MANAGEMENT DISCUSSION AND ANALYSIS
1. Monetary and Credit Policy 2012-13
1.1 The Annual Monetary Policy 2012-13 was formulated in a challenging macro economicenvironment. At the Global level, the euro area sovereign debt problem continued to weighon the global economy. Growth risks have emerged in emerging and developing economies(EDEs).
1.2 Domestically, the state of the economy was a matter of growing concern. Thoughinflation moderated, it remained sticky and above the tolerance level, even as growthslowed. Significantly, these trends were occurring in a situation in which concerns overthe fiscal deficit, the current account deficit and deteriorating asset quality loomlarge. In this context, the challenge for monetary policy was to maintain its vigil oncontrolling inflation while being sensitive to risks to growth and other vulnerabilities.
1.3 Based on these assessment of a normal monsoon and an expected better performance ofindustry compared to previous year the baseline GDP growth for 2012-13 was projected at7.3%. Keeping in view the domestic demand-supply balance, the global trends in commodityprices and the likely demand scenario, the baseline projection for WPI inflation for March2013 was placed at 6.5%.
1.4 Consistent with growth and inflation projections, M3 growth for 2012-13, for policypurposes, was projected at 15%. Consequently, aggregate deposits of SCBs were projected togrow by 16%.
1.5 Keeping in view the need to balance the resource requirements of the private sectorand the public sector, growth in non-food credit of SCBs was projected at 17%.
1.6 After raising the policy rate by 375 basis points during March 2010-October 2011,to contain inflation and anchor inflation expectations, the Reserve Bank paused in itsmid-quarter review (MQR) of December 2011. Subsequent growth-inflation dynamics promptedthe Reserve Bank to indicate that no further tightening was required and that futureactions would be towards lowering the rates.
1.7 Against this backdrop, the stance of monetary policy was intended to:
Adjust policy rates to levels consistent with the current growth moderation.
Guard against risks of demand-led inflationary pressures re-emerging.
Provide a greater liquidity cushion to the financial system.
1.8 On the basis of its policy stand, the Reserve Bank of India decided to reduce therepo rate under the liquidity adjustment facility (LAF) by 50 basis points from 8.5% to8.0%. The reverse repo rate automatically adjusted to 7.0%. The MSF rate, determined witha spread of 100 basis points above the repo rate, adjusted to 9.0%. In order to givegreater liquidity cushion the Reserve Bank raised the borrowing limit of under the MSFfrom 1% to 2% of their net demand and time liabilities (NDTL) outstanding at the end ofsecond preceding fortnight with immediate effect. The cash reserve ratio (CRR) ofscheduled banks was retained at 4.75% of their NDTL.
1.9 Some other important regulatory & developmental measures proposed were asfollows:
- To mandate SLBCs to prepare a roadmap covering all unbanked villages of populationless than 2,000 and notionally allot these villages to banks for providing bankingservices in a time-bound manner.
- Banks were advised to offer a 'basic savings bank deposit
account' with certain minimum common facilities and without the requirement of aminimum balance to all their customers.
- Banks were mandated not to levy foreclosure charges or pre-payment penalties on homeloans extended on a floating interest rate basis.
- Banks were advised to initiate steps to allot a unique
customer identification code (UCIC) number to all their customers. Existing individualcustomers may be allotted unique customer identification code by end-April 2013.
- Banks should have a board approved transparent policy on pricing of liabilities andthey should also ensure that variation in interest rates on single term deposits of Rs.1.5 million and above and other term deposits is minimal.
- Banks should reduce their regulatory exposure ceiling to a single NBFC, having goldloans to the extent of 50% or more of its total financial assets, from the existing 10% to7.5% of bank's capital funds.
- To mandate banks to put in place a robust mechanism for early detection of signs ofdistress, and measures, including prompt restructuring in the case of all viable accountswherever required, with a view to preserving the economic value of such accounts; and tomandate banks to have proper system generated segmentwise data on their NPAaccounts, write-offs, compromise settlements, recovery and restructured accounts.
- To mandate banks to have a board approved policy on classification of unclaimeddeposits; grievance redressal mechanism for quick resolution of complaints; recordkeeping; and periodic review of such accounts.
- With a view to address the issue of counterfeit notes in circulation, banks wereadvised to ensure that notes received over the counters are re-circulated only afterensuring their proper authentication through machines.
- Keeping in view the extended geographical spread of bank branch network andleveraging on technology, RBI decided to channelize the distribution of currency and coinsonly through currency chests and bank branches.
2. Macro-Economic Scenario in 2012-13
2.1 As per the advance estimate of Central Statistics Office (CSO)'s India's GDP growthis expected to moderate to 5% in FY13, which will be lowest growth rate of the country ina decade. The slowdown was mainly due to the moderation in industrial activity aggravatedby domestic supply bottlenecks, and slowdown in the services sector reflecting weakexternal demand.
2.2 As per advance estimate, the agricultural sector is likely to slow down to 1.8% in2012-13, compared to 3.6% 2011-12. Manufacturing growth is also expected to drop to 1.9%in FY13, from 2.7% in previous year. The services sector including finance, insurance,real estate and business services sectors are likely to grow by 8.6% in FY13, against11.7% in FY12. However, the growth in the mining and quarrying is likely to be better at0.4%, compared to contraction of growth of 0.6% a year ago.
2.3 The growth in index of industrial production (IIP) decelerated to 1.0% during2012-13 from 2.9% in the corresponding period of the previous year. As per use-basedclassification, while capital goods registered a negative growth of 6.3%, Basic goods andIntermediate goods registered a growth of 2.3% and 1.2% respectively. The Consumerdurables and Consumer non-durables have recorded growth of 2.1% and 2.7% respectively,with the overall growth in Consumer goods being 2.4%. For the April-March 2013-14, thecumulative growth for eight core industries stood at 2.6%, lower than the 5.0% growth seenin the same period last year.
2.4 Headline inflation, as measured by the wholesale price index (WPI), moderated to anaverage of 7.3% in 2012-13 from 8.9% in the previous year. The easing was particularlysignificant in Q4 of 2012-13, with the year-end inflation recording at 6.0%. Non-foodmanufactured products inflation ruled above the comfort level in the first half of 2012-13but declined in the second half to come down to 3.5% by March, reflecting easing of inputprice pressures and erosion of pricing power. Largely driven by food inflation, retailinflation, as measured by the new combined (rural and urban) consumer price index (CPI)averaged 10.2% during 2012-13. Even after excluding food and fuel groups, CPI inflationremained sticky, averaging 8.7%.
2.5 India's cumulative value of exports for April-March 2012-13 stood at $300.57billion as against $305.96 billion, registering a negative growth of 1.76%. The value ofimports for the period April-March, 2012-13 was US $ 491.48 billion as against US $ 489.32billion registering a growth of 0.44% over the same period last year. The trade deficitfor April - March, 2012-13 was estimated at US $ 190.92 billion which was higher than thedeficit of US $ 183.36 billion during April -March, 2011-12.
2.6 India's Current Account Deficit (CAD) reached a record level of 6.7% of GDP for Q3of 2012-13. The average CAD levels for the first three quarters is around 5.3% of GDP andas per the initial estimate it is likely to be around 5% of GDP for the whole year. Thisis higher than previous year record level of CAD at 4.2% of GDP in FY12.
2.7 During 2012-13, the country's foreign exchange reserves declined by US $1.75billion and stood at US $292.65 billion as on 29th March 2013.
2.8 The growth outlook for 2013-14 depends upon a combination of global and domesticmacro-economic factors. The current projections for GDP growth for FY14 by variousagencies and financial institutions range from 5.7% to 6.7%. While the RBI projected agrowth to 5.7% in FY14, the projection of Economic Survey was within the range of 6.16.7%.The projections are showing a moderate improvement in economic growth in FY14 compared toprevious year. However, overall growth prospects of the economy really depend on therevival of industrial sector and growth pick up in services sector and a revival ofinvestment climate in the economy.
