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United Bank of India

BSE: 533171 | NSE: UNITEDBNK ISIN: INE695A01019
Market Cap: [Rs.Cr.] 1,813.35 Face Value: [Rs.] 10
Industry: Banks - Public Sector

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Director's Report

The Board of Directors have pleasure in presenting the 64th Annual Report of the Bank along with the Audited Balance Sheet, Profit and Loss Account and the report on Business and Operations for the year ended March 31, 2014 (FY – 2013-14).



Global Economy:The Global economy has broadly strengthened and is expected to improve further in 2014–15, with much of the impetus coming from advanced economies. Inflation in these economies, however, has underperformed projections, reflecting still-large output gaps and recent commodity price declines. Activity in many emerging market economies has disappointed in a less favorable external financial environment, although they continue to contribute more than two-thirds of global growth.

Indian Economy:

India's economic growth rate for the FY 2013-14 is estimated at 4.9 per cent which shows better performance than the previous year, mainly due to improved performance in the agriculture and allied sectors.

Gross Domestic Product:

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation had estimated the growth of GDP at 4.9 per cent for 2013-14 as compared to the growth rate of 4.5 per cent in 2012-13.

The highlights of the performance of GDP in the third quarter Q3 (October-December) of 2013-14 released by Ministry have been summarized below:

The GDP for Q3 of 2013-14 was estimated at Rs.14.78 lakh crore, as against Rs.14.12 lakh crore in Q3 of 2012-13, showing a growth rate of 4.7 per cent over the corresponding quarter of last year.

The economic activities which registered significant growth in Q3 of 2013-14 over Q3 of 2012-13 were, 'finance, insurance, real estate and business services' at 12.5 per cent, 'community, social & personal services' at 7.0 per cent, 'electricity, gas & water supply' at 5.0 per cent, 'trade, hotels, transport and communication' at 4.3 per cent and 'agriculture, forestry & fishing' at 3.6 per cent.

Sectoral growth of Credit:

As per the sectoral deployment of credit data released by the RBI, incremental non-food credit witnessed significant growth in 2013-14. The rise in incremental non-food credit in 2013-14 was particularly significant during August and September 2013. Liquidity tightening measures of RBI in July 2013 made the market borrowing via commercial paper (CPs) and other debt instruments expensive. Thus, corporates avoided raising money via debt instruments and moved towards bank financing for their working capital needs. Bank creditrose sharply by 20.1 per cent compared to preceding year and reached Rs.6.96 trillion. This was the first instance such a rise was noticed in the incremental non-food credit in last three years.

Owing to the healthy rise in incremental non-food credit, growth in outstanding non-food credit recorded a growth of 14.3 per cent in 2013-14 from 13.5 per cent in the preceding year. However, it remained lower than the levels that were seen during the 2008-12 period. Non-food credit had risen by 18.1 per cent per annum between 2008-09 and 2011-12.

On a year-on-year (y-o-y) basis, non-food bank credit increased by 14.3 per cent in March 2014 as compared with the increase of 13.5 per cent in March 2013.

* Credit to agriculture and allied activities increased by 13.5 per cent in the year ending March 2014 as compared with the increase of 7.9 per cent in March 2013.

* Credit to industry increased by 13.1 per cent during the year 2013-14 as compared to 15.1 per cent during 2012-13. Deceleration in credit growth was observed in respect of mining and quarrying, textiles, wood and wood products, petroleum and coal product, chemical and chemical products, glass and glassware, cement and cement products, basic metals, engineering, gems and jewellery and infrastructure.

* Credit to the services sector increased by 16.1 per cent in March 2014 as compared to the increase of 12.6 per cent recorded in March 2013.

* Credit to Non Banking Financial Companies (NBFCs) increased by 13.2 per cent in March 2014 as compared with the increase of 11.6 per cent in March 2013.

* Personal loans increased by 15.5 per cent in March 2014 as compared to the increase of 14.7 per cent in March 2013.


Reversing its downward trend, the annual rate of inflation as measured by the Wholesale Price Index (WPI) rose by 5.7% in the month of March 2014. Mirroring the trend in WPI, CPI for the month of March '14 rose by 8.31% compared with 8.1% in February '14.

Primary articles basket witnessed a marginal increase in inflation from 7.4% in March '13 to 7.7% in March '14. Inflation in food articles rose to 9.9% in March '14 compared with 8.6% inflation in March '13. However, the rise in food inflation was offset to a substantial extent by the fall in inflation in the non food articles from 9.3% in March '13 to 4.6% in March '14.

