annualreport08-09

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2008-09


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Annual Report 2008-09

CONTENTSPage No.

1. Board of Directors 1

2. Senior Management Team 2

3. Directors Report 3

4. Management Discussion and Analysis Report 8

5. Non-financial Report 19

6. Corporate Governance Report 20

7. Auditors Report 35

8. Financial Statements 36

9. Cash Flow Statement 73

10. Statement pursuant to Section 212 74

11. ING Vysya Financial Services Limited 75

12. Consolidated Auditors Report 92

13. Consolidated Financial Statements ofING Vysya Bank Limited and its Subsidiary

93

14. Consolidated Cash Flow Statement 127

15. Basel II - Pillar 3 disclosures 128

78thANNUAL GENERAL MEETING

Venue : The Auditorium,

ING Vysya House,

No.22, M G Road,

Bangalore - 560 001

Day/Date : Friday, 04-Sep-2009

Time : 11.00 A.M.

BOARD OF DIRECTORS

K R Ramamoorthy

Chairman

Vaughn Nigel Richtor

Managing Director and CEO (till 06-Apr-2009)

Aditya Krishna

Arun Thiagarajan

Lars Kramer (till 01-May-2008)

Meleveetil Damodaran (from 21-Jul-2008)

Philippe Damas

Ramakrishnan Subramanian

Richard Cox

Ryan PadgettSantosh Ramesh Desai

Vaughn Nigel Richtor (from 01-Jun-2009)

Wilfred Nagel

OFFICER IN-CHARGE

Jayant Mehrotra (from 06-Apr-2009 AN)

CORPORATE SECRETARY

M V S Appa Rao

STATUTORY AUDITORSM/s S R Batliboi & Co.,

Chartered Accountants,

Kolkata

ING VYSYA BANK LIMITED

Registered and Corporate Office:

ING Vysya House, No.22, M.G.Road

Bangalore - 560 001

Registrars & Share Transfer (R&T) Agents

Karvy Computershare Private Limited

Unit: ING Vysya Bank Limited

17-24, Vittal Rao Nagar,

Madhapur,

Hyderabad 500 081

Ph: 040-23420815

Fax: 040-23420814

E-mail : [email protected]


3/1472 ING Vysya Bank Limited

SENIOR MANAGEMENT TEAM

Vaughn Nigel Richtor

Managing Director and CEO (till 06-Apr-2009)

Jayant Mehrotra

Chief Financial Officer

and Officer in-charge (from 06-Apr-2009 AN)

Ashok Rao B

Chief of Staff Legal, Compliance & Vigilance

Don Koch

Chief Operating Officer (upto 30-Sep-2008)

Janak Desai

Country Head Wholesale Banking

Jan Van Wellen

Chief Risk Officer

Prasad J M

Chief Human Resources

Samir Bimal

Country Head Private Banking

Uday Sareen

Country Head Retail Banking

Prasad C V G

Chief Information Officer

Meenakshi A

Head Operations

Bishwajit Mazumder

Chief Audit Executive

M V S Appa Rao

Corporate Secretary


4/147378th


The Board of Directors have pleasure in presenting the Seventy Eighth Annual Report of the Bank together with the Audited Statements

of Accounts for the year ended 31-Mar-2009, Auditors Report thereon and other documents and statements as are required.

Financial and Business Performance

For the year ended March 2009 the Bank posted a net profit of Rs. 189 Crore compared to Rs. 157 Crore for 2007-08. The pre-tax profit

improved to Rs. 295 Crore compared to Rs. 251 Crore during the previous year. TheNet Interest Income for the year 2008-09 increased

to Rs. 650 Crore registering an increase of 30%.

The aggregate business of the Bank reached Rs.41,641 Crore as at 31-Mar-2009 compared to Rs. 35,107 Crore as at 31-Mar-2008. The

Total Depositsof the Bank increased to Rs. 24,890 Crore registering a growth of 22%. TheNet Advances increased to Rs. 16,751 Crore

by March 2009 compared to Rs. 14,650 Crore at the end of the previous year. The Bank has exceeded the regulatory target of 40% of

adjusted net bank credit for priority sector lending, having achieved a level of 42.89% (previous year 42.68%). Export advances declined

to Rs. 1,211.87 Crore from Rs. 1,300.67 Crore at the end of the previous year. The export credit as a percentage of net bank credit stood

at 7.23%. As of 31-Mar-2009, the outstanding credit to Scheduled Castes / Scheduled Tribes borrowers stood at Rs. 37.58 Crore and the

percentage of recovery to demand as on 31-Mar-2009 was 48.45% (previous year 48.33%) of the amounts fallen due. The Net NPAs

increased to 1.23 % as of March 2009 from 0.70% as of March 2008.

Paid up-capital and Capital Adequacy Ratio

The paid up capital of the Bank stood at Rs.102.60 Crore as at 31-Mar-2009 as compared to Rs. 102.47 Crore, as at 31-Mar-2008.

The Bank has adopted the New Capital Adequacy Framework (Basel II) from 31-Mar-2009. Under this framework, the Capital Adequacy

Ratio (CAR) stood at 11.65% as at 31-Mar-2009 as against the Reserve Bank of India (RBI) stipulated minimum of 9%. Of this, Tier I

Capital was 6.89% and Tier II Capital was at 4.76%.

Under the previous norm (Basel I), the CAR stood at 11.68 % as at 31-Mar-2009. Of this, Tier I Capital was 6.91% and Tier II capital 4.77%

as compared to 6.82% and 3.38% respectively as at 31-Mar-2008.

The detailed discussion on financials and business performance is presented in the Management Discussion and Analysis Report,

forming part of this Annual Report.

Appropriation of Profits and Dividend

In compliance with the requirement under the Banking Regulation Act, 1949 and the guidelines issued thereunder by the RBI, the

Directors propose to transfer Rs.47.19 Crore (previous year Rs. 39.23 Crore) to Statutory Reserve, Rs.2.28 Crore (previous year Rs. 3.15

Crore) to Capital Reserve and Rs.2.30 Crore (previous year Rs. 4.77 Crore) to Investment Reserve, for the year ended March 2009. The

Directors also propose to transfer Rs. 10 Crore (previous year Rs. 6.70 Crore) to Special Reserve under Section 36(i)(viii) of the Income

Tax Act, 1961.

Taking into account the regulatory restrictions, the Board of Directors recommend the payment of dividend at 20% on the face value

of fully paid-up shares increasing from 15% of the previous year. The outflow on account of the proposed dividend, including the

dividend tax, would be Rs. 24.01 Crore.

The dividend recommended, on approval would be paid to all those shareholders whose names appear as Beneficial Owners as atthe end of 20-Aug-2009 as per the list to be furnished by Depositories (viz., NSDL and CDSL) in respect of the shares held in electronic

form and those shareholders whose names appear in the Register of Members of the Bank as members after giving effect to all valid

transfers of shares in physical form which will be lodged with the Bank on or before 20-Aug-2009.

Consolidated Financial Statements

As required under AS 21 issued by the Institute of Chartered Accountants of India (ICAI), the Banks consolidated financial statements

are included in this Annual Report incorporating the accounts of its wholly owned subsidiary company viz., ING Vysya Financial Services

Limited in line with the basis of consolidation as explained in the Notes to the said consolidated statements.

DIRECTORS REPORT



Employee Stock Option Scheme

During the f inancial year 2008-09, eligible employees were vested with 12,42,600 options under the ESOS 2007 scheme which had been

granted during the financial year 2007-08. Similarly eligible employees under ESOS 2005 scheme Tranche II (Loyalty options) were also

vested with 2,60,540 options.

The requisite particulars to be disclosed under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme)

Guidelines, 1999, in respect of the options granted etc., under the existing and new schemes are furnished inAnnexure-I to this

report.

Statutory Disclosures

The particulars of employees required under Section 217(2A) of the Companies Act, 1956 and the rules made thereunder, are given in

the annexure appended hereto (Annexure- II) and forming part of this report. In terms of Section 219(1)(b)(iv) of the Act, the Report

and Accounts are being sent to the shareholders excluding the aforesaid annexure. Any shareholder interested in obtaining a copy of

the said annexure may write to Corporate Secretary at the Registered Office of the Bank.

The provisions of Section 217(1)(e) of the Companies Act, 1956 relating to conservation of energy and technology absorption are not

applicable to the Bank. The Bank has, however, used information technology extensively in its operations.

Subsidiaries

ING Vysya Financial Services Limited (IVFSL), a wholly owned subsidiary of the Bank with the object of carrying on business of

non-fund / fee based activities of marketing and distribution of various financial products / services of the Bank / other company earned

a net profit of Rs. 0.37 Crore for the year 2008-09, as against Rs. 0.23 Crore during the previous year. The Company continues to provide

services to the Bank as may be required from time to time on a non-exclusive contract basis.

As required under Section 212 of the Companies Act, 1956 the Balance Sheet, Directors Report and other documents pertaining to

IVFSL, along with a statement of interest of the Bank in the subsidiary, are attached to the financial statements of the Bank.