3. Banking Trends in 2012-13
3.1 The combination of growth slowdown, persistence of inflation, rising bad loans andresultant restructuring of loans have posed a significant challenge for the performance ofbanking industry during 2012-13.
3.2 Taking cognizance of falling growth, the Reserve Bank lowered policy interest rateand the SLR by 100 bps each, and the CRR by 75 bps in 2012-13. Accordingly, Repo andReverse Repo came down to 7.5% and 8.5% respectively and SLR to 23%, while CRR reduced to4%. It also undertook liquidity injections through outright purchases of G-secs as a partof open market operations (OMOs) totaling about Rs. 1.5 trillion during the year.
3.3 The credit & deposit growth of Scheduled Commercial Banks' (SCBs') in FY13 wasquite subdued clearly showing a lower economic activity. The deposit growth of SCBs hasregistered a marginal improvement by registering a growth of 14.3% at the end of March2013 (22nd March 2013) as against 13.5% in the corresponding period last year. However,much of the growth in deposit mobilisation has happened in Q4 of FY13. Non-food creditgrowth decelerated from 18.2% at the beginning of 2012-13 and remained close to 16.0% forthe major part of the year. By March 2013, non-food credit growth dropped to 14.0%, lowerthan the indicative projection of 16.0% of RBI.
3.4 Money supply (M3) growth was around 14.0% during Q1 of 2012-13 but deceleratedthereafter to 11.2% by end-December as time deposit growth slowed down. Consequent to thepickup of deposit in Q4 of FY13, M3 growth reached 13.3% by end-March 2013.
3.5 Despite a large injection of liquidity through CRR cuts and OMOs, liquidityconditions tightened especially since November 2012, mainly due to large and persistentbuild-ups in government cash balances. The net average liquidity injection under the dailyliquidity adjustment facility (LAF), at Rs. 730 billion during the first half of the year,increased significantly to Rs. 1012 billion during the second half. The Reserve Bank alsoinjected liquidity to the tune of Rs. 1546 billion through open market operation (OMO)purchase auctions. The net injection of liquidity under the LAF, which peaked at Rs. 1808billion on March 28, 2013 reflecting the year-end demand.
3.6 In the currency market rupee showed high volatility, especially during the firsthalf of FY13 and touched its all time low of 57.22 on July 27, 2013. Since mid September2012, rupee was showing some stabilization in response to the various policy reformsinitiated by the government and resultant portfolio capital flows. Even though the rupeewitnessed some weakness during the second week of February to early March, it remainedlargely range-bound.
4. Bank's Operational Performance
4.1 Deposit Mobilisation
4.1.1 During the year 2012-13 emphasis was laid on clientele expansion with strategy oflining up a series of campaigns for CASA growth. The campaigns saw opening of over 15.91lakh Current and Savings accounts. Key Branches and New branches were focused for retaildeposits. Two new deposit schemes named Corp Super Gain for 222 days and CorpSuper Gains Plus for 444 days were launched during December 2012 offering attractiveinterest rates. An amount of Rs. 5400 crore were mobilized under these deposit schemes.
Encouraged by the performance under these schemes, one more new deposit scheme by name CorpPower Plus for 555 days was launched during January 2013, under which Rs. 3029 crorewas mobilized till March 2013.
4.1.2 Performance Highlights:
i) The Non Bank Deposits of the Bank has reached a level of Rs. 146524 crore as at 31stMarch, 2013, registering a year-on-year growth of Rs. 29923 crore at 25.66%. The totaldeposits of the Bank including CD's reached a level of Rs. 166005 crore as at 31st March2013, registering year-on-year growth of Rs. 29863 crore at 21.94%.
ii) Current Deposits stood at Rs. 15180 crore as against Rs. 12275 crore in theprevious year.
iii) Savings Deposits reached Rs. 20759 crore with net accretion of Rs. 2951crore at16.57% Y-O-Y growth.
iv) The Share of Demand Deposits in total Non Bank Deposits stood at 24.52%.
v) Term deposits reached a level of Rs. 110584crore with a net accretion of Rs. 24066crore at a growth rate of 27.82% Y-O-Y.
vi) The Average Non Bank Deposits of the Bank increased by Rs. 19123 crore and stood atRs. 119883 crore as at 31st March, 2013 recording a growth of 18.98% year-on-year. AverageCASA grew by 7.98% with net accretion of Rs. 1882 crore and stood at Rs. 25471crore.
vii) The Bank has added 20,37,706 new Deposit Accounts during the year of which17,65,233 new accounts have been added under Demand Deposits.
4.2 Credit Growth:
4.2.1 The credit portfolio of the Bank increased from Rs. 100469 crore as at 31.03.2012to Rs. 118717 crore [Net of provision] as on 31.03.2013, registering an absolute growth ofRs. 18248 crore at 18.2% during the financial year ended 31.03.2013. Growth in credit wasachieved through intense marketing of various loan products of the Bank, both under Retailand Mid corporates.
4.2.2 The average advances grew by Rs. 15931 crore from Rs. 82325 crore as at March2012 to Rs. 98256 crore as at March 2013, registering a growth rate of 19.4%. The CD ratioas on 31.03.2013, stood at 71.51%.
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 31.03.2013, Bank's credit toInfrastructure stood at Rs. 19785 crore, which constitutes 16.7% of the aggregate credit.
4.2.4 SME Credit:
The Bank's thrust for lending to SME segment continued. During the FY 2012-13, the SMEcredit has improved from Rs. 14340 crore to Rs. 19517 crore as on March 2013 registering aY-o-Y growth of Rs. 5177crore [36.10%]. SME credit constitutes 19.42% of the Net BankCredit of the Bank as at 31.03.2013. For a focused approach to this segment, 16 new SMELoan Centers have been opened at Bangalore, Chennai, Coimbatore, Hyderabad, Pune,Vadodara, Gr. Mumbai, Delhi, Kolkata, Ludhiana,Mangalore, Kochi, Chandigarh, Trichy,Ahmedabad and Jaipur in respective Zonal Offices for speedier processing and hassle-freeflow of credit to this Sector. The USPs of these SME loan centers are that they areprovided with relationship managers and proposals received are to be disposed off within aturnaround time of 15 days (Rs. Rs. _ Rs. in crore)
4.3 Priority Sector Lending
4.3.1 Sectoral Deployment:
220.127.116.11 The Total amount of credit deployment to Priority sector by way of credit hasmoved up from Rs. 29912 crore as on 31.3.2012 to Rs. 37955 crore as at 31.3.2013,recording an increase of Rs. 8043 crore at 26.89%. The Priority sector advances of thebank stood at 37.78% of the Adjusted Net Bank Credit as against the RBI norm of 40% ofANBC.
18.104.22.168 The Agriculture credit stood at Rs. 9466 crore as at 31.3.2013 as against Rs.7140 crore as at 31.3.2012 showing a growth of Rs. 2326 crore at 32.57 % over March 2012.Funds deployed under Agriculture constituted 9.42% of ANBC. Concerted efforts have beenmade for effective implementation of Annual Credit Plan. Suitable action plan andstrategies have been worked out to ensure improved performance during the fiscal 2013-14.
22.214.171.124 Credit to MSE [Micro and Small Enterprises] increased from Rs. 13752 crore asat 31.3.2012 to Rs. 18555 crore as at 31.3.2013, witnessing a growth of Rs. 4803 crore at34.93%. Bank bears one time guarantee fee and also the Annual fee in respect of all Smallenterprises' loans up to Rs. 10.00 lakh. This is an increase from the earlier Rs. 5.00lakh to the present limit of Rs. 10 lakh as a measure to encourage entrepreneurs to takeup Small Enterprise activities. Small enterprises up to Rs. 100 lakh are eligible forcoverage under the Credit guarantee scheme.
126.96.36.199 Other Priority Sector lending increased from Rs. 9019 crore as at 31.3.2012 toRs. 9934 crore as at 31.3.2013, registering a growth of 10.14%.
4.4 Social Lending:
4.4.1 Dispensation of Credit under various Government Sponsored Social Lending /Poverty Alleviation Schemes and to Weaker sections of the society was given due importanceso as to fulfill the Bank's socio- economic obligations.
