The Board of Directors is pleased to place before you, the 95th Annual Report on the business and operations of the South Indian Bank Ltd. ("the Bank") along with the audited accounts for the Financial Year (FY) ended March 31, 2023.

PERFORMANCE OF THE BANK

The performance highlights of the Bank for the financial year ended March 31, 2023 are as follows:

Previous year's figures have been regrouped / reclassified, wherever necessary to conform to current year's classification.

BUSINESS ACHIEVEMENTS

The Bank has achieved a total Business of C 1,63,743.42 crore, consisting of Deposits of C 91,651.35 crore and Gross Advances of C 72,092.07 crore as on March 31, 2023.

DEPOSITS

The total Deposits of the Bank as on March 31, 2023 was C 91,651.35 crore as against C 89,142.10 crore as on March 31, 2022, registering a growth of 2.81%. The break-up of the deposits as on March 31, 2023 is as under:

The Bank during the year has focused on Retail Advances and CASA.

The CASA has grown from C 29,601.37 crore as on March 31, 2022 to C 30,227.06 crore as on March 31, 2023, with a growth of 2.11%. The Savings Bank Deposits grew by 2.03 % on a year on year basis. Current Deposits grew by 2.56% on a year on year basis. While opening new banking relationships, the Bank has accorded priority to meaningful financial inclusion during the period under reporting.

ADVANCES

The advance portfolio of the Bank grew by 16.62% on a YoY basis to reach C 72,092.07 crore as on March 31, 2023. The focussed strategies implemented by the Bank has facilitated rapid growth in advances.

The Bank has registered a robust recovery and up-gradation of GNPA aggregating to C 1,295.82 crore, during the financial year 2022-23. The Gross NPA of the Bank as on March 31, 2023 as a percentage to gross advance is 5.14 and Net NPA stood at 1.86%. Ensuring the Bank's vision on asset quality, the underwriting standards are revisited and reviewed from time to time. The GNPA and Net NPA percentage of the new loan book stood only being 0.09 and 0.06 respectively, excluding '21 Crore of Credit card business that have fully been backed by FLDG and '5.00 Crore Gold Loan.

During the financial year 2022-23, the Bank could register growth with focus on building quality assets across all Verticals like Corporate, SME, Housing Loan, Auto Loan, Credit Card, Personal Loan, Gold Loan, etc. The Housing Loan policy of the Bank was revamped during the year 2022-23, to make the Housing Loan products more competitive in the market without compromising on credit quality. The technical team embedded with proficiency on valuation of securities also started full-fledged functioning during the financial year.

The Bank has adopted a forward looking approach and envisaged more co-lending arrangements to enhance

priority sector lending. All the priority sector advance targets stands achieved and the Bank was also able to generate additional revenue of C 79.75 crore during the year, through sale of Priority Sector Lending Certificates (PSLCs).

Priority sector target & achievement as on March 31,2023 is as follows:

The high quality portfolio growth was channelized by the Relationship Management structure at numerous locations/touch points which helped the Bank in tapping various Retail, SME and cross-sell opportunities. Decentralisation of credit processing centres resulted in speedy disposal of credit facilities.

Endeavours for profitable credit growth through quality credit

To achieve the vision of 'profitable credit growth through quality credit', the Bank has made an arrangement with Mckinsey & Company India LLP and re-designed the credit underwriting model - SIB MSME Integrated Lending Engine (SMILE) for SME lending up to C 2.00 crore. The banking industry too, witnessed a wave of changes as everything from business models to operations transitioned to a digital world. The Bank is in the process of migrating to an advance suite provided by 'M/s Nucleus Software Exports Ltd' & 'M/s NewGen Software Technologies Ltd' which can handle all the procedures from sourcing to collection, including documentation in retail and SME lending digitally.

Profit

The Net Operating Income (Net Interest Income and Other Income) of the Bank increased by C 550.85 crore (16.83%) from C 3,273.86 crore in FY 2021-22 to C 3,824.71 crore in FY 2022-23. The decrease in Non- Interest Income was C 221.47 crore (21.42%) during the year, which was mainly on account of depreciation on security receipts charged during the FY 2022-23. The Operating Profit for the year under review was C 1,507.33 crore (before taxes and provisions) as against C 1,247.57 crore for the financial year 2021-22. The Net Profit for the year was C 775.09 crore as compared to a net profit of C 44.98 crore during the previous year and the profit available for appropriation are as per details given below:

Dividend

The Board of Directors has recommended a dividend of 30% i.e. C 0.30 per Equity share of face value of C 1/- each per share for the financial year ended March 31, 2023 (previous year Nil).

CAPITAL & RESERVES

The Bank's issued and paid-up capital stood at C 209.27 crore as on March 31, 2023. The Bank has not issued any securities during the financial year 2022-23.

The capital plus reserves of the Bank has moved up from C 5,853.13 crore, as on March 31,2022 to C 6,674.58 crore as on March 31, 2023, mainly on account of plough back of profits and fixed asset revaluation during the current financial year.

THE CAPITAL TO RISK WEIGHTED ASSETS RATIO (CRAR)- BASEL III

The Capital to Risk Weighted Assets Ratio (CRAR) of the Bank according to Basel III guidelines is 17.25 as on March 31, 2023 as against the statutory requirement of 11.50 (including Capital Conservation Buffer). Tier I CRAR constitutes 14.74 while Tier II CRAR works out to 2.51. The Bank follows Standardized Approach, Standardized Duration Approach and Basic Indicator Approach for measurement of capital charges in respect of credit risk, market risk and operational risk, respectively.

LISTING AGREEMENT WITH STOCK EXCHANGES

The Bank's shares continue to be listed on BSE Ltd. and The National Stock Exchange of India Ltd. The Tier I/II Bonds issued by the Bank continue to be listed on BSE Ltd. The Bank confirms that it has paid the listing fees to all the Stock Exchanges for the year 2023-24. The securities of the Bank are actively traded on NSE (Shares only) and BSE (Shares and Bonds) and have not been suspended from trading.

EXPANSION PROGRAMME

The Bank has been successful in widening its network across India with 946 banking outlets (940 Branches, 3 Satellite branches and 3 Ultra small branches) and 1,289 ATMs/CRMs as on March 31, 2023. The Bank has opened 16 new outlets and closed 4 branches. The Bank has also opened 40 new ATMs, 9 CRMs across the country during the financial year 2022-23 and closed 23 ATMs and 8 CRMs. The branch network now covers 26 States and 4 Union Territories. The Bank plans to open 17 banking outlets and 25 ATMs & 10 CRMs during the financial year 2023-24. Construction of Currency Chest at Kannur

has been completed. Construction of Currency Chest at Kakkanad is under progress and the same is expected to be completed in the FY 2023-24, as per the time line permitted.

INVESTMENT

As the pandemic seemed to abate, the Russia-Ukraine conflict caused inflation in India and across the world. Consumer Price Index (CPI) inflation in India persisted at elevated levels during 2022-23, impacted by a series of adverse supply shocks and the continuing pass through of high input costs. To curb the high inflation, the RBI has increased the policy repo rate by 250 basis points (bps) during May 2022-February 2023 to 6.5%, keeping the stance to "accommodative" and monetary policy remaining focused on progressively aligning inflation with the target, while supporting growth. This was preceded by the introduction of the Standing Deposit Facility (SDF) at a rate 40 bps higher than the fixed rate reverse repo. Thus, the effective rate hike since April last year has been 290 bps. These increases have been fully transmitted to the overnight weighted average call money rate (WACR), the operating target of monetary policy, which has gone up from daily average of 3.32% in March 2022 to 6.52% in March 2023.

