Dear Stakeholders,

It is with great pride that I present to you the 5th Integrated Annual Report of Karur Vysya Bank for FY 2025-26. Since 2020, the Bank has pursued a focused transformation agenda built around three priorities: Growth, Profitability and Asset Quality. FY 2025-26 reaffirmed the strength and consistency of this journey.

The year also held special significance as Karur Vysya Bank completed 110 years of service. From our origins in Karur as a bank serving traders and agriculturists, we have evolved into a pan-India institution, while remaining rooted in trust, customer service and responsible banking.

A Legacy of 110 Years

Completing 110 years is a reminder of the responsibility we carry as custodians of an institution built over generations. For KVB, legacy has always been about preserving the values of trust, prudence and service while continuously adapting to the needs of customers, businesses and communities. This perspective has guided transformation over the past few years. We have strengthened the Bank’s fundamentals, expanded our reach, deepened our digital capabilities and remained focused on delivering banking that is relevant, secure and accessible.

A Year of Purposeful Acceleration

The operating environment remained broadly supportive, with the global economy maintaining a stable growth path and India continuing to strengthen its position as the fastest-growing major economy. The financial sector also recorded healthy credit expansion, supported by sustained retail demand, increasing MSME lending and policy initiatives aimed at expanding financial inclusion. During the year, the monetary environment remained conducive to growth. Following the reduction in the repo rate to 5.25% and its retention at that level in the February, April and June monetary policy reviews, the RBI maintained a neutral stance to support economic momentum, while liquidity conditions across the banking system remained well-managed. For FY 2026-27, ICRA expects incremental credit growth in the range of 11.0% to 11.7%, indicating a healthy and sustainable pace of expansion.

Against this backdrop, KVB continued to deliver with consistency, reflecting the strength of our franchise, the quality of our execution and the discipline with which we pursue growth. Our performance during the year reflects both the strength of our business model and the quality of execution. Total business crossed ₹2,14,420 Crore, with advances growing 17% year-on-year to ₹98,754 Crore and deposits growing 13% year-on-year to ₹1,15,666 Crore. Net profit increased by 29% to ₹2,510 Crore, while operating profit rose 27% to ₹4,075 Crore. By proactively booking a significant proportion of advances during the first quarter, we were able to benefit from a full cycle of income accrual while maintaining our focus on portfolio quality and profitability.

Our cost-to-income ratio stood at 42.96%, underscoring our disciplined approach to control operating expenses. This reflects our continued emphasis on cost control.

On the liabilities front, we have invested consistently over the past few years to build a stable, granular and relationship-led deposit base. FY 2025-26 saw these efforts translate into tangible outcomes, with deposits constituting 54% of our total business. Our CASA ratio stood at 26.91%, with CASA balances growing 12% year-on-year to ₹31,122 Crore. We continued to strengthen our CASA acquisition engine through the dedicated channel, a new-to-bank engagement program focused on various segments, and targeted initiatives aimed at deepening existing relationships.

Beyond deposit mobilization, we consciously worked toward improving the quality of our liability franchise by building relationships that are active, transaction-led and engagement-driven. The branch-led BSSE program played an important role in this effort by deepening customer engagement and facilitating the reactivation of dormant accounts.

Retail term deposits grew 15% Y-o-Y, with 78% of term deposits below ₹5 Crore. This highlights the increasingly granular and stable nature of our funding base. At the same time, we continued to reduce our dependence on bulk deposits, resulting in a more balanced liability profile and a stronger foundation to support future credit growth.

We adopted a proactive approach throughout the year, with a clear focus on protecting spreads, optimizing funding costs and enhancing earnings visibility. We shifted portions of our floating-rate book to fixed rates, particularly in jewel loans and select retail products. As a result, the fixed-rate book expanded from 10% to 29% of total advances in FY 2025-26 compared to FY 2024-25. On the liabilities side, we leveraged the softening interest rate environment to optimise funding costs, particularly as a significant portion of our special term deposits matured during the year.

During the year, we rebalanced investments toward State Development Loans and select non-SLR instruments offering superior spreads, while increasing investments in corporate bonds issued by existing borrowing customers.

These initiatives generated stronger returns, improved operating efficiency, enabled priority sector benefits where applicable, and supported the maintenance of a healthy net interest margin of 4.11%.

Yield on investments improved by 7 basis points Y-o-Y, while the gross investment book expanded to ₹29,394 Crore as of March 2026, making a meaningful contribution to total income.

