SHIVALIK MERCANTILE CO-OPERATIVE BHARAT BANK LTD. F1RST

SHIVALIK MERCANTILE CO-OPERATIVE BANK LTD.

23RD ANNUAL REPORT 2019-20

BHARATF1RST

contents

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Corporate information

01

Digital banking

09

Vision and values

02

Credit portfolio

11Chairman’s message

12

Our branch and ATM network

04

Financial section

43Annual Operation Plan for FY 2020-21

68Appropriation of Profit

69AGM Notice

70

Milestone

06

Board of Directors and senior management

28Directors’ report

32

Key performance indicators

08

Corporate Governance report

36

RBI License No. UBD.UP.1468 P, dated 20th Sept. 1997.

Date of Commencement 5 September 1998

Registered Under Multi-state Cooperative Societies Act, 2002, Regn. No. L11016/10/2010-L&M dated 14th Sept. 2010

Area of Operation Uttar Pradesh, Delhi, five districts of Madhya Pradesh and two districts of Uttarakhand.

Acquisitions • In 2010 – Bhoj Nagarik Sahakari Bank Maryadit, Dhar, MP.

• In 2012 – Malwa Commercial Coop. Bank Ltd., Indore, MP.

Regd. Office 13/1207, Ansari Road, Saharanpur-247001 (U.P.)

Telefax: 0132-2612381; 2612382; 9927145550

Head Office Head Office I:Hakikat Nagar, Saharanpur – 247001 (U.P.) Telefax : 0132-2726125; 2726147; 992713550

Head Office II:Fusion Square, Plot No 5A & 5B Sector 126, Noida – 201301 Telefax : 0120-4060000

[email protected]/shivalikbank

IFS Code SMCB000 1001 till 1031 where last 4 digits represent the relevant branch code

Branches 31 branches in 6 clusters1. Saharanpur 1 Cluster: 5 branches 2. Saharanpur 2 Cluster: 8 branches3. NCR Cluster: 5 branches4. Madhya Pradesh Cluster: 5 branches 5. Lucknow Cluster: 2 branches6. Meerut Cluster: 6 branches

Business correspondents 3 - Affiliated with and working under various branches

Banking hours 10 a.m. ~ 4.00 p.m. – Mondays to Saturdays Holiday on 2nd and 4th Saturdays

Number of ATMs 57 (all branches, BC offices and offsite ATMs)

Number of Micro ATMs 272 m-ATMs deployed as on March 31, 2020

CBS Platform in use Finacle by Infosys, Version 10.2.18

Statutory Auditors MRS & Co., Chartered Accountants, Vaishali

Corporate Information

Vision and values

Shivalik Mercantile Co-operative Bank Limited (the ‘Bank’) was registered as a co-operative society under the Uttar Pradesh Co-operative Societies Act, 1965. The Reserve Bank of India granted it the license to conduct banking operations in the Saharanpur district as a Primary Urban Co-operative Bank. Operations began on the 5th of September, 1998, and since then, Shivalik Bank extended its footprint and achieved Tier-II status. Following the acquisition of another bank in Dhar, Madhya Pradesh, in 2010, Shivalik Bank de-registered from the Uttar Pradesh Co-operative Societies Act, 1965, and was subsequently registered under the Multi-state Co-operative Societies Act, 2002. Shivalik Bank went on to acquire another bank in Indore, Madhya Pradesh, in 2012. The Bank is the first and largest multi-state urban co-operative bank in Uttar Pradesh, with its head office split between Saharanpur and Noida.

The Bank continues to stand as a co-operative that addresses the growing needs of the lowest-income economic strata in the areas of its presence, through a combination of loan responsiveness, superior service and affordable cost – a compelling value proposition. The Bank’s micro-finance support through self-help groups (SHGs) helps address the entire eco-system of borrowers in any location, strengthening the Bank’s visibility and effectiveness.

The Bank is spread across Uttar Pradesh and Madhya Pradesh. It operates through 31 branches. In Uttar Pradesh, it has a presence in Saharanpur, Shamli, Meerut, Muzaffarnagar, Hapur, Ghaziabad, Noida (National Capital Region) and Lucknow. In Madhya Pradesh, it has its presence in Indore, Dhar, Khargone, Ujjain and Dewas.

Shivalik Bank is the largest multi-state urban cooperative bank in Uttar Pradesh. The Bank leverages its understanding of cutting-edge technology and experience to widen its footprint and transform the customer’s experience.

The Bank offers numerous deposit schemes (savings, current accounts, fixed and recurring deposits), loan products (demand loans, term loans, revolving credit) and additional services like insurance, payments, foreign-exchange and point-of-sale (PoS) solutions.

Overview Footprint Strengths

Products and services

Received ‘Banking Service Excellence Award’ in 2017.

Received ‘The Best I.T. Head FCBA Award’ in 2016.

Adjudged among India’s Top 100 Co-operative Banks 2015 Awards and received ‘Certificate of Excellence’ by BitStream Mediaworks.

Received ‘Young Achiever’s Award’ by Hindustan Media Ventures.

Mr. Suveer Kumar Gupta (MD & CEO) was awarded ‘The Best Youth CEO’ under the mid-sized co-operative bank category in the FCBA Awards.

Received ‘Client Innovation Award’ for Customer Journey Reimagination and Modern Technology led Innovation at Finacle Client Awards, 2020

Awards and recognition

Products & services

Deposits Savings

Fixed deposits

Nre deposits

Flexi recurring deposits

Current

Door-to-Door Deposit

Loans Home Loans

Personal &

Consumption Loans

Gold Loans

Car / Auto Loans

Two-wheeler Loans

Loans for Working Capital

Reverse Mortgage Loans

Roof Top Solar Loans

Loans to Professionals & Self Employed

Loans for Micro/SSI

Units

Retail Traders Loans

Commercial Building Loans

Commercial Vehicle Loans

Self Help Groups (SHG) & Mini SHG

Loans Against Warehouse Receipts

Shivalik Green Card (Kisan Credit Card)

Agriculture Term

Loans

Digital Services Internet Banking

SMS Banking

Debit Card

ATM Banking

Cash Deposit Machines

POS Machine

AEPS (AADHAR Enabled Payment System)

Fund Transfer (RTGS/NEFT/IMPS/NACH)

e-commerce

Mobile Banking

Add-on services Insurance

Remittances

Lockers

Business Correspondents

Forex

To serve the lowest strata of society with the best products at the best prices and the best technology-driven customer service, at the same time being a model employer for the national industry and emerging as a global role model in the small banking sector

Vision

Values

Strong relationships with employees and customers

Mutual respect for all employees and customers

Customer centricity

Big on integrity and reputation

Building trust

Unmatched service

Long-term relationship

Go an extra mile to help customer

Honour each other’s commitments

Put yourself in the other’s shoes

Respect one another

Respond to people

Listen to the customer

Customer delight

Customer connect

Never underestimate the customer

Honesty

Transparency

Moral values

Being ethical

2 l Shivalik Mercantile Co-operative Bank Ltd. Annual Report 2019-20 l 3

Branch Address Branch Code

Contact Number Email id

Cluster 1 - District Saharanpur 1

Ansari Road 13/1207, Ansari Road, Saharanpur-247001 (U.P)

1001 (0132) 2612381, 2612382, 9927145550

[email protected]

Hakikat Nagar Hakikat Nagar, near Old Sales Tax Office, Saharanpur-247001 (U.P.)

1003 (0132) 2726125, 2726147, 9927116660

[email protected]

Chilkana Road Near Gyan Garden Colony, Chilkana Road, Saharanpur-247001 (U.P.)

1009 9690990033 [email protected]

Sharda Nagar 1/1245 Wake Mohalla Khalasi Line, Sharda Nagar, Saharanpur-247001 (U.P.)

1017 84770 06125 [email protected]

Madho Nagar Ground Floor, 1546 A/6, New Madho Nagar, Saharanpur - 247001 (UP)


BC Offices: Chhutmalpur (affiliated to Hakikat Nagar Branch)

Offsite ATMs: Chhutmalpur

Cluster 2 - District Saharanpur 2

Deoband Plot No-780, Subhash Chowk, Railway Road, Deoband-247554 Dist. Saharanpur (U.P.)

1004 (01336) 222808, 9568880001

[email protected]

Ambehta Khera Bus Stand Main Road, Ambehta- 247340 Dist. Saharanpur (U.P.)


Nagal G.T. Road, Near Canara Bank, Nagal, Dist. Saharanpur-247551 (U.P.)

1011 (01336)-231112, 9690004794

[email protected]

Sarsawa 51 & 53, Gayatri Market, Ambala Road, Main Market,Opposite Punjab Sindh Bank, Sarsawa-247232 Dist. Saharanpur (U.P.)

1012 (01331)-246125, 9690004994

[email protected]

Nanauta Deoband Road,Opposite OBC Bank, Nanauta-247452 Dist. Saharanpur (U.P.)

1013 (01336)-253125, 9927986125

[email protected]

Rampur Near OLD PNB Building Moh. Mahajanan, Rampur Maniharan-247451, Dist. Saharanpur (U.P.)

1014 (01336)-252125, 9927007125

[email protected]

Gangoh Rambagh Road, Gangoh-247341 Dist. Saharanpur (U.P.)


Shamli 99/2, V.V. Internal College Road, Shamli-247776

1026 (0139)-8251826, 7088002526

[email protected]

BC Offices: Nakur (affiliated to Ambehta Branch) Offsite ATMs: Nakur, Thana Bhawan

Cluster 3 – NCR Region

Noida 27 Bhoja Mkt., Nr. Vinayak Hospital, Sector 27, Noida-201301 (U.P.)

1007 (120)-2555334,9540407222

[email protected]

Ghaziabad Plot NO. 507, Sachin Complex, G.T. Road, Nr. Bhatia Mod, Ghaziabad-201001 (U.P.)

1015 (0120) 2860003, 9560606533

[email protected]

Noida 135 WA 68 Upper GF, Near Shriram Millenium School, Sector 135, Noida-201301 (U.P.)


Indirapuram Raison Shopping Complex, AhinsaKhand-II, Near Ashiana Green, Indirapuram, Ghaziabad-201014 (U.P.)

1019 (0120) 2651717 [email protected]

Noida 45 SDA-8, Sector-45, Noida-201303 1027 9818445983 [email protected]

Offsite ATMs: Dadri, Salarpur Khadar

Cluster 4 - Madhya Pradesh

Dhar Plot No-112, MG Road, Chota Rajwada, Dhar – 454001 (M.P.)

1006 (07292) 222413 [email protected]

Indore 6, Jagjivan Ram Nagar, Main Road, Patnipura Chowk, Indore-452011 (M.P.)

1010 (0731) 2704268 [email protected]

Khargone 73 Jawahar Nagar, Khargone-451001 (M.P.)

1022 (07282) 232425 [email protected]

Ujjain 37, Ujjain Trade Centre, Ghatkarpar Marg, Near BJP Office, Freegunj, Ujjain – 456001 (M.P.)


Dewas 8, Tarani colony, A.B. Road, Near Hotel Abhilasha, Dewas – 455001 (M.P.)


Cluster 5 - District Lucknow

Alambagh 565-KA/68, Amrudhi Bagh, Sringar Nagar, Alambagh, Lucknow 226005 (U.P.)

1023 (0522)- 4241777 [email protected]

Vikas Nagar 1/175 Sector-1 Vikas Nagar near Shiv Murti Lucknow 226022(U.P)

1024 (0522)-4241888 [email protected]

Cluster 6 - District MeerutMeerut C-2/6, Nai Sadak, Shastri Nagar, Garh Road,

Meerut-250004 (U.P.)1008 (0121) 2604364,

[email protected]

Muzaffarnagar Ground Floor 311, South Bhopa Road, Opposite LIC Office, Nai Mandi, Muzaffarnagar-251001 (U.P.)


Khatauli Ward No. 8, Ganeshpuri, G.T. Road, Khatauli-251201, Dist. Muzaffarnagar (U.P.)


Hapur W – 29/73(1), Jal Nigam office, Opposite Collector Ganj, Railway Road, Hapur 245101 (U.P.)

1025 (0122)-2300004, 9105551025

[email protected]

Mawana 2422-2423, Hastinapur, Mawana,Near Subhash Chowk, Dist. Meerut 250401, (U.P.)

1028 (01233)-271004 7055027555

[email protected]

Sardhana 567-569, Chaudhary Market, Near Union Bank, Binoli Road, Sardhana, Dist. Meerut-250342 (U.P.)

1031 (01237)-237015, 9105806060

[email protected]

All our branches are equipped with ATMs, in addition to these we have 5 offsite ATMs

Our Branch & ATM network


Milestones

Launches first branch in Saharanpur on September 5, 1998

Launches net banking and mobile banking.

Total business of the bank crosses H1000 crore.

Sets up a second head office in Noida.

Sets up centralised account opening and loan appraisal functions

Launches account opening through m-ATMs.

Implements e-KYC authentication.

Goes live on IMPS.

Launches Affordable Housing Scheme.

Received RBI approval to open 10 new branches

Launches cloud based RTGS/NEFT services

Launches NACH and NECS to improve the Bank’s payment system.

Launches Green PIN – paperless ATM PIN.

Becomes enrolled with Direct Benefit Transfer (DBT).

Installs solar panels at ATMs to maintain uptime and to reduce the carbon footprint.

Commences migration of CBS platform to Finacle by Infosys, India’s second largest technology company.

Implementation of paperless account opening service for SHG customers.

Implements of in-house tools on Power Apps to track the progress of live project.

Launches Digital village initiative.

Direct membership of IFSC from NPCI.

Ties up with Bill Desk and BBPS (Bharat Bill Payment System).

Implements LOS (Loan Origination System)

Procures Fraud Risk Management (FRM) from NPCI.

Strengthens security of online transactions through debit card by adding another level of authentication.

Received new BIN from NPCI for international usage/ acceptance.

Upgraded all the CDMs into Recyclers, increasing time efficiency and customer convenience.

Submits an application to RBI for transition to a Small Finance Bank

Third branch becomes operational in Hakikat Nagar.

Becomes the first UCB in the country to receive an in-principle approval from RBI to transition to a Small Finance Bank (SFB)

Goes live on Finacle CBS platform and mobile and internet banking digital suite by Infosys

1998 2015

2017

2016Achieves full branch computerisation, first in Saharanpur district.

1999

2018

Second branch becomes operational in Gangoh.

2002 2005

Achieves a deposit base of H100 crore and becomes a Tier-II bank, covering the entire state of Uttar Pradesh.

Becomes the first and only multi-state co-operative bank of Uttar Pradesh, following the acquisition of Bhoj Nagrik Sahakari Bank Maryadit, Dhar, Madhya Pradesh

Achieves complete Core Banking Status (CBS).

Achieves net worth of H50 crore.

Completes installation of Cash Deposit Machines and ATMs across branches and BC offices.

Becomes the first co-operative bank in North India to issue debit cards for online/ PoS shopping.

Collaborates with merchants to offer in-house PoS devices for electronic payments.

Launches SMS banking, enabling easier accessibility.

2010 Opens a

second branch in Madhya Pradesh, following the acquisition of Malwa Commercial Cooperative Bank Limited, Indore.

2012 Becomes

the first co-operative bank in North India to start issuing RuPay ATM cum debit cards.

Installs ATMs at all branches.

Starts opening business correspondent offices in remote areas in Uttar Pradesh and Madhya Pradesh

Changes CBS platform to Profile by FIS

2013 2014 2019


Key Performance Indicators

Digital Banking

Parameter 2015-16 2016-17 2017-18 2018-19 2019-20

Capital

Share capital (H crore) 43.89 45.10 45.70 57.33 61.61

Capital adequacy ratio (%) 13.85 15.07 12.68 13.07 13.09

Reserves (H crore) 12.83 19.94 21.25 21.69 17.08

Net worth (H crore) 61.22 65.69 65.65 77.21 79.61

Deposits & Advances

Deposits (H crore) 809.60 916.97 953.40 1,051.20 1,139.82

CASA (H lac) 256.71 332.76 319.52 336.10 319.31

Cost of Deposits (%) 7.85 7.02 6.45 6.17 6.40

Advances (H crore) 602.22 559.51 611.61 715.23 718.60

Yield on advances (%) 13.03 12.99 12.44 12.15 12.13

CD ratio (%) 69.79 61.03 64.15 68.03 63.05

Investment

Total investments (H crore) 184.80 245.28 227.85 246.30 262.82

Yield on investments (%) 8.32 8.86 7.12 7.87 8.09

Interest Income & Expenses

Interest income (H crore) 94.97 100.85 99.03 104.92 117.31

Interest expense (H crore) 62.10 61.79 59.69 61.39 71.75

Net interest income (H crore) 32.87 39.06 39.34 43.53 45.56

Non-Interest Income

Non-interest income (H crore) 5.01 4.76 7.25 10.58 12.70

Profitability

Total business (H crore) 1,411.82 1,476.48 1,565.00 1,766.43 1,858.42

Operating profit (H crore) 15.09 17.63 5.47 4.83 3.46

Net profit after tax & provisions (H crore) 7.35 10.02 3.17 3.85 2.25

Net interest margin (%) 3.88 4.34 4.15 3.99 4.06

Average assets (H crore) 862.43 961.72 1,017.40 1089.86 1,224.33

Dividend (percent) 9.00 9.00 8.00 8.00 NIL

Non-Performing Assets (NPA)

Gross NPA (percent) 1.26 2.29 2.14 1.57 2.83

Net NPA (percent) 0.60 1.35 1.45 1.19 1.82

Employee Productivity

Number of employees 256 389 503 486 466

Business per employee (H Lacs) 445.20 430.15 322.68 363.46 398.80

Operating profit per employee (H Lacs) 5.89 5.14 1.12 0.99 0.74

Today, digital banking is no longer a luxury for the customers or a premium offering by the banks. It has now become a bare essential for customers to have and banks to offer. This is especially relevant in the current context with the widespread impact of the pandemic.

