Indian Overseas Bank


BSE: 532388 | NSE: IOB | ISIN: INE565A01014 
Market Cap: [Rs.Cr.] 6,486 | Face Value: [Rs.] 10
Industry: Banks - Public Sector

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Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

Economic Environment & Banking Environment

The Indian Economy is expected to grow at 6.4% in the next fiscal against the presentlevel of 5% during 2012-13. The overall performance of Agriculture and Manufacturingsector is bound to improve due to the reform measures taken by the government. Themeasures such as virtual deregulation of diesel prices, capping of subsidized gas suppliesand partial decontrol of sugar industry would improve the economy further.

During the past, Indian banking sector displayed a high level of resiliency in the faceof inflation and fiscal uncertainty in the advanced economies. In order tostimulate the economy and support the growth of banking sector, the RBI has adoptedvarious measures in changing the key policy rates. CRR reduced to the present level of 4%and Repo rates lower at 7.5%, helped the banks to increase the credit flow. However, lowerinterest spread and Credit market imbalances were the major forces which affected thebank's profitability. This is evidenced by the fact that the growth in the manufacturingsector is subdued at 1.90% and service sector growth declined to 6.6% during 2012-13.

Bank's Operations.

Domestic Deposits

The Bank's aggregate domestic deposits increased from Rs. 1,72,219 crore in March 2012to Rs. 1,95,457 crore in March 2013. The growth in deposits was moderate at 13.49%. TheBanks CASA deposits reached Rs. 52,703 crores in March 2013 with CASA Deposits percentageto total Domestic deposits at 26.96%. Savings Deposits growth was at 16.10% to reach Rs.40257 crores as on March 2013.

Credit Deployment

The domestic advances showed a favorable growth of 13.71% aggregating to Rs. 1,44,894crore as at the end of March 2013 against Rs. 1,27,419 crore recorded in the previousyear. The domestic CD ratio also improved to 74.13% during the year as against 73.99% inthe previous year.

Overseas Performance

During August 2012, Bank has availed the second tranche of MTN funds of US$ 500 Mio andallocated US$ 250 Mio each for asset expansion at Singapore and Hongkong branches. DuringFebruary 2013, Bank has obtained Board approval for increasing the size of the existingMTN programme of US$ 1.00 Bn to US$ 2.00 Bn. The enhancement in size of the MTN programmehas been approved by the Board, to enable the bank to provide long term funds for overseasoperations, so that the Cost of Funds would be reduced and NIM is maximized.

The Bank's Joint venture subsidiary India International Bank Malaysia Berhad-IIBMB(JVwith Bank of Baroda and Andhra bank) has become fully operational at Malaysia since 11thJuly 2012. As per Finance Ministry Directions of June 2012, bank has obtained Boardapproval for overseas expansion plans, at the Board meeting held on 30.6.2012.As per thedirections of the Ministry and as approved by the Board, Bank is taking steps to set up aJV subsidiary or a WOS at Seoul, Bangkok, Colombo, Vietnam and Mongolia.

In respect of setting up of a JV subsidiary at Senegal, as directed by the Ministry,bank has already explored the possibility by deputing a General Manager to visit Senegal.Based on the visit report by the GM, Board at its meeting held on 1.9.2012, has resolvedto participate in the Equity of National Bank for Economic Development, Senegal and toassist the bank in an advisory capacity for which advisory fees may be charged.

During February 2013, bank has received RBI approval for opening of an FCBU at Colomboand for opening of a branch at Sukhumvit, Thailand. Bank will be proceeding to establishthese offices during the FY 2013-14. Bank is following up with RBI and Ministry of Financefor upgradation of Representative Offices at Vietnam, Guangzhou and Dubai into fullfledged branches. Bank is further following up for permission from RBI for conversion ofthe Extension Counter at Colombo into a branch.

There are two branches in Hongkong and one each at Singapore, South Korea, Sri Lankaand Bangkok. Representative offices are located at Guangzhou, China, at Ho Chi Minh City,Vietnam and at Al Karama, Dubai. Remittance Centres operate at Boonlay and Serangoon,Singapore and an extension Counter is located at Sri Lanka. The Joint Venture subsidiaryis functioning at Malaysia.

As at the end of March 2013, the bank had 13 establishments abroad, including 6 fullfledged branches, 3 Representative offices, 2 Remittance Centres, 1 Extension counter and1 Joint Venture Subsidiary.

Forex Operations

Turnover

The total merchant turnover for 2012-13 including AD branches is Rs. 1,10,553 crore asagainst Rs. 87,542 crore last year recording a growth of 26.29%.

This includes the precious metal business of the bank for 2012-13 to the tune of Rs.2,538 crores (8,751 kgs) as against Rs. 2,242 crores (8,832 kgs) in the previous year withan increase of 13.22%.

Profit on Exchange

Forex division of Treasury has achieved a total Profit on Exchange at Rs. 241 crore for2012-13. The Profit on Exchange has increased by 30.81% when compared Rs. 184 crore in theprevious year.

Other income

Forex Division of Treasury has earned Other Income at Rs. 20.33 crore for 2012-13. Thisincludes Rs. 10.93 crore (Rs. 9.75 crore in 2011-12) from precious metal business.

MSME

The Bank's MSME advances increased to Rs. 23410 crore as of March 2013. The Shareof MSME credit on gross domestic credit increased from 14.40 % in 2011-12 to 16.02 % in2012-13. This includes advances to Micro and Small Enterprises (MSE) to the tune of Rs.19524 crore, which forms part of the priority sector credit. The Bank increased advancesto MSE sector by 31.18 % surpassing the mandatory requirement of 20 %. Credit to Microsector alone surpassed Rs. 2000 crores during the year reflecting a growth of 33 %. TheBank financed around 1,00,000 new micro sector accounts during the year.

The Bank was awarded First Prize in lending under PMEGP scheme for southern zoneawarded by Ministry of MSME and also won second prize among Public Sector Banks forlending under Micro and Small enterprises. The awards were received by Chairman &Managing Director Mr. M. Narendra from His Excellency, The President of India, Sri. PranabMukherjee .

The Bank launched "IOB SME Mahila Plus", exclusively for Women Entrepreneursfor starting a new unit or for expansion of the existing unit with credit limits upto Rs.2 crore. IOB MICRO ONE scheme launched earlier has been quite successful with nearly 1800new Micro sector borrowers financed under the scheme of which around 1000 borrowers havebeen covered during the current year under cluster-financing approach. The Bank currentlyoffers IOB Rice Mills Plus scheme for finance of modern rice mills. CertainRegion-Specific credit schemes have been introduced for financing cashew processing unitsin Mangalore, (Karnataka), marble processing units in Rajasthan, rig operating units inSalem (Tamil Nadu) etc. The Bank also extended concessional credit terms for purchase ofnew Ambassador cars under Taxis Replacement Scheme by Govt of Kolkata.

The Bank entered into an MOU with Credit Guarantee Trust for Micro and Smallenterprises (CGTMSE) for extending collateral free loans upto Rs. 2 crores under theirRisk Sharing Facility (RSF) II. During the year, 20000 new loans have been covered underthis scheme with incremental approvals to the tune of Rs. 1000 crores by CGTMSE. Withincreased coverage, the Bank expects sizeable number of new accounts to be covered underthe scheme. The Bank's MOU with SIDBI under Loan Facilitation Service (LFS) ensures SIDBIsubmitted duly rated and validated credit proposals for consideration and sanction. Bankexpects to utilize this arrangement in the best manner to boost credit to MSME sector.Bank's present MOU with National Small Industries Corporation (NSIC) would enable the bankto receive MSME credit application vide the latter's vast reach through various schemesand training programmes.

The bank has renewed the existing restructuring and rehabilitation policy for sick MSMEaccounts and OTS policy for sick non-viable MSE accounts during the current year.

Mid Corporate

Mid Corporate Group takes care of the lending requirements of borrowers otherthan Agriculture / MSME borrowers. During the year the Bank made fully operational 15Specialized Mid corporate branches all over India (Bangalore, Baroda, Chennai, Chandigarh,Coimbatore, Delhi, Faridabad, Hyderabad, Indore, Kolkatta, Ludhiana, Madurai, Mumbai, Puneand Vijayawada) which process necessary expertise in credit appraisal and quicker deliveryof credit. Under this group Bank has an exposure of Rs. 12,053 crore for the year ended 31March 2013. The contribution from the new branches was Rs. 4325 crore as of March 2013.These branches send the credit proposals directly to Central Office for speedy disposal.During the year, Mid corporate group has sanctioned 273 proposals from all over India withtotal sanctioned limit of Rs. 16,753 crore.

Large Corporate

Large Corporate Group is yet another vertical in Credit front, taking care ofCredit requirement of borrowers other than Agriculture borrowers whose Credit requirementis above Rs. 100 crores. Under this vertical, bank has a fund based exposure of Rs. 55,892crores and Non Fund Exposure of Rs. 11,061 crore for the year ended 31.3.2013.

During the year Bank has opened specialized Large Corporate branches at 8 places allover India (Ahmedabad, Bangalore, Chennai, Coimbatore, Delhi, Hyderabad, Kolkata andMumbai). Apart from the above, 15 existing branches are also identified as Large CorporateBranches.

These specialized branches are focusing in lending to borrowers coming under LargeCorporate segment making available necessary expertise in credit appraisal and quickerdelivery of credit. These branches are sending the credit proposals directly to CentralOffice for expedient disposal.