Fuel and power inflation which had been on the higher end over the last six months rose to 11.2% in March '14 compared to 7.8% in the corresponding month of the previous year. This was the highest inflation rate for the industry in the last six months.

Inflation in manufactured products had dropped to 3.2% in March '14 from 4.3% in March '13. This was reflective of the fact that the manufacturing sector has had a slack run in FY14.

Average Inflation FY 2013-14: Inspite of the high WPI inflation which persisted for the larger part of FY14, the average WPI inflation for FY14 stood much lower at 5.92% as opposed to the 7.36% of inflation in FY13. Average inflation in primary articles remained unchanged at 9.9% in FY14 vis--vis 9.8% in FY13. Inflation in food articles escalated to 12.8% in FY14 compared with 9.9% in FY13 and inflation in non food articles has decelerated to 5.6% from 10.6% it averaged in FY13. Fuel and power inflation on average had fallen only marginally to 10.1% from 10.4%. Average inflation in manufactured products reduced sharply from 5.4% in FY13 to 2.9% in FY14. This further reiterated the apparent slowdown of the manufacturing sector in the country.

External Sector:

A large trade deficit made the Indian economy vulnerable to external sector shocks in the first half of the FY 2013-14 and saw the Indian currency touching a record low of almost 69 per dollar in August. However, a pickup in exports and curbs on gold imports helped India to rein in its current account deficit in the last two quarters of 2013-14.

The trade deficit reached a five-month low in March, totaling USD 10.5 billion, which was just below the USD 10.4 billion shortfall recorded in the same month last year. In the 12 months up to March, the trade deficit totaled USD 138.5 billion, which marked an improvement over the USD 189.5 billion shortfall seen in the same period of last year.March's result reflected a contraction in both imports and exports. Overseas sales contracted 3.2% over the same month last year, which was up from the 3.7% contraction recorded in February. Imports decreased 2.1% in March (February: -17.1% year-on-year). This marked the softest pace in seven months following six months of double-digit contractions, which were driven by the strong government-imposed curb on gold imports.

The 12-month sum of exports up to March totaled USD 312.4 billion. Accordingly, India's overseas sales came in 3.9% short of its export target of USD 325 billion for FY 2013-2014.

Government managed to bring the current account deficit (CAD) in 2013-14 down to $32 billion, or 1.7 per cent of gross domestic product (GDP), compared with the $45 billion estimated in the interim Budget in February and $35 billion projected towards the end of March.

Economic Environment in West Bengal

West Bengal is the 4th largest State in India in terms of population with over 91 million people. Percentage growth in population for the period 2001-2011 was 13.9%. It holds a large and rich human capital. The area of the State is 88,752 sq. km. and the density of population is 1029 per sq. km, which is 2nd in the country.

Against the national GDP growth of 4.9% in 2013-14, Bengal's GSDP growth is estimated to be 7.7% contributed by a growth of 5.28% in agriculture, 9.58% growth in Industry and 7.8% growth in Services.

* West Bengal holds the 5th position in Social Sector Expenditure in India.

* The city of Kolkata has the 3rd highest GDP, based on Purchasing Power Parity amongst all Indian cities.

In respect of Institutional Finance, the State of West Bengal has a robust, dynamic and resilient banking infrastructure. In recent times, the State has shown significant increase in both deposits and credit.

State's Robust Banking Infrastructure

• The State of West Bengal enjoysthe presence of 26 Public Sector Banks, 18 PrivateBanks, 3 Regional Rural Banks, 18 Co-operative banks and 8 Foreign Banks operating across the State.

• The Credit-Deposit Ratio (CDR) of the State is around 64%, creating huge potential for credit availability for industrial activities.

United Bank of India, owing its origin to the State, continuesto hold a key position in the economic growth of the State. The Bank has been playing a leading role in extending financial services to large number of people through a network of 789 branches, spread across the State of West Bengal.

In March 2013-14, the total business of the Bank in the State stood at Rs.93178 crore, comprising of total deposit at Rs.68112 crore and advance at Rs.25066 crore which accounted for 51.91% of Bank's total business in the country.


The Annual Monetary Policy for 2013-14 was formulated by Reserve Bank of India in an environment of incipient signs of stabilization in the global economy and prospects of a turnaround, albeit modest, in the domestic economy. The monetary policy stance for 2013-14 was intended to:

* continue to address the accentuated risks to growth;

* guard against the risks of inflation pressures re-emerging and adversely impacting inflation expectations, even as corrections in administered prices release suppressed inflation; and

* appropriately manage liquidity to ensure adequate credit flow to the productive sectors of the economy.