The goal for Shivalik is not only to increase the size of the balance sheet but also to enhance the customer experience and provide banking services in a simple, easy to use manner which would be most relevant for our target customer segment. This has been the ethos in the way we build our products and also in the way we

think about our digital offerings.

Shivalik completed a large technology upgrade in April 2019 moving to the Finacle Digital Banking Suite provided by Infosys. Through this transformation, the following aspects were re-imagined :

• A brand new mobile banking app was launched which provided services such as fund transfers, opening fixed deposits, debit card services, cheque book services, bill payments and a number of other service requests at the fingertips of our customers. The app includes enhanced security features like biometric or facial ID based login.

• Enhanced internet banking services with the full spectrum of retail banking services including fund transfers, opening accounts, customer statements, service requests and account summaries.

• New account categories onboarded for paperless account opening

• Instant loan origination on our website where the customer can check their eligibility for obtaining a loan from us within minutes.

Innovating with simplicity


92%Loans secured by collateral 4

(in H lac) Average ticket size >50%

Small lending (Upto H25 lac per borrower)

Shivalik has an extremely focused credit ethos which is centred around building a risk managed and well balanced portfolio of loans and advances. Our credit strategy is driven by the vision of the bank to meet the credit needs of the retail segment which gives us the following benefits :

- Low average ticket size per loan Minimised customer concentration risk as large exposures remain a handful

Higher average yield in this segment of customers

- Secured Lending Book Most of the loan book is backed by property, gold or another form of collateral

Microfinance portfolio is less than 10% and is also backed by joint liability guarantees

- Product and Customer Diversification Well diversified portfolio with very limited product concentration risk

Health mix of individual and business customers allowing us to sail through cyclical downturns better than most

Over the last few years, the banking sector has expanded credit porftolio through unsecured personal lending largely to satisfy the consumption demands of individuals. This is especially true for FY 19-20 where personal credit was the largest growing segment across the banking industry. However, your bank has remained true to its credit fundamentals of providing cost effective credit to those in need albeit by building a risk managed, secured loan portfolio.

Well diversified secured loan portfolio with minimal product and concentration risk

Product Split

Microfinance 8.10% Cash credit/Overdraft 15.60%

Retail Loans 64.10%

Gold Loans 3.10%

Loan against Deposit 9.10%

Individual: 55%

Business: 45%

Customer Profile

Retail Loans refers to Term Loans including loans to MSME & other retails businesses and individual loans such as housing, asset purchase and agriculture.

Credit Portfolio

Digital metrics

84.13% FY2019-20

4.3 (in million) FY2019-20

86.10% FY2019-20

90.37% FY2018-19

3.3 (in million) FY2018-19

82.15% FY2018-19

Paperless account opening as % of total SB accounts opened

Payment related transaction volume

Digital transactions as % of total transaction volume

Digital prowess reflected in the digital transaction volume and paperless account opening stats


C h a i r m a n ’ s M e s s a g e

Overview I am pleased to present an overview of where we stand as a co-operative bank.

Our bank reported a total income of H130.01 crore in 2019-20, which represented a 12.56 per cent growth over the previous financial year.

During the year under review, the company made a proactive business-strengthening investment in cutting-edge technologies that was expensed from the Profit & Loss Account of the financial year under review.

This investment will strengthen our business and corresponding financials across the foreseeable future after we have transformed from a co-operative bank into a small finance bank.

The health of the business improved, reflected in a 7.30 per cent growth in Earnings before Depreciation, Interest and Tax to H10.30 crore in FY2019-20. The performance of the company has been comprehensively explained in the Directors’ Report.

What makes this performance creditable is that it was derived in a weakening Indian economy; the growth of the economy declined in each successive quarter; growth of 6.20 per cent in FY2018-19 declined to 4.00 per cent (revised) in FY2019-20. Towards the close of the financial year under review, banking sentiment was affected by the outbreak of the COVID-19 pandemic, which necessitated a complete national lockdown, starting from March 24, 2020 that extended for more than a couple of months before being lifted in phases.

Transition Interestingly, the bigger the challenge, the larger the opportunity.

Shivalik Bank was a co-operative bank for more than two decades.

The bank has been provided the in-principle approval to transition into a small finance bank, representing the closing of one chapter and the opening of an exciting new phase in our organisation’s existence.

The one feature that will remain constant to both periods is our commitment to building Bharat.

We stand by our sustained commitment to build Bharat not with large loans, but with many small ones.

We stand by our sustained commitment

to build Bharat not by addressing the needs of the strongest, but by servicing the weakest.

We stand by our sustained commitment to build Bharat not by using the usual credit appraisal techniques but by developing customised ones.

We stand by our sustained commitment to build Bharat not by addressing short-term financing needs but with the objective of transforming destinies.

ImpactWe are pleased with the result of our commitment.

We helped a number of borrowers seed our loans into their small businesses.

We helped customers purchase capital equipment or raw materials. We recruited semi-urban employees, strengthening the local economy. We advised, counselled and guided micro-businesses. We helped our customers enter a virtuous cycle of growth and prosperity.

What makes this creditable is that our customers were unable to secure loans from commercial banks as they were not considered serious customers and the techniques to appraise credit-worthiness of this customer base were far from being formalised in India.

At Shivalik Bank, we trusted – our systems on the one hand and the credibility of the small borrower on the other. Our trust was validated. Borrowers were proven to be thrifty; the small trader or shop-keeper prided on timely repayment; most needed

seed funding to get them started or working capital to finance stock purchase without seeking perpetual support.

In doing so, we did not just transact; we helped created an eco-system of trade, customers and employment, building India from grassroot upwards.

Increased relevanceAt Shivalik Bank, we see ourselves as a bank that is at the right place at the right time.

The Indian government is focused on financial inclusion, highlighting the need for all of India – the largest to the smallest – to be brought into the banking system.

At Shivalik Bank, we possess a credible track record in this regard.

Our presence across more than two decades has strengthened our grassroots recall across customers and the community. Our delegated and decentralised operational structure makes it possible to respond to on-ground realities with responsive and customised decision-making around the needs of the un-banked and underserved. We possess a rich experience in micro-lending, which comprises loans of small amounts. We introduced products and services customised around the needs of small retail customers. We invested in a superior technology stack and digital banking offerings compared to other urban co-operative banks (UCBs) and many commercial banks. Besides, while we operate as a UCB, we benchmark ourselves against commercial banks with

Our presence across more than two decades has strengthened our grassroots recall across

customers and community.

During 2019-20, The company witnessed an upturn, reflected in a 7.3 per cent growth in Earnings before Depreciation, Interest and Tax to H10.30 crore.


respect to compliance and regulatory requirements. We remain compliant with applicable RBI requirements not only for UCBs but in many cases for small finance banks, strengthening our business continuity and operational sustainability.

Macroeconomic OverviewOverall health of the Indian economy remained grim throughout 2019-20 as evident by slower GDP growth majorly due to low domestic demand and decrease in manufacturing and construction activities. RBI took steps to support and increase the growth by cutting down the repo rates multiple times in FY 2019-20 which led India 10-Year yield to come down by 140-150 bps.

However, March 2020 also saw the rise, spread and impact of COVID 19 which resulted in a slump in growth globally due to lockdowns and a complete halt in economic activities.

Scheduled Commercial BanksThe Indian banking landscape has seen a significant number of new additions over the last 5 years due to the creation of new age banks such as payment and small finance banks. At the same time, the industry has also seen consolidation and regulatory action on the relatively weaker

banks which has led to a reduction in the number of banks operating in the country especially post the consolidation of the public sector banks.

Credit offtake during 2019-20 was muted with non-food credit growth being nearly half the average growth of 7.0% in the last 5 years. The slowdown in credit growth was spread across all bank groups, especially private sector banks.

OutlookAt Shivalik Bank, we are excited about our prospects following our transition into a small finance bank.

An insight into our prospects is really an insight into the evolving story of India.

At Shivalik Bank, we believe that this transition will widen opportunities for credit disbursal. To circumvent the challenges of the past when credit appetite would be largely serviced across larger borrowers, the time has come when the smaller borrowers and credit seekers will be increasingly serviced through a widening network of small finance banks using a digital first model.

Credit offtake in personal loans segment accounted for the largest share especially in housing and credit cards. Deposits continued to grow at a faster pace than advances as the economic growth drives disposables incomes up and an increase in banking penetration.

Net profits of scheduled commercial banks improved in 2019-20 especially due to gains on the treasury portfolio due to favourable yield movement and an improvement in Net Interest Margins. This was also aided by an improvement in asset quality as the banks improve their Gross NPA ratios driven by lower slippages and resolution of a few large accounts through Insolvency and Bankruptcy Code.

Most banks strengthened their capital buffers in FY 2019-20 and all major banks have announced plans to raise capital through a combination of equity and/or debt. This would be especially important in the context of COVID-19.

Small Finance Banks (SFB)Small Finance Banks continued to build credence to the concept of specialised banking licenses for this segment. Deposits showed significant growth in FY 19-20 for SFBs with these accounting for 60% of the liabilities. However, growth on the assets side was driven by

investments and credit growth remained muted.

The financial performance of the SFBs improved due to improvement in asset quality and an increase in capital adequacy.

Urban Co-operative Banks (UCB)UCBs have remained at the forefront

We believe that the provision of supply will create its own demand, strengthening the integration of small finance banks into the lives of people. At Shivalik Bank, we believe that the complement of digital and financial will enhance service responsiveness.

In view of this, we promoted digitalisation by encouraging customers and providing them with digital banking services. The bank invested in technology upgradation to improve customer satisfaction. The provision of m-ATM transactions increased digital awareness. The bank created customer awareness about the benefits of debit cards and online transactions. The bank implemented paperless account

of financial inclusion for a number of decades. With more than 1500 such banks in the country, this sector plays an important role in providing banking to those most in need of these services. However, consumer confidence in this sector has been reducing over the years and was severely impacted in FY2019-20 due to the failure of a large UCB due to fraudulent activities and poor corporate governance. This has made capital raising efforts for this sector all the

more challenging especially since there is no formal debt or equity market for this sector. RBI introduced a number of policy changes in the aftermath of the events in FY2019-20 to improve the governance and control systems in UCBs. In addition, the recent changes in the Banking Regulation Act would also enhance the control that the RBI has over the functioning of UCBs which is expected to be positive in the long term.

opening and digitalised customer service requests. The result is that in the last few years, the bank emerged as one of the leading digitised co-operative banks across North and Central India.

I must assure our stakeholders that this direction will only accelerate as we transition from an urban co-operative bank into a small finance bank, empowering our customers and building a stronger Bharat.

Yashvir Kumar GuptaChairman

The immediate impact of lockdowns on the financial performance of commercial banks was

contained through timely policy actions by the Reserve Bank of India.

The bank invested in technology upgradation to improve customer satisfaction. The provision of

m-ATM transactions increased digital awareness.


The word ‘pioneering’ was seeded into our DNA from the time we went into business

When Shivalik Bank went into business the initial response was usual.

The question being repeatedly asked by a number of external observers was: ‘What’s different about this co-operative bank?’

This clamour was resolved when Shivalik Bank introduced computerisation with a difference – a pioneering technology intervention in India’s co-operative banking sector.

Shivalik’s maiden branch provided the facility of complete branch computerisation as opposed to the conventional application of only a handful of such functions. Besides, the benefit of this computerisation extended from functional in-house support to where it mattered most: the area of customer engagement.

The result was that customers who were required to periodically visit the branches physically and stand in

long queues to get their passbooks updated were pleasantly surprised to find their passbooks being given to them in a computerised, detailed and easy-to-read format, a refreshingly new experience.

Besides, bank interventions were now completed in only a fraction of the time. A number of customers who would otherwise need to take half the day off to go to the bank to get their work done, could now visit the bank, get their work done and head back to office in a fraction of the time. The result of these pioneering initiatives was that the Shivalik Bank brand didn’t just stand for trust among consumers; it stood for a superior customer experience as well.

This sentiment was encapsulated by one of our delighted customers who described her banking experience with the words, ‘Ekdum videshi bank jaisa’.

SHIVALIK’S MAIDEN BRANCH PROVIDED

THE FACILITY OF COMPLETE BRANCH COMPUTERIZATION

AS OPPOSED TO THE CONVENTIONAL

APPLICATION OF ONLY A HANDFUL OF

SUCH FUNCTIONS.

‘Ekdum videshi bank jaisa’


How Shivalik Bank made the recurring worry of ‘Bank jaana hai; aadha din nikal jaayega’ history

In 1998, Shivalik became the first bank in the city to offer doorstep delivery of account statements, demand drafts, pay orders. The bank also offered delivery/pickup of cash and cheques when required by the customers. These facilities freed up manpower of our customers thereby making significant impact on overall business efficiency and cost.

This new normal at Shivalik Bank had transformational upsides. A number of customers indicated they were being respected for the first time by any bank. The shopkeepers in markets proximate to Shivalik Bank’s Ansari Road branch voted with increased deposits and moved their accounts en masse.

Within just six months of launch, Shivalik Bank competitors began to feel the heat, changing the way competing banks would restructure their customer approach in pin codes wherever Shivalik Bank arrived. Shivalik Bank didn’t just improve the game; it changed it.

In the early days of Shivalik Bank’s existence, the brand of a urban co-operative bank was one where clerks pushed paper, customers spent a long time, queues abounded and the overall mood was usually grim.

This was the scenario in virtually every co-operative bank until the time Shivalik Bank went into business at the turn of the century.

When the bank was launched in 1998, its management resolved that it would transform all the legacy issues associated with banks.

The management focused on the transformation of the customer experience at the bank from day one, where fundamental documents would be delivered to customers at their homes.

When retail customers realised that Shivalik Bank provided a pioneering service for its niche that was equivalent to one being provided by multi-national banks, they responded with wonder, relief and surprise.

IN 1998, WHEN THE BANK

LAUNCHED, SHIVALIK WAS

THE FIRST IN THE CITY TO OFFER

DOORSTEP BANKING

SERVICES TO CUSTOMERS.

Shivalik Bank didn’t just improve the game; it changed it.


Shivalik Bank became the first co-operative bank in Uttar Pradesh UP to become a Multi State Co-operative Bank

More than 20 years ago, an urban co-operative bank was generally considered to be an unambitious financial intermediary, marked by A trust deficiency.

This translated into a low expectation: customers made excuses on behalf of the bank. This, in turn, became a vicious downward cycle of low expectations leading to average customer service.

Then Shivalik Bank entered the picture.

Shivalik Bank acquired a loss-making bank in Dhar, Madhya Pradesh, in 2010.

Over the years, within co-operative banking circles, the word that began to be associated with Shivalik Bank was ‘progressive’.

The ground-level impact proved transformational. A transition from being regulated by UP Cooperative Societies Act to Multi-state Cooperative Societies Act suddenly

widened the bank’s exposure, footprint and mindset.

The business-level impact was even more telling. Shivalik Bank transformed the loss-making acquisition into surplus within just a year.

Besides, the benefits from a cross-transfer of capabilities proved even more productive. At the acquired bank in Dhar, the service and product offerings improved following inputs from the parent bank; the merged Balance Sheet strengthened and enhanced customer perception.

By emerging as one of the first Indian co-operative banks to venture beyond their state of origin into another state through the inorganic route, Shivalik Bank sent out a message of ambition, investment and sustainable growth.

Over the years, the bank has remained true to its reputation as one of the most progressive banks in the country

BY EMERGING AS ONE OF THE

FIRST URBAN CO-OPERATIVE

BANKS IN UTTAR PRADESH TO

VENTURE INTO ANOTHER STATE

THROUGH INORGANIC

ROUTE, SHIVALIK BANK

WAS SENDING OUT A MESSAGE

OF AMBITION, INVESTMENT

AND SUSTAINABLE

GROWTH.

Shivalik Bank transformed the loss-making acquisition into a profitable one within a year through superior product offerings and customer service.


Shivalik Bank launched anywhere-banking services when this was unheard of in co-operative banks

One of the challenges that Shivalik Bank’s corporate customers faced was in running multi-location businesses.

To facilitate transactions between two locations of their business they needed to engage with different banks or open different accounts within the same bank.

Shivalik Bank studied this customer pain point and changed this tedious legacy through an effective proposition.

The bank deepened its information technology investment that facilitated the real-time sharing of

information between branches. This empowered a customer with an account at the Saharanpur branch, for instance, to go the bank’s Gangoh location, deposit a cheque or withdraw cash – without an account at that branch.

Shivalik Bank articulated a simple line: ‘From now on, you do not strictly have an account with any of our specific branches; you have an account with Shivalik Bank. You can bank anytime and anywhere with us.’

The message that this sent out was that any Shivalik Bank customer could walk into

any of the bank’s branches and treat it like his ‘mother’ branch. The customer could access demand draft, account statements, cash deposits and cash withdrawals from any of these branches - without additional charges.

The result – through innovative use of technology when the bank did not have a core banking solution – was that the business community with operations at Gangoh and Saharanpur now possessed wider operational flexibility on account of this service. This shifted the image of Shivalik Bank from one among many to one that was leading.

IN THE EARLY 2000, SHIVALIK BANK LAUNCHED ANY-BRANCH BANKING WHEN CORE BANKING SOLUTION WAS AT INFANCY IN INDIA THROUGH INNOVATIVE USE OF TECHNOLOGY.

