United Bank of India

The Board of Directors have pleasure in presenting the 60th Annual Report of the Bankalong with the Audited Balance Sheet, Profit and Loss Account and the report on Businessand Operations for the year ended March 31, 2010 (FY 2009-10).

1.1 DOMESTIC ECONOMIC SCENARIO

The year 2009-10 was a challenging year for the Indian economy. In this year Indianeconomy has improved considerably since global recession brought down growth to 6.7% in2008-09 from an average of over 9% in the preceding three years. All attention was focusedon reviving the Indian economy during the FY 2009-10 and putting it back on track at theearliest. Though overseas demand will take some more time to revive, robust domesticconsumption and rising investment placed the economy firmly on the growth trajectory.Despite a negative growth in the agriculture and allied activities, strong industrialrecovery, higher growth in the core infrastructure sector, growth in services activitiesand increased net direct tax collections of the Central Government facilitated the economyto rebound.

GROSS DOMESTIC PRODUCT (GDP)

The Indian economy recorded a growth of 7.2 % during 2009-10, a rise from 6.7 per centduring 2008-09 as estimated by Central Statistical Organisation (CSO). Thus the turnaroundin GDP growth witnessed during the first quarter of 2009-10 was sustained during thesecond quarter, spurred by robust revival in industrial performance and fiscal expendituredriven services activities. During Q3 of 2009-10 GDP growth was 6% against 6.2% in thecorresponding period of 2008-09. In the first three quarter of the fiscal, real GDP grewby 6.7 per cent as compared to 7.1 per cent in the corresponding period of 2008-09. In thefourth quarter the real GDP is estimated to have grown by an impressive 8.4 per cent.

SECTORAL GROWTH

It is estimated that rabi food grain production will touch a record high of 117.5million tonnes in 2009-10. Production has been rising consistently for the past fouryears. But against the all-time high rabi food grain crop estimated in 2009-10, Kharifproduction is estimated to plummet by 19 per cent to 95.7 million tonnes. High rainfalldeficit in the 2009 south west season hit acreage as well as yield. As a result, totalfood grain output is estimated to dip to 212 million tonnes in 2009-10, from all time high234.5 million tonnes in 2008-09. Non-food grain output is estimated to decline by 5.9 percent in 2009-10.

Reeling under the impact of global meltdown, industrial growth based on Index ofIndustrial Production (IIP) decelerated to 2.4% during 2008-09 from 8.5% growth during theprevious year. In the financial year 09-10, industrial output showed a positive turn andhas topped 9% for three consecutive months since August and grew a strong 11.7% inNovember. Growth of Industrial output has touched a 15 year high at 17.6% in December2009, the fastest pace after April 1995. The uptrend in Industrial activity continues andrecorded a growth of 16.7% in January 2010 and 15.1% in February 2010. The recovery hasalso become more broad-based with 14 out of 17 industry groups recording acceleratedgrowth during April 2009-February 2010. The sharp pick-up in the growth of the capitalgoods sector, in double digits since September 2009, points to the revival of investmentactivity.

INFLATION:

The developments on the inflation front remained worrisome during the year. The annualrate of inflation, which had been moving in the sub-zero level for consecutive threemonths, June to August 2009, fell to (-) 0.12% for the thirteenth successive week atAugust 29, 2009. At the week ended September 5, 2009, the inflation reversed back topositive zone at 0.12%. Wholesale price index-based inflation accelerated from 0.5% inSeptember, 2009 to 9.9% in March, 2010, exceeding the Reserve Bank’s baselineprojection of 8.5% for March 2010 set out in the Third Quarter Review. Year-on-year WPInon-food manufactured products (weight; 52.2%) inflation, which was (-) 0.4% in November,2009, turned marginally positive to 0.7% in December, 2009 and rose sharply thereafter to3.3% in January, 2010 and further to 4.7% in March, 2010. Year-on-year fuel priceinflation also surged from (-) 0.7% in November, 2009 to 5.9% in December, 2009, to 8.1%in January, 2010 and further to 12.7% in March, 2010. Despite seasonal moderation, foodprice inflation remained elevated. WPI inflation was not driven by supply side factorsalone. The contribution of non food items to overall WPI inflation, which was negative at(-) 0.4% in 2009 rose sharply to 53.3% by March 2010. Consumer price index (CPI) basedmeasures of inflation were in the range of 14.9- 16.9% in January/ February 2010. Thushigh inflation, originated from food prices, had started spreading to the broader economyand gradually became more generalized.

