Andhra Bank Management Discussions.

MACRO ECONOMIC DEVELOPMENTS: In the first half of the financial year, Indias economic growth reversed momentum from that of the rest of the world, decelerating, as the rest of the world accelerated. A number of developments like, demonetization, implementation of new GST, high and rising real interest rates, the Twin Balance sheet challenge obstructed Indian economic growth. Indias GDP growth in 2017-18 at 6.6% was lower than 7.1% in 2016-17. Implementation of GST had a transient effect on urban Consumption through loss of output and employment in labour intensive unorganised sector. But in the second half of the year, the economy witnessed robust signs of revival. Economic growth improved as the transitory phase came to an end and the synchronous global economic recovery boosted exports. Government expenditure provided sustained support to aggregate demand, with a pick-up in pace in the second half.

Monetary and Liquidity Conditions: During the financial year 2017-18, Reserve Bank of India (RBI) maintained the stance of monetary policy as neutral in consonance with the objective of achieving medium term target for CPI inflation of 4%. the Average CPI inflation rate has come down to 3.3% during FY 2017-18 from 4.5% in FY 2016-17. RBI has cut repo rates by 25 bps points between April 2017 and March 2018. RBI has kept rates unchanged since August 2017 at 6.00%. Liquidity conditions remained favourable for the major part of the year. However during Q4 pick up in credit demand led to tighter liquidity conditions, thereby limiting the fall in the deposit rates as compared to last year.

Balance of Payments and External Sector: As observed the deceleration in economic growth is on account of decline in the export growth which led to widening of current account deficit (CAD) which worsened to USD 13.5 billion (2% of GDP) during Oct-Dec17 (Q3 2017-18) from a level of USD 8 billion (1.4% of GDP) in the corresponding quarter a year ago. Further, the surge in crude oil prices, which rose by more than 20% YoY increased the import bill. Indias trade deficit widened to USD 44.1 billion during Q3 2017-18 from a level of USD 33.3 billion in the year-ago period. Despite the soaring CAD, the forex reserves grew by USD 9.4 billion due to a stronger capital account surplus. is was in contrast to the deficit of 1.2 billion in the year-ago period.

the capital and financial account surplus rose to USD 12.6 billion in Q3 2017-18 from USD 7.3 billion in Q3 2016-17, supported by stronger portfolio investment inflows worth USD 5.3 billion.With the CAD soaring and concerns over potential fiscal slippage (as fiscal deficit reached 4% of GDP by end Jan18), the rupee witnessed a downward pressure. the combination of soaring CAD and a high fiscal deficit (twin deficit scenario) will bring in inflationary pressures and likely weigh down the rupee, which has already lost 1.4% against USD since the beginning of 2018. There was an accretion to foreign exchange reserves, taking their level to US $ 424 billion as on March 30, 2018. Financial Markets (Equity and Bond Markets): Domestic financial market segments have been mainly driven by idiosyncratic factors, barring phases of overwhelming global spill overs that impacted equity and forex markets intermittently during FY 2017-18. Excess liquidity, which had persisted till January following demonetisation, turned into deficit towards close of the year. Bond markets have experienced some drying up of liquidity as yields rose amidst concerns about inflation and the fiscal situation with raising crude prices. the BSE Sensex Equity markets extended their gains in FY 2018, with the Sensex closing at a historic high of 36,283 on January 29, 2018. A number of factors contributed to the markets overall buoyancy: strengthening macroeconomic conditions; revival of corporate sales and improving prospects for future earnings; the announcement of PSU banks recapitalisation; a jump in Indias ranking in the World Banks ease of doing business index; the ratings upgrade by Moodys; sustained net investment by domestic institutional investors; and positive cues from global equity markets. However, Market conditions and sentiment reversed dramatically in February and selling pressures intensi_ed, with a variety of factors in play: global sell-o_s in bonds and equities following stronger than expected job and inflation data for the US that prompted market participants to anticipate a faster pace of normalisation of US monetary policy; expectations of tighter liquidity conditions going forward and other domestic policy developments announced in the Budget. During the year the gains from secondary market have reduced as compared to the last year. the BSE SENSEX registered a return of 11.3%, while NIFTY registered a return of 11.5% in FY 2017-18.

Bond Markets:

Since the beginning of August 2017, yields in the secondary government securities (G-sec) market hardened almost monotonically, driven mostly by domestic factors up to early March 2018. Among global factors, rising international crude prices through the quarter and the increase of 25 basis points in the federal funds target by FOMC pushed up the G-sec yields. the surge in 10-year G-Sec yields from 6.51 per cent at the end of Q1 (April-June) FY2018 to 7.32 per cent at the end of Q3 FY18 also resulted in an increase in yields of corporate bonds and impacted the corporate bond issuances with year-on-year de-growth in fresh bond issuances by 14 per cent and 24 per cent during Q2 (July-September) FY2018 and Q3FY2018, respectively. the yields touched a high of 7.78 per cent, up 46 basis points from the level of 7.32 per cent at the end of the October-December quarter. G-Sec yields cooled off by 28-29 basis points to 7.33-7.34 per cent toward March end. the rise in G-sec yield is on account of fiscal concerns owing to increase crude prices and faster than expected normalization of monetary policy in advanced economies especially in US.

Trends in Banking Industry:

Impairment in the asset quality of the banking sector remained very high, necessitating sizeable provisioning and deleveraging, thereby restricting banks lending capacity, profitability and capital positions. However the overall credit growth for the financial year 2017-18 was higher at 10.3% as compared to 5.08 % in 2016-17. Demand has grown for both corporate & retail loans; particularly the services, real estate, consumer durables & agriculture allied sectors have led the growth in credit . the deposits of the banking system witnessed a lower growth of 6.7 % during 2017-18 as compared to 11.75% of the last financial year.

OUTLOOK

Indian economy has recouped from the disruptions and green shoots are visible with investment demand picking up supported by Infrastructure spending by the government. the bank recapitalisation plan by Government of India shall provide the necessary impetus to the banks by providing growth capital to enhance credit supply to the economy with favourable forward linkages. Enhanced spending on infrastructure, implementation of new projects, digital payments revolution and continuation of reforms are expected to provide further momentum to growth. Indias banking sector is also poised for robust growth as the rapidly growing business will facilitate banks credit growth. the global growth is expected to remain robust supporting GDP growth which is projected to increase from 6.6% in 2017-18 to 7.4% in 2018-19. These developments augur well for revival in credit demand in FY 2018-19

PERFORMANCE HIGHLIGHTS OF THE BANK

Business: For the financial year ended 31st March 2018, Banks Business stood at _ 3,72,605 Crores recording an increase of _ 32,932 Crore from _ 3,39,673 Crore as on 31.03.2017, with a growth rate of 9.70% (y-o-y).

Deposits: Banks Total Deposits stood at _ 2,08,070 Crore as on 31.03.2018, recording an incremental growth of _ 12,629 Crore (6.46%) over the previous year. the share of CASA deposits (Current and Savings) in Total Deposits stood at 31.05%.

? Current Deposits stood at _ 10,360 Crore as on 31.03.2018 as compared to _ 8660 Crore as on 31.03.2017, registering a growth rate of 19%.

? Savings Bank Deposits increased to _ 54,236 Crore as on 31.03.2018, from _ 48655 Crore as on 31.03.2017, growing at a rate of 11%.

? Term Deposits increased from _ 138124 Crore as on 31.03.2017 to _ 143469 Crore as on 31.03.2018, registering a growth rate of 4%.

Advances: Gross Bank Credit increased by 14.08% from _ 1,44,232 Crore as on 31.03.2017 to _ 1,64,535 Crore as on 31.03.2018.

