Indian Bank

A. ECONOMIC ENVIRONMENT

After witnessing slowdown in 2008-09, the global economy is slowly regaining with thelarge unprecedented interventions by governments. The speed of recovery, however, remainssignificantly divergent. The projections for global output for 2010 generally point toconsolidating recovery, led by the Emerging Market Economies (EMEs), especially those inAsia.

However, the global economy faces several challenges such as high levels ofunemployment, which are close to 10 per cent in the US and the Euro area. Despite signs ofrenewed activity in manufacturing and initial improvement in retail sales, the prospectsof economic recovery in Europe are clouded by the acute fiscal strains in some countries.Inflation in major advanced economies is still moderating as the output gap persists andunemployment remains high.

INDIAN ECONOMY

• During 2009-10, the Indian economy showed resilience with a broadbased recovery.This was possible due to a rebound in industrial output, better prospects for the Rabicrop and continuing resilience of the services sector.

• The advance estimates released by the Central Statistical Organisation (CSO) inearly February 2010 placed the real GDP growth during 2009-10 at 7.2 per cent. Theagriculture sector supported by good rabi prospects is expected to show a lower decline of(-)0.2 percent.

• Industrial output, which was affected by the cyclical slowdown recoveredsubstantially in 2009-10 and expected to record a growth of 8.8 per cent.

• The services sector, exhibited significant recovery in the second quarter of2009-10, with growth in the output of the sub-groups viz., 'construction' and 'trade,hotel, transports & communication', accelerating while growth in 'community, social& personal services' slowed down and, the growth in this sector would be 8.5 per cent.

INDUSTRIAL SECTOR

• The industrial sector recovered with the Index of Industrial Production (IIP)registering double digit growth during October 2009-February 2010 and IIP????? weightedcontribution of 88.8 per cent, higher than its weight of 79.4 per cent in the IIP

• Sectoral growth rates in February 2010 registered a growth of 8.4 per cent inBasic goods, 44.4 per cent in Capital goods and 15.6 per cent in Intermediate goods. TheConsumer durables and Consumer non-durables recorded growth of 29.9 per cent and 2.3 percent respectively, with the overall growth in Consumer Goods being 8.9 per cent.

• The use-based classification of industries shows that capital goods sinceSeptember 2009 and intermediate goods since August 2009 have registered double digitgrowth, which will support the growth momentum in several downstream industries.

• Durables production witnessed double-digit growth since the beginning of 2009-10and accelerated further between November 2009 and February 2010. The growth in basic goodsremained relatively moderate during 2009-10, with intermittent spikes. Industry segmentslike 'transport equipment and parts', 'machinery and equipment other than transportequipment' and 'metal products and parts, except machinery and equipment' recorded growthrates in the range of 36-59 per cent during December 2009-February 2010. The surge ingrowth of 'transport, equipment and parts' during the last few months is also corroboratedby the robust performance seen in automobiles production.

• The performance of core infrastructure after improving significantly duringNovember 2009 to January 2010, decelerated in February 2010 mainly due to slowdown in thegrowth of cement and steel, which may be attributed partly to adjustment in inventories.The accelerated growth in power was led by the robust manufacturing sector performance,while the growth in the output of cement and steel until February 2010 has been on accountof improved construction activity.

EXTERNAL SECTOR

• India's external sector witnessed improvement with the recovery seen in theglobal economy as reflected in the turnaround in exports, buoyancy in capital inflows andfurther accretion to the country's foreign exchange reserves. Exports recovered from 12months of consecutive decline and posted an average growth of 20.5 per cent duringNovember 2009-February 2010.????growth of about 43.0 per cent during December2009-February 2010, mirroring the impact of strong recovery in growth.

• During 2009-10, Foreign Exchange reserves increased by US$ 27.1 billion, to US$277.04 billion, as on Mar.26, 2010, comprising mainly of increase in gold holdings (US$8.4 billion), SDRs (US$ 5.0 billion) and foreign currency assets (US$ 13.3 billion).

• India's balance of payments position during April-December 2009 remainedcomfortable with a modest increase in current account deficit, despite a lower tradedeficit, on account of decline in invisibles surplus. There has been a turnaround incapital inflows, mainly led by portfolio inflows, reflecting the buoyant growth prospectsof the Indian economy.

PRICE SCENARIO

• Inflationary conditions in India during 2009-10 were marked by two distinctphases. During the first half of 2009-10, the year-on-year WPI inflation remainedsignificantly low (negative during June-August 2009) on account of the high base of sharpincreases in prices recorded a year ago. This period, however, was characterised by asignificant build-up of inflationary momentum, largely on account of the partialpass-through of increases in international prices.

• During the second half of the year, increasing food prices, on account ofunfavourable agricultural supply conditions caused by the deficient South-West monsooncoupled with the waning of base effect led to sharp increase in inflation and the headlineWPI inflation reached 9.9 per cent (y-o-y) in February 2010.

EQUITY MARKETS

• The activity in the primary segment of the domestic capital market displayedsigns of revival in Q2 and Q3 of 2009-10.Stock prices displayed a continuous upwardmomentum throughout the year, except for some occasional corrections during the last twoquarters caused by Dubai World default and the Greek sovereign debt concerns. Followingthe optimism on account of measures announced in the Union Budget 2010-11 such as theroadmap for fiscal consolidation and PSU divestment, stock prices recorded further gains.As at end-March 2010, the Sensex and the Nifty both registered gains of 81 per cent and 74per cent, to close at 17528 and 5249 respectively.

• The gains in stock prices were also led by the FN investments, while at the sametime mutual funds turned net sellers. Flls made net purchases of US$ 23.7 billion in theIndian equity market during 2009-10 (net sales of US$ 10.4 billion in 2008-09), while themutual funds' net sales during 2009-10 amounted to Rs.10,512 crore (net purchases ofRs.6,985 crore in 2008-09)

B. MONETARY DEVELOPMENTS

• During the first half of 2009-10, growth in both broad money (M3) and non-foodcredit decelerated. However, during the second half it reversed with economic recoverygaining pace. By the end of the financial year, growth in both M3 and non-food creditexceeded the Reserve Bank's indicative projections of growth of 16.5 per cent and 16.0 percent, respectively.

• Aggregate Deposits as on Mar.26,2010 showed a year-on-year growth of 17.0 percent, compared to 19.9 per cent in the previous year. Deposits of the banking systemslowed down mainly due to the gradual decline in interest rates on time deposits in laggedresponse to the lower policy rates. With the increasing demand for credit from the bankingsystem, deposit mobilisation gained strength, and deposit rates also moved up end March.Even after the absorption of Rs.36,000 crore through the 75 basis points hike in CRReffected in February 2010, liquidity conditions have remained comfortable, as evident fromthe reverse repo operations under the Liquidity Adjustment Facility (LAF)

DETAILED BUSINESS OVERVIEW

GLOBAL BUSINESS

Global Business of the Bank increased to Rs. 1,50,886 crore as on March 31, 2010 fromRs. 1,24,413 crore as on March 31, 2009 registering an increase of Rs. 26473 crore and agrowth of 21.28 %. Domestic Business of the Bank increased by Rs.26749 crore toRs.1,45,269 crore as on that date from Rs. 1,18,520 crore as on 31.3.2009 registering agrowth of 22.57 %.

RESOURCE MOBILISATION

Global Deposits of the Bank improved to Rs. 88,228 crore as on 31.3.2010 from Rs.72,582 crore as on 31.3.2009 with an accretion of Rs. 15646 crore and growth of 21.56%.Domestic Deposits of the Bank increased by Rs. 15647 crore to Rs. 85306 crore as on31.3.2010 from Rs. 69,659 crore as on 31.3.2009 registering growth of 22.46 %.

