Karnataka Bank Ltd

Dear Stakeholders,

Your Board of Directors have the pleasure of presenting the 100th Annual Report of the Bank together with the Audited Statement of Accounts for the financial year ended March 31, 2024, and the Auditors' Report thereon. The highlights of the operational performance are as under:

OPERATIONAL PERFORMANCE

Rs. in crore

Note: The figures mentioned above are on standalone basis. The consolidated financial statements are furnished separately as part of this report.

BUSINESS OVERVIEW

As on March 31,2024, the Business Turnover (Gross) of the Bank has reached a new high of Rs. 1,71,059.49 crore with a YoY growth of 15.06%. During FY 24, the Bank has registered an all-time high net profit of Rs. 1,306.28 crore with an impressive 10.68% YoY growth. The deposits and advances grew by 12.24% and 19.08% YoY respectively. As of March 31,2024, the CD ratio was 74.45%. Inspite of the northward movement of interest rates, the Bank has maintained the share of CASA at 31.97%. The asset quality has been improved with a 21 bps and 12 bps reduction, respectively, under Gross NPAs and Net NPAs. As on March 31,2024, Provision Coverage Ratio (PCR) was 79.22%. The bank completed a record capital raising of Rs. 1,500 crore within 6 month in H2FY24 thereby increasing their holdings to over 40% as March 31 2024. As a result CRAR improved to an all time high of 18.00% and thereby the financial year 202324 was yet another year of satisfactory performance, witnessing further strengthening of the fundamentals of the Bank.

DEPOSITS AND CASA

The total deposits grew by 12.24% during the financial year under review, with CASA at 31.97% of total deposits. The CASA deposits grew by 8.82% YoY. The deposits below Rs. 2 crore accounted for about 87.90% of the total deposits, reflecting a strong retail franchise.

ADVANCES

The advances grew by 19.08% YoY. The lending profile was well balanced with the share of retail advance at 46.60% & mid corporate advances at 25.68% and Large corporate advances at 27.72% of the loan book.

The priority sector advances increased from Rs. 32,181.73 crore to Rs. 36,487.47 crore forming 53.85% of applicable Adjusted Net Bank Credit (ANBC), and agricultural advances increased from Rs. 1 1,305 crore to Rs. 14,281 crore, which, together with eligible deposits under the Rural Infrastructure Development Fund (RIDF), constituted 21.08% of ANBC during Q4FY24. The Bank also focuses on lending under various socio-economic schemes, weaker section schemes, MSMEs etc.

ASSET QUALITY AND PROVISION COVERAGE RATIO (PCR)

Your Bank has been focusing on improving the asset quality through better credit appraisal and effective monitoring, as well as intensified recovery efforts. In terms of absolute numbers, the GNPAs increased to Rs. 2,578.42 crore as on March 31, 2024, from Rs. 2,292.91 crore as on March 31,2023. However, the percentage of Gross NPAs reduced from 3.74% as on March 31,2023, to 3.53% as on March 31,2024.

The amount of Net NPAs (NNPAs) was Rs. 1,129.18 crore as against Rs. 1,021.27 crore on March 31, 2023 and during the period, the percentage of NNPAs substantially improved to 1.58% as against 1.70% last year. The Provision Coverage Ratio (PCR) stood at 79.22% on March 31,2024.

INVESTMENTS

The total investments increased by 4.18% and the Investment to Deposit ratio (ID ratio) stood at 24.78% as on March 31,2024, as against 26.70% on March 31,2023.

OPERATIONAL METRICS

The gross income of the Bank for the year ended March 31,2024, stood at Rs. 9,617.42 crore compared to Rs. 8,212.81 crore last year recording a YoY growth of 17.10%.

The total expenditure (excluding provisions and contingencies) increased by 24.14% to Rs. 7,454.11 crore for the year ended March 31,2024, as against Rs. 6,004.58 crore for the last financial year. The cost to income ratio stood at 53.15%.

During the FY, Net Interest Income (NII) grew by 3.57% over the previous year. The Net Interest Margin (NIM) reduced to 3.51% from 3.70% during last year.

The operating profit decreased by 2.03% to Rs. 2,163.31 for FY 2023-24 from Rs. 2,208.23 crore for the previous year due to certain one-time expenses during the year on account of increased retirement benefit cost due to revised IBA scales, centenary expenses and increased IT outlay. The provisions (other than tax) and contingencies for FY 2023-24 were Rs. 600.58 crore vis-a-vis Rs. 767.19 crore for the previous year.

The net profit reached an all-time high of Rs. 1,306.28 crore from Rs. 1,180.24 crore during the previous year, registering a growth of10.68%.

APPROPRIATIONS

The net profit of Rs. 1,306.28 crore, along with a sum of Rs. 165.92 crore brought forward from the previous year, aggregating to Rs. 1,472.20 crore, has been appropriated as under:

DIVIDEND

Recognising the overall performance of the Bank and being the Centenary year, the Board of Directors has recommended a dividend of Rs. 5.50/- per share (55%) for the year ended 31st March 2024 (previous year Rs. 5/- per share (50%). The dividend payout ratio for the year works out to 15.88% as against 13.30% for the previous year. In accordance with Accounting Standard as (AS) 4 - Contingencies & Events Occurring after the Balance Sheet Date, the proposed dividend amounting to Rs. 207.49 crore (Previous year Rs. 156.37 Crore) has not been shown as an appropriation from the Profit for the year ended March 31,2024, in line with the Dividend Distribution Policy of the Bank and directions from the Reserve Bank of India for the payment of dividend out of the profit.

EARNINGS PER SHARE (EPS) AND BOOK VALUE

The Earnings Per Share stood at Rs. 39.84 (basic) and Rs. 39.66 (diluted) for the year ended March 31, 2024. This was Rs. 37.88 (basic) and Rs. 37.66 (diluted) during the previous year. The Book Value per share has further improved to Rs. 287.57 as on March 31,2024 as against Rs. 262.96 during the previous year.

CAPITAL FUNDS AND CAPITAL ADEQUACY RATIO (CRAR)

The capital funds of the Bank increased from Rs. 9,312.53 crore to Rs. 11,253.14 crore. With the record capital raising of Rs. 1,500 crore as mentioned above, the Capital to Risk- Weighted Assets (CRAR) Ratio improved to a high of 18.00% as on March 31,2024, as against the previous year's ratio of 17.45%. The Bank has consistently maintained the CRAR ratio well above the minimum requirement of 11.50%, including the Capital Conservation Buffer of 2.50% stipulated by the Reserve Bank of India and the internal policy of the Bank of maintaining the CRAR one and half per cent over and above the regulatory requirement.

