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Andhra Bank.

BSE: 532418 Sector: Financials
NSE: ANDHRABANK ISIN Code: INE434A01013
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OPEN 51.15
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VOLUME 198076
52-Week high 66.75
52-Week low 41.75
P/E 21.09
Mkt Cap.(Rs cr) 3548.84
Buy Price 0.00
Buy Qty 0.00
Sell Price 52.10
Sell Qty 87.00

Andhra Bank. (ANDHRABANK) - Director Report

Company director report

Directors of your Bank are happy to present the Annual Report of the Bank together withthe audited Statement of Accounts and Auditors' Report for the financial year ended March31 2016.

MANAGEMENT'S DISCUSSION AND ANALYSIS

1.1. MACRO ECONOMIC DEVELOPMENTS

The global economic activity slowed during FY 2015-16 across economies barring fewexceptions. The sluggish global growth has impacted the growth of Indian Economy andconsequent investment and credit demand. The Estimates of GDP that the Central StatisticsOffice (CSO) released recently the growth rate of GDP at constant market prices is at 7.6per cent in 2015-16 mainly because private final consumption expenditure has accelerated.In GVA terms: Agricultural sector growth improved during FY 16 to 1.2% from -0.2% in FY15; Industry has shown significant improvement primarily on account of the acceleration inmanufacturing (7.4 % vis-a-vis 5.9 % in FY 15). Meanwhile services sector growthdecelerated to 8.9% from 10.3% in FY15. FY 2015-16 began on a strong positive notehowever; the high expectations were moderated during the course of the year trackingglobal developments and pace of domestic policy actions. In sum recovery in the economicactivity and investment cycle has begun in FY 2015-16 but the full effects on output arethe matter of expectations.

1.2 Monetary and Liquidity Conditions

During the financial year 2015-16 the stance of monetary policy has continued to beaccommodative. Barring transient periods of surpluses the liquidity conditions generallytightened in the second half of the year beginning from mid- October . The Average CPIinflation rate has come down to 4.9% during FY 2015-16 from 5.9% in FY 2014-15. RBI hascut repo rates by 75 bps points between April 2015 and March 2016.

1.3 BoP and External Sector

The external position appears robust. The current account deficit is at comfortablelevels at 1.4% of GDP There was an accretion to foreign exchange reserves taking theirlevel to US$ 355.6 billion as on March 25 2016 equivalent to about 10 months of imports.India was well-positioned to absorb the volatility. Although the rupee has declinedagainst the dollar it has strengthened against the currencies of its other tradingpartners.

1.4 Equity Markets

During 2015 - 16 the resources mobilized through primary securities market have goneup. 108 companies have accessed the capital market as compared to 88 issues last year.Among the public issues there were 74 IPOs and 21 public debt issues. During the year thegains from secondary market have moderated as compared to the last year. The BSE sensexreturn has fallen to -6.2% as compared to 24.9% registered during the last year.

1.5 Bond Markets

The 10-yr Benchmark yield softened during FY 2015-16 the average yield softened to7.8% in FY 15-16 from 8.3% in FY 14-15. The yields of G-Secs started to ease ahead of themonetary policy easing cycle but firmed up through the second half of 2015-16. After theannouncement of the Union Budget however yields steadily eased to 7.6% by March'16.

1.6 Trends in Banking Industry

The Banking business muted during the FY 2015-16. Despite a higher real interest rateon Deposits the incremental growth in deposits of All Scheduled Commercial Banks was lowat 9.9% this year as compared to 10.7% of last year. Credit growth gradually picked upduring the second half led by reduction of repo rates by RBI and consequential base ratecuts by the Banks. The overall credit growth for the FY 201516 was 11.3% as compared to9.0% in FY 2014-15.

2. PERFORMANCE HIGHLIGHTS OF THE BANK

2.1 Business

For the financial year ended 31st March 2016 Andhra Bank's Business stood at Rs.310673 recording an increase of Rs. 26085 Crore from Rs.284588 Crore as on 31.03.2015with a growth rate of 9.2% (y-o-y).

2.2 Deposits

Andhra Bank's Total Deposits stood at Rs. 174302 Crore as on 31.03.2016 recording anincremental growth of Rs 19290 Crore (12.4 %) over the previous year. The share of CASAdeposits (current and savings) in Total Deposits stood at 26.08%.

• Current Deposits stood at Rs. 7541 Crore as on 31.03.2016 as compared to Rs.9706 Crore as on 31.03.2015.

• Savings Bank Deposits increased to Rs 37924 Crore as on 31.03.2016 from Rs.32696 Crore as on 31.03.2015 growing at a rate of 16%.

• Term Deposits increased from Rs. 112610 Crore as on 31.03.2015 to Rs. 128828Crore as on 31.03.2016 registering a growth rate of 14.4%.

2.3 Advances

Gross Bank Credit increased by 5.2% from Rs. 129576 Crore as on 31.03.2015 to Rs.136371 Crore as on 31.03.2016. Credit to Agriculture Sector (incl RIDF & non priority)stood at Rs. 24679 Crore as on 31.03.2016 as against Rs. 20338 Crore as on 31.03.2015registering a growth rate of 21.3%.

Credit to Micro Small and Medium Enterprises (MSME) increased from Rs. 20258 Crore ason 31.03.2015 to Rs. 23278 Crore as on 31.03.2016 registering a growth rate of 14.9%.

2.4 Profitability

2.4.1 Total Income for the financial year 2015-16 increased by 7.4% from Rs.17868Crore during financial year 2014-15 to Rs. 19199 Crore. Non-Interest Income increased toRs. 1564 Crore compared to Rs. 1499 Crore in the previous year. Operating Profit of theBank increased to Rs.3960 Crore compared to Rs. 3298 Crore in the previous yearregistering a growth rate of 20.1%. Net Profit stood at Rs. 540 Crore for the financialyear 2015-16.

2.4.2 The Total Interest Income recorded a growth rate of 7.7% and increased fromRs. 16369 Crore during 2014-15 to Rs. 17635 Crore during 2015-16. Of this InterestIncome from Advances grew by 5.7% from Rs. 12742 Crore during 2014-15 to Rs. 13467 Croreduring 2015-16. Interest Income from investments increased by 10.5% from Rs.3509 Croreduring 201415 and stood at Rs.3876 Crore during 2015-16.

2.4.3 Out of total Non Interest Income Fee Based Income for the financial yearended 31.03.2016 stood at Rs.158 Crore.

2.4.4 Total Expenses during the financial year 2015-16 were Rs.15239 Crore againstRs. 14570 Crore during the previous year. Of this Operating Expenses stood at Rs. 2925Crore. Establishment Expenditure as a percentage of Total Expenditure stood at 11.38% forthe financial year ended 31.03.2016.

Table 1: Highlights of Revenue Expenditure and

Profitability

2014-15 2015-16 Absolute Growth Percentage Growth
Total Interest Income 16368.61 17634.67 1266.06 7.73%
Total Interest Expenditure 11830.57 12313.71 483.14 4.08%
Net Interest Income 4538.04 5320.96 782.92 17.25%
Other Income 1499.84 1564.47 64.63 4.31%
Profit on sale of Investments 366.5 230.97 -135.53 -36.98%
Core Other Income 1133.34 1333.5 200.16 17.66%
Operating Expenses 2739.44 2925.43 185.99 6.79%
Operating Profit 3298.44 3960 661.56 20.06%
Provisions and Contingencies 2660 3420.16 760.16 28.58%
Net Profit 638.44 539.84 -98.6 -15.44%

APPROPRIATIONS

The appropriations made out of Net Profit are shown in Table 2. An amount of Rs. 134.96Crore was transferred to statutory reserves during 2015-16 and with this the statutoryreserves now stand at Rs. 2751.91 Crore. Transfer towards Dividend (including DividendTax) amounted to Rs. 41.43 Crore.

Table 2: Appropriations out of Net Profit

2015-16
Appropriation out of Net Profit 539.84
Balance brought forward 94.99
Transfer to Statutory Reserves 134.96
Transfer to Capital Reserve 36.80
Transfer to Revenue Reserves 126.64
Transfer to Special Reserve 200.00
Transfer to proposed Dividend (including Dividend Tax) 41.43
Profit carried over to Balance Sheet 95.00

2.5 KEY FINANCIAL RATIOS

The Bank has done considerably well in key financial ratios given the performance ofthe Industry as a whole. Net Interest Margin (NIM) stood at 3.18% compared to 3.00% in theprevious year. Cost to Income Ratio stood at 42.49% as compared to 45.37% for theprevious year. Earnings per Share (EPS) stood at Rs.8.60 and Book Value per Share (BVPS)stood at Rs.150.68

Gross Non-Performing Assets to Gross Advances stood at 8.39% and Net Non-PerformingAssets to Net Advances stood at 4.61% for the financial year ended 31.03.2016.

Table 3: Key Financial Ratios Parameter 31.03.2015 31.03.2016
Yield on Advances (%) 11.38 10.71
Cost of Deposits (%) 7.73 7.18
Net Interest Margin (%) 3.00 3.18
Yield on Funds (%) 9.64 9.25
Cost of Funds (%) 6.97 6.46
Cost-to-income Ratio (%) 45.37 42.49
CRAR - Basel III (%) 10.63 11.58
Return on Assets (%) 0.38 0.28
Earning Per Share (Rs.) 10.82 8.60
Book Value Per Share (Rs.) 153.83 150.68
Net NPA (%) 2.93 4.61
Gross NPAs (%) 5.31 8.39

2.6 CAPITAL & NET WORTH

Parameter 31.03.2015 31.03.2016
Equity Capital 603 681
Reserves Surplus 9461 9623
Networth of the Bank (Tangible) 9274 10264

2.7 CAPITAL ADEQUACY

As per the Reserve Bank of India guidelines the start date for implementation of BaselIII guidelines in India is w.e.f. April 12013. Accordingly w.e.f. April 12013 the Bankhas been assessing its Capital Adequacy as per Basel III prescriptions. The total CapitalFunds of the Bank are at Rs.15732.74 as on March 312016 and the Capital Adequacy Ratio at11.58% is above the required RBI prescribed norm of 9.625%.

The Bank has in place an "Internal Capital Adequacy Assessment Process"(ICAAP) for assessing the adequacy of Capital levels keeping in view the expected increasein business levels and enhanced Capital requirements in the Basel III regime. Theassessment process also includes a framework for inclusion of Pillar-II risks underBasel-III guidelines such as Credit concentration risk interest rate risk in the bankingbook liquidity risk etc.

Table 4: CRAR Position

31st March 2016 (Basel III)
CE Tier-1 Capital 10553
Additional Tier-1 Capital 1412
Tier-II Capital 3768
Total 15733

3. BUSINESS REVIEW

The Total Business (Total Deposits plus Gross Bank Credit) of the Bank registered agrowth rate of 9.2% up from Rs.284588 Crore as on 31.03.2015 to Rs. 310673 Crore as on31.03.2016.

3.1 Aggregate Deposits

Aggregate Deposits (excluding inter-bank deposits) went up from Rs. 154974 Crore as on31.03.2015 to Rs. 174233 Crore as on 31.03.2016 registering a growth rate of 12.4%.Aggregate Deposits comprised of current deposits of Rs. 7482 Crore savings deposits ofRs. 37924 Crore and term deposits of Rs. 128828 Crore.

