Canara Bank Management Discussions.

I. ECONOMIC ENVIRONMENT

During the financial year, the indian economy exhibited signs of turnaround, with most macroeconomic indicators pointing towards sustained recovery. Notwithstanding the challenges posed by the lingering effect of demonetization, implementation of Goods and Services Taxes (GST) and rising real interest rate, India became the fastest growing economy in the world, even surpassing China in the second half. As per the provisional estimates released by the Central Statistical Organization (CSO), Indias Gross Domestic Product (GDP) grew by a healthy 6.7% y-o-y in 2017-18, albeit slower compared to 7.1% in the previous year. GDP growth was largely driven by robust performance of the services sector, which grew by 7.9% y-o-y as against 7.7% y-o-y in the previous year. Despite headwinds, industry growth was also steady at 5.5% y-o-y compared to 5.6% y-o-y previously. Within industry, while manufacturing growth slowed to 5.7% y-o-y (prior 7.9%) on account of a transient drag on coal and cement industry.

Construction activities posted solid growth of 5.7% (prior 1.3%) as the effects of demonetization waned. Meanwhile, growth in agriculture dipped lower to 3.4% y-o-y compared to 6.3% in the previous year owing to poor monsoon and fall in food prices, which in turn manifested into lower consumer inflation, particularly in the first half of FY18.

Retail inflation as measured by Consumer Price Index (CPI) remained broadly tamed averaging 3.6% during the first half of FY18. However, rising crude oil prices, adverse base effect and 7th Central Pay Commission HRA impact drove inflation higher in the second half. CPI inflation was up at 4.28% in March 2018 as against 3.89% in March 2017. However, Wholesale Price Index (WPI) eased to 2.47% in March 2018 compared to 5.30% in March 2017. The divergence between CPI and WPI narrowed during the year, pinpointing that the primary inflation driver was no longer food prices.

While growth turned around and inflation remained tamed, the economy continued on the path of fiscal consolidation. Fiscal deficit for 2017-18 was maintained at 3.5% of GDP but it is expected to narrow to 3.2% of GDP in 2018-19, according to Governments Union Budget target.

On the external sector front, both exports and imports showed improvement compared to the muted performance seen in the previous two years. As per the provisional data released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S), total exports rose to US $303 billion compared to US $276 billion in the last year. Total imports stood at $460 billion against US $384 billion in the previous year. A faster pace of increase in imports led to widening in trade deficit to US $156 billion in 2017-18 compared to US $109 billion in the previous year. This along with muted capital flows pushed the Current Account Deficit (CAD) higher to 1.9% of GDP from 0.7% GDP in the last year. Despite this, vulnerabilities on the external front remained well contained and India continued to be a preferred destination for FDI flows. 2017-18 was also a year of structural reforms with the implementation of GST, major thrust on Insolvency and Bankruptcy proceedings and Governments massive bank recapitalization plan. The reform initiatives have already helped the India jump 30 spots in Worlds Ease of Doing Business and will help the economy anchor to a robust and sustained growth trajectory.

Economic Environment in Karnataka

As per the Economic Survey of Karnataka, the Gross State Domestic Product (GSDP) grew higher by 8.5% during 2017-18 (2011-12 price series) compared to 7.5% in the last year. As an economically developed State in India, Karnataka contributes 7% to the countrys GDP.

Canara Bank, owing its origin to the State, is continuing its key position in the State. The Bank has been playing a leading role in the State through its 986 branches and 2146 ATMs, spread across the State. The State contributes about 20.6% to total domestic business of the Bank. The total business of the Bank in the State stood at Rs 172808 crore, comprising Rs 102260 crore under deposits and Rs 70548 crore under advances as at March 2018, with a credit to deposit (C-D) ratio of 68.99%.

II. MONETARY AND BANKING DEVELOPMENTS

Growth in key monetary aggregates and money supply in 2017-18 reflected the changing liquidity conditions arising from domestic and global financial environment. The monetary policy stance during the year was primarily to contain inflation and manage liquidity.

The consistent efforts of remonetisation were fruitful and money supply (M3) hit 9.6% growth as against 6.9% in March 2017 and Currency in Circulation (CIC) grew by 37% (from Rs 13353 billion to Rs 18293 billion) as on March 2018.

Aggregate deposits of the Scheduled Commercial Banks (SCBs) grew at 6.7% y-o-y compared to 11.8% growth in the previous year on unfavourable base effect post demonetization period. On the other hand, SCBs credit grew higher by 10.3% as against a lower growth of 5.1%. Continuous hardening of bond yields made bank credit a preferred options for the borrowers. SCBs C-D ratio stood higher at 75.49% as on March 2018 compared to 72.89% as on March 2017.

The asset quality of the banking sector continued to be under stress during the year. This, coupled with some regulatory changes and macroeconomic environment, impacted their profits and profitability. The year 2017-18 saw the following changes in the key policy measures announced by the RBI.

• Repo rate decreased by 25 basis points (bps) to 6.00% and consequently reverse repo rate stood at 5.75% from 6.00%.

• Marginal Standing Facility (MSF) Rate and Bank Rate were aligned 25 bps above the repo rate at 6.25%.

• Cash Reserve Ratio (CRR) was kept unchanged at 4% of Net Demand and Time Liabilities (NDTL) during the year.

• Statutory Liquidity Ratio (SLR) was decreased by 100 basis points to 19.50% during the year.

Changes in Repo Rate and MSF Rate during the year

Effective Since Repo Rate (%) Re- verse Repo rate (%) Cash Reserve Ratio (CRR) (%) of NDTL Statutory liquidity ratio (SLR) (%) MSF Rate (%)
April 06, 2017 6.25 6.00 4.00 20.50 6.50
June 07, 2017 6.25 6.00 4.00 20.50 6.50
August 02, 2017 6.00 5.75 4.00 20.00 6.25
October 04, 2017 6.00 5.75 4.00 20.00 6.25
Decem- ber 04, 2017 6.00 5.75 4.00 19.50 6.25
February 07, 2018 6.00 5.75 4.00 19.50 6.25

RBI made the following major policy announcements/ supervisory review/changes during the year.

• RBI revised Prompt Corrective Action (PCA) framework for banks, effective from 1st April 2017. PCA is triggered when banks breach certain regulatory requirements like minimum capital (CRAR/ Common Equity Tier I ratio), asset quality (net NPA), profitability (return on asset) and Leverage Ratio. RBI has set trigger points on the basis of these parameters. The PCA framework would apply without exception to all banks operating in India including small banks and foreign banks operating through branches or subsidiaries.

• Additional provisions for standard advances at higher than the prescribed rates in respect of advances to stressed sectors of the economy were put in place. The banks were asked to adpot a Board–approved policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors.

• In a bid to provide greater transparency and better discipline with respect to income recognition, asset classification and provisioning (IRACP) as part of its supervisory processes, RBI asked banks to make required disclosures on (a) the additional provisioning requirements assessed by RBI exceeding 15% of the published net profits after tax for the reference period or (b) the additional Gross NPAs identified by RBI exceeding 15% of the published incremental Gross NPAs for the reference period, or both.

