MANAGEMENT DISCUSSION AND ANALYSIS
1. Macroeconomic & Banking Scenario
1.1. Global Economy
1.1.1. The global economy witnessed gradual slowdown in the calendar year 2012 asannual growth in gross domestic product (GDP) slowed to 3.2 percent from 4.0 percent noteda year ago. Downside risks notwithstanding, the global growth recovery prospects are seenstrengthening in the year 2013. The International Monetary Fund (IMF), in its latestrelease of the World Economic Outlook (WEO), has projected mildly better global GDP growthof 3.3 percent in 2013 and 4.0 percent in 2014. While being upbeat about emerging marketand developing economies, the IMF warns of diverging growth dynamic in advanced economies.Growth in the US is expected at 1.9 percent in 2013 and 3.0 percent in 2014. In contrast,GDP in the euro area is expected to fall by 0.3 percent in 2013 and then recover by 1.1percent in 2014. The risks to outlook mainly relate to uncertainty about the fallout fromevents in Cyprus, politics in Italy as well as vulnerabilities in the periphery of theeuro area along with high fiscal deficit and debt in the United States as well as inJapan.
1.1.2. Sturdy actions by the european policymakers helped improve confidence andfinancial conditions. Although the U.S. policymakers avoided the fiscal cliff, they havefailed to find durable solutions to other short-term fiscal risks. Japan adopted moreexpansionary macroeconomic policies in response to a larger-than-expected slowdown. Policyeasing in key emerging market economies has supported internal demand. In the euro area,periphery sovereign spreads have dropped. Low U.S. dollar and euro interest rates haveprompted many companies to increase their issuance of foreign-currency-denominated debt.Low policy interest rates are the forecast for the major advanced economies. The centralbanks have held policy rates constant or cut them modestly in response to the 2012slowdown.
1.1.3. With its ever increasing integration with the global economy, through trade andfinance channels, India's growth prospects are no more insulated from adversities ofglobal output cycle.
1.2. Domestic Economy
1.2.1. The uncertain economic outlook in advanced economies and slowdown ofexternal demand coupled with volatility in the financial markets adversely affectedIndia's GDP growth rate in 2012-13. Persistently high levels of inflation beyond comfortzone of the Reserve Bank of India (RBI), high level of twin deficits (fiscal & currentaccount deficits) and slowdown in investment climate affected the growth prospects.
1.2.2. As per the advance estimates of the Central Statistics Office (CSO), India'sannual GDP growth is estimated at 5.0 percent during FY 2012-13 compared to 6.2 percent inthe previous year. The decline in the growth rate of output was primarily due toagriculture and services sectors, while industrial sector growth also remained sluggish.The slow growth in the agriculture sector was largely on account of the rainfalldeficiency while the slowdown in industry and services sectors was due to domestic policyuncertainties, lagged impact of earlier monetary tightening and weakening of externaldemand. The deterioration in the services sector was reflected under 'trade, hotels,transport and communication' and 'financing, insurance, real estate and businessservices'. Sector-specific problems, such as those in communications, aggravated theslowdown.
Chart-2: Sector wise contribution to GDP Growth Rate (%)
1.2.3. External Sector: External imbalances were in focus as the current accountdeficit (CAD) to GDP ratio reached a historic high of 6.7 percent in the third quarter of2012-13. However, CAD was adequately financed by capital inflows, without any reservedepletion. Non-oil non-gold imports decelerated and the sticky oil and gold importsresulted in the widening of trade deficit. Nevertheless, the overall balance of paymentswas marginally in surplus due to strong capital inflows, led by foreign institutionalinvestors (FII). India's exports decreased to US $ 301 billion in FY 2012-13, recordingannual de-growth of -1.8 percent. Imports increased to US $ 492 billion in FY 2012-13,recording subdued annual growth of 0.4 percent. Trade deficit widened further to US $ 191billion in FY 2012-13 compared to US $ 183 billion during the corresponding period of theprevious year.
1.2.4. Inflation: Domestic headline inflation moderated after remaining in therange of 7.5-8.1 percent during first half of the year 2012-13 to 6.0% percent(provisional) for the month of March 2013, much below the RBI's indicative projection of6.8 percent. The easing in headline inflation was particularly significant in the fourthquarter of FY 2012-13. While subdued pressures from global commodity prices and therange-bound exchange rate helped the course of downward movement in the inflationtrajectory, the decline in inflation also reflects the impact of growth moderation and theweak pricing power of firms as well as past monetary policy actions aimed at containinginflation.
1.2.5. RBI's Policy Stance: The contours of the policy stance of the RBI includedaddressing the accentuated risks to growth, guarding against the risks of inflationpressures re-emerging, remaining alert to the risks on account of the CAD and managingliquidity to ensure adequate credit flow to the productive sectors of the economy. In linewith the policy stance, RBI reduced the repo rate by a cumulative 100 basis points duringApril-March 2012-13 and the Cash Reserve Ratio (CRR) was slashed by a cumulative 75 bps.
1.2.6. Financial Markets
184.108.40.206. Liquidity Conditions: During the financial year 2012-13, liquidity wasgenerally in deficit mode on account of high govt. cash balances with the RBI and elevatedincremental credit to deposit ratio for most part of the year. The average net injectionunder liquidity adjustment facility (LAF) stood at Rs. 86,600 crore during FY 2012-13. Inorder to address liquidity tightness in the system, RBI reduced CRR and additionallyinjected liquidity through open market operations (OMOs) to the tune of Rs. 1,54,600 croreduring FY 2012-13.
220.127.116.11. Debt Market: The gross market borrowing of the central government throughdated securities during 2012-13 to the tune of Rs. 5,58,000 crore was successfullycompleted. Reflecting expectations of a reduction in policy rate, optimism aboutimprovement in the fiscal situation, reduction in the primary issuances, and expectationsof further measures from the government to rein-in the fiscal deficit, G-sec yields easedin the beginning of fourth quarter of 2012-13. The continuation of OMO purchase auctionsalso added to the positive sentiments. However, benchmark yield started hardening, firstin end-January after markets factored in limited space for monetary policy rate cuts andthen in March due to tighter liquidity and fears that political uncertainty at the centremay impact capital inflows. The 10-year benchmark yield hardened from 7.86 percent atend-February 2013 to 7.99 percent at end-March 2013.
18.104.22.168. Forex Market: Reform measures, postponement of General Anti AvoidanceRules (GAAR) by two years, partial deregulation of diesel prices, liberalized foreigndirect investment (FDI) limits for certain sectors, rise in FII limits in corporate debtand G-sec market and announcement of fiscal consolidation path, boosted the confidence ofglobal investors in the Indian economy. Reflecting these developments, the rupee showed amodest appreciation in January 2013 which, came under pressure due to dollar demand fromoil importing companies. As at end-March 2013, the rupee showed lower annual rate ofdepreciation compared to currencies of some other major emerging economies, such asBrazil, South Africa and Argentina.
22.214.171.124. Equity Market: Key stock market indicators show that price to earnings(PE) and price to book value (PB) ratios of India's benchmark indices declined in 2012-13in comparison with the preceding two years. However, end-March 2013 data indicate thatIndia is reasonably priced in terms of return on equity (ROE) and PB ratio compared tomost other emerging economies. Together with an increase in the turnover in the securitiesmarkets, there was also a decline in volatility of both Nifty and Sensex in 2012-2013. BSESensex rose by 7.8 percent as at end-March 2013 over the closing of previous financialyear.
