Andhra Bank Merged Directors Report

We place before you the directors Report of the Bank for the financial year ended March 31, 2020.

#MDStart#

MANAGEMENTS DISCUSSION & ANALYSIS

Economy Overview:

In the year 2019-20, Global growth recorded its weakest pace since the global financial crisis a decade ago, registering a growth of 2.9% in 2019 compared to 3.6% in the previous year. Rising trade barriers and associated uncertainty weighed on business sentiment and activity globally. Both emerging and developing market economies as well as advanced economies slowed down. Towards end of the financial year, global growth has hit unprecedented depths of despair amidst Covid-19. Global Lockdown due to the pandemic saw major indices of manufacturing and services across countries declining to record lows on the back of supply-side disruptions. Global energy prices plunged, global financial markets dramatically sold-off equity and debt in March 2020 which led to crashing of benchmark equity indices and tightening of bond yields. Governments and Central Banks have taken unprecedented fiscal and monetary policy measures to mitigate the adverse impact of Covid-19.International Monetary Funds (IMF) projects global output in 2020 to contract by 3 per cent with output of advanced countries contracting more than emerging market and developing economies. Turning to Indian economy, even before the onset of Covid-19 pandemic, the country was experiencing a slowdown. The countrys GDP growth for FY20 at 4.2% was lower compared to growth of 6.1% in FY19.Severalfiscaland monetary actions were initiated by the Government and RBI respectively, to lessen the adverse impact on financial system due to COVID-19 related disruptions. On the policy front, the year saw many measures undertaken by the government and the regulator. On part of the government, a mega amalgamation exercise was undertaken and 10 Public Sector Banks (PSBs) were amalgamated into 4 large entities, and your Bank is poised to emerge as the 5th largest Bank in the country with amalgamation of Andhra Bank and Corporation Bank into Union Bank of India, with effect from 01.04.2020. Similarly, on the regulatory front, the introduction of External Benchmark Linked Lending Rates (EBLR) to all Retail Segments will go a long way in improving the monetary transmission.

Amalgamation:

Initiating major reforms in the PSBs, a mega amalgamation exercise is taken up in FY 2020. Accordingly, 10 PSBs have been amalgamated into 4 Banks. As part of this initiative, Andhra Bank and Corporation Bank have been amalgamated into Union Bank of India, w.e.f. 01.04.2020, making the amalgamated entity, the 5th largest PSB in the country.

The amalgamation exercise aims to reap the scale and scope economies from increased branch network, customer base and synergies on account of cost rationalization & technological assimilation. After amalgamation, the Bank will become stronger with more than 9500 Branches, 13300 plus ATMs, an employee strength of over 75,000 and with a customer base of over 120 million. The amalgamation will also provide impetus for adoption of the best practices among the banks to improve customer service, productivity, leading to higher profitability.

PERFORMANCE HIGHLIGHTS OF THE BANK

Business: For the financial year ended 31st March 2020, Banks Business stood at Rs 3,91,264 Crore as against Rs 3,98,511 Crore as on 31.03.2019.

Deposits: Banks Total Deposits stood at Rs 2,12,609 Crore at as on 31.03.2020, as against 2,19,821 Crore as on 31.03.2019.The share of CASA deposits (Current and Savings) in Total Deposits stood at 34.55%.

• Current Deposits stood at Rs 11,333 Crore as on 31.03.2020 as compared to Rs 10,230 Crore as on 31.03.2019, growing at a rate of 10.78%.

• Savings Bank Deposits increased to Rs 62121 Crore as on 31.03.2020, from 58, 768 Crore as on 31.03.2019, growing at a rate of 5.71%.

• Term Deposits stood at 1,39,155 Crore as on 31.03.2020 as against 150,823 Crore as on 31.03.2019.

Advances: Gross Bank Credit stood at Rs 178655 Crore as on 31.03.2020 as against 178690 Crore as on 31.03.2019.

• Credit to Agriculture Sector (including RIDF & non-priority) stood at Rs 37,673 Crore as on 31.03.2020 as against 36,691 Crore as on 31.03.2019.

• MSME portfolio stood at Rs 29,834 Crore as on 31.03.2020 as against Rs 32,876 Crore as on 31.03.2019.

• Retail Credit portfolio stood at Rs 43,614 Crore as on 31.03.2020 as against Rs 40,985 Crore as on 31.03.2019.

Classification of Advances portfolio ( Rs in Crore)

Category	31.03.19	31.03.20	Variance
1. Food Credit	834	1046	25.42%
2. Non-Food Credit (2.1 to 2.4)	177856	177609	-0.14%
2.1 Agricultural Advances	36961	37673	1.93%
2.2 Advances to MSME Sector	32876	29834	-9.25%
2.3 Retail Credit (incl. DLs)	40985	43614	6.41%
2.4 Large Industries & Other Advances	67034	67533	0.75%
GROSS BANK CREDIT (1+2)	178690	178655	-0.02%
Of which, Lending to Priority sector	78318	76441	-2.40%

Area-wise distribution of Aggregate Deposits & Advances as on 31.03.2020 is set forth in the following Table.

( in Crore)

Sl. No.	Category of Branches	Deposits 31.03.20	% to total	Advances 31.03.20	% to total
1	Rural	16815	7.91%	22540	12.62%
2	Semi-Urban	31133	14.65%	28004	15.68%
3	Urban	47551	22.37%	29722	16.64%
4	Metro	117045	55.07%	98338	55.06%
5	TOTAL (1+2+3+4)	212545	100.00%	178605	100.00%

Profitability:

Total Income for the financial year 2019-20 of the bank stood at Rs 22,527 Cr as compared to Rs 20,977 Cr for FY 2018-19. The Non-interest income of the bank stood at Rs 2743 Cr. Operating Profit of the Bank stood at 5093 Cr compared to 5023 Crore in the previous year. However, on account of higher provisioning towards ageing of NPAs, the Bank incurred a Net Loss of Rs 1324 Cr for FY 2019-20 as compared a Net Loss of Rs 2786 Cr for FY 2018-19. The Total interest income of the Bank stood at 19,784 cr as compared to Rs 18,932 Cr of the previous year. Of which, Interest Income from Advances registered an increase by 7.43% from 14173 Cr during 2018-19 to Rs 15,226 Cr in 2019-20. Interest Income from investments stood at Rs 4,396 Cr in 2019-20. Total Expenses during the financial year 2019-20 is Rs 17,435 Cr against 15,954 Crore registered during the previous year. The interest expenditure increased by 4.68 % from 12,224 Cr in 2018-19 to Rs 12,795 Cr in 2019-20. The, Operating Expenses stood at 4,639 Crore, registering an increase of 24.37% over the previous year.

Profitability Highlights Revenue, Expenditureand

( in Crore)

	2018-19	2019-20	Abs Gr	% Gr
Total Interest Income	18932.22	19784.18	851.96	4.50%
Total Interest Expenditure	12223.99	12795.49	571.5	4.68%
Net Interest Income	6708.23	6988.69	280.46	4.18%
Other Income	2045.04	2742.94	697.90	34.13%
Profit on sale of Investments	83.72	730.75	647.03	772.85
				%
Core Other Income	1961.32	2012.19	50.87	2.59%
Operating Expenses	3730.15	4639.03	908.88	24.37%
Operating	5023.12	5092.60	69.48	1.38%
Provisions and Contingencies	7809.24	6416.73	-1392.51	-17.83%
Net Profit	-2786.12	-1324.13	1461.99	-52.47%

APPROPRIATIONS: After making various provisions, the net loss for the year 2019-20 has been arrived at 1324.13 Cr. Brought forward balance in P/L Account is Rs - 6253.12 Cr. The appropriations are given below.

Appropriations ( in Crore)	2018-19	2019-20
Appropriation out of Net Profit	-2786.12	-1324.13
Balance brought forward	-3463.08	-6253.12
Transfer to Statutory Reserves	0.98	96.53
Transfer to Capital Reserve	2.94	289.58
Transfer to Revenue Reserves	0	0
Transfer to Special Reserve	0	0
Transfer to proposed Dividend (incl. Dividend Tax)	0	0
Profit carried over to Balance Sheet	-6253.12	-7963.36

KEY FINANCIAL RATIOS: Net Interest Margin (NIM) stood at 3.32 % compared to 3.31% in the previous year. Cost to Income Ratio stood at 47.67% as compared to 42.61% for the previous year. Earnings per Share (EPS) stood at- Rs 4.43 and Book Value per Share (BVPS) stood at 23.92. Gross Non-Performing Assets to Gross Advances stood at 16.07% and Net Non-Performing Assets to Net Advances stood at 4.92% for the financial year ended 31.03.2020.