UTILIZATION OF FUNDS RAISED THROUGH PREFERENTIAL ALLOTMENT AND QUALIFIED INSTITUTIONS PLACEMENT DURING THE YEAR

EQUITY CAPITAL BASE

As on March 31,2024, the paid-up capital of your Bank stood at Rs. 3,77,24,99,580 comprising 37,72,49,958 equity shares of Rs. 10/- each.

During the year 13,02,757 equity shares of Rs. 10/- each were allotted to option grantees upon exercise of stock options under KBL ESOS-2018.

CHANGE IN CAPITAL BASE AFTER THE CLOSE OF THE FINANCIAL YEAR

After the close of the Financial Year 2,73,172 equity shares of Rs. 10/- each were allotted pursuant to the exercise of options vested with grantees under KBL ESOS-2018.

DEBT INSTRUMENTS & CREDIT RATING

The Bank has issued subordinated debt instruments (i.e., Unsecured Non-Convertible Subordinated BASEL III Debt Instruments) as a part of Tier-2 Capital on a private placement basis. These bonds are listed on the debt segment of the National Stock Exchange of India Limited (NSE). The Bank excercised the call option Tier-2 capital in 2 tranches totalling Rs. 720 crore during November 2023 and February 2024. The details of the debt instruments outstanding as on March 31,2024, are as under:

Your Bank has paid interest on these debt instruments on time since the issue of respective debt instruments as per the terms of the issue.

Redemption of Series V Bond:

During the financial year under review, the Bank exercised call option on 16.11.2023 for redemption of the bonds issued under Series V for Rs. 400 crore.

Redemption of Series VI Bond:

During the financial year under review, the Bank exercised call option on the previous working day i.e, 17.02.2024, since the date of call option i.e., 18.02.2024 was a holiday (Sunday), for redemption of the bonds issued under Series VI for Rs. 320 crore.

TRANSFORMATION JOURNEY- 'KBL VIKAAS'

The aspirational transformation journey of the Bank, ''KBL-VIKAAS' was launched in the year 2017 has successfully completed 6 years and further remodeled as 'KBL VIKAAS 3.0' with visible accomplishments and is surging ahead with various futuristic initiatives based on the 3 principles Run the Bank, Grow the Bank, Change the Bank.

Our Bank has embarked on a comprehensive digital transformation journey aimed at integrating advanced IT systems and digital technologies to enhance customer experience and operational efficiency. This transformation is centred around providing an omnichannel banking experience, leveraging an API-driven open banking architecture, and personalizing customer interactions through data analytics.

Under the "KBL-VIKAAS" program, initiated in Fiscal 2017, we have laid the groundwork for our digital strategy, in consultation with the Boston Consulting Group. This initiative focuses on bolstering our Bank's foundational capabilities and staying at the forefront of technological innovation. As part of this transformation, we established the Digital Centre of Excellence (DCoE), dedicated to developing digital innovations and technological enhancements. Currently, the DCoE professionals, driving various digital initiatives. Program has successfully completed 6 years and further remodeled as 'KBL VIKAAS 3.0' with visible accomplishments and is surging ahead with various futuristic initiatives based on the 3 principles Run the Bank, Grow the Bank, Change the Bank. The Bank also set up an Analytical Centre of Excellence(ACOE) creating a data-lake with capability to drive business acquisitions based on historical data of transactions by customers. More details about ACOE are provided in sections below.

Details about various digital initiatives introduced during the FY 2023-24 are furnished in Management Discussion and Analysis.

Leveraging through Wholly Owned Subsidiary of the Bank:

"KBL Services Limited" was incorporated as a non-financial services wholly owned subsidiary of The Karnataka Bank Limited on 21.06.2020. Setting up of the Company was envisioned with an objective of achieving higher operational efficiency and creating value over longer run for the group as a whole. The scope of activities permitted to be carried out by the "KBL Services Limited" are business sourcing, data entry work, contact centre management, management of alternate banking channels, back-end processing activities, IT projects & support, digital capabilities and providing sub-staff/house-keeping/maintenance staff/attenders to the parent Bank. To begin with, the Company has taken up Business Sourcing, Data entry work, back-end processing activities and contact centre and expects to widen its service offering to other permitted activities in the upcoming financial years. The subsidiary has started making profit for the first year.

RISK MANAGEMNET AND GOVERNANCE

In the normal course of business the Banks are exposed to various risks, namely, Credit Risk, Market Risk and Operational Risk, besides other residual risks such as Liquidity Risk, Interest Rate Risk, Concentration Risk, Strategic Risk, Reputation Risk etc. With a view to efficiently manage such risks, your Bank has put in place various risk management systems and practices. In line with the guidelines issued by the Reserve Bank of India from time to time, your Bank continues to strengthen various risk management systems that include policies, tools, techniques, systems and other monitoring mechanisms.

Your Bank aims at achieving appropriate trade-off between risks and returns. Risk management objectives of the Bank broadly cover proper identification, assessment, measurement, monitoring, controlling, mitigation and reporting of the risks across various business segments of the Bank. The risk management strategy adopted by your Bank is based on a clear understanding of the risks and the level of risk appetite, which is dependent on the willingness of your Bank to take risks in the normal course of business. A Board level committee, viz., Risk & Capital Management Committee (RCMC) periodically reviews the risk profile, evaluates the overall risks encountered by the Bank and develops policies and strategies for its effective management.

The various senior management committees such as Credit Risk Committee (CRC), Asset-Liability Management Committee (ALCO), Operational Risk Management Committee (ORMC) etc. operate within the broad policy framework of the Bank to ensure and enhance the risk control and governance framework within the Bank. The Risk Management Department at Head Office oversees the overall implementation of various risk management initiatives across the Bank.

In line with guidelines issued by RBI, your Bank has nominated a Chief Information Security Officer (CISO), who is responsible for articulating and enforcing the policies that the Bank use to protect the information assets apart from coordinating security related issues in implementation of new systems under Information Technology in the Bank.

OFSAA (Oracle Financial Services Analytical Applications): Your Bank has all the necessary systems and tools in place for ALM, MRM, LRM, FTP and IRRBB. An advanced application i.e. OFSAA is in the final stage for implementation that covers ALM, LRM, FTP, PFT & IFRS9.

More elaborate discussion on how the Bank manages the key risks associated with its operations are provided under Management Discussion and Analysis attached to this report.

