1. It gives me immense pleasure to place before you the Annual Report
of your Bank for the financial year 2011-12. I feel elated while making
this maiden address to you on assuming the position of Chairman and
Managing Director of this great institution. At the outset, I humbly
submit that it was a challenge to us to sustain growth both in business
and profitability of the Bank, in the backdrop of global slowdown and
its impact on Indian economy. I am sure, you will appreciate that your
Bank has done fairly well in both these important parameters during
2011 — 12. I am happy to share with you in brief, the Indian Economic
and banking scenario and salient features of your Bank''s performance.
2. Economic Scenario
2.1 After an impressive growth of 8.4% in the preceding two financial
years, India''s economic growth has seen a moderation in the financial
year 2011-12. As per the advance estimate of Central Statistical
Organisation (CSO), the Gross Domestic Product (GDP) during 2011-12, is
expected to grow at 6.9%. The moderated growth is largely due to the
deceleration in Industrial performance.
2.2 During the year, global demand experienced a slowdown due to the
concerns in the European market and moderate recovery of the US
economy. Growth also slowed down in emerging and developing economies
(EDEs), reflecting the combined impact of higher inflation, monetary
tightening and slowdown in global growth.
2.3 India''s macro economic environment has been impacted by the
concerns emerging from higher inflation, rising interest rates, fall in
investments, higher fiscal & current account deficit, rising oil
prices, depreciation of rupee, putting pressure on the growth of the
2.4 Even though the growth came down, the level of Wholesale Price
Inflation (WPI) remained elevated for most part of the financial year
2011-12. After remaining consistently at higher levels of above 9%
during April November 2011, the level of inflation dipped to 6.9% by
end March 2012, consistent with the Reserve Bank of India''s projection
of 7%. However, the concerns remain in the form of food and fuel
inflation, with a rise in the prices of certain food articles and the
continuing high international commodity prices.
2.5 Going forward, the market has not yet stabilized. There have been
growing concerns in Euro area which have been reflected in the recent
credit down grade of Spain and recessionary trend in UK. The growth
rate in the BRICS nations has also moderated. The overall domestic and
international outlook does not seem to have improved as expected.
However, the regulator has taken an optimistic outlook for 2012-13
based on the projections made and recovery expected in Indian as well
as global economy.
2.6 The economic survey has indicated a growth of 7.6% for the
financial year 2012-13, while the RBI has projected a growth of 7.3%.
With an assumption of a normal monsoon, the growth in agriculture is
likely to be close to the last year''s level. Industrial sector is
expected to perform better than in the last year, showing some positive
outlook for the growth of the economy. However, considering the
linkages with global growth outlook it can be said that the growth of
the Indian economy would be dependent, to quite an extent on the growth
being registered by the other major economies. This is mostly relevant
for the nations which are our predominant trade partners.
2.7 On the banking front, the performance in FY12 has been impacted by
the high interest rates and low credit off take. Higher inflation had
prompted the regulator to raise policy rates 375 basis points between
March — October 2011, thus making the credit costlier. Despite
offering high interest rates, banks were not able to mobilize the
desired funds through deposits, creating pressure on liquidity. There
have also been concerns on asset quality across the banking industry
because of the indirect impact of trade & demand slowdown and higher
interest rates on repayment capacity of the clients.
2.8 As on 30th March 2012, the aggregate deposits of Scheduled
Commercial Banks (SCBs) increased by 17.4% compared to 15.9% recorded
in the previous year. Bank credit growth decelerated to 19.3% from
21.5% last year, reflecting slower economic activity. Broad money (M3)
as on 23rd March 2012, grew by 13.0% compared to 16.1% recorded in the
corresponding previous year.
2.9 In spite of the challenging environment, our Bank could register an
overall business growth of over 16% to reach a level of Rs2.36 lakh
crore for the financial year ended March 2012. Deposits have grown by
17% to cross a level of Rs1.36 lakh crore, while overall credit
surpassed a level of over Rs1 lakh crore with a growth of 16%. The Bank
has continued its focused attention on the productive sectors of the
country by giving support to various segments including SME,
agriculture, retail etc., and by giving added thrust on financial
inclusion. Besides this, the Bank is also poised to have a pan India
presence with expansion in the unbanked and underbanked, rural and
other areas of the country where we do not have presence as of now. The
Bank has also created another milestone by opening its 1500th branch
showing our growing presence across the country.