? Credit to Agriculture Sector (including RIDF & non priority) stood at _ 30,844 Crore as on 31.03.2018 as against _ 27,573 Crore as on 31.03.2017 registering a growth rate of 11.86%.

? MSME portfolio registered a growth of 23.61% YOY basis from _ 27260 Cr to _ 33697 Cr

? Retail Credit portfolio registered a growth of 41.53% YoY from _ 27,541 Cr to _ 38,979 Cr.

Classification of Advances portfolio (_ in Crore)
Category 31.03.17 31.03.18 Variance
1. Food Credit 1059 825 -234
2. Non-Food Credit (2.1 to 2.4) 143173 163710 20537
2.1 Agricultural Advances 27573 30844 3271
2.2 Advances to MSME Sector 27260 33697 6437
2.3 Retail Credit (incl. DLs) 27541 38979 11438
2.4 Large Industries & Other Advances 60799 60189 -610
GROSS BANK CREDIT (1+2) 144232 164535 20303
Of which, Lending to Priority sector 61690 70121 8431

Area-wise distribution of Aggregate Deposits & Advances as on 31.03.2018 is set forth in the following Table.

(_ in Crore)

Sl. No. Category of Branches Deposits 31.03.18 % to total Advances 31.03.18 % to total
1 Rural 14084 7% 16705 10%
2 Semi-Urban 27170 13% 25198 15%
3 Urban 46886 23% 31360 19%
4 Metro 119931 57% 91271 55%
5 TOTAL (1+2+3+4) 208071 100% 164535 100%

Profitability: Total Income for the financial year 2017-18 of the bank stood at _ 20347 Cr as compared to _ 20336 Cr for FY 2016-17. the Non-interest income of the bank increased from _ 2308 Cr to _ 2372 Cr registering a YoY growth of 2.76% . Operating Profit of the Bank increased to _ 5361 Crore compared to _ 4388 Crore in the previous year registering a growth rate of 22%. However, on account of increased provisioning towards NPAs the Bank incurred a Net Loss of _ 3412 Cr for FY 2017-18 as compared to Net profit of _ 174 Cr for the financial year 2017-18.

the Total interest income of the Bank stood at _ 17974 Cr as compared to _ 18027 Cr of the previous year. Of this, Interest Income from Advances registered a fall by 5.25% from _ 13598 Cr during 2016-17 to _ 13069 Cr during 2017-18. Interest Income from investments increased by 8.41% from _ 4230 Crore during 2016-17, and stood at _ 4602 Crore during 2017-18. Total Expenses during the financial year 2017-18 is _ 14985 Crore against _ 15948 Crore during the previous year. Of this, Operating Expenses stood at _ 3346 Crore. Establishment Expenditure as a percentage of Total Expenditure stood at 12.40% for the financial year ended 31.03.2018.

Highlights of Revenue, Expenditure and Profitability- (_ in Crore)

2016-17 2017-18 Absolute Growth Percentage Growth
Total Interest Income 18027.42 17974.54 -52.88 -0.29%
Total Interest Expenditure 12495.78 11639.79 -855.99 -6.85%
Net Interest Income 5531.64 6334.75 803.11 14.52%
Other Income 2308.31 2372.07 63.76 2.76%
Profit on sale of Investments 764.34 489.36 -274.98 -35.98%
Core Other Income 1543.96 1882.71 338.75 21.94%
Operating Expenses 3451.99 3345.79 -106.2 -3.08%
Operating Profit 4387.95 5361.03 973.08 22.18%
Provisions and Contingencies 4213.63 8773.56 4559.93 108.22%
Net Profit 174.32 -3412.53 -3586.85 -2057.62%

APPROPRIATIONS: A_er making various provisions, the net loss for the year 2017-18 has been arrived at _ 3412.53 Cr. Brought forward balance in P/L Account is _ 1.53 Cr. the appropriations are given below.

Appropriations

(_ in Crore)

2016-17 2017-18
Appropriation out of Net Profit 174.33 -3412.53
Balance brought forward 95.00 1.53
Transfer to Statutory Reserves 43.60 13.02
Transfer to Capital Reserve 129.20 39.07
Transfer to Revenue Reserves 0 0
Transfer to Special Reserve 95.00 0
Transfer to proposed Dividend (incl. Dividend Tax) 0 0
Profit carried over to Balance Sheet 1.53 -3463.09

KEY FINANCIAL RATIOS:

the Banking Industry, as a whole, has been passing through a difficult phase and the bank has done well in key financial ratios in the present scenario. Net Interest Margin (NIM) stood at 3.33% compared to 3.07% in the previous year. Cost to Income Ratio stood at 38.43%, as compared to 44.03% for the previous year. Earnings per Share (EPS) stood at _ -42.12 and Book Value per Share (BVPS) stood at _ 60.25. Gross Non-Performing Assets to Gross Advances stood at 17.09% and Net Non-Performing Assets to Net Advances stood at 8.48% for the financial year ended 31.03.2018.

Key Financial Ratios
Parameter 31.03.2017 31.03.2018
Yield on Advances (%) 9.77 8.84
Cost of Deposits (%) 6.43 5.57
Net Interest Margin (%) 3.07 3.33
Yield on Funds (%) 8.38 7.71
Cost of Funds (%) 5.81 4.99
Cost-to-income Ratio (%) 44.03 38.43
CRAR – Basel III (%) 12.38 11.00
Return on Assets (%) 0.08 -1.46
Earnings Per Share (_ ) 2.56 -42.12
Book Value Per Share (_ ) 153.84 60.25
Net NPA (%) 7.57 8.48
Gross NPAs (%) 12.25 17.09

 

CAPITAL & NET WORTH (_ in Crore)
Parameter 31.03.2017 31.03.2018
Equity Capital 681 1199
Reserves Surplus 10730 9619
Net worth of the Bank (Tangible) 10479 7223

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 are at _ 16707 Cr as on March 31, 2018 and the Capital Adequacy Ratio at 11.00 % the Bank has put in place an "Internal Capital Adequacy Assessment Process" (ICAAP) for assessing the adequacy of Capital levels keeping in view the expected increase in business levels and enhanced Capital requirements in the Basel III regime. the assessment process also includes a framework for inclusion of Pillar-II risks under Basel-III guidelines, such as Credit concentration risk, interest rate risk in the banking book, liquidity risk, etc.

CRAR Position 31 March 2018 (Basel III)
CET1 5.61%
AT1 1.83%
Total Tier-I 7.44%
Tier-II 3.56%
Total CRAR 11.00%

Priority Sector Lending: Total Priority sector advances net of PSLC (Priority Sector Lending Certificates) is _ 59285 Cr which constitute about 41.25% of Adjusted Net Bank Credit (ANBC) as against the norm of 40%. Bank has made net sale of _ 10836 Cr PSLC General / SF-MF through e-kuber portal of RBI and earned a premium / commission of _ 93.91 Cr during the FY 2017-18.