Key Financial Ratios

Parameter	31.03.2019	31.03.2020
Yield on Advances (%)	8.54%	8.55%
Cost of Deposits (%)	5.53%	5.59%
Net Interest Margin (%)	3.31%	3.32%
Yield on Funds (%)	7.44%	7.43%
Cost of Funds (%)	4.80%	4.81%
Cost-to-income Ratio (%)	42.61%	47.67%
CRAR Basel III (%)	13.68%	11.12%
Return on Assets (%)	-1.09%	-0.50%
Earnings Per Share ()	-19.01	-4.43
Book Value Per Share ()	34.29	23.92
Net NPA (%)	5.73%	4.92%
Gross NPAs (%)	16.21%	16.07%

CAPITAL & NET WORTH

( in Crore)

Parameter	31.03.2019	31.03.2020
Equity Capital	2884.49	3,095.54
Reserves Surplus	10280.64	9,132.36
Net worth of the Bank (Tangible)	9889.48	7403.14

Return on Networth: Return on Net worth has improved to -0.18 as on 31.03.2020 from -0.28 as on 31.03.2019. Reasons for changes are as under:

a) Reduction in year on year loss from Rs 2,786.13 crores for FY 2018-19 to Rs 1,324.13 crores for FY 2019-20 b) Infusion of Capital of Rs 200 cores on 04.03.2020 by Government of India and Rs 256.80 on 24.04.2019 by way of ESPS.

c) Draw down from Statutory Reserve towards interest of Additional Tier-I Perpetual Basel III Compliant bonds by an amount of Rs 70.64 crore during the year ended 31.03.2020. changes Operating Profit Margin (%):There are no significant in Operating Profit Margin (%) as compared to the immediately preceding financial year.

Net Profit Margin (%):Net Profit Margin (%) has improved to -5.88% as on 31.03.2020 from -13.28% as on 31.03.2019. Reasons for improvement in profitability is as follows: a) Provision for NPA decreased by Rs 1,218 crores in FY 2019-20. b) Depreciation on Investments decreased by Rs 100 crores in FY 2019-20. c) Interest on advances increased by Rs 1,054 crores in FY

2019-20.

CAPITAL ADEQUACY: As per the guidelines issued by Reserve Bank of India, the start date for implementation of Basel III guidelines in India is with effect from April 1, 2013. Accordingly, the Bank has been assessing its Capital Adequacy as per Basel III prescriptions. The total Capital Funds of the Bank as on March 31, 2020 stood at Rs 14,688.49 Crs and the Capital Adequacy Ratio at 11.12% is above the required RBI prescribed norm of 10.875%.

CRAR Position	31 March 2020
	(Basel III)
CET1	6.49%
AT1	1.67%
Total Tier-I	8.16%
Tier-II	2.96%
Total CRAR	11.12%

Priority Sector Lending : Priority Sector advances of the bank stood at 76441 Crore and registered a negative growth of 2.40 % (Y-O-Y) as on 31.03.2020. The absolute decrease over March. 2019 is Rs 1877 Crore. Total Priority sector advances net of PSLC (Priority Sector Lending Certificates) is Rs 64931 Cr. Bank has made net sale of Rs 15310 Cr under PSLC General / SF-MF through e-kuber portal of RBI and earned a premium / commission from PSLCs /IBPCs of 152.74 Cr during the FY 2019-20.

Priority Sector Lending

(in Crore)

Category	2019-20
1. Priority Sector Advances (2 to 7)	76441
2. Agriculture-Priority (2.1 + 2.2)	34925
2.1 Agriculture Loans-Priority	34140
2.2 Eligible Investments (RIDF)	785
3. Micro, Small and Medium Enterprises	29834
3.1 Eligible Investment in SIDBI & MUDRA	281

Category	2019-20
4. Educational Loans	1576
5. Housing Loans (includes Indirect Finance& Investment in NHB)	10072
5.1 Eligible Investment in NHB	148
6. Social Infrastructure	8
7. Renewal energy and others	26
8. Priority Sector Advances (net of PSLC)	64931
8.1 PSLC Sales (General + SF/MF)	15310
8.2 Purchase of Micro Enterprises	1800
8.3 Purchase of General	2000
9. Agriculture-Priority (net of PSLC)	28525
9.1 PSLC Sales (SF/MF) / Agri	6400

Statutory Priority Sector Targets / Sub Targets and their Achievements 2019-20: (Yearly - on quarterly average basis).	Targets	Achieve- ments
I. Priority Sector Advances	40.00	40.09%
(% to ANBC)
II. Agricultural Credit	18.00	18.19%
(% to ANBC)
III. Small & Marginal Farmers	8.00	11.28%
(% to ANBC)
IV. Micro Enterprises	7.50	7.51%
(% to ANBC)
V. Direct Lending to Non- Corporate farmers	12.11	14.25%
(% to ANBC)
VI. Weaker Section Advances	10.00	14.11%
(% to ANBC)

Credit to Agriculture-Priority

• Agricultural advances (Agri-Priority) of the bank stood at Rs 34925 Crore at the end of March. 2020, registering a growth rate of 3.56 % (Y-O-Y). The absolute increase over March 2019 is Rs 1200 Crore. Agri. Priority advances (after net sale of PSLC SF/MF & PSLC-Agri of 6400 Cr) are at 28525 Cr.

• Lending to Small & Marginal Farmers Loans to Small & Marginal Farmers as on 31.03.2020 was 18033 Cr (after net sale of 6400 Crs under PSLC SF/MF)

• Lending to Self Help Groups Bank has extended financial assistance to 256435 Self Help Groups (SHGs) with total exposure of 8092 Crore as on 31.03.2020.

• Total credit extended to women beneficiaries as on 31.03.2020 was at Rs 29075 Cr i.e., 16.27 % of Net Bank Credit as against norm of 5%.

• Credit to Weaker Sections Advances to Weaker sections (after net sale of 6400 Cr under PSLC SF/MF) stood at

22722 Crore.

• Credit to Minorities is on 31.03.2020, bank is having 335 branches in Minority dominated Districts. Of the Banks total network across the country, the percentage of Branches in minority dominated Districts stood at 8.33 % (i.e., Rs 6309 Crs) as on 31.03.2020.

• NPA under Agriculture Out of total Agricultural advances of 37673 Cr (including Agri-Non priority) as on 31.03.2020, NPA under Agriculture is Rs 1879 Cr which is 4.99% of Gross Agril. Advances as against 4.65 % during previous year.

Credit to MSME Sector:

Parameter	31.03.19	31.03.2020	YoY Growth
( in crore)
Micro	11958.68	10487.05	- 1471.63
Micro & Small Enterprises	24628.83	22348.14	- 2280.69
Total MSME	32876.40	29834.01	- 3042.39

• Lending to Micro Enterprises is at 7.51% (average) of Banks total ANBC for the year ended March 2020 which has surpassed the statutory sub target of 7.50% stipulated by RBI.

• During the FY 2019-20, Branches have sanctioned 2,76,430 (including 212054 PMJDY-Over Drafts) MUDRA loans with aggregate sanction limit of 2009.78 crore and an amount of 1914.10 crore is disbursed as on 31-03-2020.

• With a view to increase transactions under TReDS enabling MSMEs to overcome the problem of delayed realization of their receivables, bank has set-up an exclusive TReDS cell under MSME Department HO.

• As on 31.03.2020, Bank has discounted 786 bills amounting to Rs 259 Crs through TReDS Cell, HO with an income of 5.22 Crs.

Retail Lending: The Banks Retail Credit portfolio stood at 40,985 crores as on 31.03.2019 as against Rs 43,614 crores as on 31.03.2020 with year on year growth of Rs 2,628 Crs. The segment has registered a growth of 6.41% on YOY basis including deposit loans and credit card.

• Housing loans portfolio has increased from Rs 20,105 Crs as on 31.03.2019 to Rs 20,951 Crs as on 31.03.2020 with an absolute growth of Rs 847 crs registering a growth rate of 4.21% on yoy basis.

• Non Agricultural Gold Loans (NAGL) portfolio has increased from Rs 3,062 Crores as on 31.03.2019 to Rs 3,870 Crores as on 31.03.2020 with an absolute growth of Rs 808 Crores registering a growth rate of 26.40% on yoy basis.

• Other Retail Loans Portfolio has increased from Rs 5,698 Crores as on 31.03.2019 to Rs 7,022 Crores as on 31.03.2020 with an absolute growth of Rs 1,324 Crores registering a growth of 23.23% on yoy basis.

Advances Industry wise Exposure: Bank has loan exposure to various sectors like Housing Loans, NBFCs, Power, Iron & Steel, textiles, etc. Exposure to top 10 industries constitutes 48.53% of previous quarter Fund Based exposure as on 31.03.2020, signifying a diversified loan portfolio.