Basel III Capital Regulations - Implementation of Leverage Ratio: To mitigate the risk of excessive leverage and enhance the financial stability, RBI mandated the minimum Leverage Ratio (LR) under Basel III Regulations for banks in India. Both the capital measure and the exposure measure along with the leverage ratio are to be disclosed on a quarter-end basis. However, banks must meet the minimum leverage ratio requirements at all times. As on March 31, 2024, your Bank had a comfortable leverage ratio of 7.86% as against the regulatory minimum requirement of 3.50%.

Capital Adequacy & Capital Adequacy Assessment Process (ICAAP):

Under Pillar 2 of the Basel II Accord, Internal Capital Adequacy and Assessment Process (ICAAP) was introduced as a measure of the adequacy of a capital resources of the Bank in relation to its current liabilities and also in relation to the risks associated with its assets. An appropriate level of capital adequacy ensures that the entity has sufficient capital to support its activities and that its net-worth is sufficient to absorb adverse changes in the value of its assets without becoming insolvent. An assessment of the capital requirement of the Bank is carried out through comprehensive projections of future business that takes cognizance of the strategic intent of the Bank, profitability of particular business and opportunities for growth. The proper mapping of credit, operational and market risks to this projected business growth enables assignment of capital that not only adequately covers the minimum regulatory capital requirements but also provides headroom for growth. The calibration of risk to business is enabled by a strong risk culture in the Bank aided by effective, technology-based risk management system.

The Disclosure under Pillar III of Basel III accord has been annexed to the this report as in Annexure-I.

In compliance with Basel guidelines, the Bank has put in place a policy document for Internal Capital Adequacy Assessment Process (ICAAP) to evaluate its capital adequacy requirements. Stress testing framework for various stress scenarios is also put in place for a better understanding of the likely impact of adverse market movements/events on the capital and earnings. The results of the ICAAP and stress testing are reviewed periodically to assess the capital requirement for the projected business growth, keeping in view the risk appetite and risk profile of the Bank. A Board level Risk & Capital Management Committee (RCMC) reviews the risk appetite, risk profile, business projections as well as capital assessments of your Bank at periodic intervals.

SEGMENT REPORTING Business Segment-

For the purpose of segment reporting in terms of AS 17 of the Companies (Accounting Standards) Rules 2021 and as prescribed in the RBI guidelines, the business of the Bank has been classified into 4 segments i.e. (a) Treasury operations (b) Corporate/Wholesale Banking (c) Retail Banking (d) Other Banking Operations.

Geographical Segment-

Further as per the RBI circular DOR.AUT.REC.12/22.01.001/2022-23 dated April 07, 2022, on establishment of Digital Banking Unit (DBU, 'Digital Banking' has been identified as a Sub-segment under Retail Banking. Since the Bank does not have any overseas branch, reporting under geographic segment does not arise. The segment assets have been identified and segment liabilities have been allocated on the basis of segment assets.

The details about aforesaid business segments are discussed in Management Discussion and Analysis attached to this report.

Banking Outlets and Alternate Delivery Channels (ADCs):

As on March 31, 2024, your Bank had 2,417 service outlets including 921 branches, one extension counter, 856 ATMs and 639 recyclers with a presence in 593 centres spread across 22 States and 2 Union Territories. Apart from the above, the Bank also has one Data Centre with a Disaster Recovery Centre and Near Line Site (NLS), two Service branches, five Currency Chests, two Central Processing Centres, one Digital Centre of Excellence, Nine Asset Recovery Management Branches and 3 Central Loan Processing Hubs and one Central Loan Sanctioning Centre for Sanctioning of retail loans. During the financial year under review, your Bank has opened twenty new branches.

More details are discussed in Management Discussion and Analysis attached to this report.

Government Business:

Pursuant to the deregulation of the policy by the Central Government and Reserve Bank of India (RBI), the eligible scheduled private sector banks have been permitted to act as agency banks of RBI for conduct of government business. Based on the evaluation and fulfillment of eligibility criteria, your Bank has been appointed by RBI as Agency Bank vide Lr.DGBA.GBD.No.S363/42.01.033/2021-22 dated 20/07/2021 followed by execution of Agreement between RBI and your Bank on July 27, 2021. With this, your Bank can now undertake Revenue Receipts and Payments on behalf of the Central/State Governments, Pension Payments and collection of Stamp Duty charges and any other item of work specifically approved by the user department concerned and concurred by RBI.

With pan-India presence, driven by strong and robust technology and digital platforms, your Bank is confident of being the preferred choice for the Central and State Governments in providing the best possible financial solutions in the most seamless manner. The handling of government business augurs well for your Bank as it helps in facilitating the customers in tax payments thus enhancing relationship stickiness and as a source of revenue through eligible agency business commission.

Your Bank has made active progress and started collecting statutory tax payments such as Customs Duty, Goods & Service Taxes (GST) on behalf of Central Board of Indirect Taxes and Customs (CBIC) and Direct Tax (Income Tax/Advance Tax) on behalf of Central Board of Direct Taxes (CBDT). The specialized schemes are formulated to on board Government Department/Bodies/ Corporation/ etc. accounts.

Your bank has made active progress in completing the administrative and technical procedures with few of the agencies. Your Bank is well positioned to make foray into strategically important government projects/mandates that helps in expansion of liability business skewed towards low-cost deposits and open new avenues of fee income contributing to the bottom-line.

Third Party Products

With an aim to provide diversified financial products & services and to maximize value-added services to the customers, your Bank provides a bouquet of Third Party Products, which include Life Insurance, General Insurance, Health Insurance, Mutual Funds, Demat Account, Trading Account, Co-branded Credit Cards, PoS Network, KBL FASTag, NPS, SGB, APY, etc. A summary of the major third-party products is provided in Management Discussion and Analysis attached to this report.

Customer Service:

Your Bank is continuously focusing on creating new benchmarks in customer service so as to make the Bank distinctly more competitive. This necessitates designing of innovative and cost-effective mechanisms for delivering banking services efficiently. The Bank is actively involved in putting in place system and procedures on banking services rendered to customers and an effective grievance redressal mechanism including an Internal Ombudsman [IO] as per the guidelines received from RBI and IBA from time to time. The Bank is also providing doorstep banking services to the Senior Citizen customers of more than 70 years of age and differently abled or infirm persons including visually impaired at all branches of metro centres and "on a best effort basis" at all other branches of the Bank, going forward.