The year 2013-14 saw the following key policy measures announced by the RBI

A. Changes in CRR, SLR and Repo Rate during the year:

Review Date CRR SLR Repo Reverse Repo MSF Bank Rate
03.05.2013 4.00 23.00 7.25 6.25 8.25 8.25
15.07.2013 4.00 23.00 7.25 6.25 10.25 10.25
20.09.2013 4.00 23.00 7.50 6.50 9.50 9.50
07.10.2013 4.00 23.00 7.50 6.50 9.00 9.00
29.10.2013 4.00 23.00 7.75 6.75 8.75 8.75
28.01.2014 4.00 23.00 8.00 7.00 9.00 9.00

B. Apart from the above monetary policy announcements, the

RBI also announced the following development and regulatory policies;

1. Basel III Regulation on Countercyclical Capital Buffer:

A    s part of the Basel-III capital framework, an internal Working Group (Chairman: Shri B. Mahapatra) was constituted to operationalise the countercyclical capital buffer framework in India and the draft report was placed on the Reserve Bank's website on December 02, 2013 for inviting comments/ suggestions from various stakeholders.

2. Framework for Dealing with Domestic Systemically Important Banks

The Basel Committee on Banking Supervision (BCBS) provided a framework for dealing with domestic systemically important banks (D-SIBs) in October 2012. The D-SIBs framework is principle-based and provides broad guidance to national authorities on assessment of the systemic importance of banks and additional capital requirements of D-SIBs. RBI placed a draft of the proposed framework for D-SIBs on the Reserve Bank's website on Dec 02, 2013 for inviting comments/suggestions from various stakeholders.

3. Guidelines on Stress Testing

The Reserve Bank issued guidelines on stress testing on 02 December 2013. These guidelines required banks to have a sound stress testing policy which will determine liquidity risk, interest rate risk, credit risk and foreign exchange risk under stressed scenarios.

4. Un hedged Foreign Currency Exposures of Corporates

The Reserve Bank of India introduced incremental provisioning and capital requirements for banks' exposures to entities with un hedged foreign currency exposures from April 1, 2014.

Un hedged foreign currency exposures (UFCEs) of corporates are an area of concern as the corporates which do not hedge their foreign currency exposures can incur significant losses due to exchange rate movements. These losses may reduce their capacity to service the loans taken from the banking system and, thereby, affect the health of the banking system.

5. Periodicity of Payment of Interest on Rupee Savings/ Term Deposits

As per extant instructions, banks are required to pay interest on savings deposits and term deposits at quarterly or longer intervals. As all commercial banks are now on core banking platforms, RBI decided to give banks the option to pay interest on savings deposits and term deposits at intervals shorter than quarterly intervals.

6. Licensing of New Banks in the Private Sector

The Reserve Bank of India (RBI) released the final guidelines for issuing new bank licences on 22nd February 2013, paving the way for corporate houses to enter the banking sector. The RBI assessed the quantitative and qualitative aspects of the 27 applicants which included analysis of the financial statements of the key entities in the group, 10-year track record of running their businesses, proposed business model for the bank as well as the applicants' demonstrated capabilities for running a bank, among others.Thereafter, the applications were referred to the High-Level Advisory Committee (HLAC) headed by former RBI Governor Bimal Jalan., which submitted its recommendations to the RBI on February 25, 2014.The RBI issued bank licences on 2nd April 2014 after a gap of a decade to IDFC and Bandhan Financial Services Pvt Ltd. It had last awarded licences to Kotak Mahindra Bank and Yes Bank in 2003-04.

7. Mode of Presence of Foreign Banks in India - Scheme of Subsidiarisation

From a financial stability perspective, RBI is in the process of finalizing a scheme of subsidiarisation of foreign banks in India, guided by the two cardinal principles of reciprocity and single mode of presence. The Wholly Owned Subsidiaries (WOSs) would be given near-national treatment, including in the opening of branches.While it will not be mandatory for existing foreign banks (i.e., banks set up before August 2010) to convert into WOSs, they will be incentivised to convert into WOSs by the attractiveness of the near-national treatment afforded to WOSs. The initial minimum paid-up voting equity capital or net worth for a WOS shall be Rs.5 billion.


The global economy in 2014 appears to be in a better shape than what it was in 2012 and 2013. The IMF forecasts global growth to pick up to 3.6% in 2014 from approximately 2.9% in 2013.

US economy is on a strong recovery path being helped by the reviving job market, increase in manufacturing activity and better conditions for export.

