Tamilnad Mercantile Bank Ltd

for the Year 2024-25

Your Board of Directors have great pleasure in presenting the 103^rd Annual Report along with the Audited Financial Statements as on March 31, 2025 along with the Cash Flow Statement for the year ended March 31, 2025.

1. Business Performance

The Bank had a successful year in its 103^rd year of operations and recorded satisfactory performance. During the year under review, the total business increased from H89,485.47 crores to H 98,054.49 crores registering a growth of 9.58%.

Operating profit increased from H 1,481.78 crores to Rs. 1,745.74 crores (+17.81%).

Net profit Increased from Rs 1,072.03 crores to Rs. 1,182.61 crores (+10.32%).

Deposits of the Bank increased from Rs 49,515.07 crores to Rs. 53,688.96 crores (+8.43%) during the year.

Gross Advances increased from Rs 39,970.40 crores to Rs 44,365.52 crores (+11%) during the year.

Net Advances increased from Rs 39,733.75 crores to Rs 43,983.67 crores (+10.70%) during the year.

Gross NPAs Decreased from 1.44% to 1.25%.

Net NPAs Decreased from 0.85% to 0.36%.

Provision Coverage Ratio (PCR) increased from 87.52% to 93.86%.

The total income increased by H648.90 crores during the year from H5,492.85 crores in the previous year to H6,141.75. crores during the year under review (+11.81%). Interest income increased from H4,847.91 crores to H5,291.26 crores. Other income increased from H644.94 crores to H 850.49 crores during the FY 2024-2025. Increase in total expenditure was at H384.94 crores. The total expenditure increased from H4,011.07 crores during the FY 2023-2024 to H 4,396.01 crores during the FY 2024-2025. Earnings per share increased from H67.70 to H74.68, the book value of the share increased from H500.23 to H 568.90.

2. Profit and appropriation

The net profit stood at H 1,182.61 crores for the financial year ended March 31,2025 after making all necessary provisions under various categories as per the prudential norms prescribed by Reserve Bank of India. The appropriation out of the profit earned for the financial year 2024-25 are as under:

3. Dividend

Your Directors have recommended the payment of a final dividend at the rate of H 11.00 (Rupees

Eleven only) per equity share of the face value of H 10/- each (110%) for the year ended March 31, 2025. Dividend pay-out is in accordance with the Bank's dividend distribution policy (https://www.tmb.in/ pages/Regulatory-Policies), RBI guidelines and will be payable subject to approval of members at the ensuing Annual General Meeting and deduction of tax at source, to those Shareholders whose names appear in the Register of Members as on the Cut-off date i.e. August 01, 2025.

4. Capital and Reserves

The Bank's issued and paid-up capital was H 158.35 Crores as on March 31, 2025.

5. Issue of Equity shares

During the year under review there was no fresh issue of equity shares.

6. Earnings Per Share (EPS) and Book Value

The earnings per share stood at H 74.68 (basic) and H 74.68 (diluted) for the financial year ended March 31, 2025. This was H67.70 (Basic) and H67.70 (diluted) during the previous year. The book value per share has further improved to H 568.90 as on March 31,

2025, as against H500.23 during the previous year.

7. Capital adequacy

The Capital to Risk Weighted Assets Ratio (CRAR) stood at 32.71% (as per Basel III) as on March 31, 2025, as against the minimum required level of 11.50% (including the Capital Conservation Buffer) stipulated by Reserve Bank of India. The CRAR consisted predominantly of Common Equity Tier I (CET 1) which was 31.24% out of 32.71% of CRAR.

8. Deposits

The aggregate Deposits of the Bank as on March 31,2025 stood at H 53,688.96 crores, registering a growth of 8.43% over H 49,515.07 crores as on 31.03.2024. The interest rates for deposits were kept aligned with the prevailing trends in the Banking Industry.

Being a Banking Company, the disclosures required as per Rule 8(5)(V) of Companies (Accounts) Rules, 2014 are not applicable to your bank.

9. Advances portfolio – management of assets and development of business

TheBankcontinueditslendingactivitiesinconformity with its Board approved Policies and Guidelines of the Reserve Bank of India. The Gross Advances of the Bank increased from H 39,970.40 crores as on 31.03.2024 to H 44,365.53 crores as on 31.03.2025. The increase in advances is mainly due to the growth recorded in Retail and Agricultural advances.

The Bank continued its thrust on lending to Priority Sectors (PS) including Agriculture and Micro and Small Enterprises comprising both Manufacturing and Service Enterprises. The level of advances to Priority Sectors stood at Rs 34,278.68 crores as on March 31, 2025. The Total PS Advances (Net of PSLCs Sold) at H 21,675.70 Crores constitutes 69.94% of ANBC as on March 3, 2024, as against the regulatory minimum requirement of 40%. The achievement of PS Advances, based on the Quarterly Average level of PS Advances / Quarterly Average ANBC is at 73.82%. Agricultural Advances reached H 18,583.69 Crores as on March 31st, 2025. The Total Agricultural Advances (Net of PSLCs Sold) and including RIDF and other qualifying investments for Priority - Agriculture constitutes 20.02% of ANBC as on 31/03/2024, as against the regulatory minimum requirement of 18%. The achievement of Agriculture Advances, based on the Quarterly Average level of Agriculture Advances / Quarterly Average ANBC is at 24.77%.

