Corporation Bank


BSE: 532179 | NSE: CORPBANK | ISIN: INE112A01015 
Market Cap: [Rs.Cr.] 5,918 | Face Value: [Rs.] 10
Industry: Banks - Public Sector

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Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

1. Monetary and Credit Policy 2013-14

1.1 The Annual Policy for 2013-14 was formulated in an environment of incipient signsof stabilization in the global economy and prospects of a turnaround, albeit modest, inthe domestic economy.

1.2 Against this backdrop, the stance of monetary policy was intended to:

• Continue to address the accentuated risks to growth.

• Guard against the risks of inflation pressures re-emerging and adverselyimpacting inflation expectations.

• Appropriately manage liquidity to ensure adequate credit flow to the productivesectors of the economy.

1.3 The RBI expected a modest improvement in economic activity in FY14 compared toprevious year. Based on this assumption, the country's economic growth was projected togrow at 5.7% in 2013-14. Keeping in view the domestic demand-supply balance, the outlookfor global commodity prices and the forecast of a normal monsoon, WPI inflation wasexpected to be range-bound around 5.5% during 2013-14.

1.4 Consistent with the above growth projections and the RBI's inflation tolerancethreshold, M3 growth for 2013-14 was projected at 13.0% for policy purposes. Consequently,aggregate deposits of SCBs were projected to grow by 14.0%. Keeping in view the resourcerequirements of the private sector, the growth in non-food credit of SCBs was projected at15.0%.

1.5 On the basis of the assessment, the Reserve Bank decided to reduce the policy reporate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5% to 7.25%.The reverse repo rate under the LAF, determined with a spread of 100 basis points (bps)below the repo rate, automatically adjusted to 6.25%. The Marginal Standing Facility (MSF)rate, determined with a spread of 100 bps above the repo rate, adjusted to 8.25%.

1.6 Some other important regulatory and developmental measures proposed were asfollows:

• Reduce the requirement of holding held-to-maturity (HTM) category bonds in thestatutory liquidity ratio (SLR) portfolio for the banks to 23% from the existing 25%.

• Enhanced the loan limits to micro and small enterprises for priority sectorclassification.

• Speedier branch expansion in unbanked rural centers for ensuring seamless rollout of Direct Benefit Transfer Scheme of the Government.

• Finalized the prudential guidelines on restructuring of advances by banks andfinancial institutions based on the Mahapatra Committee recommendations.

• Increased the risk weights and provisioning requirements on banks' exposure tocorporates on account of corporates' unhedged forex exposure positions.

• Bring all districts in metropolitan areas under the fold of the Lead BankScheme.

• Improve the interface of exporters with banks and financial institutions to cutdelays and streamline procedures.

• To allow FIIs to hedge their currency risk by using exchange traded currencyfutures in the domestic exchanges.

• Allow non-bank authorized entities to be part of the payment systeminfrastructure.

• Restrict the import of gold on consignment basis by banks only to meet thegenuine needs of exporters of gold jewellery.

• Prepare a discussion paper on White Label POS and place it in the public domainfor comments.

• Follow a uniform, fair and transparent pricing policy and not discriminatebetween their customers at home branch and non-home branches with a view to ensure thatbank customers are treated fairly and reasonably without any discrimination.

2. Macro-Economic Scenario in 2013-14

2.1 As per the advance estimate of the CSO, India's GDP growth was expected to moderateto 4.9% in FY14, a slightly better growth compared to previous year's growth rate of 4.5%,mainly on an improved performance in the agriculture and allied sectors. The GDP growthrate was 4.4%, 4.8% and 4.7% respectively in the first, second and third quarters of2013-14 at an average of 4.6%.

2.2 As per advance estimates, the agricultural sector is likely to achieve a growthrate of 4.6% in 2013-14, compared to 1.4% 2012-13. On the other hand, manufacturing growthis expected to drop by -0.2% in FY14, from 1.1% in previous year. The growth in the miningand quarrying is likely to be at -1.9%, compared to contraction of -2.2% a year ago. Theservices sector including inance, insurance, real estate and business services sectors islikely to show growth of 6.3% in FY14, against 6.2% in FY 13.

2.3 The index of industrial production (IIP) showed a negative growth of 0.1% during2013-14 compared with 1.1% growth in the 2012-13. As per the use based classiication, thecumulative growth during 2013-14 for basic goods, capital goods and intermediate goodsstood at 2.0%, -3.7% and 3.0% respectively. The consumer durables and consumernon-durables have recorded a growth of -12.2% and 5.2% respectively, with an overallgrowth in consumer goods being -2.6%. As per the sector wise classification, mining andmanufacturing decelerated to -0.8% and -0.8%, respectively, while electricity sectorregistered a growth of 6.1% in 2013-14 as against the preceding year.

2.4 Inflation as per WPI recorded a 3-month high of 5.70% in Mar'14 from as high as7.52% in Nov'13 and 5.65% during the corresponding month of the previous year. Foodinflation (which has a weight of 14.3% in the WPI basket) increased to 9.90% in Mar'14from 8.12% in the previous month. On the other hand, core inflation increased to 12-monthhigh of 3.50% in Mar'14 as against 3.20% in Feb'14. In 2013-14, the wholesale priceinflation averaged 5.91%, lower than the 7.36% inflation seen in the preceding year.Retail inflation, based on CPI, increased to 8.31% in Mar'14 from 8.03% in the precedingmonth. Core CPI inflation, which excludes food and fuel, stood at 7.82% in Mar'14, lowerthan 7.84% in Feb'14. In 2013-14, the retail inflation averaged 9.49%, lower than the10.18% inflation seen in the preceding year.

2.5 India's cumulative value of exports for the period Apr-Mar 2013-14 was $312.36billion as against $300.40 billion, registering a growth of 3.98% over the same periodlast year. The value of imports for the period Apr-Mar 2013-14 was $450.95 billion asagainst $490.74 billion registering a negative growth of 8.11% over the same period lastyear. The trade deficit for Apr-Mar 2013-14 was estimated at $138.59 billion which waslower than the deficit of $190.34 billion during Apr-Mar. 2012-13. India's Current AccountDeficit (CAD) reached a record low of 0.9% of GDP for Q3 of 2013-14. The average CAD levelfor the first three quarters is around 2.3% of GDP and as per the initial estimate it islikely to be around 2% of GDP for the whole year. This is lower than the record CAD levelof4.8% of GDP in FY 13.

2.6 All key deficits, with the exception of effective revenue deficit, have turned outto be lower in 2013-14 revised estimates (RE) than the budget estimates (BE), in absoluteterms. In terms of GDP, while the revenue deficit of 3.3% remained unchanged from the BE,gross fiscal deficit (GFD) and primary deficit (PD) were lower by 0.2% points each, at4.6% and 1.3% respectively. During 2014-15, the GFD-GDP ratio is budgeted to decline by0.5% points to 4.1%.

2.7 During 2013-14, the country's foreign exchange reserves rose by US $11.62 billionand stood at US $303.7 billion as on 28th Mar'14. In order to arrest the slide in Rupeeand to augment depleting forex reserves, RBI had announced two concessional swapfacilities on 4th Sep'13, under which banks could swap dollars raised through foreigncurrency non-resident (FCNR) deposits and overseas borrowings with the RBI. Over thethree-month period from Sep'13-Nov'13, reserves surged by $16.5 billion. With the revivalof portfolio flows since December 2013, India's forex reserves reached US$ 298.6 billionas on 21st Mar'14, an accretion ofUSS 28.2 billion over end-Aug'13.

2.8 The economic growth in FY15 is likely to be higher than that in FY14. However, thepace of recovery is likely to be modest. The recovery is likely to be supported byinvestment activity picking up due to part resolution of stalled projects and improvedbusiness and consumer conidence. The downside risk to growth still remains on account ofthe continued weak performance of industry and increase in risks to agriculture from theEl Nino phenomenon. The current projections for GDP growth for FY15 by various agenciesand inancial institutions range from 5% to 6%. While the RBI projected growth to be in therange of 5% to 6% in FY15, albeit with downside risks to the central estimate of 5.5%, theprojection of National Council of Applied Economic Research (NCAER) and IMF stands at 5.6%& 5.4%, respectively.

3. Banking Trends in 2013-14

3.1 The combination of growth slowdown, persistence of inflation, rising bad loans andresultant restructuring of loans have posed a signiicant challenge for the performance ofbanking industry during 2013-14.

3.2 Taking cognizance of rising inflationary pressure in the economy, the Reserve Bankhiked policy interest rates by 75 bps during 2013-14. Accordingly, Repo and Reverse RepoRate rose to 8% and 7%, respectively, while CRRwas kept unchanged at 4%. In the AnnualMonetary Policy 2013-14 presented on 3rd May'13, the RBI had reduced Repo Rate by 25 bpsto 7.25% and the Reverse repo rate was adjusted to 6.25%. Thereafter, repo rate wasincreased by 25 bps to 7.5% in the Mid Quarter Monetary Policy Review on 20th Sep'13. Itwas further increased by 25 bps to 7.75% in the 2nd Quarter Review on 29th Oct'13.Finally, in the 3rd Quarter Review presented on 28th Jan'14, the repo rate was increasedby 25 bps to 8%.