Meanwhile, in the few weeks during March, 2023, global economy started witnessing a renewed phase of turbulence with fresh headwinds from the banking sector turmoil in some advanced economies. Bank failures and contagion risk have brought financial stability issues to the forefront. Given the stubbornness in inflation, central banks continued to tighten monetary policy, although at a reduced pace. Inflation globally has moderated in the recent months, but its descent to the target is proving to be long and arduous. The RBI projects CPI inflation to moderate to 5.2% for FY24. Looking ahead, India's headline inflation is likely to moderate at 4-5% in FY24, and this may augur well for RBI to continue the pause. The next move by the RBI will likely to be a cut, albeit conditional on global policy moves.

The nominal exchange rate of the Indian rupee (INR) depreciated from C 75.24 to record low of C 83.26 relative to the US Dollar (USD) in FY23 amidst tightening global financial conditions, an uncertain global environment and portfolio capital outflows.

The Bank's gross investment portfolio stood at C 26,014.21 crore as on March 31, 2023 compared to C 22,534.01 crore as on March 31, 2022, reported an increase of 15.44%. Investment Deposit Ratio moved to 28.40 as on March 31,

2023 from 25.28 as on March 31, 2022. Profit on sale of investment for the FY 2022-23 stood at C 70.01 crore. Total interest Income (Interest Dividend) from investment for the year was C 1,285.72 crore. Yield on investments (profit interest earned to average investments) during the FY 2022-23 was 5.38%.

During the year, the trading desks in Treasury Department have all managed their portfolios well with data-backed analysis. The SLR trading desk also planned and executed the Bank's participation in Government's Securities Market. The desk has successfully managed the held-to-maturity (HTM) book. The equity trading desk took well thought out positions in the secondary market and participated actively in the various primary market offerings. The forex trading desk too contributed actively to overall profits by taking gainful trading positions.

System's liquidity remained in large surplus especially in the first half of FY23, but it moderated to C 0.4 lakh crore during H2 from C 3.3 lakh crore during H1. The net LAF slipped occasionally into deficit mode in H2, triggered by frictional pressures from festival-related currency demand, month-end GST outflows and quarterly advance tax payments.

The Fund Management and Money Market Desk at Treasury Department successfully managed the liquidity risk by maintaining appropriate levels of surplus funds. The desk also ensured compliance with the regulatory requirements of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).

Besides the above, the Forex Merchant Desk in Treasury Department offers to the Bank's customers solutions for foreign exchange risk hedging and remittance-related services. A significant portion of the total Treasury profits for FY 2022-23 came from Forex Merchant activities. Going forward, Treasury Department intends to focus on Forex Merchant business and other similar offerings to customers for diversifying its revenue mix.

A new Treasury Management Software will be implemented in the Financial Year 2023-24. This will enhance product portfolio and better the customer service. The Treasury Department was able to operate continuously and without interruptions during the year, which demonstrates the resilience of the risk management systems and processes in place.

During the FY 2022-23, as a result of focused and sustained efforts using legal recourse available under the SARFAESI Act, DRTs and Civil Courts, the Bank has been able to improve its overall recovery. The Bank has also relied on expeditious deciding on requests for one-time settlement. The cumulative effect of the sustained action has facilitated the Bank to reach an all-time high recovery figure of C 1,814.69 crore, which is 24% higher than the recovery during the last financial year 2021-22. The recovery was largely in cash and the Bank has recorded its highest ever cash recovery at C 1,570.66 crore. During the financial year 2022-23, in order to improve the quality of assets, special thrust was given to selection and underwriting of credit. Further, focus on building efficiency of collection team, resulted in marked improvement in collections and the Bank reaching its lowest ever SMA2 numbers at C 711.65 crore (against C 892.15 crore in FY2021-22). Incremental NPA was also controlled and addition to GNPA was limited at C 1,513.22 crore, as against C 2,159.23 crore in FY 2021-22. The Gross NPA of the Bank has decreased to 5.14% from 5.90% as on March 31, 2022. The Net NPA has decreased to C 1,293.61 crore, from C 1,777.77 crore as on March 31, 2022. In terms of percentages, the Net NPA has decreased to 1.86 from 2.97 as on March 31, 2022. On the recovery front, the Bank has managed to outperform peer group banks and strives to build capability to sustain the momentum and deliver higher numbers during the years to come.

RISK MANAGEMENT

Risk is an integral part of banking business. In the recent past, the Bank has exerted focused efforts in building a robust, and sustainable risk governance framework and to create risk awareness culture across all tiers of the organization's hierarchy and continues to do so. Various initiatives such as comprehensive review of Credit Risk Policy and other Risk Management Policies have been initiated along with other process improvements. Liquidity is also actively being managed through the ALCO forum, where the Bank is pursuing actively into increasing the sticky and retail deposits along with operationalizing majority of the wholesale banking financing relationships. As part of the Business Continuity Management, the Bank's Operational Risk team is working in close coordination with various stakeholders to ensure smooth conduct of operations.

The risk management strategy of the Bank is based on a clear understanding of various risks, disciplined risk assessment, risk measurement procedures and continuous monitoring for mitigation. The policies and procedures established for this purpose are continuously evaluated and benchmarked against the best practices followed in the industry. Through continuous refinement/ improvement of the risk measurement/ management systems, including automation of feasible processes, the Bank aims to ensure regulatory compliance as well as better return on and utilization of the capital in line with the business objectives. The Risk Management Department received Certificate of approval under ISO 9001:2015 Standard during the Financial Year 2022-23. There are no elements of Risk identified, which may, in the opinion of the Board, threaten the existence and stability of the Bank.

RISK MANAGEMENT POLICY FRAMEWORK

The Bank has a comprehensive policy framework which contains separate policies for identification, measurement and management of all material risks including but not limited to credit, market, operational, liquidity and other Pillar-II risks. The Bank has put in place an integrated risk management policies which ensures independence of the risk governance structure. The required standard operating procedures also follows the Policies to ensure that all the parameters are well covered while implementing the approved policies. The details of risk management practices are provided in Management Discussion and Analysis Report annexed to the Director's Report.

COMPLIANCE WITH CAPITAL ADEQUACY FRAMEWORK

In compliance with regulatory guidelines on Pillar I of Basel III norms, the Bank has computed capital charge for credit risk as per the Standardized Approach, for market risk as per the Standardized Duration Method and for operational risk as per the Basic Indicator Approach. To address Pillar II risk, the Bank has implemented ICAAP (Internal Capital Adequacy Assessment Process), to integrate capital planning with budgetary planning and to capture residual risks which are not addressed in Pillar I, like credit concentration risk, interest rate risk in the banking book, liquidity risk, earnings risk, strategic risk, reputation risk, pension obligation risk etc. The Bank has adopted a common framework for additional disclosures under Pillar III for adhering to the market discipline norms of Basel III guidelines. This requires the Bank to disclose its risk exposures, risk assessment processes and

its capital adequacy to the market in a consistent and comprehensive manner.

PARTICULARS REGARDING CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO PURSUANT TO SUB SECTION (3)(M) OF SECTION 134 OF THE COMPANIES ACT, 2013 READ WITH RULE (8)(3) OF THE COMPANIES (ACCOUNTS) RULES,2014

The Bank ensures strict compliance with all statutory requirements and voluntarily undertakes several sustainable steps in order to contribute towards a better environment. The Bank has undertaken various initiatives for energy conservation at its premises. The Bank has taken various initiatives to reduce its carbon footprint and improve resource efficiency. It ranging from using better technology to improve energy efficiency, recycling and generating energy from renewable sources. A detailed report on the same is included in the Business Responsibility and Sustainability Report forming part of this annual report. Digital & Technology Department of the Bank has been focusing on the innovation, improvement and implementation of projects on Bank's digital platforms viz., ATM, Net Banking, Mobile Banking, etc. The Department also ensures the highest level of service and integrity of the internal applications and infrastructural support to enable a seamless growth in the Bank's business operations. Digital strategy of the Bank is instituted on 4 pillars viz. INPF i.e., Indulge (customer selfservice), Nudge (assistance to be nudged to go digital), Purge (remove redundant processes using automation) and Forge (impactful Fintech partnerships). Enhancing selfservice capability across channels, empowering branches with technology solutions to nudge the customers to go digital, automating manual processes at branches & back-offices to improve customer TAT using AI & RPA and tie up with Fintech's are an integral part of Bank's overall strategy. The Bank has grown the share of digital transaction to 95% in the last Financial Year 2022-23. The Bank is planning to increase this share further in the coming Year. Technology strategy focuses on leveraging cloud adoption, high availability, fraud detection, cyber security and modernization of infrastructure to stay competitive and provide better services to the customers. The Bank, being a banking company and an authorized dealer in Foreign Exchange, has taken all possible steps to enhance export credit. Through its export financing operations, the Bank supports and encourages the country's export efforts.

Number of cases filed, if any, and their disposal under section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Bank has zero tolerance towards any action on the part of any executive/employees which may fall under the ambit of 'Sexual Harassment' at workplace and is fully committed to uphold and maintain the dignity of every women staff working in the Bank. The Bank has complied with provisions relating to the constitution of the Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 [14 of 2013]. The Policy provides for protection against sexual harassment of women at workplace and for prevention and redressal of such complaints. All the employees (permanent, contractual, temporary, trainees) are covered under this policy.

Number of complaints pending as at the beginning of the financial year - Nil

Number of complaints filed during the financial year - Nil

Number of complaints pending as at the end of the financial year - Nil

Particulars of Employees

The Bank had 9678 employees as on March 31, 2023. The details of the top 10 employees including the employees who were in receipt of aggregate remuneration of more than C 1.02 crore per annum (employed throughout the year) or who were in receipt of remuneration of C 8.5 lakhs per month (employed for a part of the year ) during the FY 202223, in terms of remuneration drawn pursuant to provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this report (Annexure A). The ratio of the remuneration of each director to the median employees' remuneration and other details in terms of sub-section 12 of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to this report (Annexure B).

THE ANNUAL REPORT ON CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES:

A brief outline of the Bank's CSR Policy, including overview of projects or programs to be undertaken.

South Indian Bank's CSR Policy

The South Indian Bank is grateful to the society that has supported and encouraged the Bank during its long journey of growth and development. The Bank believes that no organization can make sustainable development without the patronage of the society. The Bank is committed to integrate social and environmental concerns in its business operations. The Bank shall continue to have among its objectives, promotion and growth of national economy and shall continue to be mindful of its social and moral responsibilities to the customers, shareholders and the society. The Bank is committed to financing the economic and developmental activities of the nation with concern for human rights and environment.

In line with the CSR Policy and in accordance with Schedule VII, section 135 of Companies Act, 2013 the Bank undertook various activities during the FY 2022-23, which had significant impact on the society. These activities, inter-alia, include:

• Eradicating hunger, poverty and malnutrition, promoting health care including preventive healthcare and sanitation and making available safe drinking water.

• Promoting Education, including special education and employment enhancing vocational skills and livelihood enhancement projects.

• Empowering women, setting up homes and hostels for women and orphans, setting up old age homes, measures for reducing inequalities faced by socially and economically backward groups.

• Ensuring environmental sustainability, maintaining quality of soil, air and water.

• Rural development activities.

• Training to promote nationally recognized sports.

• Promoting Financial Literacy.

CSR Expenditure

The Bank has always given top priority to fulfilling its obligations under the Corporate Social Responsibility. Diversified Projects in the areas of healthcare, education, sports and sanitation that would benefit the society as a whole are identified and the Bank wholeheartedly supports such initiatives.

The amount to be spent by the Bank towards CSR for FY 2022-23 as per Section 135 of the Companies Act, 2013, comes to '1.84 crore. The amount spent by the Bank this year towards CSR was '1.86 crore. The Bank had also embarked on some major projects last year in the field of education, healthcare etc. By choosing long term sustainable projects, the Bank has taken an approach which brings steady and long lasting impact on the society. The details of the CSR activities of the FY 2022-23 are mentioned in Annexure 'C' to this report.

Web-Link to the CSR Policy

https://www.southindianbank.com/userfiles/file/csr_policy.pdf

FINANCIAL INCLUSION

Financial inclusion refers to efforts to make financial products and services accessible and affordable to all individuals and businesses, regardless of their personal net worth or company size. Financial inclusion strives to remove the barriers that exclude people from participating in the financial sector and using these services to improve their lives. Financial inclusion is an effort to make every day financial services available to more of the world's population at a reasonable cost. It aims to ensure that the poor and marginalised make the best use of their money and attain financial education.

With advances in financial technology and digital transactions, more and more start-ups are now making financial inclusion simpler to achieve. It is all about bringing basic banking facilities to the lower income groups at an affordable cost. The Bank has adopted several financial inclusion initiatives, including appointment of Business Correspondents and Financial Literacy Counsellors. For expanding the Financial Inclusion activities, the Bank has 68 Business Correspondents and 19 Financial Literacy Counsellors as on 31.03.2023, in the States of Kerala and Tamil Nadu. Through corporate business correspondents, the Bank has on-boarded 6,554 borrowers with total outstanding of C 27.62 crore in the FY 2022-23 in the agriculture lending, hence reaching out to the unserved and under served strata of society.

Aadhaar Enabled Payment System (AePS)

Aadhaar Enabled Payment System (AePS) is a payment service, empowering a bank customer to use Aadhaar as his/her identity to access his/ her respective Aadhaar enabled bank account and perform basic banking transactions through a Business Correspondent / POS machine. National Payment Corporation of India (NPCI), an umbrella organisation for all retail payments is

controlling AePS operations. AePS offers basic banking services such as Cash Withdrawal, Cash Deposit, Balance Enquiry, Aadhaar to Aadhaar Fund Transfer and Mini Statement. The Bank has also successfully migrated to Aadhaar Enabled Payment System (AePS) for performing transactions through Business Correspondents.

Business Correspondent

In an era of heightened competition, thin profit margins and cost constraints, establishment of conventional bank branches in all locations cannot be a viable proposition. It is, therefore, imperative to explore the possibilities of other cost effective delivery mechanisms to reach out to remote locations and satisfy the financial needs of clientele at an affordable cost. This has evolved the concept of Business Correspondent (BC) in the banking sector. This is also an efficient and effective tool for implementation of Financial Inclusion programme of Government of India.

Though there are manifold challenges like credit risk, operational risk, legal risk, reputational risk, difficulty in assessing the integrity of the BCs, managing cost on low volume of business, and effective supervision and control of the activities, there exists the potential for employment generation, creativity and productivity in rural hinterlands for bringing about a comprehensive economic development and the resultant benefits to the Bank. Bank's BCs are branded under the name "BANK MITRA".

The wholly outsourced BC model will complement the Bank's strength to increase business volume and improve efficiency of operation. The Bank is ensuring that the Business Correspondent meets the benchmark performance standards at all stages of delivery of services, without diluting Bank's values and principles, control mechanisms, business processes or goodwill and reputation.

Financial Literacy Counsellors

Financial Literacy is the ability to understand how money works in our day to day life and how someone manages it, how he/she invests it and how a person offers it to others. More specifically, it refers to the set of skills and knowledge that allows an individual to make informed and effective decisions with their financial resources. As on 31.03.2023 the Bank has engaged 13 FLCs in different Blocks of Kerala to disseminate financial literacy to the people. In addition to this, the Bank has also appointed 6 FLCs in different Districts in Tamil Nadu to emphasize the objectives of Financial Literacy. Bank's FLCs are branded under the name "SIB JYOTHIS". Efforts are being taken

to make them more efficient, responsive to the needs of the people. A Board approved policy covering all aspects of Financial Literacy Counsellors has been formulated, giving due consideration to the revised guidelines on FLCs circulated by RBI.

