Your Directors have the pleasure of presenting the 102^nd Annual Report of the Bank together with the Audited Statement of
Accounts for the financial year ended March 31, 2026, and the Auditors' Report thereon. The highlights of the operational
performance are as under:

OPERATIONAL PERFORMANCE

Note: The figures mentioned above are on a standalone basis. The consolidated financial statements are furnished separately as
part of this report.

BUSINESS OVERVIEW

As on March 31, 2026, the Aggregate Business (Gross) of the Bank has reached H1,92,1 18.67 crore with a YoY growth of 5.12%.
During FY 26, the Bank registered net profit of H1,310.50 crore with YoY growth of 3.00%. The deposits and Gross advances grew
by 3.79% and 6.90% YoY, respectively. As of March 31,2026, the CD ratio was 76.61%. The Bank has maintained the share of CASA
at 33.61%. The asset quality has improved with a 30 bps and 33 bps reduction, respectively, under Gross NPAs and Net NPAs. As
on March 31, 2026, Provision Coverage Ratio (PCR) was 83.54%. CRAR was at 20.07%. Overall, the financial year 2025-26 was yet
another year of satisfactory performance, witnessing further strengthening of the fundamentals of the Bank.

DEPOSITS AND CASA

The total deposits grew by 3.79% during the FY under review, with CASA at 33.61% of total deposits. The CASA deposits
grew by 9.85% YoY.

ADVANCES

The advances grew by 6.90% YoY. The lending profile was well balanced, with the share of retail advances at 50.88% & mid corporate
advances at 19.08% and Large corporate advances at 30.04% of the loan book.

The priority sector advances increased from H37,569.19 crore to H44,475.24 crore, forming 51.72% of applicable Adjusted Net Bank
Credit (ANBC), and agricultural advances increased from H 16,614.37 crore to H19,822.09 crore, which, together with eligible deposits
under the Rural Infrastructure Development Fund (RIDF), constituted 23.05% of ANBC during Q4FY26. The Bank also focuses on
lending under various socio-economic schemes, weaker section schemes, MSMEs, etc.

ASSET QUALITY AND PROVISION COVERAGE RATIO (PCR)

The Bank has been focusing on improving the asset quality through better credit appraisal and effective monitoring, as well as
intensified recovery efforts. In terms of absolute numbers, the GNPAs decreased to H2,320.93 crore as on March 31, 2026, from
H2,402.08 crore as on March 31, 2025. The percentage of Gross NPAs reduced from 3.08% as on March 31, 2025, to 2.78% as on
March 31,2026.

The amount of Net NPAs (NNPAs) reduced to H803.22 crore (0.98%) as on March 31, 2026, as against H1,004.55 crore (1.31%) and
during the period, the percentage of NNPAs substantially improved to 0.98% as against 1.31% last year. The Provision Coverage
Ratio (PCR) stood at 83.54% on March 31,2026.

INVESTMENTS

The total investments increased by 8.98% and the ID ratio stood at 24.58% as on March 31,2026, as against 23.41% on March 31,2025.

OPERATIONAL METRICS

The gross income of the Bank for the year ended March 31,2026, stood at H10,320.72 crore compared to H10,283.12 crore last year,
recording a YoY growth of 0.37%.

The total expenditure (excluding provisions and contingencies) decreased by 1.30% to H8,346.55 crore for the year ended March 31,
2026, as against H8,456.08 crore for the last financial year. The cost-to-income ratio decreased by 377 bps to 56.34%.

During FY 2025-26, Net Interest Income (NII) declined to 5.79% over the previous year, while Net Interest Margin (NIM) moderated to
2.88% from 3.19%. This was mainly due to the decline in yield on advances following repricing of external benchmark-linked loans,
which led to compression in spreads despite a reduction in the cost of deposits.

The operating profit increased by 8.05% to H1,974.17 crore for FY 2025-26 from H1,827.04 crore. The provisions (other than tax)
and contingencies for FY 2025-26 were H316.07 crore vis-a-vis H186.44 crore for the previous year, owing to increased provisioning
towards NPA in order to improve the Provision Coverage Ratio (excluding technically written-off accounts), which improved from
58.18% to 65.39%.

The net profit reached to H1,310.50 crore from H1,272.37 crore during the previous year, an increase of 3.00%.

APPROPRIATIONS

The net profit of H1,310.50 crore, along with a sum of H189.50 crore brought forward from the previous year, aggregating to H1,500
crore, has been appropriated as under:

DIVIDEND

Having regard to the overall performance of the Bank, the Board of Directors has recommended a dividend of H5.00/- per share
(50%) for the year ended March 31,2026 (previous year H5.00/- per share (50%). The dividend payout ratio for the year works out to
14.43% as against 14.84% for the previous year. In accordance with Accounting Standard (AS)4-Contingencies & Events occurring
after the balance sheet date, the proposed dividend amounting to H189.09 crores (Previous year H188.97 crores) has not been
shown as an appropriation from the Profit for the year ended March 31, 2026, in line with the Dividend Distribution Policy of the
Bank and directions from the Reserve Bank of India for the payment of dividend.

EARNINGS PER SHARE (EPS) AND BOOK VALUE

The Earnings Per Share stood at H34.66 (basic) and H34.60 (diluted) for the year ended March 31, 2026. This was H33.69 (basic)
and H33.61 (diluted) during the previous year. The Book Value per share has further improved to H349.69 as on March 31,2026, as
against H319.77 during the last year.

CAPITAL FUNDS AND CAPITAL ADEQUACY RATIO (CRAR)

The capital funds of the Bank increased from H12,219 crore to H13,383.02 crore. The Capital to Risk- Weighted Assets (CRAR) Ratio
improved to a high of 20.07% as on March 31, 2026, as against the previous year's 19.85%. The Bank has consistently maintained
the CRAR ratio well above the minimum requirement of 11.50%, including the Capital Conservation Buffer of 2.50% stipulated by the
Reserve Bank of India and the internal policy of the Bank of maintaining the CRAR 1.50% over and above the regulatory requirement.

EQUITY CAPITAL BASE

As on March 31,2026, the paid-up capital of your Bank stood at H 3,78,18,15,620.00 comprising 37,81,81,562 equity shares of H10/-
each. During the year, 1,71,066 equity shares of H 10/- each were allotted to option grantees upon exercise of stock options under
KBL Employees Stock Options Scheme 2018 and 73,834 equity shares of H10/- each were allotted to option grantees upon exercise
of stock options under Karnataka Bank Employees Stock Options Scheme, 2023.

CHANGE IN CAPITAL BASE AFTER THE CLOSE OF THE FINANCIAL YEAR

After the close of the Financial Year 73,665 equity shares of H10/- each were allotted to option grantees upon exercise of stock
options under KBL Employees Stock Options Scheme 2018 and 85,977 equity shares of H10/- each were allotted to option grantees
upon exercise of stock options under Karnataka Bank Employees Stock Options Scheme, 2023.

LISTING

The Equity Shares of the Bank continue to remain listed on BSE Limited and the National Stock Exchange of India Limited.

DEBT INSTRUMENTS & CREDIT RATING

The Bank has issued subordinated debt instruments (i.e., Unsecured Non-Convertible Subordinated BASEL III Debt Instruments) as
a part of Tier-2 Capital on a private placement basis. These bonds are listed on the debt segment of the National Stock Exchange of
India Limited (NSE). The details of the debt instruments outstanding as on March 31,2026, are as under:

Your Bank has paid interest on this debt instrument on time since the issue of the debt instrument as per the terms of the issue.