1.2.7. Performance of the Banking Industry
126.96.36.199. Money Supply: Growth in money supply (M3) remained broadly on theindicative trajectory of RBI during FY 2012-13. The growth in money supply which was 13.2percent at the beginning of the financial year remained consistent during the course ofthe year and stood at 13.3 percent by end-March 2013. The stagnant growth in money supplywas on account of tightness in primary liquidity, lower credit demand during most part ofthe year, slackening pace of economic activity and deceleration in inflation.
188.8.131.52. Aggregate Deposits: Aggregate deposits of scheduled commercial banks(SCBs) recorded annual growth of 13.5 percent during FY 2012-13 compared to 13.4 percentduring the last financial year. The muted deposits growth was primarily on account ofdeceleration in time deposits growth.
184.108.40.206. Credit Growth: Consequent to deceleration in GDP growth, the demand forcredit was adversely affected. The deterioration in credit quality, on the other hand,impeded the supply of domestic credit. Notwithstanding the large injection of liquidity bythe Reserve Bank, adverse sentiments originating from global and domestic developmentsdampened credit expansion and the SCBs' nonfood credit growth remained below the Reserve
Bank's indicative trajectory. Despite low off-take, credit growth remained abovedeposit growth for most of 2012-13. Non-food bank credit growth to industry and servicessectors decelerated. The annual bank credit growth to industry at 15.7 percent in March2013 moderated considerably from 20.3 percent in March 2012. Deceleration in credit growthto industry was observed in all the major sub-sectors.
2. Customer Centricity Initiatives
2.1. Your Bank strictly adheres to the principles indicated by the Banking Codes andStandards Board of India (BCSBI) and strives to meet customer expectations, maintaintransparency in all its proceedings and build up a feasible customer redressal mechanism.Besides continuous efforts towards creating convenience to customers, your Bankstrengthened the following:
2.1.1. UnionXperience Branch: The Bank has adopted a new branch model under thebrand name, UnionXperience. These branches provide better ambience and model changes havebeen effected in the front office and back office. These branches provide automation likeself service passbook, cheque deposits machine, queue management system, phone bankingdirectly connected to call centre. This enables branch staff to deepen customer engagementresulting into better cross-sell and up-sell. As on 31st March 2013, 251branches of the Bank are modeled as UnionXperience branches.
2.1.2. Customer Care Unit: Your Bank's Customer Care Unit (CCU) was established asa part of its ongoing initiative on Customer Service Excellence. Through CCU, the Bank hascreated a centralized capability for handling all types of customer requirements, be itonline grievance redressal, reporting of service deficiency or specific service request.The Integrated Case Management Tool (ICMT) has been put in place to integrate complaintsacross channels. CCU also facilitates customer feedback on the level of satisfaction.
2.1.3. Multi Channel Experience - SampUrna ATM:
The customer service excellence project aims at providing uniform and superiorexperience to customers across channels. Each channel on its own or in combination offersenhanced range of services. Apart from increasing the branch network, your Bank isenhancing ATM network at a faster pace. Today, branch-to-ATM ratio of the Bank is amongstthe best and a number of banking facilities are available through ATMs. The Bank haslaunched multiple facilities interfacing mobile banking and ATM like NEFT through ATM,IMPS through ATM, investments in mutual fund through ATM and e- Cash, a product thatfacilitates transfer of funds from ATM to Mobile.
2.1.4. Talking ATMs: During the last financial year, your Bank unveiled India'sfirst ever truly accessible Talking ATM in Vastrapur, Ahmedabad on 6th June2012 for the visually and physically challenged people. Your Bank has pioneered TalkingATMs in India. Union Bank's Talking ATM model and workflow has set a benchmark. The Bankhas also developed Talking ATM usage accessible manuals in DAISY and electronic brailleformats.
Overview of the Performance
3. Resources Management
3.1. Towards resource mobilization, your Bank's focus areas included improving currentaccount & saving account (CASA) deposits and retail term deposits during FY 2012-13.Special CASA campaigns were also launched for mobilizing low cost deposits. The high costdeposits declined, both in quantum as well as percent to total deposits.
3.2. Total deposit stood at Rs. 2,63,762 crore as of 31st March 2013,recording annual growth of 18.35 percent during FY 2013. CASA deposits increased to Rs.81,635 crore as of 31st March 2013, recording annual growth of 17.11 percentduring FY 2013. The share of CASA deposits to total deposits stood at 30.95 percent as of31st March 2013.
Table - 7: Resource Mobilization
|Parameter ||FY 2012 ||FY 2013 || |
| || || ||Absolute ||% |
|Total Deposit ||222869 ||263762 ||40893 ||18.35 |
|CASA Deposit ||69705 ||81635 ||11930 ||17.11 |
|Term Deposit ||153164 ||182127 ||28963 ||18.91 |
4. Credit Management
4.1. Your Bank's focus areas included lending to the productive sectors of the economy.Thrust was also given on sustainable growth of advances. During the year, the Bank passedon the benefit of lower policy rates to various segment of borrowers. Processing chargesfor home and car loan borrowers were also waived off from 15th August 2012 to31st March 2013.
4.2. Gross advances of the Bank increased to Rs. 2,11,911 crore as of 31stMarch 2013, recording annual growth of 17.06 percent during the last financial year2012-13.
Table - 8: Advances portfolio
|Parameter ||FY ||FY || |
| ||2012 ||2013 ||Absolute ||% |
|Gross Advances ||181031 ||211911 ||30880 ||17.06 |
|Agriculture Advances ||15397 ||20224 ||4827 ||31.35 |
|MSME Advances ||23805 ||34699 ||10894 ||45.76 |
|Retail Advances ||16048 ||19560 ||3512 ||21.88 |
5. Micro, Small & Medium Enterprises (MSME)
5.1. Bank's micro, small & medium enterprises (MSMEs) portfolio increased to Rs.34,699 crore as of 31st March 2013, recording annual growth of 45.76 percentduring FY 2013. The share of the MSME lending in domestic advances increased from 13.85percent as of 31st March 2012 to 17.45 percent as of 31st March2013. MSME advances was one of the focus areas of the Bank by assuring quick turn aroundtime (TAT), credit delivery at affordable prices & making available customizedproducts and providing hassle free flow of credit to the sector.
5.2. Advances to micro & small enterprises (MSEs) increased from Rs. 16,801 croreas of 31st March 2012 to Rs. 24,500 crore as of 31st March 2013,recording annual growth of 45.82 percent during the year. Share of MSE in total MSMEadvances increased to 70.61 percent as of 31st March 2013.
5.3. To enhance the share of MSME advances, your Bank reduced interest rates for MSMEborrowers, conducted special campaigns under advances to micro enterprises across all thebranches, launched 19 cluster specific schemes at 30 locations across the country.
6. Priority Sectors
6.1. Priority Sector: Priority sector advances (PSA) increased from Rs. 41,889crore as of 31st March 2012 to Rs. 56,809 crore as on 31st March2013, registering annual growth of 35.62 percent during FY 2012-13. Priority sectoradvances constituted 34.72 percent of the adjusted net bank credit (ANBC) as of 31stMarch 2013, higher than 29.55 percent as on 31st March 2012.