Directors

Mr. Lars Kramer resigned as Director effective 1-May-2008. The Board places on record its appreciation for the valuable contributions

rendered by him during his tenure as Director on the Board.

Mr. Santosh Ramesh Desai was appointed by the Board of Directors as an Additional Director effective 29-Apr-2008 to hold office till the

77th AGM. The shareholders at the said AGM appointed Mr. Santosh Ramesh Desai as a Director liable to retire by rotation.

Mr. Ramakrishnan Subramanian was appointed by the Board as Director in the casual vacancy caused by the resignation of Mr. Lars

Kramer effective 1-May-2008. Mr. Ramakrishnan Subramanian will hold off ice upto the date which Mr. Lars Kramer would have held

office if he had not resigned, i.e., till the date of the 78th AGM.

Mr. Meleveetil Damodaran was appointed by the Board of Directors as an Additional Director effective 21-Jul-2008 to hold off ice till the

78th AGM. A notice, as required under Section 257 of the Companies Act, 1956 has been received by the Bank for appointment of Mr.

Meleveetil Damodaran as Director of the Bank. A proposal to appoint Mr. Meleveetil Damodaran as Director, liable to retire by rotation,

is being placed before the shareholders at the ensuing AGM.

Mr. Vaughn Nigel Richtor ceased to be Managing Director and CEO on completion of his tenure of three years and two months

extension on 06-Apr-2009 at the close of business. He also ceased to be a Director as his directorship was co-terminus with his term as

DIRECTORS REPORT


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DIRECTORS REPORT

Managing Director and CEO. The Board places on record its appreciation for the valuable contributions rendered by him during his

tenure as Managing Director and CEO of the Bank.

Pending RBIs approval for appointment of Managing Director and CEO, a Committee of Directors has been constituted with three

members viz., Mr. Philippe Damas, Chairman of the Corporate Governance Committee as Chairman, Mr. K R Ramamoorthy, Part-time

Chairman and Mr. Arun Thiagarajan, Non-Executive Independent Director to oversee the operations and administration of the Bank

in the absence of Managing Director and CEO. Chief Financial Officer, Mr. Jayant Mehrotra, the senior most officer of the Bank was

appointed as Officer in-charge to look after the day-to-day affairs of the Bank. Mr. Jayant Mehrotra took charge from Mr. Vaughn

Richtor, the outgoing Managing Director and CEO at the close of business on 06-Apr-2009. This is in terms of RBIs advice vide its letter

DBOD. No.16840/ 08.57.001/200809 dated 06-Apr-2009.

Mr. Vaughn Nigel Richtor was subsequently appointed by the Board of Directors as an Additional Director effective 1-Jun-2009 to hold

office till the 78th AGM. He is also appointed on the Committee of Directors effective 01-Jun-2009. A notice, as required under Section

257 of the Companies Act, 1956 has been received by the Bank for appointment of Mr. Vaughn Nigel Richtor as Director of the Bank.

A proposal to appoint Mr. Vaughn Nigel Richtor as Director, liable to retire by rotation, is being placed before the shareholders at the

ensuing AGM.

Part-time Chairman

The Reserve Bank of India granted its approval for re-appointment of Mr. K R Ramamoorthy as Part-time Chairman vide its letter No.

DBOD No.20390/08.57.001/2008-09 dated 28-May-2009 for a period up to 07-Jul-2010 with effect from the date of expiry of his previous

term on 05-May-2009. Further, RBI vide its letter No. DBOD No.441/08.57.001 /2008-09 dated 06-Jul-2009 has approved, under Section

35B of the Banking Regulation Act, 1949, the remuneration to Mr. K R Ramamoorthy with effect from the date of his reappointment

i.e., 05-May-2009, for which a resolution is included in the Notice of the 78th Annual General Meeting.

Retirement of Directors by rotation

Mr. Philippe Damas, Mr. Wilfred Nagel and Mr. Arun Thiagarajan will retire by rotation in terms of Section 256 of the Companies Act,

1956 at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. A brief resume of each of these

Directors is furnished in the Annexure to the Notice convening the Annual General Meeting.

Registrars and Share Transfer (R&T) Agents

Karvy Computershare Private Limited, Hyderabad continues to be the R & T Agents for the shares of the Bank.

Auditors

The Statutory Auditors viz., M/s. S R Batliboi & Co., Chartered Accountants who were re-appointed at the 77th Annual General Meeting

held on 30-Jun-2008 are retiring at this AGM and being eligible for re-appointment under the guidelines of RBI offer themselves for

re-appointment.

Reserve Bank of India vide its letter no. DBS.ARS.No.14154/08:27:005/2008-09 dated 15-May-2009, conveyed its approval for the

re-appointment of M/s. S R Batliboi and Co., Chartered Accountants, Kolkata as Statutory Auditors of the Bank for the third consecutive

financial year 2009-10. The Shareholders are requested to appoint the above auditors and authorize the Board of Directors to determine

their remuneration. Shareholders are also requested to authorize the Board of Directors to appoint Branch Auditors and determine

their remuneration.

Other Reports

As required under Clause 49 of the Listing Agreement entered into with the Stock Exchanges, a detailed report on Corporate Governance

is included in this Annual Report.



Directors Responsibility Statement

As required by Section 217(2AA) of the Companies Act, 1956, the Directors confirm:

(i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper

explanation relating to material departures;

(ii) that they had selected such accounting policies and applied them consistently and made judgements and estimates that were

reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and

of the profit of the Bank for the year under review;

(iii) that they had taken proper and suff icient care for the maintenance of adequate accounting records in accordance with the

provisions of the Companies Act, 1956 for safeguarding the assets of the Bank and for preventing and detecting fraud and other

irregularities;

(iv) that they had prepared the accounts for the financial year ended 31-Mar-2009 on a going concern basis.

Acknowledgements

The Board is grateful to the Reserve Bank of India and other government and regulatory agencies for their continued

co-operation, support and guidance.

The Directors express their deep sense of appreciation of all the employees, whose outstanding professionalism, commitment and

initiative has made the Banks growth and success possible and continues to drive its progress.

The Board of Directors would also like to place on record their appreciation of the encouragement and patronage received from valued

customers and other stakeholders like financial institutions, bondholders etc., and look forward to their continued support.

Finally, the Directors acknowledge the Members for their trust and support.

For and on behalf of the Board

Place : Bangalore K R Ramamoorthy

Date : 21-Jul-2009 Chairman

DIRECTORS REPORT


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Statutory Disclosures as of 31-Mar-2009 regarding ESOS under Clause 12 of the Securities and Exchange Board of India

(Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines,1999

ESOS 2002

(as modified in 2005)ESOS 2005 ESOS 2007

Tranche 1 Tranche 2 Tranche 1 Tranche 2(Loyalty Options) Tranche 1

Options Granted - Pre Rights Issue 2005 1,66,800 1,60,490 - - -

- Post Rights Issue 2005 3,27,980 4,29,524 4,65,212 5,25,285 51,68,366

Pricing Formula

Exercise price is

equivalent to 75%

of the average

price of the shares

during the past six

months in the Stock

Exchange, where the

Stocks are traded in

highest number.

Exercise price is

equivalent to 75% of

the average price of

the shares during the

past six months in

the Stock Exchange,

where the Stocks

are traded in highest

number.

Exercise price is

equivalent to 75%

of the average

price of the shares

during the past six

months in the Stock

Exchange, where the


highest number.

Exercise price is

equivalent to 75%

of the average

price of the shares

during the past six

months in the Stock

Exchange, where the


highest number.

Exercise price isclosing price in theStock Exchange,where the shares aretraded in the highestnumber, prior tothe date of meetingof the Board ofDirectors in whichoptions are granted.

AGM Resolution 29-Sep-01 29-Sep-01 22-Sep-05 22-Sep-05 11-May-07

Options Vested - Pre Rights Issue 60,450 28,868 - - -

Post Rights Issue 2,90,610 3,39,536 239,260 260,540 1,242,600Options Exercised - Pre Rights Issue 59,740 27,568 - - -

Post Rights Issue 2,64,280 2,36,722 1,49,326 90 -

Total number of Shares arising as a result of

exercise of Option

Pre Rights Issue 59,740 27,568 - - -

Post Rights Issue 2,64,280 2,36,722 1,49,326 90 -

Options Lapsed

Pre Rights Issue 25,065 25,541 - - -

Post Rights Issue 62,980 1,33,217 1,42,101 17,515 60,000

Variation of terms of options NIL NIL NIL NIL NIL

Money realised by exercise of options (in Rs.) 2,23,31,660.00 2,30,80,395.00 1,84,47,649.00 1,66,33.80 -

Total number of options in force 720 59,585 1,73,785 5,07,680 51,08,366

Employee wise details of grant to Senior

Managerial PersonnelMr. B Ashok Rao - 11,900 5,000 - 252,500

Mr. Bishwajit Mazumder - - - - 39,000

Mr. Don Koch - - - - -

Mr. Janak Desai - - - - 605,000

Mr. Jan Van Wellen - - - - -

Mr. Jayant Mehrotra - - 5,000 - 600,000

Ms. Meenakshi A - - - - 45,000

Mr. Prasad C V G - - - - 32,000

Mr. Prasad J M - - 5,500 - 293,000

Mr. Samir Bimal - - 7,000 - 552,000

Mr. Uday Sareen - - - - 638,366

Mr. M V S Appa Rao 5,040 5,440 4,500 500 -

Any other employee who received a

grant in any one year of the optionsamounting to 5% or more of the optionsgranted during the year.