Total advances to the weaker sections stood at H 14,619.71 Crores as on March 31, 2025. The Total advances to Weaker Sections (Net of PSLCs Sold) at H 5,004.71 Crores represents 16.15% of the ANBC as on 31/03/2024, as against the regulatory minimum requirement of 12.00%. The achievement of Advances to the weaker section, based on the Quarterly Average level of Advances to weaker section / Quarterly Average ANBC is at 19.53%. Similarly, the bank achieved the mandatory targets for the sub-sectors like Loans to Small and Marginal Farmers (at 10.75% as on March 3, 2025 based on the ANBC as on March 3, 2024, as against the regulatory minimum requirement of 10.00%). The achievement of Advances to the Small and Marginal Farmers, based on the Quarterly Average level of Advances to the Small and Marginal Farmers / Quarterly Average ANBC is at 14.52% and Advances to Micro Enterprises (at 25.52% as on March 3, 2025 based on the ANBC as on March 3, 2024, as against the regulatory minimum requirement of 7.50%). The achievement of Advances to Micro Enterprises, based on the Quarterly Average level of Advances to Micro Enterprises / Quarterly Average ANBC is at 26.12%. Under export credit, the bank achieved a level of H 597.76 Crores as on March 31,2025 as against H 834.60 crores achieved as on March 31, 2024, due to underutilization of sanctioned Export limits. The Bank has sanctioned totally 20,761 No of Working Capital Term Loans (WCTLs) to the tune of H 2675.01 crores as on March 31,2025 since the inception of the scheme Emergency Credit Guarantee Line Credit Scheme (ECLGS). There is no account opened during the FY 2024-25 under Emergency Credit Guarantee Line Credit Scheme (ECLGS).

During the current year, the bank will strive further to increase the flow of credit to Agriculture, Retail, and MSME Sectors and the Weaker Sections.

The bank has been actively participating in all the initiatives and schemes of the Government of India including Pradhan Mantri Mudra Yojana (PMMY), Dairy Entrepreneurship Development Scheme (DEDS),Pradhan Mantri Awas Yojana (PMAY), Entrepreneurship Development & Employment Generation Scheme (EDEGS), PM Street Vendors Atma Nirbhar Nidhi (PM SVANIDHI) etc. by implementing the same in the Bank.

The Bank has sold PSLCs worth H 12,640.00 crores till 31/03/2025, which fetched an income of H 195.92 Crores. In Category-wise, the Bank had sold PSLC-Small & Marginal Farmers for H 9,615.00 Crores, PSLC-Agriculture for Rs 2,800.00 Crores and PSLC-Micro Enterprises for H 225.00 Crores as on 31/03/2025.

Under the Financial Inclusion (FI) Programme, the Bank has covered 142 villages as on 31.03.2025. The total Basic Savings Bank Deposit Account (BSBDA) of the bank as on 31st March 2025 stood at 1.50 lakhs.

During the financial year ended March 31st, 2025, the Bank achieved a turnover of H 20,679.75 crores in trading operations, resulting in a net profit of H 21.77 crores, as against H 6.53 crores in the previous year. The net investments of the Bank stood at H 15,100.50 crores as on March 31, 2025, as against H 15,262.60 crores as at the end of the previous year. The Investment-to-Deposit Ratio of the Bank was 28.13%, as against 30.82% at the end of the previous year. The average realized yield on the investment portfolio during the year stood at 6.77% as against 6.85% in the previous year. The income earned during the year from investments, comprising of interest income and dividend income excluding income from RIDF was H 1017.42 crores as against H 1055.86 crores in the previous year.

The disclosures regarding particulars of loans, guarantee given and securities provided is exempt under the provisions of Section 186(11) of the Companies Act, 2013 since it is a banking company.

Foreign exchange business during the year 2024-25 in terms of actual inflows was H11,269.96 crores

(Previous Year H11,577.57 crores) whereas Foreign Exchange outflows was H8,071.76 crores (previous year H 9,400.97 crores) The total merchant turnover of the bank for the year 2024-25 was H 19,341.72 crores against H 20,978.54 Crores during the previous year 2023-24. The profit on foreign exchange business for the year 2024-25 was H38.91 crores against Rs 40.38 Crores during the previous year 2023-24. Your Bank has correspondent relationship with 328 overseas banks by exchange of Relationship Management Application (RMA) under SWIFT (Society for Worldwide Interbank Financial Telecommunication). It facilitates smooth and fast flow of communication in the international business. The SWIFT arrangement has enabled the Bank to give timely and efficient service to customers. During the year under review, 56 branches are linked to Forex Processing Centre(FPC) and the total number of branches linked to FPC has been increased to 525 from 469 branches. Our Bank has the necessary infrastructure to render fast and efficient service relating to inward remittance and for crediting the beneficiaries accounts on receipt of the foreign currency funds in our Nostro accounts abroad. Your Bank is committed to increase the Forex Business activities significantly for adding good revenues to the bank in the coming years. Your Bank has provided online Electronic Trading Platform named as TMBFXBRIDGE for concluding exchange rates in 39 branches & FPC and direct view access to your forex customers. FX-Retail platform is provided to Forex customers.

During the year under review, your bank has added 26 new branches and the branch network of the bank has been increased to 578 branches. In addition to that, your bank has added 4 ATMs,

22 CRMs. The Bank's ATM and alternate delivery channel network stood at 1150 ATMs, 380 CRMs, 124 e-lobbies, covering 17 States and 4 Union Territories.

As on 31st March 2025, the Bank's total staff strength is 4,743 (including 20 contract employees) consisting of 2,368 Officers, 1,738 Customer Service Executives and 637 Supporting Staff. During the year under review, 365 regular employees and 6 contract employees were recruited and 476 employees were promoted. Out of 4,743 employees, 2,853 employees were moved to the CTC structure.

The Business per employee has increased from H 19.34 crores to H 20.67 crores in the FY 2024-25. The Bank's Staff Training College at Nagercoil had conducted 74 physical training programmes and 12 online training sessions on various banking subjects like Credit, Forex, Recovery, KYC/AML Information Security etc. 3,001 staff members had undergone training programmes during the FY 2024-25. TMB eSMART, an online e-learning Management System was indigenously developed by your Bank to cater the training needs of all staff members. It can be accessed 24x7x365 by our staff members in intranet and internet. Using TMB eSMART, our staff members can learn varied Bank subjects like Credit, Forex, Information Security, KYC etc. In order to build skill sets in different facets of Banking, your bank has introduced 13 TMB Capacity Building exams in various areas like KYC, Credit, Forex, Recovery etc. In addition to the above, your Bank has tied up with reputed training institutions like SIBSTC-Bengaluru (Southern India Banks' Staff Training College), NIBM-Pune, IIBF- Mumbai, IDRBT, Hyderabad, CAFRAL, etc. 1350 staff members were trained in these leading institutions during FY 2024-25.

