates as a director and thereafter at the first meeting of the Board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, give a declaration that he meets the criteria of independence.
The terms and conditions of appointment of Independent Director is disclosed on the website of the Bank and a web link thereto is : <http://www.federalbank.co.in/shareholder–information>
Policy on remuneration to Non–Executive Directors/Independent Directors
The Policy of the Bank for the payment of remuneration to Non–Executive Directors/Independent Directors of the Bank is explained in the Comprehensive Compensation Policy for Non Executive Directors/Independent Directors (other than Part Time Chairman), as approved by the Board of Directors and is disclosed on the website of the Bank and a web link thereto is: <http://www>. federalbank.co.in/shareholder–information.
As required under Banking Regulation Act, 1949 prior approval of RBI is required, to give remuneration to Non–Executive Part Time Chairman of the Board.
Policy on remuneration to MD & CEO, Executive Director, Key Managerial Personnel and other employees
The Compensation / Remuneration Policy of the Bank as approved by the Board contains the policy for payment of remuneration to Executive Directors including MD & CEO, Key Managerial Personnel and for the employees of the Bank.
As per the guidelines given by RBI, Compensation/Remuneration Policy has been designed with the following Core Principles:
1. Effective governance of compensation.
2. Alignment of compensation with prudent risk taking.
3. Effective supervisory oversight and stakeholder engagement.
Change in the Policy
RBI vide letter no. DBR.No.BC.97/29.64.001/2014–15 dated June
01, 2015 had advised all private sector banks to formulate and adopt a comprehensive compensation policy for the non–executive Directors (other than the Part Time Chairman) in compliance with the provisions of the Companies Act, 2013. As such a new Policy named Comprehensive Compensation Policy for Non Executive Directors/ Independent Directors (other than Part Time Chairman) has been framed and approved by the Board and a weblink thereto is provided under the heading "Policy on remuneration to Non–Executive Directors/Independent Directors".
Compensation of Managing Director & CEO, Whole Time Directors and senior Executives (Non IBA)
The compensation paid out to the referred functionaries is divided into two components:
1. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span. (Approval from RBI to be taken as per section 35B of the Banking Regulation Act while deciding the fixed and variable compensation part for Managing Director & CEO and Whole Time Directors)
2. The variable compensation for Managing Director & CEO and senior Executives (Non – IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the revenue point index / performance score card which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay is paid purely based on performance and is measured through score cards for Managing Director & CEO /WTDs. The score card provides a mix of financial and non financial, quantitative and qualitative metrics. KPAs to contain targets on risk adjusted metrics such as RAROC, RARORAC, in addition to target on NPAs.
Compensation paid to Senior Executives and other staff members on IBA package
The compensation paid to other officials that include Award Staff, Officers coming under Scale I to III and Senior Executives coming under Scale IV to VII is fixed based on the periodic industry level settlements with Indian Banks' Association. The variable compensation paid to functionaries is based on the Performance Linked Incentive Scheme, which has been formulated on the basis of performance parameters set in Performance Management System. The scale of pay and other service conditions applicable to employees, whose compensation package is governed under IBA package has been revised consequent to the 10th Bipartite Settlement.
Policy on Board Diversity
Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank, as contained in the Banking Regulation Act, 1949 and satisfying the Fit and Proper Criteria for directors, as per the regulatory requirement of RBI and Listing Regulations.
The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the boardroom. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In forming its perspective on diversity, the Bank also takes into account factors based on its own business model and specific needs from time to time.
Board Diversity enhances the quality of performance of the Board; usher in independence in the performance of the Board; eradicates the gender bias in the Board; achieves sustainable and balanced performance and development; supports the attainment of strategic objectives & also ensures compliance of applicable laws and good corporate practices.
The Nomination Committee has the responsibility for leading the process for Board appointments and for identifying and nominating, for approval by the Board, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of directors to the Board.
Board appointments will be based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. While making Board appointments the requirement as per the Companies Act,2013 for appointment of atleast one woman director on the Board of the Bank is also considered.
Key Managerial Personnel who were appointed or have resigned during the year
In compliance with Section 203 of the Companies Act, 2013, Mr. Ashutosh Khajuria was appointed as the CFO and Key Managerial Personnel of the Bank w.e.f. 16 September 2015, in the place of Mr. Sampath D, who vacated the office of CFO and Key Managerial Personnel w.e.f. 16 September 2015 and who was entrusted with the charge of Head–Network II. Mr. Abraham Chacko who was the Executive Director and Key Managerial Personnel of the Bank, retired from the service of the Bank w.e f. 01 May 201 5.
