Annual Report 2012-2013 Federal Bank

PERFECT
BANKING
PARTNER
Annual Repor t
2012- 2013
Corporate Offce,
Post Box No. 103, Federal Towers, Aluva-683 101, Kerala, India.
Phone: 91-484-2623620-29.
Email: [email protected]
www.federalbank.co.in
The Federal Bank Limited, Regd. Offce: Aluva.
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CONTENTS
page
Mangement
Discussion
and Analysis
28
page
Corporate
Identity
02
page
Financial
Statement of
Fedbank Financial
Services Ltd
122
page
Message from
MD & CEO
06
page
Corporate
Governance
46
page
Performance
Dashboard
03
page
Consolidated
Financial
Statement
149
page
Financial
Statement of
The Federal
Bank Limited
60
page
Message from
Chairman
05
page
Board of
Directors &
Management
Team
07
page
Directors
Report
16
Safe Harbour
This document contains certain forward-looking statements based on current
expectations of The Federal Bank Limited management. Actual results may vary
signifcantly from the forward-looking statements contained in this document
due to various risks and uncertainties. These risks and uncertainties include the
effect of economic and political conditions in India and outside India, volatility
in interest rates and in the securities market, new regulations and Government
policies that may impact the businesses of The Federal Bank Limited as well as its
ability to implement the strategy. The Federal Bank Limited does not undertake
to update these statements. This document does not constitute an offer or
recommendation to buy or sell any securities of The Federal Bank Limited or
any of its subsidiaries and associate companies. This document also does not
constitute an offer or recommendation to buy or sell any fnancial products
offered by The Federal Bank Limited. Figures for the previous year have been
regrouped wherever necessary to conform to current years presentation.
Federal Bank won IDRBT Banking Technology Excellence Awards for year 2011-12- Best Bank Award among Small
Banks for Mobile Banking and Electronic Payments and Best Bank Award among Small Banks for CRM and Business
Intelligence Initiatives. Mr Shyam Srinivasan, MD & CEO received the award at the hands of Dr. D. Subbarao, RBI
Governor in the presence of Mr. Ajith Kumar K. K, (Deputy General Manager).
ANNUAL REPORT 2012-13
The perfect partner walks alongside always; anticipates obstacles
and clears the path with discretion and agility; encourages when
the going is tough and responds with warmth; applauds &
celebrates when goals are accomplished...
At Federal Bank, we aspire to be the Perfect Banking Partner to
our customers - NRI, Retail, SME, Agriculture, Large Corporate - for
we believe that at the core of our work are the relationships we
build with individuals, in whose smiles and achievements, lie the
secret to our growth and success.
In the following vignettes, we bring to you, our esteemed
shareholders, a glimpse into the partnerships we have built with
our target customer segments.
PERFECT BANKING PARTNER
2
The Federal Bank Limited
What we are
The Federal Bank Limited (erstwhile Travancore Federal Bank
Limited) was incorporated with an authorised capital of
5,000 at Nedumpuram near Tiruvalla in Central Travancore
in1931 under the Travancore Companies Act. In 1947, the
name of the Bank was changed to The Federal Bank Limited.
Today, the Bank is listed on the Bombay, Cochin, National
and London Stock Exchanges.
Vision
Become the numero uno bank in Kerala and a
leading player in our chosen segments/markets.
Be the trusted partner of choice for target (SME,
Retail, NRI) customers.
Be a customer-centric organisation setting
standards for customer experience.
Offer innovative yet simple products supported by
state-of-the art technology.
Have a dynamic and energised workforce with a
strong sense of belonging.
Deliver top tier financial performance and superior
value to stakeholders.
Be a role model for corporate governance and
social responsibility.
Our Mission
Devote balanced attention to the interests and
expectations of stakeholders, and in particular:
Shareholders: Achieve a consistent annual post-tax
return of at least 20% on net worth.
Employees: Develop in every employee a high degree
of pride and loyalty in serving the Bank.
Customers: Meet and even exceed expectations of
target customers by delivering appropriate products
and services, employing, as far as feasible, single-
window and 24-hour-seven-day-week concepts,
leveraging a strengthened branch infrastructure,
ATMs, other alternative distribution channels, cross-
selling a range of products and services to meet
customer needs varying over time, and ensuring the
highest standards of service at all times.
1,103
Branches
(March 31, 2013)
1,172
ATMs
(March 31, 2013)
10,059
Team
(March 31, 2013)
7,60,872
NRI customers
(March 31, 2013)
ABOUT THE BANK
3
PERFORMANCE DASHBOARD
Retail Advances grew
from 10,623 Cr
to 13,328 Cr (up
by 25.47%)
SME and Agri
Advances grew
from 10,472 Cr
to 12,821 Cr (up
by 22.44%)
NRI deposits grew
from 11,184 Cr
to 15,266 Cr (up
by 36.50%)
CASA deposits grew
from 13,402 Cr
to 15,519 Cr (up
by 15.80%)
Volume growth
Earnings per share -
49.00
CRAR - 14.73%
Return on Equity -
14.03%
Return on Assets -
1.35%
Key ratios
Consolidated Profit
after tax grew from
753.73 Cr to
852.66 Cr (up by
13.12%)
Total Income
grew from
6,090.73 Cr to
6,832.01Cr (up
by 12.17%)
Profit after tax grew
from 776.79 Cr
to 838.17 Cr (up
by 7.90%)
Income growth
4
PERFORMANCE DASHBOARD
Increasing presence Increasing accounts
Robust growth in customer deposits
Improving profitability
Improving deposit mix
Operating profit Net Profit
672
743
950
1,103
FY 10 FY 11 FY 12 FY 13
Number of ATMs
732
803
1,005
1,172
FY 10 FY 11 FY 12 FY 13
449
957
SME and
Agri
1
1
3
%
185
311
Current
Account
6
8
%
Retail
advances
9
0
%
1365
2600
Savings
Account
3
2
%
5244
6940
7
6
1
1
9
1
4
8
1
0
9
3
0
1
2
7
4
3
Savings
deposit
1
8
3
1
2
4
0
6
2
5
4
6
2
9
0
9
Demand
deposit
1
8
4
6
5
2
0
5
9
2
2
8
2
9
2
3
3
5
1
9
Other retail
deposit
3
6
0
5
8
4
3
0
1
5
4
8
9
3
75
7
6
1
5
Total
Deposit
FY 10 Resident retail TD FY 11 CASA FY 12
High Value
FY 13
NRI TD
( cr) (%)
( Cr) ( Cr)
11.53
25.85
22.60
40.20
10.66
26.53
25.27
37.55
13.31
27.39
14.65
44.65
17.01
26.94
14.66
41.40
FY 10 FY 11 FY 12 FY 13
2
7
8
5
8
2
9
1
3
1
2
6
5
FY 10
3
3
5
7
2
0
1
0
7
7
1
4
2
7
FY 11
3
5
4
7
1
5
1
1
3
4
1
5
0
6
FY 12
3
4
7
6
9
6
1
0
9
0
1
4
6
0
FY 13
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
1
3
6
2
3
7
3
4
8
4
6
5
FY 10
1
3
2
2
7
2
4
1
5
5
8
7
FY 11
1
4
6
3
3
7
5
3
9
7
7
7
FY 12
1
9
0
4
0
5
6
1
6
8
3
8
FY 13
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Q
4
Q
3
Q
2
Q
1
Number of Branches
FY 2011-12
FY 2012-13
Numbers in 000s
5
Dear Esteemed Shareholders,
I am privileged to address this message to
all our stakeholders as the Chairman of The
Federal Bank Limited from September 2012.
I have been on the Board of Directors for
the last seven years; both as an enabler
and as part of a fulfilling journey of the
transformation process of your Bank.
The Annual Report for this fiscal 2012-13
therefore reflects both the resilience and
positive performance of the Bank, despite
the adverse global and domestic economic
environment.
As you are aware, the year began with
continuing crises in the Euro-zone as well
as stresses in the Western banking system
- that resulted in a contagion impact
sweeping across the emerging economies,
including India.
The U.S. economy started early in the fiscal
to show signs of anemic recovery. Both the
Federal Reserve and the U.S. authorities
have therefore remained anxious to sustain
the growth momentum through monetary
stimulus -- such that other countries in
Europe, Japan, China and elsewhere began
to emulate with their own accommodative
monetary stance.
India was naturally impacted by the
headwinds drifting down from the
developed economies. However, due to
persistent domestic inflationary pressures,
the monetary policy remained tight.
During the year, manufacturing and other
productive sectors declined - causing Gross
Domestic Product (GDP) growth to dip in
from 6.2% in 2011-12 to about 5%.
Despite this, during the fiscal, there
was a good flow of NRI remittances
and investments by Foreign Institutional
Investors (FIIs) -- partly stemming from
the falling Indian Rupee against major
currencies.
The policy-makers made determined efforts,
especially in the last few months of the
fiscal, to create a more conducive business
environment; focusing particularly on Foreign
Direct Investments (FDIs).
All these policy measures augur well for
2013-14 and beyond.
Your Banks performance
Despite the external challenges, your Bank
improved its performance during the year
in vigorous pursuit of its strategic business
objectives.
The Bank invested in expanding its operating
network; with the addition of 153 branches
and 174 ATMs during the financial year to
record 1103 branches and 1179 ATMS as
at the 31st of March 2013.
Net profit increased by 7.9% and Earnings
Per Share (EPS) improved from 45.41 to
49.00. Book value per share grew from
333.61 to 364.74.
I am happy to advise that the Board of
Directors recommend a dividend for the
year at the same level as in the previous year
i.e. of 9.00 per share, on par.
Excellent relationships with our
customers and stakeholders
During the fiscal, the Bank increased
the number of customers that it serves
effectively across its operating geographies.
Federal Bank has always reached out to the
Non-Resident Indian (NRI) diaspora and
established tremendous connectivity with
its customers overseas. This year, as in the
recent past, witnessed a step-up in terms of
remittances and other business flows from
NRIs.
I have personally had the opportunity to
engage with several of these NRI clients;
especially those in the GCC. It is therefore, a
matter of pride for me to hear from them of
their appreciation and acknowledgement of
Federal Banks outstanding service quality
and empathetic sensitivities to their needs
- both at home and abroad.
The Bank has also continued to customise
its products and services; so as to deliver
differentiated and innovative products.
I am encouraged by the Banks careful
build-up of businesses in the SME segments
in their chosen clusters of branches in
the Western and Northern India; while
deepening its domestic franchise in Kerala
and in South India.
Growth in Progress
Strategically, the Banks governance quality
and management bandwidth are also
being enhanced to cope with the emerging
rigours of the banking and financial sector.
The Bank remains steadfastly committed to
build on its core values, instilled in us by the
Banks Founder - the late Shri K.P. Hormis,
and deliver a consistently positive growth in
value for all our stakeholders.
We are grateful to all the authorities and
regulators for their support and guidance
in our endeavours.
Over the years, your Bank has invested
in its human resources and technology
as well as strengthened its technical
and professional teams - through both
training & development as well as a careful
nurturing of talent and experience across
the Bank and its subsidiary.
In conclusion, may I acknowledge the
excellent dedication and contribution of all
of the Banks staff members i.e. the Federal
family.
Suresh Kumar
Chairman
MESSAGE FROM
THE CHAIRMAN
6
Dear Shareholders,
I am happy to present to you our results
for the financial year 2012-13. We
delivered a satisfactory performance in
very demanding circumstances. The year
that went by was characterised by a sharp
focus on strengthening our fundamentals
and ensuring that we maintain a balanced
approach to the conduct of business.
As you are aware, global economic
challenges the deceleration in global
economic recovery, the continuing
eurozone crisis and the fiscal cliff in the US
have had a direct bearing on the business
environment in our country as well. India
faced a slowdown in investments, high
interest rates, high current account deficit
and a decade-low GDP growth. While these
affected the macro picture, there were some
tangible opportunities which your Bank
made a determined effort to capitalise on.
Some of the milestones we achieved
during the year were noteworthy and
more importantly, give us the platform to
accelerate our growth in the coming years.
We crossed the 100,000 Cr mark in
total business, entering the league of
larger banks in the country.
Our network expanded by 16.11% to
1,103 branches, making us the fourth
largest private sector Bank across our
footprint and the largest in Kerala.
Our focus businesses and segments
grew encouragingly - Retail Advances
(25.47%), SME advances (22.44%),
Savings Balances (16.59%) - registering
top quartile performances in the
market. This was helped by heartening
performances by our new branches that
dot the country.
Our Non Resident customers continued
to provide us with their patronage,
which helped us gain share in a crucial
business segment which grew 36.51%
Our two strategic investments - IDBI
Federal Life Insurance Company Ltd and
Fedbank Financial Services Ltd. - turned
profitable this year.
However, the year was not without
challenges. Some of our stressed advances
did face the impact of a sluggish external
environment, resulting in unfortunate
increase in slippages. Our determined
efforts to have strong credit underwriting
for new advances and strengthened
recovery practices helped stabilise our
overall portfolio quality.
Third-party recognition and awards are
always an inspiration to a team and we had
our share of them in 2012-13. We were
recognised for our high quality technology
platform; for our commitment to service
excellence and for sensitive engagement
with-deep rooted social causes.
As I look ahead into FY 2013-14, I remain
optimistic about the future, yet tempered
with realism. I truly believe that our Bank
is positioned to respond suitably to
challenges and capitalise on emerging
opportunities. The management team is
acutely aware, as I mentioned last year,
that we live in demanding times and to
be an out-performer in this environment,
we must possess a deep and abiding
commitment to execution and excellence
while never straying from our core values
and objectives.
We are confident that by being the perfect
banking partner to our customers, we will
return to you with an inspired performance
in this financial year.
Thanking you for your continuous support.
I remain Proud to be a Federal.
Shyam Srinivasan
Managing Director and CEO
MESSAGE FROM
THE MANAGING
DIRECTOR & CEO
7
BOARD OF DIRECTORS
MANAGEMENT TEAM
Seated from left to right: Shri K M Chandrasekhar I Shri Suresh Kumar, Chairman I Shri Shyam Srinivasan, MD & CEO
I Prof. Abraham Koshy. Standing left to right: CA Nilesh Shivji Vikamsey I Shri Dilip Gena Sadarangani I Dr K Cherian Varghese I
Shri Sudhir Moreshwar Joshi I Shri Abraham Chacko, Executive Director I Dr M Y Khan.
Ashutosh Khajuria
President
Radhakrishnan Nair
Chief Human Resources
Officer
Harikumar K S
General Manager
Varghese K I
General Manager
Mohanachandran K R
General Manager
Sampath D,
Additional General
Manager
Jose V Joseph,
Additional General
Manager
Nagarajan R,
Additional General
Manager
Surendran A,
Additional General
Manager
Madhavakumar
V R, Additional
General Manager
Pradosh Kumar
Mohapatra, Additional
General Manager
Thampy Kurian,
Additional General
Manager
8
BONDS OF TRUST
9
Meeting Non
Resident Aspirations
WE BELIEVE THAT
AT THE HEART OF
OUR BUSINESS LIES
THE CAPACITY TO
BUILD ENDURING
RELATIONSHIPS.
NRI patrons at a
togetherVgather event.
Fun engagements for the NRI
clientele like the TogetherVgather
reunion.
Value added services like holiday
planning, tax advisory, health
care services and online religious
offerings.
Priority lounges at all major NRI
centers Fedselect Lounges
One among the banks with the
most number of inward remittance
arrangements.
Tech-enabled offerings which
invariably reduce the distance
between continents.
We believe that these small steps help
the NRI customers stay connected real-
time with their finances as well as their
loved ones, while forging the Banks
relationship with them further.
T
hey are far away from the warmth of home and family, toiling over
sands or seas or frozen lands. Every time they listen to a Mohammed
Rafi or a Yesudas, their hearts ache to be homeward bound. Though
they have made their fortunes away from their homeland, they have left
their heart behind. We at Federal Bank relate to the pangs of longing
that they endure. We cannot of course bring their homeland to them,
but we can certainly bring the wealth of their toil to their loved ones
and ensure that it remains safe and growing. The relationship is beyond
that of a Banker and a customer. It is a bond of trust.
10
FULFILLING THE PROMISE OF PROSPERITY
11
Nurturing
SME Relationships
WE HAVE
EXTENDED BEYOND
THE USUAL, NOT AS
AN EXCEPTION BUT
AS A CONSISTENT
RULE.
Inauguration of Federal
Banks 3rd Currency Chest at
Mumbai by Shri. B B Mohanty
(General Manager- Reserve
Bank of India) in the presence
of Shri Shyam Srinivasan, MD
& CEO, Shri Abraham Chacko
(Executive Director), Shri T S
Jagadeesan (Rtd CGM), Shri K
I Varghese (General Manager)
and others.
At Federal Bank the roles shift
fluidly from banker to advisor to
consultant.
Tailor made SME products and
services in a variety of fields
including Education, Medicine,
Agriculture, Allied Agriculture,
Fisheries, and Engineering
Supply Chain financing - from
raw material procurement to
receivables collection.
Zealous participation and
contribution in all initiatives
organised by Government and
non-Government bodies for SMEs.
Specialised products for small
businessmen, professionals and
traders engaged in a variety of
activities.
Your Bank is a strong believer in the
power of entrepreneurial India and will
continue to support the SME segment
in its journey forward.
T
hey started off with whim and courage for capital. They waded
through the headwinds with the strength lent by the faith in their
business ideas. The numerous obstacles could not bog them down, for
they believed in themselves. Over the years, from modest outfits they
grew bigger and better in volume and returns. They have created jobs
that shelter families. They are the engine of the universe around them.
We at Federal Bank realise what it takes to grow from small beginnings
while remaining fiercely independent, because seven decades ago we
were a fledgling too. We share their passion and believe in them.
12
SHARED DREAMS
13
Fulflling
Retail Dreams
WE STRIVE TO
OFFER THE BEST
DEAL, WITH
QUALITY AND
AGILITY, TO HELP
REALIZE THE
DREAMS OF A
NATION.
An interior view of branch St
Marks Road, Bangalore.
Innovative delivery channels with
convenient and personalised
offerings
Contemporary Customer
Relationship Management tools
and Analytics to predict customer
preferences.
Pre-approved loans to customers
based on insights from
transactional information
Novel products - like Apna Gold
24X7 (Debit Card for Gold loan
limits) and RD Extragain (A recurring
deposit with added benefits).
Priority Banking Services to ensure
personalised service to HNIs
Loyalty programs to users of debit
cards and first-time customers.
Retail is a key segment which the Bank
pursues and will continue to occupy an
important role in the future growth of
the Bank.
T
hey stand around the dining table a small family of four. On
the table is a plan for their new home. A dream built over years.
A desire that lights up four pairs of eyes simultaneously. They have
put their dream together lovingly, brick after brick. The plan for the
realisation of their dream has been anxiously discussed and debated.
We at Federal Bank so believe in that dream, that when they choose
to light that lamp of their dream, ours will be the first pair of hands to
protect the flame from the wind.
14
REACHING BEYOND THE ORDINARY
15
Embracing Inclusion
FOR FEDERAL
BANK FINANCIAL
INCLUSION IS NOT
A REGULATORY
COMPULSION BUT
AN OPPORTUNITY
TO PARTICIPATE IN
BUILDING A BETTER
ECO-SYSTEM FOR
THE UNBANKED
AND UNDER-
BANKED REACHES
OF THE COUNTRY
Inauguration of 21 Financial
Inclusion Grama Jeevan
Branches in Tamil Nadu by
Shri Dr. Ramasamy (Honble
Vice Chancellor of Tamil Nadu
Agricultural University) in the
presence of Shri. Manoharan
M (DGM), Shri Srinivasan K
(AGM) and others.
Financial literacy centers to create
awareness.
Equipped and prepared for the
Direct Benefit Transfer of subsidies
Micro insurance schemes for the
less privileged.
One of the first movers to enable
Aadhaar linkage
Micro credit to villagers and SHGs
through Grama Jeevan Branches
and Ultra Small Branches
Your Bank has been in the forefront
of implementing initiatives involving
financial inclusion. Going forward too,
the Bank shall lead from the front in
reaching out to the un-included.
T
he best savings avenue for them comes in the shape of a round
tin biscuit box; the contents of which are counted every day. Their
children cannot go to school because the nearest one is 30 kms away.
They borrow at huge interest rates to carry forth their vocations. They
are the less privileged citizens of Indias rural and suburban fringes.
We at Federal Bank empathise with their aspirations for they are no
different from ours. Theirs is a cause close to our heart. We entwine
our activities with their needs to improve their environment and bring
the light of finance to their doorstep.
16
The Federal Bank Limited ANNUAL REPORT 2012-13
Your Board of Directors has the
immense pleasure of presenting
the 82nd Annual Report of
The Federal Bank Limited on its
business and operations front
along with the audited accounts
for the year ended March 31,
2013.
FINANCIAL PARAMETERS For the year ended ( In Crores)
31-03-2013 31-03-2012
Net Interest Income 1,974.66 1,953.40
Fee and Other Income 664.44 532.34
Net Revenue 2,639.10 2,485.74
Operating Expense 1,179.54 979.27
Operating Profit 1,459.56 1,506.47
Net Profit 838.17 776.79
Profit brought forward 296.68 25.78
Total Profit Available for appropriation 1,134.85 802.57
Appropriations:
Transfer to Statutory Reserves 209.55 194.20
Transfer to Revenue Reserves 172.14 98.88
Transfer to Capital Reserves 22.95 5.40
Transfer to Special Reserves 33.70 28.50
Proposed Dividend 153.95 153.94
Provision for Dividend Tax 26.17 24.97
Balance Carried over to Balance Sheet 516.39 296.68
Financial Position (as on)
Deposits 57,614.86 48,937.12
Advances 44,096.71 37,755.99
Total Business (Deposits + Advances) 101,711.57 86,693.11
Other Borrowings 5,186.99 4,241.03
Investments 21,154.59 17,402.49
Total Assets ( Balance Sheet Size) 71,049.57 60,626.77
Equity Capital 171.06 171.05
Ratios
Return on Total Assets (%) 1.35 1.41
Return on Equity (%) 14.03 14.37
Earnings Per Share () 49.00 45.41
Book value per share () 364.74 333.61
Operating cost to Income (%) 44.69 39.40
Capital Adequacy Ratio (%) Basel (I) 13.09 13.83
Capital Adequacy Ratio (%) Basel (II) 14.73 16.64
Directors report
17
The financial year (FY12-13 ) was marked by macroeconomic
and inflationary challenges. Regulatory tightening was also a
distinctive feature of the year. Your Bank was able to deliver
a consistent set of numbers amidst all these challenges,
through systematic and calibrated process corrections,
planned de-bulking of exposures and deposits and via
focused attention on market demands.
In FY 12-13 the Bank continued its strategic drive in its
traditional areas of strength viz. retail, NRI, SME, agriculture
and gold loans through value-added offerings. Our retail
portfolio grew by 19.09% annually, supported by a growth
in retail deposits by 17.45% and retail advances by 25.47%.
Priority sector advances of the Bank declined by 857.57 Cr
in the last fiscal year and stood at 11794.97 Cr as on 31st
March 2013. Advances to the agriculture sector were marked
by an increase of 8.89% and reached 4702.80 Cr. The Bank
exhibited robust performance in the gold loan business with
an increase of 76.67% in the portfolio.
The Bank also continued the strategic expansion of its
footprint by opening 153 branches during the financial year.
The Banks branch strength as on 31stMarch 2013 stood
at 1,103. The financial year saw your Bank cross the 1,000
branch milestone. The Bank also added 174 ATMs during
the financial year bringing the ATM strength to 1,172 as on
31 Mar 2013. Post 2012-13, the Bank intends to continue its
strategy of enhancing its presence in its chosen geographies
outside the State of Kerala, which include the States of
Tamil Nadu, Karnataka, Punjab, Gujarat and Maharashtra.
The Bank will choose to pursue growth in areas where it
has accumulated considerable experience over the years viz.
agriculture, SME and NRI businesses.
Net Profit
During the year ended March 31, 2013, your Bank registered
a net profit of 838.17 Cr, an increase of 7.90% over the
previous year.
As a result of a refinement in the asset quality, the Bank
could rein in a total provisioning to 621.39 Cr. This was
mainly aided by a reverse effect of 36.82 Cr of investment
depreciation and a reduced loan loss provisioning of 189.28
Cr (with an overall provision coverage of 80.96%. taking into
account all written off accounts). An amount of 355.59 Cr
was earmarked for taxes and 113.34 Cr, for other purposes.
Return on Average Equity and Return on Average Total Assets
stood at 14.03% and 1.35% respectively. Earnings per Share
of the Bank, for the year FY 2012-13 stood at 49.00 as
compared to the previous fiscal year figure of 45.41. Book
value per share increased from 333.61 in the previous fiscal
year to 364.74 in FY 12-13.
Operating Profit
In the financial year 2012-13, the Bank had continued its
policy of reducing its reliance on bulk businesses, selecting
advances through a tightly-sieved quality filter, increasing its
footprint materially and augmenting its workforce to match
the network growth. The Operating Profit of your Bank
stood at 1,460 Cr.
The Net Interest Margin of the Bank for the year stood
at 3.37%, despite the interest rate volatility. Net Interest
Income of the Bank for the period increased from 1,953.40
Cr to reach 1,974.66 Cr.
The financial year ended March 2013, saw Total Non-interest
Income of the Bank grew to 664.44 from 532.34 Cr in FY
11-12, clocking a growth of 24.81%.
Expenditure
The fiscal year ended 2013 witnessed an increase in the
total expenses of the Bank which reached 5,372.45 Cr from
4,584.26 Cr with an increase of 17.19%. Interest expenses
increased to 4,192.91 Cr in FY 12-13 from 3,604.99 Cr in
FY 11-12.
Despite the strains on the macroeconomic level and increased
costs, your Bank succeeded in reining in the cost of deposits
to 7.58% compared to 7.41% of the previous year.
Average cost of all funds (deposits + borrowings + bonds)
recorded a marginal increase and reached 7.67%. The
growth in term deposit portfolio, the general increase in
18
Directors report
rate of interest offered on term deposits coupled with the
deregulation of the rate of interest offered on NRE term
deposits (INR) by the RBI contributed to an increase in the
interest expenses on deposits. The interest expenses as
percentage of the Total Income increased to 61.37% from
59.19% in FY 2012.
In the current fiscal, CASA increased from 13402 Crore to
15519 Crore. Average CASA grew by 23.49% from 11630
Crore to 14362 Crore. CASA to total deposits decreased
marginally from 27.39% in FY 11-12 to 26.94% in FY 12-13,
as term deposits grew at a faster pace. Operating Expenses
of the Bank during the fiscal year grew from 979.27 Cr to
1,179.54 Cr. This has been caused by increase in human
capital related expenses (wages, DA, contribution to the
New Pension Scheme, retirement benefits of employees
among others) and depreciation.
The expenses on account of the opening of 153 new
branches during the fiscal year have also contributed to the
increase in operating expenses.
The Cost to Income ratio of the Bank stands at 44.69%
(39.40% in FY 2012) which was a reflection of the varied
strategic initiatives viz. increasing our footprint in chosen
geographies and increase in manpower. Income growth
was muted due to the reorienting of our sourcing to quality
and lower risk segments and the impact on revenue due to
slippage of some vintage accounts.
Income
Despite the macroeconomic slowdown, inflationary issues
and other uncertainties that plagued the financial year, your
Bank could hold its own by maintaining and growing quality
assets as well as by implementing a market-oriented pricing
policy.
The Total Income of the Bank during the fiscal year 2013
recorded a 12.17% growth to reach 6,832.01 Cr from
the previous fiscal year figure of 6090.73 Cr. The interest
income component grew by 10.96% while other income
grew by 24.81% y-o-y.
Income from advances increased by 10.64% to reach
4,635.66 Cr. At the same time, income from investments
registered a reasonable growth to reach 1,464.60 Cr
clocking at a rate of 11.31% annually.
The yield on advances stood at 12.28% and the yield on
investments at 7.24%. The Net Interest Margin for the fiscal
year is at 3.37% as against 3.79% of the last fiscal, owing
primarily to the lower yield on advances.
Focused attention on streams of fee-based income and
other income resulted in an increase of 24.81%. The total
other income grew from 532.34 Cr in the previous fiscal to
664.44 Cr in the current fiscal.
Spread
During the fiscal year the Banks spread on advances (gross)
decreased to 4.70% from 5.17% and spread on investments
(gross) stood at 0.67%. The spread (net of provisions) on
advances decreased from last years 4.50% to reach 4.20%.
Dividend
Continuing the Banks policy of striking a fine balance
between retained earnings and dividend, your Banks Board
has recommended a dividend of 9 per share on par with
the dividend for the previous fiscal. Protecting the value for
our shareholders has always been a guiding philosophy of
the Bank.
Investor Education and Protection Fund
As per the Companies Act 1956, dividend unclaimed
for more than seven years from the date of issue is to be
transferred to Investor Education and Protection Fund. On
28.09.2012, we transferred 31,73,731 to the Fund.
Growth in Business
Total business of your Bank reached 1,01,711.57 Cr as on
31st March 2013. The Bank crossed an important milestone
of 1,00,000 Cr. Total deposits increased by 17.73% from
48,937.12 Cr in FY12 to 57,614.86 Cr in FY13. The
total advances of your Bank increased by 16.79% from
37,755.99 Cr in FY 12 to 44,096.71 Cr in FY13.
NRE deposits clocked an increase of 65.21% to reach
19
Directors report
13,156.98 Cr and retail deposits grew by 17.45% to touch
48,484.37 Cr. CASA deposits also displayed a growth of
15.80% to reach 15518.80 Cr.
The savings deposits of the Bank has touched 12,743
Cr, growing by 16.59% over that of the previous fiscal of
10,930 Cr.
The investment portfolio of the Bank burgeoned to
21,154.59 Cr in the current fiscal from 17,402.49 Cr in the
previous fiscal, registering a growth of 21.56% compared to
19.71% in the previous fiscal year. The average investments
on y-o-y registered a growth of 12.34% as compared to
previous fiscal year growth of 44.31%.
Loan Asset Quality
In the fiscal 2012-13, your Bank consolidated its credit
underwriting processes, which had been initiated in the
previous fiscal by isolating the sourcing and sanctioning legs
of the credit vertical. The credit monitoring cells, the Stressed
Assets Management Cell and the National Credit Hub were
strengthened with sufficient manpower and by making the
processes leaner and more efficient. This could to a great
extent ensure that fresh slippages can be reduced.
The Banks Gross NPA and Net NPA stood at 3.44% and
0.98% respectively as at the end of March 2013. The total
provisions held against non-performing advances, expressed
as a percentage of Gross NPAs amounted to 80.96%
(including technically written-off accounts) at the end of FY
2012-13.
The Bank managed its NPA portfolio prudently, by
considering and exercising options such as SARFAESI Act,
compromise settlements, Lok Adalats and DRT.
Provision Coverage
As on 31 March 2013, the Bank held a total provision of 1,
097.87 Cr. Provision coverage for NPAs as on 31 March 2013
stood at 70.65%. As per the RBI directive, banks should hold
a minimum provision coverage of 70% including technically
written-off accounts. As on 31 March 2013, the provision
coverage ratio of the Bank, including technically written-off
accounts is 80.96%.
Capital Adequacy
Historically, your Bank has been strong on capital adequacy.
The CRAR of the Bank calculated in line with Basel II norms
stood at 14.73% which is considerably higher than the 9%
stipulated by the RBI. Of this, Tier-I CRAR is 14.09%.
Employee Productivity
Business per Employee of the Bank during the period has
grown from 10.13 Cr in FY2011-12 to 10.75 Cr in and the
profit per employee of the Bank stood at 8.91 lakh during
the fiscal.
Share Value
Earnings per Share of your Bank increased from 45.41 to
49.00 registering a growth of 7.90%. Return on Equity
during the year reached 14.03% in the fiscal year ended 31st
March 2013.
Employee Stock Option Scheme (ESOS)
The Bank has instituted an Employee Stock Option Scheme
to enable its employees including Wholetime Directors to
participate in the future growth and financial success of the
Bank. Under the Scheme 85,51,650 options can be granted
to the employees. The Employee Stock Option Scheme is
in accordance with the Securities and Exchange Board of
India (Employee Stock Option and Employee Stock Purchase
Scheme) Guidelines, 1999. The eligibility and number of
options to be granted to an employee is determined on
the basis of various parameters such as scale, designation,
work performance, grades, period of service, annual fixed
pay, Banks performance and such other parameters as may
be decided by the Compensation Committee from time to
time in its sole discretion and is approved by the Board of
Directors.
The Banks shareholders approved the scheme for issuance
of stock options to employees including Wholetime Directors
on 24th December 2010.
The option conversion price was set to be the closing price
on the day previous to the grant date. The compensation
20
Directors report
committee granted 34,72,020 options during the year 2011
-12 and 24,48,475 options during the year 2012-13. The
options granted are non-transferable, with vesting period of
one to four years, subject to standard vesting conditions,
must be exercised within five years from the date of vesting.
As on 31 March 2013, 11,631 options had been exercised
and 54,46,279 options were in force.
Other statutory disclosures as required by the SEBI guidelines
on ESOP are given in Annexure-II to this report.
Expansion of Network
Your Bank crossed the landmark of 1,000 branches in the
current fiscal year to expand its footprint to 1,103 branches
as on 31st March 2013. On 17.08.2012 (1st day of the
Malayalam month of Chingam), Shri Vayalar Ravi, Honorable
Union Minister for Overseas Affairs, inaugurated the 1,000th
branch of your Bank commemorating the opening of the
first Branch of Federal Bank some sixty seven years ago by
our Founder Shri K P Hormis. The Bank was able to add 153
branches in the current fiscal year which included under-
banked and un-banked centres as per RBIs guidelines.
This resulted in a footprint expansion of 16.11% from the
previous years base. The Bank had opened a number of
branches in the chosen five States of Tamil Nadu, Punjab,
Gujarat, Karnataka and Maharashtra and also in Kerala.
Corporate Social Responsibility
Corporate Social Responsibility and sustainable development
initiatives were incorporated in the Banks business
strategies/policies. The Bank has a well-defined CSR policy
which has been circulated among the employees and also
made available in the intranet and in the Banks website.
Your Bank has always stood for the assistance and upliftment
of the rural/agrarian community by devising specific schemes
and inculcating banking habits in them.
Fedbank Hormis Memorial Foundation, a public charitable
trust instituted by your Bank provides scholarships to
the economically disadvantaged students for pursuing
professional education courses. The Trust also endeavours
to impart better knowledge and awareness in the field of
banking to the less privileged particularly in far flung rural
areas, through training programmes, seminars, award
ceremonies among others.
The Bank runs a customer contact centre manned almost
entirely by differently-abled personnel. The Bank, through its
CSR cell lends a helping hand by sponsoring ambulances,
computers, dialysis machines, medical equipments,
elevators, free midday meals, environmental and healthcare
projects, and social cultural and educational programmes
among others. The cell also engages in community outreach
programmes related to health, family welfare, environment,
education, providing potable water, sanitation and
empowerment of women and other marginalised groups.
As part of its employee engagement initiatives your Bank
has participated wholeheartedly in promoting Earth Hour
prescriptions, paperless banking, blood donation, adoption
of population control measures and scores of such initiatives
amongst its employees.
The Bank, leveraging its technological advantages, has
influenced the lives of the less privileged in a meaningful
way. Such as fishermen, farmers, coolies, construction
workers, rickshaw pullers and migrant labourers, by bringing
them to the centre from the peripheries. In the last fiscal,
the Bank carried forward the initiative christened Fedjyothi
through which the ICT (Information & Communication
Technology) model accounts (which are operated using
Biometric Smart Cards and Micro ATM) were delivered door-
to-door to people in far flung and hard-to-reach areas, as a
part of its financial inclusion programme. Long before the
bill on Corporate Social Responsibility (CSR) was introduced,
the Bank had started practicing CSR activities in line with the
lofty ideals of its founder, Shri K P Hormis.
Awards and Accolades
Your Bank received the NPCI award for being the highest
contributor in number of IMPS (Immediate Payment
Service) transactions, which is one of the clearest
indicators of the technological preeminence of your Bank
The Bank received the NPCI Award for Excellence in
promotion of Inter Bank Payment Service.
The Bank won the following IDRBT Banking Technology
21
Directors report
Excellence Awards for the year 2011-12:
a) Best Bank Award among Small Banks for Mobile
Banking and Electronic Payments.
b) Best Bank Award among Small Banks for CRM and
Business Intelligence Initiatives.
IDRBT (Institute for Development and Research in
Banking Technology) sets the benchmark and recognises
technology implementation and absorption among
banks aimed at improving customer service, customer
convenience and overall productivity.
National award of excellence Quality Brands India 2012-
14
The Bank received the National award of excellence
Quality Brands India 2012-14. National award of
excellence Quality Brands India 2012-14 was awarded
to the Bank on 20th June 2012. This is a prestigious
award instituted by Quality Brands India Private Limited,
an independent appraiser organisation established
in 2008 to identify, recognise and honour business
enterprises that excel in performance, research, growth
and brand building in India.
Rashtriya Udyog Ratna Award
The Bank bagged the Rashtriya Udyog Ratna Award on
20th June 2012. The National Education and Human
Resource Development Organisation (NEHRDO) has
recognised your Banks outstanding contribution to the
national economic growth by presenting this award.
NEHRDO is an organisation established to ensure the
economic and social well-being of the nation through
the development of individuals and institutions.
Corporate Governance
The Bank has adopted a Code of Corporate Governance
which while taking care of and safeguarding the interest
of shareholders and all other stakeholders also provides for
good management, adoption of prudent risk management
techniques and compliance with required standards of
capital adequacy.
The Code also aims at identifying and recognising the Board
of Directors and the Management of the Bank as the principal
instruments through which good corporate governance
principles are articulated and implemented, giving utmost
importance towards ensuring transparency, accountability
and equality of treatment amongst all the stakeholders in
tune with statutory and regulatory requirements. A copy of
the Code is available on our website.
Board of Directors
The composition of the Board of Directors is governed by the
Banking Regulation Act, 1949, the Companies Act, 1956,
Listing Agreement, and the Code of Corporate Governance
adopted by the Bank. The Board comprises of nine Directors,
as on 4th June 2013, with rich experience and specialised
knowledge in various areas of relevance to the Bank,
including banking, accountancy, MSME, finance, small scale
industry, agriculture, and information technology.
Shri Shyam Srinivasan MD & CEO joined the Bank on
23.09.2010. Shri. P.C. John, Executive Director (ED), who
was the Wholetime Director of the Bank, retired on 30 April
2013.
Excluding the MD & CEO and the ED all other members of
the Board are Non-Executive and Independent Directors.
Prof. Abraham Koshy and Dr. M.Y.Khan were re-elected/
appointed as Directors of the Bank at its last Annual General
Meeting held on 2nd August 2012.
The other Directors who are retiring at this AGM are Shri
Suresh Kumar and CA Nilesh S. Vikamsey. Shri Suresh Kumar
and CA Nilesh S. Vikamsey both being eligible, have offered
themselves for reappointment.
Shri Suresh Kumar holds a Bachelors degree in Economics &
Commerce (Hons.) from the University of Bombay. He started
his career as a probationary officer in the State Bank of India
(SBI). In 1979, he continued his banking career as a member
of the Senior Management and Executive Committee (ExCo)
of the Emirates Bank Group; following senior treasury and
general management positions in Government of Dubais
projects. He is a fellow of the Indian Institute of Bankers
and has also completed several Advanced Management
22
Directors report
Programmes at London, Wharton and Columbia Schools of
Business. He has been the Founder-President of the Indian
Business & Professional Council, Dubai and an active member
of the Regional Chief Executive Forum of the Institute of
International Finance (IIF). He retired in April 2012 as a CEO
in the Emirates NBD Group, Dubai, and as a member of the
Board of its subsidiaries. Currently, Shri Suresh Kumar is also
Chairman of Federal Bank Financial Services Ltd and a non-
executive Director on the Boards of IDBI Life Insurance Co.
Ltd and ICICI Prudential Asset Management Co. Ltd. He has
been a recipient of several accolades and recognition and
was awarded the Hind Rattan (Jewel of India) on the 25th
of January 2012. Shri Suresh Kumar holds 105,710 GDRs of
Shri Nilesh Shivji Vikamsey is a Chartered Accountant by
profession, and holds a diploma in Information System
Audit and was also associated with the Business Consultancy
Studies course at the Bombay Chartered Accountants Society
jointly with Jamnalal Bajaj Institute of Management Studies.
He is the senior partner of Khimji Kunverji & Co, Chartered
Accountants, a firm which has over 75 years of experience
in the areas of auditing, taxation, corporate and personal
advisory services, business and management consulting
services, due diligence, valuations, inspections, and
investigations. He is a member of the Central Council of the
Institute of Chartered Accountants of India (ICAI). He has also
acted as a Speaker/Chairman at various seminars, meetings,
lectures held by various committees. He is a director in India
Infoline Limited, India Infoline Investment Services Private
Limited, Rodium Realty Limited, ICAI Accounting Research
Foundation. Apart from being contributor to various
articles, he has been managing audits/consultancy of large
nationalised banks, foreign banks (Indian operations), large
listed public and private limited companies.
CA Nilesh Shivji Vikamsey did not hold any shares of the
Bank as on 31st March 2013.
Dr. T.C. Nair resigned from the Board of the Bank w.e.f
01.05.2013.
The Directors who were co-opted by the Board as additional
directors are Dr. K. Cherian Varghese on 20.10.2012, Shri
Sudhir M Joshi on 20.10.2012 , Shri K.M Chandrasekhar on
06.12.2012 and Shri Dilip Gena Sadarangani on 4.6.2013.
Dr. K. Cherian Varghese was co-opted to the Board as an
Independent Director w.e.f 20.10.2012. He received his
Ph.D (Commerce) in Business Policy and Administration from
University of Mumbai. Presently, he is the chairman of Union
KBC Trustee Company Private Ltd. He is also a member of
Government of Indias MOU Task Force for PSUs. He has 36
years of experience as banker. During this period, he was
the Chairman & Managing Director / CEO of Union Bank
of India, Corporation Bank, and South Indian Bank Ltd. He
also served as Executive Director of Central Bank of India and
General Manager of Indian Bank. He was also the Chairman
of the Board for Industrial and Financial Reconstruction
(BIFR) of Government of India and the President of Indian
Institute of Banking and Finance. He is an Associate of the
Chartered Institute of Bankers, London. He was included in
the roll of honour of the top fifty, of those who passed the
Associate Examination of the Chartered Institute of Bankers,
London from all over the globe and was awarded a honorary
fellowship by the Indian Institute of Banking and Finance.
Dr.K.Cherian Varghese did not hold any shares of the Bank
as on 31st March 2013.
Shri Sudhir Moreshwar Joshi was co-opted to the Board as an
Independent Director w.e.f 20.10.2012. He is a professional
banker with vast experience in the banking industry. He holds
a Bachelor of Science degree in Chemistry from University of
Pune and is a Certified Associate of the Indian Institute of
Bankers. He was the Head of Treasury at HDFC Bank. He is
also on the Board of National Securities Clearing Corporation
of India Ltd. and is a member of its Executive Committee
and Audit and Risk Committee. Previously, he has held key
positions with State Bank of India. Shri Joshi was also part
of the Times Bank Core Management Team as Executive Vice
President (Treasury).
Shri Sudhir M Joshi did not hold any shares of the Bank as
on 31st March 2013.
Shri K.M.Chandrasekhar was co-opted as an Independent
Director of our Board on 06.12.2012. He is the Vice Chairman
of Kerala State Planning Board. He entered the Indian
23
Directors report
Administrative Service in 1970. Prior to that, he did his B.A
(Honours) in Economics and M.A. in History from St. Stephens
College, University of Delhi. After entering Government
Service, he got the degree of M.A. in Management Studies
from the University of Leeds in United Kingdom. He spent
the first 25 years of his career in Kerala, holding positions as
Managing Director of the State Civil Supplies Corporation,
District Collector, Idukki, Director of Fisheries, Principal
Secretary (Industries) and Principal Secretary (Finance). In
1996, he left Kerala on Central Government deputation
and rose to the highest position that any Indian civil servant
can occupy that of Union Cabinet Secretary. As Cabinet
Secretary, he was the Head of all the Civil Services in India
and reported directly to the Prime Minister of India. He
retained that position for a full four years, a tenure that
has not been matched by any other officer during the last
40 years. He retired from Government Service in 2011 at
the age of 63, having served Government for 41 years. He
also served as Joint Secretary in the Key Trade Policy Division
of the Ministry of Commerce, Union Revenue Secretary,
Deputy Chief of Mission in the Embassy of India, Brussels
and the Ambassador and Permanent Representative of India
in the World Trade Organisation in Geneva. It was he who
introduced for the first time, the Performance Management
and Evaluation System in the offices of Government of India.
He has considerable management experience having been
associated as Chairman, Managing Director or Member of
the Board of Directors with more than 40 companies in
the public, joint and private sector. He has written several
articles and presented papers. He has also been consultant
to the Commonwealth Secretariat and to the UN Food and
Agriculture Organisation.
Shri K.M.Chandrasekhar did not hold any shares of the Bank
as on 31st March 2013.
Shri Dilip G Sadarangani was co-opted as an Independent
Director on 4.6.2013. He has wide experience in the realm of
banking/technology/operations, and includes management,
maintenance and support of IT software projects as well as
IT operations. He has developed and put in place processes
and IT policies and continuity plans in three leading Banks in
India, Australia and Kuwait
Shri Dilip G Sadarangani holds a Bachelor of Science (Hons)
degree from University of Bombay. He also holds a post
graduate diploma in Computer Management from Jamnalal
Bajaj Institute of Management, University of Bombay. He has
developed business-technology strategies for ANZ Grindlays
Bank, Standard Chartered Bank (SCB), India, Gulf Bank,
Kuwait and Man Power, Asia Pacific. He was a key member
of the Global Leadership team in ANZ Bank (Australia),
Standard Chartered Bank (India & Global), and Gulf Bank
(Kuwait) and Manpower Inc (Asia Pacific & Global) He was
also a core member of the team which automated the first
50 branches of one of the largest financial institutions in
the world State Bank of India and led the replacement
of disparate legacy systems with modern banking systems
in ANZ Bank across Pacific Island nations, South Asia and
Middle East. He drove the off-shoring of large volume of IT
acitivities in ANZ and Standard Chartered Banks to India and
Malayasia.
Subsidiary
FedBank Financial Services Ltd. is a fully-owned subsidiary of
the Bank. As required under Section 212 of the Companies
Act, 1956, the financial statements relating to this company,
the sole subsidiary of the Bank, for FY 12-13 are attached.
Annual Financial Statements and Audit Report
As required by Section 212 of the Companies Act, 1956,
the Banks Balance Sheet as on 31 March 2013, its Profit
and Loss account, and the Statutory Auditors report and
statements required under the Section, are attached.
Statutory Audit
M/s. Deloitte Haskins & Sells,Chartered Accountants,
Chennai, and M/s. M P Chitale & Co., Chartered Accountants,
Mumbai, jointly carried out the statutory central audit of the
Bank. The statutory central/branch auditors audited all the
branches and other offices of the Bank.
Joint Venture in Life Insurance Business
The Banks joint venture Life Insurance Company, in
association with IDBI Bank Limited and Fortis Insurance
International N.V. (now Aegeas), namely IDBI Fortis Life
Insurance Company Limited, renamed as IDBI Federal Life
24
Directors report
Insurance Company Limited, commenced operations in
March 2008. Currently the Bank has a total stake of 208
Cr in the equity of the company holding 26% of the equity
capital.
Statutory Disclosure
Stock Exchange Information
The Banks Equity Shares are listed on:
1. Bombay Stock Exchange Limited, Phiroze Jeejeebhoy
Towers, Dalal Street, Mumbai - 400 001.
2. National Stock Exchange Ltd. Exchange Plaza
Bandra - Kurla Complex Bandra East, Mumbai - 400 051.
3. Cochin Stock Exchange Ltd. MES, Dr. P.K. Abdul Gafoor
Memorial Cultural Complex 4th Floor, 36/1565, Judges
Avenue, Kaloor, Kochi - 682 017.
The GDRs issued by the Bank are listed on the London Stock
Exchange.
The annual listing fees have been paid to all the Stock
Exchanges mentioned above.
Through its export-financing operations, the Bank supports
and encourages the countrys export efforts.
Considering the nature of activities of the Bank, the provisions
of Section 217 (1) (e) of the Companies Act, 1956 relating
to conservation of energy and technology absorption do not
apply to the Bank. The Bank is, however, constantly pursuing
its goal of technological upgradation in a cost-effective
manner for delivering quality customer service.
Personnel
As required by the provisions of Section 217 (2A) of the
Companies Act, 1956, read with Companies (Particulars of
Employees) Rules, 1975, as amended, the names and other
particulars of the employees are set out in the Annexure to
the Directors Report. (Annexure I).
Directors Responsibility Statement
As required by section 217 (2AA) of the Companies Act,
1956, the Directors state that:
The Bank has in place a system to ensure compliance of all
laws applicable to the Bank;
In the preparation of the annual accounts, the applicable
accounting standards have been followed along with proper
explanation relating to material departures;
The Directors have selected such accounting policies
and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give a
true and fair view of the state of affairs of the Bank at the
end of the financial year and of the profit of the Bank for
that period;
The Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance
with the provisions of this Act for safeguarding the assets of
the Bank and for preventing and detecting fraud and other
irregularities; and
The Directors have prepared the annual accounts on a going
concern basis.
Acknowledgement
The Board of Directors places on record its sincere thanks
to the Government of India, Reserve Bank of India, various
State Governments and regulatory authorities in India
and overseas for their valuable guidance, support and
cooperation. The Directors wish to express their gratitude to
Investment Banks, rating agencies and stock exchanges for
their wholehearted support.
The Directors record their sincere gratitude to the Banks
shareholders, esteemed customers and all other well-wishers
for their continued patronage. The Directors express their
appreciation for the contribution made by every employee
of the Bank.
For and on behalf of the Board of Directors
Aluva Suresh Kumar
Date: 4th June 2013 Chairman of the Board
25
Directors report
Annexure - I
Statement pursuant to Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees)
Rules, 1975, (forming part of the Directors Report for the year ended March 31, 2012) in respect of employees of the Bank
Name, Qualification and
Age (in years)
Designation Remuneration (in ) Experience
(In years)
Date of
commencement
of employment
Last employment
Gross @ Net #
Shri. Shyam Srinivasan
@ B.E., P.G.D.M. (IIM,
Kolkata) 51 years
Managing
Director &
CEO
105,57,556* 74,62,556 27 years 23rd September
2010
Head (Consumer
Banking- India),
Standard Chartered
Bank
Shri. Abraham Chacko@
Post graduate diploma
in Business Management
(XLRI, Jamshedpur)
Bachelors in Commerce
(Honours) 60 years
Executive
Director
83,01,127 59,15,127 34 years 21st May 2011 Regional Head of
Business/ Sales/
Trade - Asia/Middle
East/Central Asia/
Africa, ABN Amro
Bank/RBS
Shri. Ashutosh Khajuria@
B.Sc. (Physics), LL.B, M.A.
(Economics), CAIIB,DTIRM
53 YEARS
President
(Treasury)
72,28,086 51,53,086 29 years 16th June 2011 CGM &Head of
Treasury, IDBI
BANK LIMITED
# Net of Taxes Paid
@In addition to the above 1,28,275 stock options were granted to Shri. Shyam Srinivasan, MD & CEO, 65,000 stock options were granted to
Shri. Abraham Chacko, Executive Director and 40,000 stock options were granted to Shri. Ashutosh Khajuria, President (Treasury) @ market
rates relevant on the date of grant.
* Includes the bonus/ex-gratia for FY 2010-11 and FY 2011-12 (10.08 lakh and 17.50 lakh respectively) payment made after receiving RBI
approval in FY 2012-13.
26
Directors report
Annexure - II
Sl.
no.
