Your Directors have great pleasure in presenting before you the Annual Report of the Bank along with the audited Balance Sheet, Profit & Loss Account and the Report on Business and Operations for the year ended March 31, 2014.
1. MANAGEMENT DISCUSSION AND ANALYSIS:
1.1 Economic scenario 2013-14
Domestic economic developments in the current financial year (FY14) were mostly driven by inflationary pressures, subdued demand and investment position.
Real GDP growth for the first three quarters of FY14 was 4.6 per cent, which was marginally better than 4.5 per cent recorded in same period of FY13. The full year growth is likely to be about 4.7 per cent. Developments in the past two quarters indicate that slowdown in economic growth has already bottomed out and recovery (although slow) has started.
During the year, growth in industrial production has moved like a snake in a narrow tunnel around the point of stagnation, while in 5 out of the first 10 months there were negative growths. Among the major industry categories, the worst hit has been Consumer Durables and Motor Vehicles.
Significant moderation in inflationary pressures and prospects of higher domestic demands on account of General Elections may spur industrial growth, which has shown negative growth in current FY so far.
On account of decline in imports and sustained growth in exports (except for the month of February) trade deficit has been shrinking for the eighth consecutive month. Current Account Deficit (CAD) in the first three quarters of this year has come down to USD 31 billion from USD 88 billion in FY 2012-13. The stringent steps taken to curb gold and declining non-POL non-gold international commodity prices have helped in shrinking CAD.
In the current financial year, inflation remained the prime focus, especially for monetary policy measures of the RBI.
Dr. Urjit Patel Committee has highlighted the need for CPI inflation to be the nominal anchor for monetary policy considerations and has recommended CPI inflation target of 8 per cent by January 2015, 6 per cent by January 2016 and set a long term target of 4 per cent with a band of +/-2 per cent.
Both retail (CPI) and wholesale (WPI) inflation, which were in double digits for most part of the year, have declined drastically in the last quarter to 8.63 per cent and 4.68 per cent in February 2014.
Performance of Indian Banking Industry in 2013-14
During the current financial year, the Banking sector has been witnessing downward pressure on margins on account of higher cost of deposits, deceleration in credit growth as well as rising NPAs/restructured assets.
Y-o-Y growth in Aggregate Deposits of Scheduled Commercial Banks (SCBs) lagged behind growth in bank credit. Due to high domestic inflation and lower economic growth, household financial savings rate has come down which is reflected in the slower deposit growth. The gap between growth in bank deposits and credit reversed since Sept 2013, thanks to the special swap window made available by RBI for FCNR(B) deposits.
As on last reporting Friday of FY14 (31st March 2014), even though aggregate deposits of SCBs witnessed a y-o-y growth of 14.65 per cent to Rs. 77,394 billion, the growth rate adjusted for growth in FCNR(B) deposits has been the RBI targeted rate of 14 per cent. Aggregate Deposit of BoM increased by 25.54 per cent (Y-o-Y) during the same period.
As on 31st March 2014, Bank Credit of SCBs has grown by 14.31 per cent (y-o-y) to Rs. 60,131 billion as against 15.37 per cent in the same period of the previous year. Credit of BoM increased by 17.89 per cent (y-o-y) as of 21.03.2014.
C-D Ratio of SCBs stood at 77.69 percent (as on 31st March 2014).
Indian Economy is expected to show better growth in the coming year. IMF has projected it to grow by 5.4 per cent and 6.4 per cent respectively in calendar years 2014 and 2015 as compared to 4.4 per cent the year 2013.
The RBI also has projected economic growth in 2014-15 in the range of 5-6 per cent. It also projects CPI inflation to be in the range of 7.5-8.5 percent in Q4 of 2014-15.
As per the trend prevailing in the system and reported by various rating agencies, asset quality of Banks will remain under pressure in the next year as economic recovery is likely to be subdued, and it will take time for domestic industrial activity to recover. The weak asset quality is likely to put pressure on Banks' profitability and capitalization in FY 2014-15.
2. PERFORMANCE OF YOUR BANK 2013-14
Total business of your Bank stood at Rs. 2,07,172 crore as on 31.03.2014, as compared to Rs. 1,70,734 crore a year ago, registering a year-on-year growth of 21.34 per cent.
Total deposits of the Bank stood at Rs. 1,16,803 crore, up by 23.8 per cent over the level of Rs. 94,337 crore as at the end of March 2014.
Current & Savings Bank (CASA) deposits increased to Rs. 41,921 crore as on 31.03.2014. Share of CASA deposits in total deposits of your Bank stood at 35.89 per cent as on 31.03.2014 which is one of the highest among Public Sector Banks.
2.3 Credit Deployment
The Bank has put in place a lending policy in conformity with the guidelines issued by RBI and also the lending norms of the Government of India. It emphasizes on qualitative credit growth and ensures compliance with regulatory requirements as well as the prudential exposure limits.