Table-9: Priority Sector Lending
|Parameters ||FY 2012 ||FY 2013 || |
| || || ||Absolute ||% |
|Total Priority Sector Credit ||41889 ||56809 ||14920 ||35.62 |
6.2. Agriculture: The agricultural advances increased from Rs. 15,397 crore as of31st March 2012 to Rs. 20,224 crore as on 31st March 2013,registering annual growth of 31.35 percent during FY 2013. The agricultural advances aspercent to ANBC stood at 12.36 percent as of 31st March 2013 as compared to10.86 percent during the previous year. Total disbursements of Rs. 14,773 crore were madeunder Special Agriculture Credit Plan (SACP) against the target of Rs. 13,675 crore.During FY 2013, additional 152220 Kisan credit cards were issued with credit facility ofover Rs. 2,219 crore.
6.3. Specific Lending for Social Upliftment: With a view to encourageentrepreneurship among the women and to make them self-sufficient, your Bank promotescredit to women entrepreneurs. As of 31st March 2013, number of womenbeneficiaries are 6.13 lakh and outstanding loans to women beneficiaries have improved by32.10 percent to Rs. 9,053 crore i.e., 5.53 percent of ANBC as on 31st March2013. The achievement level is higher than 5 percent of ANBC mandated by the RBI. Theassistance to Weaker Section stood at Rs. 15,023 crore, i.e. 9.18 percent of ANBC as on 31stMarch 2013, higher than 6.26 percent of ANBC as on 31st March 2012. Advances toSC/ST covered 103747 beneficiaries, with outstanding loans of Rs. 2,617 crore as of March31, 2013.
6.4. Lending to Minority Communities: The assistance provided to minoritycommunities stood at Rs. 5,289 crore, covering 271182 beneficiaries as of 31stMarch 2013 with share of these advances to total priority sector advances at 9.31 percentin FY 2012-13 compared to 9.21 percent in the previous year.
7. Retail Lending
7.1. The retail advances of the Bank increased to Rs. 19,560 crore as of 31stMarch 2013, recording annual growth of 21.88 percent. The share of retail loans indomestic advances increased from 9.34 percent as of 31st March 2012 to 9.83percent as of 31st March 2013.
7.2. Home loan, car loan and mortgage loan saw an impressive growth during the lastfinancial year. The amount of new loans sanctioned in home loan, car loan and mortgageloan segments increased at an annual rate of 47 percent, 70 percent and 120 percentrespectively during FY 2013.
7.3. Continuing its effort to embrace technology for creating customer convenience,your Bank introduced online loan application facility for home loan, vehicle loan,education loan and loan against property. This facility is integrated with the Bank'sexisting loan processing system that ensures fast turn-around time. The Bank is alsoimplementing the centralized retail credit processing set-up at major metros and cities.
8. Corporate Credit
8.1. The Bank has nine dedicated industrial finance branches (IFB) to focus exclusivelyon large corporates. Industry desks have been set for specialized appraisal of specificindustries. Large Corporate advances of the Bank increased to Rs. 71,121 crore as of 31stMarch 2013, recording annual growth of 19.23 percent. This constituted 36 percent of totaladvances of the Bank.
Table - 10: Large Corporate Advances (IFBs)
| ||FY 2012 ||FY 2013 ||Annual Growth % |
|Total Advances ||59649 ||71121 ||19.23 |
9.1. The total investment portfolio of the Bank stood at Rs. 81,189 crore as of 31stMarch 2013 against Rs. 62,524 crore as of 31st March 2012, registering annualgrowth of 29.85 percent. The investments portfolio comprised of investments made ingovernment securities, state development loans and other approved securities formaintenance of Statutory Liquidity Ratio (SLR) and non-SLR investments like equity shares,corporate debentures, public sector undertaking bonds, commercial papers (CPs),certificates of deposit (CDs), security receipts, mutual funds, venture capital funds,subsidiaries & joint ventures.
9.2. The yield on investment portfolio was 7.38 percent for the year ended 31stMarch 2013 as against 6.96 percent for the year ended 31st March 2012. Furtheryield on interest bearing securities for the year ended 31st March 2013 was7.69 percent as against 7.40 percent for the last year. The treasury endeavours to manageliquidity and maximize return on funds through efficient allocation of resources. Besidescompliance with the statutory requirements, treasury takes proprietary positions ingovernment securities, equity shares, debentures and bonds and also deploys funds inforeign exchange markets.
9.3. The Bank extends hedging facilities to customers through derivative transactionsin addition to its proprietary trading in derivatives. The transactions are undertakenwithin the framework of the RBI guidelines. The Bank has actively traded in both interestrate and currency derivatives. Among the interest rate derivatives, Bank has traded inovernight indexed swaps and in currency futures and forward in the currency derivativessegment.
10. Domestic Foreign Business & International Banking
10.1. Your Bank has a 'Domestic Foreign Business & International BankingDepartment' which is responsible for faster disposal of credit proposals relating to tradefinance and expansion of Bank's overseas operations. Bank has 89 Authorized Dealers'Category-B branches. The Bank is having correspondent relationship with 326 leadinginternational banks at all major international centres. The Bank has rupee drawingarrangement (RDA) with 22 international banks and 22 exchange houses as on 31stMarch 2013. The online remittance product, Union Flash, currently offered through UAEExchange is a 24 X 7 online remittance solution for NRI in the Gulf region who can use theproduct for instant credit of funds to the resident Indians having account with UnionBank. Your Bank has entered into a tie up with Western Union Money Transfer (WUMT) forfaster delivery of cash remittances through the Bank's 165 branches in Uttar Pradesh,which will be extended to other branches across the country in a phased manner.
10.2. The export credit of your Bank increased to k 8,917 crore as of 31stMarch 2013 registering annual growth of 34.82 percent over k 6,614 crore as of 31stMarch 2012. Foreign exchange turnover increased to k 1,60,836 crore as of March 31, 2013.
10.3. The Bank raised USD 350 million in August 2012 under its medium term note (MTN)programme at a competitive price. This was the fourth tranche out of total MTN programmeof USD 2 billion. The proceeds of MTN are mainly used to meet the funding requirements ofthe Bank's foreign offices.
10.4. Overseas Operations: Your Bank has opened its second foreign branch at DubaiInternational Financial Centre (DIFC), Dubai, UAE on 9th March 2013 to carry out normalcommercial banking operations like acceptance of deposits, trade finance, externalcommercial borrowing (ECBs) and syndicated loans. Bank's other overseas branch is at HongKong, operational since May 2008. Your Bank is also in the process of opening branches atSydney (Australia) and Antwerp (Belgium) and a subsidiary at London (UK) during thefinancial year 2013-14. The Bank already has representative offices at Shanghai (China),Abu Dhabi (UAE), Beijing (China), Sydney (Australia) and London (UK).
10.5. The deposits of these two overseas branches increased to USD 509 million as of 31stMarch 2013, registering an annual growth of 114.77 percent. Advances increased to USD 2.40billion as of 31st March 2013 registering annual growth of 32.80 percent. Theoperating profit of these two overseas branches stood at USD 17 million for the year2012-13.
11. Financial Inclusion
11.1. As part of initiatives taken under 'Meaningful Financial Inclusion' and'Financial Inclusion Plan 2010-13', the Bank has extended its reach to 29497unbanked/under-banked villages by providing basic banking services through BusinessCorrespondent Model (BCM). 1.25 crore FI customers were acquired under BCM and wereprovided with bio-metric cards. The Bank is also extending micro-loans as emergencycredit, providing micro insurance at a nominal premium, thus promoting economic activitiesamong the rural/urban poor. During the financial year 2012-13, the Bank has disbursed k83.10 crore to 32451 women beneficiaries under micro-loan product, 'Pragati' for jointliability groups formed by women.
