Empowering MSMEs. Annual Report 2016-17 www.sidbi.in www.sidbistartupmitra.in www.standupmitra.in Mission To facilitate and strengthen credit flow to MSMEs and address both financial and developmental gaps in the MSME ecosystem. Annual Report 2016-17 Progress at a Glance (` Crore) As on March 31 1991 2001 2011 2015 2016 2017 Total Assets 5,309.2 17,089.8 51,216.8 60,855.0 76,478.5 79,682.3 Outstanding Portfolio 5,176.8 14,570.6 46,053.6 55,342.6 65,632.1 68,289.6 Capital - Authorised 500.0 1,000.0 1,000.0 1,000.0 1,000.0 1,000.0 - Paid-up 450.0 450.0 450.0 450.0 487.0 531.9 Reserves and Funds 44.9 3,611.6 5,868.4 9,329.6 11,108.3 13,069.5 Total Income (Net of provisions) 425.1 1,619.4 3,433.0 5,938.5 5,559.5 6,266.5 Net Profit 35.6 477.4 513.8 1,417.1 1,177.5 1,120.2 Dividend to Shareholders 5.0 67.5 112.5 112.5 94.7 93.9 Return on Avg. Outstanding Portfolio (%) 0.7 3.3 2.0 3.8 2.9 2.5 Standard Assets as percentage of net outstanding portfolio 100.00 95.63 99.72 99.22 99.27 99.56 Capital to Risk Assets Ratio (%) 13.90 28.12 30.60 36.69 29.86 28.42 Small Industries Development Bank of India Report of the Board of Contents Directors for the year ended March 31, 2017 submitted to the Central Government on July 21, 2017 in terms of Section 30 (5) of the Small Letter of Transmittal Industries Development Bank of India Act, 1989. Board of Directors Committees of Directors Chairman & Managing Director’s Report Directors’ Report 2016-17 ANNUAL REPORT Chapters 01. Micro, Small and Medium Enterprises – Performance and Outlook 02. Business Initiatives and Overall Operations 03. Promotional & Developmental Initiatives 04. Management and Corporate Governance Audited Balance Sheet along with Profit and Loss Account and Cash Flow Statement of SIDBI (Appendix – I) Consolidated Balance Sheet along with Profit and Loss Account and Cash Flow Statement of SIDBI including its associates and subsidiaries (Appendix – II) Letter of Transmittal July 21, 2017 The Secretary, Ministry of Finance, Government of India, New Delhi. Madam, Annual Accounts and Report of the Board on the working of SIDBI – FY 2016-17. In accordance with the Provisions of Section 30(5) of the Small Industries Devel- opment Bank of India Act, 1989, we forward herewith the following documents: (1) Copy of Annual Accounts of Small Industries Development Bank of India for the year ended March 31, 2017; and (2) A copy of the Report of the Board on the working of Small Industries Devel- opment Bank of India during the year ended March 31, 2017. Yours faithfully, (Ajay Kumar Kapur) (Manoj Mittal) Dy. Managing Director Dy. Managing Director Encl.: As Above Annual Report 2016-17 1 Board of Directors (As on August 31, 2017) Shri Mohammad Mustafa Chairman & Managing Director Shri Ajay Kumar Kapur Shri Manoj Mittal Dy. Managing Director Dy. Managing Director Shri Satyananda Mishra Shri S. N. Tripathi Shri J. Chandrasekaran Shri Pankaj Jain Shri G. A. Tadas Shri S. Hariharan Smt. Smita Bharadwaj 2 Annual Report 2016-17 Committees of Directors (As on August 31, 2017) Executive Committee Audit Committee Shri Mohammad Mustafa, Chairman Shri Satyananda Mishra, Chairman Shri Ajay Kumar Kapur Shri Ajay Kumar Kapur Shri Manoj Mittal Shri Manoj Mittal Shri J. Chandrasekaran Shri Pankaj Jain Shri S. Hariharan Shri G. A. Tadas Shri Satyananda Mishra Shri S. Hariharan Risk Management Committee Special Committee to Monitor Large Value Frauds Shri Ajay Kumar Kapur Shri Manoj Mittal Shri Mohammad Mustafa, Chairman Shri G. A. Tadas Shri Ajay Kumar Kapur Shri J. Chandrasekaran Shri Manoj Mittal Shri Pankaj Jain Shri G. A. Tadas Information Technology Shri J. Chandrasekaran Strategy Committee Shri S. Hariharan Shri Satyananda Mishra, Chairman Shri Ajay Kumar Kapur Customer Service Committee Shri Manoj Mittal Shri G. A. Tadas Shri Mohammad Mustafa, Chairman Shri Pushpinder Singh (External Expert) Shri Ajay Kumar Kapur Shri Manoj Mittal Shri J. Chandrasekaran HR Steering Committee Shri S. Hariharan Shri Mohammad Mustafa, Chairman Shri Ajay Kumar Kapur Recovery Review Committee Shri Manoj Mittal Shri Pankaj Jain Shri Mohammad Mustafa, Chairman Shri J. Chandrasekaran Shri Ajay Kumar Kapur Shri Satyananda Mishra Shri Manoj Mittal Dr. (Smt) Chitra Rao (External Expert) Shri Pankaj Jain Shri G. A. Tadas Review Committee on Wilful Defaulters & Non-cooperative Remuneration Committee Borrowers Shri Pankaj Jain Shri S. Hariharan Shri Mohammad Mustafa, Chairman Shri Satyananda Mishra Shri Satyananda Mishra Annual Report 2016-17 3 Chairman and Managing Director’s Statement The Board of Directors and the management of SIDBI are privileged to present the Bank’s Annual Report for Financial Year 2016-17. With great pleasure, I would like to inform that, your Bank has come up with a number of initiatives to address the finan- cial, developmental and promotional needs of MSMEs in FY 2016-17. During the year, the balance-sheet size of your Bank recorded a 4.2% growth to `79,682 crore. The total MSME credit outstanding of the Bank also registered growth of 4% to reach `68,290 crore as on March 31, 2017. I would like to add that SIDBI introduced a number of proactive measures to augment credit availability to the MSME sector and to upscale existing schemes. Some of the business initiatives taken during FY 2016-17 are given below. • A Memorandum of Understanding (MoU) was signed with Vijaya Bank to provide eligible MSEs with financial assistance at 1-year MCLR of Vijaya Bank (presently 8.65% p.a.) to be refinanced by SIDBI. A similar MoU was signed with Capital Small Finance Bank Ltd. for collaboration/partnership in financial and non-financial areas to support MSMEs. • In order to widen credit delivery channels, SIDBI signed strategic MoUs with eight industry associations in MSME clusters. 4 Annual Report 2016-17 • Two facilities have been introduced to strengthen Small Finance Banks (SFBs) and augment their equity and resource base: - Provide equity investment for setting up/capitalisation of the SFBs to meet their initial equity/capital gap; in particular, the requirement for equity from domestic sources. - Post transformation of the MFIs/NBFCs into SFBs, SIDBI would provide refinance support. • To enhance benefits for its premium customers, SIDBI introduced a new variant of the existing Privileged Customer Scheme (PCS) - PCS (Premium). Under the scheme, enhanced annual credit limit would be provided to existing well-perform- ing customers for their annual non-project specific investment plans. • SIDBI and NSE Strategic Investment Corporation Ltd. (NSICL) – a subsidiary of NSE -have set up the first Receivables Exchange of India Limited (RXIL). It may be noted that RXIL has been the first entity to operationalise a ‘Trade Receivables Discounting System’ (TReDS) on January 09, 2017. TReDS is an institutional mech- anism (under RBI guidelines) that facilitates the financing of trade receivables of MSMEs through multiple financiers on an electronic platform through a transpar- ent bidding process, in which multiple financiers participate. SIDBI has consciously adopted a ‘Credit Plus’ approach under which the Bank addresses the Promotional and Developmental (P&D) needs of stakeholders (both MSMEs as well as other financial institutions) along with their financial needs. As the nodal body tasked with the development of the MSME ecosystem, it is critical that SIDBI addresses the financial, promotional and developmental needs in an integrat- ed and holistic manner. For example, in addition to directly financing MSMEs, SIDBI is actively granting support in the areas of cluster development, rural industrialisation, technological up-gradation, skill and entrepreneurship development, MSME advisory services, promoting innovation and incubation, market linkages, etc. These P&D interventions have made noticeable socio-economic impact benefitting more than 2.3 lakh persons in the MSME sector. Additionally, more than 1.5 lakh employment avenues have been created and over 80,000 units (mostly rural enterprises) have been set up. Besides, SIDBI provides a gamut of integrated services to MSMEs through its associ- ates and subsidiaries, such as: • SIDBI Venture Capital Limited (SVCL) - for providing Venture Capital (VC) assis- tance to MSMEs; • Micro Units Development & Refinance Agency (MUDRA) - for ‘funding the unfund- ed’ micro enterprises in the country; • Credit Guarantee Fund Trust - for Micro and Small Enterprises (CGTMSE) to provide credit guarantee coverage to collateral-free/ third-party guarantee free loans up to `200 lakh to MSEs; Annual Report 2016-17 5 • Receivable Exchange of India Ltd. (RXIL) to enable faster realisation of receivables by MSMEs; • SMERA Ratings Limited (SMERA) - for credit rating of MSMEs; • India SME Technology Services Ltd (ISTSL) - for technology advisory and consul- tancy services and • India SME Asset Reconstruction Company Ltd. (ISARC) for speedier resolution of Non-Performing Assets (NPA) in the MSME sector. Given the success of these associates and subsidiaries, your Bank will continue to evaluate new opportunities to expand the scope of these current assets as well as to set up new assets that, align with the overall vision of SIDBI. For example, technology enabled marketplaces like RXIL can be extended to provide for other financial and business needs of the MSMEs. Thus, SIDBI supplements and complements the efforts of banks and financial institu- tions to strengthen the MSME sector and make it more vibrant. During the recent years, the Government of India has taken a number of initiatives such as Make in India, Start-up India, Stand-up India, Prime Minister Mudra Yojana (PMMY), Digital India, Skill India, Zero Effect Zero Defect, etc. This was with the aim of providing impetus to inclusive and sustainable economic growth of the Indian econo- my, more particularly the MSME sector. SIDBI endeavors to support the Government of India in its initiatives and work towards taking our nation and MSMEs, in particular, to greater heights of success. Towards that, SIDBI has introduced several schemes to support government programmes. Some of these initiatives include: • SIDBI Make in India Soft Loan Fund for Micro, Small & Medium Enterprises (SMILE) under the 'Make in India' Programme, • Digital initiatives like setting up of web portals, viz. “www.sidbistartupmitra.in” to connect start-up entrepreneurs with stakeholders, viz. incubators, mentors, angel networks, venture capital funds, etc. • “www.standupmitra.in” for stand-up loans and • “www.udyamimitra.in” for MUDRA loans, Stand-up India loans and MSME loans upto `2 crore. Going forward the endeavor of SIDBI would be to power the delivery of all the MSME focused schemes through greater technological integration so as to allow MSMEs hassle free access to these schemes, irrespective of the financial partner they chose. SIDBI has always been a great supporter of faster and higher growth of the MSME sector, considering the sector’s valuable contributions to the Indian economy. SIDBI will continue to amplify the role it plays in providing MSMEs achieve newer milestones and attain higher growth levels, launch innovative products, speed up the processes & delivery and address financing and developmental gaps, making the sector stron- ger, robust, vibrant, sustainable, more inclusive and competitive. ( Mohammad Mustafa) Chairman & Managing Director 6 Annual Report 2016-17 Directors’ Report 2016-17 The Board of Directors of the Bank takes continues its uninterrupted dividend pleasure in presenting its Report on the payment record since inception. overall business and operations of your Bank for the financial year ended March 31, II. Business Initiatives during 2017. FY 2016-17 Your Bank was set up in 1990 under an Act During FY 2016-17, your Bank undertook a of the Parliament as the principal financial number of business initiatives to augment institution for the promotion, financing and credit support to the MSME sector. Some of development of the MSME sector in India the important initiatives are: and coordination with institutions engaged in similar activities. Financial support to • In order to enhance credit flow to the MSMEs is provided by way of (a) Indirect MSME sector on competitive terms, finance to banks and FIs for onward lending your Bank entered into a Memorandum to MSMEs and (b) Direct finance in the niche of Understanding (MoU) with Vijaya areas like risk capital, sustainable finance / Bank. The objective was to provide energy efficiency financing, receivable eligible MSEs with financial assistance finance, services sector financing, etc. at 1-year MCLR of Vijaya Bank (present- ly 8.65% p.a.) supported by refinance I. Business Performance from your Bank. Additionally, your Bank also offers term loans at about 9.5% p.a. The outstanding portfolio of your Bank for eligible units under the ‘Make in increased by 4% to `68,290 crore as on India’ scheme. March 31, 2017 from `65,632 crore as on March 31, 2016. The total asset base of your • A similar MoU was signed with Capital Bank increased by 4.2% to `79,682 crore in Small Finance Bank Ltd. for collabora- FY 2016-17 from `76,478 crore in FY tion/partnership in various financial and 2015-16. non-financial areas to support MSMEs. The total income of your Bank during the • In order to widen credit delivery chan- financial year increased to `6,346 crore as nels, your Bank has entered into eight compared to `5,785 crore during the strategic MoUs with different industry previous year. The Profit before Tax for the associations. year was `1,687 crore, compared to `1,636 crore in the previous year. The net profit • In order to strengthen Small Finance after tax and Deferred Tax Adjustment for Banks (SFBs) and augment their equity the year was `1,120 crore as against `1,177 and resource base, your Bank intro- crore in the previous year. Your Bank has duced two facilities: declared a dividend of 18% for the year and 8 Annual Report 2016-17 - Provide equity investment for III. Upscaling of earlier initiatives setting up/capitalisation of the SFBs to meet their initial equity / • During FY 2015-16, your Bank had capital gap; in particular, the launched, a `10,000 crore ‘SIDBI Make requirement for equity from domes- in India Soft Loan Fund for Micro, Small tic sources. & Medium Enterprises’ (SMILE) to offer soft loans in the nature of quasi-equity - Post transformation of the in order to meet the required debt-equi- MFIs/NBFCs into SFBs, your Bank ty ratio and term loan on relatively soft would provide refinance support. terms. Till end of March 2017, aggre- gate loans of `3,586 crore were sanc- • In order to encourage further growth of tioned under the scheme. its well-performing customers, your Bank introduced a new variant of • Your Bank has contracted a World existing Privileged Customer Scheme Bank LoC for 'MSME Growth Innovation (PCS), viz., PCS (Premium), under which and Inclusive Finance (MSME-IIF)’ your Bank would provide enhanced project for improving access to finance annual credit limits to its existing for MSMEs right from the initial stages well-performing customers for their to its growth years through innovative annual non-project specific investment financial products. As on March 31, plans. 2017, 1,061 MSMEs were assisted with an aggregated term loan of `1,945 • In the area of Receivable Financing, the crore under the said LoC. following initiatives were undertaken. IV. Digital Initiatives - Your Bank, along with NSE Strate- gic Investment Corporation Ltd. • As part of up-scaling its initiatives to (NSICL) - a subsidiary of NSE, set up address the gaps in the start-up the first Receivables Exchange of ecosystem, your Bank created an India Limited (RXIL). RXIL has been online platform “www.sidbistartupmi- the first entity to operationalise a tra.in”. The portal enables start-up ‘Trade Receivables Discounting entrepreneurs located anywhere in the System (TReDS)’ on January 09, country to get connected with various 2017. TReDS is an institutional stakeholders, viz. incubators, mentors, mechanism under RBI guidelines angel networks, venture capital funds, for facilitating the financing of trade etc. The portal is also supported by receivables of MSMEs through Department of Science and Technology multiple financiers. This would [DST], Govt. of India. As on March 31, facilitate financing of trade receiv- 2017, 5,890 startups, 105 incubators ables of MSMEs on an electronic and 86 investors have registered on this platform through a transparent platform. bidding process, in which multiple financiers participate. Annual Report 2016-17 9 • In order to foster smooth implementa- • In a bid to boost availability of long term tion of “Stand-Up India” Scheme, your resources for MSMEs in the country, Bank developed a web-portal SIDBI signed an MoU with LIC on April “www.standupmitra.in” which is 07, 2016, under which LIC allocated an designed to obtain application forms, amount of `200 crore to co-invest along provide information, enable registra- with India Aspiration Fund. Under the tions, provide links for handholding, MoU, the aggregate commitment stood tracking and monitoring. A similar portal at `104.50 crore. for catering to other MSME loans upto `2 crore, www.udyamimitra.in has also • Under the Start-up India initiative, the been launched, which has emerged as Government established Fund of Funds a universal loan marketplace backed by for Start-ups (FFS) of `10,000 crore with Indian Banks’ Association. Both the your Bank for contributing to AIFs which portals have facilitated access to credit in turn would invest in start-ups to the to 2,047 enterprises till date. extent of twice as defined by GoI. Government released `500 crore in V. Business Operations March 2016 and `100 crore in March 2017. During the year, total amount V.1 Equity/Risk Capital aggregating to `623.50 crore was committed to 17 AIFs under FFS. A. Direct Risk Capital Assistance • Under “A Scheme for Promotion of • SIDBI is directly extending structured Innovation, Rural Industry and Entrepre- assistance to start-ups and early stage neurship (ASPIRE)” Fund of Ministry of ventures under Start-up Assistance MSME, `60 crore was disbursed to Scheme [SAS]. SIDBI had also entered SIDBI for managing the Fund for into formal understanding with investing in VCs with investment focus NASSCOM and Indian Software Prod- on start-up and early stage enterprises uct Industry Round Table (iSPIRT) for in the areas of rural and agro industries. validation of business models under the As on March 31, 2017, SIDBI has SAS. On a cumulative basis, 47 committed `39.50 crore to 4 AIFs under start-ups have been sanctioned ASPIRE Fund. assistance of `66 crore. V.2 Sustainable Development B. Fund of Funds Operations • Your Bank has been promoting sustain- • The Bank has constituted a `2,000 able development of the MSME sector crore India Aspiration Fund (IAF) as a in India by not only providing adequate Fund of Funds for making investments and affordable energy efficiency / in Alternative Investment Funds (AIFs), green finance, but also enhancing which was launched by Hon’ble awareness of benefits of climate control Finance Minister on August 18, 2015. amongst MSME clusters. The Bank has On a cumulative basis, commitments of been operating focused lending `1,146 crore have been made to 35 schemes for promoting investment in AIFs. clean production and energy efficient technologies / production processes 10 Annual Report 2016-17 under bilateral Lines of Credit (LoC) existing technologies and to install solar from international agencies such as roof top photo voltaic or solar thermal JICA, Japan; AFD, France; and KfW, systems. Germany. The main objective of these schemes is to enhance energy efficien- • Your Bank has been nominated as cy, reduce CO2 emissions and improve “National Implementing Entity” for the profitability of the Indian MSMEs in accreditation with Green Climate Fund the long run. These energy efficiency (GCF) by Ministry of Environment, Forest interventions by SIDBI have helped in & Climate Change, Govt. of India. GCF is reduction of 11.2 lakh tons of CO2 . a fund set up by United Nations to support climate change mitigation and • An important initiative in this regard is adaptation actions in developing the World Bank-led GEF-financed countries. The accreditation has since energy efficiency project being execut- been cleared by GCF Board paving way ed by your Bank along with Bureau of for your Bank to play a major role in Energy Efficiency (BEE). The project is formulation and implementation of being implemented in 10 clusters with nationally important projects in climate the objective “to increase demand for change mitigation and adaptation. energy efficiency investments in target MSME clusters and to build their VI. Microfinance capacity to access commercial finance”. Overall, more than 1,200 walk- • Your Bank has been a pioneer financial through audits and 750 detailed energy institution in the micro finance space audits have been conducted under the and continued to provide financial project. The project has provided assistance, in the form of equity, implementation assistance to more quasi-equity and term loans to MFIs than 670 MSME units. while advocating and implementing various responsible lending practices. • Further, your Bank along with Energy Till March 2017, the Bank has devel- Efficiency Services Limited (EESL) is oped the capacity of more than 100 implementing World Bank supported MFIs and provided financial support to project, viz. “Partial Risk Sharing Facility them to the extent of `12,714 crore, for Energy Efficiency (PRSF)”, a Guaran- benefitting 356 lakh people, mostly tee Fund with a corpus of around `251 women. crore (USD 37 million) and technical assistance of `41 crore (USD 6 million). • Your Bank has been playing the role of The project intends to provide partial a market-maker to enhance the corpo- risk cover to banks/FIs for the loans rate governance and operational given by them to ESCO-implemented efficiency of MFIs and enabling smooth projects. flow of adequate credit to the micro finance sector through measures like • Your Bank has launched the capacity assessment ratings, portfolio End-to-End-Energy-Efficiency Solutions audits, code of conduct assessment, (4E solutions) product to help the MSME etc. Promoting responsible lending and units in cutting down on the power & adherence to a laid-down Code of fuel cost and also to help them upgrade Conduct (CoC) are major interventions Annual Report 2016-17 11 by SIDBI. Further, to standardise the • Skill & Entrepreneurship Development tool, your Bank developed, piloted and rolled out a Harmonized COCA Tool With a view to strengthen the technical (HCT) in consultation with other stake- and managerial capacities of the holders. The final HCT has since been MSME entrepreneurs, your Bank rolled out and COCA exercises of 37 supports reputed management/ MFIs are presently underway. technology institutions to offer certain structured management/ skill develop- VII. Promotional and Developmental ment programmes, viz. “Skill-cum-Tech- (P&D) Support nology Up-gradation Programme” (STUP) and “Small Industries Manage- In its endeavour towards holistic ment Programme” (SIMAP). Since its development of the MSME sector, your inception, SIDBI has supported 1,563 Bank adopts a ‘Credit Plus’ approach STUPs benefitting about 32,810 partici- wherein besides credit, grant support is pants and 302 SIMAPs benefitting also provided for various promotional about 9,100 participants. and developmental activities like cluster development, rural industrialisation, • MSME Advisory technological upgradation, skill and entrepreneurship development, MSME - Your Bank has appointed retired advisory services, promoting innovation bankers as Knowledge Partners and incubation, market linkages etc. (KPs) for guiding new/existing The promotional & developmental entrepreneurs regarding the interventions of the Bank have benefit- various sources of MSME related ted more than 2.3 lakh people in the information, schemes of MSME sector, helped create more than SIDBI/commercial banks/FIs, 1.5 lakh jobs and set up more than government subsidies/benefits, 80,000 units, mostly rural enterprises. providing credit linkages, debt Some of the important initiatives are counselling and support services given below. for MSMEs. So far, more than 13,000 MSMEs have benefited • Cluster Development through MSME Advisory Centres (MACs). Cluster development support remains one of the key thrust areas of your Bank - RBI has designated your Bank to which include skill development, be the registering authority for enterprise development, creation of implementation of the Certified market linkages, various specialised Credit Counsellors (CCC) Scheme. services, etc. Your Bank also focuses on As per the CCC Scheme launched rural clusters through its Micro Enter- on July 11, 2017, credit counsellors prise Promotion Programme (MEPP) will be appointed for the MSME which aims at promoting viable micro ecosystem under a governance enterprises leading to employment framework. This is expected to ease generation in rural India. MEPP has so access to credit, especially to micro far been implemented in 126 districts in enterprises. Your Bank has roped in 26 states. Cumulatively, about 42,500 Indian Institute of Banking and rural enterprises have been set up. Finance (IIBF) for certification of the CCC and Indian Banks’ Association (IBA) for coordination. 