MONEY SUPPLY

During the financial year, the year-on-year growth in money supply (M3) moderated fromover 20.0% at the beginning of the financial year to 16.4 % in February 2010 beforeincreasing to 16.8 % by March 2010, slightly above the Reserve Bank’s indicativeprojection of 16.5 % reflecting deceleration in bank credit growth during 2009-10. Thiswas reflected in non-food credit growth of 16.9 %, above the indicative projection of 16%, significantly lower than the 22 % growth a year ago.

BANKING AND INTEREST RATES

In the year 2009-10, aggregate deposits of Scheduled Commercial Banks (SCBs) registereda growth of 17.0% to Rs.44,86,574 crore against 19.9% growth a year ago. The total bankcredit recorded a lower growth of 16.7% to Rs.32,40,399 crore upto March 26th,2010 ascompared to 17.5% growth in 2008-09. Due to lower expansion of credit and aggregatedeposits, credit-deposit ratio of scheduled commercial banks stood at 72.2% as on March26, 2010, slightly lower than the level of 73.4% a year ago. Non-food credit of scheduledcommercial banks expanded by 16.9% to Rs.31,91,910 crore as on March 26,2010 against 17.8%in the previous year.

On a review, the RBI took monetary measures of reducing Repo rate and Reverse repo rateby 25 bps each to 4.75% and 3.25% respectively from 21st April, 2009, while keeping theCRR unchanged at 5.00%. However, in the fourth quarter of the year 2009-10, the RBItightened monetary policy by raising CRR by 75 bps in two phases (50 bps in 1st phasew.e.f. 13.02.2010 and 25 bps in 2nd phase w.e.f. 27.02.2010) to 5.75% and by raising Reporate and Reverse repo rate by 25 bps each to 5.00% and 3.50% respectively w.e.f.19.03.2010.

1.2 EXTERNAL SECTOR

Exports have grown since October 2009 and in absolute terms, they were range-boundbetween USD 14.1 14.6 billion. In February 2010, exports shot up to USD 16 billion, closerto the export earnings of the pre-crisis level.

During April February 2009-10, imports declined by 12.6% to US $ 248 billion against283.8 billion in 2008-09 (March end). Trade deficit in 2009-10 is estimated to US $ 105billion narrowed from US $ 117.1 billion in the previous fiscal.

2. PERFORMANCE OF THE BANK : 2009-10

Performance Highlights

• Total business at Rs.1,10,936 crore registered a growth of 22.9 per cent.

• The total deposits increased from Rs.54,536 crore to Rs.68,180 crore as onMarch 31,2010 registering a growth of 25.0 per cent.

• There was a growth by 19.7 per cent in total advances which increased fromRs. 35,727 crore to Rs. 42,756 crore.

• Credit Deposit ratio stood at 62.7% at the end of March 2010.

• Gross NPA ratio stood at 3.21% at the end of March 2010.

• Net NPA ratio stood at 1.84 % at the end of March 2010.

• Operating Profit stood at Rs.875.85 crore

• During 2009-10, the Bank earned net profit of Rs.322.36 crore against a netprofit of Rs.184.71 crore during 2008-09.

• Return on Assets stood at 0.45 %.

• Capital Adequacy Ratio stood at 12.80% (Basel II) as on 31.3.2010.

• Business per employee increased to Rs.7.14 crore from Rs 5.85 crore.

• As on 31st March 2010, total number of branches stood at 1534 and all thesebranches are under CBS.

• As on 31st March 2010, the Bank had 283 ATMs.

2.1 DEPOSIT MOBILISATION

Total deposit of the Bank increased from Rs. 54,536 Crore as at 31st March 2009 toRs.68,180 crore as at March 2010 registering a growth of 25.0%. With a view to increasethe retail deposits, the Bank has given thrust to mobilize CASA deposits during the year.As a result, Bank’s Savings Deposits grew by 27.1%.

2.2 CREDIT DEPLOYMENT

The total credit portfolio of the Bank went up by Rs.7,029 crore and reached Rs.42,756crore as on March 31,2010, registering a growth of 19.7 per cent during the fiscal. Creditdeposit ratio stood at 62.7 per cent as on March 31, 2010. Growth in credit has beenachieved primarily through high growth of credit to infrastructure sector and large scaleindustries like Iron and Steel, Cement, Textiles and Petroleum products. In addition,intense marketing of Bank’s various retail credit products, MSME and agriculturallending also received focussed attention during the year. Bank’s non-food creditincreased by Rs.6,958 crore to Rs.41,885 crore, recording a growth of 19.9 per cent, whilefood credit increased to Rs.871crore as on March 31,2010 from Rs. 800 crore at the end ofMarch 2009.

