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General
The Board of Directors of DFCC Bank PLC (the Bank) take pleasure in presenting their Report on the State of Affairs of the Bank as published in this Annual Report of the Bank which also consists of the Audited Financial Statements of the Bank, the Consolidated Financial Statements of the Group and the Auditor’s Report on those Financial Statements.
The disclosures in this Annual Report conform to the requirements of the Companies Act No. 07 of 2007, the Banking Act No. 30 of 1988 (as amended), the Directions issued by the Monetary Board of the Central Bank of Sri Lanka under the Banking Act and the Listing Rules of the Colombo Stock Exchange (CSE).
The disclosures required under Section 168 of the Companies Act No. 07 of 2007, published in this Annual Report are tabulated in the table below:
| Section | Disclosure requirement | Reference to Annual Report |
| 168 (1) (a) | The nature of the business of the Bank and Group | (Note 1.4 to the Financial Statements) |
| 168 (1) (b) | Signed Financial Statements of the Bank in accordance with Section 152 | (Financial Statements) |
| 168 (1) (c) | Auditor’s Report on Financial Statements of the Bank and the Group | Independent Auditors’ Report |
| 168 (1) (d) | Changes in accounting policies made during the accounting period | (Note 6 to the Financial Statements) |
| 168 (1) (e) | Particulars of entries in the interest register made during the accounting period | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 168 (1) (f) | Remuneration and other benefits of Directors during the accounting period | (Notes 19 and 56.2 to the Financial Statements and this Report) |
| 168 (1) (g) | Total amount of donations made by the Bank during the accounting period | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 168 (1) (h) | Information on Directorate of the Bank during and end of the accounting period and persons who ceased to hold office as Directors during the accounting period. | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 168 (1) (i) | Amounts payable to the Auditors’ as audit fees and fees for other services rendered during the accounting period as a separate disclosure | (Note 19 to the Financial Statements) |
| 168 (1) (j) | Auditors’ relationship or any interest with the Bank and its subsidiaries | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 168 (1) (k) | Annual Report of the Board of Directors on the State of Affairs of the Bank signed on behalf of the Board of Directors | (Signed with an acknowledgment by two Directors and the Company Secretary) |
Constitution
DFCC Bank was incorporated in 1955 under the DFCC Bank Act No. 35 of 1955 as a limited liability public company and the ordinary shares of the Bank were listed on the Colombo Stock Exchange.
Consequent to the enactment of the DFCC Bank (Repeal and Consequential Provisions) Act No. 39 of 2014, the DFCC Bank Act No. 35 of 1955 was repealed and with effect from 6 January 2015 the Bank was incorporated under the Companies Act No. 07 of 2007 as a public limited company listed on the Colombo Stock Exchange with the name “DFCC Bank PLC”.
The shareholders at the Extraordinary General Meeting held on 28 August 2015 approved the amalgamation of DFCC Vardhana Bank PLC (DVB) with DFCC Bank PLC (the Bank). The Registrar General of Companies on 1 October 2015 issued the Certificate of Amalgamation in terms of Section 244 (1) (a) of the Companies Act No. 07 of 2007 that DVB has been amalgamated with DFCC Bank PLC in accordance with the provisions of Part VIII of the Companies Act, with DFCC Bank PLC surviving as the amalgamated entity.
DFCC Bank PLC also obtained a commercial banking license from the Monetary Board of the Central Bank of Sri Lanka in terms of the Banking Act No. 30 of 1988, as amended, and accordingly upon the amalgamation now operates as a Licensed Commercial Bank with effect from 1 October 2015.
Going Concern
The Directors are satisfied that the Bank has adequate resources to continue its operations in the future and as such, the Financial Statements are prepared on the basis of a going concern. The Auditors have declared the Bank solvent even after the payment of dividend.
Financial Statements
The Financial Statements of the Bank and the Group are given on pages 234 to 385 of the Annual Report. The Financial Statements of the Bank and the Group have been prepared in accordance with Sri Lanka Accounting Standards prefixed SLFRS and LKAS, the Banking Act No. 30 of 1988 and amendments thereto, the Companies Act No. 07 of 2007 and other applicable statutory and regulatory requirements.
