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Chairman’s Speech at the 88th Annual General Meeting

Dear Shareholders,

I have great pleasure in welcoming you all to the 88th Annual General Meeting of The South Indian Bank Ltd for the Financial Year 2015-16 being held here today. The Annual Report including the Audited Financial Statements of the Bank for the year ended 31st March 2016 are already with you and with your permission, I take them as read. I thank you for your esteemed presence, continued trust and support extended to the Bank all these years. Before coming to your Bank’s Performance, I would like to share with, in short, a flavor of the present economic and banking scenario

Economic and Banking Scenario:

Global growth remained subdued in 2015, with a modest growth of 3.1 percent, and is expected to recover at a slower pace than previously envisioned. According to the International Monetary Fund’s (IMF) World Economic Outlook Report (April 2016), the global growth is expected to be modest at 3.2 per cent in 2016, as the advanced economies are in the recovery mode. The recovery is projected to strengthen in 2017 and beyond, driven primarily by the emerging markets and developing economies, as conditions in stressed economies start gradually to normalize.

Consolidating India’s pole position as the fastest-growing large economy, the country’s fourth quarter GDP growth stood at a higher than anticipated 7.9%. The country expanded by 7.50%, 7.60% and 7.2% during first, second and third quarters and overall for full year, the economy grew at a five-year high of 7.60%. This upswing was supported by growth in industrial as well as agricultural sector. For the entire FY2015-16,the agriculture sector grew by 1.20%. Indian banks, including public sector banks are aggressively positioning themselves for technology infrastructure to enhance customer experience and gain competitive advantage. Internet and mobile banking is gaining rapid foothold. Customer Relationship Management (CRM) and data warehousing will drive the next wave of technology adoption in banks. Indian banks are rapidly focusing on SMAC (Social, Mobile, Analytics and Cloud) techniques to reach and expand the network of customers. Banks in the country are set to benefit further as they move ahead in implementing additional technological applications.

Indian banks are increasingly focusing on adopting integrated approach to risk management. Banks have already adopted the international banking supervision accord of Basel II; incidentally, according to RBI, majority of the banks already comply capital requirements of Basel III, which had a timeline of 31 March 2019. Most of the banks have put in place the framework for asset-liability match, credit and derivatives risk management. Loan-to-Deposit ratio for banks across sectors has increased over the years. Private and foreign banks have posted higher return on assets than nationalized and public sector banks. This has stimulated most of the foreign banks to start their operations in India. Banks are laying emphasis on diversifying the source of revenue stream to protect themselves from the impact of interest rate cycle. Focusing on increasing fee and fund based revenue by launching basket of new asset management, wealth management and treasury products.

As a function of stringent identification norms pursued by the Central Bank of our country and lower than expected growth in some of the key sectors of the economy, the Gross NPA to Gross Advances in listed banks grew from Rs.3.00 lakh crore in FY15 to around Rs.5.81 lakh crore in FY16 and the Net NPA has also deteriorated from Rs.1.67 lakh crore to Rs.3.39 lakh crore during the same period.

Performance of the Bank:

Despite the challenges the banking industry faced during the year under review, your Bank had achieved a net profit of Rs 333.27 crore as on March 31, 2016 against the net profit of Rs 307.20 crore posted during the previous year ended March 31, 2015.

The Key financial highlights for the year 2015-16 are summarized as under:

1. The total gross business of the Bank grew from Rs.89368.14 crore to   Rs.97191.52 crore registering a growth of 8.05% over the previous year.

2. Total deposits grew from Rs. 51,912.49 crore to Rs.55720.73 crore, recording a growth of 7.34% over the previous year.

3. The gross advances increased from Rs.37,725.65 crore to Rs.41470.79 crore, registering a growth of 9.93% over the previous year. Food credit grew from Rs.579.07 crore to Rs.589.67 crore and non-food credit stood at Rs.40881.12 crore vis-à-vis Rs.37146.58 crore in the last year, posting an increase of Rs.3734.54 crore.

4. Total Priority Sector advances as at the end of the financial year stood at Rs.19144.65 crore, constituting 47.44% of the Adjusted Net Bank Credit (ANBC). Exposure to agriculture sector amounted to Rs.7902.37 crore forming 19.58% of ANBC as at the end of the financial year.

5. The Board of Directors has recommended a dividend of 50% i. e. @ Re.0.50 per equity share of Re.1/- each.

6. The capital plus reserves of the Bank has improved up from Rs. 3589.40 crore to Rs.3841.93 crore on account of the above and the plough back of profits during the year.

