Capital Small Finance Bank Annual Report 2015-16

Annual Report 2015-16

Expanding Outreach with Local Touch

Vishwas Se Vikas Tak Our Vision

To provide superior banking service, focused on customers' needs.

To contribute to the economic development of the area by innovative ideas, technology and new products.

To maintain a long lasting and trustworthy relationship with the local community.

Annual Report 2015-16 | 01 Our Vision

To provide superior banking service, focused on customers' needs.

To contribute to the economic development of the area by innovative ideas, technology and new products.

To maintain a long lasting and trustworthy relationship with the local community.

Annual Report 2015-16 | 01 Board Members Board Committees

Chairman (Part-time) Chief Operating Officer Management Committee Special Committee on Frauds Inder Krishan Sardana & Company Secretary Inder Krishan Sardna Inder Krishan Sardana Munish Jain Sarvjit Singh Samra Sarvjit Singh Samra Managing Director Bhagwant Singh Sangha Bhagwant Singh Sangha Sarvjit Singh Samra Chief Financial Officer Sukhpal Singh Gill Sahil Vijay Credit Sanctioning Committee Directors Sarvjit Singh Samra Stakeholders Relationship Committee Santokh Singh Chhokar Auditors Bhagwant Singh Sangha Inder Krishan Sardana Bhagwant Singh Sangha M/s V.P. Vijh & Co. Ranbir Singh Sarvjit Singh Samra Sukhpal Singh Gill Chartered Accountants Ranbir Singh Ranbir Singh Jalandhar Audit Committee Madan Gopal Sharma Madan Gopal Sharma Corporate Social Responsibility Committee Harmesh Khanna Bhagwant Singh Sangha Sarvjit Singh Samra Rakesh Soni Sukhpal Singh Gill Bhagwant Singh Sangha Ranbir Singh Ranbir Singh

Risk Management Committee Investor Grievance Redressal Committee Sarvjit Singh Samra Sarvjit Singh Samra Bhagwant Singh Sangha Bhagwant Singh Sangha Sukhpal Singh Gill Ranbir Singh

Nomination and Remuneration Committee Securities Allotment Committee Bhagwant Singh Sangha Inder Krishan Sardana Madan Gopal Sharma Sarvjit Singh Samra Sukhpal Singh Gill Bhagwant Singh Sangha Rakesh Soni Securities Transfer Committee Sarvjit Singh Samra Bhagwant Singh Sangha Sukhpal Singh Gill

02 | Annual Report 2015-16 Annual Report 2015-16 | 03 Board Members Board Committees

Risk Management Committee Investor Grievance Redressal Committee Sarvjit Singh Samra Sarvjit Singh Samra Bhagwant Singh Sangha Bhagwant Singh Sangha Sukhpal Singh Gill Ranbir Singh

02 | Annual Report 2015-16 Annual Report 2015-16 | 03 Financial Highlights Our Achievements

(` in crores)

Business Analysis 2015-16 2014-15 2013-14 CAGR

Deposits 1814.13 1506.78 1264.14 19.79% 1 2 Advances 1148.40 929.30 757.61 23.12% Pioneer in bringing Promoting 3 state-of-the-art banking financial Total Business 2962.53 2436.08 2021.75 21.05% Extension of banking services facilities in rural areas inclusion to the unbanked villages at low cost. in the Net Worth 114.84 89.51 79.77 19.98% through Branches and area of Suvidha Kendras operation (Brick & Mortar B.C. outlets). since 4 inception by Profitability Analysis 2015-16 2014-15 2013-14 CAGR 7 Day Branch Banking providing 5 6 from day one with easy access Gross Revenue 202.33 171.99 140.73 19.90% extended and of banking Maintaining Business uninterrupted banking services a high Credit CAGR of Net Interest Income 62.68 54.62 46.23 16.43% hours. to the masses. Deposit Ratio more than of above 63%. 21%. Operating Profit 21.26 19.26 18.70 6.63%

Net Profit 13.74 14.22 10.61 13.80% 7

One-stop financial hub in rural and semi urban areas.

Ratio Analysis 2015-16 2014-15 2013-14 8 9 10

CASA % 35.16% 35.72% 37.94% Contribution towards Surpassed Average business per economic development national branch of `63 Crores. Return on Average Equity 13.44% 16.80% 14.05% and employment targets in generation in the area. Priority Sector, Return on Average Assets 0.74% 0.92% 0.84% Agriculture and Weaker 12 Interest Spread 3.70% 3.87% 4.02% 11 Section Ranked as no.1 in Banking Sector Net Interest Margin 3.37% 3.53% 3.65% Advances. amongst India's 100 best companies to Accredited with ‘ICAI’ work for 2016 for second consecutive EPS (`) 6.70 7.23* 6.14 award for excellence in year by 'Great Place to Work Institute' financial reporting for in India. Book Value Per Share (`) 49.89 51.85 50.83 two consecutive years.

Capital Adequacy Ratio 17.20% 15.22% 15.01%

Gross NPAs % 0.73% 0.39% 0.36%

Net NPAs % 0.45% 0.13% 0.09% 1st Small Finance Bank in India to start operations Dividend % 16% 16% 10%

*Restated EPS

04 | Annual Report 2015-16 Annual Report 2015-16 | 05 Financial Highlights Our Achievements

(` in crores)

Business Analysis 2015-16 2014-15 2013-14 CAGR

Net Profit 13.74 14.22 10.61 13.80% 7

One-stop financial hub in rural and semi urban areas.

Ratio Analysis 2015-16 2014-15 2013-14 8 9 10

Capital Adequacy Ratio 17.20% 15.22% 15.01%

Gross NPAs % 0.73% 0.39% 0.36%

Net NPAs % 0.45% 0.13% 0.09% 1st Small Finance Bank in India to start operations Dividend % 16% 16% 10%

*Restated EPS

04 | Annual Report 2015-16 Annual Report 2015-16 | 05 CONTENTS

Managing Director's Note ...... 08

Directors' Report ...... 10

Extract of Annual Return ...... 29

Management Discussion Analysis ...... 37

Product & Services ...... 46

Auditors' Report ...... 47

Annual Accounts

Balance Sheet ...... 52

Profit and Loss Account ...... 53

Cash Flow Statement ...... 54

Schedules ...... 55

Significant Accounting Policies ...... 60

Notes on Accounts ...... 64

06 | Annual Report 2015-16 Annual Report 2015-16 | 07 CONTENTS

Managing Director's Note ...... 08

Directors' Report ...... 10

Extract of Annual Return ...... 29

Management Discussion Analysis ...... 37

Product & Services ...... 46

Auditors' Report ...... 47

Annual Accounts

Balance Sheet ...... 52

Profit and Loss Account ...... 53

Cash Flow Statement ...... 54

Schedules ...... 55

Significant Accounting Policies ...... 60

Notes on Accounts ...... 64

06 | Annual Report 2015-16 Annual Report 2015-16 | 07 positive note against the banking services accessible to further encourage us to achieve MANAGING DIRECTOR'S NOTE backdrop of economic the common man. The Bank is greater milestones in future. uncertainty in the banking sector. providing a safe, efficient and Total Deposits of the Bank service oriented repository of The Bank has become the first increased from `1506.78 crores savings to the local community choice of the customers in most as on March 31, 2015 to on one hand, and reducing their of its operational centers and As a Local Area Bank the area of `1814.13 crores as on March dependence on moneylenders by endeavors to build on this 31, 2016 resulting in a growth making need based credit easily operation was restricted to five districts preeminent position in the of 20.40%. Total Advances available on the other hand. existing centers as well as at of Punjab only. Conversion to Small increased to `1148.40 crores The Bank has set a rare example the new centers to be added Finance Bank has removed the as on March 31, 2016 from in this regard as it has opened in future. I humbly acknowledge `929.30 crores as on March 57608 Savings Bank Accounts geographical barriers for expansion. with recognition the timely 31, 2015, showing a growth of which are ‘No Frill Accounts’ as This will result in exponential growth advice, valuable guidance and 23.58%. The total business of the on March 31, 2016. Also your support received by the Bank of the Bank across all spheres. Bank has increased to `2962.53 Bank has kept pace with the fast from the Promoters, Directors, crores as on March 31, 2016 as growing challenges and has Government Authorities , Sarvjit Singh Samra against `2436.08 crores as on been quick to put in place the especially The Reserve Bank Managing Director March 31, 2015, resulting in a value added services like the of India, SEBI and the Stock growth of 21.61%. Total Gross Debit Cards, SMS alerts etc. Exchange. revenue has increased to The tremendous performance of `202.33 crores as on March the Bank is evident from the fact 31, 2016 as against `171.99 that most of its branches have Our committed, motivated and Dear Shareholders crores as on March 31, 2015, become the largest branches at dedicated team relentlessly strives resulting in a growth of 17.64%. their respective centers in this to exceed the expectations of its I take this opportunity to share my districts of Jalandhar, Kapurthala of conversion, taking the total Net Interest income has increased short span. customers and endeavors to delight that Capital Local Area and Hoshiarpur in Punjab for the number of branches to 57 to `62.68 crores as on March create superior value for all 31, 2016 as against `54.62 stakeholders through the use of Bank Limited has made a historic initial 13 years. In January 2013, (31 rural, 19 semi urban, The Bank aims high to reach crores as on March 31, 2015, the best standards of operations. transition on April 24, 2016 after the Reserve Bank of India 5 urban and 2 metropolitan). `12000 crore mark in terms resulting in a growth of 14.76%. I, along with my colleagues on its conversion into Capital Small accorded the approval for During the current financial year, of the total business and branch However due to high expenditure the Board, would like to convey Finance Bank Limited thereby expansion in the Bank's area of 19 more branches will become network of 216 by the year incurred during the transitional our sincere thanks and becoming the maiden Small operation to two more districts of operational. The total business March 31, 2021 Finance Bank of the country. Ludhiana and Amritsar in Punjab. of the Bank has crossed `3150 phase of the Bank and increase appreciation. Capital Local Area Bank, along crores mark with more than in provisions, the Net Profit has with nine other entities, was 370000 number of accounts. marginally declined to `13.74 Your Bank has always been The stage is set for us to make I extend my gratitude to all the granted in-principle approval by The Bank has 80% of its business crores as on March 31, 2016 committed in creating a diverse, a mark in Indian Banking stakeholders for their confidence the Reserve Bank of India to set in rural and semi urban areas, as against `14.22 crores as on inclusive and meritocratic work Industry. The opportunities are and unflinching belief in our up 'Small Finance Bank' on with Priority Sector Lending of March 31, 2015. culture enabling us to attract and unlimited as conversion to Small ability to deliver value. I would September 16, 2015. 81.28% of the Adjusted Net Bank retain the best talent available. Finance Bank has removed the like to take this opportunity to Credit as on March 31, 2016. This alone has led the bank to be geographical barriers for Your Bank has always been a reiterate our commitment to work The Bank is extending loans ranked no.1 in Banking Sector Capital Local Area Bank, the expansion. This will result in frontrunner in the area of priority towards meeting your high primarily to small borrowers and amongst India’s 100 Best largest Local Area Bank in the exponential growth of the Bank sector lending. It has been expectations and take your 57.50% of the total advances are Companies to work for 2016 for country, before conversion to across all spheres. harnessing the vast potential organization to the next level up to the ticket size of `25 lacs as the second consecutive year. ‘Small Finance Bank' has been of rural market through its wide of growth. on March 31, 2016. The Bank has made to the list into operations for last 16 years network of rural branches. The Bank transitioned from a of India’s 100 Best Companies with excellent performance in all The Bank has always focused Local Area Bank to Small Finance to work for the third consecutive Sarvjit Singh Samra spheres. The Bank has been The financial year 2015-16 on promoting Financial Inclusion Bank with 47 branches. 10 new year with an improvement in rank Managing Director operating in three contiguous ended for the Bank on a very in the area of operation since branches were added on the eve the very beginning by making every year. These recognitions

08 | Annual Report 2015-16 Annual Report 2015-16 | 09 positive note against the banking services accessible to further encourage us to achieve MANAGING DIRECTOR'S NOTE backdrop of economic the common man. The Bank is greater milestones in future. uncertainty in the banking sector. providing a safe, efficient and Total Deposits of the Bank service oriented repository of The Bank has become the first increased from `1506.78 crores savings to the local community choice of the customers in most as on March 31, 2015 to on one hand, and reducing their of its operational centers and As a Local Area Bank the area of `1814.13 crores as on March dependence on moneylenders by endeavors to build on this 31, 2016 resulting in a growth making need based credit easily operation was restricted to five districts preeminent position in the of 20.40%. Total Advances available on the other hand. existing centers as well as at of Punjab only. Conversion to Small increased to `1148.40 crores The Bank has set a rare example the new centers to be added Finance Bank has removed the as on March 31, 2016 from in this regard as it has opened in future. I humbly acknowledge `929.30 crores as on March 57608 Savings Bank Accounts geographical barriers for expansion. with recognition the timely 31, 2015, showing a growth of which are ‘No Frill Accounts’ as This will result in exponential growth advice, valuable guidance and 23.58%. The total business of the on March 31, 2016. Also your support received by the Bank of the Bank across all spheres. Bank has increased to `2962.53 Bank has kept pace with the fast from the Promoters, Directors, crores as on March 31, 2016 as growing challenges and has Government Authorities , Sarvjit Singh Samra against `2436.08 crores as on been quick to put in place the especially The Reserve Bank Managing Director March 31, 2015, resulting in a value added services like the of India, SEBI and the Stock growth of 21.61%. Total Gross Debit Cards, SMS alerts etc. Exchange. revenue has increased to The tremendous performance of `202.33 crores as on March the Bank is evident from the fact 31, 2016 as against `171.99 that most of its branches have Our committed, motivated and Dear Shareholders crores as on March 31, 2015, become the largest branches at dedicated team relentlessly strives resulting in a growth of 17.64%. their respective centers in this to exceed the expectations of its I take this opportunity to share my districts of Jalandhar, Kapurthala of conversion, taking the total Net Interest income has increased short span. customers and endeavors to delight that Capital Local Area and Hoshiarpur in Punjab for the number of branches to 57 to `62.68 crores as on March create superior value for all 31, 2016 as against `54.62 stakeholders through the use of Bank Limited has made a historic initial 13 years. In January 2013, (31 rural, 19 semi urban, The Bank aims high to reach crores as on March 31, 2015, the best standards of operations. transition on April 24, 2016 after the Reserve Bank of India 5 urban and 2 metropolitan). `12000 crore mark in terms resulting in a growth of 14.76%. I, along with my colleagues on its conversion into Capital Small accorded the approval for During the current financial year, of the total business and branch However due to high expenditure the Board, would like to convey Finance Bank Limited thereby expansion in the Bank's area of 19 more branches will become network of 216 by the year incurred during the transitional our sincere thanks and becoming the maiden Small operation to two more districts of operational. The total business March 31, 2021 Finance Bank of the country. Ludhiana and Amritsar in Punjab. of the Bank has crossed `3150 phase of the Bank and increase appreciation. Capital Local Area Bank, along crores mark with more than in provisions, the Net Profit has with nine other entities, was 370000 number of accounts. marginally declined to `13.74 Your Bank has always been The stage is set for us to make I extend my gratitude to all the granted in-principle approval by The Bank has 80% of its business crores as on March 31, 2016 committed in creating a diverse, a mark in Indian Banking stakeholders for their confidence the Reserve Bank of India to set in rural and semi urban areas, as against `14.22 crores as on inclusive and meritocratic work Industry. The opportunities are and unflinching belief in our up 'Small Finance Bank' on with Priority Sector Lending of March 31, 2015. culture enabling us to attract and unlimited as conversion to Small ability to deliver value. I would September 16, 2015. 81.28% of the Adjusted Net Bank retain the best talent available. Finance Bank has removed the like to take this opportunity to Credit as on March 31, 2016. This alone has led the bank to be geographical barriers for Your Bank has always been a reiterate our commitment to work The Bank is extending loans ranked no.1 in Banking Sector Capital Local Area Bank, the expansion. This will result in frontrunner in the area of priority towards meeting your high primarily to small borrowers and amongst India’s 100 Best largest Local Area Bank in the exponential growth of the Bank sector lending. It has been expectations and take your 57.50% of the total advances are Companies to work for 2016 for country, before conversion to across all spheres. harnessing the vast potential organization to the next level up to the ticket size of `25 lacs as the second consecutive year. ‘Small Finance Bank' has been of rural market through its wide of growth. on March 31, 2016. The Bank has made to the list into operations for last 16 years network of rural branches. The Bank transitioned from a of India’s 100 Best Companies with excellent performance in all The Bank has always focused Local Area Bank to Small Finance to work for the third consecutive Sarvjit Singh Samra spheres. The Bank has been The financial year 2015-16 on promoting Financial Inclusion Bank with 47 branches. 10 new year with an improvement in rank Managing Director operating in three contiguous ended for the Bank on a very in the area of operation since branches were added on the eve the very beginning by making every year. These recognitions

08 | Annual Report 2015-16 Annual Report 2015-16 | 09 Now the products and services performance even in this volatile environment. The Bank has achieved another DIRECTORS' REPORT provided by the bank which were milestone with the total business surpassing `2900 crores during the year restricted to the region could be 2015-16. The Bank has showed continued acceleration and momentum in Dear Shareholders, provided Pan India. building a strong liability franchisee with its credit Deposit Ratio of 63.30%. Despite the economic slowdown, the Bank has shown remarkable growth As a Small Finance Bank, your The Directors of the Bank have great pleasure in presenting the for the year ended March 31, 2016. The financials of the bank at a glance bank endeavors to promote 17th Annual Report on the business and operations of the Bank along is as under: with the audited accounts for the year ended March 31, 2016. financial inclusion by accepting deposits and lending to the unbanked sections such as micro Financial Highlights (` in crores) business enterprises, small farmers Economic Overview slowed down to 9.4% in FY15-16 was looked upon as an agricultural Year ended Year ended Particulars Growth (%) from 14.3% recorded in FY14. economy where big industrial units and unorganized sector entities. March 31, 2016 March 31, 2015 India’s economy ended FY 2015- Poor earnings growth by companies, were a rarity and banking industry The Bank as a Small Finance Bank Deposits 1814.13 1506.78 20.40 16 on a high note. The slow pace of investments, risk did not play its role effectively kicked of operations with 10 new improvement in India’s economic Advances 1148.40 929.30 23.58 aversion of banks due to rising bad besides being a deposit unit branches. fundamentals has accelerated in Total Business 2962.53 2436.08 21.61 loans, and availability of alternative because of its huge NRI base. The Bank has a total of 57 the year 2015 with the combined Gross Revenue 202.33 171.99 17.64 funding sources for corporates Set up with the objective to impact of strong government branches as on date. Out of which pulled down credit growth during augment credit for viable economic Net Interest Income 62.68 54.62 14.76 reforms, RBI's inflation focus 31 branches are rural, 19 are semi- the year. Similarly, the growth in activities in the rural areas and supported by benign global urban and 5 are urban and 2 are Operating Expenses 55.74 46.93 18.77 deposits of Scheduled Commercial bridging the credit gap, i.e. bank, commodity prices. With the metropolitan. Your bank plans to Provisions & Contingencies 7.52 5.04 49.21 Banks (SCBs) at 10.7% in FY15-16 caters to the needs of rural India improvement in the economic expand in a phased manner. was much lower than the growth and have been delivering a wide Profit before Tax 19.89 20.82 (4.47) scenario, there have been various The Bank aims to add new at 14.1% in the previous financial range of financial services and Profit after Tax 13.74 14.22 (3.38) investments leading to increased branches in Punjab in the first year year. Mounting non-performing providing world-class banking M&A activities. and the total number of branches assets continue to remain as an services to the local rural Year ended Year ended shall increase to 76 by the March Appropriations Financial Year 2015–16 saw India area of concern. The good thing community at low cost. 3, 2017. Thereafter the Bank plans March 31, 2016 March 31, 2015 emerge as a bright spark even as is the future expectations of Transfer to Statutory Reserve 3.43 3.55 The Board is elated to share with to expand to the neighbouring advanced and emerging economies economic recovery gives glimpse you that The Reserve Bank of India states of Haryana, Himachal Transfer to other Reserves 0.09 1.38 grappled with uncertainty and slower of hope to the banking industry for Pradesh, Rajasthan, Uttarakhand Depreciation Charge has granted permission to Capital - 0.25 growth. Economic growth in India business revival and improvement of earlier years Local Area Bank Limited to convert and Union Territory of Delhi. peaked in the second quarter of the in asset quality. into Capital Small Finance Bank The Bank has partnered in the Proposed Dividend 3.00 2.76 fiscal at 8.2% (under new series) Now, coming to our land, Punjab, Limited and thereby Banking growth and development of its Corporate Dividend Tax 0.61 0.57 but remained moderate in the third the land of unlimited possibilities License no. MUM : 116 dated various stakeholders, which has and fourth quarter at around 7.5%. Leaving balance where agriculture, small and March 4, 2016 was issued to in turn made the Bank post record to be carried forward 6.61 5.71 Cyclical macro parameters like to the next year medium scale industry and Capital Small Finance Bank performance in every sphere. inflation, current account deficit entrepreneurship is blossoming. Limited. Accordingly the Capital The year has ended at a positive have improved during the year due and a progressive note for all of Year ended Year ended Your bank, is putting in its share Small Finance Bank rolled out its Ratio Analysis to domestic as well as external March 31, 2016 March 31, 2015 in the fast paced economic operations on April 24, 2016 as our stakeholders with a pickup in factors. The Indian economy is development of the state of Punjab. the maiden Small Finance Bank the investment climate and our Credit Deposit Ratio 63.30% 61.67% in the midst of significant structural Punjab has witnessed fast track of the country. In fact we take pride bank will make the most of all Business per Employee* 4.61 4.30 change and is expected to embark economic development and that it was the historic day for the the opportunities in hand. on a sustained economic growth Return on Equity (pre-tax) 19.47% 24.60% structural shift over the past half banking sector in India as it would cycle. According to World Bank, Capital Adequacy Ratio 17.20% 15.22% century. Punjab was a state known be reckoned as a day when Small India is set to be the world's fastest Operating Performance primarily for its agriculture, Finance Banks were introduced in Non-Performing Assets(Net)* 5.13 1.19 growing major economy in the livestock, forestry, and less for the banking system. The new The Financial year 2015-16 has Paid up Capital* 23.02 17.27 Financial Year 2015–16 at 7.5% industries, minerals, tourism. journey of the bank could been bad for the banking sector. and gradually move up to 8% in Net Worth* 114.84 89.51 The demographics are changing accelerate the growth of the Slow growth of loan and an the next two financial years Book Value Per Share (`) 49.89 51.85 and changing for the good. business of the bank in many increasing pile of non-performing The growth in the Indian banking There is a growing middle class dimensions. Conversion to small assets became a matter of concern Earnings Per Share (`) 6.70 7.23** sector, however remained under with regular monthly income finance bank has removed the throughout the sector. However (*` in crores) pressure in FY15. Credit offtake besides agriculture income. Punjab geographical barrier for expansion. your bank has showed a healthy **Restated EPS

10 | Annual Report 2015-16 Annual Report 2015-16 | 11 Now the products and services performance even in this volatile environment. The Bank has achieved another DIRECTORS' REPORT provided by the bank which were milestone with the total business surpassing `2900 crores during the year restricted to the region could be 2015-16. The Bank has showed continued acceleration and momentum in Dear Shareholders, provided Pan India. building a strong liability franchisee with its credit Deposit Ratio of 63.30%. Despite the economic slowdown, the Bank has shown remarkable growth As a Small Finance Bank, your The Directors of the Bank have great pleasure in presenting the for the year ended March 31, 2016. The financials of the bank at a glance bank endeavors to promote 17th Annual Report on the business and operations of the Bank along is as under: with the audited accounts for the year ended March 31, 2016. financial inclusion by accepting deposits and lending to the unbanked sections such as micro Financial Highlights (` in crores) business enterprises, small farmers Economic Overview slowed down to 9.4% in FY15-16 was looked upon as an agricultural Year ended Year ended Particulars Growth (%) from 14.3% recorded in FY14. economy where big industrial units and unorganized sector entities. March 31, 2016 March 31, 2015 India’s economy ended FY 2015- Poor earnings growth by companies, were a rarity and banking industry The Bank as a Small Finance Bank Deposits 1814.13 1506.78 20.40 16 on a high note. The slow pace of investments, risk did not play its role effectively kicked of operations with 10 new improvement in India’s economic Advances 1148.40 929.30 23.58 aversion of banks due to rising bad besides being a deposit unit branches. fundamentals has accelerated in Total Business 2962.53 2436.08 21.61 loans, and availability of alternative because of its huge NRI base. The Bank has a total of 57 the year 2015 with the combined Gross Revenue 202.33 171.99 17.64 funding sources for corporates Set up with the objective to impact of strong government branches as on date. Out of which pulled down credit growth during augment credit for viable economic Net Interest Income 62.68 54.62 14.76 reforms, RBI's inflation focus 31 branches are rural, 19 are semi- the year. Similarly, the growth in activities in the rural areas and supported by benign global urban and 5 are urban and 2 are Operating Expenses 55.74 46.93 18.77 deposits of Scheduled Commercial bridging the credit gap, i.e. bank, commodity prices. With the metropolitan. Your bank plans to Provisions & Contingencies 7.52 5.04 49.21 Banks (SCBs) at 10.7% in FY15-16 caters to the needs of rural India improvement in the economic expand in a phased manner. was much lower than the growth and have been delivering a wide Profit before Tax 19.89 20.82 (4.47) scenario, there have been various The Bank aims to add new at 14.1% in the previous financial range of financial services and Profit after Tax 13.74 14.22 (3.38) investments leading to increased branches in Punjab in the first year year. Mounting non-performing providing world-class banking M&A activities. and the total number of branches assets continue to remain as an services to the local rural Year ended Year ended shall increase to 76 by the March Appropriations Financial Year 2015–16 saw India area of concern. The good thing community at low cost. 3, 2017. Thereafter the Bank plans March 31, 2016 March 31, 2015 emerge as a bright spark even as is the future expectations of Transfer to Statutory Reserve 3.43 3.55 The Board is elated to share with to expand to the neighbouring advanced and emerging economies economic recovery gives glimpse you that The Reserve Bank of India states of Haryana, Himachal Transfer to other Reserves 0.09 1.38 grappled with uncertainty and slower of hope to the banking industry for Pradesh, Rajasthan, Uttarakhand Depreciation Charge has granted permission to Capital - 0.25 growth. Economic growth in India business revival and improvement of earlier years Local Area Bank Limited to convert and Union Territory of Delhi. peaked in the second quarter of the in asset quality. into Capital Small Finance Bank The Bank has partnered in the Proposed Dividend 3.00 2.76 fiscal at 8.2% (under new series) Now, coming to our land, Punjab, Limited and thereby Banking growth and development of its Corporate Dividend Tax 0.61 0.57 but remained moderate in the third the land of unlimited possibilities License no. MUM : 116 dated various stakeholders, which has and fourth quarter at around 7.5%. Leaving balance where agriculture, small and March 4, 2016 was issued to in turn made the Bank post record to be carried forward 6.61 5.71 Cyclical macro parameters like to the next year medium scale industry and Capital Small Finance Bank performance in every sphere. inflation, current account deficit entrepreneurship is blossoming. Limited. Accordingly the Capital The year has ended at a positive have improved during the year due and a progressive note for all of Year ended Year ended Your bank, is putting in its share Small Finance Bank rolled out its Ratio Analysis to domestic as well as external March 31, 2016 March 31, 2015 in the fast paced economic operations on April 24, 2016 as our stakeholders with a pickup in factors. The Indian economy is development of the state of Punjab. the maiden Small Finance Bank the investment climate and our Credit Deposit Ratio 63.30% 61.67% in the midst of significant structural Punjab has witnessed fast track of the country. In fact we take pride bank will make the most of all Business per Employee* 4.61 4.30 change and is expected to embark economic development and that it was the historic day for the the opportunities in hand. on a sustained economic growth Return on Equity (pre-tax) 19.47% 24.60% structural shift over the past half banking sector in India as it would cycle. According to World Bank, Capital Adequacy Ratio 17.20% 15.22% century. Punjab was a state known be reckoned as a day when Small India is set to be the world's fastest Operating Performance primarily for its agriculture, Finance Banks were introduced in Non-Performing Assets(Net)* 5.13 1.19 growing major economy in the livestock, forestry, and less for the banking system. The new The Financial year 2015-16 has Paid up Capital* 23.02 17.27 Financial Year 2015–16 at 7.5% industries, minerals, tourism. journey of the bank could been bad for the banking sector. and gradually move up to 8% in Net Worth* 114.84 89.51 The demographics are changing accelerate the growth of the Slow growth of loan and an the next two financial years Book Value Per Share (`) 49.89 51.85 and changing for the good. business of the bank in many increasing pile of non-performing The growth in the Indian banking There is a growing middle class dimensions. Conversion to small assets became a matter of concern Earnings Per Share (`) 6.70 7.23** sector, however remained under with regular monthly income finance bank has removed the throughout the sector. However (*` in crores) pressure in FY15. Credit offtake besides agriculture income. Punjab geographical barrier for expansion. your bank has showed a healthy **Restated EPS

