UCO Bank

BSE: 532505 | NSE: UCOBANK | ISIN: INE691A01018 
Market Cap: [Rs.Cr.] 7,585 | Face Value: [Rs.] 10
Industry: Banks - Public Sector

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Management Discussions


1. World Economic Scenario

In FY 2008-09, banks completed a full circle when top lenders across the globe, mosttellingly those from the USA and other developed countries, had to seek Government dolesfor their survival. Pillars of global finance had their foundations shaken to the core -some survived, mostly through bailouts from their respective Governments - others haveceased to exist.

In the wake of the Lehman Brothers collapse in September 2008 the system cracked.According to a top US financier, the decision to let Lehman fail was "the gamechanger" which perhaps changed the complexion of the crisis from a modest one to asevere one. According to others, it was not so much the Lehman collapse as the uncertaintyit created in its aftermath about when and under what circumstances the US authoritieswould support financial institutions, that precipitated the crisis. Through all this,global financial intermediation - that intricate and interdependent system thatchannelizes the world's savings into productive capital investments - has been severelyweakened. Banks, fearful of their own solvency, have all but stopped lending.Credit-financed economic activity has been brought to a virtual standstill with thebiggest economic crisis - the most serious the world has faced in the post-War era -staring across nations.

The process of globalization, involving above all the globalization of finance, hasseen the financial crisis, which began in the U.S. spread to Europe and then becomeglobal. Even countries that managed their economies well, did not allow their banks toengage in excessive risk taking through derivatives and where rational lending practiceswere followed, are suffering. The crisis has badly shaken business and investorconfidence, melted asset values, adversely impacted business activities/ plans andprofitability of business enterprises. By all accounts a global recession has set in.

According to the IMF, the economic trend which started in the second half of 2008 inthe USA & Europe would continue and they would experience severe contraction in 2009.In 2010, the US may register modest positive growth, but the Euro-zone is projected 1ohave only negligible positive growth. The emerging economies is expected to registermodest growth in 2009 - well below that of recent years - with some recovery in2010.

2. The Indian Scenario

Emerging market economies like India are not immune from the economic crisis because ofthe linkages between the financial sectors. As the RBI Governor has pointed out, theimpact of the aforesaid credit crisis in India, is felt through three channels: the tradechannel, the financial channel and the confidence channel.

Till the Lehman collapse, it was assumed that the impact on India would be primarilythrough the trade channel. The trade channel impact - exports account for less than 1 5%of GDP -was assumed to be bearable in so far it would set back growth only by 1 to 1.5%.But the financial channel impact was far more serious and wide-ranging - restrictingIndian companies' access to overseas finance, lowering domestic liquidity and causingstock prices to fall.

For Indian companies, fresh international borrowings have become difficult; buyers'credit for international transactions has become scarce; Indian banks' overseas branchesand subsidiaries find they are unable to access funds and have had to be provided withdollar funds by their parents from out of India; and so on. When access to funds becomesrestricted, the impact on investment and economic growth is far-reaching causing interalia capital expenditure to be spread out over a longer time period than it might havebeen otherwise.

At the same time, the stock market witnessed unprecedented slide caused as much by theimpact of net sales by Flls as also by depressed investor sentiment about prospects forglobal and domestic economic growth. At a time of low share prices, corporates find itextremely difficult to raise equity capital. These funding constraints will prevent theIndian corporate sector to accept risks and expand its balance sheet.

As far as the 'confidence channel' impact on the Indian economy is concerned, it is butnatural that at a time of global crisis, consumers and investors cut back on spendingbecause of the prevailing uncertainty and loss of confidence. Job losses, a hard realityin times of economic downturn, also have direct and perceptible impact on consumerspending.

Against this background, the corporate sector in India experienced significant erosionof margins in the third quarter. Although the fourth quarter is likely to be better, thesecond half of FY 08-09 will see significant dip in profits & therefore of internal generationof surplus for investment. As many companies had to postpone their plans to raiseequity, they had to take recourse to debt to finance ongoing projects. This would furthererode their profitability in the second half of 2008-09.

For the quarter ended March 2009 sectors like telecom, cement, FMCG, capital goods,fertilisers, and oil marketing companies are expected to show better results while sectorslike IT, auto ancillaries, real estate, shipping, metal and mining, gems and jewellerywould suffer. Client survey by one of the top Indian IT companies shows 89% of clientshave reduced their IT budget. On one hand, quarterly results of all sectors areexpected to show reduction in operating expenses (because of a sharp drop in globalcommodity prices and lower salary expenses) while on the other, interest expenses on loansare expected to go up as the cost of funds is still high. Oil marketing companies areexpected to show much improved results on the back of falling crude prices globally.Increased Government thrust on infrastructure activities and spending on rural developmentprojects have led to strong dispatches by cement majors in the quarter and many companiesare looking at fresh capacity expansion. Infrastructure companies are also expected topost healthy topline growth because of substantial order bookings, fall in steel pricesand change in the industry scenario. In the retail segment, the economic slowdown hasaffected value retailing and many retailers have scaled down their expansion plans andhave shut down some unviable stores.

Though the overall sales growth is expected to decelerate in the quarter ended March,there would be some bright spots and signs of recovery in sectors like steel, cement,two-wheelers and oil marketing companies. Steel production has increased, cement priceshave risen, and the auto and housing sectors have picked up, too. The Indian telecomsector is the fastest growing in the world. In the rural segment, there was perhaps nodecline in demand at all.

Indian banking sector is considerably less affected by the ongoing crisis than those inthe developed countries. This is because the situation in India is quite different fromelsewhere. In those countries, the banks suffered huge losses leading to a collapse in theflow of credit and confidence which in turn dragged down the real economy. InIndia, it is the other way round. The real economy has been affected through variouschannels and banks are feeling the effects of a slowing down of the economy.

Though agriculture also recorded a deceleration in growth, the outlook is expected toremain satisfactory with sowing in the rabi season being higher than that in the previousyear.

Growth Rates of Real GOP

SI. No. Sector 2007-08* 2008-09# 2008-09
1. Agriculture and Allied Activities 4.9 2.6 0.6
(17.8) (17.1)
2. Industry 7.4 4.2 3.5
(19.2) (18.7)
3. Services 10.8 9.2 9.7
(63.0) (64.2)
4. Real GDP at Factor Cost 9.0 7.1 6.9
(100) (100)

* : Quick Estimates.

# : Advance Estimates.

Figures in parentheses indicate shares in real GDP

Source: Central Statistical Organization (CSO)

Both imports and exports recorded sharp deceleration in the third quarter of 2008-09due to the shrinkage of overseas market, slowing down in domestic demand and fallingcommodity prices. The overall trade deficit led to expansion in Current Account deficit toUS $ 36.5 billion in April-December, 2008 as compared with US $ 15.5 billion inApril-December, 2007. Declining reserves was witnessed on account of large net outflowunder portfolio investment and large repayment under short term trade deficit along with awider Current Account deficit. The foreign exchange reserves showed decline of US $ 57.70billion during the FY'08-09 and stood at US $ 253 billion as on 10,h April,2009.

Balance of Payments

(US $ billion)
April - Mar. April - Dec. April - Dec.
Item 2007-08 PR 2007-08 PR 2008-09 P
Exports 166.2 113.6 133.5
Imports 257.8 182.9 238.9
Trade Balance -91.6 -69.3 -105.3
Net Invisibles 74.6 53.8 68.9
Current Account Balance -17.0 -15.5 -36.5
Net Capital account 108.0 82.0 15.3
Overall Balance * 92.2 67.2 -20.4
Export Growth (%) 28.9 21.9 17.5
Import Growth (%) 35.2 28.3 30.6
Invisibles receipts growth (%) 29.7 30.1 18.8
Invisibles payments growth (%) 18.7 13.2 8.7

PR : Partially Revised.

P : Preliminary.

* Overall Balance includes errors and omissions

Source : RBI's Publication on "Macroeconomic and Monetary Developments in2008-09".

On the back of the slowdown in economic activities due to the international financialturmoil, there has been moderation in the monetary growth during 2008-09 as reflected inthe deceleration in the bank credit

Scheduled Commercial Bank Data on last reporting Friday basis

(Amt. in Rs. Cr.)

SI. No. Item

Variations (year-on-year)

As on Mar. 28, 2008 As on Mar. 27, 2009
Absolute Per cent Absolute Per cent
1. Aggregate Deposits 585006 22.4 633382 19.8
II. Bank Credit 430724 22.3 408099 17.3
III. Investments in Govt. and other Approved Securities 180199 22.8 194031 20.0
IV. Investments in non-SLR Securities 30155 21.5 41344 24.2

Source : RBI's Publication on "Macroeconomic and Monetary Developments in2008-09".

3. The Government Response to the Economic Crisis

There were state interventions long before the full impact of the global crisis wasfelt in India. Increased expenditures on account of rural employment schemes, debt relieffor farmers and the Sixth Pay Commission had already been budgeted last year although theprovisions increased later. These steps were meant to benefit vast sections of thepopulation, both rural and urban.

