Indian Bank

To The Members,

Your Directors have great pleasure in presenting the Bank's Annual Report along with the Audited Financial Statement of Accounts and the Cash flow statement for the year ended 31st March 2009.

FINANCIALHIGHLIGHTS

The Bank took forward its growth story with Operating profit increasing to Rs.2,228.83 crore as against Rs. 1,659.30 crore for 2007-08, registering a growth of 34.32%.

• Net profit for 2008-09 was at Rs.1,245.32 crore as compared to Rs. 1,008.74 crore for 2007-08, showing a growth of 23.45% in the current year.

• Net Interest Margin improved to 3.54% from 3.45%.

• Return on average assets was at 1.62% and 1.64% for 2007-08.

• Capital Adequacy Ratio stood at 13.27% as against 12.74% as of March 2008. The Bank is Basel II compliant.

• Return on Net worth for 2008-09 was at 23.35% as against 24.51% for 2007-08.

• Earning s per share as of Marc h 2009 was Rs.27.96 and Book value per share was Rs.127.52 during the current year.

• Global Business of the Bank stood at Rs.1,24,413 crore registering a growth of 22.85%.

• Total Deposits grew by Rs.11,536 crore to Rs.72,582 crore, a growth of 18.90% for the year 2008-09.

• Gross Advances were at Rs.51,831 crore, registering an increase of Rs.11,603 crore (28.84%) as on 31.3.2009. Overall Credit Deposit ratio was at 71.41%.

• Priority Sector Advances at Rs.18,426 crore, grew by Rs.3,297crore(21.79%).

• Agriculture Credit grew by Rs.1,544 crore (24.53%) to Rs.7,838 crore and accounted for 20.51% of Adjusted Net Bank Credit.

• During 2008-09,total recovery of NPA including Accounts Under Collection amounted to Rs.457.10 crore.

• Gross NPA was at 0.89% as against 1.21% for March 2008 and Net NPA was lower at 0.18% as against 0.24% for March 2008.

• Financial Inclusion : During 2008-09, 17.04 lakh accounts were opened under the scheme, of which Overdraft was extended in 52,545 accounts for Rs.10.91 crore.

• Total Branch network of the Bank in India increased to 1642 as on 31.3.2009 and all the branches are under CBS.

• Total number of ATMs increased to 755 which included 205 offsite ATMs and customers can have access to 32000 ATMs in the shared network.

INCOME AND EXPENDITURE

• Durin g the year, total income of the Bank increased o t Rs.7,865.77 crore with a strong growth in interest income to the tune of Rs.1,617.40 crore or 31.03%. Net interest income registered a rise of Rs.554.62 crore (27.00%).

• Other Income at Rs.1,035.44 crore registered an increase of 2.96%.

• OntheExpenditureside,theBank'sinterestexpenditur e was at Rs.4,221.81 crore an increase of Rs.1,062.70 crore or 33.64%.

• Total operating expenses at Rs.1,415.13 crore fo r 2008-09 has shown an increase of Rs.14.84 crore, an increase of 1.06%, when compared to the level of Rs.1,400.29 crore in 2007-08.

The income and expenditure for the period 2008-09 are given hereunder:

SPREAD ANALYSIS

• The Bank's Net Interest income improved to Rs.2,608.52 crore in 2008-09 from Rs. 2,053.90 crore in 2007-08, thereby registering a growth of 27%. The increase is attributed to the substantial increase in interest income arising from volume growth in advances.

• The increase in interest income ledto a marginal increase in Net Interest Margin to 3.54% as of March 2009.

The Spread analysts is as under:

IMPORTANT RATIOS

PROVISIONS AND CONTINGENCIES

• Provision for Depreciation on Investments including amortisation of premium on Held to Maturity category and one time shifting of securities from AFS to HTM category is to the tune of Rs.265.99 crore as compared o t a provision of Rs.114.49 crore in 2007-08.

• Provision for Standard Assets amounted to Rs.40.87 crore in March 2009 as against Rs.95.59 crore in March 2008 in compliance with RBI regulations.

• Profit before tax for 2008-09 is at Rs.1,786.10 crore as against Rs. 1,234.98 crore for 2007-08. Profit after tax is at Rs.1,245.32 crore as against Rs. 1,008.74 crore in 2007-08.

DIVIDEND

• The Board of Directors is pleased to recommend a final dividend of 30% for 2008-09, thus making the total dividend for 2008-09 to 50%. The dividend for financial year 2008-09 shall be subject to tax on dividend to be paid by the Bank. The total outflow on account of dividend for 2008-09 is Rs.295.27 crore including dividend tax. The payout ratio works out to 20.27%.

NET WORTH AND CRAR

• The Net worth of the Bank improved to Rs.5,880.30 crore as on 31.3.2009 from Rs. 4,653.07 crore as on 31.03.2008 reflecting a growth of 26.37% due to plough back of profits.

• The Capital to Risk (Weighted) Assets Ratio (CRAR) is 13.27% as of March 2009, compared to 12.74% as of March 2008, against the requirement of 9%.

• The CRAR of Tier I capital was 11.28% as of March 2009 as against 11.29% as of March 2008.

In accordance with the priorities accorded by the Government of India, the Bank's Advances to SC/ST increased by Rs.312.78 crore to reach Rs. 1,315.96 crore as of 31st March 2009 covering 3.51 lakh individuals and constituted 7.14 % of total Priority Sector advances, representing 31% growth over the previous year's position.

Also as per Government guidelines, during the process of Direct Recruitment and Internal Promotions, Pre-recruitment and Pre-promotion trainings are offered to SC/ ST employees.

Periodical Quarterly Meetings are conducted and grievances, if any are resolved then and there. The SC/ST Cell also ensures prompt disposal of grievances/representations of SC/ST employees. A Chief Liaison Officer in the rank of General Manager is nominated for this purpose.

CHANGES INTHE BOARD DURINGTHEYEAR

During the period under review, Shri Anup Sankar Bhattacharya assumed charge as Executive Director on 15.10.2008. Prof. Narendra Kumar Agrawal and Shri C K Ranganathan joined the Board as Directors representing the shareholders on 30.06.2008 and Shri Kumar Sanjay Krishna I.A.S., Joint Secretary, Department of Economic Affairs, Ministry of Finance, Government of India, joined the Board as Director on 13.01.2009 representing the Government in the place of Shri V S Senthil. Shri G Charath Chandran retired from the Board on 31.01.2009 as he completed his term of three years.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that in the preparation of the annual accounts for the year ended March 31, 2009 -

• The applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

• The accounting policies framed in accordance with the guidelines of the Reserve Bank of India, were consistently applied;

• Reasonable and prudent judgment and estimates were made so as to give a true and fair view of the state of affairs of the Bank at the end of the financial year and of the profit of the Bank for the year ended March 31, 2009.

• Proper and sufficient care were taken for the maintenance of adequate accounting records in accordance with the provisions of applicable laws governing banks in India; and

• The accounts have been prepared on a going concern basis.

ACKNOWLEDGEMENT

The Board expresses its gratitude to the Government of India, Reserve Bank of India and Securities & Exchange Board of India for the valuable guidance and support received from them. The Board also thanks the financial institutions and correspondent banksfor their co-operation and support. The Board acknowledges the unstinted support of its customers and shareholders.The Board records its sincere appreciation for the valuable contribution made by Shri V S Senthil and Shri GCharathChandran who ceasedto be member effective from 13.01.2009 and 01.02.2009 respectively. The Board wishes to place on record its appreciation of the dedicated services and contribution made by members of staff for the overall performance of the Bank.