11.2. Micro remittance facility for migrants extended using bio-metric card technologyis also made available for inter-bank transactions using NEFT platform. During thefinancial year, Bank facilitated 24.58 lakh remittances amounting to about k 812 crore.
11.3. The Bank has a tie-up with Sri Kshetra Dharmasthala Rural Development Project(SKDRDP), a NGO for financing of Self Help Group (SHGs). Till date, 54878 groups have beenformed, of which 42062 SHGs are credit linked with outstanding of k 260.65 crore. Theproject has been implemented in Belgaum, Bangalore and Kozhikode.
11.4. Direct Benefit Transfer (DBT) Disbursement: DBT is
being implemented in 43 Pilot Districts (Phase I) w.e.f. 1st January 2013, and will berolled out in 78 districts w.e.f. 1st July, 2013 (Phase II). Out of 43districts, the Bank has branch network in 40 districts spread across 16 states. As of 31stMarch 2013, as a sponsor, your Bank has remitted k 67.31 lakh involving 19523 accounts andas a destination bank received k 176.89 lakh to the credit of 12902 beneficiary accountsmaintained at various branches.
11.5. Financial Literacy: In the process of putting various financialinclusion initiatives in mission mode, the Bank has opened 202 Village Knowledge Centers,14 Rural Self-employment & Training Centre and 16 Financial Literacy Centers locatedat various parts of the country. These centers provide the basic financial learning to theun-privileged customers so that they can make a more informed decision with respect toasset allocation and do not fall prey to unhealthy tactics of the local moneylenders.
11.6. Self Help Groups (SHGs): Micro-financing through SHG develops aninstitutional framework, improves access to credit for the poor and inculcates a cultureof thrift and disciplined loan repayment. As of 31st March 2013, 233680 groupshave been formed and 189548 groups have been credit linked with exposure of k 894 crore.To give impetus to SHG Bank linkage programme, your Bank is implementing a new scheme forintensifying development of Women Self Help Groups through NGOs/other supportorganizations in backward/Left Wing Extremism affected districts namely, Chandauli &Jaunpur in Uttar Pradesh and Rewa & Sidhi in Madhya Pradesh where Bank has lead bankresponsibility.
12. Lead Bank Scheme
12.1. Your Bank has the lead bank responsibility in 14 districts viz. Azamgarh,Jaunpur, Varanasi, Ghazipur, Maunath Bhanjan, Sant Ravidas Nagar (Bhadohi) and Chandauliin Uttar Pradesh; Rewa, Sidhi and Singrauli in Madhya Pradesh; Ernakulam and Idukki inKerala and Khagaria & Samastipur in Bihar. With 516 branches in these districts,Bank's deposits and advances in Lead Districts stood at k 25,181 crore and k 7,501 crorerespectively as of 31st March 2013 as against k 20,264 crore and k 6,339 crorerespectively in the previous year. Total Priority Sector advances and Agriculture advancesstood at k 4,716 crore & k 2,291 crore respectively as of 31st March 2013,which constitute 62.87 percent and 30.54 percent respectively of total advances in leaddistricts. Bank has one R-SETI in each lead district that provides training to youth inrural and semi-urban areas to take up self employment ventures.
13. Regional Rural Banks (RRBs)
13.1. The Bank had sponsored 2 RRBs, viz. Kashi Gomti Samyut Gramin Bank (KGSGB),Varanasi, in Uttar Pradesh and Rewa Sidhi Gramin Bank (RSGB), in Madhya Pradesh. TheGovernment of India vide notification dated 1st November 2012 announcedamalgamation of Rewa Sidhi Gramin Bank, Rewa and other 2 RRBs into a single RRB viz.,Madhaynchal Gramin Bank with Head office at Sagar under sponsorship of State Bank ofIndia. KGSGB, Varanasi has a network of 401 branches covering 8 districts of Eastern U.P.The business mix of the RRB is k 8,086 crore as on March 31, 2013. The priority sectoradvances stood at k 1,296 crore which constituted 71 percent of the advances portfolio.Your RRB was the first to achieve 100 percent implementation of the Core Banking Solution(CBS) and first to offer RTGS/NEFT facility to their customers. Kashi Gomti Samyut GraminBank, Varanasi has issued country's first RuPay ATM card to provide benefits oftechnology/alternate delivery channels to rural customers. To enable RRBs to play theirrole effectively, training is imparted to RRB staff at Sponsor Bank training centers aswell through external training establishments. Kashi Gomti Samyut Gramin Bank, Varanasihas also set up own training centre at Azamgarh, U.P.
14. Asset Quality Management
14.1. Gross Non-performing Assets (GNPA) as a ratio of gross advances came down to 2.98percent as of 31st March 2013 from 3.01 percent as of 31st March2012. Net NPA to net advances ratio also came down to 1.61 percent from 1.70 percentduring the comparable period. Provision coverage ratio has also improved by 3 percentagepoints to 65.21 percent as of 31st March 2013 from 62.22 percent as of 31stMarch 2012.
14.2. Banking sector witnessed deterioration in asset quality during 2012-13 due toslowdown in domestic economy and subdued external demand. Your Bank was, however, able toreduce Gross NPAs in absolute term as well as ratio to gross advances after it peaked at k6,541 crore in June 2012 from k 5,450 crore as of 31st March 2012. As of 31stMarch 2013, Gross NPAs stood at k 6,314 crore. Accretion to NPA is attributable tosectoral downturn in textiles, construction, iron & steel and chemicals & chemicalproducts etc.
Table - 11: Movement of NPA
|Particulars ||FY 2012 ||FY 2013 |
|Gross NPAs (Opening) ||3623 ||5450 |
|Additions ||3760 ||3975 |
|Less, reductions ||1933 ||3111 |
|(I) Upgradation ||255 ||733 |
|(II) Recoveries ||740 ||1250 |
|(III) Write-off ||938 ||1128 |
|Gross NPAs (Closing) ||5450 ||6314 |
|Net NPAs || || |
|- Opening ||1803 ||3025 |
|- Closing ||3025 ||3353 |
14.3. The cash recovery and up-gradation stood at k 1983 crore as of 31stMarch 2013 compared to k 995 crore in the previous year, showing an increase of 99percent. The percentage of recovery/up-gradation to opening NPA level stood at 36.39percent as of 31st March 2013 as compared to 27.46 percent in the last fiscal,showing improved recovery efforts. Bank has made recovery of k 486 crore in written offaccounts and unapplied interest as of 31st March 2013 compared to k 471 crorein the previous year.
14.4. The break-up of sectoral NPA is given as under:
Table - 12: Sectoral NPA as percent to sectoral advances
|Sectors ||FY 2012 ||FY 2013 |
|Agriculture & allied activities ||9.58 ||7.33 |
|Industry ||2.92 ||3.22 |
|Retail ||4.02 ||2.88 |
|Services ||3.52 ||1.80 |
14.5. Your Bank issued notices to 3635 defaulting borrowers involving dues of k 1,593crore during FY 2013 under the Securitization & Reconstruction of Financial Assets andEnforcement of Security Interest Act (SARFAESIA), 2002. One Time Settlement (OTS) wasapproved in 611 cases, resulting in a recovery of k 132 crore. Further, assets worth k 588crore were seized in 1082 cases and the Bank has recovered an amount of k 196 crore bysale of properties. Special OTS for NPAs with outstanding of less than k 10 lakh wasintroduced with effect from 1st October 2012. This resulted in recovery of k238 crore in over 46000 accounts.
