Annualreport08 09

2008-09
BOARD OF DIRECTORS
K R Ramamoorthy Chairman Vaughn Nigel Richtor Managing Director and CEO (till 06-Apr-2009) Aditya Krishna
78 ANNUAL GENERAL MEETING

th
Arun Thiagarajan Lars Kramer (till 01-May-2008) Meleveetil Damodaran (from 21-Jul-2008) Philippe Damas Ramakrishnan Subramanian Richard Cox Ryan Padgett Santosh Ramesh Desai Vaughn Nigel Richtor (from 01-Jun-2009) Wilfred Nagel
Venue : Day/Date Time : :
The Auditorium, ING Vysya House, No.22, M G Road, Bangalore - 560 001 Friday, 04-Sep-2009 11.00 A.M.
OFFICER IN-CHARGE Jayant Mehrotra (from 06-Apr-2009 AN) CORPORATE SECRETARY Page No. 1 2 3 8 19 20 35 36 73 74 75 92 93 127 128 Karvy Computershare Private Limited Unit: ING Vysya Bank Limited 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081 Ph: 040-23420815 Fax: 040-23420814 E-mail : mailmanager@karvy.com STATUTORY AUDITORS M/s S R Batliboi & Co., Chartered Accountants, Kolkata ING VYSYA BANK LIMITED Registered and Corporate Office: ING Vysya House, No.22, M.G.Road Bangalore - 560 001 Registrars & Share Transfer (R&T) Agents M V S Appa Rao
CONTENTS
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. Board of Directors Senior Management Team Directors Report Management Discussion and Analysis Report Non-financial Report Corporate Governance Report Auditors Report Financial Statements Cash Flow Statement Statement pursuant to Section 212 ING Vysya Financial Services Limited Consolidated Auditors Report Consolidated Financial Statements of ING Vysya Bank Limited and its Subsidiary Consolidated Cash Flow Statement Basel II - Pillar 3 disclosures
78th Annual Report 2008-09
SENIOR MANAGEMENT TEAM

Vaughn Nigel Richtor Managing Director and CEO (till 06-Apr-2009) Jayant Mehrotra Chief Financial Officer and Officer in-charge (from 06-Apr-2009 AN)
Ashok Rao B Chief of Staff Legal, Compliance & Vigilance
Don Koch Chief Operating Officer (upto 30-Sep-2008)
Janak Desai Country Head Wholesale Banking
Jan Van Wellen Chief Risk Officer
Prasad J M Chief Human Resources
Samir Bimal Country Head Private Banking
Uday Sareen Country Head Retail Banking
Prasad C V G Chief Information Officer
Meenakshi A Head Operations
Bishwajit Mazumder Chief Audit Executive M V S Appa Rao Corporate Secretary
ING Vysya Bank Limited
DIRECTORS REPORT
The Board of Directors have pleasure in presenting the Seventy Eighth Annual Report of the Bank together with the Audited Statements of Accounts for the year ended 31-Mar-2009, Auditors Report thereon and other documents and statements as are required. Financial and Business Performance For the year ended March 2009 the Bank posted a net profit of Rs. 189 Crore compared to Rs. 157 Crore for 2007-08. The pre-tax profit improved to Rs. 295 Crore compared to Rs. 251 Crore during the previous year. The Net Interest Income for the year 2008-09 increased to Rs. 650 Crore registering an increase of 30%. The aggregate business of the Bank reached Rs.41,641 Crore as at 31-Mar-2009 compared to Rs. 35,107 Crore as at 31-Mar-2008. The Total Deposits of the Bank increased to Rs. 24,890 Crore registering a growth of 22%. The Net Advances increased to Rs. 16,751 Crore by March 2009 compared to Rs. 14,650 Crore at the end of the previous year. The Bank has exceeded the regulatory target of 40% of adjusted net bank credit for priority sector lending, having achieved a level of 42.89% (previous year 42.68%). Export advances declined to Rs. 1,211.87 Crore from Rs. 1,300.67 Crore at the end of the previous year. The export credit as a percentage of net bank credit stood at 7.23%. As of 31-Mar-2009, the outstanding credit to Scheduled Castes / Scheduled Tribes borrowers stood at Rs. 37.58 Crore and the percentage of recovery to demand as on 31-Mar-2009 was 48.45% (previous year 48.33%) of the amounts fallen due. The Net NPAs increased to 1.23 % as of March 2009 from 0.70% as of March 2008. Paid up-capital and Capital Adequacy Ratio The paid up capital of the Bank stood at Rs.102.60 Crore as at 31-Mar-2009 as compared to Rs. 102.47 Crore, as at 31-Mar-2008. The Bank has adopted the New Capital Adequacy Framework (Basel II) from 31-Mar-2009. Under this framework, the Capital Adequacy Ratio (CAR) stood at 11.65% as at 31-Mar-2009 as against the Reserve Bank of India (RBI) stipulated minimum of 9%. Of this, Tier I Capital was 6.89% and Tier II Capital was at 4.76%. Under the previous norm (Basel I), the CAR stood at 11.68 % as at 31-Mar-2009. Of this, Tier I Capital was 6.91% and Tier II capital 4.77% as compared to 6.82% and 3.38% respectively as at 31-Mar-2008. The detailed discussion on financials and business performance is presented in the Management Discussion and Analysis Report, forming part of this Annual Report. Appropriation of Profits and Dividend In compliance with the requirement under the Banking Regulation Act, 1949 and the guidelines issued thereunder by the RBI, the Directors propose to transfer Rs.47.19 Crore (previous year Rs. 39.23 Crore) to Statutory Reserve, Rs.2.28 Crore (previous year Rs. 3.15 Crore) to Capital Reserve and Rs.2.30 Crore (previous year Rs. 4.77 Crore) to Investment Reserve, for the year ended March 2009. The Directors also propose to transfer Rs. 10 Crore (previous year Rs. 6.70 Crore) to Special Reserve under Section 36(i)(viii) of the Income Tax Act, 1961. Taking into account the regulatory restrictions, the Board of Directors recommend the payment of dividend at 20% on the face value of fully paid-up shares increasing from 15% of the previous year. The outflow on account of the proposed dividend, including the dividend tax, would be Rs. 24.01 Crore. The dividend recommended, on approval would be paid to all those shareholders whose names appear as Beneficial Owners as at the end of 20-Aug-2009 as per the list to be furnished by Depositories (viz., NSDL and CDSL) in respect of the shares held in electronic form and those shareholders whose names appear in the Register of Members of the Bank as members after giving effect to all valid transfers of shares in physical form which will be lodged with the Bank on or before 20-Aug-2009. Consolidated Financial Statements As required under AS 21 issued by the Institute of Chartered Accountants of India (ICAI), the Banks consolidated financial statements are included in this Annual Report incorporating the accounts of its wholly owned subsidiary company viz., ING Vysya Financial Services Limited in line with the basis of consolidation as explained in the Notes to the said consolidated statements.
DIRECTORS REPORT
Employee Stock Option Scheme During the financial year 2008-09, eligible employees were vested with 12,42,600 options under the ESOS 2007 scheme which had been granted during the financial year 2007-08. Similarly eligible employees under ESOS 2005 scheme Tranche II (Loyalty options) were also vested with 2,60,540 options. The requisite particulars to be disclosed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, in respect of the options granted etc., under the existing and new schemes are furnished in Annexure-I to this report. Statutory Disclosures The particulars of employees required under Section 217(2A) of the Companies Act, 1956 and the rules made thereunder, are given in the annexure appended hereto (Annexure- II) and forming part of this report. In terms of Section 219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of the said annexure may write to Corporate Secretary at the Registered Office of the Bank. The provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption are not applicable to the Bank. The Bank has, however, used information technology extensively in its operations. Subsidiaries ING Vysya Financial Services Limited (IVFSL), a wholly owned subsidiary of the Bank with the object of carrying on business of non-fund / fee based activities of marketing and distribution of various financial products / services of the Bank / other company earned a net profit of Rs. 0.37 Crore for the year 2008-09, as against Rs. 0.23 Crore during the previous year. The Company continues to provide services to the Bank as may be required from time to time on a non-exclusive contract basis. As required under Section 212 of the Companies Act, 1956 the Balance Sheet, Directors Report and other documents pertaining to IVFSL, along with a statement of interest of the Bank in the subsidiary, are attached to the financial statements of the Bank. Directors Mr. Lars Kramer resigned as Director effective 1-May-2008. The Board places on record its appreciation for the valuable contributions rendered by him during his tenure as Director on the Board. Mr. Santosh Ramesh Desai was appointed by the Board of Directors as an Additional Director effective 29-Apr-2008 to hold office till the 77th AGM. The shareholders at the said AGM appointed Mr. Santosh Ramesh Desai as a Director liable to retire by rotation. Mr. Ramakrishnan Subramanian was appointed by the Board as Director in the casual vacancy caused by the resignation of Mr. Lars Kramer effective 1-May-2008. Mr. Ramakrishnan Subramanian will hold office upto the date which Mr. Lars Kramer would have held office if he had not resigned, i.e., till the date of the 78th AGM. Mr. Meleveetil Damodaran was appointed by the Board of Directors as an Additional Director effective 21-Jul-2008 to hold office till the 78th AGM. A notice, as required under Section 257 of the Companies Act, 1956 has been received by the Bank for appointment of Mr. Meleveetil Damodaran as Director of the Bank. A proposal to appoint Mr. Meleveetil Damodaran as Director, liable to retire by rotation, is being placed before the shareholders at the ensuing AGM. Mr. Vaughn Nigel Richtor ceased to be Managing Director and CEO on completion of his tenure of three years and two months extension on 06-Apr-2009 at the close of business. He also ceased to be a Director as his directorship was co-terminus with his term as
DIRECTORS REPORT
Managing Director and CEO. The Board places on record its appreciation for the valuable contributions rendered by him during his tenure as Managing Director and CEO of the Bank. Pending RBIs approval for appointment of Managing Director and CEO, a Committee of Directors has been constituted with three members viz., Mr. Philippe Damas, Chairman of the Corporate Governance Committee as Chairman, Mr. K R Ramamoorthy, Part-time Chairman and Mr. Arun Thiagarajan, Non-Executive Independent Director to oversee the operations and administration of the Bank in the absence of Managing Director and CEO. Chief Financial Officer, Mr. Jayant Mehrotra, the senior most officer of the Bank was appointed as Officer in-charge to look after the day-to-day affairs of the Bank. Mr. Jayant Mehrotra took charge from Mr. Vaughn Richtor, the outgoing Managing Director and CEO at the close of business on 06-Apr-2009. This is in terms of RBIs advice vide its letter DBOD. No.16840/ 08.57.001/200809 dated 06-Apr-2009. Mr. Vaughn Nigel Richtor was subsequently appointed by the Board of Directors as an Additional Director effective 1-Jun-2009 to hold office till the 78th AGM. He is also appointed on the Committee of Directors effective 01-Jun-2009. A notice, as required under Section 257 of the Companies Act, 1956 has been received by the Bank for appointment of Mr. Vaughn Nigel Richtor as Director of the Bank. A proposal to appoint Mr. Vaughn Nigel Richtor as Director, liable to retire by rotation, is being placed before the shareholders at the ensuing AGM. Part-time Chairman The Reserve Bank of India granted its approval for re-appointment of Mr. K R Ramamoorthy as Part-time Chairman vide its letter No. DBOD No.20390/08.57.001/2008-09 dated 28-May-2009 for a period up to 07-Jul-2010 with effect from the date of expiry of his previous term on 05-May-2009. Further, RBI vide its letter No. DBOD No.441/08.57.001 /2008-09 dated 06-Jul-2009 has approved, under Section 35B of the Banking Regulation Act, 1949, the remuneration to Mr. K R Ramamoorthy with effect from the date of his reappointment i.e., 05-May-2009, for which a resolution is included in the Notice of the 78th Annual General Meeting. Retirement of Directors by rotation Mr. Philippe Damas, Mr. Wilfred Nagel and Mr. Arun Thiagarajan will retire by rotation in terms of Section 256 of the Companies Act, 1956 at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. A brief resume of each of these Directors is furnished in the Annexure to the Notice convening the Annual General Meeting. Registrars and Share Transfer (R&T) Agents Karvy Computershare Private Limited, Hyderabad continues to be the R & T Agents for the shares of the Bank. Auditors The Statutory Auditors viz., M/s. S R Batliboi & Co., Chartered Accountants who were re-appointed at the 77th Annual General Meeting held on 30-Jun-2008 are retiring at this AGM and being eligible for re-appointment under the guidelines of RBI offer themselves for re-appointment. Reserve Bank of India vide its letter no. DBS.ARS.No.14154/08:27:005/2008-09 dated 15-May-2009, conveyed its approval for the re-appointment of M/s. S R Batliboi and Co., Chartered Accountants, Kolkata as Statutory Auditors of the Bank for the third consecutive financial year 2009-10. The Shareholders are requested to appoint the above auditors and authorize the Board of Directors to determine their remuneration. Shareholders are also requested to authorize the Board of Directors to appoint Branch Auditors and determine their remuneration. Other Reports As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a detailed report on Corporate Governance is included in this Annual Report.
DIRECTORS REPORT
Directors Responsibility Statement As required by Section 217(2AA) of the Companies Act, 1956, the Directors confirm: (i) (ii) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; that they had selected such accounting policies and applied them consistently and made judgements and estimates that were 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 the year under review; that they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; that they had prepared the accounts for the financial year ended 31-Mar-2009 on a going concern basis.
(iii)
(iv)
Acknowledgements The Board is grateful to the Reserve Bank of India and other government and regulatory agencies for their continued co-operation, support and guidance. The Directors express their deep sense of appreciation of all the employees, whose outstanding professionalism, commitment and initiative has made the Banks growth and success possible and continues to drive its progress. The Board of Directors would also like to place on record their appreciation of the encouragement and patronage received from valued customers and other stakeholders like financial institutions, bondholders etc., and look forward to their continued support. Finally, the Directors acknowledge the Members for their trust and support. For and on behalf of the Board Place : Bangalore Date : 21-Jul-2009 K R Ramamoorthy Chairman
ANNEXURE - I TO DIRECTORS REPORT

Statutory Disclosures as of 31-Mar-2009 regarding ESOS under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999
ESOS 2002 (as modified in 2005) Tranche 1 Options Granted - Pre Rights Issue 2005 - Post Rights Issue 2005 1,66,800 3,27,980 Exercise price is equivalent to 75% of the average price of the shares during the past six months in the Stock Exchange, where the Stocks are traded in highest number. 29-Sep-01 60,450 2,90,610 59,740 2,64,280 Tranche 2 1,60,490 4,29,524 Exercise price is equivalent to 75% of the average price of the shares during the past six months in the Stock Exchange, where the Stocks are traded in highest number. 29-Sep-01 28,868 3,39,536 27,568 2,36,722 Tranche 1 4,65,212 Exercise price is equivalent to 75% of the average price of the shares during the past six months in the Stock Exchange, where the Stocks are traded in highest number. 22-Sep-05 239,260 1,49,326 ESOS 2005 Tranche 2 (Loyalty Options) 5,25,285 Exercise price is equivalent to 75% of the average price of the shares during the past six months in the Stock Exchange, where the Stocks are traded in highest number. 22-Sep-05 260,540 90 ESOS 2007 Tranche 1 51,68,366 Exercise price is closing price in the Stock Exchange, where the shares are traded in the highest number, prior to the date of meeting of the Board of Directors in which options are granted. 11-May-07 1,242,600 -
Pricing Formula
AGM Resolution - Pre Rights Issue Post Rights Issue Options Exercised - Pre Rights Issue Post Rights Issue Total number of Shares arising as a result of exercise of Option Pre Rights Issue Post Rights Issue Options Lapsed Pre Rights Issue Post Rights Issue Variation of terms of options Money realised by exercise of options (in Rs.) Total number of options in force Employee wise details of grant to Senior Managerial Personnel Mr. B Ashok Rao Mr. Bishwajit Mazumder Mr. Don Koch Mr. Janak Desai Mr. Jan Van Wellen Mr. Jayant Mehrotra Ms. Meenakshi A Mr. Prasad C V G Mr. Prasad J M Mr. Samir Bimal Mr. Uday Sareen Mr. M V S Appa Rao Any other employee who received a grant in any one year of the options amounting to 5% or more of the options granted during the year. Identified employees who were granted options during any one year, equal to or exceeding 1% of the issued capital (exclude outstanding warrants and conversions) of the company at the time of grant. Options Vested
59,740 2,64,280 25,065 62,980 NIL 2,23,31,660.00 720
27,568 2,36,722 25,541 1,33,217 NIL 2,30,80,395.00 59,585
1,49,326 1,42,101 NIL 1,84,47,649.00 1,73,785
90 17,515 NIL 1,66,33.80 5,07,680
60,000 NIL 51,08,366
5,040 NIL
11,900 5,440 NIL
5,000 5,000 5,500 7,000 4,500 NIL
500 NIL
252,500 39,000 605,000 600,000 45,000 32,000 293,000 552,000 638,366 NIL
NIL
NIL
NIL
NIL
NIL
The details on Employee compensation cost is given under Employee Stock Option Scheme in the Notes on Accounts (Schedule 18) of the Balance Sheet (page no. 50)
MANAGEMENT DISCUSSION & ANALYSIS REPORT

MACRO ECONOMIC AND BANKING INDUSTRY DEVELOPMENTS Real Gross Domestic Product (GDP) growth in 2009-10 is likely to fall below trend, brought on by a slowdown in global and domestic demand together with a lagged impact of aggressive monetary tightening. The drivers of growth continue to be services while manufacturing industry has taken a hit. The GDP for the final quarter of 2008-09 has been estimated at 5.8%, taking the annual GDP for 2008-09 to 6.7%. The economic activities which registered significant growth in 2008-09 are, mining and quarrying at 3.6 per cent, construction at 7.2 percent, financing, insurance, real estate and business services at 7.8 per cent, and community, social and personal services at 13.1 per cent. The growth rate in agriculture, forestry and fishing, and manufacturing is estimated at 1.6 per cent and 2.4 per cent, respectively in this period. The past year also witnessed high volatility in the equity markets. The BSE Sensitive index (Sensex) fell by 38% from 15,771 on 1-April2008 to 9,708 on 31- March-2009. The fall in the index can be attributed to fears of an economic recession in the US, the sub-prime crisis and a reduction in liquidity caused by the crisis of confidence in the US and European economies. The Indian Rupee was negatively impacted due to the compound impact of all the above. The regulatory authorities have taken several measures such as relaxing norms for external commercial borrowing, raising limits for foreign investment in corporate debt, and raising interest rate on NRI deposits; which we feel are positive in the medium-term for the Rupee. During 2008-09, the rupee depreciated against the US dollar to 50.56 against Rs.39.9 as on 1-Apr-2008, depreciated against the Euro to 66.97 on 31-Mar-2009 against 62.24 on 1-April 2008 and at the same time appreciated against the Pound to 72.41 as on 31-Mar-2009 against Rs.78.77 as on 1-Apr-2008. Investment (as a % of GDP) has been running ahead of savings (as a % of GDP) for the last few years. Though marginal propensity to save increases with uncertainty on future income, job and salary cuts will likely lead to a lower savings as downturn kicks in. This together with the postponement of capital expenditures by corporates due to tightening of credit availability and slowing demand will likely alter the savings-investment balance. At the same time, India continues to be a domestic demand driven economy and consumption demand is still sturdy. Demand for consumer non-durables like food (contributing to 41% of consumption) is likely to sustain. Slowing inflation, declining input costs and increased rural spending (following increased government investment in infrastructure, rise in MSP for crops) will help sustain consumption. Inflation has moderated significantly from its high of 12.91% in August 2008 and the annual rate of inflation (in WPI terms) for 2008-09 averaged to 8.4%.While fuel and manufacturing inflation have moderated significantly, primary articles inflation may pose a risk. On the Policy front, against the backdrop of global financial uncertainty, securing and maintenance of financial stability has been accorded priority from a policy perspective. The Central Bank strived to optimally balance the objectives of financial stability, price stability and growth. The Reserve Bank left the Bank rate unchanged but aggressively cut the Repo rate and the Reverse Repo rate during the financial year. The CRR has been cut from 7.5% in the beginning of the year to 5% now. Reverse repo rate has been cut by 275 bps and Repo rate by 425 bps from the peak rates observed in the fiscal year 2008-09. Against this backdrop, the Banking sector has performed commendably. As per the Weekly Statistical supplement published by RBI, aggregate deposits of Scheduled Commercial Banks (SCBs) increased by 19.8% YoY (Rs.6,33,382 Crore) on 27-March- 2009 as against 22.4% (Rs.5,85,006 Crore) in the previous year. Credit extended by SCBs increased by 17.3% (Rs.4,08,099 crore) as against 22.3% (Rs.4,30,724 Crore) in the previous year. Further slowdown in the asset growth as well as possible deterioration in NPA levels may be the challenges ahead for the industry. OVERVIEW OF FINANCIAL AND BUSINESS PERFORMANCE During the financial year 2008-09, the Bank achieved reasonable growth in key operating parameters despite the slowdown in the Indian economy. The key factors contributing to the performance of the Bank were continued emphasis on core income streams, sound treasury management and improving operational efficiency.

Total deposits of the Bank aggregated to Rs.24,890 Crore as at 31 March 2009, an increase of Rs.4,432 Crore (22%) over the previous fiscal. The growth in deposits was better than the industry growth. Low cost deposits increased from Rs.6,452 Crore at March 2008 to Rs.6,713 Crore at March 2009. However low cost deposits as a proportion of total deposits was at 27% against 31% in the previous year. This was mainly due to high interest rates on term deposits prevailing in the market due to which there was a movement of deposits from CASA (Current account and Savings account) to the higher yielding term deposit accounts. This was in line with the Industry trend. Deposits Growth
Total assets of the Bank increased 25% to Rs.31,857 Crore from Rs.25,540 Crore at March 2008. Net advances increased 14% to Rs.16,751 Crore as at 31 March 2009 from Rs. 14,650 Crore at the end of the previous fiscal. Advances Growth
Eligible net priority sector assets stood at Rs.6,283 Crore as of 31 March 2009 and constituted 42.89% of adjusted Net Bank Credit as of 31 March 2008 as against the target of 40% stipulated by the RBI. The Bank recorded a net profit after tax (PAT) of Rs.188.8 Crore in the year 2008-09, an increase of 20% from Rs.156.9 Crore recorded in the previous year. Profit before tax (PBT) increased by 17% to Rs.294.7 Crore from Rs.251.5 Crore in the previous financial year. Operating profits (before provisions and contingencies) grew strongly by 38% to Rs. 425 Crore from Rs. 308 Crore in the previous year.

Net Profit (Rs. in Crore)
Excluding exceptional items reported in the previous financial year, PAT increased by 32% and PBT by 28% over the prior year. Operating profit before exceptional items was significantly higher by 48% over the previous year. The Net Income of the Bank rose by 31% to Rs. 1,197 Crore from Rs.917 Crore during the financial year 2008-09. During this period, Net Interest Income grew by 30% to Rs. 649.6 Crore from Rs. 498.4 Crore on the back of Balance sheet growth of 25% due to improved margins. The yield on advances improved from 10.5% in the prior year to 11.5%. The cost of deposits however increased at a lower rate from 6.3% to 6.8% for the year ended March 2009. Fee and Other Income increased by 38% over the previous financial year, the main drivers of growth being trade finance and income from customer foreign exchange transactions. Other income constituted 46% of the Net Income of the Bank. Operating expenses increased to Rs.772 Crore from Rs.610 Crore in the previous year mainly due to the impact of the 48 new branches that were opened during the year and the investments made in the franchise over the past 2-3 years. The staff strength increased to 6,227 from 5,852 as at the previous year end. The Cost to Income ratio has improved to 64.5% from 66.5% in the previous year with the continued focus of the Bank to improve its operating efficiency. Cost Income Ratio
The net NPA level of the Bank as at March 2009 stood at Rs.206 Crore, which is 1.23% of total assets compared to 0.70% of previous year. The increase in NPA levels is due to the impact of the economic slowdown which has created some temporary mismatches in the cash-flows of some of our clients. The Bank continues to monitor these and other accounts which show early warning signs and is pro-actively taking appropriate steps. The increased focus on recoveries continued during the year.
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Net NPA
The capital adequacy ratio (CAR) of the Bank stood at 11.68%. During the third quarter of the year 2008-09, the Bank raised about Rs.95 Crore of Tier I capital in the form of Innovative Perpetual Debt Instrument. The Bank also raised Rs.200 Crore of Upper Tier II capital and Rs.210 Crore of Lower Tier II capital through the issue of bonds during the financial year to meet increased business requirements. The Bank adopted the Basel II framework as on 31 March 2009 and the CAR as per the Basel II guidelines stands at 11.65%. INTERNAL CONTROL SYSTEMS The internal control system of the Bank is reinforced through three lines of defence i.e. Business Owners, Risk Management (credit, operational, market risk) and Internal Audit. The Banks internal controls have been developed to provide reasonable assurance that the organizations business objectives will be achieved and risks identified and managed effectively. The internal control of the Bank is aligned with the overall organizational structure. Apart from basic operational controls at a Branch level, there are two additional levels of controls: the Regional office and the Corporate Office. The internal audit department acts as an independent entity analyzing effectiveness and adequacy of the internal controls of the Bank through frequent audit and reviews. The Bank has an adequate control system, which is overseen by the Audit Committee of the Bank in line with Section 292A of the Companies Act, 1956 who review the working of internal auditors and statutory auditors to ensure compliance. Appropriate action is taken if deficiencies are reported. In order to improve the compliance culture and ensure a better understanding of the internal controls, a number of workshops and education programmes have been conducted for the Banks employees. BUSINESS REVIEW An overview of various business segments along with their performance in 2008-09 and their future strategies is presented below. RETAIL BANKING Retail Banking continues to be a key focus area for the Bank. The business is organized into Branch Banking, Consumer Loans, Business Banking (SME) and Agricultural and Rural Banking (ARB). The key priorities for the Bank have been acquisition of new customers, deepening customer relationship through segmentation and cross-sell, profitable expansion of distribution and building an enhanced brand presence to serve the target segments.
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BRANCH BANKING The year 2008-09 was a year of expansion and growth for the Retail business, with new products, branches and ATMs, enhanced Wealth Management solutions and a new advertising campaign. The branch network of the Bank grew to 520 (441 Branches, 37 Extension Counters, 28 Satellite offices, 9 RCCs and 5 ARMBs) as on 31 March 2009 with the ATM network across the country reaching 351. On the new product front the Bank launched the Formula Savings account an upgrade of the successful Orange Savings product and Platina the Banks preferred banking program. The new corporate segment package Aspira was launched in March 2009. These launches will further increase our market share in the large corporate segment and have resulted in our customer base growing to 1.8 million. The Bank launched a new online Wealth Management System, which offers complete financial planning for our customer. The system provides a single-view to the customer of his entire deposits and wealth management portfolio and gives the client enhanced control along with greater engagement with the Relationship Manager. Through the system the customer can also receive market updates and research. In our constant endeavor to make life easier for customers, the Bank upgraded its Internet Banking portal which now provides a smoother customer experience apart from adding new features to our online banking offering. This year also saw the launch of Mobile Banking. Mobile Banking provides a virtual bank to the customer where he can view and transact on his bank accounts and get updates on branch/ATM locations. Given the extremely high penetration of mobile phones in India, Mobile Banking will provide access to a large segment of customers to the banking system. The Bank launched a nationwide marketing campaign spanning television, print, outdoor and online media. We showcased some of our key product offerings in the campaign including the Orange Savings Account, Fixed Deposits and Business Banking. This was followed by an ING brand campaign covering the three business entities of ING in India including ING Vysya Bank. As of March 2009, the Bank has touched 1 million Debit Cards, with spends using the Debit Cards clocking a growth of over 40%. The Credit Cards program has been revamped to offer more products and enhanced features. The Bank is also partnering with the Government to offer Biometric cards to beneficiaries of the National Rural Employment Guarantee (NREG) and Social Security Pension Scheme (SSP) programs. The Bank has enrolled over 69,000 customers and has disbursed over Rs. 2 Crore of wages. BUSINESS BANKING (SME) The Bank has traditionally focused on Micro, Small and Medium Enterprise business, which accounts for a sizeable proportion of total advances. This segment serves the needs of business enterprises with annual sales turnover of up to Rs.150 Crore for both domestic and export credit requirements. Apart from regular working capital facilities, the Bank also offers structured products to cater to the needs of clients. This segment has contributed significantly towards priority sector advances of the Bank. The clear focus, strategy and strong relationship teams and distribution, have helped ensure strong growth in this segment. This segment continues to be a priority, with a focus on new customer acquisition, product innovation, customer service and relationship management. The business clocked a healthy Balance Sheet growth along with reduced delinquencies and Fee Income growth of over 80%. We will continue our focus on profitable growth in the coming financial year as well. CONSUMER LOANS Consumer Loans include Home, Personal, Educationand Commercial Vehicle loans and other value-added products and services. The Home Loan business contributed the largest growth to the consumer assets book. During the year 2008-09, we have further enhanced our Loan against Property product, which along with Home Loans grew by over 50% and these continue to be a key focus area. Personal Loan Credit shield was launched in the second quarter of the year. Revenue from Credit Shield linked to both Personal Loan and Home Loan has seen rapid growth since its launch. AGRICULTURAL AND RURAL BANKING (ARB) The total advances handled by Agricultural and Rural Banking business segment crossed Rs. 1,600 Crore mark in March09. The Bank has a network of 84 rural branches mostly spread in AP, Karnataka and Tamilnadu. The Bank has a wide range of products like Kisan Credit Card, Produce loans, Gold loans and Term loans catering to the diverse needs of the farming community. The Bank has been
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actively participating in lending to Micro finance activity. With a view to actively contribute to the efforts of Financial Inclusion, the Bank accelerated the lending directly to SHGs (Self Help Groups) and indirectly through MFIs (Micro Finance Institutions). The Banks active role in SHG linkage programme also earned laurels as 6 Branch Heads in Andhra Pradesh were recognized on the occasion of Republic Day celebrations. The Bank has also entered into tie-ups with National Bulk Handling Corporation (NBHC) to give impetus to commodity lending. The Bank has successfully implemented the Debt Waiver/relief scheme announced by the Government of India. The scheme benefited over 21,000 farmers. Of these, nearly 15,000 farmers benefited under the waiver scheme and the remaining benefited under the relief scheme. NEW PRODUCT LAUNCHES AND MARKETING PROMOTIONS Eager to expand beyond southern India and establish a pan India presence over the next few years, the Bank commissioned consumer research to understand the perception of the ING Vysya Bank brand pan India. Based on the research the Bank launched its most ambitious marketing plan this year. The campaign stemmed from the insight that banking was a chore for most customers and there were several pain points associated with it. We looked at INGs global brand pillars and there too we saw that one key ING promise is that it is easy to deal with. Thus the Jiyo easy or Live Easy platform was born for ING Vysya Bank. Keeping in mind that the target consumer values his time and wants to feel in control of his finances, the Bank launched a series of new products, services and features. Each of these re-enforce the Jiyo EASY promise, e.g. instant debit cards, auto cheque re-order, SMS HELP service, etc. New products launched like Platina Preferred Banking, Formula Savings Account, Aspira Corporate Salary Solutions, ING Wealth Management Services and ING Mobile Banking combine features, which are best in class and simplified to meet the demands of the consumer. The Live Easy platform was made to come alive through a host of product focused communication. For example, any ATM free access benefit of the Orange Savings Account was communicated through TV, print and outdoor across more than 60 publications in varied languages and TV commercials. A communication plan for Fixed deposits was also developed that ran in Print, TV, Outdoor and Online for two months and received good response in terms of fixed deposits for the Bank and high recall for the Banks interest rates. The Bank participated and promoted the awareness of the Earth Hour as a social initiative by requesting support from employees, customers, service providers and the local Bangalore Community. The Bank switched of lights in all outlets in Bangalore at the designated hour and hosted a Candle Lighting ceremony for citizens in Bangalore. The Bank also launched a kids portal www.kidzzbank.com to educate children on savings and investments. PRIVATE BANKING The Bank continues to aim towards becoming the advising Bank of first choice for Private Banking clients. While two of the three new products launched in 2007-08 have recorded comparable performance vis--vis the benchmark, two new equity portfolio opportunities were identified and launched in 2008-09. Assets under Management have grown by 31% and Revenues have grown by 29% in financial year under review. Among products introduced this year, Private Banking also offered structured products manufactured by an established player to its clients. Private Banking continues to proactively monitor and advise its clients on their investment in light of the continuing volatility in financial markets. The trend shifted to fixed income products towards the second quarter of the financial year continuing into the fourth quarter. Income Plans and Bond Funds gained flavor. Private Banking continues to operate on an advisory driven model and research remains the focus for introduction of new products, including recommendations in debt products as opportunities arise. Recruiting good talent selectively continues to be a priority. WHOLESALE BANKING The Wholesale Banking business headquartered in Mumbai provides a range of banking products and services to Indias leading corporates and fast growing businesses. The fund-based products include working capital finance, term finance and structured finance facilities. The non-fund based products mainly consist of letters of credit, financial and performance guarantees etc. Our fee-based high-value added products are cash management services, financial market transactions and structured hedge products, trade services,
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corporate finance and debt syndication advisory. Our advisory services focus on advising clients on mergers and acquisitions, capital restructuring and capital raising. The Bank also accepts rupee and foreign currency deposits with fixed or floating interest bases from our corporate customers. Wholesale fund based assets have increased to nearly Rs.7,000 Crore registering a growth of about 12%, with emphasis on asset quality and tighter credit controls. In the same period, wholesale deposits reduced by about 13% to around Rs. 5,250 Crore in line with the strategy of the Bank to increase the share of retail deposits and reduce reliance on wholesale funding. Wholesale Bank revenues grew by a healthy 50% over previous year by focusing on improving lending spreads and enhancing fee-based revenues. The Wholesale Bank is organized into two overlapping groups, (i) Client Coverage and (ii) Products and Services. While the Client Coverage group is responsible for managing relationships with identified client sub-groups, the Products and Services group is responsible for product and service delivery to the entire Wholesale Banking client base. Our principal wholesale client coverage and relationship management groups are as follows: CORPORATE & INVESTMENT BANKING GROUP (C&IB) The C&IB Group is responsible for managing relationships with large corporates (typically with sales turnover exceeding Rs. 1,000 Crore (effective 1-Apr-2009, hitherto exceeding Rs. 400 Crore) and MNC relationships, irrespective of the turnover. The primary focus of the C&IB relationship managers is to market High Value Added (HVA) products viz. Debt Capital Markets, Corporate Finance, Financial Markets and Advisory services for the same. C&IB Group is also responsible for coordinating with ING Bank N.V. for offering their products and cross-selling of Retail Banking products and services to corporate clients and their employees. In addition to the above, they cross-sell the products offered by other ING Group managed entities in India such as ING Vysya Life Insurance Company Limited (IVL) and ING Vysya Mutual Fund (IVMF). EMERGING CORPORATES GROUP (EC) The Emerging Corporates group is serviced from ten cities within the Banks extensive network and focuses on managing relationships for manufacturing, processing, and services sector companies with an annual sales turnover between Rs.150 Crore and Rs.1000 Crore (effective 1st April 2009, hitherto upto 400 Crore). A wide range of products are offered to meet the needs of this business segment, with special focus on export credit, regular working capital finance, cash management services, term loans, non-fund based facilities like letters of credit, guarantees and structured finance products in addition to the cross sell of ING group products. The EC segment contributes 75% of the Banks export credit advances. This business segment remains a key area of growth for Wholesale Banking. BANKS AND FINANCIAL INSTITUTIONS The Banks and Financial Institutions Group, headquartered in Mumbai, is a dedicated group created to leverage the business opportunities with Private and Public Sector Banks and financial institutions across India. The group has primary responsibility for origination of transactions and product and service delivery to the Bank/FI client base including funding products, correspondent bank relationships, treasury products, asset purchase and sale and deposit products. FINANCIAL MARKETS (FM) The financial year 2008-09 has been an unprecedented year for Financial Markets with markets witnessing historically high volatilities. In this tumultuous period, the Banks strong Risk Management Policies have held good stead, giving advantage to the Bank to build on its strengths further. FM unit in the Bank consists of four key units Trading and Market Making, Sales, Structuring and Asset and Liability Management. The Trading and Market Making unit provides liquidity and prices to the Sales team and other market participants. In these volatile markets, the unit has been able to effectively and profitably exploit the opportunities within the defined risk framework. Volatile markets also helped our market making unit post record volumes both to market participants and the Sales team. The unit has contributed well to information dissemination and analysis of the markets so that our clients benefited from our expertise in the area.
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Our Sales team helps corporate clients manage their currency and interest rate risks within their risk management practices. The unit is guided by prudent and transparent approach to client deals, adhering to approved appropriateness and documentation policies. In line with the changing dynamics, the Sales team changed focus from structured transactions to vanilla products. The changed focus has helped us maintain good portfolio, providing strong base for the coming year. The sales unit is supported by a centralized structuring unit that assists in product structuring, pricing and execution. The structuring unit has strong product capability in foreign exchange and interest rate risk products and provides in-house solutions for all our client needs. The structuring unit is assisted by state of art systems and processes to measure and warehouse risks. The Asset Liability Management (ALM) desk has played a key role in managing liquidity and interest rate risks, besides facilitating balance sheet growth. Having been totally compliant with maintaining statutory reserve requirements, the unit also managed the Banks investment portfolio well and efficiently managed volatility in this book. Financial Markets as a unit is committed to further strengthening our platform, so as to provide strong risk management base to the Bank and to our clients. RISK MANAGEMENT AND PORTFOLIO QUALITY Risk is an integral part of every aspect of banking and the Bank aims at delivering superior shareholder value by achieving an appropriate trade off between risk and return. The risk management policy of the Bank, monitored at the highest levels, is based on a thorough analysis of key risk areas of Credit Risk, Market Risk and Operational Risk. CREDIT RISK Credit Risk Management (CRM) is an important component of risk management in banks. The Bank has put in place an appropriate organization structure, credit risk policy frame work, product approval process, borrower selection norms, security and documentation requirements, monitoring and follow-up standards, asset classification norms, etc., to achieve these objectives. The Risk Management and Review Committee of the Board is primarily responsible for owning and managing the risk policy in the Bank. The Chief Risk Officer assisted by other executives at Corporate Office and Zonal/Regional Offices carries out the CRM function. Credit is handled across different segments, viz., Corporate and Institutional, Emerging Corporates, Banks and Financial Institutions, Financial Markets, Business Banking (SME), Agricultural and Rural Banking, Private Banking and Consumer Finance. The Credit Policy document is updated annually, incorporating both revised regulatory and internal guidelines on various types of credit products and under-writing standards. The Policy also covers exposure norms, industry/sectoral exposure limits, methods of appraisal, delegation of approval powers, guidelines for recovery and restructuring, etc. Most credit exposures have primary and/or collateral securities, with appropriate legal documentation. Escrowing cash-flow, obtention of post dated cheques or electronic clearing service (ECS) mandates and financial or other covenants are stipulated depending upon the type of borrower and facilities availed. Financial Markets products are offered to corporate clients in accordance with the Appropriateness Policy. All borrower accounts are subject to periodical unit visits, security verification and review/renewal. Review of Industry Portfolios, Watch List accounts, accounts having overdue/adverse Mark to Market exposures, or other irregularities are carried out periodically with a view to identifying early warning signals, taking remedial action and minimizing delinquencies. Facilities to borrowers whose business is affected by economic downturn are also restructured after ascertaining their viability. Portfolio quality of Consumer Assets is reviewed monthly and appropriate corrective action taken, based on trends. There are dedicated Collections and Recovery teams. Recoveries are made by enforcement of securities, foreclosure of mortgages and other legal remedies. Asset classification and provisioning is done in accordance with RBI guidelines. Continuous efforts are being made to improve Credit MIS infrastructure using IT resources of the Bank, with a view to gather timely information, both at individual borrower account level, group level and as a portfolio. The Bank has taken appropriate steps to be compliant with Basel II norms. In the second half of financial year 2008-09, the Indian economy also felt the impact of the global economic slow-down. While exporters came under stress due to issues in importing countries, domestic businesses also experienced lower sales volumes, elongated payment cycles and lower profitability. Some of our borrower clients faced cash-flow and debt servicing issues. The Bank provided support to viable businesses by providing higher credit facilities and/or restructuring term loans. In other cases, steps were taken to
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contain exposures, improve recoveries and obtain additional collaterals. The unsecured consumer loan portfolio also experienced higher delinquencies. Bank is confident that the robust risk management practices put in place will enable the Bank in managing issues arising out of such cyclicality. Some of the additional steps being taken are: (i) More frequent review of affected sectors and stressed accounts; (ii) Strengthening credit approval norms; (iii) Revisiting product norms for Consumer Finance portfolio; and (iv) Strengthening collection processes for consumer loans. MARKET RISK Market Risk Management (MRM) focuses on three businesses and their risks:(1) Trading and Market Marking,(2) Asset and Liability Management, and(3) Structured Products and Sales. An in-house developed Value at Risk modulecombined with various controls supports MRM in the day-to-daycontrol of the Trading activities in the Bank. For effective Asset and Liability management, an Asset Liability Committee (ALCO) has been operating in the Bank to manage the capital position, liquidity and interest rate risks of the Banks entire balance sheet. MRM provides ALCO with various tools to manage risks such as Value at Risk, Event Risk, Earnings at Risk and balance sheet simulations for the impact of volume growth and changes in interest margins. With these tools, ALCO sets the ING Vysya Reference Rate (IVRR) and spreads on IVRR for various products, based on the Banks strategy. Structured Products and Sales mainly provides corporate clientsa range ofderivativeinstruments to hedge their business exposures. MRM is the overall coordinator of the support units within the Bank for Financial Markets products, and controls and monitors the activities of the desk within the regulatory authoritys framework. The focus for the coming year is to further improve the risk based pricing of products, and risk awareness within the business units of retail and wholesale in respect of regulatory requirements and international standards and to advise managementon the optimal product mixstrategy. OPERATIONAL RISK The Operational Risk Management (ORM) function manages the operational, information and security risks. ORM reports to the Chief Risk Officer (CRO) who is part of the Executive Management Committee. The Board and senior management are kept informed of operational risk issues on a periodic basis. The Risk Management and Review Committee (RMRC) approves the operational Risk Management Policy. The Country Operational Risk Committee (ORC) and Regional Operational Risk Committee meet on a periodic basis to discuss and take decision on operational risk issues. The Bank has defined operational risk as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events including the risk of reputation loss. The Bank has clearly defined risk categories which help to implement the operational risk framework. The Bank also uses the non-financial risk dashboard to provide integrated risk information on compliance, operational, information and security risk using a consistent approach and risk language. The Bank has developed a comprehensive framework supporting the process of identifying, measuring and monitoring operational, information and security risks. The Bank applies scorecards to measure the quality of operational, information and security risk processes within a business. Scoring is based on the ability to demonstrate that the required risk management processes are in place within the business units. The scorecards indicate the level of control with the business units depending on both the maturity of implemented operational, information and security risk processes and the control measures taken. The Banks Crisis Management Policy provides a cohesive overview of the crisis management governance, including detailed crisis management officer roles and responsibilities across the Bank, and functional requirements to ensure physical security. The ORM function operates with the mission of ensuring the confidentiality, integrity and availability of information and associated information processing assets through the disciplined use of risk management practices. The function has defined a comprehensive suite of policies, standards and guidelines, and compliance is measured and monitored on a regular basis. The function actively measures and monitors information risk within the key IT risk areas. The result of this process is used by the business units to budget, plan, and implement appropriate risk mitigation actions. The Bank currently qualifies for the basic indicator approach for operational risk capital assessment. The capital requirement for operational risk has been estimated as per the Basel II related regulatory guidelines prescribed by the Reserve Bank of India.
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INFORMATION TECHNOLOGY (IT) The IT Service Management Group, the technology organization of the Bank manages the Banks enterprise-wide technology needs. The Bank continues to endeavor to be at the forefront of technology usage in the financial services sector. The Bank strives to use information technology as a strategic tool for our business operations, to gain a competitive advantage and to improve our overall productivity and efficiency. The Banks technology initiatives are aimed at enhancing value, offering improved convenience and service to customers while optimizing costs. The Bank has a technology blue print aligned to the business strategy. This blue print is used to drive all technology decisions. There were quite a few initiatives successfully completed in the financial year. The disaster recovery site has been upgraded to cover a broader set of applications. The Core Banking platform has also been moved to an upgraded infrastructure with improved performance. New solutions have been implemented for CMS Payments, centralised ECS and Wealth Management businesses. A new Mobile Banking solution was also developed for the Retail Banking business in the current year which will provide an additional access channel to our customers enabling them to access information, perform financial transactions at their convenience etc. The upgrade of the critical applications in the Financial Markets business unit is nearing completion. During the year, the IT operations were also successfully transitioned to a multi-vendor support model. OPERATIONS Operations continued on its journey towards keeping pace with the Banks growth strategies in an efficient and effective manner. During the year, the process for savings and current account opening was completely centralised to ensure strict adherence to KYC guidelines. To make banking easier for our customers, the Bank introduced insta ATM cards and pin-mailers, thus enabling customers to walk into a branch and get replacements of a lost card or a pin mailer instantaneously. A process of auto generation and dispatch of cheque books to customers by monitoring usage of cheque leaves was initiated and e-tax payment enabled. To improve efficiency, the electronic clearing process was automated, the clearing process re-engineered, a 24 / 7 holiday free operations shop was setup to be consistent on turn-around-times for liability products and a centralized service desk to provide instant and complete resolution to customer interfacing units on customer queries was implemented. Inter branch reconciliation process was automated. Enthused by the success of centralizing the wholesale lending operations, the Bank centralized the trade finance operations keeping in mind the rapidly changing regulatory and market environment. Trade mid-offices have been set up at various locations keeping in mind the customers requirements and the Banks aspiration to make things easy for the customer at all times. The Bank is geared up to meet the plans of the RBI to roll out the cheque truncation process at other locations with the successful completion of the same at Delhi. The Bank was amongst the first few who participated in RBIs pilot launch of speed clearing in Chennai and is in readiness to align with RBIs expansion plans on this front. Business continuity plans are in place for all the critical activities within the Bank to ensure continuity of operations. INTERNAL AUDIT The operations of the Bank including the information systems functions are subjected to audit by the Internal Audit department which is an independent function reporting directly to the Audit Committee of the Board. The Internal Audit department follows the Risk Based Audit approach across the Bank, wherein process and control gaps, if any, are identified with suitable recommendations for remediation. In addition, key functions such as Financial Markets, Centralised Operations and Trade Finance amongst others are covered under concurrent audit. Audit of key regulatory compliance is the focus of a dedicated cell within the department. Findings of Internal Audit are followed up for timely closure and effective resolution by the management. COMPLIANCE In line with the RBI guidelines on compliance function in Banks, a Compliance Framework involving compliance risk identification and assessment, risk mitigation, compliance monitoring, incidents management, compliance advisory, training and communication etc., has been developed and embedded in the compliance organisation structure. Compliance culture and awareness have been further strengthened through e-learning modules on function specific areas across various business and support functions covering about 3,300 employees across the organization. Compliance monitoring has been intensified through a network of compliance officers at corporate office level supported by Nodal Compliance Officers at Business / Support Function levels. The compliance function has been providing advisory services on various regulatory / compliance issues to the business units and other support functions in the Bank.
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HUMAN CAPITAL MANAGEMENT Given the market challenges, there has been considerable focus on optimizing the existing resources - through internal job postings, transfers and development initiatives. Training and development has assumed significant importance. Over 550 employees (Officers and award staff) were covered under the Ladder of Success program. The Ladder of Success program was introduced last year and is a structured training program to upgrade the skills at all levels. With a view to equip the internal employees to compete for new opportunities a focused program titled Development tracks was introduced this year. In addition, in line with the compliance and control requirements, up-skilling programs were conducted for BOSH (Branch Operations and Service Head) under a program titled BOSH to SMART BOSH and ensured coverage of over 70 BOSHs in the program. The Brand value workshop Jiyo Easy was conducted across the organization and about 4,000 employees were covered under this initiative. The Bank, through its dedicated and wellequipped Competence Development Center (CDC) has successfully delivered 130 training programs (including domain, skill, attitude and management training) with an average 2 man-days of training for each employee during the last financial year. The Bank continued to invest in improving communication within the organization. Chat with the CEO Sessions, CEO Connect and Sangam meetings provided the opportunity for a two-way flow of information within the Bank. The IVB values have been internalized across the organization through workshops and we now have more than 75% of our population covered. The values have also been integrated in all our process and policies. The Peoplesoft Human Capital Management (HCM) project, which was initiated at the end of the last financial year, was successfully launched during the year. The HCM system improves HRs service delivery, provides greater transparency and visibility of information to employees, reduces risk and provides better control. Overall, staff complement increased by around 400 during the year from 5,852 at the end of March 2008 to 6,227 at March 2009. The Industrial Relations during the current financial year remained cordial. OPPORTUNITIES AND THREATS As part of expanding its operations, the Bank sights a number of opportunities and faces threats to its strategy. Opportunities to improve its performance are through:
Focused aligning of new products to customer segments, higher balance build-up and effective utilization of the distribution network Realizing the value of the investments made in the franchise to enhance profitability. Improving productivity of our distribution and efficiency of our service platforms. Enhancing cross-sell of products and that between the different operating segments. Optimally utilising investment in technology to further improve service delivery Greater focus on Rural Banking by leveraging the distribution network.
Risks that must be managed include, amongst others: Inflation and volatility in interest rates; Tightening of Liquidity in the Banking system and effective management of ALM. Increase in Non Performing Assets (NPAs) due to further deterioration in the business environment. Risk of recession in the Global and Indian economy impacting volume growth. Effective management of capital to fund business growth
OUTLOOK GDP growth for the year 2009-10 is expected to be around 6-6.5% with inflation between 1.5-2%. Though India continues to be a domestic demand driven economy and consumption demand is still sturdy, credit growth is expected to moderate in FY10 from FY09. Given that several crucial sectors remain heavily dependant on the US and European economies, unless these markets see a recovery, India would continue to perform below its full potential The Indian Banking system is sound, with conservative leverage, stable funding, good asset quality, high regulatory reserves and no exposure to US sub-prime credit. However concerns on the large and increasing fiscal deficit, deterioration in the asset quality of Indian
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NON FINANCIAL REPORTING