10 | Annual Report 2015-16 Annual Report 2015-16 | 11 No. of Branches Capital Adequacy Ratio (CAR) agreements for different segments of dividend distribution and higher Direct Agriculture Advances under of capital markets such as equity capital appreciation by retaining its CAPITAL KISAN CREDIT CARD Year ended Year ended To enhance the Capital Adequacy Particulars shares (including convertibles), adequate quantum of profits to Scheme. The scheme is customer March 31, 2016 March 31, 2015 Ratio, the Bank during the financial non-convertible debt securities, etc. meet future expansion plans. A sum friendly and has given impetus to year 2015-16 issued Upper Tier II Rural 22 17 and disclosure norms in relation of `343.48 lakhs out of the profits the flow of credit to agriculturists. Basel - I compliant Bonds 2015-16 thereto, thereby ensuring better has been transferred to statutory This scheme has been largely Semi Urban 19 15 in the nature of debenture of face enforceability. Your Bank has duly reserves, besides making provisions instrumental in upliftment of credit value `1.00 lakh each, to the Urban 4 4 adopted these regulations and all against standard assets as per availability in rural areas under the extent of `25.00 crores on March the required compliances have norms of the Reserve Bank of India. jurisdiction of our bank. Advances Metropolitan 2 2 30, 2016, which are listed in the made. Keeping in view the twin objectives to Weaker Sections also continue Bombay Stock Exchange. During to strengthen our capital base and to receive special priority. Total 47 38 the year, the Bank issued Lower reward the shareholders, the The advances made to weaker Tier II Subordinated Debt Bonds 1. Total Deposits of the Bank 8. Net Worth of the bank has Great Place to Work directors propose to plough back section including small and in the nature of debentures of face increased from `1506.78 increased to `114.84 crores 78.19% of the profit and have marginal farmers, scheduled castes, value of `1,00,000/- each to the Capital Local Area Bank has been crores as on March 31, 2015 as on March 31, 2016 as recommended a dividend of 16% etc. stood at `144.71 crores as on extent of `12.00 Crores. ranked no 1 in Banking Sector to `1814.13 crores as on against `89.51 crores as on amongst India’s 100 Best for the year 2015-16 i.e `1.60 per March 31, 2016. The advances to March 31, 2016 resulting March 31, 2015. Companies to work for 2015 by share on prorata basis. weaker sections stood at 15.59% of in a growth of 20.40%. Adjusted Net Bank Credit of previous 9. Reserves & Surplus increased to Rights Issue ‘Great Place to Work institute’ in year i.e. March 31, 2015 as against 2. Total Advances (gross) `91.82 crores as on March 31, India. In 2015 it was the largest To further strengthen the Capital Advance to Priority Sector and the regulatory benchmark of 10%. increased to `1148.40 crores 2016 against `72.25 crores as study in the country on workplace base and enhance Capital Weaker Section as on March 31, 2016 from culture, attracting participation from The Bank has initiated number of on March 31, 2015. Adequacy, the Bank during the `929.30 crores as on March over 700 organisations spanning The basic model of the Bank has steps to increase lending to Priority The Bank values its customer financial year 2015-16 came out 31, 2015, showing a growth over 20 industries. Great Place to been built around catering to the Sector/Weaker Sections, including satisfaction and we base our every with a Rights Issue of 57,54,922 of 23.58%. Work is a global institute with its financial needs of its clientele in the identifying potential centers for endeavor around it. The Bank has Equity Shares of `10 each for cash focused lending, imparting training 3. Total business of the Bank has Headquarters at San Francisco, best possible way with continuous been continuously striving to at a price of `30 per equity share increased to `2962.53 crores USA and has presence in more focus on facilitating Priority Sector to officers on rural lending, provide world class banking (including share premium of `20 as on March 31, 2016 as than 45 countries across globe. Advances and to meet the banking liberalised credit norms and services under single roof at low per equity share) aggregating to against `2436.18 crores as This Institute has covered more than needs of the weaker sections of the softening interest rates. cost since day one. Envisioned to `17,26,47,660.00 to the members on March 31, 2015, resulting 25 years of research, recognising society. The Bank has always been The Bank has completed 100% establish long lasting relationship of the Bank on Rights Basis. The in a growth of 21.61%. and building great work places striving for adequacy and financial inclusion in the adopted with the local communities, the equity shares were offered to the worldwide and conducts the world’s genuineness of the facilities 129 villages and 50 municipal 4. Total Gross revenue has Bank focuses towards personalized existing shareholders on rights basis largest and most reputed study of provided in the major thrust areas, wards, covering population of increased to `202.33 crores as banking and strives to create an in the ratio of one equity share for workplace excellence and people namely Priority Sector and Weaker 2,64,323 and 50,282 households. on March 31, 2016 as against innovative and responsive every three equity shares held. management practices. The Indian Sections. Priority sector advances The Bank has submitted the `171.99 crores as on March approach in its area of operation With the infusion of additional 31, 2015, resulting in a growth branch of this institute started increased to `755.99 crores as on branch-wise progress report to the with an ultimate objective to further equity, the Bank has surpassed of 17.64%. working about 12 years ago. Every March 31, 2016 as against respective Lead District Managers. financial inclusion in its area of the benchmark net worth of `100 year, they conduct a research of `515.88 crores as on March The Bank has opened 57,608 5. Net Interest income has operation since inception. crores stipulated by the Reserve more than 600–700 organisations 31, 2015, registering a growth of number of ‘No Frill’ accounts up increased to `62.68 crores as Our business model has been Bank of India vide guidelines dated working in India. 46.54%. The Priority Sector to March 31, 2016 under financial on March 31, 2016 as against designed such, that it enhances November 27, 2014 for Small Advances stood at 81.28% of the inclusion of those households that `54.62 crores as on March our performance and backs us up Finance Banks. Adjusted Net Bank Credit of 31, 2015, resulting in a growth did not have any access to in tough times. It has been set up The Paid up Capital of the Bank as Dividend of 14.76%. previous year i.e. March 31, 2015 banks/post offices. and strengthened over the years on March 31, 2016 was `2301.99 The year gone by has been and are above the 40% benchmark 6. Net Profit decreased to `13.74 with the faith and trust of local lacs. The Capital Adequacy of the The promoters with local monumental in several respects. set by the Reserve Bank of India. crores as on March 31, 2016 communities. Bank as on March 31, 2016 was background clearly, understood The Bank has generational The total credit to agriculture has as against `14.22 crores as on 17.20%. Securities and Exchange the problems faced by the rural The performance of the Bank is opportunity to expand in newer increased to `460.94 crores as March 31, 2015, resulting in a Board of India (SEBI) on September population to avail banking characterized by strong brand geographies and reap the benefits on March 31, 2016 as against decline of 3.38%. 2, 2015 issued the SEBI (Listing services. From day one, Capital equity, well diversified loan of its brand equity. The years `344.94 crores as on March 31, Obligations and Disclosure Local Area Bank, now converted to 7. Fixed Assets (Net) of the Bank portfolio, customer delight, efficient of hard efforts have provided this 2015 showing a growth of 33.63%, Requirements) Regulations, 2015 Capital Small Finance Bank w.e.f. increased to `3642.50 lacs and effective risk management golden opportunity to the Bank. which stood at 49.56% of the (‘Listing Regulations’) with the aim April 24, 2016, introduced state- as on March 31, 2016 as with a mission of bringing modern The Bank constantly endeavors Adjusted Net Bank Credit of against `3254.13 lacs as on to consolidate and streamline the of-the-art branches in rural areas banking services at low cost to the to share the growth of the bank previous year i.e. March 31, 2015. March 31, 2015. provisions of existing listing with 7 - Day Branch Banking and rural areas. with the shareholders in the form The Bank has made majority of its

12 | Annual Report 2015-16 Annual Report 2015-16 | 13 No. of Branches Capital Adequacy Ratio (CAR) agreements for different segments of dividend distribution and higher Direct Agriculture Advances under of capital markets such as equity capital appreciation by retaining its CAPITAL KISAN CREDIT CARD Year ended Year ended To enhance the Capital Adequacy Particulars shares (including convertibles), adequate quantum of profits to Scheme. The scheme is customer March 31, 2016 March 31, 2015 Ratio, the Bank during the financial non-convertible debt securities, etc. meet future expansion plans. A sum friendly and has given impetus to year 2015-16 issued Upper Tier II Rural 22 17 and disclosure norms in relation of `343.48 lakhs out of the profits the flow of credit to agriculturists. Basel - I compliant Bonds 2015-16 thereto, thereby ensuring better has been transferred to statutory This scheme has been largely Semi Urban 19 15 in the nature of debenture of face enforceability. Your Bank has duly reserves, besides making provisions instrumental in upliftment of credit value `1.00 lakh each, to the Urban 4 4 adopted these regulations and all against standard assets as per availability in rural areas under the extent of `25.00 crores on March the required compliances have norms of the Reserve Bank of India. jurisdiction of our bank. Advances Metropolitan 2 2 30, 2016, which are listed in the made. Keeping in view the twin objectives to Weaker Sections also continue Bombay Stock Exchange. During to strengthen our capital base and to receive special priority. Total 47 38 the year, the Bank issued Lower reward the shareholders, the The advances made to weaker Tier II Subordinated Debt Bonds 1. Total Deposits of the Bank 8. Net Worth of the bank has Great Place to Work directors propose to plough back section including small and in the nature of debentures of face increased from `1506.78 increased to `114.84 crores 78.19% of the profit and have marginal farmers, scheduled castes, value of `1,00,000/- each to the Capital Local Area Bank has been crores as on March 31, 2015 as on March 31, 2016 as recommended a dividend of 16% etc. stood at `144.71 crores as on extent of `12.00 Crores. ranked no 1 in Banking Sector to `1814.13 crores as on against `89.51 crores as on amongst India’s 100 Best for the year 2015-16 i.e `1.60 per March 31, 2016. The advances to March 31, 2016 resulting March 31, 2015. Companies to work for 2015 by share on prorata basis. weaker sections stood at 15.59% of in a growth of 20.40%. Adjusted Net Bank Credit of previous 9. Reserves & Surplus increased to Rights Issue ‘Great Place to Work institute’ in year i.e. March 31, 2015 as against 2. Total Advances (gross) `91.82 crores as on March 31, India. In 2015 it was the largest To further strengthen the Capital Advance to Priority Sector and the regulatory benchmark of 10%. increased to `1148.40 crores 2016 against `72.25 crores as study in the country on workplace base and enhance Capital Weaker Section as on March 31, 2016 from culture, attracting participation from The Bank has initiated number of on March 31, 2015. Adequacy, the Bank during the `929.30 crores as on March over 700 organisations spanning The basic model of the Bank has steps to increase lending to Priority The Bank values its customer financial year 2015-16 came out 31, 2015, showing a growth over 20 industries. Great Place to been built around catering to the Sector/Weaker Sections, including satisfaction and we base our every with a Rights Issue of 57,54,922 of 23.58%. Work is a global institute with its financial needs of its clientele in the identifying potential centers for endeavor around it. The Bank has Equity Shares of `10 each for cash focused lending, imparting training 3. Total business of the Bank has Headquarters at San Francisco, best possible way with continuous been continuously striving to at a price of `30 per equity share increased to `2962.53 crores USA and has presence in more focus on facilitating Priority Sector to officers on rural lending, provide world class banking (including share premium of `20 as on March 31, 2016 as than 45 countries across globe. Advances and to meet the banking liberalised credit norms and services under single roof at low per equity share) aggregating to against `2436.18 crores as This Institute has covered more than needs of the weaker sections of the softening interest rates. cost since day one. Envisioned to `17,26,47,660.00 to the members on March 31, 2015, resulting 25 years of research, recognising society. The Bank has always been The Bank has completed 100% establish long lasting relationship of the Bank on Rights Basis. The in a growth of 21.61%. and building great work places striving for adequacy and financial inclusion in the adopted with the local communities, the equity shares were offered to the worldwide and conducts the world’s genuineness of the facilities 129 villages and 50 municipal 4. Total Gross revenue has Bank focuses towards personalized existing shareholders on rights basis largest and most reputed study of provided in the major thrust areas, wards, covering population of increased to `202.33 crores as banking and strives to create an in the ratio of one equity share for workplace excellence and people namely Priority Sector and Weaker 2,64,323 and 50,282 households. on March 31, 2016 as against innovative and responsive every three equity shares held. management practices. The Indian Sections. Priority sector advances The Bank has submitted the `171.99 crores as on March approach in its area of operation With the infusion of additional 31, 2015, resulting in a growth branch of this institute started increased to `755.99 crores as on branch-wise progress report to the with an ultimate objective to further equity, the Bank has surpassed of 17.64%. working about 12 years ago. Every March 31, 2016 as against respective Lead District Managers. financial inclusion in its area of the benchmark net worth of `100 year, they conduct a research of `515.88 crores as on March The Bank has opened 57,608 5. Net Interest income has operation since inception. crores stipulated by the Reserve more than 600–700 organisations 31, 2015, registering a growth of number of ‘No Frill’ accounts up increased to `62.68 crores as Our business model has been Bank of India vide guidelines dated working in India. 46.54%. The Priority Sector to March 31, 2016 under financial on March 31, 2016 as against designed such, that it enhances November 27, 2014 for Small Advances stood at 81.28% of the inclusion of those households that `54.62 crores as on March our performance and backs us up Finance Banks. Adjusted Net Bank Credit of 31, 2015, resulting in a growth did not have any access to in tough times. It has been set up The Paid up Capital of the Bank as Dividend of 14.76%. previous year i.e. March 31, 2015 banks/post offices. and strengthened over the years on March 31, 2016 was `2301.99 The year gone by has been and are above the 40% benchmark 6. Net Profit decreased to `13.74 with the faith and trust of local lacs. The Capital Adequacy of the The promoters with local monumental in several respects. set by the Reserve Bank of India. crores as on March 31, 2016 communities. Bank as on March 31, 2016 was background clearly, understood The Bank has generational The total credit to agriculture has as against `14.22 crores as on 17.20%. Securities and Exchange the problems faced by the rural The performance of the Bank is opportunity to expand in newer increased to `460.94 crores as March 31, 2015, resulting in a Board of India (SEBI) on September population to avail banking characterized by strong brand geographies and reap the benefits on March 31, 2016 as against decline of 3.38%. 2, 2015 issued the SEBI (Listing services. From day one, Capital equity, well diversified loan of its brand equity. The years `344.94 crores as on March 31, Obligations and Disclosure Local Area Bank, now converted to 7. Fixed Assets (Net) of the Bank portfolio, customer delight, efficient of hard efforts have provided this 2015 showing a growth of 33.63%, Requirements) Regulations, 2015 Capital Small Finance Bank w.e.f. increased to `3642.50 lacs and effective risk management golden opportunity to the Bank. which stood at 49.56% of the (‘Listing Regulations’) with the aim April 24, 2016, introduced state- as on March 31, 2016 as with a mission of bringing modern The Bank constantly endeavors Adjusted Net Bank Credit of against `3254.13 lacs as on to consolidate and streamline the of-the-art branches in rural areas banking services at low cost to the to share the growth of the bank previous year i.e. March 31, 2015. March 31, 2015. provisions of existing listing with 7 - Day Branch Banking and rural areas. with the shareholders in the form The Bank has made majority of its

12 | Annual Report 2015-16 Annual Report 2015-16 | 13 Securities are being carried out Advances Profile after taking safety and liquidity into Deposits Profile consideration. Total investments of the Bank stood at `585.80 crores 14000000

as on March 31, 2016 comprising 11762301 12000000 Kissan Credit Cards `573.80 crores in sovereign 11% 9685109 Indirect Agri Loans Government Securities, `4.00 10000000 SSI 8% crores in debt based instruments 7845579 8000000 Retail Traders 39% and `8 crores in liquid schemes of SRWT 5910090 6000000 5914083 mutual funds with a maturity mix of 4798314 5038154 9% Housing

Amount (in '000) 4506118 securities consistent with the risk 3614627 Other priority Sector 4000000 3187320 Personal Loans perception and Investment Policy 2000000 Auto Loans guidelines of the bank. 464954 1% 210996 253086 289692 344540 Trading Advances 1% 7% 13% 0 LAP 3% 2011-12 2012-13 2013-14 2014-15 2015-16 2% 1% Others Loans Profitability

In the economic scenario where the Current Saving Term banking sector is facing multifarious challenges with a subdued growth, uninterrupted extended banking Investments However with the conversion to volume through delivery channels. the Bank. The bank has made all heightening asset quality concerns Capital Small Finance Bank, the The strategy of the bank is the efforts to provide maximum hours from 10:00 am to 5:00 pm The Treasury Group, under the amidst weakening corporate business of the bank is expected empowered by competitive skills, customer satisfaction and quick from Monday to Saturday and from supervision and guidance of balance sheets, your bank has been to grow manifold, therefore the valuable business principles, services. The implementation of 10:00 am to 2:00 pm on Sunday. Investment Committee, is looking able to maintain a reasonable net expected profits of the bank in commitments and economic wisdom. customer services measures is This helps rural masses to avail after the Assets and Liabilities, profit amounting to `13.74 crores. FY 2016-17 look very promising. monitored during the visit of the banking services conveniently and compliance of regulatory reserve However the bank has incurred a The opening of new branches will executives to branches and also an efficiently. requirements, market and liquidity lot of operational expenses in the boost the profitability and growth Great Customer Service internal committee has been set up The Bank has also provided credit risks. The core team strictly adheres current year due to the transitional with diversified portfolio and will at branch level for ensuring high linkage for micro lending under to the established prudent norms The Bank strives to provide great phase from a Local Area Bank to cater to larger base of stake holders. standards of customer services Joint Liability Group Model through for building suitable trading customer services for customer Small Finance Bank. Also the bank rendered by the bank. The Standing Business Correspondent. As on portfolio to make best of the delight. Your bank strives to has made high provisioning for Committee on Customer Service available opportunities. The continue to provide best-in-class March 31, 2016, total 1471 NPA’s in the FY 2015-16. Due to Our Strategy service across all its category of met 4 times during the financial Groups consisting 7355 members objective of the Treasury Desk is to these contributory factors, the net With the vision to be the most customers which will help the Bank year 2015-16. were formed. The total constantly watch global and local profit of the bank has declined innovative and one of its kind in in protecting and growing its brand disbursement of `1707.26 lacs was developments, take proactive steps marginally as compared to the last India, the Bank from its beginning equity. The immense opportunities made to the beneficiaries under to make most of all the financial year. Also the decrease in Complaint Database has been implementing best of its lie ahead with commensurate micro lending and total outstanding opportunities across asset classes the Net Profit of the bank could be No. of complaints pending at the and manage all the uncertainties strategies for serving the plethora responsibility for living up to our 1 as on March 31, 2016 was attributed to the reduction in the beginning of the year of entrepreneurs, individuals as well vision for delivering world class `511.70 lacs. and adverse moves prudently. yield on advances which are not in as businesses. The Bank has made financial services at the door steps No. of complaints received during Investments in SLR and Non- SLR consonance with the yield on funds. 4 possible to bring world-class of less catered rural masses as well the year

financial services at the doorsteps as expanding urban clientele. No. of complaints redressed during 5 of unprivileged rural masses of Extending the highest quality in the year IncomeProfit Analysis Profile India. Technology savvy, state-of- service to its customers attracts top No. of complaints pending at the Nil 2500000 the-art branch network, one-stop priority in our scheme of things. end of year 2023262 2000000 financial-hub coupled with personal A Standing Committee on 1719878 touch has been one of our Customer Service of the board has 1500000 1407296 1193871 strongest strategic tools to grow been duly constituted which reviews Statutory Disclosures 982441 and optimize returns in the the level of customer service in the 1000000 1. Compliances as per The 626792 546150 competitive environment. The Bank Bank including customer

Amount (in '000) 462441 Reserve Bank of India and 500000 397991 351837 aspires to further enhance its complaints and the nature of their the Government of India profitability by adding new fund resolution and also ensures 0 We’ve made all statutory 2011-12 2012-13 2013-14 2014-15 2015-16 based and non-fund based implementation of directives compliances with The Reserve products and reducing transaction received from RBI with respect to Bank of India and the Gross Income Net Interest income costs by increasing transaction rendering services to customers of

14 | Annual Report 2015-16 Annual Report 2015-16 | 15 Securities are being carried out Advances Profile after taking safety and liquidity into Deposits Profile consideration. Total investments of the Bank stood at `585.80 crores 14000000 as on March 31, 2016 comprising 11762301 12000000 Kissan Credit Cards `573.80 crores in sovereign 11% 9685109 Indirect Agri Loans Government Securities, `4.00 10000000 SSI 8% crores in debt based instruments 7845579 8000000 Retail Traders 39% and `8 crores in liquid schemes of SRWT 5910090 6000000 5914083 mutual funds with a maturity mix of 4798314 5038154 9% Housing

14 | Annual Report 2015-16 Annual Report 2015-16 | 15 Government of India including 5. Extract of the Annual Return regulators or courts or tribunals financial products and maintaining capital adequacy sections of the Board Report and maintenance of Cash Reserve The Extract of the Annual Return impacting the going concern increased level of competition and sufficient liquidity. Structured also under Management Ratio (CRR) and Statutory in Form No. MGT – 9 shall status of the bank. has necessitated the need for an Liquidity and Interest Rate Discussion and Analysis. Liquidity Ratio (SLR). form part of the Board’s report. effective and structured risk Sensitivity of the bank is being 9. Transfer to reserves in 14.Name of the companies management practice in prepared on monthly basis in 2. Information as per Rule 5 6. Disclosure under Section terms of Section 134(3)(j) of which has become ceased to financial institutions. The Bank line with the RBI guidelines. (2) of Companies 134 (3)(m) of the the Companies Act, 2013 be Subsidiaries / Associates has adopted an integrated (Appointment and Companies Act, 2013 read For the financial year ended 11.Independent Directors or Joint Ventures during the approach for the management Remuneration of with Rule 8(3) of the March 31, 2016, the Bank has Declaration in terms of year in terms of Sec of risk. Effective internal policies Managerial Personnel) Companies (Accounts) transferred `343.48 lacs to the Section 134(3)(d); Sec 134(3)(q) read with Rule are developed in tune with the Rules, 2014 Rules, 2014 Statutory Reserve Fund 149(6) of Companies Act 8(5)(iv) of Ch IX – Company business requirements and best There are no employees in the The provisions of Section 134 (maintained under section 17(1) 2013 (Account) Rules, 2014 practices. Capital Bank has Bank drawing salary of `60.00 (3)(m) of the Companies Act, of RBI Act, 1934). The Bank has The Bank has obtained The Bank does not have any formulated ‘Risk Management lacs per annum or `5.00 lac 2013 read with Rule 8(3) of the transferred `8.71 lacs to declaration of Independence Subsidiary, Joint venture or Policy’ and an Internal Capital per month or more; and none Companies (Accounts) Rules, Special Reserve maintained from Mr. Sukhpal Singh Gill, Associate Company. Adequacy Assessment Policy of the employees are relatives 2014 regarding conservation under section 36 (1) (viii) of Mr. Ranbir Singh, Mr. Madan (ICAAP) for identifying and 15.Disclosure Under The Sexual of Directors. Moreover, none of of energy and technology Income Tax Act, 1961. Gopal Sharma, Mrs. Harmesh measuring various operational, Harassment of Women at the employees of the company absorption is given in the Khanna and Mr. Rakesh Soni 10.Asset-Liability and Risk credit and market risks. Workplace (Prevention, other than Managing Director Management Discussion and and they meet the criteria of Management pursuant to Operational risks are managed Prohibition and Redresseal) hold by himself or along with Analysis attached to this report. independence as laid down section 134 (3)(n) of through comprehensive systems Act, 2013 in terms of The his spouse or dependent There was no foreign exchange under Section 149(6) of the Companies Act, 2013 of internal control, establishing Sexual Harassment of children two percent or more earnings inflow or outflow Companies Act, 2013. The Bank has formulated systems and procedures to Women at the workplace equity shares of the company. during the year under review. and adopted a robust risk monitor transactions, 12.Company’s Policy on (Prevention, Prohibition & 3. Transfer of unclaimed 7. Disclosures Under Section management framework. maintaining key back-up Directors’ Appointment & Redresseal) dividend to Investor 134(3)(l) of The Companies Whilst the Board is responsible procedures and undertaking Remuneration including Act, 2013 Education and Protection Act, 2013 for framing, implementing and criteria for determining regular contingency planning. The Bank has constituted an internal fund The Bank has converted itself monitoring the said risk Qualifications, Attributes, We constantly strive to enhance compliant committee for redressal of In terms of Section 125 of the from Capital Local Area Bank management framework, it has Independence etc. in terms the risk management complaints for Sexual Harassment of Companies Act, 2013, any Limited to Capital Small delegated its powers relating to of Sec 134(3)(e); Sec 178(1) capabilities in accordance with women at the workplace. There is unclaimed or unpaid dividend Finance Bank Limited. The monitoring and reviewing of risk & (3) of Companies Act 2013 the emerging regulatory no pending complaint under the relating to the financial year Reserve Bank had granted associated with the business of The Nomination and guidelines and the broad risk said act. 2007-08 is due for remittance Banking License no. MUM : the Bank to the Risk management principles. The Remuneration Committee of the on October 15, 2015 to the 116 dated March 4, 2016 Management Committee. Bank Bank reviews the risk Bank has put in place ‘Fit and Investor Education and to Capital Small Finance Bank. follows an integrated approach management system and the Proper’ criteria policy for Protection Fund established The Bank as Capital Small to managing risks and the progress made in implementing considering the appointment Adequacy of Internal Financial by the Central Government. Finance Bank started its processes are embedded in the the RBI guidelines on risk and remuneration of Directors Controls Related To Financial The Bank has duly transferred operation on April 24, 2016. fundamental business model. management, on a quarterly and Key Managerial personnel Statements the requisite amount to Investor Except this significant change The Risk Management basis. The Asset Liability as per the guidelines issued by The Board has inter alia reviewed Education and Protection Fund or as disclosed elsewhere in Landscape in the Bank covers Management Committee(ALCO), Reserve Bank of India. The policy the adequacy and effectiveness of as on March 31, 2016. this report, there have been the stages of identifying, consisting of the Bank’s senior contains detailed procedures for the Bank’s internal financial no material changes and assessing, measuring, management and the Managing determining qualification, 4. Explanation or comments controls relating to its financial commitments which can affect managing, controlling and Director, is responsible for positive attributes, due diligence on qualifications, statements which provide the financial position of the reporting risk concerns across ensuring adherence to the limits mechanism and reference reservations or adverse reasonable assurance regarding company occurred between all the risk classes viz. Credit, set by the Board as well as for checks for appointment of remarks or disclaimers the reliability of financial reporting the end of the financial year Market and Operational Risks. deciding the business strategy Directors and Key Managerial made by the auditors and and preparation of financial of the company and date of The Risk Management Policies of the bank (on the assets and Personnel. the practicing company statements. These controls and this report. adopted and reviewed liabilities sides) in line with the secretary in their reports 13.State of the Company’s processes are driven through periodically articulate, codify bank’s budget and decided risk There were no qualifications, 8. Details of significant & Affairs of the company in various policies and procedures the strategy, structure, processes management objectives. The reservations or adverse remarks material orders passed by terms of Section 134(3)(I) of which are reviewed periodically. and systems to manage bank committee actively manages made by the Secretarial the regulators or courts or the Companies Act 2013 wide risks. Expanding business and controls the structure of The Board has discussed with the Auditors M/s. B Mathur & tribunals The state of affairs of the arenas, deregulation and assets and liabilities and interest Management of the Bank the major Company Secretaries, New There are no significant and/or company in details has been globalization of financial rate sensitivities with a view financial risk exposures and the Delhi in their reports. material orders passed by the given separately in different activities, emergence of new of optimizing profits besides

16 | Annual Report 2015-16 Annual Report 2015-16 | 17 Government of India including 5. Extract of the Annual Return regulators or courts or tribunals financial products and maintaining capital adequacy sections of the Board Report and maintenance of Cash Reserve The Extract of the Annual Return impacting the going concern increased level of competition and sufficient liquidity. Structured also under Management Ratio (CRR) and Statutory in Form No. MGT – 9 shall status of the bank. has necessitated the need for an Liquidity and Interest Rate Discussion and Analysis. Liquidity Ratio (SLR). form part of the Board’s report. effective and structured risk Sensitivity of the bank is being 9. Transfer to reserves in 14.Name of the companies management practice in prepared on monthly basis in 2. Information as per Rule 5 6. Disclosure under Section terms of Section 134(3)(j) of which has become ceased to financial institutions. The Bank line with the RBI guidelines. (2) of Companies 134 (3)(m) of the the Companies Act, 2013 be Subsidiaries / Associates has adopted an integrated (Appointment and Companies Act, 2013 read For the financial year ended 11.Independent Directors or Joint Ventures during the approach for the management Remuneration of with Rule 8(3) of the March 31, 2016, the Bank has Declaration in terms of year in terms of Sec of risk. Effective internal policies Managerial Personnel) Companies (Accounts) transferred `343.48 lacs to the Section 134(3)(d); Sec 134(3)(q) read with Rule are developed in tune with the Rules, 2014 Rules, 2014 Statutory Reserve Fund 149(6) of Companies Act 8(5)(iv) of Ch IX – Company business requirements and best There are no employees in the The provisions of Section 134 (maintained under section 17(1) 2013 (Account) Rules, 2014 practices. Capital Bank has Bank drawing salary of `60.00 (3)(m) of the Companies Act, of RBI Act, 1934). The Bank has The Bank has obtained The Bank does not have any formulated ‘Risk Management lacs per annum or `5.00 lac 2013 read with Rule 8(3) of the transferred `8.71 lacs to declaration of Independence Subsidiary, Joint venture or Policy’ and an Internal Capital per month or more; and none Companies (Accounts) Rules, Special Reserve maintained from Mr. Sukhpal Singh Gill, Associate Company. Adequacy Assessment Policy of the employees are relatives 2014 regarding conservation under section 36 (1) (viii) of Mr. Ranbir Singh, Mr. Madan (ICAAP) for identifying and 15.Disclosure Under The Sexual of Directors. Moreover, none of of energy and technology Income Tax Act, 1961. Gopal Sharma, Mrs. Harmesh measuring various operational, Harassment of Women at the employees of the company absorption is given in the Khanna and Mr. Rakesh Soni 10.Asset-Liability and Risk credit and market risks. Workplace (Prevention, other than Managing Director Management Discussion and and they meet the criteria of Management pursuant to Operational risks are managed Prohibition and Redresseal) hold by himself or along with Analysis attached to this report. independence as laid down section 134 (3)(n) of through comprehensive systems Act, 2013 in terms of The his spouse or dependent There was no foreign exchange under Section 149(6) of the Companies Act, 2013 of internal control, establishing Sexual Harassment of children two percent or more earnings inflow or outflow Companies Act, 2013. The Bank has formulated systems and procedures to Women at the workplace equity shares of the company. during the year under review. and adopted a robust risk monitor transactions, 12.Company’s Policy on (Prevention, Prohibition & 3. Transfer of unclaimed 7. Disclosures Under Section management framework. maintaining key back-up Directors’ Appointment & Redresseal) dividend to Investor 134(3)(l) of The Companies Whilst the Board is responsible procedures and undertaking Remuneration including Act, 2013 Education and Protection Act, 2013 for framing, implementing and criteria for determining regular contingency planning. The Bank has constituted an internal fund The Bank has converted itself monitoring the said risk Qualifications, Attributes, We constantly strive to enhance compliant committee for redressal of In terms of Section 125 of the from Capital Local Area Bank management framework, it has Independence etc. in terms the risk management complaints for Sexual Harassment of Companies Act, 2013, any Limited to Capital Small delegated its powers relating to of Sec 134(3)(e); Sec 178(1) capabilities in accordance with women at the workplace. There is unclaimed or unpaid dividend Finance Bank Limited. The monitoring and reviewing of risk & (3) of Companies Act 2013 the emerging regulatory no pending complaint under the relating to the financial year Reserve Bank had granted associated with the business of The Nomination and guidelines and the broad risk said act. 2007-08 is due for remittance Banking License no. MUM : the Bank to the Risk management principles. The Remuneration Committee of the on October 15, 2015 to the 116 dated March 4, 2016 Management Committee. Bank Bank reviews the risk Bank has put in place ‘Fit and Investor Education and to Capital Small Finance Bank. follows an integrated approach management system and the Proper’ criteria policy for Protection Fund established The Bank as Capital Small to managing risks and the progress made in implementing considering the appointment Adequacy of Internal Financial by the Central Government. Finance Bank started its processes are embedded in the the RBI guidelines on risk and remuneration of Directors Controls Related To Financial The Bank has duly transferred operation on April 24, 2016. fundamental business model. management, on a quarterly and Key Managerial personnel Statements the requisite amount to Investor Except this significant change The Risk Management basis. The Asset Liability as per the guidelines issued by The Board has inter alia reviewed Education and Protection Fund or as disclosed elsewhere in Landscape in the Bank covers Management Committee(ALCO), Reserve Bank of India. The policy the adequacy and effectiveness of as on March 31, 2016. this report, there have been the stages of identifying, consisting of the Bank’s senior contains detailed procedures for the Bank’s internal financial no material changes and assessing, measuring, management and the Managing determining qualification, 4. Explanation or comments controls relating to its financial commitments which can affect managing, controlling and Director, is responsible for positive attributes, due diligence on qualifications, statements which provide the financial position of the reporting risk concerns across ensuring adherence to the limits mechanism and reference reservations or adverse reasonable assurance regarding company occurred between all the risk classes viz. Credit, set by the Board as well as for checks for appointment of remarks or disclaimers the reliability of financial reporting the end of the financial year Market and Operational Risks. deciding the business strategy Directors and Key Managerial made by the auditors and and preparation of financial of the company and date of The Risk Management Policies of the bank (on the assets and Personnel. the practicing company statements. These controls and this report. adopted and reviewed liabilities sides) in line with the secretary in their reports 13.State of the Company’s processes are driven through periodically articulate, codify bank’s budget and decided risk There were no qualifications, 8. Details of significant & Affairs of the company in various policies and procedures the strategy, structure, processes management objectives. The reservations or adverse remarks material orders passed by terms of Section 134(3)(I) of which are reviewed periodically. and systems to manage bank committee actively manages made by the Secretarial the regulators or courts or the Companies Act 2013 wide risks. Expanding business and controls the structure of The Board has discussed with the Auditors M/s. B Mathur & tribunals The state of affairs of the arenas, deregulation and assets and liabilities and interest Management of the Bank the major Company Secretaries, New There are no significant and/or company in details has been globalization of financial rate sensitivities with a view financial risk exposures and the Delhi in their reports. material orders passed by the given separately in different activities, emergence of new of optimizing profits besides