BUSINESS SOLUTIONS GROUP JOURNEY - 'KBL VIKAAS 3.0'

The Bank's aspirational transformation journey, 'KBL VIKAAS' was launched in the year 2017 and has successfully completed eight
impactful years. Building on this strong foundation, the initiative has evolved into 'KBL VIKAAS 3.0', reflecting a renewed focus on
innovation, agility, and customer-centricity. In line with the Bank's vision to emerge as a 'Digital Bank of the Future', KBL VIKAAS
3.0 continues to drive key initiatives aimed at enhancing business growth, strengthening customer experience, and improving
operational efficiency through digital enablement.

During FY 2025-26, the Bank has continued its journey under KBL VIKAAS 3.0 with the rollout of various initiatives, as detailed below:

LEVERAGING THROUGH WHOLLY OWNED SUBSIDIARY OF THE BANK

Wholly owned subsidiary of the Bank "KBL Services Limited (KSL)" was incorporated as a non-financial services wholly owned
subsidiary of The Karnataka Bank Limited on 21.06.2020. The setting up of KSL was envisioned with an objective of achieving higher
operational efficiency and creating value over the longer run for the group as a whole. The scope of activities permitted to be carried
out by KSL is business sourcing, data entry work, contact center management, management of alternate banking channels, back¬
end processing activities, IT projects & support, digital capabilities and providing sub-staff / house-keeping / maintenance staff /
attenders to the parent Bank. To begin with, the Company has taken up Business Sourcing, Data entry work, back-end processing
activities and an outbound calling center and expects to widen its service offering to other permitted activities in the upcoming
financial years. There has been no change in the business of the Company during the financial year ended March 31,2026.

RISK MANAGEMENT AND GOVERNANCE

In the normal course of business, the Banks are exposed to various risks, namely, Credit Risk, Market Risk and Operational Risk,
besides other residual risks such as Liquidity Risk, Interest Rate Risk, Concentration Risk, Strategic Risk, Reputation Risk, etc. With
a view to efficiently manage such risks, your Bank has put in place various risk management systems and practices. In line with the
guidelines issued by the Reserve Bank of India from time to time, your Bank continues to strengthen various risk management
systems that include policies, tools, techniques, systems and other monitoring mechanisms.

Your Bank aims at achieving an appropriate trade-off between risks and returns. Risk management objectives of the Bank broadly
cover proper identification, assessment, measurement, monitoring, controlling, mitigation and reporting of the risks across various
business segments of the Bank. The risk management strategy adopted by your Bank is based on a clear understanding of the risks
and the level of risk appetite, which is dependent on the willingness of your Bank to take risks in the normal course of business. A
Board-level committee, viz., Risk & Capital Management Committee (RCMC), periodically reviews the risk profile, evaluates the overall
risks encountered by the Bank and develops policies and strategies for its effective management.

The various senior management committees such as Credit Risk Committee (CRC), Asset-Liability Management Committee (ALCO),
Operational Risk Management Committee (ORMC), etc. operate within the broad policy framework of the Bank to ensure and
enhance the risk control and governance framework within the Bank. The Risk Management Department at Head Office oversees
the overall implementation of various risk management initiatives across the Bank.

In line with guidelines issued by the RBI, your Bank has nominated a Chief Information Security Officer (CISO), who is responsible for
articulating and enforcing the policies that the Bank uses to protect the information assets, apart from coordinating security-related
issues in the implementation of new systems under Information Technology in the Bank.

Further, in compliance with regulatory expectations and the Digital Personal Data Protection (DPDP) Act, your Bank has also appointed
a Data Protection Officer (DPO) who is responsible for ensuring that customer data is handled safely, monitoring compliance with
data protection laws, addressing privacy-related concerns, and promoting awareness of data protection practices within the Bank.

OFSAA (Oracle Financial Services Analytical Applications):

Your Bank has all the necessary systems and tools in place for ALM, MRM, LRM, FTP and IRRBB. An advanced application, i.e., OFSAA,
has been implemented which covers ALM, LRM, FTP, PFT & IFRS9.

More elaborate discussion on how the Bank manages the key risks associated with its operations is provided under Management
Discussion and Analysis attached to this report.

Basel III Capital Regulations - Implementation of Leverage Ratio:

To mitigate the risk of excessive leverage and enhance financial stability, the RBI mandated the minimum Leverage Ratio (LR) under
Basel III Regulations for banks in India. Both the capital measure and the exposure measure, along with the leverage ratio, are to be
disclosed on a quarter-end basis. However, banks must meet the minimum leverage ratio requirements at all times. As on March 31,
2026, your Bank had a comfortable leverage ratio of 8.77% as against the regulatory minimum requirement of 3.50%.

Capital Adequacy & Capital Adequacy Assessment Process (ICAAP):

Under Pillar 2 of the Basel II Accord, the Internal Capital Adequacy and Assessment Process (ICAAP) was introduced as a measure of
the adequacy of a capital resource of the Bank in relation to its current liabilities and in relation to the risks associated with its assets.
An appropriate level of capital adequacy ensures that the entity has sufficient capital to support its activities and that its net-worth is
sufficient to absorb adverse changes in the value of its assets without becoming insolvent. An assessment of the capital requirement
of the Bank is carried out through comprehensive projections of future business that takes cognizance of the strategic intent of the
Bank, profitability of particular business and opportunities for growth. The proper mapping of credit, operational and market risks
to this projected business growth enables assignment of capital that not only adequately covers the minimum regulatory capital
requirements but also provides headroom for growth. The calibration of risk to business is enabled by a strong risk culture in the
Bank, aided by an effective, technology-based risk management system.

The Disclosure under Pillar III of the Basel III accord has been annexed to this report in Annexure-I.

In compliance with Basel guidelines, the Bank has put in place a policy document for the Internal Capital Adequacy Assessment
Process (ICAAP) to evaluate its capital adequacy requirements. A stress testing framework for various stress scenarios is also put
in place for a better understanding of the likely impact of adverse market movements / events on the capital and earnings. The
results of the ICAAP and stress testing are reviewed periodically to assess the capital requirement for the projected business growth,
keeping in view the risk appetite and risk profile of the Bank. A Board-level Risk & Capital Management Committee (RCMC) reviews
the risk appetite, risk profile, business projections as well as capital assessments of your Bank at periodic intervals.

SEGMENT REPORTING
Business Segment-

For the purpose of segment reporting in terms of AS 17 and as prescribed in the RBI guidelines, the business of the Bank has been
classified into, i.e., (a) Treasury (b) Corporate / Wholesale Banking (c) Retail Banking (including Digital Banking Unit (DBU) and other
Retail Banking) (d) Other Banking Operations.

Geographical Segment-

The Bank does not have any overseas branch. Thus, reporting under the geographic segment does not arise. Segment assets have
been identified, and segment liabilities have been allocated on the basis of segment assets.

(Previous year's figures have been regrouped/rearranged wherever necessary.)

The details about aforesaid business segments are discussed in Management Discussion and Analysis attached to this report.
Banking Outlets and Alternate Delivery Channels (ADCs):

As on March 31, 2026, your Bank had 2,450 service outlets including 975 branches, one extension counter, 767 ATMs and 707
recyclers with a presence in 619 centers spread across 22 States and 2 Union Territories. Apart from the above, the Bank also has
one Data Centre with a Disaster Recovery Centre and Near Line Site (NLS), one Service branch, five Currency Chests, two Central
Processing Centers, one Digital Centre of Excellence, 14 Asset Recovery Management Branches and 14 Retail Loan Processing and
Sanctioning Centres (RLPSCs) and 1 Centralized Loan Processing and Sanctioning Centre (CLPSC). During the financial year under
review, your Bank has opened twenty-three new branches.