NIL NIL NIL NIL NIL

Identified employees who were grantedoptions during any one year, equal toor exceeding 1% of the issued capital(exclude outstanding warrants andconversions) of the company at the timeof grant.

NIL NIL NIL NIL NIL

The details on Employee compensation cost is given under Employee Stock Option Scheme in the Notes on Accounts (Schedule 18)of the Balance Sheet (page no. 50)

ANNEXURE - I TO DIRECTORS REPORT



MANAGEMENT DISCUSSION & ANALYSIS REPORT

MACRO ECONOMIC AND BANKING INDUSTRY DEVELOPMENTS

Real Gross Domestic Product (GDP) growth in 2009-10 is likely to fall below trend, brought on by a slowdown in global and domestic

demand together with a lagged impact of aggressive monetary tightening. The drivers of growth continue to be services while

manufacturing industry has taken a hit. The GDP for the final quarter of 2008-09 has been estimated at 5.8%, taking the annual

GDP for 2008-09 to 6.7%. The economic activities which registered significant growth in 2008-09 are, mining and quarrying at 3.6 per

cent, construction at 7.2 percent, financing, insurance, real estate and business services at 7.8 per cent, and community, social and

personal services at 13.1 per cent. The growth rate in agriculture, forestry and fishing, and manufacturing is estimated at 1.6 per

cent and 2.4 per cent, respectively in this period.

The past year also witnessed high volatility in the equity markets. The BSE Sensitive index (Sensex) fell by 38% from 15,771 on 1-April-

2008 to 9,708 on 31- March-2009. The fall in the index can be attributed to fears of an economic recession in the US, the sub-prime crisis

and a reduction in liquidity caused by the crisis of confidence in the US and European economies. The Indian Rupee was negatively

impacted due to the compound impact of all the above. The regulatory authorities have taken several measures such as relaxing norms

for external commercial borrowing, raising limits for foreign investment in corporate debt, and raising interest rate on NRI deposits;

which we feel are positive in the medium-term for the Rupee. During 2008-09, the rupee depreciated against the US dollar to 50.56

against Rs.39.9 as on 1-Apr-2008, depreciated against the Euro to 66.97 on 31-Mar-2009 against 62.24 on 1-April 2008 and at the same

time appreciated against the Pound to 72.41 as on 31-Mar-2009 against Rs.78.77 as on 1-Apr-2008.

Investment (as a % of GDP) has been running ahead of savings (as a % of GDP) for the last few years. Though marginal propensity to

save increases with uncertainty on future income, job and salary cuts will likely lead to a lower savings as downturn kicks in. This together

with the postponement of capital expenditures by corporates due to tightening of credit availability and slowing demand will likely

alter the savings-investment balance. At the same time, India continues to be a domestic demand driven economy and consumption

demand is still sturdy. Demand for consumer non-durables like food (contributing to 41% of consumption) is likely to sustain. Slowing

inflation, declining input costs and increased rural spending (following increased government investment in infrastructure, rise in MSP

for crops) will help sustain consumption.

Inflation has moderated significantly from its high of 12.91% in August 2008 and the annual rate of inflation (in WPI terms) for 2008-09averaged to 8.4%.While fuel and manufacturing inflation have moderated significantly, primary articles inflation may pose a risk.

On the Policy front, against the backdrop of global financial uncertainty, securing and maintenance of financial stability has been

accorded priority from a policy perspective. The Central Bank strived to optimally balance the objectives of financial stability, price

stability and growth. The Reserve Bank left the Bank rate unchanged but aggressively cut the Repo rate and the Reverse Repo rate

during the financial year. The CRR has been cut from 7.5% in the beginning of the year to 5% now. Reverse repo rate has been cut by

275 bps and Repo rate by 425 bps from the peak rates observed in the f iscal year 2008-09.

Against this backdrop, the Banking sector has performed commendably. As per the Weekly Statistical supplement published by RBI,

aggregate deposits of Scheduled Commercial Banks (SCBs) increased by 19.8% YoY (Rs.6,33,382 Crore) on 27-March- 2009 as against

22.4% (Rs.5,85,006 Crore) in the previous year. Credit extended by SCBs increased by 17.3% (Rs.4,08,099 crore) as against 22.3%

(Rs.4,30,724 Crore) in the previous year. Further slowdown in the asset growth as well as possible deterioration in NPA levels may be

the challenges ahead for the industry.

OVERVIEW OF FINANCIAL AND BUSINESS PERFORMANCE

During the financial year 2008-09, the Bank achieved reasonable growth in key operating parameters despite the slowdown in the

Indian economy. The key factors contributing to the performance of the Bank were continued emphasis on core income streams, sound

treasury management and improving operational efficiency.


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Total deposits of the Bank aggregated to Rs.24,890 Crore as at 31 March 2009, an increase of Rs.4,432 Crore (22%) over the previous

fiscal. The growth in deposits was better than the industry growth. Low cost deposits increased from Rs.6,452 Crore at March 2008 to

Rs.6,713 Crore at March 2009. However low cost deposits as a proportion of total deposits was at 27% against 31% in the previous year.

This was mainly due to high interest rates on term deposits prevailing in the market due to which there was a movement of deposits

from CASA (Current account and Savings account) to the higher yielding term deposit accounts. This was in line with the Industrytrend.

Deposits Growth

Total assets of the Bank increased 25% to Rs.31,857 Crore from Rs.25,540 Crore at March 2008. Net advances increased 14% to Rs.16,751

Crore as at 31 March 2009 from Rs. 14,650 Crore at the end of the previous fiscal.

Advances Growth

Eligible net priority sector assets stood at Rs.6,283 Crore as of 31 March 2009 and constituted 42.89% of adjusted Net Bank Credit as of

31 March 2008 as against the target of 40% stipulated by the RBI.

The Bank recorded a net profit after tax (PAT) of Rs.188.8 Crore in the year 2008-09, an increase of 20% from Rs.156.9 Crore recorded

in the previous year. Profit before tax (PBT) increased by 17% to Rs.294.7 Crore from Rs.251.5 Crore in the previous financial year.

Operating profits (before provisions and contingencies) grew strongly by 38% to Rs. 425 Crore from Rs. 308 Crore in the previous

year.





Net Profit (Rs. in Crore)

Excluding exceptional items reported in the previous financial year, PAT increased by 32% and PBT by 28% over the prior year. Operating

profit before exceptional items was significantly higher by 48% over the previous year.

The Net Income of the Bank rose by 31% to Rs. 1,197 Crore from Rs.917 Crore during the financial year 2008-09. During this period,

Net Interest Income grew by 30% to Rs. 649.6 Crore from Rs. 498.4 Crore on the back of Balance sheet growth of 25% due to improved

margins. The yield on advances improved from 10.5% in the prior year to 11.5%. The cost of deposits however increased at a lower rate

from 6.3% to 6.8% for the year ended March 2009. Fee and Other Income increased by 38% over the previous financial year, the main

drivers of growth being trade finance and income from customer foreign exchange transactions. Other income constituted 46% of the

Net Income of the Bank. Operating expenses increased to Rs.772 Crore from Rs.610 Crore in the previous year mainly due to the impact

of the 48 new branches that were opened during the year and the investments made in the franchise over the past 2-3 years. The staff

strength increased to 6,227 from 5,852 as at the previous year end. The Cost to Income ratio has improved to 64.5% from 66.5% in the

previous year with the continued focus of the Bank to improve its operating efficiency.

Cost Income Ratio

The net NPA level of the Bank as at March 2009 stood at Rs.206 Crore, which is 1.23% of total assets compared to 0.70% of previous

year. The increase in NPA levels is due to the impact of the economic slowdown which has created some temporary mismatches in the

cash-flows of some of our clients. The Bank continues to monitor these and other accounts which show early warning signs and is

pro-actively taking appropriate steps. The increased focus on recoveries continued during the year.


12/1471178th



Net NPA

The capital adequacy ratio (CAR) of the Bank stood at 11.68%. During the third quarter of the year 2008-09, the Bank raised about Rs.95

Crore of Tier I capital in the form of Innovative Perpetual Debt Instrument. The Bank also raised Rs.200 Crore of Upper Tier II capital and

Rs.210 Crore of Lower Tier II capital through the issue of bonds during the financial year to meet increased business requirements. The

Bank adopted the Basel II framework as on 31 March 2009 and the CAR as per the Basel II guidelines stands at 11.65%.

