Management Discussion And Analysis
1. Global Economy
1.1. Global activity is on recovery track with advanced economies (AEs) fine-tuningdebt & deficit levels to augur a jobs-driven-recovery. Global growth, which showedsigns of pick-up in early 2013, became broader gradually. Banks and financial institutionsare gradually becoming stronger, though balance-sheet effects still have held up growth.With activity stabilizing and fiscal consolidation slowing in the AEs, investors are nowless worried about debt sustainability. Although full recovery is seen still a year or twoaway, the key central banks have started pressing normalization levers of monetary policy.
1.2. Emerging market and developing economies (EMDEs) witnessed the consequent play ofglobal linkage effects through trade, finance and confidence channels. Beginning FY2013-14, in May 2013, the US Federal Reserve first signaled a possible reduction ofmonthly bond purchasing, popularly known as tapering of stimulus. The EMDEmarkets suffered a capital flight to advanced economies as risk adjusted return gotthinner. The yield on 10 year US treasury paper rose by 70-100 basis points between earlyMay 2013 and early July 2013. Consequent erosion of the return differentials of EMDEassets vis--vis the US treasury paper, made FIIs turn net sellers in these markets.EMDEs, particularly those with large twin deficits viz. current account deficit and fiscaldeficit, suffered sharp depreciation in the exchange rate, inviting unconventionalresponses by the policymakers. The Fed postponing tapering in September 2013,however, yielded some time for the EMDEs to prepare for the eventual tapering in future.To their credit, when the Fed actually effected reducing its monthly bond purchases inDecember 2013 policy, the EMDEs had made encouraging gains on improving their domesticmacros such that the tapering was accepted by markets rather positively.Further, given tapering also signaled a sustained pick-up in advancedeconomies, EMDEs have sensed increased demand for exports. Financial environment, however,is likely to remain challenging as the AEs gradually complete the normalization ofmonetary policy in 2014-15.
1.3. Global activity is expected to improve further in 2014-15, largely on account ofrecovery in the advanced economies. International Monetary Fund (IMF), in its April 2014issue of World Economic Outlook, projects global output growth to be slightly higher in2014, at around 3.7 per cent, rising to 3.9 per cent in 2015. Growth in the United Statesis expected to be 2.8 per cent in 2014, up from 1.9 per cent in 2013 and 3 per cent for2015. The euro area is turning the corner from recession to recovery. Growth is projectedto strengthen to 1.2 per cent in 2014 and 1.5 per cent in 2015, but the recovery is likelyto be uneven. Growth in China rebounded strongly in the second half of 2013, largely dueto acceleration in investment. This surge is expected to be temporary, in part because ofpolicy measures aimed at slowing credit growth and raising the cost of capital. Growth inChina is thus expected to moderate slightly, to remain around 7.5 per cent in 2014-15.
2. Domestic Economy
2.1. India has had another sub-potential growth year in financial year (FY) 2013-14. Asper the advanced estimates of the Central Statistics Office, Indias annual grossdomestic product (GDP) growth is estimated at 4.9 per cent during FY 2013-14 as comparedto 4.5 per cent noted during FY 2012-13. Agriculture & Allied, Industry (includingconstruction) and Services noted annual growth of 4.6 per cent, 0.7 per cent and 6.9 percent respectively during FY 2013-14 as against 1.4 per cent, 1.0 per cent, and 7.0 percent respectively during FY 2012-13. Services continued to be growth driver in FY 2013-14.Within services, trade, hotels, transport and communication sectors remain theworst hit of slowdown (3.5 per cent annual growth as against growth of 5.1 per cent in theprevious year). The sectors, financing, insurance, real estate and businessservices and community, social and personal services noted a growth rateof 11.2 per cent and 7.4 per cent respectively during FY 2013-14 as against 10.9 per centand 5.3 per cent respectively during FY 2012-13.
2.2. On expenditure based estimation, the slowdown hit consumption which decelerated to4.4 per cent in FY 2013-14 as against 5.2 per cent growth noted during FY 2012-13. Withinconsumption, the private expenditure and Government expenditure noted growth of 4.1 percent and 5.5 per cent respectively in FY 2013-14 as against 5.0 per cent and 6.2 per centrespectively during FY 2012-13. Investments meanwhile stayed flat. Government efforts tocontrol gold imports reflected in contraction in Valuables (declined 3.6 per cent).External sector however buoyed demand as net exports shrank in the period.
2.3. Inflation: Weak demand conditions in economy, stabilizing currency, slowerincrease in minimum support price (MSP) of food crops, and better harvest in a normalmonsoon year have brought disinflationary pressures in economy. Wholesale price index(WPI) based build up inflation rate in the FY 2013-14 was 5.7 per cent. However, firmingup of Core inflation suggests cost-push spiral risks building up in economy. Retail levelinflation, as measured by consumer price index (CPI) meanwhile, remained sticky at about10 per cent for most of FY 2013-14, though moderated to average 8.4 per cent in Q4 FY2013-14.
2.4. Liquidity Conditions: Barring the market gyrations witnessed inJuly-September, 2013, which warranted deliberate liquidity tightening by the RBI in orderto check speculative attacks on Rupee, liquidity situation remained within acceptabledeficit levels from the RBIs perspective. Term repo facility together with theforeign currency non-resident (FCNR) deposits scheme helped steadying the resourcemobilization from banks to match incremental demand of loans. Though liquidity tightnessreflected in positive spike of call rate spread over repo rate, overnight money marketrates continued to remain in the target range, viz. +/-1 per cent spread over Repo,implying liquidity was effectively managed through open market operations (OMOs) and termRepos conducted by the RBI during second half of 2013-14.
2.5. Banking Aggregates
2.5.1. As on March 21, 2014, annual growth in M3 noted at 13.5 per cent. Meanwhile,scheduled commercial banks (SCBs) deposits and advances grew by 14.6 per centand 14.3 per cent, respectively. SCBs investment in SLR securities noted 10.7 percent annual growth. Spurt in deposits growth is also reflective of banks raising FCNRdeposits to benefit from the RBI swap facility that confined to November 30, 2013.
2.5.2. Non-food bank credit increased by 14.3 per cent as on March 2014 as comparedwith the increase of 13.5 per cent in March 2013. Credit to agriculture and alliedactivities increased by 13.5 per cent while credit to industry increased by 13.1 per centin March 2014. Deceleration in credit growth was observed in respect of mining andquarrying, textiles, wood and wood products, petroleum and coal products, chemical andchemical products, glass and glassware, cement and cement products, basic metals,engineering, gems and jewellery and infrastructure. Credit to the services sectorincreased by 16.1 per cent in March 2014. Personal loans increased by 15.5 per cent inMarch 2014.
2.6. External Sector
2.6.1. Merchandise exports stood at USD 312.4 billion during FY 2013-14, registering agrowth of 4.0 per cent over the same period last year. Meanwhile, imports stood at USD450.9 billion registering a negative growth of 8.1 per cent over the same period lastyear. Oil imports during FY 2013-14 were valued at USD 167.6 billion which was 2.2 percent higher over FY 2012-13. Gold & silver imports stood at USD 33.4 billion which wasUSD 22.4 billion lower than the FY 2012-13 level, reflecting the policy measures taken bythe Government. Accordingly, the trade deficit for FY 2013-14 stood at USD 138.6 billionwhich was lower than USD 190.3 billion trade deficit during FY 2012-13.
2.6.2. With Indias forex cover to imports rising to above 8 months and CAD seenat half of the level a year ago, Indian currency has turned more stable and predictable.Rupee ended the fiscal year 2013-14 at 60.10/US$ with 10.5 per cent loss against US$ onannual basis, recouping from its all time low on August 28, 2013 (68.85/US$).