Credit Monitoring Excellence:

In order to have an effective post sanction monitoring and collection mechanism, an exclusive Credit Monitoring Department (CrMD) is set up at Head Office. Contact Centre was setup for follow-up of stress accounts during initial days. 'Regional Collection Hubs (RCH) consisting of Regional Retail Collection Team (RRCT) and Regional Corporate Collection Team (RCCT) are set-up at all the Regional offices. The RRCTs and RCCTs follow up /initiate time bound/DPD-wise actions to ensure collection of dues in respect of all loan accounts under the overall supervision of CrMD. A dedicated Credit Monitoring Team (CrMT) is also functioning under RCHs at all the Regional Offices to undertake post-sanction monitoring of loan accounts of respective Regions.

With a view to improve the efficiency in monitoring & follow up activities, The Bank has implemented Behavioral & EWS modules to identify the loan accounts having threat to recover of dues in future dates and classify the account as low, medium & high risk category. Based on the category of the borrowers, collection activities, like sending SMS, emails, calling & customer visits etc. are prioritized. Web based collection tool-"KBL-Kollect+" is also finetuned for undertaking prioritized collection activity.

The Bank has been making its best efforts in bringing down overall stress in SMA (SMA 0, 1,2) under performing advances. The stress in Restructured advances is also showing declining trend on account of improved monitoring and collection efficiency. Auto Sweep system for auto collection of EMI / Installment/Interest of loans from operating accounts of borrowers, enabled E-Connect solution for making payment to the loan accounts through UPI payment options, Auto-capturing of Early Warning Signals etc., are put in place.

For close monitoring of restructured advances, the Bank has formed an exclusive cell viz., "Restructured Advances Monitoring Cell" within the Credit Monitoring Department. Further, Consortium & Multiple Banking Arrangement Cell was also formed for special monitoring of loans accounts under Consortium & Multiple Banking Arrangement.

Digital Initiatives undertaken by the Bank:

1. To share the exchange of Information between banks under consortium and multiple banking arrangement seamlessly, the Bank has implemented the system of auto submission of exchange of Information.

2. To submit Education Loan Interest Subsidy claims by the Branches, the Bank has implemented a module for auto submission of education loan subsidy claim.

3. The Bank has implemented the online Registration of Security Interest in CERSAI (Registration of Individual Immovable Property) through API integration.

4. The Bank has enabled Branch portal for online submission of stock statements.

5. The Bank has implemented digitalized valuation platform for both branch users & valuers, supported with Geo - coordinates for valuation of the property.

SUPPORT AND CONTROL FUNCTIONS Information Technology:

The Bank has Robust Core Banking System (CBS) since year 2000 and all its branches and offices are under CBS network. Alternate Delivery channels viz. ATM, Internet Banking, Mobile Banking, UPI, PoS have been integrated with the Core Banking System.

The Disaster Recovery [DR] arrangement also exists to ensure business continuity in the event of primary site failure for all business- critical applications (CBS, ATM, Internet Banking, Mobile banking, UPI). This arrangement is strengthened by implementing three-way data replication process aimed at maintaining zero data loss. The critical applications like CBS, ATM, Internet Banking and Mobile Banking are part of this arrangement. Primary Data Centre of the Bank hosted in Tier 4 Data Centre and DR Data Centre hosted in Tier-3 Data Centre.

The IT infrastructure of the Bank is headed by Chief Information Officer (CIO) and supported by Chief Technology Officer (CTO) and other executives of IT Department . Your Bank will continue to take note of technological revolutions and take appropriate decision at the right time to provide premier banking services and also continue to be a tech-savvy Bank aiming for Digital Bank of Future.

The Bank is also extending facilities like Funds Transfer through electronic means [NG-RTGS, NEFT, IMPS, UPI, ECS, NECS etc.], Speed Clearing, CTS, Financial Inclusion, IVR and other technology enabled services and products.

Analytical Centre of Excellence (ACoE):

As an important element of our ongoing digital transformation endeavour, the Analytical Centre of Excellence (ACoE) was established in Bengaluru. The vision of the ACoE is to (i) predict to prioritise by analysis of data and creation of more than 43 sustainable use cases; and (ii) automate through digital strengthening of CRM, eCollect, EWS, marketing automation for customised products and communication and enable teams for execution and business outcomes.

The ACoE in its pursuit has built a scalable Cloud Data Platform (complied with IDRBT cloud security guidelines) and developed advanced analytics & AI/ML interventions to drive business growth along with self-service business intelligence tools to enable departments & branches with timely, actionable information across Lines-of Business in the Bank such as Liabilities, Assets, Credit Risk & Collections, and Digital channels.

Leveraging advanced analytics & AI/ML to tap business opportunity, improve processes & drive growth: Across lines of business, the ACoE has built analytics-led interventions to enhance cross-sell (term deposits, loans, third party products), acquire quality accounts, manage key customers, improve collections, migrate customers to digital channels, and enable branches with actionable information, etc. to drive value for the Bank. Comprehensive statistical measures to track the success of analytics use cases is also implemented.

Unified, Scalable, Central Data Repository Solution & Processing Infrastructure: To support the scope of its digital ambitions, the ACoE has built a unified, scalable, and central data repository solution. This centralisation has streamlined data management and processing and provided a holistic view of data to facilitate more effective analytics.

Integrated Analytics with Business Processes to Enable Data-Driven Decision Making: The ACoE has also enhanced and established multiple systems to weave analytics into all business processes. Set-up of fully functional CRM, establishment of next- gen Early Warning System and enhancement of Collections tool are some of the important achievements.

Upskilled In-House Analytics Resources for Seamless Business Continuity: Recognising the importance of human capital in the digital transformation journey, ACoE has undertaken upskilling its in-house analytics resources. The workforce is being trained in role specific trainings and certifications in Data Science, Machine Learning, Visualization, Cloud & Security, DevOps and MLOps. This will ensure that our workforce is fully equipped with the necessary skills to provide seamless business continuity.

Human resources (ISO-9001:2015 certified):

As on March 31, 2024, The Bank had 8907 employees of which, 2799 are women employees constituting around 31.42% of the total strength. Your Bank has put in place an institutional mechanism for the protection of women employees at the workplace and adopted a policy pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, providing for the protection of women employees against the sexual harassment of women at the workplace and redressal of such complaints. There were no complaints pending at the beginning of the financial year and no complaints were received during the financial year under review. Further, the Bank provides training and development opportunities to the employees which is discussed in detail in the Managing Discussion and Analysis.

Risk Based Supervision (RBS)

In view of the growing complexities in the processes, product offerings and systems and procedures in the Indian banking sector, pursuant to the recommendation of the High-Level Steering Committee, the Reserve Bank of India has shifted its supervisory stance to a risk-based approach called the Supervisory Program for Assessment of Risk and Capital (SPARC) which is focusing on evaluating both present and future risks, identifying incipient problems and facilitating prompt intervention / early corrective action etc. Your Bank has been included under the same and migrated to Risk Based Supervision since March 31,2015. A plan of action for complying with various findings in RBS communicated to the Bank in the Risk Assessment Report is also ensured.

