I am presenting the Annual Report and financial statements of your Bank for thefinancial year 2015-16. I would like to share with you the performance highlights andfinancial indicators of the Bank along with the business environment within which yourBank operated during the year.
On the economic front the overall macro-economic fundamentals have shown improvementduring the year 2015-16. As per the Advance Estimates the Central StatisticalOrganization (CSO) estimated the GDP (Gross Domestic product) growth rate of India toincrease to 7.6 per cent in 2015-16 from 7.2 per cent in 2014-15. The country couldachieve this growth rate despite very unfavorable global conditions and two consecutiveyears of shortfall in monsoon. The Indian economy can draw considerable comfort fromprevailing favourable macro conditions in terms of decline in inflation increase inforeign capital inflows fairly stable currency narrowing trade deficit and currentaccount deficit lower interest rate regime and growth supportive government policies andinitiatives including the adoption of fiscal discipline. Further the IndianMeteorological Department (IMD) has predicted that the monsoon this year is expected to be"above normal." The prediction would be a relief for the economy as a goodmonsoon is expected to revive the rural demand. Looking at the overall macro-economicpicture we can expect 2016-17 to be a better year in terms of the overall growthprospects of the economy.
However despite improved macro-economic fundamentals there are areas likesluggishness in the global economic outlook the slowing export growth lower privateinvestments and sluggishness in corporate performance posing a significant challenge inthe immediate future.
On the banking front the performance of the Indian banking sector during the yearremained subdued. The banking sector experienced a slowdown in balance sheet growth. Theprofits and profitability of the banking sector was affected mainly by the deteriorationin the asset quality which continued during the year with rise in volume and proportion ofstressed assets. Credit market activity was weighed down by weak demand due to sluggishindustrial and corporate activity and the presence of considerable slack. In additionrisk aversion among banks emanating from asset quality concerns restrained credit flows.
As far as the interest rates were concerned RBI continued itsaccommodative stance in respect of policy rates. In response to the cumulativereduction in the policy repo rate by 125 bps since January 2015 the median base rate ofbanks however declined by 60 bps as against a higher decline of 80 bps in their medianterm deposit rates during the same period reflecting the preference of banks to protectprofitability in the wake of deteriorating asset quality and higher provisioning. TheMarginal Cost of Fund Based Lending Rate (MCLR) system effective from April 1 2016 isexpected to impart greater transparency in the pricing of credit and improve thetransmission of policy rate into lending rates.
As decline in asset quality has been a key area of concern for the banking sector ingeneral and PSBs in particular several regulatory steps were taken such as preparationof a corrective action plan by the Joint Lenders Forum (JLF) for distressed assetsperiodic refinancing and fixing a longer repayment schedule for long-term projects as partof flexible structuring extension of the date of commencement of commercial operations inthe case of project loans to infrastructure sector without these loans being labelled asnon-performing advances (NPAs) subject to certain conditions strategic restructuring ofdebt involving the provision to convert debt into equity issuance of guidelines regardingclassification of wilful defaulters and non-cooperative borrowers among others. In Q3 of2015-16 the Reserve Bank started the Asset Quality Review (AQR) to ensure that banks weretaking proactive steps to correctly classify their loan portfolios with the deadline ofMarch 2017 to clean up by making full provision. A fresh plan for recapitalisation wasalso introduced as part of the seven-point plan with the proposed capital infusion inPSBs following a performance and need-based approach to the tune of Rs 70000 crore till2019.
This capital support would be vital for PSBs in the light of their weakening capitalpositions and would enable them to adopt the Basel III framework.
Despite the fact that the financial year 2015-16 posed several challenges for theIndian banking sector various proactive and forward-looking policy initiatives takenwould definitely enable banks to face the challenges relating to asset quality andprofitability in the short term and also support them to meet the diverse and largelyunmet needs of banking services in the long-term. The entry of new players includingpayment banks small banks & universal players will certainly increase the competitionin the industry. As far as the banking sector is concerned the future is going to be moreexciting and challenging.
The major highlights of your Banks performance during 2015-16 are:
Total Business of the Bank has reached Rs 345493.08 crore as on 31st March 2016 asagainst Rs 344411.86 crore as on 31st March 2015 registering an absolute growth of Rs1081 crore.
While total Deposits grew by 2.92% to reach Rs 205170.84 crore total Advancesdeclined by 3.27% to reach Rs 140322.24 crore as on 31st March 2016.
During the year the Bank concentrated on reducing the Bulk deposits and replacing itwith retail deposits. The level of Bulk deposit has come down from 51.04% as at 31.03.2015to 45.53% as on 31.03.2016.
Your Bank has launched 5 campaigns during the fiscal year 2015-16 with the mainaim of improving the clientele base under CASA. In total Bank has mobilized 378616payroll accounts during the Fiscal year 2015-16 comprising of all the variants of CorpPayroll Accounts. Bank achieved a year-on-year growth of 69% in mobilizing Corp Payrollaccounts and Rs 115.17 crore growth in balance outstanding as on 31.03.2016.