14.6. Bank has 10 Asset Recovery Branches (ARBs) to have focused attention on highvalue NPAs. These ARBs could recover k 155 crore during FY 2013. Big borrowal accounts inNPA category are reviewed at regular intervals by Controlling Offices at different levels.NPA position of the Bank is also reviewed at quarterly intervals by the Board. Softcollection capability is being built not only to enhance recovery but also to containNPAs. With a view to maintain healthy asset quality and to control NPAs, the services ofCollection Contact Center were extended to both Bangalore as well as Chennai Zones duringthe year.
15. Restructured Accounts
15.1. Keeping in view the viability of units, restructuring is used as a tool to lend ahand of assistance to borrowers who are temporarily in distress because of circumstancesbeyond their control. The distress may be because of general downturn in the economy or ina particular sector. Amount outstanding under restructured advances as of 31stMarch 2013 was k 11,626 crore, which is 5.85 percent of the domestic advances of the Bank.NPA outstanding under restructured advances was k 1,820 crore as of 31st March2013 which is 10.72 percent of total restructured amount of k 16,965 crore.
16. Transaction Banking
16.1. Alternate Channels: The percentage of electronic transactions to totaltransactions increased from 54.75 percent as of 31st March 2012 to 60.02percent as of 31st March 2013. In line with the growth in electronictransactions, your Bank consistently achieved increase in income from alternate channels.
16.2. ATMs and Cards: Your Bank has 4603 ATMs across the country as of 31stMarch 2013 which is an increase of 802 ATMs over 31st March 2012. Total numberof cards issued crossed 10 million during FY 2013. Bank issued more than 2.4 million debitcards during FY 2013. Bank launched in June 2012 first of its kind Talking ATM forvisually and physically challenged people. Currently Bank is having more than 100 TalkingATMs at various locations across country. Bank introduced series of remittance productssuch as NEFT, IMPS, Union eCash on ATM during FY 2013.
16.3. Bank launched India's first RuPay prepaid card. This Aadhar based RuPay prepaidcard is capable of supporting biometric authentication by the Unique IdentificationAuthority of India (UIDAI) for transaction processing. Bank has introduced platinum creditcard to its existing VISA credit card variants and implemented loyalty program for debitand credit card holders. Customers can enjoy the privilege of earning reward points on alltransactions made through Bank's debit & credit cards at POS and e-Commerce outlets.
16.4. Bank also participated as an issuing bank in Punjab Government Foodgrain Supplypayment ecosystem developed on National Payment Corporation of India (NPCI) platform andissued RuPay based cards for collecting payments.
16.5. Internet and Mobile Banking: Your Bank has added new features on its electronicchannels like internet and mobile banking. Enhancing security of these electronic channelshas been the primary theme during the last year. Bank has been one of the first toimplement Mobile banking on USSD (Unstructured Supplementary Service Data) platform. IMPSservice that enables customers to make interbank fund transfers through mobile on realtime basis is now available on all three channels viz. ATM, Mobile banking and Internetbanking. During the last financial year, Bank has taken up cashless campus project inKendriya Vidyalaya Sanghatan, Pune. Bank has implemented payment gateway solutions oncollege/ university portals to collect fee payments.
16.6. Currency Chest: Your Bank has provided Note Sorting Machines to 487 brancheshaving average receipts of more than k 50 lakh. At present Bank has 64 Currency Chests andis in the process of opening a Currency Chest at Salem, Tamilnadu.
16.7. Cash Management Services (CMS): The CMS Division mobilized 180 new connectionsunder various CMS products and earned a total income of k 30.17 crore (non interest incomek 10.71 crore and interest income k 19.46 crore) for the Bank, putting a turnover of k50,074 crore during the financial year 2012-13. Bank has set up a payment hub exclusivelyto take care of payment services. Payment Hub is already carrying out bulk salary paymentof Kendriya Vidyalaya & Navodaya Vidyalaya, pan India. Bulk remittance by way ofonline transfer and RTGS/NEFT of certain Govt./Semi-Govt. and private organizations arebeing carried out by the payment hub on a regular basis. Web-CMS has been madeoperational. Clients are able to access CMS software to view their accounts andtransactions through Union Bank's web-site.
16.8. Merchant Banking: All branches of your Bank provide facility of ASBA (ApplicationSupported by Blocked Amount) enabled now. Bank has made available ASBA facility forapplying in Public Issues through Internet banking and also extended the facility ofregistration of applicant and their details. Bank obtained the permanent registration forMerchant Banker and Banker to issue activities and has turned active in handling ofpayment and collection assignments of corporate clients/PSUs.
17. Information Technology
17.1. The Bank has proactively adopted innovative technologies and processes to caterthe changing customer requirements and to ensure absolute customer satisfaction. A numberof initiatives in technology implementations were undertaken through CBS and othersupporting systems such as financial inclusion gateway, online application facility inlending automation solution (LAS), IMPS on alternate delivery channels, enterpriseapplication integration (EAI) middleware, business intelligence tools for managementreports and dashboards, document management system, unified communications, digital mediasignage and robust security and network applications.
17.2. Bank has implemented the payment systems introduced by RBI, Government of Indiaand other state governments on time and utilize the services efficiently to fulfill thedaily requirements of customers. These payment gateways include RTGS / NEFT / ECS / NECS /AEPS Payment Gateway, NPCI Payment Gateway, State Governments Payment Gateway for TaxCollections, Direct Taxes and Indirect Taxes (Excise & Service Taxes) payment gatewayintegration for online Tax Payments, Excise & Custom Duty payment integration etc.CPSMS Integration.
17.3. The major initiatives taken during the year are as under:
17.3.1. To meet the increasing transaction volumes, Bank has increased computingcapacity of CBS system.
17.3.2. Through middleware application, the Bank has integrated various applicationslike Foreign Inward Remittances, Treasury, HRM Solution, Swift, RTGS, NEFT, Online tradingapplication etc with CBS to facilitate seamless flow of transactions.
17.3.3. As a yet another initiative in Mobile banking, your Bank has enabled inter bankfund transfer on real time basis using account number and IFSC Code of the beneficiarybank. Now our Mobile Banking customers can send money from their mobile handset to anyother bank account instantly on 24 x 7 basis using beneficiary account number & IFSCcode.
17.3.4. In internet banking, Bank has introduced new features like IPv6 (InternetProtocol version 6), the latest revision of the Internet Protocol (IP) for Net-Banking andenhanced security implementation and enabling fund transfer through IMPS via internetbanking channel.
17.3.5. Payment Gateway integrations with several state governments and MCA (Ministryof Corporate Affairs) have been implemented for online collection of taxes.
17.3.6. Your Bank has successfully commissioned Financial Inclusion Gateway during thisyear. This system integrates Bank's Core Banking System (CBS) with Bank's variousFinancial
Inclusion vendors' system and Centralized Bio-Metric Authentication System forprocessing transaction initiated by Financial Inclusion customer at Hand Held Device/Micro ATM.
17.3.7. As part of Governmental initiatives in "Direct Benefits Transfer"(DBT), your Bank has taken active lead in seeding and linking of Aadhaar numbers with bankaccount numbers and enabled necessary features in Bank's CBS Application.
17.3.8. To achieve effective information security governance, your Bank is followingInformation Security Management System (ISO 27001). We have implemented ISO27001 for theDatacenter and DR site.