12 Annual Report 2016-17 • Financial Literacy • Promoting Innovation and Incubation - Your Bank is implementing the • Your Bank had supported the Poorest States Inclusive Growth National Innovation Foundation, (PSIG) Programme with support of Ahmedabad by way of corpus Department for International support for setting up Micro Venture Development (DFID), Government Innovation Fund (MVIF) to the extent of United Kingdom to mainly of `850 lakh which benefitted more women, in four states, viz. Uttar than 200 innovations. Pradesh, Madhya Pradesh, Bihar and Odisha. The PSIG programme • Further, with a view to foster has adopted a two-pronged successful entrepreneurs and strategy of working both at the develop industry in the knowledge community and institutional level to and technology based areas in the support women empowerment. At small enterprises, SIDBI had the community level, the supported setting up of SIDBI programme has so far directly Innovation and Incubation Centre trained 2.17 lakh women on finan- (SIIC) at Indian Institute of Technolo- cial literacy, gender issues and gy, Kanpur. SIIC has so far incubat- raised awareness of 89,000 com- ed 69 start-ups in diverse areas of munity members through Mass state-of-the-art technologies, out of Awareness Camps. which 42 have graduated. - Apart from enhancing their finan- • The Bank has supported Indian cial literacy, the PSIG programme Institute of Management (IIM), enhanced their confidence level Lucknow in setting up the SIDBI and instilled a positive mental Centre for Innovation in Financial attitude towards life. Perhaps the Inclusion (SCI–FI) at IIM, Lucknow most dramatic result was weaning under the Poorest States Inclusive away the rural women from their Growth (PSIG) Programme. subscription to ponzy schemes and chit funds which registered a VIII. Resources Management dramatic fall from 32% to 2%. Another noticeable impact was the Resources aggregating `65,731 crore were improvement of sanitary conditions. raised by your Bank during FY 2016-17 as Subsequent to the training against `53,807 crore during FY 2015-16. programmes, many women During the year under review, the Bank constructed toilets. raised resources of `65,111 crore from domestic sources and `620 crore of foreign • Digital Financial Literacy currencies. In order to provide the much required IX. Rating of SIDBI Debt Instruments impetus to the Micro-business, your Bank conducted 112 Digital Financial The short-term and long-term debt instru- Literacy Programmes (DFLP) across ments of your Bank are rated by CRISIL and seven states covering 107 micro CARE Ratings. During FY 2017, business clusters and trained nearly 6,500 artisans. Out of these, 40% were female artisans. Annual Report 2016-17 13 (a) CRISIL reaffirmed rating of CRISIL AAA/ XI. Subsidiaries / Associates Stable for the unsecured Bonds issuance programme aggregating XI.1 SIDBI Venture Capital Limited (SVCL) `1,400 crore, FAAA / Stable (Reaf- was established in 1999 as an Invest- firmed) for Fixed Deposit Programme ment Management Company for and CRISIL A1+ (Reaffirmed) for `2,000 managing Venture Capital Funds crore for Commercial Paper (VCFs). Since inception, SVCL has Programme; and continued to provide growth capital to high-quality, growth-oriented MSMEs (b) CARE Ratings have Reaffirmed Rating across diversified sectors. SVCL, at of present, is acting as the Investment i. CARE AAA; Stable (Triple A; Manager for seven funds with a total Outlook: Stable) for RIDF Deposits corpus of `1,883 crore. of `38,000 crore; and unsecured Bonds of `21,276.60 crore, XI.2 Micro Units Development & Refinance Agency (MUDRA) was set up on April 8, ii. CARE AAA (FD); Stable (Triple A 2015 as a wholly owned subsidiary of (Fixed Deposits); Outlook: (Stable) SIDBI for ‘funding the unfunded’ micro for fixed deposits, enterprises in the country. MUDRA refinances banks, Micro-finance iii. CARE AAA; Stable (Triple A; Institutions (MFIs), NBFCs and other Outlook:Stable)/CARE A1+ (A One lending institutions which lend to micro Plus) for Commercial Paper / small business entities under Pradhan (CP)/Certificate of Deposit (CD) Mantri Mudra Yojana (PMMY). During FY Programme of `21,000 crore. 2016-17, MUDRA provided refinance support of `3,255 crore. iv. CARE Ratings have also Reaf- firmed CARE AAA (Is); Stable (Triple Under PMMY, a target of `1,80,000 A (Issuer Rating); Outlook: Stable) crore was set for FY 2016-17, as for Issuer Rating to SIDBI. against which `1,80,528.54 crore has been sanctioned involving 3,97,01,047 X. Human Resources accounts. A target of `2,44,000 crore has been fixed under PMMY for FY As on March 31, 2017, your Bank had on its 2017-18. rolls 1173 active full time staff comprising 1023 officers, 97 Class III staff and 53 XI.3 Receivables Exchange of India Limited Subordinate staff. Of the total staff, 205 (RXIL): Based on Reserve Bank of belong to Scheduled Castes (SCs), 82 to India’s (RBI) approval under the Scheduled Tribes (STs) and 217 to Other Payment and Settlement System (PSS) Backward Classes (OBCs). The staff Act, 2007, RXIL was set up on February strength included 8 ex-servicemen, 29 25, 2016 to operate the TReDS Persons with Disabilities (PwD) categories Exchange. RXIL is a joint venture and 1 in both ex-servicemen and Persons promoted by SIDBI and NSE Strategic with Disabilities (PwD) categories. The Investment Corporation Limited strength of women employees was 254. (NSICL), a subsidiary of National Stock Exchange of India Limited (NSE). RXIL is the first entity to receive approval from 14 Annual Report 2016-17 Reserve Bank of India (RBI) on Decem- resolve them with a special focus on the ber 01, 2016 to launch TReDS NPAs of MSME sector. As of March 31, Exchange. Accordingly, RXIL launched 2017, ISARC had assets under man- India’s first TReDS Exchange on agement (AUM) of `376.69 crore. January 09, 2017. Further, It has successfully executed financing of XI.7 India SME Technology Services Limited trade receivables of MSMEs and also (ISTSL) incorporated in 2005, offers successfully settled both financing and technology advisory and consultancy repayment legs through NPCI NACH services for projects related to energy Debit and Credit Settlement System as efficiency, cluster development and mandated by RBI. evaluation studies, capacity building, awareness creation, skill development. XI.4 Credit Guarantee Fund Trust for Micro It also provides services such as and Small Enterprises (CGTMSE): providing information on technology CGTMSE was set up in 2000 by Govern- options, match-making, finance syndi- ment of India and SIDBI to operate the cation and business collaborations and Credit Guarantee Scheme (CGS) for organising seminars/meets and Micro and Small Enterprises (MSEs) providing market support. ISTSL is which guarantees credit facilities upto empanelled with Bureau of Energy of `200 lakh extended by Member Lend- Efficiency (BEE), Ministry of Power, ing Institutions (MLIs) to those MSE Government of India as Grade-2 Energy loans, which are not backed by collater- Service Company (ESCO). al security and / or third party guaran- tees. The guarantee scheme helped in XII. Awards and Recognitions creating 27.72 lakh MSE loan accounts- for loan amount of `1.29 lakh crore as Your Bank was conferred with the ADFIAP on March 31, 2017. The estimated Development Awards 2017 under ‘SME employment generation out of CGTMSE Development Category’ for its SME devel- operations was 90.61 lakh as on March opment solutions and initiatives. 31, 2017. Your Bank was accredited with ISO/IEC XI.5 SMERA Ratings Ltd. (SMERA): SIDBI, 27001:2013 certification for IT infrastructure alongwith Dun & Bradstreet (D&B) Management, Application Development & and several Public and Private Sector Management, IT Service Desk and Data banks, set up SMERA in September Center from BSI (British Standards Institu- 2005, as an MSME dedicated third-par- tion) during the year. ty rating agency to provide comprehen- sive, transparent ratings to MSMEs. XIII. Acknowledgements Cumulatively, since its incorporation, SMERA had rated 40,764 MSME units The Board acknowledges the valuable up to March 31, 2017, out of which support received from the Government of MSEs accounted for 98%. India and the Reserve Bank of India. The Board is also thankful to the World Bank XI.6 India SME Asset Reconstruction Group; Japan International Cooperation Company Ltd. (ISARC) was incorporat- Agency (JICA), Japan; Department for ed on April 11, 2008 and commenced International Development (DFID), U. K.; its business operations on April 15, 2009 Kreditanstalt fur Wiederaufbau (KfW), with the principal objective to acquire non-performing assets (NPAs) and to Annual Report 2016-17 15 Germany; The Deutsche Gesellschaft fur ers engaged in the promotion and develop- Internationale Zusammenarbeit (GIZ), ment of the MSME sector. The Bank also Germany; International Fund for Agricultural thanks all its clients and investors for their Development (IFAD), Rome; French Devel- cooperation and looks forward to the opment Agency (AfD), France and Asian continued support in the years to come. The Development Bank (ADB) for their contin- Board recognizes and places on record its ued resource support and technical coop- appreciation for the services of SIDBI staff, eration. The Board places on record its at all levels, who showed strong and appreciation for the cooperation extended continued commitment, integrity and to SIDBI by Life Insurance Corporation of dedication to take the Bank on a higher India (LIC), banks, state level institutions, growth trajectory during the year. industry associations and other stakehold- (Ajay Kumar Kapur) (Manoj Mittal) Dy. Managing Director Dy. Managing Director 16 Annual Report 2016-17 Chapter - 1 Micro, Small & Medium Enterprises - Performance & Outlook 18 Annual Report 2016-17 The MSME sector continues to be an making NBFCs eligible Member Lending important pillar of India’s economy in terms Institutions (MLIs) for providing credit of its contribution to economic growth, guarantee to MSEs. The other initiatives employment generation and exports (Table include operationalisation of Trade Receiv- 1.1). With more than 51 million enterprises able Discounting System (TReDS), credit providing employment to over 117 million, guarantee schemes by National Credit the Indian MSME sector is the second Guarantee Trustee Company (NCGTC) for largest after agriculture. The share of Micro Units loans, Stand-up India loans and MSMEs in the country’s Gross Value Added Factoring, establishment of SC/ST hubs to (GVA) stood at around 33% in FY 2014-15. provide support to SC/ST entrepreneurs in The share of MSMEs in manufacturing public procurement, etc. The Union Budget output was 33% while exports constituted 2017-18 introduced certain important 45%. As per available data, the MSME measures like reducing corporate tax for sector registered an average growth rate of small companies with turnover of up to `50 7.4% during FY 2012-15. While manufactur- crore to 25% which is expected to benefit ing registered 6.2% growth, services around 6.7 lakh MSMEs and bringing down reported 7.7% growth. Presumptive Tax rate for those with turnover of up to `2 crore to 6% from 8%. More Than 117 million This would protect domestic industries in employment. Second largest employer after agriculture terms of higher custom duty from import of cashew nuts, select electronic hardware, MSME Sector’s leather footwear manufacturing compo- 33% of the country’s Contribution GVA nents, to name a few. With the objective of to Indian Economy increasing cash flow to MSMEs, the RBI also included factoring transactions on ‘with More than 51 million recourse’ basis under priority sector MSMEs lending. Additionally, the factoring transac- tions taking place on the TReDS platform have also been made eligible for classifica- MSME Outlook tion under priority sector. These proactive initiatives of the GoI and RBI are expected Overall, the MSME sector is expected to to further strengthen the MSME ecosystem grow at a healthy rate, owing to the several making it more vibrant and competitive. initiatives of the Government of India (GoI) and Reserve Bank of India (RBI). Some of them are – the launch of the ‘Stand-up India’ programme, ‘Zero Effect Zero Defect’ (ZED) scheme, increase of credit guarantee limit from `1 crore to `2 crore, apart from Annual Report 2016-17 19 Table 1.1: MSME Sector – Principal Characteristics 1. No. of Enterprises in 2014-15 (in million) 51.1 Out of which, a. Percentage share of Registered Units* 6% b. Percentage share of Un-registered units* 94% c. Percentage share of Socially Backward Classes (SCs/STs/OBCs)* 51% d. Percentage share of Rural Units* 55% e. Percentage share of women enterprises* 7.4% 2. Employment in 2014-15 (in million) 117.1 3. Average Employment per Enterprise (No.) 2.3 4. Investment per employment (` Lakh)* 5.3 5. Percentage of Enterprises availing loans* 7.3% a. From Institutional Sources 5.2% b. From Non-institutional sources 2.1% c. Percentage of Enterprises without loans / self-finance 92.7% 6. Percentage share of MSME GVA out of India’s GVA in 2014-15 33.3% 7. Percentage share of MSMEs in India’s Manufacturing Output 33.4% in 2014-15 8. Percentage share in India’s exports in 2014-15 45% * As per MSME Census 2006-07. Sources: Annual Report 2016-17, Min. of MSME; MSME Census 2006-07. 20 Annual Report 2016-17 Chapter - 2 Business Initiatives and Overall Operations 22 Annual Report 2016-17 SIDBI launched a `60 crore ASPIRE fund on October 20, 2016 to promote innovation, rural entrepreneurship and agricultural industry. Seen here are (from left to right): Shri Ajay Kumar Kapur, Dy. Managing Director, SIDBI; Shri B. H. Anil Kumar, IAS, Joint Secretary, Ministry of MSME, Govern- ment of India; Shri Kalraj Mishra, Hon’ble Minister for MSME; Dr. Kshatrapati Shivaji, IAS, the then Chairman & Managing Director, SIDBI and Ms. Chitra Ramakrish- na, the then Managing Director & Chief Executive Officer, National Stock Exchange. SIDBI, set up in 1990 under an Act of the Parliament, is the principal financial institu- tion for the promotion, financing and develop- ment of the Micro, Small and Medium Enter- prise (MSME) sector in India. Additionally, the Bank also coordinates with institutions Environmental engaged in similar activities. Accordingly, SIDBI has always endeavoured to work En vir Soc towards sustainable development of the on io- me Eco- nt Environmental MSME sector on Triple Ps fronts - Profit al (economic), People (social) and Planet SUSTAINABILITY (environment), and manifested in creation of economic wealth, its distribution for an Social Socio- egalitarian society and preservation of Economic Economic ecological wealth. On the economic front of creating an enabling financial ecosystem for MSMEs, SIDBI has strived to meet the diverse credit needs of MSMEs through innovative credit products, credit processes and credit chan- Economic Impact nels. The Bank has been a pioneer in MFI-led microfinance movement in India. It has SIDBI's financial assistance has impact- nurtured and strengthened more than 100 ed various strata of society - ranging MFIs, which have witnessed steady inflows of from bottom-of-the-pyramid to medium investments from other investors encouraged enterprises, from traditional industries to by SIDBI’s initial bets on these institutions. high-end knowledge-based industries Some of the supported MFIs have grown to and from domestic production to export become Small Finance Banks (SFBs). SIDBI promotion. SIDBI has touched the lives of has also ushered in a culture of energy more than 360 lakh people in the MSME efficiency and sustainable finance in the sector, directly and indirectly, through MSME sector. The Bank also pioneered various credit measures. Venture Capital, Risk Capital facilities, Reverse factoring, among others, for MSMEs which were later adopted by other players. Annual Report 2016-17 23 Strategic Business • In order to widen credit delivery chan- nels, the Bank has been entering into Initiatives strategic MoUs with industry associa- tions. So far, eight such MoUs have The Bank has initiated a number of proac- been signed with different industry tive measures to augment credit and equity associations. to the MSME sector. • In a bid to boost availability of long term Credit Delivery through new resources for MSMEs in the country, partners SIDBI signed an MoU with LIC on April 07, 2016, under which LIC allocated an • In order to enhance credit flow to the amount of `200 crore to co-invest along MSME sector on competitive terms, with India Aspiration Fund. Under the SIDBI entered into a Memorandum of MoU, the aggregate commitment stood Understanding (MoU) with Vijaya Bank. at `104.50 crore. The objective was to provide eligible MSEs with financial assistance at Support to SFBs: 1-year MCLR of Vijaya Bank (presently 8.65% p.a.) supported by refinance from In order to strengthen Small Finance Banks SIDBI. Additionally, SIDBI also offers (SFBs) and augment their equity and term loans at about 9.5% p.a. for eligible resource base, the Bank introduced two units under the ‘Make in India’ scheme. facilities: • A similar MoU was signed with Capital • Provide equity investment for setting Small Finance Bank Ltd. for collabora- up/capitalisation of the SFBs to meet tion/partnership in various financial and their initial equity/capital gap; in partic- non-financial areas to support MSMEs. ular, the requirement for equity from domestic sources. • Post transformation of the MFIs/NBFCs into SFBs, the Bank would provide refinance support. Privileged Finance In order to encourage further growth of its well-performing customers, SIDBI intro- duced a new variant of existing Privileged Customer Scheme (PCS), viz., PCS (Premi- SIDBI signed an MoU with Vijaya Bank for um), under which SIDBI would provide providing concessional finance to MSEs on enhanced annual credit limits to its existing February 20, 2017. Seen here are from left to well-performing customers for their annual right: Shri B. S. Rama Rao, Executive Director, non-project specific investment plans. Vijaya Bank, Dr. Kishore Sansi, Managing Director and CEO, Vijaya Bank, Shri Manoj Mittal, Dy. Managing Director, Shri K. G. Alai, the then Chief General Manager and Shri A. C. Sahu, General Manager. 