2.7.1. Markets surged on improving investor confidence about a decisive and stablepolity outcome in General Elections 2014. Sentiments also gained with external and fiscalbalances showing improvement. Sensex and Nifty ended FY 2013-14 with 18.8 per cent and18.0 per cent annual gains respectively. Sectoral index, Bankex stood 3.8 per cent higherover the level year ago. However, commodities benchmark, MCXComdex posted 11.8 per centgains in FY 2013-14. Indian markets have benefitted of the up-turn in global macros evenas the domestic recovery remained slow and gradual. In two months period, i.e.February-March 2014, markets noted 9 per cent gains. Banking sector stocks meanwhile,gained about 25 per cent. IMF forecasts Indias growth in real GDP at market pricesrising to 5.4 per cent in fiscal year 2014-15 in India.
Overview of the Performance of the Bank
3. New Initiatives: Your Bank has set for itself a mission to emerge as theleading retail bank in customer service excellence. During the year 2013-14 your Banklaunched various initiatives to work its way up in the customer preference.
3.1. Your Bank introduced Union Family Scheme addressing the banking needsof the entire family. Grouping the accounts benefits the customers in terms of betterpersonalization of product & deeper relationships with the Bank.
3.2. A new product Union Progress for micro enterprises was introduced inMarch 2014 giving added benefits to the borrower. The threshold limit of the margin of theproduct ranges from 5 per cent to 15 per cent. All the eligible cases under the scheme aremandatorily covered under Credit Guarantee Fund Trust for Micro and Small Enterprises(CGTMSE). Bank absorbs the entire guarantee fee (1 per cent) payable to CGTMSE in respectof our borrower covered under the guarantee scheme. No processing fee is charged forlimits up to Rs. 10 lakh, while a nominal processing fee of Rs. 1,000 is payable forlimits above Rs. 10 lakh.
3.3. During the year, the Bank has brought disbursement of all the Central Governmentpensions under Central Pension Processing Centers (CPPC). Disbursements of telecom,railway and postal pensions have been centralized. The Bank now has 90,000 pensionaccounts under centralized system of disbursement.
3.4. Further extending banking facilities to the unbanked and under banked populationyour Bank has come up with the concept of Mobile Van Banking. 20 mobile vansshall be deployed in various states so that the people at remote villages may accessbanking services at their doorstep.
3.5. Your Bank has entered into an agreement with CSC e-Governance IndiaLtd. for launching kiosk banking at various places. Under the scheme the kiosks,which are already providing state/central government services such as electricity billpayment, property tax payment, issue of birth/death certificates, issue of land/ revenuerecords etc. at village levels, will also provide banking services such as opening ofaccounts, deposit/ withdrawal from the accounts and other basic banking facilities. Thisproject has been launched on pilot basis in Andhra Pradesh and Kerala and is going to belive at many centers shortly.
3.6. The Bank has taken the lead in appointing the Internal Ombudsman foraddressing the customer grievances in a focused way. The purpose of creating this post isto ensure quick redressal of grievances and prevention of escalation to The BankingOmbudsman. The Internal Ombudsman has started functioning from August 2013.
3.7. Your Bank has successfully deployed the Fund Transfer Pricing and ProfitabilityManagement Modules of Oracles Financial Services Analytical Application (OFSAA) withthe assistance of M/s. HCL Technologies Ltd. This is the first implementation ofOracles 5.6 version of OFSAA in India. From April 2013, the Bank has moved over to amore robust and scientific transfer pricing mechanism called Matched Fund TransferPricing System from the existing gross basis concept where a single rate was fixedfor all assets and another rate for all liabilities. This new system enabled account wisetransfer pricing of all assets and liabilities based on the tenor, re-pricing and cashflow characteristics and would also enable centralization of interest rate risk at theCentral Funding Unit. The Matched Fund Transfer Pricing System would help in bettermanagement of interest rate risk and margins.
4. Resources Management: The global deposit of the Bank increased by 12.9per cent from Rs. 2, 63,762 crore as on March 31, 2013 to Rs. 2, 97,675 crore as on March31,2014 showing an absolute accretion of Rs. 33,913 crore. CASA portfolio increased by Rs.6,166 crore from Rs. 81,635 crore as on March 31, 2013 to Rs. 87,801 crore as on March 31,2014 showing a growth of 7.6 per cent. The share of CASA to total deposit stood at 29.5per cent.
Table 6: Resource Mobilization
|Parameter ||FY 2014 ||FY 2013 ||Annual Growth |
| || || ||Absolute ||% |
|Total Deposit ||297675 ||263762 ||33913 ||12.9 |
|CASA Deposit ||87801 ||81635 ||6166 ||7.6 |
|Term Deposit ||209874 ||182127 ||27747 ||15.2 |
5. Credit Management: Gross advances of the Bank increased to Rs. 2,34,332crore as of March 31, 2014, recording annual growth of 10.6 per cent during the lastfinancial year 2013-14. RAM (retail, agriculture and MSME) sectors continue to beBanks focus as these provide stable and consistent growth opportunities for theeconomy, too; these sectors contribute significant share in employment, exports andoverall growth. RAM sectors contribute 44.3 per cent of domestic advances as onMarch 31, 2014, higher than 37.4 per cent as on March 31, 2013.
Table 7: Advances
|Parameter ||FY 2014 ||FY 2013 ||Annual Growth |
| || || ||Absolute ||% |
|Gross Advances ||234332 ||211911 ||22421 ||10.6 |
|Retail Advances ||24931 ||19560 ||5371 ||27.5 |
|Agriculture Advances ||25614 ||20224 ||5390 ||26.7 |
|MSME Advances ||45372 ||34699 ||10673 ||30.8 |
|Mid & Large Corporate Advances ||113976 ||110002 ||3974 ||3.6 |
6. Retail Lending
6.1. The Banks retail lending portfolio saw an impressive growth of 27.5 per centduring the year, from Rs. 19,560 crore as on March 31, 2013 to Rs. 24,931 crore as onMarch 31, 2014. Retail loans as per cent to domestic advances increased from 9.8 per centas on March 31, 2013 to 11.5 per cent as on March 31, 2014.
Table 8: Retail Loans
|Schemes ||2013-14 ||2012-13 ||Annual Growth |
| || || ||Absolute ||% |
|Home Loans ||15424 ||12366 ||3058 ||24.7 |
|Auto Loans ||2199 ||1704 ||495 ||29.0 |
|Education Loans ||2219 ||2046 ||173 ||8.5 |
|Mortgage Loans ||3732 ||2335 ||1397 ||59.8 |
|Others ||1357 ||1109 ||248 ||22.4 |
|Total Retail Loans ||24931 ||19560 ||5371 ||27.5 |
6.2. The Banks Union Personal (personal loan) and UnionMortgage (loan against property) schemes were modified on key parameters, includingpricing. The pricing structure under the Union Home scheme was also revised.Currently each scheme offers loans at very attractive terms and conditions. The Bankopened 4 new Union Loan Points (ULPs), the special retail lending branch, at Allahabad,Agra, Haldwani and Tirupathi. This takes the total number of ULPs to 61 across thecountry.
7. Agriculture Lending
7.1. Agriculture is one of the thrust areas for the Bank. The Bank has formulatedvarious area specific schemes for financing under agriculture and allied sectors likepoultry, sugarcane, tobacco growers, green house etc, along with reintroducing the valueadded schemes like RuPay Kisan Credit Cards, Union Agri Service, scheme forfinancing dealers of inputs, agriculture machineries & implements, scheme for cottonginners, scheme for construction of rural godowns. Agriculture advance increased by Rs.5,390 crore registering a growth of 26.7 per cent. As on March 31, 2014, Banksagricultural advances stood at Rs. 25,614 crore covering 18.1 lakh borrowers. Lending todirect agriculture contributes a major share in agricultural advances; the directagriculture advances recorded an annual growth of 29.1 per cent. During the financialyear, 2.5 lakh new farmers were added to the Banks fold and 1.9 lakh additionalKisan Credit Cards (KCC) were issued with credit facility of over Rs. 2,636 crore. DuringFY 2013-14, total disbursement of Rs. 16,548 crore was made under Special AgricultureCredit Plan (SACP) registering an increase of 12.0 per cent over FY 2012-13.