But from the beginning of the third quarter of FY09, when the full impact of the globalrecession started telling on the Indian economy, the government announced three fiscalstimulus packages in quick succession - in Dec'08, Jan'09 & Mar'09. The salient pointsof these measures are:

• Additional plan expenditure upto Rs. 20,000 cr. for critical rural,infrastructure and social security schemes such as Pradhan Mantri Gram Sadak Yojana(PMGSY), Jawaharlal Nehru National Urban Renewal Mission (JNNURM), National RuralEmployment Guarantee Scheme (NREGS), Indira Awas Yojana, Accelerated Irrigation BenefitProgramme and National Social Assistance Programme (NSAP).

• Cuts in tax & duty rates

• Lowering of interest rates on export and housing finance

• RBI offering a line of credit of Rs. 5000 crore to EXIM Bank to providepre-shipment and post-shipment credit, in rupees or dollars, to Indian exporters atcompetitive rates

• Several other measures to support exports, MSME & Textile sectors

• India Infrastructure Finance Company (IIFCL), authorized to raise Rs. 10,000 cr.through tax free bonds by 31.03.2009 for refinancing bank lending of longer maturity toeligible infrastructure bid based PPP projects, mainly highways and port projects. To fundadditional projects of about Rs. 75,000 crore at competitive rates over the next 18months, IIFCL is being enabled to access in tranches an additional Rs.30,000 crores by wayof tax free bonds once funds raised in the current year are effectively utilized.

• To help maintain the momentum of expenditure at the state government level,states will be allowed to raise in the current financial year additional market borrowingsof 0.5% of their Gross State Domestic Product (GSDP), amounting to about Rs 30,000 crore,for capital expenditures.

• States, as a one time measure upto 30.06.2009, will be provided assistance underthe JNNURM for the purchase of buses for their urban transport systems. A scheme towardsthis end will be announced shortly.

The monetary response to the financial crisis has been initiated mainly sinceSeptember, 2008 following the Lehman collapse. Prior to that, the RBI was focusing onfighting inflation by adopting measures that contributed to tightening of money supplyrather than relaxation.

The flight of capital from India as well as the drying up of dollar credit abroad meantthat both rupee and dollar liquidity were tightly squeezed. The sharp depreciation of therupee with respect to the dollar required the RBI to intervene with dollar sales and thisalso impacted negatively on rupee liquidity.

To improve liquidity conditions, the RBI cut repo rate from 9% in Aug'08 to 5% inMar'09, reverse reporate from 5% in

Dec'08 to 3.5% in Mar'09 and CRR from 9% in Aug'08 to 5% in Jan'09. But many believethat these monetary measures will have a limited role in the present crisis and augmentinggovernment expenditure is the call of the hour. The monetary indicators are as follows:

Monetary Indicators

(Amt. in Rs. Cr.)
SI. No. Item Variations (year-on-year)
Mar. 31, 2008 Mar. 31, 2009
Absolute Per cent Absolute Per cent
1. Broad Money (M3) 701580 21.2 740932 18.4
a) Currency with the Public 85474 17.7 97815 17.2
b) Aggregate Deposits 614546 21.7 646627 18.8
i) Demand Deposits 99410 20.9 -1179 -0.2
ii) Time Deposits 515137 21.9 647806 22.6
Of which :
Non-Resident Foreign Currency Deposits -10525 -15.6 10368 18.2
Net Bank Credit to the Government 71612 8.6 377318 41.7
d) Bank Credit to the Commercial Sector 447059 21.0 435536 16.9
e) Net Foreign Exchange Assets of the Banking Sector 381952 41.8 27716 2.1

Source : RBI's Publication on "Macroeconomic and Monetary Developments in2008-09".

Inflation recorded a sharp decline in the second-half of the FY'08-09 due to the fallin international energy and commodity prices and also by decrease in demand pressures onaccount of financial crisis. In India the inflation measured in terms of the WholesalePrice Index declined from 12.9 per cent recorded on 2nd August, 2008 to 0.3 percent as on March 28, 2009 because of reduction in the administered prices of petroleum andelectricity as well as decline in the prices of freely priced petroleum products,oil-seeds, edible oils, oil cakes, raw cotton, cotton textiles and iron and steel.However, on account of high food prices, the Consumer Price Index continued to remainhigh. The equity market which had remained subdued throughout 2008-09 began to pick upduring the last week of March, 2009 in line with the international developments.

4. Looking Ahead

The fundamentals in the Indian economy continue to be strong. While RBI estimated GDPgrowth during FY 08-09 would be between 7.5 and 8 percent, mid-year review of thegovernment of India has put it between 7 to 8 per cent. Developments in the real economy,financial markets and global commodity prices, point to a period of moderation in growth,with declining inflation.

The true strength of a system is revealed in times of adversity. In the financialsector, Indian banks are the safest and soundest institutions in the world when seen inthe current global scenario. They remain sound and well capitalized because of prudentpolicy and actions taken by the government and the central bank.

Meanwhile, these are some of the lessons which can be drawn by the countries mostaffected by the prevailing financial crisis:

• Risk management and regulatory practices have to stay ahead of financialinnovations and new business models.

• There has to be close co-ordination among all agencies

- central banks, regulators, supervisors & fiscal authorities

- entrusted with the job of maintaining fiscal stability/ discipline.

• Markets and institutions should not be allowed to succumb to excesses.Regulators have to be vigilant.

The crisis has impacted India, but thanks to a strong regulatory regime, high savingsrate and a growing consuming class, the country has withstood the crisis. Banks in Indiahad already gone through the challenging transformation of adapting from a closed economyto an open one - with more opportunities, but also more challenges. Over the years, thecentral bank has progressively tightened prudential norms and stressed on risk management.Thus, Indian banks are today better prepared to deal with any adverse impact of thepresent crisis than at any time in the past.

After a period of some painful adjustment, once calm and confidence are restored in theglobal markets, economic activity in India is expected to recover sharply.


5. Branch Network

Branch Expansion

During the FY'08-09, the Bank opened 108 branches including eight branches which wereupgradation of existing extension counters into full-fledged branches. Fifty percent ofthe new branches which were opened (i.e. 54) are in the rural and semi-urban areas and 14are Specialized Branches comprising 5 Asset Management Branches, 4 Mid Corporate Branchesand 5 Services Branches. On 31.03.2009, the total number of Mid Corporate branches of theBank stood at 26 and Service Branches at 18 as against 4 Flagship Corporate branches ofthe Bank at Kolkata, Chennai, Mumbai and New Delhi. The Bank continued to have oneIntegrated Treasury Management Branch at Mumbai. There has been no closure of branchduring the FY'08-09.

At present, the Bank has four Senior Citizen branches at Salt Lake (Kolkata),Parliament Street (New Delhi), Sector 1 78 (Chandigarh) and Korattur (Channai) forcatering to the needs of Senior Citizens.

With a view to give focused attention to recovery of relatively high-value NPAaccounts, the Bank decided to open Asset Management branches at five metro centres namely,Kolkata, Delhi, Mumbai, Chennai and Bangalore during the year under review.

The 2000th branch, at Sivagangai in Tamil Nadu was inaugurated by the thenHon'ble Union Finance Minister, Shri P Chidambaram on 25,h October, 2008.

With the opening of 100 new branches and upgradation of 8 Extension Counters tofull-fledged Branches and no closure of branches, the total number of domestic branches asat the end of 31st March, 2009 stood at 2065. There has been no change in thenumber of overseas branches which continued to be four, 2 each in Singapore and Hong Kong.Taking these four overseas branches, the global network of branches of the Bank as at theend of 31s1 March, 2009 stood at 2069.

The total number of Representative Offices of the Bank in overseas centres stood at two- one each at Kuala Lumpur, Malaysia and Guangzhou, China - as at the end of the FY.

Extension Counters

With the upgradation of 8 extension counters into full-fledged branches, the totalnumber of Extension Counters as at the end of 31st March, 2009 stood at 11.There has been no closure of extension counters during the FY'08-09. We give below theposition of population group-wise branches of the Bank as on 31st March, 2009.

Population Category March 2008 March 2009 Percentage of Branches in each category to total number of branches as at the end of 31.03.09
Rural 845 781 38
Semi-urban 367 401 19
Urban 445 457 22
Metropolitan 300 426 21
Total Domestii : 1957 2065 100

6. Business Activities of the Bank

The global business of the Bank as on 31.3.2009 stood at Rs. 1,69,890.62 crore, therebyshowing a growth of 25.35 per cent over the previous year 2007-08. During the FY'08-09,the Bank has added a total business of Rs. 34,354.74 crore. The global deposits of theBank stood at Rs. 1,00,221.57 crore, thereby adding an amount of Rs. 20312.63 crore duringthe FY'08-09, with a percentage growth of 25.42. The global advances of the Bank showed agrowth of 25.24 per cent ( Rs. 14,042.11 crore in absolute term) and stood at Rs.69,669.05 crore.

On an Y-o-Y basis, the domestic business of the Bank increased by 25.47 per cent andstood at Rs. 1,57,233.02 crore, with deposits at Rs. 93,212.95 crore (25.64 per centgrowth) and advances at Rs. 64,020.07 crore, (25.21 per cent growth). During the FY'08-09,the total domestic business of the Bank increased by Rs. 31,914.53 crore comprising Rs.19,023.20 crore deposit and Rs. 12,891.33 crore advances respectively.

