1. Global Economy
1.1. Global economy remained mired in concerns of stagnation and low inflation in 2014.Euro zone, for instance, witnessed another round of easing to obviate deflation risks asthe European Central Bank announced monthly purchases of 60 billion worth securities,beginning March 2015 which could well be carried till September 2016; effectively astimulus of over 1.1 trillion. Global financial stability risks increased in second halfof the financial year (FY) 2014-15, with risks shifting from advanced economies toemerging market economies (EMEs), from banks to shadow banks, and from solvency to marketliquidity risks. Disinflationary forces strengthened as oil and commodity prices dropped.Crude oil prices began a sharp decline since June 2014 and more than halved by the yearend (from US$ 115 per barrel to below US$ 50 per barrel). Although it benefited commodityand oil importing countries, it increased financial risks in some exporting countries andin the oil sector. As a result of these developments, inflation expectations and long-termbond yields have fallen. Meanwhile, expectations of the U.S. policy rates rising in late2015 have sparked rapid appreciation of the US Dollar. The EMEs are caught in these globalcross-currents and face higher risks, as companies that borrowed heavily in internationalmarkets could face balance sheet strains.
1.2. The International Monetary Fund (IMF), in its latest update of World EconomicOutlook (WEO), expects global growth to be 3.5 per cent and 3.7 per cent in 2015 and 2016respectively. It is because of weakening growth prospects in China, Russia, the euro area,and Japan as well as weaker activity in some major oil exporting countries because of thesharp drop in oil prices. The United States is the only major economy for which the IMFhas raised its growth projection. The US Federal Reserve anticipate that real activity islikely to expand somewhat faster than its potential in coming quarters, thereby promotingfurther gains in employment and declines in the unemployment rate.
2. Domestic Economy
2.1. India, with a GDP of US$ 2.1 trillion, however, stands a marked contrast to itsown reflection a year ago. Growth has been rising, fiscal and current account balancesmoderate, exchange rate stable and most importantly inflation has been brought down tolevels conducive to macro stability. 2.2. According to the new 2011-12 base year series ofGDP estimates released by the Central Statistics Office (CSO), growth in real GDP (atmarket prices) in fiscal year (FY) 2013-14 stood at 6.9 per cent as against earlierestimates of 5.0 per cent based on the 2004-05 base year. Further, the CSO has projectedIndias GDP rising to 7.4 per cent in the FY 2014-15 in its advance estimates (AE)released in February 2015.
Weak demand conditions in economy, stabilizing currency, decline in commodity prices,particularly of crude, slower increase in rural wages as also minimum support price (MSP)of food crops, and better food distribution management have brought disinflationarypressures in economy. Wholesale price index (WPI) based build up inflation rate inApr-Mar, FY 2014-15 was (-) 2.3 per cent compared to a build up rate of 6.0 per cent inthe corresponding period of the previous year. Retail level inflation, as measured byconsumer price index (CPI) noted at 5.2 per cent in March 2015, lower than 8.2 per cent inMarch 2014. The CPI excluding food & fuel items, i.e. Core CPI inflation remained at4.1 per cent in March 2015 as against 8.0 per cent in March 2014.
2.4. External Sector
2.4.1. Indias merchandise exports stood US$ 310.5 billion during FY 2014-15,registering a contraction of 2.5 per cent over the same period last year, while importswas US$ 447.5 billion registering a contraction of 0.7 per cent thus leaving a tradedeficit of US$ 137.0 billion in FY 2014-15 which was higher than the deficit of US$ 135.8billion during FY 2013-14. Amid fragile external demand conditions price realizations byexporters have been eroded, despite export volumes going up. With the Indian rupee gainingin real effective terms, export margins are coming under pressure for those exporterswithout substantial imported inputs.
2.4.2. With Indias forex cover to imports rising to above 9 months and currentaccount deficit staying below 2 per cent of GDP, Indian currency has turned more stable.Rupee ended the FY 2014-15 at 62.6/US$ with 4.1 per cent annual loss in value against US$following 10.5 per cent annual loss it incurred in FY 2013-14. In real effective terms,however, the rupee appreciated over its level at the end of March 2014 on account ofpersisting inflation differentials vis--vis trading partners.