This shifted the image of Shivalik Bank from one among many to one that was leading.


Became the first co-operative bank to use cloud services as early as 2013

consummation, working the country’s banking system to benefit customers.

Besides, Shivalik Bank became the first urban co-operative bank in North India to issue Ru Pay ATM cum debit cards in 2013; it became the first urban co-operative bank in North India to issue Ru Pay debit cards for online shopping and post on sale merchant sale transactions in 2014.

Shivalik Bank also became the first urban co-operative bank to host NEFT/RTGS services and core banking solution (powered by Infosys Finacle) in 2016 and 2019 respectively on cloud. The agility and scalability of using the cloud to host the information technology infrastructure was a key draw for the bank’s visionary Board and management team.

The result is that Shivalik Bank is being respected as a pioneering forward-looking institution that is committed to forwarding customer’s interests.

The management had foreseen that the concept of a bank would one day fit into a mobile phone.

The management had foreseen that the legacy concept of a bank belonging to a ‘location’ would, over time, fade.

The management had foreseen that to be served competently and comprehensively by a bank, it would not require one to write proposals in triplicate to a person across the counter.

The result of being ahead of the curve was validated when Shivalik Bank made RTGS and NEFT cash transfer free in 2016, well before the RBI made this mandatory three years later.

Further, even for banks that possessed an e-banking license but not permit transactions, Shivalik Bank walked the road less travelled. The bank allowed customers to place fund transfer requests on the e-banking platform, which would then be placed with another bank for

YEARS BEFORE THE WORD

‘DIGITAL’ BEGAN TO BE ASSOCIATED

WITH CO-OPERATIVE

BANKING, THE MANAGEMENT

AT SHIVALIK BANK HAD SEEN

THE FUTURE.

Being an early cloud adopter has helped the bank remain agile


Shivalik Bank becomes the first Urban Cooperative Bank in the country to receive in-principle approval to transition to a Small Finance Bank

approval from RBI to transition to a SFB in January 2020.

Key strategic rationales for the transition:• The transition would allow

the bank the ability to offer full suite of retail banking products / services since urban co-operative banks (UCB) have restrictions on offering certain products and services.

• As a UCB, the bank is restricted to offering services within its area of operations. The transition to SFB will allow the bank to expand across the country as per the requirements of the customers.

• Ability to attract capital from private institutional investors would provide the resources required to invest in future growth activities and for investments in technology.

• Migration from co-operative ownership structure to corporate structure will allow the bank to be more flexible and nimble in decision making.

The bank took cognizance of the guidelines regarding voluntary transition of UCBs into SFBs issued by RBI on September 27, 2018. The guidelines provide a voluntary path for transition of a co-operative bank to a banking company registered under the Banking Regulation Act and Companies Act. Given the significant role played by co-operative banks in the Indian economy especially for serving the under banked sections of the population and the enormous corpus of public funds available with them, these guidelines provide a guide path for the future for well run co-operative banks. The Board of Directors, shareholders and senior management team were fully supportive of this voluntary transition for Shivalik and believe that the bank will benefit from the additional regulatory and corporate governance zeal expected of commercial banks and contribute towards the nation’s goal of financial inclusion. The bank received in-principle

SINCE BEING A PIONEER IS PART

OF THE BANK’S DNA, SHIVALIK

BANK CREATED HISTORY IN

THE BANKING SECTOR BY

BECOMING THE FIRST URBAN

CO-OPERATIVE BANK IN THE

COUNTRY TO APPLY

TO RBI FOR TRANSITIONING TO A SFB UNDER THE VOLUNTARY

TRANSITION GUIDELINES

ISSUED BY RBI IN 2018.

Ability to attract capital from private institutional investors would provide the resources required to invest in future growth activities and for investments in technology


Board of Directors Functional Heads

Annual Report 2019-20 l 2928 l Shivalik Mercantile Co-operative Bank Ltd.

Yashvir Kumar Gupta

Chairman

Shiv Puran GulatiVice-Chairman

Sudhakar AgarwalDirector

Navleen KundraChief Risk Officer

Gaurav MittalChief Operating Officer

Harsh Mittal, FCAChief Financial Officer

Vijay Kumar DhingraDirector

Sanjay Gupta, CADirector

Ankit KhareInformation Technology

Divya SethiHead Business Development

Vijay AgarwalMicrofinance

Gaurav Kumar Gupta Finance

Gyanendra BajpaiCredit

Harish BhatiaTreasury

P. K. GuptaAudit

Pradeep Shukla Compliance

Sarvesh SinghalDirector

Dr. Kamal Kant GuptaDirector

Arun Kumar MalikDirector

Satyasheel Rao Pawar

Director

Suveer Kumar Gupta

MD & CEO

Ankit GargCluster Head, Meerut

Deependra VermaCluster Head, MP

Himanshu GargCluster Head, Saharanpur

Sandeep RatraCluster Head, NCR

Shruti PandeyCompany Secretary

Dr. Sanjeev MittalDirector

Vishal KaushikAdministration

Abhishek TiwariCluster Head, Lucknow

Sarul ChaudharyInsurance

Smriti BaligaHuman Resource

Ravi Ratnaker SinghOperations

Senior Management Team

30 | Shivalik Mercantile Co-operative Bank Ltd. Annual Report 2019-20 | 31

DIRECTORS’REPORT

The Board of Directors take great pleasure in presenting the 23rd

Annual Report on the business and operations of your Bank,

together with the Audited Statement of Accounts for the year

ended March 31, 2020.

MACROECONOMIC TRENDSThe state of the Indian and the global economy have significant

impacts on policy decisions by governments and regulatory bodies

which in turn have an impact on the banking industry.

The overwhelming mandate delivered at the national elections in

May 2019 provided a boost to sentiments of all investor categories

in India and globally. The government made a number of sweeping

changes in relation to key long standing political issues such

as Article 370 in the first half of the financial year which led to a

fluctuation in macro-economic trends.

The GDP growth rate of the Indian economy continued to slow

down throughout 2019-20 majorly due to low domestic demand

and decrease in manufacturing and construction activities. RBI took

steps to support and increase the growth by cutting down the repo

rates multiple times in the Financial Year 2019-20 which led to a

reduction in India 10-Year Government Bond yield by 140-150 bps

until February 2020.

The banking and financial services industry remained under stress

especially due to adverse incidents at PMC Bank which led to a

significant policy rethink for urban co-operative banks (UCBs)

operating in India. In addition, the moratorium imposed on Yes Bank

in March 2020 further led to an erosion of consumer confidence in

private sector banks.

The RBI has been active in introducing stricter norms regarding

the governance of UCBs such as detailed cyber security guidelines,

reductions in exposure limits on advances, increase in priority sector

requirements and alignment of loan ticket size guidelines with those

of Small Finance Banks. The central government has also introduced

changes to the Banking Regulation Act which were announced

in the Budget session of Parliament allowing greater regulatory

supervision of UCBs by the RBI. All these factors are slowly leading

a revival in public confidence which has eroded to significant lows

following the adverse incidents in the banking industry.

March 2020 also saw the rise, spread and impact of COVID 19

which resulted in slump in growth globally due to lockdowns and

complete halt in economic activities.

Due to low demand globally, the crude prices have come down

drastically touching even USD 19 per barrel and devaluation of the

rupee against the US Dollar. The economic conditions globally are

projected to be at their worst levels since World War II. Crude oil

consumption and demand are indicators of economic growth and

at the peak of the lockdown, global oil consumption had reduced

to as low as 20-30% of its peak. The escalations on the border areas

with China has added to the burden of the Indian government

which was already stretched in managing the country’s response to

the COVID-19 pandemic.

The lockdown and significant impact on businesses and

consumption behaviours could lead to significant stresses in the

Global banking sector especially for banks with exposures to highly

impacted sectors such as Aviation, Hospitality and Public Transport.

Amidst all the doom and gloom, the team at Shivalik has been

building from strength to strength. We completed a significant

technology upgrade in 2019-20 with the migration of our Core

Banking Solution and Digital Banking Suite to Infosys Finacle which

is the industry leader in banking technology solutions. The bank’s

digital banking offerings have also come to the fore due to the

COVID-19 pandemic with penetration levels increasing manifold

since March 2020. With banking classified as an ‘essential service’

during the lockdown, our team of “COVID warriors” have remained

committed to serving the needs of our customers and upholding

Shivalik’s commitment to strong customer service.

TRANSITION TO A SMALL FINANCE BANKThe Shivalik team created history by becoming the first co-operative

bank in the country to receive an in-principle approval from the

RBI to transition into a Small Finance Bank on 6 January 2020. This

has significant implications for the bank and coupled with the

technology upgrade, the bank is well positioned to execute its

growth plans. The key advantages of becoming a Small Finance

Bank would be as follows:

• Classified as a Scheduled Commercial Bank

• Allowed to open branches pan India

• Offer loans across any location in India

• Eligible to source Government and Institutional business

• Eligible for refinancing and subsidy schemes offered by

Government of India

• Acceptability of Bank Guarantees and Fixed Deposits offered by

the Bank in Government organizations

• Offer investments in mutual funds as a distribution agent

• Offer products which allow benefits under the Income Tax Act

e.g. super saver fixed deposits for senior citizens

FINANCIAL PERFORMANCEThe financial highlights for the year under review vis-à-vis last year,

are presented below:

(Amount in C crore)

Particulars FY 2019-20 FY 2018-19Deposits 1,139.82 1051.20

Borrowings 7.69 7.82

Advances 718.60 715.24

Investment 262.82 246.30

Interest Earned 117.31 104.92

Other Income 12.70 10.58

Total Income 130.01 115.5Interest Expenses 71.75 61.39

Operating expenses 55.10 49.23

Provisions & Contingencies/Taxes 0.91 1.03

Total Expenses 127.75 111.65Net Profit for the year 2.25 3.85Profit/Loss brought forward 4.76 5.06Write back of excess IFR & PY

Adjustment

(0.31 ) 0.86

Total Profit 6.70 9.77Appropriation Dividend to shareholder of previous FY (3.67) (3.63)

Transfer to Statutory Reserve (0.56) (0.96)

Other Reserves (0.25 ) (0.42)

Net profit carried over to Balance Sheet

2.22 4.76

During the financial year under review, the deposits of our bank

increased to C 1139.80 Crores registering a growth of 8.4% as

compared to prior year. The increment was largely driven by growth

in term deposits which represents a reasonable performance given

the significant dip in consumer confidence in UCBs following the

detection of a large scale fraud at PMC Bank. Advances increased

to C 718.60 crore registering a muted growth of 0.5% as compared

to the last financial year as the bank further strengthened its credit

assessment capabilities which led to greater risk filters being applied

and also reduced its exposure to certain large exposures as a prudent

measure given the uncertainty in the business environment due

to the slow down of the Indian economic fundamentals. The total

business size of the bank grew by C 92 Crores during the financial

year under review. Despite the headwinds for the co-operative

banking sector, this represents a reasonable performance.

Net Profit (after tax and provisions) has decreased to C 2.25 crore

which represents a decline compared to the previous financial year.

This performance may appear to be under whelming as a headline

figure, however, it is important to delve deeper into the figures.

The profitability has declined largely on account of depreciation

on investments made in the business especially the technology

upgrade which will allow the bank to expand at a much quicker

pace in the future. Earnings before Interest on Borrowings, Tax,

Depreciation and Amortisation were 7.3% higher than prior year at

C 10.30 Crores for FY 2019-20.

The total income of the bank grew by 12.6% compared to prior

year and exceeded C 130 Crores for the first time in the bank’s

history. This was accompanied by a 5% growth in net interest

income. Net Interest Margin remained healthy at 4% albeit declined

compared to prior year which highlights the continued strength

of the core banking activities central to any bank. Staff expense

ratio experienced significant decline in the year and asset quality

remained strong with Gross NPA at 2.83% as at the end of the

financial year under review.

The technology upgrade has also led to a complete automation of

recognition of non-performing assets in the bank’s new CBS and a

change in accounting policy of the bank in recognising recoveries

in loan accounts. Therefore, the increase in Gross NPA in 2019-20 is

attributed to a one time change related to these factors and is not

expected to recur in the future under normal circumstances.

With the completion of large transformation projects which require

significant capital or revenue expenditure, the bank is confident

of an improved performance on EBITDA and Net profit metrics in

2020-21.

CAPITAL RAISING & CAPITAL ADEQUACY RATIO (CRAR)During the year under review, the Bank has issued 4,27,688 equity

shares of C 100 each aggregating to C 4.28 Crores. Post allotment of


aforesaid equity shares, the subscribed capital of the Bank stands at

C 61.61 crore comprising of 61,61,411 equity shares of C 100 each as

on March 31, 2020.

The Bank is well capitalized with a Capital Adequacy Ratio of 13.09%

as at March 31, 2020; of which Tier I Capital was C 77.43 crore and

Tier II Capital was C 11.93 crore. The significant strength of our capital

position provides the bank with adequate head room to cater to

any unforeseen challenges that may be experienced in 2020-21 due

to the deepening of the COVID-19 crisis.

DIVIDENDThe Bank has been profitable since inception and has a consistent

track record of rewarding its shareholders by way of dividends. Due

to the COVID-19 pandemic, the RBI has issued guidelines for all banks

not permitting them to declare dividends until 30 September 2020.

This has been done to ensure that banks remain well capitalised to

face the challenges in relation to the uncertainties arising from the

business environment.

TRANSFER TO RESERVESAs per the requirement of RBI Regulations and in accordance with

provisions of section 63 of the Multi States Co-Operative Societies

Act, 2002 & Bye Laws of the Bank, the Bank has transferred the

following amounts to various reserves during the Financial Year

ended March 31, 2020:

Amount transferred to Amount (R in Crore)Statutory Reserve 0.48

Investment Fluctuation Reserve –

Special Reserve u/s 36(1)(vii) of Income

Tax Act

–

Contingency Reserve 0.23

Provision on Standard Assets –

OPERATIONAL HIGHLIGHTSThe bank’s functions have continued to strengthen their resolve

for being ready to be a Small Finance Bank by building on the

significant work done over the last few years. The management

team has been strengthened with the addition of a Chief Risk Officer

who has brought added vigour to the bank’s risk management

framework. Shivalik remains committed to serving the needs of all

its key stakeholders in a sustainable risk managed way.

A major landmark in operational upgrade was the migration

of the Bank’s Core Banking Solution (CBS) to Finacle powered

by Infosys in April 2019. Finacle is an industry leading solution

which is preferred by banks in India and around the world and its

capabilities to integrate with a host of digital channels through

an open API framework offer endless possibilities on the future of

banking at Shivalik. In addition, the bank also migrated to Finacle’s

Digital Banking Suite by upgrading its mobile and internet banking

offerings. The quality of these services is at par with a number of

other leading banks in India with features such as biometric and

facial recognition logins for mobile banking and an exciting new

School Fee payments module in Internet Banking.

The bank has worked on automating other aspects of the business

as well including further upgrades to the bank’s loan origination

system with in built algorithms to provide credit sanctioning

outcomes for the front end teams. This has aided the branches in

being able to deliver an in-principle credit decision to borrowers

in minutes which would be confirmed post scrutiny of borrower

and collateral documentation. In addition, this has also been made

available on the bank’s website where customers can use the self

service option to check their loan eligibility in minutes.

On the risk management side, the bank has further strengthened

the risk ethos by instituting a Risk Management Committee at the

management level which meets regularly. It has representation

from the key functions of the bank. Information Security and IT

Risk Management are segregated units which have been working

tirelessly to upgrade the bank’s cyber security defences through

regular vulnerability assessments and implementation of a Network

Monitoring Tool.

The need for self improvement is a virtue that is built into the Shivalik

culture. As a result, learning and development along with employee

engagement activities hold a high priority within the organisation.

The bank launched an enhanced Learning Management System

in the year with a number of courses available in the online self

learning curriculum. We firmly believe that confidence to do well

stems from deep knowledge and these are essential virtues to be

able to service our customers.

As has been mentioned earlier, the start to the calendar year

2020 was a very pleasant one for all Shivalik employees. The joy of

receiving the in-principle approval from the RBI to transition into a

Small Finance Bank on 6 January 2020 had each one of us celebrating

this amazing milestone of being the first UCB in the country to

receive this approval. The management team with the help of the

various teams are working towards a successful transition and we

look forward to creating history again by becoming the first UCB

in the country to successfully transition into a Small Finance Bank.

INITIATIVES TAKEN BY VARIOUS DEPARTMENTSDuring the financial year under review, a list of the key achievements and initiatives of each department are shown below:

Admin - Assistance to Risk function in preparation of a business continuity plan document

- Biometric lock installation for gold loan storage cabinets to enhance security

- Creation of a centralized storage facility for important documents

- Streamlining of ATM cards purchase and reconciliation process

Compliance - In-principle approval from RBI for transition into a Small Finance Bank.

- Successful renewal of Foreign Exchange (AD - II) and corporate insurance agency license

- Application to RBI for approval of Memorandum of Association & Article of Association pursuant to in-principal

approval for transition to Small Finance Bank (SFB).

- Application to RBI for approval of the proposed Board of Directors of Shivalik Small Finance Bank pursuant to in-

principal approval for transition to SFB

Credit - Automation of a number of credit processes in the Core Banking Solution

- Implementation of online loan eligibility check on Bank’s website

- Comprehensive training and implementation of learning techniques for our credit personnel to ensure better

appraisals, decision making and improved compliance of RBI norms.