Banks due to a slowing economy, concerns on sufficient availability of capital are some of the challenges the Banking industry will be exposed to. Against this backdrop, the Bank will continue to focus on the risk-return equation and improving efficiency and productivity to meet the challenges in a rapidly changing environment. Your directors are pleased to present the Non Financial Report for the year 2008-09. The Report deals both with Corporate Social Responsibility and Sustainability Development. CORPORATE SOCIAL RESPONSIBILITY (CSR) ING Vysya Foundation was incorporated in October 2004 to promote Corporate Social Responsibility of ING Group entities in India. The Bank contributes to the Foundation substantially every year. The mandate for the Foundation is to promote primary education for underprivileged children. This approach is part of worldwide Chances for Children programme (CFC) of ING Group. During the year, the Foundation has run a fund raising campaign Class of 2008 among the employees of ING entities and donated Rs.40 Lakh to UNICEF Fund for promoting the education of the children studying in Bridge Schools supported by UNICEF and Government of India. SUSTAINABILITY DEVELOPMENT The Bank endeavors to ensure that the projects financed by it, are environmentally and socially sound and sustainable. Towards its endeavor for sustainability development, the Bank has adopted the following policies: I) General Environmental and Social Risk (G-ESR) policy II) Equator Principles (EP) Policy III) Specific Environmental and Social Risk (S-ESR) Policy Every year the Bank submits the Annual Environmental and Social Performance Report to International Finance Corporation (IFC). This report covers Environmental Management System and Project Environmental and Social Compliance. The Bank has also adopted the Equator Principles (EP) policy. EP is a set of voluntary environmental and social guidelines for ethical project finance. These principles commit banks and other signatories not to finance projects that fail to meet these guidelines. The EP is based on the social and environmental policies and guidelines of the International Finance Corporation (IFC) and the World Bank. Child labour, involuntary resettlement and protection of natural heritages are examples of social and environmental issues covered by the EP. ING Group has adopted the EP and as part of the Group, the Bank has also adopted the EP, which forms part of the Credit Risk Manual. Initiatives under Sustainability Development The Bank has launched a kids portal to educate the children on nature, environment and saving of money. On entering the portal viz., www.kidzzbank.com children are taken on a voyage of discovery, hand held by the portal pal NEO. The Bank and its employees participated in the global movement called Earth Hour to show the solidarity against climate change. The Bank in association with BVV Sangha established Rural Development and Self Employment Training Institute at Bagalkot to identify, orient, motivate, train and assist the unemployed rural youth to take up self-employment ventures as alternative career.
The Bank has also undertaken various Financial Inclusion initiatives with the objective of providing banking / financial services to all people in a fair, transparent and equitable manner at affordable cost.
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CORPORATE GOVERNANCE REPORT

1. CORPORATE GOVERNANCE 1.1 Banks Philosophy The Corporate Governance philosophy of the Bank is to promote corporate fairness, transparency and accountability with the objective of maximizing long term value for all stakeholders. This philosophy is realized through the Banks endeavour to work towards portfolio, operational and reputational excellence.
1.2 Mission of the Bank Setting the standard in helping our customers manage their financial future.
1.3 Vision of the Bank 2. To emerge as a top five among Foreign and Private Sector Banks with a market share in excess of 1%.
BOARD OF DIRECTORS 2.1 Composition The requirements for composition of the Board of Directors of the Bank are mainly governed by the relevant provisions of the Companies Act, 1956, the Banking Regulation Act, 1949 and Clause 49 of the Listing Agreement. Mr. K R Ramamoorthy, Non-Executive and Independent Director is the Chairman of the Bank. As of 31-Mar-2009, the Board has 11 Directors out of which, four are Independent Directors, in compliance with the requirements under Clause 49 of the Listing Agreement. Ten out of eleven Directors as against the requirement of six possess the prescribed special knowledge or practical experience and meet the conditionalities of Section 10A(2) of the Banking Regulation Act, 1949. Out of ten, three Directors as against the requirement of two possess special knowledge or practical experience in the areas of Agriculture and Rural Economy, Co-operation or Small Scale Industry. The composition of the Board as of 31-Mar-2009 is given below: NAME OF THE DIRECTOR (Mr.) K R Ramamoorthy Vaughn Nigel Richtor DESIGNATION Chairman Managing Director and CEO Director Director Director Director Director Director CATEGORY Non-Executive, Independent and compliant with Sec 10A(2) Executive, Non Independent # and compliant with Sec 10A(2) NonExecutive, Independent and compliant with Sec 10A(2) Non-Executive, Independent and compliant with Sec 10A(2) Non-Executive, Non- Independent # and compliant with Sec 10A(2) Non- Executive, Non- Independent # and compliant with Sec 10A(2) Non-Executive, Non- Independent # and compliant with Sec 10A(2) Non- Executive, Non- Independent # and compliant with Sec 10A(2) Non-Executive, Independent Non-Executive, Non- Independent # and compliant with Sec 10A(2) Non-Executive, Non- Independent # and compliant with Sec 10A(2) AREA OF EXPERTISE Agriculture & Rural Economy, Co-operation, Banking and SSI Banking, Economics, Marketing, Risk Management, Strategic Planning, Treasury Operations and Agriculture & Rural Economy Banking (especially Retail Banking) and Technology & Systems Strategic Planning, Technology & Systems, Economics and Finance Banking (especially Retail & Wealth Management) Banking (Credit and Risk Management) Banking (especially Treasury and Financial Markets), Economics and Finance Banking (especially Wholesale Banking), Finance, Economics and Risk Management Marketing, Branding and Strategic Planning Banking, Finance, Marketing, Risk Management and Credit Recovery Banking, Finance, Economics, Law, Public Administration and Agricultural & Rural Economy
Aditya Krishna Arun Thiagarajan Philippe Damas Richard Cox Ryan Andrew Padgett Wilfred Nagel
Santosh Ramesh Desai Director Ramakrishnan Director Subramanian Meleveetil Damodaran Director
# Representing Foreign Promoter Group (ING Group)
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2.2 Changes in the Board of Directors during the year 2.2.1 The following are the changes in the composition of Board of Directors during the year. Appointments Name (Mr.) Santosh Ramesh Desai Date of Appointment Appointed by the Board of Directors as an Additional Director effective 29-Apr-2008, till the date of AGM i.e. 30-Jun-2008. Appointed as Director liable to retire by rotation at the AGM on 30-Jun-2008. Appointed by the Board of Directors as Director in casual vacancy effective 01-May-2008, caused due to the resignation of Mr. Lars Kramer who was appointed at the AGM on 26-Sep-2006 as Director liable to retire by rotation. Appointed by the Board of Directors as an Additional Director effective 21-Jul-2008, till the date of the ensuing AGM.
Ramakrishnan Subramanian
Meleveetil Damodaran
Resignations Name (Mr.) Lars Kramer Extension Name (Mr.) Vaughn Nagel Richtor Date of Extension 07-Feb-2009 On the expiry of his initial term of three years on 6-Feb-2009, an extension for a further period of two months was sought from RBI. RBI approved the extension of his tenure for a further period of two months effective 7-Feb-2009, up to 6-Apr-2009. Mr. Vaughn Nigel Richtor relinquished his office at the close of business on 6-Apr-2009. Mr. Vaughn Nigel Richtor was appointed by Shareholders at the 75th AGM held on 26-Sep-2006 as a non-retiring Director to hold office co-terminus with the term of his appointment as Whole-time Director on the Board as approved by RBI from time to time under the Banking Regulation Act, 1949. As such Mr. Vaughn Richtor also ceased to be a Director on the Banks Board, effective 06Apr-2009 at the close of business. 2.2.2 Criteria for appointment and renewal of appointment of Directors The Bank ensures the following as per the recommendations of Dr. Ganguly Group Report, adopted by the Bank in terms of RBIs directives on Fit and Proper criteria for appointment and renewal of appointment of directors of banks. a) Due diligence by the Corporate Governance (Nomination) Committee to determine suitability of the person for appointment as a director on the Board and for declaring him as fit and proper for appointment, based upon qualification, expertise, track record, integrity and other fit and proper criteria. b) Declaration and undertaking by the person to be appointed as a director to the effect that he has not been convicted for any offence, has not come to the adverse notice of the Regulators, is not holding substantial interest in the Bank, has not availed fund and non-fund facilities from the bank etc. Letter of consent to act as a Director and confirming that he is not disqualified under Section 274 of the Companies Act, 1956. Reference checks with the appropriate persons / authority Execution of deed of covenant. Date of Resignation 01-May-2008
c) d) e)
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2.2.3 Changes proposed at the 78th Annual General Meeting (AGM) Directors holding office till 78th AGM Mr. Ramakrishnan Subramanian, was appointed in casual vacancy caused by resignation of Mr. Lars Kramer and is eligible to hold office only up to the 78th AGM. Directors retiring by rotation and being eligible, offer themselves for re-appointment Mr. Wilfred Nagel, Mr. Philippe Damas and Mr. Arun Thiagarajan are retiring by rotation and being eligible, offer themselves for re-appointment. Directors seeking appointment Mr. Meleveetil Damodaran was appointed by the Board as an Additional Director who will hold office until the ensuing AGM. A notice, as required under Section 257 of the Companies Act, 1956 has been received by the Bank for appointment of Mr. Damodaran as a Director of the Bank. A proposal to appoint Mr. Damodaran as Director of the Bank, liable to retire by rotation, is being placed before the shareholders at the ensuing AGM. A brief resume along with the particulars specified under Clause 49 of the Listing Agreement, in respect of person(s) proposed for appointment / re-appointment as Directors at the ensuing AGM, are attached with the Notice of the meeting and circulated to the Shareholders. These details are also placed on the website of the Bank viz., www.ingvysyabank.com.
2.3 Board Meetings During the year, eight Board meetings were held as against four meetings required as per Clause 49 of the Listing Agreement and Section 285 of the Companies Act, 1956. The dates of the Board meetings held were: 29-Apr-2008, 30-Jun-2008, 21-Jul2008, 24-Sep-2008, 31-Oct-2008, 06-Jan-2009, 23-Jan-2009 and 23-Mar-2009.
2.4 Details of attendance at the Banks Board Meetings, Annual General Meeting, directorship, membership and chairmanship in other companies for each of the Directors are as follows : Board meetings Directorship Membership attended Attendance in other of through at last Indian Public Committees Tele/ Video AGM Limited of other Conference Companies Companies Persons who have been Directors throughout the year 2008-09 K R Ramamoorthy 8 8 Present 7 6 Vaughn Nigel Richtor 8 8 Present Aditya Krishna 8 4 Present 5 Arun Thiagarajan 8 7 Present 11 5 Philippe Damas 8 5 2 Present Richard Cox 8 4 Present Ryan Andrew Padgett 8 6 Present Wilfred Nagel 8 3 Present Santosh Ramesh Desai 7 4 Present 1 Ramakrishnan 7 5 Present Subramanian Meleveetil Damodaran 5 2 NA 3 Persons who ceased to be Directors during the year 2008-09 Lars Kramer 1 NA Name of the Director (Mr.) Board Board meetings meetings held during attended tenure in person Chairman -ship of Committees of other Companies 2 -
Note: The details of Directorships and Chairmanships / Memberships of Committees of other companies given above are in accordance with the provisions of Section 275 of the Companies Act, 1956 and Clause 49 of the Listing Agreement. Only Membership of Audit Committee and Shareholders Grievance (Investors) Committee are considered for calculating the number of the Memberships / Chairmanships of Committees.
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3. COMMITTEES There are seven regular Board Level Committees in the Bank as follows: 1. Audit Committee of the Board 2. Risk Management and Review Committee 3. Corporate Governance Committee (which also acts as Remuneration Committee, Compensation Committee and Nomination Committee) 4. Investors Committee 5. Special Committee for Monitoring Frauds 6. Customer Service Committee and 7. Board Credit Committee The constitution and functioning of these Committees are governed by relevant provisions of the Companies Act, 1956, Listing Agreement as well as the guidelines / circulars issued by the Reserve Bank of India from time to time in addition to the directions / observations of the Board of Directors. A brief on each Committee, its scope, composition and meetings held during the year is as follows: 3.1 Audit Committee of the Board (ACB) Scope and Terms of Reference To review the quarterly and annual financial statements before submission to the Board, oversee the financial reporting process to ensure transparency, sufficiency, fairness and credibility of financial statements. To review the adequacy and effectiveness of the internal audit function and control systems. To function as per RBI guidelines to the extent that they do not violate the provisions of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement. To focus on the objective of unqualified financial statements.
Composition and Meetings ACB consists of five members with the majority being Independent Directors. Mr. Arun Thiagarajan, Independent Director is the Chairman of the Committee and the Corporate Secretary of the Bank acts as Secretary to the Committee in terms of Clause 49 of the Listing Agreement. During the year 2008-09, the Committee met six times. The dates of the meetings held were: 28-Apr-2008, 1-Jul-2008, 21-Jul-2008, 31-Oct-2008, 23-Jan-2009 and 23-Mar-2009. No. of Meetings attended in person 6 5 4 4 4 No. of Meetings attended through Tele/ Video conference 1 -
Member (Mr.) Arun Thiagarajan, Chairman Lars Kramer (up to 1-May-2008) K R Ramamoorthy Philippe Damas Aditya Krishna Ramakrishnan Subramanian
Meetings held during the tenure 6 1 6 6 6 5
3.2 Risk Management and Review Committee (RMRC) Scope and Terms of Reference To review and approve the Banks overall risk appetite and set limits for individual types of risk, including credit, market and operational risk. To approve material changes to the overall risk appetite and monitor the Banks risk profile, including risk trends and concentration. To ensure that the principal risks facing the Bank have been identified and are appropriately managed.
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To assess existing and potential risks for the Bank. To ensure effective management of the above risks. To review constantly and realign changes to credit, market and operational risk policy. To monitor and approve credit portfolio and trading limits. To ensure minimal risks arising from portfolio concentration. To review and approve measurement techniques, tools and approaches used to identify, aggregate and control credit, market and operational risk. To manage the comprehensive Risk Policy, review implementation of risk management techniques, review policies and procedures to ensure continued compliance to Risk Policy. To oversee the activities of Risk Management Departments and co-ordinate with the Board, Chief Risk Officer (CRO) and other Executive Committees such as Asset & Liability Committee (ALCO) and Credit Policy Committee. To review managements report on the risk control standards in the Bank.
Composition and Meetings The Committee consists of six members. Mr. Wilfred Nagel is the Chairman of the Committee. The Corporate Secretary of the Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met four times. The dates of the meetings held were: 29-Apr-2008, 21-Jul-2008, 31-Oct-2008 and 22-Jan-2009. Meetings held during the tenure 4 4 4 4 4 4 No. of Meetings attended in person 2 3 4 4 3 4 No. of Meetings attended through Tele/ Video Conference -
Member (Mr.) Wilfred Nagel, Chairman K R Ramamoorthy Richard Cox Ramakrishnan Subramanian, alternate to Richard Cox. Vaughn Richtor Arun Thiagarajan Ryan Padgett 3.3 Corporate Governance Committee (CGC) Scope and Terms of Reference
To ensure adherence to Corporate Governance Guidelines by all units in the Bank. To induct and ensure a pro-active governance framework in the Bank. To review and monitor the implementation of various mandatory / non-mandatory requirements of Clause 49 of the Listing Agreement dealing with Corporate Governance in Indian Companies. To monitor and ensure that interests of all the stakeholders viz., shareholders, customers, employees, and the community / society are served properly. To act as Remuneration Committee, the constitution of which is non-mandatory under the provisions of the Listing Agreement, for the purpose of determining / reviewing the Banks policy on specific remuneration packages for executive (whole time) directors, whenever required. In all such cases, the meeting is chaired by an Independent Director (member). The scope also extends to review the performance / remuneration of senior executives. To act as Compensation Committee in terms of SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 for the purpose of formulation of policy, procedures and schemes and overall supervision and administration of Employee Stock Option Schemes (ESOSs) in the Bank. To review status of compliance with Section 10A of the Banking Regulation Act, 1949 and Clause 49 of the Listing Agreement relating to composition of the Board of Directors and also composition of other mandatory committees. To act as Nomination Committee for the purpose of recommending appointment of Non- Executive/Independent Directors after carrying out the due diligence under fit and proper norms prescribed by the regulator, RBI.
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Composition and Meetings The Committee consists of four members. Mr. Philippe Damas is the Chairman of the Committee. The Corporate Secretary of the Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met six times. The dates of the meetings held were: 28-Apr-2008, 01-Jul-2008, 31-Oct-2008, 06-Jan-2009, 23-Jan-2009 and 23-Mar-2009. Meetings held during the tenure 6 6 6 6 No. of Meetings attended in person 5 5 6 4 No. of Meetings attended through Tele/ Video Conference 1 -
Member (Mr.) Philippe Damas, Chairman K R Ramamoorthy Arun Thiagarajan Aditya Krishna 3.4 Investors Committee (IC) Scope and Terms of Reference
To look into the redressal of investors grievances like non-transfer of shares, non-receipt of Annual Reports, non-receipt of declared dividends etc. To oversee investor relations To approve share transfers (to the extent not delegated to officials) and To monitor servicing of investor requirements. The Committee was constituted in terms of the mandatory requirement of Clause 49 of the Listing Agreement entered into with Stock Exchanges. During the year, the Bank received 122 complaints from the shareholders all of which stand resolved. As on 31-Mar-2009, there are no complaints pending for resolution. Composition and Meetings The Committee consists of three members. Mr. Arun Thiagarajan, Independent Director is the Chairman of the Committee. Mr. M V S Appa Rao, Corporate Secretary of the Bank, being the Compliance Officer of the Bank, acts as Secretary to the Committee. During the year 2008-09, the Committee met two times. The dates of the meetings held were: 31-Oct-2008 and 22-Jan-2009. No. of Meetings attended through Tele/ Video Conference -
Member (Mr.) Arun Thiagarajan, Chairman Vaughn Richtor Santosh Ramesh Desai
Meetings held during the tenure 2 2 2
No. of Meetings attended in person 2 2 1
3.5 Special Committee for Monitoring Frauds (SCMF) Scope and Terms of Reference To monitor and follow up cases of fraud involving amounts of Rs. 50 Lakh and above (as against RBIs recommendation for Rs.1 Crore and above vide its circular DBS.FGV(F)No.1004/23.04.01A/2003-04 dated 10-Jan-2004). To monitor effective detection of frauds and reporting thereof to the regulatory and enforcement agencies and review the action taken against the perpetrators of frauds.
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Composition and Meetings The Committee consists of six members. Mr. Arun Thiagarajan is the Chairman of the Committee. Corporate Secretary of the Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met two times. The dates of the meetings held were: 01-Jul-2008 and 22-Jan-2009. Meetings held during the tenure 2 2 2 2 2 2 No. of Meetings attended in person 2 2 1 2 1 No. of Meetings attended through Tele/ Video Conference -
Member (Mr.) Arun Thiagarajan, Chairman Vaughn Richtor K R Ramamoorthy Ryan Padgett Philippe Damas Wilfred Nagel 3.6 Customer Service Committee (CSC) Scope and Terms of Reference
To bring about ongoing improvements on a continuous basis in the quality of customer service provided by the Bank. To initiate, review and implement proactive measures to bring ongoing improvements in the quality of customer service provided by the Bank and improve the level of customer service for all categories of clients. To ensure compliance with the recommendation of the Committee on Procedures and Performance Audit on Public Services (CPPAPS) and monitor progress on an ongoing basis. Composition and Meetings The Committee consists of four members. Mr. Aditya Krishna is the Chairman of the Committee. Corporate Secretary of the Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met two times. The dates of the meetings held were: 01-Jul-2008 and 31-Oct-2008. Member (Mr.) Aditya Krishna K R Ramamoorthy Vaughn Richtor Santosh Ramesh Desai 3.7 Board Credit Committee (BCC) Scope and Terms of Reference To approve credit limits beyond the powers of Executive Credit Committee (ECC). Meetings held during the tenure 2 2 2 2 No. of Meetings Attended in person 2 2 2 2 No. of Meetings Attended through Tele/ Video Conference -
Composition and Meetings The Committee consists of four members. Mr. Richard Cox is the Chairman of the Committee. The Corporate Secretary of the Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met nine times. The dates of the meetings held were: 29-Apr-2008, 30-Jun-2008, 21-Jul-2008, 22-Aug-2008, 24-Sep-2008, 31-Oct-2008, 22-Jan-2009, 16-Feb-2009 and 23-Mar-2009. Member (Mr.) Richard Cox, Chairman Wilfred Nagel Ryan Padgett (alternate to Wilfred Nagel) Arun Thiagarajan Vaughn Richtor Meetings held during the tenure 9 9 6 9 9 No. of Meetings No. of Meetings attended attended in person through Tele/ Video 5 3 2 8 9 -
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4. REMUNERATION/COMPENSATION 4.1 Policy Remuneration of Chief Executive Officer / Whole-time Director is subject to approval of Reserve Bank of India in terms of Section 35B of the Banking Regulation Act, 1949. Non-Executive Independent Directors are paid sitting fees of Rs.20,000/- for each Board/Committee meeting attended. Directors belonging to Promoter Group(s) have not drawn any sitting fees for the meetings attended during the year. Mr. Arun Thiagarajan, Non- Executive & Independent Director, holds 15,080 equity shares of the Bank as on 31-Mar-2009. Mr. Aditya Krishna, Non-Executive & Independent Director, holds 17,000 equity shares of the Bank as on 31-Mar-2009. 4.2 Remuneration to Directors Mr. Vaughn Nigel Richtor is the Managing Director and CEO of the Bank effective 07-Feb-2006, till 06-Apr-2009. In terms of Section 35B of the Banking Regulation Act, 1949, the annual remuneration package of Rupees One Crore Ten Lakh, has been duly approved by the Reserve Bank of India and by the Shareholders at the Annual General Meeting on 26-Sep-2006.
5.
DETAILS OF GENERAL BODY MEETINGS AND OTHER SIGNIFICANT DEVELOPMENTS: Details of the General Body Meetings held in the last three years are given below: General Body Meeting 77th AGM Date, Time and Venue 30-Jun-2008 at 10.00 AM at The Auditorium, ING Vysya House, No.22, M.G. Road, EGM Bangalore-560 001 06-Nov-2007 at 11.00 AM at The Auditorium, ING Vysya House, No.22, M.G. Road, 76th AGM Bangalore-560 001. 28-Jun-2007 at 10.30 AM Dr. B R Ambedkar Bhavana, Millers Road, Vasanthanagar, 75th AGM Bangalore-560 052. 26-Sep-2006 at 10.30 AM Dr. B R Ambedkar Bhavana, Millers Road, Vasanthanagar, Bangalore-560 052. 2 Nil 3 No. of Special Resolutions passed Nil
DISCLOSURE 6.1 The Disclosure on materially significant related party transactions is given under point 18.14 in the Notes on Accounts (Schedule 18) of the Balance Sheet. 6.2 Penalty levied / strictures passed on the Bank during the previous three years by Stock Exchanges or any other Statutory Authority for non- compliance with any regulation relating to capital market. a) Penalties imposed during the year 2008-09 by Stock Exchanges/SEBI Nil b) Penalties imposed during the previous three years already disclosed in the Annual Reports of earlier years Nil c) Strictures passed during the year 2008-09 by SEBI/Stock Exchange Nil
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d) Strictures passed during the previous three years already disclosed in the Annual Reports of earlier years, are as follows: Particulars Disgorgement order by SEBI against eight Depository participants in the country out of which Banks individual liability amounted to Rs.55 Lakh. Action taken by Management Status update Bank appealed against the The SAT stayed the order and finally disgorgement order before set aside the order through its decision Securities Appellate Tribunal ( SAT). dated 22 Nov- 2007.
Enquiry proceeding against the Bank The Bank attended the enquiry alleging violation of certain SEBI Rules proceedings and submitted a and Regulations. written statement with supporting documents.
SEBI offered to settle the issue through a Consent order process, which was accepted by the Bank. Accordingly, SEBI closed the matter by issue of Consent Order dated 17-Feb-2009 following payment of an amount of Rs. 4 lakh which is referred to as settlement charges in the said order.
6.3 Whistle Blower Policy The Bank has a Whistle Blower Policy in place as approved by the Corporate Governance Committee at its meeting held on 18-Jan-2006. Subsequently, operating Guidelines were issued to all the Branches / Offices effective 20-Mar-2006. RBIs Policy on Protected Disclosure Scheme is also put in place as a sequel to Whistle Blower Policy. The Whistle Blower Policy of ING Vysya Bank has the following key objectives: To provide an avenue for the employees and others to raise concerns in respect of violation of Law, questionable business practices or grave misconduct by the employees of the Bank that could lead to financial loss or reputation risk to the Bank To provide reassurance of protection of the whistle blower from reprisal, discrimination or victimization for having blown the whistle in good faith To provide the details of reporting, investigation and settlement of the issues and To provide direct access to the Chairman of the Audit Committee of the Board, where a senior management person/ reporting officer is involved
In terms of the policy, employees of the Bank and its affiliates including persons employed by or associated with the Bank on a contractual or temporary basis are required to be vigilant against frauds perpetrated on the Bank whether by their own colleagues or by outsiders and are advised to blow the whistle in case they become aware of any unethical or improper business practices by their colleagues or superiors. During the year, three investigations into whistle blower references were conducted and the issues escalated were resolved.
6.4 Code of Conduct In compliance with Clause 49 of the Listing Agreement, Managing Director and CEO made the following declaration affirming compliance with the Code of Conduct by the Directors and Senior Management of the Bank: Declaration of Compliance with the Code of Conduct I confirm that all the Directors have affirmed compliance with the Banks Code of Conduct for Directors. Also, the Senior Management Team has affirmed compliance with the Banks Code of Conduct for Senior Management. Place: Bangalore Date: 06-Apr-2009 Vaughn Richtor Managing Director & CEO
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6.5 Compliance with Mandatory Requirements The Bank has complied with the mandatory requirements of the Code of Corporate Governance as stipulated under Clause 49 of the listing agreement entered into with the Stock Exchanges.
6.6 Compliance with Non -Mandatory Requirements The Corporate Governance Committee (CGC) also acts as the Remuneration Committee to determine the Banks policy on specific remuneration packages for Executive (Whole-Time) Directors whenever required. Its scope also extends to the review of remuneration of senior executives. The CGC consists of four members, out of whom three are independent Directors. When CGC acts as Remuneration Committee, it is chaired by an independent Director. The Bank has also complied with the non-mandatory requirements in the following manner: The Bank publishes its financial results on its website viz., www.ingvysysabank.com, which is accessible to all. There are no audit qualifications in the financial statements during the period. The Bank has adopted a Whistle Blower Policy, which permits the employees of the Bank to voice their concerns in respect of any activity or event, which is against the interest of the Bank or society (please refer 6.3) The half yearly communication to the shareholders are hosted on the Banks website viz., www.ingvysyabank.com.
6.7 Adoption of Secretarial Standards Secretarial Standards for various secretarial practices have been formulated and issued by The Institute of Company Secretaries of India (ICSI), New Delhi, a pioneer in inculcating culture of good governance in corporate India. The Bank has voluntarily adopted the following five Secretarial Standards with the approval of the Corporate Governance Committee : 1. Secretarial Standard on Meetings of Board of Directors SS-1 2. Secretarial Standard on General Meetings SS-2 3. Secretarial Standard on Registers and Records SS-4 4. Secretarial Standard on Minutes SS-5 5. Secretarial Standard on Transmission of Shares and Debentures SS-6 7 MEANS OF COMMUNICATION TO THE SHAREHOLDERS/INVESTORS 7.1 Investor Relations Guiding principles ING Vysya Bank is committed to maintaining an open and consistent communication policy with shareholders, potential investors and other interested parties. The objective is to ensure that the perception of these parties about the historical record, current performance and future prospects is in line with managements understanding of the actual situation at ING Vysya Bank. The guiding principles of this policy, as it relates to shareholders, are that ING Vysya Bank gives equal treatment to shareholders in equal situations, that any price-sensitive information is published in a timely fashion and that information is provided in a format that is as complete, simple, transparent and consistent as possible. The Bank has a well-defined Code of Internal Procedures and Conduct for preventing and regulating the practice of Insider Trading, applicable to Designated Employees. This Internal Code is regularly monitored to ensure overall compliance with the provisions of SEBI (Prohibition of Insider Trading) Regulations, 1992.
7.2 Methodology ING Vysya Banks communication strategy makes use of both traditional and modern communication tools. All information relevant to shareholders is placed on the Banks website, viz., www.ingvysyabank.com from time to time. This includes the shareholding pattern of the Bank on a quarterly basis, Quarterly / Annual Financial Results, details of Directors
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as required under Clause 49 of the Listing Agreement, half yearly communication to the shareholders etc. The Balance Sheet as on 31-Mar-2009 along with Schedules is also placed on the website for the information of the Shareholders. The Quarterly and Annual Financial Results were published in the Financial Express (English Newspaper) and The Samyuktha Karnataka (regional language Newspaper) and the quarterly presentations made to investors are also posted on Banks website viz., www.ingvysyabank.com 8. GENERAL INFORMATION FOR THE SHAREHOLDERS Financial year 1-Apr-2008 to 31-Mar-2009 Board Meeting for consideration of / dealing with Accounts for the year 2008-2009 Posting of Annual Reports Book Closure Date Last date for receipt of Proxy Forms Date, Time and Venue of 78th AGM
28-Apr-2009 10-Aug-2009 21-Aug-2009 to 04-Sept-2009 Upto 11.00 a.m.- 02-Sept-2009 04-Sept-2009, Friday, 11.00 a.m. The Auditorium, ING Vysya House, No. 22, M.G. Road, Bangalore - 560 001. On and from 04-Sept-2009 but not beyond 03-Oct-2009.
Dividend Payment Date
8.1 Listing on Stock Exchanges The Shares of the Bank are listed on the following Stock Exchanges: Name of Stock Exchange National Stock Exchange of India Limited (NSE) Stock Code INGVYSYABK Address Exchange Plaza, 5th Floor, Plot No.C/1, G Block, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.
Bombay Stock Exchange Limited (BSE)
531807
8.2 Share Prices The Shares are regularly traded on the NSE and BSE. The monthly market price data of High and Low prices of shares of the Bank traded on NSE during the year are given below: Market Price Data: Monthly High and Low Prices of shares traded on NSE Months Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 High Price (Rs.) 340.00 324.00 299.80 258.00 242.00 275.00 218.40 160.00 184.00 158.70 159.70 129.00 Low Price (Rs.) 280.80 279.60 208.10 191.25 204.00 180.20 129.30 115.00 129.10 118.95 121.00 104.20 Aggregate Volume (Number of Equity Shares) 10,163 17,405 19,778 78,760 5,797 18,323 32,647 11,822 32,547 10,003 8,251 57,872
During the year, the closing share prices of the Bank varied from a low of Rs.105.50 (09-Mar-2009) to a high of Rs. 326.20 (01-Apr-2008) On 31-Mar-2009, the scrip closed at Rs. 128.40
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IVBL Share Price in comparison with BSE Sensex- 01-Apr-2008 to 31-Mar-2009
IVBL Share Price in comparison with NSE NIFTY- 01-Apr-2008 to 31-Mar-2009
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8.3 Shareholding Of the 10,26,04,115 shares of the Bank as on 31-Mar-2009, 93.44% of shares are held in demat mode. A table showing the distribution of shares among 24,297 Shareholders according to size, class and category of shareholders as on 31-Mar-2009 is given below: Category Upto 5000 5001 - 10000 10001 - 20000 20001 - 30000 30001 - 40000 40001 - 50000 50001 - 100000 100001 and above Total No. of shareholders 19,890 1,973 1,582 355 132 84 128 153 24,297 Total Shares 22,44,656 14,65,775 21,36,062 8,70,439 4,63,496 3,83,795 9,14,972 9,41,24,920 10,26,04,115 % to shareholders 81.86 8.12 6.51 1.46 0.54 0.35 0.53 0.63 100.00 % to paid up capital 2.19 1.43 2.08 0.85 0.45 0.37 0.89 91.74 100.00
8.4 Shareholding pattern as on 31-Mar-2009 Sl. No. 1 2 3 4 5 6 Category Promoters* Foreign Institutional Investors (Including IFC**) Mutual Funds, Banks, FIs NRIs Corporate Bodies Indian Public Total No. of Shares 4,53,42,625 2,53,51,027 1,38,67,899 46,07,298 28,35,741 1,05,99,525 10,26,04,115 % To Equity 44.19 24.71 13.52 4.49 2.76 10.33 100.00
* Promoters consists of Foreign Promoter, ING Group (43.81%) and Indian Promoter, GMR Group. ** Foreign Institutional Investors include International Finance Corporation (IFC), a Multilateral Institution holding 45,40,000 shares constituting 4.42% of paid up capital of the Bank
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8.5 Aggregate Foreign Investment (AFI) as defined by RBI As on 31-Mar-2009 Category Foreign Promoters IFC FIIs (excluding IFC) NRIs Foreign Nationals Total 8.6 List of Top 10 shareholders as on 31-Mar-2009 Sl. No. 1 2 3 4 5 6 7 8 9 10 Name Ing Mauritius Holdings (a wholly owned subsidiary of ING Group) Ing Mauritius Investments I (a wholly owned subsidiary of ING Group) Aberdeen Asset Managers Limited A/C Aberdeenintern International Finance Corporation Dilip Ramniklal Mehta Winterfall Limited Arisaig Partners (Asia) Pte Ltd A/C Arisaig India Fid Funds (Mauritius) Limited Templeton Mutual Fund A/C Franklin India Flexi Cap Bajaj Allianz Life Insurance Company Ltd. Total Shares as on 31-Mar-2009 3,49,48,979 1,00,04,448 47,26,280 45,40,000 45,00,000 44,87,935 40,59,070 35,53,720 13,82,223 12,92,120 7,34,94,775 % to Paid-up Capital 34.06 9.75 4.61 4.42 4.39 4.37 3.96 3.46 1.35 1.26 71.63 % age to equity 43.81 4.42 20.29 4.49 0.00 73.01
8.7 Status of dematerialisation of Banks shares The Banks shares are available for dematerialisation with both the depositories; i.e National Securities Depository Limited (NSDL) and Central Depository Serivces (India) Limited (CDSL). 93.44% of shares have been dematerialised as on 31-Mar-2009. Category of shares held Physical form Dematerialized form with - NSDL - CDSL Total No. of Shares 67,30,378 9,47,87,641 10,86,096 10,26,04,115 % of Shareholding 6.56 92.38 1.06 100.00
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8.8 STATEMENT SHOWING DETAILS OF DIVIDEND REMAINING UNPAID FOR 31-MAR-2009. SL. No. 1 2 3 4 5 6 7 Year 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Percentage of dividend declared 35% 40% 50% NIL NIL 6.5% 15% THE YEARS 2001-02 TO 2007-08 AS ON
Amount of unclaimed dividend as on 31-Mar-2009 (Rs.) 7,96,905.89 8,85,288.02 14,60,325.00 NIL NIL 4,40,757.00 9,63,977.00
Due date for transfer of unclaimed dividend by Bank to Investors Education and Protection Fund (IEPF) 26-Oct-2009 20-Oct-2010 21-Oct-2011 NA NA 2-Aug-2014 4-Aug-2015
During the financial year 2008-09, the Bank has transferred on 11-Nov-2008 the unclaimed dividend amounting to Rs. 4,87,970/- to the Investor Education and Protection Fund. 8.9 Share Transfer System The Banks shares are in compulsory dematerialization (demat) mode and are transferable through the depository system. Investor Services are handled by R & T Agents, Karvy Computershare Private Limited, Hyderabad. Physical Share transfers are registered and returned within 30 days from the date of receipt provided all documents are correct and valid in all respects. Shareholders are requested to continue to send their transfer / dematerialisation and other requests directly to our R & T Agents / Depository Participants.
8.10 Contact Details Shareholders may correspond with the R & T Agents at the following address: Karvy Computershare Private Limited 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081. Ph : 040-23420815 Fax : 040-23420814 Email: mailmanager@karvy.com Contact Person: Mr. Jayaraman V K Email: jayaramanvk@karvy.com Website: www.karvycomputershare.com Shareholders may correspond with the Bank at the following address: Mr. M.V.S. Appa Rao Corporate Secretary Secretarial Department, ING Vysya Bank Limited, No.22, M G Road, Bangalore 560 001. Ph : 080 25005770 (D), 25005000 (G) Ext : 3570 Fax : 080-25005555, 25559212 E-mail : sharecare@ingvysyabank.com
AUDITORS CERTIFICATE ON CORPORATE GOVERNANCE