2.5. Liquidity Conditions
In the money markets, liquidity situation eased considerably since October 2014 due tostructural and seasonal factors, including deposit mobilization by banks outpacing creditgrowth. The expenditure/transfers by the government also helped in improving the marketliquidity. The shift in the monetary policy stance steered by two cuts in the policy reporate enabled interest rates to ease further during the last quarter of FY 2014-15. Itreflected in the weighted average call rates to remain close to the repo rate during thequarter.
2.6. Banking Aggregates
2.6.1. As on March 20, 2015, scheduled commercial banks (SCBs) deposits andadvances grew by 11.4 per cent and 9.5 per cent respectively on annual basis. SCBsinvestment in SLR securities noted 13.2 per cent annual growth. Credit-Deposit Ratio forthe SCBs stood at 76.5 per cent.
2.6.2. Non-food bank credit increased by 8.6 per cent during the above period of2014-15 as compared with an increase of 14.3 per cent during corresponding period of2013-14. Credit to agriculture and allied activities increased by 15.0 per cent during2014-15, as compared with 13.5 per cent increase during 2013-14. Credit to industryincreased by 5.6 per cent down from an increase of 13.1 per cent during 2013-14.Deceleration in credit growth to industry was observed in all major sub-sectors, barringconstruction. Credit to the services sector increased by 5.6 per cent lower than theincrease of 16.1 per cent during 2013-14, with deceleration observed in all majorsub-sectors. Credit to NBFCs increased by 6.4 per cent during 2014-15 as compared with anincrease of 13.2 per cent during the previous year. Personal loans increased by 15.4 per
2.7.1. Indian markets had a great run as benchmark Sensex gained 24.9 per cent in FY2014-15, its best since FY 2009-10, while the Nifty rose 26.7 per cent. Banking sectorindex, Bankex, meanwhile, noted 43.2 per cent gains in FY 2014-15. If not for thelosses in March 2015, Indian equities would have ended even stronger. Indian indices wereamong the better performing in the world, with significantly attractive valuationsrelative to fundamentals and the cross-country EME experience. Some of these gains werespared during January-March 2015 by pessimism triggered by fears of earlier than expectedreversal in the US interest rate cycle, uncertainty relating to Greece and geo-politicaltensions in the Ukraine and the Middle East.
3. HDR Framework as performance philosophy
Your Bank believes in three pillars that would define its position in the next stage ofgrowth. These are H.D.R - Human Resources, Digital Banking and Risk Management. The HDRFramework would strengthen foundation of customer service excellence as well as goodemployer brand.
3.1. Human Resources: The first pillar is related to empowering our people acrossthe operational networks. Your Bank will strengthen systems that would harness the skillsand insights of people throughout the Bank; that would spark new ideas and enablesimplification of processes and deliverables. Your Bank will invest in training andre-skilling of its employees in a manner which is relevant, efficient and result-oriented.The Bank will strengthen performance management system that clearly distinguishes a goodperformance and creates further opportunities for the individuals in career progression,incentive, placement, etc.
3.2. Digital Deepening: Today, e-savvy banks take greater share of payments made bycustomer. Going forward, the number of transactions facilitated by a bank will determineits market share in deposits. The Bank will endeavour to promote self-initiatedtransactions through Mobile and Internet Banking. With enhanced usage of technointerfaces, the Branches may re-invent themselves as sales-driven centres.
3.3. Risk Management: Your Bank has strong risk management practices which will befurther strengthened. Your Bank will leverage technology to empower the process of riskphilosophy in the Bank, covering all facets of banking covering loan origination,underwriting, collection & monitoring adherence to KYC-AML guidelines. This will alsoencompass deliverables for a risk-return trade-off in all our activities.
4. Resources Management
4.1. The global deposit of the Bank increased by 6.5 per cent from Rs. 2,97,676 croreas on March 31, 2014 to Rs. 3,16,870 crore as on March 31, 2015 showing an absoluteaccretion of Rs. 19,194 crore. CASA portfolio increased by Rs. 4,849 crore from Rs. 87,801crore as on March 31, 2014 to Rs. 92,651 crore as on March 31, 2015 showing a growth of5.5 per cent. The share of CASA to total deposit stood at 29.2 per cent. 4.2. The growthof SB deposits remained better than overall growth in deposits. SB deposits of the Bankincreased to Rs. 71,558 crore as on March 31, 2015 from Rs. 65,098 crore as onMarch 31, 2014, witnessing growth of 9.9 per cent.