2.2.1 RETAIL FINANCING

Retail financing is one of core business activities of the Bank focused on providingRetail Credit with quick & convenient service.

In contrast to choppy and subdued market situation in Retail Credit segment during theFY 09-10, the portfolio of Retail Credit increased to Rs.5,726 crore as on 31.03.10 fromRs.4,260 crore a year before. During the year the Bank has been able to register 34.4%growth (Rs.1,466 crore) in this portfolio. Amid competitive market scenario andchallenges, during this year, Bank remained very much optimistic & buoyant in thisSegment to surpass the target of Rs 5,600 crore.

In all the areas of Sanction, Disbursement & Growth, the achievement in FY 09-10has surpassed that of corresponding period of previous year (08-09). As at March 2010,Retail Credit portfolio represented 13.4% of our total outstanding loans and advances(11.9% a year ago). There was a directional shift in retail credit portfolio this year.Significant growth came from the schemes like Personal Loan (83%), Car Loan (71%), CashRental (146%) & Education loan (18%) with low delinquency & high yield. Moreimportantly, growth in these segments helped to maintain higher margins.

2.2.2 PRIORITY SECTOR LENDING

Bank’s lending to Priority sectors continued to be its prime focus area and itstood at Rs.14,396 crore, registering a growth of 22.4% in comparison to its 2009 level.Bank’s lending to weaker section stood at Rs.3,750 crore as on 31.03.2010 registeringa growth of 43.5% over the previous year. The per centage share of lending to PrioritySector amounts to 40.3% of ANBC.

FARM SECTOR

Agricultural sector registered a growth of 21.1 % at Rs. 4,758 crore. The Bank issued51,520 Kisan Credit Cards (KCC) during the year with credit coverage of Rs.151.67 crore atthe end of March 2010.

SELF HELP GROUPS

Self Help Group concept continues to be the thrust area and the Bank established savinglinkages with 66,130 SHGs mobilising Rs.35.62 crore as deposits and credit linkages with50,047 SHGs with credit amount of Rs.90.72 crore up to March, 2010.

ASSISTANCE TO MINORITY COMMUNITIES

Bank’s lending to Minority Communities at Rs.2,085 crore constituted 14.5 per centof the Bank’s Priority Sector lending as against target of 15 per cent.

ASSISTANCE TO WOMEN

During the year Bank extended Rs.1,905 crore being 5.4% of Adjusted Net Bank Credit(ANBC) to 3,45,992 women borrowers, surpassing the RBI’s stipulated norms of 5% ofANBC for lending to women borrowers. During the year, 10,861 SHGs were savings linked and7,457 SHGs were credit linked. About 80% of these SHGs are constituted by women members.

2.2.3 MICRO, SMALL AND MEDIUM ENTERPRISES

With the enactment of MSMED Act 2006, Bank has initiated various steps to step-upcredit flow to MSME Sector, registering a 74.3% growth at Rs.6,457 crore as on 31st March,2010.

2.3 ASSET QUALITY

The Bank has been complying with RBI Guidelines relating to Income Recognition, AssetClassification and Provisioning. Reduction in NPA achieved during the year was for Rs.628crore as against Rs.552 crore during the previous year. In per centage term, Gross NPARatio of the Bank stood at 3.21% as on 31.03.2010 as against 2.85% during the previousyear. In absolute term Gross NPA stood at Rs.1,372 crore as on 31.03.2010. Net NPA ratioof the Bank stood at 1.84% as on 31.03.2010 as against 1.48% during the previous year. Inabsolute term, Net NPA stood at Rs.779 crore as on 31.03.2010. During the year, 20,321Recovery Camps were organised and Cash Recovery made in those camps during the year wasRs.92.02 crore as against Rs 56.49 crore during the previous year. The Bank has alsoframed policy for Sale of Assets to ARCs. Further, to boost recovery from small NPAs andWritten off accounts, an incentive scheme has been introduced. Bank’s Recovery Policyhas been revised to facilitate quick settlement in existing NPA accounts.

2.4 TREASURY OPERATIONS

At the end of the year, Bank’s Gross Investment stood at Rs.26,602 crore,increased by Rs.8,009 crore from that of Rs. 18,593 crore in the previous year, whereasSLR investment grew by Rs.5,499 crore to Rs.20,123 crore. Total interest income rose toRs. 1,616.52 crore as on 31.03.2010 against Rs. 1,342.99 crore in the previous year.During the year, the trading profit was Rs. 180.45crore against Rs. 217.84 crore in theprevious year. The average yield on investments stood at 7.68% as against 7.95% in theprevious year. The Non-performing investment came down to Rs.17.17 crore as on 31.03.2010from Rs.30.96 crore as on 31.03.2009.