Gross advances of the Bank increased from Rs. 76,397 crore as on 31.3.2013 to Rs. 90,369 crore as on 31.3.2014 with growth of 18.29 per cent. Efficient service with customer centric approach has enabled the bank in registering growth, in-line with the banking industry during the year 2013-14.
Several steps have been taken for improving credit delivery mechanism along with improvement in turnaround without compromising the overall quality of credit.
Mid Corporate shall continue to be one of the thrust areas for the bank in future for increasing yield on advances and dispersion of credit risk.
Efforts are continued to improve portfolio yield by reshuffling the portfolio mix.
2.3.1 Sectoral Deployment of Credit
While financing to various segments of the economy, the Bank has endeavored to maintain a diversified credit portfolio, with a view to ensuring credit dispersion across sectors. The Bank has continued its efforts to support core, manufacturing and priority sectors as well as infrastructure projects, which serve to drive economic growth. This focus of the Bank will continue in future, in line with the national economic growth priorities.
Industry wise credit deployment as on 31.03.2014 is as under.
|Sr. No.||Credit deployed||Outstanding as on 31.03.2014 Rs. in crore||Percentage to total credit outstanding||Outstanding as on 31.03.2013 Rs. in crore||Percentage to total credit outstanding|
|ii. Chemicals, Dyes, Paints, etc||1578.92||1.75%||1387.15||1.83%|
|iv. Iron & Steel||2689.22||2.98%||1640.21||2.16%|
|v. NBFCs & Trading||15111.27||16.72%||12671.06||16.72%|
|viii. Other Industries||10900.69||12.06%||9018.1||11.90%|
|7||Commercial Real estate||4793.96||5.30%||3551.63||4.69%|
2.3.2 Credit Administration and Monitoring
Early warning signals are captured from the CBS system on daily basis for close monitoring of stressed accounts on near real time basis. System generated SMS alerts are sent to the customers to pre-empt delinquency. An integrated web-based reporting has been introduced in the Bank to enable instant communication between branches/Zones/Head Office for effective monitoring of credit portfolio.
The credit quality of borrowal accounts is further monitored through periodical asset performance review, credit audits & stock audits. Timely rescheduling of repayment terms is undertaken in deserving cases.
2.4 Asset Performance
During the Financial Year (FY) 2013-14, total cash recovery in NPAs was Rs. 706.41 crore (last year Rs. 411.22 crore). Of this, recovery in Ledger balance was Rs. 646.46 crore (Rs. 198.73 crore), including recovery in sale of Assets Rs. 242.16 crore (NIL), recovery in written off accounts was Rs. 303.32 crore (Rs. 156.76 crore) and recovery in cases of unapplied interest was Rs. 38.22 crore (Rs. 55.73 crore). This was besides up gradation of NPAs to the tune of Rs. 101.39 crore (Rs. 105.19 crore).
This year's achievement was possible due to intensive follow up adopted by the Branches with the defaulting borrowers through letters, notices, recovery camps, Lok Adalatas, actions under SARFAESI and through DRTs.
To address and improve recovery in small sized NPAs having ledger balances upto Rs. 10.00 lakh, the bank established additional 5 Micro Asset Recovery Cells (MARC) at Zonal offices thereby making total 39 MARCs. The recovery performance through this vertical was encouraging with MARCs recovering Rs. 376.66 crore (Rs. 210.53 crore). The share of recovery of MARCs in total cash recovery of the bank was 54.05% (51.20%).
The bank continued during this FY a special 'One Time Settlement'(OTS) scheme and also launched special OTS product (M-zero) for recovery in NPA accounts having ledger balance up to Rs. 5.00 lakh. The total recovery in NPAs under this scheme was Rs. 50.15 crore as against Rs. 38.40 crore in the previous year.
The Gross NPA ratio of the bank stood at 3.16% during the financial year from 1.49% as of 31.03.2013. Similarly the ratio of Net NPAs stood at 2.03% as on 31.03.2014 as against 0.52% a year ago. The NPA ratios of the Bank are much better than not only of the peer Banks but also of many large Banks.
2.5 Foreign Exchange Business and Export Finance
During the year 2013-14, the Bank has achieved merchant turnover of Rs. 28,370 Crores (Rs. 30,437 Crores) and an interbank turnover of Rs. 4,71,327.30 (Rs. 4,14,162 Crores) and earned Forex Profit of Rs. 74.60 Crores (Rs. 60.41 Crores). The outstanding export credit as on 31st Mar 2014 was Rs. 1948.97 as against Rs. 1908.31 as on 31st Mar 2013. The Treasury & International Banking Branch at Mumbai (A category branch) and 33 B Category branches across the country cater to the International business needs of the customers of the Bank. In order to provide prompt service to Non Resident Indian (NRI) clients, Bank has a NRI Cell at Deccan Gymkhana Branch, Pune which provides online remittance facilities for its NRI customers. With a view to enable branches to provide better service to NRI clients, Bank has provided Instant NRI information which is updated on monthly basis.