Industrial relations in the Bank continued to be very cordial during the year with frequent interactions between the management and the Officers' and Employees' Associations and various staff welfare activities were undertaken during the year. The Bank continues to lay emphasis on developing the individual skills of its employees and providing a healthy and cordial work environment so as to get maximum contribution from the employees of the Bank.

The Bank has continued to maintain a very good record in internal housekeeping. The core banking solution made it possible for the branches to balance all their accounts and tally reconcile all the balances up to March 31st, 2025. There was also timely submission and scrutiny of the control returns, which was given adequate importance at all levels with necessary follow up.

The bank has put in place an effective and strong Risk Based Internal Audit (RBIA) System. During the financial year 2024-25, RBIA were conducted through TMB eTHIC Module in 540 branches (Totally 619 audits) of the bank. Submission of compliance reports and closure of audits are followed up through the respective regional offices. Besides, RBIA was conducted at critical Departments such as KYC and AML Cell, Risk Management Department, Credit Department, Information Technology Department (Chennai & Thoothukudi), CPC Tirunelveli, CPC Chennai, Service Branch Chennai, Compliance Department, Integrated Treasury Department, International Banking Division.

The bank has a proper and adequate internal control system. The bank has standardised operating procedures in monitoring the account operations to have effective internal controls.

During the year under review, Credit Audit has been conducted for 1154 borrowal accounts in 229 branches.

The bank continued to have the system of Concurrent Audit through TMB eTHIC Module, which covered 268 branches and important departments. Concurrent Audit has been recognized as an important tool of internal control and is in force at major branches including 39 ‘B' category branches designated for forex business. Further concurrent audit is implemented in the following important departments – International Banking Division, Treasury, DPS Cell, Chennai Service Branch, Forex Processing Centre, Transaction reconciliation at various divisions of ITD, Accounts Department, Expense approval of ITD, Establishment Department, Planning and Development & Resource Mobilization Department, Central Processing Centres at Chennai and Tirunelveli and all the four Currency Chests located at Chennai, Podanur, Madurai and Thoothukudi Pudukottai. As per RBI direction, the Bank is conducting bi-monthly surprise verification of cash in currency chest at Madurai, Chennai, Podanur and Thoothukudi Pudukottai and the reports are forwarded to Planning Department and respective Regional Offices, for further follow up.

Submission of compliance reports and closure of audits are followed up through the respective regional offices / departments.

As per RBI guidelines, Information System audit cell has been established under Inspection Department. Information System audits were conducted at all the 540 branches (619 audits) along with Risk Based Internal Audit, 11 Departments and 12 Regional offices. Every year, critical Information systems deployed in your Bank like Core Banking System, E-Banking, Mobile banking, ATM, RTGS, Treasury, CTS clearing process, Server, SOC, HRMS and network infrastructure etc., are subjected to Information Systems audit by an external auditor.

To assess the robustness of the systems and procedures established in various operational units of the Bank and to have an oversight on the effectiveness of the management, various departments at Head Office and all Regional Offices are subject to Management Audit, which was conducted once in every 18 months.

During the year under review, Management Audits were conducted at 10 Regional Offices (Ahmedabad Region, Chennai Region, Bengaluru Region, Hyderabad Region, Madurai Region, Salem Region, Tirunelveli Region, Trichy Region, Mumbai Region and Thiruvananthapuram Region) and

25 Departments (Vigilance Department, Human Resource Development Department, Operations

& Services Department, KYC/AML Cell, Credit Monitoring Department, Accounts Department, MIS Department, Staff Training College (Nagercoil), Inspection Department, Recovery Department, Credit Department, Disciplinary Action Cell (DAC), Bancassurance Cell, Customer Service Cell & Internal Ombudsman Department, Compliance Department, Establishment Department, Legal Department, Chennai Service Branch, RTGS/WUMT, CPC,Chennai, CPC,Tirunelveli, IBD-Treasury-FPC, Information Security Department, Planning Development Resource Mobilization Department and DPS Cell).

In addition to the above audit the Bank regularly conducts revenue audit in the branches, to detect revenue leakages.

The functions of the vigilance machinery of the Bank are broadly divided into 3 types, viz. preventive, surveillance and punitive. The Vigilance Department undertakes a study of the existing procedures and practices prevailing in the organization with a view to modify those procedures or practices that provide scope for malpractice/fraud perpetrated by the staff members and also finding out the causes of delay in reporting and the points at which the delays occur and devising suitable steps to minimize delays at different stages. To educate the employees of the Bank, the Vigilance Department brings out various fraud awareness circulars and conducts training programmes periodically. As a part of creating awareness, ‘Vigilance Day' is observed on the 31st October every year. The Vigilance Department plays a vital role in the implementation and follow-up of the directives and guidelines issued from time to time by Reserve Bank of India. Upon the directions of RBI, Vigilance Department has also formulated/implemented a Vigilance Policy from July 13, 2011 and the Policy is being reviewed every year.

The Bank has implemented the Whistle-blower cum Protected Disclosure Policy, intended to promote the participation of employees at all levels and detection of corruption, misuse of office, criminal offences, suspected/ actual fraud, failure to comply with the rules and regulations prescribed by the Bank and any events/acts detrimental to the interest of the Bank, depositors and the public resulting in financial loss/operational risk, loss of reputation etc. Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances. It provides adequate safeguards against Whistle Blower's victimization for those who avails such mechanism and offers direct access to the Chief of Internal Vigilance (CIV). Further, there was no occasion where a person was denied access to the Audit Committee of the Board. The details of the Whistle-blower cum Protected Disclosure Policy are posted on the Bank's website and available at the link: https://tmb.in/pages/Regulatory-Policies.