16 | Annual Report 2015-16 Annual Report 2015-16 | 17 steps taken by it to monitor and the approval for appointment of Corporate Governance • The Board is professional in of India in addition to other reports As on March 31, 2016, control such exposures. The Bank Mr. Inder Krishan Sardana (DIN character with a strong on the working of our bank. The committee had three members The Bank puts utmost thrust on best has a mechanism of testing the 398202) as Part-time Chairman of commitment to shareholder Board is responsible for approving consisting of Mr. Madan Gopal corporate governance. Capital controls at regular intervals for their Capital Small Finance Bank Limited value, transparency, the strategic direction, plans and Sharma, Mr. Bhagwant Singh Small Finance Bank continues to design and operating effectiveness for a period of three years w.e.f. accountability, ethical standards priorities of the Bank, monitoring Sangha and Mr. Sukhpal Singh believe in observing the best to ascertain the reliability and April 24, 2016, the date of and regulatory compliances. corporate performance against Gill, which includes two corporate governance practices authenticity of financial information. conversion of Capital Local Area strategic business plans, including members from Risk and benchmarking itself against • The Board’s approach to and Bank Limited to Capital Small overseeing operating results on a Management Committee of the each practice on an ongoing basis. outlook on every aspect of Finance Bank Limited. regular basis to evaluate whether Board. The majority of the The Board of Directors and the governance is propelled by a Directors the business is being properly members of the committee are Management of the Bank believe keenness to further realization managed, overseeing the Bank’s independent non executive The Board of the Bank is duly that a strong system of corporate of the Bank’s vision and Retirement of Directors in Corporate Governance framework. directors. The committee has constituted in accordance with the governance is critically important to mission. Capital Small Finance compliance to section 10(2A) been constituted to review the provisions of Banking Regulation usher in a value-based organization Bank has created robust global (i) of the Banking Regulation structure, size, composition, Act and Companies Act, 2013. that is socially responsible and banking facilities and services in Act, 1949 Meetings of the Board and diversity of the Board and commercially vibrant. The Bank is rural areas like 7-day banking, Committees of the Board designing of the criteria for Mr. Rakesh Soni and Mrs. Harmesh committed to adhering to the extended and uninterrupted Managing Director & Chief determining the qualifications, Khanna were appointed as highest standards of corporate working hours, anywhere and The Board of Directors of the Bank Executive Officer (MD & CEO) positive attributes and Directors by the Board of Directors governance through constantly anytime banking, ATMs, mobile is meeting regularly to discuss and independence of the directors. Mr. Sarvjit Singh Samra has been of the Bank in the meeting held on benchmarking itself against global and internet banking, life and decide on various business policies, Also an integral function of the serving as the Managing Director August 22, 2015. best practices. The essence of the general insurance services strategies and other businesses. committee would be to oversee CEO of the Bank since July 21, Mr. Dinesh Gupta, Director and Bank’s Corporate Governance which led to a shift in the The Bank has several committees the framing, review and 2003, with the approval of Reserve Mr. Sham Singh Bains, Director philosophy flows from the financial services at a global which have been established as a implementation of Bank of India (RBI) and the retired on April 21, 2015 in following: level. part of the best Corporate compensation policy of the shareholders, from time to time. Governance practices and are in compliance to Section 10(2A)(ii) • The composition of the Board of We consider it our inherent The Reserve Bank of India on July compliance with the requirements Bank on behalf of the Board. of Banking Regulation Act, 1949. Directors of the Bank is responsibility to disclose timely and 17, 2015 approved the of the relevant provisions of Based on the recommendations governed by the relevant accurate information regarding our re-appointment of Mr. Sarvjit Singh applicable laws and statutes. of the Nomination and provisions of the Companies financials and performance, as well Remuneration Committee, Samra as Managing Director of the Directors Retiring by Rotation Act, 2013, the Rules made as the leadership and governance Bank for a period of three years the Board has approved the In terms of Section 152 of the thereunder and the provisions of of the company. We envisage w.e.f. July 21, 2015 and the The Bank has following Compensation Policy for Companies Act, 2013, the Banking Regulation Act, attaining market leadership in our shareholders in the meeting held on Committees of the Board: Directors, KMP and all other Mr. Bhagwant Singh Sangha being 1949 and as per the guidelines area and many of our branches September 19, 2015 confirmed the employees of the company. longest in the office shall retire at of the Reserve Bank of India. have already become market 1. Management Committee said appointment. The Reserve As part of the policy, the the forthcoming Annual General leaders with respect to advances. 2. Audit Committee Bank of India granted licence no. • The Directors have distinguished company strives to ensure that: Meeting and being eligible for We aim to be a banking industry 3. Credit Sanctioning Committee MUM:116 dated March 4, 2016 to themselves in different walks of a) The level and composition re-appointment, offers himself for 4. Risk Management Committee Capital Small Finance Bank Limited bench mark in value creation and life through experience and 5. Nomination and Remuneration of remuneration is to carry on small finance bank re-appointment. corporate citizenship. We believe expertise. Committee reasonable and sufficient to business in India. The approval for that Corporate Governance • The Bank’s Board has an 6. Securities Transfer Committee attract, retain and motivate appointment of Mr. Sarvjit Singh becomes crucial for banks as they Appointments/Resignations of optimum combination of 7. Special Committee on Frauds directors of the quality Samra as Managing Director and not only accept and deploy large the Key Managerial Personnel executive and non-executive 8. Stakeholders Relationship required to run the company Chief Executive Officer of Capital amount of uncollateralized public directors. The Board presently Committee successfully; Small Finance Bank Limited was Mr. Sarvjit Singh Samra, Managing funds in fiduciary capacity, but also comprises of nine directors 9. Corporate Social Responsibility granted by the Reserve Bank of Director and Chief Executive leverage such funds through credit b) Relationship between including one woman director Committee India on April 21, 2016 on the Officer; Mr. Munish Jain, Chief creation. In view of importance of remuneration and and it provides diverse 10. Investors Grievance Redressal existing terms and conditions. Operating Officer and Company the banking system for financial performance is clear and combination of professionalism, Committee Secretary and Mr. Sahil Vijay, Chief stability, sound corporate meets appropriate knowledge, expertise and 12. Securities Allotment Committee. Financial Officer of the Bank are governance is not only relevant at performance benchmarks; experience as required in the Appointment of Part-time the Key Managerial Personnel as the level of the individual bank, a) Nomination and and Chairman banking business. The Board but is also a critical ingredient at per the provisions of the remuneration Committee c) Remuneration to Directors, has five independent directors the system level. As a part of good The Reserve Bank of India vide Companies Act, 2013. None of The Board of Directors in the KMP and senior constituting more than one-half Corporate Governance practice, letter no. DBR. Appt. No. the Key Managerial Personnel has meeting held on April 25, 2015 management involves a of its total membership strength the Board reviews the various 13207/29.52.001/2015-16 resigned or appointed during the reconstituted the Nomination balance between fixed and and one women director. reports/returns as per the calendar dated April 21, 2016 conveyed year under review. and Remuneration committee. incentive pay reflecting short of reviews set by the Reserve Bank

18 | Annual Report 2015-16 Annual Report 2015-16 | 19 steps taken by it to monitor and the approval for appointment of Corporate Governance • The Board is professional in of India in addition to other reports As on March 31, 2016, control such exposures. The Bank Mr. Inder Krishan Sardana (DIN character with a strong on the working of our bank. The committee had three members The Bank puts utmost thrust on best has a mechanism of testing the 398202) as Part-time Chairman of commitment to shareholder Board is responsible for approving consisting of Mr. Madan Gopal corporate governance. Capital controls at regular intervals for their Capital Small Finance Bank Limited value, transparency, the strategic direction, plans and Sharma, Mr. Bhagwant Singh Small Finance Bank continues to design and operating effectiveness for a period of three years w.e.f. accountability, ethical standards priorities of the Bank, monitoring Sangha and Mr. Sukhpal Singh believe in observing the best to ascertain the reliability and April 24, 2016, the date of and regulatory compliances. corporate performance against Gill, which includes two corporate governance practices authenticity of financial information. conversion of Capital Local Area strategic business plans, including members from Risk and benchmarking itself against • The Board’s approach to and Bank Limited to Capital Small overseeing operating results on a Management Committee of the each practice on an ongoing basis. outlook on every aspect of Finance Bank Limited. regular basis to evaluate whether Board. The majority of the The Board of Directors and the governance is propelled by a Directors the business is being properly members of the committee are Management of the Bank believe keenness to further realization managed, overseeing the Bank’s independent non executive The Board of the Bank is duly that a strong system of corporate of the Bank’s vision and Retirement of Directors in Corporate Governance framework. directors. The committee has constituted in accordance with the governance is critically important to mission. Capital Small Finance compliance to section 10(2A) been constituted to review the provisions of Banking Regulation usher in a value-based organization Bank has created robust global (i) of the Banking Regulation structure, size, composition, Act and Companies Act, 2013. that is socially responsible and banking facilities and services in Act, 1949 Meetings of the Board and diversity of the Board and commercially vibrant. The Bank is rural areas like 7-day banking, Committees of the Board designing of the criteria for Mr. Rakesh Soni and Mrs. Harmesh committed to adhering to the extended and uninterrupted Managing Director & Chief determining the qualifications, Khanna were appointed as highest standards of corporate working hours, anywhere and The Board of Directors of the Bank Executive Officer (MD & CEO) positive attributes and Directors by the Board of Directors governance through constantly anytime banking, ATMs, mobile is meeting regularly to discuss and independence of the directors. Mr. Sarvjit Singh Samra has been of the Bank in the meeting held on benchmarking itself against global and internet banking, life and decide on various business policies, Also an integral function of the serving as the Managing Director August 22, 2015. best practices. The essence of the general insurance services strategies and other businesses. committee would be to oversee CEO of the Bank since July 21, Mr. Dinesh Gupta, Director and Bank’s Corporate Governance which led to a shift in the The Bank has several committees the framing, review and 2003, with the approval of Reserve Mr. Sham Singh Bains, Director philosophy flows from the financial services at a global which have been established as a implementation of Bank of India (RBI) and the retired on April 21, 2015 in following: level. part of the best Corporate compensation policy of the shareholders, from time to time. Governance practices and are in compliance to Section 10(2A)(ii) • The composition of the Board of We consider it our inherent The Reserve Bank of India on July compliance with the requirements Bank on behalf of the Board. of Banking Regulation Act, 1949. Directors of the Bank is responsibility to disclose timely and 17, 2015 approved the of the relevant provisions of Based on the recommendations governed by the relevant accurate information regarding our re-appointment of Mr. Sarvjit Singh applicable laws and statutes. of the Nomination and provisions of the Companies financials and performance, as well Remuneration Committee, Samra as Managing Director of the Directors Retiring by Rotation Act, 2013, the Rules made as the leadership and governance Bank for a period of three years the Board has approved the In terms of Section 152 of the thereunder and the provisions of of the company. We envisage w.e.f. July 21, 2015 and the The Bank has following Compensation Policy for Companies Act, 2013, the Banking Regulation Act, attaining market leadership in our shareholders in the meeting held on Committees of the Board: Directors, KMP and all other Mr. Bhagwant Singh Sangha being 1949 and as per the guidelines area and many of our branches September 19, 2015 confirmed the employees of the company. longest in the office shall retire at of the Reserve Bank of India. have already become market 1. Management Committee said appointment. The Reserve As part of the policy, the the forthcoming Annual General leaders with respect to advances. 2. Audit Committee Bank of India granted licence no. • The Directors have distinguished company strives to ensure that: Meeting and being eligible for We aim to be a banking industry 3. Credit Sanctioning Committee MUM:116 dated March 4, 2016 to themselves in different walks of a) The level and composition re-appointment, offers himself for 4. Risk Management Committee Capital Small Finance Bank Limited bench mark in value creation and life through experience and 5. Nomination and Remuneration of remuneration is to carry on small finance bank re-appointment. corporate citizenship. We believe expertise. Committee reasonable and sufficient to business in India. The approval for that Corporate Governance • The Bank’s Board has an 6. Securities Transfer Committee attract, retain and motivate appointment of Mr. Sarvjit Singh becomes crucial for banks as they Appointments/Resignations of optimum combination of 7. Special Committee on Frauds directors of the quality Samra as Managing Director and not only accept and deploy large the Key Managerial Personnel executive and non-executive 8. Stakeholders Relationship required to run the company Chief Executive Officer of Capital amount of uncollateralized public directors. The Board presently Committee successfully; Small Finance Bank Limited was Mr. Sarvjit Singh Samra, Managing funds in fiduciary capacity, but also comprises of nine directors 9. Corporate Social Responsibility granted by the Reserve Bank of Director and Chief Executive leverage such funds through credit b) Relationship between including one woman director Committee India on April 21, 2016 on the Officer; Mr. Munish Jain, Chief creation. In view of importance of remuneration and and it provides diverse 10. Investors Grievance Redressal existing terms and conditions. Operating Officer and Company the banking system for financial performance is clear and combination of professionalism, Committee Secretary and Mr. Sahil Vijay, Chief stability, sound corporate meets appropriate knowledge, expertise and 12. Securities Allotment Committee. Financial Officer of the Bank are governance is not only relevant at performance benchmarks; experience as required in the Appointment of Part-time the Key Managerial Personnel as the level of the individual bank, a) Nomination and and Chairman banking business. The Board but is also a critical ingredient at per the provisions of the remuneration Committee c) Remuneration to Directors, has five independent directors the system level. As a part of good The Reserve Bank of India vide Companies Act, 2013. None of The Board of Directors in the KMP and senior constituting more than one-half Corporate Governance practice, letter no. DBR. Appt. No. the Key Managerial Personnel has meeting held on April 25, 2015 management involves a of its total membership strength the Board reviews the various 13207/29.52.001/2015-16 resigned or appointed during the reconstituted the Nomination balance between fixed and and one women director. reports/returns as per the calendar dated April 21, 2016 conveyed year under review. and Remuneration committee. incentive pay reflecting short of reviews set by the Reserve Bank

18 | Annual Report 2015-16 Annual Report 2015-16 | 19 and long-term performance • Oversight of regulatory with the solution to critical social, e) Meeting of the Board and Committees objectives appropriate to the compliance, ethics, and environmental and economic The details of the meetings of the Board and the committees are as under: working of the Company and whistle blower hotlines. needs of the marginalized/ its goals. underprivileged sections of the • Monitoring the internal society in order to benefit the b) Securities Allotment control process. communities at large and create Board of Directors Committee • Overseeing the performance social and environmental impact. Total Meetings 9 The Board of Directors in the of the internal audit function. The Bank’s planned CSR meeting held on March 19, • Discussing risk management April 25, 2015; August 1, 2015; initiatives involve setting up August 22, 2015; September 19, 2015; 2016 re-constituted a Securities policies and practices with a solid foundation of various Dates of Meetings November 5, 2015; December 30, 2015; Allotment Committee of the management. Board to allot all types of programmes. For your bank, it January 25, 2016; February 17, 2016 and March 17, 2016. securities issued by the bank d) Corporate Social is of paramount importance that and also to approve various Responsibility Committee the funds of the bank are utilized Number of Meetings attended by Directors related matters. The committee and statutory disclosure. prudently to ensure maximum 1. Mr. Inder Krishan Sardana 9 social benefit and development. comprises of Mr. Inder Krishan Believing in the philosophy that Sardana, Chairman; Mr. Sarvjit So the initial time was taken to 2. Mr. Sarvjit Singh Samra 9 society is not just another Singh Samra, Managing put in place processes, evaluate stakeholder in its business, but 3. Mr. Santokh Singh Chhokar 6 Director; Mr. Bhagwant Singh various projects and their the prime purpose of our 4. Mr. Bhagwant Singh Sangha 9 Sangha, Director; Mr. Rakesh execution timelines. Therefore all existence, your bank, in its Soni, Director and Mr. Munish the CSR initiatives were in the 5. Mr. Sukhpal Singh Gill 9 various operations is committed Jain, Chief Operating Officer pipeline in the last financial year to making a positive contribution 6. Mr. Ranbir Singh 7 and Company Secretary as the Bank could spend `14.15 in a number of ways. The Bank 7. Mr. Madan Gopal Sharma 5 the members of the committee. lacs against `36.05 lacs being views Corporate Social 2% of Average Net Profits for last 8. Mr. Rakesh Soni 7 (w.e.f. August 22, 2015) c) Audit Committee Responsibility as its commitment 3 years. However as the ground to operate ethically and 9. Mrs. Harmesh Khanna 3 (w.e.f. August 22, 2016) The Bank has duly constituted work has been done, the bank is contributing to economic an Audit Committee of the positive that the execution of the development while improving the board. The members of the projects will begin in this committee are Mr. Madan quality of life of its employees as financial year and the bank Management Committee Gopal Sharma, Chairman; well as that of the local would spend the prescribed Mr. Bhagwant Singh Sangha, communities and society at Total Meetings 4 amount on the CSR initiatives. Director; Mr. Sukhpal Singh Gill, large. Pursuing a vision towards April 15, 2015; August 1, 2015; The Annual Report on Corporate Dates of Meetings Director and Mr. Ranbir Singh, the socioeconomic November 5, 2015 & February 16, 2015 Social Responsibility for the FY Director. The committee met six empowerment of under 2015-16 is attached as Number of Meetings attended by Directors times in a year. The details of the privileged and marginalized Annexure B to this report. meetings of the committee are sections of society, the Bank 1. Mr. Sarvjit Singh Samra 4 disclosed separately under the reiterates its commitment to 2. Mr. Inder Krishan Sardana 4 head Meetings of the Board and support social initiatives with a Committees of the board in this special focus on education, 3. Mr. Bhagwant Singh Sangha 4 report. The functions of the Audit financial literacy and livelihood Committee are as follows: support. In compliance with Section 135 of the Companies • Overseeing the financial Audit Committee reporting and disclosure Act, 2013 read with the process. Companies (Corporate Social Total Meetings 6 Responsibility Policy) Rules 2014, • Monitoring choice of April 20, 2015; August 6, 2015; September 28, 2015; the Bank has established Dates of Meetings accounting policies and November 12, 2015; February 26, 2016 and March 30, 2016 Corporate Social Responsibility principles. (CSR) Committee. The Bank has Number of Meetings attended by Directors • Overseeing hiring, also designed a board approved 1. Mr. Madan Gopal Sharma 5 performance and Corporate Social Responsibility independence of the external policy through which the bank 2. Mr. Bhagwant Singh Sangha 6 auditors. aims to align our CSR strategy 3. Mr. Sukhpal Singh Gill 6

4. Mr. Ranbir Singh 6

20 | Annual Report 2015-16 Annual Report 2015-16 | 21 and long-term performance • Oversight of regulatory with the solution to critical social, e) Meeting of the Board and Committees objectives appropriate to the compliance, ethics, and environmental and economic The details of the meetings of the Board and the committees are as under: working of the Company and whistle blower hotlines. needs of the marginalized/ its goals. underprivileged sections of the • Monitoring the internal society in order to benefit the b) Securities Allotment control process. communities at large and create Board of Directors Committee • Overseeing the performance social and environmental impact. Total Meetings 9 The Board of Directors in the of the internal audit function. The Bank’s planned CSR meeting held on March 19, • Discussing risk management April 25, 2015; August 1, 2015; initiatives involve setting up August 22, 2015; September 19, 2015; 2016 re-constituted a Securities policies and practices with a solid foundation of various Dates of Meetings November 5, 2015; December 30, 2015; Allotment Committee of the management. Board to allot all types of programmes. For your bank, it January 25, 2016; February 17, 2016 and March 17, 2016. securities issued by the bank d) Corporate Social is of paramount importance that and also to approve various Responsibility Committee the funds of the bank are utilized Number of Meetings attended by Directors related matters. The committee and statutory disclosure. prudently to ensure maximum 1. Mr. Inder Krishan Sardana 9 social benefit and development. comprises of Mr. Inder Krishan Believing in the philosophy that Sardana, Chairman; Mr. Sarvjit So the initial time was taken to 2. Mr. Sarvjit Singh Samra 9 society is not just another Singh Samra, Managing put in place processes, evaluate stakeholder in its business, but 3. Mr. Santokh Singh Chhokar 6 Director; Mr. Bhagwant Singh various projects and their the prime purpose of our 4. Mr. Bhagwant Singh Sangha 9 Sangha, Director; Mr. Rakesh execution timelines. Therefore all existence, your bank, in its Soni, Director and Mr. Munish the CSR initiatives were in the 5. Mr. Sukhpal Singh Gill 9 various operations is committed Jain, Chief Operating Officer pipeline in the last financial year to making a positive contribution 6. Mr. Ranbir Singh 7 and Company Secretary as the Bank could spend `14.15 in a number of ways. The Bank 7. Mr. Madan Gopal Sharma 5 the members of the committee. lacs against `36.05 lacs being views Corporate Social 2% of Average Net Profits for last 8. Mr. Rakesh Soni 7 (w.e.f. August 22, 2015) c) Audit Committee Responsibility as its commitment 3 years. However as the ground to operate ethically and 9. Mrs. Harmesh Khanna 3 (w.e.f. August 22, 2016) The Bank has duly constituted work has been done, the bank is contributing to economic an Audit Committee of the positive that the execution of the development while improving the board. The members of the projects will begin in this committee are Mr. Madan quality of life of its employees as financial year and the bank Management Committee Gopal Sharma, Chairman; well as that of the local would spend the prescribed Mr. Bhagwant Singh Sangha, communities and society at Total Meetings 4 amount on the CSR initiatives. Director; Mr. Sukhpal Singh Gill, large. Pursuing a vision towards April 15, 2015; August 1, 2015; The Annual Report on Corporate Dates of Meetings Director and Mr. Ranbir Singh, the socioeconomic November 5, 2015 & February 16, 2015 Social Responsibility for the FY Director. The committee met six empowerment of under 2015-16 is attached as Number of Meetings attended by Directors times in a year. The details of the privileged and marginalized Annexure B to this report. meetings of the committee are sections of society, the Bank 1. Mr. Sarvjit Singh Samra 4 disclosed separately under the reiterates its commitment to 2. Mr. Inder Krishan Sardana 4 head Meetings of the Board and support social initiatives with a Committees of the board in this special focus on education, 3. Mr. Bhagwant Singh Sangha 4 report. The functions of the Audit financial literacy and livelihood Committee are as follows: support. In compliance with Section 135 of the Companies • Overseeing the financial Audit Committee reporting and disclosure Act, 2013 read with the process. Companies (Corporate Social Total Meetings 6 Responsibility Policy) Rules 2014, • Monitoring choice of April 20, 2015; August 6, 2015; September 28, 2015; the Bank has established Dates of Meetings accounting policies and November 12, 2015; February 26, 2016 and March 30, 2016 Corporate Social Responsibility principles. (CSR) Committee. The Bank has Number of Meetings attended by Directors • Overseeing hiring, also designed a board approved 1. Mr. Madan Gopal Sharma 5 performance and Corporate Social Responsibility independence of the external policy through which the bank 2. Mr. Bhagwant Singh Sangha 6 auditors. aims to align our CSR strategy 3. Mr. Sukhpal Singh Gill 6

4. Mr. Ranbir Singh 6

20 | Annual Report 2015-16 Annual Report 2015-16 | 21 Risk Management Committee Securities Allotment Committee

Total Meetings 4 Total Meetings 1

April 20, 2015; August 1, 2015; Dates of Meetings Dates of Meetings March 30, 2016 November 5, 2015 & February 16, 2015 Number of Meetings attended by Directors Number of Meetings attended by Directors 1. Mr. Inder Krishan Sardana 1 1. Mr. Sarvjit Singh Samra 4 2. Mr. Sarvjit Singh Samra 1 2. Mr. Bhagwant Singh Sangha 4 3. Mr. Bhagwant Singh Sangha 1 3. Mr. Sukhpal Singh Gill 4 4. Mr. Rakesh Soni 1

Credit Sanctioning Committee Corporate Social Responsibility Committee Total Meetings 6 Total Meetings 2 April 20,2015; May 16, 2015; July 29, 2015; Dates of Meetings Dates of Meetings August 22, 2015 and February 17, 2016 September 17, 2015; December 16, 2015; March 19, 2016 Number of Meetings attended by Directors Number of Meetings attended by Directors 1. Mr. Sarvjit Singh Samra 2 1. Mr. Sarvjit Singh Samra 6 2. Mr.Bhagwant Singh Sangha 2 2. Mr. Dinesh Gupta 1 (retired on April 21, 2015) 3. Mr. Ranbir Singh 2 3. Mr. Sham Singh Bains 1 (retired on April 21, 2015)

4. Mr. Bhagwant Singh Sangha 5 (w.e.f. April 25, 2015) Vigil Mechanism Loans, Guarantees or Considering the nature of the Investments in Securities industry in which the Bank operates, 5. Mr. Ranbir Singh 4 (w.e.f. April 25, 2015) The Bank has implemented a Whistle Blower Policy pursuant to Pursuant to Section 186(11) of transactions with related parties of which Whistle Blowers can raise the Companies Act, 2013 and the Bank are in the ordinary course concerns relating to Reportable clarification dated February 13, of business especially with respect Securities Transfer Committee Matters (as defined in the policy) 2015 issued by the Ministry of to the banking transactions which Total Meetings 6 such as breach of CAPITAL SMALL Corporate Affairs loans made, are also on arms’ length basis. All FINANCE BANK Code of Conduct, guarantees given or securities such related party transactions are May 20, 2015; August 6, 2015; September 29, 2015; Dates of Meetings being placed before the November 16, 2015; February 4, 2016 and March 25, 2016. fraud, bribery, corruption, employee provided or acquisition of securities misconduct, illegality, health & by a banking company in the Board/Audit Committee for Number of Meetings attended by Directors safety, environmental issues and ordinary course of its business are approval, wherever applicable.

1. Mr. Sarvjit Singh Samra 6 wastage / misappropriation of bank exempted from disclosure in the funds/assets, etc. Further, the Annual Report. Therefore the said Auditors & Auditors’ Report 2. Mr. Bhagwant Singh Sangha 6 mechanism adopted by the Bank provision is not applicable to M/s V.P. Vijh & Co., Chartered encourages the Whistle Blower to the bank. 3. Mr. Sukhpal Singh Gill 6 Accountants, Jalandhar, Statutory report genuine concerns or Auditors of the Bank have audited grievances and provides for Contracts or Arrangements the accounts of the Bank for the adequate safeguards against Nomination and Remuneration Committee with Related Parties financial year 2015-16 as per the victimization of Whistle Blower who accounting standards followed in Total Meetings 6 avail of such mechanism and also All related party transactions that were entered during the financial India. There is no qualification, April 18, 2015, July 20, 2016, provides for direct access to the year 2015-16 were in the ordinary reservations or adverse remarks Dates of Meetings September 11, 2015, September 18, 2015, Chairman of the Audit Committee, given by the auditors which needs October 31, 2015 and January 12, 2016 in exceptional cases. The course of the business of the Bank comments by the Board and are functioning of the Vigil mechanism and were on arm’s length basis. Number of Meetings attended by Directors self-explained and therefore, in the is reviewed by the Audit Committee There were no materially significant 1. Mr. Madan Gopal Sharma 4 opinion of the Directors, do not call from time to time. The concerns related party transactions entered for any further comments. 2. Mr. Dinesh Gupta 1(retired w.e.f. April 21, 2015) reported in accordance with the by the Bank with Promoters, said policy have been duly settled. Directors, Key Managerial M/s.V.P.Vijh & Company, Chartered 3. Mr. Sham Singh Bains 1(retired w.e.f. April 21, 2015) None of the Whistle Blowers have Personnel or other persons which Accountants, Jalandhar were 4. Mr. Bhagwant Singh Sangha 6 been denied access to the Audit may have a potential conflict with appointed as Statutory Auditors of the interest of the Bank. the Bank for a period of three years 5. Mr. Sukhpal Singh Gill 5(w.e.f. April 25, 2015) Committee of the Board.