The overseas business of the Bank showed an increase of Rs. 2440.22 crore during theyear with a growth of 23.88 per cent and stood at Rs. 12657.61 crore. The deposits ofoverseas centres stood at Rs. 7008.62 crore with a growth of 22.55 per cent and advancesof Rs. 5648.99 crore with a growth of 25.58 per cent.

The average per branch domestic business increased from Rs. 64.04 crore in the year2007-08 to Rs. 76.14 crore in 2008-09. In terms of deposits, the average domestic depositper branch stood at Rs. 45.14 crore in 2008-09, showing an increase of Rs. 7.23 crore overthe previous year 2007-08. The average per branch domestic advances increased from Rs.26.13 crore in 2007-08 to Rs. 31.00 crore in the FY'08-09, thereby showing an increase ofRs. 4.87 crore.

New Business Initiatives

i) A new banking product titled "UCO Magic Cheques" (pre-funded cheques) waslaunched by Shri Arun Ramanathan, I.A.S., Secretary (Financial Services), Govt, of India,New Delhi at a function held in New Delhi on 2nd September, 2008.

ii) For current account holders who opt to maintain stipulated minimum balance with theBank, a new product, "UCO Premium Plus", which offers free remittance facilityby way of DD/TT/MT/RTGS/Pay Orders etc. upto 2 times of the chosen Minimum Monthly AverageBalance on a daily basis, was launched.

iii) Central Credit Processing Unit (CCPU) for advances other than Retail Advances hasbeen started as a pilot project at Bhubaneswar, Orissa.

iv) Debt Syndication Cell set up under Flagship Credit Department for syndication ofterms loans, to provide consultancy services and to help make the Bank as Lead Bank inconsortium advances in order to augment Fee-based income.

v) To strengthen the Bank's Credit Portfolio with quality advances generating goodyield, Golden Clearance Scheme was introduced whereby decision regarding creditapplications of our "A" or better rated existing corporate clients was beingcommunicated within a maximum period of 3-5 days.

vi) Setting up a Crisis Monitoring Cell at the corporate level to review/monitor theBank's exposure under sensitive sectors like steel, real estate, cement and textile in thepresent situation of Global Financial Turmoil.

vii) On-line Request System for UCO Education Loan has been made available on Bank'swebsite.

viii) Introduction of Performance-based Cash Incentive Scheme for Rural and Semi-urbanbranches of the Bank.

7. Income & Expenditure Income

The total income of the Bank increased from Rs. 7280.69 crore in 2007-08 to Rs. 9141.28crore in 2008-09, thereby showing a growth of 25.56 per cent. The main factorscontributing to the growth in income were income from advances which increased by 30.31per cent and Treasury income (profit on sale of investments) which showed an increase of49.50 per cent during the FY'08-09.


The total expenditure of the Bank increased from Rs. 6326.74 crore in 2007-08 to Rs.7939.66 crore in 2008-09, thereby showing an increase of 25.49 per cent. The majorincrease in expenditure was due to increase in interest cost which showed an increase of29.00 per cent during the FY'08-09 over the previous year. The staff expenses of the Bankremained well within control showing a growth of 11.51 per cent. The operating expensesother than staff cost showed an increase of 13.14 per cent during the FY'08-09 over theprevious year.

8. Profitability

The profitability of the Bank continued to show improvement. During the FY'08-09, theBank has registered a net profit of Rs. 557.72 crore, an increase of Rs. 145.56 crore or35.32 per cent over the previous year. The increase in net profit of the Bank had beenprimarily due to increase in income from advances and from Treasury operations along withcontrol over operating expenses including staff costs.

9. Capital Structure

There has been a change in the overall Capital structure of the Bank during theFY'08-09. As on 31.03.2009, the total capital of the Bank stood at Rs. 1249.36 crore andthe total Reserves and Surplus at Rs. 2707.69 crore.

The Bank has during the year restructured its capital as per Capital Restructuring Planapproved by the Government of India (GOI). In accordance with the plan, a sum of Rs. 250crore out of the total equity capital of Rs. 799.36 crore has been converted intoPerpetual Non-Cumulative Preferences Shares (PNCPS), thereby reducing the total equityshare capital of the Bank to Rs. 549.36 crore and consequential reduction in thepercentage shares held by the GOI from 74.98 per cent to 63.59 per cent. As per the Plan,Government of India will be subscribing a sum of Rs. 1200 crore in innovative type capitalinstruments of the Bank , in two tranches of Rs. 450 crore and Rs. 750 crore during theyears 2008-09 and 200910 respectively, to strengthen the capital base of the Bank. TheBank has received Rs. 450 crore on 30.03.2009 and accordingly allotted PNCPS to theGovernment of India.

During the FY'08-09, the Bank has raised subordinated debt of Rs. 275 crore by issue ofunsecured redeemable bonds under Tier-ll Capital. This is in addition to Rs. 3250.15 croresubordinated debt raised in earlier years. The Bank has also redeemed Rs. 150 crore ofsubordinated debt instruments under Tier-ll Capital during the FY'08-09.

The Capital Adequacy Ratio of the Bank (CRAR) as on 31.03.2009 stood at 9.75 per centunder BASEL-I. During the FY'08-09, the Bank continued to remain BASEL-II compliant withCapital Adequacy Ratio (CRAR) at 11.93 per cent as on 31.3.2009.

10. Non-Performing Assets

There has been considerable reduction in the percentage of Gross NPA to Gross Advancesfrom 2.97 per cent in the year 2007-08 to 2.21 per cent in the FY'08-09. The Gross NPA ofthe Bank as on 31.03.2009 stood at Rs. 1 539.51 crore. The highlight of the year has beenvery good recovery performance both in cash recovery as well as through up-gradation. Thetotal cash recovery and upgradation during the FY'08-09 has been Rs. 675.71 crore asagainst Rs. 582.94 crore in the year 2007-08. The total reduction in NPA during theFY'08-09 was Rs. 778.97 crore. The position of NPAs during the FY'08-09 at overseascentres of the Bank continued to be nil. The percentage of Net NPA to Net Advances of theBank continued to show decline and as at the end of March, 2009, NNPA ratio stood at 1.18per cent against 1.98 per cent as of March, 2008.

During the FY'08-09, the recovery from Written-off Accounts continued to be good andthe Bank recovered an amount of Rs. 77.76 crore.

11. Risk Management

The Bank has put in place Risk Management Policy, Loan Policy and Asset LiabilityManagement Policy duly approved by the Board of Directors. All functions relating to RiskManagement are in accordance with these policy directives.

The organizational framework for Risk Management in the Bank comprises of Board ofDirectors and Risk Management Committee of the Board at the apex level. Risk Managementpolicies in the area of Credit Risk, Market Risk and Operational Risk are formulated bythe Board. The Bank has three executive committees viz., Credit Risk Management Committee,Asset Liability Management Committee and Committee for Operational Risk Management, whoare entrusted with the responsibility of design and implementation of Risk Managementprocesses in the respective areas in accordance with the policies laid down by the Board.The decisions of these committees are reported to the Risk Management Committee of theBoard. The decision/minutes of the Risk Management Committee of the Board are submitted tothe Board of Directors.

In the matter of implementation of the Risk Management guidelines issued by the ReserveBank of India, the Bank has reviewed its progress and also adopted item-wise action pointsincluding a time frame approved by the Board.

A Capital Planning Committee has been set up for Capital Management and Balance Sheetplanning.

Basel II Compliance

The Bank has implemented the New Capital Adequacy Framework. It has adoptedStandardized Approach for Credit Risk and Basic Indicator Approach for Operational Riskunder the Revised Framework with effect from March 31, 2008 in accordance with regulatoryrequirements.

The Bank computes its Capital to Risk Weighted Asset Ratio (CRAR) both under the oldand the revised guidelines on an ongoing basis. The Board is kept informed on the Impactof various elements/portfolios on the Bank's CRAR. The Bank has in place Board approvedpolicy on utilization of the credit risk mitigation techniques and collateral management,on disclosures and on Internal Capital Adequacy Assessment Process (ICAAP).

Credit Risk

In order to control risk exposures, the Bank has put in place guidelines on Single andgroup Borrower exposure, Unsecured exposure, Capital Market Exposure and Counter Party(Inter Bank) exposure within the ambit of regulatory directives wherever warranted.Industry/Sector wise exposure limits have also been put in place to avoid concentration ofrisk and also to maintain a market share reasonably comparable with exposure of allscheduled commercial banks. Adherence to prudential limits is monitored by Credit RiskManagement Committee of the Bank and Risk Management Committee of the Board.

The Bank's Loan Policy provides guidelines for risk acquisition in the area of Credit.Industry Reports and the industry average of important financial parameters of variousindustries are being provided to the operational wings which are taken into account fortaking credit decisions. For implementation of Bank's policy guidelines on risk managementthe operational wings are provided with training inputs.

Bank has developed in-house Credit Rating models and minimum standards have been setfor all new accounts, green field accounts and take-over accounts. The Bank has putin place Rating based discretionary powers for sanctioning of credit proposals. Inaddition, New Business Committee at Zonal level and Corporate level accord clearance fromindustry and group angle for new proposals.