Customer service is an important part of maintaining the going customer relationship, which is a key for continuous business growth and to retain the customer. The Bank is well known for its good, courteous and effective service to customer and constantly endeavouring to meet the expectations of the modern-day tech-savvy customers, by introducing new and innovative products for seamless digital experience.

As per the provisions of Internal Ombudsman Scheme 2018 and the Integrated Ombudsman

Scheme 2021, Shri.V.Seetharaman was appointed as the Internal Ombudsman for your Bank and he joined duty on October 4, 2024. The Internal Ombudsman examines customer complaints which are in the nature of deficiency in service on the part of the bank, that are partly or wholly rejected by the bank. As the bank shall internally escalate all complaints, which are not fully redressed to the Internal Ombudsman, before conveying the final decision to the complainant, the customers need not approach the Internal Ombudsman directly.

Your Bank is taking various steps to provide technology-enabled products and services to customers by adopting latest developments in technology. Banking Services are extended to our customers through Branches and ATMs by using multiple network technologies such as MPLS, Leased Line, GSM and VPNoBB with redundant connectivity. As an alternative to traditional Branches / ATMs, the digital services are seamlessly offered to our customers without any disruption through various delivery channels viz. Internet Banking, Mobile Banking, IMPS, UPI, AEPS, Point of Sale terminals, Cash Deposit Kiosk, Passbook Printing Kiosk, WhatsApp Banking etc., The availability of the services of all the alternate delivery channels to our customers is ensured by way of active monitoring and attending to outages if any, instantly.

Your Bank has implemented "Finacle", the Core Banking Solution in all its branches. Core Banking Solution (Ver. 6.x) was implemented during 2001-02 and its major migration v10.2.25 was carried out during August 2022.

The Bank has 1,150 ATMs and 380 CRMs as on 31 March, 2025. Your Bank has implemented Software Defined WAN (SD-WAN) for both primary and secondary link at Branches. Implementing SD-WAN enables Branches to use Bandwidth more efficiently by utilizing both Primary and Secondary link providing uninterrupted banking services to its customers.

Your Bank had introduced "Internet Banking facility" to the customers during November 2008. Currently the e-Banking facility has been extended to all our customers. The Bank has has also introduced Corporate Net banking facility for our customers with maker / checker facility to bring in more security to the transaction initiated by corporate customers. The Bank has has also tied up with multiple Payment Gateway service providers for extending utility bill payment services to our customers.

Facilities provided to customers through Internet Banking includes RTGS, NEFT, IMPS, opening of Deposit Accounts, e-Commerce transactions, online tax payment, online bills IPO applications, Foreign Exchange Transactions utility services payment, scheduled payments, etc. Payments to TMB Credit Card dues and Prepaid Card Top-up facility are also provided through Internet Banking.

Mobile Banking facility has been provided in both Android and iOS. Customers can self-onboard in Mobile Banking and also through branches. By using mobile banking facility, customer can perform SB/ CA/loan/deposit inquiry, transfer of funds (Within TMB/NEFT/IMPS/RTGS), Deposit Opening, TNEB payment, Mobile Recharge, Cheque Book Issuance, ATM Card Blocking, Cheque Status Inquiry, etc., In addition, certain features like Transaction limit setting, Credit Card details and Payment Dues, Debit Card Blocking, Beneficiary Management, Beneficiary Name Lookup, Voice Authentication, Loan against Deposits, Overdraft against Deposits and Form 15 G / H declaration are available for the Mobile Banking Customers. The Bank is striving to continuously add new features in our Mobile Banking application.

Unified Payment Interface (Acquirer and Issuer) service is available as an additional feature in TMB MBank Application to our customers. Customers using TMB MBank app can Send Money, Receive Money, Approve Payments, Scan and Pay QR, IPO Mandates, One Time Mandates, Recurring Mandates and more, by linking our Bank account or other Bank accounts in TMB MBank app, similar to various NPCI Certified Third Party UPI applications like BHIM. NRI Customers can send funds through Foreign Inward Remittance via UPI to our Bank accounts. UPI Lite facility with auto top-up is available where customers can do their UPI Payments up to H1000 without entering UPI Pin. Recently our Bank is live in UPI International Payments, Credit Card on UPI, UPI Circle (Delegate Payments) and Credit Line on UPI as issuer.

Bank has initiated various steps to increase its digital footprint.

Bank's Server infrastructure is maintained at primary (DC - Chennai) and secondary (DR Site - Bengaluru) co-located Data Centers. The Bank is having Physical, Virtual, Hyper Converged Infrastructure and dedicated Storage devices.

Hyper Converged infrastructure installed at our DC and DR locations, which is a three-node cluster arrangement, provides high availability, high scalability, cost effective, improved workload performance and occupies less space.

Storage Infrastructure was upgraded from SAS to Flash storage to get high performance in Core Banking Solution (Finacle). It is scalable for our future needs and high availability.

Health of Server Infrastructure is monitored on real time for Server related parameters such as CPU Utilization, CPU Load, Memory Usage, Process, Threads, Disk Space Usage, Network Traffic, Uptime, Regex (Regular Expression) based alerts etc.

PAM (Privileged Access Management) solution was implemented to provide access to the servers in a more secure way. We are activating the DR Site on quarterly basis, to ensure that the Disaster Recovery operations remain accurate, relevant and operable during adverse conditions.

Your Bank is having Endpoint Extended Detection and Response (XDR) system to protect our Endpoints from Malware and Ransomware attacks. Also, the Bank has have implemented Data Loss Protection (DLP) which facilitates to block / alert transmission of data based on sensitive keywords across intra / inter network infrastructure. We have adequate Firewall, Intrusion Prevention System (IPS) and Intrusion Detection System (IDS) to protect our network from external threats accessing through internet. All the endpoints have been integrated with domain and policies have been enforced through Network Access Control (NAC) and Active Directory. Further, Bank has setup Security Operation Center (SOC) under the direct control of Information Security Department where the following tools / components are installed to monitor SOC operations.