Pradhan Mantri Jan-Dhan Yojana (PMJDY)

Pradhan Mantri Jan-Dhan Yojana (PMJDY), is conceived as a national mission on financial inclusion initiated by Honourable Prime Minister on August 15, 2014. The scheme envisages universal access to banking facilities, with at least one basic banking account for every household. In line with the directives given by Ministry of Finance and SLBC, PMJDY scheme was implemented in the Bank since 2014. Pradhan Mantri Jan-Dhan Yojana (PMJDY) is National Mission for Financial Inclusion to ensure access to financial services, namely, a basic savings & deposit accounts, remittance, credit, insurance, pension in an affordable manner. Under the scheme, a basic savings bank deposit (BSBD) account can be opened in any bank branch or Business Correspondent (Bank Mitra) outlet, by persons not having any other account.

Atal Pension Yojana (APY)

Atal Pension Yojana (APY), a pension scheme for citizens of India is focused on the unorganized sector workers. Under the APY, guaranteed minimum pension ranging from '1,000/- to C 5,000/- per month will be given at the age of 60 years depending on the contributions by the subscribers. Any Citizen of India can join the APY scheme.

The prospective applicant may provide Aadhaar and mobile number to the Bank during registration to facilitate receipt of periodic updates on APY account. However, Aadhaar is not mandatory for enrollment.

The benefit of minimum pension under Atal Pension Yojana would be guaranteed by the Government in the sense that if the actual realized returns on the pension contributions are less than the assumed returns for minimum guaranteed pension, over the period of contribution, such shortfall shall be funded by the Government. On the other hand, if the actual returns on the pension contributions are higher than the assumed returns for minimum guaranteed pension, over the period of contribution, such excess shall be credited to the subscriber's account, resulting in enhanced scheme benefits to the subscribers.

Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)

The Pradhan Mantri Jeevan Jyoti Bima Yojana is available to people in the age group of 18 to 50 years having a

Bank account who give their consent to enable autodebit. Aadhar would be the primary KYC for the Bank account. The life cover of '2 lakhs shall be for the one-year period stretching from 1st June to 31st May and will be renewable. The PMJJBY offers an annual life coverage of '2 lakhs in case of the demise of the policyholder during the policy term. The policy can be availed at the lowest premium rate of '436 per annum.

Pradhan Mantri Suraksha Bima Yojana (PMSBY)

Pradhan Mantri Suraksha Bima Yojana (PMSBY) is an accidental insurance scheme that provides one year of accidental death and disability coverage with an annual renewal. With the minimum premium rate of '20/- per annum, this policy is most beneficial to the poor and low-income section of the society. PMSBY covers people aged between 18 years and 70 years with a Bank account for accidental death and full disability benefits of up to '2 Lakh and for partial disability for '1 Lakh.

GREEN INITIATIVE IN CORPORATE GOVERNANCE.

Dispatch of documents in Electronic Form: As a responsible corporate citizen, the Bank supports and pursues the 'Green Initiative' of the Ministry of Corporate Affairs ("MCA"). In conformance with such initiatives and in terms of Rule 18 of the Companies (Management and Administration) Rules, 2014, the Bank may give notice through electronic mode including e-mail to those Members who have provided their e-mail address either to their Depository Participants (DPs) or to the Registrar/ Company. Pursuant to General circulars dated on December 28,2022 issued by MCA and SEBI Master Circular dated on July 11, 2023 under the Head 'Relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in continuation to SEBI circular dated 5th January, 2023, the notice of 95th Annual general Meeting and the Annual Report 2022-23 will be sent via email to all the shareholders and no physical copies will be sent via post.

Further, in terms of Regulation 36 of the Listing Regulations, the listed entity is required to send soft copies of its Annual Report to all those shareholder(s), who have registered their email address for this purpose. Accordingly, the documents including the notice and explanatory statement of 95th Annual General Meeting, Annual Report of the Bank for the financial year 202223 including Audited Financial Statements, Directors' Report, Auditors' Report etc., for the year ended March 31, 2023, is sent to the e-mail address registered with their Depository Participant(DP)/Registrar/Company. The e-mail

addresses indicated in respective DP accounts which will be periodically downloaded from NSDL/CDSL will be deemed to be their registered e-mail address for serving notices/documents including those covered under Section 136 of the Companies Act, 2013. In case a Member, whose e-mail address has changed, fails to update this new e-mail address, the said documents will be sent to the existing e-mail address and the said documents will be deemed to have been delivered, in compliance with the relevant provisions of the Companies Act, 2013, the relevant Rules made thereunder and the Listing Regulations. Members who have not yet registered their e-mail address are requested to do so, at the earliest. In case of shares held in electronic form and in case of any change in the e-mail address, Members are requested to update the same with their DP and in case of shares held in Physical form, Members are requested to update the same with the RTA/Company. Security holders may please note that, as allowed by MCA and SEBI circulars, the Bank will not be sending physical copies of AGM Notice to shareholders and Annual Report to the security holders unless the same is specifically requested.

Please note that the said documents will also be uploaded on the Bank's website www.southindianbank.com and copies thereof will be made available for inspection at the Registered Office of the Bank during 10.00 a.m. to 3.00 p.m. on all working days except Saturdays, Sundays, Bank Holidays and Public Holidays up to the date of ensuing AGM. Shareholders have been requested on several occasions to update their e-mail IDs in their folio/ demat A/c to help accelerate the Bank's migration for paperless compliances. The Bank seeks your support for the said green initiatives, as it is designed to protect our fragile environment.

Further, as a part of green initiative by the Bank, all relevant agenda papers pertaining to the Board/ Committee are being circulated in advance to the Board of Directors through electronic mode to facilitate easy access of agenda which would provide sufficient time to the Board for reading and understanding the proposals placed in a meeting.

ANTI - MONEY LAUNDERING (AML)

Transactions processed through the Core Banking Solution are monitored for detecting suspicious transactions, using an AML application to comply with the provisions under Prevention of Money Laundering Act (PMLA). The Bank already has a Centralized Processing Centre (CPC)

for customer creation with the objective of full KYC compliance and to use KYC as a fraud prevention tool. The Bank has attached great importance for compliance of KYC/AML/CFT norms by the customers as per the Reserve Bank of India directive.

FATCA-CRS

The Bank has been registered as a reporting entity under FATCA, under GIIN No. IIK7HU.99999.SL.356, to comply with the reporting requirement under the interGovernmental agreement entered between Indian and US Government and the CRS Multilateral Competent Authority Agreement.

DIRECTORS

The composition of the Board of Directors is governed by the Banking Regulation Act, 1949, the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the Code of Conduct on Corporate Governance adopted by the Bank. The Board comprises of 9 Directors as on the date of this report, with rich experience and specialized knowledge in various areas of relevance to the Bank, including Banking, Accountancy, Risk Management, Treasury, Finance, Business Management, Small scale Industry, Agriculture, Law, Human Resources and Information Technology.

Excluding the MD & CEO, all other members of the Board are Non-Executive Directors and six Directors out of the total nine Directors are Independent Directors. Declaration has been obtained from the Independent Directors as required under the RBI Regulations, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Companies Act, 2013. The remuneration and other benefits paid to MD & CEO of the Bank and other Non-Executive and Independent Directors during the financial year 2022-23 are disclosed in Corporate Governance Report. Vide Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019 an online data Bank for the independent directors ("Data Bank") has been rolled out by the Indian Institute of Corporate Affairs, all the Independent Directors of the Bank had registered themselves in the Data Bank in compliance with the same.

During the 94th Annual General Meeting held on July 12,2022 as recommended by the Bank the shareholders accorded their approval for:

• Re-appointment of Sri. Paul Antony (DIN: 02239492) as a Non-Executive Director of the Bank liable to

retire by rotation under Section 152 of Companies Act, 2013.

• Appointment of Sri. Benny P Thomas (DIN: 09448424) as non-executive Director of the Bank, liable to retire by rotation under Section 152 of Companies Act, 2013, who was appointed as an Additional Director pursuant to Section 161(1) of the Companies Act, 2013 on 30th December, 2021 and who holds office up to the date of the 94th Annual General Meeting.

• Revising the remuneration payable to Sri. Murali Ramakrishnan (DIN: 01028298), Managing Director and CEO of the Bank.