22 | Annual Report 2015-16 Annual Report 2015-16 | 23 Risk Management Committee Securities Allotment Committee

Total Meetings 4 Total Meetings 1

22 | Annual Report 2015-16 Annual Report 2015-16 | 23 from 2015-16 and until the M/s B. Mathur & Co., Company 6. The Directors have devised ANNEXURE-A conclusion of 19th Annual General Secretaries, Secretarial Auditors of proper systems to ensure FORM NO. MR 3 Meeting of the Bank, subject to the Bank, in their Secretarial Audit compliance with the provisions approval of Reserve bank of India report. of all applicable laws and that SECRETARIAL AUDIT REPORT and ratification by Members every such systems were adequate and for the financial year ended march 31, 2016 year on a remuneration (including Directors’ Responsibilities operating effectively. terms of payment) to be fixed by Pursuant to section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies Statement 7. The accounts have been the Board of Directors of the Bank, (Appointment and Remuneration of Managerial Personnel) Rule, 2014 In accordance with the applicable prepared on an ongoing based on the recommendation of To, concern basis. the Audit Committee, plus service provisions of the Companies Act, The Members, tax and such other taxes as may be 2013, the Directors confirm that - M/s Capital Small Finance Bank Limited applicable, and reimbursement of 1. In preparation of the annual Acknowledgment (Formerly known as “Capital Local Area Bank Limited”) all out of pocket expenses in accounts for the year ended The Board of Directors is grateful Midas Corporate Park, 3rd Floor connection with the audit of March 31, 2016, the applicable to the Government of India. accounting standards have been 37 G.T. Road, Jalandhar – 144001, Punjab accounts of the Bank for the year The Reserve Bank of India, SEBI, followed along with proper ending March 31, 2016 to March IRDA and other regulatory authorities We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good explanation relating to material 31, 2018. The Auditors have for their continued guidance, corporate practices by M/s Capital Small Finance Bank Limited (Formerly known as “Capital Local Area Bank Limited”) confirmed that the re-appointment departures, if any. cooperation and support. The Board (hereinafter called the “Company”). Secretarial Audit was conducted in a manner that provided us a reasonable basis for if made at the Annual General 2. The accounting policies, framed would also like to take this opportunity evaluating the corporate conducts/statutory compliances and expressing our opinion thereon. Meeting, will be within the in accordance with the to express its appreciation for the Based on our verification of the Company’s books, papers, minute books, forms and returns filed and other records prescribed limits under section guidelines of The Reserve Bank continuing commitment, sense of maintained by the Company and also the information provided by the Company, its officers and authorized representatives 141(3)(g) of the Companies Act, of India, were consistently involvement, professionalism and during the conduct of secretarial audit, we hereby report that in our opinion, the Company has, during the audit period 2013 and they are not disqualified applied. dedication of the members of the to be appointed as auditors under covering the financial year ended on March 31, 2016 complied with the statutory provisions listed hereunder and also that 3. Reasonable and prudent staff in ensuring high level of the Company has proper board-processes and compliance-mechanism in place to the extent, in the manner and subject to the provisions of Companies Act, judgement and estimates were performance and growth that the the reporting made hereinafter: 2013 and Companies (Audit & made so as to give a true and bank has achieved during the year. We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Auditor) Rules 2014 or under any fair view of the state of affairs The Board also places on record its Company for the financial year ended on March 31, 2016 according to the provisions of: other law.” of the bank at the end of the gratitude to the shareholders, Financial Year and of the profit bankers, customers, suppliers and Secretarial Auditors and Audit of the bank for the year-ended other stakeholders who have i The Companies Act, 2013 (the a. The Securities and e. The Securities and March 31, 2016. Exchange Board of India Secretarial Auditors Pursuant to extended their valuable sustained Act) and the rules made Exchange Board of India 4. Proper and sufficient care was (Issue and Listing of Debt the provisions of Section 204 of support, co-operation and thereunder; (Substantial Acquisition of the Companies Act, 2013 and taken for the maintenance of Shares and Takeovers) Securities) Regulations, encouragement. The Directors wish ii The Securities Contracts the Companies (Appointment and adequate accounting records in Regulations, 2011; Not 2008; to thank the investors, the banking (Regulation) Act, 1956 Remuneration of Managerial accordance with the provision community, rating agencies and Applicable f. The Securities and of the Companies Act, 2013, (‘SCRA’) and the rules made Personnel) Rules, 2014, the Bank Exchange Board of India Banking Regulation Act, 1949 stock exchange for their support. thereunder; b. The Securities and has appointed M/s B. Mathur & Co., (Registrars to an Issue and applicable laws governing The Directors look forward to their Exchange Board of India Company Secretaries in Practice iii The Depositories Act, 1996 and Share Transfer banks in India for safeguarding continued contribution in realisation (Prohibition of Insider through it’s partner Mr. Brijeshwar and the Regulations and Bye- Agents) Regulations, the assets of the Company and of the corporate goals in the years Trading) Regulations, Dayal Mathur (FCS No.5734 and laws framed thereunder; 1993 regarding the for preventing and detecting ahead. We wish to apprise our 1992; Not Applicable COP No. 5334 ) to conduct Companies Act and frauds and other irregularities. worthy members who have entrusted iv Foreign Exchange Secretarial Audit of the Bank. c. The Securities and dealing with client; Not 5. The Directors have laid down their trust and confidence in the Management Act, 1999 and The Secretarial Audit Report is Exchange Board of India Applicable adequate internal financial bank that Capital Small Finance the rules and regulations made annexed herewith as Annexure (Issue of Capital and controls, which were fully Bank will venture to strive hard to thereunder to the extent of g. The Securities and A to this report. There are no Disclosure Requirements) operating during the take long strides ahead with freshly Foreign Direct Investment, Exchange Board of India qualifications, reservations or Regulations, 2009; Not financial year. instilled energies. Overseas Direct Investment (Delisting of Equity adverse remarks made by Applicable and External Commercial Shares) Regulations, Borrowings; d. The Securities and 2009; and Not Exchange Board of India Applicable For and on behalf of the Board of Directors v The following Regulations and (Employee Stock Option Guidelines prescribed under h. The Securities and Scheme and Employee the Securities and Exchange Exchange Board of India Stock Purchase Scheme) Place: Jalandhar Bhagwant Singh Sangha Sarvjit Singh Samra Board of India Act, 1992 (Buyback of Securities) Guidelines, 1999; Not Date : April 30, 2016 Director Managing Director (‘SEBI Act’): Regulations, 1998; Not Applicable Applicable

24 | Annual Report 2015-16 Annual Report 2015-16 | 25 from 2015-16 and until the M/s B. Mathur & Co., Company 6. The Directors have devised ANNEXURE-A conclusion of 19th Annual General Secretaries, Secretarial Auditors of proper systems to ensure FORM NO. MR 3 Meeting of the Bank, subject to the Bank, in their Secretarial Audit compliance with the provisions approval of Reserve bank of India report. of all applicable laws and that SECRETARIAL AUDIT REPORT and ratification by Members every such systems were adequate and for the financial year ended march 31, 2016 year on a remuneration (including Directors’ Responsibilities operating effectively. terms of payment) to be fixed by Pursuant to section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies Statement 7. The accounts have been the Board of Directors of the Bank, (Appointment and Remuneration of Managerial Personnel) Rule, 2014 In accordance with the applicable prepared on an ongoing based on the recommendation of To, concern basis. the Audit Committee, plus service provisions of the Companies Act, The Members, tax and such other taxes as may be 2013, the Directors confirm that - M/s Capital Small Finance Bank Limited applicable, and reimbursement of 1. In preparation of the annual Acknowledgment (Formerly known as “Capital Local Area Bank Limited”) all out of pocket expenses in accounts for the year ended The Board of Directors is grateful Midas Corporate Park, 3rd Floor connection with the audit of March 31, 2016, the applicable to the Government of India. accounting standards have been 37 G.T. Road, Jalandhar – 144001, Punjab accounts of the Bank for the year The Reserve Bank of India, SEBI, followed along with proper ending March 31, 2016 to March IRDA and other regulatory authorities We have conducted the Secretarial Audit of the compliance of applicable statutory provisions and the adherence to good explanation relating to material 31, 2018. The Auditors have for their continued guidance, corporate practices by M/s Capital Small Finance Bank Limited (Formerly known as “Capital Local Area Bank Limited”) confirmed that the re-appointment departures, if any. cooperation and support. The Board (hereinafter called the “Company”). Secretarial Audit was conducted in a manner that provided us a reasonable basis for if made at the Annual General 2. The accounting policies, framed would also like to take this opportunity evaluating the corporate conducts/statutory compliances and expressing our opinion thereon. Meeting, will be within the in accordance with the to express its appreciation for the Based on our verification of the Company’s books, papers, minute books, forms and returns filed and other records prescribed limits under section guidelines of The Reserve Bank continuing commitment, sense of maintained by the Company and also the information provided by the Company, its officers and authorized representatives 141(3)(g) of the Companies Act, of India, were consistently involvement, professionalism and during the conduct of secretarial audit, we hereby report that in our opinion, the Company has, during the audit period 2013 and they are not disqualified applied. dedication of the members of the to be appointed as auditors under covering the financial year ended on March 31, 2016 complied with the statutory provisions listed hereunder and also that 3. Reasonable and prudent staff in ensuring high level of the Company has proper board-processes and compliance-mechanism in place to the extent, in the manner and subject to the provisions of Companies Act, judgement and estimates were performance and growth that the the reporting made hereinafter: 2013 and Companies (Audit & made so as to give a true and bank has achieved during the year. We have examined the books, papers, minute books, forms and returns filed and other records maintained by the Auditor) Rules 2014 or under any fair view of the state of affairs The Board also places on record its Company for the financial year ended on March 31, 2016 according to the provisions of: other law.” of the bank at the end of the gratitude to the shareholders, Financial Year and of the profit bankers, customers, suppliers and Secretarial Auditors and Audit of the bank for the year-ended other stakeholders who have i The Companies Act, 2013 (the a. The Securities and e. The Securities and March 31, 2016. Exchange Board of India Secretarial Auditors Pursuant to extended their valuable sustained Act) and the rules made Exchange Board of India 4. Proper and sufficient care was (Issue and Listing of Debt the provisions of Section 204 of support, co-operation and thereunder; (Substantial Acquisition of the Companies Act, 2013 and taken for the maintenance of Shares and Takeovers) Securities) Regulations, encouragement. The Directors wish ii The Securities Contracts the Companies (Appointment and adequate accounting records in Regulations, 2011; Not 2008; to thank the investors, the banking (Regulation) Act, 1956 Remuneration of Managerial accordance with the provision community, rating agencies and Applicable f. The Securities and of the Companies Act, 2013, (‘SCRA’) and the rules made Personnel) Rules, 2014, the Bank Exchange Board of India Banking Regulation Act, 1949 stock exchange for their support. thereunder; b. The Securities and has appointed M/s B. Mathur & Co., (Registrars to an Issue and applicable laws governing The Directors look forward to their Exchange Board of India Company Secretaries in Practice iii The Depositories Act, 1996 and Share Transfer banks in India for safeguarding continued contribution in realisation (Prohibition of Insider through it’s partner Mr. Brijeshwar and the Regulations and Bye- Agents) Regulations, the assets of the Company and of the corporate goals in the years Trading) Regulations, Dayal Mathur (FCS No.5734 and laws framed thereunder; 1993 regarding the for preventing and detecting ahead. We wish to apprise our 1992; Not Applicable COP No. 5334 ) to conduct Companies Act and frauds and other irregularities. worthy members who have entrusted iv Foreign Exchange Secretarial Audit of the Bank. c. The Securities and dealing with client; Not 5. The Directors have laid down their trust and confidence in the Management Act, 1999 and The Secretarial Audit Report is Exchange Board of India Applicable adequate internal financial bank that Capital Small Finance the rules and regulations made annexed herewith as Annexure (Issue of Capital and controls, which were fully Bank will venture to strive hard to thereunder to the extent of g. The Securities and A to this report. There are no Disclosure Requirements) operating during the take long strides ahead with freshly Foreign Direct Investment, Exchange Board of India qualifications, reservations or Regulations, 2009; Not financial year. instilled energies. Overseas Direct Investment (Delisting of Equity adverse remarks made by Applicable and External Commercial Shares) Regulations, Borrowings; d. The Securities and 2009; and Not Exchange Board of India Applicable For and on behalf of the Board of Directors v The following Regulations and (Employee Stock Option Guidelines prescribed under h. The Securities and Scheme and Employee the Securities and Exchange Exchange Board of India Stock Purchase Scheme) Place: Jalandhar Bhagwant Singh Sangha Sarvjit Singh Samra Board of India Act, 1992 (Buyback of Securities) Guidelines, 1999; Not Date : April 30, 2016 Director Managing Director (‘SEBI Act’): Regulations, 1998; Not Applicable Applicable

24 | Annual Report 2015-16 Annual Report 2015-16 | 25 (vi) Reserve Bank of India Act, 1934. Adequate notices were given to all Finance Bank Limited”and the ANNEXURE-B directors to schedule the Board same has been approved by (vii) Banking Regulation Act, 1949. Meetings along with agenda and the Registrar of Companies. ANNUAL REPORT ON CSR ACTIVITIES (viii) The Employee Provident Fund detailed notes on agenda which Certificate of Incorporation Act, Payment of Gratuity Act, were sent at least seven days in pursuant to change in the A brief outline of the Company's constituted in accordance with and maintaining ecological Minimum Wages Act, Payment advance, and a system exists for name has been issued by The CSR policy, including overview of the provisions of the Act with balance of Wages Act, Payment of respect to its composition and seeking and obtaining further Registrar of Companies dated the projects or programs undertaken • Socio- Economic Growth Bonus Act, Contract Labour and a reference to the web-link to terms of reference.The CSR information and clarifications on April 15, 2016. • Health care and Family Regulation & Abolition Act and Committee will be responsible the agenda items before the meeting the CSR policy and projects or Welfare notification issued by labour and for meaningful participation at (iii) The Company has made a programs: for the following: • Employment enhancing department from time to time Rights Issue of 57,54,922 • Formulate and update our the meeting. 1. Policy statement vocational skills under above acts. Equity Shares of `10 each CSR Policy, which will be The decisions in the meetings were The CSR Policy focuses on • Contribution to the Prime for cash at a price of `30 per approved by the Board of We have examined compliance with passed unanimously, hence, no addressing critical social, Ministers National Relief equity share (including share the bank the applicable clauses of the environmental and economic fund and or any other fund dissenting members’ views have • Suggest areas of following: premium of `20 per equity needs of the marginalized / set up by Central or State been recorded as part of the intervention to the Board share) aggregating to underprivileged sections of the Government. (I) Secretarial Standards issued by minutes. of bank `17,26,47,660.00 to the society. Through this policy we The Institute of Company The Bank shall ensure a We further report that there are Members of the Bank on Rights aim to align our CSR strategy • Approve projects that are Secretaries of India (SS-1 and transparent monitoring adequate systems and processes in line with the CSR policy SS-2 as applicable w.e.f. 01st Basis on December 30, 2015. with the solution to these mechanism for CSR activities. in the Company commensurate problems in order to benefit • Put monitoring mechanisms July, 2015). 1. The CSR Committee shall with the size and operations of the (iv) The Company has issued in place to track the the communities at large and review the progress of CSR (ii) The Listing Agreements entered 1,200 (One Thousand and progress of each project Company to monitor and ensure create social and activities at least twice a into by the Company with Two Hundred) unsecured compliance with applicable laws, environmental impact. • Recommend the CSR year, including the annual Stock Exchange(s); redeemable Non Convertible rules, regulations and guidelines. 2. Scope of Corporate Social expenditure to the Board review. subordinated (Lower Tier II) of bank who will approve it (iii) The Securities And Exchange Responsibility policy 2. The Board of Directors bonds in the nature of Board Of India (Listing The policy would pertain to all • Meet atleast once a year to shall review the progress We further report that during the debentures on Private Obligations And Disclosure activities undertaken by the review the progress made of CSR activities at least Placement Basis of `1,00,000 Requirements) Regulations, audit period there were following Bank towards fulfilling its • Give directions for the annually. specific events / actions having a (Rupees One Lac Only) each 2015. corporate social responsibility disbursement of funds The web link to the social major bearing on the Bank’s affairs amounting `12,00,00,000 objectives. The policy would During the period under review, 4. Corporate Social initiatives of the bank is as in pursuance of the above referred (Rupees Twelve Crore Only) also ensure compliance with Responsibility Activities follows: the Company has duly complied laws, rules, regulations, guidelines, on February 17, 2016. section 135 of the Companies with the various applicable provisions The CSR Committee of the Bank http://www.capitalbank.co etc. which are: Act, 2013 and would include of the Acts, Rules, Regulations, (v) The Company has issued 2,500 would consider and approve the .in/index.php/social- the activities as covered under initiatives Guidelines, Standards, etc. as (I) The Company has converted (Two Thousand Five Hundred) projects or programmes that the Schedule VII to the Act and the Bank should undertake as CSR. mentioned above. itself from Local Area Bank to Unsecured Redeemable non 1. The Composition of the Companies (Corporate Social The Bank’s focus shall be to Small Finance Bank on April convertible (Upper Tier II), CSR Committee is as We further report that Responsibility Policy) Rules, adopt projects in the following follows: 24, 2016. The Reserve Bank Basel I compliant bonds in the 2014 and as amended from key areas of intervention defined The Board of Directors of the had granted Banking License • Mr. Sarvjit Singh nature of debenture on Private time to time. This policy in Schedule VII. However the Company is duly constituted with no. MUM:116 dated March 4, Samra( Chairman) Placement Basis of `1,00,000 applies to all our CSR projects committee may undertake any proper balance of Executive 2016 to Capital Small Finance • Mr. Bhagwant Singh (Rupees One Lac Only) each and it will be further reviewed activity as mentioned in Schedule Directors, Non-Executive Directors Bank Limited to carry on small Sangha, (member) amounting `25,00,00,000 and updated annually. As a VII of the Companies Act 2016 and Independent Directors. The finance bank business in India. (Rupees Twenty Five Crore practice, we classify only those as a part of its Corporate Social • Mr. Ranbir Singh changes in the composition of the (member) (ii) The Company had applied for Only) and Listed on BSE projects that are over and Responsibility Board of Directors that took place changing its name from Limited on March 30, 2016. above our normal course of • Eradicating extreme hunger 2. Average net profit of the during the period under review were “Capital Local Area Bank business as CSR. and poverty Company for last three carried out in compliance with the financial years: Limited” to “Capital Small 3. Governance structure: • Promotion of Education provisions of the Act. Rs.1802.59 lacs The Bank will have a robust • Promoting Gender equality and transparent governance and empowering women 3. Prescribed CSR expenditure (i.e.two percent of the For B Mathur & Co., structure to oversee the • Reducing child mortality and amount as in 3 above) Company Secretaries implementation of our CSR improving maternal health Policy. The Bank has a CSR • Combating various diseases Rs. 36.05 lacs Date : 30th April, 2016 Brijeshwar Dayal Mathur Committee which is duly • Environmental Sustainability Place: New Delhi Managing Partner; FCS: 5734; CP No.: 5334

26 | Annual Report 2015-16 Annual Report 2015-16 | 27 (vi) Reserve Bank of India Act, 1934. Adequate notices were given to all Finance Bank Limited”and the ANNEXURE-B directors to schedule the Board same has been approved by (vii) Banking Regulation Act, 1949. Meetings along with agenda and the Registrar of Companies. ANNUAL REPORT ON CSR ACTIVITIES (viii) The Employee Provident Fund detailed notes on agenda which Certificate of Incorporation Act, Payment of Gratuity Act, were sent at least seven days in pursuant to change in the A brief outline of the Company's constituted in accordance with and maintaining ecological Minimum Wages Act, Payment advance, and a system exists for name has been issued by The CSR policy, including overview of the provisions of the Act with balance of Wages Act, Payment of respect to its composition and seeking and obtaining further Registrar of Companies dated the projects or programs undertaken • Socio- Economic Growth Bonus Act, Contract Labour and a reference to the web-link to terms of reference.The CSR information and clarifications on April 15, 2016. • Health care and Family Regulation & Abolition Act and Committee will be responsible the agenda items before the meeting the CSR policy and projects or Welfare notification issued by labour and for meaningful participation at (iii) The Company has made a programs: for the following: • Employment enhancing department from time to time Rights Issue of 57,54,922 • Formulate and update our the meeting. 1. Policy statement vocational skills under above acts. Equity Shares of `10 each CSR Policy, which will be The decisions in the meetings were The CSR Policy focuses on • Contribution to the Prime for cash at a price of `30 per approved by the Board of We have examined compliance with passed unanimously, hence, no addressing critical social, Ministers National Relief equity share (including share the bank the applicable clauses of the environmental and economic fund and or any other fund dissenting members’ views have • Suggest areas of following: premium of `20 per equity needs of the marginalized / set up by Central or State been recorded as part of the intervention to the Board share) aggregating to underprivileged sections of the Government. (I) Secretarial Standards issued by minutes. of bank `17,26,47,660.00 to the society. Through this policy we The Institute of Company The Bank shall ensure a We further report that there are Members of the Bank on Rights aim to align our CSR strategy • Approve projects that are Secretaries of India (SS-1 and transparent monitoring adequate systems and processes in line with the CSR policy SS-2 as applicable w.e.f. 01st Basis on December 30, 2015. with the solution to these mechanism for CSR activities. in the Company commensurate problems in order to benefit • Put monitoring mechanisms July, 2015). 1. The CSR Committee shall with the size and operations of the (iv) The Company has issued in place to track the the communities at large and review the progress of CSR (ii) The Listing Agreements entered 1,200 (One Thousand and progress of each project Company to monitor and ensure create social and activities at least twice a into by the Company with Two Hundred) unsecured compliance with applicable laws, environmental impact. • Recommend the CSR year, including the annual Stock Exchange(s); redeemable Non Convertible rules, regulations and guidelines. 2. Scope of Corporate Social expenditure to the Board review. subordinated (Lower Tier II) of bank who will approve it (iii) The Securities And Exchange Responsibility policy 2. The Board of Directors bonds in the nature of Board Of India (Listing The policy would pertain to all • Meet atleast once a year to shall review the progress We further report that during the debentures on Private Obligations And Disclosure activities undertaken by the review the progress made of CSR activities at least Placement Basis of `1,00,000 Requirements) Regulations, audit period there were following Bank towards fulfilling its • Give directions for the annually. specific events / actions having a (Rupees One Lac Only) each 2015. corporate social responsibility disbursement of funds The web link to the social major bearing on the Bank’s affairs amounting `12,00,00,000 objectives. The policy would During the period under review, 4. Corporate Social initiatives of the bank is as in pursuance of the above referred (Rupees Twelve Crore Only) also ensure compliance with Responsibility Activities follows: the Company has duly complied laws, rules, regulations, guidelines, on February 17, 2016. section 135 of the Companies with the various applicable provisions The CSR Committee of the Bank http://www.capitalbank.co etc. which are: Act, 2013 and would include of the Acts, Rules, Regulations, (v) The Company has issued 2,500 would consider and approve the .in/index.php/social- the activities as covered under initiatives Guidelines, Standards, etc. as (I) The Company has converted (Two Thousand Five Hundred) projects or programmes that the Schedule VII to the Act and the Bank should undertake as CSR. mentioned above. itself from Local Area Bank to Unsecured Redeemable non 1. The Composition of the Companies (Corporate Social The Bank’s focus shall be to Small Finance Bank on April convertible (Upper Tier II), CSR Committee is as We further report that Responsibility Policy) Rules, adopt projects in the following follows: 24, 2016. The Reserve Bank Basel I compliant bonds in the 2014 and as amended from key areas of intervention defined The Board of Directors of the had granted Banking License • Mr. Sarvjit Singh nature of debenture on Private time to time. This policy in Schedule VII. However the Company is duly constituted with no. MUM:116 dated March 4, Samra( Chairman) Placement Basis of `1,00,000 applies to all our CSR projects committee may undertake any proper balance of Executive 2016 to Capital Small Finance • Mr. Bhagwant Singh (Rupees One Lac Only) each and it will be further reviewed activity as mentioned in Schedule Directors, Non-Executive Directors Bank Limited to carry on small Sangha, (member) amounting `25,00,00,000 and updated annually. As a VII of the Companies Act 2016 and Independent Directors. The finance bank business in India. (Rupees Twenty Five Crore practice, we classify only those as a part of its Corporate Social • Mr. Ranbir Singh changes in the composition of the (member) (ii) The Company had applied for Only) and Listed on BSE projects that are over and Responsibility Board of Directors that took place changing its name from Limited on March 30, 2016. above our normal course of • Eradicating extreme hunger 2. Average net profit of the during the period under review were “Capital Local Area Bank business as CSR. and poverty Company for last three carried out in compliance with the financial years: Limited” to “Capital Small 3. Governance structure: • Promotion of Education provisions of the Act. Rs.1802.59 lacs The Bank will have a robust • Promoting Gender equality and transparent governance and empowering women 3. Prescribed CSR expenditure (i.e.two percent of the For B Mathur & Co., structure to oversee the • Reducing child mortality and amount as in 3 above) Company Secretaries implementation of our CSR improving maternal health Policy. The Bank has a CSR • Combating various diseases Rs. 36.05 lacs Date : 30th April, 2016 Brijeshwar Dayal Mathur Committee which is duly • Environmental Sustainability Place: New Delhi Managing Partner; FCS: 5734; CP No.: 5334

26 | Annual Report 2015-16 Annual Report 2015-16 | 27 4. Details of CSR spent during FY 2015-16: FORM NO. MGT 9 1 2 3 4 5 6 7 8 EXTRACT OF ANNUAL RETURN S No CSR Sector in Projects or Amount Amount spent Cumulative Amount as on financial year ended on 31.03.2016 Project which programs outlay on the expenditure spent: or the (budget) upto the direct or (1) Local Area projects or activity project is project or reporting through Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) or other programs identified covered programs Sub- heads: period implementi of the Company (Management & Administration ) Rules, 2014. (2) Specify the wise ng agency state and (1) Direct district where expenditure projects or on projects or REGISTRATION & OTHER DETAILS: programs was programs. undertaken (2) Overheads 1 CIN U65110PB1999PLC022634

Contribut Contribut 2 Registration Date 31-05-1999 ion ion to CII towards Foundati relief and on for Capital Small Finance Bank Limited 1 welfare in earthqua Nepal - `1 lac `1 lac Direct 3 Name of the Company (Formerly known as Capital Local Area Bank Limited) calamity ke Relief affected Fund for areas Nepal Company Limited by 4 Category/Sub-category of the Company Eradicating Contribut shares/Indian Non Government Company extreme ion to All hunger India Midas Corporate Park, 3rd floor 37, 2 and Pingalwar - `0.20 lacs `0.20 lacs Direct Address of the Registered office & Amritsar 5 G.T. Road, Jalandhar - 144001 poverty Charitable contact details Society, Tel. 91-181-505 1111 / 2222 Amritsar 6 Whether listed company Listed (Debt Segment) Environm Green ental Belt 3 Sustainab Maintena Karvy Computershare Private Limited Registry Services ility and nce for Name, Address & contact details of the Karvy House, 46, Avenue 4, Street No.1, Banjara Hills, 7 maintainin Public Jalandhar - `12.95 lacs `12.95 lacs Direct Registrar & Transfer Agent, if any Hyderabad - 500034. ecologic Places Tel. 91-11-43681700, Fax.91-11-43681710 al balance

a) Total amount to be spent for FY 2015-16 - `36.05 lakh PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY b) Amount unspent, if any - `21.90 lakh All the business activities contributing 10% or more of the total turnover of the company shall be stated

5. Reasons for not spending was taken to put in place financial year and the bank Name & Description of main NIC Code of the % to total turnover of SL No the 2% of average net profit processes, evaluate various would spend the prescribed products/services Product /service the company of last three financial years: projects and their execution amount on the CSR initiatives. timelines. Therefore all the CSR The Bank’s planned CSR 6. Responsibility statement of 1 Banking and Financial Service 64191 100% initiatives were in the pipeline in initiatives involve setting up a the CSR Committee: the last Financial year and the solid foundation of various Bank could spend `14.15 lacs The CSR Committee confirms programmes. For your bank, it is against `36.05 lacs being 2% that the implementation and of paramount importance that monitoring of the CSR Policy, is of Average Net Profits for last PARTICULARS OF HOLDING, SUBSIDIARY & ASSOCIATE COMPANIES the funds of the bank are 3 years. However as the ground in compliance with CSR utilized prudently to ensure work has been done, the bank is objectives and Policy of the maximum social benefit and Company. HOLDING/ % OF positive that the execution of the APPLICABLE development. So the initial time SL No Name & Address of the Company CIN/GLN SUBSIDIARY/ SHARES projects will begin in this SECTION ASSOCIATE HELD Sarvjit Singh Samra Place: Jalandhar Bhagwant Singh Sangha Chairman CSR Committee Date : April 30, 2016 Director 1 NA NA NA NA NA and Managing Director

28 | Annual Report 2015-16 Annual Report 2015-16 | 29 4. Details of CSR spent during FY 2015-16: FORM NO. MGT 9 1 2 3 4 5 6 7 8 EXTRACT OF ANNUAL RETURN S No CSR Sector in Projects or Amount Amount spent Cumulative Amount as on financial year ended on 31.03.2016 Project which programs outlay on the expenditure spent: or the (budget) upto the direct or (1) Local Area projects or activity project is project or reporting through Pursuant to Section 92 (3) of the Companies Act, 2013 and rule 12(1) or other programs identified covered programs Sub- heads: period implementi of the Company (Management & Administration ) Rules, 2014. (2) Specify the wise ng agency state and (1) Direct district where expenditure projects or on projects or REGISTRATION & OTHER DETAILS: programs was programs. undertaken (2) Overheads 1 CIN U65110PB1999PLC022634

28 | Annual Report 2015-16 Annual Report 2015-16 | 29 SHAREHOLDING PATTERN (Equity Share Capital break up as % to total Equity) SHAREHOLDING OF PROMOTERS

No. of Shares held at the Shareholding at the Shareholding at the No. of Shares held at the end of the year % change beginning of the year beginning of the year end of the year % Category of Shareholder during change in % of Total % of Total the year Demat Physical Total Demat Physical Total % of shares % of shares share Shares Shares Sl No. Shareholders Name % of total % of total pledged pledged holding No of shares of No of shares of A. PROMOTERS encumbered encumbered during the shares the shares the to total to total year (1) Indian company company shares shares a) Individual/HUF 0 4103716 4103716 23.77 0 7540198 7540198 32.76 83.74 b) Central Govt. or State Govt. 0 0 0 0 0 0 0 0 1 Parkash Kaur 66293 0.38 NIL 88391 0.38 NIL 33.33 c) Bodies Corporates 0 0 0 0 0 0 0 0 0 2 Amarjit Singh Samra 844800 4.89 NIL 1640864 7.13 NIL 94.23 d) Bank/FI 0 0 0 0 0 0 0 0 0 3 Sarvjit Singh Samra 793320 4.59 NIL 1742904 7.57 NIL 119.70 e) Any other 0 0 0 0 0 0 0 0 0 4 Amardeep Singh Samra 592680 3.43 NIL 790240 3.43 NIL 33.33 SUB TOTAL (A) (1): 0 4103716 4103716 23.77 0 7540198 7540198 32.76 83.74 5 Amarpreet Kaur 33000 0.19 NIL 44000 0.19 NIL 33.33