Current Deposits reached the level of Rs.6570 crore as on 31.3.2010 against Rs. 5,252crore as on 31.3.2009, a growth of 25.10 %. Savings Bank Deposits grew by 23.34 % toRs.21790 crore as on 31.3.2010 from Rs. 17,667 crore as on 31.3.2009. The share of lowcost deposit in total deposits improved to 32.14% as on 31.3.2010 from 31.58 % as on31.03.2009.

CREDIT DEPLOYMENT

Gross Advances of the Bank touched the level of Rs.62,658 crore as on 31.3.2010 againstRs. 51,831 crore as on 31.3.2009 recording a growth of 20.89 %. Domestic Credit increasedby Rs. 11102 crore (22.72 %) to Rs. 59963 crore as on 31.3.2010 against Rs. 48,861 croreas on 31.3.2009. The growth mainly accrued from Non food credit.

Domestic Non food credit increased by Rs. 11098 crore (23.24 %) to Rs. 58842 crore ason 31.3.2010 against Rs.47,744 crore as on 31.3.2009.

The CD ratio of the Bank as on 31.3.2010 stood at 71.02% The Bank continues its thruston improving its yield on advance and asset quality.

Priority Sector advances with an outstanding of Rs. 21665 crore constituted 44.34% ofthe Adjusted Net Bank Credit and registered an increase of Rs. 3239 crore.

BRANCH NETWORK AND EXPANSION

As on 31.03.2010, the Bank had 1756 domestic branches comprising of 498 Rural, 455 SemiUrban, 441 Urban and 362 Metropolitan branches. There were 41 Extension Counters, 26Satellite Offices, 1 Collection Counter, 20 Rural Banking Service Centres and 1 ForexBureau. During the year, the Bank opened 114 branches. Besides, the Bank has 2 foreignbranches in Colombo and Singapore.

SEGMENT-WISE PERFORMANCE

Priority Sector Credit

• Priority Sector advances of the Bank increased by Rs.3239.23 crore to reach Rs.21664.94 crore as on 31st March 2010 registering a Year on Year growth rate of 17.58%. Itconstituted 44.38% of Adjusted Net Bank Credit (ANBC) as against the 40% norm stipulatedby RBI

Agriculture credit

• Credit to Agriculture increased by Rs. 1306.45 crore to reach Rs. 9143.99 croreas on 31^st March 2010 and registered a YoY growth rate of 16.67%.

• It constituted 18.73% of ANBC as against the 18% norm.

• To improve Agricultural lending, Branches observed "Intensive Farm CreditCampaign" coinciding with South West Monsoon between 15^th June and 15^thAugust 2009 and farm credit extended to 28040 farmers to the tune of Rs.278.67crore.

• Similarly during Nov and Dec 09, coinciding with North East Monsoon, Branches inSouthern States observed "Agri Plus - 2009" - Campaign for intensive farm creditduring which farm credits were extended to 27914 farmers amounting to Rs. 332.28 crore.

• With the objective of sensitizing Branch Managers of Rural / Semi Urban Branchesand RDOs, one day workshops were organised in all Circles during June / July 2009.

Agriculture Disbursement

• Special Agricultural Credit Plan: Against the annual target of Rs. 5300crore for the year 2009-10, Branches have disbursed a total of Rs. 6580.11 crore,recording 124% achievement.

• New Farmers financed: During the year 4.11 lakh new farmers were financed,working out to 432 farmers per Rural / Semi Urban Branch against the norm of 250 in ayear.

• Finance to Small and Marginal Farmers: During the year a total of 6.67 lakhfarmers were financed to the tune of Rs. 3204.76 crore, which works out to 56% of directagricultural disbursements against the norm of 40%.

• Disbursement under Interest Subvention Scheme: During the year 9.51 lakhfarmers were extended credit under subvention scheme, amounting to Rs.3659.94 crore. TheBank is eligible for a subvention of Rs.27.55 crore as of 31.03.2010 @ 2%. Further, GOIannounced 1% incentive for the prompt repayers from 1^st April 2009 under which1.37 lakh farmers were benefitted during 2009-2010 and the Bank is eligible for anadditional subvention of Rs.1.57 crore.

Microfinance

• The Bank's SHG portfolio was at Rs. 1917.12 crore covering 1.90 lakh SHGs. as on31.03.10 improving by Rs. 566.26 crore from the level of Rs 1350.86 crore as on 31.03.09covering 1.55 lakh SHGs

• During the year, the Bank disbursed Rs. 1458.53 crore as credit assistance to112135 SHGs.

• The Bank has been adjudged by Government of Tamil Nadu as the "BestPerforming Bank in the State of Tamil Nadu - First Place" for the year 2008-09. Theaward was presented to the Chairman and Managing Director on 16.11.2009 at Chennai byShri. M.K. Stalin, Hon'ble Deputy Chief Minister, Tamil Nadu. Besides, five of theBranches have received State Level awards.

The Bank has established 27 MICROSATE branches (specialized Micro Finance branches) ofwhich 5 were opened during the • current financial year. During 2009-10, 23901 groupshave been financed to the tune of Rs. 398.24 crore. Total credit outstanding of MicrosateBranches stood at Rs, 467.30 crore covering 37424 groups as at the end of March 2010.

Education loan scheme

• Education loan portfolio was at Rs.2300.07 crore as on 31^st March2010 benefitting 165594 students.

• During the year, Education Loans were extended to 92153 students amounting toRs.603.62 crore compared to Rs.540.17 crore disbursed during 2008-09.

• On-line Education Loan Application system was implemented in the Bank from15.10.07. During 2009-10, a total of 1932 applications were received out of which 1241were sanctioned amounting to Rs.42.43 crore.

• Interest Concession @ 0.50% on the applicable card rate on Fresh EducationalLoans sanctioned to Girl students with effect from 01.07.2009.

Financial Inclusion (Fl)

• Total Financial Inclusion (involving all Banks)achieved in UT of Puducherrywhere the Bank holds SLBC responsibility and in Cuddalore (TN) & Kollam (Kerala) wherethe Bank has Lead Bank role. In remaining 11 other Lead Districts, the Branches haveimplemented 100% Financial Inclusion. 100% Fl has also been completed by the Bank inNilgiris (ST concentrated), Tiruvarur (SC concentrated) and Kanniyakumari (minoritiesconcentrated) districts of Tamil Nadu as per RBI directions.

• As per recommendations of High Level Committee to review the Lead Bank Schemechaired by Smt. Usha Thorat, Deputy Governor, RBI, banks have been advised to prepare aroad map to provide Banking Services in every village having a population of over 2000 byMarch 2011. The Bank has been allotted 1468 villages covering 18 States. A FinancialInclusion Plan has been rolled out by the Bank to provide Banking services in identifiedvillages before March 2012.

• Under Financial Inclusion project, a total of 22.31 lakh No-Frills accounts wereopened in 4637 villages. Cumulatively, Overdraft / General Credit Card facility wasallowed in 52678 accounts to the tune of Rs.11.60 crore.

• Under Janashree Bima Yojana (JBY), the micro insurance scheme launched inassociation with Life Insurance Corporation of India, intended for providing life cover toSHG members, the Bank provided insurance cover to 54177 members during the year taking thetotal cumulative coverage to 1.30 lakh members.

Weaker Section Advances

• Credit outstanding to Weaker Sections stood at Rs. 5205.97 crore as at the endof March 2010, working out to 10.67 % of ANBC against stipulated norm of 10%.

• DRI Advances: Weaker Section Fortnight with focus on DRI loans, was observed bythe Branches (i) between 18.05.09 & 30.05.09, (ii) between 16.11.09 & 21.11.09 and(iii) between 01.03.10 & 06.03.2010. As a result, during the year the Branchesdisbursed 23645 DRI loans amounting to Rs. 29.86 crores. Outstanding level which stood atRs.11.44 crore as of March 09 improved by Rs.16.09 crore to reach Rs.27.53 crore as of31.03.10, working out to 0.06% of total advances as of 31.03.09.