Review of Business of the Year
DFCC Bank continued its commitment to serving customers across the country, delivering high-quality customer centric banking services, despite the volatile and challenging economic environment. Recognising the challenging circumstances faced by our customers, the Bank proactively initiated a series of impactful relief initiatives and measures to address their predicament. These internal initiatives, driven by the Bank's commitment to customer welfare, were specifically tailored to alleviate the adverse effects of the unpredictable economic conditions experienced during the year.
The Message from the Chairman, Chief Executive’s Review and the Management Discussion and Analysis give further details of the operations of the Bank and the Group, and the key strategies that were adopted during the year under review.
Profit and Appropriations
| Year ended 31 December 2023 | LKR ’000 |
| Profit for the period | 7,219,702 |
| Appropriations | |
| Transfer to: Reserve fund (statutory requirement) | 365,000 |
| First and final dividend recommended for financial year ended 31 December 2023 | 2,109,743 |
| Unappropriated profit for the period | 4,744,959 |
Accounting Policies
The accounting policies adopted in the preparation of the Financial Statements of the Bank and the Group are stated on Notes to the Financial Statements of the Annual Report.
There were no changes to the accounting policies of the Group in the year under review, other than as disclosed in Note 6 to the financial statements.
Auditors’ Report
The Auditors’ Report on the Financial Statements, which is unqualified, is given on Independent Auditors’ Report.
Reappointment of Auditors
The present Auditors, Messrs KPMG have expressed their willingness to continue as Auditors of the Bank for the next financial year ending 31 December 2024. The Audit Committee has reviewed the effectiveness and the relationship with the Bank including the fees paid to the Auditors and has concluded that they are suitable to continue in office. The Directors are satisfied that based on the written representation made by the Auditors, they have no relationship or interest with the Bank or with any of its subsidiaries which would impair the Auditors independence. A resolution pertaining to their reappointment and authorising the Directors to determine their remuneration will be proposed at the Annual General Meeting for adoption.
The Board of Directors
The Board of Directors of the Bank consist of 11 Directors with wide knowledge and experience in the fields of banking, finance, trade, law, commerce, or services. Profiles of the Directors are given on Board of Directors.
The Directors of the Bank categorised in accordance with criteria specified in the Direction No. 11 of 2007 issued by the Central Bank of Sri Lanka are as follows:
Independent Non-Executive Directors
J Durairatnam – Chairman
Ms L K A H Fernando
W R H Fernando
Ms H M N S Gunawardana
N K G K Nemmawatta
Ms A L Thambiayah
N Vasantha Kumar
H A J de S Wijeyeratne
Non-Independent Non-Executive Directors
W D Batagoda
Ms V J Senaratne
Executive Director
N H T I Perera – Chief Executive Officer
The Independent Directors satisfy the criteria set out in Section 9.8.3 of the CSE Listing Rules. Further, all directors satisfy the fit and proper assessment criteria stipulated in the CSE Listing Rules.
Appointment, Retirement/Resignation and Re-election of Directors
There were no new appointments, retirements or resignations during the year.
Retirement by Rotation and Re-election of Directors
The Directors retiring by rotation in terms of Article 44 are J Durairatnam, Ms A L Thambiayah and N Vasantha Kumar, who offer themselves for re-election under the said Article with the unanimous support of the Directors.
Details relating to Directors seeking re-election:
| Name of Director/ Date of appointment |
Date last re-elected |
Board Committees served during 2023 |
Directorships and other principal commitments 2021 to 2023 |
| J Durairatnam/ 30 August 2018 | 30 March 2021 |
|
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| N Vasantha Kumar/ 1 September 2021 | 30 March 2022 |
|
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| Ms A L Thambiayah/ 1 September 2021 | 30 March 2022 |
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* Functioned as Chairman until 25 October 2023. None of the above Directors (Including close family) has had any relationships with other Directors, the Bank or with any shareholders holding more than 10% of shares of the Bank. |
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Directors’ Remuneration
The Directors’ remuneration in respect of the Bank and the Group for the financial year ended 31 December 2023 is given below:
| Year ended 31 December | 2023 LKR ’000 |
2022 LKR ’000 |
| Bank | 61,854 | 60,932 |
| Group | 89,270 | 84,135 |
Directors’ Meetings
The Bank held 12 Board meetings during the year. The Table on Corporate Governance of the Annual Report gives details of the attendance of the Directors at Board and Board Committees during the year.