Retail Banking and Marketing

Retail Loans with Housing Loans, Educational Loans and Jewel Loan to Others as majorsegments improved by 35.68% during the year. There was a good response to the newproduct developments such as Reverse Mortgage Loan for supplementing the financial needsof senior citizens owning self occupied residential house / flat for leading a decent lifeduring their twilight days, IOB Royal a loan scheme to cater to the needs of SeniorCivil Servants and High Net worth Individuals like IT Sector, Professors, Self employedProfessionals, IOB Surya - a Scheme to finance purchase of Solar Energy equipments, IOBBounty a Term Loan for ATMs/Cash Dispensers (installed & maintained by Vendors) undertransaction cost mode, IOB Muthuchippi - to provide financial assistance to all the womenbeneficiaries under Dr.Muthulakshmi Maternity Benefit Scheme (MMBS) and IBA model loanscheme for Vocational Education and Training a loan scheme developed as anextension of the existing Model Educational Loan Scheme for pursuing higher education inIndia & Abroad, to support the national initiatives for skill development.

The income earned under direct Life Insurance increased from Rs. 780 lacs in 2011-2012to Rs. 815 lacs for the year 2012-13. Bank has mobilized Rs. 247 Crore of Premium duringthe year 2012-13 and stood First among all Bancassurance partners of LIC for the thirdyear in succession.

The income earned under Health Care Plus, which was at Rs. 180 lacs during the year2011-12 increased to Rs. 296 lacs for the year 2012-13 registering a growth of 64.44%.During the year, the Bank has mobilized 59166 policies (including renewal) with a premiumof Rs. 19.91Crore.

The income earned under Asset Insurance, which was at Rs. 607 lacs during the last yearincreased to Rs. 800 lacs during the current fiscal with a growth of 31.80%.

Priority Sector Credit

Gross Credit under Priority Sector increased to Rs. 51056 crore at the end ofMarch 2013, registering a growth of 26.95%. With the achievement of Priority Sectoradvances to Adjusted Net Bank Credit (ANBC) Ratio at 40.03%, Bank has further plans tocontinue and surpass the National Goal of 40% in the coming years also.

Agriculture

During the year, the agricultural credit registered an incremental growth of Rs. 4,153crore from Rs. 19,240 crore as of March 2012 to Rs. 23,393 crore as ofMarch 2013. TheBank's ratio of agricultural advances to Adjusted Net Bank Credit was 18.34% as againstthe required norm of 18%. The Bank disbursed Rs. 34,160crore under Special AgriculturalCredit Plan (SACP) as against the target of Rs. 26,875 crore during the year.

Key Agricultural Products

IOB Sagar Lakshmi: An exclusive loan product (Loans up to Rs. 1lac) designed forfinancing fisherwomen empowering them with sustainable income generation.

IOB Bhoomi Shakti: The scheme is formulated to provide financial assistance forwomen having farm land in their own name and tenant farmers. The scheme provides forinterest concession @ 0.50% for limits upto Rs. 50,000/- and 0.25% above Rs. 25,000/-.Processing Charges, Upfront Fee and Mortgage Charges are waived for all loans grantedunder this Scheme.

Overdraft in SB Accounts: The Bank has formulated a scheme for Savings-cum-ODaccounts for rural families which do not have any land facilitating overdraft facilitiesup to Rs. 10,000/- per family.

IOB Green Credit: A scheme for meeting the short term production credit orinvestment credit or both. The scheme was made more attractive by increasing maximum limitup to Rs. 25 lacs.

IOB Urban Horticulture: The scheme is meant for individuals and institutions forraising kitchen garden, flower garden, small orchards or roof gardens. The scheme ismodified by increasing minimum limit to Rs. 33,000/- and maximum limit to Rs. 2.50 lacs toindividuals and to Rs. 25 lacs to Institutions. Margin and collateral security is waivedfor loans up to Rs. 1.00 lac. The scheme is now extended to Retired IOBians drawingmonthly pension from us and also the discretion for lending to institutional clients havebeen relaxed under the scheme.

IOB Agri Transport : This scheme is designed for purchase of any vehicles to beused for agriculture purpose. The scheme is liberalized by waiving margin for loans up toRs. 1.00 lac. Further, collateral security valued at least 50% of the loan amount in anyform is also waived.

Kisan Credit Card Scheme (KCC)

The Bank issued 5,22,559 KCCs during the year. The total number of cards cumulativelyissued by the Bank as at the end of March 2013 stood at 30,83,751.

Kisan Tatkal Scheme (KTC):

An instant credit scheme aimed at farming community to meet the emergency requirementsfor Agriculture purposes and for tiding over temporary difficulties. Individual farmers /joint borrowers, who are existing Kisan Credit Card holders having satisfactory trackrecord of at least two years are eligible for availing loan under this scheme.

Microfinance

During the year, the Bank credit-linked 41,306 Self Help Groups (SHGs) with a creditoutlay of Rs. 745 crores. The cumulative number of SHGS credit linked by the Bank is4,75,172 with a total disbursement of Rs. 4,946 crores as of March 2013. "SHGFestival" from 15.01.2013 to 15.03.2013 was observed coinciding with InternationalWomen's Day on 8th March to give fillip to SHG linkage under the direct segment.

Credit flow to Women

Bank's credit flow to women stood at Rs. 17,718 Crore as of March 31, 2013 constituting13.89 % of the Bank's Adjusted Net Bank Credit, as against the norm of 5%.

Lead Bank Scheme

The bank has Lead Bank responsibility in twelve districts in Tamil Nadu and onedistrict in Kerala. The bank is also the Convenor of State Level Bankers' Committee ofTamil Nadu (SLBC). During the year of review, as Convenor of SLBC, Tamil Nadu, the bankhas conducted four meetings of the SLBC. In addition, the bank convened the followingspecial SLBC meetings during the year.

1. Meeting on Tamil Nadu Government's Scheme for Poultry Development.

2. Meeting on Weavers' Credit Cards Scheme.

3. Meeting on Crop Insurance Scheme.

4. Meeting on Special SLBC on Credit Risk Guarantee Fund for Low Income Housing(CRGFTLIH).

5. Two special SLBC meetings on Financial Inclusion.

6. Meeting on Opening one bank account per family.

7. Meeting on Electronic Benefit Transfer System.

8. Two special SLBC meetings on Payment of MGNREGS wages through banks in Tamil Nadu.

9. Meeting on implementation of NRLM in Tamil Nadu

10.Meeting on ""New Entrepreneur -Cum- Enterprise Development Scheme"(NEEDS)" of Govt. of Tamil Nadu.

11. Meeting on to discuss request of One Year Moratorium Period for Term LoanInstalment and Interest for Coimbatore industrial units

12.Meeting on Tamil Nadu Government's G.O.Ms.48 dated 13.02.2013 on Drought in 31districts of the State

- SLBC identified 4445 unbanked villages in Tamil Nadu with a population of 2000 andabove and allotted to various banks. All the 4445 villages have been provided bankingfacilities under Financial Inclusion well ahead of the timeline given by MOF(March 2012).100% achievement

- SLBC identified 7816 villages with population of below 2000 of which banks havecovered 5517 villages as on 23.03.2013. Percentage of achievement is 71.

- SLBC facilitated establishment of Rural Self Employment Training Centres in all the31 districts by the 4 Lead Banks -100% achievement

- SLBC facilitated establishment of Financial Literacy & Credit Counselling centresin all the 32 districts including Chennai. -100% achievement

SLBC initiatives on Credit Flow in Tamil Nadu

- Tamil Nadu achieved a CD ratio of 121.79% as of December 2012 and stands one amongthe very few states who achieved this feat. 100% achievement

- Tamil Nadu achieved 102% achievement of target under Annual Credit Plan (ACP) as ofDecember 2012 which is achieved by only a very few states. > 100% achievement

- Tamil Nadu achieved 43.17% under Priority Sector as of December 2012 against thenational norm of 40% - >100% achievement

- Tamil Nadu achieved 19.76% of Agricultural Advances as of December 2012 against thenational norm of 18% - >100% achievement

- Tamil Nadu achieved 10.97% of advances to weaker sections as of December 2012 againstthe national norm of 10% - > 100% achievement

SLBC initiatives on Electronic Benefit Transfer in Tamil Nadu

- 6.32 lakh beneficiaries are being paid pension through Smart Cardsoperated by Business Correspondents engaged by banks in 4445 villages in the State underT.N.Government Old Age Pension Scheme by July 2012.

- 1.76 lakh fishermen are paid lean period assistance of Rs. 4000/- throughbank credit in the State.

- 8.12 lakh pregnant women are being paid grant of Rs. 12, 000/- under Dr.Muthulakshmimaternity benefit scheme through bank credit.

Regional Rural Banks:

Bank has sponsored two Regional Rural Banks viz., Pandyan Grama Bank in Tamil Nadu andNeelachal Gramya Bank in Odisha. Both were functioning well. Pandyan Grama Bank has earnedNet Profit After Tax consecutively for the past seventeen years and recorded Nil Net NPAcontinuously for the past ten years

On 07.01.2013, Government of India by their notification amalgamated Neelachal GramyaBank (sponsored by IOB), Kalinga Gramya Bank (sponsored by UCO Bank) and Baitarani GramyaBank (sponsored by Bank of India) into a single entity called, Odisha Gramya Bank , withheadquarters at Bhubaneswar, Odisha under our Bank's sponsorship. At present Pandyan GramaBank and Odisha Gramya Bank are RRBs sponsored by the Bank and both RRBs have recorded netprofit during the year. All the branches of both RRBs are CBS compliant and NEFT facilityhas been provided to both RRBs.