Compliance Function

Your Bank is effectively addressing Compliance Risk through the Compliance function. The compliance function is one of the key elements in the Corporate Governance structure of the Bank along with internal control and risk management process. The Bank has set up a robust Compliance Department with sufficient independence to promote a healthy compliance culture. The Bank ensures strict observance of all statutory provisions, guidelines from RBI and other Regulators, standards and codes, the internal policies and fair practices of the Bank.

The compliance function includes interpretation/dissemination of regulatory and statutory guidelines and ensures that controls and procedures capture the appropriate information to the Senior Management in their risk management function. The risk-based compliance programme of the Bank, under the supervision of the Chief Compliance Officer, ensures appropriate coverage across businesses, besides verifying the level of compliance through 'Compliance Testing' of branches/business units. The Bank carries out an annual compliance risk assessment to identify and assess its significant compliance risks and take steps to manage the risks effectively. Further, the tone from the Top management continuously emphasizes the significance of compliance to usher in perceptible improvements in the overall compliance culture of the Bank.

Vigil Mechanism

The Bank has implemented the Protected Disclosure Policy (Whistle Blower Policy) since the year 2007 intended to promote participation of employees at all levels and detection of corruption, misuse of Office, criminal offences, suspected/actual fraud, failure to comply with the rules and regulations prescribed by the Banks and any events/acts detrimental to the interest of the Bank, depositors and the public resulting in financial loss/operational risk, loss of reputation etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower who avails such mechanism and also provides for direct access to the Chief of Internal Vigilance (CIV). Further, there was no occasion where a person was denied access to the Audit Committee of the Board. The details of Whistle Blower Policy is posted in website of the Bank and available at the link: https://karnatakabank.com/investors/policies-codes

Corporate Social Responsibility

Corporate Social Responsibility (CSR) initiatives of the Bank are designed to make a positive impact on a wide range of areas of social life like healthcare, education, livelihood enhancement, empowering women/socially and economically disadvantaged, environmental sustainability/ green initiatives, protection of heritage/ culture, promotion of sports, rural development, Swachh Bharath etc., aimed at promoting the overall development of the society. Further, to minimize the urban-rural divide, your Bank has been strengthening its rural orientation through initiatives aimed at imparting financial literacy and extending banking services to the people in rural unbanked areas, fairly and transparently, at an affordable cost.

Further, pursuant to Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Board has constituted 'Corporate Social Responsibility (CSR) Committee' of the Board and has also put in place a Policy on Corporate Social Responsibility (CSR Policy) to undertake projects/programmes in pursuance of the said Policy. Under CSR activities, The Bank has so far funded 1997 projects with a total financial outlay of Rs. 92.61 crore, and these projects have exhibited a welcome positive impact on society.

Pursuant to Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the contents of the CSR Policy, along with the report on amounts spent on various projects/ programmes during FY2023-24, are detailed in Annexure- II to this report. Further, in terms of Rule 4(5) of the CSR rules, certification from the Chief Financial Officer has been obtained for the CSR spending during FY 2023-24.

Financial Inclusion:

Through the Financial Inclusion Plan, your Bank aims at 'connecting people' with the Bank and not just opening accounts. This includes meeting the small credit needs of the rural public, giving them access to the payments system, providing remittance facilities, life insurance and health insurance etc. Your Bank has 430 branches, apart from 35 Ultra Small Branches, located in the rural and semi-urban areas and offers banking facilities to the rural clientele. Our rural branches are also acting as Financial Literacy Centres FLC and imparting banking literacy among the rural populace. In accordance with Prime Minister's Jan Dhan Yojana (PMJDY), the Bank has implemented the revised Strategy and Guidelines for Financial Inclusion activities. Your Bank is actively participating in the Direct Benefit Transfer (DBT) Programme of Govt. of India to transfer the benefits of various Schemes / LPG subsidies directly to the beneficiaries' Aadhaar-enabled bank accounts.

As part of the Financial Inclusion plan, the Bank has been offering the following services:

Sub-K Impact Solutions Limited:-

The Bank has tied up with Sub-K Impact Solutions Limited to provide the BC services, and as on March 31,2024, 130 BC Agents are covering allocated villages in the states of Karnataka, Andhra Pradesh and Chhattisgarh.

M/s Digivriddhi (DGV):-

The Bank has engaged with M/s DGV as corporate BCs since January 2024 to tap milk farmers business across Karnataka states. As on March, 2024, they have been onboarded by Six Dairy Co-operative Societies (VDCS) as sub-BC agents. The Bank is expecting good accretion business in future.

1. Aadhar Enabled Payment System (AEPS): The Bank has introduced AEPS transaction services offered by the National Payments Corporation of India (NPCI) at all Business Correspondent (BC) locations of the Bank, and with this, the customers of the Bank having an Aadhar-enabled SB account can transact at the BC point.

2. Financial Literacy and Credit Counseling Centres FLCC: The Bank is running 5 FLCC at B.C Road - Bantwal, Hangal, Kundagol, Tiptur and Alur (Karnataka). During FY2024, 5 FLCC have conducted 1,031 Financial Literacy campaigns in which 77,575 participants took part. In adherence to RBI guidelines, all the rural branches of your Bank are also conducting financial literacy Camps.

3. Social Security Schemes: All the branches of your Bank are actively involved in providing three Social Security Schemes-Prime Minister Jeevan Jyothi Bima Yojana (PMJJBY), Prime Minister Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) schemes to customers across the country.

4. Prime Minister Jan Dhan Yojana (PMJDY): All the branches across the country are opening accounts under PMJDY and are issuing RuPay Debit Cards.

5. The Bank is one of the trustees of Karnataka Farmers Resource Centre (KFRC), Bagalkot, established to impart training and act as a resource centre for farmers under the umbrella of SLBC Karnataka. The Bank has contributed Rs. 50.00 lakhs towards the capital expenditure/corpus of KFRC.

6. In line with the Pradhan Mantri Street Vendor's Atmanirbhar Scheme, The Bank has rolled out KBL- PM - SVANidhi scheme providing working capital loans up to Rs. 50,000/- to the street vendors to support their businesses.