• Advances to SC/STs : Outstanding credit to SC/ ST beneficiaries stood at Rs.1667.08 crore as of 31.03.2010, working out to 7.69% of Priority Sector Advances of theBank.

• Lending to Minorities: Advances granted to Minorities which stood at Rs.2442.45crore as of March 2009 increased by Rs.751.08 crore during the year to reach Rs. 3193.53crore as of 31.03.2010, working out to 14.74 % of total Priority Sector Advances.

Agricultural Debt Waiver and Debt Relief Scheme 2008

• In terms of the announcement made by the Gol in the Union Budget 2007-08, theBank provided debt waiver amounting to Rs.459.01 crore benefiting 2.36 lakh Small andMarginal Farmers.

• Besides 42892 lakh other farmers were identified as eligible for a Debt Reliefof Rs.84.67 crore out of which 30602 farmers have paid their share (75%) as of 31.03.2010,and a relief of Rs.58.58 crore passed on by the Branches. GOI has extended the period forpayment of 75% share by Other Farmers up to 30.06.2010.

• As on 31.03.2010, amount of Debt Waiver receivable from GOI stood at Rs. 164.07crore and Debt Relief receivable at Rs.58.58 crore.

• Fresh loans are being issued to the beneficiaries of the Debt Waiver / DebtRelief scheme from 01.07.08. Accordingly during 2008-09, 97357 fresh loans were disbursedamounting to Rs.283.19 crore. During the year, 105566 fresh loans have been disbursedamounting to Rs. 403.30 crore.

Capacity Building Initiatives

• As a step towards getting closer to the rural people, the Bank has set up aTrust by name "Indian Bank Trust for Rural Development" (IBTRD) for undertakingvarious developmental activities. Under the trust, the Bank has established FinancialLiteracy and Credit Counseling (FLCC) centers at Dharmapuri and Puducherry. The Bank hasalso established RUDSETI Model Training institutes named as "Indian Bank SelfEmployment Training Institute (IND SETI) in five centers viz., Salem, Puducherry, Vellore,Chittoor and Tiruvallur. Of the five, three Centers were opened during the year. A totalof 90 training programmes have so far been conducted by our INDSETIs benefitting 2457individuals.

• Apart from the above, exclusive initiatives of the Bank towards capacitybuilding, the Bank is already participating in Rural Training Centre, Karaikudi, TamilNadu (jointly with and NABARD & IOB) and Andhra Pradesh Bankers' Institute of Rural&Entrepreneurship Development -APBIRED, Hyderabad (jointly with Government of AP &four other Banks). These two training institutes offer wide range of skill orientedtraining programmes with a focus on rural population. A total of 178 training programmeshave so far been conducted by RTC, Karaikudi (benefitting 4442 members) and 72 programmesby APBIRED, Hyderabad (benefitting 1952 members).

Rural Technology Initiatives

• Banking Service Centre (BSC): 20 opened by the Bank in rural areas across thecountry on a pilot basis to enable door step banking, by providing basic banking servicesat village level. These centers extend financial and non-financial services in the fieldof Agriculture, Education, Health etc. with the help of Internet facility.

• For Self Help Groups, an exclusive software application has been developed forenabling dual biometric authentication of SHG members (i.e. with finger print). So far 57Biometric ATMs have been installed in the Bank.

• Smart Card Project in Andhra Pradesh : Government of Andhra Pradesh isimplementing Smart Card Project for disbursement of NREGP wages and Social SecurityPensions. The Bank is implementing the project in Chittoor District, where the Bank hasLead Bank role. Customer enrollment has been completed for 25666 accounts in Karvetnagar /Vedurukuppam mandal and card distributed to 24835 beneficiaries. The Chairman and ManagingDirector inaugurated the project by distributing Smart Cards to the beneficiaries atChittoor on 19.09.09. Payment of Government Pension (Social Security Pension) throughsmart cards commenced on 01.10.09. So far payments to the tune of Rs.2.25 crore have beendisbursed to wage earners and pensioners through the project.

Lead Bank Scheme

• The Bank holds SLBC responsibility in UT of Puducherry and Lead Bank role in 13districts (10 in Tamil Nadu, two in Andhra Pradesh and one in Kerala).

Under Annual Credit Plan 2009-10, Banks in the above Lead Districts disbursed PrioritySector Credit to the tune of Rs.16514.81 crore during the nine month period ended Dec 2009registering 74.81% of annual target. For 2010-11, Banks in above Lead Districts have madeprojections of Rs.25309.80 crore under ACP, which is 14.65%) increase over 2009-10 target.

The Lead Districts are actively involved in implementing Financial Inclusion Plan toprovide Banking Services in unbanked villages. Accordingly, 2863 unbanked villages withpopulation over 2000 have been identified and allocated to member Banks for providingBanking Services before March 2012. Of the above, 931 villages have been allotted to theBank.

CREDIT FLOW TO SMALL AND MEDIUM ENTERPRISES (SME)

• For the year 2009-10, the SME exposure was at Rs.

against the 20% stipulated by Gol under SME, The Y-O-Y growth under SME works out to33% as on 31.03.2010 by excluding the "Retail Trade" under SE.

• The Bank is following the Internal Credit Rating system (RAM) for rating SMEs.Rate of interest is linked to the Credit Rating based on Internal Credit Rating system ofthe Bank or credit rating acquired by the SME borrowers from SMERA / CRISIL.

• The Bank has in place a policy on Debt Restructuring of SME accounts sinceDecember 2005. During 2009-10 SME accounts involving an amount of Rs 142.49 crore wererestructured.

• The Bank has in place a policy package for financing Small and MediumEnterprises since January 2006. The policy has been reviewed recently in March.2010.

• The Bank with three exclusive SME branches at Peenya Industrial Estate,Bangalore, Coimbatore and at Trichy (Thuvakudi) and 59 other General Banking Branchesconverted /re-designated into Specialised SME Branches for enhancing the quality SMEportfolio.

• An additional 102 branches identified for lending composite loans to SmallEnterprises.

PERSONAL SEGMENT LOANS

During the year, the Bank continued its focus on Personal Segment Loans. The Bank hasRetail Banking Centre at each of its 28 Circle Offices for processing and sanctioning ofPersonal Segment Loans. Personal loans consists mainly of Home Loans, Automobile Loans,Personal Loans, Education Loans, Rent Encash, Ind Mortgage, Reverse Mortgage and loansagainst financial securities like Deposits / NSCs.

During the year, fresh disbursements to the tune of Rs. 5027.90 crore were made inPersonal Segment Loans. The total amount outstanding under Personal Segment Loans stood atRs10856.40 crore at the end of March 2010 as compared to Rs.9664.14 crore in the previousyear,

The segment wise exposure is given below:

Tie-up Arrangements:

During the year, tie-up was made with Hyundai Motors for financing their Cars.

Bancassurance Business:

The Bank has Corporate Agency Tie up Arrangement with United India Insurance Co. Ltd.(UIICO) for non life insurance business and with HDFC Standard Life Insurance Co for lifeinsurance business.

The Bank has Distribution Tie up Arrangement with UTI AMC and Reliance AMC fordistributing their Mutual Fund Products.

Various Group Insurance Products are offered by the Bank to customers on OPTIONAL BASISby arrangement with UIICO/LIC/Kotak Mahindra OM Life Insurance Co (Kotak) as given below:

1. IB Jeevan Kalyan & IB Jeevan Varishta (from LIC); IB Yatra SurakshaScheme & IB Chhatra Schemes from UIICO for all customers

2. IB Griha Jeevan (from LIC) and IB Home Suraksha (from Kotak) are offered to coverthe life of Home Loan Borrowers and IB Jeevan Vidhya (from LIC) offered to cover the lifeof Education Loan Student borrowers.