Particulars ESOP 2010
Granted On
09th April 2011
ESOP 2010
Granted On
02nd June 2011
ESOP 2010
Granted On
16th June 2011
ESOP 2010
Granted On
05th Nov 2012
1. No. of options granted 33,12,020 1,00,000 60,000 24,48,475
2. No. of options issued Nil Nil Nil Nil
3 Pricing formula The exercise price considered is the closing market price as on the day
preceding the date of the grant, at the stock exchange which has had
the maximum trading volume of the Banks share.
4 No. of options vested 13,92,001 50,000 30,000 Nil
5. No. of options exercised 11,631 Nil Nil Nil
6. No. of shares arising as a result of
exercise of options
11,631 Nil Nil Nil
7. Options lapsed 462,585 Nil Nil Nil
8. Variation in terms of options Nil Nil Nil Nil
9. Money realised by exercise of options 48,92,580.15 Nil Nil Nil
10. Total number of options in force 28,37,804 1,00,000 60,000 24,48,475*
11. Employee-wise details of options granted
to
a) Senior Managerial Personnel i.e MD &
CEO
5,13,100 - - 1,28,275
ED I
ED II
10,125
-
-
1,00,000
-
-
15,000
65,000
b) Any other employee who receives
a grant in any one year of options
amounting to 5% or more of the
options granted during the year
Nil Nil Nil Nil
c) Identified employees who were
granted options, during any one
year equal to or exceeding 1% of the
issued capital (excluding outstanding
warrants and conversions) of the
company at the time of grant.
Nil Nil Nil Nil
12. Diluted Earnings Per Share (EPS) of the
Bank after considering the effect of
potential Equity Shares on account of
exercise of options
49.00 per share
27
Directors report
Sl.
no.
Particulars ESOP 2010
Granted On
09th April 2011
ESOP 2010
Granted On
02nd June 2011
ESOP 2010
Granted On
16th June 2011
ESOP 2010
Granted On
05th Nov 2012
13. Impact of the difference between the
intrinsic value of the options and the fair
value of the options on profits and on
EPS
Had the Bank adopted the fair value method (based on Black-Scholes
pricing method) for pricing and accounting options, Net profit after tax
would have been lower by 1,272.91lacs for FY 2012-13
Basic EPS 48.25 per share
Diluted EPS 48.09 per share
14 Weighted average exercise prices of
options whose:
i. whose exercise price equal to the
market price
ii. Exercise price is greater than the
market price
iii. Exercise price is greater than the
market price

447.03
Nil
Nil
Weighted average fair value of options
i. whose exercise price equal to the
market price
109.79
ii. Exercise price is greater than the
market price
Nil
iii. Exercise price is greater than the
market price
Nil
15. The Securities and Exchange Board of India (SEBI) has prescribed two methods to account for stock grants; (i) the
intrinsic value method; (ii) the fair value method. The Bank adopts the intrinsic value method to account for the
stock options it grants to the employees. The Bank also calculates the fair value of options at the time of grant, using
Black-Scholes pricing model with the following assumptions:
i. Risk-free interest rate 7.50% 8.25% 8.25% 8.00%
ii. Expected life 3 years to 4.5
years
3 years to 4
years
3 years to 4.5
years
3 years to 4.5
years
iii. Expected volatility 20% 20% 20% 20%
iv. Expected dividends 1.50% 1.50% 1.50% 1.50%
v. The price of the underlying share in
market at the time of grant of option
(in )
423.45 449.70 454.65 474.00
* Includes ESOS shares granted to MD and two EDs
28
Global Scenario
In the fiscal year 2012-13, the world economy remained
under stress as in the immediately preceding years. With
fiscal cliffs hovering over America and a meltdown in Europe,
the year 2013 started off uncertainly. Developed economies
(more so in Europe) faced recession as a fallout of the
mounting public debt and inherent financial weaknesses.
The growth of the American economy may continue to
remain low on account of concerns over fiscal tightening.
Among emerging markets, the Chinese economy continued
to grow at a modest rate of 7.8% in 2013 as against its
aggressive show of 9.3% in the year 2012. While the policy
environment in the developed economies was tailor-made
to prevent any sudden crises, uncertainty around the revival
in global growth remained a concern throughout the year.
The central banks of the developed world pursued a policy of
maintaining low interest rates in the FY 2012-13.
The continuance of the eurozone sovereign debt crisis and
the uncertainty over the US fiscal cliff proved to be major
hindrances to global growth and financial stability. While
Europe continues with its efforts to contain the crisis,
emerging economies face the threat of spillovers in the face
of global trade and volatile capital flows.
Indian Economic Scenario
The Indian economy registered moderate recovery in the
fiscal 2013, tracking the global economic conditions and
fortunes of the developed and emerging economies. In the
first nine months of the fiscal 2013, Indias gross domestic
product (GDP) grew by 5.0%, as against the growth of
6.6% in the corresponding period of fiscal 2012. The service
sector, industrial sector and agriculture sector demonstrated
growth rates of 6.7%, 3.2% and 4.0% during the initial 9
months of the financial year 2013 as against 8.5%, 4.0%
and 4.3% respectively for the same period of the fiscal 2012.
The primary reason for the stymied growth can be attributed
to the weak industrial performance clocking 3.2% in 2012-
13. Similarly, agricultural growth also suffered on account of
a weak monsoon. The second half of the financial year was
adversely impacted by fiscal consolidation which resulted in
the shrinking of government expenditure, resulting in further
slowdown, especially in the service sector.
Headline inflation moderated to 7.4% in 2012-13 after
registering 9.6% in 2010-11 and 9.0% in 2011-12. The
monetary measures pursued by the RBI, the recent softening
of global commodity prices and a relatively stable rupee saw
core inflation decline continuously.
The Banking Scenario
Throughout the past couple of years, the Indian banking
sector has demonstrated a high level of resilience in the face
of high domestic inflation, rupee depreciation and fiscal
uncertainty in the US and Europe.
The slowdown of the economy led to subdued demand and
hampered the credit growth of the banking sector. Another
fallout of the slowdown was the deterioration of the existing
stock of credit on banks books. Credit growth suffered in
most major sub-sectors, with the exception of some - viz.
cement, textiles, food processing among others.
On the deposits front also, the banking industry put forth
a modest growth of 13.5%. With the economy poised for
better growth in the coming fiscal and with the inflation
declining, the deposit growth is expected to show a better
performance in the coming fiscal.
MANAGEMENT
DISCUSSION AND
ANALYSIS
29
Capital adequacy, asset quality, financial inclusion and talent
acquisition and efficient management are some of the key
challenges for the Indian banking industry, which has a total
of 87 banks (26 public sector banks, 20 private banks and
41 foreign banks).
The RBIs mandate to license new private sector banks
may have a considerable impact on the status quo of the
industry and define new lines of activity in the sector. Capital
adequacy will be a challenge for the commercial banks in
India, as they look towards achieving further growth as well
as complying with Basel III guidelines.
Review of Business Performance
The FY 2012-13 was a point of inflection in the journey of
the Bank. Your Bank crossed an important landmark figure of
1,00,000 Cr in total business. Several of the Banks processes
that were watched keenly over the past two years stabilised
in the FY 2012-13 viz. the risk independence strategy
which separated sourcing and sanctioning ( was streamlined
through manpower strengthening), centralisation of
account opening through document management system,
the creation of a new organisational blueprint via the
introduction of the zone and region concept, clearly defining
service quality parameters, establishment of separate
compliance wing to ensure strict statutory adherence among
others. The Balance Sheet of the Bank grew to 71,049.57
Cr, keeping pace with the volume growth in the Bank
The Banks networth stood at 6,239.27Cr as on 31.03.2013
indicating the financial strength of your Bank. The Capital
Adequacy Ratio (CRAR) of the Bank, computed as per
Basel II guidelines, stood at a robust level of 14.73% as on
31.3.2013. The Tier-I (core CRAR) capital was 14.09%.
In FY 2013, the Bank posted net profit of 838.17 Cr
registering a growth of 7.90%. Despite the challenging
economic scenario, the Bank could restrain the gross NPA
ratio at 3.44% and net NPA at 0.98%.
The advances portfolio of the Bank grew by 16.79% to reach
44,096.71 Cr and the deposit portfolio grew by 17.73% to
reach 57,614.86 Cr. Advances and deposit portfolio of the
Bank grew in tandem with the industry.
The total income posted a growth of 12.17% and amounted
to 6,832.01 Cr. Tracking the industry, the net profit of the
Bank grew by 7.90% to touch 838.17 Cr as on 31st March
2013. Return on average assets of the Bank stood at 1.35%.
Earnings per share improved to reach 49.00 from 45.41
from the previous fiscal.
The business per employee of the Bank as on March 31,
2013 increased to 10.75 Cr from 10.13 Cr at the end of
the previous financial year. The profit per employee for the
year 2012-13 stood at 8.91 Lakh. The cost to income ratio
increased to 44.69% as on 31 Mar 2013 as against 39.40%
as on 31 Mar 2012. The Bank had invested substantially in
expanding its geographical foot print by opening a record
number of 153 branches and recruited 1,843 employees
during the year, resulting in an increase in the cost to income
ratio. New business to be generated through this expanded
infrastructure may produce improvement in this ratio in the
coming years.
The SME advances of the Bank constituted 28.37% of the gross
advances while retail credit contributed 29.49%. The Banks
priority sector advances stood at 11,794.97 Cr, of which
lending to the agricultural sector stood at 4,702.80 Cr
30
MANAGEMENT DISCUSSION AND ANALYSIS
NRI Business
During fiscal 2013, the NRI deposits of your Bank registered
a growth of 36.51% reaching a level of 15,267 Cr from the
base of 11,184 Cr The NRE deposit portfolio grew by 65%.
The Bank has appointed business development managers in
all the zones across the country as part of its strategy to
have a focus beyond Kerala. Arrangements with Mastercard
to offer Business class lounge facilities to HNI customers at
seven airports in India are in place. The representative office
at Abu Dhabi acts as your Banks gateway to GCC countries,
offering service and support to NRI customers in that region.
Value-added services were launched by the Bank enabling
NRI patrons to avail a bouquet of services tailor-made for
them like holiday planner, tax advisory services, healthcare
services and online religious offerings. Crorepathi and multi
Millionaire FSFs, recurring deposit products launched by
your Bank, were well accepted by our NRI patrons.
International Banking and Cross Border
Remittances
Your Bank entered into a Rupee Drawing Arrangement
with 11 more entities during the fiscal. Presently, the Bank
has remittance tie-ups with seven banks and 64 exchange
houses. It would be interesting to note that the total number
of exchange houses in the Gulf Co-operation Council (GCC),
Hong Kong and Singapore are only about 100. In addition
to this, the Bank has remittance tie ups with Western Union,
Xpress Money, VISA money transfer, Remit2India, Transfast,
Moneygram as well as cash payout arrangements with SAMBA
Bank and Arab National Bank (Fed-e Cash) under MTSS.
The Bank handled 46,67,779 inward rupee remittances
during the year with an inflow of 26,755 Cr.
The Bank has a cutting-edge remittance engine, FedFast
Plus, through which money can be remitted to the
beneficiaries accounts with Federal Bank in seconds and
with other banks in India at hourly intervals as per the NEFT
clearance schedule.
On 28th February, 2013, RBI amended the guidelines and
permitted RDA (Rupee Drawing Arrangement) from 34
FATF (Financial Action Task Force) compliant countries.
This relaxation will complement our plans to extend rupee
drawing arrangements to US, UK, Australia, Canada and
other non GCC countries.
Foreign Exchange Business
Your Bank undertakes all types of foreign exchange business. As
on 31st March 2013, the Bank had two A Category branches
and seventy five (75) B Category branches for handling foreign
exchange business. SWIFT connectivity has been extended
to the designated branches to facilitate faster and reliable
communication with major banks all over the world.
Export credit facilities are provided both in rupee and in
foreign currency for pre-shipment and post-shipment
activities of the exporters. Credit facilities are extended
for export of cashew, sea foods, garments, minerals, coir,
spices, other food products, leather, rubber, pharmaceutical
products, gems and jewellery among others.
Credit facilities are extended for import goods including
chemicals, timbers, raw cashew nuts, paper and electronic
items. Your Bank arranges Buyers Credit from overseas
banks for import customers at competitive rates.
The Bank conducted regular one-on-one meetings with
exporters/importers to assess the financial position of
the units, support additional credit requirements and to
strengthen the relationship. Updates on forex market
movements are sent to clients on a regular basis.
The Bank has been giving much thrust to the development of
forex business and is continuously endeavouring to improve
the operating skills of the personnel through meetings,
interactions and training programmes. This enabled the
designated branches to improve their operating efficiency
substantially. The Bank is also in the process of centralising
its forex functions to the Head Office in a calibrated manner
to extend timely and efficient service to forex clients and
improve effectiveness of the designated branches. Issuance
of Import LCs and the realisation of import bills under LC
have already been centralised. The Bank periodically updates
and codifies the RBI/FEDAI instructions applicable for forex
31
business, in the form of comprehensive guidelines for the
benefit of the customers and operating staff.
Micro, Small & Medium Enterprises
Your Bank has been giving special attention to SME finance
since its inception. The popularity that the Bank enjoys
among this sector was built on a philosophy of trust and
confidence reposed in industrialists, traders, businessmen
and agriculturists.
The SME portfolio continues to be the catalyst for financial
growth of the Bank over the years. During the past financial
year, SME advances increased to 12,821 Cr from 10,472
Cr and current account deposits increased to 2,776 Cr from
2,472 Cr.
The following innovative products/services were introduced
in the financial year for SMEs
SME Asset Power Scheme Business loan for professionals
to facilitate setting up offices / clinics etc.
Fed + Amrita, Health Portal for Amrita Institute of
Medical Sciences enabling card holders and our
customers to make online booking for various services /
payment of in-patient bills among others.
Virtual Accounting System to enable businesses to
segregate transactions with each of their customer/
supplier introduced.
Bulk note acceptors installed at select branches.
Customised loan products for gold manufacturing units
launched
Online religious offerings portal launched in our website
Sree Padmanabha Swamy Temple is one of the
contracted institutions.
Supply chain finance /channel financing as a niche
area for quality volume growth - the concept is being
popularised. Software enabling easy operations is
installed.
Provision for online MSME loan application introduced
Retail Business
During the financial year, resident savings bank balances
registered an above-industry growth of 16.27% to reach a
figure of 7,281 Cr. The Bank also registered a growth in the
total resident retail deposits to reach a figure of 30,385 Cr.
As part of extending personalised and customised services
to high networth customers, the Bank has been providing
priority banking services across various branches. The
special service christened FedSelect has been spread to
over 130 branches by 31st of March 2013. The business
in this portfolio has increased by 169%. Under this service,
customers experience a whole new world of banking through
dedicated customer relations personnel and special banking
lounges. The Bank also offers home banking services under
this facility. The Bank opened an exclusive priority branch at
Tiruvalla/Muthoor to cater to the HNI clients. This branch
provides state-of-the-art facilities, exclusivity and beyond
banking experience for our high networth clients. Our
Bangalore St Marks Road branch was re-dedicated with
special focus on FedSelect clients with a top-class lounge and
relationship support. The Bank is successfully running various
loyalty programmes enhancing customer value and loyalty.
The Bank has been able to successfully offer its fee collection
solution, EFEE, and thereby earn support and goodwill of a
large number of educational institutions.
During the year ended March 31, 2013, your Bank had
reached a total life insurance premium collection figure of
103 Cr for its joint venture life insurance company, IDBI
Federal Life Insurance Co. Ltd. During the financial year,
as a para banking service, your Bank actively participated
in the sale of Federal Pure Gold through select branches.
The Bank also offers depository services and e-trade facilities
for investors. The Bank has entered into a tie up with Bajaj
Allianz General Insurance Company for distribution of
general insurance products across its branches.
The retail loan book of the Bank reached 13,328 Cr forming
29.49% of the total advances of the Bank. Housing loans
continued to be the major contributor in retail advances
constituting 40% of the total retail loans. The housing loan
32
portfolio increased to 5,353 Cr even after your Bank had
put in place a slew of quality control measures for such loans,
consciously aiming at weeding out lower quality accounts.
Auto loans closed at 441 Cr and gold loans (excluding
agricultural gold loans) grew by 75% to reach 4,263 Cr,
even in the backdrop of intense competition from private
players/NBFCs. The Bank also introduced an innovative
product, Apna Gold 24*7, which earned the attention of
the market and the product won two international awards
for innovation in concept and technology. During the year
the Bank also introduced housewarming loans a first-of-
its-kind in the country. A twin product, RD Extra Gain that
encourages savings habits and also takes care of the loan
requirements was introduced. The Bank continues to place
a lot of importance to asset quality and this has resulted in
retail NPA going down considerably during the fiscal. During
the year the Bank came up with a dedicated Credit Hub,
National Auto Hub, to process and sanction auto loans in
the state of Kerala to ensure excellent delivery time and the
services of such hubs are proposed to be extended on pan-
India basis. The Bank also set up a separate sales vertical
during the year to consolidate, accelerate and take forward
the sales activities of your Bank under a single umbrella.
Agriculture
Recognising the importance of the agricultural sector in
the development of the nation, your Bank has created
an elaborate institutional framework to meet the credit
requirements of the sector. Agricultural lending forms an
integral part of the priority sector lending of the Bank.
The Banks agricultural credit portfolio registered a growth
of 9% and stood at 4,702.80 Cr as on 31st March 2013,
which is 12.12% of Adjusted Net Bank Credit (ANBC); as
against the benchmark of 18% stipulated by the RBI.
One of the reasons for the shortfall is that several accounts
were reclassified from the existing Agricultural Credit
portfolio to other segments like Small and Medium
Enterprises and Corporate Advances. On account of revised
guidelines announced by RBI on Priority Sector Lending,
sectors like food and agro processing, financing the farmers
indirectly through the co-operative system, finance to co-
operative societies in excess of 5 Cr among others were
excluded, from being reckoned as agriculture advances.
To give special focus to agricultural lending, the Bank
is concentrating on credit dispensation in sectors like
plantation, horticulture, land development, irrigation, farm
mechanisation, construction of rural godowns, cold storages
and poly house/ greenhouse, precision farming, floriculture,
animal husbandry, poultry, fishery among others. This service
is extended through rural, semi-urban and urban branches
of the Bank.
To give a boost to the agricultural credit portfolio and
to achieve the benchmark stipulated by the RBI under
agricultural lending , the Bank has aggressive plans to expand
its footprint outside the State of Kerala especially in Punjab,
Gujarat, Maharashtra, Karnataka and Tamil Nadu, where
the Bank intends to increase its branch network. Technically
qualified personnel are also posted in such centres where
there is good scope for agricultural lending.
Financial Inclusion
Your Bank, as part of its mission to reach out to those who
are deprived of banking in the under banked/ unbanked
villages has successfully implemented biometric smart
card and Micro ATM based FEDJYOTHI project in Kerala,
Maharashtra, Chattisgarh and Tamil Nadu and delivered the
banking services through Business Correspondents.
Financial Literacy Centres
The Bank has setup 19 Federal Ashwas Financial Literacy
centres in Kerala with an aim to educate the public in rural/
semi-urban and urban areas to promote financial literacy,
intelligent borrowing and to save the small customers
from debt trap by offering preventive and curative credit
counselling.
Micro insurance
The Bank has launched the micro insurance scheme Federal
Suraksha exclusively for the under-privileged sections of
the society. This scheme provides insurance cover against
33
accidental death and fire and burglary of household items;
the premium amount payable is as low as 17 per year for a
cover of 50,000.
Achievement of Meaningful Financial Inclusion of
Households in Ernakulam District
Ernakulam district got the rare distinction of being declared
the first district in India to have achieved meaningful
financial inclusion of households on November 22, 2012.
Your Bank was in the forefront of this mission and played
a key role in achieving meaningful financial inclusion in
Ernakulam district. Officers of the Bank visited all the
financially excluded households in the service area wards,
ensured account opening for at least one member of every
household, extended micro insurance and also micro credit
facilities to the financially excluded population.
Aadhaar
The Bank launched a facility for customers to link their
account number to Aadhaar, open accounts with the
Aadhaar letter/card as the proof of identity and address and
also launched the NPCI~UIDAI Aadhaar Payment Bridge
platform for receiving cooking gas subsidies and similar
Goverment benefits such as scholarships, old age pensions,
among others to the Aadhaar linked accounts.
Direct Benefit Transfers
The Bank has played a key role in the first phase of the
ambitious Direct Benefit Transfer programme (DBT)
launched by the Government of India in 43 districts in India
by conducting surveys, household visits, opening accounts,
ensuring at least one account for all financially excluded
households and linking of accounts to Aadhaar in the service
area wards of our branches in these districts. This will ensure
flow of subsidies and government benefits to the intended
beneficiaries; which is the objective of the DBT programme.
Urban Financial Inclusion
The Bank is also into urban financial inclusion, by bringing
groups like construction workers, street vendors, rickshaw
pullers and migrant labour in urban/semi-urban areas in
to the fold of formal banking . The Bank offers doorstep
banking services to such customers through Immediate
Payment Systems (Mobile) platform and its branches.
Grama Jeevan branches
Your Bank has opened 31 exclusive financial Inclusion Grama
Jeevan branches in Kerala, Tamil Nadu, Karnataka and
Maharashtra. These branches are involved in augmenting
rural income and improving livelihood by providing micro
credit to the villagers to engage in agricultural and other
similar activities,. The Bank also encourages the activities of
self-help groups and farmers clubs.
Ultra Small branches
Federal Bank has launched four low-cost intermediary ultra
small branches in un-banked villages in Kerala which will act
as customer service points for the business correspondents
appointed in these areas. Through these branches, your
Bank will be able to reach out to the villagers and offer a
bouquet of banking services suitable to them.
Corporate Advances
As on 31.3.2013 large corporate advances constituted about
42.14% of the total advances portfolio. The business from
this segment registered a moderate growth of 11.30% in
the financial year ended March 31, 2013. The Bank provides
comprehensive financial and risk management solutions to
clients generally with a turnover of more than 500 Cr or
with credit requirement of 25 Cr and above.
In the changing economic scenario, corporate portfolio
requires diversified and specialised products and services
from banks. To compete with major players, several
structural developments have been brought about in the
Large Corporate Department.
A specialised dedicated relationship team has been
appointed to offer financial solutions to various categories
including large, mid and emerging Indian corporate groups,
public sector enterprises, Government bodies, multinational
companies and financial institutions.
Specialised solutions are being offered to clients after
determining specific needs and their credit risk profile within
34
our broad parameters and policies. Prospective clients are
being selected after in-depth analyses. The Bank offers an
array of banking products and services covering working
capital, term finance, trade finance, specialised corporate
finance products, structured financial services, foreign
exchange, syndication services and electronic banking
requirements of corporate clients.
Specialised debt syndication desk has been started to work
with corporate/ SME clients to structure their credit portfolio
to aid them in raising funds.
The Bank has been taking active steps in improving
efficiency in relationship management with corporates.
Customer Relationship Management (CRM) software has
been implemented in the Bank across all major corporate
branches. It has created cross selling opportunities for the
Bank within the existing and prospective customer base.
The loan policy of the Bank has put in place a matrix of
industry exposure limits with a view to de-risking the
portfolio through diversification. The Bank has stipulated a
clear threshold exposure criteria which determines the credit
rating and guides taking large and new exposures. Prudential
ceilings are prescribed for exposure in long-term assets,
unsecured advances among others. Apart from subjecting
each credit exposure to robust risk analysis at several levels
it is also vetted by a Credit Risk Vetting Committee which
consists of senior executives.
Integrated Treasury Operations
Your Banks Integrated Treasury Operations involve
maintenance of Statutory Reserve requirements, Balance
Sheet Management, trading in Money Market, Bonds
and Debentures, Equity and Foreign Exchange. The Bank
has established dedicated and full-fledged dealing desks
for various segments like Foreign Exchange, Interbank
and Merchant Trading, Currency Futures, Money Market,
Government Securities, Bonds and Debentures, Certificates
of Deposit, Commercial Paper, Interest Rate Swaps and
Equity in Banks dealing room in Mumbai.
The Bank has commenced trading actively in Currency
Futures in all approved exchanges. Our capabilities in this
area have been augmented at the trading desk level so as
to encash all trading opportunities. The Bank has revamped
the Interest Rate Swaps (IRS) desk which undertakes activities
of trading in IRS for proprietary as well as balance sheet
hedging purposes. During the fiscal 2013, your Bank held
seminars, workshops and interactive sessions for exporters,
importers and gilt account clients. A separate marketing
team has been formed at Treasury Department level for
marketing various treasury products.
The Bank raises resources in bulk through Certificates of
Deposit, for which the Bank has the highest rating of A1+
by CRISIL. The Bank is using various trading platforms
like Reuters, D2, FX Clear, BARX, AUTOBAHN, 360T, Citi
Velocity and COMMERZ in the dealing room for a better and
streamlined trading activity in forex.
The Bank is represented on FIMMDA Board by virtue of
the Head of Treasury being one of the twelve Directors of
FIMMDA. Bank has also been nominated as a Managing
Committee member of FEDAI for FY 2013.
Integrated Risk Management
The primary responsibility of laying down risk parameters
and establishing an integrated risk management framework
and control system rests with the Board of Directors. A Board
level committee, viz. the Risk Management Committee
(RMC) oversees management of credit, market and
operational risks. Three separate executive level committees,
viz. the Credit Risk Management Committee (CRMC), Asset
Liability Management Committee (ALCO) and Operational
Risk Management Committee (ORMC) ensure effective
management of credit, market and operational risks
respectively.
Integrated Risk Management Department (IRMD) of the
Bank is headed by a Deputy General Manager. The credit,
market and operational risk management departments are
functionally assigned to three separate cells under the IRMD.
The Bank has put in place the following policies for risk
management, approved by the Board of Directors:
35
1. Integrated Risk Management Policy,
2. Credit Risk Management Policy
3. Asset Liability Management Policy,
4. Policy on interest rates on deposits,
5. Operational Risk Management Policy,
6. Stress Testing Policy,
7. Business Continuity Plan Policy,
8. Policy on Internal Capital Adequacy Assessment Process
(ICAAP),
9. Disclosure Policy, and
10. Loan Policy.
The Bank has established an independent onsite mid-
office within Treasury Department, reporting directly to
the Head of IRMD. The mid-office scrutinises the treasury
deals and transactions from the point of view of market risk
management.
Compliance with Basel II framework
As per the prudential guidelines issued by Reserve Bank of
India, the Bank has migrated from norms under Basel I to
Basel II as on 31 March 2009 and capital adequacy ratio
under the New Capital Adequacy Framework (NCAF) is being
computed on a quarterly basis.
In tune with regulatory guidelines on Pillar-I of the Basel
II norms, the Bank has computed capital charge for credit
risks as per the Standardised Approach, for market risk as
per the Standardised Duration Method and for operational
risk as per the Basic Indicator Approach. Under Pillar-II,
the Bank assesses the level of inherent risks and related
capital requirements on a quarterly basis using a well-
defined Internal Capital Adequacy Assessment Process, as
approved by the Board. Additional disclosure requirements
under Pillar-III of Basel II are also complied with. The Bank
is progressively coming up with initiatives for meeting the
requirements of the advanced approaches for credit, market
and operational risks under Basel II. External consultants
are guiding the Bank through the process of migration via
advanced approaches. Software solutions for adoption of
Basel II advanced approaches are being implemented. The
frameworks of the advanced approaches are in line with the
Banks objective of adopting the industry-best practices in
risk management.
Capital Adequacy Ratio
The Banks capital adequacy ratio as on 31/03/2013 under
Basel II norms is 14.73% with Tier-I CRAR of 14.09% fully
comprising of common equity, as against the minimum
level of 9% prescribed by the Reserve Bank of India. The
Banks comfortable common equity capital level offers good
cushion for further expansion and growth in asset portfolio
and smooth adoption of Basel III norms.
Basel III
RBI guidelines on Basel III demands building capital and
liquidity buffers in phases from 2013. It seeks to enhance
the minimum core capital, introduce a capital conservation
buffer, and prescribe a counter-cyclical buffer. The Banks
comfortable level of common equity capital offers good
cushion for smooth implementation of Basel III norms.
Capital Management framework
The philosophy of Banks risk management framework is to
take risks by choice and not by chance, set prudential limits
for various types of risks based on regulatory stipulations
and internal risk appetite, monitor operations within the
set limits and ensure that returns match the risks taken. The
capital management philosophy of the Bank is to operate
with an optimum level of capital in relation to its internal
risk profile and extant regulatory guidelines, that permits
utilisation of the existing and emerging market opportunities
and ensure optimum level of returns on an ongoing basis.
The Bank conducts ICAAP process every year as stipulated
by RBI. ICAAP is aimed at ensuring that Bank maintains
an amount of capital commensurate to its risk profile and
improves upon its risk management systems and framework
on an ongoing basis. It involves realistic assessment of the
level of risks inherent in the business operations of the Bank
and setting aside adequate capital to cover all such risks. The
ICAAP policy covers all material risks involved in the business
operations of the Bank and establishes organisational
framework with delineated hierarchical responsibilities. The
36
assessment is done considering the operational presence,
activities, and processes, complexity of products and overall
risk profile of the Bank, including that of the wholly-owned
subsidiary. The sufficiency of Pillar-I capital charge is assessed
in relation to the risk profile of the Bank. Monitoring of the
level of all material risks, also forms part of ICAAP. In short,
ICAAP is integrated into the management and decision-
making process in true letter and spirit and is reflected in the
processes and business operations of the Bank.
Risk Based Supervision
Reserve Bank of India had appointed a High Level Steering
Committee (HLSC) under the Chairmanship of Deputy
Governor, Dr.K.C.Chakrabarty to review the supervisory
processes of commercial banks for meeting the objectives
of supervision which is primarily to protect the interest of
depositors, customers and also to promote financial stability.
In view of the growing complexities in the processes,
product offerings and systems and procedures in the Indian
banking sector and for ensuring optimisation of supervisory
resources the Committee had recommended a shift in RBIs
supervisory stance to Risk-Based approach which would
focus on evaluating both present and future risks, identifying
incipient problems and facilitating prompt intervention /
early corrective action. This transition to Risk Based approach
to supervision will be effective from the current supervisory
cycle (2013-14) beginning from April 2013 in two phases.
Under the revised approach, preliminary risk assessment
on various parameters would be carried out offsite. RBI has
included your Bank among the 30 banks identified in the
first phase of Risk Based Supervision (RBS).
Credit initials Programme
The Bank has introduced a unique concept - certification
programme of Credit initials for identifying and
empowering a strong team of individuals who have the
domain expertise and competency in handling various facets
of credit management. The credit initials programme was
introduced with the following objectives.
To establish a framework in the Bank to assess the
capability of the officials involved in credit sanctioning
process.
To identify and update/develop the level of credit
competency of the officials involved in credit sanction
process on an ongoing basis.
To empower officers who have exhibited knowledge and
proven competency in credit management.
To evaluate and measure the quality of credit decisions
taken by functionaries at various levels.
To improve the credit delivery mechanism in quality,
quantity and turn around time.
Branch heads in Scale IV and V, who are found competent in
this assessment exercise, are delegated with individual credit
sanctioning powers, thereby adding one more channel for
efficient credit delivery.
Business Continuity Plan
In terms of the Business Continuity Plan Policy approved by
the Board, Business Continuity Plan (BCP) Committees have
been formed in head office, zonal offices and branches.
A Contingency Management Team (Task Force) has been
formed at head office, functioning as a Central Crisis
Management Team for ensuring business continuity. The
Banks Core Banking System, ATM switch, among others
have undergone periodical DR testing to ensure the capability
of the same to handle disastrous situations.
Information security
The Bank has an information systems security team
functioning at its head office. The team is in charge of
creation and maintenance of security policies and plans.
The team is responsible for the formulation and periodic
review of the information systems security policies as well
as creating information security awareness among staff and
customers of the Bank. As per the RBI circular dated 29th
April, 2011, on Working Group on Information Security,
Electronic Banking, Technology Risk Management and
Cyber Frauds - Implementation of Recommendations, the
Bank has taken various steps towards complying with the
37
requirements outlined.
Legal and Business Compliance
The main objective of the Legal Department of the Bank is
to devise systems and controls that can effectively manage
and minimise the legal risks. The Bank has a well laid
down system to ensure defect-free documentation so as to
mitigate the legal challenges associated with operational
risks. New products and schemes introduced by the Bank
undergo legal vetting by the Department for ensuring legal
compliance. The department is rendering professional and
expert advice on various legal issues associated with the Bank
and educates the operating units with periodical circulation
of legal decisions pronounced by various courts, educational
series, amendments/modifications in statutes from time to
time. The Legal Department department also extends faculty
assistance for training on legal matters to the employees of
the Bank.
The Legal Department also conducts a biennial conference
of legal officers of the Bank so as to impart information
regarding the latest changes/amendments of various laws.
Leveraging Operations & Processes
Through carefully centralising some processes and
decentralising some others, your Bank has always strived
to extract maximum output and thereby increase efficiency.
Leveraging on better processes and procedures has led to
enhanced operational efficiency and service delivery. During
the year, the Bank continued focusing on improving the
productivity through automation, reducing the turnaround
time and ultimately enhancing customer service.
The Banks corporate website was redesigned with revised
content, easy-to-use features, innovative tools, value added
services for NRI customers and interactive wizards for
facilitating product search.
With a view to enhance customer convenience, registration
for internet banking facility has been made online.
The Bank has successfully brought all SME loans under
the Centralised Lending Automation Processing System,
which enables a turnaround time of one hour for opening
a loan account, once approval by credit hubs / branches is
completed.
The Bank has also centralised the process of archival of old
records at outsourced locations to help branches to save
space and improve the ambience at the branches. The
Bank has already completed the process in 100 branches
and going ahead this will be extended to all the identified
branches in a phased manner. The following activities have
also been centralised with a view to have more operational
convenience, control and quality of data:
a. Opening of inland LC/BG (Letter of Credit/Bank
Guarantee).
b. Issuance of EBRC (Electronic Bank Realisation Certificate)
c. All TDS (Tax Deducted at Source) activities such as
deduction, remittance and generation of TDS certificate
(Form 16) with effect from 1st April 2012.
d. CTS (Cheque Truncation System) clearing implemented
in all MICR centres coming under the Chennai grid.
Business Effectiveness through Technology
Your Bank is a pioneer among Indian banks, in the area of
using technology to leverage its operations and was the
first bank in India to computerise all its branches. The Bank
offers its customers, a variety of services such as internet
banking, mobile banking, on-line bill payment, on-line fee
collection, depository services, online e-trade services, cash
management services, merchant banking services, RTGS/
NEFT facility, IMPS, EFEE (school fee management) among
others. This has been done as a strategic move to enhance
the convenience for its customers. The Bank also offers Point
of Sale (PoS) terminal services to its merchant clientele. A 24
hour toll-free helpline ensures that the customers are taken
care of, round the clock.
Cash Deposit Machines
Your Bank has introduced Cash Deposit Machines or Bunch
Note Acceptors (BNA) at select branches which facilitates
remittance of cash on real time basis to customers accounts
38
on a 24x7 time frame, i.e. even beyond the business hours
of the Bank. The machine has inbuilt intelligence to identify
fake notes and to sort cash deposited by customers into
different denominations. It also provides other facilities like
balance enquiry and mini statement.
ACI Excellence Awards 2013
The Bank has won the international ACI Excellence Awards
2013 for its product Apna Gold 24X7. Taking gold
ornaments as the security, Apna Gold 24x7 provides
customers the convenience of withdrawal/use of the loan
amount through any ATM/POS across the country.
MasterCard Innovation Award
Your Bank has won the MasterCard Innovation Award
for the Cash Passport Travel Card product under prepaid
programme category. The award is in recognition of
introducing a secured travel card product with chip and PIN
protection.
The other awards which your Bank won during the period
include:
IDRBT Award for Excellence in Banking Technology 2011
- Best CRM initiative among small banks category
IDRBT Award for Excellence in Banking Technology 2011
- Best Bank Award among small banks for mobile and
electronic payments
Mobile Banking
Mobile platform promises to be the most convenient channel
for delivery, going by the industry predictions. The Bank
is committed to augment the overall customer experience
and services through this channel and has acquired an
appropriate platform for in-house development on the
mobile platform.
The Bank has already developed native versions for Android,
BlackBerry, Windows and iPhone platforms of its mobile
banking application. The various variants of the IMPS based
inter-bank funds transfer have been made operational
thereby empowering customers to undertake m-commerce
transactions and funds transfer from their mobile phones,
while on the move. The Bank has started tying up with small
merchants to popularise the IMPS, a fact appreciated by the
National Payment Corporation of India (NPCI).
Aadhaar Based Payments
Your Bank has become member of the Aadhaar Payment
Bridge Services through which direct benefit transfers
are being received by its customers from the various
governmental agencies.
IT Governance
In accordance with the Gopalakrishna Committee
recommendations, the Bank has initiated many steps to
augment its IT governance. A separate cell to attend to
security, compliance and governance issues with relation to
information technology has been formed. The Bank also has
put in place tools to ensure strict compliance of software
licensing norms.
The Bank has initiated the process of getting ISO 27001
certification for its data centre, disaster recovery site and
command centres. A near DR Centre to ensure zero data loss
has been set up.
The Bank also acquired a transaction monitoring system
to monitor and identify suspicious transactions hitting the
Core Banking System. It has also subscribed to the fraud
monitoring services provided by Visa and NPCI.
Government Business
With the recent changes made by the government to
permit private sector banks to foray into doing government
business, the Bank has acquired necessary systems to
support handling of such transactions. Already the Bank
has started providing tax collection services to one of the
Southern States. Discussions with other States are under
way. The Bank is also awaiting permission from the Central
Government to handle a part of its businesses.
Your Bank is banker to the Kerala State Electricity Board
for collection of energy bills from High Tension users. The
payment is acceptable through NEFT / RTGS and over the
counter. Your Bank also helps KSEB to collect bills from the
retail customers through its net banking service.
39
Human Resources
Your Bank has a motivated and committed workforce and
strongly believes that human resources are its most valuable
asset. Through the active guidance of the Board, the
Management team strives to keep the workforce engaged
through a series of strategic initiatives to support the
business growth and achieve organisational objectives.
The total Human Capital of the Bank has increased to 10,059
by inducting 1,843 new entrants in various positions during
the financial year. The average age of employees of your
Bank is now 38 years compared to 40 last year. The male
female ratio of the Bank is 66:34.
Manpower Management
a) Manpower planning.
Manpower planning exercises were conducted across the
organisation in a professional manner in collaboration
with field level functionaries. Manning of positions based
on the branch profile was initiated to ensure that the right
person was placed at the right place. A consultative process
between the HR Department and the Business departments
has ensured that appropriate decisions are taken with regard
to placement of the most valuable resource of the Bank.
b) Recruitment
During the year recruitment was conducted through
various channels. This included lateral hiring as well as
campus recruitments. Various processes such as newspaper
advertisements, advertisements in job portals were utilised
to make Federal Bank visible as an ideal employer.
You will be pleased to note that your Bank has entered into
a tie up with Manipal Global Education Services for a one
year residential programme, to mould a group of highly
capable and job ready prospective workforce to take on the
various challenges in the Bank as we leap into the future. The
first batch of 107 students was inducted after a structured
selection process involving a written test, group discussion
and personal interview. We expect this to become a regular
source of high quality, high caliber employees in the years
to come.
c) Performance Management System
To assess employee performance and to foster employee
growth and development, a Performance Management
System has been introduced . The FedPMS online platform
was launched to make the process easier and more effective.
d) Communication
HR Road show titled Bodhi was conducted across the Bank
to share the experience of line managers in different facets
of the HR Management, and inculcate in them the tenets of
leadership and responsibility. The HR leadership interacted
with the line managers reiterating their role in leading their
team and developing people capability. Suggestions from
the programme formed the base to redesign the established
HR policies and programmes.
An online platform titled HR Direct was launched to address
HR-related queries within a stipulated time frame. Another
platform named Managers Speak was also rolled out
for managers to express their feedback, suggestions and
concerns to leaders of the HR Department.
Federal Reach, an in-house magazine published quarterly,
released four editions in 2012-13 with wide participation of
the employees and their family members.
e) Business Linkage
A certification programme titled Credit Initials was rolled
out to identify and hone the skills of the officials in the areas
of credit appraisal, sanctioning and credit management and
also to expedite the process of credit delivery.
Compensation policy as envisaged by the RBI was drafted
and put in place with the approval of the Board.
Best business units of the Bank were recognised across all
regions, zones and corporate level. The entire team of the
best corporate business unit was offered a trip to a foreign
location in recognition of their efforts and also to motivate
the people to perform better.
f) Employee Stock Option Scheme
The Bank offered employee stock options in 2012 as a part
of the ESOS 2010 scheme. It was granted to all employees
40
confirmed in the services of the Bank as on 1st November,
2012. Vesting of 2011 grant was completed in the current
fiscal.
g) Learning & Development
On the learning front, primary focus during the fiscal was laid
on induction programmes. 31 Induction programmes were
conducted covering new recruits giving them orientation in
values and culture of the Bank and imparting knowledge in
basics of banking and customer service. A series of behavioural
and functional programmes were also conducted during the
fiscal, empowering the Banks employees at different levels
with contemporary skill sets. Apart from these, a programme
titled SPARSH, (a personality development programme for
the children of employees of the Bank) was conducted for 98
children, in four batches. A programme titled FRAGRANCE
focused on personality development was conducted for the
children of the Banks customers.
To foster individual development, your Bank has started two
clubs of the Toastmasters International at the Corporate
Office. The objective of the club is to enhance communication
and leadership skills of the member participants. The Bank is
also working on starting an assessment and development
centre with a view to identify potential of the employees and
drawing up individual development plans.
h) Employee and Industrial Relations
The industrial relations climate in the Bank during the
fiscal stayed amicable and issues were addressed and
resolved through mutual discussions. The implementation
of progressive staff accountability started showing results
through the creation of a positive environment facilitating
growth and development within the compliance framework.
i) Administration & Welfare
Fed Care a group medical insurance scheme for retired
employees was launched on the auspicious occasion of 67th
Founders Day. 1221 retired employees are covered under
this scheme. Your Bank has implemented a new pension
scheme to all employees who joined the services of the Bank
on or after 01/04/2010. As on date 3,140 employees have
benefited under this scheme.
Achievements
As recognition of the various HR initiatives & practices
undertaken by the organisation, HR Leadership Awards were
conferred on the Bank by the following organisations:
Institute of Public Enterprise (IPE), at ASIA PACIFIC HRM
CONGRESS 2012 held at Bangalore and
World HRD congress at a function held at Hyderabad.
Marketing Initiatives
The visibility of the Federal Bank brand saw a perceptible
improvement during the year, especially in those geographies
where the Bank is focused on. The Bank used various media
like television, print, radio, digital and OOH (Out of Home)
to reach out to new and existing customers.
The Bank is generating customer leads through search
engine marketing and search engine optimisation. The
Bank is strengthening its presence across the social media,
viz- Facebook, You Tube and Twitter and its Facebook page
has generated more than 2 lakh followers. The Bank intends
to intensify its focus in the digital marketing space.
Customer Grievance
Particulars 31st March 2013
(a) No. of complaints pending at
the beginning of the year
45
(b) No. of complaints received
during the year
2510
(c) No. of complaints redressed
during the year
2507
(d) No. of complaints pending at
the end of the year
48
41
Implementation of Awards 31st March 2013
(a) No. of unimplemented awards
at the beginning of the year
2
(b) No. of awards passed by the
Banking Ombudsman
-
(c) No. of awards implemented
during the year
1
(d) No. of unimplemented awards
at the end of the year
1
Vigilance
Your Bank has put in place an effective vigilance mechanism
to safeguard the Bank and its customers from fraud.
The Bank has formulated a comprehensive Fraud Risk
Management Policy and Whistleblower Policy which are
reviewed and updated from time to time, in line with RBI
instructions. The Vigilance Department of the Bank has the
twin roles of investigation of frauds and prevention of frauds.
The preventive measures aim at enhancing awareness of
fraud risks and promoting a culture of compliance among
employees, through preventive vigilance audits, vigilance
workshops, circulation of modus operandi of frauds which
occurred among others. Your Bank is also promoting
customer awareness on frauds, especially cyber frauds
through different communication channels, as an effective
tool in prevention of frauds.
KYC and Anti-Money Laundering
The Bank has taken sufficient steps for the strict compliance
of the Know Your Customer and Anti Money Laundering
(KYC/AML) guidelines by maintaining a comprehensive
policy framework and updating it in line with the guidelines
issued by the Reserve Bank of India from time to time. The
KYC policy of the Bank incorporates customer acceptance
policy, identification procedures, monitoring of transactions
and risk management processes. We have installed a central
anti-money laundering software to ensure regulatory
compliances. The monitoring of transactions against a range
of risk variables forms an integral part of the KYC compliance
mandate. The alerts generated in the software on the basis
of pre-defined benchmarks and scenarios help in monitoring
the daily transactions, enabling identification of any
suspicious transactions undertaken by money launderers
and financiers of terrorism. In order to make the monitoring
more timely and stringent, the KYC-AML cell has also started
online monitoring of transactions using another software
tool.
Compliance
A separate and independent division, viz. the Compliance
Division is functioning in the Bank to ensure the existence
and practice of a high-level of compliance across the various
levels in the Bank. The Bank has formulated a well-defined
Compliance Policy to adequately enable compliance functions
and strengthened it to ensure the effective monitoring and
coordination of the compliance functions. Your Bank has
laid-down an effective mechanism to monitor compliance
functions. In all branches/offices, Compliance monitoring
officers have been nominated to monitor the compliance
functions. The Bank is focusing on employee education
through circulars, workshops and frequent contacts to
sensitise them on the need for a strong compliance culture
and also striving to develop a robust compliance culture in
the Bank.
Inspection & Audit
Your Bank has a well established Inspection & Audit
Department ensuring adherence to systems, policies and
procedures of the Bank and Guidelines received from
regulators like RBI, Government of India, State Governments
and all other statutory bodies. Audits and Inspections are
carried out in the Bank as per the Board approved Audit Policy.
M/S M P Chitale & Co undertook a Quality Assurance Study
of the present Audit system of the Bank and made many valid
recommendations in their report of July 2012. The revised
policy was made in line with these recommendations. The
Model Audit Manual on Internal & Concurrent Audit Systems
in Public Sector Banks circulated by Ministry of Finance was
also a source of guidance while revising the audit policy of the
Bank. All the branches are covered under Risk based Internal
Audit (RBIA). The assessment of level of risk and its direction
42
is carried out on the Risk Matrix prescribed by the Reserve
Bank of India, assisting the Management in identifying areas
of high risk requiring attention on priority basis. The status
of risk categorisation of branches is reviewed by the Audit
Committee of the Board on a quarterly basis.
As on 31-03-2013, 194 branches, Treasury Department,
International Banking Department (IBD), DP Division and
Gold Sale business of RBD were subjected to Concurrent
Audit covering 63.59% of the total business of the Bank
(57.14% of deposits and 71.75% of advances) on that date,
as against the minimum requirement of 50% of deposits and
advances separately, stipulated by RBI.
The Bank conducts Credit Audit as part of Loan Review
Mechanism, for examining compliance level with sanction
and post sanction process / procedures laid down from time
to time, as per RBI guidelines where the limit sanctioned is
above 2 Cr.
Information Systems Audit is conducted as per the IS Audit
Policy approved by the Board of Directors. I S Audit of Data
Center DR and core applications was done by M/S Ernst &
Young. 376 branches were also covered under IS Audit.
Various other Audits are also carried out in the Bank such as
Management Audit of Zonal Offices, Credit Hubs, Stressed
Asset Management Cells, Credit Monitoring Cells, and HO
Departments, Forex Audit, and Vulnerability Analysis &
Penetration testing (VAPT). Under Risk Based Internal Audit
(RBIA) 769 audits were completed as against 741 targeted
during FY-13. All the 6 Fedfina Retail Hubs were also
subjected to Management Audit. Five Zonal Offices were
subjected to Management Audit as per the Audit Plan. Forex
Audit covered 51 branches; Revenue Audit covered 381
branches; and Credit Audit covered 212 accounts.
Your Bank has an in-house fully automated Audit
Management System which covers all Audits with dedicated
servers, systems and databases which are managed under
secured environments and by adequately trained personnel.
This significantly contributed to the Bank going green, by
doing away with paper reports.
Off-site Monitoring
Off-site monitoring cell of your Bank is poised to enter the
next maturity level in effectively meeting the demands of
the rapidly changing business environment and regulatory
compliance on internal audit. The main aim of constituting
the cell is to review periodic reports on critical items and
sensitise the controlling offices, departments and branches
for taking corrective action on a daily basis.
Document Management System (DMS)
Phased implementation of Document Management System
(DMS) is progressing well in all branches. All the documents
will be available for verification through DMS once the
process is completed. So the Bank will be in a position
to conduct major part of RBIA centrally (off-site) and the
number of days spent by inspecting officials at the branches
can be reduced considerably.
Report on Corporate Social Responsibility
through Sustainable Development
A Policy on Corporate Social Responsibility (CSR) was
adopted and a CSR cell was formed during the year 2012.
States of Kerala, Tamil Nadu, Gujarat and Maharashtra are
selected as areas for CSR activities for the time being. The
policy lays emphasis and extends help and support to the
following focus areas
Education
Medical Treatment (Healthcare)
Support to agricultural infrastructure projects.
The Bank encompasses a Triple Bottomline approach
(Social, economic and environmental features) in its CSR
initiatives.
The Bank has always been in the forefront to support socially
beneficial initiatives of responsible organisations. Activities
the Bank associated with, during the FY 2012-13 were:
To celebrate the launch of the 1000th branch in a
responsible manner, your Bank, with the support of
Indian Medical Association (IMA), conducted blood
donation camps across India.
43
Organised a breast cancer awareness campaign Protect
Your Mom on 18th October 2012 on the 67th Founders
Day. A pink walkathon was another event organised on
the Founders day where 1,500 students from schools
around Kochi along with Federal Bank employees
enthusiastically participated in the walk.
The Bank in association with SB Global trust organised
career guidance class in schools all over Kerala. As of
date, the project has been successfully conducted in
75 schools spread across 10 districts covering 9,255
students and will reach 10,000 soon.
World Environment Day on 5th June 2012 was celebrated
at Federal Bank branches with various activities including
distribution of saplings to the customers from selected
branches. 1,300 saplings where distributed from 41
branches across India.
Sponsored the event FEDERAL BANK SOORYA
MONSOON FESTIVAL a fund-raising programme of
Maithri Counseling Center, Kochi for establishing their
base. The programme was conducted in the month of
June.
Sponsored desktop computers for Empowerment Centre
for the Blind, Trivandrum to train the blind students on
trouble shooting, networking, hardware maintenance
and assembling computers.
Extended financial support for free flight for 100
differently abled children from Nedumbassery,
Ernakulam.
Extended support for Mother Touch Charitable Trust
for developing a website. The aim of the website is to
provide information in all relevant areas of disability
management (at national and international level).
Aided Ahmad & Haris Khan Charitable Trust in educating
30 underprivileged girl students in Jammu.
Sponsored a school bus for Pratheeksha Special School,
North Parur and Deepthi Special School, Muhamma
for the use of differently abled children.
Extended financial support for the construction of a
library at Mar Thoma Guidance Centre, Vytilla.
Sponsored the purchase of a generator at CSI Vocational
Higher Secondary school, Thiruvalla.
Sponsored an ambulance for Alpha Pain Clinic, Kochi to
carry patients in and out of the Palliative center.
Extended Support in renovating old building for poor
old aged people and orphan boys and girls of St. Joseph
Center for Disabled, Taliparamba.
Aided the purchase of LCD projector for Aswasalayam
Aids Foundation, Aluva to educate people on various
diseases caused by alcohol, drugs, tobacco and other
harmful products
Extended financial support to Dilasa Sangli Mission,
Maharashtra for construction of dormitory and toilet for
HIV positive orphans.
Supported Fr. Ignatius Centenary Celebration Committee
for purchasing a Dialysis Machine to be installed at Lisie
Hospital, Ernakulam.