8. Micro, Small & Medium Enterprises
8.1. MSME continues to be our area of focus. During the year, your Bank has ensuredenhancement in the base of MSME clientele and hassle-free flow of credit to this sector byassuring quick turnaround time (TAT), credit delivery at affordable prices and customizedproducts as per the requirements of the clients. While the Bank has large network forreaching out to MSME clientele across the country, in order to have special focus yourbank has 700 dedicated business banking branches (BBBs) for credit delivery to MSMEs and20 SARALs (Central Processing Centres) for speedy appraisal and sanction of MSME loans.These BBBs & SARALs have been established in potential centres across the country, soas to accelerate delivery of credit to MSMEs and for quicker decisions on sanction ofloans to MSMEs, which is critical for MSME growth. During FY 2013-14, the Bank hasincreased the number of BBBs from 350 to 700 and number of SARALs from 19 to 20 for bettercredit appraisal, ensuring lower TAT and for increasing the focus on the core segment ofmicro & small advances (MSE). As a result, Banks MSME portfolio stood at Rs.45,372 crore registering an annual growth of 30.8 per cent at the end of the FY 2013-14.The share of the MSME lending constituted 20.9 per cent of the Banks domesticadvances.
8.2. Micro & Small Enterprises: Micro & Small Enterprises constitute 72per cent of the total MSME portfolio. During the Financial Year 2013-14, Bank has reducedits interest rates for MSE advances by 25 basis point (bps) to 150 bps. Your Bank has alsoconducted a series of mega credit campaigns for canvassing accounts of micro enterprisesacross all the branches in the country during the last fiscal. With greater thrust oncoverage of MSE loans under CGTMSE, the Bank covered more than 14,000 MSE loans under theCollateral Free Loan scheme during FY 2013-14. Of the 388 SME Clustersidentified by United Nations Industrial Development Organization (UNIDO) & Ministry ofMSME, your Bank has presence in 387 clusters. MSE Rehabilitation Cell has been establishedin each of our Regional Offices for timely detection & monitoring of sick units and toprovide necessary rehabilitation to sick but viable units. Further, for canvassing newbusiness of corporates with a turnover between Rs. 100 crore to Rs. 500 crore, your Bankhas opened a total of 21 new Mid-Corporate Branches across major centres of the country ason March 31, 2014. MSE portfolio stood at Rs. 32,622 crore, as on March 31, 2014,registering a growth of 33.2 per cent.
9. Priority Sectors
9.1. As per RBIs new guidelines issued on May 15, 2014, it has been decided toinclude the outstanding deposits placed by scheduled commercial banks under RuralInfrastructure Development Fund (RIDF) and certain other funds established with NABARD, onaccount of their shortfall in lending to priority sector as part of indirect agricultureunder priority sector classification. The outstanding deposits under the above funds withNABARD as on preceding March 31st will form part of Adjusted Net Bank Credit (ANBC). Theseguidelines are applicable with effect from March 31, 2014. Thus, the numbers shown herehave been adjusted accordingly.
9.2. Priority sector advances registered a growth of 40.6 per cent and stood at Rs.79,869 crore as on March 31, 2014 constituting 40.4 per cent of the ANBC.
Table 9: Priority Sector Lending
|Schemes ||2013-14 ||2012-13 ||Annual Growth |
| || || ||Absolute ||% |
|Adjusted Net Bank* Credit ||197646 ||163636 ||34010 ||20.8 |
|Priority Sector* ||79869 ||56809 ||23060 ||40.6 |
|As % to ANBC ||40.4 ||34.7 || ||569 bps |
|Agriculture* ||28769 ||20224 ||8545 ||42.3 |
|As % to ANBC ||14.6 ||12.4 || ||220 bps |
|Direct Agriculture ||19875 ||15395 ||4480 ||29.1 |
|As % to ANBC ||10.1 ||9.4 || ||65 bps |
*Note: Numbers for 2013-14 include eligible outstanding deposits under RIDF &other funds, as per RBIs revised norms issued on May 15, 2014. Thus, these numbersare not strictly comparable to 2012-13.
9.3. Weaker Section: Banks finance to weaker section has improved from Rs.15,023 crore to Rs. 20,334 crore, registering a growth of 35.4 per cent to reach a levelof 10.3 per cent of ANBC against benchmark of 10 per cent set by GOI/RBI.
9.4. Women Beneficiaries: With a view to encourage entrepreneurs amongst thewomen and to make them self sufficient, Bank is providing credit to women. The Bank hasfinanced 7.7 lakh women beneficiaries, and outstanding loans to women beneficiaries haveimproved from Rs. 9,053 crore to Rs. 11,657 crore i.e. 5.9 per cent of ANBC againstbenchmark of 5 per cent set by GOI/RBI.
9.5. Minority Communities: In line with Government of India directive onwelfare of minority communities, the Bank has been extending finance to the minoritycommunities. During FY 2013-14, Bank has financed Rs. 2,991 crore to the 86,118 minoritycommunity borrowers. The total outstanding to minority community stood at Rs. 8,280 crore,registering an annual growth of 56.6 per cent.
10. Corporate Credit
10.1. The mid and large corporate credit portfolio of the Bank is well diversified.While corporate can avail facilities from branches across India, the Bank has 9 dedicatedIFBs (Industrial Finance Branches) at important centers, viz; Mumbai, New Delhi, Kolkata,Hyderabad, Chennai, Ahmedabad, Pune and Bangalore. The advances portfolio of 9 IFBsconstitute nearly 60 per cent of Banks total mid and large corporate loans. TheseIFBs report directly to large corporate vertical at central office. The Large CorporateVertical initiative was taken to ensure faster movement of the proposals of corporateclients, providing industry specific specialized services and introduce CorporateRelationship Manager (CRM) model. The credit proposals at Large Corporate Verticalare processed at the respective industry desk. Industry reports are prepared on varioussectors to guide the branches for taking exposures/enhancing exposures in potentialindustry/sector.
Table 10: Mid and Large Corporate Advances
|Particulars ||2013-14 ||2012-13 ||Growth |
| || || ||Absolute ||% |
|Mid & Large Corporate Advances ||113976 ||110002 ||3974 ||3.6 |
|w/w 9 IFBs Advances ||73496 ||71121 ||2375 ||3.3 |
11.1. The treasury division handles domestic treasury operations, forex operations,fixed income, derivatives products, equity and other alternate asset classes. Treasury isequipped with a state-of-the-art dealing room with all facilities to extend all types oftreasury services to its clients spread across the country.
11.2. The gross investment portfolio of the Bank stood at Rs. 94,169 crore as of March2014 as against Rs. 81,189 crore as of March 2013, registering annual growth of 16.0 percent. The investment portfolio comprises investments made in Government securities, statedevelopment loans and other approved securities for maintenance of Statutory LiquidityRatio (SLR) and non-SLR investments like equity shares, corporate debentures, PSU bonds,commercial papers, certificate of deposits, mutual funds, venture capital funds,subsidiaries and joint ventures.
11.3. The average yield on investment, as of March-2014 was 7.5 per cent against 7.4per cent as of March-2013. Average yield on interest bearing securities as of March-2014was 7.9 per cent against 7.7 per cent for the last year. During FY 2013-14, Treasuryprofits on sale of investment and exchange earnings were Rs. 486 crore and Rs. 461 crorerespectively.
12. Domestic Foreign Business & International Banking
12.1. Domestic Business: The export credit stood at Rs. 10,041 crore as on March31, 2014 compared to Rs. 8,917 crore as on March 31, 2013 registering an annual growth of12.6 per cent. During the year Bank had categorized four branches as authorized dealingbranches for undertaking trade finance and to make forex services accessible locally tomore customers. Additional sixteen such branches are proposed to be categorized asauthorized dealing branches during 2014-15. An NRI back-office has been set up for openingof NRI accounts sourced by Overseas Relationship Managers (ORMs) from Gulf CooperationCouncil (GCC) countries for expediting the account opening process of NRI customers fromoverseas centres. Global Travel card co-branded with American Express has been introduced.The Banks NRI deposits increased by 66.2 per cent during the year to Rs. 15,899crore as on March 31, 2014 from Rs. 9,564 crore as on March 31, 2013. The non-interestincome from forex business was Rs. 227 crore for FY 2013-14 as against Rs. 172 crore in FY2012-13 registering an annual growth of 32 per cent.
12.2. Overseas Business: The total business of the Bank from overseas operationsat Dubai International Financial Centre (DIFC), Dubai and Hong Kong branches increased by28.9 per cent over the year to USD 3,746 million as on March 31, 2014.
Table 11: Overseas Operations
|Particulars ||FY ||FY ||Annual Growth |
| ||2013-14 ||2012-13 ||Absolute ||per cent |
|Overseas Deposits ||812 ||509 ||303 ||59.5 |
|Overseas Advances ||2935 ||2398 ||537 ||22.4 |
|Total Overseas Business ||3746 ||2907 ||839 ||28.9 |
12.3. The Banks second foreign branch at DIFC, Dubai, has achieved breakeven inits first year of operation. For FY 2014-15, Bank proposes to operationalize two foreignbranches at Sydney (Australia) and Antwerp (Belgium) and one overseas subsidiary at London(UK) to further strengthen its global footprint. The Bank already has representativeoffices at Shanghai (China), Abu Dhabi (UAE), Beijing (China) and Sydney (Australia).
13. Financial Inclusion
13.1. Lack of financial services has considerable impact on the conditions of thepeople as well as economic health of the country. Financial exclusion is a symptom as wellas the cause of poverty to a large extent. Families dwelling in unbanked areas find itdifficult to save and to plan financially for the future. The unbanked are largely cut-offfrom the savings as also sources of credit both for short and long term. Your Bank hasbeen pioneer in taking initiatives for ensuring access to financial services, foreconomically disadvantaged segments of the society and vulnerable groups such as theweaker sections and low income groups, at an affordable cost. Your Bank had drawn a threeyear Financial Inclusion Plan 2013-16, approved by the Board, with a vision "to reachthe unreached by extending financial services at an affordable cost on an ongoingbasis" thereby to improve quality of life of those who have been hitherto deprived offinancial services from formal financial institutions".
13.2. Bank has extended its reach to 33055 unbanked / marginally banked villages byproviding basic banking services through business correspondent model (BCM) by appointing10076 BCs in these villages. Over 131 lakh Financial Inclusion (FI) customersaccounts were acquired over bio-metric cards under BCM and Rs. 231 crore of deposit wasmobilized. Micro-loans are being extended to the rural as well as urban population withlimited financial means, as emergency credit and to promote economic activity among thegroup. Your Bank also provides micro insurance at a nominal premium. ThroughPragati, a specially devised micro-loan product launched over bio-metriccards, for Joint Liability Groups formed by women, Bank has disbursed Rs. 217 crore to33,330 women beneficiaries. The total amount outstanding as on March 31, 2014 under thescheme is Rs. 122 crore.
13.3. Remittances: Micro remittance facility for migrants, extended usingbiometric card technology, is now also made available for inter-bank transactions usingNEFT platform. During the financial year, Bank facilitated 15.6 lakh remittances amountingto about Rs. 214 crore. A new remittance product with attractive features is beinglaunched on real time basis to increase business under this scheme. Your Bank also has anactive remittance product, Union Bank Money based on mobile technologyspecially designed for urban migrant labour for remitting their money to relatives attheir native villages.
13.4. Financial Literacy: While undertaking various financial inclusioninitiatives, the Bank appreciates that it is necessary to create awareness aboutusage/benefits of financial services offered by Bank rather than mere providing access tothese services. Taking this learning in its stride, the Bank has opened 8 financialliteracy and counseling centers (FLCCs) during the year taking the total FLCCs of yourBank to 24. These centers provide the basic financial learning to un-privileged customersso that they can make a more informed decision with respect to asset allocation and do notfall prey to unhealthy tactics of the local moneylenders. Your Bank is having 202 VillageKnowledge Centers (VKC) which disseminate banking knowledge apart from the development inthe field of agriculture.
13.5. Union Adarsh Gram Yojna: As a part of its commitment to the nation, theBank has launched "UnionAdarshGram Yojna" (UAGY) under its CorporateSocial Responsibility (CSR) project by adopting 60 villages across the nation this yearfor their all round socio-economic development, taking total villages under UAGY to 210.The objective of scheme is to adopt backward villages coming under the command area of ourrural and semi-urban branches and to develop these villages in integrated manner as amodel village in the district. The scope of the scheme extends to several activitiesthrough involvement of the Bank in various social economic development programs, launchedby the Central, State Governments and Local Self Government bodies. Under the scheme,meritorious girl children are adopted by helping them financially to complete theirstudies up to class XII. Basic amenities like water filters, benches, fans and solar lampsare provided to the students at government schools. Under Union Adarsh Gram Yojana, theBanks endeavor is to make the villages self-sufficient and self-sustaining in everyaspect. From 2014-15, it has been advised that all the rural branches shall adopt onevillage under UAGY.
13.6. Direct Benefit Transfer (DBT) Disbursement: DBT has been implemented in 43districts under phase I w.e.f. January 1, 2013, and extended in 78 more districts w.e.f.July 1, 2013 (Phase II). Of these, your Bank is having presence in 113 districts. Duringthe year 2013-14, the Bank as Sponsor Bank has remitted Rs. 273 lakh involving 18,185accounts. As a destination bank, your Bank received Rs. 14,276 lakh to the credit of21,74,880 beneficiary accounts maintained at various branches.
13.6.1. Direct Benefit Transfer for LPG (DBTL): The Government of India isimplementing direct credit of subsidy in the accounts of LPG beneficiaries in 289districts all over India. The scheme is also being implemented in our lead districts ofErnakulam and Idukki in Kerala w.e.f. September 1, 2013, and Rewa in Madhya Pradesh w.e.f.January 1, 2014. The progress of the scheme in the above mentioned three districts as ofMarch 31, 2014 is as under.
Table 12: Progress of DBTL in lead Districts
|DBTL II ||Ernakulam ||Idukki ||Rewa |
|Number of LPG connection holders ||914034 ||234513 ||137288 |
|No. of forms received from OMCs ||1441 ||NIL ||NIL |
|Out of this seeding done ||1441 ||NIL ||NIL |
|Percentage of seeding ||100 ||NIL ||NIL |
|Direct seeding requests received from all banks ||624886 ||152205 ||30532 |
|Out of this seeding done ||624886 ||152205 ||30532 |
|Percentage of seeding ||100 ||100 ||100 |
|Percentage of seeding of total LPG Beneficiaries ||68.4 ||64.9 ||22.2 |
13.7. Self Help Groups: The scheme of Micro Credit through Self Help Group (SHG)has been an effective instrument for lifting the poor above the level of poverty. Duringthe year, Bank formed about 42,000 SHGs and credit linked 35,000 SHGs. As of March 31,2014, outstanding to SHGs stood at Rs. 1,250 crore. Considering the role played by SHGs inempowerment of women, the Bank is focusing on formation and financing of women SHGs(WSHG). As per the directives of The Ministry of Finance, the Bank is implementing theWSHG scheme for women empowerment in 4 identified districts of the country viz. Rewa,Sidhi, Chandauli and Jaunpur. SHGs are primarily engaged in agriculture and various alliedactivities to generate gainful employment & income for villagers. During the year,2013-14, an amount of Rs. 402 crore was disbursed to 35,273 SHGs with present outstandingof Rs. 595 crore. The project is presently implemented in Belgaum, Bangalore, Mangaloreand Kozhikode regions.
13.8. LeadBankScheme:Bankhastheleadbankresponsibility in 14 districts spreadover 4 states. The Bank has a network of 602 branches in these lead districts. In FY2013-14, Banks deposits in the lead districts increased to Rs. 25,976 crore andadvance to Rs. 8,942 crore compared to Rs. 24,515 crore and Rs. 7,568 crore under depositsand advances respectively in the previous year.
Table 13: Lead Districts
|Lead Districts ||State |
|Azamgarh, Sant Ravidas Nagar(Bhadohi), Chandauli, Ghazipur, Jaunpur, Mau, Varanasi ||Uttar Pradesh |
|Khagaria, Samastipur ||Bihar |
|Rewa, Sidhi, Singrauli ||Madhya Pradesh |
|Ernakulam, Idukki ||Kerala |
13.9. Rural Self Employment Training Institute (RSETI):
With the aim of mitigating the unemployment problem among the rural youth, Bank hasestablished 14 RSETIs in as many districts where the Bank has lead bank responsibility. Upto March 31, 2014 these RSETIs have conducted 1,406 training programmes imparting trainingto 38,975 candidates. Out of the trained candidates, 25,593 candidates have been settledwith gainful employment with a settlement rate of 66 per cent. One of the RSETIs,Perumbavoor was felicitated for securing "AA" grade in the grading exerciseconducted by the Ministry of Rural Development (MoRD).
13.10. Regional Rural Banks (RRBs): At present, Union Bank of India issponsoring 1 RRB, viz. Kashi Gomti Samyut Gramin Bank (KGSGB), Varanasi. It has a networkof 414 CBS branches spread over 8 districts of eastern Uttar Pradesh namely, Varanasi,Azamgarh, Jaunpur, Ghazipur, Chandauli, Mau, Sant Ravidas Nagar (Bhadohi) and AmbedkarNagar. Total business of KGSGB has crossed Rs. 9,000 crore mark and stood at Rs. 9042crore with a growth of 12 per cent as on March 31, 2014. The deposits stood at Rs. 6,932crore, within which CASA was 63 per cent. Advances stood Rs. 2,110 crore out of whichpriority sector advances contributed 72 per cent, while agriculture advances contributed43 per cent. In addition to the above, KGSGB is continuously progressing in the technologyfront. During FY 2013-14, 22 ATMs have been installed; taking the tally to 23 ATMs,including a Talking ATM, thus a new milestone in the history of RRB has beenestablished. KGSGB has introduced ATM-enabled KCC for the benefit of farmers. RTGS/NEFTservice and Digital Authority Cheque system has been introduced. KGSGB is also in theprocess of introducing mobile banking shortly. At present SMS alert for regulartransactions and SMS banking facility are provided by the Bank.
14. Asset Quality Management
14.1. Gross Non-performing Assets (GNPA), as a ratio of gross advances, stood at 4.1per cent as of March 31, 2014 as against 3.0 per cent as of March 31, 2013. Net NPA to netadvances ratio stood at 2.3 per cent as against 1.6 per cent during the comparable period.Provision coverage ratio stood at 59.9 per cent as of March 31, 2014 as against 65.2 percent as of March 31, 2013.
14.2. Asset quality remained an area of concern for the banking sector during 2013-14.Accretion to NPA is attributable to sectoral downturn in power, energy, real estate, iron& steel, services and other sectors.
Table-14: Movement of NPA
| ||(Rs. crore) |
|Particulars ||FY 2013-14 |
|Gross NPAs (Opening) ||6314 |
|Additions ||5478 |
|Less, reductions ||2228 |
|(I) Upgradation ||551 |
|(II) Recoveries ||765 |
|(III) Write-off ||912 |
|Gross NPAs (Closing) ||9564 |
|Net NPAs || |
|- Opening ||3353 |
|- Closing ||5340 |
14.3. The break-up of sectoral NPA is given as under:
Table-15: Sectoral NPA as per cent to sectoral advances (%)
|Sectors ||FY 2014 ||FY 2013 |
|Agriculture & allied activities ||6.2 ||7.3 |
|Industry ||4.8 ||3.2 |
|Retail ||2.0 ||2.9 |
|Services ||1.2 ||1.8 |
14.4. Your Bank issued notices to 2,822 defaulting borrowers involving dues of Rs.1,604 crore during FY 2013-14 under the Securitization & Reconstruction of FinancialAssets and Enforcement of Security Interest Act (SARFAESIA), 2002. One-Time Settlement(OTS) was approved in 628 cases, resulting in a recovery of Rs. 108 crore. Further, assetsworth Rs. 780 crore were seized in 651 cases and the Bank recovered an amount of Rs. 152crore by sale of properties.
14.5. The Bank has 10 Asset Recovery Branches (ARBs) across the country to have focusedattention on high value NPAs. These ARBs could recover Rs. 100 crore during FY 2013-14.Big borrowal accounts in NPA category are reviewed at regular intervals by ControllingOffices at different levels. NPA position of the Bank is also reviewed at quarterlyintervals by the Board. Soft collection capability is being built not only to enhancerecovery but also to contain NPAs. With a view to maintaining healthy asset quality and tocontrol NPAs, the services of Collection Contact Center were extended both to Bangaloreand Chennai Zones during the year.
15. Restructured Accounts
15.1. Amount outstanding under standard restructured advances as of March 31, 2014 wasRs. 12,353 crore, which is 5.3 per cent of advances of the Bank. NPA outstanding underrestructured advances was Rs. 3,080 crore as of March 31, 2014.
16. Choice of Channels
16.1. Your Bank offers a choice of channels to customers. These include traditionalbranch network, ATMs, mobile banking, internet banking as well as call centre.
16.2. Your Bank has a well spread network of branches in India. During the year numberof domestic branches increased by 360 to 3869 branches. During the year, 30 per cent ofbranches were opened in unbanked centers, well above the threshold limit of 25 per cent asprescribed by the RBI. Also more than 90 per cent of the newly opened branched were inrural and semi urban areas. Your Bank also opened its 1st branch at Imphal in the state ofManipur, thus extending its presence in all the states of India. Currently your Bank hastwo foreign branches at Dubai and Hongkong.
16.3. Additional 1826 ATMs were opened during the year thus increasing the ATM networkto 6429 as on March 31, 2014, from 4603 ATMs in the previous year. The ratio of ATM tobranches further improved to 1.66 as of March 31, 2014 from 1.31 as on March 31, 2013. Thenetwork of talking ATMs launched last year has increase to 1000 plus as of end-March 2014.
Table 16: Network
| ||Mar-14 ||13-Mar |
|Total Branches ||3871 ||3511 |
|- Overseas Branches ||2 ||2 |
|ATMs ||6429 ||4603 |
|- Talking ATMs ||1066 ||100 |
|ATM to branch ratio ||1.66 ||1.31 |
16.4. There is increasing preference of the customers towards alternate channels whichreflects in the increasing number of transactions shifting to electronic mode. Thepercentage of electronic transactions increased from 60 per cent in March 2013 to 62 percent in March 2014.
16.5. ATMs and Cards: Your Bank has a wide network of 6429 ATMs pan India and 135 lakhDebit cards as on March 31, 2014. During 2013-14, Bank introduced series of remittanceproducts such as NEFT, IMPS, card to card transfer on ATM. The Bank has also introducedPlatinum credit card to its existing VISA credit card variants and implemented Loyaltyprogram for debit and credit card holders. Customer can enjoy the privilege of earningreward points on all transactions made through Banks Debit & Credit Cards at POSand E-Commerce outlets. Your Bank participated as an issuing bank in Punjab GovernmentFoodgrain Supply Payment Ecosystem developed on National Payment Corporation of India(NPCI) platform and issued Rupay based cards for collecting payments.
16.6. Internet and Mobile Banking: Enhancing the security of the electronic channels ofthe Bank has been the primary theme during the last year. The Bank has launched mobilebanking application for iPhone /iPad users. The IMPS service that enables customers tomake inter-bank fund transfers through mobile on real time basis is now available on allthree channels viz. ATM, Mobile Banking and Internet Banking. The IMPS P2A (Person toAccount) transfer through both Internet Banking and Mobile Application has also beenenabled. Also, the Bank has implemented payment gateway solutions on college/ universityportals to collect fee payments.
16.7. In line with the growth in electronic transactions, your Bank consistentlyachieved increase in income from alternate channels as shown below:
17. Transaction Banking
17.1. Currency Chest: At present, the Bank has 64 Currency Chests and is in the processof opening a Currency Chest at Shirdi and Agra. Your Bank has completed the exercise ofproviding Note Sorting Machines to 1226 branches having average receipts of more than Rs.50 lakh per day. The Bank has also installed 50 Coin Vending Machines (CVMs) in variousbranches across the country.
17.2. Cash Management Services (CMS): Your Bank caters to the specific corporaterequirements of the clients towards the receivables & payables management at a highspeed, with minimal cost, supported by a customised MIS. The CMS Division mobilized 104new connections under various CMS products and earned a total income of Rs. 21 croreregistering a turnover of Rs. 56,066 crore during FY 2013-14. Under the CMS payment hubalmost 3 lakh payments per month worth Rs. 540 crore are given effect, which includessalary payment of Kendriya Vidyalaya, Navodaya Vidyalaya, National Rural EmploymentGuarantee Act (NREGA) payments, and payments of Living Wage Ordinance (LWO). All BharatSanchar Nigam Limited (BSNL) payments under Enterprise Resource Planning (ERP), for entireMaharashtra are carried out by CMS and BSNL payments for other states like Gujarat, TamilNadu etc have lined up, which when materialized can provide considerable float and fees.The virtual account services for catering inward NEFT/RTGS is tested and is set to startfor Lions Club International, Delhi Development Authority (DDA), Kerala Building and OtherConstruction Worker Welfare Board (KBOCWWB) etc which will add valuable CASA to the Bank.Your Bank is also set to launch National Automated Clearing House (NACH) services as partof CMS collections for Non Banking Financial Companies (NBFCs) as a sponsor bank.
17.3. Merchant Banking: Bank has made available ASBA (Application Supported by BlockedAmount) facility for applying in Public Issues through Internet Banking and also extendedthe facility of registration of applicant and their details. Bank obtained the permanentregistration for Merchant Banker and Banker to issue activities and has been handlingpayment and collection assignments of corporate clients/PSUs.
18. Third Party Product Distribution
18.1. Under its retail products, your Bank also provides a spread of Third PartyProducts. The Bank offers to customers the life insurance products of its jointventure, Star Union Dai-Ichi Life Insurance Company. For the non-life insurance products,the Bank has a tie-up with New India Assurance Co. Ltd. During the financial year,2013-14, your Bank introduced health insurance products in association with the ReligareHealth Insurance Company Ltd. The Bank also offers mutual fund products to customers as anagent of its subsidiary, Union KBC Asset Management Company Limited. The commission incomeearned by the Bank from sale of insurance & mutual funds during the year increased by26 per cent to Rs. 42.2 crore as of March 31, 2014.
19. Information Technology
19.1. The Banking industry has gone through many changes and the structure of theindustry is continuously evolving with the rapid development in Information Technology.Your Bank has proactively adopted innovative technologies and processes to serve thechanging customer requirements and to ensure efficient and accessible services to thecustomer through Branch Network, ATMs, Internet Banking, Mobile Banking, SMS Banking andCall centers.
19.2. Along with the initiatives taken under Core Banking Solutions (CBS), the Bank hasimplemented other supporting systems such as Kiosk Banking Application for providingbanking services to Financial Inclusion customers through Common Service Centers (CSC)Agent. Account opening form has been upgraded with the E-KYC. A two factor authenticationhas been implemented by the introduction of mobile OTP (one time password) for securetransactions through Internet Banking. Further to enhance the security of transactionshappening in the branches, your Bank has implemented Bio-metric Authentication Solution inCore Banking for all the CBS users.
19.3. During the year 2013-14, the Bank has undergone significant developments inproviding electronic services via various delivery channels namely IMPS P2A in InternetBanking, Online PPF through Internet Banking, EuroPay, MasterCard and Visa (EMV) cardissuance to customers, Missed call facility for balance enquiry, SMS Banking facility forRRB (Kashi Gomti Samyukt Gramin Bank). Yours is the first bank to launch InterbankCard-to-Card balance transfer. An online portal for donations for Prime Minister ReliefFund and various other religious organizations has been made available. Your Bank hasintroduced SMS alerts for loan installment due, deposit maturity, birthday wishes messagesto the customers, etc. The facility to accept Aadhaar Seeding request through variouschannels (ATM, Internet Banking, and Corporate Website & SMS) and seeding into CBSafter demographic verification with UIDAI has been enabled. Also the account openingprocess has been improved by introducing workflow to reduce TAT. As part of BusinessContinuity Planning & Disaster Recovery Management strategy, the Bank has successfullycompleted live switch-over and switch-back drills for critical applications, thusenhancing Banks readiness in responding to emergency situations.
20. Risk Management
20.1. Your Bank has a proactive approach towards risk management. Its risk philosophyinvolves developing and maintaining a healthy portfolio within its risk appetite andregulatory framework. The Bank constantly endeavours to ensure that business functionpartners with the risk management function to derive value and the available capital isoptimally utilized.
20.2. The Bank addresses the Credit, Market and Operational Risk through appropriatepolicies, organization structure, risk measurement techniques, adequate systems,procedures monitoring and reporting mechanisms. It has a well defined risk appetitestatement and the independent risk function ensures that the Bank operates with its riskappetite framework.
20.3. Risk Management is a Board driven function in the Bank with the SupervisoryCommittee of the Board on Risk Management and ALM at the apex level supported byoperational level committees of top executive for managing various risks. Appropriatestructure, policies and review processes are in place in the area of risk management.
20.4. Credit Risk
20.4.1. Credit Risk Management Committee oversees the credit risk function in the Bank.Credit Risk Policies, Credit Approving Authority, Prudential Exposures Limits, Risk RatingSystem, Risk Based Pricing, Portfolio Management are the various instruments formanagement of credit risk.
20.4.2. The Bank has standardized and well-defined approval processes for all advances.It adopts a Committee Approach for credit sanctions and has Credit Approval Committees atvarious levels. It has comprehensive internal rating models and scoring models for retailexposures. Entire credit portfolio of the Bank is subject to internal credit rating. Bankhas credit rating migration and default probability data for more than 10 years.
20.4.3. It continuously monitors portfolio concentrations by borrower, groups, sectors,retail schemes, industry, geography, etc and constantly strives to improve credit qualityand maintain a risk profile that is diverse in terms of borrowers, products, industrytypes and geography.
20.5. Market Risk
20.5.1. Asset Liability Management Policy, Treasury Policy and Market Risk Policy aidthe management in mitigating the market risk in the banking and trading books. Overallresponsibility of managing the market risk lies with the Asset Liability Committee (ALCO).The Committee meets regularly and decides on the size, mix, tenor, pricing and compositionof various assets and liabilities. It primarily does identification, measurement,monitoring and management of liquidity and interest rate risk. The Bank ensures proactiveliquidity management, creates stress scenarios and has a contingency liquidity plan inplace. 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.
20.6. Operational Risk
20.6.1. Comprehensive systems and procedures, internal control system and audit areused as primary means for managing Operational Risk. The Bank has in place a Boardapproved Operational Risk Management Policy based on Reserve Bank guidelines. All newproducts introduced by the Bank pass through a New Product Approval Process to identifyand address operational risk issues. Variation in existing products as well as outsourcingactivities is also reviewed. The Bank has compiled data relating to operational lossesincurred during the last eight years and it is analysed for taking corrective measures sothat these losses incurred do not recur.
20.6.2. As a good corporate governance measure, the Bank has formulated a DisclosurePolicy to have greater transparency in its working. Recognizing the importance of BusinessContinuity Planning (BCP), for minimizing the adverse effects of business disruption andsystem failure, the Bank has put in place a BCP policy which provides a blueprintdetailing a wide range of responses under disruptive environment to protect its staff,assets and interest of the customers.
20.7. Progress under BaselII
20.7.1. The Bank has implemented the New Capital Adequacy Framework under Basel-IIw.e.f March 2009. While the Bank, to start with, has adopted Standardized Approach forCredit Risk, Standardized Duration method for Market Risk and Basic Indicator approach forOperational Risk, the initiatives so far undertaken are geared towards enabling the Bankto comply with the standards set out for more advanced capital measurement approaches inthe Basel-II accord.
20.7.2. With regard to credit risk, Bank has already complied with the requirements foradvanced approaches in the areas of (a) Risk Policy making, (b) implementation of creditrisk strategies & necessary guidelines, (c) Credit rating/scoring of loans, (d)Portfolio management & reporting, (e) Industry researches, (f) Credit risk stresstesting etc. The officials from credit risk management are members in the loan sanctioningcommittees of the Bank at various levels to represent the risk concerns.
20.7.3. An Internal Rating Based (IRB) Module, which enables two dimensional obligorand facility rating, has been implemented and all accounts are now rated only through thesystem. The 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) the Bank has already put in place necessary framework and is in the processof compiling the data.
20.7.4. In the area of operational risk, Bank has started the process of putting inplace a Risk and Control Self-Assessment (RCSA) framework and groundwork for developmentof Key Risk Indicators (KRI) is also on. Steps have also been initiated to upgrade theexisting systems and practices to migrate to Advances approaches. The Bank has alreadyapplied to the Reserve Bank of India for migrating to the standardized approach forOperational Risk.
20.7.5. With regard to market risk, the Bank computes the value at risk (VaR) for alltrading portfolios, which provides valuable insights into risk profile of the Banksexposure. It has applied to Reserve Bank of India for migrating to internal modelsapproach for market risk.
20.7.6. The 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 the RBI guidelines, which is being validated by external agencies.
20.7.7. The Bank has been forerunner among public sector banks in enhancing itsperformance evaluation system. It has implemented a robust and scientific fund transferpricing system i.e. matched fund transfer pricing system and is implementing aprofitability management module which will enable measurement of profitability undervarious dimensions.
20.8. Implementation of Basel III
20.8.1. The Bank has been proactively conducting internal assessment of adequacy ofcapital, liquidity ratios and leverage ratios in accordance with Basel-III standards. Ithas been participating in the Quantitative Impact Study (QIS) carried out by RBI to assessthe impact of Basel III guidelines since 2010. The disclosure norms under Basel-III arealso being complied with. Banks capital position is in compliance with Basel-IIIexpectations, well above the minimum requirements. Projections of Capital Adequacy as perBasel III guidelines are also carried out as a part of Internal Capital AdequacyAssessment Process (ICAAP) and avenues for capital raising are also evaluated and planned.The Bank expects to make a smooth transition to Basel-III standards, as per RBIstimelines.
20.9.1. The 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. Interview &customer due diligence form are revised to cover additional information. Efforts are beingmade to ensure customer profiling, risk categorization in all accounts. Filling up of KYCmenu details has been made mandatory. Notices are issued in vernacular languages and alsogiven advertisement in local newspaper requesting account holders to contact base branchfor updating KYC details. Special training sessions and workshops on KYC-AML are conductedand one session on KYC-AML is introduced in all internal trainings to sensitize all staffacross the Bank. Letters are issued to branches/ currency chest for detection and timelyreporting of counterfeit currency notes. The Bank has acquired money laundering software(AMLock) to generate alerts to facilitate detection of suspicious transactions andsubmission of suspicious transaction report (STR), non-profit organization transactionreport (NTR), counterfeit currency report (CCR), and cash transaction report (CTR) onelectronic mode to Financial Intelligence Unit, India (FIU-Ind). The Bank continuouslystrives to improve the compliance on KYC-AML.
21. Compliance Function
21.1. A robust compliance system is in place with a well documented Compliance Policythat outlines the compliance philosophy of the Bank. The focus of compliance function ison bank-wide adherence to regulation compliance, statutory compliance, compliance withfair practice codes and other codes prescribed/ suggested by self regulatoryorganizations, Government policies, the Banks internal policies and prevention ofmoney laundering and funding of illegal activities.
21.2. The compliance policy is reviewed annually. The role & responsibility asregards compliance function is clearly defined for every tier in the Bank. A wellestablished reporting system also exists to ensure compliance of regulatory and statutorycompliance through self certification process by which compliance certificate is submittedby branches to the higher offices. This system is also in place for verticals in CentralOffice. The Audit Committee of the Board and the Board are apprised at monthly / quarterlyintervals about important communications received from RBI/MOF/SEBI etc & status ofcompliance thereon. A comprehensive database on various compliance related issues is beingdeveloped.
22. Human Resources Management
22.1. Manpower strength: The total manpower of the Bank, as on March 31, 2014,stood at 33,806. The following are the details of category of employees.
Table 17: Category of employees
|Category ||Officers ||Clerks ||Sub-staff ||Total |
|Total Employees, Of which ||18158 ||9325 ||6323 ||33806 |
|Scheduled Castes (SCs) ||3175 ||1885 ||2413 ||7473 |
|Scheduled Tribes (STs) ||1253 ||545 ||552 ||2350 |
|Other Backward Classes (OBCs) ||3649 ||2145 ||1507 ||7301 |
|Persons with Disability (PWD) ||185 ||152 ||88 ||425 |
|Ex-Servicemen ||159 ||616 ||801 ||1576 |
|Women ||3620 ||2564 ||836 ||7020 |
22.2. Recruitments: The Bank recruited 3,736 employees comprising 1,561Probationary Officers, 496 Specialist Officers, 1,612 Clerks and 67 Subordinate Staffduring 2013-14.
22.3. Reservation policy: The Bank continues to have regular dialogues with thevarious SC/ST and OBC Welfare Associations in the Bank and the platform was fully utilizedto redress the grievances of the various reserved category employees, including issuesconcerning policy matters. Reservations, relaxations and concessions were extended to thevarious reserved categories as per the extant Government guidelines.