Table 7: Resource Mobilization
| || || || ||(Rs. crore) |
|Parameter ||FY 2015 ||FY 2014 ||Annual Growth |
| || || ||Absolute ||% |
|Total Deposit ||316870 ||297676 ||19194 ||6.5 |
|CASA Deposit ||92650 ||87801 ||4849 ||5.5 |
|-Savings Deposits ||71558 ||65098 ||6460 ||9.9 |
|Term Deposit ||224220 ||209875 ||14345 ||6.8 |
4.3. The Bank added 113 lakh CASA accounts during FY 2014-15. In addition, forstrengthening existing relationship with customers, the Bank also activated 13 lakhdormant accounts.
4.4. The Bank launched Tabulous Banking during FY 2014-15, for enhancing customerconvenience. This is tablet-based account opening system where staff of the Bank visitsthe place of individual for opening accounts. The Bank opened 35,000 accounts throughTabulous Banking currently active in 9 cities.
4.5. Moreover, the Bank was able to reduce high cost deposits during FY 2014-15. At theend of March 2015, share of high cost deposits in total deposits stood at 5.8 per centcompared to 12.6 per cent in the corresponding period previous year.
5. Credit Management
5.1. Gross advances of the Bank increased to Rs. 2,62,757 crore as of March 31, 2015,recording annual growth of 12.1 per cent during FY 2014-15. The Bank has focus on retail,agriculture and MSME sectors, which we call RAM sectors as these providestable and consistent growth opportunities for the economy. These sectors contributesignificant share in employment, exports and overall growth, too. RAM sectors nowcontribute 48.9 per cent of domestic advances as on March 31, 2015, higher than 44.3 percent as on March 31, 2014.
| ||Table 8: Advances |
| || || || ||(Rs. crore) |
|Parameter ||FY 2015 ||FY 2014 ||Annual Growth |
| || || ||Absolute ||% |
|Gross Advances ||262757 ||234332 ||28425 ||12.1 |
|Retail Advances ||31658 ||24931 ||6727 ||27.0 |
|Agriculture ||31574 ||25614 ||5960 ||23.3 |
|Advances || || || || |
|MSME Advances ||54755 ||45372 ||9383 ||20.7 |
|RAM sectors ||117987 ||95917 ||22070 ||23.0 |
5.2. Centralized Processing Centres for MSMEs (SARALs) and Retail loans (ULPs) alongwith usage of credit information reports facilitated significant improvement inunderwriting capabilities of the Bank. Further, the focus on RAM segment facilitated indiversifying the risks, while loans to these sectors generally carry lower risk weights,thereby also facilitating capital conservation. As a result, ratio of advances riskweighted assets (RWA) to gross advances of the Bank declined to 75.7 per cent as of March2015 compared to 77.4 per cent in March 2014, leading to lower burn of capital. The RAMfocus also boosts the objective of meeting priority sector lending targets.
6. Retail Lending
6.1. Retail lending portfolio saw an impressive growth of 27.0 per cent during theyear, from Rs. 24,931 crore as on March 31, 2014 to Rs. 31,658 crore as on March 31, 2015.Retail loans as per cent to domestic advances increased from 11.5 per cent as on March 31,2014 to 13.1 per cent as on March 31, 2015. The retail portfolio diversified further asshare of home loans reduced in total retail loans to 59.3 per cent from 61.9 per cent ason March 31, 2014. The shift towards other segment of retail was mainly mortgage loanwhich is secured and high yielding.
| ||Table 9: Retail Loans || || |
| || || || ||( Rs. crore) |
|Schemes ||FY 2015 ||FY 2014 ||Annual Growth |
| || || ||Absolute ||% |
|Home Loans ||18783 ||15424 ||3359 ||21.8 |
|Auto Loans ||2642 ||2199 ||443 ||20.1 |
|Education Loans ||2482 ||2219 ||262 ||11.8 |
|Mortgage Loans ||5390 ||3732 ||1658 ||44.4 |
|Others ||2361 ||1357 ||1003 ||73.9 |
|Total Retail Loans ||31658 ||24932 ||6726 ||27.0 |
The Bank introduced Smart Save variant under Union Home scheme, wherein theborrower can withdraw an amount to the extent of over flow in the housing loan accountfacilitating saving in interest rate for borrower having surplus funds without loss ofliquidity.