Reserve Bank of India, vide circular DBOD No.BC 112/08.138.001/2001-02 dated 4-Jun-2002 has stated that in the case of Banks, a separate certificate from auditors regarding compliance with conditions of Corporate Governance is not considered necessary as the compliance of Banks with RBI instructions is already being verified by the statutory auditors.
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AUDITORS REPORT
To The Members of ING Vysya Bank Limited 1. We have audited the attached balance sheet of ING Vysya Bank Limited (the Bank) as at 31March2009 and also the profit and loss account and cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Banks management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956 (the Companies Act). The reports on accounts of 49 branches audited by branch auditors, as submitted by the management of the Bank, have been dealt with in preparing our report in the manner considered appropriate by us. 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 purposes of our audit and have found them to be satisfactory; b) In our opinion, the transactions of the Bank which have come to our notice have been within its powers; c) 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us. The reports on the accounts of the branches audited by the branch auditors have been forwarded to us and have been appropriately dealt with; d) The balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account and with audited returns received from the branches; e) In our opinion, the balance sheet, profit and loss account and cash flow statement dealt with by this report comply with the accounting standards referred to in subsection (3C) of Section211 of the Companies Act, read with guidelines issued by the Reserve Bank of India insofar as they apply to the Bank; f) On the basis of written representations received from the directors, as on 31 March 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified from being appointed as a director in terms of clause(g) of subsection(1) of Section274 of the Companies Act, 1956;
2.
3.
4.
g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required for banking companies, and give a true and fair view in conformity with the accounting principles generally accepted in India; i. ii. in case of the balance sheet, of the state of the affairs of the Bank as at 31March2009; in case of the profit and loss account, of the profit for the year ended on that date; and
5.
iii. in case of cash flow statement, of the cash flows for the year ended on that date.
For S.R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No.:048749 Mumbai 28 April 2009
35
BALANCE SHEET AS AT 31 MARCH 2009
(Rs. in thousands) PARTICULARS SCHEDULE 31 March 2009 31 March 2008
CAPITAL AND LIABILITIES Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions 1 2 3 4 5 1,026,041 16,002,909 248,899,244 21,524,175 31,117,536 1,024,743 14,331,834 204,575,559 12,498,052 22,968,849
TOTAL
318,569,905
255,399,037
ASSETS Cash and Balance with Reserve Bank of India Balance with Banks and Money at call and short notice Investments Advances Fixed Assets Other Assets 6 7 8 9 10 11 17,910,228 4,912,286 104,955,389 167,509,304 4,371,997 18,910,701 22,635,265 9,212,320 62,933,196 146,495,484 3,992,146 10,130,626
TOTAL
318,569,905
255,399,037
Contingent Liabilities Bills for collection Significant Accounting Policies Notes on Accounts As per our report of even date For S. R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No: 048749 Place: Bangalore Date: 28 April 2009
12
739,082,609 30,150,131
595,258,919 18,058,006
17 18
For and on behalf of the Board
K.R. Ramamoorthy Chairman
Jayant Mehrotra Officer-in-charge
Arun Thiagarajan Director Place: Bangalore Date: 28 April 2009
Philippe Damas Director
36
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 2009
(Rs. in thousands) PARTICULARS INCOME Interest Earned Other Income TOTAL EXPENDITURE Interest Expended Operating Expenses Provisions and Contingencies TOTAL PROFIT Net Profit for the year Profit/(Loss) Brought Forward TOTAL APPROPRIATIONS Transfer to Statutory Reserve Transfer to Capital Reserves Transfer to Investment Reserve Transfer to Special Reserve ( u/s 36 (1) (viii) of Income Tax Act, 1961) Proposed Dividend Dividend Tax Balance Carried to Balance Sheet TOTAL Earnings Per Share ( Rs. Per Equity Share of Rs.10 each) Basic Diluted Significant Accounting Policies Notes on Accounts As per our report of even date For S. R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No: 048749 Place: Bangalore Date: 28 April 2009 For and on behalf of the Board SCHEDULE 13 14 31 March 2009 22,398,898 5,476,657 27,875,555 31 March 2008 16,804,391 4,185,660 20,990,051
15 16
15,902,699 7,724,698 2,360,361 25,987,758
11,820,478 6,094,893 1,505,378 19,420,749
1,887,797 1,035,324 2,923,121
1,569,302 184,363 1,753,665
471,949 22,753 23,007 100,000 205,208 34,874 2,065,330 2,923,121
392,326 31,467 47,715 67,000 153,711 26,122 1,035,324 1,753,665
18.41 18.33 17 18
16.47 16.26
Arun Thiagarajan Director Place: Bangalore Date: 28 April 2009
37
SCHEDULES TO BALANCE SHEET AS AT 31 MARCH 2009
(Rs. in thousands) PARTICULARS SCHEDULE I - CAPITAL AUTHORISED CAPITAL 350,000,000 (Previous Year 350,000,000) Equity Shares of Rs.10 each 100,000,000 (Previous Year 100,000,000) Preference Shares of Rs.10 each ISSUED CAPITAL 102,927,692 (Previous Year 102,826,959) Equity shares of Rs.10 each SUBSCRIBED AND CALLED UP CAPITAL 102,604,115 (Previous Year 102,474,264) Equity Shares of Rs.10 each Fully Called and Paid up TOTAL SCHEDULE 2 - RESERVES AND SURPLUS I. STATUTORY RESERVE Opening Balance Additions during the year Total (A) II. CAPITAL RESERVE (a) Revaluation Reserve Opening Balance Less: Depreciation on revalued assets Total (B) (b) Others Opening Balance Add: Transfer from Profit and Loss Account Total (C) III. SECURITIES PREMIUM Opening Balance Add: Additions during the year Less: Deductions during the year Total (D) TOTAL CAPITAL RESERVE (B+C+D) IV. SPECIAL RESERVE Opening Balance Add: Additions during the year Total (E) V. REVENUE AND OTHER RESERVES (F) Revenue Reserves Opening Balance Less: AS 15 Transitional Liability Total (F) 555,351 555,351 1,125,970 (570,619) 555,351 67,000 100,000 167,000 67,000 67,000 7,775,663 13,098 7,788,761 9,975,019 4,382,410 3,422,299 (29,046) 7,775,663 9,946,655 1,075,816 22,753 1,098,569 1,044,349 31,467 1,075,816 1,095,176 (7,487) 1,087,689 1,107,829 (12,653) 1,095,176 2,622,347 471,950 3,094,297 2,230,021 392,326 2,622,347 1,026,041 1,026,041 1,024,743 1,024,743 1,029,276 1,028,270 3,500,000 1,000,000 3,500,000 1,000,000 31 March 2009 31 March 2008
38
(Rs. in thousands) PARTICULARS (G) Investment Reserve Opening Balance Add: Additions during the year Total (G) Total (V) (F+ G) VI. Employee Stock Option Scheme Outstanding (Net of deferred compensation cost) VII. Balance in Profit and Loss Account (H) TOTAL (I to VII) SCHEDULE 3 - DEPOSITS A. I. II. Demand Deposits i. ii. From Banks From Others 1,820,853 31,324,216 33,984,173 1,080,513 32,212,080 31,231,656 78,223 23,007 101,230 656,581 44,682 2,065,330 16,002,909 30,508 47,715 78,223 633,574 26,934 1,035,324 14,331,834 31 March 2009 31 March 2008
Savings Bank Deposits
III. Term Deposits i. ii. From Banks From Others TOTAL(I to III) 36,989,272 144,780,730 248,899,244 248,899,244 TOTAL 248,899,244 29,720,260 110,331,050 204,575,559 204,575,559 204,575,559
B. Deposits of Branches In India C. Deposits outside India
SCHEDULE 4 - BORROWINGS I. II. Borrowings in India i. ii. Reserve Bank of India Other Banks 5,750,255 15,773,920 TOTAL (I to II) Secured Borrowings included in (I) & (II) above is NIL (Previous Year : NIL) 21,524,175 650,000 4,847,012 7,001,040 12,498,052
iii. Other Institutions and Agencies Borrowings outside India
SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I. II. Bills Payable Interest Accrued 3,667,080 1,221,805 10,329,020 1,008,100 14,891,531 TOTAL (I to V) 31,117,536 5,415,386 922,098 4,969,445 854,800 10,807,120 22,968,849
III. Subordinated Debt -Tier II Bonds ( Including Innovative Perpetual Debt Instrument) IV. Provision against Standard Assets V. Others ( Including Provisions)
39
(Rs. in thousands) PARTICULARS SCHEDULE 6 - CASH AND BALANCE WITH RESERVE BANK OF INDIA I. II. Cash In Hand ( Including Foreign Currency Notes) Balances With Reserve Bank of India i. ii. In Current Account In Other Accounts TOTAL (I to II) SCHEDULE 7-BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I. In India i) Balances With Banks a) In Current Accounts b) In Other Deposit Accounts 1,407,424 256,314 2,016,110 2,313,820 15,218,932 17,910,228 20,735,403 22,635,265 2,691,296 1,899,862 31 March 2009 31 March 2008
ii) Money at Call and Short Notice a) With Banks b) With Others TOTAL (i to ii) 1,663,738 4,329,930
II.
Outside India i) Balances With Banks a) Current Accounts b) In Other Deposit Accounts 10,583 357,255 2,438,895
ii) Money at Call and Short Notice a) With Banks b) With Others TOTAL (i to ii) GRAND TOTAL (I to II) 3,237,965 3,248,548 4,912,286 2,086,240 4,882,390 9,212,320
SCHEDULE 8 - INVESTMENTS (NET) I. Investments in India i) Government Securities ## ** $ 92,585,496 1,742 29,996 1,236,462 20,988 11,080,705 104,955,389 48,824,804 1,742 53,173 1,203,256 20,988 12,829,233 62,933,196
ii) Other Approved Securities## iii) Shares iv) Debentures and bonds v) Subsidiaries/Joint Ventures
vi) Others (Mutual funds and RIDF Deposits) @ TOTAL
40
(Rs. in thousands) PARTICULARS II. Investments Outside India TOTAL GROSS INVESTMENTS LESS: Depreciation/Provision for Investments NET INVESTMENTS @ Includes deposits with NABARD, NHB and SIDBI of Rs. 908.10 crores (previous year Rs. 282.92 crores) and PTCs Rs. 116.32 crores (previous year Rs. 113.34 crores) 31 March 2009 104,955,389 105,014,173 (58,784) 104,955,389 31 March 2008 62,933,196 63,079,858 (146,662) 62,933,196
## Includes securities costing Rs. 7.13 crores (previous year Rs. 5.81 crores) pledged for availment of telegraphic transfer discounting facility ** Includes Repo Lending of Rs. 1260 crores (previous year Rs. Nil crores) and net of Repo borrowing of Rs. Nil under the Liquidity Adjustment Facility (previous year Rs. 194.95 crores) in line with Reserve Bank of India requirements. $ Includes securities costing Rs. 19.79 crores ( previous year Rs.10.18 crores) pledged for margin requirement
SCHEDULE 9 - ADVANCES (Net) A. i) Bills Purchased and Discounted ii) Cash Credits, Overdrafts and Loans repayable on demand iii) Term loans TOTAL B. i) Secured by Tangible Assets ii) Covered by Bank/Government Guarantees iii) Unsecured TOTAL C. I ADVANCES IN INDIA i) Priority Sector ii) Public Sector iii) Banks iv) Others II ADVANCES OUTSIDE INDIA TOTAL SCHEDULE 10 - FIXED ASSETS I. I Premises i) At cost as on 31 March of the preceding year ii) Appreciation in the value iii) Additions during the year iv) Deductions during the year v) Depreciation to date a. Capital Work in Progress TOTAL 8,355,878 66,370,012 92,783,414 167,509,304 135,817,218 1,952,060 29,740,026 167,509,304 61,550,000 706,828 33,868 105,218,608 167,509,304 8,095,445 59,071,168 79,328,871 146,495,484 115,036,962 1,802,229 29,656,293 146,495,484 50,889,976 2,987,261 383,684 92,234,563 146,495,484
939,213 1,172,709 2,111,922 (7,910) (245,421) 1,279,533 3,138,124
982,055 1,172,709 4,581 2,159,345 (47,423) (220,670) 1,111,632 3,002,884
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(Rs. in thousands) PARTICULARS II. II Other Fixed Assets ( Including Furniture and Fixtures) i) At cost as on 31 March of the preceding year 3,415,721 506,881 3,922,602 iii) Deductions during the year iv) Depreciation to date a. Capital Work In Progress TOTAL III. Lease Fixed Assets i) At cost as on 31 March of the preceding year 1,540,585 1,540,585 iii) Deductions during the year iv) Depreciation to-date v) Add: Lease Adjustment Account TOTAL TOTAL (I to III) SCHEDULE 11 - OTHER ASSETS I. II. Inter Office Adjustment ( Net) Interest Accrued 207,843 2,432,673 319,214 6,522 65,775 15,878,674 TOTAL SCHEDULE 12 - CONTINGENT LIABILITIES I. II. Claims against the bank not acknowledged as debts Liability for partly paid investments 64,494 350,173,736 338,855,913 36,310,679 12,879,889 797,898 739,082,609 60,548 296,935,230 252,756,453 32,218,779 12,908,888 379,021 595,258,919 18,910,701 161,808 1,823,177 463,322 6,573 84,271 7,591,475 10,130,626 vi) Less: Provision / Write off of NPAs (1,370,976) 226,713 (237,649) 158,673 4,371,997 1,540,585 1,540,585 (1,342,967) 201,889 (237,649) 161,858 3,992,146 ii) Additions during the year (26,310) (3,060,377) 239,285 1,075,200 3,115,249 356,301 3,471,550 (55,829) (2,693,712) 105,395 827,404 ii) Additions during the year 31 March 2009 31 March 2008
III. Tax Paid in Advance and Tax deducted at source (Net) IV. Stationery and Stamps V. Non Banking Assets acquired in satisfaction of claims (Net) VI. Others
III. Liability on account of Outstanding Forward Exchange Contracts IV. Liability on account of Outstanding Derivative Contracts V. Guarantees given on behalf of constituents in India VI. Acceptances , Endorsements and Other Obligations VII. Other items for which the bank is contingently liable TOTAL
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SCHEDULES TO PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 2009
(Rs. in thousands) PARTICULARS SCHEDULE 13 - INTEREST EARNED i. ii. Interest/Discount on Advances/Bills Income on Investments 17,476,282 4,698,422 152,230 71,964 TOTAL SCHEDULE 14 - OTHER INCOME i. ii. Commission, Exchange and Brokerage Profit/ (Loss) on sale of Investments (Net) 3,293,027 389,658 45,959 1,110,822 3,000 16,442 12,481 (28,009) 633,277 TOTAL SCHEDULE 15 - INTEREST EXPENDED i. ii. Interest on Deposits Interest on Reserve Bank of India/Inter-Bank Borrowings TOTAL SCHEDULE 16 - OPERATING EXPENSES i. ii. Payments and Provisions for Employees Rent, Taxes and Lighting 3,922,205 597,108 105,652 41,914 408,245 2,796 6,560 42,398 224,283 221,731 238,071 1,913,735 TOTAL 7,724,698 3,023,854 450,743 110,263 42,751 389,309 3,596 6,100 24,786 191,563 211,599 200,725 1,439,604 6,094,893 14,010,372 514,587 1,377,740 15,902,699 10,461,950 334,534 1,023,994 11,820,478 5,476,657 2,507,514 118,220 33,813 829,841 43,416 29,219 10,218 (32,937) 646,356 4,185,660 22,398,898 12,968,911 3,502,901 200,301 132,278 16,804,391 31 March 2009 31 March 2008
iii. Interest on Balances with RBI and other inter bank funds iv. Others
iii. Profit on Revaluation of Investments (Net) iv. Profit/ (Loss) on sale of Land, Buildings and Other Assets(Net) v. Profit on Exchange / Derivative Transactions (Net) Subsidiaries/Companies and Joint Ventures Abroad/in India Add: Lease Equalisation Less: Depreciation vi. Income earned by way of Dividends etc.from vii. Lease Income
viii. Miscellaneous Income
iii. Others ( Including interest onTier II Bonds)
iii. Printing and Stationery iv. Advertisement and Publicity v. Depreciation on Banks Property vi. Directors Fees, Allowances and Expenses vii. Auditors Fees and Expenses (Including Branch Auditors) viii. Law Charges ix. Postage,Telegrams,Telephones x. Repairs and Maintenance xi. Insurance xii. Other expenditure
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Significant Accounting Policies

Schedule 17 - Significant Accounting Policies 1 BACKGROUND ING Vysya Bank Limited (the Bank) was incorporated on 29 March 1930 and is headquartered in Bangalore. Subsequent to acquisition of stake in the Bank by ING Group N.V. in August 2002, the name of the Bank was changed from Vysya Bank Limited to ING Vysya Bank Limited. BASIS OF PREPARATION OF FINANCIAL STATEMENTS These financial statements have been prepared and presented under the historical cost convention and accrual basis of accounting, unless otherwise stated, and in accordance with the generally accepted accounting principles (GAAP) in India and conform to the statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time to the extent they have financial statements impact and current practices prevailing within the banking industry in India. The financial statements comply in all material respects with the Notified accounting standards by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The accounting policies have been consistently applied and are consistent with those used in the previous year. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. The estimates and assumptions used in the accompanying financial statements are based upon managements evaluation of the relevant facts and circumstances as of the date of financial statements. Actual results could differ from those estimates. Any revisions to accounting estimates are recognized prospectively in the current and future periods. REVENUE RECOGNITION Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. a. Income and expenditure is accounted on accrual basis except as stated below: Interest on advances, securities and other assets classified as non-performing assets/ securities is recognized on realization in accordance with the guidelines issued by the RBI. 5 FOREIGN EXCHANGE TRANSACTIONS a. Monetary assets and liabilities denominated in foreign currencies are translated into Indian Rupees at the rates of exchange prevailing at the balance sheet date as notified by Foreign Exchange Dealers Association of India (FEDAI) and resulting gains/losses are recognised in the profit and loss account. Processing fees collected on loans disbursed, along with related loan acquisition costs are recognized at the inception of the loan.
b. Income on assets given on lease Finance income in respect of assets given on lease is accounted based on the interest rate implicit in the lease in accordance with the guidance note issued by the ICAI in respect of leases given up to 31 March 2001 and in accordance with AS 19 Leases in respect of leases given from 1 April 2001. Premium/discount on acquired loans Premium paid/discount received on loans acquired under deeds of assignment are recognised in the profit and loss account in the year of such purchases.
c.
d. Sale of investments Realized gains on investments under Held To Maturity (HTM) category are recognized in the profit and loss account and subsequently appropriated, from the profit available for appropriation, if any, to capital reserve account in accordance with RBI guidelines after adjusting for income tax and appropriations to the statutory reserve.
b. Outstanding forward exchange contracts and bills are revalued on the balance sheet date at the rates notified by FEDAI and the resultant gain/ loss on revaluation is included in the profit and loss account. c. Contingent liabilities denominated in foreign currencies are disclosed on the balance sheet date at the rates notified by FEDAI.
DERIVATIVE TRANSACTIONS Derivative transactions comprise forwards, interest rate swaps, currency swaps, currency and cross currency options to hedge on-balance sheet assets and liabilities or to take trading positions. Derivative transactions designated as Trading are Marked to Market (MTM) with resulting gains/losses included
44

in the profit and loss account and in other assets/other liabilities. Derivative transactions designated as Hedge are accounted for on an accrual basis. 7 INVESTMENTS For presentation in the Balance sheet, investments (net of provisions) are classified under the following heads Government securities, Other approved securities, Shares, Debentures and Bonds, Subsidiaries and Joint Ventures and Others, in accordance with Third Schedule to the Banking Regulation Act, 1949. Valuation of investments is undertaken in accordance with the Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks issued by the RBI. For the purpose of valuation, the Banks investments are classified into three categories, i.e. Held to Maturity, Held for Trading and Available for Sale: a. Held to Maturity (HTM) comprises securities acquired by the Bank with the intention to hold them upto maturity. With the issuance of RBI Circular No. DBOD. BP.BC.37/21/04/141/2004-05 dated 2 September 2004, the investment in SLR securities under this category is permitted to a maximum of 25% of Demand and Time Liabilities. c. In the event provisions created on account of depreciation in the Available for sale or Held for trading categories are found to be in excess of the required amount in any year, such excess is recognised in the profit and loss account and subsequently appropriated, from profit available for appropriation, if any, to Investment Reserve account in accordance with RBI guidelines after adjusting for income tax and appropriation to statutory reserve.
d. Treasury bills and Commercial paper being discounted instruments, are valued at carrying cost. Discount accreted on such instruments is disclosed under other assets in accordance with RBI directive and investments are shown at acquisition cost. e. REPO and Reverse REPO transactions are accounted for on an outright sale and outright purchase basis respectively in line with RBI guidelines. The cost/income of the transactions upto the year end is accounted for as interest expense/income. However, in case of reverse REPO, the depreciation in value of security compared to original cost is provided for.
ADVANCES Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by RBI and are stated net of provisions made towards non-performing advances. Provision for non-performing advances comprising substandard, doubtful and loss assets is made in accordance with the RBI guidelines which prescribe minimum provision levels and also encourage banks to make a higher provision based on sound commercial judgement. Non-performing advances are identified by periodic appraisals of the loan portfolio by management. In case of consumer loans, provision for NPAs is made based on the inherent risk assessed for the various product categories. The provisioning done is higher than the minimum prescribed under RBI guidelines. As per RBI guidelines, a general provision at the rate of 0.40% is made on all the standard advances except in the case of loans to Small and Medium Enterprises and direct agricultural advances where provision is made at the rate of 0.25%. Provision towards standard assets is shown separately in the Balance Sheet under Schedule-5 Other liabilities and Provisions. FIXED ASSETS Fixed assets are stated at historical cost less accumulated depreciation, with the exception of premises, which were revalued as at 31 December 1999, based on values determined by approved valuers.
b. Held for Trading (HFT) comprises securities acquired by the Bank with the intention of trading i.e. to benefit from short-term price/interest rate movements. c. Available for Sale (AFS) securities are those, which do not qualify for being classified in either of the above categories.
d. Transfer of securities between categories of investments is accounted for at the acquisition cost / book value / market value on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is fully provided for. Valuation of investments is undertaken as under: a. For investments classified as HTM, excess of cost over face value is amortized over the remaining period of maturity. The discount, if any, being unrealised is ignored. Provisions are made for diminutions other than temporary in the value of such investments.
b. Investments classified as HFT and AFS are revalued at monthly intervals. These securities are valued scripwise and any resultant depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the net appreciation for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.
45

Cost includes cost of purchase of the asset and all other expenditure in relation to its acquisition and installation and includes duties, taxes (excluding service tax), freight and any other incidental expense incurred on the asset before it is ready for commercial use. Office Equipment (including Electrical and Electronic equipment, Computers, Vehicles and other Office Appliances) are grouped under Other Fixed Assets. a. Depreciation on Premises is charged on straight line basis at the rate of 1.63% upto 31March2002 and at 2% with effect from 1April2002. indication that an asset (comprising a cash generating unit) may be impaired. If any such indication exists, the Bank estimates the recoverable amount of the cash generating unit. 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. If such recoverable amount of the cash generating unit is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the revised recoverable amount, subject to a maximum of depreciated historical cost. 11 NON-BANKING ASSETS i. ii. Electrical and Electronic equipment 20% Furniture and Fixtures 10% Non-Banking assets acquired in settlement of debts /dues are accounted at the lower of their cost of acquisition or net realisable value.
b. Additional depreciation on account of revaluation of assets is deducted from the current years depreciation and adjusted in the Revaluation Reserve account. Depreciation on the following items of Fixed Assets is charged over the estimated useful life of the assets on Straight Line basis. The rates of depreciation are:
iii. Vehicles 20% iv. Computers and Software 33.33% v. ATMs and VSAT equipment 16.66% vi. Improvements to leasehold premises amortised over the shorter of primary period of lease or estimated useful life of such assets, which is currently estimated at 6 years. Depreciation on Leased Assets is provided on WDV method at the rates stipulated under Schedule XIV to the Companies Act, 1956. Software whose actual cost does not exceed Rs. 100,000 and other items whose actual cost does not exceed Rs. 10,000 are fully expensed in the year of purchase. Assets purchased during the year are depreciated on the basis of actual number of days the asset has been put to use in the year. Assets disposed off during the year are depreciated upto the date of disposal. 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. Profits on sale of fixed assets is first credited to profit and loss account and then appropriated to capital reserve.
12 CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash in hand, balances with Reserve Bank of India, 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).
13 SECURITISATION TRANSACTIONS Securitisation transactions are accounted for in accordance with applicable RBI guidelines and ICAI guidance note on Accounting for Securitisation.
14 EMPLOYEES STOCK OPTION SCHEME The Employee Stock Option Schemes provide for the grant of equity shares of the Bank to its employees. The Schemes provide that employees are granted an option to acquire equity shares of the Bank that vests in a graded manner. The options may be exercised within a specified period. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account for its stock-based employee compensation plans as per the Guidance Note on Accounting for Employee Sharebased Payments issued by the ICAI. Compensation cost is measured by the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date. The fair price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which
10 IMPAIRMENT OF ASSETS In accordance with AS 28 Impairment of Assets, the Bank assesses at each balance sheet date whether there is any
46