Bank earned commission income of Rs. 18.21 crore by way of marketing third partyproducts like Life Insurance, Non Life Insurance and Mutual Fund Products during the year(corresponding figure for the period ended 31.03.2009 was Rs. 15.24 crore.)

OTHER FINANCIAL PRODUCTS

IB Swarna Mudra Scheme

The Bank is in to the sale of Gold Coins since 24.03.2006. These products are availablein 2g, 4g, 5g, 8g, 10g, 20g, 50g coins/bars currently at 1423 branches.

Credit Card

Indian Bank launced Visa Business Card in March 2010 to address card and paymentrequirements of Corporate and SME clientele segments of the Bank. Earlier in Personal CardSegment the Bank had launched Global Credit Cards in two variants viz. Gold andClassic and Bharat Card for the common man. IB cards and related services are pricedcompetitively along with lower interest rate. Other value additions offered include freeinsurance cover and tie-up with United India Insurance and a sure cash back credit ofReward Points. Bharat Card has been launched as part of Bank's financial inclusionProgramme and benefits the large number of lower income groups.

Wealth Management Services

The Bank launched Wealth Management Services (WMS) on 7^th February 2009 on apilot basis in Chennai. Under this, the Bank offers Financial Advisory Services to HighNetworth Individuals (HNI) clients. Wealth Management Services involve structuring ofsuitable financial plans for customers, depending upon their risk tolerance, life goals,cash flows and investment horizon and also includes regular monitoring and rebalancing ofthe client's portfolios. WMS is a highly personalised service, wherein a dedicated team ofClient Relationship Managers and Wealth Managers interact regularly with HNI customers forall their financial needs.

Depository Participant Services

The Depository Participant Services launched on 22.05.2006 are now being offeredthrough 362 branches as on 31.03.2010. The Bank has tie up with Indbank Merchant BankingServices Limited for on-line trading facility for the customers who can also have accessthrough internet banking to view their holdings.

ASSET QUALITY MANAGEMENT

Consistent focus on quality assets along with prudent risk management has improved theBank's asset quality. Under NPA Management, the Bank focused on arresting the slippages ofstandard assets to NPA category. In this regard, the Bank took timely action, byidentifying and monitoring the Special Mention Accounts.

• Bank continued the good performance in NPA Recovery Management during theFinancial Year 2009-10 as well.

• Bank achieved an aggregate Global Recovery of Rs. 587.48 crore. Of which,Contribution to Income was Rs.448.89 crore.

• Bank has been proactive and vibrant in recovering the money staked in StressedAssets.

• All the fora available for the Bank, like Lok Adalat, DRT, SARFAESI, negotiatedsettlements etc were effectively used for resolution of NPAs.

• In tune with the emerging scenario of the economy, the Recovery Policy wasrefined further and front officers sensitized for scaling up recovery performance further.

• OTS policy for small loans NPAs upto Rs 2.00 lakh implemented to address theissue of small loan NPAs.

• Bank's Gross NPA ratio has been brought down .

• During the year 3357 accounts for Rs.3234.71 crore were restructured of whichless than 1% became NPA.

RISK MANAGEMENT

The Bank complied with all the guidelines of the Reserve Bank of India on creation ofRisk Management architecture.

The Bank is BASEL II compliant w.e.f 31 03 2008. Necessary initiatives have been takenfor moving over to higher approaches under Basel II as per the time lines indicated byRBI.

An independent Risk Management department is functioning for effective Risk Managemententerprise wide. Risk is managed through the three Apex committees viz.

(i) Credit Risk Management Committee (CRMC)

(ii) Asset and Liabilities Management Committee (ALCO) and

(iii) Operational Risk Management Committee (ORMC).

These committees work within the overall guidelines and policies approved by the RiskManagement Committee of the Board.

The Bank has in place various policies to manage the Risk. To analyse the Riskenterprise wide and with the objective of integrating all the risks of the Bank anIntegrated Risk Management policy is in place. The important risk policies comprise CreditRisk Policy, Asset and Liabilities Management Policy, Operational Risk Management Policy,Business continuity planning and Policy on Corporate Governance.

The Risk management systems are in place to identify and to analyse the risks at theearly stage, set and maintain prudential limits and manage them to face the changing riskenvironment. Software driven rating mechanism is in place to confirm the rating to ensurecredit quality. An entry level scoring system is in place.

Loan Review Management Committee reviews the Loan Review Mechanism and Credit Auditfunctions periodically. In addition, Standard Assets Monitoring Committee reviews theSpecial Mention Accounts periodically to initiate timely action to prevent slippage ofstandard assets to non-performing assets.

The liquidity risk is managed through studying structural liquidity on a daily basis,which is being discussed in the Funds and Investments Committee and reviewed every monthby ALCO .The interest rate risk is managed through monthly interest rate sensitivitystatements monitored by ALCO. The mid office, directly reporting to Risk ManagementDepartment monitors integrated treasury transactions independently. Operational risk ismanaged by integrating the operational risk management systems into day to day managementprocesses and adopting various risk mitigating strategies. The risk perception in variousproducts / procedures is critically analysed. Stress tests are conducted periodically forthe credit risk, liquidity risk and interest rate/ exchange rate risk.

Policy on Internal Capital Adequacy Assessment Process (ICAAP) is in place whereby theBank identifies / measures and allocates Capital for various residual risks identifiedunder Pillar II on quarterly basis and reviewed by the Board half yearly. The CRARposition of the Bank is reviewed by the Board on a half yearly basis and assessment forthe next three years is also provided based on projected business position.

In compliance with the Reserve Bank of India guidelines on Basel II - Pillar 3 - MarketDiscipline, the Bank has in place a Disclosure Policy duly approved by the Board and thedisclosures on Quarterly / Half Yearly / Annual basis as per the Policy are ported /incorporated in the Bank's Website / Annual Report. The Disclosure Policy is also revisedannually.

HUMAN RESOURCES MANAGEMENT (HRM)

The Bank is committed to create a congenial working environment where there is mutualtrust and respect duly recognizing the talents, rights and dignity of every employee. Thefocus is on placing officers in suitable positions, matching their job skills, talents,ability to take decisions and solve problems, explicitly making clear that such staffmembers should be aware of what exactly the Bank expects from them. As a part ofsuccession planning, recruitment and promotion in the Bank are aimed at articulating andspearheading the future growth of the Bank. To align with the fast changing businessneeds, Human Resources Management Department is giving top priority to "training andimparting of knowledge" to each and every employee. Thus Human Resources is alignedto meet the organizational needs of the Bank.

MANPOWER POSITION

The position of manpower in the Bank as on 31.03.2010 is as follows:

*Reservation for OBCs in direct recruitment came into force only with effect from8.9.1993. Employees belonging to OBC recruited in the Bank prior to 8.9.1993 wereclassified as General Category and included in General list.

RECRUITMENT AND PROMOTION

A comprehensive manpower exercise was carried out by HRM Department and a SuccessionPlan was placed to the Board at its meeting dated 19.11.2009 and it was duly approved.Based on the plan, promotion of personnel from one scale to another was carried out.

In the recruitment process initiated for the year 2009-10,550 candidates in clericalcadre were posted to branches.

A Chief Security Officer in AGM Cadre ((SMG-Scale V) was appointed on 04.01.2010 and 40Rural Marketing Officers were appointed on Contractual Basis.

Recruitment process is under way for selection and appointment of 204 SpecialistOfficers in various functional areas in Scale I to Scale V and 118 Probationary Officersin JMG Scale I. Out of the same, 27 Specialist Officers were selected in Scale II, ScaleIII, IV and V in different functional areas. The process of selection of the remainingSpecialist Officers in Scale I and II will be completed shortly.