18. Risk Management
18.1. Your Bank has a proactive approach towards Risk Management. The Bank's riskphilosophy involves developing and maintaining a healthy portfolio within its riskappetite and regulatory framework. The Risk Management framework is specifically designedto identify key risk areas, measure, monitor and manage them efficiently in order todeliver enhanced shareholder value by achieving an appropriate tradeoff between risk andreturns. Bank constantly endeavors to ensure that business function partners with the RiskManagement function to derive value and the available capital is used most effectively.
18.2. The Risk Management architecture of the Bank comprises of an independent RiskManagement Organizational structure both at the Corporate and Field level, Risk ManagementPolicies, Risk Measurement Tools and Risk Monitoring and Management Systems. By postingRisk Management Officers at the field, Bank is a pioneer in inculcating a risk culturethroughout the organization. Risk profiling of the Bank for various risk areas and forregional offices is being done on a quarterly basis. Bank has a well defined risk appetitestatement and the independent risk function ensures that the Bank operates with its riskappetite framework.
18.3. The Board of Directors of the Bank are primarily responsible for laying down riskparameters and establishing an integrated risk management and control system. The Bank'sBoard approves Risk Management policies and also sets out limits taking into account therisk appetite of the Bank and the skills available for managing the risks. Board ofDirectors are supported by a Sub-Committee of the Board known as Supervisory Committee ofthe Board on Risk Management and Asset & Liability Management, which in turn issupported by the committees of executives headed by Chairman & Managing Director,namely Credit Risk Management Committee (CRMC), Asset Liability Committee (ALCO) andOperational Risk Management Committee (ORMC).
18.4. Credit Risk
18.4.1. The credit risk mechanism consists of policies and practices that includemechanisms for risk identification, risk measurement, risk grading/ aggregationtechniques, reporting and risk control/mitigation techniques, documentation, legal issuesand management of problem loans to protect asset quality and ensure orderly growth andtargeted risk adjusted return on assets.
18.4.2. The Credit Risk Management Policy along with Collateral Management Policyaddress the Credit Risk related to lending activities. Credit Approving Authority,Prudential Exposure Limits, Risk Rating System, Risk Based Pricing, Portfolio Managementare the various instruments for management of Credit Risk.
18.4.3. Your Bank has standardized and well-defined approval processes for allcredit proposals to minimize the credit risk associated with them. Bank adopts CommitteeApproach for credit sanctions and has Credit Approval Committees at various levels fromregional office onwards. Bank has also developed credit rating models for exposure above k2 lakh and scoring model for Retail lending schemes. The Bank has a system of portfoliorating for retail loans which are subjected to credit scoring and thus the entire creditportfolio of the Bank is subject to internal credit rating. Bank has credit ratingmigration and default probability data for more than 10 years. It continuously monitorsportfolio concentrations by borrower, groups, sectors, retail schemes, industry,geography, etc and constantly strives to improve credit quality and maintain a riskprofile that is diverse in terms of borrowers, products, industry types and geography.
18.5. Market Risk
18.5.1. Asset Liability Management Policy and Treasury Policy aid the management inmitigating the market risk in the banking and trading books. Overall responsibility ofmanaging the market risk lies with the Asset Liability Committee (ALCO). The Committeemeets regularly and decides on the size, mix, tenor, pricing and composition of variousassets and liabilities. It primarily carries out identification, measurement, monitoringand management of liquidity and interest rate risk. It uses tools such as ratio analysis,gap analysis, Structural liquidity, Dynamic Liquidity, Interest Rate Sensitivity etc.Value at Risk, Duration Gap Analysis etc for management of liquidity and interest raterisks. The fundamental focus is to add value both from the earnings perspective and fromthe economic value perspective. Bank has an independent mid-office positioned in Treasurywhich reports to risk management. It ensures compliance in terms of exposure analysis,limits fixed and calculation of risk sensitive parameters like Value at Risk, PVO1,Duration, Defeasance Period, etc.
18.6. Operational Risk
18.6.1. Comprehensive systems and procedures, internal control system and audit areused as primary means for managing Operational Risk. Bank has in place a Board approvedOperational Risk Management Policy based on Reserve Bank guidelines. All new productsintroduced by the Bank pass through a new product approval process to identify and addressoperational risk issues. Operational loss data has been captured for the last five andhalf years and mapped into eight business lines and seven loss events. Bank's income isalso mapped into eight business lines and Bank is in process to migrate to theStandardized Approach. It has also agreed to join external data pooling initiative of IBA.
18.6.2. As a good corporate governance measure, Bank has formulated a DisclosurePolicy to have greater transparency in its working. It has also developed a BusinessContinuity Plan (BCP) and implemented the same. The BCP provides a blueprint detailing awide range of responses under a disruptive environment to protect its staff, assets andinterest of the customers. BCP contains steps to be adhered to both at the preventive aswell as recovery phase when challenged with real life incidents.
18.7. Implementation of Basel-II
18.7.1. Bank has implemented the New Capital Adequacy Framework under Basel-II asper the timelines prescribed by the RBI. While the Bank has adopted Standardized Approachfor Credit Risk, Standardized Duration method for market risk and Basic Indicator approachfor Operational Risk, the initiatives so far undertaken are geared towards enabling theBank to comply with the standards set out for more advanced capital measurement approachesin the Basel-II accord. With regard to credit risk, Bank has already complied with therequirements for advanced approaches in the areas of a) Risk Policy making, b)implementation of credit risk strategies & necessary guidelines, c) Creditrating/scoring of loans, d) Portfolio management & reporting, e) Industry researches,f) Credit risk stress testing etc. The officials from credit risk management are membersin the loan sanctioning committees of the Bank at various levels to represent the riskconcerns. Bank has also moved over to a completely automated & networked environmentthrough its CBS and has enhanced its IT architecture and Management Information Systems.It has developed various training programs to upgrade the risk management skills of itsemployees. Bank has also assessed its preparedness for moving over to advanced approaches.
18.7.2. Bank has set up an Internal Rating Based (IRB) Module which enables twodimensional obligor and facility rating required for moving over to the advancedapproaches. The module has been implemented and all accounts are now rated only throughthe system. Bank has also set up a centralized rating pool with respect to corporateborrowers to improve the rating quality, create robust rating data and for betteradministration of rating models. In order to estimate credit risk components viz.probability of default (PD), loss given default (LGD), exposure at default (EAD) &maturity (M) Bank has already put in place necessary framework and is in the process ofcompiling the data.
18.7.3. In the area of Operational risk, Bank has started the process of putting inplace a Risk and Control Self-Assessment (RCSA) framework. Workshops were conducted andRisk and Controls were assessed in 30 products and processes. Bank plans to cover all themajor products and processes during the coming year. Groundwork for development of KeyRisk Indicators (KRI) is also on.
18.7.4. For enhancing manpower skills on risk management, Bank conducts in-housetraining programs and also nominates officials for attending training programs on riskmanagement in reputed external training institutes. Bank has an excellent training systemin place through which it attempts to develop the professional and managerial skills ofits employees. Bank has also recruited qualified professionals from reputed businessschools who would help in refining the risk management practices, measurement andmanagement tools.
18.7.5. Bank has also developed a framework for quantifying the Pillar-2 risks andhas put in place a comprehensive Internal Capital Adequacy Assessment Process (ICAAP)framework in line with RBI guidelines, which is being validated by external agencies
18.7.6. In order to shift the metrics of measurement from traditional volume basedmeasures to risk based measures, Bank has implemented a robust and scientific fundtransfer pricing system i.e. Matched Fund Transfer Pricing System. A ProfitabilityManagement Module has also been implemented which would assist the Bank in measuringprofitability under various dimensions. This would pave the way for moving over to RiskBased Performance Measurement and Risk Based Pricing.