Mobile Banking and Net Banking:

Mobile banking app - KBL Mobile Plus, Internet banking-KBL Money Click and Omni channel KBL ONE are the prominent Digital
Banking channels. Apart from ATM/CR, value-added features such as Deposit Loan Opening and Closure, Email OTP enablement
for NRI customers, a new platform for bill payment/ recharge through Bill Desk Hexagon Solutions, and re-KYC in Mobile Banking.

During the FY, the Bank has completely revamped the Retail Mobile Banking app to give users a new user interface and experience
(UI/UX) with new added features such as overview of accounts, spend analyzer, transfer using Mobile number, Simplified and
complete UPI functionalities. As on March 31,2026, 95.99% of transactions were performed through the digital Banking channels.

Government Business:

Pursuant to the policy of deregulation by the Government of India and the Reserve Bank of India (RBI), eligible scheduled private
sector banks have been permitted to act as agency banks of the RBI for undertaking government business. In accordance
with the prescribed eligibility criteria, the Bank was appointed as an Agency Bank of the RBI vide letter No. DGBA.GBD. No.
S363/42.01.033/2021-22 dated July 20, 2021, followed by execution of the requisite agreement with the RBI on July 27, 2021.
Accordingly, the Bank is authorized to undertake collection of revenue receipts and disbursement of payments on behalf of the
Central and State Governments, Pension disbursements, Collection of stamp duty, and such other transactions as may be approved
by the concerned user departments and concurred by the RBI.

Leveraging its pan-India presence and robust digital infrastructure, the Bank is well-positioned to deliver seamless, scalable, and
technology-driven financial services to Central and State Government entities. The Bank's government business operations enhance
customer convenience in statutory payments, deepen relationship stickiness, and augment fee-based income through agency
commission in line with applicable guidelines.

Bank has operationalized multiple government business modules and commenced collection of statutory tax payments, including
Customs Duty and Goods and Services Tax (GST) on behalf of the Central Board of Indirect Taxes and Customs (CBIC), as well as
Direct Taxes (Income Tax and Advance Tax) on behalf of the Central Board of Direct Taxes (CBDT). The Bank has also introduced
structured onboarding frameworks for Government departments, bodies, and corporations to accelerate liability acquisition and
deepen institutional relationships.

Bank has commenced acceptance of public applications for Capital Gains Tax Exemption Bonds issued under the relevant provisions
of the Income Tax Act, 2025. These bonds, issued by Government-backed entities and public sector undertakings, provide investors
with an avenue to mitigate long-term capital gains tax liabilities arising from transfer of eligible assets, subject to applicable regulatory
provisions. The Bank is presently facilitating investments in such bonds issued by Power Finance Corporation Limited (PFC), REC
Limited, and Indian Railway Finance Corporation Limited (IRFC). This initiative strengthens the Bank's engagement with Government-
related entities while expanding its suite of investment-linked customer offerings.

The Bank has entered into an agreement with the Department of Treasuries, Government of Karnataka, for integration with the
Khajane II - Integrated Financial Management System (IFMS). Under this arrangement, the Bank facilitates seamless collection of
government receipts and tax payments through the Khajane II platform, and has commenced collection of Karnataka Government
revenue receipts, strengthening its presence in the State Government business ecosystem.

The Bank continues to focus on expanding its Government Business portfolio through onboarding of Central and State Government
departments, integration with key digital platforms, and participation in emerging government mandates. Strategic emphasis is
placed on increasing low-cost CASA deposits, enhancing digital payment capabilities, and strengthening fee-based income streams,
thereby contributing to sustainable balance sheet growth.

Third Party Products

With an aim to provide diversified financial products & services and to maximize value-added services to the customers, your Bank
provides a bouquet of Third-Party Products, which include Life Insurance, General Insurance, Health Insurance, Mutual Funds,
Demat Account, Trading Account, Co-branded Credit Cards, PoS Network, KBL FASTag, NPS, SGB, APY, etc. A summary of the major
third-party products is provided in the Management Discussion and Analysis attached to this report.

Customer Service:

Your Bank is consistently focused on setting new benchmarks in customer service to enhance its competitiveness. This involves
designing an innovative and cost-effective mechanism to deliver banking services efficiently. The Bank is actively engaged in
establishing systems and procedures for providing quality services to customers, along with an effective grievance redressal
mechanism, including an Internal Ombudsman (IO), in line with the guidelines issued by the RBI and IBA from time to time.

The Bank ensures inclusive and barrier-free banking services for persons with disabilities (PwDs), in line with RBI guidelines and
the Rights of Persons with Disabilities Act, 2016. This includes provision of accessible branch infrastructure (ramps, tactile paths,
low-height counters) wherever feasible, Talking ATMs with audio and Braille support, and doorstep banking services free of charge
for customers with mobility constraints. The Bank also facilitates alternative modes of account operations, including acceptance
of thumb impressions. Digital channels, including internet banking and mobile applications, are being progressively aligned with
recognized accessibility standards to ensure usability for visually, hearing, and cognitively impaired customers. Further, staff
sensitization programs and grievance redress mechanisms have been put in place to ensure non-discriminatory service delivery

and enhanced financial inclusion for PwDs. These measures aim to promote financial inclusion and independence, ensure dignity
and equal participation and provide safe, convenient, and barrier-free banking experience.

Credit Monitoring Excellence:

To strengthen post-sanction monitoring and collection / recovery mechanisms, the Bank has established a dedicated Credit
Monitoring Department (CrMD) at Head Office. A Centralized Contact Centre has also been set up to facilitate timely follow-up of
stress accounts during the early stages of stress identification. Regional Monitoring and Collection Centre (RMCC) comprising of
Regional Retail Collection Team (RRCT) and Regional Corporate Collection Team (RCCT) has been established across the Regional
Offices to initiate timely DPD-wise follow-up and recovery actions for regularization of the loan accounts. In addition, a dedicated
Credit Monitoring Team (CrMT) functioning under RMCCs undertakes post-sanction monitoring of loan accounts across their
respective Regions. In addition to this, for large ticket loan accounts, direct borrower follow-up is undertaken by CrMD. Further,
during the visits by HO-executives to RO / Branches, borrower interactions & field visits are conducted to support regularization and
strengthen recovery efforts.

To enhance the efficiency of monitoring & follow-up activities, the Bank has implemented Behavioral Analytics, EWS & call prioritization
modules to identify the loan accounts with potential repayment stress and classify the borrowers based on risk categories. Various
collection channels, including SMS, emails, tele calling & customer visits, etc., are prioritized based on risk assessment. Web-based
collection platform "KBL-Kollect " has been fine-tuned for undertaking prioritized collection activity.

The Bank continues to make sustained efforts to reduce overall SMA (SMA 0, 1,2) level in the advances portfolio and the impact of
these initiatives is clearly visible. Systems such as Auto Sweep - automatic recovery of EMI / Installment/Interest from borrower's
operating accounts, E-Connect solution enabling UPl-based repayment to loan accounts and automated capture of Early Warning
Signals, etc., have been implemented to strengthen collection efficiency and improve portfolio monitoring.

The Regular Asset Monitoring Cell under CrMD monitors diversion of funds in OD accounts through an offsite surveillance
mechanism. Drawing Power updation activities for OD accounts with a sanctioned limit of H 4.00 crore & above are being processed
at CrMD under a maker-checker framework to ensure enhanced control and compliance.

The Restructured Advances Monitoring Cell and Consortium & Multiple Banking Arrangement Cell have been constituted under
CrMD to monitor restructured loan accounts and accounts under Consortium & Multiple Banking Arrangement, respectively. In
addition, a system-enabled auto-submission process for Exchange of Information (EOI) has been introduced to ensure timely
submission of EOI to member banks in compliance with regulatory requirements.