In the process of Promotion from Clerical to Officer cadre, the Written examination forMerit and Seniority cum Merit was conducted on 28.03.2010. ON-LINE test was conducted in285 centres throughout India. Total of 2541 eligible Clerical candidates appeared for theexamination and the list of 470 successful candidates was released on 28.03.2010 itself.

As a one time measure, stenographers who were drawing special allowance wereinterviewed through "Video Conferencing" and 18 candidates were promoted assteno officers. Further, during the year the bank has promoted 209 sub-staff members toclerical cadre to those who qualified a written test conducted in basic compuers.

During the year, promotions also took place in various cadres including executives. Thetests for promotion upto Scale IV were conducted On-Line and the interviews were conductedthrough "Video Conferencing" thereby leveraging the technology available to theoptimum level.

The Bank has effected the following promotions in various scales during this year:

At the Top Management Grade, 6 Deputy General Managers were promoted as GeneralManagers, 25 Asst. General Managers were promoted as Deputy General Managers. Similarly,at the Senior Management level, 48 Chief Managers were promoted as Asst. General Managersand 204 Senior Managers were promoted as Chief Managers. At the Junior and MiddleManagement level, 846 Managers were promoted as Senior Managers, 1402 Asst. Managers werepromoted as Managers. Further, the Bank has promoted 667 Clerical staff as JuniorManagement Scale I officers.

WELFARE MEASURES FOR SC/ST/OBC/PWD EMPLOYEES

As per Government of India's guidelines, reservations are ??? ided to Scheduled Castes(SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs) and Persons WithDisability PWD) candidates in the Direct Recruitment. Reservation in promotions areprovided as per Government guidelines.

Periodical Quarterly Meetings with All India Indian Bank SC/ST Employees' WelfareAssociation are conducted and grievances if any are resolved then and there. The SC/ STwelfare at HO/HRM also ensures prompt disposal of grievances / representations of SC/STemployees. A General Manager is nominated as Chief Liaison Officer to look after theinterest of employees representing SC/ST category. Similarly, to look-after the welfare ofemployees belonging to OBC category, a General Manager has been nominated as Chief LiaisonOfficer.

UPGRADATION OF SKILLS

The Bank's training infrastructure constitutes the State-of-the art Training College byname "Indian Bank Management Academy for Growth and Excellence" (IMAGE) and 8Staff Training Centres across the country enabling the staff and the officers to upgradetheir skills.

During the year 10647 Officers, 10049 Clerks and 1186 Sub-staff members were trainedthrough internal training system. 523 officers and Executives had attended externaltrainings at various institutions. During the year 6 executives were nominated foroverseas training.

E-learning

The Bank has an e-learning portal which can be accessed through CBS Help Desk. Thereare 53 course libraries in various banking topics. Login is provided to all Staff.Presently 9033 active users are there.

INDUSTRIAL RELATIONS

The Top Management of the Bank interacts with the leaders of Employees' Unions,Officers' Associations and their response is positive resulting in the desired growth andharmonious Industrial Relations during the year.

SAP

This robust HR software being put in use by the Bank has been immensely useful in theretrieval of data and providing uninterrupted service to all Circles / Branches addressingall HR functionalities. SAP is also effectively used as a decision support system incritical areas like promotion, online PF Loan disbursal to staff etc. As a measure ofextending technological advancement to the entire workforce and in aiming to achieve apaperless processing of HR related issues and reducing the transit time, a cohesiveweb-site for Human Resources Management through Intranet has been hosted.

STAFF WELFARE MEASURES

The Central Welfare Committee of the Bank constantly reviews the welfare schemesavailable to the employees and improvements are being made based on need.

HOUSE MAGAZINE

To build up an effective two way communication which is vital for the organization andto share knowledge, gauge progress, know limitations, learn from failures, solve problems,innovate and support, HRM Department has a House Magazine - "HR Active- it is".The Bank also publishes quarterly house journal 'IND IMAGE'.

CUSTOMER SERVICE

Customer Service and redressal of complaints/grievances continued to receive thehighest focus during this year. Branches were periodically sensitized over the importanceof customer service and were also directed to conduct Monthly Joint Customer ServiceCommittee meetings by including at least 3 customers and a senior citizen as members, toget feedback on the Bank's services and their suggestions for improvement of customerservice.

The Bank's endeavour is always to reach out the customers and to meet their needs/requirements. Towards creating awareness of the Bank's products, services and the Bank'scommitments to them in terms of redressal mechanism, policies, codes, Citizens' charter,KYC norms, rules for operating the accounts, were made available to the customers inbooklet form "Booklet on Customer Centric Services" in all the branches.

The Bank's Board in its meeting held on 12.10.2009 approved the Policy of GeneralManagement of the Branches. This Policy for General Management of the Branches is areflection of the Bank's ongoing efforts to provide better service to the customers andset higher standards for performance. This Policy is based on principles of transparencyand fairness. The Bank's systems are oriented towards providing better customer service.

Standing Committee on Customer Service, chaired by Chairman & Managing Directorwith Executive Directors and Functional General Managers as members, is being conductedonce in a quarter. The committee also consists of 4 non-official members who are customersof branches in Chennai. The committee has been formed to safeguard the interests of thecommon persons, depositors and borrowers. The committee also reviews the nature ofcomplaints received and efforts taken to redress their grievances.

BCSBI

"The Bank is a member of Banking Codes and Standards Board of India(BCSBI), wherein , the Bank has made commitments to its customers that it would actfairly and reasonably in its dealings with them and would ensure that all dealings withthe customers rest on ethical principles of integrity and transparency. The Bank adoptedthe revised .BCSBI Code-August 2009. Copies of the revised Code would fee madeavailable to all the new customers, staff and to those old customers who ask for the same.

Bank has also adopted the Code of Bank's Commitment to the Micro and Small Enterprisesand given a commitment for providing speedy and efficient credit service delivery.

Right to Information (RTI) Act

A separate desk attached to customer service cell is handling the requests/applications and appeals received by the Bank under the RTI Act. Since its inception, theBank is adopting a single window approach suggested by Parliamentary Committee onimplementation of RTI Act.

The Bank received 1213 applications and 180 Appeals under the RTI Act during the period2009-10. All the applications were disposed off within the time frame.

FOREX BUSINESS

The Bank handled forex business turnover of Rs. 25155 crore during the year. Of this,export and other inward remittances amounted to Rs. 9665 crore while imports and otheroutward remittances amounted to Rs. 15490 crore. During the year total turnover in theinter bank forex market amounted to Rs.110551 crore. 99 Branches are authorized to handleforex business, of which 72 branches are provided with SWIFT connectivity. The Bank hascorrespondent arrangements with 190 banks in 69 countries.

353 branches are authorized to handle Foreign Currency Non-Resident (FCNR) Accounts.Non Resident Indian (NRI) Deposits as on March 31, 2010 were at Rs. 3212 crore.Remittances from Singapore are credited to the beneficiary in India instantly on receiptof funds at Singapore through the new remittance scheme "Enterprise RemittanceScheme" launched in January 2010. As per this scheme, the beneficiary account inIndia is credited with rupee equivalent of the foreign remittances within minutes ofreceipt at Singapore and an SMS message is forwarded to the remitter at Singaporeinforming the credit. This facility is available on all days of the week.

The other remittance facilities for NRIs offered by the Bank include "XpressMoney", "Money Gram" and internet based "IndRemit". Apart fromthese the Bank handles remittances to India in the form of DD drawing arrangements through3 prominent Exchange Houses in the Middle East and Speed Remit from Singapore besidesnormal SWIFT based Money Transfer from across the globe.

International Operations

The Bank has two foreign branches located at Singapore and Colombo. Total Deposits andAdvances (gross) of the overseas branches as on 31.03.2010 were Rs. 2921 crore and Rs.2690 crore respectively.