Financial Inclusion:

Bank has introduced Smart Card Banking through Business Correspondent as per theguidelines of Reserve Bank of India for providing Banking facilities in un-bankedvillages. Business Correspondents deliver the services at the front end by usingbio-metric smart cards and Hand Held Devices. The devices are voice enabled in vernacularlanguage and user friendly even for illiterates. This has enabled villagers even in remotelocations to transact Banking business at their own place.

Under "Swabhimaan" of Govt of India, Bank has covered all the 1800 allottedvillages under various population categories under Smart Card Banking across the country.In addition to the above, in the State of Tamil Nadu our Bank has covered 995 villagesunder Smart Card Banking. Apart from this we have covered 85 other villages also. SmartCard Banking is now being implemented in 2880 villages spread over 21 States and 2 U Tcovering 54 Regions. Under financial inclusion, 2901 villages were covered by way of SmartCard banking as well as Brick& Mortar Branch.

During the year under review our Bank has opened 16,62,779 Basic Savings Bank DepositAccounts taking the total number of such accounts to 43,70,173. So far our Bank has issued5,19,174 smart cards and the number of transactions undertaken in the smart card terminalis 39,38,657.

Setting up Ultra Small Branch (USB)

As per the guidelines of Ministry of Finance we have set up Ultra Small Branches in1273 Financial Inclusion villages having population of above 2000 and in 2 villages havingpopulation above 5000.

3 USBs have been upgraded into Brick and Mortar Branch.

Award

Bank has bagged SKOCH AWARD for Financial Inclusion for 3 consecutive years. In 2012-13Bank won SKOCH Award for the Financial Inclusion project namely "Turning theTide" for development of fishermen at Chennai.

Corporate Social Responsibility

IOB-Sampoorna is a unique Project encompassing several livelihood initiatives in thevillages to ensure all-inclusive growth of rural population.

It comprises of credit and non-credit components such as Financial Inclusion, I.T.Enabled banking operations with Biometric Smart Cards under Business Correspondent model,Tree Planting and Social Forestry, Cleaning Water Bodies, Health Care, Skill Training foryouth in computer, Rural Business Process Outsourcing, Promotion of non-conventionalenergy and Rural Tourism.

The scheme is under implementation for last 5 years. This year 9 more villages wereadded taking the total IOB Sampoorna villages to 100 all over India.

Rural Self Employment Training Institutes (RSETIs)

In line with the guidelines issued by Ministry of Rural development, GOI our Bank hadset up RSETIs at all Lead Districts to provide training to farmers, members of SHGs,beneficiaries under SGSY, Educated Unemployed Youths, Artisans and Beneficiaries belongingto weaker sections. In addition to the above, we have set up one RSETI in the NilgirisDistrict also for the benefit of the Tribals.

A Rural Training Centre was set up by the Bank (jointly with NABARD and Indian Bank) atKaraikudi (Sivaganga Dist, TN). We have Lead Bank responsibility in these Districts.During the year under review, through these Training Institutes Our Bank had conducted 154training programmes benefiting 3963 trainees.

Financial Literacy Centre (FLC) viz., SNEHA:

During the period under review our bank has set up one FLC at Vettikavala, Kerala. FLCis named as SNEHA. Totally Bank set up 15 FLCs.

These centres will educate the people in rural and urban areas with regard to variousfinancial products and services available from formal financial sector, provide face toface financial counseling services and offer debt counseling to indebted individuals. FLCswill enable the user public to make informed choices regarding financial services/products to derive the maximum benefits. During the year under review, FLCs has conducted7900 programs in total.

Sakthi - Indian Overseas Bank Chidambaram Chettyar Memorial Trust:

The Trust, set up jointly by the Management of the Bank, Indian Overseas Bank Officers'Association and All India Overseas Bank Employees' Union to perpetuate the memory ofBank's Founder Shri M. Ct. M. Chidambaram Chettyar, continued to provide EntrepreneurialDevelopment Training to women, thereby empowering them socially and financially to meetthe challenges. The Trust has so far conducted 62 Entrepreneurship Development Programmes(EDP) and skill based training programmes exclusively for women at various centresbenefitting 3331 women.

Investments

The growth in investments during the year 2012-13 was driven by increase in SLRinvestments mainly on account of additional SLR requirements consequent to Deposit Growthof the bank.

Gross domestic investments as of 31st March 2013 stood at Rs. 60195 crore as againstRs. 54,736 crores as on 31dt March 2012 registering a growth of 9.97% over the previousyear. The investments in SLR segment registered an incremental growth of Rs. 4153 crore or8.28% during the year while Non-SLR investments increased by Rs. 1306 crore with a growthof 28.61%.

During the year 2012-13, securities for Rs. 2639 crore were transferred from Availablefor Sale category (AFS) to Held to Maturity (HTM) segment and Rs. 28.30 crore from Held toMaturity (HTM) to Available for Sale (AFS).

As on 31st March 2013, the extent of SLR securities held in HTM stood at 22.92% of DTLagainst the limit of 25% prescribed by RBI compared to 22.54% as on 31.3.2012.

During the year, the G Sec Yield maintained its downward trend due to policy easingmeasures taken by RBI. The bank continued to trade both in fixed income securities andequities throughout the year. The turnover (book value) in the secondary market was Rs.97132 crore during the year 2012-13 as against Rs. 102532 crore in 2011-12. Total profiton sale of securities amounted to Rs. 307 crore during the year 2012-13 as against Rs. 172crore of 2011-12. The return on total investments (before amortization) stood at 7.53% asagainst 7.54% in 2011-12. Despite the falling yield on account of monetary easing by RBI,the yield on domestic investments was favorably maintained at 7.53% during the year.

Rupee Derivatives

During the year 2012-13, Bank has actively traded in Rupee interest swaps and notentered into any fresh hedging swaps. Due to maturity, the outstanding in interest rateswaps has come down to Rs. 998 crore as on 31.3.2013 as against Rs. 1073 crores as on31.3.2012.

Merchant Banking

The Bank has successfully managed an IPO which got listed in the Main Exchanges of BSEand NSE during 2011-12 and another SME IPO in the NSE Emerge Platform during 2012-13 byacting as Co-Book-Running Lead Manager.

ASBA (Banker to Issue activity)

As required by SEBI, all general banking branches have been made ASBA enabled branchesto accept ASBA applications for IPO, FPO and Rights Issues. Bank has also become aSyndicate ASBA bank to accept IPO/FPO/Rights applications from Brokers at 17 branches inthe SEBI specified 12 centres.

Other activities under merchant banking

The Bank continues to act as Debenture Trustee, Collecting Bankers to Non ASBA Issues,Dividend/Interest Paying Banker, etc. The Bank recently accepted a mandate to act asSecurity Trustee and Facility Agent for a large project. The Bank continues to dovaluation of shares also. During 2012-13, the Bank also issued a Fairness opinion on shareexchange ratio under a Scheme of Amalgamation under Sections 391 to 394 of the CompaniesAct, 1956.

Depository Operations:

The Bank is a Depository Participant (DP) of NSDL and is extending depository relatedservices through 57 service centre branches (including the controlling Chennai Depositorybranch). Of these, 14 branches are in Chennai, 26 in Mumbai and the remaining in othercities. In order to improve the number of demat accounts, our bank became a DP of CDSLduring this year by offering the service through 12 service centres.

Capital Market Services Branch

In order to cater to the financial requirements of Stock Brokers, our bank set up aCapital Market Services Branch at Mumbai during May 2012. The branch is extending creditfacilities to Stock Brokers with a view to attracting them to nominate our bank as theirClearing and Settlement Bank for handling their daily Clearing Obligations of StockExchanges.

Customer Service

The Bank is a member of Banking Codes and Standards Board of India (BCSBI) and hasadopted the Code of Commitment to Bank's Customers drafted by BCSBI.

As a part of ongoing effort for better customer service, a new system called SPGRS(Standardised Public Grievance Redressal System) was introduced for speedy redressal ofcustomer grievances. It is a web based online system wherein customers can register thecomplaint online with status tracking facility. The Regional offices and Branches areenabled to view the complaints in the system and resolve the same immediately.

Customers Fortnight was observed in all branches during November 2012 and Executivesfrom the Central Office and Regional Offices have visited the branches and met thecustomers. The Bank has conducted a Customer Service Survey on all India basis toascertain the level of customer service. The inputs from the survey are being used fornecessary improvements in systems and products.

Toll Free Teleservices for Redressal of Customer Grievances (No.1800-425-4445) isprovided on 24x7 basis for receiving the complaints from the customers to resolve within48 hours.

The details of customer complaints received and redressed during the year 2012-13 aredetailed below.

Sl.No. Details At Central Office At Regional Offices
1. No. of complaints pending at the beginning of the year 85 65
2. No. of complaints received during the year 1835 1693
3. No. of complaints redressed during the year 1806 1669
4. No. of complaints pending at the end of the year 114 89
Settlement Rate 94.06 94.94

No. of awards passed by the Banking Ombudsman and implemented by the Bank are asfollows.