2.10 The Bank having been known for its technology initiatives has
taken another step towards e-banking by developing applications that
can be downloaded on to Android tablets and Smart Phones. We would
continue to provide the best in class customer service as an endeavour
to reach out to our existing as well as prospective customers and
3.1 Business growth
3.1.1 The Total Business of the Bank grew by 16.21% to reach to the
level of Rs2,36,611crore as on 31st March 2012 from Rs2,03,598 crore
recorded as on 31.03.2011.
3.1.2 The Total Deposits has grown by 16.61% to reach Rs1,36,142 crore
and the Total Advances, for the first time crossed the one lakh crore
mark to reach Rs1,00,469 crore registering a growth of 15.68%.
3.1.3 During the year, the Bank focused on lending to Agriculture, SMEs
and Retail segment. While credit to Agriculture increased by 29.51% to
reach Rs7,140 crore, Advances to SME segment improved by 22.9% to
Rs14,340 crore. The Retail credit stood at Rs20,289 crore.
3.1.4 The Credit-Deposit ratio (CD ratio) stood at 73.80%
3.1.5 The Standard Assets constituted 98.74% of the Bank Credit.
3.1.6 The aggregate investments stood at Rs47,598.53 crore, as against
Rs43,539.31 crore in the previous year.
3.2.1 The Total Income of the Bank increased by Rs4,119.27 crore to
reach Rs14,510.40 crore, showing an increase of 39.64%.
3.2.2 The Operating Profit rose to Rs2,855.97 crore registering a growth
3.2.3 The Net Profit of the Bank, for the first time, crossed a
milestone figure of Rs1,500 crore to reach Rs1,506.04 crore.
3.3 The Bank''s CRAR under Basel II stood at a comfortable level of
3.3.1 Networth of the Bank stood at Rs8,276 crore as against Rs 7,138
crore last year.
3.3.2 Return on Equity (ROE) works out to 18.20% and the Return on
Average Assets (ROAA) is at 1.06%.
3.3.3 The Cost to Income Ratio improved to 38.44% as compared to 39.13%
in the previous year.
3.3.4 The Non-interest income increased by 18.85% to Rs1,492 crore and
the Net Interest Income increased by 7.05% to Rs3,146 crore. The Net
Interest Margin works out to 2.48%.
3.4 Earnings per Share has gone up to Rs101.67 from Rs98.50 and the Book
Value per Share improved to Rs558.69 from Rs497.62.
3.5 The Gross NPA stood at 1.26% and the Net NPA stood at 0.87%. The
Bank has effected Cash recovery and up-gradation of NPAs to the extent
of Rs 758.60 crore, which is higher by 20.93% over previous year.
3.6 The Staff Productivity has recorded a marked improvement. The
Business per Employee moved up from Rs15.73 crore to Rs17.13 crore, Net
Profit per Employee remained at Rs10.9 lakh and Business per Branch
improved from Rs149.59 crore to Rs157.74 crore.
3.7 The Bank firmly believes that acquisition of new clients and
nurturing the relationship with existing clients will only help in
expansion of its business. During the year the clientele base of the
Bank increased by 20.47 lakh to 142.48 lakh.
3.8 Service Outlets : Bank''s total service outlets crossed 6,000 mark
to reach 6,164 units, comprising of 1,500 branches, 1,274 ATMs and
3,390 Branchless Banking units. Of these, 139 branches, 24 ATMs and 890
Branchless banking units were operationalised during the year.
3.9 The Bank has been setting standards in the area of Financial
Inclusion. During the year, 890 villages have been covered to take the
total number of units to 3,390. More than 1.65 lakh No frill SB
accounts were opened taking the tally to 14.26 lakh accounts with a
balance of Rs 67.49 crore. 23,970 General Credit Cards amounting to
Rs33.17 crore were sanctioned. The Bank has covered all the 332 villages
allotted by SLBCs of various states, within the stipulated time,
covering 25 locations through Branch Model and 307 locations through
Business Correspondent Model. The Bank has also implemented Urban
Financial Inclusion in 105 urban locations spread across 6 states.