All accounts with Bank's exposure above Rs. 25 lakhs are rated internally and suchrating forms an integral part of our sanction process. Further, rating of borrowalaccounts are done by person(s) who are not associated with sanction of credit proposals orits processing. All credit proposals beyond a cutoff point require approval of"Credit Appraisal Grid" prior to being placed before sanctioning authority.

Accounts with exposure less than Rs. 25 lakhs are rated internally on "PooledAsset" basis.

TOO per cent of Bank's credit portfolio stands rated internally. The internal ratingmodule is robust and the results of internal rating compare well with those of theregulatory approved external rating agencies.

During the year, 64 per cent of our credit portfolio with exposure of Rsl 0 crore andabove were externally rated. Around 45% of credit portfolio of RslO crore and above wererated 'A' or above by one of the four rating agencies approved by regulatory authorityviz., CARE, CRISIL, FITCH and ICRA. Portfolio quality and portfolio performance aremonitored zone-wise. Rating-wise distribution of zonal credit portfolio is also monitored.

Pricing Policy is set by Asset Liability Management Committee of the Bank which decidesthe pricing within the overall framework of policy guidelines. The Bank has in placemarket linked pricing system for LC Bills discounting.

Credit audit of accounts with exposure of Rsl 0 lakhs and above are undertaken within areasonable period after sanction, and appropriate measures are taken wherever required.

Market Risk

The Asset Liability Management (ALM) Committee of the Bank assesses Liquidity Risk andInterest Rate Risk of the Bank. Structural Liquidity Returns and Interest Rate Sensitivityreturns are helping tools towards this end. "Earnings at Risk" is also estimatedevery month to assess the impact of interest rate changes in the earnings. The Bank alsoestimates VaR of its equity on a regular basis.

ALM model developed in-house is an aid towards generation of Structural Liquidity,Interest Rate Sensitivity and Earnings at Risk from the base data. These returns alsosupport decisions for funding or deployment as the case may be, by the ALM Committee.

Additionally, the Bank takes a view on Interest Rate and Exchange Rate every month.These views are also made available to the Operational wings.

The Bank has in place Modified Duration Gap analysis for ALM purpose. The Bank assessesValue at Risk (VaR) on the standard Investment Portfolio (excluding equity and MutualFunds) on a daily basis. Back testing of the VaR result is also being carried outregularly.

Mid-Office reporting on PSU Bonds, SLR Investments, Investment in debentures and equityhas been stabilized.

Operational Risk

The Bank has put in place its Operational Risk Management Policy. In terms of thepolicy, it has also established a framework to systematically track, collect and analyzethe data on individual operational risk loss events.

The Bank has been collecting relevant data under different loss event types as alsodifferent business lines (as per BASEL-II) under the framework since 1, April 2006 todevelop a model to estimate capital requirement on account of operational risk.

12. Social Banking Priority Sector

During the FY'08-09, the total Priority Sector advances of the Bank had increased toRs. 25232 crore from Rs. 20474 crore as on 31.03.08, thereby showing an increase of Rs.4758 crore or an increase of 23.24 per cent. The total Priority Sector advances toAdjusted Net Bank Credit stood at 50.69 per cent as on 31st March, 2009 asagainst 47.08 per cent as on 31" March, 2008 and the National Parameter of 40 percent.

Lending to Agriculture

Advances to agricultural sector have increased to Rs 11239 crore as on 31.3.2009 fromRs. 7884 crore as on 31.3.2008, constituting a growth of 42.55 per cent (Rs. 3355 crore inabsolute terms). Agriculture Advances to Adjusted Net Bank Credit stood at 22.58 per centas on 31st March, 09 as against 18.35 per cent as on 31st March, 08and the National Parameter of 18 per cent.

Financing new farmers

The Bank has financed 102686 numbers of new farmers with an amount of Rs.671.12 croresduring the FY'08-09.

Issuance of Kisan Credit Card

113518 numbers of Kisan Credit Cards were issued involving an amount of Rs.692.77 croreduring the FY'08-09.

Finance to SC/ST

As a part of social banking, the Bank has provided Rs. 1787.36 crore finance to SC/STbeneficiaries which is 7.1 7 per cent of total Priority Sector advances.

Finance to Women Beneficiaries

Women beneficiaries were given finance to the tune of Rs. 3429 crore which constitutes6.89 per cent of Adjusted Net Bank Credit against the National Parameter of 5 per cent.

Finance to Minority Community

As on 31.03.2009, credit facilities of Rs. 3176 crore has been extended to MinorityCommunities which is 13.01 per cent of Priority Sector Advance as against the target of 13per cent set for the year.

Finance to Weaker Section of Society

The Bank has extended credit to the extent of Rs. 5973 crore to Weaker Sections of theSociety, which constitutes 12 per cent of Adjusted Net Bank Credit against the NationalParameter of 10 per cent.

Advances under Education Loan Scheme

Education Loan during the FY'08-09 reached the level of Rs. 492.96 crore covering 28293students for their studies as against Rs. 318.24 crore in the last year ended March, 2008,thereby showing a 54.90 per cent growth (Rs.174.72 crores in absolute terms).

Financing of Micro, Small and Medium Enterprises (MSMEs):

The Bank has received the "Second Position for National Award" for Excellencein Micro Enterprises Lending during 2007-08. The Bank's Chairman & Managing Directorreceived the Award from Shri Manmohan Singh, the Hon'ble Prime Minister of India on30.08.2008.

The Bank also received the "BEST BANK" National Award for lending under RuralEmployment Generation Programme in Eastern Zone from the Chairperson of Khadi Village& Industries Commission.

As against Rs.6710 crore of advances to MSME as on 31.03.2008, the Bank has achieved afigure of Rs. 8963 crore as on 31.03.2009 registering an increase of Rs. 2253 crore and agrowth of 33.57 per cent over last year.

The Bank has also covered 2587 Micro and Small Enterprises (involving an amount ofRs.111.84 crore) under guarantee cover of Credit Guarantee Fund Trust Scheme for Micro andSmall Enterprises (CGTMSE).

The Bank has entered into MOU with some reputed Credit Rating Agencies, viz., CRISIL,SMERA, Dunn & Bradstreet, and Fitch Rating, to achieve the twin objectives of pricingBank's Products on the basis of objective risk assessment of MSME and expanding Bank'sPriority Sector business.

The Stimulus Economic Package of the Government for helping MSME Sector has beenimplemented by the Bank, which includes concession in rate of interest up to 1 per cent toMicro & Small Enterprises.

SLBC Convenor / Lead Bank Responsibility

The Bank is the Convenor of the State Level Bankers' Committee (SLBC) in two Statesnamely, Himachal Pradesh and Orissa, and is keeping close liaison with the StateGovernments. The Bank has taken necessary steps for effective monitoring and properimplementation of guidelines issued by RBI/GOI from time to time particularly of PovertyAlleviation / Employment Generation Schemes etc. The Bank has also, on a regular basis,taken active part in the SLBC meetings convened by other banks.

In line with the stipulation of Stimulus Package of the Government for MSME Sector,Special SLBC meetings are being convened every month by our SLBC Convenors in Orissa andHimachal Pradesh.

The Bank has 34 Lead Districts spread over 7 States as on 31.03.2009. The Bank ismonitoring the performance of these Lead Districts under the Annual Credit Plan (ACPs)through regular holding of DLRC/DCC meetings. The Bank has taken due care in implementingAnnual Credit Plans in its Lead Districts through regular discussions in the DLRC/DCCmeeting about achieving the targets.

Financial inclusion

In India, vast majority of the population in the rural areas and unorganised sectorhave limited or no access to affordable financial services such as savings, loan,remittance and insurance services. The best way to enable the financially excluded to takecharge of their lives is by providing them access to affordable financial services -especially credit and insurance which would enhance their livelihood opportunities.Moreover, Financial Inclusion gives formal identity and provides access to the paymentssystem and savings safety net like deposit insurance. Hence Financial Inclusion iscritical for achieving inclusive growth and thereby ensuring social and politicalstability.

With a view to establishing the basic right of every person to have access toaffordable basic banking services the Bank has taken various initiatives which areenumerated in the following paragraphs.

No Frills Accounts

The Bank has opened 5,27,988 numbers of 'No Frills account' as on 31.03.2009. For theseaccounts, the Bank follows the simplified KYC norms.

General purpose Credit Card

In terms of RBI guidelines, the Bank has provided hassle free credit to its customersbased on the assessment of cash flow of the entire household without any insistence onsecurity or end-use of fund stipulations. The Bank is monitoring progress under the schemeregularly.

9182 GCCs have been issued up to 31.03.2009 involving an amount of Rs.20.79 crore

100 per cent Financial Inclusion:

The State of Himachal Pradesh (where UCO Bank is the SLBC convenor) has the distinctionof being the first State in India for achieving 100 per cent Financial Inclusion. Underthe effective co-ordination of the Bank and through active support extended by theofficials of Himachal Pradesh State Government as also all other banks operating in theState, this feat was achieved.