the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered. 15 STAFF BENEFITS The Bank provides for its Pension, Gratuity and Leave liability based on actuarial valuation done as per the Accounting Standard 15 (Revised). i. Retirement benefits in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts. Gratuity, Pension and Leave Encashment Liability are defined benefit obligations and are provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The Bank offsets, on a year on year basis, current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
17 NET PROFIT/(LOSS) Net profit / (loss) disclosed in the profit and loss account is after considering the following: Provision/ write off of non-performing assets as per the norms prescribed by RBI; Provision for income tax and wealth tax; Depreciation/ write off of investments; and Other usual, necessary and mandatory provisions, if any.
ii.
18 EARNINGS PER SHARE (EPS) Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive.
iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method. Short term compensated absences are provided for based on estimates. iv. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. 16 TAXES ON INCOME Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the incometax law), fringe benefit tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized.
19 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS In accordance with AS 29 - Provisions, Contingent Liabilities and Contingent Assets, the Bank creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. Such provisions are not discounted to present value. A disclosure for a contingent liability is made when there is a possible obligation, or a present obligation where outflow of resources is not probable. Where 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. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resource would be required to settle the obligation, the provision is reversed. The bank does not account for or disclose contingent assets, if any.
47
Notes on accounts
18 18.1 Notes on accounts Balancing of books and reconciliation The Bank has completed its inter branch reconciliation. The reconciling items have been identified and elimination of reconciling items is in progress. Appropriate adjustments have been incorporated in the financial statements to reflect completion of reconciliation for the purpose of presentation. Routine matching of select general ledger control account balances with subsidiary ledgers is in progress at few branches and is expected to be completed in due course with no financial statement impact as on 31March2009. Employee stock option scheme ESOS 2002 The employee stock option scheme (ESOS 2002 or the scheme) of the Bank was approved by Board of Directors in their meeting dated 23 July 2001 and by the shareholders at the Annual General Meeting held on 29 September 2001. A total of 500,000 equity shares of Rs.10each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme was in force. These options will vest over a period of five years from the date of grant i.e. 20% at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. Consequent to the rights issue of the Bank during the financial year 2005-2006, appropriate adjustments were made to the number of outstanding options and initially fixed exercise price. ESOS 2002 was discontinued by the Bank in the Annual General Meeting held on 22 September 2005. No further options have been granted under this scheme. The movement in ESOS 2002 during the year ended 31March2009 is as under: Particulars Stock options outstanding at the beginning of the year Less: Options exercised during the year Less: Options forfeited during the year Stock options outstanding at the end of the year Year ended 31March2009 150,480 86,041 4,134 60,305 Year ended 31March2008 361,730 167,190 44,060 150,480
18.2
The weighted average exercise price for the options exercised during the year is Rs. 91.49 (Previous Year - Rs. 90.47) ESOS 2005 The employee stock option scheme (ESOS 2005 or the scheme) of the Bank was approved by the Board of Directors in their meeting dated 27 July 2005 and by shareholders at the Annual General Meeting held on 22September2005. A total of 893,264 equity shares of Rs.10each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme is in force. These options will vest over a period of four years from the date of grant i.e. 25% at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. The board level committee in their meeting dated 25 October 2007 approved the grant of options under ESOS 2005 loyalty options scheme. The movement in ESOS 2005 during the year ended 31March2009 is as under: Particulars Stock options outstanding at the beginning of the year Add: Options granted during the year Less: Options exercised during the year Less: Options forfeited during the year Stock options outstanding at the end of the year Year ended 31March2009 730,451 3,825 14,692 38,119 681,465 Year ended 31March2008 354,914 523,960 109,477 38,946 730,451
The weighted average exercise price for the options exercised during the year is Rs. 121.03 (Previous Year - Rs. 124)
48
Notes on accounts
ESOS 2007 The employee stock option scheme (ESOS 2007 or the scheme) of the Bank was approved by the Board of Directors in their meeting dated 7 March 2007 and by the shareholders through postal ballot meeting held on 11 May 2007. A total of 78,00,000 equity shares of Rs. 10 each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme is in force. These options will vest over a period of three years from the date of grant i.e, 40% in 1st year; 30% in 2nd year and 30% in 3rd year at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. The movement in ESOS 2007 during the year ended 31 March 2009 is as under: Particulars Stock options outstanding at the beginning of the year Add: Options granted during the year Less: Options exercised during the year Less: Options forfeited during the year Stock options outstanding at the end of the year The details of exercise price for stock options outstanding as at 31 March 2009 are: Range of exercise Number of options price outstanding (In Rs.) 84.50 97.50 92.59 - 136.47 184.82 114.20 - 315.40 720 59,585 173,785 507,680 5,108,366 Weighted average remaining contractual life of the options (Years) 0.50 0.50 4.93 5.07 5.86 Weighted average exercise price (In Rs.) 84.50 97.50 122.29 184.82 219.55 Year ended 31March2009 3,166,500 2,001,866 60,000 5,108,366 Year ended 31March2008 3,166,500 3,166,500
Scheme ESOS 2002 Tranche I ESOS 2002 Tranche II ESOS 2005 Tranche I ESOS 2005 (Loyalty options) ESOS 2007 Tranche I
The details of exercise price for stock options outstanding as at 31 March 2008 are: Range of exercise Number of options price outstanding (In Rs.) 84.50 97.50 92.59 - 136.47 184.82 214.20 - 275.15 38,970 111,510 208,991 521,460 3,166,500 Weighted average remaining contractual life of the options (Years) 0.50 1.10 5.88 6.07 6.48 Weighted average exercise price (In Rs.) 84.50 97.50 122.34 184.82 263.00
Scheme ESOS 2002 Tranche I ESOS 2002 Tranche I I ESOS 2005 Tranche I ESOS 2005 (Loyalty options) ESOS 2007 Tranche I
Total employee compensation cost recognised in Profit and Loss Account for the year ended 31 March 2009 is Rs. 21,184 thousands. (Previous Year Rs. 17,762 thousands). All options under each scheme when exercised, are settled through issue of equity shares. The Bank follows the intrinsic method for valuing the stock options. The difference between Employee Compensation Cost computed based on such intrinsic value and Employee Compensation Cost that shall have been recognised if fair value of options had been used is explained below:
49
Notes on accounts
a) Employee Compensation Cost Particulars Intrinsic value Fair value* Excess to be charged b) Impact on Profit Particulars Declared Profit Less: Adjustment for additional charge due to Black Scholes Adjusted Profit c) Impact on Earnings Per Share Particulars Declared in the financial Statements Basic (Rs.) Diluted (Rs.) Revised EPS Basic (Rs.) Diluted (Rs.) Year ended 31 March 2009 18.41 18.33 17.68 17.61 Year ended 31 March 2008 16.47 16.26 16.08 15.88 (Rs. in thousands) Year ended 31 March 2009 1,887,797 74,569 1,813,228 Year ended 31 March 2008 1,569,302 36,935 1,532,367 Year ended 31 March 2009 21,184 95,753 74,569 (Rs. in thousands) Year ended 31 March 2008 17,762 54,697 36,935
d) Significant assumptions: Weighted average information to estimate the fair value of options Particulars Risk free interest rate Expected life (excluding grant period of one year) Expected volatility Expected dividend The price of the underlying share in market at the time of option grant (as per NSE) Share price adjusted after rights issue * ESOS 2002 Tranche I 5.89% 5 yrs 2.80% 40% 255.30 97.50 Tranche II 4.78% 5 yrs 2.40% 40% 451.30 146.58 6.68% 4 yrs 2.00% 162.60 162.60 ESOS 2005 Tranche I Loyalty option 7.64% 2 yrs 2.89% 15% 262.60 262.60 ESOS 2007 Tranche I 5.59%-9.24% 3 yrs 2.89%-3.20% 15% 114.20-315.40 114.20-315.40
The Black-Scholes Model is used to calculate a theoretical call price (ignoring dividends paid during the life of the option) using the five key determinants of an options price: stock price, strike price, volatility, time to expiration, and short-term (risk free) interest rate.
The call option values under Black- Scholes Model for option valuation under different schemes are: Years Year 1 Year 2 Year 3 Year 4 Year 5 ESOS 2002 Tranche I 17.91 22.47 26.76 30.81 34.63 Tranche II 53.63 57.96 62.10 66.04 69.80 ESOS 2005 Tranche I 46.61 54.11 61.12 67.68 Loyalty option 91.37 103.97 ESOS 2007 Tranche I 6.27-23.81 12.08-45.77 17.63-66.10
50
Notes on accounts
As required under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, a certificate issued by auditors of the Bank indicating that the Schemes have been implemented in accordance with these guidelines and in accordance with the resolution of the Bank in General Meeting will be placed at the Annual General Meeting of the shareholders.
18.3
Accounting Standard (AS) 15 Revised on Employee benefits Gratuity, Pension and Leave Benefit plans The Bank has defined benefit plans in respect of Gratuity, Pension and Leave Encashment. The Gratuity and Pension schemes are funded out of Trust fund set up for this purpose separately. The following tables summarize the components of net benefit expense recognized in the profit and loss account and the funded status and amount recognized in the balance sheet for the respective plans. Profit and Loss account: - Net employee benefit expense (recognized in payment to and provision to employees) The contribution to the employees Provident Fund amounted to Rs.85,911 thousands for the year ended 31 March 2009 (Previous Year Rs. 64,261 thousands) (Rs. in thousands) Particulars 1. Current service cost 2. Interest cost on benefit obligation 3. Expected return on plan assets 4. Net actuarial (gain)/ loss recognized in the year 5. Past service cost 6. Net expenses (1+2+3+4+5) 7. Transitional liability 8. Net expenses recognized in profit & loss account ( 6-7) Actual return on plan assets 31 March 2009 51,280 45,094 (52,716) (39,992) 3,666 3,666 59,737 Gratuity 31 March 2008 45,340 44,268 (51,028) (87,205) (48,625) (48,625) 26,195 31 March 2009 130,405 124,717 (103,073) 133,947 285,996 285,996 96,068 Pension 31 March 2008 102,310 90,319 (73,072) 70,585 619,761 809,903 622,640 187,263 85,000 (Rs. in thousands) Particulars 1. Current service cost 2. Interest cost on benefit obligation 3. Net actuarial (gain)/ loss recognized in the year 4. Past service cost 5. Net expenses (1+2+3+4) 6. Transitional Liability 7. Net expenses recognized in Profit & Loss account ( 5-6) Leave encashment 31 March 2009 9,615 25,477 (2,430) 32,662 32,662 31 March 2008 10,884 12,496 185,923 3 209,306 110,698 98,608 Leave availment 31 March 2009 20,123 11,619 (10,280) 21,462 21,462 31 March 2008 19,056 10,488 (5,724) 131,106 154,926 131,106 23,820
Balance Sheet - Details of Provision for Gratuity, Pension and Leave (Rs. in thousands) Particulars Present value of obligation Fair value of plan assets Liability (Assets) Liability (Asset) recognized in the balance sheet 31 March 2009 607,592 (652,552) (44,960) (44,960) Gratuity 31 March 2008 584,575 (633,200) (48,625) (48,625) 31 March 2009 1,886,910 (1,220,561) 666,349 666,349 Pension 31 March 2008 1,726,164 (949,400) 776,764 776,764
51
Notes on accounts
Particulars Present value of obligation Fair value of plan assets Liability (Assets) Liability (Asset) recognized in the Balance Sheet Leave encashment 31 March 2009 343,450 343,450 343,450 31 March 2008 349,241 349,241 349,241 31 March 2009 176,388 176,388 176,388 (Rs. in thousands) Leave availment 31 March 2008 154,926 154,926 154,926
Changes in the present value of the defined benefit obligation are as follows: (Rs. in thousands) Particulars Opening defined benefit obligation Interest cost Current service cost Benefits paid Actuarial (gains) / losses on obligation Gratuity 31 March 2009 584,575 45,094 51,280 (40,386) (32,971) 31 March 2008 642,500 44,268 45,340 (35,495) (112,038) 584,575 Pension 31 March 2009 1,726,164 124,717 130,405 (221,318) 126,942 1,886,910 31 March 2008 1,559,622 90,319 102,310 (108,600) 82,513 1,726,164 (Rs. in thousands) Particulars Opening defined benefit obligation Interest cost Current service cost Benefits paid Actuarial (gains) / losses on obligation Closing defined benefit obligation Leave encashment 31 March 2009 31 March 2008 349,241 25,477 9,615 (38,453) (2,430) 343,450 169,105 12,496 10,884 (29,167) 185,923 349,241 Leave availment 31 March 2009 31 March 2008 154,926 11,619 20,123 (10,280) 176,388 131,106 10,488 19,056 (5,724) 154,926
Closing defined benefit obligation 607,592
The Changes in the fair value of plan assets are as follows: Particulars Opening fair value of plan assets Expected return Contributions by employer Benefits paid Actuarial gains / (losses) Closing fair value of plan assets 31 March 2009 633,200 52,716 (40,385) 7,021 652,552 Gratuity 31 March 2008 642,500 51,028 (35,495) (24,833) 633,200 31 March 2009 949,400 103,073 396,411 (221,318) (7,005) 1,220,561
(Rs. in thousands) Pension 31 March 2008 877,400 73,072 95,600 (108,600) 11,928 949,400
Previous four annual years figures are not disclosed as revised AS 15 was applicable from 2007-08 The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: Particulars Investments with insurer Investment in Government/ PSU bonds/securities Gratuity 31 March 2009 31 March 2008 100% 100% Pension 31 March 2009 31 March 2008 100% 100% -
52
Notes on accounts
Principal assumptions used in determining gratuity, pension and leave encashment obligations for the Banks plans are shown below: Particulars Discount rate (%) p.a. Expected rate of return on assets (%) Employee turnover % p.a. Gratuity 31 March 2009 7.99 8.02 1 (IBA), 28 (Others) 31 March 2008 8.00 8.00 2 (IBA), 28 (Others) Pension 31 March 2009 7.72 9.50 1 (IBA) 31 March 2008 8.00 8.00 2(IBA)
Particulars Discount rate (%) p.a. Expected rate of return on assets (%) Employee turnover % p.a.
Leave encashment 31 March 2009 7.72 N.A. 1 (IBA), 28 (Others) 31 March 2008 8.00 N.A 2 (IBA), 28 (Others)
Leave availment 31 March 2009 7.99 N.A. 1 (IBA), 28 (Others) 31 March 2008 8.00 N.A 2 (IBA) 28 (Others)
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. With respect to defined benefit plans, the Bank is yet to determine the contributions expected to be paid to the plans during the annual period beginning 1 April 2009. Provisions and contingencies debited to the profit and loss account include: (Rs. inthousands) Particulars Provision for income tax (including deferred tax) Provision for wealth tax Provision for fringe benefit tax Provision/ write off of NPAs Provision/write off (write back) of leased assets Depreciation/ write off (write back) of investments (net) Provision towards standard asset Provision for restructured advances Others Total Year ended 31 March 2009 1,030,359 1,000 27,373 1,063,400 (46,472) 153,300 54,495 76,906 2,360,361 Year ended 31 March 2008 908,175 900 36,210 359,997 (19,772) (96,379) 157,600 158,647 1,505,378
18.4
18.5
Provisions for taxes during the year (Rs. in thousands) Particulars Provision for income tax (including deferred tax) Provision for fringe benefit tax Year ended 31March2009 1,030,359 27,373 Year ended 31March2008 908,175 36,210
Provision for Taxes for the year includes an addition of Rs. NIL (Previous Year Rs. 87,848 thousands) arising from the order of settlement commission relating to financial years 1993-94 to 1998-99 and a reduction in provision of Rs. NIL (Previous Year Rs. 52,465 thousands) arising out of a MAT credit for the financial year 2001-02 in respect of the financial year 1999-2000.
53
Notes on accounts
18.6 Investments 18.6.1 Issuer composition of non SLR investments The details relating to issuer composition of non- SLR investments as at 31 March 2009 are as follows: (Rs. in thousands) Issuer Public sector undertakings Financial Institutions Banks Private Corporates Subsidiaries/ Joint Ventures Others * Provision held towards depreciation Total * Amount 55,000 9,106,040 649,665 5,415 20,988 2,570,000 (38,957) 12,368,151 Extent of below Extent of private investment grade placement securities 55,000 9,106,040 649,665 5,415 20,988 1,200,000 11,037,108 25,000 25,000 Extent of unrated securities 9,081,040 5,415 20,988 9,107,443 Extent of unlisted securities 5,000 9,106,040 629,665 5,415 20,988 2,570,000 12,337,108
includes investments in Pass through certificates where the exposure is considered towards ultimate obligator/ borrower.
The details relating to issuer composition of non-SLR investments as at 31 March 2008 is as follows: (Rs. in thousands) Amount Issuer Public sector undertakings Financial Institutions Banks Private Corporates Subsidiaries/ Joint Ventures Others * Provision held towards depreciation Total 55,000 50,000 20,000 46,821 20,988 14,036,602 (122,760) 14,106,651 14,222,043 91,821 2,897,043 4,159,411 Extent of private Extent of below placement investment grade securities 55,000 50,000 20,000 46,821 20,988 14,029,234 50,000 41,821 Extent of unrated securities 46,821 20,988 2,829,234 Extent of unlisted securities 5,000 50,000 46,821 20,988 4,036,602
includes investments in Pass through certificates where the exposure is considered towards ultimate obligator/ borrower
18.6.2 Non-performing non SLR investments Particulars Opening balance Additions during the year Reduction during the year Closing balance Total provisions held Year ended 31 March 2009 41,406 41,406 (Rs. in thousands) Year ended 31 March 2008 68,926 27,520 41,406 41,406
54
Notes on accounts
18.6.3 Repo transactions The details relating to repo transactions during the year ended 31 March 2009 are as follows: (Rs. in thousands) Particulars Securities sold under repos # Securities purchased under reverse repos # * # Minimum outstanding during the year * 492,687 1,000,000 Maximum outstanding Daily average outstanding As at during the year during the year 31March2009 7,500,000 16,000,000 2,813,116 5,673,913 12,600,000
Minimum outstanding during the year excludes days with nil outstanding positions. At market price
The details relating to repo transactions during the year ended 31 March 2008 are as follows: (Rs. in thousands) Particulars Securities sold under repos # Securities purchased under reverse repos # Minimum outstanding during the year * 95,238 90,000 Maximum outstanding Daily average outstanding As at during the year during the year 31March2008 5,000,000 5,000,000 723,741 147,568 2,000,000 -
* #
Minimum outstanding during the year excludes days with nil outstanding positions. At market price.
18.6.4 Value of Investments (Rs. in thousands) Particulars Gross value of Investments a. In India b. Outside India Provisions for depreciation a. In India b. Outside India Net value of Investments a. In India b. Outside India As at 31 March 2009 105,014,173 58,784 104,955,389 As at 31 March 2008 63,079,858 146,662 62,933,196 -
18.6.5 Movement of provisions held towards depreciation on investments (Rs. in thousands) Particulars Opening balance Add: Provisions made during the year Less: Write-off/write-back of excess provisions during the year Closing balance Year ended 31 March 2009 146,662 87,878 58,784 Year ended 31 March 2008 270,541 2,231 126,110 146,662
55
Notes on accounts
18.7 Advances 18.7.1 Information with respect to loan assets subjected to restructuring during the year: (a) Particulars of assets restructured: (Rs. in thousands) Particulars Standard advances restructured No. of Borrowers Amount outstanding+ Sacrifice* # Sub standard No. of Borrowers advances Amount outstanding+ restructured Sacrifice* # No. of Borrowers Doubtful advances Amount outstanding+ restructured Sacrifice* # No. of Borrowers TOTAL Amount outstanding+ Sacrifice* # CDR Mechanism SME Debt restructuring 31 March 31 March 31 March 31 March 2009 2008 2009 2008 1 203,590 32,045 1 203,590 32,045 Others 31 March 31 March 2009 2008 42 19 1,399,414 921,194 22,451 42 19 1,399,414 921,194 22,451 -
* Sacrifice is diminution in the fair value + Amounts outstanding represent facilities restructured. # Sacrifice for restructuring prior to 27 August, 2008 have been calculated as per the RBI norms prevalent at that time
(b) Additional disclosures with respect to restructured accounts as per the RBI circular dated 17 April 2009 (Rs. in thousands) S.No Disclosures 1. Application received up to March 31, 2009 for restructuring, in respect of accounts which were standard as on September 1, 2008. 2. Of (1), proposals approved and implemented as on March 31, 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet. 3. Of (1), proposals approved and implemented as on March 31, 2009 but could not be upgraded to the standard category. 4. Of (1), proposals under process/implementation which were standard as on March 31, 2009. 5. Of (1), proposals under process/implementation which turned NPA as on March 31, 2009 but are expected to be classified as standard assets on full implementation of the package. Number 30 29 Amount 1,795,779 1,496,894
298,885
Only accounts on which special regulatory treatment considered.
(c) Small and Medium Enterprises (SME) included in (a) above: Particulars Total amount of loan assets subjected to restructuring Year ended 31 March 2009 208,352 208,352 -
(Rs. in thousands) Year ended 31 March 2008 26,880 26,880 -
Out of above:
Amount of standard assets subjected to restructuring Amount of sub-standard / doubtful assets subjected to restructuring
56
Notes on accounts
18.7.2 Movement in NPAs Particulars Opening balance as on 1 April 2007 Additions during the year ended 31 March 2008 Reductions (including write offs) during the year ended 31March 2008 Closing balance as on 31 March 2008 NPAs to advances (%) Additions during the year ended 31 March 2009 Reductions (including write offs) during the year ended 31March 2009 Closing balance as on 31 March 2009 NPAs to advances (%) Gross* 1,263,800 1,973,000 2,074,400 1,162,400 3,318,100 2,386,600 2,093,900
(Rs. in thousands) Net* 1,140,200 1,973,000 2,080,900 1,032,300 0.70 3,318,100 2,290,900 2,059,500 1.23
* After considering technical write off

18.7.3 Movement in provisions for NPA Particulars Opening balance Additions during the year Technical write-offs / (write backs) during the year Closing balance 18.7.4 Floating provision Year ended 31 March 2009 1,063,400 1,063,400 -
The Bank has not created any floating provision during the year ended 31 March 2009 (Previous year: Nil). 18.7.5 Provisions on standard assets (Rs. in thousands) Particulars Provision towards standard assets during the year Cumulative provision for standard assets as at year end Year ended 31 March 2009 153,300 1,008,100 Year ended 31 March 2008 157,600 854,800
Provisions towards standard assets are included in Other liabilities in Schedule 5 to the balance sheet.
18.7.6 Purchase/ sale of non performing assets Details of non performing financial assets sold: Particulars No. of accounts sold* Aggregate outstanding, net of provisions/ write offs (Rs. in thousands) Aggregate consideration received (Rs. in thousands) * Year ended 31 March 2009 Year ended 31 March 2008 1 1,939 3,000
Provision held against the NPA sold of Rs.50,500 thousands and Rs.726 thousands during the year 2006-07 & 2007-08 respectively has not been reversed to profit and loss account in view of RBI Circular No DBOD.No.BP. BC.16/21.04.048/2005 dated 13 July 2005 and is retained as provision for NPA to be utilised to meet the shortfall / loss on account of sale of other non performing financial assets.
No non performing financial assets were purchased during the year (Previous year: Nil).
57
Notes on accounts
18.7.7 Securitisation of financial assets (Rs. in thousands) Particulars Total number of accounts Total number of transactions Book value (net of provisions) of accounts sold (Rs. in thousands) Aggregate consideration received (Rs. in thousands) Additional consideration realized in respect of accounts transferred in earlier years Aggregate gain/ (loss) over net book value (Rs. in thousands) Contribution Agreement The Bank invests in SPVs through contribution agreements and such amounts invested are recorded as loans and advances. The interest is recognized based on net yields on these transactions. Year ended 31 March 2009 Year ended 31 March 2008 3 2 1,400,000 1,403,040 3,040
18.7.8 (a) Exposure to capital market (Rs. in thousands) Particulars (i) direct investment in equity shares, convertible bonds, convertible debentures and units of equity oriented mutual funds the corpus of which is not exclusively invested in corporate debt; 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 equityoriented mutual funds; 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; 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; secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; 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; bridge loans to companies against expected equity flows / issues; As at 31 March 2009 5,415 As at 31 March 2008 5,415
(ii)
3,730,772
3,559,235
(iii)
(iv)
17,467
500,000
(v) (vi)
567,750
920,914
4,321,404
4,985,564
(vii)
(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) Total Exposure to Capital Market
Point (ii) above includes loans to investment companies amounting to Rs. 3,700,000 thousands (previous year Rs. 3,500,000 thousands) secured by bank deposits.
58
Notes on accounts
(b) Exposure to real estate sector (Rs.in thousands) Particulars As at 31March2009 As at 31March2008
(a) Direct exposure

(i) Residential mortgages Individual housing loans up to Rs. 20 lakhs (Previous year Rs.15 lakhs) Others Fund based Non- fund based 8,224,100 22,024,641 5,609,890 253,900 4,319,700 15,441,770 5,104,134 292,538
(ii) Commercial real estate
(iii) Investment in mortgage backed securities and other securitised exposures a. Residential b. Commercial real estate 1,583,100 1,734,500 -
(b) Indirect exposure

Fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) Non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) 4,944,000 42,639,631 4,339,900 31,232,542
Total 18.7.9 Prudential exposure limits quantitative disclosures
Details of credit exposures where the Bank has exceeded the prudential exposure during the year ended 31 March 2009: (Rs.in thousands) Name of the borrower Exposure Limits ceiling sanctioned 2,892,090 3,160,000 Maximum amount outstanding during the year 3,122,630 Outstanding balance as at 31March 2009 3,122,630 Outstanding as a % of capital funds 31 March 2009 16.39%
Reliance Industries Ltd
The RBI has vide its letter no. RPCD.Co.Plan. / 1388/04.09.46 /2007-08 dated 25.04.2008 communicated that the single borrower exposure norms will not be applicable to exposure assumed by banks on NABARD. Hence, the same is not been disclosed. Details of credit exposures where the Bank has exceeded the prudential exposure during the year ended 31 March 2008: (Rs.in thousands) Name of the borrower Exposure Limits ceiling sanctioned 2,308,800 3,094,016 Maximum amount outstanding during the year 3,094,016 Outstanding balance as at 31March 2008 2,829,234 Outstanding as a % of capital funds 31 March 2008 20.10%
NABARD *
Names of borrowers mentioned above do not include exposure to one borrower, where the sanctioned limit has exceeded the prudential exposure, but the required consent from the borrower has not been received for the purpose of disclosure. However, no disbursements against incremental limits have been made to the borrowers.
18.7.10 Risk category wise country exposure As per the RBI guidelines, the country exposure of the Bank is categorized into various risk categories and depending on the risk category, the banks are required to make provision where net funded exposure to any country exceeds 1% of banks assets. As on 31 March 2009 net funded exposure to no country has exceeded 1% of total assets of the bank
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Notes on accounts
(Previous year USA, risk category of insignificant). The details of exposure and provision are as under: (Rs.in thousands) Risk Category Insignificant 18.8 Fixed assets 18.8.1 Capital work in progress The Capital work in progress (Premises) of Rs.1,279,533 thousands (Previous year Rs.1,111,632 thousands) includes Rs. 1,014,513 thousands (Previous year Rs.1,052,463 thousands) towards the lease premium paid to Mumbai Metropolitan Regional Development Authority (MMRDA) in connection with the lease of land. The Bank has entered into an agreement to lease with MMRDA, however lease agreement with MMRDA will be executed at a later date upon completion of the construction and obtaining other necessary approvals. Exposure (net) as at Provision held as at Exposure (net) as at Provision held as at 31 March 2009 31March 2009 31 March 2008 31 March 2008 3,651,460 2,282
18.8.2 Leases
Operating leases
The Bank has commitments under long-term non-cancellable operating leases primarily for premises. The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. Following is a summary of future minimum lease rental commitments for such non-cancellable operating leases: (Rs. in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total minimum lease rental commitments As at 31 March 2009 As at 31 March 2008 118,025 75,895 193,920 67,598 70,562 163 138,323
Additionally, the Bank also leases office/branch premises under cancelable operating lease agreements. Total lease rental expenditure under cancelable and non-cancelable operating leases debited to profit and loss account in the current year is Rs. 379,269 thousands (Previous year: Rs. 278,140 thousands)
Finance leases
The Bank has taken assets under finance leases/hire purchases. Future minimum lease payments under finance leases are as follows: (Rs.in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total Less: Finance charges Present value of finance lease obligation As at 31 March 2009 As at 31 March 2008 1,080 1,890 2,970 (516) 2,454 1,080 2,970 4,050 (912) 3,138
The present value of finance lease liabilities are as follows: (Rs.in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total As at 31 March 2009 As at 31 March 2008 1,003 1,451 2,454 684 2,454 3,138
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Notes on accounts
18.9 Deferred taxes In accordance with Accounting Standard 22 Accounting for taxes on income issued by the Institute of Chartered Accountants of India (ICAI) and notified by the Companies Accounting Standard Rules, 2006., provision for taxation for the year is arrived at after considering deferred tax credit of Rs. 327,663 thousands (Previous year: Rs. 349,153 thousands) for the current year. The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: (Rs. in thousands) Particulars As at 31 March 2009 550,846 176,693 835,176 211,635 1,774,350 As at 31 March 2008 424,768 179,750 651,442 211,635 1,467,595
Deferred tax assets

On account of provisions On leave encashment On investments On pension fund Total deferred tax asset
Deferred tax liabilities

On depreciation on fixed assets On bad debts claim Total deferred tax liability Net deferred tax assets/(liability) 18.10 Intangibles Gross block Particulars Intangible assets Application software Total Previous year As at 1 April 2008 502,387 502,387 433,935 Additions 92,753 92,753 72,252 Deletions As at 31 March 2009 595,140 595,140 502,387 Application software, which is classified as intangible asset is capitalized as part of fixed assets and depreciated on a straight line basis over its estimated useful life of three years. (Rs. in thousands) Depreciation / Amortization Net block As at Charge As at As at 1 April for Deletions 31 March 31 March 2008 the year 2009 2009 432,026 432,026 380,414 69,747 69,747 55,412 3,800 501,773 501,773 432,026 93,367 93,367 70,361 134,918 160,738 295,656 1,478,694 155,825 160,738 316,563 1,151,032
3,800
18.11 Capital (Tier I and Tier II) raised during the year 2008-09 During 2008-09, the Bank has raised Tier I and Tier II capital as mentioned below: (Rs.in thousands) Sl.No 1 2 3 Instrument Lower Tier II Bonds Tier I Bonds Upper Tier II Bonds Amount Date of allotment Tenor 10 years Perpetual 15 years 10.40% 3 Month Libor+ 400 basis points 3 Month Libor+ 230 basis points with step up option of 100 basis point after 10 years 9.65% Interest Rate Mode of Issue Private Placement Private Placement Private Placement 1,500,000 15 July 2008 947,100 23 October 2008 1,998,200 23 January 2009
Lower Tier II Bonds
600,000 31 January 2009
10 years
Private Placement
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Notes on accounts
18.12 Details of provision (Rs.in thousands) Particulars Opening balance Additions during the year Reversals during the year Amounts used Closing balance Year ended 31 March 2009 248,143 81,123 10,981 333 317,952 Year ended 31 March 2008 218,656 45,812 14,485 1,840 248,143
The above provisions include provisions made on account of frauds, legal claims, operational losses and other items of similar nature. These provisions would be utilized/released upon settlement.
18.13 Off Balance Sheet Items 18.13.1 Derivative contracts Interest Rate Swaps: (Rs. in thousands) Particulars The notional principal of swap agreements Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements # Collateral required by the bank upon entering into swaps Concentration of credit risk arising from the swaps As at 31 March 2009 189,569,034 1,788,597 Predominantly with Banks ( 78%) (328,168) As at 31 March 2008 130,438,309 780,494 Predominantly with Banks (65%) (281,478)
The fair value of the swap book [asset / (liabilities)] # MTM netted off counterparty wise.
Forward Rate Agreements (FRA): (Rs. in thousands) As at 31 March 2009 8,779,666 15,126 Banks only (100%) 189.94 As at 31 March 2008 2,006,000 124,202 Banks only (100%) 1.01
Particulars i. ii. iii. iv v. # The notional principal of FRA Agreements Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements # Collateral required by the bank upon entering into swaps Concentration of credit risk arising from the swaps The fair value of the swap book [asset / (liabilities)] MTM netted off counterparty wise.
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Notes on accounts
Derivatives: Currency Swaps Particulars The notional principal of swap agreements Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements # Collateral required by the bank upon entering into swaps Concentration of credit risk arising from the swaps The fair value of the swap book [asset / (liabilities)] # MTM netted off counter party wise. As at 31 March 2009 43,037,434 2,209,882 Predominantly with Banks (51%) 873,625
(Rs. in thousands) As at 31 March 2008 13,776,193 699,525 Predominantly with Banks (56%) 290,690
The Bank enters into derivative contracts such as Interest Rate Swaps (IRS), Forward Rate Agreements (FRA), Currency Swaps (CS) and option agreements. Notional amounts of principal outstanding in respect of IRS, FRA and CS as at 31st March 2009 is Rs 241,386,135 thousands (Previous year Rs. 146,220,502 thousands). Indian Rupee Interest Rate Swaps for the year ended 31 March 2009 Nature Trading Trading Trading Trading Number 124 132 42 46 Total Notional Principal (Rs. thousands) 42,000,000 42,300,000 12,600,000 16,000,000 112,900,000 Benchmark NSE MIBOR NSE MIBOR MIFOR MIFOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable
Indian Rupee Interest Rate Swaps for the year ended 31 March 2008 Nature Trading Trading Trading Trading Number 120 142 46 46 Total Notional Principal (Rs. thousands) 36,000,000 47,000,000 12,750,000 11,400,000 107,150,000 Benchmark NSE MIBOR NSE MIBOR MIFOR MIFOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable
Foreign currency - Interest Rate Swaps, Currency Swaps and Forward Rate Agreements for the year ended 31 March 2009 Nature Trading Trading Trading Trading Trading Trading Trading Hedging Hedging Number 68 77 22 7 3 4 28 2 4 Total Notional Principal (Rs. thousands) 41,359,123 41,545,871 19,288,788 4,077,563 870,431 2,363,134 11,430,503 3,250,958 4,299,761 128,486,132 Benchmark LIBOR LIBOR LIBOR Principal Principal Principal Principal LIBOR LIBOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Float Receivable vs Float Payable Fixed Payable Fixed Receivable Fixed Received vs Fixed Paid Principal only Swaps Float Receivable vs Float Payable Fixed Payable vs Floating Receivable
63
Notes on accounts
Foreign currency - Interest Rate Swaps , Currency Swaps and Forward Rate Agreements for the year ended 31 March 2008 Nature Trading Trading Trading Trading Trading Trading Trading Trading Trading Hedging Hedging Number 14 16 21 1 1 8 3 2 2 1 1 Total Notional Principal (Rs. thousands) 6,000,367 9,181,606 16,598,982 634,375 564,890 1,865,957 360,465 1,516,977 369,649 1,069,445 907,788 39,070,501 Benchmark LIBOR LIBOR LIBOR LIBOR LIBOR Principal Principal Principal Principal LIBOR LIBOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Floating Receivable vs Floating Payable Floating Payable Floating Receivable Fixed Payable Fixed Receivable Fixed Receivable vs. Fixed Payable Principal only Swaps Floating Receivable vs. Floating Payable Fixed Payable vs Floating Receivable
The fair value of Rupee and FX IRS, CS and FRA contracts as at 31 March 2009 is Rs. 545,647 thousands (Previous year Rs. 9,213 thousands), which represents the net mark to market gain on swap contracts. As at 31 March 2009 the exposure to IRS, CS and FRA contracts is spread across industries. However based on notional principal amount the maximum single industry exposure lies with Banks at 62.85% (Previous year: 78.17%). In case of an upward movement of one basis point in the benchmark interest rates, there will be a positive impact of Rs.1,568 thousands (Previous year: Rs. 289 thousands) on total Interest Rate Swap trading book including Rupee IRS, FX IRS, CS and FRA. Agreements are with Banks/ Financial Institutions and corporate under approved credit lines. The Options are covered on exactly back-to-back basis and hence have a nil fair value on a net basis. As at 31March 2009 notional outstanding for outstanding option contracts is Rs 97,469,778 thousands (Previous year: Rs 106,535,957 thousands)
18.13.2 Exchange Traded Interest Rate Derivatives, Forward Rate Agreements & Currency Swaps No Exchange Traded Interest Rate Derivatives, Forward Rate Agreements and Currency Swaps were entered during the year ended 31 March 2009 (Previous year: NIL)
18.13.3 Risk exposure on derivatives The Bank currently deals in various derivative products, i.e., Rupee and Foreign Currency Interest Rate Swaps, Currency Swaps, Forward Rate Agreement, Currency and Cross Currency options. These products are offered to the Banks customers to enable them to manage their exposure towards movement in foreign exchange rates or in Indian / foreign currency interest rates. The Bank also enters into these derivative contracts (i) to cover its own exposures resulting either from the customer transactions or own foreign currency assets and liabilities or (ii) as trading positions. The derivative contracts, as above, expose the Bank to risks such as credit risk and market risk. Credit risk implies probable financial loss the Bank may ultimately incur, if the counter parties fail to meet their obligations. Market risk deals with the probable loss the Bank may ultimately incur as a result of movements in exchange rates, benchmark interest rates, credit spreads etc., to the extent that the exposures are not fully covered by the Bank on a back-to-back basis or as hedge positions. The Bank has established an organization structure to manage these risks that operates independent of investment and trading activities. Management of these risks is governed by respective policies approved by the Board of Directors. While expanding relationship-banking activities, the Bank has put in place a credit policy by defining the internal risk controls. The policy incorporates the guidelines issued by the RBI from time to time and envisages methodologies of
64
Notes on accounts
identification, quantification of risk on the basis of Loan Equivalent Factor, risk rating and mitigation of the credit concentration risk by stipulating counterparty wise as well as product wise exposure ceiling. ISDA agreements are entered into with counterparties. The Bank has evolved a similar policy for managing market risks through specific product mandates, limits on book sizes, stop loss limits, Value at Risk limits (VaR), Event Risk Analysis, counter party limits etc. The Bank has also set up an Asset-Liability Management Committee (ALCO) and a RiskManagementReview Committee (RMRC), which monitor the risk on an integrated basis. The market risk and credit risk management teams monitor compliance with the policies on a continuous basis and there is a clearly defined procedure of reporting and ratification of any limit breaches for derivative products. Quantitative disclosure: (Rs. in thousands) Sl. No (i) a) For hedging b) For trading (ii) Marked to Market Positions a) Asset (+) b) Liability (-) (iii) (iv) Credit Exposure Likely impact of one percentage change in interest rate (100*PV01) # a) on hedging derivatives b) on trading derivatives (v) Maximum and Minimum of 100*PV01 # a) on hedging - Maximum - Minimum b) on trading - Maximum - Minimum # * 90,129 28 69,197 150 247,520 20,458 37,423 30,102 2,439,926 1,566,300 7,031,208 777,535 486,845 1,411,597 3,572,301 3,900,280 5,356,859 1,311,787 1,593,265 1,742,909 Particular Derivatives (Notional Principal Amount) * 7,550,719 35,486,715 1,977,233 11,798,960 198,340,701 132,444,309 Currency derivatives As at As at 31 March 2009 31 March 2008 Interest rate derivatives As at As at 31 March 2009 31 March 2008
236,495 (79,727)
30,126 (1,224)
Amounts stated are inclusive of impact of Currency swaps and Interest Rate Swaps and are stated at absolute values. Does not include notional of Forward contracts and Currency options, trading or hedging.
18.14 Related Party Transactions List of related parties Related parties where control exists ING Vysya Financial Services Limited wholly owned subsidiary of the Bank. Related parties with significant influence and with whom there are transactions during the year ING Bank N.V. and its branches ING Vysya Bank Staff Provident Fund ING Vysya Bank Staff Gratuity Fund ING Vysya Bank Superannuation Fund ING Vysya Bank (Employees) Pension Fund Key Management Personnel Vaughn Richtor The above list does not include the related parties, which are having transactions with the Bank by way of deposit accounts.
65
Notes on accounts
(Rs. in thousands) Total
Items / Related Party
Related parties where control exists
Investment in Tier I Bonds
(-) (-)
Investment in Tier II Bonds
(-) (-)
Investment in Upper Tier II Bonds
(-) (-) Maximum 55,301 (20,485) Outstanding 38,735 (20,485) Maximum20,988 (20,988) Outstanding 20,988 (20,988) (-) (-)
Deposits kept with Bank including lease deposit
Investment
Borrowing
Call borrowing (-) (-) Lending (-) (-) (-) (-) (2,530)
Interest paid Interest received Interest accrued but not due (payable)
Related parties with significant Key Management Personnel influence and with whom there are transactions during the year Maximum 1,078,062 (-) (-) Outstanding 1,078,062 (-) ( -) Maximum 1,375,206 (-) (10,000) Outstanding 1,375,206 (-) (10,000) Maximum 1,885,752 (-) (1,069,445) Outstanding 1,885,752 (-) (1,069,445) Maximum 553,884 (-) (515,231) Outstanding 548,246 (-) (510,665) Maximum6,598,680 (-) (-) Outstanding 3,100,288 (-) (-) Maximum 16,534,720 (-) (7,263,235) Outstanding 15,773,920 (-) (6,193,790) Maximum (-) (748,454) Outstanding (-) (-) Maximum 659,360 (-) (-) Outstanding (-) (-) 958,301 (355,527) (-) 384,637 (262,929) (-) 74,909 (100,584) (-)
Maximum 1,078,062 ( -) Outstanding 1,078,062 (-) Maximum 1,375,206 (10,000) Outstanding 1,375,206 (10,000) Maximum 1,885,752 (1,069,445) Outstanding 1,885,752 (1,069,445) Maximum 609,185 (535,716) Outstanding 586,981 (531,150) Maximum6,619,668 (20,988) Outstanding 3,121,276 (20,988) Maximum 16,534,720 (7,263,235) Outstanding 15,773,920 (6,193,790) Maximum (748,454) Outstanding (-) Maximum 659,360 (-) Outstanding (-) 958,301 (355,527) 384,637 (262,929) 74,909 (103,114)
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Notes on accounts
(Rs. in thousands) Total
Items / Related Party
Related parties where control exists (9,951) (-) 62 (3,065) 7,903 (16,538) (-) 6,824 (7,052) 388,403 (311,018) (43,183) (-) (-) (-) (-) (-) (-) (-) (-)
Dividend received Purchase and sale of securities Rendering of services Receivable from rendering of services Reimbursement received Reimbursement paid Receiving of services Receiving of services outstanding Contribution to employee welfare funds - Paid Contribution to employee welfare funds- Payable Managerial remuneration Letter of Credit issued Bank guarantees Received Bank guaranteesIssued Derivative transactions - notional outstanding
Related parties with significant Key Management Personnel influence and with whom there are transactions during the year (-) (-) 18,374,176 (13,296,776) (-) (1,693) (-) (-) (-) 295,807 (-) (-) (-) (-) (-) (-) (-) (-) 494,656 (170,004) (-) (776,757) (-) 1,040,000 (-) 2,610,250 (1,095,000) 2,277,060 (16,687) Maximum 63,609,230 (29,997,500) Outstanding 63,609,230 (29,698,499) Maximum 62,828,064 (36,531,285) Outstanding 37,433,704 (23,658,213) 45,268 (24,859) 98,078 (75,683) (168,977) 92,330 (16,494) (-) 9,850 (9,740) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-)
(9,951) 18,374,176 (13,296,776) 62 (4,758) 7,903 (16,538) 295,807 (-) 6,824 (7,052) 388,403 (311,018) (43,183) 494,656 (170,004) (776,757) 9,850 (9,740) 1,040,000 (-) 2,610,250 (1,095,000) 2,277,060 (16,687) Maximum 63,609,230 (29,997,500) Outstanding 63,609,230 (29,698,499) Maximum 62,828,064 (36,531,285) Outstanding 37,433,704 (23,658,213) 45,268 (24,859) 98,078 (75,683) (168,977) 92,330 (16,494)
Forward transactions (-) (-) (-) (-) (-) (-)
Premium received Premium paid Premium Receivable Gain on Liquidation
(Previous years figures are given in parentheses)
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Notes on accounts
18.15 Key Ratios 18.15.1 Capital Adequacy Ratio Basel-I Particulars Tier 1 capital (Rs. in thousands) Tier 2 capital (Rs. in thousands) Total capital Capital ratios Tier 1 capital (%) Tier 2 capital (%) Total capital (%) Percentage of shareholding of the Government of India Amount of subordinated debt outstanding as Tier II capital (Rs. in thousands) 6.91% 4.77% 11.68% 8,821,400 6.82% 3.38% 10.20% 4,969,445 6.89% 4.76% 11.65% 8,821,400 As at 31 March 2009 15,163,150 10,460,930 25,624,080 As at 31 March 2008 12,885,400 6,395,200 19,280,600 Basel -II As at 31 March 2009 15,163,150 10,460,930 25,624,080
Computation of Capital Adequacy Ratio under the New Capital Adequacy Framework (Basel II) as mandated by RBI is effective for the bank from 31 March 2009. Hence previous year figures are not given.
18.15.2 Business ratios and other information is set out below: Particulars Interest Income as a percentage to working funds $ Non-interest income as a percentage to working funds Operating profit as a percentage to working funds $ Return on assets @ Business (Deposits plus advances) per employee # (Rs. in thousands) Profit per employee # (Rs. in thousands) Year ended 31 March 2009 8.26% 2.02% 1.57% 0.70% 60,639 303 Year ended 31 March 2008 7.91% 1.97% 1.45% 0.74% 54,728 268
$ @ #
Working funds are reckoned as an average of total assets as reported to RBI. Return on assets is with reference to average working funds. Productivity ratios are based on year-end employee numbers.
18.15.3 Earnings Per Share (EPS) The details of EPS computation is set out below: Particulars Earnings for the year (Rs. in thousands) Basic weighted average number of shares (Nos) Basic EPS (Rs.) Dilutive effect of stock options (Nos) Diluted weighted average number of shares (Nos) Diluted EPS (Rs.) Nominal value of shares (Rs.) As at 31 March 2009 1,887,797 102,550,549 18.41 422,835 102,973,384 18.33 10.00 As at 31 March 2008 1,569,302 95,280,597 16.47 1,246,822 96,527,419 16.26 10.00
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Notes on accounts
18.16 Segment Reporting: Segment Information Basis of preparation As per the guidelines issued by RBI vide DBOD.No.BP.BC.81/21.01.018/2006-07 dated April 18, 2007, the classification of exposures to the respective segments is now being followed. The business segments have been identified and reported based on the organization structure, the nature of products and services, the internal business reporting system and the guidelines prescribed by RBI. The Bank operates in the following segments: (a) Treasury The treasury segment includes the net interest earnings on investments of the bank in sovereign bonds, corporate debt, mutual funds etc, income from trading, income from derivative and foreign exchange operations and the central funding unit. Retail Banking The retail banking segment constitutes the business with individuals and small businesses through the branch network and other delivery channels like ATM, Internet banking etc. This segment raises deposits from customers, makes loans and provides fee based services to such customers. Exposures are classified under retail banking broadly taking into account the orientation criterion, the nature of product and exposures which are not exceeding Rs. 5 crores. Revenue of the retail banking segment includes interest earned on retail loans, fees and commissions for banking and advisory services, ATM Fees etc. Expenses of this segment primarily comprise the interest expense on the retail deposits, personnel costs, premises and infrastructure expenses of the branch network and other delivery channels, other direct overheads and allocated expenses. Wholesale Banking The wholesale banking segment provides loans and transaction services to large corporate, emerging corporate, institutional customers and those not classified under Retail. Revenue of the wholesale banking segment includes interest and fees earned on loans to customers falling under this segment, fees from trade finance activities and cash management services, advisory fees and income from foreign exchange and derivatives transactions. The principal expenses of the segment consist of personnel costs, other direct overheads and allocated expenses. Other Banking Operations All Banking operations that are not covered under the above three segments. Unallocated All items of which cannot be allocated to any of the above are classified under this segment. This also includes capital and reserves, debt classifying as tier I or tier II capital and other unallocable assets and liabilities. Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments. Segment result includes revenue reduced by interest expense, operating expenses and provisions, if any, for that segment. Inter-segment revenue represents the transfer price paid/received by the central funding unit. For this purpose the present internal funds transfer pricing mechanism has been followed which calculates the charge based on yields benchmarked to an internally developed yield curve, which broadly tracks certain agreed market benchmark rates. Segment-wise income and expenses include certain allocations. The Retail banking and Wholesale banking segments allocate costs among them for the use of branch network etc. Operating costs of the common/shared segments are allocated based on agreed methodology which estimate the services rendered by them to the above four segments.
(b)
(c)
(d)
(e)
Geographic Segments The Bank operates in one geographical segment i.e. Domestic.
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Notes on accounts
Segment Results for the year ended 31 March 2009 Business Segments Particulars Revenue Less: Inter segment revenue Net Revenue Result Unallocated expenses Operating Profit Provisions and contingencies Unallocated provision & contingencies Taxes Net Profit Other Information Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Capital and Reserve & Surpluses Total Liabilities Treasury Year ended 31 March 2009 20,704,210 (15,112,928) 5,591,282 789,608 Corporate/ Wholesale Banking Year ended 31 March 2009 17,045,590 (5,187,358) 11,858,232 2,203,866 Retail Banking Year ended 31 March 2009 22,985,723 (12,559,682) 10,426,041 1,276,943 Other Banking Operations Year ended 31 March 2009 -
(Rs. in thousands) Total Year ended 31 March 2009 60,735,523 (32,859,968) 27,875,555 4,270,417 22,259 4,248,158 1,275,638 25,991 1,058,732 1,887,797 As at 31 March 2009 314,702,274 3,867,631 318,569,905 280,073,285 21,467,670 17,028,950 318,569,905
(9,590)
253,227
1,032,001
799,198 As at 31 March 2009 137,518,494 137,518,494 31,174,041
1,950,639 As at 31 March 2009 99,850,789 99,850,789 56,988,780
244,942 As at 31 March 2009 77,332,991 77,332,991 191,910,464
As at 31 March 2009
31,174,041
56,988,780
191,910,464
Segment Results for the year ended 31 March 2008 Business Segments Particulars Revenue Less: Inter segment revenue Net Revenue Result Unallocated expenses Operating Profit Provisions and contingencies Unallocated provision & contingencies Taxes Net Profit Other Information Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Capital and Reserve & Surpluses Total Liabilities Treasury Year ended 31 March 2008 15,203,997 (10,682,620) 4,521,377 78,257 Corporate/ Retail Banking Wholesale Banking Year ended Year ended 31 March 2008 31 March 2008 13,770,473 15,960,180 (4,736,999) (8,524,980) 9,033,474 7,435,200 1,296,893 1,600,479 Other Banking Operations Year ended 31 March 2008 Total Year ended 31 March 2008 44,934,650 (23,944,599) 20,990,051 2,975,629 (99,114) 3,074,743 458,841 101,315 174,636 As at 31 March 2008 97,255,104 97,255,104 17,273,779 1,557,993 As at 31 March 2008 89,634,152 89,634,152 55,596,408 784,160 As at 31 March 2008 63,784,968 63,784,968 150,238,763 As at 31 March 2008 945,285 1,569,302 As at 31 March 2008 250,674,224 4,724,813 255,399,037 223,108,950 16,933,510 15,356,577 255,399,037
(96,379)
(261,100)
816,320
17,273,779
55,596,408
150,238,763
Information is collected as per the MIS available for internal reporting purposes. The methodology adopted in compiling and reporting the segmental information on the above basis has been relied upon by the auditors.
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Notes on accounts
18.17 Other Disclosures 18.17.1 Customer complaints and awards passed by Banking Ombudsman 1. Customer complaints: Particulars (a) (b) (c) (d) 2. No. of complaints pending at the beginning of the year No. of complaints received during the year No. of complaints redressed during the year No. of complaints pending at the end of the year Year ended 31 March 2009 83 26,747 26,741 89 Year ended 31 March 2008 306 18,522 18,745 83
The above details are as certified by the management. Awards passed by Banking Ombudsman: Particulars (a) (b) (c) (d) No. of unimplemented Awards at the beginning of the year No. of Awards passed by Banking Ombudsman during the year No. of Awards implemented during the year No. of unimplemented Awards at the end of the year Year ended 31 March 2009 1 1 Year ended 31 March 2008 -
The above details are as certified by the management.
18.17.2 Penalties levied by RBI on the Bank During the year there were no penalties levied by RBI on the Bank (previous year Nil.)
18.17.3 Penalty imposed by Securities and Exchange Board of India (SEBI) During November 2006, SEBI passed disgorgement order on the Bank for failure / negligence in adherence to the Know Your Customer (KYC) norms by SEBI. As per the order Bank faced a liability of Rs.5548 thousands. The Bank preferred an appeal before Securities Appellate Tribunal. The Appeal before the Securities Appellate Tribunal (SAT), Mumbai came up for decision on 11 January 2007. The SAT observed that the disgorgement order was passed though the guilt of the Bank was not established and that none of the parties were given a hearing nor was it established that the Bank had indeed benefited from the ill gotten gains. Hence, on these grounds the court set aside the disgorgement order. Pursuant to the above, an enquiry proceeding was initiated under SEBI (PHEEOIP), Regulations, 2002. A show cause notice was issued on the Bank, which was replied to and hearings were held. Subsequently, SEBI has accepted our consent proposal and settled the matter by passing a consent order dated 17 February 2009. An amount of Rs 4 lakh was paid as settlement charges as per the consent order.
18.17.4 Maturity profile of assets and liabilities: Maturity profile of assets and liabilities as at 31 March 2009 is set out below: (Rs.in thousands) 1 to 14 days Deposits Advances 15 to 28 days Over 3 Over 6 Over 1 year 29 days to months months and up to 3 3 months and up to 6 and up to years months 1 year 38,456,972 34,645,294 56,522,748 22,272,859 19,356,579 19,723,445 19,851,540 30,455,918 9,754,116 11,770,196 15,254,911 5,989,373 Over 3 years and up to 5 years 18,553,634 18,561,639 5,539,339 Over 5 years Total
42,879,773 20,788,303 21,862,112 16,966,719 5,120,142
14,779,661 248,899,244 20,731,352 167,509,304 11,085,251 104,955,389
Investments 40,442,061
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Notes on accounts
Borrowings Foreign Currency assets Foreign Currency liabilities
2,316 4,116,280
1,232,668
1,268,000 14,528,053 5,366,347 3,055,830
5,715,875 4,244
9,917 593
14 121,728
102,689
21,524,175 14,000,379
10,581,358
38,951
1,493,164 14,722,995
8,089,791
361,161
3,417,922
1,244,125
39,949,467
Maturity profile of assets and liabilities as at 31 March 2008 is set out below: (Rs.in thousands) 1 to 14 days Deposits Advances Borrowings Foreign Currency assets Foreign Currency liabilities 15 to 28 days 29 days to 3 months Over 3 Over 6 Over 1 year months months and up to 3 and up to and up to 1 years 6 months year 40,219,714 27,606,889 47,914 Over 3 years and up to 5 years 6,840,441 8,381,341 11 96,288 Over 5 years Total
40,388,089 15,651,110 20,225,998 13,105,315 1,640,117 4,814,400 1,026,105 653,106 6,816,673
43,726,118 18,529,791 24,187,251 16,487,587 15,527,588 18,405,972 843,888 4,233,095 934,502 6,960,008 2,509,849 1,076 22,599 -
22,261,856 14,993,701
25,242,641 204,980,557 15,682,869 146,495,484 13,500,383 14 62,933,196 12,498,052 14,682,010
Investments 10,025,000
5,715,410
4,903,585
303,120
2,486,252
628,992
7,493,320
57,934
1,136,313
22,724,926
Classification of assets and liabilities under the different maturity buckets are compiled by management on the same estimates and assumptions as used by the Bank for compiling the return (DSB 8 and 9) submitted to the RBI.
18.17.5 Letters of comforts issued by the Bank The Bank has 153 letter of comforts/ undertaking issued and outstanding as on 31 March 2009 amounting to Rs. 6,469,577 thousands.
18.17.6 Draw down from Reserves
The Bank has not undertaken any draw down of reserves during the year. 18.17.7 Previous years figures Previous years figures have been regrouped / recast, where necessary, to conform to current years presentation.
Signatures to Schedules 1 to 18
Jayant Mehrotra Officer-in-charge Place : Bangalore Date : 28 April 2009
Arun Thiagarajan Director
72
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009