24 Annual Report 2016-17 Faster Realisation of Receivables Operationalisation of TReDS To help MSMEs in faster realisation of their SIDBI, along with NSE Strategic Investment receivables, SIDBI introduced Receivable Corporation Ltd. (NSICL) - a subsidiary of Finance Scheme in 1991. Under the NSE, set up the first Receivables Exchange scheme, limits are fixed for performing of India Limited (RXIL). RXIL has been the purchaser companies with regard to first entity to operationalise a ‘Trade Receiv- discounting usance bills of MSMEs, in order ables Discounting System (TReDS)’ on that MSMEs realise their sale proceeds January 09, 2017. TReDS is an institutional quickly. Besides, SIDBI offers invoice mechanism under RBI guidelines for discounting facilities to suppliers (MSME) of facilitating the financing of trade receiv- purchaser companies. ables of MSMEs through multiple financiers. This would facilitate financing of trade To scale up Receivable Financing through receivables of MSMEs on an electronic the digital mode, the Bank undertook the platform through a transparent bidding following initiatives: process, in which multiple financiers participate (Box 2.1). Box 2.1: Operationalisation of TReDS The TReDS Exchange uses a simplified process to on-board the participants. Only Factoring Units i.e. invoices accepted by the counterparty go for auc- tion. Multiple financiers are allowed to bid on the invoices. They need to enter the discount/financing rate. The participant who bears the financing/ inter- est cost has the right to accept the bid. On acceptance of the bid by the cost-bearing participant, the auction is concluded. The MSME seller will receive funds on T+1/ T+2 (depending on the time when the bid is accepted by the cost-bearing participant) after the invoice has been financed. On T+1, the Financiers bank account is debited and the sellers designated bank account is credited. The credit to sellers account happens only if the debit to the Financiers designated bank account is successful. This is the Leg1 settlement. Under Leg2 settlement, the buyer will make repayment to the Financier who financed the transaction. In other words, on invoice due date, account of the buyer shall be auto debited using NPCI NACH Auto Debit mechanism to settle the obligations due to the financier/banker. For factor- ing units remaining unfinanced, the buyer can use the TReDS Exchange to make payment to the MSME seller as part of Leg3 settlement. Annual Report 2016-17 25 Entity Creation Verification Payment of Fee Onboarding Register & Execute RXIL Verification Pay Registration Master Agreement & due dilligence Fee Initiator Acceptor Auction Factoring Buyer / Seller Counter Party Auction of Factoring Unit uploaded invoices Accepts Invoices unit begins Bid Offering Bid Acceptance Obligation Auction Financial Bid Cost bearers Auction of Factoring Process accepts the best unit begins bid LEG 1 (T+1) Bid Acceptance Obligation Settlement Debit Financier & Debit to buyer & Unifinanced or Credit MSME Seller Credit MSME Seller Falled Leg 1 settling Process Realese Factoring directly between Register with CERSAI UNITs from CERSAI Buyer & Seller Scaling up Existing Schemes SMILE Scheme: fostering inclusive economic growth and enabling employment creation. As on During FY 2015-16, the Bank had launched, March 31, 2017, 1061 MSMEs were assisted a `10,000 crore ‘SIDBI Make in India Soft with an aggregated term loan of `1,945 Loan Fund for Micro, Small & Medium crore under the said LoC. Enterprises’ (SMILE) to offer soft loans in the nature of quasi-equity in order to meet the Sustainable Finance required debt-equity ratio and term loan on relatively soft terms. Till end of March 2017, SIDBI has been promoting sustainable aggregate loans of `3,586 crore were development of the MSME sector in India by sanctioned under the scheme. not only providing adequate and affordable energy efficiency/green finance, but also The SMILE scheme has benefitted 1,384 enhancing awareness of the benefits of MSMEs as on March 31, 2017. climate control in MSME clusters. SIDBI has been operating focused lending schemes World Bank LoC for promoting investment in energy efficient technologies/production processes, clean SIDBI has contracted a World Bank Line of technology including renewable energy like Credit (LoC) for 'MSME Growth Innovation solar rooftop voltaic or solar thermal system and Inclusive Finance (MSME-IIF)' Project'. production and under bilateral Lines of The project focuses on improving access to Credit from international agencies such as finance for MSMEs right from the initial JICA, Japan; AFD, France and KfW, Germa- stages to its growth years through innova- ny. tive financial products. The Bank aims at 26 Annual Report 2016-17 The main objective of these schemes is to enhance energy efficiency, reduce A 4E Success Story CO2 emissions and improve the profit- ability of the Indian MSMEs. An import- M/s. Kudu Knitwear Pvt. Ltd. - a yarn and customised clothing manufacturing unit at ant initiative in this regard is the World Ludhiana, Punjab ran up an annual energy Bank-led GEF-financed energy efficien- bill of `5.2 crore for annual energy consump- cy project being executed by SIDBI tion of 2,667 toe. Through a detailed energy along with Bureau of Energy Efficiency audit, it was found that the unit was running (BEE). The project is being implemented at lower efficiency due to incomplete com- in 10 clusters with the objective of bustion, abnormal operation of the boiler and increasing demand for energy efficiency faulty design. investments in target MSME clusters and building their capacity to access com- The unit was taken up under 4E Solutions mercial finance. Overall, more than 1,200 and the existing boiler was replaced with a walk-through audits and 750 detailed fully automated higher efficiency packaged energy audits were conducted under boiler. Several energy efficiency measures were implemented and the unit was able to the project. The project has provided reduce its energy cost by 12%. With a capital implementation assistance to more than investment of `40 lakh and a payback period 670 MSMEs. of 2.67 years, the unit reported annual savings of `15 lakh in energy cost. The Bank has also launched the 517 End-to-End-Energy-Efficiency Solutions 12 % (4E solutions), a product to help MSME Re duc units cut down on power and fuel cost tio n and upgrade existing technologies. 454 Before After Energy Cost (INR Lakh/Yr) Environmental Impact • SIDBI has been a pioneer in promoting energy efficiency in the MSME sector. It is implementing various programmes such as, the World Bank project financed by Global Environmental Facility (GEF) titled “Financing Energy Efficiency at MSMEs” in around 10 MSME clusters in India and also scaling up the benefits through an End to End Energy Efficiency (4E) Solutions Product at National level. These projects have positively impacted the environment by way of lifetime emission reduction of 11.2 lakh tons of CO2. • The Bank is also implementing the World Bank supported project, viz. “Partial Risk Sharing Facility for Energy Efficiency (PRSF)” along with Energy Efficiency Services Limited (EESL). The project is expected to result in significant energy savings to the tune of 1,000 GWh and mitigation of CO2 emissions reductions to the tune of 0.734 million tons. • The energy efficiency initiative of the Bank has resulted in energy saving of 10-25% in different MSMEs. This has boosted the direct profitability of such MSMEs. Annual Report 2016-17 27 Further, SIDBI along with Energy Efficiency ments for such projects have been devel- Services Limited (EESL) is implementing the oped and hosted on its website World Bank supported project, ‘Partial Risk (http://prsf.sidbi.in) for the benefit of ESCOs. Sharing Facility for Energy Efficiency (PRSF)’, a Guarantee Fund corpus of around SIDBI has been accredited as ‘National `251 crore (USD 37 million) and technical Implementing Entity’ by the Green Climate assistance of around `41 crore (USD 6 Fund (GCF) set up by the United Nations for million). The project intends to provide funding climate change mitigation and partial risk cover to banks/FIs for the loans adaptation actions through Accredited given by them to ESCO-implemented Entities in developing countries. The projects. Five Memorandums of Under- accreditation has since been cleared by standing (MoUs) have been signed with GCF Board paving way for the Bank to play interested and eligible banks/NBFCs to a major role in formulation and implementa- participate under PRSF, i.e. ESCO financing tion of nationally important projects in with PRSF guarantee support. Under the climate change mitigation and adaptation. project, standardised transaction docu- Equity Augmentation Measures A major constraint in availing of credit by MSMEs is their low level of capital base which reduces their leveraging capacity to get adequate loans from the banking system. Also, lack of equity support has inhibited the innovations in the sector. This gap is being addressed by SIDBI in a number of ways. A. Direct Risk Capital Assistance B. Fund of Funds Operations • Risk Capital Support: • India Aspiration Fund: SIDBI commenced the Risk Capital The Bank has constituted a `2,000 operations in 2009 under the MSME crore India Aspiration Fund (IAF) as a Risk Capital Fund (MSME-RCF) with a Fund of Funds for making investments committed corpus of `2,000 crore. in Alternative Investment Funds [AIFs]. MSME-RCF was used for both - direct AIFs supported under IAF with corpus of risk capital assistance and for Fund of upto `500 crore would in turn make Funds operations. This Fund has been investments in MSMEs to the extent of fully committed. twice the commitment of SIDBI or 50% of the corpus of the AIF, whichever is • Start-up Assistance: higher. AIFs having corpus of more than SIDBI is also in the process of directly `500 crore would in turn make invest- extending structured assistance to ments in MSMEs to the extent of twice start-ups and early stage ventures the commitment of SIDBI or `250 crore, under Start-up Assistance Scheme whichever is higher. (SAS). SIDBI had also entered into a formal understanding with NASSCOM and Indian Software Product Industry Round Table (ISPIRT) for validation of business models under SAS. 28 Annual Report 2016-17 • Fund of Funds for Start-ups: country, SIDBI entered into an MoU with Under the ‘Start-up India’ initiative Life Insurance Corporation of India (LIC) announced by the Hon’ble Prime on April 07, 2016, under which, LIC Minister on August 15, 2015, the allocated an amount of `200 crore to Government established a `10,000 coinvest along with India Aspiration crore Fund of Funds for Start-ups (FFS). Fund. This is now with SIDBI for contributing to AIFs which in turn would invest in start-ups to the extent of twice as Equity Support Impact defined by GOI. The Government has • Direct equity / quasi-equity support/ commit- released `600 crore till March 2017. ment at `1,107 crore. • Benefitted 575 Start-ups/MSMEs. During the year under review, opera- • Supported 56 AIFs which would have a total tional guidelines of FFS were finalised equity/quasi-equity pool of `1,809 crore. and issued by Department of Industrial Direct Equity Assistance No. of Policy and Promotion (DIPP), GoI. Support Provided Beneficiaries Schemes (` in Crore) • ASPIRE Fund: GEMS 1041 528 Under the ‘A Scheme for Promotion of Start-up 66 47 Innovation, Rural Industry and Entrepre- Assistance neurship (ASPIRE) Fund of Ministry of Total 1107 575 MSME, `60 crore was allocated and disbursed to SIDBI for managing the Name of the Amount No. of AIFs Fund under Committed Fund. The objective of the scheme is to FoF (` in Crore) invest in VCs that focus on start-ups / India Aspiration 1146 35 early stage enterprises in the areas of Fund Rural and Agro Industries. Fund of Fund 624 17 Operations • MoU with LIC: In a bid to boost availability of long term ASPIRE Fund 39 4 resources for innovative MSMEs in the Total 1809 56 Success Stories of Incorporated in August 2005, ‘ESDS Software Solution’ is a leading IT enabled Service provider based out of Nashik, SIDBI’s Equity Maharashtra. ESDS has expertise in the areas of Data Center Support Service, Application Development, Product Development, Cloud Computing etc. In order to upscale the business through innovation, SIDBI provided sub-debt assistance to the tune of `4.50 crore in FY2015. The successful operations and expansion of the business enabled the company to open its second data center admeasuring 80,000 sq.ft in Mahape, Navi Mumbai in 2016. The revenue doubled from `35 crore in FY2015 to `70 crore in FY2017. It may be noted that the new data centre was inaugurated by the Chief Minister of Maharashtra. SEDEMAC Mechatronics, Pune is a technology-products company that focuses on controls for engines and power-trains. In order to boost technological innovations in the form of ‘Smart Ignition’ product for motorcycles and scooters and also to expand overseas, SIDBI sanctioned `4 crore as Risk capital funding in FY2015 and further funding of `8 crore as Term Loan under DCS & `8 crore limit under working capital scheme in 2016. Post SIDBI’s investment, the company recorded a 400% increase in three years from `15 crore in FY2015 to `80 crore in FY 2017. Annual Report 2016-17 29 Digital Initiatives In the recent period, the Government of In order to further strengthen the start-up India (GoI) introduced financial schemes for ecosystem, SIDBI created “www.sidbistart- the unserved sections of society: MUDRA upmitra.in” portal with the prime objective of loans upto `10 lakh for very small micro enabling start-up entrepreneurs to get enterprises, Stand-up India (SUI) loans of connected with various stakeholders, viz. more than `10 lakh and upto `100 lakh for incubators, mentors, angel networks, SCs/STs and Women and Start-up India Venture Capital funds, etc. The highlights of scheme to foster entrepreneurship and these digital initiatives and impact are given promote innovation by creating an eco- in Box 2.3 and 2.4 respectively. system that is conducive for the growth of start-ups. Box 2.3 Digital Initiatives for Access to Credit In order to widen these programmes so as to enable underserved people to apply for SUI Clinics: A performance linked such loans even from remote locations, the initiative to enable ease of access by Bank created online loan portals www.- facilitating on-the-spot applications of standupmitra.in for stand-up loans and aspirants with support of expert agen- www.udyamimitra.in for MUDRA loans, cies. Stand-up India loans and MSME loans upto `2 crore. The reach of these two portals are Champion Agencies (ChAs): ChAs are given in Box 2.2. the ones who can be relied upon to attend the Handholding (HH) request unable to be tackled by identified Hand Box. 2.2 Performance under Udyamimitra Holding (HH) agency. and Standupmitra Portal (as on April 30, 2017) Integration with Guarantee Companies: No. of hits on Standupmitra : 16.16 lakh; Any loan applied on the portal (on or Mitra portal(s) Udyamimitra : 2.90 lakh after March 31, 2017) would be analysed by the NCGTC rule engine to provide Registration 40,974 better understanding to the Banker on the tentative eligibility of guarantee Applications 37,274 Nos. (online 6,556) coverage. Sanctions 32,304 Nos. (online 1,700) SUI sanctions : 29,730 for Audio Visual Movies: In order to deepen `6,107 crore the outreach, the audio visuals enabling navigation of portal with ease have No. of 1.06 lakh of 102 Banks been expanded further to include 10 branches vernaculars. logged in Ease of Access Kit has been made No. of 5,321 available on the dashboard of the bank Standup India branches for ready reckoning. Help Centres (SUHCs) logged in 30 Annual Report 2016-17 SIDBI Startup Mitra portal: As part of upscaling its initiatives to address gaps in the start-up ecosystem, SIDBI created an online platform “www.sidbistartupmitra.in”, which was launched by the Hon’ble President of India on March 17, 2016. The objective was to bring all stakeholders, startup entrepreneurs, incubators, investors (Angel networks/ Venture Capital Funds), industry bodies, mentors /advisors, banks on this electronic platform in order to meet the financing and other needs of the early stage and start-up enterprises. The platform facilitates entrepreneurs to engage with incubators, investors, mentors and government schemes for start-ups in India by becoming the knowledge partner for State and Central Governments. The portal is also supported by the Department of Science and Technology [DST], Govt. of India. Around 5,890 start-ups, 105 incubators and 86 investors have registered on this platform. Box 2.4: Impact of Digital Initiatives of SIDBI • Differentiator: • Volunteers as changemakers: The analytical data on portals indicate that ME4WE (Mentor Enablers for Women under Stand-up India, MUDRA and MSMEs, Entrepreneurs), a voluntary offering from the outreach of 38000+ sanctions (1962 22 lady officers of SIDBI have, in a span of online and rest offline i.e. directly received just three months, attended to 67 hand- at branches which are uploaded on portal) holding requests out of 110. A pool of has been recorded. Similarly, 15,234 volunteers- women entrepreneurs handholding requests (in eight expertise assisted by SIDBI has also been firmed areas of Application Filling/ Project Report up to handhold/mentor women entrepre- Preparation, Entrepreneurship Develop- neurs at post disbursement stage to help ment Programme / Digital Literacy, Finan- them resolve problems related to the cial Training, Margin money or Subsidy, setting up of an enterprise. Mentoring, Skilling-Vocational, Workshed Requirement, Energy Efficiency - Hand- • Breaking Barriers: holding for Solar Projects and Energy By enhancing access to Women and Audits) with top three requests types being SCs/STs under Standup India ( thus Entrepreneurship Development breaking gender and underserved/un- Program/Digital Literacy, Application served barriers), the portals are breaking filling/Project Report Preparation and barriers of language ( through Audio Margin money or subsidy) have been Visuals (AVs) in 10 languages capturing lodged and 9,478 responded. estimated 65%+ population), educational and age barriers also. About 357 districts • Virtual loan market: (310 under Stand-Up India) have been A loan application is being picked by covered through online sanctions multiple banks. Also, banks are picking (districts like Unakoti of Tripura, Gander- cases which have been marked as not bal and Kupwara Districts of Jammu & interested by other banks and aspirants Kashmir have been accessed online are receiving responsive calls and so on. only), thus breaking geographical barriers. Aspirants including transgen- • Ease of doing business: ders in the age group of 40-50 years as About 1960 plus online cases have been also 60 years and above have become done. The numbers have increased from 20 entrepreneurs thus indicating that those cases a week to 40 indicating traction of employed are opting for vocational digital access. Majority of the cases are avenues. In the over 60 years age group, being done in the loan bracket of `25 lakh the number of women entrepreneurs are registering average Turn Around Time (TAT) more compared to men. In terms of of upto one week. (88% of online cases education, 42% of online sanctions have being done in one week). been for Class XII and below and Annual Report 2016-17 31 A Success Story through Stand-up Portal Smt. Y. L. Lalitha Kumari, aged 49, from West Goda- vari District of Andhra Pradesh came to know about the scheme through a banker whom she had been contacting in the past for a loan. She was able to lodge the application independently on the portal. After submission of the application, her loan of `37.50 lakh was sanctioned by the Central Bank of India, Eluru Branch under the Stand-Up India scheme. The unit started production from August 2016 and now engages 15 labourers with a monthly turnover of `1.5 lakh to `2 lakh. Micro Finance SIDBI has been the pioneer financial capacity building measures to strengthen institution in promoting MFI-based micro-fi- MFIs and the ecosystem. Till March 2017, nance ecosystem in the country. Over the the Bank has developed the capacity of years, SIDBI emerged as a Market Maker to about 100 MFIs and provided financial create a supply side solution to cater to the support to them to the extent of `12,714 financing needs of the Bottom-Of-the-Pyra- crore, benefitting 356 lakh people, mostly mid (BOP) populace. This was done through women. its micro finance interventions and by nurturing and creating a network of strong, SIDBI's microfinance support has helped viable and sustainable Micro Finance the poor to access financial services, Institutions (MFIs) for providing micro improve the quality of their life through finance services to the economically creation of alternative/additional livelihood disadvantaged people, especially women. opportunities, reduce dependence on the It is important to mention here that the exploitative informal sources of credit, interventions of SIDBI have been designed increase participation in the family and to cater both, the demand as well as the business decision making, enhance knowl- supply side needs. In other words, SIDBI has edge on financial matters, improve social not only supplied financial support to MFIs security, asset status, health and education for onward lending to micro units, but also parameters. undertook a number of developmental and A conclave on Small Micro Finance Institutions was held on August 26, 2016 at New Delhi. From left to right: Shri S. Ramakrishnan, the then Chief General Manager, SIDBI, Shri Jiji Mammen, CEO, MUDRA, Dr. Kshatrapati Shivaji, the then Chairman and Managing Director, SIDBI, Shri Manoj Mittal, Dy. Managing Director, SIDBI and and Shri P. Satish, Executive Director, Sa-Dhan asset status, health and education parameters. 32 Annual Report 2016-17 Box 2.5: Micro Finance Impact Under the ADB-JFPR Project of Supporting Micro entrepreneurship for Women’s Empow- erment, Insight Development Consulting Group (IDCG) conducted end-line survey after training of women micro-entrepreneurs who reported the following changes: The percentage of women entrepreneurs who Attained increased knowledge on financial matters 81 could increase their average monthly sales & business turnover 90 could access easier credit of `50,000 or more 77 reported improved mobility of women micro enterpreneurs 65 felt improved social security and asset status 75 reported increased participation in decisions regarding their business 75 reported increased participation in family decision making 80 reported increased family income from contribution of their business 90 The women micro-entrepreneurs also presented a vibrant social-economic profile. • 95 % are married and nearly 72 % live in nuclear families. • 11 % are illiterate while 26 % have completed high-school. • 69 % own their businesses and 23 % contribute all the household income. SIDBI’s Initiatives on Responsible Financing SIDBI has been playing the role of a market-maker to enhance corporate governance and operational efficiency of MFIs and enable smooth flow of adequate credit to the micro finance sector through measures like capacity assessment ratings, portfolio audits, code of conduct assessment, etc. Promoting responsible lending and adherence to a laid-down Code of Conduct (COC) are major interventions by SIDBI. (Box 2.6). Box 2.6: Responsible Micro Finance Measures • Lenders’ Forum: SIDBI is the Convener of the Lenders’ Forum comprising key lenders of MFIs which was created for sharing information and promoting cooperation among MFI lenders. Major lenders of MFIs have agreed to impress upon MFIs to implement responsible lending practices through a common set of loan covenants including adherence to Fair Practices Code, KYC norms, etc. • Development of Harmonised CoCA Tool: A voluntary Code of Conduct has been developed by the Industry Associations, viz. Sa-Dhan and MFIN. The Code of Conduct lays down the requirements in the areas of Integrity and Ethical Behavior, Transparency, Client Protection, Governance, Recruitment, Client Education, Data Sharing, Customer Feedback/Grievance Redressal Mechanism, which aim at improving the sectoral practices. • In the Phase I of development of Code of Conduct Assessment (COCA) tool, SIDBI under- took a total of 75 assessments and all the reports have been placed in the public domain by SIDBI. • Support for Strengthening the Self Regulatory Organisations (SRO) mechanism: To ensure effective monitoring of the functioning of NBFC-MFIs, their compliance with the regulations and Code of Conduct and in the best interest of the customers of the NBFC-MFIs, RBI decided to accord recognition to two micro finance industry bodies, viz., Microfinance Institutions Network (MFIN) and Sa-Dhan as SROs of NBFC-MFIs. SIDBI supported Sa-Dhan by way of grant support for implementing the SRO framework. The purpose of support was to strengthen Sa-Dhan as a SRO and put in place an effective regulatory mechanism even for those MFIs which had not yet been brought under any regulation in the micro finance space. Support to Sa-Dhan for implementing SRO frame- work was a market development initiative aimed at the larger sectoral good. Nodal Agency Services for Government of India Schemes A. Credit Linked Capital Subsidy Scheme B. Technology Up-gradation Fund (CLCSS): Scheme (TUFS): The Scheme aims at facilitating Tech- The Ministry of Textiles introduced the nology Up-gradation of Micro and Small Technology Up-gradation Fund Scheme Enterprises by providing 15% capital (TUFS) for textiles and jute industry to subsidy [ceiling of `15 lakh] on institu- facilitate induction of state-of-the-art tional finance availed by them for technology by the textile units. During induction of improved technology in FY 2016-17, total subsidy of `36.73 approved sub-sectors/products. 