• RBI withdrew existing loan-restructuring mechanisms under schemes like SDR and S4As and instead provided for a stringent 180-day timeline for banks to agree on a resolution plan and could be referred for insolvency proceedings in case of a default with effect from 1st March, 2018. The concerned direction also included consistent reporting of the status of stressed assets, speedy implementation of resolution plans and timelines for large accounts to be referred under Insolevncy and Bankruptcy Code (IBC).

• To facilitate timely resolution of stressed assets, RBI decided that the decisions agreed upon by a minimum of 60% of creditors by value and 50% of creditors by number in the Joint Lenders Forum (JLF) would be considered as the basis for deciding the Corrective Action Plan (CAP), and will be binding on all lenders, subject to the exit (by substitution) option available in the Framework.

• GST registered MSME borrowers whose aggregate exposure does not exceed Rs 250 million as on January 31st, 2018 were given relaxation of additional 90 days in NPA recognition.

• As per section 125 of Insolvency and Bankruptcy Code (IBC), 2016, a financial creditor shall submit financial information and information relating to assets in relation to which any security interest has been created, to an information utility (IU) in such form and manner as may be specified by regulations.

• All Scheduled Commercial banks (SCBs) were allowed to participate in Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) within the overall ceiling of 20% of their net worth permitted for direct investments in shares, convertible bonds/ debentures, units of equity-oriented mutual funds and exposures to Venture Capital Funds (VCFs) (both registered and unregistered), subject to certain conditions.

• With respect to Partial Credit Enhancement (PCE) to Corporate Bonds, it has been decided by RBI that to be eligible for PCE from banks, corporate bonds shall be rated by a minimum of two external credit rating agencies at all times and the rating reports, both initial and subsequent, shall disclose both standalone credit rating (i.e., rating without taking into account the effect of PCE) as well as the enhanced credit rating (taking into account the effect of PCE).

• Risk weights and Loan to Value (LTV) ratios of individual housing loans were rationalized and revised.

• As per limits on balances in customer accounts with Payments Banks (PB) sweep out arrangements with other banks, RBI permitted the payments banks to act as Business Correspondents (BCs) of other banks. Under the BC arrangement and with prior specific or general consent of the customer, PB may effect the transfer of funds deposited by the customer into the customers account with another eligible bank, so that the balance in the customers account with the PB does not exceed Rs 100,000 or any such lower amount as specified by the customer. PBs were not given rights to operate or have real-time access to the funds available in the account of the customer at any other bank, including the transferee bank.

• For limiting liability of customers in unauthorized electronic banking transactions, RBI asked banks to put in place appropriate systems and procedures to ensure safety and security of electronic banking transactions carried out by customers. As per the direction, robust and dynamic fraud detection and prevention mechanism, procedures to assess the risks resulting from unauthorized transactions and measure the liabilities arising out of such events, appropriate measures to mitigate the risks and protect themselves against the liabilities arising there from; and a system of continually and repeatedly advising customers on how to protect themselves from electronic banking and payments related fraud were asked to be put in place.

• RBI notified the issue of comprehensive Credit Information Reports (CIRs) in respect of a borrower, furnished to the Credit Institutions by incorporating all the credit information available in all modules like consumer, commercial and MFI, etc., in respect of the borrower.

• Ujjivan Small Finance Bank Limited, Emirates NBD Bank (P.J.S.C), Suryoday Small Finance Bank Limited, Utkarsh Small Finance Bank Limited and Au Small Finance Bank Limited were included in the second schedule to the RBI Act 1934.

• In a significant move, RBI amended the master directions to financial services provided by the banks, wherein no bank shall hold more than 10% in the equity of a deposit taking NBFC, hold more than 10% of the paid up capital of a company, not being its subsidiary engaged in non-financial services or 10% of the banks paid up capital and reserves, whichever is lower.

• Introduced Legal Entity Identifier (LEI) for large corporate borrowers to improve the quality and accuracy of financial data systems for better risk management post the Global Financial Crisis. A LEI is a 20-digit unique code to identify parties to financial transactions worldwide.

OUTLOOK FOR 2018-19:

As per the World Economic Outlook, April 2018 by the International Monetary Fund (IMF), world output (global economy) growth has been projected to improve from 3.8% in 2017 to 3.9% in 2018 driven by strong growth acceleration in Advanced Economies and Emerging Market as well as Developing Economies. The global trade volume has been projected to expand from 4.9% in 2017 to 5.1% in 2018. Growth of Indian Economy was projected to expand from 6.7% in 2017 to 7.4% in 2018. However, there are uncertainties revolving the protectionism stance by major economies, volatile global commodity prices and its ramifications.

RBI, in its second bi-monthly policy review, projected that Indias growth measured by Gross Domestic Product (GDP) to grow by 7.4% in 2018-19, with risk evenly balanced. The headline inflation has been projected in the range of 4.8-4.9% (including HRA) and 4.6% (excluding HRA) in H1 of FY19. For H2 FY19, CPI may be higher at 4.7% (both including & excluding HRA). The improved outlook is backed by several favourable domestic factors like improving capacity utilization, credit off-take and revival in investment activities.

The ongoing structural reforms and regulatory measures undertaken by the Government of India and RBI are expected to augur well for the economy as well as banking sector. Global demand has been buoyant, which will in turn, encourage the export growth and gives further thrust on investment. Rural and urban consumption is expected to stay robust throughout the year. The enabling amendments and policy initiatives undertaken by the Government of India to address resolution of the stressed assets, like, institution of the Insolvency and Bankruptcy Code and empowering RBI to issue directions to a bank or banks with respect to resolution process under the Banking Ordinance have already commenced showing positive results. Moving ahead, subsequent amendments on eccective implementation, ameliorating financials coupled with healthy regulatory environment will revitalize the banks.

CANARA BANK IN 2017-18:

Under various business parameters, Canara Bank performed better during the year in sync with its major thrust areas, viz., increasing retail deposits (including CASA), expanding Retail assets, including Agriculture, MSMEs, Housing and other retail segments, and improving operational financial ratios such as, Net Interest Margin (NIM) and cost of deposits.

FINANCIAL PERFORMANCE

Operating profit of the Bank increased to Rs 9548 crore compared to Rs 8914 crore last year. Due to increase in provisions and contingencies on account of stressed loan book, the Bank reported a net loss of Rs 4222 crore for 2017-18 compared to a net profit of Rs 1122 crore during last year. Net Interest income of the bank increased by 23.21% to Rs 12163 Crore compared to Rs 9872 crore generated during last year.

Key Financial Ratios (%) March 2017 March 2018
Cost of Funds 5.65 5.17
Yield on Funds 7.42 7.34
Cost of Deposits 6.25 5.60
Yield on Advances 8.99 8.12
Yield on Investments 7.75 7.63
Net Interest Margin (NIM) 2.23 2.42
Return on Assets (RoA) 0.20 (0.75)
Return on Equity (RoE) 4.15 (16.74)
Cost to Income Ratio 48.85 50.03

NIM improved to 2.42% against the last years 2.23% and Cost of Deposit reduced to 5.60% from 6.25% a year ago.

Income and Expenditure Analysis:

During the year, total income stood at Rs 48195 crore, comprising Rs 29096 crore interest from loans and advances, Rs 10412 crore interest from investments, Rs 6943 crore from non-interest income and Rs 1744 crore from other income.