(Rs in thousands) PARTICULARS A) Cash Flow from Operating Activities Net Profit before Tax and Extraordinary Items Adjustments for : Depreciation charges Employee compensation expense (ESOS) Provision/write off of Advances Profit /loss on revaluation of investment Provision for Standard Assets Other Provisions Lease Adjustment Account (Profit)/Loss on Sale of Non banking Assets (net) (Profit)/Loss on Sale of Assets (net) (Profit)/Loss on foreign exchange revaluation Dividend received from subsidiary/others Cash Generated from Operation Less: Direct Taxes Paid Adjustments for : Decrease / (Increase) in Advances Decrease / (Increase) in Other assets Non-Banking Assets sold Decrease/ (Increase) in Investments Increase / (Decrease) in Deposits Increase / (Decrease) in Other liabilities Increase/ (Decrease) in Borrowings Net Cash flow from / (used in) Operating Activities B) Cash Flow from Investing Activities Movement in Work in Progress Purchase of Fixed assets / leased assets Sale of Fixed assets/ Leased assets Dividend received from subsidiary/others Sale proceeds - investments Net Cash flow used in Investing Activities C) Cash Flow from Financing Activities Proceeds from issue of shares Share premium collected Dividend Paid Subordinated Debt -Tier II Bonds ( Including Innovative Perpetual Debt Instrument) Net Cash Flow from Financing Activities Net Increase/ (Decrease) in Cash and Cash Equivalents Cash and Cash equivalents as at the beginning of the year (Including Money At Call and Short Notice) Cash and Cash equivalents as at the end of the year (Including Money At Call and Short Notice) As per our report of even date For S. R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No: 048749 Place: Bangalore Date: 28 April 2009 31-Mar-09 2,946,528 436,254 21,184 1,063,400 505,775 153,300 131,402 (24,824) (10,847) (45,959) (568,630) (3,000) 4,604,583 914,624 3,689,959 (21,389,277) (8,942,678) 29,343 (42,527,968) 44,204,373 2,444,161 9,026,123 (13,465,964) (301,791) (506,881) 55,863 3,000 (749,809) 1,298 9,662 (179,833) 5,359,575 5,190,702 (9,025,071) 31,847,585 22,822,514 115,695 3,384,052 (69,130) (1,406,866) 2,023,751 15,930,550 15,917,035 31,847,585 (124,640) 982,395 81,976 43,416 983,147 (27,168,417) (3,291,423) 1,123,113 (18,108,376) 50,808,517 3,764,470 4,062,521 12,923,652 31-Mar-08 2,514,584 422,246 17,762 359,997 453,311 157,600 138,876 (1,348,914) (184,438) (33,813) 60,732 (43,416) 2,514,527 781,280 1,733,247
For and on behalf of the Board K.R. Ramamoorthy Chairman Arun Thiagarajan Director Place: Bangalore Date: 28 April 2009 Jayant Mehrotra Officer-in-charge Philippe Damas Director
73
Statement pursuant to Section 212 of The Companies Act, 1956 relating to Subsidiary Companies
1 2 3 Name of the Subsidiary Company Financial year of the Subsidiary company ended on Number of Equity Shares held by ING Vysya Bank Ltd. and/ or its nominees in the subsidiary as on March 31, 2009 Extent of interest of ING Vysya Bank Ltd in the Capital of the Subsidiary Net Aggregate amount of profits/(Losses) of the Subsidiary so far as it concerns Members of the ING Vysya Bank Limited and is not dealt with in the Accounts of ING Vysya Bank Limited a) for the financial year ended on March 31, 2009 b) for the Previous financial years of the Subsidiary since it became a Subsidiary 6 Net Aggregate amount of profits/(losses) of the Subsidiary so far as it concerns Members of the ING Vysya bank Limited dealt with or provided for in the Accounts of ING Vysya Bank Limited a) for the financial year ended on March 31, 2009 b) for the Previous financial years of the Subsidiary since it became a Subsidiary 7 Changes in interest of ING Vysya Bank Limited in the Subsidiary between the end of the Financial Year of the subsidiary and that of ING Vysya Bank Limited NIL Rs. 1284.32 lacs Rs. 36.69 lacs ING Vysya Financial Services Limited 31st March 2009 88,45,100 equity shares of Rs. 2.50 each fully paid up
100%
Rs. 548.83 lacs
Not applicable
For and on behalf of the Board
Place : Bangalore Date : 28 April 2009
74
BOARD OF DIRECTORS Ashok Rao B Managing Director and Chief Executive Officer
R S Mani Director
M V S Appa Rao Director
Ranjiv Walia Director (from 14-Jun-2008) Srinivas T Company Secretary
Statutory Auditors M/s. S .R. Batliboi & Co., Chartered Accountants Kolkata Bankers ING Vysya Bank Limited Infantry Road Bangalore ING Vysya Financial Services Limited Registered Office ING Vysya House No 22, M. G. Road, Bangalore 560 001 Registrars & Share Transfer (R&T) Agents Karvy Computershare Private Limited Unit: ING Vysya Financial Services Limited 17-24, Vittal Rao Nagar, Madhapur, Hyderabad 500 081 Ph: 040-23420815 Fax: 040-23420814
ING Vysya Financial Services Limited
75
DIRECTORS REPORT
To The Shareholders The Board of Directors have pleasure in presenting the Twenty Second Annual Report of your Company together with the audited Statement of Accounts for the year ended 31st March 2009, Auditors Report thereon. PERFORMANCE Financial results of your Company for the year ended 31st March 2009 are as under: (Rs. in Lakh) CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION The operations of the Company do not involve any manufacturing or processing activities. Hence, the requirement to disclose the particulars as per the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, regarding conservation of energy and technology absorption is not applicable to the company. FOREIGN EXCHANGE EARNINGS AND OUTGO There were no foreign exchange earnings or outflow during the year under report. DIRECTORS Mr. M V S Appa Rao, Director retires by rotation and is eligible for reappointment. The constitution of the Board of Directors of the Company is as follows: Non Executive Directors Mr. R S Mani Mr. M V S Appa Rao Mr. Ranjiv Walia Managing Director & Chief Executive Officer Mr. Ashok Rao B During the year 2008-09, four Board Meetings were held. The dates of the Board meetings held were: 22-Apr-2008, 20-Sep2008, 29-Dec-2008 and 30-Mar-2009. DIRECTORS RESPONSIBILITY STATEMENT Pursuant to section 217 (2AA) of the Companies Act, 1956, the Directors hereby state that (i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (ii) they had selected such accounting policies and applied them consistently and made judgements and estimates that were 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 31st March 2009 and of the profit of the Company for the year under review;
Particulars GROSS INCOME Administrative Expenses CASH PROFIT Depreciation OPERATING PROFIT PROFIT BEFORE TAX PROVISION FOR TAX Deferred Tax Charge / (Credit) PROFIT AFTER TAX
for the year for the year ended ended 31-Mar-2009 31-Mar-2008 117.12 60.07 57.05 1.30 55.75 55.75 17.13 1.93 36.69 131.25 106.60 24.65 2.44 22.21 22.21 5.68 (6.20) 22.73
During the year under report, your Company recorded a total income of Rs. 117.12 lakh as against Rs. 131.25 lakh in the previous year. The Company has posted a Net Profit of Rs. 36.69 lakh after providing Rs. 1.30 lakhs for depreciation and Rs. 19.06 lakh for taxation as against a net profit of Rs. 22.73 lakh in the previous year. DIVIDEND To strengthen the reserve base, your Directors do not recommend any dividend for the year. PERSONNEL There are no employees whose particulars are required to be furnished under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.
76
DIRECTORS REPORT
(iii) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) they had prepared the accounts for the financial year ended 31-Mar-2009 on a going concern basis. AUDTIORS REPORT With reference to the observations made by the auditors in their report, the directors state that the company has been providing beverages to employees in the office premises and paying the insurance premium on Group Medical Charges and Group Personal Accident. The basic understanding was that beverages provided to employees in the office premises and Insurance premium paid on behalf of employees is companys labour welfare measure and hence both are not subject to Fringe Benefit Tax (FBT). The statutory auditors while auditing the company books for the financial year 2008-09, have advised that cost of beverages provided to employees attracts FBT and the insurance premium paid is not a statutory obligation and hence the same will also attract FBT. Based on the opinion of the Statutory Auditors, we have paid the additional amount of FBT amounting to Rs. 6,018/- to the Statutory Authorities. However, we shall be obtaining a legal opinion on the above, should the opinion indicate that we are not liable to pay, we shall proceed to claim a refund. AUDITORS M/s. S.R. Batliboi & Co., Chartered Accountants, the Statutory Auditors of the Company retire at the ensuing Annual General Meeting and are eligible for reappointment. Subject to the approval of the shareholders, it is proposed to appoint M/s. S.R. Batliboi & Co., Chartered Accountants as Statutory Auditors of the Company for the financial year 200910. Shareholders are requested to appoint the said auditors and authorize the Board of Directors to fix their remuneration. OUTLOOK The main object of IVFSL is to carry on business of non-fund / fee based activities of marketing and distribution of various financial products / services of IVBL / other companies, apart from recovery of the old lease rentals due to the company. Further, your company continues to provide the services to the parent company, ING Vysya Bank Ltd., as may be required from time to time on a non-exclusive contract basis. ACKNOWLEDGEMENT Your Directors thank all the customers, advisors, auditors and advocates for their continued valuable support. Your Directors place on record their appreciation of the devotion and contribution of the employees at all levels. Your Directors place on record their gratitude for the overall support extended by the parent company, ING Vysya Bank Limited.
For and on behalf of the Board Ashok Rao B Managing Director & Chief Executive Officer M V S Appa Rao Director
77
AUDITORS REPORT
To The Members of ING Vysya Financial Services Limited 1. We have audited the attached Balance Sheet of ING Vysya Financial Services Limited (the Company) as at March 31, 2009 and also the Profit and Loss Account and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As required by the Companies (Auditors Report) Order, 2003 (as amended) (the Order) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956 (the Act), we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order. Further to our comments in the Annexure referred to above, we report that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit; 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;
accounts 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 31, 2009; b) in the case of the Profit and Loss Account, of the profit for the year ended on that date; and c) in the case of Cash Flow Statement, of the cash flows for the year ended on that date.
2.
For S.R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No.: 048749 Place : Mumbai Date : 18 April 2009 Annexure referred to in paragraph 3 of our report of even date Re: ING Vysya Financial Services Limited (the Company) i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets. (b) Fixed assets have been physically verified by the management during the year and no material discrepancies were identified on such verification. (c) There was no substantial disposal of fixed assets during the year. The Companys does not maintain any inventory and accordingly sub-clauses (a), (b) and (c) to clause 4(ii) of the Order are not applicable. As informed, the Company has not granted nor taken any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956 and accordingly sub-clause (a), (b), (c), (d), (e), (f) and (g) of clause 4(iii) of the Order are not applicable. In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business, for the purchase of fixed assets and for the sale of services. During the course of our audit, no major weakness has been noticed in the internal control system in respect of these areas. Provisions in respect of adequate controls are referred in clause 4(iv) of the Order relating to purchase of inventory is not applicable as the Company does not maintain any inventory. According to the information and explanations provided by the management, there are no contracts or arrangements referred to in section 301 of the Act that need to be entered
3.
4.
ii)
ii.
iii)
iii. The Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report are in agreement with the books of account; iv. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Act; v. On the basis of the written representations received from the directors, as on March 31, 2009, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2009 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act;
iv)
vi. In our opinion and to the best of our information and according to the explanations given to us, the said
v)
78
AUDITORS REPORT
into the register maintained under section 301 have been so entered. Accordingly, sub clause (b) clause 4(v) of the Order is not applicable. vi) The Company has not accepted any deposits from the public.
xi)
The Company has neither taken any loans from a financial institution or a bank nor issued any debentures. Consequently, clause 4(xi) of the Order is not applicable to the Company. 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.
xii)
vii) The Company has an internal audit system, commensurate with the size and nature of its business. viii) To the best of our knowledge and as explained, the Central Government has not prescribed maintenance of cost records under clause (d) of sub-section (1) of section 209 of the Companies Act, 1956 for the products of the Company. xi) (a) Undisputed statutory dues including provident fund, income-tax, service tax, cess have generally been regularly deposited with the appropriate authorities
xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause 4(xiii) of the Order is not applicable to the Company. xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause 4(xiv) of the Order are not applicable to the Company. xv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions.
though there has been considerable delay in two cases in deposit of Rs.6,018 of fringe benefit tax. As
explained to us, the Company did not have any dues on account of employee state insurance, sales tax, excise duty, custom duty, wealth tax and investor education and protection fund. (b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, service tax, and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable. (c) According to the information and explanations given to us, there are no amounts in respect of provident fund, professional tax and service tax that have not been deposited with the appropriate authorities on account of any dispute. The Company has disputed the following income tax and sales tax claim:
Name of the statute Nature of dues Amount (Rs) Period to Forum where which the dispute is pending amount relates 816,000 FY The Company 1996-1997 has preferred an appeal before the Income Tax Appellate tribunal 282,334 FY The Company 2005-2006 has preferred an appeal before the CIT Appeals 40,990 FY The Company has 1998-1999 preferred appeal before the Deputy Commercial Tax Officer
xvi) The Company did not have any term loans outstanding during the year. xvii) According to the information and explanations given to us and on overall examination of the balance sheet of the Company, we are of the opinion that the funds raised on short term basis have not been used for long term investment. xviii) The Company has not made any preferential allotment of shares to parties or companies covered in the register maintained under section 301 of the Act. xix) The Company did not have any outstanding debentures during the year. xx) The Company has not raised any money by public issue.
Income Tax Act,1961
Income Tax / Interest demanded
Income Tax Act, 1961
Income Tax / Interest demanded
xxi) Based upon the audit procedures performed for the purpose of reporting the true and fair view of the financial statements and as per the information and explanations given by the management, we report that no fraud on or by the Company has been noticed or reported during the course of our audit.
Sales Tax Act Arrears of Tax of 1998-99
For S.R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No.: 048749 Place : Mumbai Date : 18 April 2009
x)
The Company has no accumulated losses at the end of the financial year. The Company has not incurred cash loss during the year and in the immediately preceding financial year.
79
BALANCE SHEET AS AT 31 MARCH 2009
(Amount in Rs.) Schedule SOURCES OF FUNDS Shareholders funds Share capital Reserves and surplus 1 2 22,112,750 58,552,218 80,664,968 22,112,750 54,883,270 76,996,020 31 March 2009 31 March 2008
APPLICATION OF FUNDS Fixed assets Gross block Less : Accumulated depreciation Net block Deferred tax asset (net) Investments Current assets, loans and advances Sundry debtors Cash and bank balances Loans and advances Current liabilities and provisions Current liabilities Provisions
3 1,122,486 (1,088,822) 33,664 1,474,771 4 1,122,486 (958,494) 163,992 1,667,529 920,000
5 6 7
38,715,107 57,981,271 96,696,378 17,055,838 484,007 17,539,845 79,156,533 80,664,968
20,142,798 20,489,091 69,872,520 110,504,409 35,775,159 484,751 36,259,910 74,244,499 76,996,020
8 9
Net current assets/(liabilities)
Notes to the Financial Statements
14
The schedules referred to above and notes to accounts form an integral part of the Balance Sheet. As per our report of even date
For S.R. Batliboi & Co. Chartered Accountants
For and on behalf of the Board of Directors of ING Vysya Financial Services Limited
per Viren H.Mehta Partner Membership No.:048749
Ashok Rao Managing Director & CEO
M.V.S Appa Rao Director
Srinivas T Company Secretary Place : Mumbai Date : 18 April 2009 Place : Bangalore Date : 18 April 2009
80
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2009
(Amount in Rs.) For the year ended 31 March 2009 For the year ended 31 March 2008
Schedule Income Income from brokerage, commission & outsourcing Other income 10 11
6,824,000 4,888,414 11,712,414
8,569,155 4,555,915 13,125,070
Expenditure Personnel expenses Operating expenses Depreciation 12 13 3 2,265,621 3,741,769 130,328 6,137,718 5,574,696 1,704,064 192,758 8,926 3,668,948 31,903,452 35,572,400 0.41 8,845,100 2.50 14 3,582,388 7,077,634 244,288 10,904,310 2,220,760 556,536 (619,595) 11,170 2,272,649 29,630,803 31,903,452 0.26 8,845,100 2.50
Profit before tax Provision for tax - current tax - deferred tax charge/ (credit) - fringe benefit tax Net profit for the year Profit and Loss account, beginning of the year Amount carried to Balance Sheet Earnings per share (basic and diluted) Weighted average number of equity shares Nominal value per share Notes to the Financial Statements
The schedules referred to above and notes to accounts form an integral part of the Profit and Loss Account. As per our report of even date
81
SCHEDULES TO THE ACCOUNTS
(Amount in Rs.) 31 March 2009 1. Share capital Authorised capital 40,000,000 (2008 - 40,000,000) equity shares of Rs.2.50 each 31 March 2008
100,000,000
100,000,000
Issued, subscribed and paid-up capital 8,845,100 (2008 - 8,845,100) equity shares of Rs.2.50 each
22,112,750 22,112,750
22,112,750 22,112,750
Note: Of the above 8,845,040 equity shares are held by ING Vysya Bank Limited, the holding company. The balance shares are jointly held by ING Vysya Bank Limited with its nominees
2.
Reserve and Surplus A. General reserve B. Profit and Loss Account 22,979,818 35,572,400 58,552,218 22,979,818 31,903,452 54,883,270
3.
Fixed assets Gross block As at 1 April 2008 Tangible assets Computers Office equipment Intangible assets Computer Software Total 41,548 1,122,486 41,548 1,122,486 41,548 958,494 130,328 41,548 33,664 163,992 882,782 198,156 882,782 198,156 781,575 135,371 93,534 36,794 875,109 172,165 7,673 25,991 101,207 62,785 Additions Deletions As at 31 March 2009 As at 1 April 2008 Accumulated depreciation For the year As at Deletions 31 March 2009 Net block As at 31 March 2009 As at 31 March 2008
- 1,088,822
Previous year
12,683,068
11,560,582
1,122,486 6,617,820
244,288 5,903,614
958,494
163,992
82
(Amount in Rs.) 31 March 2009 4. Investments Non trade, unquoted - valued at cost - NIL units (2008- 92 units) of National Housing Board capital gain bonds 2002 31 March 2008
920,000 920,000 920,000
Aggregate amount of unquoted investment 5. Sundry debtors* Debtors outstanding for a period exceeding six months - Unsecured, considered good - Unsecured, considered doubful Other Debts - Unsecured, considered good
470,619
117,639 470,619
470,619 470,619 -
20,025,159 20,613,417 470,619 20,142,798
Less: Provision for doubtful debtors
* includes dues from companies under same management - NIL (2008 - Rs.20,142,798/-) 6. Cash and bank balances Cash in hand Balances with scheduled banks - in current account - in deposit account
38,715,107 38,715,107
489,091 20,000,000 20,489,091
7.
Loans and advances Unsecured, considered good - Advances recoverable in cash or in kind for value to be received - Advance Fringe Benefit Tax, net of provision - Advance tax, net of provision - Other current assets** ** includes dues from companies under same management - NIL (2008 - Rs. 25,569,097/-).
394,972 57,586,299 57,981,271
383,175 285,115 43,484,258 25,719,972 69,872,520
8.
Current liabilities Sundry Creditors for supplies, expenses and services *** Provision for Fringe Benefit Tax, net of advance Other liabilities *** includes dues to companies under same management Rs. 7,902,932/(2008 - NIL).
12,087,876 5,944 4,962,018 17,055,838
29,010,901 6,764,258 35,775,159
9.
Provisions Provision for gratuity Provision for leave
287,006 197,001 484,007
400,407 84,344 484,751
83
(Amount in Rs.) For the year ended 31 March 2009 10. Income from brokerage, commission & Outsourcing Brokerage Mutual Fund Bonds Outsourcing Income For the year ended 31 March 2008
6,824,000 6,824,000
1,458,026 59,168 7,051,961 8,569,155
11.
Other income Interest income [ TDS - Rs.35,808/- (2008 - Rs.686,386/-) ] Reimbursements for business promotion services for customers Miscellaneous income Recovery from lease assets
140,987 137,427 4,610,000 4,888,414
1,761,307 2,431,495 363,113 4,555,915
12
Personnel costs Salaries, wages, allowances and bonus [ Net of reimbursement of Rs.341,176,561/- (2008 - Rs.271,929,288/-) ] Contribution to provident fund and other funds Staff welfare expenses
2,280,626 (37,786) 22,781 2,265,621
3,236,626 301,525 44,237 3,582,388
13.
Operating expenses Rates & taxes Advertisement and marketing expenses Business development expenditure [ Net reimbursement Rs.114,230/- (2008 - Rs.362,283/-) ] Rent & Electricity Travelling and conveyance [ Net reimbursement Rs.30,712/- (2008 - Rs.132,711/-) ] Telephone [ Net reimbursement Rs.157,458/- (2008 - Rs.1,446,438/-) ] Legal and professional charges [ Net reimbursement Rs.142,959/- (2008 - Rs.103,997/-/-) ] Printing and stationery [ Net reimbursement Rs.46,925/- (2008 - Rs.71,183/-) ] Auditors remuneration Staff training expenses Postage and telegram Insurance [ Net reimbursement Rs.24,033/- (2008 - Rs.100,447/-) ] Provision for doubtful debts Miscellaneous expenses [ Net reimbursement Rs.100,000/- (2008 - Rs.34,615/-) ]
35,510 49,900 61,642 3,268 51,800 2,740,728 355,833 345,000 6,350 24,599 47,597 19,542 3,741,769
227,789 2,548 3,065,043 82,585 92,010 2,590,350 159,797 319,379 3,300 12,102 4,567 470,619 47,545 7,077,634
84
NOTES TO THE FINANCIAL STATEMENTS
Schedule 14 (All amounts in Indian Rupees except where stated) 1. Nature of Operations ING Vysya Financial Services Limited (the Company) is a 100% subsidiary of ING Vysya Bank Limited (the Bank). The Company was incorporated on 4 February 1987 as a public limited company under the Companies Act, 1956 (the Act) in the name of The Vysya Bank Leasing Limited. In 2002, consequent to discontinuance of leasing business, the Company changed its name to Vysya Bank Financial Services Limited with the object of carrying on business as brokers and agents for marketing and distribution of insurance products and mutual fund on commission basis. Further in the year 2003, the Company changed its name to ING Vysya Financial Services Limited. At present, the company is engaged in the business of non-fund / fee based activities of marketing and distribution of various financial products / services of the Bank. The registered office of the Company is situated at Bangalore, Karnataka. The operations of the Company are primarily carried out at Bangalore. Statement of Significant Accounting Policies (a) Basis of preparation The financial statements have been prepared to comply in all material respects with the Notified Accounting Standard by Companies Accounting Standards Rules, 2006 and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared under the historical cost convention on an accrual basis except in case of assets for which provision for impairment is made. The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. (b) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the results of operations during the reporting period end. Although these estimates are based upon managements best knowledge of current events and actions, actual results could differ from these estimates. (c) Fixed Assets Fixed assets are stated at cost (or revalued amounts, as the case may be), less accumulated depreciation and impairment losses if any. Cost comprises the purchase price and any attributable cost of bringing the asset to its working condition for its intended use. Borrowing costs relating to acquisition of fixed assets which takes substantial period of time to get ready for its intended use are also included to the extent they relate to the period till such assets are ready to be put to use.
2.
(d) Investments Investments that are readily realisable and intended to be held for not more than a year are classified as current investments. All other investments are classified as long-term investments. Current investments are carried at lower of cost and fair value determined on an individual investment basis. Long-term investments are carried at cost. However, provision for diminution in value is made to recognise a decline other than temporary in the value of the investments. (e) Depreciation Depreciation is provided using the Straight Line Method (SLM) as per the useful lives of the assets estimated by the management, or at the rates prescribed under schedule XIV of the Companies Act, 1956 whichever is higher. Asset Category Office Equipment Computers & Software (included in Plant and Machinery) (f) Impairment i. The carrying amounts of assets are reviewed at each balance sheet date if there is any indication of impairment based on internal/external factors. An impairment loss is recognized 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. Rates(SLM) 20% 33.33% Schedule XIV Rates (SLM) 4.75% 16.21%
ii.
(g) Revenue recognition Commission received for touch point verification / outsourcing services rendered is recognized based on contractual terms and rates on an accrual basis except for Income from brokerage and business promotion services which is recorded at actuals.
85
Interest on the deployment of surplus funds is recognized using the time proportion method based on the underlying interest rates. Dividend income is recognized when the right to receive dividend is established.
(h) Income taxes Tax expense comprises of current, deferred and fringe benefit tax. Current income tax and fringe benefit tax is measured at the amount expected to be paid to the tax authorities in accordance with the Indian Income Tax Act. Deferred income taxes reflects 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 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. In situations where the company has unabsorbed depreciation or carry forward tax losses, all deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that they can be realised against future taxable profits. At each balance sheet date the Company re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax assets to the extent that it has become reasonably certain or virtually certain, as the case may be that sufficient future taxable income will be available against which such deferred tax assets can be realised. The carrying amount of deferred tax assets are reviewed at each balance sheet date. The company writes-down the carrying amount of a deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available. Earnings Per Share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events of bonus issue; bonus element in a rights issue to existing shareholders; share split; and reverse share split (consolidation of shares). The Company has no potentially dilutive equity shares as at the year end. Retirement and other employee benefits Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions are due. The contributions towards provident fund are made to Statutory Authorities. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The Company has a leave policy for the availment of accumulated leave, it does not provide for encashment of leave. Leave liability is provided on the basis of actuarial valuation on projected unit credit method made at the end of each financial year. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.
(i)
(j)
(k) Provisions A provision is recognised when an enterprise has a present obligation as a result of past event; 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. Cash and Cash equivalents Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term investments with an original maturity of three months or less.
(l)
86
3.
Related Parties Names of related parties Names of related parties where control exists irrespective of whether transactions have occurred or not : Holding Company Subsidiary Company Names of other related parties with whom transactions have taken place during the year Key Management Personnel i. ING Vysya Bank Ltd. ----Ashok Rao Managing Director & CEO
The following is a summary of significant related party transactions with the holding company : For the year ended 31 March 2009 Outsourcing Income Interest income Rent Salary cost for deputed staff Reimbursement of Payroll cost Reimbursement of other expenses Reimbursement of Service Tax Reimbursement for Fixed Assets Advance received on account of payment of salary 6,824,000 130,689 61,642 115,349 341,176,561 616,317 42,067,000 4,297,412 15,000,000 For the year ended 31 March 2008 7,051,961 1,707,843 3,065,043 481,997 271,929,288 2,251,674 34,647,009 -10,000,000
ii.
The Company has the following amounts due from/to holding company 31 March 2009 31 March 2008 43,182,266 2,529,629 -484,644 20,000,000
Receivables:
Receivables Interest accrued on bank deposits --7,902,932 38,712,642 --
Payables:
Payables
Balance with BankIn current account In deposit account 4. iii. The Company has no transactions with key management personnel during the year. Contingent liabilities and commitments 31 March 2009 Income tax demand for which appeals pending Sales Tax demand for Asst. Year 1998-99 1,098,334 40,990 1,139,324 5. Deferred tax Components of deferred tax asset and liability are as follows: 31 March 2009 Deferred tax assets / (liability) on account of provision for Employee Benefits Deferred tax assets on account of depreciation Net Deferred tax asset / (liability) 164,514 1,310,257 1,474,771 31 March 2008 164,488 1,503,041 1,667,529 31 March 2008 816,000 40,990 856,990
87
6.
Earnings per share (EPS) The computation of basic and diluted earnings per share is set out below. For the year ended 31 March 2009 Profit after tax Weighted average number of equity shares outstanding during the year considered for computation of basic and diluted EPS Basic and diluted earnings per share of face value Rs. 2.50 each 3,668,948 8,845,100 For the year ended 31 March 2008 2,272,649 8,845,100
0.41
0.26
7.
Auditors remuneration (excluding service taxes) 31 March 2009 Statutory audit fees Out of pocket expenses 300,000 45,000 345,000 31 March 2008 300,000 45,000 345,000
8.
Gratuity and Leave benefit plans: The Company has a defined benefit for gratuity & Leave plan. Every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The leaves get accumulated during the services upto 150 days. The following tables summarise the components of net benefit expense recognised in the profit and loss account and amounts recognised in the balance sheet: Profit and Loss account Net employee benefit expense (recognised in Employee Cost) Gratuity 31 March 2009 Current service cost Interest cost on benefit obligation Expected return on plan assets Net actuarial (gain)/ loss recognised in the year Past service cost Net benefit expense 72,275 32,033 31 March 2008 103,639 35,689 Leave 31 March 2009 20,180 6,748 31 March 2008 20,180 3,519
(217,709)
(185,035)
85,729
16,660 43,985 84,344
(113,401)
(45,707)
112,657
Balance sheet Details of Provision for Gratuity and Leave Benefits Gratuity 31 March 2009 Present Value of obligation Fair value of Plan Assets Liabilities (assets) Unrecognised past service cost Liability (asset) recognised in the Balance Sheet 287,006 31 March 2008 400,407 Leave 31 March 2009 197,001 31 March 2008 84,344
287,006
400,407
197,001
84,344
287,006
400,407
197,001
84,344
88
Assumptions for Gratuity & Leave Benefits 31 March 2009 Discount Rate Expected Return on Plan Assets Mortality Future Salary Increases Disability Attrition Retirement Gratuity 7.93% p.a Leave 7.95% p.a N/a 8% p.a Nil 97% p.a 58 years 31 March 2008 Gratuity 8% p.a Leave 8% p.a N/a 10% p.a Nil 70% p.a 58 years
L.I.C 1994-96 Ultimate L.I.C 1994-96 Ultimate
9.
Segment Reporting The Company is engaged in a single business of outsourcing activities within India. There are no other geographical and business segments.
10. Expenditure & Earnings in Foreign Currency is Nil. (2008 - Nil) 11. Managerial remuneration : Nil. (2008 - Nil) 12. Capital commitment : Nil (2008 Nil) 13. Based on the information available with the Company, there are no suppliers who are registered as micro or medium enterprises under The Micro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2009. Also there are no amounts outstanding to small-scale industrial undertakings as at 31March2009 (2008 - Nil) 14. Previous Year Comparatives Previous years figures have been regrouped / reclassified where necessary, to conform to this years presentation.
For and on behalf of the Board of Directors of ING Vysya Financial Services Limited Ashok Rao Managing Director & CEO M V S Appa Rao Director
Srinivas T Company Secretary Place : Bangalore Date : 18 April 2009
89
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
(Amount in Rs.) 31 March 2009 Cash flow from operating activities Profit before Taxation Depreciation Interest income Gratuity Leave availment Cash generated from operation Less: Direct taxes paid Adjustments for : (Increase) / Decrease in loans and advances (Increase) / Decrease in sundry debtors Increase / (Decrease) in current liabilities Net cash flow from operating activities Cash flow from investing activities Proceeds from sale of fixed assets Proceeds from redemption of investments Interest received Net cash flow from investing activities Cash flow from financing activities Interim dividend paid Tax on dividend Net Cash Flow from Financing Activities Net Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents as at the beginning of the year Cash and cash equivalents as at the end of the year Net Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents include the following: Cash on hand Balances with scheduled banks in - Current Accounts - Fixed Deposit 5,574,696 130,328 (140,987) (113,401) 112,657 5,563,293 (15,523,972) 25,708,175 20,142,798 (18,725,265) 17,165,029 920,000 140,987 1,060,987 18,226,016 20,489,091 38,715,107 18,226,016 38,715,107 38,715,107 31 March 2008 2,220,760 244,288 (1,761,307) (45,707) 84,344 742,378 (31,057,892) 16,906,908 28,413,484 (40,759,682) (25,754,804) 5,656,968 1,761,307 7,418,275 (9,950,738) (1,691,127) (11,641,865) (29,978,394) 50,467,485 20,489,091 (29,978,394) 489,091 20,000,000 20,489,091
As per our report of even date
90
BALANCE SHEET ABSTRACT AND COMPANYS GENERAL BUSINESS PROFILE
I.
Registration Details Registration No. Balance Sheet 8144 31.03.2009 State Code 08
II.
Capital raised during the year (Amount in Rs. Thousands) Public Issue Right Issue NIL NIL Bonus Issue Private Placement NIL NIL
III.
Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousands) Total Liabilities Sources of Funds Paid-up Capital Reserves & Surplus Application of Funds Net Fixed Assets Investments Accumulated Losses 34 NIL NIL Net Current Assets Deferred Tax Assets Misc. Expenditure 79157 1475 0 22113 58552 Secured Loans Unsecured Loans NIL NIL 80665 Total Assets 80665
IV.
Performance of Company (Amount in Rs. Thousands) Turnover Profit Before Tax Earning Per Share in Rs. 11712 5574 0.41 Total Expenditure Profit After Tax Dividend Rate % 6138 3669 Nil
V.
Generic Names of Three Principal Products / Service of Company (as per monetary terms) Item Code No. (ITC Code) Product Description ---------- Not Applicable -------------------- Not Applicable -----------
For and on behalf of the Board of Directors of ING Vysya Financial Services Limited Ashok Rao Managing Director & CEO Srinivas T Company Secretary Place: Bangalore Date: 18 April 2009 M.V.S Appa Rao Director
91
AUDITORS REPORT Auditors Report on the Consolidated Financial Statements of ING Vysya Bank Limited and its Subsidiary
To The Board of Directors ING Vysya Bank Limited We have audited the attached consolidated balance sheet of ING Vysya Bank Limited and its subsidiary (the Group), as at 31 March 2009, and also the consolidated profit and loss account and the consolidated cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the ING Vysya Bank Limiteds management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and dis closures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. We report that the consolidated financial statements have been prepared by the ING Vysya Bank Limiteds management in accordance with the requirements of Accounting Standards 21, Consolidated financial statements, notified pursuant to the Companies (Accounting Standards) Rules, 2006. In our opinion and to the best of our information and according to the explanations given to us, the 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 2009; (b) in the case of the consolidated profit and loss account, of the profit for the year ended on that date; and (c) in the case of the consolidated cash flow statement, of the cash flows for the year ended on that date.
per Viren H. Mehta Partner Membership No.: 048749
92
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH 2009
(Rs. in thousands) PARTICULARS CAPITAL AND LIABILITIES Capital Reserves and Surplus Deposits Borrowings Other Liabilities and Provisions 1 2 3 4 5 1,026,041 16,064,323 248,860,531 21,524,175 31,142,977 1,024,743 14,389,251 204,555,075 12,498,052 22,942,862 SCHEDULE 31 March 2009 31 March 2008
TOTAL ASSETS Cash and Balances with Reserve Bank of India Balance with Banks and Money at call and short notice Investments Advances Fixed Assets Other Assets TOTAL Contingent Liabilities Bills for collection Significant accounting policies Notes on Accounts 17 18 12 6 7 8 9 10 11
318,618,047
255,409,983
17,910,228 4,912,288 104,934,401 167,509,304 4,373,768 18,978,058 318,618,047 739,083,748 30,150,131
22,635,265 9,212,324 62,913,129 146,495,484 3,993,722 10,160,059 255,409,983 595,258,919 18,058,006
As per our report of even date For S.R. Batliboi & Co. Chartered Accountants For and on behalf of the Board
per Viren H.Mehta Partner Membership No.:048749 Place : Bangalore Date : 28 April 2009
93
CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2009
(Rs. in thousands) PARTICULARS INCOME Interest Earned Other Income TOTAL EXPENDITURE Interest Expended Operating Expenses Provisions and Contingencies TOTAL PROFIT/(LOSS) Net Profit/(Loss) for the period Consolidated Net Profit / (Loss) for the year attributable to the Group Add: Brought forward consolidated profit / (loss) attributable to the Group Add: Reversal on account of divestment of associate TOTAL APPROPRIATIONS Transfer to Statutory Reserve Transfer to Capital Reserves Transfer to Investment Reserve Transfer to Special Reserve ( u/s 36 (1) (viii) of Income Tax Act, 1961) Proposed Dividend Dividend Tax Balance Carried to Consolidated Balance Sheet TOTAL Earnings Per Share ( Rs. Per Equity Share of Rs.10 each) Basic Diluted Number of shares used in computing Earnings Per Share Basic Diluted 102,550,549 102,973,384 95,280,597 96,527,419 18.45 18.37 17.31 17.09 471,949 22,753 23,007 100,000 205,208 34,875 2,102,201 2,959,993 392,326 31,467 47,715 67,000 153,711 26,123 1,068,201 1,786,543 1,891,792 1,891,792 1,068,201 2,959,993 1,649,532 1,649,532 8,721 128,290 1,786,543 15 16 15,902,568 7,723,624 2,362,267 25,988,459 11,818,770 6,095,355 1,505,326 19,419,451 13 14 22,398,908 5,481,343 27,880,251 16,804,444 4,264,539 21,068,983 SCHEDULE 31 March 2009 31 March 2008
As per our report of even date For S.R. Batliboi & Co. Chartered Accountants For and on behalf of the Board
per Viren H.Mehta Partner Membership No.:048749 Place : Bangalore Date : 28 April 2009
94
SCHEDULES TO THE CONSOLIDATED BALANCE SHEET AS ON 31 MARCH 2009
(Rs. in thousands) PARTICULARS SCHEDULE 1 - CAPITAL AUTHORISED CAPITAL 350,000,000 (Previous year 350,000,000) Equity shares of Rs.10 each 100,000,000 Preference shares of Rs.10 each ISSUED CAPITAL 102,927,692 (Previous Year 102,826,959) Equity shares of Rs.10 each SUBSCRIBED AND CALLED UP CAPITAL 102,604,115 (Previous Year 102,474,264) Equity shares of Rs.10 each fully called and paid up TOTAL SCHEDULE 2 - RESERVES AND SURPLUS I. STATUTORY RESERVE Opening balance Additions during the year TOTAL (A) II. CAPITAL RESERVE (a) Revaluation Reserve Opening balance Less: Depreciation transferred to Consolidated Profit and Loss Account TOTAL (B) (b) Others Opening balance Add: Transfer from Consolidated Profit and Loss Account TOTAL (C) SECURITIES PREMIUM Opening balance Add: Additions during the year Less: Deletions during the year TOTAL (D) TOTAL CAPITAL RESERVE (B+C+D) IV. CAPITAL RESERVE ON CONSOLIDATION Opening balance Less: Deduction on divestment of Associate TOTAL (E) SPECIAL RESERVE Opening balance Add: Additions during the year TOTAL (F) 31 March 2009 31 March 2008
3,500,000 1,000,000
3,500,000 1,000,000
1,029,276
1,028,270
1,026,041 1,026,041
1,024,743 1,024,743
2,622,347 471,949 3,094,296
2,230,021 392,326 2,622,347
1,095,176 (7,487) 1,087,689 1,075,816 22,753 1,098,569
1,107,829 (12,653) 1,095,176 1,044,349 31,467 1,075,816
III.
7,775,663 13,098 7,788,761 9,975,019
4,382,410 3,422,299 (29,046) 7,775,663 9,946,655
1,125 1,125
129,415 (128,290) 1,125
V.
67,000 100,000 167,000
67,000 67,000
95
(Rs. in thousands) PARTICULARS VI. REVENUE AND OTHER RESERVES (a) Revenue Reserves Opening Balance Less: AS 15 Transitional Liability TOTAL (a) (b) Investment Reserve Opening Balance Add: Additions during the year TOTAL (b) TOTAL (G) (a+b) VII. Employee stock option scheme outstanding (net of deferred compensation cost) (H) 31 March 2009 31 March 2008
578,766 578,766
1,149,385 (570,619) 578,766
78,223 23,007 101,230 679,996 44,686 2,102,201 16,064,323
30,508 47,715 78,223 656,989 26,934 1,068,201 14,389,251
VIII. BALANCE IN CONSOLIDATED PROFIT AND LOSS ACCOUNT (I) TOTAL (I to VIII) SCHEDULE 3 - DEPOSITS A I. Demand deposits i. From banks ii. From others Savings bank deposits
1,820,853 31,285,503 33,984,173
1,080,513 32,211,596 31,231,656
II.
III. Term deposits i. From banks ii. From others TOTAL (I to III) B. C. Deposits of branches in India Deposits outside India TOTAL SCHEDULE 4 - BORROWINGS I. Borrowings in India i. Reserve Bank of India ii. Other banks iii. Other institutions and agencies Borrowings outside India TOTAL ( I to II) Secured borrowings included in (I) and (II) above is NIL (Previous year : NIL)
36,989,272 144,780,730 248,860,531 248,860,531 248,860,531
29,720,260 110,311,050 204,555,075 204,555,075 204,555,075
5,750,255 15,773,920 21,524,175
650,000 4,847,012 7,001,040 12,498,052
II.
96
(Rs. in thousands) PARTICULARS SCHEDULE 5 - OTHER LIABILITIES AND PROVISIONS I. II. III. IV. V. Bills payable Interest accrued Subordinated Debt -Tier II Bonds ( Including Innovative Perpetual Debt Instrument) Provision against Standard Assets Others (including provisions) TOTAL ( I to V) SCHEDULE 6- CASH AND BALANCE WITH RESERVE BANK OF INDIA I. II. Cash in hand (including foreign currency notes) Balances with Reserve Bank of India i. In current account ii. In other accounts TOTAL (I to II) 2,691,296 15,218,932 17,910,228 1,899,862 20,735,403 22,635,265 3,667,080 1,221,805 10,329,020 1,008,100 14,916,972 31,142,977 5,415,386 919,568 4,969,445 854,800 10,783,663 22,942,862 31 March 2009 31 March 2008
SCHEDULE 7- BALANCES WITH BANKS AND MONEY AT CALL AND SHORT NOTICE I. In India i) Balances with banks a) In current accounts b) In other deposit accounts ii) Money at call and short notice a) With banks b) With others TOTAL (i to ii) II. Outside India i) Balances with Banks a) In current accounts b) In other deposit accounts ii) Money at Call and Short Notice a) With Banks b) With Others TOTAL (i to ii) GRAND TOTAL (I to II) SCHEDULE 8 - INVESTMENTS (NET) I. Investments in India i) Government securities ## ** $ ii) Other approved securities ## iii) Shares iv) Debentures and bonds v) Others (mutual funds, commercial papers and post office deposits) @ TOTAL 92,585,496 1,742 29,996 1,236,462 11,080,705 104,934,401 48,824,804 1,742 53,173 1,204,176 12,829,234 62,913,129
1,407,426 256,314 1,663,740
2,016,114 2,313,820 4,329,934
10,583 3,237,965 3,248,548 4,912,288
357,255 2,438,895 2,086,240 4,882,390 9,212,324
97
(Rs. in thousands) PARTICULARS II. Investments outside India GRAND TOTAL GROSS INVESTMENTS Less: Depreciation/Provision for Investments NET INVESTMENTS @ Includes deposits with NABARD, NHB and SIDBI of Rs. 908.10 crores (previous year Rs 282.92 crores) and PTCs Rs. 116.32 crores (previous year Rs. 113.34 crores) 31 March 2009 104,934,401 104,993,185 (58,784) 104,934,401 31 March 2008 62,913,129 63,059,791 (146,662) 62,913,129
## Includes securities costing Rs. 7.13 crores (previous year Rs. 5.81 crores) pledged for availment of telegraphic transfer discounting facility ** Includes Repo Lending of Rs. 1260 crores (previous year Rs. Nil) and net of Repo borrowing of Rs. Nil under the Liquidity Adjustment Facility (previous year Rs. 194.95 crores) in line with Reserve Bank of India requirements. $ Includes securities costing Rs. 19.79 crores (previous year Rs.10.18 crores) pledged for margin requirement
SCHEDULE 9 - ADVANCES (net) A. i) Bills purchased and discounted ii) Cash credits, overdrafts and loans repayable on demand iii) Term loans TOTAL i) Secured by tangible assets ii) Covered by Bank/Government guarantees iii) Unsecured TOTAL I ADVANCES IN INDIA i) Priority sector ii) Public sector iii) Banks iv) Others ADVANCE OUTSIDE INDIA TOTAL SCHEDULE 10 - FIXED ASSETS I. Premises i) At cost as on 31 March of preceding year ii) Appreciation in the value iii) Additions during the year iv) Deductions during the year v) Depreciation to date 939,213 1,172,709 2,111,922 (7,910) (243,683) 982,055 1,172,709 4,581 2,159,345 (47,423) (219,258) 8,355,878 66,370,012 92,783,414 167,509,304 135,817,218 1,952,060 29,740,026 167,509,304 8,095,445 59,071,168 79,328,871 146,495,484 115,036,962 1,802,229 29,656,293 146,495,484
B.
C.
61,550,000 706,828 33,868 105,218,608 167,509,304
50,889,976 2,987,261 383,684 92,234,563 146,495,484
II
98
(Rs. in thousands) PARTICULARS I A. Premises under construction TOTAL II. Other Fixed Assets ( Including Furniture and Fixtures) i) At cost as on 31 March of the preceding year ii) Additions during the year iii) Deductions during the year iv) Depreciation to date II A. Capital work in progress TOTAL III. Lease Fixed Assets i) At cost as on 31 March of the preceding year ii) Additions during the year iii) iv) v) vi) Deductions during the year Depreciation to-date Add: Lease adjustment account Less: Provision / Write off of non performing assets TOTAL GRAND TOTAL (I to III) SCHEDULE 11 - OTHER ASSETS i) ii) iii) iv) v) vi) Inter-office adjustment (net) Interest accrued Tax paid in advance and tax deducted at source (net) Stationery and stamps Non banking assets acquired in satisfaction of claims (net) Others TOTAL SCHEDULE 12 - CONTINGENT LIABILITIES i) ii) iii) iv) v) vi) vii) Claims against the bank not acknowledged as debts Liability for partly paid investments Liability on account of outstanding Forward Exchange contracts Liability on account of Outstanding Derivative Contracts Guarantees given on behalf of constituents in India Acceptances, Endorsements and Other Obligations Other items for which the bank is contingently liable TOTAL 64,494 350,173,736 338,855,913 36,310,679 12,879,889 799,037 739,083,748 60,548 296,935,230 252,756,453 32,218,779 12,908,888 379,021 595,258,919 207,843 2,432,673 376,800 6,522 65,775 15,888,445 18,978,058 161,808 1,823,177 507,091 6,573 84,271 7,577,139 10,160,059 31 March 2009 1,279,533 3,139,862 31 March 2008 1,111,632 3,004,296
3,416,843 506,881 3,923,724 (26,310) (3,061,466) 239,286 1,075,234
3,127,932 356,301 3,484,233 (67,390) (2,694,670) 105,395 827,568
1,540,585 1,540,585 (1,370,976) 226,712 (237,649) 158,672 4,373,768
1,540,585 1,540,585 (1,342,967) 201,889 (237,649) 161,858 3,993,722
99
SCHEDULES TO CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 2009
(Rs. in thousands) PARTICULARS SCHEDULE 13 - INTEREST EARNED i. ii. iii. iv. Interest/Discount on advances/bills Income on investments Interest on balances with RBI and other inter bank funds Others (includes IRS income) TOTAL SCHEDULE 14 - OTHER INCOME i. ii. iii. iv. v. vi. vii. viii. Commission, Exchange and Brokerage Profit/ (Loss) on sale of investments (net) Profit on revaluation of investments (net) Profit/ (Loss) on sale of land, buildings and other assets (net) Profit on Exchange / Derrivative transactions (net) Income earned by way of dividends etc.from subsidiaries/companies and joint ventures abroad/in India Lease income Miscellaneous income (including bad debt recoveries) TOTAL SCHEDULE 15 - INTEREST EXPENDED i. ii. iii. Interest on Deposits Interest on Reserve Bank of India/Inter-Bank borrowings Others (including interest onTier II Bonds and IRS) TOTAL SCHEDULE 16 - OPERATING EXPENSES i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. Payments and Provisions for Employees Rent, Taxes and Lighting Printing and Stationery Advertisement and Publicity Depreciation on Banks Property Directors Fees, Allowances & Expenses Auditors Fees and Expenses (Including Branch Auditors) Law Charges Postage,Telegrams,Telephones Repairs and Maintenance Insurance Other expenditure TOTAL 3,924,471 597,144 106,008 41,964 408,049 2,796 6,905 45,139 224,359 221,731 238,119 1,906,939 7,723,624 3,027,436 450,971 110,423 42,751 389,227 3,596 6,445 27,351 191,667 211,599 200,730 1,433,159 6,095,355 14,010,241 514,587 1,377,740 15,902,568 10,460,242 334,534 1,023,994 11,818,770 3,293,027 389,658 45,959 1,110,822 3,000 914 637,963 5,481,343 2,332,944 205,803 33,813 829,841 33,465 6,500 822,173 4,264,539 17,476,282 4,698,422 152,230 71,974 22,398,908 12,968,911 3,502,901 200,301 132,331 16,804,444 31 March 2009 31 March 2008
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Schedule 17 - Significant Accounting Policies 1 BACKGROUND ING Vysya Bank Limited (IVB or the Bank) was incorporated on 29 March 1930 and is headquartered in Bangalore. Subsequent to acquisition of stake in the Bank by ING Group N.V. in August 2002, the name of the Bank was changed from The Vysya Bank Limited to ING Vysya Bank Limited. The Bank is engaged in providing a wide range of banking and financial services including commercial banking and treasury operations. ING Vysya Financial Services Limited (IVFSL), a wholly owned subsidiary of the Bank, is engaged in the business of non-fund/fee based activities of marketing and distribution of various financial products/ services of the bank. BASIS OF PREPARATION OF FINANCIAL STATEMENTS The consolidated financial statements of the Bank and its wholly owned subsidiary (hereinafter referred to as the Group) are prepared under the historical cost convention and accrual basis of accounting, unless otherwise stated and in accordance with generally accepted accounting principles in India and conform to the statutory requirements prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (RBI) from time to time to the extent they have financial statement impact and current practices prevailing within the banking industry in India. The financial statements comply in all material respects with the Notified accounting standards by Companies (Accounting Standards) Rules, 2006 and the relevant provisions of the Companies Act, 1956. The accounting policies have been consistently applied and are consistent with those used in the previous year. USE OF ESTIMATES The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in India requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates and assumptions used in the accompanying consolidated financial statements are based upon managements evaluation of the relevant facts and circumstances as on the date of financial statements. Actual results could differ from those estimates. Any revisions to accounting estimates are recognized prospectively in the current and future periods. 4 BASIS OF CONSOLIDATION a. The consolidated financial statements include the financial statements of the Bank and its subsidiary.
b. The consolidated financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as laid down under AS 21 -Consolidated Financial Statements prescribed by the ICAI. c. The audited financial statements of the Bank and its subsidiary have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses. Intra-group balances, material intra-group transactions and resulting unrealized profits are eliminated in full and unrealized losses resulting from intra-group transactions are eliminated unless cost cannot be recovered.
d. The cost of investment of Bank in subsidiary is eliminated. The excess or shortfall of such cost over the Banks portion of equity of subsidiary is treated as Goodwill or Capital Reserve. e. The reporting date for the subsidiary is 31March2009. For the purposes of preparation of the consolidated financial statements, the audited financial statements of subsidiary have been considered.
REVENUE RECOGNITION Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured. a. Income and expenditure is accounted on accrual basis except as stated below Interest on advances, non-performing securities and other assets classified as Non-Performing Assets is recognized on realization in accordance with the guidelines issued by the RBI. Processing fees collected on loans disbursed, along with related loan acquisition costs are recognized at the inception of the loan.
b. Income on assets given on lease Finance income in respect of assets given on lease is accounted based on the interest rate implicit in the lease in accordance with the guidance note issued by the ICAI in respect of leases given up to 31 March 2001 and in accordance with AS 19 Leases in respect of leases given from 1 April 2001.
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c. Premium/discount on acquired loans Premium paid/discount received on loans acquired under deeds of assignment are recognised in the profit and loss account in the year of such purchases. 8 INVESTMENTS For presentation in the Balance sheet, investments (net of provisions) are classified under the following heads Government securities, Other approved securities, Shares, Debentures and Bonds, and Others, in accordance with Third Schedule to the Banking Regulation Act, 1949. Valuation of investments is undertaken in accordance with the Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks issued by the RBI. For the purpose of valuation, the Banks investments are classified into three categories, i.e. Held to Maturity, Held for Trading and Available for Sale: a. Held to Maturity (HTM) comprises securities acquired by the Bank with the intention to hold them upto maturity. With the issuance of RBI Circular No. DBOD. BP.BC.37/21.04.141/2004-05 dated 2 September 2004, the investment in SLR securities under this category is permitted to a maximum of 25% of Demand and Time Liabilities.
d. Sale of investments Realized gains on investments under Held To Maturity (HTM) category are recognized in the profit and loss account and subsequently appropriated, from the profit available for appropriation, if any, to capital reserve account in accordance with RBI guidelines after adjusting for income tax and appropriations to the statutory reserve. Commission and Brokerage income Commission received for touch point verification/ outsourcing services rendered is recognized based on contractual terms and rates on an accrual basis except for income from Brokerage and business promotion services which is recorded at actuals.
e.
TRANSACTIONS INVOLVING FOREIGN EXCHANGE a. Monetary assets and liabilities denominated in foreign currencies are translated into Indian Rupees at the rates of exchange prevailing at the balance sheet date as notified by Foreign Exchange Dealers Association of India (FEDAI) and resulting gains/losses are recognised in the profit and loss account.
b. Held for Trading (HFT) comprises securities acquired by the Bank with the intention of trading i.e. to benefit from short-term price/interest rate movements. c. Available for Sale (AFS) securities are those, which do not qualify for being classified in either of the above categories.
b. Outstanding forward exchange contracts and bills are revalued on the balance sheet date at the rates notified by FEDAI and the resultant gain/ loss on revaluation is included in the profit and loss account. c. Contingent liabilities denominated in foreign currencies are disclosed at the balance sheet date at the rates notified by FEDAI.
d. Transfer of securities between categories of investments is accounted for at the acquisition cost / book value / market value on the date of transfer, whichever is lower, and the depreciation, if any, on such transfer is fully provided for. Valuation of investments is undertaken as under: a. For investments classified as HTM, excess of cost over face value is amortized over the remaining period of maturity. The discount, if any, being unrealised is ignored. Provisions are made for diminutions other than temporary in the value of such investments.
DERIVATIVE TRANSACTIONS Derivative transactions comprise forwards, interest rate swaps, currency swaps, currency and cross currency options to hedge on-balance sheet assets and liabilities or to take trading positions. Derivative transactions designated as Trading are Marked to Market (MTM) with resulting gains/losses included in the profit and loss account and in other assets/other liabilities. Derivative transactions designated as Hedge are accounted for on an accrual basis.
b. Investments classified as HFT and AFS are revalued at monthly intervals. These securities are valued scripwise and any resultant depreciation or appreciation is aggregated for each category. The net depreciation for each category is provided for, whereas the net appreciation for each category is ignored. The book value of individual securities is not changed consequent to periodic valuation of investments.
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c. In the event provisions created on account of depreciation in the Available for sale or Held for trading categories are found to be in excess of the required amount in any year, such excess is recognised in the profit and loss account and subsequently appropriated, from profit available for appropriation, if any, to Investment Reserve account in accordance with RBI guidelines after adjusting for income tax and appropriation to statutory reserve. were revalued as at 31 December 1999, based on values determined by approved valuers. Cost includes cost of purchase of the asset and all other expenditure in relation to its acquisition and installation and includes duties, taxes (excluding service tax), freight and any other incidental expense incurred on the asset before it is ready for commercial use. Office Equipment (including Electrical and Electronic equipment, Computers, Vehicles and other Office appliances) are grouped under Other Fixed Assets. a. Depreciation on Premises is charged on straight line basis at the rate of 1.63% upto 31March2002 and at 2% with effect from 1April2002.
d. Treasury bills and Commercial paper being discounted instruments are valued at carrying cost. Discount accreted on such instruments is disclosed under other assets in accordance with RBI directive and investments are shown at acquisition cost. e. REPO and Reverse REPO transactions are accounted for on an outright sale and outright purchase basis respectively in line with RBI guidelines. The cost/income of the transactions upto the year end is accounted for as interest expense/income. However, in case of reverse REPO, the depreciation in value of security compared to original cost is provided for.
b. Additional depreciation on account of revaluation of assets is deducted from the current years depreciation and adjusted in the Revaluation Reserve account. Depreciation on the following items of Fixed Assets is charged over the estimated useful life of the assets on Straight Line basis. The rates of depreciation are: i. ii. Electrical and Electronic equipment 20% Furniture and Fixtures 10%
ADVANCES Advances are classified into standard, sub-standard, doubtful and loss assets in accordance with the guidelines issued by RBI and are stated net of provisions made towards non-performing advances. Provision for non-performing advances comprising substandard, doubtful and loss assets is made in accordance with the RBI guidelines which prescribe minimum provision levels and also encourage banks to make a higher provision based on sound commercial judgement. Non-performing advances are identified by periodic appraisals of the loan portfolio by management. In case of consumer loans, provision for NPAs is made based on the inherent risk assessed for the various product categories. The provisioning done is higher than the minimum prescribed under RBI guidelines. As per RBI guidelines, a general provision at the rate of 0.40% is made on all the standard advances except in the case of loans to Small and Medium Enterprises and direct agricultural advances where provision is made at the rate of 0.25%. Provision towards standard assets is shown separately in the Balance Sheet under Schedule-5 Other liabilities and Provisions.
iii. Vehicles 20% iv. Computers and Software 33.33% v. ATMs and VSAT equipment 16.66%
vi. Improvements to leasehold premises amortised over the shorter of primary period of lease or estimated useful life of such assets, which is currently estimated at 6 years. Depreciation on leased assets is provided on WDV method at the rates stipulated under Schedule XIV to the Companies Act, 1956. In case of IVFSL, depreciation on leased assets is charged over the primary lease period of the respective assets on Straight Line basis. Software whose actual cost does not exceed Rs. 100,000 and other items whose actual cost does not exceed Rs. 10,000 are fully expensed in the year of purchase. Assets purchased during the year are depreciated on the basis of actual number of days the asset has been put to use in the year. Assets disposed off during the year are depreciated upto the date of disposal. 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.
10 FIXED ASSETS Fixed assets are stated at historical cost less accumulated depreciation, with the exception of premises, which
103