Management Discussion and Analysis
The Management Discussion and Analysis Report for the year under review as stipulated under the listing agreement with the stock exchanges in India is presented in a separate section forming part of this Annual Report.
Loans, Guarantees or Investments in Securities
Pursuant to Section 186 (11) of the Companies Act, 2013, 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.
Internal Complaints Committees
Bank had constituted Internal Complaints Committees at 9 Zones and Head Office, to prevent and redress the complaints relating to sexual harassment and to organize workshops/ awareness programs to empower women employees while handling cases relating to sexual harassment. The employees who had undergone the certification program in employee counseling, form part of the various Internal Complaints Committees. The functioning of the committees were carried out as per letter and spirit contained in the provisions of "The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013". Workshops/ awareness programs regarding women empowerment were conducted at various locations across India. The following is the data with regard to the redressal of complaints by the Internal Complaints Committees:
a) No. of complaints received for the year FY 201 6 : 05
b) No. of complaints disposed of during FY 201 6 : 05
c) No. of cases pending for more than 90 days : Nil
d) Nature of action taken by the employer/ District Officer : As per the recommendations of the committee, appropriate action was taken/ punishment imposed on the respondent/ erring employee
Variations in the market capitalisation of the Bank
Variations in the market capitalisation of the Bank, Price Earnings Ratio as at the closing date of the current financial year and previous financial year is mentioned below
Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) and other applicable regulation of the Listing Regulations, the Board has carried out an annual performance evaluation of its own performance and of the directors individually, as well as the evaluation of the working of its various Committees for the year under consideration.
The evaluation process was initiated by putting in place, a structured questionnaire after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning, such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.
Thereafter a separate exercise was carried out to evaluate the performance of individual Directors, including the Chairman of the Board, who were evaluated on specified parameters. The performance evaluation of the Independent Directors was carried out by the entire Board, other than the Independent Director concerned. The performance evaluation of the Chairman and the Non Independent Directors were carried out by the Independent Directors. The Directors expressed their overall satisfaction with the evaluation process.
II) Performance Evaluation of Non–Independent Directors (MD & CEO and Executive Director) Criteria for Evaluation
Against set targets, achievements of performance were evaluated considering:
i) Achievements of performance against targets set ii) Appraises the Board regarding the organization's financial position and operational budget so as to enable the Board to make informed financial decisions iii) Provides Leadership in developing strategies and organizational plans with the management and the Board of Directors iv) Ensures that the Board is kept informed about all issues concerning the Bank v) Media interaction and ability to project positive image of the Company vi) Effectively pursue the performance goals in relation to mission and objective of the organization vii) Motivating employees, providing assistance & directions viii) Supervising & Safeguard of confidential information ix) Establishment of internal control processes, monitoring policies and encouraging suggestions x) Cultivates effective relationship with Industry Forums, community and business leaders, Regulatory Bodies and Public Officials.
i) The MD's & ED's attendance at the Board and Committee meetings is good; ii) They present financial reports to the Board on a regular basis and submits an annual budget for Board review, revision and approval; iii) They regularly appraise the Board on the organization's financial position and operational budgets that aids the Board to make informed financial decisions; iv) The Executives constantly endeavor to enhance internal control processes, monitor execution of policies and are very receptive to suggestions; v) The MD has adequate qualities of leadership in developing strategy & execution for achieving them, vi) The MD & ED adequately endeavor to Implement Board decisions and are very strong in media interactions and have put in efforts in building and reinforcing the Brand and image of the Bank; vii) MD demonstrates his commitment to the Organisation goals, is ethical, motivates & guides employees for better performance; viii) His personal rapport and good relationship with industry forums / regulatory bodies, etc are highlights and testimony of the respect and prominence of Federal Bank in the Indian banking landscape.
III) Performance Evaluation of Independent Directors including Chairman Criteria for evaluation include:
i) Attendance at the Board and Committee meetings ii) Study of agenda papers in depth prior to meeting and active participation at the meeting iii) Contributes to discussions on strategy as opposed to focus only on agenda iv) Participate constructively and actively in the Committees of the Board in which they are chairpersons or Members v) Exercises his/her skills and diligence with due and reasonable care and brings an independent judgement to the Board vi) The Director remains abreast of developments affecting the company and external environment in which it operates independent of his being appraised at meetings.