The net investments of the Bank stood at Rs. 37249.58 crore as on 31.03.2014 as compared to Rs. 31430.31 crore as on 31.03.2013. Investments under Held to Maturity (HTM) category consist of 86.97 per cent while Available for Sale (AFS) comprised 12.74 per cent of total investment portfolio as on 31.03.2014. The net interest income from investment activity increased to Rs. 2543.03 crore from Rs. 2231.28 crore during the last year, a growth of 13.97 per cent.
The borrowings of the Bank as on 31.03.2014 stood at Rs. 8326.47 crore, including refinance availed from RBI, NABARD and SIDBI to the extent of Rs. 2861.08 crore. The total borrowings as at 31.03.2013 were Rs. 12877.49 crore.
2.8 Merchant Banking
The Bank handled 84 issues of Commercial Paper amounting to Rs. 20160.85 crore for its clients as an Issuing and Paying Agent (IPA) during the year and earned a commission income of Rs. 9.52 lakh.
2.9 Depository Services
The Bank is Depository Participant (DP) of Central Depository Services of India Ltd. (CDSL) since September 1999. Account level queries related to Demat account balances etc. are available at the 131 identified branches of the Bank. All the branches of the Bank can open Demat account through the Demat Cell of Mumbai. The Bank also provides free "EASI" facility (through CDSL) to view account position through internet. Query compliance facility is available at Maha Seva (Customer Care Center). The Bank has added tie up with two Share Broking Companies i.e. Reliance Securities Ltd and Ventura Securities Ltd for Maha-e-trade (Online Share Trading) Services for its customers along with existing Religare Securities Ltd.
In order to add new customers in its fold under Demat, Banks is offering waiver in annual maintenance charges for the Demat Accounts opened under Rajiv Gandhi Equity Scheme for three years.
The Annual Maintenance Charges and Dematerialization charges (for converting Bank's physical shares into electronic form) are waived for staff/Ex-staff and share holders of the Bank. The Bank has also introduced Basic Services Demat Account Facility (BSDA).
All the branches of the Bank are authorized to sell life and non-life insurance products of Life Insurance Corporation of India and United India Insurance Co. Ltd. under corporate agency arrangements, respectively. The Bank has sold 98929 Non-life Insurance Policies and 30554 Life Insurance policies during the year 2013-14. The LIC accredited 198 branches of the Bank as Bima Bank, besides 17 Zones which were declared as BIMA Zone. The Delhi Zone became Double Bima Zone.
The Bank offers group insurance scheme of LIC namely 'Maha Suraksha Deposit Scheme (New One Year Renewable Group Assurance Plan') a life insurance cover of Rs1 lakh for deposit account holders. The Bank offers Maha Swasthya Yojana, a Family Floater Group Mediclaim Policy of United India Insurance Co. Ltd. for its customers.
The Bank earned a commission of Rs. 7.32 crore from life insurance, showing growth of 10 per cent and Rs. 4.12 crore for non-life insurance business during the year 2013-14 showing increase of 18 per cent.
2.11 Mutual Fund Activity
The Bank has a tie-up with 25 AMCs (Asset Management Companies) for selling Mutual Fund products. The mutual fund business mobilized by the Bank earned commission income of Rs. 5 lakh during the year.
2.12 Government Business
During the year 2013-14, 544553 challans of Direct Taxes were collected; similarly 1,89,696 challans of Indirect taxes were collected by the branches. Our Branches are also collecting other state Govt. taxes including GRAS of Maharashtra State and the total number of Challans collected during the Year is 5,41,220. Total commission to the tune of Rs. 2.70 Cr was received on Tax collection business from Central Government and Commission received from states Tax collection business is Rs. 0.72 Cr.
The Bank has started processing and crediting monthly pension payments of more than 1,13,624 Central Government, Defence, Railway and Telecom pensioners at Central Pension Processing Cell (CPPC), Pune. The processing and payment for new PPOs/ corrigendum PPOs Master Data base for central Government pensioners etc are being handled by CPPC. This facilitates faster and accurate payment of pension as well as quick settlement of funds by RBI. Timely complaint redressal system has also been established for pension complaint. The commission on Government Business (Pension) for the Year 2013-14 is Rs. 13.57 Cr.
The unique facility of direct & Indirect taxes & VAT collection of Maharashtra is provided by the Bank, at the branch counter in all branches through Maha e-seva services. E-payment of Taxes facility available for net banking customers is also available for direct / Indirect Taxes / VAT payments (for Govt. of Maharashtra). The tax payment facility has been introduced for e-payment of custom duty & the Maharashtra State taxes are collected through integration in Govt. Revenue Accounting System (GRAS) both online and across the counters. The Bank has added Karnataka and Delhi states for collection of state Government commercial taxes. Bank is offering its services in VAT Collection in U.P in all branches.
