a) Liquidity Coverage Ratio (LCR)
Bank is computing LCR on a daily basis in line with the RBI circular dated June 9, 2014 on "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and LCR Disclosure Standards". These guidelines ensure that banks maintain sufficient amount of High Quality Liquidity Assets (HQLAs) to survive 30 days stress scenario so that banks can take corrective measures within such period. These HQLAs have to be 100% of the net cash outflows w.e.f. January 1,2019.
Bank's Asset Liability Management Committee (ALCO) is empowered to monitor and form suitable strategies to maintain stipulated levels of LCR by channelizing funds to target good quality asset and liability profile to meet Bank's profitability as well as liquidity requirements. Funding strategies are formulated by the Finance and Accounts Department (FAD) in accordance with ALCO guidance. The objective of the funding strategy is to achieve an optimal funding mix which is consistent with prudent liquidity, diversity of sources and servicing costs. Accordingly, FAD estimates daily liquidity requirement. With the help of structural liquidity statement prepared by Bank, FAD evaluates current and future liquidity requirement and takes necessary action. Bank has consistently maintained LCR above 100% during FY 22-23 i.e., at levels higher than the required regulatory at minimum level on an ongoing basis.
b) Overseas assets, NPAs and Revenue -Nil (Previous Year - Nil)d) Particulars of resolution plan and restructuring
There are no Borrowers requiring additional provision in terms of Reserve Bank of India Circular DBR.No.BP. BC.45/21.04.048/2018-19 dated June 7, 2019.
During the year, there was no conversion of debt into equity on restructuring (Previous year Nil.)
e) Divergence in asset classification and provisioning:
No disclosure on divergence in asset classification and provisioning for NPAs is required with respect to the Risk based Supervision conducted by the Reserve Bank of India for the year ended 31st March 2022, based on conditions mentioned in the RBI Master Direction No. RBI/DOR/2021-22 /83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated 30th August 2021 (updated as on 11th October 2022). (Previous year Nil.)
e) Factoring Exposure- The bank has no Factoring exposure as on 31.03.2023. (Previous Year- Nil)
f) Intra -group Exposure
There are no Intra Group exposures other than investment of ' 1.50 crore in wholly owned non-financial Subsidiary KBL Services Ltd. (Previous Year ' 1.00 crore)
g) Unhedged foreign currency exposure
The Bank has put in place a policy on Hedging of Foreign Currency Exposure which is a part of the Loan Policy which stipulates the guidelines on managing the risk arising out of the unhedged foreign currency exposure in line with the extant RBI guidelines. Further, the Bank has made a provision of ' 20.39 crore (Previous year ' 17.87 crore) and has provided capital for the unhedged foreign currency exposure of borrowal entities of '2.73 crore (Previous year ' 4.46 crore) in line with the extant RBI guidelines.
h) Disclosure on amortisation of Expenditure on account of Enhancement in family pension of Employees of Banks:
The Bank had fully recognised the expenditure for enhancement of Family pension in the FY 2021-22.
Disclosure on Risk exposure in derivatives Qualitative Disclosure
The Bank has put in place Board approved Integrated Treasury Policy, Asset Liability Management (ALM) policy, Market Risk Management Policy and Fund Transfer Pricing Policy for effective management of market risk in the Bank. The objective of Integrated Treasury Policy is to assess and minimize risks associated with treasury operations by extensive use of various risk management tools. Broadly, it encompasses Policy prescriptions for managing systemic risk, credit risk, market risk, operational risk and liquidity risk in treasury operations.
For market risk arising out of various products in treasury and its business activities, the Bank has set regulatory/ internal limits and ensures the adherence thereof. Migration of ratings is tracked regularly. Limits for exposures to counter- parties, industries and countries are monitored and the risks are controlled through Stop Loss Limits, Overnight limit, Daylight limit, Aggregate Gap limit, Individual gap limit, Value at Risk (VaR) limit for Forex, Inter-Bank dealing and various investment limits. For the Market Risk Management the Bank has a Mid Office. The functions of Mid Office are handled by Risk Management Department.
The Board, RCMC & ALCO are overseeing the market risk management of the Bank, procedures thereof, implementing risk management guidelines issued by regulator, best risk management practices followed globally and ensures that internal parameters, procedures, practices/policies and risk management prudential limits are adhered to.
Liquidity risk of the Bank is assessed through daily gap analysis for maturity mismatch based on residual maturity in different time buckets as well as various liquidity ratios and management of the same is done within the prudential limits fixed thereon. Advance techniques such as Stress testing, simulation, sensitivity analysis etc. are conducted on regular intervals to draw the contingency funding plan under different liquidity scenarios.
Fund Transfer Pricing Policy which lays down methodology/assumptions on which profitability of the branches/ products/customers is measured and the FTP results are being used for effective decision making.
@ Credit exposure is calculated as per RBI Circular DBS.FID.No.C-12/01.02.00/2002- 03 dated 20-01-2003 on measurement of credit exposure of derivatives products and we have adopted current exposure method for calculating the same. According to the circular, on order to calculate the credit exposure equivalent of off balance sheet interest rate & exchange rate instruments under current exposure method, a bank would sum:
i. The total replacement cost (obtaining by marking by marking to marking) of all its contracts with positive value (i.e. when bank has to receive money from counterparty) and
ii. An Amount Potential future charges in credit exposure calculated on the basis of the notional principal amount of the contract multiplied by the credit conversion factor of 1% (applicable to contracts maturing less than one year) and 5% (contract maturing one year and above) according to residual maturity.
c) Credit default swaps
The Bank has not entered into any credit default swap. (Previous Year- Nil)
The RBI, vide its communication Ref: DBR.BP.BC.No.29/21.07.001/2018-19 dated 22nd March, 2019 has deferred implementation of Ind AS for all Scheduled Commercial Banks till further notice. However, going forward, in order to implement Indian Accounting Standards (Ind AS), The Bank has set up a Steering Committee head by the Managing Director to facilitate on continuous basis the process of smooth implementation of Ind AS in the Bank. Also, a sub-committee called IFRS Working Group is formed to work towards effectively implementing Ind AS in the Bank by having detailed discussions and deliberations on Ind AS Standards and related RBI Circulars. The RBI Discussion Paper on ECL was studied and deliberated by the IFRS Working Group and the responses for the Discussion Paper was shared with Reserve Bank of India on 28th February 2023.
Further, Bank has been submitting the proforma Ind AS financials to RBI every half year as per the RBI guidelines. Also, as a prudent measure, Bank is preparing Proforma Ind AS financials on quarterly basis and the estimated impact along with latest update on the Ind AS implementation in the Bank is placed to the Audit Committee of the Board.
15. Accounting Standards
In compliance with the guidelines issued by the Reserve Bank of India regarding disclosure requirements of the various Accounting Standards, following information is disclosed:
a) Accounting Standard 5 - Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies
There are no material prior period items.
In the preparation of these Financial Statements, the Bank has followed the same accounting policies and generally accepted accounting practices adopted for the preparation of the Audited Financial Statements for the year ended March 31, 2022.
b) Accounting Standard 9 - Revenue Recognition
Revenue is recognized on accrual basis as per Accounting Policy No. 1 of Schedule 17 to the financial statements. Certain items of income are recognized on cash basis and same is not material.
Depreciation on the book value of the building up to March 31,2023 is '62.79 crore. Profit and Loss Account for the current financial year has been debited with additional depreciation charge of '5.40 crore representing the incremental depreciation on the revalued amount.
d) Accounting Standard 15 - Employee Benefits
Various Benefits made available to the Employees
i) Pension: The Bank has a defined benefit plan under Pension Trust to cover employees who have joined employment up to 31st March 2010 and who have opted for Pension Scheme, provided they have completed 20 years of service. The benefits under this plan are based on last drawn salary and the tenure of employment. The liability for the pension is determined and provided on the basis of actuarial valuation and is covered by purchase of annuity from LIC. The employees who have joined employment after 31st March 2010 are covered under contributory pension scheme.
ii) Gratuity: In accordance with the applicable Indian Laws, the Bank provides for defined gratuity benefit retirement plan ('the Gratuity Plan') covering eligible employees. This plan provides for a lump sum payment to the eligible employees on retirement, death, incapacitation or termination of employment of amounts that are based on the last drawn salary and tenure of employment. Liabilities with regard to the gratuity plan are determined by actuarial valuation and contributed to the gratuity fund trust. Trustees administer the contribution made to the trust and invest in specific designated securities as mandated by law, which generally comprise of Central and State Government Bonds and debt instruments of Government owned corporations.
iii) Leave Encashment (PL): The Bank permits encashment of leave accumulated by the employees. The liability for encashment of such leave is determined and provided on the basis of actuarial valuation. For the current financial year, Bank has provided an amount of ' 13.40 crore (Previous year Rs 19.01 crore).
iv) Provident Fund: The Bank pays fixed contribution to Provident Fund at predetermined rates to a separate trust, which invests the funds in permitted securities. The contribution to the Fund is recognised as expense and is charged to the Profit and Loss Account. The obligation of the Bank is limited to such contributions. As on 31st March 2023, there was no liability due and outstanding to the Fund by the Bank.
v) Other Employee Benefits: Other than the benefits listed above, the Bank also gives certain other benefits to the employees, which include Medical Aid, Sick Leave, Casual Leave etc.,
For the purpose of segment reporting in terms of AS 17 of the Companies (Accounting Standards) Rules 2021 and as prescribed in the RBI guidelines, the business of the Bank has been classified into 4 segments i.e. (a) Treasury operations (b) Corporate/Wholesale Banking (c) Retail Banking (d) Other Banking Operations. Further as per the RBI circular DOR.AUT.REC.12/22.01.001/2022-23 dated April 07, 2022, on establishment of Digital Banking Unit (DBU) 'Digital Banking' has been identified as a Sub-segment under Retail Banking. Since the Bank does not have any overseas branch, reporting under geographic segment does not arise. Segment assets have been identified and segment liabilities have been allocated on the basis of segment assets.
1. A In terms of Regulation 23(9) of the SEBI (LODR) Regulations, 2015 read with "Para 5 Accounting Standard 18 - Related Party Disclosures" of the RBI Master Direction on Financial Statements - Presentation and Disclosures dated August 30, 2021, "where the disclosures under the Accounting Standards are not aggregated disclosures in respect of any category of related party i.e., where there is only one entity in any category of related party, banks need not disclose any details pertaining to that related party other than the relationship with that related party."
2. Bank has only one entity under Subsidiary and two Key Managerial Personnel, the definition of which, are drawn from the "Accounting Standard 18 - Related Party Disclosures" as required for disclosure under Regulation 23(9) of the SEBI LODR. In terms of the aforesaid RBI Master Direction, the Bank's relationship with each of the parties is as under:
Key Managerial Personnel:
a) Mr. Mahabaleshwara MS, Managing Director & CEO of the Bank, who was the Whole Time Director upto 14th April 2023 on the Board of the Bank and his appointment is in accordance with the approval received from the RBI in terms of Banking Regulation Act, 1949.
b) Mr. Sekhar Rao, Managing Director & CEO (Interim) of the Bank, who is the Whole Time Director from 1st February 2023 on the Board of the Bank and his appointment is in accordance with the approval received from the RBI in terms of Banking Regulation Act, 1949.
Subsidiary:
KBL Services Ltd. is a Wholly Owned Non-Financial Subsidiary of the Bank in respect of which the approval of the
Reserve Bank of India has been obtained in terms of "Master Direction- Reserve Bank of India (Financial Services
provided by Banks) Directions, 2016".
17. Litigations and claims
A sum of '1630.03 crore (Previous year ' 1222.43 crore) is outstanding on account of demands raised by the Income Tax Department in the earlier years, out of which an amount of '956.13 Crore (Previous year ' 765.87 Crore) has been paid under protest by debit to Sundry Assets - Protested Tax Account and for the balance of '673.90 crore (Previous year ' 456.56 Crore) stay from collection of demand has been granted.
In addition to the above, the Income Tax Department has gone on appeal on various issues wherein Appellate Authority has given decisions in favour of the Bank to the extent of ' 486.55 crore (Previous year ' 352.31 crore).
The Bank has also preferred appeal against certain service tax demands to the extent of '193.15 crore (Previous year ' 193.15 crore) and paid pre deposit of ' 1.06 crore (Previous year ' 1.06 crore) by debit to Sundry Assets -Service Tax Paid under Protest.