3.3 Due to exchange market pressures, the RBI took exceptional liquidity measures in2013-14. The MSF rate was increased by 300 bps to 10.25% from 17th July'13. Besides, theoverall allocation of funds under the LAF was limited to 1.0% of the Net Demand and TimeLiabilities (NDTL) of the banking system. The overall limit under LAF was further reducedto 0.5% of NDTL on 24th July'13. Banks were also required to maintain a minimum daily CRRbalance of 99% of the requirement. However, with the ebbing of pressures on exchange rate,the RBI rolled back exceptional measures in a calibrated manner. Accordingly, the minimumCRR balance was reduced to 95% effective from the fortnight beginning 21st Sep'13. The MSFrate was reduced by 75 bps from 10.25% to 9.5% in the Mid-Quarter Review of Sep'13 andfurther by 50 bps on 8th Oct'13. In the 2nd Quarter Review of Monetary Policy presented on29th Oct'13, the MSF rate was reduced by 25 bps to 8.75% and this has brought down the gapbetween it and the repo rate back to its normal level of 100 bps.

3.4 During 2013-14, RBI injected net liquidity to the tune of about Rs. 520 billionthrough outright Open Market Operations (OMOs), besides an average daily net liquidityinjection of Rs. 906 billion through LAF, MSF and term repos and Rs. 294 billion throughexport credit refinance (ECR). During Q4, an average trillion has been injected on a dailybasis via LAF, MSF and term repos and Rs. 397 billion through ECR.

3.5 Scheduled Commercial Banks' (SCBs') business in FY14 was subdued, clearly showinglower economic activity. The deposit of SCBs has registered a y-o-y growth of 14.6% as at21st Mar'14, as against 14.3% in the corresponding period last year. However, much of thegrowth in deposit mobilization happened in the second half of FY14, largely aided by asurge in foreign currency non-resident (FCNR) deposits swapped by banks into Rupeedeposits. Following this, deposit growth of SCBs even reached a high of 17.0% for thefortnight ended 13th Dec'13. Thereafter, deposits growth has cooled down once again toaround 15%. Broad money (M3) for 2013-14 (up to 21st Mar'14) increased by 13.5% ascompared to 13.8% during the corresponding period of last year.

3.6 The non-food credit growth of SCBs trended below the RBI projection of 15% forFY14. As on 21st Mar'13, the y-o-y growth in credit stood at 14.5% (up from 14.1%, a yearago). Credit growth had hit a high of 18.2% y-o-y for the fortnight ended 18th Sep'13.Credit demand increased in August and September as the RBI took extraordinary liquiditytightening measures in July to stem a slide in the Rupee.

The RBI has also decided to move to a new regime of bi-monthly monetary policy reviewstarting 1st Apr'14, which is in line with the recommendation of the Urjit Patel panel onmonetary policy. Under the new regime, RBI will hold six reviews in each inancial year,against the present practice of eight.

4. Bank's Operational Performance 4.1 Deposit Mobilisation

4.1.1 During the year 2013-14 emphasis was laid on clientele expansion with strategy oflining up a series of campaigns for CASA growth. The campaigns saw opening of over 24.33lakh Current and Savings accounts. Key Branches and New branches were focused formobilisation of retail deposits. A special Deposit Scheme CORP1111 for a tenure of 1111days offering attractive interest rate was launched in the month of December 2013 formobilizing retail deposits of less than Rs. 1 crore. An amount of Rs. 926.81 crore wasmobilized under this scheme during the period between 23.12.2013 to 31.03.2014 from 48,819accounts.

4.1.2 Performance Highlights:

i) The Non-Bank Deposits of the Bank has reached a level of Rs. l,72,017crore as at31st March, 2014, registering a year-on-year growth of Rs. 25,493 crore at 17.4%. Thetotal deposits of the Bank including Certificate of Deposits (CD's) reached a level of Rs.1,93,393 crore as at 31st March, 2014, registering year-on-year growth of Rs. 27,388 croreat 16.50%.

ii) Current Deposits stood at Rs. 14,823 crore as against Rs. 15,180 crore in theprevious year.

iii) Savings Deposits reached Rs. 24,478 crore with net accretion of Rs. 3,719 crore at17.91% Y-O-Ygrowth.

iv) The Share of Demand Deposits in total Non-Bank Deposits stood at 22.85%.

v) Term deposits (excluding CDs & Inter Bank Deposits) reached a level of Rs.1,32,715 crore with a net accretion of Rs. 22,131crore at a growth rate of 20.01% Y-O-Y.

vi) The Aggregate Average Deposits of the Bank increased by Rs. 28,106 crore and stoodat Rs. 1,64,824 crore as at 31st March, 2014 recording a growth of 20.56% year-on-year.Average CASA grew by 11.67% with net accretion of Rs. 2,968 crore and stood at Rs. 28,410crore.

vii) The Bank has added 26,83,451 new Deposit Accounts during the year of which,23,91,538 new accounts have been added under Demand Deposits.

4.2 Credit Growth:

4.2.1 The credit portfolio of the Bank increased from the level of Rs. 1,18,717crore asat 31.03.2013 to Rs. 1,37,086 crore as on 31.03.2014, with an absolute growth of Rs.18,369 crore at 15.47% during the financial year ended 31.03.2014. Growth in credit wasachieved through intense marketing of various loan products of the Bank with specialthrust on Agriculture, Retail, Small & Medium Enterprises.

4.2.2. The average advances grew by Rs. 18,784 crore from the level of Rs. 98,256 croreas at March 2013 to Rs. 1,17,040 crore as at March 2014, registering a growth rate of19.1%. The CD ratio as on 31.03.2014, stood at 70.88%.

4.2.3 Infrastructure Lending:

The Bank has been endeavoring to participate more in the nation building activities byextending credit to infrastructure sector. As at 31.03.2014, Bank's credit toInfrastructure stood at Rs. 20,020 crore, which constitutes 14.6% of the aggregate credit.

4.2.4 SME Credit:

The Bank's thrust for lending to the SME sector continued. During the year 2013-14, theSME portfolio has increased from Rs. 19,517 crore as on 31.03.2013 to Rs. 24,818 crore ason 31.03.2014, registering a growth of Rs. 5,301 crore (27.16%). Out of the SME portfolio,advances to the Micro and Small HCtS ' Rs. in crore)

Enterprises (MSE) stood at Rs. 23,816 crore as at 31.03.2014 as against Rs. 18,555crore during the corresponding period last year, recording an increase of Rs. 5,261 crore(28.35%).

During the year, SME Loan Centres with dedicated services of Relationship Managers& Loan Processing team were operationalized at Bangalore (S), Delhi (N), Mumbai,Coimbatore, Ahmedabad, Chennai and Pune to extend a timely and hassle free credit to SMEs.Bank plans to open similar such centres at Lucknow, Ludhiana, Indore, Jaipur, Thane,Kolkata and Chandigarh, shortly.

SME Mega Loan Expos were conducted at nearly 100 locations across India to createawareness of Banks SME loan products among entrepreneurs. As a strategic initiative, SMEGrand Festival Loan Bonanza and Corp Micro Plus campaigns were launched during thefinancial year 2013-14.

As on March 2014, Bank has achieved two out of the three regulatory parametersprescribed by the Prime Ministers Taskforce on MSME sector namely : (1) Credit flow to MSEand (2) Growth in the number of Micro Enterprises under MSE. Though, the Bank could notachieve the prescribed share of Micro Enterprises in MSE, the same has reached a level of54.85% as on 31.03.2014 as against 46.45% as at 31.03.2013.

Regulatory Target RBI / MoF Target Mar-2014 (%age achievement Y-O-Y)
Credit flow to MSE 20% 28.35%
Share of Micro Enterprises in MSE 60% 54.85%
Growth in No. of Micro Enterprise aJcs 10% 28.27%

The Bankhas been awarded First Prize under "National Award for Excellence in MSELending" and Second Prize under "National Award for Excellence in Lending toMicro Enterprises" for the year 2012-13, by the National Committee under the Ministryof MSME. Shri S. R. Bansal, Chairman & Managing Director of the Bank received theseprestigious National Awards for Excellence at the benign hands of Dr. Manmohan Singh, theHon'ble Prime Minister of India, during the National Awards Function held at VigyanBhavan,New Delhi on 1st March, 2014. The Bank also bagged the SKOCH Achiever Award for SMEenablement during the year 2013-14.

4.3 Priority Sector Lending 4.3.1 Sectoral Deployment:

4.3.1.1 The Total amount of credit deployment to Priority sector has moved up from Rs.37,955 crore as on 31.3.2013 to Rs. 48,560 crore as at 31.3.2014, recording an increase ofRs. 10,605 crore at 27.94%. The Priority sector advances of the bank stood at 40.91% ofthe Adjusted Net Bank Credit (ANBC) as against the RBI norm of 40% of ANBC.

4.3.1.2 The Agriculture credit stood at Rs. 13,144 crore as at 31.3.2014 as against Rs.9,466 crore as at 31.3.2013, recording a growth of Rs. 3,678 crore at 38.85 % over March2013. Funds deployed under Agriculture constituted 11.07% of ANBC. Direct AgricultureCredit of the Bank increased from Rs. 6,707 crore to Rs. 9,958 crore recording a growth of48.47% during the year. With this, the Bank could achieve the disbursement target of Rs.8,500 crore under Special Agriculture Credit Plan during 2013-14.