• Re-appointment of Sri Salim Gangadharan, (DIN: 06796232) as Independent Director of the Bank upto November 1, 2023 in compliance with section 149 of the Companies Act, 2013, not liable to retire by rotation as Non-Executive Independent - Part time Chairman of the Bank and approval of his remuneration.

• Re-appointment of Sri V.J. Kurian, (DIN: 01806859) as Independent Director of the Bank for a second term as Non-Executive Independent Director of the Bank, not liable to retire by rotation.

• Re-appointment of Sri. Pradeep M Godbole (DIN: 08259944) as Non-Executive Independent Director of the Bank, not liable to retire by rotation.

• Appointment of Smt. Radha Unni (DIN: 03242769) as Independent Director of the Bank, not liable to retire by rotation.

Sri Parayil George John Tharakan (DIN: 07018289), Nonexecutive Independent Director of the Bank, retired from the Board of Directors w.e.f. 24th November 2022 upon completion of his eight-year term, as per Section 10A(2A) of the Banking Regulation Act, 1949.

The Board of Directors has recommended to members:

• To re-appoint Sri. Benny P Thomas (DIN: 09448424) as Non-Executive Director of the Bank, liable to retire by rotation at the 95th AGM, who retires by rotation under Section 152 of Companies Act, 2013 and being eligible, offers himself for reappointment.

• To re-appoint Sri M George Korah (DIN: 08207827)) as Non-Executive Independent Director of the Bank, who was appointed by the Board of Directors on August 31, 2018 and appointed by Shareholders at the 91st AGM held on July 17, 2019 for a period of 5

years, and in respect of whom the Bank has received a notice in writing, proposing his candidature for the office of Director of the Bank, for a second term as 'Non-Executive Independent Director' of the Bank, for the purpose of Section 149 of the Companies Act, 2013, to hold office for a period not exceeding three consecutive years,not liable to retire by rotation.

Necessary information pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, in respect of directors to be appointed, re-appointed and change in terms of appointment at the ensuing Annual General Meeting are given in the Annexure to the Notice convening the Annual General Meeting scheduled to be held on August 24, 2023.

None of the Directors of your Bank are disqualified for being appointed as Directors, as specified in Section 164 (1), Section 164 (2) and Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules, 2014.

CHANGE IN KEY MANAGERIAL PERSONNEL

There was no change in Key Managerial Personnel during the financial year ended March 31, 2023.

On May 31, 2023, Mr. Joby M C, Joint General Manager, Head of Inspection and Vigilance Department and Head of Internal Audit and Chief of Internal Vigilance and a Key Managerial Personnel of the Bank has retired from the Bank on attaining superannuation. The Board of Directors of the Bank has appointed Mr. Nandakumar G, General Manager as Head of Inspection and Vigilance Department and Head of Internal Audit and Chief of Internal Vigilance of the Bank w.e.f June 01, 2023.

Composition of Audit Committee

The Audit Committee of the Board is chaired by Sri M George Korah, (Non-Executive Independent Director), who is a Chartered Accountant. The other members of the committee are Sri. Pradeep M Godbole (Non-Executive Independent Director), Sri. R A Sankara Narayanan (NonExecutive Independent Director) and Smt. Radha Unni (Non-Executive Independent Director). The constitution of the Committee is in compliance with the regulatory requirements. The terms of reference of the Audit Committee, are in accordance with the SEBI (LODR) Regulations, 2015, Companies Act, 2013 and RBI guidelines.

2015, the Bank has appointed Smt. Radha Unni (DIN: 03242769) as Woman Director on the Board of the Bank.

Bank's policy on directors' appointment and remuneration including criteria for determining qualification, positive attributes, independence of a director and other matters provided under subsection (3) of Section 178.

The nomination policy of the Bank can be accessed at https://www.southindianbank.com/userfiles/file/ nomination_policy.pdf

Criteria for appointment as a Director of the Bank:

The Nomination and Remuneration Committee of the Board shall identify and ascertain the integrity, qualification, expertise and experience of the person who is considered for being appointed/re-appointed as Director of the Bank and apply due diligence in compliance with the Banking Regulation Act, 1949, Reserve Bank of India directives on Fit & Proper Criteria, all other applicable provision of the Companies Act, 2013, SEBI (LODR) Regulations, 2015 including any amendments from time to time and Nomination Policy of the Bank.

Criteria for Determining Qualifications, Positive Attributes

a) The professional and personal ethics, integrity and track record.

b) Special knowledge or practical experience in Banking, accountancy, agriculture and rural economy, co-operation, economics, finance, law, small-scale industry, Information Technology, Payment & Settlement Systems, Human Resources, Risk Management, Business Management or any other matter useful to the Banking Company in the opinion of Reserve Bank of India.

c) Ability to provide insights and practical wisdom based on their experience and expertise relevant to the Bank's line of business.

d) Details of his/her association with other Companies/ LLPs/ Firms (including NBFC)

e) Details of substantial interest in other Companies/ LLPs/ Firms (including NBFC).

f) Details of financial facilities, if any, availed from the Bank.

g) Details of default in the re-payment of loans, availed from the Bank or any other Bank, if any

Remuneration of MD & CEO and Material Risk Takers:

The Board approved Compensation Policy deals with the Compensation & Benefits of the Whole-time Directors/ MD & CEO. The remuneration of the Whole-time Directors/MD & CEO is recommended by the Nomination & Remuneration Committee (NRC) to the Board for approval after considering the factors prescribed under the Compensation Policy. The Compensation Policy factors the guidelines issued by the RBI from time to time.

The Board considers the recommendations of NRC and approves the remuneration, with or without modifications, subject to shareholders' and regulatory approvals. The remuneration payable to Whole-time Directors/MD & CEO is subject to prior approval of the Reserve Bank of India (RBI). Therefore, the remuneration or any revision in remuneration to Whole-time Directors/MD & CEO is payable only after receipt of the approval from RBI.

The compensation paid out to the referred functionaries is divided into two components:

The fixed compensation is determined based on the relevant factors such as industry standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span and adherence to statutory requirements. All the fixed items of compensation, including the perquisites, will be treated as part of fixed pay. Perquisites that are reimbursable would also be included in the fixed pay so long as there are monetary ceilings on these reimbursements. Contributions towards superannuation/retirement benefits will also be treated as part of fixed pay.

The variable compensation for Whole Time Directors, Managing Director & Chief Executive Officer and Material Risk Takers is fixed based on organizational performance (both business-unit and firm-wide) and KPAs set for the official. The organization's performance is charted based on Performance Scorecard which takes into account various financial indicators like revenue earned, cost deployed, profit earned, NPA position and other intangible factors like leadership and employee development. The Performance Parameters provides a mix of Financial and Non-Financial, Quantitative and Qualitative Metrics. The variable pay is paid in the form of a mix of cash and share-linked instruments. While considering/ recommending the variable pay in respect of Managing Director & CEO,

the entire variable pay can be in cash to be exercised. The assessment of the variable pay will be based on 'Key Performance Indicators' (KPI) achievement of respective whole-time directors/ Chief Executive Officers / Material Risk Takers (MRTs).

Limit on Variable Pay:

A. For Whole-Time Directors and Chief Executive

Officers

i. In compliance with the RBI Guidelines and other applicable rules and regulations at least 50%, should be variable and paid on the basis of individual, business-unit and firm-wide measures that adequately measure performance. The total variable pay shall be limited to a maximum of 300% of the fixed pay (for the relative performance measurement period).

ii. In case variable pay is up to 200% of the fixed pay, a minimum of 50% of the variable pay; and in case variable pay is above 200%, a minimum of 67% of the variable pay should be via noncash instruments.

iii. In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/ her variable pay will be capped at 150% of the fixed pay, but shall not be less than 50% of the fixed pay.

iv. The deterioration in the financial performance of the Bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

B. For Material Risk Takers (MRTs)

i. In compliance to the RBI Guidelines and other applicable rules & regulations 50% of total pay for all MRTs should be variable pay and paid on the basis of individual, business-unit and firm-wide measures that adequately measure performance.

ii. 50% of the variable pay should be via noncash instruments.

iii. The deterioration in the financial performance of the Bank should generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero.