Table 8: Priority Sector Lending (_ in Crore)
Category 2017-18
1. Priority Sector Advances (2 to 7) 70121
2. Agriculture-Priority (2.1 + 2.2) 29637
2.1 Agriculture Loans-Priority 28443
2.2 Eligible Investments (RIDF) 1194
3. Micro, Small and Medium Enterprises 29654
4. Educational Loans 1397
5. Housing Loans (includes Indirect Finance& Investment in NHB) 9385
Category 2017-18
5.1 Eligible Investment in NHB 220
6. Social Infrastructure 18
7. Renewal energy and others 30
8. Priority Sector Advances (net of PSLC) 59285
8.1 PSLC Sales (General + SF/MF) 10836
9. Agriculture-Priority (net of PSLC) 27787
9.1 PSLC Sales (SF/MF) 1850
10. NPA under Agri Credit 1269
I. Priority Sector Advances (% to ANBC) 41.25%
II. Agricultural Credit (% to ANBC) 19.33%
III. Small & Marginal Farmers (% to ANBC) 10.76%
IV. Direct Lending to Non-Corporate farmers (% to ANBC) 14.61%
V. NPA under Agri. as on 31.03.18 (% to Gross Agri advances) 4.11%

Credit to Agriculture-Priority: Agricultural advances (Agri-Priority) of the bank stood at _ 29637 Crore at the end of Mar. 2018, registering a growth rate of 11.24% (Y-O-Y). the absolute increase over Mar. 2017 is _ 2994 Crore. Agri. Priority advances (a_er net sale of PSLC SF/MF of _ 1850 Cr) are at _ 27787 Cr which constitutes 19.33% of as against the norm of 18%.

Lending to Small & Marginal Farmers: Total credit extended to Small & Marginal Farmers as on 31.03.2018 was _ 15463 Cr (a_er net sale of _ 1850 Crs under PSLC SF/MF) i.e., 10.76% of ANBC as against the statutory norm of 8%. Direct Lending to Non-Corporate farmers: As against the statutory norm of 11.78% of ANBC to direct lending to non-Corporate farmers for the FY 2017-18, bank has reached 14.61% i.e., _ 21005 Cr.

Lending to Self Help Groups: Bank has extended financial assistance to 241431 Self Help Groups with total exposure of _ 6565 Cr as on 31.03.2018.

Credit to Weaker Sections: Advances to Weaker sections is at _ 19080 Cr. at the end of Mar. 2018 (a_er net sale of _ 1850 Cr under PSLC SF/MF). Bank surpassed the target of 10% of ANBC to weaker section by achieving 13.28% of ANBC as on 31.03.2018.

Credit to Minorities: Total credit extended to minority communities as on 31.03.2018 was at _ 6126 Cr i.e., 10.33 % of Priority Sector advances as against norm of 15%.

Credit to Women: Total credit extended to women beneficiaries as on 31.03.2018 was at _ 21104 Cr i.e., 14.58 % of Net Bank Credit as against norm of 5%.

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. Since inception, 171400 candidates have been trained through 5911 programmes by the Institutes and around 72.30% of the trained candidates are engaged in gainful ventures. 42.10% of settled candidates are credit linked by the Bank branches. During the year FY 2017-18, the institutes imparted training to 11608 candidates through 454 programmes. 11 RSETIs out of 12 RSETIs under RSETI scheme of MoRD awarded with highest rating "AA" by Ministry of Rural Development, Govt. of India for the year 2016-17.

NIRED Rajam (Srikakulam District, Andhra Pradesh State), one of the RSETIs sponsored by Andhra Bank received "Best Performing RSETI" Award (1st place in the country other than North Eastern & Hilly Region and Union Territories) for 2017-18 from Minister for Rural Development & Panchayat Raj, Govt. of India on 05.05.2018 during Aajeevika Evam Kaushal Vikas Diwas & Mela held at Ranchi, Jharkhand. Another RSETI sponsored by the Bank i.e., RSETI Nellore (SPS Nellore District, Andhra Pradesh) also selected as Best RSETI (4th place in the country other than North Eastern & Hilly Region and Union Territories) for 2017-18.

Financial Literacy and Credit Counselling Centres: Bank has established Jana Chetana Financial Literacy and Credit Counselling Trust and running 10 Financial Literacy Centres in all Lead Districts. These centres are promoting financial literacy activities through campaign mode and providing service related extension services. Bank has approved for opening of 5 new FLCCs one at Sirguppa in Karnataka state, one at Srikalahasthi in Andhra Pradesh state and each one at Jagtial, Sircilla, and Siddipet in Telangana state. All our Rural Branches and RSETIs are organizing Financial Literacy Camps in the villages by utilizing the services of local artists/magicians and organizing Kala Jataas.

Credit to MSME Sector

Parameter (_ in Crore) 31.03.17 31.03.18 YOY Gr%
Micro 9701.53 11138.13 14.80%
Micro & Small Enterprises 20717.27 23059.08 11.30%
Total MSME 27260.10 33696.89 23.61%

? During the year, 296192 MUDRA loans are sanctioned with aggregate total limit of _ 3673 Cr and an amount of _ 3246 Cr is disbursed. Further 4102 applications were sanctioned with a limit of _ 773 Cr under Stand Up India. the cumulative performance under Stand UP India is 6002 sanctions with a limit of _ 1055 Cr. the bank taken up the following initiatives under MSME financing in the FY 2017-18, to increase lending to MSME sector:

? To finance against GST receivables of MSME units – New Product –MSME Mitra had been launched

? Policy has been framed for participation in online digital platform of TReDS and joined RXIL for financing trade receivables

? To promote digital transactions and to encourage MSEs to move towards cashless transactions from cash based transactions, to field functionaries to include 30% of the digital portion of projected turnover instead of 20% while assessment of WC limits to MSE units under turnover method, for limits up to _ 6.00 Crores.

? To MSME borrowers, Standby Term Loan is allowed irrespective of credit rating to the extent of 20% of the Fund Based limits subject to a cap of _ 1.00 Crore for acquiring additional machinery

? To consider fixing a separate additional working capital limit for MSEs up to 20% of the regular working capital limit at the time of sanction / renewal of working capital limit, specifically for meeting the temporary rise in working capital requirements.

? Presently 9 SME Expresses are functioning at various Centres for scouting the new business and for reducing the TAT. 559 Branches are attached to SME Expresses and catering the various needs of MSME borrowers.

? Keeping in view of the importance of MSME sector in the economy our Bank introduced the following:

? 25% of assessed turnover can be allowed as working capital credit limit under turnover method up to _ 6.00 crores instead of the existing 20% of the projected turnover.

? ABHIVRUDHI Scheme "Financing to MSEs (Micro and Small Enterprises) up to _ 6.00 Crore against property" wherein assessment of credit limits is simpli_ed and obtention of CMA data is waived.

? the bank has entered into agreement with NCGTC for providing guarantee cover under Loans sanctioned under PMMY (Mudra) and Stand up India. the bank has entered into MOU with M/s Bajaj Auto Ltd for financing cargo vehicles

? the bank has launched a new cluster specific product "AB SOLEACE" for financing manufacturing/trading units in Footwear Park, New Delhi . Further, the bank has identified 389 clusters were allotted to 240 Branches for focused approach and towards growth under MSME sector.

Retail Lending: the Banks Retail Credit portfolio stood at _ 38,979 crores as on 31.03.2018 as against _ 27,541 Crores as on 31.03.2017, with year on year growth of _ 11,438 Crs. the segment has registered a growth of 41.53% on YOY basis including deposit loans and credit card.

? Housing loans portfolio has increased from _ 13,870 Crs as on 31.03.2017 to _ 17,941 Crs as on 31.03.2018 with an absolute growth of _ 4,071 Crs registering a growth rate of 29.35% on YOY basis.

? Vehicle Loans portfolio has increased from _ 1,337 Crs as on 31.03.2017 to _ 1,730 Crs as on 31.03.2018 with an absolute growth of _ 393 Crs registering a growth rate of 29.42% on YOY basis.

? Education loans portfolio has increased from _ 2,469 Crores as on 31.03.2017 to _ 2,504 Crores as on 31.03.2018 with an absolute growth of _ 36 Crores registering a growth rate of 1.44% on YOY basis.

? Property Loans (Loan against property) Portfolio has increased from _ 2,692 Crores as on 31.03.2017 to _ 4,912 Crores as on 31.03.2018 with an absolute growth of _ 2,219 Crores registering a growth of 82.42% on YOY basis.