2.5 FOREX BUSINESS

The merchant forex turnover during 2009-10 was Rs.8,731 crore as compared to Rs.7,971crore in the previous year registering a growth of 9.52%. Interbank forex turnover wasRs.67,212 crore and earnings from forex business (exchange and commission) were Rs.32.26crore during 2009-10 as against Rs.51,152.17 crore and Rs.34.22 crore respectively duringthe year 2008-09, maintaining in the same range.

The foreign exchange business network of the Bank consisted of one ‘A’Category AD Branch, 38 ‘B’ Category AD Branches and 183 ‘C’ CategoryAD Branches. The main forex dealing room of the Bank is at Head Office, Kolkata and theother forex dealing room is at Overseas Branch, Mumbai. There are 17 Swift centres of theBank operating at different locations of the country for prompt execution of remittancesand other forex transactions. The Bank maintains 18 Nostro accounts in various currenciesto facilitate settlement of forex transactions.

During the year, the Bank has opened a Representative Office in Dhaka, Bangladesh forexpansion of foreign business. The office was inaugurated by Hon’ble HighCommissioner of India in Bangladesh on 3rd February, 2010.

• In line with RBI guidelines, the Bank successfully migrated to Basel-IIframework with effect from 31st March 2009. Bank maintained Capital Adequacy ratio (CRAR)under Basel-II above regulatory requirement. CRAR position of the Bank has been computedat 12.80 % having Tier-I ratio at 8.16 % as on 31.03.2010.

• Bank formulated /reviewed various risk management policies namely ALMPolicy, Stress Testing Policy and Policy on Credit Risk Mitigation & CollateralManagement, Operational Risk Management Policy, Compliance Policy, Disclosure Policy,Credit Audit Policy, in line with RBI/IBA guidelines.

• In line with RBI guidelines on Supervisory Review & Evaluation Process(SREP) Pillar-II, Bank submitted Internal Capital Adequacy Assessment Process (ICAAP)document to RBI for FY 2008-09.

• In order to compute and manage capital requirement under Market Risk on anon-going basis, Bank has initiated steps for procuring a software based model forautomated computation of capital charge. The model will further strengthen the internalcontrol system of investment portfolio of the Bank.

• Bank initiated various steps like Business line mapping of variousactivities of Bank for successful migration to advanced approach {The StandardisedApproach (TSA)} under Operational Risk.

• Bank conducted portfolio analysis of major industries / sectors, whereBank’s exposure is substantial to study the impact of that particular industry /sector on the credit portfolio of the Bank, and the prevalent market scenario. Analysis onfourteen sectors including Gems & Jewellery, Cold Storage, Tea, NBFC, Power Sector,Cement, Iron & Steel Sector, Infrastructure, Loan to Educational Sector, Textile, RealEstate, Petroleum, Rice and Coal Sector was undertaken during the year.

• Macro Level analysis of the entire credit portfolio of the Bank covering thequality of the credit portfolio vis-a-vis return, overall risk return scenario, prudentialand substantial exposure norms, NII & NIM etc. was carried out on quarterly basis.

• Analysis of various exposure norms to ensure Bank’s various exposuresare within the exposure limits / ceilings fixed by RBI / Bank’s Board and analysis onmigration of the risk rating for large borrowal accounts had been undertaken onhalf-yearly basis.

• In line with RBI guidelines, Stress Testing on Liquidity Risk, Interest RateRisk, Credit Risk impact on capital adequacy and profitability of the Bank has beenconducted on half yearly basis. The Bank had also undertaken On-site credit audit foraccounts having credit limit over Rs.40.00 lacs to improve the quality of creditportfolio.

• Bank officers including Regional Heads were nominated for various training /seminar on Risk Management at reputed institutions like NIBM, IBA, IDRBT, NIBSCOM, SBI,etc.

2.7 MERCHANT BANKING

During the Financial Year 2009-10, Merchant Banking Division of the Bank acted astrustees to debenture/ bond holders in respect of 11 issues. Bank also acted as‘Paying Banker’ for payment of dividend/interest warrants of several companies.

2.8 GOVERNMENT TRANSACTIONS

The Bank is handling different Government business activities including collection ofGovernment Revenue, collection of Government Deposit, handling of Government Fund, paymentof School Salary and different categories of pension, maintenance of Currency Chest. TotalTax collection during 2009-10 was Rs. 6,183.23 crore.

