kokan merchantile cooperative bank ltd Management discussions

KOKAN MERCANTILE CO-OPERATIVE BANK LIMITED ANNUAL REPORT 2006-2007 MANAGEMENT DISCUSSION AND ANALYSIS Performance Overview: The overall performance of the Bank during the year had been satisfactory. The result is mainly evident in the prime barometer of increase in Deposits and Reserves of the Bank. The sustained efforts of one and all have enabled the Bank to register a net profit of Rs.71.75 lakhs during the year after providing all statutory provisions. The Working Capital increased to Rs.31,767.00 lakhs and Reserve and Other Funds to Rs. 4,539.28 lakhs, while the efforts for deposit mobilization could fetch a rise of Rs.2,717.11 lakhs in deposits. The performance high lights of the year 2006-07 are as under: Rs. in lakhs 31.3.2006 31.3.2007 Growth percent Share Capital 559.02 617.51 10.46% Reserves 3916.13 4,539.28 15.91% Owned Funds 4475.15 5,156.79 15.23% Deposits 23249.48 25,966.59 11.68% Loans & Advances 12648.16 16,245.73 28.44% Investments 9363.48 10,032.53 7.14% Working Capital 28202.29 31,767.00 12.63% Gross Income 2418.04 2,499.04 3.34% Total Expenditure 2341.18 2,427.29 3.67% Net Profit 76.86 71.75 - 6.64% Capital to Risk 17.34% 17.72% Assets Ratio (CRAR) Net Profit: Net Profit of the Bank before provision for Income Tax is Rs.121.84 lakhs. However after making provision for Income Tax of Rs.47.13 lakhs and Fringe Benefit Tax of Rs.2.97 lakhs, the net profit available for appropriation is Rs.72.09 lakhs including carried forward balance of Rs.0.34 lakhs of last year against last year net profit of Rs.76.86 lakhs. Dividend: The Board of Directors are pleased to recommend dividend @6% per annum this year, on pro rata basis subject to approval of Reserve Bank of India, Appropriation: The Board of Directors recommend the following appropriation out of the net profit available for distribution. APPROPRIATION: Amount (Rs.) Statutory Reserve Fund 25% 18,02,256.00 For payment of Dividend @6% p.a. 34,01,784.10 Contingency Fund 10% 7,20,902.00 Education Fund 1% 72,090.00 Investment Fluctuation Fund 12,00,000.00 71,97,032.10 Balance of Profit carried forward 11,993.07 72,090,25.17 Membership: Membership of the Bank stood at 45,007 as on 31 March, 2007. The number of nominal members as on 31.3.2007 was 7,212 (as against 6,587 as on 31.3.2006) which is 16.02% of the total members, as against 20% permissible by Reserve Bank of India. Share Capital: Paid up Share Capital of the Bank as at the year end stood at Rs.617.51 lakhs as compared to Rs.559.02 lakhs as at the previous year end, giving a rise of 10.46% in the equity during the year. The Bank appeals to the members who are holding small amount of shares, to purchase additional shares in order to increase the Banks capital base and owned funds. Reserves And Other Funds: The Reserves of the Bank stood at Rs.4,539.28 lakhs on 31.3.2007 as against last year of Rs.3,964.36 lakhs. The following table shows the figures of the Reserves & Other Funds under various heads as on 31.3.2007 as compared to that as on 31.3.2006: Rs. in lakhs PARTICULARS 2006-2007 2005-2006 RISE Rs. Reserve Fund (Statutory) 574.85 555.21 19.64 Buildings Fund 433.42 433.42 - Dividend Equilisation Fund 12.39 12.39 - Bad and Doubtful Debts 1,274.88 1,267.98 6.90 Contingent provisions for Standard Assets 80.10 43.06 37.04 Gratuity Fund 261.00 228.83 32.17 Staff Welfare Fund 9.09 8.17 0.92 Members Welfare Fund 1.94 1.41 0.53 Development Reserve Fund 19.75 19.75 - Charitable Fund 4.25 4.25 - Overdue Interest Reserve 36.91 48.23 -11.32 Contingency Fund 35.78 28.07 7.71 Reserve for Investment Fluct. Fund 30.00 65.00 -35.00 Reserve for depreciation on investment 114.38 81.21 33.17 Other Provisions 17.81 17.81 - Revaluation Reserve 1,608.77 1,149.57 459.20 General Reserve 0.81 - 0.81 Capital Reserve 23.15 - 23.15 TOTAL Rs. 4,539.28 3,964.36 Working Capital: The Working Capital stood at Rs.31,767.00 lakhs as against Rs.28,202.29 lakhs of the last year. The following abridged Balance Sheet reflects the composition of Working Capital as at the year end: (Rs. in lakhs) 2005-2006 Liabilities 2006- 2005-2006 Assets 2006- 2007 2007 Own Funds (Share Liquid Assets Capital, Bldg., (Cash, Bal. 4475.15 Reserves & Other 5156.79 12945.87 with Banks 12475.90 Funds) and Investment) 23249.48 Deposits 25966.59 12648.16 Advances 16245.73 Interest 321,19 receivable 347.77 on Loans & Investments - Borrowings - Premises, Fur & Fixture, Vehicles, Sec. Items, Computers, Encoding 400.59 Other 571.53 1884.84 Machines, 2367.92 Liabilities Generator. 