Assisted Snehabhavan- Alzheimers Day Care Centre,
Aluva for expanding their project at Aluva.
Aided the purchase of a 125 KV Generator for IMA
Voluntary Donor Blood Bank, Cochin.
Sponsored utility vehicle to BOSCO Rehabilitation Centre,
Bangalore for transporting orphaned children of
Bangalore.
Sponsored a musical programme Melody in Darkness-
fund raising programme for the blind, Kochi for
establishing a permanent residential facility.
Sponsored an ambulance for pain and palliative care,
Kozhikode to carry patients suffering from cancer, AIDS
and chronic pain.
Sponsored an ambulance for Pain Navjeevan Trust,
Ichalkaranji, Kolhapur for carrying the mentally deranged
people from rehabilitation centres to a mental hospital at
Pune and at times to be used as a mobile dispensary also.
44
Extended support for Runathone of Hope a Fund
raising project for humanitarian project at Pune. More
than 6,000 runners participated in the corporate race
including our team comprising of more than 100 Federal
Bank employees.
Supported the Government District Hospital, Aluva to
purchase a lift for dialysis patents.
Sponsored an ambulance for Lisie Hospital, Kochi for
dialysis patents.
Sponsored an ambulance for Dr. K.M Cherian Heart
Foundation, Thiruvalla for the patients of Kuttanad
region.
Facilitated the building of a dialysis block for the patients
of Malankara Orthodox Syrian Church Medical Mission,
Puduppady.
Helped IMA Pune in buying an ambulance, for
community-based project for screening cervical cancer.
Extended support in constructing a computer lab for
RSS-Government HACLP School, Aluva.
Supported Positive Thinking Movement -An Initiative
by the Elders Forum, Kochi.
Supported Choral EVE 2012 a platform for talented
singers.
Sponsored OTICON Annual National Conference, for
Indian occupational therapists. The conference aimed
at bringing all healthcare professionals together for
improving awareness about rehabilitation of the disabled
and updating their knowledge.
Assisted in the purchase of school uniform for the poor
children of the landslide victims at Idukki.
Facilitated organising a womens empowerment
programme by YWCA, Aluva.
Distributed six PCs to the computer lab at the Government
U P School-Anadhapuram, Nellayi, Thrissur.
Extended financial support for the reconstruction of St.
Marys LP School, Vallarpadam.
In association with Kerala Management Association
organised a Women empowerment programme-
Women Management Conclave,at Ernakulam
Sponsored a medical camp organised by Paithrikam
Samskarika Vedi on 22nd December, 2012 at
Mathilakam. The camp was beneficial to the rural and
urban community and covered cardiac, neurological,
orthopaedic, gynaecological, and ENT specialists and
paediatricians.
Sponsored the silver jubilee celebration of Ernakulam
District Association of Deaf All Kerala Deaf Childrens
Chithrakala Camp and Painting Comptetion.
Supported Hospice and Palliative Care Day on 10th Oct
by Alpha Pain Clinic and National Service Scheme of M G
University - Walkathon form Marine Drive to Fine Arts
Society Hall followed by a seminar
Sponsored an eye camp by the Catholic Congregation on
10th November 2012 at Chalakkal, Thumbichal.
Sponsored Abilities Mela Kochi 2012 conducted by
the Peoples Council for Social Justice. The mela was
conducted for showcasing and selling crafts work made
by the differently-abled.
Sponsored cost of printing 1,000 booklets of the HIV /
AIDS outreach programme
The Bank supported Ashraya 13-inter college volleyball
tournament by Rotary Club of Palarivatom- to raise funds
for the operation theatre at General Hospital, Kochi.
Supported Samaritan Home- a home for aged and
destitute people, Thalassery- for digging a tube well.
Evangeline Booth Hospital at Varikoli, Puthencruz
purchased a four wheeler trolley with the Banks support
to supply food to the inmates.
Sponsored musical instruments for implementing music
therapy in open prison at Trivandrum
Supported Providence home- a home for differently-
45
abled handicapped orphans, Karakkunnam- for digging
a tube well.
Fedbank Hormis Memorial Foundation
Federal Bank has instituted a public charitable trust by
name Fedbank Hormis Memorial Foundation in 1996 to
perpetuate the fond memory of late Shri. K. P. Hormis, the
founder of the Bank. The Trust is striving hard to inculcate
better knowledge and awareness in the field of banking
through training programmes, focused seminars, awards
and so on. The activities includes bestowing scholarships to
economically disadvantaged students
Fedbank Hormis Memorial Foundation has been granting
scholarships to economically backward professional college
students. From the year 2011, the number of scholarships
has been increased from 25 to 50.
46
The Bank has adopted a Code of Corporate Governance
which while taking care of and safeguarding the interest
of shareholders and all other stakeholders also provides for
good management, adoption of prudent risk management
techniques and compliance with required standards of
capital adequacy.
The Code also aims at identifying and recognising the Board
of Directors and the Management of the Bank as the principal
instruments through which good corporate governance
principles are articulated and implemented, giving utmost
importance to ensure transparency, accountability and
equality of treatment amongst all the stakeholders in tune
with statutory and regulatory requirements. A copy of the
Code is available on request and is also displayed on our
Banks website.
Board of Directors
The composition of the Board of Directors is governed by the
Banking Regulation Act, 1949, the Companies Act, 1956,
Listing Agreement, and the Code of Corporate Governance
adopted by the Bank. The Board comprises of 10 Directors
as on 31.03.2013 with rich experience and specialised
knowledge in various areas of relevance to the Bank,
including banking, accountancy, MSME, finance, industry,
agriculture, and information technology.
Shri. P. C. Cyriac, ceased to be a member of the Board and also
as the Chairman of the Board of the Bank from 31.08.2012.
Shri. Suresh Kumar was appointed as Chairman, by the Board
of Directors at their meeting held on 01/02 August 2012 and
he took charge as Chairman from September 2012, with the
approval of RBI.
Dr. K. Cherian Varghese and Shri. Sudhir M Joshi, were
appointed as Directors of the Bank on 20.10.2012 . Shri.
K. M. Chandrasekhar was appointed as the Director on
06.12.2012. Shri. Dilip G Sadarangani was appointed as
Director on 4.6.2013.
Dr.T.C.Nair, an independent Director on the Board of the
Bank resigned from the Board on 01.05.2013 and the
Board took on record of the same at its meeting held on
04.06.2013
Shri. P.C. John was a Whole Time Director of the Bank up
to 30.04.2013 and ceased to be a Director on expiry of his
term on that date.
Excluding the MD & CEO, all other members of the Board are
Non-Executive and Independent Directors.
Prof. Abraham Koshy and Dr. M.Y. Khan were re-elected/
appointed as Directors of the Bank at its last Annual General
Meeting held on 2nd August 2012.
No relationship exists between the Directors of the Bank.
The other directors who are retiring at this AGM are Shri.
Suresh Kumar and CA.Nilesh S Vikamsey and being eligible
have offered themselves for reappointment.
Nine Board Meetings were held during the Financial Year
ended March 31, 2013.
CORPORATE
GOVERNANCE
47
Attendance Details as on 31.03.2013 of Board / Committees of the Board are given below.
Name of Director No of Board Meetings attended/held. Attendance at Last AGM
Shri.P.C.Cyriac* 3/3 Present
Shri. Suresh Kumar 9/9 Present
Dr. T. C. Nair* 8/9 Present
Dr. M. Y. Khan 7/9 Present
Prof. Abraham Koshy 8/9 Present
CA. Nilesh S Vikamsey 8/9 Present
Shri. Shyam Srinivasan 9/9 Present
Shri. P. C. John 8/9 Present
Dr. K. Cherian Varghese 3/3** Director w.e.f 20.10.2012; was not
Director on the date last AGM
Shri. Sudhir M Joshi 3/3** Director w.e.f 20.10.2012; was not
Director on the date of late AGM
Shri. K.M. Chandrasekhar 2/2** Director w.e.f 06.12.2012; was not
Director on the date of last AGM
* Shri.P.C.Cyriac and Dr.T.C.Nair ceased to be Directors w.e.f 31.08.2012 and 01.05.2013
** Number of meetings held after the Director joined the Board
48
CORPORATE GOVERNANCE
Board Procedure
All the major issues included in the Agenda for discussion in
the Board/Committees of Board are backed by comprehensive
background information to enable the Board/Committee
to take informed decisions. Agenda papers are generally
circulated in advance prior to the meeting of the Board/
Committees. Also the Board/Committee agenda contains
the Compliance Report of the directions taken at previous
meetings. The members of the Board exercise due diligence
in performance of the functions as Directors of the Bank
and follow highest degree of business ethics, transparent
practices and code of good governance amidst a cordial
environment.
Remuneration To Directors
Shri. Shyam Srinivasan, MD & CEO, was paid 95,58,092
(gross), Shri. P.C.John (Executive Director) was paid 41,
92,052 (gross) as remuneration for the year in accordance
with the terms and conditions approved by Reserve Bank of
India and the shareholders.
a) No pecuniary relationship exists for independent Directors
vis--vis the Bank, other than payment of sitting fees for
Board/Committee meetings.
b) The Non Executive Directors are paid sitting fees as per
the provisions of Companies Act, 1956.
The details of remuneration of Shri.Shyam Srinivasan and
Shri.P C John are as under:
Shri. Shyam
Srinivasan
MD & CEO
()
Shri. P C John
Executive
Director
()
Basic Pay 69,99,960 25,43,913
House Rent Allowance Nil 5,08,787
Provident Fund (Employer
Contribution)
6,99,996 2,54,388
Servant Wages 60,000 36,000
Drivers Wages Nil 90,000
Subscription to periodicals Nil Nil
Medical Expenses 48,136 62,420
Premium on Mediclaim
Policy
Nil Nil
Leave Travel Concession Nil 1,79,544
Bonus/Ex-gratia/Others* 17,50,000 5,17,000
Total 95,58,092 41,92,052
*Paid with the approval of RBI.
Reserve Bank of India has approved grant of 1,28,275
options under ESOS 2010 to Shri. Shyam Srinivasan, MD &
CEO and 15000 options to Shri. P.C.John (Executive Director)
The other Independent Directors were paid 20,000/- each
as sitting fees for attending Board meeting and Audit,
Finance, Nomination, Ethics and Remuneration Committee &
Risk Management Committee meetings and 10,000/- each
for attending other Committee meetings of the Board. The
sitting fee paid to the Directors is within the limits prescribed
under the Companies Act, 1956.
Directors Shareholding
Name of the Director No. of Shares held as on
31-03-2013)
Shri.P.C.John 1231
Prof. Abraham Koshy 1000
(*Note: 1,05,710 GDRs of the Federal Bank Ltd. are held by Shri.
Suresh Kumar)
Audit Committee
The Audit Committee consists of three non-executive
independent Directors, and is chaired by CA. Nilesh S
Vikamsey, a Non-Executive Independent Director, since
24th June 2011. The other members of the Committee for
FY 13 were Dr. M.Y.Khan and Dr. T.C Nair, Non-Executive
Independent Directors. The terms of reference of the Audit
Committee, incorporated in the Banks Code of Corporate
Governance, are in accordance with the listing agreements
entered into by the Bank with stock exchanges where
the Banks shares are listed, as well as RBI guidelines. The
Committee is expected to:
a. Review the Banks financial policies, and where necessary,
49
recommend changes for the Boards approval;
b. Review periodically the adequacy of internal control
systems (including the asset-liability management and
risk-assessment and management systems) with the
management and external and internal auditors, assure
itself that the systems are being effectively observed and
monitored, and, where necessary, approve changes or
recommend changes for the Boards approval;
c. Review the adequacy of the internal audit function,
including the structure of the internal audit department,
staffing, and the suitability and seniority of the official
heading it, reporting structure coverage, and the
frequency of internal audit, and, where necessary,
approve changes;
d. Review the findings of any investigations by internal
auditors or vigilance officials into actual or suspected
fraud or irregularity or a failure of internal control
systems of a material nature, and convey to the Board
any comments of the Committee or action initiated by it
on the findings;
e. Oversee the Banks financial reporting process and the
disclosure of its financial information to ensure that the
financial statements are correct, sufficient, and credible,
and present a true and fair view of the state of affairs
and of the profit or loss of the Bank for the relevant
financial year or other period as the case may be;
f. Recommend, for shareholders approval, the
appointment, reappointment, removal, or replacement
of the external auditors, and the fee payable to them
for the audit, taking into consideration any relationship
between the auditors and the Bank that may have impact
on the independence of the auditors in carrying out the
audit;
g. Discuss with the external auditors, before they commence
the audit, the nature and scope of the audit, and
ensure co-ordination where more than one audit firm is
employed;
h. Review the draft quarterly and annual financial statements
with the external auditors and the management before
submission to the Board for approval; and
i. Discuss with the management the auditors report
and assessment, their qualifications and concerns, if
any, and the managements response to the auditors
management letter and long-form audit report.
The Audit Committee met 4 (Four) times during the
year in due compliance with RBI and Listing Agreement
requirements.
Attendance Details are given below.
Name of the members No of meetings attended/
held.
CA. Nilesh S Vikamsey 4/4
Dr.M.Y.Khan 2/4
Dr.T.C.Nair 3/4
Nomination, Ethics, Compensation And
Remuneration Committee
The Committee is chaired by Shri. Suresh Kumar and has two
other members viz: Prof. Abraham Koshy and Dr. M.Y.Khan.
All of them are Non Executive and Independent Directors.
Shri.P. C. Cyriac was a member of the Committee and ceased
to be a director w.e.f 31.08.2012 .
The terms of reference of the Committee are:
a. Develop, for Board approval, a policy on the size and
composition of the Board taking into account the
available and needed diversity and balance in terms
of experience, knowledge, skills, and judgment of the
Directors.
b. Review, from time to time, possible candidates for current
or potential Board vacancies, including Directors who are
to retire and are eligible for reappointment or re-election
and other persons who may be recommended by the
Chairman or other Directors, shareholders, senior officers
of the Bank, or others; and
c. Recommend to the Board candidates for election
(including re-election) or appointment (including
50
reappointment) to the Board.
d. To look into the complaints and allegations against the
top management of the Bank.
e. To review the compensation package for the MD & CEO
and the Executive Directors, and recommend revisions
for Board approval.
f. To consider and approve issuance and allotment of ESOS
shares to MD/ ED and employees of the Bank.
The Bank is having a compensation policy as per RBI
guidelines.
The Committee met 8 (Eight) times during the year.
Name of the members No of meetings attended/held.
Shri. P. C. Cyriac* 3/3
Shri. Suresh Kumar 7/8
Prof.Abraham Koshy 8/8
Dr. M.Y. Khan 4/8
* Shri. P.C. Cyriac ceased to be a Director w.e.f 31.08.2012
Shareholders/Investors Grievances And Share
Transfer Committee
The Committee is chaired by CA. Nilesh S Vikamsey, an
independent Director and consists of Shri. Sudhir M
Joshi,Shri.Shyam Srinivasan, MD & CEO of the Bank & Shri.
P.C. John (Executive Director), as members. Shri.Sudhir
M Joshi was inducted as a member w.e.f 20.10.2012 on
reconstitution of the committee. Shri. P.C. Cyriac ceased
to be the Chairman of the Committee w.e.f. 31.08.2012.
Shri Girish Kumar. G, Company Secretary, functions as the
Compliance Officer.
a. To approve or reject applications for transfer of shares
referred to the Committee by the Banks Registrar and
Share Transfer Agents in terms of such criteria as may be
determined by the Committee and conveyed to the Agents.
b. To initiate further actions on the complaints as is
considered necessary or desirable by way of redressal or
to prevent similar complaints arising in the future; and
c. To review, where necessary, complaints received from
shareholders or others regarding transfer of shares,
non-receipt of declared dividends, non-receipt of
annual accounts or reports, or other matters relating to
shareholding in the Bank, and any action taken by the
Bank on such complaints.
The Committee met 8 (Eight) times during the year and
reviewed and redressed the complaints received from
shareholders. The Bank attended to the complaints promptly
and to the satisfaction of the shareholders. All the share-
transfer applications received up to 31 March 2013 have
been processed.
Total complaints
received during
the year
Number of
complaints
redressed
Number of
complaints pending
for redressal
147 145 2
Name of the members No of meetings attended/
held.
Shri.P.C.Cyriac * 3/3
Shri.Shyam Srinivasan 8/8
Shri.P.C.John 8/8
Shri. Sudhir M Joshi 2/2
(*Shri. P.C.Cyriac ceased to be a Director w.e.f. 31.08.2012)
Finance Committee
The Committee is chaired by Shri Suresh Kumar and consists
of Dr. K.Cherian Varghese, Shri. Sudhir M Joshi, Shri.Shyam
Srinivasan, MD & CEO of the Bank and Shri. P.C.John,
(Executive Director) as members. Shri. P.C.Cyriac was a
member of the Committee till 31.08.2012 and he ceased to
be a member w.e.f 31.08.2012 Shri. Sudhir M Joshi and Dr.
K Cherian Varghese were inducted to the committee w.e.f
51
20.10.2012 on reconstitution of the committee.
a. To consider proposals for approval, renewal, or modification
of various types of funded and non-funded credit facilities
to clients within such authority as is delegated to the
Committee by the Board from time to time.
b. Review of top 100 borrowal accounts of above 5 Cr in
each category of NPA i.e. substandard/doubtful/loss.
c. To ratify credit proposals sanctioned by MD & CEO/
Executive Director/General Manager(s).
d. To ratify compromise proposals/bad debts written off
with the approval of MD & CEO/Executive Director.
The Finance Committee met 12 (Twelve) times during the
year.
Shri.P.C.Cyriac* 3/3
Shri.P.C.John 11/12
Dr. K. Cherian Varghese 7/7
Shri. Sudhir M Joshi 7/7
(*Shri. P.C.Cyriac ceased to be a Director w.e.f. 31.08.2012)
Risk Management Committee
The Committee is chaired by Prof. Abraham Koshy and
consists of Dr.K.Cherian Varghese, Shri. Shyam Srinivasan,
MD & CEO of the Bank as members. Dr. T.C. Nair was a
member of the Committee and he ceased to be a member
w.e.f 20.10.2012 on reconstitution of the Committee. Shri
P. C. John was member of the Committee till his retirement.
a. Devise the policy and strategy for integrated risk
management containing various risk exposure of the Bank.
b. Effectively co-ordinate between the Credit Risk
Management Committee (CRMC), Asset Liability
Management Committee (ALCO) and Operational Risk
Management Committee (ORMC).
c. Setting policies and guidelines for credit risk
measurement, management and reporting.
d. Ensuring that the credit risk management processes
satisfy the Banks policy.
e. Set risk parameters and prudential limits for credit
exposure.
f. Appointment of qualified and competent staff; ensuring
posting of qualified and competent staff, independent
credit risk managers, etc.
g. Ensure that adequate training is made available to the
staff in Credit Risk Management Department, which
handles this complex function.
h. Ensure that operational risk management processes
(including people, systems, operations, limits and
controls ) satisfy banks policy.
i. Reviewing and approving market risk limits, including
triggers or stop-losses for traded and accrual portfolios
j. Ensuring robustness of financial models, and the
effectiveness of all systems used to calculate market risk.
k. Setting policies and guidelines of operational risk
measurement, management and reporting.
l. Ensure that adequate training is made available to the
staff handling Operational Risk Management functions,
which is of great importance to the Bank
The Risk Management Committee met 4 (Four) times during
the year.
Prof. Abraham Koshy 4/4
Dr.T.C.Nair 2/2
Shri.P.C.John 4/4
Dr. K. Cherian Varghese 2/2
52
Customer Service Committee
consists of Shri. K.M.Chandrasekhar, Shri.Shyam Srinivasan,
MD & CEO of the Bank and Shri.P.C John, (Executive
Director) as members. CA.Nilesh S Vikamsey was a member
of the Committee and he ceased to be a member w.e.f
20.10.2012 on reconstitution of the Committee. Shri. K .M.
Chandrasekhar was inducted as a member w.e.f 16.01.2013.
Addressing the formulation of a comprehensive Deposit
Policy, incorporating the issues such as the treatment of
death of a depositor for operations of his account, the
product approval process, the annual survey of depositor
satisfaction and the triennial audit of such services.
Besides, the Committee also examines any other issues
having a bearing on the quality of customer service
rendered.
The Committee met 2 (Two) times during the year.
Shri.P.C.John 1/1
Shri.K.M. Chandrasekhar 1/1
Committee For Investment and Raising of
Capital
The Committee is chaired by Shri. Suresh Kumar and consists
of Shri. Shyam Srinivasan , MD & CEO , Shri. Sudhir M Joshi
and Dr.T.C Nair as members with an objective to look into
the various avenues for strategic & non-strategic investment
within the overall policy of the Bank for its organic and
inorganic growth. The Committee also looks after the
various options for raising of resources to achieve the
tasks. CA.Nilesh S Vikamsey ceased to be a member w.e.f.
20.10.2012 on reconstitution of the Committee.
The Committee met 3 (Three) times during the year.
CA.Nilesh S Vikamsey 1/1
Dr.T.C.Nair 3/3
Shri.Sudhir M Joshi 2/2
Committee For Human Resources Policy
The Committee is chaired by Prof. Abraham Koshy, and
consists of Shri. K.M. Chandrasekhar, Shri. Shyam Srinivasan,
MD & CEO and Shri.P.C John (Executive Director) as members.
Shri. K.M Chandrasekhar was inducted as a member w.e.f.
16.01.2013. CA.Nilesh S Vikamsey was a member of the
Committee and he ceased to be a member w.e.f 20.10.2012
on reconstitution of the Committee.
a. To review the existing HR policy of the Bank.
b. Finalise the organisational structure
c. Address concerns expressed by various quarters like
Union, Association etc.
d. To identify the areas of motivation
e. Review recruitment policies
f. Review compensation policies
g. Make industry comparison
h. Review existing agreements and suggest methods to
make them mutually beneficial
i. Introduction of performance management/measurement
and compensation packages.
The Committee met once (1) during the year.
Shri. Shyam Srinivasan 1/1
Shri. P.C.John 1/1
53
Committee For Marketing Strategies
consists of Shri. K.M.Chandrasekhar, Shri.Shyam Srinivasan,
MD &CEO and Shri. P.C John (Executive Director) as members
to evolve and formulate the strategies for marketing of its
various products. CA. Nilesh S Vikamsey was a member of the
Committee and he ceased to be a member w.e.f 20.10.2012
and Shri. K.M.Chandrasekhar was inducted as a member
w.e.f 16.01.2013 on reconstitution of the Committee.
Shri. Sudhir.M.Joshi was a member of the Committee from
20.10.2012 and he ceased as a member w.e.f 16.01.2013
on reconstitution of the committee
The Committee draws plan & programme to achieve the
target in the competitive scenario.
The Committee met 2 (Two) times during the year.
Shri. Shyam Srinivasan 2/2
Shri. P.C.John 1/1
Shri. K.M.Chandrasekhar 1/1
Details Of Board, Audit Committee, Finance Committee, Risk Management Committee and
Share Transfer Committee Meetings Held During The Financial Year Ended March 31, 2013.
Sl.
no.
Board Meeting Audit Committee Finance Committee Risk Management
Committee (RMC)
Share transfer
Committee
1 11.05.12 10.05.12 10.5.12 14.09.12 11.05.12
2 29.06.12 01.08.12 15.06.12 19.10.12 29.06.12
3 01.08.12 19.10.12 01.08.12 16.01.13 01.08.12
4 15.09.12 16.01.13 11.09.12 11.03.13 15.09.12
5 06.10.12 16.10.12 20.10.12
6 20.10.12 23.11.12 06.12.12
7 06.12.12 13.12.12 17.01.13
8 17.01.13 16.01.13 12.03.13
9 12.03.13 09.02.13
10 28.02.13
11 12.03.13
12 27.03.13
54
Information relating to last three general body meetings is furnished below:
Name of Meeting Day, Date and Time of Meeting Venue Special Resolution Transacted
79th Annual General
Meeting
Monday, 13th September 2010
at 10 A.M.
Mahatma Gandhi Municipal
Town Hall, Aluva
No Special Resolution
80th Annual General
Meeting
Saturday, 3rd September 2011
at 10 A.M.
Mahatma Gandhi Municipal
Town Hall, Aluva
81st Annual General
Meeting
Thursday, 2nd August 2012
at 10 A.M
Priyadarshini Town Hall,
Thottakaattukara, Aluva
Disclosures
There were no material transactions between the Bank and
its Directors or management having potential conflict with
the larger interests of the Bank. The Bank complied with the
directives issued by the stock exchanges on which the Banks
shares are listed, SEBI, and other regulatory authorities. No
penalties or strictures have been imposed on the Bank by
SEBI or any of the Stock Exchanges for any non-compliance
on any matter relating to capital markets during the last
three years. No Postal Ballot was conducted during the
financial year 2012-2013.
Insider Trading Code:
The Bank has formulated a code for prevention of Insider
Trading pursuant to Securities and Exchange Board of
India (Insider Trading) (Amendment) Regulation 2002 to
prevent the practices of Insider Trading. Shri. Girish Kumar
Ganapathy, Company Secretary has been designated as
Compliance Officer for this purpose. Senior Management of
the Bank has affirmed compliance with the Code of Conduct.
Adherence Of Code Of Corporate Governance:
The Board of Directors of the Bank has adopted the Code
of Corporate Governance .All the Board members and the
senior management of the Bank have affirmed compliance
to the Banks Code of Corporate Governance.
Training of Board Members:
Bank has initiated steps for meeting the training needs of the
Directors and they are being nominated wherever suitable
programs are available.
Mechanism for evaluating non-executive
Board Members:
A mechanism for the performance evaluation of non-
executive directors is under process.
Whistle Blowing Policy:
The Bank affirms that no employee has been denied access
to the Audit Committee of the Board under the Whistle
Blowing Policy adopted by the Bank.
Ethical Standards Employed By The Bank:
The Bank has formulated service manual for its employees.
This manual contains comprehensive regulations on ethical
standards to be mandatorily observed by all the employees
of the Bank.
Outstanding GDRs/ADRs/Warrants or any
Convertible Instruments, Conversion Date and
Likely Impact on Equity:
The Bank has 33,71,338 GDRs (equivalent to equity shares)
outstanding, which constituted 1.97% of the Banks total
equity capital as at 31 March 2013. No convertible debenture
is outstanding.
CEO/CFO Certification:
In terms of Clause 49 of the Listing Agreement, the
55
certification by MD & CEO and Chief Financial Officer on
the financial statements and internal controls relating to
financial reporting has been obtained.
Means Of Communication:
The quarterly, unaudited and annual audited financial
results were published in nationally circulated newspapers
in English, such as, Business Line, Business Standard and
Financial Express, and in the regionally circulated Malayalam
daily Deepika. The results were also displayed on the Banks
website - www.federalbank.co.in
General Information For Shareholders
Annual General Meeting
Date : 20.07.2013
Time : 10 AM
Venue : Mahatma Gandhi Municipal Town
Hall, Aluva
Financial year : 01st April 2012 to 31st March
2013
Period of book closure : 11.07.2013 to 20.07.2013
Dividend payment date : Will be within the prescribed time
limit
Financial Calendar
Approval of quarterly results for the period ending:
30th June 2012 : 2nd August 2012
30th September 2012 : 20th October 2012
31st December 2012 : 17th January 2013
31st March 2013 : 27th April 2013
Listing On Stock Exchanges
The Banks shares are listed on the stock exchanges viz.
National Stock Exchange of India Ltd., BSE Ltd. and Cochin
Stock Exchange. The GDRs issued by the Bank in 2006 have
been listed on the London Stock Exchange.
BSE Scrip Code : 500469
Scrip ID : FEDBANK
NSE Symbol : FEDERALBNK
Demat ISIN Code : INE171A01011
The annual listing fees for 2012-13 have been paid to all the
Stock Exchanges where the shares are listed.
Movements in the market price of the Banks
shares on the National Stock Exchange:
Month High Low
Apr-12 448.80 402.15
May-12 425.00 390.40
Jun-12 455.00 404.95
Jul-12 459.00 392.00
Aug-12 445.00 400.50
Sep-12 454.80 399.50
Oct-12 571.00 446.40
Nov-12 498.95 448.00
Dec-12 544.00 473.25
Jan-13 550.95 493.00
Feb-13 524.30 474.95
Mar-13 505.00 463.10
56
Federal Bank: 431.15 (Apr 2012) - 480.65 (Mar 2013)
NIFTY: 5317.90 (Apr 2012) - 5682.55 (Mar 2013)
Performance in comparison to NIFTY
Registrars And Share Transfer Agent
Integrated Enterprises (India) Ltd.
2nd Floor, Kences Towers,
No.1 ,Ramakrishna Street,
Off : North Usman Road
T.Nagar, Chennai-600017
Phone No: 044-28140801-03
Fax: 044-28142479
Share Transfer
The share transfer instruments, as and when received, are
duly processed and shares in respect of valid share transfer
instruments are transferred in the names of transferees
complying with rules in force.
The Bank obtains from a Company Secretary in practice,
half yearly certificate of compliance with the share transfer
formalities as required under Clause 47(c) of the Listing
Agreement with Stock Exchanges and files a copy of the
certificate with the Stock Exchanges.
As required by SEBI, a Reconciliation of Share Capital Audit
is conducted on a quarterly basis by a Practicing Company
Secretary and Certificate issued in this regard is forwarded to
the Stock Exchanges.
Dematerialisation Of The Banks Shares
Of the total listed equity shares of the Bank, 97.19% are held
in dematerialised form and 2.81% in physical form. Under
agreements with National Securities Depository Services
Ltd (NSDL) and Central Depository Services Ltd (CDSL), the
Banks shares can be and are traded in electronic form.
Shares remaining in physical form can be dematerialised for
which the share holders are requested to open a Depository
Account with the Depository Participants (DP) and lodge the
share certificates along with Demat Request Form with them.
Unclaimed Dividends
Under the Transfer of Unclaimed Dividend Rules, it would
not be possible to claim the dividend amount once deposited
in Investors Education & Protection Fund (IEPF). Therefore,
shareholders are again requested to claim their unpaid
dividend, if not already claimed.
Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Feb 13 Mar 13
90
95
100
105
106.86
111.48
110
115
120
125
Federal Bank
Nifty
57
The details of unclaimed dividend of last three years are as under
(As on 31-03-2013)
Sl. No. Financial Year Amount of unclaimed Dividend (in )
1 2009-10 77,60,400.00
2 2010-11 1,24,01,364.00
3 2011-12 1,34,88,822.00
Total 3,36,50,586.00
Share Holding Pattern as on March 31,2013
Share holder Category. Shares % Holding
Shares held by Custodians and others against which Depository Receipts have been issued 45,17,785 2.64
Mutual Funds/UTI 2,73,00,498 15.96
Financial Institutions/Bank/Insurance Companies 88,71,267 5.19
Foreign Institutional Investors 7,85,68,225 45.93
Bodies Corporate 1,70,09,076 9.94
NRI, Trust, Overseas Corporate Bodies, Foreign Bank, Foreign Body Corporate , LLP,
Clearing Member
97,05,288 5.67
Individual 2,50,86,993 14.67
Total 17,10,59,132 100.00
Details of Share holders holding more than 1% of the shares as on 31.03.2013
Sl.no. Name Shares Percentage
1 INTERNATIONAL FINANCE CORPORATION 82,24,239 4.81
2 FRANKLIN TEMPLETON INVESTMENT FUNDS 66,53,585 3.89
3 EMIRATES FINANCIAL SERVICES PSC 54,80,423 3.20
4 LIFE INSURANCE CORPORATION OF INDIA 49,18,543 2.88
5 WARHOL LIMITED 49,12,000 2.87
6 MORGAN STANLEY MAURITIUS COMPANY LIMITED 47,87,930 2.80
7 EQUINOX PARTNERS LP 46,29,345 2.71
8 M/S NAPEAN TRADING AND INVESTMENT CO PVT LTD 41,03,041 2.40
9 GENERAL INSURANCE CORPORATION OF INDIA 36,00,000 2.10
10 EASTSPRING INVESTMENTS (SINGAPORE) LIMITED A/C THE PRUDENTIAL
ASSURANCE COMPANY LIMITED
35,19,348 2.06
11 DEUTSCHE BANK TRUST COMPANY AMERICAS 33,71,338 1.97
12 RELIANCE CAPITAL TRUSTEE COMPANY LIMITED A/C RELIANCE GROWTH FUND 32,76,300 1.92
13 BIRLA SUN LIFE INSURANCE COMPANY LIMITED 30,46,013 1.78
58
Sl.no. Name Shares Percentage
14 RELIANCE CAPITAL TRUSTEE CO. LTD A/C RELIANCEBANKING FUND 20,79,033 1.22
15 KUROTO FUND LP 20,42,753 1.19
16 FID FUNDS (MAURITIUS) LIMITED 20,35,588 1.19
17 MFS INTERNATIONAL NEW DISCOVERY FUND 20,13,395 1.18
18 BAJAJ ALLIANZ LIFE INSURANCE COMPANY LTD. 18,87,755 1.10
19 M/S REGAL INVESTMENT AND TRADING CO PVT LTD 18,46,029 1.08
20 FRANKLIN TEMPLETON MUTUAL FUND A/C FRANKLIN INDIA BLUECHIP FUND 17,30,000 1.01
21 DIMENSIONAL EMERGING MARKETS VALUE FUND 17,22,798 1.01
Total 7,58,79,456 44.36
Distribution of Holdings as on March 31, 2013
No. of shares held Holders Amount
No. %
%
Up to 500 49716 82.27 6,14,30,050 3.59
501 - 1000 5896 9.76 4,19,10,720 2.45
1001 - 2000 2781 4.60 3,80,19,370 2.22
2001 - 3000 727 1.2 1,82,88,420 1.07
3001 - 4000 271 0.45 95,43,600 0.56
4001 - 5000 218 0.36 99,63,630 0.58
5001 - 10000 345 0.57 245,07,320 1.43
ABOVE 10001 475 0.79 1506928210 88.1
TOTAL 60429 100 1710591320 100
Locations
With its Head Office at Aluva, the Bank has a network of
1103 Branches across India.
Address for correspondence: The Federal Bank Ltd.
Secretarial Department,
PB No. 103, Federal Towers,
Head Office, Aluva 683 101,
Kerala State, India.
E-mail [email protected]
Company Secretary Shri. Girish Kumar Ganapathy
Auditors M/s Deloitte Haskins & Sells,
Chennai
M/s M.P.Chitale & Co, Mumbai
Compliance With The Code Of Conduct
I confirm that for the year under review all Directors and
members of the Senior Management have affirmed
compliance with the Code of Conduct of the Bank.
Shyam Srinivasan
4th June 2013
59
AUDITORS CERTIFICATE
TO THE MEMBERS OF
THE FEDERAL BANK LIMITED
We have examined the compliance of conditions of Corporate Governance by The Federal Bank Limited (the Bank) for the
year ended 31st March 2013, as stipulated in clause 49 of the Listing Agreement of the said Bank with the Stock Exchanges.
The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination was limited
to procedures and implementation thereof, adopted by the Bank for ensuring the compliance of the conditions of Corporate
Governance. It is neither an audit nor an expression of opinion on the financial statements of the Bank.
In our opinion and to the best of our information and according to the explanations given to us, we certify that the Bank has
complied with the conditions of Corporate Governance as stipulated in the above mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability of the Bank nor the efficiency or
effectiveness with which the management has conducted the affairs of the Bank.
For Deloitte Haskins & Sells For M P Chitale & Co.
Chartered Accountants Chartered Accountants
(Registration No.008072S) (Registration No. 101851W)
M. Ramachandran Ulhas Chitale
Partner Partner
(Membership No.16399) (Membership No. 32292)
KOCHI, 4th June, 2013.
60
Independent Auditors Report
The Shareholders of
The Federal Bank Limited,
Aluva
Report on the Financial Statements
1. We have audited the accompanying financial statements
of The Federal Bank Limited (the Bank), which
comprise the Balance Sheet as at 31st March, 2013 and
the Profit and Loss Account and the Cash Flow Statement
for the year then ended and a summary of significant
accounting policies and other explanatory information.
Incorporated in these financial statements are the returns
of 35 branches / offices of the Bank audited by one of us
and 1096 branches / offices audited by branch auditors.
Managements Responsibility for the Financial Statements
2. The Banks Management is responsible for the preparation
of these financial statements that give a true and fair
view of the financial position, financial performance and
cash flows of the Bank in accordance with the provisions
of Section 29 of the Banking Regulation Act, 1949,
Accounting Standards referred to in Section 211 (3C) of
the Companies Act, 1956 in so far as they apply to the
banks and the Guidelines issued by Reserve Bank of India.
This responsibility includes the design, implementation
and maintenance of internal controls relevant to the
preparation and presentation of the financial statements
that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
Auditors Responsibility
3. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted
our audit in accordance with the Standards on Auditing
issued by the Institute of Chartered Accountants of
India. Those Standards require that we comply with
ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free from material misstatement.
4. An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on
the auditors judgement, including the assessment of the
risks of material misstatement of the financial statements,
whether due to fraud or error. In making those risk
assessments, the auditor considers internal control
relevant to the Banks preparation and fair presentation
of the financial statements in order to design audit
procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the
effectiveness of the Banks internal control. An audit also
includes evaluating the appropriateness of accounting
policies used and the reasonableness of the accounting
estimates made by the Management, as well as evaluating
the overall presentation of the financial statements.
5. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
6. In our opinion and to the best of our information and
according to the explanations given to us, the aforesaid
financial statements give the information required by the
Banking Regulation Act, 1949 as well as Companies Act,
1956 in the manner so required for banking companies
and the Guidelines issued by Reserve Bank of India from
time to time and give a true and fair view in conformity
with the accounting principles generally accepted in
India:
(i) in the case of the Balance Sheet, of the state of affairs
of the Bank as at 31st March, 2013;
(ii) in the case of the Profit and Loss Account, of the
profit of the Bank for the year ended on that date; and
61
(iii) in the case of the Cash Flow Statement, of cash flows
of the Bank for the year ended on that date.
Emphasis of Matter
7. We draw attention to Note No.2.9 of Schedule 18 to
the Financial Statements which describes proportionate
charge of pension liability of the Bank amounting to
` 33.68 Crore to the Profit and Loss Account and the
balance unamortised pension liability of ` 67.36 Crore
as at 31st March 2013, included in Schedule 11 to the
Financial Statements to be amortised over the next two
years, pursuant to the exemption from the application
of the provisions of the Accounting Standard (AS) 15,
Employee Benefits, granted by the Reserve Bank of India
and made applicable to the Bank vide letter no. DBOD
No.BP.BC.15896 / 21.04.018 / 2010-11 dated April 8,
2011.
Our Opinion is not qualified in respect of this matter.
Report on Other Legal and Regulatory Matters
8. As required by Section 227(3) of the Companies Act, 1956
and Section 30 of the Banking Regulation Act,1949, we
report that:
(a) we have obtained all the information and explanations
which, to the best of our knowledge and belief, were
necessary for the purpose of our audit and have
found them to be satisfactory.
(b) the transactions of the Bank, which have come to our
notice, have been within the powers of the Bank.
(c) the returns received from the branches / offices of
the Bank not visited by one of us have been found
adequate for the purposes of our audit.
9. In our opinion, the Balance Sheet, Profit and Loss
Account and Cash Flow Statement comply with the
Accounting Standards referred to in Section 211(3C) of
the Companies Act, 1956 in so far as they apply to banks.
10. We further report that:
(i) the Balance Sheet and Profit and Loss Account dealt
with by this report, are in agreement with the books
of account and with the returns received from the
branches / offices not visited by any one of us.
(ii) in our opinion, proper books of account as required
by law have been kept by the Bank so far as appears
from our examination of those books.
(iii) the reports on the accounts of the branches audited
by branch auditors have been dealt with in preparing
our report in the manner considered necessary by us.
(iv) on the basis of the written representation received
from the directors and taken on record by the Board
of Directors, none of the directors is disqualified as on
31st March, 2013 from being appointed as a director
in terms of clause (g) of sub-section (1) of section 274
of the Companies Act, 1956.
Partner Partner
KOCHI,
27 April, 2013.
62
Balance Sheet as at 31 March 2013
Krishnakumar K Girish Kumar Ganapathy
Assistant General Manager Company Secretary
In terms of our report attached For and on behalf of the Board of Directors
For Deloitte Haskins & Sells For M P Chitale &Co. P C John Shyam Srinivasan
Chartered Accountants Chartered Accountants Executive Director & CFO Managing Director & CEO
Firm Reg. No. 008072S Firm Reg. No. 101851W
Suresh Kumar Prof. Abraham Koshy
Chairman Nilesh S Vikamsey
M Ramachandran Ulhas Chitale Dr. K Cherian Varghese
Partner Partner Sudhir M Joshi
Membership No. 16399 Membership No. 32292 K M Chandrasekhar
Place: Kochi Directors
Date: 27 April, 2013
(in Thousands of `)
)s -rrr .s) -rrr| As at As at
+r r-r-rr>r Schedule 31 March 2013 31 March 2012
rr| r = r CAPITAL AND LIABILITIES
rr| Capital 1 1,710,587 1,710,471
+Ii + +v Reserves and Surplus 2 61,936,003 55,352,798
xI{ Deposits 3 576,148,633 489,371,221
=v Borrowings 4 51,869,908 42,410,341
+x @ h il |vx Other Liabilities and Provisions 5 18,830,596 17,422,890
Vb Total 710,495,727 606,267,721
rr|-rrr ASSETS
||||| ||| |+ | -|+| ~|||| Cash and Balances with Reserve Bank of India 6 27,424,961 24,241,466
|+| | ~|||| ~| ||| | Balances with banks and money
il +{ Sx { |{vx at call and short notice 7 9,774,943 11,084,048
xvx Investments 8 211,545,909 174,024,877
~||| Advances 9 440,967,029 377,559,859
l +i Fixed assets 10 3,974,746 3,261,392
~-| |||||| Other assets 11 16,808,139 16,096,079
rr= Total 710,495,727 606,267,721
~|+||+ ~ | Contingent liabilities 12 302,459,180 358,494,040
|||r| + |-| ||-| Bills for collection 12,266,208 11,893,140
|r||| -|||+ -| -|||||| Significant Accounting Policies 17
-||| ||-|| |||||| Notes on Accounts 18
~-|||||| + | |-|| || + | Schedules referred to above form
+ ~||| ~| + | | an integral part of the Balance Sheet
rrr =rrr -r
63
Profit and Loss Account for the year ended 31 March 2013
(in Thousands of `)
)s -rrr .s) r-rrr -rrr| For the year ended For the year ended
rr +|-r -rr-rrr|-r -r=r Schedule 31 March 2013 31 March 2012
rr I. INCOME
~|||| ||| Interest earned 13 61,675,657 55,583,924
+x + Other income 14 6,644,398 5,323,432
rr= Total 68,320,055 60,907,356
rr II. EXPENDITURE
|| |+|| ||| ||| Interest expended 15 41,929,123 36,049,851
{Sx Operating expenses 16 11,795,389 9,792,731
||| ~| ~|+||+ || Provisions & contingencies 6,213,867 7,296,779
rr= Total 59,938,379 53,139,361
-rr-r;rr|-r III. PROFIT/LOSS
|| + |; -||| Net profit for the year 8,381,676 7,767,995
||-| || + ~|-||| -||| Profit brought forward from Previous Year 2,966,787 257,766
11,348,463 8,025,761
|r|-rrrr-r IV. APPROPRIATIONS
||| ~||-||||| +| ~|| Transfer to Revenue Reserve 1,721,400 988,800
+|-|-|| ~||-||||| +| ~|| Transfer to Statutory Reserve 2,095,500 1,942,000
||||| ~||-||||| +| ~|| Transfer to Capital Reserve 229,500 54,017
~|+||| ~||-||||| +| ~|| Transfer to Contingency Reserve
|||| ~||-||||| + | ~|| Transfer to Special Reserve
v 36(1)(vii) ~|,| ~|||-||| (sec 36(1)(viii) of IT Act) 337,000 285,000
.|||||| -|||||| +| .|||||-| Provision for proposed dividend 1,539,528 1,539,424
-||||| + +| .|||||-| Provision for Dividend Tax 261,643 249,733
~|||| || ~|| |-|-| |~| | -| |||| |||| r Balance carried over to Balance Sheet 5,163,892 2,966,787
rr= Total 11,348,463 8,025,761
.||| || ~|-| ,) Earnings per Share (Basic and Diluted) (`) 49.00 45.41
,~|+ | |-| +; .||+ ) (Face value of `10/- each)
(~-|||| + | | -|| .+ || -|) (Refer Note 2.1 of Schedule 18)
|r||| -|||+ -| -|||||| Significant Accounting policies 17
-||| ||-|| |||||| Notes on Accounts 18
~-|||||| + | -||| ~| r||-| |||| Schedules referred to above form
+ | + ~||| ~| + | | an integral part of the Profit and Loss Account
rrr =rrr -r
64
Cash Flow Statement for the year Ended 31 March, 2013
(in Thousands of `)
Year ended Year ended
31.03.2013 31.03.2012
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before taxes 11,937,576 11,695,095
Adjustments for:
Depreciation on Fixed Assets 786,974 566,645
Depreciation on Investments (414,881) 348,622
Provision for Non Performing Investments 46,700
Provision for Non Performing Assets (Including Bad Debts) 1,892,846 2,217,694
Provision on Standard Assets 493,400 364,500
Profit on sale of fixed assets (net) (1,908) (3,316)
Provision for Restructured assets 676,826 343,552
Provision for Other Contingencies (36,925) 95,311
15,380,608 15,628,103
Adjustments for working capital changes:-
(Increase)/ Decrease in Investments (excluding Held to Maturity Investments) (4,055,894) (13,940,544)
(Increase)/ Decrease in Advances (65,300,016) (60,245,216)
(Increase)/ Decrease in Other Assets 10,764 (4,017,642)
Increase/ (Decrease) in Deposits 86,777,412 59,223,415
Increase/ (Decrease) in Other liabilities and provisions 904,291 1,432,834
Direct taxes paid (4,920,624) (6,090,483)
Net Cash flow From Operating Activites 28,796,541 (8,009,533)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (1,513,178) (936,708)
Proceeds from Sale of Fixed Assets 12,681 7,969
Investment in Subsidiary/Joint Venture (1,810,000)
(Increase)/ Decrease in Held to Maturity Investments (33,096,957) (13,246,205)
Net Cash Used in Investing Activities (34,597,454) (15,984,944)
65
Cash Flow Statement for the year ended 31st March 2013 (Contd...)
(in Thousands of `)
31.03.2013 31.03.2012
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issue of Share Capital (ESOS) 116
Proceeds from Share Premium 4,777
Repayment of Subordibate Debt (760,000)
Increase/(Decrease) in Borrowings (Excluding Subordinate Debt) 10,219,567 23,526,715
Dividend Paid (1,789,157) (1,689,759)
Net Cash generated from financing Activities 7,675,303 21,836,956
Net Increase in Cash and Cash Equivalents 1,874,390 (2,157,521)
Cash and Cash Equivalents at the beginning of year 35,325,514 37,483,035
Cash and Cash Equivalents at the end of year 37,199,904 35,325,514
Note:
Cash and cash equivalents comprise of cash on hand (including foreign currency notes), Balances with Reserve Bank of India, Balance
with Banks and money at call and short notice (Refer schedules 6 and 7 of the Balance sheet).
66
Schedules forming part of Balance Sheet
Authorised Capital 2,000,000 2,000,000
[20,00,00,000 (Previous year 20,00,00,000) Equity Shares of ` 10 each]
Issued Capital 1,713,295 1,713,179
[17,13,29,541 (Previous year 17,13,17,910) Equity Shares of ` 10/- each]
Subscribed, Called up and Paid up Capital 1,710,591 1,710,475
[17,10,59,132 (Previous year 17,10,47,501) equity shares of `10/- each, which includes
3318 shares (Previous year 3318) of ` 10/- each issued for consideration
other than cash and 4,37,35,378 shares (previous year 4,37,35,378) issued
as Bonus shares and 2,00,00,000 underlying equity shares (previous year
2,00,00,000) of `10/- each issued towards Global Depository Receipts
(including over allotment option of 20,00,000 equity shares) and 8,54,29,763
equity shares of `10/- each allotted on Rights basis during the financial year
2007-08 and issue of 11631 ESOS shares under ESOS 2010]
(Allotment of 1306 Shares (Previous year 1306) of ` 10/- each pertaining
to the Rights Issue of 1993 issued at a premium of `25/- per share and
52,420 shares (previous year 52,420) of `10/- each pertaining to the
Rights Issue of 1996 issued at a premium of `140/- per Share and 2,16,683
equity shares (Previous year 2,16,683) of `10/- each at a premium of
`240/- per share pertaining to Rights issue of 2007 are kept pending
following orders from various courts)
(Issue of certificates/credit in demat account in respect of 82,588 shares
(previous year 82,788) of `10/- each out of the Bonus issue of 2004
are kept in abeyance consequent to injunction orders from various courts)
Less: Calls in arrears 4 4
Total 1,710,587 1,710,471
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 1 CAPITAL
67
Schedule: 3 DEPOSITS
A. I. Demand Deposits
i. From Banks 592,963 126,997
ii. From Others 28,496,439 25,332,098
29,089,402 25,459,095
II. Savings Bank Deposits 127,431,909 109,299,457
III. Term Deposits
i. From Banks 6,276,618 4,762,050
ii. From Others 413,350,704 349,850,619
419,627,322 354,612,669
Total 576,148,633 489,371,221
B. I. Deposits of branches in India 576,148,633 489,371,221
II. Deposits of branches outside India
Total 576,148,633 489,371,221
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 2 RESERVES AND SURPLUS
I. Statutory Reserve
Opening balance 10,694,676 8,752,676
Additions during the year 2,095,500 1,942,000
12,790,176 10,694,676
II. Capital Reserves
a) Revaluation Reserve
Opening balance 54,142 56,328
Deductions during the year 2,077 2,186
52,065 54,142
b) Others
Opening balance 1,656,193 1,602,176
Additions during the year 229,500 54,017
1,885,693 1,656,193
1,937,758 1,710,335
III. Share premium
Opening balance 24,755,856 24,755,856
Additions during the year 4,777
24,760,633 24,755,856
IV. Revenue and Other Reserves
a) Revenue Reserve
Opening Balance 11,206,341 10,217,541
Additions during the year 1,721,400 988,800
12,927,741 11,206,341
b) Investment Fluctuation Reserve
Opening Balance 1,897,200 1,897,200
Additions during the year
1,897,200 1,897,200
c) Special Reserve (As per section 36(1)(viii) of Income Tax Act)
Addition during the year 337,000 285,000
2,157,600 1,820,600
V. Contingency Reserve
301,003 301,003
VI. Balance in Profit and Loss Account 5,163,892 2,966,787
Total 61,936,003 55,352,798
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
68
Schedule: 5 OTHER LIABILITIES AND PROVISIONS
I. Bills Payable 302,265 205,190
II. Inter - office adjustments (Net) 1,856,540 1,636,847
III. Interest accrued 687,622 2,658,532
IV. Others (including provisions)* 15,984,169 12,922,321
Total 18,830,596 17,422,890
*Includes :-
(a) Contingent provision against standard assets 2,453,781 1,960,381
(b) Proposed Dividend 1,539,528 1,539,424
(c) Tax on Proposed Dividend 261,643 249,733
(d) Deferred Tax Liability (Net) 641,900
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 6 CASH AND BALANCES WITH RESERVE BANK OF INDIA
I. Cash in hand (including foreign currency notes) 5,288,505 3,958,443
II. Balance with Reserve Bank of India
i. in Current Accounts 22,136,456 20,283,023
ii. in Other Accounts
Total 27,424,961 24,241,466
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 4 BORROWINGS
I. Borrowings in India
i. Reserve Bank of India 3,300,000 900,000
ii. Other Banks # 322,000 582,000
iii. Other institutions and agencies ## 34,339,160 27,639,733
37,961,160 29,121,733
II. Borrowings outside India 13,908,748 13,288,608
Total 51,869,908 42,410,341
Secured borrowings included in I and II above 4,997,198 2,998,145
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
# Represents Subordinated Debt in the nature of Non Convertible debentures
## Borrowings from other Institutions and agencies include Subordinated Debt of `1,978,000 Thousands (Previous Year
` 2,478,000 Thousands) in the nature of Non Convertible Debentures
69
Schedule: 8 INVESTMENTS
I. Investments in India in :
i. Government Securities ## ** 145,750,543 115,312,413
ii. Other approved Securities
iii. Shares 2,564,217 1,907,292
iv. Debentures and Bonds 8,017,423 9,603,502
v. Subsidiaries/ Joint Ventures 3,980,000 3,959,200
vi. Others (Mutual Funds, Commercial Paper etc.) @ 51,233,726 43,242,470
Total 211,545,909 174,024,877
II. Investments outside India
Grand Total (I and II) 211,545,909 174,024,877
Gross Investments 211,691,397 174,538,545
Less: Depreciation/ Provision for Investments 145,488 513,668
Net Investments 211,545,909 174,024,877
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
## Includes securities costing `1,447,241 Thousands (previous year `1,478,176 Thousands) pledged for clearing facility and margin
requirements
@ Includes priority sector shortfall deposits ` 24997387 Thousands (previous year ` 20,433,228 Thousands)
** Net of Repo borrowing of ` 14,700,000 Thousands (previous year ` 26,250,000 Thousands) under the Liquidity Adjustment
Facility in line with the RBI requirements
Schedule: 7 BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I. In India
i. Balances with banks
a. in Current Accounts 1,004,261 400,902
b. in Other Deposit Accounts 5,885,600 4,231,800
ii. Money at call and short notice
a. With Banks 1,000,000
b. With other institutions 4,045,707
Total 6,889,861 9,678,409
II. Outside India
i. in Current Accounts 170,832 133,764
ii. in Other Deposit Accounts 2,714,250 1,271,875
iii. Money at call and short notice
Total 2,885,082 1,405,639

(in Thousands of `)
As at As at
31 March 2013 31 March 2012
70
Schedule: 9 ADVANCES (NET OF PROVISIONS)
A. i. Bills purchased and discounted 14,938,824 18,538,117
ii. Cash credits, overdrafts and loans repayable on demand 265,154,471 216,832,298
iii. Term loans 160,873,734 142,189,444
Total 440,967,029 377,559,859
B. i. Secured by tangible assets $ 340,827,603 262,781,389
ii. Covered by Bank/Government guarantees # 26,926,169 28,641,138
iii. Unsecured 73,213,257 86,137,332
Total 440,967,029 377,559,859
C. I. Advances in India
i. Priority Sector 114,956,971 121,884,584
ii. Public Sector 22,666,528 28,175,847
iii. Banks 29,641 44,636
iv. Others 303,313,889 227,454,792
Total 440,967,029 377,559,859
II. Advances outside India
Grand Total (C I and C II) 440,967,029 377,559,859
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
$ Includes Advances against book debts
# Includes advances against L/Cs issued by banks
Schedule: 10 FIXED ASSETS
I OWNED ASSETS
a. Premises #
Gross Block
At the beginning of the year 2,205,630 2,192,717
Deductions during the year
Closing Balance 2,231,549 2,205,630
Depreciation
As at the beginning of the year 568,870 507,890
Charge for the Year 59,145 60,980
Depreciation to date 628,015 568,870
Net Block 1,603,534 1,636,760
b. Other fixed assets (including furniture and fixtures)
Gross Block
Depreciation
As at the beginning of the year 3,055,661 2,629,022
Charge for the year 729,906 507,851
Depreciation to date 3,689,389 3,055,661
Net Block 2,367,378 1,620,798
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
71
Schedule: 10 FIXED ASSETS (Contd...)