100 per cent Financial Inclusion has been achieved by the Bank in Dausa District(Rajasthan) and in Hoogly District (W. Bengal), which are also the Bank's lead districts.

Besides, other districts are also in the process of getting financial coverage ofhitherto excluded population to ensure 100 per cent Financial Inclusion in all the areasentrusted to the Bank.

IT Based Financial Inclusion

The Bank started the IT based Financial Inclusion project on Pilot Basis at Neliavillage in Cuttack District of Orissa on 30.10.2008 and it is running successfully.

Agricultural Debt Waiver & Debt Relief Scheme - 2008 (ADWDR-08)

During the year ended 31.03.2009, the Bank has successfully implemented ADWDR-08strictly within the time schedule given by Ministry of Finance/Reserve Bank of India. Thebenefit of Debt Waiver was given to 250496 numbers of Small & Marginal farmers. Theamount of Claim for Debt Waiver was Rs.531.51 crores.

Opening of Rural Self Employment Training Institutes (RSETIs):

To make Financial Inclusion fruitful, financial literacy is of utmost importance.Towards this end various steps are being taken by the Bank at field level as per decisionin various forums. The Bank has formed a Trust named 'UCO Development Trust', throughwhich the Bank has started Entrepreneurship Development Centre at Howrah (West Bengal) andPuri (Orissa). In 2008-09, after the initiative taken by the Government of India to openRural Self Employment Training Institutes (RSETI), three more RSETIs one each at Cuttackand Balasore in Orissa and Dausa in Rajasthan have been opened.

New Social Banking Schemes launched

i) Uco Mahajan Rin-Mukti Yojna

With an objective to free the indebted farmers from the clutches of Money Lenders,Fertilizer & Input Dealers and Middlemen etc, the Bank has launched a new schemetitled Uco Mahajan Rin Mukti Yojna in July 2008. Under the scheme, a maximum amount ofloan of Rs.25000/- is given per farmer family for the purpose.

ii) Scheme for Rehabilitation of Manual Scavengers (SRMS)

In order to rehabilitate the remaining manual scavengers, the Bank introduced thisscheme on 19.05.2008.

13. Regional Rural Banks (RRBs)

At present, there are five RRBs sponsored by the Bank. The particulars of each RRB ason 31.03.2009 are as under :

SI. No. Name of RRB Name of the State Date of Establishment/ Amalgamation No. of Branches
1. Jaipur Thar Gramin Bank Rajasthan 27.01.2006 213
2. Kalinga Gramya Bank Orissa 02.01.2006 183
3. Bihar Kshetriya Gramin Bank Bihar 12.09.2005 148
4. Paschim Banga Gramin Bank West Bengal 26.02.2007 216
5. Mahakaushal Ksh. Gramin Bank Madhya Pradesh 01.04.1984 43
Total: 803

During the FY'08-09, the total deposits of the RRBs sponsored by the Bank increased byRs. 994.35 crore from Rs. 5030.42 crore as on 31.03.2008 to Rs. 6024.77 crore as on31.03.2009, thereby showing growth of 19.77 per cent. During the same period, the advancesincreased by 9.37 per cent. In absolute terms the advances increased by Rs. 215.14 crorefrom Rs. 2296.23 crore as on 31.03.2008 to Rs. 2511.37 crore as on 31.03.2009.

The Gross NPA level reduced both in absolute terms as well as percentage of GNPA toGross Advances during the FY'08-09. The Gross Non-Performing Assets was brought down toRs. 209.40 crore as on 31.03.2009 as against Rs. 252.60 crore as on 31.03.2008. The GrossNPAs as percentage to Gross Advances reduced from 11.00 per cent as on 31.03.2008 to 8.34per cent as on 31.03.2009. The net non-performing assets of the RRBs as on 31.03.2009stood at Rs.l 06.74 crore and in terms of percentage to net advances, it was 4.44. Out offive RRBs sponsored by the Bank, four RRBs have reported net profit during the year. Theremaining one namely, Kalinga Gramya Bank has reduced its loss as compared to last year.

14. Overseas Operations

During the FY'08-09, the financial and economic crisis, which had erupted globally, hadits impact on our operations, both in Singapore and Hong Kong. However, the Bank has shownresilience in improving its business growth at its overseas centres. The overseas businessgrowth of the Bank stood at 23.88 per cent, with deposit growth at 22.55 per cent andadvances growth of 25.58 per cent.

The overseas centres continued to contribute to the total profit of the Bank. The netprofit of the overseas centres of the Bank stood at Rs. 92.38 crore for the FY'08-09,which was 60.86 per cent higher compared to last year.

15. Export Credit

The export credit of the Bank as on 31.03.2009 stood at Rs. 1735.49 crore whichconstituted 2.78 per cent of Net Bank Credit. Various steps were initiated during the yearto increase the export credit. However, the global and economic meltdown impacted theBank's growth in this area.

16. Forex Business

During the FY'08-09, the Bank increased its merchant turnover by 45.88 per cent overthe previous year. The export turnover and import turn-over as on 31.03.2009 stood at Rs.6690.33 crore and Rs. 1 1,702.15 crore respectively. The exchange profit of the Bank as on31.03.2009 stood at Rs. 69.88 crore as against Rs. 47.24 crore as of 31.03.2008.

17. Treasury & Investment Management:

During the FY'08-09, the total gross domestic Investments of the Bank increased by22.06 per cent and stood at Rs. 28237.71 crore as at the end of 31.03.2009.

During the same period, the profit on sale of domestic investment touched a recordfigure of Rs. 306.95 crore vis-avis Rs. 210.34 crore during the previous year 2007-08.

18. Technology Initiatives

The Bank reached a new milestone by migrating 1000 branches to Core Banking Solution(CBS) platform by October, 2008, well before the target date of December 2008. The pace ofroll out is one of the fastest in the Banking industry. 4402 end users of CBS were giventraining during the year. The Bank is in the process of bringing the remaining branchesunder CBS fold during the current financial year.

Using Alternate Delivery Channels offered by the Bank, any customer can avail variousservices like withdrawing cash through ATM, viewing position of his accounts,transfer of funds from one account to his other account or third party account, UtilityBill Payment etc. through Internet Banking. They can also send request for variousservices like issuance of Cheque Book and Demand Draft. These services are available 24x7and 365 days of the year. The Bank is having facility for payment of Central Excise andService Tax (EASIER) and payment of Direct Taxes through Internet Banking apart fromcollection of physical challans (EASIEST) for indirect taxes in 82 branches and directtaxes Online Tax Collection System (OLTAS) through 304 designated branches. The customerscan also avail personalized Multicity Cheque facility.

The Bank has also expanded its ATM network by 109, and presently it has installed 414ATMs across the country and it has plan to expand it further. The Bank has joined NationalFinancial Switch (NFS) during the year. The Bank's ATM card can now be used at more than33000 ATMs of these banks under the said arrangement.

Using Bank's VISA International Debit Card, a customer can access around 33000 VISAenabled ATMs of various banks in India and 14 lacs ATMs across the Globe. This card canalso be used at 3.50 lac POS (Point of Sale) Terminals in the country and 30 million POSglobally. The Bank has achieved a card base of 5.32 lacs within a short span of time.

The Bank introduced UCO Mobile banking during the FY'08-09. The customers can now availthe facilities of push and pull service requests viz. account getting debited/credited,cheque bounce, balance enquiry, view last three transactions etc. through mobile banking.

As on 31.03.2009, all 2069 branches of the Bank are computerized. About 87% of thebusiness of the Bank in the country is being conducted through Core banking Solution (CBS)and Fully computerized branches.

To facilitate quick and efficient communication, e-mail facility has been provided to 1798 locations of the Bank covering inter-alia, 1551 branches as well as AdministrativeOffices and Departments.

SWIFT Connectivity has been provided to 37 B-category FOREX branches. All B-Categorybranches (64) have been brought under CBS which would enable them to handle forextransactions through the system without manual intervention. This would enable the Bank tocomply statutory requirement of submission of bank wide R-return at a single point fromTreasury branch, Mumbai from 1st April, 2009.

During the year, the RTGS implementation in the Bank for customer and inter Banktransactions progressed satisfactorily and 287 more RTGS enabled branches were addedacross the country. As of 31st March 2009, the Bank has 663 RTGS live branches.National Electronic Fund Transfer (NEFT) has been introduced in all the RTGS enabledbranches. The Bank is in the process of implementing Straight Through Processing (STP) forRTGS in all CBS branches and through internet Banking.

The Bank has computerized Government Pension Payment System in 1400 branches handlingthe pension payment. The Bank has set up Centralised Pension Payment Cell at Nagpur tocater to centralized pension payment for pensioners.

Multi Video Conferencing System has been implemented in the Bank connecting Head Officedepartments and Zonal Offices. The total number of such multi-video conferences heldduring the period was 63. UCO Online intranet has been introduced to have workforce of thebank regularly updated with instructions/circulars/manuals. A Virtual Classroom anddiscussion forum has been developed and hosted on UCO Online for interaction of Faculty ofStaff Colleges and staff members.

A Toll free number of Helpdesk has been operationalised for customers to cater to CBSqueries like balance enquiry of accounts, Bank's various products and ATM related queries.