4.3.1.3 Other Priority Sector lending increased from Rs. 9,934 crore as at 31.03.2013to Rs. 11,358 crore as at 31.03.2014, registering a growth of 14.33%.

4.4 Social Lending:

4.4.1 Dispensation of Credit under various Government Sponsored Social Lending I PovertyAlleviation Schemes and to Weaker sections of the society was given due importance so asto fulill the Bank's socio-economic obligations.

4.4.2 The number of Self Help Groups availing financial assistance, has increased from93,329 as at 31.03.2013 to 1,27,065 as at 31.03.2014. Credit to Self Help Groups increasedfrom Rs. 1,022 crore as at 31.03.2013 to Rs. 1,314 crore as at 31.03.2014, registering agrowth of Rs. 292 crore at 28.57%.

4.4.3 Our advances to Weaker sections stood at Rs. 12,183 crore at 31.03.2014 [forming10.26 % of ANBC], thus surpassing the regulatory norm oflO % of ANBC.

4.4.4 Finance to women beneficiaries stood at Rs. 7,039crore as at 31.03.2014 asagainst Rs. 5,021crore as at 31.03.2013 and the bank achieved 5.93% ofANBC towards lendingto women beneficiaries as against the regulatory norm of 5% ofANBC.

4.4.5 As at 31.03.2014, out of a total Priority sector credit of Rs. 48,560 crore, theoutstanding credit to Scheduled Caste/ Scheduled Tribe is Rs. 746.62 crore. Credit topersons belonging to Minority Communities reached a level of Rs. 7,785 crore forming16.03% of Priority Sector Advances.

4.5 Retail Lending

4.5.1 Retail lending continued to be a focus area of the Bank during the year 2013-14.The outstanding under Retail credit improved from Rs. 25,148 crore as on 31.03.2013 to Rs.29,026 crore as on 31.03.2014, recording a growth of Rs. 3,878 crore (15.4%). The share ofthe Retail Credit to the Net Bank Credit stood at 21%.

4.5.2 The portfolio under Corp schemes stood atRs. 21,193 crore as on 31.03.2014 asagainst Rs. 16,355 crore as on 31.03.2013, recording a growth of Rs. 4,838 crore at 30%.

4.5.3 Special promotional campaigns/events were launched during the year to market theproduct and attract new clients.

* Vacation Offer [Car loan] was launched with effect from 15.04.2013 to 31.05.2013,with an all time low interest rate.

* "Monsoon Bumper Offer/Grand Festival Bonanza" was in operation for a periodof 8 months from 01.06.2013 to 31.01.2014 under Corp Home, Corp Vehicle, Corp Vyapar, CorpDoctor Plus and Corp Char Sansar Schemes with attractive interest rates andwaiver/concessions in processing charges.

* The Bank has also organized (i) Retail Expos for marketing its Housing & VehicleLoans and (ii) Businessmen/Traders Meet at major centres across the country, during theyear. The various promotional campaigns/events has created greater visibility to theBank's retail products/schemes, resulting in good business from new contacts.

4.6 New Retail loan Products:

The Bank has introduced a new retail loan product during the year - "Corp CharSansar", a secured Personal Loan variant, specially designed for existing housingloan borrowers, to meet family/personal expenses, was introduced on 01.04.2013.

4.7 Retail Loan Centres:

At present 32 Retail Loan Centres are in operation at all major centres, out of which11 Retail Loan Centres were set up during the year. The Retail Loan Centres have in totalsanctioned 36,300 loan applications amounting to Rs. 5,819 crore under various CorpSchemes during the year.

4.8 Online in-principle approval of Education loans :

Under the in-principle approval of on-line educational loan applications, 385in-principle approvals amounting to Rs. 16.84 crore were accorded during the year.

4.9 Financial Inclusion and Branchless Banking - "Corp GrameenaVikasKendras"

4.9.1 Financial Inclusion and Branchless Banking continue to be the thrust area of theBank. During the financial year, the Bank has provided banking infrastructure in 787villages through Branchless Banking model to take the total number of villages providedwith such facility to 4,332 as at the end of March 2014. The Bank has opened 3.98 lakhsimple 'Basic Saving Bank Deposit Accounts' of people belonging to the weaker sections ofthe society during the year, reaching a level of 21.26 lakh accounts with an outstandingbalance of Rs. 157.46 crore. The Bank has sanctioned 37,501 General Credit Cards till datewith an outstanding balance of Rs. 47.08 crore. The Bank has implemented Urban FinancialInclusion in 114 urban locations spread across 7 states and branded it as 'Corp ShahariVitthiya Samaveshan Kendra'.

4.9.2 Implementation of Government directions: Various State Level Bankers'Committee (SLBCs) have allotted 1,562 road map villages across the country for providingbanking facility either through brick and mortar branch or extension counter or servicecounter or ICT based Business Correspondent (BC) model during the Financial Inclusion Planfor three years from 2013-14 to 2015-16. Of these, Bank has since provided bankingfacility at 1,075 villages (1,067 villages through BC model and 8 villages through branchmodel) as at 31.03.2014. Remaining villages will be provided during 2014-15 thus coveringall villages one year ahead of the target.

4.9.3 Electronic Benefit Transfer Programme: Bank is actively participating inElectronic Benefit Transfer (EBT) Programme i.e. disbursement of wages under MGNREGS(Mahatma Gandhi National Rural Employment Guarantee Scheme) and pensions under SSP (SocialSecurity Pensions) in the states of Andhra Pradesh, Karnataka and Tamil Nadu. Thedisbursements are being made through BCs under this programme. Bank has opened 9.76 lakhaccounts and issued 7.24 lakh smart cards to the beneiciaries under these schemes toreceive the amounts conveniently at their door step.

4.9.4 Bank is participating in Aadhaar Payment Bridge System (APBS) and Aadhaar EnablePayment System (AEPS) implemented by NPCI.

4.9.5 Common Service Centre (CSC): Bank has entered into an agreement with CSCe-Governance Service India Ltd., for extending banking services through their CommonService Centers across the country. The KIOSK based software has been implemented at 4CSCs. The model will be expanded to different places across the country during the comingdays.

5. Credit Assets Quality and Classification

The recession like situation in the economy has put severe strain on the asset qualityof banks. Our bank is no exception to this. The loan delinquency has been considerablyhigher as compared to the previous years. The NPA level has witnessed a sharp increaseduring the year. However, the NPA level could be contained through close monitoring andfollow up and initiating prompt recovery measures.

The classification of the loan assets in terms of Prudential Norms prescribed by theRBI is as follows:

(Rs. in crore)

As on 31.03. 2012

As on 31.03. 2013

As on 31.03.2014

Amount % to total asset Amount % to total asset Amount % to total asset
Standard 99551.10 98.74 117305.77 98.28 133905.74 96.58
Sub-Standard 638.45 0.63 1159.98 0.98 2674.44 1.93
Doubtful 555.50 0.55 791.00 0.66 1881.40 1.36
Loss 80.26 0.08 97.25 0.08 180.95 0.13
Gross Loan Assets 100825.31 100.00 119354.00 100.00 138642.53 100.00

6. Recovery

6.1 The Bank has been complying with the RBI guidelines relating to Income recognition,Asset Classification and Provisioning. The Bank continues to apply a three prongedstrategy for better NPA management. The strategy consists of a) Preventive actions, b)Recovery & upgradation, & c) Resolution & settlement.

6.2 The Gross NPA of the Bank was Rs. 4,736.79 crore as on 31.03.2014 compared to Rs.2,048.23 crore as at the end of the previous financial year. The Gross NPA constituted3.42% of the Gross Advances as on 31st March, 2014 as against 1.72% at the end of thecorresponding previous financial year.

6.3 The Net NPA of the Bank was Rs. 3,180.56 crore as on 31.03.2014 compared to Rs.1,410.88 crore as at the end of the previous financial year. The Net NPA ratio of the Bankagainst the Net Advances has increased from 1.19% as at 31.03.2013 to 2.32% as at31.03.2014. As a matter of prudence, the Bank provided in full for all NPA Accounts withborrower wise aggregate liability of less than Rs. 25,000/- irrespective of the nature andextent of securities held.

6.4 The Cash recovery & Upgradation during the Financial year 2013-14 has increasedto Rs. 1,355-53 crore as compared to Rs. 1,509.30 crore in the previous financial year.This is attributed to the economic slowdown prevailing in the country.

6.5 The provisions under SARFAESI Act 2002 have been effectively leveraged to ensurefurther improvement in Recovery performance. An amount of Rs. 776.89 crore has beenrecovered/ upgraded in 3,534 accounts during the year through SARFAESI action.

6.6 The Bank has introduced a special One Time Settlement (OTS) scheme by name"Corp Riyayati-II" for small NPA accounts with balances up to Rs. 10.00 lakh on01.08.2013. As on 31.03.2014, a sum of Rs. 41.00 crore could be recovered in 13,871accounts under the scheme.

6.7 Holding of Mega Recovery Camps in all the zones covering NPA cluster branches hasbeen identified as an effective strategy in tackling NPAs, especially the small value NPAaccounts. Such camps are meticulously planned and conducted at all the zones of the bankcovering clusters of NPA concentrated branches with the active support of the rank andfile. A large number of borrowers had attended the camps conducted during the currentfinancial year. The Bank held 700 such Mega Recovery Camps across all the zones in thecountry during the year 2013-14. As many as 16,500 borrowers attended the camps andsettled their accounts. The Bank could achieve a cash recovery of Rs. 80.00 crore throughconduct of Mega Recovery Camps during the year. Further, 5,296 accounts involving Rs. 450crore were upgraded in the camps.