22.4. Training: The Bank is committed to nurturing its human resources in orderto attain sustainable higher trajectory growth by effectively addressing the quality ofthe services provided. The changing requirements of both the organization and individuals,arising out of achievement of business objectives, large scale recruitments, successionplanning, etc. entail need-based training programmes. The Staff College and seven trainingcenters across the country continue to impart training in key areas. The Bank impartedtraining to 27,654 employees under 777 calendar programmes, 52 workshops and 229locational programmes during the year 2013-14.
22.5. Performance Management: The Bank has adopted a balanced approach to attaingrowth and development thereby leveraging its human assets in order to achieve continuousexcellence on the business front. A complete revamping of the Performance ManagementSystem (PMS) has been undertaken for making the same more transparent and objective. Thissystem will be further stabilized in 2014-15 with a focus on time-line discipline. As perGovernment guidelines, a mechanism for representation has been made available on-line. Therepresentations received for PMS 2012-13 have addressed by a 3 member committee acrossvarious regions and central office.
23. 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 with a human face.
24. Official Language: During the year 2013-14 the Bank took various measures topromote use of Official Language in the Bank like publication of Hindi book on NPAPrabandhan-Vividh Aayam, publication of comics in Hindi Banda Hazir Haion customer service, organizing online Hindi competition on Rajbhasha and banking forexecutives and staff members respectively to motivate them to use official language intheir routine activities. A Hindi animation film Jini Aur Char dost andcartoon film on Surakshit Bhavishya Va Khushhali were produced to createbanking awareness amongst children specially in rural areas. The Bank also organizedorientation training programme for newly recruited official language officers. The Bankwas awarded second prize under Indira Gandhi Rajbhasha Shield for FY 2011-12as also First, Third and Fourth prize for linguistic regions B, A and C respectively underthe Reserve Bank Rajbhasha Shield 2011-12 for excellent use of OfficialLanguage in the Bank.
25. Security: During the year 2013-14 under review, the Security Division madeconcerted efforts to enhance the level of security in the Bank by strengthening thesecurity infrastructure, imparting training and carrying out extensive securityinspections to improve the security standard of the branches. Security arrangements in1324 branches were inspected by the Security Officers. As part of our thrust on electronicsurveillance, closed circuit television (CCTV) systems were installed in 792 additionalbranches and anti-burglary alarm systems were installed in 611 additional branches.Emphasis was laid on security awareness among the staff members. Accordingly shorttraining capsules on Security and Fire Safety were conducted by the securityofficers in 1029 branches. 887 armed guards underwent refresher training programmes, whichincluded live firing practice.
26. Internal Audit
26.1. In terms of the guidelines issued by the Ministry of Finance (MoF) andrequirements on risk-based Internal Audit, your Bank has put in place a well-definedInternal Audit Policy and Concurrent Audit Policy for 2013-14. Considering the needs, theRisk Based Internal Audit (RBIA) Policy was modified and a maiden Management Audit Policyfor 2014-15 was also formulated, duly approved by the Board.
26.2. During the year 2013-14, audit of 3285 branches was conducted. Besides this,audit of 91 Foreign Exchange Dealing branches, 47 Service branches, 128 Currency Chests,Management Audit of 61 Regional Offices, 10 Field General Managers Office, 12Central Office Departments and 1 RRB was also undertaken. The pending leakage of income asat end March 2014 was Rs. 2.3 crore compared to Rs. 4.7 crore as at end March 2013. Therehas also been a considerable decline in number of branches with High ControlRisk from 144 during FY 2012-13 to 15 during FY 2013-14. There has also been a steepdecline in number of pending special reports.
26.3. The Audit Committee of the Board of Directors met 8 times during the year2013-14. It perused the audit reports and made suggestions for improving operatingefficiency and strengthening the systems and control.
26.4. As per the guidelines of the Ministry, concurrent Audit should cover 70 per centof the deposits and advances of the Bank. As of end March 2014, your Banksconcurrent Audit covered 65 per cent of deposits and 81 per cent of advances i.e. 72 percent of the business of the Bank.
26.5. The Bank has been adopting technology in a big way and installed many informationsystems to support our business strategy / goals. In order to safeguard the criticalinformation systems from various vulnerabilities, external /internal threats, audit of allInformation systems was carried out for the year 2013-14 by an outsourced vendor alongwith the Banks IS Audit team. The audit observations were duly complied by the Bankto ensure the integrity and confidentiality of the data and to provide uninterruptedavailability of systems to the users. The IS Audit of the various branches of the Bank wasconducted by the Banks internal audit team.
26.6. Based on the guidelines of the Ministry, your Bank has put in place a 2 tierOffsite Monitoring structure (OMC) viz. Central Offsite Monitoring Cell and RegionalOffsite Monitoring Cells at all ROs. The OMC will give early warning signals on omissions,deviations and lapses with regard to transactions carried out at branches. Accordingly theOMCs are analysing the alerts on daily basis to find out suspicious / irregulartransactions which are followed up with the branches for timely rectification.
27.1. 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. The Banks thrust is on Preventive Vigilance, as ithelps in checking occurrence of frauds, achieve growth and profitability. Accordingly, anumber of interactive sessions with field functionaries were arranged so as to createnecessary awareness of systems and procedures and to sensitize them about the pitfalls ofnon-compliance. 499 such Preventive Vigilance visits were made to various offices of theBank during the year 2013-2014. Moreover, regular interactions with Field GMs and RegionalHeads have been held to make them aware of the irregularities observed duringPreventive Vigilance visits so as to assist them in supervision of Branchesunder their jurisdiction more effectively. To strengthen the Preventive VigilanceAwareness on an ongoing basis, Staff Training College, Bangalore and Staff TrainingCentres across the country have started one session exclusively on Preventive VigilanceAwareness before commencing any training programme. Further, a mechanism of PreventiveVigilance Committees (PVCs) has been put in place at Branches / other offices with a viewto educating the operating staff for curbing the non-observance of the laid downprocedures or other malpractices in order to inculcate and nurture a culture of alertnessat the ground level. This initiative will go a long way in minimizing the deviancy at theoperating level. An element of incentivisation has also been introduced in the"Whistle Blower Policy". Genuine informants will be given due weightage at thetime of promotion and placements as and when applicable without disclosing their identity.Revised policy is being popularized in the Bank to encourage the whistle blowing action asa tool to prevent the frauds etc.
27.2. Improvements in systems and procedures are suggested regularly with a view toeither plugging possible loopholes or improve effectiveness. As a proactive vigilancemeasure, we are trying to build up the technological capacity in the Bank to counter newkind of frauds that are likely to happen in future.
28.1. Current business cycle is expected to take a turn towards revival during currentfinancial year. Economic growth in India is expected to rise in FY 2014-15 by a percentagepoint over its level in FY 2013-14. Inflation, at both retail and wholesale levels, hascome off from the previous year highs. More importantly, inflation excluding food and fuelitems, i.e. core inflation, has been within comfortable levels for last one year atwholesale levels and is seen gradually declining at retail levels, too. This projects abenign outlook on interest rate scenario this year. Decisive mandate in General Elections2014 has further added positives to this outlook. Indias gains on reducing twindeficits, i.e. fiscal deficit and current account deficit, are seen making room for moreconducive policy response to growth.
28.2. Union Bank of India has set its sight on recouping profitability. The Banksreturn on assets (ROA) is presently about half of its potential based on the currentcapabilities. Some of this decline is indeed cyclical, and will recover in line withrecovery in economy. The focus will be on improving efficiencies through orientingadvances mix in favour of RAM (retail, agriculture and MSME) sectors for improvedyield on advances, encouraging fee-based income by leveraging unified market team, networkand bouquet of products and services,[harnessing diversified branch presence (with 61 percent branches in rural & semi-urban areas) for low cost resource mobilization] andcontaining stress on asset quality. The Bank is poised to record a better performanceduring 2014-15, with focus on efficiency, quality growth, profitability and buildingcapital strengths.