II ASSETS GIVEN ON LEASE
Gross Block
At the beginning of the year 31,013 31,013
Additions during the year
Closing Balance 31,013 31,013
Depreciation
Charge for the year
Net Block 3,834 3,834
Total (I & II) 3,974,746 3,261,392
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
# Includes buildings constructed on leasehold land at different places having original cost of ` 655,216 Thousands and Written down
value of ` 549,014 Thousands with remaining lease period varying from 61 -73 years
Schedule: 11 OTHER ASSETS
I. Inter - office adjustments (net)
II. Interest accrued 4,273,812 3,995,024
III. Tax paid in advance/tax deducted at source (Net of provision) 5,673,810 6,204,886
IV. Stationery and Stamps 29,734 26,918
V. Non-banking assets acquired in satisfaction of claims 27,858 31,061
VI. Others @ 6,802,925 5,838,190
Total 16,808,139 16,096,079
@ Includes Deferred Tax Asset (Net) 1,253,900
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 12 CONTINGENT LIABILITIES
I. Claims against the Bank not acknowledged as debts 7,301,798 6,611,455
II. Liability on account of outstanding forward exchange contracts 245,319,772 304,316,064
III. Guarantees given on behalf of constituents - in India 36,966,166 35,336,490
IV. Acceptances, endorsements and other obligations 12,338,376 11,884,826
V. Other items for which the Bank is contingently liable 533,068 345,205
Total 302,459,180 358,494,040
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
72
Schedules forming part of Profit and Loss Account
Schedule: 14 OTHER INCOME
I. Commission, exchange and brokerage 3,046,834 2,515,690
II. Profit on sale of investments (Net) 2,057,560 820,706
III. Profit on revaluation of investments (Net)
IV. Profit on sale of land, buildings and other assets (Net) 1,908 3,316
V. Profit on foreign exchange transactions (Net) 793,960 842,086
VI. Income earned by way of dividends etc. from companies in India 58,874 51,246
VII. Miscellaneous income 685,262 1,090,388
[Includes Recoveries in assets written off ` 4812.13 lakh (previous year ` 8573.78 lakh)]
Total 6,644,398 5,323,432
(in Thousands of `)
For the year ended For the year ended
31 March 2013 31 March 2012
Schedule: 15 INTEREST EXPENDED
I. Interest on deposits 38,375,495 33,312,800
II. Interest on Reserve Bank of India/Inter bank borrowings 779,355 485,465
III. Others 2,774,273 2,251,586
Total 41,929,123 36,049,851
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 16 OPERATING EXPENSES
I. Payments to and provisions for employees 6,264,594 5,438,538
II. Rent, taxes and lighting 1,327,280 948,128
III. Printing and stationery 126,446 103,690
IV. Advertisement and publicity 126,921 160,510
V. Depreciation on Banks property 789,051 568,831
Less: Depreciation on revaluation of Premises transferred from Revaluation Reserve 2,077 2,186
786,974 566,645
VI. Directors fees, allowances and expenses 7,738 6,964
VII. Auditors fees and expenses (including branch auditors fees and expenses) 52,668 44,991
VIII. Law charges 57,931 49,644
IX. Postage, Telegrams, Telephones etc. 323,205 276,189
X. Repairs and maintenance 438,544 373,219
XI. Insurance 472,681 435,371
XII. Other expenditure 1,810,407 1,388,842
Total 11,795,389 9,792,731
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 13 INTEREST EARNED
I. Interest/discount on advances/bills 46,356,627 41,897,637
II. Income on investments 14,645,987 13,157,376
III. Interest on balances with Reserve Bank of India and other inter-bank funds 563,557 348,836
IV. Others 109,486 180,075
Total 61,675,657 55,583,924
(in Thousands of `)
31 March 2013 31 March 2012
73
Significant Accounting Policies
Schedule: 17 SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH, 2013
1 Background
The Federal Bank Limited (the Bank) was incorporated in 1931 as Travancore Federal Bank Limited to cater to the banking needs
of Travancore Province by a small group of local citizens. It embarked on a phase of sustained growth under the leadership of Late
K.P. Hormis. The Bank has a network of 1131 branches / offices in India and provides retail and corporate banking, para banking
activities such as debit card, third party product distribution, in addition to treasury and foreign exchange business. The bank is
governed by Banking Regulation Act, 1949 and other applicable Acts/ Regulations. The Banks shares are listed in the Bombay
Stock Exchange Limited, Cochin Stock Exchange Limited and National Stock Exchange of India Limited. The GDRs issued by the
Bank in 2006 have been listed on the London Stock Exchange.
2. Basis of preparation
The financial statements have been prepared and presented under the historical cost convention on accrual basis of accounting,
and comply with the generally accepted accounting principles, statutory requirements prescribed under the Banking Regulation
Act, 1949, the circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time and the Accounting Standards
notified under the Companies (Accounting Standards) Rules, 2006, to the extent applicable and current practices prevailing
within the banking industry in India.
3. Use of estimates
The preparation of the financial statements in conformity with the generally accepted accounting principles requires the
Management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses
and disclosure of contingent liabilities at the date of the financial statements. Actual results could differ from those estimates.
The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any
revisions to the accounting estimates are recognised prospectively in the current and future periods.
4. Significant accounting policies
4.1 Advances
Advances are classified into performing assets (Standard) and non-performing assets (NPAs) as per the RBI guidelines
and are stated net of specific provisions made towards NPAs and floating provisions. Further, NPAs are classified into sub-
standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for NPAs are made over and above
the minimum required as per the guidelines of the RBI on matters relating to prudential norms.
Advances shown in the Balance Sheet are net of (a) bills rediscounted and (b) provisions made for non performing advances.
Loss assets and unsecured portion of doubtful assets are provided / written off as per the RBI guidelines.
Amounts recovered against debts written off are recognised in the profit and loss account.
For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which requires
the diminution in the fair value of the assets to be provided at the time of restructuring.
A general provision for standard advances is made @ 0.25% in case of direct advances to agricultural and SME sectors, 1 %
in respect of advances classified as commercial real estate, 2.75 % in respect of certain class of restructured assets and 0.40%
for all other advances as prescribed by the RBI.
4.2 Country risk
In addition to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant,
low, moderate, high, very high, restricted and off-credit and provision is made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal
provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1 % of
the total funded assets, no provision is maintained on such country exposure.
4.3 Investments
Classification
In accordance with the RBI guidelines, investments are categorised into Held for Trading (HFT), Available for Sale (AFS)
and Held to Maturity (HTM) and further classified under six groups, viz. Government Securities, Other Approved Securities,
Shares, Debentures and Bonds, Subsidiaries / joint ventures and other investments for the purposes of disclosure in the
Balance Sheet.
a) Investments which are held for sale within 90 days from the date of purchase are classified as Held for Trading.
b) Investments which the bank intends to hold till maturity are classified as Held to Maturity.
c) Investments which are not classified in either of the above two categories are classified as Available for Sale.
74
Schedule: 17 SIGNIFICANT ACCOUNTING POLICIES FOR THE YEAR ENDED 31 MARCH, 2013 (Contd...)
Acquisition Cost
Transaction costs including brokerage and commission pertaining to acquisition of investments are charged to the Profit
and Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
Valuation
The valuation of investments is made in accordance with the RBI Guidelines:
a) Held for Trading/Available for Sale Each security in this category is valued at the market price or fair value and the net
depreciation of each group is recognised in the Profit and Loss account. Net appreciation, if any, is ignored.
The market value of investments where current quotations are not available is determined as per the norms prescribed
by RBI.
b) Held to Maturity These are carried at their acquisition cost. Any premium on acquisition of government securities are
amortised over the remaining maturity period of the security. Any diminution, other than temporary, in the value of
such securities is provided for.
c) Repurchase and reverse repurchase transactions These are accounted as outright sale and outright purchase
respectively. The difference between the clean price of the first leg and the clean price of the second leg is recognised
as interest income / interest expense over the period of the transaction. However, depreciation in their value, if any,
compared to their original cost, is provided for.
d) In respect of securities included in any of the three categories of investments where interest / principal is in arrears, for
more than 90 days, income thereon is not reckoned and appropriate provision for the depreciation in the value of the
investments is made, as per prudential norms applicable to non-performing investments. Debentures / Bonds in the
nature of advances are subjected to usual prudential norms applicable to advances.
e) Market value of investments where current quotations are not available, is determined as per the norms prescribed by
the RBI as under:
in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e. not
overdue beyond 90 days), the market price is derived based on the YTM for Government Securities as published by
Fixed Income Money Market and Derivatives Association of India (FIMMDA) / Primary Dealers Association of India
(PDAI) and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit
risk mark-up for each categories and credit ratings along with residual maturity issued by FIMMDA is adopted for this
purpose;
in case of bonds and debentures (including Pass Through Certificates) where interest is not received regularly (i.e.
overdue beyond 90 days), the valuation is in accordance with prudential norms for provisioning as prescribed by RBI;
equity shares, for which current quotations are not available or where the shares are not quoted on the stock
exchanges, are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from
the companys latest Balance Sheet. In case the latest Balance Sheet is not available, the shares are valued at ` 1 per
company;
Units of Venture Capital Funds (VCF) held under AFS category where current quotations are not available are marked
to market based on the Net Asset Value (NAV) shown by VCF as per the latest audited financials of the fund. In case
the audited financials are not available for a period beyond 18 months, the investments are valued at ` 1 per VCF.
Investment in unquoted VCF after 23rd August, 2006 are categorised under HTM category for the initial period of
three years and valued at cost as per RBI guidelines;
Investment in security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Reconstruction
Company /Securitisation Company.
Investments in subsidiaries/associates are categorised as HTM and assessed for impairment to determine permanent
diminution, if any, in accordance with the RBI guidelines.
All investments are accounted for on settlement dates except investments in equity shares which are accounted for on trade
date as the corporate actions are effected in equity on the trade date.
Transfer between Categories
Transfer between categories is done at the lower of the acquisition cost / book value / market value on the date of the
transfer and the depreciation, if any, on such transfer is fully provided for.
75
Profit or Loss on Sale / Redemption of Investments
a) Held for Trading and Available for Sale Profit or loss on sale / redemption is included in the Profit and Loss account.
b) Held to Maturity Profit or loss on sale / redemption of investments is included in the Profit and Loss account. In case
of profits, the same is appropriated to Capital Reserve after adjustments for tax and transfer to statutory reserve in
accordance with RBI guidelines.
Repo and Reverse Repo Transactions
In respect of Repo transactions under Liquidity Adjustment Facility (LAF) with RBI, monies borrowed from RBI are credited
to investment account and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense.
In respect of Reverse Repo transactions under LAF, monies paid to RBI are debited to investment account and reversed on
maturity of the transaction. Revenues thereon are accounted as interest income.
4.4 Foreign currency transactions
Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction.
Monetary foreign currency assets and liabilities are translated at the Balance Sheet date at rates notified by Foreign Exchange
Dealers Association of India (FEDAI). All profits/losses resulting from year end revaluations are recognised in the Profit and
Loss Account.
Outstanding forward exchange contracts including currency swaps undertaken to hedge foreign currency assets/ liabilities,
funding swaps and spot exchange contracts are revalued at quarter end exchange rates notified by FEDAI for specified
maturities and at interpolated rates for contracts of interim maturities The resulting gains or losses on revaluation are
included in the Profit and Loss Account in accordance with RBI/FEDAI guidelines. The forward exchange contracts of longer
maturities where exchange rates are not notified by FEDAI are revalued at the forward exchange rates implied by the swap
curves in respective currencies. The resultant gains or losses are recognised in the Profit and Loss Account.
Currency futures contracts are marked to market using daily settlement price on a trading day, which is the closing price
of the respective futures contracts on that day. While the daily settlement price is computed based on the last half an hour
weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day
of the futures contract or as may be specified by the relevant authority from time to time. All open positions are marked to
market based on the settlement price and the resultant marked to market profit/loss is daily settled with the exchange.
Contingent liabilities on account of foreign exchange contracts, guarantees, acceptances, endorsements and other obligations
denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.
4.5 Derivative transactions
The Bank recognises all derivative contracts at the fair value, on the date on which the derivative contracts are entered into
and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classified as contingent Assets/
Liabilities. In respect of derivative contracts that are marked to market, negative market value is recognised in the Statement
of Profit and Loss in the relevant period. Contingent liabilities on account of derivative contracts denominated in foreign
currencies are reported at closing rates of exchange notified by FEDAI at the Balance Sheet date.
4.6 Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation and impairment, if any. Cost includes freight,
duties, taxes and incidental expenses related to the acquisition and installation of the asset.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances
paid to acquire fixed assets.
Premises which were revalued are stated at such values on revaluation and the appreciation credited to the Revaluation
Reserve.
Depreciation is provided on the written down value from the date of addition at the rates prescribed in Schedule XIV to the
Companies Act, 1956 except in the following cases where higher rate of depreciation has been provided on a straight line
basis.
Asset Rate of Depreciation
Computers and Accessories, Mobile Phones, EPABX 33.33%
Software Expenditure 33.33%
Improvements to leased premises 20.00%
76
Depreciation on assets revalued has been charged on their written-down value including the addition made on revaluation,
and an equivalent amount towards the additional depreciation provided consequent upon revaluation has been transferred
from the Revaluation Reserve to the Profit and Loss Account.
All fixed assets individually costing less than ` 5,000 are fully depreciated in the year of installation.
Depreciation on assets sold during the year is recognised on a pro-rata basis till the date of sale.
4.7 Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain if there is any indication of impairment
based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
4.8 Non-Banking Assets
Non-Banking assets acquired in settlement of debts /dues are accounted at the lower of their cost of acquisition or net
realisable value.
4.9 Cash and Cash Equivalents
Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks /
institutions and money at call and short notice (including the effect of changes in exchange rates on cash and cash equivalents
in foreign currency).
4.10 Revenue Recognition
Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on
receipt in accordance with AS-9, Revenue Recognition as notified under the Companies (Accounting Standards) Rules, 2006
and the RBI guidelines.
Guarantee commission, commission on letter of credit and annual locker rent fees are recognised on a straight line basis
over the period of contract. Other fees and commission income are recognised when due, except in cases where the bank is
uncertain of ultimate collection.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain or loss arising on sale of NPAs is accounted as per the guidelines prescribed by the RBI, which require provisions to be
made for any deficit (where sale price is lower than the net book value), while surplus (where sale price is higher than the net
book value) is ignored.
Loan Syndication fee is accounted for on completion of the agreed service and when right to receive is established.
Unpaid funded interest on term loans are accounted on realisation as per the guidelines of RBI.
The bank imports gold coins on a consignment basis for selling to its customers. The difference between the sale price to
customers and cost of purchase is included in other income.
4.11 Finance Lease
Accounting Standard on Leases (AS19) issued by the Institute of Chartered Accountants of India (ICAI) is applicable to leases
entered into on or after 1st April 2001. Since all the Banks outstanding finance lease transactions were entered into prior to
that date, the Bank has followed the earlier ICAI guidelines in respect of these leases.
Depreciation on non-performing leased assets (NPAs) is provided on written-down value as per the Companies Act 1956,
by directly charging to Profit & Loss Account without any corresponding adjustment in the Lease Adjustment Account. In
addition to depreciation, provision is also made for non-performing leased assets as per RBI guidelines.
4.12 Retirement and other employee benefits
a) Provident Fund
The contribution made by the bank to The Federal Bank Employees Provident Fund, administered by the trustees is
charged to Profit and Loss account.
b) Pension Fund
The contribution towards The Federal Bank Employees Pension Fund, managed by trustees, is determined on actuarial
basis on projected unit credit method as on the Balance Sheet date and is recognised in the accounts. However,
77
the liability arising on account of re-opening of pension option to existing employees who had joined prior to 29th
September 1995 and not exercised the option earlier, is amortised over a period of five years commencing from the
financial year 2010-11 as permitted by the Reserve Bank of India.
Employees who had joined the services of the Bank with effect from April 01, 2010 are covered under Defined
Contributory Pension Scheme (DCPS). In respect of such employees the bank contributes 10% of the Basic Pay plus
Dearness Allowance and the expenditure thereof is charged to Profit and Loss account.
c) Gratuity
The bank makes annual contribution to The Federal Bank Employees Gratuity Trust Fund administered and managed by
the Trustees. The cost of providing such benefits is determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in the Statement of
Profit and Loss in the period in which they occur. The retirement benefit obligation recognised in the Balance Sheet
represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced
by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions to the schemes.
d) Compensation for absence on Privilege / Sick / Casual Leave and Leave Travel Concession (LTC)
The employees of the bank are entitled to compensated absence on account of privilege / sick / casual leave as per
the leave rules. The bank measures the long term expected cost of compensated absence as a result of the unused
entitlement that has accumulated at the balance sheet date based on actuarial valuation and such costs are recognised
in the accounts.
The employees are also eligible for LTC as per the rules. The estimated cost of unused entitlement as on the Balance
Sheet date based on actuarial valuation is provided for.
4.13 Debit card reward points
Provision for probable redemption of debit card reward points is made on an estimated basis.
4.14 Employee Stock Option Scheme
The Bank has formulated Employee Stock Option Scheme (ESOS) 2010 in accordance with Securities and Exchange Board of
India (Employee Stock Option Scheme) Guidelines, 1999. The Scheme provides for grant of options to Employees of the Bank
to acquire Equity Shares of the Bank that vest in a graded manner and that are to be exercised within a specified period. In
accordance with the SEBI Guidelines and the guidance note on Accounting for Employee Share based payments issued by
the ICAI, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOS over the
exercise price of the option is amortised on a straight line basis over the vesting period.
4.15 Taxation
Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are determined
in accordance with the Income tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet date.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by same
governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient
future taxable income will be available against which such deferred tax assets can be realised. The impact of changes in the
deferred tax assets and liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon the Managements judgement as to
whether realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed
depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realised against future profits.
4.16 Segment Reporting
Business Segments have been identified and reported taking into account, the target customer profile, the nature of product
and services, the differing risks and returns, the organization structure, the internal business reporting system and guidelines
issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;
a) Treasury
The treasury services segment primarily consists of interest earnings on investments portfolio of the bank, gains or losses
78
on investment operations and earnings from foreign exchange business. The principal expenses of the segment consist
of interest expense on funds borrowed and other expenses.
b) Corporate / Whole Sale Banking
The Corporate / Whole sale Banking segment provides loans and other banking services to segment identified on
the basis of RBI guidelines. Revenues of this segment consist of interest earned on exposure exceeding ` 5 Crore per
customer and the charges / fees earned from other banking services to these customers. The principal expenses of the
segment consist of interest expense on funds borrowed and other expenses.
c) Retail Banking
The Retail Banking segment provides loans and other banking services to customers other than Corporate / Whole Sale
Banking customers, identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on
Loans made to such customers and the charges / fees earned from other banking services from them. The principal
expenses of the segment consist of interest expense on funds borrowed and other expenses.
d) Other Banking Operations
This segment includes income from para banking activities such as debit cards, third party product distribution and
associated costs.
Geographic Segment
The Bank operates only in India.
4.17 Earnings per Share
The Bank reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, as notified by the
Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by dividing the net profit after tax by
the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares
were converted or exercised during the year. Diluted earnings per share is computed using the weighted average number of
equity shares and dilutive potential equity shares outstanding at the year end.
4.18 Provisions, contingent liabilities and contingent assets
A provision is recognised when the Bank has a present obligation as a result of past event where it is probable that an
outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions
are not discounted to its present value and are determined based on best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence
of one or more uncertain future events not within the control of the Bank; or
a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources
will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if
it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period
in which the change occurs.
4.19 Service tax input credit
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and
when there is no uncertainty in availing / utilising the credits.
4.20 Net Profit
The net profit disclosed in the Profit and Loss Account is after considering the following:
(a) provision/ Write off of Non Performing Assets as per the norms prescribed by RBI;
(b) Provision for Taxes;
(c) Depreciation/ Write off of Investments; and
(d) Other usual, necessary and mandatory provisions, if any
79
Notes forming part of the Financial Statements
Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 MARCH, 2013
1. Disclosures as per RBIs Master Circular on Disclosure in Financial Statements
1.1. Capital Adequacy Ratios
The Banks Capital Adequacy Ratios calculated in accordance with the RBI guidelines are as follows:
The computation of CRAR as per Basel II is compiled by the management and relied upon by the Auditors.
Tier I Capital 6,139.06 5,949.34 5,605.91 5,416.18
Tier II Capital 278.72 468.44 275.47 465.20
Total Capital 6,417.78 6,417.78 5,881.38 5,881.38
Total Risk Weighted Assets and Contingencies 43,559.63 49,045.63 35,353.10 42,518.80
Capital Ratios
i) Capital to Risk Assets Ratio (CRAR) -
Tier I Capital (%) 14.09 12.13 15.86 12.74
ii) CRAR - Tier II Capital (%) 0.64 0.96 0.78 1.09
iii) CRAR (%) 14.73 13.09 16.64 13.83
iv) Percentage of the shareholding of the
Government of India in nationalized banks Nil Nil Nil Nil
v) Amount of subordinated Debt raised
as Tier II capital (` Crore) Nil Nil Nil Nil
vi) Amount raised by issue of IPDI (` Crore) Nil Nil Nil Nil
vii) Amount raised by issue of Upper
Tier-II Instruments (` Crore) Nil Nil Nil Nil
(` in Crore)
31 March 2013 31 March 2012
Particulars Basel II Basel I Basel II Basel I
1.2. The Key business ratios and other information:
(i) Interest Income as a percentage to Working Funds* (%) 9.93 10.09
(ii) Non-interest income as a percentage to Working Funds* (%) 1.07 0.97
(iii) Operating Profit as a percentage to Working Funds* (%) 2.35 2.73
(iv) Return on Assets [ Based on Working Fund] *(%) 1.35 1.41
(v) Business (Deposits less inter-bank deposits plus
advances) per employee (` Crore)** 10.75 10.11
(vi) Profit per employee (` Crore)** 0.09 0.09
As at As at
Particulars 31 March 2013 31 March 2012
* Working Funds represent average of total assets as reported to RBI in Form X under Section27 of the Banking Regulation
Act, 1949 during the year.
** Productivity ratios are based on average employee numbers for the year.
1.3. Provisions and Contingencies recognised in the Profit and Loss Account include:
i) Provision towards NPAs (net) 189.28 221.77
ii) Provision for Depreciation in Value of Investments (Net) (41.49) 34.86
iii) Provision for Non - Performing Investments 4.67
iv) Provision for Standard Assets 49.34 36.45
v) Provision for Taxation :
Current Tax 514.81 305.90
Deferred tax (159.22) 86.81
vi) Provision towards Present Value of sacrifice on restructuring, expected
Wage Revision, other contingencies etc. 64.00 43.89
Total 621.39 729.68
For the year ended / As at 31 March 2013 31 March 2012
(` in Crore)
80
Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS (Contd...)
1.4. Investments
1.4.1. Details of Investments:
1.4.2. a) Investments under HTM (excluding specified investments as per RBI norms) account for 23.84% (previous year
24.95%) of demand and time liabilities as at the end of March 2013 as against permitted ceiling of 25% stipulated
by RBI.
b) In respect of securities held under HTM category premium of `22.10 Crore (previous year : `22.13 Crore) has
been amortised during the year and debited under interest received on Government securities.
c) Profit on sale of securities from HTM category amounting to `45.30 Crore (previous year : `10.66 Crore) has been
taken to Profit and Loss Account. During the year, the Bank has appropriated ` 22.95 Crore (previous year ` 5.40
Crore), net of taxes, to the Capital Reserve, being the gain on sale of HTM investments in accordance with RBI
guidelines.
(1) Value of Investments
(i) Gross Value of Investments
(a) In India 21,169.14 17,453.85
(b) Outside India
(ii) Provisions for Depreciation
(a) In India 9.88 51.37
(b) Outside India
(iii) Provisions for Non-Performing Investments
(a) In India 4.67
(b) Outside India
(iv) Net Value of Investments
(a) In India 21,154.59 17,402.48
(b) Outside India
(2) Movement of provision held towards depreciation on Investments.
(i) Opening balance 51.37 16.50
(ii) Add: Provisions made during the year 51.37
(iii) Less: Write-off/ write-back of excess provisions during the year 41.49 16.50
(iv) Closing balance 9.88 51.37
(3) Movement of provision for Non Performing Investments (NPI)
(i) Opening Balance
(ii) Add: Provision made during the year 4.67
(iii) Less: Write off/ Write back of excess provisions during the year
(iv) Closing Balance 4.67
(` in Crore)
1.4.3. Repo Transactions
Details of securities sold/purchased (in face value terms) during the years ended 31st March, 2013 and 31st March,
2012 under repos/reverse repos (excluding LAF transactions):
A) Securities sold under REPOs
i) Government Securities 2400 319.53 1400
() (2500.00) (356.15) (2500.00)
ii) Corporate Debt Securities
() () () ()
Securities purchased under REVERSE REPOs
i) Government Securities
() (1000.00) (10.11) ()
() () () ()
(` in Crore)
Outstanding during the year Outstanding
Particulars Minimum Maximum Daily Average as on 31/03/2013
81
1.4.3. Repo Transactions (contd...)
(Previous years figures are given in brackets)
B) Securities sold under Market REPOs
() () () ()
() () () ()
Securities purchased under
REVERSE Market REPOs
() () () ()
() () () ()
(` in Crore)
Outstanding during the year Outstanding
Particulars Minimum Maximum Daily Average as on 31/03/2013
1.4.4. Details of Non-SLR investment portfolio
a) Issuer composition as at 31 March, 2013 of non-SLR investments
1 Public Sector Units 73.80 52.00
(80.93) (68.00) () () ()
2 Financial Institutions 51.02 50.50
(73.29) (50.50) () () ()
3 Banks 2651.41 89.68
(1309.82) (69.68) () () ()
4 Private Corporates 810.41 525.93 27.86 11.46 78.45
(1932.66) (601.56) () (6.72) (74.21)
5 Subsidiaries/ Joint ventures 398.00 398.00 398.00
(398.00) (398.00) () () (398.00)
6 Others 2602.21 99.72
(2092.86) (46.01) () () ()
7 Less: Provision held 7.85 xx xx xx xx
towards depreciation (16.31)
Total 6579.00 1215.83 27.86 11.46 476.45
(5871.25) (1233.75) () (6.72) (472.21)
(` in Crore)
Sl. Issuer Amount Extent of Extent of below Extent of Extent of
No. private investment unrated unlisted
placement grade securities securities Securities
** ***
(1) (2) (3) (4) (5) (6) (7)
(Previous years figures are given in brackets)
Amount reported under column (4), (5), (6) and (7) above are not mutually exclusive
** Excluding Investments in Shares `262.98 Crore (Previous Year ` 193.42 Crore)
*** Excluding Investments in Pass through Certificates `7.70 Crore (Previous Year ` 0.17 Crore)
82
b) Non-SLR investments category-wise:
Shares 256.42 190.73
Debentures and Bonds 801.74 960.35
Subsidiaries / Joint Ventures 398.00 395.92
Others 5122.84 4324.25
Total 6579.00 5871.25
(` in Crore)
Opening Balance
Additions during the year 4.67
Reductions during the year
Closing Balance 4.67
Total Provisions held 4.67
(` in Crore)
c) Non-performing Non-SLR investments
1.4.5. Sale and transfers to/ from HTM Category
During the current year, the value of sales/transfers of securities to/from HTM category (excluding one-time transfer
of securities and sales to RBI under OMO auctions) was within 5% of the book value of investments held in HTM
category at the beginning of the year.
1.5. Derivatives
Disclosure in respect of Outstanding Interest Rate Swaps (IRS) and Forward Rate Agreement (FRA)
1.5.1 Exchange Traded Interest Rate Derivatives:
(i) Notional principal amount of exchange traded interest rate
derivatives undertaken during the year (instrument-wise) Nil Nil
(ii) Notional principal amount of exchange traded interest rate
derivatives outstanding as on 31st March 2013 Nil Nil
(iii) Notional principal amount of exchange traded interest rate
derivatives outstanding and not highly effective Nil Nil
(iv) Mark-to-market value of exchange traded interest rate
derivatives outstanding and not highly effective Nil Nil
Sl No. Particulars 31 March 2013 31 March 2012
(` in Crore)
1.5.2 Forward Rate Agreement (FRA)/ Interest Rate Swap (IRS)
i) The notional principal of swap agreements 1250.00 1075.00
ii) Losses which would be incurred if counter parties failed
to fulfil their obligations under the agreements 4.94 22.80
iii) Collateral required by the bank upon entering into swaps Nil Nil
iv) Concentration of credit risk arising from the swaps Nil Nil
v) The fair value of the swap book 0.67 0.22
Sl No. Particulars 31 March 2013 31 March 2012
(` in Crore)
The nature and terms of the IRS as on 31 March, 2013 are set out below:
(` in Crore)
Nature Nos. Notional Principal Benchmark Terms
Hedging
Trading 25 625 NSE MIBOR Fixed payable v/s floating receivable
Trading 25 625 NSE MIBOR Fixed Receivable/floating payable
83
The nature and terms of the IRS as on 31 March, 2012 are set out below:
(` in Crore)
Nature Nos. Notional Principal Benchmark Terms
Hedging
Trading 21 525 NSE MIBOR Fixed payable v/s floating receivable
Trading 22 550 NSE MIBOR Fixed Receivable/floating payable
1.5.3. Disclosure on Risk exposure in Derivatives
a) Qualitative Disclosures
Structure, organization, scope and nature of management of risk in derivatives etc.
The Treasury Department is organised into three functional areas, ie, front office, mid office and back office
under the charge of Assistant General Managers with overall supervision and control by President Treasury.
Derivative deals are generally executed for market making. Although fresh derivative deals are not undertaken,
the outstanding position of earlier years is managed by the back office.
The risk in the derivatives is monitored regularly by assessing marked to market position (MTM) of the entire
portfolio and the impact on account of the probable market movements. Various risk limits have been put in
place under different segments of the derivatives, as approved by Board. The risk profile of the outstanding
portfolio is reviewed by the Board at regular intervals. The current outstanding under the derivatives portfolio
were executed for trading purposes.
Accounting:
Board Approved Accounting Policies as per RBI guidelines have been adopted. The swaps are marked to market
every month and the MTM losses in the basket are accounted in the books while MTM profits are ignored.
Collateral Security:
As per market practice, no collateral security is insisted on for the contracts with counter parties like Banks/Primary
Dealers (PDs) etc. For deals with Corporate Clients, appropriate collateral security/margin etc. are stipulated
wherever considered necessary.
Credit Risk Mitigation:
Most of the deals have been contracted with Banks/ Major PDs and no default risk is anticipated on the deals with
them. No derivative contracts are done for other clients as of now.
b) Quantitative Disclosures
(i) Derivatives (Notional Principal Amount)
a) For hedging
b) For trading 1250
(ii) Marked to Market positions (1)
a) Asset (+) 4.94
b) Liabilities (-) 4.27
(iii) Credit Exposure (2) 17.44
(iv) Likely impact of one percentage change in interest rate (100*PV01)
a) on hedging derivatives
b) on trading derivatives 0.003
(v) Maximum and Minimum of 100*PV01 observed during the year
a) on hedging
b) on trading Max 0.017
Min 0.003
Sl. As at 31 March 2013
Currency Interest rate
No. Particulars Derivatives Derivatives
(` in Crore)
84
1.6. Asset Quality
1.6.1 Net non-performing assets
Net non-performing assets as a percentage of net advances. 0.98 0.53
(%)
Gross NPAs as on 1st April (Opening Balance) 1,300.83 1,148.33
Additions (Fresh NPAs) during the year 807.00 695.31
Sub total (A) 2,107.83 1,843.64
Less:
(i) Upgradations 159.08 75.68
(ii) Recoveries (excluding recoveries made from upgraded accounts) 224.06 305.67
(iii) Write offs 11.47 108.35
(iv) Reduction by Sale of Assets to ARCs 159.21 53.11
Sub-total (B) 553.82 542.81
Gross NPAs as on 31 March (Closing Balance) 1,554.01 1,300.83
(` in Crore)
1.6.2 Movement in gross non-performing assets
Opening Balance at the beginning of the year 199.00 190.69
Additions during the year 605.67 439.26
Reductions during the year 372.73 430.95
Closing Balance at the end of the year 431.94 199.00
(` in Crore)
1.6.3 Movement in net non-performing assets
b) Quantitative Disclosures (Contd...)
(i) Derivatives (Notional Principal Amount)
a) For hedging 206.04
b) For trading 1075
(ii) Marked to Market positions (1)
a) Asset (+) 22.93 8.59
b) Liabilities (-) 8.37
(iii) Credit Exposure (2) 23.96 10.75
(iv) Likely impact of one percentage change in interest rate (100*PV01)
a) on hedging derivatives 0.01
b) on trading derivatives (0.01)
(v) Maximum and Minimum of 100*PV01 observed during the year
a) on hedging Max 0 .012
Min 0.010
b) on trading Max 0.06
Min 0.01
Sl. As at 31 March 2012
Currency Interest rate
No. Particulars Derivatives Derivatives
(` in Crore)
85
(a) Opening Balance 196.04 159.59
(b) Addition/Adjustments during the year 49.34 36.45
(c) Deduction during the year
(d) Closing Balance 245.38 196.04
Particulars 2012-13 2011-12
(` in Crore)
1.6.8 Movement of Provision on Standard Assets
Provision for Income Tax
a) Current Tax for the year 514.81 305.90
b) Deferred Tax for the year (159.22) 86.81
(` in Crore)
1.6.9 Amount of Provisions made for income-tax during the year
Opening Balance 1,055.33 942.34
Closing Balance 1,097.87 1,055.33
(` in Crore)
1.6.5 Sector wise Non-performing Assets
Above information is provided as per the internal classification by management and has been relied upon by the auditors.
1 Agriculture and allied Activities 3.11% 3.42%
2 Industry (Micro and Small, Medium and Large) 6.59% 6.97%
3 Services 6.99% 4.10%
4 Personal loans 23.31% 14.13%
Percentage of NPAs to Total
Sl. Advances in that Sector
No. Sector 31 March, 2013 31 March, 2012
1.6.6 Movement in floating provision:
(a) Opening Balance 38.00 38.00 179.52 179.52
(b) Additional provision for the year Nil Nil Nil Nil
(c) Draw down during the year Nil Nil Nil Nil
(d) Closing Balance 38.00 38.00 179.52 179.52
(` in Crore)
Standard Assets NPA Provision
Particulars 2012-13 2011-12 2012-13 2011-12
1.6.7 The Provisioning coverage ratio of the bank computed in terms of the RBI Guidelines as on 31 March, 2013 was
80.96% (Previous Year 88.85%).
1.6.4 Movement in provisions for non-performing assets
86
1.6.10 Particulars of Accounts Restructured
Details of loan assets subjected to restructuring during the year ended 31 March, 2013:
Asset Classification Standard Sub- Doubtful Loss Total Standard Sub- Doubtful Loss Total
Standard Standard
(` in Crore)
Type of Restructuring Under CDR Mechanism Under SME Debt Restructuring Mechanism
Restructured No. of borrowers 5 2 1 0 8 77 22 90 14 203
accounts as on Amount
April 1 of the Outstanding
FY (Opening (a)Restructured
Balance) facility 96.35 68.51 31.56 0 196.42 139.57 39.04 82.32 9.55 270.48
b)Other Facility 5.66 5.66 3.15 0.35 3.50
Provision thereon 31.75 12.37 7.26 0 51.38 6.01 0.85 5.77 0.14 12.77
Fresh Restructuring No. of borrowers 7 1 0 0 8 14 1 0 0 15
during the year Amount
Outstanding
(a)Restructured
facility 207.49 35.62 0 0 243.11 83.92 2.6 0 0 86.52
b)Other Facility 14.68 14.68 12.65 0.64 13.29
Provision thereon 16.98 5.40 0 0 22.38 3.44 0.19 0 0 3.63
Upgradation to No. of borrowers 1 0 0 0 1 0 0 0 0 0
restructured Amount
standard category Outstanding
during the FY (a)Restructured
facility 44.08 0 0 0 44.08 0 0 0 0 0
b)Other Facility 2.70 2.70
Provision thereon 10.18 0 0 0 10.18 0 0 0 0 0
Restructured No. of borrowers 0 0 10 10
Standard Advances Amount
which cease to Outstanding
attract higher (a)Restructured
provisioning and/ facility 0 0 15.30 15.30
or additional risk b)Other Facility
weight at the end Provision thereon 0 0.82 0.82
of FY
Downgradation of No. of borrowers 0 0 1 0 1 0 14 0 0 14
restructured Amount
accounts during Outstanding
the FY (a) Restructured
facility 0 0 32.30 0 32.30 0 17.82 0 0 17.82
b)Other Facility 8.74 8.74
Provision thereon 0 2.19 2.19 0.88 0.88
Write-offs of No. of borrowers 0 0 0 0 0 0 0 9 0 9
restructured Amount
the FY (a)Restructured
facility 0 0 0 0 0 0 0 27.50 0 27.50
b)Other Facility
Provision thereon 0 0.57 0.57
March 31 of the Outstanding
FY (closing figures) (a)Restructured
facility 337.64 35.62 70.78 0 444.04 201.48 17.82 76.31 10.13 305.74
b)Other Facility 65.94 17.54 83.48 90.81 6.76 28.27 5.27 131.11
Provision thereon 36.89 5.40 2.59 0 44.88 9.78 0.56 4.26 0.08 14.68
87
Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENS Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENTS (Contd...)
1.6.10 Particulars of Accounts Restructured
Details of loan assets subjected to restructuring during the year ended 31 March, 2013:
Asset Classification Standard Sub- Doubtful Loss Total Standard Sub- Doubtful Loss Total
Standard Standard
(` in Crore)
Type of Restructuring Others Total
April 1 of the FY Outstanding
(Opening Balance) (a)Restructured
facility 1100.35 31.74 187.42 20.19 1339.70 1336.27 139.29 301.30 29.74 1806.60
b)Other Facility 72.92 11.73 84.65 76.07 17.74 93.81
Provision thereon 22.62 0.53 2.04 4.95 30.14 60.38 13.75 15.07 5.09 94.29
Fresh Restructuring No. of borrowers 81 5 0 0 86 102 7 0 0 109
during the year Amount
Outstanding
(a)Restructured
facility 525.76 4.66 0 0 530.42 817.17 42.88 0 0 860.05
b)Other Facility 75.42 20.69 96.11 102.75 21.33 124.08
Provision thereon 67.66 2.96 0 0 70.62 88.08 8.55 0 0 96.63
Upgradation to No. of borrowers 17 0 0 0 17 18 0 0 0 18
restructured Amount
standard category Outstanding
during the FY (a)Restructured
facility 3.71 0 0 0 3.71 47.79 0 0 0 47.79
b)Other Facility 0.06 0.06 2.76 2.76
Provision thereon 0.05 0 0 0 0.05 10.23 0 0 0 10.23
Restructured No. of borrowers 66 66 76 76
Standard Advances Amount
which cease to Outstanding
attract higher (a)Restructured
provisioning and/ facility 30.66 30.66 45.96 45.96
or additional risk b)Other Facility 1.32 1.32 1.32 1.32
weight at the Provision thereon 0.28 0.28 1.10 1.10
end of FY
Downgradation No. of borrowers 0 40 2 13 55 0 54 3 13 70
of restructured Amount
facility 0 7.29 0.32 99.82 107.43 0 25.11 32.62 99.82 157.55
b)Other Facility 1.17 1.17 9.91 9.91
Provision thereon 0 0.23 0.02 4.92 5.17 0 1.11 2.21 4.92 8.24
Write-offs of No. of borrowers 0 0 15 26 41 0 0 24 26 50
restructured Amount
facility 0 0 17.11 0.02 17.13 0 0 44.61 0.02 44.63
b)Other Facility
Provision thereon 0 0 0.32 0 0.32 0 0 0.89 0 0.89
March 31 of the Outstanding
FY (closing figures) (a)Restructured
facility 1416.25 7.44 67.14 167.98 1658.81 1955.37 60.88 214.23 178.11 2408.59
b)Other Facility 397.04 1.19 22.07 14.78 435.08 553.79 7.95 67.88 20.05 649.67
Provision thereon 111.73 0.36 0.7 0.18 112.97 158.40 6.32 7.55 0.26 172.53
Note: This note is given for the first time. Hence previous years numbers are not furnished.
88
(a) No of accounts 201 20
(b) Aggregate value (net of provisions) of accounts sold to SC/RC 113.92 36.43
(c) Aggregate consideration 238.91 64.95
(d) Additional consideration realised in respect of accounts transferred in earlier years 19.95
(e) Aggregate gain/(loss) over net book value 144.94 28.52
(` in Crore)
1.6.11 Details of financial assets sold to Securitisation / Reconstruction companies for Asset Reconstruction:
1. No of Accounts sold
2. Aggregate outstanding NIL NIL
3. Aggregate consideration received
(` in Crore)
B. Details of non-performing financial assets sold:
1. (a) No. of accounts purchased during the year
(b) Aggregate outstanding NIL NIL
2. (a) Of these, number of accounts restructured during the year
(b) Aggregate outstanding
(` in Crore)
1.6.12 Details of non-performing financial assets purchased / sold
A. Details of non-performing financial assets purchased:
1.6.13 There are no advances as on 31 March, 2013 (previous year: Nil) for which intangible securities have been taken as
collateral by the Bank.
1.7. Asset Liability Management
A maturity pattern of certain items of assets and liabilities at 31 March, 2013 and 31 March, 2012 is set out below:
Year ended 31 March, 2013
Day 1 193.84 3027.91 34.95 100.59 141.19
2 -7 days 797.93 204.22 1862.71 517.18 330.17 13.43
8-14 days 884.80 319.66 194.65 6.16 1.01 9.44
15-28 days 1741.80 1057.32 532.65 330.00 1.82 10.10
29 days to 3 months 6988.50 3160.31 2665.02 580.85 62.60 704.49
Over 3 months and upto 6 months 6682.26 3372.79 1564.80 841.00 432.80 549.55
Over 6 months and upto 1 Year 13351.63 5991.87 3279.57 765.00 96.52 671.87
Over 1 Year and upto 3 Years 24201.02 18224.94 4819.13 1526.74 121.65 243.52
Over 3 Years and upto 5 Years 1667.13 3341.97 743.40 620.06 51.63 92.27
Over 5 Years 1105.95 5395.71 5457.71 42.84
Total 57614.86 44096.70 21154.59 5186.99 1241.63 2435.86
(` in Crore)
Maturity Pattern Deposits Advances Investments Borrowings Foreign Foreign
Currency Currency
Assets Liabilities
89
Year ended 31 March, 2012
Day 1 149.76 182.31 1.88 211.82 6.87
2 -7 days 628.08 887.62 282.36 299.81 104.76 103.72
8-14 days 349.29 1246.15 68.29 129.13 29.75
15-28 days 580.22 856.93 269.02 105.00 248.10 41.35
29 days to 3 months 4656.61 2814.34 1489.87 61.00 217.87 324.99
Over 3 months and upto 6 months 8138.02 2853.46 705.58 1569.55 242.00 1310.65
Over 6 months and upto 1 Year 11070.48 4757.42 218.09 240.69 35.93 474.23
Over 1 Year and upto 3 Years 21435.66 17069.49 898.01 992.76 296.50 221.84
Over 3 Years and upto 5 Years 1374.28 3128.60 1423.90 400.58 22.93 52.59
Over 5 Years 554.72 3959.67 12045.48 571.64 5.80
Total 48937.12 37755.99 17402.48 4241.03 1514.84 2565.99
(` in Crore)
Maturity Pattern Deposits Advances Investments Borrowings Foreign Foreign
Currency Currency
Assets Liabilities
Note:
Classification of assets and liabilities under the different maturity buckets is based on the same estimates and assumptions as
used by the Bank for compiling the return submitted to the RBI, which has been relied upon by the auditors. Maturity profile
of foreign currency assets and liabilities exclude forward contracts.
a) Direct Exposure:
(i) Residential Mortgages:-
Lending fully secured by mortgages on residential property that is or will
be occupied by the borrower or that is rented; 5,206.16 5,168.07
(of which individual housing loans eligible for inclusion in
Priority sector advances) (3,039.96) (3,368.31)
(ii) Commercial Real Estate:-
Lending secured by mortgages on commercial real estates (office buildings,
retail space, multi-purpose commercial premises, multi-family residential
buildings, multi-tenanted commercial premises, industrial or warehouse
space, hotels, land acquisition, development and construction, etc.).
Exposure would also include non-fund based (NFB) limits; 1,086.16 526.12
(iii) Investments in Mortgage Backed Securities (MBS) and other
securitised exposures
a. Residential 87.08 31.57
b. Commercial Real Estate 0.66 1.21
b) Indirect Exposure:
Fund based and non-fund based exposures on National Housing Bank (NHB)
and Housing Finance Companies (HFCs). 1,376.48 1,127.30
Total Exposure to Real Estate sector 7,756.54 6,854.27
Category 31 March 2013 31 March 2012
(` in Crore)
1.8. Exposures
1.8.1 Exposure to Real Estate Sector
90
1.8.2 Exposure to Capital Market
i) Direct investment in equity shares, convertible bonds, convertible debentures
and units of equity-oriented mutual funds the corpus of which are not
exclusively invested in corporate debt; 252.13 196.18
ii) Advances against shares/bonds/debentures or other securities or on clean basis
to individuals for investment in shares (including IPOs/ESOPs), convertible bonds,
convertible debentures, and units of equity-oriented mutual funds; 4.53 12.20
iii) Advances for any other purposes where shares or convertible bonds or convertible
debentures or units of equity oriented mutual funds are taken as primary security; 2.17 2.04
iv) Advances for any other purposes to the extent secured by the collateral security
of shares or convertible bonds or convertible debentures or units of equity
oriented mutual funds i.e. where the primary security other than shares/
convertible bonds/convertible debentures/units of equity oriented mutual
funds does not fully cover the advances;
v) Secured and unsecured advances to stockbrokers and guarantees issued on
behalf of stockbrokers and market makers; 84.43 152.13
vi) Loans sanctioned to corporates against the security of shares / bonds/debentures
or other securities or on clean basis for meeting promoters contribution to the
equity of new companies in anticipation of raising resources;
vii) Bridge loans to companies against expected equity flows/issues;
viii) Underwriting commitments taken up by the banks in respect of primary issue of
shares or convertible bonds or convertible debentures or units of equity oriented
Mutual funds
ix) Financing to stockbrokers for margin trading;
x) All exposures to Venture Capital Funds (both registered and unregistered) 20.34 14.61
Total Exposure to Capital Market 363.60 377.16
Category 2012-13 2011-12
(` in Crore)
1.8.3 Risk Category wise Country Exposure
The net funded exposure of the Bank in respect of foreign exchange transactions with each country is within 1% of
the total assets of the Bank and hence no provision is required to be made in respect of country risk as per the RBI
guidelines:
Insignificant 611.36 613.67
Low 277.09 340.08
Moderate 72.49 28.55
High 7.34 5.76
Very High 12.31 8.43
Restricted 0.02 0.04
Off-credit 0.04
Total 980.61 996.57
(` in Crore)
Risk Category* Exposure (net) Provision held Exposure (net) Provision held
as at 31 as at 31 as at 31 as at 31
March 2013 March 2013 March 2012 March 2012
* The above figures include both funded as well as non-funded exposure.
91
1.8.4 Information on Concentration of deposits:
Total Deposits of Twenty Largest depositors 4,195.01 2,374.51
Percentage of Deposits of twenty largest depositors to total deposits of the bank 7.28% 4.85%
31 March 2013 31 March 2012
(` in Crore)
1.8.5 Information on Concentration of advances:
Total advances of Twenty Largest Borrowers 8,714.00 6,863.43
Percentage of advances of twenty largest Borrowers to total advances of the bank 19.76% 18.18%
31 March 2013 31 March 2012
(` in Crore)
1.8.7 Information on Concentration of NPAs:
Total exposures to top Four NPA accounts 401.29 208.07
31 March 2013 31 March 2012
(` in Crore)
1.8.6 Information on Concentration of exposure:
Total exposures of Twenty Largest borrowers/customers 9935.41 9071.20
Percentage of exposures to twenty largest borrowers/customers to total
exposure of the bank on borrowers/customers 13.70% 13.50%
31 March 2013 31 March 2012
(` in Crore)
1.8.8 During the year ended 31 March, 2013, the Banks credit exposure to single borrower and group borrowers was
within the prudential exposure limits prescribed by RBI.