INTERNAL CONTROL SYSTEMS

The internal control system of the Bank is reinforced through three lines of defence i.e. Business Owners, Risk Management (credit,

operational, market risk) and Internal Audit.

The Banks internal controls have been developed to provide reasonable assurance that the organizations business objectives will

be achieved and risks identified and managed effectively. The internal control of the Bank is aligned with the overall organizational

structure. Apart from basic operational controls at a Branch level, there are two additional levels of controls: the Regional office andthe Corporate Office. The internal audit department acts as an independent entity analyzing effectiveness and adequacy of the internal

controls of the Bank through frequent audit and reviews.

The Bank has an adequate control system, which is overseen by the Audit Committee of the Bank in line with Section 292A of the

Companies Act, 1956 who review the working of internal auditors and statutory auditors to ensure compliance. Appropriate action is

taken if deficiencies are reported.

In order to improve the compliance culture and ensure a better understanding of the internal controls, a number of workshops and

education programmes have been conducted for the Banks employees.

BUSINESS REVIEW

An overview of various business segments along with their performance in 2008-09 and their future strategies is presented below.

RETAIL BANKING

Retail Banking continues to be a key focus area for the Bank. The business is organized into Branch Banking, Consumer Loans, Business

Banking (SME) and Agricultural and Rural Banking (ARB). The key priorities for the Bank have been acquisition of new customers,

deepening customer relationship through segmentation and cross-sell, profitable expansion of distribution and building an enhanced

brand presence to serve the target segments.





BRANCH BANKING

The year 2008-09 was a year of expansion and growth for the Retail business, with new products, branches and ATMs, enhanced Wealth

Management solutions and a new advertising campaign. The branch network of the Bank grew to 520 (441 Branches, 37 Extension

Counters, 28 Satellite offices, 9 RCCs and 5 ARMBs) as on 31 March 2009 with the ATM network across the country reaching 351.

On the new product front the Bank launched the Formula Savings account an upgrade of the successful Orange Savings product and

Platina the Banks preferred banking program. The new corporate segment package Aspira was launched in March 2009. These

launches will further increase our market share in the large corporate segment and have resulted in our customer base growing to 1.8

million. The Bank launched a new online Wealth Management System, which offers complete financial planning for our customer. The

system provides a single-view to the customer of his entire deposits and wealth management portfolio and gives the client enhanced

control along with greater engagement with the Relationship Manager. Through the system the customer can also receive market

updates and research.

In our constant endeavor to make life easier for customers, the Bank upgraded its Internet Banking portal which now provides a

smoother customer experience apart from adding new features to our online banking offering. This year also saw the launch of Mobile

Banking. Mobile Banking provides a virtual bank to the customer where he can view and transact on his bank accounts and get

updates on branch/ATM locations. Given the extremely high penetration of mobile phones in India, Mobile Banking will provide access

to a large segment of customers to the banking system.

The Bank launched a nationwide marketing campaign spanning television, print, outdoor and online media. We showcased some

of our key product offerings in the campaign including the Orange Savings Account, Fixed Deposits and Business Banking. This was

followed by an ING brand campaign covering the three business entities of ING in India including ING Vysya Bank.

As of March 2009, the Bank has touched 1 million Debit Cards, with spends using the Debit Cards clocking a growth of over 40%.

The Credit Cards program has been revamped to offer more products and enhanced features. The Bank is also partnering with the

Government to offer Biometric cards to beneficiaries of the National Rural Employment Guarantee (NREG) and Social Security Pension

Scheme (SSP) programs. The Bank has enrolled over 69,000 customers and has disbursed over Rs. 2 Crore of wages.

BUSINESS BANKING (SME)

The Bank has traditionally focused on Micro, Small and Medium Enterprise business, which accounts for a sizeable proportion of totaladvances. This segment serves the needs of business enterprises with annual sales turnover of up to Rs.150 Crore for both domestic

and export credit requirements. Apart from regular working capital facilities, the Bank also offers structured products to cater to the

needs of clients. This segment has contributed significantly towards priority sector advances of the Bank. The clear focus, strategy and

strong relationship teams and distribution, have helped ensure strong growth in this segment. This segment continues to be a priority,

with a focus on new customer acquisition, product innovation, customer service and relationship management.

The business clocked a healthy Balance Sheet growth along with reduced delinquencies and Fee Income growth of over 80%. We will

continue our focus on profitable growth in the coming financial year as well.

CONSUMER LOANS

Consumer Loans include Home, Personal, Education and Commercial Vehicle loans and other value-added products and services. The

Home Loan business contributed the largest growth to the consumer assets book. During the year 2008-09, we have further enhanced

our Loan against Property product, which along with Home Loans grew by over 50% and these continue to be a key focus area.Personal Loan Credit shield was launched in the second quarter of the year. Revenue from Credit Shield linked to both Personal Loan

and Home Loan has seen rapid growth since its launch.

AGRICULTURAL AND RURAL BANKING (ARB)

The total advances handled by Agricultural and Rural Banking business segment crossed Rs. 1,600 Crore mark in March09. The Bank

has a network of 84 rural branches mostly spread in AP, Karnataka and Tamilnadu. The Bank has a wide range of products like Kisan

Credit Card, Produce loans, Gold loans and Term loans catering to the diverse needs of the farming community. The Bank has been


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actively participating in lending to Micro finance activity. With a view to actively contribute to the efforts of Financial Inclusion, the

Bank accelerated the lending directly to SHGs (Self Help Groups) and indirectly through MFIs (Micro Finance Institutions). The Banks

active role in SHG linkage programme also earned laurels as 6 Branch Heads in Andhra Pradesh were recognized on the occasion of

Republic Day celebrations. The Bank has also entered into tie-ups with National Bulk Handling Corporation (NBHC) to give impetus to

commodity lending. The Bank has successfully implemented the Debt Waiver/relief scheme announced by the Government of India.The scheme benefited over 21,000 farmers. Of these, nearly 15,000 farmers benefited under the waiver scheme and the remaining

benefited under the relief scheme.

NEW PRODUCT LAUNCHES AND MARKETING PROMOTIONS

Eager to expand beyond southern India and establish a pan India presence over the next few years, the Bank commissioned consumer

research to understand the perception of the ING Vysya Bank brand pan India. Based on the research the Bank launched its most

ambitious marketing plan this year. The campaign stemmed from the insight that banking was a chore for most customers and there

were several pain points associated with it. We looked at INGs global brand pillars and there too we saw that one key ING promise is

that it is easy to deal with. Thus the J iyo easy or Live Easy platform was born for ING Vysya Bank.

Keeping in mind that the target consumer values his time and wants to feel in control of his finances, the Bank launched a series of

new products, services and features. Each of these re-enforce the J iyo EASY promise, e.g. instant debit cards, auto cheque re-order,SMS HELP service, etc. New products launched like Platina Preferred Banking, Formula Savings Account, Aspira Corporate Salary

Solutions, ING Wealth Management Services and ING Mobile Banking combine features, which are best in class and simplified to meet

the demands of the consumer.

The Live Easy platform was made to come alive through a host of product focused communication. For example, any ATM free access

benefit of the Orange Savings Account was communicated through TV, print and outdoor across more than 60 publications in varied

languages and TV commercials. A communication plan for Fixed deposits was also developed that ran in Print, TV, Outdoor and Online

for two months and received good response in terms of fixed deposits for the Bank and high recall for the Banks interest rates.

The Bank participated and promoted the awareness of the Earth Hour as a social initiative by requesting support from employees,

customers, service providers and the local Bangalore Community. The Bank switched of lights in all outlets in Bangalore at the designated

hour and hosted a Candle Lighting ceremony for citizens in Bangalore.

The Bank also launched a kids portal www.kidzzbank.com to educate children on savings and investments.

PRIVATE BANKING

The Bank continues to aim towards becoming the advising Bank of first choice for Private Banking clients. While two of the three new

products launched in 2007-08 have recorded comparable performance vis--vis the benchmark, two new equity portfolio opportunities

were identified and launched in 2008-09. Assets under Management have grown by 31% and Revenues have grown by 29% in

financial year under review. Among products introduced this year, Private Banking also offered structured products manufactured by

an established player to its clients.

Private Banking continues to proactively monitor and advise its clients on their investment in light of the continuing volatility in

financial markets. The trend shifted to fixed income products towards the second quarter of the financial year continuing into the

fourth quarter. Income Plans and Bond Funds gained flavor. Private Banking continues to operate on an advisory driven model and

research remains the focus for introduction of new products, including recommendations in debt products as opportunities arise.

Recruiting good talent selectively continues to be a priority.

WHOLESALE BANKING

The Wholesale Banking business headquartered in Mumbai provides a range of banking products and services to Indias leading

corporates and fast growing businesses. The fund-based products include working capital finance, term finance and structured finance

facilities. The non-fund based products mainly consist of letters of credit, financial and performance guarantees etc. Our fee-based

high-value added products are cash management services, financial market transactions and structured hedge products, trade services,



corporate finance and debt syndication advisory. Our advisory services focus on advising clients on mergers and acquisitions, capital

restructuring and capital raising. The Bank also accepts rupee and foreign currency deposits with fixed or floating interest bases from

our corporate customers.