Industry wise Exposure of Advances

( in Crore)

Sl. Industry	Ceilings as % of Total Advances of previous Quarter	Actual Fund based Exposure (Credit+ Investment+ derivative) as on 31.03.2020	FB Exposure as % of Total Exposure (Credit + Investment + derivative) of Previous Quarter i.e. 31.12.19
1 Housing Loans (Direct+Indirect)	18.00%	27797.26	14.34%
2 NBFC (including HFCs)	12.00%	19769.84	10.20%
3 Power	12.00%	13949.06	7.20%
4 Construction& Contractors	5.00%	8278.24	4.27%
5 Iron & Steel	7.00%	5766.77	2.98%
6 Textiles	6.00%	4693.25	2.42%
7 Rice Mills	3.00%	4416.09	2.28%
8 Petroleum Products	5.00%	4020.67	2.07%
9 Commercial Real Estates	4.00%	2708.79	1.40%
10 Engineering	3.00%	2659.28	1.37%
Total		94059.25	48.53%

INVESTMENTS: In terms of RBI guidelines, the Bank is required to invest in SLR securities to the extent of 18.25% of NDTL. Banks investment decisions are based on risk-return trade-off and bank is scrupulously following the regulatory and internal guidelines. Statutory prescriptions relating to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) are complied with and being monitored on a continuous basis. Risk Management in treasury operations has been strengthened further by undertaking stress testing and back testing of the investment portfolio at quarterly intervals, besides daily monitoring of Duration and Value-at-Risk (VaR). External rating migration of the bonds and debentures portfolio is also being monitored on quarterly basis. As on 31.03.2020, the Investments (net of depreciation) decreased by 2.58% and stood at Rs 61331.17 Crore, down from 62953.09 Crore as on 31.03.2019. SLR maintained as on 31.03.2020 was Rs 44238.66 Crore, which constituted 19.41% of Net Demand and Time Liabilities (NDTL). Interest income from investments decreased from Rs 4558.05 Crore in FY 2018-19 to Rs 4358.10 Crore in FY 2019-20. Profit on sale of investments stood at Rs 730.75 Crore during FY 2019-20, while it was 83.72 Crore during FY 2018-19.

Classification of Investments

(in Crore)

PARTICULARS	FY 2018-19	FY 2019-20	Var (%)
1. Government Securities	57479.76	57620.02	0.24
2. Other Approved Securities	0.00	0.00	0.00
3. Shares	515.17	346.30	-32.78
4. Debentures & Bonds	2512.22	2280.76	-9.21
5. Subsidiaries and / or Joint Ventures	359.16	360.18	0.28
6. Others (Mf, VCFs, SRs)	2086.78	723.91	-65.31
TOTAL (1 to 6)	62953.09	61331.17	-2.58

Strategic Investments:

• Joint Venture in Insurance: India First Life Insurance

Company Ltd was incorporated on 19.06.2008 having shareholding of 44%, 30% and 26% by Bank of Baroda, Andhra Bank and Legal & General Insurance, UK respectively. Carmel Point Investments India Private Limited acquired 26% stake from Legal & General Middle East Limited ("L&G") of UK. Our investment in the life insurance venture is 187.50 Crore. The joint venture commenced business on 16.11.2009.

• Banking Joint Venture in Malaysia: M/s. India

International Bank (Malaysia) Bhd. (IIBMB) was incorporated in Malaysia on 13.08.2010 with a shareholding of 40%, 25% and 35% by Bank of Baroda, Andhra Bank and Indian Overseas Bank respectively. The Banks stake in the venture is 25%, amounting to RM 82.50 Million (book value Rs 143.28 Crore), in a total subscribed capital of RM 330 Million (approximately Rs 578.00 Crore @ 1 RM = Rs 17.5150 as on 31.03.2020). The joint venture commenced business on 11.07.2012.

Treasury & Forex Business: The Bank is an ‘Authorised Dealer, to deal in foreign exchange business through 57 designated ‘B category branches of the Bank. Systems have been put in place for management of country risk, exchange risk and other foreign exchange risks. The country risk exposures for single country risk limit and aggregate risk limits for the group of countries under each risk category are fixed and are being monitored on daily basis.

• During FY 2019-20, the Bank recorded a merchant turnover of Rs 31,982 Cr in Forex, as compared to Rs 37,733 Cr during FY

2018-19

• During the FY 2019-20, the profit on Forex transactions is Rs 270.97 Cr, when compared to Rs 308.19 Cr during the FY 2018-19.

• The Bank recorded Inter-Bank turnover of Rs 10,72,145 Cr during FY 2019-20, when compared to Rs 11,44,818 Cr during FY 2018-19.

• Export finance of the Bank stood at Rs 3,434 Cr. as on 31.03.2020, when compared to Rs 3,742 Cr. as on 31.03.2019.

CREDIT CARD BUSINESS: Our Bank is a Pioneer in Credit Card Business, both as Issuer and Acquirer (merchant Business) since 1981. Our Card base increased to 3,03,962 as against card base of 3,01,234 for the Year ended March 2019.The total card dues of Credit Cards has increased from 443.64 Crores as on 31st March 2019 to Rs 462.91 Crores as on 31st Mach 2020.The turnover of Credit Cards has increased from Rs 1,690.34 Crores for the Year ended March 2019 to Rs 1,774.75 Crores for the Year ended March 2020.The Division has made a net profit of 66.12 Crores for the Year ended March 2020 showing a growth rate of 5.91% as against Rs 62.43 Crores for the Year ended March 2019.

MERCHANT BANKING SERVICES:

The Bank is having the following two Registrations with SEBI:

1. Debenture Trustees

2. Bankers to an Issue

The Bank is not undertaking any activities as Category I Merchant Bankers or Debenture Trustees and Merchant Banking registration was surrendered in 2017-18. The Bank is attending to the requests and redressing the grievances of the shareholders of the Bank with regard to equity and dividend related issues, in coordination with the Banks Registrars & Share Transfer Agents, M/s MCS Share Transfer Agents Limited, Mumbai.

• Raising of equity capital for the Bank: During the financial year 2019-20, the Bank has raised equity of Rs 200 crore from Government of India on preferential basis. The Bank has also raised Rs 192.60 crore by way of allotment of Ten Crore Equity Shares to eligible employees of the Bank under ANDHRA BANK EMPLOYEES STOCK PURCHASE

SCHEME at a discounted price of Rs 19.26p. per share. The said shares have been allotted on 24.04.2019.

• Raising of Debt Capital of the Bank: During the financial year 2019-20, the Bank has not issued any debt bonds.

• Rating of Debt Bonds and Certificate borrowings of the Bank: The Bank is availing the services of M/s CARE Ratings India Limited and M/s CRISIL Limited for rating of the Debt Bonds and CD issues of the Bank.

• Payment of annual interest on the debt capital raised by the Bank: The Department is making the payment of annual interest to the bondholders as on the respective due dates.

• Payment of dividend on the equity shares: NIL

• Holding of General Meetings: The 19th Annual General Meeting of shareholders of the Bank was held on 29.07.2019 and obtained their approval for adoption of annual accounts of the Bank for the FY ended 31.03.2019. Department also conducted Extra-ordinary General Meeting on 26.02.2020 for approval of shareholders for issue of shares to Government of India on preferential basis to the tune of Rs 200 crore

• Compliance with SEBI Regulations/ Guidelines and

Provisions of Listing Regulations: The Bank has complied with the SEBI Regulations/ Guidelines issued from time to time. Bank is complied with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

• Transferring the Unpaid/Unclaimed Dividend to Investor Education and Protection Fund (IEPF): In terms of the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Act, 2006 (which has come into force from 16.10.2006), the amount of dividend remaining unpaid or unclaimed or unencashed for a period of seven years is requested to be transferred to the Investor Education and Protection Fund (IEPF) established by the Central Government under Section 125 of the Companies Act, 2013. During the FY 2019-20, the Bank has transferred unclaimed/unpaid dividend amount pertaining to the year 2011-12 to the Investor Education and Protection Fund (IEPF).

Secretarial Audit: Pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI Circular dated 08.02.2019, M/s. D. Hanumanta Raju & Co., Practicing Company Secretaries had been appointed as the Secretarial Auditor of the Bank for the FY 2019-20. The Secretarial Audit of the Bank was conducted for the full year in respect of the matters as prescribed in the said circular and as set out in the Secretarial Audit Report for the financial year 2019-20 which is provided as an annexure to this report.

The Secretarial Audit firm has not given any qualification in their report but has given some observations / suggestions to improve the Corporate Governance practices followed by the Bank. A gist of the same is given hereunder:

There are four vacancies on the Board of the Bank under Section 9(3)(h) and one vacancy each under Section 9(3)(e) and Section 9(3)(f) of The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (Act) which are to be nominated by the Central Government.

The Nomination Committee and Remuneration Committee of the Bank are constituted separately on the basis of RBI and Ministry of Finance circulars respectively.