Table 5: Category-wise classification of Aggregate Deposits (' in Crore)

Type of Deposits Amount 31.03.2016 Percentage of Aggregate Deposits
1 Current Deposits 7481.54 4.29%
2 Savings Bank Deposits 37923.89 21.77%
3 Term Deposits 128827.93 73.94%
4 TOTAL (1+2+3) 174233.36 100.00%
Growth rate over previous year (%) 12.43%

Area-wise distribution of Aggregate Deposits (excl inter-bank deposits) as on31.03.2016 is set forth in the following Table.

Table 6: Area-wise classification of Aggregate Deposits

(' in Crore)

Category of . Branches Amount % to total
1 Rural 13141.99 (19.4%) 7.54%
2 Semi-Urban 30208.16 (25.4%) 17.34%
3 Urban 49035.35 (16.5%) 28.14%
4 Metro 81847.88 (5.2%) 46.98%
5 TOTAL (1+2+3+4) 174233.38 (12.4%) 100.00%

Note: Figures in () indicate annual growth rate over the previous year

3.2 Gross Bank Credit

For the Financial Year ended 31.03.2016 Bank registered a growth rate of 5.2% in GrossBank Credit over the previous year adding Rs. 6794 Crore during the year to reach Rs.136371 Crore as compared to Rs.129576 Crore for the Financial Year ended 31.03.2015.

Table 7: Classification of Advances portfolio

Category 31.03.2015 31.03.2016 Variance
1. Food Credit 1746.73 1877.87 131.14
2. Non-Food Credit (2.1 to 2.4) 127829.41 134492.75 6663.34
2.1 Agricultural Advances (Excl. RIDF) 19797.78 24373.12 4575.34
2.2 Advances to MSME Sector 20257.62 23277.77 3020.15
2.3 Retail Credit (incl. DLs) 19846.12 24428.29 4582.17
2.4 Large Industries & Other Advances 67927.89 62413.57 -5514.32
GROSS BANK CREDIT (1+2) 129576.14 136370.62 6794.48
Of which Lending to Priority sector 44960.46 54545.38 9584.92

3.2.1 Priority Sector Lending

Priority Sector advances of the Bank stood at Rs. 54545 Cr (including Rs.416 Cr UnderRIDF and other funds) at the end of March 2016 registering a y-o-y growth of 21.31% andabsolute increase of Rs.9585 Cr. As against statutory requirement of 40% of ANBC Bankrecorded 41.88% under Priority Sector as on 31.03.2016.

Table 8: Priority Sector Lending (as on 31.03.2016)

Category 2015 -16
1. Priority Sector Advances (2 to 8) 54545.38
2. Agriculture-Priority (2.1 + 2.2) 24079.91
2.1 Agriculture Loans-Priority 23774.03
2.2 Eligible Investments (RIDF) 305.88
3. Micro Small and Medium Enterprises 20988.48
3.1 out of which Eligible Investment in SIDBI 24.13
4. Educational Loans 1780.60
5. Housing Loans (including indirect finance) 7650.82
5.1 out of which Eligible Investment in NHB 85.67
6. Social Infrastructure 17.10
7. Renewable Energy 25.68
8. Others 2.79
I. Priority Sector Advances (% to ANBC) 41.88%
II. Agriculture Advances (% to ANBC) 18.49%
III. Small & Marginal Farmers (% to ANBC) 10.24%
IV. Direct Lending to Non-Corporate farmers (% to ANBC) 14.35%
V. NPA under Agriculture as on 31.03.2016 (% Gross NPA) 4.44%

3.2.1.1 Credit to Agriculture

Total agricultural (Priority) lending of the bank stood at Rs.24080 Cr as at the endof March 2016 which includes eligible investment under RIDF of Rs.306 Cr. as againststatutory requirement of 18% of ANBC Bank has reached 18.49% as on 31.03.2016.

3.2.1.2 Lending to Self Help Groups (SHGs)

Bank has extended financial assistance to 239133 self help groups with total exposureof Rs.5376 Cr as on 31.03.2016.

3.2.2 Lending to Micro & Small Enterprises (MSE)

Total advances to micro & small enterprises of the bank was at Rs.20988.48 Croresas at the end of March'16 registering a y-o-y growth of 21.79%. The absolute growthduring the period is Rs.3033 Crores.

3.2.3 Credit to Weaker Sections

Advances to weaker sections stood at Rs.16054 Crores i.e. 12.33% of ANBC as againstnorm of 10%.

3.2.4 Credit to Minorities

Total credit extended to minority communities was at Rs.4983 Crores i.e. 11.08% ofPriority Sector advances as against norm of 15%.

3.2.5 Credit to Women

Total credit extended to women beneficiaries was at Rs.16203 Crores i.e. 11.88 % ofNet Bank Credit as against norm of 5%.

3.2.6 NPA under Agriculture

Out of Total Agricultural advances of Rs.24679 Cr (including Agri-Non priority) as on31.03.2016 NPA under Agriculture is Rs.1094.83 Cr i.e. 4.44% of Gross NPA as against5.29% of Gross NPA as on 31.03.2015

3.2.7 Andhra Bank Rural Development Trust:

Andhra Bank Rural Development Trust is running 13 Rural Self Employment TrainingInstitutes in A.P (9) Telangana (1) Odisha (2) Kerala (1) states and imparting needbased training for capacity building/entrepreneurial development and dissemination ofknowledge to farmers SHG women Rural unemployed youth and artisans.

Since inception 148947 candidates have been trained through 5049 programs by theInstitutes and around 79% of the trained candidates are engaged in gainful ventures.During the year the institutes imparted training to 11023 candidates through 447programs.

All our eleven RSETIs (2 RSETIs were recently opened) have been awarded with highestrating "AA" by Ministry of Rural Development Government of India for the year2014-15.

3.2.8 Financial Literacy and Credit Counseling Centres

Bank has established Jana Chetana Financial Literacy and Credit Counseling Trust andrunning six Financial Literacy Centres in all Lead Districts. Bank is in the process ofopening another 25 FLC centres at various places in A.P. These centers are promotingfinancial literacy activities through campaign mode and providing service relatedextension services. All our Rural Branches and RSETIs are organizing Financial LiteracyCamps in the villages by utilizing the services of local artists/ magicians and organizingKala Jataras.

3.2.9 Village Visits:

Bank has started 'Village Visits' (Palle Bata) on every Wednesday in Andhra Pradeshstate w.e.f 06.01.2016 as per the advice of SLBC AP All Rural/Semi-urban branches havingservice area villages have to visit the villages on every Wednesday and Urban/Metro/Newlyopened branches having no service area have to conduct 'Customer Meet' at branchpremises. Now it is being implemented across the country in Andhra Bank. This program isbeing implemented by all branches to improve their 'CONNECT' with the target group.

3.3 Credit to MSME Sector

MSME Sector is playing a crucial role in the economic development of our country. OurBank has accorded high priority in lending to this sector since a long time.

31.03.15

31 . 03.16

Growth (March 14- March 15)

Actuals Target Achievement %of achievement to target Amount % of growth
Micro & Small En terprises 15936.36 20665 17746.68 85.87% 1810.32 11.35%
Total MSME 20257.62 26395 23277.77 88.19% 3020.15 14.90%

• As on 31.03.2016 216094 MUDRA loans are sanctioned and an amount of Rs. 1569.36crores is disbursed.

• Keeping in view of the importance of MSME sector in the economy our Bankintroduced the following:

• 25% of assessed turnover can be allowed as working capital credit limit underturnover method up to Rs. 6.00 crores instead of the existing 20% of the projectedturnover.

• ABHIVRUDHI Scheme "Financing to MSEs (Micro and Small Enterprises) up toRs. 3.00 crore against property" wherein assessment of credit limits is simplifiedand obtention of CMA data is waived.

• To bring down the Turnaround Time (TAT) our Bank has established SMExpress forcentralized processing of MSME proposals in eight places i.e. at Hyderabad Chennai PuneCoimbatore Visakhapatnam Guntur Bangalore and Hyderabad.

• There are 19 Specialized MSME branches operating in the states of AndhraPradesh Telangana Orissa Tamilnadu Punjab and Chattisgarh to tap the potentialbusiness in MSME sector.

Our performance under CGTMSE scheme:

Year No of A/cs Amount (Rs. Crores)
31.03.15 13212 543.59
31.03.16 23427 740.31

3.4 Retail Lending

The Bank's Retail Credit portfolio stood at Rs. 24428 crore as on 31.03.2016 asagainst Rs.19846 crores as on 31.03.2015 with year on year growth of Rs.4582 crs. Thesegment has registered a growth of 23% on YOY basis including deposit loans and creditcard.

Housing loans portfolio has increased from Rs 9688 Crs as on 31.03.2015 to Rs.11811Crs as on 31.03.2016 with absolute growth of Rs 2123 crs registering a growth rate of 22%.Vehicle Loans portfolio has increased from Rs 819 Crs as on 31.03.2015 to Rs.1046 Crs ason 31.03.2016 with absolute growth of Rs 227 crs registering a growth rate of 28%.Education loans portfolio has increased from Rs.1831 Crores as on 31.03.2015 to Rs.2234Crores as on 31.03.2016 with absolute growth of Rs.403 Crores registering a growth rate of22%

Loans against property (Mortgage Loans) portfolio has increased from Rs.331 Crores ason 31.03.2015 to Rs.1027 Crores as on 31.03.2016 with absolute growth of Rs.696 Croresregistering a growth rate of 210%.

Bank has waived processing charges on Housing Loans and Vehicle Loans from 14.09.2015to 30.06.2016.

Bank has reduced rate of interest on Loans against property (Mortgage Loans) portfoliofrom 12.90% p.a to 12.15% p.a.

3.5 Advances - Industry wise Exposure

Bank has loan exposure to various sectors like Power Housing Loans NBFCs Iron &Steel textiles etc. Exposure to top 10 industries constitutes 51.53% of gross bankcredit as on 31.03.2016 signifying a diversified loan portfolio.

Table 9: Industry wise Exposure of Advances

Industry Ceilings as % of Total Advances of previous Quarter Actual Fund based exposure as on 31.03.2016 Exposure as % of Total Advances of Previous Quarter i.e. 31.12.2015
1 Power 22.00% 14382.63 10.58%
2 Housing Loans 15.00% 14388.18 10.58%
3 NBFC 10.00% 11316.05 8.32%
4 Iron & Steel 10.00% 7403.05 5.44%
5 Textiles 9.00% 6042.85 4.44%
6 Construction & Contractors 10.00% 4618.57 3.40%
7 Commercial Real Estates 7.00% 3786.14 2.78%
8 Rice Mills 6.00% 3494.62 2.57%
9 Engineering (Heavy & Light) 5.00% 2564.44 1.89%
10 Drugs & Pharmaceuticals 5.00% 2279.84 1.68%
Total 70276.37

3.6 Area-wise position of Gross Bank Credit

The population group wise distribution of Credit as on 31.03.2016 is as under:

Table 10: Gross Bank Credit-Population Group Wise as on 31.03.2016

Category Amount % to total
1 Rural 15173.01 (1.9%) 11.13%
2 Semi-Urban 30835.91 (69.9%) 22.61%
3 Urban 20801.95 (-26.1%) 15.25%
4 Metro 69559.75 (1.7%) 51.01%
5 TOTAL 136370.62 (5.2%) 100.00%

Note: Figures in () indicate annual growth rate over the previous year

4. INVESTMENTS

In terms of RBI guidelines the Bank is required to invest in SLR securities to theextent of 21.50% of NDTL. Bank's investment decisions are based on risk-return trade-offand bank is scrupulously following the regulatory and internal guidelines. Statutoryprescriptions relating to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) arecomplied with and being monitored on a continuous basis. Risk Management in treasuryoperations has been strengthened further by undertaking stress testing and back testing ofthe investment portfolio at quarterly intervals besides daily monitoring of Duration andValue-at-Risk (VaR). External rating migration of the bonds and debentures portfolio isalso being monitored on quarterly basis.

As on 31.03.2016 the Investments (net of depreciation) increased by 15.84% and stoodat Rs.53864.19 Crore up from Rs. 46499.43 Crore as on 31.03.2015. SLR maintained as on31.03.2016 was Rs. 45623.95 Crore which constituted 25.41% of Net Demand and TimeLiabilities (NDTL). Interest income from investments increased from Rs. 3508.55 Crore in2014-15 to Rs. 3875.86 Crore in 2015-16. Profit on sale of investments stood at Rs. 230.55Crore during 2015-16 while it was Rs.374.07 Crore during 2014-15.

Table 11: Classification of Investments

2014-15 2015-16 Var (%)
1. Government Securities 42504.78 49671.88 16.86%
2. Other Approved Securities 0.00 0.00 --
3. Shares 315.77 312.52 -1.03%
4. Debentures & Bonds 1966.45 2027.17 3.09%
5. Subsidiaries and / or Joint Ventures 316.79 361.79 14.20%
6. Others 1395.64 1490.83 6.82%
TOTAL (1 to 6) 46499.43 53864.19 15.84%

4.1 Strategic Investments

4.1.1 Joint Venture Insurance

Our Bank is having Joint venture in insurance with Bank of Baroda and Legal and GeneralPlc of UK christened India First Life Insurance Co. Ltd. Our stake in the venture is 30%while Bank of Baroda holds 44% and Legal and General Plc holds 26% stake. Both the bankshave commenced sale of insurance policies through their branch outlets. Our investment inthe life insurance venture is Rs. 187.50 Crore.

4.1.2 Banking subsidiary in Malaysia

The Bank along with Bank of Baroda and Indian Overseas Bank has entered into a tie upfor setting up a banking subsidiary in Malaysia. The Bank's stake in the venture is 25%amounting to RM 82.50 Million (book value Rs. 143.28 Crore) in a total subscribed capitalof RM 330 Million (approximately Rs.559.35 Crore @ 1 RM = Rs. 16.9500 as on 31.03.2016).

The joint venture vz. INDIAINTERNATIONAL BANK (MALAYSIA) BHD commenced business on11.07.2012. The joint venture bank has a business of Rs 328.58 Crore at the end of31.12.2015.

4.1.3 Bombay Stock Exchange

United Stock Exchange of India Ltd which was promoted by a consortium of banks CanaraBank Bank of Baroda

Allahabad Bank Bank of India Indian Overseas Bank and Oriental Bank of Commerce ofwhich our bank is also a partner. The Bank's Investment in United Stock Exchange of IndiaLtd. is ' 3 Crore. During the year USE is amalgamated with Bombay Stock Exchangeand we were allotted 77922 shares of bSe with a Face Value of ' 1 per share @ Rs385 per share amounting to Rs 3 crore.

4.1.4 Metropolitan Stock Exchange of India Ltd. (MCX Stock Exchange Ltd.

The Bank's investment in the equity of MSEI is Rs 25 Crore. The Exchange commencedtrading in Equity Cash and Equity Derivatives from February 11 2013.

4.2 Treasury & Forex Business

The Bank is an 'Authorised Dealer' to deal in foreign exchange business through 56designated B category branches of the Bank. The Bank has speed remittance arrangementswith two Exchange Houses based in Gulf.

Systems have been put in place for management of country risk exchange risk and otherforeign exchange risks. The country risk exposures for single country risk limit andaggregate risk limits for the group of countries under each risk category are fixed andare being monitored on daily basis.

During the year 2015-16 the Bank recorded a merchant turnover of Rs 34059.08 Crore inForex. The bank achieved Inter-Bank turnover of Rs 494560.91 Crore as on 31.03.2016compared to Rs 483250.08 Crore as on 31.03.2015. Export finance of the Bank stood at Rs4467.02 crore as on 31.03.2016.

5. CREDIT CARD BUSINESS

Our Bank is a Pioneer in Credit Card Business both as Issuer and Acquirer (MerchantBusiness) since 1981. Excluding SBI among other Public Sector Banks our Bank is havingmajor Market Share in the Credit Card Business.

Card Issuance: At present our card base is 1.49 lakh cards.

Card Type No. of Cards issued in 2015 No. of Cards issued in 2016 % Increase
1 Credit Cards 11513 15930 38%
2 Prepaid Cards Gift Cards 15716 18210 16%
Travel Cards 1882 2869 52%
3 A.P/Telangana Govt. ART Cards 77919 89335 15%

 

Card Dues outstanding 2015 2016 % Increase
At the year ending 31st March 165.18 177.83 8.00
Gross Income 60.14 67.06 11.50
Card Turnover 614.00 663.00 8.00

• We have launched Complaint Tracking System through FINACLE menu for speedyredressal of Card holders grievances.

• We have introduced EMI facility to our card holders.

• WE have now launched Application Processing software in FINACLE for sanction ofCredit Card under HCCDAPP Menu. All Branch Heads are delegated with powers to sanctioncard limit up to Rs.1.00 lakh. This is a historic development by which card can bedelivered to the applicant within T + 5 days.

• SMS based services - 9 types of card holders requirements are enabled.

6. MERCHANT BANKING SERVICES

A Shareholders and Investor Relation Section is functioning as a part of the Division.The Bank has received 9 complaints and 6553 requests during the Financial Year 2015-16.All the complaints and requests have been redressed by the Bank.

The Bank has raised Rs.500.00 Crores by issuance of 8.58% - 10 years Basel-IIICompliant Tier-II Bonds (Series-A) and Rs.500.00 Crores by issuance of 8.63% - 10 yearsBasel-III Compliant Tier-II Bonds (Series-B) on private placement basis through biddingroute to augment Tier-II capital and overall capital of the Bank for strengthening theCapital Adequacy as per Basel-III requirements and for enhancing the long term resources.

The Bank has also raised Rs.800 Crores through the issuance of 10.95% - Basel-IIICompliant Additional Tier-I Perpetual Debt Bonds on private placement basis to augmentAdditional Tier-I Capital and overall capital of the Bank for strengthening the CapitalAdequacy as per Basel- III requirements.

An Annual General Meeting of shareholders of the Bank was held on 08.07.2015 seekingshareholders' approval for adoption of audited annual accounts of the Bank for the FY2014-15 to declare dividend on equity shares of the Bank for the FY 2014-15 and toapprove raising of capital through Qualified Institutional Placement / Follow-on PublicOffer etc.

The Bank has declared a dividend of Rs.2/- per share on 602846791 equity shares ofthe Bank for the FY 2014-15 amounting to Rs. 120.57 Crores with the dividend pay-out dateas 17.07.2015.

The Bank conducted an Extraordinary General Meeting of shareholders of the Bank on23.09.2015 and sought shareholders' approval on raising of capital by issuance of equityshares by way of preferential allotment to Government of India on infusion of Rs.378Crores by Government of India towards share capital of the Bank. The Bank issued andallotted 49463491 equity shares of Rs.10/- each at a premium of Rs.66.42p. per share toGovernment of India on preferential basis. With this infusion the Government's stake hasincreased from 61.0183% to 63.9742% of the total share capital of the Bank of Rs.652.31Crores

The Bank has also conducted an Extraordinary General Meeting of shareholders of theBank on 21.03.2016 and obtained approval of shareholders for raising of capital byissuance of 28853210 equity shares of Rs.10/- each at a premium of Rs.37.30p. per shareaggregating to Rs.136.48 Crores to Life Insurance Corporation of India. With this theholding of Life Insurance Corporation of India has increased from 10.7181% to 14.50% oftotal paid-up capital of the Bank. After this allotment the total paid-up capital of the

Bank is Rs. 681.16 Crores and the stake of Government of India has come down from63.9742% to 61.2643%.

Application Supported by Blocked Amount (ASBA):

SEBI vide Notification dated 10.11.2015 has mandated that all the investors applyingin a public issue shall use only Application Supported by Blocked Amount (ASBA) facilityfor making payment. ASBA facility was enabled on August 24th 2009 through our bank. As onMarch 31st 2016 total 2749 branches of the Bank across PAN India were enabled to acceptASBA applications. We have also extended the facility through our Net Banking Channelwhere customers can bid online hassle free .

7. BANCASSURANCE & FEE-BASED PRODUCTS

The Bank has been constantly focusing on augmenting non-interest income throughdiversification of income streams by taking up marketing of life and non-life insuranceproducts Mutual fund products Depository Services Direct taxes Commercial taxesMunicipal taxes utility payments Payment gateway services Auto-Debit facilities etc.

7.1 Insurance

The Bank along with Bank of Baroda and Legal & General Group Plc of UK has formed ajoint venture life insurance company named IndiaFirst Life Insurance Co Ltd and it wasformally launched in the month of March 2010. The Bank has shareholding of 30% in thecompany while Bank of Baroda has 44% and 26% is held by Legal and General Group Plc.

During the FY 2015-16 total New Business premium (including Retail and Group business)of Rs. 131.38 Cr was mobilized. Renewal premium of Rs. 114.70 Cr was collected up to31.03.2016. Bank earned commission of Rs. 16.17 Cr from sale of Life Insurance Policies.

7.2 Mutual Fund Business

The Bank is having tie ups with Mutual Fund companies namely UTI Mutual Fund SBIMutual Fund Principal Mutual Fund Tata Mutual Fund Sundaram Mutual Fund RelianceMutual Fund Birla Sun Life Mutual Fund Fidelity Mutual Fund Kotak Mutual Fund LICMutual Fund and Baroda Pioneer Mutual Fund.

7.3 Depository Services

Bank is offering depository Services to the public under the brand name of "ABDemat". The Bank is a Depository Participant (DP) with Central Depository Services(India) Limited (CDSL) as well as with National Securities Depository Limited (NSDL).

7.4 Government Business Department

• Interface with Website of Central Board of Excise and Customs to facilitatecollection of Excise duty Customs and Service Tax for our Net Banking constituents iscompleted and is in live operation.

• Customization of online payment system for VAT and Commercial Tax in the Stateof Uttar Pradesh is completed and the module is in live.

• Collection of Delhi VAT in the NCT of Delhi through e-mode is completed and themodule is in live.

• Collection of all TamilNadu Govt. taxes - Online is completed and the module isin live.

• Government of Madhya Pradesh & Chhattisgarh have approved our Bank forcollection of Commercial Tax viz. Central Sales Tax VAT Entry Tax Trade Tax throughE-mode. Customisation is in progress.

• Government of Karnataka & Gujarat have approved our Bank for collection ofCommercial Tax viz. Central Sales Tax VAT Entry Tax Trade Tax through E-mode.Customisation is in progress.

• E-mode for collection of fees for online citizen services using Payment Gatewayunder e-Panchayat initiative in the State of Andhra Pradesh. - In Live.

• Electronic Fund Management System (EFMS) for Aarogyasri Trust (AP) to enablebulk upload of payments to various beneficiaries including hospitals. -Testing iscompleted and will go live shortly.

• Online upload of e-receipts of both the States of AP and Telangana pertaining toGovt Treasury to the portal of RBI E-Kuber.

• Direct fund transfer to the beneficiaries under Swachha Andhra Corporation andSwachha Bharat Mission.

• Collection of fees for AP Skill Development Corporation under PersonnelManagement Skill Development and general trainings.

• Online collection of processing fee/EMD and other receipts using NEFT/RTGS forAP Industrial Infrastructure Corporation Ltd.

• Distribution of welfare grants to beneficiaries from Labour WelfareCommissioner Andhra Pradesh.

• CBDT- Approval received for collection of Direct Taxes for 521 Branchesadditionally (earlier 817 Branches) - Total 1338 branches were enabled with CBDT module.

• COLLECTION OF DIRECT TAXES - Total of 41 Focal Point Branches have beenauthorized by RBI.

• Govt. Business during 2015-16 has witnessed a y-o-y growth of 19%.

• Income on Govt. Business is to the tune of Rs. 11.24 cr for the year (2015-16).

• Large Govt. corporate like A.P Pollution Control Board AP Waqf Board AP LabourWelfare Dept.NREGS are in our fold.

• We were given the Principal Banker status for the AP Capital RegionalDevelopment Authority (APCRDA).

• Senior Citizen Savings Scheme (SCSS) : A total of 418 branches were enabled tooperate this scheme.

• The software developed on the portal for AP Sarva Siksha Abhiyan provides forthe generation of grant-wise information (intervention) from any of the accounts linked tothis portal. Our bank has also provided two helpdesks one at DIT and another at HO.

• We have provided the BILLCOLL facility to AP state board of Intermediateeducation (APSBiE) TSBIE and Sthreenidhi credit coop Fed Ltd A.P. (loan recoveries)

• We have provided National Automated Clearing House (NACH - disbursement module)facility to MEMPA A.P. APSRTC Labour Welfare Board TS Livestock Development agency(TSLDA) etc.

• Collection of Traffic police challans - online Govt. of Telangana throughPayment Gateway - Module is completed and live.

• Sukanya Samriddhi Scheme and Kisan Vikas patra Scheme have been implementedsuccessfully in 418 authorised branches of our bank.

• Fee Based Income under Government Business - Achievement as on 31-03-2015 /31-03-2016.

Description - Fee Based Income Mar 2015 Mar 2016
1. Government Business: (Direct Taxes Treasury Business Comm. Taxes Pensions Etc.) 9.29 11.24

Fee Based Income : Y-o-Y growth : 20.99%

8. IT INITIATIVES

Crop Insurance:

Branches are providing loans to farmers for the purpose of crop productionrequirements. Currently branches are computing premium manually and debiting accounts.Declaration forms are prepared manually and submitted to Agriculture Insurance Company(AIC). The problem Associated in the above practice is wrong premium collection missingof accounts from the coverage and non-remittance of premium to AIC.

To minimize the above difficulties Finacle system support for debiting crop insuranceis provided:

• As a onetime measure user has to create the land database for the crops financedby them. Then based on the State/ District/Mandal/ Village land extent amount of advanceand category of farmer system will calculate the premium amount and debit the accounts.System will also provide the details of accounts for which insurance premium is notdebited.

• System will also generate the declarations as per AIC formats.

• Crop wise/Village wise/Insurance scheme wise declarations in the format given byAIC can be generated from the system.

Customs Duty/Excise/Service Tax payment:

Bank is authorized to collect different types of Indirect tax payments like Customsduty Excise and Service tax online. The feature is now made available on Internet Bankingfor retail and corporate customers which will allow the users to pay the tax using IECcode/Assesse code assigned by the department.

Payment Gateway Integration with SBIePay Payu Citrus EBS and Times of Money:

Bank has tied up with Payment Gateway services provider like SBIePay Payu CitrusEBS and Times of Money and integrated the same with Internet Banking through whichInternet Banking Retail customers can pay different types of utility bills to themerchants enabled at the payment gateways.

Online IB Transaction password resetting:

A new feature has been introduced to retail and corporate Internet Banking customers toallow them to set transaction password on their own. Retail customers can use ATM debitcard and reset where as corporate customer should have registered and activated HardwareToken. User can also enable/disable the transaction password using the option providedunder Manage tab in Internet Banking.

PMJBY/PMSBY

request seeding through Internet Banking / ATM :

Internet Banking Retail customers can give a request for PMSBY and PMJBY insuranceschemes using the option provided under PM Jan Dhan's Jan Suraksha Scheme Enrollment linkprovided in Home page of Internet Banking. This facility is enabled in Banks ATMs / SMS /Internet Banking Channel.

PMJDYTOD through SMS Mode

For enrolment to Pradhan Mantri Jan Dhan Yojana TOD a new module is developed forreceiving request from customer through SMS / ATMs. The customer mobile number should beregistered with the bank for SMS alerts and should be eligible for the scheme. Customerwill receive two SMS i.e confirmation SMS on enrollment and on TOD Approval.

Online RD opening through Net Banking:

Retail customers can now open online Recurring deposit through Internet banking usingthe option provided under REQUESTS tab. Once the account is opened the same will appear inself funds transfer to allow further credits.

Online Standing Instructions:

This facility is enabled for retail customers in Internet Banking. Under 'StandingInstructions Request' module customer can place request for Modify / Delete / Inquire astanding instruction through NetBanking. Standing instructions can be created by theretail customers for periodical transfer of funds to RD account Loan account and otheraccounts of self/third party.

Online e-TDR & Online Term Deposit / Recurring Deposit Closure:

Retail customers can give a request for closure of term deposit and recurring depositsusing the option provided under REQUESTS tab of Internet Banking. The accounts openedthrough online will only come for closure. In case the deposit receipt is printed at thebranch end those accounts will not appear for closure even though the account is openedthrough online.

Mobile Banking Registration/Deregistration/mPIN Generation:

Internet Banking Retail customers can give a request for registration deregistrationand MPIN using requests tab. The requests will be processed offline and the facility isnot available for the users having VIEW only facility in Internet Banking.

Immediate Payment Service (IMPS) through Branches:

New module is developed in Finacle to enable IMPS transaction at branches. Using IMPSthrough Branch module customer can remit funds to other bank customers instantly usingaccount number and IFSC. Facility is enabled for both walkin customer and our Bankcustomers. Walkin customer can remit funds through cash upto Rs. 49999/- and our Bankcustomers can remit through account upto Rs. 2 lacs per transaction.

Utility Bill Payments For Retail Customers Through M/S Paytm PG Services Provider:

PayTM payment gateway services was integrated with our internet banking on 30/12/2015.With this facility our Bank retail internet banking customers can make payments online formerchandise purchased from the merchants enrolled by PayTm.

Andhra Bank Cube:

Bank has launched cobranded wallet with M/s Citrus. Using this digital personal financemanager Mobile App Customers can perform following activities

a. Create payment reminders for Digital Cash and Cheque payments.

b. Integrated Payment Gateway supporting Card based Account based and Citrus' DigitalCash based payments.

c. The Wallet capability in the app supports Saved Cards and Prepaid Cash paymentsseamlessly.

d. Payment tracker by account presents 6 month view of the payments made through ABCube or Offline.

e. Ability to replace cash collection - education P2B (Merchant Payments) P2G (GovtTaxes) type payments using AB Cube

f. Now available in Android version; iOS version will be launched shortly.

Speedpay:

Bank in association with BSNL and Pyro has successfully launched the cobranded prepaidcard SpeedPay. SpeedPay is an open loop mobile wallet which can be used by customers forAirtime Recharges DTH Recharges Postpaid Bill Payments Landline Bill Payments &Utility Bill Payments. Its a open loop mobile wallet which allows transfer of funds fromwallet to bank account and also cash withdrawals.

Social Media listening and response management:

Bank has implemented Social Media listening and response management on an opex model.The basic idea of implementing this solution is to have insight into what young generationis talking about Bank on social media understand their expectations to get informationon complaints made by customers on social media to get honest feedback from customers one-products etc.

Social Media Listening:

The solution provided has crawlers/connectors which gathers data from various socialmedia platforms (eg: facebook twitter Google+ mouthshut etc) and news sources (NDTVCNN IBN etc) on the internet. It gathers information as to what people are talking aboutAndhra Bank. The tool has the ability to monitor billions of conversations and generatetext analytics based on predefined criteria. The tool used is Radian6. The dashboards areshared daily showing the details of total number of posts duly classified as positivenegative & neutral.

Social Media response management:

The customer comments are categorized as "Positive" "Neutral" and"Negative" and report is provided to bank team daily. Bank staff is providingthe required response which will be posted as responses for the customer comments on therespective website.

Further Bank has also created official pages in Facebook and Twitter and we are makingfrequent posts about our various products and services.

Sovereign Gold Bonds

To reduce the demand for physical gold Government of India has introduced SovereignGold Bond Scheme. Necessary customization was done in Finacle in order to facilitate thebranches to enter the subscription details in Finacle without using RBI e-kuber portal. Atend of the day the entire data will be sent to RBI in electronic form for issue of thebonds.

Housing Loan Lead through Mobile Application

A new option is enabled on AB e-Passbook Mobile App to capture Housing Loan Lead. Thisoption is available for our existing customers as well as for new customers. Once lead iscaptured immediately it shows the lump-sum eligible amount as per data entered. This datais shared with Retail Credit Department along with mobile number of the prospectivecustomer. The lead will be processed by Retail Credit Department by contacting them.Retail Credit Department is provided with a portal where all leads are displayed andauthorised users are allowed to access this portal to process the leads.

Online SB Account Opening

Online SB Account Opening is enabled through our website www.andhrabank.co.in (OnlineServices>Online Savings Account Opening). Using this facility any resident Indian canapply for opening of Saving Bank Account online. Each application submitted online isidentified using a Unique Tracking ID for each successful request.

Branch has to verify all the online customer requests pertaining to branch using menu'HSBOA' in CBS. The request will be available for verification after T+1 where T is thedate of online request submission. Branch can verify the request using Track ID onpersonal visit of the customer to his/her opted branch within 15 days. After 15 dayssystem will automatically delete customer account opening requests which are in entrystatus.

APY through SMS Mode

For enrolment to Atal Pension Yojana a new module is developed for receiving requestfrom customer through SMS. The customer mobile number should be registered with the bankfor SMS alerts and should be eligible for the scheme. This data will be sent to FI Cell HOfor further processing.

Vidyalaxmi Portal

This portal was developed for processing the education loan applications received onGovernment Vidyalaxmi portal. The applications once uploaded to this portal getsautomatically updated to LAPS module. XML file generation for reverse upload to governmentsite for updating applications' status is also developed.

Integration of Online Application Entry and Tracking System with LAPS Module:

In tune with market demands option is now provided in Bank website to let prospectiveborrowers place loan requisitions online. This facility would enable prospective borrowersto calculate eligible loan amount online after entry of preliminary details. Whenborrower submits these details seeking the loan a unique reference number would begenerated and this number would be communicated to the borrower by SMS and e-mail. Thisreference number would help borrowers track the status of their loan proposal online.Further processing of loan proposal would take place procedurally after completion ofkYc compliance and due diligence.

Online contribution to PPF:

Internet Banking Retail customers can now link their PPF accounts and carry out fundstransfer to PPF accounts. Retail customers can link their own PPF accounts or third partyaccounts by initiating transaction to that PPF account and can generate the statement forthe credits done through branch as well as through internet banking.

Cash Recyclers:

Bank has installed 1133 Cash Recyclers which can accept as well as dispense cash 24 x7 & credit to loan account is also enabled in Cash Recyclers.

APEPDCL bill payment through ATM:

APEPDCL Power bill payment is enabled through Andhra Bank ATM. Users with Bank debitcard can make payment through this facility.

Sukanya Samridhi Yojna

The Sukanya Samridhi Yojna also known as girl child prosperity scheme was introducedby Govt of India. Sukanya Samridhi account is to ensure a bright future for girl childrenin India. This yojna is to facilitate them proper education and carefree marriageexpenses. This scheme offers a small deposit investment for the girl children. One of thekey benefits of the scheme is that it is quite affordable and offers one of the highestrates of interest. Interest rates are fixed and will be communicated by GOI every year.The module was developed in Finacle wherein branches which are designated for PPF &SCSS can open accounts under this scheme.

Rupay Platinum Debit Card

Rupay Platinum Debit Card was launched by Bank on NPCI platform which is loaded withpremium usage offers. The cash withdrawal limit on ATMs is Rs. 50000.00 and purchaselimit on POS terminals is Rs. 100000.00. The card carries a personal accident insurancecoverage of Rs. 2.00 lacs.

Online validation of Customer details with CFT list

The United Nations periodically circulates the following two lists of individuals andentities suspected of having terrorist links and as approved by its security council(UNSC). Banks are required to update the lists and take them into account forimplementation of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act 1967.Banks should ensure that they do not have any account in the name of individuals/entitiesappearing in the above lists. Details of accounts resembling any of theindividuals/entities in the lists should be reported to FIU-IND invariably.

To meet the above regulatory requirement Bank has customized CBS system such thatwhenever branch goes for creation of new customer master the customer name is checkedagainst CFT database on real time basis. When the customer name is present in the CFT lista warning message is prompted to the branch user along with matched names from the CFTlist. If no matching record are found then no message will be displayed and the branchuser can go ahead to onboard the customer.

Offsite Monitoring - Alert Management

A new facility is provided for the alert mechanism wherein the Branches can directlyaccess alerts online and respond the same without sending and receiving any mails.Presently the facility is available for 12 types of daily alerts.

Integrated e-surveillance system for ATMs

Bank is implementing centralized integrated security surveillance system to prevent ATMrelated physical crimes which include Intrusion detection sensors Fire detectionSmoke/Heat Detection Intrusion alarm Hooter/Burglar Alarms User Alarm activationswitch Speaker Microphone other sensors to raise alerts during various contingencies.Purchase order placed on the 3 vendors for all the 2500 sites for implementation of thesolution. Implementation under progress.

ATM Switch migration to FSSnet Switch:

Hitherto Bank was maintaining its own ATM switch. To save on cost Bank decided to takeATM switch service on Opex model. Accordingly Bank has successfully migrated ATM SwitchServices to FSS Switch on opex model on 20.02.2016.

Online Booking of lockers:

On Banks website now option is provided to prospective customers to view the details ofthe vacant lockers available at different branches. The customer can then book lockerbased on the availability and can approach the branch for further processing of therequest.

Dashboard for Top Management using SAS tools:

Bank in-house team has developed different 15 dashboards on various importantparameters giving details of the performance of the Bank using SAS tools. These dashboardsare being used by Top Management to take informed decisions.

Kisan Vikas Patra scheme

Govt Of India has launched Kisan Vikas Patra (KVP)2014 scheme which is available to theinvestors in the denomination of Rs. 1000 5000 10000 and 50000. Kisan Vikas Patrashave unique liquidity feature where an investor can if he so desires encash hiscertificates after the lock-in period of 2 years and 6 months and thereafter in any blockof six months on pre-determined maturity value. The certificate can also be pledged assecurity to avail loans from the banks and in other case where security is required to bedeposited. Accordingly our bank has also customized the scheme in Finacle and released tothe designated 418 branches.

9. NETWORK EXPANSION

During the Financial Year 2015-16 Bank opened 296 Branches (including up-gradation of4 Extension Counters) and added 1404 ATMs/BNA/CRS. With this as on31.03.2016 Bank had6477 Delivery Channels consisting of 2803 Branches 4 Extension Counters 34 SatelliteOffices and 3636 ATMs& BNA/CRs spread over 26 States and 3 Union Territories. The Bankhas 45 Specialized Branches catering to the needs of the specific segments of clientele.The Bank also has two Representative (overseas) Offices at Dubai (U.A.E) (opened in May2006) and New Jersey (U.S.A) (opened in November 2008).

Table 13: Population Group Wise classification of Branches

Category Number % to total
1 Rural 827 29.5%
2 Semi-Urban 757 27.0%
3 Urban 756 27.0%
4 Metro 463 16.5%
TOTAL 2803 100.0%

As on 31.03.2016 the Bank had 45 Specialized Branches as detailed hereunder:

Table 14: Specialized Branches

Category of Specialised Branches No. of Brs.
Specialised SME Branches 18
Specialised Argicultural Finance Branches 2
Specialised Agri - Hitech Branches 6
Specialised Housing Finance Branches 4
Specialised Personnel Banking Branches 4
Specialised NRI Branches 3
Corporate Finance Branches 2
Auto-Tech Finanace Branch 1
Overseas Branch 1
Asset Recovery Management Branch 3
Small B Branch 1
TOTAL 45

9.1 Presence in Minority-Dominated Districts

At the end of 31.03.2016 we are having 306 branches in Minority dominated Districts. Ofthe Bank's total network across the country the percentage of Branches in minoritydominated Districts stood at 11.08 % as on 31.03.2016.

9.2 Navshakti Initiatives

1. The number of Navshakti Branches crossed the land mark figure of 1000 on 18.03.2016.

2. 343 Branches were converted to Navshakti model during the current financial year ofwhich 133 are Rollout Branches and 210 are New Branches. As on 31.03.2016 there are 1035Navshakti Branches of which 400 are Rollout Branches and 635 are new branches.

3. The first Delite Banking Branch at Road No.45 Jubilee Hills and Hyderabad wasinaugurated on 15.10.2015. This is the first of its kind branch catering to the needs ofthe HNI Customers.

4. 4 RLEs and 2 SMEs were opened during the current financial year. With this thetotal number of RLEs and SMEs as on 31.03.2016 is 17 and 10 respectively.

5. 113 Officers under MM-III cadre were identified and inducted into the talent poolcreated for Succession Planning

10. QUALITATIVE ASPECTS:

10.1 Risk Management

The Bank has a comprehensive "Integrated Risk Management Policy" for themanagement of Credit risk Market risk and Operational risk as per the guidancenotes/guidelines issued by the Reserve Bank of India. Accordingly all the risk managementfunctions viz. Credit Risk Asset- Liability Management (ALM) Mid-office of theTreasury and Operational risk functions have been integrated. The "Integrated RiskManagement Policy" of the Bank is being reviewed every year in tune with theregulatory guidelines.

10.1.1 Credit Risk

• Credit Risk Management Committee is responsible for implementation of the Creditpolicies approved by the Board and RMC.

• The Bank has a well defined 'Loan Policy' duly approved by the Board prescribingstandards for presentation of credit proposals financial covenants rating standards andbenchmarks delegation of credit approving powers prudential limits on large creditexposures asset concentrations standards for loan collateral portfolio management loanreview mechanism risk concentrations risk monitoring and evaluation pricing of loansprovisioning regulatory/legal compliance etc.

• Bank also is having in place the Credit Risk Management Policy Credit RiskMitigation & Collateral Management Policy Credit Risk Rating Policy Loan Recoveryand NPA Management Policy.

• The Bank has in place comprehensive risk rating system for various categories ofexposures. Bank has established a Rating cell for assigning internal ratings for allexposures of Rs 5 Crore and above. The Rating cell vets the internal rating given by thebranch / Zonal office and assigns final rating.

• The Rating cell ensures comprehensive rating coverage integrity of ratingprocess and proper data maintenance.

• The Bank utilizes industry reports from CRISIL and the industry risk scoreservice from CRISIL Research.

10.1.2 Market Risk

Market risk implies possibility of loss arising out of adverse movements of marketdetermined rates and prices. The objective of market risk management is to avoid excessiveexposure of Bank's earnings and equity to such losses and to reduce Bank's exposure to thevolatility inherent in financial instruments such as securities foreign exchangecontracts equity and derivative instruments as well as balance sheet or structuralpositions. The Bank has in place a well-defined 'Market Risk Management Policy' and anorganizational structure for market risk management functions. The Bank manages marketrisk through 'Asset-Liability Management (ALM) policy and 'Investments/Forex policy'.

A high level Executive Committee viz. Asset-liability Committee (ALCO) oversees the ALMin the Bank and deliberates on liquidity and interest rate scenario in the market anddecides upon the pricing of various products. ALCO regularly monitors the identificationmeasurement monitoring and mitigation of market risk in liquidity interest rates equityand forex areas.

The 'liquidity risk' is measured and managed through 'gap analysis' for maturitymismatches based on residual maturity. For assets and liabilities which are ofnon-maturity nature. Bank is conducting behavioural studies and factoring the observationsin the gap analysis. The behavioural study findings are subjected to back-testing and arevalidated regularly. Prudential limits are fixed for net gaps and also for cumulative gapup to one year and these limits are measured and monitored regularly. Liquidity profile ofthe Bank is also measured regularly through various liquidity ratios and monitoring of thesame is done with the help of prudential limits fixed thereon.

The 'interest rate risk' is monitored on a regular basis through 'Maturity gapanalysis' and 'Duration gap analysis'. Tolerance limits have been fixed for impact on NetInterest Income (NII) due to adverse changes in interest rates. To measure the impact ofinterest rate changes on Bank's equity duration gap analysis is done and prudential limitis set for modified duration of equity. Modified duration of equity is within theprudential limits set for this purpose. VaR and duration analysis are used for measuringmarket risk including treasury operations. The Interest Rate Risk in Banking Book (IRRBB)is also being assessed on a monthly basis.

Other market related risks to which any bank is exposed are foreign exchange risk onforeign currency positions liquidity or funding risk and price risk on tradingportfolios. The Bank has clearly articulated policies to control and monitor its treasuryfunctions. These policies comprise management practices procedures prudential risklimits review mechanisms and reporting systems. These policies are revised regularly atfixed intervals in line with the changes in financial and market conditions.

10.1.3 Operational Risk:

Management of Operational Risk is a part of the 'Integrated Risk Management Policy' andthe Bank has a focused attention for management of the Operational Risk in the light ofthe Reserve Bank of India guidelines. Operational Risk Management Cell is responsible forcoordinating all the operational risk management activities of the bank and these includebuilding an understanding of the risk profile implementing tools related to operationalrisk management and working towards the goals of improved controls and lower risk.Operational Risk Management Committee [ORMC] ensures implementation and compliance of theOperational Risk policies and reports to the Board/Risk Management Committee [RMC].

The Bank has been computing capital charge for Operational risk by adopting 'BasicIndicator Approach' (BIA) as stipulated by the RBI.

10.1.4 Approaches followed for computation of Capital to Risk Weighted Assets Ratio(CRAR)

As per RBI guidelines all Commercial banks in India shall follow the StandardisedApproach for Credit risk Standardized Duration Approach for Market risk and BasicIndicator Approach for Operational risk under the 'New Capital Adequacy Framework".

Credit Risk: Bank at present is following the Standardized Approach for estimationof capital requirements for Credit Risk which also includes the HTM portfolio ofInvestments. Bank is gearing itself to move over to Advanced approaches for Credit risk.In this regard Bank has developed a Credit Risk Rating Model (CRRM) with the consultancyassistance of National Institute of Bank Management (NIBM) Pune. This model is furtherstrengthened internally by making it a WAN (Wide Area Network) based CRRM model so that itis accessible from any of the locations of the bank. This model is capable of providingtransition matrices and default probabilities (Probability of default) and would help theBank in moving over to the Advanced Approaches in future.

Market Risk: Bank is using the Standardized Duration method for computing capitalcharge for Market risk (investments in HFT and AFS categories) as per RBI guidelines.

Operational Risk: Bank is providing capital for Operational risk as per the BasicIndicator Approach (BIA).

10.1.5 Preparation for moving over to Advanced Approaches

Bank is in the process of migrating to Advanced Approaches through implementation of anIntegrated Risk Management Solution

10.1.6 Bank's compliance to RBI guidelines on Basel requirements:

Pillar - I (Minimum Capital requirements)

RBI has introduced in its Basel III guidelines the following enhanced capitalrequirements and has also prescribed transitional arrangements to conform to theserequirements in a phased manner by March 312019.

Regulatory Capital As % to RWAs
(i) Minimum Common Equity Tier 1 ratio 5.5
(ii) Capital conservation buffer (comprised of Common Equity) 2.5
(iii) Minimum Common Equity Tier 1 ratio plus capital conservation buffer [(i)+(ii)] 8.0
(iv) Additional Tier 1 Capital 1.5
(v) Minimum Tier 1 capital ratio [(i)+(iv)] 7.0
(vi) Tier 2 capital 2.0
(vii) Minimum Total Capital Ratio (MTC [(v)+(vi)] 9.0
(viii) Minimum Total Capital Ratio plus capital conservation buffer [(vii)+(ii)] 11.5

The Bank is calculating its Capital Adequacy in accordance with Basel II & BaselIII guidelines. The Bank's Capital Adequacy at present is in conformity with thetransitional arrangements for Basel III as prescribed by RBI. However to meet the growingbusiness requirements the Bank may have to supplement its Capital funds especially byincreasing Common equity in future.

Pillar - II (Supervisory Review & Evaluation Process)

In compliance with the Pillar-II guidelines of the RBI under Basel III framework theBank has formulated a Policy of Internal Capital Adequacy Assessment Process (ICAAP) toassess internal capital in relation to various risks that it is exposed to. Stress Testingand scenario analysis are used to assess the financial and management capability of theBank to continue to operate effectively under exceptional but plausible conditions. Thebank is calculating the Concentration risk on a quarterly basis to assess the portfoliolevel risks based on sectoral geographical and borrower wise concentration. Bank is usingstatistical parameters like Herfindahl-Hirshman Index (HHI) Gini Coefficient andRosenbluth Index for determining the Credit Concentration Risk. The Bank has a Boardapproved Stress Testing Policy describing the various techniques used to gauge itspotential vulnerability and also its capacity to sustain such vulnerability.

Pillar - III (Market Discipline)

The Bank has a Disclosure Policy as per the disclosure requirements contained in thecircular issued by the Reserve Bank of India on the implementation of the Basel IIICapital Regulations. The guidelines therein are adhered to and compliance is reported tothe Competent Authorities. Pillar- III (Market discipline) of Basel III aims to encourageMarket discipline by developing a set of disclosure requirements which allows marketparticipants to assess key pieces of information on the scope of application capitalrisk exposures risk assessment processes and hence the capital adequacy of the Bank. ThePillar-III Disclosures are published on a quarterly and half yearly basis on the Bank'swebsite plus a year-end disclosure as on March of every year. The Pillar-III year-enddisclosures are also published in the Bank's Annual Report apart from being available onthe Bank's website.

10.1.7 In addition to the above RBI has introduced several other measures of leverageand liquidity standards viz.

• A minimum Leverage Ratio of 4.5% to curb the excessive leverage of a bank'sbalance sheet and

• Liquidity standards by way of two ratios viz. Liquidity Coverage Ratio (LCR) andNet Stable Funding Ratio (NSFR). The LCR requires a bank to hold sufficient high-qualityliquid assets to cover its total stressed net cash outflows over 30 days. The NSFRrequires a bank to hold sufficient amount of stable funds to meet the requirement ofstable funding over a one-year period of extended stress.

The Bank is regularly calculating and monitoring the Liquidity ratios taking asreference the RBI guidelines issued for LCR and draft guidelines issued for NSFR. The Bankis also calculating and monitoring the Leverage ratio on a quarterly basis.

10.2 Management of Asset Quality

Gross NPAs of the Bank stood at Rs. 11444 Crore as on 31.03.2016. Gross NPAs as apercentage to Gross Advances stood at 8.39% while Net NPAs as a percentage to Net Advancesstood at 4.61%. The Provision Coverage of NPAs as on 31.03.2016 was 56.89%.

Total reduction in NPA accounts amounted to Rs.1765 Crore.

Table 15: Position of Non-Performing Assets

2014-15 2015-16
Gross NPAs at the beginning of the year 5857.60 6876.54
Additions during the year 3424.25 6332.04
Reduction during the year 2405.31 1764.95
Gross NPAs at the end the year 6876.54 11443.63
Net NPAs 3688.63 6035.65

The segment-wise distribution of NPAs as on 31.03.2016 is as under:

Table 16: Segment-wise Non-Performing Assets

Segment Amount % to Total Advances*
I. Agriculture 1095 4.43%
II. MSME 1823 7.70%
III. Retail Credit 365 1.50%
IV. Large & Mid Corporate 8161 12.83%
Total 11444 8.39%

*NPA% to Advances indicates NPA to Advances of that segment. Provisions held underdifferent classes of NPAs are as under:

Table 17: Provisions held for Non-Performing Assets (including floating Provisions)

Nature of Asset Amount Provision Held
Sub-Standard Assets 3337.15 569.37
Doubtful Assets 8063.97 4783.10
Loss Assets 42.51 42.51
Total 11443.63 5394.98

10.2.1 Restructuring mechanism

During FY 2015-16 7 accounts with outstanding amount of Rs.1371.97 Cr wererestructured in terms of the restructuring packages. The total balances in restructuredaccounts as at the end of March 2016 stood at Rs.11393.09 Crore in 167 accounts.

10.2.2 Lending Practices

The Bank had framed well defined Loan Policy Guidelines with the approval of the Board.These guidelines are reviewed by the Board at periodical intervals based on Reserve Bankof India guidelines Annual Policy Statement of Reserve Bank of India competitiveenvironment prevailing among the banks for accelerated credit growth envisaged in certainbusiness segments marketing & development of new products and taking into account thefeedback received from the field level functionaries credit departments at Head Office.

Credit Committees have been constituted in the Bank at Head Office Circle Office andZonal Office levels for exercising sanctions of credit proposals and suitable sanctioningpowers have been delegated to these committees in terms of directions of Ministry ofFinance. Further based on feedback received from field level functionaries the delegatedpowers of various sanctioning authorities are reviewed and revised to reduce turnaroundtime in the sanction of credit proposals. The loan review mechanism is furtherstrengthened in the Bank ensuring review of sanctions made by all functionaries by thenext higher committees / competent authorities as the case may be.

The guidelines of the Bank on Loan Policy Delegation of Powers and Credit MonitoringPolicy have been reviewed by the Bank and a comprehensive booklet is released on28.11.2012. Subsequent changes have been communicated through circulars from time to time.The Department is in the process of releasing a comprehensive booklet with updatedinformation as on 31.03.2016.

10.2.3 Techno Economic Viability (TEV) Cell

The bank has a Techno Economic Viability (TEV) Cell which is independent of CreditProcessing & Sanctioning Departments. The cell undertakes preparation of ProjectInformation Memorandum (PIM) conducting Techno - Economic Viability (TEV) study and DebtArrangement (Loan Syndication) for corporate clients. The cell has earned Fee based incomeof Rs. 68.33 Lakhs during the Financial Year 2015-16.

10.2.4 Credit Monitoring Cell

Credit Monitoring Cell of the Bank is reconstituted for both Large and Mid CorporateDepartments separately and continues to monitor the accounts falling under the powers ofHead Office. This Monitoring Cell is exclusive and separate from the Credit monitoringdone by Credit Monitoring & Review Department (CMRD) at Head Office.

10.3 Management Information System

Bank has developed a robust Management Information System which captures data essentialfor vital functions such as risk management and planning and which serves as an effectivetool for the Top Management in decision making. This has facilitated quick decisionmaking. The Bank is in a position to analyse performance in major parameters even on a dayto day basis using the information system available. Leveraging on the CBS platform of theBank the MIS has facilitated speedy decision making and its implementation.

10.4 Inspection & Audit

As per the direction of the Department of Financial Services Ministry of FinanceGovernment of India and as approved by our Bank's Board we have modified the inspectionmethodology of our bank and migrated to system driven Risk Based Internal Audit w.e.f01.04.2014 using a software that has been developed in-house using the expertise of ourDevelopment Team in the Department of Information Technology of our Bank.

Under the new RBIA methodology we have completed the annual inspection of 1758 branchessuccessfully during 2015-16.

10.5 Compliance Policy

The Bank has in place a comprehensive Compliance Policy. An executive of the Bank inthe rank of Deputy General Manager has been appointed as the 'Chief Compliance Officer'.As per the Policy adopted by the Bank suitable organizational structure has been laiddown defining the roles and responsibilities for Compliance Officers of variousdepartments at Head Office Zonal Offices and Branches. Compliance of statutory andregulatory guidelines is the scope of operation of the compliance function in the Bank.Suitable reporting system is put in place to ensure effective implementation of CompliancePolicy in the bank.

10.6 Legal

Legal Action under SARFAESI Act 2002

SARFAESI Act 2002 came to force on 21.06.2002. Bank is utilizing this Act as aneffective tool for recovery of NPA loans. By invoking SARFAESI Act 1211 secured assets(cumulative from 2002) were sold by the Bank up to 31.03.2016 involving Real Balance ofRs.1981.20 crores. During the period from 01.04.2015 to 31.03.2016 the Bank sold 140secured assets and recovered an amount of Rs 113.33 crores. Total recovery affected by theBank through invocation of SARFAESI Act in the financial year has been Rs.574.92 crores

Adherence to Right to Information Act RTI Act 2005 came into force with effectfrom 18.10.2005 and the Act was implemented in our Bank from the date of inception as theBank is a Public Authority under Sec. 2(h) of the Act. All Zonal Managers are designatedas Central Public Information Officers (CPIOs) for all offices in the Zone to deal withrequest and render reasonable assistance/information. General Manager at Head Office isthe Appellate Authority under the Act.

During the year 2015-16 Bank received 1070 Requests and 118 Appeals under RTI Act. Allthe requests and appeals were responded and replied in time.

10.7 Customer Service

• Customer Meet was conducted on 24.11.2015 at all the branches on the eve ofFounder's Birthday.

• As a part of Customer Centric Initiatives we have started holding SegmentSpecific Customer Meets apart from the general Customer Meets are held.

10.8 Human Resources Management

During 2015-16 various guidelines received from the Government of India on H.R. issueswere incorporated in the bank's HR Policy.

In order to meet the demands of expansion the man power gap arisen due to retirementsand also to bridge the skill gaps in areas like Credit Information Technology ForexRisk Management Treasury etc. bank inducted 169 Specialist Officers in the fields ofRural Development HR Official Language Financial Analysts IT and Law 136 GeneralOfficers and 807 Clerks during the year. Bank also ensured career progression of employeesby considering 1343 promotions in all grades put together as per the manpower &recruitment plan for the year.

MoU with Manipal Academy

As done in previous years our Bank has entered into an MOU with Manipal Universityduring the year for hiring Job-ready Officers and selected 150 candidates for undergoingone year PGDBF course. On completion of 9 months course at University the students shallbe put on 3 months internship in our Branches. Upon completion of the course they will beinducted into the bank.

Industrial Relations

Industrial Relations are cordial in the Bank. Quarterly meetings were conducted atCorporate Office with the representatives of the recognized Officers' Federation and theAward Employees' Union. Besides this periodical meetings were also held at Zonal level tosort out the local issues to better the working conditions as well as customer service.

Training

Bank has an Apex College with state-of-the art training facilities located in FinancialDistrict in Hyderabad. To improve the core capabilities of employees various trainingprogrammes on Credit Risk Management Forex Leadership Development Product Awarenessand Soft skills development were conducted besides induction and Refresher programmes forthe newly recruited employees.

In addition to the above one day capsule workshops on specialized areas like CreditManagement Recovery Management Awareness on E-products were conducted at zonal level toimprove operational efficiency of the field staff. During the year 2015-16 428 in-housetraining programmes / workshops were conducted and trained 9459 employees. During the yearunder review 196 Officers were sent for external trainings organized by reputed instituteslike NIBM CAB ASCI etc.

E-learning

E-learning is an extension to the class-room learning and enables the bank to offeron-line training in a quick easy convenient and cost effective manner from anywhere andeverywhere. In order to develop a learning culture among the employees Bank has come outwith E-learning project as a part its HR transformation initiative. An exclusive intranetportal titled "Navshakthi e-Gyan" is developed in association with the knowledgepartner IDRBT for developing e-courses. 100% of the Officers and Clerical employees haveregistered themselves with the e-portal and 73 e-courses are so far uploaded for theutility by the registered users.

Staff strength

Cadre Strength % to total
Officers 10354 55.50%
Clerks 5454 29.23%
Sub Staff * 2848 15.27%
Total 18656 100.00%

* Excluding Part Time Sweepers

SC/ST/OBC Profile

Our Bank has been implementing reservation policy for SCs & STs as per Govt. ofIndia guidelines. The representation of SCs and STs is 3920 and 1519 respectively in totalwork force of 20016 working in the Bank as on 31st March 2016. Out of total 10354officers 1830 belong to SC category and 847 belong ST category. Bank has nominated aGeneral Manager as Chief Liaison Officer for SCs & STs at Head Office and all ZonalManagers as Liaison Officers at Zonal Level to address the grievances if any of SC &ST employees. Bank has been regularly conducting quarterly joint meetings with therepresentatives of SC & ST Employees Welfare Association of Andhra Bank.

Our Bank has been implementing reservation policy for Other Backward Classes (OBCs)with effect from 08.09.1993 as per Govt. of India guidelines. The representation of OBCsis 4867 in the total work force of 20016 working in the Bank as on 31st March 2016. Bankhas nominated a General Manager as Chief Liaison Officer for OBCs at Head Office and allsecond line executives at Zonal Office as Liaison Officers at Zonal level to address thegrievances if any of OBC employees. Bank has been regularly conducting Half yearly jointmeetings with the representatives of All Andhra Bank BC Employees Welfare Association.

Differently Abled Persons

Our Bank is providing 3% of total vacancies arising in Officer Clerical andSubordinate staff cadre in a year. The 3% posts are distributed amongst 3 categories ofPersons who are differently abled i.e. Blindness or low vision (B/LV) - 1%; HearingImpairment (HI) - 1%; Loco Motor disability or cerebral palsy (LM) - 1%. Therepresentation of Persons with Disabilities is 423 (2.11%) in total workforce of 20016 ason 31st March 2016

11. OFFICIAL LANGUAGE

• Hindi Quarterly Progress Report Submission has been made On-line throughout theCountry which facilitates prompt and error-free submission of Hindi Quarterly ProgressReports.

• On-Line Quarterly Memory Test is conducted for all Zonal Offices and brancheswhere staff strength is 10 or more. This is another novel and innovative on-line testintroduced by our Bank.

• An exclusive 4-page brochure was printed regarding OL Implementation at Zonaland branch level. The same was sent to all ZOs and branches.

• Rajbhasha Link in AB Staff Portal has been revamped. Besides 'RajbhashaMission' Banking Terminology Administrative Phraseology Rajbhasha Margdarshika variousformats Important Circulars other related information Hindi House Magazine MonthlyHindi e-bulletin and Hindi Workshop material has also been kept in our Portal.

• Official Language Implementation Committee of HO is held regularly everyquarter.

• Learn a Hindi Word Everyday Scheme and 'Thought for the Week' was prepared andsent to all Branches and Zones through a circular for implementation.

• Head Office and all Zones successfully celebrated Hindi Fortnight during whichfive Hindi competitions were also conducted. All branches celebrated Hindi Day. An AllIndia Hindi Essay competition was also conducted during this occasion. Two Hindi Posterswere also prepared and sent to all branches.

• Website of our Bank is in Trilingual (Hindi Telegu & English) and is in'Unicode'. It is updated on weekly basis.

• On-Line OL test was successfully conducted throughout the Country in which morethan 4700 employees participated.

• A Pocket Nirdeshika regarding Use of Hindi was printed and sent to all Zones andbranches for implementation.

• Quarterly Issue of "Rajbhasha Sarita" Quarterly Hindi Magazine wasprinted in every quarter in time. Photography competition is also held regularly for thismagazine. Rajbhasha Vani" - Hindi monthly e-bulletin is being regularly issued byHead Office and 36 Zones.

• Hindi word is displayed daily on AB Staff Portal. It is also being sent to allZones and branches by e-mail.Hindi Workshop was conducted by Head Office and all Zones inall quarters

• "Rajbhasha Guide" and "Margdarshika" was prepared and sentto all Zones. The booklets contain guidelines about OL Implementation and Help Literaturerespectively

* Noting Table guide was printed and supplied to all Offices and branches.

* All employees are provided guidance to work in Hindi in Computers by providing 'DeskTraining' during OL Inspection.

* Dy. Director Implementation appreciated Innovative steps of our Bank regarding OLImplementation.

* Ministry of Finance inspected our Head Office and appreciated Use of Hindi andinnovative steps of our Bank in OL Implementation.

* Use of Hindi in our Tirupati Bangalore N. Delhi Varanasi Kochi Warangal &Ahmedabad branch was appreciated and awarded Special Prize by Ministry of Home Affairs.

* Our Bank won total 38 prizes in various Hindi Competitions conducted under the aegisof TOLIC.

* Head Office was awarded First Prize in Use of Hindi in Hyderabad by Ministry of HomeAffairs.

12. VIGILANCE

* During the Financial Year 2015-16 General Manager & Chief Vigilance Officeraddressed the Zonal Managers conference and emphasized the importance of preventivemeasures. He explained about common lapses observed by the vigilance department. Hevisited some of the Branches and Zonal Offices and guided the staff on implementation ofvarious preventive vigilance measures and emphasized on adherence to System Procedure andGuidelines (SPG) to ably arrest frauds and vigilance cases.

* In the current financial year 11885 number of employees were enlightened onPreventive Vigilance aspects in 485 different training programs/sessions held at ApexCollege Hyderabad.

* Vigilance Department implemented 29 major systemic improvements which resulted inminimizing the occurrence of frauds.

* Department has achieved the target of reviewing Assets & Liabilities statement ofofficers staff as per Central Vigilance Commission Guidelines.

* Department has investigated into and disposed off 78 complaints received during theyear.

* During the year 59 vigilance cases have been registered out of which 20 cases havebeen disposed off.

* Preventive Vigilance Inspection has been conducted in 2243 branches to ensureimplementation of extant guidelines. Reports were reviewed by the department and necessaryinstructions have been issued to the branches for compliance.

* Vigilance Department observed "Vigilance Awareness Week" from October 26.2015 to October 31 2015. As part of the Vigilance Awareness Week one IndependentDirector a veteran banker Shri. Krishna Kumar addressed the officers at our Head Officeon 29.10.2015 on 'Preventive Vigilance as a tool of Good Governance' the central theme ofVigilance Awareness Week. Competitions in elocution essay writing were conducted at headoffice and at various schools and colleges in different cities by respective zonaloffices.

13. LEAD BANK SCHEME

Andhra Bank is the Convener Bank for State Level Bankers' Committee Andhra Pradeshsince 1984. Consequent to reorganization of AP into Telangana & Residual AndhraPradesh w.e.f 2nd June 2014 responsibility of Convenership of SLBC of residual APcontinued to be with Andhra Bank.

So far 193 SLBC meetings have been organized including 10 SLBC Meetings in thereorganized state of Andhra Pradesh. The State Credit Plan for 2015-16 was launched by theHon'ble Chief Minister of Andhra Pradesh on 29.06.2015. Andhra Bank is having Lead Bankresponsibilities in six districts viz. Srikakulam East Godavari West Godavari Gunturin Andhra Pradesh and Ganjam Gajapathi districts in Odisha State. Bank is discharging allresponsibilities in implementation of Lead Bank Scheme.

Financial Literacy Centres (FLCs):

SLBC has identified the uncovered blocks and were allotted among banks for opening ofFLCs. The Financial Literacy material finalized by the Mission office was translated intovernacular language by SLBC and sent to banks.

Spread of Financial Literacy in Government approved Industrial Training Institutes(ITIs):

The Department of Financial Services MoF GoI have communicated their decision tolaunch a financial literacy drive to educate students. SLBC has mapped 843 skillingcentres with FLCs & Bank branches existing in the state of Andhra Pradesh.

Website: An exclusive website is set up for SLBC of Andhra Pradesh with URLwww.slbcap.nic.in for the information of all the stake holders and general public. Thewebsite is being updated at regular intervals with the latest data and information.

14. FINANCIAL INCLUSION

Pradhan Mantri Jan-Dhan Yojana (PMJDY) was formally launched on 28th August; 2014.TheYojana envisages universal access to banking facilities with at least one basic bankingaccount for every household financial literacy access to credit insurance and pensionBank has successfully implemented PMJDY and as on 31.03.2016 21.78 Lakhs accounts havebeen opened as against 19.46 lakhs during previous year.

Out of 21.78 lakh accounts 14.61 Lakhs accounts are in rural areas and 7.16 Lakhs inurban areas.

Total deposits of Rs. 212.91 Crore have been mobilized with average balance ofRs.977.51 as against Rs. 506.00 during previous year Zero balance accounts stood at 4.54lakhs comprising of 20.84% whose reduction is from 58.18%.

19.15 Lakh RuPay Debit cards have been issued against

15.96 Lakhs during 31.03.2015. Aadhaar seeding has been done in 12.94 Lakh accounts.

Direct Benefit Transfer Scheme implementation:

Particulars No. of Accounts Average Balance (In .) Zero Balance % of Zero Bal A/c Rupay Cards Issued % of Rupay Cards Issued
31-03-2015 1946523 506.00 1132645 58.18 1596806 82.03
31-03-2016 2178145 977.51 454041 20.84 1915801 87.95

Over Draft Facility under PMJDY:

• The basic concept is to include the last mile to the financial channel byextending the overdraft to the needy.