A dedicated Quality Assurance Cell has also been established under CrMD for purification and validation of MIS data pertaining to
loan accounts. Newly opened loan accounts are reviewed on an ongoing basis to ensure proper MIS classification. Further, while
sanctioning Agri gold loans above H 2 lakh, the Quality Assurance Cell verifies RTC/Land ownership documents or any other valid
proof establishing ownership of agricultural land.

SUPPORT AND CONTROL FUNCTIONS
Information Technology:

The Bank has a robust Core Banking System (CBS) since the year 2000 and all its branches and offices are under the CBS network.
Alternate Delivery channels viz. ATM, Internet Banking, Mobile Banking, UPI, PoS have been integrated with the Core Banking System.

The Disaster Recovery [DR] arrangement also exists to ensure business continuity in the event of primary site failure for all business-
critical applications (CBS, ATM, Internet Banking, Mobile Banking, UPI). The Bank has implemented 3-Way replication (DC, DR and
NLS) and Oracle Data Guard (ODG) configuration, besides taking offline backups and DR tests are being done on a quarterly basis.
The critical applications like CBS, ATM, Mobile Banking and UPI are part of this arrangement. The primary Data Centre of the Bank is
hosted in a Tier 4 Data Centre and the DR Data Centre is hosted in a Tier 3 Data Centre.

The IT infrastructure of the Bank is headed by GM IT & MIS and other executives of the IT Dept. Your Bank will continue to take note
of technological revolutions and take appropriate decisions at the right time to provide premier banking services and also continue
to be a tech-savvy Bank aiming for a Digital Bank of the Future.

The Bank is also extending facilities like Funds Transfer through electronic means [NG-RTGS, NEFT, IMPS, UPI, ECS, NECS etc.], Speed
Clearing, CTS, Financial Inclusion, IVR and other technology-enabled services and products.

Analytical Centre of Excellence (ACoE):

Data & Analytics as a Strategic Asset

Data and analytics have matured into a core enterprise capability. Platforms such as the unified cloud data repository, CRM and Early
Warning System are embedded across business, risk and customer functions. Integrated insights across systems have been enabled
by the Business teams to improve efficiency, portfolio quality and enhanced customer engagement.

Intelligence in Business & Risk Decisions

Analytics / ML models are embedded into critical processes such as collections prioritization, cross-sell targeting for ETB customers
basis the changing market conditions & customer behavior. These interventions have assisted the business teams with rolling
out targeted campaigns, identification of risk parameters through EWS triggers, and improvement in operational efficiency
through CRM adoption.

Customer Engagement & Outreach

The focus shifted toward maximizing customer outreach and conversions. Digital channels were leveraged for strong customer
connect, while branch teams ensured immediate consumption of digital leads. Insights on demographics, banking behavior and
product usage aided in better customer outreach and strengthened relationships across branch teams.

Operational Efficiency & Conversions

Frontline teams at Branches adopted CRM tools extensively, benefiting from scheduling, reminders and Customer 360 views.
Branches and senior teams were provided with dashboards for monitoring performance and driving continuous improvements. The
emphasis was on maximizing conversions, enhancing digital channel usage and ensuring campaigns are translated into business.

Human Resources:

As on March 31, 2026, the Bank had 9047 employees, of which 2950 are women employees constituting around 32.61% of the
total strength. Your Bank has put in place an institutional mechanism for the protection of women employees at the workplace and
adopted a policy pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)
Act, 2013, providing for the protection of women employees against sexual harassment of women at the workplace and redressal
of such complaints. At the start of the fiscal year, no complaints were pending. During the year, five complaints were received, and
all were closed.

Compliance Function

The Bank effectively manages compliance risk through a well-established Compliance Function, which constitutes a key pillar of
its corporate governance framework, alongside internal controls and risk management processes. A robust and independent
Compliance Department has been instituted to foster a strong culture of compliance across the organization. The Bank ensures
strict adherence to all applicable statutory provisions, regulatory guidelines issued by the Reserve Bank of India (RBI) and other
authorities, as well as industry standards, internal policies and fair practice codes.

The Compliance Function is responsible for the interpretation and dissemination of regulatory requirements and for ensuring
that appropriate controls and procedures are in place to capture and report relevant information to Senior Management, thereby
supporting effective risk management. Under the supervision of the Chief Compliance Officer, the Bank operates a risk-based
compliance programme that ensures comprehensive coverage across all business segments, including periodic compliance testing
of branches and business units to assess adherence levels.

Further, the Bank undertakes an annual compliance risk assessment to identify, evaluate and proactively mitigate significant
compliance risks. The strong tone set by Top Management consistently underscores the importance of compliance, thereby driving
continuous improvement and strengthening the Bank's overall compliance culture.

Vigil Mechanism

The Bank has implemented the Protected Disclosure Policy (Whistle Blower Policy) since the year 2007. The Policy provides a
formal mechanism for employees at all levels to report concerns relating to unethical behaviour, corruption, misuse of office,
criminal offences, suspected or actual fraud, non-compliance with the Bank's rules and regulations, and any acts or events that may
adversely impact the interests of the Bank, its depositors, or the public, including those leading to financial loss, operational risk, or
reputational damage.

The mechanism established under the Policy enables Whistle Blowers to report genuine concerns or grievances in a secure and
confidential manner. It also provides for adequate safeguards against victimization of individuals availing such mechanism and
ensures direct access to the Chief of Internal Vigilance (CIV). The detailed Whistle Blower Policy is hosted on the Bank's website and
is available at the following link:https://karnatakabank.bank.in/investors/policies-codes

Corporate Social Responsibility

Corporate Social Responsibility (CSR) initiatives of the Bank are designed to make a positive impact on a wide range of areas of
social life like healthcare, education, livelihood enhancement, empowering women / socially and economically disadvantaged,
environmental sustainability / green initiatives, protection of heritage / culture, rural development, Swachh Bharat, etc., aimed at
promoting the overall development of the society.

Further, pursuant to Section 135 of the Companies Act, 2013 (Act), read with Companies (Corporate Social Responsibility Policy)
Rules, 2014, the Board has constituted 'Corporate Social Responsibility (CSR) Committee' of the Board and has also put in place a
Policy on Corporate Social Responsibility (CSR Policy) to undertake projects / programmes in pursuance of the said Policy. Under CSR
activities, the Bank has so far funded 2,532 projects with a total financial outlay of H 148.31 crore, and these projects have exhibited
a welcome positive impact on the society.

Pursuant to Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the contents of the CSR Policy, along
with the report on amounts spent on various projects/ programmes during FY2025-26, are detailed in Annexure- II to this report.
Further, in terms of Rule 4(5) of the CSR rules, certification from the Chief Financial Officer has been obtained for the CSR spending
during FY 2025-26.

Financial Inclusion:

Through the Financial Inclusion Plan, your Bank aims at connecting people with the Bank and not just opening accounts. This includes
meeting the small credit needs of the rural public, giving them access to the payments system, providing remittance facilities, life
insurance and health insurance, etc. Your Bank has 454 branches, apart from 35 Ultra Small Branches, located in the rural and semi¬
urban areas and offers banking facilities to the rural clientele. Our rural branches are also acting as Financial Literacy Centers (FLCs)
and imparting banking literacy among the rural populace. In accordance with Prime Minister's Jan Dhan Yojana (PMJDY), the Bank
has implemented the revised Strategy and Guidelines for Financial Inclusion activities. Your Bank is actively participating in the Direct
Benefit Transfer (DBT) Programme of the Government of India to transfer the benefits of various Schemes / LPG subsidies directly
to the beneficiaries' Aadhaar-enabled bank accounts.