Digital Banking - Initiated the UPI 2.0 Issuer certification with NPCI

- Upgraded to a new Enterprise Fraud Risk Management (EFRM) solution which helps the bank to monitor high risk

transactions

- Implementation of 24x7 NEFT and RTGS

- Implementation of Dynamic Key Exchange (DKE) as a security enhancement measure for payment system

Human Resource Development

- Initiated linking of learning to performance management to increase focus learning and skill development

- Introduction of a new framework to drive e-learning

- Introduction of mandatory courses for employees on the e-learning platform as per RBI guidelines

- Introduction of document creation guidelines for all functions to ensure uniformity

- Extensive use of authoring tools to make interactive media content

Information Technology

- Launched a change advisory board (CAB) with representation from Management, Business and IT teams to

deliberate on any changes to the CBS, Digital Banking suite and m-ATM work flows

- Undertook UI/UX improvement on E-banking and M-banking including optimizing the user registration and login

to enhance customer experience

- Upgraded the AML (Anti-money laundering), Auto-recon (Automated reconciliation) and NACH solutions

- Completed the EMV certification for all ATMs

- Strengthened info-security controls and IT risk management with roll-out of the following:

• NAS storage setup for backups and archival

• Virtual LAN segregation isolating departments/groups of employees on a common network

• ATM network segregation

• Network monitoring tool to centrally monitor the complete network

• Advances Threat Protection (ATP) to ensure better security on emails for critical resources including C-suite and

HODs

• Upgrades to network access points at both HO in-line with CERT-IN advisories.


Insurance - Migrated all logins of insurance proposals through online lead generation platform

- Implemented two-wheeler insurance through BQR Code across all the branches

- Successfully launched Micro Care insurance policy, a dedicated insurance plan for micro segment customers

Internal Audit - Changes in the frequency of internal audit on the basis of risk perception

- Initiated concurrent audit of investment and forex functions

- Identification of potential challenges at early stages through changes in the frequency of head office internal audit

from annual to quarterly

Micro-Finance - Implemented centralized processing of loan applications in the microfinance function

- Enhanced customer service and connect through tele-calling and tele-verification of microfinance customers

Operations and Customer Service`

- Smooth transition to a new core banking platform and digital banking suite

- Successful launch of RuPay Platinum Debit Card

- Adoption of customer centric approach for resolution of complaints and requests in a timely manner

- Successfully migrated customer transactions to digital channels via regular communication through multiple

contact points

Treasury - Successfully applied for NDS-Call membership issued by RBI

- Initiated internal research and summary of important events to investment committee members

- Streamlined the investment portfolio management process of the bank with respect to prudential as well

regulatory limits monitoring

COMMITTEES OF THE BOARDThe Bank has the following Board level Committees which have

been established in compliance with the requirements of the

business and relevant provisions of applicable laws and statutes:

1. Audit Committee

2. Nomination and Human Resource Committee

3. Special Large Fraud Monitoring Committee

4. Board Loan and Share Committee

The details with respect to the composition, terms of reference,

number of meetings held, etc. of these Committees are given in the

report on Corporate Governance which forms part of the Annual

Report.

NUMBER OF MEETINGS OF THE BOARD AND COMMITTEESRegular meetings of the Board and its Committees are held

to discuss and decide on various business policies, strategies,

financial matters and other businesses. The schedule of the Board/

Committee meetings to be held in the forthcoming financial year is

circulated to the Directors in advance to enable them to plan their

schedule for effective participation in the meetings. Due to business

exigencies, the Board has also been approving several proposals by

circulation from time to time.

The Board met seven (6) times during the FY 2019-20 viz. on April 30,

2019, May 24, 2019, August 20, 2019, November 18, 2019, February

15, 2020 and March 27, 2020.

Additionally, several Committee meetings were held during the

year including Audit Committee, Nomination and Human Resource

Committee, Special Large Fraud Monitoring Committee and Board

Loan and Share Committee which met four (4), four (4), one (1) and

thirty (30) times respectively during the year. Detailed information

on the meetings of the Board and its Committees are included

in the Report on Corporate Governance, which forms part of the

Annual Report.

STATUTORY AUDITORDuring the financial year under review, the members of the Bank at

its 22nd Annual General Meeting held on September 15, 2019 have

approved appointment of M/s MRS & Co., Chartered Accountants

as Statutory Auditor of the Bank from conclusion of 22nd Annual

General Meeting till conclusion of 23rd Annual General meeting of

the Bank in accordance with the provisions of RBI Guidelines and

Section 70 of the Multi State Co-Operative Societies Act, 2002 &

Clause 63 of the bye-laws of the Bank.

The Report given by Statutory Auditors on the financial statements

of the Bank forms part of this Annual Report. There has been no

qualification, reservation, adverse remark or disclaimer given by the

Auditors in their Report. Also, no instance of fraud was reported by

the Auditors of the Bank.

WHISTLE BLOWER POLICY / VIGILANCE MECHANISMStrong Corporate Governance is an integral pillar of the way Shivalik

conducts business. The Bank has adopted an internal Code of Ethics

& Business Conduct, which lays down the principles and standards

that govern the actions of the Bank and its employees. Any actual or

potential violation of the Code, howsoever insignificant or perceived

as such, would be a matter of serious concern for the Bank. The role

of employees in pointing out such violations of the Code cannot be

undermined.

The Bank is committed to adhere to the highest standards of ethical,

moral and legal conduct of business operations. To maintain these

standards, the Bank encourages its employees who have concerns

about suspected misconduct to come forward and express these

concerns without fear of punishment or unfair treatment in line

with the stated Whistle Blower Policy.

During financial year under review, the Bank has not received any

complaints in respect of the aforesaid.

RELATED PARTY TRANSACTIONThere were no materially significant transactions with related

parties including promoters, directors, or relatives of the Directors

during the financial year under review which could lead to a

potential conflict with the interest between the Bank and these

parties. The details of the transactions with related parties, if any,

were duly placed before the Audit Committee of the Board from

time to time. There were no material individual transactions with

related parties, which were not in the ordinary course of business of

the Bank, nor were there any transactions with related parties, which

were not on arm’s length basis. Suitable disclosure as required by

the Accounting Standards (AS18) has been made in the notes to the

Financial Statements. The Board of Directors has formulated a policy

on materiality of Related Party Transactions.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013The Bank has formulated and adopted a Policy on Prevention of

Sexual Harassment at Workplace and takes all necessary measures

to ensure a harassment-free workplace and has instituted an Internal

Complaints Committee for redressal of complaints. The Bank

believes that all employees of the Bank including regular trainees

and those employed on contractual basis at workplace including

other individuals who are dealing with the Bank have a right to be

treated with dignity.

During financial year under review, the Bank has not received any

complaints in view of the aforesaid.

ACKNOWLEDGMENTThe Board of Directors would like to express their sincere gratitude

to the members and customers of the Bank for their confidence

and patronage, as well as to the Reserve Bank of India and other

regulatory authorities for their cooperation, support and guidance.

In addition, we express strong appreciation for the commitment

shown by the employees in supporting the Bank in its journey to

becoming a Small Finance Bank i.e. a Scheduled Commercial Bank.

For and on behalf of the Board of Directors

Sd/-

Date: 22 July, 2020 (Suveer Kumar Gupta)Place: Saharanpur MD & CEO


CORPORATEGOVERNANCE REPORT

1. PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE Corporate Governance is essentially a set of standards, systems,

and procedures aimed at effective, honest and transparent

management of a Bank within the applicable statutory and

regulatory structures. The Corporate Governance framework

at Shivalik Mercantile Co-operative Bank Limited (hereinafter

referred as “Shivalik Bank”) takes into account the relevant

statutory provisions of the Banking Regulations Act, 1949

(AACS), Multi State Co-operative Societies Act, 2002 and

Reserve Bank of India (RBI) directives and guidelines issued

from time to time.

Shivalik Bank considers corporate governance as a cornerstone

of conducting business in an ethical and responsible manner

which is fair to all the stakeholder groups. The following

principles are embedded in our governance framework:

• Strategic and critical review of the past, current and future

performance of Shivalik Bank by the Board of Directors and

its sub-committees.

• Transparent approach to decision making by Executive

Management and Board.

• A sound system of internal controls to mitigate and monitor

internal and external risks.

• Accuracy and transparency in disclosures to all stakeholders

for all material information.

• Compliance of laws, rules and regulations in true letter and

spirit.

2. BOARD OF DIRECTORS2.1 Composition

The Bank is managed by the Board of Directors, which

formulates strategies, policies and reviews its performance

periodically. The composition and election of the Board of

Shivalik Bank is governed by the Multi-State Co-operative

Societies Act, 2002 and the Byelaws of the Bank. As per the

Byelaws of the Bank, the maximum strength of the Board of

Directors shall be twelve directors including two Co-opted

directors. The Board of Directors are elected by the members

of the Bank and tenure of Board of Directors is five years from

the date of their appointment. The election to the Board

of Directors for tenure 2016-2021 was held on February 14,

2016 under the supervision of Mr Anil Kumar, who had been

appointed as a Returning Officer to conduct the election.

As on March 31, 2020, the Board of Directors comprised 10

members in addition to MD & CEO of the Bank. The Board

includes eminent persons including people with backgrounds

in Accountancy, Audit, Medicine, Law, Taxation and Banking.

The MD & CEO is the ex-officio member of all the Committees

of the Board.

Responsibility for day-to-day management of the Bank is

entrusted with senior management personnel under the

leadership of MD & CEO who operates under the guidance and

control of the Board. The Board is responsible for reviewing

the performance of the bank including steps taken by senior

management and approving future strategic vision with the

aim of enhancing stakeholder value.

2.2 Chairman of the Board

The Board of Directors unanimously elected Mr. Yashvir Kumar

Gupta & Shri Shiv Puran Gulati as the Chairman & Vice-Chairman

respectively of the Board on February 14, 2016.

Mr. Yashvir Kumar Gupta, a graduate in Mechanical Engineering

from IIT – BHU, is the Chairman of the Board and founder

member of Shivalik Bank, and has been at the helm of Shivalik

Bank since 1998 turning what was then a small start-up bank

into close to a C 2000 Crore business with a presence in three

states having 31 branches currently. He has a rich experience

of close to five decades in the field of trading, agri-business

and banking and worked at Hindustan Aeronautics Limited

(HAL) prior to taking on entrepreneurial ventures. Troubled

by the poor quality of customer service in nationalized banks

at that time, he set up the Shivalik Mercantile Co-operative

Bank Limited in 1998 to provide a rich and delightful banking

experience to customers.

2.3 Roles & Responsibilities of Board of Directors The primary responsibility for good corporate governance of

the Bank rests with its Board of Directors. The Board has been

entrusted by the shareholders with the responsibility of overall

direction, supervision and control of the Bank. The Board’s fiduciary

responsibility to the shareholders requires that the Board should

act in their shared corporate interest, in good faith, and with due

diligence. At the same time, the Board should recognise and take

into account the interests of other stakeholders in the Bank, such

as depositors, other creditors, employees, the government, and

the community in which it functions.

In addition to the Multi State Co-operative Societies Act, 2002 read

with MSCS Rules, 2002 and Byelaws of the Bank, Master Circular on

Board of Directors for Urban Co-operative Banks (UCBs) issued by

Reserve Bank of India is also applicable to the Board of Directors of

the Bank mutatis mutandis.

2.4 Board Meetings During financial year 2019-20, The Board met six (6) times viz.

on April 30, 2019, May 24, 2019, August 20, 2019, November 18,

2019, February 15, 2020 and March 27, 2020.

i. The Bank being a Multi-State Co-operative Society, all

Directors are elected by members of the Bank in General

Meeting amongst themselves except co-opted Directors.

ii. Except Mr. Yashvir Kumar Gupta, Chairman, Dr. Sanjeev

Mittal, Director and Mr. Suveer Kumar Gupta, MD & CEO of

the Bank, no other Directors are related to each other.

3. BOARD COMMITTEES The Board has constituted various Committees of Directors to take informed decisions in the best interest of the Bank. These Committees

monitor the activities as per the scope defined in their Charter and terms of reference. Detail regarding the same are hereunder:

3.1 Audit Committee

Brief Terms of Reference /

Roles and responsibilities

1. To provide direction and oversee operation of Audit function of the Bank.

2. To oversee Bank’s financial reporting process and disclosure of financial information to ensure that

the financial statement is correct, sufficient and credible.

3. To review internal and concurrent audit system of the Bank with special emphasis on its quality and

effectiveness and status of compliance.

4. To recommend appointment & removal of external/Internal auditors.

5. To review related party transaction.

Composition The Committee is headed by Mr. Yashvir Kumar Gupta, Chairman of the Bank. All members of the

Committee have requisite financial and management experience including a Chartered Accountant.

Chief Risk Officer and Audit Controller of the Bank are permanent invitees. Other members of

management and representatives of statutory auditors are also invited to attend and participate in the

meetings, whenever required. Members of Audit Committee of the Bank during financial year under

review are:

1. Mr. Yashvir Kumar Gupta, Chairman

2. Mr. Vijay Kumar Dhingra, Member

3. Mr. Sarvesh Singhal, Member

4. Mr. Sanjay Gupta, Member

5. Mr. Suveer Kumar Gupta, Member

Meetings During financial year under review, four (4) meetings of Audit Committee of Board were held.


3.2 Board Loan & Share Committee



1. To ensure the compliance of Loan Policy approved by the Board;

2. To consider, approve and sanction all the loan proposals;

3. To form different committees of bank functionaries and delegate loan sanctioning powers to them;

4. To consider and approve the waiver and settlement cases of all kind;

5. To approve applications for new membership (Regular and Nominal) for both borrowers and non-

borrowers;

6. To allot shares to new as well as existing members;

7. To approve share refunds and transfers.

Composition Members of Board Loan and Share Committee of the Board during financial year under review are:

1. Shri Yashvir Kumar Gupta, Chairman

2. Shri Shiv Puran Gulati, Vice Chairman

3. Shri Sarvesh Singhal, Member

4. Shri Suveer Kumar Gupta, Member

Credit Head of the Bank is Permanent Invitee to the Committee.

Meetings During financial year under review Thirty (30) meetings of Board Loan and Share Committee of Board

were held.

3.3 Special committee of the Board for monitoring Large Value frauds



To monitor large value fraud cases with a direct financial impact of Rs. 1 Crore and above including

detection procedures, reporting to regulatory and enforcement agencies and action against the

perpetrators of the frauds at the highest level.

Composition Members of the Committee during financial year under review are:


2. Mr. S P Gulati, Member

3. Mr. Sudhakar Agarwal, Member

4. Mr. Sanjay Gupta, Member



Meetings During financial year under review one (1) meeting of Special committee of the Board for monitoring

Large Value frauds was held. (No large value frauds were reported during the year).

3.4 Nomination & Human Resource Committee



To look into the matter of policies related to Human Resource Development. The terms of reference

include consideration of all issues/areas concerning Human Resource Planning & Management, all HR

Policies and initiatives.

Composition Members of Nomination & Human Resource Committee of the Board during financial year under review

are:


2. Mr. Vijay Kumar Dhingra, Member



Chief Operating Officer and Chief Human Resources Officer are Permanent Invitees of this Committee.

Meetings During financial year under review four (4) meetings of Nomination & Human Resource Committee were

held.

4. OTHER FUNCTIONAL COMMITTEES OF THE BANK Apart from the above, the Board has delegated its power to MD & CEO of the Bank to constitute such Functional Committees with

specific terms of reference as it may deem fit from time to time. These include the following:

1) Executive Committee

2) Asset Liability Committee

3) Investment Committee

4) KYC & AML Committee

5) Purchase and Expenditure Committee

6) IT Vision Committee

7) Risk Management Committee

Details regarding members along with their designation, frequency of meeting, No. of meetings held during financial year under review

are presented hereunder:

Sr. No.

Name of Executive Committee Name of the members along with Designation

Frequency of their meeting

No. of Meetings held during FY 2019-20

1. Executive Committee Mr. Suveer Kumar Gupta, Chairman

Mr. Harsh Mittal, Member

Mr. Gaurav Mittal, Member

Mr. Navleen Kundra, Member

Monthly or as and

when required

Fifteen (15)

2. Asset Liability Committee Mr. Suveer Kumar Gupta, Chairman




Mr. Ravi Ratnaker Singh, Member

Mr. Gaurav Kumar Gupta Member

Mr. Gyanendra Bajpai, Member

Mr. Pradeep Kumar Shukla, Member

Mr. Ankit Khare, Member

Mr. Harish Bhatia, Member

Monthly or as and

when required

Thirteen (13)

3. Investment Committee Mr. Suveer Kumar Gupta, Chairman




Mr. Harish Bhatia, Member

Mr. Joney Roy, Member


Monthly or as and

when required

Thirteen (13)

4. KYC & AML Committee Mr. Suveer Kumar Gupta, Chairman

Mr. Harsh Mittal, Member,



Mr. Ravi Ratnakar Singh, Member


Quarterly or as

and when

required

Four (4)


Sr. No.