The evaluation done, brought out the fact that good attendance of Independent Directors was there in the Board and committee meetings. They are knowledgeable, ethical and bring their respective expertise in the deliberations and make valuable contributions. They have adequate understanding of their role and responsibilities as Independent directors.
IV) Performance Evaluation of Board and Committees Criteria for Evaluation of Board
i) If Board is of appropriate size and has the appropriate balance and diversity of background, business experience, industry knowledge, skills and expertise in areas vital to the Bank's success, representing sectors laid down by the regulators, given its current and future position ii) New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization's activities, the Board encourages a culture that promotes candid communication iii) The Board oversees management's procedures for enforcing the organization's code of conduct, Action Taken Reports on the discussion/directions of the Board are submitted at regular intervals to the Board iv) The Board oversees risk management through inputs from the Risk Management Committee v) The Board considers the quality and appropriateness of financial reporting, including the transparency of disclosures vi) The Board ensures compliance with the relevant provisions of the Companies Act and other regulatory provisions as applicable to the Bank vii) The Board oversees the compliance processes viii) The Board views the organization's performance from the competitive perspective–industry and peers performance, industry trends and budget analysis and with reference to areas where significant differences are apparent etc.
Criteria for Evaluation of Committees
i) The Committee's Terms of Reference and composition is reviewed annually and is found to be constituting of Directors representing sectors laid down by the regulator and continue to be appropriate
ii) Committee meetings are organized properly in number, timing and location iii) The Committee allocates the right amount of time for its work etc.
Evaluation Outcome of Board/Committees
i) The structure and composition of the Board is appropriate with adequate number of Directors and a good balance of diverse professional backgrounds, business experience, industry knowledge, skills and expertise in areas vital to the Bank's success in its current and future position; ii) The proportion of independent to non–independent directors is good; iii) The Board demonstrates integrity, credibility, trustworthiness, active and effective participation at Board & Committee meetings which are held at reasonable and regular intervals; iv) The Board and Committee processes and procedures are good with different committees reviewing different functional areas of the Bank's operations; v) The Board and its Committees also reviews Bank's performance, risk management, financial reporting, compliances, technology, operations with adequate frequency of meetings etc.
V) Assessment of flow of information
Criteria for Evaluation
The agenda and related information are circulated in advance of meetings to allow Board members sufficient time to study and understand the information; Information on the annual operating plans and budgets and other updates are provided to the Board; Updates on operating results of the Bank is furnished to the Board periodically etc.
The flow of information to the Board and its committees is generally good.
Evaluation of Senior Management Personnel in the Bank
The compensation paid out to KMP is divided into two components. The fixed compensation is to be determined based on the industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span.
The variable compensation to Senior Executives (Non – IBA package) to be fixed based on organizational performance and KPAs set for the official. The organization's performance is charted based on the Revenue Point Index / Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. Variable pay are paid purely based on performance. Key Performance Indicators (KPAs) to contain targets on Risk Adjusted Metrics such as RAROC, RARORAC, in addition to target on NPAs. An ED level Committee has been constituted for reviewing the linkage of risk based performance with remuneration, for employees above Level 5(AGM). The Committee with the assistance of Risk Department & HR will study the business and industry environment, analyze and categorize the risks into immediate and long term and streamline the components of the compensation plan like proportion of the total variable compensation to be paid to Senior Employees so as to ensure financial stability of the organization. These committees would also analyze various factors to ascertain whether cost/ income ratio supports the remuneration package provided to Senior Executives and other officials consistent with maintenance of sound capital adequacy ratio.
During the year nine Board meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per the Listing Regulations.
Director's Responsibility Statement
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; and the Directors have prepared the annual accounts on a going concern basis.
To the best of the knowledge of the Directors and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:
a. that in the preparation of the annual financial statements for the year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;
b. that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31,2016 and of the profit of the Bank for the year ended on that date;
c. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;
d. that the annual financial statements have been prepared on a going concern basis;
e. that proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;
f. that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.