One new Currency Chest was opened at Diamond Harbour Branch and another at TripuraGramin Bank under tripartite agreement with UBI, RBI & TGB.

Ten training programmes on Government Business were conducted at Staff TrainingCollege, Kolkata. Two workshops on Currency Chest were organised with faculty support fromRBI, Kolkata in presence of General Manager (Issue Department) RBI, Kolkata. One seminarwas held in association with National Small Savings Institute, GOI, MOF on PublicProvident Fund.

2.9 CORPORATE SOCIAL RESPONSIBILITY

United Bank Socio Economic Development Foundation (UBSEDF) was formed on 30th March,2007 for the noble cause of promoting and carrying out socio- economic developmentalactivities and rendering assistance to weaker and under privileged section of the societyirrespective of their caste, creed and religion. The bank has provided Rs 2 crore asCorpus to the Trust.

United Bank Rural Development & Self Employment Trust (UBRUDSET) was formed on 5thApril 2008. Main objective of the trust is to set up and promote training institute forempowering poor and under privileged, unemployed youth and women by development of skilland entrepreneurship through training to make them self reliant and ensure ruraldevelopment. The trust acts as the apex policy making body for overseeing the functioningof all the RUDSETIs being set up by the Bank directly or in collaboration with reputedinstitutions / NGOs. The trust also reviews the functions of the RUDSETIs and approves thetraining plans and budgets of individual RUDSETI. The trust has an initial corpus of Rs 10lac which has been kept as Fixed Deposit.

The bank has set up 5 RUDSETIs, which have conducted 138 training programmes since1.4.2007 covering 2,932 trainees of which 1,520 were women comprising 51.8% of the totaltrainees. The settlement rate is 81.55 %. A total of 1,017 of such trainees have availedbank loan.

2.10 FINANCIAL INCLUSION

The Bank is SLBC Convenor in the states of West Bengal & Tripura. The activitiesunder Lead Bank Scheme during the year 2009-10 centered on Financial Inclusion to beachieved by extended banking facilities to the unbank segment of the society. The bank hastaken the following initiative for achiving financial inclusion;

• Bank has set-up a ‘Financial Inclusion Cell’ at head office, headed bya General Manager, with a team of senior officers.

• 7,489 unbanked villages of West Bengal having population of over 2,000 have beenallotted to different banks for setting up of banking outlets within March 2012.

• This apart, 419 unbanked villages of Tripura having population of over 2,000have also been identified and allotted amongst the banks for providing banking outletwithin March 2012.

• Eight districts of West Bengal and three districts of Tripura have beenidentified for 100% Financial Inclusion. Of these, 87% and 84% of the households in theidentified districts of West Bengal & Tripura respectively have been covered till now.

2.11 REGIONAL RURAL BANKS

The Combined aggregate position of all four sponsored RRBs viz. Bangiya Gramin VikashBank, Assam Gramin Vikash Bank, Tripura Gramin Bank and Manipur Rural Bank are as follows:

RBI Currency chest has been opened in Bardowali Branch of Tripura Gramin Bank. UnitedBank of India is facilitating introduction of CBS in RRBs to make them technologically atpar with Commercial Banks.

2.12 BRANCH EXPANSION

With the opening of 83 branches during the year 2009-10, the total number of branchesstood at 1534 as on 31.03.2010 spreading across all the States of the country. The Bankhas also 10 Extension Counters.

Statewise opening of branches during FY2009-10:

Five branches, in Murshidabad District, namely as Jangipur, Mithipur, Haroa, Palsanda& Malancha were inaugurated during the year by Shri Pranab Mukherjee, Hon’bleUnion Finance Minister. The Bank has also opened 9 branches in unbanked Gram Panchayats inWest Bengal and one branch at unbanked area in Tripura to extend banking facilities inunbanked areas as per decisions of SLBC. Out of 1534 branches, 730 branches (47.6%) arelocated in 68 Minority Concentration Districts (MCDs) throughout the country and fiftynine per cent of the total branch networks are in rural and semi-urban areas to serve ourcountry in the hinterland. During the year, the Bank has established its global footprintby opening a Representative Office in Dhaka, Bangladesh on 3rd February, 2010.

2.13 PERSONNEL ADMINISTRATION

The total staff strength of the Bank stood at 15,285 as on March 31, 2010 as against15,111 last year. The staff productivity of the Bank has increased to Rs.7.14 crore as on31.03.2010 from Rs.5.85 crore as on 31.03.2009.

As a part of effective succession planning, process for recruitment of 894 ProbationaryOfficers and 486 Clerks apart from 281 Specialist Officers have been initiated andsuccessfully completed.