1. Security Incident & Event Management (SIEM)

2. Database Activity Monitoring (DAM)

3. Privileged Access Management (PAM)

4. Web Application Firewall (WAF)

During Financial year 2024-25, your Bank has completed the following major IT Projects:

1. Enabling of GST Payment by Customers in Government Business Module.

2. Implementation of Direct Tax (CBDT) payments by Customers in Government Business Module.

3. Engaged Fintech as Merchant Aggregator to onboard merchants and provide QR Code to merchants.

4. Implementation of Rupay National Common Mobility Card (NCMC) to travel in Metro and Buses.

5. Enabled Online Foreign Exchange Operations to Customers in Internet Banking.

6. Introduced Insta Kit for Savings Account Opening.

7. Enabled UPI on Rupay Credit Card as issuer. Customer can link their Rupay Credit Card for UPI Transactions.

8. Enabled Voice Authentication as additional factor of authentication for Transactions in Mobile Banking.

9. Enabled Loan against Deposits and Overdraft Against Deposit in Mobile Banking.

10. UPI Credit Line, Auto Topup for UPI Lite and Delegate Payments (UPI Circle), Credit Card on UPI is enabled for Customers as Issuer.

11. IT Infrastructure has revamped to handle increased transaction volume growth.

Launched TMB Apartment Savings Bank Accounts

Launched TMB Student Saving Bank Accounts

Launched TMB Prime Salary and Super Salary SB Accounts

Launched various Term Deposit Schemes with attractive interest rates

TMB 400 (400 Days)

TMB 300 (300 Days)

TMB Akshay Deposit Scheme

The Bank has bagged the following awards during the year under review:

The Bank has bagged two Atal Pension Yojana (APY) awards during the Felicitation program conducted by PFRDA on 21 June, 2024 at New Delhi

Ultimate Champions Trophy

Award of Ultimate Achiever

The Bank has bagged six Atal Pension Yojana (APY) awards during the Felicitation program conducted by PFRDA on 28 June, 2024 at Chennai

Numero Uno Exemplary Award of Par Excellence

Diamond Cup

Award of Exemplary Leadership

Exemplary Award of Par Excellence (2)

Award of Achievement

During the financial year 2024-25, CRISIL renewed the rating for the Certificate of Deposit programme of the Bank as follows,

Your Bank has a proactive approach towards Risk Management. Its risk philosophy involves developing and maintaining its banking activities within its risk appetite and regulatory framework. The Risk Management Architecture of the Bank comprises of an Independent Risk Management Organizational structure at the corporate level, Risk Management Policies, Risk Measurement Tools and Risk Monitoring and Management Systems. The Bank has a well-defined risk appetite statement and all the banking functions are dovetailed to the risk appetite statement. The Board of Directors of the Bank is primarily responsible for laying down risk parameters and establishing an integrated risk management and control mechanism. The Board of Directors is supported by a Sub-Committee of the Board known as the Risk Management Committee of the Board (RMCB), which in turn is aided by the Asset Liability Committee (ALCO), Credit Risk Management Committee of Executives (CRMCE) and Operational RiskManagementCommitteeofExecutives(ORMCE).

The executive level Committees are headed by the MD & CEO of the Bank. The Bank's RMCB reviews its Risk Management policies and recommends to the Board for approval. The Board also sets out limits, taking into account the risk appetite of the Bank and the goals set.

The bank's liquidity ratios, i.e. LCR & NSFR are also above the minimum stipulated level indicating comfortable position with regard to liquidity risk. Your Bank has been proactively conducting internal assessment of adequacy of capital, liquidity ratios and leverage ratios in accordance with Basel-III standards. Your Bank is also conducting stress testing and scenario analysis periodically to assess our resilience under extreme but plausible situations Your Bank's capital position is in compliance with Basel-III expectations and well above the minimum requirements.

The Bank's Board as on March 31st, 2025 comprises of 13 Directors and the composition of Board are given below:

All Directors, other than Managing Director and CEO & The Executive Director, are non-executive Directors on the Board. The details of Directors are available in the Corporate Governance report, which forms part of this report.

The details of directors or key managerial personnel who were appointed or have resigned during the year is mentioned in the Corporate Governance Report.

The Board of Directors of the Bank in their meeting held on January 17, 2025, have approved the Tamilnad Mercantile Bank Limited (TMB) Employee Stock Option Plan 2024 ("TMB ESOP 2024") and the same was approved by the shareholders of the Bank on March 12, 2025 through Postal Ballot. The Bank has filed an application with the Stock Exchanges for obtaining in-principle approval from them for issuing new shares under TMB ESOP 2024. In connection with the application submitted for in-principle approval, the National Stock Exchange of India has advised the Bank to modify some clauses in the TMB ESOP 2024 scheme so as to comply with the rules & regulations prescribed under SEBI (SBEB) Regulations, 2021. Based upon the requirement, the Compensation Committee has approved the modifications in the scheme. Approval from the Stock Exchanges is awaited.

Pursuant to Regulation 13 of the Securities Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, a certificate from the Secretarial Auditor is attached as Annexure 9.

Your Bank has received necessary declarations from all the Independent Directors under Section 149(7) read with Section 149(6) of the Companies Act, 2013 and Regulation 25(8) read with Regulation 16(1)(b) of the SEBI LODR, they meet the criteria of independence laid down thereunder.

In terms of the provisions of Section 149 of the Companies Act, 2013, and Regulation 17 of SEBI (LODR) Regulations, 2015 the Bank has appointed Smt. R. Kanagavalli (DIN: 00883998) as Woman (Independent) Director on the Board of the Bank.

Your bank does not have any subsidiaries or Associates or Joint Ventures for the financial year ended March 31, 2025.