AWARDS AND ACCOLADES:

Your Bank has bagged the following awards during the financial year under review in recognition of its achievement:

1. The Bank has bagged three prestigious awards from Infosys Finacle Innovation Awards 2023, under the following categories:

a) 'Platinum' award under 'Transformation Excellence'

b) 'Platinum' under 'Process Innovation'

c) 'Gold' under 'Channel Innovation'.

Function was held on 02.06.2023 at Mumbai.

2. The Bank has bagged 'Exemplary Digital Transformation Strategy' and 'Outstanding Data Analytics Initiative' awards conferred by Elets-Banking and Finance held on 10.06.2023 at Goa.

3. The Bank has been conferred with 'ET Edge ICONIC Brands of India 2023' award at a glittering function at Mumbai. The award was presented by the Iconic Actress Zeenat Aman.

4. The Bank has been awarded with Digital Marketing Award for 'Stop kidding Yourself' Campaign on 16.10.2023 at the Pitch BFSI Marketing Awards 2023.

5. The Bank has been conferred with the prestigious Runner-up Award in the "Best Fintech & Digital Public Infrastructure Category" at the 19th Annual Banking Technology Conference organised by IBA. Additionally, the Bank also bagged the Special Mention Award in the Best AI & ML category. Function was held on 09.02.2024.

6. Two (2) Awards at 'MSME Banking Excellence Awards-2023' by CIMSME (Chamber of Indian Micro Small & Medium Enterprises) held on 29.02.2024 at New Delhi, as detailed here below:

a) Best Bank for Creating Awareness among MSME - Winner

b) Best Bank for Supporting Startups- Runner-Up

Implementation of Ind AS:

In order to implement Indian Accounting Standards (Ind AS), the Bank has set up a Steering Committee headed by the Managing Director and a sub-committee called IFRS Working Group having members across cross-functional business verticals, to work towards effectively implementation of Ind AS in the Bank. The Bank has been submitting the Proforma Ind AS financials to RBI every half year as per the RBI guidelines. Also, as a prudent measure, The Bank is preparing Proforma Ind AS financials on quarterly basis and the estimated impact along with latest update on the Ind AS implementation in the Bank is placed to the Audit Committee of the Board. Towards effective implementation of the Standards, the Bank has also endeavoured on onboarding - Oracle Financial Services Analytical Application (OFSAA) which includes IFRS-9 Module to compute Effective Interest Rate (EIR) and Expected Loan Loss Provisioning (ECL) through the Core Banking System.

The Reserve Bank of India (RBI), vide its communication Ref: DBR.BP.BC.No.29/21.07.001/2018-19 dated March 22, 2019 has deferred implementation of Ind AS for all Scheduled Commercial Banks till further notice.

DIVIDEND DISTRIBUTION POLICY

Your Bank has adopted a Policy on the Distribution of Dividend to the shareholders pursuant to the Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Gist of the Dividend Distribution Policy is as under:

• Being a Banking entity, Dividend Distribution is guided by the RBI Circular DBOD.No.BP.BC.8821. 02.67/2004-05 dated May 05, 2005, with regard to eligibility criteria for distribution of dividend.

• Factors considered for a recommendation of dividend includes both internal factors such as financial performance, dividend payout trends, tax implications, and corporate actions and external factors such as shareholders' expectations, macro environment etc.

• Factors considered for determining the quantum of dividend include financial performance, capital fund requirements to support future business growth, having regard to the dividend payout ratio prescribed under the aforesaid RBI Guidelines etc.

The Dividend Distribution Policy of the Bank is available on website of the Bank at https://karnatakabank.com/sites/default/ files/7074-02/policy-on-dividend-distribution-707B-74.pdf

ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014, a copy of the Annual Return of the Company for FY2024 prepared in accordance with Section 92(1) of the Act has been placed on the website and is available at https://karnatakabank.com/investors/annual-reports

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank has prepared Consolidated Financial Statement including its subsidiary - KBL Services Limited and pursuant to the provisions of Accounting Standard ('AS') 21, the Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014, the Consolidated Financial Statements of the Bank along with its subsidiary for the financial year ended March 31, 2024 forms part of the Annual Report. The financial position and performance of the subsidiary are given in Form AOC-1 attached to this Report as Annexure-III.

In accordance with the third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its Standalone and Consolidated Financial Statements has been hosted on the website, https://karnatakabank.com. Further, as per the fourth proviso to the said Section, the Audited Annual Accounts of the said subsidiary Company of the Bank, considered as part of the Consolidated Financial Statements have also been hosted on the website of the Bank: https://karnatakabank.com. The documents/details available on the website of the Bank: https://karnatakabank.com will also be available for inspection by any Member at its Registered Office.

INVESTOR RELATION CELL

To maintain a regular connect with the investors, your Bank has a dedicated Investor Relation Cell at the Registered Office. Besides redressing the grievances, if any, from the investors, the Cell proactively disseminates corporate information on a voluntary basis to the shareholders through email (wherever made available) about financial results, major events and coverage about the Bank in the media etc.

CORPORATE GOVERNANCE

Your Bank is committed to adopt the best practice of corporate governance to protect the interests of all the stakeholders of the Bank, viz. shareholders, depositors and other customers, employees and society in general and maintain transparency at all levels. A detailed report on corporate governance practices is given in Annexure-IV to this report.

Further, pursuant to Regulation 34(3) of SEBI Listing Regulations read with Part E of Schedule V of the Listing Regulations, a certificate from M/s. BMP & Co. LLP, Bengaluru, Practicing Company Secretaries certifying the compliance with various provisions of the Corporate Governance is annexed to this Report as Annexure-V.

The Company has received a certificate from M/s. BMP & Co. LLP, Bengaluru, Practicing Company Secretaries, pursuant to clause 10(i) of Part C under Schedule V of SEBI Listing Regulations that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India or the Ministry of Corporate Affairs or any such statutory authority and same is attached as Annexure-VI to this report.

EMPLOYEE STOCK OPTIONS (ESOP)

The shareholders of the Bank, on March 30, 2023, have approved 'KBL Employee Stock Option Scheme-2023' (ESOS-2023) with a total of 15,00,000 stock options available for grant. During the reporting year, 3,13,193 options were granted under ESOS 2023.

Other statutory disclosures as required by the SEBI guidelines/Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 on ESOS are given in website of the Bank in the link: https://karnatakabank.com/ investors/annual-reports

The Bank has received a certificate from M/s. BMP & Co. LLP, Bengaluru, Practicing Company Secretaries, pursuant to Regulation 13 of the Securities Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 that the Bank has implemented the ESOP Schemes in accordance with the applicable provisions of the Regulations and Resolution(s) of the Bank in the General Meeting(s) and through postal ballots, as the case may be and same is attached as Annexure-VII to this report.