7. Treasury and Investment Operations

7.1 The aggregate investment of the Bank as on 31st March, 2014 was Rs. 66,698.61 crorewith maturity mix of securities consistent with risk perceptions and investment policiesof the Bank.

7.2 The average yield on investments including RIDF investments during the year underreport stood at 7.42% compared to 7.34% as at the end of the previous year.

7.3 The net profit from sale of investments was Rs. 338.99 crore for the year ended31.03.2014 as compared to Rs. 280.33 crore in the previous year.

7.4. The Bank has put in place the risk management tools like Duration, ModifiedDuration and Value at Risk for all interest bearing securities.

8. International Banking

8.1 The Bank has 63 Designated Branches, which cater to the foreign exchange business.Cumulative Merchant turnover has increased by 7.20 %, from Rs. 73,421 crore to Rs. 78,710crore, during the year 2013- 14.

8.2 Exchange Income declined by 7.54%, from Rs. 99.71 crore to Rs. 92.19 crore, duringthe year.

8.3 Fee Based Income increased by 4.77%, from Rs. 179.74 crore to Rs. 188.31 croreduring the year.

9. Merchant Banking Activities:

9.1 During the year the Bank has handled 10 Dividend Payout and 11 Issue Collectionassignments.

10. Precious Metal Business

10.1 During the year, the Bank achieved an aggregate turnover of Rs. 2,094.34 croreearning an Income of %.59 crore from Precious Metals Business excluding income from goldloans.

10.2 Gold coins in various denominations ranging from 2 grams to 50 grams were sold atover 300 branches of the Bank, achieving total sales of 35.92 kg amounting to Rs. 10.50crore, thus earning an income of Rs. 0.26 crore.

11. Designated Branches and Treasury and Investment Department

11.1 Process Improvement

a) Straight Through Processing (STP) is in place between Designated Branches andTreasury Branch for all types of Forex Transactions. Most of the transactions of branchesare auto uploaded at Treasury Branch through STP.

b) Link Branches have been enabled with "rate seeking facility" and all theFCNR transactions are brought under STR Mirror balance at Treasury Branch is updatedinstantaneously and most of the specific FCNR transactions are under auto mode.

c) Uploading of Nostro Credits to CBS is in place, thereby enabling auto reconciliationofNostro accounts.

d) The Processing of Nostro Credits has been fast tracked by generating and sending theRecon advices to branches by 12 noon of the same day instead of day end, thus helpingbranches to utilise the entries on the same day instead of next day.

e) Electronic Display Board for online display of Forex Rates has been installed at allthe Designated Branches.

f) Uploading of Forex & Gold Positions to Risk Management Server for easyprocessing.

g) Exchange Houses — Reconciliation process has been simplified and dailybalancing in Foreign Currency has been made available.

h) Corp Global Prepaid Multicurrency Travel Card launched during the current year, inassociation with M/S Thomas Cook (I) Ltd.

12. Collection and Payment Services (CAPS)

12.1 Keeping pace with the changing environment in the payment system, and as apro-active CMS Banker, the Bank has initiated host of 'customer centric' technologicalinitiatives during the year. Amongst them are:

• Host-to-Host technology was introduced during the year which enables processingof bulk payment iles without manual intervention at both Corporates office and Bank.

• Unified Payment system 'Corp-Unipay' was introduced to effect seamless paymentsacross channels like RTGS/NEF77 ABB etc.

• The above initiatives have not only brought speed & operational eficiency inpayments but also reduced the cost of operation, enabling the Bank to be more competitivein the CMS Market.

12.2 CAPS has drawn detailed action plan to re-jig the CMS business in the ensuinginancial year, such as :

• Aggressively market the new payment products to corporate customers

• Extend cross border remittance to other Exchange Houses

• Introduce e-Mandate services riding on the National Automated Clearing House(NACH) introduced by the National Payment Corporation of India (NPCI) - A New Productwhich is more helpful to NBFCs, Asset Management Companies, Utility Services Companies,Big Corporates, Government Divisions, etc. to collect the amount ofinstallments/premium/monthly bills etc. through mandates on speciied dates.

• Introduce bulk payment facility through NACH - credit infrastructure to creditthe payouts, dividends, refunds, interest amount etc. instantly.

CAPS continues to add value to the bank through cross selling business opportunities.

13. Inter-Branch Accounts Reconciliation

13.1 Timely reconciliation and speedy elimination of Inter Branch transactions continueto be the forte of the Bank. The Bank has a Central Inter Branch Reconciliation system forProcessing of Inter-Branch Transactions, in order to maintain eficiency in this vital areaof housekeeping.

13.2 During the financial year 2013-14, the Bank continued to maintain its corecompetence in the area of timely reconciliation of Inter-Branch transactions. TheInter-Branch transactions were generally processed and reconciled on the next day of thetransaction. All Inter-Branch transactions emanated up to 31.03.2014 stand reconciled andall entries (other than credits in respect of Demand Drafts issued) up to 07thJanuary, 2014 (other than credits in respect of unpaid Demand Drafts) stand eliminated asat 31.03.2014.

14. Information Technology Initiatives

14.1 The Bank has been lining up various IT initiatives which are focused not only atcustomer friendly delivery channels providing value added services but also to enhance theinternal eficiency and improving the decision making processes by bringing in an effectiveManagement Information System and adhering to the regulatory compliance.

14.2 The Bank, on 27.01.2014, won the IBA Banking Technology Award 2012-13 for Best useof Mobility Technology in Banking.

14.3 Core Banking Solution (CBS)

• The Bank has in place a Core Banking Solution and all the branches are coveredunder CBS.

• Uniform Customer Identification Code [UCIC] has been allocated to all thecustomers of the CBS database based on certain vital parameters.

• The Asset Classification feature is implemented as an integral part of CBS.

• The workflow for handling Account Processing Centers [APC] has been integratedwith the CBS.

14.3.1 New CBS

M/s. Accenture Services Pvt. Ltd. Mumbai have been appointed as the new Technology andProject Management Consultant, for implementing New Core Banking and a few otherapplications in the Bank.

14.4 ATMs

The Bank has 2264 ATMs across the country. In addition to the usual features, thefollowing add-on facilities have been provided through ATM delivery channel.

• LIC Premium Payment.

• VISAMoney Transfer.

• NEFT facility through ATMs.

• Use of Campus Card.

14.5 Internet Banking

• Total User IDs created as on 31.03.2014 are 8,04,938. Average number of hits permonth for the period from 01.04.2013 to31.03.20l4were20,07,982.

• Internet Banking facility has features like Balance Enquiry Funds transfer,NEFT/RTGS/IMPS Payments, Online Deposit opening, Payment of instalments towards RD andLoan Accounts, Payment of Direct and Indirect Taxes, Customs Duty, Service Tax, LICPremium, State Taxes, e-payment facility for Temples and Charitable Institutions,Educations Institutions, IRCTC, ASBA etc.

• Internet Banking is now accessible through Android phones, iOS phones, tabletsand iPads, through separate application developed as "apps".

• Opening of term deposit has been facilitated online in Internet Banking.

• Additional features were implemented during the year, such as ICEGATE Paymentsfor multiple Challans with encryption, decryption and double confirmation facilities.

14.6 Mobile Banking

The number of users of SMS Banking has increased to 13,74,867 as on 31.03.2014 of which6,00,190 users were registered during the year. The following new facilities have beenintroduced:

• Bank has also enabled an ePassbook facility on Mobile with value added features.

• Bank has implemented SMS based, Menu based and App based SMS/Mobile Banking forcustomers as another delivery channel for banking transactions and services.

• Bank is the first to implement LIC premium payment through IMPS.

14.7 Real Time Gross Settlement System [RTGS]

1945 branches of the Bank are participating in the RTGS system as on 31.03.2014. Allnew branches are planned to be provided with RTGS facility. An average of 2.50 lakhtransactions are made every month through RTGS. NewGen RTGS with ISO 20022 messagingformat has been implemented. RTGS facility is provided through Internet Banking also.

14.8 National Electronic Funds Transfer (NEFT)

As on 31.03.2014, NEFT has been enabled in 1931 Branches of the Bank. NEFT facility isalso provided through Internet Banking, SMS Banking, Mobile Banking and ATMs. All newbranches are planned to be provided with NEFT facility. An average of 17.00 lakhtransactions are made every month using NEFT. The Continuous Credit feature is provided tothe inward NEFT transactions.

14.9 Management Information System [MIS]

• Data extracted from Core Banking Solution (CBS) is uploaded to a database so asto provide the required MIS to all the Functional Divisions.

• The consolidation of Balance Sheet data [Weekly/Monthly] and Advances data isbeing done at a central MIS location through a separate framework (PLUM).

• The data which is not available in CBS, is aggregated by using a web based entrysystem (PLUM) provided to all the Branches with maker checker mechanism.

• The Bank has implemented a solution for Automated Data Flow (ADF) to RBI. Allthe applicable returns are enabled in the solution for submission as on December 2013.