7.1. Agriculture is one of the thrust areas for the Bank. With focus on credit deliveryto agriculture, agriculture advances increased by Rs. 5,960 crore, registering a growth of23.3 per cent. As on March 31, 2015, agricultural advances stood at Rs. 31,574 crorecovering 21.7 lakh borrowers. Direct agriculture advances recorded a growth of 26.9 percent constituting 11.9 per cent of ANBC. During FY 2014-15, total disbursement of Rs.18,990 crore was made under special agriculture credit plan (SACP) registering an increaseof 14.8 per cent over FY 2013-14. During the financial year, 2.9 lakh new farmers wereextended finance by the Bank and 2.6 lakh additional kisan credit cards were issued withcredit facility of over Rs. 3,481 crore. 86.3 per cent out of 4.23 lakh eligible farmers,i.e. 3.7 lakh farmers were issued ATM enabled KCC as on March 2015.
8. Micro, Small & Medium Enterprises
8.1. During the year, your Bank has ensured increased in the base of MSME clientele andhassle-free flow of credit to this sector by assuring quick turnaround time (TAT), creditdelivery at affordable prices and customized products as per the requirements of theclients. While the Bank has large network for reaching out to MSME clientele across thecountry, in order to have special focus, your Bank has 700 dedicated business bankingbranches (BBBs) for credit delivery to MSMEs and 20 SARALs (Central Processing Centres)for speedy appraisal and sanction of MSME loans. These BBBs & SARALs have beenestablished in potential centres across the country, so as to accelerate delivery ofcredit to MSMEs and for quicker decisions on sanction of loans to MSMEs. Your BanksMSME portfolio stood at Rs. 54,755 crore registering an annual growth of 20.7 percent at the end of the FY 2014-15. The share of the MSME lending constituted 23.1 per centof the Banks domestic advances. 8.2. Micro & Small Enterprises constitute 73.1per cent of the total MSME portfolio. During the Financial Year 2014-15 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. MSE portfolio stood at Rs.40,031 crore, as on March 31, 2015, registering a growth of 22.7 per cent.
8.3. Your Bank has also formulated five cluster specific schemes for financing Ceramic/ Vitrified Tiles (Rajkot), Footwear Manufacturer (Kozhikode), Merchant Traders (Bijapur),Cotton/Groundnut Traders/Processors (Rajkot), and Wheat Flour Mills (Chandigarh) duringthe period to boost up exposure under MSME segments. With this, the Bank now offers 43client specific schemes to its MSME customers.
9. Corporate Credit
9.1. Your Bank has always supported the growth of large scale service &manufacturing enterprises which have nation-building roles. However, large corporate,unlike MSME have differing needs and therefore, the Bank has a dedicated large corporatevertical under which there are 9 specialized branches across the country for catering totheir needs. These are called Industrial Finance Branches. 9.2. However,corporates having threshold limits of above Rs. 200 crore and all Infrastructureproposals of borrowers of any other branch across the country, including their groupaccounts irrespective of number of accounts, are under purview of large corporatevertical.
|Table 10: Mid and Large Corporate Advances || |
| || || ||(Rs. ||crore) |
|Particulars ||FY 2015 ||FY 2014 ||Growth |
| || || ||Absolute ||% |
|Mid & Large ||120471 ||116175 ||4296 ||3.7 |
|Corporate Advances || || || || |
|w/w IFB Advances ||78719 ||73496 ||5223 ||7.1 |
10. Priority Sectors
10.1. The Bank continues to accord importance to varied goals under nationalpriorities. Priority sector advances registered a growth of 9.4 per cent and stood at Rs.87,387 crore as on March 31, 2015 constituting 40.0 per cent of the adjusted net bankcredit (ANBC).