DIRECTORS AND CHANGES IN THE BOARD

As of March 31, 2024, Board of the Bank comprised of eleven Directors with one Independent Woman Director. Except Mr. Srikrishnan H, Managing Director & CEO, Mr. Sekhar Rao, Executive Director and Mr. B R Ashok, Non-Executive Director, all others are Independent Directors. The details of the criteria for appointment and remuneration of Directors are provided in the report on Corporate Governance under Annexure-IV.

During the FY 2023-24, the Bank has inducted Mr. Harish Hassan Visweswara (DIN: 08742808) as an Additional Director (NonExecutive, Independent) w.e.f. February 01,2024, and his appointment as Independent Director was approved by the shareholders vide resolution dated February 27, 2024 passed via Postal ballot (e-voting).

During the financial year under review, Mr. Mahabaleshwara M S retired from the post of Managing Director & CEO on April 14, 2023, upon completion of his tenure.

During the financial year under review, Mr. Keshav Krishnarao Desai, (DIN: 07427621) Independent Director, retired on February 18, 2024, upon completion of his tenure of eight years from the date of appointment.

The Board places on record its appreciation for the valuable contributions and the guidance given by them during their tenure in office.

Considering the foregoing and as per Section 152(6) of Companies Act, 2013, at the ensuing AGM, Mr. Sekhar Rao, (DIN: 06830595), Executive Director, being the longest in office shall retire by rotation. Further, being eligible, he has offered himself for reappointment. In the opinion of the Board Mr. Sekhar Rao has the integrity, expertise and requisite experience, which is beneficial to the business interest of the Bank. Based on the performance evaluation and recommendation of the Nomination and Remuneration Committee (NRC), the Board recommends his re-appointment for approval by the members of the Bank. Accordingly, a resolution seeking the reappointment of Mr. Sekhar Rao has been included in the Notice of 100th AGM.

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER (MANAGING DIRECTOR & CEO)

Mr. Srikrishnan Rs. has assumed charge as the Managing Director & CEO of the Bank w.e.f. June 9, 2023, for a period of three years.

DECLARATION BY INDEPENDENT DIRECTORS

Pursuant to the provisions of Section 149(7) of the Companies Act, 2013 and Regulation 25(8) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Bank has received necessary declarations from all the Independent Directors confirming that they meet the criteria of independence for Independent Directors as on March 31,2024.

FAMILIARISATION PROGRAMMES OF INDEPENDENT DIRECTORS

All directors including Independent Directors are familiar with their roles, rights, and responsibilities in the Bank at the time of appointment and also on a recurrent basis. The Bank facilitates familiarisation programme and other programmes including Certification programme for its Directors. The details of various programmes undertaken/ arranged for familiarizing the Independent Directors and other programmes arranged for the directors are disclosed in the Report on Corporate Governance under Annexure-IV, which forms part of this Report.

PERFORMANCE EVALUATION OF THE BOARD

Your Board of Directors has laid down criteria and process for performance evaluation of Directors, Chairman, Whole time Directors, Committees of the Board and Board as a whole. The NRC annually reviews and approves the criteria and the mechanism for carrying out the evaluation exercise effectively. The statement indicating the manner in which formal annual evaluation of the Directors, the Board and Committees of the Board etc., are given in detail in the report on Corporate Governance under Annexure-IV. In pursuance to the above, the Independent Directors, in their separate meeting held on March 30, 2024, have reviewed, and evaluated the performance of the Board as a whole and the Non-Executive Director. Further, the Board has also reviewed the performance of the Committees of the Board and that of individual Independent Directors at its meeting held on April 18, 2024.

As per the Policy of the Bank on Performance Evaluation, the performance evaluation of the Managing Director & CEO and Executive Director are carried out by the Independent Directors, after the publication of the annual audited financial results.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions with the related parties that were entered into during the financial year under review are in the ordinary course of the business of the Bank and on an arm's length basis. There were no materially significant related party transactions entered into by the Bank with the Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of the Bank. As such disclosure in Form AOC-2 is not applicable. The Policy on dealing with Related Party Transactions as approved by the Audit Committee/ Board has been placed on the website of the Bank under the Investor Portal The said policy can be accessed through the link: https://karnatakabank.com/investors/policies-codes.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Section 134(3)(c), 134(5) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rule, 2014 and other applicable provisions, your Directors state that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanations relating to material departures.

b) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as of the end of financial year March 31,2024, and profit and loss for that period.

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

d) The Directors have prepared the annual accounts on a going concern basis.

e) The Directors have laid down the internal financial controls followed by the Bank and that such internal financial controls are adequate and are operating effectively.

f) The Directors have devised proper systems to ensure compliance with the provision of all applicable laws and that such systems were adequate and operating effectively.

a. Statutory Auditors:

At the 99th Annual General Meeting held on August 29, 2023, M/s. Sundaram & Srinivasan, Chartered Accountants (Firm Registration No. 004207S), M/s. Kalyaniwalla & Mistry LLP, Chartered Accountants, (Firm Registration No./LLP No. 104607W/ W100166) and M/s. Ravi Rajan & Co LLP, Chartered Accountants, (Firm Registration No./LLP No. 009073N/N500320) were appointed as Joint Statutory Auditors of the Bank to hold office upto the ensuing 100th Annual General Meeting. The Board of Directors proposes to the members for continuation of only M/s. Ravi Rajan & Co LLP, Chartered Accountants to hold office upto the conclusion of 101st Annual General Meeting as M/s Sundaram & Srinivasan, Chartered Accountants & M/s Kalyaniwalla & Mistry LLP, Chartered Accountants were completing their maximum tenure of three years as per the extant RBI guidelines and Policy of the Bank on Appointment of Statutory Auditors.

As per RBI guidelines, it is necessary to have minimum two Statutory Auditors for our asset size. Accordingly, the Board of Directors of the Bank at its meeting held on May 24, 2024, on the recommendation of the Audit Committee of the Board proposed the appointment of M/s. R. G. N Price & Co., Chartered Accountants, (FRN 002785S) as Joint Statutory Auditors of the Bank. Pursuant to Section 30 (1A) of the Banking Regulation Act, 1949, approval has been obtained from RBI vide their letter Ref. CO. DOS. RPD. No. 52580/08.30.005/2024-25 dated July 02, 2024. Accordingly, the Board of Directors recommends the appointment of M/s. R. G. N Price & Co., Chartered Accountants, (FRN 002785S), as Joint Statutory Auditor of the Bank for the financial year 2024-25 (i.e., up to the conclusion of the 101st AGM). The Bank has received consent from the above auditors and necessary confirmation from them that they are not disqualified from being appointed as auditors of the Bank pursuant to the provisions of the Companies Act, 2013 and the Rules made thereunder.

b. Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the rules made thereunder, your Bank has appointed M/s. BMP & Co, LLP, Bengaluru, Company Secretaries in practice as the Secretarial Auditor to conduct the Secretarial Audit for the financial year ended March 31,2024. The secretarial audit report from the Secretarial Auditor is annexed to this report as a part of Annexure-VIII.

Pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 read with SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 08, 2019, the Bank has obtained the Annual Secretarial Compliance Report, certified by CS Pramod S M (COP: 13784), Partner, M/s. BMP & Co. LLP Company Secretaries in practice, Bengaluru, for the financial year ended March 31, 2024, on compliance of all applicable SEBI Regulations and circulars/ guidelines issued thereunder and a copy was submitted to the Stock Exchanges within the prescribed timeline. The Secretarial Compliance report is annexed to this report as a part of Annexure-IX.

c. Reporting of frauds by Auditors

There is no qualification or adverse remark in Auditors' Report. There is no incident of fraud requiring reporting by the Auditors under Section 143(12) of the Companies Act, 2013.

STATUTORY DISCLOSURES

The disclosures under sub-section (3) of Section 134 of the Companies Act, 2013 and Rule 8 of Companies (Accounts) Rules, 2014 are furnished below:

a) Conservation of energy and technology absorption: Considering the nature of the business of the Bank, the provisions of Section 134(3)(m) of the Companies Act, 2013 relating to conservation of energy and technology absorption are not applicable to your Bank. The Bank has, however, used information technology in its operations extensively. Further, to promote renewable sources of energy, the Bank has installed solar panels at the Corporate Office, a few Regional Offices and in a few owned premises of the Bank.

b) During the year ended March 31,2024, the Bank earned Rs. 16.97 crore and spent Rs. 5.77 crore in foreign currency.

c) There were no significant and material orders passed by the regulators or courts of tribunals impacting the going concern status and the operations in future of the Bank.

d) Internal financial control systems and their adequacy: Your Bank has laid down standards, processes and structure facilitating the implementation of internal financial control across the Bank and ensure that same are adequate and operating effectively.

e) Key Managerial Personnel:

• Mr. Srikrishnan Rs. (appointed and took charge w.e.f. June 09, 2023) Managing Director & CEO, Mr. Abhishek S Bagchi, CFO and Mr. Sham K, Company Secretary, were the Key Managerial Personnel of the Bank as on March 31, 2024, as per the provisions of the Companies Act, 2013.

• Mr. Mahabaleshwara M S, demitted his office on April 14, 2023 upon completion of his term as Managing Director & CEO.

f) Remuneration of Directors: Disclosure pursuant to Section 197 (12) of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure-X to this report.

g) During the financial year 2023-24, there was no employee who was in receipt of remuneration requiring disclosure as per the limits prescribed under Section 197 of the Companies Act, 2013, read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. However, the remuneration (including variable pay determined in the subsequent financial year) pertaining to the Whole Time Directors is subject to prior approval of the Reserve Bank of India. The details of remuneration paid to Mr. Mahabaleshwara M S, the then Managing Director & CEO (up to April 14, 2023) and Mr. Sekhar Rao, Executive Director, Remuneration of present Managing Director & CEO - Mr. Srikrishnan Rs. are provided in the Corporate Governance Report.

h) In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the Top-10 employees in terms of remuneration drawn forms part of this annual report. In accordance with the provisions of Section 136(1) of the Companies Act, 2013, the annual report excluding the aforesaid information, is being sent to the members of the Bank and others entitled thereto. The said information is available for inspection by the members at the Registered Office of the Bank during business hours of the Bank up to the date of the ensuing Annual General Meeting. Any member interested in obtaining a copy thereof, may write to us at investor.grievance@ktkbank.com.

i) There are no material changes affecting the financial position of the Bank which have occurred between the end of the financial year of the Bank to which the financial statements relate and the date of this Report.

j) Particulars of loans, guarrentees or investments under section 186: Nil

k) Any changes in nature of business during the year under review: Nil

NUMBER OF BOARD MEETINGS

During the financial year under review the Board met 16 times and the details thereof are provided in the report on Corporate Governance attached to this report. The maximum gap between any two Board Meetings was less than one Hundred and Twenty days.

COMMITTEES OF THE BOARD

As on March 31,2024, the Bank had 11 Committees of the Board which were constituted to comply with the requirements of relevant provisions of the applicable laws and for operational efficiency. The details of the meetings of the Board and the Committees, their composition (as on March 31, 2024), terms of reference, powers, roles etc., are furnished in the report on Corporate Governance attached to this report in Annexure-IV.

PROCEEDINGS PENDING UNDER THE INSOLVENCY AND BANKCRUPTCY CODE,2016:

No application has been made or any proceeding is pending under the IBC, 2016.

MAINTENANCE OF COST RECORDS

Being a Banking Company, the Bank is not required to make and maintain such accounts and cost records as specified by the Central Government under sub-section (1) of Section 148 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The details of transfer of unclaimed dividend, shares, share application money to IEPF is given in Report on Corporate Governance given as Annexure-IV to this report.

SECRETARIAL STANDARDS

The Company complies with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT:

The Bank has adopted various policies that imbibe the best practices with regard to environmental, social and governance (ESG) principles. In this context, Bank has prepared a Business Responsibility and Sustainability Report (BRSR) for the Financial Year 2023-24, prepared in accordance with the requirements under Regulation 34(2)(f) of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and as per the format devised by the Securities and Exchange Board of India vide Circular SEBI/HO/CFD/CFD-SEC-2/P/CIR/2023/122. The same is provided under Annexure-XI.

MANAGEMENT DISCUSSION AND ANALYSIS:

In compliance with the Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, separate Section on Management Discussion and Analysis, as approved by the Board, which includes details on the state of affairs of the Bank, forms part of this Board's Report.

ACKNOWLEDGEMENTS

The Board of Directors would like to place on record their sincere gratitude to the customers of the Bank, depositors, shareholders for their unwavering support, patronage and goodwill. Your Directors also place on record their gratitude for the continued guidance and support provided by the Reserve Bank of India, other government and regulatory authorities, financial institutions and correspondent banks. Your Directors express their deep sense of appreciation to all the staff members, for their contribution to the quest for sustained growth and profitability of the Bank and look forward to their continued contribution for scaling greater heights.