In the previous year ended 31 March, 2012, the Banks credit exposure to single borrower had exceeded the prudential
exposure limits prescribed by RBI, the details of which are given below:
Housing Development 29.06.2011 to 820 1013.42 3.54 882.15 817.54
Finance Corporation Limited 17.02.2012
(` in Crore)
Name of the Period Original Limit % of excess limit Exposure Exposure
Borrower Exposure Sanctioned sanctioned Ceiling as on as on
Ceiling over original 31 March, 31 March,
ceiling 2012 2012
In the previous year ended 31 March, 2012, the Banks credit exposure to group borrowers was within the prudential
exposure limits prescribed by RBI.
1.9. Penalty levied by RBI on account of bouncing of SGL sale transaction ` 0.68 lakhs (Previous Year Nil); Date of payment 27
July, 2012.
The above information is as certified by the Management and relied upon by the auditors
1.10. Disclosure of customer complaints
(a) No. of complaints pending at the beginning of the year 45 28
(b) No. of complaints received during the year 2510 1588
(c) No. of complaints redressed during the year 2507 1571
(d) No. of complaints pending at the end of the year 48 45
92
* One award is implemented by the Bank and another award is withheld by the appellate authority (AA) .
$ Appeals against both the awards were filed
@ Appeal rejected by AA, case filed in High Court and stay obtained
The above information is as certified by the Management and relied upon by the auditors.
1.11. Disclosure of Awards passed by the Banking Ombudsman
(a) No. of unimplemented awards at the beginning of the year 2 2
(b) No. of awards passed by the Banking Ombudsman 2
(c) No. of awards implemented during the year 1 2*
(d) No. of unimplemented awards at the end of the year 1@ 2$
1.12. Draw Down from Reserves
The Bank has not made any draw down of reserves during the year.
1.13. Letter of Comfort
The Bank has not issued any letters of comfort (LoC) on behalf of its subsidiaries.
1.15. The Bank has not sponsored any special purpose vehicle which is required to be consolidated in the consolidated financial
statements as per accounting norms.
1.16. Details of Overseas Assets, NPAs and Revenue - Nil
1.17. Disclosures on Remuneration
(i) Qualitative disclosures
a) Information relating to the composition and mandate of the Remuneration Committee:
Composition
The remuneration committee of the Board consists of three members of which one member from Risk Management
committee of the Board will facilitate effective governance of compensation.
Function and mandate
The remuneration committee of the Board would oversee framing, review and implementation of the compensation
policy on behalf of the Board with the assistance of Integrated Risk Management department (IRMD).
Process
The remuneration committee with the assistance of IRMD will closely co-ordinate with the Risk committee of the
Board to review the compensation practices every year and to decide instances for invoking clawback agreements.
The committee will study the business and industry environment, analyze and categorize the risks into immediate
and long term and stream line the components of the compensation plan like proportion of the total variable
compensation to be paid to Managing Director & Chief Executive Officer (MD & CEO), Executive Directors (ED) and
Senior Executives to ensure financial stability of the Bank.
The committee would also analyze various factors to ascertain whether cost/ income ratio supports the remuneration
package provided to MD & CEO, EDs and Senior Executives, consistent with maintenance of sound capital adequacy
ratio.
1.14. Bancassurance Business
Details of income earned from bancassurance business:
* Includes receipts on account of marketing activities undertaken on behalf of Bancassurance partners.
1 For selling life insurance policies 24.14 12.99
2 For selling non-life insurance policies 1.72 1.50
3 For selling mutual fund products 0.69 0.36
4 Others 1.48 2.83
Sl. No. Nature of Income * 31 March 2013 31 March 2012
(` in Crore)
93
Authority to invoke clawback arrangement
The remuneration committee of the Board have the authority to ascertain whether the decision taken by the MD &
CEO, ED and Senior Executives (Non-IBA) have brought forth a negative contribution to the Bank. The committee
will be vested with the powers to invoke the clawback arrangement or compensation recovery within a period of
three years from the date of payment of variable compensation.
b) Information relating to the design and structure of remuneration processes and the key features and objectives of
remuneration policy.
The compensation payable to MD & CEO, ED and Senior Executives is divided into fixed and variable components.
The fixed compensation is determined based on the industry standards, the exposure, skill sets, talent and
qualification attained by the official over his/her career span etc. Approval from RBI is obtained to decide fixed
compensation for MD & CEO and ED.
The variable compensation for MD & CEO and senior executives (Non IBA package ie. CGM and above) are
determined based on Banks performance and Key Performance Areas (KPA) set for the official. KPAs contain
targets on risk adjusted metrics such as Risk Adjusted Return on Capital (RAROC), Risk Adjusted Return on Risk
Adjusted Capital (RARORAC), in addition to target on NPAs.
The objectives of the remuneration policy are four fold:
- To align compensation with prudent risk taken
- To drive sustainable performance in the organization
- To ensure financial stability of the organization; and
- To attract and retain talent
c) Description of the ways in which current and future risks are taken into account in the remuneration processes.
For the purpose of effectively aligning compensation structure with risk outcomes, the functionaries in the Bank are
arranged under the following four categories
1) MD & CEO / ED
2) Senior Executives (Non IBA package)
3) Senior Executives (On IBA package)
4) Other members of staff (on IBA package)
Compensation Recovery policy
A claw back arrangement or a compensation recovery policy is provided, which will entail the Bank to recover
proportionate amount of variable compensation paid to the above functionaries on account of an act or decision
taken by the official which has brought forth a negative contribution to the bank at a prospective stage. The claw
back arrangement would be valid for a period of three years from the date of payment of variable compensation.
Limit on variable pay
The variable compensation offered to an official would not exceed 70% of the total fixed compensation
Severance pay and guaranteed bonus
Severance pay (other than gratuity or terminal entitlements or as entitled by statute) is not paid to any official of
the organization
Sign on bonus or joining bonus is limited to the first year and is paid only as Employee stock options
Hedging
No compensation scheme or insurance facility would be provided by the Bank to employees to hedge their
compensation structure to offset the risk alignment mechanism (deferral pay and clawback arrangements)
embedded in their compensation arrangement
Committees to mitigate risks caused by an individual decision
In order to further balance the impact of market or credit risks caused to the organization by an individual decision
taken by a senior level executive, MD & CEO or a ED, the bank has constituted various committees to take decisions
on various aspects
94
Credit limits are sanctioned by committee at different levels.
Investment decisions of the Bank are taken and monitored by Investment committee and there is an upper limit in
treasury dealings where individual decisions can be taken.
Interest rates on Asset and liability products for different buckets are decided and monitored by the Asset Liability
Committee of the Board (ALCO). Banks exposure to liquidity risk are also monitored by ALCO.
Integrated Risk Management Department (IRMD)
In order to effectively govern the compensation structure, IRMD would assist the Remuneration Committee of the
Board to monitor, review and control various risks and balance prudent risk taking with the compensation paid out
to top executives and other employees
Compensation of risk control staff
The total fixed and variable compensation paid out to the employees of IRMD is independent of business parameters
and rendering of effective support to the Remuneration Committee of the Board. The variable compensation
component (Performance Linked Incentive or PLI) will be subjected to a minimum and greater proportion of
compensation will be fixed in nature to ensure autonomy and independence from business goals
d) Linkage of performance during a performance measurement period with levels of remuneration.
The Banks performance is charted based on the revenue point index / performance scorecard which takes into
account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other
intangible factors like leadership and employee development. Variable pay is paid purely based on performance
and is measured through Score cards for MD& CEO / EDs. The score card provides a mix of financial and non-
financial, quantitative and qualitative metrics.
Compensation paid to Senior executives and other staff members on IBA package
The compensation paid to other officials that include Award staff, Officers coming under Scale I to III and Senior
executives coming under Scale IV to VII is fixed based on the periodic industry level settlements with Indian Bank
Association. The variable compensation paid to these functionaries is based on the Performance Linked incentive
scheme which has been formulated on the basis of performance parameters set in Performance Management
System
e) Banks policy on deferral and vesting of variable remuneration and criteria for adjusting deferred remuneration
before vesting and after vesting.
Deferred compensation and Performance Linkage
In the event variable compensation paid to MD & CEO, ED and Senior Executives (Non-IBA) exceeds more than 50%
of the fixed compensation for the year on account of high level of Banks performance, 60% of the variable pay so
entitled to the official will be deferred for payment over a period of 3 years. The amount is parked in an escrow
account and the payment will be made in the ratio of 20:30:50 over a period of three years, i.e.,
- 20 % of the deferred compensation will be paid in the first year
- 30% of the deferred compensation in the second year; and
- 50 % of the deferred compensation in the third year
Clawback and deferral arrangements
The provisions of clawback and deferral arrangements are applicable to the referred functionaries and all employees
in the event their variable compensation exceeds 50 % of their fixed emoluments
f) Description of the different forms of variable remuneration
Bank uses an optimum mix of cash, ESOPS and variable PLI to decide the compensation of employees in all
categories. The distribution of ESOPS and variable PLI are higher in top levels and is linked with their performance
measurements taken from Scorecards. This is done to align the compensation of senior staff with their performance,
risk and responsibility taken in higher assignments. The Officers in Scale I-III as well as Award staff come under the
purview of IBA package that is as per the Industry wide settlements. Variable compensation, ESOP is linked with
seniority in these levels
95
(ii) Quantitative disclosures
(a) Number of meetings held by the Remuneration Committee during the financial 8 8
year and remuneration paid to its members. `440,000 `520,000
(b) (i) Number of employees having a variable remuneration award
during the financial year. 3 3
(ii) Number and total amount of sign-on awards made during the financial year. Nil 1
(iii) Details of guaranteed bonus, if any, paid as joining / sign on bonus Nil `1,000,000
(iv) Details of severance pay, in addition to accrued benefits, if any. Nil Nil
(c) (i) Total amount of outstanding deferred remuneration, split into cash,
shares and share-linked instruments and other forms Nil Nil
(ii) Total amount of deferred remuneration paid out in the financial year. Nil Nil
(d) Breakdown of amount of remuneration awards for the financial year to 17,069,640(F) 15,065,814(F)
show fixed and variable, deferred and non-deferred (`) 4,025,000(V) 31,267(V)
(F) Fixed; (V) - Variable
(e) Total amount of outstanding deferred remuneration and retained remuneration
exposed to ex post explicit and / or implicit adjustments. Nil Nil
Current Year Previous Year
Weighted average number of equity shares used in computation
of basic earnings per share (in 000s) 171,059 171,047
Weighted average number of equity shares used in computation
of diluted earnings per share (in 000s) 171,059 171,047
Nominal Value of share (in `) 10 10
Basic earnings per share (in `) 49.00 45.41
Diluted earnings per share (in `) 49.00 45.41
Earnings used in the computation of basic and diluted earnings per share (` in 000) 8,381,676 7,767,995
2. Other Disclosures
2.1. Earnings Per Share (EPS)
Outstanding at the beginning of the year 3,035,875
Surrendered during the year
Granted during the year* 2,448,475 3,472,020
Exercised during the year 11,631
Forfeited/lapsed during the year 26,440 436,145
Outstanding at the end of the year 5,446,279 3,035,875
Options exercisable 1,460,370
Number of Options
2012-13 2011-12
2.2. Employee Stock Option Scheme (ESOS):
(i) Shareholders of the bank had approved Employee Stock Option Scheme (ESOS) through postal ballot, the result of
which was announced on December 24, 2010, enabling the Board and/or the Compensation Committee to grant
such number of equity shares, including options, of the Bank not exceeding 5% of the aggregate number of paid up
equity shares of the Bank, in line with the guidelines of SEBI. Pursuant thereto, the Compensation Committee of the
bank granted the following options:
* ESOS granted on 5th November 2012 with vesting period of 1,2,3 and 4 years. Exercise period of 5 years and exercise price
of `474/- per share.
As per SEBI guidelines the accounting for ESOS can be done either under the Intrinsic value basis or Fair value basis.
The Compensation Committee in their meeting dated 10/05/2012 decided to adopt Intrinsic value method for accounting
of ESOS, in terms of the power vested on them as per the resolution of EGM dated 24 December 2010
96
The exercise price of the options granted is the same as the market price on the date prior to grant date and hence there
is no intrinsic value for the options, which has to be amortized over the vesting period. If Fair Value Method had been
adopted based on Black-Scholes pricing model for pricing and accounting of options, net profit would be lower by `12.73
Crore (Previous Year: ` 19.73 Crore)
The modified basic and diluted earnings per share for the year, had the company followed Fair Value Method of accounting
for ESOS compensation cost, would be ` 48.25 and ` 48.09 (Previous Year: ` 44.26 and ` 44.16) respectively.
(ii) Dividend paid on shares issued on exercise of stock options
The Bank may allot shares between the Balance Sheet date and record date for the declaration of dividend pursuant to the
exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2013, if
approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current
year.
2.3 Segment Reporting (AS 17)
In terms of the Accounting Standard 17 of ICAI, the Banks operations are classified into four business segments and the
information on them is as under.
(` in Crore)
Treasury Corporate/Whole Retail Banking Other Banking Total
Business Segment sale Banking Operations
Revenue 1813.60 1530.30 2169.73 1992.10 2807.88 2529.04 40.80 39.29 6832.01 6090.73
Result (net of provisions) 287.61 42.13 254.70 257.01 618.30 850.39 33.15 19.97 1193.76 1169.50
Unallocated expense
Operating profit (PBT) 1193.76 1169.50
Income taxes 355.59 392.71
Extraordinary profit/loss
Net Profit 838.17 776.79
Other Information
Segment Assets 24616.62 20342.52 22045.64 19958.93 23202.73 18797.34 69.28 557.58 69934.27 59656.37
Unallocated assets 1115.30 970.41
Total assets 71049.57 60626.78
Segment liabilities 22155.15 18304.57 20412.75 18629.58 21517.25 17576.27 64085.15 54510.42
Unallocated liabilities 599.76 410.03
Total liabilities 64684.91 54920.45
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Geographic Segment Information
The Bank operates within India
IDBI Federal Life Insurance Company Limited Associate
Fed Bank Financial Services Limited Subsidiary
Sri. Shyam Srinivasan, Managing Director & CEO Key Management Personnel
Sri. P C John, Executive Director & CFO Key Management Personnel
Name of the Party Nature of Relationship
2.4. Related Party Disclosures
a) Details of Related Parties:
97
2.5. Fixed Assets
a) Fixed Assets as per Schedule 10 include Intangible Assets relating to Software and System Development Expenditure
which are as follows:
Gross Block
At the beginning of the year 39.39 26.77
Closing Balance 70.47 39.39
Depreciation / Amortisation
Charge for the year 4.64 6.16
Depreciation to date 36.51 31.87
Net Block 33.96 7.52
(` in Crore)
b) Land and premises include flats `0.37 Crore (previous year: `0.37 Crore), written down value `0.17 Crore (previous year:
` 0.18 Crore), taken possession of and being used by the Bank, for which documentation/registration formalities are to
be completed.
2.6. Revaluation of Fixed Assets
During the year 1995-96, the appreciation of ` 9.65 Crore in the value of land and buildings consequent upon revaluation
by approved valuers was credited to Revaluation Reserve. Depreciation for the year on the net addition to value on such
revaluation of assets at ` 0.21 Crore (Previous year: ` 0.22 Crore) has been transferred from Revaluation Reserve to Profit and
Loss Account. There has been no revaluation of assets during this year.
Remuneration 1.49 1.09
Dividend Paid * *
Key Management Personnel #
b) Significant transactions with related parties:
* Asterisk denotes figures below ` 1 Lakh
During the year 2012-13, 143 Thousands (Previous Year : 523 Thousands) number of Stock Options under ESOS 2010
Scheme were granted to MD & CEO and Executive Director & CFO
# The normal transactions of the Bank with the above persons as constituents are not reckoned for the purpose of disclosure.
Note: In accordance with the RBI Guidelines on Compliance with the Accounting Standards by the Banks, the details of
transactions with associate/joint venture and subsidiary company have not been disclosed since there is only one entity in
the respective category of the related party.
(` in Crore)
98
2.7. Deferred Tax Assets / Liability
The major components of deferred tax assets and deferred tax liabilities are as under:
Deferred Tax Liability
Tax effect of items constituting deferred tax liability:
(i) Interest accrued but not due 111.81 102.24
(ii) Depreciation on Fixed Assets 5.47 5.73
(iii) Depreciation on Investments 151.85 243.32
Total (A) 269.13 351.29
Deferred Tax Asset
Tax effect of items constituting deferred tax assets:
(i) Interest/premium paid on purchase of securities 56.29 47.22
(ii) Provision for Standard Assets 83.34 47.00
(iii) Others 224.53 171.76
Total (B) 364.16 265.98
Deferred tax liability/ (Asset) (A-B) (95.03)$ 85.31
Less: Deferred tax on Provision for NPA and other disallowances
by the Income Tax Department 30.36 21.12
Net Deferred tax liability/ (Asset) (125.39) 64.19 $
31 March 2013 31 March 2012
(` in Crore)
$ Net Deferred Asset of `159.22 Crore credited to the Profit and Loss Account.
2.8. Employee Benefits
a) Defined Contribution Plan
Provident Fund
Employees, who have not opted for pension plan are eligible to get benefits from provident fund, which is a defined
contribution plan. Aggregate contributions along with interest thereon are paid on retirement, death, incapacitation
or termination of employment. Both the employee and the Bank contribute a specified percentage of the salary to the
Federal Bank Employees Provident Fund. The Bank has no obligation other than the monthly contribution.
The Bank recognized `0.37 Crore (Previous year: `0.41 Crore) for provident fund contribution in the Profit and Loss
Account
New Pension Scheme
As per the industry level settlement dated 27/04/2010, employees who joined the services of the Bank are not eligible for
the existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with
the New Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their
Pay and Dearness Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate
Provident Fund for employees joining on or after 01/04/2010.
The Bank recognized ` 5.69 Crore (Previous year: ` 2.94 Crore) for DCPS contribution in the Profit and Loss Account
b) Defined benefit plan
Gratuity
The Bank provides for Gratuity, a defined benefit retirement plan (the Gratuity Plan) covering the eligible employees.
The Gratuity Plan provides a lumpsum payment to vested employees on retirement, death, incapacitation or termination
of employment, of an amount based on the respective employees salary and the tenure of employment. Vesting
occurs upon completion of five years of service as per Payment of Gratuity Act, 1972 and its amendment with effect
from 24.05.2010 or as per the provisions of the Federal Bank Employees Gratuity Trust Fund Rules / Bi-partite Award
provisions. Liabilities with regard to the Gratuity Plan are determined by Actuarial valuation as on the Balance Sheet date,
based upon which, the Bank contributes all the ascertained liabilities to the Federal Bank Employees Gratuity Trust Fund
(the Trust). Trustees administer contributions made to the Trust and contributions are invested in specific investments
as permitted by law.
99
Superannuation / Pension
The Bank provides for monthly pension, a defined benefit retirement plan (the pension plan) covering eligible
employees. The pension plan provides a monthly pension after retirement of the employees till death and to the family
after the death of the pensioner. The monthly pension is based on the respective employees salary and the tenure of
employment. Vesting occurs upon completion of ten years of service. The Bank pays the monthly pension by purchasing
annuities from Life Insurance Corporation of India (LIC). Liabilities with regard to the pension plan are determined by
actuarial valuation as on the Balance Sheet date, based upon which, the Bank contributes all the ascertained liabilities
to the Federal Bank (Employees) Pension Fund (the Trust). Trustees administer contributions made to the Trust and
contributions are invested in specific investments as permitted by law.
The following table as furnished by Actuary sets out the funded status of gratuity / pension plan and the amount
recognized in the Banks financial statements as at March 31, 2013.
(i) Change in benefit obligations:
Projected benefit obligation, beginning of the year 225.25 203.51 598.76 589.34
Service Cost 12.00 10.94 42.18 49.16
Interest cost 18.20 16.38 46.14 46.48
Actuarial (gain)/ loss 6.85 15.97 8.98 (1.25)
Benefits paid (22.17) (21.55) (111.94) (84.97)
Projected benefit obligation, end of the year 240.13 225.25 584.12 598.76
(` in Crore)
Gratuity Plan Pension Plan
Particulars 2012-13 2011-12 2012-13 2011-12
(ii) Change in plan assets:
Plan assets at beginning of the year at fair value 198.87 184.69 422.62 404.04
Expected return on plan assets 16.90 15.70 35.92 34.34
Actuarial gain/(loss) 1.69 20.04 3.23 1.31
Employers Contributions 26.38 94.34 67.90
Benefits paid (22.17) (21.56) (111.94) (84.97)
Plan assets at end of the year, at fair value 221.67 198.87 444.17 422.62
(` in Crore)
Particulars 2012-13 2011-12 2012-13 2011-12
(iii) Reconciliation of present value of the obligation and the fair value of the plan assets:
Fair value of plan assets at the end of the year 221.67 198.87 444.17 422.62
Present value of the defined benefit obligations
at the end of the period 240.13 225.25 584.12 598.76
Liability recognized in the Balance Sheet 18.46 26.38 139.95@ 176.14
(` in Crore)
Particulars 2012-13 2011-12 2012-13 2011-12
@ Includes amount payable on account of transitional liability due to second option for pension `67.36 Crore. (Previous
year ` 101.04 Crore)
100
(iv) Gratuity / pension cost for the year ended 31 March, 2013:-
Service cost 12.00 10.94 42.18 49.16
Interest cost 18.20 16.38 46.14 46.48
Expected return on plan assets 16.90 15.70 35.92 34.34
Actuarial (gain)/loss 5.16 (4.07) 5.75 (2.56)
Employee Cost 18.46 7.55 58.15 58.74
Amortisation Cost 33.68 33.68
Net cost Debit to Profit and Loss account 91.83 92.42
Amount not debited in profit and loss account,
but carried over to be amortised in future years * 67.36 101.04
Actual return on plan assets 18.59 35.74 39.15 35.65
(` in Crore)
Particulars 2012-13 2011-12 2012-13 2011-12
* See item No.2.9 of schedule 18
(v) Investment details of plan Assets :-
Central and state Government bonds 46.53 49.06 137.37 141.27
Other debt securities 29.51 31.14 90.47 92.49
Balance in Saving bank account with the Bank 2.87 2.10 6.33 9.17
Net current assets 2.21 2.42 6.68 6.80
Balance with LIC# 140.55 114.15 203.32 172.89
Total 221.67 198.87 444.17 422.62
(` in Crore)
Particulars 2012-13 2011-12 2012-13 2011-12
# In the absence of detailed information regarding plan assets which is funded with Life Insurance Corporation of India,
the composition of each major category of plan assets, the percentage or amount for each category to the fair value of plan
assets has not been disclosed.
Defined Benefit Obligations 240.13 225.25 203.51 181.73 153.03
Plan Assets 221.67 198.87 184.69 181.73 153.03
Surplus/Deficit (18.46) (26.38) (18.82)
Experience adjustments on
Plan Liabilities [Gain / (Loss)] 17.02 0.03 13.89 40.36 (0.96)
Experience Adjustments on
Plan Assets [Gain / (Loss)] 22.33 0.64 (0.26) (0.10) (0.57)
2012-13 2011-12 2010-11 2009-10 2008-09
(` in Crore)
(vi) Experience Adjustments :-
i) Gratuity Plan
Plan Assets 444.17 422.62 404.04 195.38 161.02
Surplus/Deficit (139.95) (176.14) (185.30)
Experience adjustments on
Plan Liabilities [Gain / (Loss)] (1.22) 450.11 0.59 (0.22) 4.73
Experience Adjustments on
Plan Assets [Gain / (Loss)] 1.38 0.96 (0.37) (0.72) (1.45)
2012-13 2011-12 2010-11 2009-10 2008-09
(` in Crore) ii) Pension Plan
101
(vii) Assumptions:-
Discount rate 8.50% 8.50% 8.50% 8.50%
Annuity rate per Rupee 126.18297 125.65445
Salary escalation rate 5.00% 5.50% 5.00% 5.50%
Estimated rate of return on plan assets 8.50% 8.50% 8.50% 8.50%
Employee Turnover
Above 45 (Age in Years) 0.6% 0.6% 0.6% 0.6%
29 to 45 (Age in Years) 0.3% 0.3% 0.3% 0.3%
Below 29 (Age in Years) 0.1% 0.1% 0.1% 0.1%
(` in Crore)
Particulars 2012-13 2011-12 2012-13 2011-12
The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and
other relevant factors.
The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the
Fund during the estimated term of the obligations.
The bank expects to contribute ` 29.02 Crore (Previous Year ` 18.83 Crore) and ` 63.96 Crore (Previous Year ` 50.58 Crore)
as gratuity and pension respectively for the year 2013-14.
The above information is as certified by the actuary and relied upon by the auditors.
c) Leave Encashment/Sick Leave / Leave Travel Concession / Unavailed Casual Leave
The employees of the Bank are entitled to compensated absence. The employees can carry forward a portion of the
unutilised accrued compensated absence and utilise it in future periods or receive cash compensation at retirement or
termination of employment for the unutilized accrued compensated absence for a maximum of 240 days. The Bank
records an obligation for compensated absences in the period in which the employee renders the services that increase
this entitlement. The Bank measures the expected cost of compensated absence as the additional amount that the Bank
expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date based on actuarial
valuations.
A sum of ` 9.93 Crore (Previous year: ` 1.14 Crore) has been provided towards the above liabilities in accordance with
AS 15 (Revised) based on actuarial valuation.
The Actuarial liability of compensated absences of accumulated privilege, sick, casual leaves and leave travel concession
of the employees of the Bank is given below:
Privilege leave 113.53 106.69
Sick leave 27.18 24.63
Leave Travel Concession 9.87 9.52
Casual Leave 2.23 2.04
Total actuarial liability 152.81 142.88
Assumptions
Discount rate 8.50% 8.50%
Salary escalation rate 5.00% 5.50%
(` in Crore)
2.9. The net liability arising on exercise of second option for Pension by employees (other than separated / retired employees)
actuarially determined during Financial Year 2010-11 at ` 168.43 Crore is amortised equally over a period of five years
pursuant to the exemption from the application of the provisions of the Accounting Standard (AS) 15, Employee Benefits,
granted by the Reserve Bank of India and made applicable to the Bank vide letter no. DBOD No.BP.BC.15896 / 21.04.018 /
2010-11 dated April 8, 2011. Accordingly, an amount of ` 33.68 Crore (Previous Year: ` 33.68 Crore), being proportionate
amount is charged to Profit and Loss Account for the year and the balance unamortised pension liability of ` 67.36 Crore
(Previous Year: ` 101.04 Crore) is to be amortised over the next two years.
102
2.10. Provisions and Contingencies
a) Movement in provision for frauds included under other liabilities:
Opening balance at the beginning of the year 3.83 3.65
Reductions on account of payments during the year
Reductions on account of reversals during the year
Closing balance at the end of the year 5.10 3.83
31 March 2013 31 March 2012
(` in Crore)
b) Movement in provision for debit card reward points:
Opening provision at the beginning of the year 0.17
Provision made during the year 3.37 0.17
Reductions during the year 0.01 *
Closing provision at the end of the year 3.53 0.17
31 March 2013 31 March 2012
(` in Crore)
Asterisk denotes figures below `1 Lakh.
c) Movement in provision for other contingencies (including derivatives):
Opening provision at the beginning of the year 38.37 30.50
Closing provision at the end of the year 32.82 38.37
31 March 2013 31 March 2012
(` in Crore)
d) Movement in floating provisions:
Opening balance 38.00 38.00 179.52 179.52
Provision made during the year
Draw down from provision
Closing balance 38.00 38.00 179.52 179.52
(` in Crore)
Standard Assets Provisions NPA Provision
Particulars 2012-13 2011-12 2012-13 2011-12
2.11. Description of contingent liabilities:
a) Claims against the Bank not acknowledged as debts
These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in
progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank.
b) Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency swaps, Forward exchange contracts and currency futures
on its own account. Bank enters into Forward exchange contracts for customers. Forward exchange contracts are
commitments to buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments
to exchange cash flows by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps
are commitments to exchange fixed and floating interest rate cash flows. Currency Futures contract is a standardized,
exchange-traded contract, to buy or sell a certain underlying currency at a certain date in the future, at a specified price.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing.
Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to
fulfill its financial or performance obligations.
103
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Banks customers
that are accepted or endorsed by the Bank.
e) Other items
Other items represent stock of gold on consignment basis.
2.12. Small and Micro Industries
Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from 2 October, 2006,
certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported
cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above
is based on the information available with the Bank which has been relied upon by the auditors.
2.13. Figures of previous year were audited by Joint Central Statutory Auditors other than current Joint Central Statutory Auditors
Deloitte Haskins & Sells and M P Chitale & Co. Figures for the previous year have been regrouped and reclassified, where
necessary to conform to current years presentation.
Krishnakumar K P C John Shyam Srinivasan
Assistant General Manager Executive Director & CFO Managing Director & CEO
Girish Kumar Ganapathy Suresh Kumar Prof. Abraham Koshy
Company Secretary Chairman Director
Nilesh S Vikamsey Dr. K Cherian Varghese
Director Director

Place: Kochi Sudhir M Joshi K M Chandrasekhar
Date : 27 April 2013 Director Director
104
Basel II Disclosures of The Federal Bank Ltd., as on 31 March 2013
I. SCOPE OF APPLICATION OF BASEL II DISCLOSURES
TABLE DF - 1: SCOPE OF APPLICATION
1. Qualitative disclosures
1.1 Name of the top Bank in the group to which The Federal Bank Ltd.
the framework applies
1.2 Differences in the basis of consolidation for accounting and regulatory purposes: (outline with a brief description of
entities within the group)
i) The revised capital adequacy norms (in conformity with Basel II Pillar III requirements) apply to Federal Bank at solo
level.
ii) The Bank has one fully owned subsidiary viz. Fedbank Financial Services Ltd and an associate viz. IDBI Federal Life
Insurance Company Ltd.
Consolidated financial statements of the group (parent and subsidiary) have been prepared on the basis of audited
financial statements of Federal Bank and its subsidiary, combining and adding together the items such as assets,
liabilities, income and expenses, after eliminating intra group transactions.
1.3 That are fully consolidated: (AS 21)
2. Quantitative disclosures
2.1 Aggregate amount of capital deficiencies in all subsidiaries not included in the consolidation and that are deducted
a) Fed Bank Financial Services Ltd The wholly owned subsidiary has been 100%
registered as an NBFC.
The major activities include marketing of
banks own products and business of
lending against gold
Name Activity Holding %
a) NIL
1.4 That are pro-rata consolidated: (AS 27)
a) NIL
1.5 That are given a deduction treatment:
a) NIL N.A. N.A.
Name of subsidiary Activity Amount of shortfall deducted (in ` cr.)
a) Name IDBI FEDERAL Life Insurance Company Limited.
b) Country of incorporation / residence India
c) Proportion of ownership interest 26%
d) Proportion of voting power 26%
e) Quantitative impact on regulatory capital of using this CRAR under deduction method is 14.34% as against
method versus using the deduction 14.73% under the risk weighting method.
IDBI FEDERAL Life Insurance Company Ltd. Insurance 26%
1.6 That are neither consolidated nor deducted
2.2 The aggregate amounts (e.g. current book value) of the banks total interests in insurance entities, which are risk-
weighted as well as their name, their country of incorporation or residence, the proportion of ownership interest and,
if different, the proportion of voting power in these entities. In addition, indicate the quantitative impact on regulatory
capital of using this method versus using the deduction
105
II. STRUCTURE AND ADEQUACY OF CAPITAL
TABLE DF - 2: CAPITAL STRUCTURE
1.1 Summary (information on the terms and conditions of the main features of all capital instruments, especially in the
case of capital instruments eligible for inclusion in Tier 1 or in Upper Tier 2.)
A. Tier I Tier I Capital includes Equity Share Capital and Reserves and surpluses comprising of Statutory
Reserve, Capital Reserve - Investments, Share Premium, Revenue Reserve, Investment fluctuation
Reserve, Special Reserve, Contingency Reserve and Balance in Profit & Loss A/c.
B. Tier II Tier II Capital includes Revaluation Reserve, Tier II
Bonds - Subordinated Debt and General Provisions
Type of capital Features
2.1 Details of capital instruments
A. Innovative instruments
(Tier I capital) Nil
B. Other capital instruments
(Tier I) Nil
C. Debt capital instruments
eligible for inclusion in
Upper Tier II capital Nil
D. Subordinated debt 26.07.04 30 117 6.85 Rating by CARE as
eligible for inclusion CARE AA and by India
in Lower Tier II capital 16.12.06 200 120 9.25 Ratings & Research (A Fitch
Group company) as AA-(Ind)
Type of capital Date of Amount Tenure in Coupon Rating
instrument issue in ` Cr. months (% p.a.)
A TIER I CAPITAL
Paid up share capital 171.06
Reserves and Surplus 6,188.39
Innovative instruments (IPDI or any other instrument that may be allowed from time to time) 0.00
Other capital instruments 0.00
Amounts deducted from Tier I capital, including goodwill and investments 220.39
B TIER II CAPITAL (Total amount net of deductions from Tier II capital)
Debt capital instruments eligible for inclusion in Upper Tier II capital 0.00
Total amount outstanding 0.00
Of which, amount raised during the current year 0.00
Amount eligible to be reckoned as capital funds 0.00
Subordinated debt eligible for inclusion in Lower Tier II capital 230.00
Total amount outstanding 230.00
Of which, amount raised during the current year 0.00
Amount eligible to be reckoned as capital funds 126.00
Other Tier II capital 247.72
Revaluation Reserve 2.34
General Provisions 245.38
Deductions from Tier II capital 95.00
C Other deductions from capital, if any. 0.00
D Total eligible capital 6,417.78
Amount in ` Crore
2.2 Capital funds
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II. STRUCTURE AND ADEQUACY OF CAPITAL (contd...)
TABLE DF - 3: CAPITAL ADEQUACY
III. RISK EXPOSURE AND ASSESSMENT
1. Qualitative Disclosures
1.1 A summary discussion of the Banks approach to assess the adequacy of its capital to support current and future
activities.
1. Policy on Internal Capital Adequacy Assessment Process has been put in place and the assessment of capital
commensurate to the risk profile is reviewed on a quarterly basis.
2. Capital requirement for current business levels and estimated future business levels are assessed on a periodic basis.
3. CRAR has been worked out based on Basel- I and Basel- II guidelines and it is well above the Regulatory Minimum
level of 9 %.
(A) Objectives and policies
1. Credit risk
1.1 Strategies and processes:
The Bank is exposed to credit risk in its lending operations. The Banks strategies to manage the credit risks are as
under:
a) Defined segment exposures delineated into retail, small and medium enterprises and to Corporate;
b) Industry wise segment caps on aggregate lending by Bank across Branches
c) Individual borrower wise caps on lending as well as borrower group wise lending caps linked as a percentage to
the Banks capital funds at the end of the previous year
d) Credit rating of borrowers and allowing credit exposures only to defined thresholds of risk levels; the approach
also includes diversification of credit rating wise borrowers but within acceptable risk parameters
e) The Banks current entire business is within India and hence there is no geographic cap on lending in India; there
is also no cap on lending within a State in India. However, in respect of cross border trade which would involve
exposures to banks and financial institutions located outside India, there is a geographic cap on exposures apart
from cap on individual bank/institution
f) A well defined approach to sourcing and preliminary due diligence while sourcing fresh credit limits
g) A clear and well defined delegation of authority within the Bank in regard to decision making linking risk and
exposure amount to level of approval.
h) Regular review of all credit structures and caps, continuously strengthening credit processes, and monitoring
oversight which are regularly reviewed and duly approved by the Board of the Bank.
2. Quantitative Disclosures
2.1 Minimum capital requirements under Pillar I of Basel II
A Capital requirements for credit risk (@ 9% CRAR) 3371.49
Portfolios subject to Standardized approach 3371.49
Securitisation exposures 0.00
B Capital requirements for market risk (Standardized duration approach) (@ 9% CRAR) 233.73
Interest rate risk 152.58
Foreign exchange risk (including gold) 18.00
Equity risk 63.15
C Capital requirements for operational risk (Basic Indicator Approach) (@ 9% CRAR) 315.15
Amount in ` Crore
Consolidated Bank (group as a whole - applicable annually only) 14.91% 14.05%
The Federal Bank Ltd. (solo basis) 14.73% 14.09%
Significant bank subsidiaries (wherever applicable, entity wise data)
Name of entity Total CRAR Tier I CRAR
2.2 Capital Adequacy Ratio (CRAR) % for consolidated group (consolidation only for annual disclosures) and significant bank
subsidiaries
107
III. RISK EXPOSURE AND ASSESSMENT (contd...)
i) Credit hub system put in place to enhance quality of credit appraisal and underwriting process.
j) Bank has put in place appropriate mechanism for ongoing identification, development and assessment of
expertise of officials in the area of credit appraisal, underwriting and credit management functions.
k) Dedicated credit monitoring cells function at various levels to monitor/follow up of performance of loans and
advances.
l) All credit proposals of `5.00 crores and above are scrutinized and risk assessment is conducted by Integrated Risk
Management Department, independent of the business functions.
Oversight of the Boards sub committee on risk.
Bank has put in place Board approved comprehensive Credit Risk Management Policy designed with added focus
on credit risk management. The policy aims to provide basic framework for implementation of sound credit risk
management system in the Bank. It spells out various areas of credit risk, goals to be achieved, current practices
and future strategies. Bank has also operationalised required organizational structure and framework as prescribed
in the policy for efficient credit risk management through proactive identification, precise measurement, fruitful
monitoring and effective control of credit risk arising from its credit and investment operations. Bank has Board level
sub committee, Risk Management Committee, to oversee Bank wide risk management and senior executive level
Credit Risk Management Committee to monitor adherence to policy prescriptions and regulatory directions. CRMC
of the Bank meets once in a month to take stock of Banks credit risk profile based on the reports placed by Credit
Risk Management Cell of Integrated Risk Management Department.
Bank has put in place detailed Loan Policy spelling out various aspects of credit dispensation and credit administration.
Loan policy stipulates measures for avoiding concentration risk by setting prudential limits and caps on taking sector
wise, rating grade wise, and customer-constitution wise exposure. The policy gives specific instruction on valuation
of collaterals .Bank has also put in place guidelines on fixing and monitoring of exposure ceilings to contain risk in
credit and investment exposures. The Internal Capital Adequacy Assessment Process (ICAAP) periodically conducted
by the Bank takes care of the residual risk assessment and also adequacy of capital under Basel II norms.
1.2 Scope and nature of risk reporting / measurement systems:
Bank has developed comprehensive risk rating system that serves as a single point indicator of diverse risk factors of
counterparty and for taking credit decisions in a consistent manner. Risk rating system is drawn up in a structured
manner, incorporating different factors such as borrower specific characteristics, industry specific characteristics etc.
Risk rating is made applicable for loan accounts, whether funded or non-funded, with total limits above `2.00 lakhs.
Bank uses different rating models for different types of exposures. Rating model used for infrastructure exposures
and corporate exposures are comprehensive in structure whereas model used for small exposures in the range of
`2.00 lakhs to `50.00 lakhs is relatively simple in structure. Retail advances are rated using scoring model. At present
separate scoring models are used for rating Home loans, Auto loans and Property Power loans. Bank also uses a
separate rating model for rating its investment exposures. Bank is undertaking annual validation of its rating model
for exposures of `5.00 Crores and above and is also conducting migration and default rate analysis for all loans of
`50.00 lakhs and above.
Rating process and rating output are used by the Bank in sanction and pricing of its exposures. Bank also conducts
annual credit rating of its exposures and the findings are used in annual migration study and portfolio evaluation.
Credit facilities are sanctioned at various levels in accordance with the delegation approved by the Board. The
exercise of delegation and credit rating assigned by the sanctioning authority are subjected to confirmation by a
different authority. Bank has also operationalised pre-sanction risk vetting of exposures of `5.00 Crores and above
by independent Integrated Risk Management Department. Risk rating and vetting process being done independent
of credit appraisal function ensures its integrity and independency.
Credit audit is being conducted at specified intervals. Bank has made reasonably good progress in implementing all
available instruments of credit risk mitigation.
1.3 Policies for hedging / mitigating risk and strategies and processes for monitoring the continuing effectiveness
of hedges/ mitigants:
Banks Credit Risk Management Policy also stipulates various tools for mitigation of credit risk and collateral
management. Investment Policy of the Bank covers risk related to investment activities of the Bank and it prescribes
prudential limits, methods of risk measurement, and hedges required amount in mitigation of risk arising in
investment portfolio. Credit Risk Management Committee at senior executive level and Risk Management Committee
108
at Board level monitor, discuss, evaluate and review risk mitigation levels and effectiveness of mitigation measures.
Risk rating process by itself is an integral part of processes of selection of clients and sanction of credit facilities.
Exercise of delegation for sanction of fresh loans or renewal/review of existing exposure by field level functionaries
is permitted only for borrowers above a pre-specified rating grade. Entry-level restrictions are further tightened
in certain sectors when market signals need for extra caution. Rating of an exposure awarded by an official is
confirmed by another official to ensure its integrity.
2. Market risk
The Bank monitors market risk through risk limits and Middle Office in operationally intense areas. Detailed policies
like Asset Liability Management Policy, Investment Policy, Derivatives Policy etc., are put in place for the conduct of
business exposed to market risk and also for effective management of all market risk exposures.
The policies and practices also take care of monitoring and controlling of liquidity risk arising out of its banking and
trading book operations.
Bank has put in place regulatory/ internal limits for various products and business activities relating to trading
book. Bank also subjects investment exposures to credit rating. Limits for exposures to counterparties, industries
and countries are monitored and risks are controlled through Stop Loss Limits, Overnight Limit, Daylight Limit,
Aggregate Gap Limit, Individual Gap Limit, Inter-Bank dealing and investment limits etc. Parameters like Modified
Duration, VaR etc are also used for risk management and reporting.
Bank has an independent Mid Office working on the floor of Treasury Department for market risk management
functions like onsite monitoring of adherence to set limits, independent valuation and reporting of activities. This
separate desk monitors market/operational risks in treasury/forex operations on a daily basis and reports directly to
the Head of IRMD.
Asset Liability Management Committee (ALCO), also known as Market Risk Management Committee, is primarily
responsible for establishing market risk management and asset liability management in the Bank, procedures
thereof, implementing risk management guidelines issued by the regulator, best risk management practices followed
globally and monitoring adherence to the internal parameters, procedures, practices/policies and risk management
prudential limits.
Policies for hedging/ mitigating risk and strategies and processes for monitoring the continuing effectiveness of
hedges / mitigants are discussed in ALCO and based on the views taken by/ mandates given by ALCO, hedge deals/
mitigation steps are undertaken.
Liquidity risk of the Bank is assessed through Statement of Structural Liquidity and through Statement of Short Term
Dynamic Liquidity. The liquidity profile of the Bank is measured on a static basis using the Statement of Structural
Liquidity, and on a dynamic basis using statement of Short Term Dynamic Liquidity. Structural liquidity position is
assessed on a daily basis and dynamic liquidity position is assessed on a fortnightly basis.
Additional prudential limits on liquidity risk fixed as per ALM policy of the Bank are also monitored by ALCO on a
quarterly basis. Interest rate risk is analyzed from earnings perspective using Traditional Gap Analysis and economic
value perspective using Duration Gap Analysis on a monthly basis. Based on the analysis, steps are taken to minimize
the impact of interest rate changes.
Advance techniques such as Stress testing, sensitivity analysis etc. are conducted periodically to assess the impact of
various contingencies.
3. Operational risk
Bank has put in place detailed framework for Operational Risk Management with a well-defined ORM Policy.
Operational Risk Management Committee (ORMC) at the executive level oversees bank wide implementation of
Board approved policies and processes in this regard. All new schemes/products of the Bank are risk vetted from the
point of view of operational risk, before implementation.
Various tools, controls and mitigation measures implemented for management of operational risk are being reviewed
109
and updated on a regular basis, to suit the changes in risk profile. Bank has also put in place a comprehensive bank
wide Business Continuity Plan to ensure continuity of critical operations of the Bank covering all identified disasters.
Bank has started collection of internal operational loss data from Fiscal 2006-07. In the year 2009, Bank has
introduced separate accounting of operational risk events to enhance transparency and to enable effective
monitoring of loss events. Well-designed system for reporting identified loss events and data in the most granular
form is put in place. Operational Risk Management Cell is the central repository for operational loss data of the Bank.
Consolidation and analysis of loss data is placed before the Operational Risk Management Committee on a quarterly
basis.
Bank is using insurance for mitigating operational risk. Bank is subscribing to the General Bankers Indemnity Policy
as mitigation against loss of securities due to various external events. Bank also mitigates loss in other physical assets
through property insurance.
4. Interest rate risk in Banking Book
Interest Rate Risk is assessed in two perspectives - Earnings perspective using Traditional Gap Analysis conducted
monthly to assess the impact of adverse movement in interest rate on the Net Interest Income (Earnings at Risk)
and economic value perspective using Duration Gap Analysis conducted monthly to assess the impact of adverse
movement in interest rate on the market value of Banks equity.
Interest rate risk in Banking Book is measured and Modified Duration of Equity is evaluated on a monthly basis.
The likely drop in Market Value of Equity for 200 bps change in interest rates is computed and benchmarked under
the Internal Capital Adequacy Assessment Process for computation of Pillar II capital charge for Interest Rate Risk.
Earnings at Risk based on Traditional Gap Analysis are calculated on a monthly basis and adherence to tolerance
limit set in this regard is monitored and reported to ALCO / RMC. The results of Duration Gap Analysis as well as that
of Traditional Gap Analysis including the adherence to tolerance limit set in this regard is monitored and is placed
before ALCO / RMC for approval. Stress tests are conducted to assess the impact of interest rate risk under different
stress scenarios on earnings of the Bank.
Bank has put in place mitigating/hedging measures prescribed by Investment Policy, ALM Policy, Derivatives Policy
and Stress Testing Policy.
Risk profiles are analyzed and mitigating strategies/hedging process are suggested and operationalised by Treasury
Department with the approval of Senior level Committees.
(B) Structure and organization of Banks risk management function
Bank has put in place appropriate organizational framework for bank-wide management of risk on integrated basis. The
structure ensures coordinated process for measuring and managing all types of risk on an enterprise-wide basis to achieve
organizational goals. The structure assures adherence to regulatory stipulations. The structure is designed in tune with the
general guidelines of Regulator.
Banks Board at the top of the structure has assumed overall responsibility for bank-wide management of risk. The Board
decides risk management policies of the Bank and sets risk exposure limits by assessing Banks risk appetite and risk bearing
capacity. Risk Management Committee of the Board assumes responsibility of devising policy and strategy for enterprise-
wide risk management. The Committee also sets guidelines for measurement of risks, risk mitigation and control parameters
and approves institution of adequate infrastructure for risk management. The Committee meets regularly and reviews reports
placed on various risk areas.
There are three support committees of senior executives (CRMC, ALCO also known as MRMC, ORMC) responsible for
implementation of policies and monitoring of level of risks in their respective domains. The Committees are headed by
Managing Director & CEO. Senior executives from respective functional areas and risk management are members of the
Committee. The Committees meet regularly to take stock of various facets of risk management function and place their
110
reports to Board level Risk Management Committee. CRMC meets at least once in a month and ORMC meets at least once in
a quarter. Depending on requirement, ALCO meets very often. Further, an apex level Business Continuity Plan Committee is
constituted with the Managing Director & CEO as its head, to ensure continuity of critical operations of the Bank in the event
of occurrence of disasters.
Single point management of different types of risks bank-wide is made functional through Integrated Risk Management
Department. The Department is responsible for overall identification, measurement, monitoring and control of various types
of risks faced by the Bank in its operations and compliance of risk management guidelines and policies issued by Regulator/
Board. The Department has three separate Cells to look after three broad categories of risks. Independent Mid-Office
functioning on the floor of Treasury Department is reporting directly to the Head of IRMD. The distinct risk Cells report to the
Head of IRMD. The Head of IRMD reports to the Chief Risk Officer, who in turn reports directly to the Managing Director &
CEO.
(C) Structured Risk Wise Disclosures
TABLE DF - 4: CREDIT RISK: GENERAL DISCLOSURES
1.1 Definitions of past due and impaired (for accounting purposes).
1. Non Performing Assets
An asset including a leased asset becomes non-performing when it ceases to generate income for the bank. A non
performing asset (NPA) is a loan or an advance where
a. Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan
b. The account remains out of order as indicated in paragraph 2 below, in respect of an Overdraft /Cash Credit (OD/
CC)
c. The bill remains overdue for a period of more than 90 days in case of bills purchased and discounted
d. The installment of principal or interest thereon remains overdue for two crop seasons for short duration crops
e. The installment of principal or interest thereon remains overdue for one crop season for long duration crops.
An account is classified as NPA if the interest charged during any quarter is not serviced fully within 90 days from the
end of the quarter.
2. Out of Order status
An account is treated as Out of Order if the outstanding balance remains continuously in excess of the sanctioned
limit / drawing power. In cases where the outstanding balance in the principal operating account is less than the
sanctioned limit / drawing power, but there are no credits continuously for 90 days as on the date of Balance Sheet
or credits are not enough to cover the interest debited during the same period, these accounts are treated as out of
order.
3. Overdue
Any amount due to the bank under any credit facility is overdue if it is not paid on the due date fixed by the bank.
4. Credit Risk
a. Inability or unwillingness of the counterparty to pay interest, repay principal or otherwise to fulfill their contractual
obligations under loan agreements or other credit facilities
b. Downgrading of counterparties whose credit instruments the Bank may be holding, causing the value of those
assets to fall.
c. Settlement Risk (possibility that the Bank may pay counterparty and fail to receive the corresponding settlement in
return).
1.2 Discussion of the Banks Credit Risk Management Policy:
Bank has put in place a detailed Credit Risk Management Policy. Goal of this policy is to create a transparent
framework for identification, assessment and effective management of credit risk in all operations of the Bank
and to secure organizational strength and stability in the long run. The policy aims at contributing to the Banks
profitability by efficient and profitable utilization of a prudent proportion of the Banks resources and maintaining
a reasonably balanced portfolio of acceptable risk quality through diversification of credit risks. The policy also
envisages optimizing returns with satisfactory spread over funding cost and overheads.
The policy also deals with structure, framework and processes for effective management of inherent credit risk.