As part of the Financial Inclusion plan, the Bank has been offering the following services:

1. Business Correspondent (BC) services:

Sub-K Impact Solutions Limited: -

The Bank has tied up with Sub-K Impact Solutions Limited to provide BC services, and as on March 31,2026, 179 BC Agents are
covering allocated villages in the states of Karnataka, Andhra Pradesh and Chhattisgarh.

M/s. Vakrangee Ltd:-

Bank is associated with M/s Vakrangee Limited as Corporate BCs since July 2024 to tap assets & liabilities business across India
under the BC model. As on March 31, 2026, 22 BC agents are onboard, who are carrying eKYC based account opening and
AEPS transactions.

Aadhaar Enabled Payment System (AEPS): The Bank has introduced AEPS transaction services offered by the National Payments
Corporation of India (NPCI) at all Business Correspondent (BC) locations of the Bank, and with this, the customers of the Bank
having an Aadhaar-enabled SB account can transact at the BC point.

2. Financial Literacy and Credit Counseling Centers (FLCs): The Bank is running 5 FLCs at B.C Road - Bantwal, Hangal, Kundagol,
Tiptur and Alur (Karnataka). During FY 2026, 5 FLCCs conducted 940 Financial Literacy campaigns in which 57,293 participants
took part. In adherence to RBI guidelines, all the rural branches of your Bank are also conducting financial literacy Camps.

3. Social Security Schemes: All the branches of your Bank are actively involved in providing three Social Security Schemes-Pradhan
Mantri Jeevan Jyothi Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY)
schemes to customers across the country.

4. Pradhan Mantri Jan Dhan Yojana (PMJDY): All the branches across the country are opening accounts under PMJDY and are
issuing RuPay Debit Cards.

5. The Bank is one of the trustees of Karnataka Farmers Resource Center (KFRC), Bagalkot, established to impart training and act
as a resource center for farmers under the umbrella of SLBC Karnataka. The Bank has contributed H50.00 lakhs towards the
capital expenditure/corpus of KFRC.

6. In line with the Pradhan Mantri Street Vendor's Atmanirbhar Scheme, the Bank has rolled out the KBL- PM - SVANidhi scheme
providing working capital loans up to H 50,000/- to the street vendors to support their businesses.

AWARDS AND ACCOLADES:

Your Bank has bagged the following awards during the financial year under review in recognition of its achievements:

1. The Bank has bagged "Award of Excellence" under "Special Appreciation campaign" for achieving the target under

APY during the period 2024-25 at the APY Felicitation Programme and Strategy Review Meeting (South Zone)
held on 25.04.2025 in Chennai.

2. The Bank has bagged the prestigious Infosys Finacle Innovation Awards 2025 - "Gold" under Product Innovation.

3. Karnataka Bank has received two IBA CISO Awards under Private Sector - Small Bank Category. Awards received at the 4^th I BA
CISO Summit & Citations held on 06.06.2025 in Mumbai.

a) Cyber Security Team of the Year

b) Cyber Security Transformation of the Year

4. Karnataka Bank has been honored with a special award in the category "Leader in Ethical Collection Practices" in recognition
of the Bank's significant efforts in ensuring ethical collection practices. This Accolade was presented by The Brainalytics in
association with India's Largest AI-Powered Collection Platform Spocto-X at the first-ever Collection Summit "Bharath Collection
Summit and Award 2025" held at Mumbai on 12.06.2025.

5. Bank has bagged "Award of Excellence Achiever" under "APY Annual Awards FY 2024-25" campaign from PFRDA for
excellent performance during FY 2024-25. The award was received at the APY Annual Felicitation Programme held on

25.08.2025 at New Delhi.

6. Bank has been honored with a Certificate of Encouragement for Achievement of 89% of the Annual Target for the Atal Pension
Yojana in FY 2024-25 under SLBC Karnataka by Pension Fund Regulatory & Development Authority (PFRDA) at an event held on

27.11.2025 at Bengaluru.

7. Bank has bagged 5 Awards in IBA 21^st Annual Banking Technology Conference, Expo and Citations- 2024-2025 event held on

09.01.2026 at Mumbai under the following categories:

a) Best Fintech & DPI Adoption -Winner

b) Best Tech Talent - Runner-up

c) Best Technology Bank- Special Mention

d) Best Digital Financial Inclusion - Special Mention

e) Best Digital Sales - Special Mention

IMPLEMENTATION OF IFRS CONVERGED INDIAN ACCOUNTING STANDARDS (IND AS):

The Reserve Bank of India (RBI) has deferred implementation of Ind AS for all Scheduled Commercial Banks until further notice. The
Bank has been submitting the Proforma Ind AS financials to the RBI every half year as per the RBI guidelines. Also, as a prudent
measure, the Bank is preparing Proforma Ind AS financials on a quarterly basis, and the estimated impact, along with the latest update
on Ind AS implementation in the Bank, is placed before the Audit Committee of the Board. Towards effective implementation of the
Standards, the Bank has also endeavored and onboarded Oracle Financial Services Analytical Application (OFSAA), which includes
the IFRS 9 module to compute Effective Interest Rate (EIR) and Expected Loan Loss Provisioning (ECL) through the Core Banking
System. With respect to the notified RBI directions on the ECL and EIR framework, the Bank has done a preliminary assessment and
has already initiated steps towards implementation within the regulatory guidelines effective from 1^st April 2027.

DIVIDEND DISTRIBUTION POLICY

Your Bank has adopted a Policy on the Distribution of Dividend to the shareholders pursuant to Regulation 43A of the SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations). The gist of the Dividend Distribution
Policy is as under:

• Being a Banking entity, Dividend Distribution is guided by the RBI Circular RBI/DOR/2025-26/168 DOR.ACC.REC.87/21-02-
067/2025-26 dated November 28, 2025, with regard to eligibility criteria for distribution of dividend.

• Factors considered for a recommendation of dividend include both internal factors such as financial performance, dividend
payout trends, tax implications, and corporate actions and external factors such as shareholders' expectations, macro
environment, etc.

• Factors considered for determining the quantum of dividend include financial performance, capital fund requirements to
support future business growth, having regard to the dividend payout ratio prescribed under the aforesaid RBI Guidelines, etc.

The Dividend Distribution Policy of the Bank is available on the website of the Bank athttps://karnatakabank.bank.in/
investors/policies-codes

ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act, 2013 ("Act"), read with Rule 12 of the Companies (Management and Administration)
Rules, 2014, a copy of the Annual Return of the Bank for FY2026 prepared in accordance with Section 92(1) of the Act would be
placed on the website of the Bankhttps://karnatakabank.bank.in/investors/ after the Annual General Meeting (AGM).

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the provisions of Section 129(3) of the Act, read with Rule 8 of Companies (Accounts) Rules, 2014, the Bank
has prepared Consolidated Financial Statement including its subsidiary - KBL Services Limited and pursuant to the provisions of
Accounting Standard ('AS') 21, the Consolidated Financial Statements notified under Section 133 of the Act, read together of the
Companies (Accounting Standards) Rules, 2021, the Consolidated Financial Statements of the Bank along with its subsidiary for the
financial year ended March 31,2026 forms part of the Annual Report. The financial position and performance of the subsidiary are
given in Form AOC-1 attached to this Report as Annexure-III.

In accordance with the third proviso to Section 136(1) of the Act, the Annual Report of the Bank, containing therein its Standalone
and Consolidated Financial Statements, has been hosted on the website,https://karnatakabank.bank.in. Further, as per the
fourth proviso to the said Section, the Audited Annual Accounts of the said subsidiary Company of the Bank, considered as part
of the Consolidated Financial Statements, have also been hosted on the website of the Bank: https://karnatakabank.bank.in. The
documents/details available on the website of the Bank: https://karnatakabank.bank.inwill also be available for inspection by any
Member at its Registered Office.