Table 11 : Priority Sector Lending*
| || || || ||(Rs. crore) |
|Schemes ||FY 2015 ||FY 2014 ||Annual Growth || |
| || || ||Absolute ||% |
|Adjusted Net Bank Credit ||218562 ||197646 ||20916 ||10.6 |
|Priority Sector ||87387 ||79869 ||7518 ||9.4 |
|As % to ANBC ||40.0 ||40.4 ||-40 bps || |
|Agriculture ||35175 ||28769 ||6406 ||22.3 |
|As % to ANBC ||16.1 ||14.6 ||153 bps || |
|Direct Agriculture ||25340 ||19875 ||5465 ||27.5 |
|As % to ANBC ||11.6 ||10.1 ||153 bps || |
* Including RIDF amount
10.2. Lending to Specific sectors
10.2.1.Women Beneficiaries: With a view to promote entrepreneurs among the womenand to make them self sufficient, your Bank encourages credit to women entrepreneurs. Asof March 31, 2015, the Bank has financed 9.3 lakh women beneficiaries. Total outstandingloans to women beneficiaries have improved from Rs. 11,657 crore to Rs. 14,262 crore i.e.6.5 per cent of ANBC against benchmark of 5.0 per cent set by GoI/RBI. During the FY2014-15, the Bank has launched a new scheme named as "Union Nari Shakti" forwomen entrepreneurs engaged in any kind of activity coming under the Micro & SmallEnterprise (MSE). The scheme featured low interest MSE loan with zero processing fee andno collateral of loan up to Rs. 1 crore.
10.2.2.Minority Communities: In line with Government of India directives on welfareof minority communities, your Bank is extending finance to the minority communities suchas Sikhs, Muslims, Christians, Zoroastrians, Buddhists and Jains. During FY 2014-15, theBank has recorded growth of Rs. 2,202 crore to minority community borrowers, registering agrowth of 26.6 per cent to record an outstanding of Rs. 10,482 crore.
10.2.3.Weaker Sections: Your Bank has been actively participating in financing forweaker sections of the society. The Banks finance to weaker section has improvedfrom Rs. 20,334 crore to Rs. 23,069 crore, registering a growth of 13.5 per cent toreach a level of 10.6 per cent of ANBC against benchmark of 10.0 per cent set by GoI/RBI.
10.3. Self Help Groups
10.3.1. The scheme of micro credit through Self Help Groups (SHGs) is an effectiveinstrument providing assistance to the poor by creating self employment opportunities andmaking them credit worthy. During the year, the Bank has formed 40,111 SHGs and creditlinked 27,485 SHGs. As of March 2015, outstanding loans to SHGs stood at Rs. 1,707 crore.
10.3.2. Considering the role played by SHGs in empowerment of women, the Bank isfocusing on formation and financing of women SHGs (WSHGs). As per the directives of theMinistry of Finance, the Bank is implementing the WSHG scheme for women empowerment in 4identified districts of the country viz. Rewa, Sidhi, Chandauli & Jaunpur. 10.3.3. TheBank is also implementing the interest subvention scheme under national rural livelihoodmission (NRLM) for the benefit of Women Self Help Groups in 150 identified Districts.
10.4. Rural Self Employment Training Institute (RSETI)
10.4.1. With the aim of mitigating the unemployment problem among the rural youth, theBank has established 14 RSETIs in as many districts where the Bank has lead bankresponsibility. During FY 2014-15, these RSETIs conducted 345 training programmes andimparted training to 9862 candidates. Out of the above trained candidates, 6172 candidateshave been settled with gainful employment with a settlement rate of 62.6 per cent.
10.4.2. As per assessment of the Ministry of Rural Development, out of 14 RSETIs, 10RSETIs received "AA" grade while 4 RSETIs received "AB" grade duringthe FY 2013-14.
10.5. Lead Bank Scheme
10.5.1. Your Bank has the lead bank responsibility in 14 districts spread over 4 statesas given below:
Table 12: Position under Lead Bank Scheme
|S. ||State ||District |
|No. || || |
|1 ||Bihar ||Khagaria and Samastipur |
|2 ||Kerala ||Ernakulam and Idukki |
|3 ||Madhya Pradesh ||Rewa, Sidhi and Singrauli |
|4 ||Uttar Pradesh ||Azamgarh, Bhadohi, Chandauli, |
| || ||Ghazipur Jaunpur, Mau, and |
| || ||Varanasi |
10.5.2. The Bank has a network of 634 branches in these lead districts. In FY 2014-15,the Banks deposits in these districts increased to Rs. 31,126 crore and advances toRs. 10,760 crore as against level of Rs. 25,977 crore & Rs. 8,914 crore underdeposits and advances respectively in the previous year.