The Eurozone climbed out of recession in the second half of 2013. The European Commission estimates that the negative impact of fiscal austerity on growth will come down from 0.75% in 2013 to 0.2% of Eurozone GDP in 2014. However, weak private sector growth and high unemployment continue to limit recovery and growth is projected to be around 1 percent in 2014.

Overall, growth in emerging market and developing economies is expected to increase to 5.1 percent in 2014. Portfolio shifts and some capital outflows are likely with Fed tapering. Increased financial market and capital flow volatility and exchange rate adjustments remain a concern.

Resurgence of exports, prospects of revival in the global economy, unclogging of domestic policy logjam and moderation in inflation observed recently, point to a better outlook for the Indian economy in 2014-15 vis--vis 2013-14. In the World Economic Outlook update released by the IMF in January 2014, growth projection for India for the year 2014 has been kept at 5.4% over the estimated growth of 4.9% during the year 2013-14. RBI expects the real GDP of the country to grow in a range of 5 to 6 per cent in 2014-15 with downside risks to the central estimate of 5.5 per cent.

The Reserve Bank's policy stance is firmly focused on keeping the economy on a disinflationary glide path that is intended to hit 8 per cent CPI inflation by January 2015. However, there are downside risks stemming from a less-than-normal monsoon due to possible el nino effects; uncertainty on the setting of minimum support prices for agricultural commodities and the setting of other administered prices, especially of fuel, fertiliser and electricity; the outlook for fiscal policy; geo-political developments and their impact on international commodity prices.

In 2013-14, CAD is estimated to have fallen to $45 billion (2.5% of GDP) from $88 billion (4.8% of GDP) inthe previous year. The improvement in CAD is a result of; (i) the curbs on gold imports, ii) a sharp slowdown in domestic demand pulling down consumption and investment goods' imports, and (iii) a weak rupee and (iv) recovery in US benefiting exports.Despite the sharp reduction in CAD this year, the nature of improvement is unsustainable and the Current Account gap is expected to widen to about 3.0% of GDP during the year 2014-15.


Bank's performance during the year was in line with the slackened business growth and increase in stressed assets at the industry level. The main performance indicators of growth, profitability, efficiency, productivity, and solvency are as under:

The Bank has registered an Operating Profit of 2061.74 crore during the financial year 2013-14 compared to Rs. 2049.91crore in the financial year 2012-13, registering a growth of Rs.11.83 crore (0.58%). However, due to higher provisioning requirement for rise in NPA and staff pension and gratuity requirement, Bank suffered a Net Loss of Rs (-)1213.45 crore in FY 2013-14 compared to a net profit of Rs. 391.90 crore earned last year.

Gross Profit per Employee worked out to Rs.12.50 lakh for the year.

Key Financial Ratios (%) March 2013 March 2014
Cost of Funds 7.24 7.23
Yield on Funds 9.73 9.44
Cost of Deposits 7.08 7.14
Yield on Advances 11.31 10.83
Yield on Investments 7.91 8.00
Spread as a % of AWF 2.39 2.10
Net Interest Margin (NIM) 2.67 2.28
Operating Expenses to AWF 1.45 1.40
Return on Avg. Assets (RoAA) 0.38 -0.99
Return on Equity 7.20 -35.56
Business per Employee (Rs. In Crore) 10.83 10.67
Net Profit per Employee (Rs. In Lakh) 2.53 -7.35
Book Value 115.83 84.88

AWF – Average Working Fund

Income and Expenditure Analysis

Interest income of the Bank during 2013-14 increased by Rs.1347.79crore (14.57%) from Rs. 9251.50 crore in the year 2012-13 to Rs. 10599.29crore. Non-interest income increased by Rs.140.3crore (13.15%) from Rs.1066.57crore in the financial year 2012-13 to Rs.1206.87crore in the financial year 2013-14. The Cost of Deposits increased to 7.14% due to uptrend in interest rates during the year. The Yield on Advances declined to 10.83% as at March 2014 compared to 11.31% as at March 2013.

Interest Expenditure increased to Rs. 8036.47 crore with a lower Y-o-Y increase of 18.8% compared to 23.4% registered during last year. The Bank contained its increase in operating expenses at 13.57% amounting to Rs.1707.95 crore. The Net interest income recorded a growth of Rs.75.6 crore (3.04%) during the year and the Net Interest Margin (NIM) worked out at 2.28%.

Capital & Reserves

Net Worth of the Bank was assessed at Rs.4188 crore as on March 31, 2014. Total paid-up capital of the Bank was Rs.1355 crore while the reserves and surplus stood at Rs.3928 crore. The Government shareholding in the Bank accounted for at 88% at March 2014.