Directors’ Interests in Shares/Debentures
| Number of shares | ||
| As at 31 December | 2023 | 2022 |
| W D Batagoda | Nil | Nil |
| J Durairatnam | Nil | Nil |
| Ms L K A H Fernando | Nil | Nil |
| W R H Fernando | Nil | Nil |
| Ms H M N S Gunawardana | Nil | Nil |
| N K G K Nemmawatta | Nil | Nil |
| N H T I Perera | 25,814 | 24,635 |
| Ms V J Senaratne | 2,101 | 2,006 |
| Ms A L Thambiayah | 105,094 | 100,292 |
| N Vasantha Kumar | 1,800 | Nil |
| H A J de S Wijeyeratne | 12,905 | 12,316 |
No Director directly or indirectly holds debentures or options of the Bank.
Directors’ Interests Register
Directors have made the general disclosure as provided for in Section 192 of the Companies Act No. 07 of 2007. The Directors have declared all material interests in contracts involving the Bank and have not participated in the decision-making related to such transactions. As required by the Companies Act No. 07 of 2007, an interest register is maintained by the Bank and relevant entries are recorded therein.
Directors’ Interests in Transactions with the Bank
The Directors’ interests in transactions carried out in the ordinary course of business on an arm’s length basis with entities/persons (other than subsidiaries, the joint venture, and associate) listed under each Director for the year ended 31 December 2023 is as follows:
| LKR ’000 | |
| J Durairatnam Assetline Finance Limited Aggregate amount of accommodation |
500,000 |
| Asian Hotels and Properties PLC Aggregate amount of payment for services |
1,883 |
| Ms L K A H Fernando Aggregate amount of accommodation | 7,500 |
| United Motors Lanka PLC Aggregate amount of payment for services |
872 |
| N K G K Nemmawatta Aggregate amount of accommodation | 5,000 |
| N H T I Perera LankaPay (Pvt) Ltd. Aggregate amount of payment for services | 996 |
| Ms A L Thambiayah Renuka Hotels PLC Aggregate amount of payment for services |
5,188 |
| H A J de S Wijeyeratne Aggregate amount of accommodation | 15,600 |
| Trans Asia Hotels PLC Aggregate amount of payment for service |
1,968 |
During the year, N H T I Perera has been Chairman/Director of one or more of the subsidiary, joint venture, or associate company. Details of transactions with subsidiary, joint venture and associate company are disclosed in Note 56.4.
No Director or their close family members has had any material business relationship during the year with other Directors of the Bank.
Corporate Donations
During the year, the Bank made donations amounting to LKR 135,000/-.
Board Committees
The following are the present members of the permanent committees of the Board. Changes to the composition during the year are set out in the respective committee reports in the Annual Report:
| Committee | Members | Nature of Directorship |
Date Appointed to Committee |
| Audit Committee | H A J de S Wijeyeratne – Chairman | Independent | 1 July 2020 |
| Ms L K A H Fernando | Independent | 1 November 2017 | |
| Ms H M N S Gunawardana | Independent | 1 July 2022 | |
| Credit Approval Committee |
J Durairatnam – Chairman | Independent | 31 August 2018 |
| N K G K Nemmawatta | Independent | 28 July 2019 | |
| Ms A L Thambiayah | Independent | 1 January 2022 | |
| Credit Restructure Committee |
J Durairatnam – Chairman | Independent | 28 July 2019 |
| N K G K Nemmawatta | Independent | 24 June 2020 | |
| N Vasantha Kumar | Independent | 28 September 2021 | |
| Human Resources and Remuneration Committee |
Ms H M N S Gunawardana – Chairperson* | Independent | 26 August 2020 |
| W D Batagoda | Non-Independent | 28 September 2022 | |
| J Durairatnam** | Independent | 28 July 2019 | |
| Ms A L Thambiayah | Independent | 24 November 2021 | |
| Nomination and Governance Committee | W R H Fernando – Chairman* | Independent | 28 September 2022 |
| J Durairatnam** | Independent | 28 July 2019 | |
| Ms V J Senaratne | Non-Independent | 26 August 2020 | |
| N Vasantha Kumar | Independent | 1 July 2022 | |
| Integrated Risk Management Committee |
N Vasantha Kumar – Chairman | Independent | 1 September 2021 |
| Ms L K A H Fernando | Independent | 1 November 2017 | |
| W R H Fernando | Independent | 28 September 2022 | |
| N H T I Perera | Executive | 1 January 2022 | |
| Ms V J Senaratne | Non-Independent | 26 April 2017 | |
| Chief Risk Officer of the Bank is also a member of the Committee. | |||
| Related Party Transactions Review Committee |
N K G K Nemmawatta – Chairman | Independent | 1 July 2022 |
| J Durairatnam | Independent | 28 July 2019 | |
| N H T I Perera | Executive | 1 January 2022 | |
| Ms A L Thambiayah | Independent | 1 February 2024 | |
* With effect from 26 October 2023.