227 crore were facilitated towards 1690 micro and small enterprises were subsidy cases under TUFS. facilitated with CLCSS subsidy amount- ing to `11.59 crore during FY 2016-17. 34 Annual Report 2016-17 Box 2.7: Impact of IMEF An impact assessment study was commissioned by SIDBI to evaluate the impact of IMEF funding on the MFI sector and the sustainability of the funded MFIs. The key findings of the study are as under: • Institutional Sustainability: IMEF funding can be attributed for a high and positive impact on the MFIs in terms of building their overall sustainability in a large proportion of MFIs. The fund had the highest impact in the area of institutional sustainability. • Outreach, Lending Practices and Operational Efficiency: There was a remarkable improvement in performance of the MFIs in the area of outreach and lending practices and operational efficiency. • Overall Impact Based on Regulatory Status: It has been found that the impact of IMEF funding was uniform across MFIs irrespective of their regulatory status (NBFCs vs. Non-NBFCs). Around 32% of NBFC MFIs and 24% of Non-NBFC MFIs in the immediate term and around 75% of MFIs (for both NBFCs and Non-NBFCs) in the medium term demonstrated a medium to high level of impact of funding. • Overall Impact Based on Geography: The impact of IMEF funding was found to be the most significant in north-based MFIs with all MFIs showing a medium to high level impact of funding in the medium term. • A significant number of the investee entities can already be called “success stories” in terms of growth and other financial parameters achieved post investment. One of the most notable success stories has been RGVN (North East) Microfi- nance Ltd., a socially oriented MFI operating exclusively in the North East region which was selected and granted in principle approval by RBI or setting up a Small Financial Bank (SFB). The banking license for SFB operations has since been granted and the entity will soon be commencing operations. According to Smt. Rupali Kalita, Managing Director, RGVN (North East) Microfinance Ltd., “At the time of registration of RGVN (NE) MFL as a seperate Micro Finance Compa- ny by hiving it off from the original RGVN Society, SIDBI provided the initial capital support from IMEF Fund. We are grateful to SIDBI for initiating the Micro Finance initiative in the north eastern region and for being an integral part of our growth and success from near failure to the present position where we are at the thresh- old of opening the doors of North East Small Finance Bank.” 36 Annual Report 2016-17 Business Operations Overall Operations SIDBI's credit support to MSMEs is being During FY 2016-17, the total indirect finance channelised through indirect financial portfolio of the Bank increased by 6% to assistance to banks/FIs for onward lending `57,678 crore. and also directly with emphasis on niche financing like equity/risk capital, sustain- Direct Credit able finance, receivable finance, services sector financing among others. The direct MSME credit assistance by the Bank includes, among others, niche financ- The total MSME outstanding credit of the ing support like risk capital, sustainable Bank increased by 4% during FY 2016-17 to finance, receivable finance, services sector `68,290 crore as against `65,632 crore in finance, etc. The net credit outstanding FY2015-16. The outstanding highlights are stood at `10,612 crore by end of March given in Table 2.1. 2017 which was around 16% of the Bank’s total portfolio. Indirect Credit The indirect credit assistance encom- Portfolio Size In ` crore passed refinancing support to banks, State 65632 68290 Financial Corporations (SFCs), Bills Redis- 55343 counting support to banks, assistance to 46054 Microfinance Institutions (MFIs), NBFCs and resource support to various institutions and agencies. Total indirect finance of the Bank 14571 was around 84% of its total credit outstand- 5177 ing by end-March 2017, while refinance to 1991 2001 2011 2015 2016 2017 banks constituted a major portion at 71%. As a March 31 Table 2.1: Overall Operations In ` crore Particulars FY 2015-16 FY 2016-17 O/s Amount as on O/s Amount as on March 31 March 31 I. Indirect Credit a. Refinance 46,544 48,503 b. Micro Finance 2,013 2,308 c. Resource support to NBFC / Others 5,678 6,867 Total Indirect Credit 54,235 57,678 II. Direct Credit a. Risk Capital 792 707 b. Sustainable Finance 1,920 1,341 c. Service Sector 1,934 1,927 d. MSME Receivable Finance 1,513 1,071 e. Others 5,238 5,566 Total Direct Credit 11,397 10,612 Grand Total 65,632 68,290 Note: Outstanding figures are net of prudential write-off and NPA provision. 38 Annual Report 2016-17 Financial Operations Income & Profit In ` crore 6267 5939 5560 The total income of the Bank increased by 9.7% during FY 2016-17 to `6,345.80 crore 3433 as compared to `5,784.60 crore during the 1619 preceding year. The total expenditure 425 1417 1177 1120 477 514 36 during the corresponding period was 1991 2001 2011 2015 2016 2017 `4,579.03 crore compared to `3,922.98 Income Profit crore during the preceding year. The Profit Durng the year ended March 31 before Tax for the year was marginally higher at `1,687.47 crore, compared to Balance Sheet Size In ` crore `1,636.47 crore in the preceding year. The 79682 net profit after tax and Deferred Tax Adjust- 76478 ment for the year was `1,120.18 crore as 60855 against `1,177.46 crore in the preceding 51217 year. Balance Sheet Size 17090 5309 The Balance sheet size of the Bank 1991 2001 2011 2015 2016 2017 increased by 4% to `79,682 crore in FY As on March 31 2016-17 from `76,478 crore in FY 2015-16. Also, the networth of the Bank stood at `12,905 crore in FY 2016-17. Rating of SIDBI Debt Instruments Resources Management The short-term and long-term debt instru- ments of SIDBI are rated by CRISIL and Resources aggregating `65,731 crore were CARE Ratings. During FY2017 (a) CRISIL raised by SIDBI during FY 2016-17 as Reaffirmed rating of CRISIL AAA/Stable for against `53,807 crore during FY 2015-16. the Unsecured Bonds issuance Programme During the year under review, the Bank aggregating `1,400 crore, FAAA/Stable raised resources of `65,111crore from (Reaffirmed) for Fixed Deposit Programme domestic sources and `620 crore in foreign and CRISIL A1+ (Reaffirmed) for `2,000 currencies. crore for Commercial Paper Programme; and (b) CARE Ratings have Reaffirmed The accounts of the Bank for the financial Rating of CARE AAA; Stable (Triple A; year 2016-17 were audited by M/s Borkar & Outlook: Stable) for (i) RIDF Deposits of Muzumdar, Chartered Accountants, `38,000 crore; and (ii) Unsecured Bonds of Mumbai who were appointed in terms of `21,276.60 crore, CARE AAA (FD); Stable Section 30(1) of the SIDBI Act, 1989 (as (Triple A (Fixed Deposits); Outlook:Stable) for amended) at the Annual General Meeting fixed deposits, CARE AAA; Stable (Triple A; held on July 07, 2017 for carrying out the Outlook:Stable)/CARE A1+ (A One Plus) for statutory audit. Commercial Paper (CP)/Certificate of Deposit (CD) Programme of `21,000 crore. The reports of the Auditors are given on CARE Ratings have also Reaffirmed CARE page nos. 68 and 108. AAA (Is); Stable (Triple A (Issuer Rating); Outlook: Stable) for Issuer Rating to SIDBI. Annual Report 2016-17 39 Balance Sheet and Statement of Accounts The audited Balance Sheet, along with Refinance Agency Ltd. (MUDRA) and Profit and Loss Account and Cash Flow associates viz. SMERA Ratings Ltd. Statement of Small Industries Development (SMERA), India SME Asset Reconstruction Bank of India, for the financial year 2016-17 Company Ltd. (ISARC), India SME Technolo- are given in Appendix – 1. The consolidated gy Services Ltd. (ISTSL), Receivable Balance Sheet along with Profit and Loss Exchange of India Ltd. (RXIL) and others are Account and Cash Flow Statement of SIDBI given in Appendix – II. with its subsidiaries viz. SIDBI Venture Capital Ltd. (SVCL), SIDBI Trustee Company Ltd. (STCL), Micro Units Development & 40 Annual Report 2016-17 Study on credit gaps, potential and financing of Franchising Industry in India Study of scope of funding of MSMEs by SIDBI in existing/new niche areas Final Report October 2014 1 I ncepti on Report Study on Servi ces Sector in India Study on Credit G aps and Potenti al Study conducted for: Small Industries D evelopment Bank of India (SI D B I) Presented by: D un & Brad st r ee t Informa t ion Se rvices India Priva t e Limi t e d IC C C hamb e r s, Saki V ihar Road, Po w ai, M umbai 400 072 (Hereinafter - S ubmi tt e d on: 26 M arch 2013 1 Chapter - 4 Management and Corporate Governance 56 Annual Report 2016-17 Suppliers Regulators Corporate social responsibility activities along with good corporate governance and International implementation have been important Partners Shareholders aspects of SIDBI’s operations. The high- Our lights of SIDBI’s corporate governance Stakeholders systems are as follows: Society Customers Employees 1. Board of Directors The Small Industries Development Bank of India Act, 1989 provides for a 15-member Shareholding Pattern Board of Directors. Out of these, eight The shares of SIDBI are held by the Directors are appointed/nominated by the Government of India and thirty three Central Government comprising Chairman other institutions/public sector banks/- and Managing Director (CMD), two Whole insurance companies owned or Time Directors, two Government officials controlled by the Central Government. and three experts (including one from State The shares of major shareholders as on Financial Corporation) having special March 31, 2017 are: knowledge of or professional experience in matters useful to the Bank. Out of the Major Shareholders (%) remaining seven Directors, one each is nominated by three largest shareholders among IDBI, public sector banks, insurance 16.25 companies and institutions owned or 43.01 15.40 controlled by the Central Government and other four are elected by the public or 13.14 alternatively, can be co-opted by the Board 12.20 until assumption of charge by the elected Directors. The Board has co-opted one Director for the time being. The Board, as on IDBI Bank August 28, 2017, had 10 Directors, including State Bank of India Chairman & Managing Director (CMD) & two Other Whole Time Directors. Govtment of India LIC of India Dr. Kshatrapati Shivaji relinquished charge of CMD, SIDBI on December 6, 2016 to join as Executive Director, Asian Development on the SIDBI Board with effect from August Bank. 01, 2016, in place of Shri S. K. V. Srinivasan. In exercise of the powers conferred by Shri R. Ramachandran, co-opted by the Section 6(1)(a) of the SIDBI Act, 1989 the Board as a Director under Section 6(1)(f) of Central Government, vide its notification the SIDBI Act, tendered his resignation on dated August 4, 2017, appointed Shri close of proceedings of the Board at its Mohammad Mustafa, IAS as CMD of SIDBI. meeting held on August 16, 2017, which Shri Mohammad Mustafa took charge as was accepted by the Board. CMD on August 28, 2017. The Board placed on record its apprecia- The IDBI Bank, vide its communication tion of the valuable contribution made by dated July 28, 2016, has nominated Shri the Directors who retired from the Board of G.A.Tadas, Executive Director, as Director SIDBI during the year. Annual Report 2016-17 57 2. Committees of the Board In order to focus on important issues, the Borrowers (RCWD&NCB) and Remunera- Board has constituted 10 Committees viz., tion Committee (Box 4.1). The minutes of the Executive Committee (EC), Audit Committee Committee meetings containing (AC), Risk Management Committee (RiMC), decisions/recommendations are submitted Special Committee to Monitor Large Value to the Board. The Bank has appointed M/s. Frauds (SCMLVF), Information Technology R. M. Lall & Co. as Consultant for suggesting Strategy Committee (ITSC), Customer ways for improving the oversight of the Service Committee (CSC), HR Steering Board on various Committees with specific Committee (HRSC), Recovery Review reference to monitoring and reviewing the Committee (RRC), Review Committee on performance of the Committees. Wilful Defaulters & Non Co-operative Box 4.1: Committees of the Board • The Board held seven meetings during FY 2016-17. • The Executive Committee considers (i) sanctioning of credit / grant proposals, (ii) loan compro- mise / settlement of loans / write off proposals, (iii) proposals for approval of capital and revenue expenditure, (iv) proposals relating to acquisition and hiring of premises, (v) proposals relating to filing of suits / appeals, defending them and any other matter referred to or delegat- ed to the Committee by the Board. The Committee held ten meetings during FY 2016-17. • The Audit Committee, in addition to overseeing the functioning of the Audit Vertical and reviewing its major observations, also provides guidance in matters relating to finalisation of accounts of the Bank and observations made in RBI Inspection report. During FY 2016-17, the Committee held six meetings. • The Risk Management Committee lays down policy and strategy for Integrated Risk Manage- ment of the Bank. During FY 2016-17, five meetings of the Committee were held. • With a view to provide focused attention on monitoring of frauds involving an amount of `1 crore and above and in terms of the guidelines of RBI, SCMLVF has been constituted. Five meetings of the Committee were held during FY 2016-17. • The ITSC gives direction to the Bank's IT function, especially with regard to IT vision, policy and strategy so as to align with its business objectives. In addition, the Committee also guides the Bank in framing its long term IT plan and provides oversight of IT implementation and management. During FY 2016-17, four meetings of the Committee were held. • To enable the Bank to formulate policies and assess the compliance thereof internally with a view to strengthen the corporate governance structure and also to bring about ongoing improvements in the quality of customer services provided by the Bank, the Board has constituted CSC. During FY 2016-17, three meetings of the Committees were held. • HRSC has been constituted to guide and give suggestions / recommendations to the Board in HR matters. The Committee held two meetings during FY 2016-17. • Further, to review all NPA cases having principal outstanding of `3 crore and above, RRC has been constituted. During FY 2016-17, four meetings of the Committee were held. • RCWD&NCB has been constituted to review the orders passed by the Committee for Identifi- cation of Wilful Defaulters & Non-Cooperative Borrowers, identifying cases as wilful defaulters & non-cooperative borrowers. One meeting of the Committee was held during FY 2016-17. • The Government of India (GOI) introduced performance incentive scheme for the Whole Time Directors of the Bank and for that purpose, as per the directives of GoI, a “Remuneration Committee” of Board of Directors has been constituted. 58 Annual Report 2016-17 Internal Committees Risk and Information Security Committee (RISC) Asset Liability Management Committee Risk and Information Security Committee In terms of the Asset Liability Management (RISC) is a cross functional committee of Policy of the Bank, the Asset Liability executives, that leads Information Security Management Committee (ALCO) has been (IS) and attempts to mitigate IS and Infor- constituted, which is headed by the Chair- mation Technology (IT) related risks. RISC man & Managing Director and comprises ensures alignment of the security Deputy Managing Directors and other programme with organisational objectives. senior executives of the Bank heading Risk It reviews the impact and status of IT Management, Credit, Resources & Treasury security incidents periodically and provides and Information Technology, Corporate guidance on remedies and compliance. Accounts & NBFC Verticals, Business Head I The Committee is also instrumental in & Business Head II, as members. ALCO, achieving organisational change towards a inter-alia, reviews and monitors the liquidity culture that promotes good security prac- and interest rate risks of the Bank. During tices and compliance with policies. During FY 2016-17, nine meetings of the Commit- FY 2016-17, three meetings of the Commit- tee were held. tee were held. Investment Committee The BCM Steering Committee The Investment Committee formulates The Business Continuity Management strategies and recommends options (BCM) Steering Committee is responsible available for investment within the scope of for Business Continuity Management the Investment Policy of the Bank and framework/activities. The Committee relevant RBI guidelines issued from time to establishes and demonstrates commitment time. During FY 2016-17, six meetings of the to BCM Policy and determines how the Committee were held. Bank will manage and control identified risks. The Committee reviews the adequacy Enterprise Risk Management of the business continuity, recovery, contin- Committee (ERMC) gency plans and reviews test results. It provides direction for continuous improve- The Enterprise Risk Management Commit- ment of the overall health of BCM as part of tee (ERMC) is responsible for the develop- Management Review. During FY 2016-17, ment, overall implementation and supervi- two meetings of the Committee were held. sion of the risk management framework in the Bank. ERMC is responsible for providing Internal Complaints Committee recommendations to formulate the Credit and Operational Risk Management policies As per the provisions of the Sexual Harass- and strategies for the Bank and manage ment of Women at Workplace (Prevention, the risks on the asset book. ERMC under the Prohibition and Redressal) Act, 2013, the supervision of the Risk Management Bank has put in place Internal Complaints Committee of the Board evaluates and Committees at Chennai, Kolkata, Lucknow, manages the overall risk composition in the Mumbai and New Delhi for redressal of Bank’s portfolio. During FY 2016-17, one complaints related to sexual harassment meeting of the Committee was held. and matters concerning thereof or inciden- tal thereto. During the year, no complaint of sexual harassment was received by any of these Committees. Annual Report 2016-17 59 3. Risk Management robust and resilient business continuity strategy and framework. SIDBI has put in place a comprehensive Risk Management System, which is sensi- 4. Implementation of Indian tive and responsive to risks emanating from Accounting Standards (Ind-AS) business and operations. The framework for risk management in the Bank encompass- Government of India has issued the road- es policies, organisation structure, system map in January 2016 for implementation of and practices of identification, assessment, International Financial Reporting Standards measurement, mitigation and monitoring of (IFRS) converged Indian Accounting Stan- risks. The Bank has in place Enterprise Risk dards for banks and FIs. Accordingly, during Management (ERM) Policy which is FY 2016-17, SIDBI initiated the process of reviewed annually. The ERM Policy is an implementing Ind-AS along with its subsid- umbrella document that covers the gener- iaries. The Bank accordingly, has appointed al/common aspects pertaining to risk a consultant to assist in implementation of management by the Bank and links to the the Ind-AS. Training on Ind-AS has been subsidiary policy documents, viz., Loan provided to the officers of the Bank. In terms Policy, Loan Recovery Policy, Investment of the requirement stipulated by RBI Policy, Asset–Liability Management (ALM) circular, the Bank had submitted proforma Policy, Operational Risk Management Ind-AS financial statements to the RBI for (ORM) Policy, IT Security Policy, Delegation the half year ended September 30, 2016. of Powers etc. Apart from the credit, market and operational risks covered in various 5. Implementation of GST policies, the other risks viz., residual credit, credit concentration, interest rate risks in Goods and Service Tax (GST) had received the books of the bank, legal, reputation, etc. Hon’ble President’s assent on September are addressed in the Internal Capital 08, 2016 and GST has been implemented Adequacy Assessment Process (ICAAP) from July 01, 2017 by GOI. SIDBI has Policy. obtained statewise GST registration for 30 states and 2 Union Territories where SIDBI Risks associated with the Bank’s lending offices are located. Necessary modifica- and treasury operations, including off-bal- tions in the existing IT Systems compliant ance sheet items, are constantly monitored, with GST guidelines have been made. measured and managed under the overall Awareness Programs on GST for all its supervision and guidance of Risk Manage- Branch Offices/ Regional Offices/ Head ment Committee (RiMC) of the