Wholesale fund based assets have increased to nearly Rs.7,000 Crore registering a growth of about 12%, with emphasis on asset qualityand tighter credit controls. In the same period, wholesale deposits reduced by about 13% to around Rs. 5,250 Crore in line with the

strategy of the Bank to increase the share of retail deposits and reduce reliance on wholesale funding. Wholesale Bank revenues grew

by a healthy 50% over previous year by focusing on improving lending spreads and enhancing fee-based revenues.

The Wholesale Bank is organized into two overlapping groups, (i) Client Coverage and (ii) Products and Services. While the Client

Coverage group is responsible for managing relationships with identified client sub-groups, the Products and Services group is

responsible for product and service delivery to the entire Wholesale Banking client base. Our principal wholesale client coverage and

relationship management groups are as follows:

CORPORATE & INVESTMENT BANKING GROUP (C&IB)

The C&IB Group is responsible for managing relationships with large corporates (typically with sales turnover exceeding Rs. 1,000 Crore

(effective 1-Apr-2009, hitherto exceeding Rs. 400 Crore) and MNC relationships, irrespective of the turnover. The primary focus of theC&IB relationship managers is to market High Value Added (HVA) products viz. Debt Capital Markets, Corporate Finance, Financial

Markets and Advisory services for the same.

C&IB Group is also responsible for coordinating with ING Bank N.V. for offering their products and cross-selling of Retail Banking

products and services to corporate clients and their employees. In addition to the above, they cross-sell the products offered by other

ING Group managed entities in India such as ING Vysya Life Insurance Company Limited (IVL) and ING Vysya Mutual Fund (IVMF).

EMERGING CORPORATES GROUP (EC)

The Emerging Corporates group is serviced from ten cities within the Banks extensive network and focuses on managing relationships

for manufacturing, processing, and services sector companies with an annual sales turnover between Rs.150 Crore and Rs.1000 Crore

(effective 1st April 2009, hitherto upto 400 Crore). A wide range of products are offered to meet the needs of this business segment,

with special focus on export credit, regular working capital finance, cash management services, term loans, non-fund based facilitieslike letters of credit, guarantees and structured finance products in addition to the cross sell of ING group products. The EC segment

contributes 75% of the Banks export credit advances. This business segment remains a key area of growth for Wholesale Banking.

BANKS AND FINANCIAL INSTITUTIONS

The Banks and Financial Institutions Group, headquartered in Mumbai, is a dedicated group created to leverage the business

opportunities with Private and Public Sector Banks and financial institutions across India. The group has primary responsibility for

origination of transactions and product and service delivery to the Bank/FI client base including funding products, correspondent bank

relationships, treasury products, asset purchase and sale and deposit products.

FINANCIAL MARKETS (FM)

The financial year 2008-09 has been an unprecedented year for Financial Markets with markets witnessing historically high volatilities.In this tumultuous period, the Banks strong Risk Management Policies have held good stead, giving advantage to the Bank to build

on its strengths further.

FM unit in the Bank consists of four key units Trading and Market Making, Sales, Structuring and Asset and Liability Management. The

Trading and Market Making unit provides liquidity and prices to the Sales team and other market participants. In these volatile markets,

the unit has been able to effectively and profitably exploit the opportunities within the defined risk framework. Volatile markets also

helped our market making unit post record volumes both to market participants and the Sales team. The unit has contributed well to

information dissemination and analysis of the markets so that our clients benefited from our expertise in the area.



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Our Sales team helps corporate clients manage their currency and interest rate risks within their risk management practices. The unit

is guided by prudent and transparent approach to client deals, adhering to approved appropriateness and documentation policies. In

line with the changing dynamics, the Sales team changed focus from structured transactions to vanilla products. The changed focus has

helped us maintain good portfolio, providing strong base for the coming year.

The sales unit is supported by a centralized structuring unit that assists in product structuring, pricing and execution. The structuring

unit has strong product capability in foreign exchange and interest rate risk products and provides in-house solutions for all our client

needs. The structuring unit is assisted by state of art systems and processes to measure and warehouse risks.

The Asset Liability Management (ALM) desk has played a key role in managing liquidity and interest rate risks, besides facilitating

balance sheet growth. Having been totally compliant with maintaining statutory reserve requirements, the unit also managed the

Banks investment portfolio well and efficiently managed volatility in this book.

Financial Markets as a unit is committed to further strengthening our platform, so as to provide strong risk management base to the

Bank and to our clients.

RISK MANAGEMENT AND PORTFOLIO QUALITY

Risk is an integral part of every aspect of banking and the Bank aims at delivering superior shareholder value by achieving an appropriatetrade off between risk and return. The risk management policy of the Bank, monitored at the highest levels, is based on a thorough

analysis of key risk areas of Credit Risk, Market Risk and Operational Risk.

CREDIT RISK

Credit Risk Management (CRM) is an important component of risk management in banks. The Bank has put in place an appropriate

organization structure, credit risk policy frame work, product approval process, borrower selection norms, security and documentation

requirements, monitoring and follow-up standards, asset classification norms, etc., to achieve these objectives.

The Risk Management and Review Committee of the Board is primarily responsible for owning and managing the risk policy in the

Bank. The Chief Risk Officer assisted by other executives at Corporate Office and Zonal/Regional Offices carries out the CRM function.

Credit is handled across different segments, viz., Corporate and Institutional, Emerging Corporates, Banks and Financial Institutions,

Financial Markets, Business Banking (SME), Agricultural and Rural Banking, Private Banking and Consumer Finance. The Credit Policy

document is updated annually, incorporating both revised regulatory and internal guidelines on various types of credit products and

under-writing standards. The Policy also covers exposure norms, industry/sectoral exposure limits, methods of appraisal, delegation of

approval powers, guidelines for recovery and restructuring, etc.

Most credit exposures have primary and/or collateral securities, with appropriate legal documentation. Escrowing cash-flow, obtention

of post dated cheques or electronic clearing service (ECS) mandates and financial or other covenants are stipulated depending upon

the type of borrower and facilities availed. Financial Markets products are offered to corporate clients in accordance with the

Appropriateness Policy. All borrower accounts are subject to periodical unit visits, security verification and review/renewal. Review of

Industry Portfolios, Watch List accounts, accounts having overdue/adverse Mark to Market exposures, or other irregularities are carried

out periodically with a view to identifying early warning signals, taking remedial action and minimizing delinquencies. Facilities to

borrowers whose business is affected by economic downturn are also restructured after ascertaining their viability. Portfolio quality

of Consumer Assets is reviewed monthly and appropriate corrective action taken, based on trends. There are dedicated Collections

and Recovery teams. Recoveries are made by enforcement of securities, foreclosure of mortgages and other legal remedies. Asset

classification and provisioning is done in accordance with RBI guidelines.

Continuous efforts are being made to improve Credit MIS infrastructure using IT resources of the Bank, with a view to gather timely

information, both at individual borrower account level, group level and as a portfolio. The Bank has taken appropriate steps to be

compliant with Basel II norms.

In the second half of financial year 2008-09, the Indian economy also felt the impact of the global economic slow-down. While

exporters came under stress due to issues in importing countries, domestic businesses also experienced lower sales volumes, elongated

payment cycles and lower profitability. Some of our borrower clients faced cash-flow and debt servicing issues. The Bank provided

support to viable businesses by providing higher credit facilities and/or restructuring term loans. In other cases, steps were taken to




contain exposures, improve recoveries and obtain additional collaterals. The unsecured consumer loan portfolio also experienced

higher delinquencies.

Bank is confident that the robust risk management practices put in place will enable the Bank in managing issues arising out of

such cyclicality. Some of the additional steps being taken are: (i) More frequent review of affected sectors and stressed accounts; (ii)Strengthening credit approval norms; (iii) Revisiting product norms for Consumer Finance portfolio; and (iv) Strengthening collection

processes for consumer loans.

MARKET RISK

Market Risk Management (MRM) focuses on three businesses and their risks: (1) Trading and Market Marking, (2) Asset and Liability

Management, and (3) Structured Products and Sales. An in-house developed Value at Risk module combined with various controls

supports MRM in the day-to-day control of the Trading activities in the Bank. For effective Asset and Liability management, an Asset

Liability Committee (ALCO) has been operating in the Bank to manage the capital position, liquidity and interest rate risks of the

Banks entire balance sheet. MRM provides ALCO with various tools to manage risks such as Value at Risk, Event Risk, Earnings at Risk

and balance sheet simulations for the impact of volume growth and changes in interest margins. With these tools, ALCO sets the ING

Vysya Reference Rate (IVRR) and spreads on IVRR for various products, based on the Banks strategy. Structured Products and Sales

mainly provides corporate clients a range of derivative instruments to hedge their business exposures. MRM is the overall coordinator

of the support units within the Bank for Financial Markets products, and controls and monitors the activities of the desk within the

regulatory authoritys framework. The focus for the coming year is to further improve the risk based pricing of products, and risk

awareness within the business units of retail and wholesale in respect of regulatory requirements and international standards and to

advise management on the optimal product mix strategy.