Singapore branch, established in 1941, has carved a niche in offering a variety ofbanking services using the latest technology and enjoys enormous goodwill and customerloyalty. The branch is presently maintaining its business in two accounting units,Domestic Banking Unit (DBU) for Singapore Dollar business and Asian Currency Unit (ACU)for business in currencies other than Singapore Dollar.

Colombo branch, established in the year 1932, has active market presence extendingtrade finance. The Foreign Currency Banking Unit (FCBU), Colombo is engaged in offshorebanking operations.

Technology Initiatives

a) Core Banking Solution

• All the 1756 branches and 41 Extension counters in India are now on CBS. Boththe overseas branches at Singapore & Colombo have been connected to CBS network.

• The Bank has adopted versatile approach for ensuring uninterrupted connectivitylike Leased line with ISDN Backup, VSATs., GPRS etc.

• CBS implemented in 62 administrative offices (including departments in HeadOffice, Circle offices, IMAGE, STCs, Inspection Centers, Stationery Departments, etc.).

• All the 28 Circle Offices and IMAGE have Video Conferencing facility.

b) Services available to customers under CBS

• Roaming Account Facility - Through Multicity cheques & 'Sweep' facility

• Internet Banking, Mobile Banking, Telebanking

• Cash Management Services

• Inward remittance facility in all CBS branches through 'Moneygram' 'Xpressmoney'etc.

• E-payment for Central Excise collection, Customs Duty and Service Tax throughinternet banking.

• Depository Services made available at 324 branches at select centres.

• Interbank remittance facility through RTGS, National Electronic Funds Transfer.

• Payment of fees / charges to Registrar of Companies.

• IND CORP NET BANKING (Corporate Internet Banking) facility extended to corporatecustomers.

• The Bank is the first to implement bilingual facility in CBS branches.

c) Disaster Recovery (DR) Drill

In accordance with RBI guidelines. Disaster Recovery drills for the critical systemhave been conducted twice in the period 2009-10 as per details below:

The first DR Drill for the year 2009-10 was conducted on 09.08.09.

The second DR Drill for the year was conducted on 13 24.01.2010 by shifting the entireData Center operations to Secondary Data Center (DR site) at Hyderabad andrunning CBS applications for the entire day. It is a composite ???? consisting of CBSoperations, ATM operations, Internet Banking operations, etc. The operations were revertedback to the Primary Data Center after completion of the operations.

DR drill for RTGS was successfully conducted on 1^st and 2^nd Aug2009.

d) Centralization of activities for customer benefit

ATM Service Centre: Centralized ATM Service centre established to take care ofreconciliation, accounting and to redress customer grievances regarding ATM transactions.

Centralized Pension Processing: Centralized Pension Processing successfullyimplemented.

Centralized Deposit Processing: Specialized branches established at Chennai,Bangalore, Delhi and Mumbai Circles for facilitating centralized processing ofapplications for opening of accounts, issue of statement of accounts, issue of chequebooks, etc.,

Centralized clearing operations: Outward clearing operations have been centralizedin all Service Branch locations. Inward clearing operations have been centralized inChennai and Delhi using "in house" software.

Centralized Storage of TBC data: "In house" program has been developedfor conversion of erstwhile TBC data into Oracle & centralized storage. Web-basedsoftware has also been developed for generation & downloading of Statement of A/c bybranches. Data collection and migration has been completed.

e) ATMs:

• 1005 ATMs (Including 274 offsite ATMs) are in operation. All ATMs areinterconnected for online ATM transactions.

• The Bank has opened 57 Biometric ATMs. Biometric ATMs opened for extending 24x7services to Self Help Groups (SHG), ATM operations by Joint Account holders introducedfirst by the Bank, enabling round the clock ATM services for SHGs.

• ATM installed at 59 Railway Stations, of which ATM with Kiosk installed at 34Railway Stations

• Voice interface provided in ATMs for guiding the users .

• ATM card-base of the Bank is 43.51 lakhs including 'Maestro' branded cards of38.09 lakhs.

• Bank's Maestro cards can be used in the Mastercard branded POS terminalsinternationally.

• All the Maestro, Cirrus and MasterCard branded cards can be used in the Bank'sATMs for balance enquiry and Cash withdrawal.

• More than 54000 ATMs are available to Bank's customers through abovearrangements.

• Collection of fees for Vellore Institute of the Technology (VIT), RamakrishnaCollege, Coimbatore and GRD Matriculation School, Coimbatore; booking of air tickets forKingfisher Airlines and booking of railway tickets through IRCTC are enabled throughBank's ATM by using the Bank's ATM card / Debit card.

• Collection of Electricity Bill charges of TNEB through internet enabled from theyear 2009. As an additional feature, this facility is extended to Bank's customers byusing their ATM/ Debit Cards w.e.f. 01.02.2010.

f) Other initiatives:

• The Bank has implemented "FinDNA"- software developed by M/s. TCS Ltdas an upgrade to the CBS software, for Anti Money Laundering ( AML) monitoring. As of now,AML implemented in 1568 branches.

• The Bank has been authorized by 'AP Online' (Andhra Pradesh Government'sinitiative) for payment of Electricity Bills, Water Tax, Property Tax, Trade License,etc., by the Bank's customers using Internet Banking services.

• Treasury Branch opened for integrated treasury transactions and Forextransactions. Common Gateway Server installed at Bank's Treasury Branch and connected toINFINET through leased line. This is the common gateway for all inter-bank, SystemicallyImportant Payment System (SIPS) applications developed by Reserve Bank of India.

• New Electronic Accounting System in Excise and Service Tax (EASIEST) in webplatform developed inhouse replaced the existing Packages at Collecting, Focal as well asLink level branches.

• The Bank is one of the 5 banks identified to implement MCA21 programme for theMinistry of Company Affairs.

• The following interbank applications like Negotiated Dealings SettlementSystem(NDS), Real Time Gross Settlement Systems(RTGS), Structured Financial MessagingSolution (SFMS), Centralised Funds Management System (CFMS), Collateralised Borrowing andLending Obligations(CBLO) SW, FX clear for Foreign Exchange operations. NationalElectronic Funds Transfer (NEFT), On-line Tax Accounting System (OLTAS), implemented inall designated branches.

• Electronic Clearing Service (ECS both debit and credit) enabled in all CBSbranches.

• Electronic Data Interchange (EDI): EDI between Harbour branch and Chennai SeaCustoms (for payment of import duty and disbursement of duty drawback amounts) and betweenPort Trust Chennai (for payment of shippers' charges) and Harbour branch have beenimplemented. EDI also implemented with Hyderabad Inland Container Depot, Chennai andCochin Airports, and Visakhapatnam Port Trust for collection of customs duty.

• Cheque Truncation Project: RBI implemented CTS in NCR Delhi on pilot basis. Allthe Banks' branches including branches of the Indian Bank in NCR are participating in CTS

• In compliance with RBI guidelines , Bank has implemented 3D Secureauthentication by way of additional authentication in the form of a PIN known only to thecustomer, in addtion to the CVV number for Debit/Credit card operations for all onlinetransactions.

• As per RBI guidelines, the Bank has implemented "Online Alerts"through mobile phone to the card holders for all 'Card not present' transactions of thevalue of Rs.5000/-and above.

• Rollout of Financial inclusion Project using contactless smart cards in AndhraPradesh to make payment of wages under National Rural Employment Guarantee Act (NREGA) andSocial Security Pension (SSP) in select districts of AP was launched.

• Applications Supported by Blocked Amount (ASBA) module implemented. The Banksparticipating in the IPO process will be able to upload the bids of their customers intothe electronic book of BSE/NSE. Application processing, blocking and unblocking ofrequired funds from the customers accounts, generating files in the required formats forNSE/BSE and updating the data would be the major function.