The Bank's ROA for FY 2025-26 stood at 1.93%, exceeding our guided range, while ROE stood at 17.79%.

Alongside core income growth, we continued to strengthen our fee income franchise. Processing fees, guarantee and letter of credit income, third-party distribution revenues and recovery-related income all contributed to a more balanced non-interest income profile with Y-o-Y growth of 14%. The Bank also achieved cumulative principal write-off recoveries of ₹679 Crore during the period.

I am pleased to note that our asset quality remains among the strongest in the industry. As on 31st March 2026, gross NPA stood at 0.75%, net NPA at 0.19% and the slippage ratio at 0.75%, all comfortably within our stated guidance. SMA 30+ levels declined further to 0.17% of total advances, reflecting improving portfolio health across business segments and the effectiveness of our underwriting and monitoring frameworks. The standard restructured book decreased further to 0.41% of total advances by March 2026. Total stressed assets comprising net NPA, restructured advances and net security receipts fell to a multi-year low of 0.45% of total assets.

The provision coverage ratio of 96.45% reflects a philosophy that has remained unchanged over the years. We believe in building resilience during periods of strength so that the balance sheet remains well protected across economic cycles. This conservative approach has served the Bank well and continues to provide confidence as we scale the business further. We remain well capitalised with a capital adequacy ratio under Basel III at 18.76%.

New Strategic Directions

During FY 2025-26, we initiated two strategic growth avenues that we believe hold significant long-term potential. The first was affordable housing finance, which we commenced through both direct sourcing and a co-lending arrangement that is nearing operational readiness. This segment aligns well with our strengths in secured lending and relationship-based banking, while addressing the growing demand for organised housing finance among first-time homebuyers and underserved customer segments.

The second is the preparedness to relaunch our credit card business with a refreshed product suite tailored to the evolving needs of our customers. Backed by a growing base of salaried individuals, entrepreneurs and retail customers, this initiative is aimed at deepening customer engagement and expanding our product offerings. This was relaunched in the first quarter of the current year.

In parallel, we continued to strengthen our distribution network through the opening of new branches in strategically important markets. I deeply appreciate the way our teams have expanded the Bank’s presence while preserving our relationship-led approach. Through a combination of Regular and Lite branch formats, we are creating a more flexible physical network that can enhance customer accessibility, deepen local relationships and support business growth across urban, semi-urban and rural markets.

Celebrating Excellence

Our pursuit of excellence continued to be recognised across multiple domains during the year, spanning technology, asset quality, and our focus on priority sectors such as MSMEs. The Bank received Best Small Indian Bank award given by Business Today Magazine for the 3^rd consecutive year. At the IBA CISO Summit 2025, we received multiple awards for our capabilities in cybersecurity resilience, incident response, and compliance. Our disciplined approach to risk management and operational excellence was further acknowledged at the ICC Banking Awards, where we earned the Best Bank under Mid-size category, along with recognition for Asset Quality. Our continued commitment to supporting the MSME sector was also recognised at the MSME Banking Excellence Awards. These achievements reflect the consistency of our performance and the strength of our institutional capabilities.

Transforming through Technology

Technology remains central to our growth strategy, enabling us to deliver a seamless, secure digital banking experience. As of 31st March 2026, 97% of all transactions were conducted through digital channels, underscoring the success of our digital transformation journey. Our flagship mobile banking platform, KVB DLite, continued to witness strong adoption, surpassing 7 Mn downloads and serving over 1 Mn monthly active users. The app maintains high customer satisfaction ratings of 4.8 on the Google Play Store and 4.6 on the Apple App Store. During the year, we further enhanced the platform with integrated Video KYC for seamless onboarding, GenAI-powered personalised customer communications, and customer-friendly features such as Pay to Contacts, dynamic offers, card management, and customised navigation options.

To strengthen our digital offerings for business customers, we launched KVB Corp, a dedicated mobile banking platform for corporate and SME clients. The application provides a comprehensive suite of services, including loan management, GST and income tax payments, e-statements, Form 26AS access, mutual fund services, and payment solutions through IMPS, NEFT, and RTGS. We also introduced a dedicated CRM platform for the commercial banking business to improve lead management, monitor business opportunities, and accelerate customer acquisition, particularly within the MSME segment.