(2) Foreign 6 Gagan Samra 99000 0.57 NIL 132000 0.57 NIL 33.33 a) NRI- Individuals 0 0 0 - 0 0 0 0 0.00 7 Kuljit Singh 79970 0.46 NIL 106627 0.46 NIL 33.33 b) Other Individuals 0 0 0 0 0 0 0 0 0 8 Navneet Kaur 158400 0.92 NIL 858400 3.73 NIL 441.92 c) Bodies Corp. 0 0 0 0 0 0 0 0 0 9 Surinder Kaur Samra 369600 2.14 NIL 936486 4.07 NIL 153.38 d) Banks/FI 0 0 0 0 0 0 0 0 0 10 Brig. Swarn Singh Saini 475513 2.75 NIL 475513 2.07 NIL - e) Any other 0 0 0 0 0 0 0 0 0 11 Gursharan Kaur 222420 1.29 NIL 240720 1.05 NIL 8.23 SUB TOTAL (A) (2): 0 0 0 - 0 0 0 - 0.00 Total Shareholding 12 B.S. Sangha 39600 0.23 NIL 39600 0.17 NIL - of Promoter 13 Chanan Singh Dhillon 35200 0.20 NIL 38200 0.17 NIL 8.52 (A)= (A)(1)+(A)(2) 0 4103716 4103716 23.77 0 7540198 7540198 32.76 83.74 14 Randeep Dhillon 66000 0.38 NIL 81000 0.35 NIL 22.73

i) Indian 0 0 0 0 0 0 0 0 0 At the beginning of the year 844,800 4.89 844,800 4.89 ii) Overseas 0 0 0 0 0 0 0 0 0 Amarjit 2 Singh Right shares allotted on 30.12.2015 796064 3.46 1,640,864 7.13 b) Individuals Samra i) Individual shareholders At the end of the year 1,640,864 7.13 1,640,864 7.13 holding nominal share At the beginning of the year 793,320 4.59 793,320 4.59 capital upto Rs.1 lakhs 0 0 0 0 0 0 0 0 0 Sarvjit ii) Individuals shareholders 3 Singh Right shares allotted on 30.12.2015 949584 4.13 1,742,904 7.57 holding nominal share capital Samra in excess of Rs. 1 lakhs 0 0 0 0 0 0 0 0 0 At the end of the year 1,742,904 7.57 1,742,904 7.57 c) Others (specify) 0 0 0 0 0 0 0 0 At the beginning of the year 592,680 3.43 592,680 3.43 Amardeep SUB TOTAL (B) (2): 0 0 0 0 0 0 0 0 0 4 Singh Right shares allotted on 30.12.2015 197560 0.86 790,240 3.43 Total Public Shareholding Samra (B)= (B)(1)+(B)(2) 0 0 0 0 0 0 0 0 0 At the end of the year 790,240 3.43 790,240 3.43 C. SHARES HELD BY CUSTODIAN At the beginning of the year 33,000 0.19 33,000 0.19 FOR GDRS & ADRS 0 0 0 0 0 0 0 0 0 Amarpreet 5 Right shares allotted on 30.12.2015 11000 0.05 44,000 0.19 Non Promoters 0 13161255 13161255 76.23 0 15479695 15479695 67.24 17.62 Kaur Grand Total (A+B+C) 0 17264971 17264971 100.00 0 23019893 23019893 100.00 33.33 At the end of the year 44,000 0.19 44,000 0.19

30 | Annual Report 2015-16 Annual Report 2015-16 | 31 SHAREHOLDING PATTERN (Equity Share Capital break up as % to total Equity) SHAREHOLDING OF PROMOTERS

B. PUBLIC SHAREHOLDING 15 Dinesh Gupta-HUF 22000 0.13 NIL 29333 0.13 NIL 33.33 (1) Institutions 16 Dinesh Gupta 205920 1.19 NIL 295920 1.29 NIL 43.71 a) Mutual Funds 0 0 0 0 0 0 0 0 0 Total 4103716 23.77 7540198 32.76 83.74 b) Banks/FI 0 0 0 0 0 0 0 0 0 C) Cenntral govt 0 0 0 0 0 0 0 0 0 d) State Govt. 0 0 0 0 0 0 0 0 0 e) Venture Capital Fund 0 0 0 0 0 0 0 0 0 CHANGE IN PROMOTERS' SHAREHOLDING (SPECIFY IF THERE IS NO CHANGE) f) Insurance Companies 0 0 0 0 0 0 0 0 0 g) FIIs 0 0 0 0 0 0 0 0 0 Shareholding at the Cumulative Share holding beginning of the year during the year h) Foreign Venture Sl No. Shareholders Name Capital Funds 0 0 0 0 0 0 0 0 0 % of total shares % of total shares No of shares No of shares i) Others (specify) 0 0 0 0 0 0 0 0 0 of the company of the company SUB TOTAL (B) (1): 0 0 0 0 0 0 0 0 0 At the beginning of the year 66,293 0.38 66,293 0.38 Parkash 1 (2) Non Institutions Kaur Right shares allotted on 30.12.2015 22098 0.10 88,391 0.38 a) Bodies corporates At the end of the year 88,391 0.38 88,391 0.38 i) Indian 0 0 0 0 0 0 0 0 0 At the beginning of the year 844,800 4.89 844,800 4.89 ii) Overseas 0 0 0 0 0 0 0 0 0 Amarjit 2 Singh Right shares allotted on 30.12.2015 796064 3.46 1,640,864 7.13 b) Individuals Samra i) Individual shareholders At the end of the year 1,640,864 7.13 1,640,864 7.13 holding nominal share At the beginning of the year 793,320 4.59 793,320 4.59 capital upto Rs.1 lakhs 0 0 0 0 0 0 0 0 0 Sarvjit ii) Individuals shareholders 3 Singh Right shares allotted on 30.12.2015 949584 4.13 1,742,904 7.57 holding nominal share capital Samra in excess of Rs. 1 lakhs 0 0 0 0 0 0 0 0 0 At the end of the year 1,742,904 7.57 1,742,904 7.57 c) Others (specify) 0 0 0 0 0 0 0 0 At the beginning of the year 592,680 3.43 592,680 3.43 Amardeep SUB TOTAL (B) (2): 0 0 0 0 0 0 0 0 0 4 Singh Right shares allotted on 30.12.2015 197560 0.86 790,240 3.43 Total Public Shareholding Samra (B)= (B)(1)+(B)(2) 0 0 0 0 0 0 0 0 0 At the end of the year 790,240 3.43 790,240 3.43 C. SHARES HELD BY CUSTODIAN At the beginning of the year 33,000 0.19 33,000 0.19 FOR GDRS & ADRS 0 0 0 0 0 0 0 0 0 Amarpreet 5 Right shares allotted on 30.12.2015 11000 0.05 44,000 0.19 Non Promoters 0 13161255 13161255 76.23 0 15479695 15479695 67.24 17.62 Kaur Grand Total (A+B+C) 0 17264971 17264971 100.00 0 23019893 23019893 100.00 33.33 At the end of the year 44,000 0.19 44,000 0.19

30 | Annual Report 2015-16 Annual Report 2015-16 | 31 Shareholding at the Cumulative Shareholding SHAREHOLDING PATTERN OF TOP TEN SHAREHOLDERS beginning of the year during the year (other than Directors, Promoters & Holders of GDRs & ADRs) Sl No. Shareholders Name Changes in the Shareholding at the Shareholding at the % of total shares % of total shares shareholding due to No of shares No of shares beginning of the year end of the year of the company of the company Right issue on 30.12.2015 Sl No. Name % of total % of total % of total At the beginning of the year 99,000 0.57 99,000 0.57 No of shares of No of shares of No of shares of shares the shares the shares the Gagan company company company 6 Right shares allotted on 30.12.2015 33000 0.14 132,000 0.57 Samra 1 Balbir Singh & Joginder Kaur 862400 5.00 - - 862400 3.75 At the end of the year 132,000 0.57 132,000 0.57 2 Rashpal Singh Virk & Surinder Kaur Virk 662047 3.83 22682 0.10 684729 2.97 At the beginning of the year 79,970 0.46 79,970 0.46 3 Mohan Singh Johal 547800 3.17 - - 547800 2.38

7 Kuljit Singh Right shares allotted on 30.12.2015 26657 0.12 106,627 0.46 4 International Township Developers Pvt. Ltd. 520080 3.01 - - 520080 2.26 5 Karnail Singh & Ramesh Kaur / Harbinder Singh 467500 2.71 - - 467500 2.03 At the end of the year 106,627 0.46 106,627 0.46 6 Gurinder Mann 293333 1.70 97778 0.42 391111 1.70 At the beginning of the year 158,400 0.92 158,400 0.92 7 Tarlochan Singh Hyare 385000 2.23 - - 385000 1.67 Navneet 8 Right shares allotted on 30.12.2015 700000 3.04 858,400 3.73 8 Piara Singh 362230 2.10 - - 362230 1.57 Kaur 9 Gurdev Singh Samra & Balbir Kaur Samra 258500 1.50 100000 0.43 358500 1.56 At the end of the year 858,400 3.73 858,400 3.73 10 Gurnam Singh 358435 2.08 - - 358435 1.56 At the beginning of the year 369,600 2.14 369,600 2.14 Total 4717325 27.32 220460 0.96 4937785 21.45 Surinder 9 Kaur Right shares allotted on 30.12.2015 566886 2.46 936,486 4.07 Samra SHAREHOLDING OF DIRECTORS & KMP At the end of the year 936,486 4.07 936,486 4.07 Shareholding at the Cumulative Shareholding At the beginning of the year 475,513 2.75 475,513 2.75 Name of beginning of the year during the year Brig. Swarn 10 Sl No. the For Each of the Directors & KMP Singh Saini % of total shares % of total shares At the end of the year 475,513 2.07 475,513 2.07 Directors No of shares No of shares of the company of the company

At the beginning of the year 222,420 1.29 222,420 1.29 At the beginning of the year 19800 0.11 19,800 0.11

Gursharan 1 I.K Sardana Right shares alloted on 30.12.2015 31600 0.14 51,400 0.22 11 Right shares allotted on 30.12.2015 18300 0.08 240,720 1.05 Kaur At the end of the year 51400 0.22 51,400 0.22 At the end of the year 240,720 1.05 240,720 1.05 At the beginning of the year 16500 0.10 16,500 0.10 M. G. 2 At the beginning of the year 39,600 0.23 39,600 0.23 Sharma Right shares alloted on 30.12.2015 5600 0.02 22,100 0.10 B.S. 12 Sangha At the end of the year 22100 0.10 22,100 0.10 At the end of the year 39,600 0.17 39,600 0.17 Sarvjit At the beginning of the year 793320 4.59 793,320 4.59 Singh At the beginning of the year 35,200 0.20 35,200 0.20 3 Samra Right shares alloted on 30.12.2015 949584 4.13 1,742,904 7.57 Chanan (Managing Director) At the end of the year 1742904 7.57 1,742,904 7.57 13 Singh Right shares allotted on 30.12.2015 3000 0.01 38,200 0.17 Dhillon B. S. At the beginning of the year 39600 0.23 39,600 0.23 4 At the end of the year 38,200 0.17 38,200 0.17 Sangha At the end of the year 39600 0.17 39,600 0.17 At the beginning of the year 205920 1.19 205,920 1.19 At the beginning of the year 66,000 0.38 66,000 0.38 Dinesh 5 Right shares alloted on 30.12.2015 90000 0.39 295,920 1.29 Randeep Gupta 14 Right shares allotted on 30.12.2015 15000 0.07 81,000 0.35 Dhillon At the end of the year 295920 1.29 295,920 1.29 At the beginning of the year 1320000 7.65 1,320,000 7.65 At the end of the year 81,000 0.35 81,000 0.35 Santokh 6 Singh Right shares alloted on 30.12.2015 440000 1.91 1,760,000 7.65 At the beginning of the year 22,000 0.13 22,000 0.13 Chhokar At the end of the year 1760000 7.65 1,760,000 7.65 Dinesh 15 Gupta Right shares allotted on 30.12.2015 7333 0.03 29,333 0.13 At the beginning of the year 90568 0.52 90,568 0.52 -HUF Munish Transfer on 11.08.2014 3071 0.01 93639 0.41 At the end of the year 29,333 0.13 29,333 0.13 7 Jain (Company Right shares alloted on 30.12.2015 57462 0.25 151101 0.66 Secretary) At the beginning of the year 205,920 1.19 205,920 1.19 At the end of the year 151101 0.66 151,101 0.66 Dinesh 16 Right shares allotted on 30.12.2015 90000 0.39 295,920 1.29 Sahil Vijay At the beginning of the year 0 - - - Gupta 8 (Chief Right shares alloted on 30.12.2015 4226 0.02 4,226 0.02 Financial At the end of the year 295,920 1.29 295,920 1.29 Officer) At the end of the year 4226 0.02 4,226 0.02

32 | Annual Report 2015-16 Annual Report 2015-16 | 33 Shareholding at the Cumulative Shareholding SHAREHOLDING PATTERN OF TOP TEN SHAREHOLDERS beginning of the year during the year (other than Directors, Promoters & Holders of GDRs & ADRs) Sl No. Shareholders Name Changes in the Shareholding at the Shareholding at the % of total shares % of total shares shareholding due to No of shares No of shares beginning of the year end of the year of the company of the company Right issue on 30.12.2015 Sl No. Name % of total % of total % of total At the beginning of the year 99,000 0.57 99,000 0.57 No of shares of No of shares of No of shares of shares the shares the shares the Gagan company company company 6 Right shares allotted on 30.12.2015 33000 0.14 132,000 0.57 Samra 1 Balbir Singh & Joginder Kaur 862400 5.00 - - 862400 3.75 At the end of the year 132,000 0.57 132,000 0.57 2 Rashpal Singh Virk & Surinder Kaur Virk 662047 3.83 22682 0.10 684729 2.97 At the beginning of the year 79,970 0.46 79,970 0.46 3 Mohan Singh Johal 547800 3.17 - - 547800 2.38

At the beginning of the year 222,420 1.29 222,420 1.29 At the beginning of the year 19800 0.11 19,800 0.11

32 | Annual Report 2015-16 Annual Report 2015-16 | 33 INDEBTEDNESS OF THE COMPANY INCLUDING INTEREST OUTSTANDING/ACCRUED BUT NOT DUE FOR PAYMENT REMUNERATION TO OTHER DIRECTORS

Secured Loans Unsecured Particulars of Deposits Total Indebtedness Name of the Directors excluding deposits Loans Remuneration

Sukhpal Indebtness at the beginning of the financial year I.K Ranbir B.S S.S. M.G. Dinesh Rakesh Harmesh Total 1 Independent Directors Singh S.S Bains Sardana Singh Sangha Chhokar Sharma Gupta Soni Khanna Amount i) Principal Amount 0 633300000 0 633300000 Gill (a) Fee for attending ii) Interest due but not paid 0 0 0 0 board committee meetings 79000 82500 145500 6000 78000 30000 421000 iii) Interest accrued but not due 0 45068 0 45068 (b) Commission Total (i+ii+iii) 0 633345068 0 633345068 (c ) Others, please specify Change in Indebtedness during the financial year Total (1) 79000 82500 145500 6000 78000 30000 421000 Additions 0 370000000 0 370000000 2 Other Non Executive Directors Reduction 0 45068 0 45068 (a) Fee for attending Net Change 0 369954932 0 369954932 board committee meetings 100500 172500 55000 22500 350500 Indebtedness at the end of the financial year (b) Commission i) Principal Amount 0 1003300000 0 1003300000 (c ) Others, please specify. ii) Interest due but not paid 0 0 0 0 Total (2) 100500 172500 55000 22500 350500 iii) Interest accrued but not due 0 160958 0 160958 Total (B)=(1) + (2) 100500 79000 172500 55000 82500 145500 22500 6000 78000 30000 771500 Total (i+ii+iii) 0 1003460958 0 1003460958 Total Managerial Remunecation 5480277 (A) + (B) REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL Overall Cieling as per the Act: Being a Banking Company, the provisions of Banking Regulation Act, 1949 apply to the Bank and the remuneration of every wholetime Director is subject to the approval of RBI. The remuneration is however well within the limits prescribed Remuneration to Managing Director, Whole time director and/or Manager: under the Companies Act, 2013.

1 Gross salary Sarvjit Singh Samra (Managing Director) Total Amount REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

(a) Salary as per provisions contained in Particulars of Remuneration Key Managerial Personnel section 17(1) of the Income Tax. 1961. 4074534 4074534 Sl No. Gross Salary CEO Company Secretary CFO Total (b) Value of perquisites u/s 17(2) of the Income tax Act, 1961 634243 634243

(a) Salary as per provisions contained in section 1. 0 5116967 1158552 6275519 (c ) Profits in lieu of salary under section 17(3) of the Income Tax Act, 1961 0 0 17(1) of the Income Tax Act, 1961.

2 Stock option 0 0 (b) Value of perquisites u/s 17(2) of the Income Tax Act, 1961 0 280351 19406 299757 3 Sweat Equity 0 0

4 Commission 0 0 (c ) Profits in lieu of salary under section 17(3) of the Income Tax Act, 1961 0 0 0 0 as % of profit

2. Stock Option 0 0 0 0 others (specify)

3. Sweat Equity 0 0 0 0 5 Others, please specify

4. Commission as % of profit others, specify 0 0 0 0 Total (A) 4708777 4708777

5. Others, please specify 0 0 0 0 Ceiling as per Act: Being a Banking Company, the provisions of Banking Regulation Act, 1949 apply to the Bank and any payments to non-executive/independent Directors other than sitting fees can be paid only with the approval of RBI. Independent Directors are paid only sitting fees except for Managing Director who is paid an annual remuneration with the approval of RBI. Total 0 5397318 1177958 6575276

34 | Annual Report 2015-16 Annual Report 2015-16 | 35 INDEBTEDNESS OF THE COMPANY INCLUDING INTEREST OUTSTANDING/ACCRUED BUT NOT DUE FOR PAYMENT REMUNERATION TO OTHER DIRECTORS

Secured Loans Unsecured Particulars of Deposits Total Indebtedness Name of the Directors excluding deposits Loans Remuneration

1 Gross salary Sarvjit Singh Samra (Managing Director) Total Amount REMUNERATION TO KEY MANAGERIAL PERSONNEL OTHER THAN MD/MANAGER/WTD

(a) Salary as per provisions contained in section 1. 0 5116967 1158552 6275519 (c ) Profits in lieu of salary under section 17(3) of the Income Tax Act, 1961 0 0 17(1) of the Income Tax Act, 1961.

2 Stock option 0 0 (b) Value of perquisites u/s 17(2) of the Income Tax Act, 1961 0 280351 19406 299757 3 Sweat Equity 0 0

4 Commission 0 0 (c ) Profits in lieu of salary under section 17(3) of the Income Tax Act, 1961 0 0 0 0 as % of profit

2. Stock Option 0 0 0 0 others (specify)

3. Sweat Equity 0 0 0 0 5 Others, please specify

4. Commission as % of profit others, specify 0 0 0 0 Total (A) 4708777 4708777

34 | Annual Report 2015-16 Annual Report 2015-16 | 35 PENALTIES/PUNISHMENT/COMPOUNDING OF OFFENCES Management Discussion and Analysis

Details of Penalty/ Appeall made The major downside risks to the patterns. These include lingering Section of the Punishment/ Authority Type Brief Description if any Companies Act Compounding (RD/NCLT/Court) baseline outlook are related to the subdued global demand; limited (give details) GLOBAL fees imposed ECONOMIC impact of the ongoing monetary prospects for large increases in A. COMPANY policy normalization in the United trade growth as a result of trade PERSPECTIVE States, ongoing uncertainties in the agreements; and perhaps more Penalty NIL NIL NIL NIL NIL euro area, potential spillovers from limited scope for further integration Punishment NIL NIL NIL NIL NIL geopolitical conflicts, and persistent of developing countries into the The world economy continues to vulnerabilities in emerging global trading system. Compounding NIL NIL NIL NIL NIL grow at a modest pace. The growth economies. To mitigate these risks divergence between various regions and ensure a return to strong, Global Employment B. DIRECTORS has further widened in 2015, owing sustainable and balanced growth, a to differing impacts from the recent broad set of policy measures at the Penalty NIL NIL NIL NIL NIL Against the backdrop of modest decline in the prices of oil and domestic, regional and global level GDP growth, employment creation Punishment NIL NIL NIL NIL NIL other commodities, as well as is needed. remains too weak to recover the country-specific factors. While the Compounding NIL NIL NIL NIL NIL jobs lost during the crisis and to recovery in developed economies absorb new market entrants. Global Inflation is visible, many countries still face Unemployment is thus expected to C. OTHER OFFICERS IN DEFAULT considerable headwinds from the Overall global inflation continues remain elevated in many developed legacies of the global financial Penalty NIL NIL NIL NIL NIL to decline amid persistent negative countries, while part-time jobs and crisis. The overall subdued output gaps and the drop in oil and lower labour force participation will Punishment NIL NIL NIL NIL NIL performance of the world economy food prices. This aggregate picture remain major challenges. Compounding NIL NIL NIL NIL NIL in recent years has raised concerns encompasses a wide range of of a “new normal” of lower growth. diverse dynamics. In developed The broad-based weakness in countries, inflation rates - and International Capital Flows investment worldwide not only inflation expectations - have drifted The global financial markets holds back current growth, but also downwards despite unprecedented continue to be driven by highly reduces potential growth in the expansionary monetary policies. accommodative monetary policies future. Deflation risks remain in place, in a low-inflation or deflationary Stagnant investment across particularly in the euro area and environment in developed economies remains the main drag Japan. In developing countries, economies and weakening growth. on growth. Clouding the outlook is lower oil prices have generally The trade off between the continuing loss of momentum in reduced inflationary and balance- accommodative monetary policies EMEs, overlaid by the anticipated of-payment pressures, giving and fear of fragile and dwindling slowdown in China and tightening central banks more room to tackle economic growth has caused wide financial conditions. Global slowing growth. The overall impact gyrations in asset prices during economic activity has slackened on inflation differs widely across various phases of greed and fear. further and international trade countries, depending on exchange As a result, at times, sovereign and remains subdued, while downside rate trends, the importance of oil in corporate bond yields have risks have increased. Weak demand consumer baskets, monetary policy plummeted to record lows, while and soft commodity prices have stances and the extent of fuel stock markets have reached new rekindled fears of deflation in some subsidies. highs and then all of a sudden key AEs, prompting renewed capital flight dragged stock prices divergence in monetary policy sharply lower and hardened bond International Trade stances. With fragile domestic yields. Cross-border bank lending economic fundamentals, EMEs While prospects for global trade has also started to recover, but is remain vulnerable to swings in are improving, several factors will still below the levels observed market sentiments and capital continue to limit the possibilities for before the financial crisis. Capital outflows. trade to return to higher growth flows to developing economies and

36 | Annual Report 2015-16 Annual Report 2015-16 | 37 PENALTIES/PUNISHMENT/COMPOUNDING OF OFFENCES Management Discussion and Analysis

36 | Annual Report 2015-16 Annual Report 2015-16 | 37 economies in transition have and support growth and Global Financial Markets capital flows and investor global economy. And the outlook prolonged contraction in exports. retreated, with persistent volatility. employment, while at the same time sentiment. There is urgent need of for short-term growth is also good While private consumption has Global financial markets witnessed Given a subdued growth outlook preventing an unwarranted build-up calibrated policy actions from as according to the IMF, the Indian been the mainstay in holding up a roller coaster ride during the for many of these economies and in asset prices. For most other decision makers all over the world economy is the "bright spot" in the aggregate demand, it has largely whole year 2015-16. The year the US monetary policy developed economies, risk of to take consistent and objective global landscape. been an urban phenomenon; gone by witnessed the first US Fed normalization, the international stagnation amid prolonged low steps to achieve price stability, curb rural consumption have generally rate hike in almost a decade and With decline in oil and commodity capital flows have been negative inflation, sluggish growth, heightened fluctuations in financial remained weak or in negative it was accompanied with wide prices, the Indian economy is with wide fluctuations and the trend protracted weak aggregate demand markets, achieve sustainable territory. On the supply side though, fluctuations in sentiment thanks to expected to grow by 7.5 percent in is expected to be downwards going and slow-paced structural reforms economic development and build some silver linings are discernible. multiplicity of factors such as fears 2015-16, 7.9 percent the next forward as well. continue to warrant pro-active strong socio-economic model for Despite consecutive deficient of crackdown of Chinese economy, fiscal and 8 percent in 2017-18 as monetary policy stances, future success. monsoons and unseasonal weather dwindling global recovery and per the India Development Update particularly in the euro area and more recently, foodgrains stagnating investments. The last report of the World Bank. Aided by Global Exchange Rates Japan. The European Central Bank production is on course to post quarter of FY 2015-16 started on a supportive external environment, (ECB) expanded its QE programme a modest improvement over the Global foreign exchange markets a terrible note specially for global in particular the sharp decline in oil in March, reduced the deposit rate INDIAN levels recorded a year ago. For broadly tracked the equity markets, equity markets. Since the beginning and commodity prices, the Indian further into negative territory (-0.4 industry, the deceleration in the policy measures of central banks in of calendar year 2016, fears about ECONOMIC economy has taken strong strides per cent) and cut its policy rate to volume of production has been systemically important economies weakening global growth have re- PERSPECTIVE towards higher growth and zero. While the aim of countries more than offset by the decline in and shifts in investors’ risk emerged, especially about China. enhanced stability. Growth has pursuing negative interest rates has input costs. While service sector assessments. The major trend on Global equity markets dipped into picked up, inflation has declined, been to improve domestic growth activity has been expanding at a global foreign exchange markets ‘bear’ territory during January- Despite a tough year for the the current account deficit has and inflation outlook, it has given reasonable pace. has been the strength of the dollar. February 2016, with equity prices economy and financial markets narrowed, and external reserves rise to global concerns about The overall trend of US dollar has retreating across all major markets. and limited progress on headline have increased. However, the financial stability. Monetary policy been on the rising side during Bank equities, in particular, were hit reforms during the FY 2015-16, growth acceleration is conditional in EMEs has also been diversely Inflation and Inflationary whole of the year, reaching multi- hard in AEs and have fallen India will remain one of the on the growth of investment picking stanced, reflective of varied Expectations year highs against many currencies. significantly since the beginning of strongest growth stories in the up. Higher economic growth calls macroeconomic conditions. China Given uncertainties over the euro the year. Net foreign portfolio flows world. The current cyclical recovery for fiscal reforms that protect public The swift fall in commodity prices has aggressively cut deposit and area outlook, the effects of a rise in to EME bond markets were mostly – coupled with improvements in the capital spending; financial sector specially crude oil prices has lending rates and relaxed required US interest rates and the weakness negative which kept yield rates ease of doing business that have reforms; and reforms in the business helped Indian Economy in taming reserves, to modulate the pace of in some emerging economies, high. In Q4 of 2015-16, financial largely flown beneath the radar– as environment – all of which can down inflation and focus more economic slowdown. By contrast, foreign exchange volatility will likely market turbulence and a further positive signs for India’s long-term help unlock private investments. rigorously on accelerating growth. South Africa raised its policy rate in remain elevated. sharp fall in oil prices aggravated growth and corporate earnings The current situation offers an The Reserve Bank of India has November 2015 and January 2016 worries about global growth, and environment. opportunity to further strengthen taken several commendable steps to curb inflationary pressures. Brazil government bond yields fell into the business environment and starting from targeting inflation and Russia continue to maintain The global macroeconomic and Global Monetary Policy negative territory in some AEs. The enhance the quality of public and taking clear and consistent high policy rates despite recession, financial risks shifted from Monetary policy stances have been introduction of a negative deposit spending. Continuous strong monetary policy action to achieve as inflationary pressures remain advanced to emerging economies diverging across both AEs and rate by Japan pushed its 10-year momentum in these reforms will price stability and sustainable elevated by large currency with the latter facing pressures from EMEs. Growing divergence in the bond yield into negative zone, further unleash the productivity that growth. The inflation targeting depreciation. India stands out as weakening prospects of growth, monetary policy stances of the which spurred demand for other Indian firms need in order to create and taming inflation to below 6% by clear winner in terms of clarity and falling commodity prices and United States and much of the rest positive yielding treasuries and jobs and become globally January 2016 has given the central continuity in terms of targeting and strengthening of the dollar. of the world presents considerable depressed their yields. competitive. bank leeway to push for growth and adhering to sound macroeconomic However, the Indian economy the RBI has taken proactive macroeconomic policy challenges In sum, the global recovery has principles. The Reserve Bank of appears quite resilient, given a measures as well for quick and for many countries. been slow and diverse with India has done a commendable modest recovery in the economy, Demand and Output systematic transmission of policy downside risks to global economic In December 2015, the Fed raised job, to first target inflation and declining inflation and buoyant action, to safe guard against activity having increased. With Aggregate demand was restrained its policy rate after almost a decade bring it back within target zone of capital flows. The long-term growth external shocks of US interest rate global commodity prices and by stalling fixed investment, weak – to a target range for the fed funds 6% in January 2016 and then take prospects of the Indian economy decisions or global commodity inflation expected to remain soft, rural consumption and the ongoing rate of 0.25-0.5 per cent. For the calibrated accommodative are positive due to its young prices as well as providing ample monetary policy stances continue to fiscal consolidation. Domestic Fed, the key challenge is to monetary policy stance and population, corresponding low liquidity in the system so that be highly accommodative, but economic activity lost pace in the manage the pace and sequence of proactively cut interest rates to dependency ratio, healthy savings business do not find any dearth divergent. Financial markets remain second half of 2015-16, slowed normalizing the policy rate so as to augment growth after having tamed and investment rates, and of liquidity at any time. With the vulnerable to volatility and flux in down by muted investment and a maintain macroeconomic stability, down inflation. increasing integration into the expectations of lower commodity