? Bank has waived processing charges on Housing Loans and Vehicle Loans during the financial year to have an edge in the market competition.

Advances – Industry wise Exposure: Bank has loan exposure to various sectors like Power, Housing Loans, NBFCs, Iron & Steel, textiles, etc. Exposure to top 10 industries constitutes 47.81% of gross bank credit as on 31.03.2018, signifying a diversified loan portfolio.

Sl. Industry Ceilings as % of Total Advances of previous Quarter Actual Fund based exposure as on 31.03.18 Exposure as % of Total Advances of Previous Quarter i.e., 31.12.17
1 Housing Loans 15.00% 19791.64 13.06%
2 Power 12.00% 14605.06 9.64%
3 NBFC 10.00% 11957.44 7.89%
4 Iron & Steel 8.00% 7802.45 5.15%
5 Construction& Contractors 6.00% 6215.95 4.10%
6 Textiles 7.00% 6020.61 3.97%
7 Rice Mills 4.00% 4017.27 2.65%
8 Commercial Real Estates 4.00% 3499.78 2.31%
9 Engineering 3.00% 2416.22 1.59%
10 Drugs, Pharmaceuticals 5.00% 2344.35 1.55%
Total 78670.77

INVESTMENTS:

In terms of RBI guidelines, the Bank is required to invest in SLR securities to the extent of 19.50% of NDTL. Banks investment decisions are based on risk-return trade-o_ 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 31.03.2018, the Investments (net of depreciation) increased by 8.50% and stood at _ 64770.30 Crore, up from _ 59697.49 Crore as on 31.03.2017. SLR maintained as on 31.03.2018 was _ 55,275.26 Crore, which constituted 26.43% of Net Demand and Time Liabilities (NDTL). Interest income from investments increased from _ 4230.06 Crore in 2016-17 to _ 4488.43 Crore in 2017-18. Profit on sale of investments stood at _ 489.32 Crore during 2017-18, while it was _ 764.62 Cr during 2016-17.

Classification of Investments

(_ in Crore)

PARTICULARS 2016-17 2017-18 Var (%)
1. Government Securities 55870.79 59072.74 5.73
2. Other Approved Securities 0.00 0.00 0.00
3. Shares 545.48 796.58 46.03

 

4. Debentures & Bonds 1967.41 2499.91 27.07
5. Subsidiaries and / or Joint Ventures 361.79 357.63 -1.15
6. Others 952.02 2043.44 114.64
TOTAL (1 to 6) 59697.49 64770.30 8.50

Strategic Investments

Joint Venture Insurance: Our Bank is having Joint venture in insurance with Bank of Baroda and Legal and General Plc of UK named "India First Life Insurance Co. Ltd". Our stake in the venture is 30% while Bank of Baroda holds 44% and Legal and General Plc holds 26% stake. Our investment in the life insurance venture is _ 187.50 Crore.

Banking subsidiary in Malaysia: the Bank, along with Bank of Baroda and Indian Overseas Bank, has entered into a tie up for setting up a banking subsidiary in Malaysia. the Banks stake in the venture is 25%, amounting to RM 82.50 Million (book value _ 143.28 Crore), in a total subscribed capital of RM 330 Million (approximately _ 556.72 Crore @ 1 RM = _ 16.8703 as on 31.03.2018). the joint venture viz. INDIA INTERNATIONAL BANK (MALAYSIA) BHD commenced business on 11.07.2012. Treasury & Forex Business: the Bank is an ‘Authorised Dealer, to deal in foreign exchange business through 56 designated ‘B category branches of the Bank. the Bank has speed remittance arrangements with an Exchange House based in Gulf. 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 the year 2017-18, the Bank recorded a merchant turnover of _ 38,811.11 Crores in Forex, when compared to _ 34,820.3 Crores during the year 2016-17.

? During the year 2017-18, the profit on Forex transactions is _ 397.68 Crores when compared to _ 382.19 Crores during the year 2016-17.

? the Bank recorded Inter-Bank turnover of _ 10,14,325.95 Crores during 2017-18,when compared to _ 5,76,024.16 Crores during 2016-17.

? Export finance of the Bank stood at _ 4,223.81 Crores as on 31.03.2018, when compared to _ 4,176.23 Crores as on 31.03.2017.

? the bank made a trading profit of _ 10.94 Crores during the year 2017-18, when compared to _ 9.27 Crores during the year 2016-17.

CREDIT CARD BUSINESS: Our Bank is a Pioneer in Credit Card Business, both as Issuer and Acquirer (merchant Business) since 1981. At present, our Card base is 236853 as against card base of 168393 for the year ended March 2017 showing a growth rate of 40.65% for the year ending March 2018. the turnover of Credit Cards has increased from _ 834.42 Cr for the Year ended March 2017 to _ 1170.51 Cr for the Year ended March 2018 showing a growth rate of 40.27%. the division has made a net profit of _ 37.76 Cr. For the period ended March 2018 as against _ 25.17 Cr. in the previous year showing a growth rate of 50.01%. 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. (Merchant Banking registration cancelled in 2017-18) the Bank is attending to the requests and redressing the grievances of the shareholders 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 2017-18 the Bank has raised _ 1100 Crores and _ 1890 Crores under Equity Capital from Government of India in Preferential basis.

Raising of debt capital for the Bank: During the Financial Year 2017-18, the Bank has raised the following debt bonds:

Additional Tier I Bonds 9.20% _ 500 Cr
Tier II Bonds 7.98% _ 1000 Cr

Rating of Debt Bonds and Certificate of Deposits borrowings of the Bank: the Bank is availing the services of M/s.CARE Ratings India Limited, M/s.Brickwork Ratings Pvt. Limited, M/s.India Ratings & Research Pvt. Ltd and M/s.CRISIL Limited for rating of the Debt Bonds and CD Issues of the Bank.

Holding of General Meetings: the 17th Annual General Meeting of shareholders of the Bank was held on 21.07.2017 and obtained their approval for adoption of annual accounts of the Bank for the FY ended 31.03.2017, special resolution on raising of capital through Qualified Institutional Placement, Follow-on Public O_er, etc. Department also conducted EGM on 06.05.2017 for Preferential issue and on 12th March 2018 for Election of shareholder Directors.

Compliance with SEBI Regulations / Guidelines and provisions of Listing Regulations: the Bank has complied with the SEBI Regulations / Guidelines issued from time to time. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have come into effect from 01.12.2015. Henceforth, the same are complied with. the bank is Transferring Unpaid /Unclaimed dividend amount to Investor Education and Protection Fund (IEPF).

Application Supported by Blocked Amount (ASBA): SEBI vide Notification dated 10.11.2015, has mandated that all the investors applying in a public issue shall use only Application Supported by Blocked Amount (ASBA) facility for making payment. ASBA facility was enabled on August 24th, 2009 through our bank. As on March 31st, 2018, all branches (2911) of the Bank across pan India were enabled to accept ASBA applications. We have also extended the facility through our Net Banking Channel where customers can bid online hassle free. 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: the 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. During the financial year 2017-18, total New Business premium ( including Retail and Group business) of _ 190.88 Crore was mobilized. Renewal premium of _ 214.31 Crore was collected upto 31.03.2018. Bank earned commission of _ 29.40 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 Cigna TTK Insurance Co Ltd for Health Insurance. During the year the Bank has mobilized the premium of _ 148.25 Crore and earned a commission of _ 23.89 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 _ 1.69 Crore.