Related Party Transactions
All related party transactions that were entered during the financial year were in the ordinary course of the business of the Bank and were on arm's length basis. There were no materially significant related party transactions entered by the Bank with related parties which may have a potential conflict with the interest of the Bank. All Related Party Transactions were placed before the Audit Committee for approval. Prior omnibus approval for transactions which are of repetitive nature is obtained from the Audit Committee and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.
The policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Bank and the link for the same is <http://www.federalbank>. co.in/our–commitments.
Since all related party transactions entered into by the Bank were in the ordinary course of business and were on an arm's length basis, disclosures as per Form AOC–2 is not applicable to the Bank. There were also no material contracts or arrangement or transactions at arm's length basis during the period.
Technology and Digital Updates
This year, your Bank has introduced an innovative Mobile Application, FedBook Selfie, for opening SB account with Federal Bank from Anywhere, Anytime. FedBook Selfie won the Skoch Smart Technology Award 2015.
FedBook Selfie app is an innovative product, first of its kind in the Banking Industry. Using Selfie app customers have the convenience of opening a Savings Bank account, with Federal Bank, on their own, from anywhere, anytime using their mobile device. They can make their first transfer of money to their account, then and there. The transferred amount will reflect in their mobile passbook instantly. The app downloaded to open the Selfie account, after opening the account, turns itself to a digital passbook. Customer will from there onwards see only his digital passbook with all his account details. Selfie App provides positive customer experience and maximizes customer convenience. Real time validations are integrated in the App to ensure KYC compliance and reduced account opening turnaround time.
Federal Bank won the IDRBT Banking Technology Excellence Awards 2014 – 15 for Digital Banking, Analytics and Big Data category.
Federal Bank also received the Banking Frontier's Finnoviti 2015 Award for its Mobile Application 'Scan N Pay' which enables easier p2p inter–bank fund transfer using the IMPS facility.
Benefits of this innovation are:
• Enhanced customer experience in account opening.
• Instant availability of account number in less than 3 minutes.
• Facilitates instantaneous funds of transfer to the newly opened account.
• Instant updating of mobile passbook to reflect the transaction.
• Helps to eliminate failure of account–opening due to incomplete opening form or mismatches in KYC.
• 100% compliance due to automation of KYC checks (PAN, Aadhaar etc.).
Missed Call Banking
Federal Bank introduced Missed Call Banking with the first service as balance enquiry. Recently Bank also introduced mobile recharging through Missed Call. Once the customer registers for the facility, a missed call will recharge any phone including a third party phone based on the registration details.
FedMobile is Federal Bank's Mobile Banking application. This convenient and secure app has now been provided with a new User Interface for enhanced customer experience. Features which are available in the new App are Easy Registration process, Online activation of Beneficiary, Search beneficiary option in Fund Transfer, Reset PIN facility, Funds Transfers (Intra Bank, NEFT & IMPS), Mobile Recharge, Data Card or DTH Recharge and School Fee payment. FedMobile App is available across multiple mobile operating systems (OS).
Auditors Statutory Audit
M/s. Deloitte Haskins & Sells, Chartered Accountants, Chennai, and M/s. M P Chitale & Co., Chartered Accountants, Mumbai, jointly carried out the statutory central audit of the Bank during the Financial Year 201 5–1 6. Additionally 1278 number of branches were subjected to branch statutory audit by 693 number of branch auditors. The statutory central/branch auditors audited all the branches and other offices of the Bank. Deloitte Haskins & Sells, Chartered Accountants, Chennai and M.P. Chitale & Co, Chartered Accountants Mumbai would be retiring at the conclusion of the forthcoming Annual General Meeting. They have been statutory auditors of the Bank for four consecutive years, which is the maximum term for statutory auditors of banking companies as per the guidelines issued by Reserve Bank of India.
RBI had vide letter no. DBS.ARS.No.15083/08.09.005/201 5–16 dated June 20,2016, approved the appointment of M/s. B S R & Co. LLP, Chartered Accountants, Mumbai, ( ICAI FRN– 101248 W) together with M/s M M Nissim & Co, Mumbai, (ICAI FRN– 107122
W), as the Joint Central Statutory Auditors of the Bank for the year 2016–17, for which the shareholders approval has been sought in Eighty Fifth Annual General Meeting of the Bank.