The Bank has been advised by its Tax Consultants and Experts that there are good chances of success in these appeals, considering favorable judicial pronouncements and / or appellate orders on identical issues for earlier years. Hence, the Bank does not consider it necessary to make any provision or include the same under Schedule 12 - Contingent Liability, to the Balance sheet.
All pending litigations which may have an impact on its financial position have been estimated and provided for. In respect of other pending litigations, no provision is required since these pending litigations have no impact on its financial position.
18. Employee Stock Option
The shareholders of the Bank, on July 21,2018, have approved 'KBL Employee Stock Option Scheme-2018' (ESOS-2018) with a total of 50,00,000 stock options available for grant each of which is convertible into one equity share. The scheme has been framed in accordance with SEBI (Share Based Employee Benefits) Regulations, 2014 as amended from time to time. Further, to give effect to the corporate action by way of Bonus issue in the ratio of 1:10, additional 1,07,147 options have been accounted and hence, the total available options under the scheme stand increased to 51,07,147 stock options.
The options granted under ESOS 2018 would vest after one year from the date of grant of such options in a graded manner over a period of three years (i.e. 40%, 30% & 30% respectively on completion of 1st, 2nd & 3rd year), as determined by the Nomination & Remuneration Committee (NRC), a committee of the Board of Directors, subject to continued employment with the Bank on the date of vesting.
During the year ended March 31, 2023, no modifications were made to the terms and conditions of ESOSs as approved by the NRC.
The Shareholders of the Bank on March 30, 2023 have approved 'KBL Employee Stock Option Scheme-2023' (ESOS-2023) with a total of 15,00,000 Stock options available for grant each of which is convertible into one equity share catering partially towards the disbursal of share linked portion of variable pay as per RBI guidelines relating to compensation payable to MD & CEOs/Whole Time Directors/Material Risk Takers (MRTs) in banks vide DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 4, 2019. The Scheme, which is in lieu of ESOS-2018, has been framed in accordance with Securities and Exchange Board of India (Share Based Employee Benefits & Sweat Equity) Regulations, 2021. The old Scheme ESOS 2018 will continue to be operative for the limited purpose of permitting exercise of already granted options.
The Options granted under ESOS 2023 would vest after one year from the date of grant of such options in a graded manner over a period of three years (i.e. 30%, 30% & 40% respectively on completion of 1st, 2nd & 3rd year), as determined by the Nomination & Remuneration Committee (NRC), a committee of the Board of Directors. During the year under report, there was no grant of options under ESOS 2023.
19. The Board of Directors of the Bank have proposed a dividend of ' 5.00 per Equity share of ' 10/- each for the year ended March 31st 2023 (Previous year ' 4.00 per Equity share of ' 10 each), subject to the approval of the members at the ensuing Annual General Meeting. In terms of Accounting Standard (AS) 4 Contingencies and Events occurring after the Balance sheet date, the Bank has not appropriated proposed dividend aggregating to ' 157.00 crore from the Profit and loss account for the year ended March 31st, 2023. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of Capital adequacy ratio as on March 31st, 2023.
20. Reconciliation of Branch Adjustments and Balancing of Subsidiary Ledgers
i) Balancing of Subsidiary Ledgers is completed at all the Branches/ offices
ii) Reconciliation of Branch Adjustments/Interbank accounts has been completed up to 31st March 2023 and steps are being taken to give effect to consequential adjustments of pending items.
21. Disclosure under Rule 11(e) of the Companies (Audit & Auditors) Rules, 2014
The Bank, as part of its normal business, grants loans and advances (including loans against third party deposits or Non-Banking Finance Company or Real estate promoters / developers loan, other margins / security), makes investment, provides guarantees (including against margin / guarantees received from third parties / banks) to and accepts deposits and borrowings from its customers, other entities and persons. These transactions are part of Bank's authorised normal business, which is conducted ensuring adherence to regulatory requirements.
In the course of the transactions carried out as described above
(a) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall whether directly or indirectly lend or invest in other persons or entities identified by in any manner whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or like on behalf of the Ultimate Beneficiaries.
(b) The Bank has not received any funds from any person(s) or entity(ies) including foreign entity(ies) ("Funding Party") with the understanding, whether recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
23. Previous year's figures have been regrouped/rearranged wherever necessary.
|