INVESTOR RELATION CELL

To maintain a regular connect with the investors, your Bank has a dedicated Investor Relations Cell at the Registered Office. Besides
redressing the grievances, if any, from the investors, the Cell proactively disseminates corporate information on a voluntary basis
to the shareholders through email (wherever made available) about financial results, major events and coverage about the Bank in
the media, etc.

CORPORATE GOVERNANCE

Your Bank is committed to adopt the best practices of corporate governance to protect the interests of all the stakeholders of the
Bank, viz. shareholders, depositors and other customers, employees and society in general and maintain transparency at all levels.
A detailed report on corporate governance practices is given in Annexure-IV to this report.

Further, pursuant to Regulation 34(3) of the Listing Regulations read with Part E of Schedule V of the Listing Regulations, a certificate
from M/s. SVJS & Associates, Bengaluru, Practicing Company Secretaries certifying compliance with various provisions of the
Corporate Governance is annexed to this Report as Annexure-V.

The Bank has received a certificate from M/s. SVJS & Associates, Bengaluru, Practicing Company Secretaries, pursuant to clause
10(i) of Part C under Schedule V of Listing Regulations that none of the Directors on the Board of the Bank have been debarred or
disqualified from being appointed or continuing as Directors of companies by the Securities and Exchange Board of India or the
Ministry of Corporate Affairs or any such statutory authority and same is attached as Annexure-VI to this report.

EMPLOYEE STOCK OPTIONS (ESOP)

The shareholders of the Bank, on March 30, 2023, have approved 'KBL Employee Stock Option Scheme-2023' (ESOS-2023) with a
total of 15,00,000 stock options available for grant. During the reporting year, the details of the grant of options under the scheme
ESOS-2023 are as follows:

The options are granted as part of the variable pay package:

The Bank has received a certificate from M/s. SVJS & Associates, Bengaluru, Practicing Company Secretaries, pursuant to Regulation
13 of the SBEB Regulations, confirming that the Bank has implemented the ESOP Schemes in accordance with the applicable
provisions of the SBEB Regulations issued by SEBI and Resolution(s) of the Bank in the General Meeting(s) and through postal
ballots, as the case may be and the same is attached as Annexure-VII to this report.

DIRECTORS AND CHANGES IN THE BOARD

As of March 31, 2026, the Board of the Bank comprised Eight Directors with One Non-Executive Independent Woman Director.
Except Mr. Raghavendra Srinivas Bhat (DIN: 11 165725), Managing Director & CEO and Mr. B R Ashok (DIN: 00415934), Non-Executive
Director, all other directors are Independent Directors. The details of the criteria for appointment and remuneration of Directors are
provided in the report on Corporate Governance under Annexure-IV.

Further, as per Section 152(6) of the Act, at the ensuing AGM, Mr. B R Ashok, Non-Executive Non-Independent Director, being the
longest in office, shall retire by rotation. Further, being eligible, he has offered himself for re-appointment. In the opinion of the
Board, Mr. B R Ashok, Non-Executive Non-Independent Director, has the integrity, expertise and requisite experience, which is
beneficial to the business interests of the Bank. Based on the performance evaluation and recommendation of the Nomination and
Remuneration Committee (NRC) of the Board, the Board recommends his re-appointment for seeking approval from the members
of the Bank. Accordingly, a resolution seeking the re-appointment of Mr. B R Ashok, Non-Executive Non-Independent Director, has
been included in the Notice of the 102^nd AGM.

RESIGNATIONS

During the year under report, the following Directors resigned from the Board of the Bank.

• Mr. Srikrishnan H (DIN: 00318563), resigned from the position of Managing Director & CEO of the Bank, w.e.f. July 15, 2025.

• Mr. Sekhar Rao (DIN: 06830595), resigned from the position of Executive Director of the Bank, w.e.f. July 31,2025.

• Dr. D S Ravindran (DIN: 09057128), resigned from the position of Non-Executive Independent Director of the Bank, w.e.f.
March 06, 2026.

CESSATION

During the year under report, Mr. Justice A V Chandrashekar (DIN: 08829073) ceased to hold office as Non-Executive Independent
Director w.e.f. August 18, 2025 upon completion of his tenure.

APPOINTMENT

• Mr. Raghavendra Srinivas Bhat (DIN: 1 1165725) was appointed as Managing Director & CEO of the Bank w.e.f. July 16, 2025
for an interim period of 3 months and thereafter the tenure was extended for a period of one month. Subsequently, he was
appointed as Managing Director & CEO of the Bank w.e.f. November 16, 2025, for a period of one year, i.e., up to November 15,
2026, pursuant to the approvals of the shareholders and the Reserve Bank of India, as applicable.

• Mr. P. Pradeep Kumar (DIN: 03614568) was re-appointed as a Non-Executive Independent Director w.e.f. August 19, 2025.

• Mr. B R Ashok (DIN: 00415934) was re-appointed as a Non-Executive Non-Independent Director of the Bank w.e.f.

September 23, 2025.

• Mrs. Uma Shankar (DIN: 07165728) was re-appointed as a Non-Executive Independent Director w.e.f. November 01,2025.

• Mr. Balakrishna Alse S (DIN: 08438552) was re-appointed as a Non-Executive Independent Director w.e.f. May 26, 2026.

• Mrs. Biji S.S. (DIN: 11534526) was appointed as an Additional Director in the capacity of Executive Director of the Bank w.e.f.

July 15, 2026, subject to the approval of shareholders.

• Dr. M. Aruna Shyam (DIN: 11789970) was appointed as an Additional Director in the category of Non-Executive Independent
Director w.e.f. July 18, 2026, subject to the approval of shareholders.

• Mr. Parthasarathi Periaswamy (DIN: 08507318) was appointed as an Additional Director in the category of Non-Executive
Independent Director w.e.f. July 29, 2026, subject to the approval of shareholders.

MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER (MANAGING DIRECTOR & CEO)

Mr. Raghavendra Srinivas Bhat (DIN: 11165725) was appointed as Managing Director & CEO of the Bank w.e.f. July 16, 2025 for an
interim period of 3 months and thereafter the tenure was extended for a period of one month. Subsequently, he was appointed as
Managing Director & CEO of the Bank w.e.f. November 16, 2025, for a period of one year i.e., up to November 15, 2026.

DECLARATION BY INDEPENDENT DIRECTORS

Pursuant to the provisions of Section 149(7) of the Act, and Regulation 25(8) of the Listing Regulations, your Bank has received
necessary declarations from all the Independent Directors confirming that they meet the criteria of independence applicable to
Independent Directors as on March 31,2026.

FAMILIARISATION PROGRAMMES OF INDEPENDENT DIRECTORS

All Directors, including Independent Directors, are familiar with their roles, rights, and responsibilities in the Bank at the time of
appointment and also on a recurrent basis. The Bank facilitates a familiarisation programme and other programmes, including a
Certification programme for its Directors. The details of various programmes undertaken / arranged for familiarising the Independent
Directors and other programmes arranged for the directors during the Financial Year 2025-26 are disclosed in the Report on
Corporate Governance under Annexure-IV, which forms part of this Report.

PERFORMANCE EVALUATION OF THE BOARD

Your Board of Directors has laid down criteria and processes for performance evaluation of Directors, Chairman, Whole-time
Directors, Committees of the Board and Board as a whole. The NRC annually reviews and approves the criteria and the mechanism
for carrying out the evaluation exercise effectively. The statement indicating the manner in which formal annual evaluation of the
Directors, the Board and Committees of the Board, etc., is given in detail in the report on Corporate Governance under Annexure-
IV. In pursuance of the above, the Independent Directors, in their separate meeting held on March 26, 2026, have reviewed and
evaluated the performance of the Board as a whole and the Non-Executive Directors. Further, the Board has also reviewed the
performance of the individual Independent Directors at its meeting held on March 27, 2026.