Board. The Office Verticals located all over India have Bank, as a proactive measure, has put in been conducted. Specific trainings have place an Integrated Risk Management also been provided to the officers handling System (IRMS), which includes policies and GST related works. systems for Credit Risk Management, Market Risk Management, ORM and ICAAP. The Bank has implemented a Comprehen- sive Operational Risk Evaluator (CORE) system used for Loss Data Capture, Key Risk Indicator (KRI) and Risk and Control Self Assessment (RCSA). The Bank has also implemented a business continuity man- agement framework, designed to ensure continuity of critical business operations during disasters. The intention is to minimize SIDBI conducted a series of roundtable disruption to critical operations at an conferences for identifying implications of GST on MSMEs and facilitating easier acceptable level by putting in place a adoption of GST. 60 Annual Report 2016-17 6. NPA Management 7. Internal Audit Management In order to improve the overall quality of The Internal Audit of the Bank plays a assets of the Bank, the NPA management pivotal role in strengthening corporate strategy is to reduce the present level of governance and complying with manage- Non-Performing Assets (NPAs), prevent ment objectives to strengthen internal further slippages and maximise recovery control and improve Risk Management. through appropriate recovery tools. Audit Vertical has been carrying out Opera- In terms of RBI guidelines, a Framework for tional Audit (OA) of branch offices (BOs), revival and rehabilitation of MSMEs has regional offices (ROs) and select Head been laid down with a view to ensuring early Office verticals, Management Audit (MA) of identification of stress and implementing Head Office (HO) Verticals, Transaction necessary corrective action plan for Audit (TA) of Debt Servicing Activities of resolution. Treasury & Funds Management Vertical (TFMV), Information Systems (IS) Audit, etc. As per the directives of Government of on regular basis. Moreover, Audit Vertical India, a Board level ‘Recovery Review reviews the monthly Concurrent Audit Committee’ has been constituted to review reports of TFMV and Transaction Audit of all individual NPA cases having principal Indirect Finance Vertical being carried out outstanding of `3 crore and above. Further, by external audit firms. Concurrent audit of the Fast Track Committee (FTC) has been TFMV covers Treasury Operations, viz. constituted to review all NPA cases and Money Market Operations (MMO) and Stressed Assets having principal outstand- Dealing Room Operations (DRO) of TFMV. ing of `1 crore and above. The system of The Bank also undertakes Credit Audit regular interaction of FTC with the in-house through Regional Offices in respect of Default Review Committee (DRC) at the accounts under Direct Credit Schemes operating offices to monitor the NPA wherein exposure is above `3 crore and in accounts and accounts causing concern 10% of the cases on sample basis, wherein has become an effective monitoring tool. outstanding is less than `3 crore. Standard Assets & Net NPAs The Bank has also introduced Concurrent In ` Crore Audit mechanism in 39 BOs through 95.6 99.72 99.22 99.27 99.56 external CA firms, which together account for more than 92% of the Direct Credit operations of the Bank. 4.4 0.28 0.78 0.73 0.44 2001 2011 2015 2016 2017 Standard Assets (%) Net NPA’s (%) As at March 31 The Gross NPAs of the Bank at `823 crore constituted 1.20% of gross credit outstand- ing of the Bank by March-end 2017. The net NPAs at `302 crore was only 0.44 % of net credit outstanding. Annual Report 2016-17 61 8. Human Resource Strength The Human Resource strength of the Bank The strength of women employees in SIDBI is an indicator of its present operational is 254 (21.65%). The Bank has been intro- requirements as well as potential to upscale ducing policies from time to time to help its in future. In order to augment the existing women employees with a better work life staff position, the Bank added 153 officers balance. The diverse technical/professional comprising General and Specialist Streams. staff, such as Engineering, Management, In all such recruitment processes, Pre-Re- Law, CA, ICWA, Company Secretary, cruitment Training is organised for candi- Agriculture, and Banking related qualifica- dates belonging to SC/ST as well as tions such as JAIIB/CAIIB have played an OBC categories. important role in strengthening the organi- sation. The Bank encourages its employees As on March 31, 2017, the Bank had on its to pursue higher studies on part-time basis rolls, 1173 active full time staff comprising by way of reimbursement of fees. 1023 officers, 97 Class III staff and 53 Subordinate staff. Of the total staff, 205 belong to Scheduled Castes (SCs), 82 to Scheduled Tribes (STs) and 217 to Other Backward Classes (OBCs). The staff strength included eight ex-servicemen, 29 Persons with Disabilities (PwD) categories Employees by Category and 1 PwD Ex-serviceman. The Bank FY 2016 FY 2017 maintains the roster as per guidelines issued by GoI and the same is vetted by 908 Officers 1023 Chief Liaison Officers (CLOs) of the Bank annually and also reviewed by GoI from time to time. The last such review was made Class III Staff 95 97 in February, 2017. Review reports on implementation of the reservation policy of 57 Subordinate Staff GoI is placed before the Board and thereaf- 53 ter, sent to GoI, on a half-yearly basis. The Roster upto December 31, 2016 has been Total Full Time 1060 Employees (FTE) 1173 uploaded on the SIDBI website. By Socially Physically Handicapped Female Employees Disadvantaged Group FY 186 FY 234 SC 29 2016 2016 205 ST 74 82 FY FY 29 254 2017 2017 171 OBC 217 FY 2016 FY 2017 62 Annual Report 2016-17 Training & Career Development • The Training Cell, HRV was conferred with ISO 9001:2008 certification by The Bank continues to upgrade skills of its Intertek Certification Limited, an agency employees and impart appropriate training accredited by United Kingdom Accredi- with an aim to enhance professional tation Service (UKAS). development, increase motivation and employee job satisfaction. Staff Welfare Activities During the year under review, a new state of During the year FY 2016-17, the Bank the art training facility “SIDBI Centre for continued to provide support to several Advanced Learning (SCALE)” was set up at welfare activities for its staff members and the Head Office, Lucknow. As was done in their families. Under the guidance of the the past, the Bank continued to impart Central Welfare Committee, funds to the training by deputing its employees to: tune of `2.48 crore were allocated to various offices of the Bank. During FY • In-house training programmes - held at 2016-17, the Bank launched “SIDBI Employ- SIDBI MSME International Training ees Health Augmentation Tool” (SEHAT) to Institute, Bhubaneswar and SIDBI encourage employees to undertake activi- Centre for Advanced Learning, ties for a healthy body and mind promoting Lucknow. their and their families overall wellbeing. • Inland training programmes/ work- 9. Vigilance shops conducted/organized by reputed national institutions in the country and The Bank lays emphasis on the preventive and pro-active vigilance aspects and has • International programmes to provide been taking several initiatives for strength- organisational focus and ensure ening the systems and procedures to comprehensive all-round development promote efficiency and transparency. of the staff. Accordingly, the vigilance set-up in SIDBI is led by a full-time Chief Vigilance Officer • During the year, the Bank made 880 [CVO] who is assisted by the Vigilance Team (out of which 168 were women) nomina- at the Head Office (HO) and Regional tions for in-house, inland and interna- Vigilance Officers at the respective Regions. tional training programmes organised by renowned training/academic Preventive Vigilance Committees at the institutions. regional level and a Central Vigilance Committee at the Head Office have been 17 officers (including three from set up to review the preventive vigilance reserved categories) were nominated to measures. An Internal Advisory Committee attend international programmes in on vigilance scrutinizes complaints or cases order to familiarise them with the arising out of inspections, audit reports, current international practices in staff accountability reports among others different areas viz. Development and furnishes its recommendations to the Banking, Leadership Development, CVO. Vigilance Vertical acts as the nodal Sustainable Finance, Strategic vertical for investigation of complaints Response to Risk in Microfinance related to frauds perpetrated on the Bank. Markets among others. As part of the anti-fraud sensitization programme, the modus operandi of frauds is shared by the Fraud Management Cell (FMC) with regions/branches from time to time. Annual Report 2016-17 63 The CVO, RVOs (Regional Vigilance A portal on Rajbhasha on the SIDBI-in- Officers) and the vigilance team, in their tranet, provides valuable information on its periodic meetings with the staff, discuss implementation and aims at giving a fillip to incidents of operational gaps/compliance carry out transactions in Hindi. The issues and sensitizes the staff on the RBI-banking glossary, sentences and importance of adhering to guidelines, notings used in the day-to-day working of systems and processes and making the the Bank have been uploaded on the decision-taking processes transparent, fair intranet, to enable staff members to use the and equitable. To spread awareness, the material while working in Hindi. Latest vertical publishes its in-house magazine copies of the quarterly Hindi magazine ‘Dakshata’. A vigilance blog has been ‘Sankalp’ brought out by the Bank are also created on the SIDBI Intranet wherein staff available on the portal. members are encouraged to post their experiences/articles. During the year under review, 59 Hindi workshops were organised at various The vigilance work is reviewed by the CMD, offices of the Bank and staff-members were SIDBI every quarter during his meeting with imparted practical training on the language CVO and important/pending issues, if any, and usage of Unicode on the computer. are dealt with in accordance with the Chief Vigilance Commission (CVC) guidelines. The In keeping with the directives received from Vigilance Vertical also submits a report on the Government of India, a Translation Vigilance activities to CVC and a half-yearly Reorientation Programme for Hindi officers review of the said activities is submitted to was organised during September 1-3, 2016 the Board of Directors of the Bank. at Lucknow. In pursuance of the annual implementation programme, the official During the financial year, the Vigilance language related inspections were vertical also organised a workshop on conducted by the Head Office and Regional Preventive Vigilance by inviting Shri Praty- Offices in as many as 44 offices and Verti- ush Sinha, ex-CVC, as the guest faculty. The cals. conference was attended by senior officers and the top management both from The Bank organised 12th All India SIDBI Lucknow and Mumbai. The Vigilance Inter-Bank Hindi Essay Competition during Vertical also released the updated the year, which aimed at motivating banks Vigilance manual this year. and financial institutions to carry out their official work in Hindi. 10. Implementation of the Official Language Policy in the Bank The Bank organised SIDBI Rajbhasha Shield Competition in order to create a SIDBI has been making conscious efforts in competitive environment at the regional implementation of the official language offices and promote increasing use of Hindi. policy of the Government of India. This has Also, Rajbhasha Pratinidhi Yojana was enabled the Bank attain considerable implemented amongst staff members from success in establishing Hindi as the the Hindi-speaking and non-Hindi catego- medium of communication for official work. ries at each of the regional offices as also at To further the cause, Official Language the HO-vertical level to enhance the appli- Implementation Committees were consti- cation of Hindi. tuted in offices at Lucknow, Mumbai, New Delhi and all ROs/BOs of the Bank to review the status of the implementation of the official language and suggest measures to enhance Hindi correspondence. 64 Annual Report 2016-17 11. Implementation of Right to disposed off as per the provisions of the Act Information Act, 2005 within the stipulated time. The Bank is implementing the Right to During the year, 23 appeals were made to Information Act, 2005 (RTI Act). Accordingly, the First Appellate Authority (FAA) of the the Bank has displayed on its website Bank, which were disposed off within the (www.sidbi.in) functions and duties of the stipulated time as per the provisions of the organization, norms set by the Bank for RTI Act. Against the decisions taken by FAA, discharge of its functions, powers and 4 appeals were preferred before the CIC. duties of its officers and employees, organi- There has been no delay in either furnishing sation chart, sub-ordinate legislations, the information by the CPIO or in deciding procedures followed in the decision making appeals by the FAA. All quarterly online processes, including the channels of returns have been regularly submitted to supervision and accountability, various CIC on time. No officer of the Bank has been committees constituted by Board, etc. as fined/penalised for violation of the provi- envisaged under Section 4(1)(b) of the Act. sions of the RTI Act. The Bank has designated Central Public Information Officer (CPIO), Alternate Central 12. Improvements in Information Public Information Officer, Central Assistant Technology Set-up Public Information Officers and First Appellate Authority and Alternate First A robust Information Security Management Appellate Authority as per the Act, the System has been implemented to protect details of which are available on the Bank's the Bank against security threats. The Bank website. Further to the instructions laid has been certified by British Standards down by GoI, the Bank has aligned and Institution (BSI) and complies with ISO/IEC linked with RTIMIS Portal of Department of 2001:2013 since it has implemented Infor- Personnel and Training, Govt. of India at mation Security Management System www.rtionline.gov.in w.e.f. August 01, 2016 which complies with the ISO 27001 stan- for better disposal and co-ordination of RTI dards. The management of Information applications. In terms of the directives of Security applies to Data Centre operation, Central Information Commission (CIC), the management and monitoring of operations Bank has also designated a Transparency from Mumbai and Chennai. Officer for better implementation of Section 4 of the Act with a view to promoting 13. Debenture Trustees congenial conditions for timely response by CPIO to RTI queries. During the year, the Following are the contact details of the Bank received 291 applications seeking debenture trustees for SIDBI’s outstanding information and all the applications were unsecured bond issues: ISIN : INE556F08IP8 ISIN : INE556F08IV6 For rest of the ISINs Axis Bank Limited, SBICAP Trustee Company Limited ALLBANK FINANCE LTD. Axis House, 2nd Floor, “E”, Apeejay House, 6th Floor, West (wholly owned subsidiary of Allahabad Bank) Bombay Dyeing Mill Wing, 3, DinshawVachha Road, Corporate Office : Allahabad Bank Compound, Pandurang Churchgate, Mumbai – 400 020 Building, 2nd Floor, 37, Mumbai Budhkar Marg, Worli, Mumbai. www.sbicaptrustee.com Samachar Marg, Fort, Mumbai - 400 023. Tel: 022-24255215/16 Fax: Contact : Shri Deepak Dhondye Board: +91-22-22626283 Ext: 24 Fax: 022- 24254200 Mob:8879150014 Tel: (022) +91-22-22677552 Email: debenturetrustee@axis- 43025514 Fax:(022) 22040465 Email: companysecretary@allbank bank.com E-mail : deepak.dhondye@sbicap- finance.com Contact Person: Shri Kanhu trustee.com Website: www.allbankfinance.com Harichandan Contact Person: Ms.Melvita Lewis, Company Secretary cum Compliance Officer Annual Report 2016-17 65 14. Acknowledgements The Board acknowledges the valuable The Board places on record its appreciation support received from GoI and RBI. The for the co-operation extended to SIDBI by Board is also thankful to the World Bank banks, state level institutions, industry Group; Japan International Cooperation associations and other stakeholders Agency (JICA), Japan; Department for engaged in the promotion and develop- International Development (DFID), U. K.; ment of the MSME sector. The Bank also Kreditanstalt fur Wiederaufbau (KfW), thanks all its clients and investors for their Germany; The Deutsche Gesellschaft fur co-operation and looks forward to contin- Internationale Zusammenarbeit (GIZ), ued support in the years to come. The Germany; International Fund for Agricultural Board recognises and places on record its Development (IFAD), Rome; French Devel- appreciation for the services of SIDBI staff, opment Agency (AfD), France and Asian at all levels, for showing strong and contin- Development Bank (ADB) for their contin- ued commitment, integrity and dedication ued support and technical co-operation. in taking the Bank on a higher growth trajectory. 66 Annual Report 2016-17 Additional disclosures as per RBI guidelines Annual Report 2016-17 93 Additional disclosures as per RBI guidelines Classified as Classified as standard NPA In Part B 94 Annual Report 2016-17 Additional disclosures as per RBI guidelines `Crore (k) Write-offs and recoveries Particulars FY2016-17 FY2015-16 Opening balance of Technical / Prudential written 1,377.70 1,233.02 off accounts as at April 1, 2016 Add : Technical / Prudential write offs during the year 294.35 198.73 Sub total (A) 1,672.05 1,431.75 Less : Actual write off 51.85 0.88 Less : Recoveries made from previously technical/prudential written off accounts during the year 46.52 53.17 Sub total (B) 98.37 54.05 Closing balance as at March 31, 2017 (A-B) 1,573.68 1,377.70 (l) Overseas Assets, NPAs and Revenue Particulars FY2016-17 FY2015-16 Total Assets - - Total NPAs - - Total Revenue - - (m) Depreciation and provisions on investments Particulars FY2016-17 FY2015-16 (1) Investments (i) Gross Investments 8,225.90 8,005.90 (a) In India 8,225.90 8,005.90 (b) Outside India - - (ii) Provisions for Depreciation 467.74 570.04 (a) In India 467.74 570.04 (b) Outside India - - (iii) Net Investments 7,758.16 7,435.86 (a) In India 7,758.16 7,435.86 (b) Outside India - - (2) Movement of provisions held towards depreciation on investments (I) Opening balance 50.16 65.95 (ii) Add: Provisions made during the year - - (iii)Appropriation, if any, from Investment - - Fluctuation Reserve Account during the year (iv) Less: Write off / write back of excess provisions - - during the year (v) Less: Transfer, if any, to Investment Fluctuation 2.02 15.79 Reserve Account* Annual Report 2016-17 95 Additional disclosures as per RBI guidelines `Crore FY 2016-17 FY 2015-16 $ 96 Annual Report 2016-17 Additional disclosures as per RBI guidelines `Crore 2. (a) Of these, number of accounts restructured during the year - - (b) Aggregate outstanding - - (ii) Details of non performing financial assets sold: Particulars FY2016-17 FY2015-16 No. of accounts sold 1 - Aggregate outstanding 23.04 - Aggregate consideration received 27.66 - 6. Operating Results Particulars FY2016-17 FY2015-16 (I) Interest income as a percentage to average working funds 7.68 8.34 (ii) Non-interest income as a percentage to average working funds 0.35 0.37 (iii) Operating profit as a percentage to average working funds (before provisions) 2.24 2.80 (iv) Return on average assets (before provisions for taxation) 2.14 2.46 (v) Net Profit per employee ( `crore) 0.96 0.96 1.11 7. Credit concentration risk (a) Capital market exposure Annual Report 2016-17 97 Additional disclosures as per RBI guidelines `Crore Particulars FY2016-17 FY2015-16 (i) direct in v e s t m ent in equit y s hare s, con v ertible bond s, convertible debentures and units of equity oriented mutual 537.72 458.58 funds the corpus of which is not exclusively invested in corporate debt; (ii) advances against shares / bonds / debentures or other securities or on clean basis to individuals for investment in - - shares (including IPOs / ESOPs), convertible bonds, convertible debentures, and units of equity oriented mutual funds; (iii) advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity oriented - - mutual funds are taken as primary security; (iv) advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where - - the primary security other than shares / convertible bonds / convertible debentures / units of equity oriented mutual funds `does not fully cover the advances; ( v ) s ecured and un s ecured ad v ance s to s tockbroker s and guarantees issued on behalf of stockbrokers and market - - makers; 1,284.44 1,023.20 98 Annual Report 2016-17 Additional disclosures as per RBI guidelines `Crore ` ` Annual Report 2016-17 99 Additional disclosures as per RBI guidelines `Crore 100 Annual Report 2016-17 Additional disclosures as per RBI guidelines `Crore ii) Quantitative Disclosures FY 2016-17 FY 2015-16 Sr. No. Particulars Currency Interest rate Currency Interest rate Derivatives Derivatives Derivatives Derivatives 1 Derivatives / Notional Principal Amount ) 9,108.09 - 7,891.12 - (i) For hedging 9,108.09 - 7,891.12 - (ii) For trading - - - - 2 Marked to Market Positions [1] -122.27 - 318.52 - (i) Asset (+) -122.27 - 318.52 - (ii) Liability (-) - - - - 3 Credit Exposure [2] 747.61 - 874.20 - Likely impact of one percentage change 4 in interest rate (100* PV01) 204.22 - 228.39 - (i) On hedging derivatives 204.22 - 228.39 - (ii) On trading derivatives - - - - 5 Maximum and Minimum of 100*PV01 - - - - observed during the year (i) On hedging 258.27/204.22 - 228.39/161.58 - (ii) On trading - - - - 9. Disclosure of Letters of Comfort (LoCs) issued by AIFIs The particulars of Letters of Comfort (LoCs) issued during the year, assessed financial impact, and assessed cumulative financial obligations under the LoCs issued in the past and outstanding is as under: " LoCs outstanding as on LoC issued during LoCs redeemed LoCs outstanding as on March 31, 2016 the year during the year March 31, 2017 No of LoC Amount No of LoC Amount No of LoC Amount No of LoC Amount 2 3.27 5 10.41 6 11.88 1 1.80 Annual Report 2016-17 101 Additional disclosures as per RBI guidelines `Crore FY FY FY FY 102 Annual Report 2016-17 Additional disclosures as per RBI guidelines `Crore (Income in schedule XIII - 'other income' includes Prior Period Income of `1,78,32,983 for FY 2016-17 [Previous Year - (`49,07,708)] and Other expenditure in schedule XIV - 'Operating Expenses' for FY 2016-17 includes Prior Period Expenditure of (`41,27,095) [Previous Year (`1,80,56,736)]. (b) Accounting Standard 17 – Segment Reporting As required under Accounting Standard-17 'Segment Reporting' the Bank has disclosed "Business segment" as the Primary Segment. Since the Bank operates in India, there are no reportable geographical segments. Under Business Segment, the Bank has identified Whole Sale Operations (Direct Lending), Whole Sale Operations (Refinance) and Treasury as its three reporting segments. These segments have been identified after considering the nature and risk profile of the products and services, the organization structure and the internal reporting system of the Bank. Previous year's figures have been regrouped and reclassified to conform to the current year's methodology. Part A: BUSINESS SEGMENTS Business Segments Wholesale Wholesale Treasury Total Operations (Direct Operations Lending) (Refinance) Particulars FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 1 Segment Revenue 1,243 1,362 4,577 3,878 526 545 6,346 5,785 Exceptional Items - - Total 6,346 5,785 2 Segment Results 46 183 1,612 1,441 168 150 1,826 1,774 Exceptional Items - - Total 1,826 1,774 Unallocable Expenses 139 138 Operating profit 1,687 1,636 Income Tax (Net of write back) 567 459 Net profit 1,120 1,177 3 Other information Segment Assets 10,709 11,490 59,097 54,945 8,841 8,768 78,647 75,203 Unallocated Assets 1,035 1,275 Total Assets 79,682 76,478 Segment Liabilities 7,497 8,108 52,034 48,915 5,037 6,246 64,568 63,269 Unallocated Liabilities 1,794 1,894 Total 66,362 65,163 Capital / Reserves 3,215 3,339 6,372 5,530 3,733 2,446 13,320 11,315 Total 13,320 11,315 Total Liabilities 79,682 76,478 Part B: GEOGRAPHIC SEGMENTS - Nil (c) Accounting Standard 18 – Related Party Disclosures Items / Related Party Parent Sub-sidiaries Associates/ Key Relatives Total (as per Joint ventures Manager of Key ownership Management or control) Personnel@ Personnel Borrowings# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Deposit# Outstanding at the year end 60.46 - 0.26 60.72 Annual Report 2016-17 103 Additional disclosures as per RBI guidelines `Crore Maximum during the year - 60.46 - 0.41 - 60.87 Placement of deposits# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Advances# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Investments# Outstanding at the year end 1,751.05 28.60 - 1,779.65 Maximum during the year 1,751.05 28.60 - 1,779.65 Non funded commitments Outstanding at the year end - - - - - - Maximum during the year - - - - - - Leasing arrangements availed# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Leasing arrangements provided# Outstanding at the year end - - - - - Maximum during the year - - - - - - Purchase of fixed assets - - - - - - Sale of fixed assets - - - - - - Interest paid - 3.54 - 0.02 - 3.56 Interest received - - 4.92 - - 4.92 Rendering of services* - 5.24 1.48 - - 6.72 Receiving of services* - - - - - - Management contracts* - - - 0.68** - 0.68 @Whole time directors of the Board # The outstanding at the year end and the maximum during the year are to be disclosed * Contract services etc. and not services like remittance facilities, locker facilities etc. ** Remuneration to Key Management Personnel. 