In line with the thrust areas for the Bank, non-interest income (Excl. Trading profit) registered a growth of 9.80% to Rs 5020 compared to Rs 4572 crore during last year. Apart from trading profit, other major sources of non-interest income, like, service charges (2195 crore), commission and exchange (1200 crore), recovery from written off accounts (936 crore) and Profit from exchange transaction (538 Crore) contributed to the non-interest income of the Bank. The share of non-interest income to total income stood at 14.41% from last year level of 15.43%.

Total expenditure of the Bank came down by 3.45% y.o.y to Rs 38647 crore from Rs 40028 crore incurred during last year. Interest expenses of the Bank declined by 7.70% to Rs 29089 crore. Operating expenses increased by 12.28% to Rs 9558 crore, comprising staff cost of Rs 5444 crore and other operating expenses of Rs 4114 crore. Due to downward movement in the interest rates, the Banks cost of deposits reduced by 65 bps to 5.60% from from the last years 6.25%.

The net interest income, the difference between interest paid and interest earned by the Bank, increased by 23.21% to Rs 12163 crore compared to the last years Rs 9872 crore.

Capital and Reserves:

Net worth of the Bank, as at March 2018 stood at Rs 23086 crore compared to Rs 26914 crore as at March 2017. While the total paid-up capital of the Bank stood at Rs 733 crore, the reserves and surplus increased to Rs 34872 crore.

(Amt. Rs Crore)

Composition of Capital March 2017 March 2018
Basel III Basel III
Risk Weighted Assets 338999 351698
CET I 30226 33455
CET I (%) 8.92 9.51
AT I 2896 2769
AT I (%) 0.85 0.79
Tier I Capital 33122 36224
CRAR (%)(Tier I) 9.77 10.30
Tier II Capital 10472 10280
CRAR (%)(Tier II) 3.09 2.92
Total Capital 43594 46504
CRAR (%) 12.86 13.22

Capital Adequacy Ratio, under Basel III, improved to 13.22% as at March 2018 against the regulatory requirement of 10.875%, including capital conservation buffer of 1.875%. Within the capital adequacy ratio, CET I ratio was at 9.51% and Tier I capital ratio was at 10.30%. The Bank is comfortable in the capital front. Government has infused a capital of Rs 4865 crore in FY18, thereby Government shareholding in the Bank has increased to 72.55% from 66.30% a year back. Adequate headroom is available to raise capital in order to support the business growth momentum.

BUSINESS GROWTH

Deposits:

Total Deposits increased to Rs 524772 crore as at March 2018 compared to Rs 495275 crore a year ago, with a y.o.y growth of 5.96%.

Current and Saving (CASA) deposits of the Bank increased by 11.54% y-o-y to Rs 167035 crore as at March 2018. The Banks CASA deposits share to domestic deposits improved to 34.28% from the last years 32.85%. Savings deposits grew by 11.70% to Rs 142051 crore. Current deposits grew by 10.64% to Rs 24984 crore. The focus on premier CASA products, like, Canara Galaxy, Canara Privilege, SB Powerplus and NRI accounts was given to

Pursuing a strategy of expanding deposit clientele, the Bank added 42 lakhs deposit clientele accounts during the year, taking the total number of deposit accounts to 7.39 crore.

Advances (net):

The Bank expanded its asset base to a well diversified one comprising of the productive segments of the economy, like, Agriculture and Micro, Small and Medium Enterprises (MSMEs) and other productive sectors in addition to Retail assets, including Housing, Education, and Vehicle loan segments. As against the 10.3% growth in advances of the Industry as a whole, advances (Net) of the Bank grew by 11.61% to reach Rs 381703 crore as at March 2018 compared to Rs 342009 crore a year ago.

The number of borrowal clientele accounts increased to 88 lakhs as at March 2018. Total business of the Bank increased to Rs 906475 crore, with a y-o-y growth of 8.26% compared to Rs 837284 crore in the previous year.

During the year, the Banks total clientele base increased by 48 lakhs to 8.27 crore from the last years level of 7.79 crore.

RETAIL LENDING OPERATIONS:

In line with the thrust areas set for the year, the Banks retail lending operations recorded good y-o-y growth.

(Amt. Rs Crore)

Retail Segments

As at March

Y.O.Y Growth

2017 2018 Quantum (%)
1. Housing 32285 40075 7790 24.13
1.1 Housing
24337 28308 3971 16.32
(Direct)
1.2 Housing
7948 11767 3819 48.05
(Indirect)
2. Vehicle 5140 6739 1599 31.11
3. Other
13835 21601 7766 56.13
Personal
4. Education 7651 8438 787 10.29
Total Retail
58910 76853 17943 30.46
Loans (1+2+3+4)

The outstanding retail loans portfolio grew by 30.46% y-o-y to Rs 76853 crore as at March 2018. The disbursals under various retail lending schemes amounted to Rs 52229 crore. The outstanding housing loan portfolio rose to Rs 40075 crore, with a y-o-y growth of 24.13% and accounted for 52.15% of the total retail lending portfolio. Vehicle loans and other personal loans increased by 31.11% and 56.13% y-o-y respectively.

Education Loans:

Over the years, the Bank has assisted substantial number of promising students to pursue higher education in India and abroad. The Banks education loan portfolio increased to Rs 8438 crore. The Bank has financed around 2.99 lakh students as at March 2018. The Bank is performing consistently well with progressive growth in education loan segment. During 2017-18, the Bank has disbursed education loans worth Rs 1452 crore.

1000 institutions rated as ‘A grade by NAAC have been mapped for providing education loans to students of these institutes. A Memorandum of Understanding (MOU) has been signed with National Skill Development Corporation (NSDC) for sanction of education loans for students pursuing vocational courses in affiliated institutes of NSDC throughout the country. An MOU has also been signed with The Institute of Company Secretaries of India, New Delhi for extending education loans. Tie-up arrangements are made with M/s BIOCON Ltd, M/s Bosch Ltd, M/s Bombay Stock Exchange Institute, and M/s Volvo Eicher Commercial Vehicles Pvt. Ltd., to encourage vocational education loans.

Government of India has set-up a fully IT-based Student Financial Aid Authority to administer and monitor scholarships as well as Educational Loan Schemes, through Pradhan Mantri Vidya Lakshmi Karyakram to ensure that no student misses out on higher education for lack of funds. A Vidya Lakshmi portal <www.vidyalakshmi.co.in> has been made live on 15.08.2015. The students can apply online for Education Loan from any bank. The Bank has also in place ‘Vidya Turant, an online instant loan sanction facility to students and ‘Vidya Sahay, a bridge loan scheme for making down payment for Common Entrance Test (CET), at the time of selection and counselling.

The Bank has been designated as the Nodal Bank for administering subsidy schemes of Government of India, which includes Central Scheme of Interest Subsidy on Educational Loans (CSIS), National Rural Livelihood Mission(NRLM), Padho Pardesh subsidy scheme to provide Interest Subsidy on Education Loans for overseas studies pursued by students belonging to notified minority communities and Dr.Ambedkar Central Sector Scheme Of Interest Subsidy On Educational Loan for Overseas Studies for Other Backward Classes (OBCs) & Economically Backward Classes (EBCs).