OPERATIONAL RISK

The Operational Risk Management (ORM) function manages the operational, information and security risks. ORM reports to the

Chief Risk Officer (CRO) who is part of the Executive Management Committee. The Board and senior management are kept informed

of operational risk issues on a periodic basis. The Risk Management and Review Committee (RMRC) approves the operational Risk

Management Policy. The Country Operational Risk Committee (ORC) and Regional Operational Risk Committee meet on a periodic basis

to discuss and take decision on operational risk issues.

The Bank has defined operational risk as the risk of direct or indirect loss resulting from inadequate or failed internal processes, peopleand systems or from external events including the risk of reputation loss. The Bank has clearly defined risk categories which help to

implement the operational risk framework. The Bank also uses the non-financial risk dashboard to provide integrated risk information

on compliance, operational, information and security risk using a consistent approach and risk language.

The Bank has developed a comprehensive framework supporting the process of identifying, measuring and monitoring operational,

information and security risks. The Bank applies scorecards to measure the quality of operational, information and security risk processes

within a business. Scoring is based on the ability to demonstrate that the required risk management processes are in place within the

business units. The scorecards indicate the level of control with the business units depending on both the maturity of implemented

operational, information and security risk processes and the control measures taken.

The Banks Crisis Management Policy provides a cohesive overview of the crisis management governance, including detailed crisis

management officer roles and responsibilities across the Bank, and functional requirements to ensure physical security.

The ORM function operates with the mission of ensuring the confidentiality, integrity and availability of information and associated

information processing assets through the disciplined use of risk management practices. The function has defined a comprehensive suite

of policies, standards and guidelines, and compliance is measured and monitored on a regular basis. The function actively measures

and monitors information risk within the key IT risk areas. The result of this process is used by the business units to budget, plan, and

implement appropriate risk mitigation actions.

The Bank currently qualifies for the basic indicator approach for operational risk capital assessment. The capital requirement for

operational risk has been estimated as per the Basel II related regulatory guidelines prescribed by the Reserve Bank of India.



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INFORMATION TECHNOLOGY (IT)

The IT Service Management Group, the technology organization of the Bank manages the Banks enterprise-wide technology needs.

The Bank continues to endeavor to be at the forefront of technology usage in the financial services sector. The Bank strives to use

information technology as a strategic tool for our business operations, to gain a competitive advantage and to improve our overallproductivity and efficiency. The Banks technology initiatives are aimed at enhancing value, offering improved convenience and service

to customers while optimizing costs. The Bank has a technology blue print aligned to the business strategy. This blue print is used to

drive all technology decisions.

There were quite a few initiatives successfully completed in the financial year. The disaster recovery site has been upgraded to cover a

broader set of applications. The Core Banking platform has also been moved to an upgraded infrastructure with improved performance.

New solutions have been implemented for CMS Payments, centralised ECS and Wealth Management businesses. A new Mobile Banking

solution was also developed for the Retail Banking business in the current year which will provide an additional access channel to our

customers enabling them to access information, perform financial transactions at their convenience etc. The upgrade of the critical

applications in the Financial Markets business unit is nearing completion. During the year, the IT operations were also successfully

transitioned to a multi-vendor support model.

OPERATIONS

Operations continued on its journey towards keeping pace with the Banks growth strategies in an efficient and effective manner.

During the year,the process for savings and current account opening was completely centralised to ensure strict adherence to KYC

guidelines. To make banking easier for our customers, the Bank introduced insta ATM cards and pin-mailers, thus enabling customers

to walk into a branch and get replacements of a lost card or a pin mailer instantaneously. A process of auto generation and dispatch

of cheque books to customers by monitoring usage of cheque leaves was initiated and e-tax payment enabled. To improve efficiency,

the electronic clearing process was automated, the clearing process re-engineered, a 24 / 7 holiday free operations shop was setup to

be consistent on turn-around-times for liability products and a centralized service desk to provide instant and complete resolution to

customer interfacing units on customer queries was implemented. Inter branch reconciliation process was automated.

Enthused by the success of centralizing the wholesale lending operations, the Bank centralized the trade finance operations keeping

in mind the rapidly changing regulatory and market environment. Trade mid-offices have been set up at various locations keeping in

mind the customers requirements and the Banks aspiration to make things easy for the customer at all times. The Bank is geared up

to meet the plans of the RBI to roll out the cheque truncation process at other locations with the successful completion of the sameat Delhi. The Bank was amongst the first few who participated in RBIs pilot launch of speed clearing in Chennai and is in readiness

to align with RBIs expansion plans on this front. Business continuity plans are in place for all the critical activities within the Bank to

ensure continuity of operations.

INTERNAL AUDIT

The operations of the Bank including the information systems functions are subjected to audit by the Internal Audit department

which is an independent function reporting directly to the Audit Committee of the Board. The Internal Audit department follows the

Risk Based Audit approach across the Bank, wherein process and control gaps, if any, are identified with suitable recommendations

for remediation. In addition, key functions such as Financial Markets, Centralised Operations and Trade Finance amongst others are

covered under concurrent audit. Audit of key regulatory compliance is the focus of a dedicated cell within the department. Findings

of Internal Audit are followed up for timely closure and effective resolution by the management.

COMPLIANCE

In line with the RBI guidelines on compliance function in Banks, a Compliance Framework involving compliance risk identification and

assessment, risk mitigation, compliance monitoring, incidents management, compliance advisory, training and communication etc.,

has been developed and embedded in the compliance organisation structure. Compliance culture and awareness have been further

strengthened through e-learning modules on function specific areas across various business and support functions covering about

3,300 employees across the organization. Compliance monitoring has been intensified through a network of compliance off icers at

corporate office level supported by Nodal Compliance Officers at Business / Support Function levels. The compliance function has been

providing advisory services on various regulatory / compliance issues to the business units and other support functions in the Bank.




HUMAN CAPITAL MANAGEMENT

Given the market challenges, there has been considerable focus on optimizing the existing resources - through internal job postings,

transfers and development initiatives. Training and development has assumed significant importance. Over 550 employees (Off icers

and award staff) were covered under the Ladder of Success program. The Ladder of Success program was introduced last year andis a structured training program to upgrade the skills at all levels. With a view to equip the internal employees to compete for new

opportunities a focused program titled Development tracks was introduced this year. In addition, in line with the compliance and

control requirements, up-skilling programs were conducted for BOSH (Branch Operations and Service Head) under a program titled

BOSH to SMART BOSH and ensured coverage of over 70 BOSHs in the program. The Brand value workshop J iyo Easy was conducted

across the organization and about 4,000 employees were covered under this initiative. The Bank, through its dedicated and well-

equipped Competence Development Center (CDC) has successfully delivered 130 training programs (including domain, skill, attitude

and management training) with an average 2 man-days of training for each employee during the last financial year.

The Bank continued to invest in improving communication within the organization. Chat with the CEO Sessions, CEO Connect and

Sangam meetings provided the opportunity for a two-way flow of information within the Bank. The IVB values have been internalized

across the organization through workshops and we now have more than 75% of our population covered. The values have also been

integrated in all our process and policies.

The Peoplesoft Human Capital Management (HCM) project, which was initiated at the end of the last financial year, was successfully

launched during the year. The HCM system improves HRs service delivery, provides greater transparency and visibility of information to

employees, reduces risk and provides better control. Overall, staff complement increased by around 400 during the year from 5,852 at

the end of March 2008 to 6,227 at March 2009. The Industrial Relations during the current financial year remained cordial.

OPPORTUNITIES AND THREATS

As part of expanding its operations, the Bank sights a number of opportunities and faces threats to its strategy. Opportunities to

improve its performance are through:

Focused aligning of new products to customer segments, higher balance build-up and effective utilization of the distribution

network

Realizing the value of the investments made in the franchise to enhance profitability.

Improving productivity of our distribution and eff iciency of our service platforms.

Enhancing cross-sell of products and that between the different operating segments.

Optimally utilising investment in technology to further improve service delivery

Greater focus on Rural Banking by leveraging the distribution network.

Risks that must be managed include, amongst others:

Inflation and volatility in interest rates;

Tightening of Liquidity in the Banking system and effective management of ALM.

Increase in Non Performing Assets (NPAs) due to further deterioration in the business environment.

Risk of recession in the Global and Indian economy impacting volume growth.

Effective management of capital to fund business growth

OUTLOOK

GDP growth for the year 2009-10 is expected to be around 6-6.5% with inflation between 1.5-2%. Though India continues to be a

domestic demand driven economy and consumption demand is still sturdy, credit growth is expected to moderate in FY10 from FY09.