The Board will from time to time specify the Material

Risk Takers (MRTs).

The Variable pay assessment should be considering the following parameters

• The HR Dept. in consultation with CFM Dept. has to recommend that amount of Variable pool of the Bank each year to the Nomination and Remuneration Committee.

• While recommending the variable Pool HR Dept. should establish the linkage between the variable pool at the Bank level and the performance of the Bank vis-a-vis its financials and risk assumed.

• Further HR Dept. should also detail the linkage between performance of various units/ functions/ divisions to performance of variable pool.

• There should be a prudent basis for distribution of the overall variable pool between various units/ functions / divisions including various control and assurance functions.

• Performance thresholds as defined and assessed by HR Dept. to be attained for being eligible for variable compensation.

The same to be included and form part of the Performance Linked Incentive scheme.

Malus / Clawback

The deferred compensation should be subject to malus/ clawback arrangements in the event of subdued or negative financial performance of the Bank and/or the relevant line of business in any year. The Bank has identified a set of situations which require the invocation of the malus and clawback clauses that may be applicable as detailed below:

i) Applying of Malus / Clawback arrangement on entire variable pay on occurrence of the following Situations:

• Identified fraud / misconduct by the executive (whole-time directors, Chief Executive Officers / Material Risk Takers (MRTs)) pertaining to the corresponding period for which the clause to be applied.

ii) Applying of Malus / Clawback arrangement on unvested portion of deferred variable pay on occurrence of the following situation:

• Reporting of operating loss or more than 50% fall in operating profit in any year

iii) Applying of Malus clause on unvested portion of deferred variable pay on occurrence of the following situation:

• Wherever the assessed divergence in Bank's provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure as detailed below: (As referred in RBI circular No. DBR.BP.BC. No.32/21.04.018/2018-19 dated April 1, 2019, as amended from time to time),

a. the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

b. the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period

Further, in such situations, no proposal for increase in variable pay (for the assessment year) shall be entertained. In case the Bank's post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if criteria for public disclosure are triggered either on account of divergence in provisioning (clause (a)) or both provisioning (clause (a) and asset classification (Clause (b)).

Any other act detrimental to the interest of the Bank including and not restricted to violation of Code of Conduct, violation of Framework for dealing with Conflict of Interest, violation of rules and regulations of the Bank, failure to discharge fiduciary and regulatory duties - and in respect of which the Bank would reserve the right to institute appropriate civil, criminal or other proceedings at the risks, costs and consequences of such individuals.

As part of the criteria for the application of malus and clawback, the following period during which malus and/or clawback can be applied will be 36 months from application of the clause. covering at least deferral and retention periods (a period of time after the vesting of instruments which have been awarded as variable pay during which they cannot be sold or accessed)

In case, the MRT(s) resigns, retires or takes early retirements or has been terminated, the above provisions of clawback shall apply subject to due process for recovery of amounts adjudged.

Guaranteed Bonus

Guaranteed bonus is not consistent with sound risk management or the 'pay for performance' principles and should not be part of the compensation plan. Therefore, guaranteed bonus should only occur in the context of hiring new staff as joining/sign-on bonus and be limited to the first year. Such bonus will neither be considered part of fixed pay nor part of variable pay. Further, banks will not grant severance pay other than accrued benefits (gratuity, pension, etc.) except in cases where it is mandatory under any statute.

Hedging

The Bank will not provide any facility or funds or permit employees to insure or hedge their compensation structure to offset the risk alignment effects embedded in their compensation arrangement. To enforce the same, the Bank will establish appropriate compliance.

Remuneration of Chairman:

The NRC recommends the remuneration of the nonexecutive Independent Chairman to the Board which is considered and approved by the Board in the same manner subject to Shareholders' and regulatory approvals. The NRC, while recommending the remuneration of the part-time Chairman considers the Function, Role and Responsibilities of the Chairman and Regulatory guidelines as applicable etc. The remuneration payable to the Chairman is subject to prior approval of the Reserve Bank of India (RBI). Therefore, the remuneration or any revision in remuneration of the Chairman is payable only after receipt of the approval from RBI.

Remuneration of Non-Executive Directors (NEDs):

The NEDs are paid sitting fees for attending each meeting of the Board of Directors or any committee thereof as approved by the Board, within the permissible limit prescribed under the Companies Act, 2013, SEBI (LODR) Regulations, 2015 and other regulatory guidelines, as amended from time to time. The Board while recommending the change in the sitting fees considers various factors like size and complexity of organization, comparison with the peer Banks and Regulatory guidelines as applicable etc. while recommending the change in the sitting fees to the Board.

Policy on Board Diversity:

Pursuant to SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 to ensure compliance with the applicable provisions, the Bank has devised a policy on Board diversity to ensure adequate diversity in its Board of Directors. The Bank believes that diversity underpins the successful operation of an effective Board and embraces diversity as a means of enhancing the business. With a view to achieve sustainable and balanced development, the Bank sees increasing diversity at the Board level as an essential element in supporting the attainment of its strategic objectives. A diverse Board includes and makes good use of differences in the skills, regional and industry experience, background, race, gender and other qualities of Directors.

Policy on Board Diversity of the Bank mainly depends on the qualifications for appointment of Directors of the Bank as contained in the Banking Regulation Act,1949 and satisfying the Fit and Proper Criteria for directors as per the regulatory requirement of RBI.

The Bank continuously seeks to enhance the effectiveness of its Board and to maintain the highest standards of corporate governance and recognizes and embraces the benefits of diversity in the Board room. Diversity is ensured through consideration of a number of factors, including but not limited to skills, regional and industry experience, background and other qualities. In formulating its perspective on diversity, the Bank also takes into account factors based on its own business model and specific needs from time to time.

The NRC has the responsibility to lead the process for Board appointments and for identifying and nominating, candidates for appointment to the Board. The benefits of diversity continue to influence succession planning and continue to be the key criteria for the search and nomination of Directors to the Board.

The Board appointments are based on merit and candidates will be considered against objective criteria, having due regard for the benefits of diversity on the Board, including gender. The policy of Board Diversity is displayed in Bank's website: https://www.southindianbank.com/userfiles/file/ rupay/disclosure/policy_on_board_diversity.pdf

Familiarisation Programme

The Bank had conducted various sessions during the financial year to familiarize the Independent Directors of

the Bank, including various topics on Banking Industry, business model, Corporate Law, Risk management system and Cyber Security. Further, the Directors are encouraged to attend the training programmes being organized by various regulators/ bodies/institutions on above matters. The details of such familiarization programmes are displayed on the weblink of the Bank. https://www. southindianbank.com/userfiles/file/disclosure_on_ familiarisation_programme_for_independent_directors. pdf

Board Level Performance Evaluation

The Companies Act, 2013 and SEBI (LODR) Regulations, 2015 stipulates the performance evaluation of the Directors, MD & CEO, Chairman, Board and its Committees. Considering the said provisions, the Bank has devised the process and the criteria for the performance evaluation which has been recommended by the Nomination & Remuneration committee and approved by the Board.

The process for formal annual performance evaluation is as under:

> Committee of Independent Directors at their separate meeting evaluates the performance of NonIndependent Directors, MD & CEO, Chairman of the Bank and the Board as a whole.

> The Board evaluates the performance of the Independent Directors, Non-Executive Directors, Chairman and MD & CEO (excluding the director being evaluated) and submit its report to the Nomination & Remuneration committee.

> The Board and Nomination & Remuneration Committee evaluates the fulfilment of the independence criteria as specified in the regulations and their independence from the management.

> The Board evaluates the performance of Board level committees.

> Nomination & Remuneration Committee evaluates/ reviews the performance of each Director and recommends the appointment/re-appointment/ continuation of Directors to the Board. Based on the recommendation of Nomination & Remuneration Committee, Board will take appropriate action.