** Functioned as Chairman until 25 October 2023.
In addition, from time to time the Board appoints committees to deal with specific matters. The Board also invites external advisors and Key Management Personnel to serve on some of the committees as and when necessary.
Further details relating to the committees are given in the section on Corporate Governance and the Committee Reports.
Dividend
The Directors have approved the payment of a first and final dividend of LKR 5.00 per share, (final dividend paid in the previous period, LKR 2.00 per share). The total dividend for the year will amount to approximately LKR 2,110 Mn (LKR 805 Mn in the previous period), which amounts to 31% of the Bank’s distributable profit.
The Directors unanimously declare that, DFCC Bank PLC will satisfy the solvency test stipulated in Section 57 of the Companies Act No. 07 of 2007 immediately after the dividend payment is made and a certificate of solvency from its Auditor is obtained.
Property, Plant, and Equipment, and Leasehold Property
The total expenditure of acquisition on property, plant, and equipment during the year amounted to LKR 1,291 Mn, of which intangible assets amounted to LKR 252 Mn. Details of these are given in Notes 37 and 38 to the Financial Statements.
Reserves
Total reserves and retained profit amounted to LKR 53,874 Mn.
Market Value of Freehold Properties
The information on market value of freehold properties are given in Note 37.1.2 to the Financial Statements.
Stated Capital and Subordinated Debentures
The stated capital as at 31 December 2023 was LKR 13,866 Mn. The number of shares in issue as at 31 December 2023 was 421,948,655. Consequent to the Scrip issue approved during the year, the stated capital was increased by LKR 684.5 Mn.
Further information is given on Notes to the Financial Statements
Share Information
Information relating to earnings, net asset and market value per share are given on Investor Capital of the Annual Report and also contain information pertaining to the share trading during the period.
Shareholders
As at 31 December 2023, there were 10,103 registered shareholders and the distribution is indicated on Investor Capital.
The 20 largest shareholders as at 31 December 2023 are listed on Investor Capital.
Employment and Remuneration Policies
The policy of the Bank is to develop and maintain a dedicated and highly motivated group of employees who are committed to creating sustainable value through effective risk management and high quality service while supporting public and private sector in its development efforts within the ambit of the Articles of Association of the Bank. DFCC Bank PLC continuously invests in training and development of its staff to meet these objectives. The Bank is an equal opportunity employer. Remuneration of employees consists of fixed and variable payments. Annual increments and pay awards are based on the performance of the Bank and the individual. It is the Bank’s policy to fix remuneration at a level which will attract, motivate, and retain high quality employees.
Statutory Payments
The Directors, to the best of their knowledge and belief are satisfied that all statutory payments due to the Government and in relation to the employees have been made on time.
Review of Related Party Transactions
The Related Party Transactions Review Committee is responsible for ensuring compliance with the code specified in Section 9.14 of the CSE Listing Rules. The Committee reviewed the related party transactions carried out during the year and noted that the transactions were in compliance with the said code.
Compliance with Laws, Regulations, and Prudential Requirements
DFCC Bank PLC has not engaged in any activities contravening the laws and regulations and has complied with prudential requirements. Directors are provided with updates on revisions to Rules, Directions and other applicable laws. The Directors obtain a confirmation report from the Management with regard to compliance with laws, regulations, and prudential requirements on a quarterly basis.
Events Occurring after the Reporting Period
Subsequent to the date of the statement of financial position, no circumstances have arisen which would require adjustments to the accounts. Significant events occurring after the reporting period which in the opinion of Directors require disclosure are described in Note 58 to the Financial Statements.
Corporate Governance
Corporate Governance practices of the Bank are governed by Direction No. 11 of 2007 of the Central Bank of Sri Lanka (as amended) and Section 9 of the Listing Rules of the Colombo Stock Exchange. Details of governance practices are given on Corporate Governance.