38 | Annual Report 2015-16 Annual Report 2015-16 | 39 economies in transition have and support growth and Global Financial Markets capital flows and investor global economy. And the outlook prolonged contraction in exports. retreated, with persistent volatility. employment, while at the same time sentiment. There is urgent need of for short-term growth is also good While private consumption has Global financial markets witnessed Given a subdued growth outlook preventing an unwarranted build-up calibrated policy actions from as according to the IMF, the Indian been the mainstay in holding up a roller coaster ride during the for many of these economies and in asset prices. For most other decision makers all over the world economy is the "bright spot" in the aggregate demand, it has largely whole year 2015-16. The year the US monetary policy developed economies, risk of to take consistent and objective global landscape. been an urban phenomenon; gone by witnessed the first US Fed normalization, the international stagnation amid prolonged low steps to achieve price stability, curb rural consumption have generally rate hike in almost a decade and With decline in oil and commodity capital flows have been negative inflation, sluggish growth, heightened fluctuations in financial remained weak or in negative it was accompanied with wide prices, the Indian economy is with wide fluctuations and the trend protracted weak aggregate demand markets, achieve sustainable territory. On the supply side though, fluctuations in sentiment thanks to expected to grow by 7.5 percent in is expected to be downwards going and slow-paced structural reforms economic development and build some silver linings are discernible. multiplicity of factors such as fears 2015-16, 7.9 percent the next forward as well. continue to warrant pro-active strong socio-economic model for Despite consecutive deficient of crackdown of Chinese economy, fiscal and 8 percent in 2017-18 as monetary policy stances, future success. monsoons and unseasonal weather dwindling global recovery and per the India Development Update particularly in the euro area and more recently, foodgrains stagnating investments. The last report of the World Bank. Aided by Global Exchange Rates Japan. The European Central Bank production is on course to post quarter of FY 2015-16 started on a supportive external environment, (ECB) expanded its QE programme a modest improvement over the Global foreign exchange markets a terrible note specially for global in particular the sharp decline in oil in March, reduced the deposit rate INDIAN levels recorded a year ago. For broadly tracked the equity markets, equity markets. Since the beginning and commodity prices, the Indian further into negative territory (-0.4 industry, the deceleration in the policy measures of central banks in of calendar year 2016, fears about ECONOMIC economy has taken strong strides per cent) and cut its policy rate to volume of production has been systemically important economies weakening global growth have re- PERSPECTIVE towards higher growth and zero. While the aim of countries more than offset by the decline in and shifts in investors’ risk emerged, especially about China. enhanced stability. Growth has pursuing negative interest rates has input costs. While service sector assessments. The major trend on Global equity markets dipped into picked up, inflation has declined, been to improve domestic growth activity has been expanding at a global foreign exchange markets ‘bear’ territory during January- Despite a tough year for the the current account deficit has and inflation outlook, it has given reasonable pace. has been the strength of the dollar. February 2016, with equity prices economy and financial markets narrowed, and external reserves rise to global concerns about The overall trend of US dollar has retreating across all major markets. and limited progress on headline have increased. However, the financial stability. Monetary policy been on the rising side during Bank equities, in particular, were hit reforms during the FY 2015-16, growth acceleration is conditional in EMEs has also been diversely Inflation and Inflationary whole of the year, reaching multi- hard in AEs and have fallen India will remain one of the on the growth of investment picking stanced, reflective of varied Expectations year highs against many currencies. significantly since the beginning of strongest growth stories in the up. Higher economic growth calls macroeconomic conditions. China Given uncertainties over the euro the year. Net foreign portfolio flows world. The current cyclical recovery for fiscal reforms that protect public The swift fall in commodity prices has aggressively cut deposit and area outlook, the effects of a rise in to EME bond markets were mostly – coupled with improvements in the capital spending; financial sector specially crude oil prices has lending rates and relaxed required US interest rates and the weakness negative which kept yield rates ease of doing business that have reforms; and reforms in the business helped Indian Economy in taming reserves, to modulate the pace of in some emerging economies, high. In Q4 of 2015-16, financial largely flown beneath the radar– as environment – all of which can down inflation and focus more economic slowdown. By contrast, foreign exchange volatility will likely market turbulence and a further positive signs for India’s long-term help unlock private investments. rigorously on accelerating growth. South Africa raised its policy rate in remain elevated. sharp fall in oil prices aggravated growth and corporate earnings The current situation offers an The Reserve Bank of India has November 2015 and January 2016 worries about global growth, and environment. opportunity to further strengthen taken several commendable steps to curb inflationary pressures. Brazil government bond yields fell into the business environment and starting from targeting inflation and Russia continue to maintain The global macroeconomic and Global Monetary Policy negative territory in some AEs. The enhance the quality of public and taking clear and consistent high policy rates despite recession, financial risks shifted from Monetary policy stances have been introduction of a negative deposit spending. Continuous strong monetary policy action to achieve as inflationary pressures remain advanced to emerging economies diverging across both AEs and rate by Japan pushed its 10-year momentum in these reforms will price stability and sustainable elevated by large currency with the latter facing pressures from EMEs. Growing divergence in the bond yield into negative zone, further unleash the productivity that growth. The inflation targeting depreciation. India stands out as weakening prospects of growth, monetary policy stances of the which spurred demand for other Indian firms need in order to create and taming inflation to below 6% by clear winner in terms of clarity and falling commodity prices and United States and much of the rest positive yielding treasuries and jobs and become globally January 2016 has given the central continuity in terms of targeting and strengthening of the dollar. of the world presents considerable depressed their yields. competitive. bank leeway to push for growth and adhering to sound macroeconomic However, the Indian economy the RBI has taken proactive macroeconomic policy challenges In sum, the global recovery has principles. The Reserve Bank of appears quite resilient, given a measures as well for quick and for many countries. been slow and diverse with India has done a commendable modest recovery in the economy, Demand and Output systematic transmission of policy downside risks to global economic In December 2015, the Fed raised job, to first target inflation and declining inflation and buoyant action, to safe guard against activity having increased. With Aggregate demand was restrained its policy rate after almost a decade bring it back within target zone of capital flows. The long-term growth external shocks of US interest rate global commodity prices and by stalling fixed investment, weak – to a target range for the fed funds 6% in January 2016 and then take prospects of the Indian economy decisions or global commodity inflation expected to remain soft, rural consumption and the ongoing rate of 0.25-0.5 per cent. For the calibrated accommodative are positive due to its young prices as well as providing ample monetary policy stances continue to fiscal consolidation. Domestic Fed, the key challenge is to monetary policy stance and population, corresponding low liquidity in the system so that be highly accommodative, but economic activity lost pace in the manage the pace and sequence of proactively cut interest rates to dependency ratio, healthy savings business do not find any dearth divergent. Financial markets remain second half of 2015-16, slowed normalizing the policy rate so as to augment growth after having tamed and investment rates, and of liquidity at any time. With the vulnerable to volatility and flux in down by muted investment and a maintain macroeconomic stability, down inflation. increasing integration into the expectations of lower commodity

38 | Annual Report 2015-16 Annual Report 2015-16 | 39 and crude oil prices along with managing spillovers has become a has cut interest rates and managed • The fluctuations in global in the absence of effective Our transparent and strategic HRD confidence in consistent and major challenge for domestic quick and universal transmission of commodity prices and international monetary policy policy of recruiting local work force mature policy action by the reserve macroeconomic policies. In India, the same in the system and has international capital flows can coordination, there can be no room has always proven to be successful bank of India, the inflationary both domestic factors and global abated the inflation and inflationary create downside risks going for complacency. in attracting and retaining the best expectations have also been spillovers have conditioned expectations. Accordingly, the next forward. talent of the region. India stands at a once in a pruned down. movements in financial markets, milestone is set at 5 per cent for On the domestic front, risks arising generational take off stage where The unique culture, built upon though increasingly domestic inflation by the end of 2016-17. from erratic climatic conditions, the structural reforms including but strong values and a foundation of factors appear to have played a Second, the Union Finance Minister limited policy space, corporate not limiting to the timely teamwork, camaraderie, and Financial Sector more prominent role. announced, in his speech performance, asset quality of implementation of the Goods and commitment is a strong competitive presenting the Union Budget for The regulatory and supervisory Money, bond and credit markets financial institutions and low Services Tax (GST); rationalizing advantage for the Bank. 2016-17, that the Reserve Bank of policy responses during the year have been largely insulated from investment growth, among other current expenditures, especially on India Act is being amended to Our approach to remuneration, included the initiatives for de- global spillovers, while foreign factors, could pose challenges. To subsidies; delivering on divestment provide basis for a monetary policy including any discretionary stressing the banking sector, exchange and equity markets have mention a few: plans, ensuring greater tax framework and a Monetary Policy incentive or performance-related reforming and recapitalization of experienced bouts of volatility. buoyancy, encouraging PPP Committee (MPC). It is a big step • While India’s macro-economic awards, is designed to reward the public sector banks (PSBs), Liquidity conditions generally projects; and addressing balance which will add value and fundamentals are relatively success appropriately. In addition to strengthening the liquidity standards tightened in the second half of sheet issues of public sector banks transparency to the monetary stronger, domestic demand and lucrative remuneration structure, of the banks, monitoring the the year and proactive liquidity are must to kick off to ten percent policy decisions. private investment are still not employees are offered with buildup of leverage in the banking management alleviated pressure plus growth rate on a picking up, underscoring the additional benefits like staff system, convergence with the on money market rates. Long-term sustainable basis. need to step up public mediclaim, gratuity and international accounting standards, yields exhibited a tightening bias till Challenges to Economic investments. insurance facilities. policies relating to licensing and February and risk spreads reflected Growth expansion of UCBs and making the both corporate sector stress and • While the ratio of short term Human Capital We want our people to excel. By banking sector more inclusive. There are challenges both at external debt to forex reserves leveraging their unique strengths, asset quality concerns in banks. Capital Small Finance Bank – is domestic and global level to cope has been moderating, attracting providing the workforce with the India’s financial system remains Among domestic factors, liquidity India’s first small finance bank and with. On the global front: robust capital flows to finance right technical and professional stable and the relatively stronger conditions, market micro structure, takes pride on its expansion to Pan the current account deficit will training, we help them realize their macroeconomic fundamentals lend inflation and fiscal outlook, and • The biggest challenge remains to India. As an organization we are require continuous thrust on potential and also help them resilience to face the still prevailing market concerns relating to asset be the risks from potential highly committed to deliver finest structural reforms and perform to exceptional standards uncertainty and emerging risks in quality of banks and corporate tightening of the US monetary banking services at the doorsteps. improving the ease of doing which are in line with the growth the global economy and financial balance sheets have a prominent policy and the pace at which the Furthermore we strive to create a business. plans of the bank. Our endearing markets. However, the policy influence on market activity. US raises its interest rates. While culture of dynamism which fosters Learning and Development policy makers and stakeholders will need Proactive liquidity management is the Reserve Bank of India has • In the corporate sector, development and recognizes its offers an assorted range of to remain watchful about the critical to transmission, but by taken preventive measures to declining profitability, high employees as its greatest assets – technical and behavioural potential adverse impact of itself cannot prevent disruptions reduce external vulnerability, and leverage and low debt servicing The Life-line. We envision attaining programs along with orientation developments in the global arising from overwhelming has built international buffers as capacity continue to cause the pinnacle of success, into our workshops which aims to ensure scenario particularly increased global developments. a first line of defense, the risk concern with their attendant areas of operations by providing that the employees thrive in their volatility in financial markets and remains, warranting vigilance. adverse impact on the financial escalation prospects to our current role and are well positioned further slowdown in global trade. sector, notwithstanding a HUMAN CAPITAL. Monetary Policy Stance • With the developments in China to take on new opportunities as marginal improvement observed and sluggish global trade growth We work hard to ensure that our they rise. Two great achievements at the during the first half of current would define the global economy workplace has a diverse, inclusive Financial Markets and Liquidity monetary policy front have taken financial year. Building a high performance culture going forward. and meritocratic environment and a Conditions place in the FY 2015-16. First, the is our prerogative. The Bank Overall, India’s relatively stronger strong commitment to sustainability. inflation target of 6 per cent for • The so called currency war envisages a credible and Various segments of the domestic macroeconomic fundamentals in Our values are a vital way in which January 2016 set for itself by the which started with China transparent performance financial market spectrum have terms of growth, inflation, current we bring our unique culture to life, Reserve Bank and subsequently devaluating its currency multiple management process that helps in been impacted by bouts of turmoil account and fiscal deficits provide a and we seek to build a team that adopted formally under the times to augment its exports aligning individual goals with in global financial markets and reasonable degree of resilience to shares in and actively lives these Monetary Policy Framework which had catastrophic impact of corporate objectives. The heightened volatility. In view of the Indian economy and financial values in their day-to-day work. We Agreement (MPFA) was achieved. other emerging market performance management is disruptions in normal functioning of system in the event of spill-over always strive to search for people Since then, the Reserve Bank of currencies, can serious affect supported by rewards and these markets and the implications effects from global factors. who possess the qualities that make India has shift its monetary policy domestic price stability and recognitions. To exemplify the CEO for monetary policy transmission, However, with the continued up our values of trust, Stupendous stance to accommodative. The RBI international trade Club is one such reward of identifying, measuring and uncertainty over global growth and Performance and Professionalism. competitiveness.

40 | Annual Report 2015-16 Annual Report 2015-16 | 41 and crude oil prices along with managing spillovers has become a has cut interest rates and managed • The fluctuations in global in the absence of effective Our transparent and strategic HRD confidence in consistent and major challenge for domestic quick and universal transmission of commodity prices and international monetary policy policy of recruiting local work force mature policy action by the reserve macroeconomic policies. In India, the same in the system and has international capital flows can coordination, there can be no room has always proven to be successful bank of India, the inflationary both domestic factors and global abated the inflation and inflationary create downside risks going for complacency. in attracting and retaining the best expectations have also been spillovers have conditioned expectations. Accordingly, the next forward. talent of the region. India stands at a once in a pruned down. movements in financial markets, milestone is set at 5 per cent for On the domestic front, risks arising generational take off stage where The unique culture, built upon though increasingly domestic inflation by the end of 2016-17. from erratic climatic conditions, the structural reforms including but strong values and a foundation of factors appear to have played a Second, the Union Finance Minister limited policy space, corporate not limiting to the timely teamwork, camaraderie, and Financial Sector more prominent role. announced, in his speech performance, asset quality of implementation of the Goods and commitment is a strong competitive presenting the Union Budget for The regulatory and supervisory Money, bond and credit markets financial institutions and low Services Tax (GST); rationalizing advantage for the Bank. 2016-17, that the Reserve Bank of policy responses during the year have been largely insulated from investment growth, among other current expenditures, especially on India Act is being amended to Our approach to remuneration, included the initiatives for de- global spillovers, while foreign factors, could pose challenges. To subsidies; delivering on divestment provide basis for a monetary policy including any discretionary stressing the banking sector, exchange and equity markets have mention a few: plans, ensuring greater tax framework and a Monetary Policy incentive or performance-related reforming and recapitalization of experienced bouts of volatility. buoyancy, encouraging PPP Committee (MPC). It is a big step • While India’s macro-economic awards, is designed to reward the public sector banks (PSBs), Liquidity conditions generally projects; and addressing balance which will add value and fundamentals are relatively success appropriately. In addition to strengthening the liquidity standards tightened in the second half of sheet issues of public sector banks transparency to the monetary stronger, domestic demand and lucrative remuneration structure, of the banks, monitoring the the year and proactive liquidity are must to kick off to ten percent policy decisions. private investment are still not employees are offered with buildup of leverage in the banking management alleviated pressure plus growth rate on a picking up, underscoring the additional benefits like staff system, convergence with the on money market rates. Long-term sustainable basis. need to step up public mediclaim, gratuity and international accounting standards, yields exhibited a tightening bias till Challenges to Economic investments. insurance facilities. policies relating to licensing and February and risk spreads reflected Growth expansion of UCBs and making the both corporate sector stress and • While the ratio of short term Human Capital We want our people to excel. By banking sector more inclusive. There are challenges both at external debt to forex reserves leveraging their unique strengths, asset quality concerns in banks. Capital Small Finance Bank – is domestic and global level to cope has been moderating, attracting providing the workforce with the India’s financial system remains Among domestic factors, liquidity India’s first small finance bank and with. On the global front: robust capital flows to finance right technical and professional stable and the relatively stronger conditions, market micro structure, takes pride on its expansion to Pan the current account deficit will training, we help them realize their macroeconomic fundamentals lend inflation and fiscal outlook, and • The biggest challenge remains to India. As an organization we are require continuous thrust on potential and also help them resilience to face the still prevailing market concerns relating to asset be the risks from potential highly committed to deliver finest structural reforms and perform to exceptional standards uncertainty and emerging risks in quality of banks and corporate tightening of the US monetary banking services at the doorsteps. improving the ease of doing which are in line with the growth the global economy and financial balance sheets have a prominent policy and the pace at which the Furthermore we strive to create a business. plans of the bank. Our endearing markets. However, the policy influence on market activity. US raises its interest rates. While culture of dynamism which fosters Learning and Development policy makers and stakeholders will need Proactive liquidity management is the Reserve Bank of India has • In the corporate sector, development and recognizes its offers an assorted range of to remain watchful about the critical to transmission, but by taken preventive measures to declining profitability, high employees as its greatest assets – technical and behavioural potential adverse impact of itself cannot prevent disruptions reduce external vulnerability, and leverage and low debt servicing The Life-line. We envision attaining programs along with orientation developments in the global arising from overwhelming has built international buffers as capacity continue to cause the pinnacle of success, into our workshops which aims to ensure scenario particularly increased global developments. a first line of defense, the risk concern with their attendant areas of operations by providing that the employees thrive in their volatility in financial markets and remains, warranting vigilance. adverse impact on the financial escalation prospects to our current role and are well positioned further slowdown in global trade. sector, notwithstanding a HUMAN CAPITAL. Monetary Policy Stance • With the developments in China to take on new opportunities as marginal improvement observed and sluggish global trade growth We work hard to ensure that our they rise. Two great achievements at the during the first half of current would define the global economy workplace has a diverse, inclusive Financial Markets and Liquidity monetary policy front have taken financial year. Building a high performance culture going forward. and meritocratic environment and a Conditions place in the FY 2015-16. First, the is our prerogative. The Bank Overall, India’s relatively stronger strong commitment to sustainability. inflation target of 6 per cent for • The so called currency war envisages a credible and Various segments of the domestic macroeconomic fundamentals in Our values are a vital way in which January 2016 set for itself by the which started with China transparent performance financial market spectrum have terms of growth, inflation, current we bring our unique culture to life, Reserve Bank and subsequently devaluating its currency multiple management process that helps in been impacted by bouts of turmoil account and fiscal deficits provide a and we seek to build a team that adopted formally under the times to augment its exports aligning individual goals with in global financial markets and reasonable degree of resilience to shares in and actively lives these Monetary Policy Framework which had catastrophic impact of corporate objectives. The heightened volatility. In view of the Indian economy and financial values in their day-to-day work. We Agreement (MPFA) was achieved. other emerging market performance management is disruptions in normal functioning of system in the event of spill-over always strive to search for people Since then, the Reserve Bank of currencies, can serious affect supported by rewards and these markets and the implications effects from global factors. who possess the qualities that make India has shift its monetary policy domestic price stability and recognitions. To exemplify the CEO for monetary policy transmission, However, with the continued up our values of trust, Stupendous stance to accommodative. The RBI international trade Club is one such reward of identifying, measuring and uncertainty over global growth and Performance and Professionalism. competitiveness.

40 | Annual Report 2015-16 Annual Report 2015-16 | 41 appreciation for the top performers and Compliance department has its branches to reduce electric waste 6. Process Planning & 4. The Bank completed Phase-II of System from Intellect Design Arena and also acts as a token of direct reporting to the Managing and the same is monitored on Implementation under Business the Go-Linux project with Ltd. (erstwhile Polaris Financial inspiration for others. Director. The Team has initiated a periodical basis. Other measures Continuity Plan and disaster UBUNTU Operating System for Technology Ltd.) Chennai which few new improvements in FY 2016 like sue of LEDs, power saver air recovery. Desktop Systems. enables the bank clientele to avail To maintain a perfect work - life that are expected to further assist in conditioning equipment’s etc are any branch banking and anytime balance, the bank has introduced 7. Project planning and 5. The Bank is the 1st sub-member proactively identifying risks in being installed for conserving the banking through different delivery various employee engagement implementation on new bank in India to start e- changing business dynamics and energy. There is no capital channels like ATMs, I-banking & activities like sports meet, festival management goals. commerce on RuPay Network assist in improving overall control investment on energy conservation Mobile application. celebrations and establishment day environment. All the branches are equipment other than specified 8. Functional and level 1 support 6. The PMS (Performance celebrations. subject to regular inspections along above. to end users on Intellect CBS, Measurement System) was Focusing on corporate social with short inspections in between Foreign exchange transactions, developed in-house using the Brief Technical Functionality – We at CAPITAL SMALL FINANCE responsibility, Capital Small Finance two regular inspections and various Payroll, Mail Server, Money PULSE framework. CBS BANK LIMITED (CSFB) believe that Bank has established itself as the other audits, viz; concurrent audit Transfer & Pulse Framework. the banks with the ability to adopt 7. The Bank is the 1st sub-member Under “Intellect CBS” the preferred employer by making its of FFMC, revenue audit, IS audit and integrate information bank in India to issue EMV application, database & the mark as “Great Place to Work” for etc. Further, concurrent audit of technology will dominate in the cards on RuPay Network. storage servers are placed two consecutive years 2014 - 2015 branches is also being done as per New Developments in highly competitive domestic market. centrally in the Data Centre at the and continues to cultivate a self- concurrent audit policy of our bank. Technology Field 8. The Bank in-principle has Accordingly CSFB continues to Head Office. The Application runs motivated team, enriched with a The Bank has a system of rating the finalized for a CBS upgrade on leverage information technology as 1. The Bank went live with the AML on Linux Operating System at the spirit of belonging and oneness. quantitative and qualitative the new CANVAS technology a strategic tool in business (Anti-Money Laundering System). server end using Oracle as performance of the branches in from Intellect Design Arena operations for customer delight by 2. The Bank launched the Classic database (RDBMS). Branches are all the critical functional areas. Limited. offering efficient and improved RuPay Debit Card for its connected to the central servers Internal Control and Audit The Audit Committee of the Board services with low cost and using it customers. through WAN links using standard The bank is committed and believes reviews the performance of the as a tool to improve staff Technology Architecture Internet browser for secure and in absolute functional autonomy effectiveness of controls and 3. The Bank completed the in- productivity, increasing efficiency Content - Application for CBS reliable communication. The DR and well-being of internal control compliances with regulatory house development of the and more efficient & effective in all Branches and Head site is hosted at Tata and audit so that the functioning of guidelines and reviews the internal Software Framework called control over banking operations. Office Communications, Pune. the bank is proper and all the audit reports. The Bank has also “PULSE”. regulatory and internal standards introduced an irregularities We are convinced that investing in The Bank is using Core Banking are met with. To be in line with the eradication system for prompt IT is critical and also understand changing economic environment, rectification of irregularities and that its potential and consequences avoidance of recurrence. The on the banking is enormous. That is Capital Bank has resorted towards Net Worth Analysis enhancing its risk management system is reviewed and revised from why CSFB since its inception is systems. Utmost importance is given time to time depending on the equipped with a full-fledged Business Profile 918154 to proper maintenance and safety changing business conditions. As a Information Technology Department of public money, while providing all result of the improvements initiated with four verticals of expertise; Software, System & Support, 722457 the banking services and fulfilling last year, Internal Control and Audit 18141338 prudent risk-mitigation and risk is continuously emerging as a unit Network and Helpdesk with required manpower to strengthen 640781 management principles. We believe providing valuable inputs for 15067803 in maintaining highest standards of improving the overall risk develop, maintain and support IT 555898 management and controls. infrastructure to the following: 12641389 internal control and taking pro- 461121 active steps and rigorous 1. System/hardware support and 9777803 11451066 monitoring of the bank’s overall trouble shooting. 9268456 Energy Conservation and 8196630 operations. A well-developed Amount (in '000) 7555601 Amount (in '000) Information Technology 2. LAN/WAN maintenance and 6031803 committed Internal Audit Team and 230199 troubleshooting. 5162575

Compliance department is working The company being banking 172650 156954 156954 156954 at an independent level for 3. Level 1 support on CBS company, the energy consumed by 3746444 4523363 5857951 2861121 3131631 evaluating the adequacy of all the bank during this period is only application to branches. internal controls and ensuring in the form of electricity and diesel 4. Secure systems towards any 2011-12 2012-13 2013-14 2014-15 2015-16 adherence to internal procedures 2011-12 2012-13 2013-14 2014-15 2015-16 used in generators. The company potential threat. Develop and as well as regulatory and legal has allocated specific cost budgets Years implement automation. Investment Advances Deposits requirements. The Internal Audit for the same in Head Office and all Reserves & Surplus Share Capital

42 | Annual Report 2015-16 Annual Report 2015-16 | 43 appreciation for the top performers and Compliance department has its branches to reduce electric waste 6. Process Planning & 4. The Bank completed Phase-II of System from Intellect Design Arena and also acts as a token of direct reporting to the Managing and the same is monitored on Implementation under Business the Go-Linux project with Ltd. (erstwhile Polaris Financial inspiration for others. Director. The Team has initiated a periodical basis. Other measures Continuity Plan and disaster UBUNTU Operating System for Technology Ltd.) Chennai which few new improvements in FY 2016 like sue of LEDs, power saver air recovery. Desktop Systems. enables the bank clientele to avail To maintain a perfect work - life that are expected to further assist in conditioning equipment’s etc are any branch banking and anytime balance, the bank has introduced 7. Project planning and 5. The Bank is the 1st sub-member proactively identifying risks in being installed for conserving the banking through different delivery various employee engagement implementation on new bank in India to start e- changing business dynamics and energy. There is no capital channels like ATMs, I-banking & activities like sports meet, festival management goals. commerce on RuPay Network assist in improving overall control investment on energy conservation Mobile application. celebrations and establishment day environment. All the branches are equipment other than specified 8. Functional and level 1 support 6. The PMS (Performance celebrations. subject to regular inspections along above. to end users on Intellect CBS, Measurement System) was Focusing on corporate social with short inspections in between Foreign exchange transactions, developed in-house using the Brief Technical Functionality – We at CAPITAL SMALL FINANCE responsibility, Capital Small Finance two regular inspections and various Payroll, Mail Server, Money PULSE framework. CBS BANK LIMITED (CSFB) believe that Bank has established itself as the other audits, viz; concurrent audit Transfer & Pulse Framework. the banks with the ability to adopt 7. The Bank is the 1st sub-member Under “Intellect CBS” the preferred employer by making its of FFMC, revenue audit, IS audit and integrate information bank in India to issue EMV application, database & the mark as “Great Place to Work” for etc. Further, concurrent audit of technology will dominate in the cards on RuPay Network. storage servers are placed two consecutive years 2014 - 2015 branches is also being done as per New Developments in highly competitive domestic market. centrally in the Data Centre at the and continues to cultivate a self- concurrent audit policy of our bank. Technology Field 8. The Bank in-principle has Accordingly CSFB continues to Head Office. The Application runs motivated team, enriched with a The Bank has a system of rating the finalized for a CBS upgrade on leverage information technology as 1. The Bank went live with the AML on Linux Operating System at the spirit of belonging and oneness. quantitative and qualitative the new CANVAS technology a strategic tool in business (Anti-Money Laundering System). server end using Oracle as performance of the branches in from Intellect Design Arena operations for customer delight by 2. The Bank launched the Classic database (RDBMS). Branches are all the critical functional areas. Limited. offering efficient and improved RuPay Debit Card for its connected to the central servers Internal Control and Audit The Audit Committee of the Board services with low cost and using it customers. through WAN links using standard The bank is committed and believes reviews the performance of the as a tool to improve staff Technology Architecture Internet browser for secure and in absolute functional autonomy effectiveness of controls and 3. The Bank completed the in- productivity, increasing efficiency Content - Application for CBS reliable communication. The DR and well-being of internal control compliances with regulatory house development of the and more efficient & effective in all Branches and Head site is hosted at Tata and audit so that the functioning of guidelines and reviews the internal Software Framework called control over banking operations. Office Communications, Pune. the bank is proper and all the audit reports. The Bank has also “PULSE”. regulatory and internal standards introduced an irregularities We are convinced that investing in The Bank is using Core Banking are met with. To be in line with the eradication system for prompt IT is critical and also understand changing economic environment, rectification of irregularities and that its potential and consequences avoidance of recurrence. The on the banking is enormous. That is Capital Bank has resorted towards Net Worth Analysis enhancing its risk management system is reviewed and revised from why CSFB since its inception is systems. Utmost importance is given time to time depending on the equipped with a full-fledged Business Profile 918154 to proper maintenance and safety changing business conditions. As a Information Technology Department of public money, while providing all result of the improvements initiated with four verticals of expertise; Software, System & Support, 722457 the banking services and fulfilling last year, Internal Control and Audit 18141338 prudent risk-mitigation and risk is continuously emerging as a unit Network and Helpdesk with required manpower to strengthen 640781 management principles. We believe providing valuable inputs for 15067803 in maintaining highest standards of improving the overall risk develop, maintain and support IT 555898 management and controls. infrastructure to the following: 12641389 internal control and taking pro- 461121 active steps and rigorous 1. System/hardware support and 9777803 11451066 monitoring of the bank’s overall trouble shooting. 9268456 Energy Conservation and 8196630 operations. A well-developed Amount (in '000) 7555601 Amount (in '000) Information Technology 2. LAN/WAN maintenance and 6031803 committed Internal Audit Team and 230199 troubleshooting. 5162575

42 | Annual Report 2015-16 Annual Report 2015-16 | 43 We are India’s 1st Small Finance Bank

44 | Annual Report 2015-16 Annual Report 2015-16 | 45 We are India’s 1st Small Finance Bank

44 | Annual Report 2015-16 Annual Report 2015-16 | 45 Products & Services Independent Auditor’s Report

DEPOSITS LOANS To the members of CAPITAL India (‘RBI’) from time to time. require that we comply with SMALL FINANCE BANK This responsibility also includes ethical requirements and plan • Housing Loans Savings LIMITED (Previously known as maintenance of adequate and perform the audit to obtain • Personal Loans CAPITAL LOCAL AREA BANK accounting records in reasonable assurance about Capital Small Finance Bank's Savings • Auto Loans LIMITED) accordance with the provisions whether the financial statements Account is just the right product for • Gold Loans of the Act for safeguarding of are free of material everyone, salaried or self-employed, high • Kisan Credit Cards 1. We have audited the the assets of the Bank and for misstatements. net worth individuals and NRI's. The • Advances To Retail Traders accompanying financial preventing and detecting frauds unmatched package of Capital Small • Education Loans statements of CAPITAL SMALL 6. An audit involves performing and other irregularities; Finance Bank Savings Bank Account brings • Mortgage Loans Against Property FINANCE BANK LIMITED procedures to obtain audit selection and application of the benefits of better, efficient and hassle- • Advances Against Rentals (Previously known as Capital evidence about the amounts free banking, depending upon the customer appropriate accounting • Advances for construction/Real Estate Projects Local Area Bank Limited) (here and the disclosures in the needs. The Bank offers following saving policies; making judgments and • Overdraft Facility in referred to as ‘the Bank’), financial statements. The accounts as per the requirement of the estimates that are reasonable which comprise the Balance procedures selected depend on customers. and prudent; and design, Sheet as on 31 March 2016, the auditor’s judgment, MONEY TRANSFER implementation and • Normal Savings Account the Profit and Loss Account, the including the assessment of the Capital Small Finance Bank extends the services of receiving maintenance of adequate • Capital Savings Account Cash Flow Statement for the risks of material misstatement of money from friends and relatives in over 200 countries in the internal financial controls, that • Capital Saver Savings Account year then ended, and a the financial statements, fastest possible way. For this purpose we have a tie-up with were operating effectively for • Capital Super Savings Account summary of significant whether due to fraud or error. In Western Union Financial Services Inc., Money Gram Inc. & Xpress ensuring the accuracy and • Basic Saving Bank Deposit Account accounting policies and other making those risk assessments, Money. Western Union, Money Gram & Xpress Money are global completeness of the accounting (No Frill A/C) explanatory information. the auditor considers internal leaders in money transfer and message services, with a history of records, relevant to the financial control relevant to the pioneering service dating back to more than 100 years. preparation and presentation of Consumers can quickly and easily transfer money through Western Bank’s preparation of the Current the financial statements that Management’s Responsibility financial statements that give a Union and Money Gram agents located in over 200 countries give a true and fair view and Money transactions are at the heart of most worldwide. for the Financial Statements true and fair view in order to are free from material business relationships. Your bank's support design audit procedures that 2. The Bank’s Board of Directors is misstatement, whether due to and services can make all the difference in are appropriate in the responsible for the matters fraud or error. closing a deal, and maintaining goodwill FOREX SERVICES circumstances. An audit also stated in section 134(5) of the with business associates. includes evaluating the • Sale of Foreign Currency Companies Act, 2013 (‘the • Purchase of Foreign Currency appropriateness of accounting • Normal Current Account Act’) with respect to the Auditor’s Responsibility • Travelers Cheques (TC) policies used and the • Capital Current Account preparation of the financial 3. Our responsibility is to express reasonableness of the • Capital Plus Current Account statements that give a true and an opinion on the financial accounting estimates made by • Capital Premium Current Account INSURANCE fair view of the financial statements based on our audit. the Bank’s Directors, as well as position, financial performance We at Capital Small Finance Bank, understand that different evaluating the overall and cash flows of the Bank in 4. We have taken into account the people have different needs at various stages of their lives. That's Term Deposit provisions of the Act, the presentation of the financial why, we in association with ICICI Prudential Life Insurance accordance with the accounting statements. Just as each little drop matters in filling a Company Ltd., offer a host of Life Insurance solutions, depending principles generally accepted in accounting and auditing bucket, similarly little saving today yields on whether a customer is a young individual planning for the years India, including the Accounting standards and matters which 7. We believe that the audit better results tomorrow. Term Deposit ahead or an established professional planning for the retirement. Standards specified under are required to be included in evidence we have obtained is account of the bank can be opened with a In order to expand the Life Insurance product range for the section 133 of the Act, read the audit report under the sufficient and appropriate to minimum amount of `1000/- under various customers at large Capital Small Finance Bank, has additionally with Rule 7 of the Companies provisions of the Act and the provide a basis for our audit schemes. collaborated with HDFC Standard Life Insurance Co. Ltd. (Accounts) Rules, 2014 as rules made thereunder. opinion on the standalone amended by Companies financial statements. • Cumulative Deposit Account Banking services should not just meet the financial needs, but also 5. We conducted our audit of the (Accounting Standards) • Short Term Deposit Account help to protect what is important to us, be it our home, office, Bank including its branches in Amendment Rules, 2016 and • QIDS Account machine, vehicle or health. We're associated with Bajaj Allianz accordance with Standards on provisions of Section 29 of the • MIDS Account General Insurance Co. Ltd., and now we have joined hands with Auditing (‘the Standards’) SBI General Insurance Co.Ltd. also, to offer numerous flexible Banking Regulation Act, 1949 • Recurring Account specified under section 143(10) options that fulfill all General Insurance needs of the customers. and circulars and guidelines of the Act. Those standards issued by the Reserve Bank of