EMPLOYEE STOCK OPTION SCHEME:

The SIB ESOS 2008 Employee Stock Option Scheme ('the Scheme') provides for grant of stock options on equity shares of the Bank to employees and Managing Director &CEO of the Bank. The Scheme is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits and sweat equity) Regulations, 2021. The Bank followed Black Scholes model for calculating fair value of option to account for its stock based employee compensation plans as per the Guidelines for all the options granted till the accounting period ended 31 March, 2023. The fair value thus arrived were being recognised as expense beginning with the accounting period for which approval has been granted as per RBI circular No. RBI/2021-22/95 DOR.GOV.REC.44/29.67.001/2021-22 dt. August 30, 2021. Till March 2023, 5,69,80,858 stock options were vested, out of which 2,89,49,199 stock options were exercised by eligible employees. The money realized due to exercise of the said options was C 42,74,54,572.64 and consequently 2,89,49,199 shares of C 1/- each have been allotted to the concerned employees/legal heirs.

A Certificate of the Secretarial Auditors pursuant to Regulation 13 of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 will be placed to the AGM for the scrutiny of Shareholders. The total options granted under twelve phases of SIB ESOS 2008 works out to 2.97% of the paid-up share capital of the Bank as at March 31, 2023. The scheme has generated the intended motivation amongst the staff. There is no material change in the scheme during the FY 2022-23 and the scheme is in compliance with the applicable regulations. The scheme was last modified at the AGM held on 18.08.2021 in line with the new regulations. Statutory disclosures regarding details of the stock options granted, vested, exercised, forfeited and expired during the year under review is hosted on the website of the Bank and can be viewed at https://www.southindianbank.com/content/annual-report-financial-year-2022-to-2023/3978

AUDITORS

a) Statutory Auditors:

The shareholders at its 93rd Annual General Meeting held on August 18, 2021, has appointed M/s. CNK & Associates LLP, Chartered Accountants, Mumbai (Firm Registration Number: 101961 W/W-100036) and has appointed M/s K Venkatachalam Aiyer & Co, Chartered Accountants, Kochi (Firm Registration Number 004610S) as the Joint Central Statutory Auditors of the Bank at its 94th Annual General

INTERNAL CONTROL AND AUDIT/INSPECTION

Internal Control and their Adequacy

The Bank has put in place extensive internal controls and processes to mitigate operational risks, which includes maker checker authentication of CBS transactions, centralized processing of opening and modifications of CASA accounts and loan accounts, centralized sanctioning of loan facilities, etc.

Various Preventive controls viz., Dual custody for cash, gold and other security items, maintenance of daily control registers for security items, finger-scan-authentication for processing of transactions in CBS in addition to login passwords, stringent guidelines on password usage, STP processes between CBS and payment interface systems for transmission of messages etc. are in place.

As per the requirement of Companies Act, 2013, the Bank has formulated an Internal Financial Controls framework. Risk and Controls associated with each process in the Bank are documented under the Internal Financial Controls Framework. Inspection and Vigilance Department plays a significant role in testing the control effectiveness for each process under the framework.

The Internal Audit function provides independent assurance to the Board of Directors and Senior Management on the quality and effectiveness of the Bank's internal control, risk management and governance systems and processes, thereby helping the Board and Senior Management to protect the Bank and its reputation.

Audit/Inspection

The Bank has an Inspection & Vigilance department which is responsible for independently evaluating the adequacy and effectiveness of all internal controls, risk management systems, governance systems and processes. The Department is manned by appropriately qualified personnel to handle the Risk Based Internal Audit, Management Audits, Information Systems Audit, and Special audits including Investigations. All the internal audits are conducted based on the RBI direction in relation to conducting risk based internal audit, and concurrent audit of branches and identified critical processes of the branches.

Head of Internal Audit & Vigilance is directly reporting to MD & CEO.

Internal inspectors conduct inspection at regular intervals and the inspection reports are placed to Audit Committee at Executive level (Sub Committee of Audit Committee of Executives (SACE)/ Audit Committee of Executives - ACE) for review, which is overseen and controlled by Board Level committee (Audit Committee of Board - ACB).

Audit of Branches

All the branches are subjected to Risk Based Internal Audit (RBIA). This audit is conducted at periodic intervals based on the risk perception. All the audits are conducted based on predefined check points and all the operational areas are covered under this audit. Credit audit is also conducted as part of Risk Based internal audit where aggregate credit exposure of a borrower is C 5 crore and above.

In addition to RBIA of branches, the Bank has concurrent audit system, which covers selected Branches, conducted by qualified Chartered Accountants/retired officers. The selection of branches for concurrent audit is done in such a way that it covers branches having substantial advance or deposit, entire specialized Branches such as 'B' Category Branches, Corporate Branches etc., and all poorly rated branches as per the latest rating awarded.

In addition to the concurrent and risk based internal audits, the branches are subjected to Surprise Inspection, Flash Inspection, IS Audit, Revenue Inspection, Self-Audit, Gold Loan Inspection/ Asset Verification and compliance inspection during the financial year.

Separate monitoring team - Inspection Monitoring Group (IMG) closely monitors various inspections/audits at the Branches. There are six IMGs who are reporting to Head of IMG. These Monitoring groups are assigned the task of ensuring the compliance and closure of the inspection report of the branches. During the course of inspections, serious issues if any concerning regulatory guidelines, legal requirements and operational processes are found, these are escalated to the Management for timely action.

All the branch related audit are presently automated through system where reporting, risk rating, compliance and closure of the reports are done through software application which provides the Bank with an overall control on various audits conducted in the branches. Continuous improvements are made to the application to automate several activities at HO and digitize the records in a single application.

Audit of Departments and critical process

Management Audit of Regional Offices (RO) and Departments are conducted at periodical intervals based on the risk perception.

In addition to the management audit conducted by inspection department, all the critical operations such as International Banking Division, Treasury Department, Credit Department and Centralized Processing Centers, etc., are subjected to concurrent audit by independent Chartered Accountant firms. All these reports are reviewed by Sub Committee of Audit Committee of Executives (SACE) and corrective steps are taken to rectify the lapses/ irregularities, if any, pointed out in such inspections.

Information System Audit of CBS and major applications are conducted by Internal Audit Department as well as by external audit firm. The IS audit team also undertakes a general scrutiny of the efficiency of the information system at branch level and its rating so as to enhance the internal controls.

New product/process whenever introduced in the Bank is reviewed by Inspection Department and recommendations are made for necessary controls/improvements for deficiencies / gaps observed in existing internal controls.

Inspection Division also carries out independent evaluation of Bank's internal financial controls in terms of Companies Act, 2013 and also the adequacy of internal financial controls with reference to the Financial Statements.

EXPLANATION FOR AUDITOR'S COMMENT IN THE REPORT

The Statutory Auditor's Report for the year 2022-23 does not contain any qualification

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 and other applicable provisions of the Banking Regulation Act,1949, the Bank has prepared its Consolidated Financial Statement including its wholly owned subsidiary Company M/s. SIB Operations and Services Limited, which is forming part of this Annual report. The financial position and performance of its subsidiary Company is given in Form AOC-1, the statement containing salient features of the financial statements of the subsidiary Company.

In accordance with third proviso to Section 136(1) of the Companies Act, 2013, the Annual Report of the Bank, containing therein its Standalone and the Consolidated Financial Statements has been hosted on its website, (www. southindianbank.com). Further, as per 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 Bank's website, (www.southindianbank.com). The said documents have been hosted on the website of the Subsidiary Company of the Bank also, in compliance with the said Section. The documents/details available on the Bank's website (www.southindianbank.com) will also be available for inspection by any Member at its Registered Office. Further, pursuant to the provisions of Accounting Standard ('AS') 21, Consolidated Financial Statements notified under Section 133 of the Companies Act, 2013, read together with Rule 7 of the Companies (Accounts) Rules, 2014 issued by the Ministry of Corporate Affairs, the Consolidated Financial Statements of the Bank along with its Subsidiary Company for the year ended March 31, 2023 forms part of the Annual Report.