11. Financial Inclusion
11.1. The Bank made continuous and sustainable progress in the areas of financialinclusion. The Bank has 231.6 lakh FI accounts (including BC model branchless accounts)with deposit of Rs. 1,235.4 crore, out of which 45.9 lakh accounts were opened underPradhan Mantra Jan Dhan Yojana (PMJDY) during FY 2014-15. Under PMJDY, your Bank wasallotted 5,407 rural sub-service areas (SSAs) comprising 18,396 villages.
|Table 13: Progress under Pradhan Mantri Jan Dhan Yojana || |
|(PMJDY) || |
|Parameters ||Achievements of the Bank |
|Villages covered ||18396 |
|Sub Service Areas ||5407 |
|Urban Wards ||2581 |
|Accounts opened till March ||Rs. 46 lakh |
|31, 2015 || |
|Deposits ||Rs. 348 crore |
|RuPay Cards issued ||45 lakh |
|Aadhaar Seeding ||12 lakh |
11.2.1. The Bank has disbursed Micro Loans of Rs. 1,956.7 crore under BC Model toJLGs/SHGs. Total Micro loans outstanding as of March 2015 are Rs. 971.8 crore.
11.2.2. Under BC Model, the Bank has devised two products for lending to Self-HelpGroups and Joint Liability Groups and are successfully implemented with no/meagre overdue.
a) Shree Kshetra Dharmashtala Rural Development Project (SKDRDP), SHG Groups: UnderShree Kshetra Dharmashtala Rural Development Project (SKDRDP), 70,905 groups have beenlinked with total disbursements of Rs. 1,344.47 crore. As on March 31, 2015, outstandingis Rs. 816.8 crore with no overdue as SKDRDP provides 100 per cent loan recoveryassurance.
b) Pragati: (Women JLG Groups): This scheme is operational with support of FINO.The Bank has extended loans of Rs. 651.2 crore to 1,03,122 women JLGs wherein outstandingas on March 31, 2015 is Rs. 155.0 crore out of which Rs. 0.4 crore is overdue. FINOprovides 99 per cent loan recovery assurance.
11.3.1. The Bank has opened 15.80 lakh accounts over biometric cards and on mobileplatform under the Micro Remittance Project. During March 2015, 1.60 lakh number oftransactions of remittances amounting to Rs. 26.08 crore were handled.
11.4. Direct Benefit Transfer for LPG (DBTL)
11.4.1. Government of India is implementing direct credit of subsidy in the accounts ofLPG beneficiaries. The scheme is also being implemented in lead districts of the Bank viz:Ernakulam and Idukki in Kerala with effect from September
01, 2013 and Rewa in Madhya Pradesh with effect from January 01, 2014. The Governmenthas now again started crediting DBTL Gas Subsidy directly in the Bank accounts in 54Districts from November, 15, 2014 and pan India from January 01, 2015.
11.5. Direct Benefit Transfer (DBT)
11.5.1. Government of India has started implementing direct benefit transfer (DBT) in43 districts from January 01, 2013 and extended it to 78 more districts from July 01,2013. Your Bank has presence in 113 districts. The transactions for DBT and DBTL are asunder.
| ||Table 14: Progress of DBT and DBTL || |
|Period ||Transaction Initiated at Union Bank branches received from other banks ||Credit |
| ||Total Amt in Success Amt in Records Records lakh Rs. Records lakh Rs. received received as as Destination ||Amt in lakh Rs. |
| ||Sponsor Bank || |
| ||Bank || |
|FY 2014- 2015 ||18,133 387.38 15,106 307.36 4707045 ||16,348.27 |
11.6. Financial Literacy Initiatives
11.6.1. Your Bank has so far established 26 Financial Literacy & CounsellingCentres (FLCCs). All in our 14 lead districts and other districts of Kerala through theseFLCCs 40,113 individuals have been counselled in 2,168 village camps organised to createawareness about financial literacy and banking services amongst rural folk. 17,589 personswere brought to banking fold by openi