Given that several crucial sectors remain heavily dependant on the US and European economies, unless these markets see a recovery,

India would continue to perform below its full potential

The Indian Banking system is sound, with conservative leverage, stable funding, good asset quality, high regulatory reserves and no

exposure to US sub-prime credit. However concerns on the large and increasing fiscal deficit, deterioration in the asset quality of Indian



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NON FINANCIAL REPORTING

Banks due to a slowing economy, concerns on sufficient availability of capital are some of the challenges the Banking industry will be

exposed to.

Against this backdrop, the Bank will continue to focus on the risk-return equation and improving efficiency and productivity to meet

the challenges in a rapidly changing environment.

Your directors are pleased to present the Non Financial Report for the year 2008-09. The Report deals both with Corporate Social

Responsibility and Sustainability Development.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

ING Vysya Foundationwas incorporated in October 2004 to promote Corporate Social Responsibility of ING Group entities in India.

The Bank contributes to the Foundation substantially every year. The mandate for the Foundation is topromote primary education for

underprivileged children. This approach is part of worldwide Chances for Children programme (CFC) of ING Group.

During the year, the Foundation has run a fund raising campaign Class of 2008 among the employees of ING entities and donated Rs.40

Lakh to UNICEF Fund for promoting the education of the children studying in Bridge Schools supported by UNICEF and Government

of India.

SUSTAINABILITY DEVELOPMENT

The Bank endeavors to ensure that the projects financed by it, are environmentally and socially sound and sustainable. Towards its

endeavor for sustainability development, the Bank has adopted the following policies:

I) General Environmental and Social Risk (G-ESR) policy

II) Equator Principles (EP) Policy

III) Specific Environmental and Social Risk (S-ESR) Policy

Every year the Bank submits the Annual Environmental and Social Performance Report to International Finance Corporation (IFC). This

report covers Environmental Management System and Project Environmental and Social Compliance.

The Bank has also adopted the Equator Principles (EP) policy. EP is a set of voluntary environmental and social guidelines for ethical

project finance. These principles commit banks and other signatories not to finance projects that fail to meet these guidelines. The EP

is based on the social and environmental policies and guidelines of the International Finance Corporation (IFC) and the World Bank.

Child labour, involuntary resettlement and protection of natural heritages are examples of social and environmental issues covered by

the EP. ING Group has adopted the EP and as part of the Group, the Bank has also adopted the EP, which forms part of the Credit Risk

Manual.

Initiatives under Sustainability Development

The Bank has launched a kids portal to educate the children on nature, environment and saving of money. On entering the portal

viz., www.kidzzbank.com children are taken on a voyage of discovery, hand held by the portal pal NEO.

The Bank and its employees participated in the global movement called Earth Hour to show the solidarity against climate change.

The Bank in association with BVV Sangha established Rural Development and Self Employment Training Institute at Bagalkot to

identify, orient, motivate, train and assist the unemployed rural youth to take up self-employment ventures as alternative career.

The Bank has also undertaken various Financial Inclusion initiatives with the objective of providing banking / financial services to all

people in a fair, transparent and equitable manner at affordable cost.



CORPORATE GOVERNANCE REPORT

1. CORPORATE GOVERNANCE

1.1 Banks Philosophy

The Corporate Governance philosophy of the Bank is to promote corporate fairness, transparency and accountability with

the objective of maximizing long term value for all stakeholders. This philosophy is realized through the Banks endeavourto work towards portfolio, operational and reputational excellence.

1.2 Mission of the Bank

Setting the standard in helping our customers manage their financial future.

1.3 Vision of the Bank

To emerge as a top five among Foreign and Private Sector Banks with a market share in excess of 1%.

2. BOARD OF DIRECTORS

2.1 Composition

The requirements for composition of the Board of Directors of the Bank are mainly governed by the relevant provisions of

the Companies Act, 1956, the Banking Regulation Act, 1949 and Clause 49 of the Listing Agreement.

Mr. K R Ramamoorthy, Non-Executive and Independent Director is the Chairman of the Bank. As of 31-Mar-2009, the Board

has 11 Directors out of which, four are Independent Directors, in compliance with the requirements under Clause 49 of the

Listing Agreement.

Ten out of eleven Directors as against the requirement of six possess the prescribed special knowledge or practical experience

and meet the conditionalities of Section 10A(2) of the Banking Regulation Act, 1949. Out of ten, three Directors as against

the requirement of two possess special knowledge or practical experience in the areas of Agriculture and Rural Economy,

Co-operation or Small Scale Industry.

The composition of the Board as of 31-Mar-2009 is given below:

NAME OF THEDIRECTOR (Mr.)

DESIGNATION CATEGORY AREA OF EXPERTISE

K R Ramamoorthy Chairman Non-Executive, Independent andcompliant with Sec 10A(2)

Agriculture & Rural Economy,Co-operation, Banking and SSI

Vaughn Nigel Richtor ManagingDirector andCEO

Executive, Non Independent #and compliant with Sec 10A(2)

Banking, Economics, Marketing, RiskManagement, Strategic Planning, TreasuryOperations and Agriculture & Rural Economy

Aditya Krishna Director NonExecutive, Independentand compliant with Sec 10A(2)

Banking (especially Retail Banking) andTechnology & Systems

Arun Thiagarajan Director Non-Executive, Independentand compliant with Sec 10A(2)

Strategic Planning, Technology & Systems,Economics and Finance

Philippe Damas Director Non-Executive, Non- Independent #and compliant with Sec 10A(2)

Banking (especially Retail & Wealth M anagement)

Richard Cox Director Non- Executive, Non- Independent #and compliant with Sec 10A(2)

Banking (Credit and Risk Management)

Ryan Andrew Padgett Director Non-Executive, Non- Independent #and compliant with Sec 10A(2)

Banking (especially Treasury and FinancialMarkets), Economics and Finance

Wilfred Nagel Director Non- Executive, Non- Independent #and compliant with Sec 10A(2)

Banking (especially Wholesale Banking), Finance,Economics and Risk Management

Santosh Ramesh Desai Director Non-Executive, Independent Marketing, Branding and Strategic Planning

RamakrishnanSubramanian

Director Non-Executive, Non- Independent #and compliant with Sec 10A(2)

Banking, Finance, Marketing, Risk Managementand Credit Recovery

Meleveetil Damodaran Director Non-Executive, Non- Independent#and compliant with Sec 10A(2)

Banking, Finance, Economics, Law, PublicAdministration and Agricultural & Rural Economy

#Representing Foreign Promoter Group (ING Group)


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2.2 Changes in the Board of Directors during the year

2.2.1 The following are the changes in the composition of Board of Directors during the year.

Appointments

Name (Mr.) Date of Appointment

Santosh Ramesh Desai Appointed by the Board of Directors as an Additional Director effective

29-Apr-2008, till the date of AGM i.e. 30-Jun-2008. Appointed as Director liable

to retire by rotation at the AGM on 30-Jun-2008.

Ramakrishnan Subramanian Appointed by the Board of Directors as Director in casual vacancy effective

01-May-2008, caused due to the resignation of Mr. Lars Kramer who was

appointed at the AGM on 26-Sep-2006 as Director liable to retire by rotation.

Meleveetil Damodaran Appointed by the Board of Directors as an Additional Director effective

21-Jul-2008, till the date of the ensuing AGM.

Resignations

Name (Mr.) Date of Resignation

Lars Kramer 01-May-2008

Extension

Name (Mr.) Date of Extension

Vaughn Nagel Richtor 07-Feb-2009

On the expiry of his initial term of three years on 6-Feb-2009, an extension

for a further period of two months was sought from RBI. RBI approved

the extension of his tenure for a further period of two months effective

7-Feb-2009, up to 6-Apr-2009. Mr. Vaughn Nigel Richtor relinquished his office

at the close of business on 6-Apr-2009.

Mr. Vaughn Nigel Richtor was appointed by Shareholders at the 75th AGM held

on 26-Sep-2006 as a non-retiring Director to hold office co-terminus with theterm of his appointment as Whole-time Director on the Board as approved by

RBI from time to time under the Banking Regulation Act, 1949. As such Mr.

Vaughn Richtor also ceased to be a Director on the Banks Board, effective 06-

Apr-2009 at the close of business.

2.2.2 Criteria for appointment and renewal of appointment of Directors

The Bank ensures the following as per the recommendations of Dr. Ganguly Group Report, adopted by the Bank

in terms of RBIs directives on Fit and Proper criteria for appointment and renewal of appointment of directors of

banks.

a) Due diligence by the Corporate Governance (Nomination) Committee to determine suitability of the person for

appointment as a director on the Board and for declaring him as fit and proper for appointment, based upon

qualification, expertise, track record, integrity and other fit and proper criteria.

b) Declaration and undertaking by the person to be appointed as a director to the effect that he has not been

convicted for any offence, has not come to the adverse notice of the Regulators, is not holding substantial

interest in the Bank, has not availed fund and non-fund facilities from the bank etc.

c) Letter of consent to act as a Director and confirming that he is not disqualif ied under Section 274 of the Companies

Act, 1956.

d) Reference checks with the appropriate persons / authority

e) Execution of deed of covenant.




