93rd ANNUAL REPORT 2019 - 2020 Printed at LS Graphic Prints BOARD OF DIRECTORS Shri S.SUNDAR Managing Director & CEO Shri G.SUDHAKARA GUPTA Shri N.SAIPRASAD Shri GORINKA JAGANMOHAN RAO Shri RAGHURAJ GUJJAR Shri SHAKTI SINHA Shri SATISH KUMAR KALRA Smt. MEETA MAKHAN Shri K.R.PRADEEP Shri B.K.MANJUNATH Shri Y.N.LAKSHMINARAYANA MURTHY Shri RAJNISH KUMAR Shri SUNDARAM SHANKAR RBI Additional Director RBI Additional Director ANNUAL REPORT 2019-2020 BOARD OF DIRECTORS Shri / Smt. S.Sundar - Managing Director & CEO (From 01.01.2020) G.Sudhakara Gupta N.Saiprasad Gorinka Jaganmohan Rao (From 02.12.2019) Raghuraj Gujjar (From 02.12.2019) Shakti Sinha (From 02.12.2019) Satish Kumar Kalra (From 02.12.2019) STATUTORY AUDITOR Meeta Makhan (From 23.01.2020) M/s.P.Chandrasekar LLP K.R.Pradeep (From 23.01.2020) Chartered Accountants B.K.Manjunath (From 10.06.2020) Bengaluru Y.N.Lakshminarayana Murthy (From 30.07.2020) (Firm’s Registration No.000580S/S200066) Rajnish Kumar – RBI Additional Director Sundaram Shankar – RBI Additional Director (From 18.11.2019) SECRETARIAL AUDITOR Shri Kaliappagounder Muthusamy, PRESIDENTS Practicing Company Secretary Meenakshi Sundaram RM Coimbatore Sreeram G (M.No.F 5865; CP:3176) REGISTERED OFFICE SENIOR VICE PRESIDENTS Salem Road, Kathaparai, Padmanabhan Premkumar Karur-639 006, Tamilnadu Nachiappan N Phone : 04324-258501 Ravindra Kumar G Website : www.lvbank.com Manikandan M E-Mail : [email protected] CIN L65110TN1926PLC001377 Gurumurthy R K Thiruvadi S CORPORATE OFFICE Murli M Khemka “LVB HOUSE”, No.4, Sardar Patel Road, Guindy, Chennai - 600 032 CHIEF FINANCIAL OFFICER Tamilnadu Hariharan K Phone : 044 22205222 REGISTRAR AND SHARE TRANSFER AGENT COMPANY SECRETARY M/s. Integrated Registry Management Services N.Ramanathan Private Limited II Floor, “Kences Towers”, No.1, Ramakrishna Street, North Usman Road, T.Nagar, Chennai - 600 017. Phone : 044-28140801/2/3 Fax: 28142479 Email : [email protected] 1 ANNUAL REPORT 2019-2020 CONTENTS Page No. Report of Directors 3 Report of Auditors 20 Balance Sheet 28 Profi t & Loss Account 29 Cash Flow Statement 30 Schedules 31 BASEL III - Pillar 3 Disclosures 69 Certifi cate on Corporate Governance and ESOS 89 A Decade of Progress 150 2 ANNUAL REPORT 2019-2020 DIRECTORS’ 93rd ANNUAL REPORT To THE MEMBERS The Directors of your Bank hereby are presenting the 93rd Annual Report on the business and operations of your Bank together with the Audited Accounts for the year ended 31st March, 2020 (FY 2019-20). 1. FINANCIAL PERFORMANCE The highlights of the fi nancial performance of your Bank for the year ended 31st March, 2020 are as under: For the year ended (` in crores) Particulars 31st March 2020 31st March 2019 Deposits 21443.19 29279.44 Advances (net) 13827.89 20103.26 Investments (net) 5383.83 8430.17 Total Income 2558.03 3090.21 Operating Loss (-)15.46 (-)11.97 Provisions & Contingencies 820.59 882.13 Net Loss (-)836.04 (-)894.10 At the outset, this year proved to be most diffi cult for your Bank on the back of certain events happening in our bank coupled with certain external factors. Consequentially your bank registered a total business of ` 38116.53 crores in FY 2019-20 as against ` 51235.40 crores in FY 2018-19, a decrease of 25.61%. Deposits fell by 26.76%, from ` 29279.44 crores as at 31st March 2019 to ` 21443.19 crores as at 31st March 2020 on the back of conscious decision to reduce bulk deposits. CASA represented 26.63% of total deposits. Total advances (net) reduced by 31.22%, from ` 20103.26 crores to ` 13827.89 crores in the same period on the constraints arising from lower CRAR. The total Priority Sector Advances were ` 8441.32 crores forming 34.96% of Adjusted Net Bank Credit (ANBC) against the regulatory prescription of 40% of ANBC for the FY 2019-20. The total Agricultural Advances stood at ` 3623.68 crores forming 15.01% of ANBC against the regulatory prescription of 18.00% of ANBC. Of which, loans to Non Corporate Farmers stood at ` 2469.66 crores forming 10.23% of ANBC against the mandatory requirements of 12.11%, loans to Small and Marginal Farmers stood at ` 2107.47 crores forming 8.73% of ANBC against the mandatory requirements of 8.00% of ANBC for the year 2019-20. Our Bank's advances to Micro Enterprises under MSME were at 6.28% of ANBC amounting to ` 1517.03 crores against the mandatory requirements of 7.50% of ANBC for the year 2019-20. Bank's advances to Weaker Sections were ` 2260.88 crores forming 9.36% of ANBC against the mandatory requirements of 10.00% of ANBC for the year 2019-20. The shortfall in achievement with the regulatory guidelines