Inter scale promotion process covering officers of all grades was successfullycompleted during this year through which a total of 789 have been promoted to theirrespective higher scale.

In another initiative, 404 clerks have been promoted to officer- JMG Scale-I during theyear.

2.13.1 TRAINING

To meet the growing challenges it has become imperative to shape the training system asper need of the time and In-House training courses have been redesigned accordingly. Forcapacity building, cross section of employees have been nominated for various externaltraining programmes. During the year employees numbering 7,193 have participated in 577training courses as per the following as below:

2.13.2 welfare of Scheduled Caste/Scheduled Tribe Employees

The Bank has been scrupulously following the Government guidelines for reservation inemployment/ promotion in respect of specific categories. The representation of SC/STemployees in total staff stood at 3690 as on 31.03.2010 constituting 24.1% of the totalemployees. During the year 114 employees belonging to SC/ST category were promoted to nexthigher cadre. They constituted 26.35% of total number of promotions effected during theyear. The Bank also conducted pre-promotional training for 272 SC and ST employees forpromotion from clerical to officers’ cadre. Dependants of 2 deceased employeesbelonging to SC category were paid ex-gratia amount to the tune of Rs. 14, 45,543/- duringthe financial year.

Quarterly meetings between the Top Management and the SC/ST Employees Welfare Councilof the Bank have been held on regular basis during the year. All of the complaintsreceived from individual/organizations regarding SC/ST matters have been looked into forearly redressal by the Bank. For economic development of SC/ST community of the society,the Bank has launched a rolling trophy in the name and style of "Bharat Ratna Dr.Babasaheb Ambedkar Best Branch Rolling Trophy" for excellent performance indisbursement of loan to SC\ST community, which is awarded to the best performing branchevery year on the birthday of Dr. Babasaheb Ambedkar.

2.13.3 INDUSTRIAL RELATIONS

The Bank has maintained harmonious industrial relations during the year 2009-2010culminating in creation of a positive atmosphere for all round growth and businessdevelopment of the Bank. Periodical meetings at different tiers of management were heldwith the representatives of the Unions/Associations for sharing of theinformation/percolation of business priorities of the Bank. At the same time emphasis hadbeen given on the redressal of the genuine grievances of the employees.

As a welfare measure, considering the aspects of Health Care for working employeesalong with dependent members of their families as also the retired employees of the Bankalong with their spouse, the Bank has renewed the existing Medi-claim Insurance Schemes.Besides, the Bank has entered into tie-up arrangements with 3 (three) more hospitals viz.CMRI Hospital, Kolkata; AMRI Hospital, Kolkata and Eastern Diagnostics & MedicalCentre Ltd., Kolkata during the year taking the total number of such arrangements to 66Hospitals and Diagnostic Centers located all over India to meet hospitalization/healthcheck-up/diagnostic requirements of employees/ retired employees at a concessional/competitive rate. In order to further strengthen Health Care measure for working andretired employees, the Bank has entered into tie-up arrangements with Rabindranath TagoreInternational Institute of Cardiac Sciences (RTIICS), Kolkata and Nightingale Diagnostic& Medical Centre Pvt. Ltd., Kolkata. This apart, annual Eye Screening Camp wasorganized during November, 2009 at Head Office under the auspices of Lawrence & Mayo.

2.13.4 Promotion of Sports

The Bank attaches great importance to the promotion of sports. The Annual Sports Meetof the Bank for the year 2009-10 was organized on 17th January, 2010 at Mohun BaganAthletic Club Ground, Kolkata in presence of the Chairman and Managing Director, ExecutiveDirector and other top executives of the Bank. Over 3000 employees, ex-employees and theirfamily members participated in the Meet with great enthusiasm. The Chairman and ManagingDirector presented mementos and prizes to the successful participants.

2.14 CUSTOMER SERVICE

With a view to improving customer service and as advised by Reserve Bank of India, theBank has constituted Board Level Committee on Customer Service and Standing Committee onCustomer Service. Both the committees meet on quarterly basis. Four such meetings wereheld during the year 2009-10.

Branch Level Committee on Customer Service (consisting of all Officials of the Branch,one representative from the recognized Union and one Senior Citizen Customer of theBranch) are to meet at least once in a month to encourage formal channel of communicationwith the customers and Branch Level functionaries and to study complaints / suggestions /difficulties faced by the customers and evolve ways and means for improving customerservice.

Customer complaints received through letters / Fax are acknowledged promptly. Timeframe for resolving the customer complaints at different levels has been fixed and allconcerned have been advised to follow the same meticulously. Complaint received at BranchLevel is to be redressed within 7 days from the date of receipt of the complaint.Complaint received at Regional Office Level are to be redressed within 15 days andComplaints received at Head Office Level is to be redressed within 21 days from the dateof receipt of the complaint.