The Bank is participating in Pilot Project for Cheque Truncation Solution in theNational Capital Region of Delhi.

19. Inspection and Internal Audit

In the financial FY'08-09, the Bank has taken major steps to bring in qualitativeimprovement in the functioning of the internal audit and inspection functions. In a majorrestructuring exercise, 9 Field Inspectorates have been created which are to be headed byDy. General Manager or at least by Asst. General Manager. Responsibilities have been givento each Field Inspectorate for carrying out inspection of branches under theirjurisdiction, follow-up for closure of the report and to close the reports after ensuringthat the necessary requirements for closing the reports have been made by respectivebranches with due certification from the controlling office of the branches i.e.respective Zonal Office. Frequency of inspection of branches is rating based i.e.,branches with lower rating are inspected more frequently than those with better ratings.

In order to keep a control over the quality of inspection carried out by theinspectors, the Bank has introduced Test Audit to assess the effectiveness of inspectionof branches carried out by inspectors. For this purpose a special cell has been created atHead Office, Inspection Department with senior level personnel. They are also responsibleto carry out special investigation as and when required/ desired.

The Bank has also developed a policy on Special Reports which governs the raising ofspecial reports and their disposals. The special reports and their modifications have beendesigned to cover areas where specific and focused steps are required to control thefunctioning in a branch.

Special steps have been prescribed for branches which have been identified asunsatisfactory. The Bank has been taking immediate steps for rectification and to havethem upgraded. In the financial year, 85 per cent of such branches have since beenupgraded.

The Bank has revamped its Concurrent Audit System thoroughly. Number of branches underconcurrent audit has been increased to 579 from 310 branches in the last financial year.The concurrent audit covers 86 per cent of domestic advances and 71 per cent of domesticdeposits. A system for appointment of Concurrent Auditor for the branch audit has been putin place and for this purpose, Bank encouraged Concurrent Auditors all overIndia to apply for such assignment through necessary advertisement in newspapers andthrough its web site, in appointing Concurrent Auditors. Bank has ensured that they haverequisite qualifications in working with information systems which is in line withcomputerization of Bank's branches.

The Bank would progressively adopt Risk Based Internal Audit (RBIA) System inconformity with the Regulatory directives. The objective is to analyse the situations atthe work centres, as brought out through RBIA, and effectively meet the business risk,control risk and operational risks thus faced. With this end in view, the format for RBIAis being suitably modified/ revised. It is contemplated that RBIA would progressivelyreplace regular inspection of branches.

At present, information System audit is a part of Regular inspection and is based ontransaction checking. It is proposed to revise the format for regular inspection, to makethem more objective and in tune with the changing banking scenario, particularly to meetthe operational risk.

In the financial FY'08-09, 1697 branches in India were subjected to regular internalinspection and RBIA was taken up at 954 branches. Revenue audit was conducted for all thedomestic branches which are not covered under concurrent audit. In addition, all the ZonalOffices are subjected to Management Audit. Regular Inspection of branches of overseascentres is conducted once in 18 months. These overseas centres are also subjected toannual audit by external statutory auditors as well as concurrent audit conducted byexternal auditors.

20. Vigilance

Regular inputs are imparted to officials/employees about Preventive Vigilance measuresduring training programmes at all Training Centres. Quick and deterrent actions are takenagainst staff involved in financial irregularities/frauds. One of the objectives of thepunitive process through Vigilance Administration is also to reform the erring officials.An incentive scheme has been introduced to reward 'whistle blowers' who give specific andtimely information regarding fraudulent attempts/activities.

21. Corporate Communications

The erstwhile Publicity & PR Cell of the Bank was re-christened as CorporateCommunications Department in line with the modern day thinking and scope of work of thedepartment.

The Bank follows a well-thought out media plan to derive maximum mileage and publicityfor the bank, its products and services. During the FY'08-09, the Bank used differentmedia vehicles for publicity viz., outdoor, print media & audio-visual media etc. toensure effective and timely dissemination of information about the Bank, build andmaintain a positive corporate image, carry out focussed publicity campaigns about ourproducts and services aimed at different population categories ( Metropolitan, Urban,Semi-urban and Rural).

A sponsored programme featuring exclusive interview of the Chairman & ManagingDirector of the Bank was telecast on prime-time by one of the leading TV Houses in thecountry on both its News and Business channels in Jan'09. Besides, details of rate cuts byUCO Bank was also displayed as scrollers on TV Channels at different times.

In the week leading to the 66th Foundation day on 06.01.09, Bank'sadvertisements were carried on a popular Radio FM channel throughout the country in theform of radio jingles.

However, bulk of Bank's publicity campaigns were carried out through the print andoutdoor media. Advertisements were carried out both in English and vernacular languageNewspapers round the year for Brand Building & Promotion, publicising differentschemes / products, launching new products, highlighting important events for the Bank,extending seasonal / festival greetings etc.

Some of the Bank's important campaigns worth mentioning were on the occasions of (a)the Chairman & Managing Director's receiving National Award for MSE Lending from theHon'ble Prime Minister on 30.08.08, (b) launching of UCO Magic Cheque, (c) opening of 2000thbranch which was also the 1000th CBS-enabled branch for the Bank,(d) Sponsoringof Sharad Shrestha 2008(Best Durga Puja Celebration 2008 in Kolkata) competition of TimesGroup of Publications, (e) Bank's Foundation Day, (f) Republic Day etc. Besides, productadvertisements and corporate image building campaigns were done regularly on myriadpublications/ magazines/ journals brought out from all parts of the country in differentlanguages.

For outdoor advertising the Bank made use of Hoardings, Glowsigns, Kiosks, Gantries,Traffic Consoles etc. at strategic locations in different Metros & towns. The Bank'sglowsign advertisements in Kolkata & Chennai airports got wide publicity and mileagefor the Bank. The Bank has also advertised within Railway stations, cricket stadiums(during important matches) where foot-falls are very high. The Bank has participated inTrade, Agricultural & Book Fairs in different parts of the country for visibility andbusiness promotions.

Internal communications formed an integral part of Bank's Corporate policy. They arecarried out through letters from Chairman & Managing Director/ Executive Director tothe employees from time to time, Bank's Website and House journal.

22. Functioning of Compliance Department

After formation of Compliance Department at Head Office in June, 2007, the compliancenetwork has been gradually widened to Corporate Departments/Zonal Offices/TreasuryBranch/ELBs/VLBs/B-Category Forex Branches and Coordinating Officers forCompliance/Compliance Officers nominated in above Offices/Branches have startedfunctioning.

The directions/guidelines issued by the Regulatory Authorities including the ReserveBank of India (RBI), Banking Codes and Standards Board of India (BCSBI), GovernmentalAuthorities as also by the quasi-Regulatory Authorities like Indian Banks' Association(IBA) are closely followed up with the concerned departments of Head Office for timelyimplementation. With the regular follow-up and monitoring process undertaken by theCompliance Department, the percentage of compliance of directions of RegulatoryAuthorities and closure of the concerned matters have considerably improved from 63 percent to 96 per cent at present.

The Compliance Department is also monitoring submission of all statutory and regulatoryreturns to the external authorities and taking steps for ensuring timely submission of thesame. As a result of regular follow-up and monitoring by the Compliance Department, thepercentage of submission has improved from 81 per cent earlier to 92 per cent at present.

The functions of the Compliance Department are gradually being extended to cover otherareas in the light of Compliance Policy. Compliance functions have been further extendedby -

i) Introducing Monthly Diary System for monitoring compliance of returns to besubmitted to Regulatory/ Statutory bodies as well as Important Control Returns (ICR) andImportant Monitoring Returns (IMR) and other control & Monitoring Returns (OCMR) byZones/Branches including overseas centres.

ii) Monitoring Know Your Customer/Anti Money Laundering implementation includinginvolvement in the process of selection of AML software.

iii) Vetting of new products/processes as and when introduced

iv) Special Monitoring of Annual Financial Inspection, Quarterly Discussions with RBIand others as required by the Regulator

v) Introduction of monitoring system for adherence to prudential norms regardinginter-bank exposure as per Risk Management Policy of the Bank and maintenance of variousprudential norms by the treasury.

vi) Compliance functions will be further strengthened gradually in the areas of -

(a) Compliance of external and internal prudential norms and adherence to systems andprocedures.

(b) Development of Compliance testing mechanism and putting in place a complianceculture in the organization through training and workshop.

A Full day Workshop on Compliance Functions, conceptualized and specially designed bythe Bank and Reserve Bank of India, Kolkata was held at our Central Staff College, Kolkatawith the faculty support of RBI and participation by Officers and Executives of AllahabadBank, United Bank of India and UCO Bank. The Workshop was inaugurated by the RegionalDirector, Reserve Bank of India, Kolkata.

23. Implementation of Know Your Customer (KYC)/ Anti-Money Laundering (AML) Policies

The Bank has taken necessary steps in effecting implementation of guidelines of KnowYour Customer (KYC) and Anti-Money Laundering (AML) policies of Reserve Bank of Indiaduring the FY'08-09. The Bank has made efforts to strengthen the implementation ofpolicies of KYC and AML procedures, more particularly in identification of SuspiciousTransactions and Cash Transactions. The Bank has also initiated the process fordevelopment of software for identifying the suspicious transactions. Special care has beentaken that the policies of KYC and AML are not diluted and regular training programmes arebeing conducted to create awareness among the staff emphasizing the need for compliance ofKYC and AML guidelines.