17. Unamortised Pension and Gratuity Liabilities The pension and gratuity liability are provided for on the basis of an actuarial valuation made at the end of each financial year based on the projected unit credit method. The acturial gains/ losses are taken to the profit and loss account and are not amortized. BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountants FRN.101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief Genaral Manager Deputy Managing Director Deputy Managing Director Darshit Doshi (Corporate Accounts Vertical) Partner M.No. 133755 Mumbai, May 18, 2017 Satyananda Mishra R. Ramachandran Director Director 104 Annual Report 2016-17 Cash Flow Statement for the year ended March 31, 2017 (`) March 31, 2016 Particulars March 31, 2017 March 31, 2017 1. Cash Flow from Operating Activities 1636,47,21,187 Net Profit before tax as per P & L Account 1687,46,83,051 Adjustments for : 14,03,49,020 Depreciation 20,05,08,564 115,71,97,341 Provision for net depreciation in investments 61,30,31,066 203,27,28,042 Provisions made (net of write back) 178,24,55,144 (127,72,09,428) Profit on sale of investments (net) (144,29,13,742) (36,54,403) Profit on sale of fixed assets (35,54,143) (13,35,20,358) Dividend Received on Investments (18,02,93,561) 96,92,33,327 1828,06,11,401 Cash generated from operations 1784,39,16,378 (Prior to changes in operating Assets and Liabilities) Adjustments for net changes in : (622,93,43,579) Current assets (345,61,29,798) 120,43,15,792 Current liabilities (503,77,84,236) 568,94,34,285 Bills of Exchange 404,85,71,508 (11074,23,44,445) Loans & Advances (3055,75,66,206) 11683,81,21,162 Net Proceeds of Bonds and Debentures & other borrowings 1086,22,06,929 2128,30,59,911 Deposits received 286,79,89,717 2804,32,43,126 (2127,27,12,087) 4632,38,54,527 (342,87,95,709) (585,00,47,507) Payment of Tax (673,92,53,652) (673,92,53,652) 4047,38,07,020 Net Cash flow from operating Activities (1016,80,49,361) 2. Cash Flow from Investing Activities (17,92,51,251) Net (Purchase)/Sale of fixed assets (15,01,82,785) (4539,91,71,680) Net (Purchase)/sale/redemption of Investments 1764,78,04,520 13,35,20,358 Dividend Received on Investments 18,02,93,561 (4544,49,02,573) Net cash used in Investing Activities 1767,79,15,295 3. Cash flow from Financing Activities 750,00,00,000 Proceeds from issuance of share capital 1000,00,00,000 & share premium (134,63,89,870) Dividend on Equity Shares & tax on Dividend (112,72,63,816) 615,36,10,130 Net cash used in Financing Activities 887,27,36,184 Annual Report 2016-17 105 Cash Flow Statement for the year ended March 31, 2017 (`) March 31, 2016 Particulars March 31, 2017 March 31, 2017 118,25,14,577 4. Net increase/(decrease) in cash and cash equivalents 1638,26,02,118 1078,53,89,874 5. Cash and Cash Equivalents at the beginning of the period 1196,79,04,451 1196,79,04,451 6. Cash and Cash Equivalents at the end of the period 2835,05,06,570 7. Cash and cash equivalents at the end of the period includes 6,68,296 Cash in Hand 6,75,054 28,06,91,058 Current account balance with Bank 27,89,24,263 12,27,85,059 Mutual Funds 1852,75,73,354 1156,37,60,038 Deposits 954,33,33,899 Note : Cash Flow statement has been prepared as per the Indirect Method prescribed in AS-3 (Revised) 'Cash Flow Statement' issued by the Institute of Chartered Accountants of India (ICAI) Significant Accounting Policies XV Notes to Accounts XVI BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountant FRN. 101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief General Manager Deputy Managing Deputy Managing (Corporate Accounts Vertical) Director Director Darshit Doshi Satyananda Mishra R. Ramachandran Partner Director Director M.No. 133755 Mumbai. May 18, 2017 106 Annual Report 2016-17 Small Industries Development Bank of India Appendix - II Independent other irregularities; selection and applica- tion of appropriate accounting policies, Auditors' Report making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of To internal controls, that were operating The Board of Directors of effectively for ensuring the accuracy and Small Industries Development Bank of India completeness of the accounting records, relevant to the preparation and presenta- Report on the Consolidated Financial tion of the financial statements that give a Statements true and fair view and are free from material misstatement, whether due to fraud or error, We have audited the accompanying which have been used for the purpose of consolidated financial statements of Small preparation of the consolidated financial Industries Development Bank of India (“the statements by the Bank's management, as Bank”) and its subsidiaries and associates aforesaid. (the Bank, its subsidiaries and associates constitute “the Group”) as on 31st March Auditor's Responsibility 2017 which comprises the consolidated Balance Sheet as at 31st March 2017, and Our responsibility is to express an opinion the consolidated Profit and Loss and on these consolidated financial statements consolidated Cash Flow Statement for the based on our audit. year then ended and a summary of signifi- cant accounting policies and other explan- We conducted our audit in accordance with atory information (“the consolidated finan- the Standards on Auditing issued by the cial statements”). Institute of Chartered Accountants of India. Those Standards require that we comply Management's Responsibility for the with ethical requirements and plan and Consolidated Financial Statements perform the audit to obtain reasonable assurance about whether the financial The Bank's Management is responsible for statements are free from material misstate- the preparation of these consolidated ments. financial statements on the basis of sepa- rate financial statements and other finan- An audit involves performing procedures to cial information regarding components that obtain audit evidence about the amounts give a true and fair view of the consolidated and disclosures in the consolidated finan- financial position, consolidated financial cial statements. The procedures selected performance and consolidated cash flows depend on the auditor's judgment, including of the Group in accordance with the the assessment of the risks of material accounting principles generally accepted in misstatement of the consolidated financial India, including the applicable Accounting statements, whether due to fraud or error. In Standards issued by the Institute of Char- making those risk assessments, the auditor tered Accountants of India. This considers internal control relevant to the responsibility also includes maintenance of Bank's preparation and fair presentation of adequate accounting records for the consolidated financial statements that safeguarding of the assets of the Bank and give a true and fair view in order to design for preventing and detecting frauds and audit procedures that are appropriate in the 108 Annual Report 2016-17 circumstances, but not for the purpose of non-consolidation of 6 associates expressing an opinion on effectiveness of wherein as per the management the the entity's internal control. An audit also carrying amount of the investments are includes evaluating the appropriateness of not realisable and are fully provided for. accounting policies used and the reason- ableness of the accounting estimates made b) Note nos 4C and 4D of Annexure I to by the Bank's management, as well as Consolidated Accounts with regard to evaluating the overall presentation of the non-consolidation of 6 associates, as in consolidated financial statements. view of the management these are not significant components and hence not We believe that the audit evidence considered for consolidation. obtained by us and the audit evidence obtained by the other auditors in terms of Our opinion is not qualified in respect of their report referred to in the 'Other Matters’ this matter. paragraph below, is sufficient and appropri- ate to provide a basis for our audit opinion Other Matters on the consolidated financial statement. We did not audit the financial statements of Opinion the 3 subsidiaries, whose financial state- ments reflect total assets of In our opinion and to the best of our infor- `1,02,07,47,44,150/- as at 31st March 2017, mation and according to the explanations total revenue of ` 5,52,98,48,646/- and net given to us and on consideration of the cash flows amounting to `(2,92,24,95,831/-) report of the other auditor on separate for the year then ended, as considered in financial statements and on other financial the consolidated financial statements. We information of the subsidiaries and associ- also did not audit the financial statements ates, as mentioned in the ‘Other Matter’ of 1 associate in whose Group's share of net paragraph below, the Consolidated Finan- profit amounting to `66,41,010/- for the year cial Statements give a true and fair view in ended 31st March 2017, based on its conformity with the accounting principles audited financial statement for the year generally accepted in India: ended 31st March 2016, as considered in the consolidated financial statements. i) in the case of the Consolidated Balance These financial statements and other Sheet, of the state of affairs of the financial information have been audited by Group as at 31st March 2017, other auditors whose report has been ii) in the case of the Consolidated Profit furnished to us by the Management, and and Loss Account, of the profits of the our opinion and our report on the consoli- Group for the year ended on that date, dated financial statement, in so far as it iii) In the case of Consolidated Cash Flow relates to the amounts and disclosures Statement, of the cash flows of the included in respect of these subsidiaries Group for the year ended on that date. and associate, is based solely on the report of the other auditors. Emphasis of Matter The Consolidated financial statement also We draw attention to: includes the Group's share of net profit of `27,00,833/- for the year ended 31st March a) Note nos 4B and 4D of Annexure I to 2017, as considered in the consolidated Consolidated Accounts with regard to financial statements in respect of 4 associ Annual Report 2016-17 109 ates, whose financial statements has not financial statements and have found been audited by us. The financial state- them to be satisfactory. ments are unaudited and have been furnished to us by the Management and our 3. In our opinion, proper books of account opinion and our report on the consolidated as required by law relating to prepara- tion of the aforesaid consolidated financial statement, in so far as it relates to financial statement have been kept so the amounts and disclosures included in far as it appears from our examination respect of these associates, is based solely of those books and the reports of the on such unaudited financial statements. We other auditors. are unable to comment upon resultant impact, if any, on the Group's share of profit 4. The Consolidated Balance Sheet, the as at 31st March 2017, had the aforesaid Consolidated Profit and Loss Account associates been audited. In our opinion and and the Consolidated Cash Flow according to the information and explana- Statement dealt with by this Report are tions given to us by the Management, these in agreement with Books of Account financial statements are not material to the maintained for the purpose of prepara- Group. tion of the consolidated financial statements. Our opinion on the consolidated financial statement is not qualified in respect of this 5. In our opinion, the aforesaid consolidat- matter with respect to our reliance on the ed financial statements comply with the work done and the reports of the other applicable Accounting Standards. auditors and the financial statements / financial information certified by the Management. Report on Other Legal and Regulatory Requirements For Borkar & Muzumdar We report that: Chartered Accountants Firm Registration No.101569W 1. The consolidated financial statements have been prepared by the Bank's Management in accordance with the requirements of Accounting Standards Darshit Doshi (AS) 21, “Consolidated Financial State- Partner ments”, Accounting Standards (AS) 23, Membership No. 133755 “Accounting for Investments in Associ- ates in Consolidated Financial State- ments” issued by the Institute of Char- Place: Mumbai tered Accountants of India and on basis Date: 18th May 2017 of the separate financial statements of the Bank, its subsidiaries and associ- ates. 2. We have sought and obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purpose of our audit of the aforesaid consolidated 110 Annual Report 2016-17 Consolidated Balance Sheet as at March 31, 2017 (`) CAPITAL AND LIABILITIES SCHEDULES March 31, 2017 March 31, 2016 Capital I 531,92,20,309 486,98,22,500 Reserves, Surplus and Funds II 13300,14,67,502 11230,06,69,051 Deposits III 23986,92,17,622 20575,12,27,905 Borrowings IV 43382,44,06,602 42356,68,51,125 Other Liabilities and Provisions V 6867,61,06,996 6925,96,89,195 Deferred Tax Liability 21,60,46,642 41,74,30,482 Total 88090,64,65,673 81616,56,90,258 ASSETS Cash and Bank Balances VI 3151,65,20,257 3285,38,58,558 Investments VII 7939,51,07,745 7126,29,58,093 Loans & Advances VIII 74241,79,39,816 68873,79,41,265 Fixed Assets IX 205,93,43,964 210,57,37,391 Other Assets X 2551,75,53,891 2120,51,94,951 Total 88090,64,65,673 81616,56,90,258 Contingent Liabilities XI 10011,96,46,746 10410,76,98,369 Significant Accounting Policies and Notes to Accounts (Annexure I) The Schedules referred to above form an integral part of the Balance Sheet. BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountant FRN. 101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief General Manager Deputy Managing Deputy Managing (Corporate Accounts Vertical) Director Director Darshit Doshi Partner M.No. 133755 Satyananda Mishra R. Ramachandran Director Director Mumbai. May 18, 2017 Annual Report 2016-17 111 Consolidated Profit & Loss Account for the year ended March 31,2017 (`) INCOME SCHEDULES March 31, 2017 March 31, 2016 Interest and Discount XII 6508,49,00,033 5879,07,90,854 Other Income XIII 379,81,19,063 281,20,57,033 Total 6888,30,19,096 6160,28,47,887 EXPENDITURE Interest & Financial charges 4386,47,21,888 3745,39,10,605 Operating Expenses XIV 547,24,19,960 431,85,65,251 Provisions & Contingencies 91,58,70,357 2,34,87,18,729 Total 5025,30,12,205 4412,11,94,585 Profit before Tax 1863,00,06,891 1748,16,53,302 Provision for Income Tax 655,15,17,517 582,33,90,333 Deferred Tax Adjustment [(Asset) / Liability] (20,13,83,841) (80,77,02,628) Share of earning/(loss) in associates 93,41,843 1,57,86,774 Profit after Tax 1228,92,15,058 1248,17,52,371 Profit brought forward 72,65,74,101 61,30,43,673 Total Profit/(Loss) 1301,57,89,159 1309,47,96,044 Appropriations Transfer to General Reserve 1000,60,00,000 1011,66,00,000 Transfer to Special reserve u/s 36(1)(viii) of 70,00,00,000 80,00,00,000 The Income Tax Act, 1961 Transfer to Statutory Reserve u/s 45-IC 21,56,73,919 13,18,69,340 of RBI Act, 1934 Others Transfer to Investment Fluctuation Reserve 2,02,40,173 15,78,97,722 Transfer to Staff Welfare Fund 2,00,00,000 1,00,00,000 Development Fund - - Dividend on Shares 93,93,08,909 94,68,10,409 Tax on Dividend 19,12,21,193 20,50,44,472 Surplus in Profit & Loss account carried forward 92,33,44,965 72,65,74,101 Total 1301,57,89,159 1309,47,96,044 Basic/Diluted Earning Per Share 23.55 26.37 Significant Accounting Policies and Notes to Accounts (Annexure I) The Schedules referred to above form an integral part of the Profit & Loss Account. BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountant FRN. 101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief General Manager Deputy Managing Deputy Managing (Corporate Accounts Vertical) Director Director Darshit Doshi Partner M.No. 133755 Satyananda Mishra R. Ramachandran Director Director Mumbai. May 18, 2017 112 Annual Report 2016-17 Schedules to Consolidated Balance Sheet as at March 31, 2017 (`) CAPITAL AND LIABILITIES March 31, 2017 March 31, 2016 Schedule I Capital (a) Authorized Capital - Equity Share Capital (75,00,00,000 Equity Shares of `10/- each) 750,00,00,000 750,00,00,000 - Preference Share Capital (25,00,00,000 Redeemable Preference Shares of `10/- each) 250,00,00,000 250,00,00,000 (b) Issued, Subscribed and Paid-up Capital - Equity Share Capital (53,19,22,031 Equity Shares of `10/- each) 531,92,20,309 486,98,22,500 -Preference Share Capital - - Total 531,92,20,309 486,98,22,500 Schedule II Reserves, Surplus and Funds A) Reserves i) General Reserve Opening Balance 8670,72,65,377 7658,27,79,622 - Additions during the year 1055,88,76,092 1012,44,85,755 - Utilisations during the year - - - Closing Balance 9726,61,41,469 8670,72,65,377 ii) Share Premium - Opening Balance 713,01,77,500 - - Additions during the year 955,06,02,190 713,01,77,500 - Utilisations during the year - - - Closing Balance 1668,07,79,690 713,01,77,500 iii) Specific Reserves a) Investment Reserve - Opening Balance 55,19,63,645 55,19,63,645 - Additions during the year - - - Utilisations during the year 55,19,63,645 - - Closing Balance - 55,19,63,645 b) Special Reserve created and maintained u/s 36 (1) (viii) of The Income Tax Act, 1961 - Opening Balance 1357,00,00,000 1277,00,00,000 - Additions during the year 70,00,00,000 80,00,00,000 - Utilisations during the year - - - Closing Balance 1427,00,00,000 1357,00,00,000 Annual Report 2016-17 113 Schedules to Consolidated Balance Sheet as at March 31, 2017 (`) CAPITAL AND LIABILITIES March 31, 2017 March 31, 2016 c) Statutory Reserve created u/s 45-IC of Reserve Bank of India Act - Opening Balance 13,18,69,340 - - Additions during the year 21,56,73,919 13,18,69,340 - Utilisations during the year - - - Closing Balance 34,75,43,259 13,18,69,340 d) Other Reserves Investment Fluctuation Reserve - Opening Balance 68,35,45,852 52,56,48,130 - Additions during the year 2,02,40,173 15,78,97,722 - Utilisations during the year - - - Closing Balance 70,37,86,025 68,35,45,852 B) Surplus in Profit and Loss account 92,33,44,965 72,65,74,101 C) Funds a) National Equity Fund - Opening Balance 255,40,61,491 254,08,68,273 - Additions / Write back during the year 89,24,580 1,31,93,218 - Utilisations during the year - - - Closing Balance 256,29,86,071 255,40,61,491 b) Staff Welfare Fund - Opening Balance 24,52,11,745 22,70,56,982 - Additions during the year 2,00,00,000 3,36,40,020 - Utilisations during the year 1,83,25,722 1,54,85,257 - Closing Balance 24,68,86,023 24,52,11,745 c) Others - - Total 13300,14,67,502 11230,06,69,051 Schedule III Deposits A) Fixed Deposits 2048,37,42,622 825,12,27,905 B) From Banks a) Under MSME Refinance Fund 9000,00,00,000 10000,00,00,000 b) Under MSME Risk Capital Fund 1500,00,00,000 1750,00,00,000 c) Others -From Foreign & Private Sector Banks - - d) Under MSME India Aspiration Fund 500,00,00,000 500,00,00,000 e) Under Fund for Venture Capital in MSME sector 2014-15 2813,54,75,000 2500,00,00,000 f) Under Priority Sector Shortfall 8125,00,00,000 5000,00,00,000 Subtotal (B) 21938,54,75,000 19750,00,00,000 Total 23986,92,17,622 20575,12,27,905 114 Annual Report 2016-17 Schedules to Consolidated Balance Sheet as at March 31, 2017 (`) CAPITAL AND LIABILITIES