1. No. of awards pending at the beginning of the year 0
2. No. of awards passed by Banking Ombudsman during the year 3
3. No. of awards implemented during the year 2
4. No. of awards lapsed due to non acceptance by customer 1
5. No. of unimplemented awards at the end of the year 0

Customer Service Centre, for which the Bank is the Convenor in Chennai City hadresolved all the complaints received during this year.

Recovery Management

Bank has 16 specialised Asset Recovery Management Branches (ARMB) to improve therecovery of NPA accounts. To expedite recovery, around 208 Recovery Officers were deputedto Regions to specifically focus on recovery. The services of Recovery Agents were alsoutilised to improve recovery.

High value Slippages of Rs. 5 cr and above were reviewed by the Board of Directors ineach of the Board meetings and the specific directions given by the Board of Directors arecarried out and followed up.

Top NPA accounts of Rs. 1 Crore and above are monitored from the corporate office on aregular basis and the borrowers are personally met by the General Manager (Law &Recovery) wherever necessary.

Top Executives including the Chairman and Managing Director, the Executive Directorsand the General Manager (Law & Recovery) reviewed all high valued NPA accountsindividually on a regular basis with field functionaries through video conference.

All Corporate GMs were allotted regions for intensive follow up of NPA accounts andthey periodically visited Regions to discuss with Borrowers for repayment/settlement /recovery. For all NPAs of less than Rs. 5 lacs there was a special campaign andBranch Managers were also empowered to accept One Time Settlements in small value NPAaccounts. An amount of Rs. 333 crores had been recovered in small value NPA accounts withoutstanding less than Rs. 5 lacs.

One time settlement being a hassle free recovery process Regional Heads/Branches wereadvised to contact the borrowers for submitting OTS proposals as per the recovery policyof our Bank. Action under SARFAESI act was initiated in all in all eligibleaccounts and properties brought for sale.

Frequent Lok Adalats/Recovery camps were conducted especially in respect of small valueNPA accounts. Regional Heads/Branches were advised to focus on recovery ofTechnical/Prudentially written-off accounts as any amount of recovery under this head willimprove the bottom line of the Bank.

Ministry of Finance has advised the Banks to initiate recovery action in the matter ofRC issued cases. Bank appointed Nodal Officers at various centres and they were directedto take up all RC issued cases and bring the securities for sale. Bank has beenco-ordinating with Presiding Officers/Recovery Officers of various DRTs and theseone-to-one discussions/ deliberations helped the Bank to identify the issues and to speedup recovery.

As against the corporate target Rs.1450 crore for total cash recovery (includingrecovery from written off accounts and recovery of undebited interest) the achievement wasRs. 1115 crores. The upgradation of NPAs during the year was Rs. 640 crores.

Recovery from technically written off accounts was around Rs. 343 crore. Recovery insmall value NPA accounts with outstanding less than Rs.5.00 lac was Rs.333 crore andrecovery in loss accounts was Rs.14 crores

Disposal of petitions received under RTI Act

The Bank received 1703 petitions seeking information under RTI Act during the year2012-13. All the requests were duly replied with in the specified period of 30 days. About90% of the petitions were positively replied and the balance applications were foundineligible for the details requested.

Our First Appellate Authority received 173 first appeals from those who were notsatisfied with the reply of Central Public Information Officer and the same was dulydisposed as per the provisions of the Act.

22 petitions resulted as second appeals with the Hon'ble Central InformationCommission. All 22 petitions were disposed by CIC.

Risk Management

The Bank has adopted the New Capital Adequacy Framework (Basel II) with effect fromMarch 31, 2008. In line with reserve Bank of India guidelines, the Bank has adopted theStandardised Approach (SA) for computation of Credit Risk Capital, Basic Indicatorapproach (BIA) for calculating the capital for Operational Risk and StandardisedMeasurement Method (SMM) for Market Risk Capital computation. The Bank is in compliancewith the regulatory requirements in this regard.

As a measure of robust credit risk management process, the bank has implemented atiered system for validation of Internal credit ratings at specified levels which isindependent of credit departments, in order to draw unbiased rating for borrowersnecessary for moving to advanced approaches. In respect of proposals falling under powersof Bank's Central Office, the validations of ratings are done at Risk Management Dept.

Exposures on Corporates / PSEs/ Primary Dealers are assigned with risk weights based onavailable external ratings. For this purpose, the Reserve Bank of India has permittedBanks to use the ratings of the six domestic External Credit Rating Agencies and the Bankhas decided to accept the ratings assigned by all these ECRAs for capital relief purpose.The Bank has only used the solicited ratings assigned by any of the ECRAs. The bankprovides incentive by way of lower rate of interest for high rated borrowal accounts. Thebank is taking adequate steps to ensure that the coverage of externally rated accountsincreases year after year.

The bank also conducts industry study for various industries wherever the exposure ofthe bank for a particular industry is beyond a threshold limit fixed by the bank. The bankconducts portfolio analysis of the credit portfolio.

The Bank is also in the process of upgrading its Risk Management systems and aprocedure for migrating to the advanced approaches envisaged under Basel II framework andis in the process of installing solutions for Market Risk Capital computation and forAsset Liability Management.

The Reserve Bank of India has issued final guidelines on Liquidity Risk Management tobe effective from March 2013. The guidelines cover preparation and submission of theConsolidated Operations including domestic operations and overseas operations separatelyat various frequencies. The bank has put in place system and procedure in place in thisregard in compliance with the RBI guidelines.

Further the Reserve Bank of India has issued guidelines on implementation of Basel IIIcapital regulations in India to be implemented in a phased manner effective from April 1,2013 with Banks disclosing Basel III capital ratios from the quarter ending June 30, 2013.

The bank has also implemented On Line Credit Processing System which enables appraisalof the credit proposal and also rating of the borrowal accounts simultaneously. Theprocess also provides data for conducting default/migration study and to computeProbability of Default etc.

The bank has put in place Board approved Market Risk Management Policy and AssetLiability Management (ALM) policy for effective management of Market risk, Liquidity Riskand Interest Rate Risk in the bank. The Liquidity risk is managed through GAP analysisbased on residual maturity/behavioral pattern of assets and liabilities on daily basis.The Market Risk management policy lays down well defined organizational structure formarket risk management functions and processes whereby the market risks carried by thebank are identified, measured, monitored and controlled within the ALM framework,consistent with the Bank's risk tolerance. The policies set various risk limits foreffective management of market risk and ensuring that the operations are in line withBank's expectation of return to market risk through proper Asset Liability Management.

The bank has put in place mechanism of short-term dynamic liquidity management andcontingent funding plan. Prudential (tolerance) limits are prescribed for differentresidual maturity time buckets for efficient asset liability management. Liquidity profileof the bank is evaluated through various liquidity ratios. The bank has also drawn variouscontingent measures to deal with any kind of stress on liquidity position. Bank ensuresadequate liquidity management by Domestic Treasury through systematic and stable fundsplanning.

Interest rate risk is managed through use of GAP analysis of rate sensitive assets andliabilities and monitored through prudential (tolerance) limits prescribed. The bankestimates earnings at risk and modified duration gap periodically for assessing the impacton Net Interest Income and Economic Value of Equity with a view to optimize shareholdervalue.

The Asset-Liability Management Committee (ALCO) / Board monitors adherence toprudential limits fixed by the Bank and determines the strategy in the light of the marketconditions (current and expected) as articulated in the ALM policy.

The bank has framed operational risk management policy duly approved by the Board.Other policies adopted by the Board which deal with management of operational risk are (a)Information Systems security policy (b) forex risk management policy (c) Policy documenton know your customer (KYC) and Anti-Money Laundering (AML) procedures (d) IT Businesscontinuity and disaster recovery plan (IT_BC-DRP) (e) compliance policy and (f) policy onoutsourcing of Financial Services.

The operational risk management policy adopted by the Bank outlines organizationstructure and detailed processes for management of operational risk. The basic objectiveof the policy is to closely integrate operational risk management processes of the bank byclearly assigning roles for effectively identifying, assessing, monitoring and controllingor mitigating operational risk and by timely reporting of operational risk exposuresincluding material operational losses. Operational risk in the bank are managed throughcomprehensive and well-articulated internal control framework.

Credit Monitoring

The Bank monitors the quality of loan portfolio, by identifying the problems and takesproactive steps to correct deficiencies. The objective is to minimize slippages ofperforming assets to non Performing Assets (NPA) category. Micro monitoring of theaccounts by segmentation and follow up of the accounts on daily basis helps the Bank tominimize slippages. The Bank has introduced system developed tools for identifying thepotential NPAs along with the critical dues to be recovered. The problems in the stressedaccounts are analysed and necessary steps are taken for recovery of the dues,restructuring/deep restructuring, enhancement etc. The quality of restructured accounts ismonitored on a continuous basis and the accounts are followed up closely.

Corporate Debt Restructuring (CDR)

A transparent mechanism has been formed by RBI under CDR system which ensures timelyrestructuring of the debt of viable corporate availing credit facilities under consortium/multiple banking. Consequent to the large number of proposals being referred to CDR cell,Mumbai for restructuring, an exclusive CDR department has been formed at Central Office tohandle the accounts for which the restructuring is undertaken under CDR mechanism.