• Financial Inclusion - As a part of outreach, Banking through ICT based SmartCard operation was introduced in Chettipattu Village in the service area of ThirukkanurBranch, for the first time in the Union Territory of Puducherry and at SorakolathurVillage in Tiruvannamalai district. Under this project banking transactions are enabledthrough POS terminals, integrating the same with Bank's CBS solution through internet.

• 20 Banking Service Centres are operational in various parts of the country toincrease the Bank's reach under financial inclusion.

• Use of Bio-metric Authentication for secured transactions: As a part ofstrengthening the security in the conduct of transactions and for authentication andnon-repudiation, besides User ID and Password, Finger Print authentication is used assecond factor authentication in 50 branches on pilot basis.

• 100% CBS implementation achieved in all the 3 RRBs (Pallavan Grama Bank,Pudhuvai Bharathiar Grama Bank and Saptagiri Grameena Bank) sponsored by the Bank.

• 24 Hours region implemented successfully on 15/08/2009. This facilitates onlineATM transactions on a 24 hour basis enabling the customers to avail full online limitthrough ATMs and other delivery channels.

• The enhanced Mobile banking facility (INDMobile) has been introduced in the Bankusing J2ME (Java 2Micro Edition) application which works on a secured, menu based and userfriendly J2ME technology.

g) Forex related developments in CBS

• All Foreign Currency deposits (FCNR, EEFC and RFC) and loans (FCPC, FCFBD andFCL) are migrated to CBS and being maintained in true currencies. Also the Bank isgenerating the Multi currency balance sheet for the branches having the assets andliabilities in true currencies.

• A facility is provided to Treasury Branch to upload the SWIFT MT103 messages fordirect credit of customer accounts at various branches without time delay.

h) Management Information System

To derive full benefit of automation through 100% CBS, the MIS department has beenproviding various reports/data for furnishing to different agencies and departments.Further, valuable information is being provided for decision making process. Internallythe MIS acts to relieve the various tiers from preparation of data. Ultimately the accentis to push applications further and maximize fruits of technology.

i) Information Systems Security

• Separate Information Systems Security Department is in place.

• IS audit of Core Banking Solutions software, Network infrastructure of the Bank,Internet Banking and ATM network has been done by an external agency.

• Guidelines issued to observe Computer Security on an on-going basis.

• Security Operation Center (SOC) housed at HO:TMD for monitoring of all theexisting and proposed security devices on a 24x7x365 basis.Under this projectfirewalls,Network Intrusion Prevention System (NIPS) Host Intrusion Detection System(HIDS) are deployed in Central Data Centre (CDC) and Disaster Recovery (DR) site.

• Implementation of Asset and Patch Management Solution: As part of the enterprisewide security project, the Asset and Patch Management Solution implemented, using whichthe computer hardware / assets can be identified, tracked and maintained by deploying thenecessary operating system patches. The solution has been deployed in HO, Circle Officesand all CBS branches.

• Enterprise System Management Solution, a sophisticated server monitoring toolinstalled at the Bank's data Centre for real time monitoring of the various criticalservers at DC and DR site.

j) Antiphishing measures provided for internet banking

• Dynamic Virtual Keypad in the Bank's Login Page for those customers accessingfrom cyber-cafes or shared networks

• Right Click and Menu Bar disabled to avoid copying/ duplication of the HTMLsource codes.

• To enforce better security to the customers, the login page has been segregatedinto 2 screens. In the first screen the user has to enter only the user-id. User will beprompted to enter the password only in the next screen which will have the welcome messagefor the customer with his account name, along with a personalised message and colourpattern of customers' choice. These features will not be available in phished sites.

• Display of necessary Security Tips in the Internet Banking Home Page aboutPhishing Attacks for customer education and guidance on how to avoid such attacks like"Not to part with details of personal credentials on any site other than the loginpage of Internet Banking site".

k) Encrypted Communication:

• The Bank uses digital certification from VERISIGN and 256 bit encryptionfacility to ensure security of online transactions and confidentiality of the data ofInternet Banking Customers.

• URL Encryption using Salted Hash Algorithm to encrypt all URL requests from theCustomers Browser to the Internet Banking Server

• Password encryption using SHA Hash Algorithm before transmission

• Extended validation Certificate from Verisign which, in addition to the existinglock symbol, will display the URL bar in green colour for genuine sites. In the case ofphishing sites, the URL bar will be displayed in Red colour in higher versions ofbrowsers.

INTERNAL CONTROLS

Risk Based Internal Audit has been carried out in 1343 branches, while InformationSystem Audit covered 1338 branches and 2000 ATM audits covered all ATMs {half yearly auditof ATMs}. Inspection of 2 Foreign branches have been completed, during the financial year2009-10.

Credit audit has been carried out covering 496 accounts.

Revenue audit covering all branches with credit exposure of Rs. 2 crore and above werecarried out, resulting in Identification and recovery of leaked income to the tune of Rs.2287.56 lakh during the 12 months ending March 2010 .

59 Management audits (28 circle offices, 2 Regional Rural Banks, 3 subsidiaries,7inspection centres, IMAGE, 9 staff Training centres, 3 computer Learning centres, 6Regional stationery centres), carried out and follow up action initiated for compliance.

Fraud Risk Management Policy has been framed in compliance of RBI guidelines on followup of large value frauds.

Information Systems (IS) Audit of Information & Communication Technology (ICT)Infrastructure - CBS application suite. Data Centre & Project Office carried out bythe external IS Audit firm completed; followed up by confirmation audit, on fixing up ofthe deficiencies/issues identified in IS Audit.

New Format for Audit of Overseas Branch, Chennai has been introduced, in compliance ofAnnual Financial Inspection observations.

Review Meeting of concurrent auditors have been conducted in all Inspection Centres, totone up the efficiency of concurrent audit system and for improving the quality ofconcurrent audit reports.

Skill development program covering 19 newly joined inspectors has been conducted forensuring effective and quality reporting.

VVR checking in electronic mode introduced in all the branches which enables bettermonitoring by Circle Office.

Backlog in signature scanning followed up with Circle offices and reduced from 5.19lakhs to 0.24 lakhs

Risk Based Internal Audit (RBIA) format has been revisited & updated with focus onareas of internal control so as to effectively capture areas of control weakness, if any,and to initiate necessary corrective measures

Automated weekly control return in lieu of AUF1 (control return on sanction of advances/TOD/Excess etc under their Discretionary powers by Branch Managers) has been introducedin 2 circles i.e Chennai & Puduchery circles on parallel run on pilot basis to enablecircle office to have better monitoring/follow up without time delay.

Inspection centres are carrying out off-site monitoring covering the branches in theirarea of operation through CBS connectivity. All the inspectors have been trained in CBSenvironment with focus on "Auditing in CBS environment" and reporting in RBIAreport format

CONSTRUCTION OF NEW HEAD OFFICE BUILDING AT ROYAPETTAH, CHENNAI

The Bank is constructing a modern Hi-Tech Office building in the land owned by it atRoyapettah, Chennai, to meet the requirements of its growing business. The foundationstone for the new building was laid by Shri P. Chidambaram, the then Union FinanceMinister on 9^th July 2008.

The new building is designed for a built up area of 1.85 lakh sq.ft havingBasement+Ground+3 upper floors. The building is also designed to have 2 additional upperfloors in future.

COMPLIANCE FUNCTION IN THE BANK

The Bank has Compliance Policy duly approved by the Board. In accordance with theReserve Bank of India guidelines, an independent Compliance Department headed by a DeputyGeneral Manager has been set up in the Bank. The Department monitors adherence to variousstatutory and regulatory guidelines governing the Bank's functioning such as:

• Various legislations such as Banking Regulation Act, Reserve Bank of India Act,Foreign Exchange Management Act, Prevention of Money Laundering Act etc.

• Regulatory guidelines issued by Reserve Bank of India (RBI), Securities andExchange Board of India (SEBI), Insurance Regulatory and Development Agency (IRDA) etc.

• Voluntary standards and codes prescribed by industry Associations such as IndianBanks' Association (IBA), Banking Codes and Standards Board of India (BCSBI), ForeignExchange Dealers' Association of India (FEDAI), Fixed Income Money Market DealersAssociation (FIMMDA) etc. and

• The Bank's internal policies, codes of conduct, guidelines etc. issued by way ofCirculars, manuals etc.

VIGILANCE

A well structured vigilance system is in place and is functioning in a proactive mannerin disposing all vigilance cases in line with the Central Vigilance Commission'sguidelines.

In the area of preventive vigilance, the Bank, through its quarterly News Letter'Ind-Chetana' and 'Preventive Vigilance Awareness Series' circulars, shares with all thestaff, the details of adverse incidents that has taken place in the branches, so as toinculcate preventive measures against recurrence of frauds.

SECURITY

The Bank has a well established security mechanism synergized with the operational riskmanagement system. Latest security gadgets concurrent with the present day requirement areprovided to the branches. To track the movement of cash vans continuously from controllingoffices, a tracking system called Resource Tracking Management System (RTMS) is put inplace. Training of Security Officers and Armed Guards is being carried out periodically toensure that they retain their perception and alertness.

IMPLEMENTATION OF OFFICIAL LANGUAGE

The Bank is actively implementing Official Language based on the Official Language Act1963 and Rules 1976. Official

Language is implemented as per the Annual Programme issued by the Ministry of HomeAffairs, Government of India and guidelines issued from time to time by the Ministry ofFinance and the Reserve Bank of India.

In keeping with the Bank's objective of 'Taking Banking Technology to the Common Man'the facility of Hindi in CBS has been provided and entries in Hindi in Pass Book have beenmade possible. The Facility of Hindi screens has been made available in ATMs also. Touchscreen material is made available in Hindi which gives information about various productsof the Bank. All computers of the Bank have the facility of word processing in Hindi.

Special emphasis is continued to be given by the Bank to train staff members throughworkshops. Hindi workshops are also conducted at various Circle Offices. Hindi website isavailable alongwith Home Page in Hindi. Hindi section has been made available in Bank'sintranet.

CORPORATE SOCIAL RESPONSIBILITY

Voluntary Blood Donation

The Bank sponsored 4283 blood donors during the year by organizing 37 blood donationcamps. Since 1980, the Bank has sponsored 53817 donors and marked a new milestone ofcrossing 50000 donors during this financial year. The Bank was awarded 2 rolling shieldsby the Madras Voluntary Blood Bank for its highest performance among all institutions andthe Bank maintains NUMBER ONE position for the 22^nd consecutive year since1988.

Eye Screening Camp:

Free Eye Screening Camp was organized for the school children and senior citizensthrough Venkatapuram Santhome, Washermanpet and Purasaiwakkam branches wherein 900 peoplewere screened for various eye problems and 130 senior citizens were treated for cataractin various eye hospitals.

Social Responsibility:

Indian Bank donated uniforms to the Children of SEERS - an organisation working foruplifting street children.

Uniforms, Note Books, Stationery items, Fans etc. were donated to 2 needy organizationsviz., Seva Chakra and Corporation School, Chindatripet, Chennai by the Employees forsocial service movement by name 'CONCERN'.

Achievement in Sports

Indian Bank is a familiar name in Indian Sports. It has teams in 9 disciplines likeathletics, basketball, carrom, chess, cricket, football, hockey, table tennis, andvolleyball. There

are 125 active sportspersons out of whom more than 30 have represented the country injunior/senior international competitions. A recruitment policy to recruit talented sportspersons and promotion policy to the achievers in the national and international events isbeing consistently followed.

Shri S Sathya of the Bank became the fastest man in India when he won the gold medal inthe 100m event in the 49^th inter state senior athletic championship held atChennai from 21^st to 24th October 2009.

Mrs Parimala Devi of the Bank's Carrom team became No.1 in India when she won thenational championship defeating the current world champion Ms. Elavazhagi in the finals on31^st March 2010.

Mrs. Revathy (former world carrom champion) and Mrs. Parimala Devi of the Bank won thetri-nation carrom test series held at Male, Maldives from 20^th to 23^rdDec 09.

Mrs. Sai Meera, an international women chess master participated in 4 internationaltournaments organized by Spanish Chess Federation from 24^th June to 10^thAug 09 and performed creditably, missing the women grand master title by half a point.

SUBSIDIARIES & REGIONAL RURAL BANKS

Subsidiaries

The Bank has three Subsidiaries viz., Ind Bank Merchant Banking Services Ltd., Ind BankHousing Ltd., and Indfund Management Ltd.

Regional Rural Banks (RRBs)

The Bank has sponsored three RRBs namely Saptagiri Grameena Bank head quartered atChittoor, Pallavan Grama Bank head quartered at Salem and Puduvai Bharathiar Grama Bankhead quartered at Puducherry. As on 31.03.2010,

• Saptagiri Grameena Bank has 131 branches with a total business of Rs.2628.59crore. (Deposits - Rs.1243.97 crore; Advances - Rs. 1384.62 crore)

• Pallavan Grama Bank has 92 branches with a total business of Rs.1146.36 crore.(Deposits - Rs.528.77 crore; Advances - Rs.617.59 crore)

• Puduvai Bharathiar Grama Bank, inaugurated on 01.06.08 has 19 branches with atotal business of Rs.86.33 crore. (Deposits - Rs.40.81 crore; Advances - Rs.45.52 crore)

• All the three RRBs have fully migrated to CBS, well ahead of the stipulated timelimit set by the Government of India i.e., September 2011.

Awards & Accolades

• Indian Bank is ranked 4th by Economic Times intelligence group's first survey onpublicly listed banks in India (published in their issue dated 23.11.09) based on overallperformance and the daily stated that - "in terms of efficiency and financialstrength, it (Indian Bank) ranks among the Best".

• The Bank was ranked 6th by Business Today among 39 big banks with a balancesheet size of Rs.24,000 crore for the year 2008-09.

• The Bank was also awarded Business World's FASTEST GROWING MID SIZE BANK and thesecond best bank. The Magazine commended thus - "Stock Prices of Indian Bank and SBIwere on equal footing in terms of price multiples.... The Bank is among the best for anymeasure of efficiency - ROE, ROA or Cost of deposits."

• Celent, a research & advisory firm, selected Indian Bank as the 'model bank'for innovative and extensive use of Core Banking Solution (CBS).

• The Bank was conferred with the 'Golden Peacock National Training Award' for theyear 2009. The award was presented to Bank's CMD on October 9, 2009 at the 10^thInternational Conference of Corporate Governance held in London.

• Govt, of Tamil Nadu awarded Manimegalai Award for lending to SHGs on 16.11.2009at Chennai.

• Best Commercial Bank in lending to SHGs in Madurai District for the year2008-09.

• Best performing Bank in rendering full support to SHGs by disbursing credit inVellore District.

• Won the IBA AWARD for "Best Risk Management Initiatives" under Publicsector Banks category for the year 2009. The Award was adjudged on the basis of theinitiatives undertaken to strengthen risk framework, risks identified and steps taken tomitigate the same and also the tangible benefits in terms of the monetary, reputation andcompliance requirements brought about by these initiatives.

YEAR AHEAD

The Bank is clearly in a branch expansion mode by opening more than 100 branches eachduring the last 3 years giving equal emphasis on improvement in customer service as well.While we are going ahead with opening more number of branches in different parts of thecountry during the coming years. Bank's motto remains providing best customer service , tomaintain the trust and goodwill the customer/stakeholder is having with us and alsoenhance the shareholders' value through volume growth in business and betterprofitability.