During the year 2019-2020, Reserve Bank of India in exercise of the powers conferred under Section 47A (1) (c ) read with the Sections 46(4) (i) and 51(1) of Banking Regulation Act, 1949, has imposed a monetary penalty of 25 lakhs on the Bank for non- compliance with certain provisions of directions issued by RBI on Know Your Customer (KYC) norms / Anti Money Laundering (AML) Standards and opening of Current Accounts.

At the outset, the management is thankful for the comments, observations and suggestions of the Secretarial Audit team. Being a Nationalised Bank, the composition of the Board is governed by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 and subject vacancies are required to be filled up by the Central Government. The position of vacancies was intimated on regular basis to the Government of India.

BANCASSURANCE & FEE-BASED PRODUCTS: The Bank has been constantly focusing on augmenting non-interest income through diversification of income streams by taking up marketing of life and non-life insurance products, Mutual fund products, Depository Services, Direct taxes, Commercial Taxes, Municipal Taxes, Utility payments, Payment gateway services, Auto-Debit facilities etc.

• Life Insurance: Our Bank along with Bank of Baroda and

Legal & General Group Plc of UK has formed a joint venture life insurance company named India First Insurance Co Ltd and it was formally launched in the month of March 2010. Now M/s Carmel Point Investments India Private Limited has acquired the shareholding of Legal & General group in 2018-19.During the financial year 2019-20, total New Business premium (including Retail and Group business) of Rs 210.89 crore was mobilized. Renewal premium of Rs 381.95 crore was collected upto 31.03.2020. Bank earned commission of Rs 24.32 crore from sale of Life Insurance Policies.

• Non-Life Insurance:The Bank has a tie up with M/s United India Insurance Co Ltd for General Insurance and Health Insurance, M/s Reliance General Insurance Co Ltd for General Insurance and has also tied up with M/s ManipalCigna Insurance Co Ltd for Health Insurance. During the year the Bank has mobilized the premium of Rs 242.94 crore and earned a commission of Rs 36.48 crore under General and Health Insurance.

• Payment Gateways and Mutual Funds:The Bank is having a tie-up with 12 Payment Gateways and 11 Mutual Fund companies.Bank has earned a commission of Rs 1.61crore.

• Fee Based Income: Bank has earned fee based income of Rs 237.14 crore.

• Depository Services: Bank is offering Depository Services to the public under the brand name of "AB Demat". The Bank is a Depository Participant (DP) with Central Depository Services (India) Limited (CDSL) as well as with National Securities Depository Limited (NSDL). The Bank has opened 190 Demat a/cs in FY 2019-20 and earned a commission of 42.28 Lakh IT Initiatives: During FY 2019-20 your Bank has taken the following I.T. initiatives to improve Customer Service:

• FEBA- Finacle E Banking Application new features added: Aadhaar mapper status facility is enabled for retail Internet Banking custome This facility provides Bank name with which the Aadhaar Number is mapped at NPCI. The prerequisite is that, the customers Aadhaar number should be fed in the customer master under Value added services. Addition is validated with OTP through registered mobile.

• Mobile Banking Application (UPI):Andhra Bank ONE UPI

Android application is integrated with M/s MSEWA API for purchase of gift cards, coupons and recharges. Application is available for customers from 19th Mar 2020.

• Extending Interest subvention for KCCFI (Fisheries) and KCCAH (Animal Husbandries) schemes and related Reporting formats: For the year 2019-20 Government extended the interest subvention to Fisheries and Animal Husbandry Farmers also (Up to 2 lakhs). DIT customized the interest subvention process flow by including KCC accounts in Fisheries and Animal Husbandry.

• Initiating application status to the borrower on submission of application as SMS alert:DIT customized a new menu LOANMIS for capturing the fields like Application received date, borrower name, Loan Amount, Application status etc., in CBS. SMS alert will be sent to the borrower mobile number given in the loan application. SMS alert will be sent on completing entry process of application and at the stage of sanction/Rejection of application.

• NPCI API services like Account Information Fetch, PAN card seeding check, Aadhaar seeding at NPCI mapper: NPCI has provided some value added services to banks in the form of API for providing better customer services at Bank/Branch level with respect to NACH related Activities.Following APIs published by NPCI has been implemented by eAB:

Obtaining "PAN" by giving account number as input

Getting Account status (For other bank Account)

Request for account holder name (For other bank Account)

Aadhar Seeding/Deseeding at NPCI mapper.

NETWORK EXPANSION: As on 31.03.2020, Bank had 6671 Delivery Channels consisting of 2874 Branches, 4 Extension Counters and 3793 ATMs including BNAs/ CRs spread over 26 States and 3 Union Territories. The Bank has 44 Specialized Branches catering to the needs of the specific segments of clientele.

Population Group Wise classification of Branches

Category	Number	% to total
1 Metro	712	24.77
2 Urban	652	22.68
3 Semi Urban	763	26.55
4 Rural	747	26.00
TOTAL	2874	100

The Bank had 44 Specialized Branches, as detailed hereunder:

	Category of Specialized Branches	No. of Brs.
1	Specialised SME Branches	17
2	Specialised Argicultural Finance Branches	1
3	Specialised Agri - Hitech Branches	6
4	Specialised Housing Finance Branches	4
5	Specialised Personnel Banking	4
	Branches
6	Specialised NRI Branches	1
7	Corporate Finance Branches	2
8	Auto-Tech Finanace Branch	1
9	Overseas Branch	1
10	Asset Recovery Management Branches	6
11	Small B Branch	1
	TOTAL	44

Presence in Minority-Dominated Districts: At the end of 31.03.2020 we are having 335 branches in Minority dominated Districts. Of the Banks total network across the country, the percentage of Branches in minority dominated Districts stood at 11.60 % as on 31.03.2020.

Andhra Bank Rural Development Trust: Andhra Bank Rural Development Trust is running 14 Rural Self Employment Training Institutes in A.P (9), Telangana (2), Odisha (2), & Kerala (1) states and imparting need based training for capacity building/entrepreneurial development and dissemination of knowledge to farmers, SHG women, Rural unemployed youth and artisans. ABRDT also running 1 Skill Development Institute in RangaReddy Dist., Telangana. Since inception, 190412 candidates have been trained through 6649 programs by the Institutes and around 78.59% of the trained candidates are engaged in gainful ventures. 55.08% of settled candidates are credit linked by the Bank branches. During the year FY 2019-20, the institutes imparted training to 9115 candidates through 351 programs. All 12 RSETIs under RSETI scheme of MoRD awarded with highest rating "AA" by Ministry of Rural Development, Govt. of India for the year 2018-19. Andhra Bank has received Best Performing Bank Award for RSETIs (2nd Rank) for the year 2018-19. Sri Kul Bhushan Jain, Executive Director of the Bank received the Award from Sri Narendra Singh Tomar, Honble Union Minister for Agriculture & farmers Welfare, Rural Development and Panchayati Raj, Govt. of India at NASC, PUSA, New Delhi in a grand National Awards Distribution function organized by the Ministry of Rural Development, Govt. of India on 19.12.2019.NIRED Rajam, one of the RSETIs sponsored by Andhra Bank which is situated in Srikakulam District, Andhra Pradesh received Best performing RSETI award for the year 2018-19 from MoRD, Govt. of India on 19.12.2019.

QUALITATIVE ASPECTS:

Risk Management: The Bank had a comprehensive "Integrated Risk Management Policy" for the management of Credit risk, Market risk and Operational risk as per the guidance notes/ guidelines issued by the Reserve Bank of India. The Department is preparing and reviewing the following policies on annual basis. i. Credit Risk Rating Policy ii. Model Risk Policy iii. Credit Risk Data Management Policy iv. Credit Risk Management Policy v. Credit Risk Mitigation and Collateral Management Policy vi. Risk Based Pricing and Performance Management Policy. vii. Operational Risk Management Policy viii. Market Risk Management Policy ix. Asset Liability Management Policy x. Integrated Risk Management Policy xi. Integrated Investments & Forex Policy

Apart from the above, the following policies are also framed by the department:

1. Stress Testing Policy

2. ICAAP Policy

3. Disclosure Policy

4. Outsourcing policy Non-IT activities

5. Policy on hedging of foreign currency exposures of the borrowe All the policies shall be reviewed annually.

Credit Risk:

Credit Risk Management Committee is responsible for implementation of the Credit policies approved by the Board and RMC. The Bank has a well-defined ‘Loan Policy duly approved by the Board prescribing standards for presentation of credit proposals, financial covenants, rating standards and benchmarks, delegation of credit approving powers, prudential limits on large credit exposures, asset concentrations, standards for loan collateral, portfolio management, loan review mechanism, risk concentrations, risk monitoring and evaluation, pricing of loans, provisioning, regulatory/legal compliance, etc. Bank also is having in place the Credit Risk Management Policy, Credit Risk Mitigation & Collateral Management Policy, Credit Risk Rating Policy, Loan Recovery and NPA Management Policy. The Bank has in place comprehensive risk rating system for various categories of exposures. Bank has established a Rating cell for assigning internal ratings for all exposures of Rs 5 Crore and above. The Rating cell vets the internal rating given by the branch / Zonal office / Circle Office and assigns Rating cell ensures comprehensive rating coverage, integrity of rating process and proper data maintenance. The Bank utilizes industry reports from CRISIL and the industry risk score service from CRISIL Research. Credit risk Cell is computing MCLR on monthly basis.