7. The Capital Adequacy Ratio under Basel III norms stood at 11.82%, which is well above the RBI mandated level of 9.625%, indicating a healthy capital position of your Bank.

8. Book value per share has improved from Rs.26.59 to Rs.28.45 and the Market Capitalization is above Rs. 2,383.30 Crore as on March 31, 2016.

9. The earnings per share (EPS) on fully diluted basis is Rs. 2.47 per Equity share of Re.1/- each as on March 31, 2016.

10. The business per employee stood Rs.12.01 crore as on March 31, 2016 vis-à-vis Rs.10.79 crore as at 31.03.2015.

11. As on March 31, 2016 the ratio of gross non-performing assets (GNPA) to gross advances increased from 1.71% to 3.77%. The net NPA ratio stood at 2.89%  as on 31.03.2016 vis-à-vis 0.96% as on 31.03.2015. The status of NPA reflects overall trend witnessed in the Industry during 2015-16.

The Bank had been successful in widening its network across India with 834 branches and 1287 ATMs. The Bank has opened 29 new offices (12 branches and 17 extension counters) and 87 ATMs across the country during the financial year 2015-16. The Bank further plans to open a maximum of 50 new offices (with a mix of Branches & Extension Counters) and 150 ATMs (including 50 Cash Deposit Machines) during the financial year 2016-17.
Human Resource policies and practices of the Bank focus on attracting, motivating and retaining qualified and skilled manpower. Concurrent with these objectives, steps are taken to improve manpower efficiency. Given the market challenges, there has been considerable focus on optimising the existing resources - through internal job postings, transfers and skill development initiatives. The Personnel Department of the Bank received ISO 9001:2008 certification during the year.
Training and development have assumed significant importance as always. The Bank's Staff Training College identifies the gaps in resource capability of the personnel and Trains them for skill development. During the financial year, Bank has provided training to 4376 of its Officers, 2142 clerks and 121 sub-staffs in different domain of Bank’s operations.
Your Bank is an early adopter of technology with a view to providing safe, secure and convenient banking facilities to its customers, the Bank has introduced host of services and facilities for enhancing customer satisfaction, which inter-alia includes the following:

1.All the branches of your Bank are inter-connected and are capable of providing online, real-time transactions to its customers. Your Bank is one of the first few entities to move from Finacle -7 to Finacle-10, the new core banking version.

2.Your Bank is offering Visa, Master and RuPay debit cards to its customers. Using SIB debit cards, Bank’s customers can withdraw cash through ATMs of any Bank in India and international usage is allowed through EMV chip cards. The Bank has also enabled its debit cards for POS/Online transactions. Co-branded Foreign Currency Travel Card launched in association with Axis Bank is specifically designed for customers who travel abroad and is available in 8 foreign currencies. Green PIN facility is available for all Debit cards.
3.The internet banking service under the brand name “SIBerNet” has helped to position the Bank as a technology-driven Bank offering superior banking services to both retail and corporate customers. With new online service called CRAYONS, now customers can register and activate for SIBerNet service through online without visiting the branch. Increased transactional limits, Fund Transfers (RTGS/NEFT/Within Bank), online bill payments, Online deposit opening, donations to temples, Block Debit card, stop payment of cheque online, Direct IRCTC ticket booking, KSEB bill payments, Apply for IPO (Initial Public offering through SIBerNet-ASBA) retrieval of forgot SIBerNet User ID etc are a few of the services offered through SIBerNet.

4.Banks are in process of transforming Mobile Banking application into a Digital Bank. Our Pride ,' SIB Mirror', an in-house developed Mobile banking application, which has become a magic in the Mobile banking space and a symbol of technological excellence among Mobile banking Applications .

5.Your Bank, in association with M/s.Atos Worldline India Pvt Ltd. is offering two types of POS terminals - PSTN (wired terminal) & GPRS (wireless).

6.Your Bank has been enrolled as a Channel Partner for the distribution of bonds issued by different companies, through Bank’s tie up with IFIN - a subsidiary of IFCI (Industrial Financial Corporation of India) Financial services Limited. Through this tie up the Bank has been enrolled as a channel partner of IFCI for the distribution of capital gain bonds and tax free bonds.

7.Your Bank has entered into tie-up with leading aggregator M/s.Billdesk Services for Centralized Direct Debit arrangement. Through this tie up Bank’s customers will be able to make regular payments like monthly/quarterly/half yearly payments of Mutual Fund SIP investments/Loan EMIs (Vehicle/Equipment Loans)/Insurance premium etc.

8.Your Bank acts as a corporate agent for the distribution of insurance products of both M/s Life Insurance Corporation of India and M/s Bajaj Allianz General Insurance Company for life insurance and general insurance respectively.