46 | Annual Report 2015-16 Annual Report 2015-16 | 47 Products & Services Independent Auditor’s Report

46 | Annual Report 2015-16 Annual Report 2015-16 | 47 Opinion c) The returns received from vi. With respect to the adequacy Annexure A to the independent including adherence to bank’s financial reporting, assessing the offices; and branches of the internal financial auditor’s report of even date policies, the safeguarding of its the risk that a material 8. In our opinion and to the best of the Bank have been controls over financial on the financial statements of assets, the prevention and weakness exists, and testing and of our information and found adequate for the reporting of the Bank and Capital Small Finance Bank detection of frauds and errors, evaluating the design and according to the explanations purposes of our audit. the operating effectiveness Limited (Previously known as the accuracy and completeness operating effectiveness of given to us, the aforesaid of such controls, refer to CAPITAL LOCAL AREA BANK of the accounting records, and internal control based on the financial statements give the 11. Further, as required by section our separate report in LIMITED) the timely preparation of assessed risk. The procedures information required by the 143(3) of the Act, we further “Annexure A”. reliable financial information, as selected depend on the Banking Regulation Act, 1949 report that: required under the Companies auditor’s judgement, including as well as the Companies Act, vii. With respect to the other i. We have sought and Report on the Internal Act, 2013 (‘the Act’). the assessment of the risks of 2013 in the manner so required matters to be included in obtained all the information Financial Controls under material misstatement of the for banking companies and give the Auditor’s Report in and explanations which to Clause (i) of Sub-section 3 of financial statements, whether a true and fair view in conformity accordance with Rule 11 the best of our knowledge Section 143 of the Companies Auditor’s Responsibility due to fraud or error. with accounting principles of the Companies (Audit and belief were necessary Act, 2013 generally accepted in India of and Auditors) Rules, 2014, 3. Our responsibility is to express 5. We believe that the audit for the purpose of our audit; the state of affairs of the Bank in our opinion and to the 1. We have audited the internal an opinion on the Bank’s evidence we have obtained is as at 31st March, 2016, and its ii. In our opinion, proper best of our information financial controls over financial internal financial controls over sufficient and appropriate to profit & loss and its cash flows books of account as required and according to the reporting of CAPITAL SMALL financial reporting based on our provide a basis for our audit for the year then ended. by law have been kept by explanations given to us: FINANCE BANK LIMITED audit. We conducted our audit opinion on the Bank’s internal the Bank so far as it appears a) The Bank has disclosed (Previously known as CAPITAL in accordance with the financial controls system over from our examination of the impact of pending LOCAL AREA BANK LIMITED ) Guidance Note on Audit of financial reporting. Report on Other Legal and those books. litigations on its financial (here in referred to as ‘the Internal Financial Controls Over Regulatory Requirements Bank’) as at 31 March 2016 in Financial Reporting (‘the iii. The Balance Sheet, the Profit position in its financial conjunction with our audit of Guidance Note’) and the Meaning of Internal Financial 9. The Balance Sheet and the and Loss Account and the statements - the financial statements of the Standards on Auditing (‘the Controls Over Financial Profit and Loss Account have Cash Flow Statement dealt Refer Schedule 18 - Bank for the year ended on that Standards’), issued by the ICAI Reporting been drawn up in accordance with by this report are in Note 11(a) to the date. and deemed to be prescribed with the provisions of Section agreement with the books 6. A bank’s internal financial financial statements; under section 143(10) of the 29 of the Banking Regulation of account. control over financial reporting Act, to the extent applicable to Act, 1949 read with Section (b) The Bank did not have is a process designed to provide iv. In our opinion, the aforesaid Management’s Responsibility an audit of internal financial 133 of the Companies Act, any long-term contracts reasonable assurance regarding financial statements comply for Internal Financial Controls controls, both issued by the 2013 read with Rule 7 of the including derivative the reliability of financial with the Accounting contracts for which there ICAI. Those Standards and the Companies (Accounts) Rules, 2. The Bank’s Board of Directors is reporting and the preparation of Standards specified under were any material Guidance Note require that we 2014 as amended by responsible for establishing and financial statements for external Section 133 of the Act, read foreseeable losses as comply with ethical Companies (Accounting maintaining internal financial purposes in accordance with with Rule 7 of the Companies certified by the requirements and plan and Standards) Amendment Rules, controls based on the internal generally accepted accounting (Accounts) Rules, 2014, as management and perform the audit to obtain 2016. control over financial reporting principles. A bank’s internal amended by companies reasonable assurance about (c) There has been no delay criteria established by the Bank financial control over financial 10. As required by sub section (3) (Accounting Standard) whether adequate internal in transferring amounts, considering the essential reporting includes those policies of section 30 of the Banking Amendment Rules 2016 financial controls over financial required to be components of internal control and procedures that (1) pertain Regulation Act, 1949, we to the extent they are not reporting was established and transferred, to the stated in the Guidance Note on to the maintenance of records report that: inconsistent with the maintained and if such controls Investor Education and Audit of Internal Financial that, in reasonable detail, accounting policies operated effectively in all a) We have obtained all the Protection Fund by the Controls over Financial accurately and fairly reflect the prescribed by RBI; material respects. information and Bank. Reporting (‘the Guidance Note’) transactions and dispositions of explanations which, to the v. On the basis of written issued by the Institute of 4. Our audit involves performing the assets of the bank; (2) best of our knowledge and representations received Chartered Accountants of India procedures to obtain audit provide reasonable assurance belief, were necessary for from the directors as on For V.P. VIJH & CO (‘the ICAI’). evidence about the adequacy of that transactions are recorded the purpose of our audit 31 March 2016 taken Chartered Accountants the internal financial controls as necessary to permit These responsibilities include and have found them to on record by the Board (Firm’s Registration No.001248 N) system over financial reporting preparation of financial the design, implementation and be satisfactory; of Directors, none of the (R.K.GUPTA)(Partner) and their operating statements in accordance with maintenance of adequate directors is disqualified as Membership Number 016274 effectiveness. Our audit of generally accepted accounting b) The transactions of the internal financial controls that on 31 March 2016 from internal financial controls over principles, and that receipts and Bank, which have come to were operating effectively for being appointed as a financial reporting included expenditures of the bank are our notice, have been within ensuring the orderly and director in terms of Section Place: Jalandhar obtaining an understanding of being made only in accordance the powers of the Bank. efficient conduct of its business, 164 (2) of the Act; and Date : April 30, 2016 internal financial controls over with authorizations of

48 | Annual Report 2015-16 Annual Report 2015-16 | 49 Opinion c) The returns received from vi. With respect to the adequacy Annexure A to the independent including adherence to bank’s financial reporting, assessing the offices; and branches of the internal financial auditor’s report of even date policies, the safeguarding of its the risk that a material 8. In our opinion and to the best of the Bank have been controls over financial on the financial statements of assets, the prevention and weakness exists, and testing and of our information and found adequate for the reporting of the Bank and Capital Small Finance Bank detection of frauds and errors, evaluating the design and according to the explanations purposes of our audit. the operating effectiveness Limited (Previously known as the accuracy and completeness operating effectiveness of given to us, the aforesaid of such controls, refer to CAPITAL LOCAL AREA BANK of the accounting records, and internal control based on the financial statements give the 11. Further, as required by section our separate report in LIMITED) the timely preparation of assessed risk. The procedures information required by the 143(3) of the Act, we further “Annexure A”. reliable financial information, as selected depend on the Banking Regulation Act, 1949 report that: required under the Companies auditor’s judgement, including as well as the Companies Act, vii. With respect to the other i. We have sought and Report on the Internal Act, 2013 (‘the Act’). the assessment of the risks of 2013 in the manner so required matters to be included in obtained all the information Financial Controls under material misstatement of the for banking companies and give the Auditor’s Report in and explanations which to Clause (i) of Sub-section 3 of financial statements, whether a true and fair view in conformity accordance with Rule 11 the best of our knowledge Section 143 of the Companies Auditor’s Responsibility due to fraud or error. with accounting principles of the Companies (Audit and belief were necessary Act, 2013 generally accepted in India of and Auditors) Rules, 2014, 3. Our responsibility is to express 5. We believe that the audit for the purpose of our audit; the state of affairs of the Bank in our opinion and to the 1. We have audited the internal an opinion on the Bank’s evidence we have obtained is as at 31st March, 2016, and its ii. In our opinion, proper best of our information financial controls over financial internal financial controls over sufficient and appropriate to profit & loss and its cash flows books of account as required and according to the reporting of CAPITAL SMALL financial reporting based on our provide a basis for our audit for the year then ended. by law have been kept by explanations given to us: FINANCE BANK LIMITED audit. We conducted our audit opinion on the Bank’s internal the Bank so far as it appears a) The Bank has disclosed (Previously known as CAPITAL in accordance with the financial controls system over from our examination of the impact of pending LOCAL AREA BANK LIMITED ) Guidance Note on Audit of financial reporting. Report on Other Legal and those books. litigations on its financial (here in referred to as ‘the Internal Financial Controls Over Regulatory Requirements Bank’) as at 31 March 2016 in Financial Reporting (‘the iii. The Balance Sheet, the Profit position in its financial conjunction with our audit of Guidance Note’) and the Meaning of Internal Financial 9. The Balance Sheet and the and Loss Account and the statements - the financial statements of the Standards on Auditing (‘the Controls Over Financial Profit and Loss Account have Cash Flow Statement dealt Refer Schedule 18 - Bank for the year ended on that Standards’), issued by the ICAI Reporting been drawn up in accordance with by this report are in Note 11(a) to the date. and deemed to be prescribed with the provisions of Section agreement with the books 6. A bank’s internal financial financial statements; under section 143(10) of the 29 of the Banking Regulation of account. control over financial reporting Act, to the extent applicable to Act, 1949 read with Section (b) The Bank did not have is a process designed to provide iv. In our opinion, the aforesaid Management’s Responsibility an audit of internal financial 133 of the Companies Act, any long-term contracts reasonable assurance regarding financial statements comply for Internal Financial Controls controls, both issued by the 2013 read with Rule 7 of the including derivative the reliability of financial with the Accounting contracts for which there ICAI. Those Standards and the Companies (Accounts) Rules, 2. The Bank’s Board of Directors is reporting and the preparation of Standards specified under were any material Guidance Note require that we 2014 as amended by responsible for establishing and financial statements for external Section 133 of the Act, read foreseeable losses as comply with ethical Companies (Accounting maintaining internal financial purposes in accordance with with Rule 7 of the Companies certified by the requirements and plan and Standards) Amendment Rules, controls based on the internal generally accepted accounting (Accounts) Rules, 2014, as management and perform the audit to obtain 2016. control over financial reporting principles. A bank’s internal amended by companies reasonable assurance about (c) There has been no delay criteria established by the Bank financial control over financial 10. As required by sub section (3) (Accounting Standard) whether adequate internal in transferring amounts, considering the essential reporting includes those policies of section 30 of the Banking Amendment Rules 2016 financial controls over financial required to be components of internal control and procedures that (1) pertain Regulation Act, 1949, we to the extent they are not reporting was established and transferred, to the stated in the Guidance Note on to the maintenance of records report that: inconsistent with the maintained and if such controls Investor Education and Audit of Internal Financial that, in reasonable detail, accounting policies operated effectively in all a) We have obtained all the Protection Fund by the Controls over Financial accurately and fairly reflect the prescribed by RBI; material respects. information and Bank. Reporting (‘the Guidance Note’) transactions and dispositions of explanations which, to the v. On the basis of written issued by the Institute of 4. Our audit involves performing the assets of the bank; (2) best of our knowledge and representations received Chartered Accountants of India procedures to obtain audit provide reasonable assurance belief, were necessary for from the directors as on For V.P. VIJH & CO (‘the ICAI’). evidence about the adequacy of that transactions are recorded the purpose of our audit 31 March 2016 taken Chartered Accountants the internal financial controls as necessary to permit These responsibilities include and have found them to on record by the Board (Firm’s Registration No.001248 N) system over financial reporting preparation of financial the design, implementation and be satisfactory; of Directors, none of the (R.K.GUPTA)(Partner) and their operating statements in accordance with maintenance of adequate directors is disqualified as Membership Number 016274 effectiveness. Our audit of generally accepted accounting b) The transactions of the internal financial controls that on 31 March 2016 from internal financial controls over principles, and that receipts and Bank, which have come to were operating effectively for being appointed as a financial reporting included expenditures of the bank are our notice, have been within ensuring the orderly and director in terms of Section Place: Jalandhar obtaining an understanding of being made only in accordance the powers of the Bank. efficient conduct of its business, 164 (2) of the Act; and Date : April 30, 2016 internal financial controls over with authorizations of

48 | Annual Report 2015-16 Annual Report 2015-16 | 49 management and directors of Opinion the bank; and (3) provide 8. In our opinion, the Bank has, in reasonable assurance regarding all material respects, an prevention or timely detection of adequate internal financial unauthorized acquisition, use, controls system over financial or disposition of the bank’s assets that could have a reporting and such internal material effect on the financial financial controls over financial Redefining Rural Banking statements. reporting were operating effectively as at 31March 2016, based on the internal control Inherent Limitations of Internal over financial reporting criteria Financial Controls Over established by the Bank Financial Reporting considering the essential components of internal control 7. Because of the inherent stated in the Guidance Note limitations of internal financial issued by the ICAI. controls over financial reporting, including the possibility of collusion or For V.P. VIJH & CO. improper management override Chartered Accountants of controls, material (Firm’s Registration No.001248N) misstatements due to error or fraud may occur and not be detected. Also, projections of (R.K. Gupta) any evaluation of the internal (Partner) financial controls over financial Membership N016274 reporting to future periods are subject to the risk that the internal financial control over Date : 30TH April, 2016 financial reporting may become Place: Jalandhar inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

50 | Annual Report 2015-16 Annual Report 2015-16 | 51 management and directors of Opinion the bank; and (3) provide 8. In our opinion, the Bank has, in reasonable assurance regarding all material respects, an prevention or timely detection of adequate internal financial unauthorized acquisition, use, controls system over financial or disposition of the bank’s assets that could have a reporting and such internal material effect on the financial financial controls over financial Redefining Rural Banking statements. reporting were operating effectively as at 31March 2016, based on the internal control Inherent Limitations of Internal over financial reporting criteria Financial Controls Over established by the Bank Financial Reporting considering the essential components of internal control 7. Because of the inherent stated in the Guidance Note limitations of internal financial issued by the ICAI. controls over financial reporting, including the possibility of collusion or For V.P. VIJH & CO. improper management override Chartered Accountants of controls, material (Firm’s Registration No.001248N) misstatements due to error or fraud may occur and not be detected. Also, projections of (R.K. Gupta) any evaluation of the internal (Partner) financial controls over financial Membership N016274 reporting to future periods are subject to the risk that the internal financial control over Date : 30TH April, 2016 financial reporting may become Place: Jalandhar inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

50 | Annual Report 2015-16 Annual Report 2015-16 | 51 Annual Accounts PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 (` in '000) BALANCE SHEET AS ON MARCH 31, 2016 PARTICULARS SCHEDULE Year ended Year ended (` in '000) 31/03/2016 31/03/2015

PARTICULARS SCHEDULE As on 31/03/2016 As on 31/03/15 INCOME Interest Earned 13 1880055 1604112 Other Income 14 143207 115766 CAPITAL & LIABILITIES Total 2023262 1719878 Capital 1 230199 172650 EXPENDITURE Reserve and Surplus 2 918154 722457 Interest Expended 15 1253263 1057962 Deposits 3 18141338 15067803 Operating Expenses 16 557410 469275

Borrowings 4 1003300 633300 Provisions and Contingencies 75198 50445 Total 1885871 1577682 Other Liabilities and provisions 5 232379 205304

Total 20525370 16801514 PROFIT/LOSS Net profit for the year 137391 142196 Profit brought forward 435069 378021 ASSETS Total 572460 520217 Cash and Balances with Reserve Bank of India 6 683727 562927

Balances with banks and Money at call and short notice 7 1929412 1921358 APPROPRIATIONS Transfer to Statutory Reserves 34348 35549 Investments 8 5857951 4523363 Transfer to Special Reserve 871 685 Advances 9 11451066 9268456 Transfer to/from Investment Reserve Account - 13181

Fixed assets 10 364250 325413 Depreciation charge on fixed assets for earlier years - 2453 Transfer to Proposed Dividend 29964 27624 Other Assets 11 238964 199997 Tax on Proposed Dividend 6068 5656 Total 20525370 16801514 Balance carried over to Balance sheet 501209 435069 Total 572460 520217

Contingent Liabilities 12 184202 152992 EARNING PER SHARE Bills for Collection - - Basic (Rupees) 6.70 7.23* Diluted (Rupees) 6.70 7.23* Significant Accounting Policies 17 (Face value) (Rupees) 10.00 10.00 Notes to Accounts 18 *Restated EPS

Munish Jain Sahil Vijay Sarvjit Singh Samra Bhagwant Singh Sangha As per our separate report appended Munish Jain Sahil Vijay Sarvjit Singh Samra Bhagwant Singh Sangha As per our separate report appended Chief Operating Officer Chief Financial Officer Managing Director Madan Gopal Sharma For V.P. Vijh & CO. Chief Operating Officer Chief Financial Officer Managing Director Madan Gopal Sharma For V.P. Vijh & CO. & Company Secretary Chartered Accountants & Company Secretary Chartered Accountants Sukhpal Singh Gill Sukhpal Singh Gill Directors R.K.GUPTA Directors R.K.GUPTA (Partner) (Partner) Date : 30TH April, 2016 Membership No. 016274 Date : 30TH April, 2016 Membership No. 016274 FRN : 01248N FRN : 01248N Place: Jalandhar Place: Jalandhar

52 | Annual Report 2015-16 Annual Report 2015-16 | 53 Annual Accounts PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2016 (` in '000) BALANCE SHEET AS ON MARCH 31, 2016 PARTICULARS SCHEDULE Year ended Year ended (` in '000) 31/03/2016 31/03/2015

Borrowings 4 1003300 633300 Provisions and Contingencies 75198 50445 Total 1885871 1577682 Other Liabilities and provisions 5 232379 205304

Total 20525370 16801514 PROFIT/LOSS Net profit for the year 137391 142196 Profit brought forward 435069 378021 ASSETS Total 572460 520217 Cash and Balances with Reserve Bank of India 6 683727 562927

52 | Annual Report 2015-16 Annual Report 2015-16 | 53 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2016 Schedules forming part of the Balance Sheet (` in '000) As On March 31, 2016 PARTICULARS Year ended Year ended (` in '000) 31/03/2016 31/03/2015 As on 31/03/16 As on 31/03/15 CASH FLOW FROM OPERATING ACTIVITIES: Net Profit before Taxes 198916 208243 SCHEDULE - 1 CAPITAL

Adjustment for: Authorised Capital 250000 250000 Depreciation Charge on Fixed Assets for The Year 54564 53048 25000000 equity shares of Rs. 10 each Loan Loss Provision 13543 9203 Issued, Subscribed and Paid-up Capital Loss on Sale of Fixed Assets 88 940 23019893 (Previous year 17264971) equity shares issued of 230199 172650 Other Provision 130 1820 Rs.10 each fully paid-up (Of the above shares 2769543 shares Depreciation on Investment - (26625) are allotted as fully paid-up equity shares by way of bonus shares) 267241 246629 Total 230199 172650

Adjustment For: (Increase)/Decrease in Term Deposits with other Banks 28883 (46012) SCHEDULE 2 - RESERVES AND SURPLUS (Increase)/Decrease In Investments (1494539) (750294) I. Statutory Reserves (Increase)/Decrease In Advances (2191086) (1716843) Opening Balance 239735 204186 Increase/(Decrease) In Borrowings - (69588) Additions during the year 34348 35549 Increase/(Decrease) In Deposits 3073535 2426414 (Increase)/Decrease In Other Assets (23190) (9594) II. Capital Reserves Increase/(Decrease) In Other Liabilities & Provision 19095 26169 Opening Balance 159 159 (320061) 106881 Additions during the year Refund/(Payment) of Direct Taxes (77302) (72863) III. Special Reserves NET CASH FLOW FROM OPERATING ACTIVITIES (397363) 34018 Opening Balance 5835 5150 Additions during the year 871 685 CASH FLOW FROM INVESTING ACTIVITIES IV. Investment Reserves Account Purchase of Fixed Assets (94500) (64491) Proceeds from Sale of Fixed Assets 1010 1862 Opening Balance 13181 - NET CASH FLOW FROM INVESTING ACTIVITIES (93490) (62629) Additions during the year - 13181 Deductions during the year - -

CASH FLOW FROM FINANCING ACTIVITIES V. Security Premium Account Net Proceeds from Right Issue of Equity Shares Opening Balance 28478 53265 to existing shareholders 172648 0 Additions during the year 115099 - Net Proceeds from the new issue of Deductions during the year 20761 24787 Unsecured Redeemable Non-Convertible Bonds 349239 225608 VI. Balance in Profit & Loss Account 501209 435069 Dividend Payment ( Including C D T) (33248) (18363) NET CASH FLOW FROM FINANCING ACTIVITIES 488639 207245 Total 918154 722457 Net Increase / (Decrease) In Cash & Cash Equivalent (2214) 178634 SCHEDULE 3 - DEPOSITS Cash & Cash Equivalents In the Beginning 788232 609598 Cash & Cash Equivalents At the end 786018 788232 A I Demand Deposits From banks 25 26 Munish Jain Sahil Vijay Sarvjit Singh Samra Bhagwant Singh Sangha As per our separate report appended From others 464929 344514 II Saving Bank Deposits 5914083 5038154 Chief Operating Officer Chief Financial Officer Managing Director Madan Gopal Sharma For V.P. Vijh & CO. & Company Secretary Chartered Accountants III Term deposits Sukhpal Singh Gill From banks - - Directors R.K.GUPTA From others 11762301 9685109 (Partner) Total 18141338 15067803 Date : 30TH April, 2016 Membership No. 016274 FRN : 01248N Place: Jalandhar

54 | Annual Report 2015-16 Annual Report 2015-16 | 55 CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2016 Schedules forming part of the Balance Sheet (` in '000) As On March 31, 2016 PARTICULARS Year ended Year ended (` in '000) 31/03/2016 31/03/2015 As on 31/03/16 As on 31/03/15 CASH FLOW FROM OPERATING ACTIVITIES: Net Profit before Taxes 198916 208243 SCHEDULE - 1 CAPITAL

54 | Annual Report 2015-16 Annual Report 2015-16 | 55 As on 31/03/16 As on 31/03/15 As on 31/03/16 As on 31/03/15

II. Outside India B I Deposits of branches in India 18141338 15067803 a) in current accounts - - II Deposits of branches outside India - - b) in other deposits accounts - - Total 18141338 15067803 c) Money at call and short notice - - Total (II) - - G. Total (I+II) 1929412 1921358 SCHEDULE 4 - BORROWINGS I. Borrowings in India - Reserve Bank of India - - SCHEDULE 8 - INVESTMENTS - Other Banks - - I Investments in India in - Unsecured Redeemable Non-Convertible Bonds 613300 493300 i) Government securities 5737951 4483363 (Subordinated debt - Tier II Capital) ii) Other approved securities - - - Hybrid debt Capital instrument issued as debentures 390000 140000 iii) Shares - - II. Borrowings outside India - - iv) Debentures and Bonds 40000 40000 Total 1003300 633300 v) Subsidiaries and/or joint ventures - - vi) Others (Certificate of deposits, money mkt based mutual funds) 80000 SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS Total (I) 5857951 4523363 I. Bills Payable 67711 61552 II. Inter-office adjustments (net) 1979 20 II Investments outside India in III. Interest accrued 26551 22404 i) Government securities - - IV. Others (including provisions) 100075 88048 ii) Subsidiaries and/or joint ventures abroad - - V. Proposed Dividend (includes tax on Dividend) 36063 33280 iii) Other Investments - - Total 232379 205304 Total (II) - - G. Total(I+II) 5857951 4523363 SCHEDULE 6 - CASH AND BALANCE WITH RESERVE BANK OF INDIA I. Cash in hand 290528 264624 SCHEDULE 9 - ADVANCES II. Balance with Reserve Bank of India A i) Bills purchased and discounted 1714 - a) in current accounts 393199 298303 ii) Cash credits, overdrafts and loans repayable on demand 7856669 6230831 b) in other deposits accounts - - iii) Term Loans 3592683 3037625 Total 683727 562927 Total 11451066 9268456

B i) Secured by Tangible Assets 11286999 9148780 SCHEDULE 7 - BALANCE WITH BANKS AND MONEY AT CALL & SHORT NOTICE ii) Covered by Bank / Government Guarantees - - iii) Unsecured 164067 119676 I. In India Total 11451066 9268456 I) Balance with banks a) in current accounts 102291 225305 C i) Advances in India b) in other deposit accounts 1667170 1696053 ii) Priority Sector 7533379 5158772 II) Money at call and short notice - - iii) Public Sector - - a) With Banks iv) Banks - - b) With other Institutions 159951 - v) Other 3917687 4109684 Total (I) 1929412 1921358 Total (I) 11451066 9268456

56 | Annual Report 2015-16 Annual Report 2015-16 | 57 As on 31/03/16 As on 31/03/15 As on 31/03/16 As on 31/03/15

II) Advances outside India i) Due from Banks - - SCHEDULE 13 - INTEREST EARNED ii) Due from Others - - I. Interest/discount on advances/bills 1300286 1086226 a) Bills Purchased & Discounted - - II. Income on investments 424680 336632 b) Syndicated Loans - - c) Others - - III. Interest on balance with Reserve Bank of India and inter-bank funds 154708 181254 Total (II) - - IV. Others 381 - G.Total (I+II) 11451066 9268456 Total 1880055 1604112

SCHEDULE 10 - FIXED ASSETS I. Premises SCHEDULE 14 - OTHER INCOME At cost as on 31st March of the preceding year 64399 61256 I. Commission, exchange and brokerage 101233 83888 Add : Additions during the year 125 3143 II. Profit/Loss on sale of investments(Net) 19068 18239 Less : Deductions during the year Total 64524 64399 III. Profit/Loss on revaluation of investments(Net) - - Depreciation IV. Profit/Loss on sale of land, building & other assets(Net) (88) (940) As at 31st March of the preceding year - - V Profit/Loss on Exchange Transactions(Net) 22872 14454 Charge for the year - - VI Income earned by way of dividends etc. - - Total - - Net Block I 64524 64399 VII Miscellaneous income 122 125 Other Fixed Assets (including furniture & fixtures) Total 143207 115766 At cost as on 31st March of the preceding year 499590 444805 Add : Additions during the year 94375 61348 Less : Deductions during the year 1958 6563 SCHEDULE 15 - INTEREST EXPENDED Total 592007 499590 Depreciation I. Interest on deposits 1175828 1003245 As at 31st March of the preceding year 238576 186836 II. Interest on inter-bank borrowings 4428 2258 Charge for the year 54564 55501 III. Others 73007 52459 Less : Reversed on sale 859 3761 Total 1253263 1057962 Total 292281 238576 Net Block II 299726 261014 Grand Total ( I & II ) 364250 325413 SCHEDULE 16 - OPERATING EXPENSES SCHEDULE 11 - OTHER ASSETS I. Payments to and provisions for employees 282334 233843 i) Inter-office adjustments (net) - - II. Rent, taxes and lighting 77274 64878 ii) Interest accrued 169933 154476 III. Printing and stationery 11700 10247 iii) Stationary & Stamps 6009 6628 IV. Advertisement and publicity 7597 6596 iv) Others 63022 38893 Total 238964 199997 V. Depreciation on bank property 54564 53048 VI. Directors fees, allowances & expenses 772 661 SCHEDULE 12 - CONTINGENT LIABILITIES VII Auditors fees and expenses 841 781 i) Claims against the Bank not acknowledged as debts - - VIII Law charges 196 46 ii) Liability for partly paid investments - - IX Postage, telegrams, telephones etc. 11027 9148 iii) Liability on account of outstanding forward exchange contracts - - iv) Guarantees given on behalf of constituents - - X Repairs and maintenance 17421 15267 (a) In India 153891 131629 XI Insurance 23344 19305 (b) Outside India - - XII Other expenditure 70340 55455 v) Acceptances, endorsements and other obligations 21032 16363 Total 557410 469275 vi) Other items for which bank is contingently liable. 9279 5000 Total 184202 152992

58 | Annual Report 2015-16 Annual Report 2015-16 | 59 As on 31/03/16 As on 31/03/15 As on 31/03/16 As on 31/03/15