During 2012-13, 30 accounts with an exposure of Rs 3602 crs. were referred to CDR. Ason 31/03/13, CDR package has been sanctioned in 64 accounts with an outstanding of Rs 5244crs. Further, 11 accounts with an aggregate exposure of Rs 1444 crs were referred to CDRat various stages of approval. Two accounts with an exposure of Rs 95.71 crs for whichreference were made are subsequently withdrawn.

One account with an exposure of Rs 205.19 crores has been treated withdrawn as thefinal package was not formulated within 180 days from the date of admission. During theyear one account with an exposure of Rs 12.97 crores has exited from CDR mechanism afterprepaying the loans and the recompense amount and one more account for Rs 4.80 crs isunder exit.

Industrial Rehabilitation

As at the close of business on 31.3.2013,Total cases under Board for Industrial andFinancial Reconstruction (BIFR) and Appellate Authority for Industrial and FinancialReconstruction (AAIFR) are 22 accounts with an exposure of Rs.434 cr. Of this 6 accountsaggregating to Rs.116 cr are standard and performing and balance 16 accounts are NPA.During the year recovery in 6 BIFR accounts amounting to Rs.15cr were made. Also, 9accounts with an exposure of Rs.435cr were added and 7 accounts with an exposure of Rs.86cr was sent out of SICA .

Compliance Function

The Bank has well laid "Compliance Policy" as per Reserve Bank of Indiaguidelines and has in place systems and procedures for managing the Compliance Risk andmitigating the same. During the year 2012-13, Compliance officersRs. training programmeswere conducted for sensitizing the Compliance Officers of Regional Offices and branches.KYC compliance has been given the necessary thrust and is being followed up diligently.The utility of' Knowledge Management Tools' has been provided in the bankRs.s intranet forthe benefit of all staff members, whereby all the regulations, guidelines of the variousregulators like Ministry of Finance,RBI, SEBI etc. can be accessed at a single point.Compliance Department serves as a nodal point of contact for Reserve Bank of India.

Disciplinary Proceedings

All long outstanding Vigilance disciplinary cases {> 6 months}where domestic enquirywas still in progress, as on 30.09.2012 have been completed before 31.03.2013(except twocases which are pending with the courts). All out efforts are made to complete thedisciplinary action process within the stipulated time norms. The average pendency ofVigilance disciplinary cases has been considerably reduced. All non-vigilance cases arebeing disposed off well within the time norms stipulated. During the yearchargesheets/show cause memos/notices had been issued for 392 cases and Punishment isawarded for 379 cases. Enquiries ordered for 134 cases and 174 enquires were completed.

Inspection

Central Office Inspection, along with Electronic Data Processing (EDP) Audit and NonIndustrial Priority Sector Advances (NIPSA), was carried out in 2084 branches during theyear 2012-13. Since all the branches were converted to Core Banking Solutions (CBS),Inspection was conducted in all the branches on-line. Out of the branches inspected, 409branches were rated as "GOOD".

Inspection of Hong Kong, Singapore, Seoul, Bangkok and Colombo branches were alsoconducted during the period. Regional Offices carried out periodical Short Inspection ofbranches. Management Audit of all 45 Regional Offices and 26 Central Office Departmentswas also conducted during this period. Total of 412 branches were brought under ConcurrentAudit covering 62.57% of Deposits and 70.76% of Advances, thereby exceeding RBI guidelinesof covering atleast 50% of Bank's Business. Revenue Audit was carried out in 1809 branchesand Test Check Audit in 412 branches. Stock Audit was conducted for 1377 accounts on aselective basis.

Risk Based Internal Audit (RBIA) was conducted in the 2084 branches, where CentralOffice Inspection was carried out. Management Audit of Regional Offices was also conductedunder Risk Based Internal Audit (RBIA) by preparing Risk profile of the Regions.

Vigilance

During the year 2012-13 the Bank has taken effective steps for disposal of pendingVigilance Disciplinary cases within the time schedule prescribed by Central VigilanceCommission. During the year 143 Vigilance Disciplinary cases were disposed. In complianceto the CVC guidelines, details of frauds were placed to Operational Risk ManagementCommittee and Audit Committee of the Board and the observations / suggestions receivedhave been acted upon by the Bank. In continuation of Bank's on-going exercise underPreventive Vigilance, one Circular and thirty Common Letters (Comlets) to all RegionalHeads based on the frauds reported, were issued to check recurrence.

Time and again Operational Staff have been advised to effectively comply with theSystems and Procedures for each functional area put in place by Bank, to guard againstfraudsters. An updated Policy on Fraud Risk Management and Fraud Investigation Function(FRM&FIF) was adopted with the approval of Bank's Board.

Emphasis is continued to be given by the Bank towards Preventive Vigilance with focuson Preventive vigilance through periodical branch Inspection by CVO and also by theRegional Vigilance Officers (RVOs) attached to various Regional Offices. The shortcomingshave been shared with the operational staff.

All Regional Offices have been posted with Vigilance Officers to handle Vigilancematters. An intensive three day Training Programme for all Regional Vigilance Offices (andOfficials from Pandyan Grama Bank and Odisha Grama Bank) was conducted by Bank at ourStaff College, Chennai from 25th February 2013 to 27th February 2013.

The participants were refreshed on various issues relating to Preventive Vigilancemeasures and post-fraud follow-up action (viz. submission of Flash Report, PreliminaryInvestigation, Report-writing, Identification of Systemic failure, if any etc.).

Vigilance Awareness week was observed by the Bank in October November 2012 i.e. from29th October 2012 to 3rd November 2012.

Information Systems (IS) Audit was conducted in 40 Regional Computer Centres, 342branches, consisting of 9 Exceptionally Extra Large, 139 Exceptionally Large and 194 Largebranches as per the Audit Plan approved by the Top Management.

During this year, IS Audit of AML Cell, DR Drill (both at Central Office and DR Site atHyderabad), Management Audit of Information Technology Department, Transaction BankingDepartment and also MIS Dept were conducted.During the year, Information Systems AuditPolicy was revised based on the draft guidelines given by the Ministry of Finance,Government of India for implementation from 1st April 2013.

Audit Sub Committee (ASC)

Board of Directors in the meeting held on August 26, 2008 approved the formation ofAudit Sub Committee (ASC). During the financial year 2012-13, 6 ASC Meetings were held.The Review of Central Office Inspection (COIR) reports of Extra Large Branches (ELB),Exceptionally Extra Large Branches (EELB) /Specialised Branches / Overseas Branchesincluding Management Audit of Regional Offices, Review of Stock Audit / Concurrent Audit /Test Check Audit / Revenue Audits were taken up for discussion in the ASC Meetings. Themajor findings of ASC with Action Taken Report was placed before ACB once in a quarter .

Information Security

The Bank has set up Information Security Department headed by Chief InformationSecurity Officer (CISO) who is directly reporting to GM Risk Management as per RBIGuidelines.

The Information Security Committee meets every quarter to review Information Securityin the bank and reviews are submitted to Board. Information Security Policy which is inplace is reviewed every year and the Bank is taking steps to fully implementrecommendations of Gopalakrishna Committee. IT products review from Information Securityperspective is carried out and recommendations and suggestions are provided to therespective departments.

Information Technology

Awards and Accolades:

During the year, the Bank was awarded the "SAP ACE award for Database Use" bySAP and "Skoch Digital Award for Technology" by Skoch in recognition of itsTechnology initiatives.

IT Organization Structure

For effective IT Governance, a Board level "IT Strategy Committee" and a TopManagement level "IT Steering Committee" have been formed in addition to theexisting IT security Committee headed by the Executive Director of the Bank and an ITTechnology Committee with external consultant from IIT, Chennai.

Policies like Information Security Policy, IT Outsourcing Policy, IT Purchase Policyand Manual , Disaster Recovery and Business Continuity Plan, IS Audit Policy , DataOwnership Policy, Data Retention Policy and Data Archival Policy have been put in place.

Green Initiatives:

• Paperless Banking Initiatives: As a step towards paperless banking initiative,Bank has implemented Microsoft SharePoint which enables the Board members to access theAgenda papers through their IPADs using wi-fi. All agenda papers are ported on the websiteand no paper notes need be carried by the members.

• Introduction of Internet Banking / Mobile Banking, Debit and Credit Cards,remittance through RTGS /NEFT have effectively reduced/ dispensed with vouchers at thebranches.

• Bank has provided IP telephones which has effectively cut down Phone Bills.

• RTGS/NEFT implemented in all branches. Straight Thru Processing introduced.Account number based credit is given.

• NEFT implemented in both RRBs sponsored by the Bank.

• The Bank has been taking various initiatives towards saving precious naturalresources and energy by adopting the latest technological advances. Video Conferencing isvery widely used both for Top Management level meetings / promotion interviews /performance reviews and for virtual classrooms.

• Open Communication System (OCS) has been rolled out in 343 districtheadquarters, 50 Regional Offices and RCCs across the country, enabling them to interactlive.

• Staff members submit Annual Performance Appraisal report (APAR) online insteadof paper.

Core Banking:

The bank has decided to transform its CBS application from the homegrown CROWN solutionto a Commercial off-the-shelf Core Banking Solution. A consultant to advise and guide thebank through the migration process will be appointed during April 2013 . The entireprocess of CBS migration is expected to be completed in 18-24 months period.

Alternate Delivery Channels:

As on 31.03.2013, Bank has 1883 ATMs spread across the country, of which 1164 areonsite, 719 ATMs are off-site of which 44 are at various Railway stations. The Bank is amember of NPCI and VISA consortiums. Under the new GOI Directives, a common RFP wasfloated for selection of vendors for ATM deployment and maintenance. Bank has installed247 cash dispensers under the new RFP, as at the end of March 2013.