111
2.1 Total gross credit risk exposures (after accounting offsets in
accordance with the applicable accounting regime and
without taking into account the effects of credit risk
mitigation techniques) 71049.57 4930.45 75980.02
2.2 Geographic distribution of exposures (same basis as adopted for
segment reporting adopted for compliance with AS 17)
Overseas
Domestic 71049.57 4930.45 75980.02
2.3 Industry type distribution of exposures (with industry break up
on same lines as prescribed for DSB returns) Please refer Table 4 (A)
2.4 Residual contractual maturity breakdown of assets (maturity
bands as used in ALM returns should be used) Please refer Table 4 (B)
2.5 Amount of NPAs (Gross) 1554.01
Substandard 464.23
Doubtful 1 473.56
Doubtful 2 223.70
Doubtful 3 57.50
Loss 335.02
2.6 Net NPAs 431.94
2.7 NPA ratios
Gross NPAs to gross advances (%) 3.44
Net NPAs to net advances (%) 0.98
2.8 Movement of NPAs (Gross)
Opening balance (balance as at the end of previous Fiscal) 1300.83
Additions during the period 807.00
Reductions 553.82
Closing balance 1554.01
2.9 Movement of provisions for NPAs
Provisions made during the period 200.20
Write off / Write back of excess provisions 157.66
2.10 Amount of Non Performing Investments 4.67
2.11 Amount of provisions held for Non Performing Investments 4.67
2.12 Movement of provisions for depreciation on investments
Provisions made during the period 0.00
Write-off 36.82
Write-back of excess provisions 0.00
Fund based Non-fund based Total
(same as total (Book value,
assets in excluding
Balance Sheet) market related
OBS contracts
and undrawn
exposures)
Amount in ` Crore
112
TABLE 4 (A): INDUSTRY TYPE DISTRIBUTION OF EXPOSURES
1 Mining & Quarrying 251.19 1.88 253.07 0.33
2 Food Processing 1127.70 3.86 1131.56 1.49
3 Beverages & Tobacco 24.72 0.00 24.72 0.03
4 Textiles 907.56 2.64 910.20 1.20
5 Leather & Leather products 62.23 1.59 63.82 0.08
6 Paper & paper products 213.63 1.04 214.67 0.28
7 Petroleum, Coal products & Nuclear Fuels 1426.58 1.24 1427.82 1.88
8 Chemicals & Chem products 838.81 0.48 839.29 1.10
9 Rubber, Plastic &their products 208.95 0.14 209.09 0.28
10 Cement & Cem products 271.19 1.00 272.19 0.36
11 Basic Metal & Metal products 1698.79 12.62 1711.41 2.25
12 All Engineering 439.54 228.07 667.61 0.88
13 Vehicles, parts and Transport Equipments 30.13 0.05 30.18 0.04
14 Gems & Jewellery 135.95 0.00 135.95 0.18
15 Construction 91.12 0.18 91.30 0.12
16 Infrastructure 3757.35 24.36 3781.71 4.98
17 Other Industries 745.15 0.00 745.15 0.98
TOTAL 12230.59 279.15 12509.74
Gross lending exposures, without netting % to gross
Sl. Fund Non-fund Total credit exposure
No. Industry based based as per Table
DF 4 - 2.1
Amount in ` Crore
TABLE 4 (B): RESIDUAL CONTRACTUAL MATURITY BREAKDOWN OF ASSETS
Amount in ` Crore
Cash Balances Balances Investments Advances Fixed Other Total
with RBI with other assets assets
banks
Day 1 528.85 6.40 0.00 34.95 3027.91 0.00 0.46 3598.57
2 - 7 days 0.00 34.48 0.00 1862.71 204.22 0.00 0.00 2101.41
8-14 days 0.00 27.95 411.79 194.65 319.66 0.00 0.00 954.05
15-28 days 0.00 49.29 124.20 532.65 1057.32 0.00 0.00 1763.46
29 days & up to
3 months 0.00 230.56 428.10 2665.02 3160.31 0.00 0.97 6484.96
Over 3 months &
up to 6 months 0.00 221.81 13.40 1564.80 3372.79 0.00 0.57 5173.37
Over 6 months &
up to 1 year 0.00 406.83 0.00 3279.57 5991.87 0.00 0.91 9679.18
Over 1 year &
up to 3 years 0.00 779.04 0.00 4819.13 18224.94 0.00 857.43 24680.54
Over 3 years &
up to 5 years 0.00 40.89 0.00 743.40 3341.97 0.00 0.86 4127.12
Over 5 years 0.00 416.40 0.00 5457.71 5395.71 397.47 819.61 12486.90
Total 528.85 2213.65 977.49 21154.59 44096.70 397.47 1680.81 71049.56
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TABLE DF - 5: DISCLOSURES FOR PORTFOLIOS SUBJECT TO THE STANDARDIZED APPROACH
1.1 For portfolios under the Standardized Approach;
Names of credit rating agencies used, plus reasons for any changes.
Bank has approved all the six External Credit Rating Agencies accredited by RBI for the purpose of credit risk rating of
domestic borrowal accounts that forms the basis for determining risk weights under Standardized Approach.
External Credit Rating Agencies approved are:
1. CRISIL
2. CARE
3. India Ratings and Research Private Limited (Formerly FITCH INDIA)
4. ICRA
5. Brickwork Ratings India Pvt. Ltd (BRICKWORK)
6. SME Rating Agency of India Ltd.(SMERA)
Two new agencies, Brickwork Ratings India Pvt. Ltd & SME Rating Agency of India Ltd. are added by the Bank during
the year for rating the exposures in line with RBI instructions in this regard. Wherever short term rating is not available,
long term rating grade is used to determine risk weight of the short term claims also. However, even if short term rating
is available, it is not used to determine risk weight of long term claims.
With respect to external credit rating, Bank is using long term ratings for risk weighting all long term claims and unrated
short term claims on the same counterparty. However, short term rating of a counterparty is used only to assign risk
weight to all short term claims of the obligor and not to risk weight unrated long term claims on the same counterparty.
For an unrated claim with respect to external credit rating, the Bank is using long term ratings for risk weighting both
unrated long term claims as well as unrated short term claims on the same counterparty. However, short term rating of
counterparty are only used to assign risk weight to unrated short term claims and not unrated long term claims of the
same counterparty.
Wherever external credit rating of guarantor is relevant, the same should be used as the entity rating of the guarantor
and not the rating of any particular issue of the guarantor. Whereas the entity ratings can be used to risk weight specific
unrated credit exposures of counterparty, rating of any credit exposure of the counterparty cannot be used to arrive at
risk weight of that counterparty as guarantor.
1.2 Types of exposure for which each agency is used.
1. Rating by the agencies is used for both fund based and non-fund based exposures.
2. Short Term Rating given by the agencies is used for exposure with contractual maturity of less than or equal to one
year (except Cash Credit, Overdrafts and other Revolving Credits).
3. Long Term Rating given by the agencies is used for exposures with contractual maturity of above one year and also
for Cash Credit, Overdrafts and other Revolving Credits.
4. Rating assigned to one particular entity within a corporate group is not used to risk weight other entities within the
same group.
1.3 Description of the process used to transfer public issue ratings onto comparable assets in the Banking Book;
The ratings available in public domain are mapped according to mapping process as envisaged in RBI guidelines on the
subject.
Issue Specific Ratings (Banks own exposures or other issuance of debt by the same borrower constituent/counterparty) or
Issuer Ratings (borrower constituent/counterparty) are applied to unrated exposures of the same borrower constituent/
counterparty subject to the following:
1. Issue specific ratings are used where the unrated claim of the Bank ranks paripassu or senior to the rated issue / debt.
2. Wherever issuer rating or issue specific ratings are used to risk weight unrated claims, such ratings are extended to
entire amount of claim on the same counterparty.
3. Ratings used for risk weighting purposes are confirmed from the websites of the rating agencies concerned.
114
TABLE DF - 5: DISCLOSURES FOR PORTFOLIOS SUBJECT TO THE STANDARDIZED APPROACH
TABLE DF - 6: CREDIT RISK MITIGATION: DISCLOSURES FOR STANDARDIZED APPROACHES
Risk weight wise details of credit risk exposures (rated and unrated) Below 100 % 39753.27
after risk mitigation subject to the Standardized Approach 100 % 18374.78
(Credit equivalent amount of all exposures subjected to Standardized More than 100 % 6031.55
Approach, after risk mitigation) Deducted 0.00
Total 64159.60
Risk Weight Amount in ` Crore
Disclosures on credit risk mitigation methodology adopted by the Bank that are recognized under the Standardized Approach
for reducing capital requirements for credit risk
1.1 Policies and processes for, and an indication of the extent to which the bank makes use of, on- and off-balance
sheet netting;
Bank has no practice of on-balance sheet netting for credit risk mitigation. Eligible collaterals taken for the exposures
are separately earmarked and the exposures are expressed without netting.
1.2 Policies and processes for collateral valuation and management
Bank has put in place Board approved policy on Credit Risk Management in which Collateral Management and credit risk
mitigation techniques used by the Bank for both risk management and capital computation purposes are separately
included. The Loan policy of the Bank covers various aspects of valuation of collaterals.
1.3 Description of the main types of collateral taken by the Bank
Collaterals used by Bank as risk mitigants for capital computation under Standardized Approach comprise eligible
financial collaterals namely:
1. Cash margin and fixed deposits of the counterparty with the Bank.
2. Gold jewellery of purity 91.6% and above, the value of which is notionally converted to value of gold with 99.99%
purity.
3. Securities issued by Central and State Governments
4. Kisan Vikas Patra and National Savings Certificates.
5. Life Insurance Policies with a declared surrender value of an insurance company regulated by the insurance sector
regulator.
6. Debt securities rated by a chosen Credit Rating Agency in respect of which the bank is sufficiently confident of market
liquidity of the security and where these securities are either:
a. Attracting 100% or lesser risk weight i.e. rated at least BBB (-) when issued by Public sector entities and other
entities including banks and Primary Dealers or
b. Attracting 100% or lesser risk weight i.e. rated at least A3 for short term debt instruments
7. Debt securities not rated by a chosen Credit Rating Agency in respect of which the bank is sufficiently confident of
market liquidity of the security and where these securities are
a. Issued by the bank
b. Listed on a recognized exchange
c. Classified as senior debt
d. All rated issues of the same seniority by the issuing Bank are rated at least BBB (-) or A3 by a chosen Credit Rating
Agency
e. The bank has no information to suggest that the issue justifies a rating below BBB (-) or A3 by a chosen Credit
Rating Agency
8. Units of Mutual Funds regulated by the securities regulator of the jurisdiction of the Banks operation and mutual
funds where
a. A price for the units is publicly quoted daily i.e. where the daily NAV is available in public domain
b. Mutual fund is limited to investing in the permitted instruments listed.
Bank has no practice of monitoring / controlling exposures on a net basis, though Bank is able to determine at any
115
TABLE DF - 6: CREDIT RISK MITIGATION: DISCLOSURES FOR STANDARDIZED APPROACHES
time loans/advances and deposits of the same counterparty. Netting benefit, even if available, is not utilized in capital
computation under Basel II norms.
1.4 Main types of guarantor counterparty and their creditworthiness
Bank considers guarantees, which are direct, explicit, irrevocable and unconditional for credit risk mitigation. Use
of such guarantees for capital computation is strictly as per RBI guidelines on the subject.
Main types of guarantor counterparties are
a. Sovereigns (Central / State Governments)
b. Sovereign entities like ECGC, CGTMSE
c. Banks and Primary Dealers with a lower risk weight than the counter party
Other entities rated AA (-) or better. This would include guarantee cover provided by parent, subsidiary and affiliate
companies when they have lower risk weight than the obligor. The rating of the guarantor should be an entity rating
which has factored in all the liabilities and commitments (including guarantees) of the entity.
1.5 Information on market / credit risk concentrations within the mitigation taken by the Bank
Majority of financial collaterals held by the Bank are by way of own deposits, government securities, Gold, Life
Insurance Policies and other approved securities like NSC, KVP etc. Bank does not envisage market liquidity risk in
respect of financial collaterals except in Gold and Units of Mutual Funds. Bank does not have exposure collateralized
through units of eligible Mutual Funds. Personal loan exposures fully secured only by Gold comes to 5.61% of total gross
credit risk exposures, in which Bank is maintaining adequate margin (minimum 20% to 25%) on value of securities. Risk
mitigation by gold is also taken in the form of agricultural gold loans to the tune of 2.76% of gross credit exposure. Each
and every exposure is reviewed/renewed/closed within a maximum period of 12 months stipulated for such exposures.
Bank could successfully manage the risks posed by sudden reduction in gold price. Measures warranted by the
situation are timely taken. Bank has not experienced any significant market liquidity risk in Gold. Overall, financial
collaterals do not have any issue in realization.
Concentration on account of collateral is also relevant in the case of land & building. Except in the case of housing
loan to individuals, land and building is considered only as an additional security. As land and building is not
recognized as eligible collateral under Basel II Standardized Approach, its value is not reduced from the amount of
exposure in the process of computation of capital charge, and is used only in the case of housing loan to individuals
and non performing assets to determine the appropriate risk weight. As such, there is no concentration risk on account
of nature of collaterals.
2.1 Credit risk exposure covered by eligible financial collaterals
A Loans and advances 8856.59 8164.24 692.35
B Non-market related off balance sheet items 4596.89 755.61 3841.28
C Securitisation exposures - on balance sheet 0.00 0.00 0.00
D Securitisation exposures - off balance sheet 0.00 0.00 0.00
TOTAL 13453.48 8919.85 4533.63
Type of exposure Credit Value of Net
equivalent eligible financial amount
of gross collateral after of credit
exposure haircuts exposure
Amount in ` Crore
2.2 Credit risk exposure covered by guarantees
A Loans and advances 2302.48 2094.62
B Non-market related off balance sheet items 399.36 383.85
C Securitisation exposures - on balance sheet 0.00 0.00
D Securitisation exposures - off balance sheet 0.00 0.00
TOTAL 2701.84 2478.47
Type of exposure Credit Amount of
equivalent guarantee
of gross (Credit
exposure equivalent)
Amount in ` Crore
116
TABLE DF - 7: SECURITISATION: DISCLOSURES FOR STANDARDIZED APPROACH
1.1 General disclosures on securitisation exposures of the Bank;
A Objectives of securitisation activities of the Bank (including the extent to which these activities transfer credit risk
of the underlying securitized exposures away from the Bank to other entities and nature of other risks inherent in
securitized assets)
Banks securitisation exposure is limited to investments in AAA rated securitisation instruments, primarily made
in an earnings perspective and risks inherent in the investment is within reasonable levels.
B Role of Bank in securitisation processes (originator / investor/ service provider/facility provider etc.) and extent of
involvement in each activity.
Bank has invested in rated securitized instruments and such investments are held in its Trading Book. Bank is not
active in securitisation processes in any other manner.
C Processes in place to monitor changes in the credit and market risk of securitisation exposures
Bank is constantly monitoring the changes in credit and market risk profile of securitisation instruments held in the
Trading Book.
D Banks policy governing the use of credit risk mitigation to mitigate the risks retained through securitisation exposures
Bank has not retained any exposure/risk as originator of securitisation transactions.
1.2 Accounting Policies for Securitisation Activities;
A Treatment of transaction (whether as sales or financings)
N.A
B Methods and key assumptions (including inputs) applied in valuing positions retained or purchased
Income from investments in Pass Through Certificates is recognized on accrual basis. Income recognition is subjected
to prudential norms stipulated by Reserve Bank of India in this regard.
C Changes in methods and key assumptions from the previous period and impact of the changes
No change is effected in methods and key assumptions used for valuation of investment in securitized instruments.
D Policies for recognizing liabilities on the balance sheet for arrangements that could require the bank to provide
financial support for securitized assets.
Bank has not entered into any arrangement to provide financial support for securitized assets.
1.3 In the Banking Book, names of ECAIs used for securitisations and the types of securitisation exposures for which
each agency is used.
Bank does not have any securitisation exposure in the Banking Book.
A Total amount of exposures securitized by the Bank Nil
B For exposures securitized, losses recognized by the Bank during the current period
(exposure type wise break up) Nil
C Amount of assets intended to be securitized within a year Nil
D Of (C) above, amount of assets originated within a year before securitisation Nil
Amount in ` Crore
2.1 In the Banking Book
E Securitisation exposures (by exposure type) and unrecognized gain or losses on sale thereon
Nil Nil Nil
TOTAL Nil Nil
Type of exposure Amount Unrecognized
securitized gain / loss
117
TABLE DF - 7: SECURITISATION: DISCLOSURES FOR STANDARDIZED APPROACH
F Aggregate amount of on-balance sheet securitisation exposures retained or purchased by
the Bank (exposure type wise breakup) Nil
G Aggregate amount of off-balance sheet securitisation exposures (exposure type wise breakup) Nil
Amount in ` Crore
I Total amount of deductions from capital on account of securitization exposures Nil
Deducted entirely from Tier I capital-underlying exposure type wise break up Nil
Credit enhancing interest only strips (I/Os) deducted from total capital -
underlying exposure type wise break up Nil
Other exposures deducted from total capital - underlying exposure type wise break up Nil
Amount in ` Crore
H Aggregate amount of securitisation exposures retained or purchased and associated capital charges (exposure type wise
and risk weight wise breakup)
Nil ---- ---- ---- ---- ---- ---- ----
Risk weights
Type of exposure 20% 30% 50% 100% 150% 350% 400%
2.2 In the Trading Book
A Aggregate amount of exposures securitized by the Bank for which the Bank has retained some exposures, which is
subject to Market Risk approach (exposure type wise details)
Nil Nil Nil
Type of exposure Gross Amount
Amount retained
Investment in Pass through Certificates 7.70
C Aggregate amount of off-balance sheet securitisation exposures (exposure type wise breakup) Nil
D Securitisation exposures retained / purchased subject to Comprehensive
Risk Measure for specific risk
Type of exposure Amount in ` Crore
B Aggregate amount of on-balance sheet securitisation exposures retained or purchased by the Bank (exposure type wise
breakup)
Investment in Pass through Certificates 1.80 % 7.70
Type of exposure Capital charges as Exposure
% to exposure (` Cr.)
E Securitisation exposures retained / purchased subject to specific risk capital charge (risk weight band wise distribution)
Investment in Pass through Certificates 1.80% 0.0014
Type of exposure Capital charges as Capital charge
% to exposure (` Cr.)
F Aggregate amount of capital requirements for securitisation exposures (risk weight band wise distribution)
Deducted entirely from Tier I capital - underlying exposure type wise break up Nil
Credit enhancing interest only strips (I/Os) deducted from total capital
- underlying exposure type wise break up Nil
Other exposures deducted from total capital - underlying exposure type wise break up Nil
Type of exposure Capital charge
(` Cr.)
G Total amount of deductions from capital on account of securitisation exposures
118
TABLE DF - 8: MARKET RISK IN TRADING BOOK
1.1 Approach used for computation of capital charge for market risk
Bank has adopted Standardized Duration Approach as prescribed by RBI for computation of capital charge for general
market risk and is fully compliant with such RBI guidelines. Bank uses VaR as an indicative tool for measuring Forex risk
and Equity Price risk. Standardized Duration Approach is applied for computation of General Market Risk for
Securities under HFT category
Securities under AFS category
Open gold position limits
Open foreign exchange position limits
Trading positions in derivatives
Derivatives entered into for hedging trading book exposures
Specific capital charge for market risk is computed based on risk weights prescribed by the Regulator.
1.2 Portfolios covered in the process of computation of capital charge
Investment portfolio under AFS and HFT, Gold and Forex open positions and Derivatives entered for trading and hedging.
TABLE DF - 9: OPERATIONAL RISK
1.1 Approach used for computation of capital charge for operational risk (and for which the Bank is qualified).
Bank has adopted Basic Indicator Approach as prescribed by RBI for computation of capital charge for operational
risk. Bank has initiated steps to move on to the Advanced Measurement Approach in due course.
TABLE DF - 10: INTEREST RATE RISK IN BANKING BOOK (IRRBB)
1.1 Brief description of approach used for computation of interest rate risk and nature of IRRBB.
Interest Rate Risk in Banking Book is computed through Duration Gap Analysis and Traditional Gap Analysis. In
Traditional Gap Analysis, the impact of changes in interest rates on Banks earnings due to changes in Net Interest Income
is assessed. i.e., earnings perspective is taken care in this method whereas in Duration Gap Analysis, the economic value
perspective is taken care of. Duration Gap Analysis measures the level of Banks exposure to interest rate risk in terms of
sensitivity of Market Value of its Equity (MVE) to interest rate movements.
1.2 Key assumptions used in Duration Gap Analysis (DGA) and computation of capital charge for Interest Rate Risk
(including assumptions on prepayment of loans and behavior of non-maturity deposits)
Board approved assumptions as stipulated in applicable policies are used in Duration Gap Analysis and computation of
capital charge for Interest Rate Risk. The following are the key assumptions involved:
1) As indicated by RBI, assets and liabilities are grouped under the broad heads under various time buckets and bucket
wise modified duration of these groups is computed using the suggested common maturity, coupon and yield
parameters.
2) Advances linked to BPLR and Base Rate has been placed in the bucket of 29 days to 3 months as per Banks interest
rate expectations.
3) All the future cash flows (future repricing amount) bucket wise are discounted with midpoint of the bucket
and suggested yield to get more accurate treatment of cash flows. The same present value is considered to arrive
2.1 Minimum capital requirements for market risk as per
Standardized Duration Approach under Basel II 233.73
Foreign exchange risk (including gold) 18.00
Equity position risk 63.15
Amount in ` Crore
119
TABLE DF - 10: INTEREST RATE RISK IN BANKING BOOK (IRRBB)
2.1 Earnings perspective (Traditional Gap Analysis)
Earnings at Risk (EaR) - impact for one year due to
Uniform 1% increase in interest rate (Amt in ` Cr.) 0.00
Uniform 1% decrease in interest rate (Amt in ` Cr.) 216.08
2.2 Economic value perspective - percentage and quantum of decrease in market value of 6.52%
equity on account of 1% uniform increase in interest rate `414.98 Cr
2. Quantitative disclosures - Impact of interest rate risk
2.1 Additional capital requirements under ICAAP
Credit risk -over and above Pillar I capital charge 0.00
Sectoral credit concentration risk 49.49
Geographical credit concentration risk 60.82
Liquidity risk 0.00
2.2 Overall capital adequacy of solo Bank (With aggregate of 14.33%
capital charge under Pillar I and Pillar II of Basel II norms)
Amount in ` Crore
(* Currency wise break up not provided as the turnover in other currencies is less than 5% of total turnover)
TABLE DF - 11: ADDITIONAL DISCLOSURES AS PER ICAAP
1.1 ICAAP is aimed to equip Bank to undertake various risks knowingly and more fruitfully in a fast changing dynamics of
integrated and complex global financial market. The policy proposes process to identify, control, monitor and
appropriately mitigate all possible risks embedded in its operations so as to draw the risk appetite and risk bearing
parameters of the Bank and measure and allocate capital for quantifiable risks. Policy aims the Bank to move towards
more advanced approaches in its capital planning and risk assessment and thereby gather enough strength to
sail safe through normal as well as troubled times, present or future. The document envisages Bank to give sufficient
comfort to the Regulator and all its stakeholders on its stability, growth and earning potential. Policy supports Bank
to maximize shareholders wealth and improve services delivery to the public by following industry level best practices.
ICAAP embodies risk philosophy of the Bank, take risk by choice and not by chance.
at the weighted Modified duration of each asset and liability and further to get the weighted modified duration of
Liabilities and Assets.
4) Banks average standard advances covering Bills Purchased / Discounted, Cash Credits/ Overdrafts and term loans
are mapped to appropriate external ratings. Yield curve for BBB rated corporate bonds is used as a proxy for yield
for Banks average standard advances for arriving at the Modified Duration of Advances.
Usual bucketing applicable to the Statement of Interest Rate Sensitivity is also made applicable to the duration of Equity
calculations. Last bucket for both liabilities and assets is approximated as above 15 years (Maximum 20 years).
1.3 Frequency of measurement of interest rate risk
Measurement and Computation of Interest rate risk in Banking Book and evaluation of Modified Duration of Equity is
done by the Bank on a monthly basis. Bank also calculates on a monthly basis the likely drop in Market Value of Equity
with 200 bps change in interest rates. Earnings-at-Risk is measured on a monthly basis using Traditional Gap Analysis.
120
BALANCE SHEET ABSTRACT AND THE BANKS GENERAL BUSINESS PROFILE
I Registration Details.
Registration No. 368 State Code : 09
Balance Sheet Date: Date Month Year
31 March 2013
II Capital raised during the year (Amount in Rs. Thousands)
Public issue NIL Rights Issue NIL
Bonus Issue NIL Private Placement NIL
III Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands)
Total of Liabilities 710495727 Total Assets 710495727
Sources of Funds:
Paid up Capital 1710587 Reserves and Surplus 61936003
Secured Loans NIL Unsecured Loans 51869908
Deposits 576148633
Application of funds
Net fixed assets 3974746 Investments 211545909
Advances 440967029 Miscellaneous Expenditure NIL
Net Current Assets 35177447 Accumulated Losses NIL
IV Performance of Bank (Amount in Rs. Thousands)
Turnover 68320055 Total Expenditure 53724512
Profit before Tax 11937576 Profit after tax 8381676
Earning per share Rs.49 Dividend @ 90% 1539528
(Annualised) (Proposed)
V Generic Name of Three Services of Bank (as per monetary terms)
Item Code No. (ITC Code) N A
Product Description Banking, Leasing, Merchant Banking
P C John Shyam Srinivasan
Executive Director & CFO Managing Director & CEO
Suresh Kumar Prof. Abraham Koshy Nilesh S Vikamsey
Chairman Director Director
Dr. K Cherian Varghese Sudhir M Joshi K M Chandrasekhar
Director Director Director

KOCHI,
27 April 2013
121
Section 212
Statement Pursuant to Section 212 of The Companies Act, 1956 Related to Subsidiary Companies
Name of Subsidiary The Fedbank Financial Services Limited
1. Financial year of the subsidiary ended on 31st March 2013
2. Share of the subsidiary held by the
Company on the above date:
a) Number and face value 19,00,00,000 equity shares of Rs.10/- each fully paid up
b) Extent of holding 100%
3. Net aggregate amount of Subsidiarys
Profit/(Losses) so far as it concerns the
members of the Holding Company not
dealt with in the Holding Companys accounts
a) for the current financial year (Amount in thousands) `141,180
b) for the previous financial year (Amount in thousands) `(73748)
4. Net aggregate amount of Subsidiarys
profits/(Losses) so far as it concerns the
members of the Holding Company dealt
with in the Holding Companys accounts
a) for the current financial year NIL
b) for the previous financial year NIL
P C John Shyam Srinivasan
Executive Director & CFO Managing Director & CEO
Suresh Kumar Prof. Abraham Koshy Nilesh S Vikamsey
Dr. K Cherian Varghese Sudhir M Joshi K M Chandrasekhar
Director Director Director

KOCHI,
27 April 2013
122
Fedbank Financial Services Limited ANNUAL REPORT 2012-13
Directors Report
Dear Shareholders,
Your Directors have pleasure in presenting the 18th Annual
Report of Fedbank Financial Services Limited (FedFina) with the
audited statement of accounts for the year ended 31st March,
2013.
FINANCIAL HIGHLIGHTS
(` in Crores)
Gross Income 88.79 37.69
Profit/Loss (-) before Depreciation
and Taxation 21.97 (5.21)
Depreciation 3.76 2.08
Profit /Loss (-) before Tax 18.21 (7.29)
Provision for Tax 4.09 0.08
Profit / Loss (-) after Tax 14.12 (7.37)
Appropriations
Transfer to Reserve Fund 2.82 0.00
Transfer to General Reserve 0.00 0.00
Proposed Dividend 7.06 0.00
Corporate Dividend Tax 1.20 0.00
Balance Carried to Balance Sheet (1.52) (4.55)
FINANCIAL AND OPERATIONAL REVIEW
Your Company is primarily into lending against gold ornaments,
property and distributing financial products predominantly for
Federal Bank. The main streams of income for your Company are,
interest income and fee based income. The major expenses for
your Company are interest expense, business sourcing expense
and cost of running the operations.
The Financial Year 2012-13 has been a landmark year for your
company with Gross Income being the highest ever for the
company.
During the financial year 2012-13, gross advances stood at `
459 Crore as against ` 324 Crore in the previous year. During
the financial year 2012-13, your Companys retail disbursements
against gold ornaments were at ` 895 Crore as against ` 696
Crore in the previous year. During the financial year 2012 -13,
your Company launched a new product - Loan against Property
(LAP) in the Second half of the financial year and disbursement
for the same stood at ` 4.37 Crore being a soft launch.
As detailed in the Financial Highlights section above, Gross
Income of your Company increased from ` 37.69 Crore in
2011-12 to ` 88.79 Crore in 2012-13 registering a growth of
136% YOY. Profit before Tax was at ` 18.21 Crore in 2012-13
as compared to ` 7.29 Crore of Loss in 2011-12. The company
grew its network from 142 branches to 172 branches.
There have been a few instances of fraud in gold loans by
way of pledging stolen /spurious gold ornaments involving an
aggregate amount of ` 1.03 Crore, as reported in the Annexure
to Auditors report. The Company has put in place necessary risk
management systems so as to prevent such instances in future.
Adequate provision in respect of the frauds has been made in
the accounts for the year.
Other NBFC specific products are being considered for financing.
Employee Productivity
Business per employee of the company during the year has
grown to ` 11.25 Lakh from 6.81 Lakh in the previous fiscal year.
Profit per employee of the company during the year has grown
to ` 1.79 Lakh from per employee loss of ` 1.33 Lakh in the
previous fiscal year.
Loan Asset Quality
Your Companys gross NPA and Net NPA (Including technically
written off accounts) improved to 1.60% and 0.53% respectively
as against 2.04% and 1.42 % as at the end of March, 2012.
The Company had taken stringent measures to contain fresh
accretion to the NPA portfolio.
APPROPRIATION
Capital and Reserves of the Company as on March 31, 2013
stood at ` 192.29 Crore. During the financial year 2012-13 the
Company transferred ` 2.82 Crore to Statutory Reserve created
U/S 45-IC of Reserve Bank of India Act, 1934.
DIVIDEND
Your Board is pleased to recommend a final dividend of ` 0.37
per equity share on the paid up equity capital of the Company. It
has been recommended after covering unabsorbed depreciation
of the previous financial year. On approval by the Members at
123
the ensuing Annual General Meeting, the said dividend would
be paid to the holding company.
The total cash outflow exclusive of tax on account of equity
dividend for the year 2012-13 would be ` 7.06 Crore.
RESOURCE MOBILISATION
Your Company started diversifying its funding sources and got
sanction from other banks for its resource needs. Commercial
Banks continued their support of the Companys assets growth.
As of 31St March 2013, borrowings from banks were ` 280.02
Crore. Your companys rated short term debt instruments were
also placed with various mutual funds / financial institutions at
competitive rates enabling the company to reduce the overall
cost of liabilities.
CREDIT RATING
The Companys short-term borrowing program from CRISIL
enjoys the highest rating of A1+. A1+ indicates very strong
degree of safety with regard to timely payment of interest and
principal.
PUBLIC DEPOSITS
The Company has not accepted any public deposits and as such,
no amount on account of principal or interest on public deposits
was outstanding as on the date of Balance Sheet.
CAPITAL ADEQUACY RATIO
The Companys capital adequacy ratio was 39.82% as on 31st
March 2013 which is significantly above the threshold limit as
prescribed by the Reserve Bank of India.
INTERNAL CONTROL
The Internal Audit department of the company through a team
of experienced personnel verifies quality of the assets pledged
and the adherence to various risk management practices at the
branch level.
RBI GUIDELINES
The Company has complied with the regulations of Reserve Bank
of India as on 31st March 2013 as are applicable to it as a Non-
Banking Finance Company.
HUMAN RESOURCES
Being a service-oriented company, your company considers
human resources as the biggest asset. As of 31st March 2013,
your company has more than 800 employees on payroll at
various management levels. Your management is committed
to providing a wholesome work environment and support with
training programs and workshops. Average age of employees of
your company is 30 years.
BOARD OF DIRECTORS
The Board consists of five members including the Chairman.
Mr. Suresh Kumar and Mr. Mohammad Yousuf Khan, Directors
are due to retire by rotation at the forthcoming Annual General
Meeting. As per the Articles of Association of the Company and
the Provision of the Companies Act, 1956, Mr. Suresh Kumar and
Mr. Mohammad Yousuf Khan being eligible, offer themselves for
re-appointment.
Mr. Pradosh Kumar Mohapatra, presently Additional General
Manager of The Federal Bank Limited and COO of Company, was
re-appointed as a Manager of the Company with effect from 1st
October 2012 for the period of one year under the provisions
of Companies Act which was confirmed by shareholders in last
general meeting.
Mr. Pradosh Kumar Mohapatra is having a professional banking
career spanning 33 years with exposure in branch banking,
merchant banking, credit, retail liabilities and asset products,
audit and administration. He is a post graduate in science and
holding a degree in law. He is also an associate member of the
Indian Institute of Bankers. He is under deputation from the
parent bank to the subsidiary company since November, 2009.
He was part of the first team of Fedbank Financial Services Ltd.
when the company began its Merchant banking, Leasing/Hire
Purchase and other Non-banking Financial operations during
1995.
At its meeting on the 25th of April 2013, based on
recommendations of the Nomination Committee of Federal
Bank Ltd (FBL), Board has considered and decided that, pending
a strategic review and re-orientation of Fedfinas businesses and
operating models, the leadership of FedFina, during this interim
period, be entrusted to Mr. Ashok Das. He has been appointed as
an Interim President of Fedfina with effect from 8th May 2013.
During the financial year 2012-13, the Board met 4 times.
124
AUDIT COMMITTEE
The Audit committee consists of Mr. P. H. Ravikumar (Chairman),
Mr. P. C. Cyriac and Mr. Shyam Srinivasan. During the financial
year 2012-13, the committee met 4 times.
RISK MANAGEMENT COMMITTEE
The Risk Management committee consists of Mr. P. C. Cyriac,
Mr. P. H. Ravikumar and Mr. Shyam Srinivasan as its members.
NOMINATION COMMITTEE
The Nomination Committee consists of Mr. Suresh Kumar, Mr.
Shyam Srinivasan and Mr. M. Y. Khan as its members.
REMUNARATION COMMITTEE
The Remuneration Committee consists of Mr. Suresh Kumar, Mr.
PH Ravikumar and Mr. PC Cyriac as its members.
AUDITORS
M/s Varma and Varma Chartered Accountants, auditors of the
Company retire at the ensuing Annual General Meeting. They
have confirmed their eligibility and willingness to accept re-
appointment as Auditors.
The Audit Committee and the Board of Directors therefore
recommend M/s. Varma and Varma, Chartered Accountants as
statutory auditors of the company for 2013-14 for the approval
of shareholders.
INFORMATION PURSUANT TO SECTION 217 OF THE
COMPANIES ACT, 1956
A. Conservation of Energy, Technology Absorption and Foreign
Exchange Earning & Outgo: Since the Company does not
own any manufacturing facility, the particulars relating to
conservation of energy and technology absorption stipulated
in the Companies (Disclosures of particulars in the Report of
the Board of Directors) Rules, 1988 are not applicable.
There are no foreign exchange earnings or outgo during the
year under review.
B. Particulars of Employees: The Company does not have any
employee of the category specified in Section 217 (2A) of the
Companies Act, 1956 read with the Companies (Particulars
of Employees) Amendment Rules, 2011.
C. Directors Responsibility Statement: As required by Section
217(2AA) of the Companies Act, 1956, your directors hereby
confirm that:
1. In the preparation of the annual accounts, the applicable
accounting standards have been followed along with
proper explanation relating to material departure
2. The Directors have selected such accounting policies
and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the company
at the end of the financial year and of the profit and loss
of the company for that period;
3. The Directors have taken proper and sufficient care for
the maintenance of adequate accounting records in
accordance with the provision of this Act for safeguarding
the assets of the company and for preventing and
detecting fraud and other irregularities; and
4. The Directors have prepared the annual accounts on a
going-concern basis.
ACKNOWLEDGEMENT
Your Directors wish to express their sincere appreciation for
the co-operation, assistance and guidance received from
the Reserve Bank of India, other Government and regulatory
agencies and rating agencies and The Federal Bank Ltd. The
Board also acknowledges the faith reposed in the Company by
the Companys lending Institutions. Your directors look forward
to their continued support in future.
Your Directors express their deep sense of appreciation of the
commitment, co-operation, active involvement and dedication
displayed by all the employees.
Your Directors thank you for your continued support, trust and
confidence reposed in them.
Date: 04/06/2013 Suresh Kumar
Place: Mumbai Chairman
125
Report on the Financial Statements
We have audited the accompanying financial statements of
FEDBANK FINANCIAL SERVICES LIMITED (the Company),
which comprise the Balance Sheet as at March 31st, 2013, and
the Profit and Loss Statement, and Cash flow Statement for
the year then ended, and a summary of significant accounting
policies and other explanatory information.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation of these financial
statements that give a true and fair view of the financial position,
financial performance in accordance with the Accounting
Standards referred to in sub-section (3C) of section 211 of the
Companies Act, 1956 (the Act). This responsibility includes
the design, implementation and maintenance of internal control
relevant to the preparation and presentation of the financial
statements that give a true and fair view and are free from
material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in
accordance with the Standards on Auditing issued by the
Institute of Chartered Accountants of India. Those Standards
require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of
the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the Companys preparation and fair presentation
of the financial statements in order to design audit procedures
that are appropriate in the circumstances. An audit also includes
evaluating the appropriateness of accounting policies used
and the reasonableness of the accounting estimates made by
management, as well as evaluating the overall presentation of
the financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of our information and according
to the explanations given to us, the financial statements give
the information required by the Act in the manner so required
and give a true and fair view in conformity with the accounting
principles generally accepted in India:
(a) In the case of the Balance Sheet, of the state of affairs of the
Company as at March 31st, 2013;
(b) In the case of the Profit and Loss Statement, of the profit for
the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows for
the year ended on that date.
Report on Other Legal and Regulatory Requirements
As required by the Companies (Auditors Report) Order, 2003
(the Order) issued by the Central Government of India in terms
of sub-section (4A) of section 227 of the Act, we give in the
Annexure a statement on the matters specified in paragraphs 4
and 5 of the Order.
As required by section 227(3) of the Act, we report that:
a. we have obtained all the information and explanations which
to the best of our knowledge and belief were necessary for
the purpose of our audit;
b. in our opinion proper books of account as required by law
have been kept by the Company so far as appears from our
examination of those books and proper returns adequate for
the purposes of our audit have been received from branches
not visited by us;
c. the Balance Sheet, Profit and Loss Statement, and Cash Flow
Statement dealt with by this Report are in agreement with
the books of account and with the returns received from
branches not visited by us;
d. in our opinion, the Balance Sheet, Profit and Loss Statement,
and Cash Flow Statement comply with the Accounting
Standards referred to in subsection (3C) of section 211 of
the Companies Act, 1956;
e. on the basis of written representations received from the
directors as on March 31st , 2013, and taken on record by
the Board of Directors, none of the directors is disqualified
as on March 31st , 2013, from being appointed as a director
in terms of clause (g) of sub-section (1) of section 274 of the
Companies Act, 1956.
For VARMA & VARMA
Chartered Accountants
FRN 004532S
R. KESAVADAS
Place: Mumbai Partner
Date : 25/04/2013 M. No. 23862
To the Members of
Fedbank Financial Services Limited
126
Annexure to the Auditors Report
1 (a) The company is maintaining proper records showing
full particulars, including quantitative details and
situation of fixed assets.
(b) We are informed that the fixed assets of the company
have been physically verified by the management
during the year, which, in our opinion is reasonable
having regard to the size of the company and the
nature of operations of the company and that no
material discrepancies have been noticed on such
verification.
(c) The company has not disposed off a substantial part of
the fixed assets during the year.
2 The company does not have any inventory and hence the
reporting requirements contained in clause number 4 (ii)
of the Order regarding inventory are not applicable to the
company.
3 (a) As informed, the Company has not granted any loans,
secured or unsecured, to companies, firms or other
parties covered in the register maintained under
section 301 of the Companies Act, 1956.
(b) As informed, the Company has not taken any loans,
secured or unsecured, from companies, firms or other
parties covered in the register maintained under section
301 of the Companies Act, 1956.
4 In our opinion and according to the information and
explanations given to us, there is adequate internal control
systems commensurate with the size of the company and
nature of its business for the purchase of fixed assets and
for the sale of services. In our opinion and according to
the information and explanations given to us, there is no
continuing failure to correct major weaknesses in internal
controls.
5 In our opinion, and according to the information and
explanations given to us, the Company has not entered into
any contracts or arrangements referred to in Section 301 of
the Companies Act, 1956.
6 The Company has not accepted any deposits from the
public and hence the directives issued by the Reserve Bank
of India and the provisions of sections 58A, 58AA or any
other relevant provisions of the Companies Act 1956 and
the rules framed there under are not applicable to the
Company.
7 In our opinion, the company has an internal audit system
commensurate with the size of the company and nature of
its business.
8 As per the information and explanations given to us, the
Central Government has not prescribed the maintenance of
cost records under section 209 (1) (d) of the Companies
Act, 1956.
9 (a) As per the information and explanations furnished to
us and according to our examination of the records of
the Company, the Company has been generally regular
in depositing undisputed statutory dues on account of
Provident Fund, Employee State Insurance, Income Tax,
Service Tax and other statutory dues as applicable to
the company with the appropriate authorities during
the year. There are no arrears of undisputed statutory
dues outstanding as at the last day of the financial
year, for a period of more than six months from the
date on which they became payable.
(b) According to the information and explanations given
to us and the records of the company examined by
us, there are no disputed statutory dues which were
outstanding, at the year end.
ANNEXURE REFERRED TO IN PARAGRAPH 1 UNDER THE HEADING REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
OF OUR INDEPENDENT AUDIT REPORT OF EVEN DATE ON THE FINANCIAL STATEMENTS OF FEDBANK FINANCIAL SERVICES
LIMITED FOR THE YEAR ENDED 31
ST
MARCH 2013
127
Annexure to the Auditors Report (Contd...)
10 As per the information and explanations given by the
management, the company has not defaulted in repayment
of its dues to bank during the year.
11 According to the information and explanations given to us
and based on the documents and records produced to us,
the Company has not granted loans and advances on the
basis of security by way of pledge of shares, debentures
and other securities, and hence the reporting requirements
under clause 4(xii) of the Order are not applicable.
12 In our opinion, the Company is not a chit fund or a nidhi
/ mutual benefit fund / society, and hence the reporting
requirements under clause 4(xiii) of the Order are not
applicable.
13 In our opinion, the Company is not dealing in or trading in
shares, securities, debentures and other investments, and
hence the reporting requirements under clause 4(xiv) of the
Order are not applicable.
14 According to the information and explanations given to
us and the records of the company examined by us, the
company has not given any guarantee for loans taken by
others from banks or financial institutions.
and the records of the company examined by us, no term
loans were availed by the company.
16 In our opinion and according to the information and
explanations given to us and the records of the company
examined by us, we report that funds raised on short-term
basis have not been used for making long-term investment.
17 The Company has not made any preferential allotment
of shares to parties or companies covered in the register
maintained under section 301 of the Companies Act, 1956.
18 The company has not issued any debentures, and hence the
reporting requirements under clause 4(xix) of the order are
not applicable.
19 The Company has not raised money by public issues during
the year, and hence the reporting requirements under
clause 4(xx) of the order are not applicable.
and the records of the company examined by us, during
the year the company has reported to the Reserve Bank of
India, instances of frauds noticed at 12 branches of the
Company involving an aggregate amount of `103.45 Lakhs,
in respect of which an amount aggregating to `98.75 Lakhs
is outstanding as at 31st March 2013. We are informed
that legal action for recovery has been initiated in all the
cases and provision has been made in the books of accounts
towards the amount involved.
For VARMA & VARMA
FRN 004532S
R. KESAVADAS
Place: Mumbai Partner
Date : 25/04/2013 M. No. 23862
128
Balance Sheet as at 31st March 2013
Dilip Maloo P. K. Mohapatra
Head - Finance & Company Secretary COO & Manager
As per our separate report of even date attached
For and on behalf of the Board For Varma & Varma
FRN 004532S
Suresh Kumar P. H. Ravikumar Shyam Srinivasan
R.KESAVADAS
Partner
M.No.23862

Place: Mumbai Place: Mumbai
Date: 25/04/2013 Date: 25/04/2013
(in Thousands of `)
Note As at As at
No. 31 March 2013 31 March 2012
I EQUITY AND LIABILITIES
(1) Shareholders Funds
(a) Share Capital 2.1 1,900,000 1,900,000
(b) Reserves & Surplus 2.2 22,940 (35,653)
(2) Non-current Liabilities
(a) Long-term Provisions 2.3 2,526 1,217
(3) Current Liabilities
(a) Short-term Borrowings 2.4 2,800,245 1,596,039
(b) Trade Payables 2.5 51,539 26,892
(c) Other Current Liabilities 2.6 35,134 55,737
(d) Short-term Provisions 2.7 117,623 26,678
Total 4,930,007 3,570,910
II ASSETS
(1) Non-current Assets
(a) Fixed Assets 2.8
(i) Tangible Assets 2.8.1 124,950 106,900
(ii) Intangible Assets 2.8.2 21,100 2,051
(iii) Capital Work-in Progress 2.8.3 - 24,508
(iv) Intangible Assets Under Development 2.8.3 2,739 12,510
(b) Deferred Tax Assets (Net) 2.24 11,887 -
(c) Long-term Loans and Advances 2.9 95,085 56,561
(2) Current Assets
(a) Trade Receivables 2.10 7,981 10,734
(b) Cash and Bank Balances 2.11 102,358 82,130
(c) Short-term Loans and Advances 2.12 4,560,025 3,267,568
(d) Other Current Assets 2.13 3,882 7,948
Total 4,930,007 3,570,910
Significant Accounting Policies and Notes on Accounts 1 & 2
129
Statement of Profit and Loss for the year ended 31st March 2013
FRN 004532S
R.KESAVADAS
Partner
M.No.23862

Date: 25/04/2013 Date: 25/04/2013
(in Thousands of `)
Note Year ended Year ended
No. 31 March 2013 31 March 2012
I. INCOME
(a) Revenue from Operations 2.14 884,553 375,799
(b) Other Income 2.15 3,353 1,091
Total 887,906 376,890
II EXPENDITURE
(a) Employee Benefit Expenses 2.16 212,518 155,957
(b) Financial Costs 2.17 213,494 102,776
(c) Depreciation and Amortization Expenses 2.8 37,608 20,790
(d) Other Expenses 2.18 242,209 170,260
Total 705,829 449,783
III Profit/(Loss) before tax ( I -II ) 182,077 (72,893)
IV Provision for Taxes
(1) Current Tax 52,784 -
(2) Deferred Tax Gain[Refer Note 2.24] (11,887) 853
V Profit/ (Loss) for the Year ( III-IV ) 141,180 (73,746)
Earnings Per Equity Share (EPS) 2.19
(1) Basic 0.74 (1.12)
(2) Diluted 0.74 (1.12)
Significant Accounting Policies and Notes on Accounts 1 & 2
130
Cash Flow Statement for the year ended 31st March 2013
(in Thousands of `)
31 March 2013 31 March 2012
A. CASH FLOW FROM OPERATING ACTIVITIES
Net Profit / (Loss) before tax as per P&L Account 182,078 (72,893)
Adjustments for
Finance Cost 213,494 104,336
Interest on fixed deposits with Federal Bank (2,314) (715)
Provision for Standard Assets 3,001 7,570
Provision for Loss Assets 6,059 14,981
Provision for Sub Standard Asset (1,842) 4,881
Provision for Bad Debts (557)
Depreciation 37,608 20,790
Operating Profit before Working Capital changes 437,527 78,950
Adjustments for Working Capital Changes
Trade Receivables 2,752 15,145.73
Short-term Loans and Advances (1,287,054) (3,205,971)
Other Current Assets 4,045 4,865.69
Long term Loans & Advances (41,419) (21,066)
(Increase)/ Decrease in Receivables (1,321,675) (3,207,026)
Long-term Provisions 1,309 (381)
Trade Payables 24,647 7,465
Other Current Liabilities (3,192) (15,880)
Short-term Provisions 1,697 (1,426)
Increase/(Decrease) in Trade/Other payables 24,461 (10,222)
Cash generated from Operations (859,687) (3,138,298)
Taxes (paid) / refunded (58,186) 3,634
Cash Flow before extraordinary items (917,873) (3,134,664)
Extraordinary items - -
Net Cash inflow / (outflow) from Operating Activities (917,873) (3,134,664)
B. CASH FLOW FROM INVESTMENT ACTIVITIES
Purchase of fixed assets (54,946) (101,508)
Investment in Fixed Deposits (573) 211,854
Interest on fixed deposits 2,335 704
Net Cash inflow / (outflow) from Investment Activities (53,184) 111,050
131
(in Thousands of `)
31 March 2013 31 March 2012
C. CASH FLOW FROM FINANCING ACTIVITIES
Interest Expenses (213,494) (104,336)
Cash Credit 1,204,206 1,596,039
Proceeds from Issue of fresh Equity Shares - 1,550,000
Net Cash inflow / (outflow) from Financing activities 990,712 3,041,703
D. NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS (A+B+C) 19,655 18,090
Opening Balance of Cash and Cash Equivalents 60,851 42,761
Closing Balance of Cash and Cash Equivalents 80,506 60,851
Cash Flow Statement has been prepared in accordance with the Accounting Standard- 3 as per the Companies ( Accounting Standards)
Rules, 2006.
FRN 004532S
R.KESAVADAS
Partner
M.No.23862

Date: 25/04/2013 Date: 25/04/2013
132
1. PRINCIPAL ACCOUNTING POLICIES
1.1. Basis of Preparation of Financial Statements
Financial Statements are prepared under the historical cost convention, in compliance with the provisions of the Companies
Act 1956 and the Accounting Standards as specified in the Companies (Accounting Standards) Rules 2006. Accounting
Policies not stated explicitly otherwise are consistent with generally accepted accounting principles.
1.2. Use of Estimates:
The preparation of financial statements in conformity with the generally accepted accounting principles requires management
to make estimates and assumptions that effect the reported amounts of assets and liabilities and the disclosure of
contingent liabilities on the date of the financial statements and the reported amount of revenue and expenses during
the reporting period. Actual result could differ from those estimates. Any revision to accounting estimates is recognized
prospectively.
1.3. Revenue Recognition:
Revenue is recognized as and when it is earned and no significant uncertainty exists as to its realization or collection.
Interest Income is recognized on accrual basis, except in case of interest on non-performing assets which are recognized on
receipt basis. Overdue charges are recognized when the company is certain of its realization.
Income from Logo-sharing (Display of Logo on website) is recognized pro-rata over the period of contract.
Exclusivity Fees (for providing services exclusively to the clients) is recognized in the year in which right to receive the same is
established subject to volume of business generated.
1.4. Fixed Assets and Depreciation:
Tangible Assets:
Fixed Assets are stated at their cost of acquisition less accumulated depreciation and impairment losses, if any.
Computers are depreciated using SLM @ 33.33% as against 16.21% as prescribed under Schedule XIV of the Companies
Act, 1956.
Leasehold improvements are depreciated @ 18.10% using WDV method.
Depreciation on other assets is provided, pro-rata for the period of use, using WDV method at the rates and in the manner
prescribed in the said schedule.
Intangible Assets:
Intangible assets include computer software which are acquired, capitalized and amortized on an SLM basis over the
estimated useful lives of 3 years on a pro rata basis.
1.5. Employee Benefits:
a) All employee benefits payable wholly within twelve months of rendering the service are classified as short term employee
benefits and the undiscounted amount are recognized as an expenses in the Profit & Loss Statement of the year in which
the related service is rendered.
b) The company has defined contribution plans for employees comprising of Provident Fund and Employee State Insurance.
The contributions paid/payable to these plans during the year are charged to Profit & Loss Statement for the Year.
c) The net present value of the obligation for gratuity benefits , which is a defined benefit plan, as determined on
independent actuarial valuation, conducted annually using projected unit credit method, as adjusted for unrecognized
past services cost, if any, is recognised in the accounts. Actuarial gains and losses are recognised in full in the Profit &
Loss Statement for the period in which they occur.
d) The company has a scheme for compensated absences for employees, the liability of which is determined on the basis of
an independent actuarial valuation carried out at the end of the year, using the projected unit credit method. Actuarial
gains and losses are recognised in full in the Profit and Loss Statement for the period in which they occur.
133
1.6. Provision for Taxes:
Income tax is accounted in accordance with Accounting Standard on Accounting for Taxes on Income (AS-22), which
includes current taxes and deferred taxes. Provision for current tax is made based on the tax payable under the Income Tax
Act, 1961.
Deferred tax on account of timing difference between taxable and accounting income is accounted using the tax rates
and the tax laws enacted or substantively enacted by the balance sheet date. Deferred tax assets in respect of unabsorbed
depreciation or carried forward losses are recognised if there is virtual certainty of realisation of such assets. Other deferred
tax assets are recognised to the extent there is reasonable certainty of their realisation.
1.7. Borrowing cost
Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that takes a substantial
period of time to get ready for its intended use are capitalized. Other borrowing costs are recognized as expenditure for the
period in which they are incurred.