During the Financial year ended March 31, 2025, there is no change in the nature of business of the Bank. 27. Directors' Responsibility Statement Pursuant to Section 134 (3) (c) read with Section 134 (5) of the Companies Act, 2013, it is hereby confirmed that: (a) In the preparation of the annual accounts for the financial year ended March 31, 2025, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) The Board of Directors have selected the accounting policies and applied them consistently and judgments and estimates made are 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 2024-25 and of the profit of the Bank for that period. (c) The Board of Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

(d) The Board of Directors have prepared the annual accounts for the financial year ended on March 31, 2025, on a going concern basis; (e) The Board of Directors have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and were operating effectively; and (f) The Board of Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

During the year under review, the bank has not entered into any significant material transactions with related parties, which could lead to potential conflict of interest, other than transactions entered into in the ordinary course of business and at arm's length basis. Hence, the disclosure in Form AOC-2 is not applicable. The policy on Related Party Transactions is placed on the Banks' and available at the link https://www.tmb.in/pages/ Regulatory-Policies

Pursuant to the provisions of the Companies Act, 2013 and the SEBI Listing Regulations, the Nomination and Remuneration Committee of the Board had laid down the criteria for Performance Evaluation of the Board as a whole, Individual Directors including Independent Directors, Non-Independent Directors, the Chairman and the Committees of the Board, as well as the process for such evaluation. The Bank has aligned its Board Evaluation Framework in line with the Guidance Note on Board Evaluation issued by the SEBI as per Circular dated January 5, 2017. The Board of Directors has carried out the annual evaluation of the performance of the Board as a whole, Individual Directors including Independent Directors, Non-Independent Directors, the Chairman and the Committees of the Board. The performance of the Board as a whole, Individual Directors including Independent Directors, Non-Independent Director, the Chairman and the Committees of the Board have been evaluated / reviewed by the Nomination and Remuneration Committee, by the Independent Directors and by the Board of Directors The Board has formulated a Policy on Performance Evaluation which includes the aspects such as

1) Acting in the best interest of the Bank

2) Exercise of due and reasonable care, skill, diligence and independent judgement

3) Avoidanceofdirectorindirectconflictsofinterest

4) Avoidance of undue gain or advantage either to self or relatives, partners or associates

5) Maintaining confidentiality of information, including commercial secrets and unpublished market - sensitive information

6) To oversee the Bank's financial reporting process and ensuring correct, adequate and credible disclosure of financial information.

7) To review with the management, the financial statements with special emphasis on accounting policies and practices, compliance with accounting standards and other legal requirements, concerning financial statements

8) To review the adequacy, quality and effectiveness of external and internal audit, internal control system, interaction with external auditors before finalization of Annual accounts and reports.

9) To review Bank's finance and risk management policies.

10) Striving to attend all committee Meetings 11) Display of requisite knowledge and expected level of awareness of the Bank and external environment in meetings and comments 12) Seeking appropriate clarification or amplification of information where necessary 13) Contribution in terms of constructive ideas, guidance and knowledge of better decision making and management of Bank's affairs.

The Bank has a Board approved Nomination and Remuneration Policy for appointment of Directors and Senior executives of the Bank. The Bank also has a Board approved compensation policy which deals with the compensation & benefits of the Managing Director & CEO, the Executive Director and all executives of the Bank.

The remuneration of the MD & CEO and the Executive Director is recommended by the Nomination & Remuneration Committee (NRC) to the Board for approval after considering the factors prescribed under the Compensation Policy. The Board considers the recommendations of NRC and approves the remuneration, modifications, subject to shareholders' and regulatory approvals. The other non-executive directors are paid only sitting fees for attending the meetings of the Board and its Committees. None of the directors including the MD & CEO and the Executive Director receives any profit linked remuneration. The sitting fees payable to the non-executive directors is H 50,000/- for Board Meeting and H 25,000/- for Committee Meetings for the year under review.

The terms and conditions of appointment of Independent Director are available on the Bank's website – https://www.tmb.in/doc/2point.pdf

The details are available in the Corporate Governance Report.

During the year under review, total 19 meetings of the Board and 77 meetings of the Committees of the Board were held. For details of the meeting of the Board and its Committees, please refer to the Corporate Governance report forming part of this report.

For the details of the Annual General Meetings, please refer to the Corporate Governance report forming part of this report.

The Bank has embraced compliance as a part of good governance and not for purely meeting the regulatory requirement. Hence, the Bank has institutionalized a strong compliance culture and mechanism across the organization, founded on the principles of transparency and trust by involving all the stakeholders. The Bank has a dedicated Compliance Department headed by Executive Vice President, for ensuring regulatory and organization level compliance, across all its businesses and operations. The key functions of this department includes, dissemination of key regulatory updates affecting the various business verticals of the Bank, review of processes from a regulatory compliance perspective, provide guidance on compliance-related matters, among others.

The Bank has complied with all the provisions of the Companies Act, 2013 and the Rules made thereon, to the extent that are applicable to the Bank. The Bank has filed an sue moto application before the Registrar of Companies, Chennai under Section 441 of the Companies Act, 2013 for which final order is awaited.

The Bank is required to appoint an internal auditor as per the requirements of Section 138 of the Companies Act, 2013, who should either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit on the functions and activities of the Bank.

The Bank has an internal audit department and it engages a practicing charted accountant as concurrent auditor to conduct the audit of the branches as per the Reserve Bank of India's guidelines. The internal audit department of the bank conducts audit of the various departments and branches on a periodical basis and findings of the audit are being placed before the Audit Committee of the Board. Considering the above, the Bank has not appointed any third party internal auditor as mandated under section 138 and rule 13 of Companies (Accounts) Rules, 2014 to conduct internal audit of the branches and various department of the Bank.

Pursuant to provisions of Section 139 of the Companies Act, 2013 read with Section 30(1A) of the Banking Regulation Act, 1949, the Board of Directors have recommended the appointment of M/s.

Sundaram & Srinivasan, Chartered Accountants, Chennai (Firm Registration No. 004207S) and M/s. Chandran & Raman, Chartered Accountants, Chennai (Firm Registration No. 000571S) as the Joint Statutory Central Auditors of the Bank for the financial year 2025-26. The Reserve Bank of India vide its letter dated 26 June, 2024 has approved the same, subject to the approval of members at the Annual General Meeting.