As a part of Grievance Redressal Mechanism and to resolve the customers’complaints instantaneously, the Bank introduced On-line Grievance Redressal System, one ofthe quickest avenues to reach to the customers for settlement of the issues to theirsatisfaction by contacting over telephone / sending e-mail if it is available in thecomplaint letter.

A number of steps have been taken by the Bank during the year to improve customerservice. All the Branches of the Bank are brought under CBS thereby giving the facility ofAny Where Banking across all our branches. All branches are now NEFT / RTGS enabledextending the service of quick transfer of fund to all our customers.

2.15 INFORMATION TECHNOLOGY

In a landmark achievement in the field of Information Technology, Bank attained 100%CBS on 12-09-2009 keeping in line with its vision to emerge as a techno savvy premierBanking institution in the country.

Bank is leveraging its technology platform for enhancing the schemes of FinancialInclusion.

With a view to provide a reliable, cost effective and robust platform for variousfinancial and non-financial applications, Bank has implemented VPN (Virtual PrivateNetwork) based WAN project integrated with VSAT network. All branches and offices of theBank are connected through WAN.

Bank had 283 ATMs as on 31-03-2010 which can be accessed by our own customers as wellas by customers of other banks. The ATM cum Debit Card holders of the Bank can access morethan 50000 domestic ATMs under a sharing arrangement through Cash Tree & NFS and manymore internationally through its affiliation to VISA. With 100% CBS and a strong Networkof ATM, Bank has been successful in extending "Any Time Any Where Banking"facility to its customers.

Bank is also offering Internet Banking facility for its customers. Customers use thischannel for e- payment of direct taxes, balance enquiry etc. Bank is also in the processof implementing a more feature rich Internet Banking System (IBS) which will offer variousvalue added net banking products to customers including SMS Banking.

All branches can now perform RTGS & NEFT transactions. These channels have becomevery popular and efficient mode of fund transfer for the customers of the Bank. Bank haslaunched telebanking channel for all branches. Customers can avail this facility to a)enquire account balance, b) request for account statement through fax / email, c) stoppayment of cheque and d) transfer fund to linked account(s).

As on 31-03-2010, Corporate E-Mail facility is operational in all the 1534 branches andin all controlling offices. Extensive transmission of Data as well as information takesplace through this facility resulting in reduction of communication time and operationalcost to a great extent.

The Bank has also been participating in Cheque Truncation System (CTS) pilot projectnow being implemented by Reserve Bank of India through NCC, Delhi in National CapitalRegion (NCR). The Bank is in the process of developing a sound Management InformationSystem (MIS) by leveraging CBS. Already a number of MIS reports are being generated fromCBS as an aid to management decision making.

During the year Bank has achieved 100% mechanisation in its MDSS (Mini Deposit SalpaSanchay). This low cost Deposit scheme (MDSS) has interface with CBS through IntelligentHand Held Machines (IHH) which are provided to Agents. Machine generated receipt with a/cbalance is provided to customers immediately on receipt of the deposit.

During the year Bank’s Data Center at Kolkata and Data Recovery (DR) Center atMumbai have been upgraded in consonance with 100% CBS infrastructure. Bank has launchedits Intranet website during the year to facilitate and improve dissemination and sharingof information within the organization. Bank is also conducting IS Security Audit coveringits entire IT Infrastructure with a Cert-in empanelled audit firm.

2.16 OFFICIAL LANGUAGE

For publicity and progressive use of Hindi towards implementation of Government’sOfficial Language Policy, All India Conference of Official Language Officers of the Bankand review meeting was held on 21.05.2009 at Bank’s Head Office. Various types ofprogrammes and Hindi Competitions were organized on the occasion of Hindi Day/Hindi Monthduring September October 2009. 12 nos. of Hindi Workshops (duration of each for 3 days)and 14 nos. of Hindi Computer Training Programmes (duration of each for 2 days) wereorganized at Bank’s Staff Training College, Kolkata. During the year, 46Officers/Employees Passed Hindi (Praveen/Pragya) Examinations. The Bank organized 2meetings under the banner of the Town Official Language Implementation Committee (Bank),Kolkata in capacity of being the coordinator. For its distinguished performance, the Bankwas awarded with 2nd Prize (Rajbhasha Shield) by the Department of Official Language,Ministry of Home Affairs, Government of India, New Delhi. The Bank received the prize inthe Official Language Conference of East & North-East Region held on 05-02-2010 atShillong (Meghalaya). Bank is publishing its quarterly Hindi Magazine ‘UnitedDarpan’ regularly. Number of Computers installed with Hindi Software in differentBranches/Offices increased from 11,926 to 18,206. Shri Surendra Mohan Nayyar, JointDirector, Ministry of Finance, Financial Services Department, New Delhi, visited the HeadOffice of the Bank on 26.03.2010 for inspection of implementation of Official LanguagePolicy.