Market Risk: Market risk implies possibility of loss arising out of adverse movements of market determined rates and prices. The objective of market risk management is to avoid excessive exposure of Banks earnings and equity to such losses and to reduce Banks exposure to the volatility inherent in financial instruments such as securities, foreign exchange contracts, equity and derivative instruments, as well as balance sheet or structural positions. The Bank has in place a well-defined ‘Market Risk Management Policy and an organizational structure for market risk management functions. The Bank manages market risk through ‘Asset-Liability Management (ALM) policy and ‘Investments/Forex policy.

A high level Executive Committee viz. Asset-liability Committee (ALCO) oversees the ALM in the Bank and deliberates on liquidity and interest rate scenario in the market and decides upon the pricing of various products. ALCO regularly monitors the identification, measurement, monitoring and mitigation of market risk in liquidity, interest rates, equity and forex areas. The ‘liquidity risk is measured and managed through ‘gap analysis for maturity mismatches based on residual maturity. For assets and liabilities, which are of non-maturity nature, Bank is conducting behavioural studies and factoring the observations in the gap analysis. The behavioural study findings are subjected to back-testing and are validated regularly. Prudential limits are fixed for net gaps and also for cumulative gap up to one year and these limits are measured and monitored regularly. Liquidity profile of the Bank is also measured regularly through various liquidity ratios and monitoring of the same is done with the help of internal limits fixed thereon.

The ‘interest rate risk is monitored on a regular basis through ‘Maturity gap analysis and ‘Duration gap analysis. Tolerance limits have been fixed for impact on Net Interest Income (NII) due to adverse changes in interest rates. To measure the impact of interest rate changes on Banks equity, duration gap analysis is done and prudential limit is set for modified duration of equity. Modified duration of equity is within the prudential limits set for this purpose. VaR and duration analysis are used for measuring market risk including treasury operations. The Interest Rate Risk in Banking Book (IRRBB) is also being assessed on a monthly basis. Other market related risks to which any bank is exposed are foreign exchange risk on foreign currency positions, liquidity or funding risk and price risk on trading portfolios. The Bank has clearly articulated policies to control and monitor its treasury functions. These policies comprise management practices, procedures, prudential risk limits, review mechanisms and reporting systems. These policies are revised regularly at fixed intervals in line with the changes in financial and market conditions.

Operational Risk: Management of Operational Risk is a part of the ‘Integrated Risk Management Policy and the Bank has final rating. The a focused attention for management of the Operational Risk, in the light of the Reserve Bank of India guidelines. Operational Risk Management Cell is responsible for coordinating all the operational risk management activities of the bank and these include building an understanding of the risk profile, implementing tools related to operational risk management and working towards the goals of improved controls and lower risk. Operational Risk Management Committee [ORMC] ensures implementation and compliance of the Operational Risk policies and reports to the Board/Risk Management Committee [RMC]. The Bank has been computing capital charge for Operational risk by adopting ‘Basic Indicator Approach (BIA) as stipulated by the RBI.

Approaches followed for computation of Capital to Risk Weighted Assets Ratio (CRAR): As per RBI guidelines, all Commercial banks in India shall follow the Standardised Approach for Credit risk, Standardized Duration Approach for Market risk and Basic Indicator Approach for Operational risk under the ‘New Capital Adequacy Framework".

Credit Risk: Bank at present is following the Standardized Approach for estimation of capital requirements for Credit Risk which also includes the HTM portfolio of Investments. Bank is gearing itself to move over to Advanced approaches for Credit risk. In this regard, Bank has developed a Credit Risk Rating Model (CRRM) with the consultancy assistance of National Institute of Bank Management (NIBM), Pune. This model is further strengthened internally by making it a WAN (Wide Area

Network) based CRRM model so that it is accessible from any of the locations of the bank. This model is capable of providing transition matrices and default probabilities (Probability of default) and would help the Bank in moving over to the Advanced Approaches in future. Market Risk: Bank is using the Standardized Duration method for computing capital charge for Market risk (investments in HFT and AFS categories) as per RBI guidelines.

Operational Risk: Bank is providing capital for Operational risk as per the Basic Indicator Approach (BIA).

Preparation for moving over to Advanced Approaches: Bank is in the process of migrating to Advanced Approaches through implementation of an Integrated Risk Management Solution.

Banks compliance to RBI guidelines on Basel requirements:

Pillar I (Minimum Capital requirements): RBI has introduced in its Basel III guidelines the following enhanced capital requirements and has also prescribed transitional arrangements to conform to these requirements in a phased manner by September 30, 2020.

Regulatory Capital	As % to RWAs
(i) Minimum common Equity Tier 1 ratio	5.5
(ii) Capital conservation buffer (comprised of Common Equity)	2.5
(iii) Minimum Common Equity Tier 1 ratio plus capital conservation buffer [(i)+(ii)]	8.0
(iv) Additional Tier 1 Capital	1.5
(v) Minimum tier 1 capital ratio [(i)+(iv)]	7.0
(vi) Tier 2 capital	2.0
(vii) Minimum Total Capital Ratio (MTC) [(v)+(vi)]	9.0
(viii) Minimum Total Capital Ratio plus capital conservation buffer [(vii)+(ii)]	11.5

* RBI vide its notification dated 27.03.2020 has deferred the implementation of last tranche of 0.625% of Capital Conservation Buffer (CCB) from 31.3.2020 to 30.9.2020.

The Bank is calculating its Capital Adequacy in accordance with Basel II & Basel III guidelines. The Banks Capital Adequacy at present is in conformity with the transitional arrangements for Basel III as prescribed by RBI. However, to meet the growing business requirements, the Bank may have to supplement its Capital funds, especially by increasing Common equity in future.

Pillar II (Supervisory Review & Evaluation Process) : In compliance with the Pillar II guidelines of the RBI under Basel III framework, the Bank has formulated a Policy of Internal Capital Adequacy Assessment Process (ICAAP) to assess internal capital in relation to various risks that it is exposed to. Stress Testing and scenario analysis are used to assess the financial and management capability of the Bank to continue to operate effectively under exceptional but plausible conditions. The bank is calculating the Concentration risk on a quarterly basis to assess the portfolio level risks based on sectorial, geographical and borrower wise concentration. Bank is using statistical parameters like Herfindahl-Hirshman Index (HHI), Gini Coefficient, and Rosenblatt Index for determining the Credit Concentration Risk. The Bank has a Board approved Stress Testing Policy describing the various techniques used to gauge its potential vulnerability and also its capacity to sustain such vulnerability.

Pillar III (Market Discipline): The Bank has a Disclosure Policy as per the disclosure requirements contained in the circular issued by the Reserve Bank of India on the implementation of the Basel III Capital Regulations. The guidelines therein are adhered to and compliance is reported to the Competent Authorities. Pillar-III (Market discipline) of Basel III, aims to encourage Market discipline by developing a set of disclosure requirements which allows market participants to assess key pieces of information on the scope of application, capital, risk exposures, risk assessment processes and hence, the capital adequacy of the Bank. The Pillar III Disclosures are published on a quarterly and half yearly basis on the Banks website plus a year-end disclosure as on March of every year. The Pillar-III year-end disclosures are also published in the Banks Annual Report apart from being available on the Banks website.

In addition to the above, RBI has introduced several other measures of leverage and liquidity standards viz.

• A minimum Leverage Ratio of 4.00% (DSIB) and 3.50% (other banks) to curb the excessive leverage of a banks balance sheet; and Liquidity standards by way of two ratios viz. Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).

The LCR requires a bank to hold sufficient high-quality liquid assets to cover its total stressed net cash outflows over 30 days. The NSFR requires a bank to hold sufficient amount of stable funds to meet the requirement of stable funding over a one-year period of extended stress. The Bank is regularly calculating and monitoring the Liquidity ratios taking as reference the RBI guidelines issued for LCR and NSFR. The Bank is also calculating and monitoring the Leverage ratio on a quarterly basis.

Management of Asset Quality: Gross NPAs of the Bank stood at 28708.54 Cr as on 31.03.2020. Gross NPAs as a percentage to Gross Advances stood at 16.07% while Net NPAs as a percentage to Net Advances stood at 4.92%. The Provision Coverage of NPAs as on 31.03.2020 was 72.95%. Total reduction in NPA accounts amounted to Rs 6165 Crore.