14.10 Disaster Recovery Set Up

The Bank has set up suitable Disaster Recovery Setup for different applications likeATMs, Core Banking, RTGS/NEFT, Internet Banking, Integrated Treasury Management Setup andCAPS and is conducting drills at regular intervals. This is primarily to ensure ourpreparedness to face any eventualities/ untoward incidences.

14.11 Cheque Truncation System:

CTS is implemented in Western Grid, Mumbai with effect from 10.08.2013, covering Pune,Ahmedabad, Goa and Bhopal in addition to Thane and Mumbai.

Cheque Truncation System (CTS) has been now extended to the following centres:

1. Bangalore 2. Coimbatore 3. Hyderabad 4.Trivandrum 5.Kolkata 6.Mangalore 7. Tiruppur8.Vellore 9. Karur lO.Hubli ll.Ludhiana 12.Coonoor 13. Hosur 14. Mysore 15. Bhubaneshwar16. Cuttack 17. Patna

14.12 Implementation of RBI Working Group Recommendations on Information Technology& Information Security Domains

The Bank has implemented most of the recommendations of the RBI Working Group onInformation Security, Electronic Banking, Technology Risk Management and Cyber Frauds. TheBank has engaged the services of a reputed external consultant for validation of theimplemented recommendations, conducting a gap-analysis and implementation of the pendingrecommendations. Of the 229 recommendations identified by the Reserve Bank of India, 191recommendations are applicable for implementation in the Bank, ofwhich, 151recommendations have already been implemented and the remaining are in the process ofimplementation.

15. Credit Cards

15.1 Credit Card facilitates the individual clients, a hassle free and risk free way ofmaking payments on shopping, travel etc. In view of the huge potential associated with it,the Bank has taken steps to expand this portfolio. The Bank is predominantly issuing cardsto its existing customers.

15.2 As on 31st March, 2014, the Bank has issued 45,383 credit cards with an aggregatelimit of Rs. 251.01 crore, having outstanding balance of Rs. 29.54 crore

15.3 The Bank earned total income of Rs. 8.85 crore and Gross Profit of Rs. 6.89 crorefor 2013-14 on issue of Credit Cards. 7.42 lakh POS transactions aggregating to Rs. 183.58crore were transacted using these cards during the year 2013-2014.

15.4 During the year 2013-14, Bank has introduced Corp Secure cards for the beneit ofits customers, wherein credit limits upto 80% of the deposits held, are granted, forutilization through credit cards.

15.5 For customer convenience, the Bank has introduced tech-sawy services such as AutoDebit Facility, SMS alerts, e-statements, on-line viewing of credit card details, ATMinterface and Veriied by Visa authentication for on-line transactions and issuance of OTP(One Time Password) to IVR transactions (Interactive Voice Response System). All thesefacilities are expected to help the customers to use the Cards efficiently.

15.6 To mitigate the risk involved in operations of credit cards and also to provideconfidence to the Card holders, VAA-VRM (VISA Advance Authorisation and VISA RiskManagement) was introduced during this financial year.

15.7 Delivery Channels

15.7.1 ATMs: As of 31.03.2014, Bank had installed 2264 ATMs. Of this 408 ATMs are underowned model, 98 ATMs are under Bank's outsourced model, 1755 ATMs are installed under DFSinitiated outsourced Model and 3 are mobile ATMs. The Bank has initiated steps to replaceall old ATMs which are more than 7 years old and as of 31.03.2014, 768 old machines havebeen replaced with new machines.

15.7.2 Debit Cards: As on 31st March, 2014, the total number of outstanding debit cards(all variants) stood at 59.29 lakhs with addition of 12.93 lakh cards during the financialyear 2013-14. The premium debit card variants of the Bank have gained popularity and as of31.03.2014, the number of outstanding Platinum and Signature Debit cards were 15,769 and4,960 respectively.

15.7.3 Sponsoring Small Banks for VISA Sub membership: Expanding the scope of plasticmoney, the Bank has enabled smaller banks to issue VISA branded cards to its customersthrough Sub Membership. The facility has empowered the customers of such smaller banks bybringing them into the plastic money culture giving them global acceptance. As of31.03.2014, Bank has sponsored 4 small Banks and this arrangement has augmented the feeincome of the Bank.

15.7.4 POS machines: As of 31.03.2014, the Bank had installed 13,501 POS machines atvarious merchant establishments. This value added service has enabled the Bank to not onlyenroll new customers but also retain existing customers. During the financial year, Bankhas introduced Mobile POS facility. The Bank is also sponsoring smaller Banks for POSacquisition by acting as settlement Bank.

16 Depository Services

16.1 The Bank is a participant of National Securities Depository Ltd., (NSDL) andoffers Demat services to its customers such as opening of Demat Accounts,Dematerialization, Rematerialisation, delivery & settlement of shares, pledge &hypothecation of securities, facilitating corporate action etc. The DP services arepresently being offered in 87 branches of the bank. The Bank has tied up with M/s ReligareSecurities Ltd., for offering Online and Offline Trading facilities to its customers. Now,the Bank has also tied up with Geojit BNP Paribas for the same. The Bank is currentlyexpanding its network of DP and ASBA (Application Supported by Blocked Amount) designatedbranches across the country.

16.2 ASBA (Application Supported by Blocked Amount)

The Bank was one of the first four banks identified by SEBI to introduce ASBA. It is anadditional payment mechanism for the benefit of investors who apply in IPO, FPO &Rights Issues through book building route or through Fixed Price Issue. This option isavailable to all segments of investors — QIBs, Non Institutional Investors such asBody Corporates, HNI etc. and Retail segment consisting of individual investors. The Bankis offering ASBA through all its branches across the country. For net banking customers,the Bank has introduced a very convenient mode of applying for ASBA through internet i.e.only with simple information such as Demat Client ID, DP ID, Name, PAN Number etc., at thefirst registration level under the 'Maintain Investors' sub-heading available in thewebsite of the Bank under ASBA head.

17. Marketing Initiatives

17.1 A marketing set up is in place at the Head Office as well as at the Zonal officesto support the efforts of the field in reaching out to the customers for businessdevelopment. 50 new marketing officers have been recruited and they have joined the ZonalMarketing teams in various Zones.

17.2 New Products — Corp Saral Savings A/c

The Bank launched a new variant of Savings Bank Account during the year viz "CorpSaral" to give a boost to the Marketing efforts of branches. The product offersfollowing free facilities viz Personal Accident cover up to Rs. 1 lakh, monthly E-mailstatement, Internet Banking facility, NEFT, Demand Draft (through Internet Banking),Personalized Cheque Book (upto 40 leaves per year), Online opening of Fixed/RecurringDeposits etc. The product has taken off well having opened 3,18,441 accounts during theyear with an outstanding balance of Rs. 521 crore.

17.3 Clientele Acquisition under CASA

Mobilizing CASA accounts has been a priority area for the Marketing Team. During theyear, the Bank could mobilize 21.82 Lakh Savings Bank Accounts and 49,078 Current Accounts(excluding Corp Pragathi account). There has been 27 percent growth in new Clientele underSB and 5 percent growth in CA customers.

17.4 Campaigns

17.4.1 A CASA campaign was conducted from 01st May to 30th June,2013 for mobilizing quality CASA accounts. During the Campaign, 84,251 SB and8,059 CAaccounts were opened with outstanding balances of Rs. 260 crore and Rs. 197 crorerespectively. More focus was given on remote delivery channel products which resulted ingetting a registration of78,139 Applicants for SMS Banking and 27,000 for InternetBanking.

17.4.2 For expansion of SB base, a Campaign named Hazaar Muskaane was conducted from15.07.2013 to 15.10.2013. Zones organized door to door campaigns for mopping up 7.84 lakhSB accounts with outstanding balance of %00 crore.

17.4.3 Motivated by this, yet another Campaign - "Nishta Campaign" wasorganized from 16th October to 15th December, 2013 with a sustenanceperiod upto 15th March, 2014, with participation of all the staff members including thatof corporate office and other administrative offices. The campaign was targetedspecifically at increasing Quality SB Clientele. The call was for each staff of the bankto bring in a minimum of 10 totally new, Quality Savings Bank accounts. During thecampaign 1.95 Lakhs eligible SB accounts were opened with outstanding balance of Rs. 490crore.

17.4.4 To further boost SB base, one more campaign named as Samarpan Campaign wasconducted from 1st March to 10th March, 2014. During the Campaign57,867 SB accounts were opened with outstanding balance of Rs. 52.39 crore.

17.4.5 Sending E mailers to all the customers for promotion of products and services: Emailers were also sent to NRI customers for marketing Corp Signature accounts, targetingthe High Value NRI customers.

17.5 CLSB Accounts for NRIs

A longstanding demand from the field regarding modifications to CLSB scheme wasfulfilled by enabling NRIs to open CLSB Accounts and increasing the tenure of the termdeposit therein from 3 years to 5 years.This is going to be of great comfort for NRIs asit would facilitate auto sweep of balances in SB to term deposits.

18. Customer Service

18.1 The Bank strongly believes that an effective, prompt and efficient customerservice plays a vital role in the business development of the Bank. With this in mind, theBank has initiated a number of measures to improve customer service.

18.2 Town Hall Event: Under the aegis of the Banking Ombudsman, a town hall event wasorganized at our Corporate Office on 16th April, 2013. The meeting was graced by theDeputy Governor of RBI, Dr. K. C. Chakrabarty along with Chairmen of different banks. TheDeputy Governor's address was followed by an interactive session with customers. TheDeputy Governor I Chairmen of different Banks amicably replied to all the queriesraised by customers.