The launch of a Soft Token application strengthened internet banking security through dynamic authentication capabilities. UPI transactions continued to gain momentum, reaching 4,157 Lakh transactions during the quarter ended March 2026. We further enhanced customer convenience through features such as UPI-based cardless cash withdrawals. We also implemented an omnichannel engagement platform that enables seamless and personalised communication across multiple digital touchpoints. In parallel, we continued to digitise internal processes, including online handling of NACH mandate cancellations and enquiries, as well as digital retrieval of CTS cheque images through internal workflow systems, resulting in improved efficiency and faster turnaround times.

Our People

Our people remain our greatest strength and the cornerstone of our continued growth. As of 31st March 2026, our workforce stood at 9,883 employees, reflecting a stable, committed, and engaged talent base. The year witnessed a notable improvement in workforce productivity, with business per employee increasing to ₹21.70 Crore from ₹18.91 Crore in the previous year. Our talent management framework is focused on building a future-ready leadership pipeline and strengthening organizational capability. During the year, we enhanced our competency-based development approach through structured assessments, individual development plans, mentoring initiatives, and leadership development programs. We also continued to invest in career progression frameworks, specialized certification programs, and internal mobility opportunities to nurture high-potential talent, support their professional aspirations, and align employee capabilities with the Bank's evolving business priorities.

Forging Partnerships

During the year, we strengthened our partner ecosystem across digital platforms, lending models, and service infrastructure to enhance efficiency and expand customer access. Our alliances in the fintech and digital space enable us to expand our digital lending capabilities, including co-lending initiatives and affordable housing finance, while supporting the seamless delivery of technology-enabled credit solutions. We also leveraged specialised partnerships to streamline onboarding, documentation, analytics and business processes, helping improve turnaround times and service quality.

Responsible Business Practices

During FY 2025-26, we further strengthened our approach to sustainability by embedding ESG principles more deeply into our overall business strategy. Building on the progress made over the past few years, we continued to integrate environmental and social considerations into key business decisions and long-term planning. On the environmental front, we are deploying grid-connected solar photovoltaic systems across rural branches and select community institutions, contributing to lower operational emissions while supporting local infrastructure.

Our commitment to sustainable and inclusive growth extends beyond banking through focused CSR initiatives that have created a meaningful impact over the years. During the year, we supported environmental conservation through the restoration of water bodies and the promotion of sustainable waste management practices. We also strengthened community development through initiatives in education, healthcare, women’s empowerment, nutrition and sanitation.

Outlook for FY 2026-27

The global financial system faces significant challenges and uncertainty. Geo-economic fragmentation, driven by tariffs, trade restrictions and industrial policies, is reshaping supply chains and fragmenting financial movements.

As we enter FY 2026-27, our focus remains on cautious moderated growth. We need to navigate the challenges carefully without compromising on quality. We have consistently delivered credit growth that is 1% to 2% above the industry average. Our RAM portfolio will continue to be the primary growth engine, complemented by selective opportunities in corporate lending where risk-adjusted returns are attractive. In the corporate banking segment, we will adopt a selective growth strategy with a risk-calibrated approach. Our emphasis will remain on well-evaluated exposures in sectors such as commercial real estate, capital markets, and EPC businesses, while ensuring risk management and asset quality.

We continue to closely monitor the evolving interest rate environment. We expect to maintain a healthy Net Interest Margin in the range of 3.75% to 3.80% and an ROA between 1.7% and 1.8%, while targeting a cost-to-income ratio below 50%. We aim to maintain a Liquidity Coverage Ratio around the levels of 120% to 125%, with the gross NPA below 1.5%, net NPA below 1%, and a slippage ratio of less than 1%. We remain focused on maintaining an appropriate balance between growth and profitability, while proactively managing the impact of higher funding and deposit costs in a competitive environment.

To support our long-term growth ambitions, we will continue to strengthen our distribution network through a calibrated expansion of our branch footprint. During FY 2026-27, we plan to open 50 new branches, comprising regular and lite branch formats, with a focus on enhancing our presence in high-growth markets and improving customer accessibility.

Conclusion

As we look to the future, we remain committed to building on our strong foundations and creating sustainable value for all stakeholders. Backed by the dedication of our employees, the guidance of our Board, and the continued trust of our customers and stakeholders, we are confident in our ability to seize new opportunities and achieve enduring growth.

On behalf of Karur Vysya Bank, I extend my sincere gratitude to the Central and State Governments, our regulators, esteemed Board members, employees, customers, shareholders, investors, and all other stakeholders for their unwavering support and partnership in our journey. Together, we will continue to shape a stronger and more prosperous future.

Regards,

B Ramesh Babu

Managing Director & CEO