24. Implementation of Right to Information (RTI) Act

The Bank has taken necessary steps to strengthen the system for providing informationunder Right to Information(RTI) Act through its various Zonal Offices at Nodal points. Thesystem will be further fine-tuned to the satisfaction of different clientele for providingnecessary information, as and when sought. The Bank has successfully conducted anawareness programme on RTI Act for all its Public Information Officers at Zonal Offices.

25. Corporate Governance

As a part of its business strategy the Bank believes in adopting the 'best practices'in the area of Corporate Governance that are followed across the industry. Towards thisend the Bank has put in place the Corporate Governance policy approved by the Board ofDirectors. The Bank strongly believes in good governance, as set out in its policy, andemphasizes the need for full transparency and accountability in all its dealings. TheBoard acts as a Trustee of its shareowners and is fully committed to creating values forthem.

During FY 08-09, the Bank has come out with its new Vision Statement which is:

"To emerge as the most trusted, admired and sought-after world class financialinstitution and to be the most preferred destination for every customer and investor and aplace of pride for its employees."

The Vision Statement envisages that the Bank prepare itself for transformation into aworld class financial institution catering to all financial needs of the customer underone roof. The Bank is taking all necessary steps to realize this vision within areasonable time.

26. Manpower

The total staff strength of the Bank at the end of March, 2009 stood at 23736 including129 employees serving overseas and 21 of whom are expatriate officers. The total domesticstaff strength of 23607 comprises of 8870 Officers, 10334 Clerks and 4403 SubordinateStaff, as compared to 23828 at the end of March,2008 comprising 8489 Officers, 10637Clerks and 4702 Subordinate Staff. Women employees numbered 2792 constituting 11.82percent of total domestic staff strength.

There were 5696 employees belonging to Scheduled Castes (SC) and Scheduled Tribes (ST)(SC- 4431 and ST-1265) which works out to 24.12 per cent of total domestic Staff Strengthof the Bank. Besides, 482 Other Backward Classes (OBC) Employees were in service at theend of the year.

There were 355 physically handicapped persons on the Bank's rolls. 1091 employeesbelonged to Minority Communities. The number of Ex-Serviceman employees stood at 468.

The Global Manpower Productivity of the Bank registered an increase of 26.21 per cent,reaching a level of Rs. 732 lac per employee on 31.03.2009 up from Rs.580 lac per employeeas on 31.03.2008.

Promotions & Recruitments

The process of promotion, covering all inter-scale promotions, in the Bank for thefinancial FY'08-09 was completed in time. The promotion process also involved promotionsfrom clerical cadre to officers' cadre and also from sub-ordinate cadre to clerical cadre.The process of direct recruitment of clerical staff was completed during the year.

During the year, the Bank decided to recruit 543 Probationary Officers in JMGS 1 ingeneralist cadre and completed the process of written examination for the same. The Bankalso decided to recruit 261 Specialist Officers in various scales/ grades in thespecialist category of Security Officers, MBAs, Law Officers, IT Officers, OfficialLanguage Officers, Chartered Accountants and Economists and placed suitable advertisementin the newspaper/website.

The Board of Directors have approved appointment of Company Secretary in the Bank forone year on contractual basis. The Board also has approved regularization of casualsweepers as consolidated wage sweepers who have been working in different branches/officeson daily basis.

Staff Welfare Measures

During the FY'08-09, the Bank has introduced Group Mediclaim Insurance for all membersof staff (officers and award staff) and their dependent family members with a coverage ofRs. 1.50 lakh for hospitalization and upto Rs.3.00 lakh for death/permanent disablement byaccident. The Bank already had 9 (nine) staff welfare schemes in existence.

During the FY'08-09, the Bank has also approved extension of benefit and enhancement oflimit in the following three existing Staff Welfare Schemes :

i) Health Check-up Scheme for employees has been extended to cover employees in agegroup of 40 years and above (earlier it was for the employees in the age group of 45 years& above).

ii) The existing scheme for additional reimbursement against hospitalisation expenses,available to for self and spouse in case of few selected diseases, has been extended tocover major surgery arising out of any accidental injur/ also.

iii) The limit towards payment of Funeral expenses has been enhanced from Rs.5000/- toRs.20,000/- to meet funeral and other related expenditure of an employee who dies while inservice of the Bank.

Group Savings Link Insurance Scheme (GSLI) for Members of Staff

GSLI Scheme introduced by the Bank from April, 2004 is being continued having 18711optees out of which 12713 members of staff opted for additional spouse coverage. Duringthe FY'08-09, 41 "death claims" of employees and 7 claims pertaining to"spouse death" were settled under the Scheme.

27. Industrial Relations

During the period, the Industrial Relations climate in the Bank remained healthy andcordial with both the Management and the Unions/ Associations sharing co-operativeattitude, mutual respect and concern. Periodical Industrial Relations Meetings were heldwith unions/associations on various IR issues both at corporate and Zonal levels.

The Bank's Apex Level Performance Review Committee comprising the top management of theBank and representatives of Officers' associations and Workmen Unions have met at regularintervals to review the performance of the Bank and to lay down strategies for improvedperformance.

28. Human Resource Initiatives

The Bank has a separate Human Resource Deptt. (HRD) headed by General Manager, IT&HR to ensure that HR developments dovetail with technology initiatives.

Parallel with the implementation of Core Banking Solutions (in 1029 branches), trainingfor acquiring skills is provided through 10 channels located at Kolkata (2), Ahmedabad(2), Bhubaneswar (2), Chennai (1), Bhopal (1) and Chandigarh (2). The Ahmedabad andBhubaneswar channels have been added in the current year. Various programmes offered tostaff members relating to CBS have enabled them to give better customer service. 287 suchprogrammes were conducted during the year, covering 5901 staff members.

Other than technology training channels, Bank has 6 other training channels located atBhopal (1), Chennai (1), Bhubaneswar (1) Ahmedabad (1) and Central Staff Colleges (2).During the year 408 Programmes were conducted by them covering 9908 staff members.

Special focus was given to impart HR skills to Branch Heads through specially deignedprogramme and 28 such programmes were conducted covering 608 Branch Heads in collaborationwith Indian Institute of Social Welfare and Business Management.

Thrust was also given to Credit Monitoring and Recovery related training and 72Programmes related to these aspects were conducted during the year covering 1940 Officers.

A number of programmes were conducted in the areas of Credit Appraisal, Credit RiskManagement, Project Finance, etc. Officers were also deputed to institutions of reputelike NIBM, CAB, IDRBT, FEDAI, IIBF for specialized programmes.

In house programmes were conducted for Executive Development in collaboration with MDI,Gurgaon. A special in house programme was conducted by IIM, Kolkata for selected Officers.

Six Senior Executives of the Bank were deputed for international programmes forproviding insight into global scenario & practices.

29. Customer Service

Redressal of public grievances was accorded a very high priority by the Bank andproviding quality customer service had always been one of the most important goals, whichis an inevitable business imperative in the present competitive banking scenario. The Bankhas always ensured that the redressal is just and fair and the grievances were redressedwell within the given time-frame as stipulated by the Bank. A structural roadmap has beenset up suggesting ways and means towards improving our standard of customer service whichautomatically resulted in reduction of number of customer complaints.

The complaints received during the FY'08-09 were disposed of mostly to the satisfactionof customers. The level of pendency of customer complaints has been brought downsubstantially. It is the endeavour of the Bank to redress all the complaints within theshortest possible time.

The year 2009 has been declared as 'Year of Customer'. During the FY'08-09, the Bankhas taken several steps to improve the quality of the customer service and has become moreresponsive to the customers. The Bank always took a keen interest in ensuring that nocustomer is deprived of his/ her rights. The guidelines of the Banking Codes &StandardBoard of India which reflects the duties of the Bank towards its customers have beenproperly displayed at all the branches. The same has also been put up on Bank's website.The Bank has also introduced "Toll Free Help Line/e-mail ID of the Call Centre"to enable the customers to have interaction with regard to our various products andservices.

Standing Committee on Customer Service of the Bank has been duly constituted andquarterly meetings were held regularly. Names and addresses of Customer GrievancesRedressal Officers at Bank's Zonal Offices as well as at Head Office level have beenprominently displayed at the Bank's branches.

30. Compliance of Official Language Policy

The Bank has taken proactive steps to implement the Official Language Policy of Govt,of India and comply with the provisions of Official Languages Act and the Rules madethere-under. The Bank has also taken appropriate follow-up action to implement thedirectives issued by Ministry of Home Affairs, Department of Official Language and alsothe instructions of Financial Services Department, Ministry of Finance and Reserve Bank ofIndia regarding the use of Hindi in official work.

In view of the directives of Govt, of India to promote 'UNICODE' application on all thecomputers, workshops for Official Language Officers and I.T. Officers of different zonesand Official Language Officers/Nodal Officers at H.O. were organised to acquaint them withits application and activation.