Fee Based Income: Bank has earned fee based income of _ 241.86 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 1984 Demat a/cs and 1668 trading accounts in FY 2018-19 and earned a commission of _ 38.57 Lakh. IT Initiatives: During FY 2017-18, our Bank has taken the following I.T. initiatives to improve Customer Service: AB-TEJ - Mobile Banking Application: the new Mobile app AB-Tej was launched on 29.05.2017. is app is user friendly and empowered with more security features. Initially the app was launched with basic features and subsequently many customer centric features were enabled. Revamping of Internet Banking (FEBA): Bank has upgraded the earlier Internet Banking with the latest version offered by M/s Infosys. is new version has features like Bulk NEFT/RTGS facility, widgets & dashboards, better User Interface (UI), better user security etc. Bharat Bill Payment System (BBPS): Bharat Bill Payment System (BBPS) was enabled with Internet Banking and released to customers. BBPS is an integrated and interoperable bill Payment Service for customers across geographies, initiated by RBI through NPCI.

IMPS through SpeedPay App is enabled for BSNL retailers on 18th April, 2017: IMPS services are extended to Speed Pay App users through new IMPS gateway from 18th April, 2017. Using this service Speed Pay app users can transfer their money from their wallet/ prepaid card to their Bank accounts.

APMIP - AP Micro Irrigation Project, Web Integration and Collection: AP Micro Irrigation Project under Department of Horticulture AP, sanctions differential subsidy to farmers on farming equipments. APMIP will verify the application and approve the percentage of subsidy then the balance non-subsidy amount to be paid by the farmer. Necessary modalities have been customized for collecting non-subsidy portion and crediting of subsidy upon receipt form APMIP.

UPAVP - UP Awas Vikas Parishad, Web Integration and Collection:

Bank has developed Web API integration for receiving payment from customers for registering for a_ordable housing project. the challan details will be fetched using Web API integration between Bank and UPAVP server and payment is made. On verification of the payment a confirmation is sent to UPAVP.

SB account opening with OTP based e-KYC: As per RBIs amendment to e-KYC guidelines, OTP based e-KYC was introduced and to comply with the same, a new scheme SBGOT has been created in Finacle for account opening using OTP to the registered mobile number with UIDAI.

Aadhaar Authentication through Branch, WEB Site, ATM, Cash Recyclers, ABTEJ & Micro ATMs: Based on PMLA guidelines issued by KYC AML dept. H.O for Aadhaar authentication of customers, facility is enabled in HEKYC menu for Aadhaar authentication of existing/new customers using Biometric/ OTP. Facility has also been enabled for Aadhaar authentication using OTP through Alternate Delivery Channels viz. website, ATMs, Cash Recyclers ABTEJ & Micro ATMs using which customers without visiting the Branch can self-authenticate themselves using the OTP based e-KYC service provided by UIDAI.

Credit Card Bill Payment by Non AB customers through NEFT/RTGS/IMPS using Card Number: Facility has been enabled for payment of Credit Card dues by Non-Andhra Bank customers through NEFT/RTGS/IMPS using Credit card number in the beneficiary account and IFSC CODE as ANDB0000782. is enables credit to the proper card account thereby avoiding any customer complaints and inconvenience. e-Mandate: e-Mandate is an electronic mandate through which customer by himself provides the authorisation to debit his/her account to any corporate or financial institution without providing physical mandate or cancelled cheque. Destination bank module for e-Mandate solution has been developed in-House. An SMS alert will be sent to the customers and Mandate registration charges will be debited to the customers account.

EVC (Electronic Verification Code)- rough Bank Account Number

We have successfully integrated to pre-validate bank account through Andhra Bank while e-_ling the IT return through http://www. incometaxindiae_ling.gov.in. the facility of EVC through Bank Account number is extended to all Andhra Bank customers whose Mobile number & PAN number are seeded to customer id.

NETWORK EXPANSION: During the Financial Year 2017-18, Bank opened 4 Branches and added 80 ATMs/ BNAs/ CRs. With this, as on 31.03.2018, Bank had 6958 Delivery Channels consisting of 2911 Branches, 4 Extension Counters, 34 Satellite Offices and 4009 ATMs including BNAs/ CRs spread over 26 States and 3 Union Territories. the Bank has 47 Specialized Branches catering to the needs of the specific segments of clientele. the Bank also has ONE Representative (overseas) Office at Dubai (U.A.E) (opened in May 2006).

Population Group Wise classification of Branches

Sl. No. Category Number % to total
1 Rural 745 25.59
2 Semi-Urban 771 26.49
3 Urban 665 22.84
4 Metro 730 25.08
TOTAL 2911 100

the Bank had 47 Specialized Branches, as detailed hereunder:

S.No. Category of Specialized Branches No. of Brs.
1 Specialised SME Branches 18
2 Specialised Argicultural Finance Branches 2
3 Specialised Agri - Hitech Branches 6
4 Specialised Housing Finance Branches 4
5 Specialised Personnel Banking Branches 4
6 Specialised NRI Branches 3
7 Corporate Finance Branches 2

 

8 Auto-Tech Finance Branch 1
9 Overseas Branch 1
10 Asset Recovery Management Branches 5
11 Small B Branch 1
TOTAL 47

Presence in Minority-Dominated Districts: At the end of 31.03.2018 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 11.50 % as on 31.03.2018.

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. As a part of moving to advanced approach and as a part of the integrated risk management solution the policy has been divided into the following policies. 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. Loan Recovery & NPA Management Policy. vii. Risk Based Pricing and Performance Management Policy. viii. Operational Risk Management Policy. ix. Market Risk Management Policy. x. Asset Liability Management Policy. xi. New Product Approval Policy. xii. Integrated Risk Management 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. Policy on Hedging of foreign currency exposures of the borrowers.

5. Outsourcing Policy.

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 _ 5 Crore and above. the Rating cell vets the internal rating given by the branch / Zonal office / Circle Office and assigns final rating.

? the 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.

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 prudential 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. Modi_ed 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 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 Standardized 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. is 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. is 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 confirm to these requirements in a phased manner by March 31, 2019.

Regulatory Capital As % to RWAs
(i) Minimum Common Equity Tier 1 ratio 5.5
(ii) Capital conservation bu_er (comprised of Common Equity) 2.5
(iii) Minimum Common Equity Tier 1 ratio plus capital conservation bu_er [(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 bu_er [(vii) + (ii)] 11.5

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 sectoral, geographical and borrower wise concentration. Bank is using statistical parameters like Herfindahl-Hirshman Index (HHI), Gini Coefficient, and Rosenbluth 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 4.5% 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 dra_ guidelines issued for 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 _ 28124.36 Cr as on 31.03.2018. Gross NPAs as a percentage to Gross Advances stood at 17.09% while Net NPAs as a percentage to Net Advances stood at 8.48%. the Provision Coverage of NPAs as on 31.03.2018 was 60.90%. Total reduction in NPA accounts amounted to _ 3410 Crore.

Position of Non-Performing Assets (_ in Crore)
2016-17 2017-18
Gross NPAs at the beginning of the year 11443.63 17669.98
Additions during the year 9410.34 13864.23
Reduction during the year 3183.99 3409.85
Gross NPAs at the end of the year 17669.98 28124.36
Net NPAs 10354.81 12636.87

the segment-wise distribution of NPAs as on 31.03.2017 is as under:

Segment-wise Non-Performing Assets (_ in Crore)

Segment Amount NPA % to ADV*
I. Agriculture 1269.48 4.14%
II. MSME 4364.92 12.95%
III. Retail Credit 690.85 1.78%
IV. Large & Mid Corporate 21799.11 35.57%
Total 28124.36 17.09%

Provisions held under different classes of NPAs are as under:

Table 17: Provisions held for Non-Performing Assets (Excluding floating Provisions of _ 13 Cr.)