Several initiatives were undertaken by the Bank to expand retail credit. During the year the Bank popularized its Online Instant in-Principle Sanction for Housing Loan and Car Loan platform, Pradhan Mantri Awaas Yojana, Housing cum Solar Loans and also Housing Loans to High Net worth Individuals (HNIs), Non-Resident Indians (NRIs) and Agriculturists. Nationwide launching of Campaigns, conduct of Expos, offering competitive interest rates, tie-up with reputed Builders, Car Dealers, introduction of Direct Selling Agents etc., have helped the Bank in expanding its retail loan portfolio.

Five new Retail Asset Hubs were opened, taking total number of RAHs to 83 across major centers in the country. The Bank also implemented several tech-based initiatives like missed call facility for retail lending Schemes, informing due dates and amount of EMIs for housing loans and introduction of web-based lead generation system.

INTEGRATED TREASURY

Aggregate investments (net) of the Bank stood at Rs 144054 crore as at March 2018. While modified duration of the investments portfolio stood at 4.99 as at March 2018, the modified duration of the Available for Sale (AFS) portfolio has increased to 4.44 as at March 2018 from 4.02 as at March 2017. The yield on investments works out to 7.63% as at 31st March 2018 as compared to 7.75% as at 31st March 2017 due to sale of securities and profit booking during the period. The trading profit under domestic treasury operations during the year decreased to Rs 1923 crore from Rs 2982 crore in March 2017 due to volatile market conditions and increased yield.

The Bank continues to be an active player in the Government Securities Market as a Primary Dealer (PD). The total amount of bids submitted for underwriting was Rs 46723 crore, of which, the underwriting commitment accepted by the RBI was Rs 19609 crore. With regard to Treasury Bills under PD business, as against the minimum success ratio of 40% to be achieved in each half year, the Bank has a success ratio of 47.94% for the first half year ended September 2017 and 43.28% for the second half year ended March 2018.

Foreign Business Turnover of the Bank aggregated to Rs 261469 crore, comprising of Rs 95317 crore under exports, Rs 54619 crore under imports and Rs 111533 crore under remittances during the year ended March 2018.

INTERNATIONAL OPERATIONS

The Bank has 8 overseas branches, viz., London and Leicester (U.K), Hong Kong, Shanghai (China), Manama (Bahrain), Johannesburg (South Africa), New York (U.S.A) and Dubai International Financial Centre (DIFC), Dubai (UAE). Besides the above 8 overseas branches, the Bank has a Representative Office at Sharjah (UAE), Canara Bank (Tanzania) Ltd., a wholly owned subsidiary at Dar es Salaam in Tanzania and Commercial Indo Bank LLC, a joint venture bank with State Bank of India in Moscow, Russia. Total business of the overseas branches aggregated to Rs 67962 crore comprising of deposits of Rs 38778 crore and advances of Rs 29184 crore as at the end of the financial year. Overseas Business constituted 7.5% of the Banks total business.

As per the directives of the Department of Financial Services (DFS), Ministry of Finance, the Bank has drawn a plan for rationalisation of overseas branches. The Bank has proposed to close/merge its four overseas branches at Leicester (U.K), Shanghai (China), Manama (Bahrain) and Johannesburg (South Africa) and to divest its stake in the Joint Venture at Moscow (Russia).

The Banks international operations are well supported by a wide network of 394 Correspondent Banks, spread across 79 countries and the Banks overseas branches/ offices. Rupee Drawing Arrangements have been made with 36 Exchange Houses and 25 overseas banks for channelizing the remittances of Non-Resident Indians

(NRIs). The Bank is managing two Exchange Houses viz., M/s Al Razouki International Exchange Company, Dubai and M/s Eastern Exchange Est., Qatar under Secondment and Management Agreements respectively.

‘Remit Money, a web-based speed remittance product has been extended to 36 Exchange Houses and also to the Banks 4 overseas branches, viz., London, Shanghai and Hong Kong and Canara Bank (Tanzania) Ltd. To facilitate instant and hassle free remittances to the beneficiaries of the Bank in India, ‘Flashremit/‘Instant Remitmoney, an instant credit facility is being offered in association with M/s. UAE Exchange, Abu Dhabi, UAE, M/s. Al Razouki International Exchange Company, Dubai, M/s. Eastern Exchange Est., Qatar, M/s GCC Exchange, Dubai, M/s Al Ahalia Money Exchange, Abudhabi, UAE, M/s. Al Ansari Exchange LLC, UAE and M/s Index Exchange, UAE.

OTHER SERVICES

During the year the Banks Merchant Banking Division has handled, as arrangers, private placements of Capital Gains Bond Issues of National Highways Authority of India (NHAI) and Rural Electrification Corporation Ltd (REC). The amount mobilized in respect of these issues Capital Gains Bonds Issue of NHAI and REC during the year was Rs 135.10 crore. As a Collecting Banker, the Bank was involved in two Private Placement Issues, collecting an amount of Rs 1387.48 crore. Further, the bank has handled 236 Public and Debt Issues under Application Supported by Blocked Amount (ASBA) and the amount blocked therein was Rs 2873.08 crore. Three specialized assignments of ‘Fair Valuation of Equity were also handled by the Division during the year.

The Syndication Group handled projects, involving project cost of Rs 3838 crore during the year, with a total debt size of Rs 3159 crore. The Group generated a fee-based income of Rs 2.98 crore during the year. The funds were arranged for projects in various segments like Infrastructure (Railway Freight Corridor, Hospital, Educational Institution) and Commercial Real Estate. The Bank has tie-up arrangements in both life and non-life insurance segments under its ‘Bancassurance arm. During the year, the Bank earned a commission income of Rs 76.6 crore from its joint venture, viz.,

M/s Canara HSBC OBC Life Insurance Company Ltd. Under the Mutual Fund business, the Bank earned a commission of Rs 26.9 crore from its joint venture, viz., M/s Canara Robeco Asset Management Company Ltd. A commission income of Rs 26.9 crore was earned under Non-Life (General) Insurance business from its tie-up arrangements with M/s Bajaj Allianz General Insurance Co Ltd, M/s TATA AIG General Insurance Co. Ltd, M/s The New India Assurance Co. Ltd and M/s United India Insurance Company Ltd. The Bank also earned a commission income of Rs 20.8 crore from its tie-up agreement with M/s Apollo Munich Health Insurance Co. Ltd for marketing their health insurance products. The Bank also has Corporate Agency Agreement with M/s Export Credit Guarantee Corporation of India for marketing export policies through its branches across India.

In order to give further impetus on offering a variety of products and enhance service quality under General Insurance, Bank has entered into a Corporate Agency tie-up with M/s The New India Assurance Co. Ltd and M/s TATA AIG General Insurance Co. Ltd w.e.f 08.06.2017 and 17.07.2017 respectively. The bank has terminated its partnership with M/s United India Insurance Co. Ltd w.e.f 24.06.2017 during the year.