March 31, 2017 March 31, 2016 Schedule IV Borrowings i) Borrowings in India a) From Reserve Bank of India - - b) From Government of India (including Bonds subscribed by GOI) 2250,10,65,132 2356,12,00,839 c) Bonds & Debentures 9301,00,00,000 13077,60,00,000 d) From Other Sources - Commercial Paper 17580,00,00,000 9090,00,00,000 - Certificate of Deposits 1014,53,48,550 3081,00,00,000 - Term Loans from Banks 643,37,83,119 760,73,58,503 - Term Money Borrowings - - - Others 1371,89,34,746 2149,42,56,515 Subtotal (i) 32160,91,31,547 30514,88,15,857 ii) Borrowings outside India (a) KFW, Germany 1382,11,29,853 1714,36,44,616 (b) Japan International 4335,71,46,562 4832,53,51,698 Cooperation Agency (JICA) (c) IFAD, Rome 112,73,11,009 131,44,98,429 (d) World Bank 4982,91,45,632 4661,92,78,563 (e) Others 408,05,41,999 501,52,61,962 Subtotal (ii) 11221,52,75,055 11841,80,35,268 Total (i & ii) 43382,44,06,602 42356,68,51,125 Schedule V Other Liabilities and Provisions: Interest Accrued 288,58,29,371 266,45,52,527 Others (including provisions) 4680,98,03,175 4817,06,23,603 Provisions for Exchange Rate Fluctuation 1444,76,15,756 1398,70,64,312 Contingent provisions against standard assets 340,23,28,592 328,55,93,872 Proposed Dividend (including tax on dividend) 113,05,30,102 115,18,54,881 Total 6867,61,06,996 6925,96,89,195 ASSETS Schedule VI Cash & Bank Balances 1. Cash in Hand & Balances with 6,83,614 6,74,499 Reserve Bank of India 2. Balances with other Banks (a) In India i) in current accounts 27,87,20,038 27,90,41,457 ii) in other deposit accounts 2404,53,14,166 2408,75,33,062 (b) Outside India i) in current accounts 4,51,902 20,48,368 ii) in other deposit accounts 719,13,50,537 848,45,61,172 Total 3151,65,20,257 3285,38,58,558 Annual Report 2016-17 115 Schedules to Consolidated Balance Sheet as at March 31, 2017 (`) ASSETS March 31, 2017 March 31, 2016 Schedule VII Investments [net of provisions] A) Treasury operations 1. Securities of Central and State Governments 396,80,00,401 685,91,44,458 2. Shares of Banks & Financial Institutions 23,95,12,137 23,95,12,137 3. Bonds & Debentures of Banks & 109,774,52,685 2359,82,58,840 Financial Institutions 4. Stocks, Shares, bonds & Debentures of 248,80,48,275 248,80,48,275 Industrial Concerns 5. Short Term Bills Rediscounting Scheme - - 6. Others 3202,75,73,351 2505,70,59,819 Subtotal (A) 4970,05,86,849 5824,20,23,529 B) Business Operations 1. Shares of Banks & Financial Institutions 114,92,61,420 61,12,61,440 2. Bonds & Debentures of Banks & Financial 5,65,33,000 5,92,10,312 Institutions 3. Stocks, Shares, bonds & Debentures of 405,77,31,494 369,79,19,478 Industrial Concerns 4. Investment in Subsidiaries - - 5. Others 2443,09,94,982 865,25,43,334 Subtotal (B) 2969,45,20,896 1302,09,34,564 Total (A+B) 7939,51,07,745 7126,29,58,093 Schedule VIII Loans & Advances [Net of Provisions] A) Refinance to - Banks and Financial Institutions 52970,48,57,960 49209,31,38,280 - Micro Finance Institutions 3393,43,58,549 258,95,4,57,707 - NBFC 72,658,293,916 5677,54,89,100 - Bills Rediscounted - - - Others ( Resource Support) - - Sub Total (A) 636,297,510,425 574,764,085,087 B) Direct Loans - Loans and Advances 9540,64,92,741 9884,06,90,456 - Receivable Finance Scheme 1070,86,54,657 1512,59,23,439 - Bills Discounted 52,81,993 72,42,283 Subtotal (B) 10612,04,29,391 11397,38,56,178 Total (A+B) 74241,79,39,816 68873,79,41,265 116 Annual Report 2016-17 Schedules to Consolidated Balance Sheet as at March 31, 2017 (`) ASSETS March 31, 2017 March 31, 2016 Schedule IX Fixed Assets [Net of Depreciation] 1. Premises 203,57,06,345 208,64,41,065 2. Others 2,36,37,619 1,92,96,326 Total 205,93,43,964 210,57,37,391 Schedule X Other Assets: Accrued Interest 1702,33,62,481 1040,51,91,079 Advance Tax (Net of provision) 331,31,93,676 238,17,96,704 Others 170,67,30,165 428,07,98,454 Expenditure to the extent not written off 347,42,67,569 413,74,08,714 Total 2551,75,53,891 2120,51,94,951 Schedule XI CONTINGENT LIABILITIES i) Claims against the Bank not 378,57,03,656 245,79,68,602 acknowledged as debts ii) On account of Guarantees / Letters of Credit 106,70,90,288 128,47,53,531 iii) On account of Forward Contracts 418,59,06,954 2145,38,16,573 iv) On account of Underwriting Commitments - - v) On account of uncalled monies on partly paid shares, debentures - - vi) Other items for which the Bank is 9108,09,45,848 7891,11,59,663 contingently liable (derivative contracts etc.) Total 10011,96,46,746 10410,76,98,369 Annual Report 2016-17 117 Schedules to Consolidated Profit & Loss Account for the year ended as at March 31, 2017 (`) CAPITAL AND LIABILITIES March 31, 2017 March 31, 2016 Schedule XII Interest and Discount 1. Interest and Discount on Loans, Advances and Bills 5979,42,76,215 5178,93,84,941 2. Income on Investments / Bank balances 529,06,23,818 700,14,05,913 Total 6508,49,00,033 5879,07,90,854 Schedule XIII Other Income: 1. Upfront and Processing Fees 33,63,39,805 37,77,29,724 2. Commission and Brokerage 2,42,76,355 2,32,35,996 3. Profit on sale of Investments 234,88,06,643 151,32,42,701 4. Income earned by way of dividends etc. 10,20,000 - from Subsidiaries / Associates 5. Provision of Earlier Years written Back - 92,953 6. Others 108,76,76,260 89,77,55,659 Total 379,81,19,063 281,20,57,033 Schedule XIV Operating Expenses: Payments to and provisions for employees 415,82,86,656 287,78,49,331 Rent, Taxes and Lighting 22,61,72,820 21,43,44,291 Printing & Stationery 1,15,67,839 1,14,83,935 Advertisement and Publicity 2,79,65,165 4,35,60,584 Depreciation / Amortisation on Bank's Property 20,14,10,951 14,10,29,220 Directors’ fees, allowances and expenses 67,57,190 83,41,739 Auditor’s Fees 70,86,071 86,71,009 Law Charges 1,74,88,521 1,94,18,324 Postage, Courier, Telephones etc 32,16,068 34,43,438 Repairs and maintenance 10,97,93,926 9,59,02,333 Insurance 57,78,557 52,68,564 Contribution to CGTMSE 4,44,41,750 1,774,75,000 Other Expenditure 6,524,54,446 71,17,77,483 Total 547,24,19,960 4,31,85,65,251 118 Annual Report 2016-17 Additional Notes to Consolidated Accounts Annexure - I - Significant Accounting Policies 1 All the significant accounting policies as mentioned in Schedule XV of the standalone financial statements have also been followed in the preparation of consolidated financial statements. 2 The financial statements of the Bank and its subsidiary companies are combined on a line to line basis by adding together the book values of like items of Assets, Liabilities, Income and Expenses after fully eliminating intra group balances and inter group transactions in accor- dance with AS-21" Consolidated Financial Statements". The Associates are accounted for using the equity method as prescribed by AS-23 " Accounting for Investments in Associates in Consolidated Financial Statements". 3 Details of Subsidiaries included in consolidated financial statements are: (`) Sr. No. Name of the subsidiary Country of Proportion Profit/Loss Incorporation of ownership 1 SIDBI Venture Capital Ltd.(SVCL) India 100% 5,58,21,174 2 SIDBI Trustee Company Ltd.(STCL) India 100% 42,85,700 3 Micro Units Development & Refinance India 100% 107,83,69,592 Agency (Mudra Ltd) Total 113,84,76,466 Financial statements of the subsidiaries are Audited. 4.A Details of Associates included in consolidated financial statements are as follows : (`) Sr. No. Name of the (%) Holding Description Investment Share of Share in Associate Profit/(loss) reserves * 1 SMERA 34.29 Credit Rating Agency for SME's 5,10,00,000 14,63,401 1,17,87,717 2 ISTSL 22.72 Technology Support to SME's 1,00,00,000 11,07,528 30,94,396 3 ISARC 26.00 ** Asset Reconstruction Company 26,00,00,000 98,89,481 6,46,08,880 4 DFC 23.76 State Financial Corporation 6,27,75,000 66,41,010 10,73,97,090 5 ReXil 30.00 Online platform for factoring / discounting 7,50,00,000 (97,59,577) - of Trade Receivables (TReDS) Total 45,87,75,000 93,41,843 18,68,88,083 * Included in Reserve Fund of `9726,61,41,469 (Previous year `8670,72,65,377) in Schedule II A(i) of the Consolidated Balance sheet. ** includes 11% holding by SVCL (100% subsidiary of SIDBI). B The results of the following associates are not included in the consolidated financial statements. However, full provision has been made in the financial statements for share of the losses. (`) Sr. No. Name of the (%) Holding Description Investment Share of Associate profit/(loss) 1. BSFC 48.43 State Financial Corporation 18,84,88,500 (18,84,88,500) 2. GSFC 28.41 State Financial Corporation 12,66,00,000 (12,66,00,000) 3. JKSFC 28.65 State Financial Corporation 10,46,20,000 (10,46,20,000) 4. MSFC 39.99 State Financial Corporation 12,52,41,750 (12,52,41,750) 5. PFC 25.92 State Financial Corporation 5,23,51,850 (5,23,51,850) 6. UPSFC 24.18 State Financial Corporation 21,67,59,000 (21,67,59,000) Total 81,40,61,100 (81,40,61,100) Annual Report 2016-17 119 Additional Notes to Consolidated Accounts C In case of following entities, though the bank holds more than 20% of voting power, they are not treated as investment in associate under AS 23 'Accounting for Investment in Associates in Consolidated Financial Statements', because they are not considered as material investments requiring consolidation. (`) Sr. No. Name of the Associate (%) Holding Description Investment 1 APITCO Ltd. 41.29 Technical Consultancy Organisation 54,70,975 2 KITCO Ltd. 49.77 Technical Consultancy Organisation 24,95,296 3 Bihar Industrial and Technical Consultancy Organisation Ltd. 49.25 Technical Consultancy Organisation 1 4 North Eastern Industrial and Technical Consultancy Organisation Ltd. 43.44 Technical Consultancy Organisation 1 5 Orissa Industrial and Technical Consultancy Organisation Ltd. 49.42 Technical Consultancy Organisation 1 6 WEBCON Consulting (India) Ltd. (Earstwhile West Bengal Consultancy Organisation Ltd.) 21.67 Technical Consultancy Organisation 4,86,783 Total 84,53,057 D. Financial statements of the associates other than State Financial Corporations's (SFC) mentioned in 4A and 4B are unaudited for the year ended March 31,2017. The figures for SFC's other than JKSFC, MSFC and UPSFC are based on audited results for the year ended March 31,2016. Regarding JKSFC and MSFC, figures are based on audited results for the year ended March 31, 2015. In respect of UPSFC, provisional results are available for the year ended March 31,2012. The Bank has not incurred any obligation or made payment on behalf of associates mentioned in 4B and 4C (Except for WEBCON Consulting (India) Ltd.) above or otherwise provided guaran- tee or commitment for the losses made by the associates in excess of its investment value in the associates. SIDBI has incurred an amount of `2,23,013/- towards appointment of MD, WEBCON Consulting (India) Ltd. and recovered an amount of `1,11,506/- from the company. Balance amount `1,11,507/- is recoverable from the company. 5. Details of significant transactions with associates are as under: Sr. No. Name of the Associate Particulars Disbursements Repayments (including interests) 1 DFC Refinance assistance - 5,45,96,792 6 As against depreciation policy of SIDBI whereby assets are depreciated on SLM / WDV at pre-determined rates, the subsidiaries and associates compute depreciation on SLM/ WDV basis as per Schedule II of the Companies Act, 2013. Thus out of the total depreciation of `20,14,10,951 (Previous Year `14,10,29,220) included in Consolidated Financial Statements, `9,02,387 being 0.45% (Previous Year `6,80,200 being 0.48%) of the amount is determined based on Depreciation provided as per the Companies Act, 2013. 7 As all shares of the subsidiaries are owned by SIDBI directly or indirectly, no separate disclosure relating to minority interest is reflected. 8 Aggregate remuneration paid to whole time director of SVCL is `57,23,206 (Previous Year `52,90,989) and Mudra Ltd. is `67,46,805 (Previous Year `37,15,637). 120 Annual Report 2016-17 Additional Notes to Consolidated Accounts (`) 9. Earning Per Share (EPS)*: March 31, 2017 March 31, 2016 Net Profit considered for EPS calculation 1228,92,15,058 1248,17,52,371 Weighted Average Number of equity shares 52,18,38,283 47,34,05,205 of face value `10 each Earning per share 23.55 26.37 *Basic & Diluted EPS are same as there are no dilutive potential Equity Shares. 10 As per the Accounting Standard 22, Accounting for Taxes on Income, the Bank has reviewed the Deferred Tax Expenditure / Saving and recognised an amount of `20,13,83,841/- as Deferred Tax Asset (Previous year - Deferred Tax Asset was `80,77,02,628/-) in the Profit and Loss Account for the year ended March 31, 2017. The Break up of Deferred Tax Asset/ ( Liability) as on March 31, 2017 is as follows : FY 2016-17 (`) FY 2015-16 (`) S. No Timing Difference Deferred Tax Asset/(Liability) Deferred Tax Asset/(Liability) 1 Provision for Depreciation 95,74,653 (1,09,719) 2 Special Reserve u/s 36(1)(viii) of the (421,81,48,976) (397,58,92,976) Income Tax Act 1961 3 Provisions for Bad & Doubtful Debts 211,36,06,638 212,05,54,201 4 Amortisation of Premium on GOI Bonds (7,32,66,842) (8,79,10,650) 5 Provision for Restructuring of Accounts 3,73,31,705 14,02,21,289 6 Others 191,48,56,181 138,57,07,372 Net deferred tax Asset/(Liability) (21,60,46,641) (41,74,30,483) 11 Contingent Liabilities SVCL has disputed liability towards municipal taxes, the amount of which cannot be deter- mined. 12 Additional statutory information disclosed in separate financial statements of the parent and the subsidiaries have no bearing on the true and fair view of the Consolidated Financial Statments and also the information pertaining to the items which are not material have not been disclosed in the Consolidated Financial Statements in view of the general clarification issued by the Institute of Chartered Accountants of India (ICAI). Annual Report 2016-17 121 Additional consolidated disclosures as per RBI guidelines (` Crore) 1 Capital Adequacy Sr. No. Particulars FY 2016-17 FY 2015-16 i) Common Equity* Not Applicable Not Applicable ii) Additional Tier 1 capital* Not Applicable Not Applicable (iii) Total Tier 1 capital 14,500.49 12,264.02 (iv) Tier 2 capital 340.23 383.75 v) Total Capital ( Tier 1+Tier 2) 14,840.72 12,647.77 vi) Total Risk Weighted Assets (RWAs) 48,234.34 41,189.02 vii) Common Equity Ratio ( Common Equity as a Not Applicable Not Applicable percentage of RWAs) * viii) Tier 1 Ratio ( Tier 1 capital as a percentage of RWAs) 30.06% 29.77% ix) Capital to Risk Weighted Assets Ratio (CRAR) (Total Capital as a percentage of RWAs) 30.77% 30.71% x) Percentage of the shareholding of the Government of India 15.40 7.59 xi) Amount of equity capital raised 44.94 36.98 xii) Amount of Additional Tier 1 capital raised; of which - - a) Perpetual Non-Cumulative Preference Shares (PNCPS): - - b) Perpetual Debt Instruments (PDI) - - xiii) Amount of Tier 2 capital raised; of which - - a) Debt capital instruments: - - b) Perpetual Cumulative Preference Shares (PCPS) - - c) Redeemable Non-Cumulative Preference Shares (RNCPS) - - d) Redeemable Cumulative Preference Shares (RCPS) - - * The figures are not being calculated at present, since BASEL-III is not applicable. (` Crore) 2. Free Reserves and Provisions (a) Provision on Standard Assets Particulars FY 2016-17 FY 2015-16 Provisions towards Standard Assets (cumulative) 340.23 328.56 (b) Floating Provisions Opening balance in the floating provisions account 2,333.91 2,639.91 The quantum of floating provisions made in the accounting year - - Amount of draw down made during the accounting year 276.10** 306.00* Closing balance in the floating provisions account 2,057.81 2,333.91 * Amount was utilised for making NPA/NPI provision in respect of one borrower account as per approval received from RBI vide letter No.DBR.FID.No.1164/03.01.11/2015-16 dated July 21, 2015 ** Amount was utlised for making NPA/NPI provisions in respect of 3 borrower accounts as per the Bank's policy on floating provision. 122 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) 3. Asset Quality and specific provisions (a) Non-Performing Advances Particulars FY 2016-17 FY 2015-16 (i) Net NPAs to Net Advances (%) 0.44% 0.73% (ii) Movement of NPAs (Gross) (a) Opening balance 1,008.18 741.11 (b) Additions during the year 354.03 536.83 (c) Reductions during the year 538.93 269.76 (d) Closing balance 823.28 1,008.18 (iii) Movement of Net NPAs * (a) Opening balance 481.41 431.44 (b) Additions during the year (2.75) 94.35 (c) Reductions during the year 176.41 44.38 (d) Closing balance 302.25 481.41 (iv) Movement of provisions for NPAs (excluding provisions on standard assets) (a) Opening balance 526.77 309.67 (b) Provisions made during the year 356.78 442.48 (c) Write of / write back of excess provisions 362.52 225.38 d) Closing balance 521.03 526.77 *The Net NPA will be NIL for the current year and previous year , if the amount of floating provision is adjusted against the same. (b) Non-Performing Investments Particulars FY 2016-17 FY 2015-16 (i) Net NPIs to Net Investments (%) 0.00% 1.36% (ii) Movement of NPIs (Gross) (a) Opening balance 621.14 529.85 (b) Additions during the year 1.27 148.55 (c) Reductions during the year 202.81 57.26 (d) Closing balance 419.60 621.14 (iii) Movement of Net NPIs (a) Opening balance 101.26 149.40 (b) Additions during the year (62.51) (38.69) (c) Reductions during the year 38.75 9.45 (d) Closing balance 0.00 101.26 (iv) Movement of provisions for NPIs (excluding provisions on standard assets) (a) Opening balance 519.88 380.45 (b) Provisions made during the year 63.78 187.24 (c) Write of / write back of excess provisions 164.06 47.81 (d) Closing balance 419.60 519.88 Annual Report 2016-17 123 Additional consolidated disclosures as per RBI guidelines (` Crore) (c ) Non-Performing Assets (a+b) Particulars FY 2016-17 FY 2015-16 (i) Net NPAs to Net Assets (Advanced + investments) (%) 0.40% 0.80% (ii) Movement of NPAs (Gross Advances + Gross investments) (a) Opening balance 1,629.32 1,270.96 (b) Additions during the year 355.30 685.38 (c) Reductions during the year 741.74 327.02 (d) Closing balance 1,242.88 1,629.32 (iii) Movement of Net NPAs (a) Opening balance 582.67 580.84 (b) Additions during the year (65.26) 55.66 (c) Reductions during the year 215.16 53.83 (d) Closing balance 302.25 582.67 (iv) Movement of provisions for NPAs (excluding provisions on standard assets) (a) Opening balance 1,046.65 690.12 (b) Provisions made during the year 420.56 629.72 (c) Write of / write back of excess provisions 526.58 273.19 (d) Closing Balance 940.63 1,046.65 (d) Disclosures on Strategic Debt Restructuring Scheme (accounts which are currently under the stand-still period) No. of accounts where Amount outstanding Amount outstanding Amount outstanding as SDR has been invoked as on the reporting date as on the reporting on the reporting date date with respect to with respect to accounts accounts where where conversion of conversion of debt to debt to equity has equity is pending taken place Classified Classified Classified Classified Classified Classified as standard as NPA as standard as NPA as standard as NPA 1 - 3.98* - - - 3.98* * includes outstanding balance of equity investment. (e) Disclosures on Change in Ownership outside SDR Scheme (accounts which are currently under the stand-still period) No. of accounts Amount outstanding as Amount outstanding as Amount outstanding as Amount outstanding as where banks on the reporting date on the reporting date on the reporting date on the reporting date have decided with respect to accounts with respect to accounts with respect to accounts to effect change where conversion of debt where conversion of debt where change in ownership in ownership to equity/invocation of to equity/invocation of is envisaged by issuance pledge of equity shares pledge of equity shares of fresh shares or sale shares is pending has taken place of promoters equity Classified Classified Classified Classified Classified Classified Classified Classified as standard as NPA as standard as NPA as standard as NPA as standard as NPA - - - - - - - - - (f) Disclosures on Change in Ownership of Projects Under Implementation (accounts which are currently under the stand-still period) No. of project loan accounts Amount outstanding as on the reporting date where banks have decided to Classified as Classified as Classified as effect change in ownership standard standard restructured NPA - - - - 124 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines Annual Report 2016-17 125 Additional consolidated disclosures as per RBI guidelines 126 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) (h) Disclosures on Flexible Structuring of Existing Loans Period No. of borrowers Amount of loans taken up Exposure weighted average taken up for flexibly for flexible structuring duration of loans taken up structuring up for flexible structuring Classified as Classified Before After Standard as NPA applying applying flexible flexible structuring structuring Previous Year FY 2015-16 1 52.87 - 15.99 22.49 Current Year FY 2016-17 - - - - - (i) Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A), as on March 31, 2017. No. of accounts where Aggregate amount Amount outstanding Provision Held S4A has been applied In Part A In Part B Classified as Standard - - - - Classified as NPA - - - - (j) Movement of Non-performing assets Particulars FY 2016-17 FY 2015-16 Gross NPAs as on April 01, 2016 1,629.32 1,270.96 Additions (Fresh NPAs) during the year 355.30 685.38 Sub total (A) 1,984.62 1,956.34 Less :- (i) Upgradations 40.13 12.33 (ii) Recoveries (excluding recoveries made from upgraded accounts) 220.62 115.96 (iii) Technical / Prudential Write offs 294.35 198.73 (iv) Write offs other than those under (iii) above* 186.64 - Sub-total (B) 741.74 327.02 Gross NPAs as on March 31, 2017 (A-B) 1,242.88 1,629.32 * Sale of Loan Accounts (amounting `23.94 crore) to ARC under Advances and actual write off (` 163.60 crore) under Investments. (k) Write-offs and recoveries Particulars FY 2016-17 FY 2015-16 Opening balance of Technical / Prudential written off accounts as at April 1, 2016 1,377.70 1,233.02 Add : Technical / Prudential write offs during the year 294.35 198.73 Sub total (A) 1,672.05 1,431.75 Less : Actual write off 51.85 0.88 Less : Recoveries made from previously technical / prudential written off accounts during the year 46.52 53.17 Sub total (B) 98.37 54.05 Closing balance as at March 31, 2017 (A-B) 1,573.68 1,377.70 Annual Report 2016-17 127 Additional consolidated disclosures as per RBI guidelines (` Crore) (l) Overseas Assets, NPAs and Revenue Particulars FY 2016-17 FY 2015-16 Total Assets - - Total NPAs - - Total Revenue - - (m) Depreciation and provisions on investments Particulars FY 2016-17 FY 2015-16 (1) Investments (i) Gross Investments 8,407.88 7,696.36 (a) In India 8,407.88 7,696.36 (b) Outside India - - (ii) Provisions for Depreciation 468.37 570.06 (a) In India 468.37 570.06 (b) Outside India - - (iii) Net Investments 7,939.51 7,126.30 (a) In India 7,939.51 7,126.30 (b) Outside India - - (2) Movement of provisions held towards depreciation on investments (i) Opening balance 50.18 65.97 (ii) Add: Provisions made during the year 0.61 - (iii) Appropriation, if any, from Investment Fluctuation Reserve Account during the year - - (iv) Less: Write off / write back of excess provisions during the year - - (v) Less: Transfer, if any, to Investment Fluctuation Reserve Account* 2.02 15.79 (vi) Closing balance 48.77 50.18 * Transfer to Investment Fluctuation Reserve is net of provision of `3.99 crore made during FY 2016-17 and `11.65 crore made during FY 2015-16. (n) Provisions and Contingencies FY 2016-17 FY 2015-16 Break up of 'Provisions and Contingencies' shown under the head Expenditure in Profit and Loss Account Provisions for depreciation/NPI on Investment # (23.89) (75.22) Provision towards NPA # 103.80 296.91 Provision made towards Income tax (Including Deferred Tax Assets/Liability) 635.01 501.57 Other Provision and Contingencies (with details)$ 11.68 13.18 # Net of write back of floating provision. $ Provision for standard asset. 