4.4.2 The number of women groups availing financial assistance, has decreased from97350 as at 31.3.2012 to 93329 groups as at 31.3.2013. Bank encouraged direct lending toWomen Self Help Groups. Credit to Women Self Help groups increased from Rs. 969.31crore asat 31.03.2012 to Rs. 1022.14 crore as at 31.03.2013, registering a growth of Rs. 52.83crore at 5.45%. Number of Self Help Groups credit linked increased from 23694 as at31.3.2012 to 24614 as at 31.03.2013. Finance to women beneficiaries stood at Rs. 5020.93crore as at 31.03.2013 as against Rs. 4544.75 crore as at 31.03.2012 and the bank achieved5.01% of ANBC as against the norm of 5% of ANBC.
4.4.3 As at 31.03.2013, out of a total Priority sector credit of Rs. 37955 crore, theoutstanding credit to Scheduled Caste/Scheduled Tribe is Rs. 531.66 crore whereas, ouradvances to Weaker sections stood at Rs. 7834.93 crore as against Rs. 4950.25 crore at31.3.2012.
4.5 Retail Lending
4.5.1 Retail lending continued to be a focus area of the Bank during the year 2012-13.The outstanding under Retail credit has recorded an impressive growth during the year. TheRetail Credit has improved from Rs. 18089 crore as on 31.3.2012 to Rs. 25148 crore as on31.3.2013, recording a growth of Rs. 7059 crore (39%). The share of the Retail Credit tothe Net Bank Credit stood at 21%.
4.5.2 The portfolio under Corp schemes increased from Rs. 11625 crore as on 31.03.2012to Rs. 16355 crore as on 31.03.2013 recording a growth of Rs. 4730 crore at 41%. This isas against the growth of Rs. 2298 crore at 25% recorded during the corresponding periodlast year.
4.5.3 Special promotional campaigns were launched during the year under Corp DoctorPlus, Corp Vyapar, Housing loan, Vehicle loan and Educational loan schemes, to attract newclients.
A Twin promotional Campaign under Corp Doctor Plus styled "Doctor PlusBonanza" and Corp Vyapar Scheme styled "Vyapar Vridhi Abhiyan" was launchedfrom 15.05.2012 to 31.08.2012.
A Special Promotional Drive under Housing Loan and Vehicle loan was in operation from01.06.2012 to 31.08.2012 under the name and style "Home Loan Mega Marathon" and"V-1000 Challenge" respectively.
A "Grand Festival Bonanza " was launched for a period of 5 months from01.09.2012 to 31.01.2013 under Corp Home, Corp Vehicle, Corp Vyapar and Corp Doctor PlusSchemes, offering attractive interest rates and waiver/ concessions in processing charges.The campaign was successfully completed with a total sanction of Rs. 3363 crore from 27419fresh applications received.
A three month long "Education Loan Campaign" was in operation from01.12.2012 to 28.02.2013 offering interest concession of 0.50% for loans above Rs. 4 lakhsinitially disbursed during the campaign period. During the campaign, 2202 fresh educationloans with an aggregate limit of Rs. 72.86 crore were sanctioned.
A "Super Bumper Car Carnival" campaign was launched by the Bank for aperiod of one month from 01.03.2013 to 31.03.2013, for financing purchase of new fourwheeled vehicles to the personal segment, offering attractive interest rate. During thecampaign, the Bank could garner a business of Rs. 152.29 crore from 2464 new vehicle loanapplications.
The campaigns were instrumental in creating greater visibility to the Bank'sretail products, apart from getting additional business from new contacts which providedan opportunity for cross selling its other products to the new clients.
4.6 Retail Loan Centres
4.6.1 At present 21 Retail Loan Centres are in operation at all major centres, out ofwhich 2 Retail Loan Centres were set up during the year. These Retail Loan Centres intotal have sanctioned 27051 loan applications amounting to Rs. 4230 crore during the yearunder various Corp Schemes.
4.7 Online in-principle approval of Education loans
Under the in-principle approval of on-line education loan applications, 337in-principle approvals amounting to Rs. 15.80 crore were accorded during the financialyear.
4.8 Credit Assets Quality and Classification
The Bank has maintained high standard in Asset quality as evidenced by lower NPAlevels. Close surveillance and initiation of prompt remedial action in borrowal accountsresulted in maintaining the quality of loan assets.
The classification of the loan assets in terms of Prudential Norms prescribed by theRBI is as follows:
(Rs. in Crores)
| || |
As on 31.03. 2011
As on 31.03. 2012
As on 31.03.2013
| ||Amount ||% to total asset ||Amount ||% to total asset ||Amount ||% to total asset |
|Standard ||86423. 22 ||99.09 ||99551.10 ||98.74 ||117305.77 ||98.28 |
|Sub-Standard ||355.76 ||0.41 ||638.45 ||0.63 ||1159.98 ||0.98 |
|Doubtful ||249. 24 ||0. 29 ||555.50 ||0.55 ||791.00 ||0.66 |
|Loss ||185.23 ||0.21 ||80.26 ||0.08 ||97.25 ||0.08 |
|Gross Loan Assets ||87213.45 ||100.00 ||100825.31 ||100.00 ||119354.00 ||100.00 |
The quality of the loan assets is evidenced by the fact that the Standard assetsconstituted 98.28% of the Bank Credit.
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 covered 155 villages through BranchlessBanking model to take the total number of units to 3,545 as at the end of March 2013. TheBank has opened 3.03 lakh 'no-frills' savings bank accounts during the year, reaching alevel of 17.28 lakh accounts with a balance of Rs. 71.31 crore. The Bank has sanctioned24,622 General Credit Cards with an outstanding balance of Rs. 35.05 Crore. The Bank hasimplemented Urban Financial Inclusion in 105 urban locations spread across 6 states andbranded it as "Corp ShahariVitthiyaSamaveshana Kendra".
4.9.2 Financial Inclusion Project for SHGs/JLGs: Bank has taken up FinancialInclusion Project for Self Help Groups (SHGs) in Belgaum and Tumkur districts ofKarnataka, in collaboration with an NGO, Sri Kshetra Dharmasthala Rural DevelopmentProject (SKDRDP). The Project envisages formation of 80,000 SHG/JLGs (Joint liabilitygroups) and opening their accounts and also individual group members' accounts. Under thisProject, 44,005 SHG's Savings Bank Accounts have been opened and the balance accrued inthese accounts is Rs. 86.37crore as at 31.03.2013.
4.9.3 Implementation of Government directions: As per the High-level committeeconstituted by Reserve Bank of India, 720 villages have been allotted to our Bank forproviding banking facility either through brick and mortar branch or extension counter orservice counter or ICT based Business Correspondent (BC) model by March 2013. Of these,Bank has covered 429 locations (65 locations through Branch Model and 364 locationsthrough BC Model) within the stipulated time.
4.9.4 Electronic Benefit Transfer Programme: Bank is actively participating inElectronic Benefit Transfer (EBT) Programme in the states of Andhra Pradesh, Karnataka andTamilnadu. MGNREGS (Mahatma Gandhi National Rural Employment Guarantee Scheme) and SSP(Social Security Pensions) payments are being disbursed through BCs under this programme.Bank has opened 8.90 lakh accounts and issued 7.0 lakh smart cards to this segment.
4.9.5 Direct Benefit Transfer: The Government of India has implemented DirectBenefit Transfer Scheme in 43 districts on pilot basis effective from 01.01.2013. Ofthese, the Bank has its presence in 34 districts and implemented the scheme. Accountopening process based on one household one account is completed and Aadhaar numbers of1.30 lakh customers mapped to NPCI (National Payment Corporation of India). Bank has onboarded to Aadhaar Number based APBS (Aadhaar Payment Bridge System), implemented by NPCIand credits received through the system are being processed to Aadhaar enabled accounts.Bank has established a FI Gateway for participating in Aadhaar Enabled Payment System(AEPS) implemented by NPCI.