CORPORATE GOVERNANCE

A separate report detailing Corporate Governance as required under applicable regulations of the SEBI (LODR) Regulations 2015 and a certificate from M/s SVJS & Associates Company Secretaries, Secretarial Auditors of the Bank, are annexed to this Report.

Annual Return/Extracts of Annual Return

Pursuant to sub-section 3(a) of Section 134 and subsection (3) of Section 92 of the Companies Act, 2013, read with Rule 11 and 12 of the Companies (Management and Administration) Rules, 2014, copy of Annual Return as at March 31,2023 in Form No. MGT-7 is hosted on the website of the Bank and can be viewed https://www. southindianbank.com/content/annual-report-financial-year-2022-to-2023/3978

Business Responsibility and sustainability Reporting (BRSR)

Environmental, Social and Governance (ESG) matters have become increasingly relevant for companies across the Globe. Being in financial sector, the Bank has focused on promotion of sustainable and environmentally friendly assets by identifying and recognising ESG risks viz-a-viz opportunities.

As part of developing a sustainable financing policy and for implementing ESG benchmarks in lending and also

• The Board has constituted an Executive Level Committee for ESG implementing in the Bank. Executive Level Committee will be responsible for supervision and implementation of ESG activities in the Bank.

• Human Resources Department has conducted training on "Human Rights under ESG framework in India" in Bank's E learning platform viz., I-learn, for familiarizing concept of ESG among all employees.

• Tie-up arrangement with authorized E-waste vendors were made for better e-waste management.

• Preventive wellness programs / campaigns / webinars through tie ups with Hospitals and other organizations has been done by Bank for employees.

• The Bank has initiated steps to provide provision for Solar power generation in New Buildings under construction, wherever possible. In this regard, the Bank has issued work order for installation of On-Grid Solar Power Plants of 50 kW each at Platinum Jubilee Building in Ayyanthole and Market Road Building in Ernakulam. Installed 25 kW Solar Power Plant in Kannur RO Building.

• As part of Light Change Project, the Bank has replaced 500 numbers of 2X2 Lights in HO and Annex Buildings to more power saving LED Lights. In continuation to the same, approval has been given for changing 628 lights in Kakkanad Administrative Building, Block I, to LED. Almost 50% of the work is completed.

• The existing practice of using flex vinyl material for Signboards has been discontinued. From now on, the new signboards shall be made with ACP (Aluminium Composite Panel) which is more durable and environment friendly. New arrangement has been made with vendors providing service on Pan India basis.

• As a green initiative, around 350 indoor plant saplings were distributed among HO and Annex Building staffs as part of the New Year Celebrations.

• The Bank has extended financial assistance under CSR for construction of RO Plant in schools.

As stipulated in Listing Regulations, the Business

Responsibility and sustainability Report describing the

initiatives taken by the Bank from environmental, social

and governance perspective is attached as part of the

Annual Report as Annexure-E.

Dividend Distribution Policy

In accordance with the Regulation 43A of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Bank has formulated a Dividend Distribution Policy and the Policy is hosted on the website of the Bank and can be viewed.

( https://www.southindianbank.com/userfiles/file/ dividend%20distribution%20policy_17.pdf)

Subsidiary Companies/Joint Ventures or Associate Companies

As on March 31, 2023, the Bank has one unlisted wholly owned subsidiary - M/s. SIB Operations and Services Limited, which was incorporated on 28th May, 2021,

M/s SIB Operations and Services Limited is a wholly owned Non-Financial Subsidiary Company of the South Indian Bank Ltd. The RBI has accorded the final approval on 25th March, 2021 for setting up the Subsidiary Company and the Company was incorporated on 28th May 2021 to cater to the operational needs of the South Indian Bank Ltd. Its authorized Capital as on 31st March, 2023 is '2 crores and the Issued and Paid up Capital is C 50 lakh . The company is providing exclusive services to the Bank in the operational areas of Tele calling, Business Development, Data Entry Operations, I.T. Support and other services permitted by Reserve Bank of India. The Subsidiary Company has reported a profit of C 22.04 lakhs as on March 31, 2023.

There are no companies which have ceased to be bank's subsidiaries, joint ventures or associate companies during the Financial year 2022-23.

Mr. M George Korah (DIN: 08207827)), Independent Director of the Bank, Mr. Murali Ramakrishnan (DIN: 01028298), MD & CEO of the Bank, Mr Thomas Joseph K (DIN 09186452), EVP and Chief Business Officer of the Bank and Mr. Chakkakkal Abraham John (DIN: 09186451) , Deputy General Manager of the Bank are directors of SIB Operations and Services Limited.

Except Mr. M George Korah (DIN: 08207827), no other directors in the Board of SIB Operations and Services Limited were drawing any remuneration / sitting fee from the subsidiary company. Mr. M George Korah (DIN: 08207827), has received ' 2,00,000/- as sitting fee for attending the Board meeting of the subsidiary company.

The Board of Directors has formulated a policy for determining 'material' subsidiaries pursuant to the provisions of the Listing Regulations. The same is displayed on the website of the Bank( https://www.

southindianbank.com/content/policy-for-determining-material-subsidiaries/781 )

Related Party Transactions

The Board of Directors has formulated a policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions pursuant to the provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The same is displayed on the website of the Bank https://www.southindianbank.com/userfiles/ file/rupay/disclosure/policy%20on%20materiality%20 of%20and%20dealing%20with%20relatedparty%20 transactions.pdf

Since the related party transactions are in the ordinary course of business and on an arm's length basis and not material AOC2 is not applicable.

Material Changes and Commitment Affecting Financial Position of the Bank

There are no material changes and commitments, affecting the financial position of the Bank which has occurred between the end of the financial year of the Bank i.e. March 31, 2023 and the date of the Directors' report i.e. July 31, 2023.

Significant and material orders passed by Regulators

During the year under review, there are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Bank's operations in future.

Maintenance of Cost Records

Being a Banking Company, the Bank is not required to maintain cost records as per sub-section (1) of Section 148 of the Companies Act, 2013.

Details in respect of frauds reported by auditors

There is no fraud reported by auditors under sub-section (12) of section 143 of the Companies Act, 2013 other than those which are reportable to the Central Government.

Compliance to Secretarial Standards

The relevant Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI) related to the Board Meetings and General Meeting have been complied with by the Bank.

Strictures and Penalties

During the last three financial years, there were no penalties or strictures imposed on the Bank by the SEBI or any of the stock exchanges and/or any other statutory authorities on matters relating to capital market.

Deposits

Being a Banking Company, the disclosures required as per Rule 8(5) (v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 and 74 of the Companies Act, 2013 are not applicable to the Bank.

Confirmation with respect to Insolvency and Bankruptcy Code, 2016

Management Discussion and Analysis Report

This has been dealt with in a separate section in the Annual Report.

Particulars of Loans, Guarantees or Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of section 186 of Companies Act, 2013, except subsection (1), do not apply to a loan made, guarantee given or security provided or investment made by a banking company in the ordinary course of business.

Directors' Responsibility statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, with respect to the Director's Responsibility Statement, it is hereby confirmed that:

a) in the preparation of the annual accounts for the financial year ended March 31, 2023, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b) the Directors had selected such accounting policies and applied them consistently and made judgments

ACKNOWLEDGEMENTS

The Board of Directors places on record its 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 securities 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 securityholders and customers for their continued support, patronage and goodwill. The single most important pillar of any Institution is its personnel, more so in the case of a service entity like a Bank, the Board acknowledges this fact and thank 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.

By Order of the Board

(SALIM GANGADHARAN) (MURALI RAMAKRISHNAN) CHAIRMAN MANAGING DIRECTOR & CEO

DIN:06796232 DIN :01028298

Place : Thrissur Date: July 31, 2023