The Board of Directors of your Bank was pleased to recommend an all
time high dividend of Rs20.50 per equity share of Rs10/- each for the
4. New Initiatives
The Bank has taken up the following new initiatives during the year to
improve its functioning:
- The Bank opened 12 new Zonal Offices at Thiruvanantapuram,
Tiruchirapalli, Nellore, Vadodara, Thane, Meerut, Jaipur, Delhi
(additional), Bangalore (additional), Patna, Ludhiana and Mangalore to
have better control, monitoring, administration and faster decision
making process. With this the total number of Zonal offices has
increased to 31.
- For faster business development and quick decision making, 6 Circle
Offices headed by General Managers were operationalised at Mumbai,
Delhi, Bangalore, Chennai, Kolkata and Ahmedabad with effect from 1st
- For a focused approach and faster dispensation of SME credit, the
Bank is operationalising 7 new SME loan centres at Mangalore, Trichy,
Ahmedabad, Kolkata, Ludhiana, Chandigarh and Jaipur.
- The online Banking has been made more user friendly and feature
rich with many new features being introduced to enhance customer
- The Bank has initiated several steps towards people development,
organizational re-design and process changes to accelerate growth with
- Planning to open more Retail hubs to cater to the increasing demand
for vehicle loans, housing loans and other loans under retail segment.
- Planning to open 300 new branches to have pan- India presence.
- Exploring the possibility of opening overseas branches at Hongkong
and Dubai in the near future and in Kenya, Zambia and Malaysia etc. in
- More Mobile ATMs and Financial Inclusion Resource Centres will be
- Continuing to innovate new products and services leveraging IT.
5. Awards and Accolades
The Awards and Accolades received from various organizations of repute
speak volumes about the Bank''s performance. Some of them are:
- SKOCH Financial Inclusion Award 2011, instituted by SKOCH
Consultancy Services Pvt. Ltd. - for completion of financial inclusion
outreach at all the villages having population of above 2,000 allotted
to the Bank by various State Level Bankers'' Committees (SLBCs), in
December 2010, way ahead of the given deadline of March 2012.
- Award for Financial Inclusion Programme by Association of
Development Financing Institutions in Asia and the Pacific (ADFIAP).
- IBA Banking Technology Awards 2010 (Three Awards): Winner Award -
under the category Best Financial Inclusion Initiative and
Best Use of Technology in Training & e-Learning Initiatives and
Runner-up Award under the category Best Online Bank amongst
Public Sector Banks.
- Bagged the Best PSU Bank of the Year award in the Financial
Leadership Awards 2011 conducted by Bloomberg UTV.
- Awarded India''s Most Customer Friendly Bank by Outlook
Money (A Personal Finance Magazine) & TNS [Taylor Nelson Sofre] (A
reputed international market research firm).
- In the Best Banks Survey conducted by Financial Express in
association with Ernst & Young, your Bank was ranked Number One
Nationalised Bank 2010-11 at FE-India''s Best Banks Awards.
- In the CNBC-TV18 Best Bank and Financial Institution Awards
presented by MCX for FY2011, the Bank was ranked Best Mid-Size
Public Sector Bank.
- Received the First Prize under National Award for Excellence in
Lending to Micro Enterprises for the year 2010-11 from Ministry of
Micro, Small and Medium Enterprises, Government of India.
- Bagged the Best Manpower Efficiency Award in Public Sector Bank
category, instituted by Federation of Indian Chambers of Commerce
and Industry (FICCI) and Indian Banks'' Association (IBA) at FIBAC
Banking Awards 2011.
- Bagged SKOCH Financial Inclusion Award 2012 for SHG
Initiatives instituted by SKOCH Consultancy Services Pvt. Ltd.
- Bagged Best Performance Award 2010-11 in SHG Bank Linkage in
Karnataka — from National Bank for Agriculture and Rural Development
(NABARD) for its Highest recovery performance in lending to Self
Help Groups (SHGs) among all the participating Banks in the State of
6. Finally, I express my sincere thanks and gratitude to all the
shareholders of the Bank for reposing their faith and confidence in the
Management. I also thank all the employees for their active involvement
and contribution towards the growth of the Bank. Customers are the
backbone of our organization. I sincerely thank our valuable customers
for their continued support and patronage. I also owe my gratitude to
the Reserve Bank of India and the Ministry of Finance, Government of
India for their support and guidance in the effective functioning of
Place : Mangalore [Ajai Kumar]
Date : 22.05.2012 Chairman and Managing Director