Share of CASA in total deposit improved to 22.14% as on 31.03.2016 as compared to19.72% as on 31.03.2015.
Asset Quality and Provisioning:
During the year there was severe pressure on quality of assets and the rise of NPA inyour Bank was not an isolated case but part of overall Industry phenomenon. The Gross NPAof your Bank increased from Rs 7106.67 crore (4.81%) as at 31.3.2015 to Rs 14544.25crore (9.98%) as at 31.03.2016 and Net NPAs increased from Rs 4464.98 crore (3.08%) to Rs9160.14crore (6.53%) during this period.
The provision coverage ratio as on 31.03.2016 is 55.05% with respect to Gross NPA asagainst 55.34% as at 31.03.2015.
The focus during the year was on recovery of NPAs. The employees rose to the challengeand your Bank could effect a cash recovery and upgradation of NPAs to the tune of Rs1596.04 crore as compared to Rs 1484.73 crore in the previous financial year.
Your Bank will continue its focus and rigorous efforts through vibrant creditmonitoring and NPA recovery system to arrest effectively the rising trend in slippagesduring the coming years.
Other key performance indicators:
Total Income of the Bank increased by Rs 107.49 crore during the financial year toreach Rs 21146.40 crore
Interest Spread increased by Rs 169.12 crore (4.16%) during the year. Non-Interestincome increased by Rs 252.69 crore with a growth rate of 17.05% whereas non interestexpenditure increased by 14.03%.
Cost of deposits of the Bank has come down from 7.97% for the year 2014-15 to 7.51% forthe year 2015-16.
Operating Profit of the Bank increased by Rs 67.57 crore during the year to reach Rs3095.02 crore. However with increased provisioning on NPAs the Bank posted net loss ofRs 506.48 crore for the year 2015-16.
The Banks consolidated Net worth improved from Rs 10513.71 crore as at31.03.2015 to Rs 11377.73 crore as at 31.03.2016. CRAR(Consolidated) under Basel II stoodat 10.96% and under Basel III stood at 10.60% as at 31.03.2016.
Priority Sector Lending :
The Bank has achieved regulatory target underpriority sector advances and itssub-sectors except that of Agriculture and Minority Communities. Total Priority Sectoradvances stood at Rs 57554 crore as on 31.03.2016 which works out to 41.95% of AdjustedNet Bank Credit (ANBC) as against the regulatory target of 40%. As in the past years yourBank conducted special campaigns during FY16 to augment agriculture advances in bothRabi and Kharif seasons. Furthermore your Bank introduced tailor-made area specificschemes to cater to the specific needs of the farming community.
A number of initiatives were taken by your Bank to support MSME sector given itspotential to generate employment and growth. Under Pradhan Mantri MUDRA Yojana (PMMY)Bank has achieved 108.87% of annual disbursement target.
Pradhan Mantri Jan Dhan Yojana/Financial Inclusion :
Your Bank has been a frontrunner in the Financial Inclusion efforts. It looks at it notjust as a social commitment but as an effective and profitable business proposition. UnderPradhan Mantri Jan Dhan Yojana our Bank has opened 25.92 lakhs accounts till 31.03.2016and mobilized Rs 741.46 crore. The Bank has been allotted 2291 villages comprising of 894SSAs and 951 wards in urban areas spread across 23 States. Bank has opened accounts of allthe unbanked households in all the villages and wards allotted and achieved saturationwell in advance. About 21% (against the national average of 27.39%) of the accounts openedunder PMJDY are zero balance accounts one of the lowest in Public Sector Banks. RuPaycards have been issued to almost all the accounts opened & Aadhaar has been seededinto 61% of the accounts opened under PMJDY. More than 80% of the Bank Mitras are carryingout daily transactions through Micro ATMs. Aadhaar based interoperable bankingtransactions and Rupay debit card (pin based) transaction are enabled in our Micro ATMs.
New Products launched:
Pradhan Mantri Awas Yojana (PMAY) a new housing loan scheme for the urban poorhas been introduced. Under the Scheme Economically Weaker Section (EWS)/Low Income Group(LIG) beneficiaries in urban areas are eligible for interest subsidy on the housing loansavailed by them.
Two new payroll variants namely Corp Pay Elite & Corp Pay Delite has beenlaunched exclusively for Government Employees with free accident insurance as well as freeterm life insurance facility.
Bank has launched premium version of Platinum cards to cater to the premiumsegments and Signature Cards to cater to the super Premium and HNI segments inassociation with VISA.
Banks digital wallet App was launched on Android and IOS platforms with ahost of features like Get Money Bill Pay DTH and Mobile Recharge Scan and Pay Directand Indirect Tax Payments Online Shopping etc.
The Bank has launched Corp Saral plus NRE Product for NRE customers withPersonal Accident Insurance cover of Rs 5.00 lakhs. The cover will be available even ifdeath occurs outside India; insurance claim will be settled in Indian Rupees only.