Position of Non-Performing Assets

( in Crore)

	2017-18	2018-19	2019-20
Gross NPAs at the beginning of the year	17669.98	28124.36	28973.97
Additions during the year	13864.23	5274.94	5899.84
Reduction during the year	3409.85	4425.33	6165.27
Gross NPAs at the end the year	28124.36	28973.97	28708.54
Net NPAs	12636.87	9091.40	7764.52

The segment-wise distribution of NPAs as on 31.03.2020 is as under:

Segment-wise Non-Performing Assets

( in Crore)

Segment	NPA Amount	NPA % to ADV*
I. Agriculture	1878.68	4.99%
II. MSME	5562.77	18.65%
III. Retail Credit	1730.33	3.97%
IV. Large & Mid Corporate	19536.76	28.93%
Total	28708.54	16.07%

*NPA% to Advances indicates NPA to Advances of that segment. Provisions held under different classes of NPAs are as under: (Excluding floating Provisions of 13 Cr.) ( in Crore)

Nature of Asset	Outstanding	Provision Held
Sub-Standard Assets	4386.66	906.12
Doubtful Assets	20260.49	15919.77
Loss Assets	4061.39	4061.39
Total	28708.54	20887.28

Restructuring mechanism: The total balances in restructured accounts (Including MSME Restructuring) as at the end of March 2020 stood at 1611.03 Crore Lending Practices: The Bank had framed well defined Loan Policy Guidelines with the approval of the Board. These guidelines are reviewed by the Board at periodical intervals based on Reserve Bank of India guidelines, Bi-monthly Policy Statement of Reserve Bank of India, competitive environment prevailing among the banks, for accelerated credit growth envisaged in certain business segments, marketing & development of new products and taking into account the feedback received from the field level functionaries, credit departments at Head Office. Credit Committees have been constituted in the Bank at Head Office, Circle Office and Zonal Office levels for exercising sanctions of credit proposals and suitable sanctioning powers have been delegated to these committees in terms of directions of Ministry of Finance. Further, based on feedback received from field level functionaries, the delegated powers of various sanctioning authorities are reviewed and revised to reduce turnaround time in the sanction of credit proposals. The loan review mechanism is further strengthened in the Bank ensuring review of sanctions made by all functionaries by the next higher committees / competent authorities as the case may be.

Management Information System: Bank has developed a robust Management Information System which captures data essential for vital functions such as risk management and planning and which serves as an effective tool for the Top Management in decision making. This has facilitated quick decision making. The Bank is in a position to analyse performance in major parameters even on a day to day basis using the information system available. Leveraging on the CBS platform of the Bank, the MIS has facilitated speedy decision making and its implementation.

Inspection & Audit: During the audit year 2019-20, department has surpassed the targets prescribed in audit plan:

• 1939 branch audits were completed under RBIA against the set target of 1784 for FY 2019-20 and 1932 reports were closed by the competent authority, as on 24.06.2020.

• 75 Management audits were conducted covering all 6 Circle / 36 Zonal offices and 33 Head office departments on selected basis.

• Annual inspection of 69 other administrative offices viz., RLE, SME, Currency chest, FSCs and Regional Rural Bank conducted.

• 1117 Limited Review of Revenue leakage audit conducted.

• Compliance audits were conducted for 902 branches.

• Average days for closure of inspection reports improved to 63.92 against 72.74 of previous year.

• 41, IS Audits were conducted during FY 2019-20, covering all IT installations, software audits, audit of outsourcing activities and Registration Authority (RA)

• Conducted Concurrent IS audit of Data Centre by internal IS Auditor on daily basis.

• Coordinated and associated with external Auditor M/s DigitalAge for conducting audit of CBS & Surround applications of 75 areas and VAPT for more than 500 servers and URLs.

Concurrent Audit: 666 auditors were appointed during 2019-20 for conducting concurrent audit covering 655 branches, 3 CTS Grids and 7 head office departments to cover 70% of business of the Bank as per RBI & DFS guidelines.

Off Site Monitoring Cell (OSM Cell): Based on the report submitted by Shri BasanthSeth committee, OSM cell generates the reports of high value/critical transactions happened at branches on previous day, scrutinize them and sensitize the controlling offices/Branches for taking corrective action wherever deficiencies are noticed in following the laid down systems and procedures. Besides sending the alerts, OSM cell reviews transactions based on different parameters and seek information/clarifications from branches transactions which they find critical or suspicious. Department is generating and reviewing 97 alerts on daily / weekly / monthly basis, out of which 81 are as per Basanth Seth committee recommendations and remaining 16 are as recommended by internal committees and Head office Department is also monitoring the Transactions of Rs 10 crs and above for every 2 hrs.

Compliance Policy: The Bank has in place a comprehensive Compliance Policy. An executive of the Bank in the rank of Deputy General Manager has been appointed as the ‘Chief Compliance Officer. As per the Policy adopted by the Bank, suitable organizational structure has been laid down defining the roles and responsibilities for Compliance Officers of various departments at Head Office, Zonal Offices and Branches. Compliance of statutory and regulatory guidelines is the scope of operation of the compliance function in the Bank. Suitable reporting system is put in place to ensure effective implementation of Compliance Policy in the bank.

Legal

• SARFAESI Act: During the Financial Year 2019-20, 370 secured assets were sold and an amount of Rs 282.81 Cr was recovered by selling the secured assets under SARFAESI Proceedings. Total cash recovery effected by the bank during the FY 2019-20 under SARFAESI Proceedings is 934.31 Cr.

• Lok Adalats: Recovered an amount of Rs 2.85 Cr in 551 accounts during the FY 2019-20.

• RTI Act: 1440 Requests and 308 Appeals were received under RTI Act during the FY 2019-20. All the Requests and Appeals were disposed off on time.

Customer Service : Bank received 95,810 complaints through various channels viz. Public Grievance Redressal System (Portal), Banking Ombudsman and Departments like NEFT Cell, RTGS, Credit Card, CPPC, Retail Credit, MSME, Priority Sector, ATM Cell, Marketing & HR during the year 2019-20 and resolved 95,667 (99.85%) complaints and as on date all the pending complaints have been since resolved.

• Complaints lodged through Public Grievance redressal System Portal have been resolved in an average time period of 7.11 days as against the prescribed time frame of 21 days.

• No Awards were passed by Offices of Banking Ombudsman for the year 2019-20.

• Our Bank has received IBA prestigious Banking Technology award 2020 - "The Most Customer-Centric Bank using Technology" as a winner in mid-sized public sector Banks.

• No penalties are paid to the cardholders towards delayed settlement of ATM failed transactions.

• To strengthen the grievance redressal mechanism, we have analysed the data of complaints lodged in Public Grievance Redressal Portal (PGRS) and conducted Root Cause Analysis and identified major areas of complaints and corrective action is taken for improving customer protection, customer service and grievance redressal framework.

• Dissemination of messages on public awareness (RBI Kehta Hai) are uploaded in Banks Website under caution to Public link as per the directions of IBA.

Human Resources Management

Manpower Planning: To augment the existing manpower, 1250 clerks were inducted during the financial year 2019-20. Career Progression: Bank completed the promotion process for 1220 employees in all cadres for the year 2020-21.

Skill Up gradation & Training: The Banks ISO 9001:2015 certified Apex College in Hyderabad caters to the training needs of all its employees across all Zones in India except for the employees working in the 12 Zones of the Bank in Orissa, West Bengal and in the coastal districts of the state of Andhra Pradesh whose training is taken care of by the Staff College located in Visakhapatnam. During the year the colleges conducted training programs and workshops on Credit Appraisal/ monitoring/recovery management, Forex, Product awareness, soft skills development, refresher course, official language, Pre-promotion training, Audit/ Inspecting Officers and various other subjects. The colleges also conducted induction training programs for the newly recruited staff members.

During the financial year 2019-20, 487 in house Training Programs were conducted at Apex College Hyderabad & Staff College, Visakhapatnam covering 11949 employees. With an aim to enhance the knowledge and productivity levels of the officers,542 Officers were nominated for external trainings conducted by reputed institutes like NIBM, RBI-CAB, IDBRDT & FEDAI, in addition to the regular trainings conducted at our Apex College Hyderabad and STC Visakhapatnam. In addition, 6 Officers/Executives were also sent to external programmes conducted abroad.

E-learning : The Apex College maintains Navshakti e-gyan portal for catering to the online e-learning training needs of the staff members In the e-gyan portal, a number of e-lessons/ short e-lessons are uploaded which can be accessed by the staff members anytime, anywhere and on any device. Upto March 2020, all APAR linked General Banking, Role based and Executive online tests were conducted at approved intervals. As per the directives of the Government of India, through "Ease of Access Service Excellence "(EASE) document, during the year 2019-20, as many as 12 General Banking Tests were conducted for officers of Scale-I to Scale-V and 4 Role based tests for Scale-II to Scale-IV for a total of 10 job roles and 8 tests for Top Executives. The marks scored were considered for appraisal (APAR) on successful completion of e-lessons.