(_ in Crore)
Nature of Asset Outstanding Provision Held
Sub-Standard Assets 6241.56 1191.01
Doubtful Assets 21072.27 13454.97
Loss Assets 810.53 797.79
Total 28124.36 15443.77

Restructuring mechanism: During FY 2017-18, 5 accounts with outstanding amount of _ 141.11 Cr were restructured in terms of the restructuring packages. the total balances in restructured accounts as at the end of March 2018 stood at _ 1711.19 Crore in 27 accounts. 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. Techno Economic Viability (TEV) Cell: the Bank has a Techno Economic Viability (TEV) Cell which is independent of the credit processing & sanctioning Departments. the Cell undertakes preparation of project Information Memorandum (PIM), conducting Techno Economic Viability (TEV) study and Debt arrangement (loan Syndication) for corporate clients. the cell has earned a fee based income of _ 103.71 lakhs (including ST & GST of _ 11.57 lakhs) during the FY 2017-18. (Previous financial year was _ 120.89 lakhs) 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. is 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 2017-18, department has met the targets prescribed in audit plan and completed:

? Annual RBIA inspection of 1917 branches

? SIFA audits of all controlling offices (HO/CO/ZO), other units like RRB, FSCS Centres, Service Centres, Currency Chests are completed in time.

? I&AD has caused Verification of SWIFT messages in Documentary Credit / trade finance messages in all B category branches and at IIB by Concurrent auditors.

? Significant changes were effected to RBIA&RBCA audit policies as per the suggestions of RBS and as per the guidelines of RBI to improve standards of audit system in our bank.

? To assess the Inherent Risk of the branches Watch List with certain parameters introduced.

? Introduction of Committee approach for closure of Inspection files of RBIA & RBCA.

? Verification of SWIFT messages and the underlying transactions on daily basis has been introduced.

? Demonetization Audit has been conducted at all branches besides Regular audits. Identification of branches for conducting Concurrent Audit and appointment of fresh auditors for more than 200 Branches.

? M/s Digital Age Strategies Pvt Ltd was selected for auditing CBS and Surrounding Applications and Related Infrastructure, and Audit is in process. Request for proposal process commenced for EFRMS(Enterprise Fraud Risk Management Solution) for selection of Bidder.

O_ Site Monitoring Cell (OSM Cell) formed based on the report submitted by Shri Basanth Seth 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 defficiencies 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 regarding the transactions which they find critical or suspicious. OSM alerts were implemented for 67 items for better monitoring of Transactions. 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 this Financial Year FY 18, 243 secured assets were sold and an amount of _ 164.82 Cr was recovered by selling the secured assets under SARFAESI Proceedings. Total cash recovery effected by the bank during the FY 2017-18 under SARFAESI Proceedings is _ 660.41 Cr (inclusive of cash recovery on sale of assets to ARC, closures, up- gradations and part recoveries).

? Lok Adalats: Recovered an amount of _ 62.87 lakhs in 464 accounts during the FY 18.

? RTI Act: 1203 Requests and 167 Appeals were received under RTI Act during the financial year 2017-18. All the Requests and Appeals were disposed off on time.

Customer Service: Bank received 2,14,138 complaints through various channels viz. Public Grievance Redressal System (Portal), Banking Ombudsman and Departments like NEFT Cell, RTGS, Credit Card, CPPC, Retail Credit, MSME, MBD, Priority Sector, ATM Cell, Marketing & HR (outsourced complaints) and SMS Upset system during the year 2017-18 and resolved 2,12,567 (98%) complaints. As on date all the pending complaints pertaining to the year 2017-18 have since been resolved.

Human Resources Management

Manpower Planning: To augment the existing manpower, 336 general officers and 550 clerks were inducted during the financial year 2017-18.

Induction of new recruits: rough revised ‘PO-On boarding system, the newly recruited probationary officers are provided intensive trainings on ‘field and forum approach. Competency mapping is done by closely monitoring these POS duly carrying out skill mapping exercise during the training programs conducted at our Apex College. Career Progression: Bank ensured career progression by considering 1216 promotions in all cadres put together during 2017-18. the entire promotion exercise was successfully completed in time as per the directions of the Board. Skill Upgradation & Training:With an objective to improve the core capabilities and competencies of employees on product awareness so_ skills development and to bridge the skill gaps in key areas like Credit appraisal, Credit Monitoring/follow up, Recovery, Risk Management, Forex, IT., etc, various training programmes were conducted and provided in-house training to 10441 employees. With an aim to enhance the knowledge and productivity levels of the officers, 390 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, 17 Officers were also sent to external programmes conducted abroad.

E-learning: For ensuring extensive reach of learning facility, and to develop a learning culture among all staff members, Bank has developed an ‘E-learning portal for updating their professional knowledge. Around 200 e-lessons are uploaded into this portal. Besides this periodical on-line tests on different subjects are being conducted for continual upgradation of skills of employees.

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. As per the Capacity Building Policy, it has been made mandatory for certification of the staff manning key functional areas. HR Digitalisation: Online implementation of leaves during the financial year 2017-18.

Mentoring: the mentoring concept which has been designed with an objective to imbibe our Banks culture, systems and procedures etc among the new entrants, has been successfully implemented during the financial year 2017-18.

Staff Strength as on 31.03.2018:

Category Strength % to total
Officers 11174 56%
Clerks 5723 29%
Sub Staff* 3024 15%
Total 19921

*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 4155 and 1691 respectively in total workforce of 21099 working in the Bank as on 31st March 2018. Out of the total of 11174 Officers, 1982 belong to SC category and 954 belong to ST category. Bank has nominated a General Manager as Chief Liaison Officer for SCs & STs at Head Office and all Zonal Managers as Liaison Officers 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 5741 out of the total work force of 21099 working in the Bank as on 31st March, 2018. Bank has nominated a General Manager as Chief Liaison Officer for OBCs at Head Office and all second line executives at Zonal Office as Liaison Officers 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.

Di_erently Abled Persons: Our Bank is providing 3% reservation to the Persons with Disabilities in direct recruitment in all cadres on horizontal basis till 18.04.2017. the 3% posts are distributed amongst 3 categories of Persons with Disabilities i.e., Blindness or low vision (B/LV) - 1%; Hearing Impairment (HI) - 1%; Loco motor disability or cerebral palsy (LM) - 1%. the representation of Persons with Disabilities is 590 (2.79%) out of the total workforce of 21099 as on 31st March, 2018. As per new Act " the Rights of Persons with Disabilities Act, 2016, with effect from 19.04.2017, every appropriate Government shall appoint in every Government establishment, not less than Four per cent (4%) (as against the existing 3%) of the total number of vacancies in the cadre strength in each group of posts meant to be filled with persons with benchmark disabilities of which, one per cent each shall be reserved for persons with benchmark disabilities under clauses (a), (b) and (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, dwar_sm, 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 (f) including deaf-blindness in the posts identified for each disabilities.

Accordingly, our Banks Board approved to adopt the revised guidelines on Reservation Policy as per the new legislation on " the Rights of Persons with Disabilities Act, 2016" and implement the same in all the recruitment processes with immediate effect.

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, ought for the week and Hindi Workshop material etc have also been kept in our Portal. Our Bank won total 73 prizes in various Hindi Competitions conducted under the aegis of TOLIC.

Head Office was awarded First Prize in Use of Hindi in Hyderabad by Ministry of Home Affairs

VIGILANCE: During the Financial Year 2017-18, 9696 number of employees were enlightened on Preventive Vigilance aspects in 316 different training programs/sessions held at Apex College-Hyderabad, Staff Training College – Vishakhapatnam and Zonal Offices.