2.13 Non Interest Income
The non-interest income stood at Rs. 894.19 crore for the year ended 31.03.2014 as against Rs. 912 crore for the year ended 31.03.2013. Non-interest income (other than profit from sale of investment), increased by Rs. 23.20 crore in the FY 201314, showing a growth of 3.02% over previous year. During the year, income from commission, exchange and brokerage increased by Rs. 53.48 crores from Rs. 491.34 to Rs. 544.82 crores.
2.14 Income, Expenditure and Profitability
The total income of the Bank grew from Rs. 10525.43 crore to Rs. 12850.85 crore indicating a growth of 22.09 per cent during the year.
The detailed income/ expenditure components are as under:
|(Rs. in crore)|
|Particulars||2013-14||2012-13||Variation (per cent)|
|Interest / discount on advances / bills||9187.15||7298.50||25.88|
|Income on investments||2543.03||2231.28||13.97|
|Interest on interbank lending & other Interest||226.48||83.65||170.74|
|Total interest income||11956.66||9613.43||24.37|
|Interest on deposits||7697.04||5879.25||30.92|
|Interest on borrowings||107.93||312.27||-65.44|
|Other Interest expenditure||642.76||388.57||65.42|
|Other Operating expenses||800.99||608.82||31.56|
|Total Non interest expenses||2396.75||1796.64||33.40|
|Total Operating Expenses||10844.48||8376.73||29.46|
|Provisions and Contingencies||
2.15 Financial ratios
|Cost to Income Ratio (percent)||54.43||45.54|
|Return on assets (percent)||0.30||0.74|
|Return on equity (per cent)||5.93||17.32|
|Book value per share (Rs.)||66.69||67.10|
|Profit per Branch(Rs. in lakh)||20.42||43.95|
|Profit per employee (Rs. in lakh)||2.68||5.59|
|Business per Branch (Rs. in crore)||109.61||98.80|
|Business per employee (Rs. in crore)||14.39||12.56|
|Interest income as per cent to Average working funds||9.24||9.33|
|Non Interest income as per cent to average working funds||0.69||0.88|
|Net Interest Margin (per cent)||2.71||3.10|
|Operating Profit as per cent to average working Funds||1.55||2.08|
|Staff expenses as a percent to average working funds||1.23||1.15|
|Dividend (per cent)||10.00||23.00|
|Net worth (Rs. Crore)||
|CRAR (%) (Basel II)||10.79||Nil|
|Of which, Tier I CRAR (%) (Basel II)||7.44||Nil|
2.16 Capital from Government of India
During the year, the Bank received equity share capital amounting to Rs. 800 crore (including share premium of Rs. 622.38 crore) from Government of India (GOI) through allotment of shares on preferential basis. With capital infusion, the share holding of GOI in equity share capital increased to 85.21% as on 31.03.2014.
The Bank's Net worth increased from Rs. 5026.57 crore as on 31.03.2013 to Rs. 6184.11 crore as on 31.03.2014.
2.18 Capital Adequacy Ratio
The Capital Adequacy Ratio stood at 10.79 per cent as on 31.03.2014, against the minimum 9 per cent prescribed by RBI in terms of Basel III norms. The Common Equity Tier I capital adequacy ratio stood at 7.44 per cent.
The Board has recommended Rs. 1 per share (10%) being interim dividend as final dividend for FY 2013-14.
3. ORGANISATION AND SUPPORT SYSTEM
3.1 Branch Expansion
During the year, the Bank opened 162 new branches, the largest number of branches opened by the Bank in a financial year since inception. As on 31.03.2014, the total branch network comprised of 1890 branches spread over 29 states and 4 union territories. The branch network includes specialized branches in the areas of foreign exchange, government business, treasury & international banking, industrial finance, small-scale industry and hi-tech agriculture, pension payment, pension processing, retail credit, Self Help Groups and asset recovery.
Area wise classification of branches as on 31.03.2014 is given in the table below:
|Sr. No.||Classification||As on 31.03.13||As on 31.03.14|
3.2 Human Resources Management
The Bank has put in place a comprehensive HRM Policy that provides the road map for acquiring appropriate & need based human resources, its development through training, job enrichment, reward and recognition for better performance, career progression, welfare and retention.
During the year the Bank recruited 1224 probationary officers and 10 law officers. The Bank has also recruited 487 Clerks during the year.
Inter scale promotions of officers were carried out for promotions to Scales MMGS II and above. Total 1237 officers were promoted to higher scales.
The cadre wise staff position shows that there is net addition of 776 employees during the FY 2013-14. The particulars are as below: