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Allahabad Bank.

BSE: 532480 Sector: Financials
NSE: ALBK ISIN Code: INE428A01015
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VOLUME 473093
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Mkt Cap.(Rs cr) 5,180
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OPEN 70.70
CLOSE 70.55
VOLUME 473093
52-Week high 92.50
52-Week low 57.00
P/E
Mkt Cap.(Rs cr) 5,180
Buy Price 69.70
Buy Qty 1500.00
Sell Price 0.00
Sell Qty 0.00

Allahabad Bank. (ALBK) - Director Report

Company director report

During the financial year 2016-17 (FY17) the Bank's global business reached the levelof Rs 359974 crore (` 3.60 lakh crore) registering a Y-o-Y growth of 0.45%. The Bank'sinternational business stood at Rs 14131 crore and recorded a Y-o-Y growth of 12.87%.Global deposits of the Bank stood at Rs 201870 crore that increased by 0.61% and grossadvances that grew by 0.25% and stood at Rs 158103 crore as at the end of Mar'17. YourBank's continued focus on low cost deposits has resulted in a robust Y-o-Y growth of27.15% in CASA deposits and the build-up stood at Rs 91598 crore as on 31st Mar'17.Subsequently CASA share improved to 45.79% as on 31st Mar'17 from 36.20% a year ago.

The Bank's operating profit decreased by 6.46% Y-o-Y on account of stress on advancesportfolio and resultant reversal/ non-booking of interest. It stood at Rs 3867 croreduring FY17. In terms of net profit the quantum of losses decreased in FY17 as provisionswere lower by 14.29% and there was an increase in non-interest income levels. Net lossdecreased to Rs 314 crore in FY17 as compared to a net loss of Rs 743 crore a year ago.Your Bank has been able to maintain its Capital Adequacy Ratio above the regulatoryrequirement. The Bank's CRAR stood at 11.45% which is above the prescribed limit. Owingto reduction in bulk deposits the cost of deposits decreased to 5.94% during FY17 from6.61% in FY16.

Against this backdrop your Directors take pleasure in placing the Bank's Annual Reportfor 2016-17 alongwith audited annual financial statements

OUR PERFORMANCE A. FINANCIAL HIGHLIGHTS

A.1. BALANCE SHEET( Amount Rs in Crore)

Parameter 31ST MAR'16 31ST MAR'17 Y-O-Y GROWTH %
Total Business 358352 359974 0.45
Total Deposits 200644 201870 0.61
Gross Advances 157707 158103 0.25

A.2. PROFIT

( Amount Rs in Crore)

Parameter 31ST MAR' 16 31ST MAR' 17 Y-O-Y GROWTH %
Operating Profit 4134 3867 -6.46
Provision 4877 4180 -14.29
Net Profit/(Loss) (743) (314)

A.3. KEY RATIOS

Parameter Mar'16 Mar'17
Cost of Deposits 6.61 5.94
Cost of Funds 6.37 5.74
Yield on Funds 9.24 8.41
Cost of Borrowings 3.85 3.52
Net Interest Margin 2.65 2.54
Return on Assets -0.33 -0.13
Cost to Income Ratio 47.06 51.25

B. OPERATIONAL HIGHLIGHTS

The modification of surveillance application LAMP has facilitated dynamic andquantified monitoring. In the first phase this tool will be used for all accounts greaterthan Rs 1.00 Crores. An account has to undergo checks at 61 points which would includealmost all the Early Warning Signals proposed by RBI. Based on the score depicting thedeficiency; corrective & prompt action is to be taken to restore the wellness of theaccount. As a result the slippage ratio has come down from 8.93% (FY16) to 8.02% (FY17).

DeVA (Document e-Verification & Approval) is a set-up tool to ensure thatirregularities mostly pertaining to documentation are taken care of. This ensures thatthere is full adherence to the guidelines while sanctioning the proposal and thedocumentation is correct and complete to ensure enforceability at a later stage ifrequired. Consequently short comings would be plugged at the 1st stage itself and itwould supplement the inspection of branch.

C. ASSET QUALITY

FY17 was a challenging year for the Indian Banking Industry due to continued stressfaced in asset quality on account of various macroeconomic and other factors. In theprevious year the RBI had also conducted Asset Quality Review in banks.

As on 31st Mar'17 Gross NPA of the Bank stood at Rs 20687.83 crore (FY16: Rs 15384.57crore) and Net NPA remained at Rs 13433.51 crore (FY16: Rs 10292.51 crore). In terms ofratio Gross NPA Percentage and Net NPA Percentage were 13.09% (FY16: 9.76%) & 8.92%(FY16: 6.76%) respectively.

The Bank initiated various measures to arrest fresh slippage and restricted it to Rs11417 crore for the FY17 compared to Rs 12924 crore for the FY16. Provision Coverage Ratio(PCR) also improved to 50.11% in FY17 from 48.22% in FY16.

To improve asset quality the Bank initiated consistent recovery drive and recovered Rs3671.69 crore with a growth of 63.70%. Of this Cash Recovery was Rs 1611.32 crore with agrowth of 72.22% due to concerted efforts daily monitoring and account specificresolution plan. During the aforesaid period total Reduction in NPA accounts stood at Rs6113.74 crore.

The Bank also formulated two new OTS schemes for small NPA accounts which resulted inaccelerated settlement of Farm Sector/ Unsecured small borrowal accounts. Furthercompromise/negotiated settlement through Rin Mukti Shivir and one-to-one meeting withborrowers was adopted as another vital tool to tackle NPAs.

However recovery in big borrowal accounts above Rs 1.00 crore remained a constraintfor the Bank for obvious reasons. For follow-up monitoring and recovery in theseaccounts online module "PARTH" (Portal for Asset Resolution through Hot chase)was introduced which was very useful in assuring resolution in this segment. The Bank alsohas 9 Asset Recovery Management Branches (ARMBs) which function exclusively for resolvingNPAs.

Initiatives taken during FY17

• The Bank introduced Online Module "PARTH" for effective monitoring ofbig borrowal accounts having outstanding above Rs 1.00 crore. Hot chase of such borrowersand timely legal action increased our penetration rate to crack these accounts forrecovery.

• Two new OTS schemes were launched for settlement of NPA accounts related to Farmsector and small unsecured loans.

• Monitoring of daily recovery was introduced with Zones/ FGMOs to improvepenetration in NPA accounts.

• The Bank organized 33 Recovery Camps in the previous year involving all thebranches which was very successful in terms of recovery that amounted to Rs 3157.26 crore.Services of Recovery Agencies and Banking Correspondents were properly utilized formarketing of One Time Settlement Schemes (OTS).

• The Bank participated in National Lok Adalat actively and settled 15154 caseshaving outstanding of Rs 148.30 crore.

• E-auctions of charged immovable & movable securities were carried outthrough-out the year. Special thrust was given in taking physical possession of immovableproperties either with the help of Enforcement Agencies or by moving application beforethe concerned DM/CMM taking advantage of amended SARFAESI Act. This step had resulted intoincrease in the percentage of properties under physical possession of the Bank whichleading to auction of properties.

• Nodal Officer at each DRT centre had been assigned the role of follow-up oflegal cases on daily basis so as to minimize delay in obtaining decrees and execution.

• Sale of chronic/difficult accounts to ARC was another option available to tacklerising NPA and was utilized and 3 accounts were sold to these agencies.

• Initiatives for identifying Wilful Defaulters were undertaken in terms ofguidelines of Reserve Bank of India. On completion of due diligence exercise identifiedborrowers were declared as Wilful Defaulter by the Bank and the number now increased to101 a three-fold jump from Mar'16 figure of only 32.

• For effective and better monitoring all borrowal accounts were categorized infour broad heads viz. (i) Below Rs 50000 (ii) Rs 50000 to Rs 1000 lakhs (iii) Rs10.00 lakhs to Rs 1.00 crore and (iv) above Rs 1.00 crore. While OTS is the main focus infirst two stages other additional options like sale under SARFAESI declaration ofwillful Defaulter restructuring suit at DRT are followed very methodically in next twocategories. Further borrowal accounts having outstanding above Rs 1.00 crore monthly VCmeetings are held with Zonal Heads and FGMs and 'Doable' accounts are identified whereturnaround/recovery is expected within the quarter. These accounts are then followed-up ondaily basis to ensure resolutions.

New initiates to be adopted

• Formation of a "War Room" at Head Office is under considerationwherein round the clock NPA monitoring will be undertaken in a more systematic andaggressive manner by a team of 4 dedicated executives who will have no other duty otherthan following up all NPA accounts above Rs 50.00 lakhs on 'actionable parameter' basis.

• After being successfully implementing PARTH module for online follow up nowcoverage will be extended to NPA accounts having outstanding above Rs 50 lakhs.

• Marketing of chronic NPA accounts among ARCs will be done to get better bids.

D. INDUSTRIAL RESTRUCTURING (a) Industrial Restructuring

The total Standard Restructured advance of the Bank came down from Rs 8332 crores (ason 31st Mar'16) to Rs 4656 crores as on 31st Mar'17. The reduction of Rs 3676 crores hashappened on account of Rs 2234 crores of slippages to NPA category and Rs 1078 croresbeing upgraded. The Bank had an outstanding of Rs 2466 crores under SDR and Rs 545 croresunder S4A as on 31st Mar'17. Under the 5/25 scheme the outstanding amount stood at Rs1187 crores.

The Bank has adopted timely restructuring for Small Medium and for other enterprisesas well. As on 31st Mar'17 the restructuring for CDR SME and other enterprises stood atRs 1567 crores Rs 383 crores & Rs 2705 crores respectively.

(b) Other Initiatives

The Bank has strengthened the monitoring system by laying emphasis on SMA 0 (Depictingover dues from Day 1 itself) level thereby arriving at a resolution at an early stage.Creating awareness about credit monitoring has been given priority through marking a slotin training programs and during interaction with field functionaries.

E. DIGITALIZATION

E1. Alternate Delivery Channels

Internet Banking:

The Bank is providing Retail Internet banking & Corporate Internet banking facilityto its customers. The Internet Banking Customers of the Bank reached 8.43 lacs as on 31stMarch 2017. The Bank as updated its Internet Banking Services during FY17 which are asunder:

• Registration of for Atal Pension Yojana (APY).

• Online registration of Mobile Banking

• Facility to link different account in Mobile Banking

• Scheduling RTGS / NEFT transactions

• Tamil Nadu & Chhattisgarh State tax payment

• Online 15G/15H submission

Mobile Banking

The Bank is providing Mobile Banking services to around 26 lakh customers. During FY17upgraded version of the Mobile App was introduced which enables the customer dotransactions with ease. The Bank has also introduced the facility to register for MobileBanking through its network of ATMs.

Unified Payment Interface (UPI)

The Bank has launched "AllBank Unified Payment Interface" a Mobile App whichallows funds transfer facility from one account to another account. Any Bank accountholder after registration in the app can pay or pull funds through the application. Thepayments can be made to the beneficiary through four modes as under:

• Virtual address

• Account Number & IFSC Code

• MMID & Mobile Number

• Aadhaar Number

RuPay Prepaid Card:

The Bank has launched RuPay Prepaid card. After reloading the card with a specifiedamount the user can use the card at ATMs POS machines & Online sites. A non bankcustomer can also purchase the card for use.

Point of Sale (PoS):

The Bank has launched merchant acquiring business through Point of Sale machines (PoS)for the merchants to accept payments from its customers through electronic means. All card(RuPay MasterCard & VISA) are accepted in the PoS. Around 370 PoS machines have beeninstalled as on 31.03.2017.

SMS Alert Services

• SMS alert is being sent prior to/after account becomes inoperative to the SB& Current account holders.

• Customers are being intimated through SMS regarding deduction of penal chargesfor fall in minimum balance.

• Customers are being intimated through SMS regarding maturity of the TermDeposit.

ATMs

The Bank has a total 1214 ATMs/CDs as on 31st Mar'17. Out of this 742 are under MOFproject 315 under opex and 157 under capex model.

E2. Cheque Truncation System (CTS)

CTS clearing was introduced in the Bank as per RBI guidelines. The CTS clearing of theBank is handled by 3 Grid centres viz. New Delhi Mumbai & Chennai.

In the Bank inward clearing of Southern Grid (Chennai) was decentralized at fourcentres i.e. Kolkata Chennai Hyderabad and Bangaluru. In order to make the CTS clearingprocess more time efficient prompt and cost efficient steps have been taken tocentralise the CTS clearing of 4 centres to a single centre- Bhubaneswar.

The Branches have been advised to ensure that only CTS compliant cheque leaves are usedby the customers. Non-CTS cheques will be completely withdrawn from the system w.e.f.01.07.2017.

E3. Information Security

• The Bank has a well documented Board approved IT security policy and an ITsecurity procedure in place that is being reviewed annually to keep it updated as perlatest trend and best practices.

• Board approved Cyber Security Policy and Cyber Crisis Management Plan has alsobeen introduced separately apart from IT Security Policy and IT Security Procedure.

• The Bank has deployed various security tools such as firewall IntrusionDetection System (IDS) Intrusion Prevention System (IPS) e-Mail Security GatewayAntivirus Solution etc. to mitigate various security threats.

• The Bank has implemented Hyper Text Transfer Protocol Secure (HTTPS) ExtendedValidation Secure Sockets Layer (EV SSL) for internet banking.

• Second Factor Authentication (One Time Password /Grid Card) Virtual Keyboardand CAPTCHA are implemented in Internet Banking.

• Quarterly VAPT (Vulnerability Assessment and Penetration Testing) and yearlyInformation System Audit are also conducted for CBS & allied infrastructures to plugin gaps related to security if any.

Business Continuity Plan and Disaster Recovery

• The Bank has its Data Centre in Tier 4 Data Centre (DC) and also has a DisasterRecovery Site (DRS) for its core banking solution and other critical applications.

• The Bank has ISO 27001:2013 Certification for its DC and DR site.

• The Bank has well documented Board Approved Business Continuity Plan to provideun-interrupted Customer Services in case of exigency.

• DR Drill is conducted on a quarterly basis to keep testing DR site's functionalpreparedness in case of any emergency.

E4. Other Initiatives

• The Bank has added some new features in "on line opening of Term/RecurringDeposit" to make it more customer friendly and attractive. New functionality ofopening of Savings Bank account through "Selfie" has been developed andintroduced in consultation with the Project Management Office.

• The existing Cheque book issue and delivery system has been re-engineered tomake it more customer friendly. As per RBI guidelines the Bank has re-designed andintroduced 10 commonly used forms with effect from 01.01.2017.

• The Documents & Record Management Policy-2016-17 has been reviewed/ updatedwith the addition of new reports/returns as required by RBI/other controlling authorities.

• Exceptional Transaction Reports generated by CBS has been reviewed andredesigned with the inclusion of 4 new reports in Exceptional Transaction category.

• The Bank has introduced new CIF & Account Opening Forms for the customers

• The Bank has put in place a well defined procedure for bringing about any changein the Systems and Procedures or introducing a new system. The compliance of the Systems& Procedures of the Bank by the branches/ offices is periodically audited/ verified.

• During FY17 a new department "New Business Initiative" was openedfor strategic business development. The Bank has planned to provide its employees ane-platform for learning and development and a blue print for the programme has beenprepared. The Bank is reviewing some of the loan facilities provided to the employees atconcessional rate.

Digitalisation- New Business Buzz Word

The Bank has taken leap forward in digitization of its business processes. New ITinitiatives have been put in place to improve delivery of services. New Digital productslike UPI Micro ATM and Aadhar Pay have been launched. The Bank has a strong network ofmore than 8250 outlets providing IT enabled online Banking Facilities with special focuson rural and remote areas of country. The Bank is focusing to innovate alternatee-delivery channels with customer friendly options.

Moving forward with Government's thrust on digitization of transactions and gearing upfor less cash society the Bank has introduced a number of products.

• Aadhar enabled AEPS transactions

• Allbank-Selfie' - Mobile app based on-line customer onboarding

• Account opening using e-KYC facility extended by UIDAI.

• Aadhaar based payment at merchant locations replacing cash transactions.

• Prepaid Card for walk-in customers and account holders.

• On-line Home loan approval

New features have been introduced to make our existing e-products more and moreconvenient for our customers.

• OTP authentication for better security in e-commerce transaction

• On-line employees PF payment to EPFO

• On-line payment of customs-duty (ICEGATE)

??On-line student fee collection

a) Micro ATMs:

• Under Financial Inclusion Project the Bank has provided Banking Facilitiesthrough Online Inter-operable Kiosk Banking Solution at 5063 Bank Mitra locations usingMicro ATMs.

• The facility of RuPay Card operations (Micro ATM functionalities) has beenoperationalised and encouraged as a party of digital push through usage of domestic RuPaycard at Bank Mitra Locations.

b) Branch-wise Vacant Locker Status: Branch-wise position of vacant locker is beingdisplayed in the Bank's website.

F. MANAGEMENT INFORMATION SYSTEM (MIS)

The Bank has launched Automated Data Flow (ADF) to provide MIS to RBI seamlessly. Bankhas set up a Centralized Data Repository (CDR) for maintaining accuracy and consistency indata provided to various stake holders. The MIS also provides analysis and information forpreparation of Balance Sheet through new accounting system Ind AS.

Status of Implementation of Ind AS

As per RBI guidelines banks are required to follow Indian Accounting Standards (IndAS) from Financial Year 2018-19 with comparatives of previous year. The Bank has submittedits Proforma Ind AS Financial Statements of Sept. 2016 to RBI within stipulated timelineof 30th Nov'16.

The Bank has formed a Steering Committee headed by Executive Director. It has also setup a separate Cell at Head Office to handle various activities relating to implementationof Ind AS. The diagnostic study has been completed to ascertain impact due to Ind AS. TheI.T. changes which may be required are being studied by the Consultant. Bank is in theprocess of drafting Ind AS compliant Accounting Policies.

G. BRANCH AND OFFICE NETWORK Domestic Presence

The Bank has pan India presence of 3245. Out of 3245 domestic branches 1205 are atRural 764 at Semi-urban 647 at Urban and 629 in Metropolitan Centres. A total of 40 newbranches have been opened during FY17 out of which 12 are at Rural 14 at Semi Urban 7each at Urban and Metro centers. The rural branches include opening of 7 branches inunbanked rural centres. Further 2 Metro and 1 each in Urban and semi-urban branches havebeen merged to consolidate the business of close by located centres.

International Presence

The Bank is having one overseas branch with a dealing room at Hong Kong. The businessof Hong Kong has increased from Rs 12519 crore as on 31st Mar'16 to Rs 14130.68 crore ason 31st Mar'17. The business of the branch increased by 12.87% on Y-o-Y basis. The totaldeposit as on 31st Mar'17 stood at Rs 2535.54 crore whereas advances stood at Rs 11595.14crore. The Hong Kong branch has earned operating profit of Rs 112.20 crore and net profitof Rs 17.49 crore in FY17.

H. INTERNATIONAL BANKING

The Bank carries out its international business in India through its 53 authorized/designated branches which includes 5 international branches & through its overseasbranch at Hong Kong. The Bank also has a centralized fully equipped forex dealing room atFCTM Branch Mumbai which handles forex transactions in 9 currencies and maintains 13Nostro accounts and 1 Vostro account. Export Credit of the Bank as on 31st Mar'17 stood atRs 2620.96 crore as compared to Rs 2539.80 crore as on 31st Mar'16. The Bank is taking allsteps to increase the credit flow to exporters. Exporters' meets are arranged at variouscentres to explain various facilities available to them. The Bank maintains correspondentrelationship with prime banks abroad. The Bank is also catering to the needs ofNonResident Indians through its branches by providing various types of deposit & loanproducts e.g. FCNR NRE & NRO deposits Housing Loan etc. The Bank is also having anarrangement with M/s. UAE Exchange & Financial Services Ltd. to facilitate MoneyTransfer Services to the domestic customers receiving remittances from their relativesresiding abroad.

I. OPERATIONS DIVISION

Business Processes

Business Process Re-engineering (BPR) Cell is functioning with the purpose of bringingdesired changes in the existing systems and processes products and business processes ofthe bank on a continuous basis for maximizing performance mainly productivity andefficiency.

J. BUSINESS DIVERSIFICATION

a. Insurance Business:

i. Life Insurance:

The Bank as a corporate agent of M/s. Life Insurance Corporation of India mobilizedpremium of Rs 103.73 crore during FY17 from 27888 policies as against total premium of Rs111.79 crore mobilized during FY16. The Bank's earnings from Life-Insurance businessduring FY17 amounted to Rs 9.63 crore as against Rs 10.28 crore during FY16.

ii. Non Life Insurance:

The Bank as a corporate agent of M/s. Universal Sompo General Insurance Company Limitedcollected premium amounting to Rs 119.54 crore during FY17 from 283369 policies mobilizedby the Bank which earned revenue of Rs 11.81 crore as against Rs 11.34 crore in FY16.

The Bank has collected premium amounting to Rs 10.06 crore during FY17 from sale of37247 customized "Allahabad Bank Health Care Plus" policies which earnedrevenue of Rs 1.42 crore.

b. Mutual Funds:

The Bank is distributing the Mutual Fund schemes of 6 AMCs i.e. Reliance Nippon AMCPrincipal PNB AMC Kotak Mutual Fund AMC UTI MF AMC Franklin Templeton AMC and PeerlessAMC through Bank branches.

The Bank has augmented commission from distribution of Mutual fund business amountingto Rs 49 lakhs during the FY17 as against Rs 46 lakhs during the FY16.

c. Depository Services:

The Bank as Depository participant of NSDL & CDSL is providing Depository servicesto the customers and has earned an income of Rs 82.99 lakh during FY17 as against Rs 31.89lakh during FY16 for providing Depository Services.

d. Online Trading Account:

The Bank is providing Broking facility to the demat customers of the Bank inassociation with M/s. Aditya Birla Money Limited. An income of Rs 7.82 lakh was augmentedby the Bank during FY17 on account of online trading activities.

e. Applications Supported by Blocked Amount (ASBA) Services:

Being Self Certified Syndicate Bank (SCSB) for submitting of application in publicissues (IPO/FPO/ Right Issue) this facility has now been made available from all thebranches of the Bank.

ASBA facility is also available for Syndicate/Sub syndicate Members for processingbroker bidded IPO forms at 58 designated bank branches. During FY17 the Bank processedapplications of the customers for 54 IPOs.

f. Cash Management Services:

The income under Cash Management Services is Rs 3.92 crore for the financial year2016-17 as against Rs 3.18 crore during corresponding period last year.

K. GOVERNMENT BUSINESS

For implementing the Prime Minister's dream for creating a pensioned society the Bankextended the coverage for APY by enrolling 73830 individuals to address the old age incomesecurity needs of the citizen.

As a Point of Presence (POP) for National Pension System (NPS) the Bank is cateringneeds of two of its corporate clients i.e. Allahabad Bank and M/S Tenughat Bidyut NigamLimited 20 Ranchi . Apart from these the Bank is acting as Point of Presence ServiceProvider (POP SP) for old age pension need of general public through its 286 branches.

During FY17 the Bank participated in four tranches of Sovereign Gold Bond Schemelaunched by Govt. of India aiming to reduce the holding of the yellow metal and also toreduce import of Gold.

Central Government's decision on the recommendations of the 7th Pay Commission-Revisionof pension of pre-2016 pensioners/ family pensioners has been implemented by the Bank inAugust 2016 to all the eligible pensioners.

During FY17 the Bank has participated in Income Declaration Scheme 2016 and PradhanMantri Garib Kalyan Deposit Schme (PMGKDS).

L. TREASURY - OPERATIONAL HIGHLIGHTS

Domestic Operations:

The treasury has earned a record trading profit of Rs 912.00 crores during FY 2016-17thereby posting a Y-o-Y growth of 120.29% over FY 2015-16. Further the Interest Incomeearned during FY17 is Rs 4091 crores which is a 2.53% Y-o-Y growth over the previousperiod. Despite of a decrease in domestic Investment portfolio Rs 600.77 crores i.e.from Rs 56034.13 crores in Mar'2016 to Rs 55433.36 crores in Mar'17 such feat could beachieved through prudent trading strategies in SLR securities and judicious investments inNon-SLR category.

Portfolio Highlights:

The global investment portfolio of the Bank as on 31.03.2017 stands at Rs 55711.96crores which includes domestic investment of Rs 55433.36 crores and Overseas investmentby our HongKong Branch to the tune of HKD 333.85 mio i.e.` 278.60 crores (converted @1HKD = Rs 8.3450). The portfolio of Rs 55711.96 crores is split in to HTM categorycarrying Rs 38526.97 crores (i.e. 69.15%) and AFS Category carrying Rs 17184.98 crores(i.e. 30.85%).

On an effective NDTL of Rs 203860.00 crores as on 31.03.2017 the Bank has maintainedSLR securities of Rs 47600.00 crores which is 23.35% of NDTL against a requirement of20.50%. Out of our SLR holdings Rs 37211.00 crores which is 18.25% of NDTL is held inHTM category against a limit of 20.50%. The Bank's NSLR portfolio of Rs 7833.65 crorescomprises mainly of Rs 2584.51 crores of CD Rs 1361.40 crores of Bonds/ Debentures Rs1457.99 crores of Security Receipts and Rs 1290.87 crores of shares and Rs 855.00 croresof Special SDL Bonds received under UDAY scheme. The equity portfolio of the Bank stood atRs 1290.87 crores includes Rs 825.63 crores of shares received through conversion of Debtunder CDR/SDR/ S4A schemes.

With the Modified duration under control the bank is maintaining a good investmentportfolio in dated securities. The bank has increased the trading volume many fold in theHFT category. The bank is also venturing into the interest rate futures. The bank is alsoinvesting more in good corporate bonds which will attract more yields and also invest incommercial paper considering the short term liquidity management. With the favorablemarket conditions bank is also trying to invest in IPOs and FPOs of good companies andchurn the equity portfolio in an effective manner.

The bank is trying to increase the forex turnover in the merchant by establishing astrong relationship with the existing exporters and imports and also meeting theprospective client. The bank has also succeeded in maintaining the business of oilcompanies by providing best quotes and services to these entities who jointly provides thelargest forex turnover in the whole industry. The interbank trading activities have alsoimproved thus increasing the profitability to the bank.

M. CUSTOMER CARE

The Bank has formulated customer centric policies such as Customer Rights PolicyDeposit Policy Cheque Collection Policy and Compensation Policy and these are displayedin Bank's website. The Bank has adopted "The Code of Bank's Commitment toCustomers" & "Code of Bank's Commitment to Micro & SmallEntrprises" formulated by BCSBI. Citizen Charter is adopted by the Bank. It isavailable at the branches and website of the Bank. The Bank also conducts Customer ServiceCommittee meetings at every branch and Zonal Office on monthly basis for providing bettercustomer service.

Customer Grievance Redressal Cell

A web based Portal aimed at providing the customers with a platform to lodge theirgrievances against the Bank for deficiency in services has been provided on the Bank'swebsite www.allahabadbank.in under customer care. Complaints received directly at HeadOffice are also lodged through this portal for monitoring record & follow up. Inorder to prioritise & expedite the redressal all Complaints are categorized in 3Baskets viz AB & C. Complaints received through MOFDPGRBI and VIPs are put in theBasket A for expeditious redressal . Bank has Customer Grievance Redressal Cell at HeadOffice. The Nodal Officer of the rank of General Manager designated by the Bank monitorsthe implementation of customer service and complaint handling mechanism for the entireBank. Complaints received from customers are being redressed and suitable replies are sentto the customers.

Initiatives taken during FY17 for improvement in customer service

Several initiatives were also taken to remain customer focused by providing fastservice bringing in diversified products/ services responding to customers' queries intime and redressal of customer complaints.

Customer Service committees have been formed at each and every branch and at Zonaloffices. The Customer Service Committee meets once a month to study complaints/suggestions cases of delay difficulties faced/ reported by customers/ members of theCommittee and evolve ways and means of improving customer service. The members include asenior citizen too.

N. IMPLEMENTATION OF OFFICIAL LANGUAGE POLICY

The Bank has been leading in the area of implementation of Official Language andachieved almost all the targets in all parameters fixed by the Government of IndiaMinistry of Home Affairs Department of Official Language for FY17. All the bilingual CBSand HRMS computers are under Hindi Interface. By adopting this bilingual systemimplementation of Rajbhasha is increasing. In addition the Bank is using Unicode Fontsfor Hindi correspondence at all level.

During FY17 the Bank has been awarded with more than 30 awards for its excellentperformance for the use of Hindi which includes regional level awards of Ministry of HomeAffairs. In addition Town Official Language Implementation Committees situated indifferent locations of the country have also awarded the Bank offices. The Bank issuccessfully convening the Town Official Language Implementation Committees constituted bythe Government of India in Ranchi and Gonda.

The Draft and Evidence Committee of Parliament on Official Language inspected AllahabadBank Head Office on 27th May 2016 and the third sub-committee of Committee of Parliamenton Official Language visited Jammu branch on 10th June 2016 Abu Road (Mount Abu) on19.09.2016 and Head Office on 17.01.2017. The Committee not only expressed satisfactionbut also appreciated the efforts made by the Bank for progressive use of Hindi.

The Bank celebrates "Hindi Maah" in the month of September every year.Various competitions are organized at All India and Zonal levels in which staff members ofall cadres participate enthusiastically. The winners are awarded with prizes in theRajbhasha function. This year also the Bank organized Hindi Maah and other programmes /competitions and awards and prizes were given.

O. SUBSIDIARY & JOINT VENTURE

• AllBank Finance Ltd. a wholly owned subsidiary of Allahabad Bank engaged inCorporate Advisory Services Project Appraisal Issue Management Loan SyndicationDebenture Trusteeship and Underwriting posted a net profit of Rs 6.76 crore in FY17.

• The Bank holds 27.04% equity stake in Asset Management Company "ASREC(India) Ltd." along with other Banks/ Institutions.

• The Bank holds 30% equity stake in joint venture company "Universal SompoGeneral Insurance Company Limited" for general insurance along with Indian OverseasBank Karnataka Bank Ltd. Dabur Investment Ltd. and Japanese insurance major"Sompo".

P. ALLAHABAD BANK UP GRAMIN BANK (AUPGB)

At present one Regional Rural Bank i. e. Allahabad UP Gramin Bank (AUPGB) with HeadOffice at Banda (UP) is sponsored by the Bank. This is operating in 11 districts of UPwith 650 branches under 10 Regions. AUPGB was formed by amalgamating six RRBs sponsored byour Bank in 2010.

The paid up capital of our sponsored RRB is Rs 61.93 crore. Central Government StateGovernment and Allahabad Bank contributed in paid up capital of AUPGB in the ratio of50:15:35 respectively. The Bank's contribution towards capital of this RRB was Rs 21.67crore. The Net worth of sponsored RRB as on 31st March'17 was Rs 789.36 crore.

During FY17 the total business of AUPGB increased from Rs 14346 crore in FY 2016 to Rs16182 crore showing an increase of Rs 1836 crore by 12.80%. The deposit and advances ason 31st Mar'17 stood at Rs 9613 crore (Y-o-Y growth: 17.55%) and Rs 658 crore (Y-o-Ygrowth: 6.49%).

The Net Profit of our sponsored RRB as on 31.03.2017 stood at Rs 31.37 crore as againstRs 9.31 crore as on 31.03.2016 showing a Y-o-Y growth of 236.94 %. AUPGB is in profitsince inception. The Gross NPAs of AUPGB increased from Rs 541 crore to Rs 607 crore(9.24% of total advances) during FY 17. All the 650 branches 04 Extension Counters and 13Administrative locations are at CBS. AUPGB is the only RRB in India which is managing itsown Data Center. Total no of employee were 2614 as on 31.03.2017.

Progress in opening of accounts under PMJDY as on 31.03.2017 stood at 1087228accounts out of which Rupay debit cards were issued in 768051 accounts. Balanceoutstanding in those accounts was Rs 258.69 crore. Total number of accounts having zerobalance as on 31.03.2017 stood at 78892. AUPGB enrolled 291503 no of customers underPMJJBY and 650021 under PMSBY. Out of 28318 saving linked SHGs credit linkage was done in22756 no of SHGs accounts with an outstanding of Rs 133.95 crore.

The RRB sponsored by the Bank is actively participating in economic development of theareas of their presence. With the implementation of Core Banking Solution (CBS) ruralcustomers are also getting benefit of latest technology thus providing services to therural poor under Financial Inclusion Plan at their doorsteps. CBS is running with anywherebanking and SMS alert.

In your sponsored RRB the facility of Micro ATMs RTGS NEFT Rupay ATM cards/ KCCcards KIOSK banking Solution (KBS) under FIP E-KYC Aadhar Payment Bridge System (ABPS)under DBT etc is also being provided to customers by AUPGB.

Q. AWARDS AND ACCOLADES

• The Bank has been awarded by M/s. Life Insurance Corporation of India formobilizing maximum no. of policies among 153 channel partners of M/s. LICI during FY17.

• FGMOs - Lucknow Kolkata & Mumbai Zonal Offices -Raipur Bhubaneswar NewDelhi & Bhagalpur were awarded by LICI during FY17 for becoming BIMA FGMOs and BimaZones respectively.

• The Bank has also bagged the "National Payment Excellence Award 2016"on Aadhar enabled Payment System from National Payments Corporation of India (Sponsored byRBI).

• The Bank was adjudged as the Best Bank in PMJDY implementation in the categoryof Group-Other states and bagged prestigious Prime Ministers Award for excellence inPublic Administration for North 24 Parganas (West Bengal).

• Acknowledging the Financial Inclusion Landscape achieved by the Bank it wasadjudged as Runner Up in the category of Best Financial Inclusion Initiatives amongstMedium Banks -"Banking Technology Award 2017" by Indian Banks Association.

R. FUTURE BUSINESS PLAN OF THE BANK

Taking into account the optimistic outlook of the economy and its different sectorsyour Bank will align its business objective to maximize its gains. The Bank shallprimarily focus on aggressive recovery drive further build-up in CASA rebalancing ofloan book with focus on SMARt loans (S: Small M: Micro A: Agriculture and Rt: Retailloans) thereby increasing its share to the loan book supported by technology. Furtherthe Bank believes that its employees are its valuable assets and therefore up-scaling ofofficers by means of training shall be undertaken. The Bank will also look at differentavenues to raise capital.

S. BOARD OF DIRECTORS

As on 31.03.2017 there were 10 Directors on the Board of the Bank including 3 wholetime Directors i.e. One Chairman & Managing Director and two Executive Directors. Thefollowing changes took place in the composition of Board of Directors.

• Shri Rakesh Sethi completed his tenure as Chairman and Managing Director due toattaining the age of superannuation as on 30.04.2017.

• Smt. Usha Ananthasubramanian was appointed as Managing Director and CEO of theBank w.e.f. 6th May 2017.

• Shri Gautam Guha was appointed as Part-time Non-Official Director on the Boardof the Bank for a period of three years w.e.f. 25.04.2016. Shri Guha was Additional DeputyComptroller & Auditor General of Govt. of India.

• Shri J. K. Singh Kharb completed his tenure as Executive Director due toattaining the age of superannuation as on 30.06.2016.

• Shri Anshuman Sharma was appointed as Government Nominee Director on the Boardof the Bank w.e.f. 14.06.2016 in place of Dr. Shashank Saksena. Shri Sharma is posted asDeputy Secretary at Department of Financial Services Ministry of Finance.

• Shri Y. P. Singh completed his 3 years tenure as Workmen Employee Director on28.08.2016. On the same day Shri Ajay Shukla completed his 3 years tenure as Part TimeNon Official Director.

• Shri Vivek Deep was appointed as RBI Nominee Director on the Board of the Bankw.e.f. 06.12.2016 in place of Shri A. Udgata. Shri Vivek Deep is posted at RBI Kanpur andworking as Regional Director of RBI for the State of Uttar Pradesh.

• Shri Sanjeev Kumar Sharma completed his 3 years tenure as Chartered AccountantDirector on 17.12.2016.

• Shri S. Harisankar was appointed as Executive Director of the Bank for a periodof three years w.e.f. 18th February 2017.

• The Board wishes to place on record its appreciation for the valuablecontribution made by Shri Rakesh Sethi (Chairman and Managing Director) Shri J. K. SinghKharb (Executive Director) Dr. Shashank Saxena Shri A. Udgata Shri Y. P. Singh ShriAjay Shukla and Shri Sanjeev Kumar Sharma (Directors).

T. DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that in the preparation of the annual accounts for the year endedMarch 31 2017:

• The applicable Accounting Standards have been followed along with properexplanation relating to material departures if any;

• The accounting policies framed in accordance with the guidelines of the ReserveBank of India were consistently applied;

• Reasonable and prudent judgment and estimates were made so as to give a true andfair view of the state of affairs of the Bank at the end of the financial year and of theprofit/loss of the Bank for the year ended March 31 2017;

• Proper and sufficient care was taken for the maintenance of adequate accountingrecords in accordance with the provisions of applicable laws governing banks in India and

• The accounts have been prepared on the principle of "going concern"basis.

U. ACKNOWLEDGEMENT

The Board of Directors places on record its gratitude to the Reserve Bank of IndiaSecurities Exchange Board of India and Government of India and other regulatoryauthorities and financial institutions for their co-operation strong support andguidance. The Board acknowledges the support of shareholders and also places on record itssincere thanks to its valued clients and customers for their continued patronage. TheBoard also expresses its deep sense of appreciation for the commitment shown by theemployees in supporting the Bank in its performance on all fronts.

For and on behalf of the Board of Directors

Usha Ananthasubramanian

Managing Director & CEO