2.17 INSPECTION AND AUDIT

• Internal inspection is a well embedded continuous process which is carried outto enhance the efficiency of the operating units of a bank in all respects while at thesame time ensuring their sound functioning for the safety and security of bank’sassets. Internal inspection aims to implement total adherence to prescribed systems,procedures and norms.

• Audits and Inspections are carried out in the bank as per the Board approvedlaid-down policy. The scope of internal inspection process is modified suitably on acontinuous basis to cope with the ever changing scenario of Banking system. Under the newsystem, Internal Inspection focuses on risk-based audit of Bank’s operating units.For the last three years, Risk Based Internal Audit of Branches is being conducted byBank’s own Inspectors. During 2009-10, Risk Based Internal Audit was conducted in 909branches, 431 branches were subjected to Concurrent Audit and Migration Audit wasconducted in 563 branches. The inspections of 16 Regional Offices were done during2009-10.

• During the year, the IS Audit of CBS Branches was initiated. It has beenconducted in 88 branches covering more than 51% of Bank’s business as on 31st March,2009. The IT Security Audit of the IT infrastructure of the Bank by CERT-In empanelledauditors was also initiated during the year 2009-10.

• Inspection/Audit function also ensured timely compliance of RBI Annual FinancialInspection/ LFAR.

2.18 CORPORATE GOVERNANCE

The Bank believes that the sound principles of Corporate Governance are important keyto be a successful organisation. The Bank ensures adherence to principles of CorporateGovernance by maintaining integrity of financial reporting, disclosure of materialinformation and sound investor relations. The Bank has adopted a Code of CorporateGovernance with the primary aim to provide good management, adoption of prudent riskmanagement techniques and compliance with the required standards of capital adequacy,thereby guarding the interest of its stake-holders, such as customers, employees, theGovernment and the society at large.

2.19 BOARD OF DIRECTORS

The Board has been constituted in accordance with Section 9 (3) of the BankingCompanies (Acquisition and Transfer of Undertaking) Act, 1970, and as per the CentralGovernment Gazette Notification. Presently the Board comprises

Sri. Bhaskar Sen Chairman & Managing Director

Sri. S L Bansal Executive Director

Sri. Sanjeev Kumar Jindal GoI Nominee Director

Sri. Tulsidas Bandyopadhyay RBI Nominee Director

Dr. Naina Sharma Non-Official Director

Sri. Suprita Sarkar Officer - Employee Director

Sri. Soumitra Talapatra Workman Employee Director

During the Year the following directors retired/ demitted office

Sri. S C Gupta Chairman & Managing Director

Sri. T M Bhasin Executive Director

Dr. R K Agrawal CA Director

Sri. Praveen Davar Non-Official Director

Sri. M A Ansari Non-Official Director

Smt. Anusuya Sharma Non-Official Director

Sri. Biswajit Kakoti Workmen Employee Director

The Board of Directors places on records its gratitude and appreciation for thevaluable contribution made by them to the functioning of the Board.

BOARD & COMMITTEE MEETINGS

During 2009-10 the Board of Director had held 9 meetings. The details of committeemeetings are as under –

PROPOSED DIVIDEND

The Board of Directors at its meeting held on May 3, 2010 have recommended, subject tothe approval of the shareholders and appropriate regulatory authorities, final dividend atthe rate of 20 per cent i.e Rs. 2/- per equity share of face value of Rs. 10/-, to allequity shareholders of the Bank whose name appear on the Register of Member on the RecordDate. This will entail an outgo of Rs.73.31 crore on account of Dividend and Dividend tax.

ACKNOWLEDGEMENT

The Board of Directors wishes to place on record its appreciation of the patronage andcooperation received from the customers. The Board also likes to place on record thevaluable guidance and excellent support extended by the Reserve Bank of India, Governmentof India, State Government of West Bengal, other regulatory agencies and all other Statelevel financial institutions. The Board of Directors appreciates the commendable servicesof the employees at all levels.

For and on behalf of the Board of Directors

(Bhaskar Sen)

Chairman & Managing Director

Place: Kolkata

Date: May 3, 2010