1.8. Impairment of assets.
The company assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. As asset
is identified as impaired, when the carrying value of the asset exceeds its recoverable value. Based on such assessment,
impairment loss, if any, is charged to the Profit & Loss Statement in the period in which, an asset is identified as impaired.
The impairment loss recognised in the prior accounting periods is reversed if there has been a change in the estimate of
recoverable amount.
1.9. Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognised when the company has a present obligation as a result of a past event, for which it is probable
that a cash outflow will be required and a reliable estimate can be made of the amount of the obligation. Provisions are
not discounted to its present value and are determined based on management estimate required to settle the obligation
at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the correct management
estimates.
Contingent Liabilities are disclosed when the company has a possible obligation or a present obligation and it is probable
that a cash flow will not be required to settle the obligation.
Contingent assets are neither recognised nor disclosed in the accounts.
1.10. Advances:
Advances are classified as Performing Assets and Non-performing Assets and Provisions required are made as per the
guidelines of the Reserve Bank of India on matters relating to Prudential Norms as applicable to Non-banking Financial (Non-
Deposit Accepting or Holding) Companies, Directions, 2007.
1.11. Segment Reporting:
The company has classified its operations into two segments Distribution (Marketing of Financial Products) and Retail
Finance. For presentation of segment information, directly attributable income and assets are allocated as such and the other
income, expenses and other assets and liabilities are apportioned on appropriate basis.
1.12. Earnings per share:
The company reports basic and diluted earnings per share in accordance with Accounting Standard 20 on Earnings per
Share. Basic earnings per share are computed by dividing the net profit or loss for the year attributable to equity share
holders (after deducting attributable taxes) by the weighted average number of Equity Shares outstanding during the period.
Diluted earnings per share are computed by dividing the net profit or loss for the year attributable to equity share holders
(after deducting attributable taxes)by the weighted average number of Equity Shares outstanding during the period as
adjusted for the effects of all diluted potential Equity Shares outstanding as at the year end.
134
2. NOTES ON ACCOUNTS
Authorised Capital:
19,00,00,000 (19,00,00,000) Equity Shares of `10 each 19,00,000 19,00,000
Issued, Subscribed and Paid Up Capital:
19,00,00,000 (19,00,00,000) Equity Shares of ` 10 each fully paid-up. 19,00,000 19,00,000
(in Thousands of `)
As at As at
2.1. SHARE CAPITAL
No Of Shares Outstanding at the beginning of the year 1,90,000 35,000
Add Additional Shares Issued During the Year - 1,55,000
Less Shares Forfeited/Bought Back During the year - -
No Of Shares Outstanding at the end of the year 1,90,000 1,90,000
(in Thousands of `)
As at As at
2.1.1 Reconciliation of the number of shares issued, subscribed and paid up at the beginning and at the end of
the year
2.1.2 Number of shares held by each shareholder holding more than 5% shares in the company:
Equity Shares Held by holding company
- Federal Bank Limited 1,90,000 1,90,000
(in Thousands of `)
As at As at
Terms/rights attached to Equity shares:
The Company has only one class of Equity shares having face value of ` 10 each/- per share. Each holder of Equity shares is entitled to
one vote per share. All of the above shares are held by the Holding Company, The Federal Bank Ltd and its nominees.
In the event of liquidation of the company, the holders of Equity shares will be entitled to receive remaining assets of the company,
after distribution of all preferential amounts. The distribution will be in proportion to the number of Equity shares held by the
shareholders.
2.2. RESERVES & SURPLUS
(a) Reserves
i) Statutory Reserve
Balance at the beginning of the year 8,412 8,412
Add: Transferred from Profit & Loss Statement (Note 2.2.1) 28,236 -
36,648 8,412
ii) General Reserve
Balance at the beginning of the year 1,470 1,470
(b) Surplus in the Profit and Loss Statement
Balance at the beginning of the year (45,535) 28,211
Add : Net Profit / (Loss) after tax for the year 1,41,180 (73,746)
Less : Appropriations
Transfer to Statutory Reserve(Note 2.2.1) (28,236) -
Proposed Final Equity Dividend Amount Per Share ` 0.37 (Previous Year Nil) (Note 2.2.2) (70,590) -
Tax on Proposed Equity Dividend (11,997) -
(15,178) (45,535)
Total of Reserves & Surplus 22,940 (35,653)
(in Thousands of `)
As at As at
2.2.1. Statutory Reserve represents the Reserve fund created under Section 45-IC of the Reserve Bank of India Act, 1934.During the
current financial year an amount of Rs 28,236 (previous year Nil) representing 20% of net profit is transferred to the fund for
the year.
135
Provision for employee benefits (Refer Note 2.3.1)
Provision for Compensated Absences 1,809 883
Provision for Gratuity 717 334
2,526 1,217
(in Thousands of `)
As at As at
2.3. LONG TERM PROVISIONS
2.2.2. The dividend proposed by the Board of Directors is subject to the approval of the share holders in the ensuing Annual General
meeting.
Provident Fund 10,138 5,481
Employee State Insurance 3,012 1,777
Total 13,150 7,258
(in Thousands of `)
31 March 2013 31 March 2012
2.3.1. Disclosures of employee benefits as required by the accounting standard 15 (revised) employee benefits are as under:
a) Defined Contribution Plan:
During the year, the Company has recognized in the Profit and Loss Statement in Note 2.16 - Employee Benefit Expenses.
2.2. RESERVES & SURPLUS (Contd...)
b) Defined Benefit Plan :
Gratuity (Unfunded) & Long term employee Benefits- Compensated absences-Vesting (Unfunded).
i Reconciliation of opening and closing
balances of defined benefit Obligation :
1 Defined Benefit Obligation as at the
beginning of the year 400 763 2168 1,393
2 Current Service cost 594 295 3,357 1,949
3 Interest Cost 32 61 178 97
4 Actuarial (gains) / losses (252) (719) (1581) (928)
5 Benefits paid - - (176) (343)
6 Short Term Compensated Absence Liability - - 640
7 Present value of Defined Benefit Obligation
as at the end of the year 774 400 (4,586) 2,168
ii Changes in the fair value of plan assets
representing reconciliation of opening and
closing balances thereof are as follows :
1 Fair value of Plan assets as at the
beginning of the year - - - -
2 Expected return on plan assets - - - -
3 Actuarial gains/ (losses) - - - -
4 Actual contributions - - 176 343
5 Benefits paid - - (176) (343)
6 Fair value of Plan assets as at
the end of the year. - - - -
8 Funded Status (774) (400) (4,586) (2,168)
(in Thousands of `)
Gratuity Compensated Absences
Particulars Current year Previous year Current year Previous year
136
2.3. LONG TERM PROVISIONS (Contd...)
b) Defined Benefit Plan : (Contd...)
iii Reconciliation of Present Value of Defined
Benefit Obligation and fair value of plan
assets showing amount recognized in
the Balance Sheet :
1 Present value of Defined Benefit Obligation 774 400 4,586 2,168
2 Fair value of plan assets - - - -
3 Funded status (774) (400) (4,586) (2,168)
4 Unrecognized Past Service Costs - - - -
5 Net asset/(Liability) recognized in
Balance Sheet (774) (400) (4,586) (2,168)
iv Expenses recognized in the profit and
loss statement for the year ended
31st March,2013
1 Current Service cost 594 295 3,357 1,949
2 Interest cost 32 61 178 97
3 Expected return on plan assets - - - -
4 Past Service cost - - - -
5 Actuarial Losses/(Gains) (252) (719) (1,581) (928)
7 Total expense recognized in the
Profit & Loss Statement 374 (363) 2,594 1,118
v Principal Actuarial Assumptions :
1 Discount Rate (%) 7.95% 8.57% 7.95% 8.57%
2 Expected Return on plan assets (%) - - - -
3 Salary Escalation (%) 10% 10% 10% 10%
4 Mortality LIC (1994-96) LIC (1994-96) LIC (1994-96) LIC (1994-96)
Ultimate Ultimate Ultimate Ultimate
vi Experience History
1 (Gain)/Loss due on obligation due to
change in assumption 154 (475) 172 (73)
2 Experience (Gain)/Loss on Obligation (406) (244) (1753) (855)
3 Actuarial Gain/(Loss) on plan assets - - - -
(in Thousands of `)
Gratuity Compensated Absences
The Discount rate is based on the benchmark yields available on Indian Government bonds as at the Balance Sheet date with
terms matching that of the liabilities and the salary increase rates takes into account the inflation, seniority, promotion and
Loans Repayable on demands from Banks :
From IDBI.( Note No 2.4.1) 3,20,030 2,50,082
From Karur Vysya Bank.( Note No 2.4.1) 2,00,514 -
Loans and advances from related parties :
Cash Credit From Federal Bank Ltd.( Note No 2.4.1) 22,79,701 13,45,957
28,00,245 15,96,039
(in Thousands of `)
As at As at
2.4. SHORT TERM BORROWINGS
2.4.1. The above facilities are secured by way of Pari passu charge on Gold Loan Receivables.
137
Trade Payables ( Refer Note 2.5.1) 51,539 26,892
51,539 26,892
(in Thousands of `)
As at As at
2.5. TRADE PAYABLES
2.5.1. The company has taken steps to identify the suppliers who qualify under the definition of micro and small enterprises as
defined under the Micro, Small and Medium Enterprises Development Act, 2006. Based on the available information, there are
no balances outstanding as payable to such suppliers at the year end.
Liability Towards Capital Contracts/goods 4,090 21,502
Security Deposit Rental (Refer Note 2.6.1) 1,610 3,072
Other Payables:
Withholding Tax and Other Statutory Dues 4,707 3,396
Employee Related Payables 16,703 2,324
Payable for Expenses 7,774 25,443
Others 250 -
35,134 55,737
(in Thousands of `)
As at As at
2.6. OTHER CURRENT LIABILITIES
2.6.1. Security Deposits include `1,610 thousands (previous year `30,72 thousands) received from The Federal Bank Ltd (Holding company).
Provision for Employee benefits: (Refer Note No 2.3.1)
Provision for Compensated Absences 2,777 1,628
Provision for Gratuity 57 67
Other Provisions (Refer Note 2.7.1)
Provision Against Non Performing Assets (Refer Note 2.7.2) 21,517 17,300
Contingent Provision Against Standard Assets (Refer Note 2.7.3) 10,685 7,683
Proposed Equity Dividend (Note No 2.2.1) 70,590 -
Provision for Tax on proposed Equity Dividend 11,997 -
1,17,623 26,678
(in Thousands of `)
As at As at
2.7. SHORT TERM PROVISIONS
2.7.1. Movement of Provision for Standard and Non-Performing Assets
As per the non Banking Financial (Non Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions,
2007, Company has created provision for Standard assets as well as Non Performing Assets.
Provision for Standard Assets
Standard Assets 42,73,857 30,59,722
Provision at the beginning of the year 7,683 113
Additional provision made during the year 3,001 7,570
Provision at the close of the year 10,685 7,683
Provision for Non-Performing Assets
Secured and Considered Doubtful 32,497 48,808
Un Secured and Considered Doubtful 11,662 12,419
Total Non Performing Assets 44,159 61,227
Provision at the beginning of the year 17,300 -
Additional provision made during the year 4,217 17,300
Provision at the close of the year 21,517 17,300
(in Thousands of `)
As at As at
138
2.7.2. Provision against non Performing Assets have been classified in accordance with RBI Guidelines, and has been made to the
extent specified in such guidelines and has not been netted of against the value of assets disclosed under short term loans and
advances (Note No 2.12).
2.7.3. Contingent Provision of ` 3,017 thousands (` 7,570 thousands) has been made during the current year against standard assets
as per clause 9A of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)
Directions, 2007.
2.7. SHORT TERM PROVISIONS (Contd...)
2.8. FIXED ASSETS
(in Thousands of `)
Gross Block (at cost) Depreciation/Amortisation Net Block
As on Additions Deduction As on As on For the Deduction As on As on As on
1st April for the for the 31st March 1st April Year for the 31st March 31st March 31st March
Description 2012 Year Year 2013 2012 Year 2013 2013 2012
Leasehold Improvements -
Interior Furnishings 74,627 16,882 4,084 87,426 10,887 14,316 587 24,616 62,810 63,740
(18,102) (56,525) - (74,627) (275) (10,612) - (10,887) (63,740) (17,827)
Furniture & Fixtures 22,858 11,479 - 34,337 5,991 4,528 - 10,519 23,818 16,867
(11,258) (11,600) - (22,858) (1,991) (4,000) - (5,991) (16,867) (9,267)
Vehicles - Cars 1,714 998 1,714 998 1,293 210 1,333 170 828 421
(1,714) - - (1,714) (1,146) (147) - (1,293) (421) (568)
Office Equipments 19,280 9,629 115 28,795 3,051 3,002 49 6,004 22,790 16,228
(3,381) (15,898) - (19,279) (1,214) (1,837) - (3,051) (16,228) (2,167)
Computers 14,831 10,514 - 25,345 5,187 5,454 10,641 14,704 9,644
(2,299) (12,532) - (14,831) (1,773) (3,414) - (5,187) (9,644) (526)
Total Tangible Fixed Assets 1,33,310 49,502 5,912 1,76,900 26,409 27,510 1,969 51,950 1,24,950 1,06,900
(36,754) (96,555) - (1,33,309) (6,399) (20,010) - (26,409) (1,06,900) (30,355)
2.8.1. Tangible Fixed Assets
(in Thousands of `)
Gross Block (at cost) Depreciation/Amortisation Net Block
As on Additions Deduction As on As on For the Deduction As on As on As on
1st April for the for the 31st March 1st April Year for the 31st March 31st March 31st March
Description 2012 Year Year 2013 2012 Year 2013 2013 2012
Computer Software 2,863 25,651 28,514 812 6,601 7,413 21,100 2,051
(700) (2,163) (2,863) (32) (780) - (812) (2,051) (668)
Total Intangible Assets 2,863 25,651 - 28,514 812 6,601 7,413 21,100 2,051
(700) (2,163) - (2,863) (32) (780) - (812) (2,051) (668)
2.8.2. Intangible Assets
2.8.3. Capital Work In Progress
Balance as at the beginning of the Year 24,508 9,149 12,510 -
Additions during the Year - 54,393 2,739 12,510
Transferred to Fixed Assets (24,508) (39,034) (12,510) -
(in Thousands of `)
Capital Work In Progress Intangible Assets Under Development
139
Secured & Considered Good:
Loan Against Property 43,399 -
Unsecured & Considered Good:
Capital Advances 60 2,955
Security Deposits - Rental 42,194 44,371
Pre Paid Expenses 591 394
Withholding and Other Taxes Receivables 8,841 8,841
95,085 56,561
(in Thousands of `)
As at As at
2.9. LONG TERM LOANS AND ADVANCES
Trade receivables outstanding for a period less than six months from due date
Other Debts (Refer Note 2.10.1) 7,724 10,734
Due for a period exceeding six months from the date they are due for payment
Unsecured & Considered Good (Refer Note 2.10.1) 257 -
7,981 10,734
(in Thousands of `)
As at As at
2.10. TRADE RECEIVABLES
2.10.1. Trade receivables include amount due from The Federal Bank Ltd (Holding Company) `7,540 thousands (Previous year - `10,734
thousands).
Cash & Cash Equivalents:
- Cash in hand 63,645 55,293
- Current Accounts 16,861 5,558
Other Bank Balances:
- Deposit Accounts (Refer Note No 2.11.1) 21,852 21,279
1,02,358 82,130
(in Thousands of `)
As at As at
2.11. CASH AND BANK BALANCE
2.11.1. Balance in Fixed Deposit Accounts have maturity period of less than or up to twelve months.
140
Secured
(a) Considered Good
Loans against Gold (Note 2.12.1) 42,30,457 30,61,284
Interest Receivable 2,68,904 1,22,106
44,99,361 31,83,390
(b) Considered Doubtful
Loans against Gold (Refer Note 2.7.1 & Note 2.12.1) 32,497 56,955
32,497 56,955
Unsecured
(a) Considered Good
Advance to Employees 202 798
Prepaid Expenses 3,506 3,665
Withholding and Other Taxes Receivables (Net of Provision) 12,177 17,579
Advances for Supplies & Services 620 909
16,505 22,952
(b) Considered Doubtful
Loans against Gold (Refer Note 2.7.1 & Note 2.12.1) 11,662 4,272
11,662 4,272
45,60,025 32,67,568
(in Thousands of `)
As at As at
2.12. SHORT TERM LOANS AND ADVANCES
Interest Receivable on Fixed Deposits 334 355
Service Tax Input Credit Receivable 1,998 145
Reimbursement receivable from the Holding company 1,039 7,272
Other Receivables (Refer Note 2.13.1) 2,004 2,562
Less:- Provision (2,004) (2,562)
Un - Billed Revenue 511 176
3,882 7,948
(in Thousands of `)
As at As at
2.13. OTHER CURRENT ASSETS
Loans granted against collateral of gold Jewellery 42,74,616 31,22,511
Total assets of the Company 49,30,007 35,70,910
Percentage of Loans granted against collateral of gold jewellery to Total Assets 86.71% 87.44%
(in Thousands of `)
As on As on
2.12.1. Disclosure required as per Reserve Bank of India Notification No. DNBS.CC.PD.No. 265/03.10.01/2011-12 dated March 21,2012
2.13.1. Other Receivables represents amounts recoverable pursuant to fraud at one of the branches of the company during the previous
financial year, which is being actively pursued for recovery. Full provision has been made in the accounts as a matter of abundant
caution.
141
(a) Retail Finance
Interest/Other Charges on Gold Loans 8,36,784 2,98,837
Interest/Other Charges on Loan Against Property 1,674 -
(b) Other Financial Services
Commission Income 44,399 55,702
(c) Fees for Provision of Facilities/ Services 1,696 21,260
8,84,553 3,75,799
(in Thousands of `)
2.14. REVENUE FROM OPERATIONS
Interest on fixed deposits 2,314 715
Interest on Income Tax Refunds 834 314
Profit on sale of Fixed assets 73 -
Miscellaneous Income 132 62
3,353 1,091
(in Thousands of `)
2.15. OTHER INCOME
Salaries and other allowances 1,93,826 1,45,857
Contribution to Provident and other Funds 13,151 7,258
Staff Welfare Expenses 5,541 2,842
2,12,518 1,55,957
(in Thousands of `)
2.16. EMPLOYEE BENEFIT EXPENSES
Interest on Cash Credit Facility 52,434 86,893
Discount on Commercial Paper 1,60,704 14,816
Processing Fees 356 1,067
2,13,494 1,02,776
(in Thousands of `)
2.17. FINANCE COSTS
142
Electricity Charges 4,691 2,676
Rent 69,962 46,313
Repairs & Maintenance
Buildings - -
Machinery 536 84
Others 7,518 2,843
Postage, Telephones &Telegram 9,098 5,411
Travelling & Conveyance Expenses 14,099 7,739
Insurance 5,546 1,838
Rates & Taxes 1,939 6,410
Legal & Professional Charges 10,606 3,158
Advertisement & Business Promotion 3,204 3,500
Commission Paid 9,276 12,307
Sourcing Expenses 370 1,845
Office Expenses 4,473 5,069
Printing & Stationery 6,990 3,241
Recruitment Charges 2,580 2,930
Exclusivity Fees refundable (Refer Note 2.18.1) - 7,872
Provision for Loss Assets(Refer Note 2.7.2) 6,059 12,419
Provision for Sub Standard Assets ( Net of Recovery) (1,842) 4,881
Provision for Standard Assets (Note 2.7.3) 3,001 7,570
Provision for Bad Debts ( Net of Recovery) (557) 2,562
Bad Debts Written Off (Note 2.18.2) 26,006 -
Security Expenses 24,323 12,405
Valuation Charges 28,572 14,249
Interest Waive off 3,106 55
Miscellaneous Expenses (Refer Note No 2.18.3) 2,652 2,882
2,42,209 1,70,260
(in Thousands of `)
2.18. OTHER EXPENSES
2.18.1. In the year ended 31st March 2011, The Company had taken credit for the whole of the income from exclusivity fees of `10,000
Thousands receivable from a General Insurance Company under an agreement to provide specified infrastructure facilities
As per the said agreement, in the event the insurance company is unable to generate an agreed level of business, proportionate
exclusivity fees to the extent of short fall of the business shall be refunded to them. Taking in to account the level of business actually
achieved during the one year period ending 29th February 2012, an amount of ` 7,872 Thousands is refundable to insurance
company, which has been recognized as a liability by debit to profit and loss Statement.
2.18.2. During the Financial year, the net balance of ` 26,006 thousands recoverable from the auctioned Gold Loan accounts have been
written off in the Financials.
Audit fees 500 250
Other services 10 150
Out of pocket expenses reimbursed 129 40
Total 639 440
(in Thousands of `)
2.18.3. Miscellaneous Expenses Include Payment to Auditors ( Net of Service Tax)
143
Profit / (Loss) after taxation (` Thousands) 1,41,180 (73,746)
Weighted average No. of Equity Shares (Thousands) 1,90,000 65,750
Basic & Diluted Earnings per Share (`) 0.74 (1.12)
(in Thousands of `)
2.19. EARNINGS PER SHARE (BASIC AND DILUTED):
(i) List of Related parties and the nature of relationship:
a) Holding Company
b) Key Management Personnel
P K Mohapatra, Manager
2.20. RELATED PARTY DISCLOSURES
(a) Holding Company
Transactions during the year:
Interest Income from Fixed Deposits 2,315 715
Commission Income 41,414 52,858
Interest paid on Cash Credit Facility 50,908 86,811
Re-imbursements of Expenses by Holding Company 10,432 31,432
Rent Recovered 1,060 3,360
Rent paid 3,724 4,681
Security deposit adjusted - 24
Electricity Expenses paid 30 69
Reimbursement of Salary to Holding Company 1,243 1,254
Proposed Dividend 70,590 -
Closing Balances in:
- Fixed Deposit Accounts 21,851 21,279
- Interest On Fixed Deposit with Bank 335 -
- Current Account Receivable/(Payable) 15,073 2,613
- Borrowings Cash credit facility 22,79,701 13,45,957
- Account Receivable 9,089 18,006
- Account Payable 1,297 644
- Security Deposit ( Sub-lease of Premises) 1,610 3,072
(b) Key Management Personnel
Remuneration to Manager 1,996 732
(in Thousands of `)
(ii) Transactions -
144
In terms of the Accounting Standard 17, Segment Reporting notified under the Companies (Accounting Standard) Rules, 2006, the
companys operations are classified into two business segments as described in the accounting policy and the information on the
same is as under:
2.21. SEGMENT INFORMATION
The Company has only Domestic Geographic Segment.
(in Thousands of `)
Distribution Retail Finance Total
Year ended Year ended Year ended Year ended Year ended Year ended
Business Segments 31.03.2013 31.03.2012 31.03.2013 31.03.2012 31.03.2013 31.03.2012
Segment Revenue 44,399 55,702 8,38,458 2,98,837 8,82,857 3,54,539
Segment Expenditure 53,881 90,350 3,69,149 2,06,267 4,23,031 2,96,617
Allocated Expenditure 5,682 6,312 37,858 33,245 43,541 39,556
Result (15,164) (40,960) 4,31,451 59,325 4,16,286 18,366
Unallocated Income (Net) (24,218) 12,047
Interest Income 3,148 1,029
Interest Expenses 2,13,138 1,04,335
Profit before Tax 1,82,078 (72,893)
Income Taxes 40,897 853
Net Profit 1,41,180 (73,746)
Other Information
Segment Assets 21,441 31,276 48,24,693 34,83,809 48,46,134 35,15,085
Unallocated Assets 83,873 55,824
Total Assets 21,441 31,276 48,24,693 34,83,809 49,30,007 35,70,909
Segment Liabilities 6,275 8,770 28,43,197 16,62,457 28,49,473 16,71,227
Unallocated Liabilities 1,57,594 35,337
Total Liabilities 6,275 8,770 28,43,197 16,62,457 30,07,067 17,06,564
Capital Expenditure 853 157 22,294 98,173 23,147 98,330
Unallocated Capital Expenditure 31,800 28,257
Depreciation/ Amortisation 958 1,342 36,650 18,918 37,608 20,260
Unallocated Depreciation - 530
2.22. Schedule appended to the Balance Sheet of a non-deposit taking non-banking financial company (as required in terms of
paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank)
Directions, 2007)
Liabilities side :
1 Loans and advances availed by the non-banking financial company
inclusive of interest accrued thereon but not paid:
(a) Debentures : Secured NIL NIL
: Unsecured NIL NIL
(other than falling within the meaning of public deposits*)
(b) Deferred Credits NIL NIL
(c) Term Loans NIL NIL
(d) Inter-corporate loans and borrowing NIL NIL
(e) Commercial Paper NIL NIL
(f) Cash Credit Facility 28,00,245 NIL
(in Thousands of `)
Amount Amount
Particulars Outstanding Overdue
145
2.22. (Contd...)
Assets side :
2. Break-up of Loans and Advances including bills receivables
[other than those included in (4) below] :
(a) Secured 42,73,857
(b) Unsecured 44,159
3 Break up of Leased Assets and stock on hire and other assets
counting towards AFC activities
(i) Lease assets including lease rentals under sundry debtors :
(a) Financial lease NIL
(b) Operating lease NIL
(ii) Stock on hire including hire charges under sundry debtors:
(a) Assets on hire NIL
(b) Repossessed Assets NIL
(iii) Other loans counting towards AFC activities
(a) Loans where assets have been repossessed NIL
(b) Loans other than (a) above NIL
4 Break-up of Investments :
Current Investments :
1 Quoted :
(i) Shares : (a) Equity NIL
(b) Preference NIL
(ii) Debentures and Bonds NIL
(iii) Units of mutual funds NIL
(iv) Government Securities
(v) Others (please specify) NIL
2 Unquoted :
(b) Preference NIL
(iv) Government Securities NIL
Long Term investments :
1. Quoted :
(b) Preference NIL
2. Unquoted :
(b) Preference NIL
(in Thousands of `)
Amount
Particulars Outstanding
146
2.22. (Contd...)
1. Related Parties
(a) Subsidiaries NIL NIL
(b) Companies in the same group NIL NIL
(c) Other related parties NIL NIL
2. Other than related parties NIL NIL
Total NIL NIL
Market Value / Book Value
Break up or fair (Net of
Category value or NAV Provisions)
6 Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted):
(i) Gross Non-Performing Assets
(a) Related parties Nil
(b) Other than related parties 44,159
(ii) Net Non-Performing Assets
a) Related parties Nil
b) Other than related parties 22,642
(iii) Assets acquired in satisfaction of debt Nil
(in Thousands of `) 7. Other information
% %
i) CRAR 39.82 54.15
ii) CRAR - Tier I capital 39.59 53.92
iii) CRAR - Tier II Capital 0.22 0.23
As at As at
2.23.1. Capital to Risk Assets Ratio (CRAR):
2.23. Disclosure in balance sheet required as per Reserve Bank of India Circular No. DNBS (PD) CC No 125 / 03.05.002/2008-09 dated
August 1, 2008 issued by the Reserve Bank of India.
5. Borrower group-wise classification of assets financed as in (2) and (3) above :
1. Related Parties
(a) Subsidiaries NIL NIL NIL
(b) Companies in the same group NIL NIL NIL
(c) Other related parties-Holding Company NIL NIL NIL
2. Other than related parties 42,73,857 44,159 43,18,015
Total 42,73,857 44,159 43,18,015
(in Thousands of `)
Amount net of provisions*
Category Secured Unsecured Total
* Contingent Provision on Standard Assets has not been netted off as per prudential norms
147
2.23. (Contd...)
a) Direct exposure
(i) Residential Mortgages -
Lending fully secured by mortgages on residential property 28,524 -
(ii) Commercial Real Estate -
Lending secured by mortgages on commercial real estates
(office buildings, retail space, multipurpose commercial premises) 14,875 -
b) Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB)
and Housing Finance Companies (HFCs). - -
(in Thousands of `)
2.23.2. Exposure to Real Estate Sector
2.23.3. Asset Liability Management :
Maturity pattern of certain items of assets and liabilities as at 31st March, 2013. (As compiled by the management)
Figures in brackets are related to the previous year.
(in Thousands of `)
1 day to 1 Month 2 Months 3 Months Over Over Over Over Total
30/31 days to to to 6 Months 1 Year to 3 Years to 5 Years
(One 2 Months 3 Months 6 Months to 3 years 5 years
Month) 1 Year
Liabilities :
Borrowings from banks - - - 2,00,514 25,99,731 - - - 28,00,245
(15,96,039) (15,96,039)
Market Borrowings - - - - - - - - -
Assets :
Advances (Considered good) 8,67,944 12,55,304 6,99,637 10,31,864 3,77,793 5,353 7,062 28,900 42,73,857
(7,01,916) (7,37,338) (3,70,640) (7,40,582) (5,10,808) - - - (30,61,284)
Investments - - - - - - - - -
( -) ( -) ( -) ( -) ( -) ( -) ( -) ( -) ( -)
Deferred Tax Asset:
Timing Difference on account of :
Depreciation on Fixed Assets - 2,516 2,516
Disallowances under IT
- Leave Encashment - 1,487 1,487
- Gratuity - 251 251
- Provision for Bad Debts 650 650
- Provision for Sub Standard Assets - 6,981 6,981
Net Deferred Tax Asset - 11,887 11,887
Deferred Tax Asset/(Liability)
Category At the Credits/(Charge) At the
beginning during the close of the
of the year year the year year
The Company has not recognized any deferred tax asset on provision for standard assets as the Company is of the opinion that such
provision does not give rise to a timing difference which has a reasonable certainty of its reversal in future.
2.24. As per the requirement of the Accounting Standard - 22, the Company has recognised a deferred tax asset, which consist of
the following:
148
2.26. During the year the Company has revised the funding norms in respect of gold loans to bring in line with the industry practice
by adding making charges and taxes resulting in an overall increase over the gold price, as against the earlier practice of
considering only the gold price.
2.27. The fall in the price of gold post the year end has not been considered for the purpose of valuing the security of gold loan
accounts, since in the opinion of the management, this erosion is temporary in nature and adequate margin exists for majority
of the gold loan accounts. In respect of certain gold loan accounts considered doubtful of recovery, whose security value as
at the year-end has exceeded the total dues including interest, the same have not been recognized as Income, as such excess
relates to Interest Income.
2.28. Previous years figures have been regrouped / reclassified wherever necessary, to make them comparable with the current years
figures.
FRN 004532S
R.KESAVADAS
Partner
M.No.23862

Date: 25/04/2013 Date: 25/04/2013
2.25. During the year the company has voluntarily altered the repayment pattern for certain category of gold loan to the benefit of the
borrower from a monthly interval to an annual repayment. The company has obtained a legal opinion that as this rescheduling
was initiated by the Company and not the borrower it will not be considered as restructuring of loans as contemplated in the
Non-Banking Financial (Non - Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007
and hence no change in the classification of such borrowers are required. As at the year end and amount of ` 1,58,200
thousand including interest receivable is outstanding in respect of such accounts.
149
To the Board of Directors of
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial
statements of THE FEDERAL BANK LIMITED (the Bank), its
subsidiary and associate (the Bank, its subsidiary and associate
constitute the group), which comprise the Consolidated
Balance Sheet as at 31st March, 2013, the Consolidated Profit
and Loss Account and the Consolidated Cash Flow Statement for
the year then ended and a summary of the significant accounting
policies and other explanatory information.
Managements Responsibility for the Consolidated Financial
Statements
The Banks Management is responsible for the preparation of
these consolidated financial statements that give a true and
fair view of the consolidated financial position, consolidated
financial performance and consolidated cash flows of the Group
in accordance with the accounting principles generally accepted
in India. This responsibility includes the design, implementation
and maintenance of internal control relevant to the preparation
and presentation of the consolidated financial statements that
give a true and fair view and are free from material misstatement,
whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We conducted our
audit in accordance with the Standards on Auditing issued by
the Institute of Chartered Accountants of India. Those Standards
require that we comply with the ethical requirements and plan
and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and the disclosures in the consolidated
financial statements. The procedures selected depend on the
auditors judgement, including the assessment of the risks of
material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments,
the auditor considers the internal control relevant to the Banks
preparation and presentation of the consolidated financial
statements that give a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness
of the Banks internal control. An audit also includes evaluating
the appropriateness of the accounting policies used and the
reasonableness of the accounting estimates made by the
Management, as well as evaluating the overall presentation of
the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of our information and according
to the explanations given to us, and based on the consideration
of the report of the other auditors on the financial statements /
financial information of the subsidiary referred to below in the
Other Matter paragraph, the aforesaid consolidated financial
statements give a true and fair view in conformity with the
accounting principles generally accepted in India:
(a) in the case of the Consolidated Balance Sheet, of the state of
affairs of the Group as at 31 March, 2013;
(b) in the case of the Consolidated Profit and Loss Account, of
the profit of the Group for the year ended on that date; and
(c) in the case of the Consolidated Cash Flow Statement, of the
cash flows of the Group for the year ended on that date.
Emphasis of Matter
We draw attention to Note No.1.9 of Schedule 18 to the
consolidated financial statements which describes proportionate
charge of pension liability of the Bank amounting to `33.68
Crore to the Consolidated Profit and Loss Account and the
balance unamortised pension liability of ` 67.36 Crore as at
31st March 2013, included in Schedule 11 to the consolidated
financial statements to be amortised over the next two years,
pursuant to the exemption from the application of the provisions
of the Accounting Standard (AS) 15, Employee Benefits, granted
by the Reserve Bank of India and made applicable to the Bank
vide letter no. DBOD No.BP.BC.15896 / 21.04.018 / 2010-11
dated April 8, 2011.
Our report is not qualified in respect of this matter.
Other Matters
1. We did not audit the financial statements of a subsidiary,
whose financial statements/financial information reflect
total assets (net) of `493 Crore as at 31st March, 2013, total
revenues of `88.79 Crore and net cash flows amounting to
`1.97 Crore for the year ended on that date, as considered
in the consolidated financial statements. These financial
statements have been audited by other auditors whose
reports have been furnished to us by the Management
and our opinion, in so far as it relates to the amounts and
disclosures included in respect of this subsidiary, is based
solely on the reports of the other auditors.
2. The consolidated financial statements also include the
Groups share of net profit of ` 2.45 Crore for the year
ended 31st March, 2013 in respect of an associate based
on its unaudited financial information. On the basis of the
information and explanations provided by the Management,
it is expected that there should be no material impact on
the consolidated financial statements consequent to any
possible adjustments to the unaudited financial statements
in respect of the aforesaid entity, since the size of this entity
in the context of the Group is not significant.
Our report is not qualified in respect of these matters.
Partner Partner
KOCHI,
27 April, 2013.
150
Consolidated Balance Sheet as at 31 March 2013
(in Thousands of `)
Schedule As at As at
No. 31 March 2013 31 March 2012
CAPITAL AND LIABILITIES
Capital 1 1,710,587 1,710,471
Reserves and Surplus 2 60,940,561 54,212,470
Deposits 3 576,111,708 489,347,329
Borrowings 4 52,390,452 42,660,423
Other Liabilities and Provisions 5 18,776,224 17,511,692
Total 709,929,532 605,442,385
ASSETS
Cash and Balances with Reserve Bank of India 6 27,488,606 24,296,759
Balances with banks and money at call and short notice 7 9,776,731 11,086,993
Investments 8 208,544,939 171,020,202
Advances 9 443,274,247 379,458,519
Fixed assets 10 4,120,796 3,370,343
Other assets 11 16,724,213 16,209,569
Total 709,929,532 605,442,385
Contingent liabilities 12 302,459,180 358,494,040
Bills for collection 12,266,208 11,893,140
Significant Accounting Policies 17
Notes on Accounts 18
Schedules referred to above form an integral part of the Consolidated Balance Sheet
151
Consolidated Profit and Loss Account for the year ended 31 March 2013
(in Thousands of `)
Schedule Year ended Year ended
No. 31 March 2013 31 March 2012
I. INCOME
Interest earned 13 62,463,207 55,817,210
Other income 14 6,646,394 5,321,972
Total 69,109,601 61,139,182
II. EXPENDITURE
Interest expended 15 42,089,395 36,066,661
Operating expenses 16 12,235,925 10,080,639
Provisions and contingencies 6,282,225 7,276,832
Share of (profit)/loss of Associate (24,506) 177,774
Total 60,583,039 53,601,906
III. PROFIT/LOSS
Net profit for the year 8,526,562 7,537,276
Add Profit b/f from Previous Year
- relating to holding company 1,862,112 (689,936)
- relating to subsidiary company (45,535) 28,211
10,343,139 6,875,551
IV. APPROPRIATIONS
Transfer to Revenue Reserve 1,721,400 988,800
Transfer to Statutory Reserve 2,095,500 1,942,000
Transfer to Capital Reserve 229,500 54,017
Transfer to Special Reserve (sec 36(1)(viii) of IT Act) 337,000 285,000
Transfer to Reserve under Sec 45 IC of RBI Act 28,236 -
Provision for proposed dividend 1,539,528 1,539,424
Provision for Dividend Tax 261,643 249,733
Balance carried over to Balance Sheet 4,130,332 1,816,577
Total 10,343,139 6,875,551
Earnings per Share (Basic and Diluted) (`) 49.85 44.07
(Face value of `10/- each)
(Refer Note 1.2 of Schedule 18)
Significant Accounting policies 17
Notes on Accounts 18
Schedules referred to above form an integral part of the Consolidated Profit and Loss account
152
Consolidated Cash Flow Statement for the year ended 31 March 2013
(in Thousands of `)
31 March 2013 31 March 2012
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before taxes 12,130,020 11,465,229
Adjustments for:
Depreciation on Fixed Assets 824,582 587,435
Depreciation on Investments (435,681) 327,822
Provision for Non Performing Investments 67,500 -
Provision for Non Performing Assets (Including Bad Debts) 1,892,846 2,217,694
Provision on Standard Assets 493,400 364,500
(Profit)/ Loss on sale of fixed assets (net) (1,981) (3,316)
(Income) / Loss From Joint Venture (24,506) 177,774
Provision for Restructured assets 676,826 343,552
Provision for Other Contingencies (36,925) 95,311
15,586,081 15,576,001
Adjustments for working capital changes:-
(Increase)/ Decrease in Investments (4,035,093) (13,940,545)
(Increase)/ Decrease in Advances (65,708,574) (62,098,155)
(Increase)/ Decrease in Other Assets 241,085 (4,059,201)
Increase/ (Decrease) in Deposits 86,764,379 59,462,785
Increase/ (Decrease) in Other liabilities and provisions 761,117 1,483,962
Direct taxes paid (5,001,087) (6,090,483)
Net Cash Generated from Operating Activities 28,607,908 (9,665,636)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (1,588,331) (1,035,426)
Proceeds from Sale of Fixed Assets 13,200 7,969
Investment in Associate (0) (260,000)
(Increase)/ Decrease in Held to Maturity Investments (33,096,957) (13,246,205)
Net Cash Used in Investing Activities (34,672,088) (14,533,662)
153
(in Thousands of `)
31 March 2013 31 March 2012
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Issue of Share Capital 116 -
Proceeds from Share Premium 4,777 -
Repayment of Subordibate Debt (760,000) -
Increase/(Decrease) in Borrowings (Excluding Subordinate Debt) 10,490,029 23,776,797
Dividend Paid (1,789,157) (1,689,759)
Net Cash generated from financing Activities 7,945,765 22,087,038
Increase/(Decrease) in Cash & Cash Equivalents 1,881,585 (2,112,260)
Cash and Cash Equivalents at the beginning of year 35,383,752 37,496,012
Cash and Cash Equivalents at the end of year 37,265,337 35,383,752
Note:
Cash and cash equivalents comprise of cash on hand (including foreign currency notes), Balances with Reserve Bank of India, Balance
with Banks and Money at Call and Short notice (Refer schedules 6 and 7 of the Consolidated Balance sheet).
154
Schedules forming part of Consolidated Balance Sheet
Authorised Capital 2,000,000 2,000,000
[20,00,00,000 (Previous year 20,00,00,000) Equity Shares of Rs 10 each]
Issued Capital 1,713,295 1,713,179
[17,13,29,541 (Previous year 17,13,17,910) Equity Shares of Rs 10/- each]
Subscribed, Called up and Paid up Capital 1,710,591 1,710,475
[17,10,59,132 (Previous year 17,10,47,501) equity shares of `10/- each, which includes
3318 shares (Previous year 3318) of ` 10/- each issued for consideration
other than cash and 4,37,35,378 shares (previous year 4,37,35,378) issued
as Bonus shares and 2,00,00,000 underlying equity shares (previous year
2,00,00,000) of `10/- each issued towards Global Depository Receipts
(including over allotment option of 20,00,000 equity shares) and
8,54,29,763 equity shares of `10/- each allotted on Rights basis during
the financial year 2007-08 and issue of 11631 ESOS shares under
ESOS 2010]
(Allotment of 1306 Shares (Previous year 1306) of ` 10/- each pertaining
to the Rights Issue of 1993 issued at a premium of `25/- per share and
52,420 shares (previous year 52,420) of `10/- each pertaining to the
Rights Issue of 1996 issued at a premium of `140/- per Share and
2,16,683 equity shares (Previous year 2,16,683) of `10/- each at a
premium of `240/- per share pertaining to Rights issue of 2007 are
kept pending following orders from various courts)
(Issue of certificates/credit in demat account in respect of 82,588 shares
(previous year 82,788) of `10/- each out of the Bonus issue of 2004 are
kept in abeyance consequent to injunction orders from various courts)
Less: Calls in arrears 4 4
Total 1,710,587 1,710,471
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 1 SHARE CAPITAL
155
I. Statutory Reserve
Opening balance 10,694,676 8,752,676
12,790,176 10,694,676
II. Capital Reserves
(a) Revaluation Reserve
52,065 54,142
(b) Others
1,885,693 1,656,193
1,937,758 1,710,335
III. Share premium
Opening balance 24,755,856 24,755,856
Additions during the year 4,777 -
24,760,633 24,755,856
IV. Revenue and Other Reserves
a) Revenue Reserve
Opening Balance 11,206,341 10,217,541
12,927,741 11,206,341
b) Other Reserves
Investment Fluctuation Reserve
Opening Balance 1,897,200 1,897,200
Additions during the year - -
1,897,200 1,897,200
c) Special Reserve (As per section 36(1)(viii) of Income Tax Act)
Addition during the year 337,000 285,000
2,157,600 1,820,600
V. Contingency Reserve
Addition during the year - -
301,003 301,003
VI. Reserve Fund
Balance as per last Balance Sheet 8,412 8,412
Transferred from Profit and Loss Account 28,236 -
36,648 8,412
VII. General Reserve
Balance as per last Balance Sheet 1,470 1,470
Transferred from Profit and Loss Account - -
1,470 1,470
VIII. Balance in Profit and Loss Account 4,130,332 1,816,577
Total 60,940,561 54,212,470
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 2 RESERVES AND SURPLUS
156
I. Bills Payable 302,265 205,190
II. Inter - office adjustments (Net) 1,856,540 1,636,847
III. Interest accrued 687,622 2,658,532
IV. Others (including provisions)* 15,929,797 13,011,123
Total 18,776,224 17,511,692
*Includes :-
(a) Contingent provision against standard assets 2,464,466 1,968,064
(b) Proposed Dividend 1,539,528 1,539,424
(c) Tax on Proposed Dividend 261,643 249,733
(d) Deferred Tax Liability (Net) - 641,900
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 5 OTHER LIABILITIES AND PROVISIONS
A. I. Demand Deposits
i. From Banks 592,963 126,997
ii. From Others 28,481,366 25,329,485
29,074,329 25,456,482
II. Savings Bank Deposits 127,431,909 109,299,457
III. Term Deposits
i. From Banks 6,276,618 4,762,050
ii. From Others 413,328,852 349,829,340
419,605,470 354,591,390
Total 576,111,708 489,347,329
B. I. Deposits of branches in India 576,111,708 489,347,329
II. Deposits of branches outside India - -
Total 576,111,708 489,347,329
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 3 DEPOSITS
I. Borrowings in India
i. Reserve Bank of India 3,300,000 900,000
ii. Other Banks # 842,544 832,082
iii. Other institutions and agencies ## 34,339,160 27,639,733
38,481,704 29,371,815
II. Borrowings outside India 13,908,748 13,288,608
Total 52,390,452 42,660,423
Secured borrowings included in I and II above 5,517,742 3,248,227
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 4 BORROWINGS
# Borrowings from other banks include Subordinated Debt of `322,000 Thousands (Previous Year `582,000 Thousands) in the
nature of Non Convertible Debentures
## Borrowings from other Institutions and agencies include Subordinated Debt of `1,978,000 Thousands Previous Year
` 2,478,000 Thousands) in the nature of Non Convertible Debentures
157
I. Cash in hand (including foreign currency notes) 5,352,150 4,013,736
II. Balance with Reserve Bank of India
i. in Current Accounts 22,136,456 20,283,023
ii. in Other Accounts - -
Total 27,488,606 24,296,759
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 6 CASH AND BALANCES WITH RESERVE BANK OF INDIA
I. In India
i. Balances with banks
a. in Current Accounts 1,006,049 403,847
b. in Other Deposit Accounts 5,885,600 4,231,800
ii. Money at call and short notice
a. With Banks - 1,000,000
b. With other institutions - 4,045,707
Total 6,891,649 9,681,354
II. Outside India
i. in Current Accounts 170,832 133,764
ii. in Other Deposit Accounts 2,714,250 1,271,875
iii. Money at call and short notice - -
Total 2,885,082 1,405,639
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 7 BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE
I. Investments in India in :
i. Government Securities ## ** 145,750,543 115,312,413
ii. Other approved Securities - -
iii. Shares 2,564,217 1,907,292
iv. Debentures and Bonds 8,017,423 9,603,502
v. Joint Venture $ 979,031 954,525
vi. Others (Mutual Funds, Commercial Paper etc.) @ 51,233,725 43,242,470
Total 208,544,939 171,020,202
II. Investments outside India - -
Gross Investments 208,690,427 171,513,070
Less: Depreciation/ Provision for Investments 145,488 492,868
Net Investments 208,544,939 171,020,202
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 8 INVESTMENTS
## Includes securities costing `1,447,241 Thousands (previous year `1,478,176 Thousands) pledged for clearing facility and margin
requirements
@ Includes priority sector shortfall deposits `24,997,387 Thousands (previous year `20,433,228 Thousands)
** Net of Repo borrowing of ` 14,700,000 Thousands (previous year ` 26,250,000 Thousands) under the Liquidity Adjustment
Facility in line with the RBI requirements
$ represents investment accounted as an associate in line with AS -23 - Accounting of Investments in Associates in consolidated
Financial Statements , as notified under the Companies (Accounting Standards) Rules, 2006 [Refer Schedule 17, Note 2.2 (iv)]
158
A. i. Bills purchased and discounted 14,938,824 18,538,117
ii. Cash credits, overdrafts and loans repayable on demand 267,418,289 218,730,956
iii. Term loans 160,917,134 142,189,446
Total 443,274,247 379,458,519
B. i. Secured by tangible assets $ 343,134,821 264,680,049
ii. Covered by Bank/Government guarantees # 26,926,169 28,641,138
iii. Unsecured 73,213,257 86,137,332
Total 443,274,247 379,458,519
C. I. Advances in India
i. Priority Sector 114,956,971 121,884,584
ii. Public Sector 22,666,528 28,175,847
iii. Banks 29,641 44,636
iv. Others 305,621,107 229,353,452
Total 443,274,247 379,458,519
II. Advances outside India - -
Grand Total (C I and C II) 443,274,247 379,458,519
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 9 ADVANCES (NET OF PROVISIONS)
$ Includes Advances against book debts
# Includes advances against L/Cs issued by banks
I OWNED ASSETS
a. Premises
Gross Block
Deductions during the year - -
Depreciation
Net Block 1,603,534 1,636,760
b. Other fixed assets (including furniture and fixtures)
Gross Block
Depreciation
As at the beginning of the year 3,082,882 2,635,453
Depreciation to date 3,748,751 3,082,882
Net Block 2,513,428 1,729,749
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 10 FIXED ASSETS
159
II ASSETS GIVEN ON LEASE
Gross Block
At the beginning of the year 31,013 31,013
Additions during the year - -
Closing Balance 31,013 31,013
Depreciation
Charge for the year - -
Net Block 3,834 3,834
Total (I & II) 4,120,796 3,370,343
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 10 FIXED ASSETS (Contd...)
* Includes buildings constructed on leasehold land at different places having original cost of `655,216 Thousands and Written down
value of `549,014 Thousands with remaining lease period varying from 61 -73 years.
I. Inter - office adjustments (net) - -
II. Interest accrued 4,273,812 3,995,024
III. Tax paid in advance/tax deducted at source (Net of provision) 5,694,828 6,204,886
IV. Stationery and Stamps 29,734 26,918
V. Non-banking assets acquired in satisfaction of claims 27,858 31,061
VI. Others @ 6,697,981 5,951,680
Total 16,724,213 16,209,569
@ Includes Deferred Tax Asset (Net) 1,265,787 -
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 11 OTHER ASSETS
I. Claims against the Bank not acknowledged as debts 7,301,798 6,611,455
II. Liability on account of outstanding forward exchange contracts 245,319,772 304,316,064
III. Guarantees given on behalf of constituents - in India 36,966,166 35,336,490
IV. Acceptances, endorsements and other obligations 12,338,376 11,884,826
V. Other items for which the Bank is contingently liable 533,068 345,205
Total 302,459,180 358,494,040
(in Thousands of `)
As at As at
31 March 2013 31 March 2012
Schedule: 12 CONTINGENT LIABILITIES
160
Schedules forming part of Consolidated Profit and Loss Account
I. Commission, exchange and brokerage 3,051,515 2,518,534
II. Profit on sale of investments (Net) 2,057,560 820,706
III. Profit on revaluation of investments (Net) - -
IV. Profit on sale of land, buildings and other assets (Net) 1,981 3,316
V. Profit on foreign exchange transactions (Net) 793,960 842,086
VI. Income earned by way of dividends etc. from companies in India 58,874 51,246
VII. Miscellaneous income 682,504 1,086,084
[Includes Recoveries in assets written off ` 4,812.13 lakh (previous year ` 8,573.78 lakh)
Total 6,646,394 5,321,972
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 14 OTHER INCOME
I. Interest on deposits 38,373,181 33,312,085
II. Interest on Reserve Bank of India/Inter bank borrowings 779,355 485,465
III. Others 2,936,859 2,269,111
Total 42,089,395 36,066,661
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 15 INTEREST EXPENDED
I. Payments to and provisions for employees 6,477,112 5,594,495
II. Rent, taxes and lighting 1,400,148 996,170
III. Printing and stationery 133,436 106,931
IV. Advertisement and publicity 130,125 164,010
V. Depreciation on Banks property 826,659 589,621
Less: Depreciation on revaluation of Premises transferred from Revaluation Reserve 2,077 2,186
824,582 587,435
VI. Directors fees, allowances and expenses 7,738 6,964
VII. Auditors fees and expenses (including branch auditors fees and expenses) 53,354 45,431
VIII. Law charges 68,537 52,802
IX. Postage, Telegrams, Telephones etc 332,303 281,600
X. Repairs and maintenance 446,598 376,146
XI. Insurance 478,227 437,209
XII. Other expenditure 1,883,765 1,431,446
Total 12,235,925 10,080,639
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 16 OPERATING EXPENSES
I. Interest/discount on advances/bills 47,144,177 42,130,923
II. Income on investments 14,645,987 13,157,376
III. Interest on balances with Reserve Bank of India and other inter-bank funds 563,557 348,836
IV. Others 109,486 180,075
Total 62,463,207 55,817,210
(in Thousands of `)
31 March 2013 31 March 2012
Schedule: 13 INTEREST EARNED
161
Schedules forming part of the Consolidated Financial Statements
Schedule: 17 SIGNIFICANT ACCOUNTING POLICIES FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH, 2013
1. Corporate information
The Federal Bank Limited (FBL or the Bank) together with its subsidiary and associate (collectively, the Group) is a diversified
financial services group providing a wide range of banking and financial services including commercial banking, retail banking,
project and corporate finance, working capital finance, insurance and treasury products and services. Operations of the Group
are spread all over India.