128 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) (o) Provisioning Coverage Ratio (PCR) FY 2016-17 FY 2015-16 Provisioning Coverage Ratio (PCR)* 87% 79% * Floating provision has not been considered while calculating PCR. 4. Investment portfolio: constitution and operations (a) Repo Transactions Minimum Maximum Daily Average Outstanding as outstanding outstanding outstanding on March 31, 2017 during the year during the year during the year Securities sold under repo i. Government securities - - - - ii.Corporate debt securities - - - - Securities purchased under reverse repo i. Government securities - - - - ii. Corporate debt securities - - - - (b) Disclosure of Issuer Composition for Investment in Debt Securities Amount of Issuer Amount Investment Below Investment Unrated Unlisted made through Grade Securities securities securities private placement Held held (1) (2) (3) (4) (5) (6) PSUs 589.47 - - - 366.46 FIs 680.80 99.99 - 61.73 146.65 Banks 1,554.42 115.00 - - - Private Corporates 1,081.99 308.86 - 392.71 352.59 Subsidiaries/Joint ventures 0.00 0.00 - 0.00 0.00 Others 4,099.95 746.73 - 746.73 4,126.72 Provision held towards depreciation (463.92) Total 7,542.71 1,270.58 - 1,201.17 4,992.42 (c ) Sale & transfers of securities to /from HTM category: During the current FY, the Bank shifted investments in Venture Capital Funds from HTM to AFS category in accordance with extant RBI guidelines. Except for the above, there was no shifting of investments to/from HTM category. 5. Details of Financial Assets purchased/ sold (a) Details of Financial Assets sold to Securitisation / Reconstruction Company for Asset Reconstruction (i) Details of Sales Particulars FY 2016-17 FY 2015-16* (i) No. of accounts (borrower) 1 - (ii) Aggregate value (net of provisions) of accounts sold to SC/RC 13.17 - (iii) Aggregate consideration 27.66 - (iv) Additional consideration realized in respect of accounts transferred in earlier years 0 - (v) Aggregate gain / loss over net book value 14.49 - -* During the FY 2015-16, one prudentially written off borrowal account amounting to `7.02 crore (principal with interest/other dues) was sold to ARC for the aggegrate consideration of `5.25 crore. Annual Report 2016-17 129 Additional consolidated disclosures as per RBI guidelines (` Crore) (ii) Details of Book Value of Investments in Security Receipts Book value of investments in security receipts Particulars FY 2016-17 FY 2015-16 (i) Backed by NPAs sold by the AIFI as underlying 9.49 - (ii) Backed by NPAs sold by banks / other financial 0.00 - institutions / non-banking financial companies as underlying Total 9.49 - (b) Details of Non Performing Financial Assets Purchased / Sold (i) Details of non performing financial assets purchased: Particulars FY 2016-17 FY 2015-16 1. (a) No. of accounts purchased during the year - - (b) Aggregate outstanding - - 2. (a) Of these, number of accounts restructured during the year - - (b) Aggregate outstanding - - (ii) Details of non performing financial assets sold: Particulars FY 2016-17 FY 2015-16 No. of accounts sold 1 - Aggregate outstanding 23.04 - Aggregate consideration received 27.66 - 6. Operating Results Particulars FY 2016-17 FY 2015-16 (i) Interest income as a percentage to average working funds 7.59 8.41 (ii) Non-interest income as a percentage to average working funds 0.44 0.40 (iii) Operating profit as a percentage to average working funds (before provisions) 2.28 2.84 (iv) Return on average assets (before provisions for taxation) 2.17 2.50 (v) Net Profit per employee (` crore) 1.05 1.18 7. Credit Concentration risk Particulars FY 2016-17 FY 2015-16 (i) direct investment in equity shares, convertible bonds, 548.72 469.58 convertible debentures and units of equity oriented mutual funds the corpus of which is not exclusively invested in corporate debt; (ii) advances against shares / bonds / debentures or other - - securities or on clean basis to individuals for investment in shares (including IPOs / ESOPs), convertible bonds, convertible debentures, and units of equity oriented mutual funds; 130 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) 7. Credit Concentration risk Particulars FY 2016-17 FY 2015-16 (iii) advances for any other purposes where shares or - - convertible bonds or convertible debentures or units of equity oriented mutual funds are taken as primary security; (iv) advances for any other purposes to the extent secured - - by the collateral security of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares / convertible bonds / convertible debentures / units of equity oriented mutual funds `does not fully cover the advances; (v) secured and unsecured advances to stockbrokers and - - guarantees issued on behalf of stockbrokers and market makers; (vi) loans sanctioned to corporates against the security of - - shares / bonds / debentures or other securities or on clean basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources; (vii) bridge loans to companies against expected equity - - flows / issues; (viii) underwriting commitments taken up by the banks in respect - - of primary issue of shares or convertible bonds or convertible debentures or units of equity oriented mutual funds; (ix) financing to stockbrokers for margin trading; - - (x) all exposures to Venture Capital Funds (both registered and unregistered) 749.79 567.53 Total Exposure to Capital Market 1,298.51 1,037.11 (b) Exposure to Country risk The bank had no overseas exposure during the current year and previous year. (c ) Prudential Exposure Limits - Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the AIFI S. No. PAN Number Borrower Industry Industry Sector Amount Amount Exposure Name Code Name Funded Non-Funded as %tage to capital Funds - - - - - - - - - ii) Credit exposure as percentage to capital funds and as percentage to total assets, in respect of : S. No. Particulars FY 2016-17 FY 2015-16 As % to As % to As % to As % to Total Assets Capital funds Total Assets Capital funds 1. The largest single borrower 16.91 100.40 9.61 62.00 The largest borrower group As large borrowers are Primary lending Institutions, the concept of borrower group is not applicable. 2 The 20 largest single borrowers 71.47 424.25 60.55 390.74 The 20 largest borrower group As large borrowers are Primary lending Institutions the concept of borrower group is not applicable. Annual Report 2016-17 131 Additional consolidated disclosures as per RBI guidelines (` Crore) iii) Credit exposure to the five largest industrial sectors as percentage of total loan assets Sr. No. Name of Industry FY 2016-17 FY 2015-16 Amount % to total Amount % to total Outstanding loan assets Outstanding loan assets Transport Equpment 1,887.10 2.54 1,474.46 2.14 Textile (Including Jute) 1,202.62 1.62 1,045.63 1.52 Metal Products 1,196.79 1.61 892.23 1.30 Hotels 696.67 0.94 660.96 0.96 Rubber & Plastic products 674.80 0.91 508.54 0.74 (iv) Total amount of advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken is `52.01 crore as on March 31, 2017 and the estimated value of intangible security as on March 31, 2017 is `30.00 crore. (v) The bank had no factoring exposure during the current year and previous year. (vi) The bank had not exceeded the Prudential Exposure Limits during the ccurrent year and previous year. (d) Concentration of borrowings /lines of credit, credit exposures and NPAs (i) Concentration of borrowings and lines of credit Particulars FY 2016-17 FY 2015-16 Total borrowings from twenty largest lenders 49,658.04 46,538.65 Percentage of borrowings from twenty largest lenders to total borrowings 73.71% 73.95% (ii) Concentration of Exposures Particulars FY 2016-17 FY 2015-16 Total advances to twenty largest borrowers 52,805.39 49,219.30 Percentage of advances to twenty largest borrowers to Total Advances 71.13% 71.46% Total Exposure to twenty largest borrowers / customers 65,657.52 54,551.10 Percentage of exposures to twenty largest borrowers / customers to Total Exposure 64.44% 62.86% (iii) Sector-wise concentration of exposures and NPAs FY 2016-17 FY 2015-16 Outstanding Gross Percentage Outstanding Gross Percentage Sr. No. Sector Total Advances NPAs of Gross Total NPAs of Gross NPAs to Total Advances NPAs to Total Advances in Advances in that sector that sector I. Industrial sector 63,518.56 823.28 1.30% 60,950.50 690.29 1.13% 1 Central Government - - - - - - 2 Central PSUs - - - - - - 3 State Governments - - - - - - 4 State PSUs 861.13 1.10 0.13% 1,250.86 2.26 0.18% 5 Scheduled Commercial Banks 51,248.41 - - 47,960.71 - - 6 Regional Rural Banks 277.04 - - - - - 7 Co-operative banks - - - - - - 8 Private sector (excluding banks) 11,131.98 822.18 7.39% 11,738.93 688.03 5.86% II. Micro-finance sector 3,393.44 - - 2,772.53 317.89 11.47% III. Others* 7,850.83 - - 5,677.55 - - Total (I+II+III) 74,762.83 823.28 1.10% 69,400.58 1,008.18 1.45% * includes advances to NBFCs and Small Finance Banks. 132 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) 8. Derivatives (a) Forward Rate Agreement / Interest Rate Swap Sr. No Particulars FY 2016-17 FY 2015-16 i) The notional principal of swap agreements - - ii) Losses which would be incurred if counterparties failed to fulfill their obligations under the agreements - - iii) Collateral required by the bank upon entering into swaps - - iv) Concentration of credit risk arising from the swaps - - v) The fair value of the swap book - - (b) Exchange Traded Interest Rate Derivatives Sr. No Particulars FY 2016-17 FY 2015-16 i) Notional principal amount of exchange traded interest rate derivatives undertaken during the year (instrument - wise) - - ii) Notional principal amount of exchange traded interest rate derivatives outstanding as on March 31 (instrument - wise) - - iii) Notional principal amount of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument - wise) - - iv) Mark-to-market value of exchange traded interest rate derivatives outstanding and not "highly effective" (instrument - wise) - - (c ) Disclosures on risk exposure in derivatives (i) Qualitative Disclosures (1) The Bank uses Derivatives for hedging of interest rate and exchange risk arising out of mismatch in the assets and liabilities. All derivatives undertaken by Bank are for hedging purposes with underlying as Foreign Currency borrowings, which are not MTM, but only translated. The Bank does not undertake trading in Derivatives. (2) Internal Control guidelines and accounting policies are framed and approved by the Board. The derivative structure is undertaken only after approval of the competent authority. The particulars of derivative details undertaken are also reported to ALCO/Board. (3) The Bank has put systems in place for mitigating the risk arising out of derivative deals. The Bank follows the accrual method for accounting the transactions arising out of derivative deals. (ii) Quantitative Disclosures Sr. No. Particulars FY 2016-17 FY 2015-16 Currency Interest rate Currency Interest rate Derivatives Derivatives Derivatives Derivatives 1 Derivatives ( Notional Principal Amount ) 9,108.09 7,891.12 (i) For hedging 9,108.09 - 7,891.12 - (ii) For trading - - - - 2 Marked to Market Positions [1] (122.27) 318.52 (i) Asset (+) (122.27) - 318.52 - (ii) Liability (-) - - - - 3 Credit Exposure [2] 747.61 - 874.20 - 4 Likely impact of one percentage change in interest rate ( 100* PV01) 204.22 228.39 (i) On hedging derivatives 204.22 - 228.39 - (ii) On trading derivatives - - - - 5 Maximum and Minimum of 100*PV01 observed during the year (i) On hedging 258.27/204.22 - 228.39/161.58 - (ii) On trading - - - - Annual Report 2016-17 133 Additional consolidated disclosures as per RBI guidelines (` Crore) 9. Disclosure of Letters of Comfort (LoCs) issued by AIFIs The particulars of Letters of Comfort (LoCs) issued during the year, assessed financial impact, and assessed cumulative financial obligations under the LoCs issued in the past and outstanding is as under: LoCs outstanding as LoC issued during the year LoCs redeemed during the year LoCs outstanding as on March 31, 2016 on March 31, 2017 No of LoC Amount No of LoC Amount No of LoC Amount No of LoC Amount 2 3.27 5 10.41 6 11.88 1 1.80 10. Asset Liability Management 1 to 14 days 15 to 28 days 29 days Over Over Over Over Over Total to 3 months 6 month 1 year 3 year 5 years 3 months & up to & up to & up to & up to 6 months 1 year 3 years 5 years Deposits 10.00 4.00 87.00 107.00 393.00 22,369.00 516.00 500.00 23,986.00 Advances 924.77 4,123.00 5,715.87 7,065.76 12,541.81 28,932.96 12,381.00 2,557.00 74,242.17 Investments 3,584.97 19.13 120.41 72.07 392.14 17.42 609.00 4,916.10 9,731.24 Borrowings 1,772.00 3,925.00 11,151.00 53.00 4,617.00 10,601.00 4,449.00 6,876.00 43,444.00 Foreign Currency assets 18.00 31.00 177.00 104.00 224.00 992.00 470.00 995.00 3,011.00 Foreign Currency liabilities - - 381.00 53.00 455.00 2,683.00 2,076.00 5,574.00 11,222.00 11. Draw Down from Reserves There is no draw down from Reserves during the current year and previous year 12. Business Ratios Particulars FY 2016-17 FY 2015-16 Return on average Equity (before provisions for taxation) 14.68 16.44 Return on average assets (before provisions for taxation) 2.17 2.50 Net Profit per employee (` crore) 1.05 1.18 13. Disclosure of Penalties imposed by RBI RBI had not imposed any penalty on the Bank during the current year and previous year. 14. Customer Complaints Particulars FY 2016-17 FY 2015-16 No. of complaints pending at the beginning of the year 2 5 No. of complaints received during the year 67 59 No. of complaints redressed during the year 67 62 No. of complaints pending at the end of the year 2 2 15. Off-Balance Sheet SPVs Sponsored The Bank had no Off-balance sheet SPVs sponsored during the current year and previous year. 16. Disclosure as per specific accounting standards (a) Accounting Standard 5 – Net Profit or Loss for the period, prior period items and changes in accounting policies Income in schedule XIII - 'other income' for FY 2016-17 includes Prior Period Income of `1,78,32,983 (Previous Year - `49,07,708) and Other expenditure in schedule XIV - 'Operating Expenses' for FY 2017 includes Prior Period Expenditure of `17,24,434 (Previous Year -`1,80,56,736). (b) Accounting Standard 17 – Segment Reporting As required as per RBI master directions and Accounting Standard-17, the Bank has disclosed "Business segment" as the Primary Segment. Since the Bank and its subsidiaries operate in India, there are no reportable geographical segments. Under Business Segment, the Bank has identified Whole Sale Operations (Direct Lending), Whole Sale Operations (Refinance), Treasury and Other Business as its four reporting segments. The other business includes the operations of two subsidiaries of the Bank viz SIDBI Venture Capital Limited and SIDBI Trustee Company Limited. 134 Annual Report 2016-17 Additional consolidated disclosures as per RBI guidelines (` Crore) Part A: BUSINESS SEGMENTS Business Segments Wholesale Operations Wholesale Operations Treasury Other Business Total (Direct Lending) (Refinance) Particulars FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 FY 2017 FY 2016 1 Segment Revenue 1,243 1,362 5,107 4,241 520 541 18 16 6,888 6,160 Exceptional Items - - Total 6,888 6,160 2 Segment Results 46 183 1,784 1,547 163 146 9 10 2,002 1,886 Exceptional Items - - Total 2,002 1,886 Unallocable Expenses 139 138 Operating profit 1,863 1,748 Income Tax (Net of write back) 635 502 Share of profit in associates 1 2 Net profit 1,229 1,248 3 Other information Segment Assets 10,709 11,490 69,192 60,773 7,109 8,036 46 42 87,056 80,341 Unallocated Assets 1,035 1,276 Total Assets 88,091 81,617 Segment Liabilities 7,497 8,108 60,207 53,931 5,037 6,243 5 4 72,746 68,286 Unallocated Liabilities 1,794 1,894 Total 74,540 70,180 Capital / Reserves 3,215 3,339 6,577 5,629 3,733 2,447 26 22 13,551 11,437 Total 13,551 11,437 Total Liabilities 88,091 81,617 Part B: GEOGRAPHIC SEGMENTS - Nil (c ) Accounting Standard 18 – Related Party Disclosures Items / Related Party Parent Sub- Associates Key Relatives of Total (as per sidiaries / Join Mana- Key Mana- ownership ventures gement gement or control) Personnel @ Personnel Borrowings# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Deposit# Outstanding at the year end - - - 0.26 - 0.26 Maximum during the year - - - 0.41 - 0.41 Placement of deposits# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Advances# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Investments# Outstanding at the year end - - 28.60 - - 28.60 Maximum during the year - - 28.60 - - 28.60 Non funded commitments# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Leasing arrangements availed# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Annual Report 2016-17 135 Additional consolidated disclosures as per RBI guidelines (` Crore) Leasing arrangements provided# Outstanding at the year end - - - - - - Maximum during the year - - - - - - Purchase of fixed assets - - - - - - Sale of fixed assets - - - - - - Interest paid - - - 0.02 - 0.02 Interest received - - 4.92 - - 4.92 Rendering of services* - - 19.43 - - 19.43 Receiving of services* - - - 1.41 - 1.41 Management contracts* - - - 1.31** - 1.31** @Whole time directors of the Board # The outstanding at the year end and the maximum during the year are to be disclosed * Contract services etc. and not services like remittance facilities, locker facilities etc. ** Remuneration to Key Management Personnel. 17 Unamortised Pension and Gratuity Liabilities The pension and gratuity liability are provided for on the basis of an actuarial valuation made at the end of each financial year based on the projected unit credit method. The acturial gains/ losses are taken to the profit and loss account and are not amortized. BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountant FRN. 101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief General Manager Deputy Managing Deputy Managing (Corporate Accounts Vertical) Director Director Darshit Doshi Partner M.No. 133755 Satyananda Mishra R. Ramachandran Director Director Mumbai. May 18, 2017 136 Annual Report 2016-17 Cash Flow Statement for the year ended March 31, 2017 (`) March 31, 2016 Particulars March 31, 2017 March 31, 2017 1. Cash Flow from Operating Activities 1748,16,53,301 Net Profit before tax as per P & L Account 1863,00,06,890 Adjustments for : 14,10,29,220 Depreciation 20,14,10,951 115,71,97,341 Provision for net depreciation in investments 61,30,31,066 1,84,36,74,056 Provisions made (net of write back) 189,75,58,851 (127,72,09,428) Profit on sale of investments (net) (234,88,06,643) (36,54,403) Profit on sale of fixed assets (35,54,143) (11,39,38,261) Dividend Received on Investments (11,98,96,737) 23,97,43,345 1922,87,51,826 Cash generated from operations 1886,97,50,235 (Prior to changes in operating Assets and Liabilities) Adjustments for net changes in : (720,61,65,968) Current assets (335,97,77,242) 153,84,62,354 Current liabilities (419,37,68,002) 568,94,34,285 Bills of Exchange 404,85,71,508 (14315,93,09,845) Loans & Advances (5877,96,88,144) 11683,81,21,162 Net Proceeds of Bonds and Debentures & other borrowings 1086,22,06,929 7128,30,59,911 Deposits received 3411,79,89,717 4498,36,01,899 (1730,44,65,234) 6421,23,53,725 156,52,85,001 (628,34,52,472) Payment of Tax (749,43,40,588) (749,43,40,588) 5792,89,01,253 Net Cash flow from operating Activities (592,90,55,586) 2. Cash Flow from Investing Activities (18,09,51,990) Net (Purchase)/Sale of fixed assets (15,14,63,380) (4591,65,51,476) Net (Purchase)/sale/redemption of Investments 1795,34,79,388 11,44,81,179 Dividend Received on Investments 11,98,96,737 (4598,30,22,287) Net cash used in Investing Activities 1792,19,12,744 3. Cash flow from Financing Activities 1499,95,00,000 Proceeds from issuance of share capital & share premium 1999,99,99,999 (139,92,95,746) Dividend on Equity Shares & tax on Dividend (113,95,59,966) 1360,02,04,254 Net cash used in Financing Activities 18,86,04,40,033 Annual Report 2016-17 137 Cash Flow Statement for the year ended March 31, 2017 (`) March 31, 2016 Particulars March 31, 2017 March 31, 2017 2554,60,83,220 4. Net increase/(decrease) in cash and cash equivalents 3085,32,97,191 1096,44,60,399 5. Cash and Cash Equivalents at the beginning 3651,05,43,619 of the period 3651,05,43,619 6. Cash and Cash Equivalents at the end of the period 6736,38,40,810 7. Cash and cash equivalents at the end of the period includes 6,74,499 Cash in Hand 6,83,614 28,10,89,825 Current account balance with Bank 27,91,71,940 365,66,85,061 Mutual Funds 3584,73,20,553 3257,20,94,234 Deposits 3123,66,64,703 Note : Cash Flow statement has been prepared as per the Indirect Method prescribed in AS-3 (Revised) 'Cash Flow Statement' issued by the Institute of Chartered Accountants of India (ICAI) Significant Accounting Policies XV Notes to Accounts XVI BY ORDER OF THE BOARD As per our report of even date For Borkar & Muzumdar Chartered Accountant FRN. 101569W U.J. Lalwani Manoj Mittal Ajay Kumar Kapur Chief General Manager Deputy Managing Deputy Managing (Corporate Accounts Vertical) Director Director Darshit Doshi Partner M.No. 133755 Satyananda Mishra R. Ramachandran Director Director Mumbai. May 18, 2017 138 Annual Report 2016-17 Head Office: SIDBI Tower 15, Ashok Marg, Lucknow - 226001 (U.P.) 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