Name of Executive Committee Name of the members along with Designation

Frequency of their meeting

No. of Meetings held during FY 2019-20

5 Purchase and Expenditure

Committee

Mr. Suveer Kumar Gupta, Chairman



Mr. Gaurav Kumar Gupta, Member


Mr. Vishal Kaushik, Member

As and when

required

Twenty-Nine (29)

6 IT Vision Committee Mr. Suveer Kumar Gupta, Chairman





Quarterly or as

and when

required

Four (4)

7 Risk Management Committee Mr. Suveer Kumar Gupta, Chairman




Mr. Ravi Ratnaker Singh, Member

Mr. Gyanendra Bajpai, Member



Mr. Praveen Kumar Gupta, Member

Mr. Rakesh Kumar Soi, Member

Ms. Smriti Baliga, Member

Once in two

month or as and

when required

Three (3)

(initiated with effect

from 25 September,

2019)

5. GENERAL BODY MEETINGS OF THE BANK Details regarding meeting of General Body of the Bank held during last three (3) financial year are hereunder:

Year Particulars of Meeting

Date, Time & Place Number of Special Resolutions

passed, if any

Nature of Special Resolutions

2017-18 Special General

Meeting

Date: July 9, 2017

Time: 10:00 am

Place: Regency Garden,

Delhi Road, Saharanpur, UP

One (1) i. Amendments to Byelaws of the Bank

20th Annual

General Meeting

Date: September 17, 2017

Time: 10:00 am

Place: Hotel Royal Residency,

Ambala Road, Saharanpur, UP

Three (3) i. Amendments to two (2) clauses of Byelaws

of the Bank.

ii. Conversion to a Commercial Bank as per

the application submitted to RBI.

Year Particulars of Meeting

Date, Time & Place Number of Special Resolutions

passed, if any

Nature of Special Resolutions

2018-19 21st Annual

General Meeting


Time: 11:00 am



One (1) i. Amendments to Byelaws of the Bank

Special General

Meeting

Date: October 23, 2018

Time: 11:00 am

Place: Hotel Clark International,

Ambedkar Chowk,

Dehradun Road,

Saharanpur, UP

Three (3) i. Approval for transition to Small Finance

Bank (SFB) under guidelines of Reserve

Bank of India

ii. Identification and approval of proposed

promoters of SFB.

iii. Approval for obtaining NOC from Central

Registrar of Co-operative Societies

2019-20 22nd Annual

General Meeting


Time: 11:00 am



Nil Nil

Special General

Meeting

Date: March 15, 2020

Time: 11:00 am



Five (5) i. Amendments to two (2) clauses of Byelaws

of the Bank.

ii. Approval for transfer of Contingency

Reserve to Bad and Doubtful Debt Reserve

iii. Approval for delegation of authority for

all things necessary for execution of the

voluntary transition to SFB

iv. Approval for transfer of shareholders of the

Bank to Public Limited Banking Company

‘Shivalik Small Finance Bank Limited’

6. DIRECTORS’ REMUNERATION Shivalik Bank being a Co-operative Bank does not remunerate

its Directors. However, expenses related to travelling and

lodging are borne by the Bank for attending Board/Committee

meetings. MD & CEO is employee of the bank and for rendering

his services to the bank, the remuneration paid during FY

ending March 31, 2020 was C 34,15,980/-.

7. RELATED PARTY TRANSACTION There were no materially significant transactions with related

parties including promoters, directors, or relatives of the

Directors during the financial year under review which could

lead to a potential conflict with the interest between the Bank

and these parties. The details of the transactions with related

parties, if any, were duly placed before the Audit Committee of

the Board from time to time. There were no material individual

transactions with related parties, which were not in the ordinary

course of business of the Bank, nor were there any transactions

with related parties, which were not on arm’s length basis.

Suitable disclosure as required by the Accounting Standards

(AS18) has been made in the notes to the Financial Statements.

The Board of Directors has formulated a policy on materiality of

Related Party Transactions.

8. WHISTLE BLOWER POLICY / VIGIL MECHANISM Strong Corporate Governance is an integral pillar of the way


Shivalik conducts business. The Bank has adopted an internal

Code of Ethics & Business Conduct, which lays down the

principles and standards that govern the actions of the Bank

and its employees. Any actual or potential violation of the

Code, howsoever insignificant or perceived as such, would

be a matter of serious concern for the Bank. The role of

employees in pointing out such violations of the Code cannot

be undermined.

The Bank is committed to adhere to the highest standards

of ethical, moral and legal conduct of business operations.

To maintain these standards, the Bank encourages its

employees who have concerns about suspected misconduct

to come forward and express these concerns without fear of

punishment or unfair treatment in line with the stated Whistle

Blower Policy.

During financial year under review, the Bank has not received

any complaints in respect of the aforesaid.

9. CODE OF CONDUCT The Board has adopted the Code of Conduct & Ethics for all

the Employees of the Bank. Code of Conduct and Ethics is a

statement of the Bank’s commitment to integrity and the

highest standards of ethical practices. It defines the standards

of conduct that is expected from all employees in order that the

right decisions are taken in performing roles and responsibilities

across various functions in the Bank. The Code is intended to be

the charter for day-to-day work to enable employees to make

the right decisions and, therefore, serves to:

i. underline the fundamental commitment to compliance

with regulatory guidelines and laws of the land.

ii. set forth basic parameters of ethical behavior.

iii. establish a system for detection and reporting of known or

suspected ethical or violations of regulation.

For and on behalf of the Board of Directors

Sd/-

Date: 22 July 2020 (Suveer Kumar Gupta)Place: Saharanpur MD & CEO

FINANCIAL SECTIONStatutory Audit Report ................................................................................................44

Balance Sheet ...................................................................................................................46

Statement of Profit & Loss .........................................................................................47

Cash Flow Statement ..................................................................................................49

Schedules to Balance Sheet .....................................................................................51

Significant Accounting Policies .............................................................................56

Appropriation of Profit ................................................................................................69


Independent Auditor’s ReportTo the Members,

Shivalik Mercantile Co-operative Bank Ltd.

Saharanpur.

Report on the Financial Statements1. We have audited the accompanying financial statements

of M/s Shivalik Mercantile Co-operative Bank Ltd (PAN-

AAAAS3251Q) having Registered office at, Ansari Road,

Saharanpur -247001, which comprise the Balance Sheet as

at 31 March 2020, and the Profit and Loss Account, and the

Cash Flow Statement for the year then ended as on date, and

a summary of significant accounting policies, disclosures and

notes on accounts. Out of 31 Branches, the returns of Head

Office and its departments and [11] branches audited by us as

per clause 6 of this report and rest of [20] Branches not audited

by us but verified by us from centralized records maintained

by Head Office, are incorporated in these financial statements.

All the Branches are covered under Concurrent/ Internal Audit

department of the Bank. The branches and other departments

audited by us accounts for [60.84%] percentage of Advances,

[74.75%] percentage of deposits, [68.01%] percentage of

Income and [73.97%] percentage of Expenses.

Management’s Responsibility for the Financial Statements2. Management is responsible for the preparation of these

financial statements that give a true and fair view of the

financial position, financial performance and cash flows of the

Bank in accordance with provisions of the Banking Regulations

Act, 1949, the guidelines issued by the Reserve Bank of India

and the guidelines issued by the National Bank for Agricultural

and Rural Development, the Central Registrar of Cooperative

Societies, the Multi State Co-operative Societies Act, 2002, the

Multi State Co-operative Societies Rules, 2002 (as applicable)

and accounting principles generally accepted in India so far

as applicable to Banks. This responsibility includes the design,

implementation and maintenance of internal controls relevant

to the preparation and presentation of the financial statements

that are free from material misstatement, whether due to fraud

or error.

Auditor’s Responsibility3. Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with the Standards on Auditing issued by the

Institute of Chartered Accountants of India. Those Standards

require that we comply with ethical requirements and plan

and perform the audit to obtain reasonable assurance about

whether the financial statements are free from material

misstatement.

4. An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s

judgement, including the assessment of the risk of material

misstatement of the financial statements, whether due to fraud

or error. In making those risk assessments, the auditor considers

internal control relevant to the Bank’s preparation and fair

presentation of the financial statements in order to design

audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the

effectiveness of the Bank’s internal control. An audit also

includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of

the financial statements.

5. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our audit

opinion.

Other Matters Paragraph6. In view of the Government imposed lockdown due to Covid-19,

we have not been able to examine the original books of

account and supporting documents including but not limited

to the documents relating to advances, cash, security etc. The

management has provided us with the scanned copies of the

relevant documents for the purpose our audit which we asked

for on test check basis.

Our opinion is not modified in respect of this matter.

Opinion7. In our opinion and to the best of our information and

according to the explanations given to us, the aforesaid

financial statements together with the Notes thereon give the

information required by the Banking Regulation Act, 1949, the

Multi State Co-operative Societies Act, 2002 and the Multi State

Co-operative Societies Rules, 2002 and the guidelines issued by

the National Bank for Agricultural and Rural Development (as

applicable) and guidelines issued by Reserve Bank of India and

the Central Registrar of Cooperative Societies, in the manner so

required and give a true and fair view in conformity with the

accounting principles generally accepted in India:

(a) In the case of the Balance Sheet, of state of affairs of the Bank as

at 31st March 2020;

(b) In the case of the Profit and Loss Account, of the profit for the

year ended on that date; and

(c) In the case of the Cash Flow Statement, of the cash flows for

the year ended on that date.

Report on Other Legal & Regulatory Requirements8. The Balance Sheet and the Profit and Loss Account have

been drawn up in Forms “A” and “B” respectively of the Third

Schedule to the Banking Regulation Act, 1949 and the Multi

State Co-operative Societies Act, 2002, the Multi State Co-

operative Societies Rules, 2002.

9. As required by Section 73(4) of the Multi State Co-operative

Societies Act, 2002, we report that:

a) We have obtained all the information and explanations,

which to the best of our knowledge and belief were

necessary for the purpose of our audit and have found to

be satisfactory;

b) In our opinion, proper books of account as required by law

have been kept by the Bank so far as it appears from our

examination of those books and proper returns adequate

for the purposes of our audit have been received from the

branches/offices;

c) The transactions of the Bank which came to our notice

have been within the powers of the bank;

d) The Balance Sheet and the Profit and Loss Account dealt

with by this report are in agreement with the books of

account and the returns;

e) The reports on the accounts of the branches/offices

audited by the branch auditors have been forwarded to

us and have been properly dealt with by us in preparing

this Report - Not applicable in our case as the Bank has

not appointed any separate Statutory Auditor for Branch

Audits. We have reviewed the accounts of all branches as

well as Head office.

f) The accounting standards adopted by the Bank are

consistent with those laid down by accounting principles

generally accepted in India so far as applicable to Banks;

g) In our opinion and according to information and

explanations given to us, we have not noticed any

material impropriety or irregularity in the expenditure or

in the realization of money due to the bank.

10. As per the information and explanations given to us and based

on our examination of the books of account and other records,

we have not come across material instances which need to

be reported under Rule 27(3) of the Multi State Cooperative

Societies Rules, 2002.

Audit Memorandum - NIL

For M R S & CO.Chartered Accountants

Firm Registration Number:- 016610N

CA Ram Kumar DhimanPartner

Place: Ghaziabad Membership No. 096852

Date: 21 July, 2020 UDIN: 20096852AAAAAI4305


Standalone Balance Sheet as at 31 March, 2020

(Amount in C)

Particulars ScheduleCurrent Year 31.03.2020

Previous Year 31.03.2019

Capital & Liabilities

(1) Capital 1 61,61,41,100.00 57,33,72,300.00

(2) Reserve Fund & Other Reserves 2 17,08,00,900.50 21,68,93,301.00

(3) Deposits & Other Accounts 3 11,39,81,64,312.79 10,51,19,96,779.73

(4) Borrowings – 7,69,00,000.00 7,82,00,000.00

(5) Bills for Collection being Bills Receivable (as per contra) – – –

(6) Branch Adjustments – – –

(7) Overdue Interest Reserves (On NPA) – 8,71,35,982.05 5,11,16,808.15

(8) Interest Payable (On term deposits) – – 11,07,282.51

(9) Other Liabilities & Provisions 4 18,13,15,916.41 13,34,35,561.68

(10)Profit & Loss 5 2,22,15,901.41 4,75,94,588.24

Grand Total 12,55,26,74,113.16 11,61,37,16,621.31

Contingent Liabilities 12 2,53,91,139.00 2,92,26,202.00

Property & Assets

(1) Cash In Hand & Balance with RBI – 24,63,02,376.90 18,98,49,430.36

(2) Balances with Other Banks 6 1,67,71,94,512.17 93,80,55,704.61

(3) Money at Call & Short Notice – 12,00,00,000.00 24,00,00,000.00

(4) Investments 7 2,62,81,66,305.00 2,46,29,81,363.00

(5) Advances 8 7,18,59,87,945.51 7,15,23,51,768.44

(6) Interest Receivable 9 20,71,55,129.68 13,38,69,054.46

Of which Overdue (On NPA) 8,71,35,982.05 5,11,16,808.15

(7) Bills Receivable being Bills for Collection (as per contra) – – –

(8) Fixed Assets Less Depreciation 10 31,97,17,472.76 32,16,76,052.51

(9) Other Assets 11 16,81,50,371.14 17,49,33,247.93

Grand Total 12,55,26,74,113.16 11,61,37,16,621.31

As per our report of even date attached

For M R S & Co.Chartered Accountants Suveer Kumar Gupta Sarvesh Singhal(Firm Regn. No. 016610N) MD & CEO Director

CA Ram Kumar Dhiman Sudhakar Agarwal Shiv Puran Gulati Yashvir Kumar GuptaPartner (M. No. 096852) Director Vice Chairman Chairman

Saharanpur: 21st July, 2020

Profit and Loss Account for the year ended 31 March, 2020

(Amount in C)



Expenditure(1) Interest on Deposits, Borrowings etc.

i) Interest on Deposits 70,92,00,278.96 60,99,08,628.53

ii) Interest on Borrowings 82,79,639.23 40,31,629.00

Total 71,74,79,918.19 61,39,40,257.53

(2) Salaries, Allowances, Provident Fund, Bonus & Gratuity etc. 25,52,83,725.34 24,08,18,744.10

(3) Rent, Taxes, Insurance, Lighting etc.

i) Building Rent 4,38,51,388.88 4,40,83,775.40

ii) Taxes 4,12,808.00 3,27,340.00

iii) Insurance 1,69,62,628.57 1,55,10,955.95

iv) Lighting 1,22,55,687.12 1,05,62,407.85

Total 7,34,82,512.57 7,04,84,479.20

(4) Law Charges 35,53,511.03 90,550.00

(5) Postage and Telephone Charges

i) Postage 12,51,264.85 18,98,828.45

ii) Telephone 4,73,299.66 6,22,551.74

iii) Computer Networking, Connectivity & Hostage 2,84,89,277.05 2,31,45,325.30

Total 3,02,13,841.56 2,56,66,705.49

(6) Audit & Consultancy Fees 5,11,00,231.44 4,38,70,825.85

(7) Depreciation and Repairs

i) Depreciation 5,85,42,095.37 3,00,07,780.00

ii) Written Off/ Impaired Assets 6,76,242.65 42.67

iii) Repairs 1,65,56,292.17 1,40,21,504.60

Total 7,57,74,630.19 4,40,29,327.27

(8) Stationery, Printing and Advertisement

i) Printing & Stationery 48,23,779.47 44,46,521.21

ii) Advertisement 28,83,104.34 31,18,006.80

Total 77,06,883.81 75,64,528.01

(9) Other Expenditure

i) Subscription 1,10,66,609.33 1,13,49,628.37

ii) AGM & Conference 6,07,325.40 6,65,583.80

iii) Security 92,22,925.16 84,22,599.20

iv) Business Promotion 9,25,453.40 9,00,119.37

v) Staff Welfare 56,16,926.79 52,46,990.31

vi) Travel & Transport 1,23,76,289.47 1,59,58,152.46

vii) Commission on Daily Deposit/DSA 19,66,523.07 50,64,105.68

viii) Banking Correspondent Expenditure 7,24,346.53 13,62,382.50

ix) Charges Paid to Other Banks & NPCI 19,78,403.74 6,20,379.38

x) Amortization On Investments 41,10,691.00 51,01,909.00

xi) Interest & Penalties – 454.00

xii) Provision on Standard Assets – 39,73,679.00

xiii) Miscellaneous Expenses 22,22,604.59 16,29,382.41

Total 5,08,18,098.48 6,02,95,365.48


(Amount in C)



(10) Loss from Sale of Non-Banking Assets 38,07,184.14 1,90,234.00 (11) Provisions for Current Year

i) Provision for Bad & Doubtful Debts (NPA) 1,13,78,316.00 51,00,000.00 ii) Special Reserve u/s 36(1)(Viii) of Income Tax Act (1,18,78,316.00) (50,00,000.00)iii) Provision for Current Income Tax 1,10,03,219.00 1,90,60,988.00 iv) Provision for Deferred Tax (14,18,605.00) (4,45,787.00)v) Provision for IDR – (83,70,369.00)

Total 90,84,614.00 1,03,44,832.00 (12) Prior Period Adjustments

I) Prior Period Expenses (7,82,444.10) (7,67,556.99)Total (7,82,444.10) (7,67,556.99)

(13) Balance of Profit 2,25,30,726.17 3,84,88,157.28 Grand Total 1,30,00,53,432.82 1,15,50,16,449.22 Explanatory Note:Contingent Prov. against Depreciation in Investments – 86,20,702.00

Income(1) Interest & Discount

i) Interest on Loans & Advances 86,71,28,911.27 79,20,24,126.19 ii) Interest on Investments 30,35,86,346.05 25,05,86,063.15 iii) Income on Investment in Mutual Funds 23,70,149.42 65,59,883.11

Total 1,17,30,85,406.74 1,04,91,70,072.45 (2) Commission, Exchange & Brokerage 48,14,794.33 41,40,946.68 (3) Profit from Sale of Non-Banking Assets 2,72,610.03 2,98,595.00 (4) Profit on Sale of Securities 2,20,47,066.00 1,01,24,818.00 (5) Other Receipts

i) Loan Processing Charges 1,11,65,962.73 1,80,34,175.11 ii) Incidental Charges 3,21,30,280.44 1,57,47,731.78 iii) Locker Rent 21,83,828.14 36,89,163.67 iv) Bad Debts Recovered 2,62,913.34 –v) Commission from Insurance Business 1,45,16,206.00 1,50,57,016.58 vi) Miscellaneous Income 3,95,74,365.07 3,87,53,929.95