The Bank was incorporated in 1931 as Travancore Federal Bank Limited to cater to the banking needs of Travancore Province by
a small group of local citizens. It embarked on a phase of sustained growth under the leadership of Late K.P. Hormis. The bank is
governed by Banking Regulation Act, 1949 and other applicable acts/ regulations.
2. Basis of Consolidation and significant accounting policies
2.1. Basis of accounting and preparation of consolidated financial statements
The consolidated financial statements of the Bank, its subsidiary and associate (together the Group) have been prepared
in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting
Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of
the Companies Act, 1956. The accounting policies adopted in the preparation of the consolidated financial statements are
consistent with those followed in the previous year.
2.2. Principles of consolidation
(i) The consolidated financial statements relate to the Federal Bank Limited (FBL or the Bank), its subsidiary company
and associate. The details of subsidiary and associate entities are given below:
(ii) The financial statements of the subsidiary company and associate used in the consolidation are drawn up to the
same reporting date as that of the Bank i.e., 31 March, 2013. These have been consolidated based on latest available
financial statements.
(iii) The financial statements of the Bank and its subsidiary company have been combined on a line-by-line basis by
adding together like items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-
group transactions and resulting unrealised profits or losses, unless cost cannot be recovered.
(iv) The consolidated financial statements include the share of profit of the associate company which have been
accounted by using equity method as per AS 23 Accounting for Investments in Associates in Consolidated Financial
Statements. Accordingly, the share of profit of the associate company has been added to the cost of investment.
(v) The consolidated financial statements have been prepared using uniform accounting policies for like transactions
and other events in similar circumstances and are presented to the extent possible, in the same manner as the Banks
separate financial statements.
(vi) Differences in accounting policies followed by the Subsidiary and associate have been reviewed and no adjustments
have been made, since the impact of these differences is not significant.
Fedbank Financial Subsidiary India The Federal 100 100
Services Limited (FFSL Company Bank Limited
or Subsidiary)
IDBI Federal Life Associate India The Federal 26 26
Insurance Company Bank Limited
Limited (Associate) IDBI Bank Limited 48 48
Ageas Insurance
International N.V 26 26
Name of the entity Relationship Country of Ownership % of Holding and voting power
Incorporation held by either directly or indirectly
through subsidiary as at
31 March, 2013 31 March, 2012
162
FOR THE YEAR ENDED 31 MARCH, 2013 (Contd...)
2.3. Use of estimates
The preparation of the consolidated financial statements in conformity with Indian GAAP requires the Management to make
estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and
the reported income and expenses during the year. The Management believes that the estimates used in preparation of
the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences
between the actual results and the estimates are recognised in the periods in which the results are known / materialise.
2.4 Advances
Advances are classified into performing assets (Standard) and non-performing assets (NPAs) as per the Guidelines issued
by Reserve Bank of India (RBI) and are stated net of specific provisions made towards NPAs and floating provisions. Further,
NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for NPAs
are made over and above the minimum required as per the guidelines of the RBI on matters relating to prudential norms.
Advances shown in the Balance Sheet are net of (a) bills rediscounted and (b) provisions made for non performing advances.
Loss assets and unsecured portion of doubtful assets are provided / written off as per the RBI guidelines.
Amounts recovered against debts written off are recognised in the profit and loss account.
For restructured/rescheduled assets, provision is made in accordance with the guidelines issued by the RBI, which requires
the diminution in the fair value of the assets to be provided at the time of restructuring.
A general provision for standard advances is made @ 0.25% in case of direct advances to agricultural and SME sectors, 1
% in respect of advances classified as commercial real estate, 2.75 % in respect of certain class of restructured assets and
0.40% for all other advances as prescribed by the RBI.
2.5 Country risk
In addition to the provisions required to be held according to the asset classification status, provisions are held for individual
country exposure (other than for home country). The countries are categorised into seven risk categories namely insignificant,
low, moderate, high, very high, restricted and off-credit and provision is made on exposures exceeding 180 days on a graded
scale ranging from 0.25% to 100%. For exposures with contractual maturity of less than 180 days, 25% of the normal
provision requirement is held. If the country exposure (net) of the Bank in respect of each country does not exceed 1 % of
the total funded assets, no provision is maintained on such country exposure.
2.6 Investments
Classification
In accordance with the RBI guidelines, investments are categorised into Held for Trading (HFT), Available for Sale (AFS)
and Held to Maturity (HTM) and further classified under six groups, viz. Government Securities, Other Approved Securities,
Shares, Debentures and Bonds, Subsidiaries/joint ventures and other investments for the purposes of disclosure in the
Balance Sheet.
a) Investments which are held for sale within 90 days from the date of purchase are classified as Held for Trading.
b) Investments which the bank intends to hold till maturity are classified as Held to Maturity.
c) Investments which are not classified in either of the above two categories are classified as Available for Sale.
Acquisition Cost
Transaction costs including brokerage and commission pertaining to acquisition of investments are charged to the Profit and
Loss Account.
Broken period interest is charged to the Profit and Loss Account.
Cost of investments is computed based on the weighted average cost method.
Valuation
The valuation of investments is made in accordance with the RBI Guidelines:
a) Held for Trading/Available for Sale Each security in this category is valued at the market price or fair value and the net
depreciation of each group is recognised in the Profit and Loss account. Net appreciation, if any, is ignored.
163
The market value of investments where current quotations are not available is determined as per the norms prescribed
by RBI.
b) Held to Maturity These are carried at their acquisition cost. Any premium on acquisition of government securities are
amortised over the remaining maturity period of the security. Any diminution, other than temporary, in the value of such
securities is provided for.
c) Repurchase and reverse repurchase transactions These are accounted as outright sale and outright purchase respectively.
The difference between the clean price of the first leg and the clean price of the second leg is recognised as interest
income / interest expense over the period of the transaction. However, depreciation in their value, if any, compared to
their original cost, is provided for.
d) In respect of securities included in any of the three categories of investments where interest / principal is in arrears, for
more than 90 days, income thereon is not reckoned and appropriate provision for the depreciation in the value of the
investments is made, as per prudential norms applicable to non-performing investments. Debentures / Bonds in the
nature of advances are subjected to usual prudential norms applicable to advances.
e) Market value of investments where current quotations are not available, is determined as per the norms prescribed by
the RBI as under:
in case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e. not
overdue beyond 90 days), the market price is derived based on the YTM for Government Securities as published by Fixed
Income Money Market and Derivatives Association of India (FIMMDA) / Primary Dealers Association of India (PDAI) and
suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for
each categories and credit ratings along with residual maturity issued by FIMMDA is adopted for this purpose;
in case of bonds and debentures (including Pass Through Certificates) where interest is not received regularly (i.e.
overdue beyond 90 days), the valuation is in accordance with prudential norms for provisioning as prescribed by RBI;
equity shares, for which current quotations are not available or where the shares are not quoted on the stock exchanges,
are valued at break-up value (without considering revaluation reserves, if any) which is ascertained from the companys
latest Balance Sheet. In case the latest Balance Sheet is not available, the shares are valued at Re 1 per company;
units of Venture Capital Funds (VCF) held under AFS category where current quotations are not available are marked
to market based on the Net Asset Value (NAV) shown by VCF as per the latest audited financials of the fund. In case
the audited financials are not available for a period beyond 18 months, the investments are valued at Re 1 per VCF.
Investment in unquoted VCF after 23rd August, 2006 are categorised under HTM category for the initial period of
three years and valued at cost as per RBI guidelines;
Investment in security receipts are valued as per the Net Asset Value (NAV) obtained from the issuing Reconstruction
Company /Securitisation Company.
Investments in subsidiaries/Associates are categorised as HTM and assessed for impairment to determine permanent
diminution, if any, in accordance with the RBI guidelines.
All investments are accounted for on settlement date, except investments in equity shares which are accounted for on
trade date as the corporate actions are effected in equity on the trade date.
Transfer between Categories
Transfer between categories is done at the lower of the acquisition cost / book value / market value on the date of the
transfer and the depreciation, if any, on such transfer is fully provided for.
Profit or Loss on Sale / Redemption of Investments
1) Held for Trading and Available for Sale Profit or loss on sale / redemption is included in the Profit and Loss account.
2) Held to Maturity Profit or loss on sale / redemption of investments is included in the Profit and Loss account. In case
of profits, the same is appropriated to Capital Reserve after adjustments for tax and transfer to statutory reserve in
accordance with RBI guidelines.
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Asset Rate of Depreciation
Computers and Accessories, Mobile Phones, EPABX 33.33%
Software Expenditure 33.33%
Improvements to leased premises 20.00%
Repo and Reverse Repo Transactions
In respect of Repo transactions under Liquidity Adjustment Facility (LAF) with RBI, monies borrowed from RBI are credited
to investment account and reversed on maturity of the transaction. Costs thereon are accounted for as interest expense.
In respect of reverse Repo transactions under LAF, monies paid to RBI are debited to investment account and reversed on
maturity of the transaction. Revenues thereon are accounted as interest income.
2.7 Foreign currency transactions
Transactions denominated in foreign currencies are accounted for at the rates prevailing on the date of the transaction.
Monetary foreign currency assets and liabilities are translated at the Balance Sheet date at rates notified by Foreign Exchange
Dealers Association of India (FEDAI). All profits/losses resulting from year end revaluations are recognised in the Profit and
Loss Account.
Outstanding forward exchange contracts including currency swaps undertaken to hedge foreign currency assets/ liabilities,
funding swaps and spot exchange contracts are revalued at quarter end exchange rates notified by FEDAI for specified
maturities and at interpolated rates for contracts of interim maturities The resulting gains or losses on revaluation are
included in the Profit and Loss Account in accordance with RBI/FEDAI guidelines. The forward exchange contracts of longer
maturities where exchange rates are not notified by FEDAI are revalued at the forward exchange rates implied by the swap
curves in respective currencies. The resultant gains or losses are recognised in the Profit and Loss Account.
Currency futures contracts are marked to market using daily settlement price on a trading day, which is the closing price
of the respective futures contracts on that day. While the daily settlement price is computed based on the last half an hour
weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day
of the futures contract or as may be specified by the relevant authority from time to time. All open positions are marked to
market based on the settlement price and the resultant marked to market profit/loss is daily settled with the exchange.
Contingent liabilities on account of foreign exchange contracts, guarantees, acceptances, endorsements and other obligations
denominated in foreign currencies are disclosed at closing rates of exchange notified by FEDAI.
2.8 Derivative transactions
The Bank recognises all derivative contracts at the fair value, on the date on which the derivative contracts are entered into
and are re-measured at fair value as at the Balance Sheet or reporting dates. Derivatives are classified as contingent Assets/
Liabilities. In respect of derivative contracts that are marked to market, negative market value is recognised in the Statement
of Profit and Loss in the relevant period. Contingent liabilities on account of derivative contracts denominated in foreign
currencies are reported at closing rates of exchange notified by FEDAI at the Balance Sheet date.
2.9 Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation and impairment, if any. Cost includes freight,
duties, taxes and incidental expenses related to the acquisition and installation of the asset.
Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances
paid to acquire fixed assets.
Premises which were revalued are stated at such values on revaluation and the appreciation credited to the Revaluation
Reserve.
Depreciation is provided on the written down value from the date of addition at the rates prescribed in Schedule XIV to the
Companies Act, 1956 except in the following cases where higher rate of depreciation has been provided on a straight line
basis.
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In the case of Subsidiary Company, Leasehold improvements are depreciated @ 18.10% using WDV method.
Depreciation on assets revalued has been charged on their written-down value including the addition made on revaluation,
and an equivalent amount towards the additional depreciation provided consequent upon revaluation has been transferred
from the Revaluation Reserve to the Profit and Loss Account.
All fixed assets individually costing less than ` 5,000 are fully depreciated in the year of installation.
Depreciation on assets sold during the year is recognised on a pro-rata basis till the date of sale.
2.10 Impairment of Assets
The carrying amounts of assets are reviewed at each Balance Sheet date to ascertain if there is any indication of impairment
based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an asset exceeds its
recoverable amount. The recoverable amount is the greater of the assets net selling price and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value at the weighted average cost of capital. After
impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
2.11 Non-Banking Assets
Non-Banking assets acquired in settlement of debts /dues are accounted at the lower of their cost of acquisition or net
realisable value.
2.12 Cash and Cash Equivalents
Cash and cash equivalents include cash in hand, balances with Reserve Bank of India and Balances with Other Banks
/ institutions and money at call and short notice (including the effect of changes in exchange rates on cash and cash
equivalents in foreign currency).
2.13 Revenue Recognition
Interest income is recognised on an accrual basis except interest income on non-performing assets, which is recognised on
receipt in accordance with AS-9, Revenue Recognition as notified under the Companies (Accounting Standards) Rules, 2006
and the RBI guidelines.
Guarantee commission, commission on letter of credit and annual locker rent fees are recognised on a straight line basis
over the period of contract. Other fees and commission income are recognised when due, except in cases where the bank
is uncertain of ultimate collection.
Dividend is accounted on an accrual basis when the right to receive the dividend is established.
Gain or loss arising on sale of NPAs is accounted as per the guidelines prescribed by the RBI, which require provisions to be
made for any deficit (where sale price is lower than the net book value), while surplus (where sale price is higher than the
net book value) is ignored.
Loan Syndication fee is accounted for on completion of the agreed service and when right to receive is established.
Unpaid funded interest on term loans are accounted on realisation as per the guidelines of RBI.
The bank imports gold coins on a consignment basis for selling to its customers. The difference between the sale price to
customers and cost of purchase is included in other income.
In case of the subsidiary, exclusivity fees (for providing services exclusively to the clients) is recognized in the year in which
right to receive the same is established subject to volume of business generated
2.14 Finance Lease
Accounting Standard on Leases (AS19) issued by the Institute of Chartered Accountants of India (ICAI) is applicable to leases
entered into on or after 1st April 2001. Since all the Banks outstanding finance lease transactions were entered into prior
to that date, the Bank has followed the earlier ICAI guidelines in respect of these leases.
Depreciation on non-performing leased assets (NPAs) is provided on written-down value as per the Companies Act 1956,
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by directly charging to Profit & Loss Account without any corresponding adjustment in the Lease Adjustment Account. In
addition to depreciation, provision is also made for non-performing leased assets as per RBI guidelines.
2.15 Retirement and Other Employee Benefits
The Bank
a) Provident Fund:
The contribution made by the bank to The Federal Bank Employees Provident Fund, administered by the trustees is
charged to Profit and Loss account.
b) Pension Fund:
The contribution towards The Federal Bank Employees Pension Fund, managed by trustees, is determined on actuarial
basis on projected unit credit method as on the Balance Sheet date and is recognised in the accounts. However,
the liability arising on account of re-opening of pension option to existing employees who had joined prior to 29th
September 1995 and not exercised the option earlier, is amortised over a period of five years commencing from the
financial year 2010-11 as permitted by the Reserve Bank of India.
Employees who had joined the services of the Bank with effect from April 01, 2010 are covered under Defined
Contributory Pension Scheme (DCPS). In respect of such employees the bank contributes 10% of the Basic Pay plus
Dearness Allowance and the expenditure thereof is charged to Profit and Loss account
c) Gratuity
The bank makes annual contribution to The Federal Bank Employees Gratuity Trust Fund administered and managed by
the Trustees. The cost of providing such benefits is determined using the Projected Unit Credit method, with actuarial
valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in the Statement of
Profit and Loss in the period in which they occur. The retirement benefit obligation recognised in the Balance Sheet
represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced
by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions to the schemes.
d) Compensation for absence on Privilege / Sick / Casual Leave and Leave Travel Concession (LTC)
The employees of the bank are entitled to compensated absence on account of privilege / sick / casual leave as per
the leave rules. The bank measures the long term expected cost of compensated absence as a result of the unused
entitlement that has accumulated at the balance sheet date based on actuarial valuation and such costs are recognised
in the accounts.
The employees are also eligible for LTC as per the rules. The estimated cost of unused entitlement as on the Balance
Sheet date based on actuarial valuation is provided for.
The Subsidiary
a) The company has defined contribution plans for employees comprising of Government Provident Fund and Employee
State Insurance. The contributions paid/payable to these plans during the year are charged to Statement of Profit and
Loss for the Year.
b) The net present value of the obligation for un-funded gratuity benefits , which is a defined benefit plan, as determined on
independent actuarial valuation, conducted annually using projected unit credit method, as adjusted for unrecognized
past services cost, if any, is recognised in the accounts. Actuarial gains and losses are recognised in full in the Statement
of Profit and Loss for the period in which they occur.
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2.16 Debit card reward points
Provision for probable redemption of debit card reward points is made on an estimated basis.
2.17 Employee Stock Option Scheme
The Bank has formulated Employee Stock Option Scheme (ESOS) 2010 in accordance with Securities and Exchange Board
of India (Employee Stock Option Scheme) Guidelines, 1999. The Scheme provides for grant of options to Employees of
the Bank to acquire Equity Shares of the Bank that vest in a graded manner and that are to be exercised within a specified
period. In accordance with the SEBI Guidelines and the guidance note on Accounting for Employee Share based payments
issued by the ICAI, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOS
over the exercise price of the option is amortised on a straight line basis over the vesting period.
2.18 Taxation
Income tax expense is the aggregate amount of current tax and deferred tax charge. Current year taxes are determined
in accordance with the Income tax Act, 1961. Deferred income taxes reflect the impact of current year timing differences
between taxable income and accounting income for the year and reversal of timing differences of earlier years.
Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the Balance Sheet
date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to the taxes on income levied by
same governing taxation laws. Deferred tax assets are recognised only to the extent that there is reasonable certainty that
sufficient future taxable income will be available against which such deferred tax assets can be realised. The impact of
changes in the deferred tax assets and liabilities is recognised in the Profit and Loss Account.
Deferred tax assets are recognised and reassessed at each reporting date, based upon the Managements judgement as to
whether realisation is considered as reasonably certain. Deferred tax assets are recognised on carry forward of unabsorbed
depreciation and tax losses only if there is virtual certainty that such deferred tax asset can be realised against future profits.
2.19 Segment Reporting
Business Segments have been identified and reported taking into account, the target customer profile, the nature of
product and services, the differing risks and returns, the organization structure, the internal business reporting system and
guidelines issued by RBI vide notification dated April 18, 2007. The Bank operates in the following business segments;
a) Treasury
The treasury services segment primarily consists of interest earnings on investments portfolio of the bank, gains or losses
on investment operations and earnings from foreign exchange business. The principal expenses of the segment consist
of interest expense on funds borrowed and other expenses.
b) Corporate / Whole Sale Banking
The Corporate / Whole sale Banking segment provides loans and other banking services to segment identified on
the basis of RBI guidelines. Revenues of this segment consist of interest earned on exposure exceeding ` 5 Crore per
customer and the charges / fees earned from other banking services to these customers. The principal expenses of the
segment consist of interest expense on funds borrowed and other expenses.
c) Retail Banking
The Retail Banking segment provides loans and other banking services to customers other than Corporate / Whole Sale
Banking customers, identified on the basis of RBI guidelines. Revenues of this segment consist of interest earned on
Loans made to such customers and the charges / fees earned from other banking services from them. The principal
expenses of the segment consist of interest expense on funds borrowed and other expenses.
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d) Other Banking Operations
This segment includes income from para banking activities such as debit cards, third party product distribution and
associated costs.
e) The Operations of Subsidiary has been classified under Retail Banking.
Geographic Segment
The Group operates only in India.
2.20 Earnings per Share
The Group reports basic and diluted earnings per share in accordance with AS 20, Earnings per Share, as notified by the
Companies (Accounting Standards) Rules, 2006. Basic earnings per share is computed by dividing the net profit after tax by
the weighted average number of equity shares outstanding for the year.
Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue equity shares
were converted or exercised during the year. Diluted earnings per share is computed using the weighted average number
of equity shares and dilutive potential equity shares outstanding at the year end.
2.21 Provisions, contingent liabilities and contingent assets
A provision is recognised when the Group has a present obligation as a result of past event where it is probable that an
outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions
are not discounted to its present value and are determined based on best estimate required to settle the obligation at the
Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates.
A disclosure of contingent liability is made when there is:
a possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non-occurrence
of one or more uncertain future events not within the control of the Bank; or
a present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources
will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is
remote, no provision or disclosure is made.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if
it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period
in which the change occurs.
2.22 Service tax input credit
Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and
when there is no uncertainty in availing / utilising the credits.
2.23 Net Profit
The net profit disclosed in the Profit and Loss Account is after considering the following:
(a) provision/ Write off of Non Performing Assets as per the norms prescribed by RBI;
(b) Provision for Taxes;
(c) Depreciation/ Write off of Investments; and
(d) Other usual, necessary and mandatory provisions, if any
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Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE CONSOLIDATED FINANCIAL STATEMENS
1.1. Provisions and Contingencies recognised in the Profit and Loss Account include:
i) Provision towards NPAs (net) 189.64 221.77
ii) Provision for depreciation Investments (41.49) 34.86
iii) Provision for Non Performing Investments 6.75 -
iv) Provision for Standard Assets 49.64 36.45
v) Provision for Taxation :
Current Tax 520.09 305.90
Deferred tax (160.41) 86.89
vi) Provision towards present value of sacrifice on restructuring,
expected wage revision, other contingencies etc. 64.00 41.81
Total 628.22 727.68
For the year ended / As at 31 March 2013 31 March 2012
(` in Crore)
1.2. Earnings per Share (EPS)
Weighted average number of equity shares used in computation of
basic earnings per share (in 000s) 171,059 171,047
Weighted average number of equity shares used in computation of
diluted earnings per share (in 000s) 171,059 171,047
Nominal Value of share (in `) 10 10
Basic earnings per share (in `) 49.85 44.07
Diluted earnings per share ( in `) 49.85 44.07
Earnings used in the computation of basic and diluted earnings per share (` in Lakhs) 85,265.62 75,372.76
Outstanding at the beginning of the year 3,035,875 -
Surrendered during the year - -
Granted during the year* 2,448,475 3,472,020
Exercised during the year 11,631 -
Forfeited/lapsed during the year 26,440 436,145
Outstanding at the end of the year 5,446,279 3,035,875
Options exercisable 1,460,370 -
Number of Options
2012-13 2011-12
1.3. Employee Stock Option Scheme (ESOS):
(i) Shareholders of the bank had approved Employee Stock Option Scheme (ESOS) through postal ballot, the result of which was
announced on December 24, 2010, enabling the Board and/or the Compensation Committee to grant such number of equity
shares, including options, of the Bank not exceeding 5% of the aggregate number of paid up equity shares of the Bank, in line
with the guidelines of SEBI. Pursuant thereto, the Compensation Committee of the bank granted the following options:
* ESOS granted on 5th November 2012 with vesting period of 1,2,3 and 4 years. Exercise period of 5 years and exercise
price of `474/-
As per SEBI guidelines the accounting for ESOS can be done either under the Intrinsic value basis or Fair value basis.
The Compensation Committee in their meeting dated 10/05/2012 decided to adopt Intrinsic value method for accounting
of ESOS, in terms of the power vested on them as per the resolution of EGM dated 24 December 2010
The exercise price of the options granted is the same as the market price on the date prior to grant date and hence there is no
intrinsic value for the options, which has to be amortized over the vesting period. If Fair Value Method had been adopted
based on Black-Scholes pricing model for pricing and accounting of options, net profit would be lower by ` 12.73 Crore
(Previous Year: ` 19.73 Crore)
The modified basic and diluted earnings per share for the year, had the company followed Fair Value Method of accounting
for ESOS compensation cost, would be ` 48.25 and ` 48.09 (Previous Year: ` 44.26 and ` 44.16) respectively.
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Schedule: 18 NOTES ON ACCOUNTS FORMING PART OF THE FINANCIAL STATEMENS (Contd...)
(ii) Dividend paid on shares issued on exercise of stock options
The Bank may allot shares between the Balance Sheet date and record date for the declaration of dividend pursuant to the
exercise of any employee stock options. These shares will be eligible for full dividend for the year ended 31 March 2013, if
approved at the ensuing Annual General Meeting. Dividend relating to these shares has not been recorded in the current
year.
1.4 Segment Reporting (AS 17)
In terms of the Accounting Standard 17 of ICAI, the Groups operations are classified into four business segments and the
information on them is as under.
(` in Crore)
Treasury Corporate/Whole Retail Banking Other Banking Total
sale Banking Operations
Revenue 1813.60 1530.30 2169.73 1992.10 2886.83 2552.23 40.80 39.29 6910.96 6113.92
Result (net of provisions) 287.61 42.13 254.70 257.01 635.10 845.20 33.15 19.97 1210.56 1164.31
Unallocated expense - --
Operating profit (PBT) 1210.56 1164.31
Income taxes 360.35 392.80
Share of Loss/Profit
of associate 2.45 -17.78
Extraordinary profit/loss - --
Net Profit 852.66 753.73
Other Information
Segment Assets 24616.62 20342.52 22045.64 19958.93 23137.72 18709.22 69.28 557.58 69869.26 59568.25
Unallocated assets 1123.69 975.99
Total assets 70992.95 60544.24
Segment liabilities 22155.15 18304.57 20412.75 18629.58 21552.68 17604.23 0.00 0.00 64120.58 54538.38
Unallocated liabilities 607.26 413.56
Total liabilities 64727.84 54951.94
Business Segment 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
Geographic Segment Information
The Bank operates within India
IDBI Federal Life Insurance Company Limited Associate
Sri. Shyam Srinivasan, Managing Director & CEO Key Management Personnel
Sri. P C John, Executive Director & CFO Key Management Personnel
Name of the Party Nature of Relationship
1.4. Related Party Disclosures
a) Details of Related Parties:
Remuneration 1.49 1.09
Dividend Paid * *
Key Management Personnel#
b) Significant transactions with related parties:
Asterisk denotes figures below ` 1 Lakh
During the year 2012-13, 143 Thousands (Previous Year : 523 Thousands) number of Stock Options under ESOS 2010
Scheme were granted to MD & CEO and Executive Director & CFO
# The normal transactions of the Bank with the above persons as constituents are not reckoned for the purpose of disclosure.
Note: In accordance with the RBI Guidelines on Compliance with the Accounting Standards by the Banks, the details of
transactions with associate have not been disclosed since there is only one entity in the respective category of the related party.
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1.6. Fixed Assets
a) Fixed Assets as per Schedule 10 include Intangible Assets relating to Software and System Development Expenditure which
are as follows:
Gross Block
Deductions during the year 0.00 0.00
Closing Balance 73.31 39.67
Depreciation / Amortisation
Charge for the year 5.30 6.23
Deductions during the year 0.00 0.00
Depreciation to date 37.24 31.94
Net Block 36.07 7.73
(` in Crore)
b) Land and premises include flats ` 0.37 Crore (previous year: ` 0.37 Crore), written down value ` 0.17 Crore (previous year:
` 0.18 Crore), taken possession of and being used by the Bank, for which documentation/registration formalities are to be
completed.
c) Revaluation of Fixed Assets
During the year 1995-96, the appreciation of ` 9.65 Crore in the value of land and buildings consequent upon revaluation
by approved valuers was credited to Revaluation Reserve. Depreciation for the year on the net addition to value on such
revaluation of assets at ` 0.21 Crore (Previous year: ` 0.22 Crore) has been transferred from Revaluation Reserve to Profit &
Loss Account. There has been no revaluation of assets during this year.
1.7. Deferred Tax Assets / Liability
The major components of deferred tax assets and deferred tax liabilities are as under:
Deferred Tax Liability
Tax effect of items constituting deferred tax liability:
(i) Interest accrued by not due 111.81 102.24
(ii) Depreciation on Fixed Asset 5.22 5.73
(iii) Depreciation on Investments 151.85 243.32
(A) 268.88 351.29
Deferred Tax Asset
Tax effect of items constituting deferred tax assets:
(i) Interest/premium paid on purchase of securities 56.29 47.22
(ii) Provision for Standard Assets 83.34 47.00
(iii) Others 225.47 171.76
(B) 365.10 265.98
Net Deferred tax liability/ (Asset) (A-B) (96.22)$ 85.31
Less: Deferred Tax on disallowance of provision for NPA and
others by the Income Tax Department 30.36 21.12
Net Deferred tax liability/ (Asset) (126.58) 64.19 $
31 March 2013 31 March 2012
(` in Crore)
$ Net Deferred Asset of `160.41 Crore credited to the Consolidated Profit and Loss Account.
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1.8 Employee Benefits
a) Defined Contribution Plan
The Bank
Provident Fund
Employees, who have not opted for pension plan are eligible to get benefits from provident fund, which is a defined
contribution plan. Aggregate contributions along with interest thereon are paid on retirement, death, incapacitation or
termination of employment. Both the employee and the Bank contribute a specified percentage of the salary to the Federal
Bank Employees Provident Fund. The Bank has no obligation other than the monthly contribution.
New Pension Scheme
As per the industry level settlement dated 27/04/2010, employees who joined the services of the Bank are not eligible for the
existing pension scheme whereas they will be eligible for Defined Contributory Pension Scheme (DCPS) in line with the New
Pension Scheme introduced for employees of Central Government. Employee shall contribute 10% of their Pay and Dearness
Allowance towards DCPS and the Bank will also make a matching contribution. There is no separate Provident Fund for
employees joining on or after 01/04/2010.
The Subsidiary
The company has defined contribution plans for employees comprising of Provident Fund and Employee State Insurance. The
contributions paid/payable to these plans during the year are charged to Statement of Profit and Loss for the year.
The Group Makes Provident Fund, Employee State Insurance Scheme Contributions and Defined Contributory Pension Scheme
for Qualifying Employees. Under the schemes, the Group is required to contribute a specified percentage of the payroll costs
to fund the benefits. The Group recognised `1.38 Crore (Previous year: ` 0.96 Crore) for provident fund contributions, `
0.30 Crore (Previous Year ` 0.18 Crore) for Employee State Insurance Scheme Contributions and ` 5.69 Crore. (Previous year:
` 2.94 Crore) for DCPS in the consolidated Profit and Loss Account. The Contributions payable to these plans by the group
are at the rates specified in the Rules of the Schemes.
b) Defined benefit plan
The Group offers the following employee benefit schemes to its employees:
i. Gratuity
ii. Superannuation/Pension
Gratuity
The Bank
The Bank provides for Gratuity, a defined benefit retirement plan (the Gratuity Plan) covering the eligible employees. The
Gratuity Plan provides a lumpsum payment to vested employees on retirement, death, incapacitation or termination of
employment, of an amount based on the respective employees salary and the tenure of employment. Vesting occurs upon
completion of five years of service as per Payment of Gratuity Act, 1972 and its amendment with effect from 24.05.2010 or
as per the provisions of the Federal Bank Employees Gratuity Trust Fund Rules / Bi-partite Award provisions. Liabilities with
regard to the Gratuity Plan are determined by Actuarial valuation as on the Balance Sheet date, based upon which, the Bank
contributes all the ascertained liabilities to the Federal Bank Employees Gratuity Trust Fund (the Trust). Trustees administer
contributions made to the Trust and contributions are invested in specific investments as permitted by law.
The Subsidiary
The net present value of the obligation for un-funded gratuity benefits, which is a defined benefit plan, as determined on
independent actuarial valuation, conducted annually using projected unit credit method, as adjusted for unrecognized past
services cost, if any, is recognised in the accounts. Actuarial gains and losses are recognised in full in the Statement of Profit
and Loss for the period in which they occur.
Superannuation / Pension
The Bank
The Bank provides for monthly pension, a defined benefit retirement plan (the pension plan) covering eligible employees.
The pension plan provides a monthly pension after retirement of the employees till death and to the family after the
death of the pensioner. The monthly pension is based on the respective employees salary and the tenure of employment.
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Vesting occurs upon completion of ten years of service. The Bank pays the monthly pension by purchasing annuities from
Life Insurance Corporation of India (LIC). Liabilities with regard to the pension plan are determined by actuarial valuation
as on the Balance Sheet date, based upon which, the Bank contributes all the ascertained liabilities to the Federal Bank
(Employees) Pension Fund (the Trust). Trustees administer contributions made to the Trust and contributions are invested
in specific investments as permitted by law.
The following table as furnished by Actuary sets out the funded status of gratuity / pension plan and the amount recognized
in the Groups financial statements as at March 31, 2013.
i) Change in benefit obligations:
Projected benefit obligation, beginning of the year 225.25 203.51 0.04 0.08 598.76 589.34
Service Cost 12.00 10.94 0.06 0.03 42.18 49.16
Interest cost 18.20 16.38 0.00 0.00 46.14 46.48
Actuarial (gain)/ loss 6.85 15.97 (0.02) (0.07) 8.98 (1.25)
Benefits paid (22.17) (21.55) -- -- (111.94) (84.97)
Projected benefit obligation, end of the year 240.13 225.25 0.08 0.04 584.12 598.76
(` in Crore)
Particulars FBL FFSL FBL
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
ii) Change in plan assets
Plan assets at beginning of the year at fair value 198.87 184.69 - - 422.62 404.04
Expected return on plan assets 16.90 15.70 - - 35.92 34.34
Actuarial gain/(loss) 28.07 20.04 - - 78.27 1.31
Employers Contributions -- -- - - 19.30 67.90
Benefits paid (22.17) (21.56) - - (111.94) (84.97)
Plan assets at end of the year, at fair value 221.67 198.87 - - 444.17 422.62
(` in Crore)
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
ii) Reconciliation of present value of the obligation and the fair value of the plan assets
Fair value of plan assets at the end of the year 221.67 198.87 - - 444.17 422.62
Present value of the defined benefit obligations
at the end of the period 240.13 225.25 0.08 0.04 584.12 598.76
Liability recognized in the Balance Sheet 18.46 26.38 (0.08) (0.04) 139.95@ 176.14
(` in Crore)
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
@ Includes amount payable on account of transitional liability due to second option for pension `67.36 Crore.
174
iv) Gratuity / pension cost for the year ended 31 March, 2013
Service cost 12.00 10.94 0.06 0.03 42.18 49.16
Interest cost 18.20 16.38 0.00 0.00 46.14 46.48
Expected return on plan assets 16.90 15.70 0.00 0.00 35.92 34.34
Actuarial (gain)/loss 5.16 (4.07) (0.02) (0.07) 5.75 (2.56)
Employee Cost 18.46 7.55 0.04 (0.04) 58.15 58.74
Amortisation Cost - - - - 33.68 33.68
Net Cost Debit to Profit and Loss Account - - - - 91.83 92.42
Amount not debited in profit and loss account,
but carried over to be amortised in future years * - - 67.36 101.04
Actual return on plan assets 18.59 16.91 39.15 35.66
(` in Crore)
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
* See Note No. 1.9 of Schedule 18.
v) Investment details of plan Assets
Central and state Government bonds 46.53 49.06 - - 137.37 141.27
Other debt securities 29.51 31.14 - - 90.47 92.49
Balance in Saving bank account with the Bank 2.87 2.10 - - 6.33 9.17
Net current assets 2.21 2.42 - - 6.68 6.80
Balance with LIC # 140.55 114.15 - - 203.32 172.89
Total 221.67 198.87 - - 444.17 422.62
(` in Crore)
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
# In the absence of detailed information regarding plan assets which is funded with Life Insurance Corporation of India, the
composition of each major category of plan assets, the percentage or amount for each category to the fair value of plan
assets has not been disclosed.
Plan Assets 221.67 198.87 184.69 181.73 153.03
Surplus/Deficit -18.46 -26.38 -18.82 0.00 0.00
Experience adjustments
on Plan Liabilities 17.02 0.03 13.89 40.36 (0.96)
Experience Adjustments
on Plan Assets 22.33 0.64 (0.26) (0.10) (0.57)
2012-13 2011-12 2010-11 2009-10 2008-09
(` in Crore)
vi) Experience adjustments
i) Gratuity Plan
a) FBL
175
Plan Assets 444.17 422.62 404.04 195.38 161.02
Surplus/Deficit -139.95 -176.14 -185.30 0.00 0.00
on Plan Liabilities (1.22) 450.11 0.59 (0.22) 4.73
on Plan Assets 1.38 0.96 (0.37) (0.72) (1.45)
2012-13 2011-12 2010-11 2009-10 2008-09
(` in Crore)
ii) Pension Plan
a) FBL
Defined Benefit Obligations 0.08 0.04 0.08 NA NA
Plan Assets Nil Nil Nil NA NA
Surplus/Deficit (0.08) (0.04) 0.08 NA NA
on Plan Liabilities (0.04) (0.02) 0.03 NA NA
on Plan Assets Not Applicable Not Applicable Not Applicable NA NA
2012-13 2011-12 2010-11 2009-10 2008-09
(` in Crore) b) FFSL
NA Not Available
vii) Assumptions
Discount rate 8.50% 8.50% 7.95% 8.57% 8.50% 8.50%
Annuity rate per Rupee - - - - 126.18297 125.65445
Salary escalation rate 5.00% 5.50% 10.00% 10.00% 5.00% 5.50%
Estimated rate of return on plan assets 8.50% 8.50% - - 8.50% 8.50%
Employee Turnover Not Not
Available Available
Above 45 (Age in Years) 0.6% 0.6% 0.6% 0.6%
29 to 45 (Age in Years) 0.3% 0.3% 0.3% 0.3%
Below 29 (Age in Years) 0.1% 0.1% 0.1% 0.1%
(` in Crore)
2012-13 2011-12 2012-13 2011-12 2012-13 2011-12
The estimates of future salary increases considered in actuarial valuation take account of inflation, seniority, promotion and
The expected rate of return on plan assets is based on the average long-term rate of return expected on investments of the
Fund during the estimated term of the obligations.
The bank expects to contribute ` 29.02 Crore (Previous Year ` 18.83 Crore) and ` 63.96 Crore (Previous Year ` 50.58 Crore)
as gratuity and pension respectively for the year 2013-14
The above information is as certified by the actuary and relied upon by the auditors.
c) Leave Encashment/ Sick Leave / Leave Travel Concession / Unavailed Casual Leave
The Bank
The employees of the Bank are entitled to compensated absence. The employees can carry forward a portion of the unutilised
accrued compensated absence and utilise it in future periods or receive cash compensation at retirement or termination of
employment for the unutilized accrued compensated absence for a maximum of 240 days. The Bank records an obligation
176
1.9 The net liability arising on exercise of second option for Pension by employees (other than separated / retired employees)
actuarially determined during Financial Year 2010-11 at `168.43 Crore is amortised equally over a period of five years pursuant
to the exemption from the application of the provisions of the Accounting Standard (AS) 15, Employee Benefits, granted by the
Reserve Bank of India and made applicable to the Bank vide letter no. DBOD No.BP.BC.15896 / 21.04.018 / 2010-11 dated April
8, 2011. Accordingly, an amount of `33.68 Crore (Previous Year: ` 33.68 Crore), being proportionate amount is charged to
Consolidated Profit and Loss Account for the year and the balance unamortised pension liability of `67.36 Crore (Previous Year:
` 101.04 Crore) is to be amortised over the next two years.
Sick leave 27.18 -
Leave Travel Concession 9.87 -
Casual Leave 2.23 -
Assumptions
As at 31 March 2013
Particulars FBL FFSL
Sick leave 24.63 -
Leave Travel Concession 9.52 -
Casual Leave 2.04 -
Assumptions
As at 31 March 2012
Particulars FBL FFSL
1.10. Provisions and Contingencies
a) Movement in provision for frauds included under other liabilities:
Balance at the beginning of the year 3.83 3.65
Reductions on account of payments during the year - -
Reductions on account of reversals during the year - -
Balance at the end of the year 5.10 3.83
31 March 2013 31 March 2012
(` in Crore)
for compensated absences in the period in which the employee renders the services that increase this entitlement. The Bank
measures the expected cost of compensated absence as the additional amount that the Bank expects to pay as a result of
the unused entitlement that has accumulated at the balance sheet date based on actuarial valuations.
A sum of ` 9.93 Crore (Previous year: ` 1.14 Crore) has been provided towards the above liabilities in accordance with AS
15 (Revised) based on actuarial valuation.
The Subsidiary
d) The company has a scheme for compensated absences for employees, the liability of which is determined on the basis of
an independent actuarial valuation carried out at the end of the year, using the projected unit credit method. Actuarial
gains and losses are recognised in full in the Profit and Loss Statement for the period in which they occur.
The Acturial liability of compensated absences of accumulated privilege, sick, casual leaves and leave travel concession
of the employees of the Group is given below:
177
1.11 Description of contingent liabilities:
a) Claims against the Group not acknowledged as debts
These represent claims filed against the group in the normal course of business relating to various legal cases currently in
progress. These also include demands raised by income tax and other statutory authorities and disputed by the group.
b) Liability on account of forward exchange and derivative contracts
The Bank enters into foreign exchange contracts, currency swaps, Forward exchange contracts and currency futures on its
own account. Bank enters into Forward exchange contracts for customers. Forward exchange contracts are commitments to
buy or sell foreign currency at a future date at the contracted rate. Currency swaps are commitments to exchange cash flows
by way of interest/principal in two currencies, based on ruling spot rates. Interest rate swaps are commitments to exchange
fixed and floating interest rate cash flows. Currency Futures contract is a standardized, exchange-traded contract, to buy or
sell a certain underlying currency at a certain date in the future, at a specified price.
c) Guarantees given on behalf of constituents
As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing.
Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill
its financial or performance obligations.
d) Acceptances, endorsements and other obligations
These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Banks customers that
are accepted or endorsed by the Bank.
e) Other items
Other items represent stock of gold on consignment basis
b) Movement in provision for debit card reward points:
Balance at the beginning of the year 0.17 -
Reductions during the year 0.01 *
31 March 2013 31 March 2012
(` in Crore)
Asterisk denotes figures below ` 1 Lakh.
c) Movement in provision for other contingencies (including derivatives):
Balance at the beginning of the year 38.37 30.50
31 March 2013 31 March 2012
(` in Crore)
d) Movement in floating provisions:
Opening balance 38.00 38.00 179.52 179.52
Provision made during the year - - - -
Draw down from provision - - - -
Closing balance 38.00 38.00 179.52 179.52
(` in Crore)
Standard Assets Provisions NPA Provision
Particulars 2012-13 2011-12 2012-13 2011-12
178
1.12 Statement of information relating to subsidiary companies (In terms of Government of India, Ministry of Corporate Affairs
General Circular No: 2/2011, No: 5/12/2007-CL III dated 8th February, 2011) in compliance with section 212 of the Companies
Act, 1956 for the year ended 31 March, 2013 and 31 March, 2012
Notes :
The Consolidated financial statements are in compliance with applicable Accounting Standards in India.
In compliance with the requirements of Clause 32 of the Listing Agreement, the consolidated financial statements are duly
audited by the auditors.
Period of the financial statements considered 31 March 2013
Currency INR
Share Capital including share application money 190.00
Reserves 2.29
Total Assets 493.00
Total Liabilities 300,71
Details of Non-current and Current Investment Nil
Turnover (Net) 88.79
Profit/ (Loss) before taxation 18.21
Provision for taxation 4.09
Profit/ (Loss) after taxation 14.12
Proposed Dividend (Including Corporate Dividend Tax) 8.26
(` in Crore)
Name of the subsidiary Fedbank Financial
Services Limited
Period of the financial statements considered 31 March 2012
Currency INR
Share Capital including share application money 190.00
Reserves (3.56)
Total Assets 357.10
Total Liabilities 170.66
Details of Non-current and Current Investment Nil
Turnover (Net) 7.69
Profit/ (Loss) before taxation (7.29)
Provision for taxation 0.08
Profit/ (Loss) after taxation (7.37)
Proposed Dividend (Including Corporate Dividend Tax) Nil
(` in Crore)
Name of the subsidiary Fedbank Financial
Services Limited
179
1.13. Additional disclosure
Additional statutory information disclosed in the separate financial statements of the Bank and subsidiary have no material
bearing on the true and fair view of the consolidated financial statements and the information pertaining to the items which are
not material have not been disclosed in the consolidated financial statements.
1.14. Figures of previous year were audited by Joint Central Statutory Auditors other than current Joint Central Statutory Auditors
Deloitte Haskins & Sells and M P Chitale & Co. Figures for the previous year have been regrouped and reclassified, where
necessary to conform to current years presentation.
Krishnakumar K P C John Shyam Srinivasan
Assistant General Manager Executive Director & CFO Managing Director & CEO
Girish Kumar Ganapathy Suresh Kumar Prof. Abraham Koshy
Company Secretary Chairman Director
Nilesh S Vikamsey Dr. K Cherian Varghese
Director Director

Place: Kochi Sudhir M Joshi K M Chandrasekhar
Date : 27 April 2013 Director Director
180
Meaningful Financial Inclusion, Ernakulam district- Dr. D Subbarao, Governor- RBI, Shri Oommen Chandy (Chief Minister, Kerala),
and Shri. K M Mani (Finance Minister, Kerala) are seen interacting with Shri Shyam Srinivasan, MD & CEO in the presence of Shri. P C
John (Rtd Executive Director), Shri. Thampy Kurian (Addl General Manager), Shri. Hibi Eden (MLA), Shri. P.I Shaik Pareeth (IAS,
District Collector) during their visit to Federal Bank stall.
Shri Shyam Srinivasan, MD & CEO launched the IDA Master Premium Debit card by handing over the first card to Dr M Raveendranath
(President, IDA Kerala Chapter) during the IDA Conference held at Lulu convention centre, Trichur.
181
Inauguration of 1000th Branch of Federal Bank at Muthoor, Thiruvalla by Senior most Metropolitan Bishop of the Mar Thoma Church
His Grace The Most Rev. Dr. Philipose Mar Chrysostom Mar Thoma Valiya Metropolitan in the presence of His Grace the Most Rev. Dr.
Joseph Mar Thoma Metropolitan (Present Head of Mar Thoma Church), Ms Linda Thomas Vanchipalam (Municipal Chairperson,
Thiruvalla), Shri. P. C. Cyriac (Rtd Chairman) and Shri Shyam Srinivasan (MD & CEO).
Inauguration of Federal Manipal School of Banking at Bangalore by Shri Abraham Chacko (Executive Director) in the presence of Shri
Radhakrishnan Nair (Chief Human Resources Officer) and other officials from the Bank and Manipal Global Education Services.
182
Federal Bank won Mastercard Innovation Award for the Cash Passport Travel Card under Prepaid Programme Category. Seen in the
picture are Shri Aravind K (CM), Shri Sumoth C (CM), Shri Vikas Varma (Mastercard - Area Head /South Asia) and Shri Dileep B (CM).
Federal Bank launched its facility for making online religious offering on behalf of the devotees of Padmanabha Swamy Temple.
Seen at the launch programme are Shri. Shyam Srinivasan, MD & CEO in the presence of Shri V K Harikumar (Executive Officer Sree
Padmanabha Swamy Temple Trust), Shri C P Sasidharan (Deputy General Manager) and others.
183
Inauguration of Br. Kohima by Shri. Temjen Toy, (IAS, Commissioner & Secretary, Works & Housing Dept. Kohima, Nagaland) in the
presence of Rev. Dr. James Thoppil (Bishop of Kohima Diocese), Shri. Debadutta Parija (AGM) and others.
Shri M Manoharan (DGM) exchanges the memorandum of agreement with Smt. Mythili, Chief Engineer, Tamilnadu Generation &
Distribution Corporation Ltd (TANGEDCO) for Online Payment of Electricity Bills through FedNet.
184
Inauguration of Federal Banks Money Exchange Bureau at the domestic terminal of Trivandrum International Airport by Shri Abraham
Chacko, (Executive Director) in the presence of Shri S S Balan (Joint General Manager- Operations, Airport Authority of India), Shri C P
Sasidharan (DGM) and others.
IMPS promotional campaign August 2012 -Shri. Sunny. K. P (DGM) receiving the NPCI award from Dr K. Ramakrishnan (Chief
Executive, IBA) for the Bank being the highest contributor in terms of transaction number in the month of August 2012 in the presence
of Shri. D. Sampath (Addl General Manager) and others.
185
As part of CSR activities, Bank donated a vehicle to Alpha Pain Clinic, Kochi. Dr. V. P. Gangadharan, Oncologist representing Alpha Pain
Clinic, Cochin Centre received the keys of vehicle from Shri. Raju Hormis (Head CSR).
Inauguration of branch Ayarkunnam by Shri. Oommen Chandy, Chief Minister of Kerala in the presence of Fr. Varghese Kalayil (Vicar, St.
Sebastians church), Shri. P. C. John, (Rtd Executive Director), Shri Thomas K U, (AGM) and others.
186
Rededication of Br. Ranebennur by Shri K H Shivakumar (KAS, Tahshildhar), in the presence of Shri Rajan R (AGM) and others.
Inauguration of Br.Kundapura by Dr.M T Reju (Deputy Commissioner & District Magistrate, Udupi) in the presence of Shri. Abu George
(AGM), Sri.K Radhakrishna Shenoy (Managing Trustee, Pete Sri Venkataramana Temple), Sri.Sachidananda Chathra (Managing Director,
Sri Durgamba) and others.
187
Shri Shyam Srinivasan, MD & CEO at The Economic Times Banking Technology Conclave 2012.
Inauguration of Br Mecheri by Shri S S Asawale (Sr. Vice President, Steel and Rolling Mills- JSW Steel Ltd) in the presence of
Shri Srinivasan. K (AGM), Shri K. Ramasamy (Dist. Chairperson Lions Club), Shri S.K Elangovan (Secretary, Kaavery Educational Institutions
and Hon Chairman of Shreenivasa Educational Trust) and others.
188
Rededication of Corporate Banking Branch, Mumbai by Shri. H. R. Khan (Dy. Governor, Reserve Bank of India) in the presence of Shri.
Shyam Srinivasan, MD & CEO, Shri. Abraham Chacko (Executive Director) and others.
Rededication of Br. Bangalore/ St Marks Road is inaugurated by Shri. Shyam Srinivasan, MD & CEO, in the presence of Shri.Harish Bijoor
(CEO- M/s Harish Bijoor Consults), Shri.Rostow Ravanan (CFO- M/s MindTree) and others.
CONTENTS
page
Mangement
Discussion
and Analysis
28
page
Corporate
Identity
02
page
Financial
Statement of
Fedbank Financial
Services Ltd
122
page
Message from
MD & CEO
06
page
Corporate
Governance
46
page
Performance
Dashboard
03
page
Consolidated
Financial
Statement
149
page
Financial
Statement of
The Federal
Bank Limited
60
page
Message from
Chairman
05
page
Board of
Directors &
Management
Team
07
page
Directors
Report
16
Safe Harbour
This document contains certain forward-looking statements based on current
expectations of The Federal Bank Limited management. Actual results may vary
signifcantly from the forward-looking statements contained in this document
due to various risks and uncertainties. These risks and uncertainties include the
effect of economic and political conditions in India and outside India, volatility
in interest rates and in the securities market, new regulations and Government
policies that may impact the businesses of The Federal Bank Limited as well as its
ability to implement the strategy. The Federal Bank Limited does not undertake
to update these statements. This document does not constitute an offer or
recommendation to buy or sell any securities of The Federal Bank Limited or
any of its subsidiaries and associate companies. This document also does not
constitute an offer or recommendation to buy or sell any fnancial products
offered by The Federal Bank Limited. Figures for the previous year have been
regrouped wherever necessary to conform to current years presentation.
Federal Bank won IDRBT Banking Technology Excellence Awards for year 2011-12- Best Bank Award among Small
Banks for Mobile Banking and Electronic Payments and Best Bank Award among Small Banks for CRM and Business
Intelligence Initiatives. Mr Shyam Srinivasan, MD & CEO received the award at the hands of Dr. D. Subbarao, RBI
Governor in the presence of Mr. Ajith Kumar K. K, (Deputy General Manager).
PERFECT
BANKING
PARTNER
Annual Repor t
2012- 2013
Corporate Offce,
Post Box No. 103, Federal Towers, Aluva-683 101, Kerala, India.
Phone: 91-484-2623620-29.
www.federalbank.co.in
The Federal Bank Limited, Regd. Offce: Aluva.
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