The year we just completed had also been quite challenging as the last year owing toboth global and domestic economics scenarios.
Global growth is expected to gain momentum in 2017 after a sluggish growth in 2016. USeconomic growth is likely to improve with increase in sentiments. Declining unemploymentand inflation gaining strength resulted in Fed hike in rates. Anticipated fiscal stimulusby the new government should further boost growth prospects. Strengthening dollarincreasing protectionism etc. may thwart growth to some extent in US. Eurozone shouldmove in the path of moderate growth with continuous monetary stimulus. The growth prospectin the region also depends on the outcome of Brexit' negotiation. Increasingproduction and exports are helping the Japanese economy to some extent. The Chineseeconomy avoided a hard landing last year as it rebalances its economy and tries to focusmore on domestic consumption driven growth. Rising commodity prices should benefit some ofthe commodity exporting economies.
Indian economy is recovering from the transitory' impact of demonetisation. Thepiled up deposits in the banking system due to demonetisation should support creditgrowth. This coupled with positive measures announced in the Union Budget 2017-18 shouldfuel growth. Goods and Service Tax (GST) should further help augment the economic growth.International Monetary Fund retained its growth forecast for India at 7.2% for FY 2017-18.Also it bumped up estimated growth of India to 6.8% from 6.6% estimated previously.Inflation moderated to 4.5% in FY 2016-17 from 4.9% in FY 2015-16. Prices of pulses andsugar continued to remain high. Rising global commodity prices along with currencyvolatility pose significant upside risk to inflation.
Export turned positive after prolonged slackness. Imports also had increased due torising bill for oil imports. The current account deficit as a percentage of GDP expectedto be around 1% in FY 2016-17. Foreign direct investment on cumulative basis had a doubledigit growth between April to December 2016-17. The portfolio investment has also turnedpositive in recent past.
The prospect of Indian economy is bright in the medium term with stable governmentpolicy initiatives reform measures and demographic dividend.
Tough time continues for public sector banks. Public Sector Banks will face competitionfrom other institutions such as payment banks and private and foreign banks.Demonetization has led to piled up of deposit in the banking industry and affected thecash intensive industries. The credit growth has stayed sluggish due to stress incorporate balance sheets.
The Financial Year 2016-17 has been a year of consolidation as well as challenges forthe Bank. The Bank continued to strategize its focus on recoveries which yielded betterresults during the year. Cash Recovery increased to Rs. 2378 crore in the financial yearended March 31 2017 as compared toRs. 1287 crore in the previous financial year endedMarch 31 2016 registering growth of 84.77%. Further upgradation of assets improved toRs. 1183 crore in the financial year March 31 2017 as compared to Rs. 608 crore in theprevious financial year ended March 31 2016. The banking industry faces challenges frommounting non-performing assets and resolution thereof. The Reserve Bank of India hasrevised the characteristics of Prompt Corrective Action (PCA) and stressed on assetquality and profitability to monitor banks and also defined three risk thresholds.
Insolvency and Bankruptcy Code 2016 is a welcome move that should speed up the recoveryprocess.
During the Financial Year 2016-17 Business of the Bank stood at Rs. 449679 crore ascompared to Rs. 456336 crore in the Financial Year 2015-16. The Deposit of the Bank hasgrown by 11.45% to Rs. 296671 crore for the financial year ended March 31 2017. The CASAshare as a percentage of Total Deposits stood at 39.20% as against 35.48% in FinancialYear 2015-16. To ensure profitable growth in Business High Cost Deposits have been shedconsiderably. The share of high cost deposits as a proportion of Total deposits has beenreduced to 3.70% as on March 2017 from as high as 5.56% as on March 2016. This is wellreflected in growth of Aggregate Core Deposits at 13.65 %.
The operating profit of the Bank increased toRs. 3089 crore from Rs. 2642 crorein Financial Year 2015-16 registering y-o-y growth of 16.92%. However the Bank posted Netloss of Rs. 2439 crore in the financial year 2016-17 mainly on account of higherprovisioning.
The Bank's Cost of Deposits reduced to 6.20% in the Financial Year 2016-17 from 6.86%in the Financial Year 2015-16 the Net Interest Income of the Bank reduced to Rs. 6574crore from Rs. 7065 crore in Financial Year 2015-16. Non-Interest Income of the Bankincreased to Rs. 2876 crore for the financial year ended March 31 2017 compared toRs.1938 crore for the financial year ended March 31 2016 registering y-o-y growth of48.38%.
Asset Quality has been the concern of the Bank for last couple of years. Gross NPA toGross Advances increased to 17.81 % as on March 31 2017 from 11.95 % as on March 312016 which was due to sale of loan assets of Rs. 22991.22 crore through IBPCparticipation. Net NPA to Net Advances increased to 10.20 % as on March 31 2017 from 7.36% as on March 31 2016. Your Bank has been proactive in respect of NPA Management andshall continue its effort to reduce the NPA level. Provision Coverage Ratio improved to58.43% as on March 31 2017 from 51.52 % as on March 31 2016.
A Bank with 4714 branches as on March 2017 of which 2/3 rd of the Branches are inrural and semi urban areas and 3677 Ultra Small Branches shall continue to position itselfas a Retail Bank. Your Bank shall be ensuring that the retail and priority sectorportfolios grow much faster than they have been so far.
I am happy to present the Annual Report of the Bank for the year ended March 31 2017.
With best wishes
Date: May 23 2017