TOTAL 9,98,33,555.72 9,12,82,017.09 Grand Total 1,30,00,53,432.82 1,15,50,16,449.22 Explanatory Note:Transferred from Investment Fluctuation Reserve – 86,20,702.00





Profit and Loss Account for the year ended 31 March, 2020

(Amount in C)

Particulars Current Year 31.03.2020 Previous Year 31.03.2019

A Cash Flow From Operating Activity

Net Profit after tax 225.31 384.88

Add (Expense side items)

Depreciation 585.42 300.08

Amortisaton on Investment 41.11 51.02

Provision for Income Tax 110.03 190.61

Provision for Deferred Tax (14.19) (4.46)

Provision for BDDR 113.78 51.00

Provision on Standard Assets – 39.74

Reserve against Profit u/s 36 (118.78) (50.00)

Provisions & Contingencies (AFS/HFT) 79.06 (83.70)

Loss from sale of Non-banking Assets 38.07 1.90

Prior Period Adjustment (7.82) 826.68 (7.68) 488.51

Less (Income side items)

Profit on Sale of Investments (220.47) (101.25)

Profit on Sale of Non-banking Assets (2.73) (223.20) (2.99) (104.23)

Adjustment for change in Assets: (Increase)/Decrease

Loan & Advances (336.36) (10,362.42)

Add: Loans written off during the year – (222.44)

OTS done during the year (336.36) (13.63) (10,598.49)

Investments (1,651.85) (1,845.22)

Balances in Fixed Deposits (7,695.90) (1,394.10)

Add: Amortization on Investments (41.11) (9,388.86) (51.02) (3,290.34)

Income Tax Paid (211.90) (294.84)

Add: Refund/ Interest on refund (15.68) (227.58) (10.69) (305.53)

Interest Receivable (372.67) 6.31

Other Assets (15.11) (387.78) (216.65) (210.33)

Adjustment for change in Liabilities: Increase/(Decrease)

Deposit 8,861.68 9,781.04

Borrowing (13.00) 782.00

Other Liabilities 55.56 (212.22)

Interest Payable (11.07) 8,893.17 1.06 10,351.87

Net Cash Generated from operations activity (618.62) (3,283.67)

B Cash Flow from Investing Activity

Purchase of Fixed Assets (565.84) (1,340.03)

Profit on sale of non banking assets 2.73 2.99

Loss on Sale of Fixed Assets (38.07) (1.90)

Profit on Sale of Investment 220.47 (380.71) 101.25 (1,237.70)

Net Cash Flow from Investing Activity (380.71) (1,237.70)

Cash Flow Statement for the year ended 31 March, 2020


(Amount in C)

Particulars Current Year 31.03.2020 Previous Year 31.03.2019

C Cash Flow from Financing Activity

Increase/(Decrease) in share capital 427.69 1,163.90

Education Fund Paid (3.85) (3.16)

Dividend paid (incl. dividend of past years) (364.48) 59.36 (376.03) 784.70

Net Cash Flow from Financing Activity 59.36 784.70

D Net Increase/Decrease in Cash and Cash Equivalent (939.98) (3,736.66)

E Cash and Cash Equivalent at the beginning of the year 6,522.95 10,259.61

F Cash and Cash Equivalent at the end of the year 5,582.97 6,522.95

Break-up of Cash and Cash Equivalents

Cash in hand and Balance with RBI 2,463.02 1,898.49

Balance with Bank in Current Account 1,919.95 2,224.46

Money at Call and Short Notice 1,200.00 2,400.00

Total 5,582.97 6,522.95

Cash Flow Statement for the year ended 31 March, 2020





SCHEDULE 1: CAPITAL (Amount in C)

ParticularsCurrent Year 31.03.2020


i) Authorized Capital 1,00,00,00,000.00 1,00,00,00,000.00

1,00,00,000 shares of C100/- each

ii) Subscribed Capital 61,61,41,100.00 57,33,72,300.00

61,61,411 shares of C100/- each

(Previous Year 57,33,723 Shares of C100/- each)

iii) Amount Called Up 61,61,41,100.00 57,33,72,300.00

On 61,61,411 shares at C100/- each

Of (iii) above, held by

(a) Individuals & Others 61,61,41,100.00 57,33,72,300.00

(b) Co-operative institutions – –

(c) Government – –

SCHEDULE 2: RESERVE FUND & OTHER RESERVES (Amount in C)



i) Statutory Reserve 13,37,29,827.50 12,89,77,641.00

ii) Investment Fluctuation Reserve 1,00,00,000.00 1,00,00,000.00

iii) Other Funds and Reserves

(a) Provision on Standard Assets 2,48,18,000.00 2,48,18,000.00

(b) Special Reserve u/s 36(1)(VIII) of I.T. Act – 1,18,78,316.00

(c) Contingency Reserve 22,53,073.00 4,12,19,344.00

Total 2,70,71,073.00 7,79,15,660.00

Grand Total 17,08,00,900.50 21,68,93,301.00

SCHEDULE 3: DEPOSIT & OTHER ACCOUNTS (Amount in C)



i) Fixed Deposits

a) Individuals & Others 8,20,50,88,369.48 7,15,10,02,613.61

b) Central Co-operative Banks – –

c) Other Societies – –

Total 8,20,50,88,369.48 7,15,10,02,613.61

ii) Savings Bank Deposit

a) Individuals & Others 2,62,68,26,814.13 2,78,39,86,939.60



Total 2,62,68,26,814.13 2,78,39,86,939.60

iii) Current Deposits

a) Individuals & Others 56,62,49,129.18 57,70,07,226.52



Total 56,62,49,129.18 57,70,07,226.52

iv) Money at Call and Short Notice – –

Grand Total 11,39,81,64,312.79 10,51,19,96,779.73

Schedule to Balance Sheet as at 31 March, 2020


SCHEDULE 4: OTHER LIABILITIES & PROVISIONS (Amount in C)



i) Bills Payable (DDs/POs issued but not yet presented for payment) 3,49,85,907.14 1,99,98,714.35

ii) Unclaimed Dividends 10,03,692.50 12,77,894.50

iii) Sundries 3,07,79,481.90 3,85,73,410.89

iv) Provision for Income Tax 1,10,03,219.00 1,90,60,988.00

v) Deferred Tax Liability 84,21,879.00 99,37,111.00

vi) Tax Deducted at Source 1,16,06,843.09 1,10,92,171.76

viii) Provision for Audit Fees 3,81,500.00 3,81,500.00

ix) Provision for Bad & Doubtful Debts (NPA) 8,11,95,586.78 3,10,16,389.18

x) Paid-up Capital (Collection Account) of Erstwhile Bhoj Nagrik Sahakari Bank Ltd., Dhar, &

Erstwhile Malwa Bank, Indore

17,12,500.00 17,12,500.00

xi) Contingent Prov. against Depreciation in Investments (IDR) – –

xii) Co-operative Education Fund 2,25,307.00 3,84,882.00

Grand Total 18,13,15,916.41 13,34,35,561.68

SCHEDULE 5: PROFIT & LOSS (Amount in C)



i) Profit as per Last Balance-Sheet 4,75,94,588.24 5,06,13,813.96

ii) Less: Appropriations of Profit for Last Year Dividend to Shareholders (3,67,07,864.00) (3,62,72,348.00)

Total (3,67,07,864.00) (3,62,72,348.00)

iii) Adjustments from Retained Profit

Add: Amount of IFR taken back to P&L – 86,20,702.00

Less: Adjustment of MTM Loss on Shifting of GSEC (30,90,487.00) –

Total (30,90,487.00) 86,20,702.00

iv) Add: Profit of the year B/f from P&L A/c 2,25,30,726.17 3,84,88,157.28

Less: Proposed Appropriations

Statutory Reserve (56,32,682.00) (96,22,039.00)

Co-operative Education Fund (2,25,307.00) (3,84,882.00)

Contingency Reserve (22,53,073.00) (38,48,816.00)

Total 1,44,19,664.17 2,46,32,420.28

Grand Total 2,22,15,901.41 4,75,94,588.24


SCHEDULE 6: BALANCES WITH OTHER BANKS (Amount in C)

Particulars Current Year

31.03.2020 Previous Year

31.03.2019

i) Current Deposits

a) District Co-operative Bank Ltd 7,60,78,086.24 3,31,71,185.69

b) SBI & Subsidiary Banks 3,46,85,782.28 2,32,18,045.94

c) Other Public Sector Banks 6,65,88,345.28 16,49,10,881.00

d) Other Scheduled Banks 1,46,42,298.37 11,45,935.98

Total 19,19,94,512.17 22,24,46,048.61

ii) Savings Bank Deposits – –

iii) Fixed Deposits

a) District Co-operative Bank Ltd. – –

b) SBI & Subsidiary Banks – –

c) Other Public Sector & Scheduled Banks 1,48,52,00,000.00 71,56,09,656.00

Total 1,48,52,00,000.00 71,56,09,656.00

Grand Total 1,67,71,94,512.17 93,80,55,704.61

SCHEDULE 7: INVESTMENTS (Amount in C)



31.03.2019

i) In Central & State Government Securities 2,62,56,94,305.00 2,46,05,09,363.00

Market Value: 2,71,32,94,811.00 2,43,44,77,750.00

Face Value: 2,60,73,70,000.00 2,43,75,00,000.00

ii) Other Trustee Securities – –

iii) Shares In Co-operative Institutions – –

Iv) Other Investments 24,72,000.00 24,72,000.00

Grand Total 2,62,81,66,305.00 2,46,29,81,363.00



SCHEDULE 8: ADVANCES (Amount in C)



31.03.2019

i) Short Term Loans, Cash Credits Overdrafts and Bills Discounted 2,67,85,68,194.19 2,78,37,89,324.19

• Of which secured against:

a) Govt. & Other Approved Securities – –

b) Other Tangible Securities 2,67,85,68,194.19 2,78,37,89,324.19

• Of the Advances, Amount due from Individuals 2,67,85,68,194.19 2,78,37,89,324.19

• Of the Advances, Amount Overdue 9,04,81,229.39 3,76,37,511.61

• Considered Bad & Doubtful of Recovery 3,19,09,743.10 42,58,502.41

(Fully provided for)

ii) Medium Term Loans 22,09,46,303.83 23,72,28,022.12



b) Other Tangible Securities 22,09,46,303.83 23,72,28,022.12

• Of the Advances, Amount due from Individuals 22,09,46,303.83 23,72,28,022.12


• Considered Bad & Doubtful of Recovery 32,52,917.09 16,09,222.72


iii) Long Term Loans 4,28,64,73,447.49 4,13,13,34,422.12



b) Other Tangible Securities 4,28,64,73,447.49 4,13,13,34,422.12

• Of the Advances, Amount due from Individuals 4,28,64,73,447.49 4,13,13,34,422.12


• Considered Bad & Doubtful of Recovery 78,15,444.20 22,98,103.94


Grand Total 7,18,59,87,945.51 7,15,23,51,768.44


SCHEDULE 9: INTEREST RECEIVABLE (Amount in C)



31.03.2019

i) Interest Receivable on Investments (Accrued)

a) Government Securities 3,93,44,816.33 3,96,19,550.22

b) Bank FDRs 8,06,42,769.30 4,00,62,628.09

c) Other Investments 31,562.00 30,70,068.00

Total 12,00,19,147.63 8,27,52,246.31

ii) Interest Receivable on NPA (Overdue) 8,71,35,982.05 5,11,16,808.15

Grand Total 20,71,55,129.68 13,38,69,054.46

SCHEDULE 10: FIXED ASSETS (INCLUDING WIP ASSETS) (Amount in C)



31.03.2019

As on 01.04.2019 32,16,76,052.51 21,76,80,191.49

Additions during the year 6,17,73,507.41 13,49,90,390.02

Less: Sale/Adjustments (51,89,991.79) (9,86,749.00)

Less: Depreciation for Current Year (5,85,42,095.37) (3,00,07,780.00)

Written Down Value as on 31.03.2020 31,97,17,472.76 32,16,76,052.51

SCHEDULE 12: CONTINGENT LIABILITIES (Amount in C)



31.03.2019

i) Bank Guarantees Issued 2,16,11,000.00 2,55,48,600.00

ii) Amount Remitted to RBI Under Deaf 37,80,139.00 36,77,602.00

Grand Total 2,53,91,139.00 2,92,26,202.00

SCHEDULE 11: OTHER ASSETS (Amount in C)



31.03.2019

i) Refundable Securities 87,32,423.76 67,51,810.00

ii) Stock of Printed Stationery 60,96,546.85 64,68,313.37

iii) Miscellaneous Receivables 4,16,49,739.68 3,39,77,640.10

iv) Tax Deducted at Source 9,90,450.60 9,84,183.30

v) Income Tax Refundable 4,26,50,224.00 2,71,35,352.00

vi) Advance Income Tax Paid 2,02,00,000.00 2,85,00,000.00

vii) Non-Banking Assets Acquired under Sarfaesi 2,27,40,040.00 2,27,40,040.00

viii) Input Credit Receivable under GST 2,04,08,237.25 2,04,39,996.16

ix) Stamp Papers in Hand 3,60,676.00 2,22,549.00

x) ATM & AEPS acquirer Receivables 5,91,149.00 2,36,98,555.00

xi) Excess Balance with LIC for Gratuity Fund 37,30,884.00 40,14,809.00

Grand Total 16,81,50,371.14 17,49,33,247.93







Significant Accounting Policies, Disclosures and Notes on Accounts (Schedule annexed to and forming part of the Balance Sheet as on 31st March 2020 and Profit & Loss Account for the year ended 31st March, 2020)

(A) BACKGROUND AND OPERATIONS:1. Shivalik Mercantile Co-operative Bank Ltd. was registered in 1997 under Uttar Pradesh Co-operative Societies Act 1965 and started

operations in September 1998. Later, in September 2010, consequent upon the inter-state merger, the Bank was re-registered under the

Multi State Co-operative Societies Act 2002, as a Multi-State Urban Co operative Bank, and expanded its area of operation beyond the

entire state of Uttar Pradesh (UP) to include area in the state of Madhya Pradesh (MP), which comprises five districts in the state, namely

Dhar, Indore, Ujjain, Dewas and Khargone. Subsequently, in financial year 2017-18, after receiving due approval from RBI, the bank has

extended its area of operation to the state of Delhi and districts of Dehradun and Haridwar in Uttarakhand. Thus, the present area of

operation of the bank comprises area in four states - UP, MP, Delhi and Uttarakhand.

2. Till the end of financial year 2019-20 (i.e. up to 31.03.2020) the Bank had thirty one branches - twenty six in UP (twelve in District

Saharanpur, two in District Muzaffarnagar, one in District Shamli, three in Meerut, one in District Hapur, two in Ghaziabad, three in Noida

and two in Lucknow) and five in MP (one each in Indore, Dhar, Dewas, Khargone and Ujjain). The Bank provides retail and corporate

banking services.

3. Merger of Malwa Commercial Co-operative Bank Ltd. with our bank: Malwa Commercial Co-operative Bank Ltd., Indore, M.P. (Target Bank) merged with Shivalik Mercantile Co-operative Bank Ltd. (Acquirer

Bank) with effect from 1st September, 2012. In accordance with the scheme of merger, the Share Capital of the Target Bank was kept

in Collection Account in the books of the Acquirer Bank for a period of 1 year from the date of merger. On the expiry of the period of

one year, the balance amount (less, held by borrowers and guarantors) remaining in collection account was transferred to the General

Reserve. As at the end of the current year, only an amount of C 24,600 remains in the books of the bank, that pertains to share capital

held by borrowers and guarantors of the above-mentioned bank.

4. Merger of Bhoj Nagrik Sahakari Bank with our bank:a. Bhoj Nagrik Sahakari Bank Maryadit, Dhar, M.P. (Target Bank) merged with Shivalik Mercantile Co-operative Bank Ltd. (Acquirer

Bank) with effect from 1st November, 2010. As per the scheme of merger, the Share Capital of the Target Bank is being treated as

Collection Account in the books of the Acquirer Bank and will remain so for a period of 10 years from the date of merger. During

this period any share-holder of the Target bank desiring to withdraw his/her shares shall be paid back the amount at par. After the

expiry of 10 years’ period, the amount remaining unpaid shall be converted to the share capital of the equivalent amount of Shivalik

Bank. The balance in the said account as at the end of the year is C 16,87,900.

(B) SIGNIFICANT ACCOUNTING POLICIES:1. Accounting Convention The financial statements have been prepared in accordance with the historical cost convention and on a going concern basis in

accordance with the generally accepted accounting principles and the statutory provisions prescribed in Banking Regulation Act 1949,

the Multi State Co-operative Societies Act 2002, circulars and guidelines issued by the Reserve Bank of India from time to time, the

Accounting Standards issued by the Institute of Chartered Accountants of India and practices prevailing within the banking industry in

the country, except as otherwise stated.

2. Use of estimates The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to

make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of

contingent liabilities at the date of the financial statements. Actual results could differ from these estimates and will be adjusted in the

accounts of the year in which they arise. Management believes that the estimates used in the preparation of the financial statements are

prudent and reasonable. Any revisions to the accounting estimates are recognized prospectively.