Under Cards Business, the Bank took several initiatives to expand its card base. As at March 2018, total number of Debit Cards increased to 4.30 crore and Credit Cards base rose to 2.23 lakhs. The Bank offers its ‘Depository Services through 32 centres spread across the country. Through these centres, the Bank is extending Online Trading Facility to DP clients of its own broking subsidiary M/s Canara Bank Securities Ltd., Mumbai. In order to have better synergy of operations and efficient delivery of services, the DP activity has been hived off to M/s Canara Bank Securities Ltd., with effect from 01.04.2017.

Executor, Trustee and Taxation Services outfit of the Bank provides services like Debenture/Security Trusteeship, Will and Executorships, Trusteeship, Personal Tax Assistance and Power of Attorney Services.

The Bank undertakes Government Business, comprising Direct and Indirect Tax collections, payment of Central Government and State Government Pensions, Handling of Postal Transactions and State Government Treasury Transactions, Public Provident Fund Scheme and Senior Citizens Saving Scheme and distributing Inflation Indexed Bonds of RBI, issuing Sovereign Gold Bonds, Sukanya Samridhi Scheme, accepting deposits under Pradhan Mantri Garib Kalyan Deposit Scheme (PMGKDS) and accepting tax under the Scheme. These products contributed to improvement of CASA and also earned a fee income of Rs 110.28 crore during year.

The Bank provides several online payment services, viz., e-payment of Sales Tax/ Commercial Tax in Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh, Bihar, Dadra & Nagar Haveli, Odisha, Punjab, West Bengal and Delhi, Virtual Treasury Package in Maharashtra, e-payment of Taxes to Transport Department in Tamil Nadu, Collection of Property Tax for the Corporation of Chennai in Tamil Nadu and Bengaluru in Karnataka, Online opening of PPF Accounts and e-Stamping project in Jharkhand, Uttar Pradesh, Tamil Nadu and Karnataka.

The Bank has been authorized as the accredited banker for Ministry of Human Resources Development (MHRD), Ministry of Culture, Ministry of Youth Affairs & Sports, Archaeological Survey of India and Unique Identification Authority of India (UIDAI), New Delhi. The Bank was implementing the National Pension System for Unorganised Sectors under Swavalamban Scheme since 2012-13. The Government of India has launched Atal Pension Yojana (APY) in place of Swavalamban with a view to provide defined pension to unorganised sector. The Bank could mobilise 4,28,051 accounts under APY as at March 2018.

Goods & Services Tax (GST) (as an agency bank) has been successfully implemented in all of our bank branches since July 01st, 2017.

Agricultural Innovation Centre (AIC) outfit of the Bank handled 113 assignments. Out of, 105 assignments were cleared, which consists of 93 appraisals, 3 vetting and 9 viability studies. The total outlay of the assignments worked out to a term loan component of Rs 723.73 crores and the Bank earned a fee income of Rs 5.91 crores during the year.

ASSET QUALITY

The withdrawal of special dispensation provided for restructuring portfolio resulted in substantial slippages. The consequent stress in the asset quality at the industry due to natural calamities and MSME loans up to Rs 1 crore were launched to provide relief to the affected borrowers. As on March 2018, the outstanding stressed assets portfolio (including restructured standard accounts) of the Bank stood at Rs 51188 crore, accounting for 12.77% of gross advances.

Risk Management:

BASEL III Capital Adequacy Framework andFuture Strategies

An independent Risk Management Wing at the Head Office is functioning as a nodal centre for overall implementation of various risk management initiatives across the Bank. Risk Management Sections are functioning at all 21 Circle Offices of the Bank as an extended arms of the Risk Management Wing.

The Bank has in place risk management policies across geographies and across all risks encompassing the entire gamut of risk profile. These include policies on Credit Risk Management, Operational Risk Management, Market Risk Management, Asset Liability Management and Group Risk Management.

The Bank has in place an Internal Capital Adequacy Assessment Process(ICAAP)underPillar2ofBaselIIInorms. The ICAAP exercise covers the domestic and overseas operations of the Bank, the Subsidiaries, Joint Ventures, Sponsored Entities and Associates. Stress testing exercise is also performed by the Bank to ascertain the potential risks faced by the Bank. The ICAAP document is reviewed and approved by the Risk Management Committee of the Board and the Board of Directors.

The Bank has a Board Level Sub-Committee for Capital Planning Process. The Committee articulates macroeconomic scenarios vis--vis capital requirements of the Bank, in tune with business strategies. The Committee ensures maintenance of appropriate level of Capital to Risk Weighted Assets Ratio (CRAR) and evaluates various options for raising the capital.

Adoption of Advanced Approaches under Basel III:

In an endeavour to move towards Advanced Approaches under Basel III for computation of capital for Credit, Market and Operational Risks, the Bank has engaged the services of a Consultant for implementation of Enterprise-wide Integrated Risk Management solution for itself and the Group Entities, so as to build requisite risk management framework.

As a pre-requisite for the implementation of Enterprise-wide Integrated Risk Management architecture, the Bank has procured a Risk Solution that would enable it to meet requirements of Advanced Measurement Approaches.

The Bank has submitted Letters of Intent to RBI for adoption of Internal Rating Based (IRB) Approach for calculation of capital charge for Credit Risk, Internal Models Approach for calculation of capital charge for Market Risk and Advanced Measurement Approach for calculation of capital charge for Operational Risk.

Preparedness for Basel III:

The final guidelines on Base lIII Capital Regulations became effective from 1st April, 2013. As per RBI guidelines, the transitional period for full implementation of Basel III Capital regulations is extended up to 31.03.2019. The banks in India need to maintain a minimum Common Equity Tier 1 (CET1) capital of 5.50%, Tier 1 capital of 7.00%, total capital of 9.00% and Capital Conservation Buffer (CCB) of 2.50% at the end of March 2019. The banks also have to maintain a minimum Tier 1 Leverage Ratio of 4.50% during parallel run as a credible supplementary measure to the risk based capital requirements.

The Bank endeavours to remain adequately capitalized and has drawn plans to meet the capital requirements stipulated by the RBI in transitory phase. The Bank has adequate headroom to raise capital from the market, including recapitalization support from the Government of India. Going forward, the Banks capital requirement shall be met by injecting fresh equity capital, retention of profits, optimization of business levels, proactive capital planning and management.

Credit Risk Management:

The Credit Risk management process outlines the principles, standards and approach for credit risk management at the Bank. Systems, procedures, controls and measures are in place to actively manage the credit risks, optimize resources and protect the Bank against adverse credit situations. In order to comprehensively address the issues and concerns of the Credit Risk, the Bank has put in place a comprehensive Credit Risk Management Policy.

A robust system for appraisal of loan/credit proposals, including seeking adequate information for appraising the viability of the proposal and creditworthiness of the applicant for sanctioning credit limits, well defined credit approval process and authorization matrix, standards for collateral management, credit monitoring, restructuring of advances, MSME and Off Balance Sheet Exposures, is followed.