Internet Banking:

Bank has home-grown Internet Banking suite, which has contemporary offerings; Openingof Term Deposits, Funds Transfer using NEFT through Internet Banking have been enabled.New customers can apply for SB Account opening through ONLINE.

E-PAYMENT of following state VAT has been made online: i)Lucknow, ii)Delhi,iii)Maharashtra (GRAS) (Multi Dept. Portal), iv) Pondichery, v)Karnataka, vi) AndhraPradesh, vii) Tamilnadu, viii) Jharkhand and ix) West Bengal which ensures float funds forthe Bank.

E-payment of West Bengal GRIPS (Govt. Receipt Portal System) for collection of Tax andNon-Tax revenue systems such as Professional Tax, Land and Land reforms, Registration andStamp Revenue, Excise, Commercial Taxes, VAT, Motor Vehicle Tax etc., are made online. IOBis the first Bank to provide this service in West Bengal.

Payment of port charges has been enabled for Chennai and Tuticorin Ports which ensuresfloat funds for the Bank.Multiple scheduling of payments to SB/CDCC/RD/ loan accounts onthe lines of branches has been introduced in internet banking. This is a unique featureand not available in most banks.

E-Accounting system for electronic remittance to customs by Importers is enabledthrough our Internet Banking.

Payment Gateway:

Payment Gateway for payment of utility bills like mobile payment, insurance premium,other banks' credit cards, telephone bill payments etc., using debit cards has beenimplemented. Loyola College, Chennai, Madras Christian College, Amet University and TN MGRMedical University has been brought under payment gateway with netbanking, debit andcredit cards and other bank VISA cards for payment of college fees.

Mobile Banking:

Mobile banking enables funds transfer between accounts, payment of credit card dues,booking of air and movie tickets, payments to post paid mobiles / DTH, suspension ofATM/Debit cards and demat services in addition to the query services like transactionstatus, balance enquiry in SB, deposit and Loan accounts. ATM and branch locators are alsoenabled. Bank has launched mobile android app for displaying our branch products. It alsohas ATM/ branch locator. Customer complaint through Mobile implemented.

Product Space

• With a view to increase Security, Biometric solutions were procured andimplemented across all our branches facilitating foolproof operational safety at all ourbranches. The solution envisages authenticating the user every time he logs into the CBSwith biometric as 3rd authentication. IOB is one of the first banks to implement biometricauthentication successfully.

• GENNEXT Branch to cater to the needs of techsavy younger generation ofcustomers has been opened in Chennai, Bangalore and Manipal.

• CTS : Cheque truncation system has been implemented in Chennai, NCR, Delhi,Coimbatore, Bangalore, Trivandrum, Puducherry, Hyderabad, Chandigarh, Salem, Erode andTrichy covering 575 branches upto March 2013.

• Aadhar registration through the branches has been enabled. Aadhar Bridgepayments have also been enabled.

• Financial Inclusion Project :Financial inclusion application enables fundstransfer, deposits and remittances towards advances in real time and it is alsointeroperable enabling any customer to transact through any Business Correspondent.

• e-BRC (e bills realization certificates) for Director General of ForeignTrade is being uploaded directly from the system on a daily basis.

• Online Loan Processing : Upgradation of RAM Rating facility from CRISILalongwith integration of Loan Appraisal Software has been implemented.

• City Back Office : For centralized opening of accounts and centralizedprocessing of inward clearing, so far 31 CBOs have been opened as on March 2013 forprocessing of inward clearing cheques.

• Central Plan Schemes Monitoring System (CPSMS) : CPSMS is a projectinitiated by Department of Expenditure, Ministry of Finance, Government of India,primarily to track the disbursement of funds to the ultimate beneficiaries. Own Softwarefor processing and accepting these funds through our Bank is already in place.

• GePG (Government E-Payment Gateway) has been implemented to disburse bulkpayments from Central Government departments to Central Govt. employees/vendors throughour bank's NEFT platform.

• Bank has 442 POS terminals installed till March 2013

• Bank has introduced e-kiosks and installed 102 kiosks in branches and ATMs.

• Bank has launched VISA international Gold / Platinum / signature cards for highnetworth customers and have so far issued more than 1500 such cards to our customers

• Also launched kisan debit cards to our agricultural customers to enable them todraw the loan proceeds through ATMs.

• Student cards have also been introduced.

• Corporate connectivity has been introduced with SAP-ERP solution, which enablescorporate to reconcile online, authorize on-line transfer of funds, e-presentment ofbills, on-line trade finance etc., The Pilot run has been completed.

• IOB is the only Nationalized Bank to collect Chennai Corporate tax acrosscounters.

• Bank has introduced direct remittance facility at our overseas branches.

Overseas Branches Computerisation

To address the need for standardization and for ensuring uniformity it was decided tobring all the overseas branches under a common software platform, under HUB and SPOKESModel, with the HUB at Singapore and Disaster Recovery Site at Bangkok.

Singapore, Bangkok and Colombo branches has already been brought under the commonsoftware platform.Seoul, Hongkong and TST, Hongkong branch are running on a stand-alonepackages and will also be brought under the common platform.

MIS and Decision Support Systems:

Oracle Business Intelligence application is fully integrated into CBS and otherapplications across multiple platforms on a real time basis and present the analyticsthrough integrated interactive dashboards with advanced visualization effects. A number ofreports have already been developed and provided to various layers like Branch Managers,and other TOP executives of the Bank including Trend Analysis, Drill Analysis, ParetoAnalysis on all Key Performance Areas at Branch / Region / Country / Global level.Forecasting models using Linear Regression and Exponential methods etc have already beendeveloped. As many as 300 analytics have been developed and ported. It is also extended asview facility through internet to the Top Management and Regional Heads.

Disaster Recovery and Business Continuity

Bank has established Three way Disaster recovery setup with Primary data Centre (PDC)and the Command Centre (CC) located in Chennai and the Disaster Recovery Site in Hyderabad(different seismic zone). The CC database is updated real-time on a Synchronous mode whichensures zero data loss, while the DR site is updated on an Asynchronous mode with marginaltime lag. Bank has provided alternate connectivity to all our Data Centres and also to thebranches wherever feasible through alternate service providers/medium.

Network

A robust MPLS-VPN network supports Bank's CBS with redundancies built in at devicelevel, media level and service provider level. All the Regional network nodes and threedata centres are provided with dual MPLS VPN Connectivity sourced from two differentservice providers.

Connectivity is provided through wired, RF and VSAT media depending upon thefeasibility at a particular location. All the branches/Offsite ATMs/other offices areconnected either by point to point leased line connection to the respective regionalnetwork node or directly under primary MPLS-VPN Cloud. Redundant MPLS-VPN links fromalternate service provider has been sourced for about 1996 branches. These links arefunctional and take care of network downtime and ensure business continuity. The networkuptime has been more than 99.91 %.

Connectivity for Ultra Small Branches is provided through a WAN based broadband 3Gmodem/ Datacards. 420 branches in 32 Regional Offices started using data cards.

Knowledge Portal

A knowledge Management Kit is deployed in our Bank's intranet which facilitates allemployees to have direct access to all latest RBI guidelines / Circulars, importantenactments, Court Judgement etc., Many public websites are also linked to through portal.

Transaction Banking

Transaction banking Department was formed with the purpose of giving a boost to LowMargin - High Volume Banking Products in order to improve the Net Interest Margin (NIM) byincreasing the paperless transactions. Along with holistic and integrated CoreBanking Solutions, the Bank provides multiple DELIVERY CHANNELS (e-Products) to thecustomers.

ATM / Cash Dispensers (CDs)

As at the end of March 2013, total number of ATMs/CDs of the Bank stood at 1883. Thereare 1164 onsite and 719 offsite ATMS. During the year under reference 2012 13, Bank hasdeployed 440 ATMs /CDs. In total, Bank has 546 ATMs in Metro Centres, 553 in UrbanCentres, 524 in Semi Urban Centres and 260 in Rural Centre. As on 31.03.2013, there are2920 branches of which 1152 branches are having onsite ATMs /CDs and 369 Offsites. Thereare 1399 branches are without either Onsite or Offsite ATMs. Bank decided to deploy oneonsite ATM/CD at every feasible branch during 2013 14.

Debit Cards

The card base as on 30.12.2012 is 43.35 lacs. During the year Bank has issued 8.69 lacDebit Cards. In total , Bank has so far issued 129171 student cards as at the end of March2013. More than 65000 student cards were issued during the year. Bank successfullylaunched issuing Rupay Kisan Debit Cards to our Agriculture borrower customers which canbe used in ATMs /PoS. Bank has so far issued 91000 cards to our customers under KisanDebit Cards.Bank launched VISA Aadhaar Insta Debit Cards to be issued to all beneficiariesof DBT.

Gold /Platinum / Signature Cards to the elite group of our customers has been launched.These cards are meant for High Net worth clients only. Branches have issued more than 1500cards to our customers. Starting from Financial Year 2012 13, bank has taken a decision oflevying annual fee on all Debit Cards from 2 nd year onwards as the cards are issued for10 years. IVR system for resolving the customer complaints over phone is expected to belaunched in May 2013 for both the Debit and Credit Cards. Loyalty Rewards for usage of ourBank Debit and Credit Cards will be processed during the second week of April and the samewill be introduced to customers before 15th May 2013.