3. Foreign Exchange Transactions The bank holds Foreign Exchange Authorized Dealer Category-ll license and has entered into transactions related to exchange/

remittance of foreign currency on behalf of customers during the year. The income and associated GST implications from the above

transactions are accounted for in the books of the bank. The bank does not have any foreign exchange assets/liabilities as on 31 March

2020.


4. Investments4.1. In accordance with the extant instructions issued by Reserve Bank of India for the purpose of valuation of Investments; the Bank has

classified its Investment portfolio as at 31st March 2020 into the following three categories:

(a) Held To Maturity (HTM): Investments under this category are carried at their book value. Any premium on acquisition of a

security is amortized over the balance period to maturity.

(b) Available For Sale (AFS): Investments in the category are valued at market rate and net depreciation in the category, if any, is

written off as expense of the year. Net appreciation, if any, has not been recognized in these financial statements.

(c) Held For Trading (HFT): Investments in the category are valued at market rate and net depreciation in the category, if any, is

written off as expense of the year. Net appreciation, if any, has not been recognized in these financial statements.

4.2. The Investments have been disclosed in the Balance Sheet as under:

(a) Government Securities (Book Value, Face Value and Market Value)

(b) Other Approved Securities

(c) Shares in Co-operative Institutions

(d) Other Investments

4.3. Market Value of Central and State Government Securities is determined Yield to Maturity method indicated by Financial Benchmark

India Pvt. Ltd.

4.4. The Amortization of premium on investments in HTM category is calculated on the basis of days remaining to maturity and the

amount of amortization is directly debited to the Profit and Loss Account as suggested in the RBI guidelines.

4.5. The bank maintains investment related reserves such as Investment Depreciation Reserve (IDR) and Investment Fluctuation Reserve

(IFR) in line with the guidelines of the RBI.

4.6. Broken period interest on debt instruments is treated as a profit and loss item.

5. Loans and Advances5.1. The classification of advances into Standard, Sub-standard, Doubtful and Loss assets, as well as provision on non-performing

advances has been arrived at in accordance with the extant instructions issued by the Reserve Bank of India with regard to Income

Recognition and Assets Classification (IRAC) from time to time and as applicable for preparation of this Balance Sheet.

5.2. In addition to this, a general provision on standard assets is also made as per the extant instructions issued by Reserve Bank of India

in the following manner:

Category of Advance (Excluding NPA) %age provision made

Advances for Commercial Real Estate for commercial use 1.00%

Advances for Commercial Real Estate for Housing needs 0.75%

Advances to agricultural and SME sector 0.25%

Advances against FD, LIC, KVP and NSC Nil

Other Advances 0.40%

5.3. The interest in respect of non-performing advances is provided separately under “Overdue Interest Reserve” in accordance with the

extant instructions issued by Reserve Bank of India.

5.4. The bank follows the RBI Master Circular on Management of Advances applicable to Urban Co-operative Banks. If the terms of the

loan are changed for competitive reasons or any administrative issues in the loan account which are outside the control of the

borrower or where such change would result in an overall acceleration of the loan repayment, such changes are considered a

variation of terms at the request of the bank in the normal course of business.



5.5. The bank has adopted a change in accounting methodology for appropriation of recoveries in loan accounts in line with AS-5. The

order of appropriation was changed to Charges, Interest / Penal Interest and Principal. Previously, the order of appropriation was

Principal, Interest / Penal Interest and Charges. The change has been considered prospectively and prior year figures have not been

restated. This has led to a one time increase in recognized amounts of Gross NPA in the current financial year. The bank intends to

apply this methodology for future subsequent periods also.

5.6. In accordance with the RBI guidelines relating to COVID-19 Regulatory Package dated March 27, 2020 and April 17, 2020, the Bank

would be granting a moratorium of three months on the payment of all installments and / or interest, as applicable, falling due

between March 1, 2020 and May 31, 2020 to all eligible borrowers classified as Standard, even if overdue, as on February 29, 2020.

For all such accounts where the moratorium is granted, the asset classification shall remain stand still during the moratorium period

(i.e. the number of days past-due shall exclude the moratorium period for the purposes of asset classification under the Income

Recognition, Asset Classification and Provisioning norms). As per the RBI guidelines, a provision of at least 5% is held for all assets

where the asset classification benefit has been extended as on 31 March 2020.

6. Fixed Assets and Depreciation6.1. Fixed Assets are stated and carried in the Balance Sheet at written down value, arrived at cost less depreciation. Cost includes

incidental expenses incurred on acquisition of assets.

6.2. As per applicable accounting standards, the residual value and useful life of assets should be reviewed periodically and if expectations

differ from future estimates, this should be considered a change in accounting estimates. Change in accounting estimates are

applied prospectively starting with the current financial year and restatement of prior year comparatives is not required.

6.3. The applicable depreciation methodology on Fixed Assets is mentioned below:

Sl. No. Asset Category Depreciation Method Useful Life

1 Furniture and Fixtures Straight Line 10 Years

2 Office Equipment Straight Line 10 Years

3 Office Vehicles Straight Line 8 Years

4 Safe, Locker Steel Almirah Straight Line 30 Years

5 Computer Hardware & Software Straight Line 3 Years

6 Temporary Structures Straight Line 3 Years

7 Other assets Straight Line Internal Assessment

6.4. Depreciation would be calculated on the basis of the number of days that the asset has been put to use in any given accounting

period.

6.5. Depreciation on assets sold during the year is charged up to the date of sale.

6.6. There has been no change in method and rates of providing depreciation as compared to the previous year.

6.7. No fixed assets were revalued during the year.

6.8. Certain capital expenditures made on assets prior to being available for use represents ‘work in progress’ assets. Depreciation /

amortization of these assets would begin once these are available for use in line with the applicable accounting standards. This

includes the expenditure on the migration of the bank’s core banking solution (CBS) which was completed during the financial year

ending 31 March 2020 and has been duly recognized and depreciated as per the bank’s depreciation policy.

7. Revenue Recognition (Accounting Standard AS-9)7.1. Items of income and expenditure are generally accounted for on accrual basis.

7.2. Income from non-performing assets is recognized to the extent realized, as per the extant instructions issued by Reserve Bank of

India.


7.3. Income derecognized on classification of any advance account as NPA is recognized as income on subsequent actual realization

and re-classification of asset as standard asset.

7.4. Interest on Government securities, debentures and other fixed income securities is recognized on a period proportional basis.

Income on discounted instruments is recognized over the tenor of the instrument on a straight-line basis

7.5. Any recovery against advances written off in earlier years is considered as income of the year in which the same is recovered.

7.6. Interest on overdue fixed deposits is provided at rate of interest applicable on savings account in accordance with the extant

instructions of RBI.

7.7. There are no material prior period items included in Profit and Loss account.

7.8. Certain items of income such as Locker Rent, DD Commission and others are recognized on cash basis. The quantum of such

income is not material.

8. Non-Performing Assets8.1. Non-Performing assets of the bank have been identified and provision thereon has been made as per the extant instructions of

Reserve Bank of India.

8.2. Interest accrued and credited to income on any advance which is classified as a Non-Performing Asset at any time during the year

is reversed to the extent this has not been realized.

8.3. Interest accrued on NPA is not shown as income but shown as a contra item under the “Overdue Interest Reserve” and “Interest

Receivable on Advances” in the Balance-sheet.

8.4 The bank has adopted a change in accounting methodology for recognition of recovery related expenses in respect of non-

performing assets in line with AS-5. All recovery expenses in relation to non-performing accounts are charged to the profit and loss

account at the time of expense recognition. Any subsequent recovery of such expenses is recognized as income in the profit and

loss account offsetting the earlier debit completely or partially. Previously, such expenses were recognized to the profit and loss

account when the account was closed or written off. The change has been considered prospectively and prior year figures have not

been restated. The bank intends to apply this methodology for future subsequent periods also.

9. Employee Benefits (Accounting Standard AS-15)9.1. The bank operates a defined benefit plan for its employees, viz. gratuity liability. The cost of providing benefits under these plans is

determined on the basis of an independent actuarial valuation at each year-end.

9.2. The bank maintains the fund under trust deed and requisite insurance arrangements with Life Insurance Corporation of India (LIC)

as Employees Group Gratuity Scheme. The shortfall, if any, between the present value of the benefit obligation and the fair value of

plan assets as on 31 March is paid/provided for and recognized as expenses in the profit and loss account.

9.3. Bank’s Contribution and Employees’ contribution towards provident fund is paid every month to Commissioner of Provident Fund

in accordance with the provisions of Employees Provident Fund and Misc Provision Act 1952. Provident Fund contributions are

made for each individual and the scheme is administered by Regional Provident Fund Commissioner (RPFC), as applicable. The rate

at which the annual interest is payable to the beneficiaries by the trusts is being administered by the government.

9.4. The Bank’s contribution to provident fund is accounted for in Profit and Loss account on the basis of contribution to the scheme.

9.5. All earned leaves which are due are paid by the end of the financial year.

10. Reserve Fund and Other Reserves10.1. Dividend remaining unclaimed over 3 years is transferred to Statutory Reserve Fund account.

10.2. Nominal Membership and Entrance Fees for Regular members are transferred Statutory Reserve Fund every year.



11. Income Tax (AS 22)11.1. Provision for current tax is made on the basis of estimated taxable income for the year.

11.2. Deferred tax is recognized, subject to consideration of prudence, on timing difference, representing the difference between

taxable incomes and accounting income that originated in one period and is capable of reversal in one or more subsequent

periods. Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantially

enacted by the Balance Sheet date.

12. Goods and Services Tax (GST) The Bank has implemented the Goods and Services Tax (GST) regime since its implementation on 1 July 2017. The bank has collected

GST on income from commission, other charges and paid GST on operating and capital expenses. The bank availed eligible Input Tax

Credit as per GST Rules on relevant expenses which was utilized for set-off of GST collected on income from commission and customer

charges. Unutilized Input Tax Credit has been carried forward to the next year for further utilization.

Income and Expense on which GST is applicable are accounted for on net of eligible GST.

13. Long Term Subordinated (Tier II) Deposit: The amount of Long Term Subordinated (Tier II) Deposit and Interest paid on thereon has been shown under the head “Borrowings” in

the Balance Sheet and “Interest on Borrowings” in the Profit and Loss Account respectively.

14. Refundable Securities Bank has deposited security amounts with Government and other agencies to acquire services which are refundable and accounted for

as other assets. These represent tangible assets and are considered recoverable in future after termination of services.

(C) DISCLOSURES AND NOTES ON ACCOUNTS:1. Disclosure as per the extant instructions of Reserve Bank of India:

(Amount in C/Lacs)

Sl. No. Particulars 31.03.2020 31.03.2019

1.1. Capital to Risk Asset Ratio (CRAR) 13.09% 13.07%

A. Capital Tier 1 7,743.40 7,663.35

B. Capital Tier II 1,192.96 1,164.74

C. Total of Tier 1 and II Capital 8,936.26 8,828.09

D. Total Risk Weight Assets 68,263.52 67,548.99

1.2. Movement of CRAR (Basis points) 2 39

1.3. Values of Investments are as under:

1) Government /Approved Securities (SLR)

i) HELD TO MATURITY

(a) Face Value 26,073.70 22,875.00

(b) Book Value 26,256.94 23,093.84

ii) AVAILABLE FOR SALE

(a) Face Value – 1,500.00

(b) Book Value – 1,511.25

(c) Market Value – 1,565.60

2) Other Investments (Non-SLR)

i) Shares of Co-operative Institution – –

ii) Others (Book Value) 24.72 24.72

iii) Others (Market Value) 29.47 28.87

1.4. Advances against Shares and Debenture NIL NIL


1.5. Advances of C 71,859.88 Lacs (Previous year C 71,523.52 Lacs) shown in the Balance Sheet include:

(Amount in C/Lacs)

ParticularsFund Based Non-Fund Based

31.03.2020 31.03.2019 31.03.2020 31.03.2019

i) Advances against Real Estate, Construction

Business, Housing

14,811.03 15,176.70 Nil Nil

ii) Advance to Directors* Nil 29.09 Nil Nil

iii) Advances to Relatives of Directors & Companies/

firms in which they are interested*

13.47 0.02 Nil Nil

iv) Advances to Chairman Nil Nil Nil Nil

*AII advances to Directors, their relatives and companies/firms in which they are interested are against the security of their own

FDRs, as explicitly allowed by RBI.

(Amount in C/Lacs)

Sl. No. Particulars 31.03.2020 31.03.2019

1.6. Average Cost of Deposits 6.40% 6.17%

1.7. a. Gross NPAs 2,032.28 1,122.96

b. Net NPAs 1,296.00 847.36

1.8. Movement in NPA

Opening Balance 1,122.96 1,307.91

Add: Additions during the year 1,048.03 3,138.59

Less: Closed/ Recovered /Written off 138.71 3323.54

Closing Balance 2,032.28 1,122.96

1.9. a. Interest income as a percentage of working funds 9.63% 9.63%

b. Non-Interest income as percentage of working funds 1.04% 0.97%

c. Operating profit as a percentage of working funds 0.28% 0.48%

d. Return on Assets 0.18% 0.35%

e. Business (Deposits + Advances) per employee 304.66 288.16

f. Profit per employee (Before Tax) 0.53 0.94

g. Profit per employee (After Tax) 0.37 0.63

1.10. a. Provision on NPAs required to be made 736.28 275.60

b. Provision on NPAs actually made 811.96 310.16

c. Provisions on depreciation in investments required to be made – –

d. Provisions on depreciation in investments actually made – –

e. Provision on Standard Assets required to be made 240.13 248.18

f. Provision on Standard Assets actually made 248.18 248.18

1.11 Payment of DICGC Premium (inclusive of GST) 129.80 116.39

1.12 Arrears in DICGC Premium Nil Nil


1.13. Restructuring of Advances: (C in Lacs)

Particulars of Accounts Restructured as on 31.03.2020 Housing Loans SME Debt Others

Standard Advances No. of Borrowers – – –

Amount outstanding – – –

Sacrifice (diminution of fair value) – – –

Sub-standard Advances No. of borrowers – – –



Doubtful Advances No. of borrowers – – –



Total No. of borrowers – – –




1.14. Write-Off of Advances: The Bank has not written off of any loan accounts during the current financial year (Prior Year: C 222.44 Lacs).

2. Related Party Disclosure (Accounting Standard AS-18)2.1. List of the related parties and their relationship

Name of the party Relationship

a. Key Managerial Personnel

1. Shri Yashvir Kumar Gupta Chairman

2. Shri Suveer Kumar Gupta MD & CEO

b. Relatives of the Key Managerial Personnel

1. Shri Suveer Kumar Gupta Son of Shri Yashvir Kumar Gupta

2. Smt. Swam Lata Gupta Wife of Shri Yashvir Kumar Gupta

3. M/s Yashvir Kumar Gupta HUF HUF of Shri Yashvir Kumar Gupta

4. Smt. Shilpa Gupta Wife of Shri Suveer Kumar Gupta

5. Shri Dinesh Kumar Mittal HUF HUF of brother of Shri Yashvir Kumar Gupta

2.2. Details of transactions with the related parties carried out on an arm’s length basis

S. No.

Nature of the transactionsRelatives of Key Managerial Personnel

31st March 2020 31st March 2019

1. Salary paid 34,15,980 34,09,873

2. Rent paid 67,34,268 65,69,292

3. Leases (Accounting Standard AS-19)The bank has cancellable operating lease and the disclosures under AS 19 on ‘Leases’ issued by ICAI are as follows:

3.1. Lease rent payments of C 451.93 Lacs (inclusive of GST) have actually been made. 50% of GST has been taken to Input Tax Credit,

the balance has been recognized in the statement of profit and loss for the year ended March, 2020 (Previous Year: C 452.92 Lacs).

3.2. The lease agreements entered into, pertain to use of premises and electricity generator by the bank. The lease agreements do not

have any undue restrictive or onerous clauses other than those normally prevalent in similar such agreements.


4. Intangible Assets (Accounting Standard AS-26)Details of Computer Software included in Fixed Assets in accordance with AS-26 on Intangible Assets issued by the ICAI are as under:

(Amount in C/Lacs)

Particulars Amount

Opening balance as on 01.04.2019 171.10

Additions during the year 2,101.43

Less: Amortization/Depreciation 307.47

Closing balance as on 31.03.2020 1,965.06

5. Impairment of Assets (Accounting Standard AS-28) The bank has written off a sum of ‘NIL’ (last year ‘NIL’) to its profit and loss account on account of Impairment of assets.

6. Provisions, Contingent Liabilities and Contingent Assets (Accounting Standard AS-29)6.1. Provisions

(a) As on 31st March 2020, the Bank had an excess provision of C 75.68 Lacs on account of Bad Debts and Doubtful Reserve (BDDR).

(b) The Bank has maintained additional provision over and above the requirement as per RBI guidelines for Bad Loans (NPA).

Provisioning Coverage Ratio (PCR) 40.00% as on 31st March 2020 (Prior Year : 27.62%). Provision Coverage Ratio indicates total

provision made against the NPA.

(c) Additional provisioning on account of COVID-19 - Asset Classification and Regulatory Package has been disclosed in the table

as per the extent norms of the Reserve Bank of India

(Amount in C/Crores)

Particulars Total

SMA / overdue categories, where the moratorium / deferment was extended 99.92

Amount where asset classification benefits is extended 6.68

Provisions made as on 31 March 2020 0.33

Provisions adjusted during the respective accounting periods against slippages Not Applicable

6.2. Contingent Assets and Liabilities(a) Details of contingent liabilities are provided below:

(Amount in C/Lacs)

Particulars 31.03.2020 31.03.2019

Bank Guarantees 216.11 255.48

DEAF (Depositor Education and Awareness Fund) 37.80 36.77

(b) Bank Guarantees are 100% secured against tangible securities.