167578 PMJDY accounts are eligible for overdraft facility and 46844customers are sanctioned overdraft facility and 13547 customers availed overdraft to the extent of ' 176.28 lacs.

Social Security Schemes (SSS):

A massive 80% of the country's population is still outside the insurance coverage whilethe government estimated that merely 11% of the working population is under pension.Inorder to bring the people under insurance coverage Honourable Prime Minister haslaunched two insurance products and one pension product are targeted especially to theunorganized sector and economically weaker section population were launched viz. PradhanMantri Jeevan Jyothi Bima Yojana (PMJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY)and Pension Scheme Atal Pension Yojana (APY) on 09.05.2015 at Kolkata.

Pradhan Mantri Jeevan Jyothi Bima Yojana (PMJBY):

• PMJBY offers Rs 2 lakh life insurance cover at a premium of Rs 330 per annum.Bank account holders in the age 18 to 50 years are eligible to avail this facility. Thelife risk cover will get terminated after 55 years.

Pradhan Mantri Suraksha Bima Yojana (PMSBY):

• PMSBY offers one year accidental death cum disability coverage for people whofall in the age group of 18-70 years of Rs 2 lakh at Rs 12 premium. The insured will getRs 1 lakh in case of partial permanent disability. Multiple bank account holders areeligible to join the schemes through any one of the savings accounts.

Atal Pension Yojana (APY):

• Atal Pension Yojana is for the people in the unorganized sector who are outsidea formal pension so far. The pension scheme would allow subscribers of age 18 to 40. Thegovernment has promised to co-contribute 50% of total contribution or Rs 1000 per annumwhichever is lower for the first five years. Subscribers without any social security andwho don't pay income tax will get this added benefit.

Position of bank under Social Security Schemes as on 31.03.2016:

SCHEME PMJJBY PMSBY APY
Accounts 650995 6660158 161028

Capacity Building of Bank Mitras:

• As directed by IBA all Corporate Business Correspondents have advised theirBank Mitras to undergo training at RSETTIs and appear for IIBF certificate examination.

• Bank is having 1360 active Bank Mitras pertaining to various Corporate BusinessCorrespondents who are regularly taking up transactions in the field.

• Of 1360 active Bank Mitras 940 Bank Mitras have appeared for IIBF Certificationexam and out of which 650 Bank Mitras have received certificate from IIBF.

• Bank has organized online examination for these 710 Bank Mitras on 22nd and 23rdDecember 2015 and for this exam 391 Bank Mitras has appeared and of which 375 Bank Mitrashave qualified the exam.

• Bank have conducted offline examination on 29th December 2015 and for this 335Bank Mitras have appeared and all have qualified.

• By this bank has completed 100% certification of active Bank Mitras.

Technological Developments in Department:

• Our bank is the first bank to provide the facility of availing Over Draftfacility from all our ATMs and also through SMS facility.

• Bank has provided the facility of enrolling SSS schemes in PoS machinesavailable at Bank Mitras.

• Aadhaar seeding has been enabled in KIOSK technology.

• All Bank Mitra logins are enabled with Aadhaar Based logins.

• Enabled host to host facility for APBS. (Aadhaar Payment Bridge System)

15. SUBSIDIARIES & REGIONAL RURAL BANKS

The Bank has one Subsidiary namely Andhra Bank Financial Services Limited (ABFSL)which is wholly- owned by the Bank.

The Company has earned a profit of Rs. 153.23 Lacs before Income Tax and a Net Profitof Rs.103.53 Lacs after Income tax during the year ending 31.3.2016 with this thenegative net worth of the company has been brought down from Rs. 915.99 Lacs to Rs. 812.47Lacs as on 31.03.2016.

Bank has one sponsored Regional Rural Bank namely Chaitanya Godavari Grameena Banklocated in Guntur (Andhra Pradesh) covering the districts Guntur East Godavari and WestGodavari. As on 31.03.2016 the total business stood at Rs.5362.13 Crore

16. VISITS OF PARLIAMENTARY COMMITTEES

During the financial year 2015-16 the bank has participated / hosted the followingparliamentary committees:

• The parliamentary Committee on Standing committee on social Justice andEmpowerment headed by Shri Ramesh Bais Hon'ble Chairman had undertaken a study tourprogramme on 11th & 12th June2015 at Hyderabad. The committee reviewed reservationfor and employment of SC/ST/OBC/Differently abled persons and Minorities at various levelsof posts in Andhra Bank as on 31.03.2015. The committee consists of Hon'ble MPs of bothLoksabha and Rajya sabha and our bank was the nodal agency for organization of study tourprogramme at Hyderabad.

• Bank also took part in Parliamentary committee Meetings on Human ResourceDevelopment National Commission for Safai Karmacharis on the issue of safai karmacharis/Group-D employees and complied to their directions.

17. SECURITY ARRANGEMENTS

High priority was accorded to up-grade security arrangements at branches currencychests and ATMs. Installation of Integrated burglar alarm system (IBAS)at branches is inprogress. Embedment of safes in non-strong room branches has been commenced and is infinal stage of completion. Establishment of e-surveillance of ATMs has commenced. Effortsare on to enhance security measures and minimize crime rate against our Bank.

18. NRI CELL

The NRI Cell was set up with a view to serve as an effective channel of communicationbetween the Bank and its NRI Clientele thereby increasing NRE Deposits. The Cell supportsand guides Representative Offices in Dubai & USA thereby ensuring betterment inCustomer Service.

Besides marketing Bank products NRI Cell provides useful information related toBanking & Foreign Exchange to NRIs through NRI Bulletin (AB Connect) every month. Atpresent nearly 30260 NRI Customers (both existing and prospective) are being connected andaccessing the information provided in the NRI Bulletin (AB Connect).

Total NRI business of the Bank increased from Rs.2082 Crore as on 31.03.2015 toRs.2505 Crore as on 31.03.2016 i.e. a growth rate of 20.32%. The total Deposits underNRE segment comprising of SBNRE TD NRE and FCNR (B) Deposits increased from Rs.1839Crore as on 31.03.2015 to Rs.2240 Crore as on 31.03.2016 registering an annual growth rateof 21.81%.

19. BRANDING AND COMMUNICATIONS

The department has been instrumental in designing the visibility concepts for theBranch Transformation under the Navshakti Project. The brand transformation at thesebranches have been much appreciated by the Customers and the Peer Banks and branded 1000thNavshakti branch which was opened in March 2016.

The Department has conducted and event Managed Foundation Day Celebrations fromNovember 23rd to November 28th 2015. During this Foundation Day Week multiple activitieslike health camps blood donation tree plantation and CSR activities were conducted atHead Office Circle Office and at Zonal Offices PAN India. As part of these celebrationsthe Bank has conducted "Dhanyawaad" in all India Customer Meet on a single dayto meet and greet the customers. An exclusive program was conducted at Machilipatnam thebirth place of our Founder which was attended by Central Vigilance Commissioner andparticipated by a large section of customers and well wishers.

CORPORATE SOCIAL RESPONSIBILITY

The Bank has spent an amount of Rs. 128.48 lakhs for multiple CSR activities and gainedsubstantial mileage among Organizations / Institutions and Governments and the brand imageof the Bank also has enhanced. The donation budget has been distributed across the countrywith an objective of spreading CSR activities PAN India.

Activities supported by the Bank during the last year included Skill developmentdonation of ambulance/School bus/ battery operated cars installation of water pumps upgradation of medical facilities construction of old age homes amongst others.

20. BANK'S WEB SITE

The Bank maintains its website www.andhrabank.in in three languages viz. EnglishHindi and Telugu for providing information about the Bank its services and productsoffered. This website is facilitating visitors to interact with Bank in the form ofinquiry feedback grievance thereby paving the way for availing its services. Theinterest rates on various products offered by the Bank are being updated on continuousbasis. Information relating to Online services like Internet Banking utility paymentsTax payment and other online services are made available on the website. The Bank has madeits WCAG (Web Content Accessibility Guidelines) website accessible to 'visually impairedpersons' as per Government of India guidelines.

The Bank has put new online module for displaying Inoperative accounts as per RBIguidelines and is being updated monthly.

During the year 2015-16 the bank has revamped the website to improve the look and feeland to improve the connect with customers.

The Bank being the Convener of State Level Bankers' Committee Andhra Pradeshmaintains separate website www.slbcap.nic.in. This website communicates all theproceedings of SLBC Meetings State Government directives instructions to Bankers andpublic.

The Bank follows meticulously CERT-In (Indian Computer Emergency Response Team)guidelines issued from time to time in maintaining Bank's Website securely.

21. AWARDS AND REWARDS

• Bank Stood first among all PSUs under percentage wise achievement of targetunder APY Phase-I and Phase -II and received accolades from Ministry of Finance Governmentof India

• Our Bank received "Award of Excellence" for empowering MSMEs byFederation of Industry Trade and Services (FITS).

• Bank received best performance award from PFRDA on 04.02.2016 among all publicsector banks.

• Bank received IDRBT Banking Technology Excellence Award for the year 2014-15 for'Use of Technology in Financial Inclusion' among Medium sized Banks .

• Citation presented by CNBC TV18 for Outstanding Contribution made by Bank inimplementation of Financial Inclusion.

• Bank has received 'Award of Excellence' in a mega function "RSETI DIWAS2015 in recognition of exceptional contribution to RSETI movement in the country for theyear 2013-14 by MoRD Govt. of India

• Bank received award from M/s. Infosys Technology under the category of best bankfor implementation of e-KYC.

22. CHANGES IN THE BOARD DURING THE YEAR

The following changes took place in the Composition of the

Board during the FY 2015-16:

• Shri C.VR. Rajendran Chairman & Managing Director retired on superannuationon 30.04.2015.

• Shri S.K. Kalra Executive Director was entrusted with Additional Charge ofManaging Director & CEO w.e.f 15.05.2015 to 01.11.2015

• Shri Suresh N. Patel joined the Board as Managing Director & CEO on02.11.2015.

23. DIRECTORS' RESPONSIBILITY STATEMENT

The Board of Directors hereby states that

• The applicable accounting standards have been followed in the preparation of theannual accounts and proper explanations have been furnished relating to materialdepartures.

• Accounting policies have been selected and applied consistently reasonable andprudent judgments and estimates have been made so as to give a true and fair view of thestate of affairs of the Bank as at 31.03.2016 and of the profit and loss of the Bank forthe financial year ended on 31.03.2016.

• Proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the relevant regulatory provisions for safeguardingthe assets of the Bank and for preventing and detecting fraud and other irregularities.

• The annual accounts have been prepared on a going concern basis.

• Internal Financial controls to be followed by the Bank have been laid down andsuch internal financial controls are adequate and are operating effectively.

• Proper systems have been devised to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.

24. ACKNOWLEDGEMENT

Andhra Bank is grateful to the Government of India RBI SEBI and otherauthorities/agencies Financial Institutions and Correspondent Banks for their valuablesupport and guidance. The Directors also express their deep sense of appreciation to allthe staff members of the Bank for their dedicated service outstanding professionalism andcommitment towards Bank's vision for a sustainable growth. Finally the Directors wish tosincerely thank all the customers shareholders and other stakeholders for their valuablesupport.

For and on behalf of the Board
Place : Hyderabad (Suresh N Patel)
Date : 30.05.2016 Managing Director & CEO

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