The proposed Auditors have confirmed their eligibility to be so appointed in terms of Section 141 of Companies Act, 2013.

The Notes on Accounts and the Significant Accounting Policies referred to in the Auditor's Report and forming part of the annual accounts and the references made by the Auditors in their Report are self-explanatory. The Auditors have not made any observations or adverse comments warranting any explanation on the part of the Board as referred to in Section 134 (3) (f) of the Companies Act, 2013.

During the year under review, the Auditors have not reported any instance of fraud committed in the Bank by its officers or employees to the Audit Committee of the Board under section 143 (12) of the Companies Act, 2013.

The Bank had appointed M/s. SPNP & Associates, Practicing Company Secretaries, Chennai, as the Secretarial Auditor to conduct the Secretarial Audit of the Bank for the FY 2024-25. The report of the Secretarial Auditor is enclosed as Annexure 1. The Secretarial Auditor has made the following observation and your directors would like to submit the response to the observation as below;

During the period under review, Mr. K. Ananth and Mr. S. Ilangovan were appointed as Heads of Internal Audit. However, the Audit Committee did not formally review and approve the appointments and the terms of remuneration of the Chief Internal Auditor, in deviation from the duties of Audit Committee as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This has been marked as a remark, with a suggestion that, going forward, the Bank shall ensure formal compliance with the aforementioned SEBI regulation.

The comment made by the Secretarial Auditor is self-explanatory in nature and Your Bank has taken necessary steps to ensure compliance with regulatory guidelines as amended from time to time.

The Bank received a demand notice from the Income Tax Department on March 29, 2024. However, the intimation to Stock exchange was made only on April 2, 2024 causing a three days delay in intimation of demand notice as per SEBI Circular dated July 13, 2023, and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This has been marked as a remark, with a suggestion that, going forward, the Bank shall ensure formal compliance with the aforementioned SEBI regulation.

The above facts came to the knowledge of the Bank on 30.03.2024 and having consecutive holidays on 31.03.2024 and 01.04.2024, the said intimation was made on 02.04.2024. However, the filings submitted with stock exchanges contains the factual condition also, which is reproduced as below: "Due to intervening holiday and Financial year end closure, the intimation is being provided today"

The Risk Management Committee (RMC) had not reviewed the appointment and terms of remuneration of Chief Risk Officer in deviation from the duties of Risk Management Committee as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This has been marked as a remark, with a suggestion that, going forward, the Bank shall ensure formal compliance with the aforementioned SEBI regulation.

The comment made by the Secretarial Auditor is self-explanatory in nature and Your Bank has taken necessary steps to ensure compliance with regulatory guidelines as amended from time to time.

During the period under review, Mr. Sanjay Kumar Goel was appointed as the Chief Financial Officer (CFO) at the Board meeting held on January 29, 2025. However, the said appointment was neither presented to nor approved by the Audit Committee, which is in deviation from the duties of Audit Committee as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The comment made by the Secretarial Auditor is self-explanatory in nature and Your Bank has taken necessary steps to ensure compliance with regulatory guidelines as amended from time to time.

During the period under review, the Bank made contributions in the form of non-monetary assets which are not classified under Schedule VII of the Companies Act 2013, including barricades, CCTV cameras, waiting sheds, and computers—to various Police Departments. Though the contributions in the form of non-monetary assets which were provided to the Police Departments, the same will be used for the benefits of the general public at large.

During the period under review, the Bank has transferred Rs. 6.78 Crores to the unspent CSR account which was originally contributed to TMB Foundation, during the financial year 2020-21. And the same was categorized under "ongoing projects.". In compliance with Section 135 of the Companies Act, 2013, the said amount should have been transferred to the specified unspent CSR account by the end of FY 2023-24.

The implementing agency has informed the Bank that due to some unavoidable circumstances / conditions, the ongoing projects were continued after the expected completion time. In view of the above, the aforesaid delay was caused.

The Bank has undertaken an audit for the Financial Year ended March 31, 2025 for all applicable compliances as per SEBI Listing Regulations and Circulars / Guidelines issued thereunder. The Annual Secretarial Compliance Report duly signed by M/s. SPNP & Associates, Practicing Company Secretaries, Chennai, has been submitted to the Stock Exchanges and is enclosed as Annexure 2 to this Directors' Report.

The Bank has complied with the provisions of the applicable Secretarial Standards issued by the Institute of Company Secretaries of India and has put in place systems which are adequate and are operating effectively.

The Bank has been supporting and financing various activities for development of alternative energy generation. The Bank recognizes wind and solar energy as main sources of best renewable and pollution free energy throughout the year and considers funding these initiatives as its contribution towards the worldwide effort against global warming. Accordingly, bank encourages setting up of solar panels by financing solar energy generation plants. The Bank has also taken various steps to conserve energy in its own premises, by establishing solar plant in 18 branches.

The Bank has constituted a Corporate Social Responsibility (CSR) Committee which has also adopted a CSR Policy. The CSR Policy is available on the Bank's website. The disclosure in respect of the CSR activities of the Bank as required to be made as per the Companies (Corporate Social Responsibility) Rules, 2014 is given in Annexure 3.

As per Section 135 of the Companies Act 2013 and Rules thereunder, the total amount to be spent is H 26.09 crores for the Corporate Social Responsibility activities for the financial year 2024-25 and a sum of H 18.83 crores has been transferred as ongoing and multiyear projects to the implementing agency.

Annual Return Pursuant to provision of Section 134(3) (a) and Section 92(3) of the Companies Act, 2013, the Annual Return as at March 31, 2025 is available in the Bank's website. The same can be accessed at https://www.tmb.in/pages/Annual-Return.

The Bank has zero tolerance towards any act on the part of any executive / employee which may fall under the ambit of ‘Sexual Harassment' at workplace and is fully committed to uphold and maintain the dignity of every woman working in the Bank. The Policy provides for prevention and protection against sexual harassment of women at workplace and for redressal of such complaints. All the employees (permanent, contractual, temporary or trainee) are covered under this policy.