? Vigilance Department ensured introduction of 15 major systemic improvements for minimizing the occurrence of frauds.

? Department has investigated into and disposed off 73 complaints received during the year.

? Preventive Vigilance Inspection has been conducted in all the branches of the Bank to ensure implementation of extant guidelines. Reports were reviewed by the department and necessary instructions have been issued to the branches for compliance.

"Vigilance Awareness Week" Vigilance Department observed "Vigilance Awareness Week" from 30th October to 4th November 2017 as per the directions of Central Vigilance Commission. the theme for the Week was "My Vision – Corruption free India". As part of the Vigilance Awareness Week, Andhra Bank organized a special programme which was attended by all the Bankers and also students of School/Colleges along with their parents/teachers at Hyderabad on 3rd November, 2017 where Honble Central Vigilance Commissioner Shri K V Choudary, graced the occasion. Bank has conducted more than 3600 programmes to create awareness among the public about ill effects of corruption and promoting integrity. Bank has conducted 3248 Awareness Gram Sabhas across the country where more than 70,000 citizens have participated. 351 Essay Writing/Elocution/Debate competitions were organized in schools and colleges to give wide publicity to propagate the message/theme of Vigilance Awareness Week. Bank conducted Walkathon at Hyderabad and other places during VAW 2017 where a large number of people have participated. A free medical camp at Hyderabad in coordination with KIMS Hospital was organized for the participants. An online test on Preventive Vigilance Measures was conducted where 3936 staff members have taken the test. News Bulletin "SAVDHAN" is being published quarterly for updating the staff with latest information on frauds and measures to safeguard themselves as well as Bank. " the Right Direction – A Key Note from CVOs desk" is being circulated to all branches and offices of the Bank to ensure enhancement of Vigilance Culture and Vigilance Compliance level in the Bank.

Major New Initiatives of Vigilance Department: An Online Compliant Registration Mechanism (OCRM) – [Whistle Blower Mechanism] has been devised by the Vigilance Department to enable the employees to register their complaint online as per Banks "Whistle Blower Policy", to raise concerns about any allegation of corruption or of misuse of offices directly to the CVO. the OCRM works on Straight rough Processing (STP) system.

A new methodology for ranking performance of Zonal Offices has been devised wherein performance of Zones in respect of Vigilance Compliance level at Zonal Offices and the Branches under their jurisdiction would be assessed and ranked based on 23 key parameters covering major aspects in Vigilance Compliance.

Faculty Support: Chief Vigilance Officer interacted with the participants of various programmes at Staff College and expressed his concerns on vigilance compliance. Department has extended faculty support to Apex College, Hyderabad on 5 occasions wherein 399 participants were imparted inputs to on Vigilance related matters. Broadcasting messages on Morals & Ethics through SMS amongst all employees to inculcate Vigilance Culture among them which are Essential Behavioral Traits that strengthen the organizations "Brand Equity".

Vigilance Training: Officers of Vigilance Department and staff from controlling offices and branches are being deputed for various training programme including External Training Programmes on Vigilance related matters.

Promotion of Integrity Pledge – New IT initiatives: Taking of Integrity Pledge propagated though various channel with the use of technology like Interactive Voice Response System, Placing Integrity Pledge Banner on Internet, Intranet, ATM Screen and Social Media (FB & Twitter).

Bank received "Vigilance Excellence Award - 2017 in the category of Timely Completion of Disciplinary Proceedings" from Central Vigilance Commission.

LEAD BANK SCHEME: Andhra Bank is the Convener Bank for State Level Bankers Committee, Andhra Pradesh since 1984. Consequent to re-organization of AP into Telangana & Residual Andhra Pradesh w.e.f 2nd June, 2014, responsibility of Convenership of SLBC of residual AP continued to be with Andhra Bank. Andhra Bank is having Lead Bank responsibilities in __een districts, viz. Srikakulam, East Godavari, West Godavari, Guntur in Andhra Pradesh, Ganjam, Gajapathi districts in Odisha, Siddipet, Sircilla Rajanna, Jagtial, Peddapally, Mancherial, Wanaparty, Nagarkurnool, Jogulamba Gadwal and Warangal rural in Telangana State. Bank is discharging the responsibilities in implementation of Lead Bank Scheme. So far 202 SLBC meetings have been organized including 19 SLBC Meetings in the reorganized 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, NABARD and various other Organizations on different subjects. the State Credit Plan for 2017-18 was launched by the Honble Chief Minister of Andhra Pradesh on 16.06.2017. SLBC has taken proactive role in formulating & organizing the following sub-committee meetings as requested by GoAP.

? Agriculture, Horticulture, Livestock and Aquaculture Development

? MSME, Govt. Sponsored Schemes and SHGs

? Service Sector and Industries

? Digital Transactions (Aadhaar Seeding, RuPay Cards distribution etc.)

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 i.e., 18004258525 & 18004251525 exclusively for MUDRA operating from Vijayawada from 01.02.2017. Website: An exclusive website is set up for SLBC of Andhra Pradesh with URL www.slbcap.nic.in for the 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

Pradhan Mantri Jan Dhan Yojana (PMJDY): Bank has successfully implemented PMJDY in 24.01 lakh accounts by 31.03.2018. Total deposits of _ 331.43 Crore have been mobilized vis--vis _ 326.33 Crores during 2016-17 with an average balance of _ 1,432.33 as against _ 1346.57 the previous year. Zero balance accounts stood at 16.09% as against 19.73% as on 31.03.2017.

Aadhaar Seeding: Bank has achieved 78.46% of Aadhaar seeding in active PMJDY accounts. Bank has also achieved 75.12% of Aadhaar seeding in active CASA accounts. Bank has achieved 64.44% in Aadhaar Authentication which is highest among the industry. Bank has achieved 74.88% under Mobile seeding in active SB accounts Over Dra_ Facility under PMJDY: the last mile of PMJDY is the financial channel by extending the overdra_ to the needy. About 3,50,634 customers are eligible for Over Dra_ and bank have sanctioned Over Dra_ to 51,299 customers. 14,290 customers availed over dra_ to the extent of _ 192.30 lacs. Our Bank is the pioneer in introducing OD facility through ATMs and Micro ATMs.

Atal Pension Yojana (APY): Bank enrolled 2,34,879 accounts during the financial year and with average per branch enrollment of 81 accounts, which is top among all Banks PAN India. Bank earned total commission of _ 446.97 lakhs during the FY 2017-18.

Activation of Bank Mitras: Bank has successfully deployed Bank Mitras in all 1,777 Sub Service Areas and also deployed 287 Bank Mitras in urban locations and also at One Stop Shop locations in the states of Andhra Pradesh and Telangana. Bank mitras are providing different Banking Services at these points. All Bank Mitras are provided with interoperable devices which are capable of taking up Rupay transactions and AEPS transactions. Andhra Bank stands 1st among all Banks in conducting AEPS in the State of Andhra Pradesh. Aadhaar Enabled Public Distribution System (AEPDS): Bank has successfully implemented Aadhaar Enabled Public Distribution System (AEPDS) in 5 districts of Andhra Pradesh state (in Krishna and 4 Lead Districts viz; Guntur, East Godavari, West Godavari and Srikakulam) in which the Fair Price Shop dealers will provide the provisions in cashless mode on an average, around 216.36 lakh AEPDS transactions were happened during the FY 2017-18.

Establishment of Aadhaar Enrolment Centres: DFS, Ministry of Finance, Govt. of India has advised all Banks to establish 1 enrolment centre for every 10 branches preferably in the area where more talukas are covered. As per existing branch network, Bank needs to establish 290 enrolment centres PAN India. Bank has so far established 275 Aadhaar enrolment and updation centres.