18.3 Public Grievance Redressal System: As per the directives of the Parent Ministry,the Bank has launched the Public Grievance Redressal System wherein customers can lodgecomplaints through various channels such as e-mail, SMS, complaint form ported in thewebsite, letters and fax etc. These complaints are pooled into a common and centralizeddata base and then resolved at different levels.

18.4 Appointment of Chief Customer Service Officer: Shri Ranjan Kumar Sinha has beenappointed as Chief Customer Service Officer with effect from 25th November, 2013. TheChief Customer Service Officer acts as an Internal Appellate Authority (InternalOmbudsman) in resolution of customer complaints.

18.5 Customer Day: To commemorate the memory of our Founder and also to rededicateourselves to the cause of the customers and customer service, the Bank celebrated its109th Foundation Day as Customer Day at all the Branches/Offices on 12.03.2014. The Bankmobilized 10,377 CASA accounts amounting to Rs. 5.90 crore on that day. A few Zonescelebrated the Customer Day by holding Blood donation Camps.

19. Integrated Risk Management System

19.1 Basel II Compliance

19.1.1 Consequent upon globalization, the interconnectivity between various countriesof the world has drastically increased. Banks and other inancial institutions all over theworld have become more interconnected than ever as the time zones separating the inancialworld has shrunk and truly world has become a smaller place. This integration however alsomeans that geo-political risks arising in one part of the globe also affects the otherpart of the world. Thus with each passing day newer and more complex risks are arising andFinancial Institutions across the world have to continuously enhance and improve theirrisk management techniques and architecture to address the growing risks. Basel II andBasel III accord are aimed at harmonizing the practices adopted by various Banks operatingacross jurisdictions and countries, under a common supervisory framework, thus bringinguniformity in the Risk Management Practices.

Risk Management is an integral part of bank's organizational structure and businessstrategy. Identiication, measurement, monitoring and controlling the risks enables theBank to minimize losses and maximize profits. The major types of risks faced by the Bankare Credit Risk, Market Risk and Operational

Risk.

19.1.2 The Credit Risk Management Committee, Market Risk Management Committee/AssetLiability Management Committee and the Operational Risk Management Committee - the threeinternal committee of executives along with the Risk Management Committee of Board arelooking after the implementation of Integrated Risk Management system in the Bank. TheBank has well laid down policies for management of Credit, Market and Operational Risk.

19.1.3 The Bank has put in place Internal Capital Adequacy Assessment Process (ICAAP)to assess the risks to which it is exposed and has put risk management process in place tomanage and mitigate those risks and evaluate its capital adequacy relative to its risks.Stress testing process is in place for enhancing risk assessment by providing the Bank abetter understanding of the likely impact even in extreme circumstances. Stress testingenables the banks to identify the vulnerable areas if any and also to prepare for the sameby developing appropriate contingency plans.

19.1.4 The Bank has appointed consultants for preparing the road map and hand holdingthe Bank in moving towards the advanced approach of risk management.

19.2 Credit Risk

19.2.1 In the area of credit risk, the Bank had in the year 2006 implemented the ratingmodels applicable for borrowers under commercial loan segment. The rating models areworking on web based enterprise wide solution called Risk Assessment Module (RAM). Thissoftware which is currently used to appraise the borrower with exposure of Rs. 10 lakh andabove, enables the bank to assess the ratings while preparing the appraisal notes. The RAMsoftware helps in creating database for moving over to the IRB approaches of Basel —II.

The Bank has also procured Capital Assessment Module (CAM) which is used for thepurpose of capital computation of credit risk under standardized approach of Basel II asprescribed by the RBI. The Bank has already applied to the Reserve Bank of India formigrating to FIRB (Foundation Internal Ratings based approach) under credit risk.Presently bank is following Standardised Approach in Credit Risk.

19.2.2 Bank has formulated a Group Credit Policy which lays down policy guidelines forcredit risk management covering all areas of operation where credit risk is involved. Thepolicy would enable the bank to enhance the risk management capabilities thus making itpossible for the bank to show a steady and healthy growth in its credit portfolioresulting in overall improved performance.

19.2.3 In terms of the above policy, the bank has set prudential limits to individualborrowers, non-corporate borrowers, entry level exposure norms, substantial exposurelimits, benchmark financial ratios, borrower standards, exposure limits/ceilings toindustries, sensitive sectors, rating category etc. The Board reviews the prudentiallimits periodically.

19.2.4 The Bank has implemented a multi-tier credit approving system wherein the loanproposals are cleared by an "Approval Grid" before being placed to therespective sanctioning authorities. For speedy and efficient disposal of credit proposals,the Bank has established Retail Hubs at major centres for retail credit approval andCentralized Credit Processing cells at each of the zones for appraising larger creditproposals. The Bank has also set up SME Loan Centers for quick and speedy disbursal ofcredit facilities to the SMEs.

19.2.5 On-site Credit Audit of Borrowal accounts has been introduced with effect from01.12.2011 for the credit exposure of Rs. 5 crore and above.

19.2.6 Offsite surveillance through the core banking platform is now made use of totrack exceptions in the conduct of borrowal accounts and initiate timely action toprotect/ improve the health of credit portfolio. Credit monitoring cells have also beenformed at all the zonal offices for independent and effective monitoring of borrowalaccounts. Large Credit exposures of Rs. 1 Crore and above are monitored through the fullyautomated Graded System of monitoring on a monthly basis. Credit Exposure of Rs. 1 Croreup to Rs. 5 Crore is being monitored by the respective ZO's exposure of Rs. 5 Crore to Rs.10 Crore by respective Circle Offices and Rs. 10 crore and above by CRMD HO. A monthlynote is being placed to the respective ZH/CH and CMD by ZO/CO/CRMD HO.

19.2.7 The Bank has also undertaken Industry Risk Assessment and Portfolio Studies inorder to assess the credit risk at the portfolio level and adopt strategies to improve thequality of portfolio and reduce the potential adverse impact of concentration of exposuresto certain borrowers or industries.

19.2.8 Study on rating migration of borrowal accounts is undertaken on Bi-Annually andappropriate corrective actions are initiated to protect the portfolio quality.

19.2.9 On-line confirmation of rating assigned by Credit Divisions at H.O., ZonalOffices and Circle Offices has been put in place, where by the ratings awarded by thesanctioning divisions are being reviewed.

19.3 Market Risk

19.3.1 Market Risk is the risk to the Bank resulting from the movement in market pricesparticularly due to changes in the interest rates, equity and commodity prices. Thechanges if not mitigated well can have direct impact on the Bank's earnings and itscapital.

19.3.2 For management of Market Risk, emphasis has been placed on measuring, monitoringand managing liquidity interest rates, foreign exchange and equity risk of the Bank. Themarket risk in trading book is monitored and managed as per appropriate control mechanismin place. Market position, funding patterns, duration, counterparty limits and varioussensitive parameters are monitored. The advanced risk management tools such as Value atRisk (VaR), Earnings at Risk (EaR), Net Overnight Open Position Limits (NOOP) and modifiedduration limits are used in managing market risk. The Bank is presently carrying out theparallel run capital computed under the IMA (Internal Models based Approach) andStandardised Duration Approach (SDA). Presently Bank is using SDA for calculating capitalrequired under market risk.

19.4 Operational Risk

19.4.1 Operational Risk is embedded in all business operations and the management ofOperational Risk is an important part of the Sound Integrated Risk Management Structure.In the background of the size and complexity of business and risk philosophy of the bank,emphasis is being given to impart knowledge at the field level through continuous trainingprocess. In order to move over to advanced approaches under Basel II framework and adoptindustry best practices in risk management, the bank has appointed consultants andsoftware vendors for implementing Operational Risk Management Framework conforming tointernational standards.

19.4.2 The Bank has implemented Operational Risk Management Policy which helps it inmanaging the Operational Risk in an effective manner. The Bank has also implementedframeworks for Loss Data Capture, Risk Control Self-Assessment (RCSA), Key Risk Indicator(KRI), Loss Data Modelling, Risk Appetite and Scenario Analysis. The Bank has alsoformulated Business Line Mapping framework for mapping products, activities, income intodifferent business lines.

19.4.3 The Bank has applied to Reserve Bank of India for moving over to "TheStandardised Approach (TSA)" for computation of capital charge for Operational Risk.The Bank has collected Operational Risk loss data for five years. Bank has rolled outOperational Risk software which is used for management of Operational Risk loss data, RCSAand KRIs across the business lines. The Bank has compiled RCSA registers for all itscritical units and has conducted RCSA workshops at various locations. Bank is monitoringvarious KRIs for critical units at regular intervals.

19.4.4 Bank has submitted Letter of Intent to Reserve Bank of India for moving over tothe "Advanced Measurement Approach (AMA)" for computation of capital charge forOperational Risk.

19.4.5 Under the Risk Based Supervision, Risk Profile Templates covering five businessrisks and two control risks are prepared on quarterly basis and submitted to RBI.

19.5 Asset Liability Management (ALM)

19.5.1 The ALM function involves planning, directing and controlling the flow, level,mix, cost and yield of consolidated funds of the Bank. The primary objective of ALM is notto eliminate the risk, but to manage it in such a way that the volatility of net interestincome is minimized.