77.07 Profit & Loss 72.09 402.23 Other Assets 329.68 A/c 28202.29 Total Rs. 31767.00 28202.29 Total Rs. 31767.00 Deposits: Due to the rigorous efforts of the Management and Staff, the Bank could mobilize sizeable amount of deposits and as such the total deposits increased to Rs.25,966.59 lakhs as on 31.3.2007 compared to Rs.23,249.48 lakhs at the end of the previous year. Year wise composition of deposits of the Bank is given here under: Rs. in lakhs 31st March % 31st March % 2007 2006 Short/Medium Term 11,884.87 45.77 11,293.23 48.57 Deposits (including NRE) Current Deposits 3,290.58 12.67 2,808.22 12.08 Saving Deposits 10,791.14 41.56 9,148.03 39.35 (including NRE) TOTAL 25,966.59 100.00 23,249.48 100.00 Loans & Advances: Due to constant efforts and less rigid loan policy adopted the Bank could increase advances to Rs.16,245.73 lakhs as on 31st March, 2007 as against Rs.12,648.16 lakhs last year. Net credit growth of Rs.3,597.57 lakhs is all the more remarkable as against the background of acute competition today from the entry of foreign and new private sector Banks aggressively into the retail and personal loan sector, from which was once the exclusive domain of co-operative Banks. The CD ratio was 62.56%. The number of borrowers stood at 13,186 at the end of the year. The Bank wishes to mention here that it has not advanced any amount to the Share Brokers or Individuals against shares. Advances To Priority Sector & Weaker Section: In terms of the policy prescribed by the Reserve Bank of India, the Bank is always eager to grant loans and advances to priority sector and weaker section and keep pace with the growth in other types of advances. As on 31.3.2007 the Bank had advanced Rs.10,286.62 lakhs to the priority sector and Rs.2,601.55 lakhs to the weaker section. Percentage of Priority Sector Advances to the total advances is 63.32%. However, Weaker Section Advances stood to 16.01% as on 31.3.2007, Purposewise Analysis Of Advances: The Banks lending for various purposes is indicated in the following table. ANALYSIS OF ADVANCES (as on 31.3.2007): Rs. in Lakhs Purpose of Loan Amount % No. of % Borrowers 1. Accommodation (Housing) 3,712.99 22.85 4,625 35.07 2. Small Scale Industries 1,823.73 11.23 642 4.87 3. Trade and Commerce 2,821.64 17.37 1,820 13.80 4. Transport Operators 944.52 5.81 974 7.39 5. Self Employed (Professionals) 584.71 3.60 256 1.94 6. Education 246.69 1.52 142 1.08 7. Other Purpose 6,111.45 37.62 4,727 35.85 Total 16,245.73 100.00 13,186 100.00 Advances To Directors And Their Relatives: Following is the table indicating loans and advances granted to the Directors and their relatives as on 31.3.2007: (Rs. in Lakhs) Advances to A B C D E F Directors (Self) 16.100 - 4.15 11.85 - 0.07% Relatives 8.03 - 2.08 5.95 - 0.04% Total 24.03 - 6.23 17.80 - 0.11% A = Balance as on 31.03.2007 B = 1.4.06 to 31.03.2007 - Disbursed C = 1.4.06 to 31.03.2007 - Recovered D = Balance O/s as on 31.03.2007 E = Overdue F = % with total Advances Investments: Taking into account the guidelines of Reserve Bank of India for adopting a cautious approach in making investments in Government Securities, the Bank has judiciously deployed its funds. Schedule F annexed to Balance Sheet gives a detailed position of investment in various securities. As already informed, all the transactions of Government Securities and PSU Bonds are in Demat form and through SGL accounts as per the guidelines of Reserve Bank of India, The Bank has made investments in GOI and other Government approved Securities, 15% of NTDL as per prescribed norms of the Reserve Bank of India. The Bank wishes to clarify here that it has no investment exposure to Share market. Audit & Inspection: Mr. Deepak Gude, Chartered Accountant, conducted the statutory audit of the Bank for the year ended 31st March, 2007 and the Bank could earn A class Audit Certification for the year 2006-2007. During the year M/s. Fakih & Co., Chartered Accountant, Mumbai carried out the Internal Audit on concurrent basis. Non-Performing Asset: Gross: Gross N.P.A. for the year 2006-2007 stood at 9.88% of Loans and Advances. Whereas the Net N.P.A. level is well below the prescribed percentage of 10% and stood at 2.20% of Loans & Advances on 31.3.2007. Expansion & Development: As already informed about purchase of new premises for Mazagaon (Reay Road) Branch on ownership basis, the Directors take pride in informing that the fully computerized Mazagaon (Reay Road) Branch has been inaugurated at Dawoodi Mansion, Reay Co-operative Housing Society Ltd., Barr. Nath Pai Road, Mazagaon and the same has become operational with effect from 30th October, 2006. This new premises will definitely see rise and progress in the business of the Branch. Further the Directors have proposed to open Branches at Hyderabad and Kankavli for which Action Plan has been submitted to Reserve Bank of India for issuing of licences. Insurance Cover For Deposits: Deposits upto Rs.1,00,000/- (Rupees One Lakh) in respect of each depositor are fully protected and insured with the Deposit Insurance & Credit Guarantee Corporation. Bank is paying insurance premium of deposits to Deposit Insurance & Credit Guarantee Corporation, regularly, Capital To Risk Assets Ratio (CRAR): Reserve Bank of India has made it mandatory to maintain Capital Adequacy norms even to Cooperative Banks. We are pleased to inform you that your Bank is adequately maintaining the CRAR (Capital to Risk Assets Ratio) which as on 31.3.2007 stood at 17.72% as against required rate of 9.00%. Industrial Relations: The Directors appreciate and place on record efforts put in by all the staff members for the progress of the Bank, they also express their gratitude for loyal and dedicated staff members for their hard work and selfless services rendered to the Customers and Depositors and expect the same to be continued in future too.