(Rs. in crores)

Composition of Capital March 2013 March 2014
Basel-II Norms Basel-II Norms Basel-III Norms
Risk Weighted Assets 62429 60060 61007
Tier 1 Capital 5242 4359 3987
Of which CET1 Capital NA NA 3987
Tier 1 Ratio (%) 8.40 7.26 6.54
Of which CET1 ratio (%) NA NA 6.54
Tier 2 Ratio (%) 2037 2523 1994
Tier 2 Capital 3.26 4.20 3.27
Total Capital 7279 6882 5981
CRAR (%) 11.66 11.46 9.81

Capital Adequacy Ratio under Basel-III norms was assessed at 9.81% with Tier-1 Ratio reaching 6.54% as at March 2014. Capital Adequacy Ratio under Basel-II norms was assessed at 11.46% with Tier-1 Ratio at 8.40% in the same period. The Bank has adequate headroom available under both Tier-1 and Tier-2 options to raise capital to support business growth momentum.



During the year 2013-14, Total Deposits of the Bank increased from Rs. 100651 crore as on 31st March, 2013 to Rs. 111510 crore, registering a growth of 10.79 per cent.Bank's Savings deposits grew by 9.16 per cent and Bank's share of CASA deposits to total deposits stood at 36.98 per cent as on March 31, 2014. With a view to reduce the cost of deposits, the Bank shed a substantial amount of bulk deposits including certificate of deposits. Thrust had also been given to maintain the share of CASA deposits to total deposits at 40%.

The Bank's customer acquisition campaign resulted in growth of customer base of the Bank from 2.72 crore as at March 2013 to 3.05 crore as at March 2014.


The total credit portfolio of the Bank went down by Rs.1726 crore (-2.48%) and reached Rs. 67982 crore as on March 31, 2014.

Credit deposit ratio stood at 60.96% as on March 31, 2014. Bank achieved the PRISEC Advance target of 40% of ANBC. Intensive marketing of retail credit products brought considerable growth in Retail Advances. The muted growth in Advances is mainly due to the restrictions on disbursement of loans beyond Rs.10 crore to any single borrower or group as advised by RBI in November 2013 considering the deterioration in the asset quality and capital adequacy position.

The Bank is taking all necessary steps to recoup its asset quality. The bank has adequate capital buffer for provision purposes. Moreover, bank is taking necessary steps to improve and strengthen its capital adequacy position and will be approaching RBI for relaxation in credit dispensation.

Bank's non-food credit declined from Rs.68154 crore to Rs.66480 crore, while food credit came down from Rs.1554 crore as on March 31, 2013to Rs.1502 crore at the end of March, 2014.

Total Business

During 2013-14, the total business of the Bank grew by 5.36% to reach Rs.179492 crore as against Rs.170359 crore during the previous financial year.

Productivity, as measured by business per employee, increased to Rs.10.83 crore compared to Rs.9.87 crore a year ago.

SWOT analysis of the Bank


* Bank has a Pan India presence spread in 28 states and 5 union territories

* Maintaining healthy CASA Ratio of 37% - 40% year after year.

* Customer acquisition remains a top priority of the Bank and customer base crossed the milestone of 3 crore this financial year.

* Strong customer loyalty in the ethnic areas of East & North East India has provided the Bank with stability and has won appreciation and awards in Customer Service on national platform

* Growing fee based and other non-interest income provides better overhead efficiency.


* Bank's advance has posted a negative growth but non-performing assets have increased. Despite good recovery and upgradation, the Gross NPA to Total Advances ratio still continues to remain high and affects earnings.

* Capital base needs to be strengthened further to support credit expansion and ensure compliance to BASEL-III norms.

* Low credit off take due to industrial downturn in Eastern and North Eastern part of the country where bank is having strong presence


* Recent branch expansion in industrially active states will open new vistas for business expansion

* Growth in demand for housing sector opens up scope for Retail Credit expansion

* Industrial climate is likely to improve with stable government in place.


* Bank is trying hard to retain borrower base, in view of restrictions on further financing.

* Ba

Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Deepak Narang , Executive Director

Sanjay Arya , Executive Director

Bikramjit Shom , Company Secretary

Sanjib Pati , Director (Workmen Employee)

Company Head Office / Quarters:

United Tower,
11 Hemanta Basu Sarani,
West Bengal-700001
Phone : West Bengal-91-033-2248472/22483857 / West Bengal-
Fax : West Bengal-91-033-22489391 / West Bengal-
E-mail : investors@unitedbank.co.in
Web : http://www.unitedbankofindia.com


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