4.9.6 Bank has won 'Skoch Financial Inclusion Award 2012' for SHG initiatives underLivelihood category from Dr. C. Rangarajan, Hon'ble Chairman, Economic Advisory Council tothe Prime Minister, at New Delhi on 5th January 2013.
5.1 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 & up gradation, & c) Resolution & settlement.
5.2 The Gross NPA of the Bank was Rs. 2048.23 crore as on 31.03.2013 compared to Rs.1274.21 crore as at the end of the previous financial year. The Gross NPA constituted1.72% of the Gross Advances as on 31st March 2013 as against 1.26 % at the end of thecorresponding previous financial year.
5.3 The Net NPA of the Bank was Rs. 1410.88 crore as on 31.03.2013 compared to Rs.869.38 crore as at the end of the previous financial year. The Net NPA ratio of the Bankagainst the Net Advances has increased from 0.87% as at 31.03.2012 to 1.19% as at31.03.2013. 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.
5.4 The Cash recovery & Up-gradation during the Financial year 2012-13 hasincreased to Rs. 1509.30 crore, compared to Rs. 758.60 crore in the previous financialyear. The improvement in the recovery has taken place on account of continuous monitoringand close follow-up of borrowal accounts at Branches/Zonal Offices & Corporate Officeand the effective implementation of One Time Settlement (OTS) Scheme / Compromisesettlements.
5.5 The provisions under SARFAESI Act 2002 have been effectively leveraged to ensurefurther improvement in Recovery performance. An amount of Rs. 439.83 crore has beenrecovered during the year due to the Recovery action under SARFAESI Act.
5.6 The Bank has introduced a special One Time Settlement (OTS) scheme by name"Corp Riyayati" for small NPA accounts with balances up to Rs. 10.00 lakh. TheScheme was in operation between 25.09.2012 to 30.06.2013. Under the scheme, the Bank hasrecovered Rs. 12.57 crore in 4994 accounts.
5.7 The Bank has adopted an innovative approach while organizing Recovery Camps duringthe year. Top Executives who were empowered to take spot decisions were associated withthe Recovery Camps. Meeting the borrowers at their own place, counseling them and takingspot decisions for speedier settlement of dues evoked good response. The Bank hasorganized 208 Recovery camps resulting in Cash Recovery/Up-gradation of NPAs to the tuneof Rs. 27.59 crore. The model of Recovery camps adopted by the Bank has been wellappreciated in the Banking circles and the concept has attracted media attention atNational level.
6. Treasury and Investment Operations
6.1 The aggregate investment of the Bank as on 31st March 2013 was Rs. 58295.18 crorewith maturity mix of securities consistent with risk perceptions and investment policiesof the Bank.
6.2 The average yield on investments including RIDF investments during the year underreport stood at 7.34% compared to 7.46% as at the end of the previous year.
6.3 The net profit from sale of investments was Rs. 280.33 crore for the year ended31.03.2013 as compared to Rs. 364.97 crore in the previous year.
6.4. The Bank has put in place the risk management tools like Duration, ModifiedDuration and Value at Risk for all interest bearing securities.
7. International Banking
7.1 The Bank has 58 Designated Branches, which cater to the foreign exchange business.Merchant turnover has decreased from Rs. 73505.22 crore to Rs. 73420.89 crore by amarginal 0.11%, during the year 2012 - 13.
7.2 Exchange Income also declined from Rs. 138.44 crore to Rs. 99.71 crore, by 27.98%,during the year.
7.3 Fee Based Income increased by 14.10% from Rs. 157.53 crore to Rs. 179.74 crore.
8. Merchant Banking Activities:
8.1 During the year the Bank has handled 17 Dividend Payout and 38 Issue Collectionassignments successfully.
9. Precious Metal Business
9.1 During the year, the Bank achieved an aggregate turnover of Rs. 4938.09 croreearning an Income of Rs. 10.90 crore from Precious Metals Business excluding income fromgold loans.
9.2 Gold coins in various denominations ranging from 2 grams to 50 grams were sold atover 300 branches of the Bank, achieving a total sales of 148.93 kgs amounting to Rs.45.02 crore.
10. Designated Branches and Treasury and Investment Department
10.1 Process Improvement
a) Straight Through Processing (STP) has been enabled 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 STP. Mirror balance at Treasury Branch is updatedinstantaneously and almost all the FCNR transactions are under auto mode.
c) Nostro Credits are uploaded to CBS thereby enabling auto reconciliation of Nostroaccounts.
d) Electronic Display Board for online display of Forex Rates has been installed at allthe Designated Branches.
e) Uploading of Forex & Gold Positions to Risk Management Server for easyprocessing.
f) Exchange Houses Reconciliation simplified.
11. Collection and Payment Services (CAPS)
11.1 The Bank, a preferred Cash Management Services (CMS) Banker in Corporate sectorcontinues to retain its premier position under CMS. To speed up the process of sanction,the lending powers in sanction of CAPS Products have been delegated to Zonal/Circleoffices.
11.2 As pro-active CMS Banker, the Bank has focused on marketing 'customer centric' newProducts/technological initiatives. Amongst them are:
i) Automated Channel Financing Facility: Under this facility, the Bank willfinance against invoice to the dealers of the OEMs/Suppliers and the entire process isfully automated right from invoice generation to settlement of funds on due dates. Thefacility has been extended through some of the Core banking Branches of the Bank inaddition to the CAPS Branches, to reach out to many of the Bank's credit clients/Newclients.
ii) Cash PIF Facility: The Bank has been extending Cash PIF facility to someEducational Institutions and Government undertakings for collection of fees and utilitybill payments, respectively. The facility has been extended across all general bankingBranches of the Bank.
iii) The local cheque collection centers have been increased to 474 in order to expandthe reach under collection management.
12. Inter-Branch Accounts Reconciliation
12.1 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 efficiency in this vitalarea of housekeeping.
12.2 During the financial year 2012-13, 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 31.03.2013 stand reconciled andall entries (other than credits in respect of Demand Drafts issued) up to 14th December,2012 stand eliminated as at 31.03.2013.
13. Information Technology Initiatives
13.1 The application of technology in day-to-day operations of the Bank has beenresponsible for augmenting and enhancing productivity levels apart from simplifyingmundane tasks. The Bank's success in this field could be attributed to proper technologyplan targeted at introduction of customer friendly delivery channels providing value addedservices and facilitating improvement in overall internal efficiency and decision makingprocess by bringing in an effective Management Information System and adhering to theregulatory compliances. In this direction, the Bank has been lining up various ITinitiatives that add value to the customer convenience apart from enhancing the internalefficiency and improving the decision making process.
13.2 Core Banking Solution (CBS)
As on 31.03.2013 all branches ofthe Bank are fully computerized and operating under theCBS ensuring hundred percent business operations under Core. 12 branches/offices are underCAPS [Collection and Payment System] and integrated with the CBS. The following programs/facilities were developed under CBS during the financial year:
Aadhaar payment platform migrated from ABPS [Aadhaar Bridge Payment System] toNACH [National Automated Clearing House] platform for the purpose of subsidy credits tovarious accounts.
Auto classification of Assets programs fine-tuned to reduce processing time.
KYC document capture programs of CBS improved to enable hassle-free KYC updationby branches.
Reminder module implemented in CBS with a feature to get a reminder on the duedate for Reset of interest on Loan accounts.
Module pertaining to Account Processing Cell for centralized account openingintroduced.
New and improved scoring model was implemented in the Retail Loan Processingpackage.
13.2.1 New CBS
With a view to migrate to a new and contemporary Core Banking Solution, the Bankselected Ernst & Young as Technology and Project Management Consultants forimplementing the same. With their assistance the Bank has floated "Request ForProposal" (RFP) and the selection process for system integrator is in progress.
The following projects will be taken up simultaneously with the project of new CBSimplementation :
Contact Centre Solution procurement and Implementation.
Lead Management Solution Implementation.
Grievance Redressal System.
Operational CRM application and infrastructure
ACRM and Data Warehouse
13.3 Internet Banking
Internet banking facility has been enabled for all the customers of all the branches ofthe bank. The features such as Funds transfer, NEFT Payments, Payment of Direct/IndirectTaxes, Customs Duty, Service Tax, LIC Premium payment, Payment of State taxes, collectionof Donations, Seva Charges for temples, Collection of fees of Educational Institutions andbooking of railway/bus and air tickets have been enabled through this delivery channel.Payment Gateway solution has been implemented with integration of systems of ServiceProviders. A dedicated help desk is in place functioning with extended working hours forhandling customer queries and guiding customers on working of CorpNet.
Due to the impressive growth in hits the infrastructure facilities in internet bankinghas been enhanced. During the year 1,45,580 new user ids have been created under internetbanking taking the total to 6,32,077 user ids till 31st March 2013. The Average total hitsper month has reached a level of 15,77,013 during the year.
The online Banking has been made more user friendly adding the following new features:
- Instant Kit facility for Internet Banking users.
- Online Opening of Fixed Deposits [FD/KCC/RD/FRD].
- Anti-Phishing to authenticate Bank's authorized site.
- One Time Password [OTP] as second factor authorization for net banking transactions.
- Online Password generation facility instead of physical Password mailer.
- Online beneficiary creation facility, for funds transfer, with two-factorauthentication.
- Mail/SMS confirmation for the online transactions executed.
- Digital signature authentication option to corporate customers.
- Joint authorization with amount wise/group wise facility for corporate customers.
- User based variable limits for funds transfer.
- Online view facility for 26AS tax credit.
- Facility to make NEFT / RTGS / IMPS remittance through net banking.
- Application Supported by Blocked Amount [ASBA] online.
- All Commercial Taxes Module for Karnataka State and Jharkhand State.
- Payment of Tax for Tamil Nadu State Tax, UP Tax, Maharashtra & Gujarat State Tax.
- Mobile banking for Android and IPAD phones/tablets (using net banking mode).
- Payment of Railway Freight charges through internet.
- Port Community System Module for Port users to pay their import dues.
13.4 Mobile Banking
Through this delivery channel, the Bank will reach its customers through messages. Menubased Mobile Banking application is launched and is available for download from ourWebsite www.corpbank.com 7,74,677 customers of the Bank enjoy this facility as on31.03.2013 of which 4,00,493 have opted for this facility during the year. The newfacilities introduced under SMS banking during the year are :
IMPS - Immediate Mobile Payment Service - P2P, P2M, P2A on Mobile & Internetwith alerts and confirmations to both the remitter and beneficiary.
Loan Alerts for Loan account becoming NPA, OD, gentle reminder for EMI fallingdue.
CorpMobile Banking app for Android phone and tablets made available on GoogleStore and app for IOS phones.
SMS Alert for All the ATM, POS, Mobile and Internet transactions for all thecustomers.
13.5 Mobile Payment Solutions
The m-Commerce space is acquiring importance due to the increasing penetration ofmobile phones in India. The Bank has tied up with M/s PayMate and ATOM Technology Pvt. Ltdto offer Mobile Payment gateway service through PayMate.
13.6 Financial Transaction Switch
Financial Transaction Switch Hardware was procured and installed to run and support5000 ATMs. Interface with 4 ATM vendors under common procurement was developed andimplemented for monitoring ATMs installed by these vendors. RupayKisan, RupayAadhar,RupayPargram interface was developed and implemented.
13.7 Wide Area Network (WAN)
Wide Area Network (WAN) connecting all the computerized branches is a pre-requisite forefficient functioning of Core Banking. 1781 units of the Bank have already been linked tothe WAN. Apart from Core Banking, the WAN is used for various other applications. All theDistribution Centers that are connected to the Core Location as well as Disaster RecoveryLocation are using MPLS links by BSNL. This has enabled multiple redundant circuits so asto provide very high uptime.
13.8 Real Time Gross Settlement System [RTGS]
The Bank is participating in the RTGS system, set-up by RBI, facilitating transactionsthrough 1673 Branches and ECs as on 31.03.2013. The Bank is in the process of extendingthis facility to all new branches. During the year 21,40,341transactions amounting to Rs.13,21,845 crore were made through RTGS.
13.9 National Electronic Funds Transfer [NEFT]
As on 31.03.2013, NEFT has been enabled in 1688 Branches. NEFT facility is alsoprovided through CorpNet (Internet Banking), SMS Banking, Mobile Banking and ATM. All newbranches are planned to be provided with NEFT facility. During the year 85,88,458transactions amounting to Rs. 76311 crore were made using NEFT. Continuous Credit ofinward NEFT transactions has been implemented.
13.10 Mail Messaging Setup
Bank's Email Set up has been upgraded to exchange 2010 and separate mail box iscreated for all confirmed officers and all branch units.
SCCM has been put in place. Further, Share Point, Intranet Portal and E-Learningmodules have also been made operational. As Anti-virus solution, Symantec End PointProtection has been implemented.
Centralized Desktop Management Solution has been completed across all theoffices.
Business Figures Reported Module (Dash Board) implemented in Intranet.
13.11 Government Business
On-line Tax Accounting System [OLTAS] module has been implemented to facilitatecollection of Direct Taxes and the same has also been facilitated through Core Banking andNet banking.
Electronic Accounting System in Excise and Service Tax [EASIEST] module has beenenabled to facilitate collection of Indirect Taxes and the same has also been facilitatedthrough Core Banking and Net banking.
ICEGATE payments have been enabled for all the 103 ports in India.
Bulk tax data upload option enabled in Net Banking Module to enable corporatecustomers to upload a data file containing the tax remittance details under theirauthorization. This facility has gained immense popularity and many of the non-agencybanks are using the facility extensively.
State Tax module has been developed to facilitate collection of state taxes. Themodule has been implemented in the States of Delhi, Maharashtra, Goa, Gujarat, UttarPradesh and West Bengal.
E-Payment of State Taxes has been enabled through Net Banking both in PersonalBanking and Corporate Banking. Presently the states like Maharashtra, Goa, Delhi, Gujarat,Andhra Pradesh, Jharkhand, Karnataka, Uttar Pradesh and Tamil Nadu are covered undere-payment.
13.12 Depository Participant [DP]
The depository services are offered by the Bank, through our Depository Participant[DP] Branch located in Mumbai. Online trading facility has been provided to the customersof the Bank through Religare Securities, IL&FS, UTI Securities and JRG Securities.
13.13 International Banking/DB/FCNR Modules in Core Banking
Straight through Process has been enabled between all the Designated Branches, LinkBranches and Treasury Branch. Process of submitting R-returns and consolidated NRD-CSR iscentralized for Bank as a whole. As required by DGFT, the issue of Bank RealisationCertificates (BRC) for export realizations in electronic form [E-BRC] has been madeoperational.
13.14 Management Information System [MIS] and Automated Data Flow to RBI
Centralized system for consolidation of Balance Sheet data [Weekly/monthly] andClassification of Advances data [CIS] is in place. The MIS on processed data is enabled tothe Zones/Branches.
Report submission framework [PLUM] is in place. The data in respect of 102statements are being collected and 165 classified reports are enabled.
Reporting framework for submission of'Compliance Data' is in place.
The software solution in respect of 'Graded Credit Monitoring System' has beenmade operational.
The Bank is in the process of implementing a Central Data Repository andsolution for Automated Data Flow to RBI.
13.15 Implementation of RBI Workgroup Recommendations on IT & IS Domains
The Bank has implemented most of the recommendations of the RBI Workgroup. The Bank hadengaged the services of Paladion Networks Pvt. Ltd for validation of the implementedrecommendations and for conducting gap-analysis. Of the 633 recommendations identified byPaladion Networks Pvt. Ltd., 521 recommendations have already been implemented and theremaining 112 recommendations are in the process of implementation.
13.16 Disaster Recovery Set Up at Head Office
The Bank has set up suitable Disaster Recovery Setup for its different applicationslike ATMs, Core Banking, RTGS, NEFT, Integrated Treasury Management and CAPS. Last DRDrill was conducted successfully for Core on 11.03.2013, for ATM on 12.12.2012, ITMS on23.03.2013, CAPS on 09.03.2013, NEFT on 15.03.2013 and RTGS-PI on 08.12.2012. InternetBanking DR drill was done on 24.03.2013.
14. Credit Cards
14.1 Credit Card facilitates the individual clients, a hassle free and risk free way ofmaking payments on shopping, travel etc. In view of the large potential associated withit, the Bank has taken steps to expand this portfolio. The Bank is predominantly issuingcards to its existing customers.
14.2 As on 31st March 2013, the Bank has issued 41969 credit cards with an aggregatelimit of Rs. 228.04 crore.
14.3 The Bank earned total income of Rs. 8.91 crore and Gross Profit of Rs. 7.07 crorefor 2012-13 on issue of Credit Cards. 6.62 lakh POS transactions aggregating to Rs. 168.61crore were transacted using these cards during the year 2012-2013.
14.4 For customer convenience, the Bank has introduced tech-savvy services such as AutoDebit Facility, SMS alerts, e-statements, on-line viewing of credit card details, ATMinterface and Verified 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.
14.5 Delivery Channels
14.5.1 ATMs: As of 31.03.2013, Bank had installed 1425 ATMs. Of this 1174 ATMs areunder owned model, 98 ATMs are under outsourced model, 151 ATMs are installed under DFSinitiated outsourced Model and 2 are mobile ATMs. During FY 13-14, the Bank proposes toinstall onsite ATMs at all branches of the Bank.
14.5.2 Debit Cards: As on 31st March, 2013, the total number of outstanding debit cardsstood at 52.08 lakhs with addition of 9.55 lakh cards during the year.
The launching of new SB variants like SB Super and SB signature have given a fillip toissuance of premium card variants like Platinum and Signature debit cards.
14.5.3 Sponsoring Smaller 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 andbrought them into the plastic money culture giving them global acceptance. This hasaugmented the fee income of the Bank.
14.5.4 POS machines: As of 31.03.2013 the Bank had installed 14,045 POS machines atvarious merchant establishments. This value added service has enabled the Bank to not onlyenroll new customers but also retain existing customers. The Bank is also sponsoringsmaller Banks for POS acquisition by acting as settlement Bank.
14.6 Depository Services
The Bank is a participant of National Securities Depository Ltd. (NSDL) and offersDemat services to its customers such as opening of Demat Accounts, Dematerialization,Rematerialisation, delivery & settlement of shares, pledge & hypothecation ofsecurities, facilitating corporate action etc. The DP services are presently being offeredin 87 branches of the bank. The Bank has also tied up with M/s HSBC Invest DirectSecurities (India) Ltd., and M/s Religare Securities Ltd., for offering Online and OfflineTrading facilities to its customers. The Bank is currently expanding its network of DP andASBA (Application Supported by Blocked Amount) designated branches across the country.
14.6.1 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 typesof accounts enabled for blocking of amount for ASBA applicants are - Savings, Current,CLSB, CCSDL, ECOD and CASBA. The Bank is offering ASBA through more than 500 outletsacross the country. For net banking customers, the Bank has introduced a very convenientmode of applying for ASBA through internet i.e. only with simple information such as DematClient ID, DP ID, Name, PAN Number etc., at the first registration level under the'Maintain Investors' sub-heading available in the website of the Bank under ASBA head. TheBank has been able to attract substantial funds from investors in major IPOs/ FPOs such asCoal India, MOIL, Power Grid, Punjab & Sind Bank, Shipping Corporation of India etc.The applicant's account does not get debited until shares are alloted to him. This allowsthe investor customer's money to remain with the Bank till the shares are allotted afterthe Issue and allotment of securities. This eliminates the need for refunds on shares notbeing allotted. The Bank has introduced this facility as a value addition for the benefitof its customers. The investor customer's funds are not parted at the time of submissionof the application and hence keep earning interest till the applied shares are allotted.The process relieves the investor from the hassles of delay in getting refund orders andits misplacement etc.
15. Marketing Initiatives
15.1 A marketing set up is in place at the Head office and Zonal office levels tosupport the efforts of the Bank in reaching out to the customers and institutions forBusiness development.
15.2 New Products launched :
15.2.1 Savings Bank Accounts : Bank launched two premium Savings Bank (SB) accountvariants during the year, viz. Corp Signature SB Account and Corp Super SB Account, toattract high end customers and to ensure their retention. The products were launched at ahigh profile function held at Dubai, in the presence of top NRIs. The products, amongstothers, offer free Personal Accident insurance up to Rs. 10 lakhs, Free high end Debitcards, Free SMS Banking, NEFT, RTGS, etc. A photograph of the products launch held inDubai is attached here:
15.2.2 Current Accounts: Two premium current account variants viz, Corp Privilegeand Corp Club were also launched during the year. Responses to the products have been veryencouraging and are expected to contribute significantly.
15.3 Clientele Acquisition under CASA Mobilizing CASA accounts has been a priorityarea for the Marketing Team. During the current year, the Bank could mobilize 46,556Current Accounts and 15.45 Lakh Savings Bank Accounts (excluding no-frill Corp Pragathiaccount). With this, the Bank has crossed the landmark figure of 13 million customer base.
15.4.1 CASA Campaign: A CASA campaign was conducted from 16 July 2012 to 30September 2012 during which 3.70 lakh CASA accounts were mobilized with outstandingBalance of Rs. 879 crore.
15.4.2 SB Campaign: Encouraged by the performance in the CASA campaign, an SBCampaign was held from 4th February 2013 to 31st March 2013. The focus of the Campaign wasto mobilise only quality accounts like - Corp Super and Corp Signature, the Premium SBaccounts and other accounts with initial balance above Rs. 5000/-. During the campaign,48,346 accounts were mobilized with outstanding balance of Rs. 539 crore.
15.4.3 The Marketing team was extensively involved in promoting the products andservices of the Bank by sending regular E-mails and messages to all its customers fromtime to time. SMSs and e-mails were sent to NRI customers during the Car Carnival campaignin February and March and communications were also sent to Doctors, IITs and IIMs and tothe retail customers at the time of launching new products.
16. Customer Service
16.1 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.
16.2 Customer Service Committee meetings are regularly held at all the branches byinviting a Senior Citizen. Customer service related to the service area are discussed insuch meetings. A Standing Committee on Customer Service also meets at least once a quarterto take care of issues concerning customer service. Issues related to Customer Service isbeing discussed at length in Board meetings every month.
16.3 Bank celebrated 'Happy Banking Week' from 5th November 2012 to 10th November 2012which provided a good opportunity to interact with the customers across differentbranches. The feedback received provided an opportunity for the Bank to further improveits customer service. During the week long campaign, the branches had focused onpopularizing gold loan schemes, retail and SME products. The Bank opened 48333 newaccounts and issued new pins to 10044 customers for e-banking facility during the week.
16.4 Standardised Public Grievance Redressal System:
Based on these draft guidelines forwarded by the Ministry of Finance on StandardisedPublic Grievance Redressal System containing 56 recommendations, the Bank has formulated apolicy which has since been approved by the Board. The Damodaran Committee Recommendationson Customer Service has also been taken up for active implementation.
16.5 The Bank is also actively implementing various recommendations made byDamodaran Committee.
17. Integrated Risk Management System
17.1 Basel II Compliance
17.1.1 Consequent upon globalization, the interconnectivity between various countriesof the world has drastically increased. Banks and other financial institutions all overthe world have no doubt been benefitted from globalization, but at the same time, thisintegration has increased not only size but also the complexity of risks. The freshexample being that of Cyprus, which had to go in for desperate measures in the lastminute, to save its banking sector that had large exposures to Greek Bonds. Thus suchcomplex and cross jurisdictional issues have become risks and having regard to theirmagnitude even Sovereigns and Banks which were once considered as too big to fail are nowshowing signs of vulnerability. To address the varying practices of risk management acrossjurisdiction, the Basel II accord and now the Basel III accord are aimed at harmonizingthe practices adopted by various banks operating in various jurisdictions and in differentcountries, under a common supervisory framework, bringing uniformity in the Riskmanagement practices.
Risk Management is an integral part of bank's organizational structure and businessstrategy. Identification, 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.
17.1.2 The Credit Risk Management Committee, Market Risk Management Committee/AssetLiability Management Committee and the Operational Risk Management Committee thethree internal committee of executives along with the Risk Management Committee of Boardare looking 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.
17.1.3 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.
17.1.4 The Bank has appointed consultants for preparing the road map and hand holdingthe Bank in moving towards the advanced approach of risk management under Basel II.
17.2 Credit Risk
17.2.1 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 and enables the bank to assess the ratings while preparing the appraisal notes. TheRAM software 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 also procured Retail Pooling Module in CAM, which willhelp the Bank to migrate to FIRB (Foundation Internal Ratings based approach) under creditrisk.
17.2.2 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.
17.2.3 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.
17.2.4 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 proposalsthe Bank has established Retail Hubs at major centers for retail credit approval andCentralized Credit Processing cells at each of the zones for appraising larger creditproposals.
17.2.5 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.
17.2.6 Offsite surveillance through the core banking platform is now made use of totrack exceptions in the conduct of borrowal accounts and initiate timely action to protect/ improve the health of credit portfolio. Credit monitoring cells have also been formed atall the zonal offices for independent and effective monitoring of borrowal accounts. LargeCredit exposures of Rs. 1 crore and above are monitored through the fully automated GradedSystem of monitoring on a monthly basis. Credit Exposure of Rs. 1 crore up to Rs. 5 croreis being monitored by the respective ZO's, Rs. 5 crore to Rs. 10 crore by respectiveCircle Offices and Rs. 10 crore and above by CRMD HO. A monthly note is being placed tothe respective Zonal Heads/Circle Heads and CMD by ZO/CO/CRMD-HO.
17.2.7 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.
17.2.8 Study on rating migration of borrowal accounts is undertaken and appropriatecorrective actions are initiated to protect the portfolio quality.
17.2.9 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.
17.3 Market Risk
17.3.1 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 will have direct impact on the Bank's earnings and its capital. These changes canhave ramifications on Bank's liquidity and profitability.
17.3.2 For management of Market Risk, emphasis has been placed on measuring, monitoringand managing liquidity, interest rates, foreign exchange and equity as well as commodityprice risk of the Bank. The market risk in trading book is monitored and managed as perappropriate control mechanism in place. Market position, funding patterns, duration,counterparty limits and various sensitive parameters are monitored. The advanced riskmanagement tools such as Value at Risk (VaR), Earnings at Risk (EaR), Net Overnight OpenPosition Limits (NOOP) and modified duration limits are used in managing market risk. TheBank is in the process of moving towards the IMA (Internal Models based approach) duringthe current financial year.
17.4 Operational Risk
17.4.1 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.
17.4.2 The Bank has implemented Operational Risk Management Policy which helps it inmanaging the Operational Risk in an effective manner. The Bank has also implementedframework documents for Loss Data Capture, Risk Control Self-Assessment (RCSA), Key RiskIndicator (KRI), Loss Data Modelling and Scenario Analysis. The Bank has formulatedBusiness Line Mapping Policy for mapping products, activities, income into differentbusiness lines.
17.4.3 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 four years. It is in the process ofrolling out Operational Risk software which will be used for management of OperationalRisk loss data across the business lines in a phased manner. The Bank has compiled RCSAregisters and identified KRIs for all its critical units. The Bank has already rolled outOperational Risk software for RCSA exercise and KRI monitoring. At present, the softwareis used by 331 users at 153 locations.
17.4.4 Under the Risk Based Supervision, Risk Profile Templates covering five businessrisks and two control risks are prepared on quarterly basis and submitted to RBI.
18. Asset Liability Management (ALM)
18.1 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.
18.2 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. Models like Earning at Risk and Duration areused for Interest rate risk management. Stress testing of liquidity risk and interest raterisk is conducted every month. The Bank applies Value-at-Risk (VaR) to measure the risk inthe Trading Book. The Bank is in the process of up gradation of its ALM software andintroducing TPM module under the said upgrade.
18.3 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 profile of theincremental assets and liabilities, demand for Bank funds, cash flows of the Bank, profitplanning and overall Balance Sheet Management.
19. Human Resources Management
19.1 To meet the requirements of Business Growth, Branch Network expansion andattrition/retirements, Bank has recruited 2347 employees directly from the market duringthe year. This includes 1530 Single Window Operators, 292 Assistant Managers, 482Specialist Officers and 43 Managers (I.T. & Chartered Accountants) provisionallyselected from Campus placements. The total staff strength stood at 15908 as on 31st March,2013 as compared to 14803 as on last day of the previous year.
19.2 Staff productivity in the Bank as on 31.03.2013 stood at Rs. 19.22 crore and NetProfit per employee stood at Rs. 9.68 lakh as on 31.03.2013 as against Rs. 17.13 crore andRs. 10.90 lakh, respectively, registered as at the end of the previous year.
19.3 The Bank has been following the guidelines for reservation in employment tospecified categories. During the year, of the total 2347 new recruitments, 510 candidatesbelonged to Scheduled Caste and Scheduled Tribe categories. The representation ofScheduledCaste/Scheduled Tribe employees in the total staff strength was 4319 (27.15%) as on31.03.2013.
19.4 The Bank has also a fair representation of other reserved categories. As on 31stMarch, 2013, 2820 staff representing Other Backward Communities, 339 PhysicallyHandicapped staff and 932 Ex-Servicemen were on the rolls of the Bank.
20. Human Resources Development & Training
20.1 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 9277employees duringthe FY 2012-13. The employees have been trained in various areas of specialization likeCredit, Forex, Risk Management, Currency Management, Human Resources Management,Information technology as well as in General Management applications.
20.2 Seven hundred twenty 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, CII,FICCI, NIRD, BIRD, ASCI, IMI, IIBM- Guwahati etc.
20.3 The division has nominated 25 Executives/Officers for attendingSeminars/Workshops/Study Tours/Trainings abroad during the financial year.
20.4 One hundred and seven Senior Executives in Scale V and above were imparted inputon Leadership, Customer Centricity and Marketing through Management Development programmeorganized at International School of Business (ISB) Hyderabad.
20.5 At present, the Bank is having Staff Training facilities at 7 locations. Duringthe financial year 6038 employees were trained at our Staff Training Centres.
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 1079 vacancies at officers cadre were filledthrough promotions.
21. Inspection & Audit
21.1 Effective Audit system with focused approach on proper assessment, effective riskcontainment measures that provides adequate internal control mechanism for improvedefficiency, sustained quality, low risk and smooth functioning of the Bank are the keypolicy perspectives of the Internal Audit Division of the Bank. As per the guidelines ofRBI, the Bank has adopted the policy of risk based internal audit.
21.2 Risk Based Internal Audit lays focus on Risk Identification, Risk Management,adequacy of Control Systems and Procedures as well as optimum use of resources. It aims atgiving an assurance to the Management on the level of regulatory and systemic compliancebesides assisting in accomplishment of corporate governance objectives.
21.3 As part of decentralization of certain audit functions and to carry out internalaudit functions of branches at regular periodicity, 12 Zonal Audit Offices (ZAOs) havebeen set up at important centers including the one at Belgaum, which has beenoperationalised during the year on 01.10.2012.
21.4 All the Branches of the Bank are subjected to internal inspection so as to containrisk, have effective control mechanism and improve efficiency 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.
21.5 The various functional Divisions at Head Office, Circle Offices, Zonal Offices,Currency Chests, Corp Bank Securities, Chiko Bank, COBSETI at Chikmagalur as also the LeadBank Offices are also subjected to regular inspection once in a year.
21.6 As per the guidelines of Reserve Bank of India, concurrent audit is carried out atthe branches/offices identified based on risk perception. During the year 2012-13, 228branches covering 78% of total business of the Bank, were subjected to concurrent audit byengaging the services of external firm of Chartered Accountants. Certain Functionaldivisions like IBR, FTS Centre, Bangalore, Treasury and Investment Division at Mumbaiincluding Investment Cell, Precious Metal Cell and Forex Cell are also subjected toInspection and Concurrent Audit.
21.7 All business units including Extension Counters are on core and are subjected toOff-site Surveillance Audit just before the commencement of the risk based audit of thebranch. On Site Branch Information Security Audit (BISA) of identified branches has alsobeen introduced effective from FY 2011-12. The Information System Audit identifiessecurity and processing risks in the computerized environment and evaluates relatedcontrols to ensure security, functionality and reliability of hardware, operating systemand application software and to ensure integrity, confidentiality and availability ofdata. Systems Audit of critical installations at Core Centre, FTS Centre, Web Centre,Treasury and Investment Department and DR Site as well as Audit of ATM Vaults is conductedevery year.
21.8 Income as well as Expenditure Audit is also carried out at identifiedbranches/offices once in a calendar year.
21.9 All important inspection and audit findings are placed before the Audit Committeeof Executives (ACE)/Audit Committee of the Board for information and suitable directions.
22. Legal Services
Legal Services Division of the Bank plays a significant role in the various commercialactivities undertaken by the Bank, including recovery of the monies lent. It has beenperforming diversified activities such as scrutiny of title to immovable propertiesoffered as security, preparation of case specific documents, monitoring of legal audit,advising branches as to the initiation of necessary steps to recover the dues of the Bank& advising on Suit filed Accounts, providing support to the branches for creation ofcharge in respect of the mortgages with Central Registry [CERSAI] and examination &disposal of applications and appeals received from citizens under the Right to InformationAct. Legal Services Division has also been taking effective steps in defending the Bank inlegal proceedings initiated before various forums like Civil/Criminal Courts, ConsumerForums, Banking Ombudsmen and various other statutory authorities. Matters pertaining toorders of attachments from income tax, sales tax or other authorities are effectivelyhandled. The Division has devised a simplified procedure for settlement of claims relatingto deceased depositors. The Law Officers are regularly and continuously handling variouslegal matters and offering legal guidance to branches and Administrative Offices in a timebound manner and take steps to safeguard the interest of the Bank in all its spheres ofactivities.
23. The Right to Information Act, 2005
23.1 Bank in pursuance of the enactment of Right to Information Act, 2005, hasdesignated Public Information Officers and Appellate Authorities at Head Office and ZonalOffices and displayed the Act in the Bank's website. Bank is complying with the provisionsof the said Act at all levels and disposing of all the applications and appeals receivedfrom the public within the stipulated time frame.
Shri Satyananda Mishra, India's Chief Information Commissioner (CIC) delivering a talkon "Right to Information Act and Relevance in the Present Context" at CorporateOffice in the presence of Shri Ajai Kumar, CMD.
24.1 In the backdrop of challenging law and order situation across the country withspecific reference to attack against banks and financial institutions, the Bank has beenalert, conscious and concerned about the safety of public assets, customers, employees andbank's property. Efforts were channelised to strengthen the risk management system of theBank. Bank has adopted forward posture in implementing measures to avoid/ minimisesecurity risk by heavily leaning on technology as force multiplier in addition toimplementation of physical security measures like fire alarm, security alarm, accesscontrol system, CCTVs and video surveillance. Frequent interactive sessions with theemployees manning the show windows by Security Officers adds additional dimension ascontributing factor in sensitising them with prevalent threats and measures. Bank isabreast with latest development in the security management field aiming to constantlyrediscover the key matrixes for breaking new grounds and to tread untraveled tracks withthe sole aim of providing utmost comfort to the customers.
25.1 The Bank has a Compliance Division in place as mandated by Reserve Bank of India.An Executive of the rank of Deputy General Manager heads the division and represents asthe Chief Compliance Officer (CCO) of the Bank.
The compliance function 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
26. Vigilance Machinery
26.1 As custodians of public funds, the Bank is expected to maintain highest standardsof honesty, integrity and efficiency.
Banking Organisations essentially work on the philosophy of mutual trust andconfidence. The roles and responsibilities of each functional division in Banks are welldefined and documented for better clarity and effectiveness. The vigilance functions inthe Bank are primarily in the nature of prevention and detection rather than takingpunitive action. The vigilance machinery plays the role of a watchdog so as to ensure thatthe laid down systems and procedures are not tampered with for any personal gain orbenefit. It believes in the principles of natural justice and punishing the guiltyirrespective of rank and position.
26.2 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 Official, 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.
26.3 The Bank has a Preventive Vigilance Mechanism in place. Branches have beendirected to convene Preventive Vigilance Meetings every month. In the said meetings, staffmembers have to discuss, share information and their work experiences so that alertnessand awareness is generated throughout the Bank.
26.4 The Bank has framed its own ''Whistle Blower Policy'', the objective of which isto 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.
26.5 A system has been put in place for conducting "preventive vigilanceaudit" at branches every quarter and at least twice in a year covering all theBranches in the respective Zones. Zonal Offices shall submit consolidated report toVigilance Division for perusal and necessary action. Preventive Vigilance Visits tobranches are also being conducted at random by Vigilance Officers.
26.6 Based on the feedback received, the Bank has put in place the following processchanges:
Snap Audits are conducted at branches where spurt in advances are found.
Offsite surveillance of Branch and Accounts are conducted through InformationSecurity Audits.
Further systemic improvements are suggested to IT Division for implementation tocurtail fraudulent ATM withdrawals/ POS payments/internet banking related frauds.
26.7 Framed Fraud Prevention & Employee Reward Policy in continuation of Fraud RiskManagement 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.
At the close of the financial year 2012-13, the Bank has achieved an impressivebusiness figure of Rs. 284722 crore registering a growth of 20.33%.
The Bank has pan-India presence with 6677 functional units comprising of 1707 Branches,1425 ATMs & 3545 Branchless Banking units and has registered its global presencethrough its foreign representative offices at Dubai and Hongkong. The Bank still has scopefor expansion of branch network in unbanked areas in India and in some of the importantforeign locations.
The increased presence of the Bank's branches in rural and semi-urban areas provides agreat scope for the Bank for improving its exposure to Agriculture and Retail business, toregister a balanced growth in retail portfolio in tandem with the wholesale business.Further, the 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.
Corporation Bank has very strong fundamentals which are reflected in the businessfigures, profitability numbers, NPA level and has an uninterrupted track record of profitand dividend payment since its inception, for the last 108 years.
It is amongst the best banks in the industry in terms of employee productivity. A highcalibre workforce, better spread of network of branches and ATMs, better infrastructurefacilities, a competitive customer service and an advanced tech savvy environment helpedthe Bank to be the beneficiary of the Direct benefit transfer scheme of the Government ofIndia and get a prime slot in the minds of the people. All this provide a greatopportunity for cross selling of its products and services for the overall growth of theBank's business.
Pioneer in Financial inclusion with 3,545 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 as compared to other Public Sector Banks, provide a great potential forthe Bank to fully exploit the techno savvy products to its advantage.
The banking industry in India is undergoing a major transformation due to changes ineconomic conditions.
High rate of inflation of the Economy has its effect on the performance of the BankingIndustry.
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 the Reserve Bank ofIndia, etc., may affect the operational viability of the Bank.
Effectiveness of Recovery Management, Asset Liability Management and Risk Managementmay have its own impact on performance.
Acute competition from the peer banks is likely to affect business growth, margins andprofitability.
29. Road map for the future
To become the most preferred Bank with Global Standards, Corporation Bank has takenvarious initiatives to attain this coveted goal.
To achieve a visionary business goal of Rs. 5 lakh crore with a network of 2,155branches by March 2014-15.
To reach a customer base of 37 million and 12,000 branchless banking units by 2014-15.
To expand its international presence in Hongkong, Dubai and African countries.
For and on behalf of the Board of Directors
|Place : New Delhi ||(Ajai Kumar) |
|Date : 23.05.2013 ||Chairman & Managing Director |