Profits on sale of fixed assets is first credited to profit and loss account and then appropriated to capital reserve. for its stock-based employee compensation plans as per the Guidance Note on Accounting for Employee Sharebased Payments issued by the ICAI. Compensation cost is measured by the excess, if any, of the fair market price of the underlying stock over the exercise price on the grant date. The fair price is the latest closing price, immediately prior to the date of the Board of Directors meeting in which the options are granted, on the stock exchange on which the shares of the Bank are listed. If the shares are listed on more than one stock exchange, then the stock exchange where there is highest trading volume on the said date is considered. 16 STAFF BENEFITS The Bank provides for its Pension, Gratuity and Leave liability based on actuarial valuation as per the Accounting Standard 15 (Revised). i. Retirement benefits in the form of Provident Fund is a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective trusts. Gratuity, Pension and Leave Encashment Liability are defined benefit obligations and are provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year.
11 IMPAIRMENT OF ASSETS In accordance with AS 28 Impairment of Assets, the Bank assesses at each balance sheet date whether there is any indication that an asset (comprising a cash generating unit) may be impaired. If any such indication exists, the Bank estimates the recoverable amount of the cash generating unit. 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. If such recoverable amount of the cash generating unit is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the profit and loss account. After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the revised recoverable amount, subject to a maximum of depreciated historical cost.
12. Cash and cash eQuivalents Cash and cash equivalents include cash in hand, balances with Reserve Bank of India, 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).
ii.
13 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.
iii. Long term compensated absences are provided for based on actuarial valuation. The actuarial valuation is done as per projected unit credit method. Short term compensated absences are provided for based on estimates. iv. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. In case of IVFSL Retirement benefits in the form of Provident Fund are a defined contribution scheme and the contributions are charged to the Profit and Loss Account of the year when the contributions are due. The contributions towards provident fund are made to Statutory Authorities. Gratuity liability is defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each financial year. The Company has a leave policy for the availment of accumulated leave, it does not provide for encashment of leave. Leave liability is provided on the basis of actuarial valuation on projected unit credit method made at the end of each financial year.
14 SECURITISATION TRANSACTIONS Securitisation transactions are accounted for in accordance with applicable RBI guidelines and ICAI guidance note on Accounting for Securitisation.
15 EMPLOYEES STOCK OPTION SCHEME The Employee Stock Option Schemes provide for the grant of equity shares of the Bank to its employees. The Schemes provide that employees are granted an option to acquire equity shares of the Bank that vests in a graded manner. The options may be exercised within a specified period. The Scheme is in accordance with the Securities and Exchange Board of India (SEBI) (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999. The Bank follows the intrinsic value method to account
104