Number of complaints pending as at the beginning of the financial year - Nil Number of complaints filed during the financial year - 1 (The same has been disposed) Number of complaints pending as at the end of the financial year – Nil Also, your Bank is in compliance with the Maternity Benefit Act, 1961 as amended from time to time.

The details of the equity shares / unclaimed Dividends transferred to Investor Education and Protection Fund (IEPF) Authority are available in the Corporate Governance report forming part of this report.

During the year under review, RBI has imposed the following penalties on the Bank:

i. RBI has imposed penalty of 4,30,000/- under the scheme of penalty for Non-replenishment of ATM (DCM(RMMT) No.S153/11.01.01/2022-23) dated August 10, 2021. (debited in our account maintained with RBI on various dates)

ii. RBI has imposed penalty of 10,000/- for deficiency in rendering customer service observed during incognito visit by RBI official at Cheranmadevi Branch on 11.11.2024 (Order date: 11.11.2024 & Paid on 17.12.2024)..

iii. RBI has imposed penalty of 20,050/- on

28.05.2024 for the reason of irregularities and directions violated during their visit at our Madurai Currency Chest. (debited in our account maintained with RBI on 28.05.2024)

The cost records as specified by the Central Government under Section 148(1) of the Companies Act, 2013, are not required to be maintained by the Bank.

The Management Discussion & Analysis as required under the Listing Regulations is enclosed as Annexure 4, forming part of this Report.

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached as Annexure 5 which forms part of this Report.

Your Bank is committed to follow the best practice of corporate governance to protect the interest of all the stakeholders of the Bank, viz. shareholders, depositors and other customers, employees and the society in general and maintain transparency at all levels.

As required under Regulation 34 (3) read with Schedule V (C) of the Listing Regulations, a report on Corporate Governance and the certificate as required under Schedule V (E) of the Listing Regulations from M/s. SPNP & Associates, Practicing Company Secretaries, Chennai, regarding compliance of conditions of Corporate Governance are given inAnnexure 6 and Annexure 7 respectively, forming part of this report.

The ‘Business Responsibility and Sustainability Report' (BRSR) of your Bank for the Financial Year ended March 31, 2025 is attached as Annexure 8 as required under Regulation 34(2)(f) of the Listing Regulations. Your Bank continues to execute strong ESG proposition by working with all relevant stakeholders as well as in its own operations.

There are no material changes and commitments affecting the financial position of the bank.

During the Financial Year 2024-25, no significant and material orders were passed by the Regulators or Courts or Tribunals against the Bank which impacts its going concern status and Bank's operations in future.

Being Banking Company, the aforesaid provision is not applicable to your Bank.

The Bank has adopted the Code of Conduct for Prevention of Insider Trading in the securities (‘PIT Code'), adopted in line with the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations'). The PIT Code, inter-alia requires, pre-clearance for trading in the securities and prohibits the purchase or sale of securities while in possession of unpublished price sensitive information(UPSI) and during the closure of trading window.

The Board has also adopted a Board approved Code of Practices and Procedures for Fair Disclosure of UPSI, which is available on the website of the Bank at https://www.tmb.in/doc/Code%20of%20 conduct%20to%20regulate%20monitor%20and%20 report%20trading%20by%20insiders.pdf.

The Board reviews the PIT Code on an annual basis and whenever required. The PIT Code has been reviewed by the ACB and the Board, as part of annual review process, during the financial year under review and certain changes are made therein in order to provide more clarity in certain clauses as per recent development in the aforesaid regulations. The Company Secretary of the Bank acts as the ‘Compliance Officer' in terms of the PIT Code and PIT Regulations, and is responsible for implementation and overseeing compliance with the PIT Code across the Bank.

The Bank has also undertaken various initiatives during the financial year to spread awareness amongst the employees of your Bank about the provisions of the PIT Code and PIT Regulations. The Bank has automated the process for submission of declarations and disclosures by designated persons electronically through software. Further, your Bank has maintained the Structured Digital Database (‘SDD') internally with adequate internal controls, in compliance with the provisions of Regulation 3(5) of the PIT Regulations. The report on the compliance with the PIT Code is also submitted to the ACB/ Board periodically

The Board of Directors are grateful for the valuable guidance and support received from the Government of India, various State Governments, regulatory bodies such as RBI, SEBI, MCA, RBI, IBA, UIDAI, CERSAI, IRDA as well as to all the shareholders, Lenders, Credit Rating Agencies for their unwavering support and trust in the Bank. The Board would further like to express appreciation to BSE Limited, National Stock Exchange of India Ltd., National Securities Depository Limited, Central Depository Services (India) Limited, Registrar & Share Transfer Agent, Vendors and Service Providers for their continued support & co-operation. The Board also wishes to place on record its profound appreciation for the valuable contribution of the Bank's Staff at all levels and looks forward to their continued involvement with commitment towards achieving the future goals.

Lastly, our sincere thanks to all our customers in India and abroad and our shareholders for their patronage and continued faith in Brand TMB as we strive to improve the Bank's position and performance on an ongoing basis and remain strongly committed to creating value for our stakeholders.

This year has been a significant milestone for the Bank, marking 103 years since its establishment — a truly commendable accomplishment.

Both the banking sector as a whole and your Bank in particular remain committed to supporting the MSME segment through the effective rollout of initiatives introduced by the government and regulatory authorities. The Bank has adopted a prudent approach in expanding its operations while maintaining strong financial performance.

Looking ahead, your Bank remains optimistic and self-assured, confidence rooted in its ability to overcome numerous challenges over the past century. With the knowledge and experience gained, the Bank is well-positioned to embrace the next hundred years with renewed vigor, driven by the trust of its valued customers and the unwavering dedication of its employees.

Your Bank looks to the future with great hope and confidence born out from the fact that the Bank has weathered many storms in its journey of hundred years and with the experience gained, will be able to look forward to the next 100 years with renewed strength, stemming from the trust of the customers and protected by the loyalty of its staff.