(c) Amount related to DEAF has been directly deposited in the specific account with RBI Mumbai.

(d) Amount transferred to DEAF:

(Amount in C/Lacs)

Particulars 2019-20 2018-19

Opening balance of amounts transferred to DEAF 36.77 28.25

Add: Amounts transferred to DEAF during the year 1.51 8.59

Less: Amounts reimbursed by DEAF towards claims (0.48) (0.07)

Closing balance of amounts transferred to DEAF 37.80 36.77



7. Segment reporting (Accounting Standard AS-17):

7.1. Bancassurance: Bank is engaged in selling of insurance policies as an authorized corporate agent, as permitted by RBI, for the

following insurance companies:

• General Insurance - New India Assurance Co. Ltd. and Bajaj Allianz General Insurance Co. Ltd.

• Life Insurance - Life India Corporation of India and Bajaj Allianz Life Insurance Co. Ltd.

• Health Insurance - Star Health and Allied Insurance Co. Ltd.

7.2. The details of the commission income received is shown below:

S. No.

Types of Insurance Name of InsurerCommission Income for

FY 2019-20

1. Life Life Insurance Corporation of India 36.89

2. Life Bajaj Allianz Life Insurance Co. Ltd 66.74

3. Health Star Health and allied Insurance Co. Ltd. 25.39

4. General Bajaj Allianz General Insurance Co. Ltd. 13.02

5. General New India Assurance Co. Ltd. 3.13

TOTAL 145.17

The commission earned from insurance business during the year is C145.17 Lacs (Previous Year: C150.57 Lacs).

8. Taxation

8.1. Income Tax

Bank has filed income tax returns since inception and all assessments other than for past two years have been completed till date.

Income Tax Department has passed final assessment order u/s 143(3) after scrutiny of return of A.Y. 2017-18 and issued a refund

order of C 1.09 Cr. This amount is yet to be received from the Income Tax Department as on 31 March 2020.

Income Tax Department has issued a refund order of C 1.66 Cr. u/s 143(1) for A.Y. 2018-19. The case has been taken up for scrutiny

under section 143(2).

Bank has filed the income tax return for A.Y. 2019-20 in October 2019.

8.2. Deferred Tax Liability

Details pertaining to the movement of deferred tax liability in the current financial year are presented below:

(Amount in C/Lacs)

Deferred Tax LiabilityDue to

Depreciation

Due to creation of Reserve U/s 36(l)

(viii) of IT Act

Due to Gratuity payment

Total

For period up to 31st March, 2019 43.83 41.51 14.03 99.37

For the year 2019-20 27.35 (41.51) (0.99) (15.15)

As on 31st March, 2020 71.18 – 13.04 84.22


9. Investments Related Disclosures:9.1. Details of Non-SLR investments as at 31 March 2020:

(Amount in C/Lacs)

S. No.

Issuer AmountExtent of ‘below

investment grade securities’

Extent of ‘unrated

securities’

Extent of ‘unlisted

securities’

1. PSUs (NHAI) 24.72 – – –

2. FIs – – – –

3. Public Sector Banks – – – –

4. Mutual Funds – – – –

5. Others – – – –

6. Provision held towards Depreciation – – – –

9.2. Non-SLR Investments of the bank comprise of the following items as at 31 March 2020: (Amount in C/Lacs)

S. No.

Name of InvestmentAmount

FY 19-20 FY 18-19

1. 8.30% Tax-free Bonds issued by NHAI. 24.72 24.72

TOTAL 24.72 24.74

(a) All the investments under this head are within limits defined as per the extant instructions of RBI.

(b) Investments under this head have been valued at the lower of book value and market value.

(c) Non-performing non-SLR investments are Nil.

9.3. As on 31st March 2020, NIL Mark to Market loss has been calculated during the valuation of investments held under the AFS

category and consequently no requirement arose to make any provision for Investment Depreciation Reserve.

9.4. Investment Fluctuation Reserve (IFR) is being created as per the instructions of the RBI. The bank is required to maintain an IFR for an

amount representing at least 5% (up to a maximum of 10%) of the book value of investments held under AFS and HFT categories

as at the end of the financial year. The bank held an IFR of C 100 lacs as on 31 March 2020, against a requirement of C 1.24 Lacs. As

per the RBI guidelines, excess amounts may be transferred to the Profit and Loss Account or may directly be reckoned towards the

Bank’s net-worth.

9.5. Shifting of Investments between categories: The Bank had transferred investment securities between HTM and AFS categories (and

vice versa) once in FY 2019-2020 which is line with the guidelines prescribed by the RBI. The amount of securities transferred were

C 46.06 Crores from HTM to AFS (Prior Year: C 18.41 Crores) and C 10.07 crores from AFS to HTM (Prior Year: C 20.44 crores). The Bank

has recognised a mark to market loss of C 3.26 Lacs in relation to shifting of two securities from HTM to AFS category.

9.6. During Financial Year 2019-20, the bank has amortized premium of C 0.41 Crores on investment securities (Prior Year: C 0.51 Crores).

10. Borrowings

10.1. Against Fixed Deposit

The Bank has taken overdraft limits from other banks, against the security of its Fixed Deposits in these banks, to meet short term

liquidity requirements during the year. The details of the limits sanctioned are as under. No limit was availed as on 31.03.2020.


(Amount in C/Lacs)

S. No.

Name of Bank from which limit has been availed Limit AmountAmount of FDRs pledged

to secure the limit

1. IDBI Bank 2.67 3.22

2. PNB 5.55 6.00

3. HDFC Bank _* 1.00

4. Equitas Small Finance Bank 6.30 9.00

5. Utkarsh Small Finance Bank 13.50 15.00

6. Ujjivan Small Finance Bank 9.00 12.00

* The FDR in HDFC Bank has been pledged with them to secure Bank Guarantee(s) for customer(s) of the Bank.


10.2. Long Term Subordinated (Tier II) Deposit:

In accordance with the RBI circular no. RBI/2016-17/7 DCBR B.P.D. Cir. No. 21/09.18.201/2016-17 and permission of Central Registrar

Co-operative Societies, the Bank has outstanding balance of C 7.69 Crores in the form of Long Term Subordinated (Tier II) Deposit

which has a maturity duration of seven years. As per the RBI guidelines, this amount is eligible as Tier II capital for the purpose of

the calculation of the Capital Adequacy Ratio.

11. Statutory Liability11.1. The Bank had a statutory liability of C 3,84,882/- on account of appropriations made during the year towards Education Fund,

which had to be paid to The National Co-operative Union of India Ltd., New Delhi, under The Multi-State Co-operative Societies

Act, 2002.

11.2. DICGC Premium has been paid up-to-date and the next payment due date will fall in May, 2020.

11.3. No penalty has been imposed on the bank by RBI till date.

12. Priority Sector and PSLC Sale12.1. The Priority Sector and Weaker Section lending ratios along with the details of the PSLC traded of the bank for the year are as

follows:

(Amount in C/Lacs)

Particulars Amount Percentage (%)

Average amount lent under Priority Sector 44,297.65 66.33%

Less: PSLC Sold (Category) (11,500.00) (17.22%)

Average Net Priority Sector Lending of the Bank 33,297.65 49.86%

Weaker Section Lending of the Bank 10,355.08 14.48%

12.2. During the financial year 2019-20, the bank has sold Priority Sector Lending certificate of C 115.00 Crores (Prior Year : C 129.00

Crores) and on which bank has earned profit of C 81.87 lacs (Prior Year : C 86.93 Lacs). Category wise details are given hereunder.

(Amount in C/Crores)

S. No. Category of PSLC Amount

1. Micro Enterprises 80.00

2. Small and Marginal Former 2.00

3. Agriculture 8.00

4. General 25.00

As per the RBI guidelines, this amount has been excluded from the amount of Priority Sector Lending as on 31st March 2020 for

the purpose of reporting.


13. Appropriation of profit for the year (Appropriation Details) Bank is following the practice of appropriation of profit towards statutory and other mandatory reserves/funds as on date of balance

sheet i.e. 31st March of each year. The appropriation towards dividend is made as approved in the AGM, after the meeting is held.

14. Employee Benefits14.1. The actuarial valuation of the defined benefit obligation and details of surplus/ deficit contributions are shown below:

(Amount in C/Lacs)

Particulars 31 March 2020 31 March 2019

Defined Benefit Obligation 134.68 133.45

Fair value of Plan Assets 171.99 173.60

Funded Status - (Surplus)/Deficit (37.31) (40.15)

Past Service Cost not yet Recognised – –

Unrecognised Asset due to Limit in Para 58(B) – –

(Asset)/Liability Recognised in the Balance Sheet (37.31) (40.15)

14.2. Bank contribution to provident fund is C102.15 Lacs in current Financial Year (Prior Year: C 98.46 Lacs).

15. Others15.1. An amount of C 1,57,88,645/- is outstanding as on the date of the Balance sheet, from Janhit Foundation, an NGO, against advance

given by bank to support them in carrying out Microfinance activity. The advance is being adjusted each month from the monthly

consultancy fees paid to Janhit Foundation by the bank.

15.2. As on 31st March 2020, the bank had a balance of C 4.07 Crores in the Contingency Reserve which has been transferred to Bad and

Doubtful Debt Reserve as per the provisions of the Bye Laws of the bank and the approval of the general body.

15.3. In FY 2019-20, the bank has transferred C 1.18 Crores from Special Reserve u/s 36(l)(viii) of Income Tax Act 1961 to Profit and Loss

Account as per provisions of Income Tax Act 1961.

16. Previous year figures have been regrouped and recasted wherever considered necessary to make them comparable with those of

current year.

As per our report of even date attached For Shivalik Mercantile Co-operative Bank Ltd.

For M R S & CO. Sd/- Sd/-

Chartered Accountants Suveer Kumar Gupta Sarvesh Singhal(Firm’s Regn. No.: 0166ION) MD & CEO Director

Sd/- Sd/- Sd/- Sd/-

CA Ram Kumar Dhiman Sudhakar Agarwal Shiv Puran Gulati Yashvir Kumar Gupta(M. No. 096852) Director Vice Chairman Chairman

Saharanpur: 21st July, 2020.


Annual Operational Plan for FY 2021-22Description Proposed Targets for the year 2021-22

Branches 41 (including 10 in unbanked locations)

Deposits C 1500 crore

Loans & Advances C 970 Crore

Net Profit C 12 Crore

Membership 39,600

New Initiatives Drive people management and employee engagement, instill learning culture, Leverage technology

offerings to increase business, Improve cost income ratio, Improve business per employee.

Long Term Perspective PlanStrategic Driver Outcome

Area of operation Bank will expand its area of operation to PAN India (subject to transition to SFB)

Opening of branches in Rural/

unbanked areas

The bank will open banking outlets in rural unbanked areas.

Expand credit in agriculture and

MSME Sector

The bank will focus to expand its credit activity in agriculture and MSME sectors.

Concentration on lending for an

amount of C25 lakhs and below

The bank will focus on small lending (i.e. for an amount of C 25 lakhs and below) in diversified

sectors.

Compliance and Risk Management The Bank will focus on compliance and risk management framework to ensure it meets the norms

required by RBI.

Financial inclusion Increase in the Microfinance programme, participation in government schemes for financial

inclusion and opening of branches in unbanked locations

Capital Structure Bank is transitioning to SFB. Bank will structure its capital requirement as per the prescribed norms

for SFBs.

Digital Banking Enhanced features on mobile banking, Internet Banking facilities for Corporate customers and

digitisation of customer service requests.

Budget for FY 2020- 21

Appropriation of profits for financial year ending March 31, 2020

Income Amount (in Cr.) Expenditure Amount (in Cr.)

Interest on loans 108.00 Interest on Deposits & Borrowings 91.20

Interest on Investments 48.00 Operating Expenses 38.40

Miscellaneous Income 11 Depreciation & Repairs 6.00

Miscellaneous Expenses 5.00

Tax & Provisions 14.40

Net profit 12.00

Total 167.00 Total 167.00

Amount (in C) Remarks

Statutory Reserve* 56,32,682.00 25% of current year's Profit (Mandatory as per Multi-State Co-operative Societies Act, 2002)

Education Fund* 2,25,307.00 1% of current year's Profit (Mandatory as per Multi-State Co-operative Societies Act, 2002)

Contingency Reserve* 22,53,073.00 10% of current year's Profit (Mandatory as per Multi-State Co-operative Societies Act, 2002)

Total Statutory Appropriation 81,11,062.00

Strategic Driver Outcome

Automation and Innovation Focus on the digital roadmap as identified below:

- Compliance, risk and reporting

- Customer experience

- Data and analytics

- Employee digital enablement

- Internal processes

Customer Service and Experience - Standardizing and improving customer journey

- Build effective customer feedback tools

Employee - Identify strategy for building sustainable talent pipeline

- Instill learning culture

- Improve employee engagement

Cyber Security Framework The Bank will strengthen the cyber security framework in compliance with prescribed with

guidelines issued by the Reserve Bank of India from time to time.


NOTICE

Shivalik Mercantile Co-operative Bank LimitedRegd. Office: 13/1207, Ansari Road, Saharanpur – 247001, Uttar Pradesh

NOTES

Notice is hereby given that 23rd Annual General Meeting (AGM) of the members of SHIVALIK MERCANTILE CO-OPERATIVE BANK LIMITED will be held on Thursday, August 13, 2020 at 11:00 am at Hotel Royal Residency, Ambala Road, Saharanpur - 247001, Uttar Pradesh, to transact the following business:

1. To confirm quorum of 23rd Annual General Meeting (AGM).

2. To grant leave of absence to members of the Bank other than those whose names appear in the attendance register of this 23rd Annual General Meeting.

3. To confirm minutes of 22nd Annual General Meeting of members of the Bank held on September 15, 2019.

4. To consider and approve Annual Report, which consist of, the report of Statutory Auditor, Audited Balance Sheet as on March 31, 2020 and Profit & Loss Account and Cash Flow Statement and report of the Board of Directors for the year ended March 31, 2020.

5. To appropriate Net Profit and declaration of dividend (Nil, as per RBI guidelines) as recommended by the Board of Directors for FY 2019-20.

6. To review actual utilization of reserve and other funds for FY 2019-20.

7. To take note of Loans & Advances outstanding against the Directors and their relatives during FY 2019-20.

8. To appoint Statutory Auditor of the Bank for FY 2020-21 and to authorize the Board of Directors to fix their remuneration.

9. To consider and approve Annual Budget for FY 2021-22.

10. To consider and approve Long-Term Perspective Plan and Annual Operation Plan of the Bank for FY 2021-22.

11. To present list of employees who are relatives of members of the Board of Directors and MD & CEO of the Bank.

12. To consider and approve forfeiture of shares of the members who are disqualified from being or continuing as members of the bank as specified in the Byelaws.

13. To consider and approve amendment in Byelaws of the Bank by inserting new sub clause under clause 9 of the Byelaws of the bank i.e. “Allotment, Transfer and Redemption of shares at face value”

14. To consider and approve amendment in Byelaws of the Bank by inserting new clause for constitution of Board of

Management (BoM).

15. To consider and approve amendment in clause 17.1 of bye laws of the Bank i.e. in relation to surrender/ transfer of membership within a stipulated time period of becoming a member.

16. To consider and approve amendment in clause 28.1 of bye laws of the Bank i.e. in relation to transfer of shares.

17. To consider and approve amendment in clause 71 of bye laws of the Bank in relation to winding up of the society.

18. To consider and approve surrender of the Urban Co-operative Banks license to the Reserve Bank of India for cancellation under Section 22(4) read with Section 56 of the BR Act, 1949.

(This will be initiated only after the Bank goes live as a Small Finance Bank, a Scheduled Commercial Bank. This is as per RBI’s in-principal approval letter given to Shivalik Mercantile Co-operative Bank Limited for transition to a Small Finance Bank on January 6, 2020)

19. To consider and approve voluntarily winding-up of the Co-operative Society in terms of provisions of the Multi State Co-operative Societies Act, once the banking license of the UCB is cancelled by RBI.

(This will be initiated only after the Bank goes live as a Small Finance Bank, a Scheduled Commercial Bank. This is as per RBI’s in-principal approval letter given to Shivalik Mercantile Co-operative Bank Limited for transition to a Small Finance Bank on January 6, 2020)

20. To consider and approve the process for members willing to continue membership during the voluntary winding-up proceedings and deemed resignation and withdrawal of other members.

21. To inform to the General body of the Bank for submission of compliance report to the Reserve Bank of India (RBI) in respect of RBI Inspection report for FY ending March 31, 2019.

22. Any other items with the permission of Chair.

Regd. Office: By Order of the Board of Directors13/1207, Ansari Road,Saharanpur – 247001,Uttar Pradesh Sd/-Date: July 22, 2020 (Suveer Kumar Gupta), MD & CEO

A [email protected]

72 | Shivalik Mercantile Co-operative Bank Ltd.

NOTES

Shivalik Mercantile Co-operative Bank Limited

Head Office 1: Hakikat Nagar, Saharanpur 247001, Uttar PradeshTelefax: (0132) 2726125, 2726147

Head Office 2: Fusion Square, Plot No 5A & 5B, Sector 126, Noida 201301, Uttar PradeshTelefax: (0120) 4060000

Email: [email protected] Visit us at: www.shivalikbank.comfacebook.com/shivalikbank twitter.com/shivalik_bank

SHIVALIK MERCANTILE CO-OPERATIVE BHARAT BANK LTD. F1RST

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