9.In association with BSNL, the Bank is facilitating the payment of BSNL Landline bill of its customers through their accounts maintained with the branches.

In line with the CSR objectives and in accordance with Schedule VII of the Companies Act 2013, South Indian Bank undertook various activities during the FY 2015-16 which had significant impact on the society. These activities are:
Total amount to be spent for the Financial Year 2015-16 was Rs.11, 57, 00, 000/. Through this CSR allocation, the Bank was able to touch the lives of many. In the FY 2015-16, the bank revamped its CSR activities to fall in line with the new rules and regulations of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014. In the FY 2015-16, our bank spent Rs.2.30 crore towards CSR activities. The bank stays committed to its corporate social responsibility and intends to continually increase the impact of its CSR initiatives. The Bank has utilized the reporting year to lay a foundation on which to build and plan future projects.
Risk Management
The perception of risk management has been radically changing within the Industry. The bank has in place a robust risk management structure which proactively identifies the risks faced by the bank and helps in mitigating the same, while maintaining proper trade-off between risk and return thereby maximizing the shareholder value. The bank has put in place risk management architecture and practices that is overseen by Risk Management Committee of the Board (RMCB). Bank is in the process of implementing Enterprise Wide Risk Management Solution (EWIRMS) as a part of moving over to advanced approach which will facilitate suitable alignment of risk and capital to the overall business strategy.
The bank has been calibrating the system of comprehensive risk profiling of the bank in line with regulatory guidelines that will facilitate integrated risk management through effective assessment of the level and direction of key risks.
Awards and Accolades
In the FY 2015-16, the Bank has received significant institutional recognitions, awards and accolades from different agencies and I am glad to mention the following:
Ø Social Banking Excellence Award 2015 (Runner up position in Rural Banking-Small Bank) instituted by ASSOCHAM Inspiring Work Places Award 2015 for best HR & Talent Practices among Private Sector Banks instituted by the Banking Frontiers.
Ø Banking Technology Excellence Award 2014-15 for “Cyber Security Risk Management” from IDRBT, the technical arm of Reserve Bank of India.
Ø The SIB’s green initiative ‘Green PIN’ won award at the MasterCard Payment Strategy Workshop 2015 held in Pune.
Ø Prize in IDRBT Banking Application Contest for the innovative mobile banking app “SIB Mirror”.
Looking Ahead
I assumed the office of the Chairman on November 2nd 2010. In FY 2015-16, your bank took multiple initiatives aimed at preparing itself for accelerated growth with a focus on achieving our vision i.e to be the most preferred bank in the areas of customer service, stakeholder value and corporate governance,. But last years have been more challenging because of macroeconomic environment impacting the quality of the loan book of the bank. But I am quite positive that your Bank will emerge as resilient in the coming years.  Your Bank is looking at profitable growth. To realize this goal, the Bank has engaged the services of IFC, Washington as a consultant to map strategies for ways of moving forward with quantum up scaling of growth- both in top & bottom lines.
Your bank has been effectively leveraging technology to serve its client's better. Emerging technologies have changed the banking industry radically through digitization and networked banking platform.
I solicit continued support from valued shareholders such as yourself and all other stakeholders for the journey forward.

I take this opportunity to express my deep sense of gratitude to the Reserve Bank of India, Securities and Exchange Board of India, Government of India, Government of Kerala and all other state Governments where the Bank operates, other Government and Regulatory Authorities, including stock exchanges, where the Bank’s shares are listed and correspondent Banks for their strong support and guidance, during the year. The Board also places on record its gratitude to the Bank’s shareholders and customers for their continued support, patronage and goodwill. The Board further places on record its appreciation for the valuable services rendered by M/s. M/s Deloitte Haskins & Sells, Statutory Auditors, during their tenure. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a Bank. Your Bank gladly acknowledges this fact and thanks all of them for their diligence and loyalty towards the Bank. The Board expresses its sincere appreciation for the dedicated services rendered by officers and employees of the Bank at all levels.

Before I conclude, I wish to share that my journey for the last six years has been enriching & rewarding. I am thankful to all of you for making it so. I would like to assure you again that your Bank has put appropriate plan, policies and strategies to achieve growth with quality and profitability. Your support, encouragement and faith have instilled in us the confidence required to pursue excellence in our journey forward.
Thank you, Ladies and Gentlemen for your time and attention.
                                                                                                                   AMITABHA GUHA
July 8, 2016                                                                                               CHAIRMAN
Note: This does not purport to be a record of the proceedings of the Annual General Meeting.