Actuarial gains/losses are immediately taken to profit and loss account and are not deferred. Other usual, necessary and mandatory provisions, if any.
17 TAXES ON INCOME Income-tax expense comprises current tax (i.e. amount of tax for the year determined in accordance with the incometax law) fringe benefit tax and deferred tax charge or credit (reflecting the tax effects of timing differences between accounting income and taxable income for the year). The deferred tax charge or credit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonably/ virtually certain (as the case may be) to be realized. The Bank offsets, on a year on year basis, current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
19 Earnings Per Share (EPS) Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year. Diluted earnings per share reflects the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive.
20 PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS In accordance with AS 29 - Provisions, Contingent Liabilities and Contingent Assets, the Group creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. Such provisions are not discounted to present value. A disclosure for a contingent liability is made when there is a possible obligation, or a present obligation where outflow of resources is not probable. Where 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. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resource would be required to settle the obligation, the provision is reversed. The bank does not account for or disclose contingent assets, if any.
18 NET PROFIT/ (LOSS) Net profit / (loss) disclosed in the consolidated profit and loss account is after considering the following: Provision/ write off of non-performing assets as per the norms prescribed by RBI; Provision for income tax and wealth tax; Depreciation/ write off of investments; and
105
Notes on accounts
18 18.1 Notes on accounts List of subsidiary considered for consolidation Sl. No. Subsidiary 1 18.2 ING Vysya Financial Services Limited (IVFSL) India 100% 100% Name Country of incorporation Extent of holding as on 31 March 2009 Voting Power
Balancing of books and reconciliation The Bank has completed its Inter branch reconciliation. The reconciling items have been identified and elimination of reconciling items is in progress. Appropriate adjustments have been incorporated in the financial statements to reflect completion of reconciliation for the purpose of presentation. Routine matching of select general ledger control account balances with subsidiary ledgers is in progress at few branches and is expected to be completed in due course with no financial statement impact as on 31March2009. Employee stock option scheme ESOS 2002 The employee stock option scheme (ESOS 2002 or the scheme) of the Bank was approved by Board of Directors in their meeting dated 23 July 2001 and by the shareholders at the Annual General Meeting held on 29 September 2001. A total of 500,000 equity shares of Rs.10each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme was in force. These options will vest over a period of five years from the date of grant i.e. 20% at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. Consequent to the Rights issue of the Bank during the financial year 2005-2006, appropriate adjustments were made to the number of outstanding options and initially fixed exercise price. ESOS 2002 was discontinued by the Bank in the Annual General Meeting held on 22 September 2005. No further options have been granted under this scheme. The movement in ESOS 2002 during the year ended 31March2009 is as under: Particulars Stock options outstanding at the beginning of the year Less: Options exercised during the year Less: Options forfeited Stock options outstanding at the end of the year Year ended 31March2009 150,480 86,041 4,134 60,305 Year ended 31March2008 361,730 167,190 44,060 150,480
18.3
The weighted average exercise price for the options exercised during the year is Rs. 91.49 (Previous Year - Rs. 90.47) ESOS 2005 The employee stock option scheme (ESOS 2005 or the scheme) of the Bank was approved by the Board of Directors in their meeting dated 27 July 2005 and by shareholders at the Annual General Meeting held on 22September2005. A total of 893,264 equity shares of Rs.10each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme is in force. These options will vest over a period of four years from the date of grant i.e. 25% at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. The board level committee in their meeting dated 25 October 2007 approved the grant of options under ESOS 2005 loyalty options scheme.
106
Notes on accounts
The movement in ESOS 2005 during the year ended 31March2009 is as under: Particulars Stock options outstanding at the beginning of the year Add: Options granted during the year Less: Options exercised during the year Less: Options forfeited Stock options outstanding at the end of the year Year ended 31March2009 730,451 3,825 14,692 38,119 681,465 Year ended 31March2008 354,914 523,960 109,477 38,946 730,451
The weighted average exercise price for the options exercised during the year is Rs. 121.03 (Previous Year - Rs. 124) ESOS 2007 The employee stock option scheme (ESOS 2007 or the scheme) of the Bank was approved by the Board of Directors in their meeting dated 7 March 2007 and by the shareholders through postal ballot meeting held on 11 May 2007. A total of 78,00,000 equity shares of Rs. 10 each were earmarked under the scheme to be allotted during the period (extended or otherwise) in which the scheme is in force. These options will vest over a period of three years from the date of grant i.e, 40% in 1st year; 30% in 2nd year and 30% in 3rd year at the end of each year from the date of grant. The vesting of options is linked to performance criteria and guidelines approved by the compensation committee of the Bank. The movement in ESOS 2007 during the year ended 31 March 2009 is as under: Particulars Stock options outstanding at the beginning of the year Add: Options granted during the year Less: Options exercised during the year Less: Options forfeited Stock options outstanding at the end of the year Year ended 31March2009 3,166,500 2,001,866 60,000 5,108,366 Year ended 31March2008 3,166,500 3,166,500
The details of exercise price for stock options outstanding as at 31 March 2009 are: Scheme ESOS 2002 Tranche I ESOS 2002 Tranche II ESOS 2005 Tranche I ESOS 2005 (Loyalty Options) ESOS 2007 Tranche I Range of exercise price (In Rs.) 84.50 97.50 92.59 - 136.47 184.82 114.20 - 315.40 Number Weighted Average remaining of options contractual life of the options outstanding (Years) 720 0.50 59,585 0.50 173,785 4.93 507,680 5,108,366 5.07 5.86 Weighted Average exercise price (In Rs.) 84.50 97.50 122.29 184.82 219.55
The details of exercise price for stock options outstanding as at 31 March 2008 are: Scheme ESOS 2002 Tranche I ESOS 2002 Tranche II ESOS 2005 Tranche I ESOS 2005 (Loyalty Options) ESOS 2007 Tranche I Range of exercise price (In Rs.) 84.50 97.50 92.59 - 136.47 184.82 214.20 - 275.15 Number Weighted Average remaining of options contractual life of the options outstanding (Years) 38,970 0.50 111,510 208,991 521,460 3,166,500 1.10 5.88 6.07 6.48 Weighted Average exercise price (In Rs.) 84.50 97.50 122.34 184.82 263.00
Total employee compensation cost recognised in Profit and Loss Account for the year ended 31 March 2009 is Rs. 21,184 thousands. (Previous Year Rs. 17,762 thousands).
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Notes on accounts
All options under each scheme when exercised, are settled through issue of equity shares. The Bank follows the intrinsic method for valuing the stock options. The difference between Employee Compensation Cost computed based on such intrinsic value and Employee Compensation Cost that shall have been recognised if fair value of options had been used is explained below: a) Employee Compensation Cost (Rs. in thousands) Particulars Intrinsic Value Fair value* Excess to be Charged b) Impact on Profit (Rs. in thousands) Particulars Declared Profit Less: Adjustment for additional charge due to Black Scholes Adjusted Profit c) Impact on Earnings Per Share Particulars Declared in the financial Statements Basic (Rs.) Diluted (Rs.) Revised EPS Basic (Rs.) Diluted (Rs.) d) 17.51 17.44 16.92 16.71 18.45 18.37 17.31 17.09 Year ended 31 March 2009 Year ended 31 March 2008 Year ended 31 March 2009 1,891,792 74,569 1,817,223 Year ended 31 March 2008 1,649,532 36,935 1,612,597 Year ended 31 March 2009 21,184 95,753 74,569 Year ended 31 March 2008 17,762 54,697 36,935
Significant assumptions: Weighted average information to estimate the fair value of options Particulars Risk Free Interest Rate Expected Life (excluding grant period of one year) Expected Volatility Expected Dividends The price of the underlying share in market at the time of option grant (as per NSE) Share Prices adjusted after Rights issue ESOS 2002 Tranche I 5.89% 5 yrs 2.80% 40% 255.30 97.50 Tranche II 4.78% 5 yrs 2.40% 40% 451.30 146.58 ESOS 2005 Tranche I 6.68% 4 yrs 2.00% 162.60 162.60 Loyalty option 7.64% 2 yrs 2.89% 15% ESOS 2007 Tranche I 5.59%-9.24% 3 yrs 2.89%-3.20% 15%
262.60 114.20-315.40 262.60 114.20-315.40
The Black-Scholes Model is used to calculate a theoretical call price (ignoring dividends paid during the life of the option) using the five key determinants of an options price: stock price, strike price, volatility, time to expiration, and short-term (risk free) interest rate.
108
Notes on accounts
The call option values under Black- Scholes Model for option valuation under different schemes are: Years Year 1 Year 2 Year 3 Year 4 Year 5 ESOS 2002 Tranche I 17.91 22.47 26.76 30.81 34.63 Tranche II 53.63 57.96 62.10 66.04 69.80 ESOS 2005 Tranche I 46.61 54.11 61.12 67.68 Loyalty option 91.37 103.97 ESOS 2007 Tranche I 6.27-23.81 12.08-45.77 17.63-66.10
As required under Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, a certificate issued by Auditors of the Bank indicating that the Scheme has been implemented in accordance with these guidelines and in accordance with the resolution of the Bank in General Meeting will be placed at the Annual General Meeting of the shareholders.
18.4
Provisions and contingencies debited to the profit and loss account include (Rs.in thousands) Particulars Provision for income tax (including deferred tax) Provision for wealth tax Provision for fringe benefit tax Provision/ write off of NPAs Provision/write off of leased assets Depreciation/ write off of investments (net) Provision for standard assets Provision for restructured advances Others Total Year ended 31 March 2009 1,032,256 1,000 27,382 1,063,400 (46,472) 153,300 54,495 76,906 2,362,267 Year ended 31 March 2008 908,111 900 36,221 359,997 (19,772) (96,379) 157,600 158,648 1,505,326
18.5
Details of provisions (Rs.in thousands) Particulars Opening balance Additions during the year Reversals during the year Amounts used Closing balance Year ended 31 March 2009 248,143 81,123 10,981 333 317,952 Year ended 31 March 2008 218,656 45,812 14,485 1,840 248,143
The above provisions include provisions made on account of frauds, legal claims, operational losses and other items of similar natures. These provisions would be utilized/released upon settlement. Provisions for taxes during the year (Rs. in thousands) Particulars Provision for income tax (including deferred tax) Fringe benefit tax Year ended 31March2009 1,032,256 27,382 Year ended 31March2008 908,111 36,221
18.6
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Notes on accounts
18.7 Investments 18.7.1 Non-performing non SLR investments Particulars Opening balance Additions during the year Reduction during the year Closing balance Total provisions held 18.7.2 Value of Investments Particulars Gross value of Investments a. In India b. Outside India Provisions for depreciation a. In India b. Outside India Net value of Investments a. In India b. Outside India 18.7.3 Movement of provisions held towards depreciation on investments Particulars Opening balance Add: Provisions made during the year Less: Write-off/write-back of excess provisions during the year Closing balance 18.8 Advances 18.8.1 Information with respect to loan assets subjected to restructuring (a) Particulars of assets restructured: Particulars Standard advances restructured Sub standard advances restructured Doubtful advances restructured TOTAL No. of Borrowers Amount outstanding+ Sacrifice* # No. of Borrowers Amount outstanding+ Sacrifice* # No. of Borrowers Amount outstanding+ Sacrifice* # No. of Borrowers Amount outstanding+ Sacrifice* # CDR Mechanism SME Debt restructuring 31 March 31 March 31 March 31 March 2009 2008 2009 2008 1 203,590 32,045 1 203,590 32,045 (Rs. in thousands) Others 31 March 31 March 2009 2008 42 19 1,399,414 921,194 22,451 42 19 1,399,414 921,194 22,451 Year ended 31 March 2009 146,662 87,878 58,784 As at 31 March 2009 104,993,185 58,784 104,934,401 Year ended 31 March 2009 41,406 41,406 (Rs. in thousands) Year ended 31 March 2008 68,926 27,520 41,406 41,406 (Rs. in thousands) As at 31 March 2008 63,059,791 146,662 62,913,129 (Rs. in thousands) Year ended 31 March 2008 270,541 2,231 126,110 146,662
* Sacrifice is diminution in the fair value + Amounts outstanding represent facilities restructured. # Sacrifice for restructuring prior to 27 August, 2008 have been calculated as per the RBI norms prevalent at that time
110
Notes on accounts
b) Additional disclosures with respect to restructured accounts as per the RBI circular dated 17 April 2009 (Rs. in thousands) S.No 1. 2. Disclosures Application received up to March 31, 2009 for restructuring, in respect of accounts which were standard as on September 1, 2008. Of (1), proposals approved and implemented as on March 31, 2009 and thus became eligible for special regulatory treatment and classified as standard assets as on the date of the balance sheet. Of (1), proposals approved and implemented as on March 31, 2009 but could not be upgraded to the standard category. Of (1), proposals under process/implementation which were standard as on March 31, 2009. Of (1), proposals under process/implementation which turned NPA as on March 31, 2009 but are expected to be classified as standard assets on full implementation of the package. Number 30 29 Amount 1,795,779 1,496,894
3. 4. 5.
298,885
Only accounts on which special regulatory treatment considered.
(c) Small and Medium Enterprises (SME) included in (a) above: (Rs. In thousands) Particulars Total amount of loan assets subjected to restructuring Year ended 31 March 2009 208,352 208,352 Year ended 31 March 2008 26,880 26,880 -
Out of above:
Amount of standard assets subjected to restructuring Amount of sub-standard / doubtful assets subjected to restructuring 18.8.2 Movement in NPAs is set out below (Rs. in thousands) Particulars Opening balance as on 1 April 2007 Additions during the year ended 31 March 2008 Reductions (including write offs) during the year ended 31March 2008 Closing balance as on 31 March 2008 NPAs to advances (%) Additions during the year ended 31 March 2009 Reductions (including write offs) during the year ended 31March 2009 Closing balance as on 31 March 2009 NPAs to advances (%) * After considering technical write off 3,318,100 2,386,600 2,093,900 Gross* 1,263,800 1,973,000 2,074,400 1,162,400 Net* 1,140,200 1,973,000 2,080,900 1,032,300 0.70 3,318,100 2,290,900 2,059,500 1.23
18.8.3 Movement in provisions for NPA Particulars Opening balance Additions during the year Technical write-offs/write backs during the year Closing balance Year ended 31 March 2009 1,063,400 1,063,400 -
111
Notes on accounts
18.8.4 Provisions on standard asset (Rs. in thousands) Particulars Provision towards standard assets during the year Cumulative provision for standard assets as at year end Year ended 31 March 2009 153,300 1,008,100 Year ended 31 March 2008 157,600 854,800
Provisions towards standard assets are included in Other liabilities in Schedule 5 to the balance sheet.
18.8.5 Purchase/ sale of non performing assets Details of non performing financial assets sold: Particulars No. of accounts sold* Aggregate outstanding, net of provisions/ write offs (Rs. in thousands) Aggregate consideration received (Rs. in thousands) Year ended 31 March 2009 Year ended 31 March 2008 1 1,939 3,000
Provision held against the NPA sold of Rs.50,500 thousands and Rs.726 thousands during the year 2006-07 & 2007-08 respectively has not been reversed to profit and loss account in view of RBI Circular No DBOD.No.BP. BC.16/21.04.048/2005 dated 13 July 2005 and is retained as provision for NPA to be utilised to meet the shortfall / loss on account of sale of other non performing financial assets.
No non performing financial assets were purchased during the year (Previous year: Nil).
18.8.6 Securitisation of financial assets Particulars Total number of accounts Total number of transactions Book value (net of provisions) of accounts sold (Rs. in thousands) Aggregate consideration received (Rs. in thousands) Additional consideration realized in respect of accounts transferred in earlier years Aggregate gain/ (loss) over net book value (Rs. in thousands) Year ended 31 March 2009 Year ended 31 March 2008 3 2 1,400,000 1,403,040 3,040
Contribution Agreement
The Bank invests in SPVs through contribution agreements and such amounts invested are recorded as loans and advances. The interest is recognised based on net yields on these transactions.
18.8.7 (a) Exposure to capital market (Rs.in thousands) Particulars (i) direct investment in equity shares, convertible bonds, convertible debentures and units of equity oriented mutual funds the corpus of which is not exclusively invested in corporate debt; 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 equityoriented mutual funds; As at 31 March 2009 5,415 As at 31 March 2008 5,415
(ii)
3,730,772
3,559,235
112
Notes on accounts
Particulars (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; 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; secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; loans sanctioned to corporates against 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; bridge loans to companies against expected equity flows / issues;
As at 31 March 2009 -
As at 31 March 2008 -
(iv)
17,467
500,000
(v) (vi)
567,750
920,914
(vii)
4,321,404
4,985,564
(viii) underwriting commitments taken up by banks in respect of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds; (ix) (x) financing to stockbrokers for margin trading; all exposures to Venture Capital Funds (both registered and unregistered)
Total Exposure to Capital Market
Point (ii) above includes loans to Investment Companies amounting to Rs. 3,700,000 thousands (previous year Rs. 3,500,000 thousands) secured by bank deposits.
(b) Exposure to real estate sector (Rs. in thousands) Particulars (a) Direct exposure (i) Residential mortgages (fully secured) Individual housing loans up to Rs. 20 lakhs (previous year 15 lakhs) Others Fund Based Non- Fund Based 8,224,100 22,024,641 5,609,890 253,900 4,319,700 15,441,770 5,104,134 292,538 As at 31March2009 As at 31March2008
(ii) Commercial real estate
(iii) Investment in mortgage backed securities and other securitised exposures a. Residential 1,583,100 1,734,500 b. Commercial real estate
(b) Indirect exposure Fund Based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) Non-Fund Based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs) 4,944,000 42,639,631 4,339,900 31,232,542
Total
113
Notes on accounts
18.9 Fixed Assets 18.9.1 Capital work in progress The Capital work in progress (Premises) of Rs.1,279,533 thousands (Previous year Rs. 1,111,632 thousands) includes Rs. 1,014,513 thousands (Previous year Rs.1,052,463 thousands) towards the lease premium paid to Mumbai Metropolitan Regional Development Authority (MMRDA) in connection with the lease of land. The Bank has entered into an agreement to lease with MMRDA, however lease agreement with MMRDA will be executed at a later date upon completion of the construction and obtaining other necessary approvals.
18.9.2 Leases
Operating leases
The Bank has commitments under long-term non-cancellable operating leases primarily for premises. Operating lease agreements entered into by the Bank do not have any purchase options. Following is a summary of future minimum lease rental commitments for such non-cancellable operating leases: (Rs.in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total minimum lease rental commitments As at 31 March 2009 118,025 75,895 193,920 As at 31 March 2008 67,598 70,562 163 138,323
Additionally, the Bank also leases office/branch premises under cancelable operating lease agreements. Total lease rental expenditure under cancelable and non-cancelable operating leases debited to profit and loss account in the current year is Rs. 379,269 thousands (Previous year: Rs. 278,140 thousands)
Finance leases
The Bank has taken assets under finance leases/hire purchases. Future minimum lease payments under finance leases are as follows: (Rs.in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total Less : Finance charges Present value of finance lease obligation As at 31 March 2009 1,080 1,890 2,970 (516) 2,454 As at 31 March 2008 1,080 2,970 4,050 (912) 3,138
The present value of finance lease liabilities is as follows: (Rs.in thousands) Particulars Not later than one year Later than one year and not later than five years Later than five years Total As at 31 March 2009 1,003 1,451 2,454 As at 31 March 2008 684 2,454 3,138
114
Notes on accounts
18.10 Earnings Per Share (EPS) The details of EPS computation is set out below: Particulars Earnings for the year (Rs. in thousands) Basic weighted average number of shares (Nos) Basic EPS (Rs.) Dilutive effect of stock options (Nos) Diluted weighted average number of shares (Nos) Diluted EPS (Rs.) Nominal value of shares (Rs.) 18.11 Deferred taxes In accordance with Accounting Standard 22 Accounting for taxes on income issued by the Institute of Chartered Accountants of India, provision for taxation for the year is arrived at after considering deferred tax credit of Rs. 327,470 thousands (Previous year Rs. 349,773 thousands) for the current year. The major components of deferred tax assets and deferred tax liabilities arising out of timing differences are as under: (Rs. in thousands) Particulars Deferred tax assets on account of provisions on leave encashment on investments on pension fund on Gratuity Total deferred tax asset Deferred tax liabilities on depreciation on fixed assets on bad debts claim Total deferred tax liability Net deferred tax assets/(liability) 18.12 Intangibles Gross block Particulars As at 1 April 2008 502,430 502,430 433,978 Additions Deletions 92,753 92,753 72,252 As at 31 March 2009 Application software, which is classified as intangible assets are capitalized as part of fixed assets and depreciated on a straight line basis over its estimated useful life of three years. (Rs. in thousands) Depreciation / Amortization As at Charge As at 1 April for Deletions 31 March 2008 the year 2009 78,224 78,224 55,412 3,800 510,293 510,293 432,069 Net block As at 31 March 2009 84,890 84,890 70,361 133,608 160,738 294,346 1,480,169 154,322 160,738 315,060 1,152,699 550,846 176,760 835,176 211,635 98 1,774,515 424,768 179,778 651,442 211,635 136 1,467,759 As at 31 March 2009 As at 31 March 2008 As at 31 March 2009 1,891,792 102,550,549 18.45 422,835 102,973,384 18.37 10 As at 31 March 2008 1,649,532 95,280,597 17.31 1,246,822 96,527,419 17.09 10
Intangible assets Application software Total Previous year
3,800
595,183 432,069 595,183 432,069 502,430 380,457
115
Notes on accounts
18.13 Related party transactions List of related parties Related parties with significant influence and with whom there are transactions during the year ING Bank N.V. and its branches ING Vysya Bank Staff Provident Fund ING Vysya Bank Staff Gratuity Fund ING Vysya Bank Superannuation Fund ING Vysya Bank (Employees) Pension Fund Key Management Personnel Vaughn Richtor The above list does not include the related parties, which are having transactions with the Bank by way of deposit accounts. (Rs. in thousands) Items / Related Party Investment in Tier I Bonds Related parties with significant influence and with whom there are transactions during the year Maximum 1,078,062 (-) Outstanding 1,078,062 (-) Maximum 1,375,206 (10,000) Outstanding 1,375,206 (10,000) Maximum 1,885,752 (1,069,445) Outstanding 1,885,752 (1,069,445) Maximum 553,884 (515,231) Outstanding 548,246 (510,665) Maximum6,598,680 (-) Outstanding 3,100,288 (-) Maximum 16,534,720 (7,263,235) Outstanding 15,773,920 (6,193,790) Maximum (748,454) Outstanding (-) Key Management Personnel (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Total Maximum 1,078,062 (-) Outstanding 1,078,062 (-) Maximum 1,375,206 (10,000) Outstanding 1,375,206 (10,000) Maximum 1,885,752 (1,069,445) Outstanding 1,885,752 (1,069,445) Maximum 553,884 (515,231) Outstanding 548,246 (510,665) Maximum6,598,680 (-) Outstanding 3,100,288 (-) Maximum 16,534,720 (7,263,235) Outstanding 15,773,920 (6,193,790) Maximum (748,454) Outstanding (-)
Investment in Tier II Bonds
Investment in Upper Tier II Bonds
Deposits kept with Bank including lease deposit
Investment
Borrowing
Call borrowing
116
Notes on accounts
(Rs. in thousands) Items / Related Party Interest received Interest accrued but not due (payable) Purchase and sale of securities Rendering of services Receivable from rendering of services Receiving of services Reimbursement received Receiving of services outstanding Contribution to employee welfare funds - Paid Contribution to employee welfare funds- Payable Managerial remuneration Letter of Credit issued Bank guarantees Received Bank guarantees- Issued Derivative transactions notional outstanding Related parties with significant influence and with whom there are transactions during the year 384,637 (262,929) 74,909 (100,584) 18,374,176 (13,296,776) (1,693) (-) (-) 295,807 (-) (-) 494,656 (170,004) (776,757) (-) 1,040,000 (-) 2,610,250 (1,095,000) 2,277,060 (16,687) Maximum 63,609,230 (29,997,500) Outstanding 63,609,230 (29,698,499) Maximum 62,828,064 (36,531,285) Outstanding 37,433,704 (23,658,213) 45,268 (24,859) 98,078 (75,683) (168,977) 92,330 (16,494) Key Management Personnel (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) 9,850 (9,740) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) (-) Total 384,637 (262,929) 74,909 (100,584) 18,374,176 (13,296,776) (1,693) (-) (-) 295,807 (-) (-) 494,656 (170,004) (776,757) 9,850 (9,740) 1,040,000 (-) 2,610,250 (1,095,000) 2,277,060 (16,687) Maximum 63,609,230 (29,997,500) Outstanding 63,609,230 (29,698,499) Maximum 62,828,064 (36,531,285) Outstanding 37,433,704 (23,658,213) 45,268 (24,859) 98,078 (75,683) (168,977) 92,330 (16,494)
Forward transactions
Premium received Premium paid Premium Receivable Gain on Liquidation
(Previous years figures are given in parentheses)
117
Notes on accounts
18.14 Segmental Reporting: Segment Information Basis of preparation As per the guidelines issued by RBI vide DBOD.No.BP.BC.81/21.01.018/2006-07 dated April 18, 2007, the classification of exposures to the respective segments is now being followed. The business segments have been identified and reported based on the organization structure, the nature of products and services, the internal business reporting system and the guidelines prescribed by RBI. The Bank operates in the following segments: (a) Treasury The treasury segment includes the net interest earnings on investments of the bank in sovereign bonds, corporate debt, mutual funds etc, income from trading, income from derivative and foreign exchange operations and the central funding unit. Retail Banking The retail banking segment constitutes the business with individuals and small businesses through the branch network and other delivery channels like ATM, Internet banking etc. This segment raises deposits from customers, makes loans and provides fee based services to such customers. Exposures are classified under retail banking broadly taking into account the orientation criterion, the nature of product and exposures which are not exceeding Rs. 5 crores. Revenue of the retail banking segment includes interest earned on retail loans, fees and commissions for banking and advisory services, ATM Fees etc. Expenses of this segment primarily comprise the interest expense on the retail deposits, personnel costs, premises and infrastructure expenses of the branch network and other delivery channels, other direct overheads and allocated expenses. Wholesale Banking The wholesale banking segment provides loans and transaction services to large corporate, emerging corporate, institutional customers and those not classified under Retail. Revenue of the wholesale banking segment includes interest and fees earned on loans to customers falling under this segment, fees from trade finance activities and cash management services, advisory fees and income from foreign exchange and derivatives transactions. The principal expenses of the segment consist of personnel costs, other direct overheads and allocated expenses. Other Banking Operations All Banking operations that are not covered under the above three segments. Unallocated All items of which cannot be allocated to any of the above are classified under this segment. This also includes capital and reserves, debt classifying as tier I or tier II capital and other unallocable assets and liabilities. Segment revenue includes earnings from external customers plus earnings from funds transferred to other segments. Segment result includes revenue reduced by interest expense, operating expenses and provisions, if any, for that segment. Inter-segment revenue represents the transfer price paid/received by the central funding unit. For this purpose the present internal funds transfer pricing mechanism has been followed which calculates the charge based on yields benchmarked to an internally developed yield curve, which broadly tracks certain agreed market benchmark rates. Segment-wise income and expenses include certain allocations. The Retail banking and Wholesale banking segments allocate costs among them for the use of branch network etc. Operating costs of the common/shared segments are allocated based on agreed methodology which estimate the services rendered by them to the above four segments.
(b)
(c)
(d)
(e)
Geographic Segments The Bank operates in one geographical segment i.e. Domestic.
118
Notes on accounts
Segment Results for the year ended 31 March 2009 (Rs. in thousands) Corporate/ Other Banking Treasury Retail Banking Total Wholesale Banking Operations Year ended Year ended Year ended Year ended Year ended 31 March 2009 31 March 2009 31 March 2009 31 March 2009 31 March 2009 20,704,210 17,045,590 22,997,435 60,747,235 (15,112,928) 5,591,282 789,608 (5,187,358) 11,858,232 2,203,866 (12,566,698) 10,430,737 1,282,843 (32,866,984) 27,880,251 4,276,317 22,258 4,254,059 (9,590) 253,228 1,032,001 1,906 799,198 As at 31 March 2009 137,518,494 137,518,494 31,174,041 1,275,639 25,990 1,060,638 1,950,638 248,936 1,891,792 As at As at As at As at 31 March 2009 31 March 2009 31 March 2009 31 March 2009 99,850,789 77,381,137 314,750,420 3,867,627 99,850,789 56,988,780 77,381,137 191,897,194 61,415 31,174,041 Treasury Year ended 31 March 2008 15,203,997 (10,682,620) 4,521,377 78,257 56,988,780 191,958,609 318,618,047 280,060,015 21,467,668 17,090,364 318,618,047
Business Segments Particulars Revenue Less: Inter segment revenue Net Revenue Result Unallocated expenses Operating Profit Provisions and contingencies Unallocated provision & contingencies Taxes Net Profit Other Information Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Capital and Reserve & Surpluses Total Liabilities Business Segments Particulars Revenue Less: Inter segment revenue Net Revenue Result Unallocated expenses Operating Profit Provisions and contingencies Unallocated provision & contingencies Taxes Net Profit Other Information Segment Assets Unallocated Assets Total Assets Segment Liabilities Unallocated Liabilities Capital and Reserve & Surpluses Total Liabilities
Segment Results for the year ended 31 March 2008 Corporate/ Other Banking Retail Banking Total Wholesale Banking Operations Year ended Year ended Year ended Year ended 31 March 2008 31 March 2008 31 March 2008 31 March 2008 13,770,473 15,973,305 44,947,775 (4,736,999) (8,459,173) (23,878,792) 9,033,474 7,514,132 21,068,983 1,296,893 1,680,594 3,055,744 (99,114) 3,154,858 (261,100) 816,320 458,841 101,253 (52) 945,232 1,557,993 864,326 1,649,532 As at As at As at As at 31 March 2008 31 March 2008 31 March 2008 31 March 2008 89,634,152 63,795,913 250,685,169 4,724,814 89,634,152 63,795,913 255,409,983 55,596,408 150,192,288 223,062,475 16,933,514 57,420 15,413,994 55,596,408 150,249,708 255,409,983
(96,379)
174,636 As at 31 March 2008 97,255,104 97,255,104 17,273,779
17,273,779
Information is collected as per the MIS available for internal reporting purposes. The methodology adopted in compiling and reporting the segmental information on the above basis has been relied upon by the auditors.
119
Notes on accounts
18.15 Off Balance Sheet Items 18.15.1 Derivative contracts Interest Rate Swaps Particulars i. ii. The notional principal of swap agreements Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements # iii. Collateral required by the bank upon entering into swaps iv. Concentration of credit risk arising from the swaps As at 31 March 2009 189,569,034 1,788,597 Predominantly with Banks ( 78% ) (328,168) (Rs. in thousands) As at 31 March 2008 130,438,309 780,494 Predominantly with Banks (65%) (281,478)
v.
The fair value of the swap book
# MTM netted off counterparty wise. Forward Rate Agreements (FRA) Particulars i. ii. As at 31 March 2009 8,779,666 15,126 (Rs. in thousands) As at 31 March 2008 2,006,000 124,202
The notional principal of FRA Agreements Losses which would be incurred if counter parties failed to fulfil their obligations under the agreements # iii. Collateral required by the bank upon entering into swaps iv. Concentration of credit risk arising from the swaps Banks only (100%) Banks only (100%) v. The fair value of the swap book 189.94 1.01 # MTM netted off counterparty wise. Derivatives: Currency Swaps Particulars i. ii. The notional principal of swap agreements Losses which would be incurred if counter parties failed to fulfill their obligations under the agreements # iii. Collateral required by the bank upon entering into swaps iv. Concentration of credit risk arising from the swaps v. The fair value of the swap book As at 31 March 2009 43,037,434 2,209,882 (Rs. in thousands) As at 31 March 2008 13,776,193 699,525
Predominantly Predominantly with Banks (51%) with Banks (56%) 873,625 290,690
# MTM netted off counter party wise. The Bank enters into derivative contracts such as Interest Rate Swaps (IRS), Forward Rate Agreements (FRA), Currency Swaps (CS) and option agreements. Notional amounts of principal outstanding in respect of IRS, FRA and CS as at 31st March 2009 is Rs 241,386,135 thousands (Previous year Rs. 146,220,502 thousands). Indian Rupee Interest Rate Swaps for the year ended 31 March 2009 Nature Trading Trading Trading Trading Number 124 132 42 46 Total Notional Principal (Rs. thousands) 42,000,000 42,300,000 12,600,000 16,000,000 112,900,000 Benchmark NSE MIBOR NSE MIBOR MIFOR MIFOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable
120
Notes on accounts
Indian Rupee Interest Rate Swaps for the year ended 31 March 2008 Nature Trading Trading Trading Trading Number 120 142 46 46 Total Notional Principal (Rs. thousands) 36,000,000 47,000,000 12,750,000 11,400,000 107,150,000 Benchmark NSE MIBOR NSE MIBOR MIFOR MIFOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable
Forex - Interest Rate Swaps, Currency Swapsand Forward Rate Agreements for the year ended 31 March 2009 Nature Trading Trading Trading Trading Trading Trading Trading Hedging Hedging Number 68 78 22 7 3 4 27 2 4 Total Notional Principal (Rs. thousands) 41,359,123 42,560,271 19,288,788 4,077,563 870,431 2,363,134 10,416,103 3,250,958 4,299,761 128,486,132 Benchmark LIBOR LIBOR LIBOR Principal Principal Principal Principal LIBOR LIBOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Float Receivable vs Float Payable Fixed Pay Fixed Receivable Fixed Received vs Fixed Paid Principal only Swaps Float Receivable vs Float Payable Fixed Payable vs Floating Receivable
Forex - Interest Rate Swaps , Currency Swaps and Forward Rate Agreements for the year ended 31 March 2008 Nature Trading Trading Trading Trading Trading Trading Trading Trading Trading Hedging Hedging Number 14 16 21 1 1 8 3 2 2 1 1 Total Notional Principal (Rs. thousands) 6,000,367 9,181,606 16,598,982 634,375 564,890 1,865,957 360,465 1,516,977 369,649 1,069,445 907,788 39,070,501 Benchmark LIBOR LIBOR LIBOR LIBOR LIBOR Principal Principal Principal Principal LIBOR LIBOR Terms Fixed Payable vs Floating Receivable Fixed Receivable vs Floating Payable Floating Receivable vs Floating Payable Floating Payable Floating Receivable Fixed Payable Fixed Receivable Fixed Receivable vs. Fixed Payable Principal only Swaps Floating Receivable vs. Floating Payable Fixed Payable vs Floating Receivable
The fair value of Rupee and FX IRS, CS and FRA contracts as at 31 March 2009 is Rs. 545,647 thousands (Previous year Rs. 9,213 thousands), which represents the net mark to market gain on swap contracts. As at 31 March 2009 the exposure to IRS, CS and FRA contracts is spread across industries. However based on notional principal amount the maximum single industry exposure lies with Banks at 62.85% (Previous year: 78.17%). In case of an upward movement of one basis point in the benchmark interest rates, there will be a positive impact of Rs.1,568 thousands (Previous year: Rs. 289 thousands) on total Interest Rate Swap trading book including Rupee IRS, FX IRS, CS and FRA. Agreements are with Banks/ Financial Institutions and corporate under approved credit lines. The Options are covered on exactly back-to-back basis and hence have a nil fair value on a net basis. As at 31March 2009 notional outstanding for outstanding option contracts is Rs 97,469,778 thousands (Previous year: Rs 106,535,957 thousands)
18.15.2 Exchange Traded Interest Rate Derivatives, Forward Rate Agreements & Currency Swaps No Exchange Traded Interest Rate Derivatives, Forward Rate Agreements and Currency Swaps were entered during the year ended 31 March 2009 (Previous year: NIL).
121
Notes on accounts
18.15.3 Risk exposure on derivatives The Bank currently deals in various derivative products, i.e., Rupee and Foreign Currency Interest Rate Swaps, Currency Swaps, Forward Rate Agreement, Currency and Cross Currency options. These products are offered to the Banks customers to enable them to manage their exposure towards movement in foreign exchange rates or in Indian / foreign currency interest rates. The Bank also enters into these derivative contracts (i) to cover its own exposures resulting either from the customer transactions or own foreign currency assets and liabilities or (ii) as trading positions. The derivative contracts, as above, expose the Bank to risks such as credit risk and market risk. Credit risk implies probable financial loss the Bank may ultimately incur, if the counter parties fail to meet their obligations. Market risk deals with the probable loss the Bank may ultimately incur as a result of movements in exchange rates, benchmark interest rates, credit spreads etc., to the extent that the exposures are not fully covered by the Bank on a back-to-back basis or as hedge positions. The Bank has established an organization structure to manage these risks that operates independent of investment and trading activities. Management of these risks is governed by respective policies approved by the Board of Directors. While expanding relationship-banking activities, the Bank has put in place a credit policy by defining the internal risk controls. The policy incorporates the guidelines issued by the RBI from time to time and envisages methodologies of identification, quantification of risk on the basis of Loan Equivalent Factor, risk rating and mitigation of the credit concentration risk by stipulating counterparty wise as well as product wise exposure ceiling. ISDA agreements are entered into with counterparties. The Bank has evolved a similar policy for managing market risks through specific product mandates, limits on book sizes, stop loss limits, Value at Risk limits (VaR), Event Risk Analysis, counter party limits, etc. The Bank has also set up an Asset-Liability Management Committee (ALCO) and a RiskManagementReview Committee (RMRC), which monitor the risk on an integrated basis. The market risk and credit risk management teams monitor compliance with the policies on a continuous basis and there is a clearly defined procedure of reporting and ratification of any limit breaches for derivative products. Quantitative disclosure: Sl. No (i) Particulars Derivatives (Notional Principal Amount) * a) For hedging b) For trading Marked to Market Positions a) Asset (+) b) Liability (-) (iii) Credit Exposure (iv) Likely impact of one percentage change in interest rate (100*PV01) # a) on hedging derivatives b) on trading derivatives (v) Maximum and Minimum of 100*PV01 # a) on hedging - Maximum - Minimum b) on trading - Maximum - Minimum # Amounts stated are inclusive of impact of Currency swaps and Interest Rate Swaps. * Does not include notional of Forward contracts and Currency options, trading or hedging. 90,129 28 69,197 150 (Rs. in thousands) Currency derivatives Interest rate derivatives As at As at As at As at 31 March 2009 31 March 2008 31 March 2009 31 March 2008 7,550,719 35,486,715 2,439,926 1,566,300 7,031,208 1,977,233 11,798,960 777,535 486,845 1,411,597 198,340,701 3,572,301 3,900,280 5,356,859 132,444,309 1,311,787 1,593,265 1,742,909
(ii)
236,495 (79,727)
30,126 (1,224)
247,520 20,458
37,423 30,102
122
Notes on accounts
18.16 Capital (Tier I and Tier II) raised during the year 2008-09 During 2008-09, the Bank has raised Tier I and Tier II capital as mentioned below: (Rs in thousands) Sl. No Instrument 1 2 3 Lower Tier II Bonds Tier I Bonds Upper Tier II Bonds Amount Date of allotment Tenor 10 years Perpetual 15 years Interest Rate Mode of Issue 1,500,000 15 July 2008 947,100 23 October 2008 1,998,200 23 January 2009 10.40% Private Placement 3 Month Libor+ 400 basis points Private Placement 3 Month Libor+ 230 basis points with step up option of 100 basis point after 10 years 9.65% Private Placement
Lower Tier II Bonds
600,000 31 January 2009
10 years
Private Placement
18.17 Gratuity, Pension and Leave Benefit plans The Bank has non-contributory defined benefit plans in respect of Gratuity, Pension & Leave Encashment. The Gratuity & Pension schemes are funded out of Trust fund set up for this purpose separately. In case of IVFSL it has a defined gratuity plan. It has a policy for availment of leave and it does not provide for encashment of leave. The following tables summarize the components of net benefit expense recognized in the profit and loss account and the funded status and amount recognized in the balance sheet for the respective plans. Profit and Loss account: - Net employee benefit expense (recognized in Employee Cost) (Rs. in thousands) Particulars 1. Current service cost 2. Interest cost on benefit obligation 3. Expected return on plan assets 4. Net actuarial (gain)/ loss recognized in the year 5. Past service cost 6. Net expenses (1+2+3+4+5) 7. Transitional liability 8. Net expenses recognized in Profit & Loss account ( 6-7) Actual return on plan assets Gratuity 51,352 45,126 (52,716) (40,210) 3,552 3,552 59,737 45,443 44,304 (51,028) (87,389) (48,670) (48,670) 26,195 Pension 130,405 124,717 (103,073) 133,947 285,996 285,996 96,068 102,310 90,319 (73,072) 70,585 619,761 809,903 622,640 187,263 85,000
31 March 2009 31 March 2008 31 March 2009 31 March 2008
(Rs. in thousands) Particulars 1. Current service cost 2. Interest cost on benefit obligation 3. Net actuarial (gain)/ loss recognized in the year 4. Past service cost 5. Net expenses (1+2+3+4) 6. Transitional liability 7. Net expenses recognized in Profit & Loss account ( 5-6) Leave encashment 31 March 2009 9,615 25,477 (2,430) 32,662 32,662 31 March 2008 10,884 12,496 185,923 3 209,306 110,698 98,608 Leave availment 31 March 2009 20,143 11,626 (10,194) 21,575 21,575 31 March 2008 19,076 10,491 (5,707) 131,150 155,010 131,106 23,904
123
Notes on accounts
Balance Sheet - Details of Provision for Gratuity, Pension and Leave (Rs. in thousands) Particulars Present value of obligation Fair value of plan assets Liability (Assets) Liability (Asset) recognized in the Balance Sheet Gratuity 31 March 2009 31 March 2008 584,575 607,879 (633,200) (652,552) (44,673) (44,673) (48,625) (48,625) Pension 31 March 2009 31 March 2008 1,886,910 1,726,164 (1,220,561) 666,349 666,349 (949,400) 776,764 776,764 (Rs. in thousands) Particulars Present value of obligation Fair value of plan assets Liability (Assets) Liability (Asset) recognized in the Balance Sheet Leave encashment 31 March 2009 31 March 2008 343,450 349,241 343,450 343,450 349,241 349,241 Leave availment 31 March 2009 31 March 2008 176,585 155,010 176,585 176,585 155,010 155,010
Changes in the present value of the defined benefit obligation are as follows: (Rs. in thousands) Particulars Opening defined benefit obligation Interest cost Current service cost Benefits paid Actuarial (gains) / losses on obligation Closing defined benefit obligation Gratuity 31 March 2009 31 March 2008 584,975 642,946 45,126 51,352 (40,386) (33,188) 607,879 44,303 45,443 (35,495) (112,222) 584,975 Pension 31 March 2009 31 March 2008 1,559,622 1,726,164 124,717 130,405 (221,318) 126,942 1,886,910 90,319 102,310 (108,600) 82,513 1,726,164 (Rs. in thousands) Particulars Opening defined benefit obligation Interest cost Current service cost Past Service Cost Benefits paid Actuarial (gains) / losses on obligation Closing defined benefit obligation Leave Encashment 31 March 2009 31 March 2008 169,105 349,241 12,496 25,477 9,615 (38,453) (2,430) 343,450 10,884 (29,167) 185,923 349,241 Leave Availment 31 March 2009 31 March 2008 131,106 155,010 10,491 11,626 20,143 (10,194) 176,585 19,076 44 (5,707) 155,010
The Changes in the fair value of plan assets are as follows: (Rs. in thousands) Particulars Opening fair value of plan assets Expected return Contributions by employer Benefits paid Actuarial gains / (losses) Closing fair value of plan assets Gratuity 31 March 2009 31 March 2008 633,200 52,716 (40,385) 7,021 652,552 642,500 51,028 (35,495) (24,833) 633,200 Pension 31 March 2009 31 March 2008 949,400 103,073 396,411 (221,318) (7,005) 1,220,561 877,400 73,072 95,600 (108,600) 11,928 949,400
Previous four annual years figures are not disclosed as revised AS 15 was applicable from 2007-08
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Notes on accounts
The major categories of plan assets as a percentage of the fair value of total plan assets are as follows: Particulars Investments with insurer Investment in Government/ PSU bonds/securities Gratuity 31 March 2009 100% 31 March 2008 100% 100% Pension 31 March 2009 31 March 2008 100% -
Principal assumptions used in determining gratuity, pension & leave encashment obligations for the Companys plans are shown below: Particulars Discount rate (%) p.a. Expected rate of return on assets (%) Employee turnover % p.a. Gratuity 31 March 2009 7.99 8.02 1 (IBA), 28 (Others) 31 March 2008 8.00 8.00 2 (IBA), 28 (Others) Pension 31 March 2009 7.72 9.50 1 (IBA) 31 March 2008 8.00 8.00 2 (IBA)
Particulars Discount rate (%) p.a. Expected rate of return on assets (%) Employee turnover % p.a.
Leave encashment 31 March 2009 7.72 N.A. 1 (IBA), 28 (Others) 31 March 2008 8.00 N.A 2 (IBA), 28 (Others)
Leave availment 31 March 2009 7.99 N.A. 1 (IBA), 28 (Others) 31 March 2008 8.00 N.A 2 (IBA) 28 (Others)
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market. With respect to defined benefit plans, the Bank is yet to determine the contributions expected to be paid to the plans during the annual period beginning 1 April 2009.
18.18 Additional Disclosure Additional statutory information disclosed in separate financial statements of the parent and subsidiaries having 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.
18.19 Other Disclosures 18.19.1 Penalties levied by RBI on the Bank During the year there were no penalties levied by RBI on the Bank (previous year Nil.) 18.19.2 Penalty imposed by Securities and Exchange Board of India (SEBI)
During November 2006, SEBI passed disgorgement order on the Bank for failure / negligence in adherence to the Know Your Customer (KYC) norms by SEBI. As per the order, Bank faced a liability of Rs.5,548 thousands. The Bank preferred an appeal before Securities Appellate Tribunal. The Appeal before the Securities Appellate Tribunal (SAT), Mumbai came up for decision on 11 January 2007. The SAT observed that the disgorgement order was passed though the guilt of the Bank was not established and that none of the parties were given a hearing nor was it established that the Bank had indeed benefited from the ill gotten gains. Hence, on these grounds the court set aside the disgorgement order. Pursuant to the above, an enquiry proceeding was initiated under SEBI (PHEEOIP), Regulations, 2002. A show cause notice was issued on the Bank, which was replied to and hearings were held. Subsequently, SEBI has accepted our consent proposal and settled the matter by passing a consent order dated 17 February 2009. An amount of Rs 4 lakh was paid as settlement charges as per the consent order.
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Notes on accounts
18.19.3 Letters of Comforts issued by the Bank
The Bank has issued 153 letter of comforts/ undertaking amounting to Rs. 6,469,577 thousands, which was outstanding as on 31 March 2009. 18.19.4 Previous years figures
Previous years figures have been regrouped / recast, where necessary, to conform to current years presentation.
Signatures to Schedules 1 to 18
K.R. Ramamoorthy Chairman Place : Bangalore Date : 28 April 2009
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CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH 2009
(Rs in thousands) PARTICULARS (A) Cash Flow from Operating Activities Net Profit before Tax and Extraordinary Items Adjustments for : Depreciation charges Employee compensation expense (ESOS) Provision/write off of Advances Profit on revaluation of investment Provision for Standard Assets Other Provisions Lease Adjustment Account (Profit)/Loss on Sale of Non banking Assets (net) (Profit)/Loss on Sale of Assets (net) (Profit)/Loss on foreign exchange revaluation Dividend received from subsidiary/others Cash Generated from Operation Less: Direct Taxes Paid Adjustments for : Decrease / (Increase) in Advances Decrease / (Increase) in Other assets Non-Banking Assets sold Decrease/ (Increase) in Investments Increase / (Decrease) in Deposits Increase / (Decrease) in Other liabilities Increase/ (Decrease) in Borrowings Net Cash flow from / (used in) Operating Activities (B) Cash Flow from Investing Activities Movement in Work in Progress Purchase of Fixed assets / leased assets Sale of Fixed assets/ Leased assets Dividend received from subsidiary/others Sale proceeds - investments Net Cash flow used in Investing Activities (C) Cash Flow from Financing Activities Proceeds from issue of shares Share premium collected Dividend Paid Subordinated Debt -Tier II Bonds ( Including Innovative Perpetual Debt Instrument) Net Cash Flow from Financing Activities Net Increase/ (Decrease) in Cash and Cash Equivalents Cash and Cash equivalents as at the beginning of the year (Including Money At Call and Short Notice) Cash and Cash equivalents as at the end of the year (Including Money At Call and Short Notice) As per our report of even date For S. R. Batliboi & Co. Chartered Accountants per Viren H. Mehta Partner Membership No: 048749 Place : Bangalore Date : 28 April 2009 For and on behalf of the Board 31 March 2009 2,952,103 436,384 21,184 1,063,400 505,775 153,300 131,402 (24,824) (10,847) (45,959) (568,630) (3,000) 4,610,288 930,148 3,680,140 (21,363,569) (8,892,426) 29,343 (42,527,048) 44,186,147 2,395,324 9,026,123 (13,465,966) (301,791) (506,881) 55,863 3,000 (749,809) 1,298 9,662 (179,833) 5,359,575 5,190,702 (9,025,073) 31,847,589 22,822,516 115,695 3,384,052 (70,821) (1,406,866) 2,022,060 15,930,551 15,917,038 31,847,589 (124,640) 988,052 81,976 35,226 980,614 (27,166,527) (3,281,852) 1,123,113 (18,108,376) 50,433,498 4,132,116 4,062,522 12,927,877 31 March 2008 2,516,805 422,490 17,762 359,997 453,311 157,600 138,876 (1,348,914) (184,438) (33,813) 60,732 (45,177) 2,515,231 781,848 1,733,383
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BASEL II PILLAR 3 DISCLOSURES - 31ST MARCH 2009