Risk Acceptance, Risk Measurement, Prudential Exposure Norms, Organizational Structure, Strategies and Operational Process are in place. In order to address the credit risk at portfolio level and the issue of concentration risk, the Policy prescribes fixation of various exposure ceilings. Risk Based Pricing is in tune with the Risk profile of the borrower to generate returns to achieve targetted RoA and NIM

The Bank has a Loan Review Mechanism for constantly evaluating the overall performance of the borrowal accounts and for bringing about qualitative improvements in credit administration, monitoring and credit audit. The entire process of the Loan review and monitoring is duly administered by the Credit Administration & Monitoring Wing.

Market Risk Management:

The Market Risk framework of the Bank aims at restricting loss from all types of market risk loss events and also to establish limit structure and triggers for various market risk factors.

Exposure limits, such as, Stop Loss Limits on Trading Book, Intraday and Overnight Limit for various Currency Positions, Dealer-wise Limits, Aggregate Gap Limit, Limits on Money Market Operations, Modified Duration Limits for investment portfolio and VaR Limits are fixed to act as risk mitigants/ triggers. Mid Office of Risk Management Wing monitors these limits, along with other triggers, on a daily basis. A reporting framework has been put in place for effective and timely monitoring of market risk limits and triggers.

Operational Risk Management:

Operational Risk Management framework in the Bank is based on ethics, organization culture and strong operating procedures, involving corporate values, internal control culture, effective internal reporting and contingency planning.

The Bank has adopted polices for management of Operational Risk, which covers various aspects, such as, Operational Risk Management Structure, Outsourcing Activities and Business Continuity Plan. At present, the Bank is in the process of migration to Advanced Approach of Basel III framework from the Basic Indicator Approach (BIA). The Bank has already put in place Incident Management module for timely reporting of incidents, Review of Key Risk Indicators (KRI), Conducting of Risk Control & Self Assessment (RCSA) workshops and Scenario Analysis workshops to compute capital charge for Operational Risk.

Asset Liability Management:

The ALM Policy of the Bank seeks to strike appropriate balance in the maturity and re-pricing profile of assets and liabilities, so as to reduce liquidity risk and manage interest rate risk. Within the policy framework, the Board of the Bank has set up Asset Liability Management Committee (ALCO), which is entrusted, inter alia, with the role of management of assets and liabilities including the funding strategies and its composition, product pricing, stress test and contingency action plan among others. A balanced ALM structure helps to sustain the spreads, profitability and long-term viability of the Bank.

The Bank has implemented the RBI guidelines with respect to Liquidity Coverage Ratio (LCR) with effect from 01.01.2015. Bank has been computing LCR on a daily basis w.e.f 01.01.2017. As on 31.03.2018, LCR of the Bank is above the stipulated regulatory minimum of 90%.

Group Risk:

The Bank has various Subsidiaries, Joint Ventures and Sponsored Entities, which are engaged in diversified activities. As the Bank has considerable stake in these Group Entities, Bank has put in place a Group Risk Management Policy to identify and manage risk in intra Group transactions and exposures to raise the standard of Corporate Governance by reducing and avoiding conflicts of interest between the Group Entities and also to ensure ‘Arms Length Principle among Entities, with regard to business parameters. The Group Chief Risk Officer (GCRO) of the Bank is supervising the risk management activities of the Group Entities.

NATIONAL PRIORITIES

Priority Sector Advances:

The Bank continues to accord importance to varied goals under national priorities, including agriculture, micro and small enterprises, education, housing, micro-credit, credit to weaker sections and specified minority communities.

Priority Sector Advances of the Bank as at March 2018 reached Rs 185626 crore, recording a y-o-y growth of 15.82% and achieved 51.69% to Adjusted Net Bank Credit (ANBC) against 40% mandated norm. (Amt. Rs Crore)

Priority Sector

As at March

Growth

Advances 2017 2018 Amount %
Total Priority Sector 160269 185626 25357 15.82
Agriculture 74079 84012 9933 13.41

With a focus on credit delivery to Agriculture, the Banks advances under agriculture portfolio increased by 13.41% to Rs 84012 crore, covering over 60 lakh farmers. Under agriculture lending, the Bank achieved 22.17% to ANBC against 18% mandated norm. During 2017-18, the Banks agriculture credit disbursal increased to Rs 67902 crore compared to Rs 58691 crore in the previous year.

The Bank undertook special campaigns for extending Crop Loans facility to all farmers.

During the year, the Bank issued 7.48 lakh Kisan Credit Cards (KCCs), amounting to Rs 11939 crore. The credit outstanding under KCCs was at Rs 16450 crore as at March 2018. 7.61 lakh Kisan RuPay Cards were issued against eligible accounts of 7.70 lakh, with an achievement of 98.78%.

The Bank actively participated in various Government Sponsored Schemes, such as, Prime Ministers Employment Generation Programme (PMEGP), National Rural Livelihood Mission (NRLM), National Urban Livelihood Mission (NULM), Swarna Jayanti Shahari Rozgar Yojana (SJSRY), and Differential Rate of Interest (DRI) Scheme.

As at March 2018, the outstanding advances under the following Government Schemes, aggregated to Rs 1276 crore, involving around 1.71 lakh beneficiaries.

Performance under various Government Sponsored Schemes:

(Amt. Rs Crore)

MARCH 2018

Scheme Accounts Amount
Prime Minister Employment Generation Programme (PMEGP) 14924 539
National Rural Livelihood Mission (NRLM) 22983 548
National Urban Livelihood Mission (NULM) 3250 27
Differential Rate of Interest (DRI) 124473 112
Swarna Jayanti Shahari Rozgar (SJSRY) 5687 50
Yojana
Total 171317 1276

Advances to DRI stood at Rs 112 crore, consisting of 1.24 lakh beneficiaries, of which, advances by rural and semi-urban branches amounted to Rs 88 crore.

In support of the underprivileged sections of the society, the Banks advances to SCs/STs beneficiaries amounted to Rs 7991 crore as at March 2018, covering 5.31 lakh borrowers. The advances to SCs/STs comprised 4.30% of total priority sector advances.

Advances to weaker sections reached Rs 49865 crore, constituting 12.80% to ANBC against mandated norm of 10%.

Various components of advances to Weaker Sections as at March 2018:

(Amt. Rs Crore)

Outstanding

Sectors
Accounts Amount
Small & Marginal Farmers,
Landless Labourers, Tenant 4095215 43777
Farmers and Share Croppers
Artisans, Village and
39557 737
Cottage Industries
SC/ST Beneficiaries 531200 7991
DRI Loans 124473 112
SJSRY Beneficiaries 5687 50
Self Help Group 133582 3359
Joint Liability Group 36300 754

As at March 2018, advances to specified minority communities aggregated to Rs 30821 crore, accounting for 16.58% of the total priority sector advances against the stipulated 15% norm.

Deendayal Antyodaya Yojana (DAY) – National Rural Livelihoods Mission (DAY-NLRM/ Aajeevika):

Under the Scheme Aajeevika, National Rural Livelihood Mission (NRLM) was launched by the Ministry of Rural Development (MoRD), Government of India in June 2011, with an aim to reduce poverty by enabling the poor household to access gainful self employment and skilled wage employment opportunity, resulting in a sustainable livelihood. The main objectives of the Scheme includes providing interest subvention to Women SHGs (WSHGs) from rural areas who avail loans up to Rs 3 lakhs at 7% per annum and to provide an additional subvention of 3% if WSHGs repay in time, thereby reducing the effective rate of interest to 4%. In the first phase, the focus was on 150 most backward districts.