under priority sector, agricultural lending, micro enterprises and weaker section advances arise mainly due to reduction/repayment of advances. The Bank's exposures to sensitive sectors including Real Estate and Capital Market were maintained well within the regulatory limits as well as overall internal ceilings prescribed for such exposures. As at the end of the year under review, the total investments (net) of the Bank stood at ` 5383.83 crores as on 31st March 2020 as against ` 8430.17 crores as on 31st March 2019. Your Bank's Treasury continues to focus on sound Asset-Liability Management and on servicing clients with appropriate treasury products and was managed reasonably well in a systematic way in a year when yields were constantly rising. 3 ANNUAL REPORT 2019-2020 2. PROFIT / LOSS The Bank has posted an operating loss of ` 15.46 crores in FY 2019-20 against the operating loss of ` 11.97 crores in the previous year FY 2018-19. The net loss for the year, after provisions and taxes, amounted to ` 836.04 crores as against a net loss of ` 894.10 crores recorded in 2018-19. 3. APPROPRIATIONS For the year ended (` in crores) Particulars 31st March 2020 31st March 2019 Profi t brought forward Transfer from Investment Reserve (-)1565.29 (-)671.12 Amount available for appropriation 0.00 0.00 Transfer to Statutory Reserve (-)836.04 (-)894.10 Capital Reserve 59.26 0.07 Other Reserve 0.00 0.00 Investment Reserve 0.00 0.00 Special Reserve u/s 36(i)(viii)of the IT Act, 1961 0.00 0.00 Proposed Dividend/Dividend paid 0.00 0.00 Corporate Dividend Tax 0.00 0.00 Balance of profi t carried forward 0.00 0.00 (-)2460.59 (-)1565.29 4. DIVIDEND In an environment of heightened uncertainty caused by COVID-19, it is important that banks conserve capital to retain their capacity to support the economy and absorb losses. Accordingly RBI vide circular DOR.BP.BC.No.64/21.02.067/2019-20 dated April 17, 2020 has directed all the banks not to make any further dividend pay-outs from the profi ts pertaining to the fi nancial year ended March 31, 2020 until further instructions. Further, in view of the Net Loss for the FY 2019-20, your Board of Directors is unable to recommend any dividend for the year. Your Bank has a Board approved Dividend Distribution Policy which has been formulated in line with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended and extant RBI Circulars / Directives. The Dividend Distribution Policy is enclosed as Annexure I to the Directors’ Report. The Policy has also been made available in the website of the Bank and can be accessed at https://www.lvbank.com/Policies.aspx . 5. CAPITAL RAISING Preferential Allotment During the year, your Bank had allotted 1,68,00,000 Equity Shares at a price of ` 112/- (face value of ` 10/- and premium of ` 102/- per equity share) for an aggregate amount of ` 188.16 crores on 04.07.2019 to M/s. Indiabulls Housing Finance Limited under Preferential Issue as per Chapter V of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended with approval of the shareholders through an Extra-ordinary General Meeting held on 20thMay 2019. Your Bank continues to explore various options for raising further capital and will keep the shareholders informed through necessary disclosures at the Stock Exchanges and Bank’s website. 6. STATEMENT OF DEVIATION OR VARIATION During the year, the Bank had allotted 1,68,00,000 Equity Shares (face value of ` 10/- and premium of ` 102/-) for an aggregate amount of ` 188.16 crore, on 04th July 2019 to M/s.Indiabulls Housing Finance Limited by way of Private Placement. The issue was done in order to enhance the Capital Adequacy Ratio in line with the RBI norms. The proceeds of the issue were used primarily to enhance the Bank’s Capital Adequacy Ratio and to increase our capacity to lend and for general corporate purposes subject to compliance 4 ANNUAL REPORT 2019-2020 of applicable laws. There was no variation prompting disclosure under Regulation 32 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, as amended. 7. EPS / BOOK VALUE Earnings per Share stood at ` (-)25.16 for the year ended 31st March, 2020 as compared to ` (-) 34.66 as on 31st March, 2019. Book Value of the share, stood at ` 31.21 on 31st March, 2020 as compared to ` 53.48 as on 31st March, 2019. The Book value adjusted for DTA, Intangible assets stood at ` (-)5.63 on 31st March, 2020 as compared to ` 25.08 as on 31st March, 2019. 8. NET OWNED FUNDS / CAPITAL ADEQUACY RATIO Net Owned Funds (NOF) of the Bank decreased from ` 1710.97 crores as at the end of FY 2019 to ` 1050.96 crores as at the end of FY 2020.