The Directors have obtained External Auditors’ assurance on effectiveness of the internal control mechanism and compliance with the Direction 11 of 2007 of the Central Bank of Sri Lanka on Corporate Governance.
Rule 3 (8) of the Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka prescribe disclosures in the Annual Report. These disclosures have been made in this Annual Report as shown in the Table below:
| Reference to rule | Requirement | Reference to Annual Report |
| 3 (8) (i) | Financial Statements on prescribed format | Financial Statements |
| 3 (8) (ii) (a) | Affirmative assurance of compliance with accounting standards and requirements | Directors’ Responsibility Statement |
| 3 (8) (ii) (b) | Affirmative assurance of the integrity of financial reporting system | Directors’ Statement of Internal Control |
| 3 (8) (ii) (c) | Assurance report issued by the External Auditor | Independent Assurance Report |
| 3 (8) (ii) (d) | Information on Directors | Board of Directors |
| 3 (8) (ii) (d) | Remuneration of Directors | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 3 (8) (ii) (e) | Net accommodation granted to each category of related party |
Corporate Governance Report |
| 3 (8) (ii) (f) | Compensation and other transactions with Key Management Personnel |
Corporate Governance Report |
| 3 (8) (ii) (h) | Compliance with prudential requirements and regulations | This Report. |
The Annual Report disclosures prescribed by Section 9 of the Listing Rules of the Colombo Stock Exchange effective as at date have been made in this Annual Report as shown in the Table below:
| Reference to rule | Requirement | Reference to Annual Report |
| 9.1.3 | Statement on compliance with the Corporate Governance Rules | Corporate Governance Report |
| 9.2.2 | Any waivers or exemptions granted | None. |
| 9.2.3 | Policies which are effective as at date | Corporate Governance Report |
| 9.5.2 | Policy governing matters relating to the Board | Corporate Governance Report |
| 9.7.5 | Fit and Proper Assessment Criteria | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 9.8.5 (b) | Names of Directors determined to be “independent” | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 9.10.1 | Policy on maximum number of directorships permitted to held by Board members | Twenty directorships. |
| 9.10.4 | Details with respect to Directors | Profiles Annual Report of the Board of Directors on the State of Affairs of the Bank Corporate Governance Report |
| 9.11.4 (3) | Members of the Nomination and Governance Committee | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 9.11.6 | Report of the Nomination and Governance Committee | Report of the Nomination and Governance Committee |
| 9.12.8 | Members of the Remuneration Committee, remuneration policy and aggregate remuneration | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 9.13.5 | Report of the Audit Committee | Report of the Audit Committee |
| 9.14.8 (1) & (2) | Non recurrent and Recurrent Related Party Transactions in terms of the Rule | Financial Statements Note (56.7) |
| 9.14.8 (3) | Report of the Related Party Transactions Review Committee | Report of the Related Party Transactions Review Committee |
| 9.14.8 (4) | Affirmative declaration | Annual Report of the Board of Directors on the State of Affairs of the Bank |
| 9.16 | Additional Disclosures That Directors have: | |
| i. Declared all material interests in contracts and have refrained from voting on matters in which they were materially interested | Annual Report of the Board of Directors on the State of Affairs of the Bank | |
| ii. Conducted a review of the internal controls covering financial, operational and compliance controls and risk management and have obtained reasonable assurance of their effectiveness and successful adherence | Directors Statement of Internal Control Independent Assurance Report | |
| iii. Made arrangements to make themselves aware of applicable laws, rules and regulations and are aware of changes particularly to Listing Rules and applicable capital market provisions | Annual Report of the Board of Directors on the State of Affairs of the Bank | |
| iv. Disclosed any material non-compliance with law or regulation and any fines, if any which are material, imposed by any government or regulatory authority | None. |
Annual General Meeting
The Sixty-Eighth Annual General Meeting will be held on 28 March 2024 at 10.00am.
Acknowledgement of the Content of the Report
As required by Section 161 (1) (k) of the Companies Act No. 07 of 2007, the Board of Directors does hereby acknowledge
the contents of this report.
For and on behalf of the Board of Directors,
J Durairatnam
Chairman
N H T I Perera
Director and Chief Executive Officer
Ms N Ranaraja
Company Secretary
19 February 2024