The RBI vide their Circular FIDD.GSSD.CO.BC.No.13/09.01 .03/2016-17 dated 25/08/2016 & FIDD.GSSD.CO.BC. No.17/09.01.03/2017-18 dated 18.10.2017 has intimated that Interest subvention scheme on credit to Women SHG during 2016-17 for all Commercial Banks and Co-operative Banks will be implemented in 100 more districts along with the existing 150 districts. All WSHGs (Women SHGs) promoted by NRLM, NGOs, Central or State Government, NABARD under WSHG Programme which are linked with the banks are eligible for benefits under the Scheme. Ministry of Rural Development, Government of India, has designated Canara Bank as nodal bank for handling claims of banks. The Bank has developed a web portal, which enables all member banks to upload their claims.

(Amt. in Rs Crore)

Interest Subvention Claims made by all Member Banks

Financial Year No of Accounts Amount
2013-14 361231 266
2014-15 500829 304
2015-16 568304 365
2016-17 29020 394
2017-18 will be available on 30th June 2018 only.

Micro Small & Medium Enterprises (MSMEs) Lending:

Advances to MSMEs increased to Rs 82098 crore as at March 2018, with a y-o-y growth of 10.49%. Credit to M&SE segments rose to Rs 65760 crore, with a 22.19% growth against mandated norm of 20%.The number of Micro Enterprises accounts recorded a growth of 3.60%. Under Pradhan Mantri Mudra Yojana (PMMY), the Bank disbursed an amount of Rs 7435 crore against the target of Rs 6900 crore during 2017-18. Sanctions and disbursals under different schemes of Mudra Yojana are as under:

As on 31.03.2018 (Amt. in Rs

Crore)
Category No. of Accounts Sanction Amount Disbursement Amount Outstanding Amount
Shishu (<50,000) 267394 992 985 873
Kishore (Above Rs 50,000- 5 Lakhs) 212343 4002 3868 3666
Tarun (Above Rs 5 Lakhs to Rs 10Lakhs) 34032 2672 2582 2503
Total 513769 7666 7435 7042

During the year, the Bank has taken following initiatives to increase flow of credit to MSME sector and also to bring about continued awareness about the steps taken.

• 167 SME Specialised Branches are functioning throughout India for faster processing of credit proposals. Besides 167 SME Specialized Branches,

52 SME Sulabhs (Specialised SME Loan Processing Centres) are also functioning across the country.

• To extend financial assistance to micro and small enterprises without offering any collateral security and with relaxed lending terms, some segment specific schemes have been launched / continued, such as, MSME Sahay, Mudra Canara Atithi, Doctors Choice (improved version), MSE SMART, MSME CAP, MSME Vahan, MSE Vijeta and Canara Contractors Scheme, Canara CARAVAN, and MSME Expo..

• To increase the Banks exposure to specific clusters and activities, new area/cluster specific schemes have been launched / continued, such as, Canara Textiles, catering to the Textile Sector, Special Scheme for lending to units engaged in Manufacturing of Ceramics and Vitrified Tiles and Weavers Mudra Scheme in lieu of Weavers Credit Card.

• Bank has on boarded into TReDS Platform through RXIL to garner business of Bill Discounting of MSEs through online portal.

• Mega Credit camps are conducted to create awareness and pool sources for increased credit flow to MSME sector.

• Summits were arranged for Start-up Entrepreneurs involving functionaries from different Government Departments and local industrial bodies/ organizations for necessary inputs and guidance for successful entrepreneurship.

• Micro Enterprises Business Centres were established at Circle Offices for handholding Micro Enterprises.

• The Bank has an exclusive website www.canaramsme.com for easy access and understanding of MSME initiatives.

• The online submission of MSME applications and tracking thereof by the customers are facilitated and used extensively by the MSME clientele.

• Entrepreneur Development Centre at Head Office have been catering to the needs of budding entrepreneurs by way of assimilation of information regarding the challenges and opportunities under MSME, conducting seminars, training initiatives, interaction with the concerned organizations and propagation of the same through regular bulletins.

• An exclusive set up established at Head office has been looking into the aspects of monitoring, slippage management and handholding in times of stress by way of rehabilitation and restructuring of MSME units as per Government guidelines.

• Single Point Contact MSME Relationship officers are named in all the 167 SME Specialised Branches to closely liaise with the Top 20 borrower accounts of the Branch and cater to all their requirements on a real time basis.

• Bank has conducted Special lending camps in the UNIDO clusters for sourcing new Proposals and to ensure increased lending to MSME sector.

The Bank is the nodal agency for Credit Linked Capital Subsidy Scheme (CLCSS) of Ministry of MSME, Government of India, for technology upgradation of Micro & Small Enterprises (MSEs). During 2017-18, subsidy amount received from the Ministry under the Scheme was Rs 27.44 crore and the same has been utilized fully during the financial year.

Empowering Women:

Women Empowerment Section at Head office and Centre for Entrepreneurship Development for Women (CEDW) at 21 Circle Offices and 118 Regional offices across the country are working relentlessly towards economic empowerment of women. These CEDWs have reached potential entrepreneurs, undertook counseling, supported their training needs, provided finance and arranged marketing facilities. A total of 342 Programmes were organized by the CEDWs during 2017-18.

These centres have also assisted in the formation of Self Help Groups (SHGs) & Credit Linkages. Rural Self Employment Training Institute set up at Harohalli, Karnataka to provide EDP/skill training to women in various vocations has trained 21,090 women since inception, out of which 638 women have been trained during 2017-18. Through 65 Training Institutes supported by the Bank, 4.32 lakh women have been trained in Self Employment ventures since inception, of which 27,410 have been trained during 2017-18. Apart from establishing two exclusive Mahila Banking Branches, the Bank has equipped over 80 branches with all women employees to give focused attention to women clientele. 18 Micro finance branches are also engaged in supporting the financial needs of Micro & Small Women entrepreneurs & SHG members. 29.99 lakh women have been assisted with a credit outstanding to the tune of Rs 51069 crore as at March 2018 and achieved 15.87% to ANBC as against RBIs requirement of 5%.

Several concessions have been provided to women borrowers that include relaxation in eligibility norms and 0.50% interest concession on educational loans to girl students. 0.05% interest concession on the Card Rates under Housing Loan to Woman and Vehicle Loan (Personal vehicle) to women. "MSE Vijeta", an exclusive loan scheme for women entrepreneurs for loans upto Rs 2 Crore under Micro & small Enterprises and Canara Mahila Savings Scheme, a special Savings Bank deposit product, with many concessions have been devised for women.

During the year, 3 successful "Women Entrepreneurs" were given cash awards on the occasion of International Womens Day under Canara Bank Best Woman Entrepreneur Awards (CBWEA) 2016-17. Under marketing support, the Bank has provided five unique custom built, high tech, solar powered mobile sales vans "Canara Vahini" with computerized billing and card swiping facility to enable women entrepreneurs and SHGs to exhibit or market their products at Bengaluru and Shivamogga (Karnataka) and Aligarh (Uttar Pradesh), Coimbatore (Tamil Nadu), and Thrissur (Kerala).