The Bank has also rolled out its latest most modern version of Core BankingSolution with Finacle Software and the migration is going on at a brisk pace. New CBS hasbeen introduced in newly opened branches at Kottara and Kulur Mangalore. This will helpthe Bank to meet the ever changing/increasing needs of our customers expand its businessintroduce techno savvy products & services and secure business of new-gen customers.
In the Internet banking portal authentication by using digital signature forhigh value transactions has been introduced.
CSR and Empowerment Initiatives:
1. The Corporation Bank Economic Development Foundation a non-profit economic outfitTrust has been pursuing its objective of fulfilling social obligation in tune withcorporate mission. All CSR activities of the Bank are conducted under the aegis of CBEDF.Financial grants to the extent of Rs 476.88 lakhs were disbursed for execution of variousprojects of social concern during the year 2015-16 through CBDEF.
2. For the welfare of underprivileged through "CorpKiran" Bank granted Rs46.94 lakhs to various Institutions during 2015-16. The major activities includedproviding food books computers water purifier etc. to poor school children andinmates of orphanages old age homes destitute homes helping physically and mentallychallenged people participation in Road Safety week at Mangalore. Out of the 127activities conducted under this scheme 17 Govt. Schools were sanctioned a financial grantto purchase computers LCD TVs and multimedia projectors to equip them with moderntechnology; 20 old age homes and destitute homes were provided with daily needs likegrocery blankets ceiling fans etc. Sanitation activities like construction of toiletblocks for girls in Govt. Schools were also carried out under "CorpKiran". Otheractivities under the project include assisting blood banks in conducting blood donationcamps donation of blood weighing scale to the blood banks etc.
3. Bank successfully completed renovation of 114 dysfunctional toilets in 53 schoolsacross the country under "Swachh Vidyala Abhiyan" as directed by MoHRD GOI. Theprompt completion of the project on time has been appreciated by the Ministry. Bank hasspent Rs 64.00 Lakh for this purpose.
No. of branches increased from 2298 to 2440 and Branchless Banking unitsincreased from 4685 to 4727 during the year.
No. of ATMs increased to 3040 and E-Lobbies increased to 246 as at 31st March2016.
Awards and Accolades:
Bank has taken various encouraging steps towards value addition expansion andinclusive banking. As a result of these good works your Bank was conferred with thefollowing prestigious awards during 2015-16.
1. NPCI (National Payments Corporation of India) has conferred three awards to the Bankand the same have been received by the Bank on 22nd December 2015 at the benign hands ofthe Deputy Governor Reserve Bank of India:
- Joint Winner in excellent performance in Cheque Truncation System (CTS).
- Runner-up in excellent performance in IMPS.
- Runner-up in excellent performance under NFS ATM Network.
This speaks of the visibility viability and vibrancy of ATM network/e-channels whichhave been passionately undertaken across the bank.
2. Bank has won following three MSME Banking Excellence Awards-2015 conferred byChamber of Indian Micro Small & Medium Enterprises (CIMSME) during January 2016.
- Best MSME Bank Award for Mid-Sized Bank-Winner.
- CSR & Business Responsibility Award for Mid- Sized Bank-Runner-Up
- Best Bank Award under MUDRA Yojana for Mid-Sized Bank- Runner-Up
3. Bank has also won following three Social Banking Excellence Awards 2015 conferredby ASSOCHAM India. Bank is Winner under Medium Bank Class :
- Rural Bank Category
- Govt. Scheme Category
- Best Social Bank Category
4. Received ten awards from NABARD at the state level awards programme held atBengaluru for best performance under SHG/ JLG Bank Linkage Programme in Karnataka
- The Bank has been adjudged first for 2013-14 in following categories: overallperformance under SHG
- Bank Linkage programme; highest share of SHG lending to priority sector lending;highest number of SHGs credit linked; highest number of JLGs credit linked;highest number of SHGs credit linked by a branch - Pandavapura branch in Mysuruzone; and highest average JLG loan size. The bank has also been ranked first for 2014-15under highest number of SHGs credit linked; and highest quantum of loan disbursed.The bank stood second under highest quantum of loan outstanding and third under highestnumber of JLGs credit linked.
5. Received "SKOCH Achiever Award - 2016" for National SME enablement fromShri. M Venkaiah Naidu Honble Minister of Urban Development Housing and UrbanPoverty Alleviation and Parliamentary Affairs Govt. of India.
Before I conclude I take this opportunity to extend my sincere gratitude to all theshareholders for their persistent support for overall development of the Bank. I sincerelythank the members of the Board Govt. of India Reserve Bank of India all the regulatoryauthorities and organisations and Insurance Companies for their valuable support andguidance. I thank all our customers for their continued support & patronage and theopportunity given to us to serve them and develop business relationship. I also place onrecord my appreciation for the employees for their dedication commitment and contributiontowards the growth of the Bank.
The valuable support of all the stakeholders and the confidence they repose in the Bankwill motivate us to work with renewed vigour to improve the business performance yearafter year.
| ||With best wishes |
| ||Yours Sincerely |
|Place : Mangaluru ||Jai Kumar Garg |
|Date : 27.05.2016 ||Managing Director & CEO |