Financial Literacy and Credit Counselling Centers: Bank has approved for opening of 5 new FLCCs one at Sirguppa in Karnataka state, one at Srikalahasthi in Andhra Pradesh state and each one at Jagtial, Sircilla, and Siddipet in Telangana state. 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 _ 169.88 Lacs before Income Tax and a Net Profit of 123.11 Lacs a_er Income tax during the year ending 31.3.2018, with this the negative net worth of the company has been brought down from _ 695.47 Lacs to _ 572.36 Lacs as on 31.03.2018. Bank has one sponsored Regional Rural Bank namely Chaitanya Godavari Grameena Bank located in Guntur (Andhra Pradesh), covering the districts Guntur, East Godavari and West Godavari with 204 branches. the total business stood at _ 8095.98 Crore, and Net Profit A_er Tax is _ 81.90 Crore as on 31.03.2018. Percentage of Gross NPA to Average Advances is 1.04%.

SECURITY ARRANGEMENTS: Technology is adapted to up-grade security arrangements at branches, currency chests and ATMs. All branches in the Bank are provided with CCTV system for surveillance. Installation of Integrated Intruder Burglar Alarm System (IIBAS) by replacing conventional alarm system is completed in 91% of branches and is in progress at the remaining branches. Centralized Alarm Monitoring System is established in Head Office to monitor functioning of Integrated Intruder Burglar Alarms installed in branches. Installation of e-surveillance replaces physical guarding at ATMs and saves revenue expenditure. Its installation is completed in 86% of ATMs and is in progress at the remaining ATMs. Night watchman is deployed at non-strong room branches to protect Banks assets. E_orts are on to ensure for maintaining all security gadgets in working condition at all times and minimize crime rate against the Bank. NRI CELL: the NRI Cell was set up with a view to serve as an effective channel of communication between the Bank and its NRI Clientele thereby increasing NRE Deposits. the Cell supports and guides the branches & Representative Office in Dubai thereby ensuring betterment in Customer Service. During the Financial year, the Bank has closed its representative office in New Jersey. NRI Cell provides useful informationrelatedtoBanking&ForeignExchangetoNRIsthroughNRIBulletin(ABConnect)everymonth.Atpresentnearly54915NRI Customers (both existing and prospective) are being connected and accessing the information provided in the NRI Bulletin (AB Connect). Total NRI business of the Bank increased from _ 3163 Cr as on 31.03.2017 to _ 3496 Cr as on 31.03.2018, i.e. a growth rate of 10.53%. the total Deposits under NRE segment comprising of SBNRE, TD NRE and FCNR (B) Deposits increased from _ 2862 Cr as on 31.03.2017 to _ 3085 Cr as on 31.03.2018 registering an annual growth rate of 7.79%.

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

? Utilization of Ad Space at Rajiv Gandhi International Airport for publicity on our products & services for a period of one year.

? Full train branding on 5 train rakes (80 coaches) of Narayanadri / Falaknuma Expresses which ply between Tirupati, Secunderabad & Howrah – for 6 months.

? Advertisement through Sri Venkateswara Bhakti Channel (SVBC) during live programmes.

? Sponsorship of FIBAC-2017 conducted by FICCI & IBA jointly.

? Sponsorship of Partnership Summit (CII) held at Visakhapatnam and

? Putting up of Banks Stall at All India Industrial Exhibition at Hyderabad which run for 45 days, apart from several others.

CORPORATE SOCIAL RESPONSIBILITY (CSR): the Bank sanctioned an amount of Rs,1.71 crores under Donations Budget to different institutions / trusts during the financial year and gained substantial mileage for the Bank. the brand image of the bank also enhanced. the donation /CSR budget was distributed among all Zones of the bank with an objective to spread CSR activities pan India. Notable CSR activities of the bank include

? Donation to CM Relief Fund, Govt. of AP an amount of _ 31 lakh

? Donation to CM Relief Fund, Govt. of Gujarat an amount of _ 25 lakhs.

? Donation of _ 30 lakhs towards cost of 24 Bicycles and Bicycle shelters to set up Public Bike Sharing System in AP Amaravathi Capital Region

? Donation to Sports Authority of India for development of sports.

the other major CSR activities are donations to charitable trusts, orphanages, municipalities etc. for undertaking social measures. 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. is 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 2017-18:

? Our bank has been presented " Award of Excellence for RSETIs" (First Prize) by Ministry of Rural Development, Govt. of India for FY 2014-15 & FY 2015-16 under category ‘C during National RSETI DIWAS held in New Delhi on 07.06.2017.

? the Bank Received "Enterprise Financing Index Award 2017" from Industries and Commerce Department, Govt. of Andhra Pradesh, on the occasion of International MSME Day.

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

? APY – Brand Ambassador

? APY – Honor the Best

? APY - People First campaign

? APY - Transformative Leaders-I&II

? APY- Makers of excellence award and

? Best Performing Bank among the PSBs for enrolling maximum number of APY.

? Our bank received the "Best Bank Award for Electronic Payment Systems" among Mid-Sized Banks13th IDRBT Banking Technology Excellence Awards.

? IBA-Our Bank has received IBA award under category ‘IT Risk and Cyber Security initiatives for the FY 2017-18 on 23 February 2018.

? Infosys- Finacle Client Innovation Awards 2017: Our Bank has received award under category ‘Process Innovation category Highly Commended award for ‘Optimizing credit card issuance process on 28th Nov 2017.

? IDRBT- Technology Excellence Award – Our Bank has received ‘Best Bank Award for Electronic Payment Systems among Mid-Sized Banks on 1st Sept 2017 at 13th IDRBT Banking Technology Excellence Awards.

Indian Accounting Standards (Ind AS) – Progress: Bank shall comply with the Indian Accounting Standards (Ind AS) for financial statements for accounting period ending 31st March 2019 and therea_er in accordance with the guidelines of Reserve Bank of India.In order to facilitate smooth transition to the application of Ind AS, Bank is in the process of identifying the changes required to be made in the IT system & other policies to comply with Ind AS.

CHANGES IN THE BOARD DURING THE YEAR: the following changes took place in the Composition of the Board during the FY 2017-18:

? Tenure of Shri Suresh N Patel, Managing Director & CEO of the Bank came to an end on 31.12.2017 on his retirement on superannuation.

? Tenure of Shri SK Kalra, Executive Director of the Bank came to an end on 31.08.2017 on his retirement on superannuation.

? Tenure of Shri Anandrao Vishnu Patil, Govt. Nominee Director came to an end on 27.04.2017.

? Ms Anjana Dube, Govt. Nominee Director was nominated on the Board of Directors of the Bank on 28.04.2017.

? Shri Kul Bhushan Jain, Executive Director was appointed on the Board of Directors of the Bank on 09.10.2017.

? Shri Balgopal Mahapatra, Non-o_cial Non-Executive Director (under CA Category) was nominated on the Board of Directors of the Bank on 27.12.2017.

? Shri A. Krishna Kumar, Director was re-elected as Director for a period of three years w.e.f. 14.03.2018 to 13.03.2021 from amongst shareholders other than Central Government.

? Shri G. Sivakumar, Director was re-elected as Director for a period of three years w.e.f. 14.03.2018 to 13.03.2021 from amongst shareholders other than Central Government.

Board wishes to place on record its appreciation of services rendered by the above members of the Board during their tenure.

DIRECTORS RESPONSIBILITY STATEMENT:

the Board of Directors hereby states 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 31.03.2018 and of the profit and loss of the Bank for the financial year ended on 31.03.2018.

? Proper and sufficient care 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: Hyderabad Kul Bhushan Jain Ajit Kumar Rath
Date: 22.05.2018 Executive Director Executive Director