As per the Policy of the Bank on Performance Evaluation, the performance evaluation of the Managing Director & CEO and the
Executive Director is being carried out by the Independent Directors.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions with the related parties that were entered into during the financial year under review are in the ordinary course of
the business of the Bank and on an arm's length basis. There were no materially significant related party transactions entered into
by the Bank with the Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of
the Bank. As such, a disclosure in Form AOC-2 is not applicable. The Policy on dealing with Related Party Transactions as approved
by the Audit Committee / Board has been placed on the website of the Bank under the Investor Portal.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with Section 134(3)(c), 134(5) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014 and other applicable
provisions, your Directors state that:

a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper
explanations relating to material departures.

b) The Directors have selected such accounting policies and applied them consistently and made judgements and estimates that
are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as of the end of the financial
year March 31,2026, and profit and loss for that period.

c) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with
the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

d) The Directors have prepared the annual accounts on a going concern basis.

e) The Directors have laid down the internal financial controls followed by the Bank and that such internal financial controls are
adequate and are operating effectively.

f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such
systems were adequate and operating effectively.

AUDITORS

a. Statutory Auditors:

At the 101^st Annual General Meeting held on 23^rd September 2025, M/s. Ravi Rajan & Co LLP, Chartered Accountants (Firm
Registration No./LLP No. 009073N/N500320), and M/s. R. G. N. Price & Co., Chartered Accountants (FRN 002785S), were

appointed as the Joint Statutory Auditors of the Bank, to hold office up to the conclusion of the 102^nd and 103^rd Annual General
Meetings, respectively.

In accordance with the extant Reserve Bank of India (RBI) guidelines and the Bank's Policy on Appointment of Statutory Auditors,
M/s. Ravi Rajan & Co LLP, Chartered Accountants (Firm Registration No./LLP No. 009073N/N500320), will be completing their
tenure of Three years as Statutory Auditors of the Bank upon completion of their maximum tenure of three years at the
conclusion of the 102^nd Annual General Meeting. Further, based on the recommendation of the Audit Committee of the Board,
the Board of Directors at its meeting held on 29^th July, 2026 has approved the re-appointment of M/s. R.G.N. Price & Co.,
Chartered Accountants (Firm Registration No.: 002785S), Chennai, as one of the Joint Statutory Auditors of the Bank for the
remaining tenure of one year, i.e., until the conclusion of the 103^rd Annual General Meeting (AGM).

As per the applicable RBI guidelines, the Bank is required to have a minimum of two Statutory Auditors considering its asset
size. Accordingly, the Board of Directors of the Bank, at its meeting held on 29 July 2026, based on the recommendation of
the Audit Committee of the Board has proposed the appointment of M/s. Batliboi & Purohit, Chartered Accountants (Firm
Registration No. 101048W), as one of the Joint Statutory Auditor of the Bank to hold office from the conclusion of this Annual
General Meeting until the conclusion of the One Hundred and Fifth (105^th) Annual General Meeting of the Bank, subject to
satisfying the eligibility norms prescribed by the Reserve Bank of India on an annual basis along with M/s. R. G. N. Price & Co.,
Chartered Accountants (Firm Registration No. 002785S) who is holding the office till the conclusion of the One Hundred and
Third (103^rd) Annual General Meeting,

Pursuant to Section 30(1A) of the Banking Regulation Act, 1949, the Bank has obtained the prior approval of the RBI vide its
letter Ref. No. CO.DOS.RPD.No.53635/08.1 1.005/2026-27 dated 11 August 2026 for the aforesaid appointments.

The Bank has received the consent of the proposed auditor and the necessary confirmation from the firm that it is not
disqualified from being appointed as Statutory Auditor of the Bank under the applicable provisions of the Companies Act, 2013
and the rules made thereunder.

b. Secretarial Audit Report:

Pursuant to the provisions of Section 204 of the Act, and the rules made thereunder, and Regulation 24A of the Listing
Regulations, the shareholders had appointed M/s. SVJS & Associates, Bengaluru, Company Secretaries in practice as the
Secretarial Auditor of the Bank for a period of 5 (five) consecutive years, commencing from April 01,2025, until March 31,2030.
Accordingly, they have conducted the Secretarial Audit for the financial year ended March 31,2026. The secretarial audit report
from the Secretarial Auditor is annexed to this report as Annexure-VIII.

Pursuant to Regulation 24A of the Listing Regulations, read with SEBI Circular No. CIR/CFD/CMD1/27/2019 dated February 08,
2019, the Bank has obtained the Annual Secretarial Compliance Report, certified by CS Lekha Ashok (COP: 9011), Partner, M/s. SVJS
& Associates, Company Secretaries in practice, Bengaluru, for the financial year ended March 31,2026, on the compliance of all
applicable SEBI Regulations and circulars/ guidelines issued thereunder and a copy was submitted to the Stock Exchanges within
the prescribed timeline. The Secretarial Compliance Report is annexed to this report as a part of Annexure-IX.

c. Reporting of frauds by Auditors

There is no qualification in the Auditors' Report. During the year, pursuant to Section 143(12) of the Act, Auditors have reported
one fraud (where amount involved is more than rupees one crore) and reported the same to the Central Government
under Form ADT-4.

STATUTORY DISCLOSURES

The disclosures required under Section 134(3) of the Act, read with Rule 8 of the Companies (Accounts) Rules, 2014 and other
applicable provisions are furnished below:

a) Conservation of energy and technology absorption: Considering the nature of the business of the Bank, the provisions of Section
134(3)(m) of the Act, relating to conservation of energy and technology absorption are not applicable to your Bank. The Bank
has, however, used information technology in its operations extensively. Further, to promote renewable sources of energy, the
Bank has installed solar panels at the Registered & Head Office, a few Regional Offices and a few owned premises of the Bank.

b) During the year ended March 31,2026, the Bank earned H 33.85 crore and spent H 4.11 crore in foreign currency.

c) There were no significant and material orders passed by the regulators or courts or tribunals impacting the going concern
status and the operations in the future of the Bank.

d) Internal financial control systems and their adequacy: Your Bank has laid down standards, processes and structure facilitating the
implementation of internal financial control across the Bank and ensures that the same are adequate and operating effectively.

e) Key Managerial Personnel:

Mr. Raghavendra Srinivas Bhat, Managing Director & CEO, Mr. Vijayakumar P H, CFO and Mr. Sham K, Company Secretary, were
the Key Managerial Personnel of the Bank as on March 31,2026, as per the provisions of the Act,.

f) Remuneration of Directors: Disclosure pursuant to Section 197 (12) of the Act, read with Rule 5 of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure-X to this report. It is hereby affirmed that the
remuneration paid to the Directors, Key Managerial Personnel and other employees of the Bank during the financial year 2025¬
26 is in accordance with the Remuneration Policy of the Bank, as approved by the Board of Directors on the recommendation
of the Nomination & Remuneration Committee.

g) During the financial year 2025-26, no employee received remuneration requiring disclosure as per the limits prescribed under
Section 197 of the Act, read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules,
2014. However, the remuneration (including variable pay determined in the subsequent financial year) pertaining to the Whole
Time Directors is subject to prior approval of the Reserve Bank of India. The details of remuneration paid to Mr. Raghavendra
Srinivas Bhat, Managing Director & CEO, Mr. Srikrishnan H, the then Managing Director & CEO (up to July 15, 2025), and
Mr. Sekhar Rao, the then Executive Director (up to July 31, 2025), are provided in the Corporate Governance Report attached
to this report in Annexure-IV.