1. Scope of application ING Vysya Bank is the controlling entity for the group, which includes its wholly owned subsidiary ING Vysya Financial services Limited (IVFSL). IVFSL is engaged in touch point verification for liability products on behalf of the Bank. The consolidation with the subsidiary ING Vysya Financial Services Limited is as per Accounting Standard 21 (AS-21). While computing the consolidated Banks Capital to Risk Weighted Assets Ratio (CRAR), the Banks investment in the equity capital of the wholly owned subsidiary is deducted 50% from Tier 1 capital and 50% from Tier 2 capital. The subsidiary of the Bank is not required to maintain any regulatory capital. The Bank has no interest in any insurance entity. Capital Structure The authorized equity share capital of the Bank is Rs.350 Crore consisting of 35 Crore equity shares of Rs.10/- each. As of March 2009, the issued and subscribed capital stood at Rs.102.93 Crore consisting of 10.29 Crore of equity shares of Rs.10/- each. The paid up share capital is Rs.102.60 Crore consisting of 10.26 Crore equity shares of Rs. 10/- each. The equity share capital of the Bank is as per the provisions of the Companies Act, 1956 and any other applicable laws or regulations. The debt capital of the Bank includes perpetual debt that qualifies as Tier 1 capital and subordinated and upper tier 2 debt that qualifies for inclusion as Tier 2 capital. The tier 1 perpetual bonds are non-cumulative and perpetual in nature and carry a call option after 10 years with an interest step up of 100 bps. The interest on these bonds is payable quarterly. The Upper tier 2 bonds are cumulative in nature with an original maturity of 15 years and a call option after 10 years. There is an interest step up option after 10 years of 100 bps. The interest on these bonds is payable quarterly. The Lower tier 2 bonds are cumulative and have an original maturity between 9-10 years. The interest on these bonds is payable annually. The repayment of principal and payment of interest on all the types of bonds mentioned above are as per the RBI regulations issued in this regard. Capital Funds Tier I Capital Tier II Capital Total Capital Funds Tier I Capital Paid-up Capital Reserves and Surplus Innovative Perpetual Debt Instruments Total Tier I Capital (Unadjusted) Deductions Investments in Subsidiaries Deferred Tax Asset Other Intangible Assets Total Deductions Total Tier I Capital (Adjusted) Tier II Capital Upper Tier II Bonds Subordinated Debt eligible for Lower II Revaluation Reserves General Provisions and loss Reserves Others Total Tier II Capital (Unadjusted) Deductions Investments in Subsidiaries Total Deductions : Total Tier II Capital (Adjusted) (Rs. in Crore) 1,516.32 1,046.09 2,562.41
2.
102.60 1,476.94 94.71 1,674.25
1.05 147.87 9.01 157.93 1,516.32
322.14 560.00 48.95 105.93 10.12 1,047.14
1.05 1.05 1,046.09
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Debt capital instruments eligible for inclusion under Tier-1 and Tier-2 capital Tier 1 Total amount outstanding as at 31 March 2009 INR and Foreign currency Amount raised during the year INR and Foreign currency Amount eligible to be reckoned as capital funds - INR Note: FCY amounts are reported in INR at the fx rate as at 31 March 2009. 3. Capital adequacy The Capital adequacy assessment process of the Bank is intended to ensure that adequate level of capital and an optimum mix of the different components of capital is maintained by the Bank to support its strategy. This is integrated with the Banks annual planning process that takes into consideration the growth assumptions across business segments and mapping of the relevant risk weights to this projected growth so that adequate capital is maintained to cover the minimum regulatory requirement and a reasonable cushion over the regulatory minimum. Capital is actively managed at an appropriate level of frequency and regulatory ratios are a key factor in the Banks budgeting and planning process with updates of expected ratios reviewed regularly during the year by Asset and Liability Committee (ALCO). The Banks ALCO has set internal triggers and target ranges for capital management, and oversees adherence with these on an ongoing basis. The Board also oversees the capital adequacy of the Bank on a quarterly basis. Summary of the Banks capital requirement as at 31 March 2009 is presented below: Amount (Rs. in Crore) A Capital requirements for Credit Risk Portfolios subject to standardized approach Securitization exposures Capital requirements for Market Risk Standardized duration approach Interest rate risk Foreign exchange risk (including gold) Equity risk Capital requirements for Operational Risk Basic Indicator approach Capital Adequacy Ratio of the Bank Tier 1 CRAR 1,792.30 77.61 67.56 9.00 1.05 110.04 11.65% 7.00% 108.01 (JPY 2.09 bln) 108.01 (JPY 2.09 bln) 94.71 Upper Tier 2 325.73 (JPY 6.31 bln) 199.82 (JPY 3.66 bln) 322.14
(Rs . in Crore) Lower Tier 2 600.00 210.00 560.00
4.
Credit risk General disclosures Credit risk management Policy framework For the identification, measurement, mitigation, monitoring and governance of Credit Risk, the Bank has laid down various Policies like Credit Risk Policy, Country Risk Policy, Counterparty Risk Policy, Customer Appropriateness and Suitability Policy, and Break Clause Policy. Other documents related to the New Capital Adequacy Framework implementation in the Bank like Stress Testing Policy, ICAAP Policy, Credit Risk Mitigation and Collateral Management Policy have also been laid down. The policies generally define - Exposure Norms, - Underwriting standards,
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- Regulatory requirements, and - Negative list and restricted exposures. These policies are reviewed annually or more frequently if required. Exhaustive Credit Risk manuals and guidelines detailing the mode of implementation of the policies have also been put into practice. Credit risk management Structural framework Risk Management & Review Committee of the Board (RMRC) is responsible for managing Credit Risk function, among others, and meets at least once a quarter. Credit Risk Management Department (CRMD), headed by Chief Risk Officer (CRO), manages this function at the departmental level, both at Corporate Office and Regional levels. The CRO is assisted by senior executives dealing with credit risk of Wholesale assets, Retail assets and Consumer Finance portfolio, to ensure that growth in business is consistent with the internal risk appetite of the Bank and the credit quality of the portfolio is maintained at all times. Specialized Credit Risk Officers handle risk areas of Counterparty Risk, Country Risk, etc. The organization structure further consists of:
Credit Policy Committee, reporting to RMRC, which is involved in formulating all relevant policy guidelines and procedures, and for immediate action on RBI guidelines on credit related matters; Board Credit Committee, Executive Credit Committee, Zonal Credit Committee, and other executives at Corporate Office, Zonal Offices and Regional Offices, who have delegated credit approval power, as per well-defined guidelines; Operations Department to assure high standards of loan documentation, security creation and compliance with pre-disbursal terms and conditions; Asset Recovery Committees and Loan Review Department, which track delinquencies, identify Watch List accounts, and give guidance on remedial management; Collections Department and Special Loans Management Group (SLMG), which is involved in recovery and management of delinquent accounts including enforcement of securities, legal action through Debt Recovery Tribunal (DRT) or other processes, etc. SLMG also computes the loan loss provisions as per regulatory requirements; Credit Audit Department, which performs the on-site audit of loans.
Credit risk management models / methods / processes The Credit Risk Policy is a business oriented statement, within the purview of regulatory requirements. It is one of the core Credit Risk Management documents, and is reviewed at least once in a financial year, or more frequently if necessitated by the changing business environment. The policy describes what constitutes an Acceptable Borrower / Facility for the Bank. It also adheres to assessing financial requirements of the borrower, and specifies the exposure and the product lending norms. The exposure norms- prudential, industry, sector, etc., are also outlined in this document. The policy also specifies the norms relating to review / renewal of loans, conducting of sample review of credit approvals by higher authorities, conducting of portfolio review and review of irregular / stressed accounts. In addition, there are Restricted Lists of industries to which either exposures should not be taken or taken selectively by the Bank. The Negative Lists of industries / activities to which Bank ensures that exposures are not taken are in areas which are not in line with the Risk Appetite statement of the Bank. The Bank follows the below mentioned principles to manage credit risk: Standard appraisal and underwriting standards for approval of credit exposures is followed. Different rating models, depending upon the type of borrower and size of exposure, are prescribed. For corporates, commodity traders, banks & financial institutions, etc., appropriate Basel Compliant Rating Models (developed originally by ING) are followed. For emerging corporate, SME and certain types of agriculture exposures, an internally developed rating model is in place. Basel Compliant models for these exposures are under development. Consumer assets and certain templated products under SME are put through score card based selection methods.
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Credit policy prescribes exposure and tenor caps based on risk rating of the borrower. Individual and group exposure norms, as per the Prudential Norms of RBI are followed. These guidelines ensure that there is no credit concentration on any individual corporate or group. Apart from this, a Risk-grid has been established, where individual exposure limits and tenors are capped based on risk rating of the company/borrower. To ensure dispersal of credit risk across different industries / segments, the Bank has prescribed specific ceilings on those industries where it has exposures. There is emphasis on efficient credit administration, comprising of obtaining proper legal documentation, putting through dayto-day transactions, periodical unit visits and security verification, monitoring & follow-up and recovery. Country risk, counterparty risk are reviewed by specialized desks and deviations from established procedures or limits are reviewed on a regular basis by various Committees like Executive Credit Committee (ECC), RMRC, etc. Credit Audit is conducted at various offices which act as dispensation points / approval authorities in addition to vertical audit of various credit products. Risk based audit of branches also addresses credit risk aspects at the time of audit of branches / offices. In addition to this, risk department visits branches and conducts sample reviews of credits approved at the branch / business unit level for better credit administration. As a general principle, the Credit Risk Policy stipulates churning of 5% of accounts on a Year-on-Year basis. Stress testing and scenario analysis A detailed Stress Testing framework and a process of stress testing is already in place as elaborated in our Stress Testing Policy. The Policy applicable to the Bank is in accordance with the RBI circular DBOD.No.BP.BC.101/21.04.103/2006-07 on stress testing. Obligor Risk, Portfolio Risk, Concentration Risk, Exposure Risk, Environmental Risk, Model Risk and Analytics risks have been incorporated in this document. As a part of this exercise, Capital Assessment Model for Credit Risk function (for Basel II Standardized Approach) is implemented. Significant Risk Factors affecting the Bank in the preceding year with respect to default levels and economic conditions and management reactions to the same CRMD constantly reviews credit growth, portfolio concentrations, delinquencies, NPA accretions, etc., at regular intervals. Based on this, decisions like tightening product norms, discontinuing certain products in specified geographies, moderating sector exposures, exiting potential problem accounts, etc., are taken. These are reviewed at Zonal and Corporate Office levels. The Executive Asset Recovery Management Committee (EARMC) at the Corporate Office (for outstanding of Rs 1crore) and Regional EARMCs (for outstanding of < Rs 1crore) are the acting bodies for reviewing irregular accounts and suggest strategies for recovery. Portfolio / Industry / Product reviews are placed to the Risk Management Committees for their review and feedback. In the current financial year, increased stress in borrower accounts and consumer loans was noticed. This was mainly due to the slowing down of the economy, reduced exports from India, elongated working capital cycle and job losses in some segments etc. Appropriate remedial steps were and are being taken to address the situation. Due to volatile foreign exchange rate movements, negative MTM exposures were noticed for some customers on whom the Bank had taken Derivative exposures. These were dealt with appropriately based on size and complexity of the problem. Restructuring of loans affected by business slow-down or for other valid reasons, was done in accordance with RBIs guidelines. Agricultural loans that were eligible for Debt Waiver and Debt Relief schemes of Govt. of India were given the benefit. Definitions of past due and impaired within the Bank Bank follows the prudential norms prescribed by RBI and the definitions of Past due, Out of Order and Overdue are as under: 1. Impaired / Non Performing Assets (NPAs)
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An asset, including a leased asset, becomes non-performing when it ceases to generate income for the bank. A 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 in respect of an overdraft / Cash Credit (OD / CC); c) a bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted; d) for short duration crop loans, an installment of principal or interest thereon remains overdue for two crop seasons; e) for long duration crop loans, an installment of principal or interest thereon remains overdue for one crop season. The Bank classifies an account as NPA only if the interest charged during any quarter is not serviced fully within 90 days from the end of the quarter. 2. Out of order / past due 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 for a continuous period of 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 also regarded 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. Overdues greater than 30 days are reviewed at regular intervals. Overdues greater than 60 days are included in Watch List / Stressed Accounts and monitored on continuous basis. Credit risk exposure Gross Credit Risk Exposures as on 31-03-09 Fund based exposures Non fund based exposures Rs. in Crore 25,350.69 (including investments) 6,919.31 (including derivatives)
The Bank has exposures in the domestic segment only. Distribution of credit risk exposure by Industry type Fund based exposures (Rs. in Crore) 1,361.47 3,859.14 876.76 1,469.36 579.33 205.17 3,921.14 13,078.32 25,350.69 Non-fund based exposures (Rs. in Crore) 0 433.96 0 75.00 0 0 0 6,410.35 6,919.31 Total (Rs. in Crore) 1,361.47 4,293.1 876.76 1,544.36 579.33 205.17 3,921.14 19,488.67 32,270.00
Industry classification Agri and allied activities Industry - Micro and Small Services Trade CRE NBFC CF Others Total
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Residual contractual maturity breakdown of assets Rs. in Crore Maturity Bucket 1 to 14 days 15 to 28 days 29 days to 3 months Over 3 months and up to 6 months Over 6 months and up to 1 year Over 1 year and up to 3 years Over 3 years and up to 5 years Over 5 years Total Movement of NPAs and Provision for NPAs Amount of NPAs (Gross) Rs. in Crore 204.88 45.90 31.18 7.62 23.62 Cash and Balances with Investments Banks 1,304.01 70.39 174.53 199.86 287.02 62.74 81.39 102.31 2,282.25 4,044.21 512.01 975.41 1,177.02 1,525.49 598.94 553.93 1,108.52 10,495.54 Advances 2,186.21 1,696.67 1,935.66 1,972.34 1,985.15 3,045.59 1,856.16 2,073.14 16,750.93 Other Assets including Fixed Assets 65.96 21.97 110.60 45.91 816.08 247.16 482.91 537.69 2,328.27
Substandard Doubtful 1 Doubtful 2 Doubtful 3 Loss Net NPAs: Rs. 205.95 Crore NPA Ratios: Gross NPAs to gross advances Net NPAs to net advances Movement of NPAs (Gross)
1.86% 1.23%
Opening balance as on 1-04-08 (+) Additions (-) Reductions Closing balance as on 31-03-09 Movement of provisions for NPAs
Rs. in Crore 203.15 331.81 221.76 313.20
Opening balance as on 1-04-08 (+) Provisions made during the period (-) Write-off (-) Write-back of excess provisions Closing balance as on 31-03-09 Movement of Non-Performing Investments (NPIs) and Provision for depreciation on investments Amount of Non-Performing Investment: Nil Amount of provisions held for non-performing investments: Nil
Rs. in Crore 86.91 106.43 89.53 0.00 103.81
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Movement of provisions for depreciation on investments Rs. in Crore Opening balance as on 01.04.2008 (+) Provisions made during the period (-) Write-off/Write-back of excess provisions Closing balance as on 31.03.2009 14.67 8.79 5.88
5.
Credit Risk: Disclosures for Portfolios subject to the Standardized Approach Use of rating agencies The Bank has entered into a Memorandum of Understanding (MoU) with three (ICRA, CRISIL, Fitch) of the four External Credit Rating Agencies (ECRAs). The MOUs provide for extending concessional fees by the ECRAs, and do not contain an exclusivity clause to deal with. Borrowers have the option of approaching any of the RBI approved ECRAs, and get themselves rated. Where bank loan ratings are available (mainly Corporates and PSEs) in the public domain, these are used, and where not available, public issue ratings of RBI approved ECRAs are reviewed for applicability and used accordingly. The rules applied while using public issue ratings and transferring the same to comparable assets in the banking book are as per the RBI requirements. The Bank uses the ratings assigned for any type of exposure by any of the ECRAs, as accepted and provided by the borrowers. While applying these ratings, the rules specified by RBI like date of assignment of rating, selection of rating from multiple ratings available, etc. are followed. Details of Gross credit exposure based on Risk Weight Amount outstanding (Rs. Crore) as on 31-03-09 16,013.17 15,086.84 1,169.99 Nil
Risk bucket Below 100% risk weight 100% risk weight More than 100% risk weight Deducted 6. Credit Risk Mitigation: Disclosures for Standardized Approaches
Policies and processes for collateral valuation and management The Credit Risk Mitigation and Collateral Management Policy approved by the Board sets the framework for collateral acceptability, valuation and management within the Bank. This covers the types of collateral taken by the Bank and defines the process for valuation and management of these collaterals. This covers collateral management on a Macro level and from Basel point of view. Bank has adopted netting off of Banks own deposits, Government Securities, Debt Oriented Mutual Funds and gold, wherever the Collateral is identifiable, marketable and enforceable and complies with the RBI requirements. Sovereign exposures and Sovereign guaranteed exposures are risk weighted as per RBI directives. A system of physical verification /periodical updation of the valuation of the collateral (within a period not exceeding three years) is followed. Periodicity for unit visits also is prescribed in the Credit Risk Policy and the Credit Risk Manuals. The Bank has set up Centralized Asset Processing Units (CAPUs) at all important centres to ensure perfection of documentation and to comply with charge registration matters. Electronic filing of Charge Registration with ROC in digital format is ensured by CAPU. Insurance of securities is also assured. The Bank complies with RBI requirements for collateral eligibility to be treated as a Credit Risk mitigant.
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Types of collateral taken by the Bank The main types of collateral taken by the Bank are Current Assets, Plant and Machinery, Land and Building, Liquid Assets like gold, cash or fixed deposits with the Bank, Capital Market related collateral, Guarantees provided by promoters/ Central Government/ State Government/ Banks/ Financial Institutions/ Other Corporates/ ECGC, etc. Type of Guarantor / Counterparty and their Credit Worthiness The types of guarantees recognized for credit risk mitigation are guarantees by Central Government, State Governments, ECGC, Banks and Corporates. The effect given for these guarantees are in line with RBI stipulations. Concentration risk within the Credit Risk Mitigants taken The Bank does not face concentration risk arising out of certain types of borrowers/ industries/ tenor as Caps have been set and are monitored. Concentration risk in terms of the mitigation taken also does not arise as the range of collateral taken, the type of borrower offering it, the location of the collateral are varied. The Exposure covered by eligible financial collateral after the application of haircuts is Rs. 984.01 Crore as at 31 March 2009. This does not include the impact of guarantor benefit. 7. Securitization: Disclosure for Standardized Approach The Bank purchases / sells loans through securitization and direct assignments. The primary objective for undertaking securitization activity by the Bank are enhancing liquidity; optimize the usage of capital and churning assets as part of risk management strategy. The Bank enters into purchase / sale of home and vehicle finance loans through SPVs/ assignment. In most of the cases, the role played by bank is that of an investor. The Bank follows the standardized approach prescribed by the RBI for the securitization activities. In accordance with the RBI guidelines, with effect from 1 February 2006, the Bank accounts for any loss arising from securitization immediately at the time of sale. The profit/premium arising from securitization is amortized over the life of the securities issued or to be issued by the special purpose vehicle to which the assets are sold. In the financial year ended 31 March 2009, the Bank has not securtised any assets as an originator and does not have any impaired/ past due assets securitized or losses recognized in the current period. The total outstanding exposures securitized by the Bank and subject to securitization framework as on 31 March 2009 is Nil Aggregate amount of securitization exposures retained or purchased as on 31st March 2009 S. No 1. 2. 3. 4. Type of securitization Securities purchased - Home and Home equity loans Liquidity facility Credit enhancement Other commitments (Rs. in Crore) Amount 120.00 Nil Nil Nil (Rs. in Crore) Amount 120.00 -
Risk weight bands of securitization exposures on the basis of book value Risk weight bands Less than 100% 100% More than 100% Deductions - Entirely from Tier I capital - Credit enchasing I/Os deducted from Total Capital - Credit enhancement (cash collateral)
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Comparative position of two years of the portfolio securitized by the Bank Sl. No 1. 2. 3. 4. 5. Type of Securitization Total number of loan assets securitized - Corporate Loan (in numbers) Total book value of loan assets securitized - Corporate loan Sale consideration received for securitized assets Gain / loss on sale on account of securitization Form and quantum (outstanding value) of service provided - Credit enhancement - Outstanding servicing liability - Liquidity support As at 31 March 2009 (Rs. in Crore) As at 31 March 2008 3 140.00 140.30 0.30 -
8.
Market risk in trading book Market risk management policy framework The base for management of market risk is the Board approved Investment Policy that lays down the scope. It also reflects the market risk appetite of the Bank and lays down adherence to regulatory guidelines. All limit types pertaining to investment or trading activities are detailed in this policy. In addition, product mandates control the type and nature of products invested or traded in. The Board has approved the Investment Policy for the financial year 2008-09. The policy is reviewed on a half-yearly basis or earlier as deemed appropriate.
Market Risk Management governance framework The Market Risk Management Department (MRMD) reports to the CRO. MRMD identifies, measures, reports and controls the market risk exposures in the Bank. The market risk due to the volatility of market variables is managed by active monitoring of Board-approved limits. Further to limit setting and monitoring, the Banks market risk is monitored through statistical tools like VaR, bpv, PV01 and event risk calculations on all trading portfolios. The Board and senior management are kept informed of the market risk issues and exposures on a regular basis. The Board approves the objectives, processes and policies of the market risk department. At regular intervals, notes are placed before the senior management and Board to assess the treasury operations and market risks inherent in such operations. The treasury review is placed on a monthly basis and includes a separate section on market risk. Any approval for limit excesses is sent to the appropriate authority (including the Board, if required) as per the Investment Policy on delegated authority. ALCO actively meets and discusses the Investment, interest rate risk and liquidity issues besides looking into Asset Liability Management (ALM) and investment policies related matters. The Financial Markets Department (FM), on behalf of ALCO, manages the day-to-day operations. ALCO reports to the Board through the RMRC. The Market Risk Management Department in the Bank operates independently of the treasury dealing room. It monitors the operations of the treasury front office and checks the limits as laid down in the policy. The exposures are reported finally to management. Financial Market Operations operates independently of the dealing room, with its own independent processing systems. Their staff handles all confirmations, payments and authorizations in the Financial Market operations systems, etc.
Market risk management models/ methods/ processes The tools used for measuring, monitoring and controlling market risks are commensurate with the nature and composition of the investments and trading activities of the Bank.
136

Limit checks, revaluation and pricing of securities are independently done on a daily basis through MRMDs own systems. The Bank uses an in-house developed module to capture VaR, and the same is back tested for model effectiveness as well. The variance covariance method is used for calculating VaR for a 1-day horizon at 99% confidence level. Historical method is used to calculate FX-Options VaR. 250-days historical simulation is applied at 99% confidence. The module also calculates the bpvs and stress scenarios. FX risk in the books is independently controlled on an overall basis by MRMD through monitoring: Day light limits Overnight limits Nostro limits Stop loss limits Gap limits Overall Position limits The Investment Policy does not allow any fresh equity positions. The current minor equity positions are largely illiquid but the Bank explores the possibility of a sale as and when an opportunity arises. Stress testing and scenario analysis The framework and scenarios for stress testing have been outlined in detail in the Market Risk Measurement Policy. While the Value at Risk methodology assumes normality, reality has shown problems with this assumption. In general, it turns out that extreme scenarios are more likely to happen than what is to be expected under the assumption of normality. In order to be aware of extreme swings, the Bank undertakes stress tests. For event risk, a set of possible combinations is calculated. Based on the outcome of the results, limits may be adjusted and re-approved by competent authority. There are broadly two categories of stress tests used, viz. sensitivity and scenario tests. Sensitivity tests are normally used to assess the impact of change in one variable on the Banks position. Scenario tests include simultaneous moves in a number of variables. As per Basel II, the stress test limits are set in such a way that it never exceeds more than 20% of the Banks capital. Accordingly, the other risk limits are derived from this principle. Portfolios covered by standardized duration approach The following portfolios are covered by the standardized duration approach: AFS (available for sale) HFT (held for trading) for MM, FX and derivatives FX from banking books Capital requirements for Market Risk Interest Rate (a+b) Equity(a+b) Foreign Exchange and Gold Total Capital Charge for Market Risk RWA for market risks a. General Market Risk b. Specific Risk a. General Market Risk b. Specific Risk (Rs. in Crore) 67.6 36.7 30.9 1.0 0.5 0.5 9.0 77.6 862.4
137

9. Operational risk ING Vysya Bank Ltd has defined operational risk as the risk of direct or indirect loss resulting from inadequate or failed internal processes, people and systems or from external events. It also includes the risk of reputation loss as well as legal risk; whereas strategic and business risks are not included. The Bank has various Policies (Operational Risk Policy, Information Risk Policy, Security Policy, Outsourcing Policy, Crisis Management Policy and Anti-Fraud Policy) in place to ensure effective management of Operational risks. Key stages of the operational risk management processes is risk identification, risk measurement, risk monitoring and risk mitigation. In order to make the process more effective and integrated for the business units, legal, compliance and operational risk functions in the Bank work in an integrated manner with similar processes. Operational Risk Management framework For effective management of the Banks operational risk exposure, the Bank has set up an independent Operational Risk Management function, which is responsible to develop and implement policies and procedures for effective management of the Banks operational risk exposure. The unit follows the Board approved Operational Risk Management Policy for effective implementation of operational risk management across various business units of the Bank. Risk management structure An Operational Risk Committee (ORC) with representation from all business lines and critical support functions has been set up to ensure effective implementation of the operational risk management across all units of the Bank. The committee meets once in every month and discusses the operational issues identified and takes necessary steps to mitigate the risks. The Bank also has Regional Operational Risk Committees (RORC) at the regional level that meet regularly to discuss the regions operational issues and takes necessary steps to mitigate the risks. In addition to the ORC and RORC, the Risk Management and Review Committee (RMRC) of the Board at the highest level meets periodically to analyze and take necessary steps to mitigate the risks that the Bank is exposed to. The Board and senior management are kept informed of operational risk issues on a periodic basis. Risk Reporting A clear defined risk reporting system has been set up in the Bank. At the regional level, RORCs have been set up to monitor the operational risk exposure with representation from the departments and senior management at the regional level. At the Corporate Office level, ORC has been set up with representation from the departments and senior management from all business lines and critical support functions of the Bank. The committees meet regularly to discuss the operational issues and take necessary steps to mitigate the risks. The Bank uses the Non-Financial Risk Dashboard (NFRD) as an operational risk reporting tool. This report highlights the identified operational risks as well as the action taken to mitigate the risks. It also provides an overview on the progress of the mitigation plans of the identified operational risks. Strategies and Processes The Bank promotes effective management of operational, information and security risk by involving the Business Units in the risk management process. This is achieved by raising operational risk awareness, increasing transparency, improving early warning information system, and allocating risk ownership and responsibilities. While the Operational Risk Management function supports the Business Units in identifying and assessing the operational risk exposure, the Business Units are responsible to take appropriate steps to put controls in place for the operational risks. The Bank has developed a comprehensive framework supporting the process of identifying, measuring, monitoring, and managing operational, information and security risks. The operational risk assessment has been made an integral part of the Banks risk management process through assessment of outsourced activities, product reviews, product approval, and project risk assessment.
138
Risk Management Processes Risk Governance
Examples of risk management tools Operational Risk Committee Compliance program Product Approval process Risk awareness training Risk and Control Self Assessments Risk Awareness programs Incident Reporting and Analysis Quality of Control Scorecards Audit Findings Action Tracking Key Risk Indicator reporting Operational risk dashboard Information Security plans and implementation Crisis management planning Personal and physical security planning
Risk Identification Risk Measurement Risk Monitoring
Risk Mitigation
The Bank has an internal risk footprint, which it uses as threshold to decide the severity of an operational event. Further, the Bank has a centralized loss data capture mechanism that it uses for the quantification of the operational losses. The Bank currently uses the scorecard approach to measure the implementation of the operational risk management across the Bank. This approach is based on the maturity of the operational risk management in the Bank. Operational risk capital: The Bank currently qualifies for the Basic Indicator Approach operational risk capital assessment. The capital requirement for operational risk has been estimated as per the Basel II related regulatory guidelines prescribed by the Reserve Bank of India. 10. Interest Rate Risk (IRR) in the banking book Changes in interest rates affect a Banks earnings by changing its net interest income and the level of other interest sensitive income and operating expenses. For the purpose of monitoring and management, interest rate risk is separated into four sources, viz.,- re-pricing risk, yield curve risk, basis risk and optionality. Identification, measurement, mitigation, monitoring and governance of IRR are prescribed in and followed as per the directions in the Market Risk Measurement Policy and the Investment Policy. Interest rate risk arising due to re-pricing of those assets and liabilities which do not have a maturity date (e.g. Current and Savings Accounts and Cash Credit/Overdraft products) is managed by distributing these assets into various maturity buckets based on an approved replication model. The model is independently developed by Market Risk and is approved by ALCO as directed by RBI before application. This model is reviewed on a yearly basis (or in case of changing market conditions as deemed appropriate). The model primarily assumes a core portion of these products as long-term assets/liabilities and replicates the same in higher tenure buckets (versus volatile portion which is replicated in the short term). Similarly, risk arising due to loan prepayments and/or deposits pre-closures is also managed by levying a penalty on such transaction. Market Risk independently ascertains the cost of such optionality through respective behavioral studies on an annual basis and the same is approved by ALCO on a yearly basis. The cost of optionality in the study is derived using the historical pre-closure values and option pricing theories. Market risk manages the interest rate risk of the banking books by pro-actively and periodically employing the tools as mentioned above. Managing and monitoring the interest rate risk exposure arising out of normal business activity is executed within the following risk limits / framework: Mismatch per bucket (cumulative and normal gap limits) Earning at Risk limit
139

VaR limit for ALM book and fraction VaR limit for the Capital book Event risk limit and Duration mismatch The type and level of structural and mismatch interest rate risk of the Bank is managed and monitored from two perspectives, being an economic value perspective and an earnings perspective. Economic Value perspective involves analyzing the impact of changes in interest rates on expected cash flows on assets, minus the expected cash out-flows on liabilities, plus the net cash flows of off-balance sheet items. Earning perspective involves analyzing the impact of changes in interest rates on accruals or reported earnings in the following year. This is measured by Net Interest Income (NII) or Net Interest Margin (NIM). The Bank combines both methodologies to analyze both effects simultaneously. Earnings impact perspective (Org cur in mln) Net Interest Income year 1 EaR +100 bps parallel Net Interest Income year 2 EaR +100 bps parallel EaR y3 ramped EaR +100 bps parallel Economic value perspective (INR in mln) NPV Impact + 50 bps +100 bps Total (10.49) (20.98) INR (31.76) (63.52) EUR 0.15 0.31 USD 16.54 33.09 GBP 4.57 9.14 JPY 0.00 0.00 TOTAL 303.1 16.2 (20.2) INR 197.2 14.8 (20.7) EUR (0.0) 0.0 0.0 USD 0.8 0.0 0.0 GBP 0.9 0.0 0.0 JPY 0.0 0.0 0.0
140
NOTES
141
NOTES
142
NOTES
143
NOTES
144
Ten years at a glance

(All Figures in Rs. Crore except as stated otherwise)
Year
Deposits Total and Advances Accounts
Investments
Gross Net Paid up Dividend No. of No. of Reserves Earnings Profits Capital (%) Employees Branches
No. of Extension Counters
1999-00
7424
3937.75
2735.65
980.56
44.31
19.76
570.48
35
6060
377
104
2000-01
8141.11
4316.31
2695.11
1013.14
37.19
22.62
630.12
35
5906
381
103
2001-02
8068.28
4418.33
3597.20
1203.93
68.75
22.62
663.72
35
5647
380
96
2002-03
9186.62
5611.61
3640.54
1262.83
86.35
22.62
684.35
40
5334
379
64
2003-04
10478.07
6936.73
4085.24
1287.41
59.00
22.65
724.67
50
4959
373
61
2004-05
12569.31
9080.59
4195.89
1113.25 (38.18)
22.71
686.69
Nil
4963
370
56
2005-06
13335.26
10231.53
4372.34
1412.75
9.06
90.72
928.95
Nil
5312
377
56
2006-07
15418.59
11976.17
4527.81
1595.69
88.91
90.90
1012.38
6.5
5341
400
40
2007-08
20498.06
14649.55
6293.32
2099.01 156.93
102.47
1433.18
15
5852
407
39
2008-09
24889.92
16750.93
10495.54
2787.56 188.78
102.60
1,600.29
20%*
6227
455
37
* Subject to approval of shareholders

Annualreport08 09

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2008-09

78 ANNUAL GENERAL MEETING

Venue : Day/Date Time : :

78th Annual Report 2008-09

SENIOR MANAGEMENT TEAM

Ashok Rao B Chief of Staff Legal, Compliance & Vigilance

Don Koch Chief Operating Officer (upto 30-Sep-2008)

Janak Desai Country Head Wholesale Banking

Jan Van Wellen Chief Risk Officer

Prasad J M Chief Human Resources

Samir Bimal Country Head Private Banking

Uday Sareen Country Head Retail Banking

Prasad C V G Chief Information Officer

Meenakshi A Head Operations

Bishwajit Mazumder Chief Audit Executive M V S Appa Rao Corporate Secretary

ING Vysya Bank Limited

78th Annual Report 2008-09

ING Vysya Bank Limited

78th Annual Report 2008-09

ING Vysya Bank Limited

ANNEXURE - I TO DIRECTORS REPORT

59,740 2,64,280 25,065 62,980 NIL 2,23,31,660.00 720

27,568 2,36,722 25,541 1,33,217 NIL 2,30,80,395.00 59,585

1,49,326 1,42,101 NIL 1,84,47,649.00 1,73,785

90 17,515 NIL 1,66,33.80 5,07,680

60,000 NIL 51,08,366

11,900 5,440 NIL

5,000 5,000 5,500 7,000 4,500 NIL

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

MANAGEMENT DISCUSSION & ANALYSIS REPORT

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

MANAGEMENT DISCUSSION & ANALYSIS REPORT

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

MANAGEMENT DISCUSSION & ANALYSIS REPORT

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

MANAGEMENT DISCUSSION & ANALYSIS REPORT

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

MANAGEMENT DISCUSSION & ANALYSIS REPORT

78th Annual Report 2008-09

MANAGEMENT DISCUSSION & ANALYSIS REPORT

ING Vysya Bank Limited

NON FINANCIAL REPORTING

78th Annual Report 2008-09

CORPORATE GOVERNANCE REPORT

# Representing Foreign Promoter Group (ING Group)

ING Vysya Bank Limited

CORPORATE GOVERNANCE REPORT

78th Annual Report 2008-09

CORPORATE GOVERNANCE REPORT

ING Vysya Bank Limited

CORPORATE GOVERNANCE REPORT

Meetings held during the tenure 6 1 6 6 6 5

78th Annual Report 2008-09