The Board had in its meeting dated 20 October 2015, appointed M/s. SVJS & Associates, Practicing Company Secretaries, to undertake the Secretarial Audit of the Bank during the Financial Year ended 31 March 2016, in compliance with the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The Secretarial Audit Report is annexed herewith as "Annexure V".
Awards and Accolades
Your Bank has been honoured with the ET Best Corporate Brand 2016 Award. The ET Best Corporate Brand Award is an extension to the survey finding, where they highlight and recognize the efforts of the most admired corporates that are shaping up the Indian marketplace. The Bank received the Best Small Bank Award on the Best Bank Survey conducted jointly by Business World &Price Water House Coopers. The Bank also won the Bankers Clubs, Kerala Award for the Best Bank at the National Level among the private sector banks. Federal Bank won the Banking Frontiers Inspiring Work place Award in the category Best HR and Talent Practice among Private Sector Banks for the second consecutive time as recognition for continuous refinements in HR practices/process. Federal Bank received the prestigious 6th Annual Greentech HR Award for Technology, as recognition for HR excellence through various technological platforms like FAME, Fed E HRM, HR Direct & Fed Campus. Federal Reach, the in–house magazine received the prestigious "In–house Communication Excellence Award". The Bank also got the IDRBT Award for Digital Banking, Analytics and Big Data in mid–sized Banks Segment. The IDRBT Award is recognition for the series of digital initiatives, undertaken by the Bank this year that include FedBook Selfie, the first–of–its–kind mobile App for account opening and Scan N Pay, the innovative mobile based Payment app which has the capability to scan the QR code, facilitating payments at merchant outlets & ecommerce, websites as well as person–to–person fund transfer. The Bank also received the Banking Frontier's Finnoviti 2016 Award and Skoch Smart Technology Award 201 5 for Fedbook Selfie. Your bank won Skoch Order of Merit Award for the categories Capacity Building & Financial Literacy and Access to Banking and Financial Services and Banking Frontier's Finnoviti 2015 Award for "Scan N Pay". Federal Bank grabbed two prestigious awards titled MasterCard Innovation Awards 2016 in connection with MasterCard Payments Strategy Workshop – Award for Paper–less and Do it Yourself Green initiative – SOFT PIN under debit card program and for the Easy Payments portal under acquiring business initiative. Your Bank also won the NSDL Star Performer Awards 2015. Mr. Thampy Kurian, GM & HR Head was awarded with the 50 Most Influential HR Professionals in Asia citation from World HRD Congress. Mr. Biju K, Chief Information Security Officer of the Bank, has been awarded Winner – Top 100 CISOs by the organisation, Infosec Maestros.
Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo
Considering the nature of activities of the Bank, the provisions of Section 134 (3) (m) of the Companies Act, 2013 relating to conservation of energy and technology absorption do not apply to the Bank. The Bank is, however, constantly pursuing its goal of technological upgradation in a cost–effective manner for delivering quality customer service. Through its export–financing operations, the Bank supports and encourages the country's export efforts.
Extract of Annual Return
The details forming part of the extract of the Annual Return in form MGT 9 is annexed here with as "Annexure III".
Particulars of Employees
As required by the provisions of Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of the employees who were in receipt of remuneration not less than sixty lakh rupees per annum or was in receipt of not less than five lakh rupees per month if employed for part of the year, for FY 2015–16 are set out in the Annexure to the Director's Report as Annexure I.
The ratio of the remuneration of each director to the median employee's remuneration and other details in terms of subsection 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure VI.
Stock Exchange Information
The Bank's Equity Shares are listed on:
1. BSE Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai – 400 001 and
2. National Stock Exchange Ltd. "Exchange Plaza", Bandra Kurla Complex Bandra East, Mumbai – 400 051.
3. The GDRs issued by the Bank are listed on the London Stock Exchange.
The annual listing fees have been paid to all the Stock Exchanges mentioned above.
The Board of Directors places on record its sincere thanks to the Government of India, Reserve Bank of India, various State Governments and regulatory authorities in India and overseas for their valuable guidance, support and cooperation. The Directors wish to express their gratitude to Investment Banks, rating agencies and Stock Exchanges for their wholehearted support.
The Directors record their sincere gratitude to the Bank's shareholders, esteemed customers and all other well–wishers for their continued patronage. The Directors express their appreciation for the contribution made by every employee of the Bank.
For and on behalf of the Board of Directors
Chairman of the Board
Date: 21 June 2016