Industrial Relations : With a view to maintain cordial Industrial relations in the bank and to sort out the issues to enhance the working conditions as well as customer service, Quarterly meetings were held with the representatives of the recognized Officers Federation and the Award Employees Union.

Succession Planning: As part of succession planning initiative, Bank has created a talent pool in various grades and these officers are groomed by providing intensive training programmes on various fronts, to occupy the top key posts in the years to come.

HR Digitalisation: Our Bank has initiated implementation of various online staff related modules on par with other Banks, viz., online submission of statement of Assets & Liabilities and APAR in case of officers, submission of leave applications, employee profile view, job families etc.

Staff Strength as on 31.03.2020:

Category	Strength	% to total
Officers	11027	54%
Clerks	6435	32%
Sub Staff*	2902	14%
Total	20364	100%

*Excluding Part Time Sweepers.

SC/ST/OBC Profile: Our Bank has been implementing reservation policy for SCs & STs as per Government of India guidelines. The representation of SCs and STs is 4250 and 1833 respectively in total workforce of 21433 working in the Bank as on 31st March 2020. Out of the total of 11027 Officers, 1929 belong to SC category and 1005 belong to ST category. Bank has nominated a General Manager as Chief Liaison Officer for SCs & STs at Head Office to ensure proper implementation of Government guidelines on reservation policy in the Bank. Bank has nominated all the Zonal Managers as Liaison Officers for SCs & STs at Zonal level to address the grievances, if any, of SC & ST employees. Bank has been conducting Quarterly Joint Meetings with the representatives of "Scheduled Castes & Scheduled Tribes Employees Welfare Association of Andhra Bank". Our Bank has been implementing reservation policy for Other Backward Classes (OBCs) with effect from 08.09.1993 as per Government of India guidelines. The representation of OBCs is 6360 out of the total work force of 21433(inclusive of part time sweepers) working in the Bank as on 31st March, 2020. Bank has nominated a General Manager as Chief Liaison Officer at Head Office to look after the reservation and other welfare matters related to OBCs. Bank has nominated all second line executives at Zonal Office as Liaison Officers for OBCs at Zonal level to address the grievances, if any, of OBC employees. Bank has been regularly conducting Half Yearly Joint Meetings with the representatives of "All Andhra Bank BC Employees Welfare Association".

Differently Abled Persons : As per Government of India guidelines, our Bank has provided 3% reservation to the Persons with Disabilities in direct recruitment to all Group of posts, of which one per cent each reserved for persons suffering from (i) blindness or low vision, (ii) hearing impairment and (iii) locomotor disability or cerebral palsy in the posts identified for each disability on horizontal basis till 18.04.2017. As per the new Act "The Rights of Persons with Disabilities Act, 2016, came into force with effect from 19.04.2017, and as per the directions received from Department of Financial Services, Ministry of Finance, Govt. of India, New Delhi, Bank has been providing reservation for Persons with Disabilities at the rate of 4% of the total vacancies identified in all cadres, of which one per cent each shall be reserved for persons with benchmark disabilities under clauses (a), (b) & (c) and one per cent for persons with benchmark disabilities under clauses (d) and (e), namely; (a) blindness and low vision; (b) deaf and hard of hearing; (c) locomotor disability including cerebral palsy, leprosy cured, dwarfism, acid attack victims and muscular dystrophy; (d) autism, intellectual disability, specific learning disability and mental illness; (e) multiple disabilities from amongst persons under clauses (a) to (d) including deaf-blindness in the posts identified for each disabilities.

The representation of Persons with Disabilities is 689 (3.21%) out of the total workforce of 21433 as on 31st March, 2020.

OFFICIAL LANGUAGE: Rajbhasha Link in AB Staff Portal has been revamped. Besides ‘Rajbhasha Mission, Banking Terminology, Administrative Phraseology, Rajbhasha Margdarshika, various formats, Important Circulars, other related information, Hindi House Magazine, Monthly Hindi e-bulletin, Annual Action Plan, Daily Hindi Word, Thought for the week and Hindi Workshop material etc have also been kept in our Portal. During the FY 2019-20 Department of Financial Services, Ministry of Finance, Government of India has awarded second Prize to the Bank for outstanding performance in Region C and the Bank has also received first prize from Hindi Academy, New Delhi.

VIGILANCE:

• CVO visited 11 Zones during the FY 2019-20 and interacted with Executives and staff of Zonal Office along with heads of large branches and discussed on certain critical parameters to ensure probity, fairness and transparency in the Bank.

• In the current financial year, 11539 number of employees were enlightened on Preventive Vigilance aspects in 455 different training programs/sessions held at Apex College-Hyderabad, Staff Training College Vishakhapatnam and Zonal Offices.

• Department is broadcasting messages on Morals & Ethics and Vigilance Angle through SMS to all employees to inculcate Vigilance Culture.

• Chief Vigilance Officer interacted with the participants of various programmes at Staff College on Vigilance Compliance and Vigilance related matters.

• Officers of Vigilance Department and staff from controlling offices and branches are being deputed to External Training Programmes on Vigilance related matters.

Performance Highlights Operations

• Department has achieved the target of reviewing Assets & Liabilities statement of officers staff.

• Department received 168 complaints out of which 157 complaints were disposed off during the year.

• At the beginning of the Financial Year 94 Vigilance Cases were outstanding. During the year 152 Vigilance Cases have been registered and 158 cases have been disposed off.

• Department referred 246 cases to HR-IR for initiating Regular Departmental Action under Non-Vigilance wherein 317 staff members were found accountable.

• Preventive Vigilance Inspection has been conducted in all the branches of the Bank to ensure implementation of Systems & Procedures.

• Department received 756 IAS Reports/FRMG Note/Special Reports during the financial year 2019-20 out of which 595 Reports were disposed off.

• Circulars on modus operandi and preventive tips of Fraud/ Vigilance Cases issued periodically for the benefit of the employees as a preventive measure.

• Fraud Review Council (FRC) meetings are being conducted every quarter to review the frauds taking place in the Bank and its modus operandi. Appropriate suggestions for systemic improvement and corrective measures to thwart happening of fraud are advised to the concerned departments for required action and follow up.

• Compliance Functions: All the Monthly, Quarterly and Annual reports have been submitted to the Commission within the timelines stipulated.

• Scrutiny of reports of Inspection & Audit Department, Notes of Audit Committee of the Board etc.

• Department observed Vigilance Awareness Week 2019 from October 28, 2019 to November 02, 2019 with the theme "Integrity A way of life". Bank has conducted

4766 Awareness Gram Sabhas across the country where more than 116428 citizens participated. Essay Writing/ Elocution/Debate competitions were organized in schools and colleges. Walkathon & cyclothon were organized at Hyderabad and other places. A free medical camp was also organized at Hyderabad. An online test on Preventive Vigilance Measures was conducted where 4627 staff members have taken the test.

• Publications: News Bulletin "SAVDHAN" and "The Right Direction A Key Note from CVOs desk" are being circulated quarterly and monthly intervals respectively for updating the staff with latest and key information on Vigilance Compliance, Frauds and to ensure improving Vigilance Culture in the Bank.

LEAD BANK SCHEME: Andhra Bank is having Lead Bank responsibilities in fifteen districts, viz. Srikakulam, East Godavari, West Godavari, Guntur in the state of Andhra Pradesh; Ganjam, Gajapathi districts in Odisha state &Siddipet, SircillaRajanna, Jagtial, Peddapally, Mancherial, Wanaparty, Nagarkurnool, JogulambaGadwal, Warangal rural in Telangana State. Bank is discharging the responsibilities in implementation of Lead Bank Scheme in all these districts.

Andhra Bank took over the Convenorship of SLBC from State Bank of India in 1984. Consequent to re-organization of AP into Telangana & residual Andhra Pradesh w.e.f 2nd June, 2014, responsibility of Convenership of Telangana State is entrusted to SBH and Convenership of SLBC of residual AP continued to be with Andhra Bank. Following the amalgamation of Andhra Bank and Corporation Bank with Union Bank of India as per Government of India notification which came into force on April 1, 2020, RBI vide notification FIDD.CO.LBS.BC.No.22/02.01.001/2019-20 date March 30, 2020 assigned SLBC convenor ship to Union Bank of India. So far 210 SLBC meetings have been organized in the state of Andhra Pradesh. During the current year, SLBC has conducted various meetings involving RBI, NABARD, Bankers and Govt. Agencies. Besides these meetings, the Convener, SLBC has participated in various meetings and Video Conferences that are being organized by Government of India, Government of Andhra Pradesh, RBI and NABARD. The State Credit Plan for AP for FY 2019-20 was launched by the Honble Chief Minister of Andhra Pradesh during 207 SLBC Meeting on 18.06.2019. SLBC is coordinating with all stakeholders and has been proactive in implementing Annual Credit Plan and other initiatives of Central & State Governments. During the year 2019-20, SLBC of AP actively involved in implementation of Digital District initiative of RBI. SLBC successfully negotiated with Govt of AP to get reimbursement of long pending VLR/PV benefit amount to Banks in state of Andhra Pradesh.