19.5.2 As a part of Risk Management and control, the Bank is using ALM system forstudying and analyzing the interest rate sensitivity (GAP Analysis), Maturity andLiquidity analysis of Assets and Liabilities. The bank is measuring the liquidity usingthe Stock and the Flow approach, further models like Earning at Risk and Duration are usedfor Interest rate risk management. Stress testing of liquidity risk and interest rate riskis conducted on quarterly basis. The Bank applies Value-at-Risk (VaR) to measure the riskin the Trading Book. The Bank has upgraded its ALM software and is conducting parallel runof Transfer Pricing Module under the said upgrade.

19.5.3 The Bank has constituted the Market Risk Management Committee/Asset LiabilityManagement Committee which meets at regular intervals to review the interest ratescenario, product pricing for both deposits and advances, desired maturity proile of theincremental assets and liabilities, demand for Bank funds, cash flows of the Bank, profitplanning and overall Balance Sheet Management.

20. Human Resources Management

20.1 To meet the requirements of Business Growth, Branch Network expansion andattrition/retirements, Bank has recruited 2,925 employees directly from the market duringthe year. This includes 2,080 Single Window Operators, 597 Assistant Managers and 248Specialist Officers. The total staff strength stood at 18,282 as on 31st March, 2014 ascompared to 15,908 as on last day of the previous year.

20.2 Staff productivity in the Bank as on 31.03.2014 stood at Rs. 19.33 crore and NetProfit per employee stood at Rs. 3.29 lakh as on 31.03.2014 as against Rs. 19.22 crore andRs. 9.68 lakh, respectively, registered as at the end of the previous year.

20.3 The Bank has been following the guidelines for reservation in employment tospeciied categories. During the year, of the total 2,925 new recruitments, 711 candidatesbelonged to Scheduled Caste and Scheduled Tribe categories. The representation ofScheduled Caste/Scheduled Tribe employees in the total staff strength was 4,949 (27.07%)as on 31.03.2014.

20.4 The Bank has also a fair representation of other reserved categories. As on 31stMarch, 2014, 3,762 staff representing Other Backward Communities, 373 PhysicallyHandicapped staff and 1,083 Ex-Servicemen were on the rolls of the Bank.

21. Human Resources Development & Training

21.1 Bank strives to groom and develop its workforce to make it one of the highlyproductive workforces of the industry. Competency and capacity building assumes greatsignificance in the era of competition and the Bank is dedicated to empower its employeeswith knowledge, skills and right attitude. The division has trained 13,599 employeesduring the FY 2013-14. The employees have been trained in various areas of specializationlike Credit, Forex, Risk Management, Currency Management, Human Resources Management,Information Technology as well as in General Management applications. Complying with thedirectives of Reserve Bank of India, special currency handling and management programmeswere held across the country.

21.2 Induction programmes for the Probationary Assistant Managers were conducted inassociation with M/s Manipal Global Education, Bangalore, M/s Nitte Institute of Banking& Finance, Mangalore and Bankers' Quotient Academy, Mumbai. Induction programmes forAgricultural Field Officers were organised in association with Bankers Institute for RuralDevelopment, Mangalore/Lucknow and National Institute for Rural Development, Hyderabad.Similar programmes were organised for Credit Managers, Forex Officers and MarketingOfficers.

21.3 Four hundred forty eight Officers/Executives of the bank were nominated to variousexternal training centres of repute for intensive training in their field of operation.The training centres identified for the purpose were - NIBM, CAB, RBI, IDRBT, NPCI, IIBF,CII, FICCI, NIRD, BIRD, ASCI, IMI, IIBM-Guwahati etc.

21.4 The division has nominated 36 Executives/Officers for attendingSeminars/Workshops/Study Tours/Trainings abroad during the financial year.

21.5 One hundred and seventy eight Senior Executives in Scale V and above were impartedinputs on different areas related to operations and administration in differentorganizations/ institutions.

21.6 During the year, the bank has trained 3,554 employees belonging to SC/ST communityand 3,138 employees belonging toOBC community.

21.7 At present, the Bank is having Staff Training facilities at 7 locations. Duringthe financial year 7,278 employees were trained at our Staff Training Centres.

21.8 Promotions

The Bank provides optimum opportunities to its employees to rise up in their career andshoulder higher responsibilities. "Fast Track Promotion" processes have beeninstitutionalized in the bank to meet the aspiration level of its employees,simultaneously catering to the manpower requirements of the bank.

During the financial year a total of 330 vacancies in officers' cadre were illedthrough promotions.

22. Inspection & Audit

22.1 As per the guidelines of the Government and RBI, the Bank has adopted the policyof risk based internal audit. Risk based internal audit lays focus on proper riskidentiication and assessment, effective risk containment and management measures, adequacyof control systems and procedures as well as optimum use of resources. It aims at givingan assurance to the Management on the level of regulatory and systemic compliance, besidesassisting in accomplishment of corporate governance objectives.

22.2 In order to carry out internal audit of branches and follow up functionsadequately and efficiently, certain audit functions have been decentralized and delegatedto 12 Zonal Audit Ofices (ZAOs). These ZAOs, located at important centers across theCountry, conduct audit and close the audit reports in terms of the Annual Audit Plan.

22.3 All the Branches of the Bank are subjected to internal inspection so as to containrisk, have effective control mechanism and improve eficiency of operations. Risk basedinternal branch inspection is conducted once in 9 to 18 months depending upon the riskperception. The periodicity of branch inspection is decided based on such riskperceptions. Newly opened branches are subjected to first inspection within 6 to 9 monthsfrom the date of starting the operations.

22.4 Risk based snap audits are conducted at identiied Extraordinarily Large Branches(ELBs)/Very Large Branches (VLBs) and high risk rated branches in between two regularinspections. Special Snap audits are also conducted at the identified Branches/Offices, asand when need arises for such audits. Quarterly KYC compliance audit of newly openedaccounts is also conducted at the Account Processing Centres (APCs), in case of Zoneswhere the branches are linked to APCs and at 5 randomly selected branches in other Zones.

22.5 Management Audit of functional Divisions at Head Office, Circle Offices and ZonalOffices are conducted once in a year. Other Ofices such as Treasury & InvestmentDivision, Mumbai, Corp Bank Securities, Capital Market Centre, COBSETI at Chikmagalur,STCs, Lead Bank Offices as also the CMS Core centres, ATM centres, LIC Credit Card Centreetc. are also subjected to regular inspection once in a year. Further, Forex DBs,CAPS/Mini Caps Branches, Currency Chests, Service Branches, ARMBs, Retail Hubs, LIC Hubs,SMELCs etc. are subjected to annual inspection.

22.6 In terms of RBI guidelines, Concurrent Audit is carried out at theBranches/Offices identified based on risk perception. During the year 2013-14, 324branches covering 78% of total business of the Bank, were subjected to Concurrent Audit byengaging the services of external firm of Chartered Accountants. All the 16 ServiceBranches of the Bank have also been brought under the ambit of Concurrent Audit witheffect from 01.10.2013. Further, identified HO functional Divisions like IBR, FTS Centre,Bangalore, Treasury and Investment Division at Mumbai including Investment Cell, PreciousMetal Cell and Forex Cell, are also subjected to Concurrent Audit apart from regularinspection.

22.7 All Branches including Extension Counters are subjected to Off-Site SurveillanceAudit. On Site Branch Information Security Audit (BISA) of identified branches is alsocarried out to identify security and processing risks in the computerized environment,evaluate related controls to ensure security, functionality and reliability of hardware,operating system and application software and to ensure data availability, integrity aswell as confidentiality. Systems Audit of critical installations at Core Centre, FTSCentre, Web Centre, Treasury and Investment Division and DR Site as well as audit of ATMVaults and audit of Service Provider Units is conducted every six months.

22.8 Income audit is carried out at identified Branches/Offices once in a year.

22.9 All important inspection and audit findings are placed before the Audit Committeeof the Board for information and suitable directions.

23. Legal Services

Legal Services Division of the Bank plays a significant role in the various commercialactivities undertaken by the Bank. It had been performing diversified activities such asScrutiny of legal opinions regarding immovable properties, Drafting/ approval of BankGuarantees/Counter Guarantees, Advising on invocation of Bank Guarantees, approval ofPlaint and other applications to be filed before various Courts/Tribunals/ Authoritiesetc.; advising on the matters relating to various High Courts & Supreme Court,approval of MOUs/Agreements referred by various Divisions of the Head Office of the Bank;advising Branches regarding recovery of the dues of the Bank, action under SARFAESI Act2002 & Suit filed Accounts, advising on Legal Audit, settlement of claims, creation ofcharge in respect of the EMG with Central Registry [CERSAI] and Advising on mattersrelating to RTI Act and disposal of Appeals received from Citizens under the RTI Act.Advising on matters relating to proceedings under Public Premises (Eviction ofunauthorized Occupants) Act, 1971. Legal Services Division has also been taking effectivesteps in defending the Bank in legal proceedings initiated before various forums likeCivil/ Criminal Courts, advising on the matters relating to Consumer Forums/otherstatutory authorities. Matters pertaining to orders of attachments from Income tax, Salestax etc. Division also advises O & M Division on various documentation aspects andrevision/Updating of Manuals. The Division is handling various legal matters and offeringlegal guidance/clarifications to branches/Zonal Offices and Administrative Offices.Division is also handling Empanelment/deletion/Review of performance of Advocates.