18.7.7. Bank has also initiated steps to integrate the role of risk in planning andstrategy formulation and in measuring performance of different business units. The Bankstrives to provide maximum returns to its stakeholders while maintaining a solid capitalbase to support the risks associated with its diversified business. It has a comfortableTier 1 capital adequacy ratio in order to support the execution of its growth plans andbusiness strategies, while meeting the regulatory capital requirements at all times.
18.8. Strengthening the Resilience: Basel-III Initiatives
18.8.1. Basel-III guidelines which are a comprehensive set of reforms to strengthenthe regulation, supervision and risk management of the banking sector were issued byReserve Bank in May 2012. Draft guidelines on Liquidity Risk Management and Basel-IIIframework on Liquidity Standards were also issued in February 2012.
18.8.2. The capital standards and new capital buffers will require banks to holdmore capital and higher quality of capital than under Basel II. The new leverage ratiointroduces a non-risk based measure to supplement the risk-based minimum capitalrequirements. Banks in India are well capitalized and are already above the minimumprescribed ratios. As Basel-III transition is phased over a longer timeframe upto 2018, itis expected to ease the pressure for immediate capital infusion.
18.8.3. The new liquidity ratios under Basel-III framework on Liquidity Standardsensure that adequate funding is maintained. Bank is awaiting final RBI guidelines toevaluate the compliance with Liquidity Coverage Ratio and Net Stable Fundung Ratio normsin the Indian context.
18.8.4. The Bank has been proactively conducting internal assessment of adequacy ofcapital, liquidity ratios and leverage ratios in accordance with Basel-III standards.Bank's capital position is in compliance with Basel-III expectations, well above theminimum requirements.
18.9.1. Bank has taken various measures to strengthen KYC-AML (Know YourCustomer-Anti-money laundering) compliance. A revised Account opening form with additionalfeatures for customer profiling and a KYC checklist has been developed. Efforts are beingmade to ensure customer profiling, risk categorization in all accounts. Special trainingsessions and workshops on KYC - AML are conducted and one session on KYC-AML is introducedin all internal trainings to sensitize all staff across the Bank. Bank has acquired Moneylaundering software (AMLock) to generate alerts to facilitate detection of suspicioustransactions and submission of Suspicious Transaction Report (STR), non-profitorganisation transaction report (NTR), counterfeit currency report (CCR), and cashtransaction report (CTR) on electronic mode to Financial Intelligence Unit, India(FIU-Ind). Bank continuously strives to improve the compliance on KYC-AML.
18.10. Fraud Risk Management
18.10.1. A dedicated Fraud Risk Management Dept. (FRMD) is in place in the Bank. TheDepartment reports the frauds to the top management, Board & RBI. It identifies thefraud prone areas, maintains database of risk /fraud prone areas. The Department suggestsimprovement in the systems & controls with a view to plug the systemic loopholesthrough the mechanism of Fraud Review Council. FRMD ensures effective monitoring of fraudsby constant follow up for recoveries in fraud related cases, prompt, timely and time boundaction against staff involved and follow up with CBI/Police/EOW for taking the cases toits natural end. The Department continuously strives to strengthen operational practices,procedures, controls and review mechanism so that fraud -prone areas are sanitized againstboth internal and external frauds.
18.10.2. The Bank also interacts with other government departments to ensure thatnature of fraud is discussed and appropriate measures are initiated for its prevention.The Bank has also been strengthening its IT security through enhanced firewalls, passwordauthentication, etc. to reduce / prevent cyber crime.
19. Compliance Function
19.1. In view of ever increasing number of regulations, compliance has increasinglybecome a focus area for effective corporate governance. In an endeavour to develop astrong compliance culture in Bank, Compliance Policy is framed and reviewed annually.Compliance Department continuously co-ordinate the identification of compliance relatedissues, assess and mitigate compliance risk. Functional department wise compliance relatedissues are identified. Role responsibility as regards compliance function is defined forevery tier in the Bank. A reporting system also exists to ensure compliance of regulatoryand statutory compliance issues through self certification process by which ComplianceCertificate is submitted by the branches to the higher offices. Such a system of selfcertification is also invoked for all verticals working in central office. Report onfindings of random test checking by the risk officers is submitted to the Top Management.The Board & its Audit Committee is appraised at monthly & quarterly intervalsabout important communications received by the Bank from the RBI & Government of Indiaand the status of compliance thereon. A comprehensive database in various compliancerelated issues is being developed.
20. Human Resource Management
20.1. Your Bank initiated HR Transformation process with an objective to align HRstrategy with the business strategy by benchmarking and adopting industry best practices.As a result of transformation exercise, Bank has streamlined various policies, processes& systems and defined, documented roles with job clarity and uploaded the same on theIntranet with feedback mechanism. HR has implemented a transparent & objectivePerformance Management System (PMS) incorporating government of India guidelines on thesame. A new module in PeopleSoft (Union Parivaar) was developed to integrate the newappraisal system for its online submission. Manpower Planning was introduced throughscientific model & calculator for arriving at the assessment of the manpowerrequirement. Bank has initiated succession planning for critical roles and is in theprocess of building leadership pipeline.
20.2. Manpower Strength: The detailed position of total manpower of the Bank as on 31stMarch 2013 are given as under:
Table No-13: Employee Strength
|Parameter ||Officers ||Clerks ||Sub-staff ||Total |
|Total Employees of which ||16405 ||9399 ||5994 ||31798 |
|Scheduled Castes (SCs) ||2906 ||1932 ||2372 ||7210 |
|Scheduled Tribes (STs) ||1100 ||528 ||535 ||2163 |
|Other Backward Classes (OBCs) ||2796 ||1946 ||1341 ||6083 |
|Persons with Disability (PWD) ||120 ||113 ||76 ||309 |
|Ex-Servicemen ||71 ||215 ||982 ||1268 |
|Women ||2865 ||2466 ||805 ||6136 |
20.3. Recruitments: Bank recruited 4509 employees during the year including 2873officers and 1636 clerks. Of the officers recruited, 2473 were probationary officers &204 were rural development officers (RDO).
20.4. Reservation Policy: The department continued to have regular dialogues withthe various SC/ST and OBC Welfare Associations in the Bank and the platform was fullyutilized to redress the grievances of the various reserved category employees includingissues concerning policy matters. Reservations, relaxations and concessions were extendedto the various reserved categories as per the extant government guidelines
20.5. Industrial Relations: The Industrial Relations Scenario in the Bank continuedto be cordial on account of the constant dialogue held with the majority trade unions andresolving all the contentious issues. Cases involving disciplinary matters were disposedof speedily in the most judicious manner and with a human face.
21. In-house Journal
21.1. The Bank's in-house journal 'Union Dhara' continues to be an excellent means ofinternal communication between management and employees with objectives of creatingoneness amongst the staff members and stimulating employees about their duties, loyaltiesand creativity. This year 'Union Dhara' clinched 11 prizes from various organizations.