58 | Annual Report 2015-16 Annual Report 2015-16 | 59 Available for Sale Bank of India guidelines, gross basis. Tax effects are Schedule 17: advances are classified as accounted for in the year of Individual Scrips in this Performing or Non Performing write off. category are marked to Significant Accounting Policies based on recovery of principal/ market at quarterly interest. Provisions on Advances intervals. While the net Appended to and Forming Part of are made in accordance with 3. FIXED ASSETS depreciation under each the Reserve Bank of India’s classification is fully a. Fixed assets are capitalized the Financial Statements for guidelines/directives, as under:- provided for in profit & loss at cost which comprises of the Year Ended March 31, 2016 account, the net a. All advances are classified cost of purchase, site appreciation if any for each under four categories i.e. (a) preparation, installation cost classification is ignored. & professional fees incurred Overview (including contingent liabilities) classified as “Available Standard Assets, (b) Sub- on the asset before the as in the financial statements and for Sale”. standard Assets, (c) Doubtful Capital Local Area Bank Limited same is put to use. the reported income and expenses Assets and (d) Loss Assets. (‘The Bank’) a banking company An investment is classified as c. Broken Period Interest during the reporting period. b. Depreciation of the fixed incorporated under The Companies Held for Trading, Available b. Specific provisions in respect Management believes that the Broken Period Interest on assets is charged over the Act, 1956, is engaged in providing for Sale and Held to of non performing advances estimates used in the preparation Debt Instruments is treated useful life as estimated by a wide range of banking and Maturity at the time of its are based on the of the financial statements are as a Revenue item. the management on a financial services including retail & purchase. Reclassification, management’s assessment prudent and reasonable. Straight line basis. commercial banking and treasury if any, in any category is of the degree of impairment of wholesale and retail operations. The Bank is governed accounted for as per the RBI c. Depreciation for key fixed d. Transfer of Security advances, subject to the by the Banking regulation Act, 1949. guidelines. assets for the year are Significant Accounting Policies between Categories minimum provisioning level provided as under: Capital Local Area Bank Limited prescribed in the Reserve 1. INVESTMENTS Transfer of Securities from has been converted into Capital Bank of India guidelines. • Improvement to Lease b. Valuation one category to another is Small Finance Bank Limited on In accordance with the Reserve Hold Premises is carried out at Acquisition c. Provisions on Standard April 24, 2016 pursuant to License Bank of India guidelines, The valuation of charged off over the cost or Book Value or Assets are made @ 0.40% number MUM: 116 granted by investments are categorized into investments is done in primary period of lease Market Value, whichever is of the outstanding Reserve Bank of India. Further “Held for Trading”, “Available accordance with the Reserve or useful life of the asset lower on the date of transfer advances. However Registrar of Companies has issued for Sale” and “Held to Bank of India guidelines: whichever is less. and the depreciation, if any, pursuance to change of name, Maturity”. Under each category provision for banks direct on such transfer is fully • The rates of depreciation Certificate of Incorporation on the investments are further advances to agriculture and provided for. for key fixed assets, April 15, 2016. classified in six classes - Govt. Held for Trading: SME sectors is made @ which are not lower than Securities, Other Approved 0.25%, commercial real Individual Scrips in this the rates, calculated on Securities, Shares, Debentures estate sector is made @ 1%, category are marked to e. Profit on Sale of the basis of the useful Basis of Preparation and Bonds, Investments in commercial real estate – market at monthly intervals Investment life specified in the Subsidiaries / Joint Ventures residential housing sector at The Financial Statements have been and the depreciation if any 0.75% and housing loans at Schedule II of the and Other Investments. Profit on sale of investments prepared on Historical Cost Basis is recognized in the profit & teaser rates @ 2% in Companies Act 2013, in the ‘Held to Maturity, following accrual basis of loss account. pursuance to RBI circulars as detailed below: category is credited to the accounting and conform to the issued from time to time. a. Basis of classification Profit & Loss Account and is statutory provisions to the extent Further the same is shown thereafter appropriated (net applicable, accounting standards Securities that are held Held to Maturity under the head ‘Other Depreciation of applicable taxes and Asset rate & pronouncements issued by The principally for resale within Liabilities’. These are valued at statutory reserve per annum Institute of Chartered Accountants 90 days from the date of acquisition cost except requirements) to capital d. Unrealized Interest of the of India, the guidelines issued by purchase are classified as Software and System where the acquisition cost is reserve. Profit on sale of the Reserve bank of India (RBI) from “Held for Trading”. previous year on Advances Development 20% higher than the face value, time to time and practices generally investments in ‘Available for which became Non- Expenditure Securities that the bank in which case, such excess prevailing in the Banking Industry in Sale’ and ‘Held for Trading’ Performing during the year is intends to hold till maturity of acquisition cost over the Computers 33.33% India, except as otherwise stated. categories is credited to provided for. are classified as face value is amortized over Profit & Loss Account. The preparation of financial “Held to Maturity”. the remaining maturity e. Provisions in respect of Mobile Phones 33.33% statements require the management period. A provision is made NPA’s are deducted from Securities that cannot be Advances. Cash Sorting to make estimates and assumptions for other than temporary 2. ADVANCES 33.33% classified in the above Machines that are considered in the reported diminution. two categories are f. Provisions are made on amount of assets and liabilities In accordance with the Reserve

60 | Annual Report 2015-16 Annual Report 2015-16 | 61 Available for Sale Bank of India guidelines, gross basis. Tax effects are Schedule 17: advances are classified as accounted for in the year of Individual Scrips in this Performing or Non Performing write off. category are marked to Significant Accounting Policies based on recovery of principal/ market at quarterly interest. Provisions on Advances intervals. While the net Appended to and Forming Part of are made in accordance with 3. FIXED ASSETS depreciation under each the Reserve Bank of India’s classification is fully a. Fixed assets are capitalized the Financial Statements for guidelines/directives, as under:- provided for in profit & loss at cost which comprises of the Year Ended March 31, 2016 account, the net a. All advances are classified cost of purchase, site appreciation if any for each under four categories i.e. (a) preparation, installation cost classification is ignored. & professional fees incurred Overview (including contingent liabilities) classified as “Available Standard Assets, (b) Sub- on the asset before the as in the financial statements and for Sale”. standard Assets, (c) Doubtful Capital Local Area Bank Limited same is put to use. the reported income and expenses Assets and (d) Loss Assets. (‘The Bank’) a banking company An investment is classified as c. Broken Period Interest during the reporting period. b. Depreciation of the fixed incorporated under The Companies Held for Trading, Available b. Specific provisions in respect Management believes that the Broken Period Interest on assets is charged over the Act, 1956, is engaged in providing for Sale and Held to of non performing advances estimates used in the preparation Debt Instruments is treated useful life as estimated by a wide range of banking and Maturity at the time of its are based on the of the financial statements are as a Revenue item. the management on a financial services including retail & purchase. Reclassification, management’s assessment prudent and reasonable. Straight line basis. commercial banking and treasury if any, in any category is of the degree of impairment of wholesale and retail operations. The Bank is governed accounted for as per the RBI c. Depreciation for key fixed d. Transfer of Security advances, subject to the by the Banking regulation Act, 1949. guidelines. assets for the year are Significant Accounting Policies between Categories minimum provisioning level provided as under: Capital Local Area Bank Limited prescribed in the Reserve 1. INVESTMENTS Transfer of Securities from has been converted into Capital Bank of India guidelines. • Improvement to Lease b. Valuation one category to another is Small Finance Bank Limited on In accordance with the Reserve Hold Premises is carried out at Acquisition c. Provisions on Standard April 24, 2016 pursuant to License Bank of India guidelines, The valuation of charged off over the cost or Book Value or Assets are made @ 0.40% number MUM: 116 granted by investments are categorized into investments is done in primary period of lease Market Value, whichever is of the outstanding Reserve Bank of India. Further “Held for Trading”, “Available accordance with the Reserve or useful life of the asset lower on the date of transfer advances. However Registrar of Companies has issued for Sale” and “Held to Bank of India guidelines: whichever is less. and the depreciation, if any, pursuance to change of name, Maturity”. Under each category provision for banks direct on such transfer is fully • The rates of depreciation Certificate of Incorporation on the investments are further advances to agriculture and provided for. for key fixed assets, April 15, 2016. classified in six classes - Govt. Held for Trading: SME sectors is made @ which are not lower than Securities, Other Approved 0.25%, commercial real Individual Scrips in this the rates, calculated on Securities, Shares, Debentures estate sector is made @ 1%, category are marked to e. Profit on Sale of the basis of the useful Basis of Preparation and Bonds, Investments in commercial real estate – market at monthly intervals Investment life specified in the Subsidiaries / Joint Ventures residential housing sector at The Financial Statements have been and the depreciation if any 0.75% and housing loans at Schedule II of the and Other Investments. Profit on sale of investments prepared on Historical Cost Basis is recognized in the profit & teaser rates @ 2% in Companies Act 2013, in the ‘Held to Maturity, following accrual basis of loss account. pursuance to RBI circulars as detailed below: category is credited to the accounting and conform to the issued from time to time. a. Basis of classification Profit & Loss Account and is statutory provisions to the extent Further the same is shown thereafter appropriated (net applicable, accounting standards Securities that are held Held to Maturity under the head ‘Other Depreciation of applicable taxes and Asset rate & pronouncements issued by The principally for resale within Liabilities’. These are valued at statutory reserve per annum Institute of Chartered Accountants 90 days from the date of acquisition cost except requirements) to capital d. Unrealized Interest of the of India, the guidelines issued by purchase are classified as Software and System where the acquisition cost is reserve. Profit on sale of the Reserve bank of India (RBI) from “Held for Trading”. previous year on Advances Development 20% higher than the face value, time to time and practices generally investments in ‘Available for which became Non- Expenditure Securities that the bank in which case, such excess prevailing in the Banking Industry in Sale’ and ‘Held for Trading’ Performing during the year is intends to hold till maturity of acquisition cost over the Computers 33.33% India, except as otherwise stated. categories is credited to provided for. are classified as face value is amortized over Profit & Loss Account. The preparation of financial “Held to Maturity”. the remaining maturity e. Provisions in respect of Mobile Phones 33.33% statements require the management period. A provision is made NPA’s are deducted from Securities that cannot be Advances. Cash Sorting to make estimates and assumptions for other than temporary 2. ADVANCES 33.33% classified in the above Machines that are considered in the reported diminution. two categories are f. Provisions are made on amount of assets and liabilities In accordance with the Reserve

60 | Annual Report 2015-16 Annual Report 2015-16 | 61 • All other Assets are The resulting differences are towards Provident Fund is b. RETAIL BANKING earnings per share are 13. ACCOUNTING FOR depreciated on the rates, accounted for as accounted for as per computed by dividing net PROVISIONS, LIABILITIES The retail banking calculated on the basis income/expenditure. statutory requirements income by the weighted AND CONTINGENT ASSETS constitutes lending to of useful life specified in debited to the profit & loss average number of equity individuals/small businesses The Bank estimates the the Schedule II of the account of the same year. shares outstanding for the subject to the orientation, probability of any loss that Companies Act 2013, 5. REVENUE RECOGNITION period. Diluted earnings per b. The Bank contributes for product and granularity might be incurred on outcome as detailed below: equity share are computed Income & Expenditure are Gratuity, a defined benefit criterion and also includes of contingencies on the basis of using the weighted average accounted on accrual basis retirement plan, covering all low value individual information available upto the number of equity shares & Depreciation except in the following cases: employees which is exposures not exceeding the date on which the financial Asset rate diluted potential equity shares per annum determined as per Actuarial threshold limit of `5 crores statements are prepared. A a. Interest on Non-Performing outstanding during the period. Assets is recognized on valuation done on year end as defined by Reserve Bank provision is recognized when an Office Machinery 6.33% realization basis as per RBI basis, charged to profit and of India. Retail banking also enterprise has a present loss account, and includes liability products obligation as a result of a past Furniture & Fixture 9.50% guidelines. 11. INCOME TAX contributions are deposited and NRI services. event and it is probable that an b. Interest which remains to a fund maintained by Income Tax Expense (Current & outflow of resources will be Motor Vehicle: c. CORPORATE/WHOLESALE overdue for 90 days on ICICI Prudential Life Deferred) is accounted for in required to settle the obligation, securities not covered by BANKING Motor Car 11.88% Insurance under separate accordance with AS 22 - in respect of which a reliable Government Guarantee is Trust set up by the Bank. This segment includes “Accounting for Taxes on estimate can be made. Two Wheeler 9.50% recognized on realization corporate/wholesale Income”, issued by ICAI. Provisions are determined based c. Liability towards leave basis as per RBI guidelines. relationships not included Current Tax is determined as the on management estimate encashment on retirement or Cycle 9.50% under retail banking. amount of tax payable in required to settle the obligation c. Commission (other than on on termination of service of respect of taxable income for at the balance sheet date, Deferred Payment an employee is valued and d. OTHER BANKING the year. Deferred Tax is supplemented by experience of Guarantees and provided for on the basis of BUSINESS d. Depreciation on assets sold recognized, subject to the similar transactions. These are Government Transactions), actuarial valuation done on or disposed of during the This segment includes para consideration of prudence on reviewed at each balance sheet Exchange and Brokerage year end basis. banking activities and other year is provided for up to are recognized on timing differences, being the date and adjusted to reflect the banking transactions not the date of sale. realization basis. difference between the taxable current estimates. In cases covered under any of the income & accounting income where the available information e. Depreciation on assets d. Interest on Overdue Bills is 8. SEGMENT REPORTING above three segments. that originate in one period and indicates that the loss on the purchased or acquired recognized on Realization The business of the Bank is is capable of reversal in one or contingency is reasonably during the year is provided Basis as per RBI guidelines. divided into four segments: more subsequent years. possible but the amount of loss for from the date they are Treasury, Retail Banking, 9. LEASES cannot be reasonably estimated, being put to use. Corporate/Wholesale Banking Lease where the lessor a disclosure is made in the 6. NET PROFITS and Other Banking Business. f. In case of revalued/ effectively retains substantially 12. IMPAIRMENT OF ASSETS financial statements. In case of impaired assets, These segments have been The Net Profits have been all the risks and benefits of In accordance with the remote possibility neither depreciation is provided identified based on the RBI’s arrived at after:- ownership of the leased term, is accounting standard 28 issued provision nor disclosure is made over the remaining useful revised guidelines on Segment in the financial statements. The a. Provisions of Income Tax classified as operating lease. by ICAI, impairment of the life of the assets with Reporting vide Circular No. Bank does not account for and Wealth Tax in Operating lease payments are assets is determined by reference to revised assets DBOD. No. BP.BC. 81/ contingent assets, if any. accordance with the recognised as an expense in the comparing the carrying amount values. 21.04.018/ 2006-07 dated statutory requirements. Profit and Loss Account on a of the asset and the recoverable April 18, 2007. The principal straight-line basis over the lease amount and if the recoverable b. Provisions on Advances activities of these segments are 14. CASH AND CASH term. amount is less than the carrying 4. TRANSACTIONS as under. EQUIVALENTS c. Adjustments to the value of amount the difference is INVOLVING FOREIGN Investments a. TREASURY charged to profit and loss Cash and cash equivalents EXCHANGE 10. EARNING PER SHARE account. Recoverable amount is include cash in hand, balance d. Other usual and necessary The treasury segment Monetary Assets & Liabilities are calculated by using the value in with RBI, balances with other provisions. primarily consists of interest The Bank reports basic and translated at the Closing Spot use method for each cash earnings from the Bank’s diluted earnings per equity banks and money at call and Rate of exchange prevailing at generating unit. investments portfolio and share in accordance with AS- short notice. the close of the year as notified 7. RETIREMENT BENEFITS gains or losses on 20 issued by ICAI. Basic by Foreign Exchange Dealers investment operations. Association of India (FEDAI). a. Defined contribution

62 | Annual Report 2015-16 Annual Report 2015-16 | 63 • All other Assets are The resulting differences are towards Provident Fund is b. RETAIL BANKING earnings per share are 13. ACCOUNTING FOR depreciated on the rates, accounted for as accounted for as per computed by dividing net PROVISIONS, LIABILITIES The retail banking calculated on the basis income/expenditure. statutory requirements income by the weighted AND CONTINGENT ASSETS constitutes lending to of useful life specified in debited to the profit & loss average number of equity individuals/small businesses The Bank estimates the the Schedule II of the account of the same year. shares outstanding for the subject to the orientation, probability of any loss that Companies Act 2013, 5. REVENUE RECOGNITION period. Diluted earnings per b. The Bank contributes for product and granularity might be incurred on outcome as detailed below: equity share are computed Income & Expenditure are Gratuity, a defined benefit criterion and also includes of contingencies on the basis of using the weighted average accounted on accrual basis retirement plan, covering all low value individual information available upto the number of equity shares & Depreciation except in the following cases: employees which is exposures not exceeding the date on which the financial Asset rate diluted potential equity shares per annum determined as per Actuarial threshold limit of `5 crores statements are prepared. A a. Interest on Non-Performing outstanding during the period. Assets is recognized on valuation done on year end as defined by Reserve Bank provision is recognized when an Office Machinery 6.33% realization basis as per RBI basis, charged to profit and of India. Retail banking also enterprise has a present loss account, and includes liability products obligation as a result of a past Furniture & Fixture 9.50% guidelines. 11. INCOME TAX contributions are deposited and NRI services. event and it is probable that an b. Interest which remains to a fund maintained by Income Tax Expense (Current & outflow of resources will be Motor Vehicle: c. CORPORATE/WHOLESALE overdue for 90 days on ICICI Prudential Life Deferred) is accounted for in required to settle the obligation, securities not covered by BANKING Motor Car 11.88% Insurance under separate accordance with AS 22 - in respect of which a reliable Government Guarantee is Trust set up by the Bank. This segment includes “Accounting for Taxes on estimate can be made. Two Wheeler 9.50% recognized on realization corporate/wholesale Income”, issued by ICAI. Provisions are determined based c. Liability towards leave basis as per RBI guidelines. relationships not included Current Tax is determined as the on management estimate encashment on retirement or Cycle 9.50% under retail banking. amount of tax payable in required to settle the obligation c. Commission (other than on on termination of service of respect of taxable income for at the balance sheet date, Deferred Payment an employee is valued and d. OTHER BANKING the year. Deferred Tax is supplemented by experience of Guarantees and provided for on the basis of BUSINESS d. Depreciation on assets sold recognized, subject to the similar transactions. These are Government Transactions), actuarial valuation done on or disposed of during the This segment includes para consideration of prudence on reviewed at each balance sheet Exchange and Brokerage year end basis. banking activities and other year is provided for up to are recognized on timing differences, being the date and adjusted to reflect the banking transactions not the date of sale. realization basis. difference between the taxable current estimates. In cases covered under any of the income & accounting income where the available information e. Depreciation on assets d. Interest on Overdue Bills is 8. SEGMENT REPORTING above three segments. that originate in one period and indicates that the loss on the purchased or acquired recognized on Realization The business of the Bank is is capable of reversal in one or contingency is reasonably during the year is provided Basis as per RBI guidelines. divided into four segments: more subsequent years. possible but the amount of loss for from the date they are Treasury, Retail Banking, 9. LEASES cannot be reasonably estimated, being put to use. Corporate/Wholesale Banking Lease where the lessor a disclosure is made in the 6. NET PROFITS and Other Banking Business. f. In case of revalued/ effectively retains substantially 12. IMPAIRMENT OF ASSETS financial statements. In case of impaired assets, These segments have been The Net Profits have been all the risks and benefits of In accordance with the remote possibility neither depreciation is provided identified based on the RBI’s arrived at after:- ownership of the leased term, is accounting standard 28 issued provision nor disclosure is made over the remaining useful revised guidelines on Segment in the financial statements. The a. Provisions of Income Tax classified as operating lease. by ICAI, impairment of the life of the assets with Reporting vide Circular No. Bank does not account for and Wealth Tax in Operating lease payments are assets is determined by reference to revised assets DBOD. No. BP.BC. 81/ contingent assets, if any. accordance with the recognised as an expense in the comparing the carrying amount values. 21.04.018/ 2006-07 dated statutory requirements. Profit and Loss Account on a of the asset and the recoverable April 18, 2007. The principal straight-line basis over the lease amount and if the recoverable b. Provisions on Advances activities of these segments are 14. CASH AND CASH term. amount is less than the carrying 4. TRANSACTIONS as under. EQUIVALENTS c. Adjustments to the value of amount the difference is INVOLVING FOREIGN Investments a. TREASURY charged to profit and loss Cash and cash equivalents EXCHANGE 10. EARNING PER SHARE account. Recoverable amount is include cash in hand, balance d. Other usual and necessary The treasury segment Monetary Assets & Liabilities are calculated by using the value in with RBI, balances with other provisions. primarily consists of interest The Bank reports basic and translated at the Closing Spot use method for each cash earnings from the Bank’s diluted earnings per equity banks and money at call and Rate of exchange prevailing at generating unit. investments portfolio and share in accordance with AS- short notice. the close of the year as notified 7. RETIREMENT BENEFITS gains or losses on 20 issued by ICAI. Basic by Foreign Exchange Dealers investment operations. Association of India (FEDAI). a. Defined contribution

62 | Annual Report 2015-16 Annual Report 2015-16 | 63 Schedule 18: Maturity Profile of total debentures issued as on March 31, 2016: Lower Tier II Bonds: Notes on Accounts (` in '000) SERIES Amount Maturity date Appended to and Forming Part of 11% TIER II BONDS SERIES-I 50300 17-09-2019 the Financial Statements tor 11% TIER II BONDS-SERIES II 36000 29-09-2019 11% TIER II BONDS SERIES-III 27800 24-10-2019 the Year Ended March 31, 2016 10% TIER II BONDS SERIES- IV 55500 27-03-2020 11% TIER BONDS SERIES- V 57100 04-06-2021 1. Capital 11% TIER II SERIES VI 30200 18-06-2021 1.1 11% TIER BONDS SERIES VII 60400 25-08-2022 Sl No. Items Current Year Previous Year 11% TIER II BONDS SERIES VIII 50300 04-05-2023

i) CRAR (%) 17.20 15.22 11% TIER II BONDS SERIES-IX 31000 20-05-2023 ii) CRAR - Tier I capital (%) 9.16 8.89 11% TIER II BONDS SERIES-X 94700 24-05-2024 iii) CRAR - Tier II capital (%) 8.04 6.33 10.50% TIER II BONDS SERIES-XII 120000 17-02-2026 iv) Amount of equity capital raised as Bonus Issue Nil ` 15696 (‘000) TOTAL 613300 v) Amount of equity raised as Right Issue ` 57549 (‘000) Nil vi) Amount of debt raised as Upper Tier-II capital ` 2500 lacs ` 1400 lacs Upper Tier II Bonds: vii) Amount of subordinated debt raised as Tier-II capital (` in '000) (Lower Tier II capital) ` 1200 lacs ` 947 lacs SERIES Amount Maturity date

11.75% Upper TIER II BONDS SERIES-XI 140000 31-03-2030 1.2 Right Issue 11.75% Upper TIER II BONDS SERIES-XIII 250000 30-03-2031 The Bank has issued right equity shares to the existing shareholders at a price of `30 per equity share (Face Value TOTAL 390000 `10) during the year as per the following details:

Date of Allotment December 30, 2015 1.4 The Bank has drawn `20761 (‘000) from securities premium account as Equity Capital before Right Issue (17264971 shares of face value `10 each) 172650 per the following details: Right Issue 1:3 (` in '000) 57549 Equity shares issued as right (5754922 shares of face value `10 each) Particulars Current Year Previous Year Total equity capital after Right issue (23019893 shares of face value `10 each) 230199 Expenditure incurred on issue of Upper/Lower Tier II Bonds 20761 9091

Bonus Issue - 15696 1.3 Tier 2 Capital TOTAL 20761 24787 Tier 2 Capital raised during the year:

The Bank has raised Unsecured Redeemable Non-Convertible Upper Tier II Bonds amounting to `250000 (` in ‘000) during the year given here under: (` in ‘000) Particulars Date of Allotment Coupon (%) Tenure Amount Upper Tier II March 30, 2016 11.75% p.a. 15 years `250000

The bank has also raised subordinated debt qualifying for Tier II Capital amounting to `120000 (‘000) during the year given here under: (` in ‘000) Particulars Date of Allotment Coupon (%) Tenure Amount Lower Tier II February 17, 2016 10.50% p.a. 10 years `120000

64 | Annual Report 2015-16 Annual Report 2015-16 | 65 Schedule 18: Maturity Profile of total debentures issued as on March 31, 2016: Lower Tier II Bonds: Notes on Accounts (` in '000) SERIES Amount Maturity date Appended to and Forming Part of 11% TIER II BONDS SERIES-I 50300 17-09-2019 the Financial Statements tor 11% TIER II BONDS-SERIES II 36000 29-09-2019 11% TIER II BONDS SERIES-III 27800 24-10-2019 the Year Ended March 31, 2016 10% TIER II BONDS SERIES- IV 55500 27-03-2020 11% TIER BONDS SERIES- V 57100 04-06-2021 1. Capital 11% TIER II SERIES VI 30200 18-06-2021 1.1 11% TIER BONDS SERIES VII 60400 25-08-2022 Sl No. Items Current Year Previous Year 11% TIER II BONDS SERIES VIII 50300 04-05-2023 i) CRAR (%) 17.20 15.22 11% TIER II BONDS SERIES-IX 31000 20-05-2023 ii) CRAR - Tier I capital (%) 9.16 8.89 11% TIER II BONDS SERIES-X 94700 24-05-2024 iii) CRAR - Tier II capital (%) 8.04 6.33 10.50% TIER II BONDS SERIES-XII 120000 17-02-2026 iv) Amount of equity capital raised as Bonus Issue Nil ` 15696 (‘000) TOTAL 613300 v) Amount of equity raised as Right Issue ` 57549 (‘000) Nil vi) Amount of debt raised as Upper Tier-II capital ` 2500 lacs ` 1400 lacs Upper Tier II Bonds: vii) Amount of subordinated debt raised as Tier-II capital (` in '000) (Lower Tier II capital) ` 1200 lacs ` 947 lacs SERIES Amount Maturity date

Bonus Issue - 15696 1.3 Tier 2 Capital TOTAL 20761 24787 Tier 2 Capital raised during the year:

64 | Annual Report 2015-16 Annual Report 2015-16 | 65 2 Investments (` in '000) ii) Non performing Non-SLR investments

Items Current Year Previous Year Particulars Amount 1. Value of Investments Opening balance Nil

a) In India Nil Nil 2.3 b) Outside India, Nil Nil The Bank in pursuance to RBI circular issued on October 7, 2014 under Fourth Bi-monthly Monitory Policy 2014-15 to (iii) Net Value of Investments reduce the SLR holdings under Held to Maturity Category from 24% to 22% in a graduated manner, has, after approval of the Board of Directors vide board resolution number 31 passed in the meeting held on April 25, 2015, transferred a) In India 5857951 4523363 government securities with a book value of `145699 (‘000) from HTM category (Held to Maturity) to AFS category b) Outside India Nil Nil (Available for Sale) which constitutes 4.62% of the HTM category.

2. Movement of provisions held towards depreciation on investments. 2.4

(i) Opening balance Nil 26625 The Bank has not undertaken any derivative business during the year.

(ii) Add: Provisions made during the year 1165 820

(iii) Less: Write-off/ write-back of excess provisions during the year 1165 27445 3 Asset Quality

(iv) Closing balance Nil Nil 3.1 Non-Performing Asset (` in '000)

ii FIs 10000 Nil Nil Nil Nil c) Reductions during the year 17263 12655 d) Closing balance 51319 11936 iii Banks Nil Nil Nil Nil Nil iv) Movement of provisions for NPAs (excluding provisions on standard assets) iv Private Corporates Nil Nil Nil Nil Nil a) Opening balance 24499 20511 v Subsidiaries/ Joint Ventures Nil Nil Nil Nil Nil b) Provisions made during the year 14921 10253 c) Write-off/ write-back of excess provisions 6444 6265 vi Others 80000 Nil Nil Nil Nil d) Closing balance 32976 24499 vii Provision held towards depreciation Nil Nil Nil Nil Nil

Total 120000 Nil Nil Nil Nil

66 | Annual Report 2015-16 Annual Report 2015-16 | 67 2 Investments (` in '000) ii) Non performing Non-SLR investments

Items Current Year Previous Year Particulars Amount 1. Value of Investments Opening balance Nil

(i) Gross Value of Investments Additions during the year since 1st April Nil Reductions during the above period Nil a) In India 5857951 4523363 Closing balance Nil b) Outside India Nil Nil Total provisions held Nil (ii) Provisions for Depreciation a) In India Nil Nil 2.3 b) Outside India, Nil Nil The Bank in pursuance to RBI circular issued on October 7, 2014 under Fourth Bi-monthly Monitory Policy 2014-15 to (iii) Net Value of Investments reduce the SLR holdings under Held to Maturity Category from 24% to 22% in a graduated manner, has, after approval of the Board of Directors vide board resolution number 31 passed in the meeting held on April 25, 2015, transferred a) In India 5857951 4523363 government securities with a book value of `145699 (‘000) from HTM category (Held to Maturity) to AFS category b) Outside India Nil Nil (Available for Sale) which constitutes 4.62% of the HTM category.

2. Movement of provisions held towards depreciation on investments. 2.4

(i) Opening balance Nil 26625 The Bank has not undertaken any derivative business during the year.

(ii) Add: Provisions made during the year 1165 820

(iii) Less: Write-off/ write-back of excess provisions during the year 1165 27445 3 Asset Quality

(iv) Closing balance Nil Nil 3.1 Non-Performing Asset (` in '000)

Sl No. Items Current Year Previous Year 2.1 The Bank has not undertaken any Repo Transactions during the year. i) Net NPAs to Net Advances (%) 0.45% 0.13% 2.2 Non-SLR Investment Portfolio ii) Movement of NPAs (Gross) i) Issuer composition of Non SLR investments a) Opening balance 36435 27430 b) Additions during the year 71567 25917 Sl No Issuer Amount Extent of Extent of Extent of Extent of Private ‘Below ‘Unrated’ ‘Unlisted’ c) Reductions during the year 23707 16912 Placement Investment Securities Securities d) Closing balance 84295 36435 Grade’ Securities iii) Movement of NPAs (Net) a) Opening balance 11936 6919 i PSUs 30000 Nil Nil Nil Nil b) Additions during the year 56646 17672 ii FIs 10000 Nil Nil Nil Nil c) Reductions during the year 17263 12655 d) Closing balance 51319 11936 iii Banks Nil Nil Nil Nil Nil iv) Movement of provisions for NPAs (excluding provisions on standard assets) iv Private Corporates Nil Nil Nil Nil Nil a) Opening balance 24499 20511 v Subsidiaries/ Joint Ventures Nil Nil Nil Nil Nil b) Provisions made during the year 14921 10253 c) Write-off/ write-back of excess provisions 6444 6265 vi Others 80000 Nil Nil Nil Nil d) Closing balance 32976 24499 vii Provision held towards depreciation Nil Nil Nil Nil Nil

Total 120000 Nil Nil Nil Nil

66 | Annual Report 2015-16 Annual Report 2015-16 | 67 3.2 Particulars of Accounts Restructured

Type of Restructuring Under CDR Mechanism Under SME Debt restructuring Mechanism Others Total Sl No Sub- Sub- Sub- Sub- Asset Classification Standard Doubtful Total Standard Doubtful Total Standard Doubtful Total Standard Doubtful Total Standard Standard Standard Standard

No. of Borrowers Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil

Restructured Accounts as on April 1 Amount Outstanding Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 1, 2015