Sixty five Hindi Workshops, including workshop for Chief Officers/Senior Officers ofHead Office, were also organized by the Bank to motivate them to do their work in Hindi.626 Branches were inspected by respective Zonal Offices during the period under review toevaluate the performance in the area of implementation of Official Language Policy ofGovernment of India and necessary follow up action has also been initiated to remove thedeficiencies.

All India UCO Bank Official Language Officers Conference was successfully held atCentral Staff College, Kolkata on 30th -31st May, 2008.

Articles on "Customer Service" & "Effective Water Management"written in Hindi by officers of our Bank were selected for deliberations in the NationalLevel Seminar in Hindi on the subject organized under the aegis of College of AgriculturalBanking, RBI.

Various forms/publicity materials/procedural booklets and report of Annual GeneralMeeting of Shareholders, Manual of Instructions, Minutes of various Board Committees wereprepared in bilingual form. Hindi text of the materials for our Bank's Website was alsoprepared, and in ATM Screen of the Bank information/guidelines were made available intrilingual form i.e., Regional Language, Hindi and English. Sufficient amount wasallocated by the Bank for the purchase of classic literary Hindi books, dictionaries,technical glossaries, Hindi books on computer/banking etc., and famous literary books inregional languages written by renowned litterateurs.

With a view to effectively monitor the work with regard to the use of Hindi in officialwork, the position of our Bank was thoroughly reviewed in the meeting of the Apex OfficialLanguage Implementation Committee of the Bank.

"Hindi Month", "Hindi Week" were celebrated enthusiastically atHead Office as well as at Zonal Offices, Central Staff College and Regional TrainingCentres. During "Hindi Month" at Head Office, Hindi Competitions for theExecutives/Officers and Clerks were also organised.

Under the auspices of Town Official Language Implementation Committee (Banks), Kolkataour Bank also organised "Inter-Bank Hindi Essay Writing Competition" for theExecutives and Officers of different Banks posted at Kolkata.

Dr. Shakeel Ahmad, Union Minister of State for Home Affairs held discussion with theHeads of offices of the Govt, of India, Govt, of India Undertakings, Banks and FinancialInstitutions etc. at Kolkata regarding the implementation of Official Language Policy inCentral Govt. Offices. Our Bank's progress in this regard was projected through PowerPoint Presentation which was highly appreciated by the Hon'ble Minister of State for HomeAffairs.

The Committee of Parliament on Official Language has applauded the Bank's commitmenttowards the successful implementation of Official Language Policy. Officials of FinancialServices Dept., Ministry of Finance, Dept. of Official Language, Ministry of Home Affairshave also praised the Bank for the steps which have been taken to augment the use ofOfficial Language in Official work.

31. Corporate Social Responsibilty

As a responsible corporate citizen, the Bank performs corporate social responsibilitywith utmost sincerity. A few of the initiatives undertaken by the Bank during the FY'08-09include organising blood donation camps and free medical camps, distribution of foods tothe flood victims, employees' voluntary contribution of part of their pay for humanitariancauses, distribution of blankets to sick and poor at various centres and giving away ofumbrellas to small street hawkers in various cities.

32. Future Plans

During FY'08-09 the Bank has made a net profit of Rs. 557.72 crore, the highest in thehistory of UCO Bank. However, the Bank considers that in order to become a Top Class Bank,it should strengthen and consolidate its operations in the years to come to make the netprofit earning commensurate with the business volume.

No doubt, the year 2009-10 will be a challenging year for the Bank because of adverseconditions prevailing globally. However, the Bank will remain firm in its commitment totouch Rs. 200,000 crore of business by March, 2010.

Keeping in mind, the year 2009 is the 'Year of Customer', the Bank would like to seethe customer satisfaction level achieving its highest peak and sharp increase in itscustomer base.

In the year 2009-10 the bank will aim at uniform segmented business growth, reductionin fresh generation of NPAs, steady round the year increase in low cost deposits,technology initiatives to cover all branches, building quality assets and finally,improved profitability.

33. Statement of Directors' Responsibilities

The Directors confirm that in the preparation of the annual accounts for the year endedMarch 31, 2009:

The applicable accounting standards have been followed along with proper explanationrelating to material departures, if any. The accounting policies framed in accordance withthe guidelines of Reserve Bank of India, were consistently applied.

Reasonable and prudent judgements and estimates were made so as to give a true and fairview of the state of affairs of the Bank at the end of the financial year and of theprofit of the Bank for the year ended March 31, 2009.

Proper and sufficient care was taken for the maintenance of adequate accounting recordsin accordance with the provisions of applicable laws governing banks in India; and theaccounts have been prepared on an on-going concern basis.

34. Board of Directors

During the FY'08-09, the Bank had 13 meetings of the Board of Directors, 19 meetings ofthe Management Committee and 9 meetings of the Audit Committee of the Board. The number ofmeetings held by various Committees of the Board are as under :

SI. No. Name of the Committee No. of Meetings held
i Risk Management Committee 4
2 Shareholders' Grievance Redressal Committee 2
3 Share Transfer Committee 14
4 Remuneration Committee 1
5 Sub-Committee for Monitoring of Large-value Frauds 3
6 Customer Service Committee 2
7 Committee on HR-related issues of the Bank 3

During the FY'08-09, Shri S K Sinha, new Government nominee Director was inducted intothe Board of Directors on 10.06.2008 in place of Shri A Bhattacharya, Government nomineeDirector who relinquished office from the Board of Directors on 09.06.2008.

Dr. Nirmal Khatri was relieved from the Board of Directors on 15.09.2008 and wasre-inducted on 24.02.2009. Two more Directors namely, Shri J D Gupta and Shri Sanjeev Jainwere inducted into the Board of Directors on 04.07.2008 and 03.03.2009, respectively.

35. Acknowledgements

The Board of Directors places on record its deep appreciation for the services renderedby the outgoing Directors during their tenures as Directors of the Bank. The Boardexpresses its sincere gratitude to the Government of India, Reserve Bank of India andother regulatory authorities for their unstinted support and valuable guidance received bythe Bank all along. The Board also thanks the Financial Institutions and correspondentbanks for their sincere co-operation. The Board places on record its profound thanks forthe continuous support and patronage extended by its customers, Staff Unions/ Associationsand shareholders ; all of whom contributed to the growth and performance of the Bank. TheDirectors extend their sincere appreciation to the dedicated and committed team ofemployees for their contribution to the overall performance of the Bank.

For and on behalf of Board of Directors

Kolkata : ( S K Goel)
08.05.2009 Chairman & Managing Director

Peer Comparison

Company Market Cap
(Rs. in Cr.)
St Bk of India 150,642.89 13.51 1.38 14.51 15.4 0.0 0.00
Bank of Baroda 33,325.25 7.42 1.02 15.30 15.1 0.0 0.00
Punjab Natl.Bank 28,230.60 7.70 0.89 12.68 16.5 0.0 0.00
Bank of India 14,104.03 4.82 0.59 14.59 13.0 0.0 0.00
Canara Bank 12,696.18 4.97 0.54 11.92 13.2 0.0 0.00
IDBI Bank 10,626.10 9.18 0.50 12.70 10.2 0.0 0.00
Union Bank (I) 9,599.47 5.03 0.59 13.67 15.0 0.0 0.00
UCO Bank 7,584.96 5.95 0.81 13.54 9.1 0.0 0.00
Oriental Bank 6,853.07 6.03 0.56 12.44 11.5 0.0 0.00
Central Bank 6,772.46 0.00 0.50 13.46 8.3 0.0 0.00
I O B 6,423.81 16.35 0.46 13.27 4.9 0.0 0.00
Syndicate Bank 6,286.40 3.32 0.64 14.12 22.8 0.0 0.00
Indian Bank 6,101.16 5.17 0.56 12.64 15.7 0.0 0.00
Allahabad Bank 5,157.46 4.52 0.47 12.83 11.8 0.0 0.00
Corporation Bank 4,750.60 5.42 0.47 12.57 16.1 0.0 0.00

Futures & Options Quote

Expiry Date
75.10 2.00  (2.7%)
Instrument: FUTSTK
Expiry Date: 24 Apr 2014
Open Price: 73.20
Average Price: 74.28
No. of Contracts Traded: 9,636,000
Open Interest: 19,696,000
Underlying: UCOBANK
Market Lot: 4000
Previous Close: 75.10
Day’s High | Low: 75.30 | 72.95
Turnover (Cr.): 71.58
Open Int. Change: -2,280,000.00 ( [10.4]% )
View detailed F& O quotes >>

Key Information

Key Executives:

Arun Kaul , Chairman & Managing Director  

N Purna Chandra Rao , Company Secretary  

Manoj Kumar Gupta , Director(PartTime NonOfficial)  

S Chandrasekharan , Executive Director  

Company Head Office / Quarters:
10 B T M Sarani,
7th Floor,
West Bengal-700001
Phone : 91-33-22316860/58/22254120/22254129
Fax : 91-33-22485625
E-mail : hosgr.calcutta@ucobank.co.in
Web : http://www.ucobank.com
Karvy Computershare Pvt Ltd
Plot No 17-24
Vittal Rao Nagar


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