21.2. Union Dhara bagged 6 awards along with the most prestigious "Champion of theChampions Trophy" at 52nd Awards ceremony of ABCI (Association of BusinessCommunicators of India), at Taj Mahal Hotel, Mumbai. RBI awarded Union Dhara the secondprize in the category of 'Bilingual House Journal'. Union Dhara bagged 'Silver' award from'PRCI (Public Relations Council of India), Bangalore'. Union Dhara also bagged JjeSMfacbii-J^bK' from 'Aashirwad, Mumbai'. Union Dhara also bagged "jccjt^ ^fftft g^cbTTfrom 'Rajbhasha Kiran, Mumbai'.
22. Official Language Implementation
22.1. During the year under review, your Bank took various measures to promote OfficialLanguage Implementation like introduction and implementation of Core Rajbhasha Solutionfor online reporting of various official language activities, publication of Hindi book on'Retail Banking - Vividh Aayam', publication of comics in Hindi 'Main Hoon Na' on ATM,online competition on Rajbhasha & Banking for executives & staff membersrespectively, organizing translation workshop for newly recruited official languageofficers, generation of report in Hindi language through MIS. Bank also organisedRajbhasha Sangoshthi at Delhi, Lucknow & Chennai for executives of the Bank. Bank isplanning to produce animation film in Hindi on financial inclusion to inculcate thebanking habits in rural masses especially amongst children.
23.1. During the year under review, your Bank has made concerted efforts to enhance thelevel of security in the Bank by strengthening the security infrastructure, impartingtraining and carrying out extensive security inspections to improve the security standardof branches. Security arrangements in 1376 branches were inspected by the securityofficers. As part of our thrust to add electronic surveillance, closed circuit televisionsystems (CCTV) were installed in additional 888 branches bringing the total number ofbranches with CCTV system to 3102 branches. Emphasis was laid on security and fire-safetyawareness among the staff members and to this end short training capsules on 'Security andFire Safety" were conducted by the security officers in 1376 branches and fullbuilding fire evacuation drill was conducted in the Bank's central office and in itstechnology centre. 951 armed guards underwent refresher training programmes, whichincluded live firing practice.
24. Internal Audit
24.1. In June 2012, the Ministry of Finance (MOF) issued detailed guidelines on riskbased internal audit which was to be implemented from 1st April 2013. The Bankhas fine-tuned the existing Risk Based Internal Audit processes and remodeled on-lineauditing software, keeping in view the Ministry's guidelines and requirements. Bank hasalso put in place a well defined audit policy for the year 2013-15 separately for RiskBased Regular Internal
Audit as well as concurrent audit, duly approved by the Board. Keeping in view theguidelines received from the RBI on the Annual Financial Inspection (AFI), Bank has put inplace a policy for AFI 2013-15 giving entire process of AFI compliance, which is dulyapproved by the Board.
24.2. During the year, audit of 2935 branches was conducted. This also includes, auditsof 92 foreign exchange dealing branches, 46 service branches and 64 currency chests,management audits of 5 regional offices, 4 Field General Manager's Office and 18 CentralOffice departments. Inspection of the Bank's subsidiary, Union KBC Asset ManagementCompany & the joint venture Star Union Dai-Ichi were also completed. The Bank had 679branches/offices covering over 68 percent of the Bank's business under concurrent audit byexternal firms of chartered accountants. The Ministry of Finance through its guidelines onconcurrent audit of branches required the Bank to cover 70 percent of its deposits andadvances under concurrent audit from 1st April 2013. The Bank is wellpositioned to meet the requirements. A separate concurrent audit policy for 2013-15 hasbeen approved by the Board.
24.3. For FY 2012-13 Information System (IS) Audit Cell work of the core bankingsystems was assigned to an external agency and they started audit from January 2013 andthey completed the audit during the year. The I.S. audit team has independently conductedaudit of 13 Information Systems. Further in keeping with MoF guidelines, the Bank has amaiden /independent I.S. Audit policy in place for the years 2013-15, duly approved by theBoard.
24.4. The Audit Committee of the Board of Directors met 12 times during the year. Theyperused the audit reports and made suggestions for improving operating efficiency andstrengthening the systems and control.
25.1. Vigilance is an essential tool to bring about excellence in the organization asit plays an important and positive role in creating an ethical climate with discipline andsafety of operations. An elaborate and well structured vigilance system has been put inplace, covering all areas of operations and in tune with the guidelines issued by theCentral Vigilance Commission (CVC). The Bank's thrust is on preventive vigilance, as ithelps in checking occurrence of frauds, achieving growth and profitability. A number ofinteractive sessions with field functionaries were arranged so as to create necessaryawareness of systems and procedures and to sensitize them about the pitfalls ofnon-compliance. 413 such preventive vigilance visits were made to various offices of theBank during the year 2012-13. Moreover, interaction with field functionaries were held tomake them aware of the irregularities observed during preventive vigilance visits so as toassist them in supervision of branches under their jurisdiction more effectively.Improvements in systems and procedures are suggested regularly with a view to either plugpossible loopholes or improve effectiveness. During the year proactive steps have beentaken by way of surveillance made possible by Bank's information technology (IT) systemsfor early detection of wrong doing as a signal to potential wrong doers.
26.1. India's macroeconomic fundamental is seen improving as inflation cools below thetolerance level of RBI allowing further headroom for monetary easing. Efforts taken by theGovernment towards fiscal consolidation and reforms measures paves the way for restoringtrust of market participants. Revival of investment sentiments is likely to ensure smoothfinancing of current account deficits (CAD). Banking industry is facilitator as also thebeneficiary of this revival. Easing of loan rates will spur retail lending which has beenrelatively resilient in this downside phase of credit cycle. Even in present scenarioretail banking offers huge potential for growth due to increasing range of specificproducts, higher disposable income in the hands of young generation & deepening ofdelivery channels. The opportunity also lies in providing timely credit, suitable range ofproducts and right price to small and medium enterprises. Increase in limits under varioussegments of priority sector advances augurs well for agriculture advances. Mobile bankingalong with penetration of internet & broad band access has potential to completelytransform the banking in the near future.
27.1. It is always difficult to identify the inflexion points in any business cycle.India's increasing integration with global markets have opened further vulnerabilities fordomestic economy where adversities of global output cycle may transmit rather sooner,through trade, finance and confidence channels. Global output growth is projected onlymildly better in the year 2013. Slow resolution of sovereign debt issues in the US,untested consequences of Japanese monetary adventure, replication of Cyprus like crisis inEuro area, etc., pose threats to smooth recovery outlook. Moreover, the factors like wideCAD, exchange rate risks, late compression of fiscal expenditure, inflationary risks, mayaffect the growth projection for India. Further, stress in certain sectors such as stateutilities, power, textiles, airlines and microfinance calls for cautious approach fromlenders.
28.1. Indian economy is expected to grow a percentage point higher than last fiscalyear. Professional forecasters see a annual GDP growth to rise to 6 percent in fiscal year2013-14 as against 5.0 percent estimated for fiscal year 2012-13. RBI has projected GDPgrowth rate of 5.7 percent for the year 2013-14. SCB's deposits and advances are projectedto grow by 14 percent and 15 percent respectively. Your Bank's financial performance hasbeen showing improvement sequentially in key parameters since second quarter of FY2012-13. This development along with expected revival in industry growth enhances thegrowth prospects in FY 2013-14 and your Bank will be able to show improved results inforthcoming years. Your Bank will endeavor to capture the opportunities with specificfocus on increasing low cost deposits and augmenting agriculture, retail, micro, medium& small enterprises business in the financial year 2013-14. Overall, the customercentricity will continue to be the driving force for the Bank.