h) In terms of Section 197(12) of the Act, read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the Top 10 employees in terms
of remuneration drawn forms part of this annual report. In accordance with the provisions of Section 136(1) of the Act, the
annual report excluding the aforesaid information is being sent to the members of the Bank and others entitled thereto. The
said information is available for inspection by the members at the Registered Office of the Bank during business hours of
the Bank up to the date of the ensuing AGM. Any member interested in obtaining a copy thereof may write to us at investor.
grievance@ktk.bank.in

i) There were no material changes affecting the financial position of the Bank which have occurred between the end of the
financial year of the Bank to which the financial statements relate and the date of this Report.

j) Particulars of loans, guarantees or investments under Section 186: The provisions of Section 186 of the Act, are not applicable
to loans made, guarantees given, securities provided or investments made by a Banking Company in the ordinary course of its
business. Accordingly, the said provisions are not applicable to the Bank.

k) Any changes in nature of business during the year under review: There has been no change in the nature of business of the
Bank during the year under review.

l) Policy on Directors' Appointment: The Bank has put in place a Board-approved "Policy on Appointment of Directors", as
recommended by the Nomination & Remuneration Committee. The Policy, inter alia, lays down the criteria for determining
qualifications, positive attributes and independence of a Director, the 'Fit and Proper' criteria in line with RBI guidelines and the
Banking Regulation Act, 1949, the manner of identification of persons qualified to become Directors and Senior Management,
Key Managerial Personnel, Senior Management and other employees, and the framework for performance evaluation. The said
Policy is available on the Bank's website athttps://karnatakabank.bank.in/investors/policies-codes

m) Statement on Integrity, Expertise, Experience and Proficiency of Independent Directors appointed / re-appointed during the
year: Pursuant to Rule 8(5)(iii a) of the Companies (Accounts) Rules, 2014, and based on the declarations received under Section
149(7), the 'Fit and Proper' due diligence by the Nomination & Remuneration Committee, registration in the IICA Independent
Directors' Databank and the proficiency test status, and the outcome of the performance evaluation, the Board of Directors
hereby places on record its opinion that the Independent Directors re-appointed during the financial year are persons of high
integrity and continue to possess the requisite expertise, experience and proficiency to discharge their duties as Independent
Directors of the Bank.

n) Companies which became or ceased to be Subsidiaries, Joint Ventures or Associate Companies: During the financial year under
review, no company has become or ceased to be a Subsidiary, Joint Venture or Associate Company of the Bank. As on March
31, 2026, the Bank has one wholly owned subsidiary, namely M/s. KBL Services Limited, and does not have any Joint Venture
or Associate Company within the meaning of Section 2(6) of the Act. A statement containing the salient features of the financial
statements of the subsidiary in the prescribed Form AOC-1, pursuant to the first proviso to sub-section (3) of Section 129 of
the Act, read with Rule 5 of the Companies (Accounts) Rules, 2014, is annexed as part of this Annual Report as Annexure-III.

o) Deposits under Chapter V of the Act: Being a Banking Company, the provisions of Chapter V of the Act, read with the Companies
(Acceptance of Deposits) Rules, 2014 do not apply to the Bank, in view of the express exclusion under Section 73(1) of the
Act, and Rule 1(3)(i) of the said Rules. Accordingly, the disclosure prescribed under Rule 8(5)(v) of the Companies (Accounts)
Rules, 2014 does not apply to the Bank. The deposits accepted by the Bank in the ordinary course of its banking business are

governed by the provisions of the Banking Regulation Act, 1949 and the directions issued by the Reserve Bank of India from
time to time, and the relevant disclosures form part of the Financial Statements and the Notes to Accounts for the financial year
ended March 31,2026.

p) Difference between the valuation at the time of One Time Settlement and at the time of availing loan from Banks or Financial
Institutions: During the financial year under review, the Bank has not undertaken any One Time Settlement in respect of any
loan availed by it from any Bank or Financial Institution. Accordingly, the disclosure relating to the difference between the
amount of the valuation done at the time of One Time Settlement and the valuation done at the time of availing the loan, along
with the reasons thereof, as required under Rule 8(5)(xii) of the Companies (Accounts) Rules, 2014, does not apply to the Bank
for the financial year under review.

q) Application or proceeding under the Insolvency and Bankruptcy Code, 2016: During the financial year under review, no
application has been made by or against the Bank under the Insolvency and Bankruptcy Code, 2016, and no such proceeding
is pending as at the end of the financial year, in respect of any loan availed by the Bank

r) Compliance with Secretarial Standards: The Bank has complied with the applicable provisions of the Secretarial Standards on
Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India
during the year under review.

s) Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013: The Bank
had constituted Internal Complaints Committee, as per letter and spirit contained in the provisions of "The Sexual Harassment
of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013", to prevent and redress the complaints relating
to sexual harassment and to organize workshops / awareness programmes to empower women employees while handling
cases relating to sexual harassment. During the financial year 2025-26, the Bank received 5 (five) complaints under the Sexual
Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, all of which were satisfactorily disposed
of during the year, and no complaint remained pending as at the end of the financial year.

t) Compliance with respect to the provisions of Maternity Benefit Act,1961: The Bank has complied with the applicable provisions
of the Maternity Benefit Act, 1961 and the Rules framed thereunder during the financial year under review.

u) Maintenance of Cost Records: Being a Banking Company, the Bank is not required to make and maintain such accounts and
cost records as specified by the Central Government under sub-section (1) of Section 148 of the Act, read with the Companies
(Accounts) Rules, 2014.

NUMBER OF BOARD MEETINGS

During the financial year under review, the Board met 22 times and the details thereof are provided in the report on
Corporate Governance attached to this report. The maximum gap between any two Board Meetings was less than one hundred
and twenty days.

COMMITTEES OF THE BOARD

As on March 31,2026, the Bank had 9 Committees of the Board which were constituted to comply with the requirements of relevant
provisions of the applicable laws and for operational efficiency. The details of the meetings of the Board and the Committees, their
composition (as on March 31, 2026), terms of reference, powers, roles etc., are furnished in the report on Corporate Governance
attached to this report in Annexure-IV.

INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

The details of transfer of unclaimed dividend, shares, share application money to IEPF are given in the Report on Corporate
Governance Annexure-IV to this report.

BUSINESS RESPONSIBILITY & SUSTAINABILITY REPORT:

The Bank has adopted various policies that imbibe the best practices with regard to Environmental, Social and Governance (ESG)
principles. In this context, Bank has prepared a Business Responsibility and Sustainability Report (BRSR) for the Financial Year 2025¬
26 in accordance with the requirements under Regulation 34(2)(f) of the Listing Regulations and as per the format devised by the
Securities and Exchange Board of India vide Circular dated March 28, 2025 (SEBI/HO/CFD/CFD-PoD-1/P/CIR/2025/42). The same is
provided under Annexure-XI.

MANAGEMENT DISCUSSION AND ANALYSIS:

In compliance with Regulation 34 of the Listing Regulations, a separate Section on Management Discussion and Analysis, as approved
by the Board, which includes details on the state of affairs of the Bank, forms part of this Board's Report.

ACKNOWLEDGEMENTS

The Board of Directors would like to place on record their sincere gratitude to the customers of the Bank, depositors and
shareholders for their unwavering support, patronage and goodwill. Your Directors also place on record their gratitude for the
continued guidance and support provided by the Reserve Bank of India, other government and regulatory authorities, financial
institutions and correspondent banks. Your Directors express their deep sense of appreciation to all the staff members for their
contribution to the quest for sustained growth and profitability of the Bank and look forward to their continued contribution to
scaling greater heights.

For and on behalf of the Board of Directors

Place: Bengaluru P Pradeep Kumar

Date :29.08.2026 Chairman