Credit Cards

Bank issued 44171 credit cards upto March 2013 and 2634 cards during the year underreference. A recovery made during this financial year from NPA card accounts is Rs.581lacs.

Payment Gateway Operations

Bank has 7 aggregators in M/s Billdesk, M/s Techprocess, M/s Avenues,M/s Ibibo, M/sTimes Money, M/s Citrus, M/s Atom Tech who have nearly 5000 sub-merchants under theirbanner including public sector organizations like BSNL,LIC of India etc. Bank hasDirect Clients like TNEB, AMET University, ITDC, IOACON,Loyola College,Ethiraj College,Madras Christian College, Dr MGR University. Transactions effected through IPG fromaggregators/direct clients works out to Rs 5.18 lacs for Rs.53.43 crores generating arevenue of Rs.89 lacs. Bank has around 15 more Direct Clients in pipeline to beadded in our Payment Gateway operations.

Internet Banking and Mobile Banking

The internet banking registrations have shown a good growth during 2012-13. From 372307in 2011 -12, the registrations have gone upto 527712 registering a growth of 42%.Registration process for internet banking has been simplified. More customer friendlyapproach viz generation of passwords by customers, increasing the daily funds transferlimit to a max of Rs 2.00 lacs etc were introduced.

Online Fee collection facility is available in Internet Banking for EducationalInstitutions. Bank has 20543 Mobile Banking Registrations as on 31.03.2013 and during theyear nearly 7000 registrations have been added.

Cheque truncation System (CTS)

CTS has been implemented in 575 branches in 12 regions across the country. As CTS hasbeen made mandatory by RBI. Bank endeavours to complete the implementation in all theregions during this FY 2013-14 in all MICR Centres.

Improving E-Transactions

Branches, Regional Offices are periodically sensitized to effectively market oure-products and to reduce paper based transactions. Training is imparted through StaffTraining Centres. In all branches, customers requesting DDs/POs are advised to make use ofRTGS/NEFT. All active SB accounts are issued Debit Cards. Customers are being advised touse our internet banking, mobile banking, ATM and other electronic services. Staff membershave been instructed to use only e-channels.

Business Intelligence analytics have been developed and deployed to monitor and analysethe performance of branches in multiple alternate delivery channels. To improve thee-payment transactions, NEFT transactions up to Rs.1 Lakh have been made free from levy ofany charge with effect from 1st July, 2012.

Government Accounts Department

Bank is accredited Agency Bank for various Central and State Revenue Collections,Direct Taxes (Income Tax), Indirect Taxes (Excise Duty, Service Tax and Customs Duty). 352designated branches for Direct Taxes and 217 designated branches for Indirect Taxes areauthorized. Nodal branches for online collection of Income Tax and 20 Nodal branches forphysical collection are in place.

Similarly Nodal branch for Service Tax, Excise Duty and for Customs duty are in placeand branches for online collection of Indirect Taxes and 8 Nodal branches for physicalcollection are also established. Bank has garnered around Rs.7939 crores (901319transactions) for Direct Taxes and Rs.4953 crores (162259) for Indirect Taxes for thefinancial year 2012-13 as against the previous year of Rs.7415 crores (852570transactions) and Rs.7285 crores (156270 transactions) respectively. All customers arebeing persuaded to pay their taxes through Bank. Various Deposits like PPF, RBI Bonds,Senior Citizens Savings Scheme are also handled by the bank.

Bank is accredited for handling Departmentalised Ministry Accounts viz., PlanningCommission and WPC Wing of Department of Telecommunications Hqrs for which ParliamentStreet Branch and Sanchar Bhawan branch are the Nodal branches. The payments of Ministrycredits are paid though Government e-Payment Gateway. Post Office Collection and drawingaccounts are handled through 52 branches in the State of Tamil Nadu. Bank is accreditedfor handling Online collection of State VAT in the States of Tamil Nadu, Andhra Pradesh,Puducherry, Karnataka, Maharashtra, Delhi, Uttar Pradesh, Jharkhand, Odisha and WestBengal. Online collection of VAT in the State of Gujarat is under the process of Testingand we are taking steps for early implementation. Also Bank is accredited for onlinecollection of Tamil Nadu Transport Department's fee collection. Currently Bank is handlingphysical collection of VAT in the States of Gujarat and designated branches in UttarPradesh. Offline collection (Counter collection) of VAT in the States of Tamil Nadu, UttarPradesh, Tamil Nadu Transport Departments' fee collections are in the process ofdevelopment. 12 Sub Treasury Operations in Tamil Nadu and 3 Sub Treasuries in the State ofOdisha are handled. Post Office Drawing and Collection accounts are handled by us andMount Road Branch is the nodal branch.

Government is moving towards e-Governance. Branches are increasing Registration of NetBanking Accounts and Transactions. Non Agency Bank customers are also contacted andimpressed upon opening of Internet Banking enabled accounts for payment of taxes. CASAbase is sizably increased by cross selling of such Products .

Centralised Pension Processing Centre

All India authorization for Central Civil, Defence and Telecom was received duringApril, May and October 2012 . CPPC disburses pension on a centralized basis to CentralCivil, Defence, Railway and Telecom Pensioners. Bank has around 53000 pension accounts.Bank has disbursed about Rs.65 crores every month and received reimbursement under singlewindow scheme for Central Civil, Defence and Telecom pensions within 2-3 days from thedate of disbursement.

Bank is claiming reimbursement for Railway pension from the respective zones, we havetaken up with Railways for reimbursement in SWS like other pensions. Bank is accreditedfor disbursing Postal Pension effective from 01.01.2013.Bank is also handling State CivilPensions under Public Sector Bank Scheme through branches. Bank is servicing around 159000pensioners.

Agency commission for pension transactions has been increased to Rs.65/- pertransactions branches may have liaison with the State Department and obtain the list ofstaff members who will be retiring in the coming months and bring them in to our fold.Bank is also servicing 81000 TNEB pensions and Mount Road Branch is the nodal Branch.

NEFT and RTGS continue to remain the most cost-effective and efficient modes forremittance. Inorder to improve the e-payment transactions, NEFT transactions up to Rs.1Lakh have made free from levy of any charge with effect from 1st July, 2012. Bank hascurrently under tie up arrangement with Internet payment aggregators and several directclients like TNEB, ITDC .

Collection of State Government revenues:

As the Governments is largely moving to an e-governance model, the bank has acceleratedits efforts to bag the bigger pie in the governmental business. The bank is currentlyaccredited for handling Online collection of State VAT in the States of Tamil Nadu, AndhraPradesh, Puducherry, Karnataka, Maharashtra, Delhi, Uttar Pradesh, Jharkhand, Odisha andWest Bengal.

Inter Branch Reconciliation

Inter - branch reconciliation has assumed a greater significance in view of itsvulnerability. Reserve Bank of India has also advised Banks to accord priority tointer-branch reconciliation at par with Business development. RBI has fixed six monthstime for elimination of inter-branch entries.

Under COMPASS (Completely Automated Settlement System) all credit entries aged morethan 3 months as per Bank's Policy Guidelines i.e. entries originated upto 31.12.2012 havebeen eliminated and brought to "Nil" status as on 31.03.2013. All debit entriesupto February 2013 in COMPASS and Demand Draft Reconciliation accounts have beeneliminated as on 31.03.2013 which is well within the RBI norms of six months.

No debit entries are outstanding for more than one month under Funds Transfer / TTsPaid Reimbursement Account/ Multicity Cheque Paid Reimbursement Account/IntercityTransactions Suspense Account as against RBI norms of six months.

Human Resources Development

During the year, Bank has launched two new training programmes - "Muskaan GrahakKi Muskaan Hamari Pehchaan" with Customer Service as focus for frontline Clerks and"Jithenge Hum Sath-Sath" (Together We Win) Management Development Programme forRepresentatives of recognized Association and Union of the Bank.

The training focus continued to be on Credit Appraisal/ Credit Monitoring, NPAManagement and Recovery in addition to Risk Management apart from all general bankingareas. Also Programme of Personnel Effectiveness and Team Building are conducted to allstaff members at Staff College and various Staff Training Centres.

Training Programme on Leadership Development, Customer Relationship Management,Strategic Branch Management, Strategic Branch Leadership Faculty Development Programmehave been conducted during the year.

Keeping in view the Corporate goal of making the bank a customer centric one, traininghas been imparted on contemporary issues of banking apart from basic areas through theinternal and external mode.

The Bank has won the Platinum Award from the Greentech Foundation, New Delhi under"Training Excellence HR Award" for the last year. Training was imparted to 13474staff members through 899 internal training programs and 2372 staff through programmesconducted by reputed external institutes. Of the total staff trained 3665 belonged toScheduled Caste (SC) and 1149 belonged to Scheduled Tribe (ST).

Bank deputed 292 Executives, 1098 Officers and 982 Clerks for training programmesconducted by reputed external institutes. Further, 26 executives and 10 Officers weredeputed for training abroad.

Training for Staff of RRB's

Bank has also trained 250 staff members of Neelachal Gramya Bank and Pandyan Grama Bankthrough 14 Training Programmes. Of the total staff trained 49 belonged to SC and 13belonged to ST. Apart from this, 36 staff members were deputed for trainingprograms abroad. 250 staff members from Regional Rural Banks have been trained during theyear.