24. The Right to Information Act, 2005

24.1 Bank in compliance of Right to Information Act, 2005, has designated AssistantPublic Information Oficer (APIO), Public Information Oficer (PIO) and AppellateAuthorities (AA) at Head Office and Public Information Officer and Appellate Authority ateach Zonal Office and Circle Office. Name of APIO, PIO and AA are displayed in the Bank'sWebsite with other relevant information as required under RTI Act by Customer ServicesDivision, Head Office. Bank is complying with the provisions of the said Act at all levelsand disposing of all the applications and appeals within the stipulated time.

25. Security

25.1 In the backdrop of challenging law and order situation across the country withspeciic reference to attack against banks and inancial institutions, the Bank has beenalert, conscious and concerned about the safety of public assets, customers, employees andbank's property. Bank has adopted forward posture in implementing measures toavoid/minimise security risk by leaning on technology as force multiplier in addition toinstallation of physical security measures like ire alarm, security alarm, access controlsystem, CCTVs and guarding wherever required. Frequent interactive sessions with theemployees manning the show windows by Security Oficers adds additional dimension ascontributing factor in sensitising them with prevalent threats and measures. Bank isabreast with latest development in the security management ield aiming to constantlyrediscover the key matrixes for breaking new grounds with the sole aim of providing utmostcomfort to the customers.

26. Compliance

26.1 The Bank has a Compliance Division headed by an Executive of the Rank of DeputyGeneral Manager who represents as the Chief Compliance Officer [CCO] of the Bank, as perthe directions of the Reserve Bank of India.

The Compliance Division in the Bank maintains a system of internal checks and balancesdesigned to ensure strict observance of applicable statutory provisions contained invarious legislations, compliance with rules and regulations applicable to banks andadherence to internal policies and fair practices codes.

27. Vigilance Machinery

27.1 As custodians of public funds, the Bank is expected to maintain highest standardsof honesty, integrity, transparency and probity. Banking Organizations essentially work onthe philosophy of mutual trust and conidence. The important factors today are"effective employee engagement & Organizational growth". Vigilance is avital management tool to increase eficiency and effectiveness of the Organization bypreventing leakages that adversely affect productivity and proitability. The roles andresponsibilities of each functional division in the Bank are well deined and documentedfor better clarity and effectiveness. The vigilance functions in the Bank are primarily inthe nature of prevention and detection rather than taking punitive action. The vigilancemachinery plays the role of a watchdog so as to ensure that the laid down systems andprocedures are not tampered with for any personal gain or beneit. It believes in theprinciples of natural justice, punishing the guilty irrespective of rank and position.

27.2 Wherever instances of serious violation in the systems and procedures are reportedor complaints received against the Bank officials, which primarily reflects on theintegrity of the Oficial, an investigation is ordered and preventive measures are takenincluding taking punitive action against the erring officials wherever required. As apro-active measure, the Vigilance Division also conducts preventive checks and reports onthe deviations observed. It also suggests how such violations can be avoided with thecollective effort of all.

27.3 The Bank has framed its own "Whistle Blower Policy", the objective ofwhich is to identify any untoward events with the help of the employees and to take timelycorrective measures so as to prevent/protect the Bank at the initial stage itself. Thismechanism also provides adequate safeguards against victimization of employees who availof this mechanism.

27.4 'Jaagrithi' a quarterly newsletter on preventive vigilance is being published andcirculated amongst all branches/offices of the Bank regularly. In the said letter, gist ofthe latest cases of fraud and the modus operandi adopted by the fraudsters are published,with an intention to alert our staff members.

27.5 The Bank has a Preventive Vigilance Mechanism in place wherein branches have beendirected to conduct meetings at regular intervals and discuss about the instructionsissued by the Vigilance Division and to share their thoughts I experiences andbring about noticeable changes in the working environment with a view to preventingpossible frauds.

27.6 The Division has given suggestions to the functional divisions for process changesbased on the indings of real cases come across.

27.7 The Division has framed Fraud Prevention & Employee Reward Policy incontinuation of Fraud Risk Management Policy to -

• Recognize the efforts of staff members who thwarted frauds

• Create awareness among all staff members

• Encouraging/motivating the other staff members to emulate such acts.

28. Opportunities

The Bank has pan-India presence with 8,617 functional units comprising of 2,021Branches, 2,264 ATMs &4,332 Branchless Banking units and has opened its zonal ofice inBhubaneswar to tap the potential of eastern region of India. It also has registered itsglobal presence through its foreign representative ofices at Dubai and Hongkong. The Bankstill has scope for expansion of branch network including unbanked areas in India and insome of the important foreign locations.

The increased presence of the Bank's branches in rural and semi-urban areas provides agreat opportunity for the Bank for improving its exposure to Agriculture and Prioritysector, SME and Retail segment, to register a balanced growth in retail portfolio intandem with the wholesale business. Its innovative technological initiatives like internetbanking, mobile banking and other facilities have been instrumental in attracting next-gencustomers. Large presence of its branches in coastal areas of Kerala, Karnataka, Goa andMaharashtra also provides greater opportunity for it to tap the NRI potential of the area.

The Bank has an uninterrupted track record of proit and dividend payment since itsinception, for the last 109 years. It is amongst the best banks in the industry in termsof employee productivity. A high calibre workforce, better spread of network of branchesand ATMs, better infrastructure facilities, a competitive customer service and an advancedtech savvy environment helped the Bank to be the beneiciary of the Direct benefit transferscheme of the Government of India and get a prime slot in the minds of the people. Allthis provide a great opportunity for cross selling of its products and services for theoverall growth of the Bank's business.

Pioneer in Financial inclusion with 4,332 branchless banking units spanning over 16states across the country.

A trendsetter in the IT based innovations, Bank is having fully computerisedenvironment in all its branches with interconnectivity through core banking.

A wide range of Delivery Channels, strong presence in the metro centres, comparativelyyounger workforce provide a great potential for the Bank to fully exploit the techno savvyproducts to its advantage.

29. Threats

The banking industry in India is undergoing a major transformation due to changes ineconomic conditions.

High rate of inflation and volatility in the Economy has its impact on the performanceof the Banking Industry.

Banks, like any other industry are exposed to credit, Market and Operational Risks inthe day to day operation, thinning of Interest spread affects the profitability structureof the Bank.

Any changes in the regulatory guidelines, policies, provisions by theGovernment/Regulator etc., may impact the performance of the Bank. Effectiveness ofRecovery Management, Asset Liability Management and Risk Management may have its ownimpact on performance. Acute competition from the peer banks is likely to affect businessgrowth, margins and profitability.

30. Road map for the future

To become the most preferred Bank with Global Standards, Corporation Bank has takenvarious initiatives to attain this coveted goal. The bank's focus is on mobilizing CASAdeposits to increase Bank's CASA share. Quality Credit growth with focus on Agriculture,Retail and MSME, Expansion of Branch and ATM Network and other alternate channels ofdelivery, Customer acquisition, especially, next-gen customers, and Improving AssetQuality.

For and on behalf of the Board of Directors

Place : Mangalore (S. R. Bansal)
Date : 23.05.2014 Chairman & Managing Director
   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
St Bk of India 185,914.59 17.01 1.57 15.19 10.0 0.0 0.00
Bank of Baroda 37,428.51 7.84 1.04 15.42 13.4 0.0 0.00
Punjab Natl.Bank 33,922.34 9.77 0.95 14.98 10.0 0.0 0.00
Canara Bank 18,383.52 7.49 0.76 12.25 10.4 0.0 0.00
Bank of India 18,201.65 6.80 0.70 15.52 11.2 0.0 0.00
IDBI Bank 14,483.63 13.24 0.66 12.91 5.4 0.0 0.00
Union Bank (I) 12,108.06 7.39 0.72 13.17 10.4 0.0 0.00
UCO Bank 10,106.51 6.64 0.95 15.18 16.8 0.0 0.00
Central Bank 9,696.16 0.00 0.79 14.96 0.0 0.0 0.00
Syndicate Bank 9,140.73 5.53 0.84 15.00 16.7 0.0 0.00
I O B 8,740.09 18.77 0.61 13.25 4.5 0.0 0.00
Oriental Bank 8,406.29 7.70 0.66 12.42 9.2 0.0 0.00
Indian Bank 6,977.40 6.65 0.60 13.00 10.3 0.0 0.00
Allahabad Bank 6,472.69 7.43 0.59 12.78 10.9 0.0 0.00
Corporation Bank 5,917.51 10.90 0.59 13.55 5.7 0.0 0.00

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Key Information

Key Executives:

Sadhu Ram Bansal , Chairman & Managing Director  

Sushobhan Sarker , Director(Shareholders)  

Kawaljit Singh Oberoi , Director(Shareholders)  

S Shabbeer Pasha , Director(Shareholders)  


Company Head Office / Quarters:
Post Box No 88,
Mangaladevi Temple Road,
Mangalore,
Karnataka-575001
Phone : 91-824-2424971-2423853
Fax : 91-824-2423853/2421581
E-mail : isd@corpbank.co.in
Web : http://www.corpbank.in
Registrars:
Karvy Computershare Pvt Ltd
Plot No 17-24
Vittal Rao Nagar
Madhapur
Hyderabad-500081

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