Lead Bank Responsibility :

The Bank has Lead Bank Responsibility in 31 Districts in the country, viz., 8 in Karnataka, 7 in Tamil Nadu, 5 in Kerala, 5 in Uttar Pradesh, 3 in Delhi, 2 in Telangana and 1 in Bihar. The Bank is the Convenor of the State Level Bankers Committee (SLBC) in Kerala.

Financial Inclusion:

A Holistic Approach to Financial Inclusion

With the basic objective of bringing the large unserved population under the banking mainstream, the Bank is striving towards a more inclusive growth by making financial products and services available to financially excluded and marginalized sections of the society in particular. As per the Government of India and the Reserve Bank of India directions, the Bank has been actively pursuing the agenda of Financial Inclusion (FI), with the key interventions, viz., expanding banking infrastructure, offering appropriate financial products, making extensive & intensive use of technology and through advocacy of financial literacy.

The Bank has 893 Financial Inclusion (FI) Branches under branch model and also engaged 2459 Business Correspondent Agents (BCAs) under Business Correspondents (BC) model. In addition, 470 Ultra Small Branches (USBs) are also operational in the Bank.

Pradhan Mantri Jan Dhan Yojana (PMJDY):

PMJDY is the initiative from Government of India for comprehensive financial inclusion of the population of India, particularly aiming at covering the households hitherto excluded from the purview of banking and empowering them with benefits and facilities provided by the banking industry. Accounts opened under PMJDY are issued with Rupay Debit card, accidental Insurance coverage to the extent of Rs 1 lakh, life insurance cover of Rs 30,000/- (for accounts opened upto 31.01.2015) and overdraft upto Rs 5000/- after six months of satisfactory dealing. The Bank was allotted 3962 Sub Service Area (SSAs) and 3371 Urban Wards for implementation of PMJDY.

Performance highlights under PMJDY:

• Opened 67.53 lakh accounts under PMJDY and mobilized a CASA deposit of Rs 2058 crore.

• Covered all allotted 10049 villages comprising of 3962 allotted SSAs and 3371 Urban wards by opening of 893 brick & mortar branches and engaging 2459 Business Correspondent Agents (Bank Mitras) at remaining locations.

• Hand-held devices are provided to Bank Mitras for facilitating payments, which are enabled for accepting Rupay Cards. The Bank has issued 42.41 lakh Rupay Debit Cards to all eligible account holders. Bank Mitras have done 122.19 lakh transactions, amounting to Rs 2328 crore during the year.

• Zero balance accounts under PMJDY have been brought down to 11.49%.

• Established a Toll Free number 1800 425 11222 for PMJDY as a part of grievances redressal mechanism and popularized through publication in National Dailies.

• Provided overdraft facilities upto Rs 5000/- to all eligible PMJDY account holders. 1.60 lakh PMJDY accounts holders have been provided with overdraft facility, amounting to Rs 20.48 crore during the year. So far the Bank has provided PMJDY overdraft facilities to 6.14 lakh account holders to the extent of Rs 92.55 crore.

Social Security Schemes:

Under various social security schemes launched by the Government of India during the year, following enrolments have been made.

Scheme Enrolments As at March 2018
Pradhan Mantri Suraksha Bima Yojana (PMSBY) 38.38 lakhs
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) 13.63 lakhs
Atal Pension Yojana (APY) 4.28 lakhs

Under Sukanya Samriddhi Yojana, the Bank has mobilized 13679 accounts.

Apart from the above, the bank has also made significant progress in the Financial Inclusion related activities during the year as under:

Business canvassed in the FI Branches:

FI branches have garnered business of Rs 18397 crore, which includes CASA deposits of Rs 4935 crore, constituting 26.82% of total deposits. Average business per FI branch stood at Rs 20.67 crore.

Position of Basic Savings Bank Deposit (BSBD) Accounts:

The Bank has opened 7.67 lakh BSBD accounts during the year 2017-18, taking the tally of BSBD accounts as at March 2018 to 169.88 lakh, with an outstanding deposit of Rs 4892 crore.

Formation & Credit Linking SHGs:

Financing to Self Help Groups has played pivotal role for poverty alleviation and financial inclusion of the rural poor. The Bank has formed 39705 SHGs and credit linked to the extent to Rs 1991 crore to 44439 SHGs during the year. The outstanding SHG accounts were more than 1.30 lakhs, with an outstanding amount at Rs 3359 crore.

Farmers Clubs:

The Bank has adopted a concept of forming Farmers Clubs, which is an association of progressive farmers, who have volunteered to disseminate the principles of development through credit and also inculcate better repayment ethics and promote peoples participation. During the year, the Bank has formed 1002 farmers clubs.

Micro Finance Branches:

The Bank has opened 18 Micro Finance Branches in the urban centres. These branches mobilized a total business of Rs 686.86 crore as at March 2018.

Financial Literacy Centres:

Formed ‘Canara Financial Advisory Trust to take care of the affairs of the Financial Literacy Centres (FLCs) of the Bank as well as the FLCs promoted by the Regional Rural Banks (RRBs) sponsored by the Bank. Pan India, the Bank has 72 FLCs in 26 lead districts and 46 blocks across the country, managed by the Counsellors (retired bankers).

Financial Literacy Initiatives:

• Financial Literacy Centres have educated 18.63 lakh persons during the year and 63.63 Lakh persons since inception.

• Engaged Financial Literacy Coordinators to monitor and motivate Bank Mitras to involve themselves in Financial Literacy in a big way in their sub-service areas and encourage people to do more transactions.

• Trained Bank Mitras through Indian Institute of Banking & Finance and Infrastructure Leasing & Finance Services (IL&FS). They were also provided with extensive training on Banking and Technology aspects by the Bank and the Corporate BCs.

• Special training was given to Branch Managers for conducting financial literacy programmes at their branches and in their service area.

• Conducted 507 financial literacy camps under Financial Inclusion Fund Scheme from the NABARD.

AADHAAR Enrolments Updation Centres:

The Bank is a Registrar and Enrolment Agency for Aadhaar Enrolment. As per UIDAI guidelines, the Bank has to establish 740 centres inside 10% of the bank branch premises, comprising of 613 centres for the bank and 127 centres for the 2 sponsored RRBs (PKGB 65 & KGB 62). Total of 735 Aadhaar Enrolments Updation Centres as on 31.03.2018, comprising of 608 centre for Canara bank and 127 centres of RRBs was established.

AADHAAR Seeding:

Present position in respect of Aadhaar Seeding in CASA accounts is 85.49%. As regards PMJDY accounts, the position is 84.53%. Due to latest Govt notification, the timeline is extended beyond 31.03.2018 till disposal of the writ petition pending at Supreme Court. Close monitoring for ensuring 100% Aadhaar Seeding is under active follow up.

AADHAAR Authentication:

Demographic authentication of accounts with UIDAI has been done successfully for nearly 200 lakh accounts. For the remaining accounts e-KYC biometric and OTP utility has been enabled in the SAS package for branches. In web portal, the Bank has provided a link for the internet banking customer to authenticate on their own. In ATM, authentication status checking facility has been provided for the customers.