APSLBC CALL CENTRE: SLBC has established a Call Centre namely ‘APSLBC CALL CENTRE on behalf of all Banks in the state with toll free telephone Number 18004258525 and an exclusive toll free number 18004251525 for MUDRA. Website: An exclusive website is set up for SLBC of Andhra Pradesh with URL www.slbcap.nic.in for information of all the stake holders and general public. The website is being updated at regular intervals with the latest data and information..

FINANCIAL INCLUSION: Aadhaar Seeding: Bank has achieved 78.21% of Aadhaar seeding and 70.58% in Aadhaar Authentication in active CASA accounts.

Atal Pension Yojana (APY): The Bank has enrolled 1,82,812 APY accounts during the year with average of 64 accounts per branch against a target of 1,73,220 @ average of 60 accounts per branch. The Bank has received an incentive of Rs 4.54 Cr of which Rs 2.31 Cr towards fresh enrolments, Rs 0.18 Cr towards volume based additional incentive and Rs 2.13 Cr. towards persistency incentive.

Establishment of Aadhaar Enrolment Centres: Bank has established 290 AECs as per UIDAI guidelines.

Financial Literacy and Credit Counselling Centers: Bank is having total of 9 FLCCs functioning at LDM offices and are providing financial literacy activities at their centres. Bank Mitra Facilitators: As number of Bank Mitra activities are increasing on day to day basis, Bank has appointed 12 Bank Mitra Facilitators in various Districts of Andhra Pradesh, Telangana and Odisha State as on 31-03-2020.

SUBSIDIARIES & REGIONAL RURAL BANKS: The Bank has one Subsidiary, namely, Andhra Bank Financial Services Limited (ABFSL), which is wholly-owned by the Bank. The Company has earned a profit of Rs 126.66 Lacs before Income Tax and a Net Profit of 91.42 Lacs after Income tax during the year ending 31.3.2020, with this the accumulated losses of the company have been brought down from Rs 480.56 Lacs to Rs 389.14 lacs as on 31.03.2020.Bank has sponsored one Regional Rural Bank namely Chaitanya Godavari Grameena Bank located in Guntur (Andhra Pradesh), covering the districts of Guntur, East Godavari and West Godavari with 220 branches. As on 31.03.2020, the total business stood at 10416.39 Crore, and Net profit after Tax is 70.64 Crore. Percentage of Gross NPA to Average Advances is 1.12.

SECURITY ARRANGEMENTS: Bank has upgraded the security arrangements at branches, currency chests and ATMs. All branches in the Bank are provided with CCTV system for video surveillance. Conventional alarm system at all branches has been upgraded to Integrated Intruder Burglar Alarm System (IIBAS). Centralized Alarm Monitoring Station has been established in Head Office for 24X7 monitoring of Integrated Intruder Burglar Alarm System installed in branches. 58 % of branches have already been integrated to CAMS at Head Office and are being monitored continuously. Integration of balance branches is in progress. State of Art integrated e-surveillance system has been provided in 89 % of the ATM Sites by replacing physical guarding with e-surveillance at these sites. Installation of e-surveillance system at balance sites is in progress. All efforts are being made to ensure that all security gadgets are maintained in working condition at all times to minimize crime incidents against Bank.

BRANDING AND COMMUNICATIONS: The Bank has undertaken publicity & branding during the financial year to derive good mileage and visibility for the Bank. Some of the major publicity activities include,

• Advertisement released in Local Newspapers on FMs message Propagating Governments initiative to improve MSME Customer Outreach Campaign Scrolling in TV

Channels

• Exhibition stalls in SHG product showcase

• Co-funding NPCIs awareness campaign on digital banking.

• Display on Airport Trolleys

CORPORATE SOCIAL RESPONSIBILITY (CSR):

As the Bank reported loss for the year ending March, 2019, there was no budget allocation for Donation which includes CSR activities for the financial year 2019-20.

BANKS WEB SITE: The Bank maintains its website www.andhrabank.in in three languages, viz., English, Hindi and Telugu for providing information about the Bank, its services and products offered. The Bank has made its WCAG (Web Content Accessibility Guidelines) website accessible to ‘visually impaired persons, as per Government of India guidelines. The Bank being the Convener of State Level Bankers Committee, Andhra Pradesh, maintains separate website www.slbcap.nic.in. This website communicates all the proceedings of SLBC Meetings, State Government directives, instructions to Bankers and public. The Bank follows meticulously CERT-In (Indian Computer Emergency Response Team) guidelines issued from time to time in maintaining Banks Website securely.

AWARDS AND REWARDS: The bank received the following awards during the FY 2019-20:

• IBA Banking Technology Award 2020:

Best Financial Inclusion Initiatives Mid size Bank (Winner)

Most Customer-Centric Bank using Technology Mid size Bank (Winner)

Best Payments Initiatives Mid size Bank (Winner)

• IBS Intelligence Global FinTech Innovation Awards 2019 for Best Digital Channel Implementation ABTEJ

• Finacle Client Innovation Awards 2020: Customer Journey Re-Imagination Mid Size Bank (Winner)

• Awards under APY: Bank got the following awards in campaigns announced by PFRDA

‘APY Formation Day Bank has been awarded as one of the WINNER.

‘APY - Mission Possible - Bank was qualified for Award as a winner with TOP Position.

‘APY - Citizen Choice Campaign - SLBC, Andhra Pradesh was qualified for Award of Appreciation under this CAMPAIGN from 1st August 2019 to 31st August 2019.

‘Rise above the rest: Bank was qualified for the Award along with Ongole, Sambalpur, Srikakulam, Kurnool and Eluru zones which also qualify for Awards.

‘APY challengers Cup: Bank was qualified for ‘Certificate of Appreciation.

‘Makers of Excellence for EDs of PSBs: Bank was qualified for Award.

‘Out Performers: Bank was qualified for Award.

‘LEADERSHIP CAPITAL 2.0 for MDs of PSBs: Bank was qualified for Award.

Indian Accounting Standards (Ind AS) Progress: Indian

Accounting standards (Ind As) has been deferred till further notice, vide circular No. DBR. BP. BC. No. 29/21.07.001/2018-19 dated March 22, 2019. However, RBI vide mail dated July 20, 2018 advised Banks to submit proforma Ind AS financial statements for every quarter, starting from quarter ended June 30, 2018. In compliance of the above, our Bank have been submitting the statement to RBI .

CHANGES IN THE BOARD DURING THE YEAR: The following changes took place in the Composition of the Board during the FY 2019-20:

• Shri Ajit Kumar Rath, Executive Director exited the Board on being posted as Chief Vigilance Officer in SBI on 29.07.2019;

• Shri E E Karthak, RBI Nominee Director exited the Board on 25.04.2019 on elevation as Executive Director, RBI, Mumbai;

• Shri P J Thomas was nominated on the Board on 26.04.2019 as RBI Nominee Director.

DIRECTORS RESPONSIBILITY STATEMENT: The Board of Directors hereby state that

• The applicable accounting standards have been followed in the preparation of the annual accounts and proper explanations have been furnished, relating to material departures.

• Accounting policies have been selected and applied consistently, reasonable and prudent judgments and estimates have been made so as to give a true and fair view of the state of affairs of the Bank as at 31.03.2020 and of the profit and loss of the Bank for the financial year ended on

31.03.2020.

• Proper and sufficientcare has been taken for the maintenance of adequate accounting records in accordance with the relevant regulatory provisions for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

• The annual accounts have been prepared on a going concern basis.

• Internal Financial controls to be followed by the Bank have been laid down and such internal financial controls are adequate and are operating effectively.

• Proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

ACKNOWLEDGEMENT:

Andhra Bank is grateful to the Government of India, RBI, SEBI, NABARD, and other authorities/ agencies, Financial Institutions and Correspondent Banks for their valuable support and guidance. The Directors also express their deep sense of appreciation to all the staff members of the Bank for their dedicated service, outstanding professionalism and commitment towards Banks vision for a sustainable growth.

Finally, the Directors wish to sincerely thank all the customers, shareholders and other stakeholders for their valuable support.

	For and on behalf of the Board,
Place : Mumbai	(Rajkiran Rai G)
Date : 31.07.2020	Managing Director

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