In order to sustain the motivation level for self development & updating theknowledge quotient, Bank has introduced a Scheme for Reimbursement of Examinationfees/incentive for passing the Depository Operations Certification Examination (DOCE)conducted by National Institute of Securities Markets (NISM).

The Bank had 28280 staff in its Domestic Operations comprising 11895 Officers, 11937Clerks and 4448 Sub-staff. Of the total staff strength, 6317 members belonged to SCcategory, 1664 to ST Category, and 4400 to OBC Category. Staff Strength includes 7077Women employees, 916 ex-servicemen and 558 physically challenged members. During the year2012-13, 300 Specialist Officers, 890 Probationary Officers and 1674 Clerks joined theservices of the Bank.

Industrial Relations

In order to maintain good Industrial Relations climate in all offices of the Bankguidelines are issued from time to time regarding enforcement of discipline, policies tobe followed in recruitment, promotion etc., which which has led to reduction of casesunder IR. Court cases are reviewed by the Bank at Apex level as per Ministry of Financeguidelines and efforts are taken to settle/get the Court cases disposed of expeditiously.In such cases which cannot be settled the cases are contested strongly.

Single Window system is being implemented by all regions vigorously to enhance customerservice and the matter is under active follow up by Central Office. Online submission ofReturn of Movable, Immovable and valuable properties by officer employees as on 31.03.2012has reached an all-time record of 99% submission.

The guidelines issued by the Ministry of Finance and Indian Banks Association withregard to staff matters are implemented expeditiously by issuing circulars for the benefitof our employees.

The industrial relations environment for the Bank remained cordial and conducive forachieving organization's objectives.

Security

Security measures, mandatory and recommendatory, were correctly and strictlyimplemented at all the branches and administrative offices .They are reviewed periodicallykeeping in view of the local law and order situation and additional steps were taken tostrengthen the security measures to create a safe environment for customers and the staff.The Bank continued to stress on preventive measures for security and fire Safety. The Bankhas sanctioned installation of CCTV in all branches and to engage Armed Guards/Watchmenfor vulnerable branches from Director General Resettlement sponsored Agencies/reputedPrivate Security Agencies on case to case basis. Personnel of our Bank have beensensitized regarding security awareness for the protection of life and property.

Rajbhasha (Official Language Policy)

The Bank has taken all efforts to implement the Official Language Policy of Governmentof India during the year 2012-13. During the year 160 Staff members who do not possessworking knowledge of Hindi were trained in IOB Praveen and Banking Pragya Courses. 2014Staff members possessing working knowledge of Hindi were trained in General HindiWorkshops held during the year. Rajbhasha Sangoshti was held on 14.09.2012 for heads ofCentral Office departments to strengthen the Official Language Implementation in CentralOffice.

Minutes of all meetings of all board level committees were translated in Hindi. As perthe directives of Govt. of India Bank has enabled Hindi Unicode font in all RegionalOffices and has provided the facility of downloading of the same on IOB ONLINE. Bankingterminology has been provided on IOB ONLINE for the benefit of staff members. Training hasbeen given to 1614 staff members for the use of Hindi in computers. Script Magic packagehas been provided in all branches for issuing pass books, statement of account, DD &Deposit receipts in Hindi. Four issues of quarterly Hindi Magazine "VANI" inprint as well as in digital form. Bank's website has been made available in Hindi also.

Reserve Bank of India has awarded Second Prize for Hindi house magazine"VANI" for the year 2011-12 in the Inter-Bank Competition for Hindi housemagazines of banks and financial institutions. Regional Offices were inspected on O Limplementation by Official Language Department, Central Office and Rajbhasha Shields wereawarded to Regional Offices and branches doing good work in official languageimplementation.

Third subcommittee of Parliamentary Committee on Official Language inspected ourRudraprayag branch on 23.06.2012. Drafting and evidence committee on Official Languageinspected our RO Bangalore on 26.12.2012. Both the committees expressed satisfaction overthe implementation of Official Language in these centres.

Annual Official Language Review Meeting and Unicode training for O L Officers was heldon 28th and 29th September 2012 to assess the progress made in the area of O Limplementation in Regional Offices and provided inputs for intensive implementation in allcentres.

As convener of Chennai Town Official Language Implementation Committee, bank hasreceived the Second Prize for its efforts in implementation of Official Language Policyduring the year 2011-12 from Official Language Department, Ministry of Home Affairs,Government of India. The Prize was given by Shri Arun Kumar Jain, Secretary,

Department of Official Language, Home Affairs, New Delhi on 22nd February 2013. Onbehalf of the committee, the Bank conducted two General Hindi Workshops, 12 Inter-BankHindi competitions, Joint Hindi Month Celebration function and Hindi Unicode trainingprogramme for the staff members of member banks / Financial Institutions. A JointRajbhasha Samaroh was held on 26th February 2013. In addition to this, two half yearlymeetings were also conducted. Three Seminars in Hindi on Banking subject were held forexecutives and Official Languge officers. Annual issue of magazine of "ChennaiBharathi" was brought out. Chennai TOLIC's website chennaibanktolic.com waslaunched during the year.

Costing of Operations

The Costing & Planning function at Central Office continues to closely monitor themovements in Income and Expenditure of the Bank on a monthly basis. Being selected as amember of the ALCO team, the department puts in various study reports/criticalanalysis/movement of Cost and Yield factors on an ongoing basis for deliberations in theALCO meetings. The department takes care of fixing the region wise NIM (Net InterestMargin) targets and monitors the regional attainment level apart from following up on SOIand MoU parameters. Action points are summarized for improving the profitability of theBank at the micro and macro level.

Parliamentary Committee:

During the year, the committees visited at Chennai are namely A). Parliamentary HouseCommittee Meeting from 28/29th May 2012, B) Study tour of the Parliamentary Committee onWelfare of other Backward Classes 1st October 12,C) Parliamentary Committee on Commerce31st January 2013 & Parliamentary committee on social justice &women th thempowerment from 7 to 9 February 2013.

Outlook for 2013-14

The Global Economy continued to be volatile throughout the year and the slowing trendis likely to continue. The U.S recovery is expected to gradually pick up steam; Europeangrowth may be weak in the North and negative in the South; China's economy is expected togain momentum; other emerging markets will show positive signs of life; Commodity priceswould move sideways again; Inflation would remain tame; Central Banks will mostly be inwait and see mode; Fiscal Policies are expected to be tight; US Dollar is expected to bestronger and flat against the rest and the risks facing the global economy will be morebalanced. However, in the recent times due to global commodity fall and inflation movingdownwards there is an expectation that RBI may further moderate the key policy Rates so asstimulate the economy. As such, Indian economy is projected to grow moderately at 6.4 %for 2013-14.

   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
St Bk of India 154,133.11 13.82 1.42 14.51 15.4 0.0 0.00
Bank of Baroda 34,816.16 7.76 1.07 15.30 15.1 0.0 0.00
Punjab Natl.Bank 29,144.82 7.95 0.92 12.68 16.5 0.0 0.00
Bank of India 14,926.12 5.10 0.63 14.59 13.0 0.0 0.00
Canara Bank 12,954.49 5.07 0.55 11.92 13.2 0.0 0.00
IDBI Bank 10,746.40 9.28 0.51 12.70 10.2 0.0 0.00
Union Bank (I) 9,400.92 4.93 0.58 13.67 15.0 0.0 0.00
UCO Bank 7,686.43 6.03 0.82 13.54 9.1 0.0 0.00
Oriental Bank 7,166.42 6.30 0.59 12.44 11.5 0.0 0.00
Central Bank 6,833.23 0.00 0.50 13.46 8.3 0.0 0.00
I O B 6,485.58 16.51 0.47 13.27 4.9 0.0 0.00
Syndicate Bank 6,333.24 3.34 0.65 14.12 22.8 0.0 0.00
Indian Bank 6,084.89 5.16 0.56 12.64 15.7 0.0 0.00
Allahabad Bank 5,181.96 4.54 0.48 12.83 11.8 0.0 0.00
Corporation Bank 4,852.80 5.54 0.48 12.57 16.1 0.0 0.00

Futures & Options Quote

 
Expiry Date
52.60 0.15  [0.3]%
Instrument: FUTSTK
Expiry Date: 24 Apr 2014
Open Price: 52.80
Average Price: 52.77
No. of Contracts Traded: 5,496,000
Open Interest: 1,800,000
Underlying: IOB
Market Lot: 8000
Previous Close: 52.60
Day’s High | Low: 53.30 | 52.35
Turnover (Cr.): 29.00
Open Int. Change: -1,624,000.00 ( [47.4]% )
View detailed F& O quotes >>

Key Information

Key Executives:

M Narendra , Chairman and MD & CEO  

Alok Pande , Nominee (Govt)  

Niranjan Kumar Agarwal , Director(PartTime NonOfficial)  

Ajit Vasant Sardesai , Director(Shareholders)  


Company Head Office / Quarters:
763 Anna Salai,
,
Chennai,
Tamil Nadu-600002
Phone : 91-44-28519491/28415702/28889392
Fax : 91-44-28585675
E-mail :
investor@iobnet.co.in
investorcomp@iobnet.co.in
Web : http://www.iob.co.in
Registrars:
Cameo Corporate Services Ltd
Subramanian Building
1ST Floor No 1
Club House Road
Chennai - 600002

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