2.2.3 Changes proposed at the 78th Annual General Meeting (AGM)

Directors holding office till 78th AGM

Mr. Ramakrishnan Subramanian, was appointed in casual vacancy caused by resignation of Mr. Lars Kramer and is

eligible to hold office only up to the 78th AGM.

Directors retiring by rotation and being eligible, offer themselves for re-appointment

Mr. Wilfred Nagel, Mr. Philippe Damas and Mr. Arun Thiagarajan are retiring by rotation and being eligible, offer

themselves for re-appointment.

Directors seeking appointment

Mr. Meleveetil Damodaran was appointed by the Board as an Additional Director who will hold office until the

ensuing AGM. A notice, as required under Section 257 of the Companies Act, 1956 has been received by the Bank for

appointment of Mr. Damodaran as a Director of the Bank. A proposal to appoint Mr. Damodaran as Director of the

Bank, liable to retire by rotation, is being placed before the shareholders at the ensuing AGM.

A brief resume along with the particulars specified under Clause 49 of the Listing Agreement, in respect of person(s)

proposed for appointment / re-appointment as Directors at the ensuing AGM, are attached with the Notice of themeeting and circulated to the Shareholders.

These details are also placed on the website of the Bank viz., www.ingvysyabank.com.

2.3 Board Meetings

During the year, eight Board meetings were held as against four meetings required as per Clause 49 of the Listing Agreement

and Section 285 of the Companies Act, 1956. The dates of the Board meetings held were: 29-Apr-2008, 30-Jun-2008, 21-Jul-

2008, 24-Sep-2008, 31-Oct-2008, 06-Jan-2009, 23-Jan-2009 and 23-Mar-2009.

2.4 Details of attendance at the Banks Board Meetings, Annual General Meeting, directorship, membership and chairmanship

in other companies for each of the Directors are as follows :

Name of the Director(Mr.)

Board

meetingsheld duringtenure

Board

meetingsattendedin person

Board meetingsattendedthrough

Tele/ VideoConference

Attendanceat lastAGM

Directorshipin other

Indian PublicLimited

Companies

Membershipof

Committeesof other

Companies

Chairman-ship of

Committeesof other

Companies

Persons who have been Directors throughout the year 2008-09

K R Ramamoorthy 8 8 - Present 7 6 2

Vaughn Nigel Richtor 8 8 - Present - - -

Aditya Krishna 8 4 - Present 5 - -

Arun Thiagarajan 8 7 - Present 11 5 -

Philippe Damas 8 5 2 Present - - -

Richard Cox 8 4 - Present - - -

Ryan Andrew Padgett 8 6 - Present - - -

Wilfred Nagel 8 3 - Present - - -

Santosh Ramesh Desai 7 4 - Present 1 - -

RamakrishnanSubramanian

7 5 - Present - - -

Meleveetil Damodaran 5 2 - NA 3 - -

Persons who ceased to be Directors during the year 2008-09

Lars Kramer 1 - - NA - - -

Note: The details of Directorships and Chairmanships / Memberships of Committees of other companies given above are in

accordance with the provisions of Section 275 of the Companies Act, 1956 and Clause 49 of the Listing Agreement. Only

Membership of Audit Committee and Shareholders Grievance (Investors) Committee are considered for calculating the

number of the Memberships / Chairmanships of Committees.



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3. COMMITTEES

There are seven regular Board Level Committees in the Bank as follows:

1. Audit Committee of the Board

2. Risk Management and Review Committee

3. Corporate Governance Committee (which also acts as Remuneration Committee, Compensation Committee and Nomination

Committee)

4. Investors Committee

5. Special Committee for Monitoring Frauds

6. Customer Service Committee and

7. Board Credit Committee

The constitution and functioning of these Committees are governed by relevant provisions of the Companies Act, 1956,

Listing Agreement as well as the guidelines / circulars issued by the Reserve Bank of India from time to time in addition to the

directions / observations of the Board of Directors. A brief on each Committee, its scope, composition and meetings held during

the year is as follows:

3.1 Audit Committee of the Board (ACB)

Scope and Terms of Reference

To review the quarterly and annual financial statements before submission to the Board, oversee the financial reporting

process to ensure transparency, sufficiency, fairness and credibility of financial statements.

To review the adequacy and effectiveness of the internal audit function and control systems.

To function as per RBI guidelines to the extent that they do not violate the provisions of Section 292A of the Companies

Act, 1956 and Clause 49 of the Listing Agreement.

To focus on the objective of unqualified financial statements.

Composition and Meetings

ACB consists of five members with the majority being Independent Directors. Mr. Arun Thiagarajan, Independent Director

is the Chairman of the Committee and the Corporate Secretary of the Bank acts as Secretary to the Committee in terms ofClause 49 of the Listing Agreement. During the year 2008-09, the Committee met six times. The dates of the meetings held

were: 28-Apr-2008, 1-Jul-2008, 21-Jul-2008, 31-Oct-2008, 23-Jan-2009 and 23-Mar-2009.

Member (Mr.)Meetings held during

the tenure

No. of Meetings

attended in

person

No. of Meetings attended

through Tele/ Video

conference

Arun Thiagarajan, Chairman 6 6 -

Lars Kramer (up to 1-May-2008) 1 - -

K R Ramamoorthy 6 5 -

Philippe Damas 6 4 1

Aditya Krishna 6 4 -

Ramakrishnan Subramanian 5 4 -

3.2 Risk Management and Review Committee (RMRC)


To review and approve the Banks overall risk appetite and set limits for individual types of risk, including credit, market

and operational risk.

To approve material changes to the overall risk appetite and monitor the Banks risk profile, including risk trends and

concentration.

To ensure that the principal risks facing the Bank have been identified and are appropriately managed.




To assess existing and potential risks for the Bank.

To ensure effective management of the above risks.

To review constantly and realign changes to credit, market and operational risk policy.

To monitor and approve credit portfolio and trading limits.

To ensure minimal risks arising from portfolio concentration.

To review and approve measurement techniques, tools and approaches used to identify, aggregate and control credit,

market and operational risk.

To manage the comprehensive Risk Policy, review implementation of risk management techniques, review policies and

procedures to ensure continued compliance to Risk Policy.

To oversee the activities of Risk Management Departments and co-ordinate with the Board, Chief Risk Officer (CRO) and

other Executive Committees such as Asset & Liability Committee (ALCO) and Credit Policy Committee.

To review managements report on the risk control standards in the Bank.


The Committee consists of six members. Mr. Wilfred Nagel is the Chairman of the Committee. The Corporate Secretary of the

Bank acts as Secretary to the Committee. During the year 2008-09, the Committee met four times. The dates of the meetingsheld were: 29-Apr-2008, 21-Jul-2008, 31-Oct-2008 and 22-Jan-2009.

Member (Mr.)

Meetings held

during the

tenure

No. of Meetings

attended in

person

No. of Meetings

attended through

Tele/ Video

Conference

Wilfred Nagel, Chairman 4 2 -

K R Ramamoorthy 4 3 -

Richard Cox 4 4 -

Ramakrishnan Subramanian, alternate to Richard Cox. - - -

Vaughn Richtor 4 4 -

Arun Thiagarajan 4 3 -

Ryan Padgett 4 4 -

3.3 Corporate Governance Committee (CGC)


To ensure adhe rence to Corporat e Governance Guidelines by all units in the Bank.

To induct and ensure a pro-active go vernance frame w ork in the Bank.

To review and monito r the implementa tion of various ma nda tory /non-ma nda to ry requirements of Clause 49 of the

Listing Agreement dealing with Corporate Governance in Indian Companies.

To mo nitor and e nsure tha t interests of all the sta keholders viz., sha reholders, customers, employees, and t he

community / society are served properly.

To act a s Remunerat ion Committ ee, the constitution of w hich is non-manda to ry under the provisions of th e Listing

Agreement, for the purpose of determining / reviewing the Banks policy on specific remuneration packages for

executive (whole time) directors, whenever required. In all such cases, the meeting is chaired by an Independent Director

(member). The scope also extends to review the performance / remuneration of senior executives.

To act as Compen sation Committ ee in terms of SEBI (Employee Stock Optio n Scheme an d Employee Stock Purchase

Scheme) Guidelines, 1999 for the purpose of formulation of policy, procedures and schemes and overall supervision and

administration of Employee Stock Option Schemes (ESOSs) in the Bank.

To review stat us of comp lia nce with Section 10A of t he Ban king Reg ulat ion Act, 1949 a nd Cla use 49 of t he Listing

Agreement relating to composition of the Board of Directors and also composition of other mandatory committees.

To act as Nomina tion Committee for the purpose of recommen ding a ppointm ent of Non- Executive/Independ ent Directors

after carrying out the due diligence under fit and proper norms